annual report 2016 - cse

Udapussellawa Plantations PLCAnnual Report 2016

Since 1750

Our COrpOrate philOsOphy

Our Visionis to be the leading agribusiness plantation Company in sri lanka.

Our Missionis to be at the forefront by enhancing shareholder value by productively

utilising our resources through diversity and innovation and continuously

improving the unique quality of our products to attract and increase our

customer base.

Our ValuesMaintaining the highest ethical standards and discharging our corporate

social responsibilities by supporting initiatives to uplift health, education

and the environment, in the communities in which we operate.

Building an exciting team-based working environment that will develop

and sustain employees at all levels.

ensuring sustainable socio-economic development by protecting and

developing our natural environment.

1uDapussellaWa plaNtatiONs plC / annual report 2016

2 uDapussellaWa plaNtatiONs plC / annual report 2016

FiNaNCial CaleNDar

Interim Financial Reports 2016 2015

First Quarter ended 31st March

(unaudited) 09.05.2016 08.05.2015

second Quarter ended 30th June

(unaudited) 05.08.2016 07.08.2015

third Quarter ended 30th september 26.10.2016 11.11.2015

(unaudited)

Fourth Quarter ended 31st December 22.02.2017 25.02.2016

(unaudited)

annual report for the year ended 31st December

(audited) 17.03.2017 18.04.2016

Meetings

20th annual General Meeting 28.06.2013

21st annual General Meeting 20.06.2014

22nd annual General Meeting 29.05.2015

23rd annual General Meeting 20.05.2016

24th annual General Meeting 27.04.2017


2016 2015 Variance - %

Performance - year ended 31st December (in Rs. ’000)

revenue 1,620,095 1,717,498 (5.67)

loss before interest & tax (168,433) (131,186) (28.39)

loss after tax (181,800) (141,744) (28.26)

total Comprehensive income (112,477) (155,742) 27.78

Financial Position - as at 31st December (in Rs. ’000)

Non Current assets 1,883,986 1,948,928 (3.33)

Current assets 378,147 322,779 17.15

total assets 2,262,133 2,271,707 (0.42)

Current liabilities 921,027 809,697 13.75

shareholders’ Funds 490,497 602,974 (18.65)

stated Capital 340,000 340,000 0.00

Capital employed 1,935,286 1,929,742 0.29

Key Financial Indicators

loss per share (rs.) (9.37) (7.31) (28.26)

Net assets per share (rs.) 25.28 31.08 (18.65)

Market price of a share (rs.) 19.40 27.90 (30.47)

Market capitalisation (rs. ’000) 376,337 541,227 (30.47)

rOCe (%) (8.70) (6.80) (28.03)

Current ratio (times) 0.41 0.40 2.99

FiNaNCial hiGhliGhtsyear ended 31st December 2016

1,620,095

(168,433)

(181,800)

(112,477)

1,883,986

378,147

2,262,133

921,027

490,497

340,000

1,935,286

(9.37)

25.28

19.40

376,337

(8.70)

0.41


ChairMaN’s MessaGe

this report is being published with the backdrop of a difficult and very challenging year for udapussellawa plantations plC and for sri lanka’s tea and rubber sectors in general. the two sectors were struggling to cope with the global downturn in trading conditions that continued from 2015 and then were hit by the worst weather conditions in recent history in sri lanka. excessive rain during the second quarter, with landslides and floods taking away many innocent lives in the Central and hill Country, was followed by an unprecedented dry spell during the second half of the year.

the impact of the weather conditions during the year resulted in the national tea production falling to a seven-year low in 2016--a drop of 11% and the third straight year of decline in production. simultaneously in 2016 tea exports dropped to a 14-year low of 287.2 Mn kg.

Next, the rapid drop in crude oil prices and the oversupply in the global market during the year had an impact on the export of natural rubber. the lack of export prospects had its impact on the Colombo auctions when the price of rubber slid to rs 240/-, its lowest level since 2009.

economythe sri lanka, economy continued to show strong progress with the estimated growth for 2016 being 5.3%. the government plans to achieve a growth rate of 7% in order to double income levels by 2025, focusing on the country being a globally competitive, export-led economy while remaining committed to the sustainable development goals adopted by the uN General assembly in 2015. the services sector, which is now the main contributor to the economy, grew at a healthy pace. earnings from tourism have continued to rise and are expected to be strong with tourist arrivals exceeding 2 Mn in 2016. several major international hotel chains have entered the sri lankan market during the last few years with the aim of making sri lanka a high-value destination. however, the agriculture sector is estimated to have contracted during the year as a result of the adverse weather conditions that prevailed during much of the year. lower tea and rubber prices also had an impact on agricultural exports. inflation has been controlled and is estimated to be around 4% in 2016. the sri lankan rupee depreciated 7.4% against the us Dollar with the dollar ending at lKr 151.66 as at 31st December 2016.

the battle with both the tea and rubber sectors had a serious negative impact on the performance of the Company, resulting in a loss of rs. 112 Mn for the year 2016. however, the results reflect a 28% improvement against the corresponding period of 2015.

it must be noted that this includes the start--up loss incurred by our new Waldemar Green tea/Oolong tea factory where commercial operations commenced during the second half

of the year, as well as the rehabilitation cost of the fields and factories of the ragala Zone estates.

Despite the difficult times, our team continued to be resilient enduring the worker unrest during wage negotiations, the consequences of the ban on glyphosate and the removal of the fertiliser subsidy. the biggest challenge of all was to manage the people and, most importantly, to maintain the morale of all employees in the face of these difficult times.

With limited financial resources available during the year under review the Company continued to invest in field and infrastructure development, focusing on improving our land base to obtain the best results from each hectare. this said, it is pertinent that the limited funds available are infused into projects where the best returns could be harnessed considering financial returns and the long--term sustainability of the business. therefore, we need to have, comprehensive understanding of the likelihood of climate change and to implement appropriate adaptation methods for our operations and the communities in which we operate.

returns from the traditional tea business are becoming increasingly skewed in recent years, proving beyond any doubt that our initiative to maintain sufficient diversity in our product portfolio has helped to broad base our revenue streams. Our accelerated rubber and timber planting and replanting initiative, commenced in 1998, whilst contributing favourably towards the annual revenue of the Company, has helped to diversify our portfolio of products.

Outlook for 2017On the production side the predictions from the weather specialist suggest that the dry conditions could continue through the first quarter, and it is expected that sri lankan tea production during the first half of 2017 will fall below the 2016 figure of 154 Mn kg. therefore, the key to sustainability will be to focus on the reduction of our cost of production. the negotiated settlement of the new wage model linked to productivity should assist the process.

the current trend in the price of tea at the Colombo auctions should hold strong, especially for orthodox black teas, leaving a small margin for correction depending on speculation of anticipated production levels, etc. this said, the weather pattern once again has been erratic in sri lanka and not in keeping with the predictions. some welcome rains were experienced during the second half of January, which should augur well for tea bushes to get re-activated and throw out some leaf. all factors considered, let’s hope we have a good start to the new year.


ChairMaN’s MessaGe (CONt.)

at the strategic level, our long-term direction will remain one of continuous development, concurrent with the consolidation of our core plantation crops and diversification--led growth.

appreciation During the year under review there was a change of the directorate. Messrs ratna ramanayake and romesh Moraes retired from the services of the Company and consequently resigned from the Board. Ms Coralie pietersz was appointed as the Finance Director. We thank the former for their long and dedicated contribution to the Company and welcome Ms pietersz to the Board.

My sincere thanks to the Management team and all employees, whose dedication and commitment have played a pivotal part in the Company’s progress during a difficult year. i extend my gratitude to all to my colleagues on the Board for their support and valued advice. in conclusion i thank all our shareholders for the trust and confidence placed in the Company, and also extend thanks to our stakeholders, who have contributed towards the Company.

Naresh ratwatteChairman


Tea

Prod

ucti

on K

g M

n

2012 2013 2014 2015 2016 Tea Production 328 340 338 329 292

% Change 100% 104% 99% 97% 89%

-

50

100

150

200

250

300

350

400

“Navigation against volatility, vagaries of weather & global turmoil”

Navigation against volatility is an inevitable feature of the business environment. the diverse risk variables get larger day by day. this doesn’t make it any easier to predict the future, but every adverse consequence brings us cherished insights into how to stay on track in a turbulent business environment.

We have concluded another challenging year: 2016, if not the hardest of yesteryears, certainly came close. it saw the Company meeting the vagaries of the weather, an increase in wages of plantation workers, the downturn of tea and rubber prices due to a multiplicity of reasons, and the ban of glyphosate, which affected a major agricultural activity.

in the absence of the fertiliser subsidy, the Company took the daring and innovative step of importing fertiliser for our own consumption, with the approval of the National Fertiliser secretariat in 2016. this accrued a substantial cost-benefit and economy of scale, mitigating the adverse effect of withdrawing the fertilizer subsidy to a certain extent, if not fully. the prevalence of artificial rubber in the backdrop of declining crude oil prices caused us to be hard pressed to sell our natural rubber and effectively prevented us from at least breaking even.

the unsettled political-socio economic conditions in the Middle eastern countries, Cis and elsewhere in the world has spoiled and further deteriorated the primary export destinations of our plantation products.

ChieF exeCutiVe OFFiCer’s reVieW

“We now accept that the business risk is inevitable. This helps the business to rebound from crisis”

although the year closed with an overall loss of rs 112 Mn from a turnover of rs 1,620 Mn in this challenging period, we have strived to manage the business of your Company with utmost resilience and sustainability. there was a continuous thrust on productivity improvements, including maximising made tea outturn, maintaining agricultural viability, revitalising age-old machineries, investing in non-traditional streams of revenue and managing fixed costs.

the tea crop harvested from our estates during the year stood at 69% of the budget or 3 Mn kg made tea. the performance of manufacturing outgrower leaf, (the filler for capacity utilisation) also has not performed to its full potential, the total intake for the year being 70% of the budget or 765,077 kg, ending the year by producing 3.8 million kg made tea, illustrated in Figure 1, along with comparative details. the deficit compared with 2015 is therefore 18% year on year, and is considered significant.

a premier regional plantation company in the forefront of forestry management has made a profit of rs 6 Mn by judicious harvesting of managed forests of the Company, which has somewhat alleviated the adverse financial performance of tea and rubber.

the coconut production during the year at yatawatte estate was 834,134 nuts, exceeding the budget by 4%.

“Dilemma of revenue from tea and rubber to compensate the additional cash outlay due to wage increase”

Without denying the fact that the plantation workers shall be adequately remunerated, on par with market conditions, the trade union action that took place during the year on its way forward in collective bargaining, ended with a productivity-based daily wage of rs 730/=, with added benefits. the protracted negotiations for a productivity-based or price-sharing wage structure concluded during the year with a wage increase of 18% and the signing of a collective agreement extant up to October 2018.

Figure 1-UPPLC Tea Production

Figure 3-Rainfall Pattern

Figure 2-Sri Lanka Tea Production

Rainfall Pattern

Tea Production

Sri Lanka Tea Production

Tea

Prod

ucti

on K

g M

n

2012 2013 2014 2015 2016 0

1

2

3

4

5

3.67 3.89 3.43 4.67 3.84

100% 106% 88% 136% 82%

Tea Production

% Change

Rai

nfal

l mm

2012 2013 2014 2015 2016 1st Quarter 319 758 176 509 292 2nd Quarter 245 704 420 561 517 3rd Quarter 230 458 336

1,540

386 137 4th Quarter 673 1,380 1,270 441

- 500

1,000 1,500 2,000

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter


ChieF exeCutiVe OFFiCer’s reVieW (CONt.)

the Western high Grown price of rs 404.81 recorded in 2015 rose to rs 496.12. Despite the external and internal factors directly affecting the business, the average tea price of the Company rose to rs 406.59 from rs 374.26 recorded in 2015 and positioned 218 invoices of various agro-climatic regions in the list of top prices. We are also pleased to mention that three invoices of Delmar topped the list as all--time record prices during the year. however, dry weather prevailed during the year, with less rainfall compared with the year 2015 as graphically illustrated, unfortunately preventing the optimum fertiliser applications and enabling us to harvest only 69% of the budgeted crop or 3 Mn kg made tea. this somewhat nullified the favourable increase in the tea price referred to above and was not able to negate the additional cash outlay. National figures also show more or less the same trend in production.

“Some critics remain sceptical that companies are not acting as well as they think they are”

the four estates reclaimed from third-party management still present a tussle to uplift them to a par with other Finlay estates. run-down soils, lack of proper agricultural inputs, lack of motivation, etc. have collectively contributed to the present state of existence. the strategic initiatives commenced in 2015 by investing rs 85 Mn for field development and conversion of the Waldemar factory to produce Green and Oolong tea is being continued.

During the year 2016 the ragala Group including Blairlomond estate produced 1,160,665 kg of made tea. that is merely 67% of the budget and is mainly attributable to the adverse weather discussed in this report. the crop harvested during the year is also behind by 257,795 kg made tea compared with the previous period.

We have adopted shear harvesting as a stance for productivity improvement as well as a solution for the shortage of tea harvesters. the productivity improvement in tea harvester deployment is reflected by the harvesters per hectare of 6.92 in 2016 compared with 7.77 in the corresponding year.

“We are certainly passionate about ‘Zero Harm’, otherwise how would we explain why we are doing it?”

your Company is manned by a population of 5,251 people of all categories, echoing our thinking that the workforce is the most treasured off-balance sheet asset. Our health and safety strategy is twofold, the first consideration being leadership from the top and the second, employee engagement. Our business, distributed in several regions in the country and being over 100 years old, has come thus far towards “Zero harm” in health and safety excellence--an overwhelming journey. Our approach is risk assessment; formulating appropriate strategies; setting realistic, achievable goals and objectives for tackling the highest risks; communicating; and leading and improving colleague engagement.

the total spending for health and safety during the year is rs 3.3 Mn, included in cost of materials and services.

We have engaged a consultant from the uK to carry out health and safety audits and provide training to our people that expands skills and develops the workforce in a safe working environment. the employees were trained, on average, 2,979 man hours per month in 2016, including sustainability.

review of the health and safety performance of the Company by the Board of Directors as well as risk assessment is periodic and obligatory, enforced and guided by risk management principles, and prioritization-proportionality-auditability. health and safety performance is being assessed and appraised by the Board of Directors, relying on key performance indicators such as injury rate, lost Day rate and Occupational illness rate worked out for male and female workers separately and benchmarked with international standards. the human and economic benefits of reaching greater heights in health and safety is a main propulsive power inter-alia on the way forward to sustainability and “Zero harm”.

“How much further do we have to travel along the road to true sustainability?”

in the past an increasing number of companies have been turning their attention towards environmental sustainability. the issue has two concepts--how to mitigate the negative impact of the business on the environment and how to minimise its consumption of finite and increasingly scarce natural resources. that we have been able to retain the rainforest alliance Certification of all our estates in 2016 is clear evidence of fulfilling the stewardship function of your Company towards true sustainability.

We are now fully on board on Credit 360, having commenced implementing it in 2015 as a reporting tool. the dashboard view shows a declining trend in the usage of energy and water and in waste generation. Concordia estate of the Company was recognised and honoured by a Merit award at the nationwide award scheme on social Dialogue convened by the Department of labour. which is a significant milestone. a more detailed report appears on pages 9-10.

We have endeavoured to increase the canopy cover by 345 ha consisting of forest and coconut plantations by 2016 predominantly by man-made vegetation. as of today we are maintaining 604 ha of forest cover, which works out to 11% of the total land base of the Company. Our diversification strategy of converting unproductive land to economically viable farmlands is aligned with the increase of canopy cover by planting eucalyptus and rubber. this has enabled us to glide on a declining trend in carbon emissions.


ChieF exeCutiVe OFFiCer’s reVieW (CONt.)

“Along with talented and agile people manning the Company we always strive to conquer the barriers on our way forward”

performance and training and development are indispensable to each other. upgrading our workforce at all levels is a top priority on the corporate agenda and a continuous process irrespective of the financial and operational performance of the Company. We consider it as investing in the “future”.

the training and development schedule of the Company has three concepts: motivation, life skills development and technical skills development. During the year we have afforded training opportunities to our employees at higher education institutions in overseas locations such as iNseaD France, and thailand, and arranged with local institutions for in-house training within the conceptual framework of Motivation-life skills-technical skills.

“Ctrl-Alt-Delete=Restart”

the expert view on the economic growth of the country is that it remains sluggish at approximately 4.5% in 2017 due to sharp fiscal consolidation, lower consumption due to lagged impact on monetary policy tightening and slow exports. it is also expected that investments remain muted while businesses are likely to cut spending due to increase of indirect and corporate tax rates.

During the year your Company has invested rs 30 Mn for land and buildings, furniture and fittings, plant and machinery, and information technology, with the highest slice of rs 17 Mn being replanting tea and rubber, thus strengthening the main streams of revenue. During the year the Company had no other alternative but to incur a sum of rs 32 Mn as the cost of borrowing, putting an additional burden on the cash outflow.

if the tea and rubber prices remain at a low ebb, and political uncertainty discord continues in overseas market destinations, then compensating for the additional cash outlay due to wage increases will require a refreshed mind-set and creative adjustments in our forward planning.

“The roots of all goodness lie in the soil of appreciation for goodness--Dalai Lama”

the Finance Director, Mr ratna ramanayake, retired from service in June 2016, having served the Company for 24 years. Ms Coralie pietersz took over as the Finance Director. Non-executive Director, Mr romesh Moraes, also retired from service in October 2016 after serving the Company for 13 years. i thank Messrs ramanayake and Moraes for being with the Company and being instrumental in bringing it to the present state of existence.

i am pleased to express my sincere gratitude to the Chairman and the members of the Board for their active and whole-hearted involvement in navigating your Company forward in a stressed --out business environment during the year. i also wish to place on record my appreciation for the unstinted cooperation extended by the management, staff, workmen, shareholders and all the stakeholders, and look forward to your cooperation in the years to come.

Dushanth ratwatteDirector/Chief executive Officer


Business

EnvironmentProducts

PartnershipsPeople &

Community

Delivering asustainable

future

sustaiNaBility perFOrMaNCe reVieW

in 2008 a strategy was formulated with the objective of creating a sustainable business. Five high-level group sustainability commitments were identified during the strategic planning process to guide our actions and evaluate our success.

people and Community We strive to make Finlays an enjoyable and rewarding place to work at, as well as an organisation that nurtures and develops people for the benefit of the individual, the Company and the community.

an awareness campaign for improving workplace harmony and community relationships was launched with kick-off sessions held in each region by the Department of labour, on social Dialogue and Workplace Cooperation, with more than 300 participants in each region. the exercise continued with sessions on stress management at the workplace. the activities conducted were evaluated at the end of the year by government representatives. Concordia estate won the merit award for the implementation of best practices. General awareness of sustainable agriculture Network (saN) (rainforest alliance) were conducted for employees and communities in the ragala region.

We experienced a prolonged drought which reduced the availability of drinking water. a supply of approximately 1000 purification units at a concessionary rate for families in the regions of Matale, Nuwara eliya and ragala was one of the programmes implemented to provide safe drinking water for the communities in which we operate. at Concordia estate, the project to build 20 housing units to accommodate residents affected by the landslide was completed and the occupants were relocated successfully through the new housing scheme.

Many estates contributed to the corporate social initiatives undertaken to bring relief to those affected by the landslide that occurred in aranayaka by donating food and other

household necessities. this was an opportunity for us to share and understand the impact of sudden natural disasters on people. the employees of udapusellawa embraced this ethos and excelled in social responsibility.

products

Crop Diversification the crop diversification from tea to rubber, coconut, forestry and ancillary crops under a crop diversification strategy continued. in 2016 the Company produced 16,629 litres of rubber latex, 834,130 coconuts and 29,276 cubic feet of timber/fuelwood. By the end of 2016, the total extent under coconut cultivation reached 165 ha, while timber and pepper extents reached 318.25 ha and 25 ha respectively.

ancillary crops mitigate the risk of price fluctuation in the main crops of tea and rubber. the contribution from the growth of the ancillary crops sector to the economic sustainability of the business was impacted by the prevailing drought. Currently, pepper, coffee and cinnamon have been identified as the key ancillary crops to be grown within the estates, which will add value to our product portfolio. During the year under review, feasibility studies were continued to identify other possible crops for diversification, especially in the ragala region.

product Diversificationthe Waldemar factory continued its production of Oolong tea, which was made available at auction during the year under review. apart from Oolong, the green tea produced from Waldemar, which has a unique taste, has triggered the sales of ragala tea.

land ManagementOur effort to nurture our soil continued at all estates. it was a difficult challenge to retain the water content of the land as the drought drained the water retained in most of the catchment areas. efforts to develop the soil conditions as well as provide the required inputs such as fertiliser were carried out to improve the land where we grow our tea..Despite the improvement of the ragala Zone estates the progress we expected was impeded by unfavourable weather conditions. We implemented initiatives to maintain the soil conditions, preventing further deterioration. Field innovation Group (FiG), an initiative to harness and concentrate the knowledge of experts of the region, was launched as a new way of sharing best practices.


sustaiNaBility perFOrMaNCe reVieW (CONt.)

