2019 - jamstockex.com · driven by various strategies being implemented by management. despite the...

ANNUAL

REPORT

2019

RESILIENCE | SUSTAINABILITY | GROWTH

A proud Jamaican Company since 1962

Annual Report 2019

CONTENTS

Performance Highlights 5

Our Vision & Strategy 6

Notice of Annual General Meeting 7

Corporate Data 8

Chairman’s Report to Stockholders 9

Board of Directors 11

Directors’ Report 15

Stockholders as at March 31, 2019 16

Our Policies and Principles 17

Corporate Governance 21

Operating Environment 28

Risk Management 30

Ten-Year Financial Review 33

Leadership Team 35

Management Discussion & Analysis 38

Managing Director’s Overview 39

Financial Performance 41

Marketing 46

Trade Marketing and Distribution 46

Brand Marketing 47

Legal and External Affairs 49

Corporate Social Responsibility 51

Human Resources 52

Audited Financial Statements 54

PERFORMANCE

HIGHLIGHTS

Share Price ($)

- 11.1%

Gross Operating Revenue (J$ Billion)

+ 2.9%

Earnings per stock unit (¢)

-2.2%

Net Profit (J$ Billion)

- 2.0%

Stockholders’ Return on Equity

+ 84.4%

Dividend Paid Per stock unit (¢)

+ 6.7%

Market Capitalization (J$Billion)

- 11.1%

Trading Profit Margin

- 1.6pp

Shareholders’ Equity to Total Assets Ratio

- 13pp

OUR VISION & STRATEGY

Growth

British American Tobacco and its subsidiary companies, including Carreras, focus on key strategic segments of the market that offer the best prospects for long term growth, including driving our premium segment. We also believe it is important to continue to develop and utilise innovative, differentiated products and offer our consumers added value from our brands.

Productivity

As a member of the British American Tobacco Group, our overall approach to productivity is about using our global resources to increase profits and generate funds for reinvesting in our business.

Our Vision & MissionOur vision is to achieve and maintain leadership of the Jamaican Tobacco Industry in order to create long term shareholder value.

Our Strategy We hold steadfast to the strategy of our parent Company, British American Tobacco, in creating shareholder value, delivering profit growth and long term business sustainability. The four pillars of this strategy are Growth, Productivity, Sustainability and developing a Winning Organization.

Sustainability

We will continue to balance our commercial objectives with the expectations of a broad range of stakeholders, thus ensuring a sustainable business.

Winning Organization

We are confident in BAT’s strategies for Growth, Productivity and Sustainability but to deliver our vision we must also have the right people and the right working environment. That is the essence of the Winning Organization strategy.

7 Carreras Limited Annual Report 2019

Financial StatementsGovernance Management's Discussion & AnalysisStrategic Report

NOTICE OF ANNUAL GENERAL MEETINGNotice is hereby given that the Fifty-Seventh Annual General Meeting of the Stockholders of CARRERAS

LIMITED will be held at the Jamaica Pegasus Hotel, 81 Knutsford Boulevard, Kingston 5 on Wednesday,

September 4, 2019 at 2:00 p.m. for the following purposes:

1. To receive the Audited Financial Statements and the Reports of the Auditors and Directors for the year ended March 31, 2019 To consider and (if thought fit) pass the following Resolution: “THAT the Audited Financial Statements and the Reports of the Auditors and Directors for the year ended March 31, 2019 be and are hereby adopted.” 2. 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 KPMG, 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.” 3. To elect Directors (a) The Directors due to retire in accordance with the provisions of Article 101 of the Articles of Incorporation are Mr. Oliver Holmes and Mrs. Janene Shaw and, being eligible, offer

themselves for re-election. To consider and (if thought fit) pass the following Resolutions: (i) “THAT Mr. Oliver Holmes be and is hereby re-elected a Director of the Company.” (ii) “THAT Mrs. Janene Shaw be and is hereby re-elected a Director of the Company.” (b) Messrs. Rafael Marquez, Arturo Campero and Juan Carlos Restrepo Piedrahita were appointed as Directors since the last Annual General Meeting of the Company and, being eligible, offer themselves for election. To consider and (if thought fit) pass the following Resolutions: i) “THAT Mr. Rafael Marquez be and is hereby elected a Director of the Company.” ii) “THAT Mr. Arturo Campero be and is hereby elected a Director of the Company.” iii) “THAT Mr. Juan Carlos Restrepo Piedrahita be and is hereby elected a Director of the Company.”

4. To confirm the remuneration of the Non-Executive Directors To consider and (if thought fit) pass the following Resolution: “THAT the amount shown in the Financial Statements of the Company for the year ended March 31, 2019 for emoluments received by the Non-Executive Directors for their services as Directors be and is hereby approved.” 5. To approve and ratify dividends and special capital cash distribution: To consider and (if thought fit) pass the following Resolution: “THAT the interim dividends of $0.21 paid on June 28, 2018; $0.16 (ordinary) and special capital cash distribution of $0.11 paid on August 30, 2018; $0.19 paid on Dec. 13, 2018; and $0.18 paid on March 14, 2019, making a total of $0.85 for the Year, be and are hereby ratified.” 6. To consider any other business which may properly be transacted at an Annual General Meeting. By Order of the Board Janene Shaw Company Secretary Registered Office: 13A Ripon Road, Kingston 5 May 22, 2019

Important Notice for Members who are

not able to attend: Any member of the Company entitled to attend and vote at this meeting is also entitled to appoint one or more proxies to attend and vote in his/her stead. Such proxies need not be members of the Company. A suitable Form of Proxy is enclosed. Form of Proxy must be lodged with the Registrar and Transfer Office: Sagicor Bank Jamaica Limited, Group Legal Trust & Corporate Services, 28 – 48 Barbados Avenue, Kingston 5, not less than forty-eight (48) hours before the time appointed for holding the meeting.

Financial Statements GovernanceManagement's Discussion & Analysis

Carreras Limited Annual Report 2019 8

Strategic Report

LOCATION

CARRERAS LIMITED

13A Ripon RoadKingston 5

Telephone: +1 (876) 749 9800Fax: +1 (876) 906 9284

E-Mail: [email protected]: www.carrerasltd.com

DEPOTS

35½ Hagley Park Road, Kingston 10

6 Allan Avenue, Port Antonio, Portland

1-2 Villa Road, Mandeville, Manchester

74 Main Street, Ocho Rios, St Ann

26 Humber Avenue, Montego Bay, St James

COMPANY SECRETARY: Janene Shaw

REGISTERED OFFICE: 13A Ripon Road Kingston 5

AUDITORS: KPMG 6 Duke Street Kingston

BANKERS: The Bank of Nova Scotia Jamaica Limited

Scotiabank Centre Cnr. of Duke & Port Royal Streets Kingston

REGISTRAR AND TRANSFER OFFICE: Sagicor Bank Jamaica Limited

Group Legal Trust & Corporate Services R. Danny Williams Building 28 – 48 Barbados Avenue Kingston 5

MANAGEMENT TEAM

NAME DESIGNATION

Marcus Steele Managing Director

Janene Shaw Finance Director

Ashleigh-Ann Arnold Legal and External Affairs Manager

Portia Darsoo Human Resource Business Partner

Jason Fournillier Trade Marketing & Distribution Manager

Rohan Campbell Marketing Deployment Manager

BOARD OF DIRECTORS

Oliver Holmes - Chairman

Arturo Campero

Michael Bernard

Matthew Hogarth

Rafael Marquez

Janene Shaw

Marcus Steele

CORPORATE DATA



CHAIRMAN’S REPORT TO STOCKHOLDERS

Shareholders:I am pleased to report that your Company performed creditably in 2018-2019. This year, despite the increasingly complex and challenging trading environment, we were able to build on past successes and minimize the negative effects of elements of the operating environment. Carreras delivered strong results despite the continued presence of the illicit cigarette trade and consumer affordability. This year, our Operating Revenue increased by 2.8%, from $12.6 billion to $12.9 billion. However, due to increased investment in strategic initiatives to bolster our drive for growth, we recorded Profit After Tax of $3.4 billion, marginally below 2017-2018 results of $3.5 billion, a 2.2% decline. It is worth noting that the 21.4% increase in the Special Consumption Tax (SCT) in March 2017 which was preceded by increases both in May 2016 and in March 2015 of 16.7% and 14.3%, respectively, is an experience from which we are still recovering. We, however, remain optimistic about the continued recovery of our volumes during 2019 that will be driven by various strategies being implemented by Management.

Despite the challenges, your Company has not wavered in its commitment to excellence, maintaining enviable shareholder value. For the 2018/19 financial year, Stockholders’ Return on Equity totaled 255.1%, compared to 170.7% in 2018, indicating growth over the prior year. Dividends paid for the year totaled $4.1 billion or $0.85 per share, a 15% increase over the corresponding period last year. Similarly, the dividend yield increased over last year, being 9% for 2018/19 compared to 7% for the prior year. This is primarily due to the completion of the

Chairman

Oliver Holmes


Financial Statements GovernanceManagement's Discussion & Analysis Strategic Report

liquidation process of Cigarette Company of Jamaica Limited (CCJ), which commenced in 2004 and ended this year. CCJ was voluntarily dissolved by the Registrar of Companies and its final distribution of $534.0 million (net) during the year allowed Carreras to make a special distribution to its stockholders on August 30th, 2018.

Shareholders, we have been able to consistently deliver value by leveraging the strength of our brands. To efficiently place our brands in the hands of distributors and customers, we continue to revise our route to market approach, covering wider geographical areas while delivering more to our customers. These initiatives will lead your Company to further growth in the medium to long term. Our capable management team continues to integrate new approaches into efficient paradigms to decrease costs. The power of our brands and our distribution approach are key parts of the backbone of the strategy to handle the still-present illicit cigarette trade.

The conversation regarding the illicit-trade is ongoing. During the year, we continued to place significant focus on sustaining the awareness of its impact among key stakeholders including the Government, law enforcement and our customers, through various media and communication initiatives. We also saw historic levels of illegal cigarette seizures which both the Police and Jamaica Customs are to be commended for, and which no doubt, demonstrates their resolve in reducing the presence of illicit cigarettes within the domestic market. We, however, continued to make recommendations to the Government on solutions to the issue which include implementing a sustainable excise strategy and stronger border and port protection mechanisms, among others.

During the year, we continued to demonstrate our philanthropy and social responsibility, delivering multi-interventions and initiatives to better the lives of our people. Empowering through education, therefore, continues to be a priority for us. This year, we awarded 42 scholarships to students attending various Jamaican colleges and universities, continuing our 51-year tradition. The 2018-2019 year was another in which our activities went beyond profit and improved the quality of life for several Jamaicans.

Good governance and responsible corporate behavior remain a priority for our business and during the year, BAT launched several key initiatives to empower employees and business units like Carreras, to better identify and mitigate challenges related to key compliance areas such as anti-bribery and anti-corruption (ABAC) laws.

As is customary in this forum, we say farewell and thank you to those directors who have resigned: Mrs. Rosa Pereira Sigala, Mrs. Maria Gabriela Rincon and Mrs. Brenda Wilbert. Thank you for your service to the board. We wish you success in all your future

endeavors. We extend an enthusiastic welcome to Messrs. Rafael Marquez and Arturo Campero, appointed on November 7, 2018 and Mr. Juan Carlos Restrepo Piedrahita, appointed effective July 24, 2019. Fellow directors, a sincere thank you for your stewardship. Your guidance and commitment to high corporate governance principles are highly appreciated. You are pillars of the Company’s continued success.

Carreras remains one of the strongest companies currently operating in Jamaica. It is supported by insightful strategies, focused execution and masterful management. Being led by the achievement-oriented Marcus Steele, underpinned by a qualified and experienced management team, the staff is poised to continue to execute clear and effective action plans that generate results. I would like to thank our staff for their dedication, hard work and ability to deliver, despite the challenges. The positive outlook of the management and staff is a key input in Carreras’ continued ability to deliver superior shareholder value. I would also like to thank our loyal customers and consumers, who despite increasing economic challenges and uncertainty, continue to trust, support and enjoy our brands. We find your continued support highly encouraging. Shareholders, thank you for your confidence in your Company and its ability to innovate and grow.

With our dedication to dynamic innovative actions, your Company remains strong and growth oriented. The business ecosystem continues to be a complex space to navigate but we have become increasingly skilled in doing so. With a fundamental focus on delivering value to shareholders, customers and consumers, the prospects for stable, solid growth is encouraging. The trust and support of our various stakeholders make us confident that Carreras will remain strong in the future.

Oliver W. HolmesChairman

Janene Shaw, Finance Director & Company Secretary, Carreras, accepts the Stock Exchange’s Best Practices Award for 1st Runner-Up, Best Performing Company for 2017.



Oliver HOLMES

NatioNality: Jamaican

PositioN: Chairman of the Board of Directors of Carreras

Ltd. since November 2015; Non-Executive and Independent

Director since February 2007; Chairman of the Nomination

and Compensation Committee since January 2016; appointed

to the Corporate Governance Committee since June 2017.

other aPPoiNtmeNts: Founder and Managing Director

of Capital Options Ltd., Chairman of the Board of Allied

Insurance Brokers Ltd., Chairman of Wigton Windfarm Ltd.

and Member of the Board of Barnett Ltd.

skills & exPerieNce: Mr. Holmes is the Managing

Director of Capital Options, a financial advisory firm he founded in 1997. Prior to establishing Capital Options, Mr.

Holmes was the Chief Operating Officer of Manufacturers Merchant Bank Ltd. and prior to that Vice President of

Citibank N. A. He served as a senior manager in virtually all

aspects of Citibank and its subsidiaries operations in Jamaica,

including Vice President - Corporate Finance, Financial

Controller – Citibank Jamaica and its subsidiaries, Corporate

Banking Group Head, Managing Director - Citifinance Limited, Manager - Centralized Operations and Chief Inspector for

the Caribbean region. During his career at Citibank, he led or

participated in many notable transactions in the Jamaican and

international markets, and, at Capital Options, has continued

to close notable transactions in the areas of capital raising,

mergers & acquisitions, financial advisory and private equity in the Jamaican and Caribbean Markets.

QualificatioNs: B.Sc. Management Studies (Hons.);

M.Sc. Accounting

committees: Chairman, Nomination & Compensation

Committee; Member, Corporate Governance Committee

Marcus STEELE


PositioN: Managing Director of Carreras Limited since

March 2013; appointed to the Board of Directors since October

2007.

other aPPoiNtmeNts: Director of Proven Wealth Limited

and Non-Executive Director at Peak Bottling Company Limited

and Catherine’s Peak Bottling Company Limited; Chairman of

the Board of Directors of Demerara Tobacco Company since

February 2018.

skills & exPerieNce: Mr. Steele first joined Carreras Group Limited in the Company’s Tobacco division, Cigarette

Company of Jamaica Limited, in the capacity of Management

Accountant in April 1998. In June 1999, he was promoted to

Finance Planning Manager and Marketing Finance Manager

in June 2001. In May 2002, he was appointed Finance

Planning Manager with overall responsibility for management

of Marketing and Operations Finance. In March 2004, Mr.

Steele was seconded to British American Tobacco (BAT)

Caribbean and Central America’s Area Office in Costa Rica as the Country Readiness Manager for the Caribbean with responsibility for leading the migration of the Caribbean legal

entities into the regional shared service centre. In July 2005,

he was appointed Finance Planning and Reporting Manager for BAT’s operations in the Caribbean and Central America

where he focused on financial reporting, strategy and planning. Mr. Marcus Steele was then appointed to the Board of

Directors of Carreras Limited on October 1, 2007 and served

as Finance Director and Company Secretary up until August

2011 when he was seconded to the Trinidad branch of another

BAT Company, Carisma Marketing Services Limited, in the

position of Country Manager with responsibility for the general

management of the Company’s businesses across 24 markets

in the English, French and Dutch Caribbean.

QualificatioNs: Graduate of St. Jago High School.

Chartered Accountant; B.Sc. Accounting, University of the

West Indies; MBA, Florida International University. Executive

Programme in General Management, Harvard Business

School.

BOARD OF DIRECTORS



Janene SHAW


PositioN: Finance Director and Company Secretary.

Appointed to the Board of Directors since May 2015.

skills & exPerieNce: Mrs. Shaw has over 25

years’ experience and a proven track record in financial management, accounting and auditing. Janene is responsible

for the Strategic Financial Management of the Company and

also performs the role of Company Secretary.

Prior to joining Carreras, Janene was employed at J. Wray & Nephew Limited / Lascelles deMercado & Co. Limited where

she held various senior finance positions being General Manager, Finance & Administration – JWN Agricultural

Division, Group Financial Officer and Accounting and Treasury Director. Prior to that, Janene was employed at

PriceWaterhouseCoopers where she gained progressive audit

experience to the level of Audit Manager.

QualificatioNs: Chartered Accountant; B.Sc. Accounting,

University of the West Indies, Mona. Member of the Institute

of Chartered Accountants of Jamaica; Member of the

Association of Certified Chartered Accountants in the U.K.

Michael BERNARD


PositioN: Non-Executive and independent Director since

2010. Executive Director (as Managing Director)from 2005 to

2010. Appointed to the Audit Committee on May 17, 2011 and

has been Chairman since February 3, 2016.

other aPPoiNtmeNts: Executive Chairman of Peak

Bottling Company Limited and Chairman of Spike Industries

Limited. He is a Non-Executive Director of Salada Foods

Limited, GK General Insurance Company Limited, New Transport Group Limited, Sterling Investments Limited and

Hardware & Lumber Limited. Chairman of the Board of

Management of Jamaica College.

skills & exPerieNce: Mr. Bernard first joined Carreras Group Limited in 1988 and in 1991 he was appointed General

Manager of the Jamaica Biscuit Company. In 1995 he

assumed concurrently, the positions of Managing Director of

two subsidiaries; the Cigarette Company of Jamaica Limited

and Agricultural Products of Jamaica Limited. In 1997, he

was appointed to the Board of Directors of Carreras Limited

until 2000 when he was seconded to the USA subsidiary of

British American Tobacco, Brown and Williamson Tobacco

Corporation. He regained leadership of the Cigarette Company

of Jamaica Limited at the end of 2001 and was re-appointed to

the Board of Carreras Group Limited in 2004.

In 2005, Michael was appointed Managing Director of Carreras

Limited, the role he held until retirement in 2010.

QualificatioNs: BA; B.Sc. summa cum laude Business

Administration, Forest Management respectively, Washington

State University; MBA, the Harvard Graduate School of

Business Administration. 2010 recipient of the Carlton

Alexander Award for Excellence; Fellow of the Jamaica

Institute of Management.

committees: Chairman, Audit Committee

BOARD OF DIRECTORS



Arturo CAMPERO

NatioNality: Venezuelan

PositioN: Appointed to the Board of Directors on November

7, 2018

other aPPoiNtmeNts: Vice President Financial Planning

and Shared Services, RAI Services Company

skills & exPerieNce: Mr. Arturo Campero is a qualified professional business manager with a proven track record in

Finance. Arturo has over 18 years of international experience

within the British American Tobacco (BAT) group, his most

recent being Finance Director of the South America North

& Caribbean (SANCAR) cluster, acting as a key member of the leadership team, driving the Revenue Sustainability agenda for the Area. Before assuming this role, he held other

senior positions within the BAT Group including: Regional Commercial Finance Manager and Regional Corporate Finance Manager, both roles at British American Tobacco

Americas located in Brazil, Strategy & Planning Manager

Venezuela, Operation Finance Manager Venezuela, Leaf

Finance Manager, Marketing Finance and Treasury in

Venezuela. In May 2019, Arturo was appointed to the role

of Vice President Financial Planning and Shared Services,

Reynolds American Inc Services Company

QualificatioNs: BSc. Business Administration (General

Management), Metropolitan University, Caracas, Venezuela

Master in Finance, Institute of Advanced Studies (IESA)

Business School, Caracas, Venezuela.

committees: Member, Audit Committee

Rafael MARQUEZ

NatioNality: Venezuelan

PositioN: Area Director, SANCAR Cluster, appointed to the Board of Directors on November 7, 2018

skills & exPerieNce: Mr. Rafael Marquez joined BAT Venezuela through Cigarrera Bigott in 1985 as an

Operations Trainee. Since then he has been involved in many

cross-functional initiatives, including senior roles in Trade

Marketing, Brand Marketing, Human Resources and General Management. Over the course of his 34 years in BAT, Rafael has had a truly international career, having worked in several

countries across the globe, including Suriname (1990 – 91), El

Salvador (1998-2000), Perú (2000-2002), Korea (2006-2010) and Singapore (2010-2011), before returning to Venezuela

for the third time in 2011 as General Manager. In April 2017,

he was appointed Area Director for the South America North

(SAN) cluster, which includes Colombia and Venezuela. In

2018, the SAN Cluster was expanded to include the Caribbean

markets (SANCAR).

QualificatioNs: BSc., Colegio Le Salle La Colina; MSc

Mechanical Engineering, Universidad Simon Bolivar; MBA,

Universidad Simon Bolivar.

BOARD OF DIRECTORS



Matthew HOGARTH


PositioN: Non-Executive and independent Director, appointed to the Board of

Directors on February 4, 2016; member of the Audit Committee since February

4, 2016 and the Nomination and Compensation Committee since May 25,

2016; Chairman of the Corporate Governance Committee since February 2,

2017.

other aPPoiNtmeNts: Managing Partner at MH&CO., Attorneys- at-

Law. Non-Executive Director of IronRock Insurance Company Limited, Jamaica Stock Exchange; CAC 2000 Limited; Marander Industries Limited.

skills & exPerieNce: Mr. Hogarth is an Attorney-at-Law. Over his years

in practice, he has managed numerous corporate bank loan transactions

for numerous international blue chip companies, private equity and debt

transactions, mergers and acquisitions, Initial Public Offerings (IPOs),

stock exchange listings, private business and legal audits and has acted in

numerous cross-border matters including the management and strategy of

insolvency and receivership assignments, including advising the Liquidator

or Receiver on legal issues. He also has considerable experience with both residential and commercial real estate transactions, including real estate

investment vehicles and structures. Mr. Hogarth has a reputation for being

solution-oriented, detailed, thorough and for his proficiency at creating practical corporate structures that marry business and the law. He received

his LL.B (with Honours) from the University of Liverpool.

QualificatioNs: LL.B (with Honours), University of Liverpool. Called

to the bar in multiple jurisdictions including Jamaica, New York State, The British Virgin Islands, Saint Lucia and Barbados. Member of the American

Bar Association, the Jamaican Bar Association, the BVI Bar Association,

INSOL International (International Association of Restructuring, Insolvency & Bankruptcy Professionals) and the American Bankruptcy Institute. Legal

member of the Private Sector Organization of Jamaica’s Listed Company’s

Committee.

committees: Chairman, Corporate Governance Committee; Member,

Audit Committee; Member, Nomination & Compensation Committee

BOARD OF DIRECTORS



DIRECTORS’ REPORTThe Directors are pleased to submit their Report and Audited Financial Statements for the year ended March 31, 2019. The following are selected highlights:

Financial Results

Year endedMarch 31, 2019

$000s

Year endedMarch 31, 2018

$000s

Profit before income tax 4,515,929 4,637,326

Income tax for the year (1,109,027) (1,152,696)

Total profit after tax 3,406,902 3,484,630

Less: minority interest (53) (34)

Net profit for the year attributable to stockholders 3,406,849 3,484,596

Revenue reserves at beginning of year 1,920,034 2,006,755

Total revenue reserves 5,326,883 5,491,351

Appropriations have been made as follows:

Dividends and Distributions (4,126,240) (3,592,256)

Deferred tax on reserves of subsidiaries in liquidation 22,010 (586)

Defined benefit plan actuarial gains/losses, net of tax 19,875 21,525

Transfer tax paid on intra-group distributions (28,384) -

1,214,144 1,920,034

Earnings per stock unit for year: 70.2¢ 71.8¢

The following payments were made during the year:

First quarter ended Jun 30, 2018 - $0.21 per stock unit (Ordinary)

Second quarter ended Sept 30, 2018 - $0.16 per stock unit (Ordinary)

- $0.11 per stock unit (Special capital cash distribution)

Third quarter ended Dec 31, 2018 - $0.19 per stock unit (Ordinary)

Fourth quarter ended Mar 31, 2019 - $0.18 per stock unit (Ordinary)

No further final dividend payment is proposed in respect of 2018/2019.

The Directors have approved an interim dividend of $0.14 per stock unit, to be paid on June 27, 2019.

Auditors

KPMG have expressed their willingness to continue in office and offer themselves for re-appointment.

Directors

Messrs. Rafael Marquez and Arturo Campero were appointed on November 7, 2018 and Mr. Juan Carlos Restrepo Piedrahita was appointed effective July 24, 2019 and, being eligible, offer themselves for election.

Mrs. Rosa Pereira Sigala, Mrs. Maria Gabriela Rincon and Mrs. Brenda Wilbert resigned and the Board wishes to express its appreciation to them for their invaluable contribution to the Company.

The Directors due to retire in accordance with the provisions of the Articles of Incorporation are Mr. Oliver Holmes and Mrs. Janene Shaw and, being eligible, offer themselves for re-election.

ON BEHALF OF THE BOARD

Janene Shaw (Secretary)



STOCKHOLDERS AS AT MARCH 31, 2019

Ten Largest Stockholders as at March 31, 2019

Stock units held

Rothmans Holdings (Caricom) Limited 2,446,508,260

Sagicor PIF Equity Fund 279,484,650

National Insurance Fund 214,184,690

SJIML A/C 3119 121,781,360

JCSD Trustee Services Ltd. – SIGMA OPTIMA 107,617,151

L.B.J. Overseas Ltd. 102,117,115

Grace Kennedy Limited Pension Scheme 74,337,030

ATL Group Pension Fund Trustee Nominee 62,726,740

NCB Insurance Co. Ltd. A/C WT 109 47,500,000

SJLIC for Scotiabridge Retirement Scheme 41,255,790

TOTAL 3,497,512,786

Directors & Connected Persons

Stock Units Held

Mr. Michael Bernard Nil

Mr. Arturo Campero Nil

Mr. Matthew Hogarth (Connected Party) 8,000

Mr. Oliver Holmes Nil

Mr. Rafael Marquez Nil

Mrs. Janene Shaw Nil

Mr. Marcus Steele Nil

There has been no change in the Directors’ stockholding interests occurring between the end of the company’s financial year and the date of the Notice convening the Annual General Meeting.

At no time during or at the end of the financial year has any Director had any material interest in any contract or arrangement in relation to the business of the company.

Executive & Senior Management:

Mr. Marcus Steele Nil

Mrs. Janene Shaw Nil

Mrs. Ashleigh Arnold Nil

Miss Portia Darsoo Nil

Mr. Jason Fournillier Nil

Mr. Rohan Campbell Nil



OUR POLICIES AND PRINCIPLES

Our Guiding Principles

We continue to live the Guiding Principles of British American Tobacco which form the core of our culture and guide how we deliver our strategy.

Enterprising Spirit We value enterprise from all of our employees, giving us a great breadth of ideas and viewpoints to enhance the way we do business. We have the confidence to passionately pursue growth and new opportunities while accepting the considered entrepreneurial risk that comes with it. We are bold and strive to overcome challenges. This is the cornerstone of our success.

Open Minded Our corporate culture is a great strength of the business and one of the reasons we have been, and will continue to be, successful. We are forward-looking and anticipate consumer needs, winning with innovative, high-quality products. We listen to, and genuinely consider, other perspectives and changing social expectations. We are open to new ways of doing things.

Freedom Through Responsibility We give our people the freedom to operate, providing them with the benefits of our scale but the ability to succeed. We always strive to do the right thing, exercising our responsibility to society and other stakeholders. We use our freedom to take decisions and act in the best interest of consumers.

Strength from Diversity We respect and celebrate each other’s differences and enjoy working together. We harness diversity – of our people, cultures, viewpoints, brands, markets and ideas – to strengthen our business. We value what

makes each of us unique.

Our Business Principles

The Principle of Mutual Benefit

is the basis on which we build our relationships with our stakeholders. We are primarily in business to build long term shareholder value and we believe the best way to do this is to seek to understand and take account of the needs of all our stakeholders.

The Principle of Responsible Product Stewardship

is the basis on which we meet consumer demand for a legal product that is generally accepted as a cause of serious diseases. Accordingly, our products and brands should be developed, manufactured and marketed in a responsible manner.

The Principle of Good Corporate Conduct

is the basis on which all our businesses should be managed. Business success brings with it an obligation for high standards of behaviour and integrity in everything we do and wherever we operate. These standards should not be compromised for the sake of results.

We are committed to operating at the highest standards of corporate conduct and transparency.

This section provides greater insight into British American Tobacco’s (BAT) policies and principles underpinning the Winning Organisation and Sustainability aspects of our strategy. These policies and principles have been endorsed and adopted by the Carreras Leadership Team and support the effective identification, management and mitigation of key risks and issues for our business in these and other areas.

Our Marketing PrinciplesWe believe in upholding high standards of corporate behaviour. We agree that the tobacco industry should be regulated, but we also think we should be able to communicate in a responsible way with adult tobacco consumers about our products. We are committed to the responsible marketing of all our products to adult consumers aged 18 and over. Our marketing is governed by the BAT International Marketing Principles which provide a consistent and responsible approach to marketing our products. We expect all our suppliers, agents and third-parties to comply with:

➠ The relevant BAT marketing principles as a minimum standard where they are stricter than local laws; or

➠ Local laws or other local marketing codes where they are stricter than, or override, BAT marketing principles.



Below are the 3 main principles which guide the way we market and distribute our brands responsibly.

Our marketing will be responsible, accurate and not misleading.1

Our marketing will be directed at adult consumers.

Our marketing will make clear that it originates from British American

Tobacco and that it is intended to promote the sale of our brands.

Our Standards of Business ConductOur Standards of Business Conduct express the high standards of business integrity that British American Tobacco (BAT) requires from employees worldwide.

The Standards of Business Conduct set out specific guidelines which provide support and guidance for employee conduct. Whistle blowing procedures are also put in place so that any employee who suspects wrongdoing can raise his/her concern in confidence.

The Standards cover four broad areas which govern general business conduct, as well as provide guidance for employees in making appropriate decisions and judgements in the course of work. These areas are:

➠ Whistleblowing;

➠ Personal and Business Integrity;

➠ Workplace and human Rights;

➠ Public Contributions;

➠ Corporate Assets and Financial Integrity;

➠ National and International Trade.

Each employee is expected to know, understand and practice the standards, as appropriate, and review and sign in accordance with the policy, on an annual basis.

During the year, as part of the annual employee sign off process, all employees had to complete a short training course on the Standards, either through the Standards of Business Conduct e-learning portal or through presentations shared by their respective line managers.

1

2

3



Anti-Bribery and Corruption Procedure

In 2018, BAT successfully deployed several key initiatives to empower employees and business units across the Group to better identify and mitigate challenges related to key compliance areas such as anti-bribery and anti-corruption (ABAC) laws. To raise awareness of these issues with employees, an e-learning was delivered to a targeted cross-functional global audience selected on the basis of their potential interaction with government officials. To complement this, employee webcasts were also hosted for BAT managers across the world.

Additionally, to assist business units in identifying Standards of Business Conduct related issues (in particular relating to bribery and corruption) in connection with third parties retained by subsidiary Companies like Carreras, a new Third-Party Procedure was launched during the year. This procedure mandates a consistent methodology for pre-contractual due diligence on prospective third-party business partners and is complemented by mandatory mitigation packages (such as training and contractual clauses) for medium and high-risk third parties.

This due diligence also provides a retrospective review of third parties with which the Company did business before the Third-Party Procedure came into effect.

Our Environmental PolicyWe are are committed to meeting consumer needs in an environmentally responsible and sustainable way. We are also committed to operating responsibly in both the direct operations that we control, and throughout the wider supply chain that we influence. Responsibility is one of the cornerstones of our strategy, and we believe that good environmental practice is good business practice.

We will comply with all legal and regulatory requirements governing environmental management, implement environmental management practices internally and monitor compliance to them.

Our Health and Safety PolicyWe recognize the paramount importance of the health, safety and welfare of all employees and non-company personnel in the successful conduct of our business. We are therefore committed to the prevention of injury and ill-health and strive for continual improvement in our health and safety management and performance, through setting clear objectives, including the monitoring and measurement of key performance indicators.

