J. L. MORISON SON & JONES (CEYLON) PLC · Share Information Information relating to earnings, dividend, net assets and market price per share is given in the 5 year summary on page

ANNUAL REPORT2013/14

J. L. MORISON SON & JONES (CEYLON) PLC

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Legal FormQuoted Public Company with Limited Liability.Listed on the Colombo Stock Exchange on 1 January 1964

Date of Incorporation31 January 1939

Date of Re-registration5 September 2007

New Registration NumberPQ 77

Accounting Year End31 March

Registered Office “Hemas House” No. 75 Braybrooke Place,Colombo 2Tel; 0114 731 731 (Hunting) Fax: 0114731777

AuditorsErnst & Young Chartered AccountantsNo. 201, De Saram Place, Colombo 10

Directors Mr. H. N. Esufally (Chairman)Mr. R. A. J. T. Perera (MD/CEO)Mr. A. S. AbeyewardeneProfessor P. R. FernandoMr. S. M. Enderby

SecretariesHemas Corporate Services (Pvt) Ltd “Hemas House” No. 75 Braybrooke Place,Colombo 2Tel; 0114 731 731 (Hunting) Fax: 0114731777

RegistrarsSSP Corporate Services (Pvt) Ltd101, Inner Flower Road,Colombo 3

Lawyers to the CompanyJulius & Creasy No. 41, Janadhipathi Mawatha ,Colombo 1.

BankersBank of CeylonPeople’s Bank Standard Chartered BankNDB BankNations Trust BankSeylan BankHSBC BankSampath Bank

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ChAIRmAN’S REvIEw

The year under review marks a significant milestone in the history of the company as it celebrates its 75th anniversary and

joined the Hemas Group as its newest subsidiary. It gives me great pleasure to address you as Chairman of your Company, J.L.

Morison Son & Jones (Ceylon) PLC, which completed a successful and eventful financial year.

Following the acquisition of J.L. Morison Son & Jones (Ceylon) PLC by the Hemas Group on May 30th 2013, your Company

posted a Revenue of Rs. 2.6 Bn with an Operating Profit of Rs. 258.2 Mn and Net Earnings of Rs. 210.8 Mn for the financial year

ended 31 March 2014. These numbers reflect an impressive 51% growth in Net Earnings and 34% growth in Operating Profits in

spite of a 13% drop in Revenue. While the drop in revenue is attributable to the loss of two Consumer agencies, your Company

has done well to more than compensate for this loss through strategic initiatives undertaken during the year.

Pharmaceutical Manufacturing, Import and Distribution forms the core of the current J.L. Morison’s operation and has performed

extremely well to post a 20% growth in Revenue despite sluggish industry growth which stood at 1.32% for 2013 as per IMS.

In conclusion to what has been an extraordinary year for the Company, I wish to thank the Board of Directors and the J.L.

Morison’s team who have worked under challenging circumstances and delivered excellent results. Finally, I’m grateful to you,

our shareholders, for the continued support and confidence placed in the Company.

husein N. EsufallyChairman

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mANAgINg DIRECtoR’S REvIEw

It gives me great pleasure to report to you for the first time as Managing Director of your Company, the performance for the year

ended 31 March 2014. Your Company recorded an impressive earnings growth of 51% reaching Net Earnings of Rs.210.8 Mn

in comparison to Rs. 139.9 Mn the previous year. Revenue declined by 13% to reach Rs. 2,639 Mn for the year under review.

Reduction in revenue was attributable to the windup of our Homecare distribution channel which distributed the Good Knight

and Kiwi brands. In spite of the decline in Revenue, the significant improvement in Operating Profit and Net Earnings was mainly

attributable to the growth in manufacture, import and distribution of pharmaceuticals despite lackluster industry growth as well

as other efficiency measures undertaken during the year.

M.S.J. Industries; the pharmaceutical manufacturing arm, succeeded in significantly increasing supplies to government hospitals

through the “Buy Back” agreement offered to local manufacturers by the government in order to stimulate the local manufacture

of pharmaceuticals. M.S.J. Industries also commenced a project to upgrade GMP (Good Manufacturing Practice) standards at

the manufacturing facility located in Colombo 15 in September 2013. We expect these upgrades to be completed by December

2014 and increase our production capacity.

Further rationalization of our portfolio by discontinuing non-core products provided focus to key products and brands under the

J.L. Morison’s umbrella. This initiative yielded results not only in terms of improved sales in our OTC (Over-the-Counter) and

pharmaceutical portfolio but also in terms of releasing working capital, thereby significantly improving the cash-flows.

Beginning December 2013, we have implemented the financial module of SAP, the globally renowned enterprise resource

planning software used by the Hemas Group. During the year we also rolled out many systems, policies and procedures, one of

which was a Performance Management System. This allowed us to foster a performance driven culture to build on the heritage

and ethos of the J.L. Morison’s culture.

I wish to thank the Chairman and the Board of Directors for the direction and guidance provided. I also wish to take this

opportunity to thank the members of the J.L. Morison’s team that retired during the year following many years of active service

and contribution to the Company. Finally, my sincere thanks to our customers, business partners and shareholders.

I wish to commend the management team and staff of the Company for taking on the challenges post-acquisition in a positive

manner and seeing the Company through a successful transition to deliver outstanding results during the year. Having concluded

a successful year, we find ourselves well-poised for long term growth.

R.A.J. trihan Perera Managing Director

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NOTICE OF MEETING

NotICE IS hEREBY gIvEN that the Seventy Fifth (75th) Annual General Meeting of the Company will be held at 3.00 pm on monday, 18 August 2014, at the Auditorium of the Ceylon Chamber of Commerce, No. 50, Navam mawatha, Colombo - 02, for the following purpose:-

AgENDA

1. To receive and consider the Statements of Accounts of the Company and of the Group for the year ended 31 March 2014, together with the Reports of the Directors and Auditors thereon.

2. To re-elect as Director, Professor Ravindra Fernando retiring in terms of Articles 85 of the Articles of Association of the Company.

3. To pass the ordinary resolution set out below to re-appoint as a director Mr. Asoka Abeyewardene who has completed 70 years of age and vacates office as a director of the Company in terms of Section 210 (2) (a) of the Companies Act No. 7 of 2007.

“RESoLvED that Mr. A. S. Abeyewardene who has completed 70 years of age be and is hereby re-appointed a Director of the Company and it is hereby declared as provided for in Section 211(1) of the Companies Act No. 07 of 2007 that the age limit of 70 years referred to in Section 210 of the said Companies Act shall not apply to Mr. A. S. Abeyewardene.”

4. To declare a first and final dividend of Rs.3.00. per ordinary voting and non-voting share as recommended by the Directors.

5. To re-appoint Messrs Ernst & Young, Chartered Accountants as Auditors for the ensuing year and to authorise the Directors to determine their remuneration.

6. To authorise the Directors to determine and make donations to Charity.

By order of the Board of J. L. morison Son & Jones (Ceylon) PLC

hemas Corporate Services (Pvt) LtdSecretaries

25 July 2014

Note A member entitled to attend and vote at the Meeting may appoint a Proxy to attend and vote in his/her place.A Proxy need not be a Member of the Company. A Form of Proxy accompanies this Notice.

* Please bring a valid document of identity for purpose of registration.

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ANNuAL REPORT OF THE DIRECTORS

The Directors have pleasure in presenting to the Members their report together with the audited financial statements of the Company and the Group for the year ended 31 March 2014.

Principal Activities of the group Manufacture of pharmaceuticals and toiletry products and, import and distribution of pharmaceuticals, toiletries, agro chemicals, medical aid and other consumer products are the principal activities of the Group. The Chairman’s Report and the CEO’s Review on page 2 and 3 of this report, respectively, describe in detail the year’s operations and all important events that occurred during the accounting period under review.

Financial statements of the Company and the groupThe financial statement of the Company and the Group, duly certified by the finance director and signed by the directors of the Company, in compliance with sections 152, 153 and 168 of the Companies Act No. 7 of 2007 are given on page 17 of the Annual Report.

Property, Plant & EquipmentMovements in Property, Plant & Equipment during the year are set out in Note 3 to the Financial Statements.

2013/14 ResultsThe total revenue of the Group for the year ended 31 March 2014 was reported as Rs. 2,638,931,384 (for the year ended 31 March 2013 – Rs. 3,042,252,503)

The profit before income tax of the Group for the year ended 31 March 2014 was Rs. 279,687,415 (for the year ended 31 March 2013 - Rs. 202,450,511) and Profit after tax for the year ended 31 March 2014 was reported as Rs.210,757,245 (for the year ended 31 March 2013 – 139,918,098).

DividendsThe Directors recommend a first and final dividend of Rs. 3.00 per ordinary voting and non-voting share for the year ended 31 March 2014, which will be payable on 27 August 2014.

DirectorsThe Board of Directors of the Company as at the year ended 31 March 2014 were:-

Mr. Husein Esufally

Mr. Trihan Perera

Mr. Steven Enderby

Mr. Asoka Abeyewardene

Prof. Ravindra Fernando

• Independence of Directors The board has made a determination as to the independence of each non-executive director and confirms that two

of the non-executive directors meet the criteria of independence in terms of Rule 7.10.4 of the Listing Rules of the Colombo Stock Exchange.

Each of the independent directors has submitted a signed and dated declaration of his independence against the specified criteria.

• Re-election of Directors Professor Ravindra Fernando retires by rotation in accordance with Article 85 of the Articles of Association, but being

eligible, offers himself for re-election with the unanimous support of the Board.

Mr. Asoka Abeyewardene who has completed 70 years of age as at the year ended 31 March 2014, vacates office as a director of the Company in terms of section 210 (2) of the Companies Act No. 7 of 2007, and is recommended by the Board for re-appointment.

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ANNuAL REPORT OF THE DIRECTORS (Contd.)

• Directors’ Disclosure in dealing in shares Directors’ Interest in Ordinary Shares of the Company - Direct

31.03.2014 31.03.2013

Mr. Husein Esufally (Chairman) 600 (non-voting) Nil Mr. Trihan Perera (MD/CEO) Nil Nil Mr. Steven Enderby Nil Nil Mr. Asoka Abeyewardene Nil Nil Prof. Ravindra Fernando Nil Nil

Directors’ Interest in Ordinary Shares of the Company - Indirect

31.03.2014 31.03.2013

Mr. Husein Esufally (Chairman) Nil Nil Mr. Trihan Perera (MD/CEO) Nil Nil Mr. Steven Enderby Nil Nil Mr. Asoka Abeyewardene Nil Nil Prof. Ravindra Fernando Nil Nil

Share InformationInformation relating to earnings, dividend, net assets and market price per share is given in the 5 year summary on page 56.

DonationsDuring the year charitable donations amounting to Rs. 110,000/- were made by the Company. (2013 - Rs. 35,650/-)

Segmental AnalysisA segmental analysis of Group operations is given in Note 28 on page 47 to the accounts.

major ShareholdingDetails of the 20 largest shareholders of Ordinary Voting & Non-Voting shares of the Company as at 31.03.2014 are given on pages 54 and 55.

Public holding of sharesThe number of Ordinary Voting shares held by the public as at 31 March 2014 was 5,808,290 (as at 31 March 2013 - 1,534,040). The number of Ordinary Non-Voting shares held by the public as at 31 March 2014 was 1,742,490 (as at 31 March 2013 - 889,580).

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

ReservesDetails of Capital and Revenue Reserves of the Company are given in Note 11 on page 39 to the Financial Statements.

Articles of AssociationThe Articles of Association of the Company may be amended by passing a special resolution.

Stated CapitalDetails of the Stated Capital of the Company are given in Note 10 on Page 39 to the financial statements. There was no movement in the stated capital during the accounting period under review.

Events occurring after the Balance Sheet dateThere have been no material events which occurred after the Balance Sheet date that would require adjustments to or disclosure in the Financial Statements.

Interest RegisterThe Company has maintained an Interest Register in accordance with the Companies Act No. 7 of 2007 and is available for inspection as required by Section 119 (1) (d) of the aforesaid Act.

Environmental ProtectionThe Directors to the best of their knowledge and belief are satisfied that the Company has complied with the applicable environmental regulations and have not engaged in any activities, which may cause detriment to the environment.

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ANNuAL REPORT OF THE DIRECTORS (Contd.)

Significant Accounting PoliciesSignificant Accounting Policies adopted by the Company in the preparation of the Financial Statements are given on pages 23 to 31 of the Annual Report.

going ConcernThe Directors, having reviewed the basis of the current financial projections and resources available to continue business operations, are confident that the Company has adequate resources to continue business operations in the foreseeable future. Accordingly the Directors consider that it is appropriate to adopt the going concern basis in preparing the financial statements.

Audit CommitteeThe Composition of the Audit Committee and their report is given on page 12 of this report.

Remuneration CommitteeThe Remuneration Committee of the ultimate parent company, Hemas Holdings PLC functions as the Remuneration Committee of the Company. The Remuneration Committee comprised two independent directors, Mr. Lalith de Mel and Mr. Maithri Wickremesinghe and was re-constituted in November 2013.

The remuneration committee at present comprises the following members.

I. Mr. Pradipta Mohaptra – Independent Director

II. Dr. Anura Ekanayake – Independent Director

III. Mr. Murtaza Esufally – Executive Director

External AuditorsThe following payments were made to the Group’s External Auditors, Messrs. Ernst & Young;.

Company group Rs. Rs. 2014 2013 2014 2013Audit Fees and Expenses 1,300,000 966,000 2,100,000 1,930,000Fees for other services and Expenses 653,094 1,244,734 912,021 1,418,400

As far as the Directors are aware, the Auditors’ do not have any interest or relationship with the Company or any of its subsidiaries other than those disclosed above.

The Report of the Auditors on the Financial Statements of the Company and the Group is set out on Page 16 of the Annual Report.

A Resolution to re-appoint the present auditors, Messrs Ernst & Young, who have expressed their willingness to continue, will be proposed at the Annual General Meeting.

Annual general meeting (Agm)The AGM of the Company for the financial year 2013/14 will be held on Monday, 18 August 2014 at the Auditorium of the Ceylon Chamber of Commerce, No. 50, Navam Mawatha, Colombo-02.

Acknowledgement of Contents of the ReportAs required by Section 168 (1) (K) of the Companies Act No. 7 of 2007, the Board of Directors hereby acknowledge the contents of this Report.

Signed for and on behalf of the Board

Husein Esufally Trihan PereraDirector Director

Hemas Corporate Services (Pvt) LtdSecretaries

Colombo19 May 2014

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CORPORATE GOVERNANCE

The Board of Directors has overall responsibility for ensuring that proper standards of Governance are maintained. The Board of Directors of J.L Morison Son & Jones (Ceylon) PLC is committed to maintaining the highest standards of corporate governance in line with the Code of Best Practice on Corporate Governance and the Listing Rules of the Colombo Stock Exchange.

Set out below is a report on the Company’s Corporate Governance principles, which were in place throughout the reporting period under review. The report also attempts to explain how power is exercised to ensure that the objectives of the Company are achieved lawfully and ethically.

