kegalle plantations plc - arpico...kegalle lanta c 2 0 1 6 17 2 the largest rubber producer of sri...

Kegalle Plantations PLC A n n u a l R e p o r t 2 0 1 6 - 1 7

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ANNUAL REPORT 2016 / 2017

KEGALLE PLANTATIONS PLC

Kegalle Plantations PLC


No. 310, High Level Road, Nawinna, Maharagama, Sri Lanka.Tel : +94 11 4310500Fax : +94 11 4310799Website : www.arpico.comEmail : [email protected]

An

nual Report 2016 / 2017


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The largest rubber producer of Sri Lanka, Kegalle Plantations PLC, made a radical change to its tradi-tional stance through moving onto a new lucrative crop, Oil Palm Cultivation. This radical move was made with the focus of being competitive in the cur-rent global economic scenario in order to be a pro-vider of high value to all our stakeholders. In a care-ful analysis of the current market trends in the plan-tation industry, it is obvious that there is a downturn trend in respect of traditional crops.

Under such situations, a Company which seeks to achieve a sustainable development and which aspires to be an outstanding performer in the industry requires to move its focus on a growing market.

Recognizing this reality, KPL took a competitive and challenging move to diversify its business and oil palm will be included in its product portfolio with the intention of capitalizing on the improving market conditions of the Palm Oil industry that will offer four major crops of economically important. This radical transformation will be a turning point of KPL which will direct the future growth of the Company.


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Governance Review

Board of Directors 62Management Team 64Corporate Governance 66Report of the Audit Committee 69Report of the Remuneration Committee 71Report of the Related Party Transactions Review Committee 72Risk Management 73

Financial Reports

Annual Report of the Board of Directors 80Statement of the Directors’ Responsibility 84Independent Auditors’ Report 85Statement of Profit or Loss 86Statement of Comprehensive Income 87Statement of Financial Position 88Statement of Changes in Equity 89Cash Flow Statement 90Notes to the Cash Flow Statement 91Notes to the Financial Statements 92

Supplementary Reports

Ten Year Summary 138 Historical Note 139Shareholder & Investor Information 142Glossary of Financial Terminology 145Notice of Meeting 147Form of Proxy 149

Corporate Information back inner cover

CO

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About Us

Vision, Mission & Objectives 2Introduction to the Report 4Company Profile 5Milestones 6Financial Highlights 7Chairman’s Review 9Our Estates 12Financial Calendar 14

Management Discussion & Analysis

Operating Environment 16Segmental Information 20Review of Operations 22Financial Review 29

Sustainability Report

Managing Our Impact 36Economic Sustainability 40Social Sustainability 44 Environmental Sustainability 50 Our Achievements 54GRI Index 56

Scan to viewThe digital version of this annual reporthttps:/www.arpico.com/contents/kpl_financial_reports.php


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VISIONTo seek excellence in all our pursuits.

To achieve excellence in the man-agement of plantations by optimum utilization of resources.

To enhance the quality of life of our employees and the neighboring villagers.

To assure our shareholders optimum returns and to be an exemplary corporate citizen.

We will endeavour to be the most techno-logically advanced producer of agricultural products and their value-added forms, by means of innovations and inventions through Research and Development.

We seek to be acknowledged in Sri Lanka and Overseas as a Producer and Supplier of quality agricultural products and their derivatives through superior customer services.

We will be a model employer in the planta-tion sector committed to achieve Leader-ship in every sphere of business activity.

We will provide our employee with the necessary training to enhance their skills and enable them to be a part of a highly motivated and dedicated workforce.

We seek to provide our shareholders with the maximum return on investment.

We intend to ensure continued liquidity and growth of the Company.

MISSION

OBJECTIVES

Abo

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Abo

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Brief introduction of Oil Palm Cultivation and why it is important for KPL

Soil condition, weather pattern, temperature meets within the low country of KPL.

Soil & Climatic Requirements for Oil Palm Cultivation;

● Welldrainedsoilwithhighhumuscontent● Terrainbelow20%● Rainfallabove2,000mm● Temperature29-33oC● Altitude-Upto300AMSL● Sunlightminimum5hoursperday

Continuedinpageno.15...

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Vision, Mission & Objectives ......................... 2Introduction to the Report ............................. 4Company Profile .......................................... 5Milestones ................................................... 6Financial Highlights ..................................... 7Chairman’s Review....................................... 9Our Estates ................................................ 12Financial Calendar ..................................... 14

Contents


4

INTRODUCTION TO THE REPORT

This is the 24th annual report of Kegalle PlantationsPLC which is presented for the year ended 31March2017. The report has mainly been prepared with theaimofprovidingtherelevantfinancialandnon-financialinformation related to the ended year so as to facilitate theunderstandinganddecisionmakingofstakeholdersof the Company. Due to the inherent nature of theplantation industry, the Company has to experience awide range of economic, environmental, social andother challenges and the operations of the Companywere carried out amidst these challenges. Accordingly,this report is intended to reflect how the Companymanaged its operations in spite of these challengesandwhat theCompany achievedduring the year andwhatconsequencesemergedonthesocietyduetotheoperationsoftheCompany.

The Financial Statements contained in the report havebeen prepared in accordance with Sri Lanka FinancialReportingStandardstocomplywiththeCompaniesActNo. 07 of 2007, the continuing listing requirements ofColomboStockExchange.

The adoption of the Global Reporting Initiatives G4Core Criteria (GRI) for sustainability reporting for thefirst time in the history of Kegalle Plantations PLC canbe recognizedas a specialdevelopmentwhich shouldbe emphasized during the current year. This can beconsidered a progressive movement towards thesustainable growth of the Company. However, theseare carried out on voluntary basis and content of thesustainabilityreporthasnotbeenexternallyassured.

Wehopethatyouwillfindthisreportasabasisfortheinformed decision making and other useful purposes.Please direct all your compliments or criticisms on our annual report.

KegallePlantationsPLCNo310,HighLevelRoad,Nawinna,Maharagama.

[email protected]:+94114310500

About Us | Introduction to the Report


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TheGovernmentofSriLanka,aspartofitsrestructuringplan for the Plantation Industry, decided to privatizethissectorand inJune1992, incorporated22regionalPlantationCompanies.TheGovernment thenassignedthese Companies, Estates that had been previouslyvested with the Government and managed by JEDB/SLPCona53yearslease.SeparateManagementAgentswerealsoselectedtomanageeachoftheseCompanies.KegallePlantationsPLC(KPL)wasoneofsuchCompaniesanditwasallotted21Estateswhichintotalhavealandbase around 10,000 ha in Kegalle, Kurunegala andBadulla Districts. Of this land base, around 5,200 haareRubber,1,400haunderTeaandanother500haareCoconut.TheCompanyproducesaround3.7mnkgofRubberand2.2mnkgofTeainclusiveofboughtcrop.Ithasemployeestrengthof5,866.

RPKManagementServices (Pvt)Limited (RPK)was theManagement Agent appointed by the Governmentand thatwasa50:50 joint ventureCompanybetweenRichardPieris&CompanyPLCandJohnKeelsHoldingsPLC.Duringthelatterpartof1995theownershipoftheCompany faced somechangeswhen theGovernmentsold20%ofsharesitheldtothepublicandthemajoritystakeof50%toRPKManagementServices(Pvt)Limited.At the same time period, Government gifted 10% ofshares toover8,000eligibleemployees. InMay1997,theGovernmentexited from theownershipofKegallePlantationsPLCbysellingtherest19%ofsharesthroughtheColomboStockExchange(CSE).

However,theGovernmentholdsthroughtheSecretarytotheTreasuryonesharewhichiscalledGoldenShareand it gives the Government the title “Golden ShareHolder”oftheCompany.

The Golden Shareholder has some special rights thanwhat is enjoyed by a normal Shareholder and theserightsare incorporated intheArticlesofAssociationoftheCompany.Theprospectusofferedtothepublicalsocontained these clauses. Some of the important clauses are given in this Annual Report under “Shareholder&InvestorInformation”.

AtthetimeRPKacquired51%stake,italsoinvestedRs.50 mn in convertible debentures of KPL. In February1998, these debentures were converted to 5 mnOrdinarySharesofRs.10/-each, increasing theShareCapitaloftheCompanytoRs.250mn.InMarch2004,RPK Management services (Pvt) Limited became afully owned subsidiary of Richard Pieris & CompanyPLC when Richard Pieris & Company PLC purchasedthe 50% stake in RPK from John Keels Holdings PLC.Consequent to the change in ownership, RPK wasnamed as RPC Management Services (Pvt) Limited.During2008theownershipoftheCompanytransferredto RPC Plantation Management Services (Pvt) LimitedfromRPCManagementServices(Pvt)Limited.CurrentlyRPCPlantationManagementServices(Pvt)Limitedholds79.08%stakeinKPL.

KegallePlantationsPLC is the largestRubberproduceramongregionalPlantationCompaniesaccountingfor4mnkgofaverageproductionperannum.

COMPANY PROFILE


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1972-1992The estates were originally vested in the Land Reform Commission during the period 1972-1992 in terms of

the Land Reform Act and subsequently vested in the JEDB.

1992 Formation of KPL as a Regional Plantation Company, and appointing a managing agent as RPK Management Services (Pvt) Ltd

(RPK), a Joint Venture between Richard Pieris and John Keells.

1995Acquisition of the controlling interest by RPK Management Services (Pvt) Ltd.

1997The Ordinary Shares of the Company are listed with the CSE of Sri Lanka.

10% of the Share Capital, amounting to 2 mn shares were gifted to over 8,000 eligible employees. Winner – ICASL Annual Report Awards - Plantation Companies.

1998Rs. 50 mn in Debentures were converted to 5 mn Ordinary Shares of Rs.10/- each, thus increasing

the Share Capital to Rs. 250 mn.

2000Winner – ICASL Annual Report Awards - Plantation Companies.

2002KPL disposed its stake of 25.86% in Maskeliya Plantations PLC at Rs.

25/- per share through CSE.


2004RPC acquired JKH stake in RPK and, renamed as RPC Management Services (Pvt) Ltd.

2007Invested Rs. 14 mn in the equity of Hamefa Kegalle (Pvt) Ltd, a joint

venture between Hamefa BV of Netherlands and KPL.

2008Hamefa Kegalle (Pvt) Ltd has become a fully owned Subsidiary of the Company.

The Company invested in 7.5 mn Ordinary Shares in Richard Pieris Natural Foams Ltd.

2010Acquired 15mn Ordinary Shares in RPNF Ltd and has become an

Associate of the Company.FSC Forestry Management Certification.

ISO 9000: 2008 Certification for all rubber manufacturing factories.

2011Obtained ISO 22000:2005 Certification and the Ethical Tea Partnership Certificate.

Bronze Award – ICASL Annual Report Awards - Plantation Sector.2nd Runner up – South Asian Federation of Accountants in Dhaka Bangladesh for

Best Presented Annual Report Awards Ceremony 2010 – Agricultural Sector.

2013Invested 12 mn Ordinary Shares in Richard Pieris Finance Ltd.Invested 2.7 mn Ordinary Shares in Arpico Insurance PLC.

Winner - Category of Best Rubber Factory of Crepe Rubber & Centrifuged Latex Manufacturing Sectors in Sri Lanka

2014Invested 1.485mn Ordinary Shares in Arpico Insurance PLC.

Gold award –Category of Rubber and Rubber Based Products initiated by CEA.

2015Invested Rs.1 bn in RPC debentures at rate of 11.25%.

Gold Award - Plantation Sector Category of Agri Business Awards - Conducted by the National Agri Business Council (NAC).

2016KPL paid an incomparable dividend of Rs.45/- per share to its shareholders in the year 2015,

recording the ever highest dividend per share issued by a Plantation Company.Gold Award - Industrial Excellence Awards 2015 conducted by the Sri Lanka Chamber

for Small and Medium Industries.

2017Became the first Regional Plantation Company to obtain ISO 9001: 2015 and Four Factories namely

Atale, Pallegama, Parambe and Udapola have been certified.

MILESTONES

Financial Highlights | About Us


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1972-1992The estates were originally vested in the Land Reform Commission during the period 1972-1992 in terms of

the Land Reform Act and subsequently vested in the JEDB.

1992 Formation of KPL as a Regional Plantation Company, and appointing a managing agent as RPK Management Services (Pvt) Ltd

(RPK), a Joint Venture between Richard Pieris and John Keells.

1995Acquisition of the controlling interest by RPK Management Services (Pvt) Ltd.

1997The Ordinary Shares of the Company are listed with the CSE of Sri Lanka.

10% of the Share Capital, amounting to 2 mn shares were gifted to over 8,000 eligible employees. Winner – ICASL Annual Report Awards - Plantation Companies.

1998Rs. 50 mn in Debentures were converted to 5 mn Ordinary Shares of Rs.10/- each, thus increasing

the Share Capital to Rs. 250 mn.


2002KPL disposed its stake of 25.86% in Maskeliya Plantations PLC at Rs.

25/- per share through CSE.


2004RPC acquired JKH stake in RPK and, renamed as RPC Management Services (Pvt) Ltd.

2007Invested Rs. 14 mn in the equity of Hamefa Kegalle (Pvt) Ltd, a joint

venture between Hamefa BV of Netherlands and KPL.

2008Hamefa Kegalle (Pvt) Ltd has become a fully owned Subsidiary of the Company.

The Company invested in 7.5 mn Ordinary Shares in Richard Pieris Natural Foams Ltd.

2010Acquired 15mn Ordinary Shares in RPNF Ltd and has become an

Associate of the Company.FSC Forestry Management Certification.

ISO 9000: 2008 Certification for all rubber manufacturing factories.

2011Obtained ISO 22000:2005 Certification and the Ethical Tea Partnership Certificate.

Bronze Award – ICASL Annual Report Awards - Plantation Sector.2nd Runner up – South Asian Federation of Accountants in Dhaka Bangladesh for

Best Presented Annual Report Awards Ceremony 2010 – Agricultural Sector.

2013Invested 12 mn Ordinary Shares in Richard Pieris Finance Ltd.Invested 2.7 mn Ordinary Shares in Arpico Insurance PLC.

Winner - Category of Best Rubber Factory of Crepe Rubber & Centrifuged Latex Manufacturing Sectors in Sri Lanka

2014Invested 1.485mn Ordinary Shares in Arpico Insurance PLC.

Gold award –Category of Rubber and Rubber Based Products initiated by CEA.

2015Invested Rs.1 bn in RPC debentures at rate of 11.25%.

Gold Award - Plantation Sector Category of Agri Business Awards - Conducted by the National Agri Business Council (NAC).

2016KPL paid an incomparable dividend of Rs.45/- per share to its shareholders in the year 2015,

recording the ever highest dividend per share issued by a Plantation Company.Gold Award - Industrial Excellence Awards 2015 conducted by the Sri Lanka Chamber

for Small and Medium Industries.

2017Became the first Regional Plantation Company to obtain ISO 9001: 2015 and Four Factories namely

Atale, Pallegama, Parambe and Udapola have been certified.

MILESTONES

FINANCIAL HIGHLIGHTS

15.3

2%

10.3

6%

3.76

%

3.44

%

5.00%

10.00%

15.00%

20.00%

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

2,58

8

2,41

4

2,02

4

1,93

3

-

500

1,000

1,500

2,000

2,500

3,000

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

2,28

7 8.

59%

18.9

3

13.8

4

5.08

4.06

8.69

-

5

10

15

20

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

113.

48

133.

70

136.

63

97.4

5

104.

87

- 20 40 60 80

100 120 140 160

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

5.92

7.59

16.8

9

12.4

9

5.98

- 2 4 6 8

10 12 14 16 18 20

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

473

346

127

101

-

100

200

300

400

500

600

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

60.00

19.00 47.00

207.50

103.00 112.00 105.00 85.50

50.70 52.00

-

50

100

150

200

250

07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

Share Price (Rs.)

217

-

Return on Average Equity (%)

Turnover (Rs. mn)

Earnings Per Share (Rs.)

Net Assets Per Share (Rs.) Price Earnings Ratio (Times)

Profit After Tax (Rs. mn)

Financial Highlights | About Us


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-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

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

Production (kg/nuts’ 000)

CoconutRubber Tea

Turnover (Rs. mn)

1,63

0

1,39

1

1,04

3

942

1,05

7

805

882

848

877

-

500

1,000

1,500

2,000

2,500

3,000

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

Rubber Tea

1,03

0

Performance - Year Ended 31 March 2017 2016 Variance

Rs.'000 Rs.'000 %

TurnoverProfitbeforeInterestandTaxProfitAfterTaxGrossDividendsCapitalExpenditure

2,287,161457,275217,263125,000175,924

1,933,063262,085101,330

1,125,000220,648

18%74%114%(89%)(20%)

Financial Position - As at 31 March

FixedAssetsCurrentAssetsTotalAssetsCurrentLiabilitiesShareholders’FundsStatedCapitalCapitalEmployed

4,315,0572,089,3236,404,3811,879,0472,621,695250,000

5,198,191

4,189,7912,168,5636,358,3531,476,5102,436,309250,000

5,163,821

3%(4%)1%27%8%-

1%

Key Indicators

EarningspershareNetAssetspershareDividendpershareMarketPricepershareReturnonCapitalEmployedMarketCapitalisationReturnonAverageEquity

Rs.Rs.Rs.Rs.%

Rs.’000%

8.69104.875.0052.008.80%

1,300,0008.59%

4.0697.4545.0050.705.08%

1,267,5003.44%

114%8%

(89%)3%73%3%

150%

About Us | Financial Highlights Chairman’s Review Chairman’s Review | About Us


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DearShareholders,

ItiswithgreatpleasurethatIwelcomeyoutothe24thAnnualGeneralMeetingofKegallePlantationsPLC,atwhichIpresenttheAnnualReportandAuditedFinancialStatements of your Company for the year ended 31March2017.

ItiswithgreatpridethatIremindyouthatyourCompanycontinuedtobethelargestnaturalrubberproducerinSri Lanka, a title which we have successfully securedoverthepastyears.Theyearunderreviewhasbeenachallengingyearfortheplantationindustryasawhole,with irregular weather patterns hampering the sector.Thereductionindemandduetogeopoliticaltensioninkeyexportmarketswasyetanotherfactorwhichplaceditsnegative footprinton the rubber industry.HoweveryourCompanywas able towithstand thesedifficultiesto a greater extent due to timely focus and effectivemanagementofresources.

During the year, Kegalle Plantations PLC recordedrevenueofRs. 2.3bnandaprofit after taxofRs. 217mn. Effective cost and finance management enabledtheCompanytostandstrong inyetanotherextremelychallengingyearfortheplantationindustry.

ECONOMIC ENVIRONMENT

Continueduncertainties in theglobaleconomyaswellasvolatility in internationalpolitics shroudedeconomicdecision making for policymakers as well as privateinvestors.Pricesofmostcommoditiesincludingfoodandbasemetals displayed an increasing trend, particularlytowards the latter part of the year. Themomentum intheglobaleconomyisexpectedtopersist in2017and2018with theongoingcyclical recovery in investment,manufacturing and trade. For the first time since theonsetofthegreatrecession,thefirstquarterof2017hasseenasynchronizedupturn in theUSA,Europe, Japanandsomekeyemergingmarkets.

Chairman’s Review Chairman’s Review | About Us

CHAIRMAN’S REVIEW


10 About Us | Chairman’s Review

Unfavorable weather conditions and sluggish globaleconomic recovery caused the economy to grow ata slower rate of 4.4 per cent in 2016 in real terms, incomparison to 4.8 per cent in the previous year. TheGovernment’srevenuebasedfiscalconsolidationprocess,helpedcontaintheoverallbudgetdeficitatthetargetedlevelof5.4percentofGDP in2016 incomparison tothedeficitof7.6percentinthepreviousyear.ThetradedeficitasapercentageofGDPexpandedto11.2percentin2016comparedto10.4percentin2015.SriLanka’sgross reserveassetpositiondeclined toUSdollars 6.0billion,asatend2016.Therupeedepreciatedagainstallmajorcurrenciesexceptthepoundsterlingin2016.AnoveralldepreciationoftherupeeagainsttheUSdollarby3.83percentin2016

INDUSTRY REVIEW

TEA

Teaproductionin2016witnessedasubstantialdeclineduetobothsupplyanddemandsidefactors.Theprolongeddrought in tea growing areas during early 2016, thechangesinweatherpatternswithovercastconditionsinmid-2016andtheseveredroughtconditioninlate2016hadanegativeeffectonteaproduction.Reductions intheapplicationoffertilizerandweedicidesmayalsohavecontributedtothisdecline.Totalteaproductionin2016declinedby11percentto292.6millionkilogramsfrom328.8millionkilograms in2015.Thedemandsidewasaffectedby,lowglobalcommoditypricesandthedeclineinoilandgas revenuesofkey tea importingcountriesspeciallyinthe1sthalfoftheyear.

The prices of high, medium and low grown teasat the Colombo Tea Auction (CTA) were above thecorrespondingpricesrecordedin2015.Accordingly,theaveragepriceof teaat theCTA increasedby17.8percenttoRs.473.15perkilogramin2016,fromRs.401.46perkilogramrecordedinthepreviousyear.Thehighestyear-on-yearincreaseinaverageteapricesatCTAwasrecordedformediumgrowntea(17.6percent),followedby lowgrown tea (17.4 per cent) andhighgrown tea(16.5percent).

RUBBER

Rubber production at 79.1 million kilograms in 2016declinedby10.7percenttorecordthelowestproductionvolumereported in thepast50years.Thiswasmainlydue to reductionof the extent under tapping and thenumberoftappingdaysinresponsetothelowerpricesmainly in the smallholder sector.

YPHincreasedby3.9percentto851kgin2016,mainlydue to the reduction of the extent under tapping inmarginallands.Domesticconsumptionofrubberintheindustrial sector, which has stagnated during the lastfewyears, increasedmarginally to reach69millionkg,

accounting for 87.2 per cent of the domestic rubberproduction.

Naturalrubberexportsdeclinedby55.8percentto16.2millionkgandthecostofproductionofrubberincreasedby5.9percent toRs.180.00perkg in2016.PricesattheColomboRubberAuctiondecreasedduringtheyearas a result of a slowdown in global demandowing tohighinventoriesinmajorconsumingcountries,includingChinaandJapan,andthesubduedglobalpricescausedmainlybylowinternationalcrudeoilprices.TheaveragepriceofRibbedSmokedSheet1(RSS1)atRs.239.28perkgattheColomboRubberAuctionin2016witnesseda3.6percentdeclineovertheaveragepricerecordedin2015.

Thepriceoflatexrubberalsodecreasedby13.0percenttoRs.262.31perkgduringtheyear.Theaveragepriceofnaturalrubberperkgdeclinedby30.1percenttoUSdollars1.6in2016fromUSdollars2.2recordedin2015.Asa resultof thedecrease inprices, theprofitmarginavailabletotheproducerremainedlow,makingrubbercultivationlessattractive.

COCONUT

Coconut production in 2016, was 3,011 million nuts,declined by 1.5 per cent over the output recordedlast year mainly due to the low rainfall received inmain coconut growing areas during the year in linewith increased industrial demand, desicated coconut productionwhichreporteda17.1percentcontractionin2015,reboundedwithagrowthof22.3percentwhichisthehighestquantumofdesiccatedcoconutproductioninthelastdecade.Coconutoilproductiondecreasedby7.5per cent, causedmainlyby the increasedpricesoffreshnuts.Desiccatedcoconutexportsof72,000metrictons,recordedasignificantgrowthof56.7percentfromthe previous year. High domestic prices for coconut,amidstthelowproductionwerepartlyattributedtotheincreaseddemandfromcoconutsbased industriesandhighexportprices. In2016, theaverage retail priceoffreshnutsdecreasedby8.3percenttoRs.45.82pernut.

COMPANY PERFORMANCE

During the year under review, the Company recordedrevenue of Rs. 2.29 billion; indicating a 18% per centincrease over the previous year reported value of Rs.1.93billion.Thus,profitafter taxofKegallePlantationsPLC increased by 114% to record Rs. 217 mn fromRs. 101 mn in the corresponding period. Total assetsof the Company were Rs. 6.404 bn in 2017 while theShareholdersfundwasRs.2.6bn.TheCompanyincurredacapitalexpenditureofRs.176mnduringtheyear,outofwhichRs.173mnwasallocatedforfielddevelopment.Outofthefielddevelopmentexpenses,Rs.139mnandRs.23mnwereincurredrespectivelyforrubberandtea.

The Company’s operations in the rubber industryachievedagrowthof12percentin2016/17althoughthe

Chairman’s Review Chairman’s Review | About Us


11Chairman’s Review Chairman’s Review | About Us

nationalrubberproductionoftheeconomyrecordedthelowestproductionvolumereportedinthelast50years.In2016/17,theCompany’sproductionofrubberhasrisento 3.74 million kilograms from 3.35 million kilogramsin2015/16.Ontheotherhand,theNSAofrubberhasrisentoRs.276.34byjust1percentfromRs.274.04in2016.Undersuchcircumstances,financialperformanceoftherubbersectorstoodatabetterpositioncomparedto the previous year. Furthermore, the revenue fromrubber segment has increased to Rs. 1.06 billion fromRs.942mnpreviousyearanditisa12percentincreasecomparedtothepreviousyear.BasicallythegrossprofitsfromrubbersectorhaveincreasedtoRs.32mnfromRs.10mnpreviousyearwhich isalmost two fold increaseoverthecorrespondingperiod.

Duringtheyearunderreview,theCompany’sproductionof teadroppedby8.8percent to2.2millionkilogramcompared to 2.4 mn in 2015/16. This drop of theproduction was mainly driven by adverse weatherconditionprevailedduringtheyear2016/17.Despitethedeclineintheproductionoftea,theCompanywasabletoachieveagrossprofitfromtheteabusinesswhichwasa gross loss in the last year. The increase in the grossprofit was mainly driven by the increase in the NSAcomparedtothepreviousyear.

Financial resultsof the coconutplantationexperiencedadownturn in the yearunder review. TheCompany’sproductionofcoconutshasdroppedto1.47mnnutsin2016/17comparisonto1.56mnnutsin2015/16whichisareductionof6percent.Ontheotherhand,theNSAofcoconutoperationhasdeclinedtoRs.24.11in2016/17fromRs.31.95in2015/16.

SUSTAINABILITY

Duringtheensuingyear,theCompanyintendstoallocatecircaRs.400mnforthefielddevelopment.OutofwhichRs. 200mnwill be allocated to the field developmentin the rubber sector. As a whole, these resources areexpected to be allocated to the field development of1,130haincludingthepreliminarywork,replantingandupkeepoftheseareas.

Investment in oil palm sector can be considered as asignificant step taken inorder toachievea sustainabledevelopment from theperspectiveof the shareholdersoftheCompany.

PRODUCTIVITY & VALUE ADDITION

TheCompanyexpectstoincreaseTeayieldto1,171kg/hacomparedtotheactualyieldof808kg/hain2016/17.On the other hand Company expects to enhance theyieldof rubber up to 1,059 kg/hawhich is 6 per centabovetheactualyieldof998kg/haduringtheyear.Alsowith respect to the Company’s responsibility towardsthe community and the environment, the Companyhas initiated a bio latex project which focuses on thereductionofusageofchemical fertilizer.TheCompany

intends to enhance the quality of the rubber throughtechnologicalandagriculturalenhancements.

FUTURE OUTLOOK

The Sri Lankan economy is expected to grow at amoderaterateofaround5percentin2017amidsttheadverseimpactofunfavorableweatherconditions,andisexpectedtoimprovegraduallythereaftertorecordanannualgrowth rateof7percentby2020.Theprivatesector is expected to play a key role in achieving thishighergrowthmomentumbyexploitingpotentialgrowthopportunitiesintheeconomyandtheexternalmarkets.Foreigninvestorsarealsoexpectedtocontributetowardsahigherlevelofinvestmentwithparticularemphasisonservicerelatedactivitiesandexportorientedindustries.Monetary policy measures are expected to maintaininflationataround5.0percent,onaverage.Evenifglobalmarket improved teaprices are continued, rigidities inthedomestic supplyandascendingcostofproductioncouldmakeitchallengingforthecountry’steaindustrytoreapthefullbenefitofglobalmarketimprovement.

ACKNOWLEDGMENTS

IwouldliketoextendmysinceregratitudetotheBoardofDirectors,ActingCEO&ManagementTeamfortheircommitmentanddedicationdisplayedduringourjourneytowardssuccessamidstchallengingenvironment.Allthehardworkandeffortofemployeesacrossall levelsarealso greatly acknowledged. I would like to thank ourvalued customers, suppliers and business partners fortheir continued loyalty and support.

MysinceregratitudealsogoesouttoallourShareholders,fortheirtrustandsupportplacedinourCompany.Ihopeyouwillcontinuetobeourlongtermpartners,whowilljoinusintakingourCompanytothenextlevel.

Dr.SenaYaddehigeChairman

31May2017Colombo


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OUR ESTATES

TotalusageofCompanybuildingsis3,507,810sq.ft.

