Industrial Asphalts (Ceylon) PLC AR - 15

INDUSTRIAL ASPHALTS (CEYLON) PLCANNUAL REPORT 2014/20152

INDUSTRIAL ASPHALTS (CEYLON) PLCANNUAL REPORT 2014/2015 3



TABLE OF CONTENTS

Corporate Information 6

Notice of Annual General Meeting 7

Chairman's Review 9

Managing Director/ CEO's Review 10

Annual Report of the Board of Directors 12

Statement of Directors' Responsibility 15

Board of Directors 16

Report of the Audit Committee 17

Report of the Remuneration Committee 18

Corporate Governance 19

Sustainability Reporting 22

Risk Management 26

Independent Auditor's Statement 31

Statement of Comprehensive Income 33

Statement of Financial Position 34

Statement of Changes in Equity 35

Cash Flow Statement 36

Notes to the Financial Statements 37

Shareholders Information 51

Form of Proxy 53


CORPORATE INFORMATION

Legal Form Quoted Public Company with limited liability listed on the Colombo Stock Exchange

Date of Incorporation 30 June 1964

Date of Re-registration 1 August 2008

Accounting year end 31 March

New Registration Number PQ 185

Registered Office No.28/1, New Nuge Road, Peliyagoda

Website www.iac.lk

Auditors Cecil Arseculeratne & Company Chartered Accountants No.8/67, Sri Siddhartha Path, Kirulapone, Colombo 05.

Directors T.H.M. Wickramasinghe (Chairman) G. Ramanan (Managing Director/ CEO) M. Perera (Non-Executive Independent Director) S.P. Muthusammy (Non-Executive Independent Director)

Company Secretaries & K H L Corporate Services Ltd.Registrars No.02, Deal Place, Colombo 03

Bankers Commercial Bank of Ceylon PLC Bank of Ceylon Hatton National Bank PLC


NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the 51st Annual General Meeting of Industrial Asphalts (Ceylon) PLC will be held on 25th September 2015 at the Auditorium of the National Olympic Committee of Sri Lanka "Olympic House" No.100/9F, Independence Avenue, Colombo 7 at 3.00 p.m. to transact the following businesses;

Ordinary Business :

1. To receive the Report of the Board of Directors and the Audited Financial Statements of the Company for the year ended 31st March 2015 together with the Report of the Auditors' thereon.

2. TodeclareafirstandfinaldividendofRs.4.50persharefortheyearended31stMarch2015asrecommendedby the Board of Directors.

3. To re-elect Mr. T.H.M. Wickramasinghe Director appointed during the year who retires in terms of Article 96 of the Articles of Association of the Company and offers himself for re-election as a Director.

4. To re-elect Mr. M. Perera Director appointed during the year who retires in terms of Article 96 of the Articles of Association of the Company and offers himself for re-election as a Director.

5. To re-elect Mr. S.P. Muthusammy Director appointed during the year who retires in terms of Article 96 of the Articles of Association of the Company and offers himself for re-election as a Director.

6. To re-appoint Messrs Cecil Arseculeratne & Company Chartered Accountants, as Auditors of the Company for the ensuing year and authorize the Directors to determine their remuneration.

7. To authorize the Directors to determine and make donations.

Special Business : Amendments to the Articles of Association ToconsiderandifthethoughtfittopassthefollowingSpecialResolution

“Resolved as a Special Resolution that theArticles of Association of the Company be amended as follows:

1. Sub Article (1) and (2) of Article 3 of the Memorandum of Association be deleted and the following be inserted as Sub Articles (1) and (2) immediately before Sub Article 3:

3 (1) To acquire, hold, exchange or deal in (any manner) listed or unlisted investments or securities of any kind or description including but not limited to shares, stocks, debentures, debenture stock, bonds, obligations, derivatives or any description and securities issued or guaranteed by any company, corporation or undertaking (of whatever nature incorporated or constituted) carrying on business or commercial activities in Sri Lanka or overseas (with due approval of the relevant state authorities) and acquire such investments and securities by original subscription, underwriting, tender, purchase, amalgamation, participation in syndicates or like negotiations or otherwise, and whether or not fully paid up, and to make payments thereon as called up or in advance of calls or otherwise; to acquire any such investments and securities in excess of the moneys for the time being proposed to be invested and to sell, exchange or otherwise dispose of, deal with, or turn to account any of the investments, estate, property, effects or assets of the company, acquired or agreed to be acquired; and to invest in or acquire by re-purchase or otherwise, any securities or investments, and to vary the securities and investments of the of the company from time to time.

3 (2) To provide business, management and other consultancy services and advice,as required from time to time, to any company,corporation or undertaking referred to in article 3(2) above in which the company invests or securities of which are acquired.” AND

2. DeletethefirstsentenceofArticle5oftheMemorandumofAssociationandrestatetheArticle5asfollows:

“5. The company will have power, from time to time, to increase, reduce, consolidate, cancel or sub-divide the capital or to issue it, or any part thereof, with such preferential, differed or special rights, privileges, or conditions as may be determined by the articles of the company for the time being.”; AND


NOTICE OF ANNUAL GENERAL MEETING [Contd.]

3. Article 110 be deleted and the following Article be inserted as Article 110 in the Articles of Association of the Company:

“110. The Board may exercise all the powers of the Company to borrow money and may mortgage or charge its undertakings, property and uncalled capital and issue bonds, debentures, debenture- stock, convertible loan stock and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party;

Provided that, if the aggregate amount being borrowed at any one time is greater than half the value of the assets of the company before such borrowing, such borrowing shall be approved by special resolution of the shareholders.”

4. Insert the following Article 161 immediately after Article 160 of the Articles of Association of the Company:

“ REPURCHASE OF OWN SHARES

161. The Company may purchase, redeem or otherwise acquire any of its own shares subject to the provisions of the Law prevailing at the time of such acquisition.”

5. Memorandum of Association of the present Articles of Association of the Company (after incorporating the aforesaid amendments) be renamed as PART A of the Articles of Association and the Articles of the present Articles of Association be named as PART B.”

By order of the Board

(Sgd.)K H L Corporate Services LimitedSecretaries

At Colombo,1st September 2015

NOTES

A member entitled to attend and vote at the above Meeting is entitled to appoint a Proxy to attend and vote on behalf of him/ her.

A Proxy need not be a member of the Company

A Form of Proxy is enclosed for this purpose.

ThecompletedFormofProxymustbedepositedat theOfficeof theCompanySecretaries,No.2,DealPlace,Colombo03notlessthan48hoursbeforethetimefixedfortheMeeting.

Power to borrow money and give security


CHAIRMAN’S REVIEW

It gives me great pleasure to present to you, valued shareholders, the annual report of your Company for the financialyear2014-15.IAChasproveditsresilienceintheface of many economic trials and tribulations over its 51 years of operations and the financial year under reviewhas been no exception.

Within this short time frame as was envisaged by the Board last year, As the new business strategies get further embedded and the positive effects of the restructuring and transformation programme mount, I am confidentthat your Company will grow in strength and deliver sustainable growth in revenue and profit in the yearsahead and cement its position as a preeminent corporate in this country.

The restructuring process and many of the radical changes made across the Company impacted several stakeholders quite significantly and it was therefore imperative thatwe kept those stakeholders properly informed of the reasons for such changes and the progress being made subsequent to such changes. Keeping that in mind, Our MD/CEO kept our shareholders appraised of the changes and the need for such changes in quite explicit terms in my report last year as well as verbally at the Annual General Meeting. In the same vein, we kept our bankers, strategic partners and principals also appraised of the ongoing developments and I am grateful that we received, during this last year, their total support and cooperation.

YourBoardisconfidentthattheharddecisionstakenduringthe past two years have set the Company on the path to performing at a higher level with the ability to compete effectively in an increasingly challenging environment. Internal governance structures, policy frameworks and business processes have been streamlined and strengthened to deliver value to stakeholders.

Economic Outlook

During the year under consideration the growth momentum was maintained and the GDP as you know grew by 7.4% which is well above the average experienced by the World and the region. This was mainly due to the focused economic policy of the Government and policy makers, which helped Sri Lanka to maintain a lower interest rate which in turn helped to create demand for Investment Goods and Consumer Goods. Enhancement of purchasing power of Government Servants by way of salary increments and reduced prices of fuel, electricity and some essential items helped to increase demand for

construction related items amongst many other items in the domestic market. This in turn helped IAC to increase its turnover. The current political instability is understandable and it should ease off by September 2015. Due to this there is a wait and see approach by many institutional investors which has resulted in a slight stagnation of the market. I am more than hopeful that the market would catapult into a new phase of growth upon the formation of the new Government after the elections.

Future

Sri Lanka is poised on the cusp of expansion and fast track development but there are certain obstacles in its path which must be cleared through political will. Supported by infrastructure development, rapid economic growth and access to foreign markets, the only way to go is up, but what remains to be seen is how the hurdles in the way of progress are cleared. I am hopeful that the authorities will lend an ear to the challenges facing the current market overall and sustainable development will be witnessed over the coming months.

Dividend

The Board is pleased to recommend a first and finaldividendofRs.4.50per shareoutofprofits for the yearended 31st March 2015 compared to Rs.3.00 per share paid last year. The dividend will be subject to a withholding tax of 10 percent. The dividend will be paid within seven market days of the AGM after approval by the shareholders

Appreciation

I would like to thank the Board of Directors, the management and very especially the Managing Director/CEO for the efforts placed in transforming the company back into its competitive position. I cannot overlook the employees of the Company for their dedication and passion to achieve our corporate goals. I wish to express my gratitude to the regulators and to our shareholders for placing their trust in the Company. Our loyal customer base and other stakeholders remain our strength and our prime motivation for aspiring to be quite simply one of the most sustainable Company's in Sri Lanka.

(Sgd.)T.H.M. WickramasingheChairman


MANAGING DIRECTOR/CEO’S REVIEW

It takes me great pleasure in presenting the 51st Annual Report of Industrial Asphalts (Ceylon) PLC.

The year 2014/2015 was a year of great change for IAC. During the year we saw the transfer of stewardship from the founding family. Under the new ownership, IAC is being transformed to capture the existing and emerging opportunities the country has to offer.

The Emerging Economy

Atamacrolevel,SriLankahasfinallyreachedastatewhere the socio-economic environment is conducive for sustained economic growth. The vast policy making and implementation machinery available to the incumbent Government would be technically available for long-term economic development, for the firsttimeaftergainingindependencefromthecolonialpowers. Political performance would be measured by economic progress, both at macro and micro level. This essentially, motivates the Government to deploy its energy to support the country's economic development. All this augments well for a dynamic and progressive enterprise who is nibble enough to capture opportunities as they emerge. New economic sectors would emerge as profitable opportunities,old well-established companies would dither away unless they change fundamentally, new skills would be required both from the entrepreneur as well as key professionals and most importantly the competitive landscape would change. As barriers to entry created by high levels of war and political risk gives way, competition would emerge not only from Sri Lankan entrepreneurs but also global players with far more capabilities than what local players possess in entrepreneurship, capital, technical know-how and access to professionals.

The Year under Review

IAC was revived along the lines it had operated for thelast50years.Thefirstprioritywastorefurbishthefactory infrastructure at Peliyagoda. The portfolio of machinery were assessed and revamped to ensure that rated production capacity was achieved and new safety standards were met. The land on which the factoryissituatedwasfilledupto5'feetwithrequiredstones and gravel to ensure that every square inch

within the premises was efficiently utilized and theeconomic value of the land was unlocked.

IAC is the proud owner of some of the most iconic brands in thewaterproofingandprotectivecoatingssegment. Unfortunately, majority of the brands were not registered with the Registrar of Trademarks and have resulted in blatant violation of the brand. Significantamountoftime,effortandresourceswerecommitted during the year to register our brands. One of the brands from our portfolio however was lost for good. All other brands were registered and required protections under the laws of the country are at the disposal of IAC.

The marketing team was established from a single persontoafully-fledgedteamcoveringthefulllengthand breath of the country. The year under review commenced without a single distributor however we endedthe year with one formal relationship and another five under discussion. The distributioncapability of the Company was also expanded, with the capacity to cover the whole country and to ensure uninterrupted distribution.

Ironically, IAC was rationing its products, issuing its all-popular products in a quota system. The product availability was also made a priority. The full ranges of products were increased to cover a minimum of 3 months sales. The raw material availability was also increased to 3 months and above.

Production capability of IAC was revived;one new machine was strategically added to compliment the existing machinery. Complete electrical rewiring of the Production facility was carried out to ensure that current and future requirements were met. Further expansionof theproductionfloorareaandadditionof new machinery are being evaluated and would be implemented during 2015/2016.

The portfolio of brands owned by IAC was marketed in a haphazard way. These brands are being brought under one primary brand whilst retaining the secondary brand as some of these secondary brands continueaccruesignificantbrandvalue.Thisexercisewould be concluded during 2015/2016.


Now, IAC carries out an advertising campaign, which is centered on target marketing enabling the key brands of the Company to be invigorated. This campaign would be further expanded during 2015/2016.

The administration capacity was also significantlyexpanded during the year under review. Key staffs were recruited to all areas to ensure smooth administration of the affairs of the Company.

The traditional activities of the Company would be divided in the future into four divisions - Protective Coatings, Bitumen, Containers & Closures and Steel Fabrications.

Financial Performance for Year

IAC had a satisfactory performance during the year, we were able to show substantial improvement in bottomlineasdetailedoutinthefinancialstatementsgiven in this Annual Report.

