annual report 2019/20...8 r i l property plc - annual report 2019/20 company shareholding %...

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R I L P

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LC - A

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L RE

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2019/20

ANNUAL REPORT 2019/20

As in life, businesses remain vulnerable to external pressures and unprecedented impacts, which challenge the very strengths of a company and its people. But, the ability to withstand such adversities and challenges will define the identity of any establishment, separating those that cringe under the strain from the ones that stand against the pressures, emerging stable and stronger than before.

Surpassing every challenge, we continue to secure our holdings, with our strengths linked firmly by a team of resilient and like-minded professionals. And armed with this fortitude, R I L remains optimistic and resolved in our stance, moving boldly ahead with the determination to withstand challenges and unexpected constraints - continuing to sustain our position of strength through years to come.

2 R I L PROPERTY PLC - ANNUAL REPORT 2019/20

ContentsOV

ERVI

EW

MAN

AGEM

ENT

REVI

EW

STEW

ARDS

HIP

About Us R I L Property PLCChairman’s Message

Organisational Structure

FoodBuzz (Private) Limited Board of Directors

Milestones United Motors Lanka PLC

CEO’s Review

Financial Highlights

Sustainability Report

5 2613

7 40226 3618

10 44

3R I L PROPERTY PLC - ANNUAL REPORT 2019/20

SUPP

LEM

ENTA

RY

INFO

RMAT

ION

FINA

NCIA

L RE

PORT

S

RISK

AND

GO

VERN

ANCE

Shareholders Information

Financial Calendar Risk Management

Glossary of Financial Terms

Responsibility Statement of Chief Executive Officer and Chief Finance Officer

Report of the Board Audit Committee

Form of ProxyIndependent Auditor’s Report

Statement of Cash Flows

Notes to the Financial Statements

Statement of Profit or Loss and Other Comprehensive Income

Report of Board Related Party Transactions Review Committee

Financial Year Summary

Statement of Directors’ Responsibility for

Financial Reporting

Corporate Governance

Notice of MeetingDirectors’ Statement

on Internal Controls

Report of Board Nominations and

Remuneration Committee

Corporate Information Inner Back Cover

Statement of Financial Position

Statement of Changes in Equity

Accounting Policies

Annual Report of the Board of

Directors on the Affairs of the

Company

1849859

18810080

195103

111

121

107

87

1869966

19010285

106

108

112

89

OVERVIEW


Establishing a presence that is recognised within a competitive landscape, R I L Property PLC has created its own definitions of commercial real estate, and has become coveted for its engineering brilliance and standards of green architecture. Since being incorporated in 2009, we have contributed to the growing commercial real estate industry in Sri Lanka, with the construction of our flagship properties PARKLAND in 2015 and PARKLAND 1 in 2018 – both designed under the influence of local engineering capabilities and the expertise of international experts.

Having acquired the admiration and recognition of our high-profile clientele of Multi National Companies (MNCs) and conglomerates, our prime, Grade “A” commercial office complex is also benchmarked for their unique design and architecture that embodies modernity and sophistication, built with a fundamental focus on green principles and sustainability.

And as a fast growing property developer we also offer a gamut of inclusive solutions, which includes facilities management, land acquisition, construction management services, consulting and strategic investment.

R I L Property PLC continues to add to the Group’s growing financial standing. This is achieved by a group of highly dedicated and professional team of employees, whose prime goal is in nurturing relationships with our stakeholders – ensuring that their interests are secured, always.

The R I L Group portfolio also comprises United Motors Lanka PLC and FoodBuzz (Private) Limited, two companies that have established a leading presence within their respective industries.

About us



Milestones

� R I L Property PLC (R I L) incorporated as a Private Limited Liability Company

2009

� R I L received BOI approval to setup a mixed development project

2011

� Obtained lease hold rights from Readywear Industries (Private) Limited in respect of the property to construct PARKLAND

� R I L commenced construction of PARKLAND

2012

� Obtained freehold rights on the land (on which PARKLAND was constructed) from Readywear Industries (Private) Limited

� FoodBuzz (Private) Limited became a wholly owned subsidiary of R I L

� Acquired the property situated in Morgan road land for investment purposes

� Construction of PARKLAND successfully completed and commenced operations

2015

� The status of R I L was changed from a “Private Limited” to a “Limited” Liability Company

� R I L achieved 100% occupancy in PARKLAND

� R I L was listed on the Main Board of the Colombo Stock Exchange

� Acquired a 51% share in United Motors Lanka PLC (UML)

� Completed the renovation and expansion of PARKLAND 1

� Integrated renewable energy system to PARKLAND 1 by investing LKR 19 Mn. on solar energy

� R I L achieved 72% occupancy in PARKLAND 1

� Occupancy levels at PARKLAND 1 increased up to 88%

� 100% renewal rate of current leases at PARKLAND

� Completed our maiden construction management project valued at LKR 275 Mn. in Central Business District (CBD)

2016 2017 2018 2019


OVERVIEW MANAGEMENT REVIEW

SUPPLEMENTARYINFORMATIONSTEWARDSHIP FINANCIAL

REPORTS RISK AND

GOVERNANCE


Parent Company

(UML HEAVY) (UMPDL) (UNIMO)

(UML)

100% 51%

100%UML HEAVY

EQUIPMENT LIMITED

100%UML PROPERTY

DEVELOPMENTS LIMITED

100%UNIMO ENTERPRISES

LIMITED

( )


Company Shareholding%

Registration Number

Chairman Board of Directors Registered Address Activities

Par

ent

R I L Property PLC

Not applicable

PV/PB 68365 PQ

Mr. S. G. Wijesinha

Ms. L. K. A. H. Fernando - Chief Executive Officer/ Executive DirectorMs. L. E. M. YaseenMr. L. W. D. AbeyarathneMs. C. G. RanasingheProfessor. N. D. GunawardenaMs. C. R. Kariyawasam

33,Park Street, Colombo 02 Develop and manage Grade ‘‘A’’ commercial office space in selected core markets in the Colombo Business District (CBD) whilst offering multi-faceted real estate solutions including facilities management, leasing, land acquisition, construction management services, consulting and strategic investment.

Sub

sidi

ary

FoodBuzz (Private) Limited

100 PV 80535 Not applicable

Ms. H. A. P. A. Sanjeewani - Chief Executive Officer/ Executive DirectorMs. R. R. TakahashiMs. L. K. A. H. Fernando

525, Union Place, Colombo 02 Operate a chain of BreadTalk™ restaurants under a franchise agreement.

Provide food processing and other related services.

United Motors Lanka PLC

51 PQ 74 Mr. S. G. Wijesinha

Mr. C. Yatawara - Group Chief Executive Officer/ Executive DirectorMr. A. W. AtukoralaMr. R. H. Yaseen - Executive Director - After Sales servicesMs. L. K. A. H. FernandoProf. K. A. M. K. RanasingheMr. S. A. ChapmanMr. H. Inoue(Resigned w.e.f. 01 April 2020)Mr. Yoshisuke Ishii(Appointed w.e.f. 07 July 2020)

100, Hyde Park Corner, Colombo 02 Import and distribution of brand new Mitsubishi and Fuso vehicles, genuine spare parts of brands represented by the Group, provision of workshop facilities for repairs and lubrication services of vehicles.

Import and distribution of Valvoline lubricants and Simoniz and Eagleone car care products.

Import and distribution of 3D printing equipment and providing related services.

Import and distribution of LiuGong concrete mixing equipment.

The Company operates 2MW roof mounted solar power projects in Ratmalana and Orugodawatte.

Fully

Ow

ned

Sub

sidi

arie

s of

Uni

ted

Mot

ors

Lank

a P

LC

Unimo Enterprises Limited

100 PB 218 Mr. S. G. Wijesinha

Mr. M. Gunatilake - Chief Executive Officer/ Executive DirectorMr. C. YatawaraMr. R. H. YaseenMs. L. K. A. H. FernandoMr. A. W. Atukorala

100, Hyde Park Corner, Colombo 02 Import and distribution of Perodua cars, Brilliance vans, JMC commercial vehicles and Yokohama tyres.

Assembly and marketing of DFSK and Z100 vehicles.

During the year, the Company commenced the import of Greaves power generators.

UML Property Developments Limited


Mr. C. Yatawara 100, Hyde Park Corner, Colombo 02 Construction of warehouse complex for hiring purpose.

Development of Company owned properties.

UML Heavy Equipment Limited


Mr. C. YatawaraMs. L. K. A. H. FernandoProf. K. A. M. K. Ranasinghe(Resigned w.e.f. 08 October 2019)

100, Hyde Park Corner, Colombo 02 Import and distribution of JCB earth moving equipment and power generators.

- In terms of Section 242 of the Companies Act No.07 of 2007, Orient Motor Company Limited a fully owned subsidiary company of United Motors Lanka PLC was amalgamated with United Motors Lanka PLC on 30 November 2019.





REPORTS RISK AND

GOVERNANCE

Company Shareholding%

Registration Number

Chairman Board of Directors Registered Address Activities

Par

ent

R I L Property PLC

Not applicable

PV/PB 68365 PQ

Mr. S. G. Wijesinha

Ms. L. K. A. H. Fernando - Chief Executive Officer/ Executive DirectorMs. L. E. M. YaseenMr. L. W. D. AbeyarathneMs. C. G. RanasingheProfessor. N. D. GunawardenaMs. C. R. Kariyawasam

33,Park Street, Colombo 02 Develop and manage Grade ‘‘A’’ commercial office space in selected core markets in the Colombo Business District (CBD) whilst offering multi-faceted real estate solutions including facilities management, leasing, land acquisition, construction management services, consulting and strategic investment.

Sub

sidi

ary


100 PV 80535 Not applicable

Ms. H. A. P. A. Sanjeewani - Chief Executive Officer/ Executive DirectorMs. R. R. TakahashiMs. L. K. A. H. Fernando

525, Union Place, Colombo 02 Operate a chain of BreadTalk™ restaurants under a franchise agreement.

Provide food processing and other related services.


51 PQ 74 Mr. S. G. Wijesinha

Mr. C. Yatawara - Group Chief Executive Officer/ Executive DirectorMr. A. W. AtukoralaMr. R. H. Yaseen - Executive Director - After Sales servicesMs. L. K. A. H. FernandoProf. K. A. M. K. RanasingheMr. S. A. ChapmanMr. H. Inoue(Resigned w.e.f. 01 April 2020)Mr. Yoshisuke Ishii(Appointed w.e.f. 07 July 2020)

100, Hyde Park Corner, Colombo 02 Import and distribution of brand new Mitsubishi and Fuso vehicles, genuine spare parts of brands represented by the Group, provision of workshop facilities for repairs and lubrication services of vehicles.

Import and distribution of Valvoline lubricants and Simoniz and Eagleone car care products.

Import and distribution of 3D printing equipment and providing related services.

Import and distribution of LiuGong concrete mixing equipment.

The Company operates 2MW roof mounted solar power projects in Ratmalana and Orugodawatte.

Fully

Ow

ned

Sub

sidi

arie

s of

Uni

ted

Mot

ors

Lank

a P

LC

Unimo Enterprises Limited


Mr. M. Gunatilake - Chief Executive Officer/ Executive DirectorMr. C. YatawaraMr. R. H. YaseenMs. L. K. A. H. FernandoMr. A. W. Atukorala

100, Hyde Park Corner, Colombo 02 Import and distribution of Perodua cars, Brilliance vans, JMC commercial vehicles and Yokohama tyres.

Assembly and marketing of DFSK and Z100 vehicles.

During the year, the Company commenced the import of Greaves power generators.



Mr. C. Yatawara 100, Hyde Park Corner, Colombo 02 Construction of warehouse complex for hiring purpose.

Development of Company owned properties.



Mr. C. YatawaraMs. L. K. A. H. FernandoProf. K. A. M. K. Ranasinghe(Resigned w.e.f. 08 October 2019)

100, Hyde Park Corner, Colombo 02 Import and distribution of JCB earth moving equipment and power generators.

- In terms of Section 242 of the Companies Act No.07 of 2007, Orient Motor Company Limited a fully owned subsidiary company of United Motors Lanka PLC was amalgamated with United Motors Lanka PLC on 30 November 2019.


Financial HighlightsGroup Company

31 March 2020

31 March 2019

Change 31 March 2020

31 March 2019

Change

EARNING HIGHLIGHTS AND RATIOSRevenue LKR'Mn. 11,236 13,956 -19% 1,003 762 32%Gross profit LKR'Mn. 3,193 3,655 -13% 925 693 33%Results from operating activities LKR'Mn. 1,272 2,047 -38% 1,517 1,420 7%Profit before tax LKR'Mn. 437 1,321 -67% 1,169 1,015 15%Profit after tax LKR'Mn. 388 1,120 -65% 1,000 804 24%Profit attributable to owners of the parent

LKR'Mn. 589 906 -35% 1,000 804 24%

Gross profit margin % 28.42 26.19 8% 92.22 90.92 1%Operating profit margin % 11.32 14.67 -23% 151.25 186.35 -19%Net profit margin % 3.45 8.02 -57% 99.70 105.46 -5%Earning per share LKR 0.74 1.15 -36% 1.25 1.02 22%Return on assets (ROA) % 1.06 3.36 -68% 4.92 4.14 19%Return on capital employed (ROCE)

% 4.1 7.1 -41% 8.5 8.2 3%

Interest cover No. of times 1.48 2.55 -42% 3.99 3.12 28%

FINANCIAL POSITION HIGHLIGHTS & RATIOSStated capital LKR'Mn. 7,360 7,360 - 7,360 7,360 -Share in issue Mn. 800 800 - 800 800 -Reserves & retained earnings/(loss) LKR'Mn. 10,230 10,078 2% 8,160 7,550 8%Equity attributable to equity holders of the parent

LKR'Mn. 17,590 17,438 1% 15,520 14,910 4%

Non-controlling interest LKR'Mn. 5,871 6,311 -7% - - -Total assets LKR'Mn. 36,585 33,351 10% 20,308 19,403 5%Total debt LKR'Mn. 9,144 7,048 30% 2,889 3,295 -12%Debt to equity % 52 40.4 29% 18.6 22.1 -16%Gearing % 28 22.9 23% 15.7 18.1 -13%Current assets LKR'Mn. 11,583 10,552 10% 486 326 49%Current liabilities LKR'Mn. 7,249 5,287 37% 455 475 -4%Inventory LKR'Mn. 7,161 6,253 15% 5 6 -17%Current asset ratio No. of times 1.60 2.00 -20% 1.07 0.69 55%Quick asset ratio No. of times 0.61 0.81 -25% 1.06 0.67 58%Net asset per share LKR 21.99 21.80 1% 19.40 18.64 4%

MARKET/SHAREHOLDERS INFORMATIONMarket value per share LKR - - - 4.10 6.40 -36%Company's market capitalisation LKR'Mn. - - - 3,280 5,120 -36%Market price to book value % - - - 0.21 0.34 -38%Price earning ratio No. of times - - - 3.28 6.26 -48%Dividend per share LKR - - - - 0.15 -100%Dividend yield ratio % - - - - 2.34 -100%Dividend payout ratio % - - - - 0.15 -100%




REPORTS RISK AND

GOVERNANCE

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Revenue Vs Earnings Before Interestand Tax (EBIT)

Group RevenueGroup Earnings Before Interest and Tax (EBIT)

2017/2018 2018/2019 2019/2020

4,477

13,956

LKR Mn.

2,175

11,236

1,352

2,607

0

5,000

10,000

15,000

20,000

25,000

30,000

Borrowing Vs Shareholder Funds

Group Total BorrowingGroup Shareholder Funds

2017/2018 2018/2019 2019/2020

LKR Mn.

7,818

21,165

23,749 23,461

7,0489,144

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Total Assets Vs Total Borrowings

Group Total AssetsGroup Total Borrowings

2017/2018 2018/2019 2019/2020

LKR Mn.

31,233

7,818 7,0489,144

33,351

36,585

0

5,000

10,000

15,000

20,000

25,000

30,000

Share Capital Vs Shareholder Funds

Group Share CapitalGroup Shareholder Funds

2017/2018 2018/2019 2019/2020

LKR Mn.

5,760

21,165

23,749 23,461

7,360 7,360

STEWARDSHIP




REPORTS RISK AND

GOVERNANCE

Chairman’s Message

LKR 11,236 Mn.Group Revenue

With the international appeal of our flagship properties and its world-class standards we have a significant requirement to uphold standards of both floor space and amenities, while providing sustainable solutions to our clientele.

Dear Shareholders,

The year ended 31 March 2020 endured multiple challenges and setbacks that swayed our economic eco-system, affecting businesses of all scale and scope, across every social stratum. Despite this context, R I L Group has performed reasonably well - proving our stability and the resilience of our people. Hence, it is with pleasure that I present to you our Annual Report for the year 2019/20.

Macroeconomic ReviewKey HighlightsCommenting on the most fundamental of indicators – the GDP stood at LKR 15,016 Bn. over LKR 14,366 Bn. reported in 2018. This was a subdued growth of

2.3% against the 3.3% recorded in 2018. Per capita GDP at current market prices was at LKR 688,719 in comparison to LKR 662,949 in 2018, which resulted from the subdued economic growth, along with a sharply depreciated Sri Lankan Rupee.

Sri Lanka experienced a severe setback from the Easter Sunday Attack, with its effects being felt across the economy, especially within sectors such as tourism, air travel, domestic transportation, accommodation, wholesale and retail trade, food and beverage services and agriculture. The Government in reviving the tourism industry adopted several measures, including financial support contributing towards the recovery in tourism and arrivals towards the latter part of 2019.

The country was further met with uncertainty in the run-up to the presidential elections in November, which also caused investor confidence to moderate, witnessed through outflows of investments from stock exchange, amidst moderated inflows.

On a rather positive note, the country was placed at the upper middle-income status by the World

Activity-wise Contribution to GDP Growth

Source: Department of Census and Statistics

Agriculture Industries Services Taxes less Subsidies GDP

-2

0

2

4

6

8

Q1-

15

Q2-

15

Q3-

15

Q4-

15

Q1-

16

Q2-

16

Q3-

16

Q4-

16

Q1-

17

Q2-

17

Q3-

17

Q4-

17

Q1-

18

Q2-

18

Q3-

18

Q4-

18

Q1-

19

Q2-

19

Q3-

19

Q4-

19

Per

cent

Financial Account

Source: Central Bank of Sri Lanka

20192018

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2,500

US

$ m

illio

n

Doing Business Indicators - 2019 for Sri Lanka

0 10 20 30 40 50 60 70 80 90 100

Overall

Indi

cato

rs

Resolving insolvencyEnforcing contracts

Trading across borders

Paying taxes

Protecting minority investorsGetting credit

Registering property

Getting electricity

Dealing with construction permits

Starting a business

S core

Source: The World Bank

Balance of Payments


-4

-3

-2

-1

0

1

2

3

2015 2016 2017 2018 2019

% o

f GD

P

Current Account Balance Financial Account (Net) Overall Balance

New Registration of Motor Vehicles

Source: Department of Motor Traffic

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Jan-

15

Apr

-15

Jul-

15

Oct

-15

Jan-

16

Apr

-16

Jul-

16

Oct

-16

Jan-

17

Apr

-17

Jul-

17

Oct

-17

Jan-

18

Apr

-18

Jul-

18

Oct

-18

Jan-

19

Apr

-19

Jul-

19

Oct

-19

Nu

mb

er

Motor Cycles

Other (includes Buses, Dual Purpose, Goods Transport, Land VehiclesQuardricycles and Motor Homes)

Three Wheelers Motor Cars

DirectInvestments

PortfolioInvestments

OtherInvestments

DirectInvestments

OtherInvestments

ReserveAssets

Net Incurrence of Liabilities Net Acquisition of Financial Assets





-2

0

2

4

6

8

Q1-

15

Q2-

15

Q3-

15

Q4-

15

Q1-

16

Q2-

16

Q3-

16

Q4-

16

Q1-

17

Q2-

17

Q3-

17

Q4-

17

Q1-

18

Q2-

18

Q3-

18

Q4-

18

Q1-

19

Q2-

19

Q3-

19

Q4-

19

Per

cent

Financial Account


20192018

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2,500

US

$ m

illio

n


0 10 20 30 40 50 60 70 80 90 100

Overall

Indi

cato

rs



Paying taxes



Getting electricity


Starting a business

S core


Balance of Payments


-4

-3

-2

-1

0

1

2

3

2015 2016 2017 2018 2019

% o

f GD

P




0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Jan-

15

Apr

-15

Jul-

15

Oct

-15

Jan-

16

Apr

-16

Jul-

16

Oct

-16

Jan-

17

Apr

-17

Jul-

17

Oct

-17

Jan-

18

Apr

-18

Jul-

18

Oct

-18

Jan-

19

Apr

-19

Jul-

19

Oct

-19

Nu

mb

er

Motor Cycles



DirectInvestments


OtherInvestments

DirectInvestments

OtherInvestments

ReserveAssets



Bank in July 2019 – one tier lower than high-income status. There was modest growth across major economic sectors, while extreme weather dampened agricultural activities slowing growth to a marginal 0.6%. Industry sector, recorded a 2.7% growth higher compared to 1.2% recorded in 2018, contributed by a 4% growth in Construction. Services sector experienced a decelerated growth of 2.3% caused by the impact of the Easter Sunday Attack on tourism and related activities.

External SectorIn external sector developments, trade and current account balances improved, as measures were introduced to curb import expenditure. Importation of vehicles was affected by these measures resulting in a decline of 48.2% in 2019 as policies went into effect alongside tax hikes for several categories of vehicles.

Consequently, vehicle registrations decreased by 23.6%, down to 367,303 vehicles in 2019 to 480,799 registered in 2018.

Export earnings increased moderately while the balance in trade recorded its lowest deficit since 2013.

Substantial inflows increased the BOP’s financial account of which International Sovereign Bond (ISB) issuances of USD. 4.4 Bn. and two tranches of the International Monetary Fund’s (IMF) extended fund facility (IMF-EFF) were major contributors. At the end of 2019, these developments bolstered gross official reserves and stabilised the exchange rate, even amidst significant debt repayments.




-2

0

2

4

6

8

Q1-

15

Q2-

15

Q3-

15

Q4-

15

Q1-

16

Q2-

16

Q3-

16

Q4-

16

Q1-

17

Q2-

17

Q3-

17

Q4-

17

Q1-

18

Q2-

18

Q3-

18

Q4-

18

Q1-

19

Q2-

19

Q3-

19

Q4-

19

Per

cent

Financial Account


20192018

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2,500

US

$ m

illio

n


0 10 20 30 40 50 60 70 80 90 100

Overall

Indi

cato

rs



Paying taxes



Getting electricity


Starting a business

S core


Balance of Payments


-4

-3

-2

-1

0

1

2

3

2015 2016 2017 2018 2019%

of G

DP




0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Jan-

15

Apr

-15

Jul-

15

Oct

-15

Jan-

16

Apr

-16

Jul-

16

Oct

-16

Jan-

17

Apr

-17

Jul-

17

Oct

-17

Jan-

18

Apr

-18

Jul-

18

Oct

-18

Jan-

19

Apr

-19

Jul-

19

Oct

-19

Nu

mb

er

Motor Cycles



DirectInvestments


OtherInvestments

DirectInvestments

OtherInvestments

ReserveAssets





-2

0

2

4

6

8

Q1-

15

Q2-

15

Q3-

15

Q4-

15

Q1-

16

Q2-

16

Q3-

16

Q4-

16

Q1-

17

Q2-

17

Q3-

17

Q4-

17

Q1-

18

Q2-

18

Q3-

18

Q4-

18

Q1-

19

Q2-

19

Q3-

19

Q4-

19

Per

cent

Financial Account


20192018

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2,500

US

$ m

illio

n


0 10 20 30 40 50 60 70 80 90 100

Overall

Indi

cato

rs



Paying taxes



Getting electricity


Starting a business

S core


Balance of Payments


-4

-3

-2

-1

0

1

2

3

2015 2016 2017 2018 2019

% o

f GD

P




0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Jan-

15

Apr

-15

Jul-

15

Oct

-15

Jan-

16

Apr

-16

Jul-

16

Oct

-16

Jan-

17

Apr

-17

Jul-

17

Oct

-17

Jan-

18

Apr

-18

Jul-

18

Oct

-18

Jan-

19

Apr

-19

Jul-

19

Oct

-19

Nu

mb

er

Motor Cycles



DirectInvestments


OtherInvestments

DirectInvestments

OtherInvestments

ReserveAssets





REPORTS RISK AND

GOVERNANCE

InvestmentForeign direct investments including foreign borrowings obtained by BOI companies decreased in 2019. However, direct investments flowed into projects in port infrastructure, property development and telecommunications - with India, Singapore, Canada, Hong Kong and China being the top sources of investment in the country.

The country expects to attract major investments in the next few years especially pertaining to the Hambantota industrial zone, Colombo port city and telecom sector. Nevertheless, the country is yet to alter its ranking in the Doing Business Index with changes in elements that provides an attractive environment for investors. High wages, cost of utilities, high cost of land acquisition and rigid Government processes remain key challenges in attracting further investments; but stand to become strongest assistors in attracting more foreign investors if rectified in the coming years. Consistent policies are also crucial in maintaining predictability and in fostering investor confidence.

Pandemic’s Impact In early 2020, the economy which had begun to recover from measures taken towards stabilising the macro economy and the external sector was once again impacted by uncertainty and a further subdued performance due to COVID-19.

The outbreak of the COVID-19 pandemic and the subsequent measures adopted in containing the spread of the virus has heightened the level of uncertainty across global economies and has

also impacted all aspects of our economy causing a challenging environment to all industries. However, the above average capital and liquidity buffers maintained by CBSL have enabled the Government in taking remedial actions in assisting businesses and citizens. The effects of the pandemic are expected to pose further challenges in the external sector as it will impact tourism, exports and workers’ remittances in 2020.

Key Company HighlightsBefore presenting the year’s most highlighted developments, it will be more apt to provide a brief snapshot of events in the past few years – especially in terms of our core business in Grade ‘‘A’’ commercial property. In 2016 with the launch of PARKLAND, we were met with a boom in industry growth especially one that posed significant prospects for commercial property with the industry facing a peak in demand. In November of 2017, we commenced operations in refurbishing and expanding the PARKLAND 1, with the decision to broaden our real-estate portfolio. The project was completed in early 2019 after delayed work and an unanticipated cost increase, but proving to be a success with 72% of confirmed tenancy at the pre-launch stage.

Both our flagship properties have now become real-estate landmarks with significant value placed on its location, architecture and facilities that have made PARKLAND and PARKLAND 1 much attractive to commercial property seekers. Designed to conform to international design

standards and smart optimisation of space, both our crowned properties are recognised as world-class commercial office complexes now occupied by large-scale conglomerates and multi national corporations.

Despite the social and political uncertainties and the dismal economic performance in 2019, I am pleased to note that we have maintained desirable levels of occupancy. The period that ensued since 2016 was a tremendously successful period for PARKLAND, as it continued to enjoy 100% occupancy, but experienced an around 4% decline in the year under review. Meanwhile, PARKLAND 1 increased occupancy rates to 88% within this period. This is a tremendous achievement to have accomplished within one year.

I must emphasise that even amidst the uncertainty that prevailed after the Easter Sunday Attack, R I L continued to be reliable in our services. We remained sustainable through prudent measures, remaining stable amidst tough times. Most importantly, we remained approachable and dependable to our clients, attending to our promise of undisrupted services.

Despite the existing occupancy levels, we are gearing for the challenging after effects of the still on-going global pandemic and an anticipated decline in demand for commercial space, which may affect business in 2020. We are strongly pursuing all possible avenues in retaining existing clients with attractive rates and revised agreement terms. Enhancing services and upgrading existing facilities will also enable us to better



accommodate the needs of our clients.

During the immediate aftermath of the Easter Sunday Attack, FoodBuzz witnessed customer demand decreasing rapidly for BreadTalkTM, affecting business unexpectedly. Eventually, demand and sales experienced a stable improvement, but once again fell into a recess following the COVID-19 pandemic at the end of the Financial Year. Despite this backdrop, FoodBuzz invested in launching BreadTalkTM’s 10th outlet, located in one of Colombo’s most prominent and high-end retail property developments.

Our subsidiary United Motors Lanka PLC (UML) experienced the impact of policy measures as taxes hiked across several segments of vehicles. This, coupled with a growing cost of sales affected UML, resulting in a loss for the year. UML has however, achieved better market share and have continued diversification strategies with the introduction of a new Indonesian vehicle brand in 2019.

Financial OutcomesAs at 31 March 2020, R I L as a Group, recorded a turnover of LKR 11,236 Mn. in total, which when segregated demonstrates LKR 1,003 Mn. from R I L, LKR 9,846 Mn. from UML and LKR 413 Mn. from FoodBuzz. Group Gross Profit registered as LKR 3,193 Mn., out of which LKR 925 Mn. contributed by R I L, LKR 2,049 Mn. by UML and LKR 244 Mn. from FoodBuzz.

Group turnover decreased by approximately LKR 2.7 Bn. and as a result Net Profit after Tax also declined for the year under review.

After deducting tax liabilities, the Group recorded a Net Profit of LKR 388 Mn., contributed by a profit of LKR 1 Bn. by the Company. Meanwhile, UML and FoodBuzz both recorded net losses of approximately LKR 410 Mn. and LKR 59 Mn., respectively. R I L did not declare any interim dividend during the year.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Group Turnover Vs Net Profit After Tax (NPAT)LKR Mn.

11,236

Group TurnoverNet Profit After Tax (NPAT)

13,956

4,477

3,744

1,120

388

2019/20202017/2018 2018/2019

Prudent MeasuresOne crucial aspect that has elevated the confidence of our tenants in our capabilities is our proactive conformance with health guidelines of WHO and the Ministry of Health. By adhering to the requirements we managed to provide an uncompromised level of service to our tenants even amidst the period of lockdown.

Macroeconomic PrudenceI anticipate the economy to improve in the medium term, with accommodative policies and prudent strategies enabling

businesses to recover from the outcomes of disrupted trade and services due to the pandemic. With air travel and resumption of external trade, we can expect the service sector, which accounts for two thirds of our economy to gain some momentum, from the sluggish movements since the beginning of 2020.

Furthermore, with prudent strategies in attracting foreign direct investment into diverse industries, the country can be on par with our South Asian and South East Asian peers, especially by focusing on minimising the challenges for investors and foreign companies in establishing businesses in Sri Lanka.

Future DirectionGovernment policies and legislation plays a determining role in the progress of commerce and trade. With challenges that continuously shift the momentum of economic developments, policies and procedures must become adaptive and holistic, providing attractive benefits for local manufacturers and encouraging new ventures that have the most positive impacts on our economy.

We cannot expect such measures to be taken overnight. Given the global pandemic, which has countries and businesses still recovering from its affects, we are yet to see our industries pick up momentum. Real estate is facing the effects of the pandemic in the form of behavioural transformations such as working remotely with the use of collaborative business tools for employees.




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In moving along with changing times, we wish to maintain our footing along with global trends in Information and Communications Technology (ICT) infrastructure. Hence, we continue to seek trends and opportunities in global concepts such as Internet of Things (IoT) and technologies that enable the concept of ‘work from home’. Businesses have now been pushed towards the virtual and digital space with a declining use of commercial space for work and in such a context, we have to be smart and prudent by adopting competitive offerings that enhances the value our clients receive from our two commercial complexes. Eco-friendliness, space optimisation, green concepts across our properties and ethical conduct are all viable and necessary enhancements in maintaining our market share as well as in providing attractive reasons that will retain our existing clientele.

In addition, we plan on introducing co-working spaces, as it has the potential for growth – especially within the current context and shifts in consumer behaviour. With our core focus on increasing occupancy levels to 100% in both properties, we will be undertaking strategic marketing activities in the hope of increasing revenue and net profit. As a provider of high-end commercial property, we will continue to focus on upgrading our services and standards, staying ahead of competitive trends and international standards.

With plans of broadening our portfolio, R I L Property PLC will continue to pursue new investment opportunities that are feasible and prudent, based on the direction of the market for commercial spaces. We will also focus on developing

properties within our land bank, which are located within the Central Business District.

AppreciationsR I L has emerged stable and resilient than ever before as we continued to bear the full brunt of the challenges from the past year. Hence, I’m most grateful to the dedicated and experienced Board of Directors, who continues to effectively lead, with immense support for my role as Chairman.

I also extend a heartfelt appreciation to, Ms. Hiroshini Fernando who continues to be a strong leader for the Company and its stability amidst tough times. I am sincerely thankful to our most capable Senior Managements across R I L, UML and FoodBuzz for their professionalism, dedication and perseverance. I also thank the entire R I L team for doing their utmost in achieving corporate goals and for continuing to work as one team under the R I L banner.

In conclusion, I convey a vote of appreciation to our shareholders for their continued confidence and patronage that takes the Company towards its long-term vision.

S. G. WijesinhaChairman

03 September 2020Colombo


CEO’s Review

LKR 1,000 Mn.Company Profit

In testimony to strong tenant portfolio ties, our flagship property, PARKLAND, maintained sound occupancy of 96% across the period under review. Securing of a perfect 100% renewal rate for expiring agreements helped buffer portfolio metrics through the successful retention of our tenant base for a second lease term.

The year under review has been a challenging period for the country, its industries and its people. The spillover effects of the Easter Sunday Attack, the uncertainty in the run-up to the presidential election and external sector policies all continued to shape macroeconomic dynamics and sentiments.

The Easter Sunday Attack brought the country back to its days of vigilance, compelling authorities, citizens and institutions to adopt a proactive stance, ensuring that safety is embedded across day-to-day operations

Throughout the year, several policies were adopted by the Government in reducing the strain on the Balance of Payments and the exchange rate, in the hope of broader economic revival. In supporting economic activity, the Central Bank of Sri Lanka (CBSL) also maintained an accommodative monetary policy. In the weeks since our reporting period concluded, the world at large has been affected negatively by COVID-19. Locally, only a few sectors or businesses have been immune to the effects of the pandemic and related lockdown that followed.

It is not surprising that salutary effects of the aforesaid economic stances could not be fully exploited translating to subdued growth in the real economy as at December 2019. Pandemic

response and preparations to assimilate the ‘new normal’ operating environment became paramount for the economy at large. As of the date of publication of this Annual Report, the CBSL continues to maintain a decisive monetary policy aiming at liquid and stable markets through a low rate environment that supports recovery.

COVID-19 has changed Sri Lanka and will no doubt change the way we do business as a Group.

Over the coming months our agility will be pivotal in addressing future challenges and leveraging advantageous and emerging opportunities in our core businesses.

Operational and Financial Performance Despite the subdued growth of the economy and with the unprecedented incidents that took place, I am pleased to report that R I L Property PLC delivered a satisfactory operating result for the year, the details of which are outlined in this report and Financial Statements that follow.

In our core business, portfolio metrics were laudable with average occupancy rates across the PARKLAND portfolio at 94% and Weighted Average Lease Expiry on par with peers, maintained despite adversity.




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PARKLAND 1 continued to pay-off during the year, securing increased occupancy levels at nearly 88% catalyzing revenue.

In testimony to strong tenant portfolio ties, our flagship property, PARKLAND, maintained sound occupancy of 96% across the period under review. Securing of a perfect 100% renewal rate for expiring agreements helped buffer portfolio metrics through the successful retention of our tenant base for a second lease term. With this achievement we secured advances in rentals and security deposits thereby enabling us to maintain a healthy cash flow position.

At Company level, our revenue increased from LKR 762 Mn. to over LKR 1 Bn. in the year under review. This is an increase of 32% and is due to revenue generated from PARKLAND 1. As a result, Company Net Profit After Tax (NPAT) witnessed an increase of 24%, up from LKR 804 Mn. in 2018/19 to LKR 1,000 Mn. in 2019/20. Other income reported at LKR 197 Mn. reflects a growth of 118% as a result of dividend received from our investment in UML.

Negative external influences on subsidiary businesses resulted in a subdued top line growth and financial performance of the Group. Topline performance saw a relative decline of 19% in comparison to the previous period, with revenue at group level reported as LKR 11 Bn., declining from LKR 14 Bn. in 2018/19. Our subsidiary, UML contributed to Group revenue with LKR 9,846 Mn. of total revenue. FoodBuzz contributed marginally to revenue through LKR 413 Mn.

The Group NPAT was registered as LKR 388 Mn. in the year under review. During a grueling year, FoodBuzz’s net loss for the year was LKR 59 Mn. and UML accounted for LKR 410 Mn. net loss while R I L contributing LKR 1,000 Mn. in NPAT.

The Group finance costs increased as a result of short-term debt, while Company finance cost reduced due to repayment of long-term debt. R I L’s finance cost declined by 18%, alongside a 12% reduction in total debt. The Company’s total debt now stands at approximately LKR 2.9 Bn., part of a group-wide debt portfolio of LKR 9.1 Bn. At Company level, R I L maintains a robust level of gearing at 16%.

In the year under review, fair valuation gain in investment property was LKR 688 Mn. adding 4.4% to Net Asset Value. Within the cautionary valuation environment under COVID-19, this value contrasts with LKR 840 Mn. in the previous year.

Strategies for Growth and StabilityOur aspirations in the COVID-19 world can be reached insofar as we are agile and responsive. The Company will focus on select areas designed to direct our course beyond the pandemic in the short to medium term.

In the first instance, a key focus was business resilience by ensuring safe operations.

Putting people first, we proactively secured our buildings with sufficient safety precautions and preventive measures to the best of our ability, by investing in

new machines and equipment. We have also adhered to public health guidelines of WHO and the Ministry of Health, taking all precautionary measures to the best of our ability, to continue to remain safe from COVID-19.

As landlord, we have a responsibility to act in the benefit of the interconnected tenant and stakeholder ecosystem we operate in not merely from a financial but also from a people perspective. Our synergies are dependent on how well we mutually support interdependent parties.

Tenant stability is a significant component of strategy. As the effect of COVID-19 will be negative for the economy generally, we made advance preparations to strengthen our relationships with tenants and will continue to work closely with them as we look to resolve near-term income uncertainty. As the year drew to a close we proactively agreed upon assistance to tenants in need to counter the impact of the lockdown that had come into effect in the latter part of March 2020.

Competitive pricing channeled through flexible leasing plans and premium services are the key strategies adopted by us to attract and retain clients. It is noteworthy that since 2016, these strategies continued to receive commendation from our clients and continue to stand in favour when renewing lease agreements.

We intend to continue driving competitive advantage through our development strategy which in turn drives expansiveness and value-add of our real estate portfolio. The momentum of


CEO’s Review

expansion and development has been consistent across our key properties despite the temporary setbacks in the economy. We have done the groundwork to facilitate the addition of 10,000 sq.ft of developable rooftop space in PARKLAND 1. We believe the development of the additional space would be a value-add to the flagship complex enhancing facilities and services for our customers, expanding our revenue streams in the long term.

Through team driven initiatives, we developed a badminton court for the use of our team and tenants as a recreational facility, which enabled us and our corporate clientele to strike work-life balance within the premise.

In addition to driving business resilience via tenant stability and intensifying asset productivity, value-add through sustainability measures is woven in with strategy.

As a property developer, R I L has a significant responsibility towards ensuring that our properties conform to green principles and sustainability protocols during phases of design, construction and business operations, with adherence to international standards that affirms environmental responsiveness across PARKLAND and PARKLAND 1.

We have integrated numerous measures of ensuring environmental sustainability in our properties – including energy efficiency and conservation, waste management, rainwater harvesting, renewable energy production, contributions to clean purified air, in addition to training employees on using energy,

water and paper responsibly and mindfully. During the year, we installed hand dryers across all necessary areas, eliminating the need for a large volume of paper towels and tissues, contributing to saving approximately 12 trees each month.

Currently our renewable solar energy system produces 5% of our internal energy requirements, resulting in a cost saving of around LKR 3 Mn. per annum. The Company has projected a five-year period in recovering the cost of investment. In addition to these measures, we encourage our employees and tenants in avoiding any action that may negatively influence the environment, whilst in operation at our buildings.

Empowering our Strongest AssetOur success thus far is due to the capabilities of a multidimensional team of employees, whose talent, energy and experience brings on board immense value. In providing a more conducive and supportive work environment, we introduced a flexible work plan for our staff during the year, enabling them to work comfortably and manage work-life pressures.

As a team we are aware of the significance placed on gender diversity and fairness in the

workplace, and the gaining of traction particularly for women’s empowerment.

We promote a fair parental leave policy for both females and males. We introduced ‘Paternity Leave’, which now enables them to take time from work to bond with their new-borns and settle into their new role as a parent.

We continue to encourage our staff in pursuing career-building activities and in improving their competencies. As a result, we facilitate paid study leave for employees in addition to an increased budget for training and employee development.

Outlook of Strategic GrowthIn the ensuing operational year 2020/21, we will drive competitive advantage through targeted development, proactively responding to the shifts in the way people work, and enhancing services to promote smoother returns through the cycle.

We also intend to be consistently mindful of the continued relevance of measures in cost discipline to help mitigate the financial impact of the COVID-19 pandemic on the business. Key amongst these during the lockdown was the introduction of a comprehensive cost control programme, including

Beyond the real estate specific strategies, our investees warrant concentric action going forward, to elicit value.




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the suspension of all non-essential capital projects and close management of operating expenditure.

The resilience of our real estate assets can be strengthened through exploring new opportunities aligned with our competency in nurturing a high-performing culture and their esteem as unparalleled commercial spaces. We would also explore the potentiality in setting up co-working spaces in order to meet the demands arising out of the “New Norm”. After a transitory downturn, co-working spaces are a growing area of interest with strategy being redrawn to accommodate a heightened level of flexibility in working arrangements.

Beyond the real estate specific strategies, our investees warrant concentric action going forward, to elicit value. FoodBuzz will venture towards expanding retail presence through a selective strategy of optimising operational efficiencies. UML, will be pursuing a diverse mix of strategies, gearing towards increasing sales in our commercial vehicle portfolio, taking benefit from the expanding construction industry.

With a focus that goes beyond our customers, we take a holistic perspective in elevating relationships with all our stakeholders – across the Group. Our team continues to nurture these relations through better services while understanding the needs of our stakeholders for improving satisfaction, loyalty and commendation.

Above all, we will ensure that our Group and subsidiaries remain stable, capitalizing on

their strengths, realigning with vacillating trends and the ever changing economic, regulatory and political climate.

AppreciationFor their confidence in us and for the continued commitment in remaining with us, I convey a heartfelt appreciation to our clients. With the synergy of our services and your feedback, we will be transforming our properties as Sri Lanka’s prime commercial complexes.

I thank our Chairman, Mr. Wijesinha and the Board of Directors for their leadership, support and insights in making the right decisions. I am also grateful to the Senior Management and the team at R I L for the constant professionalism and dedication in ensuring that we maintain our standards of service, while supporting strategic objectives.

Thank you to our investors for their continued trust in us as a young company in transition, placing us in a position of strength to reach for greater aspirations.

L. K. A. H. FernandoChief Executive Officer/ Executive Director



Board of DirectorsS. G. WIJESINHAChairman / Independent Non-Executive Director

With a prolific and extensive career, Sunil G. Wijesinha holds over 40 years of substantial multi-sector experience in industry, commerce, consultancy, training and financial services. He has held numerous directorships on the boards of several leading blue chip companies and has also served as a high-profile management consultant.

With a multidisciplinary exposure to professional training and experience, he holds expertise in industrial and systems engineering, management and Corporate Governance.

He is also credited with pioneering several practices in productivity improvement and Japanese Management techniques, in Sri Lanka. A Chartered Engineer by profession, Sunil is also a Fellow member of the Chartered Institute of Management Accountants, UK. He also holds a Master of Business Administration from the University of Sri Jayewardenepura.

Most notably, he has led the Employees’ Trust Fund Board, Employers’ Federation of Ceylon and NDB Bank PLC as Chairman, in addition to heading the Merchant Bank of Sri Lanka PLC and Dankotuwa Porcelain PLC, as Managing Director. He also held the Presidency of the National Chamber of Commerce of Sri Lanka. At present, he currently chairs the boards of selected listed entities. Sunil was appointed to the R I L Board in March 2016 and is also the Chairman in BNRC and holds memberships in the BAC and the BRPTRC.

L. K. A. H. FERNANDOChief Executive Officer/ Executive Director

With extensive work in finance and management, Hiroshini Fernando accounts for over 20 years of experience – across a broad spectrum of commercial sectors. She began her professional life at Kreston MNS & Co.- Sri Lanka Division, a correspondent firm of Grant Thornton International and a leading global firm of Chartered Accountants. Her tenure at Kreston MNS & Co. established her core expertise in accounting, auditing and strategic finance – with wide exposure to the inner workings of each area.

Given her well-rounded experience, she continues to be a source of adept insights and extensive knowledge to the Company and the Board, especially in maintaining financial transparency and matters of governance.

Hiroshini is a Fellow member of the Institute of Chartered Accountants of Sri Lanka and a Member of the Institute of Certified Management Accountants of Sri Lanka. She was appointed to the Board in June 2009.

L. E. M. YASEENNon-Independent Non-Executive Director

A founding investor of the Company and member of the Board since inception, Lorraine Estelle Marlene Yaseen has been instrumental in commanding the Company’s flagship development - PARKLAND. Her profound leadership abilities and her insights were crucial in developing the property, taking it from concept to reality.

Also a strategic investor in public and private equity, she has over three decades of experience in investment management, while her entrepreneurial impact and strategic decisions have been experienced across diverse sectors including real estate, manufacturing, apparel and food and beverages.

She was involved in strategic transactions that have led to change of control. This demonstrates her expertise and capabilities in capital market strategy, governance and market regulatory requirements. Evidenced by her role in successful direct equity investment and ventures, her perspectives on a broad range of strategic approaches immensely benefits the Company and the Board.

She was appointed to the Board in June 2009. She is also a member of BRPTRC.




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L. W. D. ABEYARATHNENon-Independent Non-Executive Director

Counting for over four decades of proficiency in diverse fields, Dhammika Abeyarathne has gained considerable experience in the areas of finance, accounting, taxation and management consultancy in private and public sector organisations with diverse business interests.

Dhammika was appointed to the Board in June 2009 as an Executive Director and was re-appointed w.e.f. March 2019 as a Non-Executive Director, following his retirement from the Company. He is also a member of the BAC.

He is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka, Member of the Institute of Certified Management Accountants of Sri Lanka, Senior Member of the Association of Accounting Technicians of Sri Lanka and a Registered Company Secretary. He is also a Business Management Graduate from the University of Sri Jayewardenepura.

C. G. RANASINGHEIndependent Non-Executive Director

An Attorney-at-Law, Chiranga possesses extensive legal expertise, which spans across a career of over two decades. She commenced her professional life as an apprentice at Gunawardene & Ranasinghe Associates. She later joined F. J. & G. de Saram in 1995 as a Professional Assistant, gaining exposure in several disciplines of law including commercial law, banking and finance, real estate and investment projects, mergers and acquisitions.

She was appointed to the Board in September 2016 and holds memberships in the BAC, BNRC and is the Chairperson of the BRPTRC. At present, she heads the Corporate Law Chambers, an independent legal practice active across Business and Commercial Law, Banking and Finance, Land Laws and Conveyancing, Company Law and Company Secretarial Practice, Civil Litigation and Commercial Arbitration.

Chiranga holds a Diploma in Human Resources Management from the Institute of Personnel Management of Sri Lanka as well as a Master of Laws from the University of Colombo.

C. R. KARIYAWASAMIndependent Non-Executive Director

Chamali Kariyawasam counts over 17 years in a diverse spectrum including investment banking and capital markets.

Chamali’s formative experience comprised equity research, economic analysis and financial analysis in the local capital market and the U.K. energy sector. Over the years, she has held distinctive roles in financial institutions including DFCC Bank, Bank of Ceylon and NDB Investment Bank. Her investment banking experience includes strategically significant public and private offers, State-sector buy-side acquisition and strategic advisory across telecom, energy, real-estate and banking sectors.

As an independent consultant, Chamali has executed projects and tactical assignments for capital market participants, infrastructure operators and regulators including the Securities and Exchange Commission of Sri Lanka and the Colombo Stock Exchange with advisory-focus on capital market product design and risk analysis, post-trade infrastructure and capital market policy. She was appointed to the Board of R I L in November 2018 and is the Chairperson of the BAC and a member of the BRPTRC.

Chamali holds a Bachelor of Science (Combined Honours) in Mathematics, Economics and Management from Royal Holloway University of London and a Master of Science in Economics from University College London.


Board of Directors

PROFESSOR N. D. GUNAWARDENAIndependent Non-Executive Director

With over 25 years as a Project Management Consultant, Professor Niranjan Gunawardena has extensive experience in the construction industry, having been involved in a substantial number of construction projects.

At present, Professor Gunawardena serves as a consultant attached to the Project Management Unit of the Ministry of Home Affairs and is responsible for monitoring and managing large construction projects handled by all District Secretariats in the country. He was appointed to the Board of R I L Property PLC in November 2018 and holds membership within the BNRC.

He is a Chartered Engineer and a Corporate Member of the Institute of Engineers Sri Lanka, as well as a Fellow of the Institute of Project Managers, Sri Lanka (IPMSL). He obtained his BSc. in Engineering from the University of Moratuwa, MSc. in Construction Technology and a PhD in Project Management from Loughborough University of Technology, United Kingdom. At present, he acts as the President of IPMSL and the Dean of the Faculty of Business at the University of Moratuwa.

He has also served as the Head of the Department of Interdisciplinary Studies as well as the Deputy Vice Chancellor at the University of Moratuwa.

R. WEUDAGEDARACompany Secretary/Senior Manager – Human Resources Development

An Attorney-at-Law, Roshini is a Registered Company Secretary, Notary Public and Commissioner of Oaths. She also holds a Bachelor of Science in Biological Science from the University of Colombo.

Prior to joining R I L, Roshini has overseen Company Secretarial responsibilities of several listed and unlisted companies and has counselled clients on matters relevant to Exchange Control, Banking, BOI, Companies Act and Listing Rules.

In July 2019, the Company assigned its Human Resource Development functions under her purview. This is in addition to her key role as Company Secretary to both R I L and FoodBuzz (Private) Limited – extending her professional acumen in legal and regulatory matters.

BAC – Board Audit Committee;

BRPTRC – Board Related Party Transactions Review Committee;

BNRC – Board Nominations and Remuneration Committee;

MANAGEMENT REVIEW


R I L Property PLC

LKR 1,003 Mn. Revenue

LKR 1,560 Mn. EBIT

LKR 1,000 Mn. NPAT

OverviewDeveloped at the core of high-end commercial real estate in Colombo and in the midst of the city’s commercial bustle, PARKLAND and PARKLAND 1 continues to define high-end commercial real estate in Sri Lanka. Now iconic in their architecture and value, the PARKLAND office complex, consisting of PARKLAND, PARKLAND 1 and PARKLAND 2 offer advanced amenities to occupants and business owners. PARKLAND and PARKLAND 1 are

the most versatile and sophisticated office spaces in the heart of Colombo.

Review of Operations PARKLANDBuilt with 202,000 sq ft. of rentable space, the fully-fledged business complex has been designed with a striking architecture that has been spaced with both stately and modernistic elements – making it a property with a unique identity. Declared open in 2015, the 22-floor building offers 14 floors

of prime Grade ‘‘A’’ rentable office space for conglomerates, as well as multinational corporates.

The PARKLAND property was designed and constructed under international best practices in space optimisation with a higher level of flexibility for clients to personalise office spaces to match corporate identities.

PARKLAND 1Our portfolio’s second high-end commercial property, PARKLAND 1 was launched after a development phase of 14-months. Previously known as the READYWEAR building, the property was refurbished and launched in January 2019. Located adjacent to PARKLAND, the property was developed on funds raised partially through a listing on the stock market.

Comparatively smaller in space than its predecessor, PARKLAND 1 has a rentable square feet area of 68,000 spread across 6 floors with a further developable 10,000 sq.ft. of rooftop terrace.

Benchmarking international principles of space economy, the building provides solutions to corporate clients with smaller space requirements. Enabled with space optimisation and adaptability, its floors can be transformed to meet such space demands and utilised in an efficient manner.

Management Review




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FacilitiesIn offering complete convenience to companies and their employees, PARKLAND provides access to essential facilities and services that enhance the overall experience, while falling in line with international standards. It provides 8 floors that are dedicated for car-parking facilities with a total of 370 parking slots with a free parking slot for each 1,000 square feet area. In addition, the parking facility is handled by web based space management solution and guidance system that provides information on slot availability in each floor, in addition to automated vehicle parking solutions.

Occupants and guests also have access to five high-speed elevators with a carrying capacity of 21 passengers for each elevator as well as two service elevators which facilitate tenants with day to day requirements.

Additional facilities offered for the ease of tenants include central air-conditioning, which is provided free of charge during office hours.

Communication facilities including centralised PA systems, pre-installed voice, data and digital TV infrastructure powered through 24-core fibre optic connectivity are also in place.

Office spaces are also powered by two 1,500 KVA generators in the event of power disruptions and are commissioned to provide 100% power generation for minimum downtime and continued operations.

Clients can access the boardroom, conference room, training room and rooftop terrace. Additionally, there is also a 24-hour help line, storage, archiving facilities and value added services overseen and enabled by a well-trained and courteous staff.

Furthermore, safety of tenants remains a top priority, as we frequently enhance safety features through equipment evaluations, updating them to match requirements.

The safety and security of the building is overseen by a central command centre, which monitors the entire property 365 days and around the clock. The building

and the surrounding property are secured with advanced safety features including CCTV cameras fitted in common areas and elevators.

Value added services and key facilities offered by PARKLAND are also offered for tenants of PARKLAND 1, focusing on high standards in services and inclusivity of all conveniences.

Occupancy PARKLAND’s clientele is an exclusive list of high-profile corporates and occupants with interests in commanding business operations through the convenience and luxury of high-end commercial property. Since 2017, PARKLAND has experienced full occupancy levels with our clients now continuing on their 5th year in occupancy.

0

20

40

60

80

100

Occupancy Level%

PARKLAND PARKLAND 1

2017/2018 2018/2019 2019/2020

100 100

72

96

88

The list of clients include corporates from large conglomerates to multinationals operating in a wide range of industries engaged in providing services to both a local and global base of customers. Pricing structures of PARKLAND remain


competitive alongside a holistic offering of facilities and modern amenities developed under global design and functional standards.

PARKLAND experienced full occupancy rates in the two Financial Years prior to 2019/20; however, during the year under review, this level has decreased approximately by 4%.

PARKLAND 1 secured additional occupancy levels over the previous operational year. Occupancy rate was registered at 88% against 72% of occupancy in the previous year.

Targeting full occupancy levels, R I L continues to follow concentrated strategies in gaining new clients as well as in enhancing awareness amongst targeted market segments.

Safety SystemsSafety remains uncompromised across PARKLAND both on the internal and external fronts and R I L ensures that all safety protocols are followed to exact specifications. During the year, the annual fire drill was conducted in collaboration with the fire department and the Company’s safety team and client nominated fire wardens.

This was done in addition to other safety awareness initiatives, organised throughout the year. Patrolling was introduced as a tactical security measure for strengthening response capabilities and for detection of any security breaches or threats to safety of tenants. Based on the lessons learned through events such as the 2019 Easter Sunday Attack, R I L has now set in place strong measures to prevent security risks. Fixed walkthrough metal detectors and baggage scanners are now placed at entrances. Explosive detectors to check vehicles that enter the premise are also set in place.

Sessions were conducted by renowned safety experts on safety awareness as a concentrated effort to encourage an attitude of ‘safety first’ amongst employees. Clients were also invited in participating at these sessions.

In addition, fire extinguishers are tested and continuously refilled and testing of drinking water is conducted on regular intervals with the ITI certification obtained.

R I L Property PLC Management Review




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Conforming to health regulations as a result of COVID-19, relevant measures are carried out including body temperature checks of each tenant or guest visitor, at the entrance, in addition to availability of hand sanitisers at the entrance and on each floor. These are requested to be followed routinely – to ensure the safety of everyone.

Service EnhancementsGoing beyond the norm of being just a rentable space, PARKLAND has been outfitted with services and value enhancing amenities that has placed convenience at the core of our offering. Each year, R I L makes additional investments in increasing these conveniences and facilities. In 2019/20 a badminton court was developed to provide tenants with a recreational space that enables them to spend time away from work after a busy day.

Pest control services are facilitated to tenants through specialist service providers.

Business VerticalsOperating as a business vertical, the facilities management services of R I L Property PLC has leveraged the Company’s experience, expertise and resources in managing commercial property spaces by providing inclusive solutions. Four properties in Colombo are being managed through this vertical, in addition to the construction management project managed in CBD.

Green EnergyOur investment in solar energy, a measure that greatly reflects the principles of going green, has produced great cost savings in energy across PARKLAND, with 5% of its energy needs sourced through the roof top solar panels.

Tangible OpportunitiesDespite business who opt for residential properties which could double as office spaces, there remains a market segment that continues to invest on the convenience, the luxury and the prestige that comes with a Grade “A” commercial property. This is also coined with the on premise infrastructure and services that eliminates the hassle of obtaining such aspects separately; these include parking, security, premier location, storage and meeting facilities, all bundled as a complete package for tenants.

Location also plays a crucial role in promoting PARKLAND and PARKLAND 1, as Park Street, Colombo 02 is one of Colombo’s prime commercial and urban locales situated in close proximity to key trade and commercial operations.


Financial ReviewRevenue and ProfitRecording revenue of LKR 1,003 Mn. R I L’s Revenue for 2019/20 exceeded the previous year’s Revenue of LKR 762 Mn. by 32%. The increase in revenue can be attributed to the increased occupancy level from PARKLAND 1. Consequently, Net Profit of R I L Property PLC reached a value of LKR 1,000 Mn. up 24% from LKR 804 Mn. recorded in the previous year.

Revenue of R I L increased over the year due to inclusion of PARKLAND 1 to our portfolio and from the resulting increase in income due to the additional tenant base. This is also in addition to renewed and retained client agreements.

However, both revenue and profit values of the Group indicates a decline, with revenue being recorded as LKR 11.23 Bn. and Profit After Tax as LKR 388 Mn. – a decline of 19% and 65%, respectively.

The reduction in revenue was caused by decreased revenue from subsidiaries as a result of regulatory and external factors.

0

200

400

600

800

1,000

1,200

Profit After Tax LKR Mn.

2018/19 2019/20

Group R I L

804

1,120

1,000

388

Cost of Sales The increase in cost of sales can be attributed to the cost of services, including all other material, salary costs etc.. and maintenance agreements, which came in effect in mid-2019; cost of sales has increased for R I L by 12% to LKR 78 Mn. from LKR 69 Mn. in the previous financial period. Cost of sales Group-wide has decreased by 22% to LKR 8 Bn. from LKR 10.3 Bn.

Other Income and GainsIn the year under review, other income of R I L increased to LKR 197 Mn. from LKR 90 Mn. in 2018/19 indicating a 118% upsurge. These mainly consist of dividend received from UML, income derived from R I L’s facilities management services and other sundry income.

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100

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2018/19 2019/20

Group R I L

90

109

197

177





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Finance Income and Finance CostFinance income of R I L declined by 41% to LKR 43 Mn. from LKR 73 Mn. to the corresponding period of 2018/19. This was mainly due to the Company investing less amount in interest earning instruments, due to the early settlement of loan to achieve interest savings. Similarly, a decline of 37% in Group finance income also registered in the year under review, bringing the income down to LKR 80 Mn.

The Company was able to negotiate better rates for existing loan, therefore finance cost of R I L reduced by 18% to LKR 391 Mn. from LKR 479 Mn.

Fair Value Gain on Investment PropertyDuring the reviewing year, fair value on investment property appreciated from LKR 14,106 Mn. to LKR 14,894 Mn. The increase in fair value was LKR 788 Mn., which includes the fair value gain of LKR 688 Mn.

0

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6,000

8,000

10,000

12,000

14,000

16,000

18,000

Fair Value Gain on Investment Property LKR Mn.

Investment propertyFair value gain

2017/18 2018/19 2019/20

14,89414,106

12,398

688840

748

The increase in investment property is attributed to PARKLAND 1, which was added to the portfolio upon completion. However, the appreciation in fair value gain and the net impact to the profit or loss account has declined compared to the previous year.

Assets and LiabilitiesThe total asset base of R I L stood at LKR 20.3 Bn. in 2019/20, marked by an approximately 5% increase from a total asset value of LKR 19 Bn. reported in 2018/19. Total assets of the Group grew by 10% from LKR 33 Bn. in 2018/19 to LKR 37 Bn. in 2019/20.

Current liabilities of R I L reduced to approximately LKR 455 Mn. over LKR 475 Mn. in 2018/19. However, current liabilities of the Group increased by 37% to LKR 7 Bn. against LKR 5 Bn. from the previous financial period. This was mainly due to increase in interest bearing borrowings.

Net asset per share increased slightly for both Group and Company.

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2018/19 2019/202017/18

Group R I L

31,2

33

3

3,35

1

36,5

85

18,3

03

19,

403

2

0,30

8

Debt and EquityTotal debt level of R I L reduced by 12% in 2019/20 and reported as LKR 2.9 Bn. This was a result of decreases due to early settlement of existing loans. Group total debt has increased by 30% to LKR 9 Bn., over the previous financial term.

Group DebtGroup Equity

R I L DebtR I L Equity

0

5,000

10,000

15,000

20,000

25,000

Debt and Equity LKR Mn.

2018/19 2019/20

7,04

8

23,7

493,

295

14,9

10

9,14

4

23,4

61

2,88

915

,520

Total equity of the Group has decreased marginally, reported as LKR 23.4 Bn. and Company equity has increased to LKR 15.5 Bn. Debt to equity ratio was 52% and 19% for Group and Company, respectively which was 40% and 22% for Group and Company in 2018/19.


Prospects for the Future Having conquered a rather challenging time period during the 1st half of 2020, we are now optimistic about the future, as businesses have commenced operations with signs of improvement in the country’s economy. In light of recent developments, the market for commercial real estate industry still faces an unpredictable road in terms of growth. Yet, despite the changes and the stagnant environment, PARKLAND properties continues to operate in high capacity with no significant impact on revenue. We continue to keenly observe market conditions as well as on new regulations that may impact our operations.

As a commercial property owner, our objective, whether it’s the short or long term is in ensuring customer retention and acquiring new customers to fill vacant space. In achieving this we follow carefully planned measures through attractive rental rates and flexible rental terms, offered under customised payment schemes and terms based on tenant requirements.

In achieving maximum levels of client acquisition and retention, our focus is on maintaining consistently high standards of service and facilities that continue to enhance client experience at PARKLAND and PARKLAND 1.

Given the present climate of adjusting to health regulations and protocols that continue to shift and change due to the pandemic, we will continue to facilitate clients with necessary resources and actions. Based on requirements we will provide affordable and attainable solutions in proceeding under the circumstances.

In focusing on growth in the long term, R I L hopes to enhance market share and continue place the Company as a leader in commercial real estate in Grade ‘‘A’’ commercial property. In achieving this we will be taking strategic measures in expanding our existing portfolio. R I L is also keen on expanding our vertical in facilities management in order to create robust revenue growth.





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Sri Lankan Economic and Social ContextIn 2019, the Sri Lankan economy experienced a GDP growth of 2.3% with per capita income mounting to LKR 688,719. The subdued performance is partly attributed to the Easter Sunday Attack in April 2019, as per World Bank statistics. And according to Asian Development Bank (ADB) estimations, GDP is forecasted to be a negative 6.1% in 2020 with a positive surge of 4.1% expected by 2021.

(7)

(6)

(5)

(4)

(3)

(2)

(1)

01

2

3

4

5

GDP Growth Rate: Sri Lanka(% per year)

2018 2019 2020 forecast

2021forecast

3.2

2.3

4.1

(6.1)

Demonstrating progression of social conditions, Sri Lanka ranked at the 71st position on the Human Development Index having gained five positions. The index provides a demonstration of a country’s human development based on a three-dimensional evaluation - health, education and living standards.

In 2020, inflation is expected to fall around 5% with a moderate decline to 4.8% by 2021. However, economic progress remains subdued since commerce and

trade remains affected by the global pandemic and its impact, with the country continuing to recover from a complete lockdown and partial economic activity from March-May 2020.

Source:

Asian Development Outlook 2020 Supplement (Asian Development Bank)

Research Intelligence Unit (RIU)

Sri Lankan Real Estate Sector In recent years, the domestic market for commercial real estate has witnessed a steady upward momentum, with new property being developed to sustain further demand. The industry has experienced rapid expansions using the post-war economic resurgence and boom in demand into full use and is now moving towards becoming a formidable proponent in regional trade and commerce. With more international firms establishing their presence in Sri Lanka, the Government continues to secure investments for several infrastructure projects in developing greater Colombo and suburbs to reap long term economic and social progression.

The CBD has had tremendous attention from supply and demand continuums, propelling mega infrastructure development programs, which continue to stir demand for high-end commercial space, catering to businesses and occupants of foreign and domestic origin. Additionally, similar growth can be seen within major Suburban Business Districts (SBD) that surround greater Colombo.

The market for commercial real estate has seen a 30% share being clinched by Grade ‘‘A’’ offices translated to an area of 1.9 Mn. sq.ft of market space, which contributes to around 7 Mn. sq.ft in total commercial real estate and office space.

The biggest single ownership of commercial real estate continues to be clinched by the World Trade Centre with 625,000 sq.ft of space. This is followed by the Shangri-La office towers, which add another 530,000 sq.ft. The majority of Grade ‘‘A’’ commercial property has been developed in Colombo 01 and 02, with Colombo 01 housing over 1 Mn. sq.ft of space in 2020.

In 2019, occupancy levels remained high, capping above 90%, with demand for Grade ‘‘A’’ office spaces continuing to increase in a strong and consistent manner. And according to market data by RIU, this demand is expected to continue strongly in 2020. The market will be met with 7 new projects which are estimated to develop 1 Mn. sq.ft of high-end space. Out of these, JKH Cinnamon Life will be the largest, with an area of 264,100 sq.ft in Colombo 02. Meanwhile, lease rates have also converted towards US$ 2.5 - 4 per sq.ft. However, despite the said growth, demand can be said as lagging in relation to supply of commercial spaces in Colombo. This is a consequence of commercial space development projects being leased and not sold, when compared against the market for residential property, which yields immediate returns.

As the Sri Lankan Rupee continues to weaken with only sporadic and short-lived accelerations,

Global Real Estate Market UpdateManagement Review


rental rates have become attractive to occupants of high-end commercial property, of which most are multinational Corporations (MNC).

On another note, the market for undeveloped land has undergone a slow momentum in 2019 recording the lowest churn in transactions witnessed in recent years, despite a boom of 2-3 years prior to 2019. According to Research Intelligence Unit (RIU), this is perceived as a result of the slowest economic growth experienced in the last decade. Yet, this trend is expected to regain a slow but positive momentum according to indications for 2020.

Competitor Analysis Competitor profile Direct

competitorsSubstitute

competitorsPotential

competitors

(Large-scale suppliers of Grade

“A” Commercial Space within the

CBD)

(Grade “B” and “C”

Commercial Space in the

SBD)

(Suppliers offering alternatives to Grade “A” Commercial

Space in the CBD)

Rivalry between existing players H H H

Bargaining power of suppliers M M L

Bargaining power of customers H H H

Threat of new entrants M H H

H High M Moderate L Low

Post-Pandemic Global EconomyWith the COVID-19 global pandemic still rampant across the world, mounting data indicated further contraction in the global economy. However, economies across the globe are gradually reinstating commercial and trade related activities in phases, with China being the first to reopen alongside several European countries and US states.

Governments across the world have taken measures to ease the financial impact of the pandemic through stimulus packages and other concessions to businesses

by 23% than the corresponding first quarter in 2019 due to deals being postponed or cancelled.

Sector-wide, growth is expected to curb as corporates may adopt a more out-of-office work approach in contracting interactions between employees. However, the situation is still fresh to predict any long term outcomes, especially in the volume of space required by companies once the crisis dissipates.

Market Growth and TrendsIn 2019, investment in global commercial real estate escalated to its highest recorded figure of US$ 800 Bn., surpassing the record set in 2007. This is correlated with increasing interest from investors who continue to take advantage of the stability of commercial real estate as an asset and due to the solid returns it offers. According to JLL Research, the sector continues to be attractive in relation to other asset classes and allocated investments are expected to see a continued increase amidst valuations and toughening competition. In addition, public real estate has outperformed other categories of assets, on a global scale, as returns for private real estate remains stable.

The market in Asia Pacific experienced a record year of investments which reached a peak of US$ 169 Bn. With growth in the U.S. the Americas also experiencing upward momentum as volumes increased by 12% to US$ 347 Bn. Investment in Europe the Middle East and Africa (EMEA) dropped by 5% with weakened activity in the United Kingdom (UK) due to Brexit

and the public. Meanwhile several European countries have followed a more lax approach with less or no restrictions imposed. Despite the catastrophic impacts there is optimism that the global economy will recover during the 2nd half of 2020 amidst constraints, as the pandemic is not expected to dissipate for some time to come.

With lockdowns imposed across the world, corporates have been compelled to operate in a volatile environment with more opting to work remotely. This has added to delayed decision making while also causing uncertainty in the sector. Consequently, global leasing volumes have decreased

Global Real Estate Market UpdateManagement Review




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as well as from challenges across the retail sector, region-wide.

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Market Growth and TrendsBn. USD

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Within the context of political uncertainty and a gradually declining global economy, investors opted for destinations such as New York, Paris and Tokyo. Nevertheless, London is the second-largest destination, and despite a 41% drop in investment due to political uncertainty the trend is expected to rebound in 2020.

Other developments seen in FY 2019 included volumes across Americas which rose by 12% against 2018 at US$ 347 Bn. Germany and France witnessed their strongest year on record, with Berlin seeing a record foreign investment of US$ 7.2 Bn. Paris received the largest of global foreign capital, while U.S. investors were the most active in cross-border buying. Asia Pacific (APAC) surpassed another record high with 6% growth to US$ 169 Bn. as Japan, South Korea, China and Singapore contributed the growth; however, political turmoil plunged the Hong-Kong market by 53%.

In addition, demand continues to be strong with investments for 2020 expected to moderate from 0-5% to US$ 780 Bn., driven by caution and availability.

Investment MomentumIn tandem with the slowing global economy, the real estate market experienced a similar contraction in its activities, especially in relation to investment and leasing, which proceeded moderately. Year-to-date transaction volumes of 2019 totaled US$ 550 Bn., increasing by 1% compared to the corresponding period. During the third quarter of 2019, transaction volumes experienced a slight upward trend by 13% reaching US$ 205 Bn. Amidst rampant market volatility and a growing unease, direct investment in first quarter of 2020 declined by 5% to US$ 200 Bn.

Investors continue to see prospects in the sector but are expected to proceed with caution which may result in marginally lower progress. Demands for office leasing are expected to also detract when compared with 2019’s record total. Supply is anticipated to peak in 2020 which will also increase vacancy ratios.

Increasing competition has encouraged investors to pursue investments that will minimise risks and enable access to market through new strategies such as recapitalisations, secondaries and joint-ventures. As per JLL, investors are also moving more towards locations that have the ability to withstand economic adversities and geo-political tensions.

Moving outside of established cities, investors are also focusing on mid-sized cities with higher

growth potentials in corporate expansions for investors. With interests in enterprising being pursued outside of globally established cities, investors are factoring in innovation and talent in such geographies with the potential for expansions in adopting resilience to future changes.

Global Leasing Volumes and Rental GrowthGlobal leasing volumes retracted to 10.3 Mn. sq.m., despite healthy leasing activity in the third quarter of 2019. Given the downward momentum in Asia Pacific, movement in leasing volumes was recorded 4% lower than last year. This trend resulted in a 5% reduction of volumes at the end of 2019 with further decline by 10% expected in 2020. Nevertheless, growth in global rental volumes is also supported by strong leasing demand in the logistics sector.

Growth in Prime Office rentals across 30 key global markets has declined slightly to 3.7% during the third quarter of 2019 and is expected to moderate to around 1.5% as supply is expected to increase in 2020. Singapore, New York and Boston were forecasted as top rental gainers in 2019.

Vacancy rates across the globe dropped down to 10.6% in the third quarter of 2019, reaching what is projected as the lowest. In 2019, new offices are expected to be around 17.5 Mn. square meters, peaking at 18.8 Mn. square meters by 2020. With new completions increasing across global markets, the global vacancy rate is projected to rise to 11.2% and 11.7% at the end of 2019 and 2020, respectively.


LKR 9,846 Mn. Revenue

OverviewCelebrating its 75th anniversary in 2020, United Motors Lanka PLC (UML), continues to retain a higher-ranking position within a rapidly saturating industry, while outperforming many. Incorporated in 1945, UML has an uncontested reputation in providing top-ranking vehicles, and in operating a wide range of global automobile brands and vehicle categories. Through years of strategic opportunities, the Company continues to reserve a leading stake in key segments within the broader markets for passenger and commercial vehicles.

In 2007, after 35 years as a state-owned entity UML was

re-registered as a public limited liability company, broadening its stakes within the country’s public market-space. Since this strategic transformation, the Company has become a forerunner in developing the country’s automobile sector, ranked amongst the leading positions of listed companies in Sri Lanka.

Presently, UML has established a widespread presence across the island with branches in Colombo, Anuradhapura, Kandy, Kurunegala, Matara, Nugegoda, Nuwara Eliya, Ratnapura and Jaffna – in addition to the head office in Hyde Park, Colombo.

Review of OperationsOperational Environment The year under review was intensely challenging, as tax hikes, the Easter Sunday Attack, a waning economy and political uncertainty contributed towards a less than desired performance. The industry also faced an atmosphere of uncertainty that prevailed at the end of the Financial Year due to the COVID-19 pandemic.

Duties which were revised on several occasions, raising the per unit rate charged on engine capacities – made some of UML’s more high-valued and more dominant products expensive, with the Company opting out of importing such vehicle segments. In addition, with Euro 4 standards being enforced, sales of commercial vehicles dropped during the first half of the year – as vehicles that were manufactured prior to the directive failed to conform to the new regulation.

In 2019, vehicle registration trends displayed a declining effect with certain months over-performing others, but with relatively poor performance in comparison to the corresponding months from 2018. According to reports, in November, registrations reached its lowest since June of 2013. This decline can be linked with the tax hikes introduced by the 2019 budget for vehicles with an engine capacity of 1000cc and above, in addition to a luxury tax on luxury vehicles. Additionally, a depreciating rupee added to the woes of automobile importers

United Motors Lanka PLCManagement Review




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and car buyers, increasing prices even further. And as a culmination of these developments, the new vehicle industry declined by 45% over the previous year leading to a significant drop in revenue.

Increased Momentum Yet despite this environment, UML’s efforts in increasing market share experienced fruition. UML’s market share of the under 1000cc passenger car segment increased by 30% - the largest sector in the overall market, shared by 15 international players. Market share for Sport Utility Vehicles’ (SUV) grew by 12-19% and double cabs also soared by 29%. However, due to the relative size of the market shares, they were insufficient to meet profitability.

In, 2019, UML introduced the Indonesian 580 SUV, which is now experiencing a market value of LKR 6.2 Mn. Assembled at the Company owned plant, the world-class SUV model underwent certain challenges but has now grown in popularity and momentum – allowing UML to take pride in its venture.

Performance of the Company’s construction equipment and generator segment demonstrated exceptionally with 300% increase in volumes, despite a reduction in size of the market share as a result of poor macroeconomic impact on the construction industry.

During the year, several endeavours were conducted in enhancing brand reputation and product awareness. Trade-in promotions were conducted in Colombo and suburbs in obtaining further exposure for selected vehicle brands and models. UML also conducted the first ever

night-time trade-in program at its Nugegoda branch. A free vehicle check-up was conducted with the objective of promoting the Mitsubishi range of vehicles on trade-in facilities.

Showcases were organised in selected, high-walk in locations including events for Xpander, Eclipse, L200 and other vehicles of Mitsubishi, Perodua, DFSK and Brilliance.

UML also participated in motor shows and trade exhibitions, showcasing selected range of products including Mitsubishi vehicles, vehicles of UML Heavy Equipment Limited and Unimo Enterprises Limited.

In a special feat, UML won the Gold Award for the 12th consecutive year, for its Annual Report in the “Automobile Category”, at the Best Annual Report Awards conducted by CA Sri Lanka.

Financial StatusWith the impact of several inhibitory factors, financial performance of the UML Group was relatively lower than the previous year. Revenue dropped to LKR 9.9 Bn. from LKR 12.8 Bn. in the previous year marking a 23% decline. And recording a loss making Financial Year Net Loss (after tax) of the UML Group was reported at LKR 410 Mn. for the year under review.

Company (UML) revenue for the year under review declined by 29% from LKR 8 Bn. in the previous year to LKR 5.7 Bn. in 2019/20. This has impacted net profit as Company PAT dropped to LKR 117 Mn. from LKR 730 Mn. in the previous Financial Year. The subdued growth in revenue was a direct result of increased duty prices and the effects of a depreciated rupee, which continued to change prices of multiple categories of vehicles.


0

3

6

9

12

15

UML Group Vs UML Company TurnoverLKR Bn.

2017/18 2018/19 2019/20

UML Group TurnoverUML Company Turnover

15

98

6

13

10

2017/18 2018/19 2019/20

UML Group Net ProfitUML Company Net Profit

(600)

(300)

0

300

600

900

1,200

1,500

UML Group Net Profit VsUML Company Net ProfitLKR Mn.

(410)

117

730

1,457

436

669

In addition, the Company also sees more potential in the field of 3D printing as the Company represents some of the best international brands in the modern technological marvel. The team handling 3D operations continues to sell printers to clients from different industries, while manufacturing components using the Company’s printers. In addition, UML’s 3D printing arm also holds an educational certificate program to educate students and business owners on the prospects of 3D technology and its usage. And based on an increasing demand, UML projects the operation to be profit bearing in the succeeding Financial Year.

The Service AdvantageTaking advantage of its retail presence and resource capabilities, UML has now established a strong after sales service for its customers that has become a key strength in a competitive environment. In an industry that is experiencing curbed importations, tax considerations and rupee depreciation, UML’s after sales services have become a key contributor to growth in sales and revenue.

UML has now assigned a staff of 1000 to 80 teams, with each team being led by a service leader/champion who oversees highest standards in customer service. Team performances are evaluated regularly, with an overall score of 90% reported for the year under review. With this success, UML continues to adopt best practices in services, implementing them in line with objectives.

United Motors Lanka PLCManagement Review

Current assets of the UML Group stood at LKR 11 Bn. and Current liabilities were reported as LKR 6 Bn. in the year under review, while current assets and liabilities of the Company were recorded as LKR 7 Bn. and LKR 3 Bn., respectively.

Due to reduction in sales, the cost of sales have declined across both UML Group by LKR 2 Bn. and UML Company by LKR 1.8 Bn. during the year.

During the Financial Year under review, the Group invested on several areas, in developing aspects that support business growth. Training and development, promotional activities, IT systems and infrastructure and CSR activities were such aspects where investments were incurred. Total assets of the UML Group stood at LKR 20 Bn., up by 12% over the previous year, of which LKR 18 Bn. is attributed to UML, which grew by 16%, in the year under review.

Thriving OpportunitiesInitiated with an investment of LKR 226 Mn. in commissioning roof top solar panels, UML’s venture into the renewable energy sector (to supply 2MGW of solar power to the national grid) has now met its intended expectations, operating in full capacity. Given the promising potentials of the venture, we hope to further pursue similar ventures. The investment was based on a long-term agreement with the Ministry of Power and Renewable Energy, which resulted in installing roof top solar panels at the Company’s workshop facilities.

UML is focused on creating efficiencies enhanced by adopting new technological transformations. In 2019/20, UML implemented SAP as their ERP system – enabling the Company with real-time information sharing that now supports with accurate decision-making.




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An Expanding PresenceUML’s branches not only provide buyers a wide selection in vehicles but also provide genuine spare parts and accessories. The branches also provide repair and maintenance services through their workshop facilities to its multitude of customers. Besides its growing retail presence, UML also claims one of the biggest networks of dealers for tyres, spare parts and lubricants.

Presently, UML has a branch network of 8 company-run branches alongside 30 dealers, dedicated for vehicle sales contributing to an increasing market share.

UML also holds ownership of two main workshops situated on a 7-acre property in Orugodawaththa and on a 10-acre property in Ratmalana, with a capacity to service and repair over 120,000 vehicles each year.

The portfolio of the Company is consistent in its growth, adding new segments every year, having identified segments that carry greater potential for profitability. UML is now the local representative of several leading global passenger and commercial automotive brands including Mitsubishi, Daimler FUSO, Perodua, Zotye, Bezza, JMC, DFSK – covering a gamut of cars, trucks, vans and buses besides construction equipment such as Liugong and JCB.

Future Outlook Optimistically driven, UML plans to expedite several strategies that will provide the Company a sustainable future despite the shifting regulatory landscape that impacts the growth of its core business. After sales service and dealer based revenue streams is expected to stir momentum for UML, until controls on imports are eased.

UML is expected to launch the latest models of Perodua in the succeeding Financial Year – ending a five-year lapse in new vehicles from the Indonesian Manufacturer. This is a respite to customers of the brand who has been eagerly anticipating its arrival, which also creates optimism for UML in increasing sales. This launch will also be joined by the launch of the new Mitsubishi Xpander model, also expected to create a buzz within the market.

UML has also taken proactive measures in maintaining awareness – in the hope of creating top of the mind recall in customers, benefiting the Company as and when the market revives after the present situation. UML remains optimistic in the new 580 SUV and in other vehicle segments, which are expected resume with increased gains.

As the COVID-19 pandemic is expected to continue its impact on all industries, another challenging year is anticipated. Therefore, the UML Group will be following a model of reduced finance

and operating costs by selling inventory, and are also focusing on increasing revenue from after sales and vehicle assembly, which faces no restrictions.

Amidst expected challenges, UML will be improving operations and processes to be leaner and more efficient in adapting to the new normal, with a readiness to provide enhanced services to customers, while increasing market share and a lower cost base.


LKR 413 Mn. Revenue

OverviewIntroducing a new culture of baked goods and delicacies in Sri Lanka, BreadTalkTM – the Singapore based franchise, entered the domestic market in 2012, attracting customers with a distinct palate for its world-renowned baked delicacies. FoodBuzz (Private) Limited, established in 2011 is the sole custodian of franchise rights for BreadTalkTM in Sri Lanka and in 2015 became part of R I L, creating a formidable presence within the local bakery food industry, competing against chains with decades of market dominance.

FoodBuzz has now set standards of international stature in operating the franchise, creating a loyal market following that continue to grow, with favourable prospects in expanding our footprint and in diversifying our product range. With a retail presence of 10 outlets that follows a model of

self-service, BreadTalkTM offers a signature range of baked goods including cakes, pastries, artisan breads, gourmet desserts and seasonal baked products made unmatched in taste, appearance and quality.

Taking bold steps in experimenting and researching on trend-setting new flavours and recipes, BreadTalkTM continues to introduce new products on a quarterly basis. Bursting with flavours and with influences from around the world, the chain continues to introduce new delicious goodies, tapping into consumer needs as demand for convenience and processed foods continues to grow in tandem with the changing lifestyles and preferences of the more urbanised populations of Sri Lanka.

Operational Review In 2020, despite an uncertain macro-environment, FoodBuzz achieved accelerated momentum

in operations, recording developments across the year.

The year presented some unprecedented challenges in the form of economic and political uncertainty, alongside the devastating Easter Sunday Attack, which had a direct impact on business. The Company felt the impact of the attacks, as tension and uncertainty mounted in and around city limits, as 90% of our locations are in and around Colombo.

However, sales volumes picked-up momentum in June 2019, meeting projections as the year progressed. Another dip in sales was experienced in the run-up to the Presidential elections in November and sometime afterwards. As the seasonal buzz approached in December 2019, business once again reversed its trajectory as sales increased.

The operational and Financial Year closed with March being impacted by the temporary closure of operations as a nationwide curfew was imposed on 20 March 2020 due to the COVID-19 pandemic. As the country went under indefinite lockdown, we initiated a delivery service – maintaining sales with our corporate clients and general customers.

During the year, keeping in line with our recurring strategies in brand building, BreadTalkTM also expedited several initiatives in strengthening brand presence and customer recall through outdoor promotions, food promotions such as ‘Cake of the Month’ and

FoodBuzz (Private) LimitedManagement Review




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thermometers, sanitiser products and gloves as well as masks has now become common practice across all our outlets and main office.

Financial ReviewWith business impacted by the Easter Sunday Attack and the COVID-19 pandemic, revenue for the year declined by 7%, reporting a value of LKR 413 Mn. There was a 10% acceleration in the Gross Profit margin by LKR 23 Mn., and reported as LKR 244 Mn. in the reviewing year.

Consequently, the decline in revenue, adoption of SLFRS 16 as well as increase in administration cost resulted in a loss of LKR 59 Mn. for the year 2019/20.

0

300

600

900

1,200

1,500

Revenue Vs Gross ProfitLKR Mn.

2017/18 2018/19 2019/20

Revenue Gross Profit

402

233

221

244

445

413

Cash inflow was also impacted by the reduction in sales, recording a significant drop in comparison to 2018/19. Current assets dropped by 27% while current liabilities have increased 42% with the recognition of lease liability under new Accounting Standard of SLFRS 16.

FoodBuzz maintained a current asset ratio of 2.6 and a quick asset ratio of 1.71 - demonstrating the Company’s ability to remain solvent in the immediate term. Total assets grew by 29% in comparison to the last Financial Year.

cross-selling promotions for a rounded offering of products. In addition, business streams have diversified through partnerships with app-based delivery service providers, enabling us to tap into a growing client base that prefers convenience.

Furthermore, in enhancing efficiency across our outlets as well as in enhancing productivity, new staffing models were introduced according to demand patterns, decreasing additional labour, as well as further reduction of food waste.

During the year, our 10th outlet was opened at the One Galle Face mall – expanding our presence further in the heart of Colombo. In addition, refurbishments were conducted at our Colombo 05 outlet. And in light of the prevailing situation we forecast a slow progress in expanding our retail footprint.

Health and Safety Health and Safety across our outlets is maintained with strict adherence to standards, and is continuously monitored on a regular basis. Within the year, safety reviews were conducted to ensure conformance to ISO-GMP safety standards, fire safety, health standards and first-aid responses.

Beginning from March 2020, we have enforced strict adherence to safety measures including customer-staff social distancing and on-premise sanitisation and other protective measures when preparing, handling and serving food and beverages. This is apart from our existing measures in upholding ISO standards and mandatory safety and hygiene protocols. The use of


0

50

100

150

200

250

Current Assets VsCurrent LiabilitiesLKR Mn.

2018/19 2019/20

Current Assets Current Liabilities

149

41

58

206

Cost of sales declined by 25% to LKR 169 Mn. against LKR 224 Mn. reported in 2018/19; this was a result of stock adjustment for the previous year.

PPE grew marginally by 7% alongside a 166% increase in new investments compared to 2018/19, and as a result, the newly launched store at One Galle Face sparked a hike of 140% in investments to LKR 12 Mn. over the previous year. Significantly, investments in Information and Communication Technology (ICT) and systems amounted LKR 10 Mn. over LKR 1 Mn. in 2018/19. And, investments in marketing-based activities declined by 33% to LKR 2 Mn., in the year under concern.

0

2

4

6

8

10

12

Investment in SegmentsLKR Mn.

2018/19

1

10

5

12

3

2

2019/20

Investments in Technology

Investment in Refurbishments

Investment in Marketing

Corporate CitizenshipAs a Company that relies heavily on the dedicated work of our employees, we have taken conscious efforts in enriching our workforce with a diverse team that comes from across Sri Lanka. We encourage recruits from other districts through long distance work practices that facilitate them with the necessary means in balancing their long distance travel and social priorities.

Furthermore, in reducing the impact from our work on the environment, we continue to reduce and control our use of energy and water, alongside other eco-friendly methods such as waste management and recycling, emission checks and use of biodegradable packing material.

We use food-grade material in production, storage and delivery. Waste is separated and disposed as per ISO standards with improved garbage storage

that has minimal impact on the environment, without any danger to health and safety protocols in and around outlets. We also train our outlet staff in conserving electricity and water – as part of responsible citizenship.

Digitally Enabled GrowthSocial media is one of our more moderately invested platforms in creating brand awareness and in maintaining continued relations with our more loyal customer following. Moving forward, we plan on retaining and increasing our customer base on Facebook to over 100,000 from the current 75,000. Digital and social media based platforms will be pursued in strengthening the resonance of the brand BreadTalkTM, and in ultimately becoming a household name.

Exploring the growing possibilities through technological innovations, FoodBuzz will be investing in the development of a mobile app scheduled to begin in 2021 and aimed at creating a stream of sales and new clientele – who constantly seeks a highly convenient form of lifestyle. Additionally, an investment on a POS system has been rescheduled for 2020/21.

Baked VersatilitiesThe baked goods industry is one that evolves dynamically, churning new innovations and options using a variety of base flavours - from cakes, pastries, gourmet and quick breads, desserts and an endless array of others. The market continues to grow with alternative innovations such as gluten-free, vegan-friendly

FoodBuzz (Private) LimitedManagement Review




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options, made from ingredients such as nuts and other plant based flours creating fresher avenues of exploration for the chain. Although such products belong to a niche segment, we will be focusing more on options that will address the demands of all diverse segments, as well as the more generalised market.

We continue to diversify our offering through more distinct and more adventurous flavours, with innovations that will delight customers of all ages – while maximising growth and realising untapped potentials within the market for bakery products. All in all, quality remains a primary focus, as we evaluate the standards of our products offering the best to our customers.

Focus for the FutureWith present times requiring more pragmatic strategies that reflect the current global and local environments, we are diverting our attention to a research-based approach in identifying future trends and market

directions. Nevertheless, one of our immediate focuses rests on increasing footfall to outlets by enhancing conveniences for customers and introducing a wide base of products that elevates local flavours as well as introducing more innovative products with influences from across the globe.

We expect to enhance the overall experience that customers receive upon entering any of our outlets and in doing so we continue to research on customer preferences, in taste and services as well as concerns on pricing, packaging, convenience and ambience.

In balancing the scales of pricing and profit, we hope to focus on the country’s deflationary movements – ensuring that our pricing strategies remain resilient to both inflationary and deflationary movements.

Further, we plan to diversify products, expanding our revenue streams and product offering with new items such as packed dry ingredients and sweets. A food truck venture will also be initiated

alongside plans to operate outlets of 300 sq.ft. in identified locations with higher footfall.

Importantly, we hope to bank on our existing strengths of unmatched R&D capabilities, strong financial backing, and skilled workforce and through the prominence of our global brand name and range of unique, artisan products.

We have also identified areas which require further improvement; one being creating products that have local influences and increasing our marketing activities, reducing our cost of production in addition to maintaining higher staff retention rates through an inclusive HR policy.

While competition, political uncertainty, economic slowdowns, increasing raw material prices and changing regulations will continue to impact, challenge and reshape our business, we will continue to build strategies around our core strengths in becoming a widespread brand name – which will gain market prominence for years to come.


Green Buildings

Human Capital

Lean Resource Management

Corporate Citizenship

As strategic thinkers, the leadership team of R I L understands well that long-term success is indubitably coined with sustainability initiatives. And as an effect of this belief R I L has evaluated our impact on the environment, society and stakeholders in every conceivable perspective. What this implies is that as a business, we don’t just believe in surviving in the short term, but also in sustaining the interests of the Company and its stakeholders for years to come.

This onward thinking is also a result of expectations that are placed on us by our stakeholders including our customers, the society, state and regulatory bodies and our shareholders. Each stakeholder expects us to not only be transparent in our operations, but to also minimise our impact on the society and the environment and to share our success with the society’s most vulnerable, from time to time.

With our core business as a property developer, we also have an obligatory calling to ensure that what we develop conforms to local and international regulations and

are developed within the required legal guidelines, that ensure the safety of the environment, the communities that are directly impacted by our operations and most importantly the safety and wellbeing of our tenants and employees.

Since inception, R I L has integrated its sustainability initiatives across corporate operations; whether it’s ensuring eco-friendliness of our construction process or ensuring the health and safety for our employees, we have incorporated

sustainable thinking across every aspect of our business.

Sustainability is embedded into our business model and adopted across the Group, through the following aspects. Policies and procedures govern their continuance and are ensured through periodical reviews and assessments. Across each of these areas, R I L has established sustainability goals with responsibility resting amongst all employees and overseen by the Senior Management.

Sustainability Report

As strategic thinkers, the leadership team of R I L understands well that long-term success is indubitably coined with sustainability initiatives. And as an effect of this belief R I L has evaluated our impact on the environment, society and stakeholders in every conceivable perspective.

Creating Sustainable Value




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Green BuildingsTaking a proactive stance to minimising any negative impact on the environment, we have designed and constructed to align with the “green building” concept, where we have thoughtfully and prudently integrated sustainability measures to the buildings across construction, refurbishment and post-development phases.

We take an active approach to addressing sustainability concerns before each development begins, reassessing their alignment with objectives before tenants occupy our commercial spaces.

In creating the ideal ‘green’ buildings, we aim to maximise opportunities in delivering positive environmental improvements our buildings can have on the climate and the environment that surrounds them.

In developing sustainable buildings we have focused on several core aspects;

• Adopting new sustainability principles and conforming to mandated regulations of environmental bodies and regulatory institutions

• Use of renewable energy (solar power)

• Mindful use of resources such as energy, water and paper

• Buildings designed to adapt to climate change

• Ensuring the use of non-toxic material

• Waste Management including re-cycling of plastics

• Indoor air quality improvement

• Reduction of carbon and plastic footprint from activities

pertaining to construction and corporate operations

• Eliminating any negative impacts from construction and operations

• Improving quality of life for tenants, employees and those living in the surroundings.

Based on the above, we design, build and maintain our buildings in line with the following principles:

• Conform to requirements of environmental legislation, including those from the Urban Development Authority and Municipal Council.

• Engage with ICTAD certified Grade C-1 Contractors who, ensure adherence to specified environmental parameters.

• Design buildings and relevant spaces for flexibility to allow ease of changes to use in the future.

• Incorporate passive design elements such as orientation, glazing, insulation and natural ventilation.

• We have minimised the thermal impact on internal temperatures of the buildings and have reduced the need for extensive cooling, which in turn has reduced the need for excess consumption of electricity by air conditioners. This is primarily due to an inbuilt gap of 150 mm as per the ‘double wall’ concept adopted across the external walls of PARKLAND.

• We have invested in double-glazed, bronze body tinted float glass and solar control coating on window glasses, which provide natural light to the buildings, while safeguarding against excessive solar radiation.

• Designing buildings that are resilient for climate change impacts from temperature and rainfall.

• Minimise waste both during construction and during occupation of buildings through a Site Waste Management Plan. Additionally, all buildings have appropriate waste storage/ collection facilities for day-to-day use.

• Minimise energy consumed in operation and transport of construction materials.

• Incorporate energy efficient solutions in design, including passive systems using natural light, air movements, as well as solutions involving energy produced from renewable sources. Both buildings are fitted with LED lighting, while PARKLAND 1 has a roof solar panel system, with the capacity to generate upto 5% of the existing electricity requirement of the complex.

• We have introduced measures for conserving water in buildings and within the immediate external environment. In all applicable places of both buildings we have installed sensor taps and eco-flush systems in order to reduce water usage.

• In addition, a rainwater harvesting system has been implemented in PARKLAND.

• We evaluate emissions and releases that may pollute the environment from our construction and refurbishment activities and we ban the use of hazardous substances where appropriate.

• In ensuring clean purified air inside our buildings, we have installed CO2 sensors with a “Demand Control Ventilation System”.


Sustainability Report Creating Sustainable Value• Based on practicality/

functionality we use recycled and/or environmentally friendly materials that are approved by relevant authorities, where ever possible.

• During the construction phase we look for opportunities to improve the landscaping of buildings.

• We invest in equipment that will facilitate the achievement of key performance indicators for sustainability, such as energy, water usage and waste management.

• Provide regular training to staff and customers to raise awareness on contemporary sustainability practices.

Lean Resource Management (LRM)Over the years, our adoption of lean management principles has enabled R I L to add value to what we offer to our clients, to our workforce, the society and the natural environment.

At every possible juncture we have integrated these principles to our operational procedures aimed at increasing efficiency

of our people and processes by eliminating unnecessary usage of resources and minimising any wasteful usage of resources such as energy, water and paper.

In essence, we follow a continuous rhythm of maintaining these principles by embedding them in our everyday operations, in order to:

1. Eliminate over-consumption and wastefulness.

2. Continuously improve our approaches, adding and modifying such principles, on a regular basis.

3. Thereby, delivering value to our stakeholders by positively impacting the bottom-line.

Much like the principles of green and sustainable buildings, LRM too is incorporated with our business model and remains rooted across our operations and the LRM agenda, which is devised around a three-pronged approach. They are:

• Conserving Electricity

• Water Saving

• Managing Paper Consumption

Policies and Procedures in LRMOur employees, the drivers and enablers of our policies and procedures in LRM engage in its agenda, expending time and effort in adopting and improving principles of lean management across processes. These policies have now become regular practice, fallen into place as habits rather than obligatory procedures.

Conserving Electricity• Staff at all levels switch-off

unnecessary lighting that are in use during day time and are requested to switch off lighting of their respective cabins/work station when they leave the premises at the end of each day.

• Limit energy consumption by ensuring that computers and printers are switched off by the end of each day and left on standby mode when not in use.

Water Saving• Cleaning activities are carried

out according to a strictly followed schedule.

• Use of rainwater for gardening, landscaping purposes and carpark cleaning.

Managing Paper Consumption• Set default printing to double

sided (duplex).

• Coloured print outs are taken only on an absolute need basis.

• Encourage staff to use print preview functions for checking layout and style before printing.

• Encourage staff to plan and print in batches where possible.

• C o n s e r vi n

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ater Saving • M

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Pa

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• Printouts are taken only on an absolute need basis.

• Access to photocopier is monitored through a pass code mechanism which helps to monitor usage.

Notable Measures of Sustainability (2019/20)During the year under review, R I L initiated several new measures in further ensuring that we contribute to conserving resources and managing use of resources wisely, responsibly.

Better Use of EnergyDuring the year, we have been scheduling of the air conditioning requirement of the buildings through the Building Management System (BMS). Accordingly the maximum demand for Air Handling Unit (AHU) has been controlled by scheduling the start time according to a time plan in order to reduce excess consumption of energy. In addition, we also deployed the use of energy dashboards to monitor water and energy consumption frequently.

R I L has increased our electricity conservation due to the renewable energy (solar panels) installed at PARKLAND 1.

In addition to the above, we are now working towards obtaining ISO 15001 – Energy Management Systems, which is based on the model of continuous improvement, making it the ideal context for integrating our energy management efforts to the overall commitment of improving quality and environmental management.

Reduced Paper Consumption We installed hand dryers across all common washrooms and lunch areas with the aim of reducing our dependence on tissue paper and paper towels. We are now indirectly contributing towards preserving approximately 12 trees a month, which is the number of trees used for manufacturing 1150 packets of paper towels (which is our average monthly consumption). And as a result, our consumption of paper towels was brought down to zero usage.

Recycling WasteR I L joined hands with RIZER to collect all waste plastic bottles in the premises, to be recycled and used for the manufacturing of Shoes, T-shirts and Brushes.

Water ConservationIn addition to the existing measures, which have been set in place across our buildings, we have installed a tube well to pump water during emergencies and to be used for gardening and landscaping purposes along with the harvesting tank installed at PARKLAND, as an alternative to the water obtained from the National Water Supply and Drainage Board.

Human CapitalThe greatest and most diversely rich asset of our Company, our employees bring on board the energy, experience and knowledge we require in achieving our long term objectives. It’s a journey of mutual growth and respect of each other’s aspirations that enables both parties to move forward in this continuously competitive and challenging corporate world.

The Company has vested greatly in the development of our employees, in line with the diverse areas of work they perform. R I L is also committed to empowering our employees in facilitating them to pursue their personal journeys towards professional and personal development.

Our CommitmentAs the first step towards our commitment to the growth of our employees, we have adopted and adhered to all applicable labour laws and have remained aligned with locally and globally accepted standards of employee development. Thereby, we have committed to the International Labour Organisation Convention and the UN Global Compact’s principles on labour.

Ethical RecruitmentAs a responsible and ethical employer, we have a strict stance against child labour and forced or compulsory labour in our operations.

Equal Opportunities for AllAs an equal opportunity employer, R I L promotes diversity across our business operations and subsidiaries. Ensuring that our employees receive the fair chance


of growth and every opportunity in performing their work in an enabling environment, we have set in place our non-discriminatory policy that ensures fair and equal treatment of all employees with regard to remuneration, benefits and working hours.

Non-Tolerance of Workplace HarassmentIn addition, harassment at workplace is not tolerated and the absence of such treatment is ensured with policies that prevent such conduct at the workplace.

Right Training and DevelopmentDeveloping the knowledge base and competencies of our employees is a critical component of our human resource strategy. We provide our staff with regular training and development initiatives and have provided them with the right tools for advancing their career prospects within the Company; and in maintaining a competitive framework of training and development that is on par with industry standards, we assess the quality of our initiatives in fulfilling the expectations and growth potentials of our employees.

A Culture of IntegrityAt R I L and across our subsidiaries, we have an obligatory requirement expected from all our employees in maintaining the highest standards of ethical and moral behaviour – sustaining the integrity in everything they undertake. Maintaining an ethical code of conduct while working with uncompromised integrity is

important to the Company, as our employees represent the R I L banner in the workplace, with our clients and with the society they live in. Any acts that harm the integrity of their work ultimately carry a ripple effect that impacts the reputation of our Group. Therefore, we expect nothing less than the best possible adherence to integrity and ethical conduct from each of our employees, at all times.

Employee Code of ConductAn all-inclusive guide to the Company’s stance on ethics and integrity, the employee Code of Conduct provides a reference point for our employees. All new recruits of our Companies are presented with a copy of this handbook when they come on board, with regular refresher programs conducted to reinforce the contents of the code.

Disciplinary PolicyThe disciplinary framework has been developed in line with the principles of Disciplinary Procedure under the country’s Labour Law. Any breach of the Code of Conduct will be subjected to disciplinary action under the company’s disciplinary policy framework.

Whistleblowing PolicyAny violation of the code of conduct and any unethical or illegal practices are encouraged to be reported and will be heard in full confidentiality as per the Whistleblowing Policy of the Company. Any such violation or alleged violation can be reported and recorded in a responsible and secure manner. Employees are encouraged to report to the Senior Manager Risk and Compliance or

any member of the Board Audit Committee. Employees can also approach the CEO directly to voice their concerns.

Human Resource GovernanceEach of our Group’s subsidiaries and the Company maintains independent control of the Human Resource Development processes and policies. This enables us to take a suitable approach that matches the industries of our companies and the varying cross-sections and degrees of professions that are inherent in each business. Thereby, we have the chance to create the right and most apt programs, designed to match the skills and experience of each of our employees – across the Group.

This also enables each company to recruit and retain the right talent for the right positions, maintaining an unbiased approach to selecting the right recruits with the right sets of skills, knowledge and experience.

Human Capital PlanAcross the Company, there is a pre-approved human capital plan that is set in motion to facilitate the entire process of human resource planning and development. The Head of Divisions (HOD) are mainly responsible for conducting a thorough assessment of the Company’s human resource requirements in line with the ensuing Financial Year. This is then submitted to the Head of Human Resources for review.

Sustainability Report Creating Sustainable Value




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Recruitment and RetentionThe recruitment process is one of our most carefully and thoughtfully managed processes carried out in strict accordance with the requirements set forth in the Human Capital Plan.

However, the resignation of an employee within the year and the resulting vacant position becomes an exception, as it will not be within the human capital plan.

The Company approaches the job market through multiple sources and publicises the vacancy in attracting the right talent. All vacancies are also advertised internally, allowing employees the opportunity to apply for the vacant position/s.

Once candidate applications have been received, an impartial screening process is followed to select the most qualified candidates without discrimination of gender, age, ethnicity, religion or financial backdrop. Applicants are treated fairly and equally. Employment is offered to the most qualified applicants and is purely based on merit. Applicants must meet the right capabilities and competencies in meeting the responsibilities of the job.

Upon recruitment, all new recruits undergo a period of probationary work for an appropriate period of time, during which the performance is assessed. At the end of this period based on their performance, the employee will either be confirmed into the permanent cadre or result in an extended probationary period, in accordance with the applicable Labour Laws.

Once recruited and absorbed into the permanent cadre, employees are trained and given opportunity to grow both within and beyond work requirements.

In the year under concern, turnover rate within R I L has declined slightly, but shows a significant increase in FoodBuzz. A similar rate is seen across UML as the previous year.

R I L FoodBuzz UML

Turnover rate (2019/20) 25% 40% 4-9%

However, most of our cadre has remained with us across the years – staying committed to our growth while proceeding to grow on a professional scale.

Employee Tenure

0

10

20

30

40

50

R I LNo. of employees

FemaleMale

Less than 5 years 5 - 10 years

20

14

5

49

FoodBuzzNo. of employees

0

20

40

60

80

100

120

FemaleMale

Less than 5 years 5 - 10 years

52

21

3

109

Male Female

0

100

200

300

400

500

600

UMLNo. of employees

Less than 5 years

5 - 10years

11 - 15 years

16 - 20 years

More than20 years

544

39

274

6641

7711317


Benefits and CompensationUnderstanding the importance of financial/non-financial incentives and benefits as a motivational factor, and its impact on the sociological and psychological wellbeing of an employee, we provide competitive salaries, in line with market standards, applicable to each subsidiary of the Group.

R I L maintains a baseline remuneration package applicable for each job category directly based on the scope and the extent of the responsibilities of the category. This becomes the standard that determines each employee’s remuneration package in addition to position, competency and performance – ensuring that all employees receive fair pay within a similar category of work.

Employees are entitled to a range of benefits including a comprehensive medical insurance cover including the immediate family. In the case of unmarried employees, the insurance cover is extended to their parents. In addition, both probationary and confirmed employees are also included under a personal accident cover covering injuries while at and outside of work. We have also covered our employees under the Directors and Officers liability cover.

Some of the monetary benefits and compensation provided for employees

• Cash gifts are presented to employees on the day of their marriage.

• Reimbursement of membership fee in professional bodies.

• Based on criteria, children of employees are rewarded upon the successful completion of Scholarship/ GCE O/L and A/L examinations.

• Company provides school books for children of the non-executive staff members, at the beginning of the year.

• Death donation policy for employees.

PromotionsUpon being promoted to a higher grade, an increase in pay will be followed but will be equitable with other employees within the relevant job grade. This is decided by the respective Heads of Division and the Human Resources Division and the approval of the CEO.

During the year under review, the procedure on giving promotions was streamlined.

Training and Development Understanding the importance our employees place on their professional and personal development and the need for training as a means of increasing their performance and enhancing competencies, we promote a mind-set of active learning amongst our employees.

Each year we conduct an annual training need analysis which is then aligned with the actual learning needs of employees as we continue to improvise and enhance the programs, refining each program at every possible juncture. Each subsidiary company has its own method of evaluation in assessing if training activities are providing the desired outcomes.

A training budget is allocated for each division of the Company at the beginning of the Financial Year. The HOD or the employee is at liberty to nominate training, which is in line with the job role and the needs of the Company. Further, having identified the training needs through evaluations conducted, HR division also recommends and organises trainings. Upon conclusion of each training program, HR department oversees that a mandatory evaluation on the training as well as knowledge sharing sessions are conducted.

Employees are also facilitated with paid study leave for both permanent and trainee employees. We reimburse a portion of the cost incurred for any short term training required by employees.

Training and Development Programs (2019/20)During the year, multiple training programs were organised across varying levels of job categories. Bi - annually in 2019, staff refresher sessions were organised to update the employees and refresh their memory on the existing policies and procedures of the Company. In addition, a number of external and internal trainings were organised during the year.





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Internal External Overseas

R I L 2 14 -UML 60 6 -FoodBuzz 42 2 1Group 104 22 1

Total Hours Trained

R I L 713UML 5,864FoodBuzz 669Group 7,246

across a given period of time and in also identifying career goals. This evaluation is carried out by R I L based on a set of pre-defined KPIs qualitative and quantitative in nature. These criterions are established at the beginning of each year and are jointly agreed upon by the individual employee and the HOD.

The results of the review provide the necessary impetus and details in the annual pay review process and in determining bonus entitlements and promotions. FoodBuzz maintains a similar process in identifying the performance of their employees, which is then used in providing the necessary financial or non-financial recognition and incentives to employees.

At UML, the process differs slightly as the set KPIs are linked to divisional and organisational goals in relation to the annual evaluation of employee performance.

Service RecognitionsR I L rewards and recognises employees who have been with the Company. Being a relatively young company, we recognise our employees who complete 5 years of service. In 2019, a token of recognition was given to those employees who were with the Company for 5 years.

Employees are also given letters of appreciations, periodically in recognition of their services, commitment and for introducing innovative ideas. These are taken into consideration for annual bonus.

Performance Management Evaluation of employee performance is an integral part of the human resource development process, which enables the Company to evaluate gaps in our approaches to training and development, whilst also providing employees the incentive to work to their best capacities.

Performance management is not only an evaluation of our employees in recognising their hard work and commitment, but is also an opportunity for the Company and our subsidiaries to take a deep assessment of the effectiveness of the training and development approaches provided to employees and in improving gaps within our operational environment, which will enable our employees to work in a much more positive and enabling environment.

Annual Performance EvaluationAs part of our policy framework, we conduct an annual review of employees’ performance in order to assess their performance

Career AdvancementWhether its advancement across a company’s job grades and hierarchy or moving to newer and higher prospects within the Group, all our employees are given the equal opportunity to advance their career.

The prospects for advancement are assessed during the annual performance evaluation program and are the key contributory aspects that enable employees to present their performance and abilities in the hope of advancing through the ranks.

Succession planning is carried out and includes Individual Development Plans with structured approaches in grooming the next set of leaders who has the potential to take up positions of leadership within the Company.

Employee RelationsStrong relations with employees are at the core of our success, as we continue to enrich the relationships we have with all our employees – irrespective of grade and ranking.


As an employer who advocates integrity, honesty, boldness and sincerity, we maintain an open door policy, assuring our employees that they have complete freedom to voice their opinions and raise issues pertaining to their role at the Company or to the reputation of our business.

Our employees have the necessary channels made available to them in conveying their views, opinions and in giving voice to confidential matters. This can be done either verbally or in writing.

• Staff briefing sessions.

• Private interviews with Head of Divisions or Human Resources personnel.

• Suggestions box.

• Training and development activities.

• Employee satisfaction surveys.

Grievance ProcedureEmployees can use grievance procedure, in the event if he/she considers that their concerns are unlikely to be resolved by means of discussion.

Each matter is investigated by the grievance committee, which is appointed explicitly for undertaking the issue at hand. The committee comprises HRM, the relevant HOD, and an independent HOD. Several proceedings will be conducted by the committee and handled independently, maintaining privacy and confidentiality of the issue and the relevant parties.

After ascertaining the best course of action, this will then be communicated to the grieved employee or employees and

the final decision rests with the committee with no influence permitted from any third party or person. The committee maintains a detailed record of the investigative process, and a written report of the investigation is presented to the CEO.

Employee EngagementAn employee, who is committed to enhancing their awareness of subjects beyond their respective fields, is one who will continue to add value to the Company and grow professionally at the same time. Therefore, we encourage our employees to pursue scopes that are outside of their present expertise and to stay connected to other aspects of the business for a well-rounded professional experience at R I L.

In 2018, R I L conducted the first-ever employee engagement survey, with employees having the opportunity to communicate their views.

Fostering Teamwork

As any other employer, we have the expectation of retaining the loyalty and admiration of our employees as we continue to deepen their commitment to the Company and the Group through a team-oriented work ethic.

Work-Life Balance and Welfare

A balanced life, which incorporates time for family, work within the society and recreational activities, has an invaluable contribution to the growth of our employees in their professional and personal lives. Understanding that every individual should maintain a positive stance on life, we nurture work-life balance amongst staff including regular

time spent engaging in other aspects outside of work.

Therefore, we also encourage employees to engage in informal activities with colleagues, thereby cultivating a positive environment that is built on camaraderie. Employees across the Group participate in activities such as annual staff get-together and trips, religious activities and other activities in a relaxed environment.

During the year, the Company organised its first ever, family carnival for employees and their families. In December the staff annual get together was held for our employees. Our annual excursion was held in Hikkaduwa. In addition,

• For employees who are resigning, the Company organises a farewell get-together.

• Access to the badminton court is provided free of charge to employees.

• During Christmas, the staff decorates the PARKLAND





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building complex and last year all decorations were made in-house. In 2019, the team also engaged in carols in the lobby area.

• We encourage staff members to attend office in Company t-shirt on Fridays, to promote both equality and loyalty.

• We have introduced flexible working hour arrangements for the employees where employees can opt to work according to the flexible working arrangement.

• An annual Pirith chanting ceremony was conducted

among employees through regular safety education and training. The HR department also ensures to maintain a record of work related accidents; this helps us to enhance our safety measures which are already in place, to mitigate incidents of a similar nature.

Annually, we conduct an awareness program on evacuation, which is directed by a trainer from the Fire Service Department. At the time of induction, new recruits are educated on the health and safety measures they must adhere to. With the current situation of the country employees are constantly educated on the health and safety measures they need to follow while at the office premises.

The Easter Sunday Attack and the COVID-19 pandemic caused us to reassess our efforts in health and safety and ensure that new measures are aligned with standard procedures and protocols. As a result, preventive and protective measures were introduced at our premises.

on 06 October 2019 with the support and participation of Directors and staff.

Health and Safety

As a property developer, we have a tremendous obligation to ensure the safety of everyone who works with us. We have a continuous responsibility that is taken seriously across the Company in maintaining a safe and healthy work environment for all.

Across our office and our properties, we have established standard safety procedures and contingency plans. In addition to;

• Regular fire safety audits and drills.

• Timely equipment inspections.

• Timely renewal of licenses for fire safety installations and maintenance contracts for lifts and escalators.

• Continuous monitoring and managing health and safety in the workplace.

We also maintain an open line of communication across all levels to gather feedback on issues relating to health and safety. In addition, we aim to inculcate a culture of ownership for health and safety


Workforce and DiversityDuring the year, all companies under the R I L banner have added to their respective workforces. Based on the scope of operations and scale, UML has the largest workforce contribution adding 1009 employees to the total group-wide cadre of 1282.

Total Employees - Group

R I L 88

UML 1,009

FOODBUZZ 185

Gender - Group

Male 1,129

Female 153


Employees by Employment Type

A significant share of our employees across all three companies is based in permanent employment positions.

Job Grade

Distribution of employees based on job grades shows a significant number engaging in middle-junior level job grades. This is seen across the three companies.

Corporate CitizenshipTaking our responsibilities beyond the boundaries of corporate plans and corporate commitments, we invest in local communities and the environment, pushed by the passion for voluntary duty in uplifting those that need our help the most. And in addition to our existing commitment to minimising our impact on the environment, we go a step further, investing

in initiatives that contribute to sustaining and nurturing the environment.

Corporate citizenship is essentially a part of our culture, as we undertake initiatives aimed at changing ourselves in better understanding humanity and in resonating the R I L banner, not only as a corporate entity but as one that advocates the importance of connecting with every stratum of our community.

With funds set aside to uplifting communities and institutions in need, we, along with our subsidiaries take every possible opportunity to support causes that contribute to the state and to the nation.

Our workforce across all three companies represents a diverse mix of ages.

Male Female

0

100

200

300

400

500

Workforce by Age - GroupNo. of employees

Age between 18-25 years




Age over58 years

244

45

471

64

10 2

248

22

156

20




REPORTS RISK AND

GOVERNANCE

Serving the CommunityDonating Medical SuppliesDuring the year, we contributed to a state hospital, with funds sourced from our profits and donated high-priced injections, medicine and dry rations. Representative of each department participated for this donation with one ambition.

Tree Planting CampaignCompany carried on a tree planting campaign with the guidance given by the Environmental Protection Authority. Through this endeavour, we succeeded in planting 120 plants in the premises of Medical Research Institute as part of our contribution to the state institution as well as reduce environment pollution.


Blood Donation CampaignFor the 4th consecutive time, the Company carried out a blood donation campaign in February 2020, with the participation and invaluable contribution of around 200 donors. The campaign is an annual event and is held with the participation of customers, employees of the organisation and subsidiaries.

Annual Pirith CeremonyAn annual Pirith chanting ceremony was conducted on 06 October 2019 with the support and participation of Directors and staff.

Repairing the Residence of a Staff MemberWe undertook the initiative of repairing the residence of one of our employees’ damaged due to adverse weather. Our Maintenance Team dedicated time and effort for this project, restoring the residence to its former state.


Annual Report Award CompetitionThe Gold Award presented under the category of Land and Property sector was won by R I L at the 55th Annual Report Award Competition, organised by the Institute of the Chartered Accountants of Sri Lanka in 2019.

The Bronze Award presented under the category of Land and Property sector was claimed by R I L at the 54th Annual Report Award Competition, organised by the Institute of the Chartered Accountants of Sri Lanka in 2018.

RISK ANDGOVERNANCE




REPORTS RISK AND

GOVERNANCE

Risk Management

With our core interests in commercial real estate and other investments, R I L Property PLC (R I L) places great focus on actively and prudently managing risks. In everyday business we prepare our people to work with a mind-set that is susceptible to identifying risks but also in knowing how and when to steer around those risks, averting negative impacts. R I L has developed an integrated framework by setting in motion necessary processes and measures to calculatedly assess and manage exposures to risks that arise internally and externally as well as those that may emerge from the broader macroeconomic and competitive environments.

Risk AppetiteOur risk management strategy is guided by Risk Appetite which takes into account the type of risks the Company is exposed to or is most likely to be impacted by and the desired level of each risk that the Company can take on board in pursuing the strategies. The overall responsibility in determining the type and level of risk the Company is willing to withstand rests with the Board of Directors.

Approach to Managing RisksR I L takes an active and prudent approach to mitigating and managing risks. In this regard, we adopt a well devised, integrated

framework that defines the processes, those accountable, and line of command that oversees the periodical evaluation of risks and the measures adopted to mitigate those risks.

At R I L, we have adopted a process-driven approach to providing reasonable assurance in safeguarding our assets and interests, which also enables us to effectively manage risks. Leadership and management plays a key role in identifying risks and in prioritising them, upon evaluating how the Company can mitigate exposure as well as

monitoring measures of mitigation. The management ranks and prioritises risks in accordance to the Company’s Impact/ Probability Methodology; risk impacts are categorised as High, Moderate and Low.

Subsequent to this evaluation of each risk, a Risk Matrix (Heat Map) is developed to understand the nature of impact and likelihood of each risk, and in ascertaining the timing and extent of control actions required. This analysis is then followed by strategies that are set in place to mitigate and control risk exposures.

An integral part of how we direct the business through uncertainties, is based on the pragmatic management of risks which has a significant capability to strengthen the stability and sustained progress of a Company.

RiskManagement

Identification and Assessment

Mitigation/Internal ControlsMonitor


1. Credit Risk

13. Reputational Risk14. Strategic Risk15. Ongoing development project Risk17. Other external factors

2. Interest Rate Risk3. Liquidity Risk4. Exchange Rate Risk5. Macro Risk

6. People and retention Risk7. Health and safety Risk8. Risk of damage to physical

assets9. Legal and Compliance Risk10. Obsolescence risk of

Inventory11. Customer satisfaction Risk12. Business continuity Risk16. Competency Gap

Market Risk

Other Risk

Operational RiskCredit Risk

The risk matrix maps each risk that falls within the categorical differentiations of Credit Risks, Market Risks, Operational Risks and Other Risks. These risks are considered as the key risks of the Company, and remain the core focus of the matrix due to the diverse backgrounds of the Company’s core business and of its Portfolio of Investees.

Risk Governance R I L relies on a risk governance framework that is a structured approach to managing risks, and is effective in delegating risk management practices to relevant levels within the Company.

Board of DirectorsIn managing risks soundly and proactively, the Board of Directors takes on the most decisive role in implementing the process, ensuring that Company objectives and broader strategies are achieved, leading the Company and its subsidiaries in the right direction. The Board conducts meetings on a quarterly basis, at which strategic plans and overall performance is evaluated alongside risk factors and the risk management process.

The Board maintains overall responsibility in determining the risk appetite and parameters which enables objectives to be achieved, while their focus rests primarily on the principal risks as detailed under the Risk Matrix.

Board Sub-CommitteesWorking as the secondary line of command, the Board Sub-Committees including the Board Audit Committee (BAC) are mandated by the Board of Directors in monitoring and reviewing the possible financial and non-financial risk exposures which may impact Company operations.

Board Audit Committee The BAC evaluates the effectiveness of the risk management process and mitigation strategies (internal controls) in controlling and managing the risks ascertained.

Types of Risk and Risk MatrixRisks have been identified and categorised according to four key areas.

IMPACT HighLow

LIKE

LIHOOD

High

Low

13

15

13

4

5

6

7

8910 17

122

16

11

14

Risk Management




REPORTS RISK AND

GOVERNANCE

The BAC reviews the tolerability of the Company’s risk management practices, reporting to the Board periodically. However, identification, assessment and management of key risks remain within the control of the Management.

While strengthening the internal control checks throughout the Company, the BAC also reviews and provides recommendation on Internal Audit reports submitted, quarterly. These audits are conducted in conformance with a pre-approved Internal Audit plan.

Board Related Party Transactions Review Committee (BRPTRC) BRPTRC reviews transactions involving interests of Directors and related-party exposures. It is led by an Independent Non-Executive Director and integrates oversight of legal and compliance risk that emanates from financial

transparency with the risk framework.

Board Nominations and the Remuneration Committee (BNRC) BNRC assimilates well into the risk framework, due to its facilitative and critical role in mitigating risks associated with people and retention.

Senior ManagementA bi-annual assessment of risks is carried out by the Company’s Senior Management and Senior Manager Risk and Compliance, reports significant changes and exposures to the BAC.

Investee Risk Governance Both FoodBuzz (Private) Limited and United Motors Lanka PLC (UML) is primarily responsible for managing risks within their

respective businesses especially in terms of UML as a listed entity.

The risk management processes adopted by our investees conform to the nature of their respective businesses, thereby, ensuring the proper and effective monitoring and assessment of their risk management frameworks and internal controls.

United Motors Lanka PLCRisk governance of our substantially held investee, UML, rests with its Board of Directors, as they remain accountable for managing the risk exposures with relation to their respective business and industry. As a listed and regulated Company, UML maintains strict adherence to maintaining integrity and transparency while following a stringent governance and risk management framework. The audit committee of UML assesses its enterprise risk, ensuring the continuance of its cohesively and pragmatically designed framework.

FoodBuzz (Private) Limited Reporting lines of risk management for FoodBuzz remains with R I L and risk control measures are ensured through the commonalities in policy frameworks. R I L’s Board Audit Committee reviews the risk framework of FoodBuzz, as per the risk reporting structure.

Board

Board Sub Committees (Review, Assess and Mitigate)

BAC BRPTRC

Employees

Senior Management (Risk Assessment)

Ris

k M

anag

emen

t & C

ompl

ianc

e

Internal Audit

BNRC


Risk ManagementSignificant risks identified during the Financial Year 2019/2020

Description of Risk Mitigation Strategies Risk Profile

2019/2020 2018/2019

1. Credit Risk

Credit risk is the risk that counterparty will not meet its obligations under financial instrument or customer contract, leading to financial loss. The Company is mainly exposed to credit risk arising from the rent receivable from its tenants and also from investment activities with financial institutions.

New tenants are assessed on creditworthiness prior to signing a lease agreement, while a refundable deposit is secured alongside a rental advance in maintaining a buffer against potential arrears. The agreement mandates remedies that cover payment defaults and other breaches. Follow-up process is conducted on debtors, assessing whether dues exceed the deposit / rental advance, while recovery actions are backed by our in-house legal division.Further, the Management Investment Committee thoroughly assesses investment options, investing excess funds in financial or non-financial institutions with higher credit ratings and/or in state-backed securities.

Low Low

2. Interest Rate Risk

Interest Rate Risk refers to the probability that financing activities would be affected by fluctuations in market interest rates.R I L’s exposure to the risk of changes in market interest rates relates primarily to short term/ long term floating rate based debt and investments.

Rates are monitored closely and renegotiated where possible, while alternative strategies are frequently regulated to mitigate adverse impacts. R I L diversifies its existing portfolio by investing in short-term investments of varying nature. The Investment Committee also evaluates attractive interest rate investments in maximising benefits. Gearing is kept at optimal level.

Low Moderate

3. Liquidity Risk

Liquidity risk refers to the risk that the Company may not have sufficient liquid financial resources to meet its obligations as they fall due in the normal course of business.

Liquidity is maintained prudently to meet forecasted cash needs of the Company including monitoring of daily cash position. The Finance Division conducts periodical Cash-flow forecasts and solvency-based analysis to identify current and future cash needs. Working capital is managed appropriately. Strong relations are pursued with banks, while existing loans are serviced timely to ensure that urgent borrowing needs are met, at short notice.

Low Low

4. Exchange Rate Risk

This risk arises when future commercial transactions are denominated in a currency that is not the entity’s functional currency.

We ensure low impact from foreign exchange volatility, as we do not maintain foreign currency assets/liabilities.

Low Low

5. Macro Risk

Macro risk refers to the financial risk emanating from macroeconomic and other factors including changes in government policies, market conditions, political changes or instability.

The Board and Management monitor policy and legislative changes. Additionally, R I L takes measures to exceed client expectations, maintaining high levels of retention, while monitoring tenant behaviour, frequently. Our diversified tenant portfolio is based on long-term agreements with varying lease cycles. We also offer attractive, industry-standard rates.Security deposits and rental advances are adjusted for inflation to buffer future losses and are obtained prior to signing or renewing agreements. Lease terms are also reviewed regularly.

Low Low




REPORTS RISK AND

GOVERNANCE


2019/2020 2018/2019

6. People and Retention Risk

This risk arises from the inability to attract and retain qualified and experienced staff which can adversely affect operations, productivity and financial results.

As per our HR Policy, we deploy non-discriminatory practices to recruit the best talent and retain employees through a promising career development plan. Employees are encouraged to attend trainings initiated by the Company. Remuneration is maintained on par with the industry, where necessary market surveys are conducted to ascertain appropriate levels. Salary adjustments are then made if deemed essential.Incentives are balanced with fixed and variable pays, based on the performance rating achieved by employees through evaluations. Policies such as grievance handling, whistle blowing are in place and employees are encouraged to raise concerns. An open door policy is followed for close dialogues and in identifying areas of concern. Employee satisfaction surveys are also conducted when necessary.

Low Moderate

7. Health and Safety Risk

Health and safety risk arises from inadequate procedures and systems in maintaining the highest standards of health and safety to minimise the risk of accidents and incidents to customers, contractors, visitors and employees

Health and safety awareness programs are conducted for employees and tenants. New tenants must submit a Chartered Electrical Engineer’s Certification upon completion of fit-out work, while insurance covers are secured for the duration of such work and for all construction purposes.Employee information is obtained through “comprehensive bio-data requests” to filter candidates prior to interviews in ascertaining their fitness for duty. Medical examinations may also be conducted at Management discretion. Adherence to safety protocols is mandatory, for which employees are trained. Awareness is created on occupational safety and health through trainings. On-site compliance is required by contractors and employees, in addition to maintaining an accident/incident register for taking preventive actions. Employees are secured by an insurance scheme, covering inter alia injuries that arise during employment and outside employment. Additionally, a Public Liability Cover is also in effect. Subsequent to the recent pandemic, safety protocols are implemented at PARKLAND. Tenants and employees are educated on their responsibilities in maintaining regulations.

Low Low


Risk Management


2019/2020 2018/2019

8. Risk of Damage to Physical Assets

This refers to losses arising from loss or damage to physical assets from natural disasters or other unforeseeable events.

The respective insurer conducts risk surveys annually on existing policies, with recommended improvements implemented accordingly. Preventive maintenance is done to improve performance, safety of equipment and reduce breakdowns. Specific training is provided on usage of main equipment to employees.Preventive regulations and best practices are followed in fire safety, and national standards in fire detection/prevention. The right insurance covers are in place to minimise financial loss on any eventuality. Operational team inspects buildings frequently for defects related to general maintenance and asset condition.

Moderate Moderate

9. Legal and Compliance Risk

This encompasses risk arising from non-compliance with laws and regulations due to changes in legal regulations including Government Policies.

Statutory compliance is reported periodically to the Board and Company stays ahead of amendments of applicable laws/regulations. All relevant statutes are complied with, identified and updated to the maximum extent, as and when required. Employees are also obligated to comply with the ‘Code of Conduct’.Further, we retain the services of Audit, Tax and Legal Consultants to address any legal, regulatory and compliance requirement. Financial transparency related to Related party exposure is overseen by the BRPTRC.

Low Low

10. Obsolescence Risk of Inventory / High Stock Holding Risk

Inventory items may run the risk of being obsolete due to low demand, giving rise to obsolescence risk.

R I L holds only stationery and maintenance related inventory, as impact from obsolescence and high stock holding is very low. Re-order levels are maintained for key inventory items and Economic Order Quantity maintained.

Low Low

11. Customer Satisfaction Risk

Loss of customer satisfaction will impact negatively the current and future performance of the Company.

Employees are subjected to continue training on improving soft skills. Customer requirements are evaluated and fulfilled periodically, through customer engagements. Tenant complaint/compliment management process is in place to ascertain areas for further improvements.

Low Low

12. Business Continuity Risk

This risk refers to the capability of the Company to continue the delivery of products or services at acceptable pre-defined levels following a disruptive incident.

Insurance covers are obtained for income losses and key contractors have been identified for urgent refurbishments resulting from disruptive incidents.

Low Moderate




REPORTS RISK AND

GOVERNANCE


2019/2020 2018/2019

13. Reputational Risk

Reputational risk refers to the potential loss of earnings and adverse impact on market capitalisation resulting from negative client and public opinion regarding the Company and its actions and the damage caused by the failure in managing customer, shareholder and public expectations.

Shared values and integrity is ensured through sound HR and governance practices, for betterment of shareholders. Adherence to statutory and regulatory compliance is ensured under controls. Customer complaints are dealt with without delay, whilst R I L website provides a medium for tenant and external party feedback. The Company Secretary effectively manages any issues of Shareholders and if needed escalates any issues to the Board, promptly.

Low Low

14. Strategic Risk

Strategic risk refers to the uncertainties and untapped opportunities embedded in our core business and investment strategies and how well they are executed.

Board quarterly meetings address strategy and performance, while periodic reviews are led by CEO to assess effective implementation of strategy. A defined evaluation process enables execution of acquisitions and investment strategy. KPIs including ROI are considered to measure results and performance of investments is evaluated continually, including performance against pre-defined variables, assessment of ways to increase returns. Exit strategies are evaluated in case of negative outlook.

Moderate Moderate

15. Ongoing Development Project Risk

Refers to the risk of projects not meeting due completion according to the target time plan or proposed building plan and delayed regulatory approvals inter-alia of Owner developing project and or manager developing projects

Relevant measures are adopted before commencing any development, whilst independent consultants are appointed to oversee key areas. Site progress is monitored by weekly discussions with contractors and consultants, taking corrective actions if required. A person dedicated to oversee this function ensures all regulatory approvals.

Low Moderate

16. Competency Gap

Refers to the difference between the current competency level of employees and the required competency level.

Annual performance evaluations are done to identify gaps and ascertain best options in resolving needs. Training sessions are conducted. Company may amend organisational structure to enable restructuring decisions if existing human resources cannot meet such gaps.

LowNot

assessed

17. Other External Factors

Refers to any other external events beyond the control of the Company.Ex: National security threats, Public health emergency situations

R I L stays up-to-date on relations with state institutions and in taking necessary action when required. Proper guidance is followed to initiate preventive measures.

LowNot

assessed


Dear Shareholder,

R I L Property PLC has completed yet another year of well-governed operations, managed within a pragmatically organised and controlled governance structure that ensures stability and progress. As the Chairman of R I L Property PLC, it gives me pleasure to present the Corporate Governance Report for the year 2019/2020, on behalf of our Board of Directors, depicting our approaches in practices of Corporate Governance.

In today’s volatile economic backdrop and with regulatory changes that impact business, our strategies and processes have to be altered and realigned to stabilise operations and to better serve our objectives. In such a climate, leadership and accountability paves the direction and control, a Company requires in adapting to change, while ensuring that our people, our processes and resources are aligned with corporate objectives, its ethical and legal frameworks.

In embedding an accountable and a stabilised process across R I L’s operations, the Board is committed to upholding and maintaining a systematic framework and structures that govern risk management and internal control without deviation. The Board has approved this well-devised governance framework with certain functions having been delegated to the Board Sub Committees.

The governance framework is documented in a comprehensive manner with documented terms of references. We continuously assess the suitability of our processes and align them with regulatory changes as well as prudent and timely practices.

I assure to the best of my knowledge, that the Board and its sub - committees, employees including the senior management have all performed their duties in conformance to relevant regulatory and statutory requisites, as well as amendments to regulations. Further the members of the Board and all employees have conformed to policies, processes and standards, set in place by the Code of Conduct, with no material violations.

S. G. Wijesinha

Chairman


Corporate GovernanceMessage from the Chairman




REPORTS RISK AND

GOVERNANCE

Summary on ComplianceAs per regulatory and statutory requirements, R I L Property PLC (Company/R I L) has maintained compliance to the following:

a. Listing Rules on Corporate Governance, issued by the Colombo Stock Exchange (CSE) (as amended);

b. All applicable requirements under the Companies Act No. 07 of 2007 (as amended) (CA 2007);

c. All other applicable laws and regulations and has satisfied all its statutory payment obligations to the government and other regulatory bodies;

d. To the maximum extent possible, compliance with the provisions of the Code of Best Practice on Corporate Governance 2017 issued jointly by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka (CG Code 2017).

Framework of Corporate GovernanceThe Corporate Governance framework of the Company is formed by internal policies and procedures that are integral to its structure. Fundamentally it seeks to ensure conformance to external regulatory requirements and internal policy requirements and other mandatory requisites that ensure apt legal and ethical conduct across the Company and its Subsidiaries.

External regulations are integrated with Company processes by internal regulations through Board approved policies.

With the exception of the CG Code 2007, all other policies, both internal and external, require mandatory compliance from respective external regulatory organisations and by the applicable corporate regulations.

Adoption of mandatory and voluntary laws and codes by the Company, and their level or status of compliance is illustrated in the table below.

Table: Mandatory and voluntary compliance

External regulatory requirements

Act/Code/Rules Compliance

Level Status

Companies Act No. 07 of 2007 (as amended)

Mandatory Fully compliant

Listing Rules of the Colombo Stock Exchange


Securities and Exchange Commission of Sri Lanka Act No. 36 of 1987 (as amended)


Code of Best Practice on Related Party Transactions December 2013


Board of Investment of Sri Lanka Law No.04 of 1978 (as amended)


The Code of Best Practice on Corporate Governance 2017 issued jointly by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka

Voluntary Compliant with most of the provisions

Internal benchmarks

Compliance

Level Status

Articles of Association Mandatory Fully compliantCode of Ethical Business Conduct for employees and Directors


Terms of References of Board Sub-Committees


Compliance Policy Mandatory Fully compliantRisk management policies and procedures


Whistleblowing policy Mandatory Fully compliantPolicy on non-audit services from External Auditor


Policy on hiring former employees of the External Auditor


Policy prohibiting insider trading Mandatory Fully compliantOther internal processes and procedures



Structure of Corporate GovernanceOverall, oversight of Corporate Governance remains with the Board of Directors, headed by the Chairman – who is responsible for leadership and direction. The Board also delegates functions to Board sub - committees, but maintains rights on any final decision relating to areas, which are under the purview of all Committees. The Board, however, regardless of Sub-Committee actions has the overall and collective responsibility of ensuring absolute and highest standards of Corporate Governance. They are the force, which ensures that the Company operates appropriately and adheres to strict ethical conduct, and ensures that corporate and external standards are upheld to the highest extent.


The Senior Management also plays a key role in implementing policies and strategies (CEO) set forth by the Board, and operates under the direction of the Chief Executive Officer.

Regulators

Board Audit Committee

Exte

rnal

Reg

ulat

ions

Internal Regulations

Senior Management

Shareholders

Management Committees

Chief Executive Officer/Executive Director

Board of Directors

Auditors

Company Secretary

Board Nominations and Remuneration

Committee

Board Related Party Transactions Review

Committee

Internal Audit, Risk and Compliance Function

The BoardCompositionAs at 31 March 2020, the Board comprised of 7 Directors with no changes to the Board’s composition.

This formation of 7 members is seen appropriate when considering the nature and scope of our operations and the number of Board Sub-Committees. The Board perceives that the present Board composition and its proportion reflect the appropriate levels of diversity in age and gender – which facilitates effective decision-making.

Independent Non-Executive Chairman

Non-Independent Non-Executive Directors

Independent Non-Executive Directors

Executive Directors

Mr. S. G. Wijesinha

Ms. L. E. M. Yaseen

Ms. C. G. Ranasinghe

Ms. L. K. A. H. Fernando

Mr. L. W. D. Abeyarathne

Ms. C. R. KariyawasamProfessor. N. D. Gunawardena




REPORTS RISK AND

GOVERNANCE

Board Composition

Non-Independent Non-Executive Directors 2

Independent Non-Executive Directors 4

Executive Directors 1

Distribution of Executive andNon-Executive Directors

Executive Directors 1

Non-Executive Directors 6

Distribution ofIndependent Directors

Independent 4

Non-Independent 2

Gender Diversity

Male 3

Female 4

0

1

2

3

4

Board Age Compositions

Less than 50 yearsBetween 50 - 70 yearsMore than 70 years

Age Analysis

2

3

2

0

1

2

3

4

Tenure in Board

Less than 3 yearsBetween 3 - 6 yearsMore than 6 years

Tenure Analysis

2 2

3

Presence of Non-Executive DirectorsThe Board of Directors is comprised of 6 Non-Executive Directors, of sufficient calibre and number, whose views carry a significant weight in the Board’s decisions.



Independent JudgementFrom the 6 Non-Executive Directors on the Board, 4 are independent – reflecting a strong and independent distribution of authority.

Criteria for IndependenceIn being recognised and termed as ‘independent’, a Director must be free of any business engagement or relationship that could materially interfere or be perceived to materially interfere when exercising judgement that are impartial and unbound by any other responsibility - intended for the betterment of the Company and in preserving the interests of our Shareholders.

Declaration of IndependenceA declaration on his/her independence/non-independence is mandated to be submitted at the time of appointment by each new Non-Executive Director – aligned with the criteria under Listing Rules of the CSE and the CG Code 2017. Firstly, the Board Nominations and Remuneration Committee (BNRC) and thereafter based on its recommendation, the Board then evaluates the new Director’s independence.

Declarations are obtained and tabled on an annual basis from each Non-Executive Director at a Board meeting. These are then reviewed for the independence of each Non-Executive Director, against the said criteria by BNRC. The Company Secretary also maintains records of said declarations.

As at 31 March 2020, the following Directors were regarded to be independent in both character and judgement, with no such reason or relationship which could materially interfere or is reasonably perceived to materially interfere in exercising judgements that are both unfettered and independent.

• Mr. S. G. Wijesinha

• Ms. C. G. Ranasinghe

• Ms. C. R. Kariyawasam

• Professor. N. D. Gunawardena

During the year, no circumstances arose for the determination of independence beyond the criteria set out in the Listing Rules of the CSE.

Role of Chairman and Chief Executive Officer (CEO) A Non-Executive Independent Director, the Chairman provides leadership to the Board of Directors, while the CEO provides executive leadership and expertise in implementing and achieving strategies and is also responsible for the overall performance of the Company. Hence, the roles of Chairman and CEO are segregated to ensure the right balance of power and authority.

In addition, the Chairman and CEO meet from time to time to discuss Board agenda as well as to discuss issues and on developments.

Role of Company SecretaryThe Company Secretary reports directly to the Chairman and has a key role in maintaining the relationship between the Company, its shareholders and regulators. Company Secretary is also sought for advice and assistance by the Directors pertaining to their duties and for ensuring the effective operation of the Board and its Sub-Committees. Further, the appointment and removal of the Company Secretary falls under the purview of the Board of Directors.

Board MeetingsBoard meetings are held on a quarterly basis with the exception of special Board meetings which are convened whenever necessary. An exception is made when a physical meeting is not feasible and the issue is raised on any urgent matter, then such matters are referred to the Board via circulation. In such instances, when decisions are taken through circular resolutions, all pertinent information with regards to the resolution are sent to the Directors, enabling them to clearly ascertain the purpose for the circulated resolution. All resolutions passed in such manner are tabled at a subsequent meeting for information of the Directors.

Attendance via audio-visual communication is also allowed at Board and Sub-Committee meetings as per the Articles of Association and Terms of References (TORs).




REPORTS RISK AND

GOVERNANCE

Delegation of Authority and Board Sub-Committees The Board Sub-Committees have received delegated functions by the Board – allowing Sub-Committees to focus on areas of responsibility and share experience and insights on areas where they possess a greater level of expertise.

Each Board Sub-Committee reports actions and are monitored by the Board regularly. In addition, each committee has been provided with a Board approved TOR. The committees submit recommendations directly to the Board and minutes of each meeting are tabled and discussed at Board meetings.

Although the Sub-Committees have authority in examining and reporting to the Board on areas of concern along with their decisions and recommendations, the Board holds ultimate responsibility concerning any matter.

At present the Board is supported by the following Board Sub-Committee:

- Board Audit Committee (BAC)

- Board Nominations and Remuneration Committee (BNRC)

- Board Related Party Transactions Review Committee (BRPTRC)

Detailed Board Sub-Committee reports are on page 80 to page 88 of this annual report.

Remuneration of DirectorsThe BNR Committee was established in 2016, by the Board, which consists exclusively of Non-Executive Directors. Its sole purpose is in ensuring the existence of a formal and transparent procedure for developing policies on staff and director remunerations.

The Board has approved a relevant TOR , under which the committee operates. None of the members of the BNR Committee or any director is involved in deliberations in respect of any remuneration, compensation or any other form of benefits to be granted to him/her. The remuneration of the members of the BNR Committee is determined by the Board, thereby eliminating any potential conflict of interests.

Communication with ShareholdersThe Company focuses on open communication and fair disclosures with emphasis on the integrity, timeliness and relevance of the information provided.

The Company is committed to having regular, proactive and effective communication with the investors as well as shareholders.

Internal Controls and Risk Management The Board of Directors recognises that it is their responsibility in maintaining a sound system of internal controls to safeguard the investment of the shareholders and the assets of the Company.

The Board has established an ongoing process for identifying, evaluating and managing significant risks faced by the Company and this process includes enhancing the system of internal controls as and when there are changes to the business operations as well as regulations.

This process is periodically reviewed by the Board through the BAC.

Statutory Compliance The Company has in place a compliance policy, the purpose of which is to identify and detail how the Company remains compliant with all of the legislative, regulatory requirements associated with its activities.

The BAC has been delegated with the authority to oversee the statutory compliance and makes recommendations to the Board on breaches of key compliance requirements.

As at the end of the year under review, R I L Property PLC has maintained complete conformance to all rules and regulations as mentioned under the;

• Corporate Governance Listing Rules of the CSE;

• Companies Act No. 07 of 2007 (as amended);

With the exception of a few instances, the Company has operated within the guidelines of the CG Code 2017 and has voluntarily adopted practices which have been identified as having relevance to the Company and in overall value addition.



Code of Business Conduct and Ethics All employees and senior management are required to adhere to a ‘Code of Ethical Business Conduct’ based on the following principles.

• The Company is committed to conducting its’ business operations with honesty, integrity and with respect to the rights and interests of all stakeholders.

• Compliance with all laws and regulations of the country.

• Every employee is individually responsible for the implementation and compliance with the Code.

Some areas covered by the Code of Conduct:

• Confidentiality;• Use of company property;• Conflicts of interest;• Security of company

information;• Bribery and corruption;

A Board approved “Code of Ethical Business Conduct“ is also available for the Directors.

Governance of SubsidiariesAs a company listed on the CSE, United Motors Lanka PLC (UML) operates under a strong and rigorous governance and risk management framework. Contextually, UML operates with highest standards of integrity and transparency – ensuring that interests of stakeholders are ensured, including those of shareholders, employees and customers.

Since FoodBuzz (Private) Limited is a wholly owned subsidiary of R I L, the consistent application of governance and risk management practices are ensured through the commonalities in policy frameworks and reporting lines to R I L.




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Appendix 1: Compliance with section 7.6 of the Listing Rules of the Colombo Stock Exchange

The table below summarises the status of compliance with section 7.6 of the Listing Rules of the Colombo Stock Exchange on the contents of the Annual Report.

CSE Rule reference and description Status of compliance

Section reference in the Annual Report

7.6 Contents of the Annual Report (i) Names of persons who were Directors of the Company

during the Financial Year√ Annual Report of the Board of

Directors on page 89(ii) Principal activities of the Company and its subsidiaries

during the year and any changes therein√ Annual Report of the Board of

Directors on page 89(iii) The names and the number of shares held by the 20

largest holders of voting and non-voting shares and the percentage of such shares held as at the end of the Financial Year

√ Share information on page 184

(iv) The float adjusted market Capitalisation, the public holding percentage, number of public shareholders and option under which the Company complies with the minimum public holding requirement


(v) A statement of each Directors’ and Chief Executive Officer’s holding in shares of the Company at the beginning and end of the Financial Year

√ Annual Report of the Board of Directors on page 89Share information on page 185

(vi) Information pertaining to material foreseeable risk factors of the Company.

Not applicable

The Company does not foresee any material risks affecting its business in the foreseeable future.

(vii) Details of material issues pertaining to employees and industrial relations of the Company.

Not applicable

During the year under review, there were no material issues pertaining to employees and industrial relations of the Company.

(viii) Extents, locations, valuations and the number of buildings of the land holdings and investment properties

√ Note 7 and note 8 to the Financial Statements

(ix) Number of shares representing the stated capital √ Note 17 to the Financial Statements

(x) A distribution schedule of the number of holders in each class of equity securities and the percentage of their total holdings

No. of holders

Holdings Total holdings %

1 - 1000

1,001 – 10,000 shares

10,001 – 100,000 shares

100,001 – 1, 000,000 shares

Over 1,000,000 shares



CSE Rule reference and description Status of compliance

Section reference in the Annual Report

(xi) Ratios and market price information on: 1. Dividend per share; 2. Dividend pay-out; 3. Net Asset Value per share; 4. Market value per share; - Highest lowest values recorded during the Financial Year - Value as at end of the Financial Year

√ Share information on page 185 and page 186 Financial highlights on page 10

(xii) Significant changes in the Company’s or its subsidiaries’ fixed assets and the market value of land, if the value differs substantially from the book value

√ Note 7 to the Financial Statements

(xiii) Details of funds raised through a public issue, Rights Issue and a private placement during the year; a. A statement as to the manner in which proceeds of

such issue have been utilised;b. If any shares or debentures have been issued, the

number, class and consideration received and the reason for the issue;

c. Any material change in the use of funds raised through an issue of securities

Not applicable

During the year under review, there were no public issues, rights issues or private placements

(xiv) a. and b. Information in respect of Employee Share Option or

Share Purchase Schemes

Not applicable

The Company does not have any Employee Share Option or Share Purchase Schemes at present.

(xv) Disclosures pertaining to Corporate Governance Practices in terms of Rules 7.10.3, 7.10.5 c. and 7.10.6 c. of Section 7 of the Listing Rules

√ Corporate Governance Report on page 68 for names of independent directors;Directors’ profiles on page 22 to page 24Board Nominations and Remuneration Committee Report” on page 85 for composition and remuneration policy;Note 31.2.2 of the Financial Statements for Directors’ aggregate remuneration;Board Audit Committee Report” on page 80

(xvi) Related party transactions exceeding 10% of the Equity or 5% of the total assets of the Entity as per Audited Financial Statements, whichever is lower.

Details of investments in a related party and/or amounts due from a related party to be set out separately.

The details shall include, as a minimum: i. The date of the transaction; ii. The name of the Related Party; iii. The relationship between the Company and the

Related Party; iv. The amount of the transaction and terms of the

transaction; v. The rationale for entering into the transaction.

Not applicable

There were no related party transactions which exceeded 10 % of the Equity or 5 % of the Total Assets, during the year under review.





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Appendix 2: Compliance with section 7.10 of the Listing Rules of the Colombo Stock Exchange

The table below summarises the status of compliance with section 7.10 of the Listing Rules of the Colombo Stock Exchange on Corporate Governance.

CSE Rule reference and description Status of compliance Section reference in the Annual Report

7.10.1 Non-Executive Directors Two or one-third of the Directors, whichever is higher, should be Non-Executive Directors.

√As at 31 March 2020, there are 6 Non-Executive Directors, out of the total of 7 Directors.

Corporate Governance Report on page 68 to page 69

7.10.2.a Independent Directors At least two or one-third of Non-Executive Directors whichever is higher should be independent.

√A s at 31 March 2020, there are 4 Independent Non-Executive Directors, out of the total of 6 Non-Executive Directors


7.10.2.b Declaration of IndependenceEach Non-Executive director should submit a declaration annually of Independence/ Non-Independence, in the prescribed format.

√All Non-Executive Directors submitted declarations in the prescribed format. Copies of the same are under the custody of Company Secretary for review.


7.10.3.a Names of Independent DirectorsNames of Independent Directors should be disclosed in the Annual Report.

√ Corporate Governance Report on page 68

7.10.3.b Criteria for Independence The basis for determining the Independence of Non-Executive Directors, if criteria for independence is not met

Not applicableThere were no such circumstances which arose for the Board to determine the Independence of the Directors outside the criteria specified in the Listing Rules.

Not applicable

7.10. 3.c Brief Resume of DirectorsA brief resume of each Director should be included in the Annual Report including his areas of expertise

√ Directors’ profiles from page 22 to page 24

7.10.3.d Brief Resumes of New

Appointments to the Board Upon appointment of a new Director a brief resume of the Director should be submitted to the Exchange for dissemination to the public.