EstateName

Planting District Location

Cultivated Area ( hectare ) Elevation Production - kg/nut’000 Factory Details Certification No. of

Rubber Tea Coconut Others TotalTotalArea

( hectare )(Metres)

EstateName Rubber Tea Coconut Crop

Manufactured Factory Type RatedKg’000/pa

ISO 9001 : 2015

Rubber

EU & USDA-NOP

Organic Rubber

ISO 22000 : 2005 Tea

Ethical Tea Partnership

Execu-tives Staff Workers

Allagolla Badulla Udapussellawa - 174.78 - 39.61 214.39 243.75 1311 Allagolla - 131 - - - - - - - - 1 14 217

Ambadeniya Kegalle Aranayake 418.09 0.75 20.60 33.79 473.23 583.25 244-355 Ambadeniya 325 - 31 - - - - - - - 2 17 319

Atale Kegalle Atale 908.51 - 28.66 39.06 976.23 1,150.36 119-154 Atale 413 - 83 Rubber SoleCrepe 950 √ - - - 3 34 458

Doteloya Kegalle Dolosbage - 187.10 - 271.65 458.75 572.64 825-955 Doteloya - 542 - Tea Leafy/Orthodox 1,394 - - √ √ 2 16 309

Eadella Kurunegala Polgahawela 336.24 - 325.59 20.88 682.71 801.79 91-122 Eadella 264 - 1,082 - - - - - - - 3 17 262

Etana Kegalle Warakapola 373.80 - 1.82 11.21 386.83 483.26 76-244 Etana 315 - 4 Rubber Scrap 228 - √ - - 1 14 308

Gampaha Badulla Udapussellawa - 213.52 - 62.13 275.65 348.99 1538 Gampaha - 316 - Tea Leafy/Orthodox 929 - - √ √ 2 20 352

Hathbawa Kegalle Rambukkana 259.22 - - 5.00 264.22 477.79 122-244 Hathbawa 234 - - - - - - - - - 1 14 169

Higgoda Kegalle Undugoda 222.29 - - 0.80 223.09 302.23 146-411 Higgoda 181 - - - - - - √ - - 1 9 155

Kirklees Badulla Udapussellawa - 246.75 - 93.96 340.71 480.70 1446 Kirklees - 442 - Tea Rotorvane 1,239 - - √ √ 2 21 326

Luckyland Badulla Udapussellawa - 369.98 - 74.88 444.86 488.75 1500 Luckyland - 302 - Tea DualManufacture 1,355 - - √ √ 3 35 577

Madeniya Kegalle Warakapola 394.22 - - 56.09 450.31 551.92 80-229 Madeniya 227 - - - - - - √ - - 1 13 332

Pallegama Kegalle Niyadurupola 564.82 - 1.88 127.28 693.98 863.91 90-200 Pallegama 370 - 7 Rubber SoleCrepe 800 √ - - - 3 22 372

Parambe Kegalle Undugoda 513.66 30.02 - 40.00 583.68 795.41 122-274 Parambe 337 22 - Rubber Crepe 636 √ - - - 2 24 388

Udapola Kurunegala Polgahawela 346.29 - 37.36 14.57 398.22 577.78 107-195 Udapola 230 - 142 - - - - √ - - 2 18 236

Weniwella Kegalle Alawwa 408.13 - 13.19 95.88 517.20 709.90 152-183 Weniwella 233 - 29 - - - - - - - 2 14 215

Yataderiya Kegalle Undugoda 137.78 121.00 25.90 7.35 292.03 324.30 244-290 Yataderiya 89 409 93 Tea Leafy/Orthodox 1,239 - - √ √ 2 21 425

UdapolaCLP Kurunegala Polgahawela - - - - - - - UdapolaCLP 524 - - Rubber CentrifugedLatex 5,000 √ √ - - 5 13 45

4,883.05 1,343.90 455.00 994.14 7,676.09 9,756.73 3,742 2,165 1,471 38 336 5,465

About Us | Our Estates Our Estates | About Us

Parambe

Higgoda

Etana

Madeniya

Pallegama

Yataderiya

Atale

Udapola / Udapola CLP

Eadella

Hathbawa

Weniwella

Ambadeniya

Doteloya

Gampaha

Allagolla

Kirklees

Luckyland

BadullaNuwaraEliya

Kegalle

Kurunegala

KurunegalaDistrict

BadullaDistrict

KegalleDistrict

Our Estates - Locations


13

Land Base Extent %

Rubber 4,883.05 50%

Tea 1,343.90 14.0%

Coconut 455.00 5%

Other Crops 976.82 10%

Forestry 17.32 0.0%

Others 2,080.64 21.0%

Our Estates - Land Base / Utilisation

TOTAL EXTENT9,756.73Hectares

EstateName

Planting District Location

Cultivated Area ( hectare ) Elevation Production - kg/nut’000 Factory Details Certification No. of

Rubber Tea Coconut Others TotalTotalArea

( hectare )(Metres)

EstateName Rubber Tea Coconut Crop

Manufactured Factory Type RatedKg’000/pa

ISO 9001 : 2015

Rubber

EU & USDA-NOP

Organic Rubber

ISO 22000 : 2005 Tea

Ethical Tea Partnership

Execu-tives Staff Workers

Allagolla Badulla Udapussellawa - 174.78 - 39.61 214.39 243.75 1311 Allagolla - 131 - - - - - - - - 1 14 217

Ambadeniya Kegalle Aranayake 418.09 0.75 20.60 33.79 473.23 583.25 244-355 Ambadeniya 325 - 31 - - - - - - - 2 17 319

Atale Kegalle Atale 908.51 - 28.66 39.06 976.23 1,150.36 119-154 Atale 413 - 83 Rubber SoleCrepe 950 √ - - - 3 34 458

Doteloya Kegalle Dolosbage - 187.10 - 271.65 458.75 572.64 825-955 Doteloya - 542 - Tea Leafy/Orthodox 1,394 - - √ √ 2 16 309

Eadella Kurunegala Polgahawela 336.24 - 325.59 20.88 682.71 801.79 91-122 Eadella 264 - 1,082 - - - - - - - 3 17 262

Etana Kegalle Warakapola 373.80 - 1.82 11.21 386.83 483.26 76-244 Etana 315 - 4 Rubber Scrap 228 - √ - - 1 14 308

Gampaha Badulla Udapussellawa - 213.52 - 62.13 275.65 348.99 1538 Gampaha - 316 - Tea Leafy/Orthodox 929 - - √ √ 2 20 352

Hathbawa Kegalle Rambukkana 259.22 - - 5.00 264.22 477.79 122-244 Hathbawa 234 - - - - - - - - - 1 14 169

Higgoda Kegalle Undugoda 222.29 - - 0.80 223.09 302.23 146-411 Higgoda 181 - - - - - - √ - - 1 9 155

Kirklees Badulla Udapussellawa - 246.75 - 93.96 340.71 480.70 1446 Kirklees - 442 - Tea Rotorvane 1,239 - - √ √ 2 21 326

Luckyland Badulla Udapussellawa - 369.98 - 74.88 444.86 488.75 1500 Luckyland - 302 - Tea DualManufacture 1,355 - - √ √ 3 35 577

Madeniya Kegalle Warakapola 394.22 - - 56.09 450.31 551.92 80-229 Madeniya 227 - - - - - - √ - - 1 13 332

Pallegama Kegalle Niyadurupola 564.82 - 1.88 127.28 693.98 863.91 90-200 Pallegama 370 - 7 Rubber SoleCrepe 800 √ - - - 3 22 372

Parambe Kegalle Undugoda 513.66 30.02 - 40.00 583.68 795.41 122-274 Parambe 337 22 - Rubber Crepe 636 √ - - - 2 24 388

Udapola Kurunegala Polgahawela 346.29 - 37.36 14.57 398.22 577.78 107-195 Udapola 230 - 142 - - - - √ - - 2 18 236

Weniwella Kegalle Alawwa 408.13 - 13.19 95.88 517.20 709.90 152-183 Weniwella 233 - 29 - - - - - - - 2 14 215

Yataderiya Kegalle Undugoda 137.78 121.00 25.90 7.35 292.03 324.30 244-290 Yataderiya 89 409 93 Tea Leafy/Orthodox 1,239 - - √ √ 2 21 425

UdapolaCLP Kurunegala Polgahawela - - - - - - - UdapolaCLP 524 - - Rubber CentrifugedLatex 5,000 √ √ - - 5 13 45

4,883.05 1,343.90 455.00 994.14 7,676.09 9,756.73 3,742 2,165 1,471 38 336 5,465

Our Estates | About Us


14

FINANCIAL CALENDAR

Annual Report Published Meetings Date

2005/06

2006/07

2007/08

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

2015/16

2016/17

29May2006

21May2007

15May2008

09June2009

19May2010

27May2011

29May2012

30May2013

30May2014

28May2015

31May2016

31 May 2017

13thAnnualGeneralMeeting








21stAnnualGeneralMeeting

22ndAnnualGeneralMeeting

23rdAnnualGeneralMeeting

24th Annual General Meeting

29June2006

29June2007

23July2008

28July2009

29June2010

30June2011

29June2012

28June2013

30June2014

30June2015

30June2016

30 June 2017

11 August 2016

09 November 2016

13 February 2017

13 August 2015

10 November 2015

11 February 2016

26 May 201630 May 2017

16 March 2017 (Rs. 5/- per Share)

10 July 2015 (Rs. 45/- per Share)

1stQuarterReports

2ndQuarterReports

3rdQuarterReports

4thQuarterReports

InterimDividend

2016/17 2015/16

About Us | Financial Calendar

Man

agem

ent

Dis

cuss

ion

& A

nal

ysis


15

Man

agem

ent

Dis

cuss

ion

& A

nal

ysis

Planting Material / Nurseries

Selected high quality seeds are imported fromthe world most reputed Palm Seeds Supplier. The germinated seeds are airfreighted undercareful packing conditions, meeting all quarantinerequirementsofSriLanka.

Theseseedsare initiallyplanted in insectproofnethousesfor06months.ThisstageiscalledtheStageIPalmOilNursery.Theselectedvigorousseedlingsare then transferred to the Stage IINurseries, andtheseplantsarewellcaredintheStageIInurseriesforaperiodof6–9monthsbeforetheygettransferredtotheFieldforplanting.

Although the financial outflows are greater at thisstageruthlesscullingofundesiredplantsaredone,asthisisthemostimportantexerciseofracinghighproductiveOilPalmCultivation.

Tra

nsf

orm

ing

fro

m t

he T

rad

itio

n...


Operating Environment .............................. 16Segmental Information............................... 20Review of Operations ................................ 22Financial Review ........................................ 29

Contents


16

The operations of theCompany are often affected bytheuncontrollableexternalenvironmentfactorsinbothfavorableandunfavorablemanners.Economicgrowth,Exchange rates, Unemployment levels, Fiscal andMonetarypolicychangesarethemorecrucialfactors.

The global environmental factors have also hinderedthe operations of the Company for a greater extent.Speciallytheglobaldemandandsupplyconditionsseemtobeadversesincepastfewyears.Theexcesssupplyofnaturalrubberandthelowdemandfrommajorexportdestinationshasresultedinalowpricefornaturalrubberintheglobalmarket.

Current government activities achieve advantageousopportunities in Euro zone and it will generate futureeconomic developments. In the local market contexttheproductionissloweddownduetolowmarketpricesandlowdemand.Thissituationhasresultedinreducingnationalproductionduringtheyearunderreview.

Sri Lankan Economic Performance

Economic Growth

Economic Growth over Last Five Years

Sector\Year 2016 2015 2014 2013 2012AgriculturalIndustrialService

(4.2%)6.7%4.2%

4.8%2.1%5.7%

4.6%4.7%4.8%

3.2%4.1%3.8%

3.9%9.0%11.2%

TotalEconomy 4.4% 4.8% 5.0% 3.4% 9.1%

The recordedGDPgrowth in2016 is4.4%and this is areductioningrowthratewhenitiscomparedtothe2015figurewhichwas4.8%.AtthesametimeGDPpercapitadecreasedfromUSD3,843toUSD3,835.Specially,therateofgrowthintheAgriculturesectorhasbecomenegativein 2016. Due to the declined production in Agriculturesector and the grown production in other sectors, thecontributionofAgriculturesectortotheGDPhasbecomevery low. It isadeclinefrom7.8%to7.1%comparedto2015.

In2016therubberproductionhasfacedadeclineforthefifth consecutive year recording the lowest productionvolume in thepast50years.Therubberproduction in2016is79.1millionKilograms.Thisisa10.7%reductioncompared to the 2015 figure, which was 88.6 millionKilograms. The low demand and price for rubber inglobalmarkethas resulted in thedecliningproductionfromsmallholders.Inadditiontothat,thereductionofbothextentundertappingandthetappingdayshasalsoled to the declined production.

OPERATING ENVIRONMENT

The tea production in 2016 witnessed a substantialdeclinedue toboth supply anddemand factors. Thetea production has declined by 11% to 292.6 millionkilogramsfrom328.8millionkilogramsduringtheperiodunderreview.Bothsupplyanddemandconditionshaveimpactedtothedeclinedproduction.Onthesupplyside,drought in teagrowingareas inmid2016hasmajorlyresultedinthereductionofteasupply.Onthedemandside,thedemandarisesfrommajorexportdestinationsseemtobedecliningthroughthepastfewyears.

The supply of coconut and coconut products hasexperiencedaslowdownduringtheyearunderreview.Coconutproductionin2016,estimatedat3,011millionnuts, declined by 1.5%over the output recorded. Thedecrease in coconut production was mainly due to low rainfallreceivedinmaincoconutgrowingareasin2016.

Despite the fact that Agriculture sector has shown adecline in production, fishing sector alone has shown agrowthof1.6%.Theindustrialsectorhasgrownatarateof 6.7% through the year 2016.Mining, Electricity, Gas,WaterandConstructionsectorsalonehaveshowngrowthratesover10%whilemanufacturingsectorhasgrownat1.7%.Duetotheinclinedrateofgrowth,thecontributionof industrial sector toGDPhas also increased to 26.8%from26.2% through the year under review.Mining andConstructions sectors have gained positive changes inproductionwipingoutthenegativechangesrecordedin2015.TheServicesectorhasgrownatarateof4.2%butthecontributiontoGDPhasreducedduetothedeclinedgrowthratecomparedto5.7%in2015.Thecontributionof Service sector towards the GDP is 22.9% and it was23.1%in2015.Publicadministrationanddefenseactivitiesrecordedanacceleratedgrowthwhileallothersubsectorsunder service sector have recorded a declined growthrate.

Sector Wise Contribution to the Total GDP

Agricultural Sector7%

Industrial Sector27%Service Sector

56%

Taxes Less Subsidies10%

Sector Wise Contribution to the Total GDP

Interest, Inflation & Exchange Rate

Management Discussion & Analysis | Operating Environment Operating Environment | Management Discussion & Analysis


17

The National Consumer Price Index (NCPI 2013=100)was 112 in January 2016 and increased to 118 inDecember2016.TheNCPI,whichdeclinedfromJanuary2016toMarch2016,increasedfromApril2016toJune2016.However,itdeclinedinJuly2016andAugust2016,afterwhichitreverseditstrendandmovedonagradualincreasingpath.NCIPmajorlyfollowedthemovementsofthepricesoffoodcategory.

Rupee liquidity in the money market, which was insurplus during the first quarter of 2016, turned to adeficit thereafter. Average Weighted call money ratehas increasedthroughtheyear2016.MonthlyaverageAWCMRwas6.4%atthebeginningandithasincreasedto8.4%through2016

Year 2016 2015 2014 2013 2012

InflationInterestRate(AWPR)

4.0%11.7%

2.8%7.5%

3.3%6.3%

6.9%10.1%

7.6%14.4%

SriLankancurrencyhasdepreciatedsubstantiallyin2016whencomparedtocurrenciesofmajorbuyers.SriLankanRupeehasdepreciatedagainstUSDollarby3.8%astheexchangeratewas recorded1USD=149LKRat theendoftheyear.AtthesametimevalueofLKRhasincreasedcompared to GBP. It has become 1GBP=186LKR atthe end of the year and it was 1GBP=215LKR at thebeginning.

LKR Against Major Buyers’ Currencies

Currency Rupee Depreciated/ Appreciated

Amount As %

USDEUROJapanese yenPoundsterling

DepreciatedDepreciatedDepreciatedAppreciated

(3.79%)(0.59%)(9.01%)13.70%

LKR Against Our Major Competitors’ Currencies

Currency Rupee Depreciated/ Appreciated

Amount As %

IndianRupeePakistanRupeeKenyanSchillingThailandBahtChineseYuan

DepreciatedDepreciatedDepreciatedDepreciatedAppreciated

(0.75%)(3.62%)(5.20%)(3.84%)3.66%

Global Economic Performance

Global economic performance has been affected to agreaterextentbyJuneduetoU.K.voteinfavorofleavingtheEuropeanUnion(Brexit)andweaker-than-expectedgrowth intheUnitedStates.Thesedevelopmentshavecreated further downward pressure on global interestrates, as monetary policy is now expected to extend.

Although themarket reaction to the Brexit shock wasreassuringly orderly, the ultimate impact remains veryunclear,asthefateofinstitutionalandtradearrangementsbetweentheUnitedKingdomandtheEuropeanUnionisuncertain.Financialmarketsentimenttowardemergingmarket economies has improved with expectations oflower interest rates in advanced economies, reducedconcern about China’s near-term prospects followingpolicy support to growth, and some firming ofcommodity prices. But prospects differ sharply acrosscountriesandregions,withAsiaingeneralandIndiainparticularshowingrobustgrowthandsub-SaharanAfricaexperiencingasharpslowdown.Inadvancedeconomies,a subdued outlook subject to sizable uncertainty anddownsiderisksmayfuelfurtherpoliticaldiscontent,withanti-integrationpolicyplatformsgainingmore traction.Severalemergingmarketanddevelopingeconomiesstillfacedauntingpolicy challenges in adjusting toweakercommodityprices.Thesegrimprospectsmaketheneedforabroad-basedpolicyresponsetoraisegrowthandmanagevulnerabilitiesmoreurgentthanever.

Economic Growth of 5 Major Economies

Country 2016 2015

USAChinaEuropeanUnionIndiaRussia

1.6%6.7%1.8%7.1%(3.0%)

2.5%6.9%1.5%7.3%(3.8%)

Government Policies

The government is planning to improve productivity,valueadditionandcompetivenessofteaindustrywhileconcentratingonexpansiontonontraditionalcultivationareas and improving productivity through promotinggood agricultural practices. As a powerful stakeholderwhoisholdingtheownershipofthelandonwhichtheCompanyholdsitsprosperity,thegovernmentcontinuedthe subsidy schemes for rubber, tea and coconut newplanting and replanting to encourage the traditionalexportproductions.Theshorttermworkingcapitalloanschemesprovidedfortheregisteredteafactoryholdershelped them to muddle through short term financialdifficulties. New technological practices of improvedtapping knives, powermats, single day drying systemandnew,highyieldingclonesinthesmallholdersectorhavebeenintroducedtoimprovetheproductquality.

Nevertheless,removingfertilizersubsidiesandimposingsubsidiesonlyonpaddycultivationnegativelyaffectedthePlantationIndustryasawholeandincreasedthecostof production.

Employment & Wages

TwomajoractsontheNationalMinimumwageandthe

Operating Environment | Management Discussion & Analysis


18

Budgetary Relief Allowance which were introduced bythegovernmentledtoanincreaseinthenominalwagesof employees in private sector. Nominal wages of theemployees in the formal private sector, as measuredby theminimumwagerate indexofemployeeswhosewagesaregovernedbytheWagesBoardsTrades(1978Dec=100),increasedmarginally.Further,nominalwagesof informal private sector employees, asmeasured bytheInformalPrivateSectorWageRateIndex(2012=100)increasedmodestly in 2016. Consequently, real wagesof employees in the formal private sector declined in2016,as thepercentage increase in thenominalwagerate index remained insignificant during the period,whileemployees inthe informalprivatesectorenjoyeda real wage growth in 2016. With the expansion ofthe construction sector, an increase of the wages inmasonryandcarpentry tradeswasobservedowing totheincreaseddemandforlaborinthesesectors.Ontheotherhand,thegrowthinwagespartlysuggestshigherlevelsofbargainingpowerofworkersinrelatedactivities,duetotheshortageoflaborsupplywithrequiredquality.

The labor force, which is defined as the economicallyactivepopulationaged15 years andabove, increasedby1.2percentduring2016to8.311million,from8.214millionin2015.However,theLFPR,whichistheratioofthelaborforcetothehouseholdpopulationaged15yearsandabove,remainedatthesamelevelof53.8percentin2016asin2015.Thiswasduetothesimilarincreaseinboththehouseholdpopulationaged15yearsandthelaborforce.Thegendergapinlaborforceparticipationcontinued to remain in favor of the male labor forcein theCountry.The femaleLFPRwas recordedas35.9percentduringtheyear2016,whilethemaleLFPRwas75.1 per cent during the same period, which reflectsthatthewillingnessof thefemalestoparticipate inthelabor force is less thanhalf of thatofmales.Over theyears,thefemaleLFPRhasshownsignsofonlymarginalimprovements,leadingtoasteadylevelofoverallLFPRofaround54percent.ThereasonsforlowfemaleLFPRarelackofprovisionsforflexibleworkinghoursorwork-from-homefacilities,lackofregularizedandproperchildcarefacilities,ahighershareofhouseholdresponsibilitiesbeingshoulderedbyfemalesandlimitationsonmobilityto and from work due to difficulties associated withpublic transport. However, the remuneration levels ofworkersinTea,Rubbersectorarenotshowingagenderinequality.

17.09%20.19%

27.75%

39.92%

12.08%

5.%

10.%

15.%

20.%

25.%

30.%

35.%

40.%

45.%

100

200

300

400

500

600

700

800

900

2016 2013 2011 2009 2007

Rate per worker Increase

Change of Wage per Employee

Rs. p

er D

ay

805.

00

687.

50

572.

00

447.

75

320.

00

The labor wages in the plantation sector is decidedby the Collective Agreements with Trade unions. Theindustrial activities, suchas “Go slow”, asking forwage

hikeshinderedthenationalteaproductionlastyear.Theincrease of wage rates directly affects the profitabilitythroughincreaseincostofsalesandalsoaffectsthecashflowoftheCompany.

Technology

Thetechnologicalchangesintheinternationalplantationindustry lead the Organizations to be cost effective,efficientandqualityproductionprocess.ThesechangeshavenotimpactedheavilyontheSriLankanplantationsector due to less likely hood to changing behaviorand, dominantly, the high level of labor power overthe plantation sector. Resulting through these the SriLankan Plantation Companies still use the technologyimplementedincolonialera.Hencetheothercountrieswho use new technology have the competitiveadvantageovertheSriLankanproductsintermsofcosteffectiveness.

Weather Conditions

Since theplantation sectoraffixedwith theagriculturalViabilityofPlantationscontributemainlyonsupplyanddemand factors. In this context the supplyof tea cropdeclinedduetoprolongeddroughtinteagrowingareasduringearly2016withovercastconditions in themid-yearandtheseveredroughtconditionscontinuedduringendyearhinderedtheproduction.Onthedemandfactorthefeverdemandgloballyduetolowcommoditypricesandthedeclineintheoilandgasrevenuesinthekeyteaimportingcountriesadverselyaffectedthepricesfortea.Rubber crop declined to 79.1 Mn; Kilos, which is thelowestproductionreportedinthelast50years,duetoadecreaseinextentundertappingandthenumberoftappingdays.

In the localmarket thepricesof tea increased in2016by18%toRs.473.15perkiloasagainstRS.401.46perkilorecordedintheyear2015.Accordingthegreenleafpricesof thesmallholders increasedtoRs.68.53 fromRs.58.80.Therubberpricesdeclinedduetothepoordemand, globally, owing to high inventories in majorconsumingcountriesinclusiveofChinaandJapan.

OurCompanyproduced2.165MnKilosofteaasagainst2.375MnKilospreviousseason.ThedropwasduetotheinconsistentweatherpatternsprevailedespeciallyintheUvaRegion.Thecontinuousdroughtthatprolongedforaperiodofoverfivemonthswasthemaincontributor.In addition the overcast conditions, the high daytemperatureandblowingmadefurtherdamagetotheharvestofcrop.

In the rubber sector the production for the year was3.742 Kilos as against 3.353 Mn kilos in the previousseason, despite the loss of tapping days due to tradeunionand “goslow”action takenby theworkersonademandforhigherwages.

Management Discussion & Analysis | Operating Environment Operating Environment | Management Discussion & Analysis


19

RubberpricesadvantageouslyascendedduringthesecondhalfoftheseasonthereforetheCompanywasabletorecordanNSAofRs.276.34duringtheyearasagainstRs.274.04lastyear.

Outlook

ThegovernmentexpectstosustainarealGDPgrowthof5percentin2017.Thefuturegrowthplanswillbeinitiatedthroughimprovementsofinvestorsentimentsandnewpolicyinitiativestoincreaseprivatesectorparticipationinallmajorsectorsintheeconomyviainvestorfriendlyenvironments.

WiththeadverseeffectofthestructuraltransitionoftheSriLankaneconomy,itisexpectedtoachieveandsustainhighgrowthtrajectoryinthemediumtermanditwillopenseveralopportunitiestoupliftthestandardofliving.

Inthemediumterm, inflation isexpectedtobemaintainedwithinthedesiredrangeof3-5percentonaverage,byappropriatelyadjustingmonetarypolicyinstruments,particularlymaintainingbroadliquidmoneymarket,highexchangerateflexibilityandpublicmonetaryconcentration.

Rubber Crop Vs Rainfall

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TeaCrop Vs Rainfall - Udapussellawa Region

TeaCrop Vs Rainfall - Yataderiya & Parambe EstatesTea

Crop Vs Rainfall - Doteloya Estate

Operating Environment | Management Discussion & Analysis


20

SEGMENTAL INFORMATION

Tea MixAs a Percentage

Cultivated ExtentAs a Percentage

Rubber - 70%

Tea - 18%

Coconut - 6%

Others - 6%

High Grown - 55%

Low Grown - 20%

Medium Grown - 25%

Centrifuged Latex - 54%

Skim & Scrap - 16%

Sole Crepe - 6%

Latex Crepe - 24%

Rubber MixAs a Percentage

TurnoverAs a Percentage

Rubber Tea Coconut Others

20% 40% 60% 80% 100%

16/17

15/16

Land Leased Assets Tangible Assets

Biological Assets Investments Stocks

Receivables & Others

Segmental AssetAs a Percentage

Utilization of ResourcesAs a Percentage

Rubber - 30%

Tea - 15%

Others Crops - 3%

Unallocated - 52%

Rubber Mix - 2016/17 Vs 2015/16

2016/17

Sole Crepe - 6%

Latex Crepe - 24%


Skim & Scrap - 16%

2015/16

Sole Crepe - 10%

Latex Crepe - 22%


Skim & Scrap - 17%

46

49

45

45

2

2

7

4

20% 40% 60% 80% 100%

16/17

15/16

2

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1

1

4

5

33

32

49

52

4

4

6

4

6%

24%

54%

16%

10%

22%

51%

17% 2015/16

Management Discussion & Analysis | Segmental Information Segmental Information | Management Discussion & Analysis


21

RUBBER2016/17 2015/16 2014/15 2013/14 2012/13 2011/12 2010/11 2009/10

Production - kg'000 3,742 3,353 3,534 4,016 4,076 4,155 4,082 4,578NSA - Rs./kg 276.34 274.04 291.26 353.16 415.14 459.76 481.15 279.12COP - Rs./kg 248.13 249.26 261.23 254.21 257.27 247.47 207.24 177.47Yield - kg/ha 998 872 883 1,011 977 1,016 936 976RevenueExtent - ha 3,224 3,489 3,535 3,591 3,653 3,764 3,798 3,971

TEAPRODUCTION - Kg '000 2016/17 2015/16 2014/15 2013/14 2012/13 2011/12 2010/11 2009/10

Uva

1,191 1,286 1,074 1,143 1,065 1,364 1,428 1,109Medium 542 583 523 600 549 652 630 634Low 431 505 496 500 548 614 715 736

NSA - Rs./Kg 2016/17 2015/16 2014/15 2013/14 2012/13 2011/12 2010/11 2009/10

Uva

460.53 365.93 381.53 380.19 361.39 282.39 307.23 324.06Medium 467.95 356.95 413.35 436.38 383.36 311.66 341.69 361.08Low 482.48 373.23 416.60 427.58 375.62 323.62 356.75 368.73

COP - Rs./Kg 2016/17 2015/16 2014/15 2013/14 2012/13 2011/12 2010/11 2009/10

Uva

457.05 409.88 449.37 415.00 405.49 353.47 289.30 316.82Medium 408.53 360.25 368.09 374.81 329.34 291.77 285.17 287.61Low 440.56 381.36 401.52 400.23 371.36 299.73 303.27 302.14

YIELD - Kg/ha 2016/17 2015/16 2014/15 2013/14 2012/13 2011/12 2010/11 2009/10

Uva

677 806 858 1,021 840 1,023 1,126 952Medium 1,356 1,265 1,582 1,652 1,690 1,746 1,573 1,413Low 1,001 1,068 1,178 1,204 1,337 1,445 1,396 1,255

REVENUE EXTENT - ha 2016/17 2015/16 2014/15 2013/14 2012/13 2011/12 2010/11 2009/10

Uva 967 952 952 952 951 946 956 972Medium 178 177 173 173 173 174 184 189Low 148 150 149 149 148 148 149 157

COCONUT2016/17 2015/16 2014/15 2013/14 2012/13 2011/12 2010/11 2009/10

Production - nut'000 1,471 1,559 1,549 1,596 1,713 1,731 1,413 1,572NSA - Rs./nut 24.11 31.95 31.71 32.62 23.31 26.78 26.45 17.99COP - Rs./nut 16.57 14.69 15.15 13.16 13.23 15.17 13.37 10.62Yield - nut/ha 3,241 3,569 3,379 3,652 4,205 4,268 3,582 3,986RevenueExtent - ha 454 437 437 437 408 406 394 394

Segmental Information | Management Discussion & Analysis


22

These achievements were possible due to stringentcontrols adopted by the team ofManagement of theCompanytosecurehighintakesfromtappingoperationsandmonitoring tapperoutturn regularly.The recordedintakesfortheseasondenoteas6.5kilosandthisshowsapositivevarianceof8%overthatoflastseason.

The current season revenue extent Rubber was 3,224hectares against the previous year extent of 3,489hectares denoting 8% drop. Factoring the same theachievementscouldbereportedcommendable.

