KOTAGALA PLANTATIONS PLC - CSEKotagala Plantations PLC for the year 2016 -2017. During the year the Sri Lankan economy grew at a rate of 4.4% which is slower than the 4.8% growth recorded

An

nual Rep

ort 2016/17 | Kotagala Plantation

s PLC

Annual Report 2016/17

KOTAGALA PLANTATIONS PLC

VisionTo be the foremost producer of High Quality Tea & Rubber

MissionTo maximise land and labour productivity and achieve excellence in the protable management of the Company in an acceptable and socially responsible manner.

Core ValuesIntegrity Courage Commitment

ObjectivesTo lead the way in the technical and innovative development of the Tea & Rubber agri-industries.

To provide a satisfying work experience to our employees and ensure a rewarding investment to our shareholders.

To be a trail-blazer in the shift away from producing visually graded rubber as an agricultural commodity to the production of a fully technically specied industrial polymer

CONTENTFinancial Highlights 01Chairman’s Review 02CEO’s Review 04Board of Directors 07Risk Management 09Enterprise Governance 11Audit Committee Report 15Remuneration Committee Report 16Related Party Transactions Review Committee Report 17Our Plantations 18Our People 19Crop and Yield 20Management Discussion & Analysis 21Ten Year Summary 25Shareholder & Investor Information 26

Financial ReportingAnnual Report of The Board of Directors 28Statement of Directors’ Responsibilities 31Independent Auditors’ Report 32Statement of Profit or Loss and Other Comprehensive Income 33Statement of Financial Position 34Statement of Changes In Equity 35Cash Flow Statement 37Notes To The Financial Statements 38Glossary of Financial And Non Financial Terms 94Notice of Meeting 95Form of Proxy 99Corporate Information Inner Back Cover

1

FINANCIAL HIGHLIGHTS

Revenue

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Rs.Mn.

12/13 13/14 14/15 15/16 16/17

Shareholders' Funds

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Rs.Mn.

12/13 13/14 14/15 15/16 16/17

Total Assets

0

2,000

4,000

6,000

8,000

10,000

Rs.Mn.

12/13 13/14 14/15 15/16 16/17

Net Asset Per Share

0

20

40

60

80

100

120

Rs./Share

12/13 13/14 14/15 15/16 16/17

Year ended 31st March

Group Company Change %

2017 2016 2017 2016

(Restated) (Restated)

Statement of Comprehensive Income

Revenue Rs.000 7,319,107 6,684,033 3,086,410 3,038,112 0.02

Loss before tax Rs.000 (369,413) (888,894) (350,830) (943,984) 0.63

Loss after tax Rs.000 (319,405) (753,401) (311,274) (838,389) 0.55

Total Comprehensive Loss for the year Rs.000 (371,871) (523,950) (374,110) (618,737) 0.40

Loss per share Rs. (7.99) (18.83) (7.78) (20.96) 0.63

Statement of Financial Position

Total Assets Rs.000 10,358,395 10,645,228 8,564,317 9,192,168 (0.07)

Total Liabilities Rs.000 8,760,051 8,675,013 6,888,695 7,142,436 0.04

Total Shareholders’ Funds Rs.000 1,598,344 1,970,215 1,675,622 2,049,732 (0.18)

Net Assets per Share Rs. 39.96 49.26 41.89 51.24 (0.18)

Market/shareholder information

Debt/ Equity Ratio 5.48 4.40 4.11 3.48 (0.18)

Quick Asset Ratio 0.40 0.48 0.35 0.42 (0.17)

Interest Cover 0.35 (0.40) 0.31 (0.69) (1.45)

Market Price (Year end) Rs. - - 10.10 15.10 (0.33)

Market Capitalisation Rs.000 - - 404,000 604,000 ( 0.33)

Kotagala Plantations PLC Annual Report 2016/172

CHAIRMAN’S REVIEW

I take great pleasure in welcoming you to the Annual General Meeting of Kotagala Plantations PLC for the year 2016 -2017. During the year the Sri Lankan economy grew at a rate of 4.4% which is slower than the 4.8% growth recorded for the previous year. A gamut of reasons contributed to the downturn in the rate of growth, among them the unfavourable weather conditions, micro economic challenges, inflationary pressures and the upward movement in interest rates.

The year saw several changes which impacted adversely on the standard practices employed by the Plantation Managers. For many years Managers relied on the use of Glyphosate in weed management on the plantations. Glyphosate was banned by the Government citing serious health concerns and thereby severely affecting the weed control programmes. The fertilizer subsidy hitherto granted by the Government was withdrawn creating a twofold adverse reaction in the plantations-that of increased cost of fertilizing the tea compounded by the lower efficacy of the fertilizer programmes due to part of the fertilizer being taken up by the controlled weed flora.

The Plantation woes of poor revenue continued with the hitherto scientifically acceptable forestry development plan established by the Plantations Ministry for the harvesting of timber and fuel timber clearings being subjected to unplanned changes.

The serious shortage of workers is a major threat confronting the plantation industry. This problem will continue with no solution in sight. Many of the young people born in the plantations to the current workers opt to move in to areas of employment away from the plantations. The lack of workers is already felt by the plantations and will prove to be a major drawback to good Plantation Management in the future. This is vividly felt during the cropping months when the estates are unable to carry out their planned agricultural programmes resulting in poor agricultural maintenance, poor yields with low quality and drop in all aspects of tea culture, quality and manufacture resulting in poor prices at the auctions.

The only solution available to the plantation management is automation of every possible process both in the field and specially in the manufacture. Another pathway that needs serious investigation is the means of increasing the yield-applicable to both tea and rubber, using advanced agronomic practices that increases production by enabling the plantations to derive the current revenue with much higher profits from smaller extents of cultivation. These techniques in agronomy enumerated above are being seriously pursed by our Plantation Managers to transform an industry forecasted with a bleak future to profitability.

TEAIn the year under review weather was not conducive for growth and the total rainfall was one of the lowest recorded in recent years. The island’s crop was also one of the lowest in recent years and 11% behind the crop harvested in the previous year.

Our own tea is mainly VP; 87% under VP in the high growns and 100% in the low growns. These VPs require adequate nutrition and adequate well distributed rain to maintain high yields and are more susceptible to erratic weather than the hardier seedling tea. Additionally the unseasonal rains reduced the window of opportunity for the regular and timely application of nutrients. We were able to harvest only 72% of the high grown budgeted crop and only 77% of the low grown budget.

The balance of payment problems and uncertain trading conditions in our main tea importing countries which seriously affected prices in 2015 had eased by the start of the new financial year and by June 2016 had reached very satisfactory levels seldom seen in recent years. We ended the year with a high grown net sale average of Rs.509.87 per kilogram and the low grown teas averaged Rs.547.42 per kilogram.

With the increase in tea auction prices, the manufacture of bought leaf became attractive. In the low country, where the bulk of our production is already bought leaf and competition for bought leaf is severe and we could not significantly improve our intakes. However we were able to improve our intakes in the high growns and ended up manufacturing 526,852 kilos of bought leaf against 200,000 kilos last year; a substantial increase.

RUBBERThe same weather which adversely affected Tea production assisted rubber production and under the prevalent drier conditions we achieved 184 days of tapping against 150 days in the previous season. Total production was 2.58 Mn kilos of rubber against 2.46 Mn kilos the previous year. The crop harvested was 95% of budget. The budget would have been easily achieved if not for an eighteen day work stoppage by the labour in support of a new collective agreement.

Prices continued to be poor and below cost of production. It is unlikely that we will see an improvement in Rubber prices in the new season. Nevertheless we did not cut back on essential agricultural maintenance activities and additionally replanted 105 hectares.

OIL PALMKotagala Plantations is a truly multi-crop company and we have already planted 526 hectares of oil palm of which 223 hectares are now in bearing. It will be a few more years before these extents come up to peak bearing. In the season under review we harvested 950,000 Fresh Fruit bunches (FFBs) against 426,000 FFBs last season. Our target is to plant in excess of 1,000 hectares in Oil Palm but are currently constrained by difficulties in importing the required seed.

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FINANCIAL PERFORMANCEThe total gross profit from tea operations was Rs. 173 million against a gross loss of Rs.62 million the previous year. The gross loss from Rubber operations was Rs.156.5 million against a gross loss of Rs.61.8 million the previous year. The gross profit from all plantation operations for the year under review was Rs.10 million against a gross loss of Rs. 131 million the previous year. After Rs. 54 million Fair Value Gain on Biological assets and other income of Rs.338 million and unallocated expenses of Rs.753.6 million the final loss for the year was Rs.374 million. The net financing cost included in the unallocated expenses is Rs. 509 million. A significant portion of the financing charges are in servicing the borrowings for investments and the Company has taken necessary steps to reduce these financing charges in the coming year.

GENERALIn October 2016 a new collective agreement was implemented and the increase in wages for the year under review was Rs130 million. On a full year basis the impact of this wage increase is expected to be in the region of a 20% increase.

Inspite of difficult trading conditions and cash flows, we have not neglected essential agricultural maintenance and labour and staff welfare activities. During the year under review Capital expenditure on replanting and the maintenance of immature areas was Rs. 302 million. A further Rs.29 million was incurred on buildings, worker housing and staff quarters.

The new year has started well and tea crops are coming in satisfactorily. The South West monsoon is delayed but expected very shortly. All available labour is employed on harvesting and although conditions are suitable, the application of fertilizer is a little behind. Indications are that the new season will be satisfactory for tea crops, although with increase harvests the current very high price levels will level down. Immediate prospects for Rubber are not good but towards the latter part of the year, when international economies stabilize we may begin to see an improvement.

My thanks and appreciation are due to all our stake holders for their continued support and confidence in the Company. To my fellow members on the Board, all executives, staff and the workforce my thanks and gratitude for their co-operation and unstinted support at all times.

S D R ArudpragasamChairman

26th May 2017


CEO’S REVIEW

We review the performance of the company in a season of mixed fortunes. A season that witnessed a resurgence in Tea prices to unprecedented levels in the latter part while Rubber prices struggled in the doldrums.

Had weather conditions been kinder, enabling crop harvests upto expectations, the company’s Tea sector would have experienced a boom year.

As it stood, however, the erratic weather that prevailed over Sri Lanka resulted in a 2016 National Tea crop that was the lower than in the previous 06 years. Unfortunately, our Tea plantations followed the trend and we ended the season at 28% below budget. This impacted heavily on our cost of production and, together with the burden of a desperately poorly performing Rubber sector, despite record Tea price averages, the Company recorded a total comprehensive loss of Rs. 374Mn.for the season.

WAGE HIKESAn increased wage was paid to all workers of the company with effect from 15th October, 2016. The impact of this was 17% on the company’s wage bill.

Furthermore, a 25% increase was afforded to all estate Staff, from 01st March, 2017 as per new Collective Agreement effective for three years.

TEAWeather conditions that prevailed over the Island were not conducive to the production of Tea crop. As a result, our High Grown region was able to harvest only 72% of the estimated crop target. Similarly, our Low Grown region harvested 77%. These figures, no doubt contributed to the National trend which reflected a decline of 11.07% from the previous year.

In the last six months of the season, when sale prices began to improve sharply, the manufacture of Bought Leaf became very attractive. Renewed interest was taken to increase the intake of Bought Leaf to our factories. Competition being intense in the Low Grown areas due to low crop production, this exercise has been more fruitful in the Up-country. However, in the Low country too some headway was made and we are pleased to report that all our three Low Country factories are now operational.

Tea prices showed an increasing trend from February, 2016 and swung sharply upward from June. Our High Growns ended the season on an Auction Average of Rs. 509.87 while the Low Growns achieved Rs.547.42. These figures make satisfactory reading compared to the Rs.388.38 and Rs.416.32, respectively, of 2015.

The high prices being fetched at present give hope that the industry is buoyant. However, it must not be forgotten that it was crop shortfalls, worldwide, that triggered the price increases. While prices have held firm in the face of improved crop intakes, the quality of Tea that is manufactured will play a major role in maintaining price structures. Our company is focused on this aspect.

RUBBERWeatherWeather conditions were more conducive for harvesting Rubber crop this season over the previous. We were able to undertake normal tapping on 184 days as against 150 days.

CropDuring the period under review, the company produced 2.58 Mn kgs as against 2.46 Mn kgs the previous season. This is an increase of 5%.

90% of the season’s budgeted crop was harvested. Unfortunately, a 18 day strike by the workers on the wage issue during the high cropping season prevented us from making further ground.

PricesRubber prices increased 6% from the beginning to the end of the season but with some drastic fluctuations in-between. The increase referred to, from Rs. 278/- to Rs. 295/-, for Latex Crepe No.1, however, hardly provides satisfaction as the increased price is still well below the cost of production.

ManufactureAlthough prices were not lucrative, the Company’s Estates continued to manufacture to high standards. The Padukka factory manufactures prime quality Sole Crepe while the 06 other factories manufacture good quality Crepe Rubber.

Capital Field DevelopmentDespite the parlous state of the Industry, the company completed 105 hectares of replanting while also maintaining 575 hectares of immature rubber planted over the last 05 years totalling to 680 hectares.

OIL PALM Crop105 hectares were included in the Revenue extent during the season, thus increasing this category to 223 hectares. 950 MT of Fresh Fruit Bunches (FFB) were harvested, compared to 426 MT in the previous season.

ManufactureThe Fresh Fruit Bunches continue to be supplied to an outside processing factory.

PricesRs. 33/- to Rs. 39/- per kg were received averaging to Rs. 37/- during the year, which are improvements from the Rs.29/- to Rs.30/- per kg fetched in the previous season.

Capital Field Development303 hectares of immature Oil Palm were maintained during the season.

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FAIR TRADE CERTIFIED MARKSOur three Fair Trade certified Tea factories, Kelliewatte, Bogahawatte and Chrystler’s Farm, experienced less sales through this system over the season.

With these trading volumes being reduced, we may have to review the benefits against certification costs.

ISO 22000:2005 & 9001:2008The requisite Audits take place from time to time and compliance is maintained by the factories of the company in order to retain these important certifications.

RAINFOREST ALLIANCEThe programme of compliance continues successfully in our certified properties while we look forward to bringing our other estates into the system as early as possible

CORPORATE SOCIAL RESPONSIBILITYThe Regions - Up Country and Low Country of Kotagala Plantations PLC have invested substantial resources in Social Responsibility Initiatives in year 2016, spending over Rs.68 Mn for 59 Units of New Housing (Green Gold Housing ) 58 Units of rehabilitation of worker quarters, 2 Child Development Centers, Concrete Roads and a Water Scheme. This project was fully funded by the Ministry of Hill Country, New Villages Infrastructure and Community Development in collaboration with the PHDT.

Green Gold Housing Scheme

Chrystler’s Farm Estate – 20 Units

Under our Living Environment of the Estate Community, 20 Housing Units were planned and constructed in 2016. A Land extent of 7 perches + 10% for infrastructure was granted per beneficiary. This project was supported by the Ministry of Hill Country & New Villages, Infrastructure and Community Development.

Health & NutritionHealth & nutrition of our workers is a major priority of our management. KPPLC is committed to maintain the Health and nutritional status of its Estate Community. Social Mobilization, Dengue Awareness Programmes, Dental Clinics, Eye Clinics, TB awareness programmes, Oral Cancer

Programme, Provision of Spectacles, Cataract removal surgeries, AIDS awareness Programmes, Promoting home gardening and educating parents to use fresh fruits and vegetables, House Hold Cash Management, Regularized feeding for children at Child Development Centers by educating Child Development Officers, promotion of breast feeding corners at Child Development Centers enabling lactating mothers to feed their babies, Refresher Training programmes for Midwives in Estates etc., were carried out on both Low Country & Up Country Regions in collaboration with the Health Ministry/RDSH & PHDT. The improvement of health conditions has benefited many in the Estate Community, from infants to retirees.

Maternal CareThe provision of maternal care on KPPLC Estates commences at the level and time of antenatal registration, with clinics, attendance, place of delivery and postnatal care by qualified Midwives in our Estates. Nutritional levels are monitored and maintained with the support of the Estate health teams under the guidance of the Medical Officer of the Health (MOH) of the respective area.

In addition, the Estate Midwives visit mothers at home to ensure early registration and to follow up during pregnancy, ensure safe delivery at hospitals and provide the best possible care.

Many educational programmes were conducted for mothers, and young females in families by the Midwives.

Our Estate health teams have contributed significantly towards early registration of pregnancies, thereby enabling better health and safety of the mothers and babies.

Estate Worker Housing Co-operative Society (EWHCS)The EWHCS was first established in 1993 by the Plantation Human Development Trust (PHDT) in collaboration with the Department of Cooperative Development, mainly with the intention of distributing funds to construct houses for the Estate community.

These societies are models which have been successfully developed on our plantations. This initiative has made a significant impact in uplifting the living conditions of the Plantation workers and their families.

The Resident Plantation Community has been empowered by the EWHCS which are now established on all Estates managed by RPCs by providing them loans, creating job opportunities, access to many goods and services, etc.

Congratulations!The Infant Mortality Rate (IMR) and Maternal Mortality Rate (MMR) on our Plantations are registered at level zero. This is a great achievement. Giving birth at home has been actively discouraged. In other words, no birth should take place outside a maternity ward or Government medical institution. We are pleased to have achieved these goals.


CEO’S REVIEW

“We congratulate our Estate Management and the Health Staff and PHDT Officials on this achievement and thank everyone involved”

World VisionWe gratefully acknowledge the tremendous contribution made by M/s. World Vision (NGO) to uplift the living conditions of the Estate Community in our Upcountry Region.

Inter Plantation Rugby 7s and Cricket 6sThe above tournaments were conducted at the Darrawela and Radella Club grounds, respectively.

Teams from our Company participated in both tournaments.

Rugby Team

Cricket Team

AppreciationWe wish to place on record our grateful thanks to our Buyers, Brokers, Lenders and Suppliers for their continued support.

Our appreciation is extended to the shareholders for the confidence they hold in us.

We would fail in our responsibilities if we did not thank, most sincerely, our Plantation Executives, staff and workforce, without whose hard work this Industry cannot be sustained. Our gratitude is also extended to the Executives and staff of our Head Office and Regional Offices for their consistent and dedicated input.

In conclusion, we thank the Chairman and the Board of Directors for providing direction and advice in steering the Company through the difficult times we have had to face.

Mahen MadugalleDirector / Chief Executive Officer26th May 2017

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BOARD OF DIRECTORS

S. D. R. Arudpragasam – ChairmanNon- Executive

Mr. S. D. R. Arudpragasam joined the Board in 1996 and was appointed Chairman in May, 2013. He serves as Chairman of several subsidiaries of The Colombo Fort Land and Building PLC (CFLB) and holds the position of Deputy Chairman on the Boards of The Colombo Fort Land and Building PLC and Lankem Ceylon PLC. He also functions as Managing Director of E.B. Creasy & Company PLC in addition to holding other Directorships within the CFLB Group.

Mr. S.D.R. Arudpragasam is a Fellow of the Chartered Institute of Management Accountants (U.K.)

C. P. R. Perera - Deputy ChairmanIndependent Non- Executive

Mr. C.P.R. Perera joined the Board in 1996 and was appointed Deputy Chairman in May, 2013. He serves as a Director in several Companies in the Colombo Fort Land & Building Group and also holds directorships in other private and public companies. He is a past Chairman of the Sri Lanka Tea Board, Sri Lanka Insurance Corporation, PERC and Bank of Ceylon. He retired as Chairman of Forbes & Walker Ltd and its subsidiary companies in June 2005 after almost 44 years of service.

He presently functions as Chairman of Ceylon Tea Brokers PLC. Mr. Perera has served as a Committee Member of the Ceylon Chamber of Commerce, The Planters Association of Ceylon and on the Committee of Management of the Ceylon Planters Provident Society. He is presently an Appointed Member of the Monetary Board of the Central Bank of Sri Lanka.

A. Rajaratnam Non – Executive Director

Mr. Rajaratnam joined the Board of Kotagala Plantations PLC in 1996 and served as Chairman from the year 2003 to May, 2013. He currently serves as Chairman of The Colombo Fort Land & Building PLC (CFLB) and several listed and unlisted companies within the CFLB Group in addition to holding other Directorships within the Group.

Mr. A. Rajaratnam is a Fellow of the Institute of Chartered Accountants of Sri Lanka.

D. S. AbeyRatnaNon – Executive Director

Mr. D.S. AbeyRatna was appointed to the Board on 11th November, 2015.

He is a Fellow of the Institute of Chartered Accountants of Sri Lanka, Chartered Institute of Management Accountants (U.K.) Certified Management Accountants of Sri Lanka. He is also a Member of the Certified Management Accountants of Australia.

Mr. AbeyRatna holds a Ph. D. from the University of Honolulu (U.S.A.)

He is the Head of AbeyRatna & Co. Chartered Accountants which is an affiliate of AGN International Ltd. (U.K.) and is a Director of the said Company. He possesses well over 40 years of experience in Finance at a very Senior Level.

Mr. AbeyRatna is a Director of several listed and unlisted Companies. He functions as Managing Director of Lankem Tea & Rubber Plantations (Pvt) Ltd. Managing Agents.

M. S. Madugalle – Chief Executive OfficerExecutive Director

Mr. Mahen Madugalle commenced his planting career with Janatha Estates Development Board (JEDB). He has worked for other private sector Plantation Companies. He joined Kotagala Plantations PLC which was then managed by George Steuart Management Services as Manager Mount Vernon Estate and was promoted as Cluster General Manager of Mount Vernon under the management of Lankem Tea & Rubber Plantations (Private) Limited (LT&RP) and subsequently as Regional General Manager of the Kotagala Region. He has also held the position of General Manager of the Agras and Uva Regions of Agarapatana Plantations Ltd.

He was appointed to the Boards of LT&RP in 2012 and Kotagala Plantations PLC in January 2013 and functioned as Deputy Chief Executive Officer of KPPLC from 1st April, 2014. Mr. Madugalle was appointed as Chief Executive Officer of KPPLC with effect from 1st April, 2015. He has provided consultancy services to the FAO in Iran on tea projects. He holds a Diploma from the National Institute of Plantation Management.

R. C. Peries Non- Executive Director

Having started his career with Carsons Cumberbatch & Co., he then moved to George Steuarts, one of the premier Agency Houses. He has served as Manager of some of the most prestigious rubber properties in the Low Country and also held senior appointments in the industry and served on the Rubber Research Board Advisory Panel. In 1983, he was the Regional Director of the JEDB Hatton Board and in 1988 he was made Director General of the Kegalle – Avissawella Zone of the JEDB. In 1992 after the Privatisation of the management of plantations, he joined George Steuart Management Services as the General Manager of Low Country rubber and tea estates of Kotagala Plantations. He continued to serve in this position even after the takeover of the Management of Lankem Tea & Rubber Plantations (Pvt) Ltd (LT&RP), Managing Agents in 1995.

He was appointed to the Directorate of LT&RP in 2002 and to the Board of KPPLC in 2005. He also serves as a Director in other Companies of The Colombo Fort Land & Building Group.

He is a member of the Rubber Research Board and of the Rubber Wages Board.

Mr. R.C. Peries is a Member of the Ceylon Institute of Planting.


BOARD OF DIRECTORS

D. A. RatwatteNon- Executive Director

Having commenced his career with Messers. Whittall Boustead Ltd prior to nationalisation he has contributed many years of his life to planting. After the nationalisation of estates he managed two of the most prestigious plantations in up-country after which he was invited to serve on the Board of Directors of the Janatha Estates Development Board VI.

After the privatization of management of the Regional Plantation Companies in 1992, Mr. Ratwatte took charge of the operations of Maturata Plantations Ltd. in the capacity of General Manager-Plantations in charge of the plantations in both Udapussellawa/Maturata and the plantations coming within the purview of Maturata Plantations Ltd. in the Deniyaya district, low-country. In 1999 he joined Lankem Tea & Rubber Plantations (Private) Ltd. (LT&RP), Managing Agents, as a Regional Director in charge of the Western High Grown properties in the Kotagala and Agarapatana districts. He was appointed to the Board of LT&RP in 2002 and joined the Board of KPPLC in 2006. He serves as a Director in other Companies of the Colombo Fort Land and Building Group. He is also in the panel of Visiting Agents , appointed by the Ministry of Plantation Industries.

Mr. D. A. Ratwatte is a Fellow of the National Institute of Plantation Management.

G. D. V. PereraNon- Executive Director

He commenced his career in planting with Mackwoods Estates & Agencies Limited in 1971. With the nationalization of Estates, he worked as an Estate Manager and Visiting Agent and was subsequently promoted as a Director of JEDB in the Nuwara Eliya Region. He has provided his services to the prestigious Commonwealth Development Corporation (CDC) of UK on tea projects in Tanzania and was resident there. After the privatisation of the management of Regional Plantation Companies, he returned to Sri Lanka and joined Forbes Plantation Management Services Ltd., as a Plantation Director of Balangoda Plantations Limited in 1993. He joined Lankem Tea & Rubber Plantations (Pvt) Ltd (LT&RP), Managing Agents in 1996 and was appointed to the Directorates of LT&RP in 2002 and KPPLC in 2006. He also serves as a Director in other Companies of the Colombo Fort Land and Building Group.

He is a past Chairman of the Planters’ Association of Ceylon. He is a Director of the Plantation Human Development Trust. Mr. G.D.V. Perera is a Member of the Ceylon Institute of Planting and a Fellow of the National Institute of Plantation Management. He is a member of the consultative committee on Tea Research.

A. M. De S. JayaratneIndependent Non- Executive Director

Mr. A. M. de S. Jayaratne was appointed to the Board of Kotagala Plantations PLC in December 2012.

He is a former Chairman of Forbes & Walker Ltd, Colombo Stock Exchange, Ceylon Chamber of Commerce and The Finance Commission. He also served as Sri Lanka’s High Commissioner in Singapore. Mr. Jayaratne is a Director of several listed and unlisted companies. He holds a Bachelor of Science degree in Economics and is a Fellow of the Institute of Chartered Accountants of Sri Lanka and of England and Wales.

Dr. L.M.K. TillekeratneIndependent Non- Executive Director

Appointed to the Board in January, 2013. Dr. Tillekeratne is a globally renowned rubber scientist and technologist with nearly 40 years national and international experience in research and development. As the Director/CEO of the Rubber Research Institute of Sri Lanka which is the first rubber research institute in the world, he held enormous responsibilities in guiding the Sri Lankan rubber industry along a growth path that includes the small holder sector. He has extensive practical experience in policy development, industry problem solving and dissemination of technology to users. His knowledge of global rubber industry is extensive. He has launched many projects to upgrade the skills, technological capabilities and productivity of the rubber farms. He is an inventor having won the prestigious Presidential Award and international acclaim for commercialized inventions that led to him being appointed Chairman, Sri Lanka Inventors Commission. Having retired from Government service in August 2006, he serves the industry as a freelance consultant; while having served as a Professor in Polymer Chemistry, University of Sri Jayewardenepura until 2011. Further, he is serving as an expert in Rubber Processing and Testing to United Nations Industrial Development Organisation (UNIDO). Under the GROW Liberia program of Adam Smith International of UK, Dr. Tillekeratne is extending his assistance to Liberia to improve the quality of RSS and to certify the quality of the rubber produced.

He holds a Diploma in Research Management from the University of Los banos, Phillipine. He also has a Master of Science Degree, in Physical Methods of Analysis and a Doctorate in Polymer Chemistry and Technology from the University of Aston, Birmingham UK. Dr. Tillekeratne is a Fellow of the Plastic & Rubber Institute of UK, Institute of Chemistry Ceylon and the National Academy of Sciences, Sri Lanka.

9

The Risk Management processAt Kotagala , we emphasise the importance of having a strong working culture within the organization that strengthens the internal processes. Risk Management is no longer an additional set of processes but embedded in the business process itself .The risks could influence the achievement of the strategy of business, operational and financial objectives therefore the Directors have taken the initiative to identify the organisations major risks and introduced several measures to mitigate the risks faced by the Company.

The following are some of the major risk factors that the company is exposed to while carrying out its business and the actions implemented to reduce or eliminate risk.

Operational riskThe company carries out continuous planning, quality control and disaster recovery management strategies in order to ensure the continuous operation of business.

Tangible assets are insured against identifiable risks and the associated insurance policies are reviewed and evaluated annually. Provision is also made for asset defects and malfunctions and for obsolescence due to advances in technology. We go to the best suppliers to ensure that defect free products are purchased. The factories in the estates and other infrastructure are continuously upgraded when required.

Exposure to reputation risk is minimized through product quality controls and a comprehensive quality management process which includes upgrading our factories to adhere to HACCP standards

WeatherThe Company’s product portfolio being Tea and Rubber, helps to minimize the impact as tea requires wet and rubber requires drier weather conditions. The location of our tea estates in the High grown and Low grown elevation categories also helps in this regard.

The Company has the option of increasing or decreasing quantities of bought crop according to weather patterns. Prudent agricultural practices such as rain guards for rubber trees and planting of TRI recommended clones and other agricultural practices to minimise drought effects and proactive planning has helped the company to minimise the risk of adverse weather conditions.

