Contents · Distilleries Company of Sri Lanka Limited (DCSL). The convertible Debentures held by...

1Annual Report 2017 -

Notice of Meeting 1

Our Vision/Our Mission 2

Historical Background 2

Corporate Information 3

Senior Management & Estate Managers 4

Chairman's Review 5 - 9

Sustainability Report 10 - 11

Report of the Board of Directors on the affairs of the Company 12 - 15

Board of Directors 16 - 17

Audit Committee Report 18

Remuneration Committee Report 19

Related Party Transactions Review Committee Report 19

Corporate Governance Statement 20- 21

Statement of Directors' Responsibilities 22

Risk Management 23 - 24

Auditors' Report 25

Statement of Profit or Loss 26

Statement of Comprehensive Income 27

Statement of Financial Position 28

Statement of Changes in Equity 29

Statement of Cash Flows 30 - 31

Notes to the Financial Statements 32 - 66

Shareholder and Investor Information 67 - 68

Financial Information 69

Statement of Value Addition 70

Performance of Estates 2017 & 2016 71 - 72

Form of Proxy 73

Instructions for Completion of Form of Proxy 74

Contents

2 - Annual Report 2017


Notice of Meeting

Notice is hereby given that the Twenty Fifth Annual General Meeting of Balangoda Plantations PLC will be held at the Auditorium, Sri Lanka Foundation Institute, 100 Independence Square, Colombo on 21st June 2018 at 10.00 a.m. for the following purposes :- 1. To receive and consider the Report of the Directors and the Financial Statements of the Company for the year ended 31st

December 2017 together with the Auditors’ Report thereon.

2. To re-elect Mr. D H S Jayawardena who is above the age of 70 years as a Director of the Company in terms of Section 210 and 211 of the Companies Act No.7 of 2007.

3. To re-elect Dr. A Shakthevale who is above the age of 70 years as a Director of the Company in terms of Section 210 and 211 of the Companies Act No.7 of 2007.

4. To re-elect Mr. D S K Amarasekera who retires by rotation at the Annual General Meeting in terms of Article 92 of the Articles of Association as a Director of the Company.

5. To re-elect Mr. D Hasitha S Jayawardena at the Annual General Meeting in terms of Article 98 of the Articles of Association as a Director of the Company.

6. To re-elect Mr. A S Perera at the Annual General Meeting in terms of Article 98 of the Articles of Association as a Director of the Company.

7. To re-appoint Messrs. Ernst & Young as Auditors and to authorize the Directors to determine their remuneration.

By order of the Board Pradeep A. Jayatunga Secretary

Colombo20th April 2018

Note

a) A member entitled to attend and vote at the above Meeting is entitled to appoint a Proxy to attend and vote instead of him. A proxy need not be a member of the Company.

b) The Shareholders and the proxy holders are kindly requested to bring this report along with an acceptable form of Identity.

c) A Proxy may not speak at the Meeting unless expressly authorized by the instrument appointing him. The Proxy may vote on a poll (and join in demanding a poll) but not on a show of hands.

d) The completed form of proxy should be deposited at the Registered Office of the Company at 110, Norris Canal Road, Colombo 10, not less than 48 hours before the time for holding the meeting.


Our VisionTo achieve excellence in the production

& marketing of tea and rubber both locally and internationally

Our Mission• To increase productivity.

• To encourage team work and motivation amongst the employees and provide for career development.

• To generate adequate return on capital.

• To achieve excellence in every sphere of activity towards becoming a model in the Private Sector corporate entity.

Historical BackgroundThe Company was originally incorporated as Balangoda Plantations Ltd on 11th June 1992 by Certificate of Incorporation issued in terms of Section 15 (1) of the Company’s Act No. 17 of 1982 read with Section 2 (2) of the Conversion of Public Corporation or Government owned Business Undertakings into Public Company’s Act. No.23 of 1987 and the order published in the Gazette Extra Ordinary of the Democratic Socialist Republic of Sri Lanka dated 11th June 1992. The Company was thereafter reregistered under the Company’s Act No.07 of 2007 as Company No. PQ 165 and a fresh certificate of incorporation issued under the provision of Section 485 (6) of the Company’s Act No.7 of 2007 with the Corporate name changed by operation of law to Balangoda Plantations PLC.

The first tranche of 51% of the issued share capital of the Company was sold by the Secretary to the Treasury through the Colombo Stock Exchange on an “all or nothing” basis and was purchased by Distilleries Company of Sri Lanka Limited (DCSL). The convertible Debentures held by Milford Exports (Ceylon) Limited were converted into 3,636,363 shares.

As per decision of the Government 10% of the Shares of the Company belonging to the Secretary to the Treasury on behalf of the Government were distributed among the eligible employees of the Company.

20% of the Shares of the Company belonging to the Secretary to the Treasury on behalf of the Government were sold to the public through the Colombo Stock Exchange and the balance 19% of the shares belonging to the Secretary to the Treasury were also sold on an “all or nothing” basis through the Colombo Stock Exchange.


Company Balangoda Plantations PLC

Legal Form Quoted Public Company

Date of Incorporation 11th June 1992

Company Registration No. P Q 165

Registered Office 110, Norris Canal Road,Colombo 10

Board of Directors Mr. D H S Jayawardena - Chairman/MDMr. Anusha S Perera - Executive Director (Appointed w.e.f. 01/10/2017)Mr. D Hasitha S Jayawardena - Non Executive Director (Appointed w.e.f.01/10/2017) Mr. C R Jansz - Non Executive DirectorMr. A L Gooneratne - Non Executive DirectorDr. A Shakthevale - Independent DirectorMr. D S K Amarasekera - Independent Director

Secretary Mr. P A Jayatunga,833, Sirimavo Bandaranaike Mawatha,Colombo 14.Telephone : 2524734/2522871

Registrars P W Corporate Secretarial (Pvt) Ltd,3/17 Kynsey Road,Colombo 8.Telephone : 4640360-3

Auditors Messrs. Ernst & Young,Chartered Accountants,201 De Saram Place.Colombo 10

Bankers Hatton National Bank PLCHead Office Branch481, Darley RoadColombo 10

Managing Agents Stassen Exports (Pvt) Limited833, Sirimavo Bandaranaike MawathaColombo 14

Corporate Information


Senior Management Teamas at 31st December 2017

Mr. A S Perera Executive Director (Appointed w.e.f.1/10/2017)

Mr. T A G de Mel General Manager (employed until 26/03/2018)

Mr. D P A PereraMr. A M A S Dhanasekara

Deputy General Manager (employed until 31/12/2017)Deputy General Manager (Appointed w.e.f.1/02/2018)

Mr. A E G Jayawardena Asst General Manager

Mr. M I A Ansar Chief Accountant

Mr. P A Jayatunga Company Secretary/Legal Officer

Estate Managersas at 31st December 2017

Mr. P K Ekanayake Balangoda Estate, Balangoda

Mr. N M P C Nawaratne Cecilton Estate, Balangodaa

Mr. P M A Pathirana Meddakande Estate, Balangoda

Mr. S S Kuruppu (Overlooking) Non Pareil Estate, Belihuloya

Mr. S S Kuruppu Pettiagalla Estate, Balangoda

Mr. P A P R de Silva Rasagalla Estate , Balangoda

Mr. I K A B Ellepola Rye/Wikiliya Estate, Balangoda

Mr. D L D S Kandegama Walaboda Estate, Balangoda

Mr. K A R Gunaratne Galatura Estate, Kiriella

Mr. B L L Prematilake Mahawela Estate, Ratnapura

Mr. S H M Gunawardena Millawitiya Estate, Ratnapura

Mr. R M D T J Ratnayake Mutwagalla Estate, Kiriella

Mr. A I B Rajasinghe Palmgarden Estate, Ratnapura

Mr. D K Wijeratne Rambukkande Estate, Ratnapura

Mr. S B Ranawaka Cullen Estate, Badulla

Mr. H S C Nanayakkara Glen Alpin Estate, Badulla

Mr. C Wanigasekera (Acting) Gowerakelle Estate, Badulla

Mr. Christopher F Stork Spring Valley Estate, Badulla

Mr. P K Senanayake Telbedde Estate, Badulla

Mr. N P Liyanage Ury Estate, Badulla

Mr. A G Gomesz Wewesse Estate, Badulla


Chairman's Review

On behalf of the Board of Directors I am pleased to present a detailed review of operations and the performance of Balangoda Plantations PLC as reflected in the Audited Financial Statements for the year ended 31st December 2017.

Year 2017 is recorded as one of the better years for the Industry with an increase in production and averages reached all-time high levels. However despite the ascent witnessed in 2017, the Industry continued to be plagued with geo political tension in the tea importing countries, policy decisions which affected the production of tea and temperature variability due to climatic changes. The ban on tea exports by Russia the largest importer of Sri Lanka too added much uncertainty towards Industry growth.

YearProduction

Mn kg

Annual Increase Mn kg

Annual Increase

%

2013 340.23 13.93 4.27

2014 338.03 2.20 (0.65)

2015 328.96 (9.07) (2.68)

2016 292.57 (36.39) (11.06)

2017 307.08 14.51 4.96

Sri Lanka’s Tea Production

National Tea production recorded 307.08 Mn kgs reflecting an increase of 4.96% in comparison to 292.57 Mn kgs for the same period in 2016. However, the negative impact of drought and floods in the first and second quarters of the year and the banning of herbicides coupled with high cost of fertilizer could still be the drawbacks to reach the production levels of the preceding years. The reluctance to undertake the required level of annual replanting by most of the smallholder farmers and the Plantation Companies due to the non-affordability of high cost and uncertainty in recovering investments is also a major contributory factor for the declining trend in the production volumes.

Year High Medium LowAll

Elevations

2013 407.91 396.96 469.67 444.75

2014 430.59 414.41 488.61 465.06

2015 400.30 362.93 417.41 405.33

2016 457.58 420.67 487.16 470.85

2017 606.59 565.85 637.95 620.17

The Colombo Auction Average of all elevations which stands at Rs.620.17 records as the highest ever yearly auction average superseding Rs.470.85 achieved in 2016. In analyzing the global supply scenario, a deficit in production was evident from a few key producer countries comprising mainly of CTC Teas and this global shortage in production was a key factor for the prices to sustain at these levels coupled with strengthening of oil prices which had influence on some key importing countries of Sri Lankan Teas.

Tea - Colombo Auction Average Prices Rs/kg

Tea Industry

Production - Low, Medium, High Elevation - Mn kgs

Low

Medium

(0.07)High

183.64197.17

+/- Jan-Dec 2016 Jan-Dec 2017

64.4364.36

13.53

1.0444.5145.55

Pric

es (R

s/kg

) High

Medium

Low

All Elevations

Average Prices Rs/kgs

2013 2014 2015 2016 2017

700

600

500

400

300

200

100

0


The Tea segment recorded a turnover of Rs.2.8 Billion in 2017 compared with Rs.2.1 Billon last year reflecting an increase of Rs.757 Mn (36.85%) due to exceptionaly high levels of Auction prices in 2017. The cash impact of the wage hike granted in October 2016 contributed towards a higher cost of production which continues to be one of the bigger challenges faced by the RPCs . Despite the numerious uncontrollable variables that affected the high cost of production and decline in crop, the Company was able to reduce the loss per kg by 77.42% with the improved net sale average of Rs.564.89 reflecting an increase of 41.43% compared to 2016.

Noteworthy Performance - Tea

Various grades of Tea manufactured by Balangoda, Cecilton, Meddekande, Pettiagalla, Rasagalla, Glen Alpin, Spring Valley, Telbedde, Ury & Wewesse Estates obtained all island top prices on 216 occasions at the Colombo Auctions

Performance of Company'sRubber Sector2017 2016 2015 2014 2013

Production (‘ooo kg) 767 951 764 671 816

Yield kg/ha 667 834 647 577 643

Turnover (Rs.Mn) 245 212 177 186 292

NSA (Rs/kg) 316.14 231.90 231.90 277.32 357.20

COP (Rs./kg) 408.30 314.10 365.49 400.51 332.09

Profit/(Loss) (Rs./kg) (92.16) (133.59) (133.59) (123.19) 25.11

Performance of the Company's Tea Sector

2017 2016 2015 2014 2013

Production (‘ooo kg) 4,829 5,147 6,386 6,822 7,298

Yield kg/ha 815 769 867 940 936

Turnover (Rs.Mn) 2,811 2,054 2,236 2,816 2,880

NSA (Rs/kg) 564.89 399.40 350.12 412.77 394.64

COP (Rs./kg) 578.00 457.46 435.64 455.65 407.83

Profit/(Loss) (Rs./kg) (13.11) (58.06) (85.52) (42.88) (13.19)

Chairman's Review

Sri Lanka Rubber Production (Mn kg)

Production 2013 2014 2015 2016 2017130.4 98 88.5 79.1 83.1

180160140120100

80604020

0

National Average Prices - Rubber Rs kg

RSS

Scrap Crepes

Latex Crepes

Latex Crepes Scrap Crepes RSS

2016 233.59 170.55 229.85

2017 351.17 269.59 335.88

0 50 100 150 200 250

Rubber Industry

The Rubber Sector has shown an improvement during year 2017 when compared with the preceding year. Sri Lanka Rubber Production increased to 83.1 Mn kgs in 2017 from 79.1 Mn kgs in 2016 due to weather being favourable for crop intakes. Auction averages too reflects an increase when compared with the previous year. However auction prices were adversely affected due to excessive imports of raw Rubber to the Country by local manufacturers.


Noteworthy Performance - RubberVarious grades of Rubber obtained top prices on 138 occasions from Galatura, Mahawela, Millawitiya, Rambukkande & Wewila

Estates.

Chairman's Review

The Company’s Rubber NSA increased to Rs. 316.14 from the previous year’s average of Rs.231.90 as a result of which the rubber turnover increased by 15.57%. Despite stringent cost control, the Company’s Rubber segment made a loss of Rs.92.16 per kg. Rubber production dipped by 19.35% due to erratic weather conditions that prevailed in the Rubber growing areas of the Company.

Effect of the Weather on Performance

Tea and Rubber yields are greatly influenced by weather. When compared with the previous year the rainfall reflects an increase of 27.64% in Balangoda Region, 41.47% in Ratnapura Region and 65.33% in Badulla Region as a result of which the total production over the previous year declined by 6.18% and 19.3% of Tea and Rubber respectively reflecting a revenue loss of approximately Rs.238 Million.

Amount Mn Rs

%

Tea Replanting 4.48 1.7

Rubber Replanting 225.60 85.96

Diversification (Fuel wood & Timber) 32.20 12.26

Land Improvement 0.05 0.02

Equipment 0.15 0.06

Total 262.48 100

Jan-Dec 2016 Jan-Dec 2017 Jan-Dec Decinnial Avg

Capital InvestmentsThe total capital expenditure for the year under review was Rs.262.48 Mn the composition of which is shown in the statement. Despite adverse external conditions and increased production costs within the Tea an Rubber Sectors the company has invested Rs. 262.28 Mn on Field Development during the year under review.

Rainfall (mm)

Rain

fall

(mm

)

Balangoda Region3,500

3,000

2,500

2,000

1,500

1,000

500

0

2,015

2,572

2,872

Badulla Region3,500

3,000

2,500

2,000

1,500

1,000

500

0

1,255

2.075 2,136

Ratnapura Region6,000

5,000

4,000

3,000

2,000

1,000

0

3,019

4,271

3,617


Chairman's Review

Diversification undertaken in 2017The Company continued its forestry/crop diversification activities in the year 2017 as prescribed for the year in the Forestry Management Plan. The thinning out programme of the young timber plants was undertaken as resulting in the availability of a significant quantity of fuelwood to the Factories. An extent of 422.75. Hects. is currently being maintained under capital expenditure inclusive of 27.65 Hects. planted with Eucalyptus Torrelliana during the year.

Loans taken in 2017Institution Type Loan Amount (Rs.) Interest Rate Purpose

Sri Lanka Tea Board Long Term Loan 44,926,350.00 5% Distress Loan

Melstacorp PLC Long Term Loan 100,000,000.00 AWPLR (Monthly Review) + 1% For working capital requirements





Melstacorp PLC Long Term Loan 34,855,905.00 AWPLR (Monthly Review) + 1% For working capital requirements (Fertilizer)

Commercial Bank Long Term Loan 62,000,000.00 14% For working capital requirements

Melsta Regal Finance Ltd Short Term Loan 40,000,000.00 18% Deepavali Festival Advance

Social Development Work - 2017Activity Estate Total Cost (Rs.)

Green Gold Housing Project(Ministry of Hill Country New Villages Infrastructure & Community Development)

Balangoda – 50 Units Pettiagalla – 32 UnitsCecilton – 12 Units *Rasagalla – 12 Units *Mutwagalla – 4 Units *Meddakande – 18 Units *Wewesse – 18 Units *.

145,200,000.00

Water Supply Projects (Ministry of Hill Country New Villages Infrastructure & Community Development)

Non Pareil Rasagalla Rye/Wikiliya Walaboda Cecilton Balangoda Rambukkande

4,276,023.35

New Latrine Projects (Ministry of Hill Country New Villages Infrastructure & Community Development)

Spring Valley – 10 Units 673,170.00

Upgrading Child Development Centres (Ministry of Hill Country New Villages Infrastructure & Community Development)

Wewesse 1,000,000.00

Child Development Centres (World Bank Project)

Spring ValleyUry Cullen GowerakelleTelbedde

14,350,000.00

Special Projects (Ministry of Hill Country New Villages Infrastructure & Community Development)

Hospital Road – UryCultural Hall – Telbedde Water Supply – Telbedde

1,844,637.16

* Preliminary work commenced in 2017 and carried over to 2018


Chairman's Review

Industrial Disputes and their effect - 2017During 2017 there were strikes/disputes on Non Pareil, Cullen, Ury, Galatura & Palmgarden Estates due to incidents took place with Unions involvement. This resulted in a loss of 2,050 man days and an estimated loss of crop valued at Rs.6,436.000.55.

Prospects for 20182017 ended on a positive note with the auction averages reaching the levels exceeding the previous records. The robust market condition that prevailed in 2017 is likely to continue during the year ahead. The global economy is expected to remain buoyant despite geo political instability in the Middle East which could affect resilience and sustainability of the Industry. Further, the country will have to contend with unsettled weather, inability to source cost effective weedicides, disruption to regular agricultural practices and high cost of fertilizer and other inputs. Wage negotiations are expected in the 3rd Quarter of 2018 and the additional cash outlay due to wage increase will directly impact the increase in cost of production posing a challenge to the viability of the Industry unless it is looked at with a fresh and reinvigorated mind-set.

Keeping our Plantations vital and responsive amid the overall operational risks is the challenge ahead and as a Plantation Company we continue to execute our vision in accordance with our values to revitalize and redirect the Company with a view to achieving the maximum potential.

The professional approach of the new management team appointed recently will concentrate on their area of expertise to add further value to the overall success of the Company by addressing agricultural and operational priorities. The new Team will make use of their skillsets and talents to maintain a constant culture of innovation and fulfill the clearly defined goals and strategic objectives to increase profitability and long term sustainability. We believe that we are capable of restoring the dignity of the Company together with the new management team and other resources such as human, physical, knowledge, capital & infrastructure and thereby producing differentiated and value added products that fetch higher prices.

Dividends I regret very much to inform you that your Directors are not recommending a dividend for the year ended 31st December 2017.

Acknowledgements On behalf of the Board of Directors I wish to thank our Buyers, Brokers and Suppliers for their patronage. I would also like to place on record the dedication, commitment and loyalty of the Management team, Executives, Staff and Workers of the Company and take this opportunity to thank each and every one of them. I also express my deep gratitude to all our shareholders who have continued to place their trust and confidence.

Sgd. D. H. S. Jayawardena Chairman/Managing Director 20th April 2018


Sustainability Report

ENVIRONMENT We have made a conscientious effort to identify key environmental aspects towards environmental responsibility which is focused on land, water, energy and habitat impacts. As a part of its pledge to continually improve the environmental and social sustainability performance we remain committed and comply with all the guidelines laid out by the Central Environmental Authority and are aligned with the code of ethics of the Rain Forest Alliance coupled with many initiatives launched by the Company to protect and conserve the natural environment. • Efficient utilization of resources • Effective waste management practices• Promotion of environmental awareness and sensitivity amongst the plantation

community • Sustainable agricultural practices SOCIAL

Housing & InfrastructureIn our efforts to provide proper living standards to our worker community the Company initiated several projects during the year 2017 as well with the assistance of the Plantation Human Development Trust and the Ministry of Hill Country New Villages Infrastructure & Community Development. Details of activities undertaken are disclosed in Page No 8.

Health & Safety Occupational health and workplace safety is of high priority in our estates. During the year under review the Company conducted a series of Health related activities, awareness programmes and training sessions to provide a healthy and safe working environment for the Estate Community. ISO 22000 and the Rain Forest Alliance Certification obtained by the Company carry features which specifically protect workers from process related risks. Given below are some of the activities continuously undertaken.

• Training Programmes on Social protection and Eradication of Child Labour • Awareness Programmes on prevention and early detection of cancer • Awareness Programmes on improving nutritional status of women & Children on

Estates• Awareness Programmes for Estate Community on Disaster Management • Special Mobile Clinics on screening of Oral Cancers• Health Camps, Clinics

Community Development The Company encourage a happy work culture and foster relationship with our employees to bring about improvements in the organization towards the achievement of the common goals described in our vision and mission statements. Believing that our employees are our most valuable asset we always make an effort to develop the ability and productivity of our worker community at all levels. Easy payment schemes for facilities such as obtaining goods and equipment, distress loans, death benefit welfare scheme, medical insurance, sports and recreational activities, religious programmes, are some of the welfare measures the Company undertakes.

ENVIRONMENTAL• Energy Efficiency • Land Management • Water Management • Bio Diversity

ECONOMIC• Increase productivity and

innovation• Value Addition• International Certifications

SOCIAL• Enhancing the dignity of

lives of our employees and inspiring them to overcome challenges

Moving towards sustainability is a social challenge and our Company as a corporate entity endeavoured to maintain its responsibility for the sake of wellbeing of the community and the environment together with our stakeholders. The Company is firmly of the view that sustainability is not only improving the quality of human life, but also living within the carrying capacity of supporting eco-systems. Over the years we have invested in material resources, time and capacity to improve the living standards of our workforce and the report reveals the constructive measures taken by Balangoda Plantations PLC in its endeavour to achieve a sustainable business model with all aspects of sustainability in our business practices


Sustainability Report

ESTATES CERTIFIED Balangoda Estate Cecilton Estate Meddakande Estate Non Pareil Estate Pettiagalla Estate Rasagalla Estate Walaboda Estate

ESTATES CERTIFIED Cecilton Estate Balangoda Estate Meddakande Estate Pettiagalla Estate Palmgarden EstateGlen Alpin EstateTelbedde Estate Ury EstateWewesse Estate

This certification works to conserve biodiversity and improve livelihoods by promoting and evaluating

the implementation of the most globally respected sustainability standards which are designed to generate

ecological, social and economic benefits.

ISO 22000

Quality Management risks are addressed by this certification

Rain Forest Alliance Certification (RAC)

Employment Opportunities Whenever an employment opportunity arises on our Estates it is the policy of the Company to give priority to the children of the existing employees before outside recruitments are made.

Employee Skill Development on Estates During the period under review the Company conducted a series of training sessions for employees on quality manufacture & agricultural practices, teamwork, career growth and development, health and safety instructions etc.

With a view to encouraging youth to remain on Estates and also discourage premature retirement and residents working outside the Estates, outsourcing has been introduced and presently commenced and working well on Tebedde, Glen Alpin & Spring Valley Estates in the Badulla Region and Balangoda, Cecilton, Meddakande, Pettiagalla, Non Pariel, Rasagalla, Rye/Wikiliya and Walaboda Estates in the Balangoda Region.

ECONOMIC Our activities are planned in keeping with our commitment towards economic dimension of sustainability. Amidst threatening global challenges we continue to focus on re-figuring and integrating our dynamic capabilities in order to create a better demand for our produce.

Value Addition International Certifications and Accreditations

Certifications awarded confirm our commitment to preservation of the environment and our processes pertaining to the quality of the end product. These certifications benchmark our policies, agricultural practices, rejuvenation and protection of the environment with international best standards.


Report of the Board of Directors on the affairs of the Company

The Directors of Balangoda Plantations PLC have pleasure in presenting their Annual Report together with the Audited Financial Statements of the Company for the year ended 31st December 2017.

Principal Activities The principal activity of the Company is the cultivation and processing of Tea and Rubber. The Company has 06 Tea Estates, 12 Tea cum Rubber Estates and 04 Rubber Estates in two Districts – Badulla and Ratnapura. The cultivated land consists of 4,150.73 Ha under Tea and 2,523.97 Ha under Rubber.

Managing Agents The Company is managed since 1st November 1996 by Stassen Exports (Pvt) Limited.

Management Fee Management Fee is paid on the following basis :

Rs.1.0 million per estate per year

From Profit

• Up to 50.0 million - 10%

• 50.0 million to 100.0 million - 20%

• 100.0 million to 200.0 million - 30%

• Over 200.0 million - 40%

Parent Company The Company’s parent undertaking and controlling party is Melstacorp PLC, which is incorporated in Sri Lanka as a Public Limited Company.

Review of Performance The review of the Company’s performance during the year is given in the Chairman’s Review in this Annual Report.

Development and Diversification Development and Diversification are covered in the Chairman’s Review in this Annual Report.

Financial Statements The Financial Statements of the Company are given on pages 26 to 66 of this Annual Report.

Auditors’ Report The Auditors’ Report on the financial statements is given on page 25 of this Annual Report.

Accounting Policies The Accounting Policies adopted in the preparation of the Financial Statements are given on pages 32 to 45 of this Annual Report. Financial Results

2017Rs.'000

2016Rs.'000

Revenue 3,056,067 2,266,657Profit/(Loss) before Tax 100,775 (371,078)Income Tax( Expense)/Reversal (192,437) 56,736Profit/(Loss) After Tax (91,662) (314,342)Net Comprehensive Income 22,395 125,148Profit/(Loss) Brought Forward 179,371 374,847Transferred to Timber Reserve (22,148) (6,406)Transferred to Available for sales reserves 47 124Available for Appropriation 88,003 179,371Proposed Dividend - Final (2017-Nil, 2016-Nil) - -Retained Profit 88,003 179,371


Estates Hect. Number of Building Value Rs.

Agarsland 3.70 151 4,836,915.38

Balangoda 45.13 667 15,920,335.09

Cecilton 11.43 352 10,463,317.58

Meddakande 14.01 409 12,436,376.19

Non Pareil 28.68 317 11,047,529.43

Pettiagalla 12.05 343 9,879,064.47

Rasagalla 39.41 488 9,193,984.98

Rye/Wikiliya 28.25 517 11,845,365.62

Walaboda 16.77 261 4,102,172.01

Galatura 28.31 375 18,038,900.18

Mahawale 16.78 487 17,200,443.93

Millawitiya 12.94 221 6,441,536.14

Mutwagalla 19.21 430 9,523,690.12

Palmgarden 36.67 667 22,275,264.16

Rambukkande 18.77 203 16,887,899.10

Cullen 3.03 308 4,816,025.99

Glen Alpin 41.05 1349 20,067,541.41

Gowerakelle 13.51 322 54,154,614.51

Spring Valley 42.49 928 15,803,972.00

Telbedde 69.79 906 19,561,456.00

Ury 36.12 703 12,634,912.72

Wewesse 9.89 561 12,865,652.18

Head Office 4.00 2 11,904,919.13

Total 552.00 10,967 331,901,888.00


2017 2016

Profitability RatiosGross Profit RatioNet Profit Ratio

4.05%3.30%

(10.18%)(16.37%)

Asset RatiosCurrent RatioAcid Ratio

0.400.14

0.350.12

Performance RatiosReturn on InvestmentReturn on Share Capital

4.96%28.79%

(17.67%)(106.02%)

Leverage RatiosDebt/Equity RatioInterest coverage

93.74%1.50

74.84%(1.89)

Investor RatiosPrice Earnings Ratio (7.78) (0.92)

Financial Ratio Analysis

Number of Buildings, Hectarage & Value


Dividend The Directors are not recommending a dividend for the year ended 31st December 2017.

Remuneration and Other Benefits of the Directors The Directors did not receive any remuneration or other benefit during the accounting period.

Donations The Company did not make any donation during the year.

Taxation Our computation confirms the deferred Tax Liabilities of Rs. 192.97 million is adequate.

Capital Expenditure The Company incurred a capital expenditure of Rs. 262.48 million, of which Rs. 262.28 million has been spent on field development.

Commitments & Contingencies Capital commitments and Contingent liabilities are disclosed in the Notes to Accounts Nos. 22 & 30.

Directorate The following Directors held office during the year under review :

Mr. D H S Jayawardena - Chairman/Managing Director Mr. C R Jansz - Non Executive Director Mr. S K L Obeyesekere - Director /CEO (resigned w.e.f.30/9/2017)Mr. Anusha S Perera - Executive Director (Appointed w.e.f. 01/10/2017)Mr. D Hasitha S Jayawardena - Non Executive Director (Appointed w.e.f.01/10/2017) Mr. A L Gooneratne - Non Executive Director Dr. A Shakthevale - Independent Director Mr. D S K Amarasekera - Independent Director

In terms of Article 92 of the Articles of Association Mr. D S K Amarasekera retires by rotation and being eligible offer himself for re-election.

Directors’ Interest in Shares None of the Directors of the Company, their spouses or dependants held any shares in the Company during the year ended 31st December 2017.

Directors’ Interest in Contracts with the Company Directors interests in contracts with the Company are disclosed in Note 32 to the Accounts and have been declared at a Meeting of the Directors. The Directors have no direct or indirect interest in any other contracts or proposed contracts of the Company.

Shareholder and Investor Information Distribution of Shareholdings as at 31st December 2017, Analysis Report of Shareholders, Market Statistics of Company’s shares and the list of 25 major shareholders are given on pages 67 and 68 of this Annual Report.

Matters pertaining to the Golden Share1. The Golden Share shall only be held by the Secretary to the Treasury in his official capacity and not in his own name, for and

on behalf of the State of the Democratic Socialist Republic of Sri Lanka, or by a company in which the State of the Democratic Socialist Republic of Sri Lanka owns 99% or more of the issued share capital.

2. The Company shall obtain the written consent of the golden Shareholder prior to sub-leasing, ceding or assigning its rights in part or all of the lands set out in Section 3A(1) of the Memorandum of Association.

3. The Articles of the Company as originally framed may from time to time be altered by special resolution, provided that the concurrence of the Golden Shareholder in writing shall be first obtained to amend the definition of the words Golden Share and Golden Shareholder and Articles 2A, 2B, 3(c), 3(c)(i), 3(c)(ii), 25A, 127A, 127B, 127C and 128.

4. The Golden Share may be converted into an ordinary share with the concurrence of the Golden Shareholder and the concurrence of a majority of the shareholders.

5. The Golden Shareholder shall be entitled to call upon the Board of Directors of the Company once in every three month period




if desired to meet with the Golden Shareholder and or his nominees, and the Directors if so called upon shall meet with the Golden Shareholder and or his nominees to discuss matters of the Company of interest to the State of the Democratic Socialist Republic of Sri Lanka.

6. The Golden Shareholder and or his nominee shall be entitled to inspect the books of accounts of the Company after giving two weeks written notice to the Company.

7. The Company shall submit to the Golden Shareholder, within 60 days of the end of each quarter, a quarterly report relating to the performance of the Company during the said quarter in a pre-specified format agreed to by the Golden Shareholder and the Company.

8. The Company shall submit to the Golden Shareholder, within 90 days of the end of each fiscal year, information relating to the Company in a pre-specified format agreed to by the Golden Shareholder and the Company.

Post Balance Sheet Events. Details of post Balance Sheet events have been disclosed in Note 31 to the Accounts.

Auditors The accounts of the year have been audited by M/s Ernst & Young, Chartered Accountants who offer themselves for re-appointment.

Fees paid to the Auditors are disclosed on Page 48 in the Financial Statements.

As far as the Directors are aware, the Auditors do not have any relationship (other than as Auditors) with the Company other than those disclosed above. The Auditors do not have any interest in the Company.

Sgd. D.H.S. Jayawardena Sgd. Anusha S PereraChairman/Managing Director Executive Director

Sgd. Pradeep A. JayatungaSecretary 20th April 2018


MR. D H S JAYAWARDENA – CHAIRMAN/MANAGING DIRECTORMr. D H S Jayawardena is one of the most successful and prominent business magnates in Sri Lanka. He heads many successful ventures in diversified fields of business.

ChairmanAitken Spence PLC, Browns Beach Hotels PLC, Aitken Spence Hotel Holdings PLC, Aitken Spence Hotel Managements Asia (Pvt) Ltd., Negombo Beach Resorts (Pvt) Ltd., Lanka Power Projects (Pvt) Ltd., Stassen Exports (Pvt) Ltd., Milford Holdings (Pvt) Ltd., C B D Exports (Pvt) Ltd., Stassen International (Pvt) Ltd., Stassen Natural Foods (Pvt) Ltd., Stassen Foods (Pvt) Ltd., Milford Exports (Ceylon) (Pvt) Ltd., Ceylon Garden Coir (Pvt) Ltd., Milford Developers (Pvt) Ltd., Lanka Milk Foods (CWE) PLC, Lanka Dairies (Pvt) Ltd., Ambewela Livestock Company Ltd., Ambewela Products (Pvt) Ltd., Pattipola Livestock Company Ltd., Timpex (Pvt) Ltd., Texpro Industries Ltd., Distilleries Company of Sri Lanka PLC, Periceyl (Pvt) Ltd., Melstacorp PLC, Bellvantage (Pvt) Ltd., Madulsima Plantations PLC, Balangoda Plantations PLC, Indo Lanka Exports (Pvt) Ltd., Bogo Power (Pvt) Ltd., Telecom Frontier (Pvt) Ltd., Lanka Bell Ltd., Bell Solutions (Pvt) Ltd.

Managing DirectorStassen Real Estate Developers (Pvt) Ltd.

DirectorStassen Plantation Management Services (Pvt) Ltd.

OthersConsul General for Denmark in Sri Lanka

MR. ANUSHA S PERERA – FIPM (SL), MIPM (SL), MIM (SL) – EXECUTIVE DIRECTORMr. Anusha Perera counts over 35 years’ experience in the Plantation Industry. He is a Fellow of the Institute of Plantation Management of Sri Lanka, a Member of the Institute of Personal Management of Sri Lanka and a Member of the Institute of Management of Sri Lanka. Mr. Anusha Perera serves as an elected Committee Member of the Ceylon Rubber Traders’ Association (CRTA) and the Ceylon Tea Traders’ Association (CTTA). He is the Executive Director of Balangoda Plantations PLC and Director of Rubber Research Board of Sri Lanka. Mr. Anusha Perera has previously served as a Director of AEN Oil Palm Processing (Pvt) Ltd, Mackply Industries (Pvt) Ltd, Director/CEO of Agalawatte Plantations PLC and also as the Chief Operating Officer – Rubber of Pussellawa Plantations Limited.

MR. C.R. JANSZ – NON-EXECUTIVE DIRECTORMr. Jansz is the Chairman of DFCC Bank PLC and is a Director of Distilleries Companies of Sri Lanka PLC and other Companies in the Melstacorp PLC. He is a Director of Lanka Milkfoods (CWE) PLC, Lanka Dairies (Pvt) Ltd. and other Companies in the Lanka Milk Foods Group.

He is a former Chairman of Sri Lanka Shippers Council and a former member of the National Trade Facilitation Committee of Sri Lanka. He has many years experience in logistics and in documentation, insurance, banking and finance relating to international trade.

Mr. Jansz holds a Diploma in Banking and Finance from the London Metropolitan University (Formerly London Guildhall University) – UK. He is a Chevening Sholar and a UN-ESCAP Certified Training Manager on Maritime Transport for Shippers.

ChairmanDFCC Bank PLC

DirectorAmbewela Livestock Company Limited, Ambewela Products (Pvt) Ltd., Melstacorp PLC., Lanka Bell Ltd., Lanka Dairies (Pvt) Ltd., Lanka Power Projects (Pvt) Ltd., Milford Holdings (Pvt) Ltd., Pattipola Livestock Company Ltd., Periceyl (Pvt)., Indo Lanka Exports (Pvt) Ltd., Balangoda Plantations PLC, Distillerires Company of Sri Lanka PLC, Lanka Milk Foods (CWE) PLC.

MR. A.L. GOONERATNE – FCA(SL),FCA(Eng.& Wales) – NON-EXECUTIVE DIRECTOR Mr. Amitha Gooneratne has held several senior positions at Commercial Bank of Ceylon PLC and served as the Managing Director from 1996 to April 2012. He is a Fellow member of The Institute of Chartered Accountants, United Kingdom and Wales and a Fellow Member of The Institute of Chartered Accountants, Sri Lanka. He was the Founder Chairman of the Financial Ombudsman Sri Lanka (Guarantee) Ltd. and former Chairman of the Sri Lanka Banks’ Association (Guarantee) Ltd. He was also the Managing Director of Commercial Development Company PLC and was the Chairman of Commercial Insurance Brokers (Pvt) Limited. He was also nominated to the Board of Sri Lankan Air Lines during 2002-2004 by the Government of Sri Lanka.

On his retirement, Mr. Gooneratne, assumed duties as Managing Director of Melstacorp Limited, which was the strategic investment arm of the Distilleries Company of Sri Lanka PLC, which subsequent to a restructure of the Group is now the Holding Company and is listed on the Colombo Stock Exchange. He is the Chairman of Melsta Regal Finance Limited and Melsta Logistics (Pvt)

Board of Directors


Limited; Board Member of Periceyl (Pvt) Limited, Balangoda Plantations PLC, Lanka Bell Limited, Telecom Frontier (Pvt) Limited, Bell Solutions (Pvt) Limited, Timpex (Pvt) Limited, Texpro Industries Limited, Bogo Power Limited, Continental Insurance Limited and Browns Beach Hotel, Bogo Power (Pvt) Ltd. and Melsta Towers, Melsta Health (Pvt) Ltd and Melsta Pharmaceuticals (Pvt) Limited which are subsidiary Companies of Melstacorp PLC.