Crop Vs Yield - Rubber

Crop Yield

Yiel

d kg

/hec

tare

Cro

p -

kg. '

000

4,07

6

4,01

6

3,53

4

3,35

3

3,74

2

977

1,011

883 872

998

800

850

900

950

1,000

1,050

2,000

2,500

3,000

3,500

4,000

4,500

5,000

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

Product Mix

Kegalle Plantations PLC., maintains the same productmix as previous year with high emphasis was madeforSoleCrepeproductioninspiteofverylowdemandInternationally for the sameGrade.Wearepleased toreportthatwhentheCountryalmostlosttheSoleCrepemarketwemanagedtoconvert6%ofourproductionor233,266kilosasSoleCrepeforaspecialexportmarket.ThemajorpartofourcropwasconvertedtoCentrifugedLatex thatwasmarketed forvalueaddedproduct, thisaccounts to 54% of the Company production. Further24% of our production wasmarketed in the Foam ofCrepeRubberthroughColomboAuctionsandthroughForwardContracts.Thebalance16%accountstoSkimandScrapCrepeRubberthattooweremarketedthroughColomboAuctionsandthroughForwardContracts.

Product Mix (%) 2017 2016SoleCrepe 6 10LatexCrepe 24 22CentrifugedLatex 54 51Skim&Scrap 16 17Total 100 100

Kegalle Plantations PLC’s estates are located in thegeologicaldistrictsofKegalleinSabaragamuwaProvince,Kurunegala in North Western Province and Badulla(Udapussellawa)inUvaProvince.WhilstRubberestatesareinKegalleandKurunegalaDistricts,teaestatesareinUdapussellawa,KegalleandDolosbage. Therainfall received intherubberareasare3,068mmduring158wetdayswhilsttheteaestateareasreceivedfeverrainfallin2,782mmin119days.

TheCompany,inadditiontotheestatescrop,GreenLeafandrubberlatexarepurchasedfromthesmallholdersasanestatevillageintegrationProgramme.

RUBBER SEGMENT

TheCompanyexperiencedtradeunionactionsoverthedemandforwageincrease,whichultimatelyresultedintheirfavourwithanincreaseof17%againsttheprevailedrate. The labour componentonCostofProduction isaround 70%which increased further, thus providing anegative impactonrubberproductionandanincreaseintheCostofProduction.

TheRubbermarket toobehaved in an erraticmanneralthough a marginal increase of 3% was showncomparedtothepreviousyear.Butincomparetothatof2014/2015seasontherealizedpriceshowedanegativevarianceof2.5%.ThistrendwasduetodecliningCrudeOilpricesandfeverdemandforNaturalRubberlocallyand internationally.

Production

Theactualproductionfortheseasonat3.742mnkiloscomparedtothepreviousyearproductionof3.353mnkilos, denoted an increase of 12%. This was possibledespitetheobstaclesof lossofman-daysduetotradeunionactions,areductionof264.35hectaresofrubberuprootedforreplantingandlandslidesduetoinclementweatherconditionsinthemonthofMay2016.

The National Production had dropped to 79mn kilosduring the period as per the Rubber DevelopmentDepartmentStatisticsandAnnualReport2016byCentralBankofSriLanka.TheCompanycontributionwas5%ofthe National Production.

TheYPH recordedbyKegalle PlantationsPLC., for theperiodis998kiloswhichis14%abovethepreviousyearand17%higherthanthatofNationalYieldPerHectarewhichisrecordedas851kilos,declaredbytheRubberDevelopmentDepartmentfortheseason.

REVIEW OF OPERATIONS

Management Discussion & Analysis | Review of Operations Review of Operations | Management Discussion & Analysis


23

Sole Crepe - 6%

Latex Crepe - 24%


Skim & Scrap - 16%

Product Mix - Rubber

2016/17

Direct Export - RubberIn metric tons

268286

389

333

218

150

200

250

300

350

400

450

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

Rubber Prices

Duringtheseasonconcluded,theaverageCrepeRubberpriceswereatRs.269/-perkilo for1XGradeandtheOffGradeswere soldatRs. 224/-per kilo. TheNo1RSSpricewasmaintainedatanaverageofRs.268/-andthe3XBrownScrapCrepeaveragepriceswerearoundRs.208/-.TheSkimRubberrealizedonlyRs.183/-asanaveragefortheperiodunderreview.TheCompanywasabletoachieveaNSAofRs.276.34perkiloduringthisperiodmainly due to the contributionmade from theSoleCrepeExports.

Colombo Auction AveragesIn Rupees per kilo

RSS1 LC-1X

374.00

295.00

244.30

208.67

316.21

369.33

305.00

249.00

287.14 298.35

100

150

200

250

300

350

400

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

100

150

200

250

300

350

400

Colombo Auction Rubber Price - RSS.1In Rupees per kilo

2017 2016

Colombo Auction Rubber Price - LC.1XIn Rupees per kilo

2017 2016

100

150

200

250

300

350

400

RSS1 LC-1X

2.28 2.12 2.29

4.89

3.56 2.91

2.28 1.88 1.61 1.77

2.24 2.20 2.33

5.34

3.49 2.87

2.31 1.91 2.12

1.77

-

1.00

2.00

3.00

4.00

5.00

6.00

07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

Rubber Market PricesIn Dollars per kilo

NSA Vs COP - RubberIn Rupees per kilo

NSA COP

200

250

300

350

400

450

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

Review of Operations | Management Discussion & Analysis


24

Profitability

The Gross Profit recorded was Rs. 32 mn from whichthis sector recorded an increase of 198% against lastseason Rs. 10.8mn gross profit, despite the obstaclesof 17% increase in Labour Wages, material cost andthestringentcontrolsmadeinoutgoingsandimprovedtappingintakes.

607

322

36 11 32 -

100

200

300

400

500

600

700

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

Gross Profit - Rubber - Rupees Mn

Gross Profit - Rubber

Market Outlook

WithcontinuousCrudeOilpricesfluctuatingnegativelyandincreasedproductionofNaturalRubberinSouthEast Asian Countries’ the prices are not expected tomoveupward in the near future. However, if Chinesemarketsreopened,therewillbeapossibilitythemarkettoimprovetowardsthe3rdand4thquarterofthenewseason.IftheSriLankanGovernmentbroughtrestrictionsonimportationofNaturalRubbertoBOI industries,animprovementinpriceslocallycouldalsobeseen.

AlthoughtheDollarhasfluctuatedpositivelyduringtheseasonsimilarimprovementwasnotseenintheRubbermarket. However, the Dollar appreciation has affectedourinputrawmaterialssuchasFertilizerandProcessingChemicals.

TEA SEGMENT

With changing of world affairs and political scenariosassociated with low production in Kenya. Sri Lankanteasonceagaingotanedgeovertheotherstosustainthe industries. Thepricesrealized in the3rdand04thquarter for all elevations of tea were attractive andencouraging.Thepriceimpactwasrelatedtocurrencyfluctuationandsupplyanddemand.Although,SriLankawas historically producing over 329 mn kilos annuallywas dropped down to 293 mn kilos denoting a 11%dropinproduction.Allelevationsteaproductionswerereportedbelowcorrespondingperiodoflastseasonandtheprevious.Weatherfactorwasthemajorimpactand

the trade union actions associated with the demand for increasedLabourWagestoohadanimpact.

The01stand2ndquartersof theyear teapriceswerestagnating inparwith thepreviousprices.However,atthebeginningof3rdquarterprice improvements inallGradesofteasofallelevationswererecordedintheteamarket.Theproductionofteaat2.165mnkilosrecordeda drop of 9% against the crop of 2.375mn kilos lastseason. This impactwasdue to inconsistentweatherpatternsprevailedintheteagrowingareas,especiallyintheUvaSector.Thecontinuousdroughtthatprolongedforaperiodof5½monthsfromMay2016toOctober2016 was the main contributory factor. In additionthe high day temperatures and blowingmade furtherdestructiontocropharvest.HowevertheMidGrownteaestatewasabletoincreasethecropintakewithaYPHof1,356asagainsttheYPHof1,265lastseason.

Yiel

d kg

/hec

tare

Cro

p -

kg. '

000

Crop Yield

Crop Vs Yield - Tea

2,16

2

2,24

3

2,09

4

2,37

5

2,16

5

1,012

1,129

993

901

808

600

700

800

900

1,000

1,100

1,200

1,500

1,700

1,900

2,100

2,300

2,500

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

Product Mix

Outof the total productionof theCompany theHighGrownUvaaccountsfor55%andMidGrown25%andthebalance20%comesfromtheLowGrownregion.Thedemandingeneralintheteamarketwasforleafygradesfor which the estates were equipped. However thepricesofsmallleafgradesmovedupwardsunexpectedlyin the second half and therefore the estates graduallyincreasedthecategoryupto30%.

Product Mix - Tea 2017 2016

UvaHigh 55% 54%WesternMedium 25% 25%LowGrown 20% 21%Total 100% 100%



25

Medium Grown - 25%

Low Grown - 20%

High Grown - 55%

Product Mix - Tea

2016/17

Western Medium - 25%

Low Grown - 21%

Uva High - 54%

Product Mix - Tea

2015/16

Market Outlook

Theteamarketasexplainedearlier,behaveddifferentlyinthe01stand2ndhalfoftheyear.Thedemandduringthe 01st six months was only for selected well-madeteasofLowGrown.However,duringthesecondhalfthistrendchangedcompletelyandthepricesofallelevationsmovedupnarrowingthepricedifferencesbetweenwell-madeandaveragemadeteas.

Thechangeinthemarkettrendwasduetoshortsupplyof tea with a drop in production in Kenya, appreciation ofDollarandtheincreaseddemandintheMiddleEastbuyingCountriesforSriLankanteasfollowingthestablepoliticalenvironmentinthosecountries.

Top Prices

It is pleasing to report that our estates were able toachieveTopPriceson301occasionsduringtheseasonoutofwhichKirkleesEstaterecordedtwoall-timerecordsforDustNo.1Grades.KirkleesEstatehasrecordedthemost denoting 137 times and the second highest isGampahaEstatewith97toppricesandLuckylandEstateachieving41TopPrices.

Tea Market PricesIn Dollars per kilo

High Medium Low

2.23 2.41

2.86 2.81

2.27

2.84 2.91 2.91

2.42

3.17

2.34 2.48

3.03 2.95

2.42

2.87

3.09 2.97

2.52

3.09 2.95

3.29

3.52 3.55

2.87

3.30

3.70 3.51

2.85

3.58

1.50

2.00

2.50

3.00

3.50

4.00

07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

In Rupees per kiloColombo Auction Tea Price - Low Orthodox

2017 2016

200

300

400

500

600

700

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

In Rupees per kiloColombo Auction Tea Price - Uva High

2017 2016

200

300

400

500

600

700


Colombo Auction Tea Price - Western MediumIn Rupees per kilo

2017 2016

200

300

400

500

600

700




26

NSA Vs COP - TeaIn Rupees per kg

NSA COP

300

350

400

450

500

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

Profitability

TheturnoverfromtheteasectorincreasedtoRs.1.030bncomparedtoRs.0.87bninthepreviousyear,denotinganimprovementof17%overthepreviousyear.Thiswaspossiblemainlyduetotheimprovedteaprices.SimilarlythegrossprofitfortheseasonreportedatRs.23mnandcomparedtothelossofRs.95mnlastseason,whichisanincreaseof124%.

Thiswaspossibledespitethewageincreaseof17%andtheincreaseincostofmaterials.ThestringentcontrolsonLabourutilizationandotherinputcostsbytheteamofManagementtoreducetheCostofProductionneedtobecommended.

4.21

32.89

18.65

(55.74)

(2.02) (4.25)

(70)

(60)

(50)

(40)

(30)

(20)

(10)

-

10

20

30

40

Uva Medium Low

2017

2016

Prof

it/kg

Regional Profit/(Loss) - Rs. mn

COCONUT SEGMENT

Production

Coconut is the 03rd highest revenue initiated crop forKegallePlantationsPLC,anditaccounts9%ofthetotalrevenueextent.Theproductionrecordedforthecurrentseason denotes a 6% drop over the previous season.Theadverseeffect ismainlyduetotheerraticweatherprevailedduringthe03rdand4thquartersoftheseason.

Yiel

d kg

/hec

tare

Cro

p -

kg. '

000

1,71

3

1,59

6

1,54

9

1,55

9

1,47

1

4,205

3,652

3,379 3,569

3,241

2,000

2,500

3,000

3,500

4,000

4,500

1,200

1,400

1,600

1,800

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

Crop Yield

Crop Vs Yield - Coconut

Prices

Due to the low demand for Virgin Coconut Oil thedemand for Coconut dropped and as a result themarket prices upto the 3rd quarter of the year wasstagnantataroundRs.20/-pernut.However,withthedrop inproduction fromDecember 2016onwards thepricesescalated,recordinguptoRs.40/-pernutintheauctions. Market indications are that the prices mayascendorremainatthecurrentlevelduetothedropinproductionwhichwill continue following the inclementweatherpatternsprevailed.

Cost of Production

The cost of production per nut wasmaintained at Rs.16.57 against Rs. 14.69 in the previous season. Hereagain the increase of 13% ismainly due to the wageincreaseoftheworkersandothermaterialcostsuchasfertilizeretc.

10

15

20

25

30

35

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

NSA COP

NSA Vs. COP - CoconutIn Rupees per kilo

Profitability

TherecordedprofitpernutreportedatRs.7.54duetothelowNSArecordedatRs.24.11inthecurrentseason.ThepreviousseasonNSAwasRs.31.95.ThelowprofitmarginisrecordedduetothedropinNSA.

InspiteoftheinevitableincreaseininputcostsofLabourWages, material and shortfall in Crop this segmentrecordedaprofitofRs.12mnasagainstRs.24mnlastseason.Theshortfall ismainlyduetodropinNSAandharvestofcrop.



27

OVERALL PROFITABILITY

569

385

97

64

199

- 100 200 300 400 500 600

12/13

13/14

14/15

15/16

16/17

Profit Before Tax

Profit Before Tax

TheprofitrecordedfortheyearaftertaxisRs.199mnwhere thegrowth rate is over 210% compared to lastyear.GrossProfitsgeneratedfromRubber,TeaandotherCrops recorded significant, amounting to Rs. 227 mncomparedtolastyearofRs.64mn.

All Segment Results - Gross Profit (Rs.‘000)

2016/17 2015/16

Rubber 32,187 10,817Tea 23,318 (95,371)Coconut 12,355 24,522OtherCrops 2,098 483SaleofRubberTrees 157,236 67,835 Total Gross Profit 227,194 8,287

INVESTMENTS

ThemainbusinessoftheCompanyrelateswithrubber,teaandcoconutproduction.Therefore, theCompany’sobjective is tomaintain therespectivefieldsasper thestandards. Fulfilling this objective the managementhas invested Rs. 176 million on fixed assets – FieldDevelopment,property,plantandequipment.

Rs.139milliononrubber,Rs.23milliononteaandRs.1 million on coconut were invested on replanting &maintenance in the year under review. Furthermore,Rs. 10 million was invested on the timber/fuel woodplantationsandRs.3wasspentonproperty,plantandequipmentsoftheCompany.

Gross Profit - Coconut

20

31

26 25

12

-

5

10

15

20

25

30

35

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

Gross Profit - Coconut - Rupees Mn

OTHER SEGMENTS

Kegalle Plantations earned Rs. 157 mn from Sale ofRubbertreesandRs.2mnasprofitderivedfromothersmallcropsfortheyearunderreview.

OVERALL REVENUE SEGMENTS

Revenue Drivers (Rs.‘000) 2016/17 2015/16

Rubber 1,057 942Tea 1,030 877Coconut 39 45OtherCrops 2 1SaleofRubberTrees 158 68Total Revenue 2,287 1,933

Tea - 45%

Coconut - 2%

Sale of Rubber Trees - 7%

Rubber - 46%

Revenue Drivers

2016/17

Tea - 45%Coconut - 2%

Sale of Rubber Trees - 4%Rubber - 49%

2015/16



28

Sector 16/17 15/16 14/15

Rubber 139 175 206

Tea 23 32 43

Coconut 1 1 0.25

Timber/FuelWood 10 11 14

PPE 3 2 43

Total Capex 176 221 306

The Company’ investments on field developments &othercapitalexpenditureoverlastdecadeareasfollows,asdepictedinthegraph.

Capital Expenditure In Rupees Million

119

166183

200

250 254

294306

221

176

100

150

200

250

300

350

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

12/1

3

13/1

4

14/1

5

15/1

6

16/1

7

Comparative Economic Indicators

For the Year Ended 31 December 2015 2016 Change %

Gross Domestic ProductGDPatCurrentMarketPrice Rs.bn 10,952 11,839 8.1

RealGDPGrowth % 4.8 4.4 (8.3)GDPDeflator % 0.8 3.6 350.0

Agriculture CropsRubber Rs.mn 14,218 10,643 (25.1)Tea(GreenLeaves) Rs.mn 75,746 82,321 8.7GrowingofOleaginousFruits(Coconut/KingCoconut/OilPalm) Rs.mn 95,573 70,860 (25.9)

Agriculture Production Index (2007-2010 = 100)AgricultureCropsRubber 66.0 59.0 (10.6)Tea 105.5 93.9 (11.0)Coconut 107.9 106.3 (1.5)

Agriculture Crops Rubber Production kgmn 88.6 79.1 (10.7)TotalExtent ha’000 137 136 (0.7)ExtentunderTapping ha’000 108 93 (13.9)CostofProduction Rs./kg 170.00 180.00 5.9AveragePrice

ColomboAuction-RSS1 Rs./kg 248.17 239.28 (3.6)Export-FOB Rs./kg 342.03 294.33 (13.9)

Replanting hectares 621 591 (4.8)NewPlanting hectares 769 592 (23.0)

Valueaddedas%ofGDP 0.3 0.3 -

Tea Production kgmn 328.8 292.6 (11.0)TotalExtent ha’000 203 203 -ExtentBearing ha’000 195 195 -CostofProduction Rs./kg 458.84 469.24 2.3AveragePrice

ColomboAuction Rs./kg 401.46 473.15 17.9Export-FOB Rs./kg 593.08 639.88 7.9

Replanting hectares 1,226 1,044 (14.8)NewPlanting hectares 495 115 (76.8)

Valueaddedas%ofGDP 0.8 0.7 (12.5)

Coconut Production nuts mn 3,056 3,011 (1.5)TotalExtent ha’000 455 466 2.4CostofProduction Rs./nut 16.39 16.70 1.9AveragePrice

Producer Price Rs./nut 33.88 32.13 (5.2)Export-FOBh Rs./nut 54.54 41.16 (24.5)

Replanting/UnderPlanting hectares 4,919 5,000 1.6NewPlanting hectares 14,408 10,996 (23.7)

Valueaddedas%ofGDP 0.8 0.7 (12.5) Source: Annual Report 2016 - Central Bank of Sri Lanka

Financial Review | Management Discussion & AnalysisManagement Discussion & Analysis | Review of Operations


29Financial Review | Management Discussion & Analysis

The reporting financial year for Kegalle PlantationsPLChasbeenachallengingyearduetomanyadverseinfluences from the external environment. Prolongeddroughtconditioninfluencedtheagriculturaloperationsof the Company. Despite such adverse impacts theCompanywasabletoachieveasoundfinancialstandinginthefinancialyear2016/2017.

Rubber

The national rubber production declined for the fifthconsecutive year and reported the lowest productionvolume reported in the last 50 years. Annual rubberproduction declined by 10.7 per cent. Such a declinein the rubber industrywas experiencedmainly due tothereductionofboththeextentundertappingandthenumberoftappingdays,inresponsetothelowerpricesmainly in the smallholder sector.

Despite thedeclining trend in the rubber industry, theCompany recorded a production of 3,742metric tonsof rubber during the yearwith a 12per cent increasein comparison to3,353metric tons in 2015/2016. Thenetsalesaverage(NSA)ofrubberalsoexperiencedanincrease from Rs. 274.04 in 2015/2016 to Rs. 276.34in2016/2017speakingto1percent increaseover thecorrespondingyear.Thecombinedeffectoftheincreasedproductionvolumeandthe improvedNSAcontributedtowardsthetotalrevenueofRs.1.05billionin2016/2017,recordingan increaseof12percent incomparison totherevenueofRs.942millionin2015/2016.

Even though the adverseweather condition exerted anegativeimpacttowardstheoperationsoftheCompany,theCompanywasabletomaintainitscostofproductionatarelativelyconstantlevel.Duringtheyearunderreview,costofproductionperkgwasRs.248.86comparedtoRs.249.26in2015/2016.

Accordingly, theCompanywas able to record a grossprofit of Rs. 32.2 million from rubber in 2016/2017indicatinga two fold increaseagainst thegrossprofitof Rs. 10.8 million in 2015/2016. Such a considerableimprovementintherubbersectorwasmainlydrivenbythe increasedproduction, increasedNSAand relativelylow cost of production.

Tea

The national tea production witnessed a substantialdecline in 2016/2017 for the consecutive third yearduetobothsupplyanddemandsidefactors.Total teaproductioninthisyeardeclinedby11.0percentto292.6millionkilogramsfrom328.8millionkilogramlastyear.

FINANCIAL REVIEW

The operations of the tea business of KPL unfoldeda pattern which was in conformity with the national behavioroftheteaindustry.Accordingly,theproductionof tea declined to 2,165 metric tons in 2016/2017indicatingareductionof9percentincomparisontotheproductionof2,375metrictonsreportedin2015/2016.Suchadeclinehasmainlybeendrivenby theadverseweatherconditionssuchasprolongeddroughts.Inspiteofsuchadeclineintheproductionofteain2016/2017,the Company recorded an increase in revenue incomparisontotheyear2015/2016duetotheincreaseofNSA fromRs. 365.23 in2015/2016 toRs. 466.81 in2016/2017,speakingtoa27.8percentincreasebetweenthese two time periods.

The cost of production at Rs. 441.56 per kg recordeda 13 per cent increase compared to previous year ofRs.391.05perkg.Eventhoughthecostofproductionincreased compared to the last year, the Companywasable to recordagrossprofitofRs. 23.3million in2016/2017 in comparison to thegross lossofRs. 95.4million reported in 2015/2016. In spite of unfavorableconditionsprevailed in the industry, theCompanywasin a position to achieve a sound financial standing in2016/2017relatingtotheteabusiness.

Operating Highlights

2016/17Rs.’000

2015/16Rs.’000

Variance Rs.’000

Variance %

Revenue 2,287,1611,933,063354,098 18%

CostofSales 2,059,9681,924,776135,192 7%

GrossProfit 227,193 8,287218,906 2,642%

NetProfit-Group 330,112 135,015195,097 145%

NetProfit-Company 217,263 101,330115,933 114%

Duringtheperiodunderreview,KPLrecordedgrossprofitof Rs. 227.2million speaking to over 20 fold increaseCompared to the gross profit of Rs. 8.3 mn reportedin2015/2016.Theproportionate increaseof18.32percent in the revenuehasmainly influenced inachievingsuchimprovedfinancialperformance.Inadditiontotheincreaseinrevenue,significantimprovementinmarginsduring relevant two financial periods also contributedtowards increase in the gross profit compared to thepreviousyear.

Asaresultoftheimprovedgrossprofit,thenetprofitoftheCompanyhasincreasedby114percentcomparedtothelastyear,andtheGroup’snetprofitalsoincreasedby145percentcomparedtothelastyear.


30 Management Discussion & Analysis | Financial Review Financial Review | Management Discussion & Analysis

Revenue

Rubber - 46%Sale of Rubber Trees - 7%

Other Crops - 0%Coconut - 2%

Tea - 45% Revenue Composition

2016/17

Despite of various global and local challenges, theCompany was able to achieve combined revenue ofRs. 2.29 billion in 2016/2017 which indicates 18 percent increase incomparisonto therevenueofRs.1.93billionin2015/2016.Suchanincreasehasmainlybeendrivenbyincreaseinturnoverinthesegmentsofrubber,tea,othercropsandsaleofrubbertreewhichreportedproportionateincreasesof12percent,17percent,345percentand131percentrespectively.

Revenue Overlook

In Million Rupees

-

500

1,000

1,500

2,000

2,500

3,000

Reve

nue

-Rs

.mn

Years

2,5

88

2,4

14

2,0

24

1,9

33

2,2

87

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

Profitability

Grossprofitfortheyearindicatedanincreaseof2,642percentoverthepreviousyearasaresultoftheimprovedfinancial performance achieved in certain businesssegments incomparisontothepreviousyear.Specially,the teasegmentof theCompany’soperation recordedagrossprofitofRs.23.3million thisyearcomparedtoagrosslossofRs.95.4millionreportedinlastyear.Duetothe increases intherevenue inthesegmentsoftea,rubberandrubbertreessalealongwiththeincreasesingrossmarginscomparedtothepreviousyear,netprofitoftheCompanyreportedanincreaseof114percenttoreportRs.217millioncomparedtothepreviousyear.

ThefinanceincomewasRs.199millionwhichisa9percentdecreasecomparedtothepreviousyear.Thefinancecost has increased by 30 per cent compared to thepreviousyearmainlyduetotheutilizationofshorttermfacilitiesandthehigherlevelofinterestratesprevailedintheeconomyduringtheperiodunderreview.

Segmental Profit - 2017In Thousand Rupees

(120,000) (100,000) (80,000) (60,000) (40,000) (20,000)

- 20,000 40,000

Rubber Tea Coconut

Profit

Rs.'0

00

20162017

Segments

2,58

8

2,41

4

2,02

4

1,93

3

2,28

7

473

346

127 101

217

-

50

100

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350

400

450

500

-

500

1,000

1,500

2,000

2,500

3,000

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

Net Cash Flow Operational Cash Flow

In Million RupeesRevenue Vs Profit After Tax

Assets Base

Theassetbaseof theCompanyhas increasedby0.72percentto6.404billionin2016/2017from6.358billionin2015/2016.Theincreaseinthenon-currentassetbasehasmainly driven the increase in the total asset base.Non-current assets of the Company has increased by3percent toRs.4.32billion fromRs.4.19billion.Thelargest portion of the non-current assets consists ofbearerbiologicalassetsrecordingRs.2.02billionwhichisa6percent increasecomparedtothe lastyearduetoinvestmentinfielddevelopmentactivitiesamountingtoRs.172.8millionwhich lead to increaseyieldof theCompanyinthefuture.

The current asset base of the Company declined toRs.2.09billionin2016/2017whichisareductionof4percentincomparisontoRs.2.17billionin2015/2016.



Composition of Assets

Current Assets33%

Leasehold PPE3%

Freehold PPE4%

Bearer Biological Assets31%

Consumable Biologicalassets2%

Financial Assets19%

Long Term Investments8%

2016/17

Current Assets

Short Term Investments - 68%

Cash and Bank Balances - 1%

Inventories - 13%

Trade and Other

Receivables - 14%

VAT Recoverable - 1%

ESC Recoverable - 1%

Amounts due from RelatedCompanies - 2%

2016/17

Net Assets per Share

During the year under review, net assets per shareincreased from Rs. 97.45 in 2015/2016 to Rs. 104.87in 2016/2017 which indicates an increase of 8 percentbetween these two timeperiods. The total assetsincreased by 0.72 per cent whereas total liabilitiesdecreasedby4%.Thishasledtoincreasethenetassetspershareduringtheyear2016/2017.

Debt Position

Total debt (Gross borrowings) of the Company hasdecreased by 6 per cent to Rs. 2,576million fromRs.2,728millionreportedintheprioryear.Despitethe22percentreduction innon-current liabilities, thecurrentliabilitiesincreasedby27percenttoRs.1,879million.

Total Assets Vs Net BorrowingsIn Million Rupees

Total Assets Net Borrowings

(1,000)

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2013 2014 2015 2016 2017

Liquidity Position

Theworkingcapitalof theCompany recordedRs.210million speaking toa70per cent reduction comparedto last year amount of Rs. 692million.The increase incurrent liabilities by 27 per centwhile the decrease incurrentassetsby4percentcomparedtothepreviousyear contributed towards the decrease in the overallliquidityoftheCompanycomparedtolastyear.

Cash Flows

Net Operating Cash Flows

During the year under review, the Company hasexperienced a negative net operating cash flowof Rs.64millionwhichwasRs.49.6millionpositiveinlastyear.Accordingly,netoperatingcashflowshavedecreasedby229percentcomparedtolastyear.Eventhoughthenetoperatingcashflowsrecordeda229percentdrop,thecash flowsgenerated fromoperations havedecreasedonlyby15percentcomparedtolastyear.

Cash Generated After Investing and Financing Activities

TheCompanyhasrecordedacashandcashequivalentbalanceofRs.425millionasattheyearend.


32

237

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460 415

353

291 274 276

153 177

207

247 257 254 261 249 248

237

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500

600

08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

Rs/k

g

Net Sale Average Vs Cost of Production Vs RSS1 Price - Rubber -

NSA COP RSS1-Market

200

250

300

350

400

450

500

550

600

08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

Rs/k

g

Net Sale Average Vs Cost of Production - Tea

NSA - Company COP - Company

Market Price - Uva High Market Price - Western Medium Market Price - Low Grown

19.31 17.99

26.45 26.78 23.31

32.62 31.71 31.95

24.11

10.93 10.62 13.37

15.17 13.23 13.16

15.15 14.69 16.57

25.00 25.44

29.60 22.89

33.04 32.30 33.64 33.88

32.13

-

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17Rs

/nut

Net Sale Average Vs Cost of Production Vs CDA Market Price - Coconut

NSA COP CDA - Market Price

Management Discussion & Analysis | Financial Review Financial Review | Management Discussion & Analysis

Capital Expenditure

During the year, the Company has invested Rs. 173millioninthefielddevelopmentsinclusiveofupkeepofimmatureplantations.Duringtheyear,CompanyinvestedRs.139millionon218.2hectaresofrubberfields,Rs.23millionon13hectaresof teafieldsdevelopments.Theinvestments on factory developments and acquisitionsofproperty,plantandequipmentamounted toRs.3.2million.

Capital Expenditure In Rupees Million

119

166183

200

250 254

294306

221

176

100

150

200

250

300

350

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

12/1

3

13/1

4

14/1

5

15/1

6

16/1

7

KPL has financed the above investments mainlythroughcombinationofcashflowsfromoperationsandborrowings.

