agalawatte plantations plccolombo 10, sri lanka. tel: 011 4718200 email: [email protected]...

AGALAWATTE PLANTATIONS PLCANNUAL REPORT 2016

AG

ALAW

ATTE PLAN

TATIONS PLC | AN

NU

AL REPORT 2016

Our VisionTo be the benchmark among plantation companies.

Our MissionTo contribute towards the growth of the Company through optimum utilization of available resources

and opportunities with the use of best management practices, whilst enhancing shareholder wealth and

improving the quality of life of all stakeholders, thereby being a partner in National Development.


| 3ANNUAL REPORT 2016

Corporate Information

Name of the Company

Agalawatte Plantations PLC (PQ 214)

Registered Office

During the financial year 2016 up to 08th December 2016No. 10, Gnanartha Pradeepa Mawatha, Colombo 08.

w.e.f. 09th December 2016Browns Capital Building, No. 19, Dudly Senanayake Mawatha, Colombo 08.

w.e.f. 21st June 2017 No. 361, Kandy Road, Nittambuwa.Tel: 0334679200/ 0332299000Fax: 0332285681 Email: [email protected]

Legal Form

A Public Quoted Company with Limited LiabilityIncorporated in Sri Lanka on 22nd June 1992

Auditors Ms.KPMG, (Chartered Accountants) No.32 A, Sir Mohamed Macan Marker Mawatha, Colombo.Tel No: +94 11 5 426426

Board of Directors

During the financial year 2016Dr. C.N.A. Nonis(Resigned 11th Nov 2016)

Mr. R.K.M. Ng(Resigned 11th Nov 2016)

Dr. W.S. Ng(Alternate to Mr. R.K.M. Ng)

Mr. L.L. Samarasinghe(Resigned 29th Jun 2016)

Mr. F.L. Fonseka(Resigned 11th Nov 2016)

Mr. S.C.J. Devendra(Resigned 11th Nov 2016)

Mrs. S.M.A. Nonis Ranaweera(Resigned 11th Nov 2016)

w.e.f. 20th Oct 2016 to 14th Jun 2017Mr. K.A.K.P Gunewardena(Appointed 20th Oct 2016 & Resigned 14th Jun 2017)

Mr. D.S.K. Amarasekera(Appointed 20th Oct 2016 & Resigned 14th Jun 2017)

Ms. V.G.S.S. Kotakadeniya(Appointed 20th Oct 2016 & Resigned 14th Jun 2017)

Mr. A.S. Perera(Appointed 20th Oct 2016 & Resigned 13th Sep 2017)

Mr. K.G. Punchihewa(Appointed 18th Nov 2016 & Resigned 14th Jun 2017)

Board of Directors

w.e.f. 22nd May 2017 to dateMr. G.P.N.A.G. Gunathilake(Appointed 22nd May 2017)

Mr. W.A. Arosha Asanga(Appointed 22nd May 2017)

Mr. L.R.W.S. Rajasekara(Appointed 22nd May 2017)

Mr. R.P.L. Ramanayake(Appointed 22nd May 2017)

Mr. A.S. Amarasuriya( Appointed 22nd Jun 2017)

Mr. W.L.P. Wijewardena( Appointed 22nd Jun 2017

Mr. R.K.A. Ranaweera( Appointed 20th Sep 2017)

Bankers Hatton National Bank PLC D F C C Bank Sampath Bank PLC People’s Bank NDB Bank Commercial Bank of Ceylon PLC Nations Trust BankBank of CeylonIndian BankState Bank of IndiaMCB Bank Limited

Secretaries Resigned 18th Nov 2016 Corporate Services (Private) Limited No. 216, De Saram Place, Colombo 10, Sri Lanka. Tel: 011 4718200 Email: [email protected]

Appointed 18th Nov 2016 LOLC Corporate Services (Pvt) Ltd No. 100/1, Sri Jayawardenapura Mawatha, Rajagiriya.

Appointed 01st Feb 2017 S.F.L Services (Pvt) Ltd 481, T B Jayah Mawatha, Colombo 10.

Appointed 30th March 2017 Nexia Corporate Consultants (Pvt) Ltd No.181, First Floor, Nawala Road, Narahenpita.Tel : 011 4 510709/ 011 2 368154E-mail : [email protected]

Registrar Business Intelligence Limited No. 08, Tickell Road, Colombo 08, Sri Lanka. Tel: 011 5 579950 Email: [email protected]


4 | ANNUAL REPORT 2016

Financial Highlights

Summary of Results Group Company

2016 2015 Change 2016 2015 Change

Rs.000 Rs.000 % Rs.000 Rs.000 %

Revenue 1,405,709 1,829,321 (23.16) 1,226,933 1,630,229 (24.74)

Loss before interest and tax (798,004) (233,403) 241.90 (813,208) (249,708) 225.66

Loss before tax including share of profits from associated companies (1,149,627) (506,338) 127.05 (1,218,721) (503,651) 141.98

Loss after tax (1,256,379) (500,799) 150.87 (1,319,452) (495,927) 166.06

Stated capital 250,000 250,000 - 250,000 250,000 -

Equity (1,845,388) (631,330) 192.30 (1,988,936) (711,805) 179.42

Total assets 3,365,483 4,397,474 (23.47) 3,155,676 4,263,199 (25.98)

Personel costs 1,119,452 1,095,366 2.19 1,077,188 1,055,545 2.05

Per Share

Basic Earnings/(losses) per share (Rs.) (50.26) (20.03) 150.92 (52.78) (19.84) 166.13

Net assets/ (liabilities) per share (Rs.) (73.82) (25.25) 192.36 (79.56) (28.47) 179.45

Market Values

Highest 24.00 28.60 (16.08) 24.00 28.60 (16.08)

Lowest 15.30 19.00 (19.47) 15.30 19.00 (19.47)

Year End 17.50 20.50 (14.63) 17.50 20.50 (14.63)

The above figures were extracted from the audited Financial Statements for the year ended 31st December 2015 and 2016, thus it should be read in conjunction with the related notes to the said Financial Statements.



Annual Report of the Board of Directors

The Directors of the Company have pleasure in presenting the Annual Report together with the Audited Financial Statements of Agalawatte Plantations PLC and Consolidated Financial Statements of the Company and its Subsidiary for the year ended 31st December 2016. The Board emphasizes the fact that this Report together with financial statements, corporate governance reports and related disclosures have been prepared and presented on behalf of the previous Board of Directors of the Company who held the office during the period under review. Further the Board wishes to notify that some of relevant information/records are not available with the company and proper accounting & internal control system had not been maintained during the year. Therefore the Board could not assure on the accuracy and completeness of the information contained in this report and has however made a reasonable effort to prepare and present its annual report for the year 2016 in view of meeting the compliance requirements while fulfilling its duty to the stakeholders of the company and also the general public.

Principal Activities

The principal activities of the Company consist of cultivation, production, processing and sale of Tea, Rubber and Oil Palm and selected non-crop diversification initiatives.

Agalawatte Plantations PLC is a holding Company that owns, directly, 100% stake in Mackply Industries (Pvt) Ltd. The principal activity of Mackply Industries (Pvt) Ltd is the production and sale of Plywood products.

Parent Enterprise

The Company’s parent undertaking was Browns Power Holdings (Pvt) Ltd as at 31st December 2016, which is a member of the LOLC Group.

However, D.R. Investments (Pvt) Ltd has become the parent company with the acquisition of 61.1% shares held in the company by Browns Power Holdings (Pvt) Ltd on 27th March 2017.

Financial Statements

The financial statements of the Company and the Group are given on pages 15 to 72.

Auditors’ Report

The Auditors’ report on the financial statements is given on pages 12 to14.

Accounting Policies

The accounting policies adopted in the preparation of the financial statements are given on pages 21 to 31.

Corporate Governance/Internal Control

Details of Corporate Governance Practices of the Company and specific measures taken with regard to internal controls are elaborated on pages 7 & 8.

Directorate

The names of the Directors of the Company who held the office during the financial year are given below.

Dr. C.N.A. Nonis (Non-Executive Director) Resigned w.e.f 11/11/2016 (Chairman at the time of resignation)

Mr. R.K.M. Ng (Non-Executive Director) Resigned w.e.f 11/11/2016

Mr. F.L. Fonseka (Non-Executive Director)Resigned w.e.f 11/11/2016 (Managing Director at the time of resignation)

Dr. W.S.Ng (Non-Executive Director) (Alternate to Mr. R.K.M.Ng)

Mr. S.C.J. Devendra (Executive Director) Resigned w.e.f 11/11/2016 (CEO at the time of resignation)

Mrs. S.M.A. Nonis Ranaweera (Non-Executive Director) Resigned w.e.f 11/11/2016

Mr. L.L. Samarasinghe (Independent Non-Executive Director)Resigned w.e.f 29/06/ 2016

Mr. K.A.K.P Gunewardena (Non-Independent Non-Executive Director)Appointed on 20/10/2016 & Resigned w.e.f. 14/06/2017

Mr. D.S.K. Amarasekera (Non-Independent Non-Executive Director)Appointed on 20/10/2016 & Resigned w.e.f. 14/06/2017

Ms. V.G.S.S. Kotakadeniya (Non-Independent Non-Executive Director)Appointed on 20/10/2016 & Resigned w.e.f. 14/06/2017

Mr. K.G. Punchihewa (Executive Director) Appointed on 18/11/2016 & Resigned w.e.f. 14/06/2017

Mr. A.S. Perera (Executive Director) Appointed on 20/10/2016 & resigned w.e.f.13/09/2017

Directors’ Remuneration

Directors’ remuneration is disclosed in Note 12 to the Financial Statements.

Auditors

Pursuant to the provisions of Section 154, sub section 2 of the Companies Act 07 of 2007, M/s. KPMG, (Chartered Accountants), was appointed as statutory auditors of the company w.e.f. 7th July 2017 to fulfill the casual vacancy caused due to the resignation of existing auditor M/s Hulugalle Samarasinghe & Company, (Chartered Accountants).

The Auditors M/s KPMG (Chartered Accountants) were paid Rs.2,500,000/- as audit fees and Rs.300,000/- for non-audit related work.

Based on the declaration made by M/s KPMG (Chartered Accountants) as far as the Directors are aware, the Auditors do not have any relationship or interest in the Company other than disclosed above.

Shareholders Information

As at 31st December 2016, the Company had 11,271 registered shareholders. An analysis of the shareholding, distribution and



names of the 20 largest shareholders are given in the Shareholders Information section (Pages 73 & 74).

Earnings and Net Assets/ (Liabilities) Value Per Share

Earnings/ (Losses) per share and net assets/ (Liabilities) per share figures are given below:

2016Rs.

2015Rs.

Earnings/ (Losses) per share (52.78) (19.84)

Net assets/ (Liabilities) per share (79.56) (28.47)

Share Trading Information

The shares of the Company were listed in the Colombo Stock Exchange from 22nd January 1996.

Information relating to the trading of the Company’s shares during 2016 are given below:

2016Rs.

2015Rs.

Market value per share -Highest 24.00 28.60

Market value per share – Lowest 15.30 19.00

Market value per share - Closing 17.50 20.50

Personnel

The Company had in its employment 5,256 (2015: 6,097) persons as at 31st December 2016.

Going Concern

The Directors have adopted the going concern concept in preparing the Financial Statements which is explained in Note 37 to the Financial Statements.

Donations

There were no donations given during the year ended 31st December 2016.

For and on behalf of the Board

Sgd. Sgd.W.A.A. Asanga L.R.W.S. Rajasekara Director Director

Sgd.Nexia Corporate Consultants (Pvt) Ltd Secretaries Agalawatte Plantations PLC

Colombo14th December 2017

Annual Report of the Board of Directors



Statement of Corporate Governance

Corporate Governance is meant to be the system of rules, practices and processes by which a Company is directed and controlled. The Company is primarily guided by the Code of Best Practices on Corporate Governance issued by the Institute of Chartered Accountants of Sri Lanka and the Listing Rules of the Colombo Stock Exchange on Corporate Governance.

This statement, prepared by the current Board on behalf of previous members of the Board who held the office during the year 2016, sets out the Company’s Corporate Governance practices only with the available information & records with the Company under the present management. However the content of this statement may not be complete and accurate in compliance with said Listing Rules and Code of Best Practices and presented with the objectives of meeting the mandatory requirements under the corporate laws and regulations of the country.

Board of Directors

The names of the Members of the Board of Directors who held the office during the year 2016 are given as follows.

Dr. C.N.A.Nonis (Non-Executive Director) Resigned w.e.f 11/11/2016 (Chairman at the time of resignation)

Mr. R.K.M. Ng (Non-Executive Director) Resigned w.e.f 11/11/2016

Mr. F.L. Fonseka (Non-Executive Director)Resigned w.e.f 11/11/2016 (Managing Director at the time of resignation)

Dr. W.S.Ng (Non-Executive Director) (Alternate to Mr. R.K.M.Ng)

Mr. S.C.J. Devendra (Executive Director) Resigned w.e.f 11/11/2016 (CEO at the time of resignation)

Mrs. S.M.A. Nonis Ranaweera (Non-Executive Director) Resigned w.e.f 11/11/2016

Mr. L.L. Samarasinghe (Independent Non-Executive Director)Resigned w.e.f 29/06/ 2016

Mr. K.A.K.P Gunewardena (Non-Independent Non-Executive Director)Appointed on 20/10/2016 & Resigned w.e.f. 14/06/2017

Mr. D.S.K. Amarasekera (Non-Independent Non-Executive Director)Appointed on 20/10/2016 & Resigned w.e.f. 14/06/2017

Ms. V.G.S.S. Kotakadeniya (Non-Independent Non-Executive Director)Appointed on 20/10/2016 & Resigned w.e.f. 14/06/2017

Mr. K.G. Punchihewa (Executive Director) Appointed on 18/11/2016 & Resigned w.e.f. 14/06/2017

Mr. A.S. Perera (Executive Director) Appointed on 20/10/2016 & resigned w.e.f.13/09/2017

The Directors who held the office during the year are responsible for protecting the rights and interests of shareholders and are accountable to them for the overall management of the Company. Also, they are accountable toward attaining a high standard of corporate governance practices as specified by regulatory bodies and legislation such as the Institute of Chartered Accountants of Sri Lanka, the Securities & Exchange Commission of Sri Lanka and the Companies Act No. 7 of 2007.

The Board is mainly responsible for formulation of overall business policy and strategy and for monitoring of effective monitoring thereof. It is further responsible to ensure that adequate internal controls and the highest ethical standards are maintained and compliance with laws and regulations.

A statement of Directors’ Responsibilities is set out on pages 9 & 10.

Board Meetings

The Board meetings have been scheduled on a regular basis, and adhoc meetings held as and when required. The Board has met 10 times during the year under review. However, 5 meetings have been held without the Company Secretaries.

Corporate Management

The Company is having multiple crops viz. Tea, Rubber and Oil Palm and has diversified into selected diversification initiatives.

The production and processing operations of the Company have been effectively divided into three geographic regions, namely the Nuwara Eliya, Ratnapura and Kalutara Districts. The General Managers are in charge of Tea, Rubber and Oil Palm estates respectively. At Corporate level, Director/Chief Executive Officer and the General Managers along with Senior Managers are associated with the Management Team. The Senior Management team oversees the day to day management of the Company under the direction of the Director/Chief Executive Officer (CEO).

Internal Control & Risk management

The Directors are responsible for the Company’s system of internal controls. The current management does not have sufficient evidence/information whether the system which was in place during the year was adequate enough to ensure that proper accounting records have been maintained and reliable financial information have been generated.

Disclosure of Information

The Present Board places great emphasis on complete disclosure of both financial and non-financial information within the bounds of commercial reality, and on the early adoption of sound reporting practices. However the Board of Directors who held the office during the financial year 2016 have already resigned and Financial Statements for the year had not been finalized during their tenure. As some of relevant records/information are not available with the company, complete disclosures have not been made under the Statement of Corporate Governance.



Accordingly, the following Committee Reports for the year ended 31st December 2016 have not been included as an integral part of this report, due to the unavailability of information on the meetings held in connection with Remuneration and Audit Committees of the Company during the year.

1. Remuneration Committee (Members as per the previous Annual Report-2014)

Mr. L.L. Samarasinghe (Chairman), Mrs. N.S.M. Samaratunga and Mr. S.N. Guneratne

2. Audit Committee (Members as per the previous Annual Report-2014)

Mr. F.L. Fonseka (Chairman), Mr. S.N. Guneratne and Mr. R.T. de Sylva

Statement of Corporate Governance



Statement of Directors’ Responsibilities

The following statement, which should be read in conjunction with the Auditors’ Report of their responsibilities set out in their report, is made with a view to distinguish the respective responsibilities of the Directors and of the Auditors, in relation to the financial statements.

Directors are responsible, under the Sections 150(1), 151, 152(1) and 153 of the Companies Act No. 7 of 2007, to prepare Financial Statements for each financial year, which give 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 and loss for the financial year. The Directors are required to prepare these financial statements on the going concern basis, unless it is not appropriate.

The Board of Directors who held office during the year under review has resigned and financial statements for the year 2016 had not been prepared and presented during their tenure. Therefore the financial statements for the year 2016 have been prepared subject to the following circumstances and limitations.

The Company’s parent undertaking was Mackwoods Plantations (Pvt.) Ltd during 2016, which is a member of the Mackwoods Group of Companies. Subsequently Browns Power Holdings (Private) Limited acquired the controlling stake of Agalawatte Plantations PLC on 14th July 2016 and the previous Board of Directors tendered their resignations before the audit of financial statements for the year 2016 concluded.

Dr. C.N.A. Nonis - Chairman (Resigned 11th Nov 2016)

Mr. R.K.M. Ng - Director (Resigned 11th Nov 2016)

Mr. W.S. Ng (Alternate to Mr.R.K.M. Ng)

Mr. L.L. Samarasinghe - Director (Resigned 29th June 2016)

Mr. F.L. Fonseka - Director (Resigned 11th Nov 2016)

Mr. S.C.J. Devendra - Director (Resigned 11th Nov 2016)

Mrs. S.M.A. Nonis Ranaweera - Director (Resigned 11th Nov 2016)

Subsequently following members were appointed to the Board on behalf of Browns Power Holdings (Private) Limited.

Mr. K.A.K.P. Gunawardena - (Appointed 20th Oct 2016 and Appointed as Chairman 18th Jan 2017)

Mr. D.S.K. Amarasekera - (Appointed 20th Oct 2016)

Mrs. V.G.S.S. Kotakadeniya - (Appointed 20th Oct 2016)

Mr. A.S. Perera - (Appointed 20th Oct 2016)

Mr. K.G. Punchihewa - (Appointed 18th Nov 2016)

On 27th March 2017, 61.1% shares of Agalawatte Plantations PLC was acquired by D.R. Investments (Private) Limited and the following members were appointed to the Board.

Mr. R.P.L. Ramanayake - (Appointed 22nd May 2017)

Mr. G.P.N.A.G. Gunathilake - (Appointed 22nd May 2017)

Mr. W.A.A. Asanga - (Appointed 22nd May 2017)

Mr. L.R.W.S. Rajasekara - (Appointed 22nd May 2017)

Mr. A.S. Amarasuriya - (Appointed 22nd June 2017 as the Director/Chairman)

Mr. W.L.P. Wijewardena - (Appointed 22nd June 2017 as the Director/Deputy Chairman)

Mr.R.K.A. Ranaweera - (Appointed 20th Sep 2017)

Following Directors tendered their resignation from the Board on 14th June 2017.

Mr. K.A.K.P. Gunawardena

Mr. D.S.K. Amarasekera

Mrs. V.G.S.S. Kotakadeniya

Mr. K.G. Punchihewa

Mr. A.S. Perera (Resigned 13th Sep 2017)

The Current Board of Directors consists of following members.