Future Direction of the Company

IAC needs to be repositioned to capture the emerging opportunities as envisaged above in this review. The restructuring of the traditional business lines of the company are complete, the focus now would be market share and market positioning. IAC needs to bere-defined.Inordertocapturethetrueaspirationsof IAC, the Company would be categorized as an Investment Trust. Under this segmentation, IAC would continuously evaluate the investment landscape for opportunities for new investments. Eventually, IAC would have a portfolio of investments. These investments would be in different forms - divisions of the company, listed entities and unlisted entities. The portfolio would be continuously evaluated to optimize shareholder return.

Appreciations

We continue to be guided by Mr. J V R Joseph, even though he retired from the Company during the year under review. His extension of expertise to us is of immense value. During the year Mrs. Sherine Krishnamoorthy one of our long-standing employees also retired after valuable service to the Company. I would like to place on record the appreciation of the services rendered by Mr. S. R. Ekanayake and Mr. M. C. P. Fernando, Both of who retired from the board. The guidance and support given by current Board of Directors have enabled IAC to surpass all benchmarks of performance, which I have no doubt would continue to be the case in the future too.

(Sgd.)G. RamananManaging Director/ CEO

MANAGING DIRECTOR/CEO’S REVIEW [Contd.]


ANNUAL REPORT OF THE BOARD OF DIRECTORS

The Directors of Industrial Asphalts (Ceylon) PLC have pleasure in presenting their Annual Report on the affairs of the Company together with the audited Financial Statements for the year ended 31 March 2015 which were approved by the Board on 1st of September 2015.

Review of Operations

TheCompanyreportedaRs.3,041ofnetprofitandanet loss after tax of Rs.0.376Mn was reported in the previous year. A more comprehensive review of the operations of the Company during the financial yearand the results of those operations are contained in the Managing Director's Review on pages 9 to 10 of the Annual Report. This report forms an integral part of the Directors' Report.

Principal Activities

The Company's principal activities are the manufacture and distribution of bituminous products; distribution of a specialist range of surface coatings and industrial chemicals.

There were no significant changes to the principalactivities of the Company during the year under review.

Legal Status

Industrial Asphalts (Ceylon) PLC was incorporated on 30 June 1964 under the provisions of the Companies Ordinance (Cap 145) and re-registered under the Companies Act, No.7 of 2007 and the Company was listed on the Colombo Stock Exchange.

Shares

Stated CapitalThe Stated Capital of the Company as at 31 March 2015 was Rs.6.6Mn consisting of 666,562 ordinary shares.

Share Information and Substantial ShareholdersAs at 31 March 2015, there were 369 registered Shareholders. Share information and the twenty largest Shareholders as at 31 March 2015 are indicated in pages 51 and 52 of the Annual Report.

Information relating to market value of a share and information on share trading is stated under Shareholder and Investors' information on page 52 of the Annual Report.

Finance

Accounting PoliciesThe Company prepared its Financial Statements according to the Sri Lanka Accounting Standards (SLFRS/ LKAS). All relevant applicable standards have been followed in presenting the Financial Statements for the year ended 31 March 2015. The significantaccounting policies adopted in the preparation of the Financial Statements are given in page 37.

Financial ResultsSummarizedresultsforthefinancialyearunderreviewis set out below.

Year ended 31 March 2015 2014 Rs.'000 Rs.'000Revenue 66,966 56,735Results from operating activities 5,709 1,815ProfitbeforeTax 4,316 (283)Income Tax expense (1,274) (92)ProfitafterTax 3,041 (376)

The Financial Statements of the Company are set out in pages 33 to 50 of the Annual Report.

DividendsThe Board of Directors have recommended the payment ofafinaldividendofRs.4.50pershareamounting toRs.2,999,529

ReservesThe movement of the reserves is given on page 35 under Statement of Changes in Equity.

Corporate DonationsDuring the year under review, the Company made no charitable donations.

TaxationThe Company has adopted accounting policy of making provision for deferred taxation. The Company's liability to income tax has been computed in accordance with the provisions of the Inland Revenue Act No. 10 of 2006 and subsequent amendments thereto. Details are given in Note 7 to the Financial Statements.

Capital ExpenditureDetails of property, plant and equipment and their movement during the year are given in Note 9 to the Financial Statements.


ANNUAL REPORT OF THE BOARD OF DIRECTORS [Contd.]

Events after the Reporting DateThere were no material events occurring after the financialreportingdatewhichrequiresanadjustmenttoor a disclosure in the Financial Statements, other than as disclosed in Note 27 to the Financial Statements.

Directors' Responsibility for Financial Reporting

The Directors' responsibility in relation to the Financial Statements is detailed under the Statement of Directors' responsibility on page 15 of the Annual Report.

Board of Directors

The following were the Directors of the Company as at 31 March 2015.

1. Mr. T.H.M. Wickramasinghe2. Mr. G. Ramanan3. Mr. M. Perera4. Mr. S.P. Muthusammy

Mr. Govindasamy Ramanan was appointed as the Managing Director/ CEO with effect from 30 May 2014.Mr. J.V.R. Joseph retired from being the Chairman and as a Director with effect from 12 August 2014.

Mr. T.H.M. Wickramasinghe, Mr. M. Perera and Mr. S.P. Muthusammy were appointed as Independent Non-Executive Directors with effect from 3 November 2014.

Directors and their shareholding as at 31 March 2015 were as follows:

No. of No. of shares shares 31.03.2015 31.03.2014Mr. T.H.M. Wickramasinghe Nil N/AMr. G. Ramanan 443,653 N/AMr. M. Perera Nil N/AMr. S.P. Muthusammy Nil N/AMr. J.V.R. Joseph N/A 1,008(retired w.e.f. 12.08.2014) Mr. S.R. Ekanayake N/A Nil(resigned w.e.f. 03.11.2014) Mr. M.C.P. Fernando N/A Nil(resigned w.e.f. 03.11.2014)

Retirement by Rotation and Re-election

Mr. T.H.M. Wickramasinghe, Mr. M. Perera and Mr. S.P. Muthusammy the Independent Non-Executive Directors appointed during the year will retire in terms of Article 96 of the Articles of Association of the Company and offer themselves for re-election.

Related Party Transactions

Related party transactions have been declared at meetings of the Directors and are detailed in Note 30 to the Financial Statements.

Directors' Interest

As required by the Companies Act, No.7 of 2007, an Interests Register was maintained by the Company during the period under review. Directors have made declarations as provided for in Section 192 (2) of the Companies Act. The Interests Register is available for inspection as required under the Companies Act.

Remuneration and Fees

Details of Directors' remuneration and fees are set out in Note 6 to the Financial Statements. All fees and remuneration have been duly approved by the Board of Directors of the Company.

Risk and Internal Control

TheBoardofDirectorsissatisfiedthatthereexistsaneffective and comprehensive system of internal controls to monitor, control and manage the risks to which the Company is exposed, to carry out its business in an orderly manner, to safeguard its assets and to secure as far as possible the reliability and accuracy of records.

Corporate Governance

The Directors acknowledge their responsibility for the Company's corporate governance and the system of internal controls. The Directors are responsible to the Shareholders for providing strategic direction to the Company and safeguarding the assets of the Company.TheBoardissatisfiedwiththeeffectivenessof the system of internal control for the period up to the date of signing the Financial Statements.


The main corporate governance practices of the Company are set out on pages 19 to 21 of the Annual Report.

The performance of the Company is evaluated at regular review meetings. These meetings provide an opportunity to ensure that progress is in line with agreed targets. Regular Board Meetings are held to further strengthen the review process and ensure compliance with all statutory and regulatory obligations.

Statutory Payments and Compliance with Laws and Regulations

TheDirectorsconfirmthat,tothebestoftheirknowledge,all taxes and duties due to the Government and all contributions, levies and taxes payable in respect of the employees and all other known statutory dues as at the reporting date have been paid and/ or provided.

Going Concern

The Board of Directors has reviewed the Company's business plans and is satisfied that the Companyhas adequate resources to continue its operations in the foreseeable future. Accordingly, the Financial Statements are prepared on the going concern concept.

Equal Opportunities

The Company is committed to provide equal opportunities to all employees irrespective of their gender, marital status, age, religion, race or disability. It is the Company's policy to give full and fair consideration to persons, with respect to applications for employment, continued employment, training, career development and promotion, having regard for each individual's particular aptitudes and abilities.

Independent Auditors

The Company's Auditors during the period under review were Messrs Cecil Arseculeratne & Company, Chartered Accountants. The fees paid to auditors are disclosed in Note 6 to the Financial Statements.

Based on the declaration from Messrs Cecil Arseculeratne & Company, Chartered Accountants, and as far as the Directors are aware, the Auditors do not have any relationship or interest in the Company other than as disclosed in the above paragraph.

Messrs Cecil Arseculeratne & Company, Chartered Accountants, have expressed their willingness to continue inofficeasAuditorsof theCompany for theensuing year.

In accordance with the Companies Act No. 7 of 2007, a resolution proposing the re-appointment of Messrs Cecil Arseculeratne & Company, Chartered Accountants, as Auditors to the Company will be submitted at the Annual General Meeting.

Independent Auditor's Report

The Independent Auditor's report on the Financial Statements is given on page 31 of the Annual Report.

Annual General Meeting

The 51st Annual General Meeting of the Company will be held on 25th September 2015. The notice convening the meeting and the agenda are given on page 7 and 8.

This Annual Report is signed for and on behalf of the Board.

(Sgd.)G. RamananManaging Director/ CEO

(Sgd.)M.PereraDirectorColombo1st September 2015

ANNUAL REPORT OF THE BOARD OF DIRECTORS [Contd.]


STATEMENT OF DIRECTORS’ RESPONSIBILITY

Set out below are the responsibilities of the Directors of the Company.

The Board of Directors are responsible for preparation of Financial Statements for each financial year andpresent Financial Statements to the Shareholders in accordance with the relevant provisions of the Companies Act No.7 of 2007 and other statutes which are applicable in preparation of Financial Statements. The Financial Statements comprise of the Statement of Financial Position as at 31 march 2015, the Statement of Comprehensive Income, Statement of Changes in Equity, Cash Flow Statement for the year ended and Notes thereto.

The Financial Statements of the Company for the year ended 31 March 2015 incorporated in this Annual Report have been prepared in accordance with the Companies Act No.7 of 2007, Sri Lanka Accounting Standards (SLFRSs and LKASs) and Listing Rules of the Colombo Stock Exchange.

The Directors are responsible to select suitable accounting policies which are applied in a consistent manner and appropriate estimates and judgements made to reflect the true substance and form oftransactions.

As per section 148 of the Companies Act No.7 of 2007, theDirectorsare required tomaintainsufficientaccounting records to disclose, with reasonable accuracy, the financial position of theCompany. TheDirectors have therefore caused the Company to maintain proper books of accounts and regular review financial reports at their meetings. The Board alsoreviews and approves all interim Financial Statements prior to their release.

The Directors have taken reasonable measures to safeguard the assets of the Company and to prevent and detect frauds and other irregularities. In this regard, the Directors have laid down effective and comprehensive internal control systems.

The Auditors of the Company, Messrs Cecil Arsecularatne & Company, Chartered Accountants, who were re-appointed in accordance with a resolution passed at the last Annual General Meeting were provided with all necessary information required by them in order to carry out their audit and to express an opinion which is contained on page 31 of this Annual Report.

Directors confirm that after considering the financialposition, operating conditions and regulatory and other factors, the Directors have a reasonable expectation that the Company possesses adequate resources to continue in operation for the foreseeable future and that the Going Concern basis is the most appropriate in the preparation of these Financial Statements.

The Board of Directors is of the opinion that Board has discharged its responsibilities as set out above.

By order of the Board

(Sgd.)K H L Corporate Services LimitedSecretariesColombo1st September 2015


BOARD OF DIRECTORS

G. RamananACMA (UK), CFA (USA), MBA (University of Chicago, Booth School of Business)Managing Director/ CEO(Appointed to the Board on 30th May 2014)

Mr Ramanan is an investment banker and has over 20 years of experience in the investment banking space in Sri Lanka. He was widely involved and continues to be active in business advisory, fund management, commercial banking and investment banking. Mr Ramanan was the Head of Investment Banking at Hatton National Bank and CEO of HNB Securities, where he was directly involved in handling the full array of investment banking services and executed several landmark transactions. In 2009 he established his owned investment banking practice along with Capital Trust Holdings. Mr Ramanan is a CFA Charter Holder and a Management Accountant, and obtained his MBA from University of Chicago Booth School of Business. Mr Ramanan is a Non-Executive Director at Adam Investments PLC.

T.H.M. WickramasingheMBA (ECU, Aus)Chairman(Appointed to the Board on 3rd November 2014)

Mr Tushan Wickramasinge is the Chairman/ CEO of Capital Trust Holdings Limited, Capital Trust Credit (Pvt) Limited, Capital Trust Properties (Pvt) Limited, Capital Trust Residencies (Pvt) Limited, Capital Trust Venture (Pvt) Limited and Capital Trust Corporate Solutions (Pvt) Limited.

He has been the Managing Director/ CEO of Capital Trust Securities (Pvt) Limited from 2003 to date. Under his leadership, the Company has expanded to have probably the largest local Investor client base which is servedthroughfivebranches.MrWickramasinghehasalso facilitated many of the strategic transactions in the Colombo Stock Exchange.

He was a Director of Lanka Orix Leasing Co. PLC from 2002 to 2009 and is also a Director of People's Merchant Finance PLC, Capital Trust Financial (Pvt) Limited and several other companies.

Further, he is the Proprietor of Shakthi Institute, an educational institute with over 10,000 registered students.

He holds an MBA from Edith Cowan University of Australia.

Mahinda PereraFCMA (UK), MBA, LLBNon-Executive Independent Director(Appointed to the Board on 3rd November 2014)

Mr Mahinda Perera counts over 30 years professional experience in the commercial sector in finance,management and legal disciplines. He commenced his professional career as a Management Accountant and is currently a Fellow of the Chartered Institute of Management Accountants, U.K. (FCMA-UK) and a CGMA. Thereafter, he obtained a Master's Degree in Management (MBA) and a Bachelor of Laws (LLB) in keeping with his career development. He was admitted to the Bar as an Attorney-at-Law in 2008.

He has wide experience in manufacturing and export industries having held senior positions in entities in divers sectors such as food and beverage, packaging and ceramic industries. He has gained extensive experience in management and finance as a ChiefExecutive Officer of a listed company as well as aManaging Director and Finance Director in unlisted entities.

Currently, as an Attorney-at-Law, he is engaged in commercial and corporate law practice and is a Director of Varners International (Private) Limited, an associate of the Varners Law Firm.

S.P. MuthusammyNon-Executive Independent Director(Appointed to the Board on 3rd November 2014)

Mr. Muthusammy has being in the business of tea plantation since 1961 and counts over 15 years of experience as a tea planter.

In 1990 Mr. Muthusammy moved into the business of growing, processing and exporting of Organic food products. Currently he is the Chairman of GreenfieldHoldings (Pvt) Limited and the Subsidiary Companies andtheAssociateCompaniesoftheGreenfieldGroup.


REPORT OF THE AUDIT COMMITTEE

Composition of the Audit Committee and meetings

The Audit Committee of Industrial Asphalts (Ceylon) PLC comprises of the two (2) Independent Non-Executive Directors, Mr. Mahinda Perera (Chairman of the committee) and Mr.S.P.Muthusammy. The Directors havetherequiredfinancialknowledgeandprofessionalskills to carry out their functions effectively and efficiently.TheChiefExecutiveOfficerandtheFinancialController attend meetings on invitation. The External Auditors, Messrs Cecil Arsecularatne & Company, Chartered Accountants attend meetings on invitation. The Company Secretary functions as the Secretary to the Audit Committee. The Audit Committee had two (2)meetingsduringthefinancialyearended31March2015.

Responsibilities of the Audit Committee

The Audit Committee is responsible to review the adequacy and effectiveness of the internal controls and the risk management system to safeguard the assets of the Company and the compliance with legal and regulatory requirements. It is also responsible for supervision of all matters associated with the appointment, terms, remuneration and performance of the External Auditors and for reviewing the scope and results of the audit.

During the financial year ended 31 March 2015 theAudit Committee reviewed and discussed the Quarterly Accounts and Annual Financial Statements with the Management in order to ensure its compliance with statutory requirements of Sri Lanka Accounting Standards, Companies Act No.7 0f 2007 and the listing rules of the Colombo Stock Exchange; and recommended to the Board of their approval prior to releasing the same to the Colombo Stock Exchange.

During the year the Audit Committee reviewed the adequacy and the effectiveness of the Company's internal control system and the procedures relating to governance and risk management system. Accordingly, the Audit Committee is satisfied that the Company'sinternal controls and the risk management framework in placeprovideareasonableassurancethatthefinancialposition of the Company is adequately monitored and the Company's assets are safeguarded.

External Audit

The External Auditor's letter of engagement, including the scope of the audit was reviewed and discussed by the Audit Committee with the Management and the External Auditors prior to the commencement of the annual audit.

Before the conclusion of the audit the Committee met with the External Auditors to discuss all audit issues and agree on their treatment.

TheAuditCommitteeissatisfiedthattheindependenceof the External Auditors has not been impaired by any eventorservicethatgivesrisetoaconflictofinterest.

After evaluating and discussing the performance of the External Auditors with the Management of the Company, the Audit Committee has recommended to the Board of Directors that Messrs Cecil Arsecularatne & Company, Chartered Accountants, be re-appointed as External Auditors for the financial year ending 31March 2016 at a remuneration to be determined by the Board, subject to the approval of the Shareholders at the Annual General Meeting.

(Sgd.)Mahinda PereraChairmanAudit Committee

1st September 2015


REPORT OF THE REMUNERATION COMMITTEE

The Remuneration Committee of Industrial Asphalts (Ceylon) PLC comprises of the two (2) Independent Non-Executive Directors, Mr. S.P. Muthusammy (Chairman of the committee) and Mr. T.H.M. Wickramasinghe. The Company Secretary functions as the Secretary to the Remuneration Committee. The Remuneration Committeehadone (1)meetingsduring thefinancialyear ended 31 March 2015.

The Remuneration Committee is responsible for reviewing and recommending the framework and policy for remuneration of Senior Management. It is ensured that the remuneration at each level of management is competitive and based on performance they are rewarded in a fair manner.

The policy on remuneration is geared to attract and retain the best professional talent to the Company and to motivate and encourage them to perform at the highest possible level.

Evaluation of performance ensures equality and fairness without discrimination of gender, age, ethnicity, religion or any other consideration.

The aggregated remuneration of the Board of Directors and the Senior Management team are disclosed in the notes to the Financial Statements.

(Sgd.)S.P. MuthusammyChairmanRemuneration Committee

1st September 2015


CORPORATE GOVERNANCE

The Board of Directors is committed to maintain the highest standards of corporate governance practiced in the interest of stakeholders while maintaining business integrity, appropriate ethical standards and professionalism in all its operations and activities. The Board ensures that the Company is in compliance with relevant statutory and regulatory requirements including requirements of the Companies Act No.7 of 2007, listing rules of Colombo Stock Exchange, requirements of Securities and Exchange Commission of Sri Lanka and other applicable laws and regulations. The Directors are responsible to establish sound internal control systems including comprehensive risk management framework, to safeguard the Company's assets, ensure accuracy and reliability of records and accountable for overall management of the Company.

In terms of section 7.10 of the listing rules of the Colombo Stock Exchange, Industrial Asphalts (Ceylon) PLC complied with the relevant provisions under Corporate Governance.

The Board of Directors

Composition of the Board of Directors and MeetingsThe Board of Directors is responsible for the governance practices established within the Company. As at 31 March 2015 the Board comprised of Managing Director/ChiefExecutiveOfficerandthreeIndependentNon-Executive Directors.

TheprofilesofalltheDirectorsdetailingtheirareasofexpertise are given on page 16 of the Annual Report.

The independence of the Non-Executive Directors were determined according to the CSE listing rules. Each Non-Executive Director has submitted a declaration of independence/ non-independence for the year. The Board makes a determination annually as to the independence/ non-independence of each Non-Executive Director.

The Non-Executive Directors bring independent objective judgement to bear on Board decisions by constructively challenging management and helping to develop the Company's strategic objectives.

The Board met on three (3) occasions during the year under review. The Directors' attendance at the Board meetings held is given below.

Name of Director Board Meetings attendedMr. T.H.M. Wickramasinghe 2 Mr. G. Ramanan 3 Mr. M. Perera 2 Mr. S.P. Muthusammy 2 Mr. S.R. Ekanayake (resigned w.e.f. 03.11.2014) 1 Mr. C.P. Fernando (resigned w.e.f. 03.11.2014) 1

The Board is also encouraged to seek independent professional advice when necessary, at the Company's expense and also have access to the Company Secretary to obtain advice and services as required.

Delegation of AuthorityThe Board has delegated the authority to the Chief Executive Officer (CEO)/ Managing Director tofacilitate the effective function of daily business affairs of the Company as per the set strategies, goals and objectives of the Board and to ensure high standards of governance. A team of Senior Management assists CEO in carrying out the day to day functions of the Company.

The Board has discussions with the CEO on the short term, medium term and long term objectives of the Company. Additionally the Board meets with Senior Management regularly to review operational matters and disseminate the Board's plan for the future.

Appointments to the BoardThe appointment of Directors to the Board is decided by the Board in accordance with the Articles of Association of the Company and in compliance with rules of governance.

Information relating to change in Directorate is communicated to the Shareholders by way of appropriate announcements to the Colombo Stock Exchange.

Re-election of DirectorsIn accordance with the Articles of Association of the Company, members comprising one third of the Board of Directors except the Managing Director/ CEO, are required to stand for retirement by rotation at least once in every three years. A retiring Director is eligible for re-election at the Annual General Meeting.


Company SecretaryThe Company Secretary is appointed by the Board of Directors of the Company. The Company Secretary liaises with the Colombo Stock Exchange on the Company's communications. It is the responsibility of the Company Secretary for making announcements with regard to AGMs and EGM to the shareholders and for accurate recording of proxy voting.

Remuneration Committee

The composition of the Remuneration Committee and the Report of the Remuneration Committee is given on page 18 of this Annual Report.

Audit Committee

The composition of the Audit Committee and the Report of the Audit Committee is given on page 17 of this Annual Report.

Accountability

Financial ReportingThe Board of Directors is responsible for timely publication of Financial Statements annually and quarterly basis. These Financial Statements are prepared based on Sri Lanka Accounting Standards (SLFRS/ LKAS) and in compliance with the listing rules

of Colombo Stock Exchange. Board ensures that these publications include all relevant financial and non-financialinformationthatneedstobecommunicatedtothe shareholders.

Internal ControlsThe Board of Directors is responsible for maintaining a sound internal control system within the organization to safeguard the Company's assets. The Board has delegated this responsibility to the Audit Committee and the responsibility of the Audit Committee with this regard is given in the page 16 of this Annual Report.

Investor Relations and Communication to shareholdersThe Board of Directors policy is to disclose all relevant information to stakeholders, within the bounds of prudent commercial judgement.

The Company ensures that the notice of the AGM along with the Annual Report containing the performance of the Company for the financial year under review aredelivered to the shareholders at least 15 working days prior to the scheduled meeting.

Annual Report of the Board of DirectorsThe Annual Report of the Board of Directors on the Affairs of the Company for 31 March 2015 is given on pages 12 to 14 of this Annual Report.

Following table provides the summary of compliance with the Corporate Governance requirements under the listing rules of the Colombo Stock Exchange.

Rule No. Requirement Compliance Status

Details

i. 7.10.1(a) The correct number of Executive/ Non-executive Directors

Compliant Three (3) Directors are Non-executive and one (1) Director - MD/ CEO is Executive

ii. 7.10.2(a) The correct number of Independent Non-executive Directors

Compliant Three Non-executive Directors are Independent Directors

7.10.2(b) Non-executive Directors should submit a signed and dated declaration of their independence/ non-independence

Compliant The Board obtained declaration from the Non-executive Directors

iii. 7.10.3(a) Annual determination of criteria of independence and declaration of same by Board

Compliant The Board of Directors annually determine and disclose the names of Directors deemed to be 'independent'.Refer ‘Corporate Governance’

7.10.3(c) Published a brief resume in the Annual Report, of each Director of the Board, including each Director's area of expertise

Complaint Refer 'Board of Directors'

CORPORATE GOVERNANCE [Contd.]


Rule No. Requirement Compliance Status

Details

iv. 7.10.5(a) Appointment of Remuneration Committee

Compliant Remuneration Committee was formed

7.10.5(a) The number of Independent Non-executive Directors in the Remuneration Committee

Compliant Refer 'Report of the Remuneration Committee'

7.10.5(a) Whether the Chairman of the Remuneration Committee is a Non-executive Director

Compliant Chairman is a Non-executive Director

7.10.5(b) Disclosure on the functions of the Remuneration Committee

Compliant Refer 'Report of the Remuneration Committee'

7.10.5(c) Disclosure in the Annual Report on the aggregate remuneration paid to Executive and Non-executive Directors

Compliant Refer page 43, note no.6

v. 7.10.6(a) The number of Independent Non-executive Directors in the Audit Committee

Compliant Refer 'Report of the Audit Committee'

7.10.6(a) Whether the Chairman of the Audit Committee is a Non-executive Director

Compliant Chairman is a Non-executive Director

7.10.6(a) Whether the Chairman or one member of the Audit Committee is a member of a recognized professional accounting body

Complaint Chairman is a member of a professional accounting body

7.10.6(b) Disclosure on the functions of the Audit Committee


7.10.6(c) Appointment of Audit Committee Compliant Audit Committee was formed

7.10.6(c) The basis for determining external auditors as being independent


CORPORATE GOVERNANCE [Contd.]


SUSTAINABILITY REPORT

We understand that, globally, stakeholders at large are demanding that companies they associate with demonstrate non-financial metrics to definesustainability and sustainable operations. Financial profitabilityasthesolecriteriaofacompany'ssuccessis an outdated concept and out rightly rejected by most right-thinking stakeholders and the organisations they support. More importantly, being an environmentally, economic and socially sustainable organisation is helping companies earn corporate respect and drive customer loyalty, not to mention earning respect from peers and industry. In an era of growing global competition, climate change and diminishing resources, companies that put sustainability as their foremost goal are winning the race.

As one of the oldest, bitumen manufactures in existence in Sri Lanka, we are living proof of continuous improvement and sustainable business practices. While we celebrate over-a-century of existence in the year 2014, we consider this an opportunity to strengthen our conceptions of business practices that are environmentally and socially sustainable, while also being financially sustainable, the key requirement ofany commercial entity. In our journey over the decades within the corporate arena of Sri Lanka, an overarching tenet has always been to ensure that our decisions, actions and impacts are sustainable and positive at all times. We are extremely cognizant that as a corporate steward involved in numerous business and industry areas, we must set an example to others, while making our stakeholders a part of our journey of progress. In this Sustainability Report, we set out the measures we take to ensure that sustainability is infused along the length and breadth of our value chain. Simultaneously, we continue to invest time and resources in understanding how we can enhance our proud track record as one of the most sustainable organizations in the country.

We believe that we have a responsibility towards our stakeholders to ensure that they are given a clear insight into how we have managed their business and how we intend to work in the future. This, therefore, is our honest effort in sustainability reporting. The report presents a balanced analysis of our sustainability performance strategy in relation to issues that are relevant and material to the Company and to our stakeholders, while complementing our ongoing engagement with stakeholders. This report focuses on key developments and includes only the most pertinent indicators in order to provide stakeholders with an integrated and succinct view of our sustainability performance. Sustainability in

our business is built on natural capital, social capital and economic capital, all of which must be taken together rather than in isolation for a true picture of sustainability. It is these capital segments that run through as themes of this report.

Collectively, the IAC Board has significant corporateacumen, skill, knowledge and experience aided by astute and knowledgeable support and information from senior management and external specialists when theneedarises tobe sufficiently informedandbe independent. Board governance ensures that the Company discloses related party transactions periodically and if any director has a direct or leading interest in any matter being discussed, they will abstain from opining, discussing and voting, all of which could influence theoutcome.Thisavoidsconflictof interestand ensures independence of the Board. IAC has established a governance structure that remains aligned to the laws of the land and ensures compliance to various regulatory mandates. The governance structure thereforeincludescommitteesresponsibleforspecifictasks and setting strategy and future direction for the Group. The Board sub committees are a vital conduit in identifying and managing economic, environmental and social performance, including relevant risks and opportunities, as well as compliance.

Our Sustainability Policy is based upon the following principles:

• We will continue to comply with and exceed wherever practicable, all applicable and related legislation, regulations and codes of practice

• We will integrate the principles and tenets of sustainability into all our business decisions

• We will strive to minimize any negative impacts that may ensue while engaging in our day to day activities

• We will integrate a sustainability mind-set among our team, making them fully aware of our sustainability policy and Empower them with a sense of ownership and commitment to implement, practice and improve it

• We will cascade our Sustainability Policy among our valued business partners, encouraging them and assisting them to adopt sound sustainable management practices


SUSTAINABILITY REPORT [Contd.]

• We intend to review and annually report and to continually strive towards improving our sustainable performance At IAC, we are committed to promoting sustainability. We remain extremely concerned for the environment and for Promoting a broader sustainability agenda, both of which are integral to our professional activities and the management of the organisation. We aim to follow and to promote good sustainability practice to reduce the negative environmental impacts of all our activities and to help our stakeholders to join in this journey that will surelybenefitourfuturegenerations.

The IAC Sustainability Framework, which incorporates our Sustainability Philosophy, Policy and Principles, articulates our strategic commitment to sustainable development and remains integral to risk management. This framework assists our stakeholders in imbuing a similar sustainability approach, promotes sound environmental and social practices, encourages transparency and accountability, and contributes to positive development impacts. We ensure that this framework reflects good practice for sustainabilityand risk mitigation, keeping abreast with trends that bring up challenging issues, which remain at the core to managing a sustainable business. These include supplychainmanagement,resourceefficiency,climatechange and human rights.

Risks and challenges go hand in hand in the business of running an organisation, whether the risk may be from environmental problems, social discontent, political and social unrest and even natural disasters. These can be termed costly, have negative publicity, threaten operating frameworks and also prompt unforeseen expenditure. Reputational damage too can far exceed the immediate cost impacts. While we seek to proactively reduce and manage these risks, challenges have never been a deterrent for us at IAC; rather, they have been a means of directing us towards opportunity and improving business performance over time. These opportunities have driven us to enhance business growth, while ensuring that we remain within compliance benchmarks, while ensuring that our stakeholders are empowered and remain inclusive to our end goal. Over the year, we identified somechallenges and risks that eventually saw an opportunity emerge, and which, through the inherent pragmatic and astute business acumen possessed within IAC, was transformed and included into the strategic way forward of the Company.

Stakeholder Involvement

We are extremely committed to engaging all of our stakeholders, both internally and externally, to become the most sustainable, responsible company we can possibly be. By listening to, partnering with and considering the perspectives of our associates, customers, shareholders, academic leaders, government, value business partners and sometimes, even our competitors, we can truly ensure that quantifiable and qualitative returns are assured.Stakeholder engagement is a crucial element to sustainable development as it is this engagement process that prompts the two-way dialogue and communication process which eventually aligns the strong relationships among our stakeholders and forms the foundation to our sustainability journey. Having identifiedourstakeholdergroups,asgivenbelow,weengage with them at various forums related to their interests and expectations, in an effort to adapt to changing needs and issues, which continue to evolve. As we pursue our corporate sustainability goals, we intend to further strengthen these relationships. Together, we are establishing transparency and enhancing our relevancy with the customers and communities we serve. We have created more formal channels for interacting with stakeholders both to learn from their expertise and to provide a forum for them to provide us with feedback.The purpose of our sustainability reporting is to create greater transparency and accountability and to allow for better informed and more robust decision-making as it is becoming more important than ever to manage both positive and negative impacts of our business activities. Our consumers are increasingly developing an ethical conscience, using sustainability information to identify their chosen brands. Customers want transparency, clarity and accessibility to information and disclosures on social, environmental and economic performance. Needless to say, this information needs to be consistent and presented in a standardized approach, therefore, it is imperative that disclosures are succinct, clear, and truthful and hold fast to the underlying ethos of a principled ethical well governed business entity, which is what IAC espouses to be.

We have never knowingly harmed the environment through any process that we have engaged in. We ensure that in all our processes and systems, we implement as many environmentally friendly initiatives as possible as is seen in the waste water treatment,


energy management, recycling initiatives, decrease in emissions and increase in forest cover that we have strategically embarked upon. We also constantly engage our valued business partners, suppliers and wherever possible our customers, to permeate environmental best practices among them.

IAC is a strong believer of equal opportunities in the workplace and prides itself on respecting its workforce Equally, regardless of gender, age, race, religion, sexual orientation, political beliefs, or any other factor. We unwaveringly uphold and support the tenets mandated by the International Labour Organisation and other prevalent regulatory bodies pertaining to human rights and child labour. We adhere to a strict policy of 'zero tolerance to child labour', a mandate that is permeated to our valued business partners including retailers and the supply chain.

Our philosophy is to partner the community in its sustainable development journey, which in turn gains us considerable advantage. We are inextricably entwined with our communities and we intend to ensure that our presencewithinthesecommunitieswillbenefitthemandus. Our longevity and culture of achievement is rooted in the motivation and mind-set of our people, who are committed and dedicated towards achieving greater heights of performance and raising the benchmark. Given that the IAC has grown into a Company encompassing a number of challenging factors and yet is unequivocally positioned with a leadership status, evidences that our team is a winning one.The dynamism, motivation and 'overzealous' attitude they always espouse has enabled this Companyto take on challenges, some deemed insurmountable and win against the odds.

HR Practice

• To provide and promote an encouraging and professional working environment for our team.

• Believe that the prosperity of our business depends on successfully developing an integrated company of motivated and innovative employees. Hence we facilitate positive employee relations and inspire employees by offering opportunities for challenging work, personal development and growth.

• Committed to hire, develop and retain the most talented people in order to achieve a committed pool of talent.

A range of processes have been instilled within the Company to ensure that recruitment is non-discriminatory, unbiased and driven by meritocracy. In addition, in a bid to streamline our recruitment processes, a recruitment requisition form was introduced, which is the base upon which recruitment is effected and a comprehensive interview evaluation form was brought in, to streamline the interview process frominitialscreeningtofinalinterviewstage.

The company follows HR best practices ensuring consistencyinHRPolicyapproachandfairplayingfieldfor Potential employees. As an organization is nothing more than the collective capacity of its people to create value, organisational culture is an important element in any organisation's make up and success. Therefore, at IAC new recruitment is based on alignment with the Company's internal culture, in addition to knowledge, skills and attitudes required for the role.

Training & Development

Training and development forms the axis to the sustainability of our business and into this we have instilled a knowledge gaining culture, which enables individuals to attain their personal goals while working towards the company's aspirations.

Recognition & Staff Well-Being

TheIACHRpolicyisbasedonthebeliefthatasatisfiedemployee is a motivated employee who will contribute towards achieving company goals voluntarily, while being more productive. We have continuously infused numerous rewards and remuneration schemes, while adding welfare initiatives that would add value to our employees to better their lifestyles.

• Continuous remuneration reviews and increases according to predetermined scales, which could also be tied to performance incentives and bonus scheme.

• A range of insurance policies are in effect including Workmen's Compensation and Personal Accident

• IAC holds annual staff get-together, sports days to build team spirit and facilitate fun and friendships

Supplier Engagement

Forging strong supplier relationships offers a comprehensive way for IAC to assess and streamline the



processes between our organization and our suppliers for an effective partnership. In reality, suppliers are people as well and we believe in emotionally engaging with our suppliers so that they work harder for us and help us cover potential risk areas. Whatever the size or category of supplier, the IAC's Supplier Policy ensures a level playing field and equal opportunitiesfor all our suppliers. We have procedures in place to ensure responsible behavior towards all our suppliers, while committing our suppliers towards reciprocity in responsible behaviour towards the Company. This ensures our stringent quality and standards are understood and met by all our suppliers.

We believe strongly in positioning our supplier philosophy on good corporate conduct, sourcing and producingresponsiblequalityproductsandinfluencinga win-win relationship worked on a platform of mutual benefit. We strongly believe that we must permeatethe best practices we have within our business, the standards and integrity and compliance initiatives to our entire supply chain. This in effect cascades to quality, productivity and standards overall being improved.

We believe that nurturing our customers is an ongoing dialogue and not a one-off event. Nurturing an ongoing and genuine relationship with customers will have a major impact on the way they perceive our brand but also serve to strengthen our operations through focused customer feedback. We engage our customers in numerous ways, nurturing and strengthening relationships to ensure strong loyalty to brand and product. From face to face ad hoc conversations, to conducting customer surveys, to formal gatherings and informal events, we are constantly engaged with our consumer. It is this feedback and varied dialogue and communication channels we have created that have assuredly enabled us to charter our future plans.

Goals towards long term sustainability

1. Be known as the preferred employer having the ability to attract and retain talented people, inducting them in a knowledge-based corporate culture, while assuring them of career enhancement in a responsible company they will be proud to be a part of.

2. Retain market leadership by ensuring that we work on high quality sustainable competitive advantages to infuse trust and loyalty among our customer base by evolving the business to be ahead of customer expectations, which in turn will deliver qualitative and quantitative sustainable returns.

3. Never lose sight of the tenets of corporate stewardship; instill governance and regulatory best practices, while demonstrating our commitment to being an ethical, transparent, accountable Group of companies.

5. Be a Green Ideologue; an advocate who will address environmental issues and 'change' the direction ofclimate change, walking the talk to spread the need to reduce our carbon footprint and ensure a better planet for future generations.



RISK MANAGEMENT

Riskcanbedefinedasthecombinationoftheprobabilityof an event and its consequences. Risk is a part of life. Avoiding all risk would result in no achievement, no progress and no reward. Undoubtedly, there is risk in today's volatile and uncertain business environment, which demands increased transparency within an organizations risk profile. There are vulnerabilities,probabilities, threats and weaknesses that must be addressed to ensure that risk in any enterprise is mitigated. This greater emphasis on risk and risk management also prompts greater penalties on entities that do not or fail to manage key risks, which naturally permeates to organisations being more cognizant of identifying and assessing risks.

In this backdrop, it is also increasingly important that oncetheserisksareidentifiedandassessed,theyaremanagedwithpre-definedtolerances.Anyentityfacesmyriad risks, from well-known risks that are inherent and characteristic of the business to unknown risks that may emerge or are just emerging. Risk resilient organizations must objectively assess their existing risk management capabilities, evaluate their organizational culture with regard to risk, performance and reward and implement sustainable risk management practices.Inthecurrentmarketcontext,riskisdefinedas the probability or threat of a liability, loss or other negative occurrence, caused by external or internal vulnerabilities which would affect the desired objectives of the organization. This also means that stakeholder expectations must be worked into the organization's risk management strategy. Vulnerabilities could mean exposure that could trigger an adverse outcome and therefore, prevent the achievement of company objectives.

The process of risk management at IAC involves analyzing exposure to risks, by identifying vulnerabilities and their probability of occurrence, which determines the way we handle such exposure. This would therefore involve the implementation of numerous policies, procedures and practices that work in conjunction to identifying, analyzing, evaluating, monitoring and prioritizing risks, which will follow the application of coordinated and economical solutions that minimize theprobabilityand impactof identifiedvulnerabilities.Once identified, elimination, reduction, transfer andretention are the broad risk management strategies employed across IAC.

At IAC we have objectives at strategic, tactical and operational levels - anything that makes achieving these objectives uncertain is a risk. Therefore Risk Management is a central part of IAC's strategic Plan. At IAC, the focus of the risk management process is the identification and mitigation of risks impactingthe Company. Moreover, the objective of our risk management is to add maximum sustainable value to all the activities of the organization. It marshals the understanding of the potential benefits and threatsof all those factors which can affect the organisation. Further it increases the probability of success, and reduces both the probability of failure and uncertainty of achieving the organization's overall objectives. As the Company is exposed to a wider range of risks arising from a dynamic business environment which it operates, it has to address the risks based on its risk appetiteandsignificance

Information and Communication

Risk Assessment

RiskResponse

ObjectiveSetting

Corporate Culture & Internal Control

Framework

Information and Communication

Risk Identification


RISK MANAGEMENT [Contd.]

The following are an overview of the main type of risks faced by IAC.

1. Financial risks

(i). Interest Rate Risk Interest rate risk is the exposure of a company's

financial condition to adverse movements ininterest rates. Accepting this risk is a normal part of operation of a company and can be animportantlinktoprofitability,cashflowandshareholder value. However, excessive levels can pose a significant threat to a company'searnings. The impact on net interest cost of a change in interest rates depends on the interest terms of assets or liabilities.

The Company's Interest rate risk arises in two ways:

• The Company have invested in interest-bearing assets, the value of which changes when the interest rate changes.