Total Debts Finance Cost Finance income

Total Debts Vs Finance Cost and Finance IncomeIn Million Rupees

1,10

8

2,33

1

2,39

6

2,72

8

2,57

6

142 179 177

198

258

166

230 228

183 199

-

500

1,000

1,500

2,000

2,500

3,000

-

50

100

150

200

250

300

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

Rs. M

nMarket Capitalization

ThemarketpriceoftheKPLsharestoodatRs.52/-pershare as at 31March 2017 against Rs. 50.70 per shareas of 31 March 2016. The market capitalization wasreportedtobeRs.1,300millionduringtheyearindicatingareductionof2.5percentcomparedtoRs.1,268millionreportedinthepreviousyear.

Market CapitalizationIn Million Rupees

2,80

0

2,62

5

2,14

5

1,26

8

1,30

0

-

500

1,000

1,500

2,000

2,500

3,000

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

Earnings per Share (EPS)

TheearningspersharerecordedatRs.8.69in2016/2017asagainstpreviousyearofRs.4.06.TheCompanyshareswere traded at Colombo Stock Exchange at a pricemultipleof5.98timesasof31March2017.

18.9

3

13.8

4

5.08

4.06

8.69

-2.004.006.008.00

10.0012.0014.0016.0018.0020.00

Earnings Per ShareIn Rupees per Share

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

7.50 13

.50

2.00 45

.00

5.00

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

11/12 13/14 14/15 15/16 16/17

Dividends Per ShareIn Rupees per Share

4

6

8

10

12

14

2,000

3,000

4,000

5,000

6,000

7,000

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

ROC

E %

Cap

ital E

mpl

oyed

Rs.

mn

ROCE Vs Capital Employed

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33

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153 177

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247 257 254 261 249 248

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600

08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

Rs/k

g

Net Sale Average Vs Cost of Production Vs RSS1 Price - Rubber -

NSA COP RSS1-Market

200

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400

450

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600

08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

Rs/k

g

Net Sale Average Vs Cost of Production - Tea

NSA - Company COP - Company

Market Price - Uva High Market Price - Western Medium Market Price - Low Grown

19.31 17.99

26.45 26.78 23.31

32.62 31.71 31.95

24.11

10.93 10.62 13.37

15.17 13.23 13.16

15.15 14.69 16.57

25.00 25.44

29.60 22.89

33.04 32.30 33.64 33.88

32.13

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5.00

10.00

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25.00

30.00

35.00

40.00

08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

Rs/n

ut

Net Sale Average Vs Cost of Production Vs CDA Market Price - Coconut

NSA COP CDA - Market Price

Financial Review | Management Discussion & Analysis


34

PERFORMANCE MEASUREMENT Quarterly Performance TabulatedbelowisthequarterlyperformanceoftheCompany.

1st

Quarter2nd

Quarter3rd

Quarter4th

Quarter Total

Revenue Rs.‘000 510,121 563,487 493,061 720,492 2,287,162GrossProfit/(Loss) Rs.‘000 (15,937) 56,332 49,397 137,401 227,194ProfitBeforeInterest&Tax Rs.‘000 25,064 93,700 86,308 252,203 457,276Profit/(Loss)BeforeTax Rs.‘000 (35,811) 27,072 18,703 189,210 199,175Profit/(Loss)AfterTax Rs.‘000 (36,413) 26,271 17,950 209,455 217,263

Earnings/(Loss)PerShare Rs. (1.46) 1.05 0.72 8.38 8.69

NetAssetValuePerShare Rs. 98.16 99.21 99.92 104.87 104.87

LastTradedMarketPricePerShare Rs. 61.80 55.00 48.50 52.00 52.00

HighestMarketPricePerShare Rs. 72.50 61.50 58.00 60.00 72.50

LowestMarketPricePerShare Rs. 51.00 54.10 45.00 46.50 45.00

TotalAssets Rs.‘000 6,479,717 6,473,670 6,398,413 6,404,381 6,404,381

TotalEquity Rs.‘000 2,453,884 2,480,155 2,498,105 2,621,695 2,621,695

TotalDebt Rs.‘000 2,826,827 2,786,184 2,623,802 2,576,496 2,576,496

DebtEquityRatio % 54 53 51 50 50

Equity/AssetRatio % 38 38 39 41 41

PriceEarningsRatio Times (42.43) 52.34 67.55 6.21 5.98

Management Discussion & Analysis | Financial Review Financial Review | Management Discussion & Analysis



Gov

ern

ance

Rev

iew

Sust

ain

abil

ity

Rep

ort

Managing Our Impact ............................... 36Economic Sustainability .............................. 40Social Sustainability ................................ 44 Environmental Sustainability ....................... 50 Our Achievements ..................................... 54GRI Index ................................................... 56

Immature Phase

Asmanyothercropsthiscultivationalsogothroughthisphaseforaperiodof03years.Duringthisperiodcare and maintenance are very vital. Protectionagainstrodentsandotherinsectsareveryimportant.Sincethispalmisavigorousgrowingplant,itrequireshighinputsoffertilizer.Theinitialinflorescencesareterminatedtokeeptheplantvigorimprove.

This plant has two different inflorescences namelymaleandfemale,thepollinationisdonebyaspecialweevil and not self-pollinated.After this phase thePalm reaching to the productive phase where therevenueisgenerated.

Tra

nsf

orm

ing

fro

m t

he T

rad

itio

n...


Contents


36

The Report

ForthefirsttimeofthehistoryofKegallePlantationsPLC,weadaptedtotheGlobalReportingInitiatives(GRIs)forreporting. This transformationwasmainlydrivenbyour inspirationofmoving from the traditional frameworkofprovidingonlythefinancialinformationintoamodelofprovidingawiderangeofinformationwhichaddressestherequirementsofthetriplebottomline.ThepracticeistobeimplementedandcontinuedonthebasicbeliefthattheCompanyshoulddirectappropriateattentionnotonlyontheexpectationsoftheinvestorswhoarekeenonfinancialstatusoftheCompanybutalsoontheexpectationsandtherequirementsofawiderangeofstakeholderswhohavethepotentialtoinfluenceandtobeinfluencedbytheoperationsoftheCompany.Thereportisformulatedusingthe“Core“optiongivenbytheGlobalReportingInitiatives.

Sust

ainab

ility Sustainability Sustainability Sustainabilit

y

Social

Economic

Environmental

KegallePlantationsPLCcontinuedtorecognizethelivingsustainablyinsubsistingwithinmeansofthenaturalsystemsthatbelongtonatureanddevelopingandmeetinguptheneedsofpresent,withoutcompromisingtheabilityoffuturegenerationstomeettheirneeds.TheCompanyalsobelievesthatasacorporateentity,itowesthecommunityanditsstakeholders,assuranceonhowthiseffortshavebenefitedthem.

The Company continued to maintain its responsibility towards the welfare of all stakeholders, irrespective ofboundariesinourareasofoperations.Webelievethatsimplybyestablishingandadheringtopriorities,CorporateSocialResponsibilityshouldbeextendedtowardsouremployees,shareholders,customers,andcommunitiesinwhichwe operate.

MANAGING OUR IMPACT

Sustainability Report | Managing Our Impact Managing Our Impact | Sustainability Report


37

Identified Material Aspects & Boundaries

Weusethefollowingprocesstoidentify,prioritizeandvalidatetheaspectsthatexertssignificantinfluenceonourbusiness.Onthebasisofthisprocess,wereporteachandeveryaspectcomprehensivelytoourstakeholders.

Step 1Identification

SustainabilityContext Materiality Completeness

Step 2Prioritization

Step 4Review

Step 3Validation

Stakeholder Inclusiveness

REPORT

Sustainability Context Sustainability Context

PRINCIPLES FOR DEFINING REPORT CONTENT

Asaresponsiblecorporatecitizen,wearealwayskeenoneachandeveryaspectwhichhasorisexpectedtohavepotentialtoaffectthebusinessaswellasawiderangeofstakeholdersaroundthebusiness.WehavedulyappliedthefollowingprinciplesinthedeterminingthemattersthataffecttheCompanyandultimatelythestakeholdersoftheCompany.

Stakeholder Inclusiveness

Inthereportingprocess,awiderangeofforcesandactorswhohavethepotentialtoaffectandbeaffectedbytheoperationsoftheCompany.Accordingly,StakeholdersofourCompanyincludenotonlytheinvestorswhohavecontributedtothefinancialcapitalbutalsootherwhohaverelationshipswiththeCompany.Inthepreparationofourreport,priorityhasbeengiventothereasonableexpectationsandinterestsofourstakeholders.

Sustainability Context

Ourreport isexpected toprovidecomprehensivedetails related to theperformanceof theCompany fromabroaderperspectiveconsideringthewidersocioeconomiccontext.Accordingly,wereporthowwecontribute,oraimtocontributeinthefuturetotheimprovementordeteriorationofeconomic,environmental,andsocialconditions,developmentsatthelocal,regionalorgloballevel.

Materiality

Under our report, we report the relevant topics thatmay reasonably be considered important for reflectingthe organization’s economic, environmental and social impacts or substantively influencing the decisions ofstakeholders.

Completeness

Thereporthascoveredmaterialaspectsandtheirboundaries,sufficienttoreflecteconomic,environmental,andsocialimpacts,andtoenablestakeholderstoassesstheorganization’sperformanceinthereportingperiod.

Managing Our Impact | Sustainability Report


38

PRINCIPLES FOR DEFINING REPORT QUALITY

In theprocessofpreparationof the sustainability report, the followingprincipleshavebeenapplied inorder toenhancethequalityoftheinformationprovidedthroughthereport.AsaCompanydedicatedtoqualityofeachandeveryaspect,weareintheopinionthattheprovisionofqualityinformationwillfacilitatetheeffectivedecisionmakingofourstakeholders.

Balance

ThereportconsistsofallthepositiveandnegativeaspectsoftheCompany’sperformancetoreflectanunbiasedpictureoftheorganizationwhichenablesareasonableassessmentoftheoverallperformanceoftheCompany.

Comparability

Ourreporthaspresentedinformationinaconsistentmannerwhichenablesstakeholderstomakemeaningfulcomparisonsagainst theCompany’spastperformance, itsobjectives,and to thedegreepossible,against theperformanceofotherorganizations.

Accuracy

The report consists of information that is sufficiently accurate and detailed for stakeholders to assess theperformanceoftheCompany.

Timeliness

Informationisreportedonaregularbasisinordertoensurethatinformationisavailableontimeforstakeholderstomakeinformeddecisions.

Clarity

Thereporthaspresentedinformationinamannerthatisunderstandableandaccessibletostakeholdersusingthe report.

Reliability

Theprocessofgathering,recording,analyzinganddisclosinginformationcontainedinourreportissubjecttoaccuracyandestablishesqualityandmaterialityofinformation.

Prioritization of Material Issues

TheaspectsthathaveahighpotentialtoexertinfluenceonourCompanycanberecognizedbasedonthefollowingmatrixandthoseaspectsareprioritizedsothatstakeholderscanunderstandthesignificantaspectsthatmattermostthebusinessprocessofourCompany.

1

1 22

3

3 4

4

5

5

6

6

7

7

Natural Environment

Infl

uenc

e of

Sta

keho

lder

s

Influence on KPL

Work Environmet

Local Development

Suplier Management

Product Responsibility

Creating Value For Shareholders & Profitability

CSR Activities

H

M

L

Sustainability Report | Managing Our Impact Managing Our Impact | Sustainability Report


39

Material Issue for KPL Corresponding GRI G4 Material Aspect Aspect BoundaryInternal External

NaturalEnvironment

Materials *Energy *Water *Biodiversity *Emissions *EffluentandWaste *ProductsandServices *Compliance *Transport *Overall *SupplierEnvironmentalAssessment *EnvironmentalGrievanceMechanisms *

WorkEnvironment

Employment *Labour/ManagementRelations *OccupationalHealthandSafety *TrainingandEducation *DiversityandEqualOpportunity *EqualRemunerationforWomenandMen *SupplierAssessmentforLabourPractices *LabourPracticesGrievanceMechanisms *Investment *Non-discrimination *FreedomofAssociationandCollectiveBargaining *ChildLabour *ForcedorCompulsoryLabour *Security Practices *IndigenousRightsAssessment *HumanRightsGrievanceMechanisms *

LocalDevelopment

LocalCommunities *Anti-corruption *PublicPolicyAnti-competitiveBehavior *Compliance *GrievanceMechanismsforImpactsonSociety *

SupplierManagementSupplierAssessmentforImpactsonSociety *SupplierHumanRightsAssessment *

ProductResponsibility

CustomerHealthandSafety *ProductandServiceLabelling *MarketingCommunications *CustomerPrivacyCompliance *

CreatingValueforShareholders&Profitability

EconomicPerformance *MarketPresence *IndirectEconomicImpactsProcurement Practices *

CSRActivities *

Managing Our Impact | Sustainability Report


40

Our Stakeholders

AsacorporatecitizenwhoishandlingconsiderableamountofresourcesofSriLankaincludingover9,000hectaresandaround6,000workforce,itisnaturaltoinfluenceandtobeinfluencedbyandtoexternalandinternalpartiescalledstakeholders.

ItisvitaltounderstandtheimplicationsuponKPLduetotheactivitiesandresponsesofstakeholders,bothinternalandexternalforthefuturebettermentofbothKPLandthestakeholders.GroupswhichhaveanimpactbyoperationsofKPLorwhicharelikelytoinfluenceKPL’soperationsareconsideredasourstakeholders.WehaveidentifiedandcategorizedourstakeholdershavinglegitimateinterestontheCompany’sperformanceintoeightkeygroups.Overtheyearswehaverecognizedallthestakeholdersequallyandit’sintuitivewiththereputationKegallePlantationsPLCdevelopedasahighvalueaddingCompanytoitsstakeholders.

1

2

3

45

6

7

8

Shar

ehol

ders

Management

Employees& Unions

Com

mun

ity

Gov

ernm

entCusto

mers

Lenders

Suppliers

Weanalyzeeachstakeholder’sexpectationsperiodicallywithanongoingdialoguewithstakeholdersatallthestagesoftheprocess.Theviewsandexpectationsofallstakeholdersareobtainedthroughanengagementprocessthatallowsthemtobeexpressedwithoutanyrestrictioninordertoprovidemaximumsatisfactionaswealwaysbelievethatoursuccessdependsupontheirsupport.Weclassifyourstakeholdersasfollows;

ECONOMIC SUSTAINABILITY

Sustainability Report | Economic Sustainability Economic Sustainability | Sustainability Report


41

1. Shareholders:

Weconsidershareholdersasapartywithhighinfluencingpowerforoursuccess.Inspiteofthecurrentyearbeingchallenging financial year, due to adverse macro-economic factors, we were in a position to improveour financial performance compared to the previousyear. Due to improved financial conditions, we havedistributeddividendsamountingtoRs.125millionwhichis6%ofthetotalvalue.

2. Management:

The Senior Management has been granted theauthority of strategic decisions making on operations.Therefore theyareheld responsible for theresultsandtheir performance is evaluated based on their results.In recognition of their skills, experience, and servicesKegalle Plantations PLC has always treated them withcompetitive emoluments, based on their performanceandtheresponsibilitytheyhold.

3. Employees & Trade Unions:

CommittedworkforceisoneofourmainassetsandKPLalwaysfocusestheattentionontheirdevelopmentandwellbeing. Our Company distributed Rs. 1,135 mn asremunerationwhichis56%ofthetotalvalue.Inaddition,wealwaysattempttoprotecttherightsoftheemployeeswiththeviewthattheyareentitledtoenjoythehumanrights irrespective of whether relevant regulationsaddress such rights. Accordingly, as a corporate bodywhichconsistsofadiversifiedworkforceintermsofage,ethnicity,religion,regionetc.,thecultureoftheCompanyalways strives to resist the discriminating practices.FollowinggraphsandCertificatesprovideevidenceonourcommitmenttoaddhighvaluetoemployees.

• Ethical Tea Partnership Certification (ETP) for allTeaManufacturingFactoriesoftheCompany.

• Scope-Continuousimprovementofthewelfareandworkingconditionsof itsworkers,aswellasonenvironmentalsustainability.

Classification of Stakeholders based on Power and Interest

1

2 3

7

8

4

5

6

H

L

POW

ER

INTEREST

The Company created a value of Rs. 2,035mn for allthe above identified stakeholders including voicelessstakeholders such as environmental groups andcommunity and they are to be best served eitherfinanciallyorsocially.

Following graph exhibits the value distribution amongourstakeholders.

Distribution of Value Added - 2017 Vs 2016

70%

3%

11%

68%

7%

59%

56%

2%

12%

6% 6% 19%

-80%

-60%

-40%

-20%

-

20%

40%

60%

80%

20162017

Remun

eratio

n

Govern

ment

Lend

ers

Divide

nd

Deprec

iation

Retai

ned P

rofit

Economic Sustainability | Sustainability Report


42

Value Added Per Employee - Rs.'000

Turnover Per Employee - Rs.'000

Turnover Per Employee

Value Added Per Employee

- 50 100 150 200 250 300 350

12/13

13/14

14/15

15/16

16/17

- 100 200 300 400 500

12/13

13/14

14/15

15/16

16/17

EmployeeunionsarekeenontheemployeebenefitsandtheCompanyisalwaysindialoguewiththemandcarriesgoodrelationship.Ouractivitiestoimproveemployees’health, safety levels, and welfare and skill levels havebeencategorized inSocialSustainability section inourSustainabilityReport.

4. Community:

CommunityshowslessinterestregardingtheCompany’sperformance and the individuals may not haveinfluenceoverouroperations.However,asanethicallydriven organization we always endeavor to maximizethe positive impacts on the community with Estate/Village integration. Our commitment in rewarding thecommunitywillbereflectedinourSustainabilityReportonSocialSustainabilitysection.

5. Government:

We recognize the State Government as a mainstakeholder.Due to the ownership on the land vestedwiththeGovernment,theGovernmentpossessesahighinfluenceover thebusinessofourCompany.Andalso2% of total value generated through the Company’soperationsisdistributedtothegovernmentinwayoftaxand lease rentals.

6. Customers:

Inthecurrentcompetitivemarket,wearedealingwiththecustomersstrategicallybyofferinghighqualityproductswhicharecapableoffulfillingcustomerrequirements.Intheprocessofprovidingvaluetocustomersintermsofhigh quality products,we have obtained the followingqualityaccreditationasawayofprovidinganassuranceas to thequality of our products. This has enabledusto maintain mutually beneficial relationships with thecustomers.

-LuckylandEstate-KirkleesEstate-GampahaEstate-DoteloyaEstate-YataderiyaEstate

• ISO 22000: 2005 System Certification - FoodSafety Management System Certification for allTeaManufacturingFactoriesoftheCompany.

• Scope -Manufacture of Black Tea. Food Sector(DriedGoods).

7. Lenders:

With the proven history of good relations with theBankers, our Company has faced no complications inobtaining financial assistance which is required fromtime to time for the smooth continuation of businessoperations as well as for the investments which arerequired for growth. As a Company driven by ethicalstandards,wearehighlykeenonmeetingtherelevantcommitment as they fall due thereby enabling theCompany to achievea sound standing in the financialmarket.Accordingly,theCompanyhasallocatedRs.237millionastheinterestpaymentsforthevariouskindsoffinancialfacilitiesobtainedanditrepresents12percentofthetotalvaluegenerated.

8. Suppliers:

Suppliers are a group of stakeholders who are highlyinterestedintheoperationsoftheCompany.Inthecontextof relations with the suppliers, there is interdependency between the operations of the Company and thesuppliers. Accordingly, we always attempt to be in anactivecommunicationwithoursupplierwiththepurposeof achieving a smooth flow in our operations.On theotherhand,wearehighlykeenonthefulfillingduestosuppliers on time and it enables tomaintainmutuallybeneficialrelationswithsuppliers.

Sustainability Report | Economic Sustainability Economic Sustainability | Sustainability Report


43

Statement of Value Added

Rupees in Millions 2016/17 2015/16

Turnover 2,287 1,933OtherIncome 316 298

2,603 2,231CostofMaterials&Services (567) (587)Value Added 2,035 1,644

DISTRIBUTION OF VALUE ADDED

ToEmployeesasRemuneration 1,135 56% 1,158 70%ToGovernmentasTaxesandLeaseRent 47 2% 53 3%ToLendersofCapitalasInterest 237 12% 175 11%ToShareholdersasDividend 125 6% 1,125 68%

Retained in the Business as;

ProvisionforDepreciation 112 6% 110 7%ProfitRetained/(Utilized) 379 19% (977) (59%)Value Added 2,035 100% 1,644 100%

ValueAddedperEmployee Rs. 346,980 259,053TurnoverperEmployee Rs. 389,901 304,659

Economic Sustainability | Sustainability Report

Ourfinancialcommitmenttostakeholderscanbesummarizedasfollows.

Sources and Utilisation of Income

Rupees in Millions 2016/17 % 2015/16 %

Sources of Income

Rubber 1,057 41% 942 42%Tea 1,030 40% 877 39%Coconut 39 2% 45 2%OtherCrops 2 0% 1 0%SaleofRubberTrees 158 6% 68 3%OtherIncome 316 12% 298 13%

2,603 100% 2,231 100%

Utilisation of Income

ToEmployeesasRemuneration 1,135 44% 1,158 52%ToGovernmentasTaxes&LeaseRent 47 2% 53 2%ToLendersofCapitalasInterest 237 9% 175 8%ToSuppliers&ServiceProviders 567 22% 587 26%ToShareholdersasDividend 125 5% 1,125 50%ToExpansion&Growth 491 19% (867) (39%)

2,603 100% 2,231 100%


44

SOCIAL SUSTAINABILITY

SKILL DEVELOPMENT OF EMPLOYEES

Training on Improving Productivity

The Officials of Productivity Secretariat conducted atraining programonproductivity improvement, KaizenTechniquesandteambuildingconceptson26July,2016for the benefit of employees, which provides a greatopportunity to improve efficiency and effectiveness ofemployees.Around40employeesattendedthetraining.

Facilities Provided to Plantation Executives/Staff to Upgrade Knowledge

The Company provides employees with relevantguidancetoupgradeknowledgeintheirspheresattheNational Institute of PlantationManagement by whichtheCompanypersonnelhaveextremelybenefitedwithexcellence.

EMPLOYEES’ HEALTH AND WELFARE

Medical Clinic

Medical clinics are organized on estate to benefit theworkers.On23September2016, aMedicalClinicwasconducted by MOH of Galigamuwa along with threemedical practitioners and 20 otherHealth Staff, where102employeesobtainedtheservicestochecktheirLipidprofile,Fastingbloodsugar,Malariatest,BMItestetc.

Training Program on Mental Health

Educative program was organized by Atale Estatefor thebenefitof its employeesand thisprogramwasconducted by the Head of “Sithsuwa Sevana” unit ofKegalle Teaching Hospital. This program was mainlyconcerningmentalhealthandotherrelatedissuessuchasfamilydisputes,workplacegrievance,drugabuseetc.toowerediscussedandillaffectsexplainedto52estateemployeeswhowerepresentforthisprogramheldon07November2016atfactorypremises.

Sustainability Report | Social Sustainability Social Sustainability | Sustainability Report


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Improving Moral of Employees

Inordertoimproveemployeemoraleandasameasureof stress relieving activity, excursions were organizedto assist the employees to maintain better friendshipamongthem,improvetheirapproachtowardsworkanddevelopemployee–employerrelationships.

SOCIAL WELFARE ACTIVITIES

Estate Land Release for Landslide victims

An extent of 51.75 of prime rubber land fromKegalleestateshavebeenreleasedtolandslidevictims.

Opening of New Housing Project

HousingandInfrastructuredevelopmentforemployeesare provided to resident employees to uplift the livingstandardofestateresidentemployeesfundedbyMinistryofUpcountryDevelopmentandInfrastructurechanneledthroughP.H.D.T.Kegalle. Sport Activities

The Company conducted a Volley Ball tournament asanentertainmentactivity for theemployees.Thiseventreallyhelpedtheemployeestoenjoyanddevelopmutualrelationship with peers.

Social Sustainability | Sustainability Report


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Assistance for Landslide Victims

As a part of Social Responsibility of the Company,arrangements were made to distribute food items tolandslidevictims.

Religious Activities

TheCompanyencouragesreligiousactivitiesonestatesandassistanceprovidedtoconducteventsontheestateand financial and material supports are extended toactivitiesinthevillage. Financial assistancehasbeengiven to conduct annualprocessionatArandaraDewalaya thatwasheldon29March, 2017. Estateemployeesparticipated voluntarilytocarrylightsattheprocession.

Cultural Activities

InternationalWomen’sDaywascelebratedinAtaleEstatewithactiveparticipationofover100femaleemployees.Bank ofCeylon , Kegalle arranged to open 44 KanthaRan Ginum a saving scheme specially designed forfemales and they contributed Rs. 500/- each for thefirst15applicantstogetherwithseveralgiftitems.TheChiefManagerofBankofCeylon,Kegalletooattendedthis program and delivered a lecture on productivityenhancement.



47

Mr. Chanaka Sendanayake, Former Deputy Director ofEducation, KandyRegionatPindeniyaNational Schoolorganized by the Superintendent Atale Estate andabout 500 school children and teachers participatedat thisprogramand the studentsand teachersgreatlyappreciatedthisprogram.

The Superintendent being in the advisory councilof Pindeniya Police Station organized this programattendedby theOfficer inChargeof Police andothermembersoftheAdvisoryCouncil. Educative Program for School Children

An opportunity was granted, enabling pre-schoolchildren andparents comprising about 100were fromAtalevillagepre-school,tovisittheAtaleFactoryon24March,2017.

Child Development

TheCompanyassistedintheprocessofthedevelopmentof preschool children.

Donations

Atale Estate employees made a donation of milkpowdertoCancerHospital,MaharagamathroughVen.Kumbukthotuwa Seelawanse Thero of Ancient SthreePuraTemple,Holombuwa.

Blood Donation Campaign

Estate employees were encouraged to donate bloodand accordingly the workers actively participated in aprogrammeheldatPindeniyaNationalSchoolorganizedbyPindeniyaPoliceStation.

Estate Village Integration

Athreehoursessiononpositivebehaviors,values,goodhabits,illeffectsofdrugabuseetc.,wereconductedby



48

Assistance for Higher Studies

The Company continues to assist the children of theemployees who pursue higher studies in the NationalUniversities.Afixedmonthly scholarship is awarded toall beneficiaries throughout the period of their highereducation.Severalchildrenhavebeenbenefitedbythisschemeandthosewhohavecompletedtheirstudiesaregainfullyemployedatpresent.

Current Scholarship holders

W.D.MRathnayakeL.K.RKumariP.W.N.LGunawardhanaR.A.J.TRanasingheK.S SamarapalaR.I.PHarischandraN.L.A.K.WBandaraA.Y.VGunasiriS.P.M.SSenakaR.P.S.SRajarathnaR.IRasaliWeerasekaraK.A.U.SKodisingheL.P.CKanchanaH.G.O.NMunasingheK.P.I.PGunarathnaK.R.S.SPathiranaGanesanSarojani

Sustainable Procurement Practices

In the current competitive context, theCompanies aremoving towards the sustainable practices in order tosurvive and achieve a growth. Accordingly, each andevery activity of the Company should align with theconceptofsustainability if theCompany isplanning tobeoutstanding in the industry.HencesuchsustainablepracticesareconsideredasdriverofvaluecreationnotonlyfortheCompanybutalsofortheotherstakeholdersand also for the society at large. The procurementpractice is such area that needs sustainable approach.Accordingly,thesustainableprocurementpracticeshavebecomeprominenceinthevaluecreationofthecurrentcompetitivecontext.

As a socially responsibleCompany,wealways attemptto carry on our business activities in a sustainablemanner.Accordingly,wefocusnotonlyonthe internaloperations of the Company but also on the activitiesrelated to the inbound and outbound logistics. HencetheCompany is highly keenonmaintaining close andmutually beneficial relationships with our supplier.Maintainingsuchrelationshipswithsupplierswillenablethe Company to effectively manage the economic,socialandenvironmentalimpacts.Accordingly,asapartof the Company’s sustainable procurement practices,we always encourageour supply chain toprocure therequired items locally if the required items are locally available. Accordingly, such local procurements willstimulate thewellbeingof those local suppliers in onehand which represents the contribution to the societyfromtheCompany.OntheotherhandsuchpracticehelptheCompanydevelopandmaintainmutuallybeneficialrelationships with the local community which is essential forthesuccessoftheoperationsoftheCompany.

On the other hand, our factories process boththe agricultural produce of our estates as well asthe bought produce from the small holders. Suchprocurementpractices leads towards thedevelopmentandthewellbeingofthelocalcommunityensuringthesustainablerelationshipsbetweentheCompanyandthelocal community.

Accordingly, following these sustainable procurementpracticeswillenabletheCompanytoachieveasustainablegrowth and ultimately achieve the predeterminedobjectivesoftheCompany.

Industrial Relations & Collective Agreements

As a socially responsible Company, we are alwayskeen on maintaining mutually beneficial relationshipswith our employees. The Company is operating onthe principle that “we cannot satisfy our customerswithout satisfied employees”. Therefore the Companyadoptsaproactiveapproachinrelationtotheindustrialrelations.Accordingly,theCompanyattemptstoprovidevalue to its employees in various aspects which areessentialforbuildingandmaintaininghealthyindustrialrelations. Company establishes its policies with regardto employees through the collective agreements. Ouremployeesbelongtoworkerandstafftradeunions.Theestateworkers are covered by a collective agreement.These collective agreements are subject to revisionperiodically.



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TheCompanyhasmadeprovision forbenefitssuchasresidence, crèches, hospitals, preschools, schools and other welfare facilities.

The Company provides value to employees in mostaspects of their lives as part of the discharging of theresponsibilityoftheCompanytowardsthesociety.

Accordingly, there are nomaterial issues in relation totheemployeeandindustrialrelationsoftheCompany.