Mr. A.S. Amarasuriya - Independent Non-Executive Director (Chairman)

Mr. W.L.P. Wijewardena - Independent Non-Executive Director (Deputy Chairman)

Mr. R.K.A. Ranaweera - Independent Non-Executive Director (Appointed 20th Sep 2017)

Mr. G.P.N.A.G. Gunathilake - CEO/ Executive Director

Mr. W.A.A. Asanga - Non-Independent Non-Executive Director

Mr. L.R.W.S. Rajasekara - Non-Independent Non-Executive Director

Mr. R.P.L. Ramanayake - Non-Independent Non-Executive Director

Therefore the present Board who did not hold any office during the year 2016, are not responsible for the transactions and operation during the year and merely facilitated the external auditors to the best of their knowledge and information/records available with the company to carry out the audit with certain limitations and lack of proper internal controls etc. during the period under the audit.

The Directors who held the office during the year ended 31st December 2016 are responsible for the compliance on good corporate governance, maintenance of proper books of accounts, preparation of financial statements in compliance with Sri Lanka Accounting Standards and also to comply with the Companies Act No.07 of 2007, listing rules and other compliance requirements.



The Directors also have general responsibility for taking such steps that are reasonably open to them, to safe guard the assets of the Company and to prevent and detect frauds and other irregularities.

The Audit Committee of the Company has been reinstated under the new management and meets periodically with the internal Auditors and External Auditors to review the manner in which the Auditors are performing their responsibilities, and to discuss auditing, internal controls and financial reporting issues. The Committee ensured that the External Auditors and the Internal Auditors have full and free access to the member of the Audit Committee to discuss any matter of substance. Further other committees i.e. Remuneration Committee and Related Party Transactions Review Committee were established during latter part of year 2017.

By order of the Board

Sgd.Nexia Corporate Consultants (Pvt) Ltd Secretaries Agalawatte Plantations PLC


Statement of Directors’ Responsibilities



Audit Committee Report

Audit Committee is the sub-Committee of the Board of Directors and it is accountable to the Board. The Committee is responsible for supporting the Board in ensuring that the Group’s financial results, internal controls and risk management are effectively managed in line with the best practices and in compliance with the accounting standards laid down by the Institute of Chartered Accountants of Sri Lanka, requirements of the listing rules of the Colombo Stock Exchange and other relevant laws and regulations. In addition, the Committee considers the contents of internal and external audit reports and recommends the appointment of the external auditors.

The present management was unable to present the role and the procedures carried by the Audit Committee of Agalawatte Plantations PLC during the year 2016 due to the absence of Audit Committee Minutes of Meetings for the period.

However, the new management has taken immediate measures in developing a good governance structure for the company. As a result, the Audit Committee re-established during the year 2017 for Agalawatte Plantations PLC and committee meetings are being held on regular basis & proper records of minutes are kept based on regulatory requirements.

Sgd.W.L.P. WijewardenaChairman- Audit Committee




Independent Auditors’ Report

TO THE SHAREHOLDERS OF AGALAWATTE PLANTATIONS PLC

Report on the Financial Statements

We were engaged to audit the accompanying financial statements of Agalawatte Plantations PLC, (“the Company”), and the consolidated financial statements of the Company and its subsidiary (“Group”), which comprise the statement of financial position as at 31st December 2016, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended and notes, comprising a summary of significant accounting policies and other explanatory information set out on pages 15 to 72.

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. Because of the matters described in the Basis for Disclaimer of Opinion paragraph, we were not able to obtain sufficient and appropriate audit evidences to provide a basis for an audit opinion.

Basis for Disclaimer of Opinion

1. Because of the disclaimer of opinion issued in respect of the prior period ended 31st December 2015, we were unable to satisfy ourselves as to the accuracy and completeness of the opening balances for inventories, property, plant and equipment, bearer biological assets, consumable biological assets, cash & cash equivalents, loans & borrowings, trade payables, tax balances, trade & other receivables, other payables and total equity. Since these opening balances entered into the determination of the results of operations and cash flows of the Company and the Group for the year ended 31st December 2016, we were unable to determine whether adjustments to the financial position, results of the operations and cash flows for the year ended 31st December 2016 might have been necessary.

2. The present board of directors of the Company could not provide a letter of representation as per Sri Lanka Auditing Standards 580 “Written Representations”, as they did not hold office during

the year ended 31st December 2016. Further as explained in Note 41 to the financial statements, the present board of directors has taken the limited responsibility for the preparation and presentation of the financial statements for the year ended 31st December 2016. We were unable to verify the impact to the financial statements for the year ended 31st December 2016 as a result of this.

3. The Company has recorded revenue of Rs. 117,809,450/- cost of sales of Rs. 84,282,195/- other income of Rs. 2,617,910/- property, plant and equipment of Rs. 5,950,607/- bank overdrafts of Rs. 7,822,876/- and trade and other payables of Rs. 35,884,504/- relating to Labookellie Tea Center of the Company for the year ended 31st December 2016. We have not been provided with sufficient and appropriate supporting documents to assess the completeness, existence, accuracy and valuation of those amounts. Accordingly, we are unable to assess the completeness, existence, accuracy and valuation of those amounts recorded in the financial statements for the year ended 31st December 2016.

4. As disclosed in Notes 6.1 to the financial statements, the Company has recorded local tea sales amounting to Rs. 11,569,994/- for the year ended 31st December 2016. However, we were unable to verify the completeness, existence and accuracy of local sales recorded under tea revenue for the year ended 31st December 2016 in the absence of sufficient and appropriate audit evidences.

5. As disclosed in Notes 12 to the financial statements, the Company has recognized an amount of Rs. 7,975,000/- as directors’ remunerations under administration expenses for the year ended 31st December 2016. However, we were unable to verify the accuracy and completeness of said expenses for the year ended 31st December 2016 due to absence of sufficient and appropriate audit evidences.

6. As disclosed in Notes 7 to the financial statements, the Company has recorded profit on disposal of property, plant and equipment of Rs. 14,710,000/- in the financial statements for the year ended 31st December 2016. We are unable to verify the accuracy and completeness of this profit on disposal in the absence of sufficient and appropriate audit evidences. Accordingly, we are unable to determine whether any adjustment relating to the profit on disposal of property, plant and equipment was necessary in the financial statements for the year ended 31st December 2016.



7. Based on the samples selected for our verification, we were unable to obtain sufficient and appropriate audit evidences over completeness and accuracy of expenses recorded in the financial statements for the year ended 31st December 2016 of Rs. 3,643,983/- included in selling and distribution expenses and Rs. 38,608,332/- included in administration expenses in the absence of documentary evidences.

8. As disclosed in Note 16.2 to the Financial Statements, the Company has recorded costs of property, plant, equipment of Rs. 896,704,388/- and related accumulated depreciation of Rs. 535,192,349/- under property, plant and equipment as at 31st December 2016. We were unable to verify the completeness, accuracy, existence and valuation of these balances in the absence of accurate fixed asset registers.

9. As disclosed in Note 17.2.1 and Note 17.2.2 to the financial statements, the Company has recorded the cost of immature and mature bearer biological assets of Rs. 442,045,000/- and Rs. 2,142,981,404/- respectively as at 31st December 2016. We were not provided with sufficient and appropriate documentation to verify the cost of immature and mature bearer biological assets as at 31st December 2016. Accordingly, we are unable to establish the existence and valuation of the cost of immature and mature bearer biological assets balances recorded in the financial statements for the year ended 31st December 2016.

10. The produce on bearer biological assets has not been accounted in accordance with LKAS 41 “Agriculture” in the financial statements for the year ended 31st December 2016. We are unable to quantify the impact on the financial statements due to departure from the Sri Lanka Accounting Standards.

11. In accordance with LKAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors’’, the correction of material prior-period errors should be corrected with retrospective application unless it is impracticable. The Company has corrected following errors prospectively in the financial statements for the year ended 31st December 2016 which is non-compliances with Sri Lanka Accounting Standards.

• The Company has incorrectly calculated depreciation on leasehold and freehold bearer biological assets as at 31st December 2015. The accurate accumulated depreciation as at 1st January 2016 was calculated during the year ended 31st December 2016 and the accumulated depreciation difference on tea and rubber of leasehold bearer biological assets relating to previous years were Rs. 6,257,750/- and Rs. 15,729,000/- respectively and accumulated depreciation difference relating to freehold bearer biological relating to previous years was Rs. 134,542,595/-. These differences have been adjusted in the financial statements for the year ended 31st December 2016 without restating the comparative figures.

• The Company has fair valued the consumable biological assets after 4 years as at 31st December 2016 even though the Company is required to fair value the biological assets at each reporting date as per LKAS 41 ”Agriculture”. The entire fair value gain of Rs. 49,524,196/- arising from the fair valuation of biological assets as at 31st December 2016 has been recognized in the financial statements for the year ended 31st December 2016 without restating the comparative figures.

• The Company has used half month salary basis to compute the retirement benefit obligation as at 31st December 2015 which is a non-compliance with Sri Lanka Accounting Standards. The retirement benefit obligation as at 31st December 2016 has been computed as per actuarial valuation method and the Company has reversed an amount of Rs. 54,618,225/- in the financial statements for the year ended 31st December 2016 without restating the comparative figures.

• The Company had not considered the temporary difference arising from consumer biological assets for the calculation of deferred tax liability as at 31st December 2015. The deferred tax impact of Rs. 64.19 Mn on consumer biological assets relating to previous years has been adjusted in the financial statements for the year ended 31st December 2016 without restating the comparative figures.

12. As disclosed in Note 32.1 to the Financial Statements, the Company has recorded retirement benefit payments of Rs. 29,083,219/- and unsettled gratuity payments of Rs. 2,927,075/- in retirement benefit obligation as at 31st December 2016. We were unable to establish the completeness, existence and accuracy of these balances in the absence of appropriate and sufficient supporting documents.

13. The Company has not capitalized the borrowings costs relating to biological assets during the year ended 31st December 2016 as required by LKAS 23 “Borrowing Costs” due to unavailability of records to identify the relevant borrowing costs. Accordingly, we are unable to quantify the impact on the financial statements due to this departure from Accounting Standards.

14. We were appointed as auditors of the Company after 31st December 2016 and thus we did not observe the counting of physical inventories as at 31st December 2016. We were unable to satisfy ourselves by alternative audit procedures to verify completeness, existence and accuracy of the inventory quantities and inventory value of Rs. 169,709,000/- as at 31st December 2016.

15. We were unable to obtain direct representations from the external legal counsels on pending litigations and accordingly to evaluate the financial impact and contingent liabilities as at 31st December 2016 and disclosures required if any in the financial Statements for the year ended 31st December 2016. We were unable to satisfy ourselves by alternative procedures, the effects of any pending litigations on the financial statements for the year ended 31st December 2016.

16. As disclosed in Note 24.1 to the Financial Statements, the Company has recorded receivables from related companies of the previous management/owners of the Company amounting to Rs. 120,594,480/- as at 31st December 2016. We were unable to establish the completeness, existence, accuracy and valuation of these balances in the absence of sufficient and appropriate audit evidences or direct confirmations from the respective parties.



Independent Auditors’ Report

17. As disclosed in Note 34.1 to the Financial Statements, the Company has recognized unsubstantiated payable balance of Rs. 392,083,846/- as at 31st December 2016. However, we were unable to verify the existence, accuracy and valuation of this balance in the absence of sufficient and appropriate audit evidences.

18. We were unable to obtain sufficient and appropriate audit evidences for majority of journal entries incorporated in the general ledger of the Company for the year ended 31st December 2016 since those journal entries are not supported with appropriate documentary evidence and required approvals by the responsible personnel of the Company. As a result, we were unable to determine whether any further adjustments might have been found necessary in respect of recorded or unrecorded balances, and the elements making up these financial statements.

19. The company has not made adequate disclosures for financial risk management policies of the company in the financial statements in accordance with SLFRS 7 “Financial Instrument Disclosures”.

20. We were unable to establish whether the company has identified and disclosed all the balances and transactions with related parties correctly in the financial statements for the year ended 31st December 2016 in accordance with LKAS 24 “Related Party Disclosures” since the Company has not maintained proper financial records in relation to the same.

21. As per LKAS 28 “Investment in Associates”, the Group should account for its investments in associates using the equity method of accounting. However, as disclosed in Note 20 to the financial statements, the Group has not recognized share of profit / (loss) from associate companies for the year ended 31st December 2016 and accordingly, the Group has not applied the equity method of accounting for investment in associates as at 31st December 2016. Consequently, we were unable to quantify the impact on the financial statements because of this non-compliance with the Sri Lanka Accounting Standards due to the non-availability of audited financial statements of the associate companies for the year ended 31st December 2016.

22. The consolidated financial statements of the Group for the year ended 31st December 2016 have been prepared based on un-audited financial statements of AEN Palm Oil Processing (Private) Limited, an joint venture of the group as disclosed in Note 21 to the financial statements. These financial statements are unaudited and have been furnished to us by the management. As a result, we were unable to determine whether any adjustments or disclosures might have been found necessary in respect of recorded or unrecorded total assets and total liabilities, and the elements making up the statement of comprehensive income, statements of changes in equity and statements of cash flows had the audited financial statements of said joint venture made available to us.

Disclaimer of Opinion

Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient and appropriate audit evidences to provide a basis for an audit opinion. Accordingly, we do not express an opinion on these financial statements.

Emphasis of Matter

Without further qualifying our opinion, we draw attention to Note 37 to the financial statements which more fully describes the existence of doubt on the going concern of the Company and the steps taken by the Company.

Other Matter

The financial statements of the Company for the year ended 31st December 2015 were audited by another auditor who expressed a disclaimer audit opinion on those financial statements on 21st June 2017.

Report on Other Legal and Regulatory Requirements

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

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

b) In our opinion:

- We have not obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have not been kept by the Company.

- The financial statements of the Company and the Group have not complied with the requirements of sections 151 and 153 of the Companies Act No. 07 of 2007.

Chartered Accountants




Statement of Profit or Loss and Other Comprehensive IncomeFor the Year Ended 31st December Group Company

Note 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

Revenue 6.1 1,405,709 1,829,321 1,226,933 1,630,229

Cost of sales 6.2 (1,564,847) (1,816,834) (1,430,089) (1,662,933)

Gross profit/ (loss) (159,138) 12,487 (203,156) (32,704)

Other income 7 145,722 105,805 194,518 108,205

Gain on changes in fair value of biological assets 8 49,524 - 49,524 -

Selling and distribution expenses (9,825) (35,180) (3,782) (28,224)

Administration expenses (219,838) (243,414) (189,095) (223,884)

Other expenses 9 (604,449) (73,101) (661,217) (73,101)

Results from operating activities (798,004) (233,403) (813,208) (249,708)

Finance income 11.1 1,076 826 1,076 826

Finance costs 11.2 (409,856) (256,439) (406,589) (254,768)

Net finance costs 11 (408,780) (255,613) (405,513) (253,942)

Share of loss in associate companies 20.6 - (21,312) - -

Share of profit in jointly controlled entity 21.1.1 57,157 3,991 - -

Loss before taxation 12 (1,149,627) (506,338) (1,218,721) (503,651)

Income tax (expenses)/ reversal 13 (106,752) 5,539 (100,731) 7,724

Loss for the year (1,256,379) (500,798) (1,319,452) (495,926)

Other comprehensive income

Actuarial gain on retirement benefit obligation 32 48,741 - 48,741 -

Tax on other comprehensive income (6,419) - (6,419) -

Other comprehensive income for the year, net of taxes 42,322 - 42,322 -

Total comprehensive expense for the year (1,214,057) (500,798) (1,277,130) (495,926)

Loss attributable to:

Equity holders of the company (1,256,379) (500,798) (1,319,452) (495,926)

Non controlling interests - - - -

Loss for the year (1,256,379) (500,798) (1,319,452) (495,926)

Total comprehensive expense attributable to:

Equity holders of the company (1,214,057) (500,798) (1,277,130) (495,926)


Total comprehensive expense for the year (1,214,057) (500,798) (1,277,130) (495,926)

Basic loss per share (Rs.) 14 (50.26) (20.03) (52.78) (19.84)

Figures in brackets indicate deductions

The financial statements are to be read in conjunction with the related notes, which form an integral part of the Financial Statements of the Group set out on pages 21 to 72.



Statement of Financial Position

As At 31st December Group Company

Note 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

ASSETSNon-current assetsRights to use the leasehold land 15 150,476 155,756 150,476 155,756 Property, plant and equipment 16 399,375 541,352 365,844 509,759 Bearer biological assets 17 1,803,068 2,341,025 1,803,068 2,341,025 Consumable biological assets 18 500,261 450,737 500,261 450,737 Investment in subsidiary 19 - - 12,500 12,500 Investment in associates 20 - 21,481 - 78,250 Investment in jointly controlled entity 21 109,702 106,211 7,965 13,128 Available for sale financial assets 22 12,418 22,305 12,418 22,305

2,975,300 3,638,867 2,852,532 3,583,460

Current assetsInventories 23 200,870 209,106 169,709 173,014 Trade and other receivables 24 169,629 196,269 94,610 126,759 Amount due from related parties 25 49 328,394 20,782 355,181 Cash and cash equivalents 26 19,635 24,838 18,043 24,785 Total current assets 390,183 758,607 303,144 679,739 Total assets 3,365,483 4,397,474 3,155,676 4,263,199

EQUITY AND LIABILITIESStated capital and reservesStated capital 27 250,000 250,000 250,000 250,000 General reserves 28 515,000 515,000 515,000 515,000 Accumulated Losses (2,610,388) (1,396,330) (2,753,936) (1,476,805)


Equity attributable to owners of the Company (1,845,388) (631,330) (1,988,936) (711,805)

Non-current liabilitiesLoans and borrowings 29.1.b 850,585 672,876 848,085 668,375 Net liability to lessor of JEDB/SLSPC 30.2.b 223,993 228,567 223,993 228,567 Deferred tax liabilities 31 199,184 98,378 198,163 98,378 Retirement benefit obligation 32 711,812 768,004 701,922 760,638 Deferred income 33 91,023 94,658 91,023 94,658 Total non current liabilities 2,076,597 1,862,482 2,063,186 1,850,616

Current liabilitiesTrade and other payables 34 2,141,393 1,611,443 2,112,518 1,594,545 Amounts due to related parties 35 35,433 472,229 35,433 472,229 Loans and borrowings 29.1.a 841,710 958,382 832,169 951,470 Net liability to lessor of JEDB/SLSPC 30.2.a 4,574 4,398 4,574 4,398 Income tax payable 50,617 30,302 45,364 31,749 Bank overdrafts 26 60,547 89,568 51,368 69,998 Total current liabilities 3,134,274 3,166,322 3,081,426 3,124,388

Total liabilities 5,210,871 5,028,804 5,144,612 4,975,005

Total equity and liabilities 3,365,483 4,397,474 3,155,676 4,263,199

Figures in brackets indicate deductions.




I certify that these financial statements have been prepared in compliance with the requirements of the Companies Act No.7 of 2007 subject to the circumstances and limitations set out in Note 41 to the Financial Statements.

Sgd. T. A. D. A. K. ThudugalaHead of Finance

The Board of Directors is responsible for the preparation and presentation of these financial statements subject to the circumstances and limitations set out in Note 41 to the Financial Statements.

Approved and signed for and on behalf of the Board of Directors of Agalawatte Plantations PLC.