1. thE BoARD

Code Provision:- ”Every company should be headed by an effective Board, which should direct, lead and control the Company”

The Board’s role is to provide entrepreneurial leadership to the Company within a framework of prudent and effective controls which enables risk to be assessed and managed. In performing its role, the Board should be responsible for matters including, ensuring the formulation and implementation of a sound business strategy, ensuring that the Chief Executive Officer and management team possess the skills, experience and knowledge to implement the strategy, ensuring effective systems to secure integrity of information, internal controls, business continuity and risk management, ensuring compliance with laws, regulations and ethical standards, ensuring all stakeholder interests are considered in corporate decisions, recognising sustainable business development in corporate strategy, decisions and activities; ensuring that the Company’s values and standards are set with emphasis on adopting appropriate accounting policies and fostering compliance with financial regulations and fulfilling such other Board functions as are vital given the scale, nature and complexity of the business concerned.

There were five board meetings held during the year under review with complete participation of all members of the Board. The schedule of matters specifically reserved for the Board included approval of long term objectives and strategy, approval of the operating and capital expenditure budgets, oversight of the group’s operations, financial reporting and control, internal controls, proposals for major capital projects and approval of policies. The Company has arranged appropriate insurance cover in respect of legal proceedings and other claims against its directors.

The names of the Directors who served during the year under review are disclosed in the Annual Report of the Directors.

2. ChAIRmAN AND ChIEF ExECutIvE oFFICER (CEo)

Code Provision:- “There should be a clear division of responsibilities at the head of the company, which will ensure a balance of power and authority, such that no one individual has unfettered powers of decision.

The roles of the Chairman and CEO have been divided between two members providing a better balance of power on the Board. The chairman’s role is pivotal in creating the conditions for the effectiveness of the board as a whole and the individual directors. The chief executive holds responsibility for executive management

3. ChAIRmAN’S RoLE

Code Provision:- “Chairman should preserve order and facilitate the effective discharge of Board functions”

The Chairman leads the Board, ensuring its effectiveness, while taking account of the interests of the Group. The Chairman conducts Board proceedings in a proper manner and ensures, inter alia, effective participation of both executive and non- executive directors.

4. FINANCIAL ACumEN

Code Provision:- “ The Board should ensure the availability within it of those with sufficient financial acumen and knowledge to offer guidance on matters of finance”

The Board comprises members with a wide range of expertise. One of the independent directors who also serves as Chairman of the Audit Committee is a financial professional.

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CORPORATE GOVERNANCE (Contd.)

5. BoARD BALANCE AND INDEPENDENCE

Code Provision:- “The board should have a balance of executive and non executive directors such that no individual or small group of individuals can dominate the board’s decision taking”

As at 31 March 2014, the Board comprised two independent directors, two non-executive directors and one executive director. The Board of Directors of J.L. Morison Son & Jones (Ceylon) PLC believes that the composition of the Board is of sufficient size and ensures a balance of skills and experience appropriate for the requirements of the business.

6. APPoINtmENtS to thE BoARD

Code Provision:- “There should be a formal, rigorous and transparent procedure for the appointment of new directors to the Board”

The Board has not established a Nominations Committee for making recommendations on board appointments. The appointments to the Board are decided by the board as a whole assessing the requirements and strategic demands of the Company.

7. SuPPLY oF INFoRmAtIoN

Code Provision:- “The Board should be provided with timely and appropriate information”

The Management has an obligation to provide the Board with appropriate and timely information, but information volunteered by the management may not be enough in all circumstances and Directors should make further inquiries where necessary. The Chairman is responsible for ensuring that the directors receive accurate, timely and clear information. under the direction of the Chairman, the Company Secretary makes certain that good information flows within the board and its committees.

8. RE-ELECtIoN

Code Provision:- “All directors should be required to submit themselves for re-election at regular intervals”

The Articles of Association require that each director seeks re-election every three years, in line with the provisions of the Code of Best Practice on Corporate Governance. A director who retires by rotation is eligible for re-election by the shareholders at the Annual General Meeting.

9. APPRAISAL oF BoARD PERFoRmANCE

Code Provision:- “Board should periodically appraise their own performance in order to ensure that Board responsibilities are satisfactorily discharged.”

The Board conducts an internal Board evaluation each year. The review is led by the Chairman and the evaluation considers a range of factors relevant to the effectiveness of the Board.

10.DISCLoSuRE oF INFoRmAtIoN IN RESPECt oF DIRECtoRS

Code Provision:- “Shareholders should be kept advised on relevant details in respect of Directors”

The Directors’ Profiles provided in this report on page 15 provide relevant details of the directors of the Company.

11.APPRAISAL oF ChIEF ExECutIvE oFFICER (CEo)

Code Provision:- “The Board should be required at least annually, to assess the performance of the CEO”

The performance of the CEO is reviewed annually against the Goals which are set at the beginning of the financial year.

12.REmuNERAtIoN

Code Provision:- “Companies should establish a formal and transparent procedure for developing policy on executive remuneration and for fixing remuneration packages.”

The Remuneration Committee of the ultimate parent company acts as the remuneration committee of the Company. The Remuneration Committee has been delegated with responsibility for both developing remuneration policy and for setting the remuneration for all executive directors and senior executives.

The Composition of the Remuneration Committee is provided on Page 7 of this report.

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13.RELAtIoNS wIth ShAREhoLDERS

Code Provision:- “Boards should use the AGM to communicate with Shareholders”

The Notice of the Annual General Meeting and a copy of the Annual Report are sent out to the shareholders 15 working days prior to the date of the AGM. This year the AGM will be held on 18 August 2014, at the Auditorium of the Ceylon Chamber of Commerce, 50 Navam Mawatha, Colombo-02.

14.ACCouNtABILItY AND AuDIt

Code Provision:- “The Board should present a balanced and understandable assessment of the Company’s financial position, performance and prospects”

The Financial Review from Page 17 to Page 49 provides a fair assessment of the Company’s performance and plans for the future.

15.INtERNAL CoNtRoL

Code Provision:- “The Board must have a process of risk management and a sound system of internal control”

The risk and control division of the ultimate parent company, Hemas Holdings PLC, conducts regular internal audits to assess and evaluate the internal control systems in place and reports the findings to the Audit Committee of the Company regularly. Any significant issues would be reported to the Board thereafter.

16.FINANCIAL REPoRtINg

Code Provision:- “The Board should establish formal and transparent arrangements for considering how they should select and apply accounting policies, financial reporting and internal control principles”

The responsibility of the directors in relation to the Financial Statements is set out in the Statement of Directors’ Responsibility on Page 14.

17.AuDIt CommIttEE AND AuDItoRS

the Audit Committee The Committee reviews and monitors the integrity of the Company’s annual and interim financial statements and any formal

statements relating to the group’s financial performance including significant financial judgments contained in them. Ultimate responsibility for the approval of the annual and interim financial statements, however, rests with the Board. At least once each year, the committee meets with the external auditors to discuss issues arising from their respective audits.

The Composition and functions of the Audit Committee are set out in page 12 of this report.

Auditor Independence and objectivity The Company has adopted a policy on the use of non–audit services provided by the Company’s external auditors Messrs.

Ernst & Young, The Committee’s prior approval is required before the Company uses non audit services. Such services will only be used where the Company benefits in a cost effective manner and the auditor maintains the necessary degree of independence and objectivity.

CoDE oF EthICS AND CoNDuCt

The Directors exercise their independent and objective judgment on issue of strategy, policy, resources and standard of conduct. The Directors ensure that all information is of confidential nature except those disclosed in the Annual Report.

Directors’ Declaration

The Directors declare that:

(a) the Company complied with all applicable laws and regulations in conducting its business.

(b) all material interests in contracts involving the Company have been declared and they have refrained from voting on matters in which they were materially interested.

(c) the Company has made all endeavours to ensure the equitable treatment of shareholders.

(d) the business is a going concern with supporting assumptions or qualifications as necessary.

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(e) they have conducted a review of internal controls covering financial operational and compliance controls and risk management and have obtained a reasonable assurance of their effectiveness and successful adherence herewith.

ComPLIANCE wIth thE RuLES oN CoRPoRAtE govERNANCE oF thE CoLomBo StoCK ExChANgE

Code Provision:- “ Directors must disclose the extent to which the Company adheres to established principles and practices of good governance”

CSE Rule No. Requirement Status of Compliance

7.10.1 Two or at least one third of the total number of Directors should be Non- Executive Directors (NEDs)

The Board of Directors as at 31 March 2014 comprised 5 directors 4 of whom, were non- executive directors.

7.10.2(a) Two or at least one third of the NEDs (whichever is higher) should be independent

Two non- executive directors have been declared as independent.

7.10.2(b) Each non-executive director should submit a declaration of independence in the prescribed format

The two independent directors have submitted a declaration confirming their independence

7.10.3 (A)

and (b)

Names of the Independent Directors should be disclosed in the Annual Report

The relevant disclosures are made in the Annual Report of the Directors

7.10.3 (c ) A brief resume of each Director should be included in the Annual Report, including his area of expertise

A brief profile of each director is provided in the Annual report

7.10.5 (c ) Remuneration Committee – Composition, functions and relevant Disclosures

The Annual Report sets out the composition and the relevant disclosures

7.10.6 (c ) The Audit Committee – Composition, functions and report of the Audit Committee

The Audit Committee Report sets out the composition and the relevant disclosures

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AuDIT COMMITTEE REPORT

Composition of the Audit Committee

The members of the Audit Committee as at the Balance sheet date were:-

Mr. Asoka Abeyewardene Independent Director (Chairman)

Professor Ravindra Fernando Independent Director (Member)

Mr. Steven Enderby Non-Executive Director* (Member)

By Invitation:-

Mr. Trihan Perera Managing Director

Mr. Anjula Prematilleke Finance Director

Mr. Prasenna Balachandran Head of Risk Control

*Appointed w.e.f. 22 August 2013

Audit Committee Report

The Audit Committee is formally appointed by the Board of Directors of the Company, and comprises two independent directors and a non-executive director, in conformity with the Listing Rules of the Colombo Stock Exchange. The Chairman of the Audit Committee is an Independent Director.

The role of the Audit Committee includes:

• Assisting Board oversight of the preparation, presentation and adequacy of disclosures in the financial statements, in accordance with Sri Lanka Accounting Standards;

• Company’s compliance with financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting related regulations and requirements;

• Processes to ensure that the Company’s internal controls and risk management procedures are adequate to meet the requirements of the Sri Lanka Auditing Standards;

• Assessing the Company’s ability to continue as a going concern in the foreseeable future;

• Independence and performance of the Company’s external Auditors; and

• To make recommendations to the Board pertaining to appointment, re-appointment and removal of external auditors and to approve the remuneration and terms of engagement of the external auditors.

The Managing Director and the Finance Director attend Audit Committee Meetings by invitation. In addition, the Head of Risk and Control of the Company attends Audit Committee Meetings by invitation.

The Audit Committee had five meetings during the year under review.

During the year under review the Audit Committee reviewed and discussed in detail the audit plan, key audit issues and their resolution and management responses. The Audit Committee also discussed the Company’s annual audited financial statements and quarterly financial statements with the management and the Auditors, and the Audit Committee ensured that they have been prepared in accordance with the Sri Lanka Accounting Standards and that the Company has complied with all regulatory compliances.

The Audit Committee also discussed policies and practices with respect to risk assessment and risk management and reviewed the Internal Audit Reports submitted by the Internal Auditor of the Company. The Audit Committee is of the view that adequate internal controls and procedures have been established by the management to ensure the effectiveness of the operations of the Company and to safeguard its assets.

The Audit Committee has recommended to the Board of Directors that Messrs Ernst & Young, Chartered Accountants, be re-appointed as external auditor of the company for the financial year ending 31 March 2015, subject to the approval of the shareholders at the next Annual General Meeting.

Mr. A.S. AbeyewardeneChairman

Colombo19 May 2014

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DIRECtoRS’ INtERESt IN CoNtRACtS wIth thE ComPANY The Directors have made general declarations as provided for in section 192 (2) of the Companies Act No. 7 of 2007.

The remuneration paid to Directors and the share ownership of Directors during the year are as indicated on pages 47, 52 and 53 respectively of this report.

Details of transactions carried out in the ordinary course of business with the Directors and related entities during the year 2013/2014 are set out below.

Name of Related Name of Director Details Balance Party outstanding as at 31.03.2014

M.S.J. Industries (Ceylon) Husein Esufally Rent - Rs. 615,000/- Rs. 26,127,087/-

(Private) Limited Trihan Perera Purchase of goods - Rs. 125,414,864/-

Steven Enderby Administrative staff salary - Rs. 24,921,917/-

M.S.J. Promotional Services Husein Esufally Sale commission - Rs. 2,707,724/- (Rs. 757,462)/-

(Private) Limited Trihan Perera Sale representative remuneration - Rs. 54,154,491/-

Steven Enderby Vehicle hire charges - Rs. Nil

Management fees - Rs. 56,250/-

M.S.J. Cargoes (Ceylon) Husein Esufally Agency commission for goods - Rs. 1,600,266/- Rs. 17,749,915/-

(Private) Limited Trihan Perera Management fee - Rs. 56,250/-

Steven Enderby Transportation costs - Rs. 2,493,690/-

Staff salary - Rs. 2,939,339/-

M.S.J. Foods (Ceylon) Husein Esufally Audit fees and expenses - Rs. 49,311/- Rs. 1,179,860/-

(Private) Limited Trihan Perera

Steven Enderby

M.S.J. Tours (Ceylon) Limited Husein Esufally Audit fees and expenses - Rs. 49,311/- (Rs. 192,804/-)

Trihan Perera

Steven Enderby

M.S.J. Hotels (Ceylon) Limited Husein Esufally Audit fees and expenses - Rs. 203,568/- Rs. 4,457,112/-

Trihan Perera Management fee - Rs. 12,000/-

Steven Enderby

Hemas Holdings PLC Husein Esufally Salaries and other related expenses - Rs. 23,699,889/- (Rs. 6,708,780/-)

Steven Enderby

Hemas Corporate Services Husein Esufally Secretarial services - Rs. 516,433/- (Rs. 304,577/-)

(Pvt) Ltd

Vishwa BPO (Pvt) Ltd Husein Esufally Payment for their expenses - Rs. 500,915/- (Rs. 231,429/-)

REPORT OF THE BOARD OF DIRECTORS

1514

STATEMENT OF DIRECTOR’S RESPONSIBILITIES

In keeping with the provisions of the Companies Act No. 7 of 2007 the Directors of J L Morison Son & Jones (Ceylon) PLC

acknowledge their responsibility to prepare and present the Financial Statements of both the Company and the group, in

accordance with section 152 of the aforesaid Act and the Sri Lanka Accounting Standards (SLFRSs/LKASs).

The Financial Statements for the year ended 31 March 2014, presented in this Report have been prepared in compliance

with the requirements of the Sri Lanka Accounting Standards, the Companies’ Act No. 7 of 2007 and the Listing Rules of the

Colombo Stock Exchange. The Directors consider that appropriate accounting policies and Standards have been applied and

reasonable estimations made when preparing the statements presented in this annual report. A material deviation, if any, from

these Standards has been disclosed where necessary.

The Directors confirm their responsibility for ensuring the maintenance of proper accounting records that disclose with reasonable

accuracy at any time the financial position of the Company and Group and enable them to ensure that it’s Financial Statements

comply with the Companies Act No. 7 of 2007. They have general responsibility for taking such steps as are reasonably open to

them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

In compliance with the Companies’ Act No. 7 of 2007 and the Listing Rules of the Colombo Stock Exchange, the Directors have

caused to issue a copy of the annual report of the Company in a CD ROM, to every shareholder, fifteen working days before

the date of the Annual General Meeting. A copy of the Financial Statements has also been delivered to the Registrar General

of Companies.

Responsibility Statement of the Directors in respect of the Annual Report

We, the Directors of the Company, confirm that to the best of our knowledge the Financial Statements of the Company and

the Group have been prepared in accordance with applicable laws and regulations and give a true and fair view of the assets,

liabilities, financial position and profit or loss of the Group; and the Directors’ Report includes a fair review of the development

and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties

that face the Group.

Anjula Prematilleke Husein Esufally Trihan Perera

Finance Director Chairman MD/CEO

Colombo

19 May 2014

1514

huSEIN ESuFALLY - NoN-ExECutIvE ChAIRmAN

Mr Husein Esufally serves as the Chairman of J L Morison

Son & Jones (Ceylon) PLC. He is also the Chairman of Hemas

Manufacturing (Pvt) Ltd, and Hemas Holdings PLC, the ultimate

Parent company. Mr. Esufally is involved in several industry

associations including the Ceylon Chamber of Commerce

where he serves on the Committee. He is also a Member of

the Board of Management of the Postgraduate Institute of

Management (PIM).

Mr. Esufally is active in several social projects and is the

Founder Director of the Association for Rehabilitation of Spinal

Cord Injuries (ARSCI).

Mr. Esufally holds a Bachelor of Science (Honours) Degree in

Electronics from the university of Sussex, uK; having received

his primary education at St Thomas College, Mt Lavinia.

tRIhAN PERERA - ExECutIvE DIRECtoR

Mr. Trihan Perera functions as the MD/CEO of the Company.

He is an Associate of the Chartered Institute of Management

Accountants, uK and holds an MBA with distinction from Keele

university, uK. Mr. Perera began his career at NDB and moved

to management consulting and academia. He has worked in

a wide range of industries including banking, shipping and

logistics, aviation, plantations, and FMCG in Sri Lanka and

overseas.

ASoKA ABEYEwARDENE - INDEPENDENt DIRECtoR

Mr. Abeyewardene is a Fellow of the Institute of Chartered

Accountants of Sri Lanka, a Fellow of the Society of Certified

Management Accountants of Sri Lanka and a Fellow of the

Institute of Directors uK. He was a former Partner of KPMG

Ford Rhodes Thornton & Co., Chartered Accountants. He is

an Independent Director of Ceylon Hospitals PLC and is the

Chairman of the Audit Committee of this company. He is also

an Independent Director of Durdans Medical and Surgical

Hospitals (Pvt) Ltd.

PRoFESSoR RAvINDRA FERNANDo -

INDEPENDENt DIRECtoR

Professor Ravindra Fernando is the Senior Professor of

Forensic Medicine and Toxicology at the university of Colombo,

Sri Lanka.

He has served as a Senior Lecturer in the Division of Forensic

Medicine of the united Medical and Dental schools of Guy’s

and St. Thomas’s hospital, university of London and the

Department of Forensic Medicine and Science in the university

of Glasgow. He was a Consultant Home Office (England and

Wales) and a Crown Office Pathologist in Scotland.

He was a Founder Secretary General of the Indo-Pacific

Association of Law, Medicine and Science and past President

of the Ceylon College of Physicians, Sri Lanka Medical

Association and the College of Forensic Pathologists of Sri

Lanka Asia- Pacific Association of Medical Toxicology.

He was the Founder Head of the National Poisons Information

Centre, National Hospital of Sri Lanka, Colombo. He has also

served as the Chairman of the Dangerous Drugs Control Board.

StEvEN ENDERBY - NoN-ExECutIvE DIRECtoR

Mr. Enderby has a long and successful track record in the

private equity space with Actis, a leading global emerging

markets fund. During his career, he has worked for Actis in

uK, uganda, Swaziland, Sri Lanka and most recently in India,

finally retiring as an Actis Partner in 2011. He has led multiple

successful private equity transactions in Sri Lanka, including

South Asia Gateway Terminals, Ceylon Oxygen and Millennium

Information Technologies.

Mr. Enderby serves as Executive Director/CEO of Hemas

Holdings PLC and as non-Executive Director of a majority of

its subsidiaries. He has also served on the Boards of many

leading businesses in India and Sri Lanka including John Keells

Holdings, Lion Brewery and Punjab Tractors.

He holds a Masters of Development Studies from the university

of Melbourne, BSc (Econ) Hons, in Economics and Accounting

from Queens university, Belfast and is also a Member of

Chartered Institute of Management Accountants

DIRECTORS’ PROFILE

1716

INDEPENDENt AuDItoRS’ REPoRtto thE ShAREhoLDERS oF J. L. moRISoN SoN & JoNES (CEYLoN) PLC

Report on the Financial StatementsWe have audited the accompanying Financial Statements of J. L. Morison Son & Jones (Ceylon) PLC (“Company”), the Consolidated Financial Statements of the Company and its subsidiaries which Comprise the Statements of Financial Position as at 31 March 2014, and the Income Statements, Statements of Comprehensive Income, Statements of Changes in Equity and Cash Flow Statements for the year then ended, and a summary of significant accounting policies and other explanatory notes.

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

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

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

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

opinionIn our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31 March 2014 and the financial statements give a true and fair view of the financial position of the Company as at 31 March 2014 and its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

In our opinion, the Consolidated Financial Statements give a true and fair view of the financial position as at 31 March 2014 and the financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards, of the Company and its Subsidiaries dealt with thereby, so far as concerns of the shareholders of the Company.

Report on other Legal and Regulatory RequirementsThese financial statements also comply with the requirements of Section 151(2) and 153 (2) to 153 (7) of the Companies Act No.7 of 2007.

19 May 2014Colombo

1716

STATEMENTS OF FINANCIAL POSITION AS AT 31 MARCH 2014

group Company Note 2014 2013 2014 2013 Rs. Rs. Rs. Rs.ASSEtSNon-Current Assets Property, Plant and Equipment 3 1 ,067,220,550 1,020,013,979 212,736,612 207,852,536Intangible Assets 4 – 1,500,000 – 1,500,000Investments in Subsidiaries 5 1 1 65,167,358 66,508,141Investments in Associates 6 1 1 – 243,028Other Financial Assets 7 6,054,677 5,430,885 5,471,377 4,847,585Deferred Tax Assets 21 – 11,044,925 – 11,044,925 1,073,275,229 1,037,989,791 283,375,347 291,996,215 Current AssetsInventories 8 550,933,929 546,829,908 356,032,985 377,830,592Trade and Other Receivables 9 591,683,896 823,248,479 484,493,234 679,396,455Advances and Prepayments 5,118,567 5,128,561 5,118,567 4,218,556Income Tax Recoverable 15,200,574 9,498,736 15,103,478 –Other Financial Assets 7 251,015,972 266,924,385 251,015,972 266,924,385 Cash and Cash Equivalents 16 148,335,114 3,794,968 129,322,810 3,213,827 1,562,288,052 1,655,425,037 1,241,087,046 1,331,583,815 total Assets 2,635,563,281 2,693,414,828 1,524,462,393 1,623,580,030 EQuItY AND LIABILItIES Stated Capital 10 7,924,800 7,924,800 7,924,800 7,924,800 Reserves 11 1,470,073,017 1,445,803,650 848,814,824 863,376,152Retained Earnings 653,053,785 455,742,282 304,729,452 223,329,782 Equity Attributable to Equity Holders of Parent 2,131,051,602 1,909,470,732 1,161,469,076 1,094,630,734Non Controlling Interest 107,967 104,935 – – total Equity 2,131,159,569 1,909,575,667 1,161,469,076 1,094,630,734 Non-Current Liabilities Interest Bearing Loans and Borrowings 12 6,979,705 50,869,580 6,979,705 17,521,776 Deferred Tax Liabilities 21 44,391,410 30,284,567 11,031,405 –Retirement Benefit Liability 13 68,778,913 85,438,161 38,291,104 52,267,010 120,150,028 166,592,308 56,302,214 69,788,786 Current LiabilitiesTrade and Other Payables 14 353,639,768 409,288,451 296,761,148 377,654,378 Income Tax Liabilities 20,683,961 – – 55,332Dividends Payable 15 3,748,966 3,499,943 3,748,966 3,499,943Interest Bearing Loans and Borrowings 12 6,180,989 204,458,459 6,180,989 77,950,857 384,253,684 617,246,853 306,691,103 459,160,510 total Equity and Liabilities 2,635,563,281 2,693,414,828 1,524,462,393 1,623,580,030

These financial statements are in compliance with the requirements of the Companies Act No.07 of 2007.

Anjula Prematilleke Finance Director

The Board of Directors is responsible for the preparation and presentation of these financial statements. Signed for and on behalf of the Board by,

Husein Esufally Trihan Perera Chairman Managing Director

The Accounting Policies and Notes on pages 22 through 49 form an integral part of these financial statements.

19 May 2014Colombo

1918

INCOME STATEMENTS - YEAR ENDED 31 MARCH 2014

group Company 2014 2013 2014 2013 Note Rs. Rs. Rs. Rs.

Revenue 17 2,638,931,384 3,042,252,503 2,068,776,524 2,566,205,744

Cost of Sales (1,762,896,795) (2,241,341,402) (1,429,845,973) (1,910,914,546)

Gross Profit 876,034,589 800,911,101 638,930,551 655,291,198

Other Operating Income and Gains 18 12,100,828 4,539,119 11,222,028 1,815,610

Selling and Distribution Costs (361,576,098) (348,163,614) (352,457,188) (343,307,169)

Administrative Expenses (268,369,853) (264,187,552) (197,943,688) (197,453,730)

Operating Profit 258,189,466 193,099,054 99,751,703 116,345,909

Finance Cost 19.1 (14,665,892) (23,479,327) (6,824,616) (14,124,132)

Finance Income 19.2 36,163,841 32,830,784 36,163,091 32,830,077

Profit Before Tax 20 279,687,415 202,450,511 129,090,178 135,051,854

Income Tax Expense 21 (68,930,170) (62,532,413) (32,323,688) (41,968,693)

Profit for the Year 210,757,245 139,918,098 96,766,490 93,083,161

Attributable to:Equity Holders of the Parent 210,754,213 139,915,624

Non controlling Interest 3,032 2 ,474

210,757,245 139,918,098

Earnings Per Share - Basic 22 27.91 18.53


1918

group Company 2014 2013 2014 2013 Note Rs. Rs. Rs. Rs.

Profit for the year 210,757,245 139,918,098 96,766,490 93,083,161

other comprehensive income

Net gains/(losses) on available - for - sale financial assets 623,792 (580,302) 623,792 (580,302)

Revaluation of land and buildings - Net of Tax effect 11.1 23,645,575 – (15,185,120) –

Actuarial gains/(losses) on defined benefit plans - Net of Tax effect 13 1,658,850 11,150,832 (265,260) 6,622,923

other comprehensive income for the year, net of tax 25,928,217 10,570,530 (14,826,588) 6,042,621

total comprehensive income for the year, net of tax 236,685,462 150,488,627 81,939,902 99,125,782

Attributable to:Equity holders of the Parent 236,682,430 150,486,153

Non-controlling Interest 3,032 2,474

236,685,462 150,488,627


STATEMENTS OF COMPREHENSIVE INCOME - YEAR ENDED 31 MARCH 2014

2120

group Stated Revaluation general Available for Retained total Non-controlling total Capital Reserve Reserve Sale Earnings Interests Equity Reserve Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

As at 1 April 2012 7,924,800 713,174,119 730,800,000 2,409,833 319,777,386 1,774,086,138 102,461 1,774,188,599

Profit for the year – – – – 139,915,624 139,915,624 2,474 139,918,098Other comprehensive income – – – (580,302) 11,150,832 10,570,530 – 10,570,530 Total comprehensive income – – – (580,302) 151,066,456 150,486,154 2,474 150,488,628

Dividends for 2011/2012 – – – – (15,101,560) (15,101,560) – (15,101,560)

As at 31 March 2013 7,924,800 713,174,119 730,800,000 1,829,531 455,742,282 1,909,470,732 104,935 1,909,575,667

Profit for the year – – – – 210,754,213 210,754,213 3,032 210,757,245Other comprehensive income – 23,645,575 – 623,792 1,658,850 25,928,217 – 25,928,217 Total comprehensive income – 23,645,575 – 623,792 212,413,063 236,682,430 3,032 236,685,462

Dividends for 2012/2013 – – – – (15,101,560) (15,101,560) – (15,101,560) As at 31 March 2014 7,924,800 736,819,694 730,800,000 2,453,323 653,053,785 2,131,051,602 107,967 2,131,159,569

Company Stated Revaluation general Available for Retained total Capital Reserve Reserve Sale Earnings Reserve Rs. Rs. Rs. Rs. Rs. Rs.

As at 1 April 2012 7,924,800 132,618,499 728,928,122 2,409,833 138,725,258 1,010,606,512

Profit for the year – – – – 93,083,161 93,083,161Other comprehensive income – – – (580,302) 6,622,923 6,042,621 Total comprehensive income – – – (580,302) 99,706,084 99,125,782

Dividends for 2011/2012 – – – – (15,101,560) (15,101,560)

As at 31 March 2013 7,924,800 132,618,499 728,928,122 1,829,531 223,329,782 1,094,630,734

Profit for the year – – – – 96,766,490 96,766,490Other comprehensive income – (15,185,120) – 623,792 (265,260) (14,826,588) Total comprehensive income – (15,185,120) – 623,792 96,501,230 81,939,902

Dividends for 2012/2013 – – – – (15,101,560) (15,101,560) As at 31 March 2014 7,924,800 117,433,379 728,928,122 2,453,323 304,729,452 1,161,469,076


STATEMENTS OF CHANGES IN EQuITY - YEAR ENDED 31 MARCH 2014

2120

CASH FLOW STATEMENTS - YEAR ENDED 31 MARCH 2014

group Company 2014 2013 2014 2013 Cash Flows from operating Activities Note Rs. Rs. Rs. Rs.Profit before Income Tax Expense 279,687,415 202,450,511 129,090,178 135,051,854 Adjustments for Dividend Income 18 (95,694) (382,775) (95,694) (382,775) Depreciation 3 40,495,150 36,380,299 28,297,501 26,766,606 Profit on Sales of Property, Plant & Equipment 14 (11,443,086) (2,597,302) (10,876,906) (672,302) Interest Income 19.2 (36,163,841) (32,830,784) (36,163,091) (32,830,077) Finance Costs 19.1 14,665,892 23,479,327 6,824,616 14,124,132 Provision for Impairment of Investment – – 1,583,811 – Provision for Impairment of Intangible Assets 1,500,000 – 1,500,000 – Provision for Defined Benefit Plans - Gratuity 13 16,996,129 15,429,716 10,703,824 9,246,163 Operating Profit before Working Capital Changes 305,641,966 241,928,992 130,864,240 151,303,601

(Increase)/ Decrease in Inventories (4,104,021) 108,176,353 21,797,607 109,048,478 (Increase)/ Decrease in Trade and Other Receivables 231,564,583 (97,580,363) 194,903,221 (35,875,846) (Increase)/ Decrease in Advances and Prepayments 9,994 554,428 (900,011) 480,504 Increase/(Decrease) in Trade and Other Payables (55,648,683) (42,207,140) (80,893,230) (54,103,475) Cash Generated from Operations 477,463,839 210,872,270 265,771,827 170,853,262

Finance Costs Paid (14,665,892) (23,479,327) (6,824,616) (14,124,132) Defined Benefit Plan Costs Paid 13 (31,351,418) (6,467,764) (25,048,147) (1,758,670) Income Tax Paid (44,546,722) (72,055,783) (37,965,840) (57,687,224) Net Cash Flows from Operating Activities 386,899,806 108,869,396 195,933,224 97,283,236

Cash Flows From / (used in) Investing Activities Acquisition of Property, Plant & Equipment 3 (56,367,655) (94,155,365) (42,305,368) (33,792,635) Proceeds from Sale of Property, Plant & Equipment 18,859,929 3,397,789 17,478,405 1,472,790 Dividends Received 95,694 382,775 95,694 382,775 Net Cash Flows used in Investing Activities (37,412,032) (90,374,801) (24,731,269) (31,937,070)

Cash Flows From/(used in) Financing Activities Proceeds From Interest Bearing Loans and Borrowings – 35,000,000 – – Repayment of Interest Bearing Loans and Borrowings (187,518,675) (55,142,594) (34,617,786) (69,701,736) Principal Payments under Finance Lease Liabilities (9,713,427) (6,257,776) (8,065,405) (3,659,318) Dividends Paid (14,852,537) (16,577,670) (14,852,537) (16,577,670) Interest Received 52,072,254 24,765,565 52,071,504 25,098,158 Net Cash flows Used in Financing Activities (160,012,385) (18,212,475) (5,464,224) (64,840,566)

Net Increase in Cash and Cash Equivalents 189,475,390 282,120 165,737,731 505,600

Cash & Cash Equivalents at the beginning of the year 16 (41,140,276) (41,422,396) (36,414,921) (36,920,521) Cash and Cash Equivalents at the end of the year 16 148,335,114 (41,140,276) 129,322,810 (36,414,921)


2322

1. CoRPoRAtE INFoRmAtIoN1.1 general J. L. Morison Son & Jones (Ceylon) PLC (“Company”) is a Public Limited Liability Company, incorporated and domiciled in

Sri Lanka. The registered office is located at “Hemas House”, No. 75, Braybrooke Place, Colombo 2 and the principal place of business of the Company is situated at No. 620, Biyagama Road, Pethiyagoda, Kelaniya.

Ordinary shares of the company are listed on the Colombo Stock Exchange.

The financial statements for the year ended 31 March 2014, comprises “the Company” referring to J. L. Morison Son & Jones (Ceylon) PLC as the holding company and “the Group” referring to the companies whose accounts have been consolidated therein.

1.2 Principal Activities and Nature of operations During the year, the principal activities of the Group were as follows; J. L. Morison Son and Jones (Ceylon) PLC - Importing and distribution of pharmaceuticals, agro chemicals, medical aid,

household insecticides, shoe care, hair care products, diagnostics reagent and equipments, and other consumer products.

M.S.J. Industries (Ceylon) (Private) Limited - Manufacturing and Trading in Pharmaceuticals and Cosmetics.

M.S.J. Promotional Services (Private) Limited - Promotional Activities.

M.S.J. Cargoes (Ceylon) (Private) Limited - Wharf Clearing Activities.

M.S.J. Hotels (Ceylon) Limited - Hotel Industry (Dormant Company)

M.S.J. Foods (Ceylon) (Private) Limited - Food and Beverage (Dormant Company)

M.S.J. Tours (Ceylon) Limited - Transport service (Dormant Company)

1.3 Parent and ultimate Parent Entity The Company’s parent undertaking is Hemas Manufacturing (Pvt) Ltd with the Company’s ultimate parent undertaking and

controlling party being Hemas Holdings PLC, incorporated in Sri Lanka.

1.4 Date of Authorisation for Issue The financial statements of J. L. Morison Son & Jones (Ceylon) PLC and its Subsidiaries for the year ended 31 March 2014

were authorised for issue in accordance with a resolution of the Board of Directors on 19 May 2014.

2.1 StAtEmENt oF ComPLIANCE The Financial Statements which comprises the Statements of Financial Position, Income statements, Statements of

Comprehensive Income, Statements of Changes in Equity, Cash Flow statements together with accounting policies and notes have been prepared in accordance with the Sri Lanka Accounting Standards laid down by the Institute of Chartered Accountants of Sri Lanka and the requirements of the Companies Act No. 7 of 2007.

2.2. BASIS oF PREPARAtIoN These financial statements have been prepared on a historical cost basis except land and buildings and available-for-sale

financial assets that have been measured at fair value. The financial statements are presented in Sri Lankan Rupees.

2.3. ChANgES IN ACCouNtINg PoLICIES The accounting policies adopted by the Group are consistent with those used in the previous financial year except for the

policy on retirement benefits obligations – gratuity.

The Group applied revised Sri Lanka Accounting Standards (LKAS - 19) on Employee Benefits retrospectively in accordance with the transitional provisions set out in the said standard.

As per previous policy actuarial gain/loss was recognized in full in the Income Statement. As per revised LKAS 19, actuarial gain/loss is recognized in full in Other Comprehensive Income (OCI).

Accordingly, the Group changed its policy for recognizing actuarial gain/ loss in OCI.

This resulted in reclassifying actuarial gain/loss previously recognized in the Income Statement to the OCI. Since there were no significant impact on retirement benefit liability, the opening Statement of Financial Position of the earliest comparative period has not been presented. The transition did not have impact on the Statement of Cash Flows.

NOTES TO THE FINANCIAL STATEMENTS – YEAR ENDED 31 MARCH 2014

2322

NOTES TO THE FINANCIAL STATEMENTS – YEAR ENDED 31 MARCH 2014 (Contd.)

2.4 SummARY oF SIgNIFICANt ACCouNtINg PoLICIES2.4.1 Basis of Consolidation The consolidated financial statements comprise the financial statements of J. L. Morison Son & Jones (Ceylon) PLC and

its Subsidiaries, M.S.J. Industries (Ceylon) (Private) Limited, M.S.J. Cargoes (Ceylon) (Private) Limited, M.S.J. Foods (Ceylon) (Private) Limited, M.S.J. Tours (Ceylon) Limited, M.S.J. Promotional Services (Ceylon) (Private) Limited and M.S.J. Hotels (Ceylon) Limited, for the year ended 31 March 2014, which are incorporated in Sri Lanka.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

The financial statements of Compak Morison (Lanka) Limited, have been excluded from consolidation from the year 1998 under Section 146 (2) B (ii) of the Companies Act. No 17 of 1982 and under the Section 153 (6) (B) of the Companies Act No.7 of 2007.

As per the letter given by Messrs. Julius & Creasy, on February 11, 1998, the movable and immovable properties of Compak Morison (Lanka) Limited, which were under mortgage to the National Development Bank (NDB) were handed over to the NDB in exercise of the rights of parate execution, NDB having advertised the property for sale in the public auction brought it in, at the auction towards the claim of NDB.

Subsidiaries Subsidiaries are those enterprises controlled by the parent. Control exists when the parent holds more than 50% of the

voting rights or otherwise has a controlling interest.

Subsidiaries are fully consolidated from the date of acquisition or incorporation, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, which is 12 months ending 31 March, using consistent accounting policies.

Accounting for Investments in Associate Company In the consolidated financial statements, Investments in Associate Companies are accounted for on the equity basis of

accounting where the value of the investment is increased or decreased to recognise the group’s share of profit or loss of such Company after the date of acquisition of the investment.

In the consolidated financial statements, Investments in Associate Company are carried forward at the value adjusted to reflect the group’s share of the fair value of net assets of the associate, net of any dividends declared by such Associate.

2.4.2 Foreign Currency translation The Financial Statements are presented in Sri Lankan Rupees, which is the Company’s functional and presentation

currency. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are taken to the income statement. Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

2.4.3 taxation a) Current Income tax Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered

from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income.

Current income tax relating to items recognized directly in Other Comprehensive Income are also recognized in Other Comprehensive Income and not in the Income Statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

2524


b) Deferred tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax

bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except:

• Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:

• Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

• In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

c) Sales tax Revenues, expenses and assets are recognised net of the amount of sales tax, except:

• Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable

• Receivables and payables are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

2.4.4. Property, Plant and Equipment

Basis of measurement Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if

any. Such cost includes the cost of replacing parts of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the profit or loss as incurred. (if applicable) The present value of the expected cost for the decommissioning of the asset after its use, is included in the cost of the respective asset if the recognition criteria for a provision are met.

Land and buildings are subsequently measured at fair value, less accumulated depreciation on buildings, and impairment losses recognised at the date of revaluation. Valuations are performed with sufficient frequency to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.

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Depreciation is calculated on a straight-line basis over the useful life of assets or components. The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

A revaluation surplus is recognised in other comprehensive income and credited to the revaluation surplus in equity. However, to the extent that it reverses a revaluation deficit of the same asset previously recognised in the income statement, in which case the increase is recognised in the income statement. A revaluation deficit is recognised in the income statement, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve. upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.

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

Depreciation Depreciation is calculated by using a straight-line method on the cost of all property, plant and equipment, other than

freehold land, in order to write off such amounts over the estimated useful economic life of such assets. The estimated useful life of assets; Freehold Buildings 40 Years

Plant and Machinery 13.33 Years

Furniture and Fittings 10 Years

Motor Vehicles 5 Years

Office Equipment 5 Years

2.4.5 Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at

the inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

Group as a lessee Finance leases which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item,

are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the income statement.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognised as an operating expense in the income statement on a straight-line basis over the lease term.

2.4.6 Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a

substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

2.4.7 Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible

assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the income statement in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed to be either finite or indefinite.

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 is reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible asset.


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Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

2.4.8 Financial Instruments – Initial Recognition and Subsequent measurement i) Financial Assets Initial recognition and measurement Financial assets within the scope of LKAS 39 are classified as financial assets at fair value through profit or loss, loans

and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition.

All financial assets are recognised initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

The Group’s financial assets include cash and short-term deposits, loans and receivables and available for sale financial instruments.

Subsequent measurement The subsequent measurement of financial assets depends on their classification as described below:

a) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an

active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the income statement. The losses arising from impairment are recognised in the income statement.

b) Available-for-sale financial instruments Available-for-sale financial instruments include equity investments. Equity investments classified as available-for-sale

are those that are neither classified as held for trading nor designated at fair value through profit or loss.

Quoted available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the available-for sale reserve to the income statement in finance costs.

The Group evaluates whether the ability and intention to sell its available-for-sale financial assets in the near term is still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the Group may elect to reclassify these financial assets. Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Group has the intent and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held-to-maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly.

Derecognition A financial asset or a part of a financial asset or part of a group of similar financial assets is derecognised 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, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither


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transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. 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.

ii) Impairment of Financial assets The Group assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group of

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

Financial assets carried at amortised cost For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists

individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred).

Available-for-sale financial investments For available-for-sale financial investments, the Group assesses at each reporting date whether there is objective

evidence that an investment or a group of investments is impaired. In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. When there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement – is removed from other comprehensive income and recognised in the income statement. Impairment losses on equity investments are not reversed through the income statement;

Increases in their fair value after impairment are recognised directly in other comprehensive income.

iii) Financial Liabilities Initial recognition and measurement Financial liabilities within the scope of LKAS 39 are classified as financial liabilities at fair value through profit or loss,

loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value plus, in the case of loans and borrowings, directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, bank overdrafts and loans and borrowings.

Subsequent measurement The measurement of financial liabilities depends on their classification as described below:

Loans and borrowings After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the

EIR method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income statement.

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Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When

an existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the income statement.

iv) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial

position if, and only if:

• There is a currently enforceable legal right to offset the recognised amounts and

• There is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously

v) Fair value of financial instruments The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference

to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

For financial instruments that do not have a quoted market price in an active market and whose fair value cannot be reliability measured are carried at cost.

2.4.9 Inventories Inventories are valued at the lower of cost and net realisable value except commodity broker – traders. Costs incurred in

bringing each product to its present location and conditions are accounted for as follows:

Raw materials - Purchase cost on a first in, first out basis

Finished goods and work in progress- Cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

2.4.10 Cash and Cash Equivalents Cash and cash equivalents are defined as cash in hand, demand deposits and short term highly liquid investments, readily

convertible to known amounts of cash and subject to insignificant risk of changes in value.

For the purpose of the statement cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.

2.4.11 Provisions Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event,

where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate assets but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance expense.

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2.4.12 Retirement Benefit Obligations a) Defined Contribution Plans – Employees’ Provident Fund & Employees’ Trust Fund Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions in line

with the respective statutes and regulations in Sri Lanka. The Company contributes 12 % and 3% of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively.

b) Defined Benefit Plan – Gratuity A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The defined benefit is

calculated by independent actuaries. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related liability.

The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Key assumptions used in determining the defined retirement benefit obligations are given in Note 13. Any changes in these assumptions will impact the carrying amount of defined benefit obligations.

The gratuity liability is not funded.

2.4.13 Impairment of Non- Financial Assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such

indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset or cash-generating unit, unless the asset or cash-generating unit does not generate cash inflows that are largely independent of those from other assets or cash-generating units. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used.

Impairment losses of continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset, except for property previously revalued where the revaluation was taken to equity. In this case the impairment is also recognised in equity up to the amount of any previous revaluation.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot ‘’exceed’’ the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.

The following criteria are also applied in assessing impairment of specific assets:

Intangible Assets Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating

unit level, as appropriate.

2.4.14 Income Statement Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue

can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The following specific recognition criteria must also be met before revenue is recognised:

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 buyer with the Company retaining neither continuing managerial involvement to the degree usually associated with ownership, nor an effective control over the goods sold.


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b) Rendering of Services Revenue from rendering of services is recognised in the accounting period in which the services are rendered or

performed.

c) Interest Income For all financial instruments measured at amortised cost and interest bearing financial assets classified as available

for sale, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the income statement.

d) Dividends Dividend income is recognized when the shareholder’s right to receive payment is established’.

e) Rental Income Rental income is recognized on an accrual basis.

f) gains and Losses Net gains and losses of a revenue nature on the disposal of Property, Plant & Equipment and other non current assets

including investments are accounted for in the income statement, after deducting from proceeds on disposal, the carrying amount of the assets and related selling expenses. On the disposal of revalued Property, Plant and Equipment, the amount remaining in the Revaluation Reserve, relating to that particular asset is transferred directly to Retained Earnings.

Gains and losses arising from activities incidental to the main revenue generating activities and those arising from a group of similar transactions which are not material, are aggregated, reported and presented on a net basis.

g) other Income Other income is recognized on an accrual basis.

2.4.15 Segment Reporting 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. All operating segments’ operating results are reviewed regularly by the senior management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to the senior management and Board of Directors include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during the period to acquire Property, Plant and Equipment.

2.5 SIgNIFICANt ACCouNtINg JuDgmENtS, EStImAtES & ASSumPtIoNS The preparation of the financial statements of the group require the management to make judgments, estimates and

assumptions, which may affect the amounts of income, expenditure, assets, liabilities and the disclosure of contingent liabilities, at the end of the reporting period. In the process of applying the group’s accounting policies, the key assumptions made relating to the future and the sources of estimation at the reporting date together with the related judgments that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

a) Defined Benefit Plans The cost of the retirement benefit plan of employees is determined using an actuarial valuation. The actuarial valuation is

based on assumptions concerning the rate of interest, rate of salary increase, special premium, retirement age and going concern of the Company. Due to the long term nature of the plan, such estimates are subject to significant uncertainty. Details of the key assumptions used in the estimates are contained in Note 13.


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b) Impairment of non-financial assets An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which

is the higher of its fair value less costs to sell and its value in use (VIu). The fair value less costs to sell calculation is based on available data from an active market, in an arm’s length transaction, of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model.

c) taxes The Group is subject to income tax and other taxes including VAT. Significant judgment was required to determine the

total provision for current, deferred and other taxes pending the issue of tax guidelines on the treatment of the adoption of SLFRS/LKAS in the Financial Statements and the taxable profit for the purpose of imposition of taxes. Uncertainties exist, with respect to the interpretation of the applicability of tax laws, at the time of the preparation of these financial statements.

uncertainties also exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. Where the final tax outcome of such matters is different from the amounts that were initially recorded, such differences will impact the income and deferred tax amounts in the period in which the determination is made.

2.6 StANDARDS ISSuED But Not YEt EFFECtIvE The following SLFRS have been issued by the Institute of Chartered Accountants of Sri Lanka that have an effective date

in the future and have not been applied in preparing these financial statements. Those SLFRS will have an effect on the accounting policies currently adopted by the Group and may have an impact on the future financial statements.

(i) SLFRS 9-Financial Instruments: Classification and Measurement SLFRS 9, as issued reflects the first phase of work on replacement of LKAS 39 and applies to classification and

measurement of financial assets and liabilities. This standard was originally effective for annual periods commencing on or after 01 January 2015. However, the original effective date has been deferred and revised effective date is yet to be announced.

(ii) SLFRS 13-Fair value measurement SLFRS 13 establishes a single source of guidance under SLFRS for all fair value measurements. This standard will be

effective for annual periods beginning on or after 01 January 2014. However use of fair value measurement principles contained in this standard are currently recommended.

In addition to the above, following standards will also be effective for annual periods commencing on or after 01 January 2014.

SLFRS 10 – Consolidated Financial Statements

SLFRS 11 – Joint Arrangements

SLFRS 12 – Disclosure of Interests in Other Entities

The above package of three standards will impact the recognition, measurement and disclosures aspects currently contained in LKAS 27-Consolidated and separate financial statements, LKAS 28- Investments in associates ,LKAS 31-Interest in joint ventures and SIC-12 and SIC 13 which are on consolidation of special purpose entities(SPEs) and jointly controlled entities respectively.

Establishing a single control model that applies to all entities including SPEs and removal of the option to proportionate consolidate Jointly controlled entities are the significant changes introduced under SLFRS 10 and SLFRS 11 respectively.

SLFRS 12 establishes a single standard on disclosures related to interests in other entities. This incorporates new disclosures as well as disclosures currently required under (as per ones previously captured in earlier versions of) LKAS 27, LKAS 28 and LKAS 31.

The Group will adopt these standards when they become effective. Pending the completion of detailed review, the financial impact is not reasonably estimable as at the date of publication of these financial statements.


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3. PRoPERtY, PLANt AND EQuIPmENt3.1 gRouP Freehold Freehold Plant Motor Vehicle Office Furniture Capital Total Land Buildings and Freehold Leasehold Equipments and work machinery Fittings in progress 3.1.1 Cost or valuation Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

01 April 2013 605,526,436 312,617,388 159,154,290 56,401,371 21,978,890 53,329,483 8,435,227 – 1,217,443,085

Additions – 1,570,198 31,815,479 11,112,000 – 7,917,479 562,227 3,390,271 56,367,655

Increase/(Decrease) due to Revaluation 30,224,464 (20,207,386) – – – – – – 10,017,078

Disposals – – – (14,597,419) (11,429,285) – – – (26,026,704)

Transfers from / to others – – – 2,455,357 (2,455,357) – – – –

As at 31 march 2014 635,750,900 293,980,200 190,969,769 55,371,309 8,094,248 61,246,962 8,997,454 3,390,271 1,257,801,114

3.1.2 Accumulated Depreciation

01 April 2013 – 20,911,564 81,513,258 35,307,135 10,608,506 41,201,296 7,887,348 – 197,429,106

Charge for the year – 7,822,269 17,606,095 6,154,715 2,460,814 5,961,550 489,708 – 40,495,150

Transfer to Revaluation Reserve – (28,733,833) – – – – – – (28,733,833)

Disposal – – – (12,509,789) (6,100,071) – – – (18,609,860)

Transfers from/ to others – – – 1,595,981 (1,595,981) – – – –

As at 31 march 2014 – – 99,119,353 30,548,041 5,373,268 47,162,845 8,377,056 – 190,580,563

3.1.3 Carrying value

As at 31 March 2014 635,750,900 293,980,200 91,850,416 24,823,268 2,720,980 14,084,117 620,398 3,390,271 1,067,220,550

As at 01 April 2013 605,526,436 291,705,824 77,641,032 21,094,236 11,370,384 12,128,187 547,879 – 1,020,013,979

3.1.4 During the financial year, the Group acquired Property, Plant and Equipment to an aggregate value of Rs. 56,367,655/- (2013 - Rs. 97,865,845/-). Cash Payments amounting to Rs. 56,367,655/- (2013 - Rs. 94,155,365/-) were made during the year for the purchase of Property, Plant and Equipment.

3.1.5 Information on the Freehold Land, Freehold Buildings of the group.

Company Address ownership Extent No. of Included In Buildings

J. L. Morison Son & Jones No.126, Aluthmawatha Road, Freehold 30.43 Perches 1 Property, Plant

(Ceylon) PLC Colombo 15 and Equipment

M.S.J. Industries (Ceylon) No.126/2, Aluthmawatha Road, Freehold 59.15 Perches 2 Property, Plant

(Private) Limited Colombo 15 and Equipment

Nos. 618 and 620, Biyagama Road, Freehold 925 Perches 11 Property, Plant

Pethiyagoda, Kelaniya. and Equipment

No. 57/2, Suraweera Mawatha, Freehold 200 Perches – Property, Plant

Pethiyagoda, Kelaniya. and Equipment

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3. PRoPERtY, PLANt AND EQuIPmENt (Contd…)3.1.6 The land and buildings belonging to J. L. Morison Son & Jones (Ceylon) PLC, situated at No. 126, Aluthmawatha Road,

Colombo 15 and the land and buildings of its fully owned Subsidiary M.S.J.Industries (Ceylon) (Private) Limited, situated at No.126 and 126/2 Aluthmawatha Road, Colombo 15 and No.618, Biyagama Road, Kelaniya were revalued during the financial year 2014 by M/S Sunil Fernando & Associate (Private) Limited, an independent valuer. The results of such revaluation were incorporated in these financial statements from its effective date . Such assets were valued based on depreciated replacement cost basis and investment method of valuation basis. The surplus arising from the revaluation was transferred to the revaluation reserve.

The carrying amount of revalued assets that would have been included in the financial statements had the assets been carried at cost less depreciation is as follows,

Cumulative Depreciation Net Carrying Net Carrying if assets were Amount Amount Cost carried at cost 2014 2013 Class of Asset Rs. Rs. Rs. Rs.

Freehold Land 30,294,710 – 30,294,710 30,294,710

Freehold Buildings 118,179,108 43,199,885 74,979,223 77,933,701

3.2 Company Freehold Freehold Plant Motor Vehicle Office Furniture Total Land Buildings and Freehold Leasehold Equipments and machinery Freehold Fittings 3.2.1 Cost or valuation Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

01 April 2013 74,553,500 53,446,500 72,644,171 78,984,732 17,184,248 50,083,292 7,397,193 354,293,636

Additions – – 24,008,646 11,112,000 – 6,904,142 280,579 42,305,368

Increase/(Decrease) due to Revaluation (2,325,500) (5,207,400) – – – – – (7,532,900)

Disposals – – – (15,785,789) (9,090,000) – – (24,875,789)

As at 31 march 2014 72,228,000 48,239,100 96,652,817 74,310,943 8,094,248 56,987,434 7,677,772 364,190,314

3.2.2 Accumulated Depreciation

01 April 2013 – 3,674,448 32,236,752 58,132,807 8,450,918 38,020,459 5,925,716 146,441,100

Charge for the year – 1,336,162 12,121,092 7,205,715 1,618,850 5,738,839 276,844 28,297,501

Transfer to Revaluation Reserve – (5,010,610) – – – – – (5,010,610)

Disposal – – – (13,577,789) (4,696,500) – – (18,274,289)

As at 31 march 2014 – – 44,357,844 51,760,732 5,373,268 43,759,298 6,202,560 151,453,702

3.2.3 Carrying value

As at 31 March 2014 72,228,000 48,239,100 52,294,973 22,550,211 2,720,980 13,228,136 1,475,213 212,736,612

As at 01 April 2013 74,553,500 49,772,052 40,407,419 20,851,925 8,733,330 12,062,833 1,471,477 207,852,536

3.2.4 During the financial year, the Company acquired Property, Plant and Equipment to the aggregate value of Rs. 42,305,368/- (2013 - Rs. 36,456,740/-). Cash payments amounting to Rs. 42,305,368/- (2013 - Rs. 33,792,635/-) were made during the year for purchase of Property, Plant and Equipment.

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3. PRoPERtY, PLANt AND EQuIPmENt (Contd…)3.2.5 The land and buildings were revalued during the financial year 2014 by M/S Sunil Fernando & Associate (Private) Limited,

an independent valuer. The results of such revaluations were incorporated in these financial statements from its effective date which is 31 March 2014. Such assets were valued based on depreciated replacement cost basis and investment method of valuation basis The surplus arising from the revaluation was transferred to the revaluation reserve.

The carrying amount of the revalued assets that would have been included in the financial statements had the assets been carried at cost less depreciation is as follows:

Depreciation Net Carrying Net Carrying if assets were Amount Amount Cost carried at cost 2014 2013 Class of Asset Rs. Rs. Rs. Rs.

Freehold Land 912,900 – 912,900 912,900

Freehold Buildings 4,128,177 2,318,368 1,809,809 1,913,013

4. INtANgIBLE ASSEtS group Company 2014 2013 2014 2013 tRADE mARK Rs. Rs. Rs. Rs.

As at 1 April 1,500,000 1,500,000 1,500,000 1,500,000 Less - Provision for impairment (1,500,000) – (1,500,000) – As at 31 March – 1,500,000 – 1,500,000

The Company acquired the Trademark “Sagara” to import & distribute Sagara Jack Mackerel on 16 November 2006.

5. INvEStmENtS IN SuBSIDIARIES5.1 group 2014 2013 holding holding Non-Quoted % Rs. % Rs.

Compak Morison (Lanka) Limited 54 1 54 1

This Company has been excluded from consolidation due to the reasons described in Note 2.4.1 under Accounting Policies.

5.2 Company 2014 2013 holding holding Non-Quoted % Rs. % Rs.

M.S.J. Industries (Ceylon) (Private) Limited 100 57,700,000 100 57,700,000 M.S.J. Cargoes (Ceylon) (Private) Limited 100 1,550,000 100 1,550,000 M.S.J. Foods (Ceylon) (Private) Limited 100 370,000 100 370,000 M.S.J. Tours (Ceylon) Limited 100 1,200,000 100 1,200,000 M.S.J. Promotional Services (Private) Limited 100 5,200,000 100 5,200,000 M.S.J. Hotels (Ceylon) Limited* 35 488,140 35 488,140 Compak Morison (Lanka) Limited 54 1 54 1 total Carrying value of Investments in Subsidiaries 66,508,141 66,508,141 Less - Provision for impairment (1,340,783) – 65,167,358 66,508,141

* M.S.J. Industries (Ceylon) (Private) Limited, a fully owned subsidiary of J. L. Morison Son & Jones (Ceylon) PLC is holding 64% of the Company.

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6. INvEStmENtS IN ASSoCIAtES6.1 group 2014 2013 holding holding Non-Quoted % Rs. % Rs.

Canned & Health Food Ltd. (6.1.1) 47 1 47 1 total Carrying value of Investments in Associates 1 1

Investments in Associate Canned & health Food Ltd 2014 2013 Rs. Rs.

Carrying Value as at 1 April 1 1 Carrying Value as at 31 March 1 1

6.1.1The investment cost in Canned and Health Food Ltd., was written off against the post acquisition losses in the consolidated financial statements.

6.2 Company 2014 2013 holding holding Non-Quoted % Rs. % Rs.

Canned & Health Food Limited 47 243,028 47 243,028 Less - Provision for impairment (243,028) – total Carrying value of Investments in Associate – 243,028

7. othER FINANCIAL ASSEtS group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

Loans and receivables Investments in Fixed Deposits 251,015,972 266,924,385 251,015,972 266,924,385 251,015,972 266,924,385 251,015,972 266,924,385 Available-for-sale investments Investments in Equity Securities (7.1) 6,054,677 5,430,885 5,471,377 4,847,585 6,054,677 5,430,885 5,471,377 4,847,585

total Current 251,015,972 266,924,385 251,015,972 266,924,385 total Non-current 6,054,677 5,430,885 5,471,377 4,847,585


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7. othER FINANCIAL ASSEtS (Contd…)7.1 Investments in Equity Securities group 2014 2013 No. of Shares Rs. No. of Shares Rs.

Quoted Sierra Cables PLC 9,900 16,830 9,900 20,790

Non-Quoted Ceybank unit Trust 191,388 5,454,547 191,388 4,826,795 Eastern Hotels Limited * 5,833 583,300 5,833 583,300 6,054,677 5,430,885

* Eastern Hotels Limited has not started its commercial operation and the fair value cannot be reliably measured.

Company 2014 2013 No. of Shares Rs. No. of Shares Rs.

Quoted Sierra Cables PLC 9,900 16,830 9,900 20,790

Non-Quoted Ceybank unit Trust 191,388 5,454,547 191,388 4,826,795 5,471,377 4,847,585

7.2 Fair values Set out below is a comparison by class of the carrying amounts and fair values of the Group that are carried in the financial

statements.

Carrying amount Fair value 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

Financial assets Trade and other receivables 591,683,896 823,248,479 591,683,896 823,248,479 Other financial assets – – – – Loans and other receivables 251,015,972 266,924,385 251,015,972 266,924,385 Available-for-sale investments 6,054,677 5,430,885 6,054,677 5,430,885 Cash and Cash Equivalents 148,335,114 3,794,968 148,335,114 3,794,968 total 997,089,659 1,099,398,717 997,089,659 1,099,398,717

Both carrying amount and the fair value of the above are equal.

Fair value hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation

technique:

Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities

Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly

Level 3: Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data


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7. othER FINANCIAL ASSEtS (Contd…)

As at 31 March 2014, the Group held the following financial instruments carried at fair value on the statement of financial position:

Assets measured at fair value As at 31 march 2014 Level 1 Level 2 Level 3 Rs. Rs. Rs. Rs.

Available-for-sale financial assets 6,054,677 5,471,377 – 583,300

During the reporting period ending 31 March 2014, there were no transfers between Level 1 and Level 2 fair value measurements.

As at 31 March 2013, the Group held the following financial instruments measured at fair value:

Assets measured at fair value As at 31 march 2013 Level 1 Level 2 Level 3 Rs. Rs. Rs. Rs.

Available-for-sale financial assets 5,430,885 4,847,585 – 583,300

During the reporting period ending 31 March 2013, there were no transfers between Level 1 and Level 2 fair value measurements.

8. INvENtoRIES group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

Raw Materials 136,821,539 105,921,958 – – Work in Progress 29,520,290 26,214,028 – – Finished Goods 368,771,262 380,918,908 349,035,260 372,266,329 Goods in Transit 15,820,838 33,775,014 6,997,725 5,564,262 550,933,929 546,829,908 356,032,985 377,830,592

9. tRADE AND othER RECEIvABLES group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

Trade Debtors 518,362,754 713,631,886 372,324,028 551,255,710 Less: Provision for bad debts (16,284,863) (9,684,862) (16,284,863) (9,684,862) 502,077,890 703,947,024 356,039,165 541,570,848 Other Debtors 89,606,006 119,301,455 78,940,092 115,413,423 Other Debtors - Related Parties (9.1) – – 49,513,977 22,412,184 591,683,896 823,248,479 484,493,234 679,396,455

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9. tRADE AND othER RECEIvABLES (Contd…)9.1 other Debtors - Related Parties Company 2014 2013 Relationship Rs. Rs.

M.S.J. Cargoes (Ceylon) (Private) Limited Subsidiary 17,749,916 15,538,516 M.S.J. Foods (Ceylon) (Private) Limited Subsidiary 1,179,861 1,130,549 M.S.J. Promotional Services (Private) Limited Subsidiary – 1,501,576 M.S.J. Hotels (Ceylon) Limited Subsidiary 4,457,113 4,241,544 M.S.J. Industries (Ceylon) (Private) Limited Subsidiary 26,127,087 – 49,513,977 22,412,184

Trade receivables are non-interest bearing and are generally on terms of 30-90 days.

As at 31 March 2014, trade receivables of an initial value of Rs. 16,284,863/- (2013: Rs.9,684,863/-) were impaired and fully provided for. See below for the movements in the provision for impairment of receivables.

group/Company Rs.

At 1 April 2013 9,684,863 Charge for the year 6,600,000 At 31 march 2014 16,284,863

As at 31 March, the ageing analysis of trade receivables, is as follows:

group Past due but not impaired Neither past total due nor < 30 30-60 61-90 91-120 >120 impaired days days days days days Rs. Rs. Rs. Rs. Rs. Rs. Rs.

2014 502,077,891 350,078,364 86,466,058 26,122,213 7,565,504 11,121,049 20,724,702 2013 703,947,024 562,184,529 81,820,662 24,051,055 13,858,254 384,296 21,648,227

Company Past due but not impaired Neither past total due nor < 30 30-60 61-90 91-120 >120 impaired days days days days days Rs. Rs. Rs. Rs. Rs. Rs. Rs.

2014 356,039,165 213,624,754 79,975,220 25,555,956 5,037,484 11,121,049 20,724,702 2013 541,570,848 458,388,725 32,548,173 15,093,209 13,508,217 384,296 21,648,227

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10. StAtED CAPItAL 2014 2013 Number Rs. Number Rs.

Fully Paid Ordinary Shares 5,808,290 6,182,310 5,808,290 6,182,310 Fully Paid Non Voting Ordinary Shares 1,742,490 1,742,490 1,742,490 1,742,490 7,550,780 7,924,800 7,550,780 7,924,800

10.1 Fully Paid ordinary Shares Balance at beginning of the year 7,550,780 7,924,800 7,550,780 7,924,800 Balance at end of the year 7,550,780 7,924,800 7,550,780 7,924,800

10.2 Rights, Preference and Restrictions of Classes of Capital The Non-Voting shares are ranked pari passu with the existing Ordinary Shares of the Company including the right to

participate in any dividend declared after the date of the issue, but excluding the right to vote.

11. RESERvES group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

Summary (a) Capital Reserves Revaluation Reserve (11.1) 736,819,694 713,174,119 117,433,379 132,618,499 General Reserve (11.2) 730,800,000 730,800,000 728,928,122 728,928,122 Available for Sale Reserve (11.3) 2,453,323 1,829,531 2,453,323 1,829,531 1,470,073,017 1,445,803,650 848,814,824 863,376,152

11.1 Revaluation Reserve on: Property, Plant and Equipment group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

As at 1 April 713,174,119 713,174,119 132,618,499 132,618,499 Revaluation surplus/(deficit) during the year 38,750,911 – (2,522,290) – Tax effects on revaluation during the year (2,387,405) – 55,101 – Tax effects on revaluation prior periods (12,717,931) – (12,717,931) – As at 31 March 736,819,694 713,174,119 117,433,379 132,618,499

11.2 general Reserve General Reserve which is a revenue reserve represents the amounts set aside by the Directors for general application. The movement of the general reserve is as follows;

group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

As at 1 April 730,800,000 730,800,000 728,928,122 728,928,122 As at 31 March 730,800,000 730,800,000 728,928,122 728,928,122

11.3 Available for Sale Reserve group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

As at 1 April 1,829,531 2,409,833 1,829,531 2,409,833 Transferred during the year 623,792 (580,302) 623,792 (580,302) As at 31 March 2,453,323 1,829,531 2,453,323 1,829,531


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12. INtERESt BEARINg LoANS AND BoRRowINgS12.1 gRouP 2014 2013 Rs. Rs.

Current interest bearing loans and borrowings Finance Leases (12.1.1) 968,263 4,736,376 Bank Loans (12.1.2) 5,212,726 19,711,242 Trust Receipt Loans – 135,075,597 Bank Overdrafts (16) – 44,935,244 6,180,989 204,458,459 Non-current interest-bearing loans and borrowings Finance Leases (12.1.1) 452,569 6,397,883 Bank Loans (12.1.2) 6,527,136 43,146,697 Other Loans – 1,325,000 6 ,979,705 50,869,580

12.1.1 Finance Leases As at New Leases As at 01.04.2013 obtained Repayment 31.03.2014 Current Non-current Rs. Rs. Rs. Rs. Rs. Rs.

hatton National Bank PLC Gross Liability 14,449,206 – (12,735,520) 1,713,686 Finance Charges Allocated to Future Periods (3,314,947) – 3,022,093 (292,854) Net Liability 11,134,259 – (9,713,427) 1,420,832 968,263 452,569

12.1.2 Bank Loans As at Loans As at 01.04.2013 obtained Repayment 31.03.2014 Current Non-current Rs. Rs. Rs. Rs. Rs. Rs.

DFCC Bank PLC 45,780,948 – (45,780,948) – People’s Bank 366,900 – (366,900) – Bank of Ceylon 9,219,495 – (3,000,000) 6,219,495 Hatton National Bank 7,490,597 – (1,970,230) 5,520,367 62,857,940 – (51,118,078) 11,739,862 5,212,726 6,527,136

12.2 Company 2014 2013 Rs. Rs.

Current interest bearing loans and borrowings Finance Leases (12.2.1) 968,263 3,762,406 Bank Loans (12.2.2) 5,212,726 4,912,147 Trust Receipt Loans – 29,647,556 Bank Overdrafts (16) – 39,628,748 6,180,989 77,950,857 Non-current interest-bearing loans and borrowings Finance Leases (12.2.1) 452,569 4,398,831 Bank Loans (12.2.2) 6,527,136 11,797,945 Loans from Related Parties – 1,325,000 6,979,705 17,521,776


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12. INtERESt BEARINg LoANS AND BoRRowINgS (Contd…)12.2.1 Finance Leases As at New Leases As at 01.04.2013 obtained Repayment 31.03.2014 Current Non-current Rs. Rs. Rs. Rs. Rs. Rs.

hatton National Bank PLC Gross Liability 10,567,254 – (8,832,422) 1,734,832 Finance Charges Allocated to Future Periods (2,406,017) – 2,092,017 (314,000) Net Liability 8,161,237 – (6,740,405) 1,420,832 968,263 452,569

12.2.2 Bank Loans As at Loans As at 01.04.2013 obtained Repayment 31.03.2014 Current Non-current Rs. Rs. Rs. Rs. Rs. Rs.

Bank of Ceylon 9,219,495 – (3,000,000) 6,219,495 3,000,000 3,219,495 Hatton National Bank 7,490,597 – (1,970,230) 5,520,367 2,212,726 3,307,641 16,710,092 – (4,970,230) 11,739,862 5,212,726 6,527,136

13. REtIREmENt BENEFIt oBLIgAtIoN gratuity group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

As at 01 April 85,438,161 91,963,475 52,267,010 53,978,021 Current Service Cost 5,889,169 5,233,909 3,909,113 3,349,594 Interest Cost on Benefit Obligation 11,106,960 10,195,807 6,794,711 5,896,569 Actuarial Loss/(Gain) for the year (2,303,959) (15,487,266) 368,417 (9,198,504) Payments During the Year (31,351,418) (6,467,764) (25,048,147) (1,758,670) As at 31 March 68,778,913 85,438,161 38,291,104 52,267,010

Remeasurement gains/(losses) in other Amounts charged to profit or loss comprehensive income Group As at 01 Service Net interest Sub-total Benefits Actuarial Experience sub total As at 31

April cost included in paid changes adjustments included march profit or loss arising from oCI changes in assumptions

2013 91,963,475 5,233,909 10,195,807 15,429,716 (6,467,764) – (15,487,266) (15,487,266) 85,438,161

2014 85,438,161 5,889,169 11,106,960 16,996,129 (31,351,418) 7,311,567 (9,615,526) (2,303,959) 68,778,913

Company

2013 53,978,021 3,349,594 5,896,569 9,246,163 (1,758,670) – (9,198,504) (9,198,504) 52,267,010

2014 52,267,010 3,909,113 6,794,711 10,703,824 (25,048,147) 3,306,475 (2,938,058) 368,417 38,291,104

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13. REtIREmENt BENEFIt oBLIgAtIoN (Contd…) The principal assumptions used in determining defined benefit obligation are shown below:

group Company Discount rate 11% 13% 11% 13% Salary Increment 9% 10% 9% 10% Retirement Age 60 years 60 years 60 years 60 years

Sensitivity of assumptions used Discount Rate Salary Increment group Company group Company

Effect on the defined benefit obligation liability Increase by one percentage point (5,444,696) (3,312,722) 6,156,976 3,811,560 Decrease by one percentage point 6,314,895 3,873,589 (5,406,567) (3,319,237)

14. tRADE AND othER PAYABLES group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

Trade Payables 58,549,799 126,579,599 34,691,337 110,810,295 Other Payables - Related Parties (14.1) 7,273,074 – 8,223,341 13,249,481 Bills Payable 220,393,036 220,031,295 206,475,967 207,336,234 Sundry Creditors Including Accrued Expenses 67,423,859 62,677,557 47,370,503 46,258,367 353,639,768 409,288,451 296,761,148 377,654,378

14.1 other Payables - Related Parties 2014 2013 2014 2013 Relationship Rs. Rs. Rs. Rs.

M.S.J. Industries (Ceylon) (Private) Limited Subsidiary – – – 13,007,365 M.S.J. Tours (Ceylon) Private Limited Subsidiary – – 192,804 242,116 M.S.J. Promotional Services (Private) Limited Subsidiary – – 757,463 – Hemas Holdings PLC ultimate Parent 6,708,780 – 6,708,780 – Hemas Corporate Services (Private) Limited Affiliate 304,577 – 304,577 – Vishwa BPO (Private) Limited Affiliate 231,429 – 231,429 – Diethem Travels (Private) Limited Affiliate 28,288 – 28,288 – 7,273,074 – 8,223,341 13,249,481

15. DIvIDENDS PAYABLE group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

unclaimed Dividends 3,748,966 3,499,943 3,748,966 3,499,943 3,748,966 3,499,943 3,748,966 3,499,943

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16. CASh AND CASh EQuIvALENtS group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

Cash at banks and on hand 148,335,114 3,794,968 129,322,810 3,213,827 148,335,114 3,794,968 129,322,810 3,213,827 Cash at banks and on hand 148,335,114 3,794,968 129,322,810 3,213,827 Bank overdrafts – (44,935,244) – (39,628,748) Cash and cash equivalents 148,335,114 (41,140,276) 129,322,810 (36,414,921)

17. REvENuE group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

Sale of goods 2,638,931,384 3,042,252,503 2,068,776,524 2,566,205,744 2,638,931,384 3,042,252,503 2,068,776,524 2,566,205,744

18. othER oPERAtINg INComE AND gAINS group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

Management Fee Income - Related Parties – – 111,161 111,161 Commission Income 138,268 649,372 138,268 649,372 Profit on Disposal of Property, Plant and Equipment 11,443,086 2,597,302 10,876,906 672,302 Sundry Income 423,781 909,670 – – Dividend from Equity Securities 95,694 382,775 95,694 382,775 12,100,828 4,539,119 11,222,028 1,815,610

19. FINANCE CoSt AND INComE19.1 Finance Cost group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

Interest Expense on Overdrafts 2,564,264 18,403,658 2,157,437 8,725,963 Interest Expenses on Interest Bearing Loans and Borrowings - Related Parties 646,936 633,950 646,936 956,450 - Others 8,429,621 2,744,119 1,925,247 2,744,119 11,640,821 21,781,727 4,729,620 12,426,532 Finance Charges on Lease Liabilities 3,025,071 1,697,600 2,094,996 1,697,600 14,665,892 23,479,327 6,824,616 14,124,132

19.2 Finance Income Income from Investments - Interest on Fixed Deposits 36,163,841 32,830,784 36,163,091 32,830,077 36,163,841 32,830,784 36,163,091 32,830,077


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20. PRoFIt BEFoRE tAx group Company Stated after Charging /Crediting 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

Included in Cost of Sales Employees Benefits including the following - Defined Contribution Plan Costs - EPF and ETF 7,461,734 7,552,605 – – - Salaries 74,257,173 66,604,920 – – - Bonus 7,823,390 5,840,276 – – Depreciation 11,971,110 11,506,688 – – Trust Receipt Loan Interest 10,400,683 28,903,770 1,921,475 12,936,530

Included in Administrative Expenses Employees Benefits including the following - Defined Benefit Plan Costs - Gratuity 16,996,129 15,429,716 10,703,824 9,246,163 - Defined Contribution Plan Costs - EPF and ETF 6,800,118 7,093,599 5,181,332 5,461,274 - Salaries 99,937,950 100,077,914 55,876,801 55,248,994 - Bonus 6,911,958 7,477,033 3,920,686 4,485,761 Depreciation 21,651,737 20,614,128 20,374,198 19,271,956 Audit Fees 2,100,000 1,930,000 1,300,000 966,000

Included in Selling and Distribution Costs Depreciation 7,923,299 7,494,650 7,923,299 7,494,650 Transport Costs 98,827,583 106,011,093 90,828,101 98,700,320 Advertising and Sales of Promotion 57,982,709 52,994,956 57,300,687 52,973,956

21. INComE tAx ExPENSE The major components of income tax expense for the years ended 31 March are as follows : group Company Income Statement 2014 2013 2014 2013 Current Income tax Rs. Rs. Rs. Rs.