Product Responsibility

KegallePlantationsPLCasadiversifiedCompanyintheareasof tea, rubber and coconuts is alwaysdedicatedtoquality.EachandeveryactivitywithintheCompanycontext iscarriedoutwiththefocusonquality.Duetothisdedicatedpracticeonquality,wehavebeenabletoestablish adistinct image in themarket related toourproductquality. Inorder tomaintainandenhance thisrecognitioninthemarketplace,weconstantlycarryonmakinginnovativereformswithintheCompanycontextwhichisrequiredtoensurethesustainabledevelopment.As a practice, we always attempt to make minorimprovementsineveryaspectoftheCompanyandwestronglybelieveintheconceptthatachieving1percentimprovementineveryaspectisbetterthanachieving100percentimprovementinoneaspect.Accordingly,wearedriventomakecontinuousimprovementthroughouttheCompanyandtoachievezerodefectsineachandeveryactivitytheCompanyisinvolved.

Asamovetowardstheachievementoftheseinspirations,we regularly conduct employee training program toensure that the employees are well capable enoughofdischarging their responsibility toensure thequalityof products. The training information of employees isdisclosed in the chapter, “Skill Development – EstateEmployees”.

Also the Company has successfully initiated a biolatex project in order to reduce the use of chemicals,stimulators and inorganic fertilizers in order to ensurethattheCompanyiscomplyingwiththefocusonquality.In addition to above moves, Company is closelyinteracting with the following organizations and hasachieved themembership of those organizations with

theviewofimprovingquality.

● TheColomboTeaTradersAssociation(CTTA)● ThePlantersAssociationofCeylon(PA)● TheEmployer’sFederationofCeylon(EFC)● TheColomboRubberTradersAssociation(CRTA)● PlantationHumanDevelopmentTrust(PHDT)● TheRubberResearchInstituteofSriLanka(RRISL)● RubberDevelopmentDepartment(RDD)● SriLankaTeaBoard(SLTB)

Additionally we have been able to obtain followingcertificatesandthesecertificatesprovideanindependentthird party assurance on the quality of the products and theoperationsoftheCompany.

EU & USDA _ NOP Certification (European Union &NationalOrganic Program (NOP) of the United StatesDepartmentofAgriculture).

ISO 9001 : 2015 System Certification – QualityManagement System Certification for all RubberManufacturingFactoriesoftheCompany.

Product Labeling

AsaCompanyresponsibleforwhatwedo,weundertakeallthelabelingandpackagingactivitiesofourproductsin accordance with the standards and guidelinesimposedbyColomboTeaAuctionsandCeylonTeaTradeAssociation.ThislabelingrequiresEstateName,gardenmark,grade,invoicenumber,grossandnetweighttobeincludedinthelabel.Accordinglywehavecompliedwiththese requirements.

Ethical Behavior

The values embedded in the culture of the Companyalways emphasize the necessity of considering theappropriatenessofeachactivityweundertakeintermsofmoralprinciplesofgoodandbadbehavior.Accordingly,all the members of the Company are required andencouraged to be highly ethical in each and everyactivityandrelationship.Accordingly,theCompanyhasdevelopedaculturewhichseeks tocomplywithmoralprinciples beyond the general laws and regulationimposedbythebusiness.



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As a corporate citizen handling over 9,000 hectarehas major consideration on environment. The naturalForestcoverspreadthroughouttheislandwasreducedduringthecolonialperiodsbysubstitutingself-sufficientagricultural economy, dominating Tea, Rubber, andCoconutandspicecrops.Thiswastheturningpointofhighbiodiversityprevalentthroughouttheislandlimitingnaturalforestreservestoone-fifthoftheland.DiversifiedEcosystems are considered amajor contributor to thebalancedenvironmentalfoodchainandhavingpositiveeffectson all living creatures, includinghumanbeings.At present the diversity of this environmental subsegmentisstrugglingtosurviveduetoadversenaturaldevelopments aswell as the activities of the strongestcreature on the earth.

AsaresponsiblechainoftheEnvironmentalecosystemwe dedicate conserving the biodiversity around us byvarious programmes coveringWater, Forestry, Species,EcosystemManagementandcreatingProtectedAreas.

Bio Latex/Organic Rubber

AsaCompanywhoisseekingtosustainitsgrowth,abilityandstrength tounforeseeable future themanagementhas its own strategies to implement. As a part of theprogramme the Company has initiated to produceorganicrubbertoreducetheuseofchemicals,stimulatorsandinorganicfertilizers inbalancingtheecosystemoftheenvironment.Theprojecthasbeeninitiatedoneightestatescovering247hectare.Theestateshaveobtainedabout300,000kgofcropfromthesefields.Thesecropsare bought by the sister Company,M/s Richard PierisNaturalFoamsLtd;atacompetitiveprice.

Environmental Protection & Water Management

In the current globalization era, one of the mainchallengesfacedbythelivingbeingsistheconservationofwaterwhichisverymuchessentialforthesurvivaloftheworld.Duetomanymalpracticesofbusinessesandhuman kinds, sources of water become continuouslypollutedposingathreatonthesurvivaloflivingbeing.Recognizing this reality, we as a socially responsibleCompany are always keen on taking each and everypossible action with the view of preserving the watersourcesforfuturegenerations.

Theproductionenvironmentisenrichedwithresourcestobolsterthequalityofthefinalproduct.Intheproductionprocess of rubber the factories of our Company haveeffluenttreatmentplants,andeverydropofwaterusedin the production process is treated and adequately purifiedtoreducetheeffluentatanacceptablelevelaspertheenvironmentpolicy.

ENVIRONMENTAL SUSTAINABILITY

Sustainability Report | Environmental Sustainability Environmental Sustainability | Sustainability Report

(Organic Rubber Fields – Udapola)


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Certificates Obtained by Our Rubber Estates

Our Company possesses certificates from globallyrecognized organizations for organic agriculturalpracticesinrubberprocessingandqualitymaintenanceinmanufacturingprocess.Followingarethecertificatesobtained.

EU & USDA – NOP Certification (European Union &NationalOrganic Program (NOP) of the United StatesDepartmentofAgriculture).

● Scope – Organic production of agriculturalproducts.

ISO 9001: 2015 System Certification – QualityManagement System Certification for all RubberManufacturingFactoriesoftheCompany.

● Estatesobtained-AtaleEstate,PallegamaEstate,Parambe Estate, Udapola Centrifuged LatexProject.

● Scope-ProductionandSaleofSoleCrepe,PaleCrepe,BrownCrepeandCentrifugedLatex.

Timber & Forestry

As a plantation Company who depends on theenvironmentwehaveusedsignificantextentofnaturalforestry. The Company believes in their responsibilitytomaintain the environment and its living beings and

has paid its attention to protect same. Our Companymaintains170hectareasconservationforestryandoutofwhich145hectaresareintheDoteloyaEstatewhichissituatedinthetransitionareabetweendryandwetzoneinDolosbage.MoreoverCompanymaintains69hectareof forestry and140hectareofPinus andother timbermainlyintheUdapussellawaRegion.

Forestry Management and Soil Conservation

The Company’s forestry management plans forsustainable management of forest and harvestabletimber extents one states continued to be in force.Guidelines have been issued to the Superintendentspertaining to the selection of land, species, cultivationpractices and the need to preserve the environment,having in mind the need to protect the environment.Plantingofdendroidthermalforestryonverysteeporinaccessible land has been prohibited. As a Companyengaged in Plantation, we are deeply involved inforestry conservation. The Company manages rubberplantationsinanextentof5,400hectaresitselfisinfactaforestcover.Riversandstreambanksinconservationforestryareinperpetuity.Thesameprincipleappliestosources of water for industrial and domestic purposes. We are conscious of the importance of preventing

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accidentalordeliberateforestfireandextremevigilanceis being exercised. Soil conservation methods, suchas proliferation of leguminous cover crops, terracingincluding “live terraces” and draining have beenundertakeninallextentsreplantedandinotherareasonanannualbasis.

Compost Project

Otherthanthesoilconservationmethodandbio latexprojecttheCompanyfurtherextendeditscontributiontotheenvironmentbyusingcompostmanure.AcompostingprojectwasinitiatedatLuckylandEstate,UdapussellawawiththeobjectivetoIncreasecropproductivity,improvesoilfertility,andreducechemicalfertilizerimportsinlongterm,andtocultivategreenmanurecropsinshortterm.

Harvesting TimberAll operations including felling, clearing, extraction &transportation of timber is undertaken in conformityto the environmental standards stipulated under theNational Environmental Act with all precautionarymeasures planned out to minimize soil erosion andrunoff fluctuation of the ground water table. It is alsomandatory on the part of the Company to replantthe harvested extents almost immediately during thesucceedingmonsoon, in addition to theestablishmentof conservation forest extents in vulnerable areas.The Inter-Ministerial Committee under the patronageof the Minister of Plantation Industries together withthe Conservator of Forests regulates all forms of treeharvesting on estates. Clear felling of trees in extentsexceeding2hectares,fellingofwindbeltsoranyformoffellingoftreesincatchmentareasorinlandswithhighgradientsaretotallyavoided.

OurestatesspreadoverthewetzonecoveringKegalle,Kurunagala and Badulla districts with ample annualaveragerainfallof2,500mm.MostofourrubberestatesinKegalle,wedgedinbetweenthecentralhighlandsandwesternsouthernplanesvaryinginheightfrom500feetabovesea level to1,000 feet.Other thanthebeautifulDoteloya teaestate,our teaplantationsaresituated intheUdapussellawa region, of theUvaProvinceon theeasternslopesofthehillcountry.Thisregionisfamousfor endemic and rare wildlife and plant species with the HakgallaStrictNaturalReserve,providingevidenceastohowourestateareasaresensitivetobiodiversity.As an estate Doteloya has the highest conservationforestry area amounting 145.48 hectare fortifying the

Compost Project in Progress Luckyland Estate

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safetyandability ingrowing for faunaandflora. It isalsooneofestateswhicharehavingbestbiodiversityhotspots.Doteloya is located incirca2,750 feetabovethesea levelamong the Dolosbage hills with immense eye catchingsceneriescoveringanareaofabout400kmbetweenKegalle,Yatiyantota,NawalapitiyaandGampola.Theestateincludesre-growth forest areas, largely in the form of abandonedcardamom cultivation. These areas act as importantsupplementary and/or additional habitats for native forestspecies,andserveashabitatcorridorsbetweenthepatchesof remnant old-growth forest on the estate and in thesurroundingarea.

The area is a best place to secure endangered speciesand mother land for several endemic species. The birdswhichcanbefoundverycommonareSriLankaSpurfowl(Galloperdixbicalcarata), Sri LankaChestnutbackedOwlet(Glaucidium castanonotum), Sri Lanka Hanging Parrot(Loriculusberyllinus),SriLankaMyna(Graculaptilogenys),SriLankaGreyHornbill(Ocycerosgingalensis),SriLankaScimitarBabbler (Pomatorhinus melanurus), Sri Lanka Junglefowl(Gallus lafayetii), Sri Lanka Spot-winged Thrush (Zootheraspiloptera),TheSri LankaOrange-billedBabbler (Turdoidesrufescens)andSriLankaMagpie(Urocissaornata).

Environmental Sustainability | Sustainability Report

Educating employees on importance of environment conservation

The Central Environment Authority, Kegalle conductedan awareness program to educate employees on theimportanceofenvironmentconservation.

Utilization of Material

In the manufacturing process in the factories of theCompany,varioustypesofmaterialsareuseddependingonthenatureoftheproductsbeingmanufactured.Therespectivequantitiesofmaterialsusedintheprocessofmanufacturinghavebeendepictedbelow.

Material Item 2016/17 2015/16

GreenLeaf(Kg) 10,159,482 11,127,076

Utilization of Energy

As a Company which is having operations in theareas of cultivation and processing of tea, rubber andcoconuts,wearerequiredtoutilizeenergyfromvarioussources incomparatively largevolumes.However,asawayofminimizingboth the costof theCompanyandalso the adverse impact on the environment due toenergyutilization,weareconstantlyconcernedwiththeamountofenergyutilizedincomparisontotheoutput.Accordingly, as a measure towards the sustainabledevelopment,wepromoteaculturewhichencouragesouremployeestoutilizeenergy inanefficientmanner.Ontheotherhand,weareintheprocessofscrutinizingthe information related to energy utilization to ensuretheefficientuseofenergy.

Energy Source 2016/17 2015/16

ElectricityUnitsConsumed 2,638,411 2,898,347ExpenditureonElectricity(Rs.‘000)

45,914 50,538


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ISO 9001:2015 System Certification

Kegalle Plantations PLC established a new record bybecoming the first Regional Plantation Company toobtainISO9001:2015CertificationinSeptember,2016and Four Rubber Factories namely Atale, Pallegama,ParambeandUdapolahavebeencertified.

Annual Report Award

Identifying the responsibility and undergoing self-compliance to its corporate ethics. Kegalle PlantationsPLCperformsitsmaximumeffortoncomplyingwithlawsandregulations.Thecertificateofcompliancehasbeenawarded by the Institute of Chartered Accountants toKegallePlantationsPLCfortheAnnualReportoftheyear2015/16atthe52ndAnnualReportAwardsCeremony.

OUR ACHIEVEMENTS

Industrial Excellence Awards – 2016

KegallePlantationsPLC’sAtaleEstatewastheGoldAwardWinnerofthe“IndustrialExcellenceAward2016”forthesecond consecutive year and the Award presentationwas held at Waters Edge on 16th November, 2016underthedistinguishedpatronageofHisExcellencythePresidentofSriLanka,Hon.MaithripalaSirisena.ThiswasconductedbySriLankaChamberforSmallandMediumIndustries.

Entrepreneur of the year Award 2016Kegalle – Business Excellence Award

KegallePlantationsPLC’sAtaleEstateclinchedthesecondpositionunderExtraLargeCategoryformanufactureinSabaragamuwaProvince.

Sustainability Report| Our Achievements Our Achievements | Sustainability Report

Mr Sriyan Eriyagama, Acting CEO of KPL accepting the ISO 9001 : 2015

System Certification from SGS Lanka


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Recieving the award - Enterpreneur of the year 2nd place - from Hon. Ranil

Wickramasinghe, Prime Minister

24th NCE Export Awards – 2016

KegallePlantationsPLCwaspresentedtheSilverAwardintheSmallCategoryunderAgriculturebulk–RubberProducts sub, for Sole Crepe Factory on Atale Estate,whichisanachievementbyanestateforthefirsttimeintheHistory,obtainedatNCEExportAwards.ThiswasinrecognitionoftheExportperformanceintheyear2015.

SLCBCC Business Star Awards – 2016

Silver Star Award

Sri Lanka – China Business Co-operation Council(SLCBCC)conductsAnnualAwardscompetitionamongcompaniesthatundertakeexportstoChina.AtaleEstateofKegallePlantationsPLCwonthePrestigiousSilverStarAwardunderLargeCategorymanufacturingSector forthesecondconsecutiveyear in recognitionofBusinessachievements.

National Energy Efficiency Awards - 2016

KegallePlantationsPLC’sAtaleEstate,SoleCrepeRubberFactory won the merit award under manufacturingSector – Small Scale Category at the National EnergyEfficiencyAwards.

ThisisthefirsttimeinSriLankanHistoryanestatehaswon an award at National Energy Efficiency awardsconducted by Sri Lanka Sustainable Energy AuthorityundertheMinistryofPowerandRenewableEnergy.

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GENERAL STANDARD DISCLOSURES

GRI Indicator

DescriptionPage Reference

Page No.

External Assurance

STRATEGY AND ANALYSIS

G4-1 Statementfromthemostseniordecisionmakerfromtheorganization ChairmanReview 09 No

ORGANIZATIONAL PROFILE

G4-3 Reportthenameoftheorganization CorporateInformation B.I.C.* No

G4-4 Reporttheprimarybrands,products,andservices OperatingEnvironment 16 No

G4-5 Reportthelocationoftheorganization’sheadquarters CorporateInformation B.I.C.* No

G4-6 Report thenumberofcountrieswhere theorganizationoperates,andnamesofcountrieswhereeithertheorganizationhassignificantoperationsorthatarespecificallyrelevanttothesustainabilitytopicscoveredinthereport

OurEstates-Locations 12 No

G4-7 Reportthenatureofownershipandlegalform CorporateInformation B.I.C.* No

G4-8 Reportthemarketsserved OperatingEnvironment 16 No

G4-9 Reportthescaleoftheorganization FinancialHighlights 07 No

G4-10 Totalworkforcebyemploymenttype,employmentcontractandregionbrokendownbygender

EmploymentStrength 65 No

G4-11 Report the percentage of total employees covered by collective bargainingagreements

IndustrialRelations&CollectiveAgreements

48 No

G4-12 Describetheorganization’ssupplychain SustainableProcurement Practices

48 No

G4-13 Significant changes during the reporting period regarding the organization’ssize,structure&ownership

Milestones/Chairman’sReview

06/09 No

G4-14 Reportwhetherandhowtheprecautionaryapproachorprincipleisaddressedbytheorganization

RiskManagement 73 No

G4-15 Listexternallydevelopedeconomic,environmentalandsocialcharters,principles,orotherinitiativestowhichtheorganizationsubscribesorwhichitendorses

EnvironmentalSustainability

50 No

G4-16 Memberships in associations (such as industry associations) and national orinternationaladvocacyorganizations

ProductResponsibility 48 No

IDENTIFIED MATERIAL ASPECTS & BOUNDARIES

G4-17 Organisation’sentitiescoveredbythereport IdentifiedMaterialAspects&Boundaries

37 No

G4-18 Processfordefiningthereportcontent IdentifiedMaterialAspects&Boundaries

37 No

G4-19 ListallthematerialAspectsidentifiedintheprocessfordefiningreportcontent IdentifiedMaterialAspects&Boundaries

37 No

G4-20 ForeachmaterialAspect,reporttheAspectBoundarywithintheorganization IdentifiedMaterialAspects&Boundaries

37 No

G4-21 AspectBoundaryforeachmaterialaspectreportoutsidetheorganization IdentifiedMaterialAspects&Boundaries

37 No

G4-22 Report the effect of any restatements of information provided in previousreports, and the reasons for such restatements

NotestoFinancialStatements

133 No

G4-23 Significant changes fromprevious reportingperiods in theScopeandAspectBoundaries

FirstTimeAdoption - -

Stakeholder Engagement

G4-24 Providealistofstakeholdergroupsengagedbytheorganization OurStakeholders 40 No

G4-25 Report thebasis for identification and selectionof stakeholderswithwhom toengage

OurStakeholders 40 No

Sustainability Report | GRI Content Index GRI Content Index | Sustainability Report

*BackInnerCover

GRI CONTENT INDEX : “In accordance” - Core


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G4-26 Approachtostakeholderengagement, includingfrequencyofengagementbytypeandbystakeholdergroup


G4-27 Keytopicsandconcernsthathavebeenraisedthroughstakeholderengagement,andhowtheorganizationhasrespondedtothosekeytopicsandconcerns


Report Profile

G4-28 Reportingperiod IntroductiontotheReport

04 No

G4-29 Dateofmostrecentpreviousreport FinancialCalendar 14 No

G4-30 Reportingcycle IntroductiontotheReport

04 No

G4-31 Contactpointforquestionsregardingthereportoritscontents IntroductiontotheReport

04 No

G4-32 ‘Inaccordance’optiontheorganizationhaschosen&GRIContentIndexforthechosen option

IntroductiontotheReport

04 No

G4-33 Policyandcurrentpracticeswith regard to seekingexternalassurance for theReport

IntroductiontotheReport

04 No

Governance

G4-34 GovernanceStrucureoftheOrganisation, includingcommitteesofthehighestgovernancebody

CorporateGovernance 66 No

Ethics & Integrity

G4-56 Organization’svalues,principles,standardsandnormsofbehaviorsuchascodesof conduct and codes of ethics

EthicalBehaviour 49 No

STANDARD SPECIFIC DISCLOSURES

Category : Economic

Material Aspect : Economic Performance

G4-DMA GenericdisclosureonEconomicperformance FinancialReview 29 No

G4-EC1 Directeconomicvaluegeneratedanddistributed Statement of Valued Added

43 No

G4-EC2 Financial implications andother risks andopportunities for theorganization’sactivitiesduetoclimatechange

RiskManagement 73 No

G4-EC3 Coverageoftheorganization’sdefinedbenefitplanobligations NotestotheFinancialStatements

128 No

G4-EC4 Financialassistancereceivedfromgovernment NotestotheFinancialStatements

129 No

Material Aspect : Market Presence

G4-DMA Generaldisclosuresonmarketpresence EmployeeStrength 65 No

G4-EC5 Ratiosofstandardentrylevelwagebygendercomparedtolocalminimumwageatsignificantlocationsofoperation

NotReported - -

Material Aspect : Indirect Economic Impacts

G4-DMA GeneralDisclosuresonIndirecteconomicimpacts IndustrialRelations&CollectiveAgreements

48 No

G4-EC7 Developmentandimpactofinfrastructureinvestmentsandservicessupported Employees’Health&Welfare

44 No

G4-EC8 Significantindirecteconomicimpacts,includingtheextentofimpacts RiskManagement 73 No

Material Aspect : Procurement Practice

G4-DMA GeneralDisclosuresonprocurementpractices SustainableProcurement Practices

48 No

G4-EC9 Proportionofspendingonlocalsuppliersatsignificantlocationsofoperation NotReported - -

GENERAL STANDARD DISCLOSURES

GRI Indicator

Description Page Reference Page No.

E x t e r n a l Assurance

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Category : Environment

Material Aspect : Material

G4-DMA GeneralDisclosuresonMaterial EnvironmentalSustainability

50 No

G4-EN1 Totalweightorvolumeofmaterialsthatareusedtoproduceandpackagetheorganization’sprimaryproductsandservicesduringthereportingperiod

UtilizationofMaterial 53 No

G4-EN2 Percentageofmaterialsusedthatarerecycledinputmaterials Not reported - -

MATERIAL ASPECT: ENERGY

G4-DMA GeneralDisclosuresonenergy UtilizationofEnergy 53 No

G4-EN3 Energyconsumptionwithintheorganization UtilizationofEnergy 53 No

G4-EN6 Reductionofenergyconsumption UtilizationofEnergy 53 No

Material Aspect : Water

G4-DMA GeneralDisclosuresonwater EnvironmentalProtection&WaterManagement

50 No

G4-EN8 Totalwaterwithdrawalbysource Not reported - -

Material Aspect : Biodiversity

G4-DMA GeneralDisclosuresonBiodiversity ForestryManagement&SoilConservation

51 No

G4-EN11 Operational sitesowned, leased,managed in,oradjacent to,protectedareasandareasofhighbiodiversityvalueoutsideprotectedareas

ForestryManagement&SoilConservation

51 No

G4-EN12 Description of significant impacts of activities, products, and services onbiodiversity in protected areas and areas of high biodiveraity value outsideprotected areas

ForestryManagement&SoilConservation

51 No

Maerial Aspect : Emission

G4-DMA GeneralDisclosuresonEmissions NotReported - -

G4-EN15 Directgreenhousegas(GHG)emissions(Scope1) NotReported - -

Material Aspect : Products and Services

G4-DMA GeneralDisclosuresonProducts&Services ProdcutResponsibilty/ProductLabeling

48/49 No

G4-EN27 Extentofimpactmitigationofenvironmentalimpactsofproductsandservices EnvironmentalSustainability

50 No

Material Aspect : Compliance

G4-DMA GeneralDisclosuresonCompliance IntroductiontoReport/EthicalBehavior

04/49 No

G4-EN29 Monetaryvalueofsignificantfinesandtotalnumberofnonmonetarysanctionsfornon-compliancewithenvironmentallawsandregulations

No suh incidents occurred.

- -

Material Aspect : Overall

G4-DMA GeneralDisclosures EnvironmentalSustainability

50 No

G4-EN31 Totalenvironmentalprotectionexpendituresandinvestmentsbytype Not reported - -

Material Aspect : Employment

G4-DMA GeneralDisclosuresonEmployment EmployeeStrength 65 No

G4-LA1 Totalnumberandratesofnewemployeehiresandemployeeturnoverbyagegroup,genderandregion

EmployeeStrength 65 No

Material Aspect : Labor / Management Relations

G4-DMA GeneralDisclosuresonLabour/ManagementRelations IndustrialRelations&CollectiveAgreements

48 No


GRI Indicator



Sustainability Report | GRI Content Index GRI Content Index | Sustainability Report


59

G4-LA4 Minimum notice periods regarding operational changes, including whetherthesearespecifiedincollectiveagreements

Not reported - -

Material Aspect : Occupational Health & Safety

G4-DMA GeneralDisclosuresonOccupationalHealth&Safety Employees’Health&Welfare

44 No

G4-LA5 Percentageoftotalworkforcerepresentedinformal jointmanagement-workerhealth and safety committees that helpmonitor and advise on occupationalhealthandsafteyprograms

Not reported - -

Material Aspect : Training & Education

G4-DMA GeneralDisclosuresonTraining&Education SkillDevelopment-EstateEmployees

44 No

G4-LA10 Programsforskillsmanagementandlifelonglearningthatsupportthecontinuedemployabilityofemployeesandassisttheminmanagingcareerendings

SkillDevelopment-EstateEmployees

44 No

Material Aspect : Diversity & Equal Opportunity

G4-DMA GeneralDisclosuresonDiversity&EqualOpportunity Employees&TradeUnions

41 No

G4-LA12 Compositionofgovernancebodiesandbreakdownofemployeesperemployeecategory according to gender, age group, minority group membership, andotherindicatorsofdiversity

NotReported - -

Material Aspect : Equal Remuneration for Women & Men

G4-DMA GeneralDisclosuresonEqualRemunerationforWomen&Men OperatingEnvironment 16 No

G4-LA13 Ratioofbasicsalaryandremunerationofwomentomenbyemployeecategory,bysignificantlocationsofoperation

NotReported - -

Sub Category : Human Rights

Material Aspect : Non-Discrimination

G4-DMA GeneralDisclosuresonNonDiscrimination Employees&TradeUnions

41 No

G4-HR3 Totalnumberofincidentsofdiscriminationandcorrectiveactionstaken No incidents were reported

- No

Material Aspect : Freedom of Associations & Colective Bargaining

G4-DMA GeneralDisclosuresonFreedomofAssociation&CollectiveBargaining IndustrialRelations&CollectiveAgreements

48 No

G4-HR4 Operations and suppliers identified inwhich the right to exercise freedomofassociationandcollectivebargainingmaybeviolatedoratsignificantrisk,andmeasurestakentosupporttheserights

IndustrialRelations&CollectiveAgreements

48 No

Material Aspect : Child Labor

G4-DMA GeneralDisclosuresonChildLabor Nooperationshavingsignificantriskforincidentsofchildlabor

- No

G4-HR5 Operationsandsuppliersidentifiedashavingsignificantriskforincidentsofchildlabor,andmeasurestakentocontributetotheeffectiveabolitionofchildlabor

Nooperationshavingsignificantriskforincidentsofchildlabor

- No

Material Aspect : Indigenous Rights

G4-DMA GeneralDisclosuresonIndigenousRights NotApplicable - -

G4-HR8 Total numberof incidents of violations involving rights of indigenouspeoplesandactionstaken

NotApplicable - -

Material Aspect : Local Communities

G4-DMA GeneralDisclosuresonLocalCommunities SoicialWelfareActivities 45 No


GRI Indicator



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60

G4-SO1 Percentage of operations with implemented local community engagement,impactassessments,anddevelopmentprograms

NotReported - -

Material Aspect : Public Policy

G4-DMA GeneralDisclosuresonPublicPolicy NotReported - -

G4-SO6 Totalvalueofpoliticalcontributionsbycountryandrecipient/beneficiary NotReported - -

Material Aspect : Anti Competitive Behaviour

G4-DMA GeneralDisclosuresonAnti-CompetitorBehaviour NoincidentsReported - No

G4-SO7 Total number of legal actions for anti-competitive behaviour, antitrust, andmonopoly practices and their outcomes

NoincidentsReported - No


G4-DMA GeneralDisclosuresonCompliance IntroductiontotheReport/EthicalBehaviour

04/49 No

G4-SO8 Monetaryvalueofsignificantfinesandtotalnumberofnonmonetarysanctionsfornon-compliancewithlawsandregulations

NoincidentsReported - No

Material Aspects : Supplier Assessment for Impacts on Society

G4-DMA GeneralDisclosuresonSupplierAssessmentforImpactsonSociety SustainableProcurement Practices

48 No

G4-SO9 Percentageof new suppliers thatwere screenedusing criteria for impactsonsociety

NotReported - -

Material Aspect : Grievance Mechanism for Impacts on the society

G4-DMA GeneralDisclosuresonGrievanceMechanismsforImpactsonSociety NotReported - -

G4-SO11 Numberofgrievancesaboutimpactsonsocietyfiled,addressed,andresolvedthroughformalgrievancemechanisms

NotReported - -

Sub Category : Product Responsibility

Material Aspect : Customer Health & Safety

G4-DMA GeneralDisclosuresonCustomerHealth&Safety ProductResponsibility - No

G4-PR2 Total number of incidents of non-compliance with regulations and voluntarycodesconcerningthehealthandsafetyimpactsofproductsandservicesduringtheirlifecycle,bytypeofoutcomes

No such incidents occurred

- No

Material Aspect : Product & Service Labeling

G4-DMA GeneralDisclosuresonProduct&ServiceLabeling ProductResponsibility 48 No

G4-PR3 Typeofproductandserviceinformationrequiredbytheorganization’sproceduresforproductandserviceinformationandlabelling,andpercentageofsignificantproductandservicecategoriessubjecttosuchinformationrequirements

ProductResponsibility 48 No

Material Aspect : Customer Privacy

G4-DMA GeneralDisclosuresonCustomerPrivacy No incident reported - No

G4-PR8 Total number of substantiated complaints regarding breaches of customerprivacyandlossesofcustomerdata

No incident reported - No


G4-DMA GeneralDisclosuresonCompliance No incident reported - No

G4-PR9 Monetaryvalueofsignificantfinesfornon-compliancewithlawsandregulationsconcerningtheprovisionanduseofproductsandservices

No incident reported - No


GRI Indicator



Sustainability Report | GRI Content Index GRI Report | Management Discussion & Analysis

Gov

ern

ance

Rev

iew


61GRI Report | Management Discussion & Analysis

Gov

ern

ance

Rev

iew

Board of Directors ...................................... 62Management Team .................................... 64Corporate Governance .............................. 66Report of the Audit Committee ................... 69Report of the Remuneration Committee ...... 71Report of the Related Party Transactions Review Committee .................. 72Risk Management ...................................... 73

Mature Stage

Having gone through the immature phase on the03rd year Palm start producing economical cropsrecording 3.5 – 4 tons of Fresh Fruit Bunches peryearperhectare.Theharvestingroundsarespreadbetween 10 – 15 days interval and approximately30 rounds harvesting is possible per year. Theharvesterselectonlythewellripebunchesonvisualobservation of the colour and lose sockets of thebunch. A bunch is weighing in the first year of itsharvestaround5–6kilos.