Certifications all estates of the Matale and Nuwara eliya Zones maintained the certification status of sustainable agriculture Network (saN) standard. the reclaimed ragala Zone continued to carry out familiarisation programmes on saN during 2016.

environment a prolonged drought, possibly the worst one experienced during the last 18 years, affected the fertility of our land. the importance of studying micro-climatic changes is increasingly justified since it is obvious that traditional weather prediction is no longer accurate. For this reason, the weather station installed at Court lodge was supported by another weather station installed at Concordia. the requirements of continuation of the research and the legal aspects of these agreements were reviewed and submitted to signature for ritsumeikan science university in 2016.

all estates participated in the World environmental Day events conducted by our parent Company during June 2016. alnwick estate won the intercompany Merit award for innovation for the making of ornaments using waste material

by the children of the estate. Court lodge estate contributed to the programme with the staff team organising the cleaning campaign at Bomburu ella followed by an awareness session on cleaning and waste management.

partnerships Discussions were held with plantation human trust and the government to plan housing schemes and sanitation and water projects. Duckwari estate completed the housing projects from funds received for the relocation of people affected by landslides on their estate.

Global reporting initiativesFinlays’ entities continued reporting non-financial data on sustainability and health & safety for consolidation at the group level. the data collection and reporting system of the new system of Credit 360 is in place.

the group Gri indicators have been chosen to complement our sustainable development strategy. Group indicators reported against eight indicators and in accordance with the Gri –G4 guideline on core indicators.

2016 2015 Variation

Carbon total carbon (tonnes CO2e) 1,952 2,452 -20% Decreased as a result of low production. total scope 1 emissions (tonnes CO2e) 464 544 -15% emission due to usage of fuel has decreased due to low

usage.total scope 2 emissions (tonnes CO2e) 1,325 1,747 -24% emission due to electricity usage has decreased due to

low consumption of electricity due to lower crop.total scope 3 emissions (tonnes CO2e) 163 161 1% emission has increased due to inclusion of

transportation of latex.Energy total energy (GJ) 143,589 145,051 -1% Not a sginificant variation, but low crop resulting in low

usage.Direct (kWh) 37,005,835 36,401,024 2% increased due to usage of firewood and briquettes. Direct non-renewable (kWh) 1,889,422 2,320,131 -19% Decreased due to low intake of leaf transport. Direct renewable (kWh) 35,116,413 34,080,893 3% increased due to reclaimed ragala Zone. indirect (kWh) 2,879,888 3,890,899 -26% Decreased due to low usage of electricity. indirect Non-renewable (kWh) 1,468,743 1,766,086 -17% Decreased due to low usage of electricity. indirect renewable (kWh) 1,411,145 2,124,814 -34% Decreased due to low usage of electricity, and the low

percentage of contribution from hydropower to the national grid.

total renewable 131,499 130,340 1% increased due to use of firewood and briquettes.

Waste total waste (tonnes) 431 489 -12% Decrease in generation of waste due to low production.total landfill (tonnes) 190 137 39% increased due to increased usage of paddy husk.total waste recovered (tonnes) 205 333 -39% Decreased due to low production and reusing of waste

and landfilling.total waste recycled (tonnes) 0 7 -98% the low usage of chemical cans, which is the main

component.total waste reused (tonnes) 36 12 202% Burying will contribute to the improvement of soil

conditions in coconut land as well as facilitate rainwater harvesting.

Water Net water use (m3) 9,635 8,261 17% increased due to water usage by the Waldemar and other

ragala Zone processing centres.

1,952 464

1,325

163

143,589

37,005,835 1,889,422

35,116,4132,879,888 1,468,743 1,411,145

131,499

431190205

0

36

9,635


FiNaNCial reVieW

summary of the financial performance compared to the previous year is given below.

2016 2015 Variance Key reasons

Restated Amount %

revenue rs. Mn 1,620 1,717 (97) -6% Decrease in turnover is mainly due to decline in the sales volume. sales volume declined by over 13% compared to 2015.

Gross loss rs. Mn (28) (61) 33 54% the improved performance is due to the increase

in tea prices during the last quarter of the year and the reduction in the losses incurred by the ragala estates.

Gross Margin % -2% -4% 2% 51% as above

loss before interest & tax rs. Mn (168) (130) (38) -29% Mainly due to the loss on the fair valuation of consumable biological assets against a gain in the previous year.

Net interest Cost rs. Mn (42) (28) (14) -50% interest cost has increased due to increased borrowings

and increase in market interest rates. loss after tax rs. Mn (182) (141) (41) -29% the loss is higher than in 2015 due to decline in crop

harvested and the loss on the valuation of biological assets.

Other Comprehensive income (expense) 69 (14) 83 593% Other Comprehensive income is higher than last year due to the gain arising from the actuarial valuation of retirement benefit obligations net of deferred tax.

total Comprehensive income for the year (112) (156) 44 28% the gain on actuarial valuation for retirement benefit obligations offsets the impact of the loss on fair value of consumable biological assets.

loss per share rs. (9.37) (7.31) (2) -28% Net assets Value per share rs. 25 31 (6) -19%

shareholders’ Funds rs. Mn 490 602 (112) 19%

Current ratio (times) 0.41 0.40 0.01 2% the current ratio has increased marginally at the year-end mainly due to increase in inventory.

performancethe Company recorded a loss of rs 210 Mn after tax against the loss of rs. 159 Mn recorded in the previous year. however, total comprehensive income improved, recording a negative rs 112 Mn against rs 156 Mn recorded in the previous year. this was due mainly to a gain on re-measurement of retirement benefit obligations amounting to rs 82 Mn. the increase in tea prices during the latter half of the year did not mitigate the impact on the drop in the production of tea, and

the increase of wages of plantation workers in October 2016, as elaborated on in the CeO‘s review on pages 6-8. Further, re-acquisition of four estates in ragala Zone in 2014 continued to have an adverse impact. however, with the implementation of better agricultural practices, the loss incurred by these four estates was reduced considerably in 2016. the gross loss attributable to tea declined by 41% or rs 31 Mn compared to the previous year mainly due to the improved performance of the estates in the ragala Zone.

1,620

(28)

-2%

(168)

(42)

(182)

69

(112)

(9.37)

25

490

0.41


FiNaNCial reVieW (CONt.)

profit after tax and the cash generated during the last five years are given below.

segmental turnovertotal turnover of the Company is rs. 1.6 Bn compared to the turnover of rs. 1.7 Bn the previous year, which represents a decrease of 6% or rs 97 Mn.

2012 2013 2014 2015 2016

tea 1,253 1,569 1,515 1,666 1574

Coconut/rubber 21 21 21 31 26

Others 38 21 13 21 19

teaturnover of the tea sector decreased by 5% compared to the previous year due to the decline in volume (by 13%) as a result of the adverse weather conditions that prevailed throughout the year. however, the impact was reduced due to the increase in price by rs 31 or 8%. Coconutthe Coconut crop at our yatawatte estate was 834,000 nuts compared to 804,000 nuts the previous year, contributing rs. 26 Mn to the top line.

Other revenue Other revenue comprises revenue from other agricultural activities, namely the sale of timber, revenue from ancillary crops, and other operating income which includes rent income on idle assets and amortisation of capital grants. Due to inconsistent performance of major crops the Company has also focused on downstream revenue to mitigate the losses incurred by the major crops. During the year under review the Company recorded a contribution of rs 19 Mn from other agricultural income against rs. 21 Mn recorded in the previous year and other income of rs. 28 Mn against rs. 31 Mn recorded in the previous year.

Gross profit MarginOverall Gp margin is 2% negative against the previous year margin of 4% negative. the improvement was mainly due to the increase in tea prices during the last quarter of the year and the decline in losses incurred by the ragala estates despite reduction in tea production.

total Comprehensive income after tax total comprehensive income for the year is negative rs. 112 Mn compared to rs. 156 Mn negative in the previous year. the main reason for the improvement is the gain on re-measurement of the retirement benefit obligation of rs 82 Mn against a loss on re-measurement of the retirement benefit obligation of rs 16 Mn in the previous year. Finance Costthe last three years have seen a significant increase in borrowings due to our commitment to continue investments in field and factory despite the poor performance of the main crops. Coupled with the increase in the market interest rates the borrowing cost has increased by rs 14 Mn or 50% during the year.

Gearing ratioBorrowing in the last two years increased due to the cash generated from operations being insufficient to meet the planned capital investment and recorded 36% (previous year 23%) loan capital against the equity at the end of the year.

150

100

50

0

(50)

(100)

(150)

(200)

Rs.

Mill

ion

2012 2013 2014 2015 2016

PAT Net cash from oparations

Tea Coconut/Rubber Others

Rs.

Mill

ion

0

1000

2000

3000

2012 2013 2014 2015 2016

Rs.

Mill

ion

800

600

400

200

0

Borrowings Interest cost2012 2013 2014 2015 2016


FiNaNCial reVieW (CONt.)

taxationincome taxation for the year of rs. 28 Mn favourable due to rs 34 Mn adjustment to the differed tax asset. the total tax payment for the year on other income is rs 5 Mn against rs 4 Mn the previous year.

the Company’s deferred tax assets as at the end of the year is rs 57 Mn, which is rs 21 Mn increase from the previous year.

the carry forward tax loss as at 31st December 2016 amounts to rs 1,028 Mn compared to rs. 862 Mn at the end of the previous year.

liquidity positionthe liquidity position of the Company remains unchanged at the end of the year compared to the previous year recording the current ratio of 0.41 times against 0.40 times last year. Capital expenditureDespite the adverse trading conditions, the Company continued with development plans and invested rs. 17 Mn for field and rs. 15 Mn on factory and infrastructure development compared to rs. 22 Mn and 89 Mn respectively the previous year.

loss per shareloss per share is rs 9.37 for the year compared to rs. 7.31 for the previous year.

Cash earnings per shareCash earnings per share indicates the cash generated by the Company per share before capital expenditure. this indicates rs 6.94 negative per share for the year compared to the previous year’s figure of rs 2.24 positive.

return on Capital employed (rOCe)this indicates the return before tax on overall invested capital including non-current and current assets. rOCe for the year under review is negative 7%, the same as the previous year.

Net assets per share a net asset per share of the company at the end of the year is rs 25, which is a drop of rs 6 per share compared to the previous year. this drop is mainly due to the loss incurred during the year.

Shareholders’ Funds Loan Capital Gearing Ratio

-100

400

2012 2013 2014 2015 2016

Rs.

Mill

ion

0

10

20

30

40

50

60

70

80

90

100

%

Tea

Timber & Others

Factory

Infrastructure

Earnings / (Loss) per share

Rs.

-10

-5

0

5

10

2012 2013 2014 2015 2016

ROCE

Rs.

-10

-5

0

5

10

2012 2013 2014 2015 2016

Net Assets per Share

Rs.

0

10

20

30

40

2012 2013 2014 2015 2016


a structured approach to manage the uncertain events,

situations or circumstances in internal or external business

environments that cause negative consequences to the

business is termed enterprise risk Management.

the Company has established a comprehensive and

structured enterprise risk Management process to identify,

assess, report and monitor the risks associated with the

business so as to eliminate or mitigate such risks.

the primary goal of the Company’s risk management

process is not necessarily to fully eliminate the risk, which

would also eliminate potential rewards, but to systematically

and effectively address the risks we are exposed to.

the risk management process of the Company includes the

following.

• Oversight of the risk management system

• risk profiling through the risk register and assigning

risk ratings

• periodic reviews of the risk register

• Formulating and implementing risk management

initiatives

• Compliance and control

• internal and external audit review and reporting

• review and reporting by the audit Committee

the risk profiling exercise has identified key business and

operational facets under which various risks have been

categorised, along with rating for likelihood and severity,

based on a unified rating scale across the group. the final

risk rating is therefore a product of severity index and a

likelihood index, resulting in a point rating recognising the

respective importance of a risk event.

the Company’s audit supervisory Committee and the audit

Committee, through the internal audit function, review and

report to the Board on the effectiveness and completeness

of the Company’s internal controls with a view to effectively

managing the business and operational risks.

Key risks and action taken to mitigate these risks is set

out below. No significant changes to the risk status of the

Company during the year, compared to the previous year.

risk register review twice a year serves as essential in the

boardroom governance procedure.

eNterprise risK MaNaGeMeNt

economic risk the lacklustre demand from the traditional market

destinations of our products, such as the Cis and Middle

eastern countries, continues to create harsh economic

and security conditions, causing an ebb in tea prices. the

trend in lower rubber prices continued in 2016. here again

the slowdown in economic activity of the main market

destinations and prevalence of artificial rubber linked to the

crude oil price, significant and sustained increase in energy

costs such as electricity and firewood, resulting in higher

production costs, are some examples of the risks identified

under economic risks of the Company.

Focus on crop diversification that contributes faster returns

and high land productivity (i.e. cinnamon, cocoa, coconut

and pepper) and diversification to new products that capture

new markets and higher returns (i.e. Green tea and Oolong

tea) are some risk mitigation actions introduced to manage

the identified risks.

industry risk the Company strives to produce true-to-type teas, high

quality rubber latex and other agricultural products in

the right quantity at the right time and thereby retain

competitive advantage positioning in the market whilst

ensuring product costs are well controlled and managed for

maximum economic viability. Management time is devoted

to uplifting estates identified as business units of low land-

labour productivity.

however, uncertainty in price fluctuations of the products

and competition from the lower-cost production countries

are examples of industrial risks that the Company is

concerned about. Crop diversification, rainforest alliance

Certification and new product developments are the

strategies that the Company is adopting to mitigate the

associated risks.

Good agricultural practices, improving land-labour ratio

and tea infilling adopted by the Company ensure a healthy

plantation crop and also minimise the risk of potential loss

due to pests and diseases. the Company is keen to explore

alternative energy sources to mitigate the risk of shortage

of firewood. Well-organised forestry management is being

practised to mitigate the risk of forest fires.


eNterprise risK MaNaGeMeNt (CONt.)

strategic risk the policy of the Company is to scientifically evaluate

strategic initiatives such as acquisitions and joint ventures

prior to firm decisions being made. post-completion audits

to serve as an important tool in monitoring the risk.

social risk there are risks related to changes in demographics and

social mores. the Company, through its human resource

development initiatives, is in a position to retain the

required workforce for continued operation. the Company

does not employ child labour under any circumstance.

technological risks the manufacturing facilities of the Company are maintained

according to industry standards with requisite financial

inputs, along with obtaining and retaining international

quality accreditations. a phased--out five--year investment

plan has been formulated to address the issue of ageing

factories.

political risks the Company is not politically aligned with any specific

political party or campaign, in accordance with its group

code of conduct. however, political intervention in wage

negotiations is a risk associated with the industry. after

protracted negotiations the rpCs agreed to a wage increase

of 18% in the year 2016.

Organisational risks the internal control system serves as the main mechanism

of identifying and mitigating organisational risk.

the audit Committee, through the internal and external

audit, ensures adequacy and completeness of the internal

control system by reviewing and recommending information

to the Board for revision or amendment.

environmental riskall manufacturing plants are under constant review to

identify and eliminate any potential threat that could

result in damage to buildings, restricted access to raw

materials or loss of human capital. all vulnerable locations

are sufficiently equipped with firefighting equipment and

provide appropriate training to personnel based on expert

advice. the risks associated with landslides is discussed

under health and safety risk.

Financial risk the Company strives to maintain a healthy financial

structure at all times whilst resorting to concessionary

and advantageous lending rates, and maintaining a good

relationship with banks and lending institutions at all times.

the Company resorts to regular credit checks on customers,

setting terms of trade early in the process. Checking invoices

and adopting a periodic follow-up through the erp system

enables effective management of this aspect of the business.

the financial and operational performance being below

expectations, as explained elsewhere in this report in more

detail, has led the Company to borrow rs 98 million as

working capital. the Company would resort to discounting

the sales prompt and closer monitoring of working capital in

the alternate.

Business continuity risk the Company’s workforce is unionised. the collective

agreement between the trade unions and the employers’

Federation of Ceylon, of which the Company is a member,

and other human resource development initiatives by

the Company has led to industrial harmony. thereby the

Company has been able to maintain a reliable supply chain.

the wage negotiations concluded during the year with the

signing of a collective agreement extant till 2018 with a daily

wage of rs 730/-.

the outgrowers being a very important external link in the

supply chain accruing substantial revenue to the Company,

are being remunerated according to the price formula set by

the sri lanka tea Board.

project risks all the subsidiary projects are subject to stringent

preplanning, technical evaluations and scientific investment

appraisals, thus addressing the risks related to technical

difficulties and commercial obstacles. the post-completion

audits serve as an important tool in managing this aspect

of business risk. every endeavour is made to sustain the

rainforest alliance certificate while working with the

certification body closely.

human resource risk the Company considers developing its human capital as

vital for business continuity. employees at all operational

levels, including shop floor workmen, are being

appropriately trained, based on need assessment by the

human resource development function of the Company.


significant and sustained labour inflation in the plantation

sector in sri lanka is one of the major risk concerns and

the Company has taken measures to mitigate this risk by

reducing the number of production floor people through

factory automation, mechanisation of field preparation in

tea estates and improving shear harvesting. Furthermore, as

a long-term strategy, the Company has extended its product

portfolio, introducing new rubber, timber, cinnamon and

pepper plantations that are less labour intensive.

policies are in place to mitigate the risk of loss of key

management talent due to accidents.

health and safety risk the risk related to employee health and safety in the

workplace receives the foremost attention and Company

policy is to gain “Zero harm”. safety precautions have been

taken with regard to all the machinery and equipment that

have a potential for injury, with trained personnel working

at each location and periodic h & s audits. the Company is

conscious of landslide-prone areas and appropriate action

is being taken in consultation with the National Building

research Organization. personnel protective equipment

has been provided as appropriate, with proper training.

employee training at all levels is being continued, with the

involvement of local and overseas trainers. the Company

is conscious of the declining trend in the availability of

potable water. health and safety serves as a main item on

the corporate agenda.

property risk all assets are adequately safeguarded with appropriate

controls for inventory protection against spoilage or theft.

adequate insurance cover is in place as the most effective

risk transfer mechanism. the Company in its Corporate

Code of Conduct has formulated and introduced a whistle-

blowing policy as an anti-fraud mechanism.

reputation risk the Company is concerned with the risks related to the

perception of the organisation by its stakeholders, the

media, and the general public, that could impact liquidity,

capital or credit rating. the Company is striving to safeguard

the international standardisation accreditations such as

the international standards Organization (isO), hazard

analysis and Critical Control point system (haCCp), ethical

tea partnership (etp), Fair trade Certifications, rain Forest

alliance (ra) Certifications held at present by our factories

and estates.

information risk the Company is able to produce accurate, relevant, reliable,

timely and complete information fulfilling the appropriate

requirements of each stakeholder with the aid of the erp

system. Keeping pace with the rapid changes in information

technology, the erp system has been upgraded to the latest

software, and is the source of business information for the

Board of Directors and senior management. a well-designed

information back-up procedure is in place along with a

Disaster recovery plan to resume business with the least

possible delay. the computer hardware will be used until

vendor support expires.

legal and regulatory risk the Company, with the active involvement of its Company

secretaries, Messrs s s p Corporate services (pvt) ltd, legal

advisers Messrs Julius & Creasy, external auditors Messrs

KpMG and internal auditors, ensures compliance with all

legislative and regulatory requirements.

Control risk the Company ensures a sound system of internal controls

is maintained to safeguard shareholders’ investments and

Company assets, and also to manage business-related risks.

the internal control system is designed, and periodically

reviewed and modified as appropriate, with a view to

achieving data integrity, data and system availability,

eliminating malpractices by employees and outsiders

such as theft, deception, forgery or false accounting. the

internal audit function is outsourced to a reputed and well--

experienced firm of chartered accountants as stated in the

report of the audit Committee. the external audit by KpMG

gives an assurance over financial statements.

professional risk the Board of Directors exerts its stewardship function

effectively for the Company. the Board collectively decides

on the appointment of Directors. the retirement and

reelection of Directors take place as set out in the articles

of association of the Company. Managers with appropriate

qualifications and experience are being recruited through

a screening and selection process and remunerated as

recommended by the Company’s remuneration committee.

the Company is not foreseeing any potential risk of

misrepresentation, defamation or corporate insolvency.

eNterprise risK MaNaGeMeNt (CONt.)


