KINGSTON WHARVES LIMITED ANNUAL REPORT 2016€¦ · feeder services to Caribbean and Latin American Ports. • The regional transshipment hub for one of the world’s leading motor

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Annual Report 2016

ENGAGE / EXECUTE / DELIVER GROWTH

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12 “In line with our strategic priority of maintaining market leadership as a regional multi-

purpose, multi-user port as well as in the provision of the full range of logistics services, the KW Group is organized around two specific business lines: (a) Terminal Operations, and (b) Logistics & Ancillary Services.”

20 “Our 2016 financial results were achieved through focused attention on and investment in

organization-readiness for expansion and reorganization to ensure delivery of our ambitious growth targets.”

27 “KWL has invested heavily in physical infrastructure in order to position itself to

grasp new opportunities for growth in cargo/trade and logistics.”

Contents

ENGAGE / EXECUTE / DELIVER GROWTH

Awarded the Caribbean’s Best Multi-Purpose

Terminal

1KWL AnnuAL RepoRt - 2016 engAge. execute. deLiveR gRoWth.

foR moRe infoRmAtion pLeAse visit: WWW.KingstonWhARves.com

2 Vision

2 Mission

3 Core Values

4 Notice of Annual General Meeting

6 KWL AT A GLAnce

6 2016 Performance Summary

10 Ten Year Statistical Review

12 Chairman’s Message

14 Board of Directors

15 Directors’ Report

16 Corporate Governance

20 CEO’s Message

22 Leadership Team

24 Strategic Focus

26 MAnAGeMenT Discussion & AnALysis

28 2016 Financial Performance

29 A Strategic Vision for the Long Haul

30 Making Sound Investments

33 Transforming the Customer Experience

34 Building a Strong Team

35 Outlook 2017

36 LeADinG LoGisTics

37 KWL In The Community

38 Top Ten Shareholders

38 Directors’ and Executives’ Shareholdings

41 Corporate Data

42 FinAnciAL sTATeMenTs

44 Independent Auditor’s Report

Proxy Form

Contents

2

Vision

To become the region’s leading multi-purpose multi-user port terminal.

Mission

To be the multi-purpose port of choice for the movement of cargo in the western hemisphere by providing consistently high quality service to the benefit of all stakeholders.



Core Values

performance - We strive for continuous improvement in our performance, measuring results carefully in support of all our core values.

integrity - Our actions and decisions shall reflect the highest ethical standards, professionalism and honesty.

customer focus - We are deeply committed to meeting the needs of our customers, and we will constantly focus on customer satisfaction.

respect - We will respect the dignity and rights of our stakeholders.

teamwork - We know that to be a successful company we must work together, frequently transcending organizational and departmental boundaries to meet the changing needs of our customers.

social responsibility - We play an active role in making our country and the community in which we operate a better place to live and work, knowing that the ongoing vitality of our country and community has a direct impact on the long-term success of our business.

Notice of AgMNOTICE is hereby given that the Annual general Meeting of Kingston Wharves Limited will be held at the KWL Total Logistics Facility (TLF), 195 second street, newport West, Kingston 13 on Thursday June 22, 2017 at 10 a.m. for the following purposes:

1. To receive the Audited Financial Statements for the year ended December 31, 2016 and the Reports of the Directors and Auditors circulated herewith:

To consider and (if thought fit) pass the following resolution:

“THAT the Audited Financial Statements for the year ended December 31, 2016 and the Reports of the Directors and Auditors circulated with the Notice convening the meeting be adopted”.

2. To declare the dividend of fourteen cents ($0.14) per share paid on August 3, 2016 and of twenty cents ($0.20) per share paid on January 19, 2017 as final.


“THAT as recommended by the Directors, the dividend of fourteen cents ($0.14) per share paid on August 3, 2016 and of twenty cents ($0.20) per share paid on January 19, 2017 be and are hereby declared as final and that no further dividend be paid in respect of the year under review.

3. Rotation of Directors

(a) The directors retiring from office by rotation pursuant to Article 107 of the Company’s Articles of Incorporation are Dr. Marshall Hall, Mr. Robert Scavone and Mr. Dorian Valdes, all Specially Appointed Directors pursuant to Article 86A of the Company’s Articles of Incorporation, and Mr Kim Clarke. The Specially Appointed Directors have been approved by their respective Appointing Shareholders for reappointment to the Board, and all the retiring Directors, being eligible, offer themselves for re-election.

To consider and (if thought fit) pass the following resolutions:

(i) “THAT Dr. Marshall Hall be and is hereby re-elected a Director of the Company.”

(ii) “THAT Mr. Robert Scavone be and is hereby re-elected a Director of the Company.”

(iii) “THAT Mr. Dorian Valdes be and is hereby re-elected a Director of the Company.”

(iv) “THAT Mr. Kim Clarke be and is hereby re-elected a Director of the Company.”

4. To appoint auditors and authorise the Directors to fix the remuneration of the Auditors.

To consider and if thought fit pass the following resolution:

“THAT PriceWaterhouseCoopers, Chartered Accountants, having agreed to continue in office as auditors, be and are hereby appointed Auditors of the Company to hold office until the next Annual general Meeting at a remuneration to be fixed by the Directors of the Company.”

5. To fix the fees of the Directors or to determine the manner in which such fees are to be fixed.


“THAT the amount shown in the audited accounts of the Company for the year ended December 31, 2016 as fees of the Directors for their service as directors, be and is hereby approved.”

4

Dated this 25th day of April, 2017

By Order of the Board

ANNA I. HARRYCompany Secretary

REgISTERED OFFICEKingport BuildingThird Street Newport WestKingston, Jamaica

NB: A member entitled to vote at the meeting is entitled to appoint a proxy to vote in his stead. A proxy need not be a member of the company. Enclosed is a proxy form for your convenience, which must be lodged at the office of the Registrar and Transfer Agent of the company, Jamaica Central Securities Depository Limited, 40 Harbour Street, Kingston, Jamaica at least forty-eight hours before the time appointed for holding the meeting. The Proxy Form shall bear the stamp of $100.00. The stamp duty may be paid by adhesive stamp (s) to be cancelled by the person executing the proxy.

Aerial view of the KWL Total Logistics Facility construction site.



KWL At A glance

KinGsTon WhArVes LiMiTeD (KWL) is consistently recognized as the Region’s leading Multi-purpose Port Terminal Operator, connecting our nation’s importers and exporters to over 30 international ports in the Caribbean, Latin and North America.

2016 Performance Summary

‘best multi-purpose terminal of the year’ awardee2006, 2007, 2009, 2013 & 2015Caribbean shipping Association

5x

KWL is the recipient of numerous awards and accolades for excellence:

Our Achievements

best in chamber nominee 2011 & 2016Jamaica Chamber of Commerce

growth & development awardee 2010Caribbean shipping Association

most efficient port awardee 2008 & 2010Caribbean shipping Association

The KWL group has experienced steady growth through prudent

management and a commitment to continuous improvement

that has ensured competitiveness, since its inception in 1945.

Our Business

In addition to its core business of terminal operations and

logistics, the KWL group operates security administrators

limited, a provider of industrial and port security services.

A listed company on the Jamaica stock

exchange

NeT AsseTs vALue

J$18 BiLLion(us$146 MILLION)

FinAnciAL

5,40

9.8

4,67

2.9

group revenue ($m)

20162015

1,67

5.3

1,57

2.1

group operating profit ($m)

20162015

terminal operations operating profit

$1.3B

logistics & ancillary operating profit

$0.3B*after eliminations

6

We DeLiVer

The port terminal provides full-range cargo

handling and logistics services 24-hours

per day, 7 days per week, including:

• MOORINg ANd uNMOORINg Of vesseLs

• sTevedORINg

• eQuIPMeNT ReNTAL

• sTRIPPINg ANd sTuffINg Of CONTAINeRs

• sTORAge ANd WAReHOusINg

• ReCONsOLIdATION Of CONTAINeRs

• CARgO HANdLINg seRvICes

• TRANssHIPMeNT

• RefRIgeRATed CARgO MANAgeMeNT ANd suPPORT

TrAnsshiPMenT KWL’s transshipment service has

achieved exponential growth over

the last decade.

• Many of the region’s premier shipping lines utilize KWL’s

terminal as their transshipment hub, operating weekly

feeder services to Caribbean and Latin American Ports.

• The regional transshipment hub for one of the world’s

leading motor vehicle carriers is managed by KWL, the

first direct service of its kind from Europe

to Jamaica.

137,

720

93,2

51

Tran

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Dom

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container twenty-foot

equivalent unitsHandled 2016

66K

34,6

37

31,2

30

Tran

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pmen

t

Dom

esticmotor units

moves2016

1,69

7

1,67

9

2016

2015

domestic tonnage Handled(‘000)

oPerATionAL



KWL At A glance cont’d

7,15

1.0

8,66

7.0

2012 2013 201620152014

market Capitalisation ($m)

28,6

18.3

16,2

47.1

8,58

1.2

12,1

36.2

12,6

89.4

2012 2013 201620152014

shareholders equity ($m)

18,5

40.2

17,4

96.9

16,9

58.3

shArehoLDers’ inTeresT

2016 Performance Summary cont’d

Berth 3Berth 4Berth 5Berth 6Berth 7Berth 8Berth 9

Our Facility1,655 metreContinuous quay with draft of up to 13m

12-acreTransshipment Car Park

2,694,000square footopen storage

Google earth image

160,000 square feet Total Logistics Facility

Berth 2

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TerMinAL inFrAsTrucTurestrategically located on the Port

of Kingston 17º58’W, 76º48’N,

the Terminal operates 24 hours

per day, 365 days per year.

on-dock open storage: Approximately 250,000 square metres (2,694,000 square feet)

reefer plugs: 172 at 440 volts

vessel draft 9 metres (29 feet) to 13 metres (42 feet)

off-dock storage: 20,000 square metres (215,000 square feet)

9 deepwater bertHs for ro-ro, lo-lo, container, general break bulk and bulk cargoes

on-dock wareHouse storage: 16,680 square metres (180,000 square feet)

continuous Quay measuring 1,655 metres (5,430 feet)

on-dock transsHipment car park: 48,562 square metres (522,720 square feet)

total logistics facility160,000 square feet of ultra-Modern Logistics Warehouse Opening 2017

hoW We WorK The equipment

& supporting

systems include:

Mobile HarbourCranes6 Trucks14

Terberg Tug Master1

empty Container Handler1

Reach stackers18 Bomb

Carts15

Tideworks Terminal Operating system

Toploader1IN AddITION TO THese ResOuRCes, We ARe ABLe TO sOuRCe AddITIONAL CHAssIs, TRuCKs, TRAILeRs ANd fORKLIfTs, uPON ReQuesT

0.41

0.59

2012 2013 201620152014

earnings Per stock unit ($)

0.90

0.88

0.59

6.06

11.3

6

20.0

1

6.00

5.00

2012 2013 201620152014

stock Price at Year end ($)

2012 2013 201620152014

Dividends Declared ($m)

143.

0

257.

4

486.

3

357.

6

286.

0



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2016 2015 2014 2013 *2012 *2011 2010 2009 2008 2007

No. of Stock Units @ 20 cents each (000’s) 1,430,200 1,430,200 1,430,200 1,430,200 1,430,200 1,072,650 1,072,650 1,072,650 1,072,650 1,072,650

Total Assets ($’000) 23,536,808 21,411,543 21,001,026 16,716,664 16,386,680 14,369,707 12,317,049 12,160,635 12,233,560 8,854,977

Net Current Assets ($’000) 2,478,345 2,281,209 2,606,034 2,911,375 2,844,769 800,995 912,786 896,221 836,735 604,910

Deposit & Cash Balance ($’000) 3,190,846 3,019,868 2,909,435 3,159,899 3,100,658 1,076,655 1,282,678 1,120,133 1,182,095 976,178

Capital Expenditure ($’000) 1,865,654 1,202,414 1,252,601 579,447 52,168 638,022 111,172 141,950 390,520 1,222,946

Total gearing ($’000) 2,342,913 1,538,117 1,926,748 1,998,940 2,046,359 2,390,675 2,462,422 3,007,277 3,110,254 2,606,776

Shareholders’ Equity ($’000) 18,540,246 17,496,896 16,958,261 12,689,393 12,136,160 9,536,247 7,908,397 7,434,373 7,289,040 4,890,156

ProFiT AnD Loss AccounT

Revenue ($’000) 5,409,801 4,672,884 3,819,691 4,232,408 3,670,177 3,168,802 3,025,883 2,570,325 2,774,922 2,568,778

% Increase/(Decrease) over prior year 15.77 22.34 (9.75) 15.32 15.82 4.72 17.72 (7.37) 8.02 10.75

Operating Profit ($’000) 1,675,251 1,572,056 1,145,267 1,477,042 1,075,667 640,764 921,723 693,091 717,528 576,428

% Increase/(Decrease) over prior year 6.56 37.27 (22.46) 37.31 67.87 (30.48) 32.99 (3.41) 24.48 (5.87)

Finance Costs ($’000) 186,408 162,718 224,151 325,746 266,330 173,465 34,442 497,056 500,043 166,111

% Increase/(Decrease) over prior year 14.56 (27.41) (31.19) 22.31 53.54 403.64 (93.07) (0.60) 201.03 67.30

Profit Before Income Tax ($’000) 1,488,843 1,409,338 921,116 1,151,296 809,337 467,299 887,281 196,035 217,485 410,317

% Increase/(Decrease) over prior year 5.64 53.00 (19.99) 42.25 73.19 (47.33) 352.61 (9.86) (47.00) (20.03)

Net Profit Attributable to Equity Stockholders ($’000) 1,293,480 1,256,397 842,730 839,255 550,203 337,604 602,741 145,333 160,705 339,771

% Increase/(Decrease) over prior year 2.95 49.09 0.41 52.54 62.97 (43.99) 314.73 (9.57) (52.70) (20.26)

Dividends Declared ($’000) 486,268 357,550 286,040 257,436 143,020 45,512 128,717 - 53,632 85,812

% Increase/(Decrease) over prior year 36.00 25.00 11.11 80.00 214.25 (64.64) 100.00 (100.00) (37.50) -

iMPorTAnT rATios

Return on Sales 23.91% 26.89% 22.06% 19.83% 14.99% 10.65% 19.92% 5.65% 5.79% 13.23%

Return on Equity 6.98% 7.18% 4.97% 6.61% 4.53% 3.54% 7.62% 1.95% 2.20% 6.95%

Current Ratio 2.50:1 2.68:1 3.39:1 3.94:1 3.63:1 1.95:1 2.02:1 2.24:1 2.12:1 1.91:1

Debt to Equity Ratio 12.64% 8.79% 11.36% 15.75% 16.86% 25.07% 31.14% 40.45% 42.67% 53.31%

Profit Before Tax to Sales 27.52% 30.16% 24.11% 27.20% 22.05% 14.75% 29.32% 7.63% 7.84% 15.97%

Dividend Cover - Times 2.66 3.51 2.95 3.26 3.85 7.42 4.68 - 3.00 3.96

Interest Cover (inclusive of foreign exchange movement) 8.99 9.66 5.11 4.53 4.04 3.69 26.76 1.39 1.43 3.47

Total No. of Employees (Permanent and Contractual) 663 717 738 819 756 481 458 434 347 202

Net Profit After Income Tax per Employee ($’000) 1,951.0 1,752.3 1,141.9 1,024.7 727.8 701.9 1,316.0 334.9 463.1 1,682.0

MArKeT sTATisTics

Stock Price at year end $20.01 $11.36 $6.00 $6.06 $5.00 $5.92 $4.00 $3.08 $4.80 $7.65

Earnings per Stock Unit 0.90 0.88 0.59 0.59 0.41 0.31 0.56 0.14 0.15 0.32

Price Earnings Ratio 22.23 12.91 10.17 10.27 12.20 19.10 7.14 22.00 32.00 23.91

Market Capitalisation ($’000) 28,618,302 16,247,072 8,581,200 8,667,012 7,151,000 6,350,088 4,290,600 3,303,762 5,148,720 8,205,773

*Restated for the adoption of amendments to IAS 19.

10 Year Statistical Review



2016 2015 2014 2013 *2012 *2011 2010 2009 2008 2007

No. of Stock Units @ 20 cents each (000’s) 1,430,200 1,430,200 1,430,200 1,430,200 1,430,200 1,072,650 1,072,650 1,072,650 1,072,650 1,072,650

Total Assets ($’000) 23,536,808 21,411,543 21,001,026 16,716,664 16,386,680 14,369,707 12,317,049 12,160,635 12,233,560 8,854,977

Net Current Assets ($’000) 2,478,345 2,281,209 2,606,034 2,911,375 2,844,769 800,995 912,786 896,221 836,735 604,910

Deposit & Cash Balance ($’000) 3,190,846 3,019,868 2,909,435 3,159,899 3,100,658 1,076,655 1,282,678 1,120,133 1,182,095 976,178

Capital Expenditure ($’000) 1,865,654 1,202,414 1,252,601 579,447 52,168 638,022 111,172 141,950 390,520 1,222,946

Total gearing ($’000) 2,342,913 1,538,117 1,926,748 1,998,940 2,046,359 2,390,675 2,462,422 3,007,277 3,110,254 2,606,776

Shareholders’ Equity ($’000) 18,540,246 17,496,896 16,958,261 12,689,393 12,136,160 9,536,247 7,908,397 7,434,373 7,289,040 4,890,156

ProFiT AnD Loss AccounT

Revenue ($’000) 5,409,801 4,672,884 3,819,691 4,232,408 3,670,177 3,168,802 3,025,883 2,570,325 2,774,922 2,568,778

% Increase/(Decrease) over prior year 15.77 22.34 (9.75) 15.32 15.82 4.72 17.72 (7.37) 8.02 10.75

Operating Profit ($’000) 1,675,251 1,572,056 1,145,267 1,477,042 1,075,667 640,764 921,723 693,091 717,528 576,428

% Increase/(Decrease) over prior year 6.56 37.27 (22.46) 37.31 67.87 (30.48) 32.99 (3.41) 24.48 (5.87)

Finance Costs ($’000) 186,408 162,718 224,151 325,746 266,330 173,465 34,442 497,056 500,043 166,111

% Increase/(Decrease) over prior year 14.56 (27.41) (31.19) 22.31 53.54 403.64 (93.07) (0.60) 201.03 67.30

Profit Before Income Tax ($’000) 1,488,843 1,409,338 921,116 1,151,296 809,337 467,299 887,281 196,035 217,485 410,317

% Increase/(Decrease) over prior year 5.64 53.00 (19.99) 42.25 73.19 (47.33) 352.61 (9.86) (47.00) (20.03)

Net Profit Attributable to Equity Stockholders ($’000) 1,293,480 1,256,397 842,730 839,255 550,203 337,604 602,741 145,333 160,705 339,771

% Increase/(Decrease) over prior year 2.95 49.09 0.41 52.54 62.97 (43.99) 314.73 (9.57) (52.70) (20.26)

Dividends Declared ($’000) 486,268 357,550 286,040 257,436 143,020 45,512 128,717 - 53,632 85,812

% Increase/(Decrease) over prior year 36.00 25.00 11.11 80.00 214.25 (64.64) 100.00 (100.00) (37.50) -

iMPorTAnT rATios

Return on Sales 23.91% 26.89% 22.06% 19.83% 14.99% 10.65% 19.92% 5.65% 5.79% 13.23%

Return on Equity 6.98% 7.18% 4.97% 6.61% 4.53% 3.54% 7.62% 1.95% 2.20% 6.95%

Current Ratio 2.50:1 2.68:1 3.39:1 3.94:1 3.63:1 1.95:1 2.02:1 2.24:1 2.12:1 1.91:1

Debt to Equity Ratio 12.64% 8.79% 11.36% 15.75% 16.86% 25.07% 31.14% 40.45% 42.67% 53.31%

Profit Before Tax to Sales 27.52% 30.16% 24.11% 27.20% 22.05% 14.75% 29.32% 7.63% 7.84% 15.97%

Dividend Cover - Times 2.66 3.51 2.95 3.26 3.85 7.42 4.68 - 3.00 3.96

Interest Cover (inclusive of foreign exchange movement) 8.99 9.66 5.11 4.53 4.04 3.69 26.76 1.39 1.43 3.47

Total No. of Employees (Permanent and Contractual) 663 717 738 819 756 481 458 434 347 202

Net Profit After Income Tax per Employee ($’000) 1,951.0 1,752.3 1,141.9 1,024.7 727.8 701.9 1,316.0 334.9 463.1 1,682.0

MArKeT sTATisTics

Stock Price at year end $20.01 $11.36 $6.00 $6.06 $5.00 $5.92 $4.00 $3.08 $4.80 $7.65

Earnings per Stock Unit 0.90 0.88 0.59 0.59 0.41 0.31 0.56 0.14 0.15 0.32

Price Earnings Ratio 22.23 12.91 10.17 10.27 12.20 19.10 7.14 22.00 32.00 23.91

Market Capitalisation ($’000) 28,618,302 16,247,072 8,581,200 8,667,012 7,151,000 6,350,088 4,290,600 3,303,762 5,148,720 8,205,773

*Restated for the adoption of amendments to IAS 19.

Chairman’s Message

Stephenson, was selected Manager of the Year for 2016 by the Jamaica Institute of Management.

Kingston Wharves is an important service provider to the businesses and people of the wider Caribbean region. As such, we take the view that our business does well when the region grows in line with its economic potential. At the same time, we are committed to playing our part in deploying all of our assets in a manner that allows them to contribute sustainably to the region’s economic success.

The economy of the Latin America and Caribbean Region is forecast to grow by 1.8 percent in 2017 and continue expanding in 2018. In light of this, our immediate focus in 2017 will be to improve our business prospects by expanding the range of cargo types that are serviced by our terminal. Our investment program will seek to strengthen our unique capabilities to handle all types of automotive, bulk, break bulk and containerised cargo. We will also seek to improve the overall efficiency of our operations, provide integrated logistics services to the region’s major importers and exporters and expand the range of ports that receive a direct call from the network of shipping lines that use Kingston Wharves.

The emphasis on economic growth and infrastructure development in Jamaica, and the designation of Kingston Wharves as a free zone and special economic zone will all improve the prospects for executing this strategy. Our customers tell us that these factors, together with proposed initiatives to make it easier to do business in

The 2016 Financial Year was an important year for Kingston Wharves Limited. We commissioned the largest mobile harbour crane in the Caribbean. This new crane adds to the

terminal’s capacity to handle Post-panamax vessels and a wider range of containerized and break bulk cargo and allowed KWL to handle the loading and discharge of the largest ships that the terminal has ever serviced. We also made considerable progress on the construction of our Total Logistics Facility – a state of the art integrated cargo warehousing, processing, logistics and distribution center designed to transform the ease of importing and exporting commercial cargo and personal effects. Upon its completion in 2017, this facility will be the single largest warehouse operating within the boundaries of the Jamaican port system and special economic zones.

In line with our strategic priority of maintaining market leadership as a regional multi-purpose, multi-user port as well as in the provision of the full range of logistics services, the KWL group is organized around two specific business lines: (a) Terminal Operations, and (b) Logistics & Ancillary Services.

Operating Profits for 2016 were $1.7 billion, an increase of 7% over 2015. Terminal Operations accounted for $1.3 billion and Logistic & Ancillary Services $0.4 billion.

The success of our strategy and its execution was recognized by the Caribbean Shipping Association when it named Kingston Wharves the “Best Multi-Purpose Port Terminal in the Region.” Moreover, our CEO, grantley

12

Jamaica and to rationalize, streamline and automate their relations with Jamaica Customs and the wider port community, are extremely important to making our terminal and logistics center even more attractive and competitive. We will continue to advocate for these developments and where possible, play a leadership role in spearheading them for the benefit of all stakeholders.

On behalf of the Directors, I congratulate and thank the leadership, staff, customers, and partners of the KWL group, who have all contributed to our success in 2016.

Jeffrey hall BA, MPP, JDCHAIRMAN

13

for more information please visit: www.kingstonwharves.com

KWL ANNuAL RePORT - 2016 engage. exeCuTe. deLIveR gROWTH.

14

Jeffrey Hall BA, MPP, JD Chairman

Committee: Executive (Chair)Length of Directorship - 5 Years

grantley stepHenson CD, JPChief Executive Officer

Committees: Executive, Audit, Compensation andLeadership Development Length of Directorship - 13 Years

bruce brecHeisen

Committee: AuditLength of Directorship - 2 Years

kim clarke

Committees: Executive, Compensation and Leadership Development Length of Directorship - 13 Years

marsHall Hall CD

Committee: AuditLength of Directorship - 2 Years

alvin Henry

Committees: Compensation and Leadership Development,Audit (Chair)Length of Directorship - 12 Years

roger Hinds

Committee: Compensation and Leadership DevelopmentLength of Directorship - 13 Years

cHarles JoHnston CD

Committee: Executive Length of Directorship - 13 Years

Harriat maragH

Committees: Audit, Executive Length of Directorship - 13 Years

katHleen moss BSC, MBA, CBV

Committees: Audit, Compensation and Leadership Development (Chair)Length of Directorship - 5 Years

robert scavone


dorian valdes


Board of Directors

Our Directors and Management Team drive the achievement of our strategic imperative to deliver growth. Together they bring a distinct set of experience and expertise needed to steer the KWL group through this transformational period in global shipping, logistics and allied services.



Directors’ Report

The Directors are pleased to submit the group results for Kingston Wharves Limited for the year 2016. operating results:- The Profit for the group before income tax was $1,488,843,000- The Profit for the group after Tax and Minority Interest was $1,293,480,000

Dividends:The Directors recommend that the following dividends declared during 2016 be declared as final:- Fourteen cents ($0.14) per share paid on August 3, 2016- Twenty cents ($0.20) per share paid on January 19, 2017 Messrs. PricewaterhouseCoopers, the present auditors will continue pursuant to Section 154 of the Companies Act, 1965.

The Directors wish to express their sincere appreciation to the management and employees for their contribution.

On behalf of the BoardApril 25, 2017

ANNA I. HARRYCompany Secretary

Corporategovernance

In 2016, the Kingston Wharves group sharpened its focus on effective corporate governance and continued to align its compliance with international best practice standards. This effort was exemplified by the following key accomplishments throughout the year:

1. Review and amendment of the Corporate governance Policy in February 2016;

2. Adoption and publication of Terms of Reference for the Board and its Committees in November 2016;

3. Publication of the previous year’s AgM Minutes at the current year’s AgM; and

4. Revision and publication of numerous policies, including a Related Party and Conflict of Interest Policy, the Code of Conduct and Confidentiality Policy, the Risk Assessment Policy, the Employee Welfare Policy, the Safety, Health and Environment Policy, and the Communications Policy.

Direct contact with all stakeholders, including shareholders, was further improved and maintained through increased disclosure of corporate governance developments through the Jamaica Stock Exchange and the Company’s website (www.kingstonwharves.com.jm.). These disclosures include the updated Corporate governance Policy; the newly-adopted Terms of Reference for the Board and its Committees; the Minutes of the 2015 AgM; and a synopsis of the group’s other newly-documented policies.

The group aims to maintain the highest international governance standards in keeping with the strategic plans enunciated by the Board and the objective of enhancing shareholder value and maintaining the confidence of all stakeholders. In executing this mandate, the Board continues to rely on and receive collaborative support from the Executives, Company Secretary and Internal Audit Manager.

board composition and director skillsand eXperience There were no changes to the composition of the Board of Directors in 2016, and at the AgM in 2016 the shareholders approved a resolution limiting the number of directors to 12. This is a reflection that the current composition and skill set of the Board are considered optimal to the needs of the group. The Directors continued to exercise a high level of prudence and independent judgment in conducting the business of the group, and aimed at all times to act in the best interest of the group, while balancing competing interests of stakeholders, including by relying on the expertise and guidance of the Company’s senior management, external professional advisors and auditors. In doing so, the Directors brought to bear their experience in the following areas:

1. Asset Procurement;2. Law;3. Business Management and Administration;4. Engineering;5. Finance/Economics/Accounting;6. Industrial Relations;7. Risk Management and Strategic Planning;8. Ship Management, Ship Operations and Ship Agency;9. Stevedoring, Transportation and Logistics; and

10. Terminal Operations.

attendance at board meetingsThere were six (6) scheduled meetings and 2 special meetings of the full Board during 2016.

regularly scHeduled board meetingsDirectors Attendance at

Meetings

Jeffrey Hall, Chairman 6/6

Bruce Brecheisen 6/6

Kim Clarke 6/6

Dr. Marshall Hall 6/6

Alvin Henry 6/6

Roger Hinds 6/6

Charles Johnston 6/6

Harriat Maragh 6/6

Kathleen Moss 6/6

Robert Scavone 6/6

grantley Stephenson 6/6

Dorian Valdes 6/6

16

special board meetingsDirectors Attendance at

Meetings



Kim Clarke 1/2


Alvin Henry 2/2

Roger Hinds 2/2


Harriat Maragh 2/2

Kathleen Moss 2/2

Robert Scavone 2/2


Dorian Valdes 1/2

In addition to their attendance at and participation in Board meetings, all Directors were present at the Annual general Meeting held on June 23, 2016.

committeesThe Board of Directors continues to receive support from the Executive, Audit, and Compensation and Leadership Development Committees, all of which meet on a quarterly basis and report to the Board after each meeting to guide the Board’s review and decision-making processes.

EXECUTIVE COMMITTEEAs set out in the Terms of Reference, the Executive Committee is empowered to act on behalf of the Board during on-demand activities that occur between Board meetings and that are later presented for full Board review. The mandate of the Executive Committee includes oversight of the group’s overall business and commercial strategy and performance, annual operating budget and financial plans necessary to achieve these objectives, including ensuring that any required corrective action is taken.

New

ly co

nstru

cted

gra

ins

silo

s. B

erth

1



Corporategovernance

eXecutive committeeMembers Attendance at

Meetings


Kim Clarke 3/4


Harriat Maragh 3/4

Robert Scavone 4/4


Dorian Valdes 4/4

AUDIT COMMITTEEThe Audit Committee facilitates the external and internal audit of the Company in order for the Board to obtain independent information about the Company’s activities. In order to perform the role defined in the Company’s Corporate governance Policy, the Audit Committee’s specific responsibilities include: 1. overseeing the financial reporting and disclosure process,

and monitoring the choice of accounting policies and principles;

2. reviewing the audit plans and reports of the external auditors and internal auditors, and considering the effectiveness of the actions taken by management on the auditors’ recommendations;

3. conducting periodic internal checks on key processes to ensure compliance with the established procedures, and reporting to the Board on the findings and recommendations for improvements; and

4. analysing and addressing the risks that are associated with key processes.