The ripeness is importantas theoilquality andoilyieldisdirectlyrelatedtotheripenessofthebunch.Thiscultivationwithastandofover110Palmsperhectarehasapotentialofgiving25tonsofFFB(freshfruitbunches)or06tonsofPalmOilperhectareatitspeakorinthe10thyearaftertheplanting.

Tra

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he T

rad

itio

n...


Contents


62

HecurrentlyholdsthepositionofManagingDirectorofthePlantationsSectoroftheRichardPierisGroupandisaDirectorofKegallePlantationsPLC,NamunukulaPlantationsPLCandMaskeliyaPlantationsPLC.HehasoverthreedecadesofexperienceinthePlantationIndustry,havingcommencedhiscareer

asanAssistantSuperintendentandthereafterservedasSuperintendentuptothetimehejoinedthecorporatemanagementofKegallePlantationsPLCin1998.

HeisthecurrentChairmanofthePlanters’AssociationofCeylonandtheColomboRubberTraders’Association.HeisalsoaDirectorofRichardPierisNaturalFoamsLtd.,ExoticHorticulture(Pvt)Ltd.,AENOilPalmProcessing(Pvt)Ltd.,andamemberoftheBoardsofDirectorsoftheSriLankaTeaBoardandRubberResearchBoard.HealsoservesasaCouncilMemberoftheCeylonChamberofCommerce,theAdvisoryCommitteeonRubber&PlasticsSectoroftheExportDevelopmentBoardandtheExecutiveCommitteeofTheSriLankaSocietyofRubber Industry.HealsoservesontheWagesBoardsfortheRubberGrowingandManufacturingTrade,CoconutGrowingTrade,Cocoa,Cardamom&PepperGrowing&ManufacturingTrade.

Prof.Nugawela joined theRubberResearch Institute in thecapacityofanAssistantBotanist in1980.HewasawardedaColomboPlanScholarshipin1981toreadforhisMastersDegreeandin1982hesuccessfullycompleteditinthefieldofAppliedPlantSciencesattheUniversityofLondon.Hehasextensive

experienceover30yearsinthecapacitiesofaBotanist,HeadofPlantScienceDepartment,DeputyDirectorResearch(Biology)andasaDirectorattheRubberResearchInstitute.InJanuary2011,Prof.NugawelaresignedfromthepostofDirectorofRubberResearchInstitutetoassumedutiesasaProfessorintheDepartmentofPlantationManagement,WayambaUniversityofSriLanka.

In1985hewasofferedascholarshipbytheFoodandAgriculturalOrganizationoftheUnitedNationstoobtainhisprofessionalqualifications.ForhisresearchworkonPlantPhysiologyandBioProductivityinHeveabrasiliensis(thenaturalrubberplant)hewasawardedaPhDfromtheUniversityofEssex,UKin1989.

Histhrustareasofresearchanddevelopmentwereonnurseryandplantingpractices,exploitation,useofyieldstimulantsandrainguards.Hehasmorethan130publicationsinbothlocalandforeignresearchjournalsandhasaddressedmanylocalandinternationalconferencesonnaturalrubber.ForhisResearchandDevelopmentworkhehaswonaNationalScienceandTechnologyAwardin2009andthePresidentialAwardforinventionsinthecategoryofenvironmentin2012.FurtherhehasalsobeenawardedwithPresidentialAwardsforhisresearchpublicationsinreputedinternationaljournals.

Prof.NugawelawasappointedtotheBoardofKegallePlantationsPLCwitheffectfrom26May2008.

Dr. Sena Yaddehige is a Sri Lankan born British Scientist/Engineer and a Swiss based industrialist.Dr. Yaddehige is the Chairman of the Richard Pieris Group of Companies comprising seven ListedCompanies,includingthreePlantationCompanies,andover50Companieswhollyormajorityowned

byRichardPierisandCompanyPLC.HeservedasaDirectorintheBoardofDirectorsofNationalDevelopmentBankPLCduringtheperiodbetween2007and2010.

Dr. Yaddehige is a brilliant scientist and a high energy radiation specialist who innovated and developed contactless sensortechnology,drivebywiresystemsandmadenumerousinventionsinradiationprocessingforwhichheholdsworldwidepatents. Inadditionhealsoholds thepatent for slow release fertilizer inSriLanka.

He is a Founder, Chairman andDirector of numerousCompanies in Sri Lanka, USA, Japan, UK,Germany, SwitzerlandandSingapore.He is also the foundingManagingDirectorof aEuropeanCompany,whichmanufacturesandexportsautomotivecomponentsandsystems,developedbasedonhisowninnovations,toEurope,Japan,ChinaandtheUnitedStates.

Dr.YaddehigewasconferredwithDoctorofScience(D.Sc.) inconsiderationofhisoriginal researchworkinthefieldsofRadiation,Radiationprocessing,ElectromechanicalSensortechnology,noncontactsensortechnologyandautomotivepedalsystemsalongwithnumerouspatentsintheabovefields.

Governance Review | Board of Directors Board of Directors Board of Directors Board of Directors | Governance Review

BOARD OF DIRECTORS


63

Dr.SSBDGJayawardenaobtainedhisB.Sc.DegreeonAgriculturewithHonoursfromUniversityofCeylon.HisM.Sc.isonAgronomywasobtainedinKyoto,andhisPh.D.onAgronomy&PhysiologyfromUniversityofKyoto.

Dr.JayawardenacurrentlyservesasthechairmanoftheSriLankaCouncilforAgriculturalResearchPolicyandadvisortotheHon.MinisterofAgriculture.HehasservedtheDepartmentofAgricultureover03decadesandretiredastheDirectorGeneraloftheAgriculture.AfterretirementhehasservedtheplantationsectorasDirectorofTeaResearchInstitute,ChairmanofTeaResearchBoard,ChairmanofCoconutResearchBoardandadvisortotheMinisterofPlantationIndustry.HehasalsoservedasamemberofmanytaskforcesappointedbythegovernmentofSriLankaandcontinuestoserveasmemberoftheNationalSalariesandCadreCommission.In2010hewasappointedasadirectortotheBoardofDirectorsofKegallePlantationsPLC.

Inaddition to theabove,Dr. Jayawardenawas theFAOrepresentative to theConsultativeGroupinInternationalAgricultureResearchandhasservedasaFAOConsultantinBio-diversityandJICAConsultanttotheGovernmentofGhanaonHorticultureSectorDevelopment.

Hehasover46yearsofprofessionalexperiencecoveringagricultural researchanddevelopmentactivities, human resource development, development of foreign funded projects, and directinvolvementinfoodsecurityandpovertyalleviationprogramsofthecountry.

HehasparticipatedinmanyInternationalConferencesrelatedtoagriculturedevelopment,researchmanagement,foodsecurity,bio-diversityandsustainableAgricultureinmanyCountriesintheworld.

Mr.ShamindaYaddehigehasbeenappointedtotheDirectorateofKegallePlantationsPLCwitheffectfrom1March2016asaNonExecutiveDirector.

Mr.YaddehigewaseducatedatCharterHouse,UnitedKingdomandgraduatedinChemicalEngineeringfromUniversityCollegeLondon.AfterestablishinghimselfinbusinessinEuropeandUSA,hefurthergraduatedinMasterofBusinessAdministrationatIEBusinessSchool,aglobaltop10rankedbusinessschool.

HeworkedasaManagementConsultantatPriceWaterhouseCoopers,UnitedKingdomandalsoatworldrenownedInternationalUltraHighNetWorthbankinggiant,CreditSuisseofSwitzerland.Hehasanextensiveexperience in InternationalMarketingandhasbuiltaverystrongmarketingnetworkinEurope.

Mr.YaddehigeisintheDirectorateofRichardPieris&CompanyPLCasanExecutiveDirector/ChiefOperatingOfficeroftheCompanyandalso intheDirectoratesofRichardPierisExportsPLCandSubsidiaryCompaniesoftheRichardPierisGroup.

Board of Directors Board of Directors | Governance Review


64

MANAGEMENT TEAM

Senior Management

SSPoholiyadde – ManagingDirector Plantation SectorSriyanEriyagama – ActingChiefExecutiveOfficerSudheeraEpitakumbura –FinancialControllerISDoranegama – GeneralManager

Middle Management

TIKodithuwakku –AccountantRMSSHerath – Manager-InformationSystemsUPJayasinghe – AssistantManagerESDDPerera – CorporateManagerRMSSBRathnayake – CorporateManagerMaleehaAmit(Mrs.) – AdministrationExecutiveLGMadhusankha – AssistantAccountantNHSKMunasinghe(Mrs.)– AccountsExecutiveWPADeAlwis –ManagementTraineeLTPMadhusankha –ManagementTraineeWMTCWeerakoon – JuniorExecutive

Estate Managers & Others

Allagolla Estate – Udapussellawa

BPDMahesh – Superintendent

Ambadeniya Estate – Aranayake

ASdeWijethunge – SuperintendentMRVaidyakularatne –AssistantSuperintendent

Atale Estate – Atale GLHDAmaratunga – SuperintendentNRBSenaratne – AssistantSuperintendentDWKKSeneviratne – AssistantSuperintendent

Doteloya Estate – Dolosbage

UKWanniarachchi – SuperintendentGMBSamaranayake – AssistantSuperintendent

Eadella Estate – Polgahawela

ACSMunaweera –SuperintendentCAJayaratne – AssistantSuperintendentHMLCWarakaulle –AssistantSuperintendent

Etana Estate – Warakapola

S DMunasinghe – Superintendent

Gampaha Estate – Udapussellawa

VinodadeSilva – SuperintendentHMITGunarathne – AssistantSuperintendent

Hathbawe Estate – Rambukkana

MWLiyanasekera – Superintendent

Higgoda Estate – Undugoda

HSBAluvihare – Superintendent

Kirklees Estate – Udapussellawa

VSAthauda – SuperintendentRNGunasekera – AssistantSuperintendent

Luckyland Estate – Udapussellawa

SRAluwihare – SuperintendentDMABDewagiri –AssistantSuperintendentWLDTIssaac –AssistantSuperintendent

Madeniya Estate – Warakapola

BPSMCooray – Superintendent

Pallegama Estate – Niyadurupola

SAAPJayatilake – SuperintendentNAMOMNavaratne – AssistantSuperintendentWLSWeerarathne –AssistantSuperintendent

Parambe Estate – Undugoda

NDMadawala – SuperintendentAAMDVMediwake – AssistantSuperintendent

Udapola Estate – Polgahawela

URNBRanatunga – SuperintendentWLDananja –AssistantSuperintendent

Centrifuged Latex Project – Udapola Estate - Polgahawela

NBRanatunga – SuperintendentCNWickremasinghe – QualityControlOfficerMTSKrishantha – SeniorTechnicalAssistantKRSDWijethilake – TechnicalAssistantIMPDIllankoon – TechnicalAssistantCSRathnayake – JuniorFactoryExecutive Weniwella Estate – Alawwa

BMJAMoonamale – SuperintendentDSRJayasinghe –AssistantSuperintendent

Yataderiya Estate – Undugoda

DVMdeRunn – SuperintendentCSAluthge – AssistantSuperintendent

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65

Year Senior Management

MiddleManagement

EstateManagers&Executives

HeadOfficeStaff

EstateStaff Harvestors&Others

Total

2015/162016/17

44

1011

3638

912

341336

5,9455,465

6,3455,866

Categorization of Employees

Age Analysis - Executives Service Analysis - Executives

Service Analysis - Staff and WorkersAge Analysis - Staff and Workers

Executives - 53

Staff - 348

Workers - 5,465

21-30 Years - 28%, 15

31-40 Years - 25%, 13

Above 40 Years - 47%, 25

Below 5 Years - 36%, 19

Above 15 Years - 17%, 9

6 -15 Years - 47%, 25

Below 5 Years - 1,749

Above 15 Years - 2,109

6 -15 Years - 2,008

Below 20 Years - 17

21-30 Years - 565

31-40 Years - 1,570

Above 40 Years - 3,714

Employment Strength

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66

CORPORATE GOVERNANCE

ARPICOINSURANCE PLC


100%

79%

35% 40%

Parent

Associate

RPC PLANTATION MANAGEMENT SERVICES (PVT) LTD

RICHARD PIERISNATURAL FOAMS LTD

HAMEFA KEGALLE(PVT) LTD

100%

RICHARD PIERIS & COMPANY PLCUltimate Parent

RICHARD PIERIS PLANTATIONS (PVT) LTD100%

Subsidiary

The Board of Directors of Kegalle Plantations PLC iscommitted and takes responsibility to maintain thehigheststandardsofCorporateGovernance.

Kegalle Plantations PLC has designed its CorporateGovernance policies and practices to ensure thatthe Company is focused on its responsibilities to itsstakeholders and on creating long term shareholdervalue. The Company recognizes the interests of allits stakeholders including shareholders, employees,customers, suppliers, consumers and the other communitiesinwhichitoperates.TheCompanycomplieswiththerulesonCorporateGovernance,includedintheListingRulesof theColomboStockExchange,and theCompany is guided by the principles included in theCodeofBestPracticeonCorporateGovernanceissuedjointlybytheSecuritiesandExchangeCommissionofSriLankaandtheInstituteofCharteredAccountantsofSriLanka.ThisstatementsetsouttheCorporateGovernancepolicies,practicesandprocessesadoptedbytheBoard.

Group Structure

The Board of Directors

TheCompanyisgovernedbyitsBoardofDirectors,whodirects and supervises the business and affairs of theCompanyonbehalfoftheshareholders.

The Board comprises five Directors, of which two areExecutive Directors whilst three are Non-ExecutiveDirectors. Out of three Non-Executive Directors, twoare Independent, ensuring an independent outlook totemper the expediencyof the experts. Brief profilesoftheDirectorsaresetoutonpages62and63.TheBoardmakesanassessmentannuallyontheindependenceornon-independence of each Non-Executive Director incompliancewithlistingrules.

DuringtheyeartheBoardmetontwooccasions.Priortoeachmeeting,theDirectorsareprovidedwithallrelevantmanagement information and background materialrelevant to the agenda to enable informed decisions.

Board Papers are submitted in advance on Companyperformance, new investments, capital projects andother issues which require specific Board approval. Aseparate information memorandum is provided onstatutorypaymentsateachBoardMeeting.

TheChairmanisresponsibleformattersrelatingtopolicy,maintaining regular contact with the other Directors,shareholdersandexternalstakeholdersoftheCompany.He is responsible for overall commercial, operationalandstrategicdevelopmentandassistedbyanExecutiveManagementCommitteecomprisingExecutiveDirectorsandHeadsofCompaniesoftheStrategicBusinessUnits (SBU) of the Ultimate Parent Company. The Financefunctiondevolveson theGroupChief FinancialOfficerandtheFinancialController,whoispresentbyinvitation

atboardmeetingswhenfinancialmattersarediscussed.The Board of Directors has access to independentprofessionaladviceasandwhendeemednecessaryfordecisionmaking.

The main functions of the Board are to:

● DirectthebusinessandaffairsoftheCompany.● Formulate short and long term strategies, as a

basis for theoperational plans of theCompanyand monitor implementation.

● Reportontheirstewardshiptoshareholders.● Identify the principal risks of the business and

ensure adequate risk management systems inplace.

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67

Dr. Sena Yaddehige

Mr. S S Poholiyadde

Prof. R C W M R A Nugawela

Dr. S S B D G Jayawardena

Mr. Shaminda Yaddehige

● Ensure internal controls are adequate andeffective.

● Approvetheannualcapitalandoperatingbudgetsandreviewperformanceagainstbudgets.

● ApprovetheinterimandfinalFinancialStatementsoftheCompany.

● Determine and recommend interim and finaldividendsfortheapprovalofshareholders.

● Ensurecompliancewithlawsandregulations.● Sanction all material contracts, acquisitions or

disposalofassetsandapprovecapitalprojects.

All Independent Directors have no direct or indirectmaterial relationshipwith theCompanyandhavedulysubmitted the annual declaration as per theColomboStock Exchange Listing Rules. Their wide range ofexpertise and significant experience in commercial,corporateandfinancialactivitiesbringan independentviewandjudgmenttotheBoard.

Corporate Governance Structure

The Company’s Governance Framework is depicted inthefollowingdiagram.

Sub Committees of the Board

The Board is responsible for the establishment andfunctioningofallBoardCommittees,theappointmentofmemberstothesecommitteesandtheircompensation.TheBoardhasdelegatedresponsibilitiestothreeBoardSub Committees which operate within clearly definedterms of reference.

Audit Committee

KegallePlantationsPLCisoneoftheGroupCompaniesof the Richard Pieris & Company PLC. Richard Pieris &CompanyisalsothemajorityshareholderandassuchtheGroupAuditCommittee acts as theAuditCommitteeoftheCompany.AuditCommitteeReportonPage69to70describestheactivitiescarriedoutduringtheFinancialYear.

Remuneration Committee

TheReportoftheRemunerationCommitteeisonPage71andhighlightsitsmainactivities.

Related Party Transactions Review Committee

The Report of the Related Party Transactions ReviewCommitteeisonPage72andhighlightsitsmainactivities.

Appointment of Chief Executive Officer

Mr.SriyanEriyagamahasbeenappointedasActingChiefExecutiveOfficer of the Company with effect from 01January2017.Mr.EriyagamadoesnotholdanysharesintheCompanyasat31March2017.

Company Secretary

The Company Secretaries are Richard Pieris GroupServices (Pvt)LtdwhoactsasSecretaries to theBoardandmake theirpresenceateveryboardmeeting.TheCompanySecretariesadvisestheboardonallregulatorymatterspertainingtoSecurities&ExchangeCommission,ColomboStockExchange.TheSecretariesalso recordsminutes which are tabled for the next meeting foreffective follow-up on decisions taken. The directorshaveindependentaccesstotheCompanySecretary.TheSecretary shallbeappointedby theDirectors for suchterm, at such remuneration and upon such conditions as theymaythinkfit.

Relationship with Shareholders

The Board maintains healthy relationships with itskey shareholders (individual and institutional) whilemaintaining a dialogue with potential shareholdersas well. The Annual General Meetings are heldto communicate with the shareholders and their participationisencouraged.Apartfromthis,itsprincipalmethods of communication include the CorporateWebsite, the Annual Report, Quarterly FinancialStatements and press releases. Further telephonelines of the Company Secretaries is published in bothQuarterlyFinancialStatementsaswellas intheAnnual

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Report&theShareholdersareabletocontacttheSeniorManagementatanygiventime.

Internal Controls

The Board is responsible for instituting on effectiveinternal control system to safeguard the assets of theCompany and ensure that accurate and completerecordsaremaintainedfromwhichreliable informationisgenerated.Thesystemincludesallcontrols includingfinancial, operational and riskmanagement. StrategiesadoptedbytheCompanytomanageitsriskaresetoutinitsreportonRiskManagementonpages73-78.

Apart from the strategic plans covering a three yeartime horizon, a comprehensive budgetary process isin place,where annual budgets, identifying the criticalsuccess factors and functional objectives, preparedby the Company are, approved by the Board, at thecommencementofafinancialyear,anditsachievementmonitoredmonthly, throughacomprehensivemonthlymanagement reporting system. Clear criteria andbenchmarkshavealsobeensetoutfortheevaluationofcapitalprojectsandnewinvestments.

The Internal AuditDivision reporting to theChairman,regularlyevaluatestheinternalcontrolsystemacrosstheorganization and its findings are reviewed first by theAudit Committee and significant issues are thereafterreportedtotheBoard.TheBoardreviewedtheinternalcontrolprocedures inexistenceand is satisfiedwith itseffectiveness.

Relationship with Other Stakeholders

The Board identifies the importance of maintaininga healthy relationship with its key stakeholders andensures the Company inculcates this practice. Internalcommunication is mainly conducted through e-mails,memos and circulars.

The Board also ensures that the Group policies andpracticesare in linewith theCompany’s valuesand itssocialresponsibilities.TheCompanypromotesprotectionof the environment, health and safety standards of itsemployees and others within the organization. Therelevant measures taken are given in detail in theSustainabilityReportonpages36-55.

Compliance

TheBoardplacessignificantemphasisonstronginternalcomplianceprocedures.TheFinancialStatementsoftheCompany are prepared in strict compliance with theguidelinesoftheSriLankaAccountingStandards(LKASand SLFRS) and other statutory regulations. FinancialStatementsarepublishedquarterlyinlinewiththeListingRulesoftheColomboStockExchangethroughwhichallsignificant developments are reported to shareholdersquarterly. The Board of Directors, to the best of theirknowledge and belief, are satisfied that all statutorypaymentshavebeenmadetodate.

Corporate Governance Requirements listed underSection7&9oftheListingRulesissuedbytheColomboStockExchange(CSE);

CSE Section Requirement Status of Reference Kegalle Plantations PLC

7.6 (vii) Details of material issues pertaining In Compliance to employees & industrial relations of the entity.7.10.1 (a) to (c) Non Executive Directors In Compliance7.10.2 (a) to (b) Independent Directors In Compliance7.10.3 Disclosures relating to Directors In Compliance7.10.4 Criteria for defining “Independence” In Compliance7.10.5 Remuneration Committee In Compliance7.10.6 Audit Committee In Compliance9 Related Party Transactions Committee In Compliance

Going Concern

TheDirectorshavecontinuedtousethe‘GoingConcern’basisin the preparation of the Financial Statements, after carefulreview of the financial position and cash flow status of theCompany.TheBoardofDirectorsbelievesthattheCompanyhas adequate resources to continue its operation for the foreseeablefuture.

Board of DirectorsShareholders

C E O

Corporate Management

External Auditors

Audit, Remuneration & RPTR Committees

InternalReporting

System

Internal Auditors

CorporateGovernance

Managment System(Decision Making,

Information Sharing)

Governance Review | Corporate Governance Report of the Audit Committee | Governance Review


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REPORT OF THE AUDIT COMMITTEE

TheAudit CommitteeCharter, approvedby the BoardofDirectorsdefinesthepurpose,authority,composition,meeting,andresponsibilitiesoftheCommittee.

ThepurposeoftheAuditCommitteeisto:

1. AssisttheBoardofDirectorsinfulfillingitsoverallresponsibilitiesforthefinancialreportingprocess.

2. Review the system of internal control and riskmanagement.

3. Monitor the effectiveness of the internal auditfunction.

4. Review the Company’s process for monitoringcompliancewithlawsandregulations.

5. Review the independence and performance oftheexternalauditors.

6. Tomake recommendations to theBoardon theappointmentofexternalauditorsandrecommendtheirremunerationandtermsofengagement.

TheAuditCommitteeconsistsofthreeIndependentNonExecutive Directors of the Richard Pieris & CompanyPLC, the Ultimate Parent Company, namelyMr. JagathC.Korale,Chairman,Dr.JayatissaDeCostaP.C.andMr.PrasannaFernando.Allthreememberswereappointedwith effect from 28 October 2016. The Chairman oftheCommittee is a Senior CharteredAccountant. TheCompanySecretaryfunctionsasSecretarytotheAuditCommittee.

The principal activities of the Committee are detailedbelow;

Meetings

The Audit Committee held eight meetings during theyearunderreview.

The Group Chief Financial Officer, Managing Directorof Plantation Sector, Chief Executive Officer, FinancialController,AccountantandGroupInternalAuditManagerwere invited if deemednecessary for audit committeemeetings.

Meetingswereheldwiththeexternalauditorsregarding

the scope and the conduct of the annual audits.

Internal Audit and Risk Management

The Internal Audit Programme was reviewed bythe Committee to ensure that it covered the majoroperationalaspectsoftheCompany.

The Group Internal Audit Manager was invited tobe present at all Audit Committee deliberations. Hepresentedasummaryofthesalientfindingsofallinternalauditsandinvestigationscarriedoutbyhisdepartmentfortheperiod.TheresponsesfromtheChiefExecutiveOfficer of the Company to the internal audit findingswere reviewed and where necessary corrective actionwas recommended and implementation monitored.

TheCommitteealsohadtheresponsibilitytoreviewthelossmakingEstatesof theCompanyandstrategies forturningroundtheseEstatesandrecommendingsuitablecorrectiveaction.

Internal Controls

During its meetings, the Committee reviewed theadequacy and effectiveness of the internal controlsystemsandtheCompany’sapproachtoitsexposuretothebusinessandfinancialrisks.ProcessesareinplacetosafeguardtheassetsoftheorganizationandtoensurethatthefinancialreportingsystemcanberelieduponinthepreparationandpresentationofFinancialStatements.AcomprehensiveManagementReportandAccountsareproducedatmonthendhighlightingallkeyperformancecriteriapertainingtotheKegallePlantationsPLCanditsSubsidiarywhichisreviewedbytheSeniorManagementonamonthlybasis.

BoardofDirectorsreviewsperformanceonaquarterlybasisormoreoften,ifrequired.

Financial Statements

The Committee reviewed the Company’s QuarterlyFinancial Statements, theAnnualReport andAccountsfor reliability, consistency and compliance with the SriLankaFinancialReportingStandardsandotherstatutoryrequirements, including the Companies Act, No 7 of2007,priortoissuance.ItalsoreviewedtheadequacyofdisclosureinthepublishedFinancialStatements.

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TheGrouphassuccessfullyadoptedthenewSriLankaAccountingStandards(newSLAS)comprisingLKASandSLFRSapplicableforfinancialperiodscommencingfrom01 April 2012 as issued by the Institute of CharteredAccountantsofSriLanka.

External Auditors

The Audit Committee has reviewed the other servicesprovided by the External Auditors to the Company toensure their independence as Auditors has not beencompromised.

TheCommitteereviewedtheManagementLettersissuedby the External Auditors, the Management responsethereto and also attended to matters specificallyaddressedtothem.TheexternalauditorskepttheAuditCommitteeinformedonanon-goingbasisofallmatters

of significance. The Committee met with the Auditorsanddiscussedissuesarisingfromtheauditandcorrectiveactiontakenwherenecessary.

TheAuditCommitteehas recommended to theBoardofDirectorsthatMessrs.Ernst&Youngbere-appointedasAuditorsforthefinancialyearending31March,2018subjecttotheapprovaloftheshareholdersatthenextAnnualGeneralMeeting.

Conclusion

The Audit Committee is satisfied that the controlenvironment prevailing in the organization providesreasonable assurance regarding the reliability of thefinancial reporting of the Company, the assets aresafeguardedandthattheListingRulesoftheColomboStockExchangehavebeenmet.

JagathC.KoraleChairman-AuditCommittee

31May2017

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REPORT OF THE REMUNERATION COMMITTEE

The Remuneration Committee of the Ultimate ParentCompany acted as the Remuneration Committee ofKegallePlantationsPLC.

The Remuneration Committee, appointed by andresponsible to theBoardofDirectors, consistsof threeindependent Non-Executive Directors, Dr. JayatissaDeCosta P. C.,Mr. JagathC. Korale andMr. PrasannaFernando.TheCommitteeischairedbyDr.JayatissaDeCosta P. C. The Committee met on several occasionsduringthefinancialyear.

The Remuneration Committee has reviewed and

recommendedthefollowingtotheBoardofDirectors:

1. PolicyonremunerationoftheExecutiveStaff

2. Specific remunerationpackage for theExecutiveDirectors

In a highly competitive environment attracting andretaininghighcaliberexecutivesisakeychallengefacedbytheCompany.Inthiscontext,theCommitteetookintoaccount,competition,market informationandbusinessperformance in declaring the overall remunerationpolicyoftheCompany.

Dr.JayatissaDeCostaP.C.Chairman-RemunerationCommittee

31May2017

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REPORT OF THE RELATED PARTY TRANSACTIONS REVIEW COMMITTEETheRelatedPartyTransactionsReviewCommitteeoftheUltimate Parent Company acted as the Related PartyTransactions Review Committee of Kegalle PlantationsPLC.

The Committee consists of three Independent Non-ExecutiveDirectorsof theUltimateParentCompanyasfollows,

Dr.JayatissaDeCostaP.C.(Chairman)Mr.JagathC.KoraleMr.PrasannaFernando

All threememberswereappointedwitheffect from28October2016.

TheGroupChiefFinancialOfficer,ManagingDirectorofPlantationSector,Chief ExecutiveOfficer, andFinancialControllerattendedmeetingsbyinvitation.TheCompanySecretary functions as Secretary to the Related PartyTransactionsReviewCommittee.

The Objectives of the Committee,

● ToexerciseoversightonbehalfoftheBoard,thatallRelatedPartyTransactions (“RPTs”,other thanthoseexemptedbytheCSEListingRulesontheRelatedPartyTransactions)ofKegallePlantationsPLC is carried out and disclosed in a mannerconsistentwiththeCSEListingRules.

● Toadviseandupdate theBoardofDirectorsontherelatedpartytransactionsoftheCompanyonaquarterlybasis.

● ToensurecompliancewiththeCSEListingRulesontheRelatedPartyTransactions.

● ToreviewpoliciesandproceduresofRelatedPartyTransactionsoftheCompany.

● Toensureshareholderinterestsareprotectedandthat fairness and transparency are maintained.