Sgd. Sgd. W.A.A. Asanga L.R.W.S. Rajasekara Director Director




Statement of Changes In Equity

For the Year Ended 31st December Stated General Accumulated Non TotalCapital Reserve Losses Controlling

InterestsGroup Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000

Balance as at 1st January 2015 250,000 515,000 (895,532) - (130,532)Total comprehensive expense for the yearLoss for the year - - (500,798) - (500,798)

- - (500,798) - (500,798)

Balance as at 31st December 2015 250,000 515,000 (1,396,330) - (631,330)

Balance as at 1st January 2016 250,000 515,000 (1,396,330) - (631,330)Total comprehensive expense for the yearLoss for the year - - (1,256,379) - (1,256,379)Other comprehensive income for the year, net of taxes - - 42,322 - 42,322

- - (1,214,057) - (1,214,057)Balance as at 31st December 2016 250,000 515,000 (2,610,388) - (1,845,388)

Stated General Accumulated TotalCapital Reserve Losses

Company Rs. 000 Rs. 000 Rs. 000 Rs. 000

Balance as at 1st January 2015 250,000 515,000 (980,879) (215,879)Total comprehensive expense for the yearLoss for the year - - (495,926) (495,926)

- - (495,926) (495,926)

Balance as at 31st December 2015 250,000 515,000 (1,476,805) (711,805)

Balance as at 1st January 2016 250,000 515,000 (1,476,805) (711,805 )Total comprehensive expense for the yearLoss for the year - - (1,319,452) (1,319,452)Other comprehensive income for the year, net of taxes - - 42,322 42,322

- - (1,277,130) (1,277,130)Balance as at 31st December 2016 250,000 515,000 (2,753,936) (1,988,936)





Statement of Cash Flows

For the Year Ended 31st December Group Company

2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

CASH FLOWS FROM OPERATING ACTIVITIES

Loss before taxation (1,149,627) (506,338) (1,218,721) (503,651)

Adjustments for :

Share of loss in associate companies - 21,312 - -

Share of profit in jointly controlled entity (57,157) (3,991) - -

Provision for impairment of property, plant and equipment 108,475 - 108,475 -

Write-off of property, plant and equipment 1,766 - 1,766 -

Gain on changes in fair value of biological assets (49,524) - (49,524) -

Provision made/(reversal) for trade and other receivables 4,427 (34,125) 5,502 (34,125)

Provision for obsolete inventories 15,243 - 15,108 -

Provision for impairment of investment in associates 21,482 - 78,250 -

Depreciation and amortization 307,326 125,690 304,487 123,501

Write off of bearer biological assets 327,726 - 327,726 -

Gain on disposal of Property, Plant and Equipment (16,448) - (16,448) -

Provision for retirement benefit obligation 79,277 88,242 76,653 86,774

Over provision of gratuity payable with respect to previous years (54,618) - (54,618) -

Dividend income - (401) (2,494) (401)

Provision for impairment of available for sale financial assets 9,368 6,245 9,368 6,245

Gain on disposal of investment in joint venture - (31,943) (46,009) (31,943)

Interest expenses 411,352 254,341 408,085 252,670

Interest income (1,076) (826) (1,076) (826)

Amortization of government grants (3,635) (3,103) (3,635) (3,103)

Operating loss before working capital changes (45,643) (84,896) (57,105) (104,858)

Working capital changes

Increase in inventories (7,007) (20,426) (11,802) (10,198)

(Increase) / decrease in trade and other receivables 22,213 (3,234) 26,647 424

Decrease in amounts due from related parties 341,291 58,525 346,770 60,526

Decrease in trade and other payables 535,050 255,842 517,973 259,600

Increase / (decrease) in amounts due to related parties (436,796) 53,610 (436,796) 53,610

Cash generated from operations 409,108 259,421 385,688 259,104

Interest paid (409,856) (238,715) (407,097) (237,044)

Income tax paid (2,986) (3,642) - -

Gratuity paid (32,111) (12,881) (32,010) (12,881)

Net cash generated from / (used in) operating activities (35,845) 4,183 (53,419) 9,179

CASH FLOWS FROM INVESTING ACTIVITIES

Investment in bearer biological assets (53,267) (98,455) (53,267) (98,455)

Purchase of property, plant and equipment (6,811) (42,574) (2,034) (29,129)

Proceeds from disposal of investment in joint venture 51,172 38,332 51,172 38,332

Proceeds from disposal of property, plant and equipment 4,939 - 4,939 -

Interest received 1,076 - 1,076 -

Dividend received 2,494 401 2,494 401

Net cash generated from/ (used in) investing activities (397) (102,296) 4,380 (88,851)




2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from long term borrowings 119,790 669,963 98,955 660,086

Repayment of long term borrowings (60,249) (501,353) (38,546) (501,353)

Proceeds from disposal of available for sale investment 519 826 519 826

Lease rentals paid - (22,834) - (22,834)

Net cash generated from financing activities 60,060 146,602 60,928 136,725

Net increase in cash and cash equivalents 23,818 48,488 11,888 57,053

Cash and cash equivalents at beginning of the year (64,730) (113,219) (45,213) (102,266)

Cash and cash equivalents at end of the year (a) (40,912) (64,730) (33,325) (45,213)

(a) Analysis of cash and cash equivalents at end of the year

Cash in hand and at bank 19,635 24,838 18,043 24,785

Bank overdrafts (60,547) (89,568) (51,368) (69,998)

(40,912) (64,730) (33,325) (45,213)



Statement of Cash Flows (Contd.)



Notes to the Financial Statements

1. REPORTING ENTITY

1.1. Domicile and Legal form

Agalawatte 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.361, Kandy Road, Nittambuwa and Plantations are situated in the planting districts of Nuwara Eliya, Rathnapura and Kalutara.

1.2. Consolidated Financial Statements

The consolidated financial statements of the Group as at and for the year ended 31st December 2016 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”).

1.3. Authorization for issue

The financial statements of Agalawatte Plantations PLC for the year ended 31st December 2016 were authorized for issue in accordance with a resolution of the Board of Directors of the Company dated on 14th December 2017 even though the present Directors were not the Directors of the Company during the year ended 31st December 2016.

1.4. Principal Activities and Nature of Operations

1.4.1 Principal Activities

During the year the principal activities of Agalawatte Plantations PLC consist of cultivation, production, processing and sale of tea, rubber and oil palm.

1.4.2 Subsidiaries, Associates and Joint Ventures

All the Companies in the Group have a common financial year, which ends on 31st March other than Agalawatte Planations PLC which has been prepared up to 31st December.

Name of the Company Relationship Principal business activity

Mackply Industries (Private) Limited (MIPL)

Subsidiary Manufacturing of plywood sheets & wooden flush doors

Mackwoods Rubber Products (Private) Limited

Associate Invested in a Company involved in manufacturing of centrifuge latex

Taprospa Resorts (Private) Limited

Associate Owned and managed tourist hotels and bungalows

AEN Palm Oil Processing (Private) Limited

Joint Venture

Processing and selling of palm oil

1.4.3 Immediate and Ultimate Parent Enterprise

In the opinion of the Directors, the Group’s immediate parent undertaking as at the date of statement of financial position was Browns Power Holdings (Private) Limited and the ultimate parent undertaking and controlling party was Lanka Orix Leasing Company PLC, a Company incorporated in Sri Lanka.

Subsequently, on 27th March 2017, D.R. Investments (Private) Limited acquired 61.1% shares of Agalawatte Plantations PLC. The ultimate parent undertaking and controlling party is now D.R. Investments (Private) Limited, a Company incorporated in Sri Lanka.

2. BASIS OF PREPARATION

2.1. Statement of Compliance

Subject to the Note 41 to the financial statements and based on the available information and best of the knowledge of present Board of Directors, the audited financial statements of the Group and the separate audited financial statements of the Company are prepared in accordance with Sri Lanka Accounting Standards laid down by the Institute of Chartered Accountants of Sri Lanka and in compliance with the requirements of the Companies Act No.07 of 2007 and Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995.

2.2. Basis of Preparation

These financial statements of the Group have been prepared subject to Note 41 to the financial Statements and in accordance with the historical cost conversion except for the following material items in the statement of financial position:

- Consumable biological assets are measured at fair value less cost to sell as per LKAS 41 – Agriculture.

- Liability for retirement benefit obligations is recognized as the present value of the defined benefit obligation based on the actuarial valuation.

- Lease hold right to Bare Land and leased assets of JEDB/SLSPC estates, which have been revalued as more fully described in Note 15 to the financial statements.

2.3. Functional and Presentation Currency

The Consolidated financial Statements of the Group are presented in Sri Lankan Rupees, which is the Group’s functional currency. All financial information presented in Sri Lankan Rupees has been rounded to the nearest Thousand, unless otherwise indicated.

2.4 Presentation of Financial Statements

The assets and liabilities of the group and the company presented in its statement of financial position are grouped

For the Year Ended 31st December 2016



by nature and listed in an order that reflects their relative liquidity and maturity pattern.

2.5 Materiality and Aggregation

Each material class of similar items is presented separately in the financial statements. Items of dissimilar nature or function are presented separately unless they are immaterial, as permitted by the Sri Lanka Accounting Standard 1 “Presentation of Financial Statements”.

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position, only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liability simultaneously.

2.6 Significant Accounting judgements, Estimates and Assumptions

The preparation of the financial statements of the Group in conformity with SLFRS and LKAS requires management to make judgements, estimates and assumptions that influence 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 based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results which form the basis of making the judgments about the carrying amount of assets and liabilities that are not readily apparent from other sources.

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, if the revision affects only that period and any future periods affected.

a) Judgements

Information about critical judgements in applying accounting policies that have most significant effect on the amounts recognized in the Financial Statements of the Company are included in the following notes to these Financial Statements;

Financial Statement Area

Disclosure Reference

Note Page

Consumable Biological Assets – Timber 18 44

Retirement Benefit Obligation 32 58

Deferred Taxation 31 57

(b) Measurement of fair value

A number of accounting policies and disclosures require the measurement of fair values, for both financials and non-financial assets and liabilities.

The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and report directly to Chief Financial Officer.

The said officer regularly reviews significant unobservable inputs and valuation adjustments.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

Fair Value Measurement Hierarchy

• Level I Quoted market prices (unadjusted) in active markets for identical assets or liabilities that the company can access at the measurement date.

The fair value for financial instruments traded in active markets at the reporting date is based on their quoted market price or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

• Level II Inputs other than quoted market prices included within Level I that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

For all other financial instruments not traded in an active market, the fair value is determined by using appropriate valuation techniques. Valuation techniques include the discounted cash flow method, comparison with similar instruments for which market observable prices exist, options pricing models, credit models and other relevant valuation models.

Notes to the Financial StatementsFor the Year Ended 31st December 2016



• Level III Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Certain financial instruments are recorded at fair value using valuation techniques in which current market transactions or observable market data are not available. Their fair value is determined using a valuation model that has been tested against prices or inputs to actual market transactions and using the best estimate of the most appropriate model assumptions.

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in the following notes.

Financial Statement Area Disclosure Reference

Note Page

Consumable Biological Assets - Timber 18 44

Retirement Benefit Obligation 32 58

Fair Values of Financial Instruments 43 69

2.7 Going Concern

The Board of Directors is informed about the conditions which raise doubt whether the Company will be able to continue as a going concern in the future as further explained in Note 37. However, the financial statements of the Company have been prepared on the assumption that the Company is a going concern as the present immediate and ultimate parent Companies have agreed to provide continuous financial support as necessary.

2.8 Comparative information

Previous period figures and notes have been reclassified wherever necessary to conform to the current year’s presentation of the Company.

2.9 Serious Loss of Capital

The Company has reported negative net assets as at 31st December 2016.

The company held an extra-ordinary general meeting on 5th May 2017 as per section 220 of Companies Act No.07 of 2007, in order to address the serious loss of capital prevailing in Agalawatte Plantation PLC.

3. SIGNIFICANT ACCOUNTING POLICIES

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

3.1 Basis of Consolidation

3.1.1 Subsidiaries

Subsidiaries are those enterprises controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities.

The consolidated financial statements incorporate the results, and assets and liabilities of the Group and its subsidiary, associates and joint venture companies. Uniform accounting policies have been adopted by the Company and its subsidiary in all significant respects in the preparation and presentation of financial statements.

Intra group balances and transactions and any unrealized gains from intra group transactions are eliminated in preparing the consolidated financial statements.

The investment in subsidiary is shown at cost in the Group’s financial statements.

3.1.2 Associates

Associates are those enterprises in which the Group has significant influence, but not control, over financial and operating policies. The Associates are accounted at cost in the Company whereas consolidated financial statements include the Group’s share of the total recognized gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases.

3.1.3 Jointly Control Entities

Jointly controlled entities are those entities over whose activities of the Group have joint control, established by contractual agreement. The consolidated financial statements include the Group’s share of the total recognized gains and losses of joint venture on an equity accounted basis (LKAS-11), from the date that joint control commences until the date that joint control ceases.

Financial periods of subsidiary, associates and joint venture represent twelve months period from 1st April to 31st March.

3.2 Foreign Currency Translations

All foreign exchange transactions are converted to Sri Lankan Rupees, which is the reporting currency, at the rates



of exchange prevailing at the time the payment was made. Monetary assets and liabilities denominated in foreign currencies are translated to Sri Lankan Rupees equivalents using year-end spot foreign exchange rates. Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined. The resulting gains and losses are accounted for in the statement of profit or loss and other comprehensive income.

3.3. Assets and Basis of their Valuation

3.3.1 Leased Assets

Property, plant and equipment financed by leasing arrangements which transfer substantially all the risks and rewards incidental to ownership, (i.e. finance leases) are treated as if they have been purchased outright and are classified as such in the financial statements. The capital element of the leasing commitment is shown as an obligation under finance leases.

Lease rentals are treated as consisting of a capital and an interest element. The capital element is applied to reduce the outstanding obligation while the interest element is charged against profit in proportion to the reducing capital element outstanding.

Leasehold rights are amortized / depreciated in equal annual amounts over the following periods:

Bare land 53 years (i.e. period of lease)Mature plantations 30 yearsBuildings 25 yearsMachinery 15 yearsImprovements to land 30 years Motor vehicles 05 yearsOther vested assets 30 years

3.3.2 Property, Plant and Equipment

3.3.2.1 Basis of Recognition

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

3.3.2.2 Basis of Measurement

Property, Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment loss.

The cost of Property, Plant and Equipment includes expenditures that are directly attributable to the acquisition of the asset. Such costs includes the cost of replacing part of the property, plant and equipment and borrowing costs for long term construction projects if the recognition criteria are met.

The cost of self-constructed assets includes the cost of materials direct labour, and any other costs directly attributable to bringing the assets to a working condition for their intended use.

3.3.2.3 Subsequent Cost

When significant parts of property, plant and equipment are required to be replaced at intervals, the company derecognizes the cost of replaced part, and recognizes the new part as individual assets (major Components) with its own associated useful life and depreciation. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repairs and maintenance costs are recognized in the statement of profit or loss as incurred.

3.3.2.4 De-recognition

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

3.3.2.5 Land Development cost

Permanent land development costs are the costs incurred in making major infrastructure development and building new access roads on leasehold lands.

These costs have been capitalised and amortised over the remaining lease period.

Permanent impairment to land development costs are charged to the Profit or Loss Statement in full or reduced to the net carrying amounts of such assets in the year of occurrence after ascertaining the loss.

3.3.2.6 Depreciation

Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.

Depreciation is recognized in the statement of profit or loss on a straight line basis over the estimated useful lives of each part of an item of Property, Plant and Equipment. Assets held under finance leases are depreciated over the shorter of the lease term and the useful lives of equivalent owned assets unless it is reasonably certain that the Group will have ownership by the end of the lease term.




The principle annual rates of depreciation used are asfollows:

Buildings 2.5%Plant and Machinery 7.5% to 20%Office Equipment 12.5% to 33.33%Motor Vehicles 20%Furniture and Fittings 10%Sanitation, water and electricity 5%

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date on which the asset is classified as held for sale or is derecognized. Depreciation methods, useful lives and residual values are reassessed at the reporting date and adjusted prospectively, if appropriate.

3.3.2.7 Capital Work-In-Progress

The cost of capital work-in-progress is the cost of purchase or construction together with any related expenses thereon.

Capital work–in-progress is transferred to the respective asset accounts at the time of first utilization or at the time the asset is commissioned.

3.3.3 Biological Assets

3.3.3.1.Recognition

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

3.3.3.2.Basis of Classification

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, Oil Palm, Timber, Other plantations and nurseries are classified as biological assets.

Biological assets of the Group are further classified as bearer biological assets and consumable biological assets.

Bearer biological assets includes tea, rubber, oil Palm and other crops, 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 include managed timber trees those that are to be harvested as agricultural produce from biological assets or sold as biological assets.

3.3.3.3. Bearer Biological Assets

The cost of land preparation, rehabilitation, new planting,

replanting, crop diversification, inter-planting and fertilizing etc, incurred between the time of planting and harvesting (When the planted area attains maturity) are classified as immature plantations. These immature plantations are shown at direct costs plus attributable overheads, including interest (borrowing cost) attributable to long-term loans used for financing immature plantations. The expenditure incurred on bearer biological assets (Tea, Rubber & Oil Palm fields), which come into bearing during the year, has been transferred to mature bearer biological assets and depreciated over their useful life in accordance with the LKAS 16- Property, Plant and Equipment.

3.3.3.3.1 Immature and Mature Plantations

The cost of replanting and new planting are classified as immature plantations up to the time of harvesting the crop. Further, the general charges incurred on the plantation are apportioned based 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 expensed in the accounting period in which it is incurred. The cost of areas coming into bearing is transferred to mature plantations at end of the financial year.

3.3.3.3.2 Infilling Costs

The land development costs incurred in the form of infilling have been capitalized to the relevant mature field, only if it increases the expected future benefits from that field, beyond its pre-infilling standard of performance assessment. Infilling costs so capitalized are depreciated over the newly assessed remaining useful life of the relevant mature plantation or the unexpired lease period, whichever is lower.

Infilling cost that are not capitalized have been charged to the statement of Profit or loss for the year in which they are incurred

3.3.3.3.3 Growing Crop Nurseries

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

3.3.3.3.4 Amortization

The cost of areas coming in to bearing are transferred to mature plantation and depreciated as follows.

Bearer Biological Asset at Cost (Replanting and New Planting)

No. of Years Rate (p.a.)

Tea 33 1/3 years 3%

Rubber 20 Years 5%

Oil Palm 20 Years 5%

No amortization is provided for immature plantations.



3.3.3.4 Consumable Biological Assets

Consumable biological assets include managed timber trees that are to be harvested as agricultural produce or sold as biological assets.

The managed timber trees of the 15 estates of the Company are measured on initial recognition at cost and at the end of each reporting period at its fair value less cost to sell in terms of LKAS 41–“Agriculture”. The cost of young plants which are below 4 years is treated as an approximation to the fair value as the impact on biological transformation of such plants to price during the period is immaterial.

The fair value of timber trees are measured using discounting cash flows method taking in to consideration the current market prices of timber, applied to expected timber content of a tree at the maturity by an independent professional valuer.

3.4 Capitalization of Borrowing Costs

Borrowing costs that are directly attributable to 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 capitalized as a part of the asset.

Borrowing costs that are not capitalized are recognised as expense in the period in which they are incurred and charged to the statement of Profit or Loss for the period.

The amount of borrowing costs which are eligible for capitalization are determined in accordance with the LKAS 23 - “Borrowing Costs”.

Borrowing cost incurred in respect of specific loans that are utilized for field development activities have been capitalized as a part of the cost of the relevant immature bearer biological assets. The capitalization will cease when the crops are ready for commercial harvesting.

3.5 Leases

a) Finance Leases

Property, Plant and Equipment on finance leases, which effectively transfer to the Company substantially the entire risk and rewards incidental to ownership of the leased items, are disclosed as finance leases at their cash price and depreciated 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 finance charges allocated to future periods are separately disclosed in notes to the financial statements. The interest element of the lease rental applicable to each financial year is charged to the statement of Profit or loss 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 or

on leased property is capitalized, and depreciated over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is shorter.

b) Operating Leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the leased term are classified as operating leases. Lease payments paid under operating leases are recognized as an expense in the statement of Profit or loss for the period.

3.6 Financial Instruments

Group does not have any derivative financial instruments. Recognition and measurement criteria for non-derivative financial instruments are as follows.

3.6.1 Non-derivative Financial Assets

3.6.1.1 Initial Recognition and Measurement

Financial assets within the scope of LKAS 39 - ‘Financial Instruments: Recognition and Measurement’ are classified as, loans and receivables (L&R) and available-for-sale (AFS) financial assets, as appropriate. The Group determines the classification of its financial assets at initial recognition.

All financial assets are recognized initially at fair value plus, in the case of financial assets not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of such financial assets.

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

The Company’s financial assets include cash and short-term deposits, trade and other receivables, loans and other receivables.

3.6.1.2 Subsequent Measurement

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

(a) Loans and Receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the Effective Interest Rate (EIR) method, less impairment. Amortized cost is calculated by taking into account any discount on acquisition and fees or costs that are an integral part of the EIR.

Loans and receivables of the company comprise of trade receivables, amounts due from related parties, deposits,




advances, and other receivables and cash and cash equivalents.

(b) Trade and Other Receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade and other receivables are stated at the amounts they are estimated to realize, net of provisions for bad and doubtful receivables. A provision for doubtful debts is made where as there is objective evidence that the company will not be able to recover all amounts due according to the original terms of receivable. Bad debts are written-off when identified.

(c) 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 consists of cash in hand and deposits in banks net of outstanding bank overdrafts that are repayable on demand and form an integral part of the company’s cash management.

3.6.1.3 De-recognition of Financial Assets

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

• The rights to receive cash flows from the asset have expired.

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

a) The Company has transferred substantially all the risks and rewards of the asset, or

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

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor

transferred control of it, the asset is recognized to the extent of the company’s continuing involvement in it.

In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the company has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay.

Any interest in transferred financial assets that qualify for de-recognition that is created or retained by the company is recognized as a separate asset or liability in the statement of financial position. On de-recognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset transferred), and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

3.6.1.4 Impairment of Financial Assets

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

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

3.6.1.5 Financial assets carried at amortized cost

Impairment losses on financial assets carried at amortized cost are measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the asset’s original effective interest rate.

Impairment losses are recognized in the income statement. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is



reversed through the Statement of profit or loss and other comprehensive income.

3.6.2 Non-derivative Financial Liabilities

3.6.2.1 Initial Recognition

Financial liabilities within the scope of LKAS 39 are classified as financial liabilities at fair value through profit or loss and loans and borrowings, as appropriate. The company determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, carried at amortized cost. This includes directly attributable transaction costs. The company’s financial liabilities include trade and other payables, amounts due to related parties, loans and borrowings and bank overdrafts.

3.6.2.2 Subsequent Measurement

The company does not have any financial liabilities at fair value through profit or loss. The measurement of financial liabilities depends on their classification as follows.

(a) Loans and Borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest rate (EIR) method. Gains and losses are recognized in the Profit or Loss for the period when the liabilities are derecognized as well as through the effective interest rate method (EIR) amortization process.

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 costs in the income statement. Other financial liabilities comprise interest bearing loans and borrowings, trade payables, other payables, amounts due to related parties, loans from related parties and bank overdrafts.

(b) Trade and Other Payables

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

Trade and other payables are stated at their cost.

3.6.2.3 De-recognition of Financial Liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the

terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Profit or loss for the period.

3.6.2.4 Fair Value of Financial Instruments

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include:

• Using recent arm’s length market transactions

• Reference to the current fair value of another instrument that is substantially the same

• A discounted cash flow analysis or other valuation models

3.7 Inventories

Finished Goods Manufactured from Agricultural Produce of Biological Assets.

These are valued at the lower of cost and estimated net realizable value, after making due allowance for obsolete and slow moving items. Net realizable value is the estimated selling price at which inventories can be sold in the ordinary course of business after allowing cost of realization and/or cost of conversion from their existing state to saleable condition.

Input Materials, Spares and Consumables

At actual Cost using Weighted Average Cost Formula.

Agricultural Produce Harvested from Biological Assets

Agricultural produce represent the tea leaves, latex and coconut harvested at the reporting date and which were not further processed at the end of the reporting period. Agricultural produce harvested from its biological assets are measured at their fair value less cost to sell at the point of harvest.

The finished and semi-finished inventories from agricultural produce are valued by adding the cost of conversion to their fair value of the agricultural produce.




3.8 Liabilities and Provisions

3.8.1 General

(a) Liabilities

Liabilities classified as current liabilities on the statement of financial position are those which fall due for payment on demand or within one year from the reporting date. Noncurrent liabilities are those balances that fall due for payment after one year from the reporting date.

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

Provisions and liabilities are recognized when the Company has a legal or constructive obligation as a result of past events and it is probable that an outflow of economic benefits will be required to settle the obligation.

(b) Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events when it is more probable that an outflow of resources will be required to settle the obligation and when a reliable estimate of the amount can be made. Provisions are not recognized for future operating losses.

Where there are number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized, even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

3.9 Retirement Benefits to Employees

3.9.1 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 “Employee Benefits”. The Company is used actuarial method under Sri Lanka Accounting Standard 19, “Employee Benefits” effective from the financial year commencing on 1st January 2016.

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 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.

3.9.2 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.

3.10 Income Tax Expense

The tax liability is computed according to the provisions of the Inland Revenue Act using tax rates enacted at the reporting date and any adjustments to tax payable in respect of previous years.

Deferred tax is recognized using the liability method, providing for timing differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

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

3.11 Statement of Profit or Loss and Other Comprehensive Income

For the purpose of presentation of the statement of profit or loss and other comprehensive income, the nature of expenses method is adopted, as it represents fairly the elements of the company performance.

3.11.1 Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and sales taxes.

The following criteria are used for the purpose of recognition of revenue.

a) Sale of goods

Revenue from the sale of goods in the ordinary course of activities is measured at the fair value of the consideration



received or receivable, net of brokerage, public sale expenses and other levies related to turnover.

Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards incidental to the ownership of the goods have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.

If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized. The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreement.

b) Other Income

Other income is recognized on an accrual basis.

c) Grants

Grants related to assets are recognized as income in the Statement of Comprehensive Income over the related assets’ useful life so as to match them with the related costs which they are intended to compensate. Other grants are set-off against related expenses and the net amount is reflected in the Statement of Comprehensive Income.

Grants relating to assets, including non-monetary grants at fair value, are presented in the Statement of Financial Position by setting up the grant as deferred income.

3.12 Segment reporting

A segment is a distinguishable component of the group that is engaged either in providing product or services (business segments), or in providing products or services within a particular economic environment (geographical segments), which is subject to risks and rewards that are different from those of other segments.

Segment information is presented in respect of the Group’s business. There are no distinguishable components to be identified as geographical segment for the Group. The business segments are reported based on the Group management and reporting structure.

Inter segment pricing is determined at prices mutually agreed between the Companies.

3.13 Comparative Figures

The Accounting Policies have been consistently applied by

the Company and are consistent with those of the previous year’s figures and phrases and have been re-arranged wherever necessary to conform to the current presentation.

3.14 Events occurring after the reporting date

All the events after the reporting date known to the present management with certainty and matters arisen during the audit are considered, and where necessary adjustments are made in the financial statements or appropriate disclosures made in accompanying notes.

4. NEW ACCOUNTING STANDARDS ISSUED BUT NOT EFFECTIVE AS AT 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 on or after 1st January 2018. Accordingly, these Standards have not been applied in preparing these financial statements.

4.1. SLFRS 15 – Revenue from contract with customers

This standard 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 periods beginning on or after 1st January 2018 with early adoption permitted.

The Group is assessing the potential impact to the financial statements resulting from the application of SLFRS 15.

4.2. SLFRS 9-Financial Instruments: Classification and Measurement

SLFRS 9 “Financial Instruments: Classification and Measurement” replaces the existing guidance in LKAS 39 - ‘Financial Instruments: Recognition and measurement’. SLFRS 9 includes revised guidance on the classification and measurement of financial instruments including a new expected credit loss model for calculating impairment on financial assets.

The Group shall apply this SLFRS to all items within the scope of LKAS 39 “Financial Instruments: Recognition and




Measurement”. SLFRS 9 is effective for annual periods beginning on or after 1st January 2018 with early adoption permitted.

4.3. SLFRS 16- Leases

SLFRS 16 requires lessees to recognize all leases on their Statement of Financial Position as lease liabilities, with 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 recognised separately in Profit or Loss. SLFRS 16 is effective for annual periods beginning on or after 1st January 2019.




2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

6 REVENUE

6.1 Industry Segment

Rubber 500,354 522,189 500,354 522,189

Tea 451,484 842,582 451,484 842,582

Oil palm 275,095 265,458 275,095 265,458

Others 178,776 199,092 - -

1,405,709 1,829,321 1,226,933 1,630,229

6.2 Cost of Sales

Industry Segment

Rubber (625,273) (604,045) (625,273) (604,045)

Tea (644,851) (941,939) (644,851) (941,939)

Oil palm (159,965) (116,949) (159,965) (116,949)

Others (134,758) (153,901) - -

(1,564,847) (1,816,834) (1,430,089) (1,662,933)

6.3 Gross profit / (loss)

Industry segment

Rubber (124,919) (81,856) (124,919) (81,856)

Tea (193,367) (99,357) (193,367) (99,357)

Oil palm 115,130 148,509 115,130 148,509

Others 44,018 45,191 - -

(159,138) 12,487 (203,156) (32,704)

7 OTHER INCOME

Amortization of government grants 3,635 3,103 3,635 3,103

Dividend income - 401 2,494 401

Gain on disposal of shares on joint venture (Note 21.2) - 31,943 46,009 31,943

Sale of rubber trees 116,744 41,946 116,744 41,946

Rent income 627 2,380 627 2,380

Sale of refuse tea 4,257 6,178 4,257 6,178

Gain on disposal of Property, Plant and Equipment (Note 7.1) 16,448 - 16,448 -

Sundry income 4,011 19,854 3,704 19,854

Management fee Income - - 600 2,400

145,722 105,805 194,518 108,205

7.1 There are no documentary evidences relating to gain on disposal of property, plant and equipment of Rs. 14,710,000/- for the year ended 31st December 2016.





2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

8 GAIN ON CHANGES IN FAIR VALUE OF BIOLOGICAL ASSETS

Consumable biological assets (Note 18) 49,524 - 49,524 -

49,524 - 49,524 -

8.1 The Company has fair valued its consumable biological assets after 4 years as at 31st December 2016 and total fair value gain of Rs. 49.52 Mn has been recognized in the financial statements for the year ended 31st December 2016.

Group Company

2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

9 OTHER EXPENSES

Write-off of trade and other receivables 39,698 - 39,698 -

Provision for Impairment of trade debtors 5,502 - 5,502 -

Reversal of impairment of amount due from related parties - (34,125) - (34,125)

Impairment provision on investment in associates 21,482 - 78,250 -

Surcharges on EPF/ETF/ESPS/CPPS and Gratuity payable (Note 9.1) 75,324 100,981 75,324 100,981

Write off of bearer biological assets (Note 9.2) 327,726 - 327,726 -

Provision for obsolete inventories 15,108 - 15,108 -

Impairment provision for property, plant and equipment 108,475 - 108,475 -

Write off of property, plant and equipment 1,766 - 1,766 -

Impairment on available for sale of financial assets 9,368 6,245 9,368 6,245

604,449 73,101 661,217 73,101

9.1 Surcharges on EPF/ETF/ESPS/CPPS and Gratuity payable

EPF surcharges 15,622 74,313 15,622 74,313

ETF surcharges 5,430 6,258 5,430 6,258

ESPS surcharges 5,895 486 5,895 486

CPPS surcharges 4,562 - 4,562 -

Gratuity surcharges 43,815 19,924 43,815 19,924

75,324 100,981 75,324 100,981

9.2 Write off of bearer biological assets

Write off of immature plantations 290,699 - 290,699 -

Write off of mature plantations 19,129 - 19,129 -

Write off of growing crop nurseries 17,898 - 17,898 -

327,726 - 327,726 -




2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

10 MANAGEMENT FEES

Management fees to managing agent - - - -

- - - -

The Company has entered into a management agreement with Managing Agents, Mackwoods Plantations (Private) Limited. As per the agreement, the basis of computing management fee is at the rate of 25% of net profits before depreciation, amortization, interest and tax (EBITDA) inclusive of all sundry and other income or such other percentage or basis to be mutually agreed between the parties from time to time. There is no management fee for the period as well as for the previous year since the EBITDA of the Company is negative. However, this agreement was cancelled by Browns Power Holdings (Private) Limited on 4th Jan 2017 after the change of ownership of the company.

Group Company

2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

11 NET FINANCE COSTS

11.1 Finance Income

Interest income 1,076 826 1,076 826

1,076 826 1,076 826

11.2 Finance costs

Interest on leases of JEDB/SLSPC 44,958 43,772 44,958 43,772

Interest on finance leases 2,079 3,577 2,079 3,577

Interest on broker advances 28,799 24,282 28,799 24,282

Interest on loans and overdrafts 332,929 211,714 329,662 210,044

Interest on commercial papers - 8,173 - 8,173

Net foreign currency exchange losses 1,091 2,098 1,091 2,098

409,856 293,616 406,589 291,946

Less: Borrowing costs capitalized during the year - (37,177) - (37,177)

409,856 256,439 406,589 254,768

Net finance costs (408,780) (255,613) (405,513) (253,942)





2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

12 LOSS BEFORE TAXATION

Loss before taxation is stated after charging all the expenses including the followings;

Directors' remunerations 7,975 8,700 7,975 8,700

Auditors' remunerations 2,944 2,875 2,500 2,500

Depreciation / Amortization

- Right to use leasehold land 5,280 5,280 5,280 5,280

- Immovable leased assets 2,475 3,741 2,475 3,741

- Property, Plant and equipment 35,890 34,017 33,233 31,829

- Bearer biological assets 263,497 82,652 263,497 82,652

Personnel costs

- Salaries and wages 878,585 999,969 838,226 963,873

- Defined benefit plan costs - Retiring gratuity 79,277 88,242 76,653 86,774

- Defined contribution plan cost - EPF / CPPS / ESPS and ETF 88,066 95,397 84,361 91,672

- Surcharges on EPF / ETF/ ESPS / Gratuity payable 75,324 100,981 75,324 100,981

13 INCOME TAX EXPENSES/ (REVERSAL)

13.1 Current Income Tax Expenses

Income tax expense on current year's profit (Note 13.2) 2,876 - - -

Under provision with respect to previous years 9,489 16,579 7,365 14,394

Charge/ (reversal) of deferred tax (Note 31) 94,387 (22,118) 93,366 (22,118)

106,752 (5,539) 100,731 (7,724)

13.2 Reconciliation between the Tax Expense and Accounting Loss

Accounting loss before tax (1,149,627) (500,092) (1,218,721) (497,405)

Less : Exempt income (120,642) (35,046) (120,642) (35,046)

(1,270,269) (535,139) (1,339,363) (532,451)

Aggregate disallowable expenses 961,195 360,942 956,453 360,942

Aggregate allowable expenses (597,715) (206,283) (590,146) (206,283)

(906,789) (380,479) (973,056) (377,792)

Aggregate non business income - - - -

Statutory loss from business (906,789) (380,479) (973,056) (377,792)

Less: Section 32 Deductions

Loss Claimed (35% of Total Statutory Income) - - - -

- - - -

Taxable Income at Special Rate @ 10% - - - -

Taxable Income liable at Normal Rate @ 28% 10,272 - - -

Total Taxable Income 10,272 - - -

Income Tax Expense

Taxable income at special rate of 10% - - - -

On Taxable Income liable @ 28% 2,876 - - -

Total Income Tax Expense 2,876 - - -




2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

13 INCOME TAX EXPENSES (CONTD.)

13.3 Tax losses carried forward

Tax losses brought forward 1,763,859 1,386,067 1,763,859 1,386,067

Add : Tax losses for the year 973,056 412,422 973,056 377,792

Less : Utilization of tax losses - - - -

Adjustment in respect of previous year - - - -

2,736,915 1,798,489 2,736,915 1,763,859

Applicable Rates of Income TaxIn terms of Section 48A - 14A of the Inland Revenue (Amendment) Act No.22 of 2011, “Specified Profit” from agricultural undertaking would be liable for income tax at the rate of 10%. The corporate tax rate applicable to manufacture and other income is 28%.

14 BASIC LOSS PER SHARE

The basic loss per share has been computed based on loss attributable to ordinary shareholders for the year divided by weighted average number of ordinary shares in issue during the year and calculated as follows:

Group Company

2016 2015 2016 2015

Loss for the year (Rs. '000) (1,256,379) (500,799) (1,319,452) (495,927)

Weighted average number of ordinary shares in issue (Nos '000) 25,000 25,000 25,000 25,000

Basic loss per share (Rs.) (50.26) (20.03) (52.78) (19.84)




15 RIGHT TO USE THE LEASEHOLD LAND

Lease agreements of all JEDB/SLSPC estates handed over to the Company have been executed to date. All of these lease are retroactive to 22nd June 1992, the date of formation of the Company. The leasehold rights to the bare land on all of these estates have been taken into the books of the Company on 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. For this purpose, the Board of Directors of the company decided at its meetings that lease bare land would be revalued at the value established for this land by Valuation Specialist Dr.Wickramasinghe just prior to the formation of the Company. The fair value as at 22nd June 1992 was taken into the books of Company.

Leasehold Rights to Bare Land of JEDB/SLSPC Estate Assets and Immovable (JEDB/SLSPC) Estates Assets on Finance Lease obtained on a long term basis, are stated at the recorded carrying values under Sri Lanka Accounting Standard No.19 – Leases, in line with Ruling of the Urgent Issues Task Force of the Institute of Chartered Accountants of Sri Lanka. Such carrying amounts are amortized over the remaining Lease term or useful life of such asset whichever is shorter.

Group Company

As at 31st December 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

Capitalized value (22nd June 1992) 279,832 279,832 279,832 279,832

Closing balance 279,832 279,832 279,832 279,832

Accumulated amortization

Balance at the beginning of the year (124,076) (118,796) (124,076) (118,796)

Charge for the year (5,280) (5,280) (5,280) (5,280)

Balance at end of the year (129,356) (124,076) (129,356) (124,076)

Carrying value 150,476 155,756 150,476 155,756

(a) The Company has obtained 17 estates on lease from Janatha Estates Development Board (JEDB) and Sri Lanka State Plantations Corporation (SLSPC). Some important terms under which these leases have been obtained are as follows:

(i) The period of the leases is 53 years from 22nd June 1992 to 21st June 2045.

(ii) The effective total lease rental for any twelve-month period is the previous twelve-month period’s lease rental escalated by the applicable Gross Domestic Product (GDP) deflator. The lease rental is payable quarterly in advance.

(b) The present value of future lease rentals (excluding the portion arising from the annual escalation of the amount due by using the GDP deflator)is shown as a liability.

