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Paragon Ceylon PLCAnnual Report

Paragon Ceylon PLC

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Notice of Meeting

NOTICE IS HEREBY GIVEN that the Sixtieth Annual General Meeting of Paragon Ceylon PLC will be held in the Board Room of Ceylon Printers Group, No. 20, Sir Chittampalam A. Gardiner Mawatha, Colombo 2, on 13th December 2017 at 10.30 a.m. for the following purposes :

1. To pass the ordinary resolution set out below to appoint Mr. W. N. S. Canagaratne who is 81 years of age as a Director of the Company.

IT IS HEREBY RESOLVED that the age limit stipulated is section 210 of the companies Act No. 7 of 2007 shall not apply to Mr. W. N. S. Canagaratne who is 81 years of age and that he be and is hereby appointed a Director of the Company in terms of section 211 of the Companies Act No. 7 of 2007.

2. To receive and consider the Report of the Directors on the affairs of the company and the Statement of Accounts for the year ended 31st March 2017 and the Report of the Auditors thereon.

3. To pass the ordinary resolution set out below to appoint Mr. L. C. G. Ratnanather who is 82 years of age as a Director of the Company.

IT IS HEREBY RESOLVED that the age limit stipulated is section 210 of the companies Act No. 7 of 2007 shall not apply to Mr. L. C. G. Ratnanather who is 82 years of age and that he be and is hereby appointed a Director of the Company in terms of section 211 of the Companies Act No. 7 of 2007.

4. To pass the ordinary resolution set out below to appoint Mr. J P S Ratnanather who is 86 years of age as a Director of the Company.

IT IS HEREBY RESOLVED that the age limit stipulated is section 210 of the companies Act No. 7 of 2007 shall not apply to Mr. J P S Ratnanather who is 86 years of age and that he be and is hereby appointed a Director of the Company in terms of section 211 of the Companies Act No. 7 of 2007.

5. To re-elect Mr. P S R Casie Chitty who retires by rotation in terms of Article 84 of the Articles of Association of the Company as a Director at the Annual General Meeting, a Director.,

6. To authorise the Board of Directors to determine contributions to charities and other donations.

7. To re-appoint Messrs, Baker Tilly Edirisinghe & Co., as Auditors and authorise the Directors to determine their remuneration.

By Order of the BoardP W Corporate Secretarial (Pvt) Ltd

Secretaries31st October 2017Colombo

Note: A member entitled to attend and vote at the above mentioned meeting is entitled to appoint a proxy who need

not also be a member.

The completed form of proxy should be deposited at the registered office of the Company at No. 20, Sir Chittampalam A. Gardiner Mawatha, Colombo 2, not less than 48 hours before the time fixed for the Meeting.

A form of Proxy is attached to the Report.

Paragon Ceylon PLC

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Corporate Information

Directors

W. N. S. Canagaratna (Chairman/Managing Director) L. C. G. Ratnanather (Group Finance Director)

J. P. S. Ratnanather

J. A. S. Ratnasabapathy (Alternate to J. P. S. Ratnanather)

J. B. M. Ponrajah

P. S. R. Casie Chitty

M. M. Marzook

Secretaries P W Corporate Secretarial (Pvt) Ltd

Head of Finance

M. S. A. Kariapper

Auditors BAKER TILLY Edirisinghe & Co. Chartered Accountants

Tax consultants Nanayakkara & Co. Chartered Accountants

Bankers Commercial Bank of Ceylon Ltd.

Lawyers

Nithi Murugesu

Attorney-at-Law

Paragon Ceylon PLC

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Directors’ ProfileW. N. S. Canagaratna–ExecutiveChairmanandManagingDirectorA journalist by profession, he began his career in the Times of Ceylon in 1954, later joining the Information Services of the British High Commission in Sri Lanka to edit the BHC’s fortnightly publication, BritishBulletin. After joining the Ceylon Printers Group in 1967, he was also the Sri Lanka correspondent for The Statesman of Calcutta and Delhi for 12 years. He still maintains his links with journalism in Sri Lanka.

Mr. Canagaratna became a Director of Ceylon Printers PLC, Paragon Ceylon PLC, Kalamazoo Industries (Pvt) Ltd, Office Equipment PLC and International Computers (Ceylon) Ltd in 1984 and became the Executive Chairman and Managing Director of the Group in 1991.

Mr. Canagaratna is responsible for all policy decisions relating to the day-to-day operations of all companies in the Group.

L. C. G. Ratnanather -GroupFinanceDirectorMr. Leslie Ratnanather has been with the Company since 1965 and counts 52 years of senior management experience. He acts as the Group Finance Director and oversees the finance function. He is a director of Ceylon Printers PLC, Paragon Ceylon PLC, Kalamazoo Industries (Pvt) Ltd, Office Equipment PLC and International Computers (Ceylon) Ltd. Mr. Ratnanather is a finalist at the Chartered Institute of Accountants Sri Lanka.

J. P. S. Ratnanather –Non-ExecutiveDirectorMr.J. P. S. Ratnanather is a non-executive director of Ceylon Printers PLC, Paragon Ceylon PLC, Kalamazoo Industries (Pvt) Ltd, Office Equipment PLC and International Computers (Ceylon) Ltd.

J. A. S. Ratnasabapathy-AlternateDirectorMr. J. A. S. Ratnasabapathy has been with the Company since 1985 and counts 32 years of senior management experience. He acts as the alternate director to Mr. J. P. S. Ratnanather and oversees the Human Resources and Administrative functions of the Group. He is an alternate director of Ceylon Printers PLC, Paragon Ceylon PLC, Kalamazoo Industries (Pvt) Ltd, Office Equipment PLC and International Computers (Ceylon) Ltd. Mr. J. A. S. Ratnasabapathy is a retired officer of the Sri Lanka Army.

J. B. M. Ponrajah - ExecutiveDirectorMr. J. B. M. Ponrajah is responsible for the overall operations of Paragon Ceylon PLC. He is responsible for strategy implementation, achievement of the Company goals. Mr. J. B. M. Ponrajah has been working with the Company since its 1972 and counts 44 years of experience in senior management, sales and marketing.

P. S. R. Casie Chitty–IndependentNon-ExecutiveDirectorMr. R. Casie Chitty joined the board as an independent non executive director in 2009. He is a independent non executive director of Ceylon Printers PLC, Paragon Ceylon PLC and Office Equipment PLC. Mr. Casie Chitty who holds a Master in Economics from the University of Colombo is also a Fellow of the Association of Chartered Certified Accountants (ACCA), UK, an Associate Member of the Chartered Institute of Management Accounts (CIMA), UK, and a Chartered Financial Analyst, USA.

M. M. Marzook –IndependentNon-ExecutiveDirectorMr. M. M. Marzook joined the board as an independent non executive director in 2013. He is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka), an Associate Member of the Chartered Institute of Management Accountants (CIMA) and holds a Master of Business Administration from the University of Sri Jayewardenepura. He is currently the Head of Special Projects – Finance and Management Information Systems, at Hayleys Advantis Limited. He counts for over 28 years’ experience in Finance, Consulting and Financial Advisory.

Paragon Ceylon PLC

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Chairman’s Review

On behalf of the Board of Directors ,I welcome you to the Sixtieth Annual General Meeting of Paragon Ceylon PLC and it gives me great pleasure to present to you the Annual Report of the Company for the year ended 31st March 2017.

Durring the year under review the Turnover of the Company recorded an increase from Rs 1.623 million to Rs1.981 million which is a 18.07% increase in the Turnover from the previous year.

The Company recorded an Operating Loss of Rs 1.120 million as against a loss on operations of Rs 1.529 million reported for the previous year.

The Company recorded a Net Loss attributable to shareholders of Rs 0.699 million From a loss of Rs 1.328 million in the previous year.

The management will be looking into the operations of the company and taking all necessary measures to increase the profitability during the current Financial Year.

In conclusion I wish to thank all our customers, bankers and suppliers for all their support.

My thanks also to my colleagues on the Board ,the Management and staff for their commitment and last but not least, our shareholders for their support and confidence.

Selvam CanagaratnaChairman

31st October, 2017

Paragon Ceylon PLC

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The Directors of Paragon Ceylon PLC have pleasure in presenting their Annual Report together with the Audited Financial Statements of the Company for the year ended 31st March 2017.

This Annual Report of the Board on the affairs of the Company contains the information required in terms of the Companies Act No. 07 of 2007, the Listing Rules of the Colombo Stock Exchange and is guided by recommended best practices.

General

Paragon Ceylon PLCis a public limited liability company which was incorporated under the Companies Ordinance No.51 of 1938 as a public company on 20th day of June 1958. Pursuant to the requirements of the new Companies Act No. 7 of 2007, the Company was re-registered on 6th June 2008 and bears registration number PQ186.

Principal activities of the Company and review of performance during the year

The main activity of Paragon Ceylon PLC, which remained unchanged during the year, is printing and sale of Paragon security register stationery, blank and preprinted computer continuous stationary. The Chairman’s Review describes the Company’s affairs and mentions important events, which took place during the year.

This Report together with the Financial Statements, reflect the state of affairs of the Company.

Financial Statements

The Financial Statements of the Company duly signed by two Directors on behalf of the Board and the Auditors are given on pages 17 to 18.

Summarised Financial Results

Revenue 1,981,781 1,623,979Profit for the year ( 699,388) (1,328,546)

Auditors’ ReportThe Report of the Auditors on the Financial Statements of the Company is given on page 16.

Accounting PoliciesThe Accounting Policies adopted by the Company in the preparation of the Financial Statements are given on pages 22 to 28 which are consistent with those of the previous period.

DirectorsThe names of the Directors who held office as at the end of the accounting period are given below and their brief profiles appear on pages 02 to 03.

Executive DirectorsMr. W.N.S Canagaratna - Chairman/Managing DirectorMr. L.C.G RatnanatherMr. J.A.S RatnasabapathyMr. J.B.M Ponrajah

Non - Executive DirectorsMr. J.P.S Ratnanather

*Independent Non-Executive Directors*Mr. P.S.R Casie Chitty*Mr. M.M Marzook

Annual Report of the Board of Directors on the Affairs of the Company

Company

Year ended 31st March 2017 2016 Rs. Rs.

Paragon Ceylon PLC

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The Directors have recommended the re-appointment of Mr. W. N. S. Canagaratne who is 81 years of age as a Director of the Company and accordingly a resolutions will be placed before the shareholders in terms of section 211 of the Companies Act in regard to the re-appointment of Mr. W. N. S. Canagaratne.

The Directors have recommended the re-appointment of Mr. L.C.G Ratnanather who is 82 years of age as a Director of the Company and accordingly a resolutions will be placed before the shareholders in terms of section 211 of the Companies Act in regard to the re-appointment of Mr. L.C.G Ratnanather.

The Directors have recommended the re-appointment of Mr. J.P.S Ratnanather who is 86 years of age as a Director of the Company and accordingly a resolutions will be placed before the shareholders in terms of section 211 of the Companies Act in regard to the re-appointment of Mr. J.P.S Ratnanather.

Mr. P.S.R Casie Chitty retires by rotation at the conclusion of the Annual General Meeting in terms of Article 84 of the Article of Association and being eligible is recommended by the Directors for re- election.

Interests RegisterThe Company maintains an Interests Register in terms of the Companies Act, No. 7 of 2007, which is deemed to form part and parcel of this Annual Report and available for inspection upon request.

All related party transactions which encompasses the transactions of Directors who were directly or indirectly interested in a contract or a related party transaction with the Company during the accounting period are recorded in the Interests Register in due compliance with the applicable rules and regulations of the relevant Regulatory Authorities.

The Related Party Transactions Review Committee has reviewed all related party transactions that require their review for the year ended 31st March 2017 in compliance with the relevant listing rules.

The relevant interests of Directors in the shares of the Company as at 31st March 2017 as recorded in the Interests Register are given in this Report under Directors’ shareholding.

Directors’ RemunerationThe Directors’ remuneration is disclosed in Note 08 to the Financial Statements.

Directors’ Interests in ContractsThe Directors’ interest in contracts are included with the related party disclosures in Note 30 to the Financial Statements.

The Company carried out transactions in the ordinary course of its business at commercial rates with related entities.

Directors’ Responsibility for Financial ReportingThe Directors are responsible for the preparation of Financial Statements of the Company to reflect a true and fair view of the state of its affairs. The Directors are of the view that these financial statements have been prepared in conformity with requirements of the Sri Lanka Accounting Standards, the Companies Act No.7 of 2007 and the Listing Rules of the Colombo Stock Exchange.

AuditorsMessrs, Baker Tilly Edirisinghe & Co., Chartered Accountants served as the Auditors during the year under review. Based on the written representations made by the Auditors, they do not have any interest in the Company other than as Auditors and Tax Consultants.

The Audit fee payable to the Auditors for the year Rs. 224,430/- (2016 – Rs.216,047/-)

The Auditors have expressed their willingness to continue in office. The Audit Committee recommended that they be re-appointed as Auditors. A resolution to re-appoint the Auditors and to authorise the Directors to determine their remuneration will be proposed at the Annual General Meeting.

Annual Report of the Board of Directors on the Affairs of the Company Contd...

Paragon Ceylon PLC

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Stated CapitalThe Stated Capital of the Company is Rs.1,000,280/-.The number of shares issued by the Company stood at 1,000,280 fully paid ordinary shares as at 31st March 2017.

Directors’ ShareholdingThe relevant interests of Directors in the shares of the Company as at 31st March 2017 and 31st March 2016 are as follows.

Major Shareholders, Distribution Schedule and other informationInformation on the twenty largest shareholders of the Company distribution schedule of the number of shareholders, percentage of shares held by the public, market values per share as per the Listing Rules of the Colombo Stock Exchange are given on pages 09 to 10 under Investor Information.

ReservesThe movement of reserves during the year are given under the Statement of Changes in Equity on page 19. (Statement of Changes in Equity).

Land holdingsThe Company does not own any free hold.

Property, Plant and EquipmentDetails and movements of property, plant and equipment are given under Note 12 to the Financial Statements.

Capital ExpenditureThe total capital expenditure during the year amounted to Rs. 0.00 Mn compared to Rs. 0.00 Mn incurred in the previous year. Details of movement in property, plant and equipment and capital work-in-progress are given under Note 12 to the financial statements.

DonationsThe Company has made Rs. 1,118.00 during the year.

DividendsNo dividends were declared.


Shareholding as at Shareholding as at 31/03/2017 31/03/2016

Mr. W.N.S Canagaratna - Chairman/Managing Director 40,070 40,070Mr. L.C.G Ratnanather Nil NilMr. J.P.S Ratnanather Nil NilMr.J.A.S Ratnasabapathy Nil NilMr.J.B.M Ponrajah 10 10Mr. P.S.R Casie Chitty Nil NilMr.M.M Marzook Nil Nil 40,080 40,080

Paragon Ceylon PLC

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Corporate GovernanceCorporate Governance practices and principles with respect to the Management and Operations of the Company are set out on page 12.

An Audit Committee, Remuneration Committee and a Related Party Transaction Review Committee function as Board sub committees, with Directors who possess the requisite qualifications and experience. The composition of the said committees is as follows.

Audit CommitteeMr. P.S.R Casie ChittyMr.M.M Marzook

Remuneration CommitteeMr. P.S.R Casie ChittyMr.M.M Marzook

Related Party Transaction Review CommitteeMr. P.S.R Casie ChittyMr.M.M Marzook

The Report on Corporate Governance is given on page 12 of the Annual Report.

Events Occurring After the Reporting DateNo circumstances have arisen since the reporting date which would require adjustment to or disclosure in the Financial Statements.

Annual General MeetingThe Annual General Meeting will be held on 13th December at 10.30 a.m. The Notice of the Annual General Meeting appears on page 01.

By Order of the BoardParagon Ceylon PLC

Mr. W.N.S Canagaratna Mr. L.C.G Ratnanather P W Corporate Secretarial (Pvt) LtdChairman/Managing Director Finance Director Secretaries.

31st October, 2017


Paragon Ceylon PLC

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Information to Shareholders and Investors

02. Shareholder Analysis

No of Shares No of Shares Held As At Held As At

31/03/2017 % 31/03/2016 %

Shares Held By The Public 596,550 59.64 667,480 66.73 Shares Held By Others 403,730 40.36 332,800 33.27 1,000,280 100.00 1,000,280 100.00

01. Twenty Largest Shareholdings

2017 2016 No of Shares No of Shares Held % Held %

1 C T Holdings PLC 213,060 21.30 213,060 21.302 Mr J T Ratnanather 95,140 9.51 95,140 9.513 Mrs B A J Ratnasabapathy 48,860 4.88 48,860 4.884 Mr A J C Ratnanather 48,710 4.87 48,710 4.875 Cyril Gardiner (Private) Limited 47,520 4.75 47,520 4.756 SirChittampalamAGardinerTrust 46,400 4.64 46,400 4.647 Mr W N S Canagaratna 40,070 4.01 40,070 4.008 Mr G I Ratnanather 35,580 3.56 35,580 3.569 Mr J S Ratnanather 35,570 3.56 35,570 3.5610 Mrs M C P Canagaratna 30,400 3.04 30,400 3.0411 Ms P R Canagaratna 29,820 2.98 29,820 2.9812 Mrs A M de Alwis 29,250 2.92 29,250 2.9213 Dr. M T Stanislaus 28,860 2.89 28,860 2.8814 Mr S H A Gulamhusein 18,430 1.84 18,470 1.8415 Mr G T Fazleabas 15,760 1.58 15,760 1.5716 MrASaverimuttu 15,000 1.50 15,000 1.5017 Mrs R M Dissanaike 14,050 1.40 14,050 1.4018 CeylonPrinters–GroupEmployeesProvidentAssociation 10,320 1.03 10,320 1.0319 Mrs M I Emmanuel 10,000 1.00 10,000 0.9920 Mr M S Wijerathne 9,890 0.99 9,890 0.99 822,690 82.25 822,730 82.25 Balance Shareholders 177,590 17.75 177,550 17.75 Total 1,000,280 100.00 1,000,280 100.00

03. Distribution of Share holding as at 31st March 2017

2017 2016 2017 2016 2017 2016 No. of Shareholders No. of Shares Held % Held

1 1,000 260 292 44,044 114,890 4.40 11.48

1,001 10,000 53 29 153,436 72,550 15.34 7.25

10,001 100,000 17 18 589,740 599,780 58.96 59.92

100,001 1,000,000 1 01 213,060 213,060 21.30 21.30

Over 1,000,000 0 0 0 0 0 0

331 340 1,000,280 1,000,280 100.00 100

Paragon Ceylon PLC

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Information to Shareholders and Investors Contd...

04. Analysis of Shareholders as at 31st March 2017

Category No. of Shareholders No. of Shares %

Local Individuals 280 469,214 46.91 Local Institutions 40 372,206 37.21 Foreign Individuals 9 154,500 15.45 Foreign Institutions 2 4,360 0.43 Total 331 1,000,280 100.00

05. Directors’ and Ceo’s Shareholding as at 31st March 2017

Names of Directors No. of shares Percentage (%)

Mr. W N S Canagaratna 40,070 4.01 Mr. L C G Ratnanather Nil Mr. J P S Ratnanather Nil Mr. J B M Ponrajah 10 0.00 Mr. J.A.S.Ratnasabapathy Nil (Alternate Director to J P S Ratnanather) Mr. P S R Casiechitty Nil Mr. M M Marzook Nil

SHARE PRICES FOR THE YEAR

31/03/2017 Date 31/03/2016 Date

Market price per share Highest during the period Rs.77.50 06.03.2017 Rs.999.90 30.12.2015 Lowest during the period Rs.46.00 01.07.2016 Rs.56.00 31.03.2016 As at end of the period Rs.68.00 Rs.57.90

31/03/2017 31/03/2016

No. of transactions 177 778 No. of Shares traded 8,933 21,777 Value of Shares traded (Rs.) 498,437.00 5,620,982.00

PUBLIC HOLDING Public Holdings precentage as at 31st March 2017 59.64% Number of shareholders representing the above precentage 320

Paragon Ceylon PLC

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Statement of Directors’ Responsibilities

The Companies Act No. 07 of 2007 places the responsibility on the directors to prepare financial statements for each year comprising a balance sheet, statement of income, cash flow and changes in equity along with the accounting policies and notes thereto, which give a true and fair view of the state of affairs of the company at the Balance Sheet date and the results for that financial year.

The Directors are of the view that the financial statements have been prepared in accordance with all applicable laws and the Sri Lanka Accounting Standards which have been selected and applied consistently and judgments and estimates have been made which are reasonable and prudent.

The directors are responsible for ensuring that the company keeps accounting records with reasonable accuracy

of the financial position of the company to enable them to ensure that the financial statements comply with the

Companies Act and Sri Lanka Accounting Standards. They are also responsible for taking reasonable steps to safeguard the assets of the company and to have proper regard to the establishment of appropriate systems of internal controls, with a view to the prevention and detection of fraud and other irregularities.

The Directors are also responsible for taking reasonable steps to manage the resources of the Company and to design and implement appropriate internal control systems with a view to protect the Company from undue risks and loss. The financial reporting system has also been reviewed by the Board through the management accounts submitted at Board meetings.

The directors confirm that they have provided the Auditors of the company with the opportunity to visit all locations of the company and to undertake all inspections and verifications as they considered appropriate to conduct their audit.

The directors are of the view that the financial statements have been prepared in accordance with all applicable laws and the Sri Lanka Accounting Standards which have been selected and applied consistently and judgments and estimates have been made which are reasonable and prudent.

The Directors confirm that all statutory payments due and payable to all statutory and regulatory authorities have been made by the Company up to date.

The Directors are of the view that they have discharged their obligations as set out in this statement.

Paragon Ceylon PLC

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Statement of Corporate Governance

By Corporate Governance, we mean the system by which companies are managed and controlled. This is important both to the directors of the company and its subsidiaries.

The Board of directors of Paragon Ceylon PLC values the guiding principles of good Corporate Governance to maintain the company as a going concern as well as to comply with standards of sound business and accounting policies.

The extent to which the rules and principles of good Corporate Governance are implemented within the Company during the year is set out below.

The Board of DirectorsThe company’s board consists of 07 directors of whom 04 are non-executive directors. The names and designations are given on page 02. The board meets on a regular basis and has a formal schedule of matters reserved to it. The board is supplied with full and timely information to enable it to discharge its responsibilities effectively. During thefinancial year 2016/2017 the board held 01 meeting and reserved certain decisions to itself while others were delegated to the management to carry out the operations of the company smoothly. Circular resolutions are adopted by the board from time to time on matters of routine importance.

Vacancies in the board are filled by a decision of the whole board. All members appointed to the board are individuals of high standing in society, experts in their chosen fields and individuals of the highest standards of integrity.

Independent DirectorsAs at the balance sheet date Mr. P. S. R. Casie Chitty and Mr. M. M. Marzook functioned as independent non-executive directors.

Directors’ Interests in ContractsDirectors’ interests in contracts have been disclosed and declared at the meetings of the Directors during the year and are disclosed in Note 30 to the Accounts and also entered in the Interest Register.

Audit CommitteeThe audit committee consists of Mr. P. S. R. Casie Chitty and Mr. M. M. Marzook.

Remuneration CommitteeThe Remuneration Committee consists of Mr. P. S. R. Casie Chitty and Mr. M. M. Marzook. This Committee makes recommendations to the Board of Directors of the Company on the remuneration policy of the Company as well as the aggregate remuneration of the Executive Directors.

Related Party Transactions Review CommitteeThe Related Party Transactions Review Committee consists of Mr. P. S. R. Casie Chitty, Mr. M. M. Marzook and Mr L. C. G. Ratnanther

Disclosure of Information and ComplianceThe Financial statements of the Company are prepared in accordance with the Sri Lanka Accounting Standards andin accordance with the requirements of the Colombo Stock Exchange.

P W Corporate Secretarial (Pvt) Ltd who act as Secretaries to the Company advises the Board on appropriate procedures for the management of its meetings and duties, as well as the compliance of Corporate Governance in the Company.

Paragon Ceylon PLC

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Remuneration Committee Report

The Remuneration Committee appointed by the Board of Directors comprises of two (2) Independent Non-executive Directors as follows:

Mr. P. S. R. Casie Chitty - ChairmanMr. M. M. Marzook

The Remuneration Policy on remuneration packages is to attract and retain the best professionals and an experienced workforce and motivate, encourage high levels of performance in a competitive environment bearing in mind the business performance and stakeholder expectations.

The Committee met once during the year. The meetings were for the purpose of examining the remuneration package of Managing Director, Executive Directors and the Management Staff, their respective performances and deciding on appropriate remuneration packages for them; as well as determining incentives based on Company performance for all management staff.

The Committee also reviewed data concerning remuneration packages among comparable Companies. The Managing Director assists the Committee by providing all relevant information with regard to compensation package.

Performance Evaluation method to compensate employees is in place and succession plans have been defined.

P. S. R. Casie ChittyChairmanRemuneration CommitteeColombo

31st October, 2017

Paragon Ceylon PLC

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Audit Committee Report

The Audit Committee is appointed by the Board of Directors of the company and reports directly to the Board. The Audit Committee consists of two Non-Executive Directors - Mr. P.S.R. Casie Chitty (Chairman), and Mr. M. M. Marzook.

The Chairman of the Audit Committee is a Fellow of the Association of Chartered Certified Accountants - UK and an Associate member of the Chartered Institute of Management Accountants - UK. Mr. Marzook is an Associate Member of the Chartered Institute of Management Accountants - UK and, holds a Master of Business Administration from the, University of Sri Jayewardenepura.

The composition of the members of the Audit Committee satisfies the criteria as specified In the Standards on Corporate Governance for listed Companies.

They are:Mr. P. S. R. Casie Chitty - ChairmanMr. M. M. Marzook

The Audit Committee is empowered to examine all matters pertaining to the Financial Affairs of the Company and assist the Board of Directors in effectively discharging their duties. The Audit Committee examines the preparation, presentation and adequacy of disclosures in the financial statements and whether these are in accordance with SriLanka Accounting Standards and whether the financial reporting requirements, are in accordance with the Companies Act and other relevant financial reporting related regulations and requirements.

The Audit Committee also reviewed and approved the Annual and Interim financial statements prior to the final approval by the Board. In all instances, the Audit Committee obtained relevant declarations from the Finance Director and Head of Finance stating that the respective financial statements are in conformity with the applicable Accounting Standards, Company Law and other Statues including Corporate Governance Rules and that the presentation of such Financial Statements are consistent with those of the Previous Quarter or Year as the case may be, and further states any departures from financial reporting, statutory requirements and Group policies, (if any).

This Audit Committee also reviews the adequacy and proper continuous functioning of the Internal Control Procedures of the Company to obtain reasonable assurances that the financial statements of the Company accurately reflect the state of affairs of the Company and the results for the period to which it relates. This Audit Committee also assesses major business and control risks of the company.

The Audit Committee meetings were held thrice during the year. The Finance Director, and Head of Finance, attended all audit committee meetings by invitation and other Senior Managers attended such meetings as and when requested to do so by the Audit Committee.

The Audit Committee assessed the independence and performance of the external auditors Messrs Edirisinghe &Co, Chartered Accountants, and has recommended to the Board of Directors that they be re-appointed as Auditors subject to the approval of the shareholders.

P. S.R. Casie ChittyChairmanAudit CommitteeColombo,

31st October, 2017

Paragon Ceylon PLC

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Report of the Related Party Transactions Review Committee

The Related Party Transactions Review Committee is appointed by the Board of Directors of the company and reports directly to the Board. The Related Party Transactions Review Committee consists of two Non-Executive Directors and one Executive Director.

Composition of the CommitteeThe Committee comprise two non-executive Independent Directors and an executive director. The members of the Committee are as follows:

Mr. P. S. R. Casie Chitty - ChairmanMr. M. M. MarzookMr. L. C. G Ratnanather

In compliance with the requirements of the Listing Rules of the CSE, the Chairperson of the Committee is an Independent Director. The Company Secretary functions as the Secretary of the Committee.

Meetings of CommitteeThe Committee had one meeting during the financial year 2016/2017 and the attendance at these meetings is showed in the Corporate Governance Report. The Chief Executive Officer, and Head of Finance attended all meetings by invitation.

The Chairperson of the Committee reported the proceedings and significant issues discussed at the Committee meeting to the Board after every Committee meeting. The minutes of the Committee meetings were circulated to the Board.

Objective of the CommitteeThe purpose of the Committee is to review all proposed related party transactions prior to being entered into or if the transaction is expressed to be conditional to such review, prior to the completion of the transactions except for transactions explicitly exempted in the Terms of Reference which is in conformity with the Listing Rules.

Policies and ProceduresThe members of the Board of Directors of the Company have been identified as Key Management Personnel. In accordance with the Related Party Transaction Policy, the declarations are obtained from each Key Management Personnel of the Company for the purpose of identifying parties related to them. Based on the information furnished in these declarations, the Company retrieves data on related party transactions from the data base of the Company.

Related Party TransactionsDetails of other related party transactions entered into by the Company during the year 2016/2017 is disclosed in Note 31 to the Financial Statements.

DeclarationA Declaration by the Board of Director on compliance with the rules pertaining to Related Party Transactions appears on the Report of the Board of Director on page 06 of this Annual Report.

P. S. R. Casie ChittyChairmanRelated Party Transactions Review CommitteeColombo

31st October, 2017

Paragon Ceylon PLC

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Auditors Report

To The Shareholders Of Paragon Ceylon Plc

Report on the Financial StatementsWe have audited the accompanying financial statements of Paragon Ceylon PLC, which comprise the Statement of financial position as at March 31, 2017, and the Statement of profit or loss and other comprehensive income, Statement of changes in equity and, Statement of cash flows for the year then ended, and summary of significant accounting policies and other explanatory information.

Board’s Responsibility for the Financial StatementsThe Board of Directors (“Board”) is responsible for the preparation of these financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards (SLFRS/LKAS), and for such internal control as Board determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOur 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 comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statement that give a true and 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 and the reasonableness of accounting estimates made by Board, as well as evaluating the overall presentation of the financial statements.

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

OpinionIn our opinion, the financial statements give a true and fair view of the financial position of the Company as at March 31, 2017 and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards (SLFRS/LKAS).

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 and scope and limitations of the audit are as stated above.b) In our opinion:

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

- the financial statements of the Company comply with the requirements of section 151 of the Companies Act No. 07 of 2007.

Edirisinghe & Co.,Chartered Accountants.

Colombo 02.31st October 2017

Independent Auditor’s Report

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Auditors Report Statement of Profit or Loss and Other Comprehensive Income

Restated For the Financial Year Ended 31st March 2017 2016 Note Rs. Rs.

Revenue 04 1,981,781 1,623,979

Cost of Sales (1,356,412) (1,242,545)

Gross Profit 625,369 381,434

Other Income 05 3,253,650 3,384,783

Selling and Distribution Costs (246,088) (177,980)

Administration Expenses (4,753,434) (5,117,824)

Results from Operating Activities (1,120,503) (1,529,587)

Finance Costs 06 (39,553) (14,682)

Finance Income 06 206,337 140,703

Net Finance (Cost)/Income 166,784 126,021

Share of Associate Company’s Profit / (Loss) before Tax 07 38,379 54,091

Profit / (Loss) before Income Taxation 08 (915,340) (1,349,475)

Income Tax Expenses 09 215,952 20,929

Profit / (Loss) for the Year (699,388) (1,328,546)

Profit / (Loss) After Income Taxation (699,388) (1,328,546)

Other Comprehensive Income

Net Change in Fair Value of Available-for-Sale Financial Assets (7,411) 32,760

Deficit / (Surplus) Charge on Employee Retirement Benefit Obligation 351,157 (170,597)

Share of Associates Company’s Other Comprehensive Income 07 (3,001) 22,294

Other Comprehensive Income for the year 340,745 (115,543)

Total Comprehensive Income for the Year (358,643) (1,444,089)

Earnings / (Loss) per Share (Rs. Cts.) 10 (0.70) (1.33)

Dividend per Share (Rs. Cts.) 11 - -

Figuresinbracketsindicatedeductions.

Theaccountingpoliciesandnotestoaccountsformintegralpartofthesefinancialstatements.

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Statement of Financial Position

RestatedAs at 31.03.2017 31.03.2016 Note Rs. Rs.

Assets

Non - Current Assets Property , Plant and Equipment 12 - -Investment property 13 - -Non Current Financial Assets 14 1,132,349 1,129,813Deferred Tax Assets 15 1,750,699 1,488,568Total Non Current Assets 2,883,048 2,618,381

Current AssetsInventories 16 297,458 391,279Income Tax Refund 17 1,483,440 1,493,495Trade and Other Receivables 18 917,976 1,604,809Due from Related Companies 19 1,627,023 1,679,023Other Current Financial Assets 20 2,333,870 2,167,426Cash and Cash Equivalents 21 90,997 87,887Total Current Assets 6,750,764 7,423,919

TOTAL ASSETS 9,633,812 10,042,300

EQUITY AND LIABILITIES

Capital and ReservesStated Capital 22 1,000,280 1,000,280Reserves - -Available for Sale Reserve 23 197,678 205,089Retained Earnings 4,233,300 4,601,336Total Equity Attributable to Owners of the Company 5,431,258 5,806,705

Non - Current LiabilitiesInterest Bearing Borrowings 24 - -Retirement Benefit Obligation 25 603,239 998,985Total Non Current Liabilities 603,239 998,985

Current LiabilitiesTrade and Other Payable 26 1,094,753 1,137,254Interest Bearing Borrowings 24 256,792 350,506Due to Related Companies 27 2,247,770 1,748,850Income Tax Liabilities - -Total Current Liabilities 3,599,315 3,236,610

TOTAL EQUITY AND LIABILITIES 9,633,812 10,042,300

These Financial Statements are in compliance with the requirements of the Companies Act No: 07 of 2007.

The Directors are responsible for the preparation and presentation of these financial statements. Signed for on behalf of the Board of Directors on 31st October 2017.

The Accounting Policies and the Notes to the Accounts Form an integral part of these financial statements.

W. N. S. Canagaratna L. C. G. Ratnanather Chairman/Managing Director Finance Director

M. S. A. KariapperFinance Officer

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Statement of Changes in Equity

Available Stated Retained for Sale Capital Earnings Reserve Total Rs. Rs Rs. Rs.

Balance as at 1st April 2013 1,000,280 5,032,816 53,865 6,086,961

Net Profit / (Loss) for the Year - 241,629 - 241,629

Other Comprehensive income for the year - - 15,750 15,750Total Comprehensive income for the year - 241,629 15,750 257,379

Transfers - - - -

Dividends - - - -


Net Profit / (Loss) for the Year - 11,127 - 11,127

Other Comprehensive Income for the Year - 53,400 18,585 71,985Total Comprehensive Income for the Year - 64,527 18,585 83,112

Transfers - - - -

Dividends - (50,011) - (50,011)

Balance as at 1 April 2015 - Previously Stated 1,000,280 5,288,961 88,200 6,377,441

Prior Year Adjusment (Note 34) - 811,518 61,835 873,353

Balance as at 1 April 2015 - Restated 1,000,280 6,100,479 150,035 7,250,794

Net Profit / (Loss) for the Year - (1,328,546) - (1,328,546)

Other Comprehensive Income for the Year - (170,597) 55,054 (115,543)Total Comprehensive Income for the Year 1,000,280 4,601,336 205,089 5,806,705

Transfers - - - -

Dividends - - - -


Net Profit / (Loss) for the Year - (699,388) - (699,388)

Other Comprehensive Income for the Year - 351,157 (7,411) 343,746Total Comprehensive Income for the Year - (348,231) (7,411) (355,642)

Transfers - - - -

Dividends - Associate Company - (19,805) - (19,805)

Balance as at 31st March 2017 1,000,280 4,233,300 197,678 5,431,258

Figuresinbracketsindicatedeductions.

TheAccountingPoliciesandNotestoAccountsformanintegralpartofthesefinancialstatements.

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Statement of Cash Flows

For the Financial Year Ended 31st March 2017 2016 Rs. Rs.

Cash Flows from Operating ActivitiesProfit / (Loss) Before Income Taxation (915,340) (1,349,475)Adjustment for

Depreciation - 1,274Dividend Income (31,750) (30,863)Interest Income (206,337) (140,703)Interest Expenses 39,553 14,682Share of associate company’s profit before tax (38,379) (54,091)Lease Interest - -Profit or Loss on Assets Disposal - -Fair Value Adjustment - -Provision for Retirement Benefit Obligations 125,911 95,343

Operating Profit Before Working Capital Changes (1,026,342) (1,463,833)

Working Capital Adjustments(Increase) / Decrease in Inventories 93,821 (9,922)(Increase) / Decrease in Trade and Other Receivables 686,831 (151,495)Increase / (Decrease) in Trade and Other Payables (42,498) 488,616(Payment) / Receipt of Related Party Balances 550,920 748,240Cash Generated from Operations 262,732 (388,394)

WHT (21,098) (12,659)Interest Paid (39,553) (14,682)Dividends Paid - -Retirement Benefit Obligations Paid (170,500) -Income Tax Paid (6,400) (21,896)Net Cash Flow from Operating Activities 25,181 (437,631)

Cash Flows from Investing ActivitiesInterest Received 206,337 140,703Investment in Fixed Deposit (166,444) (75,775)Fixed Deposit Uplifted - -Dividends Received 31,750 30,863Purchases of Equity Securities - -Acquisition of Property, Plant and Equipment - -Sales Proceeds from Asset Disposal - -Net Cash Flow from Investing Activities 71,643 95,791

Cash Flows from Financing ActivitiesReceived / Paid Borrowings - -Loan Paid - -Lease Settlement During The Year - -Loan Obtained During The Year - -Net Cash Flow from Financing Activities - -

Net Increase / (Decrease) in Cash and Cash Equivalents 96,824 (341,840)

Cash and Cash Equivalents at the Beginning of the Year (262,619) 79,221

Cash and Cash Equivalents at the End of the Period NOTE A (165,795) (262,619)

NOTE A - CASH AND CASH EQUIVALENTSFavourable BalancesCash in Hand and at Bank 90,997 87,887Unfavourable BalancesBank Overdrafts (256,792) (350,506) (165,795) (262,619)

Figuresinbracketsindicatesdeductions.TheAccountingPoliciesandNotestoAccountsformanintegralpartofthesefinancialstatements.

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Corporate Information

Reporting Entity

The Paragon Ceylon PLC is a public limited liability company incorporated and domiciled in Sri Lanka and listed on Colombo Stock Exchange. The Company’s Registered Office and the principal place of business is located at No. 20, Sir Chittampalam A Gardiner Mawatha, Colombo 02.

Principal Activities and Nature of Operations

During the year the principle activities of the company were buying and selling of Computer Stationery and Rental of Premises.

BASIS OF PREPARATION

Statement of Compliance

The financial statements of the Company have been prepared in accordance with the Sri Lanka Accounting Standards (herein referred to as SLFRSs/LKASs) effective from 1st January 2012, laid down by The Institute of Chartered Accountants of Sri Lanka (ICASL) and in compliance with the Companies Act No. 07 of 2007 and the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995.

Responsibilities for the Financial Statements

The Board of directors is responsible for the preparation and presentation of the Financial Statements of the company as per the provisions of the Companies Act No 07 of 2007.

Approval of Financial Statements by the Board of Directors

The Financial Statements of the Company for the year ended 31st March 2017 (including comparatives) were approved and authorised for issue on 31st October 2017.

The Financial Statements include following components:

² The Statement of Profit and Loss and Comprehensive Income

Providing information on the financial performance of the company for the year.

² The Statement of Financial Position Providing information on the financial position of

the company as at the year.² The Statement of Changes in Equity Providing information on the movements of stated

capital and reserves of the during the period.² The Statement of Cash Flows Providing information to the users, on generating

cash and cash equivalents and utilization of the cash and cash equivalents.

² Notes to the Financial Statements Comprising accounting policies and other

explanatory notes.

Basis of Measurement

The Financial Statements have been prepared on the historical cost basis and applied consistently with no adjustments being made for inflationary factors affecting the Financial Statements, except for the following;

² Available for Sale Financial Assets are measured at fair value.

² Loans and Receivables are measured at amortized cost.

² Liability for defined benefit obligations is recognized as the present value of the defined benefit obligation.

Functional and Presentation Currency

Items included in the Financial Statements of the company are measured using the currency of the primary economic environment in which the company operates. Financial Statements are presented in Sri Lankan Rupees, which is the company’s functional and presentation currency.

Going Concern

The Directors have made an assessment of the Company’s ability to continue as a going concern, and being satisfied that it has the resources to continue in business for the foreseeable future confirm that they do not intend either to liquidate or to cease operations. Therefore the financial statements continue to be prepared on a going concern basis.

Comparative Information

The presentation and classification of the financial statements of the previous years have been amended, where relevant for better presentation and to be comparable with those of the current year.

Change in Accounting Policies

The accounting policies adopted by the Company are consistent with those used in the previous financial year.

Use of Estimates and Judgments

The preparation of financial statements in conformity with SLFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although the judgments and estimates are based on management’s best knowledge of the current events and actions, actual results may ultimately differ from those estimates. It also requires management to exercise its judgment in the process of applying the company’s accounting policies.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Assets and Bases of their Valuation

Property, Plant and Equipment

The company applies the requirements of the LKAS 16 on “Property, Plant and Equipment” in accounting for its owned assets which are held for use in the provision of services, or for administrative purposes and are expected to be used for more than one year.

Basis of Recognition

Property, plant and equipment are recognized if it is probable that future economic benefits associated with the asset will flow to the company and the cost of the asset can be reliably measured.


An item of property, plant and equipment that qualifies for recognition as an asset is initially measured at its cost. The cost of an item of property, plant and equipment compromises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use.

Depreciation

Depreciation is calculated by using a straight-line method on the cost or valuation of all property, plant and equipment, other than freehold land, in order to write off such amounts over the estimated useful economic life of such assets.

Depreciation is recognized in the statement of comprehensive income on a straight line basis over the estimated useful lives of each component of an item of property, plant and equipment. Depreciation of an asset begins when it is available for use and ceases at the date that the asset is disposed. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the company will obtain ownership by the end of the lease term.

Rate of Depreciation

Buildings 5 YearsWater Sanitation 13 YearsPlant and Machinery 8 YearsOffice Equipment 10 YearsFurniture and Fittings 10 YearsWater pump and Electrical Installation 5 YearsFixtures 20 Years

The assets residual values, useful lives and methods of depreciation are reviewed and adjusted as appropriate at each financial year.

Derecognition

An item of property, plant and equipment are derecognized upon replacement, disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset is included in the statement of comprehensive income in the year the asset is derecognized.

Leased Assets

Finance Leases - where the company is the lessee

Finance leases that transfer to the company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of minimum lease payments.

Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of comprehensive income.

Leased assets are depreciated over the remaining lease period or the useful life of the asset, whichever is shorter.

Operating Leases

Other leases are operating leases. Assets leased within the company is not recognized in the company’s statement of financial position. Operating lease payments are recognised as an operating expense in the statement of comprehensive income on a straight -line basis over the lease term.

Investment properties

Accounting Policy

Investment properties are properties held either to earn rental income or for capital appreciation or for both. But not for sale in the ordinary course of business, used in the production or supply of goods or service or for administrative services.

Basis of recognition

Investment property is recognized if it is probable that future economic benefits that are associated with the investment property will flow to the company and cost of the investment property can be measured reliably.


An investment property is measured initially at its cost. The cost of a purchased investment property comprises

Significant Accounting Policies

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Significant Accounting Policies Contd...

of its purchase price and any directly attributable expenditure. The carrying amount includes the cost of replacing part of an existing Investment Property at the time that cost is incurred if the recognition criteria are met and excludes the cost of day-to-day servicing of an Investment Property.

The Company adopts the cost model for subsequent measurement of investment properties in accordance with LKAS 40 - Investment Property. Accordingly, land classified as investment property is stated at cost, and buildings classified as investment property are stated at cost less any accumulated depreciation and any accumulated impairment losses. Provision for depreciation is made over the period of 20 years at the rate of 5% per annum using the straight-line method for buildings classified as investment property. Land is not depreciated.

Derecognition

Investment Properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in the income statement in the period of derecognition.

Financial instruments

Financial AssetsInitial recognition and measurement

Financial assets within the scope of LKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The company determines the classification of its financial assets at initial recognition.

All financial assets are recognized initially at fair value plus, in the case of assets not at fair value through profit or loss, directly attributable transaction costs. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognized on the trade date, i.e., the date that the company commits to purchase or sell the asset.

The Company’s financial assets include cash and fixed deposits, trade and other receivables, loans and other receivables, quoted and unquoted financial instruments.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with changes in fair value recognized in finance income or finance costs in the statement of comprehensive income.

The Company evaluates its financial assets held for trading, other than derivatives, to determine whether the intention to sell them in the near term is still appropriate. When the Company is unable to trade these financial assets due to inactive markets and management’s intention to sell them in the foreseeable future significantly changes, the company may elect to reclassify these financial assets in rare circumstances. The reclassification to loans and receivables, available-for-sale or held to maturity depends on the nature of the asset. This evaluation does not affect any financial assets designated at fair value through profit or loss using the fair value option at designation.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method (EIR), less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the income statement. The losses arising from impairment are recognized in the income statement in finance costs.

Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the company has the positive intention and ability to hold them to maturity. After initial measurement, held-to-maturity investments are measured at amortized cost using the effective interest method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the income statement. The losses arising from impairment are recognized in the income statement in finance costs.

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Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available for-sale or are not classified in any of the above categories of financial assets. Available-for-sale financial assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses on available-for-sale debt instruments, are recognized in other comprehensive income and presented in the “available for sale financial assets reserve” in equity. When an investment is derecognized, the gain or loss accumulated in equity is transferred to profit or loss. Available-for-sale financial assets comprise equity securities.

Impairment losses on available for sale financial assets are recognized by transferring the cumulative loss that has been recognized in other comprehensive income and presented in the “available for sale financial assets reserve” in equity to profit or loss. Changes in cumulative impairment losses attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognized, then the impairment loss is reversed, with the amount of the reversal recognized in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in other comprehensive income.

Derecognition

A financial asset (or, where applicable a part of a financial asset or part of a company of similar financial assets) is derecognized when:

* The rights to receive cash flows from the asset have expired

* The company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass through’ arrangement; and either,

(a) The company has transferred substantially all the risks and rewards of the assets, or

(b) The company has neither transferred nor retained substantially all the risks and rewards of the assets, but has transferred control of the assets.

When the company has transferred its rights to receive cash flows from an asset or has entered into a pass-

through arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of it, the asset is recognized to the extent of the company’s continuing involvement in it. In that case, the company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the company has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay.

Impairment of financial assets

The company assesses at each reporting date whether there is any objective evidence that a financial asset or a company of financial assets is impaired. A financial asset or a company of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the company of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a company of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial LiabilitiesInitial recognition and measurement

Financial liabilities within the scope of SLFRS/LKAS are recognized when and only when the company becomes a party to the contractual provisions of the financial instrument. Financial liabilities are recognized initially at fair value plus in case of financial liabilities which can be classified in to two categories as financial liabilities at fair value through profit and loss and other financial liabilities. Company has classified its financial liabilities in to other financial liability category.

Subsequent measurement

The company classifies non derivative financial liability into the other financial liabilities category. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent

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to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. Such financial liabilities measured at amortized cost includes trade and other payables, interest bearing borrowings, amounts due to related companies etc.

Derecognition

A financial liability is derecognized when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in statement of comprehensive income.

Investments in associates

Associates are those enterprises in which the group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but no control or joint control over those policies. Investments in associates are accounted for using the equity method of accounting as per paragraph 10 of LKAS 28 since the Company cannot apply the exemptions given under paragraphs 17 due to its equity are listed on Colombo Stock Exchange and are initially recognised at cost. The financial statements include the company’s share of gains and losses accounted under the equity method from the date that significant influence commences until the date that significant influence ceases. When the company’s share of losses exceeds its investment in an equity accounted investee, the carrying amount of that interest is derecognised and the recognition of further losses is discontinued except to the extent that the group has an obligation or has made payments on behalf of the investee

The following is the associate company.

CP Group Investment (Pvt) Ltd - Holing % - 33%

Inventories

Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories is based on a weighted average cost. The cost includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories, cost includes an appropriate share of factory overheads based on normal operating capacity.

Trade and Other Receivable

Trade and other receivables are non-derivative financial assets with fixed or determinable payments. They are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of the receivables.

Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognized in the statement of comprehensive income. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in the statement of comprehensive income.

Cash and Cash Equivalents

Cash and cash equivalents in the Statement of Financial Position comprise cash at banks and in hand. Cash and Bank balances are stated at recoverable value. Bank overdrafts and short term borrowings that are repayable on demand and forming 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 flows.

Other Current Assets

Other current assets include advances, deposits and prepayments. Advances and Deposits are carried at historical value less impairment and amortized over the period during which it is utilized.

Stated capital

Classification

Ordinary shares with discretionary dividends are classified as equity. Other shares are classified as equity or liability according to the economic substance of the particular instrument. Distribution to holders of a financial instrument classified as an equity instrument is charged directly to equity.

Share issue expenses

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

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Dividend to shareholders of the Company

Dividend distribution to the Company’s shareholders is recognized as a liability in the Company’s and the company’s financial statements in the period in which the dividends are approved by the Company’s shareholders.

Liabilities and Provisions

Liabilities classified as current liabilities on the statement of financial position are those which fall due for payment on demand of the creditor or within one year from the Statement of Financial Position date. Non-current liabilities are those balances that fall due for payment after one year from the Statement of Financial Position date. All known liabilities have been accounted for in preparing these financial statements. Provisions and liabilities are recognized when the company has a legal or constructive obligation as a result of past events and it is probable that an outflow of economic benefits will be required to settle the obligation.

Loans-Term and Short-Term Borrowings

Borrowings are initially recognized at fair value net of transactions cost. Subsequently, they are stated at amortized cost ; any difference between the proceeds (Net of transaction cost) and the repayable amount (including interest) is recognized in the Statement of Comprehensive Income over the period of the loan using effective interest method.

Trade and Other Payable

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one (1) year or less (Or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Provisions

A provision is recognized if, as a result of a past event, the company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

A provision for warranties is recognized when the underlying products or services are sold. The provision is based on historical warranty data and a weighing of

possible outcomes against their associated probabilities.

Retirement Benefit Obligation

Defined Benefit Plan - Gratuity

Defined benefit plan defines an amount of benefit that an employee will receive on retirement, usually dependent on one or more factors such as years of service and compensation. The defined benefit plan comprises the gratuity provided under the Act, No 12 of 1983.

The liability is valued using the gratuity formula prescribed by the Institute of Chartered Accountants of Sri Lanka. The liability is not externally funded.

Defined Contribution Plans - EPF and ETF

A defined contribution plan is a post employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligations to pay further amounts. Obligations for contributions to a defined contribution plan are recognized as an employee benefit expense in the income statement in the periods during which services are rendered by employees. The company contributes 12% and 3% of gross emoluments of employees to the Employees’ Provident Fund and to the Employees’ Trust Fund respectively.

Other liabilities

Other Liabilities include interest, fees and expenses and other provisions. These liabilities are recorded at amounts expected to be payable at the Reporting date.

Contingent liabilities and contingent assets

The Company do not recognize a contingent liability but disclose its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare circumstance where there is a liability that cannot be recognized because it cannot be measured reliably.

A contingent asset is a possible asset that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Company. The Company do not recognize a contingent asset but discloses its existence where inflows of economic benefits are probable, but not virtually certain.

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Taxation

Income tax expense comprises of current and deferred tax. The income tax expense is recognized in profit or loss except to the extent that it relates to the items recognized directly in the statement of other comprehensive income or statement of changes in equity, in which case it is recognized directly in the respective statements.

Current Taxes

The current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

The provision for income tax is based on the elements of income and expenditure as reported in the financial statements and computed in accordance with the provisions of the Inland Revenue Act No. 10 of 2006.

Deferred Taxation

Deferred tax is provided using liability method on temporary differences as at the reporting date between the tax written down value and their carrying amounts in financial reporting of the company for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognized for unused tax losses and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax assets to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that is probable that future taxable profits will allow the deferred tax assets to be recovered.

Revenue and Expenditure

Revenue Recognition

Revenue is recognized to the extent 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. Revenue is

measured at the fair value of the consideration received or receivable net of trade discounts and sales taxes. The company separately identifies different component of a single transaction. The following specific criteria are used for the purpose of recognition of revenue.

Sale of Goods

Revenue from the sale of goods is measured at fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated cost and possible return of goods can be estimated reliably, there is no continuing management involvement with goods and the amount of the revenue can be measured reliably.

Rendering of Services

Revenue is recognized at the fair value of the consideration received or receivable net of trade discounts and sales-related taxes collected on behalf of the government of Sri Lanka when the outcome of a transaction involving the rendering of services can be estimated reliably by reference to the stage of completion of the transaction. The outcome of a transaction is estimated when all the following conditions are satisfied,

- The amount of revenue can be measure reliably,- It is probable that the economic benefits associated

with the transaction will flow to the entity,- The stage of completion of the transaction at the end

of the reporting period can be measure reliably, and,- The costs incurred for the transaction and the costs

to complete the transaction can be measure reliably.

Interest

Interest income is recognized as it accrues in the statement of comprehensive income using effective interest method.

Dividends

Dividend is recognized when the right to receive such is established, which is generally when the dividend is declared.

Gains and Losses

Net gains and losses of a revenue nature arising from the disposal of property, plant and equipment and other non current assets, including investments, are accounted for in the statement of comprehensive income, after deducting from the proceeds on disposal, the carrying amount of such assets and the related selling expenses.

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Others

Other income is recognized on an accrual basis.

Expenditure Recognition

Expenses are recognized in the statement of comprehensive income on the basis of a direct association between the cost incurred and the earning of specific items of income. All expenditure incurred in the running of the business and in maintaining the property, plant and equipment in a state of efficiency has been charged to the statement of comprehensive income.

For the purpose of presentation of the statement of comprehensive income, the “function of expenses” method has been adopted, on the basis that it presents fairly the elements of the Company’s performance.

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets.

All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that the company incurs in connection with the borrowing of funds.

Finance Income and Costs

Finance income comprises of interest income. Interest income is recognized in the statement of comprehensive income as it accrues, using the effective interest method.

Finance expense comprises interest payable on all financial liabilities such as term loans, overdrafts and finance leases.

Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position.

Statement of Cash Flows

The statements of cash flow have been prepared using the “indirect method” in accordance with LKAS 07 on ‘Statement of Cash Flows’. Cash and cash equivalents comprise cash in hand and cash at bank that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Interest paid is classified under operating cash flows. Dividend received and interest income is classified under cash flows from investing activities. Dividend paid are classified under cash flow from financing activities.

Bank overdraft and short term borrowings that are repayable on demand and forming 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 Flows.

Events Occurring after the Reporting Date

In accordance with the LKAS 10 on ‘Events After the Reporting Period’, events after the reporting date are those events that occur between the reporting date and the date when the financial statements are authorized to issue. All material post reporting date events have been considered and where appropriate adjustments or disclosures have been made in the respective Notes to the financial statements.

Earnings Per Share (EPS)

The financial statements present earnings per share (EPS) for its ordinary shareholders. The EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period.

Related party transactions

Disclosure has been made in respect of the transactions in which one party has the ability to control or exercise significant influence over the financial and operating policies/decisions of the other, irrespective of whether a price is charged.

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Notes to the Financial Statements

01. Accounting Standards Issued But Not Effective As At The Reporting Date

The following Sri Lanka Accounting Standards have been issued by the Institute of Chartered Accountants of Sri Lanka which are not yet effective as at 31 st March 2017.

SLFRS 9 - Financial Instruments: Classification and Measurement

The objective of this Accounting Standard is to establish principles for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows.

The improvements introduced by SLFRS 9 includes a logical model for classification and measurement, a single, forward-looking ‘expected loss’ impairment model and a substantially-reformed approach to hedge accounting.

An entity shall apply this SLFRS to all items within the scope of LKAS 39 ‘Financial Instruments: Recognition and Measurement’.

SLFRS 9 will become applicable from annual reporting periods beginning on or after 1st April 2018, with early adoption permitted.

SLFRS 15 - ‘Revenue from Contracts with Customers’

T h i s A c co u nt i n g S ta n d a rd e sta b l i s h e s a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including LKAS 18-Revenue, LKAS 11-Construction Contracts and IFRIC 13-Customer Loyalty Programs.

This SLFRS will become applicable from 1st April 2018 and shall be applied prospectively as of the beginning of the annual period in which it is initially applied. The disclosure requirements of this SLFRS need not to be applied comparative information provided for periods before initial application of this SLFRS.

SLFRS 16 - Leases

SLFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer (‘lessee’) and the supplier (‘lessor’). SLFRS 16 will

replace Sri Lanka Accounting Standard - LKAS 17 (Leases) and related interpretations. SLFRS 16 introduces a single accounting model for the lessee, eliminating the present classification of leases in LKAS 17 as either operating leases or finance leases.

The new Standard requires a lessee to:

- recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.

- present depreciation of lease assets separately, from interest on lease liabilities in the income statement.

SLFRS - 16 substantially carry forward the lessor accounting requirement in LKAS-17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. SLFRS 16 will become Applicable from 1st April 2019. The impact on the implementation of the above Standard has not been quantified yet.

The Company is currently in the process of evaluating the potential effect of these standards on its Financial Statements and the impacts of the adoption of these standards have not been quantified as at the reporting date. Pending the completion of the detailed impact analysis, possible impact for SLFRS 9, SLFRS 15 and SLFRS 16 is not reasonably estimable as at the reporting date.

02. Financial Risk Management The company is exposed to a range of financial risks

through its number of financial instruments. In particular, the key financial risk categories are:

• Credit Risk / Counterparty Risk • Liquidity Risk • Market Risk • Operational Risk

This note presents information about the group’s exposure to each of the above risks, the objectives, policies and processes for measuring and managing risk and management of capital. Further quantitative disclosures are included throughout these financial statements.

Risk Management Framework

The Board of Directors has overall responsibility for the establishment and oversight of the risk

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Notes to the Financial Statements Contd...

management framework. The company risk management processes are established to identify and analyse the risks faced by the group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the companies activities.

The Board of Directors oversees how management monitors compliance with the companies risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the company.

a. Credit Risk / Counterparty Risk

Credit risk arises from credit exposure to unsecured customers and cash and cash equivalents and deposits/investments with banks and financial institutions and when banks/financial institutions fail to discharge their contractual interest and principal on their debt obligations due to declining financial strength. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings or to historical information about counterparty default rates.

Management of Credit Risk

The company manages its credit risk with different types of instruments as follows

Fixed Deposits

Deposits are placed only with reputed and established commercial banks and other licensed financial institutions.

Trade and Other Receivables

The company is responsible for managing and analysing the credit risk for each of their new customers before standard payment and delivery terms and conditions are offered. The management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Sources of credit risks are identified, assessed and monitored and the company has policies to manage the risks within various subcategories. The utilization of credit limits is regularly monitored. Management does not expect any losses from non-performance by these counterparties.

The company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for group’s of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets.

The maximum exposure to credit risk for trade and other receivables at the reporting date is Rs. 917,976.00 (Rs. 1,604,809.00) which is recorded in Note 18.

Cash and Cash Equivalents

The company held cash and cash equivalents of Rs. 90,997.00 (Rs. 87,887.00) which is recorded in Note 21. Which represents its maximum credit exposure of these assets.

Respective credit ratings of banks in which company cash balances held are as follows,

² Commercial Bank of Ceylon PLC - AA+(lka)

b. Liquidity Risk

Liquidity risk is the risk that the company will encounter difficulty in meeting the obligation associated with its financial liabilities that are settled by delivering cash or other financial assets.

Management of Liquidity Risk

The companies approach to managing liquidity is to ensure, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to its reputation. The companies approach to managing its liquidity risk is as follows:

² Regularly monitoring of the group’s assets and liabilities in order to forecast cash flows for up to future period.

² Monitoring the facility limits i.e. overdrafts with banks.

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The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments.

c. Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risks;

² Foreign Exchange Risk ² Interest Rate Risk ² Equity Price Risk

Foreign Exchange Risk

Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The company does not use any derivative financial instruments to hedge the risk. The company is not exposed to foreign currency risk as it does not operate internationally.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The companies exposure to the risk of changes in market interest rates relates primarily to the companies long-term debt obligations with floating interest rates.

Equity Price Risk

The Companies listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities

d. Operational Risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the companies processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the companies operations.

² Requirements for appropriate segregation of duties, including the independent authorization of transactions

² Compliance with regulatory and other legal requirements

² Training and professional development² Ethical and business standards

03. Capital Management The companies objectives when managing capital

are to safeguard the companies ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Consistent with others in the industry, capital is monitored on the basis of the gearing ratio.

Less than 3 3 to 12 1 to 5

As at 31st March 2017 On demand months months years > 5 years Total (Rs)

Loans and borrowings - - - - - -

Trade and other payable - 3,342,523 - - - 3,342,523

- 3,342,523 - - - 3,342,523

Less than 3 3 to 12 1 to 5

As at 31st March 2016 On demand months months years > 5 years Total (Rs)

Loans and borrowings - - - - - -

Trade and other payable - 2,886,104 - - - 2,886,104

- 2,886,104 - - - 2,886,104

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04. Revenue Turnover - Sale of Goods 1,981,781 1,623,979 NBT Expense - - 1,981,781 1,623,979

05. Other Income Advertising 224,000 224,000 Rent Income 2,997,900 3,129,920 Dividend Income 31,750 30,863 Sundry Income - - 3,253,650 3,384,783

06. Net Finance (Cost)/Income

Finance Cost Interest Expense (39,553) (14,682) Intercompany Interest - - Total Finance Cost (39,553) (14,682) Finance Income Interest Income 206,337 140,703 Intercompany Interest - - Total Finance Income 206,337 140,703 Net Finance (Cost)/Income 166,784 126,021

07. Share Of Associate Company’s Profit / (Loss) Before Tax Holding % Share of associate company’s Profit / (Loss) before tax CP Group Investment (Pvt) Ltd 33 38,379 54,091 38,379 54,091 Share of associate company’s Other Comprehensive income CP Group Investment (Pvt) Ltd 33 (3,001) 22,294 (3,001) 22,294

08. Profit Before Income Tax Expense Profit before income tax expense is stated after charging all expenses including the following :

Included in Administrative Expenses Directors Emoluments 931,973 767,993 Directors Fees and Travelling 216,000 216,000 Auditors Remuneration 224,430 216,047 Depreciation - 1,274 Defined Benefit Cost, Gratuity 125,911 95,344 Salaries, Wages and Overtime 600,967 544,849 EPF 54,550 51,614 ETF 13,572 12,870 Bonus 55,866 158,198 Security Services - -

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Restated For the Financial Year Ended 31st March 2017 2016

Rs. Rs.

09. Income Tax Expenses Current Income Tax Expense Tax Charge on Profit For The Year (09.1) 46,179 38,544 Deemed Dividend Tax - - Adjustments in Respect of Current Income Tax of Previous Year - - 46,179 38,544 Deferred Income Tax Expense Relating to Origination and Reversal of Temporary Differences (Note 15) (262,131) (59,473) Income Tax Expense / (Credit) in Statement of Comprehensive Income (215,952) (20,929)

09.1 Reconciliation between current tax expense and the product of accounting profit

Accounting Profit Before Income Taxation (915,340) (1,349,475)Deficit / (Surplus) Charge on Employee Retirment Benefit - -Adjusted Accounting Profit (915,340) (1,349,475)Income Not Subject to Income Tax - -Aggregate Disallowed Items 128,061 202,276Aggregate Allowable Income (238,087) (171,566)Aggregate Allowable Expenses (188,975) (26,765)Taxable Profits from ordinary activities (1,214,341) (1,345,530)

Interest Income 206,337 140,703Tax Losses Brought Forward and Utilized (72,218) (49,246)Taxable Income 134,119 91,457Tax at 28% or Other 37,553 25,608Share of associate company’s current tax 8,626 12,936Deemed Dividend Tax - -Tax on Profit for the Year 46,179 38,544

Tax Loss at the Beginning of the Year 5,641,971 4,291,524Adjustments for Tax Loss Brought Forward - -Taxable Loss for the Year 1,445,000 1,399,693Tax Loss Utilized for the Year (72,218) (49,246)Tax Loss at the End of the Year 7,014,753 5,641,971

Effective income tax rate %Paragon Ceylon PLC is liable for income tax at a rate of 28% on its business profits and other profits.Deferred tax has been computed using the future effective tax rate of 28%.

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11. Dividends Per Share Amounts used as Numerator Dividend Paid - -

Number of Ordinary Shares used as the Denominator

Number of Ordinary Shares in Issue 1,000,280 1,000,280

- -


10. Earnings Per Share The basic earnings per share is calculated by dividing the net profits for the year attributable to ordinary

shareholders by weighted average number of ordinary shares outstanding during the year. Amounts used as Numerator Profit Attributable to Ordinary Shareholders (699,388) (1,328,546)

Number of Ordinary Shares used as the Denominator Number of Ordinary Shares in Issue 1,000,280 1,000,280 Earning / (Loss) per Share (Rs. Cts.) (0.70) (1.33)

Number of Ordinary Shares in Issue At the Beginning of the Year 1,000,280 100,028 Increase in the Number of Shares in Issue due to the Share Split - 900,252 Total Number of Shares in Issue as at the end of the Financial Year 1,000,280 1,000,280


Rs. Rs.

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Balance as at Additions / Disposals Balance as at 01.04.2016 Transfers 31.03.2017

Rs. Rs. Rs. Rs.

Cost/Valuation

At Cost Building 2,023,248 - - 2,023,248 Plant and Machinery 4,788,896 - - 4,788,896 Furniture and Fittings 474,689 - - 474,689 Electrical Installation 380,259 - - 380,259 Computers 182,800 - - 182,800 Telephone and Others 29,933 - - 29,933 Partition 113,893 - - 113,893 Computers - - - - Motor Vehicles - - - - Total Cost of Freehold Assets 7,993,718 - - 7,993,718

At Cost/Valuation Motor Vehicle - - - - Total Cost/Valuation of Leasehold Assets - - - -

Total Cost/Valuation Property, Plant & Equipment 7,993,718 - - 7,993,718

DEPRECIATION

Building 2,023,248 - - 2,023,248 Plant and Machinery 4,788,896 - - 4,788,896 Furniture and Fittings 474,689 - - 474,689 Electrical Installation 380,259 - - 380,259 Computers 182,800 - - 182,800 Telephone and Others 29,933 - - 29,933 Partition 113,893 - - 113,893 Computers - - - - Motor Vehicles - - - - Total Depreciation of Freehold Assets 7,993,718 - - 7,993,718

Motor Vehicle - - - - Total Depreciation of Leasehold Assets - - - -

Total Depreciation Property, Plant and Equipment 7,993,718 - - 7,993,718

Total Carrying Amount of Property, Plant and Equipment - -

Gross Carrying Value of Fully Depreciated Assets The cost of the fully depreciated assets of the Company amounts to Rs.7,993,718 respectively as at reporting

date.


12. Property, Plant and Equipment

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13. Investment Property Cost as at 01st April 2,023,248 2,023,248 Add: Additions /improvements - - Cost as at 31st March 2,023,248 2,023,248 Accumulated depreciation Balance as at 01st April 2,023,248 2,023,248 Charge for the year - - Accumulated depreciation as at 31st March 2,023,248 2,023,248

Balance as at 31st March - -

Rental income derived from investment property Ceylon Printers PLC 01 month 12 months Office Equipment PLC 84,985 1,019,820 Kalamazoo Industries (Pvt) Ltd 41,975 503,700 Quantum Consulting (Pvt) Ltd 74,865 898,380 Avora Digital Imaging (Pvt) Ltd 3,000 36,000 45,000 540,000 2,997,900

Direct operating expenses arising from investment property that generated rental income during the period

CT Holdings 578.25 6,939

Additional information;

(i) No of floors available in the building 06 (Six)(ii) No of square feet available in the building 30,126 sq.ft.(iii) Names of tenants Ceylon Printers PLC Kalamazoo Industries (Pvt) Ltd Office Equipment PLC Avora Digital Imaging (Pvt) Ltd Quantum Consulting (Pvt) Ltd(iv) Whether the tenants are related parties of the Company Ceylon Printers PLC Kalamazoo Industries (Pvt) Ltd Office Equipment PLC(v) The remaining usable life of the building (in years) 10 years(vi) Address of the building : No.20, Sir Chittampalam A Gardiner

Mawatha, Colombo 02.(vii) Extent of land on which the building is constructed : (a) Land covered by the building (built area) 162.04 perches (b) Land not covered by the building (not built area) 1.64 perches(viii) Latest rates payment (to the Municipal Council) Rs. 250,173 per quarter

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14. Non Current Financial Assets Financial Assets - Available for Sale 1,132,349 1,129,813 1,132,349 1,129,813

Financial Assets - Available For Sale Fair Value as Fair Value as

at 31.03.2017 at 31.03.2016 Quoted Equity Securities 138,600 143,010Private Equity 993,749 986,803Total Investment in Equity Securities 1,132,349 1,129,813

All Investments in Quoted Equity Securities are Carried at Fair Value.All Iinvestments in Unquoted Private Equity Securities, whose Fair Value Cannot be Reliably Measured, are Carried at Cost.

Investment in Quoted Equity Securities Fair Value Fair Value No of Cost as at as at No of Cost as at as at Shares 31.03.2017 31.03.2017 Shares 31.03.2016 31.03.2016

CT Land Development PLC 3,150 22,050 138,600 3,150 22,050 143,010 Total investment in Quoted Equity Securities 22,050 138,600 22,050 143,010

Market value per share are based on the list published by Colombo Stock Exchange.

Investments In Private Equity Percentage No of Cost as at Percentage No of Cost as at of Holding Shares 31.03.2017 of Holding Shares 31.03.2016

Investments in Unlisted Companies

Associate Companies CP Group Investment (Pvt) Ltd 33% 5,000 50,000 33% 5,000 50,000

Associate Companies Carrying value Carrying value on equity basis on equity basis

as at 31.03.2017 as at 31.03.2016

CP Group Investment (Pvt) Ltd (Note 14.1) 993,749 986,803

Subsidiary Companies - -

Other Investments - -

Total Investment in Private Equity 993,749 986,803

Total Investment in Equity Securities 1,132,349 1,129,813



Rs. Rs.

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Carrying value on equity basis CP Group Investment (Pvt) Ltd Net assets at the beginning of the year 986,803 923,354 Add: Profit / (loss) before tax accruing to the Company 38,379 54,091 Less: Income tax (8,626) (12,936) Add: Other comprehensive income for the year (3,001) 22,294 Less: Dividend received (19,805) - Net assets at the end of the year 993,749 986,803

Summarized financial information of associate CP Group Investment (Pvt) Ltd Income 360,648 457,162 Less : Expenses 244,349 293,251 Profit before taxation 116,299 163,911 Less : Income tax expense / (reversal) 26,140 39,201 Profit for the period 90,159 124,710 Other comprehensive income (9,095) 67,558 Total comprehensive income for the period 81,064 192,268

14. Non Current Financial Assets (Contd..)



15. Deferred Tax Assets As at the beginning of the year 1,488,568 1,429,095 Recognised in Statement of Comprehensive Income 262,131 59,473

As at the End of the year 1,750,699 1,488,568 Deferred Tax Assets originated due to temporary differences on following assets and liability bases On Property, Plant and Equipment 2,040 7,207 On Retirement Benefit Obligation 168,907 279,715

On Tax Loss Carried Forward 1,579,752 1,201,646 Total Deferred Tax Assets 1,750,699 1,488,568 Deferred Tax Liabilities originated due to temporary differences on following assets and liability bases On Property, Plant and Equipment - - Total Deferred Tax Liabilities - -

Net Deferred Tax Assets 1,750,699 1,488,56816. Inventories Finished Goods 297,458 391,279 Provision for obsolete Stock - - 297,458 391,27917. Income Tax Liabilities/(Refund)

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Balance at the Beginning of the year (1,493,495) (1,484,548) Tax Paid for Previous Year - - Under / (Over) Provision in Respect for Previous Year - - (1,493,495) (1,484,548) Tax Provision for the Year 37,553 25,608 SRL Provision for the Year - - (1,455,942) (1,458,940) WHT (21,098) (12,659) Tax Paid for the year (6,400) (21,896) Balance at the end of the year (1,483,440) (1,493,495)


18. Trade And Other Receivable Trade Debtors 580,917 1,226,537 Provision for Bad Debts (34,703) (34,703) 546,214 1,191,834 Refundable Deposits 344,463 344,463 Kalamazoo Systems PLC 3,000 3,000 WHT Receivable 4,199 4,199 Prepayments 15,000 30,000 Tax Reserve Certificate 4,600 4,600 Other Receivables - Salary Advance 500 500 Interest Income Receivable - 26,213 Other Receivable - - 917,976 1,604,809

The maximum exposure to credit risk for trade and other receivables at the reporting date is Rs. 917,976.00

Total Neither past Past due but not Impaired due nor 0-60 61-120 121-180 impaired Days Days Days Rs. Rs. Rs. Rs. Rs.

917,976 - - 5,100 912,876 Balance as at 31st March 2017 917,976 - - 5,100 912,876

19. Due From Related Companies Ceylon Printers PLC - - International Computers (Ceylon) Ltd 619,767 695,767 Kalamazoo Industries (Private) Ltd 1,007,256 983,256 Office Equipment PLC - - C.P. Group Investments (Pvt) Ltd. - - 1,627,023 1,679,023

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20. Other Current Financial Assets Loans and Receivables Held to Maturity Investments 2,333,870 2,167,426 Loans and Receivables - - 2,333,870 2,167,426 Held to Maturity Investments Bank Deposits (Non equity investments) 2,333,870 2,167,426 2,333,870 2,167,426

Bank deposits include fixed deposits which are measured at amortised cost using the effective interest rate. This financial assets are expected to be recovered through contractual cash flows.

Loans and Receivables Loans to Related Parties - - - -

21. Cash And Cash Equivalents Components of Cash and Cash Equivalents

Favourable Cash and Cash Equivalent Balances Cash at Bank 85,997 82,887 Cash In Hand 5,000 5,000 90,997 87,887 Unfavourable Cash and Cash Equivalent Balances Bank Overdraft (256,792) (350,506) (256,792) (350,506)

Cash and Cash Equivalents for the purpose of Cash Flow Statements (165,795) (262,619)

22. Stated Capital 1,000,280 Ordinary Shares in issue 1,000,280 1,000,280 1,000,280 1,000,280

The Company has done a share split on the basis of 10 (Ten) Ordinary Shares for 01 (One) Ordinary Share held, increasing the Ordinary Shares in issue from 100,028 shares, to 1,000,280 Ordinary Shares, on 18th February 2016.

Number of Ordinary Shares in Issue At the Beginning of the Year 1,000,280 100,028 Increase in the Number of Shares in Issue due to the Share Split - 900,252 Total Number of Shares in Issue as at the end of the Financial Year 1,000,280 1,000,280

23. Available For Sale Reserve

Balance as at 01st April 205,089 88,200 Prior Year Adjustment - 61,835 Balance as at 1 April 2015 - Restated 205,089 150,035 Add: Gains available for sale financial assets (7,411) 55,054 Less: Adjustment due to amalgamation - - Balance as at 31st March 197,678 205,089

Investments classified under this category are initially recognized and subsequently measured at fair value and the changes in fair value are recognized in other comprehensive income and presented under “Available for sale reserve” with in equity.

Restated 2017 2016

Rs. Rs.

Paragon Ceylon PLC

A N N U A L R E P O R T 2 0 1 7 41



24. Interest Bearing Borrowings NON CURRENT Obligation under Finance Lease - - Total Non Current Loans and Borrowings - -

CURRENT Bank Overdraft 256,792 350,506 Obligation under Finance Lease - - Term Loan - - Loans from Other Parties - - Total Current Loans and Borrowings 256,792 350,506

25. Retirement Benefit Obligation Movement in the defined benefit obligation recognized in the financial position :

As at the beginning of the year 998,985 733,045 Transfers - - Charge for the period (225,246) 265,940 Benefits paid (170,500) - As at the end of the year 603,239 998,985

Changes in the Present Value of Defined Benefit Obligation As at the beginning of the year 998,985 733,045 Interest for the year 99,418 57,177 Charge for the year 26,493 38,166 Benefits paid (170,500) - Deficit / (Surplus) charge for the year (351,157) 170,597 Transfers - - As at the end of the year 603,239 998,985

The Amounts Recognized in the Statement of Comprehensive Income Interest for the year 99,418 57,177 Charge for the year 26,493 38,166 Deficit / (Surplus) Charge for the year (351,157) 170,597 Total (225,246) 265,940

Sensitivity of assumptions employed in actuarial valuation The following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed

with all other variables held constant in the employment benefit liability measurement.

The sensitivity of the Income Statement and Statement of Financial Position is the effect of the assumed changes in discount rate and salary increment rate on the profit or loss and employment benefit obligation for the year.

1% - (37,884) (37,884) (1%) - 40,803 40,803 - 1% 41,475 41,475 - (1%) (39,147) (39,147)

The Employee Benefit Liability of the Company is Based on the Gratuity Formulae in Appendix E of LKAS 19 - Employee Benefits.

The principle assumptions used in determining the cost of employee benefits were: - Rate of Discount 12.00% 10.05% - Salary Increment Rate 9.25% 10.00% - Retirement Age 55 years and 80 years

Increase/ (Decrease) in

Discount Rate

Increase/ (Decrease) in

Salary Increment

Sensitivity effect on Income statement Increase /(Reduction)

in results for the year

Sensitivity effect on Employment Benefit Obligation Increase /

(Decrease) in the Liability

Paragon Ceylon PLC

A N N U A L R E P O R T 2 0 1 742

26. Trade And Other Payables Trade Creditors 778,472 778,227 NBT Payable - - VAT Payable - - Expense Creditors 316,281 359,027 1,094,753 1,137,254

27. Due To Related Companies Ceylon Printers PLC 1,360,295 1,497,314 International Computers (Ceylon) Ltd - - Kalamazoo Industries (Private) Ltd - - Office Equipment PLC 887,475 251,536 C.P. Group Investments (Pvt) Ltd. - - 2,247,770 1,748,850

28. Commitments And Contingencies There were no commitments and contingencies existing as at the reporting date.

29. Events Occurring After The Reporting Date There were no circumstances that have arisen, since the reporting date, which would require adjustments to,

or disclosure, in the financial statements.



Paragon Ceylon PLC

A N N U A L R E P O R T 2 0 1 7 43

30. Directors Interest In Contracts The directors of the company are also the directors of following companies. Name of Company Names of Directors

Ceylon Printers PLC Mr. W. N. S. Canagaratna Mr. L. C. G. Ratnanather Mr. J. P. S. Ratnanather Mr. P. S. R. Casie Chitty Mr. M. M. Marzook

International Computers (Ceylon) Ltd Mr. W. N. S. Canagaratna Mr. L. C. G. Ratnanather Mr. J. P. S. Ratnanather Kalamazoo Industries (Pvt) Ltd Mr. W. N. S. Canagaratna Mr. L. C. G. Ratnanather Mr. J. P. S. Ratnanather Office Equipment PLC Mr. W. N. S. Canagaratna Mr. L. C. G. Ratnanather Mr. J. P. S. Ratnanather Mr. P. S. R. Casie Chitty Mr. M. M. Marzook

C. P Group Investment (Pvt) Ltd Mr. W. N. S. Canagaratna Mr. L. C. G. Ratnanather

Other than disclosed above none of the Directors are either directly or indirectly interested in any existing or proposed contracts with the Company.

Key management personnel (KMP)

Compensation of key management personnel 2016/17 2015/16 Short term employee benefits 1,147,973 983,993

Other than disclosed above none of the Directors are either directly or indirectly interested in any existing or proposed contracts with the Company.


Paragon Ceylon PLC

A N N U A L R E P O R T 2 0 1 744

31. Related Party TransactionsDetails of significant related party transactions that have been carried out in the ordinary course of business in an arms length basis with entities are disclosed below.

All unsecured and repayable on demand. No guarantees have been issued or received in respect of any related party balances. All balances are fully recoverable and payable in cash.

The company has entered into transactions during the year with following companies in which a Director of the company is also a Director of the said company.

2017 2016For the Financial Year Ended 31st March Rs. Rs.

Name of Company Nature of TransactionCeylon Printers PLC Rent income 1,019,820 1,019,820 Sale of Goods 31,600 9,800 Fund transfers (1,188,439) (42,005) (137,019) 987,615

International Computers (Ceylon) Ltd Fund transfers (76,000) - (76,000) -

Kalamazoo Industries (Private) Ltd Rent income 898,380 898,380 Fund transfers (874,380) 394,132 24,000 1,292,512

Office Equipment PLC Rent income 503,700 503,700 Fund transfers 132,239 - 635,939 503,700


Outstanding Balances Arising From Sale / Purchase of Goods / Services

2017 2016 For the Financial Year Ended 31st March Debits Credits Debits Credits Rs. Rs. Rs. Rs.

Ceylon Printers PLC - - - 1,497,314 International Computers (Ceylon) Ltd 619,767 1,360,295 695,767 - Kalamazoo Industries (Private) Ltd 1,007,256 887,475 983,256 - Office Equipment PLC - - - 251,536 C.P. Group Investments (Pvt) Ltd. - - - - 1,627,023 2,247,770 1,679,023 1,748,850

There have been no related party transactions other than those disclosed above to be disclosed in the financial statements.

Paragon Ceylon PLC

A N N U A L R E P O R T 2 0 1 7 45



32. Assets Pledged The following assets have been pledged to Commercial Bank PLC, as securities for the facilities obtained.

Facility Security Amount (Rs.) OverDraft Facility 1. Lien over following fixed deposit in the name of paragon ceylon PLC. 450,000 2. Letter of authority and set-off. 3. Board resolution.

33. Reclassification During prior periods the Company’s building used for rental purposes, was classified under property, plant and

equipment instead of classifying the building under investment property, as an error.

During the year, the investment property has been reclassified out of property, plant and equipment and shown separately on the face of statement of financial position to enhance the comparability with the current year’s financial statements as disclosed below.

Description Current Year Classification Previous Year Classification Rs. Rs. Cost WDV Cost WDV

Property, Plant and Equipment - - 2,023,248 - Investment Property 2,023,248 - - - Total 2,023,248 - 2,023,248 -

34. Restated Financial Statements During prior periods, investment in asssociate was classified as non-current financial assets and carried at cost

less accumulated impairment. However, the investment should have been accounted for under equity method of accounting as per paragraph 10 of LKAS 28 since the Company cannot apply the exemptions given under paragraphs 17 due to its equity are listed on Colombo Stock Exchange.

As this error in the prior period constituted a error, in terms of LKAS 08 -’Accounting Policies, Changes in Accounting Estimates and Errors’, the statement of financial position as at 31 March 2016 and the statements of comprehensive income for the year ended 31 March 2016 and the retained earnings balance in the statement of changes in equity as at 1 April 2015 were restated.

The summary of correction of the error is as follows;

2016 Rs.

Statement of financial position Investment in Associates - Increase 936,802 Total 936,802

Statement of comprehensive income Share of Associate Company’s Profit / (Loss) before Tax - Increase 54,091 Share of associate company’s current tax (12,936)

Statement of other comprehensive income Share of Associates Company’s Other Comprehensive Income - Decrease 22,294

Statement of changes in equity Retained Earnings as at 1 April 2015 - Increase 811,518 Available for Sale Reserve as at 1 April 2015 - Increase 61,835 Total 936,802

Paragon Ceylon PLC

A N N U A L R E P O R T 2 0 1 746

Notes

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Paragon Ceylon PLC

A N N U A L R E P O R T 2 0 1 7 47

Form of Proxy

I/We……………………………………………..................……………...……………………………………………....

of……....………………………………………………..............………………………….......………………………..... being a member /members of Paragon Ceylon PLC hereby appoint,

(i) …………………………………....................………..................…………………..……………………………….

of …………………………………………………………...................….....................................or failing him/her.

MR. W. N. S. CANAGARATNA ....................................................................................................... WHOM FAILINGMR. L.C. G. RATNANATHER .......................................................................................................... WHOM FAILINGMR. J. P. S. RATNANATHER ........................................................................................................... WHOM FAILINGMR. J.A.S.RATNASABAPATHY ....................................................................................................... WHOM FAILINGMR. J B M PONRAJAH .................................................................................................................. WHOM FAILINGMR. P. S. R. CASIE CHITTY ............................................................................................................ WHOM FAILINGMR. M M.MARZOOK ................................................................................................................... WHOM FAILING

(ii) the Chairman of the Meeting as my/our proxy to vote as indicated hereunder for me /us and on my/our behalf at the 60th Annual General Meeting of the Company to be held on 13th December 2017 at 10.30 a.m. and at any adjournment thereof .

For Against

1. To pass the ordinary resolution set out in the Notice of Meeting under item 3 for the appointment of Mr. W.N.S. Canagaratne.

2. To pass the ordinary resolution set out in the Notice of Meeting under item 3 for the appointment of Mr. L. C. G. Ratnanather.

3. To pass the ordinary resolution set out in the Notice of Meeting under item 3 for the appointment of Mr. J P S Ratnanather .

4. To re-elect Mr. P S R Casie Chitty who retires by rotation at the Annual General Meeting, a Director.

5. To authorise the Board of Directors to determine contributions to charities and other donations.

6. To re-appoint Messrs, Baker Tilly Edirisinghe & Co., as Auditors and authorise the Directors to determine their remuneration.

* The proxy may vote as he/she thinks fit on any other resolution brought before the Meeting.

Dated this ………………………………day of ……………………………..2017.

……………...............…………… ……….……............... Date Signature of Member(s)

Paragon Ceylon PLC

A N N U A L R E P O R T 2 0 1 748

Form of Proxy Contd...

Instructions As To Completion Of Proxy Form

1 To be valid, this proxy form must be completed, signed, and deposited at the Registered Office of the Company, No. 20, Sir Chittampalam A Gardiner Mawatha, Colombo 2, Sri Lanka by 11th December 2017.

2 In perfecting the form of proxy, please ensure that all details are legible

3 If you wish to appoint a person other than the Chairman as your proxy, please insert the relevant details at (i) overleaf and initial against this entry. A proxy need not be a member of the Company.

4 Please indicate with an” X” in the space provided how your proxy is to vote on each resolution. If no indication is given, the proxy at his discretion will vote as he thinks fit. Please delete (*) if you do not wish your proxy to vote as he thinks fit on any other resolution brought before the Meeting.

5 In the case of a Company/ Corporation, the proxy must be under its Common Seal, which should be affixed and attested in the manner prescribed by its Articles of Association.

6 In the case of joint holders, only one need to sign. The votes of the senior holder who tenders a vote will alone be accounted.

2017

Ceylon Printers PLCAnnual Report

Office Equipment PLCAnnual Report

Paragon Ceylon PLCAnnual Report

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