TheCommitteearticulatedandrecommendedapolicyframeworkforadoptiononRelatedPartyTransactionsfortheCompany.InsuchprocesstheCommitteeconsideredRelatedPartyTransactionswhichrequireapprovaloftheBoard of Directors, various thresholds set out by theColombo Stock Exchange Listing Rules and disclosurerequirements, etc.

TheCommitteeheld threemeetingsduring theperiodunderreview.TheactivitiesandviewsoftheCommitteehave been communicated to the Board of Directorswhere appropriate.

Related Party Transactions during the year 2016/17

DetailsoftherelatedpartytransactionsenteredintobytheCompany/Grouparedisclosedonpage132.

Declaration

Refer: Annual Report of the Board of Directors onthe Affairs of the Company, Pages 80 to 83 for thedeclaration by the Board of Directors that no relatedparty transaction fallingwithin theambitof the ListingRuleswasenteredintobytheCompanyduring2016/17,exceptwhatwasdisclosedinthenoteno.36.

Dr.JayatissaDeCostaP.C.Chairman-RelatedPartyTransactionsReviewCommittee

31May2017

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RISK MANAGEMENT

KegallePlantationsPLCisexposedtoamultitudeofrisksasanyotherorganization&riskswhicharespecifictothePlantationSector.ThisspecificriskisassociatedwiththecultivationandprocessingofRubber,Teaandtheeconomicenvironmentinwhichitoperates.Accordingly,theCompanyseekstoadoptaprecautionaryapproachinrespondingtotherisk.TheBoardofDirectorsthereforeplacesspecialemphasisonthemanagementofbusinessriskstogetherwiththeriskmanagementCommitteetoensurethatsoundFinancial,Operational&ComplianceControlSystemsareputinplace.Internalauditors&managementteamtimetotimereviewthesystems’viabilitytoaddressprevailingriskstoeliminatedownsideofrisks&maketheuseofupsideofrisks,inordertosafeguardshareholders’investmentand assets.

Risk Management Process

TheCompany’sriskmanagementprocesscomprisesofriskculture,riskidentification,riskassessment&response,controls tomitigateoreliminaterisk, riskcommunication&consultation,andalsoriskmonitoring&reviewingofuncertaintyinbusinessdecision-making.ThediagrambelowshowstheabovestepsofriskmanagementintheoverallcontextofKegallePlantationsPLC.

Risk Culture

Risk Identification

Risk Assessment & Response

Risk M

onito

ring &

Revie

w

Control Activities

Communicate & Consult

Risk M

anag

emen

t Pro

cess

Risk Culture:

TheBoardofDirectorshasidentifiedtheirpositionanddistinctconsistenttonehasmaintainedinestablishingasoundriskmanagementsystemimplyingtheconformitytotheunderlinerequirementsofsuchasystem.Themanagementhas reflected the commitment to ethical principles and the decision making has been done considering widerstakeholderposition.Adheringtothe leadership, thestaffhas identifiedthe importanceandthefollowthesameethicalprinciplesoftheBOD.

Risk identification:

OurCompany’stopmanagementhascommittedtocreateriskculturewithintheCompany&sufficientriskawarenessamongemployees.CompanyisfollowingBottom-up-approachtoidentifyinternalrisksandthiswillencourageevenoperationallevelemployeestoidentifyriskarisingwithintheirrespectivefunctionalareas.Topmanagementisalwaysconsciousabouttheexternaldevelopmentstoidentifyexternalrisks.TheCompanywouldbeexposedtowiderangeofrisks,somearespecifictothePlantationsSectorandsomeofthemarecommonforeveryorganization.Theseidentifiedrisksarecategorizedbasicallyunderfourmainheadingsforeffectivecontrolpurposes.

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Risk Assessment & Response:

ThisallowsKegallePlantationsPLCtoconsidertheextenttowhichpotentialeventsmighthaveanimpactonachievementofobjectivesandbaseon thatdeterminehow the identified riskwill respond.Followingdiagramdepictspreviouslyidentifiedrisksupontheirlikelihoodofoccurrence&theMonitoryimpacttotheCompany.

Like

lihoo

d

Moderate

Moderate

Low

Low

Low High

Hig

h

Impact

High

Topmanagementmaydecidetheappropriateactionsdependingonthetoleranceofrisktoaddressthedifferenttypesofrisksidentifiedasabove.

• HighRisk :Riskavoidancebynotundertakingriskyactivities.• ModerateRisk :Riskreductionbyestablishinginternalcontrols&Risktransfertothirdpartieswhoare

morecapableofhandlingthosesuchastakinginsurancepolicies.• LowRisk :Riskacceptancesinceitisworthwhilerathertryingtomitigatetheserisks.

TheCompanyiswillingtotakeevenhighrisksaftercarefulinvestigationiftheseactivitiesaddcompetitiveedgetotheCompany.Howeverultimateriskacceptabilitywilldependontheriskappetitethereforemanagementisrequiredtooperatewithinthelimitstoavoidsurpassingriskappetite.

RISKL

L

L

H L H

H

H

Impact Impact

Prob

ab

ility

Prob

ab

ility

ECONOMIC RISK OPERATIONAL RISK

STRATEGIC RISKFINANCIAL RISK

Human Capital & Labour Risk

Inventory & Asset Risks

Global Economic Changes

Fiscal Policy Changing Risk

Liqudity & Cash Management Risk

Capital Investment Risk

Credit Risk Technological Risk Reputation Risk

Product & Risk of Competition

Environmental Risk

Currency Risk

Interest Rate & Gearing Risk

Procurement Risk

Information Systems Risk

- Low Risk - Moderate Risk - High Risk

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Index

Risk Exposure

Company Objectives

Risk Minimisation Strategy

Control Activities:

Control activities are thepolicies&procedures that help ensure thatmanagement risk responses are effectivelycarriedout.KPL’scontrolactivitiesoccur throughout theorganization,atall levelscoveringall functions.Basicallycontrols includea rangeofactivities suchas segregationofduties,personal controls, approvals&authorization,managementcontrols,supervision,organizationalcontrols,accounting&arithmeticchecksandphysicalcontrols.Companyhasplacedfollowingcontrolsforeachrisksidentifiedattheearlystage.

Economic Risk

Global Economic Changes

To minimize the risk associated with Changes due to Global Recession,sanctionsonCountriesorchangeininternationalMarkets.

Spreadtheriskbyattemptingtomarkettheproductsindifferentglobalmarketsandfindingreliablenewcustomers. Continues to match the supply with global demand. For an exampleconcentratemoreonbiorubber.

Fiscal Policy Changing Risk

To minimize risks associated with changing government policies oninternational trade and plantation sector.Companyhasemployedtax&legalconsultantstoadviceontheseissues.Government lobbyingthroughtheministerbymaintaininggoodformalrelationship. Willingtodealwithfinancialriskarisingwithgovernmentpolicychanges.

Operational Risk

Inventory & Asset Risk

Toreducestockobsolescence,risksfromfire,theftandmanagestock holdingcostsandtominimizemachinery&equipmentbreakdown. Reducingtheriskassociatedwiththeftandshrinkagebyfrequentphysicalcheck. Adoptingamonthlydeclarationpolicy. Identifyingshowmovingstocksandeffectively layingoutachannel forthesetobesoldoff. Obtainingcomprehensiveinsurancecoversforalltangibleassets. Adoptionofstringentprocedureswithregardtothemovingofassetsfrom one location to another. Carryingoutmandatorypreventivemaintenanceprograms. Carryingout frequentemployeetrainingprograms inareassuchasfireprevention.

Risk Rating

Low Moderate High

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Human Capital & Labor Risk

Toensureasmoothflowofoperationswithoutanyunduedisruptions.Maintaining healthy relationships with trade unions through regulardialogues. Enteringintocollectiveagreementswithtradeunions. Ensure compliance with all regulatory requirements with regard to thebenefitsapplicabletoworkersatestates. Toprotectourselfasahumanemployerbeingsuccessfulinmotivating,developing,retainingandattractingthebestofhumancapital. Improvingemployeebenefitsbywayoffinancial incentivesandwelfareactivities.Arrangein-houseandexternaltraininginordertodevelopthehuman resources.

Product & Risk of Competition

To maximize our market share and maintain leadership in the respectiveindustries. Ensuringhighstandardsofqualityintheeyesofthecustomer. Increasing productivity and efficiency in order to ensure an adequatemargindespiteincreasingwage,energyandtransportationcost. CarryingoutResearch&Developmentactivitieswhenevernecessary inordertoidentifykeyareastobefocused.

Procurement Risk

Tominimizeriskassociatedwithpriceandavailabilityofmaterials. Continuousreplantingactivitiesofallcrops. Establishingrelationshipswithmanysuppliersforlatexandboughtleafinordertoreduceover-dependencyonasinglesupplier. Enteringintoforwardcontractsforpurchasesofcertainrawmaterialitems.

Information Systems Risk

TominimizeriskassociatedwithDataSecurity,Hardware,CommunicationandSoftware.Maintainingofspareservers.Mirroringofharddiskswithcriticaldata. Databack-upsstoredinoffsitelocations. Vendoragreementsforsupportserviceandmaintenance. RegularupdatingofVirusscanners,Firewallsetc. Compliancewithstatutoryrequirementsforenvironmentalpreservations.CarryingoutApplicationControlAudits.

Strategic Risks

Environmental Risk

Companycannotcompletelyeliminatetheriskarisingwithclimatechangesandnaturaldisasters.Followingactionshavebeentakenbythemanagementinordertominimizetheimpactsonproductquality&pricesduetoadverseweather conditions. HavinginplaceSustainableagriculturalpractices. Plantingshadytreesfortea. DiversifiedcropinRubber,Tea,andCardamom&Timber. Ensureclosemonitoringofcrop&pricevarianceduringextremeweather conditions.

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Impact

Rating

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Reputation Risk

Topreventthecausesthatdamagesourreputation. Havinginplaceabudgetaryprocess&abudgetarycontrolmechanismonamonthlybasistoensurethattheCompany’sperformanceiscontinuouslyinlinewithitstargets. Adopting stringent quality assurance policies with regard to raw andpackingmaterialsboughtoutfromthirdparties. Ensure quality in manufacturing process and compliance with thestandards. Work towards obtaining at least HACCP standard in everyfactory. Ensuring effective communication with various stakeholders such asemployees,bankers,regulators,customers,suppliersandtheshareholders.

Technological Risk

To keep pacewith the current technological developments and safeguardagainstobsolescence.The continuous investments in newmachineries and experiments on newmethods.Mechanizationofestatefunctionsuptothehighestpossibleextent. InvestinginResearch&Developmentactivitieswhenevernecessary. Implementation of the new computer system in head office and theestates. Investinginhardwareresources.

Financial Risk

Currency Risk

Tominimizeriskassociatedwith thefluctuation in foreigncurrencyrates inrelation to export proceeds, import payments and foreign currency debttransactions.

Ensuringeffectiveutilizationbycoordinatingwithtreasuryoperationsactasanaturalhedge.suchasforwardbookings,forwardsales,swapsetc Export proceeds exceeding the import payments and foreign currencydebtpaymentsthroughvarioushedgingtechniques.

Interest Rate Risk & Gearing Risk

To minimize adverse effects of interest rate volatility and currency denominated borrowings. Structuringtheloanportfoliotocombineforeigncurrencyandlocal.Minimize interest rate risk through internalhedging techniques suchasmatchingbyhavingbalancebetweenvariable&fixedportionofinterestincome&expense. Effectiveutilizationofexternalhedging techniques suchas interest rateswaps.MaximumutilizationoftheconcessionaryfundingavailabletoPlantationCompanies. To ensure cost of borrowing is at the optimum level,appropriategearingratiowillbemaintainedwiththeassistanceofGroupTreasury.

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Rating

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Liquidity & Cash Management Risk

Capitalizeonopportunitiestoraisefundsatlowestpossiblecost. FundingoflongtermassetsthroughEquityandLongTermLoans. Ensure availability and effective utilization of short term facilitieswherenecessary. Toensureastrongliquidityposition. Ensuringpropermanagementofworkingcapital.MaximumutilizationoftheconcessionaryfundingavailabletoPlantationCompanies.

Capital Investments Risk

Tominimizeriskofnotmeetingprofitexpectations. Adoptingastringentapprovalprocedure forCapitalexpenditurebasedonthelevelofinvestmentandtheexpectedpayback.

Credit Risk

Tominimizerisksassociatedwithdebtordefaults. Obtaininginsurancecoversforexportdebtors. Salesaremadethroughauctionandbrokersassurethesettlement.Worktowardsobtainingcollateralsfrommajorlocalcustomerswithhighoutstanding. Followstringentassessmentprocedurestoensurecreditworthinessofthecustomerspriortothegrantingofcredit.

Communicate & Consult:

The risk management process is concerned with identifying specific stakeholders, the level of accountability,understanding their riskperceptionsanddecisionmakingduringall stagesof the riskmanagementprocess.Thecommunication process consists of the procedures to report risk to risk and control owners and also to otherstakeholders.Furthermore,thetreatmentplansandchangemanagementprocessesarealsodeliveredtotherightpartiesatrighttime.

Risk Monitoring & Review:

Thisistheprocessofassessingthepresence&functioningofCompany’sriskmanagementcomponentsovertimewiththepurposeofidentifyingweaknessesinthecontrolsinaddressingtointernal&externalchanges.Theultimateresponsibility for ongoing monitoring activities or separate evaluations lies with the top management & auditcommittee.Ourgroup internalaudit teamcarriesout frequentsystembaseauditsbyvisiting toeachestateandreportingtotheriskmanagementcommitteeonmattersrequireimmediateresponses.

Effectivenessoftheaboveriskmanagementprocesswillbereviewedannually&makeadjustmentstothecurrentprocessbytheriskmanagementcommittee.Atthisstagerelevant informationis identifiedandcommunicatedinordertofacilitatethepeoplewhoareresponsibleforriskmanagementwithintheCompany.

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79Management Team | Governance Review

Fin

anci

al R

epor

tsAnnual Report of the Board of Directors ...... 80Statement of the Directors’ Responsibility ... 84Independent Auditors’ Report ..................... 85Statement of Profit or Loss .......................... 86Statement of Comprehensive Income ......... 87Statement of Financial Position ................... 88Statement of Changes in Equity .................. 89Cash Flow Statement ................................. 90Notes to the Cash Flow Statement .............. 91Notes to the Financial Statements .............. 92

Oil Palm Processing

The harvested fresh fruit bunches should betransferredtotheprocessingMillwithin24hourstoproducehighqualitycrudePalmOilasotherwisetheFFA(freefattyacids)levelsincreaseandthevalueoftheOilwillcomedown.Atthefactorythefruitsaregradedandsterilizedtoenlargetheoilcellsof thefruitsandtoeasetheremovalofthebunchfromthefruitless.ThenthesterilizedfruitsaresenttoapresstosqueezeofftheOilwhichisthereafterwashedandpurifiedtoconvertintotocrudeOil.

ThisportionofOiliscalledthevegetablecrudePalmOilandtheMesocarportheKernel isseparated inthisprocessfromwhichKernelOil isextracted.ThetotalOilextractionvariesfrom23%-26%dependingontheripenessofthefreshfruitbunches,qualityofthemachineryandstringentqualitycontrolsof thefactoryinselectingofFFB.

Tra

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Contents


80

ANNUAL REPORT OF THE BOARD OF DIRECTORS

TheDirectorsofKPLhavepleasure inpresenting to theMembers,theirreporttogetherwiththeAuditedFinancialStatementsoftheCompanyanditssubsidiaryfortheyearended31March2017andtheAuditor’sReportthereon.

TheBoardofDirectorsapprovedthisreportattheBoardmeetingheldon31May2017.

Thedetails setouthereinprovidepertinent informationrequiredbytheCompaniesActNo.7of2007,ListingRulesoftheColomboStockExchange,SecuritiesandExchangeCommission and are guided by recommended bestAccounting Practices. The Company’s new registrationnumberisPQ135.

Principal Activities and Operational Review

The principal activity of Kegalle Plantations PLC iscultivation and processing of Rubber, Tea, Coconut andother crops and remains unchanged from the previousyear.Thenumberofestatesmanageremainedthesameaslastyear-17estateswithatotalextentcultivatedbeing7,676hectares(7,654hectaresin2016).

TheCompanycontinuestobemanagedbyRPCPlantationManagementServices(Pvt)Ltd.ThebasisofcomputationofManagement Feeswas same as that of the previousyearandwas inaccordancewith theAgreementsignedbetweenbothparties.

Future Development

Profound changes take place in the global commoditymarket. In order to stay ahead of its competitors, thestrategicdirectionoftheCompanyisregularlymonitoredbytheBoardofDirectors in thekeyareasofoperationsandfinancialmanagement,inpursuitofimprovingyields,valueaddition,diversificationandproductdifferentiationtoreducepricesensitivity,toimprovequalityandgetthebestreturnoninvestment.

Review of the Company Performance

TheChairman’sReview,ReviewofOperations,theFinancialReview and other reports attached, briefly describe theperformance of the Company and the Group in thecurrent financial year. These Reports together with theFinancialStatementsreflectresultsandthestateofaffairsoftheCompanyanditssubsidiary.

Turnover

The Turnover of the Company was Rs. 2,287,161,250/-(2016-Rs.1,933,063,249/-)whichisa18%increaseoverlastyear,CompositionoftheRevenueisgiveninNote6totheAccounts.

Financial Results

Year Ended 31 March 2017

Rs.’000

2016 RestatedRs.’000

Profitfromoperationsafterdeductingallexpenses,depreciationandallknownliabilities 199,174 63,862

(-)Taxation 18,088 37,468

ProfitAfterTax 217,262 101,330

(+)OtherComprehensiveIncome 93,124 64,846

TotalComprehensiveIncome 310,386 166,176

(+)Un-appropriatedprofitbroughtforward 1,960,803 2,934,636

(+)ImpactoftheAmendmentofLKAS41 - 3,423

Profitavailablefordistribution 2,271,189 3,104,235

AppropriationDividendspaidTimberReserveAvailable-for-SaleReservesSupergaintaxpaid

(125,000)(5,035)(56,580)

-

(1,125,000)(5,728)7,980

(20,684)

Un-appropriatedprofitcarriedforward 2,084,574 1,960,803

Investments

Information relating to themovement of investments isgiveninNote17and18totheAccounts.

Property, Plant and Equipments

ThetotalcapitalexpenditureincurredontheacquisitionoffixedassetsduringtheyearamountedtoRs.175,924,241/-(2016-Rs.220,648,351/-),outofwhichexpenditureonBiological Assets amounts to Rs. 172,756,534/- (2016- Rs. 219,068,006/-). Further information relating to themovementofFixedAssets isgiven inNotes14 to16oftheAccounts.Capitalexpenditurehasbeenfinancedbyeither longor short termborrowingsdependingon thepay-backperiodandorinternallygeneratedfunds.

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Loans & Borrowings

A breakdown of the total loans outstanding as at theStatementofFinancialPositiondateisgiveninNote24totheAccounts.

Stated Capital

TheStatedCapitaloftheCompanyasat31March2017wasRs.250,000,010/-.Adetailof theStatedCapital isgiveninNote23totheFinancialStatements.

Reserves

TheReservesoftheCompanyasat31March2017wasRs. 2,371,695,174/- (2016 - Rs. 2,186,308,570/-). ThedetailsaregivenintheStatementofChangesinEquityonPage89totheFinancialStatements.

Donations

NoDonationsweremadeduringtheyearunderreviewbytheCompany(2016–Rs.5,000/-).

Taxation

The Company is liable for income tax at the rate of28% on profits from manufacture & 10% on profitsfromagriculturebeginningfromtheyearofassessment2011/12.

Share Information

Information on Earnings, Dividend, Net Assets andMarketValuepershareisgivenonPages142to144ofthis report.

Major Shareholders

The twenty largest shareholdersof theCompanyasat31March2017togetherwithpercentagesheldaregivenunderthecaption“Shareholder&InvestorInformation”onPage142.

Directors

The Names of the Directors who held Office duringtheyeararegivenbelow.TheirbriefprofileappearsonPages62to63.

Dr.SenaYaddehige Chairman

S S Poholiyadde Director

Prof.RCWMRANugawela Director

Dr.SSBDGJayawardena Director

ShamindaYaddehige Director

Pursuant toSection211of theCompaniesActNo.07of2007,aNoticeof the followingOrdinaryResolutionhasbeenreceivedbytheCompany,fromRPCPlantationManagementServices(Private)Limited,310,HighLevelRoad, Nawinna, Maharagama, a shareholder of theCompany.

“That Dr. Sena Yaddehige of Le Neuf , Chemin, St.Saviours, Guernsey, United Kingdom who is 71 yearsof age be and is hereby appointed a Director of theCompanyintermsofsection211oftheCompaniesActNo.07of2007,andit isfurtherspeciallydeclaredthattheagelimitof70yearsreferredtoinSection210oftheCompaniesActno.07of2007shallnotapplytothesaidDr.SenaYaddehige”

Pursuant toSection211of theCompaniesActNo.07of2007,aNoticeof the followingOrdinaryResolutionhasbeenreceivedbytheCompany,fromRPCPlantationManagementServices(Private)Limited,310,HighLevelRoad, Nawinna, Maharagama, a shareholder of theCompany.

“That Dr. Gerry Jayawardena of No. 134, Batagama(North)Ja-Ela,whois74yearsofagebeandisherebyappointedaDirectoroftheCompanyintermsofsection211oftheCompaniesActNo.07of2007,anditisfurtherspeciallydeclaredthattheagelimitof70yearsreferredtoinSection210oftheCompaniesActno.07of2007shallnotapplytothesaidDr.GerryJayawardena”

In accordance with the Provisions of the Article 92 ofthe Articles of Association of the Company,Mr. SunilPoholiyadde, who retires by rotation at the AnnualGeneralMeetingwillofferhimselfforre-election.

Directors’ Interest in Contracts

Directors’interestinContractsinrelationtotransactionswithrelatedentities,transactionswithKeyManagementPersonnel and other related disclosures are stated in Note 36(RelatedPartyDisclosures)totheFinancialStatements.Inaddition,theCompanycarriedouttransactionsintheordinary course of business with the following entitieshaving one ormore directors in common is shown inPage82.

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Name of Director2017

No.of shares2016

No.of shares

Mr.SSPoholiyadde 3,307 3,307

Transactions with related undertakings;

Company Name of Director Position Nature of Transaction

AmountRs. ‘000

2017 2016

EasternBrokersLtd Mr.SSPoholiyadde Director Brokerage/LotMoney&InterestIncome 5,198 (9,197)

(Resignedw.e.f5 January2017)

Interest Register

TheCompanymaintainsaninterestregisterasrequiredbytheCompanies’ActNo.07of2007.Informationpertainingtodirectors’interestincontracts,theirremunerationandtheirshareownershiparedisclosedintheinterestregister.

Directors’ Interest in Shares

ShareholdingofDirectorswhoheldofficeduringthefinancialyearisasfollows:-

Directors’ Remuneration and Other Benefits

TheRemunerationoftheDirectorsfortheyearended31March2017isgiveninNote8oftheFinancialStatements.

Vision, Mission & Objectives

TheCompany’sVision,MissionandLongTermObjectivesaregiveninPage02ofthisreport.

Environmental Protection

The Companies activities can have both direct andindirecteffectsontheenvironment.ItisthepolicyoftheCompanytominimizeanyadverseeffectsbyrecyclingresourcesasmuchaspossibleandcreatingawarenessamongstaffoncurrentglobalenvironmentalthreats.

The Company’s efforts in relation to environmentalprotectionaresetoutonPage36under“SustainabilityReport”. Employment Policy

The Company’s recruitment and employment policy isnon discriminatory. Appraisals of individual employeesare carried out by the respective departmental headsin order to evaluate their performances and realisetheir potential and through this process tobenefit theCompanyandthemselves.

Statutory Payments

TheDirectors,tothebestoftheirknowledgeandbelief,aresatisfiedthatallstatutorypaymentshavebeenmadeup to date.

Events after the Reporting Date

No circumstances have arisen since the Statement ofFinancialPositiondate,whichwouldrequireadjustmentordisclosureintheAccounts.

Board Committees

TheBoardhasdelegatedresponsibilitiestothreeBoardSub Committees which operate within clearly definedtermsofreference.TheircompositionsandfunctionsaregiveninPages69to72ofthisreport.

Related Party Transactions

There are no non recurrent related party transactionswhichexceed10percentof theEquityor5percentofthetotalassetswhicheverislowerandtheCompanyhascompliedwiththerequirementsoftheListingRulesoftheColomboStockExchangeonRelatedPartyTransactions.However, theDirectorshavedisclosed the transactionsthat could be classified as related party transactionswhichareadopted in thepresentationof theFinancialStatementsandaccordinglygiven innote36onPages132to133.

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Corporate Governance and Internal Control

ThepoliciesadoptedbytheCompanyinrelationtoBestPracticesandGoodCorporateGovernancearegivenonPages66to68.

TheBoardhasoverallresponsibilityfortheGroup’ssystemof Internal Financial Control. Although no system ofInternal Control can provide absolute assurance againstmaterialmisstatementorlosstheGroup’sinternalcontrolsystem has been designed to provide the Directorswith reasonable assurance that assets are safeguarded,transactions authorized and properly recorded andmaterial errors and irregularities either prevented ordetectedwithinareasonableperiodoftime.

Directors’ Responsibility for Financial Reporting

The Statement of Directors’ Responsibility for financialreporting of the Company and the Group is set out inPage84ofthisreport.

Compliance with Laws and Regulations

TheDirectors, tothebestof theirknowledgeandbelief,confirmthattheCompanyhasnotengagedinanyactivitiesthatcontravenetheLawsandtheregulationsapplicableinSriLanka.FinancialStatementsarepublishedquarterlyinlinewiththeListingRulesoftheColomboStockExchange.

The Company is in compliance with the CSE rules onrelated party transactions which was made mandatory witheffectfrom1stofJanuary2016.

Auditors

The Financial Statements for the year ended 31March2017 have been audited by Messrs. Ernst & Young,CharteredAccountants.TheAuditorsReport isgivenonPage85.

Inaccordancewith theCompaniesActNo.7of2007,aresolution proposing their re-appointment as Auditors

to the Company and authorizing the Directors of theCompanytofixtheirremunerationwillbeproposedattheAnnualGeneralMeeting.

TheAuditFeeofMessrs.Ernst&YoungforthecurrentyearwasRs.3,946,800/-(2016Rs.3,528,068/-).InadditionRs.527,961/-(2016Rs.881,248/-)waspaidbytheCompanyfor non-audit related work which consists mainly ofcertificationsissuedtotheDepartmentofInlandRevenueandTaxrelatedwork.AsfarastheDirectorswereawaretheAuditorsdonothaveanyrelationshipotherthanthatofanAuditorwiththeCompany.

Annual General Meeting

TheAnnualGeneralMeetingwillbeheldon30June2017attheregisteredofficeoftheCompanyat310,HighLevelRoad,Nawinna,Maharagama.Thenoticeof theAnnualGeneralMeetingisonPage147ofthereport.

OnbehalfoftheBoard,

SSPoholiyadde Dr.SSBDGJayawardenaDirector Director

Mrs.RJSiriweeraCompanySecretary

RichardPierisGroupServices(Pvt)LtdSecretaries310,HighLevelRoadNawinnaMaharagama.

31May2017

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84

TheDirectorshaveprovidedtheAuditorsMessrs.Ernst&Young,CharteredAccountants,witheveryopportunitytocarryoutreviewsandteststhattheyconsiderappropriateandnecessaryfortheperformanceoftheirresponsibilities.TheCompany’sAuditors,Messrs.Ernst&Young,CharteredAccountants have examined the Financial Statementstogetherwith all financial records and related data andexpresstheiropinionwhichappearsasreportedbythemonpage85ofthisreport.Inarrivingattheiropinion,theyhavecarriedoutreviewsandsamplechecksonthesystemof internal controls.

OnbehalfoftheBoard,

Mrs.RJSiriweeraCompanySecretary

RichardPierisGroupServices(Pvt)LtdSecretaries310,HighLevelRoadNawinnaMaharagama.

31May2017

STATEMENT OF DIRECTORS’ RESPONSIBILITY

InkeepingwiththeprovisionsundertheCompaniesActNo.7 of 2007, the Directors of Kegalle Plantations PLC,acknowledge their responsibility in relation to financialreporting of both, the Company and that of its Group.These responsibilities differ from those of its Auditors,Messrs.Ernst&Young,whicharesetout intheirreport,appearingonpage85ofthisreport.

TheFinancialStatementsoftheCompanyanditssubsidiaryfortheyearended31March2017includedinthisreporthave been prepared and presented in accordance withtheSriLankaFinancialReportingStandards.TheyprovidetheinformationasrequiredbytheCompaniesActNo.7of2007,SriLankaAccountingStandardsandtheListingRules of the Colombo Stock Exchange. The Directorsconfirmthatsuitableaccountingpolicieshavebeenusedandappliedconsistentlyandthatallapplicableaccountingstandards havebeen followed in thepreparationof theFinancial Statements given on pages from 86 to 136inclusive. Allmaterial deviations from these standards ifanyhavebeendisclosed andexplained. The judgmentsandestimatesmadeinthepreparationoftheseFinancialStatementsarereasonableandprudent.

The Directors confirm their responsibility for ensuringthat allCompanieswithin theGroupmaintain adequateaccounting records, which are sufficient enough toprepareFinancialStatementsthatdisclosewithreasonableaccuracy, the financial position of the Company and itssubsidiary.Theyalsoconfirm their responsibility towardsensuring that the Financial Statements presented in theAnnual Report give a true and fair view of the state ofaffairsoftheCompanyanditssubsidiaryasat31March2017andthatoftheprofitfortheyearthenended.