Not applicableThere were no new appointments to the Board, during the year under review.

Not applicable

7.10.4 (a-h) Criteria for Determining

Independence Requirements for meeting the criteria to be an Independent Director

√Requirements specified under this section were considered when determining Independence of Directors.

Not applicable



Remuneration Committee 7.10.5.a Committee Composition The Remuneration Committee shall comprise of a minimum of two Independent Non-Executive Directors or of Non-Executive Directors, a majority of whom shall be independent, whichever is higher.The Chairman of the Committee shall be a Non-Executive Director.

√The Remuneration committee consist of 3 Non-Executive Directors and all including the Chairman, are independent.

Board Nominations and Remuneration Committee report on page 85 to page 86 for Committee composition.

7.10.5.b Committee FunctionsThe Committee shall recommend the remuneration for Executive Directors, CEO and/or equivalent role.

√The Committee recommends remuneration of both Non-Executive and Executive Directors.

Board Nominations and Remuneration Committee report on page 85 to page 86

7.10.5.c Disclosure in the Annual ReportThe Annual Report should set out the names of the members of the Committee, a statement of the remuneration policy and the aggregate remuneration paid to the executive and Non-Executive Directors.

√ Board Nominations and Remuneration Committee report on page 85 to page 86 for composition and remuneration policyNote 31.2.2 to the Financial Statements for aggregate remuneration of Directors.

Audit Committee7.10.6. a Committee Composition and

Meeting Attendance The Committee shall comprise a minimum of 2 Independent Non-Executive Directors or of Non-Executive Directors, a majority of whom shall be independent whichever shall be higher.The Chairman of the Committee shall be a Non-Executive Director;Unless otherwise determined by the Committee, CEO and CFO shall attend meetings;Chairman or one member of the Committee should be a member of a recognised professional accounting body.

√As at 31 March 2020, the Board Audit Committee consisted of 4 Non-Executive Directors out of which, 3 are independent.The Chairperson of the Committee is an Independent Non-Executive Director.CEO and CFO attends meetings by invitation. Mr. S. G. Wijesinha is a fellow member of the Chartered Institute of Management Accountants, while Mr. L. W. D. Abeyarathne is a fellow member of the Institute of Chartered Accountants.

Board Audit Committee report on page 80 to page 84 for Committee composition.





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7.10.6.b Functions of the Committee(i) Overseeing the preparation,

presentation and adequacy of disclosures in the Financial Statements of the Company in accordance with Sri Lanka Accounting Standards;

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

(iii) process to ensure that the Company’s internal control and risk management are adequate to meet the requirements of the Sri Lanka Auditing Standards;

(iv) Assessment of the independence and performance of the Company’s External Auditor;

(v) Recommendations to the Board pertaining to appointment, re-appointment and to approve the remuneration and terms of engagement of the External Auditor.

√The Terms of Reference of the Board Audit Committee covers the areas outlined.

Board Audit Committee report on page 80 to page 84

7.10.6.c Disclosures in the Annual ReportThe names of the members of the Audit Committee;The basis of determination of the independence of Auditors; A report of the Committee setting out the manner of compliance with their functions

√ Board Audit Committee report on page 80 to page 84


Appendix 3: Compliance with section 9 of the Listing Rules of the Colombo Stock Exchange as well as the Code of Best Practice on Related Party Transactions issued by the Securities and Exchange Commission of Sri Lanka w.e.f. 01 January 2016

The table below summarises the status of compliance with section 9 of the Listing Rules of the Colombo Stock Exchange and the Code of Best Practice on Related Party Transactions issued by the Securities and Exchange Commission of Sri Lanka.


9.3.2 Disclosures in the Annual Report9.3.2. (a) Non-recurrent related party transactionsIn the case of non-recurrent related party transactions, if aggregate value of the non-recurrent related party transactions exceeds 10% of the equity or 5% of the total assets, whichever is lower, of the Company as per the latest audited Financial Statements following information must be presented in the annual report:

• Name of the related party;

• Relationship;

• Value of the related party transactions entered into during the year;

• Value of related party transactions as a % of Equity and as a % of Total Assets;

• Terms and conditions of the related party transactions;

• The rationale for entering into the transactions

Not applicable There were no non - recurrent related party transactions which exceeded 10 % of the Equity or 5 % of the Total Assets, during the year under review.

Not applicable

9.3.2. (b) Recurrent related party transactionsIn the case of recurrent related party transactions, if the aggregate value of the recurrent related party transactions exceeds 10% of the gross revenue/income (or equivalent term in the Income Statement and in the case of group Company consolidated revenue) as per the latest Audited Financial Statements, the Company must disclose the aggregate value of recurrent related party transactions entered into during the Financial Year under review in its Annual Report with the following information:

• Name of the related party;

• Relationship;

• Nature of the transaction

• Aggregate value of the related party transactions entered in to during the Financial Year;

• Aggregate value of related party transactions as a % of Net Revenue/ Income

• Terms and conditions of the related party transactions

Not applicable There were no recurrent related party transactions which exceeded 10 % of the consolidated Net revenue or income, during the year under review.

Not applicable





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9.3.2. (c) Disclosures in the Annual ReportThe Annual Report should contain a report by the Related Party Transactions Review Committee, setting out the following: The names of the Directors comprising the committee; A statement to the effect that the Committee has reviewed the related party transactions during the Financial Year and has communicated the comments/observations to the Board of Directors;The policies and procedures adopted by the Committee for reviewing the related party transactions;The number of times the Committee has met during the Financial Year

√ Board Related Party Transactions Review Committee report on page 87 to page 88

9.3.2. (d) Declaration A declaration by the Board of Directors in the Annual Report as an affirmative statement of the compliance with these rules pertaining to related party transactions or a negative statement in the event the entity does not have related party transactions

√ Annual Report of the Board of Directors on page 89 to page 96


Report of the Board Audit CommitteeDate of establishment of the Board Audit Committee – 01 September 2016

Requirement – Listing Rules of the Colombo Stock Exchange/ The Code of best practice on corporate governance 2017 issued jointly by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka

Committee CompositionThe Board Audit Committee (BAC/ Committee) consists exclusively of Non-Executive Directors and the composition is in line with the Listing Rules of the Colombo Stock Exchange (CSE) (Listing Rules) as well as the Code of best practice on corporate governance issued jointly by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka (CG Code 2017).

The Chairperson of the Committee as well as the Committee members are appointed by the Board.

The Committee composition as at 31 March 2020

Committee member Mr. S. G. Wijesinha, is a fellow member of the Chartered Institute of Management Accountants and Mr. L. W. D. Abeyarathne is a fellow member of the Institute of Chartered Accountants of Sri Lanka. Ms. C.G. Ranasinghe is an Attorney-at-Law. As outlined in the Directors’ profiles set out on page 22 to page 24, members bring a balance of expertise requisite for the Committee’s evolving scope of work.

Terms of Reference The Committee operates within a Board approved written Terms of Reference (TOR) dealing with its authority and duties and carefully designed to discharge the Committee’s purpose. The TOR is annually reviewed to ensure that the new developments pertaining to the Committee are duly addressed. The TOR was reviewed during the year under review.

Meetings In terms of the TOR, the BAC is required to meet on a quarterly basis.

However, the Committee may meet more regularly as determined by the Chairperson of the Committee or as requested by any member of the Committee.

Regular attendees by invitation

Ms. L. K. A. H. Fernando - CEO/ED;

CEO/ED – Chief Executive Officer/ Executive Director

Ms. M. Wijesekara - Senior Manager Risk and Compliance

In addition, the Committee summoned relevant officials to participate in proceedings on a needs basis.

During the year, the Committee met seven times. Where necessary, matters were recommended to the Committee via circulation.

Secretary to the CommitteeMs. R. Weudagedara - Company Secretary functioned as the Secretary to the Committee.

Scope of Committee in Relation to SubsidiariesThe Company’s BAC performs the Audit Committee function for its wholly owned subsidiary FoodBuzz (Private) Limited.

United Motors Lanka PLC (UML) in which the Company has 51% ownership, is a listed entity with its own Audit Committee. Therefore, proceedings of the Audit Committee meetings of UML are submitted to the BAC, for information.

Ms. C. R. Kariyawasam Independent Non-Executive Chairperson Mr. S. G. Wijesinha Independent Non-Executive Member Ms. C. G. Ranasinghe Independent Non-Executive Member Mr. L. W. D. Abeyarathne* Non-Independent

Non-ExecutiveMember

* Appointed to the BAC with effect from 01 June 2019




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Reporting to the Board The proceedings of the BAC meetings are regularly reported to the Board via the Committee Chair, outlining outcomes and recommendations.

Additionally, the minutes of the BAC meetings are also tabled at successive Board meetings, for information.

Summary Role of the CommitteeThe Committee is established to assist the Board in fulfilling its supervisory responsibility for the:

• Preparation, presentation and disclosures in the Company’s Financial Statements, in keeping with the Sri Lanka Accounting Standards and other relevant statues;

• Adequacy of the internal controls and Risk Management processes;

• Adequacy and efficiency of the Internal Audit function;

• Independence and performance of the External Auditor;

• Compliance with the statutes and regulations;

• Whistle blowing policy and processes that have been instated.

Activities Financial Reporting The Committee monitors the integrity of the Financial Statements of the Group and any formal announcement relating to the Group’s financial performance, reviewing significant financial

reporting judgments contained therein including:

• Appropriateness and changes in accounting policies;

• Significant estimates and judgments made by the Management;

• Compliance with relevant Accounting Standards and applicable regulatory requirements;

• Issues arising from internal and external audits;

• The Group’s/Company’s ability to continue as a going concern;

• Statements and reports to be included in the Annual Report

The BAC considers and recommends for Board approval the Interim Financial Statements proposed for publication and the Annual Financial Statements proposed for inclusion in the Annual Report to shareholders.

Significant Considerations in view of Financial StatementsThe Committee met the External Auditor in an Audit-opening meeting to discuss the audit scope, objectives and plan. The Committee also received a report from the External Auditor upon the culmination of the audit of the Financial Statements. This report includes the Auditors’ review of the areas of audit risk and focus in relation to the Financial Statements. As required in the current context, financial reporting considerations under COVID-19 were presented to the Committee by the External Auditor.

Valuation of Investment Properties The valuation of investment properties is a key audit matter due to the subjectivity of assumptions and judgments in the valuation models, including impacts of COVID -19. While income and other estimates have been formed by the independent valuer, after careful consideration of a range of reliable sources, it must be recognised that COVID -19 is a unique and evolving event.

During times of such material uncertainty, it should be noted that the investment property valuation is current at the date of valuation only and less certainty and a higher caution should be attached to the valuation. In addition, the valuation should be kept under frequent review as the assessed value may change significantly and unexpectedly over a relatively short period of time.

As such, advice of the independent valuer was sought to determine if any material change in the fair value of investment properties was likely to have occurred post 31 March 2020. This advice indicated that there was no material impact between 31 March 2020 and the date of signing these Financial Statements.

The Committee considered the assurance process of the auditors in view of the valuation of investment properties carried out by the independent valuer. The Committee is satisfied that the disclosures as detailed in note 7 and note 8 related to the valuation of investment property are adequate.



Valuation of InventoryValuation of inventories at the subsidiary, UML, comprising vehicles, spare parts, lubricants, tyres and other inventories was highlighted as a key audit matter. Inventories are held at the lower of cost and net realisable value. The determination of whether inventory will be realised for a value less that cost requires management to exercise judgment and apply assumptions.

The Committee considers the disclosures under note 12 is adequate in this regard.

New Accounting Standards IFRIC 23 - Uncertainty over Income Tax TreatmentThe Company and the Group have adopted IFRIC 23 - Uncertainty over Income Tax Treatment effective for Annual Reporting periods beginning on or after January 01, 2019. The Committee has considered the audit action in this regard and is satisfied that the disclosures as detailed in note 22 related to this matter are adequate.

SLFRS 16 - Leases The Committee considered the impact of SLFRS 16 which had come into effect from 01 January 2019.

Both the Company and the Group have adopted the SLFRS 16 with effect from 01 April 2019, under the modified retrospective option and the Committee has closely monitored its implementation.

External Audit Ernst & Young, Chartered Accountants (Ernst & Young) acts as the Group’s External Auditor. They have been the External Auditor since 2016. Ernst & Young also provides audit services to the subsidiary, FoodBuzz. PricewaterhouseCoopers acts as the auditors of UML.

In terms of the TOR of the BAC, in the interest of good governance, the BAC can make recommendations to change the Auditor at intervals not exceeding seven years. There are no contractual obligations that restrict the choice of External Auditor.

The Committee together with the management reviewed and discussed the audit scope, approach and the audit plan with Ernst & Young, prior to the commencement of the audit for the year 2019/20.

The External Auditor was given adequate access to the Committee as well as to the relevant information required.

In keeping with the best practices on corporate governance, at least once each year, the Committee and the External Auditor discuss, without the management present, matters relating to its remit and any issues arising from the audit. Accordingly, the Committee met the External Auditor twice without the presence of the executive management.

Independence of the External Auditor The Committee has reviewed the independence and objectivity of the independent External Auditor, Ernst & Young.

The Committee has received a declaration from Ernst & Young confirming that having exercised their professional judgment, they are not aware of any relationship or interest in the Group that can reasonably be thought as having a bearing on their independence within the meaning of the Code of Conduct and Ethics of the Institute of Chartered Accountants of Sri Lanka.

The BAC implemented a policy on the engagement of the External Auditor to supply non-audit services. The Committee reviewed the non-audit services performed by the External Auditor in line with the policy during the current year. The provision of non - audit services by the External Auditor is considered as acceptable if such engagement will not compromise audit objectivity and independence and where the External Auditor is considered to be the most appropriate to carry out the work.

During the year, the Committee also set in place clear policies on hiring employees/former employees of the External Auditor in order to ensure that the hiring practices do not impair the independence of the auditor and to avoid any potential conflicts of interest.

Re-appointment of External Auditor Having considered the engagement letter, the Committee approved and recommended to the Board the audit fees for the current engagement, as commensurate with the scope agreed upon.




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The Committee also recommended to the Board the reappointment of Ernst & Young, as External Auditor for the Financial Year ending 31 March 2021, subject to the approval of the shareholders at the Annual General Meeting.

Internal Audit The Company has in place an in-house Internal Audit function headed by the Senior Manager Risk and Compliance. The Internal Audit team of the Company is constituted of appropriately experienced members to ensure the efficacy of the function.

At the beginning of the year, the Internal Audit plan is submitted to the Committee for their review and approval. The BAC then reviews the coverage of the audit plan, to ensure that the scope of the review on internal controls cover all significant operating procedures in the Company’s business model. The Internal Audit team carries out checks in accordance with the pre-approved audit plan and reports to the Committee, on a quarterly basis.

The reports cover significant findings and recommendations together with the management responses of the review of the internal controls as well as recommendations for further improvement.

In addition, the Internal Audit team also suggests for the improvement of existing processes, creating value addition. Representatives from the Internal Audit team are present at the Committee meetings during the discussion of the reports. Any control weaknesses highlighted in the Internal Audit reports are critically

examined by the Committee and follow up actions taken by the management on the audit recommendations are also reviewed. Where appropriate, the Committee recommends follow up – audits of certain processes.

The reports of the Internal Audit team are made available to the independent External Auditor as well.

Internal Controls Effectiveness of the Company’s system of internal controls is evaluated through the reports provided by the management, internal auditors as well as the independent External Auditor.

During the year, the BAC proposed and initiated a management response process, where the management would report back to the Internal Audit team on a quarterly basis, on the status of actions proposed during the Internal Audit. This process was extended to FoodBuzz as well.

The Committee is satisfied that an effective system of internal control is in place to provide reasonable assurance in safeguarding the Company’s assets and reliability of Financial Statements.

The Senior Manager Risk and Compliance is assessed by the Chairperson of the BAC on a semi-annual basis.

Risk Management All divisional heads meet customarily on a bi-annual basis with the Senior Manager Risk and Compliance for discussions to proactively identify and address risk areas identified in their areas

of business. Meetings with the divisional heads are also held on a needs basis, if circumstances warrant.

Bi - annually, the Senior Manager Risk and Compliance reports to the Committee on the status of significant risks and the progress on actions taken to ensure that the appropriate focus is maintained.

The Company has identified and documented critical risks to the business, including key operational risks and related controls in the risk matrix maintained by the Senior Manager Risk and Compliance.

Based on the risks identified and assessed, the risk heat map was developed to derive the nature, timing and extent of actions required. The risk heat map together with the mitigation strategies in place are set out on page 59 to page 65.

At the recommendation of the Board, an independent review of the existing insurance policies took place during the year, to identify any gaps and the need for any enhancements.

Whistleblowing The Company has in place a whistleblowing policy which aims to provide a channel to report in good faith and confidence, potential corporate fraud and other work place wrongdoings to any member of the Board Audit Committee, Chief Executive Officer or the Senior Manager Risk and Compliance. Employees are educated on its importance and accordingly refresher sessions are conducted on a bi-annual basis.



The Senior Manager Risk & Compliance is entrusted with the responsibility to report to the Committee any concerns reported under the policy, on a quarterly basis. The Committee would monitor the follow up actions taken on the incidents reported under the whistleblowing policy. No communications were received by the Committee during the year.

Statutory Compliance Under and in terms of the Company’s compliance policy, the Manager Legal, in consultation with the Heads of Divisions would identify and report the laws and regulations applicable to the business, on an annual basis. The Heads of Divisions together with the Manager Legal has a collective responsibility to keep track of amendments to the existing legislation as well as new laws.

The Senior Manager Risk and Compliance is entrusted with the responsibility to ensure compliance with all such identified laws and regulations. Respective Heads of Divisions issue a requisite quarterly self-confirmation on the compliance with all external and internal regulations based on which a statutory compliance report is submitted to the Board Audit Committee on a quarterly basis. Any deviations are separately reported.

These quarterly reports submitted by the Senior Manager Risk & Compliance are used by the BAC to monitor compliance with all relevant legal and statutory requirements. Where necessary, the Committee makes

recommendations to the Board on breaches of key compliance requirements.

The Committee is satisfied that laws and regulations are duly complied with and statutory payments have been made on a timely basis and there are no material violations.

ConclusionThe Committee is satisfied that internal controls and procedures in place for assessing and managing risks are adequately designed and operate effectively and is of the view that they provide reasonable assurance that the Company’s assets are safeguarded and that the Financial Statements of the Company are reliable.

The Committee’s mandate coincides with critical areas to be considered under the COVID-19 outbreak including and expanded role in the oversight of financial reporting, internal controls over the reporting and oversight of the Internal Audit function and of the External Auditor. As the consequences of the pandemic evolve, the Committee will continue to monitor these carefully while executing the current and long term actions required to navigate these circumstances.

On behalf of the Board Audit Committee

C. R. Kariyawasam Chairperson





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Report of Board Nominations and Remuneration CommitteeDate of establishment of the Board Nominations and Remuneration Committee – 01 September 2016

Requirement – Listing Rules of the Colombo Stock Exchange/ The Code of best practice on corporate governance issued jointly by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka 2017.

Committee CompositionThe Board Nominations and Remuneration Committee (BNRC/Committee) consists exclusively of Non-Executive Directors and the composition is in line with the Listing Rules of the Colombo Stock Exchange (CSE) (Listing Rules) as well as the Code of best practice on corporate governance issued jointly by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka (CG Code 2017).

The Chairman of the Committee as well as the Committee members are appointed by the Board.

Committee composition (as at 31 March 2020)

Meetings In terms of the Terms of Reference (TOR) of the Committee, the BNRC is required to meet bi-annually.

However, the Committee may meet more regularly as determined by the Chairman of the Committee.

During the year, the Committee met twice. Where necessary, matters were recommended to the Committee via circulation.




CEO/ED took part in all deliberations, except when her own interests, performance and compensation was discussed.

In addition, the Committee summons relevant officials to participate in proceedings, on a needs basis.


Reporting to the Board The proceedings of the Committee meetings are regularly reported to the Board and makes whatever recommendations to the Board it deems appropriate on any area within its purview, where action or improvement is needed.

Scope of Committee in Relation to SubsidiariesThe Company’s BNRC functions for its’ wholly owned subsidiary, FoodBuzz (Private) Limited.

United Motors Lanka PLC in which the Company has a 51% ownership, is a listed entity with its’ own Committees for this purpose.

Remuneration Policy The BNRC is entrusted with the responsibility to determine and agree with the Board the policy for remuneration.

Accordingly, the remuneration is designed in such a way to ensure fair remuneration to all members of the staff and the remuneration is linked to the achievement of individual objectives which are aligned to the short-term and long term objectives of the Company. The policy also aims in attracting and retaining the best talent.

The BNRC consults the CEO/ED, if it is deemed necessary, in its proposals relating to remuneration. No Director is involved in deciding his own remuneration.

Mr. S. G. Wijesinha Independent Non-Executive ChairmanMs. C. G. Ranasinghe Independent Non-Executive MemberProfessor. N. D. Gunawardena

Independent Non-Executive Member


Remuneration packagea. EmployeesThe remuneration package of the employees consists of a fixed component, variable component and other benefits as described below:

Fixed component Variable component Other benefits

Basic salary Annual bonus Insurance benefits Statutory employer’s contributions any other fixed allowances

Training/ educational course fee reimbursement

Fixed Component Basic salary is the fixed component which is based on the scope and complexity of the role. Employees are informed of the Key Performance Indicators (KPIs) in advance and annual performance appraisals are conducted to evaluate performance against such pre agreed KPIs. Increments and promotions are granted purely based on the results of such appraisals.

Variable Component Annual Bonus is the variable pay which is reviewed by the Committee from time to time. It is the annual remuneration which varies according to the length of service with the Company, individual performance as well as the Company performance;

Other Employee BenefitsOther benefits provided to employees include reimbursement of costs incurred for educational courses/ training and various insurance benefits.

Retirement Benefits There are no retirement benefits to employees other than gratuity.

Further, there are no employee share option schemes available for employees at present.

b. Directors• Non-Executive Directors

No remuneration is paid to Non-Executive Directors other than the monthly retainer fee and the fee paid for the participation at Board meetings and other Board Sub-Committee meetings.

Non-Executive Directors’ remuneration is based on the time, commitment and responsibilities of their roles, taking into consideration the prevailing market rates.

Retirement Benefits Non-Executive Directors are not entitled to retirement benefits.

• Executive Directors

The remuneration structure for Executive Directors consists of the following

a. Fixed remuneration;

b. Variable bonus;

c. Other benefits

Executive Directors do not receive Directors’ fees.

The CEO/ED’s remuneration is decided by the Board annually on the recommendation of the BNRC based on the achievement of the Company objectives as well as the individual performance.

Share Option Plans for Directors Currently, the Company does not have any share option plans for Directors.

Directors’ EmolumentsThe Directors’ emoluments are disclosed in note 31.2.2 to the Financial Statements.

Board Appointments The Committee when making recommendations to the Board on new appointments, assesses the Board composition against the skills and knowledge requirements to ascertain whether the combined knowledge and experience of the Board meets the strategic demands of the Company.

On behalf of the Board of Nominations and Remuneration Committee



Report of Board Nominations and Remuneration Committee




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Report of Board Related Party Transactions Review CommitteeDate of establishment of the Board Related Party Transactions Review Committee – 01 September 2016

Requirement – Listing Rules of the Colombo Stock Exchange/ The Code of best practice on corporate governance issued jointly by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka 2017/ Code of best practice on related party transactions December 2013

Committee Composition:The Board Related Party Transactions Review Committee (BRPTRC/ Committee) consists exclusively of Non-Executive Directors and the composition is in line with the Listing Rules of the Colombo Stock Exchange (CSE) (Listing Rules) as well as the Code of best practice on corporate governance issued jointly by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka (CG Code 2017).

The Chairperson who is an independent Non-Executive Director and the Committee members are appointed by the Board.

Committee composition as at 31 March 2020

Ms. C. G. Ranasinghe Independent Non-Executive Chairperson Mr. S. G. Wijesinha Independent Non-Executive MemberMs. L. E. M. Yaseen Non - Independent Non-

ExecutiveMember

Ms. C. R. Kariyawasam Independent Non-Executive Member

Meetings As mandated by the Listing Rules of the CSE, the Terms of Reference (TOR) of the Committee requires the Committee to meet on a quarterly basis. However, the Committee may meet more regularly as determined by the Chairperson of the Committee or as requested by any member of the Committee.

During the year, the Committee met four times. Where necessary, matters are also recommended to the Committee via circulation.




In addition, the Committee summoned relevant officials to participate in proceedings on a need basis.


Reporting to the Board The proceedings of the BRPTRC meetings are regularly reported to the Board via the Committee Chair.

Additionally, the minutes of BRPTRC meetings are also tabled at successive Board meetings, for information.

Policies and Procedures A Board approved Manual on Related Party Transactions (RPTs) is in place. Its objective is to establish a frame work for the Company for the identification of Related Parties (RPs) and RPTs.

Identification of RPsRPs are identified in accordance with the criteria set out in the Sri Lanka Accounting Standards (LKAS 24) as well as the Listing Rules. The Company adopts a disclosure based approach in identifying RPs.

The members of the Board have been identified as Key Management Personnel (KMPs). Self - declarations are obtained from the Directors at the time of joining the Board, for the purpose of identifying parties related to the KMPs.

Chief Finance Officer (CFO), is entrusted with the responsibility to identify and prepare a list of RPs.The list maintained by the CFO, is shared with the Company Secretary on a quarterly /annual


basis, to send out declarations. These declarations would disclose any existing or potential RPTs carried out by RPs or their Close Family members (CFM) or any changes to the position already disclosed. Based on the declarations received, the CFO updates the list on RPs. A record of these declarations is maintained by the Company Secretary.

Quarterly declarations capture any changes to the annual declarations submitted by the KMPs. The declaration would also confirm on any new appointments accepted by the Directors in other entities as KMPs.

Reporting and Reviewing RPTsUpon identification of a RP, CFO creates relevant system tracking accounts to flag the RPs. The Company has set up a process which enables the Company to generate data on RPTs, throughout the Company’s network.

All RPTs (other than those exempted under the Listing Rules) are submitted to the Committee on a quarterly basis for Committee’s review. The Committee has established guidelines to follow, when reviewing these RPTs. The Committee is supported with the task of reviewing RPTs by way of the confirmation reports of the management on RPTs that took place during each quarter. These reports would primarily confirm to the Committee, if a RPT occurred on at arms – length basis or not and the reasons for conducting such transactions with a RP.

Company Secretary would monitor the transactions of the Company with the identified RPs to ascertain transactions which triggers shareholder/Board approval as well as immediate disclosures.

Internal Audit division ensures that related party process is carried out according to the established procedure manual and applicable laws.

If a member has a personal material interest in a matter being considered or a RPT involves directly or indirectly one of the members of this Committee, the conflicted member informs the Committee immediately and excuse himself/herself at the meeting. Such member is not present while the matter is being considered at the meeting, unless for the express purpose of providing information to the Committee at the request of the other members and abstains from voting on the matter.

Related Party Transactions During the Year Other than those exempted, all transactions with RPs entered into during the year 2019/20, were reviewed by the Committee.

During the year, there were no non-recurrent or recurrent RPTs which exceeded the respective thresholds mentioned in the Listing Rules mandating disclosure in the Annual Report.

Details of other RPTs entered into by the Company are disclosed in note 31 to the Financial Statements. In the opinion of the Committee, all these RPTs were carried out on an arm’s length basis and were at market rates and on similar terms as those generally transacted with third parties.

DeclarationDuring the year under review, the Company has complied with the Related Party Transactions rules set out in Section 9 of the Listing Rules. An affirmative statement of compliance with the rules pertaining to Related Party Transactions by the Board of Directors is included on page 93 of this Annual Report.

On behalf of the Board Related Party Transactions Review Committee

C. G. RanasingheChairperson


Report of Board Related Party Transactions Review Committee




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Annual Report of the Board of Directors on the Affairs of the CompanyThe Board of Directors of R I L Property PLC (R I L/ the Company) have the pleasure in presenting to its Shareholders the Annual Report of the Company which covers and includes the Audited Financial Statements for the Financial Year ended 31 March 2020, Chairman’s message, Chief Executive Officer’s message, Corporate Governance together with the Sub-Committee reports, Risk Management, Statements of responsibility, Auditors’ Report together with other relevant information.

This Report provides the information required by the Companies Act No. 07 of 2007 (CA 2007), the Code of Best Practice on Corporate Governance issued jointly by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka (CG Code 2017) as well as the Listing Rules of the Colombo Stock Exchange (CSE).

The Annual Report of the Company including the Annual Report of the Board of Directors

was adopted by the Board of Directors on 03 September 2020. The required number of copies of the Company’s Annual Report will be submitted to the CSE and to the Sri Lanka Accounting and Auditing Standards Monitoring Board within the stipulated time.

As set out under Section 168 of the CA 2007, the following information is disclosed in this Annual Report prepared for the Financial Year ended 31 March 2020.

Reference Information required to be disclosed

Annual Report page reference and necessary disclosures

Section 168 (1) (a) The nature of the business of the Company and its subsidiaries together with any change thereof during the accounting period

Please refer page 90

Section 168 (1) (b) Completed and signed Financial Statements of the Company and the Group for the accounting period completed in accordance with section 152

The Financial Statements for the Company and the Group for the year ended 31 March 2020 have been prepared in accordance with the requirements of the Sri Lanka Accounting Standards and comply with the requirements of the CA 2007 as well as Listing Rules of the CSE, duly certified by the Chief Finance Officer and signed by two (02) members of the Board as appearing on page 106 to page 182 which form an integral part of this report

Section 168 (1) (c) Auditors’ Report on Financial Statements of the Company and the Group

Please refer page 103 to page 105

Section 168 (1) (d) Any changes made to Accounting Policies during the year under review

Please refer page 91 for the significant accounting policies adopted in the preparation of the Company and the GroupOther than those disclosed in note 5.1 in page 119 there were no changes to the Accounting policies used by the Company and the Group during the year

Section 168 (1) (e) Particulars of the entries in the Interest Registers of the Company and its subsidiaries during the accounting period


Section 168 (1) (f) Remuneration and other benefits paid to the Directors of the Company and its subsidiaries during the accounting period

Please refer note 31.2.2 to the Financial Statements on page 169 Also refer the “Board Nominations and Remuneration Committee Report” on page 85

Section 168 (1) (g) Total amount of donations made by the Company during the accounting period

Please refer note 26 to the Financial Statements on page 162


Reference Information required to be disclosed

Annual Report page reference and necessary disclosures

Section 168 (1) (h) Information on the Directorate of the Company and its subsidiaries during and at the end of the accounting period

Please refer page 8 to page 9 and page 93

Section 168 (1) (i) Separate disclosure of amounts payable by the Company and its subsidiaries to the Auditor as audit fees and fees for other services rendered during the accounting period

Please refer note 26 to the Financial Statements on page 162

Section 168 (1) (j) Auditors’ relationship or any interest in the Company and its subsidiaries

Auditors do not have any other relationship or interest in contracts with the Company and its subsidiaries other than that of the Auditor.

Section 168 (1) (k) Acknowledgment of the contents of this report/signatures on behalf of the Board by two Directors and the Secretary of the Company


GeneralThe Company was incorporated on 15 July 2009 as a private limited liability company and subsequently converted to a public limited liability Company on 13 September 2016 under the CA 2007.

The Ordinary shares of the Company are quoted on the main Board of the CSE since 04 May 2017.

Principal ActivitiesThe principal business activities of the Group are into different sectors.

The principal activity of the parent company, R I L is developing and managing Grade “A” commercial office space in selected core markets in the Colombo Business District (CBD) whilst offering multi-faceted real estate solutions including facilities management, leasing, land acquisition, construction management services, consulting and strategic investment.

Subsidiary FoodBuzz (Private) Limited is operating a chain of BreadTalkTM restaurants under a franchise agreement and provide food processing and other related services.

Subsidiary, United Motors Lanka PLC (UML) continues as the distributor for brand new Mitsubishi and Fuso vehicles, genuine spare parts of brands and provides after sales services to its customers at Colombo and from its branch network.

There were no significant changes in the nature of the principal activities of the Company and the Group during the Financial Year under review.

Changes to Group StructureThe Group Structure is demonstrated on page 8 to page 9 of the Annual Report.

In terms of Section 242 of the CA 2007, Orient Motor Company Limited a fully owned

subsidiary company of UML, was amalgamated with UML, on 30 November 2019.

There were no other significant changes to the Group structure of the Company.

Review of Performance A review of the Company and its subsidiaries’ performance during the Financial Year together with the future outlook is available in the Chairman’s message, Chief Executive Officer’s message and Management Review on page 13, page 18 and page 26 respectively.

Financial Statements The Financial Statements of the Company and the Group have been prepared in accordance with the Sri Lanka Accounting Standards (SLFRs/ LKASs) issued by the Institute of Chartered Accountants of Sri Lanka and comply with the requirements of

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




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the CA 2007 as well as the Listing Rules of the CSE.

These Financial Statements, duly certified by the Chief Finance Officer, were approved by the Board of Directors and signed by two (02) members of the Board and are given on page 106 to page182 of the Annual Report.

Directors’ Responsibility for Financial ReportingThe Directors are responsible for the preparation of the Financial Statements of the Company, which reflect a true and fair view of the financial position and the performance of the Company and the Group.

The “Director’s responsibility statement for Financial Reporting” provided on page 99 of this Annual Report forms an integral part of this Report.

Auditors’ Report The Auditors’ Report on the Financial Statements of the Company and the Group are given on page 103 to page 105 of the Annual Report.

Significant Accounting Policies The Accounting Policies adopted in the preparation of the Financial Statements of the Company and the Group are given on page 112 to page 182 of the Annual Report.

Other than those disclosed in notes 5.1 in page 119 to page 120, there were no changes in Accounting Policies during the year under review.

Going Concern The Board of Directors after considering the financial position, operating conditions, regulatory and other factors, have a reasonable expectation that the Company and its subsidiaries possess adequate resources to continue operations in the foreseeable future.

Accordingly, the Financial Statements are prepared based on the “Going Concern Concept”.

Stated Capital As at 31 March 2020, the stated capital of the Company was LKR 7,360 Mn. comprising of 800 Mn. ordinary shares.

No new share issues took place during the year under review.

Financial results

Year ended 31 March 2020 (LKR Mn.)

2019 (LKR Mn.)

Company Revenue 1,003 762Profit before tax 1,169 1,015Profit after tax 1,000 804

Group

Revenue 11,236 13,956Profit before tax 437 1,321Profit after tax 388 1,120

Reserves as at 31 March

2020 (LKR Mn.)

2019 (LKR Mn.)

Company Capital reserve 211 171Revenue reserve 7,949 7,380

Group*

Reserves 10,231 10,078

*The composition of the Reserves is shown in the statement of changes in equity on page 108 to page 110.

Segmental reporting Segmental reporting is disclosed in note 28 to the Financial Statements on page 165 to page 167.


Annual Report of the Board of Directors on the Affairs of the CompanyProvision for Taxation Provision for taxation has been computed at the prescribed rates and details are given in note 27 to the Financial Statements on page 162 to page 165.

Events Occurring After the Reporting Date There have been no material events subsequent to the Reporting date that would require adjustment to or disclosure in the Financial Statements other than those disclosed in note 33 to the Financial Statements on page 170.

DonationsDonations given by the Company and the Group are disclosed in note 26 to the Financial Statements on page 162.

Property, Plant and Capital Expenditure Capital expenditure during the year on Property Plant and Equipment by the Company and the Group were LKR 2.7 Mn. (LKR 0.85 Mn. 2018/19) and LKR 224 Mn. (LKR 482 Mn. – 2018/19), respectively. Details relating to property plant and equipment, investment properties and intangible assets are detailed in note 7, 8 and 9 to the Financial Statements, on page 124 to page 134.

Value of the owner occupied area of the investment property is LKR 371 Mn. (LKR 344 Mn. – 2018/19) and is disclosed separately under property plant and equipment

note 7 to the Financial Statements on page 124 to page 130.

Extents, locations, number of the buildings and the valuation of the properties of the Company and the Group are given in note 7.10 and 8.4 to the Financial Statements on page 128 to page 131.

All freehold land of the Group, were revalued by professionally independent valuers and brought into the Financial Statements. The investment properties are accounted using the fair value method.

Details of fair values of investment properties are given on note 8.4 to the Financial Statements. Details of revaluation of land are given in note 7.10 to the Financial Statements.

Contingent Liabilities and Capital Commitments There has been no capital commitments or contingent liabilities other than disclosed in notes 34 and 35 to the Financial Statements on page 171 of the Annual Report.

Employment The Company’s and the Group’s strength of manpower as at 31 March 2020 is 88 and 1,282 respectively.

The Group’s practices and policies inter alia relating to recruitment, training and development, career advancement and employee relations are discussed in detail under “Human Capital” on page 47 to page 54.

There were no material issues pertaining to employees and industrial relations in the year under review.

Share Information There were 1186 (1089 – 2018/19) registered shareholders as at 31 March 2020.

Distribution Schedule of ShareholdersDetails are given on page 185.

Information on Ratios and Market Price Information Disclosures under section 7.6 (xi) of the Listing Rules of the CSE are indicated on page 74.

Substantial Shareholdings and other Share Information The names of the twenty largest Shareholders, the number of shares held and the percentages are given on page 184 of the Annual Report.

Disclosures required under section 7.6 (iv) of the Listing Rules of the CSE is indicated on page 73 to page 74.

Related Party TransactionsNon-Recurrent Related Party TransactionsThere were no non-recurrent Related Party Transactions of which the aggregate value exceeded 10% of the equity




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or 5% of the total assets of the Company during the year ended 31 March 2020, which require specific disclosures in the Annual Report in terms of section 9.3.2 of the Listing Rules of the CSE and the Code of Best Practices on Related Party Transactions issued by the Securities and Exchange Commission of Sri Lanka.

Recurrent Related Party TransactionsThere were no recurrent Related Party Transactions which in aggregate exceeded 10% of the consolidated revenue of the Group as per latest audited Financial Statements, which require specific disclosures in the Annual Report in terms of section 9.3.2 of the Listing Rules of the CSE and the Code of Best Practices on Related Party Transactions issued by the Securities and Exchange Commission of Sri Lanka.

The identified Related Parties as well as the Related Party Transactions undertaken during the year are set out in note 31 to the Financial Statements on page 168 to page 170.

The members of the Board have been identified as ‘Key Management Personnel” of the Company. There were no Related Party Transactions by the Key Management Personnel with the Company.

As required by the Listing Rules of the CSE, the Board confirms that the Company has complied with all requirements as per section 9 of the Listing Rules of the CSE.

Corporate Governance The Company has complied with the Listing Rules of CSE. The

measures taken and the extent to which the Company has complied with the Listing Rules of the CSE are set out under the “Corporate Governance Report” on page 66 to page 79.

Board of Directors As at 31 March 2020, the Board of Directors of R I L Property PLC consisted of seven (07) Directors.

Mr. S. G. Wijesinha Independent Non-Executive ChairmanMs. L. E. M. Yaseen Non-Independent Non-Executive DirectorMs. L. K. A. H. Fernando Chief Executive Officer/Executive DirectorMr. L. W. D. Abeyarathne Non-Independent Non-Executive Director Ms. C. G. Ranasinghe Independent Non-Executive DirectorMs. C. R. Kariyawasam Independent Non-Executive DirectorProfessor. N. D. Gunawardena Independent Non-Executive Director

The Directors’ profiles are given on page 22 to page 24 of the Annual Report.

The names of the Directors of the subsidiary companies are given on page 8 to page 9.

Changes in the Directorate New Appointments and Resignations There were no changes to the directorate of the Company, during the year under review.

Retirement and Re-election of Directors In terms of Article 83, Professor. N. D. Gunawardena will retire by rotation and being eligible, will offer himself for re-election on the unanimous recommendation of the Board Nominations and Remuneration Committee (BNR Committee) and the Board of Directors.

In terms of section 211 of the CA 2007, Mr. S. G. Wijesinha and Ms. L. E. M. Yaseen who will be retiring due to being over the age of 70 years, will offer themselves for re-appointment on the unanimous recommendation of the BNR Committee and the Board of Directors. The Agenda of the AGM has two separate ordinary resolutions for the re-appointment of Mr. S. G. Wijesinha who is 71 years and Ms. L. E. M. Yaseen who is 78 years of age.

Board Sub-CommitteesThe Board, while assuming overall responsibility and accountability for the management of the Company, has appointed 3 Board Sub-Committees, Board Audit Committee, Board Related Party Transactions Review Committee and the Board Nominations and Remuneration Committee, to ensure oversight and control over certain affairs of the Company.


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

Directors’ Interests RegisterThe Company, in compliance with the CA 2007, maintains an Interests Register. Where applicable, all necessary entries were made in the Interests Register during the year under review.

The Interests Register is available at the Registered Office of the Company in keeping with the requirements of section 119 (1) (d) of the CA 2007.

Directors’ Interest in Contracts All Directors of the Company make the necessary declarations of their

The Board approved Terms of References are in place for each of these Sub-Committee.

Changes to the Sub-Committee compositions during the year as well as the current Committee compositions is indicated in the respective Committee reports:

Board Sub-Committee Page reference

Board Audit Committee 80Board Nominations and Remuneration Committee 85Board Related Party Transactions Review Committee 87

interests in other companies, to the Board and such interests are duly recorded in the Directors Interests Register. The Directors will have no direct or indirect interest in any contracts or proposed contracts with the Company other than those disclosed in the Interests Register.

During the year, there were no such interested transactions warranting disclosure.

The Directors disclose transactions, if any, that could be classified as Related Party Transactions in terms of the Sri Lanka Accounting Standard – LKAS 24 on “Related Party disclosures”.

As a practice of good governance, Directors refrain from voting on matters in which they are materially interested.

Declaration

The Directors declare that:

1. The Company has not engaged in any activity which contravenes the laws and regulations;

2. All material interests in contracts involving the Company have been declared and the Directors have refrained from voting on matters they were materially interested;

3. The Company has made all endeavours to ensure equitable treatment to Shareholders;

Directors’ Remuneration Details of Directors’ remuneration and other benefits in respect of the Company and the Group for the Financial Year ended 31 March 2020 are given in note 31.2.2 to the Financial Statements, on page169.

Directors’ interests in shares

Name of the Director Number of shares held as at 31 March

Percentage (%) of shares held as at 31 March

2019 2020 2019 2020

Mr. S. G. WijesinhaMs. L. E. M. Yaseen 153,232,711 153,232,711 19.15 19.15Ms. L. K. A. H. Fernando - - - -Mr. L. W. D. Abeyarathne - - - -Ms. C. G. Ranasinghe - - - -Ms. C. R. Kariyawasam - - - -Professor. N. D. Gunawardena - - - -




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4. The Business is a going concern and that the Board of Directors have reviewed the Company’s business plans and is satisfied that the Company has adequate resources to continue its’ operations in the foreseeable future.

Accordingly, Financial Statements of the Company and the subsidiaries have been prepared on the going concern assumption;

5. A review of the internal controls covering financial, operational, compliance controls and risk management were conducted and have obtained a reasonable assurance from the Internal Audit of their effectiveness and successful adherence.

Risk Management and Internal ControlThe Board of Directors, through the involvement of the Internal Audit have taken steps to ensure, and have obtained reasonable assurance, that an effective and comprehensive system of internal controls are in place that cover the financial, operational and compliance controls required to carry on the business in an orderly manner, safeguard the Company’s assets and secure, as far as possible, the accuracy and reliability of the financial records.

The Board is satisfied with the effectiveness of the system of internal controls that were in place during the year under review. The “Directors’ Statement on Internal Control” is contained on page 102 and forms an integral part of this report.

The Directors periodically review and evaluate the risks that are faced by the Company. The various exposures to risks by the Company and specific steps taken by the Company in managing risks are detailed under the “Risk Management” on page 59 to page 65 of this Annual Report.

Code of Conduct and Ethics The Company has in place a Code of Ethical Business Conduct applicable for all employees. The compliance is mandatory at all levels across the Company, without any exemptions.

A Code of Conduct and Ethics is also available for the Directors. There were no material violations reported in the respective Codes, during the year.

Whistleblowing A Whistleblowing Policy operates within the Company and the same has been communicated to employees. Bi-annual awareness sessions are conducted by the Company to educate the employees on the importance of this Policy. The Whistleblowing Policy, enables any employee to raise issues with the Management and the Board in order to identify possible risks faced by the Company at an early stage.

Corporate Social Responsibility The Board is fully committed to and considers it a key priority to act responsibly towards all stakeholders and to manage economic, environmental and social impacts during value creation activities efficiently and effectively.

Please refer sustainability report on page 44 to page 57 for more details.

Material Foreseeable Risk Factors The Company does not foresee any material risks affecting its business in the foreseeable future.

Environmental Protection The Company has made its best endeavours to comply with the relevant environment laws and regulations.

The Company has not engaged in any activity harmful or hazardous to the environment and has taken all possible steps necessary to safeguard the environment from any pollution that could arise when carrying out its business operations.

Statutory Payments The Directors confirm that to the best of their knowledge, all payments due to the government and regulatory institutions and those related to employees have been made on time during the year under review.

Outstanding LitigationThe Directors confirm that there is no outstanding litigation other than those disclosed under note 35 to the Financial Statements, of this Annual Report.


Annual Report of the Board of Directors on the Affairs of the CompanyEmployee Share Ownership PlansThe Company did not have any employee share ownership/option plans during the year.

Auditors AppointmentRetiring Auditors, Messrs. Ernst & Young, Chartered Accountants, have indicated their willingness to continue as External Auditor of the Company and a resolution to re-appoint them as Auditors and authorising the Directors to fix their remuneration, will be proposed at the forthcoming AGM.

Independence:A declaration has been provided by Messrs. Ernst & Young indicating that having exercised their professional judgment, they are not aware of any relationship or interest in the Group that can reasonably be thought as having a bearing on their independence within the meaning of the Code of Conduct and Ethics of the Institute of Chartered Accountants of Sri Lanka.

RemunerationThe fees paid to Auditors, Messrs. Ernst & Young for audit and other services are given in note 26 to the Financial Statements.

Annual General MeetingThe 11th Annual General Meeting of the Company will be held on 30 September 2020. The Notice of meeting is given on page 190 of the Annual Report.

Acknowledgement of the Contents of the Annual report As required by section 168 (1) (k) of the CA 2007, the Board of Directors hereby acknowledge the contents of this Annual Report.

This Annual Report is signed for and behalf of the Board of Directors.

S. G. Wijesinha L. K. A. H. Fernando

Chairman Chief Executive Officer/ Executive Director

R. WeudagedaraCompany Secretary


FINANCIAL REPORTS


FINANCIAL CALENDER - 2019/20 10th Annual General Meeting 26 July 2019Audited Financial Statements for the year ended 31 March 2019 signed on 26 June 2019Payment of first and final dividend for the Financial Year 2018/19 06 August 2019

Unaudited Interim Financial Statements submitted to the Colombo Stock Exchange in terms of Rule 7.4

Date of Submission

First Quarter ended 30 June 2019 13 August 2019Second Quarter ended 30 September 2019 13 November 2019Third Quarter ended 31 December 2019 13 February 2020Fourth Quarter ended 31 March 2020 04 September 2020

PROPOSED FINANCIAL CALENDER - 2020/21

11th Annual General Meeting 30 September 2020

Unaudited Interim Financial Statements to be submitted to the Colombo Stock Exchange in terms of Rule 7.4

First Quarter ended 30 June 2020 15 September 2020*Second Quarter ended 30 September 2020 On or before 15 November 2020Third Quarter ended 31 December 2020 On or before 15 February 2021Fourth Quarter ended 31 March 2021 On or before 31 May 2021

* In terms of Circular No. of 10/2020 of Colombo Stock Exchange



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STATEMENT OF DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING

INTRODUCTION

The following statement fulfills the requirement to publish the Directors’ statement on Financial Reporting as per section D.1.5 of the Code of Best Practice on Corporate Governance 2017 issued jointly by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka. (CG Code 2017).

RESPONSIBILITY

The responsibility of the Board of Directors in relation to the Financial Statements of the Company and the Group is set out in this statement, which should be read in conjunction with the Auditors’ statement set out in their report on page 103 to 105 of this Annual Report.

The Companies Act No. 07 of 2007 (CA 2007) requires the Directors to prepare the Financial Statements for each Financial Year, giving a true and fair view of the state of affairs of the Company and the Group as at the end of the Financial Year, the profit and loss of the Company and the Group for the Financial Year and present the same to the shareholders.

The Financial Statements comprise of:

y The statement of financial position ;

y The statements of profit or loss and other comprehensive income;

y The statement of changes in equity and cash flows for the year ended;

y Accounting policies and notes thereto

The Board of Directors confirm that the Financial Statements of the Company and the Group give a true and fair view, as at 31 March 2020, of the

y Financial position of the Company and its subsidiaries; and

y Financial performance of the Company and its subsidiaries

The Directors have ensured that in preparing these Financial Statements:

y The appropriate accounting policies have been selected and applied in a consistent manner and material departures, if any, have been disclosed and explained; and

y All applicable Accounting Standards in accordance with Sri Lanka Accounting Standards (SLFRS/ LKAS) as relevant have been applied; and

y Reasonable and prudent judgements and estimates have been made so that the form and substance of transactions are properly reflected; and

y To the best of their knowledge, the statements provide the information required by and otherwise comply with, the CA 2007, the Listing Rules of the Colombo Stock Exchange and the requirements of any other regulations applicable to the Company and the Group.

The Directors have a responsibility to ensure that the Company and the Group maintains sufficient accounting records to disclose, with reasonable accuracy, the financial position of the Company and the Group.

The Board of Directors accept full responsibility for the integrity and objectivity of the Financial Statements presented. The Directors are also responsible for taking reasonable steps to safeguard the assets of the Company/Group and in this regard to give proper consideration to the establishment of appropriate internal control systems with a view to preventing and detecting frauds and other irregularities.

The Directors are required to provide the Auditors with every opportunity to take whatever steps and undertake whatever inspections they may consider appropriate to enable them to express their audit opinion.

The Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and the Group and all contributions, levies and taxes payable relating to the employees of the Company and the Group, which were due and payable as at the reporting date, have been paid or, where relevant, provided for.

Following a review of the Company’s financial and related information including cash flows and borrowing facilities, the Directors are satisfied that the Company and the Group have adequate resources to continue in operation and have continued to adopt the Going-Concern basis in preparing these Financial Statements.

By order of the Board

R. WeudagedaraCompany Secretary



RESPONSIBILITY STATEMENT OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCE OFFICER

COMPLIANCE WITH THE LAWS AND REGULATIONS

The Financial Statements of R I L Property PLC (the Company/ R I L) and the Group for the Financial Year 2019/20 have been prepared and presented in compliance with the requirements of the following:

y Sri Lanka Accounting Standards issued by the Institute of Chartered Accountants of Sri Lanka (SLFRS/LKAS);

y The Companies Act No. 07 of 2007 (CA 2007);

y Listing Rules of the Colombo Stock Exchange (CSE);

y Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995;

y Code of Best Practice on Corporate Governance 2017 issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka (CG Code 2017); and

y Requirements of any other regulatory authority as applicable to the Company and the Group.

FINANCIAL REPORTING

The accounting policies used in the preparation of these Financial Statements are appropriate and are consistently applied except where otherwise stated in the notes to the Financial Statements. There are no departures from the prescribed Accounting Standards in their adoption. The significant accounting policies and estimates that involved a high degree of judgement and complexity were discussed with the Board Audit Committee (BAC) as well as the Company’s External Auditors.

Comparative information has been reclassified wherever necessary to comply with the current presentation.

The Board of Directors and the Management assume full responsibility for the integrity and objectivity of the Financial Statements presented. The estimates and judgments relating to Financial Statements were made on a prudent and reasonable basis, in order that the Financial Statements reflect in a true and fair manner, the form and substance of transactions and reasonably present the Group’s state of affairs. To ensure this, the Group has taken proper and sufficient care in implementing a system of internal controls for safeguarding assets and for preventing and detecting frauds as well as other irregularities.

We the undersigned, confirm that to the best of our knowledge, R I L and its’ subsidiaries maintain sufficient accounting records, to disclose with reasonable accuracy, the financial position and performance of the R I L Group. We also confirm that the Company and the Group have adequate resources to continue in operation and have applied the Going Concern basis in preparing these Financial Statements.

SYSTEM OF INTERNAL CONTROLS

The Group has taken proper and sufficient care in installing a system of internal control and accounting records, for safeguarding assets and for preventing and detecting frauds as well as other irregularities which are reviewed, evaluated and updated on an ongoing basis. We have evaluated the internal controls and procedures of the Company for the Financial Year under

review and confirm, based on such evaluations there were no significant deficiencies and material weaknesses in the design and implementation or operation of internal controls and frauds that involves the management or other employees.

Company’s Internal Audit function headed by the Senior Manager Risk & Compliance conducts periodic audits in accordance with the audit plan and provides comfort on the efficiency and effectiveness of the internal control system. However, there are inherent limitations that should be recognised in weighing the assurances provided by any system of internal control and accounting.

The Company acts as the BAC for its subsidiary FoodBuzz (Private) Limited, while United Motors Lanka PLC has its own BAC on which the Company relies for the efficiency and effectiveness of their internal control systems. The involvement of the Company’s BAC is limited to receipt and review of their BAC meeting minutes, with appropriate inquiries following as and when necessary.

REPORT OF INDEPENDENT AUDITORS

Messrs. Ernst & Young, Chartered Accountants, the External Auditors of the Company have examined the Financial Statements made available together with the relevant financial records, related data and Minutes of meetings and accordingly expressed their opinion in their report. Their report is given on page 103 to 105.



REPORTS RISK AND

GOVERNANCE


BOARD AUDIT COMMITTEE

The BAC pre – approves the audit services provided by Messrs. Ernst & Young, Chartered Accountants. The Committee also reviews the level of non-audit services performed by the External Auditor.

The BAC meets periodically with the Internal Auditors and the Independent External Auditors to review the manner in which their responsibilities are discharged and to discuss matters on internal controls identified by the Internal Auditors, the independent External Auditors and the Management evaluates the adequacy and effectiveness of the internal control system.

To ensure complete independence, the Internal Auditors and the External Auditors have full and free access to the members of the BAC to discuss any matter of substance.

CONCLUSION

We confirm that to the best of our knowledge

y The Financial Statements reflect in a true and fair manner, the form and substance of transactions and reasonably present the Group’s state of affairs and have applied the Going Concern basis in preparing these Financial Statements;

y The system of internal controls is operating effectively;

y The Group has complied with all applicable laws and regulations and there is no material litigation against Group other than those disclosed under note 35 to the Financial Statements;

y All taxes, duties, levies and all statutory payments by the Group and all contributions, levies and taxes payable on behalf and in respect of the employees of the Group as at 31 March 2020 have been paid or provided for, where relevant.

L. K. A. H. Fernando I. PereraChief Executive Officer/Executive Director Chief Finance Officer



DIRECTORS' STATEMENT ON INTERNAL CONTROLSINTRODUCTION

The following statement fulfils the requirement to publish the Directors’ statement on Internal Controls as per section D.1.5 of the Code of Best Practice on Corporate Governance 2017 issued jointly by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka. (CG Code 2017)

RESPONSIBILITY

Maintaining a sound system of internal controls to safeguard the investment of the shareholders and the assets of the Company, is the responsibility of the Board of Directors.

The Board has established an ongoing process for identifying, evaluating and managing significant risks faced by the Company and this process includes enhancing the system of internal controls as and when there are changes to the business operations as well as regulations. This process was in place during the year under review and was periodically reviewed by the Board through the Board Audit Committee (BAC).

However, such system is designed to manage the Company’s key areas of risk within an acceptable risk profile, rather than to eliminate the risk of failure to achieve the business objectives. Therefore, the system of internal controls can only provide reasonable and not absolute assurance on the successful management of risks, financial losses or frauds.

The Board is of the view that the system of internal controls in place is sound and adequate to provide reasonable assurance regarding the reliability of financial reporting and that the preparation of Financial Statements is in accordance with the applicable Accounting Standards and regulatory requirements.

Summarised below are the key processes adopted for the review of adequacy and effectiveness of the system of internal controls related to financial reporting:

y Board Sub - Committees are established to assist the Board

i. in ensuring the effectiveness of the operations;

ii. that the operations are in accordance with the business direction/strategies;

iii. that the Company’s operations are in line with the annual budget and approved policies;

y The Internal Audit function headed by Senior Manager Risk and Compliance, is in-house comprising of appropriately trained and competent staff with the aim to provide objective assurance. Internal Audit function reviews on an ongoing basis, the design and effectiveness of the Company’s internal control systems including systems for compliance with applicable laws and regulations and highlight areas of non –compliances and provide recommendations on areas of improvement.

y Audits are conducted according to the audit plan approved by the BAC. Frequency of the audits is determined based on the level of risk assessed. Findings of the internal audits are submitted to the BAC on a quarterly basis.

y The BAC reviews the internal control issues highlighted by the Internal Auditors and evaluates the adequacy and effectiveness of the risk management and internal control systems. The BAC reviews Internal Audit functions with particular emphasis on the scope and quality of audits. The minutes of BAC meetings are tabled at successive Board meetings for informational purposes.

The Company’s BAC acts as the BAC for its subsidiary FoodBuzz (Private) Limited.

United Motors Lanka PLC has its own BAC on which the Company relies for the efficiency and effectiveness of their internal control systems. The involvement of the Company’s BAC is limited to receipt and review of their BAC meeting minutes, with appropriate inquiries following as and when necessary.

y IT audits are conducted by independent external parties to ensure the integrity of the financial

information, data security and adequate access controls with regard to processing data.

y Recommendations by the External Auditors in connection with the internal control systems are reviewed and appropriate steps are taken to implement them.

y Policies/Procedures are developed covering functional areas of the Company and these policies and procedures are reviewed and approved by the Board periodically.

CONFIRMATION

Based on the above processes, the Board of Directors of R I L Property PLC confirms that the financial reporting system of the Company and the Group have been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Financial Statements for external purposes, and has been carried out in accordance with Sri Lanka Accounting Standards (SLFRS/LKAS), Companies Act No.07 of 2007, Listing Rules of the Colombo Stock Exchange, Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995, Code of Best Practice on Corporate Governance 2017 issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka and requirements of any other regulatory authority as applicable to the Company and the Group.


L. K. A. H. FernandoChief Executive Officer/Executive Director

C. R. KariyawasamChairpersonBoard Audit Committee




REPORTS RISK AND

GOVERNANCE


INDEPENDENT AUDITOR’S REPORT

TO THE SHAREHOLDERS OF R I L PROPERTY PLC

Report on the audit of the Financial Statements Opinion

We have audited the Financial Statements of R I L Property PLC (“the Company”) and the consolidated Financial Statements of the Company and its subsidiaries (“the Group”), which comprise the statement of financial position as at 31 March 2020, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the Financial Statements, including a summary of significant accounting policies.

In our opinion, the accompanying Financial Statements of the Company and the Group give a true and fair view of the financial position of the Company and the Group as at 31 March 2020, and of their financial performance and

cash flows for the year then ended in accordance with Sri Lanka Accounting Standards

Basis for opinion

We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics) and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the

Financial Statements of the current period. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the Financial Statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying Financial Statements.

Key Audit Matter How KAM was addressed

Valuation of land and buildings

As at 31 March 2020, land and buildings carried at fair value, classified as property, plant and equipment and investment property amounted to LKR 7,726 Mn. and LKR 14,894 Mn. respectively. Further the fair value gain recognised in statement of profit or loss amounts to LKR 688 Mn. and the revaluation surplus recognised in the other comprehensive income by the Group is LKR 840 Mn. The fair value of such property was determined by an External Valuer engaged by the Group.

The valuation of land and buildings was significant to our audit due to its materiality and use of judgements and unobservable estimates (such as current market price per perch, yield rate) described in note 8.5. In assessing the value, the External Valuer has used significant unobservable input and has taken into consideration possible effects of COVID 19.

Our audit procedures focused on the valuation performed by the External Valuer, which included among others, the following procedures:

y We evaluated the competence, capabilities and objectivity of the External Valuer appointed by the management. We read the valuation report signed by the valuer to obtain an understanding of the work of the valuer and evaluated the appropriateness as audit evidence for the recorded valuation of land and buildings in the Financial Statements.

y We engaged our internal specialist resources to assist us in evaluating the appropriateness of the valuation method used by the External Valuer and assessing the reasonableness of the range of values per perch and, yield rate in comparison to market data and recent transaction prices of comparable properties.

y Verified the land values considered by the valuer by independently corroborating with property market information.

In addition, we evaluated the adequacy of the related Financial Statements disclosures in note 7 and note 8.


INDEPENDENT AUDITOR’S REPORT

Valuation of Inventory

As at 31 March 2020, the Group held LKR 7,161 Mn. of inventories comprising vehicles, spare parts, lubricants, tyres and other inventories. As disclosed in the accounting policy note 12 inventories are held at the lower of cost and net realisable value.

The determination of whether inventory will be realised for a value less than cost requires management to exercise judgement and apply assumptions. Management determined the level of write down required by estimating the future saleability of slow moving inventory with reference to inventory aging and expected future market conditions.

Our procedures included, the following:

y We assessed the risk areas associated with valuation of inventory and communicated with the component auditor regarding the procedures to be performed to address such identified risks.

y We reviewed the component auditors’ working papers relating to the audit procedures performed to check whether (a) the purchase cost including taxes and other costs incurred to bring the inventories to their present location had been recorded correctly, (b) to assess the adequacy of the provision for obsolete and slow-moving inventories and (c) test the key controls on a sample basis over inventory valuation at lower of cost and net realisable value.

y We tested on a sample basis the reasonability of the net realisable value of vehicles by reference to recent selling prices.

In addition, we evaluated the adequacy of the related Financial Statements disclosures in note 12.

Other Information included in the 2020 Annual Report

Other information consists of the information included in the Annual Report, other than the Financial Statements and our auditor’s report thereon. Management is responsible for the other information.

Our opinion on the Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the management and those charged with governance

Management is responsible for the preparation of Financial Statements that give a true and fair view in accordance with Sri Lanka Accounting Standards,

and for such internal control as management determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

As part of an audit in accordance with SLAuSs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

y Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

y Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal controls of the Company and the Group.



REPORTS RISK AND

GOVERNANCE


We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

As required by section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.

CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditor’s report is 1420.

Colombo 03 September 2020

y Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

y Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

y Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

y Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated Financial Statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.


GROUP COMPANY

As at 31 March 2020 2019 2020 2019

Note LKR'000 LKR'000 LKR'000 LKR'000

ASSETS Non-current assets Property, plant and equipment 7 8,667,607 7,892,174 380,455 362,277 Investment property 8 14,893,600 14,106,000 14,893,600 14,106,000 Intangible assets 9 245,664 205,670 4,987 9,810 Right-of-use assets 10.1 385,435 - - - Investments in subsidiaries 11.1 - - 4,492,935 4,556,740 Financial assets at fair value through other comprehensive income 15.1 208,256 256,411 - - Reimbursable right 19.4 67,211 72,923 - - Deferred tax assets 22 484,714 223,269 - - Lease rentals receivable on straight line adjustment 49,308 42,267 49,308 42,267 Total non-current assets 25,001,795 22,798,714 19,821,285 19,077,094

Current assets Inventories 12 7,160,856 6,253,093 4,997 5,896 Trade and other receivables 13 3,623,870 3,238,097 96,132 92,036Income tax receivable 14 66,378 9,818 - - Financial assets at fair value through profit or loss 15.2 417,778 456,415 362,854 205,380 Cash and bank 16 314,607 594,677 22,513 22,810 Total current assets 11,583,489 10,552,100 486,496 326,122Total assets 36,585,284 33,350,814 20,307,781 19,403,216

EQUITY AND LIABILITIES Equity Stated capital 17.1 7,360,000 7,360,000 7,360,000 7,360,000 Revaluation reserve 610,572 251,107 210,512 170,543 Other components of equity (92,476) (60,572) - - Retained earnings 17.3 9,711,908 9,887,632 7,949,354 7,379,649 Total equity attributable to equity holders of the Company 17,590,004 17,438,167 15,519,866 14,910,192

Non-controlling interests 5,870,863 6,310,762 - - Total equity 23,460,867 23,748,929 15,519,866 14,910,192

Non-current liabilities Interest bearing loans and borrowings 18 2,744,495 3,141,410 2,744,495 3,141,410 Employee benefits 19.1 251,296 232,052 6,925 6,475 Lease liabilities 10.2 231,820 - - - Deferred tax liabilities 22 2,307,612 841,534 1,234,203 764,123 Rent received in advance 20.1 150,852 16,837 151,032 17,045 Customer deposits 21.1 189,389 82,566 196,066 89,243 Total non-current liabilities 5,875,464 4,314,399 4,332,721 4,018,296

Current liabilities Trade and other payables 20 1,076,126 1,295,064 305,789 313,550Interest bearing loans and borrowings 18 5,788,918 3,746,611 126,915 135,183 Lease liabilities 10.2 163,435 - - - Income tax payable 14 5,354 85,414 5,354 7,209 Bank overdrafts 16.2 215,120 160,397 17,136 18,786 Total current liabilities 7,248,953 5,287,486 455,194 474,728Total equity and liabilities 36,585,284 33,350,814 20,307,781 19,403,216

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

I. Perera Chief Finance Officer

The Board of Directors is responsible for these Financial Statements. Signed for and on behalf of the board by:

S. G. Wijesinha L. K. A. H. Fernando Chairman Chief Executive Officer/Executive Director

The accounting policies and notes on pages 112 to 182 form an integral part of the Financial Statements. Figures in brackets indicate deductions.

03 September 2020 Colombo

STATEMENT OF FINANCIAL POSITION



REPORTS RISK AND

GOVERNANCE


GROUP COMPANY

For the year ended 31 March 2020 2019 2020 2019


Revenue 23 11,236,077 13,955,664 1,002,900 762,179

Cost of sales (8,043,499) (10,300,396) (77,660) (69,197)

Gross profit 3,192,578 3,655,268 925,240 692,982

Other income and gains 24 109,065 177,134 197,244 90,323

Fair value gain on investment property 8 687,905 840,282 687,905 840,282

Marketing and promotional expenses (404,779) (375,310) (1,038) (1,009)

Administrative expenses (2,312,818) (2,250,464) (292,837) (202,232)

Profit from operating activities 1,271,951 2,046,910 1,516,514 1,420,346

Finance expenses 25.1 (915,294) (853,423) (390,882) (478,678)

Finance income 25.2 80,054 127,868 43,079 73,169

Net finance expenses (835,240) (725,555) (347,803) (405,509)

Profit before tax 26 436,711 1,321,355 1,168,711 1,014,837

Income tax expense 27 (48,247) (201,830) (168,576) (211,032)

Profit for the year 388,464 1,119,525 1,000,135 803,805

Profit for the year attributable to:

Owners of the parent 589,205 905,923 1,000,135 803,805

Non-controlling interest (200,741) 213,602 - -

388,464 1,119,525 1,000,135 803,805

Other comprehensive income

Items that will not be reclassified to the profit or loss in subsequent periods:

Changes in fair value of other investments at fair value through other comprehensive income 15.1.1 (62,557) (107,825) - -

Revaluation of land and buildings 7.1 & 7.2 840,105 53,775 47,641 43,672

Actuarial gain/(loss) on retirement benefit obligation 19.1 & 19.4.2 18,503 3,343 1,924 (1,004)

Tax effects on other comprehensive income 22 (162,540) (8,384) (8,211) (6,999)

Other comprehensive income for the year, net of tax 633,511 (59,091) 41,354 35,669

Total comprehensive income for the year, net of tax 1,021,975 1,060,434 1,041,489 839,474

Total comprehensive income for the year attributable to:

Owners of the parent 935,904 898,572 1,041,489 839,474

Non-controlling interest 86,071 161,862 - -

1,021,975 1,060,434 1,041,489 839,474

Earnings per share (EPS) LKR 29 0.74 1.15 1.25 1.02

The accounting policies and notes on pages 112 to 182 form an integral part of the Financial Statements.Figures in brackets indicate deductions.

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


STATEMENT OF CHANGES IN EQUITY

Group Note Stated capital Revaluation reserve

Other components of equity Retained earnings

Shareholder’s funds

Non-controlling interest

Total equity

Available for sale reserve

FVOCI reserve

LKR’000 LKR’000 LKR’000 LKR’000 LKR’000 LKR’000 LKR’000 LKR’000

As at 01 April 2018 5,760,000 204,284 (5,526) - 8,982,769 14,941,527 6,223,062 21,164,589

Impact of adopting SLFRS 9 - - 5,526 (5,526) - - - -

Adjusted balance as at 01 April 2018 5,760,000 204,284 - (5,526) 8,982,769 14,941,527 6,223,062 21,164,589

Profit for the year - - - - 905,923 905,923 213,602 1,119,525

Other Comprehensive income

Changes in fair value of other investments at fair value through other comprehensive income - - - (54,991) - (54,991) (52,834) (107,825)

Net gains on disposal of FVOCI instruments - - - (55) 55 - - -

Revaluation of land and buildings - 53,775 - - - 53,775 - 53,775

Actuarial gain/(loss) on retirement benefit obligation - - - - 1,529 1,529 1,814 3,343

Tax effects on other comprehensive income - (6,952) - - (712) (7,664) (720) (8,384)

Total comprehensive income for the year - 46,823 - (55,046) 906,795 898,572 161,862 1,060,434

Share issued during the year 17.1 1,600,000 - - - - 1,600,000 - 1,600,000

Share issue expenses 17.3 - - - - (1,932) (1,932) - (1,932)

Dividends to equity holders - - - - - - (74,162) (74,162)

As at 31 March 2019 7,360,000 251,107 - (60,572) 9,887,632 17,438,167 6,310,762 23,748,929

As at 01 April 2019 7,360,000 251,107 - (60,572) 9,887,632 17,438,167 6,310,762 23,748,929

Impact of adopting IFRIC 23 - (10,650) - - (653,417) (664,067) (328,205) (992,272)


Profit for the year - - - - 589,205 589,205 (200,741) 388,464



Revaluation of land and buildings 7.1 - 457,451 - - - 457,451 382,654 840,105


Tax effects on other comprehensive income - (87,336) - - (1,279) (88,615) (73,925) (162,540)


Dividends to equity holders 17.2 - - - - (120,000) (120,000) (197,765) (317,765)

As at 31 March 2020 7,360,000 610,572 - (92,476) 9,711,908 17,590,004 5,870,863 23,460,867



REPORTS RISK AND

GOVERNANCE


Group Note Stated capital Revaluation reserve

Other components of equity Retained earnings

Shareholder’s funds

Non-controlling interest

Total equity

Available for sale reserve

FVOCI reserve


As at 01 April 2018 5,760,000 204,284 (5,526) - 8,982,769 14,941,527 6,223,062 21,164,589

Impact of adopting SLFRS 9 - - 5,526 (5,526) - - - -


Profit for the year - - - - 905,923 905,923 213,602 1,119,525

Other Comprehensive income


Net gains on disposal of FVOCI instruments - - - (55) 55 - - -

Revaluation of land and buildings - 53,775 - - - 53,775 - 53,775


Tax effects on other comprehensive income - (6,952) - - (712) (7,664) (720) (8,384)


Share issued during the year 17.1 1,600,000 - - - - 1,600,000 - 1,600,000

Share issue expenses 17.3 - - - - (1,932) (1,932) - (1,932)

Dividends to equity holders - - - - - - (74,162) (74,162)

As at 31 March 2019 7,360,000 251,107 - (60,572) 9,887,632 17,438,167 6,310,762 23,748,929

As at 01 April 2019 7,360,000 251,107 - (60,572) 9,887,632 17,438,167 6,310,762 23,748,929

Impact of adopting IFRIC 23 - (10,650) - - (653,417) (664,067) (328,205) (992,272)


Profit for the year - - - - 589,205 589,205 (200,741) 388,464



Revaluation of land and buildings 7.1 - 457,451 - - - 457,451 382,654 840,105


Tax effects on other comprehensive income - (87,336) - - (1,279) (88,615) (73,925) (162,540)


Dividends to equity holders 17.2 - - - - (120,000) (120,000) (197,765) (317,765)

As at 31 March 2020 7,360,000 610,572 - (92,476) 9,711,908 17,590,004 5,870,863 23,460,867


Company Stated capital

Revaluation reserve

Retained earnings

Total

Note LKR’000 LKR’000 LKR’000 LKR’000

As at 01 April 2018 5,760,000 134,151 6,578,499 12,472,650

Profit for the year - - 803,805 803,805


Revaluation of buildings - 43,672 - 43,672

Actuarial gain/(loss) on retirement benefit obligation - - (1,004) (1,004)

Tax effects on other comprehensive income - (7,280) 281 (6,999)

Total comprehensive income for the year - 36,392 803,082 839,474

Share issued during the year 17 .1 1,600,000 - - 1,600,000

Share issue expenses 17.3 - - (1,932) (1,932)

As at 31 March 2019 7,360,000 170,543 7,379,649 14,910,192

As at 01 April 2019 7,360,000 170,543 7,379,649 14,910,192

Impact of adopting IFRIC 23 - - (311,815) (311,815)

Adjusted balance as at 01 April 2019 7,360,000 170,543 7,067,834 14,598,377

Profit for the year - - 1,000,135 1,000,135

Other Comprehensive Income

Revaluation of buildings 7.2 - 47,641 - 47,641

Actuarial gain/(loss) on retirement benefit obligation - - 1,924 1,924

Tax effects on other comprehensive income - (7,672) (539) (8,211)

Total comprehensive income for the year - 39,969 1,001,520 1,041,489

Dividends to equity holders - - (120,000) (120,000)

As at 31 March 2020 7,360,000 210,512 7,949,354 15,519,866


STATEMENT OF CHANGES IN EQUITY



REPORTS RISK AND

GOVERNANCE


GROUP COMPANY

Year ended 31 March 2020 2019 2020 2019


Cash flows from / (used in) operating activitiesProfit before tax 436,711 1,321,355 1,168,711 1,014,837

Adjustments for ;Depreciation, amortisation 7 & 9 318,792 270,077 37,038 37,632 Increase in fair value of investment property 8 (687,905) (840,282) (687,905) (840,282)Gain on disposal of property, plant & equipment 24 (2,702) (36,774) (30) (4,431)Net change in fair value financial assets at fair value through profit or loss 25.1 14,358 17,921 - - Fair value adjustment on unit trust - (187) - - Provision for slow moving / obsolete inventories 12.2 63,048 49,327 - - Impairment of trade receivables and bad debt written off 13.4 26,302 (2,938) - - Amortisation of right -of-use-assets 10.1 167,958 - - - Finance costs 25.1 900,936 835,502 390,882 478,678 Finance income 25.2 (70,814) (119,269) (43,079) (73,169)Dividend income 24 & 25 (9,240) (8,599) (182,967) (72,087)Impairment of subsidiary 11.1 - - 63,805 -Impairment of goodwill 9 4,005 - - -Provision for defined benefit obligations 19.1 52,527 47,563 2,374 2,205 Return expected from reimbursable right 19.4.2 (7,988) (9,195) - - Operating profit/(loss) before working capital changes 1,205,988 1,524,501 748,829 543,383

(Increase)/ decrease in inventories (970,811) 269,954 899 (1,959)(Increase)/ decrease in trade and other receivables (452,573) (1,401,508) (11,137) (1,330)Increase/ (decrease) customer deposits 60,768 40,610 60,768 41,655 Increase/ (decrease) in trade and other payables (56,675) 16,158 154,474 102,125Cash generated from operations (213,303) 449,715 953,833 683,874

Finance cost paid (883,129) (823,331) (373,075) (466,507)Income tax paid 14 (135,046) (210,797) (20,377) (23,384)Employee benefits paid by the plan 19.4.2 15,693 17,223 - - Gratuity paid 19.1 (23,715) (21,686) - (1,084)Net cash from/(used in) operating activities (1,239,500) (588,876) 560,381 192,899

Cash flows from / (used in) investing activitiesAcquisition of property, plant & equipment 7 (223,976) (482,312) (2,685) (847)Acquisition of intangible assets 9 (74,933) (63,300) (93) (1,530)Proceeds from sale of property, plant & equipment 3,492 49,584 56 6,020 Expenditure incurred on investment property 8 (99,695) (868,218) (99,695) (868,218)Net investment in unit trust 15.2.3 24,279 (224,908) (157,474) (54,207)Proceeds / (investment in) from fixed deposits - 545,000 - 545,000 Investment in financial assets at fair value through OCI 15.1 (14,402) (7,923) - - Net investments in call deposits 16.1 (3,432) (232) - - Dividend income 24 & 25 9,240 - 182,967 72,087 Finance income 70,814 124,054 43,079 73,169 Net cash flows from/(used in) investing activities (308,613) (928,255) (33,845) (228,526)

Cash flows from (used in) financing activitiesProceeds from interest bearing loans & borrowings 18 57,932,303 36,480,600 - 78,508 Repayment of interest bearing loans & borrowings 18 (56,286,911) (37,296,012) (405,183) (1,786,915)Proceed from issue of shares (net of issue cost) - 1,598,068 - 1,598,068 Principal element of lease payments (117,739) - - - Dividend paid (120,000) - (120,000) - Dividend paid to non-controlling interest (197,765) (74,162) - - Net cash flows from/(used in) financing activities 1,209,888 708,494 (525,183) (110,339)

Net increase/(decrease) in cash and cash equivalents (338,225) (808,637) 1,353 (145,966)Cash and cash equivalents at the beginning of the year 16.2 433,954 1,242,591 4,024 149,990 Cash and cash equivalents at the end of the year 16.2 95,729 433,954 5,377 4,024


STATEMENT OF CASH FLOWS


ACCOUNTING POLICIES1. CORPORATE INFORMATION

1.1 Reporting entity

R I L Property PLC (the Company) is a public limited liability Company listed on the Colombo Stock Exchange incorporated and domiciled in Sri Lanka. The Company’s registered office and the principle place of business located at No 33, Park Street Colombo 02.

R I L property PLC is registered with the Board of Investment of Sri Lanka under section 17 of the BOI ACT no. 4 of 1978.

R I L Property PLC does not have an identifiable parent of its’ own. The Company is the ultimate parent of the Group.

1.2 Principal business activities and nature of operations

Entity Principal business activities

Company

R I L Property PLC Develop and manage Grade "A" commercial office space in selected core markets in the Colombo Business District (CBD) whilst offering multi-faceted real estate solutions including facilities management, leasing, land acquisition, construction management services, consulting and strategic investment.

Subsidiaries

FoodBuzz (Private) Limited Operating a chain of BreadTalk restaurants under franchise agreement.

United Motors Lanka PLC Importation and sale of brand new Mitsubishi and Fuso vehicles, spare parts, lubricants, after sales services, 3D printers and related services.

Subsidiaries of United Motors Lanka PLC

Unimo Enterprises Limited Importation and sale of vehicles, accessories, power generators and tyres and assembling of vehicles.

UML Heavy Equipment Limited Importation and sale of heavy equipment and power generators.


Renting of premises.

Orient Motor Company Limited (OMCL) amalgamated with United Motors Lanka PLC with effect from 30 November 2019.

There were no other significant changes in the nature of the principal activities of the Company and the Group during the Financial Year under review.

2. BASIS OF PREPARATION

2.1 Statement of compliance

The consolidated Financial Statements of the Group and the separate Financial Statements of the Company have been prepared in accordance with the Sri Lanka Accounting Standards (herein referred to as SLFRSs/LKASs), laid down by The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and in compliance with the requirements of Companies Act No. 07 of 2007 and the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995.

These Financial Statements were authorised for issue by the Company’s Board of Directors on 03 September 2020.

2.2 Going concern

Due to COVID-19, the business was adversely affected with the restrictions in free movement of customers, staff and key stakeholders since mid-March 2020.

The Board of Directors of the Group evaluated the appropriateness of using going concern assumption across the Group of companies in preparing Financial Statements for the year ended 31 March 2020 based on available information. In this excercise, the Board evaluated number of scenarios prepared by the management under different assumptions which took in to account the existing and anticipated effects of COVID-19 on the Group of companies.

When preparing Financial Statements based on the available information Management has assessed the impact of COVID 19 and the appropriateness of the use of the going concern basis. The Board of R I L Property PLC is satisfied that the Company and its subsidiaries have adequate resources to continue operations without any disruption for the foreseeable future, and therefore preparing and presenting these Financial Statements on a going concern basis.

2.3 Consolidated Financial Statements

The Consolidated Financial Statements of the Company as at and for the year ended 31 March 2020, encompasses the Company and its’ subsidiaries (together referred to as the “Group” and individually as “Group Entities”).

There were no other significant changes in the nature of the principal activities of the Company and the Group during the Financial Year under review.

All subsidiaries of the Company have been incorporated in Sri Lanka.

The Directors have made an assessment of the Group’s ability to continue as a going concern in the foreseeable future and they do not intend to liquidate or to cease activities in any of the Group Entities.



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2.4 Basis of measurement

The consolidated Financial Statements have been prepared on the historical cost except for following material items in the statement of financial position.

y Financial assets at fair value through profit or loss (FVTPL) are measured at fair value.

y Financial assets measured at fair value through other comprehensive income (FVOCI) are measured at fair value.

y Defined benefit obligation is measured after actuarially valuing and the present value of the defined benefit obligation is recorded.

y Defined benefit asset is measured at fair value.

y Freehold land measured at cost at the time of acquisition and subsequently at revalued amounts which are the fair value at the date of valuation.

y Investment property is measured at fair value.

y Owner occupied building are measured at fair value.

2.5 Functional and presentation currency

Items included in the Financial Statements of the Group and the Company are measured using the currency of the primary economic environment in which the Company operates (the functional currency), which is the Sri Lankan Rupees (LKR). All amounts have been rounded to the nearest thousand, unless otherwise indicated.

2.6 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 LKAS 1 and amendments to LKAS 1 on “Disclosures initiatives”

2.7 Offsetting

Assets and liabilities and income and expenses in the Financial Statements

are not offset unless required or permitted by a Sri Lanka Accounting Standards.

2.8 Comparative information

Comparative information including quantitative, narrative and descriptive information is disclosed in respect of the previous year in the Financial Statements in order to enhance the understanding of the current year’s Financial Statements and to enhance the inter period comparability. The presentation and Classification of the Financial Statements of the previous year is reclassified, where relevant for better presentation and to be comparable with those of the current year.

The Group has not restated the comparative information for contracts within the scope of Sri Lanka Accounting Standard – SLFRS 16 on “Leases” (SLFRS 16) and adoption of IFRIC 23 on “uncertainty over income tax treatments”.

Therefore, the comparative information for 2018/19 is reported under Sri Lanka Accounting Standard – LKAS 17 on “Leases” and is not comparable to the information presented for 2019/20. Differences arising from adoption of SLFRS 16 and IFRIC 23 have been recognised directly in equity as of 01 April 2019 and are disclosed in note 6 on pages 121 to 123.

2.9 Significant accounting judgements, estimates and assumptions

In preparing these Consolidated Financial Statements, management has made judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

Impact of COVID-19 pandemic

The ongoing COVID-19 pandemic has increased the uncertainties of estimates used in the preparation of these Financial Statements. The extent and the duration of the spread of the virus & economic downturn caused by the pandemic will impact to the level of uncertainty.

The impact of the COVID-19 pandemic on accounting estimates discussed further under the relevant notes to these Financial Statements.

2.9.1 Judgements

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which has the most significant effect on the amounts recognised in the Financial Statements.

i) Classification of property

The Group determines whether a property is classified as Investment Property, owner occupied property using significant judgement as disclosed in note 7 and note 8.

Investment Property comprises land and buildings which are not occupied substantially for use by, or in the operations of the Group, not for sale in the ordinary course of business, but are held primarily to earn rental income and capital appreciation.

The Group determines whether a property qualifies as Investment Property by considering whether the property generates cash flows largely independently of the other assets held by the entity. Owner-occupied properties generate cash flows that are attributable not only to property but also to other assets used in the production or supply process.

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions can be sold separately (or


leased out separately under a finance lease), the Group accounts for the portions separately. If the portions cannot be sold separately, the property is accounted for as Investment Property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is applied in determining whether ancillary services are so significant that a property does not qualify as Investment Property. The Group considers each property separately in making its judgement.

ii) Deferred Taxation

Deferred taxation on investment property

Deferred tax on fair value gains on investment property carried at fair value is required to be measured using a rebuttable presumption that the carrying amount will be recovered through sale.

The investment property of the Group consists of freehold land and buildings. With regard to the building, the presumption is rebutted, as the Group’s business model is to consume substantially all the economic benefits embodied in the building over time, rather than through sale.

Tax base in respect of the investment property has been made in line with new Inland Revenue Act No. 24 of 2017 as disclosed in note 22.

The Company and its subsidiaries hold land to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes and they are classified as investment property or under property plant and equipment as appropriate in the Financial Statements.

With the enactment of the Inland Revenue Act. number. 24 of 2017, taxes applicable to the gains resulting from realisation of capital assets are subject to taxation at rates prescribed in the Act.

2.9.2 Accounting estimates and assumptions

The key assumptions concerning the future and other key sources

of estimation of uncertainty at the reporting date, that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next Financial Year are discussed below. The respective carrying amounts of assets and liabilities are given in related notes to the Financial Statements.

i. Estimation of fair value of investment properties

The Group carries its Investment Properties at fair value, with changes in fair values being recognised in the Statement of profit or loss. The Group engaged an independent valuer to determine the fair value as at 31 March 2020. In the valuation of Investment Property, management is required to make significant estimates such as current market price per perch, yield rate which are based on current and future market or economic conditions.

The value of investment property of the Company and the Group has been ascertained by an independent valuer and due consideration has been given to recommended best practice in the valuation of real estate in uncertain times.

ii. Principal assumptions for management’s estimation of fair value

If information on current or recent prices of assumptions underlying the discounted cash flow approach of Investment Properties is not available, the fair values of Investment Properties are determined using discounted cash flow valuation techniques. The Group uses assumptions that are mainly based on market conditions existing at each reporting date.

The principal assumptions underlying management’s estimation of fair value are those related to: the future rentals, maintenance requirements, and appropriate capitalisation rates / yields and voids. These valuations are regularly compared to actual market yield data and actual transactions by the Group and those reported by the market.

iii. Deferred Taxation

Following judgments were made in where adopting IFRIC 23 on “uncertainty over Income tax treatments” to determine the provision required for taxes on gains on realisation of Capital assets applicable to freehold land.

y Due to uncertainties that exist in the interpretation of the Inland Revenue Act No. 24 of 2017 relating to taxes applicable to the gains on realisation of free hold land, significant judgement was exercised to determine the provision required for Deferred taxes on such gains. As a result, probability of future outcome relating to uncertain tax treatment relating to capital assets were duly made by management in consultation with relevant experts.

y In assessing whether and how an uncertain tax treatment affects the determination of, tax bases, and tax rates, the Group has assumed that the taxation authority will examine amounts it has a right to examine and have full knowledge of all related information when making those examinations.

y In the event that it is not probable that the taxation authority will accept the Group’s uncertain tax treatment, the entity shall reflect the effect of uncertainty in determining the related tax bases, or tax rates as more fully described in note 22.3 and,

y Where the final outcome of these matters is different to the amounts recorded, such differences generally will impact the provision for income taxes in the period in which such a determination is made.

iv. Fair value of financial instruments

The fair values of financial instruments where no active market exists or where quoted prices are not otherwise available are determined by using valuation techniques. In these cases, the fair values are estimated from observable data in respect of similar financial instruments or using models. Where market observable inputs are not available, they are estimated based on appropriate assumptions.

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3. SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of consolidation

I. Business Combinations

The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is measured at the acquisition date fair value. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transactions costs are expensed as incurred and included in administrative expenses.

If the business combination is achieved in stages, the previously held equity interest is re-measured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration which is deemed to be an asset or liability that is a financial instrument and within the scope of SLFRS 9 Financial Instrument is measured at fair value with changes in fair value either in profit or loss or as a change to other comprehensive income (OCI). If the contingent consideration is not within the scope of SLFRS 9 financial instrument, it is measured in accordance with the appropriate SLFRS. Contingent consideration that is classified as equity is not re measured and subsequent settlement is accounted for within equity.

II. Subsidiaries

Subsidiaries are investees that are controlled by the Group. Control exists when the Company is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power to govern the financial and operating policies over the investee. The Financial Statements of subsidiaries are included in the consolidated Financial Statements from the date that control commences until the date that control ceases.

A list of the Group’s subsidiaries is set out in note 11 to the Financial Statements. There are no significant restrictions on the ability of subsidiaries to transfer funds to the Company (the Parent) in the form of cash dividend or repayment of loans and advances.

III. Non-controlling interest

Non-controlling interests are measured at their proportionate share of the acquisition identifiable net assets at the date of acquisition. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for equity transactions.

IV. Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions are eliminated.

V. Loss of control

Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any gains or losses arising on the loss of control is recognised in the income statement. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date the control is lost. Subsequently it is accounted for as an equity accounted investee or in accordance with the Group’s accounting policy for financial instruments depending on the level of influence retained.

VI. Accounting under separate Financial Statements

Investments in subsidiaries, associates and joint ventures are measured at cost less accumulated impairment in the separate Financial Statements.

3.2 Foreign currency

I. Foreign currency transactions

Transactions in foreign currencies are translated to Sri Lanka Rupees at the exchange rate prevailing at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated to Sri Lanka Rupees at the exchange rate prevailing as at the reporting date. The foreign currency gains or losses on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year and the amortised cost in foreign currency translated at the exchange rate at the end of the year. Non-monetary assets and liabilities which are measured at historical cost denominated in foreign currencies are translated to Sri Lanka Rupees at the exchange rate prevailing at the dates of the transactions. Non-monetary assets and liabilities that are measured at fair value denominated in foreign currencies are translated to Sri Lanka Rupees at the exchange rate prevailing at the dates that the fair values were determined. Foreign exchange differences arising on translation are recognised in the statement of comprehensive income.

3.3 Warranties

Costs incurred by the subsidiaries under the terms of the warranty agreement between principal suppliers are reimbursed to the subsidiaries. Any amounts that are not reimbursed under the warranty agreement are charged to the statement of comprehensive income.

3.4 Expenditure

I. Capital expenditure

All expenditure incurred in running of the business and in maintaining the property, plant and equipment has been charged to revenue in arriving at the profit for the year. For the purpose of presentation of statement of comprehensive income, the Directors are of the opinion that function of expense method present fairly the elements of the enterprise’s performance, hence such presentation method is adopted. Expenditure incurred for the purpose of acquiring, expanding or improving assets of a


permanent nature by means of which to carry on the business or for the purpose of increasing the earning capacity of the business has been treated as capital expenditure.

II. Repairs and maintenance expenses

All expenditure incurred in maintaining the property, plant and equipment in a state of efficiency has been charged to the statement of profit or loss in arriving at the profit of the year.

III. Other expenses

Other expenses are recognised in the statement of profit or loss on the basis of a direct association between the cost incurred and the earning of specific items of income. Provisions in respect of other expenses are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

3.5 Financial instruments

I. Non-derivative financial assets

Initial recognition and measurement

Financial assets are recognised when and only when the Company becomes a party to the contractual provisions of the financial instruments. The Company determines the classification of its financial assets at initial recognition.

All financial instruments are measured initially at their fair value plus transaction costs that are directly attributable to acquisition or issue of such financial instruments, except in the case of financial assets designated at fair value through profit or loss according to Sri Lanka Accounting Standard - SLFRS 09 on “Financial Instruments”. Transaction costs in relation to financial assets at fair value through profit or loss are dealt with through the statement of profit or loss.

Financial assets with embedded derivatives are considered in their

entirety when determining whether their cash flows are solely payment of principal and interest.

The financial assets include cash and cash equivalents, short term deposits, investments in unit trusts, treasury bills, equity shares and trade and other receivables.

Classification and subsequent measurement

At inception, a financial asset is classified into one of the following categories;

y Amortised cost

y Fair value through OCI

y Fair value through profit or loss

From 01 April 2018 as per SLFRS 9, the Group classifies its financial assets based on business model for managing the financial assets and the contractual terms of the cash flows measured at either;

y Amortised cost.

y Fair value (either through OCI or through statement of profit or loss)

Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date.

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

(a) Financial assets measured at amortised cost

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

y The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and

y The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Cash and cash equivalents, trade and other receivables and receivables from related parties are measured at amortised cost.

(b) Financial assets measured at FVOCI

Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains / (losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains / (losses) and impairment expenses are presented as separate line item in the statement of profit or loss.

Investment in long term equity securities are measured at FVOCI. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group’s right to receive payments is established.

(c) Financial assets measured at FVTPL

As per SLFRS 9, all financial assets other than those classified at amortised cost or FVOCI are measured at FVTPL.

Financial assets at fair value through profit or loss include financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis as they are neither held to collect contractual cash flows nor held both to collect contractual cash

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flows and to sell financial assets and financial assets designated upon initial recognition at fair value through profit or loss.

Changes in the fair value of financial assets at FVTPL are recognised in other gains / (losses) in the statement of profit or loss as applicable. Investments in unit trust and equity securities acquired for the purpose of trading are measured at FVTPL.

De-recognition

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

Impairment

From 01 April 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables, the Group applies the simplified approach permitted by SLFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

II. Non derivative financial liabilities

Initial recognition and measurement

Financial liabilities are recognised when and only when the Company becomes a party to the contractual provisions of the financial instrument. Financial liabilities are recognised initially at fair value plus transaction cost that are directly attributable to the issue of the financial liability, which are not at fair value through profit or loss. Financial

liabilities classified as financial liabilities measured at amortised cost and financial liabiliies at fair value through profit or loss (FVTPL). The Group classifies its financial liabilities as measured at amortised cost.

Classification and subsequent measurement

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

De-recognition

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the Statement of Comprehensive Income.

III. Reclassifications

Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Group changes its business model for managing financial assets.

IV. Offsetting of financial instruments

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

Classification of financial assets and liabilities

Note SLFRS 9 measurement category

Classification of financial assets

Non-current financial assets

Financial assets at fair value through other comprehensive income 15.1 FVOCI

Current financial assets

Trade and other receivables 13 Amortised Cost Financial assets at fair value through profit and loss 15.2 FVTPL Cash and bank 16 Amortised Cost

Classification of financial liabilities

Non-current fianancial liabilities

Interest bearing loans and borrowings 18 Amortised CostRent received in advance 20.1 Amortised CostCustomer deposits 21 Amortised Cost

Current financial liabilities

Trade and other payables 20 Amortised CostInterest bearing loans and borrowings 18 Amortised CostBank overdrafts 16 Amortised Cost


3.6 Impairment - non financial assets

The carrying value of the Group’s non-financial assets, other than inventories, and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or Cash Generating Units. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or cash-generating unit is the greater of if it’s value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (“Cash-Generating Unit or CGU”) for the purposes of goodwill impairment testing, goodwill acquired in a business combination is allocated to the Group of CGUs that is expected to benefit from the synergies of the combination. This allocation is subject to an operating segment ceiling test and reflects the lowest level at which that goodwill is monitored for internal reporting purposes.

An impairment loss is recognised if the carrying amount of asset or its cash generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in the statement of comprehensive income.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists.

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised.

3.7 Liabilities and provisions

I. Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as separate assets but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of profit or loss net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance cost.

II. Dividend payable

Provision for final dividends is recognised at the time the dividend is approved by the shareholders. Interim dividends payable is recognised when the Board approves such dividend in accordance with the provisions of the Companies Act No. 07 of 2007. Dividends for the year that are approved after the reporting period are disclosed under Events after the reporting period in accordance with the Sri Lanka Accounting Standard LKAS 10.

3.8 Cash flow statement

The statements of cash flows has been prepared by using the “indirect method” of preparing cash flows in accordance with the Sri Lanka Accounting Standard - LKAS 7 on ‘Statement of cash flows’.

I. Cash and cash equivalents

Cash and cash equivalents comprise of cash at bank balances and cash in hand balances. Cash and cash equivalents as referred to in the statement of cash flows comprised of those items as explained in note 16.

Bank overdrafts are included as a component of cash and cash equivalents for the purpose of the cash flow statement. The statements of cash flows are given on page 111.

3.9 Taxation

I. Sales tax

Revenue, expenses and assets are recognised net of the amount of sales tax except where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authorities in which case the sales tax is recognised as a part of the cost of the asset or part of Purchased software that is integral to the functionality of the related equipment is the expense items as applicable and receivable and payables that are stated with the amount of sales tax included. The amount of sales tax recoverable and payable in respect of taxation authorities is included as a part of receivables and payables in the Statement of Financial Position.

ACCOUNTING POLICIES



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3.10 Capital commitments and contingencies

Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present obligations where the transfer of economic benefits is not probable or cannot be measured reliably. Capital commitments and contingent liabilities of the Group are disclosed in the respective notes to the Financial Statements.

3.11 Events after the reporting date

The materiality of the events after the reporting date has been considered and appropriate adjustments and provisions have been made in the Financial Statements wherever necessary.

4. SPECIFIC ACCOUNTING POLICIESSet out below is an index of the specific accounting policies, the details of which are available on the pages that follow:

Accounting policy Page No.

Revenue 158Employee benefits 152Finance expenses and income 161Income tax 162Inventories 139Property, plant and equipment 124Intangible assets 133Investment property 130Fair value measurement 178Leases 135Earnings per share 168Investments in subsidiaries 137Deferred tax assets/liabilities 156Other income and gains 160Segment information 165Related party disclosures 168Financial risk management objectives and policies 172

5. EFFECT OF NEW ACCOUNTING STANDARDS

5.1 New Accounting Standards adopted by the Company

The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 01 January 2019:

y SLFRS 16 Leases y IFRIC 23 Uncertainty over Income Tax Treatments y Prepayment features with negative compensation - Amendments to SLFRS 9 y SLFRS 3 Business Combinations – Annual improvements y Employee benefits on plan amendment, curtailment or settlement - LAKS 19

II. Withholding Tax on dividends (WHT)

y Withholding Tax on dividends distributed by the subsidiaries.

y Dividends received by the Company out of taxable profit of the subsidiaries are subject to 14% deduction at source.

y Withholding Tax on dividends distributed by the Company.

Withholding Tax that arises from the distribution of dividends by the Company is exempted as per section 10 (1) g of the Inland Revenue Act No.10 of 2006.

Withholding Tax that arises from the distribution of dividends by the subsidiaries are recognised at the time the liability to pay the related dividend is recognised up to 31 December 2019. Effective from 01 January 2020, requirement to deduct WHT had been removed.

III. Value Added Tax (VAT)

The Company and its subsidiaries are liable to pay Value Added Tax on taxable supplies and services at the specified rates where applicable.

IV. Economic Service Charge (ESC)

The Company and its subsidiaries are liable to pay Economic Service Charge at specified rates where applicable.

As per the notice published on 01 January 2020 by the department of Inland Revenue, ESC was abolished with effect from 01 January 2020.

VI. Nations building tax (NBT)

The Company and its subsidiaries are liable to pay Nation Building Tax (NBT) at specified rates where applicable. As per the notice published on 29 November 2019 by the department of Inland Revenue, NBT was abolished with effect from 01 December 2019.


I. SLFRS 16 Leases

The Group had to change its accounting policies following the adoption of SLFRS 16. This is disclosed in note 6.1.

II. IFRIC 23 - Uncertainty over income tax treatments

The Group has accounted for the uncertainty over tax treatments under IFRIC 23. An ‘uncertain tax treatment’ is a tax treatment for which there is uncertainty over whether the relevant taxation authority will accept the tax treatment under tax law. If it is not probable that the taxation authority will accept an uncertain tax treatment, effect of uncertainty shall be reflected in determining the related taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates. The effect of uncertainty for each uncertain tax treatment shall be reflected by using either of the most likely amount or the expected value methods, depending on which method the Group expects to better predict the resolution of the uncertainty.

5.2 New Accounting Standards, amendments and interpretations issued but not yet adopted

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s Financial Statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective.

This listing of standards and interpretations issued are those that the Group reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The Group intends to adopt these standards when they become effective.

I. Amendments to References to Conceptual Framework in SLFRS Standards

II. Definition of a Business (Amendments to SLFRS 3)

This amendment revises the definition of a business. According to feedback received by the IASB, application of the current guidance is commonly thought to be too complex, and it results in too many transactions qualifying as business combinations.

This amendment is effective for the annual periods beginning on or after 01 January 2020.

III. Definition of Material (Amendments to LKAS 1 and LKAS 8)

The amendments to LKAS 1, ‘Presentation of Financial Statements’, and LKAS 8, ‘Accounting policies, changes in accounting estimates and errors’, and consequential amendments to other SLFRSs:

I. Use a consistent definition of materiality throughout SLFRSs and the Conceptual Framework for Financial Reporting;

II. Clarify the explanation of the definition of material; and

III. Incorporate some of the guidance in LKAS 1 about immaterial information.

These amendments are effective for the annual periods beginning on or after 01 January 2020.

There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on the foreseeable future transactions.

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6. TRANSITIONAL DISCLOSURES

6.1 SLFRS 16 - Leases

This note explains the impact of the adoption of SLFRS 16- Leases on the Financial Statements.

The Company and the Group adopted SLFRS 16, “Leases”, with effect from 01 April 2019, which resulted in changes in accounting policies and adjustments to the amounts recognised in the Financial Statements. In accordance with the transition provisions in the standard, the Company and the Group selected modified retrospective option with the cumulative effect of implementing the standard recognised at the date of initial application.

On adoption of SLFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the previous of LKAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 01 April 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 01 April 2019 was 13.22% and 14%.

6.1.1 Practical expedients applied

In applying SLFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

Relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review – there were no onerous contracts as at 01 April 2019.

Excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application, and;

Using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

6.1.2 Measurement of lease liabilities

GROUP COMPANY

LKR'000 LKR'000

Operating lease commitments disclosed as at 31 March 2019 904,138 -

Discounted using the lessee’s incremental borrowing rate at the date of initial application 356,189 -

Lease liability recognised as at 01 April 2019 356,189 -

Non-current lease liabilities 267,524 -

Current lease liabilities 88,665 -

356,189 -

6.1.3 Measurement of right-of-use assets

The right-of-use assets for property leases were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid accrued lease payments relating to that lease recognised in the statement of financial position as at 31 March 2020.

NOTES TO THE FINANCIAL STATEMENTS


6.1.4 The change in accounting policy affected the following individual line items in the statement of financial position on 01 April 2019 as given below;

Statement of financial position

Note

GROUP COMPANYBalance as at 31 March 2019

Impact from SLFRS 16

Balance as at 01 April 2019

Balance as at 31 March 2019

Impact from SLFRS 16

Balance as at 01 April 2019

LKR’000 LKR’000 LKR’000 LKR’000 LKR’000 LKR’000

Non-current assets

Right-of-use assets a - 396,588 396,588 Nil Nil Nil

Deferred tax asset 99,733 99,733 Nil Nil

Current assetsTrade and other receivables b 3,238,097 (40,399) 3,197,698 Nil Nil Nil

Non-current liabilities

Lease liabilities c - 267,524 267,524 Nil Nil Nil

Deferred tax liability 111,045 111,045 Nil Nil

Current liabilities

Lease liabilities c - 88,665 88,665 Nil Nil Nil

(a) Right-Of-Use assets (ROU)

Right-of-use assets are recognised at cost comprising the following;

- The amount of the initial measurement of lease liability- Any lease payments made at or before the commencement date less any lease incentives received- Any initial direct cost; and- Any restoration cost

The right-of-use assets is amortised over the lease term on a straight-line basis.

The opening adjustment as at 01 April 2019, represents the carrying value of the right-of-use assets relating to ongoing lease contracts measured on a modified retrospective basis.

(b) Trade and other receivables

Lease rentals paid before the transition date which were previously shown as prepayments have now been classified as right-of-use assets.

Carrying amount of lease rentals paid in advance are amortised over the remaining lease period or useful life of the leasehold property whichever is shorter.

(c) Lease liabilities

In accordance with provisions of SLFRS 16, lease liabilities were recognised and measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate. Each lease payment is allocated between the lease liability and finance cost. The finance cost is charged to profit or loss over the lease period at a constant periodic rate of interest on the remaining balance of the liability for each period.

Lease liabilities as at 01 April 2019, represents the present value of the remaining lease payments, relating to ongoing lease contracts, discounted using the incremental borrowing rate as of 01 April 2019.

6.1.5 Lessor accounting

The Company did not make any adjustments to the accounting for assets held as lessor under operating lease as result of the adoption of SLFRS 16.




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6.1.6 The adoption of SLFRS 16 had no impact on Group’s/Company’s retained earnings. The details of right-of-use assets are given in note 10.1 to the Financial Statements.

6.2 IFRIC 23 – Uncertainty over Income Tax Treatments

The Institute of Chartered Accountants of Sri Lanka adopted IFRIC Interpretation 23 – Uncertainty over Income tax treatments (the interpretation) with a mandatory effective date of 01 January 2019 and the Group adopted the same with effective from 01 April 2019.

The Interpretation clarifies application of recognition and measurement requirements in IAS 12 Income Taxes when there is uncertainty over income tax treatments. The Interpretation specifically addresses the following:

- Whether an entity considers uncertain tax treatments separately.

- The assumptions an entity makes about the examination of tax treatments by taxation authorities

- How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates

- How an entity considers changes in facts and circumstances

Uncertainty in determining tax applicable to gains on realisation of freehold land has been assessed in line with IFRIC 23 and following amounts are recognised in the statement of financial position as at 01 April 2019, adjusting opening balances as permitted by the interpretation.

Group

Deferred tax liability

Revaluation reserve

Retained earnings

Non- controlling

interest

Total equity

LKR’000 LKR’000 LKR’000 LKR’000 LKR’000

Balance as at 01 April 2019 841,534 251,107 9,887,632 6,310,762 23,748,929

Adoption of IFRIC 23 992,272 (10,650) (653,417) (328,205) (992,272)

Adjusted balance as at 01 April 2019 1,833,806 240,457 9,234,215 5,982,557 22,756,657

Company

Deferred tax liability

Retained earnings

Total equity

LKR’000 LKR’000 LKR’000

Balance as at 01 April 2019 764,123 7,379,649 14,910,192

Adoption of IFRIC 23 311,815 (311,815) (311,815)

Adjusted balance as at 01 April 2019 1,075,938 7,067,834 14,598,377


7. PROPERTY, PLANT AND EQUIPMENT

ACCOUNTING POLICY

Property, plant and equipment are tangible items that are held for use in the production or supply of good or services or for administrative purposes and are expected to be used during more than one period.

I. Basis of recognition

Property, plant and equipment are recognised if it is probable that future economic benefits associated with the assets will flow to the Company and cost of the asset can be measured reliably. Purchased software that is integral to the functionality of the related equipment is capitalised as part of computer equipment.

II. Measurement

An item of property, plant and equipment that qualifies for recognition as an asset is initially measured at its cost. Cost includes expenditure that is directly attributable to the acquisition of the asset and subsequent costs. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for their intended use and the costs of dismantling and removing the items and restoring the site on which they are located.

III. Cost model

The Group applies cost model to property, plant and equipment except for freehold land and buildings records at cost of purchase or construction together with any incidental expenses thereon less accumulated depreciation and any accumulated impairment losses.

IV. Revaluation model

Freehold land and buildings are stated at cost at the time of acquisition and subsequently measured at fair value at the next valuation. Freehold land and building of the Group is revalued at regular intervals to ensure that the carrying amounts do not differ materially from the fair values at the reporting date. On revaluation of an asset, any increase in the carrying amount is recognised in other comprehensive income and accumulated in equity under the heading of revaluation reserve or used to reverse a previous revaluation decrease relating to the same asset, which was charged to the profit or loss. In this circumstance, the increase is recognised as income to the extent of the previous write down. Any decrease in the carrying amount is recognised as an expense in comprehensive income or is recognised in other comprehensive income to the extent of any credit balance existing in the revaluation reserve in respect of that asset. Upon disposal or retirement, any balance remaining in the revaluation reserve in respect of an asset is transferred directly to retained earnings.

V. Subsequent costs

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

VI. De-recognition

The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected from its use. The gains or losses arising from derecognition of an item of property, plant and equipment is included in statement of comprehensive income when the item is derecognised. When replacement costs are recognised in the carrying amount of an item of property, plant and equipment, the remaining carrying amount of the replaced part is derecognised. Major inspection costs are capitalised. At each such capitalisation, the remaining carrying amount of the previous cost is derecognised.




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ACCOUNTING POLICY CONT.

VII. Depreciation

Depreciation is calculated over the depreciable amount, which is the cost of an asset or other amount substituted for cost, less its residual value. Depreciation is recognised in the statement of comprehensive income on straight-line basis over the estimated useful lives of each item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.

The estimated useful lives are as follows:

Asset category Group Company

Freehold buildings 20 - 40 years 20 years Plant and machinery 4 - 10 years - Solar pv system 20 years - Office equipment 4 - 5 years 5 years Furniture and fittings 5 - 10 years 5 years Motor vehicles 4 - 5 years 4 years Computers and accessories 4 - 5 years 4 years Fixtures and fittings 4 - 10 years 5 years Electronic equipment 5 years 5 years Air conditioners 5 years - Tools and utensils 4 - 10 years 5 years Maintenance equipment 5 years 5 years Reference books 10 years -

The asset’s useful lives are reviewed and adjusted if appropriate at the end of each reporting period.

Depreciation methods, useful lives and residual values are reviewed at each reporting date. Depreciation of an asset begins when it is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale (or included in a disposal Group that is classified as held for sale) and the date that the asset is derecognised.

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately.

VIII. Borrowing cost

As per LKAS 23 on “Borrowing costs”, the Group capitalises borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of the asset. A qualifying asset is an asset which takes a substantial period of time to get ready for its intended use or sale. Other borrowing costs are recognised in the statement of comprehensive income in the period it is incurred.

IX. Capital work-in-progress

Capital expenses incurred during the year which are not completed as at the reporting date are shown as capital working-progress, whilst the capital assets which have been completed during the year and in use have been transferred to property, plant and equipment.



7.1 Group

Land Buildings Plant and machinery

Office equipment

Furniture and fittings

Motor vehicles

Computers and

accessories

Fixture and fittings

Electronic equipment

Air conditioners

Tools and utensils

Maintenance equipment

Reference books

Electrical fixtures and

fittings

Solar pv system

Work in progress

Total

LKR’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000

At cost /valuation

As at 01 April 2019 5,791,622 1,380,774 406,588 79,617 90,801 613,374 183,673 209,507 26,366 13,571 28,918 4,139 107 137,388 226,444 989 9,193,878

Additions - 12,395 39,125 7,132 1,938 102,260 20,194 12,042 4,576 1,512 213 474 - 3,561 - 18,554 223,976

Revaluation 788,382 51,723 - - - - - - - - - - - - - 840,105

Disposals - - - (157) (183) (3,171) - - - (1,770) (8) - - - - - (5,289)

Transfers, reclassifications and adjustments - (21,979) 21,451 (20,030) 966 - 56 (2,383) 2,591 1,082 (3,546) - (107) - - (266) (22,165)

Transfer from capital work in progress - 15,385 - 1,477 9 - - - - - - - - 144 - (17,015) -

As at 31 March 2020 6,580,004 1,438,298 467,164 68,039 93,531 712,463 203,923 219,166 33,533 14,395 25,577 4,613 - 141,093 226,444 2,262 10,230,505

Accumulated depreciation

As at 01 April 2019 - 245,094 226,690 46,636 69,849 355,155 144,136 85,846 12,777 9,176 23,981 1,942 107 80,315 - - 1,301,704

Charge for the year - 69,207 35,139 6,106 6,044 104,244 15,693 21,144 2,054 1,566 1,977 898 - 12,464 11,322 - 287,858

Disposals - - - (155) (161) (3,169) - - - (1,663) (4) - - - - - (5,152)

Transfers, reclassifications and adjustments - (21,979) (9,863) (1,162) 984 319 - (438) 11,980 1,567 (2,813) - (107) - - - (21,512)

As at 31 March 2020 - 292,322 251,966 51,425 76,716 456,549 159,829 106,552 26,811 10,646 23,141 2,840 - 92,779 11,322 - 1,562,898

Carrying amount as at 31 March 2020 6,580,004 1,145,976 215,198 16,614 16,815 255,914 44,094 112,614 6,722 3,749 2,436 1,773 - 48,314 215,122 2,262 8,667,607

Carrying amount as at 31 March 2019 5,791,622 1,135,680 179,898 32,981 20,952 258,219 39,537 123,661 13,589 4,395 4,937 2,197 - 57,073 226,444 989 7,892,174

7.2 Company

Buildings Office equipment

Furniture and

fittings

Motor vehicles

Computers and

accessories



Tools and utensils


Total

LKR’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000

At cost / valuation

As at 01 April 2019 344,000 3,926 3,603 49,053 11,461 363 1,750 1,483 4,139 419,778

Additions - 887 245 - 1,023 - - 56 474 2,685

Revaluation 47,641 - - - - - - - - 47,641

Disposals, transfers (20,241) (4) (57) (30) - - - (8) - (20,340)

As at 31 March 2020 371,400 4,809 3,791 49,023 12,484 363 1,750 1,531 4,613 449,764


As at 01 April 2019 - 2,469 1,920 42,144 6,876 228 1,109 813 1,942 57,501

Charge for the year 20,241 808 741 5,969 2,736 72 350 307 898 32,122


As at 31 March 2020 - 3,275 2,622 48,085 9,612 300 1,459 1,116 2,840 69,309

Carrying amount as at 31 March 2020 371,400 1,534 1,169 938 2,872 63 291 415 1,773 380,455

Carrying amount as at 31 March 2019 344,000 1,457 1,683 6,909 4,585 135 641 670 2,197 362,277




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7.1 Group

Land Buildings Plant and machinery

Office equipment

Furniture and fittings

Motor vehicles

Computers and

accessories



Air conditioners

Tools and utensils


Reference books

Electrical fixtures and

fittings

Solar pv system

Work in progress

Total

LKR’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000

At cost /valuation

As at 01 April 2019 5,791,622 1,380,774 406,588 79,617 90,801 613,374 183,673 209,507 26,366 13,571 28,918 4,139 107 137,388 226,444 989 9,193,878

Additions - 12,395 39,125 7,132 1,938 102,260 20,194 12,042 4,576 1,512 213 474 - 3,561 - 18,554 223,976

Revaluation 788,382 51,723 - - - - - - - - - - - - - 840,105

Disposals - - - (157) (183) (3,171) - - - (1,770) (8) - - - - - (5,289)

Transfers, reclassifications and adjustments - (21,979) 21,451 (20,030) 966 - 56 (2,383) 2,591 1,082 (3,546) - (107) - - (266) (22,165)

Transfer from capital work in progress - 15,385 - 1,477 9 - - - - - - - - 144 - (17,015) -

As at 31 March 2020 6,580,004 1,438,298 467,164 68,039 93,531 712,463 203,923 219,166 33,533 14,395 25,577 4,613 - 141,093 226,444 2,262 10,230,505


As at 01 April 2019 - 245,094 226,690 46,636 69,849 355,155 144,136 85,846 12,777 9,176 23,981 1,942 107 80,315 - - 1,301,704

Charge for the year - 69,207 35,139 6,106 6,044 104,244 15,693 21,144 2,054 1,566 1,977 898 - 12,464 11,322 - 287,858

Disposals - - - (155) (161) (3,169) - - - (1,663) (4) - - - - - (5,152)

Transfers, reclassifications and adjustments - (21,979) (9,863) (1,162) 984 319 - (438) 11,980 1,567 (2,813) - (107) - - - (21,512)

As at 31 March 2020 - 292,322 251,966 51,425 76,716 456,549 159,829 106,552 26,811 10,646 23,141 2,840 - 92,779 11,322 - 1,562,898

Carrying amount as at 31 March 2020 6,580,004 1,145,976 215,198 16,614 16,815 255,914 44,094 112,614 6,722 3,749 2,436 1,773 - 48,314 215,122 2,262 8,667,607

Carrying amount as at 31 March 2019 5,791,622 1,135,680 179,898 32,981 20,952 258,219 39,537 123,661 13,589 4,395 4,937 2,197 - 57,073 226,444 989 7,892,174

7.2 Company

Buildings Office equipment

Furniture and

fittings

Motor vehicles

Computers and

accessories



Tools and utensils


Total

LKR’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000

At cost / valuation

As at 01 April 2019 344,000 3,926 3,603 49,053 11,461 363 1,750 1,483 4,139 419,778

Additions - 887 245 - 1,023 - - 56 474 2,685

Revaluation 47,641 - - - - - - - - 47,641


As at 31 March 2020 371,400 4,809 3,791 49,023 12,484 363 1,750 1,531 4,613 449,764


As at 01 April 2019 - 2,469 1,920 42,144 6,876 228 1,109 813 1,942 57,501

Charge for the year 20,241 808 741 5,969 2,736 72 350 307 898 32,122


As at 31 March 2020 - 3,275 2,622 48,085 9,612 300 1,459 1,116 2,840 69,309

Carrying amount as at 31 March 2020 371,400 1,534 1,169 938 2,872 63 291 415 1,773 380,455

Carrying amount as at 31 March 2019 344,000 1,457 1,683 6,909 4,585 135 641 670 2,197 362,277


7.3 During the Financial Year, the Group acquired property, plant & equipment to the aggregate value of LKR 224 Mn. (2018/19 - LKR 482 Mn.) Cash payments amounting to LKR 224 Mn. (2018/19 - LKR 482 Mn.) were made during the year for purchase of property, plant & equipment.

7.4 During the Financial Year, the Company acquired property, plant & equipment to the aggregate value of LKR 2.7 Mn. (2018/19 - LKR 0.8 Mn). Cash payments amounting to LKR 2.7 Mn. (2018/19 - LKR 0.8 Mn.) were made during the year for purchase of property, plant & equipment.

7.5 The revalued building during the year consist of the owner occupied area of the investment property comprising 8,549 Sq.Ft. The details of valuation are disclosed in note 7.10.

7.6 There were no compensation received/ receivable from third parties for items of property, plant and equipment that were impaired, lost or given up and there were no capitalised borrowing costs related to the acquisition of property plant and equipment during the year.

7.7 No restrictions existed on the title of the property, plant and equipment of the Group as at the reporting date, and there were no temporarily idle property, plant & equipment as at the reporting date. There was no permanent fall in value of property, plant and equipment which requires a provision for impairment as at reporting date.

7.8 There were no items of property, plant and equipment pledged as security for liabilities,other than disclosed in note 18.

7.9 Valuation of the land & buildings was independently carried out by Mr. J. M. Senanayaka Bandara, a chartered valuation surveyor who has recent experience in valuing properties of similar location and categories.

7.10 Details of land and buildings owned by the Group are as follows:

Location/Address Owned by Buildings Land extent Valuation date

Valuation technique

Fair value hierarchy

No. of building units

Sq. / Ft Acre Rood Perch Cost/carrying value

Change for the period

Total value

LKR’000 LKR’000 LKR’000

Park Street, Colombo 02 R I L Property PLC (R I L) 1 8,549 - - - - - - 31-Mar-20Income approach Level 3

84,84A Thimbirigasyaya Road, Colombo 05 FoodBuzz (Private) Limited 1 3,856 - - 14.89 133,999 7,455 141,454 31-Mar-20Market approach Level 3

100 & 100A, Hyde Park Corner, Colombo 02

United Motors Lanka PLC Group (UML)

10 81,794 1 3 0.54 3,384,900 472,650 3,857,550 31-Mar-20Market approach Level 3

143 & 145 Majeed Place, Orugodawatte 27 126,382 7 - 15.14 995,570 149,930 1,145,500 31-Mar-20Market approach Level 3

Vauxhall Street, Colombo 02 2 825 - 1 10.35 577,875 77,125 655,000 31-Mar-20Market approach Level 3

Meetotamulla, Orugodawatte 1 3,494 - 1 28.86 84,711 9,789 94,500 31-Mar-20Market approach Level 3

Maligawa Road, Ratmalana 25 89,262 9 3 36.50 586,714 67,786 654,500 31-Mar-20Market approach Level 3

Navatkuli, Jaffna 3 9,475 1 - 25.69 27,853 3,647 31,500 31-Mar-20Market approach Level 3

70 323,637 5,791,622 788,382 6,580,004




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7.3 During the Financial Year, the Group acquired property, plant & equipment to the aggregate value of LKR 224 Mn. (2018/19 - LKR 482 Mn.) Cash payments amounting to LKR 224 Mn. (2018/19 - LKR 482 Mn.) were made during the year for purchase of property, plant & equipment.

7.4 During the Financial Year, the Company acquired property, plant & equipment to the aggregate value of LKR 2.7 Mn. (2018/19 - LKR 0.8 Mn). Cash payments amounting to LKR 2.7 Mn. (2018/19 - LKR 0.8 Mn.) were made during the year for purchase of property, plant & equipment.

7.5 The revalued building during the year consist of the owner occupied area of the investment property comprising 8,549 Sq.Ft. The details of valuation are disclosed in note 7.10.

7.6 There were no compensation received/ receivable from third parties for items of property, plant and equipment that were impaired, lost or given up and there were no capitalised borrowing costs related to the acquisition of property plant and equipment during the year.

7.7 No restrictions existed on the title of the property, plant and equipment of the Group as at the reporting date, and there were no temporarily idle property, plant & equipment as at the reporting date. There was no permanent fall in value of property, plant and equipment which requires a provision for impairment as at reporting date.

7.8 There were no items of property, plant and equipment pledged as security for liabilities,other than disclosed in note 18.

7.9 Valuation of the land & buildings was independently carried out by Mr. J. M. Senanayaka Bandara, a chartered valuation surveyor who has recent experience in valuing properties of similar location and categories.

7.10 Details of land and buildings owned by the Group are as follows:

Location/Address Owned by Buildings Land extent Valuation date

Valuation technique


No. of building units

Sq. / Ft Acre Rood Perch Cost/carrying value

Change for the period

Total value

LKR’000 LKR’000 LKR’000

Park Street, Colombo 02 R I L Property PLC (R I L) 1 8,549 - - - - - - 31-Mar-20Income approach Level 3

84,84A Thimbirigasyaya Road, Colombo 05 FoodBuzz (Private) Limited 1 3,856 - - 14.89 133,999 7,455 141,454 31-Mar-20Market approach Level 3

100 & 100A, Hyde Park Corner, Colombo 02

United Motors Lanka PLC Group (UML)

10 81,794 1 3 0.54 3,384,900 472,650 3,857,550 31-Mar-20Market approach Level 3

143 & 145 Majeed Place, Orugodawatte 27 126,382 7 - 15.14 995,570 149,930 1,145,500 31-Mar-20Market approach Level 3

Vauxhall Street, Colombo 02 2 825 - 1 10.35 577,875 77,125 655,000 31-Mar-20Market approach Level 3

Meetotamulla, Orugodawatte 1 3,494 - 1 28.86 84,711 9,789 94,500 31-Mar-20Market approach Level 3

Maligawa Road, Ratmalana 25 89,262 9 3 36.50 586,714 67,786 654,500 31-Mar-20Market approach Level 3

Navatkuli, Jaffna 3 9,475 1 - 25.69 27,853 3,647 31,500 31-Mar-20Market approach Level 3

70 323,637 5,791,622 788,382 6,580,004

7.11 Cost of fully depreciated assets which are still in use as at reporting date is as follows:

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Buildings 70,479 42,978 - -

Plant & machinery 46,395 52,425 - -

Office equipment 32,945 30,353 760 662

Furniture and fittings 53,785 51,064 - -

Motor vehicles 342,756 289,385 41,968 18,408

Computers and accessories 117,749 113,785 1,572 293

Electronic equipment 42,629 40,920 - -

Air conditioners 6,976 6,391 - -

Tools and utensils 18,058 18,263 - -

Reference books - 107 - -

731,772 645,671 44,300 19,363


7.12 The carrying amount of revalued land and buildings if they were carried at cost less depreciation and impairment, would be as follows:

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Cost 2,145,266 2,145,266 175,233 175,233

Accumulated depreciation (360,814) (303,375) (58,353) (49,590)

Carrying value 1,784,452 1,841,891 116,880 125,643

8. INVESTMENT PROPERTY

ACCOUNTING POLICY

I. Basis of recognition

Investment properties are properties held either to earn rental income or for capital appreciation or both but not for sale in the ordinary course of business, used in the production in the ordinary course of business, used in the production or supply of goods or services or for administrative purposes. investment properties are recognised if it is probable that future economic benefits that are associated with the investment property will flow to the Group and cost of the investment property can be reliably measured.

Investment property comprises freehold land, freehold buildings together with the integral parts of such properties.

II. Measurement

Investment property is measured initially at its cost, including related transaction costs. After initial recognition, investment property is carried at fair value.

The fair value of investment property reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions, as appraised by an independent valuer, annually.

Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the statement of profit or loss during the financial period in which they are incurred.

Gains or losses arising from changes in the fair values of investment properties are included in the profit or loss in the period in which they arise. Fair values are determined based on an annual evaluation performed by an accredited external independent valuer applying a valuation model recommended by the SLFRS 13.

If an investment property becomes owner occupied, it is reclassified as property, plant and equipment and its fair value at the date of reclassification becomes its cost for accounting purposes.

III. De-recognition

Investment properties are derecognised when disposed, or permanently withdrawn from use because no future economic benefits are expected.

IV. Reclassification of investment property

When the use of a property changes from owner-occupied to investment property, the transfers are recorded at carrying amount following the cost model as per LKAS 40 Accounting for investment property.




REPORTS RISK AND

GOVERNANCE


GROUP/COMPANY

As at 31 March 2020 2019

LKR'000 LKR'000

As at 01 April 14,106,000 12,397,500

- Subsequent expenditure on investment property 17,079 14,094

- Expenditure incurred on new building complex 82,616 854,124

14,205,695 13,265,718

Net gain from fair value adjustment 687,905 840,282

As at 31 March 14,893,600 14,106,000

8.1 Investment properties consist of freehold land and commercial units given on rental in buildings constructed on freehold land at No 33, Park Street, Colombo 02 and No 45 Morgan Road, Colombo 02.

8.2 Expenditure incurred on new building complex includes initial expenditure incurred on designing of new building and construction payment for PARKLAND 1 at No.33,Park street,Colombo 02.

8.3 There were no items of investment property pledged as security for liabilities,other than disclosed in note 18.

8.4 Details of investment properties - Group/Company

Property Extent Valuation date

Value as at 31 March 2020

Value as at 31 March 2019

Valuation technique


Land

No. 33, Park Street, Colombo 02 2A-2R-14.87P 31-Mar-20LKR 13.5 Mn. per perch

LKR 13 Mn. per perch

Market approach Level 3

Morgan Road, Colombo 02 1A-0R-36.37P 31-Mar-20LKR 10.4 Mn. per perch

LKR 9.9 Mn. per perch


Buildings

No. 33, Park Street, Colombo 02

PARKLAND building 193,318 Sq. Ft 31-Mar-20LKR 248-393 per Sq. Ft

LKR 248-375 per Sq. Ft


PARKLAND 1 building 68,343 Sq. Ft 31-Mar-20LKR 225-425 per Sq. Ft

LKR 225-425 per Sq. Ft


8.5 The significant assumptions used by the valuer are as follows:

2020 2019 Sensitivity

Anticipated maintenance cost: 35% from rental income 35% from rental incomeIncrease will result in decrease in fair value gain

Yield/discount rate : 6.00% 5.6% - 6.00%Increase will result in decrease in fair value gain

Risk and other factors 4.5% from net annual rent 2.5% from net annual rentIncrease will result in decrease in fair value gain

Price per perch LKR Mn. - No. 33, Park Street, Colombo 02 13.50 13.00

Increase will result in increase in fair value gain

Price per perch LKR Mn. - Morgan Road, Colombo 02 10.40 9.90

Increase will result in increase in fair value gain


8.6 Fair value of the investment property is ascertained by independent valuations carried out by Mr. J. M. Senanayaka Bandara, a chartered valuation surveyor, who has recent experience in valuing properties of similar location and category. In determining the fair value of building the capitalisation of net income method has been used, which is based upon assumptions including future rental income, anticipated maintenance costs, appropriate discount rate and in determine the fair value of land, make reference to market evidence of transaction prices for similar properties, with appropriate adjustments for size and location. The appraised fair values are approximated within appropriate range of values.

The valuations of investment properties as at 31 March 2020 have been prepared on the basis of ‘material valuation uncertainty’ as recommended by The Royal Institution of Chartered Surveyors, a professional body promoting and enforcing international standards in valuation, management and development of land, real estate, construction and infrastructure, in order to highlight the difficulties in undertaking valuations in the current environment.

A ‘material valuation uncertainty’ statement implies the valuation is current at the date of valuation only and that less certainty and a higher degree of caution should be attached to the valuation. In addition, the valuation should be kept under frequent review as the assessed value may change significantly and unexpectedly over a relatively short period of time.

The outbreak of COVID-19, declared by the World Health Organisation as a “Global Pandemic” on 11 March 2020, has impacted both local and global markets. The pandemic condition continues to evolve and hence is considered too premature to reasonably assess and estimate its full impact, and in the valuers’ opinion, the value reflected as of 31 March 2020 represents the best estimate, while considering the effect of the pandemic to reasonable extent, which meets the requirements of SLFRS-13 Fair Value Measurement.

8.7 Amount recognised in the statement of profit or loss for the investment property

GROUP/COMPANY

Year ended 31 March 2020 2019

LKR'000 LKR'000

Rental income from the investment property 898,801 680,020

Other related services 104,099 82,159

1,002,900 762,179

Direct operating expenses for the investment property (77,660) (69,197)

Fair value 687,905 840,282

8.8 The carrying amount of revalued land and buildings under investment property if they were carried at cost less depreciation and impairment, would be as follows;

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Cost 6,855,625 6,755,931 6,855,625 6,755,931

Accumulated depreciation (981,661) (753,600) (981,661) (753,600)

Carrying value 5,873,964 6,002,331 5,873,964 6,002,331




REPORTS RISK AND

GOVERNANCE


8.9 Leasing arrangements

Minimum lease payments receivable on leases of investment property is as follows.

COMPANY

As at 31 March 2020

LKR'000

Less than one year 823,484

One to two years 593,175

Two to three years 458,863

Three to four years 269,585

Four to five years 153,684

More than five years 59,505

2,358,296

The investment property is leased to tenants under operating leases with rentals payable monthly.

9. INTANGIBLE ASSETS

ACCOUNTING POLICY

An intangible asset is an identifiable non monetary asset without physical substance held for use in the production or supply of goods or services, or for administrative purpose.I. Basis of recognition

Intangible assets are recognised if it is probable that the future economic benefits that are attributable to the asset will flow to the entity and the cost of the assets can be measured reliably.

II. Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. If the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree less the net amount of the fair value of the assets acquired and liabilities assumed is recognised. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. The negative goodwill is recognised immediately in the statement of comprehensive income. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold net of disposal proceeds

III. Software

All licensed computer software costs incurred by the Group, which are not integrally related to associated hardware, which can be clearly identified, reliably measured and is probable that they will lead to future economic benefits, are included in the statement of financial position under the category of intangible assets and carried at cost less amortisation and any accumulated impairment losses. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss when incurred.

IV. Useful economic lives and amortisation

Computer software are amortised over 2-10 years which is their estimated useful economic life on a straight-line basis. They are assessed for impairment whenever there is an indication that the intangible asset may be impaired. Amortisation method, useful lives and residual values are reviewed at each reporting date and adjusted if required.

V. De-recognition

An intangible asset is derecognised on disposal or when no future economic benefits are expected from its use and subsequent disposal. Gains and losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss.


GROUP COMPANY

Computer software

Capital work in progress

Goodwill Total Computer software

Total


Cost

As at 01 April 2019 54,337 180,645 6,895 241,877 19,899 19,899

Additions 74,961 - - 74,961 121 121

Disposals (29) - - (29) (29) (29)

Capitalised during the year 180,645 (180,645) - - - -

As at 31 March 2020 309,914 - 6,895 316,809 19,991 19,991

Amortisation/Impairment

As at 01 April 2019 36,207 - - 36,207 10,089 10,089

Charge for the year 30,934 - - 30,934 4,916 4,916

Impairment loss - - 4,005 4,005 - -

Disposals (1) - - (1) (1) (1)

As at 31 March 2020 67,140 - 4,005 71,145 15,004 15,004

Carrying amount as at 31 March 2020 242,774 - 2,890 245,664 4,987 4,987

Carrying amount as at 31 March 2019 18,130 180,645 6,895 205,670 9,810 9,810

9.1 The goodwill consisted of two acquisitions made by R I L Property PLC.

1. Arose from the acquisition of subsidiary FoodBuzz (Private) Limited which is amounting to LKR 4 Mn.

2. Arose from the acquisition of subsidiary United Motors Lanka PLC amounting to LKR 2.89 Mn. on 29 December 2017 which had acquired 50% shares in Unimo Enterprise Limited (formerly known as Associated United Motors Limited) which was acquired on 03 October 2002.

9.2 The goodwill arose from the acquisition of subsidiary, FoodBuzz (Private) Limited which is amounting to LKR 4 Mn. was impaired during the year and impairment loss was included in administrative expenses.

9.3 During the Financial Year, the Group acquired intangible assets to the aggregate value of LKR 74.9 Mn. (2018/19 - LKR 63.3 Mn.).Cash payments amounting to LKR 74.9 Mn. (2018/19 - LKR 63.3 Mn.) were made during the year for purchase of intangible assets.

9.4 During the Financial Year, the Company acquired intangible assets to the aggregate value of LKR 0.12 Mn. (2018/19 - LKR 1.5 Mn.). Cash payments amounting to LKR 0.12 Mn. (2018/19 - LKR 1.5 Mn.) were made during the year for purchase of intangible assets.

9.5 Other than disclosed in note 9.2, no condition has arisen that results in an impairment of intangibles that requires a provision.

9.6 Cost of fully amortised computer software of Group amount to LKR 23.7 Mn. (2018/2019 - LKR 20.4 Mn.) & Company amount to LKR 3.3 Mn. (2018/2019 - Nil) as at the reporting date.

9.7 There were no restrictions existed on the title of the intangible assets of the Group/ Company as at the reporting date.Further there were no items pledged as security for liabilities.

9.8 There were no significant intangible assets controlled by the entity but not recognised as assets because they did not meet recognition criteria or because they were acquired or generated before SLFRS 3 – Business Combinations was effective.




REPORTS RISK AND

GOVERNANCE


10. LEASES

ACCOUNTING POLICY

Leased assets

Sri Lanka Accounting Standard SLFRS 16 - Leases (SLFRS 16) became effective for annual periods beginning on or after 01 January 2019. SLFRS 16 supersedes LKAS 17 - Leases, IFRIC interpretation 4 - Determining whether an arrangement contains a lease, SIC 15 - Operating Leases - Incentives and SIC – 27 Evaluating the substance of transactions involve in the legal form of a lease.

SLFRS 16 Leases will affect primarily the accounting by lessees and will result in the recognition of almost all leases on balance sheet. The standard removes the current distinction between operating and financing leases and requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals for virtually all lease contracts.

The statement of profit or loss will also be affected because the total expense is typically higher in the earlier years of a lease and lower in later years. Additionally, operating expense will be replaced with interest and depreciation, so key metrics like EBITDA will change.

Operating cash flows will be higher as cash payments for the principal portion of the lease liability are classified within financing activities. Only the part of the payments that reflects interest can continue to be presented as operating cash flows.

The Group has adopted SLFRS 16 using the modified retrospective method from 01 April 2019, without restating comparatives for the 2018/19 reporting period, as permitted under the specific transitional provisions in the standard. Lessor accounting under SLFRS 16 is substantially unchanged from LKAS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in LKAS 17. Therefore, SLFRS 16 does not have an impact for leases where the Group is the lessor. The effect of adoption SLFRS 16 as at 01 April 2019 are disclosed in note 6.1 of page 121 to page 123.

The Group’s lease hold property includes land & buildings. Rental contract is typically made as per the initial rental or lease agreements. Rental contracts may contain both lease and nonlease components. It has elected not to separate lease and non-lease components and instead accounts for these as a single lease component. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.

Right-of-use assets

Right-of-use assets are measured at cost, less any accumulated amortisation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes :

y The amount of lease liabilities recognised,

y Initial direct costs incurred, and

y Lease payments made at or before the commencement date less any lease incentives received.

Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straightline basis over the shorter of its estimated useful life or the lease term. Right-of-use assets are subject to impairment.

The Group does not foresee any impairment of right to use assets due to the post-lockdown economic implications of COVID-19 pandemic and does not anticipate discontinuation of any asset for which the Group possesses the right to use. Lease liabilities are not reassessed as there are no known moratoriums received for the lease payments so far.



Lease liabilities

On adoption of SLFRS 16, the Company recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of LKAS 17 Leases. These liabilities were measured on a present value basis.

Lease liabilities include the net present value of the fixed payments (including in-substance fixed payments), less any lease incentives receivable.

Since the interest rate implicit in the lease is not readily determinable, the Group uses incremental borrowing rate as the discount rate. The incremental borrowing rate is the rate of interest that the Group would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in similar economic environment.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

For leases previously classified as finance leases, the entity recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application. The measurement principles of SLFRS 16 are only applied after that date.

After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

10.1 Right-of-use assetGROUP

As at 31 March 2020

LKR'000

Cost

At the beginning of the year -

Origination from initial application of SLFRS 16 (note 6.1.4) 356,189

Reclassification from lease rentals paid in advance (note 6.1.4) 40,399

Advance paid during the year 29,074

Additions during the year 127,731

At the end of the year 553,393

Accumulated amortisation

At the beginning of the year -

Reclassification from lease rentals paid in advance 17,225

Amortisation capitalised to setup cost 3,164

Amortisation for the year 147,569


Carrying amount at the end of the year 385,435

The Group has lease contracts for properties used for showrooms, workshops, outlet operations and warehouses under different lease terms and conditions. Rental contracts are typically made for fixed period of 6 months to 30 years.

On adoption of SLFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the previous of LKAS-17 Leases.

These liabilities were measured at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate as of the transition date.




REPORTS RISK AND

GOVERNANCE


10.2 Lease liabilities

GROUP

As at 31 March 2020

LKR'000

Impact from initial application of SLFRS 16 356,189

Additions during the year 127,731

Interest expense 57,023

Interest capitalised to set up cost 3,668

Payments made (149,356)


Classified as non-current liabilities 231,820

Classified as current liabilities 163,435

395,255

Amounts recognised in profit or loss

Interest on lease liabilities (note 25.1) 57,023

Maturity analysis of lease payments

Less than 2 years 167,747

2-5 years 133,814

5-10 years 89,281

Over 10 years 4,413

11. INVESTMENTS IN SUBSIDIARIES

ACCOUNTING POLICY

Subsidiaries are investees that are controlled by the Group. Control exists when the Company is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power to govern the financial and operating policies over the investee.

The cost of an acquisition is measured at fair value of the consideration of acquired identifiable assets, liabilities and contingent liabilities are at the date of acquisition. subsequent to the initial measurement the Company continues to recognise the investment in subsidiaries at cost. The Financial Statements of subsidiaries are included in the consolidated Financial Statements from the date that control commences until the date that control ceases.

All subsidiaries in the Group have a common Financial Year which ends on 31 March. Financial Statements of the subsidiaries are prepared using uniform and consistent accounting policies and all intra-group balances, unrealised gains and losses resulting from intra-group transactions, intra-group income and expenses eliminated in full. There are no significant restrictions on the ability of subsidiaries to transfer funds to the Company (the Parent) in the form of cash dividend or repayment of loans and advances.

11.1 Company

As at 31 March 2020 2019

Holding At costLKR'000

Holding At costLKR'000

FoodBuzz (Private) Limited 100% 542,913 100% 542,913

Provision for impairment (63,805) -

479,108 542,913

United Motors Lanka PLC 51% 4,013,827 51% 4,013,827

Total investments in subsidiaries 4,492,935 4,556,740


11.2 Impairment of investments

An impairment assessment was carried out on investments in subsidiaries and accordingly Company has recognised an impairment charge of LKR 63.8 Mn. against the investment in FoodBuzz (Private) Limited.

Present value of the expected cash flows of United Motors Lanka PLC exceeds its carrying value and thus no impairment was recognised.

Refer note 9.2 for impairment of goodwill acquired.

11.3 Summarised information of subsidiary that have significant non-controlling interest is provided below:


2020 2019

LKR'000 LKR'000

Summary of the statement of comprehensive income

Year ended 31 March

Revenue 9,845,621 12,769,409

Profit/(loss) after tax (409,675) 435,923

Other comprehensive Income / (expenses) 655,615 (105,592)

Total comprehensive Income 245,940 330,331

Total comprehensive income,

Owners of the parent 125,429 168,469

Non-controlling interest 120,511 161,862

245,940 330,331

Summary of the statement of financial position

As at 31 March

Non-current assets 9,182,450 7,923,720

Current assets 10,957,323 10,028,771

Total assets 20,139,773 17,952,491

Non-current liabilities 671,926 299,958

Current liabilities 6,746,403 4,773,426

Total liabilities 7,418,329 5,073,384

Total equity : attributable to equity holders of the Company 6,487,936 6,568,345

Total equity : attributable to non-controlling interest 6,233,508 6,310,762

Total equity 12,721,444 12,879,107

Summary of the statement of cash flows

Year ended 31 March

Net cash inflow/(outflow) from operating activities (1,771,713) (738,322)

Net cash inflow/(outflow) from investing activities (96,798) (663,654)

Net cash inflow/(outflow) from financing activities 1,561,332 731,403

Net increase/(decrease) of cash and cash equivalents (307,179) (670,573)




REPORTS RISK AND

GOVERNANCE


12. INVENTORIES

ACCOUNTING POLICY

Inventories are measured at the lower of cost and net realisable value. The cost of inventories that are not interchangeable are recognised by using specific identification of their individual cost and other inventories are based on weighted average cost formula. The cost of inventories includes expenditure incurred in purchasing the inventories and other costs incurred in bringing them to their present location and condition. It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses. Accordingly, the costs of inventories are accounted as follows:

y Raw materials - On weighted average basis

y Packing materials - On weighted average basis

y Motor vehicles - At actual cost

y Goods-in-transit - At actual cost

y Work-in-progress - At actual cost

y Other stocks - On weighted average basis

y Stock-in-trade - On weighted average basis

y Mosac tiles and staron sheet - At actual cost

y Consumable stock - On weighted average basis

Provisions are made for all non-moving and obsolete items of inventory to reflect the lower of cost or net realisable value.

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Raw materials 15,182 17,273 - -

Packing materials 12,404 11,284 - -

Stock-in-trade (note 12.1) 6,310,507 5,594,899 - -

Work-in-progress 81,699 93,277 - -

Goods in transit (note 12.3) 712,819 499,579 - -

Mosac tiles and staron sheets 8,112 11,851 - -

Consumable stock 4,997 5,896 4,997 5,896

Others 15,136 19,034 - -

7,160,856 6,253,093 4,997 5,896


12.1 Stock-in-trade

GROUP

As at 31 March 2020 2019

LKR'000 LKR'000

Spare parts 1,209,746 1,296,721

Vehicles 4,522,193 3,766,727

Lubricants 255,438 262,075

Tyres 124,775 112,060

3D printers 3,455 2,966

Equipment & machinery 171,836 92,997

Others 23,064 61,353

6,310,507 5,594,899

The stock-in-trade of each category has been shown after netting off the provision made for slow moving inventories in respect of each category.

12.2 Provision for slow moving inventoriesGROUP

As at 31 March 2020 2019

LKR'000 LKR'000

At the beginning of the year 322,586 273,259

Provision made during the year 63,048 49,327

At the end of the year 385,634 322,586

12.3 Goods in transitGROUP

As at 31 March 2020 2019

LKR'000 LKR'000

Vehicles 685,454 313,722

Spare parts and lubricants 27,365 185,857

712,819 499,579




REPORTS RISK AND

GOVERNANCE


12.4 Inventories & trade receivables pledged as security for liabilities of Group entities are as follows.

Company Bank Facility Amount pledged as

security

Balance outstanding

LKR’000 LKR’000

Unimo Enterprises LimitedSampath Bank PLC

Overdraft, Short term loan, Letter of credit 120,000 120,000

National Development Bank PLCOverdraft, Short term loan, Letter of credit 105,000 105,000

Commercial Bank of Ceylon PLCOverdraft, Short term loan, Letter of credit 525,000 525,000

Standard Chartered BankOverdraft, Short term loan, Letter of credit 500,000 500,000

UML Heavy Equipment Limited Commercial Bank of Ceylon PLC

Overdraft, Short term loan, Letter of credit 160,000 160,000

13. TRADE AND OTHER RECEIVABLESRefer the accounting policy in note 3.5

13.1 SummaryGROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Trade debtors 1,064,669 915,153 58,513 30,061

Impairment allowance (note 13.4) (77,591) (51,289) - -

987,078 863,864 58,513 30,061

Advances & prepayments 2,198,792 831,793 9,615 12,418

Deposits 52,918 50,313 17,933 17,933

Loans to employees (note 13.5) 20,497 19,254 3,860 4,220

Other receivable 329,183 357,853 6,211 27,404

LC margin - 1,030,340 - -

Other tax recoverable (note 13.6) 35,402 56,675 - -

Facilitation fee receivable - 28,005 - -

3,623,870 3,238,097 96,132 92,036

13.2 The Group’s exposure to credit risk and impairment losses related to trade and other receivables are disclosed in note 37.1

Classification as trade receivables

Trade receivables are amounts due from customers/tenants for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 07 - 90 days and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.

Fair values of trade receivables

Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value.


13.3 Trade receivables pledged as security for liabilities are given in note 12.4

13.4 Impairment allowance for trade receivables

GROUP

As at 31 March 2020 2019

LKR'000 LKR'000

At the beginning of the year 51,289 54,227

During the year (reversal) / provision 55,975 1,119

Bad debt written off during the year (29,673) (4,057)

At the end of the year 77,591 51,289

13.5 Loans to employees

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

At the beginning of the year 19,254 16,742 4,220 4,580

Loans disbursed during the year 13,784 12,641 - -

Recovered during the year (12,541) (10,129) (360) (360)

At the end of the year 20,497 19,254 3,860 4,220

No loans have been granted to the Directors of the Company.

13.6 Other tax recoverable

GROUP

As at 31 March 2020 2019

LKR'000 LKR'000

Economic service charge 35,402 55,684

Withholding tax - 991

35,402 56,675




REPORTS RISK AND

GOVERNANCE


14. INCOME TAX (RECEIVABLE) / PAYABLE

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

At the beginning of the year 75,596 84,707 7,209 2,392

Income tax on current year profit (note 27) 57,341 224,038 18,352 28,201

Losses utilised during the year (58,356) - - -

Under / (over) provision in respect of prior periods (note 27) (559) (22,352) 170 -

Income tax paid (135,046) (210,797) (20,377) (23,384)

At the end of the year (61,024) 75,596 5,354 7,209

Income tax receivable (66,378) (9,818) - -

Income tax payable 5,354 85,414 5,354 7,209

(61,024) 75,596 5,354 7,209

15. OTHER INVESTMENTS

Refer the accounting policy in note 3.5

15.1 Financial assets at fair value through other comprehensive income

Financial assets at fair value through other comprehensive income (FVOCI) comprise equity securities which are not held for trading, and which the Group has irrevocably elected at initial recognition to recognise in this category. These are strategic investments and the Group considers this classification to be more relevant.

GROUP

As at 31 March 2020 2019

LKR'000 LKR'000

Equity securities (note 15.1.3) 523,582 509,180

Decrease in market value (315,326) (252,769)

208,256 256,411

15.1.1 Amounts recognised in profit or loss and other comprehensive income

During the year, the following gains/(losses) were recognised in profit or loss and other comprehensive income.

GROUP


LKR'000 LKR'000

Changes in fair value recognised in other comprehensive income - FVOCI (62,557) (107,825)

Dividend from equity securities held at FVOCI recognised in profit or loss in other income (note 25.2) 6,793 6,435

(55,764) (101,390)


15.1.2 Disposal of equity investments

On disposal of these equity investments, any related balance within the FVOCI reserve is reclassified to retained earnings.

During the year 2019/2020 there were no disposals of financial assets categorised under FVOCI.

15.1.3 Equity securities designated at fair value through other comprehensive income

Group

As at 31 March 2020 2019

No. of shares

Cost Market value No. of shares

Cost Market value

LKR ’000 LKR ’000 LKR ’000 LKR ’000

Aitken Spence PLC 561,648 51,346 17,243 561,648 51,346 23,028

Bairaha Farms PLC 52,251 10,587 4,112 52,251 10,587 5,998

Central Industries PLC 21,000 1,140 689 21,000 1,140 592

Ceylon Grain Elevators PLC 5,000 471 201 5,000 471 261

Citizens Development Business Finance PLC (X) 10 1 1 10 1 1

Commercial Bank of Ceylon PLC - Non-voting 295,031 35,623 17,259 289,505 35,623 24,318

Commercial Bank of Ceylon PLC - Voting 267,895 40,302 16,100 263,646 40,302 26,022

DFCC Bank PLC 667,928 106,456 40,477 477,092 92,717 33,396

Diesel & Motor Engineering PLC 109,883 90,211 27,471 109,883 90,211 33,481

Lanka Walltiles PLC 82,116 9,760 3,375 82,116 9,760 4,927

Laugfs Gas PLC 143,049 5,912 1,302 143,049 5,912 2,403

Laugfs Power Ltd 143,049 - 343

MTD Walkers PLC 90,259 5,521 - 90,259 5,521 1,336

National Development Bank PLC 487,303 54,298 32,259 464,602 54,298 43,766

Nations Trust Bank PLC 254,874 24,689 16,108 254,874 24,689 22,913

People’s Leasing & Finance PLC 185,145 4,066 2,258 179,704 4,066 2,408

Renuka Foods PLC 388,211 9,210 5,318 388,211 9,210 5,086

Seylan Bank PLC - Voting 58,609 4,795 1,963 42,908 4,132 2,695

Singer Finance (Lanka) PLC 521,885 11,917 4,488 521,885 11,917 6,576

Softlogic Finance PLC 89,709 5,171 1,032 89,709 5,171 1,938

The Lanka Hospital Corporation PLC 9,000 652 248 9,000 652 393

Three Acre Farms PLC 5,870 846 470 5,870 846 577

Tokyo Cement (Lanka) PLC 690,634 50,608 15,539 690,634 50,608 14,296

523,582 208,256 509,180 256,411

15.2 Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss (FVTPL) comprise equity securities which are held principally for the purpose of trading in the near term.

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Investment in equity securities (note 15.2.2) 121,250 121,250 - -

Decrease in market value (66,326) (51,968) - -

54,924 69,282 - -

Other investments designated as FVTPL (note 15.2.3) 362,854 387,133 362,854 205,380

417,778 456,415 362,854 205,380




REPORTS RISK AND

GOVERNANCE


15.2.1 Amounts recognised in profit or loss

GROUP


LKR'000 LKR'000

Changes in fair value on equity securities at FVTPL (note 25.1) (14,358) (17,921)

Dividend from equity securities held at FVTPL recognised in profit or loss (note 25.2) 2,447 2,164

(11,911) (15,757)

15.2.2 Equity securities designated at fair value through profit or loss

Group

As at 31 March 2020 2019

No. of shares

Cost Market value No. of shares

Cost Market value

LKR ’000 LKR ’000 LKR ’000 LKR ’000

Bairaha Farms PLC 68,849 13,137 5,419 68,849 13,137 7,904

Central Industries PLC 11,796 638 387 11,796 638 333

Ceylon Grain Elevators PLC 55,470 5,303 2,230 55,470 5,303 2,890

Citizens Development Business Finance PLC - Non-voting 54,198 5,269 2,428 52,437 5,269 3,204

Citizens Development Business Finance PLC - Voting 75,216 8,447 5,423 73,224 8,447 5,646

Kelani Cables PLC 30,000 4,247 1,560 30,000 4,247 2,022

Kelani Tyres PLC 40,095 3,215 1,327 40,095 3,215 1,239

Lanka IOC PLC 104,100 4,002 1,645 104,100 4,002 1,811

Lanka Walltiles PLC 38,989 4,466 1,603 38,989 4,466 2,339

Laugfs Gas PLC 25,000 885 228 25,000 885 420

Laugfs Power Ltd 25,000 - 60 - - -

MTD Walkers PLC 70,000 4,204 - 70,000 4,204 1,036

Nations Trust Bank PLC 87,415 8,249 5,525 87,415 8,249 7,859

People’s Leasing PLC 407,676 8,779 4,974 395,694 8,779 5,302

Renuka Foods PLC 457,001 11,398 6,261 457,001 11,398 5,987

Sanasa Development Bank PLC 32,669 4,326 1,535 32,669 4,326 1,960

Singer Finance (Lanka) PLC 679,224 15,683 5,841 679,224 15,683 8,558

Softlogic Finance PLC 65,944 3,768 758 65,944 3,768 1,424

Three Acre Farms PLC 50,000 7,584 4,000 50,000 7,584 4,915

Vallibel One PLC 310,002 7,650 3,720 310,002 7,650 4,433

121,250 54,924 121,250 69,282


15.2.3 Other investments designated at fair value through profit or loss

Group

As at 31 March 2020 2019

No. of units Market valueLKR'000


Investment in unit trusts 14,286,447 362,854 18,382,487 387,133

14,286,447 362,854 18,382,487 387,133

Company

As at 31 March 2020 2019



Investment in unit trusts 14,286,447 362,854 9,173,004 205,380

14,286,447 362,854 9,173,004 205,380

16. CASH AND BANK BALANCE


16.1 Favourable balances

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Cash at bank* 234,311 365,942 100 90

Money market investments* 62,088 64,707 22,088 22,395

Call deposits 3,758 326 - -

Cash in hand* 14,450 163,702 325 325

Cash and bank balances 314,607 594,677 22,513 22,810

16.2 Unfavourable balances

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Overdraft* (215,120) (160,397) (17,136) (18,786)

Total cash and cash equivalents for the purpose of cash flow statement 95,729 433,954 5,377 4,024

*Cash at bank, money market investment, cash in hand and overdraft have been considered for the purpose of statement of cash flows.

16.3 In September 2015 the Department of Inland Revenue issued seizure notice to all six bank accounts of Orient Motor Company Limited (OMCL) to recover unpaid NBT of LKR 17.6 Mn. as per their records. OMCL has set-off this amount against a GST refund approved by Commissioner General of Inland Revenue (CGIR). Orient Motor Company Limited has filed a fundamental rights case in the Supreme Court against the Department of Inland Revenue on the basis that these outstanding taxes are not payable as they have been set off against refunds approved by CGIR. The case is currently being heard in the Supreme Court and there are no developments that have arisen which require a provision in the accounts. Therefore no provision has been made in these Financial Statements for the year ended 31 March 2020 as OMCL has strong reasons to believe that they will not have to settle any assessments issued by the Department of Inland Revenue.

Overdraft facilities of the Company are unsecured, refer note 35.1 and note 35.2 for detail of corporate guarantees given for related companies.




REPORTS RISK AND

GOVERNANCE


17. EQUITY

17.1 Stated capital

Group/Company 2020 2019

Number ’000 LKR'000 Number ’000 LKR'000

Balance as at 01 April 800,000 7,360,000 600,000 5,760,000

Shares issued during the Year - - 200,000 1,600,000

Balance as at 31 March 800,000 7,360,000 800,000 7,360,000

17.2 Ordinary shares

Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company. All rights attached to the Company’s shares held by the Group are suspended until those shares are reissued.

17.3 Retained earnings

GROUP COMPANY

2020 2019 2020 2019

LKR ’000 LKR'000 LKR ’000 LKR'000

Balance as at 01 April 9,887,632 8,982,769 7,379,649 6,578,499

Impact of adopting IFRIC 23 (653,417) - (311,815) -

Profit for the year 589,205 905,923 1,000,135 803,805

Other comprehensive income for the year 8,488 872 1,385 (723)

Share issue expenses - (1,932) - (1,932)

Dividend paid (120,000) - (120,000) -

Balance as at 31 March 9,711,908 9,887,632 7,949,354 7,379,649

17.4 Revaluation reserve

The revaluation reserve represents the surplus related to the revaluation of property, plant and equipment.

17.5 Fair value through other comprehensive income reserve

Fair value through other comprehensive income comprises the cumulative net change in the fair value of equity instruments until the investments are derecognised or impaired (under SLFRS 9).


18. INTEREST BEARING LOANS AND BORROWINGS


18.1 Group

Lender Balance As at 31 March 2020

Balance As at 31 March 2019

As at 01 April

2019

Loans obtained

and interest accrued

Repayment As at 31 March

2020

Within one year

After one year

Within one year

After one year

Term of the loan

Maturity period

Repayment terms Facility amount Interest rate

LKR’000 LKR’000 LKR’000 LKR’000 LKR’000 LKR’000 LKR’000 LKR’000 LKR’000

Long term loans

Commercial Bank - Facility I 626,307 - 126,467 499,840 125,040 374,800 126,467 499,840 9 Years Feb-2024 95 Equal monthly installments after one

year grace period 1,000,000 (AWPLR)

+ 0.5%

Commercial Bank - Facility III 13,157 - 1,907 11,250 1,875 9,375 1,907 11,250 9 Years Mar-2026 76 equal monthly installments together

with interest 100,000 (AWPLR)

+ 0.5%

Commercial Bank - Facility IV

1,269,680 - 133,278 1,136,402 - 1,136,402 3,278 1,266,402 12 Years Nov-2029 Payable in 10 annual installments commencing from November 2020 (Interest to be serviced monthly)

2,600,000 (AWPLR) + 0.5%

Commercial Bank - Facility V


2,500,000 (AWPLR) + 0.5%

3,276,593 - 405,183 2,871,410 126,915 2,744,495 135,183 3,141,410

Short term loans

Bank of Ceylon 808,252 16,548,430 16,546,641 810,041 810,041 - 808,252 -

Peoples Bank 500,725 6,106,000 5,616,000 990,725 990,725 - 500,725 -

Commercial Bank 946,251 8,841,753 8,140,697 1,647,307 1,647,307 - 946,251 -

Standard Chartered Bank 1,255,816 20,024,507 19,858,523 1,421,800 1,421,800 - 1,255,816 -

Sampath Bank 100,384 6,021,613 5,329,867 792,130 792,130 - 100,384 -

DFCC Bank - 390,000 390,000 - - - - -

3,611,428 57,932,303 55,881,728 5,662,003 5,662,003 - 3,611,428 -

Total 6,888,021 57,932,303 56,286,911 8,533,413 5,788,918 2,744,495 3,746,611 3,141,410




REPORTS RISK AND

GOVERNANCE


18. INTEREST BEARING LOANS AND BORROWINGS


18.1 Group



As at 01 April

2019

Loans obtained

and interest accrued


2020

Within one year

After one year

Within one year

After one year

Term of the loan

Maturity period


LKR’000 LKR’000 LKR’000 LKR’000 LKR’000 LKR’000 LKR’000 LKR’000 LKR’000

Long term loans

Commercial Bank - Facility I 626,307 - 126,467 499,840 125,040 374,800 126,467 499,840 9 Years Feb-2024 95 Equal monthly installments after one


+ 0.5%

Commercial Bank - Facility III 13,157 - 1,907 11,250 1,875 9,375 1,907 11,250 9 Years Mar-2026 76 equal monthly installments together


+ 0.5%



2,600,000 (AWPLR) + 0.5%



2,500,000 (AWPLR) + 0.5%

3,276,593 - 405,183 2,871,410 126,915 2,744,495 135,183 3,141,410

Short term loans

Bank of Ceylon 808,252 16,548,430 16,546,641 810,041 810,041 - 808,252 -

Peoples Bank 500,725 6,106,000 5,616,000 990,725 990,725 - 500,725 -

Commercial Bank 946,251 8,841,753 8,140,697 1,647,307 1,647,307 - 946,251 -

Standard Chartered Bank 1,255,816 20,024,507 19,858,523 1,421,800 1,421,800 - 1,255,816 -

Sampath Bank 100,384 6,021,613 5,329,867 792,130 792,130 - 100,384 -

DFCC Bank - 390,000 390,000 - - - - -

3,611,428 57,932,303 55,881,728 5,662,003 5,662,003 - 3,611,428 -

Total 6,888,021 57,932,303 56,286,911 8,533,413 5,788,918 2,744,495 3,746,611 3,141,410


18.2 Company



As at 01 April

2019


2020

Within one year

After one year

Within one year

After one year

Term of the loan

Maturity period



Long term loans

Commercial Bank - Facility I 626,307 126,467 499,840 125,040 374,800 126,467 499,840 9 Years Feb-2024 95 Equal monthly installments after one


+ 0.5%

Commercial Bank - Facility III 13,157 1,907 11,250 1,875 9,375 1,907 11,250 9 Years Mar-2026 76 equal monthly installments together


+ 0.5%


1,269,680 133,278 1,136,402 - 1,136,402 3,278 1,266,402 12 Years Nov-2029 Payable in 10 annual installments commencing from November 2020 (Interest to be serviced monthly)

2,600,000 (AWPLR) + 0.5%



2,500,000 (AWPLR) + 0.5%

3,276,593 405,183 2,871,410 126,915 2,744,495 135,183 3,141,410

18.3 Security offered

Long term loans

1. Commercial Bank - Facility I

Primary Mortgage Bond No.1568 dated 23 October 2015 for LKR 1.5 Bn. executed over the property at No.33,Park Street, Colombo 02 owned by R I L Property PLC.

2. Commercial Bank - Facility III

Tertiary Mortgage Bond No.126 for LKR 800 Mn. dated 08 January 2016 executed over the property at No.33,Park Street Colombo 02 owned by R I L Property PLC.

3. Commercial Bank - Facility IV & V

a. Quaternary Mortgage Bond No.1333 dated 18 December 2017 for LKR 2.6 Bn. executed over the property at No.33,Park Street, Colombo 02 owned by R I L Property PLC

b. 30 Mn. shares held by R I L Property PLC in United Motors Lanka PLC held in a slash account in the name of Commercial Bank of Ceylon PLC / R I L Property PLC.

Short term loans

Borrowings which are guaranteed through corporate guarantees given by, United Motors Lanka PLC, in favour of its subsidiaries and a related companies describes in note 35.2 and note 35.3 to the consolidated Financial Statements.

18.4 In light of the impact of the COVID-19 pandemic, some of the short term loans granted on or before 31 March 2020 were extended for a period of three months and long term loans received an interest deferment for a period of six months.




REPORTS RISK AND

GOVERNANCE


18.2 Company



As at 01 April

2019


2020

Within one year

After one year

Within one year

After one year

Term of the loan

Maturity period



Long term loans

Commercial Bank - Facility I 626,307 126,467 499,840 125,040 374,800 126,467 499,840 9 Years Feb-2024 95 Equal monthly installments after one


+ 0.5%

Commercial Bank - Facility III 13,157 1,907 11,250 1,875 9,375 1,907 11,250 9 Years Mar-2026 76 equal monthly installments together


+ 0.5%



2,600,000 (AWPLR) + 0.5%



2,500,000 (AWPLR) + 0.5%

3,276,593 405,183 2,871,410 126,915 2,744,495 135,183 3,141,410

18.3 Security offered

Long term loans

1. Commercial Bank - Facility I

Primary Mortgage Bond No.1568 dated 23 October 2015 for LKR 1.5 Bn. executed over the property at No.33,Park Street, Colombo 02 owned by R I L Property PLC.

2. Commercial Bank - Facility III

Tertiary Mortgage Bond No.126 for LKR 800 Mn. dated 08 January 2016 executed over the property at No.33,Park Street Colombo 02 owned by R I L Property PLC.

3. Commercial Bank - Facility IV & V

a. Quaternary Mortgage Bond No.1333 dated 18 December 2017 for LKR 2.6 Bn. executed over the property at No.33,Park Street, Colombo 02 owned by R I L Property PLC

b. 30 Mn. shares held by R I L Property PLC in United Motors Lanka PLC held in a slash account in the name of Commercial Bank of Ceylon PLC / R I L Property PLC.

Short term loans

Borrowings which are guaranteed through corporate guarantees given by, United Motors Lanka PLC, in favour of its subsidiaries and a related companies describes in note 35.2 and note 35.3 to the consolidated Financial Statements.

18.4 In light of the impact of the COVID-19 pandemic, some of the short term loans granted on or before 31 March 2020 were extended for a period of three months and long term loans received an interest deferment for a period of six months.


19. EMPLOYEE BENEFITS

ACCOUNTING POLICY

I. Short term employee benefits

Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short term cash bonus or profit sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

II. Defined contribution plans

A defined contribution plan is a post employment plan under which an entity pays fixed contribution into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in the statement of comprehensive income in the periods during which services are rendered by employees.

Employees’ Provident Fund

The Group and its employees (Except United Motors Lanka PLC) contribute 12% and 8% respectively of the salary of each employee to the employees provident fund manage by the Central bank of Sri Lanka.

The United Motors Lanka PLC and its employees contribute 12% and 10% respectively of the salary of each employee to the approved Private Provident fund.

Employees’ Trust Fund

The Group contribute 3% of the salary of each employee to the Employees’ Trust Fund managed by the Central Bank of Sri Lanka.

Contributions to defined contribution plans are recognised as an expense in the statement of comprehensive income as incurred.

III. Defined benefit plans - retiring gratuity

A defined benefit plan is a post employment benefit plan other than a defined contribution plan. The Group is liable to pay retirement benefits under the Payment of Gratuity Act, No 12 of 1983. The liability for the gratuity payment to an employee arises only on the completion of 5 years of continued service with the Group. The net obligation of the Group in respect of defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods and discounted to determine its present value. Any unrecognised past service costs and fair value of any plan assets are deducted.

The calculation of defined benefit obligation is performed annually by a qualified actuary using the Projected Unit Credit (PUC) method. Re-measurement of the net defined benefit liability, which comprises actuarial gains and losses, are recognised immediately in OCI. The Group determines the net interest expense on the net defined benefit liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined liability, taking in to account any changes in the net defined benefit liability during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in the statement of profit or loss and other comprehensive income.

The Group recognises all actuarial gains and losses arising from defined benefit plan immediately in other comprehensive income and all other expenses related to defined benefit plan in employee benefit expenses in profit or loss. Key actuarial assumptions used have been disclosed in note 19.5 to the Financial Statements

Subsidiaries

All the subsidiaries have adopted actuarial valuation method in line with Group accounting policies. United Motors Lanka PLC (UML)'s liability arising on retirement benefits of employees is partly externally funded.




REPORTS RISK AND

GOVERNANCE


19.1 Retirement benefits obligation - gratuity

GROUP COMPANY

2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

As at 01 April 232,052 211,448 6,475 4,350

Current service cost 27,324 24,536 1,662 1,769

Interest cost 25,203 22,843 712 436

Actuarial (gain)/losses (9,568) (5,089) (1,924) 1,004

Payments made during the year (23,715) (21,686) - (1,084)

As at 31 March (note 19.2) 251,296 232,052 6,925 6,475

19.2 The above retirement benefit obligation is attributable to following entities

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Company

R I L Property PLC 6,925 6,475 6,925 6,475

FoodBuzz (Private) Limited 4,825 3,030 - -

United Motors Lanka PLC (UML) (note 19.3) 239,546 222,547 - -

251,296 232,052 6,925 6,475

19.3 Retirement benefit obligation of UML is stated below:

GROUP

As at 31 March 2020 2019

LKR'000 LKR'000

Present value of unfunded obligations - 1,990

Present value of funded obligations 239,546 220,557

Retirement benefit obligation 239,546 222,547

19.4 Reimbursable right asset of UML is stated below:

GROUP

As at 31 March 2020 2019

LKR'000 LKR'000

Employees joined before 1992/93 mutual fund (note 19.4.1) 246 436

Employees joined after 1992/93 defined benefit plan (note 19.4.2) 66,965 72,487

67,211 72,923

19.4.1 Retiring gratuity is a defined benefit plan covering employees of United Motors Lanka PLC. UML's liability arising on retirement benefits of employees joined prior to 1992/93 is partly externally funded through investments in NDB Mutual Funds and the value of this fund as at 31 March 2020 is LKR 246 Mn. (2019 - LKR 436 Mn.). The gratuity liability of employees joined after 1992/93, is externally funded and an agreement has been entered in to with AIA Insurance PLC and covers 810 employees of the Company as at 31 March 2020.


19.4.2 Movement in fair value of reimbursable right

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

At the beginning of the year 72,487 83,462 - -

Expected return on reimbursable right 7,988 9,195 - -

Benefits paid by the reimbursable right (15,503) (17,223) - -

Benefits payable by the reimbursable right (6,942) (1,201) - -

Actuarial gains / (losses) in other comprehensive income 8,935 (1,746) - -

Fair value of the defined benefit plan at the end of the year 66,965 72,487 - -

19.5 Actuarial assumptions

R I L Property PLC FoodBuzz (Private) Limited United Motors Lanka PLC

2020 2019 2020 2019 2020 2019

Discount rate assumed 9% 11% 9% 11% 9.3% 11%

Future salary escalation 7% 10% 5% 5% 9% 10%

Retirement age 55 Years 55 Years 55 Years 55 Years 55 or 60 Years 55 or 60 Years

Staff turnover rate 25% 20% 40% 7% 4%-9% 5%-9%

Sensitivity of assumptions employed in actuarial valuation

The following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed with all other variables held constant in the employee benefits liability measurement.

The sensitivity of the statement of comprehensive income and statement of financial position is the effect of the assumed changes in discount rate and salary increment rate on the profit or loss and employment benefit obligation for the year.

Increase/(decrease) in discount rate

Increase/(decrease) in salary escalation rate

Effect on the present value of defined benefit obligation

GROUP COMPANY

2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

1% - (14,027) (15,731) (292) (289)

-1% - 15,749 17,799 317 317

- 1% 14,374 18,800 352 341

- -1% (13,046) (16,871) (329) (316)

*The figures in brackets indicate a decrease and the other figures indicate an increase.




REPORTS RISK AND

GOVERNANCE


19.6 Expense recognised statement of profit or loss and other comprehensive income

GROUP COMPANY

Year ended 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Expense recognised in statement of profit or loss

Defined benefit obligation

Current service cost 27,324 24,536 1,662 1,769

Interest cost 25,203 22,843 712 436

Reimbursable right

Expected return on reimbursable right 7,988 9,195 - -

Expenses recognised in other comprehensive income

Defined benefit obligation

Actuarial (gain)/losses (9,568) (5,089) (1,924) 1,004

Reimbursable right

Actuarial gains / (losses) 8,935 (1,746) - -

20. TRADE AND OTHER PAYABLES


GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Trade payable 444,349 378,442 54,767 8,853

Retention payable 26,472 50,031 26,472 50,031

Rent Income received in advance (note 20.1) 96,493 40,913 96,493 42,003

Customer deposits (note 21.1) 51,816 97,871 51,816 97,871

Taxes payable 12,464 43,580 5,668 2,983

Dividend payable 57 80,615 57 26

Advances received from customers 166,411 187,018 40,705 28,771

Accrued charges 169,178 8,862 9,917 -

Other payable 108,886 407,732 19,894 83,012

1,076,126 1,295,064 305,789 313,550

20.1 Rent received in advance

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Current 96,493 40,913 96,493 42,003

Non-current 150,852 16,837 151,032 17,045

247,345 57,750 247,525 59,048


21. CUSTOMER DEPOSITS


GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Customer deposits 184,560 151,890 191,237 158,567

Fair value adjustment 56,645 28,547 56,645 28,547

241,205 180,437 247,882 187,114

21.1 Classified under:

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Current liabilities - Customer deposits 51,816 97,871 51,816 97,871

Non-current liabilities - Customer deposits 189,389 82,566 196,066 89,243

241,205 180,437 247,882 187,114

22. DEFERRED TAX ASSETS / (LIABILITIES)

ACCOUNTING POLICY

Deferred tax is recognised in respect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the tax base of assets and liabilities, which is the amount attributed to those assets and liabilities for tax purposes. Significant management judgements are required to determine the amount of deferred tax assets/liabilities that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. Refer note 27 for more details on taxation.

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Deferred tax assets (note 22.1) 484,714 223,269 - -

Deferred tax liabilities (note 22.2) (2,307,612) (841,534) (1,234,203) (764,123)

Net deferred tax liabilities (1,822,898) (618,265) (1,234,203) (764,123)

The movement in the deferred tax account is as follows,

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

At the beginning of the year (618,265) (609,737) (764,123) (574,293)

Impact of adopting IFRIC 23 (992,272) - (311,815) -

Tax losses utilised (58,356) - - -

Recognised in profit or loss 8,535 (144) (150,054) (182,831)

Recognised in other comprehensive income (162,540) (8,384) (8,211) (6,999)

At the end of the year (1,822,898) (618,265) (1,234,203) (764,123)




REPORTS RISK AND

GOVERNANCE


With the enactment of the new Inland Revenue Act No. 24 of 2017, gains and losses arising from realisation of capital assets are subject to taxes, at normal business income rates of 28% or at investment tax rate of 10%. Accordingly deferred tax provision has been made to comply to the said act.

22.1 Composition of deferred tax assets

GROUP

As at 31 March 2020 2019

LKR'000 LKR'000

Property, plant & equipment 6,335 1,396

Retirement benefit obligation 68,995 6,866

Provisions 15,026 13,041

Lease liability 83,267 -

Tax loss 311,091 201,966

Net deferred tax assets 484,714 223,269

22.1.1 The Group recognises a deferred tax asset on tax losses amounting to LKR 311.1 Mn. (2019 - 201.9 Mn.) that are available to offset against future taxable profits of the companies in which the tax losses arose.

22.2 Composition of deferred tax liability

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Property plant & equipment (221,489) (180,341) (54,926) (47,255)

Retirement benefit obligation 1,939 58,137 1,939 1,813

Gain on revaluations of land (1,256,393) (74,269) (427,559) (74,269)

Investment property (753,657) (644,412) (753,657) (644,412)

Right-of-use assets (78,012) - - -

Intangible assets - (649) - -

Net deferred tax liability (2,307,612) (841,534) (1,234,203) (764,123)

22.3 The Group has applied IFRIC 23- Uncertainty over income tax treatments for the first time in these Financial Statements, and accordingly the Group has made a provision for uncertain income tax as at 01 April 2019.

Provision for uncertain income tax

The income tax charge for the year ended 31 March 2020 has been determined based on the provisions of Inland Revenue Act No. 24 of 2017 in the year of assessment 2019/20.

Due to uncertainties that exist in the interpretation of the Inland Revenue Act No. 24 of 2017 relating to tax on realised gains on freehold land, significant judgement was exercised to determine the provision for deferred tax liability required for gains on realisation of freehold land.

The Board of Directors of the Company has made an assessment of the impact on initial adoption of IFRIC 23 – Uncertainty over income tax treatment and accordingly a provision for deferred tax liability amounting to LKR 992 Mn (Group) and LKR 312 Mn. (Company) has been provided on the probable future tax effects on profits on realisation of free hold land.


Provision made in the Group reflects the liability based on expected value as per IFRIC 23. The said provision represents Group’s assessment of the impact on the Financial Statements as a result of the initial adoption of IFRIC 23 as at the transition date (01 April 2019) retrospectively with the cumulative effect of initially applying the interpretation as an adjustment to the opening balance of retained earnings, revaluation reserve and non-controlling interest as disclosed in note 6.2.

Sensitivity Analysis

In the event it is deemed by the tax authorities that freehold land be considered as “Capital Assets used in the business”, the Company and the Group would have to make an additional deferred tax charge in the statement of profit or loss for the year ended 31 March 2020 amounting to LKR 324 Mn. (Company) and LKR 324 Mn. (Group), other comprehensive income amounting to LKR 388 Mn. (Group) and Non-controlling interest amounting to LKR 363 Mn. (Group). The consequential increase in the deferred tax liability on the statement of financial position for the Company is LKR 324 Mn. and Group LKR 1,075 Mn.

In the event it is deemed by the tax authorities that freehold land be considered as “Investment Assets”, the Company and the Group would have to reverse the deferred tax provision. The impact in the statement of profit or loss for the year ended 31 March 2020 would amount to a reduction in deferred tax of LKR 324 Mn. (Company) and LKR 324 Mn. (Group), other comprehensive income amounting to LKR 388 Mn. (Group) and Non-controlling interest amounting to LKR 363 Mn. (Group). The consequential decrease in the deferred tax liability on the statement of financial position for the Company is LKR 324 Mn. and Group LKR 1,075 Mn.

23. REVENUE

ACCOUNTING POLICY

I. REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue from contracts with customers is recognised when control of the goods or services is transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

Goods transferred at a point in time

Under SLFRS 15, revenue is recognised upon satisfaction of a performance obligation. The revenue recognition occurs at a point in time when control of the asset is transferred to the customer, generally, on delivery of the goods.

Services transferred over time

Under SLFRS 15, the Group determines, at contract inception, whether it satisfies the performance obligation over time or at a point in time. For each performance obligation satisfied over time, the Group recognises the revenue over time by measuring the progress towards complete satisfaction of that performance obligation.

II. RENTAL INCOME

Rental income includes rental income from properties leased out to tenants under operating leases and income from other related services. Rental income from operating leases is recognised on a straight-line basis over the lease term in accordance with the SLFRS 16.

GROUP COMPANY

Year ended 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Rental and other related services (note 23.1) 979,456 743,106 1,002,900 762,179

Food processing and other related services (note 23.2) 412,490 445,145 - -

Automobile sales and other related services (note 23.3) 9,844,131 12,767,413 - -

11,236,077 13,955,664 1,002,900 762,179




REPORTS RISK AND

GOVERNANCE


23.1 Rental and other related services

GROUP COMPANY

Year ended 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Rental 875,357 660,947 898,801 680,020

Other related services 104,099 82,159 104,099 82,159

979,456 743,106 1,002,900 762,179

23.2 Food processing and other related services

GROUP


LKR'000 LKR'000

Net sales 434,429 468,843

Less: Royalty (21,939) (23,698)

412,490 445,145

23.3 Automobile sales and other related services

GROUP


LKR'000 LKR'000

Brand new vehicles 6,167,510 9,067,547

Spare parts, repairs & service 1,925,223 2,449,757

Lubricants & car care products 967,793 665,333

Local charges on new vehicles 296,062 304,548

Equipment & machinery 266,584 97,523

Tyres 206,055 177,350

3D printers 14,904 5,355

9,844,131 12,767,413


24. OTHER INCOME AND GAINS

ACCOUNTING POLICY

Income earned in other sources, which are not directly related to the ordinary course of business are recognised as other income.

The following specific criteria are used for the purpose of recognising income.

Profit or loss on disposal of property, plant and equipment

The gains or losses on the sale of property, plant and equipment are determined on the difference between the carrying amount of the property, plant and equipment at the time of disposal and the proceeds of disposal, net of expenses incurred on disposal. This is recognised in the year in which significant risks and rewards of ownership are transferred to the buyer.

Gains / losses on the disposal of investments

Gains / losses on the disposal of investments held by the parent have been accounted under other income after deducting from the proceeds on disposal, the carrying amount of such assets and the related selling expenses.

Sundry income

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

Facilitation fee

Facilitation fee is recognised in the statement of comprehensive income at the point of invoicing to the supplier.

Dividend income

Dividend income is recognised in profit or loss on the date the entity’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

GROUP COMPANY

Year ended 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Rent income - 1,514 - -

Dividend income - - 182,967 72,087

Profit on disposal of property, plant & equipment 2,702 36,774 30 4,431

Award received from principal 6,450 19,083 - -

Incentive received from principal 1,497 55,709 - -

Facilitation fee 17,151 32,904 - -

Staff loan interest - 1,118 - -

Income from solar PV system 39,521 - - -

Commission on insurance 5,617 2,944 - -

Income on legal services - 80 - -

Valuation fee 21 64 - -

Sundry income 35,375 26,668 14,247 13,805

Scrap sales 513 276 - -

FV adjustment of refundable deposit 218 - - -

109,065 177,134 197,244 90,323




REPORTS RISK AND

GOVERNANCE


25. FINANCE EXPENSES AND INCOME

ACCOUNTING POLICY

Finance costs comprise interest payable on all financial liabilities such as term loans, overdrafts, finance leases and fair value losses on financial assets at fair value through profit or loss. Interest expenses are recognised using the effective interest method.

Finance income comprises interest income, income from unit trusts, profit from disposal of marketable securities, dividend income, fair value gains on financial assets at fair value through profit or loss and all other income received or receivable as a result of holding financial asset.

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

The interest component of finance lease payment is recognised in the Financial Statements using effective interest rate method.

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

Dividend income on financial assets at the FVTPL and FVOCI are recognised in the Statement of Profit or Loss on an accrual basis when the Group’s right to receive the dividend is established.

25.1 Finance expenses

GROUP COMPANY

Year ended 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Overdraft interest 2,582 1,283 - -

Bank Loan interest 815,236 820,193 373,075 466,507

Finance charges on rent deposit 17,807 12,171 17,807 12,171

Finance cost other 543 190 - -

Net change in fair value - financial assets at fair value through profit or loss 14,358 17,921 - -

Interest on lease liabilities 57,023 - - -

Foreign exchange losses 7,745 1,665 - -

915,294 853,423 390,882 478,678

25.2 Finance income

GROUP COMPANY

Year ended 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Interest on repo/ fixed deposits 4,336 43,696 231 38,907

Income from unit trust investments 43,305 38,707 41,176 31,749

Interest on call deposits 10,857 12,290 - -

Interest on money market 2,483 3,413 1,672 2,513

Foreign exchange gains 9,833 20,976 - -

Net change in fair value of unit trust investment - 187 - -

Dividend income on financial assets at the fair value through profit or loss 2,447 2,164 - -

Dividend income on financial assets at the fair value through other comprehensive income 6,793 6,435 - -

80,054 127,868 43,079 73,169


26. PROFIT BEFORE TAX

Result from operating activities is stated after charging all expenses including the following:

GROUP COMPANY

Year ended 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Directors' emoluments and fees 114,184 122,755 25,320 22,516

Depreciation 287,858 262,613 32,122 32,781

Amortisation of intangible assets 30,934 7,464 4,916 4,851

Amortisation on right-of-use asset 167,958 - - -

Employees benefits including the following- Staff cost 986,671 1,000,798 111,663 98,106

- Defined contribution plan costs - EPF & ETF 129,799 112,607 9,615 9,634

- Defined benefit plan costs - gratuity 52,527 47,379 2,374 2,205

Auditor's remuneration - statutory audit & related services 5,280 4,998 956 900

Auditor's remuneration - Non audit services 2,500 434 - 434

Donations 412 393 - -

Written down of inventory 31,543 78,094 - -

Impairment losses & written offs of loans & receivables 52,002 1,117 - -

Tax compliance/consultancy charges 508 1,121 - -

Impairment of Goodwill 4,005 - - -

Impairment of Investment in subsidiary - - 63,805 -

27. INCOME TAX EXPENSE

ACCOUNTING POLICY

I. Income tax

Income tax on the profit for the year comprises current and deferred tax. Income tax is recognised directly in the statement of comprehensive income except to the extent that it relates to items recognised directly in equity or other comprehensive income.

R I L Property PLC

Pursuant to a letter dated 26 April 2016 received from Board of Investment of Sri Lanka, R I L Property PLC (formerly known as R I L Property Limited) qualifies for a tax exemption period of 12 years under Sec 17 (A) of the Inland Revenue Act No. 10 of 2006 as amended by Inland Revenue (Amendment) Act No. 08 of 2012 subject to the condition that LKR 2,500 Mn. investment is made in the project within a period of 24 Months from the date of supplementary agreement (i.e. 05 December 2013).

For the above purpose, the years of assessment shall be reckoned from the year in which the enterprise commences to make profits (2015/16). other income is liable for income tax at normal rate.


Pursuant to agreement dated 22 November 2011 and subsequent amendments there to on 15 May 2012 entered into with Board of Investment of Sri Lanka, the Company will be entitled for a tax exemption period of 06 years as stipulated in the Inland Revenue Act No.08 of 2012 (Section 16C) based on proposed investment not less than LKR 200 Mn. in fixed assets in the project.

For the above purpose “the year of assessment” shall be reckoned from the year in which the enterprises commences to make profit or any year of assessment not later than two years reckoned from the date of commencement of commercial operation which ever come first.

Other income is liable for income tax at applicable rates.




REPORTS RISK AND

GOVERNANCE




Current tax has been computed in accordance with the provisions of the Inland Revenue Act No. 24 of 2017 and amendments thereto. The taxable profit of the Company & subsidiaries are liable for income tax at 28% & 24% (2019-28%) except for the taxable profit of UML Property Development Limited (UMPDL) which is liable at 2% on turnover in accordance with an agreement entered in to with the Board of Investments of Sri Lanka under Section 17 of the BOI Act No.4 of 1978 and will be liable at the said rate till the year 2022.

Current tax

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

Tax exposures

In determining the amount of current and deferred tax, the Group considers the impact of tax exposures, including whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities. Such changes to tax liabilities would impact tax expense in the period in which such a determination is made.

II. Deferred tax

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the tax base of the assets and liabilities as at the reporting date.

Deferred tax is not recognised for;

y Temporary differences on the initial recognition of assets and liabilities in transactions that are not a business combination and at the time of transaction that affect neither accounting nor taxable profit or loss,

y Temporary differences relating to investments in subsidiaries, to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

y Taxable temporary differences arising on the initial recognition of goodwill

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the reporting date.

The principal temporary difference arise from depreciation on property, plant and equipment, investment property, intangible assets, tax losses carried forward, ROU assets, lease liabilities, provision for defined benefit obligations.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that the future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised, based on the level of future taxable profit forecasts and tax planning strategies.

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


GROUP COMPANY

Year ended 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Current income tax charge (note 27.1) 57,341 224,038 18,352 28,201

Under / (over) provision in respect of prior periods (559) (22,352) 170 -

56,782 201,686 18,522 28,201

Deferred income tax

Deferred taxation charge (note 22) (8,535) 144 150,054 182,831

Income tax expense reported in the statement of profit or loss 48,247 201,830 168,576 211,032

27.1 Reconciliation of the accounting profit and the current year tax:

GROUP COMPANY

Year ended 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Profit before income tax expense 436,711 1,321,355 1,168,711 1,014,837

Exempt dividend and other non business income (365,854) (131,392) - -

70,857 1,189,963 1,168,711 1,014,837

Add : Disallowable items 984,241 524,660 - -

Deduct : Allowable & exempted items (1,447,642) (1,396,772) (1,100,741) (914,118)

Profit/(Loss) from trade or business (392,544) 317,851 67,970 100,719

Interest income / tax profit or loss on disposal of property plant & equipment 4,916 135,595 - -

Total statutory income / assessable income (387,628) 453,446 67,970 100,719

Tax losses set off against income tax (note 27.2) 168,360 (529) - -

Taxable income net of tax losses (219,268) 452,917 67,970 100,719

Tax losses 645,997 472,920 - -

Taxable income 426,729 925,837 67,970 100,719

Taxable income liable at 28% 55,895 774,773 50,979 100,719

Taxable income liable at 24% 16,991 - 16,991 -

Taxable income liable at 14%(at 10% - 2019) - Withholding tax on inter company dividend 254,466 51,020 - -

Taxable income liable at 2% 99,377 100,044 - -

426,729 925,837 67,970 100,719

Income tax using the corporate tax rate

At 28% 15,650 216,936 14,274 28,201

At 24% 4,078 - 4,078 -

At 10% or 14% - Withholding tax on inter company dividend 35,625 5,102

At 2% 1,988 2,000 - -

Current tax 57,341 224,038 18,352 28,201

Effective tax rate 13% 17% 2% 3%

The Ministry of Finance has instructed on 31 January 2020 and 05 March 2020, that the revised income tax rates proposed to the Inland Revenue Act, No. 24 of 2017 by Circular No. PN/IT/2020-03 (Revised), be implemented with effect from 01 January 2020 pending formal amendments being made to the Inland Revenue Act.




REPORTS RISK AND

GOVERNANCE


The Group's management having applied significant judgment to the said proposed revision of income tax rates, have determined that it is probable that formal amendments to the Inland Revenue Act will be made. The management concluded that Circular No. PN/IT/2020-03 (Revised) is more likely to be enacted in the near future and therefore, income tax rates and proposed basis of quantifying current income tax stipulated in the said Circular to be effective from 01 January 2020 have been used to calculate the last quarter income tax provision of the 2019/20 Financial Year of the Group. Accordingly, the Group has decided to apply the revised income tax rates with effective from 01 January 2020.

27.2 Tax lossesGROUP


LKR'000 LKR'000

Tax loss at the beginning of the year 1,098,720 625,322

Adjustment in respect of previous year (22,959) 1,007

Tax losses made during the year 645,997 472,920

Tax losses set off during the year (168,360) (529)

Tax loss at the end of the year 1,553,398 1,098,720

As per the Inland Revenue Act No. 24 of 2017, tax losses can be deducted in full and the remaining losses can be carried forward only up to six years.

Deferred tax has been computed using the current tax rate of 28% (2019 - 28%) for the Company and the Group . Further information about deferred tax is presented in note 22 deferred tax assets / liabilities.

The Department of Inland Revenue issued income tax assessments on the United Motors Lanka PLC (UML) for the years of assessment 2009 / 10 and 2010 / 11 disallowing 2/3rd of the NBT expenses claimed by the UML. Additional assessment (excluding penalty) amounts to LKR 7.8 Mn. and LKR 18.3 Mn. respectively. On 13 November 2015, the UML filed a petition in Court of Appeal against the determination of the Commissioner General Inland Revenue (CGIR) for the year of assessment 2009 / 2010. The determination of CGIR for the year of assessment 2010 / 2011, dated on 21 January 2016 was appealed against with Tax Appeals Commission.

On 12 June 2018 the Tax Appeal Commission issued their determination in favour of the UML dismissing the assessment issued by CGIR. However CGIR has since filled action in the Court of Appeal against the said determination of the Tax Appeal Commission. However as the latest independent judgement received is in favour of the UML the provision made has been reversed.

28. SEGMENT INFORMATION

ACCOUNTING POLICY

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

The Group has three reportable segments. These segments offer different products and services and are managed separately as they require different marketing strategies.

Segment results, assets and liabilities include items directly attributable to a segment. Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, investment property and intangible assets.

Inter-segment pricing is determined on an arm’s length basis.

The activities of the Group are within Sri Lanka. Consequently, the economic environment in which the Company operated is not subject to risk and rewards that are significantly different on a geographical basis. Hence, disclosure by geographical region is not provided. The Group mainly comprises three business segments.R I L Property PLC (Company) - Property renting and other related services

FoodBuzz (Private) Limited (Subsidiary) - Engaged in food processing and other related services

United Motors Lanka PLC (Subsidiary) - Importation & sale of vehicles, spare parts, lubricants, tyres, after sales services and other related services

Management monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment.


Segment results :

Rental and other related services

(Company)

Food processing and other related services

Automobile sales and other related services

Inter/intra segment adjustments

Consolidated

Year ended 31 March 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019

LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000

Revenue 1,002,900 762,179 413,147 445,344 9,845,621 12,769,409 (25,591) (21,268) 11,236,077 13,955,664

Inter-segment revenue (23,444) (19,073) (657) (199) (1,490) (1,996) 25,591 21,268 - -

Revenue from external customers 979,456 743,106 412,490 445,145 9,844,131 12,767,413 - - 11,236,077 13,955,664

Gross profit/ (loss) 925,240 673,909 244,205 221,159 2,048,724 2,760,200 (25,591) - 3,192,578 3,655,268

Other income 197,244 90,323 763 6,015 94,025 152,883 (182,967) (72,087) 109,065 177,134

Overhead expenses (293,875) (184,168) (284,602) (283,573) (2,219,557) (2,159,569) 80,438 1,536 (2,717,597) (2,625,774)

Fair value gain on investment property 687,905 840,282 - - - - - - 687,905 840,282

Net finance income /(expenses) (347,803) (405,509) (25,782) 10,000 (471,074) (330,046) 9,418 - (835,240) (725,555)

Net profit/(loss) before tax 1,168,711 1,014,837 (65,416) (46,399) (547,882) 423,468 (118,702) (70,551) 436,711 1,321,355

Income tax (expenses)/reversal (168,576) (211,032) 6,243 1,849 138,207 12,455 (24,121) (5,102) (48,247) (201,830)

Profit/ (loss) for the year 1,000,135 803,805 (59,173) (44,550) (409,675) 435,923 (142,823) (75,653) 388,464 1,119,525

Changes in the fair value of financial assets at fair value through other comprehensive income - - - - (62,557) (107,825) - - (62,557) (107,825)

Revaluation of land and buildings 47,641 43,672 37,640 10,103 780,927 - (26,103) - 840,105 53,775

Actuarial gain/(loss) on retirement benefit obligation 1,924 (1,004) (1,249) 644 17,828 3,703 - - 18,503 3,343

Tax effects on other comprehensive income (8,211) (6,999) (10,474) 85 (80,583) (1,470) (63,272) - (162,540) (8,384)

Total comprehensive income for the year, net of tax 1,041,489 839,474 (33,256) (33,718) 245,940 330,331 (232,198) (75,653) 1,021,975 1,060,434

28.1 Segment assets and liabilities


(Company)




Consolidated

As at 31 March 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019


Assets 20,307,781 19,403,216 150,284 11,332 16,127,219 13,936,266 - - 36,585,284 33,350,814

Liabilities 4,787,915 4,493,024 245,067 37,875 8,091,435 5,070,986 - - 13,124,417 9,601,885

Capital expenditure 102,501 870,595 31,132 7,152 264,999 536,080 - - 398,632 1,413,830

Depreciation and amortisation 37,038 37,632 39,568 38,294 242,186 194,151 - - 318,792 270,077

Amortisation of right-of-use assets - - 41,362 - 140,172 - (13,576) - 167,958 -




REPORTS RISK AND

GOVERNANCE


Segment results :


(Company)




Consolidated

Year ended 31 March 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019


Revenue 1,002,900 762,179 413,147 445,344 9,845,621 12,769,409 (25,591) (21,268) 11,236,077 13,955,664

Inter-segment revenue (23,444) (19,073) (657) (199) (1,490) (1,996) 25,591 21,268 - -

Revenue from external customers 979,456 743,106 412,490 445,145 9,844,131 12,767,413 - - 11,236,077 13,955,664

Gross profit/ (loss) 925,240 673,909 244,205 221,159 2,048,724 2,760,200 (25,591) - 3,192,578 3,655,268

Other income 197,244 90,323 763 6,015 94,025 152,883 (182,967) (72,087) 109,065 177,134

Overhead expenses (293,875) (184,168) (284,602) (283,573) (2,219,557) (2,159,569) 80,438 1,536 (2,717,597) (2,625,774)

Fair value gain on investment property 687,905 840,282 - - - - - - 687,905 840,282

Net finance income /(expenses) (347,803) (405,509) (25,782) 10,000 (471,074) (330,046) 9,418 - (835,240) (725,555)

Net profit/(loss) before tax 1,168,711 1,014,837 (65,416) (46,399) (547,882) 423,468 (118,702) (70,551) 436,711 1,321,355

Income tax (expenses)/reversal (168,576) (211,032) 6,243 1,849 138,207 12,455 (24,121) (5,102) (48,247) (201,830)

Profit/ (loss) for the year 1,000,135 803,805 (59,173) (44,550) (409,675) 435,923 (142,823) (75,653) 388,464 1,119,525

Changes in the fair value of financial assets at fair value through other comprehensive income - - - - (62,557) (107,825) - - (62,557) (107,825)

Revaluation of land and buildings 47,641 43,672 37,640 10,103 780,927 - (26,103) - 840,105 53,775

Actuarial gain/(loss) on retirement benefit obligation 1,924 (1,004) (1,249) 644 17,828 3,703 - - 18,503 3,343

Tax effects on other comprehensive income (8,211) (6,999) (10,474) 85 (80,583) (1,470) (63,272) - (162,540) (8,384)

Total comprehensive income for the year, net of tax 1,041,489 839,474 (33,256) (33,718) 245,940 330,331 (232,198) (75,653) 1,021,975 1,060,434

28.1 Segment assets and liabilities


(Company)




Consolidated

As at 31 March 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019


Assets 20,307,781 19,403,216 150,284 11,332 16,127,219 13,936,266 - - 36,585,284 33,350,814

Liabilities 4,787,915 4,493,024 245,067 37,875 8,091,435 5,070,986 - - 13,124,417 9,601,885

Capital expenditure 102,501 870,595 31,132 7,152 264,999 536,080 - - 398,632 1,413,830

Depreciation and amortisation 37,038 37,632 39,568 38,294 242,186 194,151 - - 318,792 270,077

Amortisation of right-of-use assets - - 41,362 - 140,172 - (13,576) - 167,958 -


29. EARNINGS PER SHARE (EPS)

ACCOUNTING POLICY

Basic Earnings Per Share is calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. The weighted average number of ordinary shares outstanding during the year and the previous year are adjusted for events that have changed the number of ordinary shares outstanding, without a corresponding change in the resources such as a bonus issue.

29.1 The following reflects the income and share data used in the Basic earnings per share computation.

GROUP COMPANY

Year ended 31 March 2020 2019 2020 2019

Profit attributable to equity holders of the parent (LKR'000) 589,205 905,923 1,000,135 803,805

Weighted average number of ordinary shares (In '000s) 800,000 786,301 800,000 786,301

Basic earnings per share (LKR) 0.74 1.15 1.25 1.02

29.2 There were no potentially dilutive ordinary shares outstanding at any time during the year.

30. DIVIDEND PER SHARE (DPS)

Year ended 31 March COMPANY 2020

Dividend Per Share

Dividend

LKR LKR'000

Final dividend paid for 2018/2019 0.15 120,000

0.15 120,000

As required by Section 56(2) of the Companies Act No. 07 of 2007, the Board of Directors has confirmed that the Company satisfies the solvency test in accordance with Section 57 of the Companies Act No. 07 of 2007, prior to recommending the dividend and has obtained a certificate from the auditors, prior to the distribution.

31. RELATED PARTY DISCLOSURES

ACCOUNTING POLICY

The Company carried out transactions in the ordinary course of business on an arm’s length basis at commercial rates with parties who are defined as related parties as per LKAS 24 - “Related Party Disclosures”.

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

Terms and conditions of transactions with related parties

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 March 2020, the Group has not recorded any impairment of receivables relating to amounts owed by related parties (2019: Nil). This assessment is undertaken each Financial Year through examining the financial position of the related party and the market in which the related party operates.




REPORTS RISK AND

GOVERNANCE


31.1 Parent and ultimate controlling party

Company does not have an identifiable parent of its own.

31.2 Transactions with key management personnel (KMP)

Transactions ,arrangements and agreements involving key management personal (KMP) and their close family members (CFM)

According to LKAS 24 “Related Party Disclosures”, key management personnel are those having authority and responsibility for planning, directing and controlling the activities of the entity. Accordingly Board of Directors (including executive and non-executive Directors) have been classified as key management personnel of the Group.

Close family members (CFM) of the KMP are those family members who may be expected to influence, or be influenced by, that KMPs in their dealing with the entity. They may include;

(a) The individual’s domestic partner and children;

(b) Children of the individual’s domestic partner; and

(c) Dependents of the individual or the individual’s domestic partner

CFM are related parties to the entity. There were no transactions with CFM during the year.

31.2.1 Loans to Directors

No loans have been given to the Directors of the Company.

31.2.2 Key management personnel compensation

Key management personnel comprise the Directors of the Company and details of compensation are given below.

GROUP COMPANY

Year ended 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Short term employee benefits 114,184 121,672 25,320 21,433

Post employment benefit - 1,083 - 1,083

114,184 122,755 25,320 22,516

31.2.3 Other transactions with key management personnel

31.2.3.1 The names of Directors of R I L Property PLC, who are also Directors of subsidiaries are stated on page 93. (Annual report of the Board of Directors)

31.2.3.2 Details of Directors and their spouses share holdings are given on page 184 (shareholder information). There were no other transactions with key management personnel other than those disclosed in note 31.2.2 to the Financial Statements.


31.3 Transaction with the subsidiary and related entities

31.3.1 The Companies within the Group engage in trading transactions under relevant commercial terms and condition.

31.3.2 Transactions with subsidiaries

Nature of transaction Subsidiaries

FoodBuzz (Private) Limited United Motors Lanka PLC Unimo Enterprises Limited

2020 2019 2020 2019 2020 2019


As at 01 April (5,113) (5,869) (2,263) - - -

Rent and other related income/expense 18,854 15,792 4,590 3,281 - -

Deposits and advances - - - (2,343) - -

Expenses incurred on behalf of other companies (3,805) (5,102) (593) (314) - -

Services obtained 657 199 1,131 1,161 - 491

Settlements made during the year (13,724) (10,133) (3,673) (4,048) - -

As at 31 March (3,131) (5,113) (808) (2,263) - 491

Included under

Trade and other receivables 2,501 519 419 55 - -

Trade and other payables - - - (1,091) - -

Rental and customer deposits (5,632) (5,632) (1,227) (1,227) - -

(3,131) (5,113) (808) (2,263) - -

32. ASSETS PLEDGED

The assets pledged as at 31 March 2020 have been disclosed in note 12.4 and note 18 to these Financial Statements.

33. EVENTS AFTER THE REPORTING PERIOD


Lockdown of business/operations due to COVID-19 pandemic

The business was adversely affected with the restrictions in free movement of customers, tenants, staff and key stakeholders since mid-March 2020. Extent and duration of post-lockdown economic implications are not certain at this stage but it will have a negative impact on the performance of the Company and Group for the year 2020/21.

Temporary suspension of Imports

As per the Gazette notification issued on 16 April 2020, the government imposed a 90-day restriction on selected imports which included vehicles. With the expiry of 90 days this has been further extended for six months from 02 June 2020. This will have a negative impact on the revenue of the Group, due to adverse effect on United Motors Lanka PLC.

Subsequent to the reporting date, no other circumstances have arisen, which would require adjustments or disclosures in the Financial Statements other than those disclosed above.




REPORTS RISK AND

GOVERNANCE


34. CAPITAL COMMITMENTS


There were no capital commitments as at the balance sheet date.

35. CONTINGENT LIABILITIES


35.1 The Company has given corporate guarantees amounting to LKR 100 Mn. as security for the banking facilities obtained by FoodBuzz (Private) Limited from Commercial Bank.

35.2 Corporate guarantees issued by United Motors Lanka PLC to its subsidiaries:

Name of company Name of bank Facility Amount pledged as

security

LKR '000

Outstanding as at 31 Mar

2020

LKR '000

Outstanding as at 31 Mar

2019

LKR '000

Unimo Enterprises Limited Sampath Bank PLC Letter of credit, overdraft and term loans 325,000 106,000 -

Standard Chartered Bank Letter of credit, overdraft and term loans 500,000 500,000 307,988

Bank of Ceylon Letter of credit, overdraft and term loans 1,000,000 813,154 814,374


Commercial Bank of Ceylon PLC

Letter of credit, overdraft and term loans 1,000,000 100,000 70,000

35.3 Unimo Enterprises Limited has given bank guarantees to Sri Lanka customs amounting to LKR 626.3 Mn. for excise duty concession in respect of vehicles assembled but to be approved by the cabinet appointed committee.

35.4 UML has given bid bond/performance guarantees amounting to LKR 18.8 million as at the reporting date.

35.5 Details relating to certain tax assessments are reflected in note 16.3 and note 27.

36. CONTINGENT ASSETS

Under and by virtue of Lease Agreement No.109 dated 04 May 2017 attested by U. A. Kitulgoda, Notary Public, Perpetual Treasuries Limited (PTL) has leased from R I L Property PLC (the Company) an area of 7852sq.ft. (Blocks B and D) on the 18th floor (“Office Space”) from and out of the building called ‘PARKLAND’, bearing Assessment Nos.33, 33A, 33B, 33C, 33D, 33D1/1 and 33D2/1, Park Street, Colombo 2, for a period of 4 years commencing from 01 May 2017 and ending on 30 April 2021.

Since PTL has failed and neglected to pay rent and other charges pertaining to the use and occupation of the office space from January 2018, the Company has formally demanded the amounts outstanding from the lessee. In response PTL has by letter dated 13 June 2018, stated that “their ability to perform their obligations under the lease agreement under reference, have been frustrated by the conduct of “Central Bank of Sri Lanka”. In the circumstances, the Company has informed PTL that since it claims that its ability to perform its obligations under the lease agreement, has been frustrated, the said lease agreement remains discharged by frustration. Accordingly, the Company called upon PTL to immediately vacate the office space and to hand over possession thereof.

However, blocks B and D on the 18th floor were handed over to the Company by PTL only on 12 December 2018 and 15 May 2019 respectively. Therefore, the Company intends to claim liquidated damages of LKR 23.98 Mn. for overstay, in terms of the lease agreement.


37. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group has exposure to the following risks arising from financial instruments:

1. Credit risk2. Liquidity risk3. Market risk4. Operational risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for identifying, analysing, evaluating and monitoring the risk and the management of capital of the Group. Further, quantitative disclosures are included throughout these consolidated Financial Statements.

Risk management framework

The respective Board of Directors of each company has overall responsibility for the establishment and oversight of the respective company’s risk management framework.

Each company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk profile and controls, and to monitor risks and mitigate. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the company’s activities.

The Audit Committee oversees how management monitors compliance with their risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by each company. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

The risk management has been further detailed in enterprise risk management given in pages 59 to 65.

37.1 Credit risk

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

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

The Group does an extensive and continuous evaluation of credit worthiness of its customers / financial institutions by assessing external credit ratings (if available) or historical information about default rates and change the credit limits and payment terms where necessary.

37.1.1 Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was,

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Carrying amount

Trade receivables 987,078 863,864 58,513 30,061

Other receivables excluding advances and pre payments 438,000 1,542,440 28,004 49,557

Cash at bank and financial institutions 300,157 430,975 22,188 22,485

1,725,235 2,837,279 108,705 102,103

The cash and cash equivalents are held with banks and financial institutions which are rated above ‘BBB-(lka).




REPORTS RISK AND

GOVERNANCE


37.1.2 Trade receivables

The management assesses the credit quality of the customer, taking into account their financial position, past experience and other factors. Sources of credit risks are identified, assessed and monitored and the Group has policies to manage the risks within various subcategories. The utilisation of credit limits is regularly monitored.

Maximum exposure to credit risk for trade receivables at the reporting date by category wise are as follows:

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Public sector 171,814 184,836 8,021 2,380

Private sector Individual customers 19,459 178,794 - -

Corporate customers 448,843 161,996 50,492 27,681

Dealers & distributors 213,143 160,902 - -

Leasing companies 133,819 177,336 - -

987,078 863,864 58,513 30,061

37.1.3 Impairment losses

The aging of the trade receivables and impairment allowance at the reporting date was,

Trade receivables

GROUP COMPANY

As at 31 March 2020 2020

LKR'000 LKR'000

Below 60 days 729,015 54,575

61–120 days 185,366 2,530

121–180 days 47,136 358

181–240 days 37,561 21

241-300 days 12,668 180

301-360 days 17,712 -

>360 days 35,212 849

Carrying value 1,064,670 58,513

Allowance for impairment (77,591) -

Total 987,079 58,513


Impairment allowance

GROUP

As at 31 March 2020 2020

Expected loss rate

%

LKR'000

Current 1.38 3,065

61–120 days 5.19 10,725

121–180 days 14.97 6,950

181–240 days 24.97 9,373

241-300 days 33.26 4,154

301-360 days 50.62 8,965

>360 days 100.00 34,359

Total 77,591

37.1.4 The allowance accounts in respect of cash at bank and financial institutions and financial assets at FVOCI and FVTPL are used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible.

At that point the amounts are considered irrecoverable and are written off against the financial assets directly.

37.2 Liquidity risk

Liquidity risk is the risk that the Group may not have sufficient liquid financial resources to meet its obligations when they fall due. The Group manages the liquidity risk by carrying out cash flow forecasts and identifying future cash needs. Investments are planned ensuring money is available for settlements. Adequate banking facilities are approved and kept for use as and when necessary. Strong relationships have been built with banks to ensure that urgent borrowing needs are met at short notice.

The table below summarises the maturity profile of the Group’s and Company's financial liabilities:

Group 2020 Less than 3 months

3 to 12 months

1 to 5 years

More than 5 Years

Total


Interest bearing loans and borrowings 31,729 5,757,189 1,544,175 1,200,320 8,533,413

Trade and other payable 766,437 161,380 - - 927,817

Customer deposits - 51,816 168,098 21,291 241,205

Income tax payable 5,354 - - - 5,354

Bank overdrafts 215,120 - - - 215,120

1,018,640 5,970,385 1,712,273 1,221,611 9,922,909

Group 2019 Less than 3 months

3 to 12 months

1 to 5 years

More than 5 Years

Total


Interest bearing loans and borrowings 33,188 3,713,423 3,139,535 1,875 6,888,021

Trade and other payable 154,428 1,001,853 - - 1,156,281


Income tax payable 85,414 85,414

Bank overdrafts 160,397 - - - 160,397

433,427 4,813,147 3,218,377 5,599 8,470,550




REPORTS RISK AND

GOVERNANCE


Company 2020 Less than 3 months

3 to 12 months

1 to 5 years

More than 5 years

Total


Interest bearing loans and borrowings 31,729 95,186 1,544,175 1,200,320 2,871,410

Trade and other payable 546 156,934 - - 157,480


Income tax payable 5,354 - - - 5,354

Bank overdrafts 17,136 - - - 17,136

54,765 303,936 1,713,318 1,227,243 3,299,262

Company 2019 Less than 3 months

3 to 12 months

1 to 5 years

More than 5 years

Total


Interest bearing loans and borrowings 33,188 101,995 3,139,535 1,875 3,276,593

Trade and other payable 76,352 97,324 - - 173,676


Income tax payable 7,209 - - 7,209

Bank overdrafts 18,786 - - - 18,786

135,535 297,190 3,219,422 11,231 3,663,378

37.3 Market risk

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

- Foreign exchange risk- Interest rate risk- Equity price risk

37.3.1 Foreign exchange risk

Foreign currency risk arises when future commercial transactions are denominated in a currency that is not the entity’s functional currency. The Group is principally exposed to fluctuations in the value of the Japanese Yen (JPY), US Dollar (USD), Euro and Singapore Dollar (SGD) against the Sri Lankan Rupee (LKR). The Group’s functional currency is LKR in which most of the transactions are denominated, and all other currencies are considered foreign currencies for reporting purposes.

Changes in foreign currency exchange rates affect the Group’s cost of purchases. Based on anticipated exchange rate movements forward booking is considered as a method to minimise risk. Import bills are negotiated at the most favourable time for the Group.

The exposure to currency risk as at the reporting date are as follows:

GROUP

USD'000 JPY'000 SGD'000

Trade receivables as at 31 March 2020 451 13,761 150

Trade payables as at 31 March 2020 841 63,626 19


Increase/decrease in

exchange rate

Group effect on profit

before taxLKR’000

US Dollar (USD) + 5 % (3,869)

- 5% 3,869

Japanese Yen (JPY) + 5 % (4,526)

- 5% 4,526

Singapore Dollar (SGD) + 5 % 848

- 5% (848)

37.3.2 Interest rate risk

The Group’s interest rate risk arises mainly from the short term borrowings and investment of excess funds in financial instruments. Borrowings at variable rates expose the Group to cash flow interest rate risk which is partially offset by cash / investments held at variable rates. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk. The Group has cash and bank balances including deposits placed with government and reputed financial institutions. All available opportunities are considered before making investment decisions.

The global outbreak of the novel COVID-19 pandemic has resulted in consecutive reductions in policy rates and monetary easing policies by Central Bank of Sri Lanka to encourage banks and finance companies to reduce lending rates.

Proper working capital management is done to ensure that borrowing needs and investment opportunities are foreseen. Market interest rates are monitored closely to ensure borrowings and investments are at the best rate for the Group.

At the end of the reporting period the interest rate profile of the Group / Company’s interest bearing financial instruments was as follows:

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

LKR'000 LKR'000 LKR'000 LKR'000

Fixed rate instruments

Financial assets - - - -

Financial liabilities - (2,637,129) - (2,637,129)

- (2,637,129) - (2,637,129)

Variable rate instruments

Financial assets 362,854 387,133 362,854 205,380

Financial liabilities (8,533,413) (4,250,892) (2,871,410) (639,464)

(8,170,559) (3,863,759) (2,508,556) (434,084)

Sensitivity analysis

The following table demonstrates the sensitivity to a reasonable possible change in variable interest, with all other variables held constant.

Increase/ decrease in

variable rate

GROUP COMPANY

Effect on profit before tax

Effect on profit before tax

LKR’000 LKR’000

31 March 2020 variable rate instruments +5% (40,853) (12,543)

-5% 40,853 12,543




REPORTS RISK AND

GOVERNANCE


37.3.3 Equity price risk

Listed equity securities are susceptible to equity price risk arising from uncertainties of future values of the investment securities. The Group manages the equity price risk through diversification of its portfolio to different business segments.

The Group’s equity risk management policies adopted as follows;

y Equity investment decisions are based on fundamentals rather than on speculation.

y Decisions are made based on in-depth industry and macroeconomic analysis as well as on research reports on the Company performance.

The table below shows the diversification of equity investments;

As at 31 March

Sector

Group 2020 Group 2019

LKR’000 % LKR’000 %

Investment shares

Banks, finance and insurance 124,166 59.6 153,110 59.7

Capital goods 21,307 10.2 29,883 11.7

Diversified holdings 7,779 3.7 10,923 4.3

Beverage, food & tobacco 10,101 4.9 11,922 4.6

Power & energy 1,302 0.6 2,403 0.9

Health care 248 0.1 393 0.2

Retailing 27,471 13.2 33,481 13.0

Utilities 343 0.2 - -

Materials 15,539 7.5 14,296 5.6

Total 208,256 100 256,411 100

Trading shares

Banks, finance and insurance 7,060 12.9 9,819 14.2

Diversified holdings 19,424 35.4 24,134 34.8

Beverage, food & tobacco 17,910 32.6 21,696 31.3

Capital goods 7,270 13.2 10,163 14.7

Power & energy 1,873 3.4 2,231 3.2

Utilities 60 0.1 - -

Automobile & components 1,327 2.4 1239 1.8

Total 54,924 100 69,282 100.0

Sensitivity analysis

Investments in equity shares are subject to the performance of investee Company and the factors that effects the status of the stock market.

The following table demonstrates the sensitivity of the Group equity to a reasonably possible change in the market prices of the listed equity securities, with all other variables held constant.

Change in year 31 March 2020 share

price of all Companies in which the Group /

Company has invested

Group - 2020

Effect on Profit before tax as a result of gains/

losses on equity securities classified as

at FVTPL

Effect on other component of equity as a result of gains/losses

on equity securities classified as at FVOCI

LKR’000 LKR’000

Investments in equity shares + 5% 2,746 10,413

- 5% (2,746) (10,413)


37.4 Operational risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group’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 behaviour. Operational risks arise from all of the Group’s operations. The Group’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity. The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management within each business unit. This responsibility is supported by the development of overall Group standards for the management of operational risk in the following areas:

y Requirements for appropriate segregation of duties, including the independent authorisation of transactions;

y Requirements for the reconciliation and monitoring of transactions;

y Compliance with regulatory and other legal requirements;

y Documentation of controls and procedures;

y Requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified;

y Requirements for the reporting of operational losses and proposed remedial action;

y Training and professional development;

y Ethical and business standards;

y Risk mitigation, including insurance when applicable.

Compliance with set procedures is supported by periodic reviews undertaken by Internal Audit. The results of Internal Audit reviews are discussed with the management of the business unit to which they relate, with summaries submitted to the Audit Committee and senior management of the Group.

37.5 Capital management

Capital includes equity attributable to the equity holders of the parent and interest bearing term loans. The primary objective of the Group’s capital management is to ensure that it maintains a healthy capital ratios in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions.

GROUP COMPANY

As at 31 March 2020 2019 2020 2019

Debt to equity ratio 52% 40.4% 18.6% 22.1%

No changes were made in the objectives, policies or processes for managing capital during the year ended 31 March 2020.

38. FAIR VALUE DISCLOSURE

ACCOUNTING POLICY

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

y In the principal market for the asset or liability or

y In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.




REPORTS RISK AND

GOVERNANCE



Fair value measurement

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the Financial Statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1

Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2

Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3

Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable for the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

The Management of the Group determines the policies and procedures for both recurring fair value measurement, such as investment properties, property, plant and equipment-land and buildings and other investments.

External Valuer, Mr. J. M. S. Bandara is involved in valuation of significant assets, such as Investment properties and Buildings.

Involvement of external valuers is decided upon annually by the Management.

At each reporting date, the Management analyses the movements in the values of assets which are required to be remeasured or re-assessed as per the Group’s accounting policies. For this analysis, the Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.

The Management, in conjunction with the Group’s External Valuer, also compares the change in the fair value of each asset with relevant external sources to determine whether the change is reasonable.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

Fair value of financial instruments

Financial instruments of the Company/Group include trade and other receivables, cash and cash equivalents, interest bearing loans and borrowings, trade and other payables, rent received in advance, customer deposits and bank overdrafts. The fair values of these financial instruments are determined at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values;

(a) Cash and short-term deposits, trade receivables, trade payables and other current liabilities are approximate their carrying amounts largely due to the short-term maturities of these instruments.

(b) Rentals and customer deposits are fair valued by using the appropriate market interest rates.

(c) Long term variable-rate as well as fixed rate borrowings are approximate their carrying amounts largely due to the market based interest rates.

Hence the carrying amounts of Group’s/Company’s financial instruments are reasonable approximation of their fair values.


38.1 Fair value measurement hierarchy

The Group and the Company use the following hierarchy for determining and disclosing the fair value of assets and liabilities by valuation techniques:

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

Level 2 : inputs other than quoted prices included within "level 1" that are observable for the assets or liabilities, either directly or indirectly

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

The following table provides the fair value measurement hierarchy of the Group's assets and liabilities.

Fair value measurement hierarchy - GroupRecurring fair value measurementsAssets measured at fair value :

Level 1 Level 2 Level 3 Total

As at 31 March 2020 2019 2020 2019 2020 2019 2020 2019

LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000

Property, plant and equipment

- Freehold land - - - 6,580,004 5,791,622 6,580,004 5,791,622

- Building - - - 1,145,976 1,135,680 1,145,976 1,135,680

Investment property - - - 14,893,600 14,106,000 14,893,600 14,106,000

Other investments

- Quoted equity shares - 325,693 263,180 - - - 263,180 325,693

- Unit trusts 362,854 387,133 - - - - 362,854 387,133

362,854 712,826 263,180 - 22,619,580 21,033,302 23,245,614 21,746,128

Fair value measurement hierarchy - CompanyRecurring fair value measurementsAssets measured at fair value :

Level 1 Level 2 Level 3 Total

As at 31 March 2020 2019 2020 2019 2020 2019 2020 2019

LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000

Property, plant and equipment

- Building - - - - 371,400 344,000 371,400 344,000

Investment property - - - - 14,893,600 14,106,000 14,893,600 14,106,000

Other investments

- Unit trusts 362,854 205,380 - - - - 362,854 205,380

362,854 205,380 - - 15,265,000 14,450,000 15,627,854 14,655,380

At each reporting period, the Group/Company’s equity securities are measured at fair value referring to quoted market prices in the active market. Due to COVID-19 outbreak, the CSE experienced significant volatility. The operations of CSE were suspended from 20 March 2020 to 11 May 2020. Therefore, there were no quoted market prices as at 31 March 2020 to value Group’s/Company’s equity securities. According to the direction issued by the Institute of Chartered Accountants of Sri Lanka, the Group/Company valued it equity securities at the market value as at 20 March 2020.

Accordingly, investments in equity shares were categorised under “Level 2” of the fair value hierarchy as at the share market was inactive as at 31 March 2020.




REPORTS RISK AND

GOVERNANCE


38.2 Reconciliation of fair value measurement of "Level 3" financial instruments

The following table shows a reconciliation from the opening balance to the closing balance for level 3 fair values.

GROUP COMPANY

Land Building Investment property

Building Investment property

LKR ’000 LKR ’000 LKR ’000 LKR ’000 LKR ’000

Balance as at 01 April 2018 5,784,122 1,085,727 12,397,500 318,000 12,397,500

Subsequent expenditure on investment property - - 868,218 - 868,218

Assets additions - 24,838 - - -

Total gains and losses recognised in other comprehensive income - Revaluation (unrealised) 7,500 46,275 - 43,672 -

Transfer from capital work in progress 43,916

Depreciation charged - (65,076) - (17,672) -

Net gain from investment property fair valuation - - 840,282 - 840,282

Balance as at 31 March 2019 5,791,622 1,135,680 14,106,000 344,000 14,106,000

Subsequent expenditure on investment property - - 99,695 - 99,695

Assets additions - 12,395 - - -

Total gains and losses recognised in other comprehensive income - Revaluation (unrealised) 788,382 51,723 - 47,641 -

Transfer from capital work in progress - 15,385 - - -

Depreciation charged - (69,207) - (20,241) -

Net gain from investment property fair valuation - - 687,905 - 687,905

Balance as at 31 March 2020 6,580,004 1,145,976 14,893,600 371,400 14,893,600


38.3 Valuation techniques and significant unobservable inputs

The following table shows the valuation techniques used by both the Group and Company in measuring level 3 fair values and the significant unobservable inputs used.

Assets and liabilities Valuation technique Significant unobservable inputs

Property Plant and Equipment - Freehold land and buildings

Market approach

Fair value of land and buildings are based on available property market data, available facilities & services, planning restrictions, title status, size/shape and other physical factors of the land.

The valuer has used a range of prices for each land based on investigated prices in order to determine the market value.

Investment Property Income approach

In determining the fair value of Building the capitalisation of net income method have been used, which is based upon assumptions including future rental income, anticipated maintenance costs, appropriate discount rate and in determine the fair value of land, make reference to market evidence of transaction prices for similar properties, with appropriate adjustments for size and location. The appraised fair values are approximated within appropriate range of values.

y Anticipated maintenance cost y Discount rate y Risk and other factors y Price per perch


SUPPLEMENTARY INFORMATION


SHAREHOLDERS INFORMATIONTWENTY MAJOR SHAREHOLDERS

Name of shareholder As at 31 March 2020 As at 31 March 2019

Shareholding Percentage (%)

Shareholding Percentage (%)

1 Mr. M. A. Yaseen 238,058,848 29.76 238,058,848 29.76

2 Ms. L. E. M. Yaseen 153,232,711 19.15 153,232,711 19.15

3 Ms. S. M. Yaseen 76,070,528 9.51 76,070,528 9.51

Ms. R. R. Yaseen - 0.00 64,000,000 8.00

4 Ms. R. R. Takahashi 64,000,000 8.00 - 0.00

5 Mr. S. D. Yaseen 58,000,000 7.25 58,000,000 7.25

6 Mr. R. H. Yaseen 49,132,260 6.14 52,433,430 6.55

7 Commercial Bank of Ceylon PLC A/C No .01 26,128,266 3.27 26,128,266 3.27

8 Ayenka Holdings Private Limited 20,206,450 2.53 21,171,451 2.65

9 Melstacorp PLC 18,434,300 2.30 18,434,300 2.30

10 NDB Capital Holdings PLC 15,000,000 1.88 15,000,000 1.88

11 Mr. J. A. Yaseen 14,400,000 1.80 14,400,000 1.80

12 Mr. M. Anndreino Yaseen 14,400,000 1.80 14,400,000 1.80

13 Sri Lanka Insurance Corporation Ltd. - General Fund 10,000,000 1.25 10,000,000 1.25

14 Commercial Bank of Ceylon PLC A/C No.03 3,333,333 0.42 3,333,333 0.42

Seylan Bank PLC/Pinnadoowage Aravinda De Silva - 0.00 3,250,000 0.41

15 DFCC Bank PLC/Pinnadoowage Aravinda De Silva 3,250,000 0.41 - 0.00

People’s Leasing & Finance PLC/ C. D. Kohombanwickramage - 0.00 3,230,158 0.40

16 Peradev Limited 3,125,000 0.39 3,125,000 0.39

17 Elgin Investments Limited 3,000,000 0.38 3,000,000 0.38

18 Mr. D. G. Wijemanna 2,556,725 0.32 - 0.00

19 Mr. P. P. Gunasekara 2,000,000 0.25 2,000,000 0.25

20 Ms. P. M. P. G. N. Priyadarshani 1,484,361 0.19 1,484,361 0.19

PUBLIC AND NON PUBLIC SHAREHOLDINGS

As at 31 March 2020 As at 31 March 2019

Description No. of shares

No. of shareholders

Percentage%

No. of shares

No. of shareholders

Percentage%

Issued number of ordinary shares & No. of share holders 800,000,000 1186 100.00 800,000,000 1089 100.00

Less:- Shares held by non-public 484,091,559 5 60.51 484,091,559 5 60.51

Shares held by the public & No. of share holders 315,908,441 1181 39.49 315,908,441 1084 39.49

Float adjusted market capitalisation (Under option 5) LKR Mn. 1,295 2,022



REPORTS RISK AND

GOVERNANCE


DISTRIBUTION OF SHAREHOLDERS

Shareholdings As at 31 March 2020 As at 31 March 2019

No. of shareholders

No. of shares

Percentage (%)

No. of shareholders

No. of shares

Percentage (%)

1 - 1,000 634 164,521 0.02 619 158,423 0.02

1,001 - 10,000 294 1,333,869 0.17 258 1,178,726 0.15

10,001 - 100,000 195 7,345,442 0.92 155 5,830,484 0.73

100,001 - 1,000,000 42 14,170,386 1.77 37 12,079,981 1.51

Over 1,000,000 21 776,985,782 97.12 20 780,752,386 97.59

Total 1,186 800,000,000 100.00 1089 800,000,000 100.00

CATEGORIES OF SHAREHOLDERS

Categories of Shareholdings As at 31 March 2020 As at 31 March 2019

No. of shareholders

No. of shares

Percentage (%)

No. of shareholders

No. of shares

Percentage (%)

Local individuals 1,107 451,689,910 56.46 1,021 449,909,558 56.24

Local institutions 66 103,592,086 12.95 56 105,947,151 13.24

Foreign individuals 9 239,145,004 29.89 8 239,024,674 29.88

Foreign institutions 4 5,573,000 0.70 4 5,118,617 0.64

Total 1,186 800,000,000 100.00 1,089 800,000,000 100.00

PERFORMANCE AT THE CSE

Market price per share for the year ended

As at 31 March 2020

As at 31 March 2019

Price Price

Highest 7.40 7.60 Lowest 3.30 6.30 Last traded price 4.10 6.40

SHAREHOLDINGS OF DIRECTORS

Name of the Director 31 March 2020 31 March 2019No. of

sharesPercentage

(%)No. of

sharesPercentage

(%)

1 Mr. S. G. Wijesinha (Chairman) - - - -

2 Ms. L. K. A. H. Fernando (Chief Executive Officer/Executive Director) - - - -

3 Ms. L. E. M. Yaseen 153,232,711 19.15 153,232,711 19.15

4 Mr. L. W. D. Abeyarathne - - - -

5 Ms. C. G. Ranasinghe - - - -

6 Professor N. D. Gunawardena - - - -

7 Ms. C. R. Kariyawasam - - - -

Share prices 1 Qtr 2 Qtr 3 Qtr 4 Qtr

Open 6.40 6.00 6.00 5.90

Close 6.00 6.00 5.90 4.10

Highest 7.40 6.60 6.50 6.20

Lowest 5.50 5.80 5.50 3.30


FINANCIAL YEAR SUMMARY

Group Company

2020 2019 2018 2017 2016 2020 2019 2018 2017 2016 2015 2014

LKR ‘000 LKR ‘000

Operating resultsRevenue 11,236,077 13,955,664 4,476,968 960,374 269,178 1,002,900 762,179 704,471 609,289 125,418 - -

EBIT 1,352,005 2,174,778 2,607,353 1,271,726 4,950,356 1,559,593 1,493,515 1,443,754 1,301,934 4,963,265 20,726 12,721

Finance cost (915,294) (853,423) (390,371) (128,010) (1,231) (390,882) (478,678) (300,665) (122,118) (1,138) - (104)

Profit before tax 436,711 1,321,355 3,736,017 1,143,716 4,949,125 1,168,711 1,014,837 1,143,089 1,179,816 4,962,127 20,726 12,617

Income tax expense (48,247) (201,830) 7,931 62,764 1,138 (168,576) (211,032) 38,963 62,831 (1,284) (2,168) (3,533)

Profit for the year 388,464 1,119,525 3,743,948 1,206,480 4,950,263 1,000,135 803,805 1,182,052 1,242,647 4,960,843 18,558 9,084

Capital employed

Stated capital 7,360,000 7,360,000 5,760,000 4,800,000 4,800,000 7,360,000 7,360,000 5,760,000 4,800,000 4,800,000 2,000,000 1,000,000

Revaluation reserve 610,572 251,107 204,284 119,242 125,000 210,512 170,543 134,151 119,242 125,000 - -

Other component of equity (92,476) (60,572) (5,526) - - - - - - - - -

Retained earnings 9,711,908 9,887,632 8,982,769 5,510,131 4,268,531 7,949,354 7,379,649 6,578,499 5,555,874 4,967,111 16,328 9,084

Non-controlling interest 5,870,863 6,310,762 6,223,062 - - - - - - - - -

Total borrowings 9,143,788 7,048,418 7,817,866 1,065,792 1,083,432 2,888,546 3,295,379 4,985,000 911,002 1,060,000 - -

Total capital employed 32,604,655 30,797,347 28,982,455 11,495,165 10,276,963 18,408,412 18,205,571 17,457,650 11,386,118 10,952,111 2,016,328 1,009,084

Assets employed

Property plant and equipment (PPE) 8,667,607 7,892,174 7,625,861 625,133 543,491 380,455 362,277 352,128 368,835 343,522 17,387 17,732

Non-current assets other than PPE 16,334,188 14,906,540 13,056,835 11,630,281 10,684,074 19,440,830 18,714,817 17,018,735 11,902,536 10,955,313 2,509,298 810,942

Current assets 11,583,489 10,552,100 10,550,667 312,046 195,099 486,496 326,122 931,709 170,428 92,215 184,334 752,477

Current liabilities 7,248,953 5,287,486 5,548,267 617,672 601,561 455,194 474,728 1,559,958 442,440 562,007 694,691 5,194

Cash flow

Net cash flow from / (used in) operating activities (1,239,500) (588,876) 680,663 255,458 306,122 560,381 192,899 (28,234) 306,123 319,913 317,785 124,634

Net cash flow from / (used in) investing activities (308,613) (928,255) (4,272,206) (170,745) (3,738,472) (33,845) (228,526) (4,799,405) (81,228) (3,746,155) (1,678,529) (779,183)

Net cash flow from / (used in) financing activities 1,209,888 708,494 4,153,239 (148,998) 3,449,372 (525,183) (110,339) 4,873,894 (148,998) 3,449,940 895,000 1,000,000

Net increase / (decrease) in cash and cash equivalents (338,225) (808,637) 561,696 (64,285) 15,022 1,353 (145,966) 46,255 75,897 23,698 (465,744) 345,451

Key indicators

Basic earnings per share (LKR) 0.74 1.15 6.12 2.51 12.85 1.25 1.02 1.99 2.59 12.87 0.11 0.11

Net assets per share (LKR) 21.99 21.80 24.90 21.73 19.15 19.40 18.64 20.79 21.82 20.61 10.08 10.09

Return on equity 3.3% 5.2% 24.3% 11.6% 53.8% 6.4% 5.4% 9.5% 11.9% 50.1% 0.9% 0.9%

Return on capital employed 4.1% 7.1% 9.0% 11.1% 48.2% 8.5% 8.2% 8.3% 11.4% 45.3% 0.9% 1.3%

Debt/equity ratio 52.0% 40.4% 52.3% 10.2% 11.8% 18.6% 22.1% 40.0% 8.7% 10.7% - -

Gearing 28.0% 22.9% 27.0% 9.3% 10.5% 15.7% 18.1% 28.6% 8.0% 9.7% - -



REPORTS RISK AND

GOVERNANCE


Group Company

2020 2019 2018 2017 2016 2020 2019 2018 2017 2016 2015 2014

LKR ‘000 LKR ‘000

Operating resultsRevenue 11,236,077 13,955,664 4,476,968 960,374 269,178 1,002,900 762,179 704,471 609,289 125,418 - -

EBIT 1,352,005 2,174,778 2,607,353 1,271,726 4,950,356 1,559,593 1,493,515 1,443,754 1,301,934 4,963,265 20,726 12,721

Finance cost (915,294) (853,423) (390,371) (128,010) (1,231) (390,882) (478,678) (300,665) (122,118) (1,138) - (104)

Profit before tax 436,711 1,321,355 3,736,017 1,143,716 4,949,125 1,168,711 1,014,837 1,143,089 1,179,816 4,962,127 20,726 12,617

Income tax expense (48,247) (201,830) 7,931 62,764 1,138 (168,576) (211,032) 38,963 62,831 (1,284) (2,168) (3,533)

Profit for the year 388,464 1,119,525 3,743,948 1,206,480 4,950,263 1,000,135 803,805 1,182,052 1,242,647 4,960,843 18,558 9,084

Capital employed

Stated capital 7,360,000 7,360,000 5,760,000 4,800,000 4,800,000 7,360,000 7,360,000 5,760,000 4,800,000 4,800,000 2,000,000 1,000,000

Revaluation reserve 610,572 251,107 204,284 119,242 125,000 210,512 170,543 134,151 119,242 125,000 - -

Other component of equity (92,476) (60,572) (5,526) - - - - - - - - -

Retained earnings 9,711,908 9,887,632 8,982,769 5,510,131 4,268,531 7,949,354 7,379,649 6,578,499 5,555,874 4,967,111 16,328 9,084

Non-controlling interest 5,870,863 6,310,762 6,223,062 - - - - - - - - -

Total borrowings 9,143,788 7,048,418 7,817,866 1,065,792 1,083,432 2,888,546 3,295,379 4,985,000 911,002 1,060,000 - -

Total capital employed 32,604,655 30,797,347 28,982,455 11,495,165 10,276,963 18,408,412 18,205,571 17,457,650 11,386,118 10,952,111 2,016,328 1,009,084

Assets employed

Property plant and equipment (PPE) 8,667,607 7,892,174 7,625,861 625,133 543,491 380,455 362,277 352,128 368,835 343,522 17,387 17,732

Non-current assets other than PPE 16,334,188 14,906,540 13,056,835 11,630,281 10,684,074 19,440,830 18,714,817 17,018,735 11,902,536 10,955,313 2,509,298 810,942

Current assets 11,583,489 10,552,100 10,550,667 312,046 195,099 486,496 326,122 931,709 170,428 92,215 184,334 752,477

Current liabilities 7,248,953 5,287,486 5,548,267 617,672 601,561 455,194 474,728 1,559,958 442,440 562,007 694,691 5,194

Cash flow

Net cash flow from / (used in) operating activities (1,239,500) (588,876) 680,663 255,458 306,122 560,381 192,899 (28,234) 306,123 319,913 317,785 124,634

Net cash flow from / (used in) investing activities (308,613) (928,255) (4,272,206) (170,745) (3,738,472) (33,845) (228,526) (4,799,405) (81,228) (3,746,155) (1,678,529) (779,183)

Net cash flow from / (used in) financing activities 1,209,888 708,494 4,153,239 (148,998) 3,449,372 (525,183) (110,339) 4,873,894 (148,998) 3,449,940 895,000 1,000,000

Net increase / (decrease) in cash and cash equivalents (338,225) (808,637) 561,696 (64,285) 15,022 1,353 (145,966) 46,255 75,897 23,698 (465,744) 345,451

Key indicators

Basic earnings per share (LKR) 0.74 1.15 6.12 2.51 12.85 1.25 1.02 1.99 2.59 12.87 0.11 0.11

Net assets per share (LKR) 21.99 21.80 24.90 21.73 19.15 19.40 18.64 20.79 21.82 20.61 10.08 10.09

Return on equity 3.3% 5.2% 24.3% 11.6% 53.8% 6.4% 5.4% 9.5% 11.9% 50.1% 0.9% 0.9%

Return on capital employed 4.1% 7.1% 9.0% 11.1% 48.2% 8.5% 8.2% 8.3% 11.4% 45.3% 0.9% 1.3%

Debt/equity ratio 52.0% 40.4% 52.3% 10.2% 11.8% 18.6% 22.1% 40.0% 8.7% 10.7% - -

Gearing 28.0% 22.9% 27.0% 9.3% 10.5% 15.7% 18.1% 28.6% 8.0% 9.7% - -


ACCOUNTING POLICIES

The specific principles, bases, rules and practices adopted by an entity in preparing and presenting Financial Statements.

ACCRUAL BASIS

Recording revenues and expenses in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period.

ACTUARIAL GAIN/LOSS ON DEFINED BENEFIT PLAN

Gain or loss arising from the difference between estimates and actual experience in an entity’s defined benefit plan.

AMORTISATION

The systematic allocation of the depreciable amount of an intangible asset over its useful life.

ASSET TURNOVER

Revenue including subsidiary Company revenue divided by average total assets.

CONTINGENT LIABILITIES

A Liability or potential loss that may occur in the future depending on the outcome of a specific event.

CURRENT ASSET RATIO

Current assets divided by current liabilities.

CURRENT SERVICE COST

Is the increase in the present value of the defined benefit obligation resulting from employee service in the current period

DIVIDEND PER SHARE (DPS)

Dividend paid and proposed, divided by the number of issued shares, which entitle for those dividends.

DEBT

Debt consist of interest bearing borrowings, bank overdrafts and lease liabilities.

DEBT/EQUITY RATIO

Debt as a percentage of equity attributable to shareholder

DIVIDEND PAYOUT RATIO

Dividend per share divided by earnings per share, indicates the percentage of the Company’s earning that is paid out to shareholders in cash.

DIVIDEND YIELD

Dividend per share divided by the market value of a share.

DIVIDEND COVER

Net profit attributable to the ordinary shareholders divided by the total dividend.

DISCOUNT RATE

A rate used to place a current value on future cash flows. It is needed to reflect the fact that money has a time value.

DEFERRED TAXATION

Sum set aside for income tax in the current Financial Year that may become a liability or a receivable in a future Financial Year.

DEPRECIATION

The systematic allocation of the depreciable amount of an asset over its useful life.

EARNINGS PER SHARE (EPS)

Profit attributable to equity holders of the parent divided by the weighted average number of ordinary shares in issue during the period.

EARNINGS BEFORE INTEREST AND TAX (EBIT)

Earnings before interest and tax includes other operating income.

EFFECTIVE RATE OF TAXATION

Tax expense divided by profit before tax.

FAIR VALUE

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

GEARING

Proportion of total interest bearing borrowings to capital employed.

INTEREST COVER

Number of times interest charge is covered by earnings before interest and tax.

KEY MANAGEMENT PERSONNEL

Key Management Personnel are those person having authority and responsibility for planning and controlling the activities of the entity, directly or indirectly.

MARKET CAPITALISATION

Number of shares in issue at the end of the period multiplied by the market price at the end of the period.

MARKET VALUE ADDED

Market capitalisation minus shareholders’ funds.

MARKET PRICE TO BOOK VALUE

Market price per share over net asset value per share.

GLOSSARY OF FINANCIAL TERMS



REPORTS RISK AND

GOVERNANCE


NET ASSETS

Total assets minus current liabilities, long term liabilities, and non-controlling interests.

NET ASSETS PER SHARE

Net assets as at a Financial Year end divided by the number of shares in issue as at the current Financial Year end.

NON-CONTROLLING INTEREST

Equity in subsidiary not attributable to the parent

PARENT COMPANY

A Parent Company is a Company that owns enough voting stock in another equity firm to control management and operation by influencing electing its Board of Directors.

PRICE EARNING RATIO

Market price per share over earnings per share.

QUICK ASSET RATIO

Current assets excluding inventories, divided by current liabilities.

RELATED PARTY

A person or entity that is related to entity that is preparing its Financial Statements.

RETURN ON ASSETS

Profit after tax divided by the average total assets.

RETURN ON CAPITAL EMPLOYED (ROCE)

Profit before interest and tax as a percentage of capital employed.

RETURN ON EQUITY (ROE)

Profit attributable to shareholders as a percentage of equity attributable shareholders.

RIGHT-OF-USE ASSET (ROU)

As asset that represents a lessee’s right to use an underlying asset over the lease term. The asset is calculated as the initial amount of the lease liability, plus any lease payments made to the lessor before the lease commencement date, plus any initial direct costs incurred minus any lease incentives received.

SHAREHOLDERS’ FUNDS

Total of stated capital, other components of equity and revenue reserves.

TOTAL EQUITY

Shareholders’ funds plus non-controlling interest.

WORKING CAPITAL

Current assets minus current liabilities.


Notice is hereby given that the 11th Annual General Meeting (AGM) of R I L PROPERTY PLC will be held on Wednesday, 30 September 2020, at 9.30 am at level 01, PARKLAND, 33, Park Street, Colombo 02, via audio – visual means, for the following purposes:

(01) To receive and consider the Annual Report of the Board of Directors on the affairs of the Company and its subsidiaries and the Statement of Accounts for the year ended 31 March 2020 together with the Report of the Auditors thereon;

(02) (i) To pass the Ordinary Resolution set out below to re - appoint Mr. S. G. Wijesinha, who is 71 years of age, as a Director of the Company.

“IT IS HEREBY RESOLVED that Mr. S. G. Wijesinha who is 71 years of age be and is hereby re - appointed a Director of the Company and it is hereby declared that the age limit of 70 years stipulated in Section 210 of the Companies Act No.7 of 2007 shall not apply to the said Director”

(ii) To pass the Ordinary Resolution set out below to re - appoint Ms. L.E.M. Yaseen, who is 78 years of age, as a Director of the Company.

“IT IS HEREBY RESOLVED that Ms. L. E. M. Yaseen who is 78 years be and is hereby re - appointed a Director of the Company and it is hereby declared that the age limit of 70 years stipulated in Section 210 of the Companies Act No.7 of 2007 shall not apply to the said Director”

(03) To re-elect Professor. N. D. Gunawardena who retires by rotation pursuant to the provisions of Article 83 of the Articles of Association of the Company, as a Director;

(04) To re-appoint the retiring Auditors, Messrs. Ernst & Young, Chartered Accountants to hold office until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration;

(05) To authorise the Board of Directors to determine donations for the year ending 31 March 2021 and up to the date of the next Annual General Meeting;

(06) To consider any other business of which due notice has been given.

BY ORDER OF THE BOARD

Sgd.Roshini WeudagedaraCompany Secretary


Notes 1. A duly registered and entitled holder of the Company’s shares is entitled to attend, speak and vote at the AGM and is entitled

to appoint a proxy holder to attend, speak and vote on his/her behalf;

2. A proxy holder need not be a shareholder of the Company;

3. The Form of Proxy is enclosed for this purpose. The completed Form of Proxy must be deposited at the Registered Office of the Company situated at 33, Park Street, Colombo 02 or forwarded via email [email protected] or facsimile to 0112399915, not less than forty-eight (48) hours before the appointed hour of the meeting;

4. Instructions given in the Circular to shareholders dated 03 September 2020, must be followed to join the meeting via audio – visual means;

NOTICE OF MEETING



REPORTS RISK AND

GOVERNANCE


NOTES


NOTES



REPORTS RISK AND

GOVERNANCE



NOTES



REPORTS RISK AND

GOVERNANCE


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

...............................................................................................................................................................................................................

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

R I L Property PLC, hereby appoint................................................................................ (N I C No.......................................................)

of.............................................................................................................. failing him/ her

Mr. Sunil Gamini Wijesinha whom failing Ms. Lorraine Estelle Marlene Yaseen whom failingMs. Ladduwa Kovisge Anne Hiroshini Fernando whom failingMr. Loku Walpolage Dhammika Abeyarathne whom failingMs. Chiranga Gimhani Ranasinghe whom failingMs. Chamali Rangadhara Kariyawasam whom failingProfessor. Niranjan Deepal Gunawardena whom failing

as my/our proxy to represent me/us and* .............................. to vote on my/our behalf at the 11th Annual General Meeting (AGM) of R I L Property PLC (the Company) to be held on Wednesday, 30 September 2020, at 9.30 am at level 01, PARKLAND, 33, Park Street, Colombo 02, via audio – visual means and at any adjournment thereof and at every poll which may be taken in consequence of the above said meeting. I/ We the undersigned hereby authorise my/our Proxy to vote on my/our behalf in accordance with the preference indicated below:

For Against

(1) To receive and consider the Annual Report of the Board of Directors on the affairs of the Company and its subsidiaries and the Statement of Accounts for the year ended 31 March 2020 together with the Report of the Auditors thereon;

(2) To re-appoint Mr. S. G. Wijesinha, who is 71 years of age, as a Director of the Company.

(3) To re-appoint Ms. L. E. M. Yaseen, who is 78 years of age, as a Director of the Company;

(4) To re-elect Professor. N. D. Gunawardena who retires by rotation pursuant to the provisions of Article 83 of the Articles of Association of the Company, as a Director;

(5) To re-appoint the retiring Auditors, Messrs. Ernst & Young, Chartered Accountants, to hold office until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration;

(6) To authorise the Board of Directors to determine donations for the year ending 31 March 2021 and up to the date of the next Annual General Meeting;

Signed on this ..................................................................................... day of .............................................................................. Two Thousand and Twenty.

.................................................................... Signature/s

*If you wish your Proxy to speak at the meeting you should insert the words “to speak and” in the place indicated and initial such insertion.

Notes: 1. Instructions as to completion appear overleaf;2. Please indicate with an “x” in the space provided how your proxy holder is to vote;3. If there is in the view of the proxy holder, doubt (by reason of the way in which the instructions contained in the proxy have

been completed) as to the way in which the proxy holder should vote, the proxy holder shall vote as he thinks fit;

FORM OF PROXY


INSTRUCTIONS AS TO COMPLETION

1. To be valid, this completed Form of Proxy must be deposited at the Registered Office of the Company situated at 33, Park Street Colombo 02 or should be sent via email to [email protected] or facsimile on 0112399915, not less than forty-eight (48) hours before the appointed hour of the meeting;

2. The full name and address of the proxy holder and of the shareholder appointing the proxy holder should be entered legibly in the Form of Proxy; Please fill in the date of signature;

3. If you wish to appoint any person other than Directors as your proxy, please insert the relevant details in the space provided overleaf;

4. If the Form of Proxy is signed by the Power of Attorney, the respective Power of Attorney should accompany the completed Form of Proxy for registration, in the event it has already not being registered with the Company;

5. If the shareholder is a company or a corporate body, the Form of Proxy should be executed under the common seal or be signed by its Attorney or by an Officer authorised to do so on behalf of such company/ corporate body;

6. Every alteration or addition to the Form of Proxy must be duly authenticated by the full signature of the shareholder signing the Form of Proxy. Such signatures should as far as possible be placed in proximity to the addition or alteration intended to be authenticated;

7. The use of the word “Member/s” herein is a reference to “Shareholder/s”

FORM OF PROXY

Please provide the following details (Mandatory)

NIC/PP/Company Registration No. of the shareholder

Folio No.

Email address of the shareholder(s) or Proxy holder (Other than a Director appointed as proxy)

Mobile No.

Residence

Designed & Produced by

Printed by Printel (Pvt) Limited

Name of the Company

R I L Property PLC

Legal Form

The Company was incorporated in Sri Lanka on 15 July 2009 as a Private Limited Liability Company under the Companies Act No. 07 of 2007. Subsequently it was converted in to a Public Limited Liability Company on 13 September 2016 under the Companies Act No. 07 of 2007. The Ordinary shares were listed on the Colombo Stock Exchange on 04 May 2017.

Company Registration Number

PV / PB 68365 PQ

Registered Office

33, Park StreetColombo 02Tel: +94 11 233 2850-1Fax: +94 11 239 9915

Board of Directors

Mr. S. G. Wijesinha - ChairmanMs. L. K. A. H. Fernando - Chief Executive Officer/Executive Director Ms. L. E. M. YaseenMr. L. W. D. AbeyarathneMs. C. G. Ranasinghe Professor. N. D. GunawardenaMs. C. R. Kariyawasam

Board Audit Committee

Ms. C. R. Kariyawasam – ChairpersonMr. S. G. Wijesinha – MemberMs. C. G. Ranasinghe – MemberMr. L. W. D. Abeyarathne – Member

Board Nominations & Remuneration Committee

Mr. S. G. Wijesinha – ChairmanMs. C. G. Ranasinghe – MemberProfessor. N. D. Gunawardena – Member

Board Related Party Transactions Review Committee

Ms. C. G. Ranasinghe – ChairpersonMr. S. G. Wijesinha – MemberMs. L. E. M. Yaseen – MemberMs. C. R. Kariyawasam – Member

Auditors

M/s Ernst & YoungChartered AccountantsNo. 201, De Saram Place, Colombo 10Tel : +94 11 233 2850-1

Secretary

Ms. R. Weudagedara

Registrars

P W Corporate Secretarial (Pvt) LtdNo. 3/17, Kynsey Road, Colombo 08.Tel : +94 11 464 0360-3

Bankers

Commercial Bank of Ceylon PLC“Commercial House”, No. 21, Sir Razik Fareed Mw, Colombo 01Tel : +94 11 471 8248

Lawyers

Nithya PartnersAttorneys at LawNo. 97A, Galle Road,Colombo 03

Subsidiaries

FoodBuzz (Private) LimitedNo. 525, Union Place,Colombo 02

United Motors Lanka PLCNo. 100, Hyde Park Corner,Colombo 02

Website

www.rilproperty.lk

CORPORATE INFORMATION

R I L P

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PE

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LC - A

NN

UA

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PO

RT

2019/20

www.rilproperty.lk

annual report 2019/20...8 r i l property plc - annual report 2019/20 company shareholding %...

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