paramount trading (jamaica) limited annual report 2015 · rowena buddington is a chartered...

ANNUAL REPORT 2015

PARAMOUNT TRADING

2

PARAMOUNT TRADING (JAMAICA) LIMITED ANNUAL REPORT 2015

CONTENTSOUR VISION 4

CORPORATE DATA 6

NOTICE OF ANNUAL GENERAL MEETING 7

CORPORATE GOVERNANCE 8

DIRECTORS’ REPORT 12

CHAIRMAN’S OVERVIEW 13

5 YEAR FINANCIAL REVIEW 14

MANAGEMENT ANALYSIS AND DISCUSSION 17

GENERAL MANAGER’S REPORT 20

OPERATIONAL HIGHLIGHTS 21

CORPORATE CITIZENSHIP 24

SHAREHOLDINGS OF DIRECTORS 28

& CONNECTED PARTIES

AUDITED FINANCIAL STATEMENTS 32

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OUR VISION

Our mission is to provide our customers with quality chemical products and services, guided by the principles of honesty, integrity and rigorous adherence to stringent safety standards and procedures for the protection of both people and the physical environment. We will foster team-work, accountability and innovation among our employees and encourage their lifelong learning and personal development.

our mission

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our valuesour visionWe hold closest to our hearts the values of honesty, integrity, teamwork, and accountability. We recognise that the contribution of each individual is fundamental to our on-going success and, therefore, we provide opportunities for personal growth and encourage employee involvement at all levels.

To be a chemical industry leader and exemplary employer that remains success-driven and constantly energised through our passion to develop and fully satisfy our customers’ needs for our products and services.

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CORPORATE DATA

AUDITORS

McKenley & Associates

12 Kingslyn Avenue

Kingston 10

BANKERS

Sagicor Bank Jamaica Limited

60 Knutsford Boulevard

Kingston 5

39 Waltham Park Road

Kingston 13

Tel : 876.923.9015, 876.923.9040

Fax : 876.937.9241, 876.758.9340

Email : [email protected]

url : paramountjm.com

BOARD OF DIRECTORS

Radcliff Knibbs (Chairman)

Jukie Chin

Sharon Donaldson - Levine

Daryl Fong Kong

Hugh Graham

James Lechler

Richard Rogers

BOARD SUB-COMMITTEES

Mentor

Sharon Donaldson-Levine

Audit Committee

Sharon Donaldson-Levine (Chair)

James Lechler

Richard Rogers

Compensation Committee

Daryl Fong Kong (Chair)

Radcliff Knibbs

Hugh Graham

COMPANY SECRETARY

Rowena Buddington

Attorney-at-Law & Chartered

Secretary

26 Beechwood Avenue

Kingston 5

MANAGEMENT TEAM

Hugh Graham - CEO & Managing

Director

Vaughn Phang - General Manager

Joan McAnuff-Jones -

Non Executive

CFO

ATTORNEYS-AT-LAW

Patterson Mair Hamilton

85 Hope Road

Kingston 6

Georgia Hamilton & Co.

63-67Knutsford Boulevard

Kingston 5

REGISTRAR and TRANSFER AGENTS

Jamaica Central Securities

Depository Limited

P.O. Box 1084

40 Harbour Street

PARAMOUNT TRADING (JAMAICA) LIMITED

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NOTICE OF ANNUAL GENERAL MEETING

NOTE:

A member entitled to attend and vote at the meeting may appoint a proxy, who need not be a member, to attend and vote on his/her behalf. A form

of proxy is attached, which must be lodged at the registered office of the Company at 39 Waltham Park Road, Kingston 13 not less than 48 hours before

the time of the meeting.

A Corporate Shareholder, instead of appointing a proxy, may appoint a representative in accordance with Article 75 of the Company’s Articles of

Incorporation; the said Regulation is noted on the Proxy Form 7


CORPORATE GOVERNANCE

Paramount Trading is very ably led by a strong Board of Directors which diligently executes its mandate to

direct the Company’s affairs to ensure that success is achieved. This success translates into shareholder value

and is attained through prudent and effective controls, as well as accurate risk assessment and management.

The composition of the Board is such that the best mix in terms of qualifications and backgrounds to effectively

serve the Company’s needs is achieved. The members of the Board are qualified, objective, committed,

inquisitive and passionate. At Paramount we believe that this combination guarantees and will continue to

deliver the desired outcomes over the foreseeable future.

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Radcliff Knibbs, MBA Chairman

Radcliff Knibbs is Non-Executive

Chairman of the Board of

Directors. Mr. Knibbs is the Co-

Managing Director of CMK Bakery

Limited, operator of nine Juici

Patties restaurant franchises,

having begun his career in 1983 as

a self employed trader in seafoods

and subsequently working in

marketing at both the Jamaica

National Export Corporation (1985

to 1987) and Shell Chemicals

Jamaica Limited (1987 to 1989)

before moving into the restaurant

business as Managing Director

of Inglewood Investment Limited.

Mr. Knibbs is a graduate of the

Executive M.B.A. program at

Florida International University,

where he was honoured with a

leadership award, and also holds a

Sharon Donaldson-Levine, LLB, MBA, CA

Director and Mentor

Sharon Donaldson-Levine is the

Managing Director of General

Accident Insurance Company

(“GAIC”), which was listed on the

Junior Market in 2011. She is

Hugh Graham CEO & Managing Director

Hugh Graham founded Paramount

Trading (Jamaica) Limited in

February 1991. Prior to 1991 he

was a sales agent for international

chemical manufacturers and

distributors May and Baker Limited

and Rhone Poulenc Inc. He later

founded Stamina Trucking and

Transport Company Limited and, in

2010, purchased the Diversey Lever

manufacturing facility at Bell Road

Bachelor of Science degree in Pure

and Applied Chemistry (Hons.) from

the University of the West Indies.

He is a former member of the Board

of Directors of the Civil Aviation

Authority (2004 to 2011) and the

Rosemount Primary and Junior

High School.

Acquisition of this plant was followed

in 2011 by distributorship of the SIKA

line of construction products.

Mr. Graham is Councillor of the St.

Catherine Parish Council for the Lluidas

Vale Division - a position he has held

since 2007. He is also a member of the

National Water Commission’s Board

and Rural Water Supply Limited. He

is an avid tennis player and previously

served on the Boards of The JUTC,

Spectrum Management Authority and

Ultimate Tyre Company.

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mentor for Paramount Trading

and Chair of the Audit Committee.

Mrs. Donaldson-Levine is a

Director of Musson (Jamaica)

Limited and represents the local

general insurance industry in

discussions with the FSC. She

is also Treasurer for the Jamaica

Environment Trust.

Mrs. Donaldson - Levine holds

an LLB from the University of

London, England, an MBA from the

University of Wales, is a Chartered

Accountant, a fellow member of the

Institute of Chartered Accountants

of Jamaica and an attorney at law.

Jukie Gladstone Chin, OD

Director

Jukie Chin is founder and

Chief Executive Officer of Juici

Beef Limited. The company’s

restaurants serve its extensive line

of more than 50 products, including

different types of patties, loaves,

soups, fried chicken, porridge and

other traditional Jamaican foods.

Juici products are manufactured at

the company’s 90,000 square foot

manufacturing plant in Clarendon

Park, Jamaica and also, in Ontario

Canada for the purposes of sales

in supermarkets and convenience

stores in that country.

Mr. Chin was awarded the Order of

Distinction, officer class in 2003,

amongst other business awards.

and the National Aviation Academy

in Clearwater, Florida. Starting

in 1982 he worked in the family

business at Jamaica Engineering

& Construction Company Limited

as the Technical Field Supervisor

and was appointed as Director

of Jamaica Engineering and

Construction, Explosive Sales &

Services Limited and Engineering

Sales Co. Ltd. In 1992 he took

on the role of Managing Director

of Engineering Sales, where he

continued to work until 2005. In

October 2005, he founded Lechler’s

Construction Products & Supplies

Limited which he continued to

operate until December 2011.

In March 2010 Mr. Lechler was

appointed as the General Manager

of Stewart Industrial, a division of

Stewart Automotive Group.

He is an avid outdoorsman who

enjoys hunting and boating and he

is also an active member of World

President’s Organization (WPO) of

which he is the Network Officer for

the Jamaican chapter.

James Lechler Director

Mr. James Lechler is a graduate of

Campion College, the Pennington

School in Pennington, New Jersey

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Daryl Fong Kong, MBA Director

Daryl Fong Kong is a founding non

- executive Director of the Company

and a member of the Compensation

Committee. He is also a Director of

Daytona Sales Company Limited,

a local supplier of auto parts

where he is General Manager

with responsibility for sales and

inventory control, since 1989.

Richard Rogers Director

Richard Rogers is the second of two

founding non-executive Directors

of Paramount Trading and is a

member of the Audit Committee.

He is also a director of Rogers

Concrete Block Works Ltd. and

Rogers Land Development Ltd. Mr.

Rogers attended the University of

South Florida where he earned a

Bachelor’s degree in Finance.

Rowena Buddington, LLB (Hons); ACIS

Company SecretaryRowena Buddington is a Chartered

Secretary and Attorney-at-Law of

Jamaica. She has been providing

Company Secretarial Services to

local and overseas clients for over

25 years, and has been practicing as

an Attorney-at-Law under the firm

“Buddington and Company” since

2005.

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The Directors are pleased to submit their report and the Audited Financial Statements for the year ended

May 31, 2015.

FINANCIAL RESULTS

For the period the operating results were:

Revenue - $869M

Net Profit - $146M

DIRECTORS

The Directors retiring in accordance with Article 97 of the Articles of Incorporation are Mr. Jukie Gladstone

Chin and Mrs. Sharon Donaldson-Levine. Both are eligible for re-election and have indicated their

willingness to be re-elected.

AUDITORS

The Auditors of the Company, McKenley and Associates of 10 Kingslyn Avenue, Kingston 10, have indicated

their willingness to continue in office in accordance with the provisions of Section 154(2) of the Companies

Act.

Dated this 9th day of September, 2015

BY ORDER OF THE BOARD

DIRECTORS’ REPORT

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CHAIRMAN’S OVERVIEWcontributed $9 million to total revenue. This was facilitated by

the opening of a new office at 44 Waltham Park Road which

will be the hub of the operations for the sale and distribution

of oils.

Management remained focused on achieving operational

efficiency through cost containment and streamlining

operations. Operating expenses as a % of revenue was 16.6%

down from 17% in 2014.

CORPORATE GOVERNANCEDuring the year the company’s commitment to strong corporate

governance standards was recognized by the Jamaica Stock

Exchange. At the Jamaica Stock Exchange Awards function

held on December 3, 2014, Paramount received the First Runner

up Award for Best Practices Corporate Disclosure and Investor

Relations.

FUTURE OUTLOOKThere is optimism that the Jamaican economy will continue

to grow in 2015-2016. Paramount is committed to continuing

on the growth path through the pursuit of strategic alliances,

maximization of its core business, strengthening of its

Human Resources function and improvement in operational

efficiency. Paramount is close to finalizing a joint venture deal

to build a lubricant blending facility in Jamaica. This underlines

the company’s commitment to strengthen its business and

deliver sustainable earnings.

I thank my fellow Directors, our loyal employees, shareholders

and customers for their continued support. With God as

our guide along with the continued commitment of our

stakeholders, we move forward with tenacity and belief that

we can achieve against all odds.

2015 marked another commendable performance for

Paramount despite the various challenges in the business

environment and the economy as a whole.

The macro-economic environment in Jamaica showed

signs of improvement at the end of fiscal year 2014-15 amidst the stringent reform measures implemented under

the Extended Fund Facility (EFF) Agreement with the

International Monetary Fund (IMF), after consecutive years

of negative growth; The year was characterized mainly by

the devaluation of the Jamaican dollar, reduced customer

spending and little or no growth in some sectors including

manufacturing.

Our business was impacted somewhat by the difficulties faced by some of our customers which resulted in business

restructuring and reduced demand for some of our products.

Paramount rose to the challenge by focusing on creating

opportunities and exploring new businesses in order to

continue to deliver sustainable earnings to our shareholders.

FINANCIAL PERFORMANCE • The company recorded revenue of $869.4 million, up 22.6%

from $709 million in the previous year.

• Net profit amounted to $146 million, up by 56% over the previous year from $$93.4 million.

• Earnings per share increased from $0.61 last year to $0.95.

This strong performance resulted from successful strategic

initiatives, increased marketing efforts and commitment to

our customers.

Revenue from our core business (the distribution of industrial

and food chemicals) amounted to $753 million or 87% of

total revenue. During the year the company expanded its

portfolio to include the sale of petroleum products which

__________________________________Radcliff Knibbs

Chairman 13


The company’s performance reflects steady improvement over the last five years. Revenue grew by an annual compound growth rate of 14% from $513.3 million in 2011 to $869.4 million at the end of 2015.Net profit after tax improved from $44.2 million in 2011 to $146.8 million at the end of 2015 reflecting an annual compound growth rate of 35%. Net profit margin also improved over the period as the company improved its efficiency through expense management as well as implemented successful revenue growth strategies.

5 YEAR FINANCIAL REVIEW

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2011 2012 2013 2014 2015

Revenue ($) 513,345,259 613,809,228 642,128,641 709,036,860 869,455,432

% change over prior year 24 20 5 10 23

Net Profit after Tax ($) 44,227,232 53,374,640 73,348,356 93,387,213 146,023,323


Operating expenses($) 93,419,741 113,728,539 129,769,272 125,632,352 144,849,246

% change over prior year 57 22 14 (3) 15

Total assets ($) 378,059,018 384,928,512 465,825,646 524,987,782 614,514,710


Total Liabilities ($) 299,396,289 252,891,144 193,230,638 179,828,867 146,623,725

% change over prior year 84 (16) (24) (7) (18)

Shareholders' Equity($) 78,662,729 132,037,368 272,595,008 345,158,915 467,890,985


Ratios:

Net Profit Margin (%) 8.6 8.7 11.4 13.2 16.8

Gross Profit Margin (%) 33.3 32.5 30.6 32.3 32.2

Return on assets (%) 11.7 13.9 15.7 17.8 23.8

Current ratio (%) 1.6 1.8 2.6 3.0 3.8

Debt to equity ratio 1.79 0.83 0.26 0.15 0.08

Earnings per share (EPS) ($) 0.36 0.43 0.48 0.61 0.95

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Paramount was started in 1991 as a manufacturers’ representative and commission agent and as we grew, warehousing and

distribution were added during the 1990s. By the late 2000s, there was further growth into the construction sector through

alliance with the SIKA group and expansion into manufacturing through the acquisition of a manufacturing facility. Paramount

is today one of the leading distributors of industrial and food chemicals in Jamaica.

As part of its strategic thrust for growth, the Company listed on the Jamaica Stock Exchange on December 31, 2012.

The company has offices at 39 Waltham Park and 8 East Bell Road in Kingston.

The 2015 financial year continued to pose many

challenges against a background of austere IMF

pressures on the Jamaican economic, sluggish growth,

continued devaluation of the Jamaican dollar and overall

competitive market conditions. We were however able

to demonstrate our resilience and achieve our targets

for the year.

The company’s performance was impressive as

Revenues grew by 22.6% from $709 million in 2014 to

$869 million, an increase of $160 million which was

reflected in all of the business lines.

A significant contributor to this performance was the

growth in industrial chemical sales which grew by 33%

and accounted for 52% of total revenue as well as the

success of strategic initiatives employed during the year.

Gross profit margin remained steady with a slight

decline of 0.1%.

FINANCIAL PERFORMANCE

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MANAGEMENT ANALYSIS AND DISCUSSION

Net profit for the year grew to $146 million from $93.4

million in the previous year reflecting an increase of $52.6

million or 56%. The strong revenue growth along with the

reduction in foreign currency losses occasioned by a more

robust foreign currency risk management contributed to the

overall improvements in the bottom line.

Earnings per share moved to $0.95 from $0.61 Operating

Expenses increased by $19.3 million and amounted to $144.9

million up from $125.6 million in the previous year. Increased

staff costs arising from additional recruits in support a more

streamlined operation and professional fees incurred with

respect to the pursuit of business opportunities contributed

to the increase.

Finance costs declined from $21.4 million in the previous

year to $6.9 million. A major factor was the improved

management of the foreign currency risk which saw foreign

currency losses move from $10.8 million in 2014 to a gain of

$0.9 mil in the current year.

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The company’s financial position at the end of the

financial year reflected positive trends.