British American Tobacco believes in the active participation of each employee and others as appropriate, in promoting, achieving and maintaining the highest standards of health and safety, in so far as it is reasonably practicable.

Framework for Corporate Social Investment We are committed to giving back to the communities in which we operate. We also encourage our employees to play an active role both in their local and business communities. Our Corporate Social Investment policy is supported by the BAT Group Strategic Framework for corporate and social initiatives (CSI), which sets out the Group CSI strategy and how local operating companies are to develop, deliver and monitor community investment programmes within three themes: Sustainable Agriculture and Environment; Empowerment and Civic Life.

Supplier Code of ConductThe BAT Supplier Code of Conduct sets out the minimum standards, group companies expect of suppliers. Our ultimate goal is to drive the continuous improvement of standards within our supply chain and as such, we are committed to working with such suppliers over time to help them achieve adherence with the requirements of this Code.



Policies/Principles Summary Areas covered Key Stakeholder Groups

BAT Standards of Business Conduct

Anti-bribery and corruption, conflicts of interest, and entertainment and gifts. Respect in the workplace, including promoting equality and diversity, preventing harassment and bullying, and safeguarding employee wellbeing. Respect for human rights, including prevention of child labour and exploitation of labour, and respect for freedom of association. Political contributions and charitable contributions.

Financial integrity, accurate accounting and record-keeping, and information security. Anti-illicit trade, competition and anti-trust, and sanctions compliance. Whistleblowing

Employees and contractors, Governments and regulators, local communities and society

Health and Safety Policy

Health, safety and welfare of all employees, other members of our workforce and third-party personnel.

Employees and contractors, suppliers, business partners, farmers, local communities and society

Environment Policy

Our commitments to carrying out our business in an environmentally responsible and sustainable way, including agricultural, manufacturing and distribution operations.

Employees and contractors, suppliers, business partners, farmers, local communities and society

Employment Principles

Employment practices, including commitments to diversity, reasonable working hours, family friendly policies, employee wellbeing, talent, performance and equal opportunities, and fair, clear and competitive remuneration and benefits.

Group employees

Supplier Code of Conduct

Standards required of Suppliers of BAT operating Companies worldwide, including business integrity, anti-bribery and corruption, environmental sustainability and respect for human rights (covering equal opportunities and fair treatment, health and safety, prevention of harassment and bullying, child labour, and exploitation of labour, and freedom of association).

Suppliers and business partners, employees and contractors, local communities and society

Strategic Framework for corporate social investment

Sets out BAT’s Group strategy and a framework for Corporate Social Investment

NGOs and development agencies, local communities and society

International Marketing Principles

Provides a consistent and responsible approach to marketing our products.

Employees, suppliers, agents and third-parties

For more information on our policies and principles, please visit our website www.carrerasltd.com.



CORPORATE GOVERNANCE

BOARD MISSIONThe Board of Directors is collectively responsible for the success of the company.

The Board remains committed to providing entrepreneurial leadership of Carreras within a framework of prudent and effective controls which enables risk to be assessed and managed. The Board is responsible for overseeing the company’s strategic aims; ensuring that the necessary financial and human resources are in place for the company to meet its objectives; and reviewing management performance. The Board also upholds the company’s values and standards and ensures that its obligations to the company’s shareholders and others are understood and met.

Responsibilities of Board members (Chairman, Non-Executive Directors, Company Secretary)There is a clear division of responsibilities at the head of the company between the running of the Board and the executive responsibility for the running of the company’s business. No one individual has unfettered powers of decision.

ChairmanThe Chairman is responsible for leadership of the Board, ensuring its effectiveness on all aspects of its role and setting its agenda. The Chairman is also responsible for ensuring that the directors receive accurate, timely and clear information. He also ensures effective communication with Shareholders.

Non-Executive DirectorsAs part of their role as members of a unitary Board, non-executive directors constructively challenge and help develop proposals on strategy. Non-executive directors also scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance. They ensure the integrity of financial information and that financial controls and systems of risk management are robust and defensible.

Directors can obtain independent professional advice in the course of their duties, if necessary, at the company’s expense.

Company SecretaryThe Company Secretary plays a key role in assisting all directors to obtain the information they need to carry out their roles effectively. She is responsible for ensuring that Board processes and procedures are appropriately followed and that they support effective decision making and governance in accordance with the Companies Act.

Appointments to the BoardThere is a formal, rigorous and transparent procedure for the appointment of new directors to the Board.

Appointments to the Board are made on merit and against objective criteria. Care is also taken to ensure that appointees have enough time available to devote to the job. This is particularly important in the case of chairmanship. The Board also satisfies itself that plans are in place for orderly succession for appointments to the Board and to senior management, so as to maintain an appropriate balance of skills and experience within the company and on the Board.

Election and re-electionAll directors are submitted for re-election at regular intervals, subject to continued satisfactory performance. The Board ensures planned and progressive refreshing of the Board.



Independence of DirectorsIndependence is based on criteria agreed by the Board and includes:

Ј a Director that has not within the last three years been an employee of the Company or a related company;

Ј a Director that has not within the last three years had a material business relationship with the Company either directly or as a shareholder, director or senior employee of a body that has a relationship with the Company either as a supplier, a customer or competitor of the Company;

Ј a Director that has not within the last three years received additional remuneration from the Company (apart from a director’s compensation) nor participated in the Company’s performance-related pay scheme;

Ј a Director whose spouse, child(ren) or dependent(s) are not advisors, directors or senior employees of the Company;

Ј a Director who does not represent a significant shareholder.

The Board is not aware of any relationships or circumstances affecting the Directors’ independent judgement.

BOARD COMMITTEES

Committee Chairmen

The Board committee chairmen are responsible for the leadership of the respective Board committees and that each respective Board committee executes on their respective charters and mandates, as approved by the Board. The Board committee chairmen are also responsible for:

a. fixing the agenda for the relevant Board committee meetings and to ensure that all relevant matters are tabled for consideration (as requested by the members of that committee, the wider Board, or otherwise);

b. reporting to the Board at each Board meeting; and

c. reporting to the

shareholders.

Corporate Governance Committee (CGC)

Matthew HOGARTH

CHAIRMAN

Relationship with the Board and other committees

The role of the CGC and its relationship with the Board and other committees is as set out in the Charter approved by the Board and to the extent that the CGC undertakes tasks on behalf of the Board, the results are reported to, and considered by, the Board. The CGC is charged with a review of the Board, its committees and their respective functions on an annual basis and to ensure that they execute their responsibilities efficiently and with transparency and accountability.

Authority & Responsibilities

The Committee shall support the Board in the administration and exercise of the Board’s management of the Company by carrying out the following:

Corporate Governance Principles

Ј Developing, recommending and reviewing corporate governance principles applicable to the Board.

Ј Ensuring that the Board and is committees are in compliance with all regulatory composition requirements, which shall include requirements for director independence.

Ј Reviewing, no less than once annually, the adequacy of the charters of the Board and its various subcommittees, including the adequacy of this Charter, and submit to the Board any suitable recommendations in relation to the amendment of same.

Ј Reviewing, no less than once annually, the Company’s Articles of Incorporation and overall corporate governance policy and practices and submit to the Board any suitable recommendations in relation to the amendment of same.

Ј Preparing the annual Corporate Governance Statement for inclusion in the Company’s Annual Report to its shareholders.

Ј Ensuring that there is accurate, timely and full financial governance reporting with strong internal controls and risk management.

Ј Ensuring that material information regarding the Company’s operations are disclosed in a timely manner to the public and regulatory entities.



Ј Keeping abreast of the latest regulatory requirements, trends and guidance in corporate governance and updating the Board on corporate governance issues, where necessary.

Evaluation of Board & its Committees – Structure, Composition and Function

Ј Ensuring that the Board is structured and selected to ensure effectiveness, independence and protection of the public’s interests through appropriate selection and operating processes.

Ј Establishing and facilitating an effective process for the annual evaluation of the Board and its committees, which shall include the development of self-audit checklists which take into account their respective mandates and the level of contribution of individual directors. The Committee shall report to the Board the results of its annual evaluations and, based on those results, may make recommendations in respect of the structure and effectiveness of the Board and any of its committees.

Ј Overseeing the development and implementation of a Board induction process for new directors and a programme of continuing director development and training, as needed.

Ј Considering possible conflicts of interests of directors and making relevant proposals to the Board in relation to its findings.

Ј Reviewing any change in status and professional affiliation of current directors, which shall include fulfilment of independence requirements, and making relevant proposals to the Board in relation to its findings.

Meetings of the CGC

The Chairman of the CGC, in consultation with the Company Secretary, decide the frequency and timing of its meetings.

The membership of the CGC during the 2018/2019 financial year were Mr. Matthew Hogarth (Chairman), Mr. Oliver Holmes and Mrs. Rosa Pereira Sigala (up to February 6, 2019). Mr. Juan Carlos Restrepo Piedrahita will join on July 24, 2019. Mr. Marcus Steele (Managing Director) and Mrs. Janene Shaw (Finance Director/Company Secretary) are permanent invitees.

Looking Forward

The CGC shall continue to ensure that the Company is aligned with corporate governance best practices and that it continues its sterling reputation as a leader in this area.

The Key Activities of the

Corporate Governance Committee

for the financial year included:

1. A review of the Charter was conducted and there were no amendments proposed. The Charter remains relevant and provides the context for the CGC to fulfil its mandate to assist the Board in ensuring that its composition, structure, policies and processes for managing the Company are in keeping with world corporate governance best practice standards and also to ensure adherence to the relevant legal and regulatory framework.

2. The Board commenced the annual Board Self Evaluation exercise which will be facilitated by an independent external company. The evaluation measures the performance and effectiveness of the Board, its committees, the Executive and Non-Executive Directors and the Chairman.

This exercise will be concluded in the first quarter of the 2019/2020 Financial Year.

3. The CGC shortlisted priorities for the ensuing year to include:

➠ Strengthening of a Conflicts of Interest Policy and introduction of Conflicts of Interest Register.

➠ Self-audit checklist on a quarterly basis to ensure compliance with the Companies Act (as amended).

➠ Introduction of a Corporate Governance Assessment Tool to facilitate a review of the main Board by the Committee.

➠ Annual review of the Terms of Reference for Board Committees to ensure their effectiveness and recommend any necessary changes to the Board.

➠ Annual review of the Articles of Incorporation, at the beginning of the fiscal year by our Attorney to confirm whether or not any antecedent events had occurred in the past year and going into this fiscal year in respect to amendments in the Companies Act, etc. that required consideration by the Company.

➠ Directors’ Corporate Governance Training - majority of the Directors have had on-going training.



Audit Committee

Michael BERNARD

CHAIRMAN

Relationship with the BoardThe role of the Audit Committee is for the Board to decide and to the extent that the Audit Committee undertakes tasks on behalf of the board, the results are reported to, and considered by, the board. In doing so it identifies any matters in respect of which it considers that action or improvement is needed and make recommendations as to the steps to be taken.

The Board has established formal and transparent arrangements for considering how they should apply the financial reporting and internal control principles and for maintaining an appropriate relationship with the company’s auditors.

The main role and responsibilities of the Audit Committee include:

Ј to monitor the integrity of the financial statements of the company, and any formal announcements relating to the company’s financial performance, reviewing significant financial reporting judgements contained in them;

Ј to review the company’s internal financial controls and risk management systems;

Ј to monitor and review the effectiveness of the company’s internal audit function;

Ј to make recommendations to the Board, for it to put to the shareholders for their approval in general meeting, in relation to the appointment, re-appointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor;

Ј to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant professional and regulatory requirements;

Ј to develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm; and to report to the Board, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken.

Ј to review arrangements by which staff of the company may, in confidence, raise concerns about possible improprieties in matters of financial

reporting or other matters. The audit committee’s objective should be to ensure that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow-up action.

Ј to have primary responsibility for making a recommendation on the appointment, reappointment and removal of the external auditors.

The Audit Committee of the Board comprises of three members who are non-executive directors, the majority of whom is identified by the Board as independent directors. At least one member of the Audit Committee has recent and relevant financial experience.

Meetings of the Audit Committee

The Chairman of the Audit Committee, in consultation with the Company Secretary, decide the frequency and timing of its meetings.

Four (4) meetings are held during the year to coincide with key dates within the financial reporting and audit cycle. The company’s external audit lead partner is invited regularly to attend the meetings.

The Audit Committee met with the external auditors, without management, to discuss matters relating to its remit and any issues arising from the audit.

The Committee members are: Mr. Michael Bernard (Chairman), Mr. Matthew Hogarth, and Mr. Arturo Campero. Mr. Marcus Steele (Managing Director) and Mrs. Janene Shaw (Finance Director) are permanent invitees.



The Key Activities of the

Audit Committee for the

financial year included:

Ј Reviewed and after consultation with management and external auditors, recommended to the Board, unaudited quarterly financial statements and the 2019 audited annual financial statements for its approval and release to stockholders.

Ј Recommended to the Board for approval:

➠ Dividend payments

➠ Related Party Transactions

➠ Key Business Risks

The Committee considered the following in making its recommendations:

Ј Reliability and integrity of the accounting principles and practices, financial statements and other financial reporting;

Ј Internal audit functions of the Company;

Ј Risk management functions and processes of the Company;

Ј Qualifications, independence and performance of the external auditors of the Company;

Ј System of internal controls and procedures established by management and review of their effectiveness;

Ј The Company’s compliance with legal and regulatory requirements.

Nomination and Compensation Committee

Oliver HOLMES

CHAIRMAN

Relationship with the Board

The Committee shall make recommendations to the Board in specific regard to the re-appointment of any Non-executive Director at the conclusion of their specified term of office after reviewing the Director’s performance; the re-election by shareholders of any director under the retirement or by rotation provisions in the Company’s Articles of Incorporation; and the continuation in office of any Director at any time.

The main role and responsibilities of the nomination and compensation committee include:

Ј To determine the framework and policy on terms of engagement including the specific compensation of each executive director and each member of the Senior Management Team [“Leadership Team”] of the company, including entitlements where applicable under any share incentive schemes and the pensions schemes and any compensation payments.

Ј To make recommendations to the Board on suitable candidates for appointment as Board directors and to make recommendations to the Board as to the suitability of candidates for appointment as executive directors of the company.

Fees payable to non-executive directors are determined by the Board on the recommendations of the chairman and chief executive officer.



The Committee is authorized by the Board to obtain, at the company’s expense, such outside legal or other independent professional advice as it considers necessary and, in particular, is responsible for the appointment of any compensation consultants, Executive Recruitment & Placement Services [head-hunters] or any other professional service provider who may advise the Committee. Where such consultants are appointed, the Committee is required to make available a statement of whether they may have any other connections with the Company.

Meetings of the Nomination and Compensation Committee

The Committee was appointed by the Board on September 8, 2009 and comprises three members. The quorum is three and in the absence of a member, he will select another director to be his alternate at the meeting. The Chairman and the Managing Director of Carreras Limited are required to attend meetings of the Committee on the occasion of a discussion of compensation and to discuss the performance of the Executive Directors and other members of the Senior Management Team [except when their own compensation is under review], and to make proposals as appropriate.

The Committee is authorized by the Board to obtain, at the company’s expense, such outside legal or other independent professional advice as it considers necessary...

The Committee members are: Mr. Oliver Holmes (Chairman), Mr. Matthew Hogarth and Mrs. Brenda Wilbert (resigned November 7, 2018). Mr. Marcus Steele (Managing Director) is a permanent invitee to the meetings.

The Key Activities of

the Nomination and Compensation Committee for

the financial year included:

In line with the mandate given under Section 5 of the Terms of Reference which states that the Committee is to “be responsible for identifying and nominating candidates for the approval of the Board, to fill vacancies on the Board or senior management team, ensuring that such candidates, as well as fitting the specific profiles, are capable of taking a broad view of the company’s overall interest,”

the following were done:

i. On receipt of resignations from three Directors appointed by the BAT Group, the Committee reviewed the dossiers of proposed replacement candidates and deliberated on their qualifications and suitability for the roles on the Board. Once suitable candidates were agreed among the Committee members, recommendations were made to the Board to fill the vacancies.

ii. The dossiers of candidates for two senior management vacancies were reviewed and recommendations were made to the Board regarding Head of Trade Marketing & Distribution and HR Business Partner.

iii. The Committee ratified the bonus payment for the year 2018 and offered its congratulations to the management and staff for delivering a good year’s results.

iv. The Committee ratified the salary increases which were implemented on April 1, 2019 based on the annual compensation and benefit survey results.

Please note that our Corporate Governance guidelines are available on our website at www.carrerasltd.com

http://www.carrerasltd.com



The table below provides details on the Directors’ attendance at Board and Committee Meetings:

Name of Director BoardAudit

Committee

Nomination & Compensation

Committee

Corporate GovernanceCommittee

Arturo Campero* 3 2 n/a n/a

Michael Bernard 7 4 n/a n/a

Matthew Hogarth 6 4 2 1

Oliver Holmes 7 n/a 2 1

Rafael Marquez* 3 n/a n/a n/a

Rosa Pereira Sigala** 7 n/a n/a -

Maria Gabriela Rincon** 4 3 n/a n/a

Janene Shaw 6 3 n/a 1

Marcus Steele 6 3 2 1

Brenda Wilbert** 5 n/a 2 n/a

* Messrs. Arturo Campero and Rafael Marquez joined on November 7, 2018

** Mrs. Maria Gabriela Rincon and Mrs. Brenda Wilbert resigned on November 7, 2018

Mrs. Rosa Pereira Sigala resigned on February 6, 2019

Number of meetings held during the Financial Year

Board 7

Audit Committee 4

Nomination and Compensation Committee 2

Corporate Governance Committee 1 formal meeting and several telephone discussions

Ashleigh Arnold, Legal & External Affairs Manager, Carreras, being presented with the 2nd Runner Up, Best Website Award at the 2018 Jamaica Stock Exchange (JSE) Best Practices Awards by Professor Neville Ying, Chairman, JSE Best Practices Awards Committee: Carreras has been winning an Award in the Best Website category since 2012.

Awards in the category recognize the highest standards in the quality and efficiency of the dissemination of information to shareholders and the investing public through their website.



OPERATING ENVIRONMENTGlobal growth which peaked at close to 4% in 2017, softened to 3.6% in 2018 and is projected to decline further to 3.3% in 2019. Global economic activity slowed notably in the second half of 2018, reflecting a convergence of factors affecting major economies. These factors included the decline of China’s growth following a combination of regulatory tightening and an increase in trade tensions with the United States. The euro economy lost more momentum than expected as consumer and business confidence weakened and car production in Germany was disrupted by the introduction of new emission standards. External demand softened especially from emerging Asia. Japan was affected by natural disasters. Overall, trade tensions increasingly took a toll on business confidence with financial conditions tightening firstly in emerging markets and then later to advanced economies. With this weakness expected to persist in 2019, the World Economic Outlook, projects a decline in growth for 70% of the global economy. The outlook for many countries remains challenging with considerable uncertainties in the short term.

Against this background, for 2018/19, Jamaica’s macro-economic fundamentals reflected increasing stability throughout the financial year with indicators overall trending positively. The positive prospects of the Jamaican economy are underpinned by adequate reserves, sustainable balance of payments, strong fiscal performance and low inflation.

The Jamaican economy continued to show signs of recovery and projections for economic output remains positive. The preliminary Gross Domestic Product (GDP) estimate for the calendar year 2018 shows a 1.9% growth, indicating recovery over 2017. 2017’s disappointing growth of 0.5% was due mainly to severe floods and other adverse weather conditions during the first half of the year. The economy rebounded in 2018 with improved performances particularly in both the Services and the Goods Producing Industries.

For 2018, the growth in real GDP reflected increased external demand from Jamaica’s main trading partners, which supported increased exports of some goods and services. Improvements were also noted in stopover visitor arrivals, mining and quarrying, major infrastructure developments, residential and commercial buildings, road construction and rehabilitation activities.

For the March 2019 quarter, the Jamaica economy is estimated to have grown in the range of 1% to 2%. This is above the 1.4% recorded for March 2018 quarter but below the growth of 2% for the December 2018 quarter.

The prevailing expectation is that there will be modest acceleration in growth over the next two years. The government’s tax cuts, announced in the 2019 Budget, which could spur economic activity, provides an upside to economic growth. The economy is projected to grow by 1.7% in 2019.

-0.10%

0.80%1.10%

1.40%

2.20%1.80% 2.00%

Apr-Jun2017

Jul-Sept2017

Oct-Dec2017

Jan-Mar2018

Apr-Jun2018

Jul-Sept2018

Oct-Dec2018

Quarterly Gross Domestic Product

In relation to its fiscal performance, the Government of Jamaica (GOJ) continued the trend of solid performance for the 2018/19 fiscal year and remains committed to maintaining its primary surplus and public sector overall balance targets under its International Monetary Fund (IMF) Stand-By Arrangement. For the second consecutive year, the Central Government’s operations recorded a cumulative fiscal surplus, being $24.4 billion for fiscal year ended March 2019 and $8.7 billion for the corresponding period last year. The fiscal out-turn reflected a faster pace of growth in revenues and grants compared with the increase in expenditure. The performance of revenue and Grants for the 12-month period to March 2019 was attributable to higher tax receipts, non-tax receipts and grants compared to the prior year. The overperformers included GCT, customs duty and income tax.

Through successive years of fiscal discipline, the country’s debt-to-GDP ratio is expected to reduce to 96% at the end of the fiscal year ended March 31, 2019. This figure will represent the country’s lowest level of debt in nearly two decades and the first time that the debt-to-GDP ratio has dipped below 100% over that period. This will be considered a significant milestone given the historical context of high debt to GDP levels over the years, which reached an all-time high of 212.40% in 1984.

The current economic trend indicates low single digit inflation rates which is due in part to continued low commodity prices. At March 31, 2019, point-to-point inflation rate stood at 3.4% compared to 2.4% at December 2018 but remained below the lower limit of the target band of 4.0 per cent to 6.0 per cent. This increase largely reflected the impact of higher prices for agricultural foods, processed foods and other services. The effect of these increases was partly offset by a decline in electricity costs. Over the next two years, inflation is projected to average 4.5%, falling below the lower limit of the BOJ’s target band at various points during the period, then gradually approach the 5.0% target. This forecast is mainly predicated on low, albeit improving domestic demand, relative to capacity and moderate increases in international commodity prices.



-0.10%0.80%

3.90%3.40%

-2%

-1%

0%

1%

2%

3%

4%

5%

Mar-18

Apr-18May-18

Jun-18Jul-18Aug-18Sep-18Oct-18Nov-18Dec-18Jan-19Feb-19Mar-19

Mth PTP

Inflation

During our financial year, the JMD: USD exchange rate depreciated at a rate of 0.38% relative to the 2.0% appreciation observed in the previous financial year. There were significant periods of volatility during the year with the monthly average exchange rates at a high of $136.90 in August 2018 and a low of $125.35 in April 2018. At the end of March 2019 quarter, the weighted average selling rate of the Jamaican dollar vis-á-vis the US dollar of J$126.47 = US$1.00, represented an appreciation of 0.98% relative to the previous quarter. Looking ahead, in the short-term, we can expect the exchange rate to vary in either direction in accordance with demand and supply. In the longer term, the JMD/USD exchange rate should reflect the differential between Jamaica and its main trading partners, USA and Canada.

For our financial year, the Jamaican dollar depreciated against the Great Britain Pound by 3.7% to end at J$165.53 = £1.00 at March 31, 2019.

125.99 126.47

178.11165.53

Mar-18Apr-18May-18Jun-18Jul-18Aug-18Sep-18Oct-18Nov-18Dec-18Jan-19Feb-19Mar-19

J$/U$ J$/GBP

Exchange Rates(BOJ Weighted Average Selling Rate)

Net International Reserves as at March 2019 stood at US$3,084.83 million and represents 20.05 weeks of reserves of goods and services imports. This represented 8.05 weeks over the international benchmark of 12 weeks of goods imports.

Unemployment rates fell to 8% in January 2019, representing a reduction of 1.6 percentage points relative to 9.6% in January 2018. The largest increase in the number of employed persons by industry group included Real Estate and Hotels and Restaurant. Despite this reduction, more needs to be done to address the relatively high levels of youth employment, which is currently at 21.8% (January 2018: 23.7%).

12.9 12.712.2

11.310.4

9.6 9.7

8.4 8.78.0

Oct-16Jan-17

Apr-17Jul-17

Oct-17Jan-18

Apr-18Jul-18

Oct-18Jan-19

Unemployment Rate

Crime and violence levels remain high with a homicide rate of 47 per 100,000 of population for 2018. This rate is almost three times higher than the average for Latin America and the Caribbean, which has the highest homicide rate globally of 16 per 100,000 of population.

In relation to the tobacco industry, the incidence of the illicit trade in cigarettes remains a major concern. Internal studies have shown that almost a third of the cigarettes consumed in Jamaica are illicit. The illicit trade in cigarettes forms a part of the informal segment of the Jamaican economy which is estimated to be between 40% to 60% of the formal economy. This segment includes small businesses, self-employed individuals and participants in drug-trading and other illegal activities. Apart from the fact that revenues generated are not reported to the tax authorities, there is also an element of criminality involved since some areas of the informal economy are crime related.

Despite Jamaica’s progress in maintaining macro-economic stability and fostering growth, stronger and more resilient economic growth is needed to eliminate poverty and boost shared prosperity. This underscores the need to continue to address the threats that persist. Studies done by both the World Economic Forum and the World Bank have highlighted some of these. The World Economic Forum, Global Competitiveness Report 2017-18, cited that 15.5% of Jamaica business persons identified crime and theft as the most problematic factor for doing business, while 12.6% identified tax rates and 9.7% identified corruption as the greatest problem. The World Bank study, Doing Business 2018, ranked Jamaica at a low of 5 out of 190 countries in terms of ease of starting a business, and 122 out of 190 countries in terms of ease of paying taxes.

Overall Jamaica’s outlook remains positive. Economic fundamentals in Jamaica are expected to remain strong over the short to medium term. Within the context of a projected 3.3% growth in global economy in 2019, The IMF is projecting growth in GDP of 1.7% for Jamaica for the same period. The IMF further projects growth for Jamaica to increase to 1.9% in 2020 and 2.4% in 2024. The main drivers of growth are expected to be in Mining & Quarrying, Construction, Agriculture and Hotels & Restaurant Industries. Key downside risks that could derail growth prospects include a slowdown in global growth, macroeconomic and/or weather-related shocks, policy reversal of the structural reforms, and a high crime rate.



RISK MANAGEMENT

The effective management of risks is crucial to the fulfillment of Carreras Limited’s Mission and Vision. Our risk management framework supports our strategy for maintaining a long-term sustainable business. Carreras Limited manages its risks on an enterprise-wide basis across core business processes, starting at the strategic planning level, through to execution, evaluation and continuous monitoring.

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.

During the year, the Directors have carried out a robust assessment of the key risks and uncertainties facing the Company, including those that threaten its business model, future performance, solvency or liquidity.

The key risks facing the Company have remained broadly unchanged over the past year. Our number one risk remains Competition from illicit trade. The Company continues to experience high levels competition from illicit trade, either local taxes being evaded, smuggled illicit cigarettes or counterfeits.

In relation to capital management, the Company’s objectives are to safeguard its ability to continue as a going concern in order to provide returns for shareholders. The Board monitors the return on capital / stockholders’ return on equity, which is defined as net operating income divided by shareholders’ equity. For the 2018/19 financial year, the return on capital at 255.1%, is showing improvement over last year’s 170.7%.

The Board of Directors have no reason to believe that its policy to maintain a strong capital base so as to preserve investor, creditor and market confidence and to sustain the future development of the business will not continue into the foreseeable future.

RISK MANAGEMENT APPROACHThe Risk Management Committee (RMC) which is comprised of the senior management team has responsibility for identifying, assessing, managing and monitoring risks likely to face the Company and implement effective mitigating controls to manage these risks. Clear accountability is attached to each risk through the risk owner. The deliberations of RMC meetings are reported to the Board of Directors through the Audit Committee of the Board.

Carreras believes that its risk appetite and tolerance limits are the foundation of its risk management framework; which ultimately establishes the risk culture for the Company.

KEY BUSINESS RISKSCurrently there are several risks that are identified by the RMC as significant enough to be monitored. These risks, along with management’s mitigation measures are assessed at least on a quarterly basis.

Based on the Company’s risk appetite and risk tolerance, the Company actively manages the key business risks covering External Environment, Regulatory, People and Processes and Operational.

Below are some of the key risks that the Directors believe to be the most important after assessment of the likelihood and potential impact on the business. Not all of these risks are within the control of the Company and other factors besides those listed may affect the Company’s performance. Some risks may be unknown at the present and other risks, currently regarded as less material could become material in the future.



External Environment Risks:

Competition from illicit trade – either local taxes evaded, smuggled illicit cigarettes or counterfeits

With affordability being a major issue for the Jamaican cigarette consumer, resulting from the macro-economic environment, as well as increased prices of legal cigarette brands as a result of frequent and excessive excise increases, illicit cigarettes have become more attractive as they do not pay the requisite taxes, and as such, are sold at significant lower prices than legitimate brands. In addition, most of these illicit cigarettes are sold at the lower segment of the market and in contravention of regulatory requirements. This results in lower volumes and profits for legitimate players like Carreras. Furthermore, the investment in trade marketing and distribution is undermined.

Management’s Response: Robust Anti-Illicit Trade Strategy, Active engagement with key external stakeholders, Cross-industry and multi-sector cooperation, Proactive excise engagement with Government, Building brand equity for our low price offer, Strategic engagements and Price campaigns/consumer engagement activities.

Aggressive competitive environment - Legal (Low Price O!ers/Grabba)

The Jamaican tobacco industry is dynamic with new players offering brands in the low-priced segment of the market. Other tobacco products (OTP), Mainly Grabba, continue to have an increasing presence within the market based on the demand for the product. Consumer affordability issues pose a risk in consumers switching from the Company’s value for money brands to these ultra-low price offers.

Management’s Response: Expansion of distribution network, Product innovation, Understanding and advancing strategic engagement with all the tiers of the tobacco retailing universe.

Increase in crime and violence leading to increased volatility on routes

High levels of crime and violence levels have continued to be a factor in Jamaica. This impact is characterized by possible attacks on our staff members including loss of life, financial losses due to loss of assets, limited access to market and disruption to normal business processes and operations. Overall sustained crime and violence will threaten business sustainability.

Management’s Response: Rationalize routes with higher security risk, increase in security coverage on routes with higher risk profile, Implementation of new Route to Market Model

Regulatory Risks:

Significant increases or structural changes in tobacco - related taxes (excise)

The Company is exposed to unexpected and/or significant excise increases or changes to the structure thereof. Excise increases for the three consecutive years, 2015 to 2017 proved to be significant and excessive and have resulted in a transfer of volumes from the legal industry to the illicit trade in cigarettes. This was particularly so in 2017 when a 21.4% increase in tobacco excise was implemented. Not only did the industry experience a reduction in sales volumes, but the Government lost well needed revenues compared to their intake in 2016. We note that the Government has prudently not levied any further increases since that time and we encourage that the industry be provided with an opportunity to stabilize and recover sales volumes. In addition, we further encourage the implementation of a sustainable excise strategy.

Significant increases in tobacco excise affects the ability of consumers to pay for legitimate brands, thus increasing the attractiveness and demand for low priced cigarettes. This ultimately results in reducing legal industry volumes as well as the erosion of the brand value of legitimate brands. Excessive increases over time will erode revenue and profit growth and result in the failure of the Company to meet the expectations of its shareholders.

Management’s Response: Proactive Stakeholder Engagement towards ensuring a sustainable excise strategy by the Government, portfolio reviews to ensure appropriate balance and coverage across price segments, monitoring of economic indicators and Government revenues.

Tobacco regulation that inhibits growth strategy

The enactment of regulation that is unbalanced and impractical, and significantly impairs the Company’s ability to communicate with consumers, differentiate our products in the marketplace and launch future products, pose a risk to the Company’s long-term sustainability. Particularly, this could lead to an adverse impact on the ability to compete within the legal tobacco industry and with increased illicit trade.

Management’s response: Proactive and robust stakeholder engagement and litigation strategy for balanced regulations. Ongoing monitoring of marketing plans to ensure compliance with internal self-regulations and local legislation.



People and Processes Risk:

Losing key talent

Carreras’ business objective is to attract, develop and retain the right people to drive and deliver competitive advantage and superior performance. As the market becomes more saturated and globalized, competition for talent has become fiercer. As such, if the value proposition from the organization is not aligned with the demands of these talent the risk of losing them to other organizations becomes imminent.

Management’s Response: Strong retention plan benchmarking against the top ten companies’ compensation, Focus on succession planning, Employee engagement strategy.

Operational Risks:

Concentration of credit risk with large credit customers

The Company has a significant concentration of credit risk with large credit customers with material balances both individually and in aggregate. Credit risk is the risk of loss arising from a counterparty to a financial contract failing to discharge its obligations.

Management’s Response: Continuous engagement with large customers, on-going assessment of recoverability of balances which may be impacted by changes in the economic and business environment, expansion of the distribution network, Credit Risk Insurance.

Foreign currency risk

The Company incurs foreign currency risk primarily on purchases that are denominated in currency other than the Jamaica dollar, consequently, strengthening or weakening of the currencies against the Jamaica dollar would result in increased profit or loss to the Company. Sales of cigarettes are exclusively in the domestic market.

Management’s Response: Maintain US Dollar holding to cover at least twice the US Dollar liability, Continuous review of cost base, Liquidate foreign currency liabilities timely.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet commitments associated with its liabilities. Liquidity problems may result from an inability to sell a financial asset quickly at, or close to, its fair value. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and ensuring the availability of funding through an adequate amount of committed facilities.

Management’s Response: Maintain a substantial portion of highly liquid cash reserves, Ongoing monitoring of current ratio.



TEN-YEAR FINANCIAL REVIEW

(all figures expressed in thousands of dollars except where otherwise noted)

FINANCIAL YEAR 2018/19 2017/18 2016/17

PROFIT & LOSS SUMMARY

GROSS OPERATING REVENUE 12,906,497 12,550,132 13,509,228

TRADING PROFIT 4,499,362 4,587,300 4,933,927

INCOME FROM NON ROUTINE TRANSACTIONS - - -

TOTAL TRADING PROFIT 4,499,362 4,587,300 4,933,927

INVESTMENT & INTEREST INCOME 67,467 89,326 108,262

OPERATING PROFIT 4,566,829 4,676,626 5,042,189

EMPLOYEE BENEFIT INCOME (50,900) (39,300) (32,300)

PROFIT BEFORE TAXATION 4,515,929 4,637,326 5,009,889

PROFIT AFTER TAXATION 3,406,902 3,484,630 3,806,322

PROFIT ATTRIBUTABLE TO STOCKHOLDERS 3,406,849 3,484,596 3,806,233

BALANCE SHEET SUMMARY

FIXED ASSETS 383,017 337,251 300,150

SHARE CAPITAL 121,360 121,360 121,360

RESERVES 1,214,144 1,920,034 2,006,755

STOCKHOLDERS’ EQUITY 1,335,504 2,041,394 2,128,115

FINANCIAL RATIOS

TRADING PROFIT MARGIN 34.9% 36.6% 36.5%

OPERATING PROFIT/OPERATING REVENUE 35.4% 37.3% 37.3%

STOCKHOLDERS’ RETURN ON EQUITY 255.1% 170.7% 178.9%

EARNINGS PER STOCK UNIT (from normal operations) * 70.2¢ 71.8¢ 78.4¢

EARNINGS PER STOCK UNIT (from non-routine transactions) - - -

P/E RATIO 13.4 14.8 9.4

DISTRIBUTION - PER STOCK UNIT* 85.0¢ 74.0¢ 71.0¢

OTHER DATA

SHARE CAPITAL

- STOCK UNITS IN ISSUE (‘000) 4,854,400* 4,854,400* 485,440

CLOSING STOCK PRICE ($) - MARCH 31 9.43 10.61 7.40

DIVIDEND PAID 4,126,240 3,592,256 3,446,624

DEPRECIATION CHARGED 88,156 77,084 57,407

EXCHANGE GAIN / (LOSS) (16,705) (7,632) 52,202

WEIGHTED AVERAGE BUYING EXCHANGE RATES:

US$ 1 to J$ 123.5735 124.6545 127.7664

* Each ordinary share was sub-divided into 10 ordinary shares (10:1) at close of business on September 20, 2017



2015/16 2014/15 2013/14Restated2012/13

2011/12 2010/11 2009/10

11,980,138 11,208,369 10,342,006 12,241,512 11,022,746 12,935,692 10,410,178

3,736,050 3,804,121 3,199,787 3,844,022 3,437,158 4,291,204 3,514,143

- - 1,787,365 5,083,600 - - -

3,736,050 3,804,121 4,987,152 8,927,622 3,437,158 4,291,204 3,514,143

176,612 146,141 174,719 158,294 125,672 138,890 269,142

3,912,662 3,950,262 5,161,871 9,085,916 3,562,830 4,430,094 3,783,285

(9,100) (11,900) 22,600 (233,100) 363,400 550,400 711,200

3,903,562 3,938,362 5,184,471 8,852,816 3,926,230 4,980,494 4,494,485

3,011,333 2,942,960 4,003,175 6,234,234 2,597,220 3,314,076 3,001,875

3,011,191 2,942,914 3,999,992 6,234,059 2,597,229 3,314,097 3,001,869

236,485 248,256 204,632 158,650 145,150 140,190 114,724

121,360 121,360 121,360 121,360 121,360 121,360 121,360

1,654,302 3,050,396 4,073,129 3,562,164 2,818,195 3,210,417 2,669,801

1,775,662 3,171,756 4,194,489 3,683,524 2,939,555 3,331,777 2,791,161

31.2% 33.9% 30.9% 31.4% 31.2% 33.2% 33.8%

32.7% 35.2% 32.6% 32.7% 32.3% 34.2% 36.3%

169.6% 92.8% 95.4% 169.2% 88.4% 99.5% 107.5%

62.0¢ 60.6¢ 54.7¢ 55.1¢ 53.5¢ 68.2¢ 61.8¢

- - 27.6¢ 73.3¢ - - -

10.7 6.6 4.3 4.1 11.8 8.9 7.8

89.4¢ 80.9¢ 70.4¢ 117.9¢ 56.0¢ 50.0¢ 70.0¢

485,440 485,440 485,440 485,440 485,440 485,440 485,440

6.61 3.99 3.55 5.29 6.30 6.05 4.85

4,342,104 3,930,709 3,418,898 5,723,338 2,718,464 2,427,200 3,398,080

62,506 65,887 50,556 46,616 55,349 48,884 40,833

30,692 45,591 88,953 160,582 19,369 (48,911) 4,945

122.0421 115.0435 109.5744 98.8865 87.3000 85.7486 89.5082



LEADERSHIP TEAMNatioNality: Jamaican

PositioN: Managing Director of Carreras Limited since March 2013; appointed to the

Board of Directors since October 2007.

other aPPoiNtmeNts: Director of Proven Wealth Limited and Non-Executive

Director at Peak Bottling Company Limited and Catherine’s Peak Bottling Company

Limited; Chairman of the Board of Directors of Demerara Tobacco Company since

February 2018.

skills & exPerieNce: Mr. Steele first joined Carreras Group Limited in the Company’s Tobacco division, Cigarette Company of Jamaica Limited, in the capacity

of Management Accountant in April 1998. In June 1999, he was promoted to Finance

Planning Manager and Marketing Finance Manager in June 2001. In May 2002, he was

appointed Finance Planning Manager with overall responsibility for management of

Marketing and Operations Finance. In March 2004, Mr. Steele was seconded to British

American Tobacco (BAT) Caribbean and Central America’s Area Office in Costa Rica as the Country Readiness Manager for the Caribbean with responsibility for leading the migration of the Caribbean legal entities into the regional shared service centre. In July

2005, he was appointed Finance Planning and Reporting Manager for BAT’s operations in the Caribbean and Central America where he focused on financial reporting, strategy and planning. Mr. Marcus Steele was then appointed to the Board of Directors of

Carreras Limited on October 1, 2007 and served as Finance Director and Company

Secretary up until August 2011 when he was seconded to the Trinidad branch of another

BAT Company, Carisma Marketing Services Limited, in the position of Country Manager

with responsibility for the general management of the Company’s businesses across 24

markets in the English, French and Dutch Caribbean.

QualificatioNs: Graduate of St. Jago High School. Chartered Accountant; B.Sc.

Accounting, University of the West Indies; MBA, Florida International University.

Executive Programme in General Management, Harvard Business School.


PositioN: Finance Director and Company Secretary

other aPPoiNtmeNts: Appointed to the Board of Directors on May 27, 2015

skills & exPerieNce: Janene is a qualified Chartered Accountant with over 25 years’ experience and a proven track record in financial management, accounting and auditing. Janene is responsible for the Strategic Financial Management of the Company

and also performs the role of Company Secretary. Prior to joining Carreras, Janene was employed at J. Wray & Nephew Limited / Lascelles deMercado & Co. Limited where she

held various senior finance positions, being General Manager, Finance & Administration – JWN Agricultural Division, Group Financial Officer and Accounting and Treasury Director. Prior to that, Janene was employed at PriceWaterhouseCoopers where she

gained progressive audit experience to the level of Audit Manager.

QualificatioNs: BSc. Accounting, University of the West Indies, Mona Campus

Member of the Institute of Chartered Accountants of Jamaica

Member of the Association of Certified Chartered Accountants, U.K

Marcus STEELE

MANAGING DIRECTOR

BSc., ACCA, CA, MBA, GMP (HBS)

Janene SHAW

(FINANCE DIRECTOR & COMPANY SECRETARY)

FCA, FCCA, BSc.




PositioN: Legal and External Affairs Manager

other aPPoiNtmeNts: Director, The Stationery Centre, Director, Nature

Preservation Foundation, Jamaica Chamber of Commerce Representative on the Government of Jamaica and European Union Poverty Reduction Steering Committee

skills & exPerieNce: Ashleigh-Ann Arnold was appointed as the Legal and

External Affairs Manager, Carreras Limited in March 2016. She previously served as

the Legal and External Affairs Executive for Carreras since 2008 and concurrently since

2014, Legal and External Affairs Executive for 11 Markets in the Northern Caribbean for

Carisma Marketing Services, another British American Tobacco Company. After joining the Company in 2005 as a Management Trainee, Ashleigh was promoted to the role of

Corporate and Regulatory Affairs Executive during which time she played an integral role in the execution of the Company’s reputation and regulatory strategy. In February

2012, she was seconded to British American Tobacco Caribbean and Central America’s

(BATCCA) Area Office in Costa Rica as the Area Corporate Social Responsibility & Regulations Executive where she was responsible for developing and coordinating BATCCA’s corporate social responsibility initiatives and regulatory strategy in 30

markets across the Caribbean and Central America.

QualificatioNs: BSc. (Cum Laude) Integrated Marketing Communications, Winthrop

University, USA

MA (Dist.), Communications Studies, University of the West Indies, Mona


PositioN: Marketing Deployment Manager

other aPPoiNtmeNts: Adjunct Lecturer at the University of Technology

skills & exPerieNce: Rohan Campbell joined the Company in December 2011 as an Area Sales Manager, managing four depots in the Western Region. From November 2014 to June 2015, Rohan served as the Acting Trade Marketing & Distribution Manager. In September 2015, Rohan assumed the role of Project Coordinator for the DX change over, having special responsibility for redesigning the Company’s route to

market/distribution structure, leading to a significant reduction in distribution cost. In April 2017, Rohan was seconded on an International Assignment to BAT’s Caribbean and Central American Area Office in the capacity of Area Brand Executive. In this role, Rohan had oversight for brand building for the aspirational premium portfolio in 22 markets across the Caribbean. During this assignment, he also assumed the role of

Marketing Deployment Manager, double-hatting to manage the portfolio and marketing

efforts for the Caribbean cluster. Before joining Carreras, Rohan held several marketing and sales management positions including Business Unit Manager at HD Hopwood

and Company and Dairy Sales Manager at World Brand Services (a Division of Grace

Kennedy). Throughout his career, Rohan can be credited for successfully launching several new products, resulting in increased market penetration as well as implementing

several staff recognition initiatives.

QualificatioNs: BSc. (Hons) in Management Studies

MBA Marketing (Dist.), both from the University of the West Indies

Ashleigh-Ann ARNOLD

(LEGAL & EXTERNAL AFFAIRS MANAGER)

BSc. (Hons), MA (Dist)

Rohan CAMPBELL

(MARKETING DEPLOYMENT MANAGER)

BSc. (Hons), MBA (Dist.)



NatioNality: Trinidadian

PositioN: Human Resource Business Partner

skills & exPerieNce: Portia Darsoo was promoted to the position of Human

Resource Business Partner for Carreras in January 2019. She joined the HR team at West Indian Tobacco in 2014, holding different positions in both the Commercial and

Operation areas of the business. In April 2017, she was promoted to the position of

Aurora Project Lead – Caribbean and Central America in BAT´s Costa Rica office where she was responsible for the modification and implementation of a Global HR project for nine (9) end markets. In February 2018, she was seconded to BAT´s Colombia office in the position of Human Resource Business Partner as part of the SANCAR (South America North and the Caribbean) integration for her expertise in Caribbean HR. Portia has over 12 years’ experience in HR and has worked both in the Manufacturing and Financial Sectors in Trinidad and Tobago, prior to joining BAT. She is experienced in Talent Acquisition, HRIS Implementation, Training and Development, Performance Management, Project Management and Labor Relations.

QualificatioNs: BSc (Hons) Management Studies and Sociology, University of the

West Indies, St Augustine

MSc (Dist.) Human Resource Management, Heriot-Watt UniversityPortia DARSOO

HUMAN RESOURCE BUSINESS PARTNER

BSc. (Hon), MSc (Dist)

NatioNality: Trinidadian

PositioN: Trade Marketing and Distribution Manager

skills & exPerieNce: Jason Fournillier was appointed to the position of Trade

Marketing and Distribution Manager for Carreras Limited in January 2019. Jason began

his career with the BAT Family in 2004 at West India Tobacco Ltd. as a Trade Marketing

Executive, after four months moving on to specialize in the Horeca Channel (Horeca

-Hotel, Restaurant, Café). Over the years, Jason has worked in BAT Caribbean & Central America in several roles including Marketing Management Trainee, specializing

in Trade Research and Retail Communication, Trade Marketing & Distribution Manager & Area Manager and Marketing Process Lead. As Marketing Process Lead

for the Global SAP Transformation Program which involved the development of a

communication platform for SAP and roll out, Jason led of one of BAT’s largest ever

business transformation programs across the Caribbean and Central America. In

BAT Spain, he successfully standardized Retail Audit and GCS information for Spain Mainland, Portugal and The Canary Islands. He has also served as Managing Director

for Demerara Tobacco, where he developed a regulatory engagement platform for

Tobacco Control/Illicit Trade. In July 2016 he became Territory Manager for CARISMA Marketing BAT SANCAR (Colombia, Venezuela, Caribbean) where he led the rebuilding and retooling of the export arm of West Indian Tobacco Ltd. Before, beginning his

career with the BAT Family, for nine years Jason held various positions in the banking

sector, moving through the ranks to the position of Corporate Loans Officer.

QualificatioNs: Business Manager Transition Program, British American Tobacco.

BSc. Management Studies (Special), University of the West Indies

Jason FOURNILLIER

TRADE MARKETING AND DISTRIBUTION MANAGER

BSc.



MANAGEMENT

DISCUSSION

&

ANALYSIS



MANAGING DIRECTOR’S OVERVIEW

The year has been simultaneously rewarding and challenging. The challenges met and overcome by the Carreras team, demonstrate resilience, innovation, strength and agility. Despite an increasingly complex operating environment, the management team has remained fully committed to delivering enviable returns to our shareholders through various strategic initiatives. During the year, these key initiatives included efforts to achieve greater route to market efficiencies, leveraging the strength of our brands and increasing the core competencies of staff. Our approach to solving complex issues and executing our strategic plans helps to ensure that we continue to deliver value to our shareholders and certifies our commitment to a strong Carreras.

The performance this past year is reflective of an operating environment defined by decreased customer purchasing power and overall affordability challenges by some of our consumers, who in search of lower price alternatives, may participate in the very active and prevalent illicit cigarette trade. Given these external factors, we have had to place greater focus on keeping our brands healthy and at the forefront of innovation, as well as continually refine our route to market approach. The investment in these strategic priorities led to a 9% increase in our administrative, distribution and marketing expenses. Consequently, Profit after Tax declined by 2.2%, from $3.5 Billion in 2018 to $3.4 billion in 2019. However, I should highlight that Operating Revenue increased by 2.8%, $12.6 Billion in 2018 compared to $12.9 Billion in 2019, representing a slight recovery in sales volumes after the 21.4% March 2017 Special Consumption Tax increase. The Compound Annual Growth rate over the five- year period for Profit After Tax

Managing Director

Marcus Steele



and Operating Expenses is 3.7% and 0.30% respectively, indicating a trend of overall growth.

We maintain that a natural consequence of frequent and excessive increases in tobacco excise is increased interest in the illicit trade by consumers seeking a cheaper alternative. In 2018, the Company continued to work with the authorities to educate customers and consumers about the illegality and risks of consuming unregulated, illegal or smuggled products. We also staged a successful Anti-Illicit Trade Conference which was held to; sensitize key stakeholders in the fight against the illicit trade on the size and scale of the issue, present a global perspective and best practice solutions from a widely recognized expert on International illicit trade, and highlight the need to further refine the private-public collaborative framework, all of which we see as critical components of any strategy to reduce the incidence of illegal cigarettes. The commitment of the authorities to stemming the proliferation of illegal cigarettes was reinforced in the observed collaboration between the Police and the Jamaica Customs Agency, as well as the respective vigorous efforts of each agency, that led to historic illegal cigarette seizures during the year. It underscored the collaborative power of partnerships in achieving much greater collective impact than would be possible by any one organization or sector working in isolation.

In the stepwise decision-making process, there exist certain prerequisites for customer action. With the presence of the illicit trade, one of the most important prerequisites for Carreras to satisfy is the availability of our key brands. We therefore continue to revise our route to market approach. Team members were given renewed training and new opportunities for advancement. Additionally, this year, with the aid of increased security staff and a plan to deliver to more areas than ever before, we had great success. In order to reclaim areas dominated by the illicit trade and perform market disruption in the areas where it is present, how we get our products to customers remains a key strategy.

The value of efficiently delivering our products is inextricably linked to our ability to capture the hearts and minds of our consumers through marketing. This year, the marketing team did just that. Through customer-feedback and in-field observation, we have developed a deep understanding of the Jamaican consumer, culminating with a deeper appreciation of how much a single event or moment can affect a person’s relationship with a brand.

We also maintained the diversity of our offerings, as well as the high standard of our products. Craven A and Matterhorn are still the number one brands in their respective categories, while Pall Mall is effective in offering a high quality and cost-effective brand that

serves as the legal alternative to the illicit cigarette brands. Ultimately, our brands remain robust, vibrant and effective.

We have sustained our image as a successful Company through the transformative effect capable staff has on any action plan. In 2018, we implemented a multi-faceted, accessible HR system, various training opportunities and the resolution of ongoing requests. As Carreras endeavours to continue to be a place of choice to work, we continue to be a place of choice for success. Programmes such as Leading Self and Leading Managers and British American Tobacco (BAT) Global Graduate Programme have extended our ability to detect and nurture future leaders within the Company. Our commitment to continuous development of our staff has allowed us to work across departmental lines to build collaborative roadmaps to joint action, triggering an increased ability to move the needle in areas of great importance. We also continued to empower our employees on “Delivery with Integrity” through various training platforms such as e-learning and webcasts, that will allow them to better identify and mitigate challenges related to key compliance areas such as anti-bribery and anti-corruption (ABAC) laws. This was a BAT-wide initiative aimed at driving a consistent approach to compliance across the Group.

I extend my sincere thanks to every single employee. Our impressive and loyal employees continue to serve as foundational building blocks in constructing strategy and executing tactical adjustments. We have enjoyed further commitment to work-life-balance, productivity and success, and will make every effort to continue doing so.

I also offer my gratitude to the Chairman and the entire board. Their advice, leadership and expertise over the past year have been invaluable. Thank you to our customers and consumers, thank you for your loyalty. We will do our best to continue to earn your continued support and trust.

Managing our operations efficiently, responsibly and effectively remains a priority for the Management Team. As we keep our finger on the pulse regarding emerging technologies, we will continue to stabilize our volume base and secure opportunities to deliver sustainable growth by delivering customized attractive value propositions to different segments of the market.

Quality staff recruitment, agile management and skilled manoeuvring will continue to dominate our execution. This year, Carreras was strong. In the years to come, we are confident the Company will grow even stronger.

Marcus Steele

Managing Director



FINANCIAL PERFORMANCE Carreras Limited earned Operating Revenue of $12.9 billion (2018: $12.6 billion) and delivered a Profit After Tax of $3.4 billion (2018: $3.5 billion) for the financial year ended March 31, 2019. The Company experienced a 2.8% growth in Operating Revenue, signaling a slight recovery in sales volumes compared to the 2018 financial year. We are encouraged by this volume recovery and once again reaffirm our commitment to be the world’s best at satisfying consumer moments in tobacco and beyond.

Our strategy and focus for the 2019 financial year included the stabilization and recovery of volumes and providing value to consumers. Our core brands – Craven “A” and Matterhorn, performed well during the period, and continued to be the choice of adult tobacco smokers.

The sharp decline in volumes that followed the 2017 increase in tobacco excise has been widely communicated. So too has been the fact that excessive increases in tobacco excise have resulted in the transfer of volumes from the legal trade to the illicit trade in cigarettes. Within this context, we are pleased that our 2019 strategy and focus to recover volumes has been met with some success, representing a pivotal point for the business.

Although there were increases in Operating Revenue and Gross Operating Profit, increases in Administrative, Distribution and Marketing Expenses have outweighed these, resulting in a 2.2% decline in Profit After Tax compared to the previous financial year. The increase in Distribution and Marketing Expenses are mainly responsible for the growth in overheads. Firstly, the Company increased investments behind our core brands, Craven “A” and Matterhorn in order to reinforce the brand value proposition to our customers. Secondly, because of the increased levels of crime, we reorganized the sales routes to avoid certain high-risk areas and increased the security around our sales personnel. This resulted in increased security costs. Thirdly, during the year, the Company commenced the investment in its new route to market structure. This structure which is scheduled for implementation in our upcoming financial year, will focus on the re-organisation of the sales force and the distribution routes. It is worthy to note, that having increased cigarette prices in March 2017 because of the significant 21.4% increase in Special Consumption Tax on tobacco, the Company has not taken a price increase during the two years subsequent, that is, since March 2017 to present, despite an increase in its cost base.

As in previous years, we have continued to focus on creating value for our stockholders. For the 2018/19 financial year, Stockholders’ Return on Equity totaled 255.1%, compared to 170.7% in 2018, indicating growth over the prior year. Dividends paid for the year totaled

$4.1 billion or $0.85 per share, a 15% increase over the corresponding period last year. Similarly, the dividend yield increased over last year, being 9% for 2018/19 compared to 7% for the prior year.

The liquidation process for Cigarette Company of Jamaica Limited (CCJ), which commenced in 2004, was completed during the year. CCJ was dissolved by the Registrar of Companies, Companies Office of Jamaica, on November 9, 2018. Having received its final distribution from CCJ of $534.0 million (net) during the year, Carreras Limited in turn made a special distribution to its stockholders on August 30, 2018.

Overall, the Company had a rewarding financial year. The outlook continues to be positive and the Company remains “fit for the future” having laid a solid foundation over the years and established a process of continuous improvement. Thus, ensuring a talented, diverse, highly motivated and committed team, an exceptional portfolio of brands which remain the choice of consumers, and an excellent route to market platform to safeguard the sustainability of the business for all stakeholders.

Key performance indicators reflecting the Company’s results for the 2018 /19 financial year along with comparatives are:

2019 2018

Trading profit margin 34.9% 36.6%

Operating profit / Operating Revenue 35.4% 37.3%

Cash provided by operations $3.7B $3.3B

Earnings per stock unit 70.2¢ 71.8¢

Stockholders’ return on equity 255.1% 170.7%

Distribution per stock unit 85¢ 74¢

Dividend yield 9% 7%



Profit After Tax

2,943 3,011

3,8063,485 3,407

2014/15 2015/16 2016/17 2017/18 2018/19

2014/15 2015/16 2016/17 2017/18 2018/19

Profit after Tax (in Millions of JMD)

5-year CAGR: 3.7%The Company recorded Profit After Tax of $3.41 billion (2018: $3.49 billion), a 2.2% decrease compared to the prior year. The Compound Annual Growth Rate for the 5-year period, 2014/15 to 2018/19, which indicates a creditable performance over the period, reflects an average growth of 3.7% in the Company’s Profit After Tax per annum.

For the 2018/19 financial year, the main line items contributing to this year’s out-turn are summarized. Operating Revenue grew by 2.8% driven by a small uptick in volumes whilst Cost of Operating Revenue comprising Special Consumption Tax, Customs Administration Fee and material and related costs increased by 3.5%, mainly in correlation to Operating Revenue. There was an 9.3% increase in Administrative, Distribution and Marketing Expenses compared to the previous period, attributable mainly to increased Distribution and Marketing expenses.

Share Price (JMD)

5-year CAGR 24.0%(Note: As a result of the 10:1 stock split which was effective September 20, 2017, the share price for previous years has been restated for comparison purposes.)

The Company’s share price closed at $9.43 at March 31, 2019 (March 31, 2018: $10.61) reflecting an 11% decline over the previous year. During the previous year, the Company implemented at 10:1 stock split which resulted in the stock trading at prices as high as 37% above the closing price just prior to the announcement of the split by the Board of Directors and the immediate period that followed. Such increases are normal in the event of a stock split.

At a price of $9.43 at March 31, 2019, the Price Earnings Ratio is 13.4 times, comparable to that of the industry. Over the 5-year period from 2014/15 – 2018/19, the Compound Annual Growth Rate for the Company’s share price approximates to 24.0%.

DividendsThe Company distributed $4.1 billion (2018: $3.6 billion) to shareholders for the 2018/19 financial year, representing a dividend of 85¢ per stock unit (2018: 74¢ per stock unit), an increase of 15% over the prior year. This year’s dividends include $534.0 million or 11¢ per stock unit in relation to CCJ’s final distribution on liquidation. Overall, the increased amounts paid to stockholders reflect the continued importance of providing annual distributions.

0.810.89

0.71 0.740.85

2014/15 2015/16 2016/17 2017/18 2018/19

2014/15 2015/16 2016/17 2017/18 2018/19

Dividend per Share(Note: As a result of the 10:1 stock split which was effective September 20, 2017, dividend per share for previous years have been restated for comparison purposes.)



PROFIT AND LOSS ANALYSIS

Operating Revenue

11,208 11,98013,509 12,550 12,906

2014/15 2015/16 2016/17 2017/18 2018/19

2014/15 2015/16 2016/17 2017/18 2018/19

Operating Revenue (in Millions of JMD)

5-year CAGR: 3.6%Carreras Limited reported Operating Revenue of $12.9 billion for the year ended March 31, 2019, representing an increase of $356.4 million or 2.8% compared to the prior year; being positively impacted by a slight recovery in sales volumes. The Compound Annual Growth Rate for the 5-year period was approximately 3.6%, showing sustained year-on-year growth.

The industry in general and the Company has seen a sharp decline in sales volume since the 21.4% excise increase was implemented on March 13, 2017. We are aware that this exorbitant increase was preceded by increases both in May 2016 and in March 2015 of 16.7% and 14.3%, respectively,

Undoubtedly, the $3 per stick or 21.4% excise increase in March 2017, represented the “tipping point” for consumers as this increase further impacted their ability to pay for legitimate brands. There is a direct correlation between the imposition of excessive excise increases and unintended consequences such as the growth in the illicit trade in cigarettes.

For the 2018/19 financial year, the have noted a slight recovery in sales volumes and this augurs well for the future. Our strategy and focus for 2019 included the stabilization and recovery of volumes and providing value to consumers, and we have begun to reap the benefits, though only at an initial stage. As a part of our 2019 strategy, we focused on our People, Brands and our Route to Market, thus ensuring a consumer centric approach. During the year, we continued to partner with the Government to encourage their implementation of a sustainable excise strategy as well as underscoring the need for the authorities to remain relentless and vigilant in the stamping out of the illicit trade.

We congratulate the authorities on their unprecedented illicit cigarette find that took place in June 2018.

Almost 10 million sticks of cigarettes (equivalent of one 40 ft. container) was seized by the authorities, this with a value of approximately $500 million. We continue to wish for more successes in this area, as apart from the impact of the illicit trade in cigarettes on the legal industry, the Government stands to lose billions of dollars in revenues. Additionally, as the quality assurance processes of illicit cigarettes are compromised, they pose an even greater risk to the health of its consumers.

Within this context, the strength of our brands continues to be reflected in the Company’s revenue performance. The Company has continued to invest in its core brands, Craven “A” and Matterhorn and remains resolute in its commitment to consumers – to be best at satisfying consumers moments in tobacco and beyond.

Cost of Operating Revenue

5,867

6,244

6,970

6,2496,470

2014/15 2015/16 2016/17 2017/18 2018/19

2014/15 2015/16 2016/17 2017/18 2018/19

Cost of Operating Revenue (in Millions of JMD)

Cost of Operating Revenue which includes mainly Special Consumption Tax (SCT), Customs Administrative Fee (CAF) and product costs amounted to $6.47 billion, a 3.5% increase compared to the $6.25 billion recorded in prior year. The increase in the Cost of Operating Revenue is in direct correlation to the increase in Operating Revenue being impacted mainly by increases in SCT and CAF. Together, these account for $188.8 million or 85.5% of the total increase in the Cost of Operating Revenue. Product costs were also negatively impacted by the movement of the Jamaican Dollar versus the United States Dollar, which on average showed a 2% devaluation for the year.

Operating Expenses

Operating Expenses (in Millions of JMD)



Administrative, Distribution and Marketing Expenses totaling $2.01 billion increased by $165.7m or 9% over prior year’s $1.85 billion. Over the 5-year period, the Compound Annual Growth Rate approximates to 0.30%, indicating that on average the annual growth in overheads have been negligible.

The lion’s share of this year’s increase in overheads was attributable to Distribution expenses. Distribution expenses amounting to $773.4 million increased by $139.8 million or 22% as the Company sought to respond to the changes in the environment and the need to strengthen and support the field force in the delivery of volumes. Notable increases were security and staff costs.

Within the context of a 3.4% inflation rate, Administrative expenses totaling $1.10 billion (2018: $1.09 billion), grew by 1.3%.

The Company continued its investment in innovation of our core brands, Craven “A” and Matterhorn. Marketing expenses, including sponsorship, promotions and product development totaling $139.8 million, increased by 9.0% over 2018.

As in previous years, management continues to employ various cost containment and cost cutting initiatives as appropriate.

Other Operating IncomeOther Operating Income which is normally comprised of interest Income, foreign exchange variances and the write back of unclaimed dividends amounted to $149.9 million in current financial year. Overall, Other Operating Income declined by $73.8 million or 33.0% compared to the prior year, due mainly to the inclusion of SCT revaluation gains of $82.7 million in the Miscellaneous Income for the previous year. This was not applicable for the current financial year.

Apart from this, interest income which amounted to $67.5 million decreased by $21.9 million or 24%, reflecting the decline in market interest rates as well as the reduction in investment balances over the year. On the other hand, the write back of unclaimed dividends totaling $60.9 million and increasing by $43.2 million or 244% compared to the prior year, contributed positively to this year’s out-turn.

The Group continues to strategically manage its cash holdings to maximize returns from investment placements and to ensure that working capital needs are adequately covered.

Income taxThe effective tax rate for the 2018/19 financial year amounted to 24.6% slightly lower than the 24.9% recorded for 2017/18. Income tax for the period totaling $1.10 billion (2017/18: $1.15 billion) decreased by 3.8% compared to the prior year.

FINANCIAL POSITION REVIEWThe Group’s financial position remains strong and the working capital position remains healthy.

Total assets as at March 31, 2019 amounted to $3.49 billion (2017/18: $3.99 billion). Compared to the prior year, increases were noted in property, plant and equipment and inventories whilst on the other hand, there was a marked reduction in accounts receivable.