The overall responsibility for the Company’s internalcontrolsystemslieswiththeDirectors.Whilstrecognizingthefactthatthereisnosinglesystemofinternalcontrolthat could provide absolute assurance against materialmisstatementsandfraud,theDirectorsconfirmthattheprevalentinternalcontrolsystemsinstitutedbythemwhichcomprise internal checks, internal audit, financial andother controls are sodesigned that, there is reasonableassurancethatallassetsaresafeguardedandtransactionsproperly authorized and recorded, so that materialmisstatements and irregularities are either prevented ordetectedwithinareasonableperiodoftime.

TheDirectorsareof theview that theCompanyand itssubsidiaryhaveadequateresourcestocontinueoperationsintheforeseeablefuture,asagoingconcern.Accordingly,theDirectors have continued to use the going-concernbasisinthepreparationoftheseFinancialStatements.

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85

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

Opinion

Inouropinion,theconsolidatedFinancialStatementsgiveatrueandfairviewofthefinancialpositionoftheGroupasat31March2017,andofitsfinancialperformanceandcashflowsfortheyearthenendedinaccordancewithSriLankaAccountingStandards.

Report on Other Legal and Regulatory Requirements

Asrequiredbysection163(2)oftheCompaniesActNo.07of2007,westatethefollowing:

a) Thebasisofopinion,scopeandlimitationsoftheauditareasstatedabove.

b) Inouropinion:

• wehaveobtainedalltheinformationandexplanationsthat were required for the audit and, as far as appears from our examination, proper accounting recordshavebeenkeptbytheCompany,

• theFinancialStatementsoftheCompanygiveatrueandfairviewofitsfinancialpositionasat31March2017,andofitsfinancialperformanceandcashflowsfortheyearthenendedinaccordancewithSriLankaAccountingStandards,and

• the Financial Statements of the Company and theGroupcomplywiththerequirementsofsections151and153oftheCompaniesActNo.07of2007.

31May2017Colombo

INDEPENDENT AUDITORS’ REPORT

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF KEGALLE PLANTATIONS PLC

Report on the Financial Statements

We have audited the accompanying Financial Statements ofKegallePlantationsPLC (“theCompany”)and theconsolidatedFinancialStatementsoftheCompanyanditssubsidiary(“Group”)whichcomprisetheStatementofFinancialPositionasat31March2017,StatementofProfitorLoss,StatementofComprehensiveIncome, Statement of Changes in Equity and Cash FlowStatementfortheyearthenended,andasummaryofsignificantAccountingPoliciesandotherexplanatoryinformation.

Board’s Responsibility for the Financial Statements

TheBoardofDirectors(“Board”)isresponsibleforthepreparationof these Financial Statements thatgive a true and fair view inaccordancewithSri LankaAccountingStandardsand for suchinternalcontrolsasBoarddeterminesisnecessarytoenablethepreparationofFinancialStatements thatare freefrommaterialmisstatements, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these FinancialStatements based on our audit. We conducted our audit inaccordancewithSriLankaAuditingStandards.Thosestandardsrequire that we comply with ethical requirements and plan and performtheaudittoobtainreasonableassuranceaboutwhethertheFinancialStatementsarefreefrommaterialmisstatements.

AnauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresintheFinancialStatements.The procedures selected depend on the auditor’s judgment,including the assessmentof the risksofmaterialmisstatementof the Financial Statements, whether due to fraud or error. Inmaking those risk assessments, the auditor considers internalcontrols relevant to the entity’s preparation of the FinancialStatementsthatgiveatrueandfairviewinordertodesignauditprocedures that are appropriate in the circumstances, but notfor thepurposeof expressing anopinionon the effectivenessoftheentity’sinternalcontrols.Anauditalsoincludesevaluatingthe appropriateness of accounting policies used and thereasonablenessofaccountingestimatesmadebyBoard,aswellasevaluatingtheoverallpresentationoftheFinancialStatements.

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86

TheaccountingpoliciesandnotesonPages93through136formanintegralpartoftheFinancialStatements.

Year Ended 31 March Company Group

Notes 2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

Revenue 6 2,287,161 1,933,063 2,287,161 1,933,063

CostofSale (2,059,967) (1,924,776) (2,059,967) (1,924,776)

Gross Profit 227,194 8,287 227,194 8,287

Gain/(Loss)onFairValueofBiologicalAssets 16.4 5,914 5,617 5,914 5,617

OtherIncomeandGain 7 116,408 114,607 37,238 35,651

AdministrativeExpenses (46,712) (43,166) (52,705) (50,761)

ManagementFee (44,660) (6,543) (44,660) (6,543)

Profit from Operations 8 258,144 78,801 172,982 (7,750)

FinanceIncome 9 199,131 183,284 199,131 183,284

FinanceCost 10 (258,101) (198,223) (258,101) (198,223)

ShareofResultofEquityAccountedInvestees 11 - - 228,756 140,827

Profit Before Taxation 199,174 63,862 342,768 118,138

TaxExpenses 12.1 18,088 37,468 (12,656) 16,876

Profit After Taxation 217,263 101,330 330,112 135,014

BasicEarningsPerShare 13 8.69 4.06 13.20 5.41

Financial Reports | Statement of Profit or Loss Statement of Comprehensive Income | Financial Reports

STATEMENT OF PROFIT OR LOSS


87



Notes 2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

Profitfortheyear 217,263 101,330 330,112 135,014

Other Comprehensive Income

Other Comprehensive income not to be reclassified to profit or loss in Subsequent periods (net of tax)

ActuarialGains/(Losses)onDefinedBenefitPlans 25 43,381 86,451 43,381 86,451

IncomeTaxEffect 12.2 (6,837) (13,625) (6,837) (13,625)

36,544 72,827 36,544 72,827

Share of Other Comprehensive Income of EquityAccounted Investees

Other Comprehensive income not to be reclassified to profit or loss in Subsequent periods (net of tax)

ActuarialGains/(Losses)onDefinedBenefitPlans 11.2 - - (506) 125

IncomeTaxEffect 11.2 - - 40 (6)

- - (466) 119

Other Comprehensive income to be reclassified to profit or loss in Subsequent periods (net of tax)

NetGain/(Loss)onAvailable-for-SaleFinancialAssets 17.2 56,580 (7,980) 56,580 (7,980)

IncomeTaxEffect - - - -

56,580 (7,980) 56,580 (7,980)

Other Comprehensive Income for the year, net of tax 93,124 64,846 92,658 64,965

Total Comprehensive Income for the year, net of tax 310,387 166,176 422,770 199,980

Statement of Comprehensive Income | Financial Reports

STATEMENT OF COMPREHENSIVE INCOME


88

TheseFinancialStatementsareincompliancewiththerequirementsoftheCompaniesActNo.07of2007.

SudheeraEpitakumbura FinancialController TheBoardofDirectorsisresponsibleforthepreparationandpresentationoftheseFinancialStatements. SignedforandonbehalfoftheBoardofDirectorsofKegallePlantationsPLC.

SSPoholiyadde Dr.SSBDGJayawardena Director Director TheaccountingpoliciesandnotesonPages93through136formanintegralpartoftheFinancialStatements. 31May2017 Colombo

STATEMENT OF FINANCIAL POSITIONAs at 31 March Company Group

ASSETS

Non Current Assets

Notes 2017

Rs.’000

2016RestatedRs.’000


2017

Rs.’000



LeaseholdProperty,PlantandEquipmentFreeholdProperty,PlantandEquipmentBearerBiologicalAssetsConsumableBiologicalAssetsFinancialAssetsLongTermInvestments

1415

16.116.217

18.3

208,326284,038

2,022,742107,220

1,200,880491,850

224,154323,978

1,910,58994,919

1,144,300491,850

239,983365,251

1,753,21678,746

1,000,000611,850

208,326321,573

2,022,742107,220

1,200,880833,616

224,154366,631

1,910,58994,919

1,144,300718,285

239,983414,245

1,753,21678,746

1,000,000802,918

Total Non Current Assets 4,315,057 4,189,791 4,049,045 4,694,358 4,458,879 4,289,108

Current AssetsProduceonBearerBiologicalAssetInventoriesTradeandOtherReceivablesVATRecoverableESCRecoverableIncomeTaxRecoverableAmountsduefromRelatedCompaniesShortTermInvestmentsCashandBankBalances

16.31920

2122

4,191

268,121287,94623,65217,70311,25538,271

1,420,89217,293

3,311

235,954134,51826,0237,8484,77339,874

1,692,86723,395

3,423272,365210,17625,340

-5,77249,213

2,492,29722,888

4,191

267,449296,24023,66017,70311,2552,315

1,420,89217,293

3,311

235,281142,81326,0307,8484,7732,794

1,692,86723,395

3,423

271,693215,77628,182

-5,77211,489

2,492,29722,900

Total Current Assets 2,089,323 2,168,563 3,081,474 2,060,998 2,139,113 3,051,532

TOTAL ASSETS 6,404,381 6,358,353 7,130,520 6,755,354 6,597,992 7,340,640

EQUITY AND LIABILITIESEquityStatedCapitalGeneralReserveTimberReserveAvailableforSaleReserveRetainedEarnings

2323.1

250,000225,00013,52148,600

2,084,575

250,000225,0008,485(7,980)

1,960,803

250,000225,0002,758

-2,938,059

250,000225,00013,52148,588

2,422,325

250,000225,0008,485(7,992)

2,186,170

250,000225,0002,758(12)

3,129,621Total Equity 2,621,694 2,436,309 3,415,817 2,959,434 2,661,663 3,607,367

Non Current LiabilitiesInterest-bearingLoans&BorrowingsRetiringBenefitObligationsDeferredIncomeDeferredTaxLiabilityLiabilitytomakeLeasePaymentafteroneyear

2425262728

1,021,294380,800196,17846,861258,284

1,496,162429,478203,03753,369263,489

1,901,956486,075207,12679,555268,493

1,021,294380,895196,17846,861258,284

1,496,162429,573204,26253,369263,489

1,901,956486,169212,70479,555268,493

Total Non Current Liabilities 1,903,419 2,445,534 2,943,205 1,903,513 2,446,855 2,948,877

Current LiabilitiesTradeandOtherPayablesInterest-bearingLoans&BorrowingsLiabilitytomakeLeasePaymentwithinoneyearDividendPayableAmountsduetoRelatedCompanies

2924283031

251,1111,555,202

5,20526,57641,174

202,6851,231,351

5,00421,35416,116

221,621493,7904,81249,0382,237

259,1331,555,201

5,20526,57646,293

210,5291,231,351

5,00421,35421,235

229,405493,7904,81249,0387,351

Total Current Liabilities 1,879,268 1,476,510 771,498 1,892,408 1,489,474 784,396

TOTAL EQUITY AND LIABILITIES 6,404,381 6,358,353 7,130,520 6,755,354 6,597,992 7,340,640

Financial Reports | Statement of Financial Position Statement of Changes in Equity | Financial Reports


89

STATEMENT OF CHANGES IN EQUITY

Year Ended 31 March

Company Stated Capital

Rs.'000

General Reserve

Rs.'000

Retained Earnings

Rs.'000

Available-for-Sale Reserve Rs.'000

Timber Reserve

Rs.'000

Total

Rs.'000

As at 31 March 2015 250,000 225,000 2,934,636 - 2,758 3,412,393

ImpactoftheAmendmentofLKAS41(NoteLKAS16.3) - - 3,423 - - 3,423

As at 01 April 2015- As Previously Reported 250,000 225,000 2,938,059 - 2,758 3,415,817

SuperGainTaxPaid - - (20,684) - - (20,684)

As at 01 April 2015 - Restated 250,000 225,000 2,917,375 - 2,758 3,395,133

Profitfortheyear-RestatedOtherComprehensiveIncome-RestatedTimberReserveDividendspaid

----

----

101,33072,826(5,728)

(1,125,000)

-(7,980)

--

--

5,728-

101,33164,846

-(1,125,000)

Balance as at 31 March 2016 - Restated 250,000 225,000 1,960,803 (7,980) 8,485 2,436,309

ProfitfortheyearOtherComprehensiveIncomeTimberReserveDividends paid

----

----

217,26336,544(5,035)

(125,000)

-56,580

--

--

5,035-

217,26393,124

-(125,000)

Balance as at 31 March 2017 250,000 225,000 2,084,575 48,600 13,521 2,621,694

Group Stated Capital

Rs.’000

General Reserve

Rs.’000

Retained Earnings

Rs.’000

Available-for-Sale Reserve Rs.’000

Timber Reserve

Rs.’000

Total

Rs.’000

As at 31 March 2015 250,000 225,000 3,126,199 (12) 2,758 3,603,944

ImpactoftheAmendmentofLKAS41(NoteLKAS16.3) - - 3,423 - - 3,423

As at 01 April 2015 - As Previously Reported 250,000 225,000 3,129,621 (12) 2,758 3,607,367

SuperGainTaxPaid - - (20,684) - - (20,684)

As at 01 April 2015 - Restated 250,000 225,000 3,108,938 (12) 2,758 3,586,683

Profitfortheyear-Restated - - 135,015 - - 135,015


ActuarialGains/(Losses)onDefinedBenefitPlans - - 72,826 - - 72,826

Share of Other Comprehensive Income of Equity Accounted Investees

ActuarialGains/(Losses)onDefinedBenefitPlansNetGain/(Losse)onAvailable-for-SaleFinancialAssets-RestatedTimberReserveDividendspaid

----

----

119-

(5,728)(1,125,000)

-(7,980)

--

--

5,728-

119(7,980)

-(1,125,000)

Balance as at 31 March 2016 - Restated 250,000 225,000 2,186,170 (7,992) 8,485 2,661,663

Profitfortheyear - - 330,112 - - 330,112


ActuarialGains/(Losses)onDefinedBenefitPlans - - 36,544 - - 36,544

Share of Other Comprehensive Income of Equity Accounted Investees

NetGain/(Loss)on Available-for-SaleFinancialAssetsActuarialGains/(Losses)onDefinedBenefitPlansTimberReserveDividendspaid

----

----

-(466)

(5,035)(125,000)

56,580---

--

5,035-

56,580(466)

-(125,000)

Balance as at 31 March 2017 250,000 225,000 2,422,325 48,588 13,521 2,959,434


Statement of Changes in Equity | Financial Reports


90


Notes 2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

CASH FLOWS FROM / (USED IN) OPERATING ACTIVITIESNetProfitBeforeTaxation

199,174

63,863

342,768

118,139

ADJUSTMENTS FOR FinanceIncomeDepreciation/AmortisationProvisionforDefinedBenefitPlanCostsAmortisationofGrantsFinanceCostsDividendReceivedfromAssociatesImpairmentofProperty,Plant&Equipment(Profit)/LossonDisposalofAssetsGains/(Losses)onFairValueofBiologicalAssetsGains/(Losses)onSaleofBiologicalAssetsDeemedDisposal(Gain)/LossShareofResultofAssociates

982526107

716.2

7

(199,131)112,27375,681(13,257)258,101(82,215)

-(1,959)(5,914)

---

(183,284)109,54979,623(15,636)198,223(45,765)

-(2,439)(5,617)(4,598)(32,280)

-

(199,131)112,27375,681(14,483)258,101

-5,118(1,959)(5,914)

--

(228,756)

(183,284)109,54979,623(19,988)198,223

-6,341(2,439)(5,617)(4,598)6,943

(140,827)

Operating Profit before Working Capital Changes 342,753 161,639 343,698 162,065

(Increase)/DecreaseinInventories(Increase)/DecreaseinTradeandOtherReceivablesIncrease/(Decrease)inTradeandOtherPayables(Increase)/DecreaseinamountsduefromRelatedCompaniesIncrease/(Decrease)inamountsduetoRelatedCompanies

(32,167)(151,056)48,4251,60225,058

36,41274,975(18,936)9,33913,879

(32,168)(151,057)48,603480

25,058

36,41275,115(18,875)8,69513,884

Cash Generated from / (used in) Operations 234,615 277,308 234,614 277,296

FinanceCostsPaidDefinedBenefitPlanCostsPaidESC/SGT/IncomeTaxPaid

25

(206,163)(80,978)(11,593)

(147,263)(49,768)(30,626)

(206,163)(80,978)(11,593)

(147,263)(49,768)(30,626)

Net Cash from / (used in) Operating Activities (64,119) 49,651 (64,120) 49,638

CASH FLOWS FROM / (USED IN) INVESTING ACTIVITIES

FinanceIncomeGrant/SubsidyReceivedProceedsfromDisposalofProperty,Plant&EquipmentProceedsfromDisposalofBiologicalAssetsFieldDevelopmentExpenditurePurchaseofProperty,Plant&Equipment

926

NoteANoteB

199,1316,3991,959

-(172,757)(3,168)

183,28411,5462,4394,980

(219,068)(1,581)

199,1316,3991,959

-(172,757)(3,168)

183,28411,5462,4394,980

(219,068)(1,581)

Net Cash from / (used in) Investing Activities 31,564 (18,399) 31,564 (18,399)

CASH FLOWS FROM / (USED IN) FINANCING ACTIVITIES

DividendPaidDividendReceivedfromAssociatesPaymentofGovernmentLeaseRentals-InterestPaymentofGovernmentLeaseRentals-Capital Proceeds from Loans RepaymentofLoans

(119,778)82,215(51,938)(5,004)23,000

(635,157)

(1,151,934)45,765(50,960)(4,812)148,000(368,302)

(119,778)82,215(51,938)(5,004)23,000

(635,157)

(1,151,934)45,765(50,960)(4,812)148,000(368,302)

Net Cash from / (used in) Financing Activities (706,662) (1,382,243) (706,663) (1,382,243)

Net Increase / (Decrease) in Cash & Cash Equivalents (739,217) (1,350,991) (739,218) (1,351,004)

Cash&CashEquivalentsatthebeginningoftheyear NoteC 1,164,194 2,515,185 1,164,194 2,515,197

Cash&CashEquivalentsattheendoftheyear NoteD 424,977 1,164,194 424,976 1,164,194

CASH FLOW STATEMENT


Financial Reports | Cash Flow Statement Notes to the Cash Flow Statement | Financial Reports


91

NOTES TO THE CASH FLOW STATEMENT


NOTE A 2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

Investment in Field Development Expenditure

InvestmentinImmaturePlantations

Rubber 139,148 175,190 139,148 175,190

Tea 22,878 31,536 22,878 31,536

Coconut 1,004 1,346 1,004 1,346

Unallocated 9,727 10,996 9,727 10,996

Total 172,757 219,068 172,757 219,068

Company Group

NOTE B 2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

Investment in Property, Plant & Equipment

Rubber 1,609 802 1,609 802

Tea 1,458 779 1,458 779

Coconut - - - -

Unallocated 101 - 101 -

Total 3,168 1,581 3,168 1,581

Company Group

NOTE C 2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

Cash & Cash Equivalents at the beginning of the year

Cash&BankBalances 23,395 22,888 23,395 22,900

BankOverdrafts (552,069) - (552,069) -

ShorttermInvestments 1,692,867 2,492,297 1,692,867 2,492,297

Total 1,164,194 2,515,185 1,164,194 2,515,197

Company Group

NOTE D 2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

Cash & Cash Equivalents at the end of the year

Cash&BankBalances 17,293 23,395 17,293 23,395

BankOverdrafts (1,013,209) (552,069) (1,013,209) (552,069)

ShortTermInvestments 1,420,892 1,692,867 1,420,892 1,692,867

Total 424,977 1,164,194 424,976 1,164,194

Notes to the Cash Flow Statement | Financial Reports


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NOTES TO THE FINANCIAL STATEMENTS

Index to the notes to the Financial Statements

Note No. Page No.

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

Reportingentity Basisofpreparation

Summaryofsignificantaccountingpolicies

Useofjudgments,estimatesandassumptions

Standardsissuedbutnotyeteffective

Revenue

Otherincome&gain

Profitbeforetaxation

Financeincome

Financecost

Share of result of associates

Currenttaxexpenses

Earningspershare

Leaseholdproperty,plant&equipment

Freeholdproperty,plantandequipment

Biologicalassets

16.1.BearerBiologicalAssets

16.2.ConsumableBiologicalAssets-TimberPlantations

16.3.ProduceonBearerBiologicalAssets

Financialassets

17.1.Quotedinvestment

17.2.Unquotedinvestment

Longterminvestments

18.1InvestmentsinSubsidiaries

18.2.InvestmentsinAssociates

18.3.Otherlongterminvestments

18.4.SummarisedFinancialInformationofAssociates

93

93

94

110

111

112

114

114

114

114

115

116

117

117

119

120

120

121

122

122

122

123

124

124

124

124

125

Note No. Page No.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

34.

35.

36.

37.

38.

Inventories

Tradeandotherreceivables

AmountsduefromrelatedCompanies

Shortterminvestments

Stated capital

Interestbearingloansandborrowings

Retiringbenefitobligations

Deferredincome

Deferredtaxassetandliabilities

Liabilitytomakeleasepayment

Tradeandotherpayables

Dividendpayable

AmountsduetorelatedCompanies

Assetspledgedassecurities

Capitalcommitments

Commitmentsandcontingencies

Eventsafterreportingperiod

Relatedpartydisclosures

ImpactofamendmentstoLKAS16andLKAS41

Financialriskmanagementobjectivesand policies

126

126

126

126

126

127

128

129

129

130

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Financial Reports | Notes to the Financial Statements Notes to the Financial Statements | Financial Reports


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1. REPORTING ENTITY

1.1 Domicile and Legal Form

Kegalle Plantations PLC is a limited liabilityCompany incorporated and domiciled in SriLanka, under the Companies Act No. 17 of1982 (The Company was re-registered underthe Companies Act No. 07 of 2007) in termsof the provisions of the Conversion of PublicCorporations or Government Owned BusinessUndertakingintoPublicCompaniesActNo.23of1987.

TheregisteredofficeoftheCompanyislocatedatNo.310,HighLevelRoad,Nawinna,Maharagama,and Plantations are situated in the plantingdistrictsofKegalle,Kurunegala&Badulla.

TheordinarysharesoftheCompanyarelistedontheColomboStockExchangeofSriLanka.

All companies in the Group are limited liabilitycompanies incorporated and domiciled in Sri Lanka.

The Financial Statements of the Companycomprise with the Statement of FinancialPosition, Statement of Profit or Loss, StatementofComprehensiveIncome,StatementofChangesin Equity, Statement of Cash Flows togetherwith Accounting Policies andNotes to FinancialStatements.

1.2 Principal Activities and Nature of Operations

During the year, the principal activities of theCompanywerethecultivation,manufactureandsaleofRubber,Tea,andCoconut.

Principal activities of other Companies in theGroupareasfollows.

1.3 Parent Enterprise and Ultimate Parent Enterprise

The Company’s parent undertaking is RPCPlantationManagementServices(Pvt)Ltd.Intheopinionofthedirectors,theCompany’sultimateparent undertaking and controlling party isRichardPieris&Co.PLC.,whichisincorporatedinSriLanka.

1.4 Date of Authorization for issue

TheConsolidatedFinancialStatementsofKegallePlantationsPLCand its Subsidiaries for theyearended31March2017wereauthorizedfor issuein accordancewith a resolutionof theboardofdirectorson31May2017.

2. BASIS OF PREPARATION 2.1 Statement of Compliance

The Financial Statements of the Company andtheGroupwhichcomprisetheStatementofProfitor Loss , Statement of Comprehensive Income,Statement of Financial Position, Statement ofChanges in Equity, and Cash Flows StatementtogetherwithAccountingPoliciesandNotestotheFinancialStatements(the“ConsolidatedFinancialStatements”)havebeenprepared inaccordancewithSriLankaAccountingandAuditingStandardsAct No. 15 of 1995, which requires compliancewithSriLankaAccountingStandardspromulgatedbyThe InstituteofCharteredAccountantsofSriLanka (CASL), andwith the requirements of theCompaniesActNo.07of2007.

2.2 Basis of Measurement

These Consolidated Financial Statements havebeenprepared inaccordancewith thehistoricalcostconventionotherthanfollowingitemsintheFinancialStatements.

Company Relationship Nature of the business

HamefaKegalle(Pvt)Ltd Subsidiary Currentlynobusinessoperationsotherthanrent income

RichardPierisNaturalFoamsLtd Associate Manufactureofbestlatexfoamproducts

ArpicoInsurancePLC Associate Providinglifeinsuranceservices

Notes to the Financial Statements | Financial Reports


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• Right to Use of Land and leased assets ofJEDB/SLSPCatrevaluedamount.

• Managed Consumable biological assets aremeasuredatfairvalue.

• Financial instruments (includingthosecarriedatamortisedcost)

NoadjustmentshavebeenmadeforinflationaryfactorsintheConsolidatedFinancialStatements.

2.3 Functional and Presentation Currency

The Financial Statements are presented inSri Lankan Rupees (Rs.), which is the Group’sfunctionalandpresentationcurrency.Allfinancialinformationpresented inSri LankanRupeeshasbeen given to the nearest rupee, unless statedotherwise.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Accounting Policies set out below areconsistentwiththoseusedinthepreviousyear.

3.1 Going Concern

TheConsolidatedfinancialstatementshavebeenprepared on the assumption that theCompanyisagoingconcern.TheDirectorshavemadeanassessmentoftheGroup’sabilitytocontinueasagoingconcernintheforeseeablefuture,andtheydo not foresee a need for liquidation or cessation oftrading,tojustifyadoptingthegoingconcernbasisinpreparingtheseFinancialStatements.

3.2 Basis of Consolidation

The consolidated Financial Statements comprisethe Financial Statements of the Group and itssubsidiaries as at 31 March 2017. Control isachieved when the Group is exposed, or hasrights, to variable returns from its involvementwith the investee and has the ability to affectthosereturnsthroughitspowerovertheinvestee.Specifically,theGroupcontrolsaninvesteeif,andonlyif,theGrouphas:

• Power over the investee (i.e., existing rightsthat give it the current ability to direct therelevantactivitiesoftheinvestee)

• Exposure,orrights,tovariablereturnsfromitsinvolvementwiththeinvestee

• Theabilitytouseitspowerovertheinvesteeto affect its returns

Generally,thereisapresumptionthatamajorityofvoting rights result incontrol.Tosupport thispresumptionandwhen theGrouphas less thana majority of the voting or similar rights of aninvestee, the Group considers all relevant factsand circumstances in assessing whether it haspoweroveraninvestee,including:

• The contractual arrangement with the othervoteholdersoftheinvestee

• Rights arising from other contractualarrangements

• TheGroup’svotingrightsandpotentialvotingrights

TheGroupre-assesseswhetherornotitcontrolsan investee if facts and circumstances indicatethat there are changes to one or more of thethree elements of control. Consolidation of asubsidiarybeginswhentheGroupobtainscontrolover thesubsidiaryandceaseswhentheGrouploses control of the subsidiary. Assets, liabilities,incomeandexpensesofasubsidiaryacquiredordisposedofduring the year are included in theconsolidatedFinancialStatements fromthedatetheGroupgainscontroluntilthedatetheGroupceasestocontrolthesubsidiary.

Profit or loss and each component of OtherComprehensive Income (OCI) are attributed totheequityholdersoftheparentoftheGroupandtothenon-controllinginterests,evenifthisresultsin the non-controlling interests having a deficitbalance.Whennecessary,adjustmentsaremadetotheFinancialStatementsofsubsidiariestobringtheiraccountingpoliciesintolinewiththeGroup’saccounting policies. All intra-group assets andliabilities,equity,income,expensesandcashflowsrelatingtotransactionsbetweenmembersoftheGroupareeliminatedinfullonconsolidation.

Achangeintheownershipinterestofasubsidiary,without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary,it derecognises the related assets (includinggoodwill), liabilities, non-controlling interest andother components of equity while any resultant gain or loss is recognised in profit or loss. Anyinvestmentretainedisrecognisedatfairvalue.



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3.2.1 Business Combinations and Goodwill

Business combinations are accounted for usingtheacquisitionmethod.Thecostofanacquisitionismeasuredastheaggregateoftheconsiderationtransferred,measuredatacquisitiondatefairvalueandtheamountofanyNon-Controlling Interestin theacquiree. For eachbusiness combination,theGroupelectswhether itmeasures theNon-Controlling Interest in the acquiree either atfair value or at the proportionate share of theacquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred andincludedinadministrativeexpenses.

WhentheGroupacquiresabusiness, itassessesthe financial assets and liabilities assumed forappropriate classification and designation inaccordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

Ifthebusinesscombinationisachievedinstages,anypreviouslyheldequityinterestisremeasuredatitsacquisitiondatefairvalueandanyresultinggainorlossisrecognisedinprofitorloss.

Any contingent consideration to be transferredby the acquirer will be recognised at fair valueattheacquisitiondate.Contingentconsiderationclassifiedasanassetorliabilitythatisafinancialinstrument and within the scope of LKAS39 Financial Instruments: Recognition andMeasurement, is measured at fair value withchanges in fair value recognised either in profitor lossorasachangetoOCI. If thecontingentconsiderationisnotwithinthescopeofLKAS39,it is measured in accordance with the appropriate SLFRS.Contingentconsiderationthatisclassifiedas equity is not remeasured and subsequentsettlement is accounted for within equity.

Goodwill is initiallymeasured at cost, being theexcess of the aggregate of the considerationtransferredandtheamountrecognisedfornon-controlling interests, and any previous interestheld, over the net identifiable assets acquiredand liabilities assumed. If the fair value of thenetassetsacquiredisinexcessoftheaggregateconsideration transferred, theGroup re-assesseswhetherithascorrectlyidentifiedalloftheassetsacquired and all of the liabilities assumed andreviews the procedures used to measure theamounts to be recognised at the acquisitiondate.Ifthereassessmentstillresultsinanexcessof the fair valueofnetassetsacquiredover theaggregate consideration transferred, then thegainisrecognisedinprofitorloss.

After initial recognition,goodwill ismeasuredatcost less any accumulated impairment losses. For thepurposeof impairment testing,goodwillacquired in abusiness combination is, from theacquisitiondate,allocatedtoeachoftheGroup’scash-generatingunitsthatareexpectedtobenefitfrom the combination, irrespective of whetherother assets or liabilities of the acquiree areassignedtothoseunits.

Where goodwill has been allocated to a cash-generatingunitandpