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ENERGYMACKWOODS

FOR THE FINANCIAL YEAR ENDED 31ST MARCH 2012ANNUAL REPORT OF MACKWOODS ENERGY PLC

Our Vision“Mackwoods Energy to be the preferred choice and the leader in

providing energy solutions through which the company strives to

enhance shareholder value whilst contributing to the socio

economic development of the country.”

MEL is committed to value creation by fulfilling the needs of trade

and industry and meeting the national energy requirements by

providing competitive and high quality products, services and

renewable energy solutions.

We aim to accomplish this through continuous development of the

existing business and by diversifying into new products, markets

and services and renewable energy projects through optimum

procurement, production and distribution in a sustainable and

environment friendly manner. In doing so, MEL will always be

mindful of the obligations to society, the customers, shareholders

and the employees.

Our Mission

ENERGIZING THE NATION

This report, being the annual report of the Company for the financial year ended 31st March 2012 only contains information pertaining to the Company and the affairs of the Company for the financial year ended 31st March 2012. The shares of the Company were not listed during that time period. Accordingly, this annual report complies with the Listing Rules of the Colombo Stock Exchange and contains information as required thereby to the extent that such information was relevant to the Company as at 31st March 2012.

COMPLIANCE WITH THE REQUIREMENTS IN THE LISTING RULES OF THE COLOMBO STOCK EXCHANGE PERTAINING TO CONTENTS OF ANNUAL REPORTS

ENERGYMACKWOODS

M A C K W O O D S E N E R G Y P L C

02 | ANNUAL REPORT 2011/2012

Corporate Information

Chairman's Review

Recent Activities & Products

Management Team

Management Discussion & Analysis

Annual Report of the Board of Directors

Directors' Profile

Independent Auditors’ Report

Income Statement

Balance Sheet

Cash Flow Statement

Statement of Changes in Equity

Notes to the Accounts

Shareholders Information

Notice of Meeting

03

04

05

07

08

11

14

16

17

18

19

20

21

30

31

Contents



On behalf of the Board of Directors, I warmly welcome you to the Annual General Meeting of the Company, and have great pleasure in presenting to you the Annual Report and the Audited Accounts of the Company for the year ended 31st March 2012.

Financial Year 2011/12 was a landmark year for the Company, a year in which the Company achieved significant growth and invited the public for the first time, to share in the 170-year heritage of the Mackwoods Group and contribute to national development by participating in the Initial Public Offering amounting to a 25% stake in the Company.

The year saw the Company achieving an impressive turnover growth of 170% with the main revenue streams of power generators and engines supplied to the industrial and institutional sectors, service income and commission income recording substantial growth and achieving a net profit after tax of Rs 82.1M, a fourfold improvement on previous financial year.

Looking ahead, Mackwoods Energy, as a total energy solutions provider, is well positioned to expand on its proven track record of thermal power generating solutions and to diversify into small hydro-projects and other renewable energy projects, to meet the rapidly growing energy demands of the post-conflict renaissance of the Sri Lankan economy.

My sincere thanks to the Board of Directors for the valuable contribution and advice extended. I also would like to convey my appreciation to the Management Team and employees at all levels, for their hard work and commitment. In conclusion, I wish to thank you - our valued shareholders, for the confidence placed in Mackwoods Energy.

Dr. C.N.A. NonisChairman

Colombo 27th August 2012

Chairman's Review


ANNUAL REPORT 2011/2012 | 0 5

Activities

TRADE EXHIBITION, JAFFNATRADE EXHIBITION, JAFFNA

TRADE EXHIBITION,MALDIVES

TRADE EXHIBITION,MALDIVES



Our products



Dr. Chrisantha Nicholas Anthony Nonis

Mrs. Nirmali Suzanne Moira Samaratunga

Mr. Francis Lalith Fonseka

Mr. Arjuna Lasantha Yatawara

Mrs. Shelendra Marianne Andrea Nonis Ranaweera

Mr. Shamal Mirisse Liyanage

Mr Lakshman Leelaraja Samarasinghe

Mr. Lakshman Jayaraj Kumar Hettiaratchi

Dr. Hasaan Shafeeu

SENIOR MANAGEMENT

A.L.YATAWARA

S.M.LIYANAGE

V.KOLONNE

N.PERERA

OPERATIONS MANAGEMENT

P.WIMALARATNE

M.Y.C.CHINTHAKA

C.MENDIS

N.RANASINGHE

G. DE ALWIS

H.B.PRASHANTHI

H.JAYALATH

- Chairman/Non-Executive Director

- Non-Executive Director

- Executive Director

- Managing Director/Chief Executive Officer

- Non-Executive Director

- Executive Director / General Manager

- Non–Executive Director

- Independent Non-Executive Director

- Independent Non-Executive Director

- Managing Director / Chief Executive Officer

- Director / General Manager

- Asst General Manager – Engineering

- Manager Finance

- Manager Engineering

- Sales Manager

- Product Manager

- Asst Manager – Administration

- Asst Product Manager – Support Services

- Accountant

- Executive Logistics

BOARD OF DIRECTORS

Management Team



The Company achieved a significant growth during the financial year 2011/12, recording a turnover of Rs 266M, an increase of 170% on financial year 2010/11, with the main revenue streams of ex-stock sales, service income and commission income recording significant increases.