The working capital which indicates the Company’s short-term liquidity position, amounted to $1.0 billion at March 31, 2019 (2018: $1.77 billion); decreasing by $771.8 million or 43.6% compared to the prior year. The current ratio at March 2019 remains relatively strong at 1.52:1 compared to 2.05:1 for March 2018. The change over last year is indicative of reductions in both accounts receivable and in cash and cash equivalents of 14% and 22%, respectively, combined with the 35% increase in accounts payable.

Cash and cash equivalents which accounted for 51.2% of the total assets, amounted to $1.79 billion as at March 31, 2019 (2018: $2.31 billion). For the year in review, the net cash provided by operating activities amounted to $3.69 billion and net cash utilized by investing activities, comprised of mainly fleet renewals, totaled $65.3 million.

Accounts Receivable which decreased by $131.9 million or 14.5% compared to the prior year was driven primarily by decreases in trade receivables partially offset by increases in prepayments. Trade Receivables totaling $576.8 million decreased by $286.2 million or 33.2%. The overall reduction in accounts receivables is positive and reflects the improvement in the collection period from approximately 25 days to 17 days as well as a slight shift in the sales volumes by channel. This improvement is even more noteworthy considering the slight uptick in sales volumes which was previously mentioned.

The allowance for impairment losses totaled $5.8 million or 1% of trade receivables for the year. Having adopted IFRS 9, Financial Instruments, from April 1, 2018, this year’s figure measures expected credit losses using a provision matrix based on observed default rates over the expected life of the trade receivables, adjusted for forward looking estimates.

3,7252,622 2,583 2,307 1,790

1,345

448 612 911779

2014/15 2015/16 2016/17 2017/18 2018/19

Cash&CashEquivalents AccountsReceivable

Credit Risk (in Millions of JMD)



Credit risk is the risk of loss arising from a counterparty to a financial contract failing to discharge its obligations and arises principally from the Group’s receivables from customers, cash and investment securities. At March 31, 2019, the Group’s credit risk resulting from receivables and cash and investments totaled $2.4 billion, a 25% reduction compared to the $3.2 billion reported for the prior year. Compared to the prior year, both cash and cash equivalents, as well as accounts receivable showed significant reductions.

With effect from October 1, 2018, the Company has been party to a Credit Risk Insurance Policy, under a Financial Interest Clause, through its ultimate parent, British American Tobacco PLC. The Company now has in place insurance coverage for a substantial part of its credit portfolio, thus further mitigating the risk of default by customers.

Management ensures that the credit and investment policies that are in place adequately addresses the counterparty risks and as in previous years, these are continually and rigorously monitored by both Management and the Board of Directors.

Total liabilities as at March 31, 2019 which amounted to $2.16 billion increased by 10.9% compared to the prior year. This was mainly attributable to the increase in accounts payable offset by the decrease in income tax payable.

Total Liabilities (in Millons of JMD)

SHAREHOLDERS’ EQUITYTotal equity which amounted to $1.34 billion, decreased by $707.2 million over the prior year. Profit for the year of $3.41 billion and distributions to shareholders totaling $4.13 billion were the main components which accounted for the change.

The Company distributed $4.13 billion (2018: $3.59 billion) to shareholders for the 2018/19 financial year, representing a dividend of 85¢ per stock unit (2018: 74¢ per stock unit), an increase of 15% over the prior year.



MARKETING

TRADE MARKETING AND DISTRIBUTIONCarreras has always held a positive outlook, believing that our optimism and drive are key to our success. 2018 was no different as we executed a strategy designed to satisfy consumer moments in tobacco.

Principles of excellence in execution, operating in a responsible manner and guaranteeing an efficient delivery of service to our customers form the basis on which we manage our business. Focus on these key areas has allowed Carreras to maintain its position as the leader within a category that is faced with increasing competition on several fronts.

The Company is aware of the dynamic environment in which we operate and the continuing fight against the flow of illicit tobacco brands into the market. This leakage represents a threat to the consumer, the government and our business. In 2018, the Company continued to work with the authorities to educate our customers about the dangers of consuming unregulated, illegal or smuggled products. We are hopeful that this will help all companies and consumers in Jamaica to support the legitimate trade in all consumer products.

Volume Stability Following excise adjustments in the previous period, 2018/2019 saw a gradual stabilization of volumes. as our brands Craven A, Matterhorn, and Dunhill delivered a level of choice to consumers. Pall Mall was able to perform quite admirably as a viable alternative to the illicit products that continue to be a growing challenge.

While smokers have historically had very few alternatives to combustible cigarettes, innovation is now providing adult consumers with a greater choice of tobacco and nicotine products that are potentially less risky than cigarettes. We are monitoring the development of these categories and continue to

develop new and even more innovative products to add to this range of potential choices. We are proud of all our brands and believe that all our products have a role to play in our business success and our ambition to transform tobacco.

Route to Market Improvements Our most recent Route to Market improvements have brought a level of market control that allows Carreras the opportunity to properly defend against the illicit trade and improve our overall level of service. Our project team made a careful evaluation of our previous model and sought to build on the strengths of our distribution model, and propose some changes in areas not at optimum capacity. The most notable of these changes was the return to motor vehicles as our main point of distribution. These vehicles are now able to deliver effective direct sales reach, that addresses both out of stock and illicit trade concerns. Our sales teams have also been retooled with selling skills focused on productivity, efficiency and drive for results. While these adjustments offer an opportunity to cover a wider geographical base, our sales teams are also able to do this in a safer and sustainable manner. We believe the benefits to be derived from the Route to Market improvements will provide the opportunity for Carreras to establish a distribution footprint that delivers on our objectives.

We make it happen!The passion of our people is key to our continued success. Our focus in 2018 continued to be on building and inspiring our sales teams and creating a safe working environment where passionate and driven people can thrive. We look forward to the upcoming year with optimism and a make it happen attitude. We are confident we have the right team in place to deliver on our goals for 2019 and beyond.

New fleet of distribution vehicles



BRAND MARKETING

Marketing in today’s world requires agile brands; able to fully identify, decode and provide solutions to consumers’ needs, whilst creating deep emotional connections. Despite existing in an industry typified by multiple perverse variables, Carreras remains steadfast in its commitment to creating increased shareholder value by leveraging the strengths of our brands. In 2018 we advanced considerably in our agenda toward bolstering our legendary brands. Our brands continue to be a key source of competitive advantage for us; the fruits of which are manifested in our solid financials. We remain deeply committed to advancing our understanding of our “raison d’etre”, our

consumers. Our efforts for 2019 and beyond will see to us providing superior quality products, further exploring consumer moments and leading them on a path toward greater satisfaction with our brands.

Remaining Relevant in Key Consumer MomentsWe celebrate our consumers on every available occasion. We have developed an intimate understanding of the Jamaican consumer and know that to remain relevant we need to be present in the most fitting moments of consumption and situations of use for our brands. This is why in 2018, we drew even closer to our consumer base with our activations during the adult events and entertainment spaces, creating new experiences and rewarding consumers for their loyalty to our stalwart brands. We developed programs and partnered with key events to ensure that we created truly magical moments. We maintained prominent presence with our fresh vibrant activations within the local carnival scene through our partnership with the “Bacchanal Jamaica” series and also created waves with our bold powerful activations for the 20th staging of “Reggae Sumfest”, dubbed “the greatest reggae show on earth”. We will continue to activate and maintain a presence in key spaces and moments of consumption to ensure resonance and that we are the referent brand for our consumers.

Updating our PortfolioOur local beauties (Craven “A” and Matterhorn) remain foremost on our key priorities. Craven “A” reigns supreme as the real robust full-flavoured variant and Matterhorn stands as the undisputed leader in freshness and stimulation. These iconic brands have become the hallmark of quality and represent in the minds of our consumers, a promise of a truly remarkable quality smoking experience. With the solid equity they have built over the years we believe our brands not only have the ability, but the responsibility to continue to evolve and give consumers added value. We spent much of the past few years leading into 2018 doing deeper insights, gathering to uncover the major desires of our aspirational consumer target and feel we are now ready to chart a new course for our portfolio. The future for our brands could not look brighter. Our consumers are in for an exciting treat. They have told us that whilst they love our core products, they are open to greater experiences from the brands. We will be ensuring that our brands not only continue to meet our consumers’ core needs but also personify the future expressions of consumers’ expectations. Something is happening…we look to the new, whilst we leverage, celebrate and pay homage to what our consumers have traditionally come to know, love and trust about our brands.

Craven A branded Van



Exploring Additional OpportunitiesOver the years we have developed a distinct competence in satisfying the needs of adult consumers of factory manufactured cigarettes. We believe that to better meet the evolving needs of our consumer base, we should explore complementary product categories and offerings. We have tried in the past with our “Fyah Grabba”, make your own variant. Whilst this product proved not to be the exact fit for our consumers, we believe opportunities exist for further expansion of our product. In keeping with our ethos of progress over perfection, we have taken away many key learnings from our previous experience and are even better equipped to uncover and capitalize on consumer understandings for the future. We will explore categories with a good fit for both our destination portfolio and our route to market competences and capacity.

Creative ActivationsAs responsible tobacco marketers, we ensure that we only engage with adults who choose to consume our products as per our International Marketing Principles. As such we make every effort upon qualifying our consumers, to activate in creative ways that resonate with and appeal to our consumer base. In 2018, we raised the bar with not only the coverage of our activations, to include island-wide and deeper penetration; but higher quality, more meaningful consumer interactions. For 2019, we will move to another mile marker and will have more one-on-one interactions with consumers and customers; opening the door for a much more intimate brand experiences.

Creating a legacy of solid brands is a continuously evolving and iterative process. We strive for excellence in our understanding of key consumer insights, move to quickly advance our delivery of new levels of satisfying customer experiences and progress in fortifying our established competences. Our consumers remain at the heart of what we do. We hope to not only change to suit their needs but to also lead the path of change for them to meet us along their journey. We build brands which reflect who they are, who they are becoming and that will write the story for who they can be.

Craven A Activation at Reggae Sumfest 2018

Craven A Bar Display



LEGAL AND EXTERNAL AFFAIRS

THE REGULATORY ENVIRONMENT

Tobacco Regulations and ExciseIt is well known that tobacco is one of the most highly regulated products throughout the world and globally, we continue to see the introduction of tobacco control measures predominantly focused on tobacco packaging and labelling, public place smoking, and restrictions on tobacco advertising and promotions.

In our sphere, the impending introduction of new tobacco control measures by the Government remained a key area of focus for the Company. The Minister of Health continued to state the imminent introduction of regulations that will prohibit all forms of tobacco advertising, promotions and sponsorships; sales of all forms of tobacco products to minors, and increased taxes on tobacco products. We believe the regulation of our products is necessary and have expressed our support and readiness to comply, however, we continue to implore the Government on the need for balanced and practical regulations that meet the Government’s national health objectives, whilst recognizing the legitimate commercial right of the legal tobacco industry to market and distribute its brands, as well as the decision taken by adult consumers to consume a legal product. The responsible marketing and distribution of our products is entrenched in our operations, and so whilst we await and prepare for the introduction of the new regulations, we continued to observe our own internal marketing standards as well as ensured full compliance with the tobacco control regulations in force.

The Company also continued to raise awareness and caution the Government on the unintended consequences of the proposal to implement further increases in excise on tobacco products, chief of which is creating a greater demand for cheap illegal cigarettes due to affordability issues as the pricing gap between legal and illegal cigarettes widens. The resulting transfer of volumes from the legal to the illegal cigarette trade, and the ensuing implications of a thriving illicit trade, would only run contrary to the Government’s tobacco control efforts. The Company has therefore been relentless in calling on the Government to not only consider the World Health Organization’s FCTC dictates as it relates to implementing high levels of tobacco excise, but to implement a sustainable excise policy that fully considers the Jamaican market reality, vis a vis affordability issues that fuel an active illicit trade.

Youth Access Prevention ProgrammeIn 2019, the Company re-launched its Youth Access Prevention (YAP) campaign which was first implemented by the Company in 2008, then called the Youth Smoking Prevention (YSP) programme. Since that time, the Company has maintained the programme in all the outlets it distributes its products across the island (approximately 3500).

Through the programme, the Company helps to educate customers and consumers about the law prohibiting tobacco sales to minors and by minors and supports its retailers in preventing underage access to tobacco products by providing Point of Sale (POS) signage with the message “We/ I don’t sell cigarettes to persons under 18, it’s the Law”. This is a British American Tobacco (BAT) wide campaign and is implemented in more than 70 countries in which BAT markets and distributes its products. With BAT’s shift to a multicategory business- with its offer of Vapour and Tobacco Heating Products, the Youth Smoking Prevention (YSP) programme has been replaced with the Youth Access prevention (YAP) Programme.

The YAP launch in Jamaica is simply a continuation of Carreras’ partnership with retailers in upholding the minimum age law for tobacco access and its own internal standards of no sales to persons under 18 years of age.

Importantly, this relaunched YAP programme for Jamaica features POS materials with the message “We don’t sell illegal cigarettes, it is an offence- you can be fined and arrested” which is aimed at discouraging illegal cigarette sales and emphasizing that such activity is a criminal offence in outlets that sell cigarettes. The Company believes that this Anti-illicit campaign message is timely given the significant inflow and prevalence of illegal cigarettes within the domestic market.

The Illicit Trade in CigarettesDuring 2019, the Company recognized the enforcement efforts of the authorities, namely the Jamaica Customs Agency and the Counter Terrorism and Organized Crime Investigation Branch (C-TOC), with the major finds of a variety of illicit cigarettes; most notable of which was the seizure of over 850 master cases.



These historic seizures no doubt sent a signal of the authorities’ resolve to stamp out illegal cigarettes in the domestic market. Whilst we were encouraged by the strong enforcement efforts of the police and Customs, we continued to impress upon the need for stronger port and border monitoring and protection to prevent these illegal goods from entering the island in the first place, as the reality is such that once these illegal cigarettes enter the domestic market, it is much more difficult to locate and contain. We also continued to highlight the significant challenges these illegal cigarettes pose to the Government, not only in terms of its revenues, but as well to its health and tobacco control agenda.

We further pointed out the nexus between the illicit cigarette trade and the criminal underworld and have maintained our call on the Government, to vigorously pursue and bring to justice those persons involved, and in tandem with that, to review and reform the fines, penalties and sanctions for dealing in and being caught with illicit cigarettes. In addition to these recommendations to the Government in fighting this

illegal trade, we continue to reiterate that at the heart of any strategy or solution, is the need for a sustainable tobacco excise policy that recognizes the direct link between increasing tobacco excise and the proliferation of illegal cigarettes within the market.

The Company continued to play its role in the fight against illicit cigarettes through its implementation of sustained mass media and trade communication campaigns that raise awareness in identifying illegal cigarettes among the authorities, retailers, consumers and the general public. For the first time as well, the Company staged a very successful Anti-Illicit Trade Conference which had as its main objective, to bring together a wide cross-section of the stakeholders in Government and crime fighting, to bring awareness to the illicit trade and underscore the urgency in tackling the issue. A key takeaway of this conference was the collaborative power of partnerships and the greater collective impact these enforcement agencies can have by working together and creating stronger and more useful synergies in the fight against the Illicit Trade.

• Marcus Steele, MD Carreras, Michael Ellis, renowned expert on Global illicit trade and keynote speaker at the Conference, Mr, John Padgett, BAT Government Affairs and Anti-Illicit Trade Manager, Caribbean, and Hon. Horace Chang, MP, Minister of National Security in discussion at the Conference

• Speakers on the panel of experts at the Conference

• Michael Ellis in discussion with attendees at the conference

Main Drivers of the Illicit Trade



CORPORATE SOCIAL RESPONSIBILITYOver the years, Carreras has consistently sought opportunities to address critical challenges in Jamaica. Consistent with our perceived and demonstrated role as part of the group of companies in Jamaica, who play a significant role in nation-building, we remained steadfast in encouraging creativity, productivity & innovation through increased educational and community-building activity in the year 2018/2019. We believe that through these priorities we can make a seminal contribution to Jamaica, touching live in ways that change and influence them positively.

EDUCATIONThis year, from over 300 applicants, we made 42 awards to students across the island, spanning a wide cross-section of fields in Jamaica:

Ј 12 Bursaries to those in need, effectively bridging gaps in these students’ educational budgets.

Ј 7 to Teacher’s Colleges, aiming to increase the number of future educators in the country.

Ј 4 in the Arts, encouraging students to remain committed to contribute to our worldwide known culture.

Ј 6 to Community Colleges, supporting shorter term, and often practical educational pursuits.

Ј 10 HOPE scholarships, supporting children of officers of the security forces who have passed on.

Ј 3 SEEK scholarships, rewarding those Striving for Excellence and Empowering Knowledge (SEEK) valued at $1 million each.

We are confident that these interventions will “empower lives through education” and ultimately build Jamaica. The financial benefits from scholarships and bursaries are well known and acknowledged. Students can actually reduce their chance of dropping out as well as have more time for studying and learning, resulting in better grades, greater retention of knowledge and an increased chance of continuing on to graduate school and eventually achieving career goals.

Many Carreras scholarship recipients are also able to maximize their tertiary education experience through service-learning and volunteer opportunities, which in many cases help to equip them for the world of work. The attainment of a very competitive Carreras Scholarship is therefore a coveted achievement which brings recognition and prestige, creating confident and well-rounded citizens.

COMMUNITY BUILDINGCarreras continues its community building engagements and in encouraging our employees to give back to their communities.

Employees pose after the 2018 Labour Day project.

This year, we would like to highlight our Labour Day project. In keeping with the National theme for Labour Day to “Restore, Preserve and Beautify”, we worked on painting the Half-Way Tree Police Station. The activity saw staff at all levels working together to give the station’s reception area a much- needed facelift.

Janene Shaw, Finance Director & Company Secretary, Carreras, presents a scholarship to Julie-Sue Salmon, tenable at Edna Manley College of the Visual and Performing Arts.

We also continued our support for various civic organizations, enabling them to assist and empower the communities in which we operate, while engaging vulnerable members of society. We also provided sponsorship and charitable donations for art and culture initiatives.

Corporate social responsibility is integrated in our core values and beliefs and year after year, we seek opportunities to demonstrate our commitment in order to contribute to a better Jamaica.

2018 Scholarship Awardees pose with, seated in the front row, Managing Director, Marcus Steele 5th left, The Honourable Shahine Robinson, MP Minister of Labour and Social Security 6th left and the Minister of State in the Ministry of Foreign Affairs and Foreign Trade, Senator, The Honourable Pearnel Charles Jr., 7th left.



HUMAN RESOURCES Our people agenda is a key component in the achievement of the strategic objectives of Carreras Limited. As such, our Human Resource team continued their commitment to providing the leadership and expertise needed to create an environment where people can thrive and deliver sustainable Organisational results.

Improving the employee experience through digitalisationIn 2018, we launched an integrated, self-service HR system that offers numerous first-class tools and services. It provides all employees with fast, convenient access to free online training tools, employment information and career management databases. Our employees are now empowered to own their information by updating their bank accounts, home addresses and other personal information, online. Performance management has also migrated to this new tool, facilitating communication, coaching and feedback between managers and employees, regardless of their geographical location.

The Management team now has direct control over their recruitment requests, promotions, salary increases and other staff transactions, digitally. The system also provides HR metrics and reports on employee related data needed to guide and inform decision- making on employee development.

Fit for Purpose Organisational Design Beyond digitalisation, the HR function continues to support restructuring measures to ensure that the correct organisational design and skill sets exist to properly support our strategic objectives. From 2018 to 2019 we designed and executed a revised route to market (RTM) structure to further drive our RTM capabilities with respect to speed, coverage, efficiency, and effectiveness. This exercise enabled us to leverage the skills and experience already available within the Company and we were able to reclassify and, in most instances, upgrade our Sales and Distribution Representatives. There were approximately seven (7) employee promotions and the introduction of one new management role in the Trade Marketing and Distribution

Organisational structure. This new organisational design allows a clearer path for upward mobility of our key talent, allowing for better career management and succession planning.

We also took the opportunity, during this transition, to retrain and re-tool all Trade Marketing and Distribution employees on the new ways of work and improved customer service management. This restructuring has allowed us to retain key talent and further develop their capabilities to meet challenging objectives.

Winning OrganisationThe strength of our Company lies not only in the quality of our products, but in the excellence of our people and the strength of our teams and leaders. Carreras Limited maintains itself as a winning Organisation through our continued commitment to attracting, developing and retaining the best talent for our Organisation.

Fostering high performing, diverse teams across the SANCAR (South America North and the Caribbean) cluster continued to be a fundamental part of the people agenda for the past year. To ensure that employees integrated and performed well in their teams, diversity training was conducted throughout the region. This aimed to increase cultural awareness and create a positive work environment between functional and geographically dispersed teams.

Our people investment is also reflected in our leadership development, which includes a refocused effort that helps to nurture future leaders. To help managers grow into their roles we executed programs such as Leading Self and Leading Managers. Such investments in leadership contributed to one of our key talent at Carreras Limited receiving an International Assignment to the position of Finance Manager within our Region.

To identify and develop our next generation of leaders we recruited our first trainee for the British American Tobacco (BAT) Global Graduate Programme. This is an intense one-year program where the graduate will be trained and coached to spearhead challenging local and international projects. All graduates are encouraged to be courageous and innovative idea generators to keep us competitive and on a path of sustainable growth. We expect to recruit more global graduates over the coming years.

The winning team at the 2018 Strategic Leadership Agenda held at Melia Braco Village



Linking Compensation with PerformanceCompensation and alignment to our Key Performance Indicators is the foundation upon which we can deliver our strategic objectives. To ensure that we remain competitive and relevant, we constantly review our reward structures and communicate these changes in our regular staff meetings, dubbed the “What’s Up” meetings, to allow for greater transparency and alignment.

This year, a revised compensation framework was implemented to simplify our incentive scheme while supporting a wider effort to accelerate and deliver our Organisation´s agenda. As we continue to build on our pay for performance platform, we monitor and align the weights assigned to each of the key metrics that we use as benchmarks to measure our performance. Key metrics such as Volume Share Growth, Strategic Portfolio Revenue, Adjusted Profit from Operations and Cash Flow weigh heavily as a consideration for overall performance.

Increasing Engagement and CommitmentOur Strategic Leadership Agenda (SLA) continues to be the foundation on which we grow and achieve success each year. Annually, this SLA has become our road map for the successful roll-out of the British American Tobacco (BAT) Line of Sight throughout our global organization, by Region, Area and End Market. SLA 2018 was no different with the entire Carreras team participating in a weekend long activity of strategy development, fun and celebration at the Melia Braco Village Resort.

Employees of Carreras Limited at the 2018 Strategic Leadership Agenda

We continued to show appreciation to past employees at our Annual Pensioners’ Luncheon, while also recognising current employees at various functions including our Staff Party, Sales Awards, annual Christmas Breakfast and Long Service Awards. This year we recognised five (5) of our employees with Long Service Awards, celebrating 5, 15 and 20 years of service to Carreras Limited.

The Managing Directors Award is given to the employee who exemplifies the Company´s guiding principles. This year we awarded Mr. Khafre Gentles as the 2018 recipient for his passion, team work and dedication to the Company.

Managing Director, Marcus Steele presenting the Managing Director´s Award to Khafre Gentles

Fifteen (15) additional employees were recognised by our Managing Director for going beyond the call of duty and consistently demonstrating excellence in their jobs.

Notwithstanding the many wins we had in 2018, we have set the following key focus areas for 2019 to ensure that Carreras remains a winning organisation.

Ј Building our Talent Brand, which recognises the acquisition and retention of talent as a competitive advantage and key to our continued success.

Ј The implementation of innovative programs aimed at improving employee engagement and fortifying Carreras Limited as a great place to work.

Ј Revamping our reward and recognition program to ensure that we continue to acknowledge and motivate our employees

Ј Continued focus on training and development to build capabilities and competencies.

AUDITED FINANCIAL STATEMENTS

Financial Statements

March 31, 2019

Independent Auditors’ Report 56

Group Statement of Profit or Loss and Other Comprehensive Income 63

Group Statement of Financial Position 64

Group Statement of Changes in Equity 65

Group Statement of Cash Flows 67

Company Statement of Profit or Loss and Other Comprehensive Income 68

Company Statement of Financial Position 69

Company Statement of Changes in Equity 70

Company Statement of Cash Flows 71

Notes to the Financial Statements 72

KPMG, a Jamaican partnership and a member firm of the KPMG network of independent member firms affiliated

with KPMG International Cooperative (“KPMG International”), a Swiss entity.

R. Tarun Handa Nyssa A. Johnson

Cynthia L. Lawrence W. Gihan C. De Mel

Rajan Trehan Wilbert A. Spence

Norman O. Rainford Rochelle N. Stephenson

Nigel R. Chambers Sandra A. Edwards

KPMG

Chartered Accountants

P.O. Box 76

6 Duke Street

Kingston

Jamaica, W.I.

+1 (876) 922-6640

[email protected]

INDEPENDENT AUDITORS’ REPORT

To the Members of

CARRERAS LIMITED

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Carreras Limited (“the company”)

comprising the separate financial statements of the company and the consolidated

financial statements of the company and its subsidiaries (“the group”), set out on

pages 63 to 108, which comprise the group’s and company’s statement of financial

position as at March 31, 2019, the group’s and company’s statements of profit or

loss and other comprehensive income, changes in equity and cash flows for the

year then ended, and notes, comprising significant accounting policies and other

explanatory information.

In our opinion, the accompanying financial statements give a true and fair view of

the financial position of the group and the company as at March 31, 2019, and of

the group’s and company’s financial performance and cash flows for the year then

ended in accordance with International Financial Reporting Standards (IFRS) and the

Jamaican Companies Act.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing

(ISAs). Our responsibilities under those standards are further described in the

Auditors’ Responsibilities for the Audit of the Financial Statements section of our

report. We are independent of the company in accordance with the International

Ethics Standards Board for Accountants Code of Ethics for Professional

Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in

accordance with the IESBA Code. We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a basis for our opinion.

INDEPENDENT AUDITORS’ REPORT (CONTINUED)

To the Members of

CARRERAS LIMITED

Report on the Audit of the Financial Statements (continued)

Key Audit Matter

Key audit matter is a matter that, in our professional judgment, was of most

significance in our audit of the financial statements of the current period. This

matter was addressed in the context of our audit of the financial statements as a

whole, and in forming our opinion thereon, and we do not provide a separate

opinion on this matter.

Carrying amount of trade receivables

Key audit matter How the matter was addressed

in our audit

The group has a significant concentration of

credit risk with large credit customers with

material balances both individually and in

aggregate.

There is judgment involved in determining

the levels of allowance for impairment on

these balances, because of the inherent

uncertainty involved in estimating the timing

and amount of future collections.

Our audit procedures in response

to this matter, included:

Testing manual and automated

controls over the recording of

trade receivables, collections

and the ageing of invoices.

Our testing of automated

controls involved using our

own Information Technology

Audit specialist to test the

design, implementation and

operating effectiveness of

automated controls.

Testing the company’s

recording and ageing of trade

receivables.

Using the appropriate KPMG

specialist, we reviewed the

expected credit loss (ECL)

model calculations and agreed

the data inputs.

Comparing the definition of

default for the ECL

measurement, as outlined in

the accounting policy, against

the definition that

management uses for credit

risk arrangements.

Evaluating the appropriateness

of economic parameters

including the use of forward

looking information.


To the Members of

CARRERAS LIMITED


Carrying amount of trade receivables (continued)

Other Information

Management is responsible for the other information. The other information

comprises the information included in the annual report but does not include the

financial statements and our auditors’ report thereon. The annual report is

expected to be made available to us after the date of this auditors’ report.

Our opinion on the financial statements does not cover the other information and

we will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to

read the other information identified above when it becomes available and, in

doing so, consider whether the other information is materially inconsistent with

the financial statements or our knowledge obtained in the audit, or otherwise

appears to be materially misstated.

When we read the annual report, if we conclude that there is a material

misstatement therein, we are required to communicate the matter to those

charged with governance.

Key audit matter How the matter was addressed

in our audit

Our audit procedures in response

to this matter, included

(continued):

Testing the accuracy of the

ECL calculation.

Evaluating the adequacy of

the allowance for impairment

recognised in respect of the

company’s trade receivables

by assessing management’s

assumptions used including

determining compliance with

the new requirements of IFRS

9, Financial Instruments.

Considering the adequacy of

the disclosures about the

degree of estimation involved

in arriving at the allowance for

impairment.


To the Members of

CARRERAS LIMITED


Responsibilities of Management and Those Charged with Governance for the

Financial Statements

Management is responsible for the preparation of financial statements that give a

true and fair view in accordance with IFRS and the Jamaican Companies Act, and

for such internal control as management determines is necessary to enable the

preparation of financial statements that are free from material misstatement,

whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the

company’s ability to continue as a going concern, disclosing, as applicable, matters

related to going concern and using the going concern basis of accounting unless

management either intends to liquidate the group and the company or to cease

operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the company’s

financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial

statements as a whole are free from material misstatement, whether due to fraud

or error, and to issue an auditors’ report that includes our opinion. Reasonable

assurance is a high level of assurance, but is not a guarantee that an audit

conducted in accordance with ISAs will always detect a material misstatement

when it exists. Misstatements can arise from fraud or error and are considered

material if, individually or in the aggregate, they could reasonably be expected to

influence the economic decisions of users taken on the basis of these financial

statements.

A further description of our responsibilities for the audit of the financial

statements is included in the Appendix to this auditors’ report. This description,

which is located at pages 61 to 6 , forms part of our auditors’ report.

1 6


To the Members of

CARRERAS LIMITED

Report on additional matters as required by the Jamaican Companies Act

We have obtained all the information and explanations which, to the best of our

knowledge and belief, were necessary for the purposes of our audit.

In our opinion, proper accounting records have been maintained, so far as appears

from our examination of those records, and the financial statements, which are in

agreement therewith, give the information required by the Jamaican Companies

Act in the manner required.

The engagement partner on the audit resulting in this independent auditors’ report

is Nyssa Johnson.

CHARTERED ACCOUNTANTS

Kingston, Jamaica

May 22, 2019


To the Members of

CARRERAS LIMITED

Appendix to the Independent Auditors’ report

As part of an audit in accordance with ISAs, we exercise professional judgment

and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial

statements, whether due to fraud or error, design and perform audit

procedures responsive to those risks, and obtain audit evidence that is

sufficient and appropriate to provide a basis for our opinion. The risk of not

detecting a material misstatement resulting from fraud is higher than for one

resulting from error, as fraud may involve collusion, forgery, intentional

omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to

design audit procedures that are appropriate in the circumstances, but not for

the purpose of expressing an opinion on the effectiveness of the group’s

internal control.

Evaluate the appropriateness of accounting policies used and the

reasonableness of accounting estimates and related disclosures made by

management.

Conclude on the appropriateness of management’s use of the going concern

basis of accounting and, based on the audit evidence obtained, whether a

material uncertainty exists related to events or conditions that may cast

significant doubt on the company’s ability to continue as a going concern. If

we conclude that a material uncertainty exists, we are required to draw

attention in our auditors’ report to the related disclosures in the financial

statements or, if such disclosures are inadequate, to modify our opinion. Our

conclusions are based on the audit evidence obtained up to the date of our

auditors’ report. However, future events or conditions may cause the

company to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial

statements, including the disclosures, and whether the financial statements

represent the underlying transactions and events in a manner that achieves

fair presentation.


To the Members of

CARRERAS LIMITED

Appendix to the Independent Auditors’ report (continued)

We communicate with those charged with governance regarding, among other

matters, the planned scope and timing of the audit and significant audit findings,

including any significant deficiencies in internal control that we identify during our

audit.

We also provide those charged with governance with a statement that we have

complied with relevant ethical requirements regarding independence, and

communicate with them all relationships and other matters that may reasonably be

thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we

determine those matters that were of most significance in the audit of the financial

statements of the current period and are therefore the key audit matters. We

describe these matters in our auditors’ report unless law or regulation precludes

public disclosure about the matter or when, in extremely rare circumstances, we

determine that a matter should not be communicated in our report because the

adverse consequences of doing so would reasonably be expected to outweigh the

public interest benefits of such communication.