In discharging these responsibilities in 2016, the Audit Committee had oversight of the review of the Company’s Investment and Depreciation Policies and recommended certain changes to streamline the company’s audit and annual report preparation processes.

audit committeeMembers Attendance at

Meetings

Alvin Henry , Chairman 4/4



Harriat Maragh 4/4

Kathleen Moss 4/4


COMPENSATION AND LEADERSHIPDEVELOPMENT COMMITTEEUnder the Company’s Corporate governance Policy, the CLD Committee is charged with constantly reviewing the composition of the Board and succession to it, as well as reviewing the remuneration policies for Executive Directors and Senior Officers of KWL as well as material employee benefits and compensation plans and programmes. The Committee Terms of Reference define the following as the CLD Committee’s specific responsibilities: 1. managing the recruitment of new directors under the

supervision of the Board (in its Corporate governance oversight capacity);

2. overseeing the drafting and/or revision of personnel policies;

3. reviewing job descriptions of the Company’s Executives; 4. establishing a salary structure for the Company’s

Executives and reviewing expenditure on staff salaries; 5. reviewing the benefits package including the Company’s

incentive scheme; and 6. establishing and reviewing the Company’s Human

Resource Metrics and annual performance targets.

compensation and leadersHipdevelopment committee

Members Attendance atMeetings

Kathleen Moss, Chairman 4/4

Kim Clarke 3/4

Alvin Henry 4/4

Roger Hinds 4/4


Cont’d

18

board evaluationIn December 2016, the Directors assessed the performance of the Board in relation to oversight of the group’s performance against its strategic objectives, and in relation to the risk assessment and management processes. The results of the exercise indicate that the Board is comfortable with the alignment of its strategy with the Company’s objectives, and with the Board’s management of the Company’s progress in meeting those objectives. The action plan emanating from the evaluation exercise includes measures aimed at improving the governance and internal audit processes and overall performance of the group.

directors’ continuing educationOur Directors continue to receive year-round training regarding the group and legal or regulatory and other changes impacting operations. In 2016, that training included a presentation on the duties of directors, exposure to port operations at the Port of Miami, advice on the implications of the newly promulgated Special Economic Zones Act, and training regarding the Corporate governance Index to be introduced by the Jamaica Stock Exchange.

Newly constructed grains silos. Berth 1



This has been a year of real change at Kingston Wharves Limited. We added an impressive list of Best, Largest, and First to the achievements of our Terminal Operations. KWL was named the

Best Multipurpose Port in the Caribbean for the 5th time in nine years, had the honour of hosting the Northern Jubilee, the largest cargo vessel to ever call on the Terminal, and transformed Berth 2 into a cruise terminal to service the MS Monarch, the largest cruise ship to ever visit Kingston. Our continued focus on making sound investments in improving out terminal operations allowed us to capitalize on these opportunities.

I believe that we have focused on the right priorities as we have continued to build and strengthen the business. Strong foundations have been laid since we began our transformation into a multi-purpose multi-user port terminal. Our performance in 2016 supports this belief.

Operating profits for 2016 increased by 7% over 2015. Terminal Operations accounted for $1.3 billion and Logistic & Ancillary Services $0.4 billion of our $1.7 billion profit. Strong performance in container and motor vehicle handling units were the main contributors to the growth in profits in 2016. Contributions were also made by the logistics and ancillary services division, including the provision of services in warehousing, cold storage, cargo, and port security.

Our 2016 financial results were achieved through focused attention on and investment in organization-readiness for expansion and reorganization to ensure delivery of our exciting growth targets. Using international standards as our benchmarks, our efforts were concentrated on improvements in how we work, where we work and how we serve.

In 2016, we put the spotlight on improving operational efficiency and increasing productivity through developing our people, refining our processes and upgrading our equipment because our growth targets dictate that we must work differently.

Recruiting, developing and retaining the Best Workforce for terminal operations and logistics in the Caribbean is an important driver of our ambitious growth plan. The human capacity of the Company was augmented with specialists in key management and supervisory roles in 2016. Terminal Operations were shored up with the addition of several new maritime specialists, supervisors, technicians and mechanics to the Department. This has resulted in improvement in efficiency and productivity in the operations of the Terminal, including the availability and reliability of our fleet of equipment.

During the Year we aligned our strategic focus on human capital development with increased focus on and improved financial commitment to training. Among the key initiatives introduced were the HEART Competency-Based Training and Certification Programme for the Stevedoring and Warehousing workforce and the certification of many employees as Customer Service Professionals. Key productivity targets for container carriers and auto liners have begun to show improvements because we embarked on a Business Process Re-Engineering (BPR) Programme for Terminal Operations. The Programme will continue in 2017 and, when fully implemented, will put us closer to our operational efficiency targets and our goal of delivering consistent, cost-effective service to all customers. Productivity was also given a significant boost with the addition of the Liebherr LHM 600 mobile harbour crane, the largest in the Caribbean, and two (2) advanced Taylor reach stackers with lift speeds that approach 30% above their predecessors. These additions increased the fleet of mobile harbour cranes to six and reach stackers to eighteen, and position us to service larger ships such as super Post-Panamax container liners. In 2016, KWL continued its strategic investment in where we work; in expanding physical infrastructure and in improving maintenance to support our strategy of improving operational efficiency. In addition to the starting construction of the game-changing 160,000 square foot Total Logistics Facility, we increased our physical footprint within the immediate environs of the of the Newport West area through the acquisition of existing warehouse structures and vacant lots. Rehabilitation of the container storage yard with the new Rigid Pavement design – a cost reduction initiative which commenced in 2014 - continued in 2016. We also made a leap in the use of technology in preventative maintenance management with the introduction of a system tailor-made for KWL. This software is crucial in ensuring that maintenance activities and the associated costs for existing, upgraded and new facilities are properly and efficiently managed.

A safe, secure and internationally certified terminal facility is critical to our overarching growth strategy. A significant reduction of 70% in security incidents on the Terminal in 2016, cemented our commitment to terminal operations that meet international standards. Safety and security was also given a strong boost through the engagement of a premier international security risk consulting firm to develop a Security Assessment and Enhancement Programme.

Convenience for cargo customers and consistency in facilitating importers and exporters informed the development

CEO’s Message

20

of value-added services and advancements in KW-ACE, our signature customer experience transformation programme. Verified gross Mass (VgM) Certification service to exporters of Full-Container-Load (FCL) and a Reservation Service for the clearance of FCL cargo, are two value-added services that were introduced in 2016. The electronic submission of VgM information to carriers, supports Jamaica’s full compliance with the international container weight verification requirements of the Safety of Life at Sea (SOLAS) Convention implemented in 2016. FCL, part of the service enhancement strategy to improve the clearance of domestic cargo, has resulted in noticeable improvements in the processing time for cargo clearance. In 2016, the KW-ACE Service Monitoring Committee engaged in several engagement and promotional activities to ensure consistency as a core value in our service delivery. The certification of sixty staff members as Customer Service Professionals by the International Customer Service Association and the introduction of a Reward & Recognition programme supported the achievement of our service standards through skills development and positive reinforcement. The perception of KWL as a responsible company was given a boost through the implementation of our Client Engagement Centre, an online service which has the capability to monitor and manage interactions with customers, including complaints.

Kingston Wharves has a strong foundation from which we deliver growth and strengthen our position in increasingly competitive national and regional environments and a global shipping environment that lends itself to challenges. Our transformational investments have reaped noticeable short-term rewards in people development and improved terminal operations that have better positioned us to achieve our strategic goals. These improvements place us in an advantageous position as we seek new opportunities for growth in cargo/trade and logistics. We also believe that, in the long run, these investments will enable us to compete with the best in the world in operational efficiency. Therefore, in 2017, our central theme of Transformation will continue with a focus on Delivering growth through Engagement and Execution. We will engage all stakeholders in cementing excellence in operations and service delivery.

We have the ambition to maintain our leadership position in the Caribbean and Latin America. So,

we have been profoundly changing our business. We have reshaped the portfolio from a broad conglomerate to a more focused infrastructure: terminal operations and logistics services. We took important steps in that pivot last year and we invested heavily in enterprise capability in 2016. If 2015 was the year to stay the ship, 2016 was the year to set sail. And, we did. I remain extremely positive and confident about the future of this great Company.

Grantley stephenson CD, JPCHIef exeCuTIve OffICeR

21

for more information please visit: www.kingstonwharves.com

KWL ANNuAL RePORT - 2016 eNgAge. eXecute. deLIveR gROWTH.

LeadershipTeam

grantley stepHenson C.d., J.P.Chief Executive Officer || KWL

LeNgTH Of TeNuRe: 13 YeARs

mark williamsChief Operating Officer || KWL


clover moodiegroup Chief Financial Officer || KWL


anna Harry Corporate Secretary and Legal Counsel || KWL


micHael arbouine Facilities Manager || KWL

LeNgTH Of TeNuRe: 1 YeAR

valrie campbell Acting Terminal Manager || KWL


lorna dwyer Human Resources & Administration Manager || KWL


Jodenia fergueson-bryan Internal Audit Manager || KWL


lancelot green Information Technology Specialist || KWL


simone murdock Marketing & Client Services Manager || KWL


marcello ricHards Engineering Manager || KWL


lloyd smitH Technical Services Manager || KWL


Our leaders bring a distinct set of experience and expertise needed to steer the KWL group through this transformational period in global shipping, logistics and allied services. Together, they drive the achievement of our strategic imperative of delivering growth.

22

omar walker Safety & Security Manager || KWL


captain george reynolds O.d., J.P.Managing Director || SAL


maJor orville froome Operations Manager || SAL

LeNgTH Of TeNuRe: 1 YeAR

calvin watson Assistant Operations Manager || SAL




Strategic Focus

` Expand the range of cargo services offered to clients

` Provide integrated logistics services to the region’s major importers and exporters

` Expand the range of ports that receive a direct call from the network of shipping lines that use Kingston Wharves

` A high-performance workforce passionate and enthusiastic about their work and take positive action to further KWL’s reputation and interests.

` To strengthen the unique capabilities of staff and the Company

` To Build a High Level of Trust and Respect To Build a Sense of Pride within the Organization

enGAGe

01

leadersHip and team members

clients

24

` High growth trajectory with clear, stretching yet realistic goals resulting in value creation for All KWL Stakeholders

` The best terminal operations and logistics workforce in the region driven by a culture of Accountability, Commitment and Excellence (ACE) and powered by transformational leadership

` In an operationally efficient, - productive, performance-driven and technology enabled work environment

` Through Mastery of cross-functional competencies in ideal logistics skill sets in leading and managing in a dynamic and evolving space

` World Class Service Everyday… All Day - enabled by customer-driven service standards benchmarked against world-class standards.

execuTe

DeLiVer GroWTh02

03



MAnAGeMenTDiscussion & AnALysis

2626

2016 Performance

The group 28

The Divisions 28

Terminal Operations 29

Logistics & Ancillary Services 29

Strategic Vision For The Long Haul 29

Making Sound Investments 30

Transforming The Customer Experience 33

Building A Strong Team 34

Outlook 2017 35



27KWL ANNuAL RePORT - 2016 eNgAge. exeCuTe. deLIveR gROWTH.

The Management of Kingston Wharves Limited (KWL) is responsible for the reliability of the information disclosed in the Management and Discussion Analysis (MD&A). The MD&A provides an overview of the performance of the group which is consistent with previous disclosures made by the group and audited financial statements for the Financial Year 2016. This MD&A includes forward-looking statements based on our current strategic plans and expectations about future events. In light of the risks, uncertainties and assumptions discussed in the Chairman’s Message (Page 12) and discussed in this section, there are risks that our actual experience will differ materially from the expectations and beliefs reflected in the forward-looking statements in this section and throughout this report.

2016 FinanCiaL PerFormanCe

THe GrouP

The group generated revenues of J$5.4 billion; representing an increase of J$736.9 million or 16% over 2015. Operating Profits for the group for 2016 were $1.7 billion, an increase of $100 million over 2015, while profit before tax was $1.5 billion increasing by 6% relative to 2015. Net profits for the group for 2016 were $1.3 billion, an increase of 4% over 2015.

group revenue ($m)

5,40

9.8

3,81

9.7

4,67

2.9

4,23

2.4

3,67

0.1

group operating profi t ($m)

1,67

5.2

1,57

2.0

1,14

5.31,47

7.0

1,07

5.7

Terminal Operations accounted for $1.3 billion and Logistic & Ancillary Services $0.4 billion of Operating Profit. Net profits attributable to shareholders increased by 3% to $1.29 billion and earnings per share increased to $0.90 from $0.88.

THe Divisions

The KWL group have strategically organized our business activities into two distinct foci with each division playing a specific role in executing our growth plan and the achievement of our financial results. This structure now guides the operational strategies of the business and the reporting of our achievements.

Terminal operations

Logistics & Ancilliary services

New Strategic Organisation Structure

Management Discussion & Analysis (MD&A)

28

2016 2015 movement age

dIvIsIONAL RePORT $'000 $'000 $'000 %

1. revenue

Terminal Operations 4,172,483 3,594,747 577,736 16%

Logistics & Ancillary 1,237,318 1,078,137 159,181 15%

2. operating profit(before eliminations)

Terminal Operations 1,644,833 1,253,294 391,539 31%

Logistics & Ancillary 387,762 324,861 62,901 19%

TerminaL oPeraTions

KWL’s terminal operations division saw operating revenue of $4.2 billion, a 16 % increase year-on-year. Divisional profits increased by 31% from $1.2 billion to $1.6 billion. This was due to the increased performance of both the container and motor vehicle handling units, and intercompany dividend of $348 million.

A 10% increase in motor units and 4% increase in containers handled were the main contributors to the increase. Transshipment volumes continue to be higher than domestic volumes in both motor units and containers handled, and vessel calls increased by 20% (13) over 2015.

LoGisTiCs anD anCiLLarY serviCes

The logistics and ancillary services division, including services ranging from warehousing and cold storage to cargo and port security operations, generated revenues of $1.2 billion, a 15 % or $159 million increase over 2015. Divisional profits increased by 19% from $324 million in 2015 to $387 million in 2016. The main contributors to the division’s gains include increased demand for reefer services, value added integrated logistics services and facilities. Rate adjustments for the provision of security services also benefitted performance by the division.

KWL embarked on its high growth trajectory by setting clear, stretching yet realistic targets in 2016, achieved its 2016 financial results were achieved on targets for guided by delivery under the pillars of: strategic Vision, sound investments, strong Team, and serving customers.

a sTraTeGiC vision For THe LonG HauL

Our vision is to be the Best Multi-Purpose Multi-User Port and Lead Logistics Service Provider in the Region. This two-pronged strategic vision mirrors the new structure of the group: Terminal Operations and Logistics and Ancillary Services. The intent is to leverage KWL’s capabilities as a multi-purpose multi-user port facility, as well as its growing logistics capacity, to add value to cargo in Kingston for distribution throughout the Americas. Also, this structure provides clarity to staff, customers and other stakeholders about KWL’s business and the value proposition it offers in each area. Each area gained traction in 2016 and played important and specific roles in executing our growth plan.

LoGisTiCs & anCiLLarY serviCes:Growth opportunities and new Possibilities

Logistics Services is a new area of focus for KWL, which represents growth opportunities and new possibilities for the group and we have set our sight on attaining a leading position in this market segment.

Our Logistics Services division offers a full range of integrated warehousing and logistics solutions for businesses and consumers. Logistics Services projects started over the last 2 years range from straight warehouse rental arrangements to full service picking, packing, inventory control and distribution for local and international clients. We have embarked on the



MD&A Continued

creation of new or re-modeled high quality warehousing, office, production and open storage space that can allow businesses to immediately benefit from the Special Economic Zone legislation which is expected to bring business to Jamaica. These initiatives, directly in-line with our logistics strategy, continued in 2016.

The first phase of the construction of the new Total Logistics Facility (TLF), a major milestone for KWL’s logistics thrust, commenced in Aug 2015 with the erection of reinforced concrete piles. The second phase of construction commenced in the second quarter of 2016 and the Facility is scheduled to be completed by the second quarter of 2017. Upon completion, warehouse operations and storage will also be conducted within the same facility which will also house customers holding areas, and operations for KWL customer service and Jamaica Customs. The group understands that meeting and exceeding its growth targets depends on the degree to which it deploys its capital and its expertise in unique ways and the extent to which it identifies growth opportunities and exploits new possibilities.

expanding Logistics integrated chain servicesIn 2016, KWL sought to expand the reach of its logistics services to add value to the operations of its clients. The industries served spanned automobile, lubricants, and consumer distribution centres. Services included second-party logistics services, chiefly lease of logistics facilities, and Fourth Party Logistics services encompassing inventory management, billing and transportation. The Logistics Services Division achieved traction in the management of lubricants and automobiles for domestic and regional distribution.

1PL

2PL

3PL

4PL

Hauliers, warehouse operators, ect.

International forwarders

Contract logistics

(fourth party logistics)Independent general Contractors

standardized services with own or external resources

Individual or systemized services with own or external resources

Contract services with own or inbuilt resources

Logistics services tailor-made to supply chain needs of the client using best-in-class resources

PorT oPeraTions: Facilitation of national and regional Trade

Kingston boasts the seventh largest natural harbour in theworld and the Port of Kingston is a hub of trade; a conduit fortrade to Jamaica; and the gateway for trade with the Region,Latin America and the rest of the world. To maintain theviability of this important industry in Jamaica, port efficiencyis an imperative. Port efficiency is an important indicator ofport performance and an important issue in addressing tradefacilitation. Inefficient ports increase handling costs whilemore efficient ports have lower transportation costs and arebetter facilitators of imports and exports of a country. In recent years, there has been a steady rise in the demand for more efficient and reliable cargo handling operations in the shipping industry. This demand for operational excellence has been declared not only internationally but also throughout the Caribbean Region; Jamaica being no exception.

Kingston Wharves is seen as one of the largest and most experienced terminals in the English speaking Caribbean. To achieve KWL’s long-term business objective of being theBest Multi-purpose Multi-User Port in the Region, a terminal conducive to achieving this vision must be continuously developed and maintained if the group is to capitalize on the potential opportunities within the shipping industry in trade and logistics.

In 2016, KWL’s continued the transformation of its terminaloperations in keeping with its goal of maintaining its leadershipposition in facilitating trade and its objective of attaining aleading position in providing logistics services.

maKinG sounD invesTmenTs

In 2016, we embarked on a business process re-engineering(BPR) programme for terminal operations based on continualassessment and benchmarking of global maritime standards,and feedback from consultation with key commercialcustomers. The goal is to be prepared for new opportunities and new possibilities and to ensure that KWL remains currentin today’s dynamic shipping industry.

KWL has already begun to realize benefits from the BPRprogramme with key terminal productivity targets forcontainer carriers and auto liners showing improvementsover 2015; performance for 2016 was 20 net moves per

30

The first Post-Panamax vessel serviced at Kingston Wharves port terminal.

The largest Mobile Crane operating in the Caribbean – Liebherr LMH 600

Awarded the best Multi-Purpose Terminal in the Region 5 times in 9 years.

Th

e B

es

TT

he

LA

rG

es

TT

he

Fir

sT

This has been a year of significant achievements at Kingston Wharves Limited. We added an impressive list of Best, Largest, and First to the achievements of our Terminal Operations.



MD&A Continued

crane hour and 25 units per hour per gang. This programmewill continue in 2017 and, when fully implemented, will giverise to improved operational efficiency and improved servicedelivery to all customer groups on a consistent basis, in acost-effective manner. Initiatives being undertaken under theprogramme include:

` revision of work processes and procedural documentation to attain ISO Standards

` reorganization of the terminal layout, space management and traffic flow systems to improve efficiency and reduce cost

` reorganization of the Terminal Operations Department into more defined business and work units to increase responsibility, accountability and efficiency

` increase the use of technology systems, especially the Terminal Operating System (TOS) and Radio-frequency identification (RFID), and full integration of KWL’s systems with the Automated System for Customs Data (ASYCUDA) and the Port Community System (PCS) to achieve an automated process for managing the movement of cargo through the KWL Terminal.

inFrasTruCTure DeveLoPmenT & equiPmenT aCquisiTion

KWL has invested heavily in physical infrastructure in order toposition itself to grasp new opportunities for growth in cargo/trade and logistics. For example, KWL endeavors to serve as a domestic and regional transshipment centre for grain. This is an integral component of KWL’s thrust to expand its service offerings and establish its position as the Region’s leading multi-purpose and multi-user port terminal. In preparation for this, construction has commenced on the erection of 2 tower grain silos to receive, store and discharge bulk grain.

Some strategic investment in physical infrastructure which KWL embarked on in 2016 included land acquisition, refurbishing of Berths, and the rehabilitation of the container yard pavement. Approximately 9.4 acres have been acquired within the immediate environs of the Newport West area to facilitate the Company’s growth strategy. These acquisitions are a combination of existing warehouse structures as well as vacant lots. The expansion of the existing vessel docking Berths is another growth/business strategy being implemented to attract larger vessels that require deeper drafts. The first

phase of this exercise saw the expansion of Berths 8 and 9 which created an additional 365 x 15 meters of Southern operating space. Additional dredging was also done to provide a design draft of 15 meters. A similar exercise is schedule for implementation in 2017 for Berths 6 and 7.

Rehabilitation of the container storage yard with the new RigidPavement design, which commenced in 2014, continued in2016. Significant savings should be realized from this activity because the Rigid Pavement design has proven to be more cost effective than the original Concrete Paver design. Routine maintenance of the Terminal facilities will also be improved through the introduction of a preventative maintenance management system tailored for KWL. This softwareis crucial in ensuring that the maintenance activities andassociated costs for existing, upgraded and new facilities areproperly documented. To increase productivity and improve operations at the KWL Terminal, several pieces of new state-of-the-art equipment were added to the port mobile fleet during 2016. As part of its modernization programme, KWL acquired the largest Mobile Harbour Crane in the Caribbean, the Liebherr LHM 600 mobile harbour crane which boasts a 104-ton capacity for bulk cargo operations that translates into 19 containers wide, to handle typical super Post-Panamax container liners. This crane, the first of its kind in the Region, increases the fleet to six mobile harbour cranes and has been bolstered with two Bromma EH5U spreaders for efficient and reliable container loading and unloading operations. Two 40’ and two 20’ Tandemloc semi-automatic spreaders were acquired to improve productivity and increase flexibility during shipside operations.

We commissioned two (2) advanced Taylor XRS 9972 reach stackers for the Terminal. These are the latest model of Taylor stackers and feature 45-ton capacity at 4-container high stacking and 41-ton capacity at 5-container high stacking capability. The Taylor Integrated Control System (TICS) allows for the customization of operating parameters and the performance of diagnostics. The LED lights boost illumination on the machines to ensure that the operators carry out their work safely. The XRS 9972 reach stacker also has lift speeds that approach 30% above its predecessor, the TS 9972. This increases productivity significantly during operations. The fleet of Reach stackers has now increased to eighteen (18).

The International Maritime Organization (IMO) revised theSafety of Life at Sea convention (SOLAS) in 2016 and now requires packed containers destined for export to have verified weights. Kingston Wharves was ready for this challenge and

32

implemented our calibrated, robust Mettler-Toledo steel truck scale before the deadline. This scale has a 100-ton capacity, is 70ft x 11ft in dimension and is designed to withstand the harsh port environment. It requires very low maintenance and is expected to endure at least twenty years of rigorous port operations.

KWL is committed to the sustainable maintenance of a safe and secure internationally-certified terminal facility.

KWL’s security performance over the last three years shows a progressive decrease in significant incidents of contraband trafficking, particularly relating to illicit drugs. In 2016, a significant reduction of 70% in security incidents at KWL’s terminal facility cemented our commitment to port operations that meet international standards. Our proactive engagements with principal shipping agencies to discuss safety and security matters boosted the international profile of KWL as a transhipment hub for several key shipping lines.

KWL demonstrated its strong commitment to safety and security as a critical pillar of its overarching growth strategy through significant investment in its security and safety programmes in 2016. Key among the initiatives undertaken was the engagement of a premier international security risk consulting firm to develop a Security Assessment and Enhancement Programme. Some notable outcomes of this initiative included: safety cage/equipment, Fire detection/ alarm system, training /awareness, international safety certification, and implementation of best practices – OSHA, ILO, Factories Act Regulation under the Docks Regulations and IMDg. The Programme will be fully implemented in 2017.

A significant portion of IT efforts in 2016 involved rollingout the new Advantum Port Manager (APM) software and the Online Job Costing application. The new applications have resulted in customers being able to see and pay all charges online, increased ease of use and, in the case of the Online Job Costing system, reduction in cost assessment calculations from one day to less than an hour. KWL IT’s development efforts in 2016 centred around building a Service Oriented Architecture (SOA) to allow for “build-once” “use everywhere” deployment. The SOA facilitates the interfacing of internal applications to new ecosystems such as the Port Community System and the roll-out of new customer facing web applications in 2017.

TransForminG THe CusTomer exPerienCe

During the 2016 Financial Year, much effort was invested in ENgAgINg and SERVINg CUSTOMERS. Our goal was not only to ensure that we keep our existing customers but to also acquire new ones, even as we sought to build our customer value proposition.

new sHiPPinG Line serviCe

Kingston Wharves welcomed the return of Crowley Maritimeto Jamaica after 16 years. The Jacksonville, Florida-basedcompany, with a fleet of over three hundred vessels, returned to Jamaica as a result of the takeover of Seafreight’s operations in the Latin-American and Caribbean Regions. The KWL Terminal maintains Caribbean hub operation for the line and proudly hosted the maiden voyage of its new container ship, the MV Toronto Trader, with Kingston, Jamaica being the first port of call and KWL the terminal that facilitated its first cargo load.

KWL’s Terminal recommenced limited service to Evergreen Line, one of the world’s largest container lines. Together, the new lines expand the Terminal’s capacity and connectivity as aregional transshipment hub through the increase in the number of destinations in the Caribbean and Central and Latin America.

vaLue aDDeD serviCes

As a part of the service enhancement strategy to improve theclearance of domestic cargo, KWL introduced a ReservationService for the clearance of Full-Container-Load (FCL) cargo.This service has resulted in noticeable improvements in theprocessing time for cargo clearance averaging 16 percentbelow the operational target and over 30 percent below the



MD&A Continued

performance attained for regular domestic clearances. This domestic cargo clearance process will be further enhanced in 2017 with the full implementation of the Port Community System (PCS) which will accelerate the introduction of a comprehensive appointment system for the clearance of all cargo from the KWL Terminal. The importing public will benefit from significant reduction in the processing time for the clearance of cargo.

KWL introduced Pay and go, a convenient service option where customers, from the convenience of their homes or offices, engage KWL to process clearance of their less-than-container load shipments. The Customer also has the option to pay all charges online and to have their cargo delivered to their selected destinations.

KWL Implementated the Wharfage Information System which provides a modern and integratable platform to improve operational efficiency. It also ensures a value-added portal where customers can access information and settle all cargotransactions 24/7. Other value-added portals include AllCargo Charges online, Port Community System, and IVR.

Kw-aCe – our siGnaTure serviCe imProvemenTProGramme

KW-ACE, a companion to KWL’s overarching vision to be thebest Multi-user Multi-purpose Port in the Region, took centre stage in 2016. This service strategy is underpinned by five customer-driven service standards designed to transform the service experience of KWL’s customers. Support for the achievement of the service standards was encouraged through several promotional activities and the implementation of a Reward & Recognition system designed to engage staff.

To ensure consistency in service delivery, sixty employeesreceived training and international designation as Certified Customer Service Professionals from a joint training and certification programme facilitated by the International Customer Service Association and the Jamaica Customer Service Association.

The perception of KWL as a responsible company shouldreceive a boost from the implementation of a Client Engagement Centre, a completely web-based software tool that gives clients the opportunity and convenience of registering a complaint, making inquiries about charges and product and service options, informing themselves about processes such as clearing cargo, and providing feedback on their perception of the quality of service they receive at any

touchpoint. The Centre will also facilitate the analysis of the data to help in improving organizational efficiency, especially where systemic issues are identified, and drive service improvement and customer satisfaction.

BuiLDinG a sTronG Team

Our growth plan is ambitious and must be shaped by, and delivered through, a strong team effort which includes effective leadership and the engagement of all employees. This is a process that will be achieved over time through recruiting, developing and retaining the best workforce for port operations and logistics in the Caribbean.

reCruiT, DeveLoP & reTain ComPeTenT worKForCe

During 2016, the human capacity of the Company was augmented with specialists in key management and supervisory roles. Terminal Operations were shored up with the addition of several new maritime specialists. To tackle the ever-increasing demand on operational equipment and the resulting maintenance activities at the Terminal, several supervisors, technicians and mechanics were hired in the Maintenance Department to monitor and streamline activities and to assist with crane predictive, preventative and corrective maintenance. This has resulted in improvement in the availability and reliability of our fleet of equipment and, by extension, in efficiency and productivity in the operations of the Terminal.

There have also been concurrent internal human capital development initiatives geared towards equipping the workforce with the right skills & competence to be very productive and operationally efficient, and to manage, lead and deliver world-class service in our very competitive industry. Among the key initiatives introduced in this area are the HEART Competency-Based Training and Certification Programmes for the Stevedoring and Warehouse workforces.

In 2016, we aligned our strategic focus on human capitaldevelopment as an important pillar in delivering our growthstrategy with increased focus and improved financial commitment to training. Some of the achievements in trainingin 2016 include:

34

` KW-Ace international customer service certification Programme A Joint Certification initiative with the Jamaica Customer Service Association (JCSA) and the International Customer Service Association (ICSA). Sixty (60) KWL group team members successfully completed the programme and have attained the Certified Customer Service Professional designation.

` Terminal operations Training and certification Programme A Joint Certification partnership with Heart Trust NTA and Caribbean Maritime Institute (CMI) leading to NCTVET certification for KWL team members in the Stevedore Level 1, Stevedore Level 3, and Warehouse Level 3 categories. Five (5) persons have successfully completed the Stevedore Level 1 programme.

` Taylor Machine Works Master certification (Level 1) Two (2) members of the KWL Maintenance Team were among a group of international participants (at the Taylor Machine Works facility in Mississippi, USA) in pursuit of the Master Certification in maintenance of the Taylor Stackers Only the KWL participants were successful. They have both been awarded the Taylor Machine Works Certification (Level 1).

` Liebherr Mobile crane Training Several groups of Crane Operators and Maintenance personnel completed factory-based training at the Liebherr Marine Crane Company facility in Florida, USA.

` General staff Development - introduction to spanish Twenty (20) KWL team members completed Modules of an Introductory Spanish course delivered by Caribbean Training Institute for Languages (C.T.I.L.)

` Terminal operations Leadership & Management Key members of the operations leadership team participated in exchange and training programmes with ports and training institutions in the United Kingdom, the USA and the Caribbean. These experiences provide a framework for continued enhancement of KWL’s operations to achieve and sustain world-class standards.

ouTLooK 2017

For the foreseeable future we will remain focused on achieving our vision through continued strengthening of our institutional capacity, to keep us in readiness mode for brokering capabilities, whenever we are called upon to do so. The group is, and will continue to be, engaged in gathering critical data to inform fact- based decisions, assess and secure opportunities in the market and appropriately address challenges to ensure improved performance and value. Market projections and critical intelligence must significantly inform strategic planning for capital outlay for terminal operations and build-out of its logistics facilities and services. We have engaged the services of professionals with extensive industry- based leadership roles in the container and roll-on roll-off (RO-RO) global market to assist us in this endeavour.

Our strategic theme in 2017 is the continued delivery of growth through the engagement of all our stakeholders and through exceptional execution in all our operations, especially in trade and logistics in Jamaica, the Caribbean and Latin America. We have crafted initiatives to ensure that the KW container terminal is equipped in every respect to efficiently serve new and existing core customers and to leverage its capabilities to meet domestic and transhipment requirements. We will seek New Possibilities to make Kingston Wharves the best logistics terminal in the Caribbean and the leading automotive terminal in the Region.

We have a plan that is both competitive and sustainable.



Leading Logistics

At the forefront of the shipping and logistics Industry, Kingston Wharves’ remains persistent in achieving the milestones that are enabling its transition to a Lead Logistics Provider. Through significant investment, engaging key decision makers on the development of infrastructure stock, public private partnership and investment capital, the Company has expanded its integrated logistics services and clientele.