Current Income Tax charge (21.1) 70,467,455 59,062,002 32,771,537 43,221,242 under/(Over) Provision of current taxes in respect of prior years (10,938,609) – (9,964,508) – 59,528,846 59,062,002 22,807,030 43,221,242 Deferred Income tax Deferred Taxation Charge/(Reversal) (21.2) 9,401,324 3,470,411 9,516,658 (1,252,549) 68,930,170 62,532,413 32,323,688 41,968,693

21.1 A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows:

group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

Accounting Profit Before Tax 279,687,415 202,450,511 129,090,178 135,051,854 Non deductible Expenses 87,365,831 49,317,273 72,464,449 44,096,298 Deductible Expenses (150,664,496) (86,260,446) (120,676,513) (57,616,652) Brought Forward Tax losses utilised (882,358) (1,118,538) – – Interest Income 36,163,091 32,830,077 36,163,091 32,830,077 Taxable Profit 251,669,482 197,218,878 117,041,205 154,361,577

Statutory Tax Rate 28% 28% 28% 28%

Current Income Tax Expense 70,467,455 59,062,002 32,771,537 43,221,242 70,467,455 59,062,002 32,771,537 43,221,242


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21. INComE tAx ExPENSE (Contd…)21.2 DEFERRED INComE tAx 21.2.1 group Statement of Income Financial Position Statement 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

Deferred tax Liability Capital Allowances for Tax Purposes 36,784,431 31,396,874 (5,387,557) (5,974,045) Revaluation of Buildings 26,865,075 11,759,739 – – 63,649,506 43,156,613 Deferred tax Assets Defined Benefit Plans 19,258,096 23,916,972 (4,013,768) 2,503,633 19,258,096 23,916,972 Deferred Income Tax Income/(Expense) (9,401,324) (3,470,411)

other Comprehensive Income 2014 2013 Rs. Rs.

Revaluation of Buildings 15,105,336 – Defined Benefit Plans 645,109 (4,336,434) 15,750,444 (4,336,434) Net Deferred Tax Liability 44,391,410 19,239,642

Deferred Tax Assets – (11,044,925) Deferred Tax Liabilities 44,391,410 30,284,567 Net Deferred Tax Liability 44,391,410 19,239,642

21.2.2 Company Statement of Income Financial Position Statement 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

Deferred tax Liability Capital Allowances for Tax Purposes 9,090,085 3,584,124 (5,505,961) (838,236) Revaluation of Buildings 12,662,829 – 21,752,915 3,584,124 Deferred tax Assets Defined Benefit Plans 10,721,509 14,629,049 (4,010,697) 2,090,785 10,721,509 14,629,049 Deferred Income Tax Income/(Expense) (9,516,658) 1,252,549

other Comprehensive Income 2014 2013 Rs. Rs.

Defined Benefit Plans 103,157 (2,575,581) Revaluation of Buildings (12,662,829) – (12,559,673) (2,575,581) Deferred Tax Liability/(Asset) 11,031,405 (11,044,925)


4746

22. EARNINgS PER ShARE 22.1 Basic Earnings Per Share is calculated by dividing the profit for the year attributable to ordinary shareholders of the

Company by the weighted average number of ordinary shares outstanding during the year.

22.2 The following reflects the income and share data used in the basic Earnings Per Share computation.

group Company 2014 2013 2014 2013 Amount used as the Numerator: Rs. Rs. Rs. Rs.

Profit attributable to equity holders of the parent 210,754,213 139,915,624 96,766,490 93,083,161

2014 2013 2014 2013 Number of ordinary Shares used as Denominator: Number Number Number Number

Weighted Average number of Ordinary Shares in issue applicable to basic Earnings Per Share 7,550,780 7,550,780 7,550,780 7,550,780

23. DIvIDENDS group Company 2014 2013 2014 2013 Rs. Rs. Rs. Rs.

23.1 Declared and paid during the year Equity dividends on ordinary shares: Final dividend for 2011/12 – 15,105,560 – 15,101,560 Final dividend for 2012/13 15,101,560 – 15,101,560 – 15,101,560 15,101,560 15,101,560 15,101,560

24. CommItmENtS AND CoNtINgENCIES a) Capital Expenditure Commitments There are no significant commitments as at the reporting date.

b) Contingencies There are no significant contingencies as at the reporting date.

25. ASSEtS PLEDgED As at the reporting date the following assets have been pledged, as securities for liabilities.

Carrying Amount Pledged Carrying Amount Pledged group Company 2014 2013 2014 2013 Nature of Assets Nature of Liability Rs. Rs. Rs. Rs.

Immovable Properties Primary mortgage over immovable property – 758.1 Mn – –

Leased Assets Charged over leased assets on finance lease liabilities 1.4 Mn 11.1 Mn 1.4 Mn 8.1 Mn

Inventory a) Documents of title to goods shipped 550.9 Mn 546.8 Mn 356.0 Mn 377.8 Mn b) Indemnity of the Company c) Agreement to mortgage the machinery imported d) Mortgage over machinery imported

Trade Debtors Charged over trade finance 518.4 Mn 713.6 Mn 372.3 Mn 551.3 Mn facilities (import credit)

26. EvENtS oCCuRRINg AFtER thE REPoRtINg DAtE There were no other circumstances which require adjustments to or disclosures in the financial statements.


4746

27. RELAtED PARtY DISCLoSuRES Details of significant related party disclosures are as follows: 27.1 transactions with the related entities m.S.J. Industries (Ceylon) ultimate Parent other Companies total (Private) Limited 2014 2013 2014 2014 2013 2014 2013 Nature of transaction Rs. Rs. Rs. Rs. Rs. Rs. Rs.

As at 1 April (13,007,365) (6,287,274) – 28,878,848 21,690,279 15,871,483 15,403,005

Purchase of Goods (127,445,965) (100,884,074) – – – (127,445,965) (100,884,074)

Transfer/Purchase of Property and Other Assets – (925,000) – – – – (925,000)

Receipt of Services – (615,000) – – (3,772,725) – (4,387,725)

Dividend Income – – – – – – –

Management Fees Paid – – – 111,161 124,500 111,161 124,500

Settlement of Liabilities on behalf of the Company – – (26,673,844) (88,603,461) (49,507,649) (88,603,461) (49,507,649)

Settlement of Liabilities by the Company on behalf of others 183,323,855 188,385,134 19,965,064 81,485,782 60,344,443 264,809,637 248,729,577

Fund Transfer (16,743,438) (92,681,152) – – – (16,743,438) (92,681,152) As at 31 march 26,127,087 (13,007,365) (6,708,780) 21,872,329 28,878,848 47,999,416 15,871,483

27.2 transactions with Key management Personnel of the Company The key management personnel of the Company are the members of its Board of Directors. 2014 2013 Key management Personnel Compensation Rs. Rs.

Short-term employee benefits 8,138,745 19,911,108

27.3 other related parties A Key Management Personnel has control over a sole proprietorship from which the Company obtained services relating

to the hire of vehicles amounting to Nil (2013 - Rs.768,000/-) during the year, based on cash terms.

28. SEgmENtAL INFoRmAtIoN Consumer Agro Chemicals Pharmaceuticals group total 2014 2013 2014 2013 2014 2013 2014 2013REvENuE Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Total Gross Income 860,050,404 1,524,614,503 322,110,824 300,680,000 1,579,105,049 1,313,866,121 2,761,266,277 3 ,139,160,624

Less: Inter Segment Income – – – – (122,334,893) (96,908,121) (122,334,893) (96,908,121) Segment Revenue 860,050,404 1,524,614,503 322,110,824 300,680,000 1,456,770,156 1,216,958,000 2,638,931,384 3 ,042,252,503

RESuLtGross Profit 311,034,489 368,125,961 90,962,364 87,197,200 474,037,735 345,587,940 876,034,589 800,911,101

Administrative and Selling and Distribution Cost (196,208,991) (297,404,173) (73,485,274) (58,653,179) (360,251,686) (256,293,815) (629,945,951) (612,351,166)

Other Operating income 3,769,040 2,204,541 1,411,602 434,773 6,920,187 1,899,806 12,100,828 4,539,119 Operating Profit/(Loss) 118,594,538 72,926,329 18,888,691 28,978,794 120,706,236 91,193,931 258,189,466 193,099,054

Finance Expense (14,665,892) (23,479,327)

Finance Income 36,163,841 32,830,784

Income Tax Expense (68,930,170) (62,532,413) Profit for the Year 210,757,245 139,918,098

othER INFoRmAtIoNSegment Assets 2,635,563,280 2,693,414,827

Investment in Equity method Associate 1 1 Consolidated Total Assets 2,635,563,281 2,693,414,828

Segment Liabilities 504,403,712 783,839,161

othERSPurchase of Property Plant and Equipment 56,367,655 94,155,365Depreciation 40,495,150 36,380,299


4948


29. FINANCIAL RISK mANAgEmENt oBJECtIvES AND PoLICIES The Group’s principal financial liabilities, comprise loans and borrowings and trade and other payables. 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 loans and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. The Company also holds available-for-sale investments.

The Group is exposed to market risk, credit risk and liquidity risk.

“The Group’s senior management oversees the management of these risks. The senior management is supported by the Board of Directors (BOD) that advises on financial risks and the appropriate financial risk governance framework for the Group. BOD 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. It is the Group’s policy that all activities for risk management purposes are required to be approved by Board of Directors of J. L. Morison Son & Jones (Ceylon) PLC.”

The Board of Directors reviews and agrees policies for managing each of these risks which are summarized below.

market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in

market prices. Market prices comprise four types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits and available-for-sale investments.

The overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the entity’s financial performance.

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 Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates.

The Group manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. The Group’s policy is to maintain an appropriate balance between fixed and variable rate borrowings.

Foreign 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’s exposure to the risk of changes in foreign exchange rates relates primarily to the import of raw materials, finished goods and packing materials.

The major part of the foreign transactions is dealt with uS Dollars and Euros.

Equity price risk The Group’s quoted and unquoted equity securities are susceptible to market price risk arising from uncertainties about

future values of the investment securities. The Group’s Board of Directors reviews and approves all equity investment decisions.

At the reporting date, the exposure to listed and unlisted equity securities at fair value was Rs. 6,054,677/-.

Credit risk Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading

to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

trade receivables Customer credit risk is managed by each company subject to the Group’s established policy, procedures and control

relating to customer credit risk management. Credit quality of the customer is assessed based on the established credit risk evaluation policy and individual credit limits are defined in accordance with this assessment.

Outstanding customer receivables are regularly monitored.

Minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actual incurred historical data.

4948

29. FINANCIAL RISK mANAgEmENt oBJECtIvES AND PoLICIES (Contd…) Cash deposits Credit risk from balances with banks is managed in accordance with the Group treasury policy. Investments of surplus

funds are made only with approved counterparties as per this policy.

Liquidity risk The Group monitors its risk to a shortage of funds by setting up a minimum liquidity level. The Group’s objective is to

maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, and finance leases. The Group assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Access to sources of funding is sufficiently available and debt maturing within 12 months can be rolled over with existing lenders.

The table below summarises the maturity profile of groups financial liabilities based on contractual undiscounted payments.

Year ended 31 march 2014 Less than 1 year Above 1 year total Bank Financing 5,212,726 6,527,136 11,739,862 Finance Lease 968,263 452,569 1,420,832 Trade and Other Payables 353,639,768 – 353,639,768 359,820,757 6,979,705 366,800,462

Capital management Capital includes ordinary shares. The primary objective of the Group’s capital management is to ensure that it maintains a

strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value.

The company manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes managing capital during the years ended 31 March 2014 and 31 March 2013.


5150

ANALYSIS OF SHAREHOLDERS ACCORDING TO THE NuMBER OF SHARES AS AT 31-MARCH-2014

voting Shareholders

RESIDENt Shareholdings Number of No of Shares Percentage Shareholders %

1 – 1,000 shares 458 55,479 0.96 1,001 – 10,000 shares 56 188,359 3.24 10,001 – 100,000 shares 10 209,410 3.61 100,001 – 1,000,000 shares 1 100,560 1.73 > 1,000,000 shares 1 5,229,639 90.04 526 5,783,447 99.57

NoN RESIDENt Shareholdings Number of No of Shares Percentage Shareholders %

1 – 1,000 shares 3 1,063 0.02 1,001 – 10,000 shares 4 8,710 0.15 10,001 – 100,000 shares 1 15,070 0.26 100,001 – 1,000,000 shares – – – > 1,000,000 shares – – – 8 24,843 0.43

totAL Shareholdings Number of No of Shares Percentage Shareholders %

1 – 1,000 shares 461 56,542 0.98 1,001 – 10,000 shares 60 197,069 3.39 10,001 – 100,000 shares 11 224,480 3.87 100,001 – 1,000,000 shares 1 100,560 1.73 > 1,000,000 shares 1 5,229,639 90.04 534 5,808,290 100.00

Categories of Shareholders No of Shares No of Shares Individual 514 551,142 Institutional 20 5,257,148 534 5,808,290

5150

ANALYSIS OF SHAREHOLDERS ACCORDING TO THE NuMBER OF SHARES AS AT 31-MARCH-2014

Non-voting Shareholders

RESIDENt Shareholdings Number of No of Shares Percentage Shareholders %

1 – 1,000 shares 407 63,703 3.66 1,001 – 10,000 shares 37 99,544 5.71 10,001 – 100,000 shares 2 98,974 5.68 100,001 – 1,000,000 shares – – – > 1,000,000 shares 1 1,478,349 84.84 444 1,740,570 99.89

NoN RESIDENt Shareholdings Number of No of Shares Percentage Shareholders %

1 – 1,000 shares 3 1,920 0.11 1,001 – 10,000 shares – – – 10,001 – 100,000 shares – – – 100,001 – 1,000,000 shares – – – > 1,000,000 shares – – – 3 1,920 0.11

totAL Shareholdings Number of No of Shares Percentage Shareholders %

1 – 1,000 shares 410 65,623 3.77 1,001 – 10,000 shares 34 99,544 5.71 10,001 – 100,000 shares 2 98,974 5.68 100,001 – 1,000,000 shares – – – > 1,000,000 shares 1 1,478,349 84.84 447 1,742,490 100.00

Categories of Shareholders No of Shares No of Shares Individual 433 260,220 Institutional 14 1,482,270 447 1,742,490