Financial StatementsGovernance Management's Discussion & Analysis

8

CARRERAS LIMITED Group Statement of Profit or Loss and Other Comprehensive Income Year ended March 31, 2019 Notes 2019 2018 $'000 $'000 Operating revenue 4 12,906,497 12,550,132

Cost of operating revenue 5 ( 6,470,125) ( 6,249,282)

Gross operating profit 6,436,372 6,300,850

Other operating income 6 149,904 223,721

6,586,276 6,524,571

Administrative, distribution and marketing expenses 7 ( 2,013,673) ( 1,847,945)

Impairment loss on trade receivables 18 ( 5,774) -

Employee benefits expense 10(i)(e),10(ii)(c) ( 50,900) ( 39,300)

( 2,070,347) ( 1,887,245)


Income tax 8(a) ( 1,109,027) ( 1,152,696)

Profit for the year 3,406,902 3,484,630 Other comprehensive income/(loss) Items that will never be reclassified to profit or loss:

Change in effect of asset ceiling 10(i)(f) ( 749,300) ( 186,700) Remeasurement gain on plan assets 10(i)(f) 232,500 317,000

Remeasurement gain/ (loss) on obligation 10(i)(f),10(ii)(d) 543,300 ( 101,600) Income tax on other comprehensive income/(loss) 15(b) 15,385 ( 7,761)

Other comprehensive income/(losses), net of tax 41,885 20,939

Total comprehensive income for the year 3,448,787 3,505,569

Profit attributable to: Non-controlling interests 53 34 Stockholders’ interests in parent 9 3,406,849 3,484,596

3,406,902 3,484,630

Total comprehensive income attributable to: Non-controlling interests 53 34 Stockholders’ interests in parent 3,448,734 3,505,535

3,448,787 3,505,569

Earnings per ordinary stock unit 9 70.2¢ 71.8¢ The accompanying notes form an integral part of the financial statements.

Group Statement of Profit or Loss and Other Comprehensive Income

Year ended March 31, 2019

CARRERAS LIMITED

Group Statement of inancial Position March 31, 2019

Notes 2019 2018 $'000 $'000

Assets eferred tax asset 15 38,544 6,916 mployee benefits asset 10(i)(a) 138,300 181,900 roperty, plant and e uipment 11 383,017 337,251

on current assets 559,861 526,067

Cash and cash e uivalents 12 1,789,730 2,306,972 ccounts receivable 13 779,071 910,995

Income tax recoverable 2,529 10,957 Inventories 22(f) 361,462 233,179

Current assets 2,932,792 3,462,103

Total assets 3,492,653 3,988,170

E uity Share capital 14 121,360 121,360

nappropriated profits 1,214,144 1,920,034

Total attributable to stockholders of the parent 1,335,504 2,041,394 on controlling interests 22(b) - 1,275

Total e uity 1,335,504 2,042,669

Liabilities mployee benefits obligation 10(ii)(a) 223,000 253,800

on current liability 223,000 253,800

ccounts payable 16 1,136,491 840,442 Income tax payable 797,658 851,259

Current liabilities 1,934,149 1,691,701

Total liabilities 2,157,149 1,945,501

Total e uity and liabilities 3,492,653 3,988,170

The financial statements on pages 63 to 108, were approved for issue by the oard of irectors on ay 22, 2019, and signed on its behalf by:

The accompanying notes form an integral part of the financial statements.


GovernanceManagement's Discussion & AnalysisFinancial Statements

8

CARRERAS LIMITED Group Statement of Profit or Loss and Other Comprehensive Income Year ended March 31, 2019 Notes 2019 2018 $'000 $'000 Operating revenue 4 12,906,497 12,550,132




6,586,276 6,524,571




( 2,070,347) ( 1,887,245)


Income tax 8(a) ( 1,109,027) ( 1,152,696)

Profit for the year 3,406,902 3,484,630 Other comprehensive income/(loss) Items that will never be reclassified to profit or loss:

Change in effect of asset ceiling 10(i)(f) ( 749,300) ( 186,700) Remeasurement gain on plan assets 10(i)(f) 232,500 317,000

Remeasurement gain/ (loss) on obligation 10(i)(f),10(ii)(d) 543,300 ( 101,600) Income tax on other comprehensive income/(loss) 15(b) 15,385 ( 7,761)

Other comprehensive income/(losses), net of tax 41,885 20,939


Profit attributable to: Non-controlling interests 53 34 Stockholders’ interests in parent 9 3,406,849 3,484,596

3,406,902 3,484,630

Total comprehensive income attributable to: Non-controlling interests 53 34 Stockholders’ interests in parent 3,448,734 3,505,535

3,448,787 3,505,569

Earnings per ordinary stock unit 9 70.2¢ 71.8¢ The accompanying notes form an integral part of the financial statements.

CARRERAS LIMITED

Group Statement of inancial Position March 31, 2019

Notes 2019 2018 $'000 $'000




Income tax recoverable 2,529 10,957 Inventories 22(f) 361,462 233,179

Current assets 2,932,792 3,462,103

Total assets 3,492,653 3,988,170



Total attributable to stockholders of the parent 1,335,504 2,041,394 on controlling interests 22(b) - 1,275

Total e uity 1,335,504 2,042,669







The financial statements on pages 63 to 108, were approved for issue by the oard of irectors on ay 22, 2019, and signed on its behalf by:


Group Statement of Financial Position

March 31, 2019



Group Statement of Changes in Equity




11

CARRERAS LIMITED

Group Statement of Cash lo s Year ended March 31, 2019 2019 2018 Notes $'000 $'000 Cash flo s from operating activities

rofit for the year 3,406,902 3,484,630 d ustments for: epreciation 11 88,156 77,084 mployee benefits 39,300 27,600 Income tax expense 8(a) 1,109,027 1,152,696 oreign exchange loss 6 16,705 7,632 ain on disposal of property, plant and e uipment 6 ( 2,650) ( 7,186) Investment income earned 6 ( 67,467) ( 89,326)

4,589,973 4,653,130 Changes in:

ccounts receivable 133,418 ( 298,362) Inventories ( 128,283) 239,539

ccounts payable 296,049 44,261

Cash generated from operations 4,891,157 4,638,568 Income tax paid (1,198,827) (1,295,936)

Net cash provided by operating activities 3,692,330 3,342,632

Cash flo s from investing activities Investment income received 65,973 88,685 dditions to property, plant and e uipment 11 ( 133,922) ( 114,275) roceeds of disposal of property, plant and e uipment 2,650 7,276

Net cash used by investing activities ( 65,299) ( 18,314)

Cash flo s from financing activity ividends and distributions, being net cash used by financing activity 19 (4,127,568) (3,592,256)

et decrease in cash and cash e uivalents before effect of foreign exchange rate changes ( 500,537) ( 267,938) Effect of exchange rate changes on cash and cash e uivalents ( 16,705) ( 7,632)

Cash and cash e uivalents at beginning of year 2,306,972 2,582,542

Cash and cash e uivalents at end of year 12 1,789,730 2,306,972 The accompanying notes form an integral part of the financial statements.

Group Statement of Cash Flows


12

CARRERAS LIMITED Company Statement of Profit or Loss and Other Comprehensive Income Year ended March 31, 2019 Notes 2019 2018 $'000 $'000

Operating revenue 4 12,906,497 12,550,132




6,568,783 6,501,867




Gain on li uidation of subsidiary 20 376,928 - Profit before income tax 4,875,773 4,620,478

Income tax 8(d) ( 1,137,411) ( 1,148,729)

Profit for the year 3,738,362 3,471,749

Other comprehensive income Items that will never be reclassified to profit or loss:

Change in effect of asset ceiling 10(i)(f) ( 749,300) ( 186,700) Remeasurement gain on plan assets 10(i)(f) 232,500 317,000 Remeasurement gain/(loss) on obligation 10(i)(f),10(ii)(d) 543,300 ( 101,600) Income tax on other comprehensive income 15(b) ( 6,625) ( 7,175)

Other comprehensive income, net of tax 19,875 21,525





11

CARRERAS LIMITED

Group Statement of Cash lo s Year ended March 31, 2019 2019 2018 Notes $'000 $'000 Cash flo s from operating activities

rofit for the year 3,406,902 3,484,630 d ustments for: epreciation 11 88,156 77,084 mployee benefits 39,300 27,600 Income tax expense 8(a) 1,109,027 1,152,696 oreign exchange loss 6 16,705 7,632 ain on disposal of property, plant and e uipment 6 ( 2,650) ( 7,186) Investment income earned 6 ( 67,467) ( 89,326)

4,589,973 4,653,130 Changes in:





Cash flo s from investing activities Investment income received 65,973 88,685 dditions to property, plant and e uipment 11 ( 133,922) ( 114,275) roceeds of disposal of property, plant and e uipment 2,650 7,276

Net cash used by investing activities ( 65,299) ( 18,314)

Cash flo s from financing activity ividends and distributions, being net cash used by financing activity 19 (4,127,568) (3,592,256)

et decrease in cash and cash e uivalents before effect of foreign exchange rate changes ( 500,537) ( 267,938) Effect of exchange rate changes on cash and cash e uivalents ( 16,705) ( 7,632)



12

CARRERAS LIMITED Company Statement of Profit or Loss and Other Comprehensive Income Year ended March 31, 2019 Notes 2019 2018 $'000 $'000

Operating revenue 4 12,906,497 12,550,132




6,568,783 6,501,867




Gain on li uidation of subsidiary 20 376,928 - Profit before income tax 4,875,773 4,620,478

Income tax 8(d) ( 1,137,411) ( 1,148,729)

Profit for the year 3,738,362 3,471,749

Other comprehensive income Items that will never be reclassified to profit or loss:

Change in effect of asset ceiling 10(i)(f) ( 749,300) ( 186,700) Remeasurement gain on plan assets 10(i)(f) 232,500 317,000 Remeasurement gain/(loss) on obligation 10(i)(f),10(ii)(d) 543,300 ( 101,600) Income tax on other comprehensive income 15(b) ( 6,625) ( 7,175)

Other comprehensive income, net of tax 19,875 21,525



Company Statement of Profit or Loss and Other Comprehensive Income




CARRERAS LIMITED

Company Statement of inancial Position March 31, 2019

Notes 2019 2018 $'000 $'000


Investment in subsidiaries 20 15,549 206,294



Inventories 22(f) 361,462 233,179

Current assets 2,847,883 2,789,149

Total assets 3,423,293 3,547,368



Total e uity 1,266,170 1,634,173







The financial statements on pages 63 to 108, were approved for issue by the oard of irectors onay 22, 2019, and signed on its behalf by:

irector ichael . ernard

irector arcus . Steele


Company Statement of Financial Position

March 31, 2019

14

CARRERAS LIMITED

Company Statement of Changes in E uity Year ended March 31, 2019 Share capital nappropriated (note 14) profits Total $'000 $'000 $'000

alances at March 31, 201 121,360 1,611,795 1,733,155

rofit for the year - 3,471,749 3,471,749 Other comprehensive income: Remeasurement of employee benefit asset and obligation, net of taxes - 21,525 21,525

Total comprehensive income for the year - 3,493,274 3,493,274

Transactions ith o ners ividends paid (note 19) - (3,592,256) (3,592,256)

alances at March 31, 201 121,360 1,512,813 1,634,173




alances at March 31, 2019 121,360 1,144,810 1,266,170




CARRERAS LIMITED

Company Statement of inancial Position March 31, 2019

Notes 2019 2018 $'000 $'000


Investment in subsidiaries 20 15,549 206,294



Inventories 22(f) 361,462 233,179

Current assets 2,847,883 2,789,149

Total assets 3,423,293 3,547,368



Total e uity 1,266,170 1,634,173







The financial statements on pages 63 to 108, were approved for issue by the oard of irectors onay 22, 2019, and signed on its behalf by:

irector ichael . ernard

irector arcus . Steele


14

CARRERAS LIMITED

Company Statement of Changes in E uity Year ended March 31, 2019 Share capital nappropriated (note 14) profits Total $'000 $'000 $'000

alances at March 31, 201 121,360 1,611,795 1,733,155




alances at March 31, 201 121,360 1,512,813 1,634,173




alances at March 31, 2019 121,360 1,144,810 1,266,170


Company Statement of Changes in Equity




15

CARRERAS LIMITED

Company Statement of Cash lo s Year ended March 31, 2019 2019 2018 Notes $'000 $'000 Cash flo s from operating activities

rofit for the year 3,738,362 3,471,749 d ustments for:

epreciation 11 88,156 77,084 mployee benefits 39,300 27,600 ain on disposal of property, plant and e uipment 6 ( 2,650) ( 7,186) ain on li uidation of subsidiary 20 ( 376,928) - oreign exchange loss 13,259 17,686

Income tax expense 8(d) 1,137,411 1,148,729 Investment income earned 6 ( 65,274) ( 76,676)

4,571,636 4,658,986 Changes in:





Cash flo s from investing activities Capital distribution from li uidated subsidiary 20 567,673 - Investment income received 62,391 77,424 dditions to property, plant and e uipment 11 ( 133,922) ( 114,275) roceeds from disposal of property, plant and e uipment 2,650 7,276

Net cash used by investing activities 498,792 ( 29,575)

Cash flo s from financing activity ividends and distribution paid, being net cash used by financing activity 19 (4,126,240) (3,592,256)

et increase/(decrease) in cash and cash e uivalents before effect of foreign exchange rate changes 73,826 ( 275,640)

Effect of exchange rate changes on cash and cash e uivalents ( 13,259) ( 17,686)



Company Statement of Cash Flows


16

CARRERAS LIMITED

otes to the inancial Statements March 31, 2019 1. Identification and principal activity Carreras imited ( the company ) is incorporated and domiciled in amaica and is listed on the amaica

Stock xchange. It is a 50.4 subsidiary of Rothmans oldings (Caricom) imited, which is incorporated in St. ucia. The ultimate parent company is ritish merican Tobacco plc, incorporated in the nited ingdom and listed on the ondon Stock xchange. The principal activities of the company are the marketing and distribution of cigarettes.

The address of the principal place of business and the registered office of the company is 13 Ripon Road, ingston 5, amaica.

2. Statement of compliance and basis of preparation

(a) Statement of compliance:

The financial statements have been prepared in accordance with International inancial Reporting Standards (I RS) and their interpretations issued by the International ccounting Standards

oard, and comply with the provisions of the amaican Companies ct.

This is the first set of the group’s annual financial statements in which I RS 9, inancial Instruments, and I RS 15, Revenue from Contracts with Customers, have been applied. Changes to significant accounting polocies are described in note 3.

summary of significant accounting policies is included in note 22.

(b) asis of measurement and functional currency:

The financial statements are presented on the historical cost basis. nless otherwise stated, the financial statements are presented in thousands of amaica dollars ($’000), which is the functional currency of the company.

(c) ccounting estimates and udgements: The preparation of the financial statements in accordance with I RS re uires management to

make udgements, estimates and assumptions that affect the application of policies and the reported amounts of, and disclosures related to, assets, liabilities, contingent assets and contingent liabilities at the reporting date and the income and expenses for the year then ended. The estimates and associated assumptions are based on historical experience and/or various other factors that are believed to be reasonable under the circumstances. ctual amounts could differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

ey sources of estimation uncertainty:

mployee benefits see notes 10 and 22(o) :

The amounts recognised in the statement of financial position and statement of profit or loss and other comprehensive income for pension and other post-employment benefits are determined actuarially using several assumptions. The primary assumptions used in determining the amounts recognised include the discount rate used to determine the present value of estimated future cash flows re uired to settle the pension and other post-employment obligations and the expected rate of increase in medical costs for post-employment medical benefits.

ny changes in these assumptions would impact the amounts recorded in the financial statements for these obligations.



15

CARRERAS LIMITED

Company Statement of Cash lo s Year ended March 31, 2019 2019 2018 Notes $'000 $'000 Cash flo s from operating activities

rofit for the year 3,738,362 3,471,749 d ustments for:

epreciation 11 88,156 77,084 mployee benefits 39,300 27,600 ain on disposal of property, plant and e uipment 6 ( 2,650) ( 7,186) ain on li uidation of subsidiary 20 ( 376,928) - oreign exchange loss 13,259 17,686

Income tax expense 8(d) 1,137,411 1,148,729 Investment income earned 6 ( 65,274) ( 76,676)

4,571,636 4,658,986 Changes in:





Cash flo s from investing activities Capital distribution from li uidated subsidiary 20 567,673 - Investment income received 62,391 77,424 dditions to property, plant and e uipment 11 ( 133,922) ( 114,275) roceeds from disposal of property, plant and e uipment 2,650 7,276

Net cash used by investing activities 498,792 ( 29,575)

Cash flo s from financing activity ividends and distribution paid, being net cash used by financing activity 19 (4,126,240) (3,592,256)

et increase/(decrease) in cash and cash e uivalents before effect of foreign exchange rate changes 73,826 ( 275,640)

Effect of exchange rate changes on cash and cash e uivalents ( 13,259) ( 17,686)



16

CARRERAS LIMITED

otes to the inancial Statements March 31, 2019 1. Identification and principal activity Carreras imited ( the company ) is incorporated and domiciled in amaica and is listed on the amaica

Stock xchange. It is a 50.4 subsidiary of Rothmans oldings (Caricom) imited, which is incorporated in St. ucia. The ultimate parent company is ritish merican Tobacco plc, incorporated in the nited ingdom and listed on the ondon Stock xchange. The principal activities of the company are the marketing and distribution of cigarettes.

The address of the principal place of business and the registered office of the company is 13 Ripon Road, ingston 5, amaica.

2. Statement of compliance and basis of preparation

(a) Statement of compliance:

The financial statements have been prepared in accordance with International inancial Reporting Standards (I RS) and their interpretations issued by the International ccounting Standards

oard, and comply with the provisions of the amaican Companies ct.

This is the first set of the group’s annual financial statements in which I RS 9, inancial Instruments, and I RS 15, Revenue from Contracts with Customers, have been applied. Changes to significant accounting polocies are described in note 3.

summary of significant accounting policies is included in note 22.

(b) asis of measurement and functional currency:

The financial statements are presented on the historical cost basis. nless otherwise stated, the financial statements are presented in thousands of amaica dollars ($’000), which is the functional currency of the company.

(c) ccounting estimates and udgements: The preparation of the financial statements in accordance with I RS re uires management to

make udgements, estimates and assumptions that affect the application of policies and the reported amounts of, and disclosures related to, assets, liabilities, contingent assets and contingent liabilities at the reporting date and the income and expenses for the year then ended. The estimates and associated assumptions are based on historical experience and/or various other factors that are believed to be reasonable under the circumstances. ctual amounts could differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

ey sources of estimation uncertainty:

mployee benefits see notes 10 and 22(o) :

The amounts recognised in the statement of financial position and statement of profit or loss and other comprehensive income for pension and other post-employment benefits are determined actuarially using several assumptions. The primary assumptions used in determining the amounts recognised include the discount rate used to determine the present value of estimated future cash flows re uired to settle the pension and other post-employment obligations and the expected rate of increase in medical costs for post-employment medical benefits.

ny changes in these assumptions would impact the amounts recorded in the financial statements for these obligations.

Notes to the Financial Statements

March 31, 2019



Notes to Financial Statements (Continued)

March 31, 2019

17

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 2. Statement of compliance and basis of preparation (cont d)

(c) ccounting estimates and udgements (cont’d):

llowance for impairment losses see notes 13 and 22(p) :

llowances for doubtful accounts were established until arch 31, 2018, based on incurred loss analyses over delin uent accounts considering aging of balances, the credit history and risk profile of each customer and legal processes to recover accounts receivable. ffective

pril 1, 2018, such allowances are determined upon origination of the trade accounts receivable based on a model that calculates the expected credit loss ( C ) on trade accounts receivable.

nder the C model, the group analyses its accounts receivable in a matrix by days past due and determined for each age bracket an average rate of C , considering actual credit loss experience over the last 3 months and analysis of future delin uency, that is applied to the balance of the accounts receivable.

The average C rate increases in each segment of days past due until the rate is 100 for the applicable ageing bracket.

3. Changes in significant accounting policies

The group has initially adopted I RS 15, Revenue from Contracts with Customers and I RS 9 Financial Instruments from pril 1, 2018.

number of other new standards were also effective from pril 1, 2018 but they do not have a material effect on the group’s and company’s financial statements.

ue to the transition method chosen by the group and company in applying I RS 9 and I RS 15,

comparative information throughout these financial statements has not generally been restated to reflect the re uirements of these new standards.

The effect of initially applying these standards is mainly attributed to the following:

additional disclosures related to I RS 9 see notes 18(i) and 22 (p) additional disclosures related to I RS 15 see note 22 (l) .

xcept for the changes below, the company has consistently applied the accounting policies as set out in

note 22 to all periods presented in these financial statements.

I RS 15, Revenue from Contract with Customers

nder I RS 15, an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, following a five step model: Step 1: Identify the contract(s) with a customer (agreement that creates enforceable rights and obligations) Step 2: Identify the different performance obligations (promises) in the contract and account for those separately Step 3: etermine the transaction price (amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services) Step 4: llocate the transaction price to each performance obligation based on the relative stand-alone selling prices of each distinct good or service and Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation by transferring control of a promised good or service to the customer. performance obligation may be satisfied at a point in time or over time.

18

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 3. Changes in significant accounting policies (cont d)

I RS 15, (cont’d) I RS 15 also includes disclosure re uirements to provide comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. I RS 15 was effective on pril 1, 2018, and supersedes all existing guidance on revenue recognition.

The adoption of I RS 15 did not impact the timing or amount of sales from contracts with customers and the related assets and liabilities recognised by the company. ccordingly, the impact on the comparative information is limited to new disclosure re uirements. I RS 9, I RS 9 sets out re uirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces I S 39

. The re uirements of I RS 9 represent a significant change from I S 39. The new standard brings fundamental changes to the accounting for financial assets and to certain aspects of the accounting for financial liabilities.

s a result of the adoption of I RS 9, the company has adopted conse uential amendments to I S 1 , which re uire impairment of financial assets to be presented

separate in the statement of profit or loss and CI.

dditionally, the group has adopted conse uential amendments to I RS 7 that are applied to disclosures about 2019, but have not been applied to the comparative

information.

I RS 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income ( CI) and fair value through profit or loss ( T ). The classification of financial assets under I RS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. I RS 9 eliminates the previous I S 39 categories of held-to-maturity, loans and receivables and available-for-sale.

or an explanation of how the company classifies and measures financial instruments under I RS 9, see note 22 (s). The following table and the accompanying note below explain the original measurement categories under I S 39 and the new measurement categories under I RS 9 for each class of the group’s and company’s financial assets as at pril 1, 2018.




March 31, 2019

17

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 2. Statement of compliance and basis of preparation (cont d)

(c) ccounting estimates and udgements (cont’d):

llowance for impairment losses see notes 13 and 22(p) :

llowances for doubtful accounts were established until arch 31, 2018, based on incurred loss analyses over delin uent accounts considering aging of balances, the credit history and risk profile of each customer and legal processes to recover accounts receivable. ffective

pril 1, 2018, such allowances are determined upon origination of the trade accounts receivable based on a model that calculates the expected credit loss ( C ) on trade accounts receivable.

nder the C model, the group analyses its accounts receivable in a matrix by days past due and determined for each age bracket an average rate of C , considering actual credit loss experience over the last 3 months and analysis of future delin uency, that is applied to the balance of the accounts receivable.

The average C rate increases in each segment of days past due until the rate is 100 for the applicable ageing bracket.

3. Changes in significant accounting policies

The group has initially adopted I RS 15, and I RS 9

from pril 1, 2018.

number of other new standards were also effective from pril 1, 2018 but they do not have a material effect on the group’s and company’s financial statements.

ue to the transition method chosen by the group and company in applying I RS 9 and I RS 15,

comparative information throughout these financial statements has not generally been restated to reflect the re uirements of these new standards.

The effect of initially applying these standards is mainly attributed to the following:

additional disclosures related to I RS 9 see notes 18(i) and 22 (p) additional disclosures related to I RS 15 see note 22 (l) .

xcept for the changes below, the company has consistently applied the accounting policies as set out in

note 22 to all periods presented in these financial statements.

I RS 15,

nder I RS 15, an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, following a five step model: Step 1: Identify the contract(s) with a customer (agreement that creates enforceable rights and obligations) Step 2: Identify the different performance obligations (promises) in the contract and account for those separately Step 3: etermine the transaction price (amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services) Step 4: llocate the transaction price to each performance obligation based on the relative stand-alone selling prices of each distinct good or service and Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation by transferring control of a promised good or service to the customer. performance obligation may be satisfied at a point in time or over time.

18

CARRERAS LIMITED


I RS 15, Revenue from Contract with Customers (cont’d) I RS 15 also includes disclosure re uirements to provide comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. I RS 15 was effective on pril 1, 2018, and supersedes all existing guidance on revenue recognition.

The adoption of I RS 15 did not impact the timing or amount of sales from contracts with customers and the related assets and liabilities recognised by the company. ccordingly, the impact on the comparative information is limited to new disclosure re uirements. I RS 9, Financial Instruments I RS 9 sets out re uirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces I S 39 Financial Instruments: Recognition and Measurement. The re uirements of I RS 9 represent a significant change from I S 39. The new standard brings fundamental changes to the accounting for financial assets and to certain aspects of the accounting for financial liabilities.

s a result of the adoption of I RS 9, the company has adopted conse uential amendments to I S 1 Presentation of Financial Statements, which re uire impairment of financial assets to be presented separate in the statement of profit or loss and CI.

dditionally, the group has adopted conse uential amendments to I RS 7 Financial Instruments:

Disclosures that are applied to disclosures about 2019, but have not been applied to the comparative information.

Classification and measurement of financial assets and financial liabilities I RS 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income ( CI) and fair value through profit or loss ( T ). The classification of financial assets under I RS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. I RS 9 eliminates the previous I S 39 categories of held-to-maturity, loans and receivables and available-for-sale.

or an explanation of how the company classifies and measures financial instruments under I RS 9, see note 22 (s). The following table and the accompanying note below explain the original measurement categories under I S 39 and the new measurement categories under I RS 9 for each class of the group’s and company’s financial assets as at pril 1, 2018.




March 31, 2019

19

CARRERAS LIMITED


I RS 9, Financial Instruments (cont’d)

Classification and measurement of financial assets and financial liabilities (cont’d)

The Group

ote

Original classification under IAS 39

e classification under I RS 9

IAS 39 carrying

amount at March 31,

201

Remeasurement

I RS 9 carrying amount at April 1, 201

inancial assets 000 000 000 Cash and cash

e uivalents oans and

receivables mortised

cost

2,306,972

-

2,306,972

ccounts

receivable

(a)

oans and

receivables

mortised

cost 910,995 - 910,995

3,217,967 - 3,217,967

The Company

ote



IAS 39 carrying

amount at March 31,

201

Remeasurement





cost

1,645,920

-

1,645,920

ccounts

receivable

(a)

oans and

receivables

mortised

cost 910,050 - 910,050

2,555,970 - 2,555,970

(a) Trade and other receivables that were classified as loans and receivables under I S 39 are now classified at amortised cost. No allowance for impairment over these receivables was recognised for transition ad ustment on initial application of I RS 9 as at pril 1, 2018 as the amounts were considered immaterial.

Impairment of financial assets I RS 9 replace the incurred loss model in I S 39 with an expected credit loss ( C ) model. The new impairment model applies to financial assets measured at amortised cost. nder I RS 9, credit losses are recognised earlier than under I S 39 (see note 18). Transition

or assets in the scope of the I RS 9 impairment model, impairment loses are generally expected to increase and become more volatile. The group and company has determined that application of I RS 9’s impairment re uirements at pril 1, 2018 has not given rise to any material change in the group’s and company’s impairment allowance.

dditional information about how the company measures allowance for impairment is described in note 22 (p) .

20

CARRERAS LIMITED


I RS 9, (cont’d)

Changes in accounting policies resulting from the adoption of I RS 9 have been applied retrospectively, except that comparative periods generally have not been restated. ifferences in the carrying amounts of financial assets resulting from the adoption of I RS 9 are recognised in retained earnings as at pril 1, 2018. ccordingly, the information presented for 2018, does not reflect the re uirements of I RS 9 and therefore is not comparable to the information presented for 2019 under I RS 9.

4. Operating revenue perating revenue for the group and the company represents the invoiced value of products and services

sold and includes special consumption tax aggregating $5,593,796,000 (2018: $5,417,449,000).

5. Cost of operating revenue The roup and the Company 2019 2018 $'000 $'000 Special consumption tax 5,593,796 5,417,449 Customs administration fee 333,678 321,200 aterial and related costs 542,651 510,633

6,470,125 6,249,282 6. Other operating income The roup The Company 2019 2018 2019 2018

$'000 $'000 $'000 $'000

Interest income 67,467 89,326 65,274 76,676 xchange loss (16,705) ( 7,632) (13,259) ( 17,686)

ain on disposal of property, plant and e uipment 2,650 7,186 2,650 7,186 nclaimed dividends written back (note 16) 60,941 17,710 60,941 17,710 iscellaneous income 35,551 117,131 16,805 117,131

149,904 223,721 132,411 201,017




March 31, 2019

19

CARRERAS LIMITED


I RS 9, (cont’d)

The Group

ote



IAS 39 carrying

amount at March 31,

201

Remeasurement





cost

2,306,972

-

2,306,972

ccounts

receivable

(a)

oans and

receivables

mortised

cost 910,995 - 910,995

3,217,967 - 3,217,967

The Company

ote



IAS 39 carrying

amount at March 31,

201

Remeasurement





cost

1,645,920

-

1,645,920

ccounts

receivable

(a)

oans and

receivables

mortised

cost 910,050 - 910,050

2,555,970 - 2,555,970

(a) Trade and other receivables that were classified as loans and receivables under I S 39 are now classified at amortised cost. No allowance for impairment over these receivables was recognised for transition ad ustment on initial application of I RS 9 as at pril 1, 2018 as the amounts were considered immaterial.

I RS 9 replace the incurred loss model in I S 39 with an expected credit loss ( C ) model. The new impairment model applies to financial assets measured at amortised cost. nder I RS 9, credit losses are recognised earlier than under I S 39 (see note 18).

or assets in the scope of the I RS 9 impairment model, impairment loses are generally expected to increase and become more volatile. The group and company has determined that application of I RS 9’s impairment re uirements at pril 1, 2018 has not given rise to any material change in the group’s and company’s impairment allowance.

dditional information about how the company measures allowance for impairment is described in note 22 (p) .

20

CARRERAS LIMITED


I RS 9, Financial Instruments (cont’d) Impairment of financial assets (cont’d)

Changes in accounting policies resulting from the adoption of I RS 9 have been applied retrospectively, except that comparative periods generally have not been restated. ifferences in the carrying amounts of financial assets resulting from the adoption of I RS 9 are recognised in retained earnings as at pril 1, 2018. ccordingly, the information presented for 2018, does not reflect the re uirements of I RS 9 and therefore is not comparable to the information presented for 2019 under I RS 9.

4. Operating revenue perating revenue for the group and the company represents the invoiced value of products and services

sold and includes special consumption tax aggregating $5,593,796,000 (2018: $5,417,449,000).

5. Cost of operating revenue The roup and the Company 2019 2018 $'000 $'000 Special consumption tax 5,593,796 5,417,449 Customs administration fee 333,678 321,200 aterial and related costs 542,651 510,633

6,470,125 6,249,282 6. Other operating income The roup The Company 2019 2018 2019 2018

$'000 $'000 $'000 $'000

Interest income 67,467 89,326 65,274 76,676 xchange loss (16,705) ( 7,632) (13,259) ( 17,686)

ain on disposal of property, plant and e uipment 2,650 7,186 2,650 7,186 nclaimed dividends written back (note 16) 60,941 17,710 60,941 17,710 iscellaneous income 35,551 117,131 16,805 117,131

149,904 223,721 132,411 201,017




March 31, 2019

21

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 7. Expense by ature:

(a) dministrative xpenses: The roup The Company 2019 2018 2019 2018 $'000 $'000 $'000 $'000

Staff costs 177,136 151,945 177,136 151,945 irectors’ fees 8,372 8,435 8,372 8,435 epreciation 28,523 24,376 28,523 24,376 uditors’ remuneration 8,630 7,670 8,630 7,670 ccupancy costs 39,929 46,776 39,929 46,776

Transportation, travel and entertainment 61,570 52,324 61,570 52,324 Security 26,597 17,480 26,597 17,480 Insurance 23,867 21,792 23,867 21,792

egal, professional and consultancy fees 43,105 61,154 43,105 55,646 Technical and advisory fees 158,414 123,406 158,414 123,406

usiness support services 258,215 324,034 258,215 324,034 Shared service centre 69,987 35,010 69,987 35,010 Information technology 128,893 108,260 128,893 108,260

ank charges 10,837 13,914 10,797 13,847 ublic relations 44,768 54,526 44,768 54,526 ther expenses 11,663 35,436 11,294 35,155

1,100,506 1,086,538 1,100,097 1,080,682

(b) istribution expenses: The roup The Company 2019 2018 2019 2018 $'000 $'000 $'000 $'000

Staff costs 378,020 312,758 378,020 312,758

epreciation 59,633 52,708 59,633 52,708 ccupancy costs 51,122 45,294 51,122 45,294

Transportation and travel 116,170 108,192 116,170 108,192 Repairs and maintenance 7,226 7,063 7,226 7,063 Security 96,733 57,455 96,733 57,455 Insurance 3,994 2,953 3,994 2,953

egal, professional and consultancy fees 36,988 24,782 36,988 24,782 Information technology 18,076 15,597 18,076 15,597

ther expenses 5,451 6,853 5,451 6,853

773,413 633,655 773,413 633,655

(c) arketing expenses: The roup The Company 2019 2018 2019 2018 $'000 $'000 $'000 $'000

Sponsorship 87,785 76,204 87,785 76,204

romotions 46,002 38,837 46,002 38,837 roduct development 5,967 12,711 5,967 12,711

139,754 127,752 139,754 127,752

Total administrative, distribution and marketing expenses 2,013,673 1,847,945 2,013,264 1,842,089

22

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019

8. Income tax

(a) Income tax is computed at 25 of the profit for the year, as ad usted for taxation purposes, and is

made up as follows: 2019 2018 $'000 $'000

Current: rovision for charge on current year’s profit 1,125,270 1,168,422 eferred: rigination and reversal of temporary differences note 15(b) ( 16,243) ( 15,726)

Income tax expense for the year 1,109,027 1,152,696

(b) Reconciliation of actual tax charge and effective tax rate: 2019 2018 $'000 $'000

rofit before income tax 4,515,929 4,637,326

Computed expected tax charge at 25 1,128,982 1,159,332 Taxation difference between profit for financial statements and tax reporting purposes on epreciation and capital allowances 503 7,353 oreign exchange gains ( 4,289) ( 5,808) ffect of income taxed at other than standard rate ( 15,235) ( 6,571) ther ad ustments ( 934) ( 1,610)

ctual tax charge 1,109,027 1,152,696

ffective tax rate 24.56 24.86 (c) t arch 31, 2019, taxation losses in subsidiaries, sub ect to agreement by Tax dministration

amaica, amounted to approximately $777,748,000 (2018: $777,478,000). These losses may be carried forward indefinitely. The amount that can be utilised in any one assessment year is restricted to 50 of chargeable income (before utilising any prior year losses) of that assessment year.




March 31, 2019

21

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 7. Expense by ature:

(a) dministrative xpenses: The roup The Company 2019 2018 2019 2018 $'000 $'000 $'000 $'000

Staff costs 177,136 151,945 177,136 151,945 irectors’ fees 8,372 8,435 8,372 8,435 epreciation 28,523 24,376 28,523 24,376 uditors’ remuneration 8,630 7,670 8,630 7,670 ccupancy costs 39,929 46,776 39,929 46,776

Transportation, travel and entertainment 61,570 52,324 61,570 52,324 Security 26,597 17,480 26,597 17,480 Insurance 23,867 21,792 23,867 21,792

egal, professional and consultancy fees 43,105 61,154 43,105 55,646 Technical and advisory fees 158,414 123,406 158,414 123,406

usiness support services 258,215 324,034 258,215 324,034 Shared service centre 69,987 35,010 69,987 35,010 Information technology 128,893 108,260 128,893 108,260

ank charges 10,837 13,914 10,797 13,847 ublic relations 44,768 54,526 44,768 54,526 ther expenses 11,663 35,436 11,294 35,155

1,100,506 1,086,538 1,100,097 1,080,682

(b) istribution expenses: The roup The Company 2019 2018 2019 2018 $'000 $'000 $'000 $'000

Staff costs 378,020 312,758 378,020 312,758

epreciation 59,633 52,708 59,633 52,708 ccupancy costs 51,122 45,294 51,122 45,294

Transportation and travel 116,170 108,192 116,170 108,192 Repairs and maintenance 7,226 7,063 7,226 7,063 Security 96,733 57,455 96,733 57,455 Insurance 3,994 2,953 3,994 2,953

egal, professional and consultancy fees 36,988 24,782 36,988 24,782 Information technology 18,076 15,597 18,076 15,597

ther expenses 5,451 6,853 5,451 6,853

773,413 633,655 773,413 633,655

(c) arketing expenses: The roup The Company 2019 2018 2019 2018 $'000 $'000 $'000 $'000

Sponsorship 87,785 76,204 87,785 76,204

romotions 46,002 38,837 46,002 38,837 roduct development 5,967 12,711 5,967 12,711

139,754 127,752 139,754 127,752

Total administrative, distribution and marketing expenses 2,013,673 1,847,945 2,013,264 1,842,089

22

CARRERAS LIMITED


8. Income tax The Group:

(a) Income tax is computed at 25 of the profit for the year, as ad usted for taxation purposes, and is


Current: rovision for charge on current year’s profit 1,125,270 1,168,422 eferred: rigination and reversal of temporary differences note 15(b) ( 16,243) ( 15,726)


(b) Reconciliation of actual tax charge and effective tax rate: 2019 2018 $'000 $'000


Computed expected tax charge at 25 1,128,982 1,159,332 Taxation difference between profit for financial statements and tax reporting purposes on epreciation and capital allowances 503 7,353 oreign exchange gains ( 4,289) ( 5,808) ffect of income taxed at other than standard rate ( 15,235) ( 6,571) ther ad ustments ( 934) ( 1,610)

ctual tax charge 1,109,027 1,152,696

ffective tax rate 24.56 24.86 (c) t arch 31, 2019, taxation losses in subsidiaries, sub ect to agreement by Tax dministration

amaica, amounted to approximately $777,748,000 (2018: $777,478,000). These losses may be carried forward indefinitely. The amount that can be utilised in any one assessment year is restricted to 50 of chargeable income (before utilising any prior year losses) of that assessment year.




March 31, 2019

23

CARRERAS LIMITED


8. Income tax (cont d)

The Company: (d) Income tax is computed at 25 of the profit for the year, as ad usted for taxation purposes, and is


Current: rovision for charge on current year’s profit 1,121,422 1,161,293 Tax arising on capital distribution at 5 28,384 -

1,149,806 1,161,293 eferred: rigination and reversal of temporary differences note 15(b) ( 12,395) ( 12,564)


(e) Reconciliation of actual tax charge and effective tax rate: 2019 2018 $'000 $'000


Computed expected tax charge at 25 1,218,943 1,155,120 Taxation difference between profit for financial statements and tax reporting purposes on epreciation and capital allowances 503 7,353 oreign exchange gains ( 843) ( 2,693) ffect of income taxed at other than standard rate ( 128,769) ( 6,224) ther ad ustments 47,577 ( 4,827)

ctual tax charge 1,137,411 1,148,729

ffective tax rate 23.33 24.86 9. Earnings per ordinary stock unit arnings per ordinary stock unit is calculated as follows: 2019 2018

rofit for the year attributable to stockholders 3,406,849,000 3,484,596,000 rdinary stock units in issue 4,854,400,000 4,854,400,000 arnings per stock unit 70.2 71.8¢

10. Employee benefits

The Carreras roup imited Superannuation Scheme ( the old scheme ) was discontinued with effect from ecember 31, 2006 and is being wound up in accordance with the rules, applicable legislation and sub ect to the oversight of the inancial Services Commission ( SC ). enefit improvements have been agreed for the pensioners, deferred pensioners and active members of the old scheme.

24

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 10. Employee benefits (cont d)

replacement fund, the Carreras imited Superannuation und ( the new fund ) was established with effect from anuary 1, 2007. The new fund is divided into two sections a defined benefit ( ) section and a defined contribution ( C) section. The employees who were members of the old scheme are now participating in the section of the new fund whilst the individuals employed after ecember 31, 2006, are participating in the C section of the new fund. The liabilities in respect of current pensioners and deferred pensioners, who opted to transfer the value of their pension entitlement in the old scheme to the section of the new fund to provide for all future pension payments, have been transferred to the section. The liabilities in respect of the active members who became members of the new fund and opted to transfer the total or a part of their past service to the new fund have also been transferred.

The amounts recognised are computed as follows: The roup and the Company 2019 2018 $'000 $'000

ension benefits (138,300) (181,900) ost employment health and group life insurance benefit 223,000 253,800

The amounts recognised are computed as follows:

(i) ension benefits:

(a) sset recognised in the statement of financial position:

The roup and the Company 2019 2018 $'000 $'000

resent value of funded obligations 3,072,900 3,486,600 air value of plan assets (5,949,100) (5,518,400)

resent value of net obligations (2,876,200) (2,031,800) nrecognised amount due to limitation 2,737,900 1,849,900

sset recognised in statement of financial position ( 138,300) ( 181,900)

(b) ovements in the net asset recognised in the statement of financial position:

The roup and the Company 2019 2018 $'000 $'000 Net asset at beginning of the year (181,900) (200,800) Contributions paid ( 2,900) ( 3,100) xpense recognised in the statement of profit or loss and other comprehensive income 46,500 22,000

Net asset at end of the year (138,300) (181,900)




March 31, 2019

23

CARRERAS LIMITED


8. Income tax (cont d)

(d) Income tax is computed at 25 of the profit for the year, as ad usted for taxation purposes, and is


Current: rovision for charge on current year’s profit 1,121,422 1,161,293 Tax arising on capital distribution at 5 28,384 -

1,149,806 1,161,293 eferred: rigination and reversal of temporary differences note 15(b) ( 12,395) ( 12,564)


(e) Reconciliation of actual tax charge and effective tax rate: 2019 2018 $'000 $'000


Computed expected tax charge at 25 1,218,943 1,155,120 Taxation difference between profit for financial statements and tax reporting purposes on epreciation and capital allowances 503 7,353 oreign exchange gains ( 843) ( 2,693) ffect of income taxed at other than standard rate ( 128,769) ( 6,224) ther ad ustments 47,577 ( 4,827)

ctual tax charge 1,137,411 1,148,729

ffective tax rate 23.33 24.86 9. Earnings per ordinary stock unit arnings per ordinary stock unit is calculated as follows: 2019 2018

rofit for the year attributable to stockholders 3,406,849,000 3,484,596,000 rdinary stock units in issue 4,854,400,000 4,854,400,000 arnings per stock unit 70.2 71.8¢

10. Employee benefits

The Carreras roup imited Superannuation Scheme ( the old scheme ) was discontinued with effect from ecember 31, 2006 and is being wound up in accordance with the rules, applicable legislation and sub ect to the oversight of the inancial Services Commission ( SC ). enefit improvements have been agreed for the pensioners, deferred pensioners and active members of the old scheme.

24

CARRERAS LIMITED


replacement fund, the Carreras imited Superannuation und ( the new fund ) was established with effect from anuary 1, 2007. The new fund is divided into two sections a defined benefit ( ) section and a defined contribution ( C) section. The employees who were members of the old scheme are now participating in the section of the new fund whilst the individuals employed after ecember 31, 2006, are participating in the C section of the new fund. The liabilities in respect of current pensioners and deferred pensioners, who opted to transfer the value of their pension entitlement in the old scheme to the section of the new fund to provide for all future pension payments, have been transferred to the section. The liabilities in respect of the active members who became members of the new fund and opted to transfer the total or a part of their past service to the new fund have also been transferred.

The amounts recognised are computed as follows: The roup and the Company 2019 2018 $'000 $'000

ension benefits (138,300) (181,900) ost employment health and group life insurance benefit 223,000 253,800

The amounts recognised are computed as follows:

(i) ension benefits:

(a) sset recognised in the statement of financial position:


resent value of funded obligations 3,072,900 3,486,600 air value of plan assets (5,949,100) (5,518,400)

resent value of net obligations (2,876,200) (2,031,800) nrecognised amount due to limitation 2,737,900 1,849,900

sset recognised in statement of financial position ( 138,300) ( 181,900)

(b) ovements in the net asset recognised in the statement of financial position:

The roup and the Company 2019 2018 $'000 $'000 Net asset at beginning of the year (181,900) (200,800) Contributions paid ( 2,900) ( 3,100) xpense recognised in the statement of profit or loss and other comprehensive income 46,500 22,000

Net asset at end of the year (138,300) (181,900)




March 31, 2019

25

CARRERAS LIMITED


(i) ension benefits (cont’d):

(c) ovements in present value of funded obligation: The roup and the Company

2019 2018 $’000 $’000 alance at start of year 3,486,600 3,205,600 Current service cost 18,200 18,000 Interest cost 255,500 297,800 Re-measurements - ( ain)/loss from change in financial assumptions ( 491,100) 145,700 embers’ contributions 2,100 1,500 enefits paid ( 198,400) ( 176,400) ain on curtailment - ( 5,600)

alance at end of year 3,072,900 3,486,600

(d) ovements in plan assets: The roup and the Company 2019 2018 $'000 $'000

air value of plan assets at beginning of the year 5,518,400 4,925,300 Interest income on plan assets 406,100 459,200 Contributions paid 7,900 7,700 enefits paid ( 215,800) ( 190,800) Remeasurement gain on assets 232,500 317,000

air value of plan assets at end of the year 5,949,100 5,518,400

lan assets consist of the following: uities 2,125,800 1,839,800

ooled pension investments 984,600 938,900 Real property 643,900 589,100 Resale agreements 352,300 471,100

overnment and corporate bonds 1,724,900 1,584,900 Net current assets 117,600 94,600

5,949,100 5,518,400

(e) xpense recognised in profit for the year: The roup and the Company 2019 2018 $'000 $'000 Current service costs 15,300 14,900 Interest cost on obligation 255,500 297,800 Interest income on assets (406,100) ( 459,200) Interest on effect of asset ceiling 138,700 144,300 ain on curtailments and settlements - ( 5,600) dministrative expenses 17,400 14,400

20,800 6,600

26

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 10. Employee benefits (cont d) The amounts recognised are computed as follows (cont’d):


(f) Remeasurements recognised in other comprehensive income: 2019 2018 $'000 $'000

Change in effect of asset ceiling 749,300 186,700 Remeasurement gain on plan assets (232,500) ( 317,000) Remeasurement (gain)/loss on obligation (491,100) 145,700

25,700 15,400

(g) rincipal actuarial assumptions at the reporting date (expressed as weighted averages):

2019 2018

iscount rate 7.00 7.50 uture salary increases 4.00 5.50

uture pension increases 5.00 4.50

ssumptions regarding future mortality are based on 94 Tables with ages reduced by five years (2018: five years).

t arch 31, 2019, the weighted average duration of the defined benefit obligation was 13 years (2018: 15 years).

(h) Sensitivity analysis of principal actuarial assumptions:

The roup and the Company ne-half percentage ne-half percentage point increase point decrease

2019 2018 2019 2018 $'000 $'000 $'000 $'000 iscount rate (176,200) (227,700) 196,000 131,000 Salary increases 9,800 13,200 ( 9,400) ( 12,200) ension increases 185,700 117,800 (167,200) (216,600)

(i) lan assets include ordinary stock units issued by the company with a fair value of

$325,884,000 (2018: $373,372,000).




March 31, 2019

25

CARRERAS LIMITED



(c) ovements in present value of funded obligation: The roup and the Company

2019 2018 $’000 $’000

alance at start of year 3,486,600 3,205,600 Current service cost 18,200 18,000 Interest cost 255,500 297,800 Re-measurements - ( ain)/loss from change in financial assumptions ( 491,100) 145,700 embers’ contributions 2,100 1,500 enefits paid ( 198,400) ( 176,400) ain on curtailment - ( 5,600)

alance at end of year 3,072,900 3,486,600

(d) ovements in plan assets: The roup and the Company 2019 2018 $'000 $'000

air value of plan assets at beginning of the year 5,518,400 4,925,300 Interest income on plan assets 406,100 459,200 Contributions paid 7,900 7,700 enefits paid ( 215,800) ( 190,800) Remeasurement gain on assets 232,500 317,000

air value of plan assets at end of the year 5,949,100 5,518,400

lan assets consist of the following: uities 2,125,800 1,839,800

ooled pension investments 984,600 938,900 Real property 643,900 589,100 Resale agreements 352,300 471,100

overnment and corporate bonds 1,724,900 1,584,900 Net current assets 117,600 94,600

5,949,100 5,518,400

(e) xpense recognised in profit for the year: The roup and the Company 2019 2018 $'000 $'000 Current service costs 15,300 14,900 Interest cost on obligation 255,500 297,800 Interest income on assets (406,100) ( 459,200) Interest on effect of asset ceiling 138,700 144,300 ain on curtailments and settlements - ( 5,600) dministrative expenses 17,400 14,400

20,800 6,600

26

CARRERAS LIMITED



(f) Remeasurements recognised in other comprehensive income: 2019 2018 $'000 $'000

Change in effect of asset ceiling 749,300 186,700 Remeasurement gain on plan assets (232,500) ( 317,000) Remeasurement (gain)/loss on obligation (491,100) 145,700

25,700 15,400

(g) rincipal actuarial assumptions at the reporting date (expressed as weighted averages):

2019 2018

iscount rate 7.00 7.50 uture salary increases 4.00 5.50

uture pension increases 5.00 4.50

ssumptions regarding future mortality are based on 94 Tables with ages reduced by five years (2018: five years).

t arch 31, 2019, the weighted average duration of the defined benefit obligation was 13 years (2018: 15 years).

(h) Sensitivity analysis of principal actuarial assumptions:


2019 2018 2019 2018 $'000 $'000 $'000 $'000 iscount rate (176,200) (227,700) 196,000 131,000 Salary increases 9,800 13,200 ( 9,400) ( 12,200) ension increases 185,700 117,800 (167,200) (216,600)

(i) lan assets include ordinary stock units issued by the company with a fair value of

$325,884,000 (2018: $373,372,000).




March 31, 2019

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CARRERAS LIMITED


(ii) ost employment health and group life insurance benefits:

(a) iability recognised in the statement of financial position: The roup and the Company

2019 2018 $'000 $'000 resent value of future obligations, being liability recognised in statement of financial position 223,000 253,800

(b) ovements in the net liability recognised in the statement of financial position:

The roup and the Company

2019 2018 $'000 $'000 Net liability at the beginning of the year 253,800 273,800

Contributions paid ( 8,700) ( 8,600) Income recognised in the statement of profit or loss

and other comprehensive income ( 22,100) ( 11,400)

Net liability at the end of the year 223,000 253,800

(c) xpense recognised in profit for the year: The roup and the Company 2019 2018 $'000 $'000

Current service costs 10,600 11,200 Interest on obligation 19,500 26,600 ain on curtailment and settlements - ( 5,100)

30,100 32,700

(d) Remeasurements recognised in other comprehensive income:


Remeasurement gain on obligation (52,200) (44,100)

(e) rincipal actuarial assumptions at the reporting date (expressed as weighted averages):

2019 2018

iscount rate 7.00 7.50 nnual increase in health-care costs 5.00 6.50

ctuarial assumptions regarding mortality, inflation, etc., follows the same basis on those

outlined in note 10(i)(g).

28

CARRERAS LIMITED


(f) Sensitivity analysis of principal actuarial assumptions:


2019 2018 2019 2018 $'000 $'000 $'000 $'000 iscount rate (15,600) (17,800) 17,500 20,800 ealth-care cost increases 17,300 20,600 (15,400) (17,600) Salary increases 100 100 100 ( 100)

Impact on post-employment obligation of a one year increase/decrease in life expectancy: The post-employment obligation would increase by about $74,000,000 (2018: $8,400,000) or decrease by about $74,800,000 (2018: $8,300,000).

11. Property, plant and e uipment

reehold land, achinery, buildings and ork- furniture, e uipment leaseholds in-progress and vehicles Total $'000 $'000 $'000 $'000 Cost: arch 31, 2017 173,599 7,015 389,282 569,896 dditions - 106,643 7,632 114,275 Transfers 1,345 (104,309) 102,964 - isposals - - ( 27,441) ( 27,441)

arch 31, 2018 174,944 9,349 472,437 656,730 dditions - 133,622 300 133,922 Transfers - (133,294) 133,294 - isposals - - ( 9,069) ( 9,069)

arch 31, 2019 174,944 9,677 596,962 781,583

epreciation: arch 31, 2017 42,798 - 226,948 269,746 Charge for the year 17,099 - 59,985 77,084 liminated on disposals - - ( 27,351) ( 27,351)

arch 31, 2018 59,897 - 259,582 319,479 Charge for the year 16,756 - 71,400 88,156 liminated on disposals - - ( 9,069) ( 9,069)

arch 31, 2019 76,653 - 321,913 398,566

Net book values: arch 31, 2019 98,291 9,677 275,049 383,017

arch 31, 2018 115,047 9,349 212,855 337,251

reehold land, buildings and leaseholds for the group and the company include freehold land in the amount of $700 (2018: $700).




March 31, 2019

27

CARRERAS LIMITED


(ii) ost employment health and group life insurance benefits:

(a) iability recognised in the statement of financial position: The roup and the Company

2019 2018 $'000 $'000 resent value of future obligations, being liability recognised in statement of financial position 223,000 253,800

(b) ovements in the net liability recognised in the statement of financial position:

The roup and the Company

2019 2018 $'000 $'000 Net liability at the beginning of the year 253,800 273,800

Contributions paid ( 8,700) ( 8,600) Income recognised in the statement of profit or loss

and other comprehensive income ( 22,100) ( 11,400)

Net liability at the end of the year 223,000 253,800

(c) xpense recognised in profit for the year: The roup and the Company 2019 2018 $'000 $'000

Current service costs 10,600 11,200 Interest on obligation 19,500 26,600 ain on curtailment and settlements - ( 5,100)

30,100 32,700

(d) Remeasurements recognised in other comprehensive income:


Remeasurement gain on obligation (52,200) (44,100)

(e) rincipal actuarial assumptions at the reporting date (expressed as weighted averages):

2019 2018

iscount rate 7.00 7.50 nnual increase in health-care costs 5.00 6.50

ctuarial assumptions regarding mortality, inflation, etc., follows the same basis on those

outlined in note 10(i)(g).

28

CARRERAS LIMITED


(f) Sensitivity analysis of principal actuarial assumptions:


2019 2018 2019 2018 $'000 $'000 $'000 $'000 iscount rate (15,600) (17,800) 17,500 20,800 ealth-care cost increases 17,300 20,600 (15,400) (17,600) Salary increases 100 100 100 ( 100)

Impact on post-employment obligation of a one year increase/decrease in life expectancy: The post-employment obligation would increase by about $74,000,000 (2018: $8,400,000) or decrease by about $74,800,000 (2018: $8,300,000).

11. Property, plant and e uipment The Group and The Company: reehold land, achinery, buildings and ork- furniture, e uipment leaseholds in-progress and vehicles Total $'000 $'000 $'000 $'000 Cost: arch 31, 2017 173,599 7,015 389,282 569,896 dditions - 106,643 7,632 114,275 Transfers 1,345 (104,309) 102,964 - isposals - - ( 27,441) ( 27,441)

arch 31, 2018 174,944 9,349 472,437 656,730 dditions - 133,622 300 133,922 Transfers - (133,294) 133,294 - isposals - - ( 9,069) ( 9,069)

arch 31, 2019 174,944 9,677 596,962 781,583

epreciation: arch 31, 2017 42,798 - 226,948 269,746 Charge for the year 17,099 - 59,985 77,084 liminated on disposals - - ( 27,351) ( 27,351)

arch 31, 2018 59,897 - 259,582 319,479 Charge for the year 16,756 - 71,400 88,156 liminated on disposals - - ( 9,069) ( 9,069)

arch 31, 2019 76,653 - 321,913 398,566

Net book values: arch 31, 2019 98,291 9,677 275,049 383,017

arch 31, 2018 115,047 9,349 212,855 337,251

reehold land, buildings and leaseholds for the group and the company include freehold land in the amount of $700 (2018: $700).




March 31, 2019

29

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 12. Cash and cash e uivalents The roup The Company 2019 2018 2019 2018 $'000 $'000 $'000 $'000 emand and call deposits 1,789,730 2,306,972 1,706,487 1,645,920

13. Accounts receivable The roup The Company 2019 2018 2019 2018 $'000 $'000 $'000 $'000 Trade accounts receivable 582,687 865,738 582,687 865,738 Interest and other investment income receivable 5,968 4,474 5,968 3,085 repayments 179,396 27,626 179,396 27,626

ther receivables and advances: ther 16,868 15,807 17,731 16,251

784,919 913,645 785,782 912,700 ess: llowance for impairment losses ( 5,848) ( 2,650) ( 5,848) ( 2,650)

779,071 910,995 779,934 910,050

uring the year, net bad debts recognised in profit or loss aggregated $5,774,000 (2018: $2,095,000) for

the group and the company.

llowances for doubtful accounts were established until arch 31, 2018 based on incurred loss analyses over delin uent accounts considering aging of balances, the credit history and risk profile of each customer and legal processes to recover accounts receivable. ffective pril 1, 2018 such allowances are determined upon origination of the trade accounts receivable based on a model that calculates the expected credit loss ( C ) of the trade accounts receivable and are recognised over their term.

nder this C model, the group uses accounts receivable based on days past due and determines an average rate of C , considering actual credit loss experience over the last 12 months and analysis of future delin uency, that is applied to the balance of the accounts receivable. weighted average C rate is used as at arch 31, 2019 to apply against the accounts receivable balance (see note 18).

14. Share capital 2019 2018 $'000 $'000 uthorised:

4,854,400,000 ordinary shares of no par value

Stated: Issued and fully paid: 4,854,400,000 stock units of no par value 121,360 121,360

30

CARRERAS LIMITED


15. Deferred tax asset/(liability) (a) eferred tax assets and liabilities are attributable to the following:

ssets iabilities Net 2019 2018 2019 2018 2019 2018 $'000 $'000 $'000 $'000 $'000 $'000

eferred tax on reserves of subsidiary in li uidation - - - (22,010) - (22,010) ccounts payable 3,198 2,975 - - 3,198 2,975 roperty, plant and e uipment 15,785 12,613 - - 15,785 12,613 mployee benefits 55,750 63,450 (34,575) (45,475) 21,175 17,975 ccounts receivable - - ( 1,492) ( 5,716) ( 1,492) ( 5,716) nrealised foreign exchange gain - 1,079 ( 122) - ( 122) 1,079

eferred tax asset/(liability) 74,733 80,117 (36,189) (73,201) 38,544 6,916

ssets iabilities Net 2019 2018 2019 2018 2019 2018 $'000 $'000 $'000 $'000 $'000 $'000 ccounts payable 3,198 2,975 - - 3,198 2,975 roperty, plant and e uipment 15,785 12,613 - - 15,785 12,613 mployee benefits 55,750 63,450 (34,575) (45,475) 21,175 17,975 ccounts receivable - - ( 1,492) ( 771) ( 1,492) ( 771) nrealised foreign exchange gain - - ( 122) ( 18) ( 122) ( 18)


(b) ovements in temporary differences during the year are as follows:

2019 Recognised in pening Recognised profit or loss Closing balance in e uity note 8(a) balance $'000 $'000 $'000 $'000

eferred tax on reserves of subsidiary in li uidation (22,010) 22,010 - - ccounts payable 2,975 - 223 3,198 roperty, plant and e uipment 12,613 - 3,172 15,785 mployee benefits 17,975 ( 6,625) 9,825 21,175 Interest receivable ( 5,716) - 4,224 ( 1,492) nrealised foreign exchange gain 1,079 - ( 1,201) ( 122)

6,916 15,385 16,243 38,544




March 31, 2019

29

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 12. Cash and cash e uivalents The roup The Company 2019 2018 2019 2018 $'000 $'000 $'000 $'000 emand and call deposits 1,789,730 2,306,972 1,706,487 1,645,920

13. Accounts receivable The roup The Company 2019 2018 2019 2018 $'000 $'000 $'000 $'000 Trade accounts receivable 582,687 865,738 582,687 865,738 Interest and other investment income receivable 5,968 4,474 5,968 3,085 repayments 179,396 27,626 179,396 27,626

ther receivables and advances: ther 16,868 15,807 17,731 16,251

784,919 913,645 785,782 912,700 ess: llowance for impairment losses ( 5,848) ( 2,650) ( 5,848) ( 2,650)

779,071 910,995 779,934 910,050

uring the year, net bad debts recognised in profit or loss aggregated $5,774,000 (2018: $2,095,000) for

the group and the company.

llowances for doubtful accounts were established until arch 31, 2018 based on incurred loss analyses over delin uent accounts considering aging of balances, the credit history and risk profile of each customer and legal processes to recover accounts receivable. ffective pril 1, 2018 such allowances are determined upon origination of the trade accounts receivable based on a model that calculates the expected credit loss ( C ) of the trade accounts receivable and are recognised over their term.

nder this C model, the group uses accounts receivable based on days past due and determines an average rate of C , considering actual credit loss experience over the last 12 months and analysis of future delin uency, that is applied to the balance of the accounts receivable. weighted average C rate is used as at arch 31, 2019 to apply against the accounts receivable balance (see note 18).

14. Share capital 2019 2018 $'000 $'000 uthorised:

4,854,400,000 ordinary shares of no par value

Stated: Issued and fully paid: 4,854,400,000 stock units of no par value 121,360 121,360

30

CARRERAS LIMITED


15. Deferred tax asset/(liability) (a) eferred tax assets and liabilities are attributable to the following:

The Group: ssets iabilities Net 2019 2018 2019 2018 2019 2018 $'000 $'000 $'000 $'000 $'000 $'000

eferred tax on reserves of subsidiary in li uidation - - - (22,010) - (22,010) ccounts payable 3,198 2,975 - - 3,198 2,975 roperty, plant and e uipment 15,785 12,613 - - 15,785 12,613 mployee benefits 55,750 63,450 (34,575) (45,475) 21,175 17,975 ccounts receivable - - ( 1,492) ( 5,716) ( 1,492) ( 5,716) nrealised foreign exchange gain - 1,079 ( 122) - ( 122) 1,079


The Company: ssets iabilities Net 2019 2018 2019 2018 2019 2018 $'000 $'000 $'000 $'000 $'000 $'000 ccounts payable 3,198 2,975 - - 3,198 2,975 roperty, plant and e uipment 15,785 12,613 - - 15,785 12,613 mployee benefits 55,750 63,450 (34,575) (45,475) 21,175 17,975 ccounts receivable - - ( 1,492) ( 771) ( 1,492) ( 771) nrealised foreign exchange gain - - ( 122) ( 18) ( 122) ( 18)


(b) ovements in temporary differences during the year are as follows: The Group:


eferred tax on reserves of subsidiary in li uidation (22,010) 22,010 - - ccounts payable 2,975 - 223 3,198 roperty, plant and e uipment 12,613 - 3,172 15,785 mployee benefits 17,975 ( 6,625) 9,825 21,175 Interest receivable ( 5,716) - 4,224 ( 1,492) nrealised foreign exchange gain 1,079 - ( 1,201) ( 122)

6,916 15,385 16,243 38,544




March 31, 2019

31

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 15. Deferred tax asset/(liability) (cont d)

(b) ovements in temporary differences during the year are as follows (cont’d):

The Group (cont’d):


eferred tax on reserves of subsidiary in li uidation (21,424) ( 586) - (22,010) ccounts payable 2,374 - 601 2,975 roperty, plant and e uipment 9,873 - 2,740 12,613 mployee benefits 18,250 (7,175) 6,900 17,975 Interest receivable ( 5,629) - ( 87) ( 5,716) nrealised foreign exchange gain ( 4,493) - 5,572 1,079

( 1,049) (7,761) 15,726 6,916 The Company:

2019 Recognised in pening Recognised profit or loss Closing balance in e uity note 8(d) balance $'000 $'000 $'000 $'000

ccounts payable 2,975 - 223 3,198 roperty, plant and e uipment 12,613 - 3,172 15,785 mployee benefits 17,975 (6,625) 9,825 21,175 ccounts receivable ( 771) - ( 721) ( 1,492) nrealised foreign exchange gain ( 18) - ( 104) ( 122)

32,774 (6,625) 12,395 38,544


ccounts payable 2,374 - 601 2,975 roperty, plant and e uipment 9,873 - 2,740 12,613 mployee benefits 18,250 (7,175) 6,900 17,975 ccounts receivable ( 958) - 187 ( 771) nrealised foreign exchange gain ( 2,154) - 2,136 ( 18)

27,385 (7,175) 12,564 32,774

(c) The group has not recognised a deferred tax asset arising in subsidiaries amounting to $194,370,000

(2018: $194,370,000) in respect of unutilised tax losses of subsidiaries because it is not probable that the subsidiaries will have sufficient taxable profits in the foreseeable future to realise this benefit see note 8(c) .

32

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 16. Accounts payable The roup The Company 2019 2018 2019 2018 $'000 $'000 $'000 $'000

Trade accounts payable 39,070 45,764 39,070 45,764 eneral consumption tax payable 40,877 64,132 40,877 64,132 Related parties (see also note 17) 253,360 66,969 253,360 66,969 mployee related 41,590 26,579 41,590 26,579 nclaimed dividends 560,513 485,694 560,513 485,694 ther 201,081 151,304 201,081 139,524

1,136,491 840,442 1,136,491 828,662

rticle 117 of the rticles of ssociation provides that dividends declared after the date of adoption of this rticle, which remain unclaimed after a period of twelve years from the date of declaration, shall be forfeited and revert to the company (see also note 6).

17. Related party transactions and statutory disclosures

The financial statements include the following transactions with related parties in the ordinary course of business:


Royalties 25,282 28,732 urchases from related companies - cigarettes 500,937 456,077 Technical fees paid to ultimate parent company 158,414 123,406 Technical fees and business support services paid to other related company 328,202 359,044 IT support fees paid to other related company 128,600 106,586 ension schemes: ividends paid 29,250 25,222 irectors’ remuneration: ees 8,372 8,435 anagement remuneration 66,562 58,887 ey management personnel: Short-term employee benefits 124,237 111,154 ost-employment benefits 1,900 1,600

ll related party transactions were undertaken in the normal course of business.

Related party balances are shown in note 16 and are unsecured, interest free and repayable within 12 months of the reporting date.

18. inancial instruments and risk management

The group has exposure to the following risks from its use of financial instruments:

Credit risk i uidity risk arket risk

This note presents information about the group’s exposure to each of the above risks, the group’s ob ectives, policies and processes for measuring and managing risk, and the group’s and the company’s management of capital.




March 31, 2019

31

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 15. Deferred tax asset/(liability) (cont d)

(b) ovements in temporary differences during the year are as follows (cont’d):


eferred tax on reserves of subsidiary in li uidation (21,424) ( 586) - (22,010) ccounts payable 2,374 - 601 2,975 roperty, plant and e uipment 9,873 - 2,740 12,613 mployee benefits 18,250 (7,175) 6,900 17,975 Interest receivable ( 5,629) - ( 87) ( 5,716) nrealised foreign exchange gain ( 4,493) - 5,572 1,079

( 1,049) (7,761) 15,726 6,916


ccounts payable 2,975 - 223 3,198 roperty, plant and e uipment 12,613 - 3,172 15,785 mployee benefits 17,975 (6,625) 9,825 21,175 ccounts receivable ( 771) - ( 721) ( 1,492) nrealised foreign exchange gain ( 18) - ( 104) ( 122)

32,774 (6,625) 12,395 38,544


ccounts payable 2,374 - 601 2,975 roperty, plant and e uipment 9,873 - 2,740 12,613 mployee benefits 18,250 (7,175) 6,900 17,975 ccounts receivable ( 958) - 187 ( 771) nrealised foreign exchange gain ( 2,154) - 2,136 ( 18)

27,385 (7,175) 12,564 32,774

(c) The group has not recognised a deferred tax asset arising in subsidiaries amounting to $194,370,000

(2018: $194,370,000) in respect of unutilised tax losses of subsidiaries because it is not probable that the subsidiaries will have sufficient taxable profits in the foreseeable future to realise this benefit see note 8(c) .

32

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 16. Accounts payable The roup The Company 2019 2018 2019 2018 $'000 $'000 $'000 $'000

Trade accounts payable 39,070 45,764 39,070 45,764 eneral consumption tax payable 40,877 64,132 40,877 64,132 Related parties (see also note 17) 253,360 66,969 253,360 66,969 mployee related 41,590 26,579 41,590 26,579 nclaimed dividends 560,513 485,694 560,513 485,694 ther 201,081 151,304 201,081 139,524

1,136,491 840,442 1,136,491 828,662

rticle 117 of the rticles of ssociation provides that dividends declared after the date of adoption of this rticle, which remain unclaimed after a period of twelve years from the date of declaration, shall be forfeited and revert to the company (see also note 6).

17. Related party transactions and statutory disclosures

The financial statements include the following transactions with related parties in the ordinary course of business:


Royalties 25,282 28,732 urchases from related companies - cigarettes 500,937 456,077 Technical fees paid to ultimate parent company 158,414 123,406 Technical fees and business support services paid to other related company 328,202 359,044 IT support fees paid to other related company 128,600 106,586 ension schemes: ividends paid 29,250 25,222 irectors’ remuneration: ees 8,372 8,435 anagement remuneration 66,562 58,887 ey management personnel: Short-term employee benefits 124,237 111,154 ost-employment benefits 1,900 1,600

ll related party transactions were undertaken in the normal course of business.

Related party balances are shown in note 16 and are unsecured, interest free and repayable within 12 months of the reporting date.

18. inancial instruments and risk management

The group has exposure to the following risks from its use of financial instruments:

Credit risk i uidity risk arket risk

This note presents information about the group’s exposure to each of the above risks, the group’s ob ectives, policies and processes for measuring and managing risk, and the group’s and the company’s management of capital.




March 31, 2019

33

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 18. inancial instruments and risk management (cont d)

The oard of irectors has overall responsibility for the establishment and oversight of the group’s and

the company’s risk management framework. Senior management has responsibility for monitoring the group’s risk management policies and report to delegates of the oard of irectors on its activities, on a monthly basis.

The risk management policies are established to identify and analyse the risks faced by the group, to set

appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies are reviewed on a regular basis and reflect changes in market conditions and the group’s activities.

(i) Credit risk:

Credit risk is the risk of loss arising from a counterparty to a financial contract failing to discharge its obligations, and arises principally from the group’s receivables from customers, cash and investment securities.

The maximum exposure to credit risk at the reporting date is represented by the carrying value of its financial assets.

Trade receivables

The group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. anagement has established a credit policy under which each customer is analysed for creditworthiness prior to being offered a credit facility. ach customer is given a credit period which represents the maximum time allowed for having balances outstanding these are reviewed monthly. anagement has procedures in place to restrict customer orders if the customers have not cleared outstanding debts within the credit period. Customers that fail to meet the group’s benchmark creditworthiness may transact business with the group on a cash basis.

The group’s average credit period on the sale of goods is 28 days for certain established large

(wholesale) customers and 7 days for other (retail) customers. Credit risk is monitored according to each customer’s characteristics, such as whether it is an individual or company, its geographic location, industry, aging profile and financial history.

The maximum exposure to credit risk for trade receivables at the reporting date by type of customer was:

The roup and the Company 2019 2018

$'000 $'000

holesale customers 404,824 678,740 Retail customers 177,863 186,998

582,687 865,738

Expected credit loss assessment as at April 1, 2018 The group uses an allowance matrix to measure expected credit losses ( C s) in respect of trade receivables. The provision matrix is based on its historical observed default rates over the expected life of the trade receivables and is ad usted for forward looking estimates.

34

CARRERAS LIMITED


(i) Credit risk (cont’d):

The following table provides information about the exposure to credit risk and C for trade receivables as at arch 31, 2019.

eighted ross Impairment average carrying loss Credit ge categories loss rate amount allowance impaired

$’000 $’000

Current (not past due) 0.05 470,481 214 No 1 - 30 days 0.04 101,512 45 No 31-60 days 0.12 4,852 6 No 61-90 days 12.20 295 36 No

ver 90 days 100.00 5,547 5,547 es

582,687 5,848

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:


$'000 $'000 alance at 1 pril 2,650 555

Impairment loss recognised 5,774 2,609 ad debts recovered (2,576) ( 514)

alance at 31 arch 5,848 2,650

anagement has an investment policy in place and the group’s and the company’s exposure to credit risk is monitored on an ongoing basis. Cash and cash e uivalents are held with reputable financial institutions. Credit risk is considered to be low. The allowance for impairment is immaterial.

(ii) arket risk:

arket risk is the risk that changes in market prices, such as foreign exchange rates and interest

rates, will affect the company’s income or the value of its holdings of financial instruments. The ob ective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimi ing the return on risk.

(a) Interest rate risk:

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

t the reporting date the interest profile of the company’s and the group’s interest-bearing

financial instruments was: The roup The Company

2019 2018 2019 2018 $'000 $'000 $'000 $'000

ixed rate instruments: Cash and cash e uivalents 666,775 2,079,184 583,776 1,431,301




March 31, 2019

33

CARRERAS LIMITED


The oard of irectors has overall responsibility for the establishment and oversight of the group’s and

the company’s risk management framework. Senior management has responsibility for monitoring the group’s risk management policies and report to delegates of the oard of irectors on its activities, on a monthly basis.

The risk management policies are established to identify and analyse the risks faced by the group, to set

appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies are reviewed on a regular basis and reflect changes in market conditions and the group’s activities.

(i) Credit risk:

Credit risk is the risk of loss arising from a counterparty to a financial contract failing to discharge its obligations, and arises principally from the group’s receivables from customers, cash and investment securities.

The maximum exposure to credit risk at the reporting date is represented by the carrying value of its financial assets.

The group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. anagement has established a credit policy under which each customer is analysed for creditworthiness prior to being offered a credit facility. ach customer is given a credit period which represents the maximum time allowed for having balances outstanding these are reviewed monthly. anagement has procedures in place to restrict customer orders if the customers have not cleared outstanding debts within the credit period. Customers that fail to meet the group’s benchmark creditworthiness may transact business with the group on a cash basis.

The group’s average credit period on the sale of goods is 28 days for certain established large

(wholesale) customers and 7 days for other (retail) customers. Credit risk is monitored according to each customer’s characteristics, such as whether it is an individual or company, its geographic location, industry, aging profile and financial history.

The maximum exposure to credit risk for trade receivables at the reporting date by type of customer was:


$'000 $'000

holesale customers 404,824 678,740 Retail customers 177,863 186,998

582,687 865,738

The group uses an allowance matrix to measure expected credit losses ( C s) in respect of trade receivables. The provision matrix is based on its historical observed default rates over the expected life of the trade receivables and is ad usted for forward looking estimates.

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CARRERAS LIMITED


(i) Credit risk (cont’d):

Expected credit loss assessment as at April 1, 2018 (cont’d) The following table provides information about the exposure to credit risk and C for trade receivables as at arch 31, 2019.

eighted ross Impairment average carrying loss Credit ge categories loss rate amount allowance impaired

$’000 $’000

Current (not past due) 0.05 470,481 214 No 1 - 30 days 0.04 101,512 45 No 31-60 days 0.12 4,852 6 No 61-90 days 12.20 295 36 No

ver 90 days 100.00 5,547 5,547 es

582,687 5,848

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:


$'000 $'000 alance at 1 pril 2,650 555

Impairment loss recognised 5,774 2,609 ad debts recovered (2,576) ( 514)

alance at 31 arch 5,848 2,650 Cash and cash equivalents

anagement has an investment policy in place and the group’s and the company’s exposure to credit risk is monitored on an ongoing basis. Cash and cash e uivalents are held with reputable financial institutions. Credit risk is considered to be low. The allowance for impairment is immaterial.

(ii) arket risk:

arket risk is the risk that changes in market prices, such as foreign exchange rates and interest

rates, will affect the company’s income or the value of its holdings of financial instruments. The ob ective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimi ing the return on risk.

(a) Interest rate risk:

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

t the reporting date the interest profile of the company’s and the group’s interest-bearing

financial instruments was: The roup The Company

2019 2018 2019 2018 $'000 $'000 $'000 $'000

ixed rate instruments: Cash and cash e uivalents 666,775 2,079,184 583,776 1,431,301




March 31, 2019

35

CARRERAS LIMITED


(ii) arket risk (cont’d):

(b) oreign currency risk:

The group incurs foreign currency risk primarily on purchases that are denominated in a currency other than the amaica dollar. The principal foreign currency risks of the group, represented by balances in the respective currencies, are as follows: The Group:

2019 2018 S$ ( ) S$ ( ) '000 '000 '000 '000

Cash and cash e uivalents 5,428 22 5,505 179 Related party receivables 32 - - - Related party payables ( 477) (692) ( 302) -

ther payables ( 10) - ( 225) ( 11)

xposure, net 4,973 (670) 4,978 168

The Company: 2019 2018

S$ ( ) S$ ( ) '000 '000 '000 '000


ther payables ( 10) - ( 225) ( 11)

xposure, net 4,302 (670) 4,257 16 Sensitivity analysis

Strengthening or weakening of the currencies against the amaica dollar would have

increased profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The Group:

2019 2018 Increase/(decrease) in profit Increase/(decrease) in profit

4 2 10 1 Strengthening eakening Strengthening eakening $'000 $'000 $'000 $'000

S ($) 12,343 (24,686) 24,821 (12,411) ( ) ( 2,351) 4,704 1,179 ( 590)

36

CARRERAS LIMITED


18. inancial instruments and risk management (cont d)


(b) oreign currency risk (cont’d):


4 2 10 1 Strengthening eakening Strengthening eakening

$'000 $'000 $'000 $'000

S ($) 10,668 (21,337) 21,226 (10,613) ( ) ( 2,351) 4,704 112 ( 56)

xchange rates, in terms of amaica dollars, were as follows:

S$

t arch 31, 2017: 127.7664 157.8634 t arch 31, 2018: 124.6545 175.4801 t arch 31, 2019: 123.5735 163.5821

(iii) i uidity risk:

i uidity risk, also referred to as funding risk, is the risk that the group will encounter difficultyin raising funds to meet commitments associated with financial instruments. i uidity problemsmay result from an inability to sell a financial asset uickly at, or close to, its fair value. rudentli uidity risk management implies maintaining sufficient cash and marketable securities, andensuring the availability of funding through an ade uate amount of committed facilities. Thegroup manages its li uidity risk by maintaining a substantial portion of its financial assets inhighly li uid assets.

The contractual outflows as at arch 31, 2019 and 2018 for trade accounts payable, eneralConsumption Tax payable, due to related parties, employee related payables, unclaimeddividends and other payables are represented by their carrying amounts and may re uiresettlement within 12 months of the reporting date.

(iv) Capital management:

The group’s ob ectives when managing capital are to safeguard its ability to continue as a goingconcern in order to provide returns for shareholders. The oard of irectors monitors the returnon capital, which the group defines as net operating income divided by total shareholders’ e uity.

The oard’s policy is to maintain a strong capital base so as to maintain investor, creditor andmarket confidence and to sustain future development of the business.

There were no changes in the group’s approach to capital management during the year. lso, thegroup is not exposed to any externally imposed capital re uirements.




March 31, 2019

35

CARRERAS LIMITED



(b) oreign currency risk:

The group incurs foreign currency risk primarily on purchases that are denominated in a currency other than the amaica dollar. The principal foreign currency risks of the group, represented by balances in the respective currencies, are as follows:

2019 2018 S$ ( ) S$ ( ) '000 '000 '000 '000


ther payables ( 10) - ( 225) ( 11)

xposure, net 4,973 (670) 4,978 168

2019 2018

S$ ( ) S$ ( ) '000 '000 '000 '000


ther payables ( 10) - ( 225) ( 11)

xposure, net 4,302 (670) 4,257 16

Strengthening or weakening of the currencies against the amaica dollar would have

increased profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.


4 2 10 1 Strengthening eakening Strengthening eakening $'000 $'000 $'000 $'000

S ($) 12,343 (24,686) 24,821 (12,411) ( ) ( 2,351) 4,704 1,179 ( 590)

36

CARRERAS LIMITED


18. inancial instruments and risk management (cont d)


(b) oreign currency risk (cont’d):

The Company:2019 2018

Increase/(decrease) in profit Increase/(decrease) in profit

4 2 10 1 Strengthening eakening Strengthening eakening

$'000 $'000 $'000 $'000

S ($) 10,668 (21,337) 21,226 (10,613) ( ) ( 2,351) 4,704 112 ( 56)

xchange rates, in terms of amaica dollars, were as follows:

S$

t arch 31, 2017: 127.7664 157.8634 t arch 31, 2018: 124.6545 175.4801 t arch 31, 2019: 123.5735 163.5821

(iii) i uidity risk:

i uidity risk, also referred to as funding risk, is the risk that the group will encounter difficultyin raising funds to meet commitments associated with financial instruments. i uidity problemsmay result from an inability to sell a financial asset uickly at, or close to, its fair value. rudentli uidity risk management implies maintaining sufficient cash and marketable securities, andensuring the availability of funding through an ade uate amount of committed facilities. Thegroup manages its li uidity risk by maintaining a substantial portion of its financial assets inhighly li uid assets.

The contractual outflows as at arch 31, 2019 and 2018 for trade accounts payable, eneralConsumption Tax payable, due to related parties, employee related payables, unclaimeddividends and other payables are represented by their carrying amounts and may re uiresettlement within 12 months of the reporting date.

(iv) Capital management:

The group’s ob ectives when managing capital are to safeguard its ability to continue as a goingconcern in order to provide returns for shareholders. The oard of irectors monitors the returnon capital, which the group defines as net operating income divided by total shareholders’ e uity.

The oard’s policy is to maintain a strong capital base so as to maintain investor, creditor andmarket confidence and to sustain future development of the business.

There were no changes in the group’s approach to capital management during the year. lso, thegroup is not exposed to any externally imposed capital re uirements.




March 31, 2019

37

CARRERAS LIMITED


(v) air value disclosure: ue to their short term nature, the amounts reflected in the financial statements for cash and cash

e uivalents, accounts receivable, related party balances, and accounts payable are considered to approximate to their fair values. dditionally, the cost of all monetary assets and liabilities has been appropriately ad usted to reflect estimated losses on realisation or discounts on settlement.

19. Dividends and distributions 2019 2018 $'000 $'000 eclared and paid: irst uarter ended une 30, 2018 rdinary 21¢ (2017: 21¢) 1,019,424 1,019,424 Second uarter ended September 30, 2018: rdinary 16¢ (2017: 15¢) 776,704 728,160 Special interim distribution- 11c (2017-Nil) 533,984 - Third uarter ended ecember 31, 2018: rdinary 19¢ (2017: 18¢) 922,336 873,792 ourth uarter ended arch 31, 2019: rdinary 18¢ (2018: 20¢) 873,792 970,880

4,126,240 3,592,256

istribution to non-controlling interests, net 1,328 -

Total dividends to stockholders 4,127,568 3,592,256 20. Subsidiary companies The subsidiary companies, all of which are incorporated in amaica, are as follows: ercentage of ordinary shares held by Name of company rincipal activity Company Subsidiary 2019 2018 2019 2018 Cigarette Company of amaica Inactive (voluntary imited (In oluntary i uidation) li uidation) - 99.97 - - Sans Souci evelopment ormant 100.00 100.00 - - imited and its subsidiary, Sans Souci imited ormant - - 100.00 100.00

The li uidation proceedings for Cigarette Company of amaica imited (CC ) were completed on November 9, 2018.

The effects of the li uidation are as follows: The roup The Company $'000 $'000

Net assets/Investment in subsidiary, disposed (567,673) (190,745) istribution from CC 567,673 567,673

ain on li uidation of subsidiary - 376,928

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CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 21. Contractual commitments

ease commitments under operating leases at arch 31, are payable as follows: The roup and the Company 2019 2018 $'000 $'000 ithin one year 30,808 40,844

etween one year and five years 13,197 43,485

44,005 84,329

ayments made during the year ended arch 31, 2019 aggregated: 2019 2018 $'000 $'000 The roup and Company 42,602 37.138 22. Significant accounting policies

Certain new and amended standards and interpretations which were in issue, came into effect for the current financial year. That which management considered relevant to the company are outlined below:

The adoption of this interpretation did not result in any significant change to the presentation and disclosures in the financial statements. The group has consistently applied the following accounting policies to all periods presented in these consolidated financial statements.

e or amended standards

Summary of the re uirements

I RIC 22,

This interpretation is effective for annual reporting periods beginning on or after anuary 1, 2018, addresses how to determine the transaction date when an entity recognises a non-monetary asset or liability (e.g. non-refundable advance consideration in a foreign currency) before recognising the related asset, expense or income. It is not applicable when an entity measures the related asset, expense or income or initial recognition at fair value or at the fair value of the consideration paid or received at the date of initial recognition of the non-monetary asset or liability.

n entity is not re uired to apply this interpretation to income taxes or insurance contracts that it issues or reinsurance contracts held. The interpretation clarifies that the transaction date is the date on which the group initially recognises the prepayment or deferred income arising from the advance consideration. or transactions involving multiple payments or receipts, each payment or receipt gives rise to a separate transaction date.




March 31, 2019

37

CARRERAS LIMITED


(v) air value disclosure: ue to their short term nature, the amounts reflected in the financial statements for cash and cash

e uivalents, accounts receivable, related party balances, and accounts payable are considered to approximate to their fair values. dditionally, the cost of all monetary assets and liabilities has been appropriately ad usted to reflect estimated losses on realisation or discounts on settlement.

19. Dividends and distributions 2019 2018 $'000 $'000 eclared and paid: irst uarter ended une 30, 2018 rdinary 21¢ (2017: 21¢) 1,019,424 1,019,424 Second uarter ended September 30, 2018: rdinary 16¢ (2017: 15¢) 776,704 728,160 Special interim distribution- 11c (2017-Nil) 533,984 - Third uarter ended ecember 31, 2018: rdinary 19¢ (2017: 18¢) 922,336 873,792 ourth uarter ended arch 31, 2019: rdinary 18¢ (2018: 20¢) 873,792 970,880

4,126,240 3,592,256

istribution to non-controlling interests, net 1,328 -

Total dividends to stockholders 4,127,568 3,592,256 20. Subsidiary companies The subsidiary companies, all of which are incorporated in amaica, are as follows: ercentage of ordinary shares held by Name of company rincipal activity Company Subsidiary 2019 2018 2019 2018 Cigarette Company of amaica Inactive (voluntary imited (In oluntary i uidation) li uidation) - 99.97 - - Sans Souci evelopment ormant 100.00 100.00 - - imited and its subsidiary, Sans Souci imited ormant - - 100.00 100.00

The li uidation proceedings for Cigarette Company of amaica imited (CC ) were completed on November 9, 2018.

The effects of the li uidation are as follows: The roup The Company $'000 $'000

Net assets/Investment in subsidiary, disposed (567,673) (190,745) istribution from CC 567,673 567,673

ain on li uidation of subsidiary - 376,928

38

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 21. Contractual commitments

ease commitments under operating leases at arch 31, are payable as follows: The roup and the Company 2019 2018 $'000 $'000 ithin one year 30,808 40,844

etween one year and five years 13,197 43,485

44,005 84,329

ayments made during the year ended arch 31, 2019 aggregated: 2019 2018 $'000 $'000 The roup and Company 42,602 37.138 22. Significant accounting policies

Certain new and amended standards and interpretations which were in issue, came into effect for the current financial year. That which management considered relevant to the company are outlined below:

The adoption of this interpretation did not result in any significant change to the presentation and disclosures in the financial statements. The group has consistently applied the following accounting policies to all periods presented in these consolidated financial statements.



I RIC 22, Foreign Currency Transactions and Advance Consideration

This interpretation is effective for annual reporting periods beginning on or after anuary 1, 2018, addresses how to determine the transaction date when an entity recognises a non-monetary asset or liability (e.g. non-refundable advance consideration in a foreign currency) before recognising the related asset, expense or income. It is not applicable when an entity measures the related asset, expense or income or initial recognition at fair value or at the fair value of the consideration paid or received at the date of initial recognition of the non-monetary asset or liability.

n entity is not re uired to apply this interpretation to income taxes or insurance contracts that it issues or reinsurance contracts held. The interpretation clarifies that the transaction date is the date on which the group initially recognises the prepayment or deferred income arising from the advance consideration. or transactions involving multiple payments or receipts, each payment or receipt gives rise to a separate transaction date.




March 31, 2019

CARRERAS LIMITED


22. Significant accounting policies (cont d)

Set out below is an index of the significant accounting polices, the details of which are available on thepages that follows:

(a) asis of consolidation 95 (b) Non-controlling interests (NCI) 95 (c) Cash and cash e uivalents 96 (d) ccounts receivable 96 (e) ccounts payable 96 (f) Inventories 96 (g) Investment in subsidiaries 96 (h) Related parties 96-97(i) roperty, plant and e uipment 97( ) Income tax 98(k) oreign currencies 98(l) Revenue recognition 98-99(m) ther operating income 99(n) eases 99(o) mployee benefits 99-100(p) Impairment 100-103( ) etermination of profit or loss 103(r) Segment reporting 103(s) inancial instruments 103-106(t) air value 106(u) ividends and distributions 106

(a) asis of consolidation:

Subsidiaries are entities controlled by the company. Control exists when the company has the power to govern the financial and operating policies of an entity so as to obtain economic benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The consolidated financial statements combine the financial position of the company and its subsidiaries as at arch 31, 2019 and their results of operations and cash flows for the year then ended, after eliminating significant intra-group amounts. The company and its subsidiaries are collectively referred to in the financial statements as the roup .

(b) Non-controlling interests (NCI):

NCI are measured at their proportionate share of the ac uiree’s identifiable net assets at the date of ac uisition. Changes in the roup’s interest in a subsidiary that do not result in a loss of control are accounted for as e uity transactions.

NCI relates to a 0.03 interest in Cigarette Company of amaica imited, which was li uidated, and non-controlling interests are insignificant to the consolidated financial statements.

40

CARRERAS LIMITED



(c) Cash and cash e uivalents:

Cash comprises cash in hand and demand and call deposits with banks. Cash e uivalents are short-term, highly li uid investments that are readily convertible to known amounts of cash, are sub ect to an insignificant risk of changes in value, and are held for the purpose of meeting short-term cash commitments, rather than for investment or other purposes. The amounts included are short-term fixed deposits.

(d) ccounts receivable:

Trade and other receivables are measured at amortised cost, less impairment losses see note 22(p) .

(e) ccounts payable:

ccounts payable are measured at amortised cost.

provision is recognised in the statement of financial position when the group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be re uired to settle the obligation and the amount can be estimated reliably. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(f) Inventories: Inventories comprising finished products are measured at the lower of cost, determined principally

on the weighted average cost basis, and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated selling expenses.

(g) Investment in subsidiaries: The company’s investment in subsidiaries is measured at cost.

(h) Related parties:

related party is a person or company that is related to the entity which is preparing its financial statements (referred to in I S 24 as the reporting entity ).

(i) person or a close member of that person’s family is related to a reporting entity if that

person:

(a) has control or oint control over the reporting entity

(b) has significant influence over the reporting entity or

(c) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.




March 31, 2019

CARRERAS LIMITED



Set out below is an index of the significant accounting polices, the details of which are available on thepages that follows:

(a) asis of consolidation 95 (b) Non-controlling interests (NCI) 95 (c) Cash and cash e uivalents 96 (d) ccounts receivable 96 (e) ccounts payable 96 (f) Inventories 96 (g) Investment in subsidiaries 96 (h) Related parties 96-97(i) roperty, plant and e uipment 97( ) Income tax 98(k) oreign currencies 98(l) Revenue recognition 98-99(m) ther operating income 99(n) eases 99(o) mployee benefits 99-100(p) Impairment 100-103( ) etermination of profit or loss 103(r) Segment reporting 103(s) inancial instruments 103-106(t) air value 106(u) ividends and distributions 106

(a) asis of consolidation:

Subsidiaries are entities controlled by the company. Control exists when the company has the power to govern the financial and operating policies of an entity so as to obtain economic benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The consolidated financial statements combine the financial position of the company and its subsidiaries as at arch 31, 2019 and their results of operations and cash flows for the year then ended, after eliminating significant intra-group amounts. The company and its subsidiaries are collectively referred to in the financial statements as the roup .

(b) Non-controlling interests (NCI):

NCI are measured at their proportionate share of the ac uiree’s identifiable net assets at the date of ac uisition. Changes in the roup’s interest in a subsidiary that do not result in a loss of control are accounted for as e uity transactions.

NCI relates to a 0.03 interest in Cigarette Company of amaica imited, which was li uidated, and non-controlling interests are insignificant to the consolidated financial statements.

40

CARRERAS LIMITED



(c) Cash and cash e uivalents:

Cash comprises cash in hand and demand and call deposits with banks. Cash e uivalents are short-term, highly li uid investments that are readily convertible to known amounts of cash, are sub ect to an insignificant risk of changes in value, and are held for the purpose of meeting short-term cash commitments, rather than for investment or other purposes. The amounts included are short-term fixed deposits.

(d) ccounts receivable:

Trade and other receivables are measured at amortised cost, less impairment losses see note 22(p) .

(e) ccounts payable:

ccounts payable are measured at amortised cost.

provision is recognised in the statement of financial position when the group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be re uired to settle the obligation and the amount can be estimated reliably. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(f) Inventories: Inventories comprising finished products are measured at the lower of cost, determined principally

on the weighted average cost basis, and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated selling expenses.

(g) Investment in subsidiaries: The company’s investment in subsidiaries is measured at cost.

(h) Related parties:

related party is a person or company that is related to the entity which is preparing its financial statements (referred to in I S 24 Related Party Disclosures as the reporting entity ).

(i) person or a close member of that person’s family is related to a reporting entity if that

person:

(a) has control or oint control over the reporting entity

(b) has significant influence over the reporting entity or

(c) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.




March 31, 2019

41

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 22. Significant accounting policies (cont d)

(h) Related parties (cont’d):

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

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

(b) ne entity is an associate or oint venture of the other entity (or an associate or oint venture of a member of a group of which the other entity is a member).

(c) oth entities are oint ventures of the same third party.

(d) ne entity is a oint venture of a third entity and the other entity is an associate of the third entity.

(e) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

(f) The entity is controlled, or ointly controlled, by a person identified in (i).

(g) person identified in (i)(a) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(h) The entity or any member of a group of which it is a part, provides key management services to the entity.

related party transaction is a transfer of resources, services or obligations between a reporting

entity and a related party, regardless of whether a price is charged.

The company has related party relationships with its ultimate parent company, ritish merican Tobacco plc ( T) and other subsidiaries and affiliates of the T roup, its subsidiaries, directors and key management personnel and companies with common directors, and its pension schemes. ey management personnel comprises the group’s leadership team which includes executive directors and specified senior officers.

(i) roperty, plant and e uipment:

Items of property, plant and e uipment are measured at cost less accumulated depreciation and impairment losses.

Cost includes expenditures that are directly attributable to the ac uisition of the asset. The cost of

replacing part of an item of property, plant and e uipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied in the part will flow to the group and its cost can be reliably measured.

The cost of day-to-day servicing of property, plant and e uipment is recognised in profit or loss as

incurred. ith the exception of freehold land and work-in-progress, on which no depreciation is provided,

property, plant and e uipment are depreciated on the straight-line basis over the estimated useful lives of such assets, at the following annual rates:

uildings 1.4 to 2.5 easehold improvements 8 to 11 achinery, furniture and e uipment 3.3 to 33.3 otor vehicles 20 to 33.3 The depreciation methods, useful lives and residual values are reassessed annually at each

reporting date.

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( ) Income tax:

Income tax on profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in e uity, in which case it is recognised in other comprehensive income.

(i) Current income tax:

Current income tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any ad ustment to income tax payable in respect of previous years.

(ii) eferred income tax:

eferred income tax is provided for temporary differences between the carrying amounts of

assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted at the reporting date.

deferred tax asset is recognised only to the extent that it is probable that future taxable

profits will be available against which the asset can be utilised. eferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

deferred tax liability is recognised for all taxable temporary differences, except to the extent that the company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

(k) oreign currencies:

Transactions in foreign currencies are converted at the rates of exchange ruling on the dates of those transactions. The group’s monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to amaica dollars at the rates of exchange ruling at that date.

ains and losses arising from fluctuations in exchange rates are included in profit or loss.

(l) Revenue recognition:

The effect of initially applying I RS 15 on the company’s revenue from contracts is described in note 3.

erformance obligations and revenue recognition policies:

Revenue is measured based on the consideration specified in a contract with a customer. The company recognises revenue when it transfers control over a good or service to a customer.

Revenue is recognised at a point in time in the amount of the price before tax on sales expected to

be received by the company for the supply of goods, as contractual performance obligations are fulfilled,when the goods are delivered and have been accepted by the customers.

Invoices are usually payable within 7 to 45 days.




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(h) Related parties (cont’d):

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

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

(b) ne entity is an associate or oint venture of the other entity (or an associate or oint venture of a member of a group of which the other entity is a member).

(c) oth entities are oint ventures of the same third party.

(d) ne entity is a oint venture of a third entity and the other entity is an associate of the third entity.

(e) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

(f) The entity is controlled, or ointly controlled, by a person identified in (i).

(g) person identified in (i)(a) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(h) The entity or any member of a group of which it is a part, provides key management services to the entity.

related party transaction is a transfer of resources, services or obligations between a reporting

entity and a related party, regardless of whether a price is charged.

The company has related party relationships with its ultimate parent company, ritish merican Tobacco plc ( T) and other subsidiaries and affiliates of the T roup, its subsidiaries, directors and key management personnel and companies with common directors, and its pension schemes. ey management personnel comprises the group’s leadership team which includes executive directors and specified senior officers.

(i) roperty, plant and e uipment:

Items of property, plant and e uipment are measured at cost less accumulated depreciation and impairment losses.

Cost includes expenditures that are directly attributable to the ac uisition of the asset. The cost of

replacing part of an item of property, plant and e uipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied in the part will flow to the group and its cost can be reliably measured.

The cost of day-to-day servicing of property, plant and e uipment is recognised in profit or loss as

incurred. ith the exception of freehold land and work-in-progress, on which no depreciation is provided,

property, plant and e uipment are depreciated on the straight-line basis over the estimated useful lives of such assets, at the following annual rates:

uildings 1.4 to 2.5 easehold improvements 8 to 11 achinery, furniture and e uipment 3.3 to 33.3 otor vehicles 20 to 33.3 The depreciation methods, useful lives and residual values are reassessed annually at each

reporting date.

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( ) Income tax:

Income tax on profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in e uity, in which case it is recognised in other comprehensive income.

(i) Current income tax:

Current income tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any ad ustment to income tax payable in respect of previous years.

(ii) eferred income tax:

eferred income tax is provided for temporary differences between the carrying amounts of

assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted at the reporting date.

deferred tax asset is recognised only to the extent that it is probable that future taxable

profits will be available against which the asset can be utilised. eferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

deferred tax liability is recognised for all taxable temporary differences, except to the extent that the company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

(k) oreign currencies:

Transactions in foreign currencies are converted at the rates of exchange ruling on the dates of those transactions. The group’s monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to amaica dollars at the rates of exchange ruling at that date.

ains and losses arising from fluctuations in exchange rates are included in profit or loss.

(l) Revenue recognition:

The effect of initially applying I RS 15 on the company’s revenue from contracts is described in note 3.

Revenue recognition under IFRS 15 (applicable from April 1, 2018)

erformance obligations and revenue recognition policies: Revenue is measured based on the consideration specified in a contract with a customer. The company recognises revenue when it transfers control over a good or service to a customer.

Nature and timing of satisfaction of performance obligations, including significant payment terms

Revenue is recognised at a point in time in the amount of the price before tax on sales expected to

be received by the company for the supply of goods, as contractual performance obligations are fulfilled,when the goods are delivered and have been accepted by the customers.

Invoices are usually payable within 7 to 45 days.




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(l) Revenue recognition (cont’d): Revenue recognition under IAS 18 (applicable before April 1, 2018 Revenue from the sale of goods is measured at the fair value of the consideration received or

receivable, net of returns and allowances, trade discounts, volume rebates and sales taxes.

Revenue is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer, receipt of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing involvement with the goods.

(m) ther operating income:

ther operating income is mainly comprised of interest income, gains on disposal of property, plant and e uipment and refund of pension surplus. Interest income is recognised as it accrues, using the effective interest method.

(n) eases:

ayments made under operating leases are recognised in profit or loss on the straight-line basis

over the term of the lease.

(o) mployee benefits: mployee benefits comprising pensions and other post-employment assets and obligations

included in these financial statements have been actuarially determined by a ualified independent actuary, appointed by management. The appointed actuary’s report outlines the scope of the valuation and the actuary’s opinion. The actuarial valuations are conducted in accordance with I S 19, and the financial statements reflect the group’s and the company’s post-employment benefits assets and obligations as computed by the actuary. In carrying out their audit, the auditors make use of the work of the actuary and the actuary’s report.

(i) ension assets:

The company and its subsidiaries are participating employers in a pension scheme, the assets of which are held separately from those of the group, and remain under the full control of the appointed trustees. The group’s net obligation in respect of its defined benefit pension scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods that value is discounted to determine the present value, and the fair value of any scheme assets is deducted. To the extent that the obligation is less than the fair value of scheme assets, the asset recognised is restricted to the discounted value of unconditional future benefits available to the group in the form of any future refunds from the scheme or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding re uirements. The discount rate applied is the yield at the reporting date on long-term government instruments that have maturity dates approximating the terms of the group’s obligation. The calculation is performed by a ualified actuary using the pro ected unit credit method.

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(o) mployee benefits (cont’d): (i) ension assets (cont’d):

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income. The company determines the net interest expense/(income) on the net defined benefit liability/(asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability/(asset), taking into account any changes during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.

hen the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.

bligations for contributions to defined contribution pension schemes are recognised as an expense in profit or loss as incurred.

(ii) ther post-retirement health and group life insurance benefits:

The group provides post-retirement health care and group life insurance benefits, which are not entitlements, to certain of its retirees. These benefits are usually conditional upon 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 a methodology similar to that for defined benefit pension plans and the present value of future benefits at the reporting date is shown as an obligation on the statement of financial position.

ctuarial gains and losses are recognised in a manner similar to the defined benefit pension plan.

(iii) ther employee benefits:

mployee leave entitlements are recognised as they accrue to employees. provision is made for the estimated liability for vacation and sick leave, as a result of services rendered by employees up to the reporting date.

(p) Impairment:

The group recognises loss allowances for expected credit losses ( C s) on financial assets measured at amortised cost. The company measures loss allowances at an amount e ual to lifetime

C s.

oss allowances for trade receivables are always measured at an amount e ual to lifetime C s.




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(l) Revenue recognition (cont’d):

Revenue from the sale of goods is measured at the fair value of the consideration received or

receivable, net of returns and allowances, trade discounts, volume rebates and sales taxes.

Revenue is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer, receipt of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing involvement with the goods.

(m) ther operating income:

ther operating income is mainly comprised of interest income, gains on disposal of property, plant and e uipment and refund of pension surplus. Interest income is recognised as it accrues, using the effective interest method.

(n) eases:

ayments made under operating leases are recognised in profit or loss on the straight-line basis

over the term of the lease.

(o) mployee benefits: mployee benefits comprising pensions and other post-employment assets and obligations

included in these financial statements have been actuarially determined by a ualified independent actuary, appointed by management. The appointed actuary’s report outlines the scope of the valuation and the actuary’s opinion. The actuarial valuations are conducted in accordance with I S 19, and the financial statements reflect the group’s and the company’s post-employment benefits assets and obligations as computed by the actuary. In carrying out their audit, the auditors make use of the work of the actuary and the actuary’s report.

(i) ension assets:

The company and its subsidiaries are participating employers in a pension scheme, the assets of which are held separately from those of the group, and remain under the full control of the appointed trustees. The group’s net obligation in respect of its defined benefit pension scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods that value is discounted to determine the present value, and the fair value of any scheme assets is deducted. To the extent that the obligation is less than the fair value of scheme assets, the asset recognised is restricted to the discounted value of unconditional future benefits available to the group in the form of any future refunds from the scheme or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding re uirements. The discount rate applied is the yield at the reporting date on long-term government instruments that have maturity dates approximating the terms of the group’s obligation. The calculation is performed by a ualified actuary using the pro ected unit credit method.

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(o) mployee benefits (cont’d): (i) ension assets (cont’d):

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income. The company determines the net interest expense/(income) on the net defined benefit liability/(asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability/(asset), taking into account any changes during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.

hen the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.

bligations for contributions to defined contribution pension schemes are recognised as an expense in profit or loss as incurred.

(ii) ther post-retirement health and group life insurance benefits:

The group provides post-retirement health care and group life insurance benefits, which are not entitlements, to certain of its retirees. These benefits are usually conditional upon 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 a methodology similar to that for defined benefit pension plans and the present value of future benefits at the reporting date is shown as an obligation on the statement of financial position.

ctuarial gains and losses are recognised in a manner similar to the defined benefit pension plan.

(iii) ther employee benefits:

mployee leave entitlements are recognised as they accrue to employees. provision is made for the estimated liability for vacation and sick leave, as a result of services rendered by employees up to the reporting date.

(p) Impairment:

Financial assets

Policy applicable from April 1, 2018 The group recognises loss allowances for expected credit losses ( C s) on financial assets measured at amortised cost. The company measures loss allowances at an amount e ual to lifetime

C s.

oss allowances for trade receivables are always measured at an amount e ual to lifetime C s.




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(p) Impairment (cont’d):

Financial assets (cont’d)

Policy applicable from April 1, 2018 (cont’d)

hen determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating C s, the company considers reasonable and supportable information relevant and available without undue cost or effort. This includes both uantitative and ualitative information and analysis, based on the company’s historical experience and informed credit assessment and including forward looking information.

The company assumes that the credit risk on financial assets has increased significantly if it is more than 90 days past due. The company recognises loss allowances for C s and considers a financial asset to be in default when: - the borrower is unlikely to pay its credit obligations to the company in full, without recourse

by the company to action such as realising security if any is held or

- the financial asset is more than 90 days past due.

ife-time C s are the C s that result from all possible default events over the expected life of the financial instrument. The maximum period considered when estimating C s is the maximum contractual period over which the company is exposed to credit risk. Measurement of ECLs

C s are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the company expects to receive).

C s are discounted at the effective interest rate of the financial asset.

Credit-impaired financial assets

t each reporting date, the company assesses whether financial assets carried at amortised costs are credit-impaired. financial asset is credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

vidence that a financial asset is credit-impaired includes the following observable data:

- significant financial difficulty of the borrower or issuer - a breach of contract such as a default or past due event - it is becoming probable that the borrower will enter bankruptcy or other financial

reorganisation or - the disappearance of an active market for a security because of financial difficulties.

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CARRERAS LIMITED



oss allowances for financial assets measured at amortised cost are deducted from the gross

carrying amount of the assets.

The gross carrying amount of a financial asset is written off (either partially or in full) when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. This is the case when the company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts sub ect to the write-off. This assessment is carried out at the individual asset level.

Recoveries of amounts previously written off are included in impairment losses on financial instruments’ in the statement of profit or loss.

inancial assets that are written off could still be sub ect to enforcement activities in order to comply with the company’s procedures for recovery of amounts due.

n impairment loss is recognised whenever the carrying amount of an asset or its cash-generating

unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss.

(i) Calculation of recoverable amount:

The recoverable amount of investments in loans and receivables is calculated as the present value of expected future cash flows, discounted at the original effective interest rate inherent in the asset. n impairment loss in respect of an available-for-sale investment is calculated by reference to its current fair value. Receivables with a short duration are not discounted.

The recoverable amount of other assets is the greater of their net selling price and value in

use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. or an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

(ii) Reversals of impairment:

n impairment loss in respect of receivables is reversed if the subse uent increase in

recoverable amount can be related ob ectively to an event occurring after the impairment loss was recognised.

In respect of other assets, an impairment loss is reversed if there has been a change in the

estimates used to determine the recoverable amount.




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hen determining whether the credit risk of a financial asset has increased significantly since

initial recognition and when estimating C s, the company considers reasonable and supportable information relevant and available without undue cost or effort. This includes both uantitative and ualitative information and analysis, based on the company’s historical experience and informed credit assessment and including forward looking information.

The company assumes that the credit risk on financial assets has increased significantly if it is more than 90 days past due. The company recognises loss allowances for C s and considers a financial asset to be in default when: - the borrower is unlikely to pay its credit obligations to the company in full, without recourse

by the company to action such as realising security if any is held or

- the financial asset is more than 90 days past due.

ife-time C s are the C s that result from all possible default events over the expected life of the financial instrument. The maximum period considered when estimating C s is the maximum contractual period over which the company is exposed to credit risk.

C s are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the company expects to receive).

C s are discounted at the effective interest rate of the financial asset.

t each reporting date, the company assesses whether financial assets carried at amortised costs are credit-impaired. financial asset is credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

vidence that a financial asset is credit-impaired includes the following observable data:

- significant financial difficulty of the borrower or issuer - a breach of contract such as a default or past due event - it is becoming probable that the borrower will enter bankruptcy or other financial

reorganisation or - the disappearance of an active market for a security because of financial difficulties.

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Policy applicable from April 1, 2018 (cont’d)

Presentation of allowance for ECL in the statement of financial position

oss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

Write-off The gross carrying amount of a financial asset is written off (either partially or in full) when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. This is the case when the company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts sub ect to the write-off. This assessment is carried out at the individual asset level.

Recoveries of amounts previously written off are included in impairment losses on financial instruments’ in the statement of profit or loss.

inancial assets that are written off could still be sub ect to enforcement activities in order to comply with the company’s procedures for recovery of amounts due.

Policy applicable before April 1, 2018

n impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss.

(i) Calculation of recoverable amount:

The recoverable amount of investments in loans and receivables is calculated as the

present value of expected future cash flows, discounted at the original effective interest rate inherent in the asset. n impairment loss in respect of an available-for-sale investment is calculated by reference to its current fair value. Receivables with a short duration are not discounted.

The recoverable amount of other assets is the greater of their net selling price and value in

use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. or an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

(ii) Reversals of impairment:

n impairment loss in respect of receivables is reversed if the subse uent increase in

recoverable amount can be related ob ectively to an event occurring after the impairment loss was recognised.

In respect of other assets, an impairment loss is reversed if there has been a change in the

estimates used to determine the recoverable amount.




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Policy applicable before April 1, 2018 (cont’d)

(ii) Reversals of impairment (cont’d):

n impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Reversal of impairment losses is recognised in profit or loss, except for available-for-sale

e uity securities, which is recognised in other comprehensive income. ( ) etermination of profit or loss:

rofit is determined as the difference between the revenues from the goods and services rendered

and the costs and other charges incurred during the year. rofits on transactions are taken in the year in which they are realised. transaction is realised at the moment of delivery. osses are taken in the year in which they are realised or determinable.

(r) Segment reporting:

segment is a distinguishable component of the group that is engaged either in providing

products (business segment), or in providing products within a particular economic environment (geographical segment), which is sub ect to risks and rewards that are different from those of other segments.

The group’s activities are limited to the distribution of cigarettes to amaican consumers,

operating in a single segment s such no additional segment information is provided. (s) inancial instruments:

financial instrument is any contract that gives rise to a financial asset of one enterprise and a

financial liability or e uity instrument of another enterprise. or the purpose of these financial statements, financial assets have been determined to include cash and cash e uivalents and accounts receivable. Similarly, financial liabilities mainly comprise accounts payable.

(i) Recognition and initial measurement

Trade receivables are initially recognised when they are originated. ll other financial

assets and financial liabilities are initially recognised when the company becomes a party to the contractual provisions of the instrument.

financial asset (unless it is a trade receivable without a significant financing component)

or financial liability is initially measured at fair value plus, for an item not at T , transaction costs that are directly attributable to its ac uisition or issue. trade receivable without a significant financing component is initially measured at the transaction price.

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CARRERAS LIMITED


(s) inancial instruments (cont’d):

(ii) Classification and subse uent measurement

n initial recognition, a financial asset is classified as measured at: amortised cost fair value through other comprehensive income ( CI) debt investment CI e uity investment or fair value through profit or loss ( T ).

inancial assets are not reclassified subse uent to their initial recognition unless the company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at T : - it is held within a business model whose ob ective is to hold assets to collect contractual

cash flows and - its contractual terms give rise on specified dates to cash flows that are solely payments

of principal and interest on the principal amount outstanding (S I).

mortised cost represents the net present value ( N ) of the consideration receivable or payable as of the transaction date. This classification of financial assets comprises the following captions: Cash and cash e uivalents Trade and other receivables

ue to their short-term nature, the company initially recognises these assets at the original

invoiced or transaction amount less expected credit losses.

ll financial assets not classified as measured at amortised cost or CI as described above are measured at T . n initial recognition, the company may irrevocably designate a financial asset that otherwise meets the re uirements to be measured at amortised cost or at CI as at T if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

The company makes an assessment of the ob ective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management.

or the purposes of this assessment, principal’ is defined as the fair value of the financial asset on initial recognition. Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. li uidity risk and administrative costs), as well as a profit margin.




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(ii) Reversals of impairment (cont’d):

n impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Reversal of impairment losses is recognised in profit or loss, except for available-for-sale

e uity securities, which is recognised in other comprehensive income. ( ) etermination of profit or loss:

rofit is determined as the difference between the revenues from the goods and services rendered

and the costs and other charges incurred during the year. rofits on transactions are taken in the year in which they are realised. transaction is realised at the moment of delivery. osses are taken in the year in which they are realised or determinable.

(r) Segment reporting:

segment is a distinguishable component of the group that is engaged either in providing

products (business segment), or in providing products within a particular economic environment (geographical segment), which is sub ect to risks and rewards that are different from those of other segments.

The group’s activities are limited to the distribution of cigarettes to amaican consumers,

operating in a single segment s such no additional segment information is provided. (s) inancial instruments:

financial instrument is any contract that gives rise to a financial asset of one enterprise and a

financial liability or e uity instrument of another enterprise. or the purpose of these financial statements, financial assets have been determined to include cash and cash e uivalents and accounts receivable. Similarly, financial liabilities mainly comprise accounts payable.

(i) Recognition and initial measurement

Trade receivables are initially recognised when they are originated. ll other financial

assets and financial liabilities are initially recognised when the company becomes a party to the contractual provisions of the instrument.

financial asset (unless it is a trade receivable without a significant financing component)

or financial liability is initially measured at fair value plus, for an item not at T , transaction costs that are directly attributable to its ac uisition or issue. trade receivable without a significant financing component is initially measured at the transaction price.

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(ii) Classification and subse uent measurement

Financial assets – Policy applicable from April 1, 2018

n initial recognition, a financial asset is classified as measured at: amortised cost fair value through other comprehensive income ( CI) debt investment CI e uity investment or fair value through profit or loss ( T ).

inancial assets are not reclassified subse uent to their initial recognition unless the company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at T : - it is held within a business model whose ob ective is to hold assets to collect contractual

cash flows and - its contractual terms give rise on specified dates to cash flows that are solely payments

of principal and interest on the principal amount outstanding (S I).

mortised cost represents the net present value ( N ) of the consideration receivable or payable as of the transaction date. This classification of financial assets comprises the following captions: Cash and cash e uivalents Trade and other receivables

ue to their short-term nature, the company initially recognises these assets at the original

invoiced or transaction amount less expected credit losses.

ll financial assets not classified as measured at amortised cost or CI as described above are measured at T . n initial recognition, the company may irrevocably designate a financial asset that otherwise meets the re uirements to be measured at amortised cost or at CI as at T if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets – Business model assessment: Policy applicable from April 1, 2018 The company makes an assessment of the ob ective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management.

Financial assets – Assessment whether contractual cash flows are solely payments of principal and interest: Policy applicable from April 1, 2018

or the purposes of this assessment, principal’ is defined as the fair value of the financial asset on initial recognition. Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. li uidity risk and administrative costs), as well as a profit margin.




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(ii) Classification and subse uent measurement (cont’d)

Financial assets – Assessment whether contractual cash flows are solely payments of principal and interest: Policy applicable from April 1, 2018 (cont’d)

The company’s ob ective is to hold financial assets to collect contractual cash flows. In assessing whether the contractual cash flows are solely payments of principal and interest, the company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. Financial liabilities

ll financial liabilities are recognised initially at fair value and in the case of borrowings, plus directly attributable transaction costs. The company’s financial liabilities, which mainly comprise accounts payables is recognised initially at fair value. Financial assets and liabilities – Subsequent measurement and gains and losses: Policy applicable from April 1, 2018

inancial assets at amortised cost are subse uently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss.

ny gain or loss on derecognition is recognised in profit or loss. The subse uent measurement of financial liabilities depends on their classification as described in the particular recognition methods disclosed in the individual policy statements associated with each item.

Financial assets and liabilities– Policy applicable before April 1, 2018

The company classified non-derivative financial assets as Loans and receivables: measured at amortised cost using the effective interest method. The company classified non-derivative financial liabilities into the other financial liabilities category. These are subse uently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. ny gain or loss on derecognition is also recognised in profit or loss.

(iii) erecognition Financial assets

The company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

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(iii) erecognition (cont’d)

The company enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are not derecognised.

The company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expired.

(iv) ffsetting

inancial assets and financial liabilities are offset and the net amount presented in the

statement of financial position when, and only when, the company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

(t) air value:

air value is the price that would be received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date. arket price is used to determine fair value where an active market exists as it is the best evidence of the fair value of a financial instrument.

The company’s financial instruments lack an available trading market. The fair value of all financial instruments included in current assets and current liabilities are considered to approximate their carrying values, due to their short-term nature. The fair values of amounts due from and due to subsidiary companies are assumed to approximate carrying values.

(u) ividends and distributions: ividends and distributions are recognised in the period in which they are declared.




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(ii) Classification and subse uent measurement (cont’d)

The company’s ob ective is to hold financial assets to collect contractual cash flows. In assessing whether the contractual cash flows are solely payments of principal and interest, the company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.

ll financial liabilities are recognised initially at fair value and in the case of borrowings,

plus directly attributable transaction costs. The company’s financial liabilities, which mainly comprise accounts payables is recognised initially at fair value.

inancial assets at amortised cost are subse uently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss.

ny gain or loss on derecognition is recognised in profit or loss. The subse uent measurement of financial liabilities depends on their classification as described in the particular recognition methods disclosed in the individual policy statements associated with each item.

The company classified non-derivative financial assets as measured at amortised cost using the effective interest method. The company classified non-derivative financial liabilities into the other financial liabilities category. These are subse uently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. ny gain or loss on derecognition is also recognised in profit or loss.

(iii) erecognition

The company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

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(iii) erecognition (cont’d)

Financial assets (cont’d)

The company enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are not derecognised. Financial liabilities

The company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expired.

(iv) ffsetting

inancial assets and financial liabilities are offset and the net amount presented in the

statement of financial position when, and only when, the company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

(t) air value: Definition of fair value:

air value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. arket price is used to determine fair value where an active market exists as it is the best evidence of the fair value of a financial instrument.

Determination of fair value:

The company’s financial instruments lack an available trading market. The fair value of all financial instruments included in current assets and current liabilities are considered to approximate their carrying values, due to their short-term nature. The fair values of amounts due from and due to subsidiary companies are assumed to approximate carrying values.

(u) ividends and distributions: ividends and distributions are recognised in the period in which they are declared.




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23. e and amended standards issued but not yet effective

t the date of approval of the financial statements, a number of new standards and amendments to standards, were in issue but were not yet effective and which the group has not early adopted. Those which management considered may be relevant to the group are as follows:



I RS 16, Leases ffective for annual reporting periods beginning on or after anuary 1, 2019, this standard eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. ntities will be re uired to bring all ma or leases on-balance sheet, recognising new assets and liabilities. The on-balance sheet liability will attract interest the total lease expense will be higher in the early years of a lease even if a lease has fixed regular cash rentals. ptional lessee exemption will apply to short- term leases and for low-value items with value of S$5,000 or less.

essor accounting remains similar to current practice as the lessor will continue to classify leases as finance and operating leases.. The roup plans to apply I RS 16 initially on anuary 1, 2019, using the modified retrospective approach. Therefore, the cumulative effect of adopting I RS 16 will be recognised as an ad ustment to the opening balance of retained earnings at anuary 1, 2019, with no restatement of comparative information.

mendment to I S 1, Presentation of Financial Statements and I S 8, Accounting Policies, Changes in Accounting Estimates and Errors

This amendment is effective for annual periods beginning on or after anuary 1, 2020, and provides a definition of material’ to guide preparers of

financial statements in making udgements about information to be included in financial statements.

“Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.”

I RIC 23, Uncertainty Over Income Tax Treatments

ffective for annual reporting periods beginning on or after anuary 1, 2019. arlier application is permitted. I RIC 23 clarifies the accounting for

income tax treatments that have yet to be accepted by tax authorities is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under I S 12.

n entity has to consider whether it is probable that the relevant tax authority would accept the tax treatment, or group of tax treatments, that is adopted in its income tax filing. If the entity concludes that it is probable that the tax authority will accept a particular tax treatment in the tax return, the entity will determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment included in its income tax filings and record the same amount in the financial statements. The entity will disclose uncertainty. If the entity concludes that it is not probable that a particular tax treatment will be accepted, the entity has to use the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.

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CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 23. e and amended standards issued but not yet effective (cont d)



I RIC 23,

(cont’d)

The decision shouled be based on which method provides better prediction of the resolution of the uncertainty.

If facts and circumstances change, the entity is re uired to reassess the udgements and estimates applied.

I RIC 23 reinforces the need to comply with existing disclosure re uirements regarding: - udgements made in the process of applying accounting policy to

determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates

- assumptions and other estimates used and - potential impact of uncertainties that are not reflected in the financial

statements.

mendments to I RS 9,

ffective retrospectively for annual periods beginning on or after 1 anuary 2019 clarifies the treatment of: (i) repayment features with negative compensation:

inancial assets containing prepayment features with negative compensation can now be measured at amortised cost or at fair value through other comprehensive income ( CI) if they meet the other relevant re uirements of I RS 9.

(ii) odifications to financial liabilities: If the initial application of I RS 9 results in a change in accounting policy for these modifications or exchanges, then retrospective application is re uired, sub ect to particular transitional reliefs. There is no change to the accounting for costs and fees when a liability has been modified (but not substantially) - these are recognised as an ad ustment to the carrying amount of the liability and are amortised over the remaining term of the modified liability.

mendments to

These amendments are effective retrospectively for annual reporting periods beginning on or after anuary 1, 2020. The revised framework covers all aspects of standard setting including the ob ective of financial reporting.

The main change relates to how and when assets and liabilities are recognised and de-recognised in the financial statements.

New bundle of rights’ approach to assets will mean that an entity may recognise a right to use an asset rather than the asset itself

liability will be recognised if a company has no practical ability to avoid it. This may bring liabilities on balance sheet earlier than at present.

new control-based approach to de-recognition will allow an entity to derecognise an asset when it loses control over all or part of it the focus will no longer be on the transfer of risks and rewards.

The group is assessing the impact that these new standards, amendments and interpretations will have on its 2020 and 2021 financial statements.




March 31, 2019

51

CARRERAS LIMITED


23. e and amended standards issued but not yet effective

t the date of approval of the financial statements, a number of new standards and amendments to standards, were in issue but were not yet effective and which the group has not early adopted. Those which management considered may be relevant to the group are as follows:



I RS 16, ffective for annual reporting periods beginning on or after anuary 1, 2019, this standard eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. ntities will be re uired to bring all ma or leases on-balance sheet, recognising new assets and liabilities. The on-balance sheet liability will attract interest the total lease expense will be higher in the early years of a lease even if a lease has fixed regular cash rentals. ptional lessee exemption will apply to short- term leases and for low-value items with value of S$5,000 or less.

essor accounting remains similar to current practice as the lessor will continue to classify leases as finance and operating leases.. The roup plans to apply I RS 16 initially on anuary 1, 2019, using the modified retrospective approach. Therefore, the cumulative effect of adopting I RS 16 will be recognised as an ad ustment to the opening balance of retained earnings at anuary 1, 2019, with no restatement of comparative information.

mendment to I S 1,

and I S 8,

This amendment is effective for annual periods beginning on or after anuary 1, 2020, and provides a definition of material’ to guide preparers of

financial statements in making udgements about information to be included in financial statements.

I RIC 23,

ffective for annual reporting periods beginning on or after anuary 1, 2019. arlier application is permitted. I RIC 23 clarifies the accounting for

income tax treatments that have yet to be accepted by tax authorities is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under I S 12.

n entity has to consider whether it is probable that the relevant tax authority would accept the tax treatment, or group of tax treatments, that is adopted in its income tax filing. If the entity concludes that it is probable that the tax authority will accept a particular tax treatment in the tax return, the entity will determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment included in its income tax filings and record the same amount in the financial statements. The entity will disclose uncertainty. If the entity concludes that it is not probable that a particular tax treatment will be accepted, the entity has to use the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.

52

CARRERAS LIMITED

otes to the inancial Statements (Continued) March 31, 2019 23. e and amended standards issued but not yet effective (cont d)



I RIC 23, Uncertainty Over Income Tax Treatments (cont’d)

The decision shouled be based on which method provides better prediction of the resolution of the uncertainty.

If facts and circumstances change, the entity is re uired to reassess the udgements and estimates applied.

I RIC 23 reinforces the need to comply with existing disclosure re uirements regarding: - udgements made in the process of applying accounting policy to

determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates

- assumptions and other estimates used and - potential impact of uncertainties that are not reflected in the financial

statements.

mendments to I RS 9,Financial Instruments

ffective retrospectively for annual periods beginning on or after 1 anuary 2019 clarifies the treatment of: (i) repayment features with negative compensation:

inancial assets containing prepayment features with negative compensation can now be measured at amortised cost or at fair value through other comprehensive income ( CI) if they meet the other relevant re uirements of I RS 9.

(ii) odifications to financial liabilities: If the initial application of I RS 9 results in a change in accounting policy for these modifications or exchanges, then retrospective application is re uired, sub ect to particular transitional reliefs. There is no change to the accounting for costs and fees when a liability has been modified (but not substantially) - these are recognised as an ad ustment to the carrying amount of the liability and are amortised over the remaining term of the modified liability.

mendments toReferences to Conceptual Framework in IFRS Standards

These amendments are effective retrospectively for annual reporting periods beginning on or after anuary 1, 2020. The revised framework covers all aspects of standard setting including the ob ective of financial reporting.

The main change relates to how and when assets and liabilities are recognised and de-recognised in the financial statements.

New bundle of rights’ approach to assets will mean that an entity may recognise a right to use an asset rather than the asset itself

liability will be recognised if a company has no practical ability to avoid it. This may bring liabilities on balance sheet earlier than at present.

new control-based approach to de-recognition will allow an entity to derecognise an asset when it loses control over all or part of it the focus will no longer be on the transfer of risks and rewards.

The group is assessing the impact that these new standards, amendments and interpretations will have on its 2020 and 2021 financial statements.

ANNUAL GENERAL MEETING

Form of Proxy

I/We of being a Member/Members of Carreras Limited hereby appoint

of

or failing him/her

of

as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held on September 4, 2019 at 2 p.m. and at any adjournment thereof.

SIGNED this day of 2019.

SIGNATURE OF SHAREHOLDER

NOTE: To be valid, this proxy must be deposited with the Registrar and Transfer Office: Sagicor Bank Jamaica Limited, Group Legal Trust & Corporate Services, 28 – 48 Barbados Avenue, Kingston 5, not less than 48 hours before the time appointed for holding the meeting.

Place stamp here $100

RESOLUTIONS FOR AGAINST

123 a (i) 3 a (ii)3 b (i)3 b (ii)3 b (iii)45

A proud Jamaican Company since 1962

13A Ripon RoadKingston 5

Telephone: +1 (876) 749 9800Fax: +1 (876) 906 9284

E-Mail: [email protected]

Website: www.carrerasltd.com

2019 - jamstockex.com · driven by various strategies being implemented by management. despite the...

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