02

06

10

03

07

11

04

08

12

05

01

09

13

01/ Port Terminal Tour by the Hon. Dr. Horace Chang, Minister without portfolio in the Ministry of Economic growth and Job Creation 02/ Minister Chang in the Liebherr LMH 600 crane. 03/ CEO grantley Stephenson presented logistics agenda Hon. Audley Shaw Ministry of Finance and Public Services on terminal tour and the International Transportation Industry Forum hosted by Kingston Wharves Limited. 04/ Piloting logistics services for Suzuki Motor through Jamaica. 05/ Client Services and Marketing Manager Simone Murdock explains the aesthetic of the TFL to Dr. Horace Chang and Colleagues. 06/ Manager of the Year at the 2015, CEO grantley Stephenson receiving award from His Excellency the Most Hon. Sir Patrick Linton. 07/ The largest cruise ship to call Kingston docked at Kingston Wharves. 08/ Cars everywhere. Managing the almost 4,000 motor units on port at

the same time. 09/ Introduced Verified gross Mass Service with the operation of a best in class container weighing station. 10/ CEO grantley Stephenson with Minister Karl Samuda (Ministry of Transportation) at the International Transportation Industry Forum hosted by KWL. 11/ Project cargo experts. We handle containers, cars, lumber, steel and suBMArines! 12/ Crowley returns to Kingston. Inaugural and maiden call of Crowley’s Toronto Trader. 13/ TLF construction on target.

36

KWL In The Community

Kingston Wharves is committed to contributing to the viability and development of the country’s communities

and its People. Encouraged by their resilience and aptitudes, KWL remains devoted to supporting programmes and initiatives promoting discipline, education and excellence.

02

05

03

01

06

08

04

07

09

01/ CEO grantley Stephenson and Client Services & Marketing Manager Simone Murdock pose with the Jamaica Under-15 Cricket team at Sabina Park. 02/ L-R: CFO Clover Moodie, Fr. Richard Ho Long and CEO grantley Stephenson at the MOSES press launch. 03/ CEO grantley Stephenson on stage with Fr. Richard Ho Long at the opening night of MOSES. 04/ As a guest speaker, CEO grantley Stephenson aboard the Caribbean Queen for the World Maritime Day Sunset Cruise. 05/ Winners of the National U-15 Cricket programme with sponsors Kingston Wharves and Partners NCB. 06/ The captain of the Jamaica National U-15 cricket team sign a commemorative cricket shirt with the KWL executive team. 07/ The Kingston Wharves team with the National U-15 Cricket programme winners at Sabina Park 08/ The Brazilian Navy Vessel docked at Kingston Wharves Port Terminal for educational tour. 09/ CEO, grantley Stephenson presenting the Mona School of Business Management Logistics symposium.



ToP Ten sHareHoLDers as at december 31, 2016

nAMes shArehoLDinG % oF cAPiTAL

JAMAICA PRODUCERS gROUP LTD 600,736,635 42.00

S.B.D. LLC 300,689,810 21.02

SHIPPINg ASSOCIATION OF JAMAICA PROPERTY LIMITED 151,933,715 10.62

KINgSTON PORTWORKERS SUPERANNUATION FUND 151,405,130 10.59

MARITIME & TRANSPORT SERVICES LTD 71,475,924 5.00

LANNAMAN & MORRIS (SHIPPINg) LTD 28,845,258 2.02

SAgICOR POOLED EQUITY FUND 19,638,650 1.37

NCB INSURANCE CO LTD. - A/C WT 181 10,000,000 0.70

JCSD TRUSTEE SERVICES LTD - SIgMA OPTIMA 6,610,287 0.46

SEAFREIgHT LINE 6,029,108 0.42

1,347,364,517

Shareholdings

38

exeCuTives’ sHareHoLDinGs as at december 31, 2016

nAMes shArehoLDinG connecTeD ToTAL

MICHAEL ARBOUINE NIL - -

VALRIE CAMPBELL NIL - -

LORNA DWYER NIL - -

JODENIA FERgUSON-BRYAN NIL - -

ORVILLE FROOME NIL - -

ANNA HARRY NIL - -

LANCELOT gREEN NIL - -

CLOVER MOODIE NIL - -

SIMONE MURDOCK NIL - -

gEORgE REYNOLDS NIL - -

MARCELLO RICHARDS NIL - -

LLOYD SMITH NIL - -

gRANTLEY STEPHENSON 331,369 - 331,369

OMAR WALKER NIL - -

CALVIN WATSON NIL - -

MARK F. WILLIAMS NIL - -

DireCTors/senior manaGers’ sHareHoLDinGs as at december 31, 2016

nAMes shArehoLDinG connecTeD shArehoLDinG ToTAL

gRANTLEY STEPHENSON

331,369 - 331,369.00

ROgER HINDS NIL TRANSOCEAN SHIPPINg LIMITED 1,481,481 1,481,481.00

KIM CLARKE NIL MARITIME & TRANSPORTSERVICES LTD.

71,475,924 227,687,415.00

- SHIPPINg ASSOCIATION OFJAMAICA PROPERTY LIMITED

151,933,715 -

NIL A.E. PARNELL COMPANY LIMITED 4,277,776 -

HARRIAT MARAgH NIL LANNAMAN & MORRISSHIPPINg LTD.

28,845,258 34,874,366.00

SEAFREIgHT LINE LIMITED 6,029,108

CHARLES JOHNSTON 24,458 JAMAICA FRUIT & SHIPPINg LIMITED

709,507 601,446,142.00

-JAMAICA PRODUCERSgROUP LIMITED

600,736,635 -

ALVIN HENRY 91,333 NIL 91,333.00

KATHLEEN MOSS 2,000 JAMAICA PRODUCERSgROUP LIMITED

600,736,635 601,736,635.00

ASSURANCE BROKERS LIMITED 1,000,000 -

JEFFREY HALL NIL JAMAICA PRODUCERSgROUP LIMITED

600,736,635 600,736,635.00

MARSHALL HALL NIL JAMAICA PRODUCERSgROUP LIMITED

600,736,635 601,114,840.00

- MCgOWAN PROPERTIES LIMITED 378,205 -

BRUCE BRECHEISEN NIL S.B.D. LLC 300,689,810 300,689,810.00

ROBERT SCAVONE NIL NIL NIL

DORIAN VALDES NIL NIL NIL



CorporateData

40


fOR MORe INfORMATION PLeAse vIsIT: WWW.KINgsTONWHARves.COM

CHairmanJeffrey Hall

CHieF exeCuTiveoFFiCer grantley Stephenson

DireCTorsBruce BrecheisenKim Clarke Jeffrey Hall (Chairman)Marshall Hall Alvin Henry Roger Hinds

Charles Johnston Harriat Maragh Kathleen Moss Robert Scavone grantley Stephenson Dorian Valdes

auDiTors PriCewaTerHouseCooPers Scotiabank CentreCorner of Duke &Port Royal StreetsKingston

aTTorneYs-aT-Law BraHamLeGaLSuites 1 & 232 Lady Musgrave Road Kingston 5

BroCarDSuite 132 Lady Musgrave Road Kingston 5

DunnCox48 Duke Street Kingston

HarT muirHeaD FaTTa 2nd Floor 53 Knutsford Boulevard Kingston 5

HYLTon & HYLTon19 Norwood AvenueKingston 5

HYLTon PoweLL11A Oxford RoadKingston 5

LivinGsTon aLexanDer& LevY72 Harbour StreetKingston

mYers, FLeTCHer & GorDon21 East StreetKingston

PaTTerson mair HamiLTon63-67 Knutsford Boulevard Kingston 5

*reGisTrar & TransFer aGenT JamaiCa CenTraL seCuriTies DePosiTorY LimiTeD 40 Harbour Street Kingston

CorPoraTe seCreTarY anna i. HarrY Third Street Newport West Kingston 13Tel: (876) 923-9211 Fax: (876) 923-5361

aDminisTraTive oFFiCes KinGPorT BuiLDinG Third Street Newport West Kingston 13, Jamaica Tel: (876) 923-9211 Fax: (876) 923-5361

BanKersBanK oF nova sCoTia (JamaiCa) LimiTeDsCoTiaBanK CenTreCorner of Duke & Port Royal Streets Kingston

FirsT CariBBean inTernaTionaL BanK (JamaiCa) LTD. 23 Knutsford Boulevard Kingston 5

FirsT GLoBaL BanK 2 St. Lucia Avenue Kingston 5

naTionaL CommerCiaL BanK JamaiCa LimiTeD The Atrium 32 Trafalgar Road Kingston 10

42

FinAnciAL sTATeMenTs31 December 2016

Kingston Wharves Limited



Independent Auditor’s Report to the Members 44

Financial Statements

group statement of comprehensive income 50

group statement of financial position 51

group statement of changes in equity 53

group statement of cash flows 54

Company statement of comprehensive income 55

Company statement of financial position 56

Company statement of changes in equity 58

Company statement of cash flows 59

Notes to the financial statements 60

index

44



46



48



50

Page 1

Kingston Wharves Limited Group Statement of Comprehensive Income Year ended 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

Note 2016 $’000

2015 $’000

Revenue 5,409,801 4,672,884 Direct costs (2,897,704) (2,525,895) Gross Profit 2,512,097 2,146,989 Other operating income 8 196,642 249,045 Administration expenses (1,033,488) (823,978) Operating Profit 1,675,251 1,572,056 Finance costs 9 (186,408) (162,718) Profit before Income Tax 1,488,843 1,409,338 Income tax expense 10 (176,056) (141,879) Net Profit for Year 1,312,787 1,267,459 Other Comprehensive Income Item that may be reclassified to profit or loss

Changes in fair value of available-for-sale investments 41,948 - Items that will not be reclassified to profit or loss

Re-measurements of post-employment benefits 269,906 (142,142) Deferred tax effect on re-measurements of post-employment benefits (28,583) 13,731 De-recognition of revaluation surplus on disposal of property plant and

equipment (8,046) (203,794) Deferred tax effect on de-recognition of revaluation surplus 575 17,322 Effect of change in tax rate on deferred taxation on revaluation surplus (39,662) (45,329)

Total other comprehensive income, net of taxes 236,138 (360,212) Total Comprehensive Income for Year 1,548,925 907,247 Net Profit Attributable to:

Equity holders of the company 11 1,293,480 1,256,397 Non-controlling interest 12 19,307 11,062

1,312,787 1,267,459 Total Comprehensive Income Attributable to:

Equity holders of the company 1,529,618 896,185 Non-controlling interest 12 19,307 11,062

1,548,925 907,247 Earnings per stock unit for profit attributable to the equity holders of

the company during the year 13 $0.90 $0.88


Group statement of comprehensive incomeYear ended 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)



Page 2

Kingston Wharves Limited Group Statement of Financial Position 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

Note 2016 $’000

2015 $’000

ASSETS Non-current Assets Property, plant and equipment 15 18,085,443 16,644,894 Intangible assets 16 256,871 322,849 Investments 18 128,466 84,346 Due from related party 22 - 102,405 Deferred income tax assets 30 1,363 1,498 Retirement benefit asset 20 936,177 619,083 19,408,320 17,775,075 Current Assets Inventories 21 303,994 203,049 Trade and other receivables 23 617,395 404,351 Taxation recoverable 16,253 9,200 Short term investments 24 2,830,027 2,687,739 Cash and bank 24 360,819 332,129 4,128,488 3,636,468 Total Assets 23,536,808 21,411,543


Group statement of Financial Position31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

52

Page 3

Kingston Wharves Limited Group Statement of Financial Position (Continued) 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

Approved for issue by the Board of Directors on [Date] and signed on its behalf by:

Chairman Director

Note

2016 $’000

2015 $’000

EQUITY Stockholders’ Equity (attributable to equity holders of the company) Share capital 25 2,079,398 2,079,398 Other reserves 26 10,768,001 10,760,607 Asset replacement/rehabilitation and depreciation reserves 27 216,161 215,917

Retained earnings 5,476,686 4,440,974 18,540,246 17,496,896 Non-controlling Interest 12 96,565 77,258 18,636,811 17,574,154 LIABILITIES Non-current Liabilities Borrowings 28 1,795,373 1,095,836 Long term liability 29 9,454 29,785 Deferred income tax liabilities 30 1,168,265 1,111,131 Retirement benefit obligations 20 276,762 245,378 3,249,854 2,482,130 Current Liabilities Trade and other payables 31 1,002,529 735,090 Taxation 31,413 76,339 Borrowings 28 547,540 447,037 Current portion of long term liability 29 68,661 96,793 1,650,143 1,355,259 Total equity and liabilities 23,536,808 21,411,543


Group statement of Financial Position (Cont’d)31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)



Page 4

Kingston Wharves Limited Group Statement of Changes in Equity Year ended 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

Attributable to equity holders of the company

Non-controlling

Interest

Total

Equity

Note Share

Capital Other

Reserves

Asset Replacement/ Rehabilitation

and Depreciation

Reserves

Retained Earnings Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance at 31 December 2014 2,079,398 10,979,829 215,668 3,683,366 16,958,261

66,196 17,024,457

Total comprehensive income for the year - (231,801) - 1,127,986 896,185

11,062

907,247

Transfer of net interest to asset replacement/rehabilitation and depreciation reserves 27 - - 249 (249) -

-

- Transfer to asset replacement/ rehabilitation and depreciation reserves 27 - - 12,579 (12,579) -

-

- Transfer from asset

replacement/rehabilitation and depreciation reserves 27 - 12,579 (12,579) - -

-

-

Transactions with owners:

Dividends 14 - - - (357,550) (357,550)

-

(357,550)


77,258 17,574,154

Total comprehensive income for the year - (5,185) - 1,534,803 1,529,618

19,307

1,548,925

Transfer of net interest to asset replacement/rehabilitation and depreciation reserves 27 - - 244 (244) -

-

- Transfer to asset replacement/ rehabilitation and depreciation reserves 27 - - 12,579 (12,579) -

-

- Transfer from asset

replacement/rehabilitation and depreciation reserves 27 - 12,579 (12,579) - -

-

-


Dividends 14 - - - (486,268) (486,268)

-

(486,268)


96,565 18,636,811


Group statement of changes in equityYear ended 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

54

Page 5

Kingston Wharves Limited Group Statement of Cash Flows Year ended 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

Note 2016

$’000 2015 $’000

Cash flows from operating activities Net profit 1,312,787 1,267,459

Adjustments for: Amortisation 16 108,770 82,570

Depreciation 15 468,541 407,817 Provision for impairment 5,000 15,000 Foreign exchange adjustment on loans 51,550 40,262 Foreign exchange gains on operating activities (113,057) (69,951)

Loss on disposal/write-off of property, plant and equipment 2,081 5,396 Retirement benefit asset (35,764) (57,460) Retirement benefit obligations 19,960 19,992

Dividend received in kind - (84,346) Interest income 8 (86,167) (69,623) Interest expense 9 134,858 122,456 Taxation 10 176,056 141,879

2,044,615 1,821,451 Changes in operating assets and liabilities: Inventories (100,945) (15,629)

Trade and other receivables (215,130) 176,795 Trade and other payables 147,481 85,978

Recoverable from The Port Authority of Jamaica - 32,730 Cash provided by operations 1,876,021 2,101,325 Tax paid (238,436) (108,810) Net cash provided by operating activities 1,637,585 1,992,515 Cash flows from investing activities Purchase of property, plant and equipment (1,822,862) (1,164,916) Purchase of intangible asset 16 (42,792) (37,498) Purchase of investments (2,172) - Proceeds from sale of property, plant and equipment 1,050 9,466 Short term deposits with maturity greater than three months 14,685 191,676 Restricted cash (189,000) - Interest received 86,409 68,014 Net cash used in investing activities (1,954,682) (933,258) Cash flows from financing activities Dividends paid to equity holders of the company (414,773) (286,092) Interest paid (137,193) (119,324) Loans received 1,275,250 - Loans repaid (524,425) (428,893) Net cash provided by/(used in) financing activities 198,859 (834,309) Net (decrease)/increase in cash and cash equivalents (118,238) 224,948 Net cash and cash equivalents at beginning of year 3,005,183 2,703,074 Exchange adjustment on foreign currency cash and cash equivalents 114,901 77,161 NET CASH AND CASH EQUIVALENTS AT END OF YEAR 24 3,001,846 3,005,183 Total additions to property, plant and equipment per Note 15 include $28,612,000 acquired within the Group.


Group statement of cash FlowsYear ended 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)



Page 6

Kingston Wharves Limited Company Statement of Comprehensive Income Year ended 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

Note 2016 $’000

2015 $’000

Revenue 4,768,731 4,115,986 Direct expenses (2,379,378) (2,038,099) Gross Profit 2,389,353 2,077,887 Other operating income 8 495,498 183,128 Administration expenses (930,863) (737,577) Operating Profit 1,953,988 1,523,438 Finance costs 9 (189,280) (168,248) Profit before Income Tax 1,764,708 1,355,190 Income tax expense 10 (171,763) (124,180) Net Profit for Year 1,592,945 1,231,010 Other Comprehensive Income Item that may be reclassified to profit or loss

Changes in fair value of available-for-sale investments 27,768 - Items that will not be reclassified to profit or loss

Re-measurements of post-employment benefits 269,906 (142,142) Deferred tax effect on re-measurements of post-employment benefits (28,583) 13,731 De-recognition of revaluation surplus on disposal of property, plant and

equipment (8,046) (203,794) Deferred tax effect on de-recognition of revaluation surplus 575 17,322 Effect of change in tax rate on deferred taxation on revaluation surplus (39,662) (45,329)

Total other comprehensive income, net of taxes 221,958 (360,212)

Total Comprehensive Income for Year 1,814,903 870,798


company statement of comprehensive incomeYear ended 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

56

Page 7

Kingston Wharves Limited Company Statement of Financial Position 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

Note 2016

$’000 2015

$’000 ASSETS Non-current Assets Property, plant and equipment 15 14,011,688 12,593,293 Intangible assets 16 256,871 322,849 Investments in subsidiaries 17 75,731 75,731 Investments 18 85,818 55,878 Due from related party 22 102,405 102,405 Retirement benefit asset 20 936,177 619,083 15,468,690 13,769,239 Current Assets Inventories 21 292,090 195,056 Trade and other receivables 23 491,471 323,156 Group companies 22 376,906 21,233 Short term investments 24 2,048,456 2,056,746 Cash and bank 24 279,294 253,949 3,488,217 2,850,140 Total assets 18,956,907 16,619,379


company statement of Financial Position31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)



Page 8

Kingston Wharves Limited Company Statement of Financial Position (Continued) 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

Note 2016 $’000

2015 $’000

EQUITY Stockholders’ Equity Share capital 25 2,079,398 2,079,398 Other reserves 26 6,605,844 6,612,630 Asset replacement/rehabilitation and depreciation reserves

27

212,968 212,968

Retained earnings 5,810,526 4,475,105 14,708,736 13,380,101 LIABILITIES Non-current Liabilities Borrowings 28 1,793,921 1,094,384 Long term liability 29 9,454 29,785 Deferred income tax liabilities 30 584,765 492,339 Retirement benefit obligations 20 276,762 245,378 2,664,902 1,861,886 Current Liabilities Trade and other payables 31 942,824 695,372 Group companies 22 5,984 74,138 Taxation payable 18,260 64,052 Borrowings 28 547,540 447,037 Current portion of long term liability 29 68,661 96,793 1,583,269 1,377,392 Total equity and liabilities 18,956,907 16,619,379

Approved for issue by the Board of Directors on [Date] and signed on its behalf by:

Chairman Director


company statement of Financial Position (Cont’d) 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

58

Page 9

Kingston Wharves Limited Company Statement of Changes in Equity Year ended 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

Note Share

Capital Other

Reserves


and Depreciation

Reserves Retained Earnings Total

$’000 $’000 $’000 $’000 $’000 Balance at 31 December 2014 2,079,398 6,831,852 212,968 3,742,635 12,866,853

Total comprehensive income for the year - (231,801) - 1,102,599 870,798 Transfer to asset

replacement/rehabilitation and depreciation reserves 27 - - 12,579 (12,579) -

Transfer from asset replacement/ rehabilitation and depreciation reserves 27 - 12,579 (12,579) - -


Dividends 14 - - - (357,550) (357,550)


Total comprehensive income for the year - (19,365) - 1,834,268 1,814,903 Transfer to asset




Dividends 14 - - - (486,268) (486,268)


Page 10

Kingston Wharves Limited Company Statement of Cash Flows Year ended 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

Note 2016 $’000

2015 $’000



Depreciation 15 364,265 306,053 Provision for impairment 5,000 15,000 Foreign exchange adjustment on long term loans 51,550 40,262 Foreign exchange gains (90,042) (57,684)


Dividend received in kind - (55,878) Interest income 8 (58,755) (43,015) Interest expense 9 137,730 127,986

Taxation 10 171,763 124,180 2,270,362 1,739,697 Changes in operating assets and liabilities:

Inventories (97,034) (12,222) Group companies (352,992) (288) Trade and other receivables (169,866) 154,934 Trade and other payables 127,494 85,130

Recoverable from The Port Authority of Jamaica - 32,730 Cash provided by operations 1,777,964 1,999,981 Tax paid (192,799) (73,211) Net cash provided by operating activities 1,585,165 1,926,770 Cash flows from investing activities Purchase of property, plant and equipment 15 (1,799,696) (1,156,571) Purchase of intangible asset 16 (42,792) (37,498) Purchase of investments (2,172) - Proceeds from sale of property, plant and equipment 1,050 5,950 Short term deposits with maturity greater than three months 14,685 191,676 Restricted cash (189,000) - Interest received 58,462 42,001 Net cash used in investing activities (1,959,463) (954,442) Cash flows from financing activities Dividends paid to equity holders of the company (414,773) (286,092) Interest paid (178,000) (121,545) Loans received 1,275,250 - Loans repaid (524,425) (428,893) Net cash provided by/(used in) financing activities 158,052 (836,530) Net (decrease)/increase in cash and cash equivalents (216,246) 135,798 Net cash and cash equivalents at beginning of year 2,263,110 2,062,418 Exchange adjustment on foreign currency cash and cash equivalents 91,886 64,894 NET CASH AND CASH EQUIVALENTS AT END OF YEAR 24 2,138,750 2,263,110


company statement of changes in equityYear ended 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)



Page 9

Kingston Wharves Limited Company Statement of Changes in Equity Year ended 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

Note Share

Capital Other

Reserves


and Depreciation

Reserves Retained Earnings Total

$’000 $’000 $’000 $’000 $’000 Balance at 31 December 2014 2,079,398 6,831,852 212,968 3,742,635 12,866,853

Total comprehensive income for the year - (231,801) - 1,102,599 870,798 Transfer to asset




Dividends 14 - - - (357,550) (357,550)


Total comprehensive income for the year - (19,365) - 1,834,268 1,814,903 Transfer to asset




Dividends 14 - - - (486,268) (486,268)


Page 10

Kingston Wharves Limited Company Statement of Cash Flows Year ended 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

Note 2016 $’000

2015 $’000



Depreciation 15 364,265 306,053 Provision for impairment 5,000 15,000 Foreign exchange adjustment on long term loans 51,550 40,262 Foreign exchange gains (90,042) (57,684)


Dividend received in kind - (55,878) Interest income 8 (58,755) (43,015) Interest expense 9 137,730 127,986

Taxation 10 171,763 124,180 2,270,362 1,739,697 Changes in operating assets and liabilities:

Inventories (97,034) (12,222) Group companies (352,992) (288) Trade and other receivables (169,866) 154,934 Trade and other payables 127,494 85,130

Recoverable from The Port Authority of Jamaica - 32,730 Cash provided by operations 1,777,964 1,999,981 Tax paid (192,799) (73,211) Net cash provided by operating activities 1,585,165 1,926,770 Cash flows from investing activities Purchase of property, plant and equipment 15 (1,799,696) (1,156,571) Purchase of intangible asset 16 (42,792) (37,498) Purchase of investments (2,172) - Proceeds from sale of property, plant and equipment 1,050 5,950 Short term deposits with maturity greater than three months 14,685 191,676 Restricted cash (189,000) - Interest received 58,462 42,001 Net cash used in investing activities (1,959,463) (954,442) Cash flows from financing activities Dividends paid to equity holders of the company (414,773) (286,092) Interest paid (178,000) (121,545) Loans received 1,275,250 - Loans repaid (524,425) (428,893) Net cash provided by/(used in) financing activities 158,052 (836,530) Net (decrease)/increase in cash and cash equivalents (216,246) 135,798 Net cash and cash equivalents at beginning of year 2,263,110 2,062,418 Exchange adjustment on foreign currency cash and cash equivalents 91,886 64,894 NET CASH AND CASH EQUIVALENTS AT END OF YEAR 24 2,138,750 2,263,110


company statement of cash FlowsYear ended 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

60

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Kingston Wharves Limited Notes to the Financial Statements 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

1. Identification and Principal Activities

The company and its subsidiaries (the Group) are incorporated and domiciled in Jamaica. The principal activities of the company and its subsidiaries comprise the operation of public wharves, logistics services, security services and the rental of and repairs to cold storage facilities.

The wharfage rates and penal charges billed to customers by the company are subject to regulation by the Port Authority of Jamaica.

The company’s registered office is located at the Kingport Building, Third Street, Newport West, Kingston. The company is a public company listed on the Jamaica Stock Exchange.

2. Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) Basis of preparation

These financial statements have been prepared in accordance and comply with International Financial Reporting Standards (IFRS), and have been prepared under the historical cost convention as modified by the revaluation of certain items of property, plant and equipment. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. Although these estimates are based on management’s best knowledge of current events and actions, actual results could differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4. Standards, amendments and interpretations to published standards effective in the current year Certain new accounting standards, interpretations and amendments to existing standards have been published that became effective during the current financial year. The Group has assessed the relevance of all such new standards, interpretations and amendments and has adopted the following which are relevant to its operations: Amendment to IAS 1, ‘Presentation of financial statements’ on the disclosure initiative (effective

for annual periods beginning on or after 1 January 2016). The amendments do not require specific changes. However, they clarify a number of presentation issues and highlight that preparers are permitted to tailor the format and presentation of the financial statements to their circumstances and the needs of users. Preparers should consider their financial statements in light of these clarifications and whether there is an opportunity to clarify or improve the disclosure. The order of the notes needs to balance understandability and comparability and changes should generally result from a specific change in facts and circumstances.

Amendments to IAS 27, ‘Separate financial statements’ on equity method, (effective for annual periods beginning on or after 1 January 2016). These amendments allow entities to use equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements.

Page 12


2. Summary of Significant Accounting Policies (Continued)

(a) Basis of preparation (continued) Standards, amendments and interpretations to published standards effective in the current year

(continued) Annual Improvements 2015, (effective for annual periods beginning on or after 1 January 2016). The

amendments impact the following standards. IFRS 5 was amended to clarify that change in the manner of disposal (reclassification from "held for

sale" to "held for distribution" or vice versa) does not constitute a change to a plan of sale or distribution, and does not have to be accounted for as such.

The amendment to IFRS 7 adds guidance to help management determine whether the terms of an

arrangement to service a financial asset which has been transferred constitute continuing involvement, for the purposes of disclosures required by IFRS 7.

The amendment to IAS 19 clarifies that for post-employment benefit obligations, the decisions

regarding discount rate, existence of deep market in high-quality corporate bonds, or which government bonds to use as a basis, should be based on the currency that the liabilities are denominated in, and not the country where they arise.

The adoption of the above amendments effective 1 January 2016 did not have any significant impact on the Group’s financial statements. Standards, amendments and interpretations to existing standards that the Group has not yet adopted At the date of authorisation of these financial statements, certain new accounting standards, amendments and interpretations to existing standards have been issued which are mandatory for the Group’s accounting periods beginning on or after 1 January 2017 or later periods, but were not effective for the current period, and which the Group has not early adopted. The Group has assessed the relevance of all such new standards, interpretations and amendments, has determined that the following may be relevant to its operations. The impact of the changes is still being assessed by management.

Amendments to IAS 12, ‘Income Taxes, (effective for annual periods beginning on or after 1 January

2017). In January 2016, the IASB published amendments to IAS 12 clarifying specifically how to account for deferred tax assets related to debt instruments measured at fair value as well as clarifying the guidance for deferred tax assets in general by adding examples and elaborating on some of the requirements in more detail. The amendments do not change the underlying principles for the recognition of deferred tax assets.

Amendments to IAS 7, ‘Statement of Cash Flows’, (effective for annual periods beginning on or after

1 January 2017). In January 2016, the IASB published amendments to IAS 7 to improve information about an entity's financing activities. These amendments are part of the IASB initiative to improve presentation and disclosure in financial reports. The amendments require disclosure of information enabling users to evaluate changes in liabilities arising from financing activities including both cash and non-cash changes. The future adoption of these amendments will result in additional disclosure in the financial statements.


Notes to the Financial Statements31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)



Page 11


1. Identification and Principal Activities

The company and its subsidiaries (the Group) are incorporated and domiciled in Jamaica. The principal activities of the company and its subsidiaries comprise the operation of public wharves, logistics services, security services and the rental of and repairs to cold storage facilities.

The wharfage rates and penal charges billed to customers by the company are subject to regulation by the Port Authority of Jamaica.

The company’s registered office is located at the Kingport Building, Third Street, Newport West, Kingston. The company is a public company listed on the Jamaica Stock Exchange.

2. Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) Basis of preparation

These financial statements have been prepared in accordance and comply with International Financial Reporting Standards (IFRS), and have been prepared under the historical cost convention as modified by the revaluation of certain items of property, plant and equipment. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. Although these estimates are based on management’s best knowledge of current events and actions, actual results could differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4. Standards, amendments and interpretations to published standards effective in the current year Certain new accounting standards, interpretations and amendments to existing standards have been published that became effective during the current financial year. The Group has assessed the relevance of all such new standards, interpretations and amendments and has adopted the following which are relevant to its operations: Amendment to IAS 1, ‘Presentation of financial statements’ on the disclosure initiative (effective

for annual periods beginning on or after 1 January 2016). The amendments do not require specific changes. However, they clarify a number of presentation issues and highlight that preparers are permitted to tailor the format and presentation of the financial statements to their circumstances and the needs of users. Preparers should consider their financial statements in light of these clarifications and whether there is an opportunity to clarify or improve the disclosure. The order of the notes needs to balance understandability and comparability and changes should generally result from a specific change in facts and circumstances.

Amendments to IAS 27, ‘Separate financial statements’ on equity method, (effective for annual periods beginning on or after 1 January 2016). These amendments allow entities to use equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements.

Page 12



(a) Basis of preparation (continued) Standards, amendments and interpretations to published standards effective in the current year

(continued) Annual Improvements 2015, (effective for annual periods beginning on or after 1 January 2016). The

amendments impact the following standards. IFRS 5 was amended to clarify that change in the manner of disposal (reclassification from "held for

sale" to "held for distribution" or vice versa) does not constitute a change to a plan of sale or distribution, and does not have to be accounted for as such.

The amendment to IFRS 7 adds guidance to help management determine whether the terms of an

arrangement to service a financial asset which has been transferred constitute continuing involvement, for the purposes of disclosures required by IFRS 7.

The amendment to IAS 19 clarifies that for post-employment benefit obligations, the decisions

regarding discount rate, existence of deep market in high-quality corporate bonds, or which government bonds to use as a basis, should be based on the currency that the liabilities are denominated in, and not the country where they arise.

The adoption of the above amendments effective 1 January 2016 did not have any significant impact on the Group’s financial statements. Standards, amendments and interpretations to existing standards that the Group has not yet adopted At the date of authorisation of these financial statements, certain new accounting standards, amendments and interpretations to existing standards have been issued which are mandatory for the Group’s accounting periods beginning on or after 1 January 2017 or later periods, but were not effective for the current period, and which the Group has not early adopted. The Group has assessed the relevance of all such new standards, interpretations and amendments, has determined that the following may be relevant to its operations. The impact of the changes is still being assessed by management.