• The cost of the company's borrowing fluctuates when the general interest ratesituation changes. IAC's majority of its capitalemployedisfinancedthroughdebt.Further increased exposure to short term andfloatingrateborrowingshasincreasedthe exposure to the interest rate risk.

Accordingly, an effective risk management that maintains this risk at prudent levels is essential to the safety and soundness of the Company. Interest rate exposure is managed through the optimal structure decisions, striking a balance between short terms vs. long term and fixedvs. floating rate borrowings. Maintaining adeposit with higher return than interest paid on borrowings. Furthermore, negotiations with Banks/financiersareactivelysupported.Interestrates and socioeconomic circumstances are monitored by the finance officers to allowaccurate and prudent forecasts to be built. Sensitivity analyses are carried out to regularly to assess the impact of the movements of interestratesonthefinancialstatements.

(ii). Foreign Exchange Risk Foreign Exchange Risk is the risk of an

investment/receivable/payable's value changing

due to changes in currency exchange rates. Being a raw material & traded good importer,fluctuationsintheexchangeratecansignificantly impact the financial results andthe pricing policy which could in turn impact the competitive position of IAC Company. Potential impact on the business by an adverse movement in exchange rates is captured through sensitivity analysis. Also the pricing is linked to the exchange rates.

Further Company wide Foreign exchange exposures are monitored and appropriate actions are taken.

(iii). Liquidity Risk Liquidityriskistheriskofnothavingsufficient

funds to meet its financial commitments ina timely manner. The two key elements of liquidity risk are: short-term cash flow riskand long-term funding risk. The long-term funding risk includes the risk that loans may not be available when the business requires them or that such funds will not be available for the required term or at acceptable cost. Unforeseen short fall in cash can sometimes lead to liquidity risk due to factors such as: seasonal fluctuations, unplanned reduction inrevenue, business disruption and sustained reduction in profitability, unplanned capitalexpenditure and increase in operational costs, future debt repayments, delays in subsidy settlements and inadequate or non-existent financing facilities. Business models andworking capital management are reviewed periodically to ensure cash flowalignment asfar as possible and minimize dependence on unexpected external borrowings. Trade cycles are analysed with a view to generating liquidity from operations. Also the bank relationships are managed to ensure access to essential credit and cash management services.

(iv). Debtor Default Risk This is the risk of losses arising from a debtor

being unable to pay its loan obligations in full or the debtor is more than 90 days or overdue. IAC is rooted island-wide. Adverse economic conditions may result in diminishing the customer credit worthiness and thereby increasing the default risk to the Company. IAC extends credit facilities to customers



based on the credit policy which entails evaluating customers periodically. Further, controls include structured approval levels, supervision and recovery procedures on overdue amounts and legal procedure for long outstanding receivables. Bank guarantees and cash deposits are made a requirement when selecting appropriate distributors where practical and other limit exposure on unsecured credit is after a careful scrutiny. Presently, an evaluation is being carried out on all debtors of IAC to further limit and strengthen the exposure.

(v). Fraud Risk Fraud essentially involves using deception to

dishonestly make a personal gain for oneself and/or create a loss for another. The term ‘fraud’ commonly includes activities such as theft, corruption, conspiracy, embezzlement, money laundering, bribery and extortion. Fraud may be attempted as the organization has valuable property such as cash, inventory and information and also due to human interfaces in the processors. In order to counter this, we are striving to strengthen an ethical culture and also to improve the effectiveness of the internal controls. Effective internal controls reduce exposure to fraud risks and contribute to the safeguarding of assets; however, a sound system of internal control cannot provide complete protection against all fraudulent behaviour. As a further measure, new areas have been added and the existing areas have been strengthened in the internal audit plan for the current year.

2. Information Technology Risk

Information technology (IT) plays a critical role in business of the Company. As the Company manages their businesses using IT, it is important to identify risks to the IT systems and data and to reduce or manage those risks by developing a response plan in the event of an IT crisis. The Company has legal obligations in relation to privacy, electronic transactions, and staff training that influence IT risk management strategies. ITrisks include hardware and software failure, human error, spam, viruses and malicious attacks, as wellasnaturaldisasterssuchasfires,cyclonesorfloods.

In order to mitigate software failures system backups are taken and software’s are regularly updated to the latest versions while root causes are found and problems are fixed in respect ofapplication failures. Backups are restored in the event of a data base corruption and system logs are daily monitored to identify hardware failures while life cycle performance of hardware is checked and hardware’s are replaced if there is necessity. Latest anti-virus and anti-spyware protection are installed in order to protect computers from virus whilefirewall&othersecuritycontrolsareinplaceto prevent hacking, unauthorized intrusions to the computers, servers and wireless networks of the company. If communications, connectivity failures occurs service providers are informed and it’s being followed up so as to keep the outage to minimum. In order to protect the vital information, the company uses data backups that include off site or remote storage. Further the management trains the staff regularly in IT policies and procedures which covers areas such as safe handling of infected emails, protecting the privacy of customer details, and priority actions in the event of an online security breach. Moreover the management conducts workshops to identify potential IT risks, costs and impacts of those risks, andpossibleactions to minimize exposure.

3. Business risks

(i). Natural events risk Adverse weather conditions may result in

reduced demand for IAC Products. The tacit knowledge gathered from running the business during adverse weather conditions in the country has been of paramount importance in managing this risk. Performance, position and cashflowandwherenecessaryrealignmentofinvestments are made with a view to making thebusinessmodelflexibleenoughtoabsorbthe pressure from unexpected conditions.

(ii). the scarcity of raw materials. Scarcity may occur due to usage of seasonal

outputs, natural disaster, import bans and other events beyond the control of the Company. In order to mitigate the risk the company has increased the storage capacity and has upgraded the storage conditions for storing.


(iv). Quality failure risk Quality failure is a major risk to the company.

Therefore all employees are responsible for the quality of the product. Proper training and awareness are given to the all levels of the employees relating to the production and quality processes. Moreover process/product improvements are implemented and the current processes are revised periodically. Further internal/external audits conducted regularly. Research and development /quality assurance department periodically revises quality control methods and testing methods according to the local standards.

(vii). Handling of chemicals Due to the risk of handling chemicals, all

the operations of factories are managed through management system to minimize the environmental impacts. All contaminated waste is disposed according to the government regulations.Further the factorieshaveeffluenttreatment plants inside the premises and maintains fully equipped laboratory to check the required standards. Industry is tightly regulated by the Government Regulatory bodies such as Register of Pesticides, Central Environmental Authority, Local governing councils etc. Industry related policies may change time to time according to the political situation of the country.

The Company strictly follows the current regulations relevant to the respective industry and maintains a close relationship with the regulatory bodies to implement sudden changes of the regulations.

(viii).Loss of volumes/Market Share Company faces the risk of losing volumes due

to low market growth rates, intense competition from the existing players in the industry as well as new entrants. As a result competitors may continue to pursue price-centric strategies to gain market share within segments of the market.

On the other hand there are unlicensed operators in the market who resort to selling adulterated products. There is no effective regulatory mechanism to curb such illegal activities which affect the industry. Political

unrest and instability which tend to constrain operations and distribution activities. Company manages these risks to an extent through customer and channel partner education, marketing communication on product value propositions, creating awareness among the relevant stakeholders and leveraging on the brand equity. We also offer constructive suggestions to the authorities to maintain the high product standards.

4. Human resources risks

In relation to human resources the risks which have been identified are alignment of pay andperformance, meeting organizational objectives throughefficient/effectiveuseofhumanresourcesand finding right talent for the job whilst keepinglabor costs at moderate limits. The Company has Introduced a performance driven culture where objectives get measured and individuals rated as per performance with due recognition on pay and succession planning. Introduction of a Position Requisition Procedure, where all replacements/new positionsaretobejustifiedwiththefinancialbenefitto the organization has ensured that right talent is obtained while keeping the cost at a reasonable level.

5. Compliance, regulatory & legal risks

The risk of possible legal actions against the company by an individual or a corporate entity in the process of business conduct has been identifiedastheprimarylegalrisksofthecompany.Companyhasidentifiedsuchrisksand,gagedtheimpact and taken necessary actions to educate the respective staff members. Best practices and processes of better business conduct are included. IAC has implemented numerous steps to foresee the possible risks and taken preventive actions beforehand. To mitigate the risks of breaching contractual obligations and prevent IAC entering in to unfavourable contracts, company constantly involves internal and external legal experts.

6. Strategic risk

Strategic risk of a company refers to the risk to its earnings and profitability that could arise fromstrategic decisions, changes in the business conditions and improper implementation of



decisions. Thus, strategic risk could materialize due to internal or external factors. IAC considers strategic risk as one of the key elements in its risk profile.

TheCompanyhasidentifiedthefollowingstrategicrisks that would arise through internal factors:

• Risks in connection with decisions about outsourcing or maintaining processes and competencies in-house

• Risks concerning new product developments, such as new innovations, R&D, new product lines

• Risks concerning acquisitions or disposals including the likelihood of achieving organizational objectives or destroying Shareholder value The Board critically reviews the strategic goals of theCompanythroughitswelldefinedcorporateplanning and its budgeting process. This robust process ensures that the above strategic risks are well managed in all activities of the Company.

Thefollowingstrategicriskshavebeenidentifiedasmost Relevant to business of IAC which could arise through external factors:

• Risk concerning changes in customer demand• Risk in technology developments• Risk in changes in the industry and the economic

environment• Risk in regulatory requirements.

7. Reputational Risk

Being a Company which has customers at every level of the community, IAC has recognized the importance of aligning the corporate objectives and shareholder Requirements. Further, the Company has identified thatmaintaininganddeveloping thecredibility of the Company and its brands, and most importantly, its standing in the eyes of its stakeholders is a crucial exercise in ensuring sustainable success. Accordingly, like all of the intangible assets of the Company (such as goodwill, talent, knowledge, know-how, and intellectual capital and brand equity)whose value has escalated in recent years, value of itsreputationhasbeenidentifiedasadirecteffecton its share price, market share and brand value.

In addition, IAC always supports the idea of maintaining the Company’s integrity and reputation at any cost. IAC is sensitive to the attitude of local communities in which the Company operates the satisfaction and fidelity of customers. IAC uses‘transparency’ as one of its best tools in managing its image. In addition, the Company is also focused on establishing strategic relationships with reputed third parties (i.e., supply agreements, joint ventures, etc.). When it comes to product liability, IAC ensures stringent quality assurance processes. Further, whilst being sensitive to the policymaking decisions of regulators and legislators, IAC adhere to all local laws and regulations pertaining to advertising and marketing.



INDEPENDENT AUDITOR’S REPORT

TO THE SHAREHOLDERS OF INDUSTRIAL ASPHALTS (CEYLON) PLC

Report on the Financial Statements

WehaveauditedtheaccompanyingfinancialstatementsofIndustrialAsphalts(Ceylon)PLCwhichcomprisethestatementoffinancialpositionasatMarch31,2015,andthestatementofprofit&loss&othercomprehensiveincome, statementof changes in equity andcash flowstatement for the year thenended, anda summaryofsignificantaccountingpoliciesandotherexplanatoryinformationassetoutinpages33to50.

Boards Responsibility for the Financial Statements

Theboardofdirectors("Board") isresponsibleforthepreparationofthesefinancialstatementsthatgiveatrue& fair view in accordance with Sri Lanka Accounting Standards, & for such internal control as Board determines necessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatementswhetherdueto fraud or error.

Scope of Audit and Basis of Opinion

Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.Weconductedouraudit in accordance with Sri Lanka Auditing Standards. Those standards require that we comply with ethical requirements&plan&performtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsare free from material misstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamounts&disclosuresinthefinancialstatements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of materialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity'spreparationofthefinancialstatementsthatgiveatrue& fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used & the reasonableness of accounting estimates made by Board, as wellasevaluatingtheoverallpresentationofthefinancialstatements.

Webelievethattheauditevidencewehaveobtainedissufficient&appropriatetoprovideabasisforourauditopinion.

Basis for Qualified Opinion

1. During the year under review, a Director of the Company has paid Company's expenses totaling to Rupees 26,748,691/- out of his funds and such amounts have been accounted as payable to him. As a result of paying Company's expenses by the Director, we were unable to verify whether there were any additional expenses incurred by the director. However we have received a letter of representation from the director that this amount represents the total expenses incurred by him.

2. Unidentifiedcredits(deposits)inoneofthebankaccounttotalingtoRs.1,380,931/-hasbeenaccountedunderOtherpayables in thesefinancial statements.Themanagementof theCompanywasunable toexplain thesources of these credits.

3. With respect to the inventories, we noticed that though the quantities are accurately recorded the company hasvaluedfinishedgoodsstocksatthepreviousyear'svaluationrate.Thetotalofsucherrorswhichresultsinunderstatementoroverstatementofinventorieshasnotbeenquantified.


Qualified Opinion

Inouropinion,exceptforthemattersreferredtoinBasisforqualifiedopinionparagraphsthefinancialstatementsgiveatrue&fairviewofthefinancialpositionoftheCompanyasatMarch31,2015,&ofitsfinancialperformance&cashflowsfortheyearthenendedinaccordancewithSriLankaAccountingStandards.

Report on Other Legal and Regulatory Requirements

As required by section 163(2) of the Companies Act no: 07 of 2007, we state the following:

a) The basis of opinion & scope & limitations of the audit are as stated above.b) In our opinion,

- We have obtained all the information & explanations that were required for the audit & as far as appears from our examination, proper accounting records have been kept by the Company,

- Thefinancialstatementsofthecompanycomplywithrequirementsofsection151oftheCompaniesAct.

