Together We Gro We Grow At Lankem Ceylon, ... the government’s long sought after strategy of food...

TogetherWe Grow

ANNUAL REPORT 2015/2016

TogetherWe Grow

At Lankem Ceylon, we believe in the potential of combining a wide range of talents, skills and

experiences where minds are open to new ideas and inspired to explore innovative ways

of creating unique solutions and providing effective strategies, empowering them to

invent new approaches and more successful work models. In turn this leads to new spurts

of growth and development, encourages appreciation of teamwork and consolidation of

resources that provides a vast reserve of knowledge and experience.

For we truly believe as one that Together We Grow to new heights and beyond!

Our Business Areas

Agri-Inputs

Paints

Chemicals

Bitumen

Consumer

Construction & Pest Control

Leisure

Packaging

Lankem Ceylon PLC | Annual Report 2015/162

Lankem Ceylon PLC | Annual Report 2015/16 3

ContentsFinancial Highlights 5

Chairman’s Review 8

Board of Directors 11

Sustainability Report 13

Annual Report of the Board of Directors 14

Corporate Governance 18

Risk Management 22

Remuneration Committee Report 24

Related Party Transactions Review Committee Report 25

Audit Committee Report 26

FINANCIAL INFORMATION

Independent Auditors’ Report 30Statement of Profit or Loss & Other

Comprehensive Income 31

Statement of Financial Position 32

Statement of Changes in Equity 33

Cash Flow Statement 34

Notes to the Financial Statements 35

Ten Year Summary 94

Share Information 95

Notice of Meeting 97

Notes 98

Form of Proxy 99

Corporate Information Inner Back Cover


Our Business AreasOur Business Areas Are Agri-Inputs, Paints, Bituminous Products, Chemicals, Consumer Products, Packaging, Leisure, Pest Control & Construction.

VisionTo be the front runner in the chemical industry of Sri Lanka.

MissionOur mission as a manufacturer and formulator of chemical products is to expand our business through value addition and quality assurance with a commitment to society to continuously improve management and performance in the areas of health, safety and the environment.

Favourable Rating OutlookCorporate Credit Rating of “[SL] BB+” with a stable outlook assigned by ICRA Lanka Limited in June 2016.


Financial Highlights

Net Assets Per Share - Group(Rs.)

0.00

45.00

90.00

135.00

180.00

Total Equity - Group(Rs. Mn)

0

2,000

4,000

6,000

8,000

Revenue - Group(Rs. Mn)

-

6,250

12,500

18,750

25,000

2011/12 2012/13 2013/14 2014/15 2015/16

Total Assets - Group(Rs. Mn)

0

6,250

12,500

18,750

25,000

2011/12 2012/13 2013/14 2014/15 2015/16

Operating Profit - Group(Rs. Mn)

Revenue

Rs. 17,074 MnTotal Assets

Rs. 15,878 MnShareholders’ Funds

Rs. 5,217 MnNet Assets Per Share

Rs. 108.63

Performance Highlights

2011/12 2012/13 2013/14 2014/15 2015/16

2011/12 2012/13 2013/14 2014/15 2015/16

0

750

1,500

2,250

2011/12 2012/13 2013/14 2014/15 2015/16


ManagementReports

Chairman’s Review 8Board of Directors 11Sustainability Report 13Annual Report of the Board of Directors 14Corporate Governance 18Risk Management 22Remuneration Committee Report 24Related Party Transactions Review Committee Report 25Audit Committee Report 26


ManagementReports

Chairman’s Review 8Board of Directors 11Sustainability Report 13Annual Report of the Board of Directors 14Corporate Governance 18Risk Management 22Remuneration Committee Report 24Related Party Transactions Review Committee Report 25Audit Committee Report 26


CHAIRMAN’S MESSAGEOn behalf of the Board of Directors, I am pleased to welcome you to the Annual General Meeting of the company and to present the Annual Report and the audited financial statements of your Company for the year ended 31st March 2016.

The Sri Lankan economy continued its post-war growth trajectory, albeit at a more moderate rate of 4.8%. At a time when the currencies of most emerging markets are being pressurized by renewed strength in the US dollar, lagging growth numbers could exacerbate the outflow of capital out of the local market. These outflows have already seen the Sri Lankan rupee come under further pressure. The government’s decision to allow flexibility in the determination of the local currency has seen a slide in the value of the currency. In an attempt to keep inflation under check, policy makers have sent local interest trending higher over the course of the year. Another factor hurting the performance of the local economy is the uncertainty prevailing over the various fiscal measures adopted by policy makers in controlling the government finances. The group continues to be impacted by adverse weather conditions and near record lows for the commodities that it sells.

As a result of these very difficult trading conditions, the group turnover was Rs. 17.07 Billion for the year just completed an increase compared to the turnover of Rs. 15.22 Billion for the previous year. At Company level turnover increased marginally from Rs. 5.13 Billion to Rs. 5.74 Billion. At group level the loss incurred narrowed from Rs. 373.80 Million to Rs. 261.99 Million in the current financial year. The group is also impacted by the losses being made in some of its associates and we continue the process of minimizing costs in order to ensure that these associates return to profitability in the near future.

The Company’s crop protection business continues to be impacted by the ad hoc changes in regulation that govern the industry. Your Company continues to work with the global market leaders in the crop protection industry in order to deliver safe, innovative and cost effective solutions for local farmers. If the government’s long sought after strategy of food security for the local population is to be met, then the regulatory authorities must be judicial in the way that they choose which products are allowed for sale in the local market. Agriculture is the life blood of the Sri Lankan population and one of the core business areas for your Company, only when agricultural activity is increasing does your Company do well. The challenges faced by the limiting of chemical weeding is not only an issue for paddy

farmers but also the plantation sector and in most cases no alternatives are available. Crop protection is not the only part of the agricultural process where your Company is involved. We continue to make strides in the seeds sector and will look to re-enter the fertilizer market now that the government has done away with the previous subsidy methodology.

The industrial chemicals sector was continued to be impacted by the falling world market prices for its raw material. In a falling market, many of our customers operate with lower inventory levels and have the luxury of purchasing requirements from other smaller competitors. We are continually looking at rationalizing our business so that we only bring speciality chemicals into Sri Lanka and move away from commodity trading. The Bitumen business has been impacted by the slow down in infrastructure development and the delays in payments to contractors that are due from government for work already done. With many new projects in line to begin next year we are hopeful that this business can be turned around in the year ahead.

The coatings business has also slowed down markedly in the second half of the year. Most inputs in this industry are imported and the falling value of the Sri Lankan Rupees has had a negative impact on margins. The business now has at least 7 major players competing for a share of the local market and this intense competition will have an impact on margins. We are confident in the value proposition that our products bring to our consumers and that we will be able to sustain the levels of profitability that we have enjoyed in the past. While this past year has been a difficult one for the Company, our firm belief is that some of the difficult times are beyond us and that we will be able to turnaround the business in the year ahead.

Over the past two years the group has made significant investments in the packaging industry. I am happy to note that both companies have performed extremely well for the year under review. In the case of Ceylon Tapes (Pvt) Limited turnover increased from Rs. 266.17 Million to Rs. 304.61 Million in the year under review and profitability after tax increased from Rs. 22.70 Million to Rs. 38.93 Million. In the case of JF Packaging (Pvt) Ltd, a company engaged in the manufacture of flexible packaging, turnover increased from Rs. 1.49 Billion to Rs. 1.59 Billion and profitability before tax rose to Rs. 61.15 Million compared to a loss in the previous year of Rs. 145.43 Million. Last year’s performance included one time write offs of some uncollectible debts and unserviceable stocks which were


reflected in the balance sheet when the company was acquired. The group believes that packaging can be an extremely profitable line of business in the future and we will not hesitate to support both companies as they build up capability in order to further expand their packaging offerings. In the short time that the group has owned these two companies, they have shown tremendous scope for growth and avenues for further diversification.

The C.W Mackie PLC group saw its performance improve markedly during the financial year under review. For the year ended 31st March 2016, turnover increased from Rs. 7.62 Billion to Rs. 7.86 Billion. For the comparable period profit after tax improved from Rs. 179.46 Million to Rs. 278.52 Million. This was a growth of nearly 55% over the previous year. The internal trading division of C. W Mackie PLC has shown the greatest growth for the year under review, and this division continues to have the best potential for growth in the years ahead. The company also continues to improve the operations of its Kelani Valley Canneries Limited. This company manufactures a range of food products under the KVC range which are distributed by C.W Mackie PLC. With improvements in production standards and strategic purchasing of raw materials, the company should be a valuable addition to the group in the years ahead.

The company’s sugar, industrial products and marine paints division also showed growth in profitability, but were tempered by difficult market conditions that prevailed during the course of the year. The only draw on the profitability of the company were the operations of the export trading division. The export trading division primarily depends on the trading of natural rubber for its profitability. Low natural rubber prices and falling availability of natural rubber has meant that the company’s two subsidiaries Ceytra (Pvt) Limited and Ceymac Rubber (Pvt) Limited both ran at a loss during the last year. We are hopeful that both companies will show some degree of turnaround as the availability of latex improves in the next year.

While Lankem Ceylon PLC no longer consolidates the operations of Kotagala Plantations PLC and Agarapathana Plantations Limited in its annual accounts, it does consolidate a share of their losses for the year. For the year under review, the share of the loss consolidated was Rs. 225.36 Million. The losses of both plantation companies can be attributed to the continued weakness in commodity prices experienced during the last few years. While Tea prices took a marginal dip during the year,

the price of rubber continues to hover around recent all time lows. The profitability of both companies are unlikely to improve unless commodity prices rebound. The outlook for rubber prices continues to be weak and unless there is a rally in global crude prices, there is unlikely to be any improvement in the price of rubber. The outlook for tea prices is distinctly better with the expected return of Iranian buyers to the Colombo Tea auction and is likely to see an improvement of prices.

The productivity in the plantation sector continues to be a blight on the financial performance of all companies in the sector. We in Sri Lanka cannot sustain an industry that lags its other global competitors in terms of labour productivity. Also looming on the industry is another round of wage negotiations. Unless some link between wages, productivity and the price of tea at auctions are found, the long term outlook for the industry remains grim. Both companies continue to endeavor to be the least cost manufacturer in the industry. Other costs related to these companies continue to be trimmed so that the companies can sustain themselves during these difficult times.

The Lankem Ceylon PLC group is fairly well diversified. It owns and operates four hotel properties in the prime tourist locations in Sri Lanka. Over the past few years, the group has continued to invest in these properties in order to increase not only the number of rooms but also the facilities offered at these hotels. These investments were made after much careful study on the future potential for tourism in Sri Lanka.

After many years in the doldrums, the tourist industry is now showing signs of robust growth. All the major tourist markets that Sri Lanka relies on for its tourists are showing good growth. Inbound arrivals into Sri Lanka grew by nearly 17.8% during last year. Arrivals for the year stood at 1.79 million tourists. While Western Europe remains Sri Lanka’s largest market for tourists, it is refreshing to see arrivals increase quite significantly from other markets as well. This last year saw significant increases in the number of arrivals from both India and China. In order to sustain this level of growth in the years ahead, Sri Lanka will have to continue to invest in the infrastructure necessary to cater to the increasing number of arrivals.

In this background Beruwala Resorts PLC recorded a turnover of Rs. 429.51 Million compared to Rs. 308.39 Million in the previous year. The loss recorded by the company narrowed


significantly from Rs. 67.04 Million in the previous year to Rs. 15.66 Million this year. During the course of this year, the company entered into a partnership with a German company, Der Touristik which resulted in the company being rebranded as “COOEE The Palms”. This partnership will serve the company in good stead and helped boost occupancy in the years ahead. At Sigiriya Village Hotels PLC, turnover increased to Rs. 336.05 Million in the current year compared to Rs. 274.07 Million in the previous year. The profit before tax rose to Rs. 56.12 Million compared to a loss of Rs. 11.72 Million in the previous year. Marawila Resorts PLC recorded a turnover of Rs. 413.31 Million compared to Rs. 314.11 Million in the previous year and the loss narrowed quite significantly from Rs. 82.45 Million to Rs. 14.92 Million in this financial year. All three companies have dollar denominated borrowings and the fall in the value of the Sri Lanka rupee had an impact on the balance sheets of these companies.

The group continues to be impacted by the headwinds it is facing in many of the industry areas that it is present in. We see further challenges in the year ahead as interest rates show signs of further tightening and commodity prices not increasing beyond a certain threshold. The group must continue to cut costs while supporting the business areas that show signs of robust growth. While the core business of the company should improve this year, the likelihood is that the plantation group will continue to make losses. The future profitability of the group is going to be driven by the performances of the hospitality sector and the packaging sector. In these difficult times, I would like to thank all our stakeholders for their continued support and patience as we return the group to profitability.

My thanks to Mr. Dian Gomes who joined the Board in June 2010 as an Independent Non-Executive Director and resigned in February 2016 to pursue other interests. My thanks also go to my fellow colleagues on the Board for their continued counsel and guidance which has proved invaluable in these times.

A. RajaratnamChairman

Chairman’s Message contd.


BOARD OF DIRECTORSA. Rajaratnam [FCA]Chairman

Mr. A. Rajaratnam joined the Board in 1990 and was appointed Chairman in the year 2003. He serves as Chairman of The Colombo Fort Land & Building PLC (CFLB) and several listed and unlisted companies within the CFLB Group in addition to holding other Directorships within the Group.

S. D. R. Arudpragasam [FCMA (UK)]Deputy Chairman

Mr. S. D. R. Arudpragasam joined the Board in 1989, and was appointed Deputy Chairman in 1990. He serves as Chairman of several subsidiaries of The Colombo Fort Land & Building PLC. He also holds the position of Deputy Chairman of The Colombo Fort Land & Building PLC and functions as the Managing Director of E.B. Creasy & Company PLC in addition to serving on the Boards of other Companies within the CFLB Group.

Anushman Rajaratnam [B.Sc (Hons.), CPA, MBA]Managing Director

Mr. Anushman Rajaratnam was appointed to the Board as Deputy Managing Director in the year 2005 and was appointed Managing Director in April 2009. He has spent several years working overseas as a Consultant for a leading Accountancy Firm. He also serves on the Board of The Colombo Fort Land & Building PLC in addition to serving on the Boards of several subsidiaries of the Lankem Group.

D. L. Vitharana [MNI (Lond), MBA, M.Sc. (UK)]Chief Operating Officer

Mr. D. L. Vitharana was appointed to the Board in 2005. He joined Lankem Ceylon PLC in 1997 and has headed the Lankem Agro Cluster since 1999. He is currently the Chief Operating Officer of Lankem Ceylon PLC and also serves on the Boards of several subsidiaries of the Lankem Group.

R. N. Bopearatchy [B.Sc. (Cey), Dip. BM., MBA (Univ. of Col)]Director

Mr. R. N. Bopearatchy was appointed to the Board in 1996. He has considerable expertise in product development, manufacturing and marketing of pesticides, pharmaceuticals and consumer products. Soon after graduation he was employed in research at the Plant Pathology Division of the Tea Research Institute and subsequently joined Chemical Industries Colombo Ltd., and was appointed to its Board. He also served on the Boards of Crop Management Services (Pvt) Ltd., the

managing agents for Mathurata Plantations Ltd., CIC Fertilizers Ltd. and Cisco Specialty Packaging (Pvt) Ltd. He has held office as the Chairman of the Pesticide Association of Sri Lanka, the Toxicological Society of Sri Lanka and the International Mosquito Spiral Manufacturers Association (IMSMA). Mr. R. N. Bopearatchy currently holds several other directorships within the CFLB Group.

N. H. B. S. Perera [B.Sc. (Cey)]Director

Mr. N. H. B. S. Perera joined the Board in 1999. He is a former Chairman of Harrisons (Colombo) Ltd, and the Pesticides Association of Sri Lanka. He has held office as Deputy Chairman of the Planters Association of Sri Lanka and has functioned as Group Director of the Maharaja Organization Ltd. Mr. Perera has also served as Director on the Board of Harrison Lister (Colombo) Ltd, and several plantation company Boards such as Aislaby Estates Ltd, Attampettia Estates Ltd, Newburgh Estates Ltd, Kinross Estates Ltd, and Lunuwa Plantations Ltd, prior to nationalisation. He presently serves on the Boards of The Colombo Fort Land & Building PLC, Lankem Ceylon PLC and Lankem Developments PLC. Mr. Perera has considerable expertise in the field of developing and marketing Agri Chemicals, managing of plantation companies, manufacture and distribution, shipping and warehousing.

K. P. David [FCMA (UK), FCMA, FIPFM, CGMA]Director

Mr. K. P. David was appointed to the Board in 2007. Having commenced his career in the Banking sector, he joined the Parent Company E. B. Creasy & Company PLC as Group Accountant in 1993. He also serves on the Boards of several subsidiaries of the Lankem Group.

A. R. Peiris [B.Sc. (Cey), FCMA (UK), CGMA]Director

Mr. A. R. Peiris was appointed to the Board in the year 2007. He has served the Petroleum Corporation for 10 years in Technical, Planning & Finance Divisions and at the time he left the Corporation in 1979, he was the Head of the Refinery Finance Division. Thereafter, he joined National Development Bank PLC where he held several senior positions for 24 years. He has held Directorships in several reputed public listed and unlisted companies. Mr. Peiris also holds Directorships in several companies within the Lankem Group. He is also a member of the Board of Tess Agro PLC and functions as the Chairman of its Audit Committee.


R. T. Weerasinghe [BBA – USA]Director

Mr. R. T. Weerasinghe was appointed to the Board in April 2009. He joined Darley Butler & Company Ltd, in the year 1994 as a Trainee Product Manager and was seconded to Lankem Ceylon PLC as the Marketing Manager of the Consumer Division in 1998. He was promoted as General Manager of the Consumer Division in 2005 and was also appointed as General Manager of the Paints Division. In addition he was appointed as the Head of the Industrial Chemicals Division in 2009. Mr. Weerasinghe possesses expertise in the fields of Marketing and Management. Mr. Weerasinghe also serves on the Boards of certain subsidiaries of Lankem Ceylon PLC.

A. Hettiarachchy [C.Eng, MIEE, MIProdE, MIChemE]Director

Mr. A. Hettiarachchy was appointed to the Board as an Independent Non-Executive Director in April 2010. He is a Chartered Engineer and a Member of Process and Engineering Systems-Sri Lanka Institute of Nanotechnology. He serves on the Boards of Richard Pieris Arpico Finance Ltd and as Chairman on the Board of ISL Services Limited. He has served on the Board of Hayleys PLC and functioned as Managing Director on the Boards of Haycarb PLC, Recogen Limited and Puritas Limited and also served on several other subsidiaries of Haycarb PLC and Hayleys PLC both in Sri Lanka and Overseas. He was also a Board Member of the National Science Foundation and The Sri Lanka Institute of Nanotechnology. Member of the National Nano Committee and a member of several advisory Boards of the NSF. Mr. Hettiarachchy possess expertise in the fields of Process Design, Construction and Commissioning; Instrumentation and Control-Design, Installation and Commissioning; Mechanical Engineering, Thermal and Electrical Energy - Generation and Storage and Nano Technology.

A. C. S. Jayaranjan [FCA, FCMA (UK), CGMA]Director

Mr. A. C. S. Jayaranjan was appointed to the Board as an Independent Non-Executive Director in June 2010. He started his career as a professional at KPMG. Thereafter he has been working for forty years in the commercial and industrial sectors at senior managerial level. He was the Chief Accountant at James Finlay & Company PLC and Deputy Chief Executive Officer/Executive Director Shaw Wallace & Hedges PLC. Mr. Jayaranjan then joined as the Group Finance Director of Pership Group and later joined John KeeIls Holdings PLC, as Senior Vice President, Head of Learning & Development. His experience covers diverse areas in commerce and industry. Mr. Jayaranjan is a Fellow

Member of the Institute of Chartered Accountants of Sri Lanka, and a Fellow Member of the Chartered Institute of Management Accountants (UK). He is a lecturer in management for Masters programmes at the Colombo Campuses of the London Metropolitan University and the University of West London.

R. Seevaratnam [B.Sc. (Lond.), FCA (Eng.and Wales) FCA (ICASL)]Director

Mr. R. Seevaratnam was appointed to the Board as an Independent Non Executive Director in April 2014. He is a Fellow Member of The Institute of Chartered Accountants of England and Wales and of Sri Lanka and holder of a General Science Degree from the University of London. He was a former senior partner of KPMG. Mr. Seevaratnam is a Director of several listed and unlisted companies.

M. M. A. R. P. Goonetileke [B.Sc. Hons. (Mechanical Engineering), M.Eng (Industrial Engineering)] Director

Mr. Rajeeve Goonetileke was appointed to the Board in November 2015. He holds a Bachelor of Science Degree in Mechanical Engineering (Honors) from the University of Moratuwa and a Masters in Engineering (Industrial Engineering) from the Asian Institute of Technology, Bangkok, Thailand. Mr. Goonetileke possess considerable expertise in General and Supply Chain Management and counts over twenty years experience with Multinational and Sri Lankan Blue-chip companies.

Board of Directors contd.


Sustainability Report

Our Approach throughout the Company’s history, we have strived to support the communities we serve. We take pride in the special relationship we have built with our employees, consumers, shareholders and all stakeholders, in every corner of the island and we work every day to maintain that relationship and ensure that we provide them with the products and information they need to stay abreast with new and emerging trends. We aim to achieve this objective by leveraging on eco-friendly operations that minimize wastage and optimize natural resources.

We are dedicated to setting higher benchmarks in the industry that reflect global best practices in all aspects of our operations. Green leadership has to be inherent; it is not a philosophy, strategy or thought process that can be implemented on the surface but one that must form the axis of an entity’s accountable responsible conscience. This commitment has led the Company to inculcate a green and corporate responsibility framework, a framework that cascades its green consciousness and responsibility towards society, with the top management taking leadership in ensuring that the impact on the environment through business is minimised. There is also a concerted effort to continually introduce best practices and raise the bar in our actions. This approach is the backbone of Lankem, with each team member taking ownership for their actions and displaying immense responsibility and accountability. The results are now tangible, arbitrated by the accolades gained for green practices and CSR projects; however our efforts are not limited to awards and titles. We are not solely focused on short term results; instead we take a futuristic approach. We believe that creating societal and environmental value is integral to sustaining long-term shareholder value.

Our People

Our people make us different—energetic about supporting and challenging all our stakeholders in equal measure. We’re passionate about making a measurable impact in all we do. Our unique culture and approach deliver enduring results, true to each client’s specific situation. We’ll always do the right thing by our clients, our people and our communities. We have always maintained that sustainable leadership comes from within and has to be driven by spearheads who are committed to been sustainable, leaving no stone unturned to continue reducing its carbon footprint. Lankem possesses a highly talented and diverse workforce within a safe and healthy workplace. We upgrade and upkeep safety standards across all divisions. A green culture can only be fostered through persistent practice, knowledge sharing and team building. Events in our ‘Sustainable Calendar’ include the annual painting of religious places of worship – Daladha Maligawa, Madhu Church, hospitals and

medical institutes, the donation of school supplies to needy children and medical awareness workshops.

Recycling for a Sustainable Tomorrow

The Company also placed great emphasis on the environmental aspect considering its growing importance amidst clear evidence that this country’s weather patterns are also significantly affected by the effects of global warming. Our efforts in this regard were of two types, i.e. activities carried out to conserve valuable resources in our day to day operations and activities performed to improve awareness on the need for protecting the environment beyond the confines of our offices.

The Group’s business activities involve high consumption of both water and energy. These two aspects of our operations have become the focus of our sustainability efforts. As a company we understand that both are non-renewable resources and that as a large consumer of both these valuable sources, we need to minimize usage and practice sustainable best practices to recycle and recover both water and energy wherever possible.

Towards a Sustainable Future

Our environmental consciousness is ingrained into the conduct of our business. It is the ethos of Lankem. We strive to make an impact on the ecological canvas and ascertain our corporate stewardship as a ‘sustainable’ company.


Annual Report of the Board of Directors

The Board of Directors of Lankem Ceylon PLC present their Report on the affairs of the Company together with the Audited Financial Statements for the year ended 31st March 2016. The details set out herein provide the pertinent information required by the Companies Act No. 07 of 2007, and the Colombo Stock Exchange Listing Rules and are guided by recommended best practices.

General

The Company was re-registered on 18th March 2008 as required under the Companies Act No. 07 of 2007.

Principal Activities, Business and Future Prospects

The principal activities of the Company together with those of its subsidiary companies have been described along with the Corporate Information in this Annual Report. A review of the Company’s business and its performance during the year with comments on financial results and future prospects is contained in the Chairman’s Message of this Annual Report. This reports together with the Financial Statements reflect the state of affairs of the Company. The Directors, to the best of their knowledge and belief, confirm that the Company has not engaged in any activities that contravene laws and regulations.

Financial Statements

The Financial Statements of the Group are given on pages 31 to 93.

Auditors’ Report

The Auditors’ Report on the Financial Statements is given on page 30.

Accounting Policies

The Accounting Policies adopted in the preparation of the Financial Statements are given on pages 35 to 45.

Interest Register

Directors’ Interest in Transactions

The Directors have made general disclosures as provided for in Section 192 (2) of the Companies Act No. 07 of 2007. Arising from this, details of contracts in which they have an interest are disclosed in Note 29 to the Financial Statements on pages 76 to 83.

Directors’ Remuneration

Directors’ remuneration in respect of the Group for the financial year 2015/16 is Rs. 183.43 Million (2014/15 - Rs. 133.02 Million) and in respect of the Company for the financial year 2015/16 is Rs. 127.59 Million (2014/15 - Rs. 93.99 Million).

Directors’ Interest in Shares

The Directors of the Company who have an interest in the shares of the Company have disclosed their shareholdings and any acquisitions/disposals to the Board in compliance with Section 200 of the Companies Act No. 07 of 2007. Details pertaining to Directors’ direct Shareholdings are as follows:

No. of Shares No. of Shares

As at31.03.2016

As at31.03.2015

Mr. A. Rajaratnam - -

Mr. S. D. R. Arudpragasam 5,100 5100

Mr. Anushman Rajaratnam 1,000 36,204

Mr. D. L. Vitharana - -

Mr. R.N. Bopearatchy - -

Mr. N. H. B. S. Perera - -

Mr. K. P. David 8,150 8,150

Mr. A. R. Peiris 2,935 2,935

Mr. R. T. Weerasinghe 7,000 7,000

Mr. A. Hettiarachchy - -

Mr. A. C. S. Jayaranjan - -

Mr. J. D. Gomes (Resigned w.e.f. 23.02.2016)

- -

Mr. R. Seevaratnam - -

Mr. M. M. A. R. P. Goonetileke (Appointed w.e.f. 04.11.2015)

- -

Corporate Donations

Donations made by the Group amounted to Rs. 326,000 during the year under review. (2014/15 Rs. Rs. 157,000/-)

Directorate

The names of the Directors who held office during the financial year are given below. Brief profiles of these Directors appear on pages 11 and 12.


Mr. A. Rajaratnam Chairman

Mr. S. D. R. Arudpragasam Deputy Chairman

Mr. Anushman Rajaratnam Managing Director

Mr. D. L. Vitharana Director/Chief Operating Officer

Mr. R. N. Bopearatchy Director

Mr. N. H. B. S. Perera Director

Mr. K. P. David Director

Mr. A. R. Peiris Director

Mr. R. T. Weerasinghe Director

Mr. A. Hettiarachchy Director

Mr. A. C. S. Jayaranjan Director

Mr. J. D. Gomes Director (Resigned w.e.f. 23rd February 2016)

Mr. R. Seevaratnam Director

Mr. M. M. A. R. P. Goonetileke Director (Appointed w.e.f. 04th November 2015)

Mr. S. Rajaratnam ceased to be an Alternate Director to Mr. A. Rajaratnam with effect from 21st April 2015 and Mr. Amrit Rajaratnam was appointed as an Alternate Director to Mr. A. Rajaratnam with effect from 21st April 2015.

Mr. M. M. A. R. P. Goonetileke was appointed to the Board on 4th November 2015.

Mr. J. D. Gomes resigned from the Board of Directors with effect from 23rd February 2016.

In terms of Articles 84 and 85 of the Articles of Association, Mr. A. Hettiarachchy retires by rotation and being eligible offers himself for re-election.

Mr. N. H. B. S. Perera, Director, being over seventy years of age retires and offers himself for reappointment under and by virtue of the Special Notice received from a shareholder of the Company which is referred to in the Notice of Meeting.

Mr. R. N. Bopearatchy, Director, being over seventy years of age retires and offers himself for reappointment under and by virtue of the Special Notice received from a shareholder of the Company which is referred to in the Notice of Meeting.

Mr. A. Rajaratnam, who is over seventy years of age retires and offers himself for reappointment under and by virtue of the Special Notice received from a shareholder of the Company which is referred to in the Notice of Meeting.

Mr. R. Seevaratnam who is over seventy years of age retires and offers himself for reappointment under and by virtue of the Special Notice received from a shareholder of the Company which is referred to in the Notice of Meeting.

Auditors

The Financial Statements of the Company for the year have been audited by Messrs KPMG Chartered Accountants, the retiring auditors who have expressed their willingness to continue as Auditors of the Company and are recommended for reappointment. A resolution to reappoint them and to authorize the Directors to determine their remuneration will be proposed at the Annual General Meeting.

The Auditors, Messrs KPMG Chartered Accountants were paid Rs. 8.43 Million during the year under review (2014/15 - Rs. 8.54 Million) as audit fees and fees for audit related services by the Group. In addition, they were paid Rs. 3.91 Million (2014/15 – Rs. 0.44 Million) by the Group for non-audit related work. In addition to the above, Group companies are engaged with other audit firms. Audit fees in respect of these firms amounted to Rs. 1.56 Million during the year under review (2014/15 - Rs. 1.15 Million). As far as the Directors are aware, the Auditors do not have any relationship (other than that of an Auditor) with the Company. The Auditors do not have any interest in the Company.

Revenue

The revenue of the Group for the year was Rs. 17,074 Million (2014/15 - Rs. 15,222 Million).

Results

The Group made a loss before Tax of Rs. 148 Million against a loss of Rs. 260 Million in the previous year. The detailed results are given in the Statement of Comprehensive Income on page 31.

Investments

Investments made by the Group are given in Note 18 to the Financial Statements on pages 58 to 63.


Property, Plant & Equipment

During 2015/16 the Group invested Rs. 429.69 Million in Property, Plant & Equipment (2014/15 - Rs.940.71 Million). Further, your Directors are of the opinion that the net amounts of Property, Plant & Equipment other than Freehold Land, appearing in the Statement of Financial Position are not greater than their market value as at 31st March 2016. Market values of freehold Land as at 31st March 2016 are disclosed in Note 13.3 to the Financial Statements on page 54.

Stated Capital

The Stated Capital of the Company as at 31st March 2016 was Rs. 536,218,000/- and is represented by 24,000,000 issued and fully paid Ordinary Shares.

Reserves

The total Group Reserves as at 31st March 2016 comprised Other Capital Reserves of Rs. 3.41 Million, Available for Sale Reserve of Rs. 3.71 Million and Revenue Reserves of Rs. 2,063.73 Million. Whereas the total Group Reserves as at 31st March 2015 comprised Other Capital Reserves of Rs. 3.41 Million, Available for Sale Reserves of Rs. 13.43 Million and Revenue Reserves of Rs. 2,508.64 Million. The movements are shown in the Statement of Changes in Equity in the Financial Statements.

Taxation

The Group’s liability to taxation has been computed in accordance with the provisions of the Inland Revenue Act No. 10 of 2006, and subsequent amendments thereto. Income tax and other taxes paid and liable by the Group are disclosed in Note 10 to the financial statements on pages 49 to 51.

Related Party Transactions

During the financial year there were no recurrent or non-recurrent related party transactions which exceeded the respective thresholds mentioned in Section 9 of the Colombo Stock Exchange Listing Rules and the Company has complied with the requirements of Listing Rules on Related Party Transactions. The Related Party Transactions presented in the Financial Statements are disclosed in Note 29 from page 76 to 83.

Share Information

Information relating to earnings, dividend, net assets, market value per share and share trading is given on pages 94, 95 and 96.

Events Occurring after the Reporting Period

Events occurring after the Reporting Period that would require adjustments to or disclosures are disclosed in Note 34 on page 90.

Capital Commitments and Contingent Liabilities

Capital commitments and contingent liabilities as at the date of the Statement of Financial Position are disclosed in Notes 31 and 32 on page 89.

Employment Policy

The Company’s recruitment and employment policy is non-discriminatory. The occupational health and safety standards receive substantial attention. Appraisals of individual employees are carried out in order to evaluate their performance and realize their potential. This process benefits the Company and the employees.

Shareholders

It is the Company’s policy to endeavor to ensure equitable treatment to its shareholders.

Statutory Payments

The Directors, to the best of their knowledge and belief, are satisfied that all statutory payments of the Company due in relation to employees and the Government have been made promptly and are up to date.

Environmental Protection

The Company’s business activities can have direct and indirect effects on the environment. It is the Company’s policy to minimize any adverse effect its activities have on the environment and to promote co-operation and compliance with the relevant authorities and regulations. The Directors confirm that the Company has not undertaken any activities which have caused or are likely to cause detriment to the environment.

Annual Report of the Board of Directors contd.


Internal Control

The Directors acknowledged their responsibility for the Company’s system of internal control. The system is designed to give assurance regarding the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information generated. However, any system can ensure only reasonable and not absolute assurance that errors and irregularities are either prevented or detected within a reasonable period of time.

The Board is satisfied with the effectiveness of the system of internal control for the period up to the date of signing these Financial Statements.

Going Concern

The Directors, after making necessary inquiries and reviews including reviews of the Company’s budget for the subsequent year, capital expenditure requirements, future prospects and risks, cash flows and borrowing facilities, have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore, the going concern basis has been adopted in the preparation of the Financial Statements.

For and on behalf of the Board

S. D. R. Arudpragasam K. P. DavidDirector Director

By Order of the Board

Corporate Managers & Secretaries (Private) LimitedSecretaries

Colombo

1st August 2016.


Corporate Governance

Corporate Governance is a way of structuring the organisation in order to safeguard the interests of a wide variety of stakeholders. It needs to balance the Corporate Governance with everyday business management in today’s dynamic corporate world. We at Lankem firmly promise our stakeholders better business performance which is nurtured and backed through properly formulated governance practices and procedures.

We present below the Corporate Governance practices adopted and practiced by Lankem Ceylon PLC, in accordance with those listed in the Code of Best Practice on Corporate Governance issued by The Institute of Chartered Accountants of Sri Lanka and the rules on Corporate Governance set out in the Colombo Stock Exchange Listing Rules.

The Board of Directors

1.1 The Board, Composition and Meetings

The Board of Directors of Lankem Ceylon PLC is responsible for the governance practices adopted in all the companies within the Group. The Board comprises the Chairman, Deputy Chairman, Managing Director, Chief Operating Officer and nine other Directors. All the Directors are professionals who have acquired a wealth of experience and knowledge in the fields of Management, Marketing and Finance.

Name of Director

Mr. A. Rajaratnam(Chairman) Non-Executive

Mr. S. D. R. Arudpragasam(Deputy Chairman) Non-Executive

Mr. Anushman Rajaratnam(Managing Director) Executive

Mr. D. L. Vitharana(Chief Operating Officer) Executive

Mr. R. N. Bopearatchy Executive

Mr. N. H. B. S. Perera Independent Non-Executive

Mr. K. P. David Executive

Mr. A. R. Peiris Executive

Mr. R. T. Weerasinghe Executive

Mr. A. Hettiarachchy Independent Non-Executive

Mr. A. C. S. Jayaranjan Independent Non-Executive

Mr. J. D. Gomes (Resigned w.e.f. 23.02.2016)

Independent Non-Executive

Mr. R. Seevaratnam Independent Non-Executive

Mr. M. M. A. R. P. Goonetileke (Appointed on 04.11.2015)

Executive

The Board meets regularly and has met seven times during the year under review. In addition to Board Meetings, matters are referred to the Board and decided by resolutions in writing.

The number of meetings of the Board and the individual attendance by members is shown below:

Total number of meetings held: 7

Name of DirectorDirectorshipStatus

BoardMeetingsAttended

Mr. A. Rajaratnam Chairman Non-Executive 4/7

Mr. S. D. R. ArudpragasamDeputy Chairman Non-Executive

7/7

Mr. Anushman Rajaratnam

Managing Director Executive

7/7

Mr. D. L. Vitharana

Chief Operating Officer Executive

7/7

Mr. R. N. Bopearatchy Executive 7/7

Mr. N. H. B. S. Perera Independent Non-Executive 7/7

Mr. K. P. David Executive 7/7

Mr. A. R. Peiris Executive 7/7

Mr. R. T. Weerasinghe Executive 7/7

Mr. A. Hettiarachchy Independent Non-Executive 7/7

Mr. A. C. S. Jayaranjan Independent Non-Executive 6/7

Mr. J. D. Gomes Independent Non-Executive Excused

Mr. R. Seevaratnam Independent Non-Executive 6/7

Mr. M. M. A. R. P. Goonetileke

Executive 4/4

Availability of Formal Schedule of Matters

The Code of Best Practice on Corporate Governance of The Institute of Chartered Accountants of Sri Lanka suggests that the Board should have a formal schedule of matters specially reserved for its decision making. Sufficient time was dedicated at meetings in order to ensure the following.


• Offer guidance on overall direction and related strategies, financial and non-financial objectives of Lankem Ceylon PLC.

• Formulation, implementation and monitoring of business strategy of the Company.

• Overseeing the effectiveness of the internal control systems and proactive risk management system.

• Ensuring compliance with legal requirements and ethical standards.

• Approval of budgets, corporate plans, major investments and divestments.

• Approval of interim and annual Financial Statements for publication.

• Approval and review of the succession planning of the Board and top management.

• Approval of any issue of equity and debt securities of the Company.

• Any other matter which is important to ensure that the Company conducts its business in the best interest of all stakeholders.

Company Secretary and Independent Professional Advice

Lankem Ceylon PLC and all the Directors seek advice from Corporate Managers & Secretaries (Private) Ltd., who are qualified to act as Secretaries as per the provisions of the Companies Act No. 07 of 2007. In addition, the Board seeks professional advice as and when, and where necessary from independent external professionals.

Independent Judgement

The Board of Directors as a whole and individually are committed to exhibit high standards of integrity and independence of judgement on various issues from strategy to performance.

Training for Directorss

The Directors are provided with adequate and relevant training opportunities for their continuous development.

1.2 Segregation of the Role of Chairman and Chief Executive Officer

The role of Chairman and Chief Executive Officer is clearly segregated. The Managing Director functions in the capacity of Chief Executive Officer who is responsible for the operational

matters of the Company. Functional Directors are responsible for the respective division or strategic business units.

1.3 Chairman’s Role

The Chairman oversees good governance of the Company’s affairs and monitors the satisfactory performance of duties and responsibilities allocated to the Board Members.

The Chairman conducts the Board Meetings ensuring effective participation of all Directors. The Chairman ensures that the Board is in complete control of the Company’s affairs.

1.4 Financial Acumen

The Board includes seven finance professionals who possess the knowledge to offer the Board necessary guidance on matters relating to finance.

1.5 Board Balance

The Board comprises of six Non-Executive Directors of whom four are Independent and seven Executive Directors. The Non-Executive Directors have submitted their declarations of Independence or Non- Independence to the Board.

Mr. N. H. B. S Perera is a Director of the Ultimate Parent Company (UPC) and serves on several subsidiaries of the UPC. He has served on the Boards of the UPC and the Listed Entity for more than nine years. Mr. Perera also serves on the Board of certain companies which has a significant shareholding in another. However the Board after taking into consideration all other circumstance listed in the Rules pertaining to the criteria for defining Independence is of the opinion that Mr. N.H.B.S Perera is nevertheless Independent.

Mr. R. Seevaratnam serves on the Board of the Ultimate Parent Company (UPC) and on the Boards of several subsidiaries of the UPC and a majority of the Directors of certain subsidiaries serves on the Board of another. Mr. Seevaratnam also serves on the Board of certain companies which has a significant shareholding in another. However, the Board after taking into consideration all other circumstances listed in the Rules pertaining to the criteria for defining Independence is of the opinion that Mr. R. Seevaratnam is nevertheless Independent.

Mr. J.D. Gomes, Independent Non-Executive Director, resigned from the Board of Directors with effect from 23rd February 2016.


1.6 Supply of Information

Lankem Ceylon PLC has set up procedures to receive timely information including a clear agenda prior to the meetings. Minutes of all the meetings are properly recorded and circulated among Directors.

Apart from regular Board Meetings, Executive Directors and Senior Managers meet bi-weekly or more frequently in order to discuss specific matters. Decisions and important information from these meetings are conveyed to all Board Members at the Board Meetings.

Monthly Accounts and key financial parameters and performance of each division are discussed and necessary action is taken.

1.7 Nomination Committee and Appointments to the Board

New Directors are proposed for appointment by the Nomination Committee in consultation with the Chairman of the Company and in keeping with the provisions of the Articles of Association of the Company and the Rules on Corporate Governance. The recommendations made in connection with the new appointment during the year was accepted by the Board.

The details of new appointments to the Board are made available to shareholders by making announcements to the Colombo Stock Exchange.

The Company’s Nomination Committee comprises of Mr. A. Hettiarachchy – Chairman, Mr. N. H. B. S. Perera, Independent Non Executive Directors and Mr. S.D.R. Arudpragasam, Non Executive Director.

1.8 Re-election of Directors

In terms of the Articles of Association of the Company, a Director appointed to the Board (other than an appointment to an Executive Office) holds office until the next Annual General Meeting and seeks re-election by the shareholders at that meeting. The Articles require one-third or a number nearest to one-third of Directors in office (excluding Executive Directors) to retire at each Annual General Meeting. The Directors to retire are those who have been longest in office since their last election. Retiring Directors are eligible for re-election by the shareholders.

2. Directors Remuneration

2.1 Remuneration Committee

The Remuneration Committee comprises of Mr. A. Hettiarachchy – Chairman, Mr. N. H. B. S. Perera, Independent Non Executive Directors and Mr. S.D.R. Arudpragasam, Non Executive Director.

The Remuneration Committee report is set out on page 24 of this report.

2.2 Disclosure of Remuneration

Aggregate remuneration paid to Directors is disclosed in Note 29.6 to the Financial Statements on page 82.

3. Relationship with Shareholders

3.1 Constructive use of AGM/General Meetings

Lankem Ceylon PLC always welcomes the active participation of shareholders at General Meetings in order to promote and continue an effective dialogue between the two parties. Opportunities are available to shareholders to raise questions from the Chairman and other Directors at the Annual General Meeting /General Meetings. The required number of days’ notice has been given in accordance with the Articles of Association of the Company and the Companies Act No. 07 of 2007.

3.2 Major Transactions

Lankem Ceylon PLC publishes its Annual Report together with quarterly, half yearly, nine months and twelve months ended interim reports in order to communicate information to the shareholders in a timely manner. All material and price sensitive information are included in these reports together with major transactions if any during the particular period of reporting.

4. Accountability and Audit

4.1 Financial Reporting

Lankem Ceylon PLC and its Board of Directors consider timely publication of its Annual and Quarterly Financial Statements as a high priority. These publications include all material, financial and non financial information in order to facilitate the requirements of existing and potential shareholders. Financial Statements were prepared based on the Sri Lanka Accounting Standards (SLFRS / LKAS).

Corporate Governance contd.


The Annual Report of the Board of Directors on the affairs of the Company is given on pages 14 to 17 of this Annual Report.

The Directors are of the belief that the Company is capable of operating in the foreseeable future after the adequate assessment of the Company’s financial position and resources. Therefore, the going concern principle has been adopted in the preparation of these Financial Statements. The Auditors’ Report on Financial Statements is given on page 30 containing the Auditors’ reporting responsibility. Non-financial information of business segments is given on pages 46 and 93.

4.2 Internal Controls

The Board of Directors take overall responsibility for the Company’s internal control system. A separate Audit and Compliance Section has been established to review the effectiveness of the Company’s internal controls in order to ensure reasonable assurance that assets are safeguarded and all transactions are properly authorized and recorded.

4.3 Audit Committee

The Audit Committee report is set out on pages 26 and 27 of this report.

4.4 Related Party Transactions Review Committee

The Related Party Transactions are disclosed in Note 29 to the financial statements.

The Report of the Related Party Transactions Review Committee appear on page 25.


RiskManagement

Risk management carries out the process of identification of potential risk exposure and the application of proper risk management strategies to mitigate the impact to the business. Being a diversified conglomerate, a comprehensive risk approach is vital to the Company for the appropriate and adequate execution risk management to accomplish the strategic objectives.

The risk management of the Company includes ongoing risk assessment procedures and standardized reviews operation to the support of long-term strategies, regulatory and litigation compliance, health and safety, environmental compliance, financial reporting and controls and information technology and security.

The Board of Directors of Lankem Ceylon PLC has the overall responsibility for risk oversight with a focus on the most significant risks facing the Company. The Company has established comprehensive internal control systems and other risk mitigation techniques to ensure the delivery of shareholder value and completion of its obligations to all other stakeholders.

1. Strategic Risks

Strategic risk consists of the factors which challenge the accomplishment of the strategic goals of the Company, including the market factors, industry trends, competitor activities, technological threats, innovation and state policy on businesses.

2. Operational Risk

Operational risks arise from the day to day activities of the business including the inappropriate application of procedures in the processes. The Company has developed standard operating procedures to implement the best practices and a sound internal control system to monitor the effectiveness of operations. Continuous assessments and monitoring activities are made by the Compliance Department to keep all risks in the acceptable limit.

3. Financial Risk

Financial risk covers the broad area of risk including the internal risk of application of accounting policies and external risks from financial market condition mainly incorporating credit risk and market risk stemming from business operations.

3.1 Credit Default Risk Management

Credit default risks arise due to the non-payment by debtors which can lead to working capital issues. The Company implements proper credit controls and debt collection policies to ensure that the Company chooses the distributors with reliability and financial viability to honor their debts.

3.2 Market Risk Management

Market risk refers to the risk arising from the volatilities in the market forces. The Company faces market risks in the financial sphere in terms of the local rates of interest, inflation and exchange rates. In the present economic conditions, the Company is in a stable position to manage its interest rate risk and practical fluctuations. To facilitate to mitigate the risks, the Company has been continuously implemented the mitigation techniques, carefully evaluating the market factors and applying adequate controls.

3.2.1 Foreign Exchange Risk

The Company operates in a business model where the dependency on imports for raw material items is high. As a result, the exposure to foreign exchange risk is reasonably high. The fluctuation in foreign exchange rates results in transaction of risk. The Company uses forward exchange rates for reporting purposes on the assumption that future spot rates will fall below the forward rate. By this means the Company effectively provides for its foreign exchange exposure by minimizing any adverse impact.

3.2.2 Interest Rate Risk

The Company has faced increasing finance costs due to prevailing high interest rate regimes. The Company has been restructuring its debt portfolio on a continuous basis to minimize the downside risk of rising interest rates. Going forward, the Company is committed to reduce its level of debt in order to ensure that finance costs are retained under control.

3.2.3 Inflation Rate Risk

The Company serves both individual and institutional clients. Hikes in inflation rates due to the economic conditions deteriorate the purchasing power of customers. This reduces the potential market demand for our products and increase the Company’s cost base, affecting the profitability margins. The Company closely monitors fluctuations in price levels and focuses on the efficient management of its cost base to ensure minimal increase in price to customers.


3.2.4 Liquidity Risk

Due to the nature of the industry where the Company operates, a strong adherence to clear working capital management policies is much significant to the Company. The Company has been continuously revising the limits on approved credits, allowed provisions, cash and cash equivalents and feasible short term investment and funding options.

3.2.5 Investment Risk

Investment risk incorporates the threat of investments not yielding the anticipated results. The Company has in the recent past focused on organic growth. The Company conducts detailed feasibility studies and selects projects only exceeding the expected rate of return. Further regular controlling and monitoring of the performance of newly implemented projects are carried out. Moreover, suitable feedback controls are implemented to rectify any issues that may arise as well as feed forward controls are established to deter the reoccurrences of adverse variances. In addition, investments in capital and money markets are also closely monitored to avoid and mitigate risk of investment returns due to the market conditions.

Business Risk

New entrants into markets that the Company is already present as well as intensification of competition from existing market players in are significant business risks that may challenge the market share of the Company. Further, the variation in consumer spending patterns is also a potential business risk. The Company researches and updates the market information for its decision making in order to effectively manage the business risk.

Counterparty Risk

The Group may be exposed to the risk of losses on cash and other financial instruments held or managed on its behalf by financial institutions, in the instance that its counterparties’ default on their obligations. The Group policy is to limit its exposure by dealing solely with leading counterparties and monitoring their credit ratings

Industrial and Environmental Risks

The Group may be exposed to capital costs and environmental liabilities because of its past, present or future operations. The main industrial and environmental risks result from the storage of chemicals at certain sites and the waste generated from production process. These risks are predominantly managed by obtaining certifications and new methods through research and development subject to specific legislation and close supervision by the relevant authorities.

Legal and Compliance

The Company addresses this area with great concern in order to protect its corporate reputation. Legal and compliance risk relates to changes in the statutory and regulatory environment, compliance requirements with policies and procedures, including those relating to financial reporting, health and safety and intellectual property risks. Statutory and regulatory risk is the risk that the government or regulatory actions will cause us to have to change our business models or practices. The Company implements ongoing assessments on the strict adherence to all necessary regulations in relation to statutes, regulatory guidelines and environmental rules.


RemunerationCommittee Report

The Remuneration Committee comprise of the following members:

Mr. A. Hettiarachchy Chairman - Independent/Non-Executive Director

Mr. N.H.B.S.Perera Member - Independent/Non-Executive Director

Mr. S.D.R. Arudpragasam Member - Non-Executive Director

The main function of the Remuneration Committee is to assist the Board in developing and administering an equitable and transparent method for setting policy on the overall human resources strategy of the Group, the remuneration of Directors and senior management of the Group, and for determining their remuneration packages, on the basis of their merit, qualifications, and competence, and having regard to the Company’s operating results, individual performance, and comparable market statistics.

The Managing Director assists the Committee by providing relevant information and participating in the deliberations of the Committee.

The key objective of the committee is to attract, motivate and retain qualified and experienced personnel and to ensure that the remuneration of executives at each level of management is competitive and are rewarded in a fair manner based on their performance.

Mr. A. Hettiarachchy

Chairman

Remuneration Committee

1st August 2016


Related Party Transactions Review Committee Report

The Related Party Transactions Review Committee (RPTRC) which was formed in conformity with the Listing Rules of the Colombo Stock Exchange is entrusted with the responsibility of ensuring compliance with the rules and regulations governing Related Party Transactions for Listed Entities its main focus being enhancement of corporate transparency and fairness to all stakeholders.

Composition

The Company’s Related Party Transactions Review Committee comprises of the following members :

Mr. R. Seevaratnam – Chairman - Independent/ Non-Executive Director

Mr. A. Hettiarachchy – Independent/Non-Executive Director

Mr. K.P. David – Executive Director

The Company’s Secretaries Corporate Managers & Secretaries (Private) Limited function as the Secretaries to the Related Party Transactions Review Committee.

Meetings of the Committee

The Related Party Transactions Review Committee met for the first time during the first quarter of the current financial year.