The key strengths of a strong brand name and a track record and its proven business model for quality service and maintenance contributed to the significant growth of ex-stock sales turnover for the year of Rs 168M (2010/11 : Rs 60M) and combined service and commission turnover of Rs 97M (2010/11: Rs 38M).

PROFITABILITY

The Company achieved a profit before tax of Rs 105M for the financial year (2010/11: Rs 32.6M), a 222% increase on financial year 2010/11, which translated to a net profit after tax Rs 82.1M (2010/11: Rs 20.2M) a fourfold improvement on last year.

Table 11 -1: Summarised Income Statements All figures in Rs. millions

For the Year Ende d March 31, 20 09/10 20 10/11 20 11/12

Revenue 46.53 98.33 26 5.54

Gross Profit 20.57 46.10 133.25

Operating Profit 18.02 34.63 106.38

Profit Before Tax 16.37 32.63 105.02

Profit After Tax 10.41 20.25 82.13

Table 11-2: Summarised Balance Sheets All figures in Rs. millions

As at March 31, 2009/10 2010/11 2011/12

Total Non-Current Assets

0.16 0.13 210.52

Total Current Assets

36.84 60.42 521.62

Total Assets

37.00 60.55 732.14

Total Capital and Reserves

11.00 31.24 279.25*

Total Non-Current Liabilities

- 0.01 4.51

Total Current Liabilities

26.00 29.22 98.35

Total Equity and Liabilities

37.00 60.55 732.14

TURNOVER

Management Discussionand Analysis



Mackwoods Energy has powered the Sri Lankan economy through the provision of customized power solutions and the following diagram illustrates the sector diversity of the Company’s business activities during the year.

The demand for diesel power generators emanates from three main sources. Firstly, as a primary source of power supply if a connection to the utility power grid is not possible due to unavailability of grid coverage in the area of operations or the mobile nature of the activity. Secondly, generators may be used as a standby power supply when the normal source of power is interrupted. Finally, power generators are also used as a parallel source of power in combination with the grid electricity where the required power needs cannot be met primarily via grid supply. Sri Lanka’s energy statistics are given below:

Power generation in Sri Lanka is primarily driven by hydro and thermal energy sources while mini hydro and wind energy signifies a marginal contribution to the generation. The installed capacity in year 2011 amounted to 3,110 MW where total electricity generations to the sector for the same period stood at 11,000 GWh in order to meet a demand of 1,100 MWh.

2009/10 2010/11 2011/12 Net Profit Margin 21% 21% 31% Earning per Share 208.10 404.89 1.91 Return on Equity (Times) 0.95 0.65 0.29* Return on Assets 28% 33% 11% Current Ratio (Times) 1.42 2.07 1.74*

* Excluding shares pending allotment

20.2 Million4.7 Million2300 US$

Country DataPopulationNo. of HHsPer Capita GDP

Electricity SectorInstalled CapacityHydroThermalNCRE

3,110 MW1,180 MW1,680 MW

250 MW

KEY FINANCIAL RATIOS

KEY BUSINESS SECTORS

POWER SECTOR OVERVIEW

POWER GENERATION




Electricity Generation by SourceElectricity Generation Gross GenerationHydroThermalNCRE

11,000 GWh33%60%7%

Figure 1: Power Generation by Source, 2011

Energy Supply by Source

Energy Consumption by Sector

Electrification Level of HHs

TotalNational GridOff-GridFuture DemandEnergy DemandPeak Demand

92%90%2%Estd by 202020,000 GWh4330 MW

Energy Consumption by Sector

IndustryTransportDomestic & Commercial

Sector Composition

IndustrialDomesticCommercialReligiousStreet lighting

25%26%49%

36%39%23%1%1%

As a total energy solutions provider, Mackwoods Energy is well equipped to meet the rapid growth in demand for energy in post conflict development thrust of the country, through its proven track record as a thermal energy solutions provider and its planned diversification into small hydro projects in the plantations and other renewable energy projects such as solar, wind, bio-gas, etc.




The Directors of the Company have pleasure in presenting their Annual Report together with the Audited Financial Statements of Mackwoods Energy Ltd for the year ended 31st March 2012.

Change of Company’s Name

Mackwoods Energy Ltd. was formerly known as Mackwoods Engineering (Pvt) Ltd. and the name was changed with effect from 23rd September 2011 to Mackwoods Energy (Pvt) Ltd. and thereafter to Mackwoods Energy Ltd on 5th December 2011.

(The name of the Company has since changed to Mackwoods Energy PLC following the listing on the Diri Savi Board of the Colombo Stock Exchange on 25th April 2012).

Parent Enterprise

The Company’s parent undertaking is Mackwoods (Pvt) Ltd, which is a member of the Mackwoods Group of Companies.

Principal Activities

The principal activities of the Company are the provision of total energy solutions covering a wide range of products and services.

Financial Statements

The financial statements of the Company for the year ended 31st March 2012 the Chairman‘s review and the Management Discussion & Anaalysis reflect the state of affairs of the Company.

Auditors’ Report

The Auditors’ report on the financial statements is given on page 16.

Accounting Policies

The accounting policies adopted in the preparation of the financial statements are given as notes to the financial statements.

Revenue

The turnover of the Company for the year was Rs 265.54 Mn .

Capital Expenditure

The Company purchased a commercial property at No 35, Madampitiya Road, Modera, Colombo 15 on 30th September 2011 , from Mackwoods (Pvt) Ltd at a total cost of Rs 205,407,000/-.

Contingent Liabilities

Contingent Liabilities are disclosed in Note 24 to the Financial Statements.

Events occurring after the Balance Sheet date

Events after Balance Sheet are disclosed in Note 25 to the Financial Statements.

Financial Results

The net profit after tax of the Company for the financial year ended 31st March 2012 is Rs 82.1Million (2011: Rs. 20.2 million)

Stated Capital

The Stated Capital of the Company as at 31st March 2012 is Rs.205,583,112/- made up of 75,000,000 ordinary shares.

Annual Report of theBoard of Directors



Dr. Nonis was appointed as the Chairman of the Board of MEL in 2005. He is also the Chairman of the Mackwoods Group of Companies. He qualified in London, with a First Class Honours BSc. from Imperial College of Science, Technology and Medicine and obtained his M.B.B.S. from the Royal Free Hospital Medical School, University of London, having spent his electives at Massachusetts General Hospital, Harvard Medical School, Boston, USA. He carried out his postgraduate training at Royal Brompton, the Hammersmith, and Addenbrooke’s Hospital, Cambridge, and obtained his M.R.C.P. (U.K.). He is a Member of the Royal College of Physicians, UK, and is a Fellow of the Royal Society of Medicine, London, and a Member of the Institute of Directors, London.

Dr. Nonis is a Director of Ceylon Hotels Corporation PLC and served as a Director of Sri Lankan Airlines Limited, the Grants Board of the ICT Agency of Sri Lanka, the Council of the Employers’ Federation of Ceylon; the Advisory Committee on Peace and Reconciliation of the Ceylon Chamber of Commerce; President of the India Life Sciences Institute – Sri Lanka Committee and Committee Member - Sri Lanka China Business Council.

He is a Board Member of the International Chamber of Commerce of Sri Lanka; the Country Coordinating Mechanism for Sri Lanka of the Global Fund; Deputy Chairman of the Royal Commonwealth Society in London; Board member of Ramphal Institute of Commonwealth Policy Studies, London, Commonwealth Business Council and has been appointed as the Sri Lankan High Commissioner to the United Kingdom.

Mrs. Samaratunga was appointed as a Director of MEL in 1988. She is the Co-Chairman and Joint Managing Director of ML. Mrs. Samaratunga is a Fellow of the Chartered Institute of Management Accountants (UK) and counts over 25 years of management experience.

She was the first female President of the National Chamber of Commerce of Sri Lanka and the first female President of Rotary Club of Colombo. Mrs. Samaratunga was the Co-Chair of the Export Cluster of the National Council for Economic Development, a Member of the Tertiary and Vocational Education Commission and Vice-President of BIMSTEC Forum at various times. She is a Member of the ICT Grants Commission of the ICT Agency and the EDB Advisory Committee on Spices and Allied Products.

Mrs. Samaratunga is the Immediate Past Chairperson of the Exporters Association of Sri Lanka, Immediate Past President of the Sri Lanka - France Business Council, Past President of the Sri Lanka - Poland Business Council all of which operate under aegis of the Ceylon Chamber of Commerce and Committee Member of the Sri Lanka-Malaysia Business Council. She is also a Member of the Chamber Committee of the Ceylon Chamber of Commerce and a Trustee of National Agri-Business Council. Mrs. Samaratunga is also a Member of the Monetary Policy Consultative Committee of the Central Bank of Sri Lanka.

Mr. Fonseka was appointed as a Director of MEL in 1988. He is the Joint Managing Director of ML. Mr. Fonseka is a Fellow of the Institute of Chartered Accountants of Sri Lanka, and a Fellow of the Chartered Institute of Management Accountants (CIMA), UK, and holds an MBA from the University of Sri Jayewardenepura and counts over 25 years of experience in the fields of finance and business.

He is a Past President of CIMA, Sri Lanka Division, and was a Member of the Developing Nations Committee of the International Federation of Accountants (IFAC). He has served on the Urgent Issues Task Force of the Institute of Chartered Accountants of Sri Lanka and was a Member of the Global Markets Committee of CIMA Global.

Mr. Yatawara was appointed as a Director of MEL in 1990. He is a Director of ML. He is a Chartered Marketer and a Member of the Chartered Institute of Marketing, UK, and a Fellow of the Academy of Marketing Science, USA.

Mr. Yatawara is a Past President of the Sri Lanka Italy Business Council of the Ceylon Chamber of Commerce and was the Chairman of the Sri Lanka Delegation for Promotion and Trade and Investments to China, organized by the National Chamber of Commerce. He is also a past Office Bearer of the Singapore Business Council of the Ceylon Chamber of Commerce and Past President of the Kiwanis Club of Colombo City, headquartered in USA. He currently serves as the Country Representative for Kiwanis International.

Mrs. N.S.M. Samaratunga - Non-Executive DirectorFCMA (UK), CGMA

Dr.C.N.A.Nonis - Chairman/Non-Executive DirectorBSc.(Hons.)(London), MBBS (London), MRCP (UK)

Mr. Francis Lalith Fonseka – Executive DirectorFCA, FCMA (UK), CGMA, MBA (Sri J.)

Mr. Arjuna Lasantha Yatawara – Executive Director (Managing Director/CEO)MCIM, FAAI, FAMS

Directors' Profile



Mrs. Nonis Ranaweera was appointed as a Director of MEL in 2010. She is also a Director of Mackwoods (Pvt) Ltd. Mrs. Nonis Ranaweera graduated from University College London, University of London with an LLB (Hons) Degree and is a Barrister-at-Law from the Honourable Society of Gray’s Inn, UK and an Attorney-at-Law.

Mrs. Nonis Ranaweera is a Partner of Julius & Creasy – Attorneys-at-Law, Solicitors and Notaries Public and is attached to the Corporate Law Department. Mrs. Nonis Ranaweera serves as a Council Member of the Royal Commonwealth Society – Sri Lanka, a Member of the Zonta Club 1 of Colombo, and also serves as a Trustee of the Sriyani Nonis Charitable Trust.

Dr. Shafeeu was appointed as a Director of MEL in December 2011. He qualified in London with a First Class Honours in MEng from the University College London, University of London winning the Clinton Prize for the year 1990 for outstanding performance. He obtained his PhD in Electronic and Electrical Engineering and carried out his Post Doctoral Research in University College London, University of London.

Dr. Shafeeu presently works as PMTS Product Definition for Maxim Integration Solutions Ltd, a public company based in the USA and counts over 25 years of wide ranging experience at senior positions in the fields of telecommunications/engineering, in the UK, USA and the Maldives.

Mr. Liyanage was appointed as a Director of MEL in December 2011. He joined the Mackwoods Group in 1993 and counts over 15 years of power and energy sector related experience. In addition he has educational and professional experience in the fields of Marketing, Technology Management and Manufacturing. He was appointed as a General Manager in 2006.

He possesses a Diploma in Marketing from University of Colombo. He is a Member of Institute of Management, Sri Lanka and a Member of the Institute of Certified Professional Managers.

Mr. Hettiaratchi was appointed as a Director of MEL in December 2011. He is a Management Consultant, and a Director of several companies. He is a Member of the Council of University of Moratuwa; Member of the National Education Commission. Mr. Hettiaratchi was a Director of Sampath Bank PLC and is a Former President of the Organisation of Professional Associations of Sri Lanka, former President of Chartered Institute of Management Accountants- Sri Lanka Branch and the former Country Manager of IBM World Trade Corporation, Sri Lanka.

Mr. Samarasinghe was appointed as a Director of MEL in December 2011. He is a Director of ML and Deputy Chairman of Shaw Wallace and Hedges Ltd and a Director of Shaw Wallace Ceylon (Pvt) Ltd. He was the former Managing Director of Mackwoods (Pvt) Ltd. He has also held the positions of Chairman of the Employers’ Federation of Ceylon, President of the National Chamber of Commerce, Director of Ceylon Oxygen Ltd. and a Member of the Coconut Development Authority. Mr. Samarasinghe was a Member of the Inland Revenue Board of Review.

Mrs. S.M.A.Nonis Ranaweera - Non-Executive DirectorLL.B.(Hons.)(London), Barrister-at-Law (Gray's Inn), Attorney-at-Law

Mr. L. L. Samarasinghe – Non-Executive Director

Mr. Lakshman Jayaraj Kumar Hettiaratchi – Non-Executive Independent DirectorLLB, FCMA (UK), MBCS, CITP, Attorney-at-Law

Dr. Hasaan Shafeeu – Non-Executive Independent DirectorPhD, MEng (Hons), CEng, MIEE

Mr. Shamal Mirisse Liyanage – Executive Director (General Manager)Exe. Dip in Mktg (Col), MCPM, MIM (SL)

Directors' Profile



Report on the Financial StatementsWe have audited the accompanying financial statements of Mackwoods Energy Limited, which comprise the balance sheet as at March 31, 2012, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

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

Scope of Audit and Basis of OpinionOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.

OpinionIn our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended March 31, 2012 and the financial statements give a true and fair view of the Company’s state of affairs as at March 31, 2012 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on other Legal and Regulatory RequirementsThese Financial Statements also comply with the requirements of Section 151(2) of the Companies Act No. 07 of 2007.

TO THE MEMBERS OF MACKWOODS ENERGY LIMITED

WIJEYERATNE & COMPANYChartered Accountant

15 Maitland Crescent, Colombo 7P.O.Box 191, Colombo, Sri LankaPhone : (94) 11-2693147/8 2678256/7 5736996/5736933 5736878/5736844Fax : (94) 11-2693839E mail : [email protected] : www.wijeyeratne.com

Independent Auditors' Report



For the year ended 31st March 2012

Cost of Sales

Other Income

Distribution Expenses

Administration Expenses

Finance Cost

Earning Per Share

Note Year Ended 31.03.2012

Rs.

Year Ended 31.03.2011

Rs.

4 265,544,322

(132,297,354)

133,246,968

190,645

133,437,613

(12,976,247)(14,085,048)

106,376,318

(1,357,257)

105,019,061

(22,891,608)

82,127,453

1.91

98,328,503

(52,226,110)

46,102,393

110,865

46,213,259

(8,886,739)(2,701,343)

34,625,176

(1,990,209)

32,634,967

(12,389,821)

20,245,146

404.89

5

6

78

9

10

11

TURNOVER

GROSS PROFIT

PROFIT FROM OPERATIONS

PROFIT BEFORE TAXATION

TAXATION

NET PROFIT FOR THE YEAR

Income Statement



1. CORPORATE INFORMATION

1.1 Status of the Company

The company is re-registered under the Companies Act No. 07 of 2007and the registration no is PV 17807 PB. The registered office of the company is at No. 10, Gnanartha Pradeepa Mawatha, Colombo 8.

1.2 Change of Company's Name

Mackwoods Energy Limited was formerly known as Mackwoods Engineering (Private) Limited, and the name was changed with effect from 23rd September 2011and thereafter to Mackwoods Energy Limited on 5th of December 2011.

1.3 Parent and ultimate parent

The Company's parent undertaking is Mackwoods (Pvt) Ltd, which is incorporated in Sri Lanka and which in the opinion of the Directors is the Company's ultimate parent undertaking and controlling party.

1.4 Principal Activities of the Company

The principal activity of the Company is the provision of total energy solutions providing a wide range of products and services.

1.5 Date of Authorization for Issue

The financial statements of Mackwoods Energy Limited for the year ended 31st March 2012 were authorised for issue in accordance with resolution of Board of Directors on 27th August 2012.

1.6 Change in Accounting Policies

The accounting policies have been consistently applied by the company and are consistent with those used in the previous year.

2. BASIS OF PREPARATION

The Financial Statements of the Company have been prepared on the historical cost basis.

2.1. Statement of Compliance

Financial Statements have been prepared in accordance with the Sri Lanka Accounting Standards, issued by the Institute of Chartered Accountants of Sri Lanka and the requirements of the Companies Act No 07 of 2007.

2.2 Basis of Measurement

The Financial Statements of the Company have been prepared on the historical cost basis and presented in Sri Lanka Rupees.

2.3.Statement on Reclassification

The Accounting Policies have been consistently applied by the Company and are consistent with those used in the previous year. Certain comparative amounts have been reclassified to conform to the current year's presentation.




2.4. Key Estimates, Assumptions and Judgments

The preparation of Financial Statements in conformity with SLAS requires 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 those judgmental decisions.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to the Accounting Estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects current and future periods.

2.5. Going Concern

The Directors have made an assessment of the Company's ability to continue as a going concern and they do not intend either to liquidate or to cease trading.

3. SIGNIFICANT ACCOUNTING POLICIES

3.1. Revenue Recognition

Revenue is recognized to the extend that it is probable that the economic benefits will flow to the company and the revenue and associated costs incurred or to be incurred can be reliably measured. Ex Stock Revenue is measured at the fair value of the consideration received or receivable net of trade discounts and sales taxes. Service and Commission income is recognized on an accrual basis. Commission income on account of direct indent business previously shown under other income has been reclassified under revenue and the comparative figures adjusted accordingly. Interest income is recognized as the interest accrues unless collectability is in doubt.

3.1.1. Investments

Initial Recognition

Cost of Investment includes purchase cost and acquisition charges such as brokerages, fees, duties and bank regulatory fees.

MeasurementsCurrent InvestmentsCurrent Investments are carried at the lower of costs and market value.

Long Term InvestmentsLong Term Investments are stated at cost. Carrying amounts are reduced to recognise a decline other than temporarily, determined for each investment individually. These reductions for other than temporarily declines in carrying amounts are charged to income statement.

Other InvestmentsTreasury Bills and other mark-up bearing securities held for resale in the near future to benefit from short term market movements are accounted for at cost plus relevant proportion of the discounts or premiums.

3.2. Trade and Other Receivables

Trade and Other Receivables have been stated at the amounts estimated to be realised.

3.3. Liabilities and Provisions

All known liabilities have been accounted for in preparing the Financial Statements.




3.4. Profit and Loss Account

All expenses in running of the business and in maintaining the capital assets in a state of efficiency have been charged to revenue in arriving at the Profit for the year.

3.5. Inventories

Inventories are stated at the lower of the cost and net realizable value. Cost is generally determined by reference to weighted average cost. Net realizable value is the estimated net selling price in the ordinary course of business.

3.6. Taxation

3.6.1 Current Taxation

Provision for taxation has been made on the basis of the profit for the year as adjusted for taxation purpose in accordance with the provisions of the Inland Revenue Act No. 10 of 2006.

3.6.2. Deferred Taxation

Deferred Taxation has been provided on the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits, and differences relating to investment in subsidiaries, jointly controlled entities and associates to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the balance sheet date.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized.

The carrying amount of deferred income tax is reviewed at each balance sheet date and reduced to the extent that is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

3.7 Property Plant And Equipment

The property, plant and equipment have been stated at cost or valuation less accumulated depreciation. Where an item of property, plant and equipment comprises major components having different useful life, they are accounted for as separate items of property, plant and equipment.

The cost of property, plant and equipment is the cost of purchase or construction together with any expenses incurred in bringing the assets to its working condition for its intended use.

Expenditure incurred for the purpose of acquiring, extending or improving asset of a permanent nature by means of which to carry on the business or for the purpose of increasing the earning capacity of the business have been treated as capital expenditure.

Depreciation is charged on all property, plant and equipment on a straight line basis so as to write -off the cost/valuation over the estimated useful life of the these assets.

Their principal annual rates of depreciation used are as follows;

Depreciation Rate %

Buildings 2Office Equipment 25Motor Vehicle 25




3.8. Future Changes In Accounting Policies

Effects of Sri Lanka Accounting Standard issued but not yet effective.

a) The following standards have been issued by the Institute Chartered Accountants in Sri Lanka.

Sri Lanka Accounting Standard 44 financial instrument, presentation (SLAS44)

Sri Lanka Accounting Standard 45 financial instrument recognition and measurement (SLAS45)

Sri Lanka Accounting Standard 39 share base payment (SLAS39)

The effective date of SLAS44, 45 and 39 was changed during the year to be effective for the financial period beginning on or after 01st January 2012. These three standards have been amended and forms a part of the new set of financial reporting standards mentioned under note (b) below.

b)

3.9. Retirement Benefit Obligations

3.9.1. Defined Contribution Plan ETF and EPF.

A defined contribution plan is post employment benefit plan under which and entity faces fixed contributions into a separate entity and will have legal or constructive obligation to pay future amounts. Employees who are eligible for EPF and ETF contributions are covered by relevant contributions funds in line with effective status and regulations.

3.9.2. Gratuity

The Liability recognized in the Balance Sheet is the Present Value of the Defined Benefit Obligation at the Balance Sheet Date using the Gratuity Formula in Appendix E of the Sri Lanka Accounting Standard 16 - Employees Benefit (Revised 2006), which is based on the Projected Unit Credit Methods as discussed in the said Standard.

However as per the payment of the Gratuity Act No. 12 of 1983, the liability to an employee arises on completion of 5 years of continued service. The Gratuity liability is neither externally funded nor actuarially valued.

Following the convergence of Sri Lanka Accounting Standards with the International Financial Reporting Standards, the Council of the Institute of Chartered Accountants of Sri Lanka has adopted a new set of financial reporting standards that would apply for financial periods beginning on or after 01 January 2012. The application of these financial reporting standards is substantially different to the prevailing standards.




31.03.2012Rs.

31.03.2011Rs.

4. TURNOVERSales - Ex. Stock 168,398,614

97,145,708

265,544,322

19,440,675

(6,055)

127,101,204

146,535,824

(14,238,470)

132,297,354

185,600 5,045

190,645

7,065,126 1,309,556

1,911,772 178,341 166,621

1,621,120

723,711

12,976,247

60,000 308,224

2,068,009 1,233,935

9,600,000

259,753

555,127

14,085,048

360,714

22,903 428,538 545,102

1,357,257

60,039,131 38,289,372

98,328,503

23,220,228

28,749

48,446,557

71,695,534

(19,469,424)

52,226,110

83,292 27,573

110,865

4,178,176 1,980,844

974,405 116,168 70,198

253,321

1,313,627

8,886,739

40,000 152,465

1,632,246

47,418

243,950

-

585,263

2,701,343

-

37,652 179,639

1,772,918 1,990,209

Service Income & Commission Income

5. COST OF SALES

Opening Stock

Inventory write off

Purchases

Less: Closing Stock

Cost of Sales

6. OTHER INCOMEInterest IncomeOther Income

7. DISTRIBUTION COSTStaff SalariesTravellingSales Promotion & AdvertisingCommunicationEntertainment ExpensesNation Building TaxOther Selling Expenses

9. FINANCE COSTLease InterestLease ChargesBank ChargesInterest Expenses

8. ADMINISTRATIVE EXPENSESAudit FeesPrinting & Stationery

Warehousing ExpensesDepreciation

Shared Services

Vehicle Maintenance & Repairs Other Administration Expenses




12. PROPERTY PLANT AND EQUIPMENT

Cost LeasedMotor Car

Rs.

Land &Building

Rs.

Tools &Equipment

Rs.

ComputerEquipment

Rs.

Furniture& Fittings

Rs.

OfficeEquipment

Rs.

Total

Rs.

Balanceat 01.04.2011 - - 209,673 - - - 209,673

Additions 5,945,000 205,407,000 - 89,980 32,037 146,194 211,620,211

Balancesat 31.03.2012 5,945,000 205,407,000 209,673 89,980 32,037 146,194 211,829,884

Accumulated Depreciation

Balance at 01.04.2011 - - 75,974 - - - 75,974

Charge for the Year 990,840 164,155 52,418 6,666 4,005 15,851 1,233,935

Balancesat 31.03.2012 990,840 164,155 128,392 6,666 4,005 15,851 1,309,909

Net Book Value

Balanceat 31.03.2012 4,954,160 205,242,845 81,281 83,314 28,032 130,343 210,519,975

Balanceat 31.03.2011 - - 133,699 - - - 133,699

Note:

The company purchased a commercial property at No 35, Madampitiya Road, Modera, Colombo 15 on 30th September 2011 from Mackwoods (Pvt) Ltd and these land and Building are shown at total cost of Rs.205,407,000/=

31.03.2012Rs.

31.03.2011Rs.

13. INVENTORYGenerators & Equipments 5,194,844

9,043,627

14,238,471

9,504,150

9,936,525 19,440,675

Spares & Accessories

14. TRADE AND OTHER RECEIVABLESTrade Debtors 118,650,358

3,478,945 740,692 14,083 55,818

122,939,896

21,051,966

4,457,982 277,206

2,591,364 -

28,378,518

Sundry AdvancesESC ReceivablesWHT ReceivablesPrepayment




31.03.2012Rs.

31.03.2011Rs.21. TRADE & OTHER PAYABLES

22. RELATED PARTY TRANSACTIONS

2,851,103 9,111,072

705,786 145,135

18,767,991 74,000

542,979 -

1,245 34,083,961

98,800 66,382,072

4,547,440 2,017,752

705,786 418,740

3,303,836 114,000 310,046 271,503

2,225 - -

11,691,328

Trade CreditorsAccrued ExpensesTurnover Tax PayableESC PayableVAT PayableAudit Fees & tax Computation PayableNBT PayableReimbursementsOther PayableIPO ExpensesProvision for Bonus

Dr. C.N.A. Nonis, Mrs. N.S.M. Samaratunga, Mr. F.L. Fonseka, Mr. A.L. Yatawara, Mr.L.L.Samarasinghe and Mrs. S.M.A. Nonis Ranaweera Directors of the Company are also Directors of Mackwoods (Pvt) Ltd, to whom the company has provided goods and services during the year.These transactions have been carried out in the ordinary course of business on commercial terms and conditions.

Further, Mackwoods (Pvt) Ltd, has provided management and other services to Mackwoods Energy Ltd. Significant inter company transactions with Mackwoods (Pvt) Ltd.are given below.

All figures in Rs. 31st March 2012

Investment in SharesInter company PaymentsMaintenance ServicesPurchase of Assets Including Stamp Duty and Legal Charges Purchase of StocksInterest on Inter Company Account BalanceDividend PaidShared Expenses

Dr. C.N.A. Nonis, Mrs. N.S.M. Samaratunga, Mr. F.L. Fonseka, Mr.L.L.Samarasinghe and Mrs.S.M.A.Nonis Ranaweera are also Directors of Agalwatte Plantations PLC to whom the company has provided goods and services during the year. These transactions have been carried out in the ordinary course of business on commercial terms and conditions.

Dr. C.N.A. Nonis, Mr. F.L. Fonseka, and Mrs.S.M.A.Nonis Ranaweera are also Directors of Taprospa Resorts (Pvt) Ltd. to whom the company has provided goods and services during the year. These transactions have been carried out in the ordinary course of business on commercial terms and conditions.

205,083,10287,979,0262,741,760

(205,407,000)(113,361,702)

(2,582,969)(2,200,044)(9,600,000)

3,963,333

20. LEASE OBLIGATION

Alliance Finance PLC

Lease Obtained 8,650,356 -

Less: Repayment during the year (1,153,381)

7,496,975

Less: Interest in Suspense (2,344,642)5,152,333

Less: Lease payable within one year (1,189,000)

Obligation under Finance Leasing The obligation is secured by Car which is leased out under thelease agreement and is payable in 60 equal monthly installments from August 2011

-

-

--

-

-

31.03.2012Rs.

31.03.2011Rs.




SHAREHOLDERS AS AT 31ST MARCH 2012

Name No. of Shares Percentage of Shareholding (%)

62,928,793

3,018,707

3,017,500

3,017,500

3,017,500

75,000,000

83.9051

4.0250

4.0233

4.0233

4.0233

100.000

1. Mackwoods (Private) Limited

2. Dr.Chrisantha Nicholas Anthony Nonis

3. Mrs. Nirmali Suzanne Moira Samaratunga

4. Mr. Francis Lalith Fonseka

5. Mr. Arjuna Lasantha Yatawara

Total

23. TRANSACTIONS WITH KEY MANAGEMENT

Key Management Personnel are those having authority and responsibility for planning, directing and controlling the activities of the entity. Accordingly, the Board of Director (Including senior Management) has been classified as Key Management Personnel of the company.

The company has not paid fees to Directors during the Year ended 31 March 2012. Part of the remuneration of the CEO, and key management personnel were paid by the other companies of the Mackwoods Group and the company's expenditure on account of this, amounted to Rs. 2,601,960/=. There are no material transactions with the Key Management Personnel of the company.

24. CONTINGENT LIABILITIES

There were no material contingent liabilities outstanding as at Balance Sheet Date.

25. POST BALANCE SHEET EVENTS

There have been no material events occurring after the Balance Sheet date which require adjustments to or disclosure in the financial statements except that the Company has successfully completed an Initial public Offer to raise Rs 350Million by way of an offer for subscription of 25,000,000 Ordinary Voting Shares at Rs.14/= per Share and obtained a listing on the Diri Savi Board of the Colombo Stock Exchange on 25th April 2012. Following the listing the name of the company changed to Mackwoods Energy PLC.


Shareholders Information



NOTICE IS HEREBY GIVEN that the Annual General Meeting (AGM) of MACKWOODS ENERGY PLC (“the Company”)will be held at ‘Sasakawa Memorial Hall” No. 04, 22nd Lane, Colombo 03 on Friday, 28th September 2012 at 4.00 p.m. for the following purposes:

To receive and consider the Annual Report of the Board together with the Financial Statements of the Company for the financial year ended 31st March 2012 together with the report of the Auditors thereon

To consider, and if thought fit, pass the following resolution as an ordinary resolution for the re-appointment of Mr. L.L.Samarasinghe.

Ordinary Resolution

IT IS HEREBY RESOLVED that Mr.L. L. Samarasinghe who reached the age of 78 years in November 2011 be appointed a Director of the Company in terms of Section 211 or the Companies Act No. 7 of 2007, for a term that ends on the earlier of a date that is one year from the date of appointment or at the conclusion of the Annual General Meeting following this Annual General Meeting at which the appointment if any, takes place and it is further resolved that the age limit referred to in Section 210 of the said Companies Act shall not apply to Mr. L. L. Samarasinghe.

To re-appoint M/s. Wijeyeratne & Co., Chartered Accountants as the Auditors of the Company to hold office until the conclusion of the next Annual General Meeting of the Company at a remuneration to be agreed with by the Board of Directors and to audit the Financial Statements of the Company for the accounting period ending 31st March 2013.

To authorize the Directors to determine contributions to charities.

By Order of the Board Mackwoods (Private) Limited Secretaries, Mackwoods Energy PLCColombo . 27th day of August 2012

Note:

Any shareholder entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and vote/speak in his /her stead and a form of proxy is sent herewith for this purpose. A proxy need not be a member of the company.

A completed form of proxy must be deposited at the Registered Office of the Company at No. 10, Gnanartha Pradeepa Mawatha, Colombo 08 not less than 48 hours before the time appointed for the holding of the meeting.

01.

02.

03.

04.

Notice of Meeting

MACKWOODS ENERGY PLC

I/We...................................................................... of.......................................................... being member/s of the MACKWOODS ENERGY PLC hereby appoint,

Dr. C. N. A. Nonis or failing himMrs. N.S. M. Samaratunga or failing her Mr. F. L. Fonseka or failing him Mr. A. L. Yatawara or failing himMrs. S. M. A. Nonis Ranaweera or failing her Mr. L. L. Samarasinghe or failing him Mr. L. J. K. Hettiaratchi or failing himDr. H. Shafeeu or failing him Mr. S. M. Liyanage

.................................................................as my/our proxy to speak and vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held on Friday the 28th day of September 2012, at 4 pm and any adjournment thereof and at every poll which may be taken at such meeting.

As witness my/our hand this................................. day of ....................................2012.

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

Note: Delete what is inapplicable.

Instruction as to completion

The instrument appointing a proxy may be in writing under the hands of the appointer or of his Attorney duly authorized in writing under the hands of the appointer or of its attorney duly authorized in writing or if such Appointer is a corporation under its common seal or the hand of its Attorney or duly authorized person.

The instrument appointing a proxy and the power of Attorney or other authority, if any, under which it is signed or notarially certified copy of the Power of Authority or other authority will have to be deposited at the Registered Office of the Company not less than 48 hours before the time appointed for the holding of the meeting.

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Form of Proxy

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Notes

Designed &Produced by:

Mackwoods was established in 1841 by Captain William Mackwood, and has the distinction of being the second oldest mercantile establishment in Sri Lanka, and a part of Sri Lanka’s heritage. Mackwoods is one of the oldest member of the Ceylon Chamber of Commerce & Industry, since 1847, and functioned primarily as an Agency House, Insurance House and Trading company which rapidly build up a global network of partners and principals. Mackwoods was acquired in 1956 by the late Mr. N.S.O. Mendis, the father of Mrs. Sriyani Nonis. Mr. N.S.O. Mendis was a visionary entrepreneur who diversified the Groups interests, and combined it with a strong element of social philanthropy. This vision was pursued and fulfilled by Mrs. Sriyani Nonis, who at the same time expanded and further diversified the business group.

Today, Mackwoods is a conglomerate of over twenty companies engaged in key sectors of the Sri Lankan economy. It provides employment to over 8,000 individuals, has a land base of 27,000 acres. Over its 170 years history it has built up an International network of partners at all levels of stratification. Its core business sectors are Healthcare (Medical Equipment; Scientific and Lab Equipment and Pharmaceuticals); Agribusiness and Plantations (27,000 Acres of Tea, Rubber, and Palm Oil); Industry, Manufacturing; Engineering & Power Generation; Import /Export trading; ICT Education and Software Development; Hotels and Leisure Sector; Infrastructure and Real Estate development; Insurance Broking; and Stock Broking.

Mackwoods Energy PLC is a member of the Mackwoods Group of Companies and part of the Group’s rich heritage of over 170 years. Building upon the solid foundation of its parent company, MEL has grown to be a trusted provider of a wide array of energy solutions, with many products and services being offered to cater to the diverse energy needs of its customers. MEL’s strength in the power solutions business was achieved over the last decade by catering to the increasing demand for both primary and secondary power generation. The advent of peace in 2009 accompanied by the strong growth in the economy and the emerging potential presented by the far reaching national infrastructure development programme, led to MEL repositioning itself as a total energy solutions provider of an extensive array of products and services including the development of hydropower and renewable energy projects.

The Mackwoods Group continues to forge ahead in the 21st Century and its theme "Tradition with Vision" exemplifies the driving force, which has enabled the business to survive the many vicissitudes since its founding over 170 years ago. A Company with a great tradition in the past, meeting the future with vision and confidence, pursuing a strategy of diversification led growth, fiscal prudence, and constant innovation, as it continues to strive for excellence.

TM

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