Amendments to IAS 12, ‘Income Taxes, (effective for annual periods beginning on or after 1 January

2017). In January 2016, the IASB published amendments to IAS 12 clarifying specifically how to account for deferred tax assets related to debt instruments measured at fair value as well as clarifying the guidance for deferred tax assets in general by adding examples and elaborating on some of the requirements in more detail. The amendments do not change the underlying principles for the recognition of deferred tax assets.

Amendments to IAS 7, ‘Statement of Cash Flows’, (effective for annual periods beginning on or after

1 January 2017). In January 2016, the IASB published amendments to IAS 7 to improve information about an entity's financing activities. These amendments are part of the IASB initiative to improve presentation and disclosure in financial reports. The amendments require disclosure of information enabling users to evaluate changes in liabilities arising from financing activities including both cash and non-cash changes. The future adoption of these amendments will result in additional disclosure in the financial statements.


Notes to the Financial Statements 31 December 2016 (expressed in Jamaican dollars unless otherwise indicated)

62

Page 13



(a) Basis of preparation (continued) Standards, amendments and interpretations to existing standards that the Group has not yet

adopted (continued) IFRS 9, ‘Financial instruments’ (effective for annual periods 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 the multiple classification and measurement models in IAS 39 with a single model that has only two classification categories: amortised cost and fair value. 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 instrument.

IFRS 15, ‘Revenue from contracts with customers’ (effective 1 January 2018). The new standard

introduces the core principle that revenue must be recognised when the goods or services are transferred to the customer, at the transaction price. Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the contract price must generally be allocated to the separate elements. When the consideration varies for any reason, minimum amounts must be recognised if they are not at significant risk of reversal. Costs incurred to secure contracts with customers have to be capitalised and amortised over the period when the benefits of the contract are consumed.

Amendments to IFRS 15, ‘Revenue from contracts with customers’ (effective 1 January 2018).

These amendments comprise clarifications of the guidance on identifying performance obligations, accounting for licences of intellectual property and the principal versus agent assessment (gross versus net revenue presentation). New and amended illustrative examples have been added for each of those areas of guidance.

IFRS 16, ‘Leases’, (effective for annual periods beginning on or after 1 January 2019). In January 2016,

the IASB published IFRS 16 which replaces the current guidance in IAS 17. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts. There is an optional exemption for lessees for certain short-term leases and leases of low-value assets.

There are no other standards, amendments to existing standards or interpretations that are not yet effective that would be expected to have a significant impact on the operations of the Group.

Page 14



(b) Consolidation Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration

transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition- by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies.

When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at

the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.





Page 13



(a) Basis of preparation (continued) Standards, amendments and interpretations to existing standards that the Group has not yet

adopted (continued) IFRS 9, ‘Financial instruments’ (effective for annual periods 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 the multiple classification and measurement models in IAS 39 with a single model that has only two classification categories: amortised cost and fair value. 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 instrument.

IFRS 15, ‘Revenue from contracts with customers’ (effective 1 January 2018). The new standard

introduces the core principle that revenue must be recognised when the goods or services are transferred to the customer, at the transaction price. Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the contract price must generally be allocated to the separate elements. When the consideration varies for any reason, minimum amounts must be recognised if they are not at significant risk of reversal. Costs incurred to secure contracts with customers have to be capitalised and amortised over the period when the benefits of the contract are consumed.

Amendments to IFRS 15, ‘Revenue from contracts with customers’ (effective 1 January 2018).

These amendments comprise clarifications of the guidance on identifying performance obligations, accounting for licences of intellectual property and the principal versus agent assessment (gross versus net revenue presentation). New and amended illustrative examples have been added for each of those areas of guidance.

IFRS 16, ‘Leases’, (effective for annual periods beginning on or after 1 January 2019). In January 2016,

the IASB published IFRS 16 which replaces the current guidance in IAS 17. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts. There is an optional exemption for lessees for certain short-term leases and leases of low-value assets.

There are no other standards, amendments to existing standards or interpretations that are not yet effective that would be expected to have a significant impact on the operations of the Group.

Page 14



(b) Consolidation Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration

transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition- by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies.

When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at

the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.



64

Page 15



(b) Consolidation (continued) Subsidiaries (continued)

The subsidiaries, which are all incorporated and domiciled in Jamaica (except KWGHSLL), are as follows:

Principal Activities

Holding by

Company Holding

by Group Financial Year End

Harbour Cold Stores Limited

Rental of and repair services to cold storage facilities

100%

100%

31 December

Security Administrators Limited Security services 33 ⅓% 66 ⅔% 31 December Western Storage Limited Property rental 100% 100% 31 December Western Terminals Limited Property rental 100% 100% 31 December Kingston Wharves Group Holdings

(St Lucia) Limited (KWGHSLL) Non-Trading 100% 100% 31 December Kingston Terminal Operators

Limited Dormant 100% 100% 31 December Jamaica Cooling Stores Limited Non-Trading - 100% 31 December KW Logistics Limited Non-Trading - 100% 31 December KW Stevedores Limited Non-Trading - 100% 31 December Security Administrators Specialist

Services Limited Security services - 66 ⅔%

31 December

Transactions with non-controlling interests Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c) Revenue and income recognition Revenue comprises the fair value of the consideration received or receivable for the provision of services in the ordinary course of the Group’s activities. Revenue is shown net of General Consumption Tax, rebates and discounts and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities. Services These are charges made for wharfage operations, port security, installation of cold storage facilities, storage and warehousing of goods after deduction of discounts and other reductions applicable to such charges. Wharfage and other revenue items are accounted for on an accrual basis, except penal charges which are accounted for on a cash basis. Interest income Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income.

Page 16



(d) Property, plant and equipment Plant and buildings comprise mainly walls, piers, dredging facilities, roadways, warehouses and offices. Land, plant and buildings are shown at fair value, based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is restated proportionately with the change in the gross carrying amount of the asset so that the asset’s carrying amount after revaluation equals its revalued amount. Fair value represents open market value for land while buildings are shown at depreciated replacement cost as there is no market-based evidence of fair value because of the specialised nature of the buildings and the buildings cannot be sold except as part of a continuing business. All other property, plant and equipment are stated at cost less depreciation. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. Increases in the carrying amount arising on revaluation of land and buildings are credited to other comprehensive income and shown as capital reserves in stockholders’ equity. Decreases that offset previous increases of the same asset are charged in other comprehensive income and debited against capital reserves directly in equity; all other decreases are charged to the income statement.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives. The annual rates in use are:

Plant and buildings comprising buildings, leasehold properties, walls, piers, dredging and roadways 1.33% - 5%

Machinery and equipment 4% - 20% Cold room and air conditioning equipment 10%

Furniture and fixtures 5% - 10% Motor vehicles 10% - 20%

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets, or where shorter, the term of the relevant lease. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2(f)). Gains and losses on disposal of property, plant and equipment are determined by comparing proceeds with their carrying amounts and are included in profit or loss. When revalued assets are sold, the amounts included in other reserves are transferred to retained earnings.





Page 15



(b) Consolidation (continued) Subsidiaries (continued)

The subsidiaries, which are all incorporated and domiciled in Jamaica (except KWGHSLL), are as follows:

Principal Activities

Holding by

Company Holding

by Group Financial Year End

Harbour Cold Stores Limited

Rental of and repair services to cold storage facilities

100%

100%

31 December

Security Administrators Limited Security services 33 ⅓% 66 ⅔% 31 December Western Storage Limited Property rental 100% 100% 31 December Western Terminals Limited Property rental 100% 100% 31 December Kingston Wharves Group Holdings

(St Lucia) Limited (KWGHSLL) Non-Trading 100% 100% 31 December Kingston Terminal Operators

Limited Dormant 100% 100% 31 December Jamaica Cooling Stores Limited Non-Trading - 100% 31 December KW Logistics Limited Non-Trading - 100% 31 December KW Stevedores Limited Non-Trading - 100% 31 December Security Administrators Specialist

Services Limited Security services - 66 ⅔%

31 December

Transactions with non-controlling interests Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c) Revenue and income recognition Revenue comprises the fair value of the consideration received or receivable for the provision of services in the ordinary course of the Group’s activities. Revenue is shown net of General Consumption Tax, rebates and discounts and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities. Services These are charges made for wharfage operations, port security, installation of cold storage facilities, storage and warehousing of goods after deduction of discounts and other reductions applicable to such charges. Wharfage and other revenue items are accounted for on an accrual basis, except penal charges which are accounted for on a cash basis. Interest income Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income.

Page 16



(d) Property, plant and equipment Plant and buildings comprise mainly walls, piers, dredging facilities, roadways, warehouses and offices. Land, plant and buildings are shown at fair value, based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is restated proportionately with the change in the gross carrying amount of the asset so that the asset’s carrying amount after revaluation equals its revalued amount. Fair value represents open market value for land while buildings are shown at depreciated replacement cost as there is no market-based evidence of fair value because of the specialised nature of the buildings and the buildings cannot be sold except as part of a continuing business. All other property, plant and equipment are stated at cost less depreciation. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. Increases in the carrying amount arising on revaluation of land and buildings are credited to other comprehensive income and shown as capital reserves in stockholders’ equity. Decreases that offset previous increases of the same asset are charged in other comprehensive income and debited against capital reserves directly in equity; all other decreases are charged to the income statement.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives. The annual rates in use are:

Plant and buildings comprising buildings, leasehold properties, walls, piers, dredging and roadways 1.33% - 5%

Machinery and equipment 4% - 20% Cold room and air conditioning equipment 10%

Furniture and fixtures 5% - 10% Motor vehicles 10% - 20%

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets, or where shorter, the term of the relevant lease. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2(f)). Gains and losses on disposal of property, plant and equipment are determined by comparing proceeds with their carrying amounts and are included in profit or loss. When revalued assets are sold, the amounts included in other reserves are transferred to retained earnings.



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(e) Intangible assets Separately acquired rights and benefits under third party contracts with a finite useful life are shown at historical cost less subsequent amortisation. Amortisation is calculated using the straight-line method to allocate the cost of the rights and benefits over their estimated useful lives of two to ten years. Separately acquired computer software licences are shown at historical cost less subsequent amortisation. Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of five years.

(f) Impairment of non-financial assets

Assets that have an indefinite useful life, for example land, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash flows. Non-financial assets that suffer impairment are reviewed for possible reversal of the impairment at each statement of financial position date.

(g) Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The financial statements are presented in Jamaican dollars, which is the Group’s presentation currency and the functional currency of all the entities in the Group.

Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign exchange gains and losses that relate to borrowings are presented in profit or loss with ‘finance costs’.

(h) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at market interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit and loss. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in profit or loss.

(i) Investments in subsidiaries Investments by the company in subsidiaries are stated at cost.

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(j) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in, first-out basis. Net realisable value is the estimated selling price in the ordinary course of business, less the cost of selling expenses.

(k) Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term highly

liquid investments with original maturities of three months or less net of bank overdrafts. (l) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past

events, when it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

(m) Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

(n) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are

shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a

deduction, net of tax, from the proceeds.

(o) Leases Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and 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 made under operating leases (net of any incentives received from the lessor) are charged to profit and loss on a straight-line basis over the period of the lease. Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over the lease term. The respective leased assets are included in the balance sheet based on their nature.

(p) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer who makes strategic decisions as it relates to operations.





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(e) Intangible assets Separately acquired rights and benefits under third party contracts with a finite useful life are shown at historical cost less subsequent amortisation. Amortisation is calculated using the straight-line method to allocate the cost of the rights and benefits over their estimated useful lives of two to ten years. Separately acquired computer software licences are shown at historical cost less subsequent amortisation. Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of five years.

(f) Impairment of non-financial assets

Assets that have an indefinite useful life, for example land, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash flows. Non-financial assets that suffer impairment are reviewed for possible reversal of the impairment at each statement of financial position date.

(g) Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The financial statements are presented in Jamaican dollars, which is the Group’s presentation currency and the functional currency of all the entities in the Group.

Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign exchange gains and losses that relate to borrowings are presented in profit or loss with ‘finance costs’.

(h) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at market interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit and loss. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in profit or loss.

(i) Investments in subsidiaries Investments by the company in subsidiaries are stated at cost.

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(j) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in, first-out basis. Net realisable value is the estimated selling price in the ordinary course of business, less the cost of selling expenses.

(k) Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term highly

liquid investments with original maturities of three months or less net of bank overdrafts. (l) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past

events, when it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

(m) Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

(n) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are

shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a

deduction, net of tax, from the proceeds.

(o) Leases Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and 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 made under operating leases (net of any incentives received from the lessor) are charged to profit and loss on a straight-line basis over the period of the lease. Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over the lease term. The respective leased assets are included in the balance sheet based on their nature.

(p) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer who makes strategic decisions as it relates to operations.



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(q) Dividends Dividend distribution to the company’s equity holders is recognised initially as a liability in the Group’s financial statements in the period in which the dividends are approved.

(r) Employee benefits

Pension obligations The Group participates in two retirement plans, the assets of which are generally held in separate trustee-administered funds. The pension plans are funded by payments from employees and by the Group, taking into account the recommendations of qualified actuaries. The Group has a defined benefit and a defined contribution plan. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors, such as age, years of service and compensation. The asset or liability recognised in the statement of financial position in respect of the defined benefit pension plan is the present value of the defined benefit obligation at the statement of financial position date less the fair value of plan assets, together with adjustments for past service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in the income statement. The Group, through a subsidiary, also participates in a defined contribution plan whereby it pays contributions to a privately administered pension plan which is administered by trustees. Once the contributions have been paid, the subsidiary has no further payment obligations. The contributions are charged to the income statement in the period to which they relate. Other retirement obligations The Group provides post-employment health care and life insurance benefits to its retirees. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using an accounting methodology similar to that for defined benefit pension plans. Actuarial gains and losses arising from experience adjustments, and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. These obligations are valued annually by independent qualified actuaries. Termination benefits Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.

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(s) Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are

subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit and loss over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the statement of financial position date.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fees are deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fees are capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

(t) Borrowing costs General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

(u) Taxation

The tax expense comprises current and deferred income taxes. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Current income tax charges are based on taxable profit for the year, which differs from the profit before tax reported because it excludes items that are taxable or deductible in other years, and items that are never taxable or deductible. The Group’s liability for current income tax is calculated at tax rates that have been enacted at the statement of financial position date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is the tax expected to be paid or recovered on differences between the carrying

amounts of assets and liabilities and the corresponding tax bases. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred income tax.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be

available against which the temporary differences can be utilised. Tax assets and liabilities are offset when they arise from the same taxable entity, relate to the same Tax

Authority and when the legal right of offset exists.





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(q) Dividends Dividend distribution to the company’s equity holders is recognised initially as a liability in the Group’s financial statements in the period in which the dividends are approved.

(r) Employee benefits

Pension obligations The Group participates in two retirement plans, the assets of which are generally held in separate trustee-administered funds. The pension plans are funded by payments from employees and by the Group, taking into account the recommendations of qualified actuaries. The Group has a defined benefit and a defined contribution plan. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors, such as age, years of service and compensation. The asset or liability recognised in the statement of financial position in respect of the defined benefit pension plan is the present value of the defined benefit obligation at the statement of financial position date less the fair value of plan assets, together with adjustments for past service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in the income statement. The Group, through a subsidiary, also participates in a defined contribution plan whereby it pays contributions to a privately administered pension plan which is administered by trustees. Once the contributions have been paid, the subsidiary has no further payment obligations. The contributions are charged to the income statement in the period to which they relate. Other retirement obligations The Group provides post-employment health care and life insurance benefits to its retirees. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using an accounting methodology similar to that for defined benefit pension plans. Actuarial gains and losses arising from experience adjustments, and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. These obligations are valued annually by independent qualified actuaries. Termination benefits Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.

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(s) Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are

subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit and loss over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the statement of financial position date.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fees are deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fees are capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

(t) Borrowing costs General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

(u) Taxation

The tax expense comprises current and deferred income taxes. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Current income tax charges are based on taxable profit for the year, which differs from the profit before tax reported because it excludes items that are taxable or deductible in other years, and items that are never taxable or deductible. The Group’s liability for current income tax is calculated at tax rates that have been enacted at the statement of financial position date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is the tax expected to be paid or recovered on differences between the carrying

amounts of assets and liabilities and the corresponding tax bases. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred income tax.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be

available against which the temporary differences can be utilised. Tax assets and liabilities are offset when they arise from the same taxable entity, relate to the same Tax

Authority and when the legal right of offset exists.



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2. Summary of Significant Accounting Policies (Continued) (v) Investments and other financial instruments

A financial instrument is any contract that gives rise to both a financial asset in one entity and a financial liability or equity of another entity. Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

Financial assets The Group classifies its financial assets as loans and receivables and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. At initial recognition, the Group measures a financial asset at its fair value plus transaction costs that are directly attributable to the acquisition. Loans and receivables are subsequently carried at amortised cost.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the statement of financial position date. These are classified as non-current assets and comprise recoverable from The Port Authority of Jamaica in the statement of financial position. Loans and receivables included in current assets comprise trade and other receivables, group balances, cash and short-term investments in the statement of financial position.

Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date, in which case, they are included in current assets. Balances classified as available-for-sale include unquoted equity securities.

Gains and losses arising from changes in the fair value are recognised in other comprehensive income. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to profit or loss as gains or losses from investment securities included in other income. Dividends on available-for-sale equity instruments are recognised in the statement of comprehensive income when the Group’s right to receive payments is established.

Impairment of financial assets The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments classified as ‘available-for-sale’, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

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2. Summary of Significant Accounting Policies (Continued) (v) Investments and other financial instruments (continued)

Impairment of financial assets (continued) For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss. If there is objective evidence of impairment of available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in profit or loss. Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in the subsequent year.

Financial liabilities The Group’s financial liabilities are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest method. They are included as trade and other payables, group company balances, bank overdrafts and long term loans on the statement of financial position.

3. Financial Risk Management

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group’s risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The Group regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice. The Board of Directors is ultimately responsible for the establishment and oversight of the Group’s risk management framework. The Board provides guidance for overall risk management, covering specific areas, such as credit risk, market risk, foreign exchange risk, interest rate risk, and investment of excess liquidity. Management seeks to minimise potential adverse effects on the financial performance of the Group by applying procedures to identify, evaluate and manage these risks, based on guidelines set by the Board. The Board, through the Audit Committee, oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

The most important types of risk are credit risk, liquidity risk, market risk and other operational risk. For the Group, market risk includes currency risk and interest rate risk.





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2. Summary of Significant Accounting Policies (Continued) (v) Investments and other financial instruments

A financial instrument is any contract that gives rise to both a financial asset in one entity and a financial liability or equity of another entity. Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

Financial assets The Group classifies its financial assets as loans and receivables and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. At initial recognition, the Group measures a financial asset at its fair value plus transaction costs that are directly attributable to the acquisition. Loans and receivables are subsequently carried at amortised cost.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the statement of financial position date. These are classified as non-current assets and comprise recoverable from The Port Authority of Jamaica in the statement of financial position. Loans and receivables included in current assets comprise trade and other receivables, group balances, cash and short-term investments in the statement of financial position.

Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date, in which case, they are included in current assets. Balances classified as available-for-sale include unquoted equity securities.

Gains and losses arising from changes in the fair value are recognised in other comprehensive income. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to profit or loss as gains or losses from investment securities included in other income. Dividends on available-for-sale equity instruments are recognised in the statement of comprehensive income when the Group’s right to receive payments is established.

Impairment of financial assets The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments classified as ‘available-for-sale’, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

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2. Summary of Significant Accounting Policies (Continued) (v) Investments and other financial instruments (continued)

Impairment of financial assets (continued) For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss. If there is objective evidence of impairment of available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in profit or loss. Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in the subsequent year.

Financial liabilities The Group’s financial liabilities are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest method. They are included as trade and other payables, group company balances, bank overdrafts and long term loans on the statement of financial position.

3. Financial Risk Management

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group’s risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The Group regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice. The Board of Directors is ultimately responsible for the establishment and oversight of the Group’s risk management framework. The Board provides guidance for overall risk management, covering specific areas, such as credit risk, market risk, foreign exchange risk, interest rate risk, and investment of excess liquidity. Management seeks to minimise potential adverse effects on the financial performance of the Group by applying procedures to identify, evaluate and manage these risks, based on guidelines set by the Board. The Board, through the Audit Committee, oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

The most important types of risk are credit risk, liquidity risk, market risk and other operational risk. For the Group, market risk includes currency risk and interest rate risk.



72

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3. Financial Risk Management (Continued)

(a) Credit risk The Group is exposed to credit risk where a party to a financial instrument may fail to discharge an

obligation and causes the Group to incur a financial loss. The Group manages its concentrations of credit risk and places its cash and cash equivalents with high quality financial institutions. The Group limits the amount of credit exposure to any one financial institution. The Group’s choice of financial institution is based primarily on its high asset base, stability over the years and its strong overseas connections. The Group's customer base comprises a number of shipping lines represented by their local agents and numerous other customers in a variety of business sectors. The Group has policies in place to ensure that sales of services are made to customers with an appropriate credit history.

Maximum exposure to credit risk The maximum exposure of the Group and Company to credit risk is as follows:

The Group The Company

2016

$’000 2015

$’000 2016

$’000 2015

$’000 Due from related party - 102,405 102,405 102,405 Investments 128,466 84,346 85,818 55,878 Trade receivables 509,855 365,014 401,039 303,178 Other receivables 89,370 30,915 76,794 16,920 Group companies - - 376,906 21,233 Short term investments 2,830,027 2,687,739 2,048,456 2,056,746 Cash and bank 360,819 332,129 279,294 253,949

3,918,537 3,602,548 3,370,712 2,810,309

Credit review process Management performs regular analyses of the ability of customers and other counterparties to meet repayment obligations.

(i) Aging analysis of trade receivables that are past due but not impaired

Trade receivables that are less than thirty-one (31) days past due are not considered impaired. As of 31 December 2016, trade receivables of $204,782,000 (2015 - $106,697,000) for the Group and $182,983,000 (2015 - $93,922,000) for the company were past due but were not considered to be impaired. These relate to a number of independent customers for whom there is no recent history of default. The aging analysis of these trade receivables is as follows:


2016 $’000

2015 $’000

2016 $’000

2015 $’000

31 - 60 days 142,448 83,149 134,443 74,421 Over 60 days 62,334 23,548 48,540 19,501

204,782 106,697 182,983 93,922

Page 24



(a) Credit risk (continued) (ii) Aging analysis of trade receivables that are past due and are impaired As of 31 December 2016, trade receivables of $33,527,000 (2015 - $23,421,000) and $19,153,000

(2015 - $10,016,000) for the Group and company respectively were past due and considered to be impaired. These receivables were fully provided for.

The aging of these receivables is as follows: The Group The Company

2016

$’000 2015

$’000 2016

$’000 2015

$’000 Over 60 days 33,527 23,421 19,153 10,016

Movement in the provision for impairment of receivables Trade and other receivables Movements on the provision for impairment of trade receivables are as follows


2016

$’000 2015

$’000 2016

$’000 2015

$’000 At 1 January 23,421 15,556 10,016 8,143 Provision for impairment 13,673 10,246 12,609 4,234 Amounts recovered (3,567) (2,381) (3,472) (2,361) At 31 December 33,527 23,421 19,153 10,016

The movement in the provision for the year included $1,455,000 (2015 - $3,849,000) and $727,000 (2015 - $2,742,000) for the Group and company respectively for related companies. These amounts are included in bad debt expense in profit or loss. The creation and release of provision for impaired receivables have been included in expenses in profit or loss in the statement of comprehensive income. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. There are no financial assets other than those listed above that were individually impaired.





Page 23



(a) Credit risk The Group is exposed to credit risk where a party to a financial instrument may fail to discharge an

obligation and causes the Group to incur a financial loss. The Group manages its concentrations of credit risk and places its cash and cash equivalents with high quality financial institutions. The Group limits the amount of credit exposure to any one financial institution. The Group’s choice of financial institution is based primarily on its high asset base, stability over the years and its strong overseas connections. The Group's customer base comprises a number of shipping lines represented by their local agents and numerous other customers in a variety of business sectors. The Group has policies in place to ensure that sales of services are made to customers with an appropriate credit history.

Maximum exposure to credit risk The maximum exposure of the Group and Company to credit risk is as follows:


2016

$’000 2015

$’000 2016

$’000 2015

$’000 Due from related party - 102,405 102,405 102,405 Investments 128,466 84,346 85,818 55,878 Trade receivables 509,855 365,014 401,039 303,178 Other receivables 89,370 30,915 76,794 16,920 Group companies - - 376,906 21,233 Short term investments 2,830,027 2,687,739 2,048,456 2,056,746 Cash and bank 360,819 332,129 279,294 253,949

3,918,537 3,602,548 3,370,712 2,810,309

Credit review process Management performs regular analyses of the ability of customers and other counterparties to meet repayment obligations.

(i) Aging analysis of trade receivables that are past due but not impaired

Trade receivables that are less than thirty-one (31) days past due are not considered impaired. As of 31 December 2016, trade receivables of $204,782,000 (2015 - $106,697,000) for the Group and $182,983,000 (2015 - $93,922,000) for the company were past due but were not considered to be impaired. These relate to a number of independent customers for whom there is no recent history of default. The aging analysis of these trade receivables is as follows:


2016 $’000

2015 $’000

2016 $’000

2015 $’000

31 - 60 days 142,448 83,149 134,443 74,421 Over 60 days 62,334 23,548 48,540 19,501

204,782 106,697 182,983 93,922

Page 24



(a) Credit risk (continued) (ii) Aging analysis of trade receivables that are past due and are impaired As of 31 December 2016, trade receivables of $33,527,000 (2015 - $23,421,000) and $19,153,000

(2015 - $10,016,000) for the Group and company respectively were past due and considered to be impaired. These receivables were fully provided for.

The aging of these receivables is as follows: The Group The Company

2016

$’000 2015

$’000 2016

$’000 2015

$’000 Over 60 days 33,527 23,421 19,153 10,016

Movement in the provision for impairment of receivables Trade and other receivables Movements on the provision for impairment of trade receivables are as follows


2016

$’000 2015

$’000 2016

$’000 2015

$’000 At 1 January 23,421 15,556 10,016 8,143 Provision for impairment 13,673 10,246 12,609 4,234 Amounts recovered (3,567) (2,381) (3,472) (2,361) At 31 December 33,527 23,421 19,153 10,016

The movement in the provision for the year included $1,455,000 (2015 - $3,849,000) and $727,000 (2015 - $2,742,000) for the Group and company respectively for related companies. These amounts are included in bad debt expense in profit or loss. The creation and release of provision for impaired receivables have been included in expenses in profit or loss in the statement of comprehensive income. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. There are no financial assets other than those listed above that were individually impaired.



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(a) Credit risk (continued) Concentrations of risk

(i) Trade receivables

The following table summarises the Group and company’s credit exposure for trade receivables at their carrying amounts, as categorised by the concentration of customers:


2016

$’000 2015

$’000 2016

$’000 2015

$’000 Top ten customers 490,743 344,145 376,112 275,287 Other 52,639 44,290 44,080 37,907 543,382 388,435 420,192 313,194 Less: Provision for impairment (33,527) (23,421) (19,153) (10,016) 509,855 365,014 401,039 303,178

(ii) Short term investments

The Group’s short term investments comprise cash on deposit held with financial institutions.

(b) Liquidity risk Liquidity risk is the risk that the Group may be unable to meet its payment obligations associated with its financial liabilities when they fall due. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions.

Liquidity risk management process The Group’s liquidity management process, as carried out within the Group and monitored by the Board of Directors, includes: (i) Monitoring future cash flows and liquidity on a daily basis. This incorporates an assessment of

expected cash flows and the availability of high grade collateral which could be used to secure funding if required.

(ii) Maintaining committed lines of credit;

(iii) Optimising cash returns on investment;

(iv) Managing the concentration and profile of debt maturities. The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Group.

The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature, are important factors in assessing the liquidity of the Group and its exposure to changes in interest rates and exchange rates.

Page 26


3. Financial Risk Management (Continued) (b) Liquidity risk (continued)

Financial liabilities cash flows The tables below summarise the maturity profile of the Group’s and company’s financial liabilities at 31 December based on contractual undiscounted payments at contractual maturity dates.

The Group

Within 1

Month 1 to 3

Months 3 to 12 Months

1 to 5 Years

Over 5 Years Total

$’000 $’000 $’000 $’000 $’000 $’000 2016 Borrowings 57,002 112,338 497,115 1,642,262 448,160 2,756,877 Long term liability 7,193 48,624 12,844 9,454 - 78,115 Trade and other payables 1,002,529 - - - - 1,002,529 Total financial liabilities 1,066,724 160,962 509,959 1,651,716 448,160 3,837,521

2015 Borrowings 47,628 94,316 414,636 1,146,679 175,252 1,878,511 Long term liability - 84,758 12,035 29,785 - 126,578 Trade and other payables 735,090 - - - - 735,090 Total financial liabilities 782,718 179,074 426,671 1,176,464 175,252 2,740,179

The Company

Within 1

Month 1 to 3


1 to 5 Years

Over 5 Years Total

$’000 $’000 $’000 $’000 $’000 $’000 2016 Borrowings 57,002 112,338 497,115 1,642,262 446,708 2,755,425 Long term liability 7,193 48,624 12,844 9,454 - 78,115 Trade and other payables 942,824 - - - - 942,824 Group companies 5,984 - - - - 5,984 Total financial liabilities 1,013,003 160,962 509,959 1,651,716 446,708 3,782,348 2015 Borrowings 47,628 94,316 414,636 1,146,679 173,800 1,877,059 Long term liability - 84,758 12,035 29,785 - 126,578 Trade and other payables 695,372 - - - - 695,372 Group companies 74,138 - - - - 74,138 Total financial liabilities 817,138 179,074 426,671 1,176,464 173,800 2,773,147

Assets available to meet all of the liabilities and to cover financial liabilities include cash and short term investments.





Page 25



(a) Credit risk (continued) Concentrations of risk

(i) Trade receivables

The following table summarises the Group and company’s credit exposure for trade receivables at their carrying amounts, as categorised by the concentration of customers:


2016

$’000 2015

$’000 2016

$’000 2015

$’000 Top ten customers 490,743 344,145 376,112 275,287 Other 52,639 44,290 44,080 37,907 543,382 388,435 420,192 313,194 Less: Provision for impairment (33,527) (23,421) (19,153) (10,016) 509,855 365,014 401,039 303,178

(ii) Short term investments

The Group’s short term investments comprise cash on deposit held with financial institutions.

(b) Liquidity risk Liquidity risk is the risk that the Group may be unable to meet its payment obligations associated with its financial liabilities when they fall due. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions.

Liquidity risk management process The Group’s liquidity management process, as carried out within the Group and monitored by the Board of Directors, includes: (i) Monitoring future cash flows and liquidity on a daily basis. This incorporates an assessment of

expected cash flows and the availability of high grade collateral which could be used to secure funding if required.

(ii) Maintaining committed lines of credit;

(iii) Optimising cash returns on investment;

(iv) Managing the concentration and profile of debt maturities. The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Group.

The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature, are important factors in assessing the liquidity of the Group and its exposure to changes in interest rates and exchange rates.

Page 26


3. Financial Risk Management (Continued) (b) Liquidity risk (continued)

Financial liabilities cash flows The tables below summarise the maturity profile of the Group’s and company’s financial liabilities at 31 December based on contractual undiscounted payments at contractual maturity dates.

The Group

Within 1

Month 1 to 3


1 to 5 Years

Over 5 Years Total

$’000 $’000 $’000 $’000 $’000 $’000 2016 Borrowings 57,002 112,338 497,115 1,642,262 448,160 2,756,877 Long term liability 7,193 48,624 12,844 9,454 - 78,115 Trade and other payables 1,002,529 - - - - 1,002,529 Total financial liabilities 1,066,724 160,962 509,959 1,651,716 448,160 3,837,521

2015 Borrowings 47,628 94,316 414,636 1,146,679 175,252 1,878,511 Long term liability - 84,758 12,035 29,785 - 126,578 Trade and other payables 735,090 - - - - 735,090 Total financial liabilities 782,718 179,074 426,671 1,176,464 175,252 2,740,179

The Company

Within 1

Month 1 to 3


1 to 5 Years

Over 5 Years Total

$’000 $’000 $’000 $’000 $’000 $’000 2016 Borrowings 57,002 112,338 497,115 1,642,262 446,708 2,755,425 Long term liability 7,193 48,624 12,844 9,454 - 78,115 Trade and other payables 942,824 - - - - 942,824 Group companies 5,984 - - - - 5,984 Total financial liabilities 1,013,003 160,962 509,959 1,651,716 446,708 3,782,348 2015 Borrowings 47,628 94,316 414,636 1,146,679 173,800 1,877,059 Long term liability - 84,758 12,035 29,785 - 126,578 Trade and other payables 695,372 - - - - 695,372 Group companies 74,138 - - - - 74,138 Total financial liabilities 817,138 179,074 426,671 1,176,464 173,800 2,773,147

Assets available to meet all of the liabilities and to cover financial liabilities include cash and short term investments.



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(c) Market risk The Group takes on exposure to market risk, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk mainly arise from changes in foreign currency exchange rates and interest rates. There has been no change to the Group’s exposure to market risk or the manner in which it manages and measures the risk.

(i) Currency risk

Currency risk is the risk that the value of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group is primarily exposed to such risks arising from its significant level of foreign currency borrowings. This is partially offset by its US dollar revenue transactions and its holdings in US dollar cash and other accounts. The Group manages its foreign exchange risk by ensuring that the net exposure in foreign assets and liabilities is kept to an acceptable level by monitoring currency positions. The Group further manages this risk by maximising foreign currency earnings and holding foreign currency balances.

Page 28



(c) Market risk (continued)

(i) Currency risk (continued)

Concentrations of currency risk

The table below summarises the Group and company exposure to foreign currency exchange rate risk at 31 December.

The Group Jamaican$ US$ Total J$’000 J$’000 J$’000

2016 Financial Assets Investments 128,466 - 128,466 Short term investments 1,025,462 1,804,565 2,830,027 Trade and other receivables 477,188 122,037 599,225 Cash and bank 210,931 149,888 360,819 Total financial assets 1,842,047 2,076,490 3,918,537 Financial Liabilities Borrowings 1,822,404 520,509 2,342,913 Long term liability - 78,115 78,115 Trade and other payables 921,628 80,901 1,002,529 Total financial liabilities 2,744,032 679,525 3,423,557 Net financial position (901,985) 1,396,965 494,980 2015 Financial Assets Investments 84,346 - 84,346 Short term investments 1,139,733 1,548,006 2,687,739 Trade and other receivables 101,167 294,762 395,929 Cash and bank 170,756 161,373 332,129 Total financial assets 1,496,002 2,004,141 3,500,143 Financial Liabilities Borrowings 729,260 813,613 1,542,873 Long term liability - 126,578 126,578 Trade and other payables 727,519 7,571 735,090 Total financial liabilities 1,456,779 947,762 2,404,541 Net financial position 39,223 1,056,379 1,095,602





Page 27



(c) Market risk The Group takes on exposure to market risk, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk mainly arise from changes in foreign currency exchange rates and interest rates. There has been no change to the Group’s exposure to market risk or the manner in which it manages and measures the risk.

(i) Currency risk

Currency risk is the risk that the value of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group is primarily exposed to such risks arising from its significant level of foreign currency borrowings. This is partially offset by its US dollar revenue transactions and its holdings in US dollar cash and other accounts. The Group manages its foreign exchange risk by ensuring that the net exposure in foreign assets and liabilities is kept to an acceptable level by monitoring currency positions. The Group further manages this risk by maximising foreign currency earnings and holding foreign currency balances.

Page 28



(c) Market risk (continued)

(i) Currency risk (continued)

Concentrations of currency risk

The table below summarises the Group and company exposure to foreign currency exchange rate risk at 31 December.

The Group Jamaican$ US$ Total J$’000 J$’000 J$’000

2016 Financial Assets Investments 128,466 - 128,466 Short term investments 1,025,462 1,804,565 2,830,027 Trade and other receivables 477,188 122,037 599,225 Cash and bank 210,931 149,888 360,819 Total financial assets 1,842,047 2,076,490 3,918,537 Financial Liabilities Borrowings 1,822,404 520,509 2,342,913 Long term liability - 78,115 78,115 Trade and other payables 921,628 80,901 1,002,529 Total financial liabilities 2,744,032 679,525 3,423,557 Net financial position (901,985) 1,396,965 494,980 2015 Financial Assets Investments 84,346 - 84,346 Short term investments 1,139,733 1,548,006 2,687,739 Trade and other receivables 101,167 294,762 395,929 Cash and bank 170,756 161,373 332,129 Total financial assets 1,496,002 2,004,141 3,500,143 Financial Liabilities Borrowings 729,260 813,613 1,542,873 Long term liability - 126,578 126,578 Trade and other payables 727,519 7,571 735,090 Total financial liabilities 1,456,779 947,762 2,404,541 Net financial position 39,223 1,056,379 1,095,602



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(c) Market risk (continued) (i) Currency risk (continued)

Concentrations of currency risk (continued)

The Company Jamaican$ US$ Total J$’000 J$’000 J$’000

2016 Financial Assets Investments 85,818 - 85,818 Short term investments 574,541 1,473,915 2,048,456 Trade and other receivables 355,796 122,037 477,833 Group companies 376,906 - 376,906 Cash and bank 170,848 108,446 279,294 Total financial assets 1,563,909 1,704,398 3,268,307 Financial Liabilities Borrowings 1,820,952 520,509 2,341,461 Long term liability - 78,115 78,115 Trade and other payables 861,923 80,901 942,824 Group companies 5,984 - 5,984 Total financial liabilities 2,688,859 679,525 3,368,384 Net financial position (1,124,950) 1,024,873 (100,077) 2015 Financial Assets Investments 55,878 - 55,878 Short term investments 748,416 1,308,330 2,056,746 Trade and other receivables 25,336 294,762 320,098 Group companies 21,233 - 21,233 Cash and bank 153,768 100,181 253,949 Total financial assets 1,004,631 1,703,273 2,707,904 Financial Liabilities Borrowings 727,808 813,613 1,541,421 Long term liability - 126,578 126,578 Trade and other payables 687,801 7,571 695,372 Group companies 74,138 - 74,138 Total financial liabilities 1,489,747 947,762 2,437,509 Net financial position (485,116) 755,511 270,395

Page 30




Foreign currency sensitivity The following tables indicate the currency to which the Group and company had significant exposure on its monetary assets and liabilities and its forecast cash flows. The change in currency rate below represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis represents outstanding foreign currency denominated monetary items and adjusts their translation at the year end for a 1% (2015 - 1%) appreciation and a 6% (2015 - 8%) depreciation change in foreign currency rates. The sensitivity of the profit was primarily as a result of foreign exchange gains/losses on translation of US dollar-denominated trade receivables, short term investments and US dollar-denominated borrowings. Profit is more sensitive to movements in Jamaican dollar/US dollar exchange rates because of the significant level of US-dollar denominated borrowings. The correlation of variables will have a significant effect in determining the ultimate impact on market risk, but to demonstrate the impact due to changes in variables, variables had to be on an individual basis. There is no direct impact on other comprehensive income or equity.

Change in Currency

Rate

Effect on Profit before

Taxation

Change in Currency

Rate


Taxation

2016

% 2016 $’000

2015 %

2015 $’000

The Group Currency:

USD +1 13,970 +1 10,564 USD -6 (83,818) -8 (84,510)

The Company

USD +1 10,249 +1 7,555 USD -6 (61,492) -8 (60,441)

(ii) Interest rate risk

Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Floating rate instruments expose the Group to cash flow interest risk, whereas fixed interest rate instruments expose the Group to fair value interest risk.

The Group’s interest rate risk policy requires it to manage interest rate risk by maintaining an appropriate mix of fixed and variable rate instruments. The policy also requires it to manage the maturities of interest bearing financial assets and liabilities. The following tables summarise the Group’s and the company’s exposure to interest rate risk. It includes the Group and company financial instruments at carrying amounts, categorised by the earlier of contractual repricing or maturity dates.





Page 29




Concentrations of currency risk (continued)

The Company Jamaican$ US$ Total J$’000 J$’000 J$’000

2016 Financial Assets Investments 85,818 - 85,818 Short term investments 574,541 1,473,915 2,048,456 Trade and other receivables 355,796 122,037 477,833 Group companies 376,906 - 376,906 Cash and bank 170,848 108,446 279,294 Total financial assets 1,563,909 1,704,398 3,268,307 Financial Liabilities Borrowings 1,820,952 520,509 2,341,461 Long term liability - 78,115 78,115 Trade and other payables 861,923 80,901 942,824 Group companies 5,984 - 5,984 Total financial liabilities 2,688,859 679,525 3,368,384 Net financial position (1,124,950) 1,024,873 (100,077) 2015 Financial Assets Investments 55,878 - 55,878 Short term investments 748,416 1,308,330 2,056,746 Trade and other receivables 25,336 294,762 320,098 Group companies 21,233 - 21,233 Cash and bank 153,768 100,181 253,949 Total financial assets 1,004,631 1,703,273 2,707,904 Financial Liabilities Borrowings 727,808 813,613 1,541,421 Long term liability - 126,578 126,578 Trade and other payables 687,801 7,571 695,372 Group companies 74,138 - 74,138 Total financial liabilities 1,489,747 947,762 2,437,509 Net financial position (485,116) 755,511 270,395

Page 30




Foreign currency sensitivity The following tables indicate the currency to which the Group and company had significant exposure on its monetary assets and liabilities and its forecast cash flows. The change in currency rate below represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis represents outstanding foreign currency denominated monetary items and adjusts their translation at the year end for a 1% (2015 - 1%) appreciation and a 6% (2015 - 8%) depreciation change in foreign currency rates. The sensitivity of the profit was primarily as a result of foreign exchange gains/losses on translation of US dollar-denominated trade receivables, short term investments and US dollar-denominated borrowings. Profit is more sensitive to movements in Jamaican dollar/US dollar exchange rates because of the significant level of US-dollar denominated borrowings. The correlation of variables will have a significant effect in determining the ultimate impact on market risk, but to demonstrate the impact due to changes in variables, variables had to be on an individual basis. There is no direct impact on other comprehensive income or equity.

Change in Currency

Rate


Taxation

Change in Currency

Rate


Taxation

2016

% 2016 $’000

2015 %

2015 $’000

The Group Currency:

USD +1 13,970 +1 10,564 USD -6 (83,818) -8 (84,510)

The Company

USD +1 10,249 +1 7,555 USD -6 (61,492) -8 (60,441)

(ii) Interest rate risk

Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Floating rate instruments expose the Group to cash flow interest risk, whereas fixed interest rate instruments expose the Group to fair value interest risk.

The Group’s interest rate risk policy requires it to manage interest rate risk by maintaining an appropriate mix of fixed and variable rate instruments. The policy also requires it to manage the maturities of interest bearing financial assets and liabilities. The following tables summarise the Group’s and the company’s exposure to interest rate risk. It includes the Group and company financial instruments at carrying amounts, categorised by the earlier of contractual repricing or maturity dates.



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(c) Market risk (continued) (ii) Interest rate risk (continued)

The Group

Within 1

Month 1 to 3

Months 3 to 12

Months 1 to 5 Years

Over 5 Years

Non-Interest Bearing Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000

2016 Assets

Investments - - - - - 128,466 128,466

Short term investments 1,599,201 1,230,826 - - - - 2,830,027

Trade and other receivables - - - - - 599,225 599,225

Cash and bank 151,093 - - - - 209,726 360,819

Total financial assets 1,750,294 1,230,826 - - - 937,417 3,918,537

Liabilities

Borrowings - 296,594 1,011,580 778,040 251,347 5,352 2,342,913

Long term liability - - - - - 78,115 78,115

Trade and other payables - - - - - 1,002,529 1,002,529

Total financial liabilities 296,594 1,011,580 778,040 251,347 1,085,996 3,423,557

Total interest repricing gap 1,750,294 934,232 (1,011,580) (778,040) (251,347) (148,579) 494,980

2015 Assets

Investments - - - - - 84,346 84,346

Short term investments 2,431,018 198,221 58,500 - - - 2,687,739


Cash and bank 254,919 - - - - 77,210 332,129

Total financial assets 2,685,937 198,221 58,500 - - 557,485 3,500,143

Liabilities

Borrowings - - 813,613 387,001 334,571 7,688 1,542,873


Trade and other payables - - - - - 735,090 735,090

Total financial liabilities - - 813,613 387,001 334,571 869,356 2,404,541

Total interest repricing gap 2,685,937 198,221 (755,113) (387,001) (334,571) (311,871) 1,095,602

Page 32




The Company

Within 1

Month 1 to 3

Months 3 to 12

Months 1 to 5 Years Over

5 Years


$’000 $’000 $’000 $’000 $’000 $’000 $’000 2016 Assets

Investments - - - - - 85,818 85,818

Short term investments 817,630 1,230,826 - - - - 2,048,456


Group companies - - - - - 376,906 376,906

Cash and bank 151,093 - - - - 128,201 279,294

Total financial assets 968,723 1,230,826 - - - 1,068,758 3,268,307

Liabilities

Borrowings - 296,593 1,011,580 778,040 251,348 3,900 2,341,461



Group companies - - - - - 5,984 5,984

Total financial liabilities - 296,593 1,011,580 778,040 251,348 1,030,823 3,368,384 Total interest repricing gap 968,723 934,233 (1,011,580) (778,040) (251,348) 37,935 (100,077)

2015 Assets

Investments - - - - - 55,878 55,878

Short term investments 2,008,240 48,506 - - - - 2,056,746


Group companies - - - - - 21,233 21,233

Cash and bank 220,377 - - - - 33,572 253,949

Total financial assets 2,228,617 48,506 - - - 430,781 2,707,904

Liabilities

Borrowings - - 813,613 387,001 334,571 6,236 1,541,421



Group companies - - - - - 74,138 74,138

Total financial liabilities - - 813,613 387,001 334,571 902,324 2,437,509 Total interest repricing gap 2,228,617 48,506 (813,613) (387,001) (334,571) (471,543) 270,395





Page 31




The Group

Within 1

Month 1 to 3

Months 3 to 12

Months 1 to 5 Years

Over 5 Years


$’000 $’000 $’000 $’000 $’000 $’000 $’000

2016 Assets

Investments - - - - - 128,466 128,466

Short term investments 1,599,201 1,230,826 - - - - 2,830,027


Cash and bank 151,093 - - - - 209,726 360,819

Total financial assets 1,750,294 1,230,826 - - - 937,417 3,918,537

Liabilities

Borrowings - 296,594 1,011,580 778,040 251,347 5,352 2,342,913


Trade and other payables - - - - - 1,002,529 1,002,529

Total financial liabilities 296,594 1,011,580 778,040 251,347 1,085,996 3,423,557

Total interest repricing gap 1,750,294 934,232 (1,011,580) (778,040) (251,347) (148,579) 494,980

2015 Assets

Investments - - - - - 84,346 84,346

Short term investments 2,431,018 198,221 58,500 - - - 2,687,739


Cash and bank 254,919 - - - - 77,210 332,129

Total financial assets 2,685,937 198,221 58,500 - - 557,485 3,500,143

Liabilities

Borrowings - - 813,613 387,001 334,571 7,688 1,542,873



Total financial liabilities - - 813,613 387,001 334,571 869,356 2,404,541

Total interest repricing gap 2,685,937 198,221 (755,113) (387,001) (334,571) (311,871) 1,095,602

Page 32




The Company

Within 1

Month 1 to 3

Months 3 to 12

Months 1 to 5 Years Over

5 Years


$’000 $’000 $’000 $’000 $’000 $’000 $’000 2016 Assets

Investments - - - - - 85,818 85,818

Short term investments 817,630 1,230,826 - - - - 2,048,456


Group companies - - - - - 376,906 376,906

Cash and bank 151,093 - - - - 128,201 279,294

Total financial assets 968,723 1,230,826 - - - 1,068,758 3,268,307

Liabilities

Borrowings - 296,593 1,011,580 778,040 251,348 3,900 2,341,461



Group companies - - - - - 5,984 5,984

Total financial liabilities - 296,593 1,011,580 778,040 251,348 1,030,823 3,368,384 Total interest repricing gap 968,723 934,233 (1,011,580) (778,040) (251,348) 37,935 (100,077)

2015 Assets

Investments - - - - - 55,878 55,878

Short term investments 2,008,240 48,506 - - - - 2,056,746


Group companies - - - - - 21,233 21,233

Cash and bank 220,377 - - - - 33,572 253,949

Total financial assets 2,228,617 48,506 - - - 430,781 2,707,904

Liabilities

Borrowings - - 813,613 387,001 334,571 6,236 1,541,421



Group companies - - - - - 74,138 74,138

Total financial liabilities - - 813,613 387,001 334,571 902,324 2,437,509 Total interest repricing gap 2,228,617 48,506 (813,613) (387,001) (334,571) (471,543) 270,395



82

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Interest rate sensitivity

The following table indicates the sensitivity to a possible change in interest rates, with all other variables held constant, on the Group’s and company’s statement of comprehensive income and stockholders’ equity. The Group’s interest rate risk arises mainly from short term deposits and borrowings. The sensitivity of the profit or loss is the effect of the assumed changes in interest rates on net income based on floating rate deposits and borrowings. The correlation of variables will have a significant effect in determining the ultimate impact on market risk, but to demonstrate the impact due to changes in variables, variables had to be on an individual basis. It should be noted that movements in these variables are non-linear. There was no direct impact on other comprehensive income or equity.



Taxation


Taxation


Taxation


Taxation

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Change in basis points 2016 2016 2015 2015 JMD USD JMD USD +100 +100 +100 +100 10,588 17,933 2,764 11,278 -100 -50 -100 -50 (3,418) (13,455) 2,545 (8,307)

(d) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for stockholders and benefits for other stakeholders, to effectively service its customers and to maintain an optimal capital structure to reduce the cost of capital as well as meet externally imposed capital requirements. The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total stockholders’ equity and non-controlling interests. The Board of Directors also monitors the level of dividends to ordinary stockholders. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total debt divided by total stockholders’ equity. Debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the consolidated statement of financial position) less bank overdraft and interest payable. Total stockholders’ equity is calculated as capital and reserves attributable to company’s equity holders as shown in the consolidated statement of financial position.

Page 34



(d) Capital management (continued) During 2016, the Group’s strategy, which was unchanged from 2015, was to maintain the gearing ratio no higher than 75%. The gearing ratios at 31 December 2016 and 2015 were as follows:

2016

$’000 2015

$’000 Total long term borrowings (Note 28) 2,340,492 1,538,117

Total stockholders’ equity 18,540,246 17,496,896

Gearing ratio (%) 12.62% 8.79% There were no changes to the Group’s approach to capital management during the year.

(e) Fair Value of Financial Instruments

In assessing the fair value of financial instruments, the Group uses a variety of methods and makes assumptions that are based on market conditions existing at the statement of financial position date. The estimated fair values have been determined using available market information and appropriate valuation methodologies. However, considerable judgement is necessarily required in interpreting market data to develop estimates of fair value. Financial instruments that, subsequent to initial recognition, are measured at fair value are grouped into Levels 1 to 3 based on the degree to which the fair value is observable. At the reporting date, the Group and company had only Level 2 financial instruments which are defined as: those with fair value measurements that are derived from inputs other than quoted prices that are

observable for the asset or liability either directly (that is as prices) or indirectly, (that is, derived from prices).

. At 31 December 2016, instruments included within this level comprised available-for-sale unquoted equities which totalled $128,466,000 (2015 - 84,346,000) and $ 85,818,000 (2015 – 55,878,000) for the Group and company, respectively. During the year, management revised its assessment on the fair value of unquoted equities held at the start of the year. Based on the inputs available to re-measure the financial instrument (recent sales), management has transferred the asset from Level 3 to Level 2.


Level 2

$’000 Level 3

$’000 Level 2

$’000 Level 3

$’000 Balance at start of year - 84,346 - 55,878 Transfer between levels 84,346 (84,346) 55,878 (55,878) Additions 2,172 - 2,172 - Unrealised fair value gains 41,948 - 27,768 - Balance at end of year 128,466 - 85,818 -





Page 33




Interest rate sensitivity

The following table indicates the sensitivity to a possible change in interest rates, with all other variables held constant, on the Group’s and company’s statement of comprehensive income and stockholders’ equity. The Group’s interest rate risk arises mainly from short term deposits and borrowings. The sensitivity of the profit or loss is the effect of the assumed changes in interest rates on net income based on floating rate deposits and borrowings. The correlation of variables will have a significant effect in determining the ultimate impact on market risk, but to demonstrate the impact due to changes in variables, variables had to be on an individual basis. It should be noted that movements in these variables are non-linear. There was no direct impact on other comprehensive income or equity.



Taxation


Taxation


Taxation


Taxation

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Change in basis points 2016 2016 2015 2015 JMD USD JMD USD +100 +100 +100 +100 10,588 17,933 2,764 11,278 -100 -50 -100 -50 (3,418) (13,455) 2,545 (8,307)

(d) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for stockholders and benefits for other stakeholders, to effectively service its customers and to maintain an optimal capital structure to reduce the cost of capital as well as meet externally imposed capital requirements. The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total stockholders’ equity and non-controlling interests. The Board of Directors also monitors the level of dividends to ordinary stockholders. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total debt divided by total stockholders’ equity. Debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the consolidated statement of financial position) less bank overdraft and interest payable. Total stockholders’ equity is calculated as capital and reserves attributable to company’s equity holders as shown in the consolidated statement of financial position.

Page 34



(d) Capital management (continued) During 2016, the Group’s strategy, which was unchanged from 2015, was to maintain the gearing ratio no higher than 75%. The gearing ratios at 31 December 2016 and 2015 were as follows:

2016

$’000 2015

$’000 Total long term borrowings (Note 28) 2,340,492 1,538,117

Total stockholders’ equity 18,540,246 17,496,896

Gearing ratio (%) 12.62% 8.79% There were no changes to the Group’s approach to capital management during the year.

(e) Fair Value of Financial Instruments

In assessing the fair value of financial instruments, the Group uses a variety of methods and makes assumptions that are based on market conditions existing at the statement of financial position date. The estimated fair values have been determined using available market information and appropriate valuation methodologies. However, considerable judgement is necessarily required in interpreting market data to develop estimates of fair value. Financial instruments that, subsequent to initial recognition, are measured at fair value are grouped into Levels 1 to 3 based on the degree to which the fair value is observable. At the reporting date, the Group and company had only Level 2 financial instruments which are defined as: those with fair value measurements that are derived from inputs other than quoted prices that are

observable for the asset or liability either directly (that is as prices) or indirectly, (that is, derived from prices).

. At 31 December 2016, instruments included within this level comprised available-for-sale unquoted equities which totalled $128,466,000 (2015 - 84,346,000) and $ 85,818,000 (2015 – 55,878,000) for the Group and company, respectively. During the year, management revised its assessment on the fair value of unquoted equities held at the start of the year. Based on the inputs available to re-measure the financial instrument (recent sales), management has transferred the asset from Level 3 to Level 2.


Level 2

$’000 Level 3

$’000 Level 2

$’000 Level 3

$’000 Balance at start of year - 84,346 - 55,878 Transfer between levels 84,346 (84,346) 55,878 (55,878) Additions 2,172 - 2,172 - Unrealised fair value gains 41,948 - 27,768 - Balance at end of year 128,466 - 85,818 -



84

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(e) Fair Value of Financial Instruments (continued) The following methods and assumptions have been used in determining fair values for instruments not re-measured at fair value after initial recognition (i) The carrying values less any impairment provision of financial assets and liabilities with a maturity of

less than one year are estimated to approximate their fair values due to the short term maturity of these instruments. These financial assets and liabilities are cash and bank balances, trade and other accounts receivables, trade and other accounts payables, related companies balances and short term investments.

(ii) The fair values of the long term receivables (due from related party and The Port Authority of

Jamaica) could not be reliably determined as no reliable active market exists for these assets.

(iii) The carrying values of long term loans closely approximate amortised cost, which is estimated to be their fair value as they attract terms and conditions available in the market for similar transactions.

4. Critical Accounting Estimates and Assumptions in Applying Accounting Policies

Judgements and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Key sources of estimation uncertainty The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Depreciable assets Estimates of the useful life and residual value of property, plant and equipment are required in order to apply an adequate rate of transferring the economic benefits embodied in these assets in the relevant periods. The Group applies a variety of methods including the use of certified independent valuators in an effort to arrive at these estimates. Any changes in estimates of residual value will directly impact the depreciation charge. Income taxes Estimates are required in determining the provision for income taxes. There are some transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for possible tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The company was granted free zone status in December 2013, resulting in an income tax rate which is variable and based on approved methodology, and which is 10.59% (2015 – 9.65%) (Note 10).

Page 36


4. Critical Accounting Estimates and Assumptions in Applying Accounting Policies (Continued) Pension and other retirement benefits The cost of these benefits and the present value of the pension and the other post-employment liabilities depend on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net periodic cost (income) for pension and post-employment benefits include the expected long-term rate of return on the relevant plan assets, the discount rate and, in the case of the post-employment medical benefits, the expected rate of increase in medical costs. Any changes in these assumptions will impact the net periodic cost (income) recorded for pension and other post-employment benefits and may affect planned funding of the pension plans. The expected return on plan assets assumption is determined on a uniform basis, considering long-term historical returns, asset allocation and future estimates of long-term investment returns. The Group determines the appropriate discount rate at the end of each year, which represents the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension and other post-employment benefit obligations. In determining the appropriate discount rate, the Group considered interest rate of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability. The expected rate of increase of medical costs has been determined by comparing the historical relationship of actual medical cost increases with the rate of inflation in the economy. Past experience has shown that the actual medical costs have increased on average by one time the rate of inflation. Other key assumptions for the pension and other post-employment benefit costs and credits are based in part on current market conditions. If the actual health care trend rates for the post-employment obligations varied by 1% from estimates applied in valuation of the benefits, the consolidated net profit would be an estimated $45,997,000 lower or $35,591,000 higher (Note 20). Variations in the other financial assumptions can cause material adjustments in the next financial year, if it is determined that actual experience differed from the estimate (Note 20).

Impairment assessment of intangible assets The Group and Company test annually whether Rights to Customer lists included in intangible assets has suffered any impairment, in accordance with the accounting policy stated in Note 2(f). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations, which require the use of estimates. In determining the value in use, management has made certain assumptions regarding revenue growth rate, projected cash flows and discount rates.





Page 35



(e) Fair Value of Financial Instruments (continued) The following methods and assumptions have been used in determining fair values for instruments not re-measured at fair value after initial recognition (i) The carrying values less any impairment provision of financial assets and liabilities with a maturity of

less than one year are estimated to approximate their fair values due to the short term maturity of these instruments. These financial assets and liabilities are cash and bank balances, trade and other accounts receivables, trade and other accounts payables, related companies balances and short term investments.

(ii) The fair values of the long term receivables (due from related party and The Port Authority of

Jamaica) could not be reliably determined as no reliable active market exists for these assets.

(iii) The carrying values of long term loans closely approximate amortised cost, which is estimated to be their fair value as they attract terms and conditions available in the market for similar transactions.

4. Critical Accounting Estimates and Assumptions in Applying Accounting Policies

Judgements and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Key sources of estimation uncertainty The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Depreciable assets Estimates of the useful life and residual value of property, plant and equipment are required in order to apply an adequate rate of transferring the economic benefits embodied in these assets in the relevant periods. The Group applies a variety of methods including the use of certified independent valuators in an effort to arrive at these estimates. Any changes in estimates of residual value will directly impact the depreciation charge. Income taxes Estimates are required in determining the provision for income taxes. There are some transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for possible tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The company was granted free zone status in December 2013, resulting in an income tax rate which is variable and based on approved methodology, and which is 10.59% (2015 – 9.65%) (Note 10).

Page 36


4. Critical Accounting Estimates and Assumptions in Applying Accounting Policies (Continued) Pension and other retirement benefits The cost of these benefits and the present value of the pension and the other post-employment liabilities depend on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net periodic cost (income) for pension and post-employment benefits include the expected long-term rate of return on the relevant plan assets, the discount rate and, in the case of the post-employment medical benefits, the expected rate of increase in medical costs. Any changes in these assumptions will impact the net periodic cost (income) recorded for pension and other post-employment benefits and may affect planned funding of the pension plans. The expected return on plan assets assumption is determined on a uniform basis, considering long-term historical returns, asset allocation and future estimates of long-term investment returns. The Group determines the appropriate discount rate at the end of each year, which represents the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension and other post-employment benefit obligations. In determining the appropriate discount rate, the Group considered interest rate of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability. The expected rate of increase of medical costs has been determined by comparing the historical relationship of actual medical cost increases with the rate of inflation in the economy. Past experience has shown that the actual medical costs have increased on average by one time the rate of inflation. Other key assumptions for the pension and other post-employment benefit costs and credits are based in part on current market conditions. If the actual health care trend rates for the post-employment obligations varied by 1% from estimates applied in valuation of the benefits, the consolidated net profit would be an estimated $45,997,000 lower or $35,591,000 higher (Note 20). Variations in the other financial assumptions can cause material adjustments in the next financial year, if it is determined that actual experience differed from the estimate (Note 20).

Impairment assessment of intangible assets The Group and Company test annually whether Rights to Customer lists included in intangible assets has suffered any impairment, in accordance with the accounting policy stated in Note 2(f). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations, which require the use of estimates. In determining the value in use, management has made certain assumptions regarding revenue growth rate, projected cash flows and discount rates.



86

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5. Segment Financial Information

The Chief Executive Officer is the Group’s chief operating decision maker (CODM). Management has determined the operating segments based on the information reviewed by the CODM for the purposes of allocating resources and assessing performance. The Group is organised into the following business segments: (a) Terminal operations - Operation of public wharves and stevedoring of vessels.

(b) Logistics and Ancillary Services -

Operation of warehousing and logistics facilities, security services, rental of and repairs to cold storage facilities and property rental.

Transactions between the business segments are on normal commercial terms and conditions. The Group’s operations are located at Newport West, Kingston, Jamaica.