15.1 Leasehold Rights to Bare Land of JEDB/SLSPC Estate Assets and Immovable (JEDB/SLSPC) Estates Assets on Finance Lease. The Government of Sri Lanka has initiated actions under provisions of the Land Acquisition act to acquire land from lands leased to the Company in Peenkande,Kiribathgalla, Doloswella, Niriella and Noragalla estates located in Ratnapura district; Ambetenna, Mohamedi, Culloden, Clyde, Pimbura and Kiriwanaketiya located in Kalutara district and Labookelle, Weddamulla and Frotoft located in Nuwara eliya district. The total extent of land in question is approximately 282.50 Hectare which has been taken over. As per the lease agreement, the company is entitled to the compensations of any lands acquired. The details are given below.

No adjustments have been made to the Financial statements in respect of the lands acquired as the compensation receivable on these acquisitions are not known and the transactions pertaining to those acquisitions have been incomplete as at 31st December 2016.



The details of lands required by the government are given below.

15 RIGHT TO USE THE LEASEHOLD LAND (CONTD.)

15.1.a Land Acquired by the Government

District Estate Division Purpose of acquisition Extent (Hectares)

Kaluthara Pimbura AgalawatteProvide land and houses for Soldiers and construct a Police station 4.32

Kiriwanaketiya Bulathsinhala Provide land and houses for Soldiers 4.59

Mohamadi PalindanuwaraProvide land and houses for Soldiers and construct a bridge 14.23

Clyde DodangodaSouthern Highway and Provide land and houses for Soldiers 36.02

Culloden Dodangoda Southern Highway 1.67

Culloden Matugama Provide land and houses for Soldiers 4.33

Rathnapura Noragalla Nivithigala Village expansion, construct school and Flood Victims 19.32

Noragalla Pelmadulla Construct houses for Flood victims 1.32

Peenkanda Nivithigala Village expansion 71.71

Niriella Nivithigala Village expansion 23.64

Niriella Elapatha Construct houses for Flood victims 4.99

Doloswella Nivithigala Landside Victims and Village expansion 31.68

Kiribathgala Nivithigala Village expansion and contract hospital 44.19

Watapotha Kahawatte Construct houses for Flood victims 9.90

Nuwara Eliya Labookellie Nuwara Eliya Gampola Highway 3.17

Labookellie Kotmale Gampola Highway 3.32

Weddamulla Kotmale Gampola Highway and construct School 2.47

Frotoft Kotmale Construct hospital and School 1.61

282.50

16 PROPERTY, PLANT AND EQUIPMENT

Group Company

As at 31st December 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

Immovable (JEDB/SLSPC) assets on finance lease (other than bare land) (Note 16.1) 4,331 6,806 4,331 6,806

Tangible assets other than biological assets (Note 16.2) 395,044 534,546 361,513 502,953

399,375 541,352 365,844 509,759




16 PROPERTY, PLANT AND EQUIPMENT (CONTD.)16.1 Immovable (JEDB/SLSPC) assets on finance lease (other than bare land) (Company / group) As explained in Note 15 to financial statements, all JEDB/SLSPC estate lease deeds have been executed to date. In terms of the ruling of

the UITF of the Institute of Chartered Accountants of Sri Lanka, all immovable assets in the JEDB/SLSPC estates under finance leases have been taken into the books of the Company as at 22nd June 1992. These assets are taken into the statement of financial position of Company as at 22nd June 1992 and the amortization of immovable lease assets as at 31st December 2016 are as follows.

Vested improvements to land Buildings Machinery

Other vested assets Total

Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000

Capitalized value (22nd June 1992) 14,275 46,430 11,259 4,283 76,247

As at 31st December 2016 14,275 46,430 11,259 4,283 76,247

Amortization

As at 31st December 2015 11,183 43,644 11,259 3,355 69,441

Charge for the year 475 1,858 - 142 2,475

As at 31st December 2016 11,658 45,502 11,259 3,497 71,916

Written down value

As at 31st December 2016 2,617 928 - 786 4,331

As at 31st December 2015 3,092 2,786 - 928 6,806

16.2 Tangible assets other than biological assets

Company

Land and buildings

Plant and machinery

Motor Vehicles

Sanitation, water and electricity

Equipment Others Total

Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000

Cost

(a) Freehold assets

As at 1st January 2016 443,105 171,222 126,057 29,926 40,980 9,392 820,682

Additions during the year - 17 - 22 229 1,766 2,034

Write-off during the year - - - - - (1,766) (1,766)

As at 31st December 2016 443,105 171,239 126,057 29,948 41,209 9,392 820,950

(b) Leasehold assets

As at 1st January 2016 - - 116,995 - - - 116,995

Disposals during the year - - (35,825) - - - (35,825)

Write-off during the year - - (5,415) - - - (5,415)

As at 31st December 2016 - - 75,755 - - - 75,755

(c) Total gross carrying amount 443,105 171,239 201,812 29,948 41,209 9,392 896,705

Depreciation and Impairment

(i) Freehold assets

As at 1st January 2016 (46,549) (101,619) (120,520) (21,665) (37,063) (8,290) (335,706)

Charge for the year (9,667) (6,835) (5,537) (2,494) (1,627) (1,056) (27,216)

Provision for Impairment (Note 16.2.1) (108,475) - - - - - (108,475)

As at 31st December 2016 (164,691) (108,454) (126,057) (24,159) (38,690) (9,346) (471,397)



Company

Land and buildings

Plant and machinery

Motor Vehicles

Sanitation, water and electricity

Equipment Others Total

Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000

(ii) Leasehold assets

As at 1st January 2016 - - (99,018) - - - (99,018)

Charge for the year - - (6,017) - - - (6,017)

Disposals during the year - - 35,825 - - - 35,825

Write-off during the year - - 5,415 - - - 5,415

As at 31st December 2016 - - (63,795) - - - (63,795)

(iii) Total depreciation and Impairment (164,691) (108,454) (189,852) (24,159) (38,690) (9,346) (535,192)

Written down value

As at 31st December 2016 278,414 62,785 11,960 5,789 2,519 46 361,513

As at 31st December 2015 396,556 69,603 23,514 8,261 3,917 1,102 502,953

16.2.1 The Company has made an impairment provision of Rs. 93.12 Mn and Rs. 15.35 Mn for Tea Museum and Helipad in Labookellie Estate respectively as at 31st December 2016 since the management is of the view that no future economic benefits will flow to the Company through those assets.

Group Land and buildings

Plant and machinery

Motor Vehicles

Sanitation, water and electricity Equipment Others

Capital work in progress Total

Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000

Cost

(a) Freehold assets

As at 1st January 2016 455,769 201,384 129,826 29,926 46,710 10,313 3,139 877,067

Additions during the year 1,761 2,195 - 22 465 2,368 - 6,811

Transfers 3,139 - - - - - (3,139) -

Write off during the year - - - - - (1,766) - (1,766)

As at 31st December 2016 460,669 203,579 129,826 29,948 47,175 10,915 - 882,112


As at 1st January 2016 - - 116,995 - - - - 116,995

Disposals during the year - - (35,825) - - - - (35,825)

Write off during the year - - (5,415) - - - - (5,415)

As at 31st December 2016 - - 75,755 - - - - 75,755

(c) Total gross carrying amount 460,669 203,579 205,581 29,948 47,175 10,915 - 957,867

Depreciation and Impairment

(a) Freehold assets

As at 1st January 2016 (48,324) (117,746) (123,359) (21,665) (40,196) (9,208) - (360,498)

Charge for the year (10,420) (8,114) (5,702) (2,494) (1,699) (1,626) - (30,055)

Provision for Impairment (Note 16.2.1) (108,475) - - - - - - (108,475)

As at 31st December 2016 (167,219) (125,860) (129,061) (24,159) (41,895) (10,834) - (499,028)


16 PROPERTY, PLANT AND EQUIPMENT (CONTD.)



16 PROPERTY, PLANT AND EQUIPMENT (CONTD.)

17 BEARER BIOLOGICAL ASSETS (COMPANY / GROUP)

2016 2015

Tea Rubber Oil palm Others Total Tea Rubber Oil palm Others Total

Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000

On finance lease (Note 17.1) 14,837 37,298 - - 52,135 23,792 59,809 - - 83,601

Investments after formation of the company (Note 17.2) 313,622 933,306 501,515 2,490 1,750,933 396,300

1,196,321 583,740 81,062

2,257,423

328,459 970,604 501,515 2,490 1,803,068 420,092 1,256,130 583,740 81,062 2,341,024

17.1 On Finance Lease

Balance as at 1st January 80,925 203,448 - - 284,373 80,925 203,448 - - 284,373

Balance 31st December 80,925 203,448 - - 284,373 80,925 203,448 - - 284,373

Amortization

Balance as at 1st January (57,133) (143,639) - - (200,772) (54,436) (136,857) - - (191,293)

Amortization for the year (Note 17.1.1) (8,955) (22,511) - - (31,466) (2,697) (6,782) - - (9,479)

Balance 31st December (66,088) (166,150) - - (232,238) (57,133) (143,639) - - (200,772)

Carrying Amount 14,837 37,298 - - 52,135 23,792 59,809 - - 83,601

17.1.1 The Company has identified an error in the computation of depreciation charge for tea and rubber relating to previous financial years and under depreciation charge of Rs 21.99 Mn during the previous years has been recognized in the financial statements for the year ended 31st December 2016.

Group Land and buildings

Plant and machinery

Motor Vehicles

Sanitation, water and electricity Equipment Others

Capital work in progress Total

Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000


As at 1st January 2016 - - (99,018) - - - - (99,018)

Charge for the year - - (6,017) - - - - (6,017)

Disposals during the year - - 35,825 - - - - 35,825

Write off during the year - - 5,415 - - - - 5,415

As at 31st December 2016 - - (63,795) - - - - (63,795)

(c)Total depreciation and Impairment (167,219) (125,860) (192,856) (24,159) (41,895) (10,834) - (562,823)

Written down value

As at 31st December 2016 293,450 77,719 12,725 5,789 5,280 81 - 395,044 As at 31st December 2015 407,445 83,638 24,444 8,261 6,514 1,105 3,139 534,546

16.2.1 The Company has made an impairment provision of Rs. 93.12 Mn and Rs. 15.35 Mn for Tea Museum and Helipad in Labookellie Estate respectively as at 31st December 2016 since the management is of the view that no future economic benefits will flow to the Company through those assets.



17 BEARER BIOLOGICAL ASSETS (COMPANY / GROUP) (CONTD.)

17.2 Investments after Formation of the Company

As at 31st December 2016 2015

Rs. 000 Rs. 000

Immature plantations (Note 17.2.1) 442,045 1,187,802

Mature plantations (Note 17.2.2) 1,306,149 1,050,237

Growing Crop Nurseries (Note 17.2.3) 2,739 19,384

1,750,933 2,257,423

2016 2015


Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

17.2.1 Immature plantations

Balance as at 1st January 186,410 706,975 227,513 66,904 1,187,804 168,168 687,668 323,477 60,170

1,239,483

Additions during the year 5,869 37,403 7,418 1,323 52,013 20,084 79,517 34,127 6,735 140,462 Transfer out during the year * (71,959) (211,609) (216,811) (6,692) (507,071) (1,841) (60,211) (130,090) - (192,143)Write off during the year (39,956) (187,749) (1,458) (61,535) (290,699) - - - - - Balance 31st December 80,364 345,020 16,662 - 442,045 186,411 706,974 227,514 66,905

1,187,804

17.2.2 Mature plantationsBalance as at 1st January 311,449 834,890 503,691 12,857 1,662,886 309,607 774,679 373,601 12,857

1,470,744

Transfer in during the year * 71,959 211,609 216,811 6,692 507,071 1,841 60,211 130,090 - 192,142 Write off during the year (13,569) (10,352) - (3,056) (26,977) - - - - - Balance 31st December 369,839 1,036,147 720,502 16,493 2,142,981 311,448 834,890 503,691 12,857

1,662,886

DepreciationBalance as at 1st January (106,306) (352,605) (150,197) (3,541) (612,650) (97,837) (313,261) (124,998) (3,381) (539,477)Charge for the year * (34,208) (99,502) (87,496) (10,826) (232,031) (8,469) (39,344) (25,199) (160) (73,173)Write off during the year 3,719 4,129 - - 7,848 - - - - -

Balance 31st December (136,795) (447,978) (237,693) (14,367) (836,833) (106,306) (352,605) (150,197) (3,541) (612,649)Carrying Amount Mature Plantations 233,044 588,169 682,809 2,126 1,306,148 205,143 482,285 353,494 9,315 1,050,237

*The present management has carried out various procedures to calculate correct amount of mature and immature plantations and related depreciation with available information and time constraints. Accordingly, the company has transferred an amount of Rs. 507 Mn from immature plantations to mature plantations and written-off biological assets amounting to Rs.327 Mn as at 31st December 2016. However, total depreciation impact related to transfers has been adjusted to the financial statements for the year ended 31st December 2016.




2016 2015


Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

17.2.3 Growing Crop Nurseries

Balance as at 1st January 4,747 7,061 2,733 4,842 19,383 5,632 8,464 4,359 5,759 24,214 Increase / (Decrease) during the year 1,426 922 (431) (663) 1,254 (885) (1,403) (1,626) (917) (4,831)Write off during the year (5,959) (7,866) (1,938) (2,135) (17,898) - - - - - Balance 31st December 214 117 364 2,044 2,739 4,747 7,061 2,733 4,842 19,383

17.2.3 These are investments in bearer biological assets carried at cost (Tea, Rubber, Palm Oil and Mixed Crop) which comprises of immature/mature plantations since the formation of the Company. The assets (including plantations assets) taken over by way of estate leases are set out in the Notes 15 to the Financial Statements. 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 will be moved from immature to mature under this note. A corresponding movement from immature to mature of the investment undertaken by JEDB/SLSPC on the same plantation prior to the lease will also be carried out under this note.

As at 31st December



17 BEARER BIOLOGICAL ASSETS (COMPANY / GROUP) (CONTD.)

17.3 Bearer Biological Assets - Capital Expenditure


Extent - Ha Rs. 000 Extent - Ha Rs. 000

Uprooting

- Tea 3.00 1,870 - -

- Rubber - - - -

- Oil Palm - - - -

- Mixed Crop - - - -

Planting - - - -

- Tea - - 6.00 5,727

- Rubber - - 11.86 18,205

- Oil Palm - - 22.00 12,980

- Mixed Crop - - 24.75 6,735

Upkeep

- Tea 10.67 3,999 15.17 14,357

- Rubber 638.48 37,403 702.46 61,312

- Oil Palm 95.02 7,418 168.77 21,147

- Mixed Crop 8.00 1,323 - -

52,013 140,463

Group Company

2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

18 CONSUMABLE BIOLOGICAL ASSETS

Mature Plantations (Note 18.1) 500,261 450,737 500,261 450,737

Immature Plantations (Note 18.2) - - - -

500,261 450,737 500,261 450,737




18 CONSUMABLE BIOLOGICAL ASSETS (CONTD.)

As at 31st December Group Company

2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

18.1 Mature Plantations - at fair value

Balance as at 1st January 450,737 450,737 450,737 450,737

Increased due to new plantation - - - -

Harvested trees during the year - - - -

450,737 450,737 450,737 450,737

Gain arising from changes in fair value (Note 18.1.1) 49,524 - 49,524 -

Fair value as at 31st December 500,261 450,737 500,261 450,737

18.1.1 The company had fair valued its consumable biological assets after 4 years as at 31st December 2016 and total fair value gain of Rs. 49.52 Mn has been recognized in the financial statements for the year ended 31st December 2016.

18.2 The cost of immature trees up to the age of 4 years is treated as approximate to fair value perticularly on the ground of little biological transformation has taken place and impact of such transformation is expected to be immaterial. The company does not hold any Cost of immature plantation up to the age of 4 years and cost of Growing crop nurseries as at 31st December 2016. (2015 - Nil).

18.3 Measurement of Fair value

The valuation of consumable biological assets was carried by Mr. K.T.D. Tissera, an independent Chartered Valuation Surveyor, using Discounted Cash Flows (DCF) methods. The Valuation Report dated 31st December 2016 has been prepared based on the physically verified timber statistics provided by the Company.

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

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.




c) Valuation techniques and significant unobservable inputs

Following table shows the valuation techniques used in measuring Level 3 fair value of consumable biological asses as well as the significant unobservable inputs used for the valuation as at 31st December 2016.

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

Standing timber Discounted cash flows Determination of Timber Content The estimated fair value at the time of harvesting each specific species is sensitive to the following variables,

Standing timber older than 4 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 .

Timber trees in inter-crop areas and pure crop areas have been identified field-wise and spices were identified and harvestable trees were separated, according to their average girth and estimated age.

- the estimated timber content

- the estimated timber prices per

cubic meter

Expected cash flows are discounted using a risk-adjusted discount rate of 15% comprising a risk premium of 4%.

Timber trees that have not come up to a harvestable size are valued working out the period that would take for those trees to grow up to a harvestable size.

- the estimated selling related costs.

- the estimated maturity age

- the risk-adjusted discount rate.

Determination of Price of Timber

Trees have been valued as per the current timber prices per cubic meter based on the price list of the State Timber Corporation prices of timber trees sold by the estates and prices of logs sawn timber at the popular timber traders in Sri Lanka.

In this exercise, following factors have been taken into consideration.

a) Cost of obtaining approval of felling.

b) Cost of felling and cutting into logs.

c) Cost of transportation.

d) Sawing cost.

Risk-adjusted discount rate.

2016 - 15% (Risk Premium - 4%)


18.3 Sensitivity Analysis

Values as appearing in the statement of financial position are sensitive to price changes with regard to the average sales prices applied. Simulations made for timber show that an increase or decrease by 10% of the estimated future selling price has the following effect on the net present value of biological assets:

-10% 2016 +10%

Rs. 000 Rs. 000 Rs. 000

Timber 450,235 500,261 550,287

Total 450,235 500,261 550,287




Sensitivity Variation on Discount Rate

“Values as appearing in the Statement of Financial Position are sensitive to changes of the discount rate applied. Simulations made for timber show that an increase or decrease by 1% of the estimated future discount rate has the following effect on the net present value of biological assets:

-1% 2016 +1%

Rs. 000 Rs. 000 Rs. 000

Timber 514,265 500,261 487,004

Total 514,265 500,261 487,004

Group Company

As at 31st December 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

19 INVESTMENT IN SUBSIDIARY

Mackply Industries (Private) Limited - - 12,500 12,500

- - 12,500 12,500

2016 2015

Rs. 000 Rs. 000

19.1 Investment in subsidiary

Assets and liabilities 142,011 135,168

Total assets 83,631 78,185

Total liabilities 58,380 56,984

Net assets

Revenue and profit

Total revenue 178,766 152,658

Total profit after tax 9,177 11,784

Group Company

2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

20 INVESTMENT IN ASSOCIATES

Mackwoods Rubber Products (Private) Limited (Note 20.4) 7,145 7,145 6,250 6,250

Taprospa Resorts (Private) Limited (Note 20.5) 14,337 14,337 72,000 72,000

21,482 21,482 78,250 78,250

Less: Provision for impairment (Note 20.3) (21,482) - (78,250) -

- 21,482 - 78,250



20 INVESTMENT IN ASSOCIATES (CONTD.)


Rs. 000 Rs. 000

20.1 Name of the Company

Mackwoods Rubber Products (Pvt) Ltd 50% 50%

Taprospa Resorts (Private) Limited 40% 40%

20.2 Since the Company has not received the audited financial statements of Mackwoods Rubber Product (Private) Limited and Taprospa Resorts (Private) Limited for the year ended 31st December 2016, the consolidated financial statements for the year ended 31st December 2016 has been prepared without consolidating the financial position and result of operations of those associate companies.

20.3 The impairment provision has been made for the investment in associates as at 31st December 2016 due to unavailability of the financial statements of associates and the doubtfulness of the recoverability of the investments made by the Group.

Group Company

2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

20.4 Mackwoods Rubber Products (Private) Limited


Share of loss for the year - (1,073) - -


Balance as at 31st December - 7,144 - 6,250

Group Company

2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

20.5 Taprospa Resorts (Private) Limited


Share of loss for the year - (20,240) - -


Balance as at 31st December - 14,337 - 72,000

20.6 Total Share of Loss of Associates - (21,312) - -

Group Company

Percentage of holding 2016 2015 2016 2015

2016 2015 Rs. 000 Rs. 000 Rs. 000 Rs. 000

21 INVESTMENT IN JOINTLY CONTROLLED ENTITY

AEN Palm Oil Processing (Private) Limited 33.33% 33.33% 109,702 106,211 7,965 13,128

109,702 106,211 7,965 13,128




21 INVESTMENT IN JOINTLY CONTROLLED ENTITY (CONTD.)

21.1 Summarized information of the Joint Venture

21.1.1 AEN Oil Palm Processing (Pvt) Ltd

The Group has invested in 33.33% of stated capital of AEN Oil Palm Processing (Pvt) Ltd, a Joint Venture involved in the business of processing crude Palm Oil. The Group’s interest in AEN Palm Oil Processing (Pvt) Ltd is accounted for by using the equity method in the consolidated financial statements. Summarised financial information of this Joint Venture are set out below.

2016 2015

Rs. 000 Rs. 000

(Unaudited) (Unaudited)

Summarised statement of financial position of AEN Palm Oil Processing (Pvt) Ltd

Current assets, including cash and cash equivalents 186,853 109,989

Non current assets 292,775 302,649

Current liabilities, including tax payable (111,415) (57,944)

Non current liabilities, including deferred tax liabilities (39,107) (36,061)

Total Equity 329,106 318,633

Group's carrying amount of the investment 109,702 106,211

Revenue 2,256,417 1,683,418

Cost of sales (1,841,021) (1,500,899)

Other income 2,874 875

Administration expenses including depreciation (217,340) (45,486)

Finance cost (1,278) (357)

Profit before taxation 199,652 137,551

Income tax expense (28,182) (30,017)

Profit for the year 171,470 107,534

Total comprehensive income for the year 171,470 107,534

Group’s share of profit after tax 57,157 35,845

Gain/ (Loss) recognized on equity method - (31.854)

Group’s share of profit for the year 57,157 3,991

Group's share of profit before tax 66,551 45,850

Group's share of profit after tax 57,157 35,845

Number of shares invested (Nos) 796,463 1,312,830

Dividend received 2,494 401

Proceeds from disposal of shares (Note 21.2) 51,172 38,333

21.2 The AEN Palm Oil Processing (Private) Limited has executed an equal re-purchase of the shares held by each shareholder at the rates of Rs. Rs. 118.88 and Rs. 81.78 per share amounting to Rs.51.62 Mn. The gain on disposal of shares amounting to Rs. 46 Mn has been recognized under other income for the year ended 31st December 2016 (2015 - Rs. 31.94 Mn).

2016 2015

No of shares Fair Value No of shares Fair Value

Rs. 000 Rs. 000

22 AVAILABLE FOR SALE FINANCE ASSETS (GROUP/COMPANY)

Mackwoods Energy PLC 4,282,079 12,418 4,460,972 22,305

12,418 22,305



Group Company

As at 31st December 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

23 INVENTORIES

Input materials 10,314 5,610 10,314 5,610

Inventory in Labookellie tea centre (Note 23.1) 61,029 78,455 61,029 78,455

Harvested crops :

- Tea 51,296 40,324 51,296 40,324

- Rubber 57,384 44,650 57,384 44,650

Consumables and spares 4,928 4,109 4,794 3,975

Others 32,073 36,869 - -

217,024 210,017 184,817 173,014

Less : Provision for obsolete inventories (Note 23.2) (16,154) (911) (15,108) -

200,870 209,106 169,709 173,014

23.1 The inventory in Labookellie tea centre includes sealed inventory of Labookellie Tea Centre amounting to Rs.61,028,950/- as at 31st December 2016.

Group Company

2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

23.2 Movement of Provision for obsolete inventories

Balance as at 1st January 911 911 - -

Provision made during the year 15,243 - 15,108 -

Balance as at 31st December 16,154 911 15,108 -

Group Company

2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

24 TRADE AND OTHER RECEIVABLES

Produce trade receivables 130,220 42,459 56,860 42,459

Advances, deposits and prepayments 35,443 38,876 33,479 38,876

Other debtors (Note 24.1) 130,368 116,314 130,368 45,424

296,031 197,649 220,707 126,759

Less : Provision for impairment (Note 24.2) (126,402) (1,380) (126,097) -

169,629 196,269 94,610 126,759

24.1 Other debtors include amounts due from EPOC Research Laboratories Limited , Claridge Diversified Funds Limited and Paklan Latex (Private) Limited of Rs.65.16 Mn, Rs. 55.43 Mn and Rs. 1.42 Mn respectively as at 31st December 2016. These balances have been classified as amounts due from related parties as at 31st December 2015 since they were related parties as at that date. However, they ceased to be related parties upon the change of ownership of the company on 14th July 2016.




24 TRADE AND OTHER RECEIVABLES (CONTD.)

Group Company

As at 31st December 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

24.2 Movement of Provision for impairment

Balance as at 1st January 1,380 1,278 - -

Provision made during the year 4,427 102 5,502 -

Transferred from amount due from related parties 120,595 - 120,595 -

Balance as at 31st December 126,402 1,380 126,097 -

Group Company

2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

25 AMOUNTS DUE FROM RELATED PARTIES

Taprospa Resorts (Private) Limited 73,892 401,175 73,892 401,175

EPOC Research Laborataries Limited (Note 25.1) - 65,162 - 65,162

Claridge Diversified Funds Limited (Note 25.1) - 55,433 - 55,433

Mackply Industries (Private) Limited - - 20,733 26,787

Paklan Latex (Private) Limited (Note 25.1) - 1,111 - 1,111

Pussellawa Plantations Limited 49 - 49 -

73,941 522,881 94,674 549,668

Less : Provision for Impairment (Note 25.2) (73,892) (194,487) (73,892) (194,487)

49 328,394 20,782 355,181

25.1 These balances have been reclassified as other debtors as at 31st December 2016 since these parties ceased to be related parties as per LKAS 24 - “Related Party Disclosures” with effect from 14th July 2016 as a result of change of ownership of the company.

25.2 Movement of Provision for Impairment


Reversal during the year - (34,125) - (34,125)

Transferred to Other receivables (120,595) - (120,595) -

Balance as at 31st December 73,892 194,487 73,892 194,487

Group Company

2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

26 CASH AND CASH EQUIVALENTS

Favourable balances

Cash in hand 1,668 1,985 1,291 1,932

Cash in transit 377 115 377 115

Cash at banks 9,121 14,738 7,906 14,738

Investment in fixed deposits 8,469 8,000 8,469 8,000

19,635 24,838 18,043 24,785

Unfavourable balances

Less: Bank overdrafts (60,547) (89,568) (51,368) (69,998)

Cash and cash equivalents for the purpose of cash flows (40,912) (64,730) (33,325) (45,213)



26.1 Bank Overdrafts

Company

The overdraft facilities of the company are secured by a primary mortgage and a secondary mortgage on inventories and book debts of the company and a primary mortgage on leasehold right to land and other estate assets of Watapotha, Peenkanda, Frotoft and Noragalla Estates.

The Company has pledged fixed deposit of Rs 8 Mn against the overdrafts granted by Hatton National Bank PLC.

Group

The overdraft facilities of the Subsidiary is secured by a primary mortgage on its inventories and book debts. In addition, the Company has also provided a Corporate Guarantee for Rs. 9.25 Mn to the bank as a security for this facility.


Rs. 000 Rs. 000

27 STATED CAPITAL

25,000,001 Ordinary Shares Including One Golden Share Held by the Treasury 250,000 250,000

250,000 250,000

27.1 Golden Shareholder

The holders of ordinary shares and the Golden Share are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

The Golden Share has been allotted to the Secretary to the Treasury by capitalization of revaluation reserve on 1st August 1995. Articles of Association of the Company embodies the specific rights assigned to the Golden Shareholder on behalf of the State of Democratic Socialist Republic of Sri Lanka. 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.

The Golden share of Rs. 10/- held by the Secretary to the Treasury, enjoys the following special rights:

(a) The concurrence of the Golden Shareholder should be obtained to sub-lease estate lands and amend the Articles of Association of the Company in which the Golden Shareholder’s rights are given.

(b) 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.

(c) 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.

(d) 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.

(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.

Definition of the ‘Golden share’ - a share allotted to the Secretary to the Treasury in his official capacity and not in his own name, for and on behalf of the state of the Democratic Socialist Republic of Sri Lanka, and or by any transferee permitted in terms of the Articles. Definition of ‘Golden shareholder’ – the holder of the ‘Golden Share’.

The concurrence of the Golden Shareholder in writing shall be first obtained to amend the definition of the words ‘Golden Share’ and ‘Golden Shareholder’ and the Articles 5(1) to 5(12) of the Articles of Association of the Company which deals with the Golden shareholder.

The Company shall obtain the written consent of the Golden Shareholder prior to subleasing, ceding or assigning its rights in part or all of the lands set out in the Article of Association of the Company.





2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

28 GENERAL RESERVE

Opening balance 515,000 515,000 515,000 515,000

Closing balance 515,000 515,000 515,000 515,000


2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

29 LOANS AND BORROWINGS

Term loans (Note 29.2) 1,682,337 1,610,195 1,670,296 1,598,782

Finance leases (Note 29.3) 9,958 21,063 9,958 21,063

1,692,295 1,631,258 1,680,254 1,619,845

29.1 Maturity analysis

29.1.a Amount payable within one year

Term loans 833,657 943,958 824,116 937,046

Finance leases 8,053 14,424 8,053 14,424

841,710 958,382 832,169 951,470

29.1.b Amount payable after one year and less than five years

Term loans 848,680 666,237 846,180 661,736

Finance leases 1,905 6,639 1,905 6,639

850,585 672,876 848,085 668,375

1,692,295 1,631,258 1,680,254 1,619,845

29.2 Term loans

(a) Summary

Balance as at 1st January 1,610,195 1,443,338 1,598,782 1,441,802

Loans obtained during the year 119,790 668,210 97,459 658,333

Repayments during the year (47,648) (501,353) (25,945) (501,353)

Balance as at 31st December 1,682,337 1,610,195 1,670,296 1,598,782

(b) Lender-wise summary

Hatton National Bank PLC 271,884 273,826 262,343 262,413

Sampath Bank PLC 395,791 338,784 395,791 338,784

Commercial Bank of Ceylon PLC 236,735 235,601 236,735 235,601

National Development Bank PLC 351,072 350,468 351,072 350,468

People's Bank 90,455 90,455 90,455 90,455

State Bank of India- Sri Lanka Branch 49,750 49,600 49,750 49,600

DFCC Bank PLC 1,670 1,945 1,670 1,945

Lanka ORIX Finance Co PLC 109,900 110,000 109,900 110,000

Soft Logic Finance PLC 60,000 60,000 60,000 60,000

Alliance Finance Co PLC 51,240 54,639 51,240 54,639

Commercial Leasing and Finance PLC 25,869 25,000 25,869 25,000

Sri Lanka Tea Board 35,471 19,877 35,471 19,877

LOLC Factors Limited 2,500 - - -

1,682,337 1,610,195 1,670,296 1,598,782



29 LOANS AND BORROWINGS (CONTD.)

29.3 Assets pledged as collaterals by the Group / Company

Name of financial institution Nature of facility Facility granted/

rescheduled

Balance as at

31.12.2016

Securities pledged

Rs. 000 Rs. 000

Hatton National Bank PLC Term loan 50,000 31,738 Leasehold rights of Niriella estate

Term loan 200,000 169,669 Leasehold rights of Kiriwanaketiya estate

Term loan-E-Friends 13,640 8,907 Leasehold rights of Watapotha estateTerm loan 55,000 52,029 Leasehold rights of Clyde estate & Ambatenna

estate

Import Loans 9,500 6,041 Primary floating mortgage bond over trade stockTerm loan 5,000 3,500 Primary floating mortgage bond over factory

property at Pohorabawa Short term Loan 2,500 2,500

Sampath Bank PLC Term loan 358,100 357,600 Leasehold rights of Frotoft estateTerm loan 40,000 35,605 Irrevocable letter of undertaking from John Keells

Vehicle Loan - B M W Car loan

8,900 2,586 Stock mortgage -Export

Leasehold rights of Pimbura estateLeasehold rights of Delgoda estate

Commercial Bank of Ceylon PLC Term loan 207,000 206,950 Leasehold rights of Weddamulla estate & Noragalla estate

Packing credit loan 34,251 29,785 Stock mortgage -Export

Leasehold rights of Weddamulla estate

National Development Bank PLC ADB Loan 50,000 28,715 Leasehold rights of Mohamedi estateTerm Loan - Securitization

200,000

113,717

Leasehold rights of Mohamedi estate and irrevocable letter of undertaking from John Keells

Term loan 250,000 198,640 Leasehold rights of Mohamedi estate & letter of undertaking from Forbes & Walkers Tea

Short term loan 10,000 10,000 Leasehold rights of Mohamedi estate & buildings and plant machinery of Mohamedi estate

People’s Bank Term loan 44,951 70,455 Leasehold rights of Peenkande estateTerm loan 20,000 20,000 Leasehold rights of Peenkande estate and an

undertaking from Mackwoods (Private) Limited

State Bank of India - Sri Lanka Branch

Term loan - Securitization

100,000 49,750 Leasehold rights of Kiribathgalla estate and Irrevocable letter of undertaking from John Keells

DFCC Bank Term loan 1,627 1,670 Leasehold rights of Culloden estate

Lanka ORIX Finance Co PLC Revolving credit facility 110,000 109,900 Corporate Guarantee from Mackply Industries (Private) Limited

Softlogic Finance PLC Revolving credit facility 60,000 60,000 Leasehold rights of Peenkande estate Corporate Gurantee from Taprospa Resorts (Private) Limited

Alliance Finance Co PLC Term loan 25,000 292 Land owned by Mackwoods (Private) Limited Term loan 10,900 3,020 Term loan 45,000 47,928

Commercial Leasing and Finance PLC

Term Loan 25,000 25,869 Corporate Guarantee from Mackply Industries (Private) Limited

Sri Lanka Tea Board Short term Loan 35,471 35,471

Total loans and borrowings 1,971,840 1,682,337




29 LOANS AND BORROWINGS (CONTD.)


2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. ‘000

29.4 Finance leases


Leases obtained during the Year - 10,106 - 10,106

24,248 47,082 24,248 47,082

Repayments during the year (12,601) (22,834) (12,601) (22,834)


Finance charges allocated to future periods (1,689) (3,185) (1,689) (3,185)

Carrying value 9,958 21,063 9,958 21,063

29.4.1 Maturity analysis

(a) Amount payable within one year

Amount payable 8,906 16,080 8,906 16,080

Less : Finance charges allocated to future periods (853) (1,656) (853) (1,656)

8,053 14,424 8,053 14,424

(b) Amount payable after one year

Amount payable 2,741 8,168 2,741 8,168

Less :Finance charges allocated to future periods (836) (1,529) (836) (1,529)

1,905 6,639 1,905 6,639

(c) Grand total 9,958 21,063 9,958 21,063

29.5.2 Lender-wise summary

Hatton National Bank PLC - 3,902 - 3,902

Alliance Finance Co PLC - 2,451 - 2,451

Commercial Bank of Ceylon PLC - 503 - 503

Sampath Bank PLC - 77 - 77

Siyapatha Finance PLC 2,838 3,539 2,838 3,539

UB Finance Co Limited - 1,733 - 1,733

The Finance & Guarantee Company Limited - 1,937 - 1,937

Commercial Leasing & Finance PLC 8,809 10,106 8,809 10,106

11,647 24,248 11,647 24,248

Finance charges allocated to future periods (1,689) (3,185) (1,689) (3,185)

Net liability 9,958 21,063 9,958 21,063



Group Company

As at 31st December 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

30 NET LIABILITY TO LESSOR OF JEDB / SLSPC

(a) Gross liability

Opening balance 397,793 411,510 397,793 411,510

Less : paid/payable during the year (13,717) (13,717) (13,717) (13,717)

Closing balance 384,076 397,793 384,076 397,793

(b) Finance charges allocated to future periods

Opening balance 164,828 174,316 164,828 174,316

Less : Finance charges written off during the year (9,319) (9,488) (9,319) (9,488)

Closing balance 155,509 164,828 155,509 164,828

(c) Net liability 228,567 232,965 228,567 232,965

30.1 Leasehold Right to Bare Land of JEDB/SLSPC Estates assets and immovable (JEDB/SLSPC) assets on finance lease Leasehold rights to bare land of JEDB/SLSPC Estate assets and immovable (JEDB/SLSPC) estates assets on finance lease obtained on

a long term basis, are stated at the recorded carrying values as at the effective date of Sri Lanka Accounting Standard No.17 – “Leases”, in line with ruling of the urgent issues task force (UITF) of the Institute of Chartered Accountants of Sri Lanka. Such carrying amounts are amortized over the remaining lease term or useful life of such asset whichever is shorter.


2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

30.2 Maturity analysis

(a) Amount payable within one year 13,717 13,717 13,717 13,717

Less : Finance charges allocated to future periods (9,143) (9,319) (9,143) (9,319)

4,574 4,398 4,574 4,398

(b) Amount payable after one year

Amount payable after one year and less than five years 54,868 54,868 54,868 54,868


20,202 19,425 20,202 19,425

Amount payable after five years 315,491 329,208 315,491 329,208


203,791 209,142 203,791 209,142

223,993 228,564 223,993 228,567

(c) Grand total 228,567 232,965 228,567 232,965

The basic rental payable under the revised basis is Rs. 13,717,001/- per annum and this amount is to be inflated annually by Gross Domestic Production (GDP) Deflator and is in the form of contingent lease rental. Contingent lease rentals charged for the current year in the statement of comprehensive income amounts to Rs.9,142,690 /- (2015 - Rs.9,318,625/-).

Lease rental have been revised by the Ministry of Finance after the relief period of 2002 to 2008.The rentals have been computed in accordance with amendment of leases.

(1) Further liability on annual lease payment of Rs.13,717,001/- would continue until year 2045. The net present value of this liability at 4% discounting rate (as recommended by UITF) would result in a liability of Rs.228,567,223/- (2015-Rs.232,965,598/-).

(2) Net present value of Rs.228,567,223/- (as at 31st December 2015-Rs.232,965,598/-) is presented by gross liability of Rs.386,191,907/- (as at 31st December 2015-Rs.397,793,040/- ) and interest in suspense of Rs.157,625,000/-(as at 31st December 2015- Rs.164,827,402/-).

(3) The charge to the comprehensive income statement during the year is Rs.44,958,325/- (2015-Rs.43,772,499/-)




Group Company

As at 31st December 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. ‘000

31 DEFERRED TAX LIABILITIES


Recognised in profit or loss

Deffered tax charge/ (reversal) during the year 94,387 (22,118) 93,366 (22,118)

Recognised in other comprehensive income

Deffered tax charge during the year 6,419 - 6,419 -


The effective rate used to calculate deferred tax liability as at 31st December 2016 is 13.17% (2015-14.24%)

The deferred tax liability is relating to the followings,

2016 2015

Temporary Difference Tax Effect

Temporary Difference Tax Effect

Rs. 000 Rs. 000 Rs. 000 Rs. 000

Group

Accumulated Tax losses (Note 31.1) - - (1,004,011) (142,999)

Retirement benefit obligation (711,812) (94,974) (760,638) (108,336)

Provision for Warranties (406) (114) - -

Property, plant and equipment 195,807 27,728 114,343 16,286

Bearer biological assets 1,748,194 200,658 2,341,026 333,427

Consumable biological assets 500,261 65,886 - -

1,732,044 199,184 690,720 98,378

Company

Accumulated Tax losses (Note 31.1) - - (1,004,011) (142,999)

Retirement benefit obligation (701,922) (92,446) (760,638) (108,336)

Property, plant and equipment 182,724 24,065 114,343 16,286

Bearer biological assets 1,748,194 200,658 2,341,026 333,427

Consumable biological assets 500,261 65,886 - -

1,729,257 198,163 690,720 98,378

31.1 Deferred tax asset of Rs. 360,451,706/- as at 31st December 2016 arising out of the below temporary difference has not been recognized since it is not probable that future taxable profits will be available against which the Company will utilize the benefits there from. Deferred tax assets are recognized in the financial statements up to the extent of the deferred tax liabilities as at 31st December 2016.

The unrecognized deferred tax assets are attributable to the following;


Deductible Temporary Difference Tax Effect

Deductible Temporary Difference Tax Effect

Rs.000 Rs.000 Rs.000 Rs.000

On Accumulated Tax Losses 2,736,915 360,452 - -




2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

32 RETIREMENT BENEFIT OBLIGATION

32.1 Movement in the present value of the retirement benefit obligations

Provision for Gratuity

Opening Balance 575,602 692,643 568,236 686,745

Expenditure recognized in the Profit or Loss for the year 79,277 1,468 76,653 -

Actuarial (Gain)/Loss in Other Comprehensive income (48,741) - (48,741) -

606,138 694,111 596,148 686,745

Benefits paid during the year (29,183) - (29,083) -

Transfer of unsettled gratuity claimed during the year to current liability (134,963) (118,509) (134,963) (118,509)

Closing Balance 441,992 575,602 432,102 568,236

Unsettled Gratuity Payable

Opening Balance 192,402 143,981 192,402 143,981

Unsettled gratuity claimed during the year 134,963 118,509 134,963 118,509

Over provision of gratuity payable with repect of previous year (54,618) (57,208) (54,618) (57,208)

Benefits paid during the year (2,927) (12,881) (2,927) (12,881)

Closing Balance 269,820 192,402 269,820 192,402

Grand Total 711,812 768,004 701,922 760,638

32.2 The retirement benefit obligation of the company as at 31st December 2016 is based on the Actuarial Valuation carried out by Actuarial & Management Consultants (Private) Limited, a firm of professional actuaries. However, the liability has been calculated based on the half a month salary as at 31st December 2015. The impact on such charge has been adjusted in the financial statements for the year ended 31st December 2016.

32.3 Expenses recognized in the Profit or Loss and Other Comprehensive income.

Group Company

For the year ended 31st December 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

Current service costs 31,617 - 28,993 -

Interest Costs 47,660 - 47,660 -

Actuarial gain for the year (48,741) - (48,741) -

30,536 - 27,912 -




32 RETIREMENT BENEFIT OBLIGATION (CONTD.)

32.4 Actuarial assumptions

The key assumptions used by M/s Actuarial & Management Consultants (Private) Limited include the following,

2016

Rate of Discount (Long Term Government Bond) 11%

Rate of Future Salary Increases

- For Staff (Per Annum) 7.5%

- For Workers (Every Two Years) 18%

Retirement Age

- For Staff 55 years

- For Workers 60 years

Daily Wage rate

- Tea Rs. 500/-

- Rubber Rs. 500/-

In addition to the above, demographic assumptions such as mortality, withdrawal and disability and retirement age were considered for the actuarial valuation. Following “ 1949/52 Mortality Table” issued by the Institute of Actuaries, London was used to estimate the gratuity liability of the company.

32.5 Sensitivity Analysis

The sensitivity analysis on the total Comprehensive Expense and the financial position based on the assumed rate on salary increment and discount rate as at 31st December 2016 is given below,

Discount Rate Salary Escalation Rate Present value of defined benefit obligation Change

Rs. 000 Rs. 000

One percentage point increase As stated above 402,140 (29,962)

One percentage point decrease As stated above 466,462 34,360

As stated above One percentage point increase 448,901 16,799

As stated above One percentage point decrease 416,300 (15,802)

Group Company

As at 31st December 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

33 DEFERRED INCOME

Capital grants

(a) Total capital grants received


Total grants received during the year - 39,164 - 39,164

Balance at the 31st December 135,601 135,601 135,601 135,601

(b) Total amortization


Amount amortized during the year 3,635 3,103 3,635 3,103

Balance at the 31st December 44,578 40,943 44,578 40,943

(c) Total unamortized capital grants at the end of the year 91,023 94,658 91,023 94,658



33 DEFERRED INCOME (CONTD.)The above represents the following;

(a) The funds received from the Plantation Housing and Social Welfare Trust (PHSWT), Plantation Development Project (PDP) and Plantation Human Development Trust (PHDT) for the development of workers’ welfare facilities and improvements to institutional facilities.

(b) The funds received from the plantation reform project for the development of forestry plantations.

(c) The amount spent is capitalized under the relevant classification of property, plant and equipment and corresponding grant component is reflected under deferred grants and subsidies and is amortized over the useful life span of the related assets.

Group CompanyAs at 31st December 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

34 TRADE AND OTHER PAYABLES

Trade creditors 60,761 43,847 50,466 43,846

Employee related payables 766,396 942,162 761,937 942,162

Dividends payable 20,855 27,107 20,855 27,107

Broker Advances 162,497 155,674 162,497 155,674

Lease Rental Payable to JEDB/SLSPC 195,258 143,701 195,258 143,701

Accrued Interest Payable 260,107 12,516 260,107 12,516

Economic Service Charge Payable 39,550 28,159 39,550 28,159

Other creditors 243,885 258,277 229,764 241,380

Unsubstantiated payables (Note 34.1) 392,084 - 392,084 - 2,141,393 1,611,443 2,112,518 1,594,545

34.1 The Company has reclassified amount due to related parties of the previous management of the Company amounting to Rs. 392,083,846/- as unsubstantiated payables. Such parties are not related parties of the Company as at 31st December 2016. The present management of the Company has initiated processes to establish actual legal and contractual obligation for these payable balances or to disclaim such obligations and accordingly, to challenge such payable balances as at the year end. The Board of Directors has decided to continue to record these balances as unsubstantiated payables until all such transactions are substantiated with the valid documentary evidences.

Group CompanyAs at 31st December 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

35 AMOUNTS DUE TO RELATED PARTIES

Mackwoods IT (Private) Limited (Note 35.1) - 44,463 - 44,463

Mackwoods Infortec (Private) Limited (Note 35.1) - 15,244 - 15,244

Claridge Stock Broker (Private) Limited (Note 35.1) - 12,819 - 12,819

Mackwoods Insurance Broker (Private) Limited (Note 35.1) - 7,392 - 7,392

Mackwoods Energy PLC (Note 35.1) - 113,506 - 113,506

Mackwoods (Private) Limited (Note 35.1) - 253,884 - 253,884

Mackwoods Plantations (Private) Limited (Note 35.1) - 20,100 - 20,100

APL Teas (Private) Limited (Note 35.1) - 4,821 - 4,821

Browns Properties (Private) Limited 35,433 - 35,433 -

35,433 472,229 35,433 472,229

35.1 These balances have been reclassified as unsubstantiated payables as at 31st December 2016 since these parties ceased to be related companies as per LKAS 24 - “Related Party Disclosures” which effect from 14th July 2016 as a result of change of ownership of the company.

36 RELATED PARTY DISCLOSURES36.1 Substantial Shareholding and Ultimate Parent Company

The company is a subsidiary of Browns Power Holdings (Private) Limited., which holds 61.1 % of the issued stated capital of the company as at 31st December 2016. In the opinion of the directors, the company’s ultimate parent company as at the reporting date is Lanka Orix Leasing Company PLC .




36 RELATED PARTY DISCLOSURES (CONTD.)

36.2 Transactions with Key Management Personnel (KMP)

The Company considers the Board of Directors as key management personnel of the company.

Compensations to Key Management Personnel of the Company

Emoluments to the directors of the company are disclosed in Note 12 to the Financial Statements.

Other than those disclosed on Note 12 to the financial statements, there are no transactions with the key management personnel of the company and its parent company

36.3 Transactions with Related Companies

Name of the Company

Nature of Relationship

Name of the Directors

Nature of the Transactions Transaction Amount Balance as at 31st December

2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

(a) Related parties who ceased to be related parties with effect from 14th July 2016

Mackwoods IT (Private) Limited

Affiliate Mr. C. N. A Nonis Plantation software professional Charges - (8,250) - (44,463)

Mrs. N.S.M Samarathunga

Reversed debit note Plantation software professional Charges

- 3,750

Mrs. S.M.A Nonis Ranaweera

Transferred to unsubstantiated payables 44,463 -

Mr. F.L Fonseka

Mackwoods Infortec (Private) Limited

Affiliate Mr. C. N. A Nonis Reversal of provisions 15,244 - - (15,244)


Mr. F.L Fonseka


Mackwoods Insurance Broker (Private) Limited

Affiliate Mr. C. N. A Nonis Consultancy fee charged - (1,050) - (7,392)


Mackwoods Energy PLC

Affiliate Mr. C. N. A Nonis Debit note to APL Teas (Private) Limited on labookellie mini hydro power project operation, electricity net meeting charges

- (1,644) - (113,506)


Interest charged on commercial paper - (8,173)

Mr. F.L Fonseka short term advance - (4,500)

Mr. L. L Samarasinghe

Dividend received - 401


Reversal of overstated interest on commercial paper

2,109 -

Payment made 4,500 -

Debit notes on Labookellie Mini Hydro power project operation, electricity net metering

(691) -


Claridge Stock Broker (Private) Limited

Affiliate Mr. C. N. A Nonis Plantation sector review research reports

- (2,700) - (12,819)

Mr. F.L Fonseka Fee based income - (1,930)





36.3 Transactions with Related Companies

Name of the Company




2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000


Claridge Stock Broker (Private) Limited

Affiliate Mrs. S.M.A Nonis Ranaweera

Short term advance (519) (897)

Demand promissory note issued to APL Teas (Private) Limited

- (9,100)

Interest on promissory note - (667)

Debit note settlements 2,850 15,965

Payments made on behalf of Mr. F.L Fonseka

897 -

Sale of Mackwood Energy shares 519 -

Reversal of promissory notes ‘interest (645) -


Mackwoods (Private) Limited Affiliate Mr. C. N. A Nonis Other costs, salary allocation etc. - (142) - (253,884)


Repair and maintenance office & vehicle - (785)

Mr. L. L Samarasinghe

Electricity - (1,031)


Parking fee - (900)

Mr. F.L Fonseka Travelling and fuel - (511)

Private ledger expenses - (1,980)

Space allocation - (1,304)

Office services - (2,880)

Security systems - (1,905)

Legal services - (1,950)

Head office general shared cost - (14,530)

Head office telecom / electricity - (1,512)

DMCD building rent - (22,406)

Holiday work costs - (1,010)

Consultancy fee - (793)

Project support costs - (3,720)

Chemicals - (2,137)

Loans received (3,260) (20,437)

Head office support service cost, project support cost, holiday OT support service cost & other expenses charged by debit notes reversed.

- 12,000

Loans settlements - 847

Reversal of debit notes 85,384 -

Reversal of provisions 8,673





36.3 Transactions with Related Companies (Contd.)

Name of the Company




2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000


Claridge Diversified Funds (Private) Limited

Common control Provision for impairment - (55,433) - (55,433)

Transferred to Other Receivables 55,433

EPOC Research Laborataries Limited

Affiliate Common control Provision for impairment - (65,162) - (65,162)

Transferred to Other Receivables 65,162

Mackwoods Plantations (Private) Limited

Immediate parent Company


Management fee settled - 500 - (20,100)

Mr. F.L Fonseka Transferred to unsubstantiated payable 20,100

Dr. W.S Ng

Mr. C. N. A Nonis

Mr. R.K.M Ng

Mrs. N. S. M Samarathunga

Paklan Latex (Private) Limited

Affiliate Mr. C. N. A Nonis Advances Received (14,047) (76,906) - 1,111

Mr. F.L Fonseka Latex sales 15,668 76,698

Mrs. N. S. M. Samarathunga

Interest charged, chemicals issues to Company

(218) (3,755)

Loans settlements - 26,744

Factory rent 337 -

Settlements (1,434)

Transferred to other receivables (1,417) -

APL Teas (Private) Limited

Affiliate Mr. C. N. A Nonis Tea allowance to Staffs, Trade mark registration, tea donations on behalf of the Company

- (2,030) - (4,821)

Mr. F.L Fonseka Business travel expenses - (7,489)


Tea marketing & promotional expenses - (18,771)

Silver Tips Sale - 625

Tea sales from labookellie, atapotha, weddamulla, noragalla, doloswella and frotoft estate

- 43,925

Tea sales 23,384 6,095

Fuel and maintenance of vehicles - (636)

Electricity paid and Telephone paid by APL Teas (Private) Limited transferred to Company,

- (64)

Air port shop rental paid by APL Teas (Private) Limited and transferred to Company

- (4,864)




Name of the Company




2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000


APL Teas (Private) Limited

Affiliate Mr. C. N. A Nonis

Mr. F.L Fonseka


Maligawatte stores rent (828)

Labookellie Tea Museum expenses incurred by APL Teas (Private) Limited and transferred to Company

- (101)

Tea Breeze Galle capital expenses incurred by APL Teas (Private) Limited transferred to Company

- (345)

Noris avenue stores expenses incurred by APL Teas (Private) Limited transferred to company

- (60)

Salary reimbursements - (3,234)

Tea sale settlement (1,503) (7,286)

Packers wages paid by Company on behalf of APL Teas (Private) Limited and expenses incurred by Labookellie tea centre transferred to Company

- 2,565

Loan received from APL Teas (Private) Limited

(98,223) (26,563)

Funds transferred to APL Teas (Private) Limited

- 6,000

Tea marketing & promotional expenses & other expenses charged by debit notes reversed.

- 30,002

Demand promissory note issued to APL Teas (Private) Limited

- (5,500)

Interest on promissory note - (1,339)

HNB (USD) transactions -Credits (3,261) -

HNB (USD) transactions -Debits ( Transfer to promotion expenses, bank charges, interest)

6,114 -

Sale of motor vehicle 12,000 -

Expenses incurred (2,704) -

IP Memo settlement 5,430 -

Reversal of debit notes 24,000 -

Debit notes received (152) -


(b) Related parties who are being throughout the year

Mackply Industries (Private) Limited

Subsidiary Mr. C. N. A Nonis Recovery of management fee, salaries, Telephone, electricity, photo copy and stationery etc.

5,453 2,200 20,733 26,787

Mrs. N. S. M Samarathunga

Short term advance for executive salary,MC case and wages

- (3,600)

Mr. F.L Fonseka Management fee settlement - (600)

Mr. S.C.J Devendra

Exchange of funds 3,000 -

Short term advances (14,507) -





Name of the Company




2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

(b) Related parties who are being throughout the year

Taprospa Resorts (Private) Limited

Associates Mr. C. N. A Nonis

Expenses incurred 723 3,063 73,892 327,283

Mr. F.L Fonseka Funds transferred to Taprospa 12,107 29,706


Settlements received (213,364) (78,763)

Mr. S.C.J Devendra

Tissa project expenses,Tymore Villa expenses,Labookelle Villa expenses, rent income receivable

- 8,176

Capitalize Labookellie villa current account balance as a building

- (18,851)

Capitalize tymore villa current account balance as a building

- (1,255)

Capitalize westward ho villa current account balance as a building

- (1,712)

Provision for impairment - (73,892)

Set of against debit notes (52,857) -

AEN Oil Processing (Private) Limited

Joint venture Mr. C. N. A Nonis

Total sales to the AEN Oil Processing Factory

275,095 265,458 6,129 -

Mr. F.L Fonseka Settlement of dues by AEN Oil 268,966 (265,458)

(c) Related parties who became related parties as at 14th July 2016

Browns Properties (Private) Limited

Affiliate Mr. K A K P Gunawardena

Short term loan received (60,732) - (35,433) -

Mr. D S K Amarasekera

Interest on short term loan (1,459) -

Mrs. V G S S Kotakadeniya

Loans settlements 25,732 -

Mr. A S Perera Settlement of interest 1,026 -

Mr. K G Punchihewa

Pussellawa Plantations Limited

Affiliate Mr. K A K P Gunawardena

Bought leaf supply 867 - 49 -

Mr. D S K Amarasekera

Debit notes 49 -

Mrs. V G S S Kotakadeniya

Green leaf/firewood/electricity (867) -

Mr. A S Perera

Mr. K G Punchihewa





37 GOING CONCERN

The Company has recorded accumulated losses of Rs. 2,753 Mn as at 31st December 2016. Its current liabilities exceeded its current assets as at 31st December 2016 by Rs. 2,778 Mn and total liabilities exceeded its total assets by Rs. 1,989 Mn. Further, the Company’s net assets are less than half of its stated capital and faces serious loss of capital situation as at the reporting date. These conditions raise significant doubt whether the Company will be able to continue as a going concern in the future.

However, the financial statements of the Company have been prepared on the assumption that the Company is a going concern as the present immediate parent Company have agreed to provide continuous financial support as necessary to continue as a going concern.

The ownership of the Company has been changed to D R Investment (Private) limited with effect from 27th March 2017. New Management has taken number of actions to overcome situation faced by the Company as at 31st December 2016. As a result, the Company has settled following overdue balances as at the approval of financial statements by the board of directors with the financial support of immediate parent company.

(1) Government lease rentals amounting to Rs. 207 Mn(2) EPF and ETF surcharges and contribution amounting to Rs. 300 Mn(3) Overdue Gratuity payments amounting to Rs. 278 Mn(4) Overdue bank loans and loan interest amounting to Rs. 815 Mn(5) Overdue loans and leases amounting to Rs. 233 Mn(6) Overdue income taxes amounting to Rs. 16 Mn

Further, present management has initiated following actions to overcome the current situation faced by the Company.

The new management has focused on the discussions with relevant banks and other financial institutions in relation to the settlements of overdue loan and balances amounting to Rs.1.7 billion as at 31st December 2016. Subsequent to the reporting date, the company has settled overdue bank loans and accrued interest amounting to Rs. 815 Mn together with the overdue loans and lease balances obtained from finance companies amounting to Rs. 233 Mn after deducting a significant portion of interest and other charges waived off.

Further, the Company has incorporated an in-house internal audit division to build up a sound internal controls over the overall operation of the company. Therefore the Board of Directors are optimistic that the Company could improve its performance within next few years as a result of new strategic initiatives introduced by the management towards the organizational goals and objectives.

38 EVENTS OCCURRING AFTER REPORTING DATE

Subsequent to the reporting date, D R Investment (Private) limited has acquired the controlling stake of Agalawatte Plantations as at 27th March 2017.

There are no any other circumstances arisen after the reporting date that require material adjustment to or disclosure in the financial statements other than what is disclosed above.

39 COMMITMENTS

There are no material commitments as at the reporting date.

40 CONTINGENT LIABILITIES

There are no material contingent liabilities as at the reporting date that require adjustment to or disclosure in the financial statements.

41 STATEMENT OF DIRECTORS’ RESPONSIBILITIES

Consequent to the acquisition of controlling interest in Agalawatte Plantations PLC by Browns Power Holdings (Pvt) Ltd on 14th July 2016, the previous Board of Directors whose names are listed below tendered their resignations on the dates given below. Subsequently, on 27th March 2017, 61.1% of the shares of Agalawatte Plantations PLC was acquired by D R Investments (Pvt) Ltd.