He is an Independent Director of Teejay Lanka PLC., Lanka IOC and Commercial Development Company Limited.

He is also the Alternate Director to Mr. N. de S. Deva Aditiya on the Board of Distilleries Company of Sri Lanka and Aitken Spence PLC.

MR. D Hasitha S Jayawardena – NON-EXECUTIVE DIRECTOR Mr. Hasitha Jayawardena holds a Bachelor’s Degree in Business Administration BBA (Hons) from the University of Kent in the United Kingdom.

Mr. Jayawardena joined Stassen Group in February 2013. He is a Director of Stassen Exports (Pvt) Ltd., Milford Exports (Ceylon) (Pvt) Ltd., Stassen International (Pvt) Ltd., Stassen Natural Foods (Pvt) Ltd., Ceylon Garden Coir (Pvt) Ltd., Milford Developers (Pvt) Ltd., Stassen Foods (Pvt) Ltd., C.B.D. Exports (Pvt) Ltd., Lanka Milk Foods (CWE) PLC., Lanka Diaries (Pvt) Ltd., Ambewela Livestock Company Ltd., Pattipola Livestock Company Ltd., Ambewela Products (Pvt) Ltd., Zahra Exports (Pvt) Ltd., Mcsen Range (Private) Ltd., Distilleries Company of Sri Lanka PLC., Periceyl (Pvt) Ltd., Melstacorp PLC., Balangoda Plantations PLC and Madulsima Plantations PLC.

Mr. Jayawardena has also worked as an Intern at the Clinton Global Intiative Programme (CGI) in New York in 2007.

MR. D.S.K. AMARASEKERA – INDEPENDENT NON – EXECUTIVE DIRECTOR

DirectorBalangoda Plantations PLC, Browns Investments PLC, Eden Hotel Lanka PLC, Browns Capital PLC, Kelani Tyres PLC, Lanka Milk Foods (CWE) PLC, Madulsima Plantations PLC, Palm Garden Hotels PLC, Central Services (Pvt) Ltd., Ceylon Cineman Holding (Pvt) Ltd., Excel Global Holding (Pvt) Ltd., Excel Restaurants (Pvt) Ltd., Foton Lanka (Pvt) Ltd., Browns Capital Properties (Pvt) Ltd., Free Lanka Plantations Co. (Pvt) Ltd., Millennium Development (Pvt) Ltd., Samudra Beach Resorts (Pvt) Ltd., Sierra Holdings Ltd., Southern Cleaners (Pvt) Ltd., The Tea Leaf Resort Holdings (Pvt) Ltd., Tropical Villas (Pvt) Ltd., Business Process Outsourcing (Pvt) Ltd., The Colombo Land Exchange Ltd., Morningside Estate (Pvt) Ltd., Ceylon Hotel Holdings (Pvt) Ltd., Suisse Hotel Kandy (Pvt) Ltd., Ceylon Roots (Pvt) Ltd., Green Paradise (Pvt) Ltd., BG Air Services (Pvt) Ltd., Browns Tours (Pvt) Ltd., Sun & Fun Resorts Ltd, NPH Holdings (Pvt) Ltd, Bodufaru Beach Resorts (Pvt) Ltd., Don & Don Holdings (Pvt) Ltd.

Mr. D.S.K. Amarasekera is an eminent Tax Consultant and the Senior Tax and Legal Partner of Amerasekera & Company, a leading tax consultancy firm in the country. He is a Member of the Institute of Chartered Accountants of Sri Lanka, and is an Attorney-at-Law of the Supreme Court of Sri Lanka.

DR. A. SHAKTHEVALE – INDEPENDENT NON-EXECUTIVE DIRECTOR

DirectorLanka Milk Foods (CWE) PLC, Madulsima Plantations PLC and Balangoda Plantations PLC.

Retired Additional Secretary (Livestock), Ministry of Agriculture and Livestock in 2002, served as the Secretary, Ministry of Rehabilitation and Social Services in the Northeast Provincial Council and as a member of the Independent Finance Commission for two terms from July 2004 – July 2009. He works as a freelance Consultant in the field of livestock. He has also worked for FAO, as the National Consultant -Veterinary Production Specialist, UNDP, GTZ, UNHABITAT, Land O’Lake, Oxfarm GB and several local livestock organizations. He is a Forum Member and Member of the Executive Council of ‘The Organization of Professional Association of Sri Lanka’ representing the Veterinary Profession of Sri Lanka.

Board of Directors


CompositionThe Chairman of the Committee is Mr. D.S.K.Amarasekera, an Attorney-At-Law and Chartered Accountant. The other Member of the Audit Committee is the Independent Non Executive Director, Dr. A. Shakthevale. The Company Secretary functions as the Secretary to the Audit Committee.

MeetingsThe Committee had three meetings during the year. The Executive Director and the Financial Officers attended the Meeting. The Executive Senior Management Team was present at discussions, as required.

Terms of ReferenceThe Audit Committee Charter approved and adopted by the Board clearly sets out the terms of reference governing the Audit Committee ensuring highest compliance with the Corporate Governance rules applicable to listed companies in accordance with the Rules of the CSE and the Code of Best practice on Corporate Governance.

Activities and Responsibilities

Financial ReportingThe Committee reviewed and discussed the financial reporting system adopted by the Company in the preparation of its quarterly and annual Financial Statements with the Management and the External Auditors to ensure reliability of the process and the consistency of the Accounting Policies adopted and its compliance with the Sri Lanka Accounting Standards and the provisions of the Companies Act No. 7 of 2007.

Risks and ControlsThe Committee obtained and reviewed the major business risks and mitigatory action taken or contemplated for each business sector of the Company. In particular, the Committee deliberated on the financial implications to the Company arising from the world market prices for Tea and Rubber, labour issues, wage increases etc., and appraised the Board as appropriate.

Internal AuditThe internal audit function of the company was carried out by the Internal Audit Division. The Committee reviewed the effectiveness of the internal audit plan to ensure that it has been designed to provide reasonable assurance that the financial reporting system adopted by the Company can be relied on in the preparation and presentation of the financial statements. The Committee also reviewed the findings of the Internal Auditors and their recommendations together with the management responses and regularly followed up the progress of the implementation of such recommendations in order to enhance the overall control environment.

External AuditThe Audit Committee met with the External Auditors to discuss the scope and the audit strategy. The Committee also reviewed and discussed the Report of the Auditors and Management Letters issued by them to ensure that no limitations have been placed on their scope of work and conduct of the audit.

The Committee carried out an annual evaluation of the External Auditors to establish their independence and objectivity and also obtained a written declaration from the Auditors in this regard.

The Audit Committee has recommended to the Board of Directors that Messrs Ernst & Young be reappointed as the External Auditors for the financial year ending 31st December 2018.

Compliance with Laws and RegulationsThe Committee reviews the quarterly compliance reports submitted by the compliance officer to ensure that the Company has complied with all statutory requirements.

ConclusionThe Audit Committee is satisfied that the Group’s accounting policies, operational controls and risk management processes provide reasonable assurance that the affairs of the Company is managed in accordance with stated policies and that the Company’s assets are properly accounted for an adequately safeguarded.

Sgd D.S.K. AmarasekaraChairmanAudit Committee20th April 2018

Audit Committee Report


Remuneration Committee Report

The Remuneration Committee BP PLC which consists of the two Independent Non-Executive Directors namely Dr. A. Shakthevale and Mr. D.S.K.Amarasekera as Chairman is responsible for determining the remuneration policy relating to the Key Management Personnel of BP PLC.

It is the firm belief of this committee that it should formulate policies to attract, motivate and retain Key Management Personnel. The Chairman/Managing Director assists this Committee in its deliberations.

Sgd. D.S.K. AmarasekeraChairmanRemuneration Committee20th April 2018

Related Party Transactions Review Committee Report

As per the latest directive issued by the Securities Exchange Commission of Sri Lanka, which has been incorporated into the Listing Rules of the Colombo Stock Exchange, the Related Party Transactions Review Committee was established by the Board in March 2016.

Composition The Committee comprises of the following three members and two of them including the Chairman are Independent Non-Executive Directors.

Mr. D S K Amarasekera - Independent Non-Executive Director/Chairman Dr. A Shakthevale - Independent Non-Executive Director Mr. A L Gooneratne - Non-Executive Director

Profiles of the members are given on pages 16 and 17.

Purpose of the CommitteeThe purpose of the Committee as set out in Appendix 9A of the CSE Listing Rules is to review all Related Party Transactions except for transactions set out in Rule 9.5, either prior to the transaction being entered into or, if the transaction is expressed to be conditional on such review, prior to completion of the transaction.

Meetings The Committee formulated in March 2016 met three (3) times during the year under review.

Policies and Procedures The Company has in place a Related Party Transaction (RPT) Policy whereby the categories of persons who shall be considered as “related parties” has been identified. In accordance with the RPT Policy, self-declarations are obtained from each Director and Key Management Personnel of the Company for the purpose of identifying parties related to them.

As per the existing practice, a detailed report on the related party transactions is submitted to the Board of Directors periodically and such transactions are also disclosed to the shareholders through the Company’s financial statements. The RPT Committee reinforces its functions by revisiting the TOR of the Committee and RPT Policy and re-aligning the internal procedures and policies with the requirements thereof.

DisclosuresDuring the year 2017, there were no non- recurrent related party transactions that exceeded the respective thresholds mentioned in the Listing Rules of the Colombo Stock Exchange. (Refer Note 32.2.1)

Recurrent Related Party Transactions are disclosed in Note No. 32.2.2.

Details of other related party transactions entered into by the Company during the above period is disclosed in Notes 17, 18, 19, 21, 27 and 32 to the financial statements.

The Board of Directors affirms that the Related Party Transactions are in compliance with the Related Party Transactions Rules stipulated by the Colombo Stock Exchange.

Sgd D S K Amarasekara Chairman Related Party Transactions Review committee 20th April 2018


Corporate Governance Statement

Corporate Governance is the system by which companies are managed and controlled. Balangoda Plantations PLC is committed to comply with the code of Best Practices of Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka (ICASL) & the Securities Exchange Commission of Sri Lanka (SEC) and the Listing Rules of the Colombo Stock Exchange. A comprehensive view of the Governance System in the Company is given below.

The Board of Directors and its FunctionsThe Company is governed by its Board of Directors who direct, lead and supervise the business and affairs of the Company on behalf of its shareholders. The Board consists of 02 Executive Directors including Chairman/Managing Director & Executive Director 03 Non-Executive Directors and 02 Non-Executive Independent Directors. The composition of the Company’s Board has been structured in keeping with principles of good governance and long term strategy and the names of the members of the Board of Directors and their brief resumes are given on pages 16 and 17.

Although the two Independent Non-Executive Directors do not qualify under Rule 7.10.4 (g) of the Colombo Securities Exchange Listing Rules, the Board of Directors, taking account of all the circumstances, has determined that the two Directors are nevertheless independent as per the Rule 7.10.3 (b).

The Board meets as and when required to take all major decisions. Prior to each meeting the Directors are provided with all relevant management information and Board papers are submitted in advance on new investments, capital projects, company performance and other issues which require specific Board approval. The main functions of the Board :

• Conducting the business and facilitating executive responsibility for management of the Company’s affairs. • Formulate short and long term strategies and monitor implementation. • Identify the principle risks of the business and ensure adequate risk management policies in place. • Institute effective internal control systems to safeguard the assets of the Company • Ensure compliance with rules and regulations. • Approve the financial statements of the Company

Executive Committee The Executive Committee, which consists of the Chairman/Managing Director and the Executive Director is delegated with the responsibility of monitoring the progress and implementing the policies of the Company. The Executive Director reports monthly on the progress of every estate and that of the Company to the Executive Committee.

Audit Committee The Audit Committee consists of two Independent Non-Executive Directors and assists the Board by overseeing the entity’s compliance with financial reporting requirements, Company’s internal controls, risk management and assessment of the independence and performance of the external auditors. The Company has an Internal Audit Division, which submits its reports on a regular basis to the Audit Committee. The guidelines for the Internal Audit Policy ensure that the assets of the Company are protected against any unauthorized use or misappropriation, proper records are maintained and reliable information is received. Audit Committee Report on page No. 18 describes the activities carried out during the financial year.

Remuneration Committee The Remuneration Committee which consists of two Independent Non-executive Directors makes recommendations to the Board on the Company’s framework of remunerating Executive Directors. The Remuneration Committee Report appears on Page 19.

Related Party Transactions Review Committee The composition of the Related Party Transactions Review Committee includes two Independent Non-Executive Directors and one Non-Executive Director. All related party transactions except for transactions set out in Rule 9.5 of the CSE Listing Rules are reviewed by the Related Party Transactions Review Committee. The Related Party Transactions Review Committee Report appears on page 19.


Corporate Governance Statement

Levels of compliance with the CSE Listing Rules on Corporate Governance are as follows.

Rule No. Applicable Requirement Compliance Status Details

7.10.1 (a)Non-Executive Directors

• At least one-third of the total number of Directors should be Non-Executive Directors

CompliedFive out of seven Directors are Non-Executive Directors

7.10.2.(a)

7.10.2. (b)

Independent Directors

• Two or one third of Non-Executive Directors whichever is higher should be independent

• Each Non-Executive Director should submit a declaration of independence/non-independence in the prescribed format

Complied

Complied

Two out of five Non-executive Directors are independent.Non-executive Directors have submitted these declarations.

7.10.3 (a)

7.10.3 (b)

7.10.3 (c)

7.10.3 (d)

Disclosure Relating to Directors

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

• The basis for the Board to determine a Director is independent, if criteria specified for independence is not met.

• A brief resume of each Director should be included in the Annual Report and should include the Director’s areas of expertise

• Forthwith provide a brief resume of new Directors appointed to the Board with details specified in 7.10.3 (a), (b) and (c) to the CSE.

Complied

Complied

Complied

Complied

Refer Pages 16 and 17.

Refer Page 20.

Refer Pages 16 and 17.

Not applicable

7.10.57.10.5 (a)

7.10.5 (b)

7.10.5 (c)

Remuneration Committee

• A listed Company shall have a Remuneration Committee

• Composition of Remuneration Committee Shall comprise Non-Executive Directors a majority of whom will be

independent

• Functions of Remuneration Committee

The Remuneration Committee shall recommend the remuneration of Chief Executive Officer and Executive Directors

• Disclosure in the Annual Report relating to Remuneration Committee The Annual Report should set out :

(a) Names of Directors comprising the Remuneration Committee(b) Statement of Remuneration Policy

Complied

Complied

Complied

CompliedComplied

Refer Page 19

7.10.67.10.6 (a)

7.10.6 (b)7.10.6 (c )

Audit Committee

• The Company shall have an Audit Committee

• Composition of Audit Committee

• Shall comprise of Non-Executive Directors, a majority of who will be independent.

• Non-Executive Director shall be appointed as the Chairman of the Committee

• Chief Executive Officer and Chief Financial Officer should attend Audit Committee Meetings

• The Chairman of the Audit Committee of one member should be a member of a professional Accounting Body

• Audit Committee Functions

• Disclosure in the Annual Report relating to Audit Committee

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Refer Page 18.


Statement of Directors' Responsibilities

The Directors in consultation with the External Auditors select the appropriate accounting policies and apply them consistently, subject to any material departures being disclosed and explained. Further, the Directors are responsible for ensuring that the Company keeps sufficient accounting records to present, with reasonable accuracy, the financial position of the Company, in a manner that is easily understood by the shareholders. They also ensure that the Financial Statements comply with the Company’s Act and the Sri Lanka Accounting Standards (SLFRS/LKAS). In addition, they are also responsible for taking reasonable steps to safeguard the assets of the Company by the establishment of appropriate systems of internal controls with a view to the prevention and detection of fraud and other irregularities.

The Directors prepare the Financial Statements and provide the External Auditors with every assistance to undertake whatever inspections; they consider being appropriate for the purpose of enabling them to give their Audit Report in accordance with the Sri Lanka Auditing Standards. The Report of the External Auditors sets out their responsibility in respect of the Financial Statements.

The Directors confirm that, to the best of their knowledge and belief, they have discharged their responsibilities as set out in this statement.

By order of the Board Sgd. Pradeep A. Jayatunga Secretary 20th April 2018


Risk Management

Risk is defined as the possibility that an event will occur, which will impact an organization's achievement of objectives. Having a risk management plan is an important part of maintaining a successful, stable and reputed organization. While a variety of

different strategies can mitigate or eliminate risk, the process for identifying and managing the risk is fairly standard and consists of five basic steps as follows:

HIGH

Our Company which is cultivating and manufacturing Tea and Rubber has been developing a range of informal and formal approaches to manage risks before they become a threat to companywide performance and processes. In our endeavour to mitigate the negative effect of risk or evade risk altogether a structural risk management approach is in place.

The Board of Directors sets goals and objectives annually after reviewing the overall risk profile and the Senior Management Team is responsible to implement the task with greater emphasis on managing risks with prudence. Our approach on risk management relies on individual responsibility and major risks are conveyed to the Board by comprehensive reporting and quarterly reports with key economic and performance indicators presented to the Board and the Audit Committee to alert on possible risks. In addition internal & external auditors assist the Company to evaluate risks and also to determine whether adequate controls are in place to effectively mitigate risks.

The key risks Balangoda Plantations PLC is exposed to, their effects and mitigating strategies adopted are illustrated below.

Business Risk Risk Assessment Mitigating Strategies Threat Probability

Our Principal line of business is cultivation and manufacture of Tea and Rubber. The Company is susceptible to all risks associated with agriculture such as erratic weather, commodity cycle, fluctuations in global supply & demand, inability to recover the actual costs of sales in a regulated system at the auction, political and trade union influence on worker productivity

Close monitoring; Undertake sustainable agricultural practices; adopting prudent policies in infilling and replanting; crop diversification; value addition; focus on producing quality tea.

Environmental Risk An agricultural based business face enormous challenges due to the variations in atmospheric temperatures, duration of sunshine hours, wind pattern etc which have a direct impact on production and liquidity of the Company often resulting in loss of crop, quality of the harvest and in turn affecting the market share, earnings and profitability.

Improve skill levels of workers, staff and executives to meet the challenging demand of agriculture; Adoption of sustainable agricultural practices.; Constant examination and review of soil nutrient contents; Undertake effective soil conservation measures; Reservation of forests and watersheds

Operational Risk

Inadequate or failed internal processes and systems, human error, frauds, accidents, natural disasters etc can interfere with achieving business objectives.

Implement a sound internal control system; Preparation and execution of check-lists, monthly & annual budgets reviewing actual results; A monthly re-evaluation process where performance of each plantation is reviewed by Senior Executives of the Head Office; Appropriate advices conveyed to enforce a high degree of situational awareness among the Planting Executives; Compliance audits and standardization procedures; Obtain comprehensive insurance policies to cover operational risks.

Human Resource Risk Low productivity, reduction in resident manpower, disruption in work due to highly unionized large working community expose the Company to difficulties in achieving the targeted objectives.

Increase productivity; Train and encourage Plantation Executives to acquire communication skills in resolving labour disputes; Improve employee motivation, commitment, welfare, recognition and appreciation; Abide by the Collective Agreement entered into with the Trade Unions in the Company’s capacity

Product Quality Risk

Inability to maintain consistency of the quality production will result in lessening demand thereby eroding the market share and fall in prices.

Conform to well-established ethical and safety standards in providing a consumable product in terms of purity and food safety; Upgrade manufacturing process and factories to cater to the fluctuating market demand; Monitor quality assurance measures

HIGH

MODERATE

MODERATE

MODERATE


Risk Management

MODERATE

MODERATE

MODERATE

MODERATE

MODERATE

HIGH

LOW

Risk Assessment Mitigating Strategies Threat Probability

Political Risk

The impact of the political intervention, major industrial relations issues, regulatory changes, ad hoc acquisitions of land etc are constraints faced by the Industry.

Negotiating Collective Agreements with major Plantation Trade Unions; Maintain a closer dialogue with the Trade Union Leaders; Implement human development policies

Interest Rate Risk

Fiscal and monitory policy changes have a direct impact on liquidity and production costs with raising the working capital.

Maintain cash flow and budgetary control systems; Diversification; Capital development; Upgrading plant and machinery; Maintenance of biological assets in optimum condition to enhance productivity and turnover

Technical & IT Risk

Lack of accurate and timely information due to ineffective IT systems can cause disruption in taking management decisions and even lead to financial losses.

Strengthen software development with internal controls including IT security and confidentiality. Implement a sound backup system in case of system failure; Use Licensed Software

Investment Risk

Adequate return on investment heavily depends on global economic trends. The advent of the competitors with high productivity and lower production costs has a considerable impact on future profitability and sustainability. The long gestation period of replanting makes high risks for the Company since the capital invested for same is unaffordable.

Undertake proper evaluation and feasibility process; Continue replanting and infilling with a prudent policy and environmentally viable clones; Work closely with the TRI in developing an economic model to make replanting a viable investment.

Inventory Liquidity is a major concern as the industry is cyclical with long gestation periods for returns.

Produce stocks are monitored closely for speedy disposal; Input stock levels are controlled to avoid obsolescence and theft; Purchase high cost input stocks such as fertilizer, firewood and packing materials on a need basis..

Risk of Competition

Competition from other major low cost producers such as India, China, Kenya, Vietnam affects demand and prices

Closely monitor market trends; Examine tea samples regularly to maximize market gains; Take remedial measures to ensure quality marks keep up their market leadership; Rationalize manufacture during lean cropping months; Close executive supervision on harvesting leaf with the required quality; Educate the workforce on the importance of their services.

Risk of Competition

Maintenance the loyalty, trustworthiness among stakeholders, compliance of legal and statutory requirements as a highly respected corporate body is considered a major objective of the Company.

Compliance of statutory legal requirements; Adoption of the code of corporate governance by all employees, senior management and Board of Directors; Undertake sustainability initiatives, health & food safety procedures and protection of environment.


Independent Auditors' Report

INDEPENDENT AUDITORS' REPORTTO THE SHAREHOLDERS OF BALANGODA PLANTATIONS PLC

Report on the Financial StatementsWe have audited the accompanying Financial Statements of Balangoda Plantations PLC ("the Company") which comprise the Statement of Financial Position as at December 31, 2017 and the Statement of profit or loss and Statement of Comprehensive Income, Statement of Changes in Equity and Cash Flow Statement for the year then ended, and a summary of significant Accounting Policies and other explanatory information.

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

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

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

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

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

Report on Other Legal and Regulatory RequirementsAs required by section 163 (2) of the Companies Act No. 07 of 2007, we state the following:

a) The basis of opinion, scope and limitations of the audit are as stated above.b) In our opinion:

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

• the financial statements of the Company comply with the requirements of section 151 of the Companies Act No.07 of 2007.

Sgd. Ernst & Young(Chartered Accountants) 02nd May 2018Colombo

Partners: W R H Fernando FCA FCMA M P D Cooray FCA FCMA R N de Saram ACA FCMA Ms. N A De Silva FCA Ms. Y A De Silva FCA W K B S P Fernando FCA FCMA Ms. K R M Fernando FCA ACMA Ms. L K H L Fonseka FCA A P A Gunasekara FCA FCMA A Herath FCA D K Hulangamuwa FCA FCMA LLB (Lond) H M A Jayesinghe FCA FCMA Ms. A A Ludowyke FCA FCMA Ms. G G S Manatunga FCA Ms. P VK N Sanjeewani FCA N M Sulaiman ACA ACMA B E Wijesuriye FCA FCMA

Principal T P M Ruberu FCMA FCCA

A member firm of Ernst & Young Global Limited

- Annual Report 2017Balangoda Plantations PLC26

Statement of Profit or LossYear ended 31 December 2017

Notes 2017 2016 Rs. Rs.

REVENUE 6 3,056,066,816 2,266,656,524

COST OF SALES (2,932,346,578) (2,497,350,126)

GROSS PROFIT / (LOSS) 123,720,238 (230,693,602)

GAIN/(LOSS) ON FAIR VALUE OF BIOLOGICAL ASSETS 14.4 74,111,541 18,839,244

OTHER INCOME AND GAINS 7 302,984,818 118,697,066

ADMINISTRATIVE EXPENSES (194,865,868) (124,346,503)

MANAGEMENT FEE (2,052,750) (25,207,600)

FINANCE COST 8 (203,122,995) (128,367,044)

PROFIT/ (LOSS) BEFORE TAX 9 100,774,985 (371,078,439)

INCOME TAX EXPENSE 10 (192,436,932) 56,736,769

PROFIT/ (LOSS) FOR THE YEAR (91,661,948) (314,341,671)

BASIC EARNINGS/ (LOSS) PER SHARE 11 (3.88) (13.30)

The Accounting Policies and Notes on pages 32 to 66 form an integral part of the Financial Statements.

- Annual Report 2017Balangoda Plantations PLC 27

NOTES 2017 2016 Rs. Rs.

Profit/ (Loss) for the year (91,661,948) (314,341,671)

Other Comprehensive IncomeOther comprehensive income to be reclassified to profit or lossin subsequent period ( net of tax )Net change in fair value of available-for-sale financial assets 15 (46,826) (123,901)Income tax effect - -

Net other comprehensive income/ (loss) to be reclassified to profit orloss in subsequent periods (46,826) (123,901)

Other comprehensive income not to be reclassified to profit or lossin subsequent period ( net of tax )Actuarial gains/ (losses) on defined benefit plans 22 26,095,521 148,708,063Income tax effect (3,653,373) (23,436,391)

Net other comprehensive income/ (loss) not to be reclassified to profit or loss in subsequent periods 22,442,148 125,271,672 Other comprehensive income/(loss) for the year, net of tax 22,395,322 125,147,771Total Other comprehensive income for the year, net of tax (69,266,626) (189,193,900)


Statement of Comprehensive IncomeYear ended 31 December 2017


NOTES 2017 2016 Rs. Rs.ASSETSNon Current Assets Lease hold Property ,Plant and Equipment 12 226,016,628 242,977,947Property, plant & equipment 13 616,142,580 652,896,713Bearer Biological Assets 14.1 2,489,634,313 2,307,627,081Consumable Biological Assets 14.2 1,805,472,402 1,771,340,320Available for Sale Financial Assets 15 460,486 507,312 5,137,726,408 4,975,349,374Current AssetsProduce on Bearer Bialogical Assets 14.3 4,091,152 5,245,740Inventories 16 277,725,996 340,602,406Trade and Other Receivables 17 94,021,651 98,179,836Amounts due from Related Companies 18 10,808,477 5,027,372ACT Recoverable - 29,468,573VAT Receivable 13,006,714 11,975,814ESC Receivable 14,898,768 7,982,195Short Term Investments 19.1 326,634 3,107,029Cash and cash Equivalents 19.2 14,509,469 19,813,861 429,388,860 521,402,825TOTAL ASSETS 5,567,115,270 5,496,752,200EQUITY AND LIABILITIESEquityStated Capital 20 350,000,010 350,000,010Timber Reserves 1,591,918,272 1,569,769,826Available for Sale Reserves 310,486 357,312Retained Earnings 88,003,119 179,371,364Total Equity 2,030,231,887 2,099,498,512

Non Current Liabilities & Deferred IncomeInterest Bearing Loans & Borrowings 21 1,320,109,236 954,660,048Retirement Benefit Obligations 22 683,471,358 677,583,208Deferred Tax Liability 23 192,978,516 4,921,470Deferred Income 24 169,783,420 180,363,631Liability to make Lease Payment after one year 25 91,551,000 93,485,000 2,457,893,531 1,911,013,357Current LiabilitiesInterest Bearing Loans & Borrowings 21 145,147,740 129,409,893Liability to make Lease Payment within one year 25 1,934,000 1,859,000Trade and Other Payables 26 422,593,527 712,556,185Amounts due to Related Companies 27 49,279,792 133,601,944Income Tax Liabilities 15,829,384 15,328,092Dividends Payable 28 6,246,737 6,372,554Bank Overdraft 19.3 437,958,672 487,112,662 1,078,989,852 1,486,240,330TOTAL LIABILITIES 3,536,883,383 3,397,253,688TOTAL EQUITY AND LIABILITIES 5,567,115,270 5,496,752,200

These Financial Statements are in compliance with the requirements of the Companies Act No. 07 of 2007.

Sgd. M I A AnsarChief AccountantThe Board of Directors is responsible for these Financial Statements.Approved and signed for and on behalf of the Board of Directors of Balangoda Plantations PLC.

Sgd. D H S Jayawardena Sgd. Anusha S PereraChairman/Managing Director Executive DirectorThe Accounting Policies and Notes on pages 32 to 66 form an integral part of the Financial Statements.2nd May 2018Colombo.

Statement of Financial PositionAs at 31 December 2017


Stated Capital Timber Available for Retained Total Reserve Sale Reserves Earnings Equity Rs. Rs. Rs. Rs. Rs. As at 01 January 2016 350,000,010 1,563,364,388 481,213 374,846,801 2,288,692,412

Profit/ (Loss) for the year - - - (314,341,671) (314,341,671)

Transferred to Timber Reserve - 15,560,362 - (15,560,362) -

Transferred to Retained Earnings (9,154,924) 9,154,924 -

Total other Comprehensive income for the year - - (123,901) 125,271,672 125,147,771

net of tax

Dividend - - - -

Balance as at 31 December 2016 350,000,010 1,569,769,826 357,312 179,371,364 2,099,498,512

Profit/ (Loss) for the year - - - (91,661,948) (91,661,948)

Transferred to Timber Reserve - 75,266,129 - (75,266,129) -

Transferred to Retained Earnings - (53,117,683) - 53,117,683 -

Total other Comprehensive income for the year - - (46,826) 22,442,148 22,395,322

net of tax

Dividends - - - - -

Balance as at 31 December 2017 350,000,010 1,591,918,272 310,486 88,003,119 2,030,231,887


Statement of Changes in EquityYear ended 31 December 2017


Notes 2017 2016 Rs. Rs.

Net Profit/ (Loss) before Taxation 100,774,985 (371,078,439)

ADJUSTMENTS FOR

Depreciation/Amortisation 108,369,920 102,435,078Impairment of immature plantation (Rubber) 20,719,541 -Loss on timber trees 53,117,683 -Profit on disposal of Property Plant & Equipment 7 5,903,000 -Profit on Sale of Timber Trees 7 - (1,019,824)Interest Income 7 (157,110) (466,995)Retirement Benefit Obligation -Provision 22 117,435,804 117,467,059Amortisation of Grants 24 (10,580,211) (11,057,174)Provision for Obsolete Stocks 16 (126,680) (176,670)Reversal/(Provision) for doubtful debts 17 4,300 (393,470)Interest Expenses 8 203,122,995 128,367,044(Gains) / Losses on Biological Assets 14.4 (74,111,541) (18,839,244)Operating Profit before Working Capital Changes 524,472,687 (54,762,635)

(Increase)/Decrease in Inventories 16 63,003,090 (75,122,081)(Increase)/Decrease in Trade and Other Receivables 17 4,153,885 42,288,859Increase/(Decrease) in Trade and Other Payables 26 (289,962,658) 217,813,472(Increase)/Decrease in amounts due from Related Companies 18 (5,781,105) 4,293,551Increase/(Decrease) in amounts due to Related Companies 27 (84,322,152) 22,393,722Cash Generated from Operations 211,563,747 156,904,888

Payment of Economic Service Charges (14,448,538) (4,483,988)Retirement Benefit Obligations - Payments (85,452,133) (49,079,138)Interest Paid (149,610,276) (109,058,421)Net Cash from Operating Activities (37,947,650) (5,716,659)

CASH FLOWS FROM INVESTING ACTIVITIES

Interest Received 151,190 3,035,353Purchase of Property, Plant & Equipment 13 (7,189,272) (13,966,266)Investment in Immature Plantations -Note A (262,283,604) (262,631,949)Proceeds from Disposal of Property, Plant & Equipment 6,011,000 10,174,747 Net Cash used in Investing Activities (263,310,685) (263,388,115)

CASH FLOWS FROM FINANCING ACTIVITIES

Receipts of loans 569,282,255 395,402,500Repayment of Loan (188,095,214) (154,841,470)Payment to Lessor on Lease rights (38,733,685) (28,622,633)Dividend payment to the shareholders (125,817) -

Net Cash from Financing Activities 342,327,539 211,938,397

Net Increase / (Decrease) in Cash & Cash Equivalents 41,069,204 (57,166,377)

C. Cash & Cash Equivalents at the beginning of the year (464,191,772) (407,025,395)

D. Cash & Cash Equivalents at the end of the year (423,122,568) (464,191,772)


Statement of Cash FlowsYear ended 31 December 2017


Tea Rubber Others TotalNOTE A: Investment in Immature Plantations Rs. Rs. Rs. Rs.

Investment in Immature Plantations -2017 4,484,818 225,603,659 32,195,127 262,283,604

Investment in Immature Plantations -2016 8,297,103 236,881,052 17,453,794 262,631,949 ` 2017 2016NOTE C Rs. Rs.Cash & Cash Equivalents at the beginning of the year Cash & Bank Balances 19,813,861 24,328,912 Short term Investments 3,107,029 62,911,618 Bank Overdrafts (487,112,662) (494,265,925) (464,191,772) (407,025,395)

NOTE DCash & Cash Equivalents at the end of the year Cash & Bank Balances 14,509,469 19,813,861 Short term Investments 326,634 3,107,029 Bank Overdrafts (437,958,672) (487,112,662) (423,122,568) (464,191,772)


Statement of Cash FlowsYear ended 31 December 2017


Notes to the Financial StatementsYear ended 31 December 2017

1 REPORTING ENTITY Balangoda Plantations PLC was incorporated and domiciled in Sri Lanka, under the Companies Act No. 17 of 1982 (The

Company was re-registered under the Companies Act No. 07 of 2007) in terms of the provisions of the Conversion of Public Corporation and Government-Owned Business Undertakings into Public Companies under Public Companies Act No. 23 of 1987. The registered office of the Company is located at No 110 Norris Canal Road, Colombo 10, and Plantations are situated in the planting districts of Rathnapura, Balangoda & Badulla.

The Financial Statements of the company comprise with the profit or loss Statement, Statement of Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows together with Accounting Policies and Notes to the Financial Statements.

1.1 Principal activities and the nature of the operations During the year, the principal activities of the company were cultivation and manufacture and sale of Tea and Rubber.

1.2 Parent enterprise and ultimate parent enterprise The Company’s parent undertaking and controlling party is Melstacorp PLC which is incorporated in Sri lanka as a Public

Limited Company.

1.3 Date of Authorization for issue. The financial statements of Balangoda Plantations PLC for the year ended 31 December 2017 were authorized for issue

in accordance with a resolution of the board of directors on 2 May 2018.

1.4 Responsibility for Financial Statements. The responsibility of the Directors in relation to the Financial Statements is set out in the Statement of Directors’

Responsibility Report in the Annual Report.

2 BASIS OF PREPERATION

2.1 Statement of Compliance The Financial Statements of Balangoda Plantations PLC have been prepared in accordance with Sri Lanka Accounting and

Auditing Standards Act No. 15 of 1995,which requires compliance with the Sri Lanka Accounting Standards (SLFRS/ LKAS) promulgated by the Institute of Chartered Accountants of Sri Lanka (CASL) and with the requirements of the Companies Act No. 07 of 2007.

2.2 Basis of Measurement These Financial Statements have been prepared in accordance with the historical cost convention other than the

following material items in the Financial Statements.

• Managed Consumable biological assets are measured at fair value• Financial instruments - Available-for-sale financial assets are measured at fair value.

Where appropriate, the specific policies are explained in the succeeding Notes

No adjustments have been made for inflationary factors in the Financial Statements.

2.3 Functional and Presentation Currency The Financial Statements are presented in Sri Lankan Rupees (Rs.) which is the Company’s functional and presentation

currency.

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below are consistent with those used in the previous year.

3.1 Comparative information The presentation and classification of the financial statements of the current year are comparable with those of the

previous year.

3.2 Materiality and aggregation Each material class of similar items is presented separately in the Financial Statements. Items of a dissimilar nature or

function are presented separately unless they are immaterial.

3.3 Going Concern The financial statements have been prepared on the assumption that the company is a going concern. The Directors

have made an assessment of the Company’s ability to continue as a going concern in the foreseeable future, and they do not foresee a need for liquidation or cessation of trading, to justify adopting the going concern basis in preparing these financial statements. Further, the Directors of the Company noted that the company has made a gross profit of Rs. 123 Mn in the current year compared to the gross loss of Rs.203 Mn reported in the last year and confident that following will ensure the going concern ability of the company.



The administration of the Company which is now being co-ordinated by the parent Company ,Mesltacorp PLC is backed by its financial strength and that of the group to ensure the going concern ability of the Company.

The parent Company has also funded the company for its financial needs. Details are as follows.

2016 Rs.300,000,000 2017 Rs.382,355,905 2018 Rs.100,491,293 (Up to 31st of March)

3.4 Current versus non-current classification The Company presents assets and liabilities in the statement of financial position based on current/non-current

classification. An asset is current when it is:

Expected to be realised or intended to be sold or consumed in the normal operating cycle Held primarily for the purpose of trading Expected to be realised within twelve months after the reporting period OR Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months

after the reporting period

All other assets are classified as non-current. A liability is current when:

It is expected to be settled in the normal operating cycle It is held primarily for the purpose of trading It is due to be settled within twelve months after the reporting period OR There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting

period.

The company classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

3.5 Fair Value Measurement The company measures financial instruments and non-financial assets at fair value at each statement of financial position

date. Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed, are summarised in the following notes:

• Consumable biological assets - Note 14.2• Produce on bearer biological asset - Note 14.3• Financial Instrument (including those carried at amortized cost)

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:

In the principal market for the asset or liability Or 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 Company.

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.

The Company 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 categorized 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 assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

External valuers are involved for valuation of significant assets, such as managed biological assets. Involvement of external valuers is decided upon annually by the Management Committee after discussion with and approval by the Company's Audit Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Management Committee decides, after discussions with the Company's external valuers, which valuation techniques and inputs to use for each case

For the purpose of fair value disclosures, the Company 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.

3.6 Property, Plant & Equipment The Company applies the requirements of LKAS 16 on ‘Property Plant and Equipment’ in accounting for its owned assets

which are held for and use in the provision of the services, for rental to other or for administration purpose and are expected to be used for more than one year.

3.6.1 Basis of Recognition. Property Plant and Equipment is recognised if it is probable that future economic benefit associated with the assets will

flow to the Company and cost of the asset can be reliably measured.

3.6.2 Measurement Items of Property, Plant & Equipment are measured at cost (or at fair value in the case of consumable biological assets

and land & building), less accumulated depreciation and accumulated impairment losses, if any.

3.6.3 Owned Assets The cost of Property, Plant & Equipment includes expenditures that are directly attributable to the acquisition of the

asset. Such costs includes the cost of replacing part of the property, plant and equipment and borrowing costs for long terms construction projects if the recognition criteria are met. The cost of self-constructed assets includes the cost of materials and direct labour, any other cost directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.

Purchased software that is integral to the functionality of the related equipment is capitalized as a part of that equipment.

When significant parts of property, plant and equipment are required to be replaced at intervals, the entity recognises such parts as individual assets (major components) with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the Profit or Loss Statement as incurred. The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.

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

3.6.4 Leased Assets The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at

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

Company as a lessee

A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease.

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



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

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

3.6.5 Derecognition An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or

when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss statement when the asset is derecognized and gains are not classified as revenue.

3.6.6 Land Development Cost Permanent land development costs are those costs incurred in making major infrastructure development and building

new access roads on leasehold lands.

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

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

3.6.7 Biological Assets Biological assets are classified in to mature biological assets and immature biological assets. Mature biological assets are

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

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

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

3.6.7.1 Bearer Biological Assets The bearer biological assets are measured at cost less accumulated depreciation and accumulated impairment losses, if

any, in terms of LKAS 16 – Property Plant & Equipment.

The cost of land preparation, rehabilitation, new planting, replanting, crop diversification, inter planting and fertilising, etc., incurred between the time of planting and harvesting (when the planted area attains maturity), are classified as immature plantations. These immature plantations are shown at direct costs plus attributable overheads. The expenditure incurred on bearer biological assets (Tea, Rubber) which comes into bearing during the year, is transferred to mature plantations.

3.6.7.2 Infilling Cost on Bearer Biological Assets The land development costs incurred in the form of infilling have been capitalised to the relevant mature field, if it

increases the expected future benefits from that field, beyond its pre-infilling performance assessment. Infilling costs so capitalised are depreciated over the newly assessed remaining useful economic life of the relevant mature plantation, or the unexpired lease period, whichever is lower.

Infilling costs that are not capitalised have been charged to the Income Statement in the year in which they are incurred.

3.6.7.3 Produce on Bearer Biological Assets In accordance with LKAS 41, company recognise agricultural produce growing on bearer plants at fair value less cost to

sell. Change in the fair value of such agricultural produce recognized in profit or loss at the end of each reporting period.

For this purpose, quantities of harvestable agricultural produce ascertained based on harvesting cycle of each crop category by limiting to one harvesting cycle based on last day of the harvest in the immediately preceding cycle. Further, 50% of the crop in that harvesting cycle considered for the valuation.

For the valuation of the harvestable agricultural produce, the company uses the following price formulas.

• Tea - Bought Leaf rate (current month) less cost of harvesting & transport• Rubber - latex Price (95% of current RSS1 Price) less cost of tapping & transport



3.6.7.4 Borrowing Cost Borrowing costs that are directly attributable to acquisition, construction or production of a qualifying asset, which takes

a substantial period of time to get ready for its intended use or sale are capitalised as a part of the asset.

Borrowing costs that are not capitalised are recognised as expenses in the period in which they are incurred and charged to the Profit or Loss Statement.

The amounts of the borrowing costs which are eligible for capitalisation are determined in accordance with the in LKAS 23 - Borrowing Costs’.

Borrowing costs incurred in respect of specific loans that are utilised for field development activities have been capitalised as a part of the cost of the relevant immature plantation. The capitalisation will cease when the crops are ready for commercial harvest.

The amount so capitalised and the capitalisation rates are disclosed in Notes to the Financial Statements.

3.6.7.5 Consumable Biological Asset Consumable biological assets includes managed timber trees those that are to be harvested as agricultural produce or

sold as biological assets. Expenditure incurred on consumable biological assets (managed timber trees) is measured on initial recognition and at the end of each reporting period at its fair value less cost to sell in terms of LKAS 41. The cost is treated as approximation to fair value of young plants as the impact on biological transformation of such plants to price during this period is immaterial. The fair value of timber trees are measured using DCF method taking in to consideration the current market prices of timber, applied to expected timber content of a tree at the maturity by an independent professional valuer. All other assumptions and sensitivity analysis are given in Note 14.2.

The gain or loss arising on initial recognition of consumable biological assets at fair value less cost to sell and from a

change in fair value less cost to sell of consumable biological assets are included in profit or loss for the period in which it arises.

Permanent impairments to Biological Asset are charged to the Profit or Loss Statement in full and reduced to the net carrying amounts of such asset in the year of occurrence after ascertaining the loss.

Consumable biological assets initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss statement when the asset is derecognized.

3.6.7.6 Nursery Plants Nursery cost includes the cost of direct materials, direct labour and an appropriate proportion of directly attributable

overheads, less provision for overgrown plants.

3.6.8 Depreciation and Amortisation(a) Depreciation Depreciation is recognised in Profit and Loss Statement on a straight-line basis over the estimated useful economic

lives of each part of an item of Property, Plant & Equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Assets held under finance leases are depreciated over the shorter of the lease term and the useful lives of equivalent owned assets unless it is reasonably certain that the Company will have ownership by the end of the lease term. Lease period of land acquired from JEDB/ SLSPC will be expired in year 2045. The estimated useful lives and depreciation rates are as follows:

No. of Years Rate (%)

Buildings & Roads 40 2.50

Plant & Machinery 20/25 4.00/5.00

Motor Vehicles 15/20 6.67/5.00

Equipment 8/4 12.50/25

Furniture & Fittings 10 10.00

Water Sanitations 20 5.00

Mature Plantations (Replanting and New Planting)


Mature Plantations

Tea 33 1/3 3.00

Rubber 20 5.00



Depreciation of an asset begins when it is available for use and ceases at the earlier of the date on which the asset is classified as held for sale or is derecognised. Depreciation methods, useful lives and residual values are reassessed at the reporting date and adjusted prospectively, if appropriate. Mature plantations are depreciated over their useful lives or unexpired lease period, whichever is less.

No depreciation is provided for immature plantations.

(b) Amortisation The leasehold rights of assets taken over from SLSPC are amortised in equal amounts over the shorter of the

remaining lease periods and the useful lives as follows:


Bare land 53 1.89

Improvements to land 30 3.33

Mature Plantations

(Tea & Rubber) 30 3.33

Buildings 25 4.00

Machinery 15 6.67

3.7 Financial Instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity

instrument of another entity.

3.7.1 Financial assets

3.7.1.1 Initial Recognition and Measurement Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and

receivables, held-to-maturity investments, AFS financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.

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

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

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

(a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading and financial assets

designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term.

Financial assets at fair value through profit and loss are carried in the statement of financial position at fair value with changes in fair value recognised in finance income or finance costs in the Profit and Loss statement.

The Company has not designated any financial assets as at fair value through profit or loss.

(b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted

in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method (EIR), less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in other income and grants in the Profit or Loss Statement. The losses arising from impairment are recognised in the Profit or Loss Statement in finance costs for loans and in cost of sales or other operating expenses for receivables.

Loans and receivables comprise of trade receivables, amounts due from related parties, deposits, advances and other receivables.

(c) Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-

maturity when the Company has the positive intention and ability to hold them to maturity. After initial measurement, held-to-maturity investments are measured at amortised cost using the effective interest method, less impairment.



Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Profit or Loss Statement. The losses arising from impairment are recognised in the Profit or Loss Statement in finance costs

(d) Available for sale financial Assets AFS financial assets include equity investments and debt securities. Equity investments classified as AFS are those

that are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those that are intended to be held for an indefinite period of time and that may be sold in response to needs for liquidity or in response to changes in the market conditions.

After initial measurement, AFS financial assets are subsequently measured at fair value with unrealised gains or losses recognised in OCI and credited in the AFS reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the AFS reserve to the statement of profit or loss in finance costs. Interest earned whilst holding AFS financial assets is reported as interest income using the EIR method.

The Company evaluates whether the ability and intention to sell its AFS financial assets in the near term is still appropriate. When, in rare circumstances, the Company is unable to trade these financial assets due to inactive markets, the Company may elect to reclassify these financial assets if the management has the ability and intention to hold the assets for foreseeable future or until maturity.

For a financial asset reclassified from the AFS category, the fair value carrying amount at the date of reclassification becomes its new amortised cost and any previous gain or loss on the asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortised cost and the maturity amount is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the statement of profit or loss.

3.7.1.3 Derecognition A financial asset (or, where applicable, a part of a financial asset or part of a company of similar financial assets) is

derecognised when:

• The rights to receive cash flows from the asset have expired Or• The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the

received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Company’s continuing involvement in the asset. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay.

3.7.1.4 Impairment of financial assets The Company assesses at each reporting date whether there is any objective evidence that a financial asset or a group of

financial assets is impaired and if such has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows.

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

3.7.1.5 Financial assets carried at amortised cost For financial assets carried at amortised cost, the Company first assesses whether impairment exists individually for

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



The amount of any impairment loss identified is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in the statement of profit or loss. Interest income (recorded as finance income in the statement of profit or loss) continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Company. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to finance costs in the statement of profit or loss.

3.7.1.6 Available for sale financial Assets For AFS financial assets, the Company assesses at each reporting date whether there is objective evidence that an

investment or a company of investments is impaired.

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

The determination of what is ‘significant’ or ‘prolonged’ requires judgement. In making this judgement, the company evaluates, among other factors, the duration or extent to which the fair value of an investment is less than its cost.

In the case of debt instruments classified as AFS, the impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the statement of profit or loss.

Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the statement of profit or loss, the impairment loss is reversed through the statement of profit or loss.

3.7.2 Financial liabilities

3.7.2.1 Initial recognition and measurement Financial liabilities are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as

derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

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

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

(a) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities

designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by LKAS 39. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognised in the statement of profit or loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in LKAS 39 are satisfied. The Company has not designated any financial liability as at fair value through profit or loss.



(b) Loans and borrowings After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using

the effective interest rate method. Gains and losses are recognised in the Profit or Loss Statement when the liabilities are derecognised as well as through the effective interest rate method (EIR) amortization process.

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

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

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

3.7.4 Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if

there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

Financial risk management objectives and policies have been disclosed under Note 34.3.7.5 Inventories Agricultural Produce harvested from Biological Assets Agricultural produce harvested from Biological assets are measured at their fair value less cost to sell at the point of

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

Finish goods manufactured from agricultural produce of biological assets These are valued at the lower of cost and estimated net realisable value, after making due allowance for obsolete and

slow moving items. Net realisable value is the estimated selling price at which stocks can be sold in the ordinary course of business after allowing for cost of realisation and/or cost of conversion from their existing state to saleable condition.

Input Material, Spares and Consumables At actual cost on weighted average basis.

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

indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations, including impairment on inventories, are recognised in the statement of profit or loss in expense categories consistent with the function of the impaired asset, except for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment is recognised in OCI up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.



3.8 Trade and Other Receivables Trade and other receivables are stated at their estimated realisable amounts inclusive of provisions for bad and doubtful debts.

3.8.1 Provisions Provisions are recognised when the Company 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. When the Company expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Profit or Loss Statement net of any reimbursement.

3.9 Employees Benefits(a) Defined Contribution Plans - Provident Funds and Trust Fund A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a

separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to Provident and Trust Funds covering all employees are recognised as an expense in profit and loss in the periods during which services are rendered by employees.

The Company contributes 12% on consolidated salary of the employees to Ceylon Planters’ Provident Society (CPPS)/Estate Staff Provident Society (ESPS)/ Employees’ Provident Fund (EPF).

All the employees of the Company are members of the Employees’ Trust Fund, to which the Company contributes 3% on the consolidated salary of such employees.

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

recognised in the Financial Statements in respect of defined benefit plan is the present value of the defined benefit obligation at the Reporting date. The defined benefit obligation is calculated annually using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash flows using the interest rates that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in retained earnings through other comprehensive income and not reclassified to profit or loss. Past service costs are recognised immediately in the profit or Loss statement.

The provision has been made for retirement gratuities from the first year of service for all employees, in conformity with LKAS 19, “Employee Benefits”. However, under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of 5 years of continued service.

The Liability is not externally funded.

The key assumptions used in determining the retirement benefit obligations are given in Note 22.

3.10 Trade and Other Payables Trade and other payables are stated at their costs.

3.11 Capital Commitments and Contingencies Capital commitments and contingent liabilities of the Company have been disclosed in the respective Notes to the

Financial Statements.

3.12 Events occurring after the date of Financial Position. All material post events occurring after the date of financial position have been considered where appropriate; either

adjustments have been made or adequately disclosed in the Financial Statements.

3.13 Earnings per Share The Company presents basic earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the

profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

3.14 Deferred Income

3.14.1 Grants and Subsidies Government grants are recognised where there is reasonable assurance that the grant will be received and all attached

conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, it is recognised as deferred income and released to income in equal amounts over the expected useful life of the related asset.

Where the Company receives non-monetary grants, the asset and the grant are recorded gross at nominal amounts and released to the Profit or Loss Statement over the expected useful life and pattern of consumption of the benefit of



the underlying asset by equal annual instalments. Where loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as additional government grant.

Grants related to Property, Plant & Equipment other than grants received for forestry are initially deferred and allocated to income on a systematic basis over the useful life of the related Property, Plant & Equipment as follows: Assets are amortised over their useful lives or unexpired lease period, whichever is less.

Buildings 40 years

Grants received for forestry are initially deferred and credited to income once when the related blocks of trees are harvested.

3.15 Profit or Loss Statement For the purpose of presentation of Profit or Loss Statement, the function of expenses method is adopted, as it represents

fairly the elements of the company’s performance.

3.15.1 Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the

revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.

(a) Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Revenue is recorded at invoice value net of brokerage, sale expenses and other levies related to revenue.

(b) Gains and losses on disposal of an item of Property, Plant & Equipment are determined by comparing the net sales proceeds with the carrying amounts of Property, Plant & Equipment and are recognised within ‘other operating income’ in the Profit or Loss Statement.

(c) For all financial instruments measured at amortised cost and interest-bearing financial assets classified as AFS, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the statement of profit or loss.

(d) Dividend is recognised when the company’s right to receive the payment is established, which is generally when shareholders approve the dividend.

(e) Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms.

3.15.2 Expenses All expenditure incurred in the running of the business and in maintaining the Property, Plant & Equipment in a state of

efficiency is charged to revenue in arriving at the profit or loss for the period.

3.15.2.1 Financing Income and Finance cost Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, changes in the fair value of financial assets at fair value through profit or loss, and losses on hedging instruments that are recognised in profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

The interest expense component of finance lease payments is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Foreign currency gains and losses are reported on a net basis.

3.15.3 Taxes

3.15.3.1 Current Income Tax Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the

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

Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.



3.15.3.2 Deferred Tax Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities

and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

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

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

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

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

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

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognised subsequently if new information about facts and circumstances change. The adjustment is either treated as a reduction in goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or recognised in profit or loss.

3.16 Cash and Cash Equivalents Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand form

an integral part of the company’s cash management and are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows.

3.17 Statement of Cash Flows The Statement of Cash Flow has been prepared using the ‘indirect method’. Interest paid is classified as operating cash

flows, interest and dividends received are classified as investing cash flows while dividends paid and Government grants received are classified as financing cash flows, for the purpose of presenting the Cash Flow Statement.

3.18 Segment Reporting Segmental information is provided for the different business segments of the Company Business segmentation has been

determined based on the nature of goods provided by the Company after considering the risk and rewards of each type of product.

Since the individual segments are located close to each other and operate in the same industrial environment, the need for geographical segmentation has no material impact.

The segments information are disclosed in the Note no 6 to the Financial Statements.



Revenue and expenses directly attributable to each segment are allocated to the respective segments. Revenue and expenses not directly attributable to a segment are allocated on the basis of their resource utilisation, wherever possible.

Assets and liabilities directly attributable to each segment are allocated to the respective segments. Assets and liabilities, which are not directly attributable to a segment, are allocated on a reasonable basis wherever possible. Unallocated items comprise mainly interest bearing loans, borrowings, and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one accounting period.

4. USE OF ESTIMATES AND JUDGMENTS The preparation of Financial Statements in conformity with SLFRS/LKAS requires management to make judgments,

estimates and assumptions that influence the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Judgments and estimates are based on historical experience and other factors, including expectations that are believed to be reasonable under the circumstances. Hence, actual experience and results may differ from these judgments and estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period and any future periods affected.

Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the Financial Statements is included in the following notes:

• Note 23 - Deferred Taxation• Note 22 - Measurement of the Defined Benefit Obligations• Note 14 - Biological Assets• Note 25 - Liability to make Lease Payment

4.1 Deferred Taxation Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be

available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. Unused tax losses as of 31 December 2017 are given in Note 23.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. As per the Inland Revenue Act no 24 of 2017 (ACT), in the case of a company predominantly conducting an agricultural business, the applicable income tax rate is 14%. As per the above ACT “Predominantly” is defined as 80% or more calculated based on gross income. The “Agriculture business” is defined in section 195 (1) as business of producing agricultural, horticultural or any animal produce and includes an undertaking for the purpose of rearing livestock or poultry. Based on the legal expert opinion obtained, the management is of the view that the company is predominantly engaged in agricultural business.

4.2 Retirement Benefit Obligations The present value of the retirement benefit obligations depends on a number of factors that are determined on an

actuarial basis using a number of assumptions. Key assumptions used in determining the retirement benefit obligations are given in Note 22. Any changes in these assumptions will impact the carrying amount of retirement benefit obligations.

4.3 Biological Assets The fair value of managed timber trees depends on a number of factors that are determined on a discounted method

using various financial and non-financial assumptions. The growth of the trees is determined by various biological factors that are highly unpredictable. Any change to the assumptions will impact to the fair value of biological assets. Key assumptions and sensitivity analysis of the biological assets are given in the Note 14.2

5. STANDARDS ISSUED BUT NOT YET EFFECTIVE Standards issued but not yet effective up to the date of issuance of the company’s financial statements are listed below.

This listing of standards and interpretations issued are those that the company reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The company intends to adopt these standards when they become effective.

5.1 Impending Accountings standards / Standards issued not yet effective Certain new accounting standards and amendments / improvements to existing standards have been published, that are

not mandatory for 31 December 2017 reporting periods. None of those have been early adopted by the Company.

SLFRS 9 Financial Instruments: Classification and Measurement SLFRS 9 replaces the existing guidance in LKAS 39 Financial Instruments: Recognition and Measurement. SLFRS 9 includes

revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from LKAS 39.



SLFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Company has performed an impact assessment of all three aspects of SLFRS 9. This preliminary assessment is based

on currently available information and may be subject to changes arising from further detailed analyses or additional reasonable and supportable information being made available to the Company in the future. Overall, the Company expects no significant impact on its financial position and equity

SLFRS 15 - Revenue from Contracts with Customers The objective of this Standard is to establish the principles that an entity shall apply to report useful information to

users of Financial Statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

SLFRS 15 introduces a five step approach for revenue recognition from contracts with customers and replaces all other currently applicable revenue Standards and related interpretations. SLFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018. According to the impact analysis done by the management, the Company does not have any material impact from the adoption of SLFRS 15 in the year 2018.

SLFRS 16 – Leases SLFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties

to a contract, i.e. the customer (‘Lessee’] and the supplier (‘Lessor’]. SLFRS 16 will replace Sri Lanka Accounting Standard – LKAS 17 (Leases) and related interpretations. SLFRS 16 introduces a single accounting model for the lessee, eliminating the present classification of leases in LKAS 17 as either operating leases or finance leases.

The new Standard requires a lessee to:

• recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value, and

• present depreciation of lease assets separately, from interest on lease liabilities in the income statement.

SLFRS – 16 substantially carries forward the lessor accounting requirement in LKAS – 17. Accordingly, a lessor continues to classify its leases as operating lease or finance lease, and to account for those two types of leases differently.

SLFRS -16 will become effective on 1st January 2019. The impact on the implementation of the above Standard has not been quantified yet.

5.2 Amendments to Existing Accounting Standards LKAS 7 - Statement of Cash Flows The amendment requires an entity to disclose information that enables users of financial statements to evaluate changes

in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

Accordingly an entity shall disclose the following changes in liabilities arising from financing activities:

• Changes from financing cash flows• Changes in fair values and• Other changes


6 REVENUE 2017 2016 Rs. Rs.6.1 Summary Sale of Goods Tea 2,810,456,209 2,054,208,698 Rubber 245,610,607 212,447,826 3,056,066,816 2,266,656,524

6.2 Segment Information Segment Revenue Tea Revenue 2,810,456,209 2,054,208,698 Revenue Expenditure (2,383,806,907) (2,031,667,912) Depreciation (79,848,575) (55,412,802) Other Non Cash Expenditure (180,849,073) (141,550,608) Segment Results 165,951,654 (174,422,624) Rubber Revenue 245,610,607 212,447,826 Revenue Expenditure (223,476,992) (227,930,954) Depreciation (32,197,653) (23,748,344) Other Non Cash Expenditure (32,167,378) (17,039,506) Segment Results (42,231,416) (56,270,978) Total Revenue 3,056,066,816 2,266,656,524 Revenue Expenditure (2,607,283,899) (2,259,598,866) Depreciation (112,046,228) (79,161,146) Other Non Cash Expenditure (213,016,451) (158,590,114) Segment Results 123,720,238 (230,693,602) Gains on fair value of biological assets 74,111,541 18,839,244 Other Income 302,984,818 118,697,066 Other Expenditure (387,818,705) (247,097,355) Depreciation (4,720,718) (4,882,754) Gratuity (5,449,439) (733,438) Management Fees (2,052,750) (25,207,600) Operating Profit of the Company 100,774,985 (371,078,439) Segment Assets 2017 2016 Rs. Rs. Tea Non Current Assets Cost 2,091,686,391 2,075,563,977 Amortization/ Depreciation (1,117,707,164) (1,037,858,589) 973,979,227 1,037,705,388 Rubber Non Current Assets Cost 2,754,374,550 2,521,244,528 Amortization/ Depreciation (500,852,682) (468,655,029) 2,253,521,868 2,052,589,499 Unallocated Non Current Assets Cost 2,011,713,616 1,988,523,220 Amortization/ Depreciation (101,488,302) (103,468,737) 1,910,225,314 1,885,054,483

5,137,726,408 4,975,349,374




6. REVENUE (Contd..)

6.2 Segment Information (Contd..) 2017 2016 Rs. Rs. Tea Current Assets Cost 283,852,296 388,145,263 283,852,296 388,145,263 Rubber Current Assets Cost 55,889,824 63,486,878 55,889,824 63,486,878

Allocated 339,742,120 451,632,141 Unallocated 89,646,740 69,770,684

429,388,861 521,402,826

Total Assets 5,567,115,270 5,496,752,200 Segement Equity and Liabilities Non Current Liabilities Tea Allocated 828,071,493 723,966,639 828,071,493 723,966,639 Rubber Allocated 128,556,791 114,911,569 128,556,791 114,911,569

Allocated 956,628,284 838,878,208 Unallocated 1,501,265,247 1,072,135,149 2,457,893,531 1,911,013,357 Current Liabilities Tea 341,551,292 370,412,263 Rubber 66,618,290 63,797,679 Unallocated 670,820,270 1,052,030,389 1,078,989,852 1,486,240,331

Stated Capital and Reserve 2,030,231,887 2,099,498,512 Total Equity and Liabilities 5,567,115,270 5,496,752,200 Segment Capital Expenditure Cost Tea 4,863,098 22,263,369 Rubber 233,130,021 227,726,129 Unallocated 31,479,757 26,608,717 269,472,876 276,598,215



7 OTHER INCOME AND GAINS NOTES 2017 2016 Rs. Rs. Interest Income 157,110 466,995 Amortisation of Government Grants 10,580,211 11,057,174 Rent Income 43,950,855 40,881,310 Sale of Refuse Tea 43,809,497 33,989,446 Net Income / (loss) from Travellers Paradise 1,243,383 1,717,989 Net Income / (loss) from Dolomite Project (1,664,160) (264,713) Sales of Rubber Trees 60,000 4,598,684 Profit on Sale of Timber Trees - 1,019,824 Compensation Received for Acquisition of Land 46,822,770 - Management fees write back 133,638,539 - Sundry Income 18,483,613 25,206,886 Profit on Disposal of Property Plant & Equipment 5,903,000 23,471 302,984,818 118,697,066

There are no unfulfilled conditions or contingencies attached to the grants.

8 FINANCE COST 2017 2016 Rs. Rs. Interest on Lease Rental (JEDB/SLSPC) 3,814,000 3,884,000 Contingent Lease Rental (JEDB/SLSPC) 25,796,355 24,897,276 Overdraft Interest 63,422,854 58,054,084 Loan Interest 172,888,794 118,728,178 265,922,003 205,563,538 Less: Amount Capitalised (62,799,008) (77,196,494) 203,122,995 128,367,044

9 PROFIT BEFORE TAX IS STATED AFTER CHARGING 2017 2016 Rs. Rs. Auditor’s remuneration

Audit Service 4,185,000 4,074,000

Depreciation and Lease Amortisation Right to Use of Land 12.1 6,249,060 6,249,060 Immovable leased Bearer Biological assets 12.2.1 9,040,819 9,040,819 Immovable Leased assets 12.2.2 1,671,440 3,101,308 Freehold Property ,Plant & Equipment 13 43,835,406 49,345,528 Bearer Biological Assets 14.1 47,573,195 34,698,363

Staff Cost

Defined Benefit Plan Costs (Retirement Benefit Obligation) 22 117,435,804 117,467,059 Defined Contributions Plan Costs - EPF & ETF 165,010,267 137,866,508 Others - Staff Costs 1,493,279,170 1,269,299,822

Management Fees 2,052,750 25,207,600 Provision /(reversal) for bad & doubtful debts 4,300 (393,470) Provision /(reversal) for Obsolete Inventories (126,680) (176,670) Gain on change in fair value of biological assets 14.4 74,111,541 18,839,244



10. TAX EXPENSES The major component of tax expenses for the year ended 31st December 2017 are as follows

10.1 STATEMENT OF PROFIT OR LOSS NOTES 2017 2016 Rs. Rs.

(i) Current Income Tax Current Income Tax Charges 8,033,259 7,531,966

(ii) Deferred Tax Relating to Origination and (reversal) of temporary defferences 23.1 184,403,673 (64,268,736)

Income Tax charge/(reversal) reported in Statement of Profit or Loss 192,436,932 (56,736,769)

10.2 STATEMENT OF OTHER COMPREHENSIVE INCOME

Deferred tax relating to items (charged)/ credited directly to OCI during the year Net gain on acturial gains and losses on Defined Benefit Plans 23.1 (3,653,373) (23,436,391)

Deferred tax charged to Other Comprehensive Income (3,653,373) (23,436,391)

10.3 RECONCILIATION OF TAX EXPENSES AND THE ACCOUNTING PROFIT MULTIPLIED BY THE STATUTORY EFFECTIVE TAX RATE FOR 2017 AND 2016

2017 2016 Rs. Rs. Profit/ (loss) before Tax 100,774,985 (371,078,439) Effective Tax Rate 14.00% 15.76% Tax effect on Accounting Profit / (Loss) Before Tax 14,108,498 (58,481,962) Tax effect on Aggregate disallowed items 50,954,886 24,913,268 Tax effect on Aggregate allowable items (96,462,964) (81,904,782) (31,399,580) (115,473,476)

Tax effect on Interest Income 52,621 140,873 Tax effect on Rent Income 12,306,239 11,446,767 Tax effect on Tax Loss B/F & Utilised (4,325,601) (4,055,674) Income Tax Charge/(Reversal) 8,033,259 7,531,966

11. EARNINGS PER SHARE The computation of the basic earnings per share is based on profit attributable to ordinary shareholders for the period divided

by weighted average number of ordinary shares outstanding during the period and calculated as follows.

2017 2016 Rs. Rs. Amounts used as the Numerator : (91,661,948) (314,341,671) Net profit applicable to ordinary shareholders for basic earnings per share (91,661,948) (314,341,671) Amounts used as the Denominator : Weighted average number of ordinary shares in issue applicable to 23,636,364 23,636,364 basic earnings per share 23,636,364 23,636,364 Earnings/ (Loss) Per Share (3.88) (13.30)



12 LEASEHOLD PROPERTY, PLANT & EQUIPMENT 2017 2016 As at 31st December, NOTES Rs. Rs. Right-to-use of land 12.1 171,485,113 177,734,173 Immovable leased bearer biological assets 12.2.1 51,741,006 60,781,825 Immovable Leased assets 2,790,509 4,461,949s (other than right-to-use of land and bearer biological assets) 12.2.2 226,016,628 242,977,947

12.1 RIGHT-TO-USE OF LAND “Right-To-Use of Land on Lease” as above was previously titled "Leasehold Right to Bare land". The change is in order to

comply with Statement of Alternative Treatment (SoAT) issued by the Institute of Chartered Accountants of Sri Lanka dated 21st August 2013. Such leases have been executed for all estates for a period of 53 years.

This right-to-use land is amortized over the remaining lease term or useful life of the right whichever is shorter and is disclosed under non-current assets. The Statement of Alternative Treatment (SoAT) for right-to-use land does not permit further revaluation of right-to-use land. However an adjustment to the "Right-To-Use of Land" could be made to the extent that the change relate to the future period on the reassessment of liability to make the lease payment. The values taken into the Statement of Financial Position as at 22nd June 1992 and amortisation of the right to use land up to 31 December 2017 are as follows.

2017 2016 Rs. Rs. Capitalised Value 331,200,716 331,200,716 Amortization As at 1st January 153,466,543 147,217,483 Amortization charge for the year 6,249,060 6,249,060 As at 31st December 159,715,603 153,466,543

Carrying amount 171,485,113 177,734,173



12.2 IMMOVABLE LEASED ASSETS In terms of the ruling of the UITF of the Institute of Chartered Accountants of Sri Lanka prevailed at the time of

privatisation of plantation estates, all immovable assets in these estates under finance leases have been taken into the books of the Company retroactive to 22nd June 1992. For this purpose, the Board decided at its meeting on 8th March, 1995, that these assets be stated at their book values as they appear in the books of the JEDB/SLSPC, on the day immediately preceding the date of formation of the Company. These assets are taken into the Statement of Financial Position as at 22 June, 1992 and amortisation of immovable leased assets to 31 December 2017 are as follows.

12.2.1 Immovable Leased Bearer Biological Assets Mature Plantations Tea Rubber 2017 2016 Rs. Rs. Rs. Rs. Capitalised Value (22nd June, 1992) 206,227,260 64,997,320 271,224,580 271,224,580

Amortisation As at 1st January 160,299,673 50,143,082 210,442,755 201,401,936

Amortisation for the year 6,874,242 2,166,577 9,040,819 9,040,819

As at 31st December 167,173,915 52,309,659 219,483,574 210,442,755

Carrying amount 39,053,345 12,687,661 51,741,006 60,781,825

Investment in Immature Plantations at the time of handing over to the Company as at 22 June, 1992 by way of estate leases were shown under Immature Plantations.

However, since then all such investments in Immature Plantations attributable to JEDB/SLSPC period have been transferred to Mature Plantations. These mature tea and rubber were classified as bearer biological assets in terms of LKAS 41 - Agriculture. The carrying value of the bearer biological assets leased from JEDB/SLSPC is recognised at cost less amortisation.Further investments in such plantations to bring them to maturity are shown in Note 14

12.2.2 Immovable Leased assets (other than right-to-use of land and bearer biological assets)

Unimproved Improvement Other Vested Buildings Machinery 2017 2016 Lease Land to Land Assets Rs. Rs. Rs. Rs. Rs. Rs. Rs. Capitalised Value (18 June, 1992) 899,449 15,701,754 151,815 64,023,644 26,164,471 106,941,133 106,941,133

Amortisation

As at 1 January 416,697 12,853,635 151,815 62,892,566 26,164,471 102,479,184 99,377,876

Amortisation for the year 16,970 523,392 - 1,131,078 - 1,671,440 3,101,308

As at 31 December 433,667 13,377,027 151,815 64,023,644 26,164,471 104,150,624 102,479,184

Carrying amount 465,782 2,324,727 - - - 2,790,509 4,461,949

These assets are being amortised in equal annual amounts over the following periods:

Mature plantations/improvement to land 30 years Buildings 25 years Machinery 15 years

Note : The assets shown above are those movable assets vested in the Company by Gazette Notification at the date of formation of the Company (22nd June 1992).



13

PROP

ERTY

,PLA

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ND EQ

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Land

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As

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13

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5,923

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7


14 BIOLOGICAL ASSETS

14.1 BEARER BIOLOGICAL ASSETS Immature Mature Total Total Plantations Plantations 2017 2016

Rs. Rs. Rs. Rs. Cost As at 1st January 1,761,645,432 927,023,176 2,688,668,608 2,435,152,955 Additions during the year 250,299,968 - 250,299,968 253,515,653 Transfers (from)/to (289,373,368) 289,373,368 - - Impairment (20,719,541) - (20,719,541) As at 31st December 1,701,852,490 1,216,396,544 2,918,249,034 2,688,668,608 Depreciation As at 1st January - 381,041,527 381,041,527 346,343,164 Charge for the year - 47,573,195 47,573,195 34,698,363 As at 31st December - 428,614,722 428,614,722 381,041,527 Carrying amount 1,701,852,490 787,781,822 2,489,634,313 2,307,627,081

14.1.1 Immature Plantations Tea Rubber Other Total Rs. Rs. Rs. Rs.

As at 1st January 96,103,472 1,650,603,720 14,938,240 1,761,645,432 Additions during the year 4,484,818 225,603,659 20,211,491 250,299,968 Transfers (from)/to (76,961,145) (212,412,223) - (289,373,368) Impairment - (20,719,541) - (20,719,541) As at 31st December 23,627,145 1,643,075,615 35,149,731 1,701,852,490 Mature Plantations Tea Rubber Other Total Rs. Rs. Rs. Rs. At Cost As at 1st January 371,995,008 457,746,135 97,282,033 927,023,176 Transfers (from)/to 76,961,145 212,412,223 - 289,373,368 As at 31st December 448,956,153 670,158,358 97,282,033 1,216,396,544

Depreciation As at 1st January 107,994,858 265,321,703 7,724,966 381,041,527 Charge for the year 13,468,685 32,843,267 1,261,243 47,573,195 As at 31st December 121,463,543 298,164,970 8,986,209 428,614,722 Carrying amount of mature plantations 327,492,610 371,993,388 88,295,824 787,781,822 These are investments in immature/ mature plantations since the formation of the Company. The assets (including plantation

assets) taken over by way of estate leases are set out in Notes 12 . Further investment in immature plantations taken over by way of these leases are shown in the above note. When such plantations become mature, the additional investments since take over to bring them to maturity, will be moved from immature to mature under this note.

The Company has elected to measure the bearer biological assets at cost using LKAS 16 - Property, Plant & Equipment.

The above additions include Rs. 62,799,008/= (2016-Rs.77,196,494/= ) of borrowing costs capitalised during the year at a capitalisation rate of 12.56%.



14.2 CONSUMABLE BIOLOGICAL ASSETS - TIMBER PLANTATIONS 2017 2016 Rs. Rs.

As at 1st January 1,771,340,320 1,755,818,586 Gain/(loss) arising from changes in fair value less cost to sell 75,266,129 15,560,362 Increase due to development 11,983,636 9,116,296 Decrease due to harvest/ transfer (53,117,683) (9,154,924) As at 31st December 1,805,472,402 1,771,340,320 Managed trees include commercial timber plantations cultivated on estates. The cost of immature trees is treated as

approximate fair value particularly on the ground of little biological transformation has taken place and impact of the biological transformation on price is not material. When such Plantations become mature, the additional investments since taken over to bring them to maturity are transferred from Immature to Mature.

The fair value of managed trees was ascertained in accordance with LKAS 41. The valuation was carried by Messers Mr.W.M Chandrasena , incorporated valuers, using Discounted Cash Flow methods.

14.3 PRODUCE ON BEARER BIOLOGICAL ASSETS 2017 2016 Rs. Rs.

As at 1st January - restated 5,245,740 1,966,858 Change in fair value less cost to sell (1,154,588) 3,278,882 As at 31st December 4,091,152 5,245,740

14.4 GAIN/(LOSS) ON FAIR VALUE OF BIOLOGICAL ASSETS 2017 2016 Rs. Rs.

Consumable Bialogical Assets - Gain/(loss) arising from changes in fair value less cost to sell - Note No 14.2 75,266,129 15,560,362 Produce on Bearer Biologal Assets - Gain/(Loss) arising from changes in fair value less cost to sell - Note No 14.3 (1,154,588) 3,278,882 74,111,541 18,839,244



14.5.1 INFORMATION ABOUT FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) Non Range of Relationship of Financial Valuation Unobservable Unobservable Unobservable Assets Techniques Inputs Inputs inputs to Fair Value Consumable DCF Method Discounting factor 14% The higher the discount rate,the lower the fair value Biological Assets - Timber Optimum rotation 25-35 Years Lower the rotation period, the higher the fair value (Maturity)

Volume at rotation 25-85 cu.ft The higher the volume, the higher the fair value Price per cu.ft. Rs. 150/- Rs.650 /- The higher the price per cu. ft., the higher the fair value per Cu. Ft

Key assumption used in the Valuation 1. The harvesting is approved by the PMMD and Forest Department based on the forestry development plan 2. The price adopted are net of expenditure 3. Though the replanting is a condition precedent for harvesting, yet the cost are not taken in to consideration.