COrpOrate GOVerNaNCe

the Board of Directors of the Company makes a concerted

effort at all times to manage the Company with robust,

resilient and up-to-date governance practices, and strives to

continuously improve its performance of the stewardship

function bestowed in the interests of all the stakeholders of

the Company. the Company adopted transparent, ethical

and good governance practices in the process of long-term

value creation in the interest of all stakeholders.

the Board of Directors has given its highest priority to

attaining a high standard of corporate governance practices

as specified by regulatory bodies and legislation such as

the institute of Chartered accountants of sri lanka, the

securities & exchange Commission of sri lanka and the

Companies act No. 7 of 2007.

the Company’s Corporate Governance framework is

expected to ensure a transparent and good governance

system leading towards enhancing profitability and long-

term economic and environmental sustainability.

Chairman & Chief executive Officerthe balance of power is ensured by segregation of

responsibilities and authority in a distinctive manner

between the Chairman and the Chief executive Officer. Mr

N.K.h. ratwatte, Chairman, relinquished the executive role

with effect from 1st January 2016 and functioned as Non-

executive Chairman of the Company, with Mr D.J. ratwatte

serving as the executive Director and Chief executive Officer

with effect from 1st January 2016.

the Board Balance

Non-executive Directors & independent Non-executive Directorsat the beginning of the year the Board of Directors

contained altogether ten members. eight are Non-executive

Directors; three of the eight Non-executive Directors are

independent. this composition complies with the Cse listing

rules 7.10.1 (a) to (c) and 7.10.2 (a).

all independent Non-executive Directors have duly declared

their independence by the annual declaration in accordance

with Cse listing rule 7.10.2 (b) and the Board of Directors

has determined their independence or non-independence in

accordance with Cse listing rule 7.10.3.

the state of independence of Non-executive Directors was

determined by the Board of Directors based on the annual

declarations in compliance with Cse listing rule 7.10.3 (a)

and Cse listing rules 7.10.4 (a), (e) and (g).

all the members of the Board devote their time and effort

to fulfilling their stewardship function, and are available for

consultation and advice in person or via communication

channels whenever necessary.

the Board meets every quarter, or more frequently

as required to approve strategic initiatives, provide

entrepreneurial and strategic guidance and review

operational and financial performance.

the composition of the Board of Directors, attendance

of Directors at the Board meetings during the year and

retirements and new appointments are as follows.

Mr N.K.h. ratwatte NeD/Chairman 4/4

Mr D.J. ratwatte eD/CeO 4/4

Mr r.a.D.r. ramanayake eD/FD 2/4

(retired w.e.f. 30th June 2016)

Ms M.C. pietersz eD/FD 2/4

(appointed w.e.f. 1st July 2016)

Mr e.r.C. Moraes NeD 3/4

(retired w.e.f. 14th October 2016)

Mr h.a.s. Crawford NeD 3/4

Mr G.r. Chambers NeD 4/4

Mr J.M. rutherford NeD 4/4

Mr a.N. Wickramasinghe iNeD 3/4

Mr J. Molligoda iNeD 4/4

Mr M. Vamadevan iNeD 4/4

eD : executive Director

NeD : Non-executive Director

iNeD : independent Non-executive Director

CeO : Chief executive Officer

FD : Finance Director

appointments to the BoardWe consider that the combined knowledge and expertise

of the Board of Directors would be capable of meeting the

strategic objectives of the Company whilst adhering to the

best governance practices. the existing Board of Directors

collectively decides with full consent relating to new

appointments of Directors in accordance with the articles of

association of the Company.


a brief ‘re’sume’ of all the Directors, describing the nature

of expertise in relevant functional areas and whether such

Directors are considered independent or non-independent,

including the Directors newly appointed during the year, is

given in this report in compliance with Cse listing rule 7.10.3

(c).

the Board of Directors, by setting criteria, procedure,

qualifications and any special attributes, collectively decide

the appointments to senior managerial positions of the

Company.

re-election of Directorsthe re-election of directors takes place under terms of

articles 86, 87 and 94 of the articles of association of

the Company. the notice of the annual General Meeting

provides sufficient information for the shareholders to make

informed decisions in re-electing the Directors.

remuneration Committee & Directors’ remunerationthe Company has its own remuneration committee. this

remuneration committee comprises two independent non-

executive directors as follows in compliance with rule 7.10.5

(a).

the names of the Directors in the remuneration committee

as required by Cse listing rule 7.10.5 (c) appears on page 20

of this report.

in compliance with the Cse listing rule 7.10.5 (b), the

remuneration committee bases its recommendations on

remuneration of Directors and senior management broadly

on prevailing market rates and individual performance for

the final determination of remuneration.

the gross amount paid as Directors’ fees is disclosed

under notes to the financial statements, Note No. 31.2, in

compliance with rule 7.10.5 (c).

Major transactions, dialogue with share holders and annual reportDetails of all major transactions have been disclosed in this

report.

the Company website (www.finlays.net) is updated and

maintained with Company information for the benefit of any

stakeholder.

Ms M.C. pietersz Finance Director, acts as the designated

officer of the Company to clarify any matters relating to the

annual report in CD-rOM or any other relevant information.

the Company has made arrangements to notify shareholders

when the annual General Meeting convenes and to distribute

the financial statements to all the shareholders well on time

as determined by the relevant statute. it encourages all the

shareholders to attend the annual General Meeting and

exercise their voting rights.

sustainability reportingthe Company uses the Global reporting initiative (Gri)

guidelines in sustainability reporting in respect of all the

estates certified under the rain Forest alliance principles.

Compliance with Gri guidelines adequately covers the

National Green reporting system of sri lanka. the Company

uses the Credit 360 reporting mechanism for health and

safety and sustainability reporting.

a separate report on sustainability is provided in this report

for the benefit of all the stakeholders.

audit committeethe audit Committee of the Company, separate from the

parent Company’s audit committee in compliance with rule

7.10.6 (c), is chaired by a fellow member of the institute of

Chartered accountants of sri lanka comprising independent

Non-executive Directors, also complying with rule 7.10.6 (a).

the audit Committee held four meetings for the year 2016.

a separate report by the Chairman of the audit Committee

appears on pages 27-28, indicating the names of Directors

on the audit Committee and their attendance at meetings in

compliance with rule 7.10.6 (c).

related party transactions review committeethe committee performed throughout the year 2016 and

held four meetings in compliance with section 9 of the

listing rules. a more detailed account of the committee

appears on page 21 of this annual report.

the names of the Directors in the related party transactions

review committee appear on page 21 of this report.

the Chief executive Officer, Finance Director and Financial

Controller also attended the meetings held in 2016.

COrpOrate GOVerNaNCe (CONt.)


internal controlinternal and management audit function continues to be

outsourced and is being carried out by Messrs B.r. De silva

& Co., Chartered accountants. the service provided by the

firm of accountants is subject to annual evaluation as an

external service provider and governed by a service level

agreement (sla).

periodic reviews of the internal controls covering financial,

operational, and compliance requirements and risk exposure

have obtained reasonable assurance of their effectiveness

and adherence.

Group Corporate Code of Conductthe Company adheres to the Group Corporate Code

of Conduct. the Code summarizes Finlays standards,

expectations and commitments in those areas which the

Company deems key to its commitments to corporate

responsibility and is subject to review and revision annually.

Version 6 for the year 2016 was introduced on January 14,

2016 with the inclusion of uK Bribery act 2010.

the internal whistle-blowing policy and procedure,

introduced in the year 2010 as a suggestion scheme and an

anti-fraud mechanism, works well with the communication

channels open, to any user. the revised version for the year

2016 was introduced on November 16, 2016.

Corporate policy manualthe Company is broadly guided by the corporate policy

manual as a governance tool including the integrated policy

document.

the fundamental principles of the corporate policy are:

to be legally compliant

to meet or exceed customer and shareholder expectations

to recognize the contribution and value of all our employees

to be sensitive to the environment

to be economically sustainable

to be socially responsible

to pursue continuous improvement.

COrpOrate GOVerNaNCe (CONt.)

Going concernthe Directors are satisfied that the Company has the

resources to continue in business for the foreseeable future

as a going concern.

Directors’ reportthe Company has not engaged in any activity which

contravenes laws and regulations. all material interests

involving the Company have been properly disclosed in note

28 to the financial statements on page 59.

the Company is in compliance with the Colombo stock

exchange listing rules on Corporate Governance, disclosure

requirements for public limited companies and the

Companies act No. 7 of 2007.

Financial reportingthe Company has disclosed financial and non-financial

information in the form of quarterly financial statements

and the annual report. the quarterly financial statements are

subject to review by the audit committee.

Overall reporting integrity is exhibited by the statement of

Directors’ responsibility in relation to financial statements

on page 26.

Management discussion and analytical reportthe reports by the Chairman and the Chief executive

Officer deal with industry structure and developments,

opportunities and threats, risks and concerns, social and

environmental protection activities, financial performance,

material developments in human resources and industrial

relations and prospects for the future in detail.

information to the Board of Directorsthe Company’s erp system provides complete, timely,

adequate and relevant information to the Board and senior

management, enabling them to make informed decisions.

the Board meets quarterly as mentioned above, and is

supplied with all relevant information prior to the scheduled

meetings.

Company secretarya body corporate, Messrs s s p Corporate services (private)

limited, acts as the Company secretary.


the remuneration Committee, appointed by and responsible

to the Board of Directors, consists of three Non-executive

Directors, namely Mr J. Molligoda, Mr G.r Chambers and Mr

a.N. Wickramasinghe.

the Committee is chaired by Mr J. Molligoda. the Committee

met once during the financial year.

role of the Committeethe remuneration Committee has reviewed and recommended

to the Board of Directors the policy on remuneration for the

executive staff. the aggregate remuneration received by the

Directors was rs. 3.6 Mn.

remuneration policy in a highly competitive environment, attracting and retaining

executives of high calibre is a key challenge faced by the Group.

in this context, the Committee took into account competition,

market information and performance evaluation methodology

in declaring the overall remuneration policy.

J. MolligodaChairman

remuneration Committee

Colombo

17th March 2017

repOrt OF the reMuNeratiON COMMittee


the Company, as a responsible corporate citizen, complies

with the relevant legislation by forming the related party

transactions review Committee to ensure that the interests of

shareholders as a whole are taken into account when engaging

in transactions with related parties.

Compositionthe committee comprises a combination of independent Non-

executive Directors and a Non-executive Director, fulfilling Cse

listing rule 9.2.2. the names of the Directors, their status of

independence and positions occupied in the committee are

as follows.

Mr J. Molligoda--independent Non-executive Director

Chairman

Mr M. Vamadevan--independent Non-executive Director

Member

Mr a.N. Wickramasinghe--independent Non-executive

Director-Member

Mr N.K.h. ratwatte--Non-executive Director

Member

all independent Non-executive Directors have duly declared

their independence by the annual declaration in compliance

with Cse listing rule 7.10.2 (b) and the Board of Directors has

determined their independence or non-independence under

Cse listing rule 7.10.3.

the Chief executive Officer, Finance Director and Financial

Controller attended the meetings held in 2016. the minutes of

the meetings were duly recorded and disseminated to the Board

of Directors. there had not been any related party transaction,

non-recurrent or recurrent, requiring shareholder approval.

Committee meetingsthe committee performed throughout the year 2016 and

held four quarterly meetings for the purpose of reviewing the

transactions in compliance with section 9.2.1 and 9.2.4 of the

listing rules. the proceedings of the meetings were minuted

and duly disseminated to the Directors.

repOrt OF the relateD party traNsaCtiONs reVieW COMMittee

the attendance of the Directors at the committee meetings for

the year 2016 is as follows;

Mr J. Molligoda 3/4

Mr M. Vamadevan 4/4

Mr a.N. Wickremasinghe 4/4

Mr N.K.h. ratwatte 1/4

information to the Board of Directors and to the committeethe Company’s erp system provides complete, timely, adequate

and relevant information to the Board and senior management

and thereby to the related party transactions review committee.

the committee is formed and functioning as per Cse listing

rules section 9 and lKas 24.

the related party transactions entered during the year are

shown in Note 28 on page 59.


related party transactions review Committee

17th March 2017


aNNual repOrt OF the BOarD OF DireCtOrs ON the aFFairs OF the COMpaNy

the details set out herein provide the pertinent information

required by the Companies act No. 7 of 2007, the Colombo

stock exchange listing rules, and are guided by recommended

best accounting practices.

principal activities and Business review/Future Developmentsthe Company is engaged mainly in the cultivation, manufacture

and marketing of tea, rubber, coconut and forestry products,

operating mainly in the Central province.

a review of the business of the Company and its performance

during the year, with comments on financial results and future

strategic developments, is contained in the Chairman’s Message

(pages 4-5), Chief executive Officer’s review (pages 6-8) and

Financial review (pages 11-13). these reports together with

the financial statements reflect the state of affairs of the

Company.

the Directors, to the best of their knowledge and belief, confirm

that the Company has not engaged in any activities that

contravene laws and regulations.

Financial statementsthe financial statements of the Company are given on pages

30-63.

auditors’ reportthe auditors’ report on the financial statements is given on

page 29.

accounting policies the accounting policies adopted in the preparation of the

financial statements are given on pages 34-42. there were no

changes in the accounting policies adopted other than change

in the accounting policy with regard to the accounting for

produce on bearer biological assets which has been more fully

described in Note 32 on page 60 of this report.

Directors’ remuneration Directors’ remuneration, in respect of the Company for the

financial year ended 31st December 2016, is given in Note 28.2

to the financial statements, on page 60.

Corporate DonationsDonations made by the Company amounted to rs. 9,281/-. No

donations were made for political purposes.

Directoratethe names of the Directors who held office during the financial

year are given below and their brief profiles appear on page

25.

executive DirectorsMr D.J. ratwatte

Ms M.C. pietersz

Non--executive Directors Mr N.K.h. ratwatte (Non-executive Chairman)

Mr J. Molligoda

Mr M. Vamadevan

Mr a.N. Wickramasinghe

Mr J.M. rutherford

Mr h.a.s. Crawford

Mr G.r. Chambers

Mr r.a.D.r. ramanayake retired as a Director of the Company

with effect from 30th June 2016.

Ms M.C. pietersz was appointed an executive Director of the

Company with effect from 1st July 2016.

Mr e.r. Croos Moraes retired as a Director of the Company with

effect from 14th October 2016.

Messrs J. Molligoda, M. Vamadevan and a.N. Wickremasinghe

will resign from the Board with effect from 31st March 2017.

Mr N.h.G.s. Jayasinghe was appointed a Non-executive

Director of the Company and Mr e.D.p. soosaipillai was

appointed an independent Non-executive Director of the

Company with effect from 1st april 2017.

Mr G.K.B. Dasanayaka was appointed an independent Non-

executive Director of the Company with effect from 3rd april

2017.


the Board wishes to place on record the Company’s sincere

appreciation to Messrs r.a.D.r. ramanayake, e.r. Croos

Moraes, J. Molligoda, M. Vamadevan and a.N. Wickremasinghe

for their valuable contributions extended to the Company

during their tenure on the Board.

Mr h.a.s. Crawford retires by rotation in terms of article 86

and 87 of the articles of association and being eligible offers

himself for re-election.

Ms M.C. pietersz, Messrs N.h.G.s. Jayasinghe, e.D.p. soosaipillai

and G.K.B. Dasanayaka retire in terms of article 94 of the

articles of association and being eligible offer themselves for

re-election.

Directors’ interestDirectors’ interest in contracts of the Company are disclosed

in Note 28 to the Financial statements on page 59.

the Directors, at their meetings, have declared all material

interest in contracts involving the Company and have refrained

from voting on matters in which they were materially interested.

auditorsin accordance with the Companies act No. 7 of 2007, a

resolution proposing the re-appointment of Messrs. KpMG,

Chartered accountants, as auditors to the Company will be

submitted at the annual General Meeting.

the auditors, Messrs KpMG, were paid rs. 2.5 Mn (2015: rs.

2.5Mn) as audit fees by the Company.

as far as the Directors are aware, the auditors do not have any

relationships (other than that of an auditor) with the Company.

the auditors also do not have any interest in the Company.

turnoverthe total turnover of the Company for the year is rs. 1,620 Mn

(2015 – 1,717 Mn). an analysis of the turnover is given in Note

4 to the Financial statements. the Company’s turnover has

decreased by 6% compared to the previous year.

Financial results & appropriationsa pre-tax loss of rs. 210 Mn was recorded during the year.

profit for the year declined by 32% compared to the previous

year due to the adverse trading conditions which prevailed

during the year as explained in the Chief executive Officer’s

review on pages 6-8 and in the Financial review on pages

11-13.

DividendNo dividend is recommended for the year under review due to

the loss incurred and the liquidity position of the Company.

taxation and statutory paymentsaccording to the inland revenue act, No 10 of 2006 the

Company is liable for income tax at the rate of 10% on its

agricultural profits. profit other than ‘agricultural profits’ is

liable for income tax at the corporate tax rate of 28%.

all other statutory payments such as epF, etF and other taxes

have been made up to date.

Fixed assetsinformation relating to the movements of fixed assets is given

in Notes 10-14 to the Financial statements.

property, plant and equipmentthe total capital expenditure incurred during the year

amounted to rs. 32 Mn compared to rs. 111 Mn incurred in

the previous year. Further information relating to movement

in property, plant and equipment is given under Notes 12, 13

and 14 to the Financial statements.

share Capital & reservesthe stated capital as at the end of the year is rs. 340 Mn and

there was no change in the stated capital during the year.

Golden sharethe secretary to the treasury has been issued with one golden

share on behalf of the Government of sri lanka, carrying special

rights in accordance with the articles of association of the

Company. these special rights are more fully disclosed in Note

19 to the Financial statements.

Managing agentthe Company is managed by Finlays tea estates lanka (pvt)

ltd. and no management fee is charged.

aNNual repOrt OF the BOarD OF DireCtOrs ON the aFFairs OF the COMpaNy (CONt.)


Capital reserves the revaluation reserve of rs. 206 Mn (2015 – rs. 213 Mn)

represents reserves arising from the revaluation of bare land

carried out in May 1998.

the movement in the revaluation reserve is disclosed in Note

20 to the Financial statements.

employment policythe Company’s employment policy is totally non-discriminatory;

it respects individuals and provides career opportunities

irrespective of gender, race or religion. regular performance

appraisal and evaluation schemes are in place and training,

development and promotion opportunities are available to all

employees who qualify.

the total number of employees of the Company is 5,251 (2015

– 5,578 ) persons.

employees’ health & safetyMore attention has been given to employees’ health and safety

and several training programs have been conducted to

encourage the awareness of safety and health at all levels of

management. a comprehensive evaluation of health and fire

hazard was undertaken in all the factories by the Company’s

engineering division during the year under review and their

recommendations have been implemented in full.

industrial relationsthe Collective agreement between the Workers trade unions

and the representatives from the regional plantation

Companies was signed with effect from 15th October 2016.

Details of the terms as agreed in the Collective agreement and

other matters pertaining to employees and industrial relations

are contained in the Chief executive Officer’s review on pages

6-8.

environmental protectionit is the Company’s policy to minimise the adverse effects on

the environment which may result from the Company’s

operations, and to co-operate and comply with the relevant

authorities and regulations. More details in this regard are

shown on pages 9 and 10 of this report under sustainability

performance review.

Corporate Governancethe Directors are responsible for the formulation and

implementation of overall business strategies and policies, and

for setting standards in the short, medium and long term, as

well as for adopting good governance in managing the affairs

of the Company.

events Occurring after reporting DateNo circumstances have arisen since the balance sheet date

which would require adjustment, or disclosure in the financial

statements.

Going Concernthe Directors consider that the Company has adequate

resources to adopt going concern basis in preparing the

financial statements.

Directors’ shareholdingthe Directors’ and their spouses’ holdings of ordinary shares

in the Company are as follows:

As at As at

31.12.2016 31.12.2015

Mr N.K.h. ratwatte 500 500

Mr M. Vamadevan Nil Nil

Mr J. Molligoda 200 200

Mr a.N. Wickramasinghe 151 151

Mr J.M. rutherford Nil Nil

Mr D.J. ratwatte Nil Nil

Mr h.a.s. Crawford Nil Nil

Mr G.r. Chambers Nil Nil

By Order of the Board of Directors of

udapussellawa plantations plC

D.J. ratwatte M.C. pieterszDirector Director

s s p Corporate services (private) limited

secretaries

Colombo

17th March 2017

aNNual repOrt OF the BOarD OF DireCtOrs ON the aFFairs OF the COMpaNy (CONt.)


N. K. h. ratwatte having Joined James Finlay & Company (Colombo) in 1991 and

appointed as an executive Director in 1997, he was also appointed

as an executive Director of hapugastenne plantations plC and

udapussellawa plantations plC in 1998 and its Chairman/ Managing

Director since 1st april 2006. Mr ratwatte continues as a Non-

executive Director of Finlays Colombo plC since 2007 and in several

other companies within and outside the group. he is a Fellow of

the National institute of plantation Management (FipM). age 63.

r. a. D. r. ramanayake executive Director appointed to the Board in June 2010. Joined

the Company as head of Finance in 1992. Counts over 25 years of

experience in the field of finance in the plantation industry. Fellow

member of the institute of Chartered accountants of sri lanka

and the institute of Certified public accountants of sri lanka. he

is also a Director of hapugastenne plantations plC, James Finlay

plantation holdings (lanka) ltd., Finlays tea estates (lanka) limited.,

Newburgh Green teas (pvt) ltd. age 60.

D. J. ratwatte Director/Chief executive Officer of hapugastenne plantations plC

and udapussellawa plantations plC since January, 2015. Joined

the Company in 2013. he counts over 25 years experience in the

plantations industry. age 50.

J. Molligoda independent Non-executive Director appointed to the Board in

December 2007. Director, Chief executive Officer of Bogawantalawa

tea estates plC. Counts over 27 years of experience in the fields

of human resource development, financial management and

strategic planning/projects in the plantation sector. Fellow of the

institute of Chartered accountants of sri lanka, Master of Business

administration (piM), Fellow of the society of Certified Management

accountants of sri lanka. life member of the Organisation of

professional associations of sri lanka, Founder Member of

the institute of Directors of sri lanka, Founder member of the

association of hr professionals. age 60.

M. Vamadevan independent Non-executive Director appointed to the Board in

December 2001. presently advisor to the hon. Minister of plantation

infrastructure Development. holds a Mphil in applied economics

and Ma in Development economics. previously worked for 35 years

in the Ministries of planning, and Finance and planning in various

capacities. age 71.

BOarD OF DireCtOrs

e. r. Croos Moraes Director since November 1998 and Non-executive Director since

2003. executive Director of Finlays Colombo plC since October

1991. an associate Member of the Chartered institute of Marketing

uK (aCiM), a Chartered Marketer. age 59.

a. N. Wickramasinghe appointed to the Board as a non-executive Director in July 2012 upon

his retirement as General Manager – estates. Mr. Wickremasinghe

counts over 39 years experience in the tea industry. age 67.

J. M. rutherford appointed as a Non-executive Director on 1st February 2013 on

becoming Finance Director of James Finlay ltd., london. he is

a qualified Chartered accountant (iCaeW) and holds a Bachelor

of science (Bsc) degree in economics from the university of

southampton. previously he spent 15 years with associated British

Foods, a uK listed company, where he held a variety of senior finance

and other related posts. age 45

h. a. s. Crawford Mr. Crawford joined the swire Group in 1978 and has held a number

of senior positions in the Group including as executive Director of

the trading and industrial Division of swire pacific in hong Kong.

he has worked in australia, papua New Guinea, Japan, the u.s., the

u.K., taiwan and hong Kong. he holds a Ba (honours) Degree in

Modern history from the university of Oxford. Mr. Crawford was

appointed as Managing Director of Finlays Colombo plC with effect

from the 1st of september 2015. age 60.

G. r. Chambers Mr. Chambers became Managing Director of James Finlay limited

in september 2015. since joining John swire & sons in 1993, he has

worked in China, hong Kong and taiwan for swire, most recently

as COO of Damin (the world’s largest tea extract manufacturer) and

COO of swire Beverages (the largest Coca-Cola franchise bottler

in China).

in april 2014, Mr. Chambers was appointed to the hong Kong

Committee for pacific economic Cooperation to advise the hong

Kong secretary for Commerce, economic and Development on

matters relating to the participation of hong Kong in the pacific

economic Cooperation Council. Mr. Chambers has also served as an

advisor to Chatham house, the uK think-tank, on matters relating

to Greater China. age 45.

N.K.h. ratwatte having joined James Finlay & Company (Colombo) in 1991 and

appointed as an executive Director in 1997, Mr ratwatte was also

appointed as an executive Director of hapugastenne plantations

plC and udapussellawa plantations plC in 1998. he has been its

Chairman/Managing Director since 1st april 2006. Mr ratwatte

retired from executive service on 31st December 2015, and was

appointed Non-executive Chairman on 1st January 2016. Mr

ratwatte has continued as a Non-executive Director of Finlays

Colombo plC since 2007 as well as of several other companies

within and outside the group. he is a Fellow of the National

institute of plantation Management (FipM). age 64.

D.J. ratwatte Director/Chief executive Officer of hapugastenne plantations

plC and udapussellawa plantations plC since January, 2015. Mr

ratwatte joined the Company in 2013 and counts over 25 years’

experience in the plantations industry. age 50.

M.C. pietersz executive Director appointed to the Board in July 2016, Ms.

pietersz is an associate member of the institute of Chartered

accountants of england and Wales and a fellow member of the

institute of Chartered accountants of sri lanka. she holds a Bsc

(honours) degree in physics from the university of sussex and

an MBa from heriot-Watt university, edinburgh. an executive

Director of Finlays Colombo plC since November 2011, she also

serves on the Boards of Bogala Graphite lanka plC and seylan

Bank plC as an independent Non-executive Director. age 57.

J. Molligoda independent Non-executive Director appointed to the Board

in December 2007. Director, Chief executive Officer of

Bogawantalawa tea estates plC. Mr Molligoda counts over 27

years of experience in the fields of human resource development,

financial management and strategic planning/projects in

the plantation sector. Fellow of the institute of Chartered

accountants of sri lanka, Master of Business administration

(piM), Fellow of the society of Certified Management accountants

of sri lanka. life member of the Organisation of professional

associations of sri lanka, Founder Member of the institute of

Directors of sri lanka, Founder Member of the association of hr

professionals. age 61.

M. Vamadevan independent Non-executive Director appointed to the Board

in December 2001. presently advisor to the hon. Minister of

plantation infrastructure Development. Mr Vamadevan holds

an Mphil in applied economics and an Ma in Development

economics. previously worked for 35 years in the Ministries of

planning, and Finance and planning in various capacities. age 72.

a.N. Wickramasinghe appointed to the Board as a non-executive Director in July

2012 upon his retirement as General Manager–estates, Mr

Wickramasinghe counts over 39 years’ experience in the tea

industry. age 68.

J.M. rutherford appointed as a Non-executive Director on 1st February 2013

on becoming Finance Director of James Finlay ltd., london. Mr

rutherford is a qualified Chartered accountant (iCaeW) and

holds a Bsc in economics from the university of southampton.

previously he spent 15 years with associated British Foods, a uK

listed company, where he held a variety of senior finance and

other related posts. age 46.

h.a.s. Crawford Non-executive Director appointed to the Board in september

2015. Mr Crawford joined the swire Group in 1978 and has held

a number of senior positions in the Group including executive

Director of the trading and industrial Division of swire pacific

in hong Kong. he has worked in australia, papua New Guinea,

Japan, the us, the uK, taiwan and hong Kong. he holds a Ba

(honours) Degree in Modern history from the university of

Oxford. Mr Crawford was appointed as Managing Director of

Finlays Colombo plC with effect from 1st september 2015.

age 61.

G.r. Chambers Non-executive Director appointed to the Board in september

2015 on becoming Managing Director of James Finlay limited in

september 2015. since joining John swire & sons in 1993, he has

worked in China, hong Kong and taiwan for swire, most recently

as COO of Damin (the world’s largest tea extract manufacturer)

and COO of swire Beverages (the largest Coca-Cola franchise

bottler in China).

in april 2014, Mr Chambers was appointed to the hong Kong

Committee for pacific economic Cooperation to advise the hong

Kong secretary for Commerce, economic and Development on

matters relating to the participation of hong Kong in the pacific

economic Cooperation Council. Mr Chambers has also served

as an advisor to Chatham house, the uK think tank, on matters

relating to Greater China. age 46.


stateMeNt OF DireCtOrs’ respONsiBility iN relatiON tO FiNaNCial stateMeNts

the following statement, which should be read in conjunction

with the auditors’ statement of their responsibilities, as set

out in their report, is made with a view to distinguish the

respective responsibilities of the Directors and the auditors,

in relation to the financial statement.

the Directors are required by the Companies act No. 07 of

2007, to prepare and present the financial statements for each

financial year, which give a true and fair view of the state of

affairs of the Company as at the end of the financial year and

of the profit and loss for the financial year. the Directors are

required to prepare these financial statements on the going

concern basis, unless it is not appropriate.

since the Directors are satisfied that the Company has the

resources to continue in business for the foreseeable future,

the financial statements continue to be prepared on the said

basis.

the Directors consider that in preparing the financial

statements on pages 30 to 63, the Company has used

appropriate accounting policies, consistently applied, and

supported by reasonable and prudent judgments and

estimates, and that all accounting standards which they

consider to be applicable have been followed.

the Directors have responsibility for ensuring that the

Company keeps accounting records which disclose with

reasonable accuracy the financial position of the Company,

and which enable them to ensure that the financial statements

comply with the Companies act No. 07 of 2007. the Directors

have general responsibility for taking such steps as necessary

to safeguard the assets of the Company and to prevent and

detect fraud and other irregularities.

the Directors confirm that to the best of their knowledge all

taxes, duties and levies payable by the Company and all

contributions, levies and taxes payable on behalf of and in

respect of the employees of the Company and all other known

statutory dues as were due and payable by the Company as at

the Balance sheet date have been paid, or where relevant,

provided for.

On behalf of the Board of Directors

D.J. ratwatte C.p. pieterszChairman Director

Colombo

17th March 2017


role of the audit committeethe audit committee of the company is formed in compliance

with the Cse listing rules and duly empowered by the board

of directors to oversee the following:

(a) Financial reporting

(b) legal and regulatory compliance

(c) internal controls and risk management

(d) assessment of independence and performance of

external auditors.

the board of directors has formulated explicit terms of

reference for the effective functioning of the audit committee

and duly empowered by the board.

the performance of the committee is subject to annual self-

evaluation.

Compositionthe audit committee comprises the following independent

non-executive directors and is chaired by a fellow member of

the institute of Chartered accountants of sri lanka.

Mr J. Molligoda- independent Non-executive Director

Chairman

Mr M. Vamadevan– independent Non-executive Director

Member

Mr a.N. Wickremasinghe-independent Non-executive Director

Member

the board of directors based on the annual declaration has

determined the independence or non-independence of each

non executive director as per Cse listing rule No. 7.10.3

internal audit Functionthe internal audit function of the Company continues to

be out sourced to M/s B r De silva & Company, Chartered

accountants. the terms of reference are governed by a service

level agreement.

the audit committee considers that the internal audit function

is free from conditions that threaten the ability to carry out

the internal audit activities in an unbiased manner.

repOrt OF the auDit COMMittee

the main focus of internal audit function is to independently

and objectively evaluate and report on the adequacy, integrity

and effectiveness on the overall system of internal control, risk

management and governance for assurance. the risk based

internal audit plan is developed to cover key compliance,

financial and operational matters that are significant to overall

performance of the Company.

the audit committee of the Company is supported by a

functional sub-committee, namely the audit supervisory

Committee (asC) as appointed and empowered by the board

of directors with specific terms of reference and reporting

requirement to the audit committee. the asC is chaired by

the Finance Director comprises the Chief executive Officer,

Financial Controller, Operational Directors and the internal

auditors.

the audit supervisory Committee held seven meetings on

February 8, april 29, July 25, august 16, October 3, November

17 and December 15 in the year 2016 to review the internal

audit reports and the audit process.

audit Committee Meetingsthe audit committee held four meetings for the year 2016, on

april 11, august 5, October 24 and December 9 in the year 2016

the annual report for the year 2015 was reviewed at the audit

committee meeting held on april 11, 2016 attended by Mr. D

rajapakse, engagement partner, KpMG

the attendance of the Diretors at the audit committee meetings

for the year 2016, were as follows.

Mr J. Molligoda 3/4

Mr M. Vamadevan 4/4

Mr a.N. Wickramasinghe 4/4

the Chairman, Chief executive Officer, Finance Director,

Financial Controller, external auditors and internal auditors

attend meetings by invitation.

principle activitiesthe audit committee serves as a sub-committee of the board

of directors and it reports to the board of directors at its

quarterly meetings.


repOrt OF the auDit COMMittee (CONt.)

the company has compiled a risk register based on a detail

risk assessment and a risk profiling exercise and is subject

to review and revise twice a year. the company risk register

forms a part of the group risk register of the parent company.

the audit committee and the audit supervisory committee

reviewed the risk register of the company at each meeting

for the year under review and recommendations made for

improvement.

the audit committee also reviewed and deliberated on internal

audit reports, internal control issues, and effectiveness of the

internal control systems of the company as reported by the

asC, internal and external audit and compliance with legal and

regulatory requirements.

the audit committee at its meetings paid special attention with

regard to complying with the sri lanka Financial reporting

standards (slFrs) and implications associated with it.

external auditM/s KpMG, the external auditors considered to be independent

as there is no any sort of interest in the results published in

the financial statements of the Company other than as external

auditors.

the audit committee recommend to the board of directors

that M/s KpMG, Chartered accountants be re-appointed as

external auditors for the financial year ending 31st December

2017 subject to the approval by the shareholders.


audit Committee

17th March 2017


iNDepeNDeNt auDitOrs’ repOrt

report on the Financial statementsWe have audited the accompanying financial statements of

udapussellawa plantations plC, (“the Company”), which

comprise the statement of financial position as at December

31, 2016, and the statements of profit or loss and other

comprehensive income, changes in equity and, cash flows for

the year then ended, and a summary of significant accounting

policies and other explanatory information set out on pages

30 to 63 of the annual report.

Board’s responsibility for the Financial statements the Board of Directors (“Board”) is responsible for the

preparation of these financial statements that give a true and

fair view in accordance with sri lanka accounting standards,

and for such internal control as Board determines is necessary

to enable the preparation of financial statements that are free

from material misstatement, whether due to fraud or error.

auditors’ 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 auditors’

judgment, including the assessment of the risks of material

misstatement of the financial statements, whether due to fraud

or error. in making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation

of the -financial statements that give a true and fair view in

order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the entity’s internal control.

an audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of accounting

estimates made by Board, as well as evaluating the overall

presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our audit opinion.

Opinionin our opinion, the financial statements give a true and fair

view of the financial position of the Company as at December

31, 2016, 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 requirements as required by section 163 (2) of the Companies act No. 07 of

2007, we state the following:

a) the basis of opinion and scope and limitations of the

audit are as stated above.

b) in our opinion we have 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.

CHARTERED ACCOUNTANTSColombo

17th March 2017

TO THE SHAREHOLDERS OF UDAPUSSELLAWA PLANTATIONS PLC


stateMeNt OF prOFit Or lOss aND Other COMpreheNsiVe iNCOMe

Note 2016 2015 (Restated) Rs. Rs.

revenue 4 1,620,095,251 1,717,498,246

Cost of sales (1,648,409,853) (1,778,523,166)

Gross Loss (28,314,602) (61,024,920)

Other income 5 27,999,854 30,903,914

Change in Fair Value of Biological assets 14.4 (36,638,569) 15,454,638

administrative expenses (131,480,138) (116,519,326)

Net Finance Cost 6 (41,711,453) (27,600,237)

Loss before Tax 7 (210,144,908) (158,785,931)

income tax expense 8 28,344,494 17,041,434

Loss for the Year (181,800,414) (141,744,497)

Other Comprehensive Income

remeasurement of retirement Benefit Obligation 82,343,123 (16,625,749)

Deferred tax on remeasurement of retirement Benefit Obligation (13,019,586) 2,628,252

Other comprehensive income/expense for the year, net of income tax 69,323,537 (13,997,497)

Total Comprehensive Income for the Year (112,476,877) (155,741,994)

Loss per share 9 (9.37) (7.31)

Figures in brackets indicate deductions

the accounting policies and notes from pages 34 to 63 form an integral part of the Financial statements

For the year ended 31st December


stateMeNt OF FiNaNCial pOsitiON

2016 2015 2014 (Restated) (Restated)ASSETS Note Rs. Rs. Rs.Non-Current Assets right to use of land 10 307,330,132 318,114,635 328,850,923 immovable estate assets on finance lease (other than bare land) 11 40,769,255 46,971,222 53,218,234 tangible assets other than biological assets 12 475,905,846 499,217,888 448,924,936 intangible assets 13 12,800,418 14,127,372 16,254,012 Bearer biological asset 14.1 454,429,211 452,603,755 449,380,985 Consumable biological assets 14.2 535,728,387 581,669,077 563,844,881 Deferred tax asset 8.3 57,022,845 36,224,331 12,168,190 Total Non-Current Assets 1,883,986,094 1,948,928,280 1,872,642,161 Current Assets produce on bearer biological assets 14.3 5,004,874 757,073 1,470,971 inventory 15 256,607,568 214,349,210 163,857,862 trade and other receivables 16 59,726,201 62,083,067 95,404,382 Other financial assets - 1,059,973 amounts due from related companies 17 52,480,069 36,802,349 72,022,942 Cash and cash equivalents 18.1 4,327,975 7,727,474 7,169,444 Total Current Assets 378,146,687 322,779,146 339,925,601 Total Assets 2,262,132,781 2,271,707,426 2,212,567,762 EQUITY AND LIABILITIES stated capital 19 340,000,010 340,000,010 340,000,010 revaluation reserve 20 205,810,005 212,966,466 220,074,711 General reserve 21 145,073,977 137,917,516 130,809,271 accumulated profit/(loss) (200,386,815) (87,909,938) 67,832,056 Total Equity 490,497,177 602,974,054 758,716,048 Non-Current Liabilities interest bearing borrowings - payable after one year 22 125,308,654 79,996,000 - Deferred income 23 107,646,148 111,504,411 115,325,368 retirement benefit obligation 24 617,530,120 667,405,022 610,243,399 Net liability to the lessor - payable after one year 25 124,090 131,021 131,021 Total Non-Current Liabilities 850,609,012 859,036,454 725,699,788 Current Liabilities interest bearing borrowings - payable within one year 22 51,656,658 59,179,785 - Net liability to the lessor - payable within one year 25 2,018 2,018 2,018 amounts due to related companies 26 349,552,530 334,253,781 256,642,855 trade and other payables 27 265,034,310 295,618,825 216,058,713 income tax payable 5,473,606 4,386,031 4,600,535 Bank overdraft 18.2 249,307,470 116,256,478 250,847,805 Total Current Liabilities 921,026,592 809,696,918 728,151,926 Total Equity and Liabilities 2,262,132,781 2,271,707,426 2,212,567,762

the accounting policies and notes from pages 34 to 63 form an integral part of the Financial statements these Financial statements have been prepared in compliance with the requirements of Companies act No 07 of 2007.

D.S. HeenatigalageFinancial Controller the Board of Directors is responsible for the preparation and presentation of these Financial statements. approved and signed for and on behalf of the Board of Directors of udapussellawa plantations plC.

D.J. Ratwatte M.C. Pietersz Director Director Colombo17th March 2017

As at 31st December

Rs.

307,330,132

40,769,255 475,905,846

12,800,418 454,429,211 535,728,387

57,022,845 1,883,986,094

5,004,874 256,607,568 59,726,201

- 52,480,069

4,327,975 378,146,687

2,262,132,781

340,000,010 205,810,005 145,073,977

(200,386,815) 490,497,177

125,308,654 107,646,148 617,530,120

124,090 850,609,012

51,656,658 2,018

349,552,530 265,034,310

5,473,606 249,307,470 921,026,592

2,262,132,781


stateMeNt OF ChaNGes iN eQuity

Stated Revaluation General Accumulated Total Capital Reserve Reserve Profit/(Loss)

Rs. Rs. Rs. Rs. Rs.

as at 01st January 2015 -

as previously reported 340,000,010 220,074,711 130,809,271 66,361,085 757,245,077

impact of the amendments

of lKas 16 and lKas 41 (Note 32) 1,470,971 1,470,971

as at 01st January 2015 - restated 340,000,010 220,074,711 130,809,271 67,832,056 758,716,048

loss for the year - - - (141,744,497) (141,744,497)

Other Comprehensive income - - - (13,997,497) (13,997,497)

transferred to General reserve - (7,108,245) 7,108,245 - -

As at 31st December 2015 - Restated 340,000,010 212,966,466 137,917,516 (87,909,938) 602,974,054

Loss for the year - - - (181,800,414) (181,800,414)

Other Comprehensive Income - - - 69,323,537 69,323,537

Transferred to General Reserve - (7,156,461) 7,156,461 - -

As at 31st December 2016 340,000,010 205,810,005 145,073,977 (200,386,815) 490,497,177


the accounting policies and Notes from pages 34 to 63 form an integral part of the Financial statements.

As at 31st December 2016 340,000,010 205,810,005 145,073,977 (200,386,815) 490,497,177

Attributable to equity holders of the Company

For the year ended 31st December 2016


stateMeNt OF Cash FlOWs

Note 2016 2015 Rs. Rs.