CHARTERED ACCOUNTANTSColombo.01st September 2015Kvys/Sdk/S


STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2015 2014 Note Rs. Rs.

Revenue 3 66,966,446 56,735,949

Cost of Sales (43,674,016) (45,043,338)

Gross profit 23,292,430 11,692,611

Other operating income 4 730,519 1,050

Distribution expenses (5,966,627) (3,549,421)

Administrative expenses (12,347,330) (6,377,052)

Results from operating activities 5,708,991 1,767,188

Finance income 37,533 47,504

Finance costs (1,430,745) (2,098,184)

Net financing costs 5 (1,393,212) (2,050,680)

Profit before taxation 6 4,315,779 (283,492)

Income tax expense 7 (1,274,283) (92,574)

Profit for the year 3,041,496 (376,066)

Other comprehensive income/ (expense) net of income tax - -

Other comprehensive income/ (expense) for the year, net of tax - -

Total comprehensive income for the year 3,041,496 (376,066)

Profit attributable to:

Equity holders 3,041,496 (376,066)

Total comprehensive income for the year 3,041,496 (376,066)

Basic earnings per share (Rupees) 8 4.56 (0.56)

Figures in brackets indicate deductions.

The Accounting Policies and Notes on pages 37 to 50 form an integral part of the Financial Statements.


STATEMENT OF FINANCIAL POSITION

As at 31 March 2015 2014 Note Rs. Rs.

AssetsNon-current assetsProperty, plant and equipment 9 57,531,188 52,622,943Lease Hold Land 10 2,650,350 2,688,930Intangible assets 11 135,731 10,837Total Non-current assets 60,317,269 55,322,710Current assetsInventories 12 45,686,264 30,710,219Trade and other receivables 13 39,965,994 18,926,781Amounts due from related companies 14 201,201 201,201Income tax receivable 15 - 7,722Financialinvestments-Fairvaluethroughprofitorloss 16 5,188 3,723Held to maturity investments 17 375,683 375,000Cash and cash equivalents 18.1 3,763,049 90,164Total current assets 89,997,379 50,314,810Total assets 150,314,648 105,637,520Equity and liabilitiesEquityStated capital 19 6,665,620 6,665,620Revaluation reserve 46,112,663 46,112,663General reserve 20 15,141,299 15,141,299Retained earnings 17,878,227 16,836,418Total equity 85,797,809 84,756,000LiabilitiesNon-current liabilitiesDeferred tax liability 21 7,062,034 6,913,566Retirementbenefitobligation 22 776,240 860,029Commission retained - 144,375Total Non-current liabilities 7,838,274 7,917,970Current liabilitiesTrade and other payables 23 3,646,706 663,540Income tax payable 15 942,260 -Dividend payable 982,972 958,003Interest bearing loans and borrowings 24 8,663,323 9,277,890Non-interest bearing loans and borrowings 25 42,443,304 1,618,360Bank overdrafts 18.1 - 445,757Total current liabilities 56,678,565 12,963,550Total liabilities 64,516,839 20,881,520Total equity and liabilities 150,314,648 105,637,520Net asset value per share (Rupees) 128.72 127.15


I certify that the Financial Statements have been prepared in compliance with the requirements of the Companies Act No.7 of 2007.

(Sgd)S.FernandoFinancial Controller

The Board of Directors are responsible for preparation and presentation of these Financial Statements.The Financial Statements on pages 37 to 50 were approved by the Board of Directors and were signed in Colombo on 1st September 2015 on its behalf by

(Sgd) (Sgd)G.Ramanan M.PereraDirector Director


STATEMENT OF CHANGES IN EQUITY

For the Year ended 31 March 2015 Stated Revaluation General Retained Total Capital Reserve Reserve Earnings Equity Rs. Rs. Rs. Rs. Rs.

Balance as at 1st April 2013 6,665,620 46,112,663 15,141,299 18,545,607 86,465,190Total Comprehensive Income for the yearNetprofit/(loss)fortheyear - - - (376,066) (376,066)Other comprehensive income for the year - - - - -Total Comprehensive Income for the year - - - (376,066) (376,066)

Transactions with equity holdersDividends to equity holders - - - (1,333,124) (1,333,124)Total transactions with equity holders - - - (1,333,124) (1,333,124)

Balance as at 31st March 2014 6,665,620 46,112,663 15,141,299 16,836,417 84,756,000

Balance as at 1st April 2014 6,665,620 46,112,663 15,141,299 16,836,417 84,756,000

Comprehensive Income for the yearNetprofit/(loss)fortheyear - - - 3,041,496 3,041,496

Other comprehensive income/ (expense) net of tax - - - - -Total Comprehensive Income for the year - - - 3,041,496 3,041,496

Transactions with equity holdersDividends to equity holders - - - (1,999,686) (1,999,686)Total transactions with equity holders - - - (1,999,686) (1,999,686)

Balance as at 31st March 2015 6,665,620 46,112,663 15,141,299 17,878,227 85,797,810


CASH FLOW STATEMENT

For the Year ended 31 March 2015 2014 Rs. Rs.

Cash Flows from operating activitiesProfitbeforetaxation 4,315,779 (283,492)Adjustments for:Depreciation of property, plant and equipment 3,365,561 3,407,109Amortization of intangible assets 16,556 49,808Provisionforretirementbenefitobligation (83,789) 109,075Change in market value of investments (1,465) (200)Investment income (1,465) (200)Finance income (36,068) (47,304)Finance costs 1,430,745 2,098,184Operating profit before working capital changes 9,005,854 5,332,980

Changes in working capitalChange in inventories (14,976,045) (4,027,310)Change in trade and other receivables (21,039,213) 6,476,987Change in trade and other payables 2,983,166 (144,935)Change in amounts due to related companies - -Cash generated from operating activities (24,026,238) 7,637,722

Interest paid (1,430,745) (2,098,184)Gratuity paid - (198,380)Income tax paid (175,832) (182,742)Net cash flows generated from operating activities (25,632,815) 5,158,416

Cash Flows from investing activitiesPurchase of property, plant and equipment (8,235,226) (138,450)Purchase of intangible assets (141,450) -Net investment in Short term investments (683) -Investment income 1,465 200Finance income 36,068 47,304Net cash flows generated from investing activities (8,339,827) (90,946)

Cash Flows from financing activitiesInterest bearing borrowings obtained/ (repayments) (614,627) (8,038,118)Non-interest bearing borrowings obtained/ (repayments) 40,824,944 1,618,360Commission retain (144,377) 3,449Dividend paid (1,974,717) (1,323,506)Net cash flows generated from financing activities 38,091,223 (7,739,815)

Net changes in cash and cash equivalents 4,118,642 (2,672,345)Cash and cash equivalents at the beginning of the year (355,593) 2,316,752Cash and cash equivalents at the end of the year 3,763,049 (355,593)

Cash and cash equivalents at the end of the yearCash at bank and cash in hand 3,763,049 90,164Bank overdrafts - (445,757) 3,763,049 (355,593)

Figures in brackets indicate deductions.



NOTES TO THE FINANCIAL STATEMENTS

1. Reporting Entity

1.1 Corporate Information

Industrial Asphalts (Ceylon) PLC is a Public Limited liability Company incorporated and domiciled in Sri Lanka.Theregisteredofficeandtheprincipalplaceof the business is located at No. 28/1, New Nuge Road, Peliyagoda.

1.2 Principal activities & Nature of Operations

The principal activities of the Company continued to be manufacture and distribution of bituminous products, distribution of specialist range of surface coating and industrial chemicals.

1.3 Number of Employees

The staff strength of the company as at March 31 2015 was 25 (2014 - 17).

2 Basis of Preparation

2.1 Statement of Compliance

The Financial Statements comprising the Statement of Financial Position, Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows together with Notes to the Financial Statements are prepared and presented in accordance with Sri Lanka Financial Reporting Standards (SLFRSs) & Sri Lanka Accounting Standards (LKASs) (hereafter "SLFRS") laid down by the Institute of Chartered Accountants of Sri Lanka (ICASL). The presentation of the Financial Statements is in compliance with the requirements of the Companies Act No.07 of 2007.

The Financial Statements were authorized for issue by the Board of Directors on 1st September 2015.

2.2 Basis of measurement

The financial statements have been prepared ona historical cost basis except where appropriate disclosures are made with regard to fair value under relevant notes.

2.3 Functional Currency & Presentation Currency

ThefinancialstatementsarepresentedinSriLankan

Rupees,unless otherwise indicated.

2.4 Presentation of Financial Statements

The assets and liabilities of the Company presented in the Financial Statements are grouped by nature and listed in an order that reflects their relativeliquidity and maturity pattern. No adjustments have been made for inflationary factors affecting theFinancial Statements.

2.5 Materiality and Aggregation

Each material class of similar items is presented separately in the Financial Statements. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by Sri Lanka Accounting Standards LKAS 1 'Presentation of Financial Statements.

2.6 Off Setting

Financial assets and financial liabilities are offsetand the net amount reported in the Statement of Financial Position only when there is a legally enforceable right to offset the recognized amount and there is an intention to settle on a net basis, or to realize the assets and settle the liability simultaneously. Income and expenses are not offset in the Statement of Comprehensive Income unless required to be permitted by the Accounting Standards or interpretation, and specificallydisclosed in the Accounting Policies of the company.

2.7 Significant Accounting Judgment, Estimate and Assumption

The preparation of the Financial Statements in conformity with Sri Lanka Accounting Standards require management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments in applying

For the Year ended 31 March 2015


accounting policies that have themost significanteffect on the amounts recognized in the Financial Statements is included in the respective notes.

2.7.1 Going Concern

The company’s management has made an assessment of its ability to continue as a going concern and is satisfied that it has the resourcesto continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significantdoubt upon the company’s ability to continue as a goingconcern.Therefore, thefinancialstatementscontinue to be prepared on the going concern basis.

3. Significant Accounting Policies

3.1 Financial instruments - Initial recognition, Classification and subsequent measurement

3.1.1 Non-derivative financial assets

3.1.1.1 Loans and Receivables

Loans and receivables include trade and other receivables. Loans and receivables are financialassetswithfixedordeterminablepaymentsthatarenot quoted in an active market.

3.1.1.2 Available-for-sale financial assets

The Company’s investments in equity securities areclassifiedasavailable-for-salefinancialassets.Subsequent to initial recognition, they are measured at fair value and changes therein are recognized in other comprehensive income.

3.1.1.3 Cash and cash equivalents

Company considers highly liquid investment instruments with an original maturity of three months or less to be cash & cash equivalents.

Cash and cash equivalents include cash in hand and bank balances. Bank overdrafts that are repayable on demand which form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flow.

3.1.1.4 Held to maturity investments

Held to maturity investments are non-derivative financialassetswithfixedordeterminablepaymentsand fixed maturity that an entity has the positiveintention and ability to hold to maturity.

3.1.1.5 Financial Assets at fair value through profit or loss

Financialassetsat fairvalue throughprofitor lossincludefinancialassetsheldfortradingandfinancialassets designated upon initial recognition at fair valuethroughprofitorloss.

Fair value has been measured at active market price at each reporting date.

3.1.2 Non-derivative financial liabilities

Thenon-derivativefinancialliabilitiesoftheCompanyinclude loans and borrowings, bank overdrafts and trade and other payables.

Suchfinancialliabilitiesarerecognizedinitiallyatfairvalue plus any directly attributable transaction costs. Subsequent to initial recognition these financialliabilities are measured at amortized cost using the effective interest method.

3.2 Taxation 3.2.1 Income Tax

Provision for the income tax liability is made on thebasisof theprofit for theyearasadjusted fortaxation purposes in accordance with the provisions of the Inland Revenue Act No. 10 of 2006 and the amendments thereto.

Current income tax assets and liabilities for the current and prior periods consist of amounts expected to be recovered from or paid to the commissioner general of Inland Revenue. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

3.2.2 Deferred Taxation

Deferred income tax is provided, using the liability method, on all temporary differences at the balance

NOTES TO THE FINANCIAL STATEMENTS (Contd.)For the Year ended 31 March 2015


sheet date between the tax bases of assets and liabilities and their carrying amounts for financialreporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences: except

Where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accountingprofitnortaxableprofitorloss;and

Deferred income tax assets is recognized for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it isprobable that taxableprofitwill beavailable against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilized.

Industrial Asphalts (Ceylon) PLC review the carrying amount of deferred income tax assets at each balance sheet date and reduced to the extent that itisnolongerprobablethatsufficienttaxableprofitwill be available to allow all or part of the deferred income tax asset to be utilized.

Company measures Deferred income tax assets and liabilities at the tax rates that are expected to be applied to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Company recognizes in equity the deferred income tax relating to items recognized directly in equity, and not in the income statement.

3.3 Post Balance Sheet Events

Industrial Asphalts (Ceylon) PLC consider all material events occurring after the balance sheet date and, where necessary we make adjustments ordisclosurestothesefinancialstatements.

3.4 Property, Plant, & Equipment

Company states property, plant & equipment at cost, excluding the costs of day to day servicing, less accumulated depreciation and accumulated impairment in value. Such cost includes expenditure

that is directly attributable to the acquisition of the asset and cost of replacing part of the asset when that cost is incurred, if the recognition criteria are met.

We measure machinery, motor vehicles, land and buildings at fair value less depreciation and impairment charged subsequent to the date of the revaluation.

We perform valuations on every 3-5 years to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.

We credit any revaluation surplus to the revaluation reserve included in the equity section of the balance sheet, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in profit or loss, in which case theincreaseisrecognizedinprofitorloss.Werecognizea revaluationdeficit inprofitor loss,except thatadeficitdirectlyoffsettingaprevioussurpluson thesame asset is directly offset against the surplus in the asset revaluation reserve.