Functions of the Committee

Review all proposed Related Party Transactions ( Except for exempted transactions).

Determining whether the relevant Related Party Transaction is fair to, and in the best interests of the Company and its stakeholders.

Obtain updates on previously reviewed Related Party Transactions from Senior Management and approve any material changes.

Establish guidelines for Senior Management to follow in ongoing dealings with related parties.

Direct the transactions for Board approval / Shareholder approval as deemed appropriate.

Ensuring that immediate market disclosures and disclosures in the Annual Report as required by the applicable rules and regulations are made in a timely and detailed manner.

Conclusion

The Related Party Transactions Review Committee has reviewed the Related Party Transactions entered into during the financial year under review and has communicated its comments and observations to the Board of Directors.

The Board of Directors have also declared in the Annual Report that there were no recurrent or non-recurrent related party transactions which exceeded the respective thresholds mentioned in Section 9 of the Colombo Stock Exchange Listing Rules and that the Company has complied with the requirements of the Listing Rules on Related Party Transactions.

R. Seevaratnam Chairman

Related Party Transactions Review Committee

1st August 2016


AuditCommittee Report

The Audit Committee has the responsibility of assisting the Board in fulfilling its overall responsibility to the shareholders in relation to the integrity of the Company’s financial reporting process in accordance with the Companies Act and other legislative reporting requirements including the adequacy of disclosures in the financial statements in accordance with the Sri Lanka Accounting Standards. The Audit Committee also has responsibility to ensure that the internal controls of the Company are in accordance with legal and regulatory requirements. The Committee evaluates the performance and the independence of the Company’s external audit functions.

Composition

The Company’s Audit Committee comprises of two Independent Non – Executive Directors of Lankem Ceylon PLC (LCPLC) an Independent Non – Executive Director of E.B. Creasy & Company PLC (EBC) (Parent Company) and an Independent Non – Executive Director of The Colombo Fort Land & Building PLC (CFLB) (Ultimate Parent Company).

The Names of the members are given below:

Mr. A. C. S. Jayaranjan - Chairman(Independent, Non - Executive Director (LCPLC)

Mr. A. Hettiarachchy(Independent, Non - Executive Director (LCPLC)

Mr. A. R. Rasiah(Independent, Non - Executive Director (EBC)

Mr. A. M. de S. Jayaratne(Independent, Non - Executive Director (CFLB)

The Committee has a blend of experience in the commercial sector with financial expertise and high standing of integrity and business acumen in order to carry out their role effectively and efficiently. The Committee comprises of three finance professionals.

The Company’s Secretaries, Corporate Managers & Secretaries (Private) Limited function as the Secretaries to the Audit Committee.

Meetings and Attendance

The Audit Committee has met on four occasions during the financial year ended 31st March 2016 and the attendance was as follows.

Mr. A. C. S. Jayaranjan – Chairman 4/4

Mr. A. Hettiarachchy 4/4

Mr. A. R. Rasiah 4/4

Mr. A. M. de S. Jayaratne 4/4

Other members of the Board and the Management Committee, as well as the External Auditors were present at discussions where appropriate. The proceedings of the Audit Committee are regularly reported to the Board of Directors.

Terms of Reference

The Committee is governed by the specific terms of reference set out in the Audit Committee Charter. The Committee focuses on the following objectives in discharging its responsibilities taking into consideration the terms of reference together with the requirements of the Listing Rules of the Colombo Stock Exchange.

(a) Risk Management

(b) Efficiency of the system of internal controls

(c) Independence and objectivity of the external (statutory) Auditors

(d) Appropriateness of the principal accounting policies used

(e) Financial Statement integrity

Compliance

During the year under review, the Committee has assisted the Board in ensuring compliance with the statutory provisions prior to publication of Interim Financial Statements and the Annual Report. The Committee has taken necessary measures to ensure that Interim Financial Statements and the Annual Report are published in a timely manner and they are prepared and presented in accordance with the Sri Lanka Accounting Standards and also in compliance with the Companies Act and the regulatory requirements. The Committee has assessed the adequacy of existing controls and risk management procedures and recommends to the Board, additional controls and risk

AuditCommittee Report


mitigating strategies that could be implemented to strengthen the existing internal control system. Further the Committee has reviewed the routine operations of the Company and assessed the future prospects of its business operations and accordingly makes sure that the going concern assumption used in the preparation of the financial statements, is appropriate.

External Audit

The Company has appointed KPMG, Chartered Accountants, as its External Auditors for the financial year ended 31st March 2016 and the services provided by them are segregated between audit/assurance services and other advisory services. The Committee has reviewed the progress and the conduct of the statutory audit function and discussed the audit-related issues with the Auditors. KPMG Chartered Accountants has also issued a declaration as required by the Companies Act No. 07 of 2007, that they do not have any relationship or interest in any of the companies in the Group, which may have a bearing on the independence of their role as Auditors. The Committee after evaluating the independence and performance of the External Auditors, has recommended to the Board the reappointment of KPMG, Chartered Accountants, for the financial year ending 31st March 2017 subject to the approval of the Shareholders at the Annual General Meeting of the Company.

A. C. S. Jayaranjan

Chairman

Audit Committee

1st August 2016


Financial Information

Independent Auditors’ Report 30

Statement of Profit or Loss and Other Comprehensive Income 31





Ten Year Summary 94


Financial Information

Independent Auditors’ Report 30

Statement of Profit or Loss and Other Comprehensive Income 31





Ten Year Summary 94


KPMG, a Sri Lankan partnership and a member rm of the KPMG network of independent member rmsa�liated with KPMG International Cooperative(”KPMG International”), a Swiss entity.

M.R. Mihular FCA P.Y .S. Perera FCA C.P. Jayatilake FCAMs. S. Joseph FCAS.T.D.L. Perera FCAMs. B.K.D.T.N. Rodrigo FCA

W.W.J.C. Perera FCAW.K.D.C Abeyrathne FCAR.M.D.B. Rajapakse FCA

T.J.S. Rajakarier FCAMs. S.M.B. Jayasekara ACAG.A.U. Karunaratne ACAR.H. Rajan ACA

Principals - S.R.I. Perera FCMA(UK), LLB, Attorney-at-Law, H.S. Goonewardene ACA

KPMG(Chartered Accountants)

Tel : + 94 - 11 542 64 26Fax : + 94 - 11 244 58 72

Internet : www.lk .kpmg.com

+ 94 - 11 244 605 8+ 94 - 11 254 124 9+ 94 - 11 2 30 7345

32A, Sir Mohamed Macan Markar Mawatha,P. O. Box 1 86,Colombo 0 030 0,Sri Lanka.

Independent Auditors’ Report

TO THE SHAREHOLDERS OF LANKEM CEYLON PLC

Report on the Financial Statements

We have audited the accompanying Financial Statements of Lankem Ceylon PLC, (“the Company”) and the Consolidated Financial Statements of the Company and its subsidiaries (“the Group”), which comprise the Statement of Financial Position as at 31st March 2016, and the Statement of Profit or Loss and other Comprehensive Income, Statement of Changes in Equity and, Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information set out on pages 31 to 93.

Board’s Responsibility for the Financial Statements

The 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 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.

Auditors’ Responsibility

Our 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 auditors’ 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 Statements 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.

Opinion

In our opinion, the consolidated Financial Statements give a true and fair view of the financial position of the Company and its subsidiaries as at 31st March 2016, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Emphasis of Matter

Without qualifying our opinion we draw attention to Note 33 to the Financial Statements regarding the matters that may cast significant doubt that a subsidiary will be able to continue as a going concern.

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 give a true and fair view of its financial position as at 31st March 2016, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

• The Financial Statements of the Company and the Group comply with the requirements of section 151 and 153 of the Companies Act No.07 of 2007.

CHARTERED ACCOUNTANTS

Colombo

1st August 2016


Consolidated Company

For the Year Ended 31st March

Notes

2016 Rs.’000

2015 Rs.’000

Restated

2016 Rs.’000

2015 Rs.’000

Revenue 5 17,073,999 15,221,745 5,738,083 5,130,542

Cost of Sales (13,199,297) (12,025,065) (4,496,173) (4,428,928)

Gross Profit 3,874,702 3,196,680 1,241,910 701,614

Other Income 6 169,833 179,756 130,630 169,674

Distribution Costs (1,597,001) (1,483,143) (801,885) (367,778)

Administration Expenses (1,675,754) (1,420,757) (498,873) (123,014)

Other Expenses 7 (70,877) (23,568) (114,327) (45,480)

Share of Profit / (Loss) from Associates (225,355) (268,945) - -

Net Finance Costs 8 (623,259) (440,522) (346,200) (187,202)

Profit / (Loss) before Tax 9 (147,711) (260,499) (388,745) 147,814

Income Tax Expense 10 (114,274) (113,299) 20,468 20,063

Profit / (Loss) for the Year (261,985) (373,798) (368,277) 167,877

Other Comprehensive Income / (Expense)

Gain / (Loss) on Financial Assets Available for Sale (10,308) 1,796 (8,562) 2,669

Actuarial Gain / (Loss) on Defined Benefit Obligations (3,527) (5,111) (7,009) (5,685)

Tax Effect on Actuarial Gain or Loss 2,773 1,971 1,963 1,592

Other Comprehensive Income / (Expense) for the year, net of tax (11,062) (1,344) (13,608) (1,424)

Total Comprehensive Income / (Expense) (273,047) (375,142) (381,885) 166,453

Profit / (Loss) Attributable to:

Owners of the Company (438,425) (351,001) (368,277) 167,877

Non-Controlling Interests 176,440 (22,797) - -

(261,985) (373,798) (368,277) 167,877

Total Profit / (Loss) and Other Comprehensive Income / (Expense) Attributable to

Owners of the Company (452,279) (352,017) (381,885) 166,453

Non-Controlling Interests 179,232 (23,125) - -

(273,047) (375,142) (381,885) 166,453

Earnings / (Loss) per Share (Rs.) 11 (18.27) (14.63) (15.34) 6.99

The Notes from pages 35 to 93 form an integral part of these Financial Statements.

Figures in brackets indicate deductions.

Statement of Profit or Loss & Other Comprehensive Income


Statement of Financial Position

Consolidated CompanyAs at

Notes

31.03.2016Rs. ’000

31.03.2015Rs. ’000 Restated

01.04.2014 Rs. ’000 Restated

31.03.2016Rs. ’000

31.03.2015Rs. ’000

ASSETSProperty, Plant and Equipment 13 6,499,086 6,586,802 5,394,008 1,217,837 1,250,143Biological Assets 14 - - - - - Leasehold Properties 15 - - - - - Investment Properties 16 195,522 67,574 72,569 - - Intangible Assets 17 984,264 953,997 495,007 - - Investments in Subsidiaries 18.1 - - - 2,692,283 2,747,989Investments in Associates 18.2 601,918 827,273 1,096,218 322,500 322,500Investments Classified as Available for Sale 18.3 55,551 98,459 79,347 65,923 107,009Investments Classified as Held to Maturity 18.5 - 5,000 - - - Loans Due from Related Parties 18.7 - - 180,000 - - Deferred Tax Assets 26 - - - 34,972 12,368Total Non-Current Assets 8,336,341 8,539,105 7,317,149 4,333,515 4,440,009

Inventories 19 2,497,221 1,947,077 2,096,333 1,056,395 795,976 Trade & Other Receivables 20 4,298,872 4,000,069 4,203,285 1,558,191 1,025,602 Amounts Due from Related Parties - Trade 29.1 - - - 201,887 712,323 Amounts Due from Related Parties - Non Trade 29.1 171,700 143,022 143,558 388,189 475,563 Loans Due from Related Parties 29.2 85,000 103,431 136,500 105,000 117,100 Income Tax Recoverable 52,416 43,598 43,439 24,457 24,457 Investments Classified as Fair Value through Profit or Loss 18.6 127,658 197,606 211,615 127,658 197,246 Bank & Cash Balances 21 308,346 392,833 328,871 150,304 121,107 Total Current Assets 7,541,213 6,827,636 7,163,601 3,612,081 3,469,374 Total Assets 15,877,554 15,366,741 14,480,750 7,945,596 7,909,383

EQUITYStated Capital 22 536,218 536,218 536,218 536,218 536,218 Other Capital Reserves 23.1 3,409 3,409 3,409 - - Available for Sale Reserves 23.2 3,713 13,425 11,060 3,601 12,163 Revenue Reserves 2,063,728 2,508,635 2,885,309 1,346,987 1,720,310 Equity Attributable to Owners of the Company 2,607,068 3,061,687 3,435,996 1,886,806 2,268,691

Non - Controlling Interest 2,609,592 2,376,717 2,348,838 - - Total Equity 5,216,660 5,438,404 5,784,834 1,886,806 2,268,691

LIABILITIESInterest Bearing Borrowings 24 1,374,126 2,001,732 1,104,779 565,200 992,920 Deferred Income 25 19,940 22,688 25,436 - - Deferred Tax Liabilities 26 78,528 145,856 96,658 - - Retirement Benefit Obligations 27 214,548 158,866 121,514 95,062 44,058Total Non-Current Liabilities 1,687,142 2,329,142 1,348,387 660,262 1,036,978

Interest Bearing Borrowings 24 4,267,544 3,476,773 2,643,757 2,678,205 1,947,903Loans Payable to Related Parties 24 428,100 430,600 747,850 385,050 364,550Trade & Other Payables 28 2,289,412 2,445,575 2,475,946 1,245,012 1,365,446Amounts Due to Related Parties - Trade 29.3 - - - 310 3,129Amounts Due to Related Parties - Non Trade 29.3 296,859 263,747 298,201 210,286 265,644Income Tax Payable 117,543 81,843 71,600 - - Bank Overdraft 21 1,574,294 900,657 1,110,175 879,665 657,042Total Current Liabilities 8,973,752 7,599,195 7,347,529 5,398,528 4,603,714Total Liabilities 10,660,894 9,928,337 8,695,916 6,058,790 5,640,692Total Equity and Liabilities 15,877,554 15,366,741 14,480,750 7,945,596 7,909,383

Net Assets per Share (Rs.) 108.63 127.57 143.17 78.62 94.53

The Notes from pages 35 to 93 form an integral part of these Financial Statements. I certify that these Financial Statements have been prepared in compliance with the requirements of the Companies Act. No. 07 of 2007.

K. P. David Chief Financial Officer

The Directors are responsible for the preparation and presentation of these Financial Statements. Approved and signed for and on behalf of the Board of Directors of Lankem Ceylon PLC.

S. D. R. Arudpragasam D. L. VitharanaDirector Director Colombo 1st August 2016


Statement of Changes in Equity

Attributable to Owners of the Company

Consolidated

StatedCapital

Rs. ‘000

Other Capital

ReservesRs. ‘000

Available for for Sale

ReservesRs. ‘000

General Reserves

Rs. ‘000

Retained Profit /

(Loss)Rs. ‘000

Total

Rs. ‘000

Non-Controlling

InterestRs. ‘000

Total

Rs. ‘000

Balance as at 01st April 2014 536,218 3,409 11,060 300,000 2,837,132 3,687,819 2,348,838 6,036,657

Effect on Restatement (Note 38) - - - - (251,823) (251,823) - (251,823)

Balance as at 01st April 2014 (Restated) 536,218 3,409 11,060 300,000 2,585,309 3,435,996 2,348,838 5,784,834

Effect of Acquisitions, Disposals and changes in Percentage Holding in Subsidiaries - - - - (22,292) (22,292) 125,117 102,825

Transfer of General Reserve to Retained earnings - - - (300,000) 300,000 - - -

Loss for the year - - - - (351,001) (351,001) (22,797) (373,798)

Other Comprehensive Income /(Expenses) for the year - - 2,365 - (3,381) (1,016) (328) (1,344)

Dividend Paid - - - - - - (74,113) (74,113)

Balance as at 31st March 2015 536,218 3,409 13,425 - 2,508,635 3,061,687 2,376,717 5,438,404

Balance as at 01st April 2015 536,218 3,409 13,425 - 2,508,635 3,061,687 2,376,717 5,438,404

Effect of Acquisitions, Disposals and changes in Percentage Holding in Subsidiaries - - - - (2,340) (2,340) 3,697 1,357

Right Issue of Shares by a Subsidiary - - - - - - 122,197 122,197

Profit /(Loss) for the year - - - - (438,425) (438,425) 176,440 (261,985)

Other Comprehensive Income /(Expenses) for the year - - (9,712) - (4,142) (13,854) 2,792 (11,062)

Dividend Paid - - - - - - (72,251) (72,251)

Balance as at 31st March 2016 536,218 3,409 3,713 - 2,063,728 2,607,068 2,609,592 5,216,660

Company

StatedCapital

Rs. ‘000

Available for for Sale

ReservesRs. ‘000

General Reserves

Rs. ‘000

Retained Profit/(Loss)

Rs. ‘000

Total

Rs. ‘000

Balance as at 1st April 2014 536,218 9,494 300,000 1,256,526 2,102,238

Profit /(Loss) for the year - - - 167,877 167,877

Other Comprehensive Income / (Expense) for the year - 2,669 - (4,093) (1,424)

Transfer of General Reserve to Retained earnings - - (300,000) 300,000 -

Balance as at 31st March 2015 536,218 12,163 - 1,720,310 2,268,691

Balance as at 01st April 2015 536,218 12,163 - 1,720,310 2,268,691

Loss for the year - - - (368,277) (368,277)

Other Comprehensive Income / (Expense) for the year - (8,562) - (5,046) (13,608)

Balance as at 31st March 2016 536,218 3,601 - 1,346,987 1,886,806

Revenue Reserves include General Reserves and Retained Profit/ (Loss).

The Notes from pages 35 to 93 form an integral part of these Financial Statements. Figures in brackets indicate deductions.


Cash Flow Statement


For the Year Ended 31st March

Notes

2016 Rs. ‘000

2015 Rs. ‘000

Restated

2016 Rs. ‘000

2015 Rs. ‘000

Cash Flow from Operating Activities Net Profit / (Loss) before Taxation (147,711) (260,499) (388,745) 147,814

Adjustments for : Depreciation 432,744 340,129 100,471 108,054 Dividend Income (4,727) (1,460) (91,556) (77,878) Loss / (Gain) on fair value through P&L 66,913 (4,773) 66,913 (4,773) Loss / (Gain) on disposals of Investments (137) (15,331) (137) (6,331) Interest Expense 639,466 549,386 357,964 354,923 Amortization of Grant (2,748) (2,748) - - (Profit) / Loss on Disposal of Property, Plant & Equipment (10,868) (20,824) 6,495 (8,280) Exchange Gain (48,111) (60,777) (16,174) (58,682) Interest Income (35,009) (43,314) (62,503) (104,266) Defined Benefit Plan Cost - Retiring Gratuity 50,209 39,889 20,817 14,981 Impairment of AFS investments 32,537 7,292 32,537 7,292 Creditors Write off (12,174) (13,020) (10,370) (13,020) Share of Profit / (Loss) from Associates 225,355 268,945 - - Impairment of Subsidiaries - - 55,706 9,020 Impairment of Property, Plant & Equipment - 80,211 - Negative Goodwill (216) - - - Provision for Bad & Doubtful Debts - Trade & Other Receivables 111,135 88,552 47,032 12,600 Provision/(Reversal) for Bad & Doubtful Debts - Related Parties (80) (13,794) (54) (20,243) Provision/(Reversal) for Inventories 93,016 (38,783) 47,479 (19,787) Operating Profit before Working Capital Changes 1,389,594 899,081 165,875 341,424

(Increase) / Decrease in Inventories (642,197) 470,098 (307,897) 283,541 (Increase) / Decrease in Trade and Other Receivables (408,487) 440,470 (579,794) 73,011 (Increase) / Decrease in Amounts due from Related Parties (10,167) 132,215 609,963 252,776 Increase / (Decrease) in Trade and Other Payables (63,196) (315,281) (110,065) (216,862) Increase / (Decrease) in Amounts due to Related Parties (106,535) (45,453) (58,176) (185,640) Cash Generated from Operations 159,012 1,581,130 (280,094) 548,250

Income Tax Paid (152,031) (136,554) - 7 Interest Paid (568,191) (495,926) (282,705) (255,721) Gratuity Paid (42,046) (31,200) (20,511) (12,338) Gratuity refund from planned assets 43,689 - 43,689 - Net Cash from Operating Activities (559,567) 917,450 (539,621) 280,198

Cash Flow from Investing Activities Purchase & Construction of Property, Plant & Equipment (429,689) (940,705) (85,290) (507,304) Investment in Subsidiaries (43,545) (551,550) - (740,376) Net Disposal / (Investment) in AFS Investments 200 4,292 - - Net Disposal / (Investment) in Held to Maturity Investment 5,000 - - - Net Disposal /(Investment) in FVTPL Investments 3,035 18,782 2,810 14,229 Settlement of Loans Granted to Related Parties - 180,000 - 180,000 Interest Received 35,009 43,314 3,407 4,274 Dividend Received 4,727 1,460 91,556 77,878 Proceeds from Disposal of Property, Plant & Equipment 84,473 33,226 10,630 11,019 Net Cash used in Investing Activities (340,790) (1,211,181) 23,113 (960,280)

Cash Flow from Financing Activities Dividend Paid (72,251) (74,113) - - Proceeds from Right Issue 122,197 - - - Proceeds from Long Term Loans 128,758 1,471,606 - 1,090,000 Repayment of Long Term Loans (706,666) (372,661) (287,842) (210,720) Net Lease payment during the year (72,129) (67,457) (557) (2,897) Net movement in Short Term Borrowings 904,824 (72,914) 740,981 236,000 Settlement of Debentures (150,000) - (150,000) - Loans obtained from Related Parties - - 33,000 - Settlement of Loans obtained from Related Parties (12,500) (317,250) (12,500) (253,300) Net Cash used in Financing Activities 142,233 567,211 323,082 859,083 Net Increase / (Decrease) in Cash & Cash Equivalents (758,124) 273,480 (193,426) 179,001 Cash & Cash Equivalents at the beginning of the year 21 (507,824) (781,304) (535,935) (714,936) Cash & Cash Equivalents at the end of the year 21 (1,265,948) (507,824) (729,361) (535,935)

The Notes from pages 35 to 93 form an integral part of these Financial Statements. Figures in brackets indicate deductions.


Notes to the Financial Statements

1. REPORTING ENTITY

Lankem Ceylon PLC (the “Company”) is a public limited liability company incorporated and domiciled in Sri Lanka and listed on the Colombo Stock Exchange.

The Consolidated Financial Statements of the Company as at and for the year ended 31st March 2016 comprise of the Company and its subsidiaries (together referred to as the “Group” and individually as ‘Group entities’).

The registered office of the Company and the principal line of business are given on the inner back cover of this report.

The immediate and ultimate holding companies of Lankem Ceylon PLC are E.B. Creasy & Company PLC and The Colombo Fort Land & Building PLC respectively.

2. BASIS OF PREPARATION

2.1 Statement of Compliance

The Financial Statements of the Company and those consolidated with such comprise of the Statement of Financial Position, Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows, together with Notes to the Financial Statements. These Financial Statements comply with the Sri Lanka Accounting Standards hereafter referred as (SLFRS) as laid down by the Institute of Chartered Accountants of Sri Lanka and the requirement of the Companies Act No. 07 of 2007.

The Consolidated Financial Statements for the year ended 31st March 2016 were authorised for issue by the Board of Directors on 1st August 2016.

2.2 Basis of Measurement

The Consolidated Financial Statements have been prepared on the historical cost basis and applied consistently with an adjustment being made for inflationary factors affecting the Financial Statements except for the following.

• Derivative financial instruments are measured at fair value

• Non-Derivative financial instruments at fair value through profit or loss are measured at fair value

• Available for sale financial assets are measured at fair value

• Defined benefit asset is recognized as plan assets, plus unrecognized past service cost, less the present value of defined benefit obligation

2.3 Use of Estimates, Judgments and Assumptions

The preparation of the Consolidated Financial Statements in conformity with Sri Lanka Accounting Standards requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

Information about critical judgments, estimates and assumptions in applying accounting policies that could have a significant effect on the Financial Statements are mentioned below:

Policy No.

Measurement of Fair Value of Financial Instruments 3.3

Measurement of Intangible Assets 3.8

Impairment 3.11

Valuation of Employee Benefit Liabilities 3.12

Provisions, Contingent Assets & Liabilities 3.13

Deferred Tax Assets & Liabilities 3.17.2

2.4 Functional and Presentation Currency

The Financial Statements are presented in Sri Lankan Rupees which is the Group’s functional and presentation currency. All financial information presented in Sri Lankan Rupees has been rounded to the nearest thousand unless otherwise stated.

Monetary assets and liabilities denominated in foreign currencies have been translated into local currency as per the exchange rate at the date of the Statement of Financial Position while all non-monetary items are reported at the rate prevailing at the time transactions were affected.

Notes to the Financial Statements contd.


2.5 Events Occurring after the Reporting Period

All material events after the date of Statement of Financial Position have been considered and appropriate adjustments or disclosures are made in the respective Notes to the Financial Statements.

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these Consolidated Financial Statements, unless otherwise indicated.

The accounting policies have been consistently applied by Group entities. Certain comparative amounts in the Statement of Profit or Loss and Other Comprehensive Income and Statement of Financial Position have been reclassified or rearranged, wherever necessary, to conform with the current year’s presentation.

3.1 Basis of Consolidation

The Consolidated Financial Statements (referred to as the ‘Group’) comprise the Financial Statements of the Company and its Subsidiaries.

Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance. A change in the ownership interest of a subsidiary without a loss of control is accounted for as an equity transaction. If the Group loses control over a subsidiary, the group derecognised assets and liabilities of the subsidiary, any non-controlling interest and the other components of entity related to the subsidiary. Any surplus or deficit arising on the loss of controls is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control was lost. Subsequently it is accounted as an Equity Accounted Investee or as AFS Financial Assets depending on the level of influence retained.