The valuations, as presented in the external valuation models based on net present values, take into account the long term exploitation of the timber plantations. Because of the inherent uncertainty associated with the valuation at fair value of the biological assets due to the volatility of the variables, their carrying value may differ from their realisable value. The Board of Directors retains their view that commodity markets are inherently volatile and that long term price projections are highly unpredictable. Hence, the sensitivity analysis regarding selling price and discount rate variations as included in this note allows every investor to reasonably challenge the financial impact of the assumptions used in the LKAS 41 against his own assumptions.

14.5 FAIR VALUE HIERARCHY 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. NON FINANCIAL ASSETS - Consumable Biological Assets

Level 1 Level 2 Level 3

As at 31st December Date of valuation 2017 2016 2017 2016 2017 2016

Rs. Rs. Rs. Rs. Rs. Rs.

Assets measured at fair value Consumable Biological Assets - Timber 31st December 2017 - - - - 1,805,472,402 1,771,340,320 Produce on Bearer Bialogical Assets 31st December 2017 - - 4,091,152 5,245,740 - - In determining the fair value, highest and best use of timber, current condition of the trees and expected timber content at

harvesting have been considered. Also, the valuers have made reference to market evidence of transaction prices of the company, and the market prices of timber corporation, with appropriate adjustments for size and location. The appraised fair values are rounded within the range of values.



14.5.2 SENSITIVITY ANALYSIS Sensitivity variation sales price Values as appearing in the statement of financial position are very sensitive to price changes with regard to the average sales

prices applied. Simulations made for timber show that a rise or decrease by 10% of the estimated future selling price has the following effect on the net present value of biological assets:

-10% +10% Managed Timber Rs Rs

As at 31st December, 2017 (180,547,240) 180,547,240 As at 31st December, 2016 (177,134,032) 177,134,032

Sensitivity variation discount rate Values as appearing in the Statement of Financial Position are very sensitive to changes of the discount rate applied.

Simulations made for timber trees show that a rise or decrease by 1% of the discount rate has the following effect on the net present value of biological assets:

-1% +1% Managed Timber Rs Rs As at 31st December, 2017 68,007,374 (59,621,799) As at 31st December, 2016 66,721,709 (58,494,661)

15. AVAILABLE FOR SALE FINANCIAL ASSETS NO OF SHARES 2017 2016 Rs. Rs. Quoted Investments National Development Bank Ordinary Shares 3,376 460,486 507,312 460,486 507,312 Market Value per Share as at 31st December 2017 Rs 136.40/=.

16. INVENTORIES 2017 2016 Rs. Rs. Nurseries 8,046,916 9,033,483 Harvested Crop 231,172,213 281,997,485 Input Stocks, Consumables & spares 39,229,911 50,421,162 278,449,040 341,452,130 Provision for Obsolete Stocks (723,044) (849,724) 277,725,996 340,602,406

17. TRADE AND OTHER RECEIVABLES NOTES 2017 2016 Rs. Rs. Produce Debtors 17.2 11,896,104 9,465,968 Employee Related Debtors 37,231,577 32,646,289 Advances & Prepayments 227,570 445,972 Loans to Company Officers 17.1 243,473 211,298 Interest receivables from Fixed Deposits 5,920 131,535 Other debtors 47,166,706 58,024,173 96,771,350 100,925,235 Provision for doubtful debts (2,749,699) (2,745,399) 94,021,651 98,179,836

17.1 LOANS TO COMPANY OFFICERS 2017 2016 Rs. Rs. Balance at the beginning of the year 211,298 293,525 Loans granted during the year 214,669 58,275 425,967 351,800 Re payments (182,494) (140,502) Balance at the end of the year 243,473 211,298



17.2 TRADE AND OTHER RECEIVABLES -Continued

The age analysis of trade receivables is as follows:

Past due but not impaired Total 0-60 days 61-120 days 121-180 days 181-365 days > 365 days

Balance as at 31 December 2017 Rs. Rs. Rs. Rs. Rs. Rs. Produce Debtors 11,896,104 11,896,104 - - - - -

Produce debtors are realised within seven days from sales

18. AMOUNTS DUE FROM RELATED COMPANIES 2017 2016 Relationship Rs. Rs.

Madulsima Plantations PLC Related Company 10,689,013 5,027,372 Melstacorp PLC Parent Company 119,464 10,808,477 5,027,372

19. CASH AND CASH EQUIVALENTS 2017 2016 Rs. Rs.

19.1 SHORT TERM INVESTMENT Fixed Deposits with Hatton National Bank 326,634 3,107,029 326,634 3,107,029

19.2 FAVOURABLE BALANCES Cash in hand 563,978 415,735 Cash at bank 13,945,491 19,398,126 14,509,469 19,813,861

19.3 UNFAVOURABLE BALANCES Bank overdraft 437,958,672 487,112,662 437,958,672 487,112,662

20. STATED CAPITAL 2017 2016 Rs. Rs. Issued and Fully Paid Ordinary Shares Ordinary Shares including one golden Share held by the Treasury which has Special rights 23,636,364 23,636,364

Value of Issued and Fully Paid Ordinary Shares including one golden share held by the Treasury which has Special rights. 350,000,010 350,000,010

Stated Capital represents the amount paid to the company in respect of issuing 23,636,364 ordinary shares including one Golden Share which has Special rights.



21.

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41



22. RETIRING BENEFIT OBLIGATIONS 2017 2016 Rs. Rs.

At the beginning of the year 677,583,208 757,903,350 Interest Cost 74,534,153 75,790,335 Current Service Cost 42,901,651 41,676,724 Gratuity Payments for the year (85,452,133) (49,079,138) Liability experience loss / (gain) arising during the year (78,379,921) (100,860,513) Liability loss / (gain) due to changes in assumpions during the year 52,284,400 (47,847,550) At the end of the year 683,471,358 677,583,208

The actuarial valuations had been carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd, for retiring gratuity for all the employees of the Company as at 31 December 2017, which amounts to Rs. 683,471,358/-. If the Company had provided for gratuity for workers on the basis of 14 days wages and for staff and executive a half month salary for each completed year of service as at 31 December 2017, in line with the Gratuity Act No.12 of 1983 the liability would have been Rs. 989,102,891/-. Hence, there is a contingent liability of Rs. 305,631,533/- which would crystalise only if the Company ceases to be a going concern, or the resignation or termination of employees which ever is earliest.

LKAS 19 requires the use of actuarial techniques to make a reliable estimate of the amount of retirement benefit that employees have earned in return for their service in the current and prior periods and discount that benefit using the Projected Unit Credit Method in order to determine the present value of the retirement benefit obligation and the current service cost. This requires an entity to determine how much benefit is attributable to the current and prior periods and to make estimates about demographic variables and financial variables that will influence the cost of the benefit. The following key assumptions were made in arriving at the above figure.

The Present Value of Retirement Benefit Obligation is carried on annual basis

The following payment are expected from defined plan obligation on annual basis 2017 2016 Staff Workers Company Staff Workers Company Rs Rs Rs Rs Rs Rs

Within the next 12 Months 51,955,722 42,990,133 94,945,855 45,063,744 40,191,554 85,255,298 Between 2 and 5 years 19,490,003 162,663,735 182,153,738 21,416,632 107,130,062 128,546,694 Beyond 5 years 43,073,540 363,298,224 406,371,764 31,505,339 432,275,877 463,781,216 114,519,265 568,952,092 683,471,358 97,985,715 579,597,493 677,583,208

The weigted average duration of the Defined Benefit plan obligation at the reporting period is 5.61 years and 10.62 years for staff and workers respectively

The key assumptions used by Messers.Actuarial & Management Consultants (Pvt) Ltd include the following. 2017 2016

(i) Rate of Interest (per annum) 10% 11%

(ii) Rate of Salary Increase Workers (every two years) 15% 15% Estate Staff (per annum) 10% 10% Head Office Staff & Executives (per annum) 7.5% 7.5%

(iii) Retirement Age Workers 60 years 60 years Staff 55 years 55 years

(iv) Daily Wage Rate Rs.500/= Rs.500/=



SENSITIVITY OF ASSUMPTIONS USED Sensitivity analysis for significant assumptions as at 31st December 2017 is shown below.

2017 2016 Discount Rate Increase Decrease Increase Decrease Sensitivity level 1% 1% 1% 1%

Impact on defined benefit obligation - Rs. (56,361,129) 122,868,790 (45,757,295) 98,180,040 2017 2016 Future salary increment rate Increase Decrease Increase Decrease Sensitivity level 1% 1% 1% 1% Impact on defined benefit obligation - Rs. 35,985,174 (33,314,853) 27,350,955 (25,649,935)

2017 201623. DEFERRED TAX Temporary Tax Temporary Tax Difference Effect Difference Effect Rs. Rs. Rs. Rs. As at 1 January 1,523,934,945 4,921,470 1,695,459,447 45,753,815 Amount originating during the year (145,516,972) (35,316,595) (171,524,502) (40,832,345) Amount originated due to the Income Tax rate change to 14% - 223,373,641 As at 31 December 1,378,417,973 192,978,516 1,523,934,945 4,921,470 Defrred Tax Liability Temporary difference on Property, Plant and Equipment 451,583,005 63,221,621 504,565,254 79,519,484 Temporary difference on mature and immature plantation 2,489,634,313 348,548,804 2,307,627,081 230,762,708 Temporary difference on biological asset 1,809,563,554 253,338,898 1,776,586,061 177,658,606 As at 31st December 4,750,780,872 665,109,322 4,588,778,396 487,940,798 Deferred Tax Assets Temporary difference on Leased asset - - (7,977,823) (1,257,305) Temporary difference on retirement benefit obligation (683,471,357) (95,685,990) (677,583,208) (106,787,114) Carried forward tax losses (2,688,891,542) (376,444,816) (2,379,282,420) (374,974,909) As at 31 December (3,372,362,899) (472,130,806) (3,064,843,451) (483,019,328) As at 31st December 1,378,417,973 192,978,516 1,523,934,945 4,921,470

The effective tax rate used to calculate deferred tax liability for all the Temporary Differences as at 31 December, 2017 is 14%. (2016 - 15.76%/, other than to Biological Assets (10%).

23.1 Reconciliation of deferred tax charge / (reversal) 2017 2016 Rs. Rs.

At the beginning of the year 4,921,470 45,753,815 Tax charge/(reversal) during the period recognised in Statement of profit or Loss 184,403,673 (64,268,736) Tax charge/(reversal) during the period recognised in other Comprehensive Income 3,653,373 23,436,391 At the end of year 192,978,516 4,921,470



24. DEFERRED INCOME 2017 2016 Deferred Grants and Subsidies Rs. Rs. Balance at the beginning of the year 180,363,631 191,420,805 Add : Grants received / (refunded) during the year - - Less : Amortisation for the year (10,580,211) (11,057,174) Balance at the end of the year 169,783,420 180,363,631 The Company has received funding from the Plantation Housing and Social Welfare Trust and Plantation Development

Project (PDP) for the development of workers facilities such as re-roofing of line rooms, latrines, water supply, sanitation and roads etc. The amounts spent are included under the relevant classification of property, plant & equipment and the grant component is reflected under Deferred Grants and Subsidies. Grants are amortised over the life of the assets for which they are being deployed.

25. LIABILITY TO MAKE LEASE PAYMENT 2017 2016 Rs. Rs. Gross Liability As at 1st January 161,366,000 167,039,000 Repayment during the year (5,673,000) (5,673,000) 155,693,000 161,366,000 Finance cost allocated to future periods (62,208,000) (66,022,000) Net Liability 93,485,000 95,344,000 Payable within one year Gross liability 5,673,000 5,673,000 Finance cost allocated to future periods (3,739,000) (3,814,000) Net liability transferred to current liabilities 1,934,000 1,859,000 Payable within two to five years Gross liability 22,692,000 22,692,000 Finance cost allocated to future periods (14,002,928) (14,478,143) Net liability 8,689,072 8,213,857 Payable after five years Gross liability 127,328,000 138,674,000 Finance cost allocated to future periods (44,466,072) (47,729,857) Net liability 82,861,928 90,944,143 Net liability payable after one year 91,551,000 93,485,000

The lease of the estates have been amended, with effect from 11th June 1996 to an amount substantially higher than the

previous lease rental of Rs. 500/= per estate per annum. The first rental payable under the revised basis is Rs.5.673 million from 11th June 1997.This amount is to be inflated annually by the Gross Domestic product (GDP) deflator, and is in the from of Contingent rental. The contingent rental charged to the Income statement amounted to Rs.25,796,355/= Which is based on GDP deflator of 4.4% (2016)

The Statement of Recommended Practice (SoRP) for Right-to-use of Land on Lease was approved by the Council of the Institute of Chartered Accountants of Sri Lanka on 19th December 2012. Subsequently, the amendments to the SoRP along with the modification to the title as Statement of Alternative Treatment (SoAT) were approved by the Council on 21st August 2013. The Company has not reassessed the Right-to-use of Land because this is not mandatory requirement. However, if the liability is reassessed according to the alternative treatment (SoAT) on the assumption that the lease rent is increased constantly by GDP deflator of 4.4% and discounted at a rate of 13% , liability would be as follows.

Gross Liability 1,774,458,191 Finance Charges (604,142,501) Net Liability 1,170,315,691

The above reassessed liability is not reflected in these Financial Statements.



26. TRADE AND OTHER PAYABLES 2017 2016 Rs. Rs.

Trade Creditors 26,295,826 387,395,781 Employee Related Creditors 170,321,678 195,003,429 Accrued Expenses 14,808,392 17,757,330 Others 211,167,631 112,399,645 422,593,527 712,556,185

27. AMOUNTS DUE TO RELATED COMPANIES 2017 2016 Rs. Rs.

Relationship Stassen Exports (Pvt) Ltd Managing Agent 121,500 132,718,039 Madulsima Plantatons PLC Related Company 952,934 883,905 Melstacorp PLC Parrent Company 48,205,358 - 49,279,792 133,601,944

28. DIVIDENDS PAYABLE

28.1 Unclaimed Dividend 2017 2016 Rs. Rs. Payable to - Related Parties - - - Others 6,246,737 6,372,554 6,246,737 6,372,554

28.2 DIVIDENDS PAID AND PROPOSED Dividend on Ordinary Shares Dividend paid during the year Nil Nil Nil Nil Proposed for approval at AGM Final dividends for 2017 Rs. Nil/= per share (2016- Rs.Nil/=) Nil Nil Nil Nil Dividends per share (Rs.) Nil Nil



29. ASSETS PLEDGED Following assets have been pledged as securities for liabilities.

Name of Bank Loan Security Nature of Liability Carrying Facility Amount of Rs. assets Pledged

2017 2016 Rs. Rs. CENTRAL FINANCE COMPANY PLC 34 Mn. Mortgage on Colour Separator Long Term Loans 25,657,039 26,878,803

HATTON NATIONAL BANK PLC 190 Mn "Primary mortgage over the Lease hold Permanent 10,555,510 10,832,964 rights of Balangoda Estate. Overdraft Facility

HATTON NATIONAL BANK PLC 150 Mn "Primary mortgage over the Lease hold Permanent 5,145,222 5,280,466 rights of Walaboda Estate. Overdraft Facility

HATTON NATIONAL BANK PLC 500 Mn "Primary mortgage over the Lease hold Long Term Loans 10,555,510 10,832,964 rights of Balangoda Estate.

HATTON NATIONAL BANK PLC 17.8 Mn Mortage on Colour Separator Long Term Loans 13,339,719 13,946,070

HATTON NATIONAL BANK PLC 0.7 Mn Abosolute Owership of the Leased Bikes Finance Lease 213,497 348,337

HATTON NATIONAL BANK PLC 114 Mn Mortage on Colour Separator & Mahinary Finance Lease 84,277,380 87,415,526

HATTON NATIONAL BANK PLC 167 Mn "Primary mortgage over the Lease hold Long Term Loans 10,555,510 10,832,964 rights of Balangoda Estate.

30. COMMITMENTS AND CONTINGENCIES No known contingent liabilities exist as at the date of financial position other than the matter disclosed in Note 22 to the financial Statements

and few legal cases pending at the year end of which the outcome is not determinable.

31. EVENTS OCCURRING AFTER THE REPORTING PERIOD No circumstances have arisen since the reporting date which require adjustments to or disclosure in the Financial Statements.

32. RELATED PARTY DISCLOSURES Details of Significant Related Party Disclosures are as follows.

32.1 Transactions with the parent and related entities Nature of the Company Nature of Transaction Terms and Amounts Conditions 2017 2016 Rs. Rs.

Parent compnay Melstacorp PLC Loan Obtained Market Terms 382,355,905 300,000,000 Interest Expenses Market Terms (48,675,673) (18,980,559)

Group Company Distilleries Co. of Sri Lanka PLC Reimbursement of expenses Market Terms - 176,606 Other Related Parties Stassen Exports (Private) Ltd. Management Fee Contractual (1,963,500) (25,207,600) Share of Head Office Expenses Market Terms (2,200,000) (2,640,000) Management fee write back Contractual 133,638,539 - Madulsima Plantations PLC Reimbursement of expenses Market Terms (2,362,858) (3,950,584) Reimbursement of expenses Market Terms 1,621,055 2,092,342 Milford Exports (Ceylon) (Private) Ltd. Rent Received Contractual 2,840,963 2,762,981 Sales of Green Leaf Market Terms - 4,388,932 Hatton National Bank PLC Interest Income Market Terms 157,111 466,995 Interest Expenses Market Terms (145,857,051) (151,992,122) Lanka Bell Limited Lease Rental Received Contractual 3,362,917 3,153,842 Communication Charges Market Terms (2,223,869) (2,101,376) Melsta Regal Finance Ltd Loan Obtained Market Terms 40,000,000 40,000,000 Interest Expenses Market Terms (3,376,530) (2,645,754)



32.2 Terms and Conditions Transactions with related parties are carried out in the ordinary course of business on an relevant commercial terms.

Outstanding balances at the year end are unsecured and net settlement occurs in cash.

32.2.1 Non Recurrent Related Party transactions There were no non recurrent related party transactions which in aggregate value exceeds 10% of the equity or 5% of the

total assets which ever is lower of the Company as per 31 December 2017 audited Financial Statements.

32.2.2 Recurrent Related Party Transactions There were recurrent related party transactions which in aggregate value exceeds 10% of the gross revenue/income of the

Company as per 31 December 2017 audited Financial Statements. Details of related party disclosures are as follows,

32.3 Transactions with the key management personnel of the company There were no material transactions with the key management personnel of the company and its parent for the year ended

31 December 2017 other than those disclosed in the note 32.1.

33 Related Party Transactions There are no related party transactions other than those disclosed in Notes 17, 18, 19, 21, 27, and 32 above

34 Reconcilation of liabilities arising from financing activities Sri Lanka Accounting Standard - LKAS 7 (Statement of Cash flows), requires an entity to disclose information that enables

users of Financial Statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. Accordingly, changes in liabilities arising from financing activities for the year ended 31st December 2017 are disclosed below.

The funds borrowed by the Company are given in Note 21. Company Interest-Bearing Borrowings Balance as at 01 January 2017 1,084,069,941 Net Cash flows from Financing Activities 381,187,036 Non Cash Changes - Balance as at 31 December 2017 1,465,256,977

35 Financial Risk Management Objectives and Policies

35.1 Financial Risk Management Framework The Board of Directors has the overall responsibility for the establishment and oversight of the company’s financial risk

management framework which includes developing and monitoring the company’s financial risk management policies.

The company’s principal financial liabilities comprise loans and borrowings and trade and other payables. The main purpose of these financial liabilities is to finance the comapny’s operations. The company has loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. Accordingly the company has exposure to namely Credit Risk, Liquidity Risk, Currency Risk and Interest Rate Risk from its use of financial instruments.

This note presents information about the company’s exposure to each of the above risks, the company’s objectives, policies and processes for measuring and managing risk.

Disclosures Company2017 2016

a. Name of the related party - Melstacorp PLCb. Relationship - Parent Companyc. Nature of transaction - Intercompany Loand. Aggregate value of related party transactions entered into during the financial year

Revenue as per latest audited financial statements382,355,905 300,000,000

3,056,066,816 2,266,656,524e. Aggregate value of related party transactions as a % of net revenue/income 13% 13%f. Terms and conditions of the related party transactions

Transactions with related parties are carried out in the ordinary course of business on relevent commercial terms.



35.2.3 Cash and Cash Equivalents The Company held cash and Cash Equivalents of Rs.14 Mn as at 31st December 2017 (2016 – Rs.19Mn) which represents its

maximum credit exposure on these assets.

35.3 LIQUIDITY RISK Liquidity risk is the risk that the company will encounter difficulty in meeting the obligations associated with its financial

liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company does not concentrate on a single financial institution, thereby minimizing the exposure to liquidity risk through diversification of funding sources. The Company aims to fund investment activities by funding the long-term investment with long term financial sources and short term investment with short term financing.

The Table below summarizes the maturity profile of the company financial liabilities based on contractual undiscounted payments.

As at 31st December 2017 On Demand Less than 3 3 to 12 2 to 5 years >5 years Total Months Months Rs. Rs. Rs. Rs. Rs. Rs.

Interest bearing loans & borrowing - 65,856,345 88,654,387 675,345,652 639,400,593 1,469,256,977 Trade & other payables 422,593,527 - - - - 422,593,527 Bank overdraft 437,958,672 - - - - 437,958,672 860,552,199 65,856,345 88,654,387 675,345,652 639,400,593 2,329,809,176

As at 31st December 2016 Interest bearing loans & borrowing - 58,426,825 84,983,068 532,765,354 411,894,694 1,088,069,941 Trade & other payables 712,556,185 - - - - 712,556,185 Bank overdraft 487,112,662 - - - - 487,112,662 1,199,668,847 58,426,825 84,983,068 532,765,354 411,894,694 2,287,738,788

35.2 CREDIT RISK This is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its

contractual obligations, and arise principally from the company’s receivable from customers.

35.2.1 Trade and Other Receivables The Company has a minimal credit risk of its trade receivables as the repayment is guaranteed within seven working days

by the Tea auction systems.

The company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables.

The maximum exposure to credit risk for trade receivables of the company at the reporting date is Rs.11 Mn (2016 – Rs. 9 Mn).

35.2.2 Investments Credit risks from invested balance with the financial institutions are managed by the Board of Directors. Investments of

surplus funds are made only with approved counterparties and within credit limits assigned to them. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through potential counterparty’s failure.

The Company held short term investments of Rs. 0.3 Mn as at 31st December 2017 (2016 – Rs. 3 Mn) which represents the maximum credit exposure on these assets.



35.4 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 prices comprise four types of risk: interest rate risk , Currency risk & other price risk such as equity price risk. Financial instrument affected by market risk include loans & borrowings, deposits & derivative financial instruments.

35.4.1 Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes

in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates. The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings.

The Company held long term borrowings with floating interest rates of Rs.1,320 Mn (2016 – Rs.954 Mn) which represents its maximum credit exposure on these liabilities.

35.4.2 Capital Management The Company’s policy is to retain a strong capital base so as to maintain investor, creditor & market confidence and to sustain

future development of the business. Capital consists of share capital, reserves and retained earnings . The Board of Directors monitors the return on capital, interest covering ratio, dividend to ordinary shareholders.

The gearing ratio at the reporting date is as follows. As at 31.12.2017 As at 31.12.2016

Rs. Rs. Interest bearing borrowing Current portion of long term interest bearing borrowings 145,147,740 129,409,893 Payable after 1 year 1,320,109,236 954,660,048 Bank overdraft 437,958,672 487,112,662 1,903,215,649 1,571,182,603

Equity 2,030,231,887 2,099,498,512 Equity & debts 3,933,447,535 3,670,681,115 Gearing ratio 48% 43%


Shareholders and Investors Information

The issued Ordinary shares of Balangoda Plantations PLC are listed with the Colombo Stock Exchange of Sri Lanka. The Audited Accounts of the Company for the year ended 31st December 2017 have been submitted to the Colombo Stock Exchange.

Distribution of Shareholdings as at 31 December 2017No. of Shares held No. of Shareholders No. of Shareholders % Total Holdings Total Holding %

1 - 1,000 17,962 96.97 2,324,130 9.83

1,001 - 10,000 441 2.38 1,611,644 6.82

10,001 - 100,000 109 0.59 3,052,148 12.91

100,001 - 1,000,000 9 0.05 1,443,680 6.11

1,000,001 & Over 2 0.01 15,204,761 64.33

Grand Total 18,523 100.00 23,636,363 100.00

Analysis Report of Shareholders

No. of Shares held No. of Shareholders No. of Shareholders % Total Holdings Total Holding %

Individual 18,342 99.02 6,396,857 27.07

Institution 181 0.98 17,239,506 72.93

Grand Total 18,523 100.00 23,636,363 100.00

Residents 18,506 99.9 23,537,914 99.59

Non-Residents 17 0.1 98,449 0.41

Grand Total 18,523 100.00 23,636,363 100.00

Shares held by Public amounts to 41.37%

Number of shareholders representing the above percentage – 18,520 shareholders

Market Statistics as at 31st December2017 2016

Number of shares 23,636,363 23,636,363

Earning/(Loss) per Share Rs (3.88) (13.30)

Net Asset per Share Rs 85.89 88.82

Dividend per Share Rs - -

Highest Share Price Rs 39.40 20.00

Lowest Share Price Rs 10.60 11.80

Closing Share Price Rs 30.20 12.20


Shareholders and Investors Information

Twenty Five Major Shareholders As at 31st December 2017

No Name of Shareholder No. of Shares %

1 Melstacorp PLC 13,853,663 58.612

2 Employees Provident Fund 1,351,098 5.716

3 Associated Electrical Corporation Ltd 328,170 1.388

4 Mr. T Someswaran 255,000 1.079

5 Seylan Bank PLC/ S.R. Fernando 154,097 0.652

6 First Capital Markets Limited/Ventura Crystal (Pvt) Limited 136,000 0.575

7 Cocoshell activated Carbon Company Limited 129,700 0.549

8 Mr. K M S M Rajabudeen 116,679 0.494

9 Mr. R Maheswaran 112,834 0.477

10 Mr. A K Palliya Guruge Don 108,000 0.457

11 Mr. K N Karunaratne 103,200 0.437

12 Mr. R C Wijesena 100,000 0.423

13 Mr. K A N C Sugathadasa 100,000 0.423

14 Capital Trust Holdings Ltd 87,248 0.369

15 People’s Leasing & Finance PLC/Mr.W A J Withanarachchi 80,000 0.338

16 Mr. M K Nambiyarooran 78,000 0.330

17 Mr. M A Nazeer 75,018 0.317

18 Mrs. W W Somawathie 68,600 0.290

19 Mr. M S M Nadheer 66,430 0.281

20 Wadlock Machenzie Limited/Mr. M I Samsudeen 65,000 0.275

21 Mr. K Rajakanthan 64,189 0.272

22 Mr. R E Rambukwelle 63,100 0.267

23 Tranz Dominion, L.L.C. 56,891 0.241

24 People’s Leasing & Finance PLC/ M.S.F. Haqque 53,797 0.228

25 Mr. A J M Jinadasa 50,000 0.212


Financial Information

Restated Restated

2017 2016 2015 2014 2013 2012

Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000

Turnover 3,056,067 2,266,657 2,413,055 3,002,156 3,171,983 2,779,742

Profit (Loss) before Taxation 100,775 (371,078) (430,388) (106,445) 129,715 110,308

Taxation 192,436 56,736 87,295 11,214 2,939 (18,103)

Profit (Loss) after Taxation (91,662) (314,342) (343,093) (95,231) 132,654 92,205

Other Comprehensive Income 22,395 125,148 8,252 (16,048) 21,147 -

Profit (Loss) brought forward 88,003 374,847 797,374 999,681 943,921 918,037

Dividend - - - - (23,636) (23,636)

Transfer from General Reserve - - - - - -

Transfer to Timber Reserve (22,148) (6,405) (87,868) (92,377) (74,294) (42,685)

Transfer to Available for sale Reserve 47 124 182 (552) (111) -

Impact of the adjustments of LKAS 16 & LKAS 41 - - 1,901 - -

Retained Profit (Loss) 88,003 179,372 374,847 797,374 999,681 943,921

Fixed Assets 5,137,726 4,975,349 4,794,905 4,348,929 3,997,908 3,642,643

Current Assets 429,389 521,403 552,060 797,249 835,147 745,843

Current Liabilities 1,078,990 1,486,240 1,253,468 876,898 970,769 629,755

Non Current Liabilities 2,457,893 1,911,013 1,804,804 1,645,747 1,129,374 1,132,347

Net Assets 2,030,232 2,099,499 2,288,693 2,623,533 2,732,912 2,626,384

Share Capital 350,000 350,000 350,000 350,000 350,000 350,000

General Reserves - - - - - -

Timber Reserves 1,591,918 1,569,770 1,563,364 1,475,496 1,383,120 1,308,826

Available for Sale Reserve 311 357 481 663 111 -

Profit & Loss Account 88,003 179,372 374,847 797,374 999,681 943,921

Capital Employed 2,030,232 2,099,499 2,288,692 2,623,533 2,732,912 2,602,748

Number of Shares ('000) 23,636 23,636 23,636 23,636 23,636 23,636

Earning per Share (Rs.) (3.88) (13.30) (14.52) (4.03) 5.61 3.90

Dividend per Share (Rs.) (0.00) (0.00) (0.00) (0.00) 1.00 1.00

Net Asset per Share (Rs.) 85.89 88.83 96.83 111.00 115.62 111.12


Year ended 31.12.2017 Year ended 31.12.2016

% Share % Share

REVENUE 89.02 3,056,067 94.28 2,266,656

Other Income 10.98 377,096 5.72 137,536

Total Revenue 100.00 3,433,163 100.00 2,404,192

Cost of Materials & Services bought - 1,375,378 - 898,681

VALUE ADDED 59.94 2,057,785 62.62 1,505,511

% Share % Share

DISTRIBUTION OF VALUE ADDED

A To Employees as Remuneration 80.59 1,658,289 93.47 1,407,166

B To Government as taxes - - 3.77 56,737

B 1 To Government as Lease Intrest 1.44 29,610 1.91 28,781

C To Lenders of Capital as Interest 8.43 173,513 6.61 99,586

D To Shareholders as Dividends - - - -

E Retained in Business

E1 Provision of Depreciation 5.26 108,370 6.80 102,435

E2 Profit Retained 4.28 88,003 (12.57) (189,194)

100.00 2,057,785 100.00 1,505,511

Statement of Value Addition


Tea Estates ElevationCategory

Year Tea Extentha

Total Crop(kg)

YieldKg/ha

C. O.PRs/kg

N.S.ARs/kg

Balangoda Uva Medium 2017 421.95 521,649 1,007 545.58 561.21

2016 422.50 533,142 953 446.68 408.08

Cecilton Uva Medium 2017 175.98 257,760 976 611.81 575.43

2016 187.82 199,117 743 575.23 474.77

Meddakande Uva Medium 2017 169.75 248,078 1,129 608.19 571.77

2016 169.75 318,090 1,041 483.52 422.19

Non Pareil Uva High 2017 234.00 91,460 391 1,003.69 570.12

2016 240.00 117,200 416 696.70 337.70

Pettiagalla Uva Medium 2017 177.00 268,065 1,331 543.81 579.92

2016 177.00 290,174 1,166 446.94 429.20

Rasagalla Low 2017 234.81 303,963 1,092 638.50 581.13

2016 234.81 369,904 1,038 502.70 430.59

Rye/Wikiliya Low 2017 164.20 69,043 420 753.71 561.87

2016 165.80 70,230 424 626.06 404.67

Walaboda Uva Medium 2017 112.50 100,085 890 616.65 590.56

2016 120.00 76,014 633 576.51 451.99

Mahawale Low 2017 1.60 1,517 948 636.98 585.63

2016 1.75 1,578 902 429.07 418.59

Mutwagalla Low 2017 0 0 #DIV/0! 0.00 0.00

2016 0 1,790 0 700.39 418.59

Palmgarden Low 2017 4.85 174,303 744 639.23 579.29

2016 4.08 279,577 1,101 435.63 417.16

Cullen Uva Medium 2017 164.90 83,213 505 760.11 562.29

2016 160.40 99,879 623 563.06 420.50

Glen Alpin Uva Medium 2017 340.49 658,811 647 582.83 561.53

2016 339.49 787,998 663 423.82 417.69

Gowerakelle Uva Medium 2017 207.51 127,361 614 619.53 574.74

2016 208.01 131,701 633 522.02 410.86

Spring Valley Uva High 2017 548.97 480,402 694 628.08 562.81

2016 548.97 482,886 662 523.57 436.27

Telbedde Uva Medium 2017 583.83 763,656 947 585.28 549.24

2016 584.83 727,667 910 490.23 422.45

Ury Uva Medium 2017 322.42 327,941 802 610.97 544.05

2016 325.42 328,169 784 500.55 410.34

Wewesse Uva Medium 2017 263.90 352,575 746 572.89 576.60

2016 264.90 332,303 625 516.55 426.54

Performance of Estates 2017 & 2016


Performance of Estates 2017 & 2016

Rubber Estates

ElevationCategory

Year Rubber Extent ha

Total Crop(kg)

YieldKg/ha

C. O.PRs/kg

N.S.ARs/kg

Galatura Low 2017 184.64 126,368 664 499.12 323.36

2016 187.19 154,624 812 366.08 226.14

Mahawale Low 2017 232.47 132,443 569 463.71 318.16

2016 241.10 177,149 735 320.21 241.90

Millawitiya Low 2017 71.93 64,977 903 412.02 314.78

2016 52.97 51,649 975 319.26 227.47

Mutwagalla Low 2017 165.34 108,035 648 490.23 318.10

2016 158.59 141,207 884 360.25 224.86

Palmgarden Low 2017 255.83 140,818 550 506.58 316.04

2016 271.90 189,902 698 374.36 227.18

Rambukkande Low 2017 190.12 176,070 920 383.62 312.76

2016 184.93 221,007 1,187 273.86 228.00

Rye/Wikiliya Low 2017 0 0 0 0.00 0.00

2016 0 2,013 0 147.27 201.74

Ury Uva Medium 2017 9.89 5,668 573 442.83 279.38

2016 9.89 5,695 576 471.83 202.95

Wewesse Uva Medium 2017 27.32 10,870 398 406.69 279.38

2016 20.65 7,976 386 349.40 202.95

Glen Alpin Uva Medium 2017 4.83 2,285 473 483.78 279.38

2016 4.83 20 4 3,666.75 161.95


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

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

being a member/members of BALANGODA PLANTATIONS PLC do hereby appoint.

Don Harold Stassen Jayawardena or failing himAnusha Suhanda Perera or failing him Don Hasitha Stassen Jayawardena or failing him Cedric Royle Jansz or failing him Amitha Lal Gooneratne or failing himArinesarajah Shakthevale or failing himDon Soshan Kamantha Amarasekera

or…………………………………..........................................…………………............................................................................................................

..........................................................….of …………………...........................................………..……………...............…………………….………………,

as my/our proxy to represent me/us and * ………………….. to vote as indicated hereunder for me/us and on my/our behalf at the Twenty Fifth Annual General Meeting of the Company to be held on 21st June 2018 and at any adjournment thereof, and at every poll which may be taken in consequent thereof.

1) To receive and consider the report of the Directors, and the Financial Statements of the Company for the Year ended 31st December 2017 together with the Auditors’ Report thereon.

2) To re-elect Mr. D H S Jayawardena who is above the age of 70 in terms of Sections 210 and 211 of the Companies Act No. 7 of 2007 as a Director of the Company.

3) To re-elect Dr. A Shakthevale who is above the age of 70 years as a Director of the Company in terms of Section 210 and 211 of the Companies Act No.7 of 2007

4) To re-elect Mr. D S K Amarasekera who retires by rotation at the Annual General Meeting in terms of Article 92 of the Articles of Association as a Director of the Company.

5) To re-elect Mr. D Hasitha S Jayawardena at the Annual General Meeting in terms of Article 98 of the Articles of Association as a Director of the Company

6) To re-elect Mr. A S Perera at the Annual General Meeting in terms of Article 98 of the Articles of Association as a Director of the Company

7) To re-appoint M/s Ernst & Young as Auditorsand to authorize the Directors to determine their remuneration.

Signed this ………………………………….. day of ……………………………….. Two Thousand and Eighteen

Signature/s ………………………………………

Instructions regarding completion of Form of Proxy appear overleaf.

Form of Proxy

FOR AGAINST


Instructions for Completion of Form of Proxy

1. A member entitled to attend and vote at the Meeting is entitled to appoint a Proxy to attend and vote instead of him.

2. A Proxy need not be a member of the Company.

3. Kindly complete the form of Proxy, after filling in legibly your full name and address, by signing in the space provided. Please fill in the date of signature.

4. A Proxy may not speak at the Meeting unless expressly authorized by the instrument appointing him. The Proxy may vote on a poll (and join in demanding a poll) but not on show of hands.

5. If you wish the Proxy to speak at the meeting you should interpolate the words “to speak and” in the space indicated with an asterisk (*) and initial such interpolation.

6. Please indicate a “X” in the space provided how your Proxy is to vote on each resolution. 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 will vote as he thinks fit.

7. In the case of corporate member the Proxy must be completed under its Common Seal which should be affixed and attested in the manner prescribed by its Articles of Association. If the form of proxy is signed by an Attorney, the relative Power of Attorney should also accompany the completed form of proxy if it has not already been registered with the Company.

8. To be valid, the completed form of Proxy should be deposited at the Registered office of the Company at No.110 Norris Canal Road, Colombo 10, not less than 48 hours before the time of the meeting.

9. The Shareholders and the Proxy holders are kindly requested to bring this Annual Report along with an acceptable form of identity.

Contents · Distilleries Company of Sri Lanka Limited (DCSL). The convertible Debentures held by...

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Transcript of Contents · Distilleries Company of Sri Lanka Limited (DCSL). The convertible Debentures held by...