Business RiskPrices are cyclical and have an impact on earnings. Tea Auctions in Colombo are influenced by global demand and supply, and foreign currency exchange rates. The company mitigates this impact by producing high quality tea and rubber. The direct export of rubber facilitates price stability and entering into forward contracts with rubber buyers helps reduce market risk. Kotagala Plantations process a full range of teas (low grown, high grown and CTC) and different types of rubber which helps reduce market

instability. Initiatives have been taken for diversification into other crops like cinnamon and oil palm which will reduce over dependence on tea and rubber.

The Company possesses synergistic benefits from being in a group which includes a chemical supplier and another company in the plantation business.

Healthy relationships are maintained with our suppliers. Fluctuations in the exchange rates are closely monitored and hedging techniques applied when required.

In order to minimize the dependence on a single distribution channel (brokers) the company has continued to establish its export operations. Further the company has leased out a portion of land to Mlesna (Ceylon) Ltd in Kotagala for the purpose of the sub lessee to carry out sales and operate a tea centre for their products. This facility also has provision to market KPPLC garden mark packs.

Legal and regulatoryThe Company addresses this area with great concern in order to protect its corporate image. Quality assurance standards in factories have been established over a period of time (ISO, HACCP) and continuous reviews are conducted to ensure they are maintained. The Company’s legal division ensures full compliance with all regulatory requirements including labour regulations, adherence to laws and instructions of governing authorities such as Provisions of the Companies Act, Securities & Exchange Commission and Colombo Stock Exchange requirements. The Company also obtains expert advice from its Auditors, Tax consultants, Actuaries, TRI, RRI as and when required. As a public listed company we also strive for a high standard of corporate governance in the conduct of our business.

Human resourcesKotagala Plantations has entered into Collective Agreements with trade unions as a member of the employers’ federation. This helps to ensure industrial peace and a well negotiated and affordable wage. Human Resource Management is given priority, where continuous training and development programmes and workshops are held in order to motivate and develop our human resources.

Governance RiskThese risks are dealt with preventively through the actions of the company’s legal department and through frequent internal & external audits to monitor compliance. The company’s management culture stresses ethical performance in this area, following best practices at all times.

LiquidityWe strive to maintain sufficient liquidity is available to meet our debt commitments and provide for our operational capital requirements. Loans and overdraft facilities are arranged with banks to meet planned cash flow commitments.

RISK MANAGEMENT


Employee related risksRisks such as omissions, fraud, judgmental errors, negligence, are examples of employee related risks. The company has a set up a competent internal audit department which carries out exhaustive checks on a routine basis in order to eliminate the above mentioned risks. The Internal audit department functions independently and reports directly to the Executive Directors. They ensure all receipts have been banked, lodging of funds have been deployed for the intended activity. Suitable delegated authority levels have been set up and succession plans are formulated. We maintain a conducive working environment for all staff

InformationProper internal controls have been established in order to secure the information system. Routine and surprise audit checks are carried out to detect any deficiencies and improvements are suggested. The company has implemented sound backup systems and procedures, and has also entered into maintenance contracts with established agents and uses licensed software.

RISK MANAGEMENT

11

ENTERPRISE GOVERNANCE

Enterprise Governance is the combination of Business Governance and Corporate Governance, it is the set of responsibilities and practices exercised by the Board and executive management with the goal of providing strategic direction, ensuring that objectives are achieved, ascertaining that risks are managed appropriately and verifying that the organization’s resources are used responsibly.

Enterprise Governance is such an important framework. It encapsulates Corporate Governance, Performance Management, Internal Control and Risk Management, and it strives to achieve a balance between conformance and performance.

At Kotagala Plantations PLC we are firmly committed to the standards set for governance. The Company’s performances are managed to the best interest of its shareholders whilst maintaining high ethical standards. The Board is committed to adhere to various business practices in order

to further establish our Company as a good corporate citizen that values responsibility.

The strategic options, implementation and risk control strategies are closely monitored in order to deliver better results. The Company is in compliance with the majority of the good corporate governance practices recommended by The Institute of Chartered Accountants of Sri Lanka and the listing rules of the Colombo Stock Exchange. Given below is a demonstration as to how we adhere to good Corporate Governance practices.

Corporate Governance Principle Company’s adherence

Directors

Composition of the Board The Board consists of an Executive Director and nine Non-Executive Directors three of whom are Independent. The Directors possess a strong balanced blend of skills, experience to offer guidance in core areas important to KPPLC. These Directors are named below and profiled on pages 7 and 8

S. D. R. Arudpragasam - Non Executive(Chairman) C.P.R. Perera - Independent Non- Executive(Deputy Chairman) A. Rajaratnam - Non-ExecutiveD. S. AbeyRatna - Non ExecutiveM. S. Madugalle - Executive(Chief Executive Officer)R. C. Peries - Non ExecutiveD.A. Ratwatte - Non-ExecutiveG.D.V. Perera - Non-ExecutiveA. M. De S. Jayaratne - Independent Non-Executive L. M. K. Tillekeratne - Independent Non-Executive

The Non- Executive Directors have submitted declarations of their independence or non-independence to the Board of Directors.

Mr. C.P.R. Perera has served on the Board for more than nine years. He is a Director on the Boards of other Companies in which a majority of the Directors of the Company are Directors and also has significant shareholdings in another. He serves on the Board of the Ultimate Parent Company, The Colombo Fort Land and Building PLC (CFLB) and holds Directorships on certain subsidiaries of CFLB. However the Board having taken into consideration all other circumstances listed in the Rules pertaining to the Criteria for Defining Independence is of the opinion that Mr. C.P.R. Perera is nevertheless Independent.

Mr. A.M. De S. Jayaratne is a Director of the Ultimate Parent Company, The Colombo Fort Land and Building PLC (CFLB) and serves on the Boards of several subsidiaries of CFLB. However the Board having taken into consideration all other circumstances listed in the Rules pertaining to the Criteria for Defining Independence is of the opinion that Mr. A.M. De S. Jayaratne is nevertheless Independent.




Directors

Decision making of the Board In addition to attending Board Meetings, matters are referred to the Board and decided by Resolutions in writing. The Board is responsible for:-• Ensuring the conduct of the Company’s affairs in the best interest of its stakeholders.• Identifying Strategic options implementation and monitoring their success. • Appointment of the Directors, ensuring staff succession and determining remuneration of

senior executives and staff in consultation with the respective Committees.• Ensuring an effective internal control system.• Ensuring a proactive risk management system.• Ensuring compliance with highest ethical standards and legal standards.• Approval of major capital investments acquisition expansions and Budgets • Approval of interim and annual financial statements for publication.

Company Secretaries The Company and all Directors may seek advice from Corporate Managers & Secretaries (Pvt) Ltd who are qualified to act as Secretaries as per the provisions of the Companies Act No. 7 of 2007.

Independent Judgement The Board of Directors at all times exhibit high standards of integrity, commitment & independence of judgement.

Obtaining independent professional advice Advice is sought from independent experts whenever board deems it necessary. The Directors are updated on the changes in the plantation industry as well as on the general aspects which may affect the Company’s operations.

Managing Agents The Board of Directors has delegated the management of Plantation and the task of achieving the strategic objectives set out by the Board to the managing agents Lankem Tea & Rubber Plantations (Pvt) Ltd (LT &RP). The Board of LT&RP meets every month and review the progress towards achieving the budgets and discuss the operational issues. The successful implementation of the Capital Expenditure programmes and focussing on the development strategies are also key priorities.

Finance Acumen The Board comprises of four finance professionals who together with Director Finance - LT&RP possess the knowledge and the competence to offer the Board the necessary guidance on matters relating to finance.

Supply of Information Prior to each meeting all Directors are given a file of Board Papers which includes Summarized Financial Statements, operational statistics, performance reviews, sales reports, Schedules of Capital Expenditure and a Progress Report, covering all significant issues with the comparatives of prior year and budget. This information is provided at least 7 days prior to the meeting which gives Directors adequate time for qualitative deliberation and analysis.

Apart from the above, Directors Consultants, General Managers and Deputy General Managers meet monthly in order to discuss financial and non-financial matters.

Nomination Committee/Appointments to the Board New Directors are proposed for Appointment by the Nomination Committee in consultation with the Chairman of the Company, in keeping with the provisions of the Articles of Association of the Company in relation to same and in compliance with the Rules of Corporate Governance.

The Company’s Nomination Committee comprises of Mr. A.M. de S. Jayaratne – Chairman, Mr. C.P.R. Perera , Independent Non- Executive Directors, Mr. S.D.R. Arudpragasam, Non-Executive Director (Appointed w.e.f. 1st April, 2017). Mr. N.H.B.S. Perera , Independent Non- Executive Director, CFLB resigned w.e.f. 31st March, 2017)

Disclosure of appointments of New Directors to the Shareholders.

The new appointments are made available to shareholders by making announcement to the Colombo Stock Exchange

13


Re-Election of Directors In terms of the Articles of Association of the company a Director appointed to the Board holds office until the next Annual General Meeting, at which he seeks re-election by the shareholders. The Articles require one-third of the Directors in office (excluding the Managing Director and the Appointed Directors) to retire by rotation at each Annual General Meeting. The Directors who retire are those who have been longest in office since their last election. Retiring Directors are eligible for re-election by the shareholders.

Relations with Shareholders

Annual General Meeting The Company always welcomes the active participation of the shareholders at the Annual General Meeting. Questions put up by the shareholders are answered thus promoting a healthy dialogue. The required number of days notice has been given to the shareholders in terms of the Companies Act No.7 of 2007 and the Articles of Association of the Company.

Communication with Stakeholders The Company publishes the Annual Report together with the interim reports in order to communicate information to the shareholders in a timely manner.

Major Transactions There have been no transactions during the year under review which fall within the definition of “Major Transactions” as set out in the Companies Act.

Price Sensitive Information Due care is exercised with respect to share price sensitive information.

Others The Company maintains a website under the name www.lankemplantations.lk which offers any individual or body, information on the Company and its affairs. The Company’s principal communicator with all its stakeholders are its Annual Report and Quarterly Financial Statements. The shareholders are free to communicate with the Company. Whenever possible, the Company implements their suggestions.

Accountability and Audit

Financial Reporting The Board attaches high priority to timely publication of quarterly and annual results with comprehensive details (both financial & non financial) going beyond statutory requirements. This enables both existing and prospective shareholders to make fair assessments on the company’s performance and future prospects. The financial statements are prepared in accordance with Sri Lanka Accounting Standards. The Company’s accounting formats and procedures are in compliance with the procedures laid down by the regulatory authorities.

Disclosures The Annual Report of the Board of Directors is on pages 28 to 30 of this report. The Statement of Directors responsibilities for the financial reporting is on page 31 and the auditors’ report on the financial statements is on the page 32 of this annual report.

Going Concern The Board of Directors after reviewing the financial position and the cash flow of the Company are of the opinion that the Company has adequate resources to continue operations well in the foreseeable future. Therefore the Board adopts the going concern basis in preparing Financial Statements.

Internal Control The Directors are responsible for maintaining an effective internal control system and proactive risk management strategy. Internal controls cover both financial and operational matters and risk management to safe guard the assets of the Company. The risk management strategy of the Company is on pages 9 and 10 of this report. The Company also ensures that effective internal and external audit procedures are followed and the Board reviews the reports in order to maintain the progress of the systems & results.




Internal & External Audits The Internal Audit division comprises of the Internal Audit Manager and Assistants who report directly to the Executive Directors. They are empowered to examine and review the financial reporting systems, internal control procedures, accounting policies and compliance with accounting standards. It also reviews the adequacy of systems for compliance with legal, regulatory and ethical requirement and company policies. The Company maintains a professional relationship with the external auditors, KPMG. This ensures their objectivity, independence and compliance with regulatory and ethical requirements.

Accountability and Audit

Audit Committee The Audit Committee Report is set out on page 15 of this Report.

Directors’ Remuneration

Remuneration Committee The Remuneration Committee Report is set out on page 16.

Disclosure of Remuneration Aggregate remuneration paid to Directors is disclosed in Note 7 to the Financial Statements.

Related Party Transactions

Related Party Transactions Review Committee The Related Party Transactions are disclosed in Note 33 to the Financial Statements.

The Report of the Related Party Transactions Review Committee appears on page 17

Other

Compliance with Legal Requirements The Board of Directors through the company’s Legal & Finance divisions makes every endeavour to ensure that the business complies with all laws and regulations.

Social & Environmental Matters The Company has for many years recognized the benefits that accrue from responsible employment, environmental and community policies which are dealt with in detail in the Chairman’s Review and CEO’s Review.

Rights of Employees /Other Stakeholders The Company identifies the rights of employees. Several employee performance enhancing mechanisms such as performance appraisals and training initiatives are in place for the career building of our employees. A series of best practices and techniques are now embedded in the business and applied intelligently within the organization. Constant responsiveness to all stakeholder interests and an effective risk management process are critical success factors to ensure that the governance process will continue to add value in the future. The Extent to which the good Corporate Governance practices are adopted in the Company is given as above in this report.

15

AUDIT COMMITTEE REPORT

The Committee assists the Board of Directors in fulfilling its oversight responsibility to the Shareholders and other Stakeholders relating to the Company’s financial statements and the financial reporting process to ensure that the financial reporting system is in adherence with the Sri Lanka Accounting Standards and other regulatory and statutory requirements. It also reviews the adequacy of internal controls and the business risks. The Committee peruses the operational reviews and assesses the future prospects of the business operations and the fact that the going concern assumption used in the preparation of the Financial Statements is appropriate.

CompositionThe Audit Committee for the financial year ended 31st March, 2017 comprised of two Independent Non-Executive Directors and a Non- Executive Director of Kotagala Plantations PLC and an Independent Non- Executive Director of The Colombo Fort Land and Building PLC (CFLB) (Ultimate Parent Company).

The names of the members are set out below:

Mr. A.M. De S. Jayaratne - Chairman(Independent Non-Executive Director - KPPLC)

Mr. S. D.R. Arudpragasam(Non Executive Director-KPPLC)

Mr. C.P.R. Perera(Independent Non- Executive Director-KPPLC)

Mr. N.H.B.S. Perera(Independent Non- Executive Director, CFLB)(Resigned w.e.f. 31st March, 2017)

The members have varied experience and financial expertise with a high standing of integrity and business acumen to carry out their role effectively and efficiently. Two of the members are finance professionals including the Chairman.

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

Meetings and AttendanceThe Audit Committee has met on five occasions during the financial year ended 31st March, 2017 and the attendance was as follows;

Mr. A.M. De S. Jayaratne 5/5Mr. S. D. R. Arudpragasam 4/5Mr. C. P.R. Perera 5/5Mr. N. H. B. S. Perera 5/5(Resigned w.e.f. 31st March, 2017)

Other members of the Board and Senior Management Personnel of the Company as well as the External Auditors were present at discussions where appropriate. The Proceedings of the Audit Committee are reported to the Board of Directors.

Terms of Reference The role of the Committee which has specific terms of reference is set out in the Audit Committee Charter and addresses the Purpose of the Committee, its duties and responsibilities including the scope and functions of the Committee.

ComplianceThe Committee has scrutinized the quarterly accounts and the accounts for the year ended 31st March, 2017 and has taken necessary measures to ensure that the Interim Financial Statements and the Annual Report are timely published and they are prepared and presented in accordance with Sri Lanka Accounting Standards.

External AuditThe Company has appointed KPMG as its External Auditors and the services provided by them are segregated between audit/ assurance services and other advisory services.

The Committee after evaluating the independence and performance of the External Auditors has recommended to the Board the reappointment of KPMG as Auditors for the financial year ending 31st March, 2018 subject to the approval of the Shareholders at the Annual General Meeting.

ConclusionThe Audit Committee is satisfied that the accounting policies and operational controls provide reasonable assurance that the company is managed in accordance with the Group policies and adequate controls are in place to safeguards the Company’s Assets.

A.M. De S. JayaratneChairman

Audit Committee26th May 2017


REMUNERATION COMMITTEE REPORT

The Remuneration Committee comprise of the following members;

Mr. A.M. De S. Jayaratne - Chairman – Independent Non- Executive Director

Mr. C.P.R. Perera - Member – Independent Non-Executive Director

Mr. N.H.B.S. Perera - Member- – Independent Non-Executive Director, The Colombo Fort Land & Building PLC (Ultimate Parent Company) (Resigned w.e.f. 31st March, 2017)

Mr. S.D.R. Arudpragasam - Member – Non-Executive Director (Appointed w.e.f. 1st April, 2017)

The Committee analyses and reviews the remuneration packages of the key management personnel prior to the determination of such packages and guidelines are set for the compensation structures of the Management Staff.

Some members of the Board participate in the deliberations where appropriate.

It is ensured that the remuneration of executives at each level of management is competitive and they are rewarded in a fair manner based on their performance.

A.M. De S. Jayaratne

ChairmanRemuneration Committee

26th May 2017

17

RELATED PARTY TRANSACTIONS REVIEW COMMITTEE REPORT

The Related Party Transactions Review Committee is entrusted with the responsibility of ensuring compliance with the rules and regulations governing Related Party Transactions for Listed Entities. It focuses on ensuring that the Stakeholders’ interests are protected in all related party transactions.

CompositionThe Related Party Transactions Review Committee of Kotagala Plantations PLC comprises of the following members:

Mr.A.M.De S.Jayaratne - Chairman - Independent / Non-Executive

Mr. C.P.R.Perera - Member - Independent / Non-Executive

Mr.D.S.AbeyRatna - Member - Non-Executive

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

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

Meetings and AttendanceThe Related Party Transactions Review Committee has met on three occasions during the financial year ended 31st March, 2017 and the attendance was as follows;

Mr. A.M. De S. Jayaratne- Chairman 3/3Mr. C. P.R. Perera 3/3Mr. S. D. R. Arudpragasam 2/3Mr.D.S.AbeyRatna 1/3

Functions of the Committee:* Review all proposed Related Party Transactions (Except for exempted

transactions)

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

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

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

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

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

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

The Committee is free to seek external professional advice on matters within their purview when necessary.

The Board of Directors have also declared in the Annual Report that there were no recurrent related party transactions which exceeded the respective thresholds mentioned in Section 9 of the Colombo Stock Exchange Listing Rules . However non- recurrent related party transactions which exceeded the respective thresholds are duly disclosed on page 81 of the Annual Report. The Company has complied with the requirements of the Listing Rules on Related Party Transactions.

A.M. De S. JayaratneChairman

Related Party Transactions Review Committee

26th May 2017


OUR PLANTATIONSEs

tate

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Plan

ting

Distr

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ea in

Tea(

Ha)

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in R

ubbe

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a)Ar

ea In

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tal

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serv

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antin

g(H

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ing

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s etc

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l Ex

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mat

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9.50

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9.70

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6 11

7.42

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T - Tea, R - Rubber, OP - Oil Palm

19

OUR PEOPLE

Workers Clerical, Technical & Other Staff

Executives Total

2016/17 2015/16 2016/17 2015/16 2016/17 2015/16 2016/17 2015/16

Total Employees 8,258 9,081 561 589 65 69 8,884 9,739

Region Wise Kotagala 5,215 5,411 267 280 23 21 5,505 5,712

Horana 3,043 3,670 282 298 31 33 3,356 4,001

Head Office - - 12 11 11 15 23 26

8,258 9,081 561 589 65 69 8,884 9,739

Gender Wise Male 3,383 3,815 416 439 59 63 3,858 4,317

Female 4,875 5,266 145 150 6 6 5,026 5,422

8,258 9,081 561 589 65 69 8,884 9,739

Age Distribution Below 30 Years 1,103 1,573 73 73 12 17 1,188 1,663

30 - 45 Years 3,729 3,952 259 277 33 31 4,021 4,260

Over 45 Years 3,426 3,556 229 239 20 21 3,675 3,816

8,258 9,081 561 589 65 69 8,884 9,739

- - - - - - - -

Service Distribution Below 5 Years 2,154 2,595 210 192 25 29 2,389 2,816

5 - 15 Years 2,893 3,250 200 230 24 23 3,117 3,503

Over 15 Years 3,211 3,236 151 167 16 17 3,378 3,420

8,258 9,081 561 589 65 69 8,884 9,739


CROP AND YIELD

Estate Crop (KG '000) Yield per Hectare (KG)

2016/17 2015/16 2014/15 2013/14 2012/13 2016/17 2015/16 2014/15 2013/14 2012/13

TEAWestern High Grown

Bogahawatte 243 292 298 267 292 1,874 2,255 2,304 2,100 2,351

Chrystler's Farm 190 235 271 265 267 1,613 2,000 2,315 2,222 2,195

Craigie Lea 402 478 498 448 493 1,745 2,029 2,043 1,970 2,163

Drayton 433 595 709 459 550 1,719 2,111 2,215 1,942 2,327

Kelliewatte 335 340 465 354 348 1,685 1,835 2,165 1,841 2,148

Mayfield 468 626 662 619 660 1,396 2,231 2,357 2,245 2,457

Mount Vernon 789 963 991 875 1,036 1,796 2,528 2,622 2,360 2,835

Stonycliff 517 637 765 639 676 1,686 2,101 2,013 1,949 2,220

Yulliefield 551 649 690 486 529 1,125 1,559 1,620 1,441 1,573

Derryclare 292 332 368 352 403 1,474 1,689 1,873 1,816 2,103

Sub Total 4,220 5,146 5,717 4,764 5,254 1,581 2,058 2,145 1,985 2,250

Low Grown

Eduragala 34 40 35 30 33 1,922 1,981 1,458 1,350 1,525

Hedigalla 14 15 13 13 13 1,193 1,637 2,155 1,891 1,533

Gikiyanakanda 94 158 294 400 380 1,513 1,322 1,589 1,420 1,465

Rayigam 411 547 711 680 714 1,561 1,841 2,017 1,823 1,940

Vogan 125 182 244 410 227 1,154 1,540 1,618 1,403 1,646

Sub Total 678 942 1,298 1,533 1,367 1,423 1,666 1,771 1,521 1,696

Total - Tea 4,898 6,088 7,014 6,297 6,621 1,567 2,023 2,113 1,945 2,204

RUBBERArapolakanda 239 256 249 260 273 983 1,024 979 1,073 1,111

Dalkeith 335 319 247 340 345 1,149 975 703 797 712

Eduragala 123 121 150 161 168 663 562 649 656 674

Gikiyanakanda 177 154 174 215 209 587 545 632 695 649

Hedigalla 118 94 98 123 131 785 465 493 603 602

Millewa 162 164 160 201 197 831 874 730 941 893

Padukka 264 258 259 283 282 941 882 900 1,014 1,085

Paiyagalla 289 282 312 360 361 918 944 998 1,234 1,255

Rayigam 205 185 181 200 188 914 760 809 977 894

Sorana 251 242 253 289 267 988 861 836 941 948

Usk Valley 221 211 212 259 247 932 872 847 933 854

Vogan 196 175 206 230 198 641 559 685 768 675

Total - Rubber 2,580 2,465 2,501 2,920 2,866 865 785 780 885 853

21

MANAGEMENT DISCUSSION & ANALYSIS

RUBBERGlobal Rubber production of natural rubber has been around the range of 12Mn Mts during the last 3 years showing no significant growth mainly due to sharp drop in NR prices. On the contrary, Synthetic Rubber production shows an increased growth averaging around 14 Mn Mts per annum.

At present Sri Lanka is among the worlds’ top ten largest producers in Natural Rubber, but it is sad to report that the extent under tapping is in the declining trend over the years as a result of competition for land for more lucrative agricultural crops such as oil palm etc. The lower prices over a considerable period of time has led to the abandonment of tapping in marginal lands, as proceeds could not even cover the cost of production making rubber cultivation less attractive.

Rubber prices have been on a gradual improvement during the last quarter due to lower stock levels in China and other regional markets along with sharp increase in synthetic rubber prices triggered an upward trend, whilst heavy flooding in Thailand,Vietnam and Cambodia lowered the production of natural rubber during this period.

Sri lankan Rubber production at 79.1 Mn during 2016 against that of 88.6 Mn in 2015 resulting in a decline of 10.7% (10% decline in 2015), depicting a continued declining trend recording the lowest production volume in the past 50 years mainly due to the reduction of both the extent under tapping and the number of tapping days, in response to lower prices mainly in the smallholder sector.

Prices of Sri Lankan RSS rubber continued to prevail at low levels in tandem with the prices of other producing countries. The Colombo Auction average price of RSS1 at Rs.239.28 witnessed a 3.6% decline over the previous year. Prices of Latex rubber also decreased by 13% and the average prices of natural rubber declined by 30% against the previous year. Blending NR with higher percentage of synthetic rubber was reported from certain industries due to the price advantage.

Sri Lankan Rubber Averages

100

150

200

250

300

350Rs./Kg

April

May

June

July

Augu

st

Sept

embe

r

Octo

ber

Nove

mbe

r

Dece

mbe

r

Janu

ary

Febr

uary

Mar

ch

2016/2017 2015/2016

COMPANY PERFORMANCECrop

During the year under review the Company produced a crop of 2.58 Mn Kgs against that of 2.46 Mn Kgs during the previous year showing a slight increase of 4.7%, mainly due to less wet weather and increase in number of tapping days in the region.

Yield

During the year under review the yield obtained in the Low Country was 865 Kgs/ha against that of the previous year 785 Kgs/ha recording an increase of10%.

CROP- RUBBER

0

500

1,000

1,500

2,000

2,500

3,000

12/13 13/14 14/15 15/16 16/17

Kg '000



Net Sales Average

The Colombo Market prices of RSS 1 and RSS 2 increased by 8% and 10% respectively against 2015 prices. Latex crepe recorded a drop by 10% but scrap crepe showed an increase of 23% against the previous year.

YEAR RSS1 RSS2 LTX-CRP 1X

LTX-CRP 1 SCRAP CREPE

2011 508.80 505.76 574.93 566.60 462.24

2012 416.47 409.56 410.84 405.00 376.57

2013 376.90 369.21 397.28 389.69 309.23

2014 286.05 280.14 310.00 302.20 213.27

2015 248.16 242.92 301.64 296.39 174.97

2016 268.38 267.27 269.14 265.01 216.26

Kotagala Plantations were able to achieve an average NSA of Rs. 261.39 during the current financial year against that of Rs. 269.44 during the previous year recording a slight decrease by 3% mainly due to the drop in market prices of Latex crepe.

Cost of Production

The COP for rubber increased by 9% from Rs.294.95 (previous year) to Rs.321.20(current year). This was mainly due to the increase in cost of production as a result of the wage increase by 8.5%.

Revenue Vs Cost of Sale - Rubber

600

750

900

1,050

1,200

1,350

1,500

Rs.Mn.

12/13 13/14 14/15 15/16 16/17

Revenue

Cost of Sale

TEAThe year 2016 began with uncertain trading conditions, as a result of importing countries in the Middle East and to a lesser extent Russia/Ukraine continued to be burdened with economic/political issues. The decline in oil prices and global commodity markets further aggravated the position.

Colombo Auction averages for the calendar year 2016 totalled Rs. 468.61 against the previous year’s average of Rs. 402.31. Both High & Mid Growns recorded the highest ever averages for the year 2016.

Tea exports drop by 6% in terms of volume and increased by 1.5% in value as compared to the year 2015.

It is noteworthy to state that the Sri Lankan tea was fetching the highest World Auction Averages during the last 10 years except the year 2012. World productin recorded an increase of 3.7% against last year and China, India, Kenya and Sri Lanka accounted for almost 89% of the global production.

The year 2016 witnessed a 11.1% negative growth in the tea production of Sri Lanka. The 1st Quarter auction volumes showed a negative growth of 2.4 Mn Kgs against the quantities of 2015 and the prices too decreased by Rs.9.83 per kg. The 2nd Quarter auction volumes decreased by 11.3Mn Kgs but the prices increased by Rs.37.94 per kg against that of 2015. The 3rd Quarter auction volumes decreased by 9.2Mn kgs but the prices increased by Rs.94.07 per kg against that of 2015. The 4th Quarter auction volumes too decreased by 14.1 Mn Kgs but the prices increased tremendously by Rs.164.47 per kg against that of 2015.

In total the year 2016, witnessed a decrease in auction volumes of 37 Mn Kgs and as a result a corresponding revenue loss of Rs.18.3 Bn as compared to 2015.

Both Western High/Low Growns elevation averages for the financial year showed a significant increase by Rs.108.16 per kg and Rs. 100 per kg against the last year respectively. And the company achieved an average of Rs.509.87 and Rs.547.42 for the High/Low Grown Regions respectively.

Colombo Tea Auction Prices

200

300

400

500

600

Rs./Kg

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Crop

In the year under review the Company’s tea production reached 4.89 Mn kgs against 6M.kgs during the previous year recording a negative growth of 18% from High grown and 28% from low grown with an overall decrease by 20% mainly due to erratic weather conditions prevailed in the country.

Yield

During the year under review the yield obtained in the High Grown was 1,581 Kgs/ha against 2,058 Kgs/ha in the previous year recording a decline of 23% and Low Country too recorded a yield of 1,423 Kgs/ha this year against that of the previous year 1,666 Kgs/ha resulting in a decline of 13.7%. The overall Yield for the Company showed a decline of 22% from 2,023 Kgs/ha during the previous year to 1,567 Kgs/ha in the current year.

23

Crop- Tea

0

1,000

2,000

3,000

4,000

5,000

6,000

12/13 13/14 14/15 15/16 16/17

Kg '000

High Grown Low Grown

Net Sale Average (NSA)In the year under review the Company’s NSA increased substantially by 33.4% representing both High/Low growns against the previous year, but the low grown fetched an NSA of 1% more than the High grown.

Cost of Production (COP)

The COP reached to a higher figure of Rs.450.10 during the current year against that of Rs.368.00 in the previous year reflecting a significant increase by 22% mainly due to reduction in crop by 20% and the impact of wage increase of 8.5%.

Revenue Vs Cost of Sale - Tea

1500

1800

2100

2400

2700

3000

Rs.Mn.

12/13 13/14 14/15 15/16 16/17

Revenue

Cost of Sale

OIL PALMKotagala Plantations PLC has indentified an extent of 1,200 ha to be planted with this newly popular agricultural crop. The identified land is mainly confined to Kalutara District falling under shrub jungle of Godapara and some uneconomical rubber lands situated in the high rainfall areas.

Of the total programme an extent of 581 ha has already been planned. The delay in completion of the target was mainly due to the government restrictions enforced on import permits on the seeds. Out of the 581 Ha, approximately 223 Ha have come in to bearing yielding a crop of 950,000

kgs of Fresh Fruit Bunches against 426,000 Kgs the previous year showing a tremendous growth of 123% and generating a revenue of Rs.34.1 Mn against Rs.12.6 Mn last year.

Owing to the fact that Kotagala Plantations PLC is not having a factory to process Palm Oil, the facility available with AEN palm Oil Processing (Pvt) Ltd. at Baduraliya (Agalawatte) is being patronized.

Currently Palm Oil prices also have taken a downward trend in the international market similar to the rest of the commodity prices. However, the Oil Palm growers in Sri Lanka are comforted by the duty element of Rs.90/Kg on imports of either crude or refined Palm Oil, which will be a competitive edge over imported price.

CAPITAL EXPENDITUREThe Company invested an amount of Rs.302.9 Mn against Rs.350.6 Mn last year in respect of field and development expenditure. In the year under review 41.25ha of tea, 680.01ha of rubber and 302.85ha of oil palm was maintained under immature extent. The Company spent Rs.29 Mn on plant & machinery , infra structure development , social work, vehicles, IT developments and to meet HACCP standards.

Capital Expenditure - Rs. Mn.

300

360

420

480

540

600

Rs.Mn.

12/13 13/14 14/15 15/16 16/17

CHALLENGESThe volatility in Middle Eastern markets and increasing costs as a result of the wage increase of 17% have created a challenging environment for the Sri Lankan tea industry. Even if global market conditions improve, rigidities in the domestic supply due to erratic weather conditions and rising cost of production could make it challenging for the domestic tea industry to reap the full benefit of such an improvement in 2017.

Unlike Tea, the rubber small holders account for 77% of the national rubber production and only 23% is attributable to corporate sector which is significant to the local rubber industry towards the production of the finished products. The current declining trend in the rubber prices may have cascading effect on the prices offered to small holders who may not be able to sustain losses for a longer period, which will eventually affect the rubber replanting undertaken by small holders and hence a greater impact on the country’s field latex production and there by Rubber exports.


WAY FORWARDIndustry needs to urgently improve productivity and generate new markets. Productivity appears to be the top priority as Sri Lanka’s Tea prices rank top in the world market price list. New markets such as other Middle East Countries apart from Iran and other untapped European &Asian countries must be explored. The growing black tea market in China is also a possible destination to export local tea.

The way forward for Rubber is value addition. Sri Lankan rubber industry needs to attract foreign investments in order to expand and diversify. Government’s intervention in the Rubber industry is imminent towards its growth and future sustainability, by way of increased re-planting subsidy to the small holders and also revisit of the Export Cess of Rs.15/kg. levied in 2011 but has still remained in force making export prices more unattractive. Currently India is in the process of formulating a national rubber policy and an insurance-based scheme for their planters.

FINANCIAL REVIEWThe Company has reported a Gross Profit of Rs.10 Mn during the current year against the previous year’s Gross Loss of Rs.131 Mn which accounts for a increase in Gross Profit of Rs.141 Mn, mainly due to the increase in gross profit from Tea of Rs.234 Mn, increase in gross loss from Rubber by Rs.94 Mn and decrease in gross loss from Oil Palm by Rs.1 Mn, despite the impact of the wage increase by Rs. 129 Mn.

The Tea prices increased almost by 33% yielding a gross profit contribution of Rs.173 Mn against a gross loss of Rs.62 Mn last year, despite the increase in COP by 22% as a result of decrease in crop and wage increase . The Rubber prices declined by 3% reporting a gross loss of Rs.156 Mn against a gross loss of Rs.61 Mn last year, mainly due to the increase of COP by 9% as a result of the wage increase and maintaining the crop at same level as last year. The Oil Palm losses decreased by only Rs.1 Mn besides the increase in crop by 123% and prices by 25%, as a result of the increase in COP by 56% due to the depreciation cost effect of a larger land extent coming in to maturity during the year.

The increase in GP by Rs.141 Mn together with the increase in gain on biological assets of Rs.46 Mn, increase in other income of Rs.153 Mn, decrease in Administrative expenses by Rs.203 Mn and decrease in financing cost by Rs.49 Mn resulted in a significant decrease in the loss before tax by Rs.592Mn compared to the previous year.

Kotagala Plantations PLC records a total comprehensive loss of Rs. 374 Mn for the current year against a loss of Rs.618 Mn last year showing a reduction of Rs.244 Mn, despite the decrease in loss before tax by Rs.592 Mn, mainly due to the increase in loss of Rs. 254 Mn arising from reclassification of Available for Sale Assets to profit or Loss statement and decrease in Actuarial gain by Rs.25 Mn.

Turnover

The consolidated turnover increased by 10.6% with a revenue of Rs.7.3 Bn this year compared to Rs.6.6 Bn last year. The increase of Rs.0.7 Bn is mainly from a local subsidiary Company as a result of the increase in revenue from


Tea exports. The Company’s turnover of Rs.3,086 Mn for the current year against Rs.3,038 Mn last year indicates an increase of almost 1% mainly due to increase in Tea prices by 33%. The export sector contributes Rs.4.1 Bn to the consolidated turnover against Rs.3.5 Bn last year.

Pro�t Before Tax

-1000

-700

-400

-100

200

500

12/13 13/14 14/15 15/16 16/17

Rs.Mn.

Biological Assets -Timber

With the adoption of LKAS 41, the Company recognized its managed timber at fair value amounting to Rs.877 Mn in the balance sheet as at the year end and the gain recognized in the Comprehensive Income amounted to Rs.54 Mn for the current year and a restated gain of 134 Mn in the previous years.

Investments

All the quoted investments are stated at market value and unquoted investments are valued using estimates based on acceptable Bench Mark method adopting valuation factors of other comparable quoted Companies. Fair value reserve stands at Rs.5.6 Mn at the year end against that of Rs.153 Mn last year, mainly due to the disposal of quoted investments where the corresponding gain is reflected in the other income of this year.

Cash flow

The net cash flow of Rs.750 Mn generated from operating activities for the current financial year, compared to Rs. 282 Mn last year resulted in the increase in cash inflow of Rs. 467 Mn, against the last Season.

This is mainly to due increase in cash operating profit by Rs.171 Mn, increase in inventories by Rs.195 Mn, decrease in Related Party receivables by Rs.469 Mn, decrease in payables by Rs.100 Mn, and the balance of Rs. 116 Mn from increase in Related Party payables as compared to last year.

The increase in the Net Cash from the operating activities of Rs.467 Mn together with the decrease in Investing Activities by Rs.574 Mn, has been utilized to settle Government lease rentals amounting to Rs.248 Mn and net increase in loan repayment of Rs.502 Mn leaving a balance of Rs.295 Mn as an increase of Net Cash as compared to last year.

The Company closed the period with a positive Cash position of Rs. 222 Mn compared to a negative cash position o Rs. 73 Mn the previous year.

25

TEN YEAR SUMMARY R

s. ‘0

00 2

016/

2017

2

015/

2016

2

014/

2015

2

013/

2014

2

012/

2013

2

011/

2012

2

010/

2011

2

009/

2010

2

008/

2009

2

007/

2008

(R

esta

ted)

(Res

tate

d)

STAT

EMEN

T OF

COM

PREH

ENSI

VE IN

COM

E R

even

ue

3,0

86,4

10

3,0

38,1

12

3,5

55,4

80

3,6

58,8

17

3,7

06,9

41

3,6

62,7

82

3,6

83,3

66

3,1

73,7

28

2,3

31,3

70

2,7

49,1

32

Gro

ss P

rofit

/(Los

s)

10,

067

(131

,258

) 4

7,87

7 3

83,1

69

811

,052

6

70,2

32

1,0

42,7

94

567

,852

2

93,1

63

736

,750

Fa

ir Va

lue O

f Bio

logi

cal A

sset

s 5

4,37

5 7

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8

4,25

9 1

39,4

36

89,

539

(60,

149)

-

-

-

-

Oth

er O

pera

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me

338

,342

1

85,2

09

266

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2

41,8

79

184

,647

2

47,0

58

138

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9

3,84

1 1

34,8

27

97,

467

Ope

ratin

g Pr

ofit/(

loss

) Bef

ore M

anag

emen

t Fee

&

Inte

rest

1

58,3

72

(385

,387

) 6

5,58

9 5

98,4

41

846

,160

6

28,1

36

1,0

70,2

92

554

,734

3

14,8

53

705

,575

Pro

fit/(l

oss)

Bef

ore I

ncom

e Tax

(3

50,8

30)

(943

,984

) (6

03,5

76)

(151

,880

) 4

12,7

29

416

,676

7

75,2

51

392

,325

2

05,0

38

547

,401

To

tal C

ompr

ehen

sive I

ncom

e(Ex

pens

e)

(374

,110

) (6

18,7

37)

(597

,442

) (2

76,5

84)

337

,123

2

47,1

24

667

,773

3

23,1

90

171

,015

4

95,5

41

STA

TEM

ENT

OF F

INAN

CIAL

POS

ITIO

N N

on-C

urre

nt A

sset

s 7

,156

,987

7

,578

,061

7

,488

,045

7

,144

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6

,776

,883

4

,881

,615

4

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3

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2

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,320

2

,325

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Cu

rrent

Ass

ets

1,4

07,3

30

1,6

14,1

07

1,7

67,6

33

2,3

82,1

95

2,5

31,3

51

2,0

51,0

88

1,8

06,2

56

1,0

70,9

91

853

,549

9

51,3

85

8

,564

,317

9

,192

,168

9

,255

,678

9

,527

,052

9

,308

,234

6

,932

,704

6

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4

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,043

3

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3

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Stat

ed Ca

pita

l 6

80,0

00

680

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6

80,0

00

680

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3

20,0

00

320

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3

20,0

00

320

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3

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00

320

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Sh

are A

pplic

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n M

oney

-

-

-

-

1

14,5

41

-

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-

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e for

Sale

Res

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s 5

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1

53,3

67

37,

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170

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2

05,6

99

278

,145

3

17,7

13

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Gen

eral

Res

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s 2

40,0

00

240

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2

40,0

00

240

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2

40,0

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240

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2

40,0

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240

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2

40,0

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240

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R

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Earn

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7

49,9

59

976

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1

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2

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2

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2

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2

,037

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1

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9

29,6

70

822

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Sh

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1,6

75,6

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2,0

49,7

32

2,6

68,4

70

3,1

14,4

82

3,2

45,6

06

2,8

67,2

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2,9

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1,7

80,8

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1,4

89,6

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1,3

82,6

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Def

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35,0

31

331

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3

18,1

31

315

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3

04,8

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309

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3

11,6

16

275

,881

2

32,6

39

182

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In

tere

st B

earin

g Bo

rrow

ings

2

,165

,239

2

,361

,294

2

,195

,143

1

,501

,841

1

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7

39,5

84

1,1

28,2

40

986

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4

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307

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R

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blig

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ns

661

,880

6

93,7

06

751

,460

6

85,1

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593

,136

5

68,8

97

550

,226

4

93,8

36

381

,700

3

63,2

76

Net

Liab

ility

To Le

ssor

3

63,6

95

371

,165

3

78,2

12

384

,989

3

91,5

04

397

,769

4

03,7

97

409

,590

4

15,1

60

420

,514

D

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ax

170

,927

1

89,0

81

268

,004

3

93,1

87

350

,426

3

09,9

39

177

,890

1

34,7

56

89,

332

63,

851

Long

Term

Rel

ated

Party

Bal

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-

-

-

-

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-

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Cu

rrent

Lia

bilit

ies

3,1

91,9

23

3,1

95,7

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2,6

76,2

58

3,1

31,9

26

2,5

83,5

90

1,7

39,7

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848

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4

83,6

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593

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5

57,0

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8

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9,1

92,1

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55,6

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9,5

27,0

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9,3

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6,9

32,7

04

6,3

35,2

39

4,5

68,0

43

3,6

58,8

69

3,2

76,9

94

Net

Cash

Flow

From

/(Use

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) Ope

ratin

g Ac

tiviti

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749

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2

82,5

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(293

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) 5

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(281

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4

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217

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(390

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(1,8

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(449

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) (4

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(640

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00,3

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(404

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) Fr

om/(U

sed

In) F

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Activ

ities

(7

44,7

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1,4

72

640

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(3

47,5

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1,6

69,0

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(689

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) 1

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501

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3

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2 (1

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Cash

& Ca

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(448

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(326

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) 3

24,5

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327

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(2

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44,

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Per

Shar

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Earn

ings

/(Los

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(7.7

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) (5

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11.

80

10.

10

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SHAREHOLDER & INVESTOR INFORMATION

1 Stock Exchange Listing The Issued Ordinary Shares of the Company are Listed With the Colombo Stock Exchange

2 Distribution of Ordinary Shares

31st March 2017 31st March 2016

No. of shares held No. of Shareholders

Total Holding Percentage of Total Shares

No. of Shareholders

Total Holding Percentage of Total Shares

1 - 1000 12,102 1,628,048 4.07 12,057 1,620,982 4.05 1,001 - 10,000 345 1,261,640 3.16 358 1,284,474 3.21 10,001 - 100,000 86 2,017,603 5.04 84 2,273,854 5.69 100,001 - 1,000,000 14 4,164,528 10.41 12 3,892,509 9.73 Over 1,000,000 3 30,928,181 77.32 3 30,928,181 77.32

12,550 40,000,000 100.00 12,514 40,000,000 100.00

Categories of Shareholders

No. of Shareholders

Total Holdings Percentage of total

No. of Shareholders

Total Holdings Percentage of total

Individuals 12,435 4,671,389 11.68 12,399 4,994,211 12.49 Institutions 115 35,328,611 88.32 115 35,005,789 87.51

12,550 40,000,000 100.00 12,514 40,000,000 100.00

3 Public Holding/Public Shareholders The Percentage of shares held by the public as at 31st March 2017 was 30.33 % (2015/2016 – 30.39%). The number of Public Shareholders as at 31st March 2017 was 12,533 (31st March 2016 – 12,498)

4 Market Value

The Market value of the Company’s Ordinary shares was

2017 (Rs.) 2016 (Rs.)

Highest 23.00 29.50

Lowest 8.80 13.40 Close 10.10 15.10

5. Major Shareholders

31st March 2017 31st March 2016

Name No of Shares Share Percentage No of Shares Share Percentage

LANKEM PLANTATION HOLDINGS LIMITED. 15,125,000 37.81 15,125,000 37.81 LANKEM TEA & RUBBER PLANTATIONS (PVT) LIMITED 12,002,625 30.01 12,002,625 30.01 SECRETARY TO THE TREASURY 3,800,556 9.50 3,800,556 9.50 PAN ASIA BANKING CORPORTION PLC/ MRS.M.MATHEWS 598,625 1.50 598,625 1.50 SEYLAN BANK PLC/DR. THIRUGNANASAMBANDAR SENTHILVERL 586,719 1.47 586,719 1.47 BANK OF CEYLON NO. 1 ACCOUNT 486,665 1.22 486,665 1.22 PERSHING LLC S/A AVERBACH GRAUSON & CO. 391,000 0.98 91,000 0.23 PEOPLE’S LEASING & FINANCE PLC/ MR.A.RAJARATNAM 372,297 0.93 372,297 0.93 LANKEM CEYLON PLC 324,229 0.81 324,229 0.81 PAN ASIA BANKING CORPORATION PLC/LANKEM CEYLON PLC 291,612 0.73 291,612 0.73 SAMPATH BANK PLC/ DR. T. SENTHILVERL 236,751 0.59 - - COMMERCIAL BANK OF CEYLON PLC A/C NO. 04 201,750 0.50 201,750 0.50 MR. HAMZAALLY ABDULHUSEIN 151,500 0.38 271,500 0.68 MR. HIRAN ANTHONY CABRAAL 145,343 0.36 60,000 0.15 MR. ALAGIYAWANNA MOHOTTALALAGE DARMASENA 144,578 0.36 148,663 0.37 ALAGIYAWANNA E.W. BALASURIYA & CO. (PVT) LTD 118,010 0.30 225,000 0.56 MR. KORALAGODAGE DON SAHAN RACHITRA KULATUNGA 115,449 0.29 115,449 0.29 MRS. ASHA AJAY MERCHANT 97,500 0.24 97,500 0.24 SAMPATH BANK PLC/ MR. PRABODHA LASANTHA ELANGASINGHA 62,000 0.16 - - MR. FREDERICK GERMAIN NOEL MENDIS 55,000 0.14 55,000.00 0.14

Total 35,307,209 88.28 34,854,190 87.14

27

Financial CalendarQuarterly Financial Statements

03 Months ended 30th June 2016 10th August 2016

06 Months ended 30th September 2016 8th November 2016

09 Months ended 31st December 2016 8th February 2017

12 Months ended 31st March 2017 26th May 2017

Annual Report 2016/2017 26th May 2017

24th Annual General Meeting 12th July 2017

Annual Report of the Board of Directors 28

Statement of Directors’ Responsibilities 31

Report of the Auditors 32

Statement of Profit or Loss and Other Comprehensive Income 33

Statement of Financial Position 34

Statement of Changes in Equity 35

Cash flow Statement 37

Notes to the Financial Statements 38

FINANCIAL REPORTING


ANNUAL REPORT OF THE BOARD OF DIRECTORS

The Board of Directors of Kotagala Plantations PLC present their Report together with the Audited Financial Statements for the year ended 31st March, 2017. The details set out herein provide the pertinent information required by the Companies Act No. 7 of 2007, the Colombo Stock Exchange Listing Rules and are guided by recommended best practices.

Principal Activities, Business Review/Future Developments The principal activities of the Company are production, processing and selling of Tea & Rubber and production and sale of Oil Palm. The Chairman’s Review, CEO’s Review, Management Discussion and Analysis, Financial Review describes the performance of the Company during the year with comments on financial results and future developments.

The Directors to the best of their knowledge and belief confirm that the Company has not engaged in any activities that contravene laws and regulations.

Financial StatementsThe Financial Statements of the Group are given on pages 33 to 93

Auditors’ ReportThe Auditors’ Report on the Financial Statements is given on Page 32

Accounting PoliciesThe Accounting Policies adopted in the preparation of the Financial Statements are given on pages 38 to 46

Interest RegisterDirectors’ Interest in Transactions The Directors have made general disclosures as provided for in Section 192 (2) of the Companies Act No. 7 of 2007. Arising from this, details of contracts in which they have an interest are disclosed in Note 33 to the Financial Statements on pages 79 to 80

Directors’ Interest in SharesThe Directors of the Company who have an interest in the shares have disclosed their shareholdings and any acquisitions/disposals to the Board in compliance with Section 200 of the Companies Act No. 7 of 2007.

Details pertaining to Directors direct shareholdings are set out herein.

Name of Director No.of Shares No. of Shares as at as at 31.03.2017 31.03.2016

Mr. A Rajaratnam 3,200 - Mr. S D R Arudpragasam 250 250 Mr. C P R Perera 25,000 25,000Mr. R C Peries 375 375 Mr. M S Madugalle 185 185Mr. D S AbeyRatna 800 800

Directors’ RemunerationThe Directors’ remuneration in respect of the Group for the Financial Year 2016/ 2017 is disclosed in Note 7 to the Financial Statements.

Corporate DonationsNo donations were made during the year.

DirectorateThe names of the Directors who held office during the financial year and who are currently in office are given below. Brief profiles of the Directors currently in office appear on pages 7 and 8

Mr. S D R Arudpragasam - Chairman

Mr. C P R Perera - Deputy Chairman

Mr. A Rajaratnam

Mr. D S AbeyRatna

Mr. M S Madugalle - Chief Executive Officer

Mr. R C Peries

Mr. D A Ratwatte

Mr. G D V Perera

Mr. A M De S Jayaratne

Dr. L M K Tillekeratne

In terms of Articles 92 and 93 of the Articles of Association Mr. G. D. V. Perera retires by rotation and being eligible offers himself for re-election.

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

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

Mr. A.M. De S. Jayaratne being over seventy years of age retires and offers himself for reappointment under and by virtue of the Special Notice received from a shareholder of the Company which is referred to in the Notice of Meeting.

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

Dr. L. M. K. Tillekeratne who has attained the age of seventy years retires and offers himself for reappointment under and by virtue of the Special Notice received from a shareholder of the Company which is referred to in the Notice of Meeting.

Enterprise GovernanceAdoption of good governance practices has become an essential requirement in today’s corporate culture. The practices carried out by the Company are given in the Enterprise Governance Statement on pages 11 to 14

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

29

The Auditors, KPMG was paid Rs. 4.4Mn (2015/ 16 – Rs4.0Mn.) as audit fees and fees for audit related services. In addition they were paid Rs. Nil (2015/ 16 - Nil) as fees for non-audit related work. As far as the Directors are aware the Auditors do not have any relationship (other than that of an Auditor) with the Company. The Auditors do not have any interests in the Company.

RevenueThe revenue of the Group for the year was Rs. 7.3Bn. (2015/16 - Rs. 6.7Bn). The revenue of the Company for the year was Rs.3.1Bn (2015/16 – Rs.3.0Bn).

Results The Group made a loss before Tax of Rs. 369.4Mn. (2015/16 - Rs. 888.9Mn.).

The Company made a Net Loss before Tax of Rs. 350.8Mn against a loss of Rs. 943.9Mn in the previous year. The detailed results are given in the Statement of Profit or Loss and Other Comprehensive Income on page 33.

DividendsThe Board of Directors have not recommended the payment of a dividend on the Ordinary Shares of the Company for the year ended 31st March, 2017.

Managing Agents & Management FeeLankem Tea & Rubber Plantations (Pvt) Limited, a fully owned subsidiary of Lankem Plantation Holdings Limited, continue to manage the affairs of the Company. The Company did not charge Managing Agent’s Fees in the year under review. (2015/ 16 – Rs. Nill.)

Investments Investments made by the Group and Company are given in Note 17 to the Financial Statements on pages 60 to 63.

Property, Plant & EquipmentDuring 2016/2017 the Group invested Rs. 226.6Mn. in Property, Plant & Equipment. (2015/16 Rs. 78.9Mn.) Further your Directors are of the opinion that the net amounts at which land and other Property, Plant & Equipment appear in the Statement of Financial Position are not greater than their market value as at 31st March, 2017.

Capital Expenditure - CompanyThe capital expenditure of the Company during the year amounted to Rs. 332.3Mn. (2015/16 – Rs.449.7Mn.) which includes Rs. 302.8Mn. in replanting expenditure (2015/16 - Rs. 350.6Mn.) Information relating to movements in Property, Plant & Equipment are given in Notes 13 and 16 to the Financial Statements.

Stated Capital The Stated Capital of the Company of Rs. 680,000,010/- is represented by 40,000,000 Ordinary Shares and 01 Golden Share.

Rights IssueThe Company has announced a Rights Issue of 80,000,000 Ordinary Shares at a price of Rs.10/- per share in the proportion of Two (02) new Ordinary Shares for every existing issued Ordinary Share held subject to Shareholder Approval and is in the process of obtaining the required Approvals from the Colombo Stock Exchange in connection with the Listing of the said Ordinary Shares.

The purpose of the Issue is to settle outstanding statutory liabilities and to meet working capital requirements.

Post Rights Subdivision of SharesThe Board has also recommended subject to Shareholder approval a subdivision of the shares after the listing of the Ordinary Shares arising from the Rights Issue. The proposed subdivision of issued ordinary shares of the Company will be on the basis of every Two (02) existing issued and fully paid ordinary shares being sub-divided into Three (03) ordinary shares.

ReservesThe total reserves of the Group as at 31st March 2017 amount to Rs.918.3Mn. (31st March 2016 - Rs. 1,290.2Mn.) comprising General Reserve of Rs. 240Mn. and Retained Earnings of Rs. 658.8Mn. (31st March 2016 - retained earnings of Rs. 893.3Mn.), Available for Sale reserve of Rs. 20.7Mn. (31st March 2016 – Rs. 156.9Mn.) and foreign exchange translation reserve of Rs. 1.2 Mn negative (31st March 2016 – Rs. Nil.). The movements are shown in the Statement of Changes in Equity in the financial Statements.

Related Party Transactions During the financial year there were no recurrent related party transactions which exceeded the respective thresholds mentioned in Section 9 of the Colombo Stock Exchange Listing Rules. However non recurrent related party transactions which exceeded the respective thresholds are disclosed on page 81. The Company has complied with the requirements of Listing Rules on Related Party Transactions.

The Related Party Transactions presented in the financial statements are disclosed in Note 33 from page 79 to 81

TaxationThe Company, in term of section 16 (i) of the Inland Revenue Act No. 10 of 2006 (amendments) “Specified Profits” from cultivation would be exempt from income tax for a period of 5 years from 2006/ 07. The Corporate rate of tax applicable to other income would be at 28%. Further, for the year of assessment 2005/ 06 the Inland Revenue allows only 35% of the total statutory income to be set off against the carried forward tax losses. Tea which was previously “zero rated” in Value Added Tax (VAT) has been classified as “exempt” item with effect from 1st January 2005. As a result the Company is not entitled to claim any input tax on supplies relevant to tea and this will adversely effect the profitability of the Company.

Share InformationInformation relating to earnings, dividends, net assets and share trading is given on pages 1, 33, 34 and 52.


ANNUAL REPORT OF THE BOARD OF DIRECTORS

Events Occurring after the Reporting PeriodNo circumstances have arisen since the Reporting Period that would require adjustment other than those disclosed in Note 32 to the Financial Statements on page 78.

Commitments and Contingent LiabilitiesCommitments and Contingent Liabilities as at the Reporting date are disclosed in Notes 30 and 31 to the Financial Statements on page 78 respectively.

Employment PolicyThe Company’s recruitment and employment policy is non-discriminatory. The occupational health and safety standards receive substantial attention. Appraisals of individual employees are carried out in order to evaluate their performance and realise their potential. This process benefits the company and the employees. The number of persons employed by the Company at the year end was 8,884 (2015/16 – 9,739)

ShareholdersIt is the Company’s policy to Endeavour to ensure equitable treatment of its shareholders.

Statutory PaymentsThe statutory payments due in relation to employees and the Government are being made or where relevant provided for.

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

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

Going ConcernAs noted in the Statement of Directors’ Responsibilities on page 31, the Directors have adopted the going concern basis in preparing Financial Statements.

For and on behalf of the Board

D. S. AbeyRatna M. S. MadugalleDirector Director

By Order of the Board

Corporate Managers & Secretaries (Private) Ltd. Secretaries

26th May 2017

31

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The responsibilities of the Directors in relation to the Financial Statements of the Company are detailed below. The responsibility of the Auditors’ in relation to the Financial statements is set out in the Independent Auditors’ Report appearing on page 32.

The Directors are responsible under the provisions of the Companies Act to ensure compliance with the requirements set out therein to prepare Financial Statements for each financial year giving a true and fair view of the state of affairs of the Company as at the end of the financial year and of the Profit & Loss of the Company for the financial year. The Directors confirm that in preparing the Financial Statements, appropriate accounting policies have been selected and applied consistently, reasonable and prudent judgements and estimates have been made and Sri Lanka Accounting Standards have been followed.

The Directors are responsible for ensuring that the Company keeps sufficient accounting records to disclose with reasonable accuracy the financial position of the Company and for ensuring that the Financial Statements have been prepared and presented in accordance with the Sri Lanka Accounting Standards and provide the information required by the Companies Act No. 07 of 2007 and the Rules of the Colombo Stock Exchange. They are also responsible for taking reasonable measures to safeguard the assets of the Company, and in that context to have proper regard to the establishment of appropriate systems of internal control with a view to the prevention and detection of fraud and other irregularities.

The Directors are required to prepare the Financial Statements and to provide the Auditors with every opportunity to undertake whatever inspections they consider appropriate to enable them to submit their audit report.

The Directors confirm that they have complied with these requirements. They have a reasonable expectation, after making enquiries and following a review of the Company’s budget for the ensuing year, including cash flows and borrowing facilities, that the Company has adequate resources to continue in operational existence for the foreseeable future, and therefore have continued to adopt the going concern basis in preparing the accounts.

Compliance ReportThe Directors confirm that to the best of their knowledge all statutory payments relating to employees and the Government that were due in respect of the Company as at the reporting date have been provided for but not fully paid.

On behalf of the Board

D. S. AbeyRatna M. S. MadugalleDirector Director

Colombo

26th May 2017


INDEPENDENT AUDITORS’ REPORT

TO THE SHAREHOLDERS OF KOTAGALA PLANTATIONS PLC

Report on the Financial Statements

We have audited the accompanying financial statements of Kotagala Plantations PLC (the “Company”), and the consolidated financial statements of the Company and its subsidiaries (the “Group”), which comprise the statement of financial position as at 31st March 2017, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information set out on pages 38 to 93.

Board’s Responsibility for the Financial Statements

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

Auditors’ Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31st March 2017 and of its consolidated financial performance and its cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on other legal and regulatory requirements

As required by section 163(2) of the Companies Act No. 07 of 2007, we state the followings:

a) The basis of opinion and scope and limitations of the audit are as stated above

b) In our opinion:

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

- The financial statements of the Company give a true and fair view of its financial position as at 31st March 2017, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

- The financial statements of the Company and the Group comply with the requirements of sections 151 and 153 of the Companies Act No. 07 of 2007.

Chartered Accountants

Colombo

26th May 2017

33

Group CompanyFor the year ended 31st March Note 2017 2016 2017 2016

Rs`000 Rs`000 Rs`000 Rs`000


Revenue 5 7,319,107 6,684,033 3,086,410 3,038,112

Cost of Sales (7,053,921) (6,564,404) (3,076,343) (3,169,370)

Gross Profit 265,186 119,629 10,067 (131,258)

Fair Value Gain on Biological Assets 16.2.2 54,375 7,973 54,375 7,973

Other Operating Income 6 363,725 213,307 338,342 185,209

Administrative Expenses (481,836) (594,092) (244,412) (447,311)

Net Finance Costs 8 (570,863) (635,711) (509,202) (558,597)

Loss before Income Tax Expense 7 (369,413) (888,894) (350,830) (943,984)

Share of Profit of Associate Company 17.2.1 1,981 1,504 - -

Income Tax Reversal 9 48,027 133,989 39,556 105,595

Loss for the Year (319,405) (753,401) (311,274) (838,389)

Other Comprehensive Income /(Expense)

Items that will not be reclassified to profit or Loss

Actuarial Gain on Retirement Benefit Obligation 106,542 133,627 106,519 131,044

Tax effect on other comprehensive income 9.1 (21,659) (27,393) (21,651) (26,799)

Items that are or may be reclassified subsequently to profit or Loss

Available for Sale Financial Assets - Net Change in Fair Value 4,100 (1,156) (7,463) 1,129

Available for Sale Financial Assets - Reclassified to Profit or Loss (140,241) 124,373 (140,241) 114,278

Foreign Currency Translation Loss (1,208) - - -

Other Comprehensive Income/(Expense) for the year, net of tax (52,466) 229,451 (62,836) 219,652

Total Comprehensive Income /(Expense) for the Year (371,871) (523,950) (374,110) (618,737)

Loss Per Share (Rs.) 10 (7.99) (18.83) (7.78) (20.96)

Figures in brackets indicate deductions.

The Accounting Policies and Notes on pages 38 to 93 form an integral part of these Financial Statements

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


Group CompanyAs at 31/03/2017 31/03/2016 01/04/2015 31/03/2017 31/03/2016 01/04/2015

Note Rs`000 Rs`000 Rs`000 Rs`000 Rs`000 Rs`000 (Restated) (Restated) (Restated) (Restated)

ASSETSNon Current AssetsLeasehold Right to Bare Land of JEDB/SLSPC Estates 11 182,260 188,718 195,176 182,260 188,718 195,176 Immovable Leased Assets of JEDB/SLSPC Estates (Other than Bare Land) 12 56,699 112,319 127,564 56,699 112,319 127,564 Tangible Assets (Other than Mature/Immature Plantations) 13 2,100,059 2,049,190 2,142,058 851,103 926,836 926,011 Intangible asset 15 21,272 16,780 - - - - Investment Property 14 114,398 116,840 91,202 - - - Biological Assets 16 4,411,541 4,197,537 3,951,713 4,411,541 4,197,537 3,951,713 Investment in Subsidiaries 17.1 - - - 1,272,287 1,340,459 1,512,137 Investment in Associate 17.2 66,086 64,105 62,602 94,753 94,753 94,753 Investments Classified as Available for sale 17.3 333,658 745,337 720,806 288,344 711,587 675,119 Investments Classified as Held to Maturity 17.4 - 5,852 56,114 - 5,852 5,572

7,285,973 7,496,678 7,347,235 7,156,987 7,578,061 7,488,045

Current AssetsInventories 18 1,091,435 948,304 1,571,135 285,922 266,479 442,444 Trade & Other Receivables 19 1,238,390 1,273,137 1,509,326 256,952 278,889 251,934 Fair value of growing produce of bearer Biological assets. 16.1.2 7,024 - - 7,024 - - Amounts Due from Related Parties 20 219,680 176,714 133,770 620,048 1,014,347 999,633 Income tax receivable 46,711 31,301 28,324 - - -Cash and Cash Equivalents 21 469,182 719,094 881,389 237,384 54,392 73,622

3,072,422 3,148,550 4,123,944 1,407,330 1,614,107 1,767,633 Total Assets 10,358,395 10,645,228 11,471,179 8,564,317 9,192,168 9,255,678

EQUITY AND LIABILITIESCapital and ReservesStated Capital 22 680,000 680,000 680,000 680,000 680,000 680,000 General Reserve 240,000 240,000 240,000 240,000 240,000 240,000 Foreign Exchange Translation Reserve (1,208) - - - - -Available for Sale Reserve 20,757 156,898 33,681 5,663 153,367 37,960 Retained Earnings 658,795 893,317 1,540,483 749,959 976,365 1,710,510 Total Equity 1,598,344 1,970,215 2,494,164 1,675,622 2,049,732 2,668,470

Non Current Liabilities Interest Bearing Borrowings 24.1 2,165,239 2,361,294 2,195,143 2,165,239 2,361,294 2,195,143 Retirement Benefit Obligations 25 681,202 719,380 780,512 661,880 693,706 751,460 Grants and Subsidies 23 335,031 331,488 318,131 335,031 331,488 318,131 Net Obligation to Lessor of JEDB/SLSPC 26 363,695 371,165 378,212 363,695 371,165 378,212 Deferred Taxation 27 316,890 354,436 465,648 170,927 189,081 268,004

3,862,057 4,137,763 4,137,646 3,696,772 3,946,734 3,910,950

Current LiabilitiesInterest Bearing Borrowings 24.2 2,623,685 2,185,498 2,965,273 791,325 838,823 916,750 Income tax payable 5,922 2,482 4,806 - - -Trade & Other Payables 28 1,642,762 1,715,529 1,290,691 1,509,004 1,640,208 1,193,501 Amounts Due to Related Parties 29 150,331 104,075 76,022 426,432 213,553 117,022 Bank Overdraft 21 475,294 529,666 502,577 465,162 503,118 448,985

4,897,994 4,537,250 4,839,369 3,191,923 3,195,702 2,676,258 Total Liabilities 8,760,051 8,675,013 8,977,015 6,888,695 7,142,436 6,587,208Total Equity and Liabilities 10,358,395 10,645,228 11,471,179 8,564,317 9,192,168 9,255,678 Net Asset per Share (Rs) 39.96 49.26 62.35 41.89 51.24 66.71

The Accounting policies and Notes on pages 38 to 93 Form an integral part of these Financial StatementsI certify that the financial statements have been prepared in compliance with the requirements of the Companies Act No.7 of 2007

M. Kowdu General Manager Finance

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.Approved and signed for and on behalf of the Board of Directors of Kotagala Plantations PLC.

D S AbeyRatna M S MadugalleDirector DirectorColombo26th May 2017

STATEMENT OF FINANCIAL POSITION

35

STATEMENT OF CHANGES IN EQUITY

Group Stated Capital

General Reserve

Available for Sale Reserve

Foreign currency

Translation Reserve

Retained Earnings

Total Equity

Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Balance as at 31st March 2015 as previously stated 680,000 240,000 33,681 - 1,389,053 2,342,734

Prior year adjustments

Impact on Fair value gain on Biological assets (Note 35.1.1A) - - - - 168,255 168,255

Impact on Deferred Tax effect on Fair value gain on Biological assets (Note 35.1.1B) - - - - (16,826) (16,826)

Restated Balance as at 1st April 2015 680,000 240,000 33,681 - 1,540,483 2,494,164

Total comprehensive income for the Year

Restated Loss for the Year (Note 35.1.2.D) - - - - (753,401) (753,401)

Other comprehensive income / (expense) -

Net change in fair value of Available for Sale Investments transferred to the Income Statement

- - 124,373 - - 124,373

Net changes in fair value of Available for Sale Investments - - (1,156) - - (1,156)

Actuarial Gain on Retirement Benefit Obligation, net of tax 106,234 106,234

Total comprehensive income/(expense) for the Year - - 123,217 - (647,167) (523,950)

Transactions with owners of the Company, recognized directly in equity - - - - - -

Balance as at 31st March, 2016 680,000 240,000 156,898 - 893,317 1,970,215

Balance as at 1st April 2016 680,000 240,000 156,898 - 893,31 7 1,970,215


Loss for the Year - - - - (319,405) (319,405)

Other comprehensive income / (expense)


- - (140,241) - - (140,241)

Gain /(Loss) on Foreign Currency Translation - - - (1,208) - (1,208)

Net changes in fair value of Available for Sale Investments - - 4,100 - - 4,100

Actuarial Gain on Retirement Benefit Obligation, net of tax - - - - 84,883 84,883

Total comprehensive income/(expense) for the Year - - (136,141) (1,208) (234,521) (371,871)

Transactions with owners of the Company, recognized directly in equity - - - - - -

Balance as at 31st March, 2017 680,000 240,000 20,757 (1,208) 658,795 1,598,344


The Accounting Policies and Notes on pages 38 to 93 form an integral part of these Financial statements.


STATEMENT OF CHANGES IN EQUITY

Company Stated Capital

General Reserve

Available for Sale Reserve

Retained Earnings

Total Equity

Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Balance as at 31st March 2015 as previously reported 680,000 240,000 37,960 1,559,080 2,517,040

Prior year adjustments

Impact on Fair value gain on Biological assets (Note 35.1.1A) - - - 168,255 168,255

Impact on Deferred Tax effect on Fair value gain on Biological assets (Note 35.1.1B) - - - (16,826) (16,826)

Restated Balance as at 1st April 2015 680,000 240,000 37,960 1,710,510 2,668,470


Restated Loss for the Year (Note 35.1.2.D) - - - (838,389) (838,389)



- - 114,278 - 114,278

Net changes in fair value of Available for Sale Investments - - 1,129 - 1,129

Actuarial Gain on Retirement Benefit Obligation, net of tax - - - 104,245 104,245

Total comprehensive income/(expense) for the Year - - 115,407 (734,144) (618,737)

Transactions with owners of the Company, recognized directly in equity - - - - -

Balance as at 31st March, 2016 680,000 240,000 153,367 976,365 2,049,732

Balance as at 1st April 2016 680,000 240,000 153,367 976,365 2,049,732


Loss for the Year - - - (311,274) (311,274)



- - (140,241) - (140,241)

Net changes in fair value of Available for Sale Investments - - (7,463) - (7,463)

Actuarial Gain on Retirement Benefit Obligation, net of tax - - - 84,868 84,868

Total comprehensive income/(expense) for the Year - - (147,704) (226,406) (374,110)

Transactions with owners of the Company, recognized directly in equity - - - - -

Balance as at 31st March, 2017 680,000 240,000 5,663 749,959 1,675,622


The Accounting Policies and Notes on pages 38 to 93 form an integral part of these Financial statements.

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CASH FLOW STATEMENT

Group CompanyFor the year ended 31st March 2017 2016 2017 2016

Rs`000 Rs`000 Rs`000 Rs`000 (Restated) (Restated)

CASH FLOWS FROM OPERATING ACTIVITIESLoss before Income Tax Expense (369,413) (888,894) (350,830) (943,984)

Adjustments for :Depreciation/Amortisation 368,751 302,875 303,419 229,738 Inventory write off - 12,339 - -Provision for impairment of Available for Sale Investments - 146,078 - 126,331 Fair Value (gain) of Biological Assets (54,375) (7,973) (54,375) (7,973)Profit on Disposal of Property, Plant and Equipment (35,477) (11,599) (13,782) (9,516)Profit on disposal of Available for Sale Investments (172,617) - (172,617) - Interest Income (1,644) (691) (1,175) (691)Interest Expense 750,218 504,165 533,429 504,165 Exchange (gain) / Loss (28,817) (9,619) (23,052) 55,123 Provision for impairment of receivables 15,069 5,024 - -Bad debt write off - 114 - -Provision for Obsolete inventories (3,789) 4,190 - -Provision for impairment in Investment in Subsidiaries - - 68,172 171,678 Provision for impairment of amount due from Related Parties - - - -Provision for Retirement Benefit Obligation 123,192 117,209 118,039 111,527 Amortisation of Grants (9,879) (9,782) (9,879) (9,782)Operating Profit before working capital changes 581,219 163,436 397,349 226,616

(Increase)/Decrease in Inventories (139,342) 606,314 (19,443) 175,965 (Increase)/Decrease in Trade & Other Receivables 19,680 236,881 21,937 (8,541)(Increase)/Decrease in Amounts Due from Related Parties 17,031 (42,944) 454,299 (14,714)Increase/(Decrease) in Trade & Other Payables 509,155 (356,445) 266,396 365,831 Increase/(Decrease) in Amounts Due to Related Parties 46,256 28,053 212,879 96,531 Cash Generated from Operations 1,033,999 635,295 1,333,417 841,688

Income Tax/ESC paid (23,136) (20,233) - (18,414)Interest Received 1,644 691 1,175 691 Interest Paid (746,291) (503,133) (541,434) (503,133)Gratuity Paid (54,828) (44,716) (43,346) (38,237)Net Cash Generated from/(Used in) Operating Activities 211,388 67,904 749,812 282,595

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of Property, Plant and Equipment (233,233) (85,579) (29,385) (56,405)Investment in Immature Plantations (302,876) (256,618) (216,992) (266,163)Proceeds from Disposal of Property, Plant & Equipment 45,340 12,568 13,782 12,568 Net investment in Fixed Deposit 5,852 (47,477) 5,852 (47,477)Net investment in sinking fund - - (13,463) -Purchase of available for sale investments - (338) - (188)Proceeds from disposal of investment 457,214 49,712 457,214 - Net cash Generated from/(used in) Investing Activities (27,703) (327,732) 217,008 (357,665)

CASH FLOWS FROM FINANCING ACTIVITIESPayments of Finance Lease Rental (26,173) (40,039) (26,173) (40,039)Payments to Lessor on Leasehold Rights (248,413) - (248,413) -Proceeds from Long Term Borrowings 627,022 386,832 174,816 386,832 Repayments of Long Term Borrowings (741,354) (368,460) (658,401) (368,460)Grants Received 13,422 23,139 13,422 23,139 Dividend Paid - (62) - -Net Cash Generated from/( used in) Financing Activities (375,496) 1,410 (744,749) 1,472

Net Increase/(Decrease) in Cash and Cash Equivalents (191,811) (258,418) 222,071 (73,598)Cash and Cash Equivalents at the beginning of the year 189,428 378,812 (448,726) (375,363)Effect of Exchange Rate changes (3,730) 69,034 (1,123) 235 Cash and Cash Equivalents at the end of the year (Note 21) (6,112) 189,428 (227,778) (448,726)


The Accounting Policies and Notes on pages 38 to 93 form an integral part of these Financial Statements.


NOTES TO THE FINANCIAL STATEMENTS

1 REPORTING ENTITY

Kotagala Plantations PLC is a limited liability Company incorporated and domiciled in Sri Lanka, under the Companies Act No. 17 of 1982 (reregistered under the Companies Act No. 7 of 2007) in terms of the provisions of the Conversion of Public Corporation and Government Owned Business Undertaking into Public Companies Act No. 23 of 1987. The registered office of the Company is located at No 53-1/1, Sir Baron Jayathilaka Mawatha, Colombo 01 and Plantations are situated in the planting districts of Nuwara Eliya and Kalutara.

The consolidated financial statements of the Group as at and for the year ended 31st March 2017 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”).

1.1 Historical Background

The Company was formed on 22 June 1992 under the Companies Act No. 17 of 1982 (reregistered under the Companies Act No. 7 of 2007) in terms of the provisions of the conversion of Corporations and Government Owned Business Undertakings in to Public Companies Act No. 23 of 1987, to take over the plantations which were owned and Managed by Janatha Estate Development Board (JEDB) and the Sri Lanka Estate Plantation Corporation (SLSPC) both of which owned and managed a number of plantations and estates.

1.2 Parent and Ultimate Parent Group

The Group’s parent undertaking and controlling party is Lankem Plantation Holdings Limited which is incorporated in Sri Lanka as a limited liability Group, and the ultimate parent Group is The Colombo Fort Land and Building PLC.

1.3 Principal Activities and Nature of Operations

During the year, the principal activity of the Group was the cultivation, manufacture and sale of Tea, Rubber and cultivation and sale of Oil Palm.

2. BASIS OF PREPARATION

2.1 Statement of Compliance

The Financial Statements of the Group have been prepared in accordance with Sri Lanka Accounting Standards (SLFRSs and LKASs) as issued by the Institute of Chartered Accountants of Sri Lanka (ICASL) and in compliance with the requirements of Companies Act No. 7 of 2007.

Where appropriate, specific policies are explained in the succeeding notes. No adjustments have been made for inflationary factors in the Financial Statements. The said Financial Statements are prepared in Sri Lankan Rupees. (Rs.) The Directors are responsible for preparation and presentation of these financial statements.

2.2 Basis of Measurement

The Financial Statements have been prepared on historical cost basis except where appropriate disclosures are made with regard to fair value under relevant notes. Assets and liabilities are grouped by nature and in

an order that reflect their relative liquidity. The Financial Statements have been prepared on the assumption that the Company will continue as a going concern for the foreseeable future.

2.3 Functional and Presentation Currency

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

2.4 Use of Estimates and Judgements

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

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

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in the Company’s Financial Statements is included in the respective notes.

2.5 Going Concern

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

3 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

3.1 Basis of consolidation

3.1.1 Business combinations

The Group measures goodwill as the fair value of the consideration transferred including the recognised amount of any non-controlling interest in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. When the excess is negative, a bargain purchase gain is recognised immediately in the statement of comprehensive income.

The Group elects on a transaction-by-transaction basis whether to measure non-controlling interest at its fair value, or at its proportionate share of the recognised amount of the identifiable net assets, at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

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3.1.2 Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of the subsidiaries have been changed when necessary to align them with the policies adopted by the Group.

3.1.3 Investments in Associates

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

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

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

3.2 Foreign Currency Translations

Transactions in foreign currencies are translated to Sri Lankan Rupees at the exchange rates prevailing at the date of transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to Sri Lankan Rupees at the exchange rates at that date.

The foreign currency gain or loss on monetary items is the difference between the amortised cost in Sri Lankan Rupees at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period.

Non-monetary assets and liabilities which are stated at historical cost denominated in foreign currencies are translated to Sri Lankan Rupees at the exchange rate at the dates of the transactions. Non monetary assets and liabilities that are stated at fair value, denominated in foreign currencies are translated to Sri Lankan Rupees at the exchange rate that the fair value was determined. Foreign exchange differences arising on translation are recognized in Comprehensive Income.

3.3 Assets and Basis of their Valuation

Assets classified as current assets on the Statement of Financial Position are cash and bank balances and those which are expected to be realized in cash during the normal operating cycle or within one year from the reporting date, whichever is shorter.

3.3.1 Financial Assets and Financial Liabilities

3.3.1.1 Initial Recognition and Measurement

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

A financial asset or financial liability is measured initially at fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.

3.3.1.1.1 Financial Assets

At inception, financial assets are classified in one of the following categories.

• Financial assets at fair value through profit or loss

• Loans and receivables

• Held to maturity investments

• Available for sale financial assets

The Group determines the classification of its financial assets at initial recognition. All financial assets are recognized at fair value plus, in the case of assets not for fair value through profit or loss, directly attributable transaction cost.

3.3.1.1.2 Financial Liabilities

The Group initially recognizes all financial liabilities on the date that they are originated and classifies its financial liabilities as measured at amortized cost or fair value through profit or loss.

3.3.1.2 Subsequent Measurement

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

3.3.1.2.1 Financial Assets at Fair Value Through Profit or Loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by LKAS 39. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets at fair value through profit and loss are carried in the statement of financial position at fair value with changes in fair value recognized in finance income or finance costs in the Statement of Comprehensive Income.

The Group has not specified any financial asset at fair value through profit or loss.


3.3.1.2.2 Loans and receivables

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

The Loans and receivables financial assets of the Group comprise Trade & Other Receivables, cash and cash equivalents and Amounts Due from Related Parties.

3.3.1.2.3 Held-to-maturity investments

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

The held-to-maturity investments of the Group comprise Debenture and Fixed Deposit Investments.

3.3.1.2.4 Available-for-sale financial investments

Available-for-sale financial investments include equity and debt securities. Equity investments classified as available-for-sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in the market conditions.

After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealized gains or losses recognized as other comprehensive income in the available-for-sale reserve until the investment is derecognised, at which time the cumulative gain or loss is recognized in other operating income, or determined to be impaired, at which time the cumulative loss is reclassified to the Statement of Comprehensive Income in finance costs and removed from the available-for-sale reserve. Interest income on available-for-sale debt securities is calculated using the effective interest method and is recognized in profit or loss.

The available-for-sale investments of the Group comprise Equity Investments.

3.3.1.3 Derecognition of financial assets and financial liabilities

3.3.1.3.1 Financial Assets

A financial asset (or, where applicable 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.

3.3.1.3.2 Financial Liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognized in profit or loss.

3.3.1.4 Offsetting

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

Income and expenses are presented on a net basis only when permitted under SLFRSs, or for gains and losses arising from a group of similar transactions.

3.3.1.5 Amortized Cost Measurement

The amortized cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount recognized and the maturity amount, minus any reduction for impairment.

3.3.1.6 Fair Value Measurement

Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in absence, the most advantageous market to which the Group has access at the date.

If a market for a financial instrument is not active, then the group establishes fair value using a valuation technique. Valuation techniques include using recent arm’s length transactions between knowledgeable, willing parties (if available), reference to the current fair value of other


41

instruments that are substantially the same and discounted cash flow analyses. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Group, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. The Group calibrates valuation techniques and tests them for validity using prices from observable current market transactions in the same instrument or based on other available observable market data.

Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and the counterparty where appropriate.

3.3.1.7 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 (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

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

3.3.1.8 Financial Assets Carried at Amortized Cost

For financial assets carried at amortized cost, the Group assesses individually whether objective evidence of impairment exists for financial assets. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the Statement of Comprehensive Income.

If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write–off is later recovered, the recovery is credited to the Comprehensive Income.

3.3.1.9 Available-For-Sale Financial Investments

For available–for–sale financial investments, the Group assesses at each Statement of Financial Position date whether there is objective evidence that an investment is impaired.

In the case of debt instruments classified as available–for–sale, the Group assesses individually whether there is objective evidence of impairment based on the same criteria as financial assets carried at amortized cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in the Comprehensive Income. If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to a credit event occurring after the impairment loss was recognized in the Comprehensive Income, the impairment loss is reversed through Comprehensive Income.

In the case of equity investments classified as available–for–sale, objective evidence would also include a ‘significant’ or ‘prolonged’ decline in the fair value of the investment below its cost. Where 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 recognized in the Statement of Comprehensive Income – is removed from equity and recognized in the Statement of Comprehensive Income. Impairment losses on equity investments are not reversed through the Statement of Comprehensive Income; increases in the fair value after impairment are recognized in Other Comprehensive Income.

3.3.1.10 Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial Position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously.

3.3.2 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 Cash Flow Statement, cash and cash equivalents consist of cash in hand and deposits in Groups net of outstanding Group overdrafts. Interests paid and received are classified as operating cash flows for the purpose of presentation of Cash Flow Statement. The cash flow Statement reported is based on indirect method.

3.3.3 Property, Plant and Equipment

3.3.3.1 Recognition and measurement

The Property, Plant and Equipment are recorded at cost less accumulated depreciation and impairment losses.

Items of property, plant and equipment are derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset is included in the Statement of Comprehensive Income in the year the asset is derecognised.


The cost of Property, Plant and Equipment is the cost of purchase or construction together with any expenses incurred in bringing the assets to its working condition for its intended use. Expenditure incurred for the purpose of acquiring, extending or improving assets of permanent nature by means of which to carry on the businesses or to increase the earning capacity of the business has been treated as capital expenditure. The cost of property, plant and equipment is the cash price equivalent at the recognition date.

The carrying values of property plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

- Subsequent Costs/ Replacement of Parts.

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

3.3.3.2 Depreciation/Amortisation

Provision for depreciation is calculated by using a straight-line method on the cost or valuation of all property, plant and equipment, in order to write off such amounts over the estimated useful economic life of such assets. The leased assets are depreciated over the shorter of the lease term and their useful lives.

Buildings & Land Improvement Over 40 years Plant & Machinery Over 13 1/3 years CTC Machinery Over 20 Years Furniture & Fittings Over 10 years Motor Vehicles Over 5 years Equipment Over 8 years Water Projects & Sanitation Over 20 years Leasehold Assets - Plant & Machinery Over 13 1/3 years - Motor Vehicles Over 05 years Mature Plantations - Tea Over 33 1/3 years - Rubber Over 20 years

The leasehold rights of assets taken over from JEDB / SLSPC are being amortized in equal amounts, over the following years. (Lower of lease period and economic useful life).

Bare Land Over 53 years Mature Plantations - Tea & Rubber Over 30 years - Others Over 25 years Buildings Over 25 years Plant & Machinery Over 15 years Land Development Cost Over 30 years Water Supply Scheme Over 30 years

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised. Leased assets are depreciated over the shorter of the leased term and their useful lives. The useful life, residual values and depreciation methods of assets are reviewed, and adjusted if required, at the end of each financial year.

3.3.3.3 Assets held for sale

Non- current assets, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held for sale, the assets are measured at lower of their carrying amount and fair value less cost to sell. Impairment losses on initial classification as held for sale and subsequent gain or losses on remeasurement are recognized in profit and loss. Gains are not recognized in excess of any cumulative impairment loss.

3.3.3.4 Permanent Land Development Costs

Permanent land development costs are those costs incurred to make major changes to land contours to build new access roads and other major infrastructure development. Such expenditure on leasehold land has been capitalized and amortized over the remaining lease period. Permanent impairments to land development costs are charged to the Statement of Comprehensive Income in full or reduced to the net carrying amounts of such asset in the year of occurrence after ascertaining the loss.

3.3.3.5 Limited Life Land Development Costs

(Immature and Mature Plantations)

The cost of new planting, replanting, interplanting and crop diversification incurred between the time of field development and being ready for commercial harvesting are classified as immature plantations. Further, the general charges incurred on the plantation are apportioned on the labour days spent on respective replanting and new planting, and capitalized on the immature areas. The remaining portion of the general charges is charged to the Statement of Comprehensive Income in the year in which it is incurred. No depreciation is provided for immature plantation. The total expenditure incurred on perennial crops (Tea and Rubber) which come into bearing during the year have been transferred to mature plantations and depreciated over its useful life time. No depreciation has been charged on mature plantations in the year of transfer. Permanent impairments to land development costs are charged to the Statement of Comprehensive Income in full or reduced to the net carrying amounts of such asset in the year of occurrence after ascertaining the loss.

3.3.3.6 Infilling Cost

Where infilling results in an increase in the economic life of the relevant field beyond its previously assessed standard of performance, the costs are capitalized and depreciated over the useful life at rates applicable to mature plantations. Infilling costs that are not capitalized have been charged to the Statement of Comprehensive Income in the year in which they are incurred.


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3.3.4 Investment Property

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

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

An investment property is measured initially at its cost. The cost of a purchased investment property comprises of its purchase price and directly attributable expenditure, the cost of the self-constructed investment property is its cost at the date of when the construction or development is completed. The Group applies the cost model for investment properties in accordance with LKAS 40 – “Investment property.”

3.3.5 Intangible assets

Software acquired by the Group is stated at cost less accumulated amortisation and accumulated impairment losses.

3.3.5.1 Subsequent expenditure

Subsequent expenditure on software assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

3.3.5.2 Amortisation

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of the software, from the date that it is available-for-use since this most closely reflects the expected pattern of consumption of the future

3.3.6 Biological Assets

Biological assets are classified as mature biological assets and Immature biological assets. Mature biological assets are those that have attained harvestable specifications or are able to sustain regular harvests. Immature biological assets are those that have not yet attained harvestable specifications. Tea, rubber, other plantations and nurseries are classified as biological assets.

Biological assets are further classified as bearer biological assets and consumable biological assets. Bearer biological assets include tea trees, those that are not Intended to be sold or harvested, however used to grow for harvesting agricultural produce from such biological assets. Consumable biological assets includes managed timber those that are to be harvested as agricultural produce or sold as biological assets

The Group recognizes the biological assets when, and only when , the entity controls the assets as a result of past event ,it is probable that future economic benefits associated with the assets will flow to the entity and the fair value or cost of the assets can be measured reliably.

The bearer biological assets are measured at cost less accumulated depreciation and accumulated Impairment losses, if any, in terms of LKAS 16- Property Plant and Equipment as per the ruling issued by the Institute of Chartered Accountants of Sri Lanka.

The managed timber is measured on initial recognition and at the end of each reporting periods at Its fair value less cost to sell in terms of LKAS 41. The cost is treated as approximation to fair value of young plants as the Impact on biological transformation of such plants to price during this period is immaterial. Timber trees are measured at fair value at date of reporting by the management or by an independent professionally qualified valuer if the board of directors determines necessary. All details of the valuation and the assumptions are given in note 16.2.2 to the financial statements.

Nursery cost includes the cost of direct materials , direct labour and an appropriate proportion of directly attributable overheads.

The gain or loss arising on initial recognition of biological assets at fair value less cost to sell and from a change in fair value less cost to sell of biological assets are included in profit or loss for the period in which it arises.

The company recognizes its agricultural produce prior to harvest separately from its bearer plants. Such agricultural produce prior to harvest continues to be in the scope of LKAS 41 and measured at fair value less costs to sell. Changes in the fair value of such agricultural produce is recognized in the profit or loss at the end of each reporting period.

When deriving the estimated quantity, the company limits it to one harvesting cycle and the quantity is ascertained based on last day of harvest in the immediately preceding cycle in order to ascertain the fair value of produce growing on trees. 50% of the estimated crop in the harvesting cycle is considered for the valuation of the produce, the company uses bought leaf rate (current month) less costs of harvesting and transport.

3.3.7 Leased Assets

Property, Plant and Equipment on finance leases, (which effectively transfer substantial risks and benefits incidental to ownership of the leased item) are capitalized at their cash price, and depreciated/amortized over the period the Company is expected to benefit from the use of the leased assets. The corresponding principal amount payable to the lessor is shown as a liability. The interest element of the rental obligation applicable to each financial year is charged to the Statement of Comprehensive Income over the period of the lease so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The cost of improvements to the leased property is capitalized and depreciated over the unexpired period of the lease or the estimated useful lives of the improvements whichever is shorter.

3.3.8 Inventories

Inventories other than produce stocks are valued at the lower of cost and estimated net realisable value, after making due allowance for obsolete and slow moving items. Net realisable value is the price at which stocks can be sold in the normal course of business after allowing for cost of realisation and/or cost of conversion from their existing state to saleable condition. Cost is arrived as follows, Input Material At actual cost on FIFO basis. Growing Crop Nurseries At the cost of direct materials, direct labour, and an appropriate proportion of directly attributable overheads less provision for overgrown plants. Spares and Consumables At actual cost on FIFO basis. Produce Stocks Valued on the basis of estimated realisable price or since realised price.


3.3.9 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 indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating units (CGU) fair value less costs to sell and its value in use. Where the carrying amount of an asset or CGU 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. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

3.4 Revenue and Expenditure Recognition

3.4.1 Revenue Recognition

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

The following specific criteria are used for recognition of revenue:

a) In keeping with the practice in the Plantation Industry, revenue on Perennial crops are recognized in the financial period of harvesting. Revenue is recorded at invoice value net of brokerage, sale expenses and other levies related to revenue.

b) Gains or losses of a revenue nature have been accounted for in the Statement of Comprehensive Income.

c) Interest income is recognised on accrual basis.

d) Other income is recognised on accrual basis.

3.4.2 Expenditure Recognition

a) All expenditure incurred in the running of the business and in maintaining the Property, Plant and Equipment in state of efficiency has been charged to the Statement of Comprehensive Income in arriving at the profit/(loss) for the year.

b) For the purpose of presentation of Statement of Comprehensive Income, the Directors are of the opinion that function of expenses method presents fairly the elements of the enterprise’s performance and, hence such presentation method is adopted.

3.4.2.1 Income Tax

Income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

3.4.2.1.1 Current Tax

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. The elements of income and expenditure as reported in the financial statements and computed in accordance with the provisions of the Inland Revenue Act No. 10 of 2006 and amendments thereto. Relevant details are disclosed in note 7 to the Financial Statements.

3.4.2.1.2 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 assets and liabilities are recognised for all temporary differences. 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 utilized. 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 profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the year when the asset is realised or liability is settled, based on the tax rates and tax laws that have been enacted or substantively enacted as at the Reporting date. Income tax relating to items recognized directly in equity is recognised 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 tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

3.4.2.2 Borrowing Costs

Borrowing costs are recognised as an expense in the period in which they are incurred, except to the extent where borrowing costs that are directly attributable to the acquisition, construction, or production of a qualifying asset, which takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the specific asset. Borrowing Costs that are not capitalised are recognised as expenses in the period in which they are incurred and charged to the Statement of Comprehensive Income. Borrowing costs incurred in respect of loans that are utilised for field development activities have been capitalized as a part of the cost of the relevant Immature Plantation. The capitalisation will cease when the crops are ready for commercial harvest. The amount so capitalised and the capitalisation rates are disclosed in the notes to the financial statements.


45

3.5 Liabilities and Provisions

3.5.1 Retirement Benefits to Employees

3.5.1.1 Defined Benefit Plans

A defined benefit plan is a post employment benefit plan other than a defined contribution plan.

Retiring Gratuity

The Retirement Benefit Plan adopted is as required under the Payment of Gratuity Act No. 12 of 1983. This item is grouped under Retirement Benefit Obligation in the Statement of Financial Position.

Provision for Gratuity on the employees of the Company is on an actuarial basis using the Projected Unit Credit Method (PUC Method) as recommended by Sri Lanka Accounting Standard 16 (Revised 2006), “Employee Benefits” which became effective from the financial year commencing after 1st July 2007. The Company continues to use actuarial method under Sri Lanka Accounting Standard 19, “Employee Benefits” effective from the financial year commencing on 1st January 2012.

However, under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of 5 years of continued service. The liability is not externally funded.

A provision is recognized in the Statement of Financial Position when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation.

The Company adopted LKAS 19 “Employee Benefits” (Revised in 2013) with effect from 1st January 2013 in accordance with the transitional provisions in the standard and changed its basis for determining the income or expense related to defined benefit plans;

The Company recognizes all the re-measurements of the net defined benefit liability in other comprehensive income. Re measurements of the net defined benefit liability comprise an actuarial gain or loss.

The liability is not externally funded. However according to the Payment of Gratuity Act No. 12 of 1983, the liability for payment to an employee arises only after the completion of 5 years continued services.

3.5.1.2 Defined Contribution Plans - EPF, ESPS, CPPS and ETF

All employees who are eligible for defined Provident Fund Contributions (EPF, ESPS and CPPS) and Employees Trust Fund Contributions are covered by relevant contributory funds in line with respective statutes.

3.5.2 Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, and 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. The expense relating to any provision is presented in the Statement of Comprehensive Income net of any reimbursement.

3.5.3 Capital commitments and contingencies

Contingent liabilities are possible obligations whose existence will be confirmed only by occurrence or non-occurrence uncertain future events not wholly within the control of the Company or present obligations where the transfer of economic benefit is not probable or cannot be reliably measured. Contingent liabilities are not accounted in the Statement of Financial Position but are disclosed unless they are remote.

Capital commitments and contingent liabilities of the Company are disclosed in the respective Notes to the Financial Statements.

3.5.4 Deferred Income

3.5.4.1 Grants and Subsidies

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

3.6 Segmental Reporting

A Segment is a distinguishable component of the Group that is engaged in providing services, which is subject to different risks and rewards. The Group’s core business is manufacturing and sale of Tea and this line of business accounts for the entire operation of the Group. The Group’s business is located in different geographical locations where the risks and rewards related to each segment could be identified. Revenue and expenses directly attributable to each segment are allocated intact to the respective segments. Revenue and expenses not directly attributable to a segment are allocated on the basis of their resource utilisation wherever possible. Assets and Liabilities directly attributable to each segment are allocated intact to the respective segments. Assets and Liabilities, which are not directly attributable to a segment, are allocated on a reasonable basis whenever possible.

3.7 Comparative Information

The Accounting Policies have been consistently applied by the Group with those used in the previous year. Previous year’s figures and phrases have been rearranged wherever necessary to conform to the current year’s presentation.

3.8 Events occurring after the Reporting Date

All material events after the reporting date have been considered and where appropriate adjustments or disclosures have been made in the respective Notes to the Financial Statements.


4 NEW ACCOUNTING STANDARDS ISSUED BUT NOT EFFECTIVE AS AT THE REPORTING DATE

The Institute of Chartered Accountants of Sri Lanka has issued the following new Sri Lanka Accounting Standards which will become applicable for financial periods beginning and after the 1st of January 2017. Accordingly, these standards have not been applied in preparing these Financial Statements.

4.1 Sri Lanka Accounting Standard 9 - “Financial Instruments”

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

An entity shall apply this SLFRS to all items within the scope of LKAS 39 Financial Instruments: Recognition and Measurement. SLFRS 9 is effective for annual reporting periods beginning on or after 1st January 2018, with early adoption permitted.

4.2 Sri Lanka Accounting Standard 15 - “Revenue from contracts with Customers”

SLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including LKAS 18 Revenue, LKAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes.

SLFRS 15 is effective for annual reporting periods beginning on or after 1st January 2017, with early adoption permitted. However, IASB has deferred the adoption of IFRS 15 which corresponds to SLFRS 15 to be adopted from financial reporting periods beginning on or after 1st January 2018.

4.3 Sri Lanka Accounting Standard - SLFRS 16 Leases

SLFRS 16 requires lessees to recognise all leases to recognise all leases on their Statement of Financial Position as leases liabilities with the corresponding right of use assets. The profit or loss recognition pattern for recognised leases will be similar to existing finance lease accounting, with interest and depreciation expense recognized separately in Profit or Loss.

SLFRS 16 is effective for annual periods beginning on or after 1st January 2019.

Accordingly, these Standards have not been applied in preparing these financial statements.


47

Group Company

For the year ended 31st March 2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000

5 REVENUESale of ProduceTea 2,368,004 2,375,883 2,368,004 2,375,883 Rubber 765,086 771,139 684,233 649,614 Oil Palm 34,173 12,615 34,173 12,615 Tea Exports 4,151,844 3,524,396 - -

7,319,107 6,684,033 3,086,410 3,038,112

5.1 Operating Segments - Group

Segmental Analysis of Principal Crops

Tea Rubber Oil Palm Tea Exports TotalFor the year ended 31st March 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

a.) Segmental ResultRevenue 2,368,004 2,375,883 765,086 771,139 34,173 12,615 4,151,844 3,524,396 7,319,107 6,684,033 Less: Cost of Sales (2,194,973) (2,437,760) (915,859) (822,509) (40,572) (20,167) (3,902,517) (3,283,968) (7,053,921) (6,564,404)Gross Profit 173,031 (61,877) (150,773) (51,370) (6,399) (7,552) 249,326 240,428 265,186 119,629 Less: Unallocated Expenses (1,052,699) (1,229,803)Add: Other Income 418,101 221,280Loss before Income Tax Expense (369,413) (888,894)Share of Profit of Associate Company 1,981 1,504 Income Tax Reversal 48,027 133,989Other Comprehensive Income (52,466) 229,451 Net Loss for the year (371,871) (523,950)

b.) Segmental AssetsNon current assets 1,310,085 1,626,056 2,621,575 2,602,573 473,893 449,642 1,429,439 1,289,171 5,834,992 5,967,442 Current assets 850,804 870,888 979,539 924,421 3,204 1,841 1,873,020 1,351,337 3,706,565 3,148,487

2,160,889 2,496,944 3,601,114 3,526,994 477,097 451,483 3,302,458 2,640,508 9,541,557 9,115,929 Unallocated 816,837 1,529,298 Total Assets 10,358,395 10,645,228

c.) Segmental LiabilitiesNon current liabilities 681,725 872,488 347,312 593,804 - - 164,251 190,686 1,193,288 1,656,978 Current liabilities 605,644 298,772 151,231 327,559 - - 1,979,021 1,444,100 2,735,896 2,070,431

1,287,370 1,171,260 498,544 921,363 - - 2,143,273 1,634,786 3,929,185 3,727,409 Unallocated 4,830,861 4,947,604 Total Liabilities 8,760,051 8,675,013

d.) Segmental Capital ExpenditureCapital Expenditure 92,764 120,787 253,746 192,985 43,723 95,413 203,703 26,624 593,936 435,810 Unallocated - - - - - - - - 28,059 22,147 Total Capital expenditure 92,764 120,787 253,746 192,985 43,723 95,413 203,703 26,624 621,995 457,958

e.) Segmental DepreciationDepreciation 111,442 135,137 158,414 71,330 19,472 8,374 65,332 70,613 354,661 285,454 Unallocated - - - - - - - - 14,090 17,421 Total Depreciation 111,442 135,137 158,414 71,330 19,472 8,374 65,332 70,613 368,751 302,875



5.1 Operating Segments - Company

Segmental Analysis of Principal Crops

Tea Rubber Oil Palm TotalFor the year ended 31st March 2017 2016 2017 2016 2017 2016 2017 2016

Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

a.) Segmental ResultRevenue 2,368,004 2,375,883 684,233 649,614 34,173 12,615 3,086,410 3,038,112 Less: Cost of Sales (2,194,973) (2,437,742) (840,798) (711,461) (40,573) (20,167) (3,076,343) (3,169,370)Gross Profit 173,031 (61,859) (156,565) (61,847) (6,400) (7,552) 10,067 (131,258)Less: Unallocated Expenses (753,614) (1,005,908)Add: Other Income 392,717 193,182Loss before Income Tax Expenses (350,830) (943,984)Income Tax Expenses 39,556 105,595Other Comprehensive Income (62,836) 219,652Loss for the year (374,110) (618,737)

b.) Segmental AssetsNon current assets 1,310,085 1,229,076 2,620,778 2,601,824 473,893 449,642 4,404,756 4,280,542 Current assets 1,819,602 341,871 158,666 111,825 3,204 1,841 1,981,472 455,537

3,129,687 1,570,947 2,779,445 2,713,649 477,097 451,483 6,386,228 4,736,079 Unallocated 2,178,086 4,456,084Total Assets 8,564,317 9,192,168

c.) Segmental LiabilitiesNon current liabilities 681,725 780,273 346,556 593,269 - - 1,028,281 1,373,542Current liabilities 605,644 496,370 423,610 319,863 - - 1,029,254 816,233

1,287,369 1,276,643 770,166.17 913,132 - - 2,057,535 2,189,775Unallocated 4,831,156 4,952,659Total Liabilities 6,888,695 7,142,436

d.) Segmental Capital ExpenditureCapital Expenditure 70,060 108,243 190,420 223,959 43,723 95,413 304,203 427,615Unallocated - - - - - - 28,059 22,147Total Capital Expenditure 70,060 108,243 190,420 223,959 43,723 95,413 332,262 449,762

f.) Segmental DepreciationDepreciation 111,442 94,751 158,414 109,192 19,472 8,374 289,329 212,317Unallocated - - - - - - 14,090 17,421Total Depreciation 111,442 94,751 158,414 109,192 19,472 8,374 303,419 229,738

49

Group Company

For the year ended 31st March 2017 2016 2017 2016

Rs`000 Rs`000 Rs`000 Rs`000

6. OTHER OPERATING INCOME

Amortization of Capital Grants 9,880 9,781 9,880 9,781

Profit on Disposal of Property, Plant and Equipment 35,477 11,599 13,782 9,516

Profit on Disposal of Available for Sale Investments (Note 6.1) 172,617 - 172,617 -

Sale of Rubber and Other Trees 95,910 102,107 95,910 102,107

Rent Income 17,836 25,236 11,225 11,453

Sale of Refuse Tea 5,943 17,766 5,943 17,766

Dividend Income 15,519 20,588 14,429 19,655

Sundry Income 10,545 26,231 14,556 14,931

363,725 213,307 338,342 185,209

6.1 The Company disposed the total investment in C W Mackie PLC , Lankem Development PLC , Sigiriya Village Hotels PLC, Marawila Resorts PLC and part of its stake in Beruwala Resorts PLC during the year ended 31st March 2017.

Group Company


Rs`000 Rs`000 Rs`000 Rs`000

7. LOSS BEFORE INCOME TAX

Is stated after charging all expenses including the following;

Directors’ Emoluments 35,182 38,995 8,400 8,400

Auditor’s Remuneration - Audit fees and expenses 5,298 4,765 4,400 4,000

- Audit related services 175 156 175 156

Provision for impairment in investment in subsidiaries - - 68,172 171,678

Provision for impairment on other receivables 20,093 5,024 - -

Depreciation/Amortization

- Leasehold rights to Bare Land 6,458 6,458 6,458 6,458

- Immovable Leased Assets 55,620 15,245 55,620 15,245

- Tangible Property, Plant and Equipment 165,854 165,994 105,118 95,301

- Mature Plantations 136,222 112,735 136,222 112,735

- Investment Property 2,442 2,443 - -

- Intangible Assets 2,153 - - -

Personnel Cost Includes;

- Salaries and Wages 1,890,554 1,772,793 1,781,095 1,664,141

- Defined Benefit Plan Cost - Retiring Gratuity 123,192 117,209 118,039 111,527

- Defined Contribution Plans - EPF, ETF,CPPS and ESPS 304,119 202,571 290,274 188,107



Group Company


Rs`000 Rs`000 Rs`000 Rs`000

8. NET FINANCE COSTS

Finance Income

Interest Income 1,644 3,326 1,175 691

Exchange Gain 91,826 72,470 23,052 -

93,470 75,796 24,227 691

Finance Cost On;

Bank Overdraft (50,174) (8,973) (50,097) (8,873)

Finance Leases (5,157) (14,647) (5,157) (14,647)

Net Obligation to Lessor (72,723) (70,805) (72,723) (70,805)

Debentures (135,846) (122,272) (135,846) (122,272)

Bank Loans (215,543) (255,140) (143,131) (184,108)

Broker Advances (68,081) (60,148) (68,081) (60,148)

Related Company Loans - (4,299) (23,456) (4,299)

Exchange Loss (63,008) (130,234) - (55,123)

Other interest (53,801) (44,989) (34,939) (39,013)

(664,333) (711,507) (533,430) (559,288)

Net Finance Costs (570,863) (635,711) (509,202) (558,597)

51

9. INCOME TAX EXPENSE

9.1 Current Taxation

Profits from any agriculture undertaking which falls within Section 16 of the Inland revenue Act No.10 of 2006, was exempt for a period of 5 years from 2006/2007 (expired on 31st March 2011). Such profits are liable for income tax at 10% from the year of assessment 2011/2012. Therefore the corporate rate of tax applicable for Agriculture is 10% and manufacturing and other income is 28%.

Group Company


Rs`000 Rs`000 Rs`000 Rs`000

Recognized in the Profit or Loss

Income tax on Profits for the Year (Note 9.2) 5,922 2,483 237 126

Under Provision in respect of Prior years 5,259 2,132 13 -

Provision for Deferred Taxation (Note 27) (59,208) (138,605) (39,806) (105,721)

(48,027) (133,989) (39,556) (105,595)

Recognized in Other Comprehensive Income

Income tax on Profits for the Year - - - -

Provision for Deferred Taxation 21,659 27,393 21,651 26,799

21,659 27,393 21,651 26,799

9.2 Reconciliation between accounting loss and Income tax

Accounting loss before Income Tax Expense (369,413) (888,894) (350,830) (943,984)

Aggregate disallowable items 753,749 514,352 655,360 660,230

Aggregate allowable expenses (759,028) (460,239) (648,272) (425,745)

Statutory Loss from Business (374,692) (834,781) (343,743) (709,499)

Other Sources of Income 32,909 13,827 1,305 691

Total Statutory Income 32,909 13,827 1,305 691

Tax Losses set off during the Year (Note 9.3) (11,759) (4,959) (457) (242)

Assessable Income 21,150 8,868 848 450

Taxable Income 21,150 8,868 848 450

Income Tax at the rate of 10% - -

Income Tax at the rate of 28% 5,922 2,483 237 126

Current Income Tax Expense 5,922 2,483 237 126

9.3 Accumulated Tax Losses

Tax Loss Brought Forward 2,700,153 1,882,971 2,579,588 1,841,407

Adjustment in respect of prior years 138,774 (12,640) 23,131 28,924

Business loss for the year 374,692 834,781 343,743 709,499

Tax Losses set off during the year (11,759) (4,959) (457) (242)

Tax Loss Carried Forward 3,201,860 2,700,153 2,946,005 2,579,588



10. LOSS PER SHARE

The computation of Loss per Share is based on loss attributable to ordinary shareholders after tax for the year divided by the weighted average number of ordinary shares outstanding during the year and calculated as follows;

Group Company



Amount used as the Numerator

Loss attributable to Ordinary Shareholders (Rs.'000) (319,405) (753,401) (311,274) (838,389)

Amount used as the Denominator

Weighted average number of Ordinary Shares ('000) 40,000 40,000 40,000 40,000

Loss per Share (Rs.) (7.99) (18.83) (7.78) (20.96)

11. LEASEHOLD RIGHT TO BARE LAND OF JEDB/SLSPC ESTATES

The leases of all the 23 estates have been executed and will be retroactive from 22nd June, 1992. The leasehold rights to land on all these estates have been taken into the books of the Company as at 22nd June, 1992 immediately after formation of the Company, in terms of the ruling obtained from the Urgent Issues Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka. For this purpose, the Board decided at its meeting held on 8th March,1995 that these bare lands would be revalued, at the value established for these lands, by the valuation Specialist Mr.D.R.Wickramasinghe, just prior to the formation of the Company. The value taken into the 22nd June, 1992, Statement of Financial Position and the amortisation of leasehold rights upto 31st March, 2017 are as follows.

Company / Group

Revaluation

Life ofthe Asset

As at 22.06.1992

Balance as at 31.03.2017


Rs`000 Rs`000 Rs`000

Leasehold Right to Bare Land of

JEDB/SLSPC Estates 53 years 358,928 342,287 342,287

Amortisation Balance Charge Balance Carrying Value

as at for as at As at As at

01.04.2016 the year 31.03.2017 31.03.2017 31.03.2016

Rs`000 Rs`000 Rs`000 Rs`000 Rs`000

153,568 6,458 160,026 182,260 188,718

53

12. IMMOVABLE LEASED ASSETS OF JEDB/SLSPC ESTATES (OTHER THAN BARE LAND)

The leases of all the 23 estates have been executed and will be retroactive from 22nd June 1992. The leasehold rights to land on all these estates have been taken into the books of the Company as at 22nd June 1992 immediately after formation of the Company,in terms of the ruling obtained from the Urgent Issue Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka based on then existing accounting standards. For this purpose, the Board decided at its meeting held on 8th March 1995 that these barelands would be revalued, at the value established for these lands , by the valuationpecialist Mr. D R Wickramasinghe , just prior to the formation of the Company. The value taken into 22nd June, 1992, statement of Financial Position and the amortisation of leasehold rights upto 31st March 2017 are as follows,

Company / Group

Revaluation

Life ofthe Asset

As at 22.06.1992



Rs`000 Rs`000 Rs`000

Land Development Cost 30 years 6,712 6,701 6,701 Buildings other than worker housing 25 years 26,519 25,902 25,902 Plant & Machinery 15 years 8,757 8,757 8,757 Water Projects and Sanitations 30 years 8,688 8,688 8,688 Mature Plantations - Tea 30 years 69,767 227,655 227,655 - Rubber 30 years 61,138 172,379 172,379 - Others 25 years - 8,140 8,140 Immature Plantations - Tea 158,960 - - - Rubber 126,898 - - - Others 8,140 - -

475,579 458,222 458,222

Amortisation Balance Charge Balance Carrying Value as at for as at As at As at

01.04.2016 the year 31.03.2017 31.03.2017 31.03.2016 Rs`000 Rs`000 Rs`000 Rs`000 Rs`000

Land Development Cost 5,314 226 5,540 1,161 1,387 Buildings other than Worker Housing 24,539 998 25,537 365 1,363 Plant & Machinery 8,757 - 8,757 - -Water Projects and Sanitations 6,886 290 7,176 1,512 1,802 Mature Plantations - Tea 169,271 7,656 176,927 50,728 58,384 - Rubber 126,254 46,125 172,379 - 46,125 - Others 4,882 325 5,207 2,933 3,258 Immature Plantations - Tea - - - - - Rubber - - - - - Others - - - -

345,901 55,620 401,521 56,699 112,319

Investment in Immature Plantations at the time of handing over to the Company by way of estate leases are shown under Immature Plantations as at 22.06.1992. Further investment in such plantations to bring them to maturity are shown under Note 16.


NOTES TO THE FINANCIAL STATEMENTS13

. TA

NGIB

LE A

SSET

S (OT

HER T

HAN

MAT

URE /

IMM

ATUR

E PLA

NTAT

IONS

)

13.1

Gr

oup

Build

ings

an

d Lan

dW

ater

Proj

ects

and

Plan

t and

Mac

hine

ryM

otor

Veh

icles

Equi

pmen

tFu

rnitu

re an

d Fit

tings

Wor

k-in

Prog

ress

2017

20

16

Impr

ovem

ents

Sani

tatio

nsFr

eeho

ldLe

aseh

old

Free

hold

Leas

ehol

d

Rs`0

00Rs

`000

Rs`0

00Rs

`000

Rs`0

00Rs

`000

Rs`0

00Rs

`000

Rs`0

00Rs

`000

Rs`0

00

Cost

As at

1st A

pril

1,64

2,548

62

,038

829,1

04

71,90

3 31

4,392

91

,293

116,3

75

23,05

4 24

,765

3,17

5,47

0 3,

132,6

48

Addit

ions d

uring

the y

ear

8,40

5 59

7 19

1,906

-

5,

662

- 10

,725

79

9,21

3 22

6,58

7 15

7,907

Disp

osals

durin

g the

year

--

(5,00

0)-

(57,6

37)

--

--

(62,

637)

(36,1

13)

Trans

fers d

uring

the y

ear

-

-

2,726

(2,72

6) 57

,793

(57,7

93)

-

-

-

- (7

8,972

)

Writ

e off

durin

g the

year

(2,01

9)-

(64)

--

- (1

,215)

(722

)-

(4,0

20)

-

As at

31st

Mar

ch

1,64

8,934

62

,635

1,01

8,672

69

,177

320,2

10 33

,500

125,8

85

22,41

1 33

,978

3,33

5,40

2 3,

175,4

70

Accu

mul

ated

Dep

recia

tion

As at

1st A

pril

213,0

73

34,80

3 45

5,404

3,

388

240,9

94

76,19

5 80

,591

21,83

0 -

1,12

6,28

0 99

0,593

Char

ge fo

r the

year

34,44

2 2,

922

64,37

5 19

,489

26,79

4 6,

660

10,73

8 43

4 -

165,

854

165,9

94

Disp

osals

--

(1,61

2)-

(53,1

04)

--

--

(54,

716)

(25,5

98)

Trans

fers d

uring

the y

ear

--

--

57,79

3 (5

7,793

)-

--

- (4

,709)

Writ

e off

durin

g the

year

(191

)-

(43)

--

- (1

,122)

(722

)-

(2,0

78)

-

As at

31st

Mar

ch

247,3

24

37,72

5 51

8,124

22

,877

272,4

77

25,06

2 90

,207

21,54

2 -

1,23

5,33

8 1,

126,2

80

Carry

ing V

alue

as at

31.0

3.20

17 1,

401,

610

24,9

10

500,

548

46,3

00

47,7

33 8,

438

35,6

78

869

33,9

78

2,10

0,05

9 -

Carry

ing Va

lue as

at 31

.03.20

16 1,

429,4

75

27,23

5 37

3,700

68

,515

73,39

8 15

,098

35,78

4 1,

224

24,76

5 -

2,04

9,190

Th

e cos

t of f

ully

depr

eciat

ed it

ems o

f Pro

perty

, Pla

nt an

d Eq

uipm

ent

which

are s

till i

n us

e as a

t 31s

t Mar

ch 20

17 ar

e as f

ollo

ws.

Asse

t Cat

egor

y

2017

Rs

.

Build

ings

and

Land

Impr

ovem

ents

-

W

ater

Pro

ject

s and

Sani

tatio

ns

5,

229,

487

Plan

t and

Mac

hine

ry -

Free

hold

150,

107,

414

Mot

or Ve

hicle

s - Fr

eeho

ld

20

7,63

1,71

2

Eq

uipm

ent

59

,691

,141

Fu

rnitu

re an

d Fit

tings

13,1

63,2

19

435,

822,

974

55

13.

TANG

IBLE

ASS

ETS (

OTHE

R THA

N M

ATUR

E / IM

MAT

URE P

LANT

ATIO

NS)

13.1

Co

mpa

ny

Build

ings

an

d Lan

dW

ater

Proj

ects

and

Plan

t and

Mac

hine

ryM

otor

Veh

icles

Equi

pmen

tFu

rnitu

re an

d Fit

tings

Wor

k-in

Prog

ress

2017

20

16

Impr

ovem

ents

Sani

tatio

nsFr

eeho

ldLe

aseh

old

Free

hold

Leas

ehol

d

Rs`0

00Rs

`000

Rs`0

00Rs

`000

Rs`0

00Rs

`000

Rs`0

00Rs

`000

Rs`0

00Rs

`000

Rs`0

00

Cost

As at

1st A

pril

611,8

23

62,03

8 58

4,044

71

,903

270,0

36

91,29

3 75

,945

10,02

5 24

,765

1,80

1,87

2 1,

730,4

16

Addit

ions d

uring

the y

ear

5,00

7 59

7 7,

738

- 3,

570

- 3,

182

79

9,21

3 29

,385

14

5,362

Disp

osals

durin

g the

year

-

-

-

-

(30,1

45)

-

-

-

-

(30,

145)

(27,7

23)

Trans

fers d

uring

the y

ear

-

-

2,72

6 (2

,726)

57,79

3 (5

7,793

) -

-

-

-

(46,1

83)

As at

31st

Mar

ch

616,8

30

62,63

5 59

4,508

69

,177

301,2

54

33,50

0 79

,127

10,10

4 33

,978

1,80

1,11

1 1,

801,8

72

Accu

mul

ated

Dep

recia

tion

As at

1st A

pril

142,5

50

34,80

3 33

8,526

3,

388

208,1

15

76,19

5 62

,414

9,04

4 -

875,

036

804,4

05

Char

ge fo

r the

year

16,72

3 2,

922

32,93

9 19

,489

22,09

3 6,

660

4,04

4 24

8 -

10

5,11

8 95

,301

Disp

osals

-

-

-

-

(30,1

45)

-

-

-

(30,

145)

(24,6

70)

Trans

fers d

uring

the y

ear

-

-

-

-

57,79

3 (5

7,793

) -

-

-

-

-

As at

31st

Mar

ch

159,2

73

37,72

5 37

1,465

22,87

7 25

7,856

25

,062

66,45

8 9,

292

- 95

0,00

8 87

5,036

Carry

ing V

alue

as at

31.0

3.20

17 45

7,55

7 24

,909

22

3,04

4 46

,300

43

,398

8,

438

12,6

69

812

33,9

78

851,

103

-

Carry

ing Va

lue as

at 31

.03.20

16 46

9,273

27

,235

245,5

18

68,51

4 61

,921

15,09

8 13

,531

981

24,76

5 -

926,8

36

Th

e cos

t of f

ully

depr

eciat

ed it

ems o

f Pro

perty

, Pla

nt an

d Eq

uipm

ent

which

are s

till i

n us

e as a

t 31s

t Mar

ch 20

17 ar

e as f

ollo

ws.

Asse

t Cat

egor

y

2017

Rs

.

Build

ings

and

Land

Impr

ovem

ents

-

W

ater

Pro

ject

s and

Sani

tatio

ns

5,

229,

487

Plan

t and

Mac

hine

ry -

Free

hold

150,

107,

414

Mot

or Ve

hicle

s - Fr

eeho

ld

19

7,69

6,58

9

Eq

uipm

ent

48

,084

,697

Fu

rnitu

re an

d Fit

tings

7,87

7,22

5

408,

995,

412

13.

TANG

IBLE

ASS

ETS (

OTHE

R THA

N M

ATUR

E / IM

MAT

URE P

LANT

ATIO

NS)

13.1

Gr

oup

Build

ings

an

d Lan

dW

ater

Proj

ects

and

Plan

t and

Mac

hine

ryM

otor

Veh

icles

Equi

pmen

tFu

rnitu

re an

d Fit

tings

Wor

k-in

Prog

ress

2017

20

16

Impr

ovem

ents

Sani

tatio

nsFr

eeho

ldLe

aseh

old

Free

hold

Leas

ehol

d

Rs`0

00Rs

`000

Rs`0

00Rs

`000

Rs`0

00Rs

`000

Rs`0

00Rs

`000

Rs`0

00Rs

`000

Rs`0

00

Cost

As at

1st A

pril

1,64

2,548

62

,038

829,1

04

71,90

3 31

4,392

91

,293

116,3

75

23,05

4 24

,765

3,17

5,47

0 3,

132,6

48

Addit

ions d

uring

the y

ear

8,40

5 59

7 19

1,906

-

5,

662

- 10

,725

79

9,21

3 22

6,58

7 15

7,907

Disp

osals

durin

g the

year

--

(5,00

0)-

(57,6

37)

--

--

(62,

637)

(36,1

13)

Trans

fers d

uring

the y

ear

-

-

2,726

(2,72

6) 57

,793

(57,7

93)

-

-

-

- (7

8,972

)

Writ

e off

durin

g the

year

(2,01

9)-

(64)

--

- (1

,215)

(722

)-

(4,0

20)

-

As at

31st

Mar

ch

1,64

8,934

62

,635

1,01

8,672

69

,177

320,2

10 33

,500

125,8

85

22,41

1 33

,978

3,33

5,40

2 3,

175,4

70

Accu

mul

ated

Dep

recia

tion

As at

1st A

pril

213,0

73

34,80

3 45

5,404

3,

388

240,9

94

76,19

5 80

,591

21,83

0 -

1,12

6,28

0 99

0,593

Char

ge fo

r the

year

34,44

2 2,

922

64,37

5 19

,489

26,79

4 6,

660

10,73

8 43

4 -

165,

854

165,9

94

Disp

osals

--

(1,61

2)-

(53,1

04)

--

--

(54,

716)

(25,5

98)

Trans

fers d

uring

the y

ear

--

--

57,79

3 (5

7,793

)-

--

- (4

,709)

Writ

e off

durin

g the

year

(191

)-

(43)

--

- (1

,122)

(722

)-

(2,0

78)

-

As at

31st

Mar

ch

247,3

24

37,72

5 51

8,124

22

,877

272,4

77

25,06

2 90

,207

21,54

2 -

1,23

5,33

8 1,

126,2

80

Carry

ing V

alue

as at

31.0

3.20

17 1,

401,

610

24,9

10

500,

548

46,3

00

47,7

33 8,

438

35,6

78

869

33,9

78

2,10

0,05

9 -

Carry

ing Va

lue as

at 31

.03.20

16 1,

429,4

75

27,23

5 37

3,700

68

,515

73,39

8 15

,098

35,78

4 1,

224

24,76

5 -

2,04

9,190

Th

e cos

t of f

ully

depr

eciat

ed it

ems o

f Pro

perty

, Pla

nt an

d Eq

uipm

ent

which

are s

till i

n us

e as a

t 31s

t Mar

ch 20

17 ar

e as f

ollo

ws.

Asse

t Cat

egor

y

2017

Rs

.

Build

ings

and

Land

Impr

ovem

ents

-

W

ater

Pro

ject

s and

Sani

tatio

ns

5,

229,

487

Plan

t and

Mac

hine

ry -

Free

hold

150,

107,

414

Mot

or Ve

hicle

s - Fr

eeho

ld

20

7,63

1,71

2

Eq

uipm

ent

59

,691

,141

Fu

rnitu

re an

d Fit

tings

13,1

63,2

19

435,

822,

974



Group Company

As at 31st March 2017 2016 2017 2016

Rs`000 Rs`000 Rs`000 Rs`000

14 INVESTMENT PROPERTY

CostBalance as at 1st April 125,797 97,717 - - Transferred from Property Plant & Equipment - 28,080 - -

Balance as at 31st March 125,797 125,797 - -

Accumulated DepreciationBalance as at 1st April 8,957 6,515 - -Charge for the year 2,442 2,442 - -

Balance as at 31st March 11,399 8,957 - -

Net Book ValueAs at 31st March 114,398 116,840 - -

Rented Building

Address Land extent Building extent Value Valuer Detail

No.79, Biyagama Road 38,287 sq.feet 38,287 sq.feet Rs,136Mn. P B Kalugedara & Associates,

Talwatta, Kelaniya 12 Sriya Road, Wellawatta, Colombo 06

The rent earned from the investment property mentioned above is disclosed in notes 6 to the financial statements

These investment properties represent the buildings rented out by Union Commodities Private Limited , a subsidiary of Kotagala Plantations PLC, to a third party. Union Commodities Private Limited has not incurred any expenses (including repairs and maintenance ) relating to the building classified as investment properties during the year ended 31st March 2017.

Group Company

As at 31st March 2017 2016 2017 2016

Rs`000 Rs`000 Rs`000 Rs`000

15 INTANGIBLE ASSETSBoard Pac Software 936 936 - -ERP Software 20,336 15,844 - -

21,272 16,780 - -

16 BIOLOGICAL ASSETS16.1 Group/Company

Group/Company

31.03.2017 31.03.2016 01.04.2015

Rs`000 Rs`000 Rs`000


Bearer Biological assets (Note 16.1.1) 3,534,277 3,367,624 3,129,773

Consumable Biological assets (Note 16.2.1) 877,264 829,913 821,940

Total Biological Assets - Non Current Assets 4,411,541 4,197,537 3,951,713

Fair value of growing produce of Bearer Biological Assets - Current Assets (Note 16.1.2) 7,024 - -

Total Biological Assets 4,418,565 4,197,537 3,951,713

57

Mature Plantations Immature Plantations Total

Tea Rubber Oilpalm Tea Rubber Oil Palm Other

Rs`000 Rs`000 Rs`000 Rs`000 Rs`000 Rs`000 Rs`000

16.1.1 Bearer Biological assets

Cost

As at 31st March 2016 947,337 1,518,824 167,488 291,604 743,831 290,528 171,518 4,131,128

Additions/Transfer in 108,487 182,745 221,869 56,091 186,506 43,723 16,557 815,977

Transfer out - - (108,487) (182,745) (221,869) - (513,100)

As at 31st March 2017 1,055,824 1,701,569 389,357 239,208 747,592 112,382 188,075 4,434,005

Depreciation

As at 31st March 2016 249,128 506,005 8,374 - - - 763,507

Charge for the year 31,672 85,078 19,472 - - - 136,222

As at 31st March 2017 280,800 591,083 27,846 - - - 899,729

Carrying Value as at 31.03.2017 775,024 1,110,486 361,511 239,208 747,592 112,382 188,075 3,534,277

Carrying Value as at 31.03.2016 698,209 1,012,819 159,114 291,604 743,831 290,528 171,518 3,367,624

a) These are investments in mature/immature plantations since the formation of the Company. The assets (including plantation assets) taken over by way of estate leases are set out in Notes 11 and 12. Further investment in Immature Plantations taken over by way of leases are shown in this note. When such plantations become mature, the additional investments since taken over to bring them to maturity are transferred from immature to mature under this note. A corresponding movement, from Immature to Mature, in respect of the investment undertaken by JEDB/SLSPC on the same plantation prior to the leases are shown under Note 12.

b) Borrowing costs amounting Rs.22.7 million (2015/2016 - Rs. 22.3 million) on Tea, and Rs.63.1 million (2015/2016- Rs 62.1 million) on Rubber incurred on term loans and overdrafts utilised to finance replanting expenditure of tea and rubber have been capitalised. The average rate of interest for capitalisation was 14.16% (2015/16 -11.0%) The capitalisation will cease when crops are ready for harvest.

c) Other immature plantations includes Eucalyptus, Other Timber etc. which have been cultivated and managed in separate fields and other crops such as Cinnamon, Coconut etc. and carried at cost less impairment.

16.1.2 Produce on bearer Biological assets

2017 2016

Rs “000 Rs “000

Balance as at 1st April - -

Change in fair value less cost to sell 7,024 -

Balance as at 31st March 7,024 -

Produce on bearer biological assets as at 31st March 2016 have not been fair valued since the fair value as at that date is not significant to the financial statements.


Group/Company

As at 31st March 31.03.2017 31.03.2016 01.04.2015

Rs`000 Rs`000 Rs`000


16.2.1 Consumable Biological assets

As at 1st April 829,913 821,940 691,341

Expenses incurred during the Year - - 4,006

Fair value gain for the year 47,351 7,973 126,593

As at 31st March 877,264 829,913 821,940

Managed trees include commercial timber plantations cultivated on estates. The cost of immature trees upto 5 years from planting are treated as approximate to fair value

particularly on the grounds of little biological transformation has taken place and impact of the biological transformation on price is not material. When such plantations become mature, the additional investments since taken over to bring them to maturity are transferred from immature to mature.

The fair value of managed trees was valued by Mr. Fathihu A A M (FIV), Incorporated Valuer by using following assumptions.

Timber Content Estimated based on the girth,height and considering the growth and present age of the trees of each species in different geographical regions, factoring all the prevailing statutory regulations enforced against harvesting of timber coupled with forestry plan of the Company approved by the Forestry Department

Estimated based on normal life span of each species by factoring the forestry plan of the

Company approved by the Forestry Department.Economic Useful Life

Selling Price Estimated based on prevailling Sri Lankan market prices factoring all the conditions to be fulfilled in bring-ing the trees in to saleable condition

Discount rate Future cash flows are discounted at the rate of 16.3%(2015/16 - 14.8%)

16.2.2 Measurement of Fair value

The future cash flows are determined by reference to current timber prices.

a) The fair value measurement for the consumable biological assets has been categorized as Level 3 fair value based on the inputs to the valuation technique used. Breakdown of the total gains recognized in respect of Level 3 fair values of consumable biological assets namely, managed timber plantation, are given below.

Group/Company

As at 31st March 2017 2016 Rs`000 Rs`000

Change in fair value of Consumable biological assets (Note 16.2.1) 47,351 7,973

Change in fair value of growing produce of bearer biological assets (Note 16.1.2) 7,024 -

Total gain for the year 54,375 7,973


59

b) Valuation techniques and significant unobservable inputs

Following table shows the valuation techniques in measuring Level 3 fair value of consumable biological assets as well as the significant unobservable inputs used.

Type Valuation technique used Significant Unobservable Inputs Inter-relationship between key unobservable inputs and fair value measurement

Mature timber Discounted cash flows Determination of Timber Content

Mature timber older than 5 years. The valuation model considers present value of future net cash flows expected to be generated by the plantation from the timber content of managed timber plantation on a tree-per-tree basis .

Species planted in separate blocks as at the reporting date have been identified by a qualified forestry officer of the company and the timber content has been estimated based on the age and current cubic content.

the estimated fair value at the time of harvesting each specific species is sensitive to the following variables,

- the estimated timber content

- the estimated timber prices per cubic meter

- the estimated selling related costs.

- the estimated maturity age

- the risk-adjusted discount rate.

Determination of Price of Timber

Expected cash flows are discounted using a risk-adjusted discount rate of 16.3% comprising a risk premium of 3.8%.

Trees have been valued as per the current timber prices per cubic meter which is the recent selling price of a cubic meter of the specific species.

16.2.3 Sensitivity Analysis

Sensitivity Variation on Sales Price and Discount Rate

The future cash flows are determined by reference to current timber prices.

Increase/(Decrease) in the Discount Rate

Increase/(Decrease) in the Selling Price of Specific Species

Sensitivity effect on the Loss for the Year

Rs.000

Sensitivity effect on the Carrying Value of Biological Assets

Rs.000

1% - (32,409) (32,409)-1% - 34,544 34,544

- 10% 88,786 88,786 - -10% (88,786) (88,786)



Group CompanyAs at 31st March 2017 2016 2017 2016

Rs`000 Rs`000 Rs`000 Rs`000

17 INVESTMENTS17.1 Investments in Subsidiaries

Union Commodities (Private) Limited - - 1,575,001 1,575,001 Consolidated Rubber Plantations PTE Ltd - - 115 115 Cambodia Rubber Plantation Industries PTE Ltd - - 115 115 Lanka Agro Plantations PTE Ltd - - 115 115 Rubber & Allied Products (Colombo) Ltd - - 60 60

- - 1,575,406 1,575,406Less - Provision for impairment of Union Commodities ( Note 17.1.1) - - (303,119) (234,947)

- - 1,272,287 1,340,459

17.1.1 Provision for impairment of Union Commodities (Private ) LimitedBalance as at 1st April - - (234,947) (63,269)Charge for the year - - (68,172) (171,678)Balance as at 31st March - - (303,119) (234,947)

Name of the Company Nature of Business Location Ownership Percentage

Carrying ValueRs’000

Union Commodities (Private) Limited Tea Exports Kelaniya 100% 1,271,882

Rubber & Allied Products (Colombo) Ltd Manufacturing Centrifuged Latex Colombo/Horana 100% 60

Consolidated Rubber Plantations PTE Ltd Cultivation of Rubber Cambodia 100% 115

Cambodia Rubber Plantation Industries PTE Ltd Cultivation of Rubber Cambodia 100% 115

Lanka Agro Plantations PTE Ltd Cultivation of Rubber Cambodia 100% 115

Total 1,272,287

17.1.2 Summarised financial information for Subsidiary Companies of the Group

Uni Com Rubber & Consolidated Cambodia Lanka Allied Rubber Rubber Agro

Rs`000 Rs`000 Rs`000 Rs`000 Rs`000

Summary of the Statement of Comprehensive Income of Subsidiary Companies Revenue 4,151,844 151,328 - - - Profit/(Loss) After Tax (60,414) (10,134) 2,338 3,647 (13,716)

Other Comprehensive Income 11,578 - - - - Total Comprehensive Income / (Expense) (48,836) (10,134) 2,338 3,647 (13,716)

Total Comprehensive Income, - Attributable to Non-Controlling Interests - - - - - - Attributable to the Group (48,836) (10,134) 2,338 3,647 (13,716)

61

Uni Com Rubber & Consolidated Cambodia Lanka Allied Rubber Rubber Agro

Rs`000 Rs`000 Rs`000 Rs`000 Rs`000

Summary of the Statement of Financial Position of Subsidiary Companies

Non-Current Assets 1,429,439 797 - - - Current Assets 1,873,019 12,335 591,146 97,271 120,119 Total Assets 3,302,458 13,132 591,146 97,271 120,119 Non-Current Liabilities 164,822 757 - - - Current Liabilities 1,978,451 29,816 585,085 81,016 136,861 Total Liabilities 2,143,273 30,573 585,085 81,016 136,861 Net Assets - Attributable to Non-Controlling Interests - Attributable to the Group 1,159,185 (17,441) 6,061 16,255 (16,742)

Summary of the Statement of Cash Flows of Subsidiary Companies

Net Cash inflow/(outflow) from Operating Activities (275,227) (636) 6,449 (425,122) (3,592) Net Cash inflow/(outflow) from Investing Activities (175,648) (145) - - - Net Cash inflow/(outflow) from Financing Activities 485,685 - - - - Net increase/(decrease) of cash and cash equivalents 34,810 (781) 6,449 (425,122) (3,592)

Group CompanyAs at 31st March Holding % 2017 2016 2017 2016

Rs`000 Rs`000 Rs`000 Rs`000

17.2 Investments in Associate4,500,000 Ordinary shares in York Hotels (Kandy) Limited 42% 66,086 64,105 94,753 94,753

66,086 64,105 94,753 94,753

17.2.1 Investments in York Hotels (Kandy) LimitedBalance as at beginning of the year 64,105 62,602 94,753 94,753 Share of Profit for the year 1,981 1,504 - -Balance at the end of the year 66,086 64,105 94,753 94,753

Name of the Company Nature of Business Location Ownership Percentage

Carrying ValueRs’000

York Hotels (Kandy) Limited Leisure & Hospitality Kandy Percentage42%

66,086



Rs`000 Rs`000 Rs`000 Rs`000

17.3 Investments classified as available for saleInvestments in Quoted Securities (Note 17.3.1) 48,171 462,429 2,857 428,679 Investments in Unquoted Securities (Note 17.3.2) 133,316 144,200 133,316 144,200 Investments in Unit Trusts (Note 17.3.3) 152,171 138,708 152,171 138,708

333,658 745,337 288,344 711,587

Group CompanyAs at 31st March No. of Shares 2017 2016 2017 2016

Rs`000 Rs`000 Rs`000 Rs`000

17.3.1 Investments in Quoted SecuritiesC.W. Mackie PLC - 390,820 - 390,820 Lankem Development PLC - 24,107 - 24,107 Sigiriya Village Hotels PLC - 1,536 - 1,536 Marawila Resorts PLC - 276 - 276 Beruwala Resorts PLC 2,835,196 2,857 11,940 2,857 11,940

Renuka City Hotel PLC 75 22 24 - -Central Finance PLC 96,100 8,284 9,765 - -Singer Sri Lanka PLC 30 4 4 - - Chemanex PLC 35,017 1,926 2,206 - -Access Engineering PLC 74,700 1,778 1,554 - -Tokyo Cement PLC 545,907 33,300 20,197 - -

48,171 462,429 2,857 428,679


17.2.2 Summarised financial information of Associate Company

York Hotel (Kandy) Rs`000

Summary of the Statement of Profit or Loss and Comprehensive Income of the Associate Company Revenue - Profit After Tax 4,717 Other Comprehensive Income - Total Comprehensive Income 4,717 Summary of the Statement of Financial Position of the Associate Company

Non-Current Assets 157,145 Current Assets 128,678 Total Assets 285,823 Non-Current Liabilities - Current Liabilities 39,041 Total Liabilities 39,041

63

Group CompanyAs at 31st March Holding % 2017 2016 2017 2016

Rs`000 Rs`000 Rs`000 Rs`000

17.3.2 Investments in Unquoted SecuritiesAgarapatana Plantations Limited 20,000,000 133,316 144,200 133,316 144,200

133,316 144,200 133,316 144,200

17.3.3 Investment in Unit trustsNSB 0 /A Cey Bank Savings Plus Money Market Fund 152,171 138,708 152,171 138,708

152,171 138,708 152,171 138,708

Group Company

As at 31st March 2017 2016 2017 2016 Rs`000 Rs`000 Rs`000 Rs`000

17.4 Held to maturity Financial AssetsLong term Fixed Deposits - 5,852 - 5,852

- 5,852 - 5,852


Rs`000 Rs`000 Rs`000 Rs`000

18 INVENTORIESInput Materials 90,732 614,792 18,086 29,019 Growing Crop Nurseries 17,672 20,726 17,672 20,726 Produce Stock (Tea and Rubber) 949,307 255,163 238,974 182,097 Spares and Consumables 33,724 57,623 11,190 34,637

1,091,435 948,304 285,922 266,479


Rs`000 Rs`000 Rs`000 Rs`000

19 TRADE & OTHER RECEIVABLESTrade Receivables 599,916 473,262 65,921 85,313 Advances, Deposits, Prepayments & Other Receivables 624,473 763,070 157,066 151,749 Employee Advances (Note 19.1) 34,094 41,827 33,965 41,827

1,258,483 1,278,161 256,952 278,889 Less : Provision for impairment (20,093) (5,024) - -

1,238,390 1,273,137 256,952 278,889

19.1 No Advance over Rs. 20,000/- have been granted to employees and workers of the Company.



Group CompanyAs at 31st March Relationship 2017 2016 2017 2016

Rs`000 Rs`000 Rs`000 Rs`000

20 AMOUNTS DUE FROM RELATED PARTIESLankem Tea & Rubber Plantations (Private) Limited Affiliate 79,506 53,069 79,506 53,069 Agarapatana Plantations Ltd Affiliate 29,260 28,350 - -Lankem Plantations Holdings Ltd Affiliate - 22,442 - 22,442 C W Mackie PLC Affiliate 53,702 20,558 - -E B Creasy & Co. PLC Affiliate 5 - - -Sherwood Holidays Limited Affiliate 9,209 9,199 9,199 9,199 Sigiriya Village Hotels PLC Affiliate - 77 - -Galle Fort Hotel (Pvt) Ltd Affiliate 49 528 - -Lankem Ceylon PLC Affiliate 18,788 16,923 - -Horton Plains Resort & Spa Ltd Affiliate 107 100 107 100 Consolidated Plantations Pte Ltd Affiliate 378 - 378 -Beruwala Resorts PLC Affiliate 21 - - -Marawila Resorts PLC Affiliate 35 - - -Rubber & Allied Products (Colombo) Ltd Subsidiary - - 23,383 26,188 Lankem Export Pvt Ltd Affiliate 28,441 25,326 - -Consolidated Rubber Plantations Pte Limited Subsidiary - - 585,088 981,066 Far Eastern Extports ( Colombo) Ltd Affiliate 179 142 179 142 Lanka Agro Plantations Pte Ltd Subsidiary - - 394 327

219,680 176,714 698,231 1,092,533 Less - Provision for impairment - - (78,186) (78,186)

219,680 176,714 620,048 1,014,347

As at 31st March 2017 2016 2017 2016 Rs`000 Rs`000 Rs`000 Rs`000

21 CASH AND CASH EQUIVALENTSCash at Bank and Cash in Hand 469,182 719,094 237,384 54,392 Bank Overdraft (Note 21.1) (475,294) (529,666) (465,162) (503,118)Cash and cash equivalents for the purpose of the Cash Flow Statement (6,112) 189,428 (227,778) (448,726)

65

21.1 Bank Overdraft

Bank : Seylan Bank PLC

Purpose : To finance working capital requirements.

Facility : Rs. 130,000,000/-

Securities Pledged : Primary mortgage over leasehold rights of the estate lands and buildings, fixed and floating assets of Yuilliefield and Chrystlers Farm Estates.

Primary mortgage over leasehold rights of the estate lands and buildings on Sorana Estates.

Bank : Standard Chartered Bank

Purpose : To finance working capital requirements.

Facility : Rs. 250,000,000/-

Securities Pledged : Primary mortgage over leasehold rights of the estate lands and buildings, fixed and floating assets of Hedigalle and Eduragala Estates.

As at 31st March 2017 2016 Rs. Rs.

22 STATED CAPITAL40,000,000 Ordinary Shares 680,000,000 680,000,00001 Golden Share (Note 22.1) 10 10

680,000,010 680,000,010

22.1 GOLDEN SHAREHOLDER

The total amount received by the Company in respect of issue of shares are referred to as Stated Capital. The Golden share is currently held by Secretary to the Treasury and should be owned either directly by the Government of Sri Lanka or by a 100% Government owned public Company. In addition to the rights of the normal ordinary shareholders, in terms of the Articles of the Company, following special rights are vested with the Golden Shareholder.

a) The Company shall obtain the written consent of the Golden Shareholder prior to sub-leasing, ceding or assigning its rights in part or all of the lands leased to the Company by the JEDB/SLSPC.

b) The Golden Shareholder shall be entitled to call upon the Board of Directors once in three months to meet him or his nominee to discuss matters of the Company of interest to the estate.

c) The Golden Shareholder and or his nominee shall be entitled to inspect the books of accounts of the Company after giving two weeks written notice to the Company.

d) The company shall submit to the Golden Shareholder, within 60 days of the end of each quarter, a quarterly report relating to the performance of the Company during the said quarter in a pre- specified format agreed to by the Golden Shareholder and the Company

e) The Company shall submit to the Golden Shareholder, within 90 days of the end of each fiscal year, information related to the company in a pre-specified format agreed to by the Golden Shareholder and the Company



Group/ Company

As at 31st March 2017 2016

ADB-PRP PDSP PHDT Others Total Total

Rs`000 Rs`000 Rs`000 Rs`000 Rs`000 Rs`000

23 DEFERRED INCOME

Grants and Subsidies

As at 31st March 35,566 173,322 12,838 109,762 331,488 318,131

Reclassification (986) (6,188) (1,185) 8,359 -

Received during the year - - 276 13,146 13,422 23,139

Amortisation for the year (916) (5,875) (1,082) (2,006) (9,879) (9,782)

As at 31st March 33,664 161,259 10,847 129,261 335,031 331,488

(i) Asian Development Bank - Plantation Reform Project (ADB - PRP) The funds received are utilised for construction of Staff Quarters, Water Projects, Latrines, Farm Roads and purchase of Forestry Equipment.

(ii) Plantation Development Support Programme (PDSP) The funds received are utilised for construction of Dispensaries, Staff Quarters, Water Projects and upgrading Creches.

(iii) Plantation Human Development Trust (PHDT) The funds received are utilised for construction of Worker Housing, Water Projects and purchase of Ambulance.

(iv) Others

a) Ministry of Livestock Development and Estate Infrastructure The funds received are utilised for construction of Community Centers, Agency Post Offices and Upgrading Farm Roads and Creches.

b) Sri Lanka Tea Board Funds received are utilised for the construction of the CTC Tea Factory at Mount Vernon Estate.

The amounts spent are capitalised under the relevant classification of Property Plant & Equipment and the corresponding grant component is reflected under deferred grants and subsidies and amortised over useful life span of the asset.

67

Group CompanyAs at 31st March Note 2017 2016 2017 2016

Rs`000 Rs`000 Rs`000 Rs`000

24 INTEREST BEARING BORROWINGS24.1 Payable after one year

Debentures 24.3 1,000,000 1,000,000 1,000,000 1,000,000 Term Loans 24.4 1,126,984 1,306,857 1,126,984 1,306,855Finance Leases 24.5 38,255 54,437 38,255 54,437

2,165,239 2,361,294 2,165,239 2,361,294

24.2 Payable within one yearDebentures 24.3 - - Term Loans 24.4 2,604,447 2,155,856 772,087 809,181 Finance Leases 24.5 19,238 29,642 19,238 29,642

2,623,685 2,185,498 791,325 838,823 Total 4,788,924 4,546,792 2,956,564 3,200,117

24.3 Rated Secured Redeemable Listed Debentures

Debentures

Debenture Type

Year of Issue Year of Redemption

Colombo Stock

Exchange Listing

Issued Value Interest Payable Frequency

Interest Rate %

Bond rate of comparable Government

security %

Outstanding Balance as at 31st March

2017 2016

Rs. 000’ Rs. 000’

A 2014 2018 Listed Rs. 250 million Bi-annually 14.25 11.41 250,000 250,000

B 2014 2019 Listed Rs. 250 million Bi-annually 14.50 12.02 250,000 250,000

C 2014 2020 Listed Rs. 250 million Bi-annually 14.75 12.22 250,000 250,000

D 2014 2021 Listed Rs. 250 million Bi-annually 15.00 12.57 250,000 250,000

1,000,000 1,000,000

24.3.1 Trading at Colombo Stock Exchange

Debenture Type Highest Value (Rs.) Lowest Value (Rs.) Last Traded Value (Rs.)

A Not Traded

B Not Traded

C 101.00 100.00 100.00

D 100.00 100.00 100.00


NOTES TO THE FINANCIAL STATEMENTS24

.4

Grou

p /Co

mpa

ny

NDB

DFCC

Bank

Samp

ath

Bank

LOLC

Peop

les

Leas

ing

PLC

Peop

les

Bank

Stand

ard

Char

tered

Tea B

oard

Loan

HNB

State

Mortg

age

bank

F & W

JKH

Colom

bo

Trust

Cey B

ank

Comm

ercial

Pape

rs

Total

31.03

.2017

Total

31.03

.2016

Rs`0

00

Rs`0

00

Rs`0

00

Rs`0

00

Rs`0

00

Rs`0

00

Rs`0

00

Rs`0

00 Rs

`000

Rs

`000

Rs

`000

Rs`0

00 Rs

`000

Rs

`000

Rs

`000

Rs

`000

Paya

ble w

ithin

one y

ear

141,3

99

2,09

9 6,

672

33,89

0 1,

832

99,20

0 24

5,400

22

,266

101,5

00

3,54

3 -

- 1,

395

149,9

85

809,1

81

893,1

03

Paya

ble af

ter on

e yea

r 55

3,681

-

11,12

0 -

3,64

8 20

4,289

-

496,8

93

34,24

9 -

- 2,

975

- 1,

306,8

55

1,150

,308

At th

e beg

inning

of th

e yea

r 69

5,080

2,

099

17,79

2 33

,890

5,48

0 30

3,489

24

5,400

22

,266

598,3

93

37,79

2 4,

370

149,9

85

2,11

6,036

2,0

43,43

0

Add:

Loan

s Obt

ained

durin

g

th

e yea

r

78,91

8 -

--

- -

- 74

,571

--

--

- 21

,327

174,8

16

386,8

32

Conv

ersion

of Br

oker

Adva

nces

to

term

Loan

s

--

--

--

--

--

150,0

00

161,5

00

--

311,5

00

-

Exch

ange

loss

7,16

0 -

--

--

--

30,91

1 -

--

--

38,07

1 54

,233

Less:

Repa

ymen

ts ma

de du

ring

th

e yea

r

(467

,305)

(2,09

9) (7

,784)

(33,8

90)

(2,47

2) (7

,981)

(2,80

0) (2

8,179

) (7

7,631

) (5

,860)

(40,0

00)

(42,9

53)

(1,12

3) (2

1,277

) (7

41,35

4)36

8,460

At th

e end

of th

e yea

r 31

3,853

-

10,00

8 -

3,00

8 29

5,508

24

2,600

68

,658

551,6

73

31,93

2 11

0,000

11

8,547

3,

247

150,0

35

1,89

9,069

2,

116,0

36

Less:

Paya

ble w

ithin

one y

ear

(148

,807)

- (6

,672)

- (1

,832)

(58,5

93)

(92,5

00)

(68,6

58)

(105

,000)

(13,3

48)

(60,0

00)

(64,6

00)

(2,04

2) (1

50,03

5) (7

72,08

7) (8

09,18

1)

(Tran

sferre

d to C

urren

t

Liabil

ities)

Paya

ble af

ter on

e yea

r 16

5,046

-

3,33

6 -

1,17

6 23

6,915

15

0,100

44

6,673

18

,584

50,00

0 53

,947

1,20

5 -

1,12

6,984

1,

306,8

55

69

24.4.1 Term Loans

Bank Amount Balance Balance Rate of Terms of Repayment Securities PledgedObtained 31.03.2017 31.03.2016 Interest

Rs.’000 Rs.’000 Rs.’000 %

(a) NDB BankTerm Loan 198,000 26,400 66,000 AWPLR+3% Terms of repayment repayable

over 5 years from 31.12.2012 ,in equal monthly instalments of Rs.3,300,000/- and Rs.283,400 respectively. (After the re-finance is received interest rate would be 15.58%)

Secondary mortgage over lease hold rights of Stonycliff, Vogan, Gikiyanakanda and Dalkeith Estates and all immovable properties of these estates.

17,000 2,263 5,664 AWPLR+3% 215,000 28,663 71,664

Term Loan 500,000 123,016 403,226 AWPLR+4.75% Payable over 96 instalments Primary mortgage over lease hold rights of building and machinery of Millewa estate. Secondary mortgage on leased hold rights of Stonycliff, Vogan, Gikiyanakanda and Dalkeith Estates and all immovable properties of these estates.

Term Loan 204,470 156,387 173,415 LIBOR+8% Repayable over 89 instalments of (USD 41,110) and one instalment of USD 41,210 from 7th month after the disbursement.

Packing credit loan 150,000 5,787 46,775 5.5% Payable within 3 months and

rolled overPrimary mortgage Bond over stock s and books debts for Rs.200,000,000

Total 1,069,470 313,853 695,080



24.4.1 Term Loans

Bank Amount Balance Balance Rate of Terms of Repayment Securities Pledged Obtained 31.03.2017 31.03.2016 Interest

Rs.’000 Rs.’000 Rs.’000 %

(b) DFCC BankTerm Loan 128,665 - 2,099 AWPLR+2% Repayable over 10 years from

15.09.2003 in equal monthly installments of Rs. 1,067,614/- each.

Primary mortgage over lease hold rights of Drayton, Rayigam and Padukka Estate.

Total 128,665 - 2,099

(c) Sampath BankTerm Loan 50,000 10,008 17,792 10.56 In 95 equal monthly instalments

of Rs. 521,000/- and a final instalment of Rs. 505,000/- (capital) together with interest after a grace period of 48 months commencing from the date of 1st disbursement. (the interest will be recovered on a monthly basis during the grace period also)

Loan Agreement for Rs. 50,000,000/-

Primary Mortgage Bond for Rs.50,000,000/- over leasehold rights of Arapolakande rubber estate at Kalutara together with factory buildings therein.

Total 50,000 10,008 17,792

(d) Lanka Orix Leasing Company PLC

Term Loan 40,000 - 557 10.56% Repayable over 7 years from 30.03.2009 in 84 equal monthly installments of Rs. 476,191/- each

An on demand Promissory Note for Rs. 40,000,000/- with interest @ 18% p.a. untill the receipt of refinance of the subsidiary loan from the DFCC bank, and thereafter at the rate of 10.56% p.a and the Interest shall be paid together with any taxes which may be imposed by the government from time to time Primary Mortgage Bond over the Un expired Leasehold rights created by the Indenture of Lease bearing No: 293 dated 2nd March 1995 attested by D C Peiris, Notary Public and the amendment thereto bearing Indenture No: 1522 dated 4th July 1995 attested by M H D Amaratunga, Notary Public.

Corporate Guarantees of M/s Lankem Plantation Holdings Ltd and M/s Lankem Tea & Rubber Plantations (Private) Limited.

Term Loan 50,000 - 33,333 10.00% Payable within 10 monthly instalments

Total 90,000 - 33,890

71

24.4.1 Term Loans

Bank Amount Balance Balance Rate of Terms of Repayment Securities Pledged Obtained 31.03.2017 31.03.2016 Interest

Rs.’000 Rs.’000 Rs.’000 %

(e) Peoples Leasing & Finance PLCTerm Loan 7,900 3,008 5,480 19.00 Interest and capital payable

monthly and repayment is first month installment of Rs.2,200,000 and the balance 59 monthly instalments at Rs.152,649/- each

Total 7,900 3,008 5,480

(f) Peoples BankTerm Loan 196,000 186,200 189,466 AWPLR+3% Repayable within 60 instalments

of Rs.3,157,777/- each.Immovable properties and lease hold right of Mount Vernon and Mayfield estate.

Term Loan 300,000 109,307 114,023 AWPLR+3% Repayable within 60 instalments of Rs.1,725,000/- each.

Securitized tea sales Mayfield estates.

Total 496,000 295,507 303,489

(g) Hatton National BankTerm Loan 889,000 551,673 598,393 LIBOR+7.5% Payable in 32 equal quarterly

instalments of USD 0.175Mn. Each.

Mortgage of immovable property situated at talwatte village belonging to Union Commodities (Private) Limited

Total 889,000 551,673 598,393

(h) Standard Chartered BankTerm Loan 250,000 173,200 124,000 SLIBOR+3.5% Payable within 3 months and

rolled over Leasehold rights of Hedigalle and Eduragala estate

Packing credit 69,400 121,400 Total 250,000 242,600 245,400

(i) State mortgage BankTerm Loan 50,000 31,932 37,792 19% Repayment in 72 equal month-

ly instalments of Rs.718,620 commencing after the date of disbursement of the loan repayment in 72 equal monthly instalment of Rs.444,960 commencing after the date of disbursement of the loan

10 vehicles offered as security

Total 50,000 31,932 37,792

(j) Cey Bank Asset Management Limited - Commercial Paper

150,035 150,035 149,985 11.55% Repayable as per the Commer-cial Paper maturity date

Commercial Papers

Total 150,035 150,035 149,985



Amount Balance Balance Rate of Terms of Repayment Securities PledgedObtained 31.03.2017 31.03.2016 Interest

Bank Rs.’000 Rs.’000 Rs.’000 %

(k) Colombo Trust Finance PLCTerm Loan 9,156 3,246 4,370 19.00% Monthly instalment of

Rs.170,225 in first 3 months , Rs.2,500,000/- in the fourth month & Rs.170,225/- in next 56 months

KIA Sorento Jeep bearing vehicle Registration number KW -9649

Total 9,156 3,246 4,370

(l) Sri Lanka Tea BoardTerm Loan 27,832 - 22,266 Repayable within 10 instalments

Term Loan 29.572 23,657 - Repayable within 10 monthly instalments of Rs.2,957,150/- each.

Term Loan 45,000 45,000 Repayable within 36 monthly instalments ofRs.1,250,000/- each. (six month grace period)

Total 102,404 68,657 22,266

(m) Forbes & Walker LtdTerm Loan 150,000 110,000 - 19.00% Repayable within 30 monthly

instalments ofRs.5,000,000/- each.

The realized and unrealized values of the stock of the teas catalogued and to be catalogued with broker.

Total 150,000 110,000 -

(n) John Keells PLCTerm Loan 161,500 118,547 - 19.00% Repayable within 30 monthly

instalments ofRs.5,383,333/- each.

A Promissory Note, continuing undertaking and guarantee executed by the Borrower in favour of JKPLC whereby the Borrower agrees to forward teas and sales proceeds on pre-allocated marks some of which are shared with Broker to JKPLC until the payment of all monies due and owing to JKPLC.

Total 161,500 118,547 - Grand Total 3,604,130 1,899,069 2,116,036

73


Rs`000 Rs`000 Rs`000 Rs`000

24.5 Finance LeasesGross Lease Obligation 68,934 99,368 68,934 99,368 Less: Finance cost applicable for future periods (11,441) (15,289) (11,441) (15,289)Net Lease Obligation 57,493 84,079 57,493 84,079

Payable within one year (Transferred to Current Liabilities)Gross Lease Obligation 25,008 36,971 25,008 36,971 Less: Finance cost applicable for future periods (5,770) (7,329) (5,770) (7,329)Net Lease Obligation 19,238 29,642 19,238 29,642

Payable within two to five yearsGross Lease Obligation 43,926 62,397 43,926 62,397 Less: Finance cost applicable for future periods (5,671) (7,960) (5,671) (7,960)Net Lease Obligation 38,255 54,437 38,255 54,437

Total Net lease obligations 57,493 84,079 57,493 84,079



24.5.1 Finance Leases

Leasing Company and Asset Cost of the Asset

Gross Lease Obligation

Finance cost applicable for future periods

Net Lease Obligation

Amount payable within one year

Amount payable within two to

five years

Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000

People’s Leasing PLC

Mazda Cab 6,100 1,440 (97) 1,343 1,343 -

Motor Car 4,700 1,360 (109) 1,251 1,251 -

Motor Car 4,700 1,486 (114) 1,372 1,372 -

Total 15,500 4,287 (320) 3,966 3,966 -

Nations Trust Leasing

Jeep 8,700 - - - - -

Truck 1,490 - - - - -

Double Cab 5,900 289 (6) 283 283 -

Motor Jeep 9,500 - - - - -

Tractors 2,688 - - - - -

Total 28,278 289 (6) 283 283 -

Commercial Bank of Ceylon PLC

Colur Sorter 13,932 9,105 (1,224) 7,880 2,885 4,996

Hot Water Boiler 23,528 16,913 (2,472) 14,441 4,734 9,707

CTC Machine 26,069 21,108 (3,875) 17,233 4,122 13,112

Radiator 1,638 1,534 (282) 1,252 300 953

Drier 6,737 6,311 (1,636) 4,675 1,118 3,557

Prado 8,330 9,387 (1,626) 7,761 1,830 5,931

Total 80,234 64,358 (11,115) 53,243 14,988 38,255

Grand Total 124,012 68,934 (11,441) 57,493 19,238 38,255

75


Rs`000 Rs`000 Rs`000 Rs`000

25 RETIREMENT BENEFIT OBLIGATIONSBalance at the beginning of the year 719,380 780,513 693,706 751,460 Provision made during the year (Note 25.1) 16,650 (5,895) 11,520 (8,993)

736,030 774,618 705,226 741,657Gratuity payable for workers unclaimed - (10,524) - (10,524)Payments made during the year (54,828) (44,716) (43,346) (38,237)Balance at the end of the year 681,202 719,380 661,880 693,706

25.1 Provision for the year consists of the followingRecognised in Profit & LossInterest cost 81,217 78,954 76,072 75,146 Current service cost 41,975 48,778 41,973 46,905 Recognised in other comprehensive incomeActuarial (Gain)/Loss (106,542) (133,627) (106,519) (131,044)Present value of obligation as at 31st March 16,650 (5,895) 11,520 (8,993)

The actuarial valuation had been carried out by M/S Actuarial & Management Consultants (Pvt) Ltd. According to the valuation the gratuity liability on employees of the Company as at 31st March 2017 is Rs.661,880,000/-

The key assumptions used by the Actuary include the following,

1. Rate of Interest - 12.5% p.a (net of tax)

2. Rate of Salary increase Workers - 16% every two years For other categories of staff - 10% p.a

3. Retirement Age Workers - 60 years For other categories of staff - 60 years

4. Daily Wage Rate - Rs.500/- for workers

5. The Company will continue in business as a going concern

The sensitivity analysis on the total comprehensive expense and financial position based on the assumed rates for salary increment and discount rate as at 31st March 2017 is given below,

Discount rate Salary escalation rate Present value of defined benefit obligation (Rs.)

Staff Workers

One percentage point increase As stated above (97,302,536) (522,738,091)

One percentage point decrease As stated above 111,803,898 597,706,605

As stated above One percentage point increase 111,171,272 618,494,810

As stated above One percentage point decrease (97,753,710) (577,974,950)



Future Working Life Time Defined Benefit Obligations - Rs.

Staff Workers Total

Within the next 12 months 16,835,127 94,969,439 111,804,566

Between 2-5 years 28,544,312 157,800,337 186,344,649

Beyond 5 years 58,687,286 305,044,426 363,731,712

Total 104,066,725 557,814,202 661,880,927

Group CompanyAs at 31st march 2017 2016 2017 2016

Rs`000 Rs`000 Rs`000 Rs`000

26 NET OBLIGATION TO LESSOR (JEDB/SLSPC ESTATES)

Gross Lease Obligation 625,752 647,923 625,752 647,923 Less: Finance cost applicable for future periods (254,587) (269,711) (254,587) (269,711)Net Lease Obligation 371,165 378,212 371,165 378,212

Payable within one year (Transferred to Current Liabilities)Gross Lease Obligation 22,170 22,170 22,170 22,170 Less: Finance cost applicable for future periods (14,700) (15,123) (14,700) (15,123)Net Lease Obligation - (Note 28) 7,470 7,047 7,470 7,047

Payable within two to five yearsGross Lease Obligation 88,680 88,680 88,680 88,680 Less: Finance cost applicable for future periods (58,755) (58,755) (58,755) (58,755)Net Lease Obligation 29,925 29,925 29,925 29,925

Payable after five yearsGross Lease Obligation 514,902 537,073 514,902 537,073 Less: Finance cost applicable for future periods (181,132) (195,833) (181,132) (195,833)Net Lease Obligation 333,770 341,240 333,770 341,240

Net lease obligations payable after one year 363,695 371,165 363,695 371,165

In terms of the amendment of leases, Rs.22.2 million is payable each year as lease rental, commencing from 22.06.1996 till the end of the lease on 21.06.2045. This amount is to be inflated annually by the Gross Domestic Product (GDP) deflater in the form of contingent rent.

The charge to the Income Statement for the current financial year on account of interest is Rs. 72.7 Mn. (2015/2016 - Rs. 70.8 Mn)

77

Group Group

As at 31.03.2017 31.03.2016 01.04.2015 31.03.2017 31.03.2016 01.04.2015

Rs`000 Rs`000 Rs`000 Rs`000 Rs`000 Rs`000

(Restated) (Restated) (Restated) (Restated)

27 DEFERRED TAXATION

Balance at the beginning of the year 354,436 465,648 509,524 189,082 268,004 405,779

Charged in the profit & loss under income tax (59,208) (138,605) (43,832) (39,806) (105,721) (137,731)

Charged in the other comprehensive income 21,659 27,393 (44) 21,651 26,799 (44)

Balance at the end of the year 316,890 354,436 465,648 170,927 189,081 268,004

27.1 The effective tax rate used to calculate deferred tax liability/asset as at March 2017 is 20.2% (2015/16 -20.1%)

27.2 The closing deferred tax liability arises as follows,

Group 2017 2016 2015

Temporary Tax Temporary Tax Temporary Tax

Difference Effect Difference Effect Difference Effect

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000


Property Plant & Equipment 1,362,393 310,733 1,310,725 288,706 1,251,205 287,882

Retirement Benefit Obligation (681,202) (138,894) (719,380) (144,931) (780,513) (163,903)

Tax loss carried forward (3,201,860) (656,796) (2,700,153) (547,714) (1,882,971) (394,762)

Consumable biological assets 877,264 87,726 829,913 82,991 821,940 82,194

Bearer Biological Assets 3,534,277 714,118 3,367,624 675,384 3,127,765 654,237

1,890,872 316,890 2,088,726 354,436 2,537,426 465,648

Company 2017 2016 2015

Temporary Tax Temporary Tax Temporary Tax

Difference Effect Difference Effect Difference Effect

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000


Property Plant & Equipment 485,380 98,073 449,652 90,179 351,683 73,515

Retirement Benefit Obligation (661,881) (133,736) (693,706) (139,125) (751,460) (157,083)

Tax loss carried forward (2,946,005) (595,255) (2,579,588) (520,348) (1,841,107) (384,860)

Consumable biological assets 877,264 87,726 829,913 82,991 821,940 82,194

Bearer Biological Assets 3,534,277 714,118 3,367,624 675,384 3,129,765 654,237

1,289,035 170,927 1,373,892 189,081 1,708,821 268,004


Group CompanyAs at 31st march 2017 2016 2017 2016

Rs`000 Rs`000 Rs`000 Rs`000

28 TRADE & OTHER PAYABLESTrade Payables 284,128 210,632 195,488 166,648Other Payables 1,206,825 1,401,516 1,161,707 1,370,179 Payable to Employees 137,114 89,091 137,114 89,091 Payable to JEDB/SLSPC 7,470 7,047 7,470 7,047 Unclaimed Dividends 7,225 7,240 7,225 7,240

1,642,762 1,715,529 1,509,004 1,640,208

Group CompanyAs at 31st march Relationship 2017 2016 2017 2016

Rs`000 Rs`000 Rs`000 Rs`000

29 AMOUNTS DUE TO RELATED PARTIESLankem Plantation Services Limited Affiliate Co. 4,760 4,767 4,760 4,767 Sigiriya Village Hotels PLC Affiliate Co. 678 678 678 678 The Colombo Fort Land & Building PLC Parent Co. 13,005 8,873 12,914 8,873 Ceylon Tea Brokers PLC Affiliate Co. 107,501 68,247 107,501 68,247 Union Commodities (Pvt) Ltd Affiliate Co. - - 278,886 110,299 Lankem Ceylon PLC Affiliate Co. 751 - 751 -J F Packaging Pvt Ltd Affiliate Co. 2,373 693 - -Darley Butler & Co. Ltd Affiliate Co. 17,063 17,063 17,063 17,063 Agarapatana Plantations Ltd Affiliate Co. - 3,626 - 3,626 Colombo Fort Group Services (Pvt) Ltd Affiliate Co. 3,879 - 3,879 -Ceylon Tapes Pvt Ltd Affiliate Co. 311 41 - -C W Mackie PLC Affiliate Co. 10 42 - -Kellani Valley Cannaries Pvt Ltd Affiliate Co. - 45 - -

150,331 104,075 426,432 213,553

30 COMMITMENTS

There were no material commitments as at the Reporting date.

31 CONTINGENT LIABILITIES

There were no material contingent liabilities outstanding as at the Reporting date which require adjustments or disclosure to the Financial Statements.

32 EVENTS OCCURRING AFTER THE REPORTING PERIOD

There were no material events which occured after the reporting date, which require adjustments to/or disclosures on the financial statements.


79

33 RELATED PARTY DISCLOSURES

The company carried out transactions in the ordinary course of business at commercial rates with the following related entities

Related Party Name of Director Details of Transaction Amount (paid)/ received

Balance as at 31 March

2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000

(1) Transactions with Ultimate Parent CompanyThe Colombo Fort Land & Building PLC A Rajaratnam Office Rental (6,977) (13,617)

A M De S Jayaratne Office Expenses (1,312) (1,294)S D R Arudpragasam Settlement of Office Rental and Expenses 4,248 20,685

C P R Perera(12,914) (8,873)

(2) Transactions with Parent CompanyLankem Plantation Holdings Ltd A Rajaratnam Set off against inter company balances (37,120) (31,527)

S D R Arudpragasam Advances Given 14,669 18,170C P R Perera Settlement of expenses 8 - 22,442

(3) Transactions with other Related Companiesa. Lankem Tea & Rubber Plantations (Pvt) Ltd A Rajaratnam Settlement of Management Fee 3,611

S D R Arudpragasam Advances given 69,938 53,070C P R Perera Receipt on Advance given (43,501)D S AbeyRatnaR C PeriesD A RatwatteG D V PereraM S Madugalle 79,506 53,069

b. Lankem Ceylon PLC A Rajaratnam Interest Charged (794) 15,450S D R Arudpragasam Set off against inter company balances 43 (253,523)

Purchase of Fertilizer 8,170sale of 5,870,000 shares of C W Mackie 352,200settlement of NDB loans (352,200) (751) -

c. Agarapatana Plantations Ltd A RajaratnamS D R Arudpragasam Settlement of advances 125,609 (41,287)C P R Perera Advances received (121,983) (3,626)D S AbeyRatnaR C PeriesD A RatwatteG D V Perera - (3,626)

d. Lankem Plantation Services Limited A Rajaratnam Settlement of advances 7 169S D R ArudpragasamR C Peiris (4,760) (4,767)

e. Sherwood Holidays Limited A RajaratnamS D R Arudpragasam No transactions during the year - -D A RatwatteG D V Perera 9,199 9,199

f. Sigiriya Village Hotel PLC A Rajaratnam No transactions during the year - -S D R ArudpragasamC P R Perera (678) (678)


Related Party Name of Director Details of Transaction Amount (paid)/ received

Balance as at 31 March

2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000

g. Ceylon Tea Brokers PLC C P R Perera Loan Granted (100,000) (40,000)

Settlement of loan 60,509 -Sale of Tea 625,725 345,607Tea Sales Proceeds (625,487) (336,854) (107,501) (68,247)

h. Consolidated Rubber Plantations Pte Ltd R C Peries Advances received (451,689) -Exchange Gain 55,395Advances given 316 3,567 585,088 981,066

i. Lanka Agro Plantations Pte Ltd R C Peries Advances given 67 8,892 394 327

j. Rubber & Allied Products(Colombo)Ltd R C Peries Sale of Rubber 67,126 53,740S D R Arudpragasam Rubber Sales Proceeds (70,957) (73,896)

Advances given 1,027 1,007 23,383 26,188

k. Far Eastern Exports (Colombo) Ltd A Rajaratnam Advances given 37 102S D R ArudpragasamR C PeriesG D V Perera 179 142

l. Union Commodities(Pvt)Ltd S D R Arudpragasam Loans obtained (169,640) (60,000)G D V Perera Settlement of loan 21,468 13,000

Interest Charged on loans (23,416) -sale of tea 3,001 (278,886) (110,299)

m. Darley Butler & Co Ltd A RajaratnamS D R Arudpragasam

Expenses incurred on behalf of the Company

A M de S Jayaratne - (17,063) (17,063) (17,063)

n. Waverly Power (Pvt) Ltd A Rajaratnam Advances given - 3,060S D R Arudpragasam Settlement of advances - (3,060) - -G D V Perera

o. Horton Plains Resort & Spa Ltd Company registration fees 7 100 107 100

p. Consolidated Plantations Pte Ltd S D R ArudpragasamD S AbeyRatna

Advances given 378 -378 -

q. Colombo Fort Group Services (Pvt) Ltd S D R Arudpragasam IT Consultancy fees (3,879) - (3,879) -


81

(4) Non recurrent Related Party Transactions

Name of the Related Party

Relationship Value of the Related PartyTransaction entered into during the Financial yearRs.

Value of the RelatedParty Transactions as a %Equity and as a % ofTotal Assets

Terms and conditions of the Related Party Transactions

The rationale for entering into the transaction

Consolidated Rubber Plantations Pte. Ltd.

wholly owned subsidiary

451,689,141 5% of total assets27% of total equity

Part repayment by the subsidiary of the advances made by the Company. The value of the transactions were Rs. 58,089,281/- and Rs. 393,599,860/

Due to the liquidity constraints of the Company to enable the Company to meet its Statutory liabilities

Lankem Ceylon PLC Affiliate Company 352,200,000 4% of total assets21% of total equity

Disposal of 5,870,000 Ordinary Shares in Affiliate company C.W. Mackie PLC at Rs. 60/- per share to Affiliate Company Lankem Ceylon PLC on the Trading Floor of the Colombo Stock Exchange. (Total Consideration Rs.352,200,000/-)

Due to liquidity constraints, disposal of investment to meet immediate Working Capital requirements.

(5) Transactions with Key Management Personnel

The Key management personnel includes members of the Board of Directors

GroupAs at 31st march 2017 2016

Rs`000 Rs`000

Short term employee benefits 8,400 8,400

There were no other related party transactions and balances other than those disclosed in notes 5,6,13,16,25 and 29 to the Financial Statements


34 COMPARATIVE INFORMATION

Comparative information of the Company has been reclassified wherever necessary to conform with the current year’s presentation.

35 PRIOR YEAR ADJUSTMENTS

35.1 Impact on prior period error identified in the valuation of Consumer Biological Assets

The Company has erroneously not considered some of the timber fields for the biological asset valuation in the previous years. However, This error has now been corrected retrospectively in accordance with Sri Lanka Accounting Standard 8, “Accounting Policies, changes in Accounting Estimates and Errors”. Accordingly the amounts presented as at 31st March 2015 and 31st March 2016 are restated as follows.

35.1.1 Impact to the balances reported in the statement of financial position.

A) Consumer Biological Assets

31st March 2016 1st April 2015

Group Company Group Company

Rs. 000 Rs. 000 Rs. 000 Rs. 000

Balance as previously reported 640,942 640,942 653,685 653,685

Increase in gain on fair value of biological assets on restatement. 188,971 188,971 168,255 168,255

Restated balance 829,913 829,913 821,940 821,940

B) Deferred Tax Liabilities



Rs. 000 Rs. 000 Rs. 000 Rs. 000

Balance as previously reported 335,540 170,186 448,823 251,179

Deferred tax charge arising from restatement of fair value of consumer biological assets. 18,897 18,897 16,826 16,826

Restated balance 354,436 189,081 465,648 268,004

The above deferred tax effect arise due to increase in the taxable temporary difference on the fair value of consumer biological assets.

C) Retained Earnings The company has restated the retained earnings as follows.



Rs. 000 Rs. 000 Rs. 000 Rs. 000

Balance as previously reported 723,243 806,292 1,389,053 1,559,080

Add: Impact on increase in fair value of consumer biological assets 188,971 188,971 168,255 168,255

Less: Deferred Tax charge arising from restatement of fair value of consumer biological assets.

(18,897) (18,897) (16,826) (16,826)

Restated Balance 893,317 976,365 1,540,483 1,710,510


83

35.1.2 Impact to the balances reported in the Profit or Loss and Other Comprehensive Income

D) Restated Loss for the year ended 31st March 2016

31st March 2016

Group Company

Rs. 000 Rs. 000

Loss for the year as previously reported (772,044) (857,033)

Impact from increase in fair value of biological assets. (Note D.1) 20,716 20,716

Impact from increase in deferred Tax charge (Note D.2) (2,071) (2,071)

Restated Loss for the year (753,401) (838,389)

D.1 Gain/ (Loss) on change in fair value of Consumer Biological Assets

31st March 2016

Group Company

Rs. 000 Rs. 000

Gain on change in fair value of Biological Assets as previously stated (12,743) (12,743)

Increase in Gain on fair value of consumer Biological assets 20,716 20,716

Restated Gain on fair value of biological assets 7,973 7,973

D.2 Impact on Deferred Tax

31st March 2016

Group Company

Rs. 000 Rs. 000

Deferred Tax reversal as previously stated (140,676) (107,790)

Deferred tax charge on prior year adjustments 2,071 2,071

Restated deferred tax reversal (138,605) (105,721)


36 FINANCIAL RISK MANAGEMENT

(i) Overview

The Company has exposure to the following risks from its use of financial instruments:

• Credit risk

• Liquidity risk

• Market risk

• Operational risk

This note presents information about the Group’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risks, and the Group’s management of capital.

(ii) Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. The groups audit committee oversees how management monitors compliance with the groups risk management policies and procedures , and reviews and adequacy of the risk management in framework in relation to the risks faced the Group. The Groups audit committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

(iii) Credit Risk

Credit risk is the risk of financial loss to the Group if a customer fails to meet its contractual obligations, and this principally arises from the Group’s receivables from customers.

Exposure to Credit Risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows;

Group Company

As at 31st March, Carrying Amount Carrying Amount

2017 2016 2017 2016

Rs.000 Rs.000 Rs.000 Rs.000

Trade receivables 599,916 473,262 65,921 85,313

Advances ,deposits , prepayments and other receivables 624,473 763,070 157,066 151,749

Employee advances 34,094 41,827 33,965 41,827

Amount due from related parties 219,680 176,714 698,231 1,092,533

Balances with banks 469,182 719,094 237,384 54,392

1,947,343 2,173,967 1,192,567 1,425,814

(a) Trade and Other Receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Groups main sales are done through done through the brokers and export transactions are done with the involvement of bank and therefore the default risk is insignificant


85

Impairment losses

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

The aging of Loans and Receivables at the reporting date was as follows;

Group

As at 31st March, 2017 2016

Gross Balance Impairment Gross Balance Impairment

Rs.000 Rs.000 Rs.000 Rs.000

Past due 0-30 days 469,182 - 719,094 -

Past due 31-365 days 1,450,258 - 549,307 -

More than one year 27,903 (20,092) 905,566 (5,024)

1,947,343 (20,092) 2,173,967 (5,024)

Company

As at 31st March, 2017 2016

Gross Balance Impairment Gross Balance Impairment

Rs.000 Rs.000 Rs.000 Rs.000

Past due 0-30 days 237,384 - 54,392 -

Past due 31-365 days 370,095 - 390,356 -

More than one year 585,088 (78,186) 981,066 (78,186)

1,192,567 (78,186) 1,425,814 (78,186)

The maximum exposure to credit risk for Trade and Other Receivables as at the reporting date by geographic segments was as follow.

Group Company

As at 31st March, Carrying Amount as at Carrying Amount as at

2017 2016 2017 2016

Rs.000 Rs.000 Rs.000 Rs.000

Domestic 1,165,356 1,291,076 943,035 1,340,056

US $ 761,325 877,867 170,775 7,572

Euro 571 - 571 -

1,927,251 2,168,943 1,114,381 1,347,628

Cash and Cash Equivalents

The Group held cash and cash equivalents of Rs.469,182,000/- as at 31st March 2017.(Rs.719,094,000/- as at 31st March 2016)

(iv) Liquidity Risk

Liquidity risk is the risk that the Group and the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s and Company’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, without incurring unacceptable losses or risking damage to the Group’s reputation.


The following are the contractual maturities of financial liabilities.

Group Company

Carrying 0-12 More than Carrying 0-12 More than

As at 31st March 2017 Amount Months 1 year Amount Months 1 year

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Financial Liabilities (Non- Derivative)

Debenture 1,000,000 - 1,000,000 1,000,000 - 1,000,000

Term Loans 3,731,431 2,604,447 1,126,984 1,899,071 772,087 1,126,984

Finance Leases 57,493 19,238 38,255 57,493 19,238 38,255

Trade and Other Payables 1,635,292 1,635,292 - 1,501,529 1,501,529 -

Net Obligation to Lessor of JEDB/SLSPC 371,165 7,470 363,695 371,165 7,470 363,695

Amounts due to related parties 150,331 150,331 - 426,432 426,432 -

Bank Overdraft 475,294 475,294 - 465,162 465,162 -

Total 7,421,006 4,892,072 2,528,934 5,720,852 3,191,918 2,528,934

The following are the contractual maturities of financial liabilities.

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

Group Company

Carrying 0-12 More than Carrying 0-12 More than

As at 31st March 2016 Amount Months 1 year Amount Months 1 year

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Financial Liabilities (Non- Derivative)

Debenture 1,000,000 - 1,000,000 1,000,000 - 1,000,000

Term Loans 3,462,713 2,155,856 1,306,857 2,116,038 809,181 1,306,857

Finance Leases 84,079 29,642 54,437 84,079 29,642 54,437

Trade and Other Payables 1,708,482 1,708,482 - 1,633,158 1,633,158 -

Net Obligation to Lessor of JEDB/SLSPC 378,212 7,047 371,165 378,212 7,047 371,165

Amounts due to related parties 104,075 104,075 - 213,553 213,553 -

Bank Overdraft 529,666 529,666 - 503,118 503,118 -

Total 7,267,227 4,534,768 2,732,459 5,928,158 3,195,699 2,732,459

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

(v) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s and Company’s income or the value of its hold-ings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

(a) Currency risk

The group is exposed to currency risk mostly on purchases that are denominated in a currency other than Sri Lankan rupees (LKR). The foreign currencies in which these transactions primarily denominated are United States Dollars (USD)

The group is exposed to such risks in terms of Tea and Rubber exports which amounts to approximately 1/2 of total revenue of the group.


87

Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings as explained in the above paragraph, are denominated in currencies that match the cash flows generated by the underlying operations of the Group and Company, primarily USD. This provides an economic hedge without the need of derivatives being entered into.

Exposure to currency risk

The Company’s exposure to foreign currency risk was as follows based on notional amounts:


Group USD Euro USD Euro

Trade & other receivables 7,385,720 - 6,513,204 -

Balances with Banks 2,277,975 - 4,398,017 -

Interest bearing loans & borrowings (16,713,901) - (14,464,401) -

Other Payables (141,203) - (131,276) -

Gross Statement of Financial Position exposure (7,191,410) - (3,684,457) -


Company USD Euro USD Euro

Trade & other receivables - - - -

Cash & bank balances 1,123,668 1,757 52,337 -

Interest bearing loans & borrowings (4,658,901) - (5,334,401) -

Gross Statement of Financial Position exposure (3,535,233) 1,757 (5,282,064) -

Average Reporting Date Spot

Rate 2017 2016 2017 2016

Rs. Rs. Rs. Rs.

USD 147.29 141.51 151.98 144.69

Euro 324.71 - 324.71 -

Sensitivity Analysis

A strengthening of the LKR, as indicated below, against the USD at 31st March 2017 would have increased/ (decreased) the equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Company considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant.

Group

Group Strengthening Weakening

Profit/(Loss) Equity Profit/(Loss) Equity

As at 31st March 2017

USD (10% movement) (1,202,246) (1,202,246) 1,202,246 1,202,246


USD (10% movement) (586,414) (586,414) 586,414 586,414


Company Strengthening Weakening

Profit/(Loss) Equity Profit/(Loss) Equity


USD (10% movement) (591,013) (591,013) 591,013 591,013


USD (10% movement) (840,688) (840,688) 840,688 840,688

(b) Interest rate risk

The Group has obtained a fixed interest rate loans and variable rate loans. The Group has opted not to mitigate its interest rate risk in the case that the market interest rate were to be lower than the fixed interest rate that the Group has already committed to.

At the reporting date, the Company’s interest-bearing financial instruments were as follow:

Group Company

As at 31st March, Carrying Amount Carrying Amount

2017 2016 2017 2016

Rs.000 Rs.000 Rs.000 Rs.000

Fixed Rate Instruments

Financial Assets

Long term Fixed Deposits - 5,852 - 5,852

Financial Liabilities

Bank Overdrafts 475,294 529,666 465,162 503,118

Interest bearing loans and borrowings 4,788,924 4,546,792 2,956,564 3,200,117

Cash flow sensitivity analysis for variable rate instruments

The Group and Company is exposed to changes in market interest rates through Bank overdraft and other bank borrowings which were borrowed at a variable interest rate

Group

Profit or Loss Equity

100 bp increase Rs.000

100 bp decrease Rs.000

100 bp increase Rs.000

100 bp decrease Rs.000

31st March 2017

Variable rate instruments (18,688) 18,688 (18,688) 18,688

Cash flow sensitivity (Net) (18,688) 18,688 (18,688) 18,688

31st March 2016




89

Company

Profit or Loss Equity

100 bp increase Rs.’000

100 bp decrease Rs.’000

100 bp increase Rs.’000

100 bp decrease Rs.’000

31st March 2017



31st March 2016



(vi) Capital management

The Board’s policy is to maintain a strong capital base so as to maintain shareholder, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital and level of dividends to ordinary shareholders.

The Group’s and Company’s debt to adjusted capital ratio at the end of the reporting period was as follows:

Group Company

2017 2016 2017 2016

Rs.000 Rs.000 Rs.000 Rs.000

Total Liabilities 8,760,051 8,675,013 6,888,695 7,142,436

Less: Cash and Cash Equivalents 469,182 719,094 237,384 54,392

Net Debt 8,291,164 7,955,919 6,651,311 7,088,042

Total Equity 1,598,344 1,970,215 1,675,622 2,049,732

Net Debt to Equity Ratio 519% 404% 397% 346%

There were no changes in the Group’s approach to capital management during the year and the Group is not subject to externally imposed capital requirements.

(vii) Fair values

The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.

Level I: Quoted market price (unadjusted) in an active market for an identical instrument.

Level II: Valuation techniques based on observable inputs, either directly – i.e. as prices or indirectly – i.e. derived from prices. This category includes instruments valued us-ing: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

Level III: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments, the Company determines fair values using valuation techniques.

Valuation techniques include net present value and discounted cash flow models, comparison to similar instruments for which market observable prices exist. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia used in estimating discount rates. The objective of the valuation technique is to arrive at a fair value determination that reflect the price of the financial instrument at the reporting date, that would have determined by the market participants acting at the arms length.


The Company uses widely recognised valuation models for determining the fair value of common and more simple financial instruments, forward rated contracts that use only observable market data and require little management judgement and estimation. Observable prices and model inputs are usually available in the market for listed debt and equity securities and government securities. Availability of observable market prices and model inputs reduces the need for management judgement and estima-tion and also reduces the uncertainty associated with determination of fair values. Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets.

Fair values versus the Carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the Statement of Financial Position, are as follow;

31st March 2017

Carrying AmountRs.’000

Fair ValueRs.’000

Assets carried at amortized cost

Trade & Other Receivables 256,952 256,952

Amounts Due from Related Parties 620,048 620,048

Cash and Cash Equivalents 237,384 237,384

1,114,384 1,114,384

Liabilities carried at amortized cost

Trade and Other Payables 1,509,004 1,509,004

Interest Bearing Borrowings 2,956,564 2,956,564

Net Obligation to lessor of JEDB/SLSP 363,695 363,695

Amounts Due to Related Parties 426,432 426,432

Bank Overdraft 465,162 465,162

5,720,857 5,720,857

Financial Instruments Carried at Fair Value and Valuation Bases

The table below analyses financial instruments measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorized:

Group

As at 31st March 2017 Level I Level II Level III Total

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Available for sale Investments 200,342 133,316 333,658

200,342 133,316 - 333,658

Company

As at 31st March 2017 Level I Level II Level III Total

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Available for sale Investments 155,028 133,316 288,344

155,028 133,316 - 288,344

The Company has valued the investment in Agarapathana Plantations Limited, which has been coming under Level II of the fair value hierarchy, using revenue multiples of comparable listed Companies. The Company has discounted the fair value by 15% to reflect the non marketability between the unquoted equity held by the Company and the equity instruments of comparable peers.


91

Financial Instruments not carried at Fair Value and Valuation Bases

The fair values of financial assets and liabilities , together with the carrying amounts shown in the Statement of Financial Position , are as follows

Group Company

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Assets Carried at amortised Cost -

Trade & Other Receivables - - 1,238,390 1,238,390 - 256,952 256,952

Amounts due from Related Parties - - 219,680 219,680 - - 620,048 620,048

Income Tax Receivable - - 46,711 46,711 - - - -

Cash and cash equivalents - 469,182 - 469,182 - 237,384 - 237,384

469,182 1,504,781 1,973,963 237,384 877,000 1,114,384

Liabilities carried at amortised Cost

Net obligation to Lessor of JEDB/SLSPC - - 363,695 363,695 - - 363,695 363,695

Interest bearing Borrowings - - 4,788,924 4,788,924 - - 2,956,564 2,956,564

Income Tax Payable - - 5,922 5,922 - - - -

Trade & Other Payables - - 1,642,762 1,642,762 - - 1,509,004 1,509,004

Amounts due to Related Parties - - 150,331 150,331 - - 426,432 426,432

Bank Overdraft - - 475,294 475,294 - - 465,162 465,162

- - 7,426,928 7,426,928 - - 5,720,857 5,720,857

Cash and Cash Equivalents

The carrying amount of the cash and cash equivalents and balances with banks approximate the fair value as theses are short term in nature.

Trade and Other Receivables and Income Tax Receivable

Trade and other receivables are expected to be settled within one year from the reporting date and hence the discounting impact would be immaterial. Therefore carrying amount approximate the fair value as at the reporting date.

Amounts Due to/Due From Related Parties

Amounts due from Related Parties are expected to be settled within one year from the reporting date and hence the discounting impact would be immaterial. Therefore carrying amount approximate the fair value as at the reporting date.

Trade and Other Payables and Income Tax Payable

Trade and other payables are expected to be settled within one year from the reporting date and hence the discounting impact would be immaterial. Therefore carrying amount approximate the fair value as at the reporting date.

Interest Bearing Borrowings

A majority of loans outstanding as at the reporting date are floating rate instruments which are repriced upon changes in economic conditions. Therefore the carrying amount of interest bearing borrowings are approximate to the fair value.

a) Valuation models

Valuation techniques include net present value and discounted cash flow models, comparison with similar instruments for which observable market prices exist. Assump-tions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia used in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties, to the extent that the Group believes that a third party market participant would take them into account in pricing a transaction. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and the counterparty where appropriate.


b) Valuation models

The Company has an established control framework with respect to the measurement of fair values. This framework which is independent of front office management and reports to the Chief Financial Officer, and which has overall responsibility for independently verifying the results of trading and investment operations and all significant fair value measurements.

Group Financial Instrument

Loans and Receivables Available for Sale Investments

Fair Value Through Profit or Loss Investments

Held to Maturity Investments

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Investment classified as available for sale - 333,658 - -

Long term deposits - - - -

Trade & other receivables 1,238,390 - - -

Amounts due from Related Parties 219,680 - - -

Income Tax Receivable 46,711 - - -

Cash & Cash equivalents 469,182 - - -

Group Financial Liabilities

Ammortised Cost Rs.’000

Interest Bearing Borrowings 4,788,924

Net Obligation to Lessor of JEDB/SLSPC 363,695

Trade & Other Payables 1,642,762

Amounts due to Related Parties 150,331

Bank Overdraft 475,294

Company Financial Instrument

Loans and Receivables Available for Sale Investments

Fair Value Through Profit or Loss Investments

Held to Maturity Investments

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Equity Investment - 288,344 - -

Long term deposits - - - -

Trade & other receivables 256,952 - - -

Amounts due from Related Parties 620,048 - - -

Cash & Cash equivalents 237,384 - - -

Company Financial Liabilities

Ammortised Cost Rs.’000

Interest Bearing Borrowings 2,956,564

Net Obligation to Lessor of JEDB/SLSPC 363,695

Trade & Other Payables 1,509,004

Amounts due to Related Parties 426,432

Bank Overdraft 465,162


93

Quoted Investment price rate sensitivity

The Group and company is exposed to changes in share price of the Colombo Stock Exchange and the sensitivity for the investment rate change is as follows,

Group Other Comprehensive Income Equity

10% increase 10% decrease 10% increase 10% decrease

Rs.000 Rs.000 Rs.000 Rs.000

Available for Sale Investments 4,817 (4,817) 4,817 (4,817)

Company Other Comprehensive Income Equity

10% increase 10% decrease 10% increase 10% decrease

Rs.000 Rs.000 Rs.000 Rs.000

Available for Sale Investments 286 (286) 286 (286)


GLOSSARY OF FINANCIAL AND NON FINANCIAL TERMS

Financial Terms

Accounting PoliciesThe specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting financial statements.

Contingent LiabilitiesA possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise.

Current RatioCurrent Assets divided by Current Liabilities. A measure of liquidity.

Debt/Equity Ratio Total Interest Bearing Borrowings to Shareholders’ Fund.

Deferred Taxation The tax effect of timing differences deferred to / from other periods, which would only qualify for inclusion on a tax return at a future date.

DividendsDistribution of profits to holders of equity investments in proportion to their holdings of a particular class of capital.

Dividend CoverProfit attributable to Ordinary Shareholders divided by dividend. Measures the number of times dividend is covered by distributable profit.

Dividend YieldDividend per Share as a percentage of the market price. A measure of return on Investment.

Earnings per Share Profit attributable to shareholders divided by the weighted average number of ordinary shares in issue during the period

EBITDAEarnings before Interest, Tax, Depreciation and Amortisation.

ROCEProfit after Tax plus interest on loans and finance leases divided by the shareholders’ funds and interest bearing loans and borrowings.

Gearing Proportion of borrowings to capital employed.

Interest CoverProfit before tax plus net finance cost divided by net finance cost. Measure of an entity’s debt service ability.

Market CapitalisationNumber of shares in issue multiplied by the market value of a share at the reported date.

Net Assets per ShareShareholders’ Funds divided by the weighted average number of ordinary shares in issue. A basis of share valuation

Price Earnings RatioMarket price of a share divided by earnings per share as reported at that date.

Related partiesParties who could control or significantly influence the financial and operating policies of the business.

SegmentConstituent business units grouped in terms of similarity of operations and locations.

Value AdditionsThe quantum of wealth generated by the activities of the Company measured as the difference between turnover and the cost of materials and services bought in.

Working CapitalCapital required to finance the day-to-day operations computed as the excess of current assets over current liabilities.

Non Financial TermsCOPCost of producing a kilo of Tea/Rubber.

CTCCrush, Tear & Curl. A manufacturing method.

HACCPHazard Analysis Critical Control Point System. A standard for safety of foods.

Immature PlantationThe extent of plantation which is not taken in to the bearing and is in the process of development.

ISOInternational Standard Organisation.

Mature PlantationThe extent of plantation from which crop is being harvested.

NSA Net Sales Average. Measures the average value of net selling price of a kilo of Tea/Rubber.

RRIRubber Research Institute.

Seedling TeaTea grown from a seed.

TRITea Research Institute.

VP TeaVegetatively Propagated. Tea grown from a cutting of a branch of tea plant.

YPHYield per Hectare. The measure of average yearly output of produce from a hectare of mature plantation.

95

NOTICE OF MEETING

Notice is hereby given that the Twenty Fourth Annual General Meeting of Kotagala Plantations PLC will be held at the Grand Oriental Hotel, No. 2, York Street, Colombo 1, on 12th July 2017, at 10.00 a.m. for the following purposes:

1. To receive and consider the Annual Report of the Board of Directors and the Statements of Accounts for the year ended 31st March, 2017 with the Report of the Auditors thereon.

2. To re-elect as a Director Mr. G. D. V. Perera who retires in accordance with Articles 92 & 93 of the Articles of Association.

3. To reappoint Mr. A. Rajaratnam who is over seventy years of age as a Director. Special Notice has been received from a Shareholder of the intention to pass a resolution which is set out below in relation to his reappointment. (see Note No. 4)

4. To reappoint Mr. R. C. Peries who is over seventy years of age as a Director. Special Notice has been received from a Shareholder of the intention to pass a resolution which is set out below in relation to his reappointment. (see Note No. 5)

5. To reappoint Mr. A.M. de S. Jayaratne who is over seventy years of age as a Director. Special Notice has been received from a Shareholder of the intention to pass a resolution which is set out below in relation to his reappointment. (see Note No. 6)

6. To reappoint Mr. C. P. R. Perera who is over seventy years of age as a Director. Special Notice has been received from a Shareholder of the intention to pass a resolution which is set out below in relation to his reappointment. (see Note No. 7)

7. To reappoint Dr. L. M. K. Tillekeratne who has attained the age of seventy years as a Director. Special Notice has been received from a Shareholder of the intention to pass a resolution which is set out below in relation to his appointment. (see Note No. 8)

8. To re-appoint as Auditors, KPMG, Chartered Accountants and authorise the Directors to determine their remuneration.

By Order of the BoardCORPORATE MANAGERS & SECRETARIES (PRIVATE) LTD.Secretaries

Colombo12th June 2017

Notes:

1. A member of the Company who is entitled to attend and vote may appoint a proxy to attend and vote instead of him or her. A proxy need not be a member of the Company.

2. A Form of Proxy is enclosed for this purpose.

3. The instrument appointing a proxy must be deposited at the Registered Office of the Company’s Secretaries, Corporate Managers & Secretaries (Private) Limited, No.8-5/2, Leyden Bastian Road, York Arcade Building, Colombo 1, not less than forty eight hours before the time fixed for the meeting.

4. Special Notice has been received by the Company from a shareholder giving notice of the intention to move the following Resolution as an Ordinary Resolution at the Annual General Meeting:

Resolved – “That Mr. A. Rajaratnam who is seventy five years of age be and is hereby

reappointed a Director of the Company and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No.7 of 2007 shall not apply to the said Director, Mr. A. Rajaratnam.”


Resolved – “That Mr. R. C. Peries who is seventy six years of age be and is hereby

reappointed a Director of the Company and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No.7 of 2007 shall not apply to the said Director, Mr. R. C. Peries.”


Resolved – “That Mr. A. M. De S. Jayaratne who is seventy seven years of age be and

is hereby reappointed a Director of the Company and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No.7 of 2007 shall not apply to the said Director, Mr. A. M. De S. Jayaratne.”


Resolved – “That Mr. C. P. R. Perera who is seventy three years of age be and is hereby

reappointed a Director of the Company and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No.7 of 2007 shall not apply to the said Director, Mr. C. P. R. Perera.”


Resolved –

“That Dr. L. M. K. Tillekeratne who is seventy years of age be and is hereby reappointed a Director of the Company and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No.7 of 2007 shall not apply to the said Director, Dr. L. M. K. Tillekeratne.”


NOTES

97


NOTES

99

FORM OF PROXY

I/We* .................................................................................................................................................................................................................................................................. of

............................................................................................................................................................................... being a member/members* of Kotagala Plantations PLC, hereby

appoint,..........................................................................................................................................of..................................................................................................or failing him

1. Sri Dhaman Rajendram Arudpragasam of Colombo or failing him

2. Chrisantha Priyange Richard Perera of Colombo or failing him

3. Alagarajah Rajaratnam of Colombo or failing him

4. Damian Sunil AbeyRatna of Colombo or failing him

5. Mahen Susantha Madugalle of Colombo or failing him

6. Ranjit Crisantha Peries of Colombo or failing him

7. Devaka Ajit Ratwatte of Colombo or failing him

8. Ganegodage DhamithaVaamakaPerera of Colombo or failing him

9. Ajit Mahendra De Silva Jayaratne of Colombo or failing him

10. Liyanarachige Mahasen Keerthi Tillekeratne of Colombo

as my/our *proxy to represent me/us*,and to vote as indicated hereunder for me/us* and on my/our* behalf at the Twenty Fourth Annual General Meeting of the Company to be held on 12th July 2017 at 10.00 a.m. and at any adjournment thereof and at every poll which may be taken in consequence thereof

For Against

1. To receive & consider the Annual Report of the Board of Directors and the Statement of Accounts for the year ended 31st March 2017 with the Report of the Auditors thereon.

2. To re-elect Mr. G. D. V. Perera as a Director.

3. To re-appoint Mr. A. Rajaratnam as a Director.

4. To re-appoint Mr. R. C. Peries as a Director.

5. To re-appoint Mr. A. M. De S. Jayaratne as a Director.

6. To re-appoint Mr. C. P. R. Perera as a Director.

7. To re-appoint Mr. L. M. K. Tillekeratne as a Director.

8. To re-appoint as Auditors, KPMG Chartered Accountants and authorise the Directors to determine their remuneration.

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

As witness, my/our* hands this ……................…. day of .............….. 2017.

................................................. Signature Note: *Please delete the inappropriate words.1. A Proxy need not be a member of the Company.

2. If no words are struck out or there is in view of the Proxy doubt (by reason of the way in which the instructions contained in the form of Proxy have been completed) as to the way in which the Proxy should vote, the Proxy will vote as he thinks fit.

3. Instructions as to completion are noted on the reverse hereof.


Instructions as to completion

1. Please write legibly, your name, address and date, and sign in the space provided.

2. The completed Form of Proxy should be received at the Registered Office of the Company’s Secretaries, Corporate Managers & Secretaries (Pvt) Ltd at 8-5/2, Leyden Bastian Road, York Arcade Building, Colombo 01, not less than 48 hours before the time appointed for the holding of the meeting.

3. In the case of a Company/Corporation, this Form of Proxy shall be executed either under its Common Seal or by its Attorney or by an Officer on behalf of such Company/Corporation duly authorised in writing.

4. In the case of Proxy signed by an Attorney, the relevant Power of Attorney must be deposited at the Registered Office of the Company’s Secretaries for registration.

FORM OF PROXY

Name of the Company : Kotagala Plantations PLCLegal Form : A Quoted Public Company with Limited LiabilityDate of Incorporation : 22nd June 1992Company Registration No. : PQ 174Principle Activities : Cultivation, Manufacture and Sale of Tea, Rubber and Cultivation and Sale of Oil PalmRegistered Office : 53 1/1, Sir Baron Jayatilaka Mawatha, Colombo 1.E-mail : [email protected] : www.lankemplantations.lkDirectors : S.D.R. Arudpragasam - Chairman C.P.R. Perera - Deputy Chairman A Rajaratnam - (Alternate - R Edwards - Deputy Chief Executive Officer) D. S. AbeyRatna M.S. Madugalle - Chief Executive Officer R.C. Peries D.A. Ratwatte G.D.V. Perera A.M. De S. Jayaratne L.M.K. TillekeratneStock Exchange Listing : The Ordinary Shares of the Company are listed with the Colombo Stock Exchange of Sri LankaSenior Management(Lankem Tea & Rubber : D.S. AbeyRatnaPlantations (Pvt) Ltd) - Ph.D (UH-USA), F. C. M. A (UK), F.C.A (SL), F.C.M.A (SL), C.M.A (Aus)Managing Agents : R C Peries M.C.I.P : D A Ratwatte F.I.P.M : M S Madugalle Dip. (Plantation Mgt) (NIPM) : Ms K M Ramesh F.C.M.A (UK), MBA (USA)

Operational Director : Mr. R. Edwards Up Country

General Managers : J K Congreve Dip. (Plantation Mgt) - (NIPM) : Ms J Kariyawasam Attorney – at –Law , Notary Public & Commissioner for Oaths Diploma in Intellectual Property Law (USA) Diploma in Human Resource Management Training & Development (IPM) MBA ( Australia) : M Kowdu F. C. M. A / F.C.ASecretaries : Corporate Managers & Secretaries (Private) Limited 8-5/2, Leyden Bastian Road, York Arcade Building, Colombo 1.Auditors : KPMG Chartered Accountants, P.O.Box 186, Colombo 3.Bankers : Seylan Bank PLC Standard Chartered Bank People’s Bank National Development BankLegal Advisers : Messrs Julius & Creasy Attorneys-at-law P.O.Box 154, Colombo 1.

Designed & produced by

Printed by Printage (Pvt) Ltd

CORPORATE INFORMATION

Kotagala Plantations PLC53 1/1, Sir Baron Jayatilaka Mawatha, Colombo 1 E-mail: [email protected]: www.lankemplantations.lk

An

nual Rep

ort 2016/17 | Kotagala Plantation

s PLC

Documents

KOTAGALA PLANTATIONS PLC - CSEKotagala Plantations PLC for the year 2016 -2017. During the year the Sri Lankan economy grew at a rate of 4.4% which is slower than the 4.8% growth recorded