The Group measures goodwill at the acquisition date as the fair value of the consideration transferred including the recognised amount of any non-controlling interests in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of

the acquisition date. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

In a business combination achieved in stages, the Group re-measures its previously held equity interest in the acquiree at its acquisition date fair value and recognises the resulting gain or loss, if any, in profit or loss.

3.1.1 Non-controlling interests

For each business combination, the Group elects to measure any non-controlling interests in the acquiree either:

• At fair value; or

• At their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss.

3.1.2 Subsidiaries

Subsidiaries are those enterprises controlled by the Company. Control exists when the Company (the Parent) holds more than 50% of the voting rights and/or has the power, directly or indirectly, to govern the financial and operating policies of an enterprise to obtain benefits from its activities.

The following companies in which the Group’s effective holding is less than 50%, have been consolidated as subsidiaries based on the power to govern the financial and operating policies of those entities.


Company Name Holding %

C.W. Mackie PLC 39

Marawila Resorts PLC 40

York Hotel (Kandy) Ltd. 33

Ceymac Rubber Company Ltd. 39

Ceytra (Pvt) Ltd. 25

Kelani Valley Canneries Ltd. 34

The Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the date the control effectively commences until the date that control effectively ceases.

3.1.3 Investments in Associates

An Associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not have any control or joint control over those policies.

At the date of acquisition, any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate is recognized as goodwill. The goodwill is included within the carrying amount of the investment.

The results and assets and liabilities of associates are incorporated in the Consolidated Financial Statements using the equity method of accounting. Under the equity method, investments in associates are carried in the Consolidated Statement of Financial Position at cost and adjusted for post-acquisition changes in the Group’s share of the net assets of the associate less any impairment in the value of the investment. The Group’s share of profits or losses after tax is recognized in the consolidated profit or loss. Loss of an associate in excess of the Group’s interest in that associate are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

3.1.4 Loss of control

On the loss of control, the Group de-recognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous

subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

3.1.5 Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

3.2 Foreign Currency

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at prevailing exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities that are measured at fair value in a foreign currency are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Foreign currency differences arising on translation are recognised in profit or loss.

3.3 Financial Instruments

3.3.1 Non-derivative financial assets

The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.



The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expires, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group classifies non-derivative financial assets into the following categories: Financial assets at fair value through profit or loss, held to maturity financial assets, loans and receivables and available-for-sale financial assets.

3.3.1.1 Financial assets at fair value through profit or loss

A financial asset is classified as at fair value through profit or loss if it is classified as held-for-trading or is designated as such on initial recognition. Financial assets are designated as at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group’s documented risk management or investment strategy. Attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein, which takes into account any dividend income, are recognised in profit or loss.

3.3.1.2 Held-to-maturity financial assets

If the Company has the positive intent and ability to hold debt securities to maturity, then such financial assets are classified as held-to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses.

3.3.1.3 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 categories of financial assets. Available

for- sale financial assets are recognised 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 are recognised in other comprehensive income and presented in the fair value reserve in equity. When an investment is derecognised, the gain or loss accumulated in equity is reclassified to profit or loss.

3.3.1.4 Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprises by other receivables.

3.3.1.5 Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments.

Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

3.3.2 Non-derivative financial liabilities

The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only


when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group has the following non-derivative financial liabilities: Interest brearing borrowings, amounts due to related parties, bank overdrafts and trade and other payables. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.

3.3.2.1 Corporate guarantees

Corporate guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Corporate guarantee liabilities are recognised initially at their fair value, and the initial fair value is amortised over the life of the corporate guarantee. The corporate guarantee liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment when a payment under the guarantee has become probable.

3.4 Stated Capital

Ordinary shares

Ordinary shares are classified as equity. As per the Companies Act No. 07 of 2007, section 58 (1), stated capital in relation to a Company means the total of all amounts received by the Company or due and payable to the Company in respect of the issue of shares and in respect of call in arrears.

Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

3.5 Property, Plant and Equipment

3.5.1 Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost of certain property, plant and equipment was determined by reference to a previous SLASs revaluation. The Group elected to apply the optional exemption to use this previous revaluation as deemed cost at 1st April 2011, the date of transition.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the following:

• the cost of materials and direct labour;

• any other cost directly attributable to bringing the assets to a working condition for the intended use;

• when the entity has an obligation to remove the assets or restore the site an estimate of the costs of dismantling and removing the items and restoring the site on which they are located; and

• capitalised borrowing cost

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

3.5.2 Subsequent costs

The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

3.5.3 Derecognition

The carrying amount of an item of property, plant & equipment is derecognised on disposal, or when no future economic benefits are expected from its use. Gains and losses on derecognition are recognised net within other income in profit or loss.

3.5.4 Depreciation

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.



Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

Assets Years

Freehold Buildings 10-40

Plant, Machinery & Equipment 04-13 1/3

Motor Vehicles 04-05

Office Equipment 08-10

Furniture & Fittings 08-10

Computer Equipment 04-05

Linen, Cutlery & CrockeryOn replacement

basis\ 4 Years

The useful life and residual value of assets are reviewed, and adjusted if required, at the end of each financial year.

3.5.5 Finance Leases

Property, plant & equipment on finance leases, which effectively transfer to the Group substantially all the risk and benefits incidental to ownership of the leased items, are classified as leasehold assets under the property, plant and equipment and stated at an amount equal to the lower of their fair value and the present value of minimum lease payments at the inception of the lease, less the accumulated depreciation. Depreciation is made over the period the Group is expected to benefit from the use of the leased assets.

3.5.6 Operating Leases

Leases, where the lessor effectively retains substantially all of the risks and benefits of ownership over the term of the lease, are classified as operating leases. Lease payments are recognised as an expense in the Statement of Profit or Loss over the term of the lease and not recognised in the Statement of Financial Position.

3.6 Investment Property

Investment property is property held either to earn rental income or for capital appreciation or for both, but not held for sale in the

ordinary course of business, use in the production or supply of goods or services or for administrative purposes.

The Group has chosen cost model to measure investment property and consequently investment property is measured at deemed cost less accumulated depreciation and any impairment losses. Depreciation is recognised on a straight line basis over the estimated useful life of the investment property.

The estimated useful life of investment properties in the Group are as follows:

C.W. Mackie PLC - building: 40 years

Investment properties are derecognised when disposed of, or permanently withdrawn from use because no future economic benefits are expected. Any gains or losses on retirement or disposal are recognised in the year of retirement of disposal. Transfers are made to and from investment property only when there is a change in use in accordance with the criteria listed in LKAS 40 -Investment Property.

Where group companies occupy a significant portion of the investment property of a subsidiary, such investment properties are treated as property, plant and equipment in the Consolidated Financial Statements, and accounted for in accordance with LKAS 16 -Property, Plant and Equipment.

3.7 Borrowing Costs

Borrowing costs are recognised as an expense in the period in which they are incurred except those that are directly attributable to the acquisition, construction or production of a qualifying asset that takes a substantial period of time to get ready for its intended use or sale, where it is capitalised as a part of the cost of that asset.

3.8 Intangible Assets

An intangible asset is initially recognised at cost, if it is probable that future economic benefit will flow to the enterprise, and the cost of the asset can be measured reliably.

Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the


amortisation method for an intangible asset with a finite useful life are reviewed at least once at each financial year end.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level.

3.9 Inventories

Raw material, finished goods and work in progress of Lankem Ceylon PLC and its subsidiaries are valued at the lower of cost on a weighted average basis and net realisable value. Provision is made for obsolete, slow moving and defective inventories where necessary.

The cost includes expenditure incurred in acquiring the inventories and bringing them to their existing condition. In the case of manufactured inventories cost includes raw material cost and packing material cost.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses.

3.10 Derecognition of Financial Assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is de-recognised when the rights to receive cash flows from the asset have expired .The Group 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 Group has transferred substantially all the risks and rewards of the asset, or

(b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group 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 recognised to the extent of the Group’s continuing involvement in it.

In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group 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 Group could be required to repay.

3.11 Impairment

3.11.1 Non-derivative financial assets

A financial asset not classified as at fair value through profit or loss, including an interest in an equity-accounted investee, is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

3.11.2 Financial assets measured at amortized cost

The Company considers evidence of impairment for financial assets measured at amortised cost (loans and receivables and hold to-maturity financial assets) at both a specific asset and collective level. All individually significant assets are assessed for specific impairment. Those found not to be specifically impaired are, then collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually significant are, collectively assessed for impairment by grouping together assets with similar risk characteristics.

In assessing collective impairment, the Company uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s



judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables or held to maturity investment securities. Interest on the impaired asset continues to be recognised. When an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

3.11.3 Available-for-sale financial assets

Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss recognised previously in 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 recognised, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

An impairment loss in respect of an equity-accounted investee is measured by comparing the recoverable amount of the investment with its carrying amount. An impairment loss is recognised in profit or loss. An impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount.

3.11.4 Non-financial assets

The carrying amounts of the Group’s Non-financial assets, investment property and inventories, are reviewed at each reporting date to determine whether there is any indication

of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or cash generating unit (CGU) exceeds its recoverable amount. An impairment loss in respect of Goodwill is not reversed.

3.12 Employee Benefits

3.12.1 Defined Contribution Plans

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 obligation to pay further amounts. Obligations for contributions to provident and trust funds covering all employees are recognised as an expense in profit and loss when incurred.

3.12.2 Defined Benefit Plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The liability recognised in the Statement of Financial Position in respect of defined benefit plan is the present value of the defined benefit obligation as at the reporting date.

Provision for gratuity of the employees of the Company and Group are based on actuarial valuation. An actuarial valuation was carried out by a professionally qualified firm of actuaries, as at 31st March 2016 for the recognition of the Company’s Retirement Benefit Obligation. The Valuation method used by the actuary is ‘Projected Unit Method’. Any gains and losses arising from actuarial valuation that arise in calculating the obligation in respect of employee benefits are recognised in Other Comprehensive Income.

Provision has been made in the financial statements for retiring gratuities payable under the Payment of Gratuity Act No. 12 of 1983 to all employees including those who have less than 5 years of continued service with the Company.

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

Lankem Ceylon PLC and C.W. Mackie PLC have obtained insurance policies to meet the retiring gratuity payments to its employees.


3.12.3 Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

3.13 Provisions, Contingent Assets and Contingent Liabilities

Provisions are made for all obligations existing as at the date of Statement of Financial Position when it is probable that such an obligation will result in an outflow of resources and a reliable estimate can be made of the quantum of the outflow.

All contingent liabilities are disclosed as a note to the Financial Statements unless the outflow of resources is remote.

Contingent assets are disclosed in the notes, where inflow of economic benefit is probable.

3.14 Revenue

3.14.1 Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group, 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 value added taxes, after eliminating sales within the Group.

Revenue is generally accounted for on an accrual basis and following specific criteria are used for recognition of revenue:

(a) Sale of Goods

Revenue from the sale of goods is recognised when the significant risk and rewards of ownership of the goods have passed to the buyer with the group retaining neither a continuing managerial involvement to the degree usually associated with ownership, nor an effective control over the goods sold.

(b) Rendering of Services

Revenue from rendering of services is recognised in the accounting period in which the services are rendered or performed.

(c) Revenue from Construction Contracts

Revenue from construction contracts are calculated on the basis of the percentage completion method. Revenue is accounted proportionately and accrued accordingly on the jobs which are substantially completed as at the date of Statement of Financial Position. The stage of completion is assessed by reference to the surveys of work performed.

(d) Revenue from Hotel Services

Apartment revenue is recognised on the rooms occupied on a daily basis and food and beverage and other hotel related sales are recognised at the point of sale.

(e) Dividend Income

Dividend income is recognised when the shareholders’ right to receive such dividend is established.

(f) Finance Income

Finance income comprises interest income on funds invested (including available-for-sale financial assets), gains on the disposal of available-for-sale financial assets and fair value gains on financial assets at fair value through profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

3.15 Government Grants

3.15.1 Capital nature grants and subsidies

Grants and subsidies are credited to the Statement of Profit or Loss over the periods necessary to match them with related costs which they are intended to be compensated on a systematic basis. Grants related to assets, including non-monetary grants at fair value is deferred in the Statement of Financial Position and credited to the Statement of Profit or Loss over useful life of the related assets. Grants related to income are recognised in the Statement of Profit and Loss in the period in which it is receivable.

3.15.2 Revenue nature grants and subsidies

Grants and subsidies that compensate the Group for expenses incurred are recognised as revenue in the Statement of Profit or Loss on a systematic basis in the period in which the expenses are recognised. Grants that compensate the Group for the cost



of an asset are recognised in the Statement of Profit or Loss over the useful life of the related assets.

3.16 Expenses

3.16.1 Operating lease payments

Where the Company has the use of assets under operating leases, payments made under the leases are recognised in the Statement of Profit or Loss on a straight line basis over the term of the lease. Lease incentives received are recognised in the Statement of Profit or Loss as an integral part of the total lease expense over the term of the lease. Contingent rentals are charged to the Statement of Profit or Loss in the accounting period in which they are incurred.

3.16.2 Finance costs

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions and losses on disposal of available for sale financial assets, fair value losses on financial assets at fair value through profit or loss and impairment losses recognised on financial assets (other than trade receivables).

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Foreign currency gains and losses on financial assets and financial liabilities 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.

3.17 Taxation

Income tax expense comprises current and deferred tax. Income tax is recognised in the Statement of Profit or Loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

3.17.1 Current tax

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the date of Financial Position, and any adjustment to tax payable in respect of previous years.

3.17.2 Deferred tax

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for

financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, nor differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.

The principal temporary differences arise from depreciation on property, plant and equipment; tax losses carried forward, impairment of trade and other receivables and provisions for defined benefit obligations. Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at the date of Statement of Financial Position and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.

3.18 Earnings per Share

The Group presents basic earnings per share (EPS) data for its ordinary shares. Basic 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. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.


3.19 Cash Flow Statement

The Cash Flow Statement has been prepared using ‘indirect method’. Interests paid are classified as operating cash flows while dividends paid are classified as financing cash flows. Interests and dividends received are classified as investing cash flows for the purpose of presentation of Cash Flow Statement.

For the purpose of Cash Flow Statement, cash & cash equivalents consist of cash at bank and in hand and short term deposits net of outstanding bank overdrafts.

3.20 Segmental Reporting

A segment is a distinguishable component of an Enterprise that is engaged in either providing products or services (Business Segments) or in providing products or services within a particular economic environment (Geographic Segment) which is subject to risks and rewards that are different from those of other segments.

Segment information is presented in respect of the Group’s business activities. The business segment has been identified as the primary segment of the Group as there are no distinguishable components to be identified as geographical segments for the Group.

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components, whose operating results are reviewed regularly by the Board of Directors (being the chief operating decision maker) to make decisions about resources allocated to each segment and assess its performance, and for which discrete financial information is available.

3.21 Related Party Transactions

Disclosures have been made in respect of the transactions between parties who are defined as related parties as per Sri Lanka Accounting Standards No. 24 – Related Party Disclosures.

3.22 Financial Risk Management Policies

The Group’s principal financial liabilities comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is

to finance the Group’s operations and to provide guarantees to support its operations. The Group has loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. The Group also holds available-for-sale investments and enters into derivative transactions.

The Group is exposed to market risk, credit risk and liquidity risk. The Group’s Senior Management monitors these risks. The Group’s Senior Management is supported by an audit committee that advises on financial risks and the appropriate financial risk governance framework for the Group. The Audit Committee provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with group policies and group risk appetite.

4. NEW ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE

Standards issued but not yet effective up to the date of issuance of the Company’s financial statements are listed below. This listing of standards is those that the Group reasonably expects to be applicable at a future date. The Group intends to adopt those standards when they become effective.

a) SLFRS 9 – Financial Instruments

SLFRS 9 as issued reflects the replacement of LKAS 39 and applies to the classification and measurement of financial assets and financial liabilities as defined in LKAS 39. This standard becomes effective for annual periods beginning on or after January 01st, 2018. The adoption of SLFRS 9 will have an impact on classification and measurement of Company’s financial assets.

b) SLFRS 15 – Revenue from Contracts with Customers

SLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces the existing revenue recognition contracts. SLFRS 15 is effective for annual periods beginning on or after 01st January 2018.

The Group 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.



5. REVENUE


For the Year Ended 31st March 2016 Rs.’000

2015 Rs.’000

2016 Rs.’000

2015 Rs.’000

5.1 Summary

Net Revenue 17,073,999 15,221,745 5,738,083 5,130,542

17,073,999 15,221,745 5,738,083 5,130,542

5.2 Segments

Segmentation has been determined based on the operating activities of the companies or the sector, where multiple activities fall within one company or sector has been based on the core activities of that particular sector.

Trading Consumer Products - Manufacturing, Selling and Distribution of Consumer Products

Trading Industrial Products - Manufacturing, Selling and Distribution of Industrial Products

Leisure - Owning and Operation of Resort Hotels

Others - Special Projects and Other Services



2015 Rs.’000

2016 Rs.’000

2015 Rs.’000

5.3 Segment Revenue

Trading - Consumer Products 5,297,270 5,503,093 120,445 118,752

Trading - Industrial Products 11,051,338 10,908,399 5,596,990 4,978,930

Leisure 1,299,018 982,911 - -

Others 55,242 79,921 20,648 32,860

17,702,868 17,474,324 5,738,083 5,130,542

Less: Inter-Segment Revenue (628,869) (2,252,579) - -

17,073,999 15,221,745 5,738,083 5,130,542

Operating Profit Profit /(Loss) before Tax


2015 Rs.’000

2016 Rs.’000

2015 Rs.’000

Restated

5.4 Segment Profit - Consolidated

Trading - Consumer Products 74,773 151,708 11,488 83,183

Trading - Industrial Products 447,298 377,236 19,915 129,568

Leisure 154,286 (130,776) 40,357 (219,308)

Others 24,546 50,800 (219,471) (253,942)

700.903 448,968 (147,711) (260,499)


6. OTHER INCOME



2015 Rs.’000

2016 Rs.’000

2015 Rs.’000

Profit on Disposal of Property, Plant and Equipment 25,473 20,824 - 8,280

Dividend Income - Quoted Companies 3,010 1,460 44,843 43,966

- Unquoted Companies 1,717 - 46,713 33,912

Creditors no longer payable written back 12,174 13,020 10,370 13,020

Amortisation of Grants and Subsidies 2,748 2,748 - -

Commission income 236 - - -

Negative Goodwill on Acquisition 216 - - -

Gain on disposal of AFS Investments 137 15,331 137 6,331

Reversal of impairment on related party receivable 80 13,794 151 32,907

Reversal of impairment on Investment in Subsidiaries - - - 10,981

Rent Income 96,350 80,548 - -

Sundry Income 27,692 32,031 28,416 20,277

169,833 179,756 130,630 169,674

7. OTHER EXPENSES

Loss on disposal of property, plant and equipment 14,605 - 6,495 -

Impairment of Investment in Subsidiaries - - 55,706 20,000

Impairment of AFS Investments 32,537 7,292 32,537 7,292

Impairment of Amounts due from Related Parties - - 97 12,664

Sundry Expenses 23,735 16,276 19,492 5,524

70,877 23,568 114,327 45,480

8. NET FINANCE COST

(A) Finance income

Interest Income (10,011) (6,425) (3,407) (4,274)

Financial assets at fair value through profit or loss-net change in fair value: - (4,773) - (4,773)

Interest from Related Companies

- Debenture Interest Income - (12,150) - (12,150)

- Others (17,136) (15,261) (36,611) (66,971)

Commission on Corporate Guarantee (7,862) (9,478) (22,485) (20,872)

Gain on Translation of Foreign Currency (48,111) (60,777) (16,174) (58,682)

Total Finance Income (83,120) (108,864) (78,677) (167,722)





2015 Rs.’000

2016 Rs.’000

2015 Rs.’000

(B) Finance Cost

Interest on Term Loans 286,740 210,856 207,878 143,458

Interest on Overdraft and Trust Receipt Loans 170,730 147,875 84,253 112,035

Interest on Finance Lease Obligations 7,346 14,368 29 228

Debenture Interest 25,653 29,664 25,653 29,664

Other Interest 103,160 131,883 40,151 69,539

Loss on Translation of Foreign Currency 45,837 14,740 - -

Financial assets at fair value through profit or loss-net change in fair value: 66,913 - 66,913 -

Total Finance Cost 706,379 549,386 424,877 354,924

Net Finance Cost 623,259 440,522 346,200 187,202

9. PROFIT BEFORE TAX

is stated after charging all expenses including the following:

Depreciation/Amortisation

Property, Plant & Equipment 427,866 335,134 100,471 108,054

Biological Assets - - - -

Leasehold Properties - - - -

Investment Properties 4,879 4,995 - -

Impairment of Property, Plant & Equipment - 80,211 - -

Auditor’s Remuneration

KPMG 8,427 8,536 2,400 2,117

Other Auditors 1,555 1,145 - -

Non-Audit Services

KPMG 3,912 441 2,200 -

Other Auditors - - - -

Salaries and Wages 1,378,490 1,055,455 777,376 355,590

Defined Benefit Plan Cost - Retiring Gratuity 50,209 39,889 20,818 14,981

Defined Contribution Plan Cost - EPF & ETF 144,246 129,964 74,404 30,890

Managing Agent Fees 19,838 12,824 - -

Provision / (Reversal Provision) for Bad & Doubtful Debts 111,135 88,552 47,032 12,600

Provision/ (Reversal Provision) for Obsolete Inventories 93,106 (38,783) 47,479 (19,787)

Donations 326 157 - 100


10. INCOME TAX EXPENSE



2015 Rs.’000

2016 Rs.’000

2015 Rs.’000

Current Income Tax Expense (Note 10.1)

Taxation on Profit for the Year 184,990 135,158 173 -

Deemed Dividend Tax - 205 - -

Under / (Over) Provision on Taxation in respect of previous year (6,077) (179) - -

178,913 135,184 173 -

Deferred Tax Expense

Origination/(Reversal) of Temporary Differences (67,412) (23,856) (22,604) (21,655)

Deferred Tax recognized through OCI 2,773 1,971 1,963 1,592

Deferred Tax recognized through Profit or Loss (64,639) (21,885) (20,641) (20,063)

114,274 113,299 (20,468) (20,063)

10.1 Current Income Tax Expense

Reconciliation of Accounting Profit/ (Loss) to Income Tax Expense



2015 Rs.’000

Restated

2016 Rs.’000

2015 Rs.’000

Profit/ (Loss) before Taxation (147,711) (260,499) (388,745) 147,814

Intra-Group Adjustments 104,708 127,118 - -

(43,003) (133,381) (388,745) 147,814

Aggregate Disallowable Expenses 1,147,121 940,726 296,648 157,280

Aggregate Allowable Expenses (977,666) (545,706) (185,393) (141,044)

Tax Exempt (Income)/Loss (63,836) (79,243) (63,836) (79,243)

Income not part of Assessable Income (203,526) (281,180) (154,037) (236,946)

(140,910) (98,784) (495,363) (152,139)

Statutory Loss from Business 905,382 574,968 495,363 152,139

Statutory Profit from Business 764,472 476,184 - -

Other Sources of Income 112,745 145,701 59,096 99,994

Profit from Relocated Undertakings 89,982 - 89,982 -

Tax Losses utilized during the year (125,535) (50,760) (52,177) (34,998)

Qualifying Payments utilized during the year (96,282) (65,356) (96,282) (64,996)

Taxable Income 745,382 505,769 619 -

Income Tax @ 28% 163,531 130,315 173 -

Income Tax @ 12% 21,459 4,843 - -

Taxation on Profit for the Year 184,990 135,158 173 -





2015 Rs.’000

2016 Rs.’000

2015 Rs.’000

10.2 Reconciliation of Tax Losses

Balance at the beginning of the year 2,118,430 1,454,573 545,341 428,200

Adjustments to opening balance 37,903 4,260 15,163 -

On acquisition of subsidiary - 135,389 - -

Tax Loss utilized during the year (125,535) (50,760) (52,177) (34,998)

Tax Loss for the year 905,382 574,968 495,363 152,139

Balance at the end of the year 2,936,180 2,118,430 1,003,690 545,341

10.3 Corporate income taxes of the companies in the Group are computed in accordance with the Inland Revenue Act No. 10 of 2006 and subsequent amendments thereto.

Lankem Ceylon PLC and other companies within the Group, excluding those which are enjoying a tax holiday or concessionary rate of taxation as referred to below, are liable to income tax at 28%.

10.4 In accordance with the section 21 of the Inland Revenue Act No.10 of 2006, the profits & income from relocated activities (Lankem Ceylon PLC has relocated its Agro Chemicals & Agro Seeds operations to Pannala) is exempt from income tax for a period of five years commencing from the Year of Assessment 2010/2011 under GAMATA KARMANTHA PROJECT.

10.5 Lankem Technology Services Ltd., Associated Farms (Pvt) Ltd., and Lankem Agrochemicals Ltd. were non-operative during the year.

10.6 Sigiriya Village Hotels PLC, Marawila Resorts PLC, Beruwala Resorts PLC, BOT Hotel Services (Pvt) Ltd., Lak Kraft (Pvt) Ltd., Sherwood Holidays Ltd. and Galle Fort Hotel (Pvt) Ltd. are liable for taxation at 12% on the profits and income from activities relating to operating of hotels and is liable for taxation at 28% on other income in accordance with the provisions of Inland Revenue Act.

10.7 In accordance with the agreement entered into with the Board of Investments of Sri Lanka under Section 17 of the G.C.E.C. Law No.4 of 1978, profits of York Hotels (Kandy) Ltd. are exempted from income tax for a period of ten years from the year in which the Company commences to make profits or within five years from the year the company commenced commercial operations, which ever is earlier. The company is also entitled to a concessionary rate of tax at 2% of its turnover for 15 years immediately after the expiry of the said 10 years tax holiday. Other income is liable to income tax at 28%.

However, Board of Investment has given a notice of cancellation and termination of all rights, privileges and benefits conferred on the enterprise under the conduct and operation of the project with effect from 23rd November 2002.

10.8 In accordance with Section 22 (1) and 22 (2) of the Inland Revenue Act No 10 of 2006, the profits and income of Lankem Research Ltd. is exempt from income tax for a period of 5 years commencing from the Year of Assessment 2006/07. The said tax exemption provision was expired and the Company is liable for income tax at 10% on its taxable income for the year of Assessment 2012/13 and thereafter 12% as per the section 48 of Inland Revenue Act No. 10 of 2006.

10.9 In accordance with the agreement entered into with the Board of Investments of Sri Lanka under Section 17 of the G.C.E.C. Law No. 04 of 1978, profits of SunAgro Farms Ltd. are exempted from income tax for a period of 10 years with effect from 31st May 2008.

10.10 C. W. Mackie PLC and its subsidiaries are liable for income tax at 12% on taxable profits on non-traditional exports and 28% on other profits in accordance with the provisions of Inland Revenue Act No. 10 of 2006 and subsequent amendments there to.

10.11 Deferred Taxation

(i) Deferred tax has been computed by using the tax rate of 28% for the Company and subsidiaries which are liable for income tax at the standard rate for the assessment year 2015/16. The subsidiaries which are liable for income tax at reduced rates (below the standard rate) for the assessment year 2015/16 have computed the deferred tax at the tax rate of 12%.


(ii) No provision has been made for deferred tax in the Financial Statements of York Hotels (Kandy) Ltd. as no material temporary differences have arisen during the year which are expected to reverse in the future.

(iii) No deferred tax assets have been recognised in the Financial Statements of subsidiaries, namely SunAgro Farms Ltd., Lankem Exports (Pvt) Ltd., Lankem Consumer Products Ltd., Lankem Research Ltd., Lankem Paints Ltd, SunAgro Foods Ltd., Colombo Fort Hotels Ltd, Kelani Velli Canneries Ltd. and Lankem Chemicals Ltd. & Lankem Ceylon PLC because it is not probable that future taxable profit will be available against which these companies can utilise the benefit.

As at 31.03.2016

Million31.03.2015

Million

Unrecognised Deferred Tax Asset

SunAgro Farms Ltd. 5.9 5.7

Lankem Exports (Pvt) Ltd. 8.1 7.3

Lankem Consumer Products Ltd. 53.8 53.8

Lankem Research Ltd. 9.5 1.8

Lankem Paints Ltd. 26.3 23.2

SunAgro Foods Ltd. 76.1 57.8

Colombo Fort Hotels Ltd. 4.0 14.6

Lankem Ceylon PLC 162.6 76.1

Kelani Velley Canneries Ltd. 60.0 49.8

Lankem Chemicals Ltd. 9.4 -

11. EARNINGS / (LOSS) PER SHARE

Earnings / (Loss) per share is based on the profit /(loss) for the year attributable to owners of the Company divided by weighted average number of ordinary shares in issue during the year.


For the Year Ended 31st March 2016 2015 2016 2015

Profit attributable to Equity Holders of the Company (Rs.'000) (438,425) (351,001) (368,277) 167,877

Weighted Average Number of Ordinary Shares (No.'000) 24,000 24,000 24,000 24,000

Earnings / (Loss) per Share (Rs.) (18.27) (14.63) (15.34) 6.99

12. DIVIDEND PER SHARE


For the Year Ended 31st March 2016 2015 2016 2015

Dividends for Ordinary Shareholders (Rs. '000) - - - -

No. of Ordinary Shares in issue (No. '000) 24,000 24,000 24,000 24,000

Dividend per Ordinary Share - - - -



13. PROPERTY, PLANT & EQUIPMENT

13.1 Consolidated

Balance As at

01.04.2015Rs.’000

Transfers / Adjustments

Rs. ‘000

Acquisition of

SubsidiaryRs. ‘000

Additions during

the YearRs. ‘000

Disposalsduring

the YearRs. ‘000

BalanceAs at

31.03.2016Rs.’000

Cost / Deemed Cost

Freehold

Land 2,643,578 (127,871) - 26,951 - 2,542,658

Buildings 2,975,748 67,033 90,039 66,766 (11,453) 3,188,133

Land Development Cost 9,404 - - - - 9,404

Plant & Machinery 1,751,741 485 2,572 62,406 (113,173) 1,704,031

Motor Vehicles 280,692 127,122 - 99,074 (64,880) 442,008

Furniture & Fittings 479,320 (9,045) 20,965 70,125 (36,057) 525,308

Office Equipment 328,862 16,409 12,382 16,104 (7,927) 365,830

Linen & Soft Furnishings 112,151 (5,487) 3,836 11,756 (9,490) 112,766

8,581,496 68,646 129,794 353,182 (242,980) 8,890,138

Leasehold

Motor Vehicles 196,028 (127,122) - 999 (40,754) 29,151

Office Equipment 1,962 - - - - 1,962

197,990 (127,122) - 999 (40,754) 31,113

Total Cost / Deemed Cost 8,779,486 (58,476) 129,794 354,181 (283,734) 8,921,251

Balance As at

01.04.2015Rs.’000


Rs. ‘000

Acquisition of

SubsidiaryRs. ‘000

Chargefor

the YearRs. ‘000

Disposalsduring

the Year Rs. ‘000

BalanceAs at

31.03.2016Rs.’000

Accumulated Depreciation

Freehold

Buildings 594,884 (1,077) 2,793 113,664 (3,530) 706,734

Plant & Machinery 876,175 6,793 129 159,253 (88,466) 953,884

Motor Vehicles 175,959 100,967 - 44,678 (51,807) 269,797

Furniture & Fittings 327,094 (4,273) 2,012 43,536 (30,927) 337,442

Office Equipment 168,852 15,208 8,483 39,049 (6,483) 225,109

Linen & Soft Furnishings 70,939 (10,530) 759 9,116 (4,186) 66,098

2,213,903 107,088 14,176 409,296 (185,399) 2,559,064

Leasehold

Motor Vehicles 132,408 (107,153) - 18,368 (24,731) 18,892

Office Equipment 1,434 266 - 202 - 1,902

133,842 (106,887) - 18,570 (24,731) 20,794

Total Depreciation 2,347,745 201 14,176 427,866 (210,130) 2,579,858

Carrying Amount 6,431,741 6,341,393

Capital Work in Progress 155,061 (74,150) - 76,782 - 157,693

Total Carrying Amount of Property, Plant & Equipment 6,586,802 6,499,086


13. PROPERTY, PLANT & EQUIPMENT

13.2 Company

Balance As at

01.04.2015Rs.’000


Rs. ‘000

Additions during

the YearRs. ‘000

Disposalsduring

the Year Rs. ‘000

BalanceAs at

31.03.2016Rs.’000

Cost / Deemed Cost

Freehold

Land 411,965 - 1,753 - 413,718

Land Development Cost 9,404 - - - 9,404

Buildings 580,783 - 11,407 (11,042) 581,148

Plant & Machinery 415,334 - 5,969 (7,616) 413,687

Motor Vehicles 122,677 2,188 10,800 (4,128) 131,537

Furniture & Fittings 257,327 - 54,016 (29,210) 282,133

1,797,490 2,188 83,945 (51,996) 1,831,627

Leasehold

Motor Vehicles 2,188 (2,188) - - -

2,188 (2,188) - - -

Total Cost / Deemed Cost 1,799,678 - 83,945 (51,996) 1,831,627

Balance As at

01.04.2015Rs.’000


Rs. ‘000

Charge for the

YearRs. ‘000

Disposalsduring

the YearRs. ‘000

BalanceAs at

31.03.2016Rs.’000


Freehold

Buildings 111,194 - 28,918 (3,484) 136,628

Plant & Machinery 207,146 - 36,934 (3,966) 240,114

Motor Vehicles 86,904 1,286 10,665 (3,535) 95,320

Furniture & Fittings 204,753 - 23,762 (23,887) 204,628

609,997 1,286 100,279 (34,872) 676,690

Leasehold

Motor Vehicles 1,094 (1,286) 192 - -

1,094 (1,286) 192 - -

Total Depreciation 611,091 - 100,471 (34,872) 676,690

Carrying Amount 1,188,587 1,154,937

Capital Work in Progress 61,556 - 1,344 - 62,900

Total Carrying Amount of Property, Plant & Equipment 1,250,143 1,217,837



13.3

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13.4.1 Beruwala Resorts PLC, a subsidiary, has constructed building on a land which was leased out from Sri Lanka Tourism Development Authority for 30 years commencing from 1st August, 2007. The lease period will expire on 31st July, 2037. The company has paid Rs. 1,832,940/- in year 2015/16 (2014/15 - Rs. 1,836,000/-).

13.4.2 Sigiriya Village PLC, a subsidiary, has constructed building on a land which was leased out from Sri Lanka Tourism Development Authority for 30 years commencing from 2nd September, 2009. The lease period will expire on 1st September 2039. The company has paid Rs. 1,805,572/- in year 2015/16 (2014/15 - Rs. 1,654,985/-).

13.4.3 Each company in the Group has evaluated both internal and external indications of impairment of long lived assets and has not identified presence of any of such indications at the end of the financial year.

13.4.4 Property, Plant & Equipment pledged as securities in obtaining loans have been disclosed in Note 24.6 to these Financial Statements.

13.5 Fully depreciated property, plant and equipment still in use

Consolidated

The gross carrying amount of fully depreciated Property, Plant and Equipment still in use as at 31st March 2016 is Rs.622 million (2015 - Rs.517 million).

Company

The gross carrying amount of fully depreciated Property, Plant and Equipment still in use as at 31st March 2016 is Rs.253 million (2015-Rs.208 million).

14. BIOLOGICAL ASSETS

i) SunAgro Farms Ltd. - Mature Plantations

As atTotal

31.03.2016Rs.’000

Total31.03.2015

Rs.’000

Cost

At the beginning of the year 3,020 3,020

At the end of the year 3,020 3,020

Depreciation



Carrying amount - -

The requirement of recognition of bearer biological assets at its fair value less cost to sell under LKAS 41 was superseded by the ruling issued on 2nd March 2012, by The Institute of Chartered Accountants of Sri Lanka. Accordingly, the Group has elected to measure the bearer biological assets at cost using LKAS 16 - Property Plant and Equipment.



15. LEASEHOLD PROPERTIES

As atTotal

31.03.2016Rs.’000

Total31.03.2015

Rs.’000

Cost/Valuation

Leasehold Right to Bare Land

Balance at the beginning of the year 2,555 2,555

Balance at the end of the year 2,555 2,555

Accumulated Depreciation & Impairment

Leasehold Right to Bare Land



Carrying Amount - -

16. INVESTMENT PROPERTY

Consolidated

As at 31.03.2016Rs.’000

31.03.2015Rs.’000

Cost


Transfer from Property, Plant & Equipment 157,145 -

Reclassification from investment property (24,519) -




Charge for the Year 4,879 4,995

Reclassification from investment property (201) -


Carrying Amount 195,522 67,574

16.1. Consolidated - C. W. Mackie PLC

The Company has rented out a part of C.W. Mackie building complex and the value of land and buildings of that portion has been classified as investment property and accounted on “Cost Model” as required by LKAS 40 – Investment Property. The above investment property is situated at No. 36, D. R. Wijewardena Mawatha, Colombo 10 and the extent of the building is 52,923 square feet. The carrying amount of investment property as at 31st March 2016, amounted to Rs. 38.4 Mn. (As at 31st March 2015 - Rs. 43.2 Mn.).

As per the valuation carried out on 31st March 2016 by Mr. K.T.D. Tissera, an independent professional valuer J.P.U.M., Diploma in Valuation (Sri Lanka), F.R.I.C.S. (Eng), F.I.V. (Sri Lanka), Chartered Valuation Surveyor, fair value of investment property as at 31st March 2016 is Rs. 49 Mn. These properties were valued on an open market value for existing use basis.


Rental Income earned from Investment Property by the Company amounted to Rs. 93.5Mn. for the year ended 31st March 2016 (Rs. 77.6 Mn. for the period ended 31st March 2015) and direct operating expenses incurred for the same period amounted to Rs. 18.6 Mn. (Rs. 16.1 Mn. for the period ended 31st March 2015).

16.2. York Hotel Kandy Ltd.

As a result of change in the company’s business plan, Land recognised as Property , Plant and Equipment previously has been classified as Investment Property and accounted on “Cost Model” as required by LKAS 40 - Investment Property. The company intends to hold the land for capital appreciation. The above investment property is situated at Halloluwa, Katugastota and the extent of the land is 6 A, 1 R & 36 P. The carrying amount of Investment Property as at 31st March 2016, amounted to Rs. 157.1 Mn.

As per the valuation carried out on 31st March 2016, by Mr. R. S. Wijesuriya, an independent incorporated valuer, fair value of Investment Property as at 31st March 2016 is Rs. 374 Mn.

17. INTANGIBLE ASSETS

Consolidated

As at 31.03.2016Rs.’000

31.03.2015Rs.’000

Goodwill


Goodwill on Acquisition of Subsidiary 30,267 458,990

Impairment of Goodwill - -


This represents the excess of the cost of acquisition over the attributable net assets of the following companies. The aggregate carrying amount of Goodwill allocated to each company is as follows:

Consolidated

As at 31.03.2016Rs.’000

31.03.2015Rs.’000

C W Mackie PLC 165,935 165,935

Galle Fort Hotel (Pvt) Ltd. 329,072 329,072

Ceylon Tapes (Pvt) Ltd. 23,490 23,490

JF Packaging (Pvt) Ltd. 435,500 435,500

Sherwood Holidays Ltd. 30,267 -

984,264 953,997

The recoverable value of C.W. Mackie PLC was based on fair value less cost to sell and the others were based on value in use. Value in use was determined by discounting the future cash flows generated from the investment. Key assumptions used are given below:

Business growth - Based on historical growth rate and business plan

Inflation - Based on the current inflation and the total cost subjected to the inflation

Discount Rate - Average market borrowing rate adjusted for risk premium

Margin - Based on current margin and business plan



18. INVETMENTS

18.1 Investments in Subsidiaries

18.1.1 Company

GroupHolding

2016%

CompanyHolding

2016%

GroupHolding

2015%

CompanyHolding

2015%

No ofShares

31.03.2016

MarketValue

31.03.2016Rs.’000

Cost31.03.2016

Rs.’000

No ofShares

31.03.2015

MarketValue

31.03.2015Rs.’000

Cost31.03.2015

Rs.’000

Quoted Investments

C.W.Mackie PLC 39.03 39.03 39.03 39.03 14,046,811 766,956 541,413 14,046,811 762,742 541,413

Sigiriya Village Hotels PLC 51.60 23.15 51.60 23.15 2,083,760 122,723 41,851 2,083,760 122,942 41,851

Marawila Resorts PLC 39.55 7.32 39.73 13.63 16,700,919 36,472 99,756 16,700,919 55,113 99,756

Beruwala Resorts PLC 52.68 0.01 52.68 0.01 83,965 101 194 83,965 134 194

Total Quoted Investments 683,214 683,214

Unquoted Investments

Colombo Fort Hotels Ltd. 69.11 68.85 69.11 68.85 2,329,326,024 - 1,595,115 2,329,326,024 - 1,595,115

Lankem Plantation Services Ltd. 60.00 60.00 60.00 60.00 179,993 - 1,800 179,993 - 1,800

Lankem Exports (Pvt) Ltd. 100.00 100.00 100.00 100.00 10,000 - 100 10,000 - 100

Lankem Paints Ltd. 100.00 100.00 100.00 100.00 2,000,000 - 20,000 2,000,000 - 20,000

Lankem Consumer Products Ltd. 100.00 100.00 100.00 100.00 2,000,000 - 20,000 2,000,000 - 20,000

Lankem Chemicals Ltd. 100.00 100.00 100.00 100.00 2,000,000 - 20,000 2,000,000 - 20,000

Lankem Research Ltd. 100.00 100.00 100.00 100.00 250,007 - 2,500 250,007 - 2,500

SunAgro Life Science Ltd. 100.00 100.00 100.00 100.00 200,000 - 2,000 200,000 - 2,000

SunAgro Farms Ltd. 100.00 100.00 100.00 100.00 1,200,000 - 12,000 1,200,000 - 12,000

SunAgro Foods Ltd. 100.00 100.00 100.00 100.00 4,999,994 - 50,275 4,999,994 - 50,275

Lankem Technology Services Ltd. 100.00 100.00 100.00 100.00 4,999,995 - 5,000 4,999,995 - 5,000

Ceylon Tapes (Pvt.) Ltd. 100.00 100.00 100.00 100.00 820,000 - 114,898 820,000 - 114,898

JF Packaging (Pvt.) Ltd. 72.50 72.50 72.50 72.50 488,034 - 603,059 488,034 603,059

Associated Farms (Pvt) Ltd. 100.00 100.00 100.00 100.00 55,398 - 554 55,398 - 554

Total Unquoted Investments 2,447,301 2,447,301

3,130,515 3,130,515

Less: Provision for Impairment in Value of Investments (18.1.2.) (438,232) (382,526)

Total Investments 2,692,283 2,747,989


18.1.2 Provision for Impairment in Value of Investments

Company

As at 31.03.2016Rs.’000

31.03.2015Rs.’000

Lankem Consumer Products Ltd. 20,000 20,000

Lankem Paints Ltd. 20,000 20,000

SunAgro Farms Ltd. 12,000 12,000

Associated Farms (Pvt) Ltd. 554 554

Lankem Plantation Services Ltd. 1,800 1,800

Colombo Fort Hotels Ltd. 370,629 328,172

SunAgro Foods Ltd. 13,249 -

438,232 382,526

18.2 Investments in Associates

18.2.1 Investments in Associates - Consolidated

As at 31.03.2016Rs.’000

31.03.2015Rs.’000

Restated


Lankem Plantation Holdings Ltd. - (LPHL) 475,115 712,669

Waverly Power (Pvt) Ltd - (WPL) 126,803 114,604

Total Unquoted Investments 601,918 827,273

Balance as at beginning of the year 827,273 1,096,218

Share of Profit/(Loss) for the year (225,355) (268,945)


18.2.2 Investments in Associates - Company

Principal business activities Holding2016

%

Holding2015

%

No of Shares

31.03.2016

Cost31.03.2016

Rs.’000

No of Shares

31.03.2015

Cost31.03.2015

Rs.’000


Lankem Plantation Holdings Ltd.

Investing in Plantations 47.56 47.56 19,500,001 220,500 19,500,001 220,500

Waverly Power (Pvt) Ltd Generating electricity for the national grid

43.59 43.59 3,400,000 102,000 3,400,000 102,000

Total Unquoted Investments

322,500 322,500



18.2.3 Summarised financial information of Associates Companies

Summary of the Statement of Financial Position

As at

LPHL31.03.2016

Rs.’000

WPL31.03.2016

Rs.’000

LPHL31.03.2015

Rs.’000Restated

WPL31.03.2015

Rs.’000

Non-current Assets 10,986,976 204,299 10,665,655 215,390

Current Assets 3,796,833 42,397 5,068,230 46,343

Total Assets 14,783,809 246,696 15,773,885 261,733

Non-current Liabilities 6,358,599 77,012 6,487,207 117,925

Current Liabilities 6,844,032 27,907 7,025,141 30,015

Total Liabilities 13,202,631 104,919 13,512,348 147,940

Net Assets 1,581,178 141,777 2,221,537 113,793

Minority Interest (647,000) - (787,876) -

934,178 141,777 1,433,661 113,793

Ownership interest 47.56% 43.59% 47.56% 43.59%

Investees share of Net Assets 444,295 61,801 681,849 49,602

Goodwill 30,820 65,002 30,820 65,002

Carrying amount of interest 475,115 126,803 712,669 114,604

Summary of the Statement of Profit or Loss

For the year ended

LPHL31.03.2016

Rs.’000

WPL31.03.2016

Rs.’000

LPHL31.03.2015

Rs.’000Restated

WPL31.03.2015

Rs.’000

Revenue 10,228,452 82,097 13,724,826 84,509

Depreciation and amortization (445,904) (14,766) (429,555) (14,673)

Interest expense (830,351) (14,260) (734,607) (19,448)

Income and expenses (9,590,047) (25,086) (13,433,780) (21,472)

Investees share of Profit / (Loss) (237,554) 12,199 (281,549) 12,604

18.3 Investments Classified as Available for Sale


As at 31st March Note2016

Rs.’0002015

Rs.’000 Note2016

Rs.’0002015

Rs.’000

Quoted Investments 18.3.1. 24,711 34,252 18.4.1 12,914 20,633

Unquoted Investments 18.3.2. 19,711 52,248 18.4.2 41,880 74,417

Unit Trusts 18.3.3. 11,129 11,959 18.4.3 11,129 11,959

55,551 98,459 65,923 107,009


18.3.1 Quoted Investments

Consolidated

As at

No ofShares

31.03.2016

MarketValue

31.03.2016Rs.’000

No ofShares

31.03.2015

MarketValue

31.03.2015Rs.’000

Bank, Finance & Insurance

Nations Trust Bank PLC 6,365 472 6,365 637

Chevron Lubricants Lanka PLC 6,000 1,830 6,000 2,357

National Development Bank PLC 5,514 931 5,514 1,368

Total 3,233 4,362

Construction & Engineering

Colombo Dockyard PLC - - 269 44

Access Engineering PLC 400,000 8,320 400,000 7,680

Total 8,320 7,724

Hotels & Travel

Hunas Falls Hotels PLC 400 20 400 24

Hotel Sigiriya PLC - - 14,000 1,230

Pegasus Resorts PLC 960 30 960 39

Renuka City Hotels PLC 525 171 525 173

Royal Palms Beach Hotels PLC 375 11 375 14

Trans Asia Hotels PLC - - 400 38

Total 232 1,518

Plantations

Lankem Development PLC 903,680 3,615 903,680 5,422

Kotagala Plantations PLC 615,841 9,299 615,841 15,211

Total 12,914 20,633

Healthcare

Ceylon Hospitals PLC 130 12 130 15

Total 12 15

Total Quoted Investments 24,711 34,252



18.3.2 Unquoted Investments

Consolidated

As at

No ofShares

31.03.2016

MarketValue

31.03.2016Rs.’000

No ofShares

31.03.2015

MarketValue

31.03.2015Rs.’000

Sri Lanka Institute of Nanotechnology (Pvt) Ltd. 3,810,182 17,463 3,810,182 50,000

Lankem Tea & Rubber Plantations (Pvt) Ltd 8,342 1,998 8,342 1,998

Asia Pacific Golf Courses Limited 2,500 250 2,500 250

Total 19,711 52,248

18.3.3 Unit Trusts

Consolidated

As at

No ofShares

31.03.2016

MarketValue

31.03.2016Rs.’000

No ofShares

31.03.2015

MarketValue

31.03.2015Rs.’000

National Equity Fund 378,908 11,129 366,513 11,959

Total 11,129 11,959

Sector classification and market value of shares of quoted investments are based on the official valuation list published by the Colombo Stock Exchange.

18.4 Company

18.4.1 Quoted Investments

As at

No ofShares

31.03.2016

MarketValue

31.03.2016Rs.’000

No ofShares

31.03.2015

MarketValue

31.03.2015Rs.’000

Lankem Developments PLC 903,680 3,615 903,680 5,422

Kotagala Plantations PLC 615,841 9,299 615,841 15,211

Total 12,914 20,633

18.4.2 Unquoted Investments

As at

No ofShares

31.03.2016

MarketValue

31.03.2016Rs.’000

No ofShares

31.03.2015

MarketValue

31.03.2015Rs.’000

Sri Lanka Institute of Nanotechnology (Pvt) Ltd. 3,810,182 17,463 3,810,182 50,000

Lankem Tea & Rubber Plantation (Pvt) Ltd. 8,342 1,998 8,342 1,998

Ceylon Tapes (Pvt) Ltd. 160,000 22,419 160,000 22,419

Total 41,880 74,417


18.4.3 Unit Trusts

As at

No ofShares

31.03.2016

MarketValue

31.03.2016Rs.’000

No ofShares

31.03.2015

MarketValue

31.03.2015Rs.’000

National Equity Fund 378,908 11,129 366,513 11,959

Total 11,129 11,959

18.5 Investments Classified as Held to Maturity

Consolidated

As at 31.03.2016Rs.’000

31.03.2015Rs.’000

Debentures - 5,000

- 5,000

18.6 Investments Classified as Fair Value through Profit or Loss

Consolidated / Company Consolidated Company

As at

No ofShares

31.03.2016

MarketValue

31.03.2016Rs.’000

No ofShares

31.03.2015

MarketValue

31.03.2015Rs.’000

No ofShares

31.03.2015

MarketValue

31.03.2015Rs.’000

Nations Trust Bank PLC 44,600 3,309 44,600 4,464 44,600 4,464

Tokyo Cement Company PLC (Voting) 314,490 11,636 314,490 17,266 314,490 17,266

Tokyo Cement Company PLC (Non Voting) 103,290 3,336 103,290 3,863 103,290 3,863

Colonial Motors PLC 338,547 30,469 338,547 42,285 338,547 42,285

MTD Walkers PLC 87,960 2,929 87,960 4,081 87,960 4,081

Union Bank Colombo PLC 384,000 6,374 384,000 9,254 384,000 9,254

Colombo Trust Finance PLC 3,432,465 34,668 3,544,580 48,561 3,544,580 48,561

Serendib Engineering Group PLC 3,897,859 26,505 3,977,200 55,283 3,977,200 55,283

Orient Garments PLC 610,320 4,272 613,410 6,809 613,410 6,809

Renuka Agri Foods PLC 200,000 4,160 200,000 5,380 200,000 5,380

Others - - - 360 - -

127,658 197,606 197,246



19. INVENTORIES


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Raw Materials 872,629 754,728 408,717 359,955

Work- in -Progress 93,954 88,511 50,895 46,882

Finished Goods 1,393,307 1,019,783 528,650 347,340

Goods-in-Transit 170,522 59,455 133,268 59,455

Consumable Stock 91,470 55,373 - -

Packing & Other Materials 7,398 8,270 - -

2,629,280 1,986,120 1,121,530 813,632

Less: Provision for Obsolete Inventories (132,059) (39,043) (65,135) (17,656)

2,497,221 1,947,077 1,056,395 795,976

20. TRADE & OTHER RECEIVABLES


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Trade Receivables 3,983,141 3,667,875 1,515,243 862,833

Provision for Bad and Doubtful Debts (353,061) (241,926) (99,871) (52,839)

3,630,080 3,425,949 1,415,372 809,994

Other Receivables 77,526 158,687 38,867 106,907

Deposits, Advances and Prepayments 391,659 217,728 - -

Staff Loan 10,367 10,546 222 192

Tax Recoverable (Note 20.1) 189,240 187,159 103,730 108,509

668,792 574,120 142,819 215,608

4,298,872 4,000,069 1,558,191 1,025,602

20.1 Taxes Recoverable

Nation Building Tax Recoverable 1,963 124 - -

Economic Service Charge Recoverable 114,549 118,689 103,730 108,509

Withholding Tax Recoverable 504 398 - -

Value Added Tax Recoverable 72,224 67,948 - -

189,240 187,159 103,730 108,509


21. CASH & CASH EQUIVALENTS


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Favourable Balance

Fixed Deposits 149,466 137,067 97,685 87,833

Call Deposits - 255 - -

Cash at Bank 149,958 244,014 50,770 30,314

Cash in Hand 8,922 11,497 1,849 2,960

308,346 392,833 150,304 121,107

Unfavourable Balance

Bank Overdraft (1,574,294) (900,657) (879,665) (657,042)

(1,265,948) (507,824) (729,361) (535,935)

22. STATED CAPITAL

As at 31.03.2016 31.03.2015

Number of Shares

Value of SharesRs.’000

Number of Shares

Value of SharesRs.’000

Fully paid ordinary shares at beginning of the year 24,000,000 536,218 24,000,000 536,218

Issued during the year - - - -

At the end of the Year 24,000,000 536,218 24,000,000 536,218

The holders of ordinary shares are entitled to receive dividend as declared from time to time and are entitled to one vote per individual present at meetings of the shareholders or one vote per share in the case of a poll.

23. CAPITAL RESERVES

OtherCapital

ReservesRs.’000

Availablefor sale

ReservesRs.’000

Total

Rs.’000

Consolidated

Balance as at 01st April 2015 3,409 13,425 16,834

Net Gain / (Loss) on Financial Assets Available for Sale - (9,712) (9,712)

Balance as at 31st March 2016 3,409 3,713 7,122

Company

Balance as at 01st April 2015 - 12,163 12,163

Net Gain / (Loss) on Financial Assets Available for Sale - (8,562) (8,562)

Balance as at 31st March 2016 - 3,601 3,601



23.1 Other Capital ReservesThe amount set aside out of the retained profits by C. W. Mackie PLC as Export Development Grant Reserve.

23.2 Available for Sale Reserves

The amount set aside out of retained profits for the changes in the fair value of investments is classified as available for sale.

24. INTEREST BEARING BORROWINGS


As at 31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Payable after one year

Finance Lease Obligations- Others (Note 24.1) 3,735 28,304 - -

Long Term Loans - Others (Note 24.3) 1,370,391 1,773,428 565,200 792,920

Debentures (Note 24.5) - 200,000 - 200,000

1,374,126 2,001,732 565,200 992,920

Payable within one year

Finance Lease Obligations- Others (Note 24.1) 5,431 46,421 - 557

Long Term Loans - Others (Note 24.3) 515,321 638,384 219,320 279,442

Debentures (Note 24.5) 200,000 150,000 200,000 150,000

Short Term Loans (Note 24.4) 3,546,792 2,641,968 2,258,885 1,517,904

4,267,544 3,476,773 2,678,205 1,947,903

Loans Payable to Related Parties (Note 24.2) 428,100 430,600 385,050 364,550

Total 4,695,644 3,907,373 3,063,255 2,312,453

Total Interest bearing Borrowings 6,069,770 5,909,105 3,628,455 3,305,373

24.1 Finance Lease Obligations - others


As at 31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Balance at the beginning 87,043 142,090 587 3,711

Acquisition of Subsidiaries - 11,511 - -

87,043 153,601 587 3,711

Leases acquired during the year 1,273 899 - -

Payments made during the year (72,129) (67,457) (587) (3,124)

Early settlement discounts (3,712) - - -

Less: Interest in Suspense (3,309) (12,318) - (30)

Balance at the end of the year 9,166 74,725 - 557


Analysis of Finance Lease Obligations by year of repayment:


As at 31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Payable within one year

Gross Lease Obligations 8,191 55,539 - 587

Less: Finance Charges Unamortised (2,760) (9,118) - (30)

Net Lease Obligations 5,431 46,421 - 557

Payable within two to five years

Gross Lease Obligations 4,283 31,503 - -

Less: Finance Charges Unamortised (548) (3,199) - -

Net Lease Obligations 3,735 28,304 - -

24.2 Loans Payable to Related Parties

Balance at the beginning 430,600 747,850 364,550 617,850

Acquisition of Subsidiaries 10,000 - - -

Loans obtained during the year - - 33,000 -

Payments made during the year (12,500) (317,250) (12,500) (253,300)

Balance at the end 428,100 430,600 385,050 364,550

Payable within one year (428,100) (430,600) (385,050) (364,550)

Payable after one year - - - -


As at 31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

The Colombo Fort Land & Building PLC 277,500 290,000 277,500 290,000

Sigiriya Village Hotels PLC - - 74,550 74,550

J.F.Packaging (Pvt) Ltd. - - 33,000 -

Lankem Development PLC 10,600 10,600 - -

Waverly Power (Pvt) Ltd. 10,000 - - -

KIA Motors (Lanka) Ltd. 80,000 80,000 - -

Lankem Tea & Rubber Plantations Ltd 50,000 50,000 - -

428,100 430,600 385,050 364,550



The Company has obtained loans from related parties and interest on the outstanding balances is charged at the rates as specified below;

AmountRs. ‘000

The Colombo Fort Land & Building PLC ( at AWPLR + 2%) 277,500

Sigiriya Village Hotels PLC ( at AWPLR + 2%) 74,550

J.F.Packaging (Pvt) Ltd. ( at AWPLR + 2%) 33,000

24.3 Long Term Loans - Others


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Balance at the beginning 2,411,812 1,099,710 1,072,362 193,082

Acquisition of Subsidiaries - 213,157 - -

Loans obtained during the year 128,758 1,471,606 - 1,090,000

Exchange Fluctuations 51,808 - - -

Payments made during the year (706,666) (372,661) (287,842) (210,720)

Balance at the end 1,885,712 2,411,812 784,520 1,072,362


Payable after one year 1,370,391 1,773,428 565,200 792,920

24.4 Short Term Loans


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Term Loans 1,931,674 1,160,260 1,129,042 515,000

Commercial Papers - 524,955 - 524,955

Trust Receipt Loans 1,615,118 956,753 1,129,833 477,949

3,546,792 2,641,968 2,258,875 1,517,904

24.5 Debentures


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Unsecured Redeemable Debentures 200,000 350,000 200,000 350,000

200,000 350,000 200,000 350,000


Payable after one year - 200,000 - 200,000


Company

The Company has issued Rs. 200 Mn. Rated Unsecured Unlisted Redeemable Debentures of the value of Rs. 1,000/- each on 5th April 2011 to Sri Lanka Insurance Corporation Limited at the rate of AWPLR +1%. These debentures are redeemable after 5 years from the date of issue. The purpose of the issue was to fund long term working capital requirement.

24.6 Assets pledged as Security Against Interest Bearing Borrowings

Company Lender Balanceas at

31.03.2016(Rs.) Mn

Balanceas at

31.03.2015(Rs.) Mn

Terms ofRepayment

Security Pledged

Lankem Ceylon PLC Sampath Bank PLC Loan 01

346.00 370.00 Payable on the 26th of each month commencing after one month of date of disbursement as follows.Yr 1 - 12 equal installments of Rs. 2MnYr 2 - 12 equal installments of Rs. 3MnYr 3 - 12 equal installments of Rs. 4MnYr 4 - 12 equal installments of Rs. 6MnYr 5 - 12 equal installments of Rs. 7.5MnYr 6 - 11 equal installments of Rs. 8.3MnFinal Installment Rs. 8.7Mn

Primary Mortgage for Rs. 370 Mn. Over the property situated at Nawam Mawathe depicted lots A& B in plan No. 482 dated 08/05/1987 in extent of 40 perches owned by the company.

Loan 02 32.80 100.00 17 equal monthly installments of Rs. 5.6Mn and a final installment of Rs. 4.8Mn.

Commercial Bank of Ceylon PLC Loan 02

- 36.60 In 35 monthly installments of Rs.4.2 Mn and a final installment of Rs.3 Mn.

a) Primary Mortgage for Rs. 145 Mn. installments over land at Ja-ela & Gonawala.

Loan 03 55.40 96.20 In 35 monthly installments of Rs.3.4 Mn.and a final installment of Rs.1 Mn.

b) Primary Mortgage for Rs. 200 Mn. installments over land at Ja-ela & Gonawala.

Loan 04 340.40 449.60 In 57 monthly installments of Rs.8.4 Mn and a final installment of Rs.4.4 Mn.

Hatton National Bank PLC

9.92 19.90 In 59 monthly installments of Rs. 0.84 Mn. each and a final installment of Rs.0.73 Mn. together with interest payable monthly on reducing balance of capital.

784.52 1,072.30

BOT Hotel Services(Pvt) Ltd.

PABC Bank PLCTerm Loan

108.60 125.00 Repayable over 78 monthly installments The property of the Hotel premises which is situated in Kapparathota, Weligama - Rs. 50 Mn and Corporate guarantee from Beruwala Resorts PLC for Rs.75 Mn.

108.60 125.00

Beruwala ResortsPLC


205.67 197.87 Repayable over 102 monthly installment. Repayment to commence after a grace period of 18 Months from the first draw down.

Primary mortgage over land and buildings of BOT Hotel Services Ltd. situated at Weligama.

Cargills Bank PLC Term Loan 1

19.10 - Repayable over 48 monthly installments. Laundry machine & equipments.

Term Loan 2 4.20 - Repayable over 48 monthly installments. Mazda car for Rs. 4.2 Mn.

229.03 197.87

Sigiriya VillageHotels PLC

Sampath Bank PLCTerm Loan

75.37 111.44 Repayable over 35 monthly installments. Lien over Beruwala Resort PLC shares totaling to 85,384,000 numbers lodged in Sampath Bank custodial account and Rs. 17.5 Mn Mortgage over hotel kitchen equipment and other accessories.




31.03.2016(Rs.) Mn

Balanceas at

31.03.2015(Rs.) Mn

Terms ofRepayment

Security Pledged


- 53.01 Rs.100 Mn worth shares of Beruwala Resort PLC has been lodged at the custodian account maintained at PABC at any time

75.37 164.45

Marawila Resorts PLC


Term Loan 301.58 421.36 To be repaid in 5 years Existing secondary floating mortgage bonds totaling to US $ 5.37 Mn. over the hotel premises at Marawila.

301.58 421.36

Galle Fort Hotels Ltd.


61.37 67.72 Repayable over 60 monthly installments Corporate Guarantee of Rs. 0.75 Mn from Lankem Ceylon PLC and hotel property at No.28, Church Street, Galle.

Commercial Bank of Ceylon PLC

17.36 25.00 Repayable over 35 monthly installments Primary mortgage bond of Rs.25 Mn over the property at No.31, Light House Street, Galle.

Commercial Bank of Ceylon PLC

70.10 - Repayable over 60 monthly installments Primary mortgage over the property at No.31, Light House Street, Galle.

148.83 92.72

Ceylon Tapes (Pvt) Ltd.

DFCC Bank PLC Term Loan

5.43 11.05 Repayable over 60 monthly installments after a grace period of 6 months from the first disbursement

Land worth of Rs. 5.7 Mn and machinery worth Rs.0.3 Mn have been pledged when obtaining the loan.


4.78 - Repayable over 59 monthly installments

10.21 11.05

JF Packaging (Pvt) Ltd.

Sampath Bank PLC

Loan I&II 13.97 20.47 Repayable over 59 monthly installments Primary mortgage of Property at Nivasipura, Ja-Ela depicted as lot no P 7 plan no 2036 dated July 07, 2003 and Primary mortgage of Property at Etambawela estate, Matale depicted as lot A in Plan No.6968 dated 30.11.2009.

Loan III 25.53 33.37 Repayable over 60 monthly installments

Loan IV 0.45 1.11 Repayable over 36 monthly installments

Bank of Ceylon

Loan I, III, IV,V, XI 42.83 79.95 Repayable over 60 monthly installments Primary mortgage of Land, building and machinery situated at No.306, Minuwangoda Road, Kotugoda.

Loan II 41.32 53.72 Repayable over 96 monthly installments

Loan IX & X 28.33 54.44 Repayable over 36 monthly installments


Loan I 0.08 0.42 Repayable over 60 monthly installments Primary Floating Mortgage Bond for Rs.4.0M over immovable property at Lot No.9, Depicted in plan 206146A dated 30/07/2006 made by EAG Edirisinghe, LS situated at Ragama. Primary Floating Mortgage Bond for Rs. 16.0M over the Plastic Extrusion Plant & Recycling Plant.



31.03.2016(Rs.) Mn

Balanceas at

31.03.2015(Rs.) Mn

Terms ofRepayment

Security Pledged

DFCC Bank PLC

Loan I 1.46 2.34 Repayable over 48 monthly installments Personal guarantees of the1) Mr. Lakshman De Fonseka 2) Mr. Rathnayake

153.97 245.82

SunAgro Foods Ltd. Sampath Bank PLC

56.24 81.24 In 47 equal monthly installments of Rs. 2.08 Mn. and a final installment of Rs. 2.05 Mn. on 26th day of each month commencing after a grace period of 12 months.

Corporate Guarantee from Lankem Ceylon PLC amounting to Rs.110 Mn.

Commercial Bank

17.4 - Repayable over 35 monthly installments Corporate Guarantee for Lankem Ceylon PLC amounting to Rs. 75 Mn.

73.60 81.24

25. DEFERRED INCOME

Consolidated

As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000



Amortisation


Amortisation for the year 2,748 2,748


19,940 22,688

26. DEFERRED TAX LIABILITIES


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016 Rs.’000

31.03.2015 Rs.’000

Balance as at the beginning of the year 145,856 96,658 (12,368) 9,287

Acquisition of Subsidiaries 84 73,054 - -

145,940 169,712 (12,368) 9,287

Charged / (Reversal) for the period (67,412) (23,856) (22,604) (21,655)

Balance as at the end of the year 78,528 145,856 (34,972) (12,368)



26.1 Deferred Tax Composition


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016 Rs.’000

31.03.2015 Rs.’000

Deferred Tax Assets

Defined Benefit Obligations 49,546 33,821 26,618 12,336

Tax Losses carried forward 260,993 160,921 118,396 76,873

Impairment of Debtors 11,429 9,058 11,429 7,935

Impairment of Inventories 734 1,155 734 1,155

322,702 204,955 157,177 98,299

Deferred Tax Liabilities

Property, Plant & Equipment 401,230 350,811 122,205 85,931

401,230 350,811 122,205 85,931

Net Deferred Tax Assets / (Liabilities) (78,528) (145,856) 34,972 12,368

27. RETIREMENT BENEFIT OBLIGATIONS


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Fair Value of Retirement Benefit Assets 95,538 132,256 56,650 95,154

Present Value of the Funded Obligations 240,450 230,059 151,712 139,212

Present Value of the Unfunded Obligations 69,636 61,063 - -

Present Value of the Obligations 310,086 291,122 151,712 139,212

Net Obligations 214,548 158,866 95,062 44,058

Company

An Actuarial valuation has been carried out as at 31st March 2016 by Messrs. Actuarial and Management Consultants (Private) Ltd. as required by the Sri Lanka Accounting Standard 19 ‘Employee Benefits’.

Plan Assets of the Company are held by an approved external gratuity fund where it invests in insurance scheme amounting to Rs. 56.7 Mn. as at the date of Statement of Financial Position.

The valuation method used by the actuary is the ‘Project Unit Credit Method’, the method recommended by Sri Lanka Accounting Standard 19 -’Employee Benefits’.


27.1 Fair Value of Retirement Benefit Assets


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Movement in Fair Value of Plan Assets

Fair Value of Plan assets at the beginning of the year 132,256 127,622 95,154 84,414

Contribution Paid to the Plan Assets 9,611 8,758 - -

Expected Return on Plan Assets 8,465 14,288 5,185 10,740

Benefits paid by the Plan Assets / the Company (53,685) (17,381) (43,689) -

Actuarial Gains/(Losses) (1,109) (1,031) - -


27.2 Present Value of the Funded Obligations


For the Year Ended 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Movement in Present Value of Funded Obligations

Balance at the beginning of the year 230,059 205,364 139,212 120,144

Provision for the year 43,313 42,318 26,002 25,721

273,372 247,682 165,214 145,865

Benefits paid by the Plan Assets / the Company (30,980) (31,068) (20,511) (12,338)

Actuarial (Gains)/Losses (1,942) 13,445 7,009 5,685

Present Value of Defined Benefit Obligations 240,450 230,059 151,712 139,212

Expenses Recognised in the Statement of Profit & Loss

Current Service Cost 22,147 20,755 13,921 13,106

Interest Cost 21,166 21,563 12,081 12,615

Provision for the Year 43,313 42,318 26,002 25,721

Expected Return on Plan Assets (8,465) (14,288) (5,185) (10,740)

34,848 28,030 20,817 14,981

Net Actuarial (Gains)/Losses (1,942) 13,445 7,009 5,685

(1,942) 13,445 7,009 5,685

27.3 Present Value of Net Funded Obligations


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000


Present Value of Funded Obligations (240,450) (230,059) (151,712) (139,212)

Present Value of Net Funded Obligations (144,912) (97,803) (95,062) (44,058)



27.4 Present Value of the Unfunded Obligations

Consolidated

As at 31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Movement in Present Value of Unfunded Obligations


Acquisition of Subsidiaries 303 23,552

Provision for the year 15,361 11,859

76,727 75,318

Gratuity Paid (11,451) (4,890)

Actuarial (Gains)/Losses 4,360 (9,365)

Present value of Defined Benefit Obligations 69,636 61,063

Expenses Recognised in the Statement of Profit or Loss

Current Service Cost 9,408 9,239

Interest on Obligations 5,953 2,620

Provision for the year 15,361 11,859

Net Actuarial (Gains)/Losses 4,360 (9,365)

19,821 2,494

Consolidated

(i) The retirement benefit obligations as at 31st March 2016 for Marawila Resorts PLC, Sigiriya Village Hotels PLC, Beruwala Resorts PLC and C.W.Makie PLC are based on actuarial valuation carried out by Messrs. Piyal S. Goonethilleke and Associates as per which liability as at 31st March 2016 were Rs. 5.00 Mn, Rs. 8.28 Mn, Rs. 5.25 Mn and Rs. 88.74 Mn respectively.

ii) JF Packaging (Pvt) Ltd.

The retirement benefit obligations as at 31st March 2016 is based on actuarial valuation carried out by Messrs. Actuarial and Management Consultants (Private) Ltd. as per which liability as at 31st March 2016 was Rs.26.60 Mn.

27.4 Present Value of the Unfunded Obligations Contd.

iii) LKAS 19 - ‘Employee benefit’ requires to apply Project Credit Unit method to make a reliable estimate of the retirement benefit obligation in order to determine the present value of the retirement benefit obligation. These key assumptions were made in arriving at the retirement benefit obligation as at 31st March 2016 in respect of following companies which are stated below:


Company Name

Expected Salary

Increment Rate

DiscountRate

Liabilityas at

31.03.2016

Lankem Ceylon PLC 10% 11.0% 151.71

Marawila Resorts PLC 7.5% 11.0% 5.00

Sigiriya Village Hotels PLC 7.5% 11.0% 8.28

C.W. Mackie PLC 12% 11.0% 88.74

Beruwala Resorts PLC 7.5% 11.0% 5.25

BOT Hotel Services (Pvt) Ltd 7.5% 11.0% 4.32

Lankem Consumer Products Ltd. 10% 11.0% 0.50

SunAgro Farms Ltd. 10% 11.0% 0.31

SunAgro LifeScience Ltd. 10% 11.0% 1.47

Galle Fort Hotels (Pvt) Limited 10% 11.0% 2.88

Ceylon Tapes (Pvt) Limited 10% 11.0% 7.52

SunAgro Foods Ltd. 10% 11.0% 0.28

Lankem Paints Ltd. 10% 11.0% 6.06

JF Packaging (Pvt) Ltd. 10% 11.0% 26.60

Lak Kraft Ltd. 10% 11.0% 0.96

Sherwood Holidays Ltd. 10% 11.0% 0.30

27.5 Sensitivity of assumptions employed in actuarial valuation

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.

2016 2015

Consolidated Increase Rs.’000

Decrease Rs.’000

Increase Rs.’000

Decrease Rs.’000

Movement by 1%

Discount Rate (21,361) 21,095 (21,931) 25,407

Future salary scale 22,108 (20,877) 25,201 (22,619)

2016 2015

Company Increase Rs.’000

Decrease Rs.’000

Increase Rs.’000

Decrease Rs.’000

Movement by 1%

Discount Rate (7,534) 8,543 (10,625) 12,258

Future salary scale 9,284 (8,328) 12,813 (11,283)



28. TRADE AND OTHER PAYABLES


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Trade Payables 1,328,439 1,471,130 855,754 1,007,198

Other Payables 377,700 440,862 119,592 126,360

Accrued Expenses 376,258 355,872 228,454 192,926

ESC Payable 3,571 3,419 3,571 3,419

WHT Payable 162 648 162 648

Unclaimed Dividend 12,327 11,632 7,472 7,474

NBT Payable 17,835 14,427 5,922 5,028

VAT/GST Payable 104,713 92,173 24,085 22,393

Advance Received 63,457 38,448 - -

Other Levies Payable 4,950 16,964 - -

2,289,412 2,445,575 1,245,012 1,365,446

29. RELATED PARTY TRANSACTIONS

29.1 Amounts Due from Related Parties

a). Amounts due from Related Parties - Trade


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Subsidiaries

Lankem Paints Ltd. - - - 530,577

Lankem Chemicals Ltd. - - - 98,136

SunAgro Foods Ltd. - - 1,152 4,266

C.W. Mackie PLC - - 387 6,787

SunAgro LifeScience Ltd. - - 197,408 72,557

Beruwala Resorts PLC. - - 1,131 -

Marawilla Resorts PLC - - 1,043 -

BOT Hotel Services (Pvt) Ltd. - - 139 -

Sigiriya Village Hotels PLC - - 627 -

- - 201,887 712,323


b). Amounts due from Related Parties - Non-trade


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Subsidiaries

Associated Farms (Pvt) Ltd. - - 20,856 20,759

Lankem Consumer Products Ltd. - - 156,801 156,872

Lankem Paints Ltd. - - - 168,883

SunAgro LifeScience Ltd. - - 46,177 1,538

Colombo Fort Hotels Ltd. - - 307,819 277,314

C.W. Makie PLC - - 6 14,806

SunAgro Foods Ltd. - - 197 29

SunAgro Farms Ltd. - - 209 -

Lankem Exports (Pvt) Ltd. - - 60 -

Ceylon Tapes (Pvt) Ltd. - - 3,561 -

Galle Fort Hotels (Pvt) Ltd. - - 15,022 10,190

- - 550,708 650,391

Less : Provision for Bad & Doubtful

Debts - Related Parties (29.1.1) - - (177,657) (177,631)

- - 373,051 472,760


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Related Entities

E.B. Creasy & Company PLC 1,793 1,038 686 363

Darley Butler & Co Ltd. 6,712 3,012 6,472 2,291

Lankem Developments PLC 3 70 - 68

Lankem Tea & Rubber Plantations (Pvt) Ltd. 25 25 - -

Waverly Power (Pvt) Ltd. 5,773 - 5,773 -

Laxapana Batteries PLC 56 161 - 161

Kotagala Plantations PLC 2,181 678 1,503 -

Agarapatana Plantations Ltd. 569 - 569 -

The Colombo Fort Land & Buildings PLC 32,723 24,921 - -

Sherwood Holidays Ltd. - 11,576 - -

York Hotel Management Services Ltd. 24,219 10,224 - -

Creasy Foods Ltd. 7,415 7,664 135 -

Ceylon Trading Company Ltd. 62 138 - -

Cosmopoly (Pvt) Ltd. 6,622 5,684 - -




As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

JF Barrier Films (Pvt) Ltd. 80,087 76,621 - -

JF Lanka Hotels & Tours (Pvt) Ltd. 1,353 1,353 - -

Union Commodities Ltd. 1,802 - - -

KIA Motors (Lanka) Ltd. 50 - - -

Pettah Pharmacy (Pvt) Ltd. 88 - - -

Ceytape (Pvt) Ltd. 230 - - -

171,763 143,165 15,138 2,883

Debts - Related Parties (Note 29.1.1) (63) (143) - (80)

171,700 143,022 15,138 2,803

Total amounts due from Related Parties 171,700 143,022 388,189 475,563

29.1.1 Provision for Bad & Doubtful Debts - Related Parties


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Subsidiaries

Lankem Consumer Products Ltd. - - 156,801 156,872

Associated Farms (Pvt) Ltd. - - 20,856 20,759

- - 177,657 177,631

Related Entities

Darley Butler & Co Ltd. 35 35 - -

Lankem Tea & Rubber Plantation Ltd. 25 25 - -

Lankem Developments PLC 3 83 - 80

63 143 - 80

Total 63 143 177,657 177,711


29.2 Loans due from Related Parties


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

The Colombo Fort Land & Building Co. PLC 85,000 85,000 - -

Sherwood Holidays Ltd. - 18,401 - -

Colombo Fort Hotels Ltd. - - 55,000 55,000

SunAgro LifeScience Ltd. - - - 62,100

Lankem Developments PLC 30,700 30,730 30,700 30,700

Ceylon Tape (Pvt) Ltd. - - 50,000 -

Receivable within one year 115,700 134,131 135,700 147,800

Provisions for Doubtful Loans -

Lankem Developments PLC (30,700) (30,700) (30,700) (30,700)

85,000 103,431 105,000 117,100

29.3 Amounts Due to Related Parties

(a) Amounts due to Related Parties - Trade


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Subsidiaries

Ceylon Tapes (Pvt) Ltd. - - 20 3,077

JF Packaging (Pvt) Ltd. - - 290 -

Lankem Research Ltd. - - - 52

- - 310 3,129

(b) Amounts due to Related Parties - Non-trade


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Subsidiaries

Lankem Research Ltd. - - - 9,000

Sigiriya Village Hotels PLC - - 7,160 191

Lankem Technology Services Ltd. - - 4,710 4,838

Lankem Chemicals Ltd. - - 53,375 137,068

Lankem Paints Ltd. - - 7,072 -

JF Packaging (Pvt) Ltd. - - 3,144 -

- - 75,461 151,097




As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Related Entities

Island Consumer Supplies (Pvt) Ltd. 200 200 - -

York Hotel Management Services Ltd. 43,214 29,468 5,602 5,132

Kotagala Plantations PLC 8,330 - - -

Agarapathana Plantation Ltd. 10,523 - - -

Lankem Development PLC 944 - - -

Lankem Tea & Rubber Plantations Ltd. 93 39,445 43 -

E.B. Creasy & Company PLC 38,677 37,623 36,465 37,482

Carplan Ltd. 453 289 158 279

The Colombo Fort Land & Building PLC 62,107 52,795 60,829 52,229

E.B. Creasy Logistic (Pvt) Ltd. 1,008 - 895 -

Waverly Power (Pvt) Ltd. 466 - - -

Darley Butler & Co Ltd. 178 6 - -

KIA Motors (Lanka) Ltd. 36,914 29,570 - -

York Arcade Holdings PLC 3,915 4,215 - -

CM Holdings PLC 15,784 21,489 13,894 19,425

Union Commodities Ltd. 62,435 35,304 16,923 -

Laxapana Batteries PLC 15 - 15 -

Colombo Fort Group Service (Pvt) Ltd. 1 - 1 -

Cosmopoly (Pvt) Ltd. 4,871 3,426 - -

JF Barrier Films (Pvt) Ltd. 370 39 - -

JF Lanka Hotels & Tours (Pvt) Ltd. 1,750 4,799 - -

Oracle Packaging (Pvt) Ltd. 1,986 1,986 - -

L D F Packaging (Pvt) Ltd. 2,438 2,438 - -

JF Innovation (Pvt) Ltd. 187 655 - -

296,859 263,747 134,825 114,547

Total amounts due to Related Parties 296,859 263,747 210,286 265,644


29.4 Transactions with Related Parties

The Company carries out transactions in the ordinary course of its business with parties who are defined as related parties in Sri Lanka Accounting Standard 24 - Related Party Disclosure, the details of which are reported below.


For the year Ended 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Subsidiaries

(Purchases)/Sale of Goods - - 402,226 2,088,252

(Reimbursement)/ Charging of Expenses - - 111,104 699,971

Fixed Asset (Purchase)/ Sale - - (3,403) -

(Receipt)/Payment of Outstanding Balances - - (1,119,027) (2,789,596)

Interest (Expenses)/Income - - 41,128 61,768

Settlement of Loan (Obtained) / Granted - - 55,100 92,450

Loans (Granted) / Obtained - - (10,000) -

Associates

(Receipt)/Payment of Outstanding Balances (1,923) 3,870 (1,923) (16,730)

Interest (Expenses)/Income 6,332 (2,289) 7,305 5,223

Settlement of Loan (Obtained) / Granted - (67,130) - 2,300

(Reimbursement) / Charging of Expenses 323 - 323 -

Other Related Entities

(Purchases)/Sale of Goods (244,398) 9,354 5,235 308

(Receipt)/Payment of Outstanding Balances 346,910 (55,133) 52,936 76,865

(Reimbursement)/ Charging of Expenses (61,631) (21,270) (16,237) (12,991)

Rent Income 24,610 21,843 - -

Management Fees (74,493) (51,097) - -

Interest (Expenses)/Income (9,824) 470 (25,178) (34,941)

Settlement of Loan (Obtained) / Granted (12,500) (22,850) (12,500) (22,850)

Loans (Granted) / Obtained - (11,901) - -

Key Management Personnel(Receipt)/Payment of Outstanding Balances - - - -

There were no non-recurrent related party transactions entered into by the Company during the financial year, the value of which exceeded 10% of shareholders equity or 5% of the total assets of the Group or recurrent related party transactions the value of which exceeded 10% of gross revenue of the Group during the year ended 31st March 2016.



29.5 Terms and Conditions of Transactions with Related Parties

Transactions with related parties are carried out in the ordinary course of the business at commercial rates. Outstanding balances at the end of the year are unsecured. Interest on outstanding balances has been charged at the prevailing market rate (unless otherwise stated).

29.6 Transactions with Key Management Personnel

According to Sri Lanka Accounting Standard 24 - Related Party Disclosures, Key Management Personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity. Accordingly, Key Management Personnel include the members of the Board of Directors of Lankem Ceylon PLC and its subsidiary companies.

(a) Loans to Key Management PersonnelNo loans have been given to Key Management Personnel during the year.

(b) Key Management Personnel CompensationDetails of compensation for Executive and Non-Executive Directors are disclosed below.


For the year ended 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Short-term Employee Benefits 183,434 133,023 127,593 93,990

Post- Employment Benefit - - - -

Other Long-Term Benefits - - - -

Termination Benefits - - - -

Share-Based Payments - - - -

(c) Key Management Personnel Shareholding of the CompanyThe shareholdings of the Directors are disclosed on page 13 of this Annual Report.

(d) Transactions with close family membersThere were no transactions with close family members during the year.


Name of the Company Relationship Name of the Director

Mr.

A. R

ajar

atna

m

Mr.

S.D

.R. A

rudp

raga

sam

Mr.

Anus

hman

Raj

arat

nam

Mr.

D.L.

Vith

aran

a

Mr.

R.N

. Bop

eara

tchy

Mr.

N.H

.B.S

. Per

era

Mr.

K.P.

Dav

id

Mr.

A.R.

Pei

ris

Mr.

R.T.

Wee

rasi

nghe

Mr.

A. H

ettia

rach

chy

Mr.

A.C.

S. J

ayar

anja

n

Mr.

J. D

. Gom

es

Mr.

R. S

eeva

ratn

am

Mr.

M.M

.A.R

.P. G

oone

tilek

e

Lankem Ceylon PLC - √ √ √ √ √ √ √ √ √ √ √ √ √ √

The Colombo Fort Land & Building PLC Ultimate Parent √ √ √ √ √

E.B. Creasy & Company PLC Immediate Parent √ √ √ √Associated Farms (Pvt) Ltd. Subsidiary √ √ √B.O.T. Hotel Services (Pvt) Ltd. Subsidiary √ √Beruwala Resorts PLC Subsidiary √ √ √C.W. Mackie PLC Subsidiary √ √ √Ceylon Tapes (Pvt) Ltd Subsidiary √ √ √Colombo Fort Hotels Ltd. Subsidiary √ √ √Galle Fort Hotels (Pvt) Ltd. Subsidiary √ √JF Packaging (Private) Limited Subsidiary √ √ √Lankem Agrochemicals Ltd. Subsidiary √ √ √ √ √ √Lankem Chemicals Ltd. Subsidiary √ √ √ √ √ √Lankem Consumer Products Ltd. Subsidiary √ √ √ √ √ √Lankem Exports (Pvt) Ltd. Subsidiary √ √ √Lankem Paints Ltd. Subsidiary √ √ √ √ √ √Lankem Research Ltd. Subsidiary √ √ √ √ √ √Lankem Technology Services Ltd. Subsidiary √ √ √Marawila Resorts PLC Subsidiary √ √ √Nature's Link Ltd. Subsidiary √ √ √ √ √ √Sherwood Holidays Ltd. Subsidiary √ √Sigiriya Village Hotels PLC Subsidiary √ √ √ √SunAgro Farms Ltd. Subsidiary √ √ √ √ √SunAgro Foods Ltd. Subsidiary √ √ √ √ √SunAgro LifeScience Ltd. Subsidiary √ √ √ √ √ √ √Lak Kraft (Pvt) Ltd. Subsidiary √ √ √Lankem Plantation Holdings Limited Associate √ √ √Waverly Power (Pvt) Ltd. Associate √ √ √ √Agarapathana Plantations Ltd. Related √ √Carplan Ltd. Related √ √ √CM Holdings PLC Related √ √ √Colombo Fort Investments PLC Related √ √Creasy Foods Ltd. Related √ √ √ √Darley Butler & Co Ltd. Related √ √ √ √E.B. Creasy Logistic (Pvt) Ltd. Related √ √Financial Trust Ltd. Related √ √Island Consumer Supplies (Pvt) Ltd. Related √ √KIA Motors (Lanka) Ltd. Related √ √ √Kotagala Plantations PLC Related √ √

Lankem Development PLC Related √ √ √ √ √ √

Lankem Tea & Rubber Plantations (Pvt) Ltd. Related √ √ √

Laxapana Batteries PLC Related √ √Union Commodities Ltd Related √ √York Arcade Holdings PLC Related √ √York Hotel Management Services Ltd. Related √ √ √

* Mr. J. D. Gomes resigned w.e.f. 23.02.2016.

29.7 The Directors of the Company are Directors of the follwing Companies ;



30 FINANCIAL INSTRUMENTS

30.1 Financial Instruments - Statement of Financial Position

The Financial Instruments recognised in the Statement of Financial Position are as follows;


As atNotes

31.03.2016 Rs. ‘000

31.03.2015 Rs. ‘000

31.03.2016 Rs. ‘000

31.03.2015 Rs. ‘000

Financial Assets

Non Current Assets

Investments Classified as Available for Sale 18.2/18.3 55,551 98,459 65,923 107,009

Investments Classified as Held to Maturity 18.5 - 5,000 - -

55,551 103,459 65,923 107,009

Current Assets

Trade & Other Receivables 20 4,298,872 4,000,069 1,558,191 1,025,602

Amounts Due from Related Parties - Trade 29.1 - - 201,887 712,323

Amounts Due from Related Parties - Non - Trade 29.1 171,700 143,022 388,189 475,563

Loans Due from Related Parties 29.2 85,000 103,431 105,000 117,100

Investments Classified as Fair Value through Profit or Loss 18.6 127,658 197,606 127,658 197,246

4,683,230 4,444,128 2,380,925 2,527,834

Bank and Cash Balances 21 308,346 392,833 150,304 121,107

Total Financial Assets 5,047,127 4,940,420 2,597,152 2,755,950

Financial Liabilities

Non-Current Liabilities

Interest Bearing Borrowings 24 1,374,126 2,001,732 565,200 992,920

1,374,126 2,001,732 565,200 992,920

Current Liabilities

Interest Bearing Borrowings 24 4,267,544 3,476,773 2,678,205 1,947,903

Loans Payable to Related Parties 24 428,100 430,600 385,050 364,550

Trade and Other Payables 28 2,289,412 2,445,575 1,245,012 1,365,446

Amounts Due to Related Parties - Trade 29.3 - - 310 3,129

Amounts Due to Related Parties - Non - Trade 29.3 296,859 263,747 210,286 265,644

7,281,915 6,616,695 4,518,863 3,946,672

Bank Overdraft 21 1,574,294 900,657 879,665 657,042

Total Financial Liabilities 10,230,335 9,519,084 5,963,728 5,596,634


30.2 Financial Risk Management

The Group has exposure to the following risks from its use of Financial instruments:

1. Credit Risk

2. Liquidity Risk

3. Market Risk (including currency risk and interest rate risk)

This note represents qualitative and quantitative information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and procedures for measuring and managing risk.

Risk Management Framework

The Board of Directors have overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risk faced by the Group, to set appropriate risk limits and controls, and to monitor risk and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

30.2.1 Credit Risk

Credit risk is the risk of Financial loss to the Group if a customer or counter party to a Financial instrument fails to meet its contractual obligation, and arises principally from the Group’s receivables from customers, investments in debt securities.

The Group’s credit exposure is closely monitored. Credit given is reviewed with the predetermined approval procedures and contractual agreement made for every high value transaction. The carrying amount of financial assets represents the maximum credit exposure.


As at 31.03.2016 Rs.’000

31.03.2015 Rs.’000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Trade & Other Receivables 4,298,872 4,000,069 1,558,191 1,025,602

Amounts Due from Related Parties - Trade - - 201,887 712,323

Amounts Due from Related Parties - Non - Trade 171,700 143,022 388,189 475,563

Loans Due from Related Parties 85,000 103,431 105,000 117,100

4,555,572 4,246,522 2,253,267 2,330,588

The aging of Trade & Other Receivables, Amounts Due from Related Parties (Trade & Non-Trade) and Loans Due from Related Parties at the reporting date was:


As at 31.03.2016 31.03.2015 31.03.2016 31.03.2015

GrossRs. ‘000

ImpairmentRs. ‘000

GrossRs. ‘000


GrossRs. ‘000


GrossRs. ‘000


Past due 0-365 days 4,651,933 353,061 4,241,995 241,926 1,859,949 99,871 1,790,764 52,839

More than one year 287,463 30,763 277,296 30,843 701,546 208,357 801,074 208,411

4,939,396 383,824 4,519,291 272,769 2,561,495 308,228 2,591,838 261,250



Based on historic default rate the Group believes that, apart from the above, no impairment allowance is necessary in respect of Trade & Other Receivables, Amounts Due from Related Parties (Trade & Non-Trade) and Loans Due from Related Parties for past dues or past due by up to 365 days.

30.2.2 Liquidity Risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligation associated with its financial liabilities that are settled by delivering cash or any other financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding netting agreements.


As at 31st March 2016 CarryingAmountRs. ‘000

ContractualCash Flows

Rs. ‘000

Less thanOne yearRs. ‘000

More thanOne yearRs. ‘000

CarryingAmountRs. ‘000


Rs. ‘000



Non-Derivative Financial Liabilities

Term Loans / Finance Obligations / Debentures 5,641,669 5,644,978 4,270,304 1,374,674 3,243,405 3,243,405 2,678,205 565,200

Loans, Trade & Non-Trade Amounts due to Related Companies 724,959 724,959 724,959 - 595,646 595,646 595,646 -

Other Financial Liabilities

Trade & Other Payables 2,289,412 2,289,412 2,289,412 - 1,245,012 1,254,012 1,245,012 -

Bank Overdrafts 1,574,294 1,574,294 1,574,294 - 879,665 879,665 879,665 -

10,230,334 10,223,643 8,858,969 1,374,674 5,963,728 5,963,728 5,398,528 565,200


As at 31st March 2015 CarryingAmountRs. ‘000


Rs. ‘000



CarryingAmountRs. ‘000


Rs. ‘000



Non-Derivative Financial Liabilities

Term Loans / Finance Obligations / Debentures 5,478,505 5,490,822 3,485,891 2,004,931 2,940,823 2,940,853 1,947,933 992,920

Loans, Trade & Non-Trade Amounts due to Related Companies 694,347 694,347 694,347 - 633,323 633,323 633,323 -

Other Financial Liabilities,

Trade & Other Payables 2,445,575 2,445,575 2,445,575 - 1,365,446 1,365,446 1,365,446 -

Bank Overdrafts 900,657 900,657 900,657 - 657,042 657,042 657,042 -

9,519,084 9,531,401 7,526,470 2,004,931 5,596,634 5,596,664 4,603,744 992,920


30.2.3 Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, etc. will affect the Group’s income or the value of its holdings of Financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the returns

30.2.3.1 Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group has exposure to foreign currency risk where it has cash flows in overseas operations and foreign currency transactions which are affected by foreign exchange fluctuations.

Sensitivity Analysis

The following table demonstrates the sensitivity to a reasonably possible change in the USD/LKR exchange rate, with all other variables held constant, of the Group’s profit before tax due to changes in the fair value of the Group’s forward exchange contracts. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period.

Strengthening/(Weakening)in exchange rate USD

Effect on Profit before Tax

ConsolidatedRs.‘000

CompanyRs.‘000

As at 31st March 2016 +10% (116,459) (49,728)

-10% 116,459 49,728

As at 31st March 2015 +10% (119,271) (48,825)

-10% 119,271 48,825

30.2.3.2 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 exposure to the risk of change in market interest rates relates primarily to the Group’s long-term debt obligation and investment with floating interest rates.

The Group and Company are exposed to changes in market interest rates through bank overdraft and other bank borrowings which were borrowed at a variable interest rate. The Group has option not to mitigate its interest rate risk in the case that the market interest rate were to be lower than the fixed interest rate that the Group has already commited to. However, the Group utilises various Financial Instruments to manage exposure to interest rate risk arising due to finanacial instruments.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the profit before tax.



As at Increase / (Decrease) in basis points Rupee Borrowings

Effect on Profit or Loss before Tax


As at 31st March 2016 +100 decrease 48,279 31,849

-100 increase (48,279) (31,849)

As at 31st March 2015 +100 decrease 40,814 23,463

-100 increase (40,814) (23,463)

30.2.3 Fair Value Hierarchy

The table below analyses financial instruments carried at fair value by valuation method. Fair value disclosures are given below.

The different levels have been defined as follows;

Level 1: Quoted prices (unadjusted) in active markets for identical Assets or Liabilities

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the Asset or Liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

Level 3: Inputs for the Asset or Liability that are not based on observable market data (unobservable inputs)

As at 31st March 2016


Level 1Rs. ‘000

Level 2Rs. ‘000

Level 3Rs. ‘000

Level 1Rs. ‘000

Level 2Rs. ‘000

Level 3Rs. ‘000

Investments Classified as Available for Sale 24,711 11,129 19,711 12,914 11,129 41,880

Investments Classified as FVTPL 127,658 - - 127,658 - -

152,369 11,129 19,711 140,572 11,129 41,880

As at 31st March 2015


Level 1Rs. ‘000

Level 2Rs. ‘000

Level 3Rs. ‘000

Level 1Rs. ‘000

Level 2Rs. ‘000

Level 3Rs. ‘000

Investments Classified as Available for Sale 34,252 11,959 52,248 20,633 11,959 74,417

Investments Classified as FVTPL 197,246 - 360 197,246 - -

231,498 11,959 52,608 217,879 11,959 74,417


31 CAPITAL EXPENDITURE COMMITMENT

31.1 Company

The Company had no material capital or financial commitments as at the date of the Statement of Financial Position.

31.2 Consolidated

The Group had no significant capital or financial commitments as at the date of the Statement of Financial Position.

32. CONTINGENT LIABILITIES

32.1 Company

There are no material contingent liabilities outstanding as at the date of the Statement of Financial Position other than those disclosed below;

Lankem Ceylon PLC has issued Corporate Guarantees for borrowings obtained by the related companies indicated below as at 31st March 2016.

Name of the Company Amount Rs. ‘000

Darley Butler & Co. Ltd. 130,000

Waverly Power (Pvt) Ltd. 70,000

Lankem Developments PLC 62,080

Galle Fort Hotel (Pvt) Ltd. 98,663

SunAgro Lifescience Ltd. 210,000

SunAgro Foods Ltd. 185,000

755,743

32.2 Consolidated

(i) C.W.Mackie PLC

The following contingent liabilities exist as at the reporting date on account of the letters of comfort and guarantees given by the Company:

Letters of comfort and guarantees provided on behalf of the subsidiaries are as follows.

Name of the Company Amount Rs. Mn

2016 2015

Ceymac Rubber Company Ltd. 99 99

Ceytra (Pvt) Ltd 8 8

107 107

These corporate guarantees have been provided for Hatton National Bank PLC on behalf of the subsidiary companies Ceymac Rubber Company Ltd. and Ceytra (Pvt) Ltd, for short term loan facilities, where repayment terms are less than 12 months.



33. APPROPRIATENESS OF GOING CONCERN ASSUMPTION

33.1 Consolidated

The Consolidated Financial Statements of Lankem Ceylon PLC do not include any adjustments in relation to the recoverability and the classification of recorded asset amounts and classification of liabilities that may be necessary, if SunAgro Foods Ltd. is unable to continue as a going concern.

SunAgro Foods Limited, a subsidiary has incurred a loss of Rs.86.23 Mn (2014/15 – Rs. 72.83 Mn) for the year ended 31st March 2016 and as at that date the accumulated loss was Rs. 314.39 Mn (2014/15 – Rs. 228.11 Mn). Further total liabilities exceeds the total assets by Rs. 264.39 Mn (2014/15 – Rs. 178.11 Mn) and the current liabilities exceeds the current assets by Rs. 337 Mn (2014/15 – Rs. 245.46 Mn). Further, company’s net assets are less than half of the stated capital and face a serious loss of capital situation. These factors have effects on the company’s ability to continue as going concern. However the management has set an action plan which is monitored by the Board to prevent further such losses or to recoup the losses incurred. Accordingly the Directors of the Company are of the view that the company is able to continue as a going concern.

34. EVENTS OCCURRING AFTER THE REPORTING PERIOD

34.1 Company

Subsequent to the reporting date, the Company has purchased 5,870,000 Ordinary Shares of C. W. Mackie PLC at Rs. 60/- per share from Kotagala Plantations PLC on 14th June 2016 to enhance the direct holding in C. W. Mackie PLC. Accordingly the direct holding in C. W. Mackie PLC increased from 39.03% to 55.34%.

34.2 Consolidation

(i) The Directors of C. W. Mackie PLC recommended the payment of a first and final dividend of Rs. 3.50 per ordinary share amounting to Rs. 125.96 Mn. for the year ended 31st March, 2016 which was approved by the shareholders at the Annual General Meeting held on 30th June, 2016.

(ii) The Directors of Sigiriya Village Hotels PLC have recommended the payment of a first and final dividend of Rs. 4/- per ordinary share amounting to Rs. 36 Mn. for the year ended 31st March, 2016 for approval by the shareholders at the Annual General Meeting to be held on 26th August, 2016.

Subsequent to the reporting period, no other circumstances have arisen that would require adjustments to/or disclosure in the Financial Statements other than those disclosed above.


35. ACQUISITION OF SUBSIDIARIES

Colombo Fort Hotels Ltd., a subsidiary has acquired 100% of the Stated Capital of Lak Kraft (Pvt) Ltd. on 16th December 2015 and Sherwood Holidays Ltd. on 30th March 2016 for a consideration of Rs. 46.33 Mn and Rs. 01 Mn respectively.

Lak Kraft (Pvt) Ltd

Rs. ‘000

Sherwood Holidays Ltd.

Rs. ‘000

TotalRs. ‘000

Property, Plant and Equipment 1,568 114,051 115,619

Inventories 138 825 963

Trade & Other Receivables 830 621 1,451

Amount due from Related Parties 50,000 1,189 51,189

Cash & Cash Equivalents 4,013 (231) 3,782

Deferred Tax Liability (84) (84)

Retirement Benefit Obligations - (303) (303)

Trade & Other Payables (7,825) (11,300) (19,125)

Amount due to Related Parties (2,000) (147,647) (149,647)

Net Identifiable Assets and Liabilities 46,640 (42,795) 3,845

Net Assets Acquired 32,233 (29,576) 2,657

Negative goodwill on Acquisition (216) - (216)

Goodwill on Acquisition - 30,267 30,267

Investment made by Equity Holders of the Parent 32,017 691 32,727

Investment allocated to Minority Interest 14,310 309 14,619

Cash Consideration paid on Acquisition of Subsidiary 46,327 1,000 47,327

Cash & Cash Equivalents Acquired (4,013) 231 (3,782)

42,314 1,231 43,545

36. SUBSIDIARY COMPANIES OF THE GROUP

Details of subsidiaries in which Lankem Ceylon PLC held an indirect interest are set out below:

Indirect Subsidiary Effective Holding (%)

York Hotels (Kandy) Ltd. 32.86

B.O.T Hotel Services (Pvt) Ltd. 52.68

Ceymac Rubber Company Ltd. 38.53

Ceytra (Pvt) Ltd. 24.52

Kelani Velly Canneries Limited 34.48

Galle Fort Hotel (Pvt) Ltd. 69.11

Lak Kraft (Pvt) Ltd. 69.11

Sherwood Holidays Ltd. 69.11



37. NON-CONTROLLING INTERESTS IN SUBSIDIARIES

Marawila Resorts PLC Colombo Fort Hotels Ltd.

C.W.Makies PLC JF Packaging (Pvt) Ltd.

Other individually immaterial

Subsidiaries

2016Rs. ‘000

2015Rs. ‘000

2016Rs. ‘000

2015Rs. ‘000

2016Rs. ‘000

2015Rs. ‘000

2016Rs. ‘000

2015Rs. ‘000

2016Rs. ‘000

2015Rs. ‘000

Total assets 1,707,002 1,709,766 2,432,170 2,398,156 3,524,358 2,970,251 1,445,247 1,373,150 5,450,125 5,729,419

Total liabilities 585,055 886,433 653,651 558,171 1,385,138 1,075,682 1,160,676 1,147,882 3,131,916 3,339,638

Net assets 1,121,947 823,333 1,778,519 1,839,985 2,139,220 1,894,569 284,571 225,268 2,318,209 2,389,781

Carrying amount of NCI 673,094 489,931 (99,241) (34,575) 953,332 781,863 78,257 61,949 1,004,150 1,077,550

Revenue 413,312 314,110 - - 7,202,047 6,671,012 1,585,788 246,509 2,763,637 5,112,150

Profit/(loss) after tax (14,922) (82,452) (61,448) (2,668) 311,699 236,735 61,149 (1,849) 56,856 (297,943)

Total comprehensive income (16,249) (81,833) (61,446) (2,623) 315,383 229,215 59,303 (5,848) 57,006 (287,232)

Profit/(loss) allocated to NCI (9,021) (49,694) (6,011) (824) 190,043 144,337 16,816 (508) (15,387) (116,107)

Cash flows from operating activities (160,638) 62,051 190,024 (49,144) (107,535) 405,559 (90,023) (17,352)

Cash flows from/(used in) investing activities (4,978) (16,801) (189,837) 9,000 (76,193) (12,326) (29,023) (76,523)

Cash flows from financing activities 166,448 (97,108) - 40,300 86,541 (313,854) (96,404) 150,200

Dividend paid to NCI - - 65,827 65,827 -

NCI percentage (%) 60.45% 60.27% 30.89% 30.89% 60.97% 60.97% 27.50% 27.50%

Principal place of business Thalwilawella, Thoduwawa, Marawila.

8-5/2, Layden Bastian Rd, York Arcade Building, Col 01.

No.36, D. R. Wijewardena Mawatha, Colombo 10.

306, Minuwangoda Rd, Kotugoda.

38. COMPARATIVE INFORMATION

38.1 Reclassifications

To facilitate comparison and where relevant, balance pertaining to the previous year have been reclassified , as follows:

a. Statement of Financial Position


As at 31.03.2015 Reclassified(Rs. ‘000)

As per audited

accounts (Rs. ‘000)

Change (Rs. ‘000)

Reclassified(Rs. ‘000)

As per audited

accounts(Rs. ‘000)

Change(Rs. ‘000)

Retirement Benefit Assets - 95,154 (95,154) - 132,256 (132,256)

Retirement Benefit Obligations (44,058) (139,212) 95,154 (158,866) (291,122) 132,256

Short Term Borrowings 2,641,968 2,679,334 (37,366)

Long Term Borrowings - Payable after one year 1,773,428 1,736,062 37,366


38.2 Restatements

Lankem Plantation Holdings Ltd. (LPHL), an Associate has not prepared and presented Consolidated Financial Statement for the year ended 31st March 2015 by applying the exemption given in SLFRS 10 -’Consolidated Financial Statements’. Thereby, the Group followed equity accounting by considering the individual net assets of subsidiaries of LPHL. LPHL prepared and presented Consolidated Financial Statements for the year ended 31st March 2016 and accordingly the comparatives have been restated.

a. Statement of Profit of Loss & Other Comprehensive Income - Consolidation

For the year Ended 31st March 2015 Restated(Rs. ‘000)

As per audited accounts(Rs. ‘000)

Change(Rs. ‘000)

Associated Share of Profit/ (Loss) from Associate (268,945) (229,637) (39,308)

b. Statement of Financial Position - Consolidation 1st April 2014 31st March 2015

As at Restated(Rs. ‘000)

As per audited accounts (Rs. ‘000)

Change (Rs. ‘000)

Restated(Rs. ‘000)

As per audited accounts(Rs. ‘000)

Change(Rs. ‘000)

Investments in Associates 1,096,218 1,348,041 (251,823) 827,273 1,118,404 (291,131)

Revenue Reserves 2,885,309 3,137,132 (251,823) 2,508,635 2,799,766 (291,131)

39. SEGMENT INFORMATION

Information based on operating segments of the Group.

39.1 Assets and Liabilities

Total Assets Total Liabilities

As at 31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Trading - Consumer Products 2,108,396 2,343,432 1,386,276 1,307,773

Trading - Industrial Products 8,778,845 7,915,499 6,922,753 6,339,310

Leisure 4,326,436 4,020,970 1,729,090 1,711,345

Others 663,877 1,086,840 622,775 569,909

15,877,554 15,366,741 10,660,894 9,928,337

39.2. Additions to Property, Plant and Equipment, Depreciation and Amortisation

Additions to Property, Plant and Equipment

Depreciation and Amortisation

For the Year Ended 31st March 31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

31.03.2016Rs. ‘000

31.03.2015Rs. ‘000

Trading - Consumer Products 36,953 75,507 49,081 72,678

Trading - Industrial Products 238,139 581,069 248,290 148,902

Leisure 155,563 280,408 128,928 111,655

Others 307 3,720 1,567 1,899

430,962 940,704 427,866 335,134


Ten Year Summary

2015/16Rs.’ 000

2014/15Rs.’ 000

2013/14Rs.’ 000

2012/13Rs.’ 000

2011/12Rs.’ 000

2010/11Rs.’ 000

2009/10Rs.’ 000

2008/09 Rs.’ 000

2007/08Rs.’ 000

2006/07 Rs.’ 000

Statement of Profit or LossRevenue 17,073,999 15,221,745 15,563,475 24,046,619 24,158,766 23,030,604 11,046,103 9,752,487 9,451,805 7,937,129

Share of Profit / (Loss) of Associate (225,355) (268,945) (65,773) - - - - - - - Profit/(Loss) Before Income Tax (147,911) (260,499) (71,414) 801,700 1,025,104 2,108,564 803,582 256,696 918,464 502,636 Income Tax Expense (114,274) (113,299) (144,226) (248,557) (299,950) (236,815) (255,000) (194,293) (180,376) (98,745)Profit/(Loss) for the Year (261,985) (373,798) (215,639) 553,143 725,154 1,871,749 548,582 62,403 738,088 403,891 Profit Attributable to Non-Controlling Interests 176,440 (22,797) 141,059 439,984 248,801 740,643 191,274 (112,831) 444,142 209,519 Profit Attributable to Owners of the Company (438,425) (351,001) (356,699) 113,159 476,353 1,131,106 357,308 175,234 293,946 194,372

Statement of Financial PositionEquityStated Capital 536,218 536,218 536,218 536,218 536,218 536,218 281,218 281,218 289,552 222,885 Capital Reserves 3,409 3,409 3,409 3,409 3,930 3,930 443,080 272,820 271,108 271,108 Available for Sale Reserve 3,117 13,425 11,060 9,007 6,977 12,389 - - - - Revenue Reserves 2,063,728 2,508,635 2,885,309 3,482,940 3,135,964 2,597,468 1,088,624 622,724 511,363 221,565 Non-Controlling Interests 2,609,592 2,376,717 2,348,838 2,270,684 3,542,850 3,484,748 1,898,619 1,077,484 1,274,726 830,719 Total Equity 5,216,660 5,438,404 5,784,834 6,302,258 7,225,939 6,634,753 3,711,541 2,254,246 2,346,749 1,546,277

AssetsNon-Current Assets 8,336,341 8,539,105 7,317,149 7,411,407 11,963,862 10,207,147 8,348,347 6,073,323 5,404,882 5,098,130 Current Assets 7,541,213 6,827,636 7,163,601 6,932,590 9,383,432 7,447,940 5,036,069 3,186,942 3,332,428 2,558,710 Total Assets 15,877,554 15,366,741 14,480,750 14,343,997 21,347,294 17,655,087 13,384,416 9,260,265 8,737,310 7,656,840

LiabilitiesNon-Current Liabilities 1,687,142 2,329,142 1,348,387 1,547,309 5,450,131 5,301,551 4,684,213 3,359,950 2,795,150 2,819,691 Current Liabilities 8,973,752 7,599,195 7,347,529 6,494,430 8,671,224 5,718,783 4,988,661 3,646,069 3,595,411 3,290,872 Total Liabilities 10,660,884 9,928,337 8,695,916 8,041,739 14,121,355 11,020,334 9,672,874 7,006,019 6,390,561 6,110,563

Cash Flow StatementNet Cash Flow Generated from/ (Used in) Operating Activities (559,567) 917,450 146,332 144,499 1,160,123 593,060 601,347 236,932 943,316 499,631 Net Cash Flow Generated from/ (Used in) Investing Activities (340,790) (1,211,181) (573,837) (3,193,687) (2,085,613) (948,060) (1,665,322) (750,531) (379,350) (304,984)Net Cash Flow Generated from/ (Used in) Financing Activities 142,233 567,211 188,434 2,199,613 115,911 1,000,657 1,419,468 100,630 (346,667) (175,024)Net Increase/(Decrease) in Cash and Cash Equivalents 758,124 273,480 (239,071) (849,575) (809,579) 645,657 355,493 (412,969) 217,299 19,623

Key IndicatorsEarnings per Share (Rs.) (18.27) (14.63) (14.86) 4.71 19.85 47.16 15.72 8.30 15.07 9.95 Dividend Per Share (Rs.) - - - 1.50 2.50 2.50 2.25 2.00 1.80 1.50 Net Assets per Share (Rs.) 108.63 127.57 143.17 167.98 153.92 131.25 86.33 56.04 51.05 39.75 Market Capitalisation (Rs.Million) 1,920 2,474 2,400 3,468 4,320 9,636 1,365 604 977 662

Current Ratio (No.of Times) 0.84 0.90 0.97 1.07 1.08 1.30 1.01 0.87 0.93 0.78 Interest Cover (No.of times) 0.76 0.50 0.85 1.86 3.40 5.66 3.73 1.90 4.81 2.82 Price Earnings Ratio (No.of Times) (4.38) (7.05) (6.73) 30.65 9.07 8.51 4.14 3.45 3.09 3.69

Return on Equity (%) (16.82) (10.47) (10.64) 2.69 12.93 35.91 19.71 14.89 27.42 27.16Gearing (%) 60.35 55.25 50.75 45.61 52.18 46.16 54.63 54.00 47.00 61.00

Dividend Payout Ratio (%) - - - 31.81 12.60 5.30 14.32 24.00 12.00 15.00

Notes: 1) The Statement of Financial Position for FY 2012/13 & FY 2013/14 is restated in line with SLFRS 10. 2) The Statement of Profit or Loss for FY 2013/14 is restated in line with SLFRS 10. 3) The Statement of Financial Position for FY 2010/11 & FY 2011/12 is restated in line with SLFRS/LKAS. 4) The Statement of Profit or Loss for FY 2011/12 is restated in line with SLFRS/LKAS.


Twenty Major Shareholders

31.03.2016 31.03.2015

Posititon Name No ofOrdinary

Shares

% No ofOrdinary

Shares

%

1 E.B. CREASY & COMPANY PLC 10,974,635 45.73 10,974,635 45.73

2 THE COLOMBO FORT LAND AND BUILDING PLC 7,243,500 30.18 7,517,500 31.32

3 ASSOCIATED ELECTRICAL CORPORATION LTD 968,501 4.04 944,233 3.93

4 DARLEY BUTLER & COMPANY LTD 536,614 2.24 536,614 2.24

5 COLOMBO FORT INVESTMENTS PLC 423,016 1.76 422,957 1.76

6 SEYLAN BANK PLC/ THIRUGNANASAMBANDAR SENTHILVERL 327,024 1.36 139,639 0.58

7 SRI LANKA INSURANCE CORPORATION LTD-GENERAL FUND 313,500 1.31 313,500 1.31

8 CAPITAL INVESTMENTS LIMITED 274,000 1.14 - -

9 COLOMBO INVESTMENT TRUST PLC 170,735 0.71 170,719 0.71

10 C M HOLDINGS PLC 100,457 0.42 100,457 0.42

11 WALDOCK MACKENZIE LTD/ HI-LINE TRADING (PVT) LTD 92,885 0.39 92,885 0.39

12 A E C PROPERTIES ( PVT ) LTD. 90,000 0.38 83,101 0.35

13 EMPLOYEES TRUST FUND BOARD 82,283 0.34 82,283 0.34

14 BANK OF CEYLON NO. 1 ACCOUNT 72,400 0.30 72,400 0.30

15ESTATE OF THE LATE MARIAPILLAI RADHAKRISHNAN (DECEASED) 68,800 0.29 68,800 0.29

16MR ANTHONY ISIDORE DE SILVA AND MR. FRANCIS XAVIER RANJITH PEREIRA 55,047 0.23 55,047 0.23

17 VENTURA CRYSTAL INVESTMENTS LTD 50,000 0.21 114,578 0.48

18 TRUST HOLDINGS & INVESTMENTS (PVT) LIMITED 44,633 0.19 44,633 0.19

19 PEOPLE'S LEASING & FINANCE PLC/ MR.A.RAJARATNAM 36,156 0.15 952 0.00

20 PEOPLE'S LEASING & FINANCE PLC/ L.P.HAPANGAMA 35,277 0.15 10,000 0.04

21,959,463 91.52 21,744,933 90.61

MARKET VALUEThe market value of the Company’s Ordinary Share on 31st March 2016 was Rs.80/-. (31st March 2015 - Rs.103.10) Highest during the year - Rs.132/- and Lowest during the year - Rs.70.10)

NET ASSET PER SHAREConsolidatedThe Net Assets per Share as at 31st March 2016 - Rs. 108.63The Net Assets per Share as at 31st March 2015 - Rs. 127.57

CompanyThe Net Assets per Share as at 31st March 2016 - Rs. 78.62The Net Assets per Share as at 31st March 2015 - Rs. 94.53

Public HoldingThe percentage of shares held by the public as at 31st March 2016 was 17.21% (31st March 2015 - 17.21%).

Public ShareholdersThe Number of Public Shareholders as at 31st March 2016 was 2015.


No. of Shares Held

As At 31st March 2016 As as 31st March 2015

No. of Shareholders

Total Holdings % of Total Holdings

No. of Shareholders

Total Holdings % of Total Holdings

1 - 1,000 1,617 388,258 1.62 1,650 409,180 1.70

1,001 - 10,000 373 1,086,477 4.53 387 1,140,219 4.75

10,001 - 100,000 41 1,193,283 4.97 44 1,215,769 5.07

100,001 - 1,000,000 8 3,113,847 12.97 8 2,742,697 11.43

Over 1,000,000 2 18,218,135 75.91 2 18,492,135 77.05

2,041 24,000,000 100.00 2,091 24,000,000 100.00

Analysis of Ordinary Shareholders

As at 31st March 2016 No of Shareholders % Total Holdings Market Value (Rs.) % of Total Holding

Individuals 1,895 92.85 1,830,569 146,445,520.00 7.63

Institutions 146 7.15 22,169,431 1,773,554,480.00 92.37

2,041 100.00 24,000,000 1,920,000,000.00 100.00

As at 31st March 2015 No of Shareholders % Total Holdings Market Value (Rs.) % of Total Holding

Individuals 1,951 93.30 2,024,008 208,675,225 8.43

Institutions 140 6.70 21,975,992 2,265,724,775 91.57

2,091 100.00 24,000,000 2,474,400,000 100.00

Distribution of Shares


Notice of Meeting

Notice is hereby given that the Fifty First Annual General Meeting of Lankem Ceylon PLC will be held at the Grand Oriental Hotel, No. 2, York Street, Colombo 01, on 14th September 2016 at 10.00 a.m. for the following purposes namely:

• To receive and consider the Annual Report of the Board of Directors and the Statement of Accounts for the year ended 31st March 2016, with the Report of the Auditors thereon.

• To re-elect as a Director, Mr. A. Hettiarachchy who retires in accordance with Articles 84 and 85 of the Articles of Association.

• To reappoint Mr. N. H. B. S. Perera who is over seventy years of age as a Director. Special Notice has been received from a shareholder of the intention to pass a resolution which is set out below in relation to his reappointment (see Note No. 4).

• To reappoint Mr. R. N. Bopearatchy who is over seventy years of age as a Director. Special Notice has been received from a shareholder of the intention to pass a resolution which is set out below in relation to his reappointment (see Note No.5).

• To reappoint Mr. A. Rajaratnam who is over seventy years of age as a Director. Special Notice has been received from a shareholder of the intention to pass a resolution which is set out below in relation to his reappointment (see Note No.6).

• To reappoint Mr. R. Seevaratnam who is over seventy years of age as a Director. Special Notice has been received from a shareholder of the intention to pass a resolution which is set out below in relation to his reappointment (see Note No.7).

• To authorize the Directors to determine contributions to charities.

• To reappoint as Auditors, Messrs KPMG Chartered Accountants and to authorize the Directors to determine their remuneration.

By Order of the Board

Corporate Managers and Secretaries (Private) Limited

Secretaries

Colombo

8th August 2016

Note:1. Any member of the Company who is entitled to attend and vote

at this meeting may appoint a proxy to attend and vote instead of him or her. A proxy need not be a member of the Company.

2. A Form of Proxy for the Meeting is enclosed with this report.

3. The instrument appointing a proxy must reach the Registered Office of the Company’s Secretaries, Corporate Managers & Secretaries (Private) Limited, No. 8-5/2, Leyden Bastian Road, York Arcade Building, Colombo 01, not less than forty-eight (48) hours before the time appointed for the holding of the meeting.

4. Special Notice has been received by the Company from a shareholder giving notice of the intention to move the following Resolution as an Ordinary Resolution at the Annual General Meeting.

Resolved- “That Mr. N. H. B. S. Perera who is eighty five years of age be and is hereby reappointed a Director of the Company and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No.7 of 2007 shall not apply to the said Director, Mr. N. H. B. S. Perera.”

5. Special Notice has been received by the Company from a shareholder giving notice of the intention to move the following Resolution as an Ordinary Resolution at the Annual General Meeting.

Resolved – “That Mr. R. N. Bopearatchy who is seventy five years of age be and is hereby reappointed a Director of the Company and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No.7 of 2007 shall not apply to the said Director, Mr. R. N. Bopearatchy”.

6. Special Notice has been received by the Company from a shareholder giving notice of the intention to move the following Resolution as an Ordinary Resolution at the Annual General Meeting:

Resolved – “That Mr. A. Rajaratnam who is seventy five years of age be and is hereby reappointed a Director of the Company and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Director, Mr. A. Rajaratnam”.

7. Special Notice has been received by the Company from a shareholder giving notice of the intention to move the following Resolution as an Ordinary Resolution at the Annual General Meeting:

Resolved – “That Mr. R. Seevaratnam who is seventy two years of age be and is hereby reappointed a Director of the Company and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Director, Mr. R. Seevaratnam ”.


Notes


Form of Proxy

I/We..............................................................................................................................................................................of ...............................................................................................................................................................................being a member/members of Lankem Ceylon PLC, hereby appoint .......................................................................................of ...........................................................................................................whom failing.

1. Alagarajah Rajaratnam of Colombo or failing him,2. Sri Dhaman Rajendram Arudpragasam of Colombo or failing him,3. Anushman Rajaratnam of Colombo or failing him,4. Damitha Laksiri Vitharana of Colombo or failing him,5. Ranjit Noel Bopearatchy of Colombo or failing him,6. Nelakanni Hettiarachige Bernard Susantha Perera of Colombo or failing him,7. Kamalanesan Ponniah David of Colombo or failing him,8. Amaralal Rajasri Peiris of Colombo or failing him,9. Ruwan Tharka Weerasinghe of Colombo or failing him,10. Ariyawansa Hettiarachchy of Colombo or failing him,11. Anthony Crossette Selvanayagam Jayaranjan of Colombo or failing him,12. Ranjeevan Seevaratnam of Colombo or failing him,13. Mahadurage Marius Augustine Rajeeve Perera Goonetileke of Colombo

as my/our proxy to represent me/us and to speak and vote on my/our behalf at the Annual General Meeting of the Company to be held on 14th September 2016 and at any adjournment thereof and at every poll which may be taken in consequence of the aforesaid meeting.

To receive the Annual Report of the Board of Directors and the Statement of Accounts for the year ended 31st March 2016 with the Report of theAuditors thereon.

To re-elect Mr. A. Hettiarachchy as a Director.

To re-appoint Mr. N. H. B. S. Perera as a Director.

To re-appoint Mr. R. N. Bopearatchy as a Director.

To re-appoint Mr. A. Rajaratnam as a Director.

To re-appoint Mr. R. Seevaratnam as a Director.

To authorize the Directors to determine contributions to charities.

To reappoint as Auditors, Messrs KPMG, Chartered Accountants,and to authorize the Directors to determine their remuneration.

The proxy may vote as he/she thinks fit on any resolution brought before the meeting.As witness my hand/our hands this ………..day of………………….Two Thousand and Sixteen

......................................................................

Signature

Note:A proxy need not be a member of the Company. If no words are deleted or there is in the view of the proxy doubt (by reason of the manner in which the instructions contained in the Form of Proxy have been completed) as to the way in which the proxy should vote, the proxy may vote as he/she thinks fit.

Instructions as to completion are noted on the reverse hereof.

For Againts


Instructions as to Completion

1. Perfect the Form of Proxy, after filling in legibly your full name and address by signing in the space provided and filling in the date of signature.

2. In the case of Corporate Members the Form of Proxy must be under the Common Seal of the Company or under the hand of an Authorized Officer or Attorney.

3. Where the Form of Proxy is signed under a Power of Attorney (POA) which has not been registered with the Company’s Secretaries, the original POA together with a photocopy of the same, or a copy certified by a Notary Public must be lodged with the Company’s Secretaries, along with the Form of Proxy.

4. The completed Form of Proxy should be deposited at the Registered Office of the Company’s Secretaries, Corporate Managers & Secretaries (Private) Limited., 8-5/2, Leyden Bastian Road, York Arcade Building, Colombo 01, not less than forty-eight (48) hours before the time appointed for the meeting.

Form of Proxy contd.

Corporate InformationBoard of Directors ChairmanA. Rajaratnam, FCA(Alternate, Mr. Amrit Rajaratnam)

Deputy ChairmanS. D. R. Arudpragasam, FCMA (UK)

Managing DirectorAnushman Rajaratnam, B.Sc. (Hons.), CPA, MBA (Alternate, Mr. S. Rajaratnam)

D. L. Vitharana, MNI (Lond.), MBA, M.Sc. (UK)

DirectorsR. N. Bopearatchy, B.Sc (Cey), Dip. BM, MBA (Univ. of Col.)N. H. B. S. Perera, B.Sc. (Cey.)K. P. David, FCMA (UK), FCMA, FIPFM, CGMAA. R. Peiris, B.Sc. (Cey.), FCMA (UK), CGMAR. T. Weerasinghe, BBA (USA)A. Hettiarachchy, C.Eng, MIEE, MIProdE, MIChemEA. C. S Jayaranjan FCA, FCMA (UK), CGMAR. Seevaratnam, B.Sc. (Lond.), FCA (Eng.and Wales) FCA (ICASL)M.M.A.R.P. Goonetileke, B.Sc. Hons. (Mechanical Engineering), M.Eng (Industrial Engineering)

SecretariesCorporate Managers & Secretaries (Private) Limited

BankersCommercial Bank of Ceylon PLCSampath Bank PLCPeople’s BankNational Development Bank PLCHatton National Bank PLCPABC Bank PLCSeylan Bank PLCBank of Ceylon

LawyersMessrs Julius & Creasy Attorneys-at-Law

AuditorsMessrs KPMG Chartered Accountants

Name of the Company Lankem Ceylon PLC

Legal FormA limited liability company incorporated and domiciled in Sri Lanka

Date of Incorporation 15th September 1964

Company Number PQ 128

Stock Exchange ListingThe ordinary shares of the Company are listed with the Colombo Stock Exchange of Sri Lanka

No. 98, Sri Sangaraja Mawatha, Colombo 10.

Principal Activities of the CompanyManufacturing of Chemicals, Paints and Consumer Products

Subsidiary Companies and their Principal ActivitiesLankem Paints Ltd.Distribution of PaintsLankem Consumer Products Ltd. Distribution of Consumer ProductsLankem Chemicals Ltd. Distribution of Industrial ChemicalsLankem Agrochemicals Ltd. Distribution of AgrochemicalsSunAgro LifeScience Ltd.Import, Marketing and Distribution of AgrochemicalsLankem Research Ltd. Research and DevelopmentC.W. Mackie PLCManufacturer, Exporter, Importer and Distributor of Consumer, Hardware and Rubber ProductsLankem Plantation Services Ltd. Non-OperationalSigiriya Village Hotels PLCOwning and Operation of Resort HotelMarawila Resorts PLCOwning and Operation of Resort HotelColombo Fort Hotels Ltd.Investments in Hotel CompaniesLak Kraft (Private) LimitedManaging of Boutique Hotel Sherwood Holidays LimitedManaging of BungalowsBeruwala Resorts PLCOwning and Operation of Resort HotelYork Hotels (Kandy) Ltd. Investments in propertiesB.O.T. Hotel Services (Pvt.) Ltd. Owning and Operation of Resort HotelGalle Fort Hotel (Pvt) Ltd.Owning and Operation of a Boutique HotelSunAgro Farms Ltd.Growers of Vegetables, Fruits and Foliage for Export and SaleAssociated Farms (Pvt) Ltd. Farming and DairyingLankem Technology Services Ltd.Provision of Information Technology and Allied ServicesNature’s Link Ltd.Manufacturing of Herbal/Natural based productsLankem Exports (Pvt) Ltd. Export of Non Traditional GoodsSunAgro Foods LimitedGrowers, Importers, Exporters, Processors and Marketers of Food ItemsCeylon Tapes (Pvt) Ltd.Manufacturing & Trading of Packing TapeJ.F. Packaging (Pvt) Ltd.Manufacturing of Polymer PackingAssociatesLankem Plantation Holdings Ltd.Waverly Power (Pvt) Ltd.

No. 98, Sri Sangaraja Mawatha, Colombo 10.www.lankem.lk

LANKEM CEYLON PLC

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