5352

COMPUTATION OF % OF PUBLIC SHAREHOLDING - 31 MARCH 2014 - VOTING

No of SharesParent CompanyHemas Manufacturing (Pvt) Ltd 1,478,349 1,478,349 Subsidiaries CompaniesMSJ Foods (Ceylon) (Private) Limited –MSJ Hotels (Ceylon) Limited – MSJ Tours (Ceylon) Limited – MSJ Industries (Ceylon) (Private) Limited – MSJ Cargoes (Ceylon) (Private) Limited – MSJ Promotional Services (Private) Limited – – Subsidiaries or Associate Companies

– Directors shareholdingMr. H.N.Esufally (Chairman) – Mr. S.M.Enderby – Mr. R.A.J.T.Perera (CEO/ MD) – Mr. P.R.Fernando – Mr. A.S.Abeyewardene – – CEo, Spouse & ChildrenR.A.J.T.Perera – N. Perera – – over 10% holdingHemas Manufacturing (Private) Limited (Refer above) – – Issued Share Capital as at 31 March 2014 5,808,290 Less Parent Company 5,229,639 Subsidiaries Companies – Subsidiaries or Associate Companies – Directors shareholding – CEO, Spouse & Children – Over 10% holding – – 578,651 Public Holding 9.96% Public Holding as a % of Issued Share Capital

Directors shareholdingMr. H.N.Esufally (Chairman) – Mr. S.M.Enderby – Mr. R.A.J.T.Perera (CEO/ MD) – Mr. P.R.Fernando – Mr. A.S.Abeyewardene – –

5352

COMPUTATION OF % OF PUBLIC SHAREHOLDING - 31 MARCH 2014 - NON VOTING

No of SharesParent CompanyHemas Manufacturing (Pvt) Ltd 1,478,349 1,478,349 Subsidiaries CompaniesMSJ Promotional Services (Ceylon) (Private) Limited –MSJ Foods (Ceylon) (Private) Limited – MSJ Industries (Ceylon) (Private) Limited – MSJ Tours (Ceylon) Limited – MSJ Cargoes (Ceylon) (Private) Limited – MSJ Hotels (Ceylon) Limited – – Subsidiaries or Associate Companies

– Directors shareholdingMr. H.N.Esufally (Chairman) 600 Mr. S.M.Enderby – Mr. R.A.J.T.Perera (CEO/ MD) – Mr. P.R.Fernando – Mr. A.S.Abeyewardene – 600 CEo, Spouse & ChildrenR.A.J.T.Perera – N. Perera – – over 10% holdingHemas Manufacturing (Private) Limited (Refer above) – – Issued Share Capital as at 31 March 2014 1,742,490 Less Parent Company 1,478,349 Subsidiaries Companies – Subsidiaries Companies or Associate Companies – Directors shareholding 600 CEO, Spouse & Children – Over 10% holding – – 263,541 Public Holding 15.12% Public Holding as a % of Issued Share Capital

Directors shareholdingMr. H.N.Esufally (Chairman) 600 Mr. S.M.Enderby – Mr. R.A.J.T.Perera (CEO/ MD) – Mr. P.R.Fernando – Mr. A.S.Abeyewardene – 600

5554

20 major voting Shareholders as at 31 march, 2014 2014 2013 No. of Shares % No. of Shares

01. Hemas Manufacturing (Private) Limited 5,229,639 90.04 –

02. Mr. Abeyawira Reginald 100,560 1.73 188,230

03. Est. of Lat Sri Mahadeva Mylvaganam 65,000 1.12 65,000

04. Est. of Lat Radhakrishnan Mariapillai 27,140 0.47 27,140

05. Mr. Perera Cyril Francis Gregory 20,160 0.35 –

06. Gunali Enterprises Limited 18,000 0.31 –

07. Mr. De Mel Ronald Joseph Godfrey 16,200 0.28 –

08. Mr. Jafferjee Yusuf Ibrahim 15,120 0.26 –

09. Mr. Woodward Hamish Winston Mcdonald 15,070 0.26 –

10. Ms. Peiris Daisy 13,820 0.24 –

11. Mr. Goonetilleke Gajath Chrysantha 12,400 0.21 –

12. Mr. Mylventhen Srimahadeva 11,000 0.19 65,000

13. Mrs. Mathew Clarice 10,570 – –

14. Mrs. Kumaranayagam Dharini 10,000 0.17 –

15. Mrs. Wijesundera Helena Anoja Devi 10,000 0.17 –

16. Mr. Kathirgamatamby Natarajan 10,000 0.17 –

17. Mrs. Gunatilake Swarnapali 8,700 0.15 –

18. Mr. Sanoon Mohamed Hussain Mohammed 8,600 0.15 –

19. Dr. Weerasuriya Tilak Ananda 8,100 0.14 –

20. Mrs. Tudugalle Lalitha Shirani 7,860 0.14 – 5,617,939 96.73 345,370

OTHER INFORMATION TO SHAREHOLDERS & INVESTORS (Contd.)

5554

OTHER INFORMATION TO SHAREHOLDERS & INVESTORS (Contd.)

20 major Non-voting Shareholders as at 31 march, 2014 2014 2013 No. of Shares % No. of Shares

01. Hemas Manufacturing (Private) Limited 1,478,349 84.84 –

02. Est. of Late Sri Mahadeva Mylvaganam 84,000 4.82 84,000

03. Mr. Goonetilleke Gajath Chrysantha 14,974 0.86 10,900

04. Est. of Lat Radhakrishnan Mariapillai 8,140 0.47 –

05. Mr. Mylventhen Srimahadeva 17,400 0.42 17,400

06. Mrs. Mcdonald Woodward 6,620 0.38 –

07. Mr. Perera (Deceased) Cyril Francis Gregory 6,040 0.35 –

08. Mr. De Mel Ronald Joseph Godfrey 4,860 0.28 –

09. Mr. Jafferjee Yusuf Ibrahim 4,530 0.26 –

10. Ms. Peiris Daisy 4,140 0.24 –

11. Mrs. Abdulhussein Ratten Gulamhussein 4,000 0.23 –

12. Dr. Tissera Hettiarachchige Walter Elliot 3,980 0.23 –

13. Mr. Sanoon Mohamed Hussain Mohammed 3,420 0.20 –

14. Mrs. Wijesundera Helena Anoja Devi 3,000 0.17 –

15. Mr. Kathirgamatamby (Deceased) Natarajan 3,000 0.17 –

16. Mrs. Kumaranayagam Dharini 3,000 0.17 –

17. Mr. Karunaratne Sisira Sooriya Brahmana 2,900 0.17 –

18. Mrs. Mathew Clarice 2,700 0.15 –

19. Mrs. Gunatilake (Deceased) Swarnapali 2,610 0.15 –

20. Mrs. Kelaart Jennifer Ruth 2,490 0.14 – 1,660,153 94.70 112,300

5756

GROuP FINANCIAL HIGHLIGHTS – 5 YEAR SuMMARY

tRADINg RESuLtS: 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014

Profit Before Tax 160,422,868 310,729,160 304,092,926 202,450,511 279,687,415Taxation (60,886,880) (124,827,279) (93,550,846) (62,532,415) (68,930,170) 99,535,988 185,901,881 210,542,080 139,918,098 210,757,245Minority Interest (3,287) (1,659) (2,716) (2,474) (3,032) Group Profit After Tax 99,532,701 185,900,222 210,539,364 139,915,624 210,754,213

FuNDS EMPLOYED:Stated Capital 7,924,800 7,924,800 7,924,800 7,924,800 7,924,800Revaluation Reserve 261,375,330 713,174,119 713,174,119 713,174,119 736,819,694General Reserve 480,800,000 630,800,000 730,800,000 730,800,000 730,800,000Investment Function Reserve 13,215,826 – – – –Available for Sale Reserve – 4,979,905 2,409,833 1,829,531 2,453,333Retained Earnings 282,951,699 235,665,752 319,777,386 455,742,282 653,053,785 Shareholders’ Funds 1,046,267,655 1,592,544,576 1,774,086,138 1,909,470,732 2,131,051,602Minority Interest 98,086 99,745 102,461 104,935 107,967 Total Equity 1,046,365,741 1,592,644,321 1,774,188,599 1,909,575,667 2,131,159,569Long Term Liabilities 48,915,034 43,109,435 42,253,371 50,869,580 6,979,705Deferred Liabilities 87,984,617 107,028,469 115,764,228 115,722,728 113,170,323 1,183,265,392 1,742,782,225 1,932,206,198 2,076,167,975 2,251,201,597

ASSETS EMPLOYED:Current Assets 1,233,996,546 1,489,506,929 1,665,243,975 1,655,425,037 1,562,288,052Current Liabilities 755,001,383 727,787,667 712,958,919 617,246,853 384,253,684 Net Current Assets 478,995,163 761,719,262 952,285,056 1,038,178,184 1,178,034,368Investment in Associate/Subsidiary Companies 185,932,160 2 2 2 2Long Term Investments 250,001 8,247,959 5,677,887 5,430,885 6,054,677Property, Plant & Equipment 516,588,068 959,081,518 960,375,295 1,020,013,979 1,067,220,550Intangible Assets 1,500,000 1,500,000 1,500,000 1,500,000 –Deferred Tax Assets – 12,233,484 12,367,958 11,044,925 – 1,183,265,392 1,742,782,225 1,932,206,198 2,076,167,975 2,251,309,597

Return on Equity 9.51% 10.98% 11.87% 7.33% 9.89%Current Ratio 1.63 2.05 2.34 2.68 4.07%Gearing Ratio 10.78% 6.05% 6.62% 5.92% 0.62%Earnings Per Share (Rs.) 13.18 24.62 27.88 18.53 27.91Net Assets Per Share (Rs.) 138.58 224.17 234,97 252.90 282.24Dividend Per Share (Rs.) - Declared & Paid 1.10 3.45 1.50 – – - Proposed (Tax Free) 1.65 2.00 2.00 2.00 3.00

Dividend Cover 7.99 12.31 7.97 9.26 9.30Price/Earning Ratio 5.31 6.90 7.61 7.65 11.03Market Value Per Share (Voting) – Rs. 700.00 2,160.00 212.10 175.00 253.10Market Value Per Share (Non-voting) – Rs. 612.00 1,810.00 126.70 101.00 210.00Dividend Payout Ratio 0.125 0.08 0.12 0.11 0.11

The following stable market prices were recorded for the year. voting Non-voting Highest - Rs. 320.00 194.90 Lowest - Rs. 230.00 154.00

5756

FORM OF PROxY - VOTING

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

of ............................................................................................................................................... being a member/members of the

above named company hereby appoint:

Mr. Husein Esufally of Colombo or failing him

Mr. Trihan Perera of Colombo or failing him

Mr. Asoka Abeyewardene of Colombo or failing him

Professor Ravindra Fernando of Colombo or failing him

Mr. Steven Enderby of Colombo or failing him

…………………………………………………………………………………………………………. of ...................................................

……………………………………………………………………......................……………… as my/our* Proxy to represent me/us* and vote for me/us* on my/our* behalf at the Annual General Meeting of the Company to be held on Monday, the 18th day of August, 2014 at 3.00 pm at the Auditorium of the Ceylon Chamber of Commerce, No. 50 Navam Mawatha, Colombo-02 and at any adjournment thereof. For Against1. To receive and consider the Statements of Accounts of the Company

and of the Group for the year ended 31.03.2014 together with the Reports of the Directors and Auditors thereon.

2. To re-elect as director, Professor Ravindra Fernando retiring by rotation in terms of the Articles of Association of the Company

3. To re-appoint as Director, Mr. Asoka Abeyewardene retiring in terms of Section 210 of the Companies Act No. 7 of 2007

4. To declare a first and final dividend of Rs 3.00 per ordinary voting share as recommended by the Board.

5. To re-appoint M/s Ernst & Young, Chartered Accountants, as auditors of the Company and Authorize the Directors to determine their remuneration.

6. To authorize the Directors to determine and make donations to Charity.

*The Proxy may vote as he/she thinks fit on any other resolution brought before this meeting

…………………… Date:Signature/s

Note:* Please delete the inappropriate words.

The Proxy holder is kindly requested to bring a valid document of identity.

Instructions as to completion are noted on the reverse hereof.

5958

INSTRuCTIONS AS TO COMPLETION OF FORM OF PROxY

1. Kindly perfect the Form of Proxy after filling in legibly your full name and address and by signing in the space provided. Please fill in the date of signature.

2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of him/her.

3. In the case of Corporate Members, the Form of Proxy must be completed under the Common Seal, which should be affixed and attested in the manner prescribed by the Articles of Association /Statutes.

4. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy.

5. The completed Form of Proxy, addressed to the Secretaries should be deposited at Hemas House, No. 75, Braybrooke Place. Colombo 2 not less than Forty Eight (48) hours before the time appointed for the Meeting.

5958

FORM OF PROxY - NON-VOTING

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

of ............................................................................................................................................... being a member/members of the

above named company hereby appoint:

Mr. Husein Esufally of Colombo or failing him

Mr. Trihan Perera of Colombo or failing him

Mr. Asoka Abeyewardene of Colombo or failing him

Professor Ravindra Fernando of Colombo or failing him

Mr. Steven Enderby of Colombo or failing him

…………………………………………………………………………………………………………. of ...................................................

……………………………………………………………………......................……………… as my/our* Proxy to represent me/us* and vote for me/us* on my/our* behalf at the Annual General Meeting of the Company to be held on Monday, the 18th day of August, 2014 at 3.00 pm at the Auditorium of the Ceylon Chamber of Commerce, No. 50 Navam Mawatha, Colombo-02 and at any adjournment thereof. For Against1. To receive and consider the Statements of Accounts of the Company

and of the Group for the year ended 31.03.2014 together with the Reports of the Directors and Auditors thereon.

2. To re-elect as director, Professor Ravindra Fernando retiring by rotation in terms of the Articles of Association of the Company

3. To re-appoint as Director, Mr. Asoka Abeyewardene retiring in terms of Section 210 of the Companies Act No. 7 of 2007

4. To declare a first and final dividend of Rs 3.00 per ordinary non-voting share as recommended by the Board.

5. To re-appoint M/s Ernst & Young, Chartered Accountants, as auditors of the Company and Authorize the Directors to determine their remuneration.

6. To authorize the Directors to determine and make donations to Charity.

…………………… Date:Signature/s

Note:* Please delete the inappropriate words.

The Proxy holder is kindly requested to bring a valid document of identity.

Instructions as to completion are noted on the reverse hereof.

6060

INSTRuCTIONS AS TO COMPLETION OF FORM OF PROxY

1. Kindly perfect the Form of Proxy after filling in legibly your full name and address and by signing in the space provided. Please fill in the date of signature.

2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of him/her.

3. In the case of Corporate Members, the Form of Proxy must be completed under the Common Seal, which should be affixed and attested in the manner prescribed by the Articles of Association /Statutes.

4. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy.

5. The completed Form of Proxy, addressed to the Secretaries should be deposited at Hemas House, No. 75, Braybrooke Place. Colombo 2 not less than Forty Eight (48) hours before the time appointed for the Meeting.