Dr. C N A Nonis Resigned w.e.f 11th November 2016 (Chairman at the time of resignation)Mr. R K Man Ng Resigned w.e.f 11th November 2016 Mr. F L Fonseka Resigned w.e.f 11th November 2016 (Managing Director at the time of resignation)Mr. S C J Devendra Resigned w.e.f 11th November 2016 (CEO at the time of resignation)Mrs. S M A Nonis Ranaweera Resigned w.e.f 11th November 2016




41 STATEMENT OF DIRECTORS’ RESPONSIBILITIES (CONTD.)

Following board of directors were appointed and they resigned on the dates given below.

Mr. K A K P Gunawardena Appointed w.e.f 20th October 2016 and appointed as the chairman w.e.f 14th January 2017 and resigned 14th June 2017

Mr. D S K Amarasekera Appointed w.e.f 20th October 2016 and resigned 14th June 2017

Mrs. V G S S Kotakadeniya Appointed w.e.f 20th October 2016 and resigned 14th June 2017

Mr. A S Perera Appointed w.e.f 20th October 2016 and resigned 13th September 2017

Mr. K G Punchihewa Appointed w.e.f 18th November 2016 and resigned 14th June 2017

With the disposal of 61.1% shares held in the company by Browns Power Holdings (Pvt) Ltd on 27th March 2017, following directors were appointed to the board.

Mr. G.P.N.A.G. Gunatilake Appointed w.e.f 22nd May 2017

Mr. R.P.L. Ramanayake Appointed w.e.f 22nd May 2017

Mr. W.A.A. Asanga Appointed w.e.f 22nd May 2017

Mr. L.R.W.S. Rajasekara Appointed w.e.f 22nd May 2017

Subsequent to the initial appointments, the below Directors were appointed with effects from 22nd June 2017.

Mr. A.S.Amarasuriya Chairman of Agalawatte Plantations PLC w.e.f 31/07/2017

Mr. W.L.P.Wijewardena Deputy Chairman of Agalawatte Plantations PLC w.e.f 31/07/2017

Mr. R.K.A.Ranaweera Appointed w.e.f. 20/09/2017

The present Board of Directors and Head of Finance who did not hold any office during the year ended 31st December 2016 (other than Mr.Anusha Perera, Director who resigned w.e.f 13/09/2017) merely facilitated the external auditors to the best of their knowledge exercising reasonable care as practical as possible to carry out the audit with available information and encountered limitations during the process of audit which may have affected the fair presentation of financial statements for the year ended 31st December 2016.

The directors who held office during the year ended 31st December 2016 are responsible for the compliance on good corporate governance, maintenance of proper books of accounts, preparation of financial statements in compliance with Sri Lanka Accounting Standards and also to comply with the Companies Act no.07 of 2007, listing rules and other compliance requirements.

42 FINANCIAL RISK MANAGEMENT

42.1 Financial Risk Factors

The company’s principal financial liabilities comprise with loans and borrowings and trade and other payables, amounts due to related companies and short term loans. Receivables and cash that arrive directly from its operations.

Accordingly, the company’s activities exposed to variety of financial risks:

- Credit Risk

- Liquidity Risk

- Market Risk

- Operational Risk

42.2 Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework subject to the Note 41.

42.2.1 Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities.



42 FINANCIAL RISK MANAGEMENT (CONTD.)

42.2.1.1Risk exposure

The maximum risk positions of financial assets which are generally subject to credit risk are equal to their carrying amounts. Following figures shows the maximum risk positions.

Group Company

As at 31st December 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

Trade and other receivables 169,929 196,269 94,610 126,759

Amounts due from related parties 49 328,394 20,782 355,180


Total Credit Risk Exposure 189,313 549,501 133,435 506,724

42.3 Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

Group Company

As at 31st December 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

42.3.1 Net (debt) / cash ratio


Liquid assets 19,635 24,838 18,043 24,785

Current portion of borrowings 841,710 958,382 832,169 951,470

Bank overdrafts 60,547 89,568 51,368 69,998

Liquid liabilities 902,257 1,047,950 883,537 1,021,468

Net (debt)/ Cash (882,622) (1,023,112) (865,494) (996,683)

42.4 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

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

Market risk comprise of the following types of risk:

(a) Interest rate risk

(b) Currency risk

(c) Commodity price risk

(d) Equity price risk

a) Currency risk

The Company 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 Stated Dollars (USD). Since the frequency of the transaction done in foreign currency is very low, the company is not exposed to a higher degree of currency risk.

b) Interest rate risk

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




42 FINANCIAL RISK MANAGEMENT (CONTD.)42.5 Operational risk

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

42.6 Capital management The Company’s Debt to Equity ratio at the end of the reporting periods is as follows:

Carrying Amounts

Group Company

As at 31st December 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

Total Liabilities 5,210,871 5,028,804 5,144,612 4,975,005

Less: Cash and cash equivalents (19,635) (24,838) (18,043) (24,785)

Net debts 5,191,236 5,003,966 5,126,569 4,950,220

Total Equity (1,845,388) (631,331) (1,988,936) (711,806)

Adjusted Debt to Equity ratio (282%) (797%) (259%) (699%)

43 FAIR VALUES OF FINANCIAL INSTRUMENTS43.1 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;

Company


Carrying Amount Fair Value


Rs. 000 Rs. 000 Rs. 000 Rs. 000

Assets carried at amortised cost


Amounts due from related parties 20,782 20,782 355,181 355,181

Cash & Cash Equivalents 18,043 18,043 24,785 24,785

133,435 133,435 506,725 506,725

Group




Rs. 000 Rs. 000 Rs. 000 Rs. 000

Assets carried at amortised cost


Amounts due from related parties 49 49 328,394 328,394

Cash & Cash Equivalents 19,635 19,635 24,838 24,838

189,313 189,313 549,501 549,501



Group




Rs. 000 Rs. 000 Rs. 000 Rs. 000

Liabilities carried at amortised cost

Loans and Borrowings 1,692,295 1,692,295 1,631,258 1,631,258

Net liability to lessor of JEDB/SLSPC 228,567 228,567 232,965 232,965

Trade and other payables 2,141,393 2,141,393 1,611,443 1,611,443

Amounts due to related parties 35,433 35,433 472,229 472,229

Income tax payables 50,617 50,617 30,302 30,302

Bank overdrafts 60,547 60,547 89,568 89,568

4,208,852 4,208,852 4,067,765 4,067,765

43.3 Financial assets and liabilities by categories

Financial assets and liabilities in the tables below are split into categories in accordance with LKAS 39.

a) Financial assets by categories

Group Company

As at 31st December, 2016 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

Financial instruments in current assets

Trade and Other Receivables 169,629 196,269 94,610 126,759

Amounts Due From Related Parties 49 328,394 20,782 355,181

Cash and Cash Equivalents 19,635 24,838 18,043 24,785

Total 189,313 549,501 133,435 506,725

The fair value of loans and receivables does not significantly vary from the value based on amortized cost methodology.


43 FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTD.)43.2 Fair values versus the Carrying amounts

Company

As at 31st December, 2016 2016 2015



Rs. 000 Rs. 000 Rs. 000 Rs. 000

Liabilities carried at amortised cost

Loans and Borrowings 1,680,254 1,680,254 1,619,845 1,619,845

Net liability to lessor of JEDB/SLSPC 228,567 228,567 232,965 232,965

Trade and other payables 2,112,518 2,112,518 1,594,545 1,594,545

Amounts due to related parties 35,433 35,433 472,229 472,229

Income tax payables 45,364 45,364 31,749 31,749

Bank overdrafts 51,368 51,368 69,998 69,998

4,153,504 4,153,504 4,021,332 4,021,332



43 FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTD.)

b) Financial liabilities by categories

Group Company

As at 31st December, 2016 2016 2015 2016 2015

Rs. 000 Rs. 000 Rs. 000 Rs. 000

Financial instruments in non-current liabilities

Loans and Borrowings 850,585 672,876 848,085 668,375

Net Liability to lessor of JEDB/SLSPS Estates 223,993 228,567 223,993 228,567

Financial instruments in current liabilities

- -

Trade and Other Payables 2,141,393 1,611,443 2,112,518 1,594,545

Amounts Due To Related Parties 35,433 472,229 35,433 472,229

Loans and Borrowings 841,710 958,382 832,169 951,470

Net Liability to lessor of JEDB/SLSPS Estates 4,574 4,398 4,574 4,398

Bank Overdrafts 60,547 89,568 51,368 69,998

Total 4,158,235 4,037,463 4,108,140 3,989,582

The management assessed that, cash and short-term deposits, trade receivables, trade payables, bank overdrafts and other current financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between knowledgeable and willing parties, other than in a forced sale or on liquidation

The following methods and assumptions were used to estimate the fair values:

The fair value of unquoted instruments, loans from banks and other financial liabilities, obligations under finance leases, as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

43.4 Financial assets and liabilities by fair value hierarchy

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique as explained in Note 2.6 to the financial statements:

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

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

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



43 FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTD.)

43.4 Financial assets and liabilities by fair value hierarchy (Contd.)

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

As at 31st December 2016

Assets Carried at amortised Cost

Trade and other receivables - - 169,629 169,629 - - 94,610 94,610

Amounts due from related parties - - 49 49 - - 20,782 20,782

Cash & Cash Equivalents - 19,635 - 19,635 - 18,043 - 18,043

- 19,635 169,678 189,313 - 18,043 115,392 133,435

Liabilities Carried at amortised Cost

Loans and Borrowings - - 1,692,295 1,692,295 - - 1,680,254 1,680,254

Net liability to lessor of JEDB/SLSPC - - 228,567 228,567 - - 228,567 228,567

Trade and other payables - - 2,141,393 2,141,393 - - 2,112,518 2,112,518

Amounts due to related parties - - 35,433 35,433 - - 35,433 35,433

Income tax payables - - 50,617 50,617 - - 45,364 45,364

Bank overdrafts - - 60,547 60,547 - - 51,368 51,368

- - 4,208,852 4,208,852 - - 4,153,504 4,153,504





No of shares held No of Shareholders No of Shares Total Holding %

I.1-1000 shares 11,149 1,953,783 7.82%

II.1,001-10,000 shares 90 311,218 1.24%

III.10,001-100,000 shares 26 884,348 3.54%

IV.100,001-1,000,000 shares 3 1,080,551 4.32%

V. Over 1,000,000 shares 3 20,170,100 83.08%

11,271 25,000,000 100.00%

No of Shareholders No of Shares Total Holding %

Resident 11,259 20,851,150 83.40%

No resident 12 4,148,850 16.59%

11,271 25,000,000 100.00%

No of Shareholders No of Shares Total Holding %

Company Holders 49 18,466,571 73.87%

Member Holders 11,222 6,533,429 26.13%

11,271 25,000,000 100.00%

Market Value Analysis Date 2016 Rs

Date 2015

Rs

Highest -for the period ended 31st Dec 2016 18.10.2016 22.50 21.01.2015 28.60

Lowest -for the period ended 31st Dec 2016 20.12.2016 17.10 16.10.2015 19.00

Year ended 31st Dec 2016 30.12.2016 17.50 29.12.2015 20.50

Distribution of shareholding (Ordinary Shares) as at 31st December 2016



NameNumber of

Shares% of the

holding

1 BROWNS POWER HOLDINGS (PRIVATE) LIMITED 15,200,000 60.80

2 MISS.SONIA WIN-YEN NG 3,570,100 14.28

3 SAMPATH BANK PLC/ DR.T.SENTHILVERL 2,000,000 8.00

4 SEYLAN BANK PLC/DR.THIRUGNANASAMBANDAR SENTHILVERL 556,899 2.23

5 HSBC INTERNATIONAL NOMINEES LTD-SSBT-DEUSTCHE BANK AG SINGAPORE 290,000 1.16

6 DR. THIRUGNANASAMBANDAR SENTHILVERL 233,652 0.93

7 MRS. MARIA STEPHANIE ELISABETH VERA EUGENIE ATHENAIS URSULA VON ST 100,000 0.40

8 MR. MOHAMED IMTIZAM ABDUL HAMEED/ 88,200 0.35

9 MOULDEX LIMITED 75,206 0.30

10 THE MANDATORY OFFER BY BROWNS POWER HOLDINGS(PVT) LTD TO PURCHASE 74,527 0.30

11 HARNAM HOLDINGS SDN BHD 69,019 0.28

12 MR. PATWANT SINGH NIRANJAN SINGH/’5057FI’ 61,525 0.25

13 BANK OF CEYLON NO. 1 ACCOUNT 45,600 0.18

14 MR. DULSHAN THIVANKA BERUWALAGE 40,450 0.16

15 MRS. JASBINDERJIT KAUR PIARA SINGH 37,986 0.15

16 MRS. ASHANI NIMALI KIRIDENA 30,000 0.12

17 MR. ALLAN JAGATH MONESH JINADASA 25,000 0.10

18 POBRAN INVESTMENTS (PVT) LTD 25,000 0.10

19 MR. KANGASU CHELVADURAI VIGNARAJAH 20,630 0.08

20 COMMERCIAL BANK OF CEYLON PLC/S.A.GULAMHUSEIN 20,255 0.08

22,564,049 90.26

BALANCE HELD BY 11,251 SHAREHOLDERS 2,435,951 9.74

25,000,000 100.00

“Percentage of Shares held public is 24.92%

THE GOLDEN SHARE HOLDERThe Golden share of Rs 10/- is currently held by the Secretary of 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 shareholder, the Golden Shareholder has specific rights according to the Articles of Association of the company which are specified in Note No 27.


TWENTY LARGEST SHAREHOLDERS AS AT 31ST DECEMBER 2016



Information on Estates

As at 31st December 2016

TEA/RUBBER/OIL PLAM

Total Mature Immature Total Production Net Sales

Planted

Estate Crop

Extent Extent Extent Extent Average

Ha Ha Ha Ha Kg Rs/Kg

RATNAPURA DISTRICT

Peenkande Rubber1401

752 107 859 572,533 234.44

Oil Palm 157 2 159 543,685 41.28

Doloswella Tea 871 102 7 109 58,257 396.00

Rubber 305 47 352 138,789 244.83

Kiribatgala Rubber 747 206 88 294 256,169 237.87

Noragalla Tea 133 76 1 77 80,793 435.21

Watapotha Tea 365 47 - 47 23,401 414.77

Rubber 40 52 92 24,205 211.87

Niriella Tea895

9 - 9 6,191 414.57

Rubber 275 94 369 211,257 235.08

Oil Palm 14 22 36 97,103 41.94

Delgoda Tea 7 - 2 2 - -

KALUTARA DISTRICT

Culloden Rubber 1,771 628 74 702 394,739 221.17

Oil Palm 668 12 680 3,685,586 42.22

Clyde Rubber 604 342 52 394 225,387 236.65

Kiriwanaketiya Rubber 767 312 40 352 222,682 227.66

Oil Palm 18 52 70 67,782 42.83

Mohamedi Tea 724

11 - 11 7,373 323.57

Rubber 187 39 226 107,749 212.15

Oil Palm 193 4 197 985,710 42.47

Pimbura Rubber374

115 3 118 70,412 220.20

Oil Palm 170 - 170 1,125,749 42.83

NUWARA ELIYA DISTRICT

Labookellie Tea 538 311 4 315 310,102 431.51

Frotoft Tea 1,016 525 22 547 306,641 399.06

Weddemulle Tea 706 329 4 333 219,018 330.57

Tea Rubber Oil Palm Tea Rubber Oil palm

Total Mature Extent (HA) 1,410 3,161 1,220 Total Crop ( kg ) 1,011,775 2,223,922 6,505,615

Total Immature Extent (HA) 39 597 92 Total NSA (Rs/kg) 339.00 229.05 42.29

Total Planted Extent (HA) 1,449 3,758 1,311

Total Extent (Ha) 10,919



Definitions

FINANCIAL TERMS

Accounting policies

Specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting financial statements.

Borrowings

All interest bearing liabilities.

Capital employed

Total assets less interest free liabilities and provisions.

Cash equivalents

Liquid investments with original maturities of three months or less.

Contingent liabilities

Conditions or situations at the Balance Sheet date, the financial effect of which are to be determined by future events which may or may not occur.

Current ratio

Current assets divided by current liabilities.

Dividend yield

Gross dividend per share as a percentage of the market price. A measure of return on investment.

Earnings per share

Profits attributable to ordinary shareholders divided by the number of ordinary shares in issue.

EBITDA

Earnings before interest tax depreciation & amortization.

Equity

Shareholders’ funds, i.e. share capital and reserves.

Net assets per share

Shareholders’ funds after conversion of mandatorily convertible debentures divided by the number of ordinary shares after conversion.

Price earnings ratio

Market price of a share divided by earnings per share.

Related parties

Parties who could control or significantly influence the financial and operating policies of the business.

Segment

Constituent business units grouped in terms of nature and similarity of operations.

SLAS

Sri Lanka Accounting Standards.

UITF

Urgent Issues Tasks Force of The Institute of Chartered Accountants of Sri Lanka.

Value Addition

The quantum wealth generated by the activities Company measured as the difference between turnover and the cost of materials and services bought in.

Working capital

Capital required to finance the day-to-day operations (current assets minus current liabilities).

SLFRSs /LKASs

Sri Lanka Accounting Standard corresponding to International Financial Reporting Standard.

SLFRS

Sri Lanka Financial Reporting Standards.

Market capitalisation

Number of shares in issue multiplied by the market value of each share at the year end.

Fair Value

Is the amount which an asset could be exchanged between a knowledgeable willing buyer and knowledgeable seller in an arms length transaction.

Effective Tax Rate

Income tax Expense divided by profit from ordinary activities before tax.

Deferred Tax Liability

The amounts of income taxes Payable in future periods in respect of taxable temporary differences.

Deferred Tax asset

The amounts of income taxes recoverable in future periods in respect of deductible temporary differences, the carry forward of unused tax losses and the carry forward of unused tax credits.

Consumable Biological Asset

The biological assets those that are to be harvested as agricultural produce or sold as biological asset.

Bearer Biological Asset

Biological assets those are not to be harvested as agricultural or sold as biological asset.

Key Management Personnel

Key management Personnel are those persons having authority and responsibility for planning ,directing and controlling the activities of the entity, directly or indirectly.



NON-FINANCIAL TERMS

COP

The Cost of Production. This generally refers to the Cost of producing a kilo of produce (Tea/Rubber/Oil Palm).

Crop

The total produce harvested over a given period of time (usually during a financial year).

Extent in bearing

The extent of land from which crop is being harvested. Also see “Immature Plantation”.

Field

An unit extent of land. Estates are divided into fields in order to facilitate management.

Immature plantation

The extent of plantation that is under-development and is not being harvested.

Infilling

A method of field development whereby planting of individual plants is done in order to increase the yield of a given field, whilst allowing the field to be harvested.

Mature plantation

The extent of plantation from which crop is being harvested. Also see “Extent in Bearing”.

NSA

The Net Sales Average. This is the average sale price obtained (over a period of time) after deducting Brokerage fees and cost of Gratis teas.

Replanting

A method of field development where an entire unit of land is taken out of “bearing” and developed by way of uprooting the existing trees, bushes and replanting with new trees/bushes.

Yield

The average crop per unit extent of land over a given period of time (usually kgs. per hectare per year).



Notes

AG

ALAW

ATTE PLAN

TATIONS PLC | AN

NU

AL REPORT 2016

agalawatte plantations plccolombo 10, sri lanka. tel: 011 4718200 email: [email protected]...

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