Total Assets at the end of the 2015 financial year was

$614.5 million reflecting an increase of $89.5 million

(17%) over the previous year of $525 million.

Total Liabilities declined by $33.2 million (18%)

moving from $179.8 million in the previous year to

$146.6 million. This was due mainly to the retirement

and periodic repayments of some long term loans.

Current assets rose by $38.5 million (9%) moving from

$430.6 million in the previous year to $469.1 million.

BALANCE SHEET

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Inventories increased by $75.8 million (37%) from

$202.5 million in the previous year to $278.3 million,

Receivables declined by $24.8 million (14%) to $147.3

million from $172 million in the previous year and

Investments increased by $46.3 million (842%) from

$5.5 million in the previous year to $51.8 million.

Shareholders’ Equity increased by $122.8 million to

$467.9 million, moving from $345.1 million in the

previous year.

Cash flows from operating activities showed marked

improvement and increased by $35.9 million moving

from $52.9 million in the previous year to $88.8

million. During the year the company paid dividends

of $23.3 million to shareholders.

The outlook for the new financial year is promising as we will continue to pursue business opportunities and strategic

alliances which were in progress during the fourth quarter of the financial year. There will also be a renewed focus on

capacity building of its team members and strengthening of relationship with stakeholders.

OUTLOOK

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Fiscal Year 2014-2015 was a good year for

Paramount in terms of revenue, market share,

profitability and cost control. Growth has been

steady as our customer focused approach and

meaningful technical support has continued to pay

off for all our stakeholders.

Listening to our customers have allowed us to

grow both outwards by securing more market share

of our traditional product lines and upwards, by

participating in developing areas such as water

treatment chemicals and filter aids.

The success of our customer centric approach is

largely due to the guidance of our board executives

and implementation across the customer

experience team, including customer service, sales

and delivery teams. Embracing the customer as a

partner and understanding that their success and

our success is intrinsically tied, better yet, bound

together. This is the foundation that we were built on

and the strategy continues to be effective, as all of

our business units have improved on performance

indicators over the previous year.

Logistics and Purchasing also has contributed

significantly to our success. Strengthened supplier

support through relationship building and strategic

target marketing has allowed us to continue to

bring value and technology to our industry. We have

offered improved chemistries to help our customers

compete on a global scale.

During the period, we have also entered a new market segment, as

Allegheny Petroleum has partnered with us to provide world leading

lubricants and oils to Jamaica. This presents as an exciting area of

growth and we are putting several initiatives in place to be a major

player in the lubricant industry for the next fiscal year.

We faced several challenges during the period, some unique to our

business, such as the reduction and cessation of product lines,

for example “MILO” and as well as National challenges affecting

production and the economy, such as the chikungunya viral disease.

Despite the challenges, the Paramount Team rallied and remained

focused on our goals.

As a part of our mandate, we have looked internally and have

identified areas where we could have done things differently and

in some cases, better. In recognizing the competitive nature of our

business, we have implemented some changes and will continue to

improve on our processes, structure and by extension, Paramount.

We are excited about the prospects and opportunities of 2015/2016

and will employ all we’ve learnt to have yet another successful year.

GENERAL MANAGER’S REPORT

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OPERATIONAL

HIGHLIGHTS

Our customers are the experts at their business, they know what the market requires; we as

suppliers are therefore required to provide them with the means to fulfill market needs. In an

effort to execute this task more effectively, we have opted to concentrate on improving certain

specific sectors of the portfolio, as well as introducing new technologies. We continue to push to

improve our relationship with our customers, with the aim of stimulating brand loyalty, through

increased technical support; including product formulation assistance.

THE TECHNICAL GRADE PORTFOLIO

Paramount Trading continues to make progress towards expanding our supplier base. With this collaborative effort, the

Food & Beverage unit secured a major government contract which contributed $5.7 million in revenue to the division.

However, we continue to grapple with challenges of companies closures and relocation of operations. A perfect example

is the discontinuation of Milo production by Nestle Jamaica. Nonetheless, Paramount Trading continues to be customer

focused while providing our customers with quality raw materials at the most affordable price.

THE FOOD GRADE PORTFOLIO

“. . . FOOD & BEVERAGE UNIT SECURED

A MAJOR GOVERNMENT CONTRACT”

“PARAMOUNT CONTINUES TO BE

CUSTOMER FOCUSED. . .”

33%

increase in sales.

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A new supply arrangement was forged with Sika Corporation - USA replacing

the existing relationship with Sika France. This has shortened the procurement

process by cutting delivery time from 8 weeks to 3 weeks. This change has also

facilitated the introduction of some new products and technologies which

were introduced to the market. These included, but were not limited to, the

Viscocrete Technology in our super-plasticizing admixture and the Watertight

Concrete Powder, waterproofing admixture.

Refurbishment and DIY product sales reflected significant increase. This

was due to the mobilization of the sales team and the technical support

offered both on and off site to our existing and potential customers.

The division also saw an increase in projects and applications. The

department has seen a 46% increase in the number of projects compared to

the previous year.

CONSTRUCTION

As the newest member of the Paramount Family, the Oil and

Lubricants division has steadility gained traction in the marketplace

with over $9 million in sales last year, particularly with heavy duty

and fleet management customers. While initial focus was placed on

targeting existing customers, several initiatives were implemented

to expand our target market.

In addition to industrial and automotive lubricants, we moved

to provide specialized solutions to the marketplace in the form

of environmentally friendly degreasers and dust control systems.

This is consistent with our commitment to bringing the very best

technology to Jamaica at an economical cost and we have moved

to engage in projects geared towards the next generation of

lubricants.

OILS AND LUBRICANTS

“Oil and Lubricants unit. . . $9 million in sales last

year ”

46% increase

in Application Contracts.

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Stamina Trucking & Transport, the haulage and delivery division of Paramount Trading, grew steadily

throughout the financial year 2015. With the withdrawal of one major customer from the industry, we

have had to increase the amount of effort and dedication to this line of business. Such efforts included

working assiduously at obtaining new customers and maintain those existing, the addition of two (2)

new trailer drivers and the transitioning of our haulage and delivery service into our Customer Service

department. This was aimed at increasing value to our customers and other stakeholders.

TRANSPORTATION

“efforts include. . . the transitioning of our haulage and delivery service to our Customer Service department ”

12% increase

in transportation.

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Throughout the Financial Year 2014/2015, Paramount Trading participated in a number of charitable ventures

to reinforce our commitment to our corporate and immediate communities and Jamaica as the whole.

In November 2014, Allegheny Petroleum, a major

business partner, made a donation of two million two

hundred thousand Jamaican dollars ($2,200,000.00)

towards the Bustamante Hospital for Children

in Kingston, Jamaica. This donation will be used

to purchase vital equipment needed for surgical

procedures on children.

CORPORATE CITIZENSHIP

24


Paramount Trading was also a proud sponsor of this

year’s Colour Me Happy 5K. Proceeds from this event

will go towards the construction of basic schools across

the island. Other 5Ks we participated in include Digicel

Foundation 5K for Special Needs, the Sagicor Sigma

Corporate Run and the Grace Kennedy Education 5K.

We were also the proud recipients of The Jamaica Stock Exchange’s

Best Practices Award for 1st Runner Up in Corporate Disclosure and

Investor Relations (Junior Market) for 2013. The JSE’s Best Practices

Awards Ceremony was held on December 3, 2014.

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THE ANNUAL CHILDREN’S TREAT

On December 13, 2014, we staged our 12th Annual Treat for the Children of the

Waltham Park, Union Gardens and surrounding communities at our Waltham Park

Road location. Although we received some light afternoon showers, Treat 2014 was

very well attended and beneficial for all stakeholders.

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• Allegheny Petroleum

• The Stewart Group of Companies

• Christelle Harris Charity Fund

• Caribbean Producers Jamaica

• Juici Patties

• KFC

• Glaxo SmithKline

• ColdfieldManufacturing

• Virginia Dare

• Smith & Stewart Distributors Ltd.

• Kingston Hireage

• Palz Production

• Roots FM

WE CONTINUE TO ENJOY THE DEDICATION

AND SUPPORT OF OUR SPONSORS SUCH

AS:

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SHAREHOLDINGS OF DIRECTORS & CONNECTED

PARTIESJamaica Central Securities Depository Limited

Registrar Services Unit

P.O. BOX 1084, 40 Harbour Street, Kingston, Jamaica

Tel: (876) 967-3271-4, Fax: (876) 948-6653

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29


30


31


AUDITED FINANCIAL

STATEMENTS

32


Paramount Trading (Jamaica) Limited Financial Statements31 May 2015

33


Paramount Trading (Jamaica) Limited Index31 May 2015

Page

INDEX

Independent Auditors' Report to the Members

Financial Statements

Statement 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 - 36

34


To the Members ofParamount Trading (Jamaica) Limited

Independent Auditors' Report

We have audited the accompanying financial statements of Paramount Trading (Jamaica) Limited (the Company) which comprise the Company’s Statement of Financial Position as at 31 May 2015 and the statement of comprehensive income, statement of changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and with the requirements of the Jamaican Companies Act. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards of Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether or not the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

35


To the Members of Paramount Trading (Jamaica) Limited

Independent Auditors’ Report

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of Paramount Trading (Jamaica) Limited as of 31 May 2015, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the provisions of the Jamaica Companies Act.

Report on Additional Requirements of the Jamaican Companies Act

As required by the Jamaican Companies Act, we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.

In our opinion, proper accounting records have been kept, so far as appears from our examination of those records, and the accompanying financial statements are in agreement therewith and give the information required by the Jamaican Companies Act, in the manner so required.

Chartered Accountants Kingston, Jamaica

16 July 2015

36


Paramount Trading (Jamaica) Limited Statement of Comprehensive Income31 May 2015

Note 31 May 2015 31 May 2014$ $

Revenue 3(i) 869,455,432 709,036,860

Direct expenses 589,666,773 479,690,179

Gross profit 279,788,659 229,346,681

Other operating income 8 16,366,240 *9,802,646

296,154,899 239,149,327

Less operating expenses:Administrative 138,464,287 120,446,374

Selling & distribution 6,384,999 5,185,978

144,849,286 125,632,352

Operating profit before finance costs and taxation 151,305,613 113,516,975

Finance income 1,585,400 *823,391

Finance costs 10 (6,867,690) (21,378,412)

Net finance costs (5,282,290) (20,555,021)

Profit before taxation 146,023,323 92,961,954

Taxation 11 - 425,259

Net profit being total comprehensive income 146,023,323 93,387,213

$ $

Earnings per share 12 0.95 0.61

* Finance income reclassified from other operating income for comparative purposes.

37


Paramount Trading (Jamaica) Limited Statement of Financial Position31 May 2015

Note 2015 2014$ $

Non-current assets: Property, plant and equipment 14 93,584,263 88,892,017 Investments 15 51,862,246 5,487,025Current assets: Inventories 16 278,353,618 202,586,187 Taxation recoverable 333,080 185,150 Receivables 17 147,320,111 172,087,556 Cash and cash equivalents 18 43,061,392 55,749,847

469,068,201 430,608,740Current liabilities: Payables 19 110,395,637 127,627,246

Current portion of director’s loan 20 3,510,542 3,115,528Current portion of long term borrowings 21 9,582,329 13,487,376

123,488,508 144,230,150Net current assets 345,579,693 286,378,590Total assets less current liabilities 491,026,202 380,757,632Equity: Issued capital 22 77,492,243 77,492,243 Retained earnings 390,398,742 267,666,672

467,890,985 345,158,915Non-current liabilities: Director’s loan 20 4,833,375 8,343,816 Long term borrowings 21 18,301,842 27,254,901

23,135,217 35,598,717Total equity and non-current liabilities 491,026,202 380,757,632

Approved for issue by the Board of Directors on ( INSERT DATE HERE) and signed on its behalf by:

……………………………….….. ……….………………………… Hugh Graham-Chief Executive Officer James Lechler- Director

38


Paramount Trading (Jamaica) Limited Statement of Cash Flows31 May 2015

31 May 2015 31 May 2014

$ $

Cash flows from operating activitiesNet profit after taxation 146,023,323 93,387,213

Adjustments for: Gain on disposal of property, plant & equipment (215,000) (267,555)

Depreciation 11,367,652 10,695,965

Operating cash flows before movements in working capital 157,175,975 103,815,623

Changes in operating assets and liabilities: (Increase)/decrease Inventories (75,767,431) (30,135,939)

Receivables 24,767,445 (25,849,096)

Increase/(decrease) Payables (17,231,609) 17,374,001

Taxation (147,930) (12,344,213)

(68,379,525) (50,955,247)

Net cash provided by operating activities 88,796,450 52,860,376

Cash Flows from Investing Activities: Purchase of property, plant & equipment (16,059,898) (18,329,178)

Proceeds from disposal of property, plant & equipment 215,000 2,359,608

Net cash used in investing activities (15,844,898) (15,969,570)

Cash Flows from Financing Activities: Dividend paid (23,291,253) (20,823,306)

Loans received 4,461,475 -

Loans repaid (20,435,008) (18,616,709)

Net cash used in financing activities (39,264,786) (39,440,015)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 33,686,766 (2,549,209)

Cash and cash equivalents at beginning of year 61,236,872 63,786,081

CASH AND CASH EQUIVALENTS AT END OF YEAR 94,923,638 61,236,872

REPRESENTED BY: Cash and cash equivalents 43,061,392 55,749,847

Investments 51,862,246 5,487,025

94,923,638 61,236,872

39


Paramount Trading (Jamaica) Limited Statement of Changes in Equity31 May 2015

Note No. of Shares

Share Capital Retained Earnings

Total

$ $ $

Balances at 31 May 2012 10,283,059 10,283,059 121,754,409 132,037,468Stock Split (1 to 12) 113,113,649 - - -Issue of shares, net of transaction costs 30,850,000 67,209,184 - 67,209,184Net profit for the year, being total comprehensive income - - 73,348,356 73,348,356Balances at 31 May 2013 154,246,708 77,492,243 195,102,765 272,595,008Net profit for the year, being total comprehensive income - - 93,387,213 93,387,213

Dividend paid 13 - - (20,823,306) (20,823,306)Balances at 31 May 2014 154,246,708 77,492,243 267,666,672 345,158,915Net profit for the year, being total comprehensive income - - 146,023,323 146,023,323Dividend paid 13 (23,291,253) (23,291,253)Balances at 31 May 2015 154,246,708 77,492,243 390,398,742 467,890,985

40


Paramount Trading (Jamaica) Limited Notes to the Financial Statements31 May 2015

1. IDENTIFICATION AND PRINCIPAL ACTIVITIES

Paramount Trading (Jamaica) Limited was a private company limited by shares, incorporated in 1991 and domiciled in Jamaica. Effective, 31 December 2012, the Company’s shares were listed on the Junior Market of the Jamaica Stock Exchange (JSE).The registered office of the Company is located at 39 Waltham Park Road, Kingston 13.

The principal activity of the Company is importation and distribution of chemicals and other related products. During the year ended 31 May 2010, the Company acquired a franchise with a recognized brand to manufacture chemicals on behalf of an international company. In addition, the Company also entered into arrangements with another international company to distribute “SIKA” branded hardware products, whose line of products include anchoring adhesives and sealants principally distributed to the commercial hardware market.

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

The financial statements of Paramount Trading (Jamaica) Limited have been prepared in accordance with and compliance with International Financial Reporting Standards (IFRS) under the historical cost convention, as modified by the revaluation of certain available-for-sale investment securities.

Items included in the financials are measured using the functional currency of the primary economic environment in which the Company operates. The financial statements are presented in Jamaican dollars, which is the Company’s functional and presentation currency.

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:

Critical Accounting estimates and assumptions

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.

41



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(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 decreased 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

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

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 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.

42




(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.

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’s 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. 43




Standards, interpretations and amendments to published standards effective in current year(continued)

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.

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.

44



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) New and amended standards and interpretations to existing standards that are not yet effective and have not been early adopted by the Company (continued)

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 Companyshould 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.

(a) Property, plant and equipment

Property, plant and equipment are stated at historical cost, less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of items. Land is carried at cost and is not depreciated..

Depreciation is calculated on a straight-line method at such rates as will write off the carrying value of the assets over the period of their expected useful lives. Current annual rates of depreciation are: Buildings 2% - 6% Plant, machinery and equipment 10% Furniture and fixtures 10% Mobile equipment and motor vehicles 20% Computer software and equipment 10%

The assets’ residual values and useful lives are reviewed periodically for impairment. Where the assets’ carrying amount is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

45




(a) Property, plant and equipment (continued)

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 included in the statement of comprehensive incomeduring the financial period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that the future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Company.

(b) Consolidation

A subsidiary is an enterprise controlled by the Company. Control exists when the company hasthe power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. In assessing control, potential voting rights that are presently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements of companies from the date control commences until the date that control ceases.

The Company has no subsidiaries and did not do business with any related entities during the year ended 31 May 2015.

(c) Foreign currency translation

Foreign currency transactions that require settlement in a foreign currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.

Monetary assets and liabilities denominated in currencies other than Jamaican dollars are translated at the rate of exchange in effect at the statement of financial position date. Non-monetary assets and liabilities measured at historical cost denominated in currencies other than Jamaican dollars are translated at the rate of exchange in effect at the date of the transactions or initial recognition. Non-monetary items in a foreign currency that are measured at fair value are translated using the exchange rates at the date when the fair value was determined.

Exchange rates are determined by the published weighted average rate at which commercial banks trade in foreign currencies.

(d) Inventories

Inventories are stated at the lower of cost, determined consistently on the same bases, and net realizable value. The cost of finished goods and work-in-progress comprise raw and packaging materials, direct labour, other direct costs and a proportion of related production overheads. In the case of manufactured inventories, net realizable value includes estimated costs of completion and selling expenses.

46




(e) Cash and cash equivalents

Cash and cash equivalents comprise cash, bank balances and short term deposits maturing within three months or less from the date of deposit or acquisitions that are readily convertible into known amounts of cash and which are not subject to significant risk of change in value and are held for the purpose of meeting short- term cash commitments rather than for investment or other purposes.

(f) 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 andinvestments available for sale and held to maturity categories. The classification depends on thepurpose 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-derivatives that are either designated in this category or not classified in any of the other categories.

(ii)Held-to-maturity

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company 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 should be reclassified as available-for-sale.

At the date of the statement of financial position, held-to-maturity investments comprise mainly Jamaican dollar securities under resale agreements and Certificates of Deposit. 47



3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued

(f) Financial instruments (continued)

Investments (continued)

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: longterm loans and accounts payables and accruals.

(g) 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.

(h) Payables

Trade and other payables are stated at historical cost.

(i) Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and other sales taxes or duty.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 be measured reliably.

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.

48




(j) Borrowings and borrowing costs

Borrowings are recognized initially at the time proceeds are received, net of transaction costs. Borrowings are subsequently stated at amortized cost using the effective yield method. Any difference between proceeds, (net of transaction costs) and the redemption value is recognized in arriving at profit or loss over the period of the borrowings.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of these assets. 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 profit or loss in the period in which they are incurred.

(k) Leases

Leases of property, plant and equipment where the Company has substantially taken over all the risks and rewards of ownership are classified as finance leases. Finance leases arerecognized at the inception of the lease at the lower of the fair value of the leased asset or the present value of minimum lease payments. Each lease payment is allocated between the liability and interest charges so as to produce a constant rate of charge on the lease obligation. The interest element of the lease payments is charged to comprehensive income over the lease period.

Property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset or the lease term.

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments under operating leases are charged to comprehensive income on a straight – line basis over the period of the lease.

(l) Dividends

Dividends on ordinary shares are recognized in stockholders’ 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.

(m)ProvisionsProvisions 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. 49




(m)Provisions (continued)

The expense relating to any provision is charged to the statement of comprehensive income net of any reimbursement.

(n) Impairment

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognized in comprehensive income.

Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

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, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of comprehensive income unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.

Impairment losses recognized in relation to goodwill are not reversed for subsequent increases in its recoverable amount.

(o) Pension and employee benefits

The Company does not operate a pension scheme. The Company has implemented an Individual Retirement Account (IRA) scheme for some categories of staff operated by Sagicor Limited, a licensed Investment management entity. The Company contributes 5% of each participating individual’s salary and the Company’s total contribution for the year ended 31 May 2015 amounted to $475,230 (2014 - $476,653).

Employees’ benefits include current or short term benefits such as salaries, statutory contributions paid, annual vacation and sick leave, non-monetary benefits such as medical care. Entitlement to annual leave and other benefits are recognized when they accrue to employees.

50




(p) Related parties

A related party is a person or entity that is related to the entity that is preparing its financial statements (referred to in IAS 24 Related Party Disclosures as the “reporting entity”)

(a) A person or 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.

(b) An entity is related to a reporting entity if any of the following conditions applies:

i. The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

ii. One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

iii. Both entities are joint ventures of the same third party.

iv. One entity is a joint venture of a third entity and the other entity is an associate of the third entity

v. The entity is associated with 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)

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 (or of a parent 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.

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(q) Income taxes

Taxation expense on the profit or loss for the year in the statement of comprehensive income comprises current and deferred tax charges. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly to equity, in which case it is recognized in equity.

i. Current taxation

Current tax charge is the expected tax payable on the taxable income for the year, using tax rates in effect at the reporting date plus any over or under provision of tax in respect of previous years.

ii. Deferred taxation

Deferred tax liabilities are recognized for temporary differences between the carrying amounts of assets and liabilities and their amounts as measured for tax purposes, which will result in taxable amounts in future periods. Deferred tax assets are recognized for temporary differences which will result in deductible amounts in future periods, but only to the extent it is probable that sufficient taxable profits will be available against which these differences can be utilized.

Deferred tax assets and liabilities are measured at tax rates that are expected to apply in the period in which the asset will be realized or the liability will be settled based on enacted rates.

The Company’s shares were listed on the Junior Market of the Jamaica Stock Exchange (JSE)on 31 December 2012. As a result of the tax free status that was granted to the Company, entries relating to deferred taxation were reversed as at 31 May 2013. See note 11 for further information on taxation as it relates to the Junior Market of the JSE.

(r) Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses. The operating results are regularly reviewed by the entity’s Chief Operating 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.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to be used for more than one year. Management considers the Company to have five (5) (2014- four (4) strategicbusiness units. These units offer different products and services and require differenttechnology and marketing strategies.52


Page



(r) Segment reporting (continued)

The primary reportable business units are:

i. Distribution of imported chemicals

ii. Manufacturing of branded chemical products

iii. Distribution of SIKA branded construction and adhesive products

iv. Haulage services provided to external customers

v. Manufacturing and distribution of lubricants

The manufacturing operations are conducted at 8 East Bell Road, Kingston 11 and the distribution of chemicals is done from both the Company’s warehouses at East Bell Road and at 39 Waltham Park Road, Kingston 13.

Financial and other transactions between business units have been eliminated where necessary in preparing the financial statements as at 31 March 2005.

4. FINANCIAL RISK MANAGEMENT

(a) Financial risk factors

The Company’s activities expose it to a variety of financial risks in respect of its financial instruments: market risk (currency and interest rate risk), credit risk, liquidity risk and operational risk. The Company’s overall risk management policies are established to identify and analyze the risks faced by the Company and to set appropriate risk levels and controls and to monitor risk and adherence to limits.

The Board of Directors is ultimately responsible for the oversight of the Company’s risk management and has established committees such as audit and treasury to monitor risks. The Company seeks to minimize potential adverse effects on the Company’s financial performance and to manage these risks by close monitoring of each class of its financial instruments as follows:

(b) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange and interest rates will impact the Company’s income and value of its financial instruments. The objective of market risk management is to manage and control the Company’s exposure to this type of risk to within acceptable parameters, while optimizing the return on risk. 53



4. FINANCIAL RISK MANAGEMENT (continued)

(b) Market risk

i. Currency risk

Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Company is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar. Foreign exchange risk arises from future commercial transactions. The Company manages its foreign exchange risk by ensuring that the net exposure in foreign assets and liabilities is kept to an acceptable level by monitoring currency positions. The Company further manages this risk by maximizing foreign currency earnings and holding foreign currency balances.

The main currency giving rise to this risk is the United States dollars (US$). The Company’s balance sheet as at 31 May 2015 includes aggregate net foreign assets/(liabilities) of approximately US$74,370 (2014 - US$(438,195)) in respect of transactions arising in the ordinary course of business which were subject to foreign exchange rate changes as follows:

Concentrations of currency risks2015US$

2014US$

Financial assets- Cash and cash equivalents 751,996 500,425

751,996 500,425Financial liabilities- Payables and accruals (677,626) (938,620)Net total assets/(liabilities) 74,370 (438,195)

The above assets/(liabilities) are receivable/(payable) in United States dollars. The rate of exchange applicable at balance sheet date is J$116.12 to US$1 (2014 - J$111.26 to US$1)

Foreign currency sensitivity

A 5% (2014-5%) weakening of the Jamaican dollar would have increased profit for the year by approximately $0.4Million (2014-$2.4 Million decrease), assuming all other variables, in particular interest rates, remain constant.

ii. Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates.

The Company’s cash and cash equivalent are subject to interest rate risk. However, the Company attempts to manage this risk by monitoring its interest-bearing instruments closely

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(b) Market risk (continued)

ii. Interest rate risk (continued)

and procuring the most advantageous rates under contracts with interest rates that are fixed for the life of the contract, where possible. The Company invests excess cash in short-term deposits and maintains interest-earning bank accounts with licensed financial institutions.

Interest rates on certain loans are fixed and are not affected by fluctuations in market interest rates.

During the year, the Company experienced a reduction in the rates on certain of its loans. At the reporting date the interest profile of the Company’s interest bearing financial instruments was:

2015$

2014$

Fixed rateAssets - -Liabilities 36,228,088 52,201,621

36,228,088 52,201,621Variable rate:Assets 94,516,916 59,388,132Liabilities - -

94,516,916 59,388,132

Fair value sensitivity analysis for fixed rate instruments:

The Company does not hold any financial instruments that are carried at fair value. As a consequence, at the reporting date, fluctuation in interest rates, would not affect profit or equity.

Cash flow sensitivity analysis for variable rate instruments:

At the reporting date, a 2% (2014 - 2%) decrease in interest rates would have decreased profit by approximately $1.9 Million (2014-$1.2 Million), assuming that all other variables, in particular foreign currency rates, in both the current and prior years remained constant.

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(c) 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 Company faces credit risk principally in respect of its receivables from customers and to a lesser extent cash at bank and short term deposits held with financial institutions.

Cash and cash equivalent:

Cash and cash equivalent is managed by maintaining these balances with licensed financial institutions considered to be stable and are deemed to have low risk of default.

Trade receivables

Credit risk for receivables is mitigated by stringent credit reviews and approval of limits to customers and the Company structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to a single counterparty. The Company has an established credit process which involves regular analysis of the ability of customers and other counterparties to meet repayment obligations. The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Customers of the Company principally include wholesalers, retailers, bauxite companies and bakeries. There is a credit policy in place under which each customer is analyzed individually for creditworthiness prior to the Company offering them a credit facility. Customers are assigned credit limits, which represent the maximum credit allowable. The Company has procedures in place to restrict customer orders if the orders will exceed their credit limits. Customers that fail to meet the Company’s benchmark creditworthiness may transact with the Company on a prepayment or cash basis. The credit quality of the customer is assessed, taking into account its financial position, past experience and other factors. The utilization of credit limits is regularly monitored.

The Company’s exposure to this risk is minimal because approximately 90% (2014-87%) of its trade debtors is under 90 days.

Impairment:

The Company establishes a provision for impairment that represents its estimate of possible incurred losses in respect of trade receivables. Impairment is assessed for each customer balance over 90 days.

The Company’s credit period on the sale of goods ranges from 7 to 30 days. The Company has provided fully for all receivables where collectability is deemed doubtful.56




(c) Credit risk (continued)

Trade receivables (continued)

Maximum exposure to credit risk

31 May 2015

31 May2014

$ $Credit risk exposures are as follows:Investments 51,862,246 5,487,025Trade and other receivables 147,320,111 172,087,556Cash and short term equivalents 43,061,392 55,749,847

242,243,749 233,324,428

Ageing analysis of trade receivables that are past due and impaired

Trade receivables over 90 days overdue are considered impaired and are reviewed for any necessary provision.

As of 31 May 2015, trade receivables of $13,221,983 (2014 - $20,164,410) for the Company were impaired. The amount of the provision was $6,704,202 (2014-$4,917,737) for the Company. The impairment recognized represents an estimate of possible incurred losses in respect of trade receivables over 90 days.

The impaired receivables mainly relate to customers who are in unexpected difficult economic situations. It was assessed that a portion of the impaired receivables is expected to be recovered.

31 May2015

31 May2014

$ $

Gross Impairment Gross Impairment

Past due 0 to 60 days 119,279,888 - 109,759,130 -Past due 61 to 90 days 12,551,907 - 21,135,752 -Past due over 91 days 13,221,983 6,704,202 20,164,410 4,917,737

145,053,778 6,704,202 151,059,292 4,917,73757




(c) Credit risk (continued)

Trade receivables (continued)

Movement on the provision for impairment of trade receivables

The movement on the provision for impairment of trade receivables was as follows:

31 May 2015

31 May2014

$ $At 1 June 2014 4,917,737 5,985,063Provision for receivables impairment: increase/(decrease) 1,786,465 (1,067,326)At 31 May 2015 6,704,202 4,917,737

The creation of provision for impaired receivables has been included in expenses in the profit or loss account. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash.

Exposure to credit risk for trade receivables

The following table summarizes the Company’s credit exposure for trade receivables at their carrying amounts, as categorized by customer sector:

Note 31 May 2015

31 May2014

$ $

Manufacturing, wholesalers and retailers 134,818,357 131,498,213Sugar industry 2,473,817 773,560Government 532,344 9,482,690Bauxite sector 7,229,260 9,304,829

17 145,053,778 151,059,292Less: provision for impairment (6,704,202) (4,917,737)

138,349,576 146,141,555

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(d) Liquidity risk

Liquidity risk is the risk that the Company may be unable to meet its payment obligations associated with its financial liabilities when they fall due.

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities. Liquidity risk management process

The Company manages its liquidity risk by maintaining an appropriate level of resources in liquid or near liquid form. The Company maintains cash and short-term deposits for up to 90-day periods to meet its liquidity requirements.

The Company’s liquidity management process, as carried out within the Company and monitored by the Treasury function, includes:

i. Monitoring future cash flows and liquidity on an ongoing basis. This incorporates an assessment of expected cash flows,

ii. Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen interruption to cash flow;

iii. Maintaining committed lines of credit;

iv.Managing the concentration and profile of debt maturities

v. Optimizing cash returns on investments.

Cash flows of financial liabilities

The Company’s financial liabilities comprise long-term loans and payables and accruals. These amounts are due as follows:

2015

Carrying amount

$

Contractual cash flows

$

1 year or less$

1-2 yrs

$

2-5 yrs

$Long-term loans 27,884,171 40,891,021 18,160,129 17,602,863 5,128,029Payables 110,395,637 110,395,637 110,395,637 - -Director’s loans 8,343,917 10,400,000 4,800,000 4,800,000 800,000Total 146,623,725 161,686,658 133,355,766 22,402,863 5,928,029

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(d) Liquidity risk (continued)

Cash flows of financial liabilities (continued)

2014

(e) Operational risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Company’s processes such as personnel, technology and infrastructure, as well as from external factors, other than financial risks, such as those arising from legal, regulatory requirements and natural disasters.

The management of the Company is responsible for managing operational risk so as to avoid financial loss and damage to the Company’s reputation while at the same time balancing the control procedures to allow innovation and creativity to facilitate growth of the Company.Management is aware of the many operational risks and continues to implement the necessary strategies to mitigate the negative impact of the different risks associated with the operation of the Company.

(f) Capital management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for its stockholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital as well as meet externally imposed capital requirements. The Board of Directors monitors the return on capital, which the Company defines as net operating income divided by total stockholders’ equity.

Consistent with others in the industry, the Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net borrowings divided by total capital. Net borrowings is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the balance sheet). Total capital is calculated as stockholders equity as shown in the balance sheet plus net borrowings.

Carrying amount

$

Contractual cash flows

$

1 year or less

$

1-2 yrs

$

2-5 yrs

$Long-term loans 40,742,277 49,864,376 17,781,917 13,118,107 18,964,352Payables 127,627,246 127,627,246 127,627,246 - -Director’s loans 11,459,344 15,200,000 4,800,000 4,800,000 5,600,000Total 179,828,867 192,691,622 150,209,163 17,918,107 24,564,352

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(f) Capital management (continued)

During 2015, the Company’s strategy, which was in principle unchanged from 2014, was to maintain the gearing ratio below 1:1. The gearing ratios at 31 May 2015 and 31 May 2014 were as follows:

31 May 2015

$

31 May 2014

$Net borrowings 36,228,088 52,201,621Total capital 504,119,073 397,360,536Gearing ratio 0.07 0.13

There were no changes to the Company’s approach to capital management during the year.

(g) Disclosure of fair value of financial instruments

Fair value is considered as the amount for which an asset could be exchanged, or a liability settled between knowledgeable willing parties in an arm’s length transaction. Market price is used to determine fair value where an active market, such as a recognized stock exchange exists, as it is the best evidence of the fair value of a financial instrument.

Financial instruments are grouped into levels 1 to 3 based on the degree to which the fair value is observed, as follows:

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical instruments. The available-for-sale instruments in financial repurchase agreement (repos) are classified as level 1.

Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the instrument either directly (i.e., as prices) or indirectly (i.e., derived from prices). There were no financial instruments held by the Company in this category.

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the instruments that are not based on observable market data (unobservable inputs). There were no financial instruments held by the Company in this category.

The carrying value of cash and cash equivalents, accounts receivable and accounts payable are assumed to approximate to their fair values due to their short-term nature. Long term liabilities and related party balances are carried at their contracted settlement values.

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(h) Reputational Risk

The Company is engaged in a business that distributes chemical raw materials to various industries and manufactures basic inputs for food processing and industrial applications. Its reputation is critical within the market place and the Company’s management endeavors at all times to be ethical and adopts international best practices in the storage, manufacturing and distribution of its products.

The Company ensures that the necessary sanitary and quality standards are maintained and has regular audits from the government bodies responsible for the Company’s portfolio of products including the government’s Bureau of Standards, Public Health Department, Jamaica Customs Department and the Ministry of Industry and Commerce. Also, as a supplier to several multinational and reputable local companies, the Company complies with quality standards and when potential customers conduct their independent audits, the Company is approved as a certified distributor to their plants.

Rigorous quality checks are integrated in the Company’s receival and delivery process of its products and this reduces the level of customer complaints. Management considers the Company’s reputation secured as events that may damage the Company’s reputation are immediately investigated and the appropriate action taken in a manner that satisfies the complainant.

5. SEGMENTAL FINANCIAL INFORMATION

The Company is organized into five (5) (2014-four (4) primary business units that are exposed to similar risks. The principal units are:

(i) Chemicals – distribution of chemical products (ii) Construction and Adhesives – distributing SIKA branded products; adhesives and hardware

supplies (iii) Manufacturing – manufacturing of commercial cleaning agents (iv) Transportation – haulage services(v) Lubricants - manufacturing and distribution of lubricants

Measurement of performance is based on the principal unit’s gross profit as included in the internal management reports that are reviewed by the Chief Operating Decision Maker (CODM). Based on the information presented to and reviewed by the CODM, the entire operations of the Company are considered as one operating segment. Inter-unit pricing and transactions are determined on an arm’s length basis.

Information regarding the results of each unit is noted below.

Chemicals located at 39 Waltham Park Road and 8 East Bell Road, account for over 85% (2014-87%) of revenue.

Construction and Adhesives is a wholesale distribution outlet, trading under the SIKA brand and is located on Bell Road, in Kingston; and accounts for approximately 6% (2014-6%) of revenue.

Manufacturing operates from both the 39 Waltham Park Road (food grade) and 8 East Bell Road (technical grade) locations, and accounts for approximately 5% (2014-4%) of revenue.

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5. SEGMENTAL FINANCIAL INFORMATION (continued)

Transportation division operates from 39 Waltham Park Road and accounts for approximately 3% (2014-3%) of revenue

Lubricants – This division began operating from 44 Waltham Park Road, and accounts for approximately 1% (2014 – 0%) of revenue

6. OPERATING PROFIT BEFORE TAXATION

2015Chemicals Construction

andAdhesives

Manufacturing Transport Lubricants Total

$ $ $ $ $ $

Revenues 753,166,174 51,328,247 31,376,970 24,553,734 9,030,307 869,455,432Cost of sales 522,050,266 24,438,711 18,879,840 21,844,867 2,453,089 589,666,773Gross profit 231,115,908 26,889,536 12,497,130 2,708,867 6,577,218 279,788,659Gross profit % 31% 52% 40% 11% 73% 32%

2014Chemicals Construction

andAdhesives

Manufacturing Transport Total

$ $ $ $ $

Revenues 616,938,504 44,533,691 25,566,990 21,997,675 709,036,860Cost of sales 421,229,913 27,014,380 14,734,227 16,711,659 479,690,179Gross profit 195,708,591 17,519,311 10,832,763 5,286,016 229,346,681Gross profit % 32% 39% 42% 24% 32%

2015$

2014$

Auditors’ remuneration 1,750,000 1,627,500Directors’ emoluments: Fees 421,250 645,000 Management remuneration 6,966,667 4,800,000

Bad debts (recovered)/ expensed 1,786,465 (871,832)Foreign exchange (gains)/losses (906,521) 10,849,968Depreciation 11,367,652 10,695,965Staff costs (including management remuneration) 59,242,649 50,657,401 63



7. STAFF COSTS

The average number of persons employed full-time by the Company during the year was 44 (2014 -41)

8. OTHER OPERATING INCOME

Note 2014 2014$ $

Gain on disposal of fixed assets 215,000 267,555Rental income – warehousing 11,399,293 9,535,091Other 4,751,947 -

16,366,240 9,802,646

Warehouse rental income is obtained from the Company’s property located at Bell Road which was used by a 3rd party for storage of certain items.

9. EXPENSES BY NATURE

2015 2014$ $

Selling, advertising, promotion and distribution 4,598,533 6,057,810Audit fee 1,750,000 1,627,500Depreciation 11,367,652 10,695,965Bad debts (recovered)/expensed 1,786,465 (871,832)Repairs and maintenance 5,370,426 7,944,696Staff costs 59,242,649 50,657,401Motor vehicle expenses 1,929,203 4,517,461Cost of inventories recognized as expense 589,666,773 479,690,179Utilities 10,360,138 11,180,718Insurance 11,125,010 7,953,620Security 5,531,825 5,276,739Rental 3,360,000 3,105,000Other expenses 28,427,385 17,487,274

734,516,059 605,322,531

2015$

2014$

Salaries (excluding managements’ remuneration ) 47,727,808 41,232,135Management’s remuneration 6,966,667 4,800,000Employers payroll taxes 3,973,693 4,205,674Staff welfare 574,481 419,592

59,242,649 50,657,401

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10. FINANCE COSTS

2015 2014$ $

Interest expenses 5,505,079 7,883,504Debt financing fees and expenses 1,362,611 13,494,908

6,867,690 21,378,412

11. TAXATION

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

2015 2014$ $

Income tax @ 25% - -Prior year’s overprovision for taxation - 425,259Taxation overprovision (credit) income statement - 425,259

The tax charge on the Company’s profit differs from the theoretical amount that arose using the statutory tax rate of 25% as follows:

2015 2014$ $

Profits before taxation 146,023,323 92,961,954

Tax calculation at 25 % 36,505,831 23,240,489Depreciation and capital allowance 95,227 (4,834,544)Net income allowed for tax purposes (975,557) 2,544,813Remission of tax: listing on the Junior Market of the JSE (35,625,501) (20,950,758)Current year taxation charge - -

No account is taken of deferred taxation during the year ended 31 May 2015 because the Company was granted a remission from income tax as a result of listing on the Junior Market of the JSE, effective 31 December 2012.

(b) Remission of income tax

By notice dated 13th 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.

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11. TAXATION (continued)

(b) Remission of income tax (continued)

Effective 31 December 2012, 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 thefollowing proportion:

Years 1 to 5: (1 January 2013 - 31 December 2017) – 100%Years 6 to10 :( 1 January 2018 - 31 December 2023) – 50%

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

(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.

12. EARNINGS PER SHARE

Basic EPS is computed by dividing the net profit for the year attributable to shareholders by the weighted average number of ordinary shares in issue for the year’

2015 2014$ $

Net profit attributable to shareholders (J$) 146,023,323 93,387,213Weighted average number of ordinary shares in issue 154,246,708 154,246,708Basic earnings per share 0.95 0.61

13. DIVIDENDS

During the year ordinary dividends of $23,291,253 (2014-$20,823,306) was paid. The Board of Directors proposed a dividend payment of 15.1 cents (2014-13.5 cents) which was ratified on 31 October 2014 at the Annual General Meeting and the dividend was paid on 12 December 2014 to shareholders on record as at 28 November 2014.

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14. PROPERTY, PLANT AND EQUIPMENT2015

Equipment Computer Equipment

Furniture & Fixtures

Building Motor Vehicle Forklift LeasedVehicles

Total

$ $ $ $ $ $ $ $At cost:1 June 2014 34,131,234 3,618,028 2,871,016 67,567,046 29,982,950 993,166 26,169,663 165,333,103Additions 9,753,598 535,963 298,136 - 1,010,726 - 4,461,475 16,059,898Disposals - - - - (350,000) - - (350,000)31 May 2015 43,884,832 4,153,991 3,169,152 67,567,046 30,643,676 993,166 30,631,138 181,043,001Depreciation:1 June 2014 16,595,569 1,074,072 1,298,398 13,539,155 20,304,671 964,873 22,664,348 76,441,086Charge for the year 2,369,598 393,765 244,436 1,689,176 3,223,557 28,293 3,418,827 11,367,652Relieved on disposal - - - - (350,000) - - (350,000)31 May 2015 18,965,167 1,467,837 1,542,834 15,228,331 23,178,228 993,166 26,083,175 87,458,738NET BOOK VALUE31 May 2015 24,919,665 2,686,154 1,626,318 52,338,715 7,465,448 - 4,547,963 93,584,263

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14. PROPERTY, PLANT AND EQUIPMENT (continued)2014

Equipment Computer Equipment

Furniture & Fixtures

Building Motor Vehicle

Forklift Boat LeasedVehicles

Total

$ $ $ $ $ $ $ $ $At cost:1 June 2013 24,754,155 2,936,176 2,687,036 67,567,046 21,896,683 993,166 8,027,164 26,169,663 155,031,089Additions 9,377,079 681,852 183,980 - 8,086,267 - - - 18,329,178Disposals - - - - - - (8,027,164) - (8,027,164)31 May 2014 34,131,234 3,618,028 2,871,016 67,567,046 29,982,950 993,166 - 26,169,663 165,333,103Depreciation:1 June 2013 14,854,934 739,245 1,018,600 11,849,979 18,004,256 864,873 4,731,036 19,617,309 71,680,232Charge for the year 1,740,635 334,827 279,798 1,689,176 2,300,415 100,000 1,204,075 3,047,039 10,695,965Relieved on disposal - - - - - - (5,935,111) - (5,935,111)31 May 2014 16,595,569 1,074,072 1,298,398 13,539,155 20,304,671 964,873 - 22,664,348 76,441,086NET BOOK VALUE31 May 2014 17,535,665 2,543,956 1,572,618 54,027,891 9,678,279 28,293 - 3,505,315 88,892,017

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15. INVESTMENTS

2015 2014

Held-to- Maturity: $ $ 3.2% - 2.3% US$ Certificate of Deposits 49,554,631 3,173,758

J$ Securities purchased under resale agreements 2,307,615 2,313,267

51,862,246 5,487,025

The Company has entered into a collateralized reverse repurchase agreement (securities purchased under agreement to resell), which may result in credit exposure in the event that the counterparty to the transaction is unable to fulfill its contractual obligations.

Securities purchased under agreement to resell are regarded as cash and cash equivalents for the purposes of the statement of cash flows. The average effective interest rate at the year end wasapproximately 5.5% (2014- 2%)

16. INVENTORIES

2015 2014

$ $ Chemicals 212,289,044 165,188,213

Construction and adhesives 48,258,908 22,882,497

Manufacturing raw materials 2,144,819 1,055,392

262,692,771 189,126,102

Goods –In-Transit 22,940,637 18,438,193

Less: provision for obsolete stock (7,279,790) (4,978,108)278,353,618 202,586,187

17. RECEIVABLES2015 2014

$ $

Trade receivables 145,053,778 151,059,292

Refundable general consumption tax 321,475 15,534,951

Director’s account 1,247,882 -

Other receivables 7,401,178 10,411,050

154,024,313 177,005,293Less provision for bad debts (6,704,202) (4,917,737)

147,320,111 172,087,556

Trade receivables balance at the end of the year includes $26,768,454 (2014-$32,235,907) from the Company’s 5 largest customers and the balances were all within the approved credit limits. There are no other customers who represent more than 5% of the total trade receivables balance. The Companydoes not hold any collateral over trade receivables balances.

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18. CASH AND CASH EQUIVALENTS

2015 2014$ $

Cash in hand 50,000 50,000US$ bank accounts 37,468,581 52,318,043JA.$ bank accounts 5,542,811 3,381,804

43,061,392 55,749,847

Exchange rate exposure:

2015$

2014$

Cash at bank- United States dollars:The weighted average effective exchange rate throughout the Company’s financial year was as follows 113.95 105.80

The weighted average effective exchange rate at year end 116.12 111.26

19. PAYABLES

2015$

2014$

Foreign payables 78,685,911 104,440,356Local payables and accruals 31,025,726 21,962,890Other payables 1,224,000 1,224,000

110,395,637 127,627,246

20. DIRECTOR’S LOAN

2015 2014

$ $

Director’s Loan 8,343,917 11,459,344

Less current portion due within 12 months (3,510,542) (3,115,528)

4,833,375 8,343,816

This represents the balance due on a mortgage loan obtained by the Managing Director from a financial institution and on-lent to the Company at an interest rate of 12% per annum. The loan is unsecured and will mature in July 2017.

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21. LONG TERM BORROWINGS

2015 2014$ $

(i) 16% Alliance Investment Management Limited - 8,702,406(ii) 8.95 % Pan Caribbean bank loan – DBJ 18,571,221 23,136,936Finance lease obligations [see (b) below] 9,312,950 8,902,935

27,884,171 40,742,277Less current portion due within 12 months (9,582,329) (13,487,376)

18,301,842 27,254,901

(a) The details of the loan are as follows:

(i) This represents the principal loan balance which is repayable in monthly installments ofprincipal and interest of $530,691.73 and will mature in January 2016.

(ii) This represents the principal loan balance which is repayable in monthly installments of principal and interest of $539,986.21. The loan was renegotiated at a lower interest rate and will mature in September 2018. During the current year, the financial institution was rebranded as Sagicor Bank.

The loans are secured by:

Legal mortgage over commercial properties located at 39 and 44b Waltham Park Road, Lot # 8 Bell Road and other real estate.

Personal guarantee of the Managing Director

(b) The lease obligations relate to motor vehicles and are payable as follows:2015

$2014

$

Due from the reporting date as follows:Within one year 6,541,761 4,933,782

Within two to five years 6,531,282 5,792,166

Total future minimum lease payments 13,073,043 10,725,948

Less: future interest charges 3,760,093 1,823,013

Present value of minimum lease payments 9,312,950 8,902,93571



22. SHARE CAPITAL

2015$

2014$

Authorised:

162,000,000 (2014 - 162,000,000) ordinary shares of no par value Issued and fully paid:154,246,708 (2014 – 154,246,708) shares of no par value 77,492,243 77,492,243

23. RELATED PARTIES TRANSACTIONS AND BALANCES

(a) The statement of comprehensive income includes the following related party transactions2015 2014

$ $Key management compensation: Salaries 10,758,667 8,717,154

Rental expense: Director 3,360,000 3,105,000

Interest expense:Director 1,684,572 2,035,216

(b) The statement of financial position includes director’s loan which is stated at note 20, an amount payable to director of $8,343,917 (2014: $11,459,344) and an amount due from a director of $1,247,882 (2014: nil) reflected in receivables (note 17).

24. COMMITMENTS AND CONTINGENCIES

Apart from commitments to financial institutions (disclosed in Note 21) 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.

25. EVENTS AFTER STATEMENT OF FINANCIAL POSITION DATE

As at 16 July 2015, the date these financial statements were signed, the Company was finalizing arrangements with a foreign entity to participate in a joint arrangement to manufacture and distribute lubricants.72


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PARAMOUNT

TRADING

Lubricants | Industrial Chemicals | Food Additives | Construction Products | Haulage

© Paramount Trading (Jamaica) Limited / MDT / 092315E1

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