CASH FLOWS FROM OPERATING ACTIVITIES

loss before taxation (210,144,908) (158,785,931)

ADJUSTMENTS FOR

Finance Costs 45,013,931 26,655,236

retirement Benefit Obligations provision 102,206,496 98,296,993

Depreciation/amortisation 54,448,519 51,960,658

amortisation of JeDB/slspC estate assets 16,986,470 16,983,299

provision for impairment - 4,678,164

amortisation of Capital Grants (4,163,239) (4,148,230)

(profit)/loss on sale of property, plant & equipment (435,000) (4,137,458)

loss/(Gain) on fair value of Biological assets 36,638,569 (15,454,638)

Change in consumable biological assets due to harvest 5,077,671 -

provision/ (reversal) of bad and doubtful debts 4,108,798 (1,286,399)

provision/ (reversal) for slow moving and obsolete stocks (1,237,050) 1,778,972

Operating Profit before Working Capital changes 48,500,257 16,540,665

(increase)/Decrease in inventories (41,021,308) (52,270,319)

(increase)/Decrease in trade and Other receivables (691,959) 33,547,740

increase/(Decrease) in trade & Other payables (30,584,515) 79,560,112

increase/(Decrease) in amounts Due to related Companies (4,415,819) 54,983,198

Cash Generated from Operations (28,213,344) 132,361,396

retirement Benefit Obligation payments (69,738,275) (57,761,119)

tax paid (4,386,031) (4,600,959)

Finance Costs paid (32,236,715) (26,655,236)

Net Cash from Operating Activities (134,574,365) 43,344,082

CASH FLOWS FROM INVESTING ACTIVITIES

proceeds from sale of property, plant & equipment 435,000 5,485,000

Field Development expenditure (16,992,385) (22,390,323)

purchase/ Construction of property, plant & equipment (14,665,946) (88,640,781)

Net Cash used in Investing Activities (31,223,331) (105,546,103)

CASH FLOWS FROM FINANCING ACTIVITIES

proceeds from term loans, net of repayment 25,005,380 139,175,783

Net proceeds from a loan from the parent Company 4,036,848 57,848,322

Government Grants received 304,976 327,273

Net Cash used in Financing Activities 29,347,204 197,351,378

Net Increase / (Decrease) in Cash & Cash Equivalents (136,450,491) 135,149,357

Cash & Cash equivalents at the beginning of the year (108,529,004) (243,678,361)

Cash & Cash equivalents at the end of the year 18 (244,979,495) (108,529,004)


the accounting policies and Notes from pages 34 to 63 form an integral part of the Financial statements.



1. REPORTING ENTITY udapussellawa plantations plC is a public limited

liability Company incorporated and domiciled in sri lanka, under the Companies act No. 17 of 1982 in terms of the provisions of the Conversion of public Corporations or Government Owned Business undertaking into public Companies act No. 23 of 1987 and re-registered under the Companies act No. 07 of 2007. the registered office of the Company is located at 95a, Nambapana, ingiriya and plantations are situated in the planting districts of Nuwara eliya and Matale.

During the year, the principal activities of the Company were cultivation, manufacture and sale of tea, rubber, Coconut and others agriculture produce.

the ordinary shares of the Company are listed on the Colombo stock exchange of sri lanka.

the Company’s parent undertaking is James Finlay plantation holdings (lanka) limited. in the opinion of the directors, the Company’s ultimate parent undertaking and controlling party is John swire and sons limited, which is incorporated in england.

2. BASIS OF PREPARATION

2.1. Statement of Compliance the financial statements of the Company such

comprise statement of profit or loss and Other Comprehensive income, statement of Financial position, statement of Changes in equity and statement of Cash Flows together with the significant accounting policies and Notes to the Financial statements which have been prepared in accordance with sri lanka accounting standards (lKass) promulgated by the institute of Chartered accountants of sri lanka (Ca sri lanka) and with requirements of the Companies act No.07 of 2007.

the Financial statements were authorized for issue by the Board of Directors on 17th March 2017.

2.2. Basis of Measurement these Financial statements have been prepared

in accordance with the historical cost convention basis except for the following material items in the statement of financial position.• lease hold right to Bare land of JeDB/slspC

estates have been revalued as described in note 11: right to use of land

NOtes tO the FiNaNCial stateMeNts

• Consumable Mature Biological assets are measured at fair value less costs to sell.

• retirement Benefit Obligation recognized based on actuarial valuation (lKas 19)

• agriculture produce harvested from biological assets are measured at fair value.

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.

2.3. Functional and Presentation Currency these Financial statements are presented in sri

lankan rupees (rs.) which is the Company’s functional and presentation currency. all financial information presented in sri lankan rupees has been given to the nearest rupee, unless stated otherwise.

2.4. Use of Estimates and Judgments the preparation of Financial statements in

conformity with sri lanka accounting standards (lKass) requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

estimates and underlying assumption are reviewed on a ongoing basis. revision to accounting estimates are recongnised in the period in which the estimate are revised and in any future period affected.

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.

information about critical estimates and judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in the following notes:

Note 13 - tangible assets other than immature and mature

information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes:



Note 14.2 - Consumable Biological assets Note 24 - Measurement of Defined Benefit Obligation Note 8.3 - Deferred tax assets

3. SIGNIFICANT ACCOUNTING POLICIES the accounting policies set out below have been

applied consistently to all periods presented in these financial statements.

3.1. Foreign Currency Transactions transactions in Foreign Currencies are translated

to sri lankan rupees of the entity at the rates of exchange prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into local currencies at the rates of exchange prevailing at the date of the statement of Financial position while non-monetary items are reported at the rates prevailing at the date of the transactions were affected. the exchange difference arising on the translations are recognized in the statement of profit or loss and Other Comprehensive income.

3.2. Assets and Basis of their Valuation assets classified as Current assets in the statement

of Financial position are Cash and Bank balances and those which are expected to be realised in cash during the normal operating cycle of the Company’s business, or within one year from the reporting date whichever is shorter. assets other than current assets are those which the Company intends to hold beyond a period of one year from the date of the statement of Financial position.

3.2.1. Property, Plant and Equipment

3.2.1.1. Recognition and Measurement items of property, plant and equipment are

measured at cost less accumulated depreciation and accumulated impairment losses, except for Bare land on lease which is stated at revalued amount in 31st May 1998 less subsequent accumulated depreciation and accumulated impairment losses.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

3.2.1.2. Owned Assets the cost of an item of property, plant and equipment

comprise its purchase price and any directly

attributable costs of bringing the asset to working condition for its intended use. the cost of self constructed assets includes the cost of materials, direct labour, and any other costs directly attributable to bringing the asset to the working condition for its intended use. this also includes cost of dismantling and removing the items and restoring in the site on which they are located and borrowing costs on qualifying assets.

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.

3.2.1.3. Subsequent Expenditure the Cost of replacing part of an item of property,

plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. the carrying amount of the replaced part is derecognised. the cost of the day-to-day servicing of property, plant and equipment are recognised in the statement of profit.

3.2.1.4. De-recognition the carrying amount of an item of property, plant

and equipment is de-recognised on disposal; or when no future economic benefits are expected from its use or disposal. Gains or losses on de-recognition are recognised in the statement of profit or loss and when revalued assets are disposed, the amounts included in the revaluation surplus reserve are transferred to retained earnings.

3.2.1.5. Depreciation / Amortization Depreciation is calculated over the depreciable

amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.

Depreciation is recognised in statement of profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.

leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. land is not depreciated.

NOtes tO the FiNaNCial stateMeNts (CONt.)For the year ended 31st December 2016


the estimated useful lives for the current and comparative periods are as follows:

Buildings Over 40 years plant and Machinery Over 13 years Furniture and Fittings Over 10 years Motor Vehicles Over 05 years equipment Over 08 years sanitation, Water supply and electricity Over 20 years Computer hardware Over 05 years Farm road Over 40 years latrines Over 10 years

Depreciation of an assets begins when it is available for use and ceased at the earlier of the date that the assets is classified as held for sale and the date that the assets is derecognized.

Depreciation method, useful lives and residual values are reviewed at each financial year end and adjusted, if appropriate.

the leasehold rights are being amortized in equal amounts over the following periods.

Bare land Over 53 years Mature plantations Over 30 years Buildings Over 25 years Machinery Over 15 years improvements to land Over 30 years

3.2.1.6. Leased Assets assets obtained under finance lease, which

effectively transfer to the Company substantially all of the risks and benefits incidental to ownership of the leased assets, are treated as if they have been purchased outright and are capitalized at their cash price. assets acquired by way of a finance lease are measures at an amount equal to the lower of their present value and the minimum lease payments. assets held under finance lease are amortized shorter of the lease period or the useful lives of equivalent owned assets, unless ownership is not transferred at the end of the lease period. the principal/capital elements payable to the lessor is shown as liability/obligation. the lease rentals are treated as consisting of capital and interest elements. the capital element in the rental that is applied to reduce the outstanding obligation and interest element is charged against profit, in proportion to the reducing capital elements outstanding.

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

3.2.1.7. 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 statement of profit or loss and Other Comprehensive income.

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

3.2.1.8. 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 such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. an asset’s recoverable amount is the higher of an asset’s value in use and its fair value less cost to sell and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset exceeds its recoverable amount, the assets 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 pre-tax discount rates that reflect current market assessments of the time value of money and the risk specific to the asset. in determining fair value less cost to sell, recent market transactions are taken into account, if available. if no such transaction can be identified, an appropriate valuation model is used.

impairment loss of continuing operations are recognized in the statement of profit or loss and Other Comprehensive income in those expenses categories consistent with the function of the impaired asset.



a previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the assets’ recoverable amount since the last impairment loss was recognized. if that is the case, carrying amount of the asset is increased to its recoverable amount. that increased amount cannot ‘exceed’ the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. such reversal is recognized in the statement of profit or loss and Other Comprehensive income.

3.2.2. Intangible Assets an intangible asset is recognized if it is probable that

economic benefits attributable to the assets will flow to the entity and cost of the assets can be measured reliably and carried at cost less accumulated amortization and accumulated impairment losses.

3.2.2.1. Software purchased software is recognized as an intangible

asset and is amortized on a straight-line basis over its useful life.

the estimated useful life is as follows:

Asset Category Useful life enterprise resource planning system 8 years

3.2.3. Biological Asset a) Bearer biological assets and consumable

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 and other plantations are classified as bearer biological assets.

Biological assets are further classified as bearer biological assets and consumable biological assets. Bearer biological assets include tea and rubber trees, those that are not intended to be sold or harvested, however used to grow for harvesting agricultural produce in the coming years. Consumable biological assets include managed timber trees those that are to be sold as biological assets.

the cost of land preparation, rehabilitation, new planting, replanting, crop diversification, inter planting, fertilizing and etc, incurred between the time of planting and harvesting (when the planted area attains maturity) are classified as immature plantations. these immature plantations are shown at direct costs plus attributable overheads, including interest attributable to long-term loans used for financing immature plantations. the expenditure incurred on immature bearer biological assets (tea, rubber and Other Crops other than timber) which comes into bearing during the year, is transferred to mature plantations. expenditure incurred on immature consumable biological assets is recorded at cost at initial recognition and thereafter at fair value at the end of each reporting period.

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.

the bearer biological assets are measured at cost less accumulated depreciation and accumulated


the main variables in the DCF model are:

Variable Comment

timber content estimate based on physical verification of girth, height and considering the growth of each spices, factor all the prevailing statutory regulations enforced against harvesting of timber coupled with forestry plan of the Company.

economic useful life estimated based on the normal life span of each spices by factoring the forestry plan of the Company.

selling price three year annual rolling average selling prices of managed timber fields of the respective region/group of the Company.

Discount rate Discount rate reflects the possible variations in the Cash flows and the risk related to the biological assets.

Currency rs.


impairment losses, if any, in terms of lKas 16 – property plant and equipment.

the managed timber trees are 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 Discounted Cash Flow (DCF) method taking in to consideration the recent sale prices of timber of the Company under binding sales agrements, applied to expected timber content of a tree at the maturity.

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

permanent impairments to Biological assets are charged to the statement of profit or loss in full and reduced to the net carrying amounts of such assets in the year of occurrence after ascertaining the loss.

b) Infilling Cost on Bearer Biological Assets Where infilling results in an increase in the economic

life of the relevant field beyond its previously assessed standard of performance, the costs are capitalized and depreciated over the useful life at rates applicable to mature plantations.

infilling costs that are not capitalized have been charged to the statement of profit or loss in the year in which they are incurred.

(c) Produce on Bearer Biological Assets the Company recognise its agricultural produce

prior to harvest separately from its bearer plant. such agricultural produce prior to harvest continues to be in the scope of lKas 41 and measured at fair value less costs to sell. Changes in the fair value of such agricultural produce recognised in profit or loss at the end of each reporting period.

When deriving the estimated quantity the company limits to one harvesting cycle and the quantity is ascertained based on the last day of the harvest. in the immediately preceding cycle. in order to ascertain the fair value of produce growing on trees, 50% of the estimated crop in that harvesting cycle to be considered for valuation.

For the valuation of the produce the Company uses the farm gate bought leaf rate (current month) less cost of harvesting and transport.

d) Depreciation Mature plantations (replanting and New planting) are

depreciated on a straight line basis over the expected period of their commercial harvesting or unexpired lease period, whichever is less.

the expected periods of commercial harvesting for each category of crops are as follows,

tea Over 33 years rubber Over 20 years Coconut Over 50 years Cinnamon Over 20 years pepper Over 20 years

No depreciation is provided for immature plantations.

3.2.4. Inventories

3.2.4.1. 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.

3.2.4.2. Agricultural Produce after further processing Further processed output of agricultural produce

are valued at the lower of cost and estimated net realisable value, after making due allowances 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 less the estimated cost of completion and estimated cost necessary to make the sale.

3.2.4.3. Input Material, Consumables and Spares Valued at actual cost on weighted average basis

3.2.4.4. Growing Crop Nurseries Nursery cost includes the cost of direct materials,

direct labour and an appropriate proportion of directly attributable overheads, less provision for overgrown plants.



3.2.5. Financial Instruments

a) Initial Recognition and Measurement the Company initially recognises loans and

receivables and deposits on the date that they are originated

the Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. any interest in transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of Financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

b) Subsequent Measurement

Held-to-maturity financial assets the Company has the positive intent and ability to

hold debt securities to maturity, then such financial assets are classified as held-to-maturity. held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. subsequent to initial recognition held to - maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses. any sale or reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Company from classifying investment securities as held-to-maturity for the current and the following two financial years.

Loans and receivables loans and receivables are financial assets with fixed

or determinable payments that are not quoted in an active market. such assets are recognised initially at fair value plus any directly attributable transaction costs. subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

loans and receivables comprise trade and other receivables.

3.2.6. Cash & Cash Equivalents Cash and cash equivalents comprise cash balances

and fixed deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

3.3. Liabilities and Provisions liabilities classified as current liabilities on the

statement of Financial position are those which fall due for payment on demand or within one year from statement of Financial position date. Non-current liabilities are those balances that fall due for payment after one year from statement of Financial position date. all known liabilities have been accounted for in preparing these Financial statements.

a provision is recognized if, as a result of a past event the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefit will be required to settle the obligation.

3.3.1. Employee Benefits a) Defined Contribution Plans – Employees’

Provident Fund and Employees’ 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 Defined Contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

the Company contributes 12% of gross emoluments of the employees to employees’ provident Fund (epF)/ estate staff provident society (esps).

all of the employees are eligible for employees’ trust

Fund to which the Company contributes 3% of gross emoluments of such employees.

b) Defined Benefit Plans – Gratuity a Defined Benefit plan is a post-employment benefit

plan other than a Defined Contribution plan. the Company’s net obligation in respect of Defined



Benefit pension plans is calculated annually using the projected unit Credit (puC) Method. the liability recognized in the statement of Financial position is the present value of the Defined Benefit Obligation at the reporting date in accordance with the advice of an actuary. actuarial gains or losses arising are recognized as Other Comprehensive income in the period in which they arise. past service costs are recognised immediately in the statement of profit or loss and Other Comprehensive income.

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 key assumptions used in determining the retirement Benefit Obligations are given in Note 24.

3.4. Capital Commitments and Contingencies Contingencies are possible assets or obligations that

arise from a past event and would be confirmed only on the occurrence or non occurrence of uncertain future events, which are beyond the company’s control.

all material Capital Commitments and Contingent liabilities are disclosed in Note 29 and 31.

3.5. Deferred Income

3.5.1. Government Grants and Subsidies Government grants are recognized where there is a

reasonable assurance that the grant will be received and all attached conditions will be complied with. 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 assets. When the grants related to an expense item, it is recognized as income over the period necessary to match the grant on a systematic basis to the costs that are intended to compensate.

Grants related to property, plant and 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 and equipment. Grants received for forestry are initially deferred and credited to statement of profit or loss and Other Comprehensive income at once when the related blocks of trees are harvested.

3.6. Statement of Profit or Loss and Other Comprehensive Income

For the purpose of presentation of the statement of profit or loss and Other Comprehensive income the directors are of the opinion that function of expenses method presents fairly the elements of the Company’s performance, and hence such presentation method is adopted in line with the provisions of lKas 1 – presentation of Financial statements.

3.6.1. Revenue Recognition revenue is recognised to the extent that it is probable

that the economic benefits will flow to the Company and the revenue and the associated costs incurred or to be incurred can be reliably measured. revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and sales taxes. the following specific criteria are used for the purpose of recognition of revenue.

(a) Sale of Goods revenue from the sale of goods in the course of

ordinary activities is measured at invoice value net of brokerage, sale expenses and other levies relate to revenue. revenue from sale of goods is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. if it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.

(b) Interest interest income is recognised as the interest accrued

(taking into account the effective yield on the asset) unless collectability is in doubt.

(c) Rental income rental income arising from operating leases is

recognised on an accrual basis.

(d) Gain and Losses on Disposal Gains and losses on disposal of an item of property,

plant and equipment are determined by comparing the net sales proceeds with the carrying amounts of property, plant and equipment and are recognised within ‘other operating income’ in the statement of profit or loss.



3.6.2. Expenditure Recognition

(a) Operating Expenses all expenses incurred in the day to day operations

of the business and in maintaining the property, plant and equipment in a state of efficiency has been charged to the statement of profit or loss and Other Comprehensive income in arriving at the profit/ (loss) for the year. provision has also been made for impairment of non-financial assets, slow moving stocks, overgrown nurseries, all known liabilities and depreciation on property, plant and equipment.

(b) Finance Cost Finance costs comprise of interest expense on external

borrowings and related party loans and payments made under operating leases. 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. payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. lease incentives received may recognised as an integral part of the total lease expense, over the term of the lease.

(c) Income Tax Expense income tax expense comprising of current and

deferred tax. income tax expense is recognised in statement of profit or loss and Other Comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current Taxes Current tax expense for the current and comparative

periods are measured at the amount paid or expected to be payable to the Commissioner General of inland revenue on taxable income for the respective year of assessment computed in accordance with the provisions of the inland revenue act No 10 of 2006 as amended by subsequent legislation enacted or substantively enacted by the reporting date.

Deferred Taxation Deferred taxation is recognized using the Balance

sheet liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a

business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. in addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill.

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

a deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

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

the relevant details are disclosed in the respective Notes to the Financial statements.

3.7. Statement of Cash Flows the statement of Cash Flows has been prepared using

the ‘indirect Method’. interest paid is classified as operating cash flows, interest received and dividends received are classified as investing cash flows while dividend paid and Government grants received are classified as financing cash flows for the purpose of presentation of the statement of Cash Flows.

3.8. Earnings per share the Company presents Basic earnings per share (eps)

data 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, adjusted for own shares held.

3.9. Related Party Transactions Disclosure has been made in respect of the

transactions in which one party has the ability to control or exercise significant influence over the



financial and operating policies/decisions of the other, irrespective of whether a price is being charged or not.

a detailed related party transaction analysis is presented in Note 28.

3.10. Events Occurring After the Balance Sheet Date events after the reporting period are those events

favorable and unfavorable occur between the end of the reporting period and the date when the Financial statements are authorized for issue. the materiality of the events occurring after the reporting period is considered and appropriate adjustments to or disclosures are made in the Financial statements, where necessary.

3.11. 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.

revenue and expenditure directly attributable to each segment are allocated to the respective segments. revenue and expenditure not directly attributable to a segment are allocated on the basis of their resource utilization, wherever possible. unallocated items comprise mainly of income accrued and expenses incurred at head office level.

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.

the activities of the segments are described on page 61 in the Notes to the Financial statements.

3.12. Standards issued but not yet effective

SLFRS 9 – Financial Instruments: Classification and Measurement

slFrs 9 replaces lKas 39 and applies to classification and measurement of financial assets and liabilities as defined in lKas 39. the standard is effective for annual periods beginning on or after 01st January 2018. the adoption of the first phase of slFrs 9 will have an effect on the classification and measurements of financial liabilities. the Company will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture.

SLFRS 15 – Revenue from Contracts with Customers

slFrs 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. it replaces the existing revenue recognition guidance including lKas 18 revenue and lKas 11 Construction Contracts.

slFrs 15 is effective for annual reporting periods beginning on or after 01st January 2018, with early adoption permitted.

the Company is currently in the process of evaluating the potential effect of these standards on its financial statements and the impacts of the adoption of these standards have not been quantified as at the reporting date.



2016 2015

Rs. Rs.

4. REVENUE

Sale of Produce

tea 1,574,349,568 1,665,731,066

Coconut 26,482,364 30,591,065

Others (Note 4.1) 19,263,319 21,176,115

1,620,095,251 1,717,498,246

4.1. revenue classified as ‘Others’ above, mainly comprises of revenue generated from timber sales, Firewood sales, intercrop

sales and Nursery and timber plants sales during the year.

2016 2015

Rs. Rs.

5. OTHER INCOME

amortisation of Capital Grants 4,163,239 4,148,230

Gain/(loss) on sale of property, plant & equipment 435,000 4,137,458

rent income 23,118,425 21,439,436

Others 283,190 1,178,790

27,999,854 30,903,914

6. NET FINANCE COST

Finance Income

interest income (34,797) (39,585)

Finance Cost

Overdraft interest 22,862,379 14,187,700

related Company loan interest 9,409,133 12,507,121

term loan interest 12,777,216 -

exchange (Gain)/loss (3,302,478) 945,001

Net Finance Cost 41,711,453 27,600,237

7. PROFIT BEFORE TAX is stated after charging all expenses including the following;

2016 2015 Rs. Rs. statutory audit Fees 2,555,454 2,555,454 Depreciation 52,215,893 50,213,531 amortisation of intangible asset 2,232,626 1,747,128 amortisation of JeDB/slspC estate assets 16,986,470 16,983,299 provision for impairment property, plant and equipment - 4,678,164 provision/(reversal of) for doubtful debts 4,108,798 (1,286,399) provision for slow moving and obsolete stocks (1,237,050) 1,778,972 provision for impairment of immature plantation - - provision for retiring Gratuity - staff 11,028,294 8,496,566 - Workers 91,178,202 89,800,427 Defined Contribution plans - provident Funds & etF 91,938,817 104,850,357 Wages & salaries 686,017,687 835,729,901

Donations 9,281 10,800

NOtes tO the FiNaNCial stateMeNts (CONt.)

1,574,349,568

26,482,364

19,263,319

1,620,095,251

4,163,239

435,000

23,118,425

283,190

27,999,854

(34,797)

22,862,379

9,409,133

12,777,216

(3,302,478)

41,711,453


2,555,454 52,215,893 2,232,626

16,986,470 -

4,108,798 (1,237,050)

- 11,028,294 91,178,202 91,938,817

686,017,687

9,281


8. TAXATION

8.1 Current Tax Expense

in terms of section 16 (1) of the inland revenue act No. 10 of 2006, “specified profits” from cultivation is exempted from

income tax for a period of 5 years commencing from the year of assessment 2006/07. accordingly, tax exemption period

of the Company has expired in the year of assessment 2010/11. after the exempt period, the Company became liable for

income tax at the rate of 10% on its agricultural profits and 28% on manufacturing profits and other income earned during

the year of assessment.

2016 2015

Rs. Rs.

income tax expense (Note 8.2) 5,473,606 4,386,455

Deferred taxation (Note 8.3) (33,818,100) (21,427,889)

(28,344,494) (17,041,434)

8.2 Reconciliation Between Accounting Profit 2016 2015

and Taxable Profit Rs. Rs.

accounting profit Before tax (210,144,908) (158,785,931)

exempt income 36,638,569 (15,454,638)

aggregate allowable items (189,068,709) (171,461,806)

aggregate disallowable items 185,530,719 176,281,376

adjusted loss (177,044,329) (169,420,999)

profit From agriculture taxable at 10% - -

loss from Manufacturing (177,044,329) (169,420,999)

Other sources of income 30,074,760 24,101,402

total statutory income 30,074,760 24,101,402

tax losses claimed during the year (10,526,166) (8,435,491)

taxable income 19,548,594 15,665,911

income tax at 28% 5,473,606 4,386,455

tax expense charged in the statement of profit or loss 5,473,606 4,386,455

8.2.1 Tax Losses

tax loss Brought Forward 861,813,801 716,138,972

adjustment to tax loss brought forward 13,879 (15,310,679)

loss incurred during the year 177,044,329 169,420,999

tax loss claimed (10,526,166) (8,435,491)

tax loss carried forward 1,028,345,843 861,813,801

8.3 Deferred Tax Asset

Deferred tax is provided using the liability method, providing for temporary differences between the carrying amounts of

assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

2016 2015

Rs. Rs.

at the beginning of the year 36,224,331 12,168,190

Charge recognised in profit or loss 33,818,100 21,427,889

Charge/(release) recognised in Other Comprehensive income (13,019,586) 2,628,252

at the end of the year 57,022,845 36,224,331


36,224,331

33,818,100

(13,019,586)

57,022,845



8.3 Deferred Tax Asset (Contd.)

Deferred tax asset as at the year end is made up as follows;

2016.12.31 2015.12.31

Temporary Tax effect on Temporary Tax effect on

difference temporary difference temporary

difference difference

Rs Rs Rs Rs

Biological assets (535,728,387) (84,706,065) (581,669,077) (91,952,115)

property, plant and equipment (749,503,306) (118,506,835) (718,402,512) (113,567,375)

retirement Benefit Obligations 699,873,243 110,659,636 650,779,273 102,877,276

Carried Forward tax losses 1,028,345,843 162,595,695 861,813,801 136,238,293

442,987,393 70,042,431 212,521,485 33,596,079

On remeasurement of retirement Benefit Obligation (82,343,123) (13,019,586) 16,625,749 2,628,252 360,644,270 57,022,845 229,147,234 36,224,331

the Deferred tax asset has been computed taking into consideration the effective tax rate of 15.81% (2015 - 15.81%) for the Company.

Potential Impact of Income Tax Rate Change a change in the income tax rate has been recommended by the Government Budget for 2017 which was approved by the parliament as follows:

Current Rate % Proposed Rate %

udapussellawa plantations plC 10% 14%

since the New tax rates had not been published through a gazette by the parliament as at the reporting date, being December 31, 2016, the new rate was not considered to be substantially enacted as at that date. accordingly, the Company has provided for Deferred taxation at the existing rate of 10% and 28% in the Financial statements for the year ended December 31, 2016. the potential impact on the deferred tax had the Company applied the proposed rate as above is shown below:

2016 Rs.

at the beginning of the year 36,224,331 Charge recognised in profit or loss 45,816,806 release recognised in Other Comprehensive income (15,249,946) at the end of the year 66,791,190

9. LOSS PER SHARE

Basic Loss per Share loss per share is computed based on the loss attributable to ordinary shareholders divided by the weighted average number

of ordinary shares outstanding during the year as follows; 2016 2015 loss attributable to the Ordinary shareholders of the Company (rs.) (181,800,414) (141,744,497) Weighted average number of ordinary shares outstanding during the year 19,398,851 19,398,851 loss per share (rs.) (9.37) (7.31)


(535,728,387) (84,706,065)

(749,503,306) (118,506,835)

699,873,243 110,659,636

1,028,345,843 162,595,695

442,987,393 70,042,431

(82,343,123) (13,019,586)360,644,270 57,022,845

36,224,331 45,816,806

(15,249,946) 66,791,190

(181,800,414) 19,398,851

(9.37)


NOtes tO the FiNaNCial stateMeNts (CONt.)as at 31st December 2016

10.

RIG

HT

TO

USE

OF

LAN

D

leas

es h

ave

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exe

cute

d fo

r a

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ll of

the

se le

ases

are

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roac

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to

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Jun

e 19

92, t

he d

ate

of f

orm

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n of

the

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pany

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on

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f th

ese

esta

tes

have

bee

n t

aken

into

the

boo

ks o

f th

e C

ompa

ny o

n 22

nd J

une

1992

, im

med

iate

ly a

fter

for

mat

ion

of t

he C

ompa

ny, i

n te

rms

of t

he r

ulin

g ob

tain

ed f

rom

the

urg

ent

issu

es t

ask

Forc

e (u

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of

the

inst

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f sr

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ka. s

ubse

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on

31st

May

199

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e Bo

ard

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dec

ided

to

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the

bar

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nd a

t a

valu

e es

tabl

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d by

inde

pend

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atio

n sp

ecia

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, M/s

. p.B

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and

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due

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ad th

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less

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11. IMMOVABLE ESTATE ASSETS ON FINANCE LEASE (OTHER THAN BARE LAND) in terms of the ruling of the uitF of the institute of Chartered accountants of sri lanka 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 would be taken 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 22nd June 1992 statement of Financial position and depreciated as follows :

Improvement Other to Vested Mature Plant & Land Assets Plantations Buildings Machinery Total Rs. Rs. Rs. Rs. Rs. Rs.

revaluation as at 22nd June 1992 5,364,193 154,829 126,710,854 46,165,014 14,829,250 193,224,140 Balance as at 31st December 2016 5,364,193 154,829 126,710,854 46,165,014 14,829,250 193,224,140 Amortisation Balance as at 1st January 2016 4,208,370 154,829 83,386,759 43,673,710 14,829,250 146,252,918 Charge for the year 302,355 - 4,231,079 1,668,533 - 6,201,967 Balance as at 31st December 2016 4,510,725 154,829 87,617,838 45,342,243 14,829,250 152,454,885

W.D.V. as at 31.12.16 853,468 - 39,093,016 822,771 - 40,769,255

W.D.V. as at 31.12.15 1,155,823 - 43,324,095 2,491,304 - 46,971,222

investment in plantation assets which were immature at the time of handing over to the Company by way of estate leases are shown under immature plantation (revalued as at 22nd June 1992). Furthermore, investment in such immature plantation to bring them to maturity are shown under note 14.

as at 31st December 2016

193,224,140

193,224,140

146,252,918 6,201,967

152,454,885

40,769,255

46,971,222



12. TANGIBLE ASSETS (Other than Biological Assets) Freehold Assets Buildings Motor Plant and Furniture & Equipment Computers & Vehicles Machinery Fittings Hardware Rs. Rs. Rs. Rs. Rs. Rs.

Cost

as at 1 January 2016 205,084,153 82,583,227 335,058,059 6,406,859 46,907,124 24,636,071

additions 20,376,626 2,480,926 63,893,160 269,495 162,436 1,481,625

transfers - (461,000) - - - -

As at 31st December 2016 225,460,779 84,603,153 398,951,219 6,676,354 47,069,560 26,117,696

Depreciation and Impairment Loss

as at 1st January 2016 46,320,939 80,383,407 197,627,654 5,726,826 41,077,004 19,078,318

Depreciation charge for the year 5,129,816 1,146,796 21,153,327 166,931 2,485,427 2,108,281

transfers - (383,334) - - - -

As at 31st December 2016 51,450,755 81,146,869 218,780,981 5,893,757 43,562,431 21,186,599

Written Down Value

As at 31st December 2016 174,010,024 3,456,284 180,170,238 782,597 3,507,129 4,931,097

as at 31st December 2015 158,763,214 2,199,820 137,430,405 680,033 5,830,120 5,557,753

property, plant and equipment with a cost of rs. 211,042,642/- ( 2015: rs. 194,234,950/-) have been fully depreciated and continue to be in use by the Company. the assets shown above are those movable and immovable assets vested in the Company by gazette notification at the date of formation of the Company (22nd June 1992) and all investment in tangible assets by the Company since its formation. the assets taken over by way of estate leases are set out in notes 10 & 11.





Grant Funded Assets

Lines & Water, Sanitation Farm Others Total Capital work Total Latrines & Electricity Roads in progress

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

34,563,799 17,050,939 12,090,672 91,839,877 856,220,780 85,793,388 942,014,168

372,539 - 1,711,719 - 90,748,526 9,093,201 99,841,727

- - - - (461,000) (86,003,787) (86,464,787)

34,936,338 17,050,939 13,802,391 91,839,877 946,508,306 8,882,802 955,391,108

15,981,769 10,600,178 1,936,328 23,935,486 442,667,909 128,371 442,796,280

2,911,272 740,062 279,954 950,450 37,072,316 - 37,072,316

- - - - (383,334) - (383,334)

18,893,041 11,340,240 2,216,282 24,885,936 479,356,891 128,371 479,485,262

16,043,297 5,710,699 11,586,109 66,953,941 467,151,415 8,754,431 475,905,846

18,582,030 6,450,761 10,154,344 67,904,391 413,552,871 85,665,017 499,217,888


12. TANGIBLE ASSETS

(Other than Biological Assets) (Cont.)

12.1 Leasehold land :

Company Estate name Location No of Ha. Cost (Rs.)

udapussellawa plantations plC Blairlomond udapussellawa 589.75 55,628,499

alnwick udapussellawa 374.00 37,565,501

Delmar udapussellawa 628.82 64,441,500

Gordon udapussellawa 398.75 34,722,499

Waldemar udapussellawa 368.50 36,580,000

Concordia Nuwara eliya 426.80 41,215,036

Courtlodge Nuwara eliya 407.16 39,157,000

park Nuwara eliya 402.15 43,734,459

Duckwari Matale 637.86 53,768,000

Madulkelle Matale 854.14 72,437,500

yatawatte Matale 442.11 28,314,500

507,564,494

12.2 Freehold buildings :

Company Estate name Location No of buildings Cost (Rs.)

udapussellawa plantations plC Blairlomond udapussellawa 3 8,530,316

alnwick udapussellawa 2 3,584,049

Delmar udapussellawa 3 10,975,056

Gordon udapussellawa 4 10,143,412

Waldemar udapussellawa 3 25,784,969

Concordia Nuwara eliya 36 27,653,684

Courtlodge Nuwara eliya 38 10,884,642

park Nuwara eliya 6 12,877,341

Duckwari Matale 5 10,718,460

Madulkelle Matale 18 99,146,043

yatawatte Matale 16 5,149,171

head Office ingiriya 1 13,637

225,460,779

12.3 Leasehold buildings :

Company Estate name Location No of buildings Cost (Rs.)

udapussellawa plantations plC Blairlomond udapussellawa 227 4,955,119

alnwick udapussellawa 233 4,108,628

Delmar udapussellawa 76 4,286,783

Gordon udapussellawa 212 6,211,078

Waldemar udapussellawa 149 3,253,584

Concordia Nuwara eliya 344 4,818,012

Courtlodge Nuwara eliya 217 3,553,439

park Nuwara eliya 359 5,097,361

Duckwari Matale 138 4,604,896

Madulkelle Matale 205 2,825,818

yatawatte Matale 39 2,450,296

46,165,014



13. INTANGIBLE ASSETS

13.1 Computer Software 2016 2015

Cost Rs. Rs.


additions during the year 905,672 868,022

Disposals/transfers - (1,247,534)


Accumulated Amortization


Charge for the year 2,232,626 1,747,128


Written Down Value 12,800,418 14,127,372

18,088,542

905,672

-

18,994,214

3,961,170

2,232,626

6,193,796

12,800,418


14. BIOLOGICAL ASSETS 14.1 Bearer Biological Assets IMMATURE BEARER BIOLOGICAL ASSETS Total Total Tea Rubber Coconut Others as at as at 2016 2015 Rs. Rs. Rs. Rs. Rs. Rs. Cost at the beginning of the year 39,126,987 17,555,253 - 9,877,661 66,559,901 76,840,489 additions during the year 12,238,737 2,188,629 - 2,541,668 16,969,034 20,734,663 transfers to Mature Bearer Biological assets (26,477,280) - - - (26,477,280) (27,428,920) impairment loss during the year - - - - - (3,586,331) at the end of the year 24,888,444 19,743,882 - 12,419,329 57,051,655 66,559,901

MATURE BEARER BIOLOGICAL ASSETS Total Total Tea Rubber Coconut Others as at as at 2016 2015 Rs. Rs. Rs. Rs. Rs. Rs. Cost

at the beginning of the year 437,649,763 2,458,114 57,083,179 4,550,041 501,741,097 474,312,177 transfers from immature Bearer Biological assets 26,477,280 - - - 26,477,280 27,428,920 at the end of the year 464,127,043 2,458,114 57,083,179 4,550,041 528,218,377 501,741,097

Amortization at the beginning of the year 107,346,617 215,737 7,874,593 260,297 115,697,244 101,771,680

Charge for the year 13,624,695 123,242 1,144,791 250,849 15,143,577 13,925,563 acquisitions (refer note 7)

at the end of the year 120,971,312 338,979 9,019,384 511,146 130,840,821 115,697,243 Written Down Value 343,155,731 2,119,135 48,063,795 4,038,895 397,377,556 386,043,854

TOTAL BEARER BIOLOGICAL ASSETS 368,044,175 21,863,017 48,063,795 16,458,224 454,429,211 452,603,755

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 10 and 11. Further investment in immature plantations taken over by way of these leases are shown in the above note.



14.2 Consumable Biological Assets 2016 2015

Immature Consumable Biological Assets Rs. Rs.

Cost


additions 23,351 1,655,660

transfers to Mature (286,524) (1,556,348)


Mature Consumable Biological Assets


increase due to transfer from immature 286,524 1,556,348

Change in fair value less cost to sell:

Due to price changes (83,650,078) (59,438,544)

Due to physical changes 42,763,708 75,607,080

Decrease due to harvest (5,077,671) -

At the end of the year 529,485,590 575,163,107

Total Consumable Biological Assets 535,728,387 581,669,077

as per lKas 41 the company has valued its managed timber plantations at fair value less cost to sell. Managed timber plantation as at 31st December 2016 comprised approximately of 318.25 hectares (2015: 305 hectares), which are in the range of newly established plantation to plantation that are more than 24 years old.

Managed trees which are less than four years old considered to be immature Consumable Biological assets amounting rs. 6.2 million as at 31st December 2016 (2015: 6.5 million). the cost of immature trees is treated as approximate fair value particularly on the ground that little biological transformation has taken place and impact of the biological transformation on price is not material. When such plantations are matured, the additional investments to bring them to maturity are transferred from immature to mature.

14.2.1 Measurement of Fair value the mature consumable biological assets were valued using Discounted Cash Flow (DFC) method. in ascertaining the fair

value of timber, sample physical verification was carried out covering all the estates.

(i) Fair value hierarchy the fair value measurement of biological assets have been categorised as level 3 fair value based on the inputs to the

valuation technique used.

(ii) Level 3 fair values the following table shows a breakdown of the total gain / (losses) recognised in repect of level 3 fair value.

2016 2015

Rs. Rs.

Change in Fair Value of Biological assets (40,886,370) 16,168,536

Key assumptions used in the valuation are; 1. the harvesting is approved by the plantation Management and Monitoring Division and Forestry Department as per

the forestry development plan. 2. the prices adopted are net of expenditure


6,505,970

23,351

(286,524)

6,242,797

575,163,107

286,524

(83,650,078)

42,763,708

(5,077,671)

529,485,590

535,728,387

(40,886,370)



3. risk adjusted discount rates used in the range of 12% to 17% (2015: 13%). Fair value would increase if discount rate was low and fair value would decrease if discount rate was high. risk adjusted discount rate has been changed from 13% in 2015 to 12% to 17% in 2016 where the rate decreases with the age of the timber plantations. the impact due to this change is a negative rs 111,256,818 and accounted prospectively.

4. three year annual rolling average selling prices of managed timber fields of the group. Fair value would increase if timber prices were high and fair value would decrease if timber prices were low.

the valuation, as presented in the valuation model based on the net present value, take into accounts the long-term exploitation of the timber plantation. 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 realisation value. the Board of Directors retains their view that commodity markets are inherently volatile and their long-term price projection are highly unpredictable. hence, the sensitivity analysis regarding selling price and discount rate variation 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.

the biological assets of the company are mainly cultivated in leased lands. When measuring the fair value of the biological assets it was assumed that these concession can and will be renewed at normal circumstances. timber content expects to be realised in the future and is included in the calculation of the fair value that takes into account the age of the timber plants and not the expiration date of the lease.

the Company is exposed to the following risks relating to its timber plantations. Regulatory and environmental risks the Company is subject to laws and regulations in sri lanka. the Company has established environmental policies and procedures aimed at compliance with local environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure that the systems in place are adequate to manage those risks.

Supply and demand risk the Company is exposed to risks arising from fluctuations in the price and sales volume of timber. When possible

the Company manages this risk by aligning its harvest volume to market supply and demand. Management performs regular industry trend analysis to ensure that the Company’s pricing structure is in line with the market and to ensure that projected harvest volumes are consistent with the expected demand. Climate change and other risks

the Company’s timber plantations are exposed to the risk of damage from climatic changes, diseases, forest fires and other natural forces. the Company has extensive processes in place aimed at monitoring and mitigating those risks, including regular forest health inspections and industry pest and disease surveys. the Company also insures itself against natural disasters such as floods, land slides and hurricanes.

14.2.1 Sensitivity Analysis Sensitivity Variation on Sales Price Values 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 prices shows that an increase or decrease of 10% of the future selling prices has the following effect on the net present value of the Mature Consumable Biological assets.

-10% - +10%

as at 31st December 2016 476,537,031 529,485,590 582,434,149

as at 31st December 2015 517,646,796 575,163,107 632,679,418




Sensitivity Variation on Discount Rate

Values appearing in the statement of Financial position are very sensitive to changes of discount rate applied. simulations made for discount rate shows that an increase or decrease by 1% of the future discounting rate has the following effect

on the net present value of the Mature Consumable Biological assets.

-1% - +1%

as at 31st December 2016 573,180,190 529,485,590 490,111,513

as at 31st December 2015 632,753,282 575,163,107 524,164,461

2016 2015

14.3 Produce on Bearer Biological Assets Rs. Rs.

at the beginning of the year - as previously reported 757,073 -

impact of the amendments of lKas 16 and lKas 41 (Note 32) - 1,470,971

at the beginning of the year - restated 757,073 1,470,971

Change in fair value less cost to sell 4,247,801 (713,898)

at the end of the year 5,004,874 757,073

produce on bearer biological assets of rubber and other crops have not been fair valued as the amount is not significant to

the financial statements.

14.4 Change in Fair Value of Biological Assets

Change in fair value of consumable biological assets less cost to sell (40,886,370) 16,168,536

Change in fair value of produce on bearer biological assets less cost to sell 4,247,801 (713,898)

total change in fair value of biological assets (36,638,569) 15,454,638

2016 2015

15. INVENTORY Rs. Rs.

Nursery stock 9,282,906 4,820,270

produce stock - tea 205,869,432 175,625,662

produce stock - Others 3,235,979 1,615,246

Consumables and spares 40,158,475 35,464,306

258,546,792 217,525,484

less: provision for obsolete and slow moving stock (1,939,224) (3,176,274)

256,607,568 214,349,210

16. TRADE AND OTHER RECEIVABLES

trade debtors 908,265 242,016

economic service Charge (esC) receivable 8,933,692 5,457,455

advances and prepayments 44,497,230 46,342,784

Other debtors 22,641,707 23,186,707

76,980,894 75,228,962

less: provision for bad and doubtful debts (17,254,693) (13,145,895)

59,726,201 62,083,067

the Company’s exposure to credit risk and impairment loss related to trade and other receivables is disclosed in Note 34.

17. AMOUNT DUE FROM RELATED COMPANIES

hapugastenne plantations plC (interest 6% p.a.) 52,480,069 36,802,349

52,480,069 36,802,349

amount due from related company stated above is unsecured and settled occurs in cash on demand.


757,073

-

757,073

4,247,801

5,004,874

(40,886,370)

4,247,801

(36,638,569)

9,282,906

205,869,432

3,235,979

40,158,475

258,546,792

(1,939,224)

256,607,568

908,265

8,933,692

44,497,230

22,641,707

76,980,894

(17,254,693)

59,726,201

52,480,069

52,480,069



2016 2015 18. CASH AND CASH EQUIVALENT Rs. Rs.18.1 Favourable balances

Cash at bank and Cash in hand 4,327,975 7,727,474 4,327,975 7,727,474 18.2 Unfavourable balances

Bank overdraft (249,307,470) (116,256,478) Cash and Cash equivalent as per the statement of Cash Flows (244,979,495) (108,529,004)

the securities pledged have been disclosed in Note 22 to the financial statements.

19. STATED CAPITAL 2016 2015 Rs. Rs. 19,398,850 Ordinary shares 340,000,000 340,000,000 Golden share held by the secretary to the treasury (Note 19.1) 10 10 340,000,010 340,000,010 19.1 The Golden Shareholder the Golden share is currently held by secretary to the treasury and should be owned either directly by the Government

of sri lanka or by a 100% Government owned public Company. in addition to the right of a normal ordinary shareholder, in term of the articles of association of the Company, the following special rights are vested with the Golden shareholder.

(a) the Company shall obtain the written consent of the Golden shareholder prior to sub-leasing, ceding or assigning its rights in part or all of the lands leased/ to be leased to the Company by the JeDB/slspC.

(b) the Golden shareholder shall be entitled to call upon the Board of Directors meeting once in three months to meet him or his nominee to discuss matters of the Company of interest to the state of the Government.

(c) the Golden shareholder and or his nominee shall be entitled to inspect the books of accounts of the Company after giving two weeks written notice to the Company.

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

(e) the Company shall submit to the Golden shareholder, within 90 days of the end of each fiscal year, information related to the Company in a pre-specified format agreed to by Golden shareholder and the Company.

20. REVALUATION RESERVE 2016 2015 Rs. Rs. at the beginning of the year 212,966,466 220,074,711 transfers to general reserve (7,156,461) (7,108,245) at the end of the year 205,810,005 212,966,466

20.1 the leasehold right to bare land has been revalued on 31st May 1998 as per the valuation undertaken by M/s. p.B. Kalugalagedera and s.N. Wijepala, Chartered Valuers. the excess over the book value amounting to rs 376,234,165/- has been treated as a revaluation reserve.

20.2 since, the bare lands are used by the Company, the revaluation surplus is transferred to the general reserve which is consistent with the amortisation of leasehold right to bare lands as recommended by lKas 16: property, plant and equipment.

21. GENERAL RESERVE 2016 2015 Rs. Rs. at the beginning of the year 137,917,516 130,809,271 transfers from revaluation reserve 7,156,461 7,108,245 at the end of the year 145,073,977 137,917,516

4,327,975 4,327,975

(249,307,470) (244,979,495)

340,000,000 10

340,000,010

212,966,466 (7,156,461)

205,810,005

137,917,5167,156,461

145,073,977



22. INTEREST BEARING LOANS & BORROWINGS 2016 2015

Repayable Repayable Total Repayable Repayable Total

within More than as at within More than as at

1 year 1 year 31.12.2016 1 year 1 year 31.12.2015


22.A Sri Lanka Tea Board Loan 18,652,650 23,250,000 41,902,650 21,661,500 - 21,661,500

22.B Term Loans 33,004,008 102,058,654 135,062,662 37,518,285 79,996,000 117,514,285

51,656,658 125,308,654 176,965,312 59,179,785 79,996,000 139,175,785

Repayable

Repayable more than Total Total Effective Terms

within 1 year and less as at as at Rate of of

1 year than 05 years 31.12.16 31.12.15 Interest Repayment

Rs. Rs. Rs. Rs.

22.A Sri Lanka Tea Board Loan

loan i - - - - 21,661,500 interest Free repayable in 10 equal monthly installments

of rs. 2,166,150/- each, commencing

from 31.01.2016.

loan ii - 14,902,650 - 14,902,650 - interest Free repayable in 10 equal monthly installments

of rs. 1,655,850/- each, commencing

from 15.12.2016.

loan iii - 3,750,000 23,250,000 27,000,000 - aWplr+1% repayable in 36 equal monthly installments

of rs. 750,000/- each, commencing

from 31.08.2017.

18,652,650 23,250,000 41,902,650 21,661,500

22.B Term Loans

DFCC Vardhana Bank 13,000,008 44,416,654 57,416,662 17,514,285 aWplr + 4.75% repayable in 60 equal monthly installments

of rs. 1,083,333/- each commencing

from 30.09.2016.

Commercial Bank

of Ceylon plC 20,004,000 57,642,000 77,646,000 100,000,000 1-2 years: 7.5% repayable in 59 equal monthly installments

3-5 years: of rs. 1,667,000/- each and a final

aWplr+2% installment of rs.1,647,000 commencing

from 25.01.2016.

33,004,008 102,058,654 135,062,662 117,514,285

22.C Securities Pledged

the following assets have been pledged as security for liabilities:

Nature of liability Facility Outstanding Security

Rs. Million Rs. Million

Bank Overdraft

DFCC Vardhana Bank 100 99 Corporate Guarantee from hapugastenne plantations plC for rs. 100 Mn.

Term Loan

DFCC Vardhana Bank 65 57 Corporate Guarantee from hapugastenne plantations plC for rs. 65 Mn.

Total

as at

31.12.2016

Rs.

41,902,650

135,062,662

176,965,312

-

14,902,650

27,000,000

41,902,650

57,416,662

77,646,000

135,062,662

41,902,650



2016 2015

23. DEFERRED INCOME Rs. Rs


Grants received 304,976 327,273

amortisation (4,163,239) (4,148,230)


the Company has received funding from the plantation housing and social Welfare trust, tea Board subsidy Fund, plantation

reform project, estate infrastructure Development programme and from plantation Development support project for the

development of workers welfare facilities such as re-roofing of line rooms, latrines, water supply and sanitation etc. the

amounts spent are included under the relevant classification of property, plant & equipment and the grant received for such

is reflected under Deferred income. When the company complies with the condition attached to the grants and subsidies,

the grants will be credited to the statement of profit or loss and Other Comprehensive income over the useful life of the

respective assets. 2016 201524. RETIREMENT BENEFIT OBLIGATION Rs. Rs.


provisions made 19,863,373 114,922,742

payments made (69,738,275) (57,761,119)


present value of unfunded obligation 617,530,120 667,405,022

total present value of obligation 617,530,120 667,405,022

present value of net obligation 617,530,120 667,405,022

recognized liability for Defined Benefit Obligation 617,530,120 667,405,022

The Movement in the present value of Defined Benefit Obligation


interest Cost 70,410,154 64,075,557

Current service Cost 31,796,342 34,221,436

Benefit paid (69,738,275) (57,761,119)

remeasurement (gain)/ loss (82,343,123) 16,625,749


Expenses recognised in the Statements of Profit or Loss

Current service Cost 31,796,342 34,221,436

interest Cost 70,410,154 64,075,557

102,206,496 98,296,993

Expenses/(income) recognised in the Statement of Other Comprehensive Income

remeasurement of retirement Benefit Obligation (82,343,123) 16,625,749 the actuarial valuation has been carried out by acturial & Management Consultants (pvt) ltd as at 31st December 2016.

111,504,411

304,976

(4,163,239)

107,646,148

667,405,022

19,863,373

(69,738,275)

617,530,120

617,530,120

617,530,120

617,530,120

617,530,120

667,405,022

70,410,154

31,796,342

(69,738,275)

(82,343,123)

617,530,120

31,796,342

70,410,154

102,206,496

(82,343,123)




The key assumptions used by the actuary include the following.

Company 2016 2015

i) rate of interest 11% 10.50% per annum

ii) rate of salary increase

- Workers 18% 18% every two years

- staff & executives 7.50% 7.50% per annum

iii) retirement age 60 60 years

iv) Daily wage rate

- tea (rs.) 500 450 per day

- rubber (rs.) 500 450 per day

the actuarial present value of the accrued benefits as at 31st December 2016 is rs. 617,530,121/- (2015 - rs.667,405,022/-). this item is grouped under retirement Benefit Obligation in the statement of Financial position. the liability is not exter-nally funded.

Sensitivity of Assumptions Used a quantitative sensitivity analysis for significant assumptions used by the Company as at 31st December 2016 is as shown below;

effect on the employee Benefit Obligation Discount Rate Salary Escalation Attrition Rate Rate increse by one percentage point 504,843,786 570,468,731 553,917,472 Decerease by one precentage point 594,316,730 523,918,352 538,785,158

the sensitivity analysis above has been determined on a method that extrapolates the impact on employee benefit obliga-tion as a result of reasonable changes in key assumptions occurring at the end of reporting period.

the following payments are expected from contributions to the employee benefit obligations in future years;

2016 2015

With in one year 28,046,882 52,163,884

Between 2 to 5 years 111,647,338 142,147,163

More than 5 years 187,188,562 221,073,714 25. NET LIABILITY TO THE LESSOR OF JEDB / SLSPC ESTATES

Repayable Repayable more than one year Total Total

within After one year After Total as at as at

1 year less than 5 years 5 years 31.12.16 31.12.15


Gross liability 7,500 30,000 176,034 206,034 213,534 232,034

less : Finance charges (5,482) (21,086) (60,858) (81,944) (87,426) (98,995)

Net liability 2,018 8,914 115,176 124,090 126,108 133,039

the leases of the estates are executed at a rental of rs.500/- per estate per annum without any contingent rental.

213,534

(87,426)

126,108

52,163,884

142,147,163

221,073,714




2016 2015

Rs Rs

26. AMOUNTS DUE TO RELATED COMPANIES

amounts Due to related Companies - interest bearing (Note 26.1) 296,337,925 283,813,868

amounts Due to related Companies - Non-interest bearing (Note 26.2) 53,214,605 50,439,913

349,552,530 334,253,781

26.1 Amounts Due to Related Companies - Interest bearing interest rate p.a.

James Finlay plantation holdings (lanka) ltd 6.00% 198,000,000 189,000,000

Finlay instant teas (pvt) ltd 6.00% 36,452,755 36,965,546

James Finlay limited, uK - loan 3.50% 61,885,170 57,848,322

296,337,925 283,813,868

related company loans stated above are unsecured and the settlement occurs in cash on the date of maturity.

26.2 Amounts Due to Related Companies - Non-interest bearing

James Finlay limited, uK 53,214,60 50,439,913

amounts due to related company stated above is unsecured, free of interest and the settlement occurs in cash on demand.

2016 2015

Rs Rs

27. TRADE AND OTHER PAYABLES

trade Creditors 81,839,101 69,388,056

accrued expenses 3,419,050 4,761,224

payable to employees 108,180,914 102,298,099

Other Creditors 71,595,245 119,171,446

265,034,310 295,618,825 28. RELATED PARTY TRANSACTIONS

28.1 the Company carried out transaction in the ordinary course of business with parties who are defined as related parties in accordance sri lanka accounting standard (lKas) 24 ‘related party Disclosure’, the details of which are reported below.

Company Relationship Details of Transactions Amount Received/ (Paid) 2016 2015 Rs. Rs.

hapugastenne plantations plC Common Directors interest (expenditure) / income 3,817,238 (1,105,741)

Corporate Guarantee issued 200,000,000 200,000,000

Corporate Guarantee received 165,000,000 165,000,000

James Finlay plantation

holdings (lanka) ltd intermediary parent interest (expenditure) / income (9,000,000) (9,000,000)

Finlay properties (pvt) ltd. Common Directors Warehouse Charges (3,569,184) (3,280,072)

Finlay instant teas (pvt) ltd Common Directors interest (expenditure) / income (2,189,490) (2,220,626)

reimbursement of expenditure 1,676,699 1,771,533

James Finlay ltd, uK intermediary parent reimbursement of expenditure (9,675,000) (11,211,698)

Net proceeds on loan - 57,667,568

interest (expenditure) / income (2,036,880) (180,754)

seylan Bank plC Common Directors Demand deposits 554,000 -

Finlay Colombo limited Common Directors reimbursement of expenditure 931,500 -

Finlay rentokil Ceylon (pvt) ltd Common Directors Mainterance Charges 67,959 -

296,337,925

53,214,605

349,552,530

198,000,000

36,452,755

61,885,170

296,337,925

81,839,101

3,419,050

108,180,914

71,595,245

265,034,310

53,214,60

3,817,238

200,000,000 200,000,000

165,000,000 165,000,000

(9,000,000)

(3,569,184)

(2,189,490)

1,676,699

(9,675,000)

-

(2,036,880)

554,000

931,500

67,959



the Company obtained Motor (comprehensive) insurance cover from union assurance General ltd and Motor (third party), Fire all risk , Fire Commercial, Fire & theft Dwelling house, Money in transit, Goods in transit, Boiler & pressure Ves-sel insurance, electronic equipment, personal accident, Workmen’s Compensation and Fire Consequential loss insurance covers from Janashakthi General insurance ltd in 2016 and in 2015 through Finlays insurance Brokers (private) limited.

this note should be read in conjunction with Notes 6, 17 and 26 to the Financial statements.

28.2 Transactions with key management personnel according to sri lanka accounting standard 24 ‘related party Disclosures’, key management personnel are those having

authority and responsibility for planning, directing and controlling the activities of the entity. accordingly, the Board of Directors (including executive and Non-executive Directors) have been classified as key management personnel of the Company and during the year the Company paid rs. 3.6 Mn (in 2015 – rs. 5.9 Mn) as remuneration to key management personal.

28.3 Pricing Policies purchase of goods and services from related parties were made at normal trading terms on an arms’ length basis.

29. CAPITAL COMMITMENTS there are no capital commitments as at the date of the statement of Financial position.

30. EVENTS OCCURING AFTER REPORTING DATE there have been no material events occurring after the date of the statement of Financial position that require adjustments

or disclosure in the financial statements. 31. CONTINGENCIES there are no Contingent liabilities as at the date of the statement of Financial position.

32. IMPACT OF AMENDMENTS TO LKAS 16 AND LKAS 41 the prior year figures have been restated due to the following adjustments and the total effect to the Financial statements

is summarized below, amendment to lKas 16 and lKas 41, on bearer plants, are effective for annual reporting periods beginning on or after 1st

January 2016. accordingly, harvestable biological assets growing on the bearer plants are measured at their fair value less cost to harvest and accounted retrospectively.

2015 2015 2015 Previously Reported Adjustment Restated Amount Amount Amount Rs. Rs. Rs. Statement of Profit or Loss

Change in Fair Value of Biological assets 16,168,536 (713,898) 15,454,638 Statement of Financial Position

Produce on bearer biological assets

as at the beginning of the year - 1,470,971 1,470,971 as at the end of the year - 757,073 757,073

Accumulated Loss as at the beginning of the year 66,361,085 1,470,971 67,832,056

as at the end of the year (88,667,011) 757,073 (87,909,938)



33

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4,33

8

101

,926

,703

2

,999

,662

8

,653

,379

9

64,3

32

451

,021

3

1,65

8,33

1

111

,031

,104



34. FINANCIAL RISK MANAGEMENT

Overview

the Company has exposure to the following risks from its use of financial instruments:

* Credit risk

* liquidity risk

* Market risks (including currency risk and interest rate risk)

this note present qualitative and quantitative information about the Company’s exposure to each of the above risks, the

Company’s objectives, policies and procedures for measuring and managing those risks.

Risk Management Framework

the Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management

framework the Company’s risk management policies are established to identify and analyse the risk faced by the Company,

to set appropriate risk limits and controls, and to monitor risk and adherence to limits. risk management policies and sys-

tems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

Credit Risk

Credit risk is the risk of financial loss to the company, if a customer or counter party to a financial instrument fails to meet

its contractual obligation, and arises principally from the company’s receivables from customers and investment securities.

the carrying amount of financial assets represents the maximum credit exposure. the maximum exposure to credit risk at

the reporting date was as follows; 2016 2015 Loans and Receivables Rs. Rs.

trade and Other receivables 58,473,630 60,830,496

Other financial assets - 1,059,973

Cash and Cash equivalent 4,327,975 7,727,474

62,801,605 69,617,944

Impairment Loss 2016 2015 Gross Impairment Gross Impairment Rs. Rs. Rs. Rs.

trade and Other receivables 76,980,894 (17,254,693) 75,228,962 (13,145,895)

76,980,894 (17,254,693) 75,228,962 (13,145,895)

the movement in the allowance for impairment in respect of loans and receivables during the year was as follows; 2016 2015

Rs. Rs.

Balance as at 1st January 13,145,895 14,432,294

impairment loss recognised /(reversed) during the year 4,108,798 (1,286,399)

Balance as at 31st December 17,254,693 13,145,895

58,473,630

-

4,327,975

62,801,605

13,145,895

4,108,798

17,254,693

76,980,894 (17,254,693)

76,980,894 (17,254,693)




Liquidity Risk

liquidity risk is the risk that the company will encounter difficulty in meeting the obligations associated with it’s financial

liabilities that are settled by delivering cash or another financial asset. the Company’s approach to managing this exposure

is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under normal or

stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

to measure and mitigate liquidity risk, the Company closely monitors its net operating cash flow, maintained at a level of

cash and cash equivalents and secured committed funding facilities from financial institutions.

Non-derivative financial liabilities 2016 2015

Rs. Rs.

interest bearing loans & borrowings 176,965,312 139,175,785

Net liability to the lessor 2,018 2,018

amounts due to related companies 349,552,530 334,253,781

trade and other payables 265,034,310 295,618,825

791,554,170 769,050,409

Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates etc; will affect the Com-

pany’s income or the value of its holdings of financial instruments. the objective of the market risk management is to man-

age and control market risk exposures within acceptable parameters while optimising the returns.

Interest Rate Risk

interest rate risk is the risk that the fair value or future cash flows of a financial instruments fluctuate because of changes

in market interest rates. the Company exposure to the risk of changes in market interest rates relates primarily to the Com-

pany’s long term debt obligation and investments with floating interest rates.

35. Financial Instruments

the Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in

making the measurements.

level i: Quoted market price (unadjusted) in an active market for an identical instrument.

level ii: Valuation techniques based on observable inputs, either directly – i.e. as prices or indirectly – i.e. derived

from prices. this category includes instruments valued using: quoted market prices in active markets for

similar instruments; quoted prices for identical or similar instruments in markets that are considered less

than active; or other valuation techniques where all significant inputs are directly or indirectly observable

from market data.

level iii: Valuation techniques using significant unobservable inputs. this category includes all instruments where

the valuation technique includes inputs not based on observable data and the unobservable inputs have a

significant effect on the instrument’s valuation. this category includes instruments that are valued based

on quoted prices for similar instruments where significant unobservable adjustments or assumptions are

required to reflect differences between the instruments.

Level I Level II Level III

2016 2015 2016 2015 2016 2015


Foreign exchange Forward Contract - - - 1,059,973 - -

176,965,312

2,018

349,552,530

265,034,310

791,554,170

-

-

-



teN--year suMMary

Performance 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Restated Restated

revenue 942,265 1,046,095 1,146,844 1,390,746 1,179,279 1,313,248 1,612,181 1,549,968 1,717,498 1,620,095

Gross profit 162,008 97,791 130,871 252,812 21,068 129,367 126,989 35,188 (61,025) (28,314)

pBit 137,777 44,482 80,833 188,729 (38,149) 27,520 65,067 139,974 (131,186) (168,433)

interest 37,873 37,701 41,217 38,732 26,498 28,382 25,376 14,112 27,600 41,711

pBt 99,904 6,781 39,616 149,997 (64,647) (862) 39,691 125,862 (158,786) (210,145)

taxation 4,673 447 8,873 11,053 (34,489) 25,711 7,310 26,285 (17,041) (28,344)

Net profit 95,231 6,334 30,743 138,944 (30,158) (26,573) 32,381 99,577 (141,744) (181,801)

Other comprehensive income - - - - (92,497) 82,652 20,665 (1,456) (13,997) 69,324

total comprehensive income

for the year - - - - (122,655) 56,079 53,046 98,121 (155,742) (112,477)

Assets & LiabilitiesNon Current assets 1,089,684 1,258,984 1,233,688 1,388,287 1,436,534 1,520,343 1,526,458 1,872,642 1,948,928 1,883,986

Current assets 276,244 185,528 339,859 404,926 237,863 286,954 252,789 339,926 322,779 378,147

total assets 1,365,928 1,444,512 1,573,547 1,793,213 1,674,397 1,807,297 1,779,247 2,212,568 2,271,707 2,262,133

Current liabilities 251,266 252,445 265,408 690,765 589,843 655,682 583,196 728,152 809,697 921,027

Non Current liabilities 836,187 907,258 992,587 528,384 633,145 545,538 536,927 725,700 859,036 850,609

long term Borrowings 465,277 501,985 509,761 35,662 19,943 4,225 - - 79,996 125,309

retirement Benefit Obligations 248,725 288,333 362,683 373,707 498,203 429,913 429,815 610,243 667,405 617,530

Other Non Current liabilities 122,185 116,940 120,143 119,015 114,999 111,400 107,112 115,456 111,635 107,770

Share Capital & Reserves

authorised share Capital of

rs 10/- each 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000

stated Capital 340,000 340,000 340,000 340,000 340,000 340,000 340,000 340,000 340,000 340,000

revaluation reserve 274,305 266,314 258,324 250,333 242,342 234,351 227,214 220,075 212,966 205,810

General reserve (335,830) (321,505) (282,772) (16,269) (130,933) 31,726 91,910 198,641 50,008 (55,313)

total share holders’ funds 278,475 284,809 315,552 574,064 451,409 606,077 659,124 758,716 602,974 490,497

Financial RatiosrOCe - % 12.36 3.73 6.18 17.12 (3.52) 2.39 4.04 7.31 (6.80) (8.70)

Current ratio - times 1.10 0.73 1.28 0.59 0.40 0.44 0.43 0.46 0.40 0.41

Debt equity ratio - times 2.32 2.39 2.19 0.38 0.48 0.33 0.28 0.24 0.63 0.85

interest Cover - times 3.64 1.18 1.96 4.87 (1.44) 0.97 2.56 9.92 (4.75) (4.04)

total assets to Current liabilities - % 18.40 17.48 16.87 38.52 35.23 36.28 32.78 32.93 35.64 40.71

Investors Ratios

earnings per share - rs 4.91 0.33 1.58 7.16 (1.55) (1.37) 1.67 5.13 (7.31) (9.37)

price earnings ratio 6.26 36.75 19.25 6.56 (20.58) (21.24) 15.40 7.71 (3.82) (2.07)

Market price of a share - rs 30.75 12.00 30.50 47.00 32.00 29.10 25.70 39.60 27.90 19.40

Market Capitalisation - rs’000 596,513 232,786 591,663 911,744 620,762 564,505 498,549 768,192 541,227 376,337

Net assets per share - rs 14.36 14.68 16.27 29.59 23.27 31.24 33.98 39.04 31.08 25.28

Operating Ratios

annual turnover Growth - % (12.04) 11.02 9.63 21.27 (15.21) 11.36 22.76 (3.86) 10.81 (5.67)

No of employees 5,098 4,847 4,569 4,405 4,290 4,070 3,944 5,849 5,578 5,251

turnover per employee - rs’000 184.83 215.82 251.01 315.72 274.89 322.67 408.77 265.00 307.91 308.53

Fixed assets to turnover ratio - % 0.86 0.83 0.93 1.00 0.82 0.86 1.06 0.83 0.88 0.86


iNVestOr iNFOrMatiON

1. Stock Exchange

the issued Ordinary shares of udapussella plantations plC are listed with the Colombo stock exchange of sri lanka.

2. Distribution of Shares 2016 2015

No. of No. of % No. of No. of % Shareholders Shares Shareholders Shares

1 - 1,000 11,966 1,041,976 5.37 11,933 1,044,474 5.38

1,001 - 10,000 85 264,297 1.36 88 246,472 1.27

10,001 - 100,000 12 267,176 1.38 11 282,503 1.46

100,001 - 1,000,000 - - - - - -

over 1,000,000 3 17,825,402 91.89 3 17,825,402 91.89

total 12,066 19,398,851 100.00 12,035 19,398,851 100.00

3. Distribution of Shareholders 2016 2015

No. of No. of % No. of No. of % Shareholders Shares Shareholders Shares

Non - residents 9 3,805,949 19.62 8 3,805,942 19.62

residents 12,057 15,592,902 80.38 12,027 15,592,909 80.38

total 12,066 19,398,851 100.00 12,035 19,398,851 100.00

individuals 12,010 1,526,775 7.87 11,974 1,525,448 7.86

institutions 56 17,872,076 92.13 61 17,873,403 92.14

total 12,066 19,398,851 100.00 12,035 19,398,851 100.00

4. Golden Shareholder

the Golden share of rs. 10/- is currently held by the secretary to the treasury and should be owned either directly by the Government

or by a 100% Government owned Company.

5. Investor Information

2016 2015 2014 2013 2012

highest during the year rs. 27.90 43.50 57.00 32.50 33.90

Date (04/01/2016) (02/01/2015) (17/10/2014) (02/07/2013) (21/09/2012)

lowest during the year rs. 15.50 23.30 21.00 21.10 15.00

Date (04/04/2016) (02/12/2015) (17/03/2014) (06/09/2013) (06/06/2012)

Closing price rs. 19.40 27.90 39.60 25.70 29.10

trade Volume No’s 638 790 2,407 1,141 871

share Volume No’s 196,286 401,229 1,326,659 589,669 208,661

turnover rs. 3,973,563 14,474,122 47,548,058 16,919,541 5,655,578


Value--aDDeD stateMeNt

iNVestOr iNFOrMatiON (CONt)

Twenty Major Shareholders 2016 2015 Name of Shareholder No. of Shares % No. of Shares %JaMes FiNlay plaNtatiON hOlDiNGs (laNKa) liMiteD 11,208,550 57.78 11,208,550 57.78

JaMes FiNlay liMiteD, uK (“JFl”) 3,689,762 19.02 3,689,762 19.02

JaCey trust serViCes (priVate) liMiteD (helD FOr the BeNeFit OF JFl) 2,927,090 15.09 2,927,090 15.09

Mr. K M a r K alMuhairi 92,080 0.47 92,080 0.47

Mr. K G a N WiJesiNGhe 22,763 0.12 22,763 0.12

Mr. h W C D raNasiNGe 20,566 0.11 20,566 0.11

Mr. J s a perera 20,000 0.10 - -

Mrs. l s a seresiNhe 19,916 0.10 19,916 0.10

Mr. W G preMaratNa (DeCeaseD) 18,600 0.10 18,600 0.10

Mr. M h NassiM hussaiN 15,069 0.08 7,833 0.04

Mr. MOllOy BriaN MiChael 14,600 0.08 14,600 0.08

Mr. a i hasheeM 11,612 0.06 15,475 0.08

Mr. l M seNaNayaKe 11,000 0.06 11,000 0.06

MerChaNt BaNK OF sri laNKa plC/Mr. K r u GuNaWarDeNa 10,700 0.06 10,700 0.06

Mr. M y M shaMraZ 10,270 0.05 13,759 0.07

Mr. M r thaMBiNayaGaM 9,257 0.05 9,257 0.05

Mr. M N M ZiyaD 9,000 0.05 - -

Mr. K K D M u raNaWeera 8,984 0.05 8,984 0.05

Mr. a r iBrahiM 8,280 0.04 - -

Mr. s G t i N ChaNDraDasa 8,023 0.04 8,023 0.04

Mr. M M MaNsOOr - - 43,044 0.22

e.W. Balasuriya & CO. (pVt) ltD - - 8,000 0.04

asha FiNaNCial serViCes liMiteD/Mr.C.N.paKiaNathaN - - 7,091 0.04

Total 18,136,122 93.49 18,157,093 93.60

Other Shareholders 1,262,729 6.51 1,241,758 6.40

Issued Share capital 19,398,851 100.00 19,398,851 100.00

Of the issued ordinary share capital, 8.11% (2015: 8.11%) is held by the public represeting 12,060 shareholders (2015: 12,028).

2016 2015 RS. ‘000 % RS. ‘000 % turnover 1,620,095 1,717,498 Other income (8,639) 46,359 total revenue 1,611,457 100 1,763,857 100 Cost of Materials and services Bought 758,968 47 801,220 45 852,488 53 962,637 55Distribution of Value Added a to employees as remuneration 880,163 103 1,038,877 108 B to Government (28,344) (3) (17,041) (2)C to lenders of Capital 41,711 5 27,600 3 D retained in the Business D1 provision for Depreciation 71,435 8 68,943 7 D2 profit retained (112,477) (13) (155,742) (16) 852,488 100 962,637 100


seGMeNtal iNFOrMatiON

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Revenue Extent - Hectares

tea 2,043.78 2,017.95 2,006.49 2,023.03 2,013.69 2,055.57 2,054.17 2,005.66 3,273.06 3,251.62

rubber 83.04 83.04 75.54 75.54 75.54 75.54 55.12 40.12 38.50 38.50

Coconut 76.50 91.50 114.50 131.50 136.50 136.50 141.50 153.50 164.50 164.50

total 2,203.32 2,192.49 2,196.53 2,230.07 2,225.73 2,267.61 2,250.79 2,199.28 3,476.06 3,454.62

Production - Kg ’000

tea - Kg ’000 3,619 3,982 3,343 4,079 3,746 3,669 3,892 3,430 4,670 3,844

rubber - Kg ’000 70 60 51 46 41 32 30 17 14 17

Coconut-Nuts ’000 358 436 539 600 536 719 362 641 804 834

GSA - Rs

tea 248.76 263.20 321.68 338.57 314.22 356.02 387.94 420.34 375.00 406.57

rubber 218.86 246.91 195.26 348.01 460.62 375.48 342.66 251.36 208.43 207.53

Coconut - - - - - 21.88 30.59 32.08 34.84 29.67

Revenue - Rs’ 000

tea 905,456 999,159 1,103,736 1,345,981 1,123,629 1,253,047 1,569,271 1,515,117 1,665,731 1,574,350

Coconut 14,357 14,298 9,345 16,008 18,130 21,615 21,058 21,488 30,591 26,482

Others 22,452 32,638 33,763 28,757 37,520 38,586 21,852 13,363 21,176 19,263

total 942,265 1,046,095 1,146,844 1,390,746 1,179,279 1,313,248 1,612,181 1,549,968 1,717,498 1,620,095

Gross Profit - Rs’ 000

tea 147,234 90,679 134,140 255,000 15,222 114,456 134,342 35,874 (75,878) (44,967)

Coconut 7,379 3,101 (2,229) 3,438 3,849 1,333 (3,354) (664) 6,269 1,487

Others 7,395 4,011 (1,040) (5,626) 1,997 13,578 (3,999) (22) 8,584 15,166

total 162,008 97,791 130,871 252,812 21,068 129,367 126,989 35,188 (61,025) (28,314)


GlOssary

GsaGross sale average. average sale price obtained (over a

period of time, for a kilo of produce) before any deductions

such as Brokerage, etc.

NsaNet sale average. average sale price obtained (over a period

of time) after deducting Brokerage fees, etc.

COpCost of production. Generally refers to the cost of producing

one kilo/nut of produce (tea/rubber/Coconut).

earnings per shareprofit attributable to ordinary shareholders divided by the

number of ordinary shares in issue and ranking for divi-

dend.

price earnings ratioMarket price of a share divided by earnings per share.

Market CapitalisationNumber of shares issue multiplied by the market value of

each share.

MnMillion

Net assetssum of Fixed assets and Current assets less total liabilities.

Net assets per shareNet assets divided by the number of Ordinary shares in

issue.

return on equityattributable profits divided by average shareholders’ funds.

interest Coverprofit before Gross interest and tax divided by net interest

cost.

Dividend Coverprofit attributable to shareholders divided by gross dividend.

Current ratioCurrent assets divided by current liabilities.

extent in bearingthe extent of land from which crop is being harvested.

Cropthe total produce harvested.

Mature plantationthe extent of plantation from which crop is being harvested.

immature plantationthe extent of plantation which is under development and is

not being harvested.

infillinga method of field development whereby planting of indi-

vidual plants is done in order to fill the vacancies of existing

revenue fields.

Vp teaVegetatively propagated tea.

yield (yph)the average crop per unit extent of land over a given period

of time (usually kgs. per hectare per year).

isOinternational standards Organisation.

haCCphazard analysis and Critical Control point system. interna-

tionally accepted food safety standard.


NOtiCe OF MeetiNG

NOtiCe is hereBy GiVeN that the 24th annual General Meeting of udapussellawa plantations plC will be held at the sri lanka

Foundation institute, No. 100, padanam Mawatha, independence square, Colombo 07 on thursday, 27th april 2017 at 11.00 a.m.

and the business to be brought before the meeting will be :

AGENDA

1. to consider and adopt the annual repot of the Board of Directors on the affairs of the Company and the statements of accounts for the year ended 31st December 2016 with the report of the auditors thereon.

2. to re-elect Mr. h.a.s. Crawford, who in terms of articles 86 and 87 of the articles of association of the Company retires by rotation at the annual General Meeting as a Director.

3. to re-elect Ms. M.C. pietersz, who in terms of article 94 of the articles of association of the Company retires at the annual

General Meeting as a Director.

4. to re-elect Mr. N.h.G.s. Jayasinghe, who in terms of article 94 of the articles of association of the Company retires at the annual General Meeting as a Director.

5. to re-elect Mr. e.D.p. soosaipillai, who in terms of article 94 of the articles of association of the Company retires at the annual General Meeting as a Director.

6. to re-elect Mr. G.K.B. Dasanayaka, who in terms of article 94 of the articles of association of the Company retires at the annual General Meeting as a Director.

7. to authorise the Directors to determine contributions to charities up to a limit of rs.100,000/- for the financial year ending 31st December 2017.

8. to re-appoint Messrs KpMG as auditors and authorise the Directors to determine their remuneration.

By order of the Board of Directors

s s p Corporate services (private) limitedsecretaries

No.101, inner Flower road,Colombo 0317th March 2017

Note:-a member is entitled to appoint a proxy to attend and vote instead of himself/herself and a proxy need not be a member of the Company. a Form of proxy is enclosed for this purpose. the instrument appointing a proxy must be deposited at the registered Office of the secretaries, 101, inner Flower road, Colombo 03.

Security Check:-We shall obliged if the shareholders/proxies attending the annual General Meeting produce their National identity Card to the security personnel stationed at the entrance.


Notes

uDapussellaWa plaNtatiONs plC / annual report 2016

FOrM OF prOxy

i/We........…………………………………………………………………………………………………….. (NiC No....................................................)

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

being a member/members of udapussellawa plantations plC hereby appoint

(i) ………………………………………………………………………………………………………………(NiC No....................................................)

of………………………………………………………………………..........................……..............................................…………..failing him/her,

(ii) Naresh KuMar huBert ratWatte, Chairman of udapussellawa plantations plC or failing him any one of the Directors of

the Company as *my/our proxy to vote as indicated hereunder for *me/us and on *my/our behalf at the 24th annual General

Meeting of the Company to be held on 27th april 2017 at 11.00 a.m. at the sri lanka Foundation institute, No. 100, padanam

Mawatha, independence square, Colombo 07 and at every poll which may be taken in consequence of the aforesaid meeting and

at any adjournment thereof. FOR AGAINST1. to consider and adopt the annual repot of the Board of Directors on the affairs of the

Company and the statements of accounts for the year ended 31st December 2016 with the report of the auditors thereon.

2. to re-elect Mr. h.a.s. Crawford, who in terms of articles 86 and 87 of the articles of association of the Company retires by rotation at the annual General Meeting as a Director.

3. to re-elect Ms. M.C. pietersz, who in terms of article 94 of the articles of association of the Company retires at the annual General Meeting as a Director.

4. to re-elect Mr. N.h.G.s. Jayasinghe, who in terms of article 94 of the articles of association of the Company retires at the annual General Meeting as a Director.

5. to re-elect Mr. e.D.p. soosaipillai, who in terms of article 94 of the articles of association of the Company retires at the annual General Meeting as a Director.

6. to re-elect Mr. G.K.B. Dasanayaka, who in terms of article 94 of the articles of association of the Company retires at the annual General Meeting as a Director.

7. to authorise the Directors to determine contributions to charities up to a limit of rs.100,000/- for the financial year ending 31st December 2017

8. to re-appoint Messrs KpMG as auditors and authorise the Directors to determine their

remuneration.

signed this ......................................... day of ...........................two thousand and seventeen.

signature: …………………………….

Note :

(a) *please delete the inappropriate words.

(b) instructions are noted on the reverse hereof.

uDapussellaWa plaNtatiONs plC / annual report 2016

INSTRUCTIONS AS TO COMPLETION

1. in terms of article 69 of the articles of association of the Company; an instrument appointing a proxy shall be in writing and in the case of an individual shall be signed by the appointor or

by his attorney; or in the case of a corporation shall be either under the common seal or signed by its attorney or by an officer authorized to do so on behalf of the corporation. the Company may, but shall not be bound to require evidence of the authority of any such attorney or officer. a proxy need not be a Member of the Company.

2. in terms of article 70 of the articles of association of the Company; a non-resident shareholder may appoint and revoke proxies by cable or facsimile provided such cable or facsimile is

received not less than Forty eight (48) hours before the commencement of the Meeting at which it is to be used.

3. in terms of article 71 of the articles of association of the Company; the instrument appointing a proxy shall be lodged and the power of attorney (if any) under which it is signed, or a

notarially certified copy of such power, shall if required be deposited for inspection at the Office, in each case not less than forty eight (48) hours before the time appointed for holding the Meeting or adjourned Meeting, or in the case of a poll before the time appointed for the taking of the poll at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid.

4. in terms of article 75 of the articles of association of the Company; any corporation which is a Member of the Company, may by resolution of its Directors or other governing body

authorise such person as it thinks fit to act as its representative at any meeting of the Company or of any class of Members of the Company, and the person so authorised shall be entitled to exercise the same powers on behalf of such corporation as the corporation could exercise if it were an individual Member of the Company.

5. in terms of article 64 of the articles of association of the Company. in the case of joint-holders of a share the vote of the senior who tenders a vote, whether in person or by proxy, shall be

accepted to the exclusion of the votes of the other joint-holders, and for this purpose seniority shall be determined by the order in which the name stands in the register of Members in respect of the joint holding.

6. Kindly indicate with a x in the space provided how your proxy is to vote on each resolution. if no indication is given, the proxy in his discretion will vote as he/she thinks fit. every alternation or addition to the Form of proxy must be duly authenticated by the full signature of the shareholder signing the Form of proxy. such signature should as far as possible be placed in proximity to the alteration or addition intended to be authenticated.

7. to be valid, this Form of proxy must be deposited at the registered Office of the secretaries, 101, inner Flower road, Colombo 03 by tuesday, 25th april 2017 being 48 hours before the holding of the meeting.

annual report 2016 - cse

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