Subsequent Cost

These are costs that are recognized in the carrying amount of an item if it is probable that the future economic benefits embodied within that part willflowtothecompanyanditcanbemeasured.

Restoration Cost

Expenditure incurred on replacement, repairs or maintenance of Property, Plant& Equipment in order torestoreormaintainthefutureeconomicbenefitsexpected from the originally assessed standard of performance is recognized as an expense when incurred.

Derecognition

Company derecognizes an item of property, plant and equipment upon disposal or when no future economic benefits are expected from its use ordisposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognized.



Depreciation

Company calculates the provision for depreciation using written down value basis to write down cost of property, plant & equipment to their residual values over following useful lives. We do not depreciate land.

Class of Asset % per Annum

Plant & Machinery 10% Office,ComputerEquipment 25% Motor Vehicle 25% Building 2% Other Equipment 25%

Company now determines the depreciation charge separately for each significant part of anitem of property, plant and equipment and begins to depreciate when it is available for use, rather than adopting a method whereby property, plant and equipment are depreciated fully in the year of disposal with no such charge being accounted for in the year of purchase.

3.5 Intangible Assets

Basis of Recognition

An Intangible Asset is recognized if it is probable that future economic benefits that are attributableto the assetwill flow to the entity and the cost ofthe asset can be measured reliably in accordance with LKAS 38 ‘Intangible Assets’. Accordingly, these assets are stated in the Balance Sheet at cost, less accumulated amortization and accumulated impairment losses, if any.

Subsequent Expenditure

Subsequent expenditure on Intangible Assets is capitalized only when it increases the future economic benefits embodied in these assets.All other expenditure is charged to the Income Statement when incurred.

Useful Economic Lives, Amortization and Impairment

The useful lives of Intangible Assets are assessed tobeeitherfiniteor indefinite.Thecompanydoesnotpossessintangibleassetswithindefiniteusefullives. Useful economic lives, amortization and

impairmentoffiniteandindefiniteintangibleassetsare described below:

Intangible Assets with Finite Lives and Amortization

IntangibleAssetswithfinitelivesareamortizedoverthe useful economic lives. The amortization period and the amortization method for an intangible asset with finite useful life are reviewedat least at eachBalance Sheet date. Changes in the expected useful life or the expected pattern of consumption of futureeconomicbenefitembodiedintheassetareaccounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives isrecognized in the Income Statement as an expense.

Computer Software

All computer software costs incurred, licensed for use by the Company, which are not integrally related to associated hardware, which can be clearly identified, reliably measured and it is probablethat theywill lead to futureeconomicbenefits,areincluded in the Statement of Financial Position under the category of intangible assets and carried at cost, less accumulated amortization and accumulated impairment losses, if any.

Amortization of Intangible Assets

Intangible assets are amortized using the straight line method to write down the cost over its estimated useful economic lives. Effective rates are as follows:

Class of Assets % per Annum Software 50%

The unamortized balances of intangible Assets with finite lives are reviewed for impairment wheneverthere is an indication for impairment and recognized as expenses in the Income Statement to the extent that they are no longer probable of being recovered fromtheexpectedfuturebenefits.

Derecognition of Intangible Assets

Intangible assets are derecognized on disposal or whennofutureeconomicbenefitsareexpectedfromits use. Gains or losses arising from derecognition of



an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Income Statement.

3.6 Leased Assets

Leases in terms of which the Company assumes substantially all the risks and rewards of ownership are classified as ‘finance leases’. Upon initialrecognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

3.7 Inventories

Inventories are valued at the lower of cost or net realizable value after making due allowances for obsolete and slow moving items, Net realizable value is the price at which inventories can be sold in the ordinary course of business less estimated cost of completion and estimated cost necessary to make the sale.

The cost incurred in bringing inventories to its present location and conditions are accounted using the following cost formulae;

Raw Material and - At actual cost on weightedFinished Goods average cost basis.Work in Progress - At the cost of direct materials

fixed labourandanappropriateproportion of manufactory overheads based on normal capacity.

Goods in Transits - At actual cost.

3.8 Impairment 3.8.1 Financial Assets

A financial asset not carried at fair value throughprofitorlossisassessedateachreportingdatetodetermine whether there is objective evidence that it isimpaired.Afinancialassetisimpairedifobjectiveevidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated futurecashflowsofthatassetthatcanbeestimatedreliably.

An impairment loss in respectof a financial assetmeasured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effectiveinterest rate. Losses are recognized in profitor loss and reflected in an allowance accountagainst receivables. Interest on the impaired asset continues to be recognized through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profitorloss.

3.8.2 Non-financial Assets

The carrying amount of the Company’s non-financialassets,otherthaninventories,arereviewedat each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

An impairment loss is recognized if the carrying amount of an asset or cash generating unit exceeds its recoverable amount.

3.9 Liabilities and Provisions

3.9.1 Provisions

When company has a present obligation (legal or constructive) as a result of a past event, where it is probable that an outflow of resources embodyingeconomic benefits will be required to settle theobligation and the company can reliably estimate the amount of the obligation, we recognize it as a provision in accordance with LKAS 37 - Provisions, Contingent Liabilities and Contingent Asset.

3.9.2 Retirement Benefit Obligations

3.9.2.1 Defined Benefit Plan - Gratuity

A defined benefit plan is a post-employmentbenefitplanotherthanadefinedcontributionplan.The Company is liable to pay retirement benefitsunder the Payment of Gratuity Act, No.12 of 1983. Provision has been made for retirement gratuities using “Project Unit Credit” (PUC) method as recommended by LKAS 19 “Employee Benefits”.Thepresentvalueofthedefinedbenefitobligationis



determined by discounting the estimated future cash flowsbasedontheactuarialvaluationcarriedoutbyanindependentqualifiedactuary.Theassumptionsbased on which the results of actuarial valuation was determined are included in Notes to the Financial Statements. The liability is not externally funded.

However, under the payment of gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of 5 years of continues service.

3.9.2.2 Defined Contribution Plans - Employees’ Provident Fund & Employees’ Trust Fund

Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions in line with the respective statutes and regulations. The Company contributes 12 % and 3 % of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively.

3.10 Income Statement

Revenue Recognition

Revenue is recognized to the extent that it is probable thattheeconomicbenefitswillflowtotheCompanyand the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable net of trade discounts and salestaxes.Thefollowingspecificcriteriaareusedfor the purpose of recognition of revenue.

a) Sale of Goods

Revenue from the sale of goods is recognized when the significant risks and rewards or ownership ofthe goods, have passed to the buyer, usually on dispatch of the goods.

b) Interest

Revenue is recognised on a time proportion basis that takes in to accounts the effective interest rate on asset.

c) Dividends

Dividend Income is recognized when the shareholders’ right to receive the payment is established.

d) Rental income

Rental income arising on investment properties is accounted for on a straight-line basis over the lease terms.

h) Others

Other income is recognized on an accrual basis.

Borrowing Costs

Finance costs comprise interest expense on borrowings recognized in profit or loss using theeffective interest method.

Foreign Currency translation

Foreign currency gains or losses are reported on a net basis.



3 Revenue 2015 2014 Rs. Rs.

Paints 48,715,337 16,453,425 Bitumen 15,799,164 23,829,099 Sundries 2,451,944 9,645,111 Containers - 1,134,719 Chemicals - 5,673,595 66,966,446 56,735,949

4 Other operating income 2015 2014 Rs. Rs.

Sundry income 730,519 1,050 730,519 1,050

5 Net financing costs 2015 2014 Rs. Rs.

Finance costs Interest on Import loans 1,021,933 2,057,290 Loan interest 29,045 - Overdraft interest 8,441 3,274 Bank Charges 371,325 37,620 1,430,745 2,098,184 Finance income Interestonfixeddeposits 36,068 47,304 Gain /loss in share value 1,465 200 37,533 47,504 (1,393,212) (2,050,680)

6 Profit/ (loss) before tax 2015 2014 Rs. Rs.

Profit/ (loss) before tax is stated after charging: Depreciation of property, plant and equipment 3,326,981 3,407,109 Amortization of intangible assets 15,896 10,837 Directors emoluments - 100,000 Personnel expenses (Note 6.1) 9,174,088 6,581,422 Auditors remuneration - Audit fees 143,045 110,000

6.1 Personnel expenses Salaries & wages 7,829,596 5,513,406 Contributiontodefinedcontributionplans(EPF&ETF) 1,428,281 958,941 Contributiontodefinedbenefitplanforgratuity (83,789) 109,075 9,174,088 6,581,422

NOTES TO THE FINANCIAL STATEMENTS (Contd.)For the year ended 31 March


2015 2014 Rs. Rs.

Netprofitattributabletoordinaryshareholders 3,041,496 (376,066) Weighted average number of ordinary shares (Note 8.1) 666,562 666,562 Basic earnings per share (Rupees) 4.56 (0.56)

8.1 Weighted average number of ordinary shares Issued ordinary shares at the beginning of the year 666,562 666,562 Issued ordinary shares at the end of the year 666,562 666,562

7 Income tax expense 2015 2014 Rs. Rs.

Current tax expense Income tax for the current year (Note 7.2) (1,125,815) (350,817) (1,125,815) (350,817) Deferred tax expense Deferred taxation (Note 21) (148,468) 258,243 (148,468) 258,243 (1,274,283) (92,574)

7.1 In terms of provisions of Inland Revenue Act No.10 of 2006 and amendments thereto, the Company is liable for income tax at the rate of 12%.

7.2 Reconciliation of accounting profit to income tax:

Profit/(loss)beforeincometax 4,315,779 (283,492) Tax effect on disallowable expenses 7,386,997 5,043,721 Tax effect on allowable expenses (2,320,987) (1,836,757) Tax effect on exempted income - - Total statutory income 9,381,789 2,923,472 Tax losses set-off - - Assessable income 9,381,789 2,923,472 Less: Qualifying payments - - Taxable income 9,381,789 2,923,472 Income tax @ 12% 1,125,815 350,817

8 Basic earnings per share

Basicearningspershareiscalculatedbydividingthenetprofitfortheyearattributabletoordinaryshareholders by the weighted average number of ordinary shares outstanding during the year, as required by the Sri Lanka Accounting Standard (LKAS 33) on 'Earnings per Share'.

NOTES TO THE FINANCIAL STATEMENTS (Contd.)For the year ended 31 March


As at 31 March Plant & Motor Office Total Total Buildings Machinery Vehicles Equipment 2015 2014 Rs. Rs. Rs. Rs. Rs. Rs.

Cost/ Valuation Balance at the beginning of the year 34,529,999 19,990,500 4,048,988 2,572,047 61,141,534 61,003,084 Additions during the year 2,479,164 1,206,320 3,341,707 1,208,035 8,235,226 138,450 Disposals during the year - - - - - - Revaluation - - - - - - Balance at the end of the year 37,009,163 21,196,820 7,390,695 3,780,082 69,376,760 61,141,534

Accumulated Depreciation Balance at the beginning of the year 2,192,420 1,995,894 2,221,594 2,108,683 8,518,591 5,111,482 Depreciation charge for the year 669,150 1,842,843 622,729 192,260 3,326,981 3,407,109 Disposals during the year - - - - - - Revaluation - - - - - - Balance at the end of the year 2,861,570 3,838,737 2,844,323 2,300,943 11,845,572 8,518,591

Written down value: As at 31 March 2015 34,147,593 17,358,084 4,546,372 1,479,139 57,531,188 As at 31 March 2014 32,337,579 17,994,606 1,827,394 463,364 52,622,943

9 Property, plant and equipment

9.1 Revaluation of property, plant and equipment

Thebuildingwasrevaluedduringthefinancialyear2010/2011andplant&machinery,motorvehicleswererevaluedduringthefinancialyear2012/2013byanindependentvaluer.Theresultofthatrevaluationwasincorporatedinthefinancialstatements.Suchassetswerevaluedonanopenmarketvalueforanexistinguse basis. The surplus arising from the revaluation was transferred to revaluation reserve.

10 Lease Hold Land 2015 2014 Rs. Rs.

Cost Balance at the beginning of the year 3,858,030 3,858,030 Balance at the end of the year 3,858,030 3,858,030

Accumulated amortization Balance at the beginning of the year 1,169,100 1,130,130 Amortization charge for the year 38,580 38,970 Balance at the end of the year 1,207,680 1,169,100 Written down value as at 31 March 2,650,350 2,688,930

NOTES TO THE FINANCIAL STATEMENTS (Contd.)As at 31 March


11 Intangible assets 2015 2014 Rs. Rs.

Cost Balance at the beginning of the year 43,350 43,350 Additions during the year 141,450 - Balance at the end of the year 184,800 43,350

Accumulated amortization Balance at the beginning of the year 32,513 21,675 Amortization charge for the year 16,556 10,838 Balance at the end of the year 49,069 32,513 Written down value as at 31 March 135,731 10,837

12 Inventories 2015 2014 Rs. Rs.

Raw materials 19,647,283 23,282,669 Finished goods 17,499,278 4,132,924 Work in progress 8,539,703 3,294,626 45,686,264 30,710,219

Inventories amounting to Rs.45,686,264 (2014 - Rs.30,710,219) have been pledged as security for short term loans and overdraft facilities obtained from banks (Note 29).


13 Trade and other receivables 2015 2014 Rs. Rs.

Trade receivables (Note 13.3) 38,478,152 13,980,001 Staff loans 462,823 351,348 Other receivables (Note 13.1) 13,453 383,706 Deposits, advances and prepayments (Note 13.2) 1,011,566 4,211,726 39,965,994 18,926,781

13.1 Other receivables Defence Levy 13,453 13,453 Construction debtors - 370,253 13,453 383,706

13.2 Deposits, advances and prepayments Festival advance - 8,800 Deposit LECO 2,500 2,500 Refundable deposits - 7,331 Prepayments - 119,865 Return cheque account - 64,302 Social Responsibility Levy 12,368 12,368 VAT receivable 3,600,597 3,996,560 Advance payment - Import 946,698 - Other recoverables 50,000 - 4,612,163 4,211,726 Less: Impairment for VAT receivable (3,600,597) - 1,011,566 4,211,726


13.4 As at 31 March, the age analysis of Trade receivables is as follows:

Total Current < 30 Days 31-60 Days 61-90 Days > 90 Days Rs. Rs. Rs. Rs. Rs. Rs.

2015 38,478,152 12,976,188 5,610,368 5,213,476 5,409,344 9,268,775

14 Amounts due from related companies 2015 2014 Rs. Rs.

Advance given to Exchemie (Pvt) Ltd 201,201 201,201 201,201 201,201

15 Income tax (receivable)/ payable 2015 2014 Rs. Rs.

Balance at the beginning of the year (overpayment) (7,722) (175,797) Income tax provision for the year 1,125,815 350,817 Income tax payments made during the year (175,832) (182,742) Balance at the end of the year 942,261 (7,722)


13 Trade and other receivables (Contd.) 2015 2014 Rs. Rs.

13.3 Trade receivables Trade receivables 39,978,152 13,980,001 Less: Impairment of Trade receivables (1,500,000) - 38,478,152 13,980,001

2015 2014 Rs. Rs. No. of Cost Market value No. of Cost Market value shares Rs. Rs. shares Rs. Rs.

Quoted investments - at market value Union Bank PLC 200 5,000 4,980 200 5,000 3,600 Laughf Gas PLC 5 115 208 5 115 123 5,115 5,188 5,115 3,723

16 Financial Investments - fair value through profit or loss


18 Cash and cash equivalents 2015 2014 Rs. Rs.

18.1 Cash at Bank 3,737,807 85,012 Cash in hand 25,242 5,152 3,763,049 90,164

18.2 Bank overdrafts - (445,757) 3,763,049 (355,593)

17 Held to maturity investments 2015 2014 Rs. Rs.

Investment in Fixed Deposits 375,683 375,000 375,683 375,000

20 General Reserves 2015 2014 Rs. Rs.

General Reserves 15,141,299 15,141,299 15,141,299 15,141,299

General reserves refers to transfers made from retained earnings in the previous years. No particular purpose wasidentified.

19 Stated capital 2015 2014 Rs. Rs.

Ordinary shares (No. of shares 666,562) 6,665,620 6,665,620 6,665,620 6,665,620


21 Deferred tax liability 2015 2014 Rs. Rs.

Balance at the beginning of the year 6,913,566 7,171,809 Charge/(reversal) for the year 148,468 (258,243) Balance at the end of the year 7,062,034 6,913,566

21.1 Deferred tax asset (93,149) Deferred tax liability 7,155,183 Net deferred tax liability 7,062,034

21.2 Deferred tax on gratuity (93,149) Deferred tax on property, plant and equipment 723,042 Deferred tax on revaluation reserve 6,432,141 7,062,034


22 Retirement benefit obligation 2015 2014 Rs. Rs.

Balance at the beginning of the year 860,029 949,334 Current service cost - - Interest cost (Note 22.1) - - Payments made during the year - (198,380) Actuarial gain/(loss) (Note 22.2) - - Under/(over) provision made during the year (83,789) 109,075 Balance at the end of the year 776,240 860,029

The Company carried out an actuarial valuation of the gratuity as at 31 March 2015 by Mr. M. Poopalanathan, AIA,MessrsActuarialandManagementConsultant(Pvt)Ltd,afirmofprofessionalactuaries.Thevaluationmethod used by the actuaries to value the liability is the "Projected Unit Credit Method", the method recommended by the LKAS 19.

Discount rate 11.00%Future salary increase 7.50%

22.1 Interest cost The Company adopted the Actuarial valuation method of the gratuity liabilities for 31 March 2015 for the

firsttime.Thereforetheinterestcostfor31March2015cannotbeestimatedastheCompanyhasnotdonean actuarial valuation of the gratuity liabilities for the previous year.

22.2 Actuarial gain/(loss) Actuarial gain/(loss) does not arise for 31 March 2015 as the Company has not done an actuarial valuation

of the gratuity liabilities for the previous year.

24 Interest bearing loans and borrowings 2015 2014 Rs. Rs.

Import loans - 8,819,680 Term loans - 458,210 Short term loans 8,663,323 - 8,663,323 9,277,890

24.1 Sources of finance Commercial Bank of Ceylon PLC 8,663,323 9,277,890 8,663,323 9,277,890

23 Trade and other payables 2015 2014 Rs. Rs.

Trade Payables 2,970,465 - Accrued Expenses 317,051 599,568 UnidentifiedCredits 1,380,981 - Security Deposit - 63,972 VAT Payable (1,021,790) - 3,646,706 663,540



30 Related party transactions

Name of the Company Name of the Director Nature of transactions 2015 2014 Rs. Rs.

Sigma Holdings (Pvt) Ltd Mr. G. Ramanan Loan received 3,500,000 4,550,000 Loan settled - 2,931,640 Quelle Electrik (Pvt) Ltd Mr. G. Ramanan Loan received 10,576,254 - Loan settled - - Director Mr. G. Ramanan Expenses incurred on behalf of the Company 26,748,691 -

25 Non-interest bearing short term borrowings 2015 2014 Rs. Rs.

Sigma Holdings (Pvt) Ltd. 5,118,360 1,618,360 Quelle Electrik (Pvt) Ltd 10,576,254 - Loan from a Director 26,748,691 - 42,443,305 1,618,360

26 Dividends paid and proposed 2015 2014 Rs. Rs.

Dividend paid 1,974,717 1,333,124 Dividend payout ratio 0.66 Not applicable

Dividend proposed for approval at AGM Amount 2,999,529 1,999,686 Dividend per share 4.50 3.00


27 Post Balance Sheet events TheDirectorshaverecommendedthepaymentofafinaldividendforRs.4.50persharefortheyearended31st

March 2015, which requires the approval of the shareholders at the Annual General Meeting.

Noothercircumstanceshavearisenwhichwouldrequiredisclosureoradjustmentstothefinancialstatements.

28 Capital commitment and contingencies There were no material capital commitments and contingencies as at 31st March 2015.

29 Assets pledged as securities against short term borrowings:

Name of Bank Loan Facility Security Carrying amount of Assets pledged

2015 2014

Commercial Bank of Overdraft - Rs.22.5Mn Leasehold property Lease hold Lease hold Ceylon PLC Overdraft - Rs.75Mn at No.28/1, Property - Property - Short term loan Rs.8,663,323 New Nuge Road, Rs.2,650,350 Rs.2,688,930 Peliyagoda over stock held at No.28/1, New Nuge Road, Inventory - Inventory - Peliyagoda Rs.45,686,264 Rs.30,710,219


Public Holding

31 March 2015 31 March 2014 Holders Shares % %Public Holding 365 221,966 33.30% 33.79%Total Holding 369 666,562 100.00% 100.00%

SHAREHOLDERS INFORMATION

Distribution Schedule of Shareholders

Holdings (Shares) 31 March 2015 31 March 2014 No. of Total Holdings No. of Total Holdings Holders Shares % Holders Shares %1 - 1,000 336 39,866 5.98% 416 85,937 12.89%1,001 - 10,000 28 79,132 11.88% 29 66,025 9.91%10,001 -100,000 4 103,911 15.58% 2 73,246 10.99%100,001 and over 1 443,653 66.56% 1 441,354 66.21% 369 666,562 100.00% 448 666,562 100.00%

Twenty Largest Shareholders as at 31 March 2015

No Name of Shareholder 31 March 2015 No. of Shares %1 GOVINDASAMY RAMANAN 443,653 66.562 DR. T. SENTHILVERL 43,500 6.533 K. S. SOMAPALA 29,746 4.464 C. KUNGIPILLAI 18,665 2.805 D. B. WETHASINGHE 12,000 1.806 D. P. KUMARA 7,436 1.127 D. S. S. KUMARA 7,436 1.128 H. W. M. WOODWARD 6,932 1.049 M. MAHIBALAN 6,378 0.9610 M. M. ABDUL LATIFF 6,253 0.9411 R. UDALAGAMA 4,000 0.6012 S. G. N. HERATH 3,314 0.5013 R. M. S. BANDA 3,199 0.4814 A. C. P. GUNASENA 3,034 0.4615 R. G. G. WIJESURIYA 2,935 0.4416 J. MYLVAGANAM 2,466 0.3717 A. L. HULANGAMUWA 2,306 0.3518 EXECUTOR OF THE LAST WILL AND TESTAMENT OF THE LATE MR. A.Y.S. GNANAM 2,254 0.3419 N. K. PARANAGAMA DIVITOTAWELA 2,036 0.3120 C. C. GUNAWARDENA 2,000 0.30


SHAREHOLDERS INFORMATION [Contd.]

Twenty Largest Shareholders as at 31 March 2014

No Name of Shareholder 31 March 2014 No. of Shares %1 SIGMA HOLDINGS (PVT) LTD 441,354 66.212 DR. T. SENTHILVERL 43,500 6.533 K. S. SOMAPALA 29,746 4.464 D. S. S. KUMARA 7,436 1.125 D. P. KUMARA 7,436 1.126 H. W. M. WOODWARD 6,932 1.047 M. M. ABDUL LATIFF 6,253 0.948 DR. M.A.M. ARAFATH AKRAM 5,443 0.829 R. UDALAGAMA 4,000 0.6010 R. G. G. WIJESURIYA 2,935 0.4411 A. C. P. GUNASENA 2,722 0.4112 S. G. N. HERATH 2,706 0.4113 P.N. SHIROMI 2,668 0.4014 J. MYLVAGANAM 2,466 0.3715 R.M.S. BANDA 2,344 0.3516 EXECUTOR OF THE LAST WILL AND TESTAMENT OF THE LATE MR. A.Y.S. GNANAM 2,254 0.3417 D. EKANAYAKE 2,006 0.3018 D.M. FERNANDO 2,000 0.3019 C. C. GUNAWARDENA 2,000 0.3020 L. THIYAGARAJAH 1,986 0.30

Market Value of Shares

For the Year ended 31 March 2015 31 March 2014Highest price per share (Rs.) 364.00 268.80Lowest price per share (Rs.) 197.00 180.10Last traded price per share (Rs.) 297.20 200.00


FORM OF PROXY

I/We,....................................................................................................................................................of...........................................................................................................................................................................being a member/ members of the Company, hereby appoint

Mr/ Mrs/ Miss................................................................................................................................................................(holder of N.I.C.No................................................................) of.....................................................................................................................................................................................................................................................whom failing

Mr. G. Ramanan whom failingMr. T.H.M. Wickramasinghe whom failingMr. M. Perera whom failingMr. S.P. Muthusammy

As my/ our proxy to represent me/ us and vote on my/ our behalf at the 51st Annual General Meeting of the Company to be held on 25th September 2015 at the Auditorium of the National Olympic Committee of Sri Lanka “Olympic House” No.100/9F, Independence Avenue, Colombo 7 at 3.00 p.m. and at any adjournment thereof and at every poll which may be taken in consequence thereof.

Please indicate your preference by placing a ‘X’ in the box of your choice against the Resolution No.

1. Receiving of the Annual Report of the Board of Directors and the Audited Financial Statements of the Company for the year ended 31st March 2015 together with the Report of the Auditors thereon.

2. Declaration of a First and Final Dividend Rs.4.50 per share as recommended by the Board

3. Re-election of Mr. T.H.M. Wickramasinghe Director appointed during the year who retires in terms of Article 96 of the Articles of Association of the Company and offers himself for re-election as a Director.

4. Re-election of Mr. M. Perera Director appointed during the year who retires in terms of Article 96 of the Articles of Association of the Company and offers himself for re-election as a Director.

5. Re-election of Mr. S.P. Muthusammy Director appointed during the year who retires in terms of Article 96 of the Articles of Association of the Company and offers himself for re-election as a Director.

6. Re-appointment of Messrs Cecil Arseculeratne & Company, Chartered Accountants, as Auditors of the Company for the ensuing year and authorize the Directors to determine their remuneration.

7. Authorize the Directors to determine and make donations.

Special Business

Amendments to the Articles of Association

Ordinary Business For Against

Signed this...................... Day of............................... 2015

............................................... Signature

.............................................................Shareholder's N.I.C/ P.P./Co. Reg. No.


INSTRUCTIONS FOR COMPLETION OF PROXY

1. PleaseperfecttheFormofProxyoverleaf,afterfillinginlegiblyyourfullnameandaddress,bysigninginthespaceprovidedandfillingthedateofsignatureandyourNationalIdentityCardnumber.

2. ThecompletedFormofProxy shouldbedepositedat theOfficeof theCompany Secretaries, No.2, Deal Place, Colombo 03, 48 hours before the time appointed for the holding of the meeting.

3. If an Attorney has signed the Form of Proxy, the relative Power of Attorney should also accompany the completed Form of Proxy for registration, if such Power of Attorney has not already been registered with the Company.

4. If the Shareholder is a Company or a Corporate Body, the Proxy should be executed under its Common Seal in accordance with its Articles of Association or Constitution.

5. If there is any doubt as to how the vote is to be exercised, by reason of the manner in which the Form of Proxy has been completed, no vote will be recorded by the Form of Proxy.

Prin

ted

by: C

eylo

n Pr

inte

rs P

LC

INDUSTRIAL ASPHALTS (CEYLON) PLC.28/1, New Nuge Road, Peliyagoda. Tel : 0115 289 [email protected]

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Industrial Asphalts (Ceylon) PLC AR - 15

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