Terminal

Operations

Logistics and Ancillary

Services Eliminations Group Year ended 31 December 2016 $’000 $’000 $’000 $’000

External operating revenue 4,172,483 1,237,318 - 5,409,801 Operating revenue from segments 9,535 69,243 (78,778) - Total revenue 4,182,018 1,306,561 (78,778) 5,409,801 Operating profit 1,644,833 387,762 (357,344) 1,675,251 Interest expense (107,458) (30,793) 3,393 (134,858) 1,537,375 356,969 (353,951) 1,540,393 Foreign exchange loss (51,550) Profit before income tax 1,488,843 Income tax expense (176,056) Profit before non-controlling interest 1,312,787 Non-controlling interest (19,307) Net profit attributable to equity holders of the company 1,293,480

Segment assets 20,341,823 2,741,269 (500,077) 22,583,015

Unallocated assets 953,793 Total assets 23,536,808

Segment liabilities 3,163,765 687,838 (428,046) 3,423,557 Unallocated liabilities 1,476,440 Total liabilities 4,899,997 Other segment items: Interest income (Note 8) 58,755 30,805 (3,393) 86,167 Capital expenditure (Note 15) 1,170,424 681,050 - 1,851,474 Capital expenditure (Note 16) 42,792 - - 42,792 Amortisation (Note 16) 108,770 - - 108,770 Depreciation and impairment 416,829 56,712 - 473,541

Page 38


5. Segment Financial Information (Continued)

Terminal

Operations



External operating revenue 3,594,747 1,078,137 - 4,672,884 Operating revenue from segments 8,769 62,980 (71,749) - Total revenue 3,603,516 1,141,117 (71,749) 4,672,884 Operating profit 1,253,294 324,861 (6,099) 1,572,056 Interest expense (94,804) (33,751) 6,099 (122,456) 1,158,490 291,110 - 1,449,600 Foreign exchange loss (40,262) Profit before income tax 1,409,338 Income tax expense (141,879) Profit before non-controlling interest 1,267,459 Non-controlling interest (11,062) Net profit attributable to equity holders of the company 1,256,397

Segment assets 18,363,714 2,594,821 (176,773) 20,781,762


Segment liabilities 2,103,779 405,505 (104,743) 2,404,541 Unallocated liabilities 1,432,848 Total liabilities 3,837,389 Other segment items: Interest income (Note 8) 43,015 26,608 - 69,623 Capital expenditure (Note 15) 745,242 419,674 - 1,164,916 Capital expenditure (Note 16) 37,498 - - 37,498 Amortisation (Note 16) 82,570 - - 82,570 Depreciation and impairment 360,772 62,045 - 422,817

Revenues of approximately $1,783,843,000 (2015 – $1,510,768,000) were earned from two customers. The revenues are attributable to the Terminal Operations segment.





Page 37


5. Segment Financial Information

The Chief Executive Officer is the Group’s chief operating decision maker (CODM). Management has determined the operating segments based on the information reviewed by the CODM for the purposes of allocating resources and assessing performance. The Group is organised into the following business segments: (a) Terminal operations - Operation of public wharves and stevedoring of vessels.

(b) Logistics and Ancillary Services -

Operation of warehousing and logistics facilities, security services, rental of and repairs to cold storage facilities and property rental.

Transactions between the business segments are on normal commercial terms and conditions. The Group’s operations are located at Newport West, Kingston, Jamaica.

Terminal

Operations



External operating revenue 4,172,483 1,237,318 - 5,409,801 Operating revenue from segments 9,535 69,243 (78,778) - Total revenue 4,182,018 1,306,561 (78,778) 5,409,801 Operating profit 1,644,833 387,762 (357,344) 1,675,251 Interest expense (107,458) (30,793) 3,393 (134,858) 1,537,375 356,969 (353,951) 1,540,393 Foreign exchange loss (51,550) Profit before income tax 1,488,843 Income tax expense (176,056) Profit before non-controlling interest 1,312,787 Non-controlling interest (19,307) Net profit attributable to equity holders of the company 1,293,480

Segment assets 20,341,823 2,741,269 (500,077) 22,583,015


Segment liabilities 3,163,765 687,838 (428,046) 3,423,557 Unallocated liabilities 1,476,440 Total liabilities 4,899,997 Other segment items: Interest income (Note 8) 58,755 30,805 (3,393) 86,167 Capital expenditure (Note 15) 1,170,424 681,050 - 1,851,474 Capital expenditure (Note 16) 42,792 - - 42,792 Amortisation (Note 16) 108,770 - - 108,770 Depreciation and impairment 416,829 56,712 - 473,541

Page 38


5. Segment Financial Information (Continued)

Terminal

Operations



External operating revenue 3,594,747 1,078,137 - 4,672,884 Operating revenue from segments 8,769 62,980 (71,749) - Total revenue 3,603,516 1,141,117 (71,749) 4,672,884 Operating profit 1,253,294 324,861 (6,099) 1,572,056 Interest expense (94,804) (33,751) 6,099 (122,456) 1,158,490 291,110 - 1,449,600 Foreign exchange loss (40,262) Profit before income tax 1,409,338 Income tax expense (141,879) Profit before non-controlling interest 1,267,459 Non-controlling interest (11,062) Net profit attributable to equity holders of the company 1,256,397

Segment assets 18,363,714 2,594,821 (176,773) 20,781,762


Segment liabilities 2,103,779 405,505 (104,743) 2,404,541 Unallocated liabilities 1,432,848 Total liabilities 3,837,389 Other segment items: Interest income (Note 8) 43,015 26,608 - 69,623 Capital expenditure (Note 15) 745,242 419,674 - 1,164,916 Capital expenditure (Note 16) 37,498 - - 37,498 Amortisation (Note 16) 82,570 - - 82,570 Depreciation and impairment 360,772 62,045 - 422,817

Revenues of approximately $1,783,843,000 (2015 – $1,510,768,000) were earned from two customers. The revenues are attributable to the Terminal Operations segment.



88

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6. Expenses by Nature

Total direct and administration expenses: The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Advertising and public relations 28,267 28,308 27,094 26,970 Amortisation (Note 16) 108,770 82,570 108,770 82,570 Auditors' remuneration 14,583 13,788 9,561 8,961 Bad debts 10,106 7,865 9,137 1,873 Bank charges 34,264 28,684 33,838 28,390 Claims 23,940 8,386 15,777 8,393 Cleaning and sanitation 33,560 22,400 20,676 22,338 Customs overtime 41,612 35,008 41,612 35,008 Depreciation (Note 15) 468,541 407,817 364,265 306,053 Directors’ fees 18,003 17,425 17,328 16,488 Equipment rental 108,787 103,693 108,787 103,693 Fuel 142,907 135,835 142,907 135,835 Information technology 77,759 102,625 74,522 101,930 Insurance 148,907 152,447 137,931 139,352 Irrecoverable General Consumption Tax 8,889 8,737 3,800 4,006 Legal and consultation expenses 67,763 44,782 63,020 43,552 Occupancy: property taxes and rent 8,867 11,983 11,461 11,119 Provision for impairment of PPE 5,000 15,000 5,000 15,000 Repairs and maintenance 468,265 283,123 446,454 281,529 Security 166,616 80,672 56,613 58,526 Staff costs (Note 7) 1,579,043 1,369,265 1,261,226 984,745 Terminal transfers 22,871 48,803 22,871 48,803 Utilities 181,984 192,082 176,454 186,943 Other 161,888 148,575 151,137 123,599

3,931,192 3,349,873 3,310,241 2,775,676

Page 40


7. Staff Costs


2016

$’000 2015 $’000

2016 $’000

2015 $’000

Wages and salaries 1,142,747 1,086,662 892,331 771,130 Payroll taxes – employer’s contributions 123,734 119,875 94,419 84,363 Pension costs – defined benefit plan (Note 20) (20,489) (29,954) (20,489) (29,954) Pension costs – defined contribution plan 5,586 6,240 - - Other retirement benefits (Note 20) 29,319 28,549 29,319 28,549 Meal and travelling allowances 62,277 64,233 58,092 52,818 Termination costs 105,855 282 105,855 282 Other 130,014 93,378 101,699 77,557

1,579,043 1,369,265 1,261,226 984,745 8. Other Operating Income


2016

$’000 2015

$’000 2016

$’000 2015

$’000 Dividends 1,612 84,346 349,047 55,879 Interest 86,167 69,623 58,755 43,015 Foreign exchange gains 113,057 69,951 90,042 57,684 Management fees - - 2,221 2,500 Proceeds from insurance claims - 21,932 - 21,932 Other (4,194) 3,193 (4,567) 2,118

196,642 249,045 495,498 183,128 9. Finance Costs The Group The Company

2016

$’000 2015

$’000 2016 $’000

2015 $’000

Interest expense 134,858 122,456 137,730 127,986 Foreign exchange losses 51,550 40,262 51,550 40,262

186,408 162,718 189,280 168,248





Page 39


6. Expenses by Nature

Total direct and administration expenses: The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Advertising and public relations 28,267 28,308 27,094 26,970 Amortisation (Note 16) 108,770 82,570 108,770 82,570 Auditors' remuneration 14,583 13,788 9,561 8,961 Bad debts 10,106 7,865 9,137 1,873 Bank charges 34,264 28,684 33,838 28,390 Claims 23,940 8,386 15,777 8,393 Cleaning and sanitation 33,560 22,400 20,676 22,338 Customs overtime 41,612 35,008 41,612 35,008 Depreciation (Note 15) 468,541 407,817 364,265 306,053 Directors’ fees 18,003 17,425 17,328 16,488 Equipment rental 108,787 103,693 108,787 103,693 Fuel 142,907 135,835 142,907 135,835 Information technology 77,759 102,625 74,522 101,930 Insurance 148,907 152,447 137,931 139,352 Irrecoverable General Consumption Tax 8,889 8,737 3,800 4,006 Legal and consultation expenses 67,763 44,782 63,020 43,552 Occupancy: property taxes and rent 8,867 11,983 11,461 11,119 Provision for impairment of PPE 5,000 15,000 5,000 15,000 Repairs and maintenance 468,265 283,123 446,454 281,529 Security 166,616 80,672 56,613 58,526 Staff costs (Note 7) 1,579,043 1,369,265 1,261,226 984,745 Terminal transfers 22,871 48,803 22,871 48,803 Utilities 181,984 192,082 176,454 186,943 Other 161,888 148,575 151,137 123,599

3,931,192 3,349,873 3,310,241 2,775,676

Page 40


7. Staff Costs


2016

$’000 2015 $’000

2016 $’000

2015 $’000

Wages and salaries 1,142,747 1,086,662 892,331 771,130 Payroll taxes – employer’s contributions 123,734 119,875 94,419 84,363 Pension costs – defined benefit plan (Note 20) (20,489) (29,954) (20,489) (29,954) Pension costs – defined contribution plan 5,586 6,240 - - Other retirement benefits (Note 20) 29,319 28,549 29,319 28,549 Meal and travelling allowances 62,277 64,233 58,092 52,818 Termination costs 105,855 282 105,855 282 Other 130,014 93,378 101,699 77,557

1,579,043 1,369,265 1,261,226 984,745 8. Other Operating Income


2016

$’000 2015

$’000 2016

$’000 2015

$’000 Dividends 1,612 84,346 349,047 55,879 Interest 86,167 69,623 58,755 43,015 Foreign exchange gains 113,057 69,951 90,042 57,684 Management fees - - 2,221 2,500 Proceeds from insurance claims - 21,932 - 21,932 Other (4,194) 3,193 (4,567) 2,118

196,642 249,045 495,498 183,128 9. Finance Costs The Group The Company

2016

$’000 2015

$’000 2016 $’000

2015 $’000

Interest expense 134,858 122,456 137,730 127,986 Foreign exchange losses 51,550 40,262 51,550 40,262

186,408 162,718 189,280 168,248



90

Page 41


10. Income Tax Expense

The tax on profit differs from the theoretical amount that would arise using a basic statutory rate of 10.59% (2015 – 9.65%) as follows:


2016 $’000

2015 $’000

2016 $’000

2015 $’000

Profit before tax 1,488,843 1,409,338 1,764,708 1,355,190

Tax calculated at a tax rate of 10.59% (2015 – 9.65%) 157,669 136,001 186,883 130,776

Adjusted for the effects of: Income not subject to tax (1,264) (12,509) (36,964) (5,392) Income taxed at higher rate 8,486 8,311 - - Expenses not deductible for tax purposes 15,422 9,477 6,430 390 Change in rate for deferred income taxes 8,735 18,821 8,735 18,821 Prior year over provision (3,183) (11,944) (3,082) (11,944) Other (9,809) (6,278) 9,761 (8,471)

Income tax expense 176,056 141,879 171,763 124,180

The company was granted free zone status under the Jamaica Export Free Zones Act effective December 2013, resulting in income tax being charged on applicable profits at zero for export activities and 25% for non-export activities. This resulted in an effective statutory rate of 10.59% (2015 – 9.65%). This rate has also been applied in determining the amounts for deferred taxation for the company in these financial statements (Note 30).


2016 $’000

2015 $’000

2016 $’000

2015 $’000

Current tax on profit for the year 189,640 167,877 150,089 128,131 Prior year over provision (3,183) (11,944) (3,082) (11,944) Deferred income tax (Note 30) (10,401) (14,054) 24,756 7,993

176,056 141,879 171,763 124,180

Page 42


11. Profit Attributable to Equity Holders of the Company

2016 $’000

2015 $’000

(a) Net profit is dealt with as follows in the financial statements of:

Holding company 1,592,945 1,231,010 Inter-group dividends from subsidiaries eliminated on consolidation (348,000) -

Adjusted net profit – holding company 1,244,945 1,231,010

Subsidiaries 48,535 25,387 1,293,480 1,256,397

(b) Retained earnings are dealt with as follows in the financial statements of:

Holding company 5,810,526 4,475,105 Subsidiaries (333,840) (34,131)

5,476,686 4,440,974 12. Non-controlling Interest

2016 $’000

2015 $’000

At beginning of year 77,258 66,196 Share of net profit of subsidiary 19,307 11,062

96,565 77,258 13. Earnings Per Stock Unit

Basic earnings per stock unit is calculated by dividing the net profit attributable to equity holders by the weighted average number of ordinary stock units in issue during the year.

2016 2015 Net profit attributable to equity holders of the company ($’000) 1,293,480 1,256,397

Number of ordinary stock units in issue (thousands) 1,430,200 1,430,200

Basic earnings per stock unit $0.90 $0.88

14. Dividends

During the year, the company declared dividends to registered holders on record as follows.

2016 $’000

2015 $’000

Ordinary dividends, gross - 34 cents (2015 – 25 cents) 486,268 357,550 In December 2016, the company declared a dividend of 20 cents per share which is payable on 19 January 2017 to shareholders on record at 23 December 2016 (Notes 31 and 35) which is included in the total dividend above.





Page 41


10. Income Tax Expense

The tax on profit differs from the theoretical amount that would arise using a basic statutory rate of 10.59% (2015 – 9.65%) as follows:


2016 $’000

2015 $’000

2016 $’000

2015 $’000

Profit before tax 1,488,843 1,409,338 1,764,708 1,355,190

Tax calculated at a tax rate of 10.59% (2015 – 9.65%) 157,669 136,001 186,883 130,776

Adjusted for the effects of: Income not subject to tax (1,264) (12,509) (36,964) (5,392) Income taxed at higher rate 8,486 8,311 - - Expenses not deductible for tax purposes 15,422 9,477 6,430 390 Change in rate for deferred income taxes 8,735 18,821 8,735 18,821 Prior year over provision (3,183) (11,944) (3,082) (11,944) Other (9,809) (6,278) 9,761 (8,471)

Income tax expense 176,056 141,879 171,763 124,180

The company was granted free zone status under the Jamaica Export Free Zones Act effective December 2013, resulting in income tax being charged on applicable profits at zero for export activities and 25% for non-export activities. This resulted in an effective statutory rate of 10.59% (2015 – 9.65%). This rate has also been applied in determining the amounts for deferred taxation for the company in these financial statements (Note 30).


2016 $’000

2015 $’000

2016 $’000

2015 $’000

Current tax on profit for the year 189,640 167,877 150,089 128,131 Prior year over provision (3,183) (11,944) (3,082) (11,944) Deferred income tax (Note 30) (10,401) (14,054) 24,756 7,993

176,056 141,879 171,763 124,180

Page 42


11. Profit Attributable to Equity Holders of the Company

2016 $’000

2015 $’000

(a) Net profit is dealt with as follows in the financial statements of:

Holding company 1,592,945 1,231,010 Inter-group dividends from subsidiaries eliminated on consolidation (348,000) -

Adjusted net profit – holding company 1,244,945 1,231,010

Subsidiaries 48,535 25,387 1,293,480 1,256,397

(b) Retained earnings are dealt with as follows in the financial statements of:

Holding company 5,810,526 4,475,105 Subsidiaries (333,840) (34,131)

5,476,686 4,440,974 12. Non-controlling Interest

2016 $’000

2015 $’000

At beginning of year 77,258 66,196 Share of net profit of subsidiary 19,307 11,062

96,565 77,258 13. Earnings Per Stock Unit

Basic earnings per stock unit is calculated by dividing the net profit attributable to equity holders by the weighted average number of ordinary stock units in issue during the year.

2016 2015 Net profit attributable to equity holders of the company ($’000) 1,293,480 1,256,397

Number of ordinary stock units in issue (thousands) 1,430,200 1,430,200

Basic earnings per stock unit $0.90 $0.88

14. Dividends

During the year, the company declared dividends to registered holders on record as follows.

2016 $’000

2015 $’000

Ordinary dividends, gross - 34 cents (2015 – 25 cents) 486,268 357,550 In December 2016, the company declared a dividend of 20 cents per share which is payable on 19 January 2017 to shareholders on record at 23 December 2016 (Notes 31 and 35) which is included in the total dividend above.



92

Page 43


15. Property, Plant and Equipment The Group

Freehold

Land Plant and Buildings

Machinery and

Equipment

Cold Room and Air

Conditioning Equipment

Furniture

and Fixtures

Motor Vehicles

Work In Progress

Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

2016

Cost or Valuation - At 31 December 2015 4,731,771 16,050,950 2,385,176 267,404 384,188 190,805 775,672 24,785,966 Additions 110,250 43,718 23,032 - 7,922 4,712 1,661,840 1,851,474 Transfers 233,904 1,020 860,220 - - 8,082 (1,000,821) 102,405 Disposals - (54,986) (20,237) - (186,438) (18,835) - (280,496) At 31 December 2016 5,075,925 16,040,702 3,248,191 267,404 205,672 184,764 1,436,691 26,459,349

Depreciation -

At 31 December 2015 - 6,775,277 728,897 259,320 282,341 95,237 - 8,141,072

Charge for the year - 288,984 141,589 2,001 14,999 20,968 - 468,541 Relieved on disposals - (16,966) (18,468) - (181,439) (18,834) - (235,707) At 31 December 2016 - 7,047,295 852,018 261,321 115,901 97,371 - 8,373,906

Net Book Value -

At 31 December 2016 5,075,925 8,993,407 2,396,173 6,083 89,771 87,393 1,436,691 18,085,443

2015

Cost or Valuation - At 31 December 2014 4,697,005 16,684,829 1,886,406 267,404 378,473 176,523 221,200 24,311,840

Additions - 18,218 34,548 - 5,755 21,504 1,084,891 1,164,916

Transfers 34,766 29,262 465,639 - 752 - (530,419) -

Disposals - (681,359) (1,417) - (792) (7,222) - (690,790)

At 31 December 2015 4,731,771 16,050,950 2,385,176 267,404 384,188 190,805 775,672 24,785,966

Depreciation -

At 31 December 2014 - 6,963,649 635,192 249,514 260,337 81,697 - 8,190,389

Charge for the year - 277,354 85,839 9,806 16,004 18,814 - 407,817

Provision for impairment - - 9,000 - 6,000 - - 15,000

Relieved on disposals - (465,726) (1,134) - - (5,274) - (472,134)

At 31 December 2015 - 6,775,277 728,897 259,320 282,341 95,237 - 8,141,072

Net Book Value -

At 31 December 2015 4,731,771 9,275,673 1,656,279 8,084 101,847 95,568 775,672 16,644,894

Page 44


15. Property, Plant and Equipment (Continued) The Company

Freehold


Machinery and

Equipment

Cold Room and Air


Furniture

and Fixtures

Motor Vehicles

Work in Progress

Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

2016 Cost or Valuation -

At 31 December 2015 3,124,771 10,621,192 2,356,962 19,137 370,803 174,811 775,672 17,443,348

Additions 110,250 - 19,982 - 7,624 - 1,661,840 1,799,696

Transfers 131,499 1,020 860,220 - - 8,082 (1,000,821) -

Disposals - (11,000) (20,237) - (186,438) (17,226) - (234,901)

At 31 December 2016 3,366,520 10,611,212 3,216,927 19,137 191,989 165,667 1,436,691 19,008,143

Depreciation -

At 31 December 2015 - 3,780,769 698,823 12,823 271,488 86,152 - 4,850,055


Relieved on disposal - (733) (18,468) - (181,439) (17,225) - (217,865)

At 31 December 2016 - 3,970,766 819,722 14,089 104,553 87,325 - 4,996,455

Net Book Value -

At 31 December 2016 3,366,520 6,640,446 2,397,205 5,048 87,436 78,342 1,436,691 14,011,688

2015

Cost or Valuation -

At 31 December 2014 3,090,005 11,255,242 1,859,137 19,137 365,497 159,790 221,200 16,970,008

Additions - 18,047 32,186 - 5,346 16,101 1,084,891 1,156,571

Transfers 34,766 29,262 465,639 - 752 - (530,419) -

Disposals - (681,359) - - (792) (1,080) - (683,231)

At 31 December 2015 3,124,771 10,621,192 2,356,962 19,137 370,803 174,811 775,672 17,443,348

Depreciation -

At 31 December 2014 - 4,057,834 606,379 11,552 250,119 69,924 - 4,995,808



Relieved on disposal - (465,726) - - - (1,080) - (466,806)

At 31 December 2015 - 3,780,769 698,823 12,823 271,488 86,152 - 4,850,055

Net Book Value -

At 31 December 2015 3,124,771 6,840,423 1,658,139 6,314 99,315 88,659 775,672 12,593,293





Page 43


15. Property, Plant and Equipment The Group

Freehold


Machinery and

Equipment

Cold Room and Air


Furniture

and Fixtures

Motor Vehicles

Work In Progress

Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

2016

Cost or Valuation - At 31 December 2015 4,731,771 16,050,950 2,385,176 267,404 384,188 190,805 775,672 24,785,966 Additions 110,250 43,718 23,032 - 7,922 4,712 1,661,840 1,851,474 Transfers 233,904 1,020 860,220 - - 8,082 (1,000,821) 102,405 Disposals - (54,986) (20,237) - (186,438) (18,835) - (280,496) At 31 December 2016 5,075,925 16,040,702 3,248,191 267,404 205,672 184,764 1,436,691 26,459,349

Depreciation -

At 31 December 2015 - 6,775,277 728,897 259,320 282,341 95,237 - 8,141,072

Charge for the year - 288,984 141,589 2,001 14,999 20,968 - 468,541 Relieved on disposals - (16,966) (18,468) - (181,439) (18,834) - (235,707) At 31 December 2016 - 7,047,295 852,018 261,321 115,901 97,371 - 8,373,906

Net Book Value -

At 31 December 2016 5,075,925 8,993,407 2,396,173 6,083 89,771 87,393 1,436,691 18,085,443

2015

Cost or Valuation - At 31 December 2014 4,697,005 16,684,829 1,886,406 267,404 378,473 176,523 221,200 24,311,840

Additions - 18,218 34,548 - 5,755 21,504 1,084,891 1,164,916

Transfers 34,766 29,262 465,639 - 752 - (530,419) -

Disposals - (681,359) (1,417) - (792) (7,222) - (690,790)

At 31 December 2015 4,731,771 16,050,950 2,385,176 267,404 384,188 190,805 775,672 24,785,966

Depreciation -

At 31 December 2014 - 6,963,649 635,192 249,514 260,337 81,697 - 8,190,389



Relieved on disposals - (465,726) (1,134) - - (5,274) - (472,134)

At 31 December 2015 - 6,775,277 728,897 259,320 282,341 95,237 - 8,141,072

Net Book Value -

At 31 December 2015 4,731,771 9,275,673 1,656,279 8,084 101,847 95,568 775,672 16,644,894

Page 44


15. Property, Plant and Equipment (Continued) The Company

Freehold


Machinery and

Equipment

Cold Room and Air


Furniture

and Fixtures

Motor Vehicles

Work in Progress

Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

2016 Cost or Valuation -

At 31 December 2015 3,124,771 10,621,192 2,356,962 19,137 370,803 174,811 775,672 17,443,348

Additions 110,250 - 19,982 - 7,624 - 1,661,840 1,799,696

Transfers 131,499 1,020 860,220 - - 8,082 (1,000,821) -

Disposals - (11,000) (20,237) - (186,438) (17,226) - (234,901)

At 31 December 2016 3,366,520 10,611,212 3,216,927 19,137 191,989 165,667 1,436,691 19,008,143

Depreciation -

At 31 December 2015 - 3,780,769 698,823 12,823 271,488 86,152 - 4,850,055


Relieved on disposal - (733) (18,468) - (181,439) (17,225) - (217,865)

At 31 December 2016 - 3,970,766 819,722 14,089 104,553 87,325 - 4,996,455

Net Book Value -

At 31 December 2016 3,366,520 6,640,446 2,397,205 5,048 87,436 78,342 1,436,691 14,011,688

2015

Cost or Valuation -

At 31 December 2014 3,090,005 11,255,242 1,859,137 19,137 365,497 159,790 221,200 16,970,008

Additions - 18,047 32,186 - 5,346 16,101 1,084,891 1,156,571

Transfers 34,766 29,262 465,639 - 752 - (530,419) -

Disposals - (681,359) - - (792) (1,080) - (683,231)

At 31 December 2015 3,124,771 10,621,192 2,356,962 19,137 370,803 174,811 775,672 17,443,348

Depreciation -

At 31 December 2014 - 4,057,834 606,379 11,552 250,119 69,924 - 4,995,808



Relieved on disposal - (465,726) - - - (1,080) - (466,806)

At 31 December 2015 - 3,780,769 698,823 12,823 271,488 86,152 - 4,850,055

Net Book Value -

At 31 December 2015 3,124,771 6,840,423 1,658,139 6,314 99,315 88,659 775,672 12,593,293



94

Page 45


15. Property, Plant and Equipment (Continued)

(a) Freehold land of the Group was revalued as at 31 December 2014 on the basis of open market value by D.C. Tavares and Finson Reality Limited, independent qualified valuators. The freehold plant and buildings of the Group were also revalued as at 31 December 2014 on the depreciated replacement cost basis which approximates fair value, by Stoppi, Cairney and Bloomfield, quantity surveyors and construction cost consultants. The carrying value of these assets has been adjusted upwards and the increase in value net of deferred income taxes has been recognised in capital reserves (Note 26). The property, plant and equipment that, subsequent to initial recognition, are measured at fair value are grouped into Levels 1 to 3 based on the degree to which the fair value is observable. The levels are as follows: Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets

for identical assets or liabilities; Level 2 fair value measurements are those derived from inputs other than quoted prices included

within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices);

Level 3 fair value measurements are those derived from inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The items of property, plant and equipment of the Group and the company shown at revalued amounts are included in Level 2 and 3. There were no transfers between levels. The following tables disclose the Group and company’s non-financial assets carried at fair value:

The Group Fair Value measurements as at 31 December 2016

using

Categories Date of revaluation

Quoted price in an active

market

Significant other observable

inputs (Level 2)

$'000

Significant other observable inputs

(Level 3) $'000

Freehold Land Dec-14 - 5,075,925 - Plant and Buildings Dec-14 - - 8,993,407 Total - 5,075,925 8,993,407

The Company Freehold Land Dec-14 - 3,366,520 - Plant and Buildings Dec-14 - - 6,640,446 Total - 3,366,520 6,640,446

Page 46


15. Property, Plant and Equipment (Continued) (a) continued

Level 2 fair values of land have been derived using the sales comparison approach and is comparable to sales of properties in close proximity and are adjusted for differences in key attributes such as property size. The most significant input into this valuation approach is price per square foot. The valuation techniques for Level 3 fair values of plant and buildings are disclosed in the tables below. The valuation technique for Level 3 uses the current construction replacement cost (depreciable replacement cost) approach of the assets based on current rates for labour, material and contractors charges. It is also based on the location, age and condition of the plant and buildings. Fair Value Measurements using significant unobservable inputs (Level 3)

Group Company Plant &

Buildings Plant &

Buildings $’000 $’000

Opening balance at valuation 9,275,673 6,840,423 Additions 44,738 1,020 Disposals net of accumulated depreciation (38,020) (10,267) Depreciation through profit or loss (288,984) (190,730) Closing Balance 8,993,407 6,640,446

The Group

Fair value at December

2016 $’000

Valuation Technique(s)

Unobservable inputs

Range of unobservable

inputs (probability –

weighted average)

Relationship of unobservable inputs

to fair value 2016

$’000 Description

Plant and Building

8,993,407 Depreciable Replacement Cost method

Labour, material and contractor's

charges

None noted The higher the cost of labour, material and

contractors’ charges, the higher the

replacement cost Remaining

useful lives 1 year If the estimates for

the useful lives of the assets were higher or

lower by one year, the value would

higher by $10,901 and lower by

$12,143.





Page 45



(a) Freehold land of the Group was revalued as at 31 December 2014 on the basis of open market value by D.C. Tavares and Finson Reality Limited, independent qualified valuators. The freehold plant and buildings of the Group were also revalued as at 31 December 2014 on the depreciated replacement cost basis which approximates fair value, by Stoppi, Cairney and Bloomfield, quantity surveyors and construction cost consultants. The carrying value of these assets has been adjusted upwards and the increase in value net of deferred income taxes has been recognised in capital reserves (Note 26). The property, plant and equipment that, subsequent to initial recognition, are measured at fair value are grouped into Levels 1 to 3 based on the degree to which the fair value is observable. The levels are as follows: Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets

for identical assets or liabilities; Level 2 fair value measurements are those derived from inputs other than quoted prices included

within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices);

Level 3 fair value measurements are those derived from inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The items of property, plant and equipment of the Group and the company shown at revalued amounts are included in Level 2 and 3. There were no transfers between levels. The following tables disclose the Group and company’s non-financial assets carried at fair value:

The Group Fair Value measurements as at 31 December 2016

using

Categories Date of revaluation

Quoted price in an active

market

Significant other observable

inputs (Level 2)

$'000

Significant other observable inputs

(Level 3) $'000

Freehold Land Dec-14 - 5,075,925 - Plant and Buildings Dec-14 - - 8,993,407 Total - 5,075,925 8,993,407

The Company Freehold Land Dec-14 - 3,366,520 - Plant and Buildings Dec-14 - - 6,640,446 Total - 3,366,520 6,640,446

Page 46


15. Property, Plant and Equipment (Continued) (a) continued

Level 2 fair values of land have been derived using the sales comparison approach and is comparable to sales of properties in close proximity and are adjusted for differences in key attributes such as property size. The most significant input into this valuation approach is price per square foot. The valuation techniques for Level 3 fair values of plant and buildings are disclosed in the tables below. The valuation technique for Level 3 uses the current construction replacement cost (depreciable replacement cost) approach of the assets based on current rates for labour, material and contractors charges. It is also based on the location, age and condition of the plant and buildings. Fair Value Measurements using significant unobservable inputs (Level 3)

Group Company Plant &

Buildings Plant &

Buildings $’000 $’000

Opening balance at valuation 9,275,673 6,840,423 Additions 44,738 1,020 Disposals net of accumulated depreciation (38,020) (10,267) Depreciation through profit or loss (288,984) (190,730) Closing Balance 8,993,407 6,640,446

The Group


2016 $’000


Unobservable inputs



weighted average)


to fair value 2016

$’000 Description

Plant and Building



charges







higher by $10,901 and lower by

$12,143.



96

Page 47



(a) continued

The Company


2016 $’000


Unobservable inputs



weighted average)


to fair value 2016

$’000 Plant and Building



charges







higher by $6,857 and lower by $7,661.

(b) A fixed charge totalling US$26.6 million has been placed over the property, plant and equipment of the

company as well as mortgages totalling $1,040 million over certain premises and equipment owned by the company in keeping with the terms of certain loan agreements (Note 28).

(c) During the year, the company completed a physical inspection of certain classes of assets. Arising from

this exercise, an additional provision for impairment of $5 million (2015 - $15 million) was recorded in respect of certain assets.

(d) The disposal of items of property, plant and equipment mainly comprise furniture and fixtures (2015 – the demolition of a warehouse).

(e) Borrowing costs of $11.7 million (2015 – nil) were capitalised in the year.

(f) Included in property, plant and equipment are lands valuing $102,405 which were funded by the Company

and previously included in Due from Related Party (Note 22).

(g) If freehold land, plant and buildings were stated on the historical cost basis, the amounts would be as follows:


2016

$’000 2015 $’000

2016 $’000

2015 $’000

Cost 5,168,042 4,826,372 4,965,960 4,725,568 Accumulated depreciation (833,233) (806,795) (805,265) (785,785) Net book value 4,334,809 4,019,577 4,160,695 3,939,783

Page 48


16. Intangible Assets The Group and Company

Computer Software

$’000

Rights to Customer Contracts

$’000 Total $’000

At Cost - At 31 December 2014 24,330 423,667 447,997

Additions 746 36,752 37,498

At 31 December 2015 25,076 460,419 485,495 Additions 16,348 26,444 42,792

At 31 December 2016 41,424 486,863 528,287 Amortisation -

At 31 December 2014 7,722 72,354 80,076 Amortisation charge for year 3,699 78,871 82,570 At 31 December 2015 11,421 151,225 162,646 Amortisation charge for year 4,015 104,755 108,770 At 31 December 2016 15,436 255,980 271,416

Net Book Value - 31 December 2016 25,988 230,883 256,871 31 December 2015 13,655 309,194 322,849

The additions to ‘Rights to Customer Contracts’ during the year, related to the acquisition by Group of the stevedoring contracts of an operator at Port Bustamante. The amortisation period for the related contract is two years. Previously acquired contracts are amortised over two – ten years. The total amortisation charge is included in direct expenses in profit or loss.

17. Investments in Subsidiaries

2016 $’000

2015 $’000

Harbour Cold Stores Limited 13,335 13,335 Security Administrators Limited 6 6 Western Storage Limited 16,301 16,301 Western Terminals Limited 46,039 46,039 Kingston Terminal Operators Limited 50 50

75,731 75,731





Page 47



(a) continued

The Company


2016 $’000


Unobservable inputs



weighted average)


to fair value 2016

$’000 Plant and Building



charges







higher by $6,857 and lower by $7,661.

(b) A fixed charge totalling US$26.6 million has been placed over the property, plant and equipment of the

company as well as mortgages totalling $1,040 million over certain premises and equipment owned by the company in keeping with the terms of certain loan agreements (Note 28).

(c) During the year, the company completed a physical inspection of certain classes of assets. Arising from

this exercise, an additional provision for impairment of $5 million (2015 - $15 million) was recorded in respect of certain assets.

(d) The disposal of items of property, plant and equipment mainly comprise furniture and fixtures (2015 – the demolition of a warehouse).

(e) Borrowing costs of $11.7 million (2015 – nil) were capitalised in the year.

(f) Included in property, plant and equipment are lands valuing $102,405 which were funded by the Company

and previously included in Due from Related Party (Note 22).

(g) If freehold land, plant and buildings were stated on the historical cost basis, the amounts would be as follows:


2016

$’000 2015 $’000

2016 $’000

2015 $’000

Cost 5,168,042 4,826,372 4,965,960 4,725,568 Accumulated depreciation (833,233) (806,795) (805,265) (785,785) Net book value 4,334,809 4,019,577 4,160,695 3,939,783

Page 48


16. Intangible Assets The Group and Company

Computer Software

$’000

Rights to Customer Contracts

$’000 Total $’000

At Cost - At 31 December 2014 24,330 423,667 447,997

Additions 746 36,752 37,498

At 31 December 2015 25,076 460,419 485,495 Additions 16,348 26,444 42,792

At 31 December 2016 41,424 486,863 528,287 Amortisation -

At 31 December 2014 7,722 72,354 80,076 Amortisation charge for year 3,699 78,871 82,570 At 31 December 2015 11,421 151,225 162,646 Amortisation charge for year 4,015 104,755 108,770 At 31 December 2016 15,436 255,980 271,416

Net Book Value - 31 December 2016 25,988 230,883 256,871 31 December 2015 13,655 309,194 322,849

The additions to ‘Rights to Customer Contracts’ during the year, related to the acquisition by Group of the stevedoring contracts of an operator at Port Bustamante. The amortisation period for the related contract is two years. Previously acquired contracts are amortised over two – ten years. The total amortisation charge is included in direct expenses in profit or loss.

17. Investments in Subsidiaries

2016 $’000

2015 $’000

Harbour Cold Stores Limited 13,335 13,335 Security Administrators Limited 6 6 Western Storage Limited 16,301 16,301 Western Terminals Limited 46,039 46,039 Kingston Terminal Operators Limited 50 50

75,731 75,731



98

Page 49


18. Investments The Group The Company

2016

$’000 2015 $’000

2016 $’000

2015 $’000

Available-for-sale at fair value Unquoted equities in a related company 128,466 84,346 85,818 55,878

19. Recoverable from the Port Authority of Jamaica The Port Authority of Jamaica (PAJ) requires the company to allocate 16% of wharfage collected to a special

reserve. This reserve, that was created in 1976 can only be utilised for retroactive labour costs and special expenditure in accordance with directives from The Port Authority of Jamaica.

The Group and Company

2016 $’000

2015 $’000

Balance at 1 January - 32,730 Allocation of 16% of wharfage collections - (32,730) Severance payments - - - -

Page 50


20. Retirement Benefit Asset and Obligations


2016 $’000

2015 $’000

Statement of financial position (asset)/obligations for: Pension benefits (936,177) (619,083) Other retirement benefits 276,762 245,378 Profit or loss for (Note 7): Pension benefits (20,489) (29,954) Other retirement benefits 29,319 28,549

Remeasurements for: Pension benefits (281,330) 118,205 Other retirement benefits 11,424 23,937

(269,906) 142,142 (a) Pension benefits

The Group has established two pension schemes covering all permanent employees, a defined benefit plan and a defined contribution plan. The assets of the funded plans are held independently of the Group’s assets in separate trustee administered funds. Defined benefit plan The Group operates a joint contributory defined benefit pension scheme which is fully funded. The scheme is open to all permanent employees of the Group and is administered by trustees. Under the scheme, retirement benefits are based on average salary during the three years preceding retirement. The scheme is funded by employee contributions at 5% and employer contribution of 5% of salary, as recommended by independent actuaries. Members may also make voluntary contribution of up to 5% of their earnings. The assets of the scheme are held independently of the Group’s assets in a separate trustee-administered fund. The scheme is valued by independent actuaries annually using the projected unit credit method. The latest actuarial valuation was carried out as at 31 December 2016. Additionally, the plan is valued by independent actuaries triennially to determine the adequacy of funding. The latest such valuation being as at 31 December 2014 revealed that the scheme was adequately funded as at that date.

Defined contribution plan The Group, through a subsidiary, participates in a defined contributory pension scheme which was established in May 2001 and is open to security personnel and administrative personnel contracted to the subsidiary. The scheme is administered by trustees. The scheme is funded by employer’s contribution of 5% as well as contractor mandatory contributions of 5%. Members may also make voluntary contribution of up to 5% of their earnings, as recommended by independent actuaries.





Page 49


18. Investments The Group The Company

2016

$’000 2015 $’000

2016 $’000

2015 $’000

Available-for-sale at fair value Unquoted equities in a related company 128,466 84,346 85,818 55,878

19. Recoverable from the Port Authority of Jamaica The Port Authority of Jamaica (PAJ) requires the company to allocate 16% of wharfage collected to a special

reserve. This reserve, that was created in 1976 can only be utilised for retroactive labour costs and special expenditure in accordance with directives from The Port Authority of Jamaica.


2016 $’000

2015 $’000

Balance at 1 January - 32,730 Allocation of 16% of wharfage collections - (32,730) Severance payments - - - -

Page 50


20. Retirement Benefit Asset and Obligations


2016 $’000

2015 $’000

Statement of financial position (asset)/obligations for: Pension benefits (936,177) (619,083) Other retirement benefits 276,762 245,378 Profit or loss for (Note 7): Pension benefits (20,489) (29,954) Other retirement benefits 29,319 28,549

Remeasurements for: Pension benefits (281,330) 118,205 Other retirement benefits 11,424 23,937

(269,906) 142,142 (a) Pension benefits

The Group has established two pension schemes covering all permanent employees, a defined benefit plan and a defined contribution plan. The assets of the funded plans are held independently of the Group’s assets in separate trustee administered funds. Defined benefit plan The Group operates a joint contributory defined benefit pension scheme which is fully funded. The scheme is open to all permanent employees of the Group and is administered by trustees. Under the scheme, retirement benefits are based on average salary during the three years preceding retirement. The scheme is funded by employee contributions at 5% and employer contribution of 5% of salary, as recommended by independent actuaries. Members may also make voluntary contribution of up to 5% of their earnings. The assets of the scheme are held independently of the Group’s assets in a separate trustee-administered fund. The scheme is valued by independent actuaries annually using the projected unit credit method. The latest actuarial valuation was carried out as at 31 December 2016. Additionally, the plan is valued by independent actuaries triennially to determine the adequacy of funding. The latest such valuation being as at 31 December 2014 revealed that the scheme was adequately funded as at that date.

Defined contribution plan The Group, through a subsidiary, participates in a defined contributory pension scheme which was established in May 2001 and is open to security personnel and administrative personnel contracted to the subsidiary. The scheme is administered by trustees. The scheme is funded by employer’s contribution of 5% as well as contractor mandatory contributions of 5%. Members may also make voluntary contribution of up to 5% of their earnings, as recommended by independent actuaries.



100

Page 51


20. Retirement Benefit Asset and Obligations (Continued)

(a) Pension benefits (continued)

The defined benefit asset amounts recognised in the statement of financial position are determined as follows:


2016

$’000 2015

$’000 Fair value of plan assets (2,588,704) (2,166,696) Present value of funded obligations 1,652,527 1,547,613 Surplus of funded plan (936,177) (619,083) Limitation of asset due to uncertainty of obtaining economic benefits - - Asset in the statement of financial position (936,177) (619,083)

Movements in the amounts recognised in the statement of financial position:


2016 $’000

2015 $’000

Asset at beginning of year (619,083) (679,828) Amounts recognised in statement of comprehensive income (301,819) 88,251 Contributions paid (15,275) (27,506) Asset at end of year (936,177) (619,083)

The movement in the defined benefit asset recognised in the statement of financial position is as follows:


2016

$’000 2015

$’000 Balance at beginning of year (2,166,696) (1,824,731) Interest income (182,007) (169,530) Re-measurements -

Return on plan assets, excluding amounts included in interest expense (290,866) (252,844)

Members’ contributions (28,086) (25,188) Employer’s contributions (15,275) (27,506) Benefits paid 94,237 133,103 Transfer in (11) - Balance at end of year (2,588,704) (2,166,696)

Page 52



(a) Pension benefits (continued) The movement in the present value of the funded obligations over the year is as follows:


2016

$’000 2015

$’000 Balance at beginning of year 1,547,613 1,144,903 Current service cost 64,892 45,975 Interest cost 132,718 107,354 Re-measurements -

Loss from change in financial assumptions 6,954 168,925 Loss from change in experience assumptions 2,582 202,124

Members’ contributions 12,810 11,435 Benefits paid (94,237) (133,103) Transfer in 11 - Gain on curtailment (20,816) - Balance at end of year 1,652,527 1,547,613

As at the last valuation date, the present value of the defined benefit obligation was comprised of approximately $900,692,000 relating to active employees, $51,063,000 relating to deferred members, $697,736,000 relating to members in retirement and $3,036,000 representing other liabilities.

The amounts recognised in profit or loss are as follows:


2016

$’000 2015

$’000 Current service cost 49,616 32,222 Interest income (49,289) (62,176) Gain on curtailment (20,816) - Total, included in staff costs (Note 7) (20,489) (29,954)





Page 51



(a) Pension benefits (continued)

The defined benefit asset amounts recognised in the statement of financial position are determined as follows:


2016

$’000 2015

$’000 Fair value of plan assets (2,588,704) (2,166,696) Present value of funded obligations 1,652,527 1,547,613 Surplus of funded plan (936,177) (619,083) Limitation of asset due to uncertainty of obtaining economic benefits - - Asset in the statement of financial position (936,177) (619,083)

Movements in the amounts recognised in the statement of financial position:


2016 $’000

2015 $’000

Asset at beginning of year (619,083) (679,828) Amounts recognised in statement of comprehensive income (301,819) 88,251 Contributions paid (15,275) (27,506) Asset at end of year (936,177) (619,083)

The movement in the defined benefit asset recognised in the statement of financial position is as follows:


2016

$’000 2015

$’000 Balance at beginning of year (2,166,696) (1,824,731) Interest income (182,007) (169,530) Re-measurements -

Return on plan assets, excluding amounts included in interest expense (290,866) (252,844)

Members’ contributions (28,086) (25,188) Employer’s contributions (15,275) (27,506) Benefits paid 94,237 133,103 Transfer in (11) - Balance at end of year (2,588,704) (2,166,696)

Page 52



(a) Pension benefits (continued) The movement in the present value of the funded obligations over the year is as follows:


2016

$’000 2015

$’000 Balance at beginning of year 1,547,613 1,144,903 Current service cost 64,892 45,975 Interest cost 132,718 107,354 Re-measurements -

Loss from change in financial assumptions 6,954 168,925 Loss from change in experience assumptions 2,582 202,124

Members’ contributions 12,810 11,435 Benefits paid (94,237) (133,103) Transfer in 11 - Gain on curtailment (20,816) - Balance at end of year 1,652,527 1,547,613

As at the last valuation date, the present value of the defined benefit obligation was comprised of approximately $900,692,000 relating to active employees, $51,063,000 relating to deferred members, $697,736,000 relating to members in retirement and $3,036,000 representing other liabilities.

The amounts recognised in profit or loss are as follows:


2016

$’000 2015

$’000 Current service cost 49,616 32,222 Interest income (49,289) (62,176) Gain on curtailment (20,816) - Total, included in staff costs (Note 7) (20,489) (29,954)



102

Page 53



(a) Pension benefits (continued) Plan assets are comprised as follows:

The Group and Company 2016 2015 $’000 % $’000 % Quoted securities:

Equity securities 934,911 36.1% 672,837 31.1 Government of Jamaica securities 1,043,682 40.3% 1,084,012 50.0 Corporate bonds and promissory notes 155,883 6.1% 108,631 5.0 Repurchase agreements 213,652 8.3% 43,992 2.0 Leases 11,433 0.4% 16,065 0.7 Real estate 99,561 3.8% 97,050 4.5 Other 129,582 5.0% 144,109 6.7 2,588,704 100.0 2,166,696 100.0

The pension plan assets include ordinary stock units of the company with a fair value of $240,000,000 (2015 - $110,000,000).

Expected contributions to the post-employment plan for the year ending 31 December 2017 are $3.2 million.

The significant actuarial assumptions used were as follows:

2016 2015

Discount rate 9.00% 8.50% Future salary increases 6.50% 5.50%

Expected pension increase 4.50% 4.00%

Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in each territory. These assumptions translate into an average life expectancy in years for a pensioner retiring at age 65.

The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:

Impact on Post-employment obligations

Change in

Assumption Increase in

Assumption Decrease in

Assumption $’000 $’000 Discount rate 1% (196,819) 247,903 Future salary increases 1% 31,342 (29,928) Expected pension increase 1% 191,448 (158,022) Life expectancy 1% 27,504 (28,954)

Page 54



(a) Pension benefits (continued) Sensitivity (continued):

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the statement of financial position. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

(b) Other retirement benefits

The Group operates both a group health plan and a group life plan. The parent company covers 100% of the premiums of both plans. However pensioners under the health plan have the option to pay an additional premium for single dependant or multiple dependants’ coverage. The method of accounting and the frequency of valuations for these plans are similar to those used for the pension scheme. In addition to the assumptions used for the pension scheme, the main actuarial assumption is a long term increase in health costs of 8% per year (2015 – 7%) for the insured group health plan. The insured group life plan assumes a salary rate increase of 6.5% per year (2015 – 5.5%). The amounts recognised in the statement of financial position were determined as follows:


2016

$’000 2015

$’000 Present value of unfunded obligations 276,762 245,378

Movement in the amounts recognised in the statement of financial position:


2016

$’000 2015

$’000 Liability at beginning of year 245,378 201,449 Amounts recognised in the statement of comprehensive income 40,743 52,486 Contributions paid (9,359) (8,557) Liability at end of year 276,762 245,378





Page 53



(a) Pension benefits (continued) Plan assets are comprised as follows:

The Group and Company 2016 2015 $’000 % $’000 % Quoted securities:

Equity securities 934,911 36.1% 672,837 31.1 Government of Jamaica securities 1,043,682 40.3% 1,084,012 50.0 Corporate bonds and promissory notes 155,883 6.1% 108,631 5.0 Repurchase agreements 213,652 8.3% 43,992 2.0 Leases 11,433 0.4% 16,065 0.7 Real estate 99,561 3.8% 97,050 4.5 Other 129,582 5.0% 144,109 6.7 2,588,704 100.0 2,166,696 100.0

The pension plan assets include ordinary stock units of the company with a fair value of $240,000,000 (2015 - $110,000,000).

Expected contributions to the post-employment plan for the year ending 31 December 2017 are $3.2 million.

The significant actuarial assumptions used were as follows:

2016 2015

Discount rate 9.00% 8.50% Future salary increases 6.50% 5.50%

Expected pension increase 4.50% 4.00%

Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in each territory. These assumptions translate into an average life expectancy in years for a pensioner retiring at age 65.


Impact on Post-employment obligations

Change in

Assumption Increase in

Assumption Decrease in

Assumption $’000 $’000 Discount rate 1% (196,819) 247,903 Future salary increases 1% 31,342 (29,928) Expected pension increase 1% 191,448 (158,022) Life expectancy 1% 27,504 (28,954)

Page 54



(a) Pension benefits (continued) Sensitivity (continued):

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the statement of financial position. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

(b) Other retirement benefits

The Group operates both a group health plan and a group life plan. The parent company covers 100% of the premiums of both plans. However pensioners under the health plan have the option to pay an additional premium for single dependant or multiple dependants’ coverage. The method of accounting and the frequency of valuations for these plans are similar to those used for the pension scheme. In addition to the assumptions used for the pension scheme, the main actuarial assumption is a long term increase in health costs of 8% per year (2015 – 7%) for the insured group health plan. The insured group life plan assumes a salary rate increase of 6.5% per year (2015 – 5.5%). The amounts recognised in the statement of financial position were determined as follows:


2016

$’000 2015

$’000 Present value of unfunded obligations 276,762 245,378

Movement in the amounts recognised in the statement of financial position:


2016

$’000 2015

$’000 Liability at beginning of year 245,378 201,449 Amounts recognised in the statement of comprehensive income 40,743 52,486 Contributions paid (9,359) (8,557) Liability at end of year 276,762 245,378



104

Page 55


20. Retirement Benefit Asset and Obligations (Continued) (b) Other retirement benefits (continued)

The movement in the present value of the defined benefit obligation over the year is as follows:


2016

$’000 2015

$’000 Balance at beginning of year 245,378 201,449 Current service cost 12,234 8,966 Interest cost 21,319 19,583 Gain on curtailment (4,234) - Included in staff costs in profit or loss (Note 7) 29,319 28,549 Re-measurements -

Loss from change in financial assumptions 18,547 23,937 Experience losses (7,123) -

Total, included in other comprehensive income 11,424 23,937 Benefits paid (9,359) (8,557) Balance at end of year 276,762 245,378


Impact on Post-employment Obligations - Life

Change in

Assumption

Increase in Assumption

$’000

Decrease in Assumption

$’000 Discount rate 1% (2,545) 3,043 Future salary increases 1% 799 (758)

Impact on Post-employment Obligations - Medical

Change in

Assumption


$’000


$’000 Discount rate 1% (35,591) 45,997 Future medical cost rate 1% 45,997 (35,591)

Page 56



(c) Risks associated with pension plans and other post-employment plans Through its defined benefit pension plans and post-employment medical plans, the company is exposed to a number of risks, the most significant of which are detailed below: Asset volatility The plan liabilities are calculated using a discount rate set with reference to Government of Jamaica bond yields; if plan assets underperform this yield, this will create a deficit. As the plan matures, the trustees intends to reduce the level of investment risk by investing more in assets that better match the liabilities. The Government bonds largely represent investments in Government of Jamaica securities. However, the company believes that due to the long-term nature of the plan liabilities, a level of continuing equity investment is an appropriate element of the company’s long term strategy to manage the plans efficiently. See below for more details on the company’s asset-liability matching strategy. Changes in bond yields

A decrease in Government of Jamaica bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.

Inflation risk

Higher inflation will lead to higher liabilities. The majority of the plan’s assets are unaffected by fixed interest bonds, meaning that an increase in inflation will reduce the surplus or create a deficit.

Life expectancy

The majority of the plan’s obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plan’s liabilities. This is particularly significant, where inflationary increases result in higher sensitivity to changes in life expectancy.

The company ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the pension scheme. Within this framework, the company’s ALM objective is to match assets to the pension obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due. The company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the pension obligations. The company has not changed the processes used to manage its risks from previous periods. The company does not use derivatives to manage its risk. Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. A large portion of assets in 2016 consists of bonds and equities.

Funding levels are monitored on an annual basis and the current agreed contribution rate is 5% of pensionable salaries for the employees and 5% for the company. The next triennial valuation is due to be completed as at 31 December 2017. The company considers that the contribution rates set at the last valuation date to be sufficient to prevent a deficit and that regular contributions, which are based on service costs, will not increase significantly.





Page 55


20. Retirement Benefit Asset and Obligations (Continued) (b) Other retirement benefits (continued)

The movement in the present value of the defined benefit obligation over the year is as follows:


2016

$’000 2015

$’000 Balance at beginning of year 245,378 201,449 Current service cost 12,234 8,966 Interest cost 21,319 19,583 Gain on curtailment (4,234) - Included in staff costs in profit or loss (Note 7) 29,319 28,549 Re-measurements -

Loss from change in financial assumptions 18,547 23,937 Experience losses (7,123) -

Total, included in other comprehensive income 11,424 23,937 Benefits paid (9,359) (8,557) Balance at end of year 276,762 245,378


Impact on Post-employment Obligations - Life

Change in

Assumption


$’000


$’000 Discount rate 1% (2,545) 3,043 Future salary increases 1% 799 (758)

Impact on Post-employment Obligations - Medical

Change in

Assumption


$’000


$’000 Discount rate 1% (35,591) 45,997 Future medical cost rate 1% 45,997 (35,591)

Page 56



(c) Risks associated with pension plans and other post-employment plans Through its defined benefit pension plans and post-employment medical plans, the company is exposed to a number of risks, the most significant of which are detailed below: Asset volatility The plan liabilities are calculated using a discount rate set with reference to Government of Jamaica bond yields; if plan assets underperform this yield, this will create a deficit. As the plan matures, the trustees intends to reduce the level of investment risk by investing more in assets that better match the liabilities. The Government bonds largely represent investments in Government of Jamaica securities. However, the company believes that due to the long-term nature of the plan liabilities, a level of continuing equity investment is an appropriate element of the company’s long term strategy to manage the plans efficiently. See below for more details on the company’s asset-liability matching strategy. Changes in bond yields

A decrease in Government of Jamaica bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.

Inflation risk

Higher inflation will lead to higher liabilities. The majority of the plan’s assets are unaffected by fixed interest bonds, meaning that an increase in inflation will reduce the surplus or create a deficit.

Life expectancy

The majority of the plan’s obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plan’s liabilities. This is particularly significant, where inflationary increases result in higher sensitivity to changes in life expectancy.

The company ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the pension scheme. Within this framework, the company’s ALM objective is to match assets to the pension obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due. The company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the pension obligations. The company has not changed the processes used to manage its risks from previous periods. The company does not use derivatives to manage its risk. Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. A large portion of assets in 2016 consists of bonds and equities.

Funding levels are monitored on an annual basis and the current agreed contribution rate is 5% of pensionable salaries for the employees and 5% for the company. The next triennial valuation is due to be completed as at 31 December 2017. The company considers that the contribution rates set at the last valuation date to be sufficient to prevent a deficit and that regular contributions, which are based on service costs, will not increase significantly.



106

Page 57



(c) Risks associated with pension plans and other post-employment plans (continued) Life expectancy (continued) The weighted average duration of the defined benefit obligation for pension scheme is 15 years. The weighted average duration of the defined benefit obligation for post-employment medical and life insurance benefits is 16 years.

21. Inventories The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Fuel 6,471 3,972 6,471 3,972 Operating supplies 297,523 199,077 285,619 191,084

303,994 203,049 292,090 195,056

Operating supplies are shown net of provision for impairment of $5,000,000 (2015 – nil). 22. Related Party Transactions and Balances

(a) During the year the Group had normal business transactions with related parties with which there are

common directors, as follows: The Group The Company

2016

$’000 2015 $’000

2016 $’000

2015 $’000

(i) Revenue earned from sales of services Subsidiaries - - 4,842 8,268 Companies controlled by directors/members or related by virtue of common directorships 2,430,361 2,042,211 1,967,603 1,656,556

2,430,361 2,042,211 1,972,445 1,664,824

Services provided to related parties are negotiated, as with non-related party customers, and are all at arms length.

(ii) Other income Subsidiaries - dividends - - 348,000 - Subsidiaries – management fees - - 2,221 -

Companies controlled by directors/members or related by virtue of common directorships - dividends 1,612 - 1,047 -

(iii) Purchases of goods and services

Subsidiaries - - 68,155 63,961 Companies controlled by directors/members related by virtue of common directorships 253,804 265,484 252,563 264,842

253,804 265,484 320,718 328,803 Services are bought from related parties on the basis of the prices offered to non-related parties.

Page 58


22. Related Party Transactions and Balances (Continued)

(a) Transactions (continued) The Group The Company

2016

$’000 2015 $’000

2016 $’000

2015 $’000

(iv) Interest expense Subsidiaries - - 2,883 3,308 Companies controlled by directors/members

or related by virtue of common directorships 3,195 - 3,195 -

(b) Year-end balances with related parties: The Group The Company

2016

$’000 2015 $’000

2016 $’000

2015 $’000

(i) Due from related companies Subsidiaries - - 376,906 21,233 Companies controlled by directors/members or related by virtue of common directorships

Long term - 102,405 102,405 102,405 Current (Note 23) 369,961 199,134 295,124 160,705

369,961 301,539 774,435 284,343

The long term amount receivable for the Company from a related company is interest free and not due for repayment in twelve months. The amount for the Group was reclassified to property, plant and equipment (Note 15). Provisions of $6,573,000 (2015 - $7,234,000) and $4,223,000 (2015 - $5,652,000) for the Group and company respectively are held against current accounts receivable from related parties.

(ii) Due to related companies Subsidiaries - - 5,984 74,138 Companies controlled by directors/members or related by virtue of common directorships

(Notes 29 and 31) 58,216

53,313 58,216 50,446 58,216 53,313 64,200 124,584

At 31 December 2015, the amount due to subsidiaries included $32,900,000, representing funds being held on deposit for a subsidiary (Note 24).

(iii) Bank balances Companies controlled by directors/members or

related by virtue of common directorships

Short term investments - deposits 293,342 - 293,342 - Cash and bank 36,408 11,310 36,408 11,310 329,750 11,310 329,750 11,310 The ‘cash and bank’ balances with related parties are interest free based on the type of accounts held.





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(c) Risks associated with pension plans and other post-employment plans (continued) Life expectancy (continued) The weighted average duration of the defined benefit obligation for pension scheme is 15 years. The weighted average duration of the defined benefit obligation for post-employment medical and life insurance benefits is 16 years.

21. Inventories The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Fuel 6,471 3,972 6,471 3,972 Operating supplies 297,523 199,077 285,619 191,084

303,994 203,049 292,090 195,056

Operating supplies are shown net of provision for impairment of $5,000,000 (2015 – nil). 22. Related Party Transactions and Balances

(a) During the year the Group had normal business transactions with related parties with which there are

common directors, as follows: The Group The Company

2016

$’000 2015 $’000

2016 $’000

2015 $’000

(i) Revenue earned from sales of services Subsidiaries - - 4,842 8,268 Companies controlled by directors/members or related by virtue of common directorships 2,430,361 2,042,211 1,967,603 1,656,556

2,430,361 2,042,211 1,972,445 1,664,824

Services provided to related parties are negotiated, as with non-related party customers, and are all at arms length.

(ii) Other income Subsidiaries - dividends - - 348,000 - Subsidiaries – management fees - - 2,221 -

Companies controlled by directors/members or related by virtue of common directorships - dividends 1,612 - 1,047 -

(iii) Purchases of goods and services

Subsidiaries - - 68,155 63,961 Companies controlled by directors/members related by virtue of common directorships 253,804 265,484 252,563 264,842

253,804 265,484 320,718 328,803 Services are bought from related parties on the basis of the prices offered to non-related parties.

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(a) Transactions (continued) The Group The Company

2016

$’000 2015 $’000

2016 $’000

2015 $’000

(iv) Interest expense Subsidiaries - - 2,883 3,308 Companies controlled by directors/members

or related by virtue of common directorships 3,195 - 3,195 -

(b) Year-end balances with related parties: The Group The Company

2016

$’000 2015 $’000

2016 $’000

2015 $’000

(i) Due from related companies Subsidiaries - - 376,906 21,233 Companies controlled by directors/members or related by virtue of common directorships

Long term - 102,405 102,405 102,405 Current (Note 23) 369,961 199,134 295,124 160,705

369,961 301,539 774,435 284,343

The long term amount receivable for the Company from a related company is interest free and not due for repayment in twelve months. The amount for the Group was reclassified to property, plant and equipment (Note 15). Provisions of $6,573,000 (2015 - $7,234,000) and $4,223,000 (2015 - $5,652,000) for the Group and company respectively are held against current accounts receivable from related parties.

(ii) Due to related companies Subsidiaries - - 5,984 74,138 Companies controlled by directors/members or related by virtue of common directorships

(Notes 29 and 31) 58,216

53,313 58,216 50,446 58,216 53,313 64,200 124,584

At 31 December 2015, the amount due to subsidiaries included $32,900,000, representing funds being held on deposit for a subsidiary (Note 24).

(iii) Bank balances Companies controlled by directors/members or

related by virtue of common directorships

Short term investments - deposits 293,342 - 293,342 - Cash and bank 36,408 11,310 36,408 11,310 329,750 11,310 329,750 11,310 The ‘cash and bank’ balances with related parties are interest free based on the type of accounts held.



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(b) Year end balances (continued) The Group The Company

2016

$’000 2015 $’000

2016 $’000

2015 $’000

(iv) Borrowings Companies controlled by directors/members

or related by virtue of common directorships 759,330

51,296 759,330 51,296

(c) Key management compensation:


2016 $’000

2015 $’000

2016 $’000

2015 $’000

Salaries and other short term employee benefits 81,556 75,107 71,543 66,189 Payroll taxes – employer’s contributions 5,093 5,241 4,589 4,298

Pension benefits 2,929 4,273 1,868 3,332 Other 5,530 4,188 4,231 4,188 95,108 88,809 82,231 78,007 Directors' emoluments –

Fees 18,003 17,425 17,328 16,488 Consultancy 7,500 - 7,500 - Management remuneration (included in

salaries above) 35,518 33,918 35,518 33,918 23. Trade and Other Receivables The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Trade receivables 543,382 388,435 420,192 313,194 Less: Provision for impairment (33,527) (23,421) (19,153) (10,016) 509,855 365,014 401,039 303,178 Prepayments 18,170 8,422 13,638 3,058 Other 89,370 30,915 76,794 16,920

617,395 404,351 491,471 323,156 Trade receivables include amounts receivable from related parties (Note 22). The fair values for trade and other receivables approximates the carrying values.

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24. Cash and Cash Equivalents The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Short term investments - deposits 2,830,027 2,687,739 2,048,456 2,056,746 Less : Short term investments with maturity periods

in excess of 3 months - (14,685) - (14,685) Less: Investments held for subsidiary (Note 22) - - - (32,900) Less: Restricted cash (189,000) - (189,000) - 2,641,027 2,673,054 1,859,456 2,009,161 Cash and bank 360,819 332,129 279,294 253,949 3,001,846 3,005,183 2,138,750 2,263,110

The weighted average effective interest rate on short term deposits was 1.48% (2015 – 1.74%) per annum for United States dollar denominated deposits and 5.17% (2015 – 5.72%) per annum for Jamaican dollar deposits. These short term deposits have an average maturity of 53 days. The weighted average effective interest rate on short term deposits with maturity period in excess of three (3) months was 0.59% per annum for United States dollar denominated deposits and 4% for Jamaican dollar denominated investments. These short term deposits had an average maturity of 93 days.

Cash and bank and short term investments include amounts placed with related parties (Note 22). Cash at bank includes a United States dollar savings account and an interest earning current account. Interest is currently 0.15% (2015 – 0.25%) per annum and 3% (2015 – 1%) per annum respectively.

Restricted cash represents hypothecation of deposits to secure credit facilities (Note 28).

The Group has undrawn credit facilities via bank overdrafts of $60 million and $5 million which attract interest at 16.85% and 16.25% respectively. Security for the facilities is described in Note 28.

25. Share Capital

Number of Stock

Units

Ordinary Stock Units

’000 $’000 Issued share capital at:

31 December 2015 1,430,200 2,079,398 31 December 2016 1,430,200 2,079,398

The total authorised number of ordinary shares is 1,507,550,000 (2015 - 1,507,550,000) units. All issued shares are fully paid. The no par shares in issue comprise the stated capital of the company.





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(b) Year end balances (continued) The Group The Company

2016

$’000 2015 $’000

2016 $’000

2015 $’000

(iv) Borrowings Companies controlled by directors/members

or related by virtue of common directorships 759,330

51,296 759,330 51,296

(c) Key management compensation:


2016 $’000

2015 $’000

2016 $’000

2015 $’000

Salaries and other short term employee benefits 81,556 75,107 71,543 66,189 Payroll taxes – employer’s contributions 5,093 5,241 4,589 4,298

Pension benefits 2,929 4,273 1,868 3,332 Other 5,530 4,188 4,231 4,188 95,108 88,809 82,231 78,007 Directors' emoluments –

Fees 18,003 17,425 17,328 16,488 Consultancy 7,500 - 7,500 - Management remuneration (included in

salaries above) 35,518 33,918 35,518 33,918 23. Trade and Other Receivables The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Trade receivables 543,382 388,435 420,192 313,194 Less: Provision for impairment (33,527) (23,421) (19,153) (10,016) 509,855 365,014 401,039 303,178 Prepayments 18,170 8,422 13,638 3,058 Other 89,370 30,915 76,794 16,920

617,395 404,351 491,471 323,156 Trade receivables include amounts receivable from related parties (Note 22). The fair values for trade and other receivables approximates the carrying values.

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24. Cash and Cash Equivalents The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Short term investments - deposits 2,830,027 2,687,739 2,048,456 2,056,746 Less : Short term investments with maturity periods

in excess of 3 months - (14,685) - (14,685) Less: Investments held for subsidiary (Note 22) - - - (32,900) Less: Restricted cash (189,000) - (189,000) - 2,641,027 2,673,054 1,859,456 2,009,161 Cash and bank 360,819 332,129 279,294 253,949 3,001,846 3,005,183 2,138,750 2,263,110

The weighted average effective interest rate on short term deposits was 1.48% (2015 – 1.74%) per annum for United States dollar denominated deposits and 5.17% (2015 – 5.72%) per annum for Jamaican dollar deposits. These short term deposits have an average maturity of 53 days. The weighted average effective interest rate on short term deposits with maturity period in excess of three (3) months was 0.59% per annum for United States dollar denominated deposits and 4% for Jamaican dollar denominated investments. These short term deposits had an average maturity of 93 days.

Cash and bank and short term investments include amounts placed with related parties (Note 22). Cash at bank includes a United States dollar savings account and an interest earning current account. Interest is currently 0.15% (2015 – 0.25%) per annum and 3% (2015 – 1%) per annum respectively.

Restricted cash represents hypothecation of deposits to secure credit facilities (Note 28).

The Group has undrawn credit facilities via bank overdrafts of $60 million and $5 million which attract interest at 16.85% and 16.25% respectively. Security for the facilities is described in Note 28.

25. Share Capital

Number of Stock

Units

Ordinary Stock Units

’000 $’000 Issued share capital at:

31 December 2015 1,430,200 2,079,398 31 December 2016 1,430,200 2,079,398

The total authorised number of ordinary shares is 1,507,550,000 (2015 - 1,507,550,000) units. All issued shares are fully paid. The no par shares in issue comprise the stated capital of the company.



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26. Other Reserves

Other reserves comprise: The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Capital reserves 10,726,053 10,760,607 6,578,076 6,612,630 Fair value reserve 41,948 - 27,768 -

10,768,001 10,760,607 6,605,844 6,612,630

Capital Reserves The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Unrealised surplus on revaluation of property, plant and equipment 11,452,700 11,460,746 6,695,082 6,703,128

Less: Deferred taxation (1,213,596) (1,174,509) (439,972) (400,885) 10,239,104 10,286,237 6,255,110 6,302,243 Realised gain on sale of assets 30,188 30,188 5 5 Capital distributions received 3,612 3,612 3,612 3,612 Capitalisation of profits 130,325 130,325 - - Replacement reserve 319,339 306,760 319,339 306,760 Capitalisation of depreciation reserve 66 66 10 10 Arising on consolidation 3,419 3,419 - -

10,726,053 10,760,607 6,578,076 6,612,630

Fair Value Reserve This represents unrealised surplus on revaluation of available-for-sale investments.

27. Asset Replacement/Rehabilitation and Depreciation Reserves The Port Authority of Jamaica under the Wharfage Act mandated the creation of a special reserve to be provided through the tariff of wharfage rates, for the replacement and/or rehabilitation of the wharf facilities. The Port Authority of Jamaica also stipulated that the depreciation charged on the historical cost of property, plant and equipment be matched with amounts placed in a Depreciation Fund. The requirement for these reserves became effective in 1998. The Authority requires that both the Asset Replacement/Rehabilitation and the Depreciation Reserves be represented by a Fund consisting of cash, deposits or highly liquid securities. The net interest arising on such Funds should be transferred to the Asset Replacement/Rehabilitation and Depreciation Reserves, respectively. Amounts from these reserves are used for capital projects in accordance with guidelines set by The Port Authority of Jamaica.

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27. Asset Replacement/Rehabilitation and Depreciation Reserves (Continued) The balance of the reserves comprises:


2016 $’000

2015 $’000

2016 $’000

2015 $’000

Asset Replacement/Rehabilitation Reserve - - - -

Depreciation Fund 216,161 215,917 212,968 212,968

216,161 215,917 212,968 212,968

The movement in each category of reserves was as follows:

(a) Asset Replacement/Rehabilitation Reserve The Group and Company

2016 $’000

2015 $’000

At beginning of year - - Transfers from profit or loss account during the year 12,579 12,579 Transfer to capital reserves - utilised for capital expansion (12,579) (12,579) At end of year - -

(b) Depreciation Fund


2016 $’000

2015 $’000

2016 $’000

2015 $’000

At beginning of year 215,917 215,668 212,968 212,968 Transfer from retained earnings (net

interest) 244 249 - - At end of year 216,161 215,917 212,968 212,968

(c) Value of Reserve Funds Represented by Cash and Short Term Investments

The dollar amount of approvals received by the company from The Port Authority of Jamaica to undertake capital projects to date, exceeds the required provisions. As such, all related cash, deposits or highly liquid securities pertaining to reserves have been fully utilised.





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26. Other Reserves

Other reserves comprise: The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Capital reserves 10,726,053 10,760,607 6,578,076 6,612,630 Fair value reserve 41,948 - 27,768 -

10,768,001 10,760,607 6,605,844 6,612,630

Capital Reserves The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Unrealised surplus on revaluation of property, plant and equipment 11,452,700 11,460,746 6,695,082 6,703,128

Less: Deferred taxation (1,213,596) (1,174,509) (439,972) (400,885) 10,239,104 10,286,237 6,255,110 6,302,243 Realised gain on sale of assets 30,188 30,188 5 5 Capital distributions received 3,612 3,612 3,612 3,612 Capitalisation of profits 130,325 130,325 - - Replacement reserve 319,339 306,760 319,339 306,760 Capitalisation of depreciation reserve 66 66 10 10 Arising on consolidation 3,419 3,419 - -

10,726,053 10,760,607 6,578,076 6,612,630

Fair Value Reserve This represents unrealised surplus on revaluation of available-for-sale investments.

27. Asset Replacement/Rehabilitation and Depreciation Reserves The Port Authority of Jamaica under the Wharfage Act mandated the creation of a special reserve to be provided through the tariff of wharfage rates, for the replacement and/or rehabilitation of the wharf facilities. The Port Authority of Jamaica also stipulated that the depreciation charged on the historical cost of property, plant and equipment be matched with amounts placed in a Depreciation Fund. The requirement for these reserves became effective in 1998. The Authority requires that both the Asset Replacement/Rehabilitation and the Depreciation Reserves be represented by a Fund consisting of cash, deposits or highly liquid securities. The net interest arising on such Funds should be transferred to the Asset Replacement/Rehabilitation and Depreciation Reserves, respectively. Amounts from these reserves are used for capital projects in accordance with guidelines set by The Port Authority of Jamaica.

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27. Asset Replacement/Rehabilitation and Depreciation Reserves (Continued) The balance of the reserves comprises:


2016 $’000

2015 $’000

2016 $’000

2015 $’000

Asset Replacement/Rehabilitation Reserve - - - -

Depreciation Fund 216,161 215,917 212,968 212,968

216,161 215,917 212,968 212,968

The movement in each category of reserves was as follows:

(a) Asset Replacement/Rehabilitation Reserve The Group and Company

2016 $’000

2015 $’000

At beginning of year - - Transfers from profit or loss account during the year 12,579 12,579 Transfer to capital reserves - utilised for capital expansion (12,579) (12,579) At end of year - -

(b) Depreciation Fund


2016 $’000

2015 $’000

2016 $’000

2015 $’000

At beginning of year 215,917 215,668 212,968 212,968 Transfer from retained earnings (net

interest) 244 249 - - At end of year 216,161 215,917 212,968 212,968

(c) Value of Reserve Funds Represented by Cash and Short Term Investments

The dollar amount of approvals received by the company from The Port Authority of Jamaica to undertake capital projects to date, exceeds the required provisions. As such, all related cash, deposits or highly liquid securities pertaining to reserves have been fully utilised.



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28. Borrowings The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

(a) The Port Authority of Jamaica 1,480 1,480 1,480 1,480 (b) The Port Authority of Jamaica 1,452 1,452 - - (c) Bank of Nova Scotia 615,000 - 615,000 - (d) Development Bank of Jamaica/First Global

Bank Limited 127,200 156,000 127,200 156,000 (e) The Shipping Association of Jamaica Property

Limited

108,490 - 108,490 - (f) Development Bank of Jamaica/CIBC

FirstCaribbean International Bank (Jamaica) Limited 142,857 178,571 142,857 178,571

(g) CIBC FirstCaribbean International Bank (Jamaica) Limited 520,509 813,613 520,509 813,613

(h) CIBC FirstCaribbean International Bank (Jamaica) Limited 296,593 335,705 296,593 335,705

(i) CIBC FirstCaribbean International Bank (Jamaica) Limited 491,071 - 491,071 -

(j) Kingston Portworkers Superannuation Fund 35,840 51,296 35,840 51,296 2,340,492 1,538,117 2,339,040 1,536,665

Add: Interest payable 2,421 4,756 2,421 4,756 2,342,913 1,542,873 2,341,461 1,541,421 Less: Current portion (547,540) (447,037) (547,540) (447,037) 1,795,373 1,095,836 1,793,921 1,094,384

(a) These loans, which are interest free and unsecured, were obtained to build a security wall and are repayable only if the wharf is sold.

(b) This comprises a loan towards the partial cost of construction of a security wall. This interest-free and

unsecured loan is repayable only in the event of the asset being sold.

(c) This represents a partial disbursement of a $1.8 billion loan facility from The Bank of Nova Scotia for the financing of the company’s Total Logistics Facility. The loan is repayable over a 7 year period with a 2 year moratorium on principal. Thereafter, principal is repayable in 19 quarterly instalments of J$63,000,000.00 each and one final payment of J$603,000,000.00. The interest rate varies over the life of the loan with rates initially fixed at 8.5% and capped at 9.5% for the remaining 4 years.

(d) This represents a loan of $288 million granted by the Development Bank of Jamaica through First Global Bank

Limited. Interest rate is fixed at 9.75% per annum. The principal is repayable in one hundred and twenty monthly instalments of $2,400,000.

(e) This represents a loan facility of $110 million from The Shipping Association of Jamaica Property Limited for

financing of the company’s capital projects. The interest rate is fixed at 7% and the loan is repayable over fifteen years.

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28. Borrowings (Continued)

(f) This represents a credit facility granted by the Development Bank of Jamaica through CIBC FirstCaribbean International Bank (Jamaica) Limited towards the company's capital expenditure program. The interest rate is fixed at 8.25% and the loan is repayable over seven (7) years.

(g) This represents a credit facility of US$26.6 million through CIBC FirstCaribbean International Bank (Jamaica)

Limited towards the company's capital expenditure program. Interest is currently computed based on US six-month LIBOR plus 4.50% per year. This loan was issued in 2006 and is scheduled to be repaid in June 2018.

(h) This represents a loan facility from CIBC FirstCaribbean International Bank (Jamaica) Limited toward the company’s capital expenditure program for the amount of $352 million. The loan will be amortized over a ten year period at a fixed interest rate of 9.5% for the first two years and WATBY plus 2.5% thereafter. The loan facility also attracts a moratorium in the first year.

(i) This represents a loan facility from CIBC FirstCaribbean International Bank (Jamaica) Limited toward the company’s capital expenditure program for the amount of $550 million. The loan will be amortized over a 7 year period and interest is currently computed based on six-month WATBY plus 2.5%; subject to a cap of 10.25% and is scheduled to be repaid in March 2023.

(j) This represents a loan of $100 million granted by the Kingston Port Workers Superannuation Fund. The interest rate is fixed at 10% per annum. The principal is repayable over a seven year period.

The loan facilities with First Global Bank Limited (d) above are secured by mortgages over property owned by the Group, bills of sale over certain pieces of machinery and assignment of insurance over these pieces of machinery. Security for the loan facilities with CIBC FirstCaribbean International Bank (Jamaica) Limited (f)-(i) above and including the bank overdrafts (Notes 3 and 24) and guarantees (Note 33), is a registered demand debenture providing fixed and floating charges over the company’s fixed and floating assets stamped to cover US$26.6 million, assignment of insurance proceeds and promissory notes stamped in the sums of $1.152 billion and mortgages over property owned by the Group of $352 million. Undrawn facilities with this institution (excluding overdrafts (Note 24)) total $150 million for capital expenditure. The facility with Kingston Portworkers Superannuation Fund (j) is secured by mortgages over property owned by the Group and bill of sales over certain pieces of machinery (Note 15). The facility with The Shipping Association of Jamaica Property Company is secured by mortgages over property owned by the Group. The Bank of Nova Scotia (BNS) facility (c) is secured by a debenture ranked pari passu with CIBC FirstCaribbean International Bank (Jamaica) Limited over the fixed and floating assets of the Company, together with a legal mortgage over land and buildings owned by the Group, hypothecation of deposits totalling $189 million (Note 24) and supported by guarantees totalling $1.8 billion from a subsidiary. Undrawn facilities from BNS include insurance premium financing of US$1.5 million, unsecured revolving loan of $4 million and bank overdraft (Note 24).

29. Long Term Liability

Long term liability represents amounts due to third parties in relation to stevedoring contracts acquired (Note 16). The amounts are interest free and are payable upon the achievement of stipulated conditions. This balance includes amounts payable to companies controlled by directors or related by virtue of common directorships.





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28. Borrowings The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

(a) The Port Authority of Jamaica 1,480 1,480 1,480 1,480 (b) The Port Authority of Jamaica 1,452 1,452 - - (c) Bank of Nova Scotia 615,000 - 615,000 - (d) Development Bank of Jamaica/First Global

Bank Limited 127,200 156,000 127,200 156,000 (e) The Shipping Association of Jamaica Property

Limited

108,490 - 108,490 - (f) Development Bank of Jamaica/CIBC

FirstCaribbean International Bank (Jamaica) Limited 142,857 178,571 142,857 178,571

(g) CIBC FirstCaribbean International Bank (Jamaica) Limited 520,509 813,613 520,509 813,613

(h) CIBC FirstCaribbean International Bank (Jamaica) Limited 296,593 335,705 296,593 335,705

(i) CIBC FirstCaribbean International Bank (Jamaica) Limited 491,071 - 491,071 -

(j) Kingston Portworkers Superannuation Fund 35,840 51,296 35,840 51,296 2,340,492 1,538,117 2,339,040 1,536,665

Add: Interest payable 2,421 4,756 2,421 4,756 2,342,913 1,542,873 2,341,461 1,541,421 Less: Current portion (547,540) (447,037) (547,540) (447,037) 1,795,373 1,095,836 1,793,921 1,094,384

(a) These loans, which are interest free and unsecured, were obtained to build a security wall and are repayable only if the wharf is sold.

(b) This comprises a loan towards the partial cost of construction of a security wall. This interest-free and

unsecured loan is repayable only in the event of the asset being sold.

(c) This represents a partial disbursement of a $1.8 billion loan facility from The Bank of Nova Scotia for the financing of the company’s Total Logistics Facility. The loan is repayable over a 7 year period with a 2 year moratorium on principal. Thereafter, principal is repayable in 19 quarterly instalments of J$63,000,000.00 each and one final payment of J$603,000,000.00. The interest rate varies over the life of the loan with rates initially fixed at 8.5% and capped at 9.5% for the remaining 4 years.

(d) This represents a loan of $288 million granted by the Development Bank of Jamaica through First Global Bank

Limited. Interest rate is fixed at 9.75% per annum. The principal is repayable in one hundred and twenty monthly instalments of $2,400,000.

(e) This represents a loan facility of $110 million from The Shipping Association of Jamaica Property Limited for

financing of the company’s capital projects. The interest rate is fixed at 7% and the loan is repayable over fifteen years.

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28. Borrowings (Continued)

(f) This represents a credit facility granted by the Development Bank of Jamaica through CIBC FirstCaribbean International Bank (Jamaica) Limited towards the company's capital expenditure program. The interest rate is fixed at 8.25% and the loan is repayable over seven (7) years.

(g) This represents a credit facility of US$26.6 million through CIBC FirstCaribbean International Bank (Jamaica)

Limited towards the company's capital expenditure program. Interest is currently computed based on US six-month LIBOR plus 4.50% per year. This loan was issued in 2006 and is scheduled to be repaid in June 2018.

(h) This represents a loan facility from CIBC FirstCaribbean International Bank (Jamaica) Limited toward the company’s capital expenditure program for the amount of $352 million. The loan will be amortized over a ten year period at a fixed interest rate of 9.5% for the first two years and WATBY plus 2.5% thereafter. The loan facility also attracts a moratorium in the first year.

(i) This represents a loan facility from CIBC FirstCaribbean International Bank (Jamaica) Limited toward the company’s capital expenditure program for the amount of $550 million. The loan will be amortized over a 7 year period and interest is currently computed based on six-month WATBY plus 2.5%; subject to a cap of 10.25% and is scheduled to be repaid in March 2023.

(j) This represents a loan of $100 million granted by the Kingston Port Workers Superannuation Fund. The interest rate is fixed at 10% per annum. The principal is repayable over a seven year period.

The loan facilities with First Global Bank Limited (d) above are secured by mortgages over property owned by the Group, bills of sale over certain pieces of machinery and assignment of insurance over these pieces of machinery. Security for the loan facilities with CIBC FirstCaribbean International Bank (Jamaica) Limited (f)-(i) above and including the bank overdrafts (Notes 3 and 24) and guarantees (Note 33), is a registered demand debenture providing fixed and floating charges over the company’s fixed and floating assets stamped to cover US$26.6 million, assignment of insurance proceeds and promissory notes stamped in the sums of $1.152 billion and mortgages over property owned by the Group of $352 million. Undrawn facilities with this institution (excluding overdrafts (Note 24)) total $150 million for capital expenditure. The facility with Kingston Portworkers Superannuation Fund (j) is secured by mortgages over property owned by the Group and bill of sales over certain pieces of machinery (Note 15). The facility with The Shipping Association of Jamaica Property Company is secured by mortgages over property owned by the Group. The Bank of Nova Scotia (BNS) facility (c) is secured by a debenture ranked pari passu with CIBC FirstCaribbean International Bank (Jamaica) Limited over the fixed and floating assets of the Company, together with a legal mortgage over land and buildings owned by the Group, hypothecation of deposits totalling $189 million (Note 24) and supported by guarantees totalling $1.8 billion from a subsidiary. Undrawn facilities from BNS include insurance premium financing of US$1.5 million, unsecured revolving loan of $4 million and bank overdraft (Note 24).

29. Long Term Liability

Long term liability represents amounts due to third parties in relation to stevedoring contracts acquired (Note 16). The amounts are interest free and are payable upon the achievement of stipulated conditions. This balance includes amounts payable to companies controlled by directors or related by virtue of common directorships.



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30. Deferred Income Tax

Deferred income taxes are calculated on all temporary differences under the liability method using a tax rate of 10.59% (2015 – 9.65%) for the company and 25% (2015- 25%) for the subsidiaries.


2016

$’000 2015

$’000 2016

$’000 2015

$’000 Statement of financial position (assets)/liabilities for:

Deferred income tax assets (1,363) (1,498) - - Deferred income tax liabilities 1,168,265 1,111,131 584,765 492,339 1,166,902 1,109,633 584,765 492,339

Deferred income tax assets and liabilities are due to the following items:


2016 $’000

2015 $’000

2016 $’000

2015 $’000

Deferred income tax assets - Vacation leave accrual 3,062 2,716 1,750 1,404 Other payables 640 509 - 163 Employee benefit obligations 29,309 23,704 29,309 23,704 Property, plant and equipment 130 265 - - Unrealised foreign exchange losses 227 276 227 - Interest payable 256 3,789 256 3,789

33,624 31,259 31,542 29,060 Deferred income tax liabilities -

Property, plant and equipment 1,098,192 1,068,832 516,557 461,143 Unrealised foreign exchange gains 2,291 - 82 - Interest receivable 902 12,256 527 452 Retirement benefit asset 99,141 59,804 99,141 59,804

1,200,526 1,140,892 616,307 521,399 Net deferred income tax liabilities 1,166,902 1,109,633 584,765 492,339

The movement in the net deferred income tax assets and liabilities during the year is as follows:


2016

$’000 2015 $’000

2016 $’000

2015 $’000

Net liabilities at beginning of year 1,109,633 1,109,411 492,339 470,070 Profit or loss (Note 10) (10,401) (14,054) 24,756 7,993 Effect on re-measurements of post- employment

benefits 28,583 (13,731) 28,583 (13,731) Stockholders’ equity on disposal of PPE (575) (17,322) (575) (17,322) Effect of change in tax rate on previous years’

revaluation surplus 39,662 45,329 39,662 45,329 Net liabilities at end of year 1,166,902 1,109,633 584,765 492,339





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30. Deferred Income Tax

Deferred income taxes are calculated on all temporary differences under the liability method using a tax rate of 10.59% (2015 – 9.65%) for the company and 25% (2015- 25%) for the subsidiaries.


2016

$’000 2015

$’000 2016

$’000 2015

$’000 Statement of financial position (assets)/liabilities for:

Deferred income tax assets (1,363) (1,498) - - Deferred income tax liabilities 1,168,265 1,111,131 584,765 492,339 1,166,902 1,109,633 584,765 492,339

Deferred income tax assets and liabilities are due to the following items:


2016 $’000

2015 $’000

2016 $’000

2015 $’000

Deferred income tax assets - Vacation leave accrual 3,062 2,716 1,750 1,404 Other payables 640 509 - 163 Employee benefit obligations 29,309 23,704 29,309 23,704 Property, plant and equipment 130 265 - - Unrealised foreign exchange losses 227 276 227 - Interest payable 256 3,789 256 3,789

33,624 31,259 31,542 29,060 Deferred income tax liabilities -

Property, plant and equipment 1,098,192 1,068,832 516,557 461,143 Unrealised foreign exchange gains 2,291 - 82 - Interest receivable 902 12,256 527 452 Retirement benefit asset 99,141 59,804 99,141 59,804

1,200,526 1,140,892 616,307 521,399 Net deferred income tax liabilities 1,166,902 1,109,633 584,765 492,339

The movement in the net deferred income tax assets and liabilities during the year is as follows:


2016

$’000 2015 $’000

2016 $’000

2015 $’000

Net liabilities at beginning of year 1,109,633 1,109,411 492,339 470,070 Profit or loss (Note 10) (10,401) (14,054) 24,756 7,993 Effect on re-measurements of post- employment

benefits 28,583 (13,731) 28,583 (13,731) Stockholders’ equity on disposal of PPE (575) (17,322) (575) (17,322) Effect of change in tax rate on previous years’

revaluation surplus 39,662 45,329 39,662 45,329 Net liabilities at end of year 1,166,902 1,109,633 584,765 492,339

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30. Deferred Income Tax (Continued) The deferred tax movement in the profit or loss comprises the following temporary differences:


2016

$’000 2015 $’000

2016 $’000

2015 $’000

Vacation leave accrual (346) 307 (346) 195 Other payables (131) - 163 - Employee benefit obligations (4,395) (4,269) (4,395) (4,269) Unrealised foreign exchange losses 49 (276) (227) (163) Interest payable 3,533 (708) 3,533 (708) Property, plant and equipment (9,592) (26,884) 16,327 (213) Unrealised foreign exchange gains 2,291 (427) 82 (427) Interest receivable (11,354) 4,765 75 140 Retirement benefit asset 9,544 13,438 9,544 13,438

(10,401) (14,054) 24,756 7,993

The deferred tax movement on the re-measurements of post-employment benefits in other comprehensive income comprises:


2016 $’000

2015 $’000

2016 $’000

2015 $’000

Retirement benefit asset 29,793 (11,419) 29,793 (11,419) Employee benefit obligations (1,210) (2,312) (1,210) (2,312)

28,583 (13,731) 28,583 (13,731) Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts shown in the statement of financial position include the following: The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Deferred income tax assets to be recovered - After more than 12 months 29,439 23,704 29,881 23,704

Deferred income tax liabilities to be extinguished -

After more than 12 months 1,197,333 1,128,636 615,698 520,947



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31. Trade and Other Payables The Group The Company

2016 $’000

2015 $’000

2016 $’000

2015 $’000

Trade payables 102,825 78,967 83,151 65,448 Dividends payable 292,460 220,965 292,460 220,965 Provision for 16% wharfage reserve 45,176 20,820 45,176 20,820 Other payables and accruals 562,068 414,338 522,037 388,139 1,002,529 735,090 942,824 695,372

Trade and other payables include amounts payable to related parties (Note 22). 32. Operating Lease

The group earned property rental income of $52,607,000 (2015: $32,531,000) under operating leases. The future minimum lease payments receivable under operating leases are as follows:

2016

$’000 2015

$’000 No later than 1 year 35,965 30,000 Within 1 to 5 years 84,192 - Over 5 years 35,419 - 155,576 30,000

33. Contingent Liabilities Litigation

The company and its subsidiaries are subject to various claims, disputes and legal proceedings, in the normal course of business. Provision is made for such matters when, in the opinion of management and its legal counsel, it is probable that a payment will be made by the Group, and the amount can be reasonably estimated. In respect of claims asserted against the Group which have not been provided for, management is of the opinion that such claims are either without merit, can be successfully defended or will result in exposure to the Group which is immaterial to both financial position and results of operations. The Group is not currently involved in any significant litigation. Other The Group is contingently liable to its bankers in respect of guarantees in the ordinary course of business totalling approximately $2.8 million.

34. Commitments

The Group and company had capital commitments at 31 December 2016 as follows: $’000

Authorised and contracted for 941,047 35. Subsequent Events

Subsequent to the year end, the company paid a dividend of 20 cents per share to shareholders on record on 23 December 2016 (Note 14).





notes

118

notes

I/We …………………………………………………………………………………………...…

of …………………………………………………………………………………………………

being a member/members of KINgSTON WHARVES LIMITED hereby appoint …………………......................……….

……………………………………………………………………………………………………………………………………...

of ……………………………………………………………………………………………………………………………………

or failing him/her ……………………………………………………………………………………………………….....….......

of ……………………………………………………………………………………………………………………….................

As my/our proxy to vote on my/our behalf at the Annual general Meeting of the Company to be held at KWL Total Logistics Facility (TLF), 195 second street, newport West, Kingston 13. on Thursday June 22, 2017 at 10

a.m. and at any adjournment thereof.

resoLuTions For AGAinsT

Resolution 1

Resolution 2

Resolution 3

Resolution 3 (i)

Resolution 3 (ii)

Resolution 3 (iii)

Resolution 3 (iv)

Resolution 4

Resolution 5

Date this …………….…….. day of ……………..…….. 2017

……………………………………………………….....………..

Sign ature

……………………………………………..............….………..

Signature

notes:1. A Member entitled to attend and vote is entitled to appoint a proxy to attend and vote in his stead. 2. If the appointer is a corporation, this form must be under its common seal or under the hand of some officer or attorney duly

authorized in that behalf.3. In the case of joint holders, the signature of any one holder will be sufficient, but the names of all the joint holders should be

stated.4. If the form is returned without any indication as to how the person appointed proxy shall vote, the proxy shall exercise his

discretion as to how he votes or whether to abstain from voting.5. To be valid this proxy must be deposited with the Registrar and Transfer Agent, Jamaica Central securities depository Limited, 40 Harbour street, Kingston, not less than 48 hours before the time appointed for holding the meeting. 6. A proxy need not be a member of the Company.

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AUDITORS

PriceWaterhouseCoopers

LAYOUT & DESIGN

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kingport building // Third street // Newport West, P.O. Box 260 // Kingston 13 // Jamaica

tel: 1-876-923-9211 // faX: 1-876-923-5361 // [email protected] // www.kingstonwharves.com.jm

Documents

KINGSTON WHARVES LIMITED ANNUAL REPORT 2016€¦ · feeder services to Caribbean and Latin American Ports. • The regional transshipment hub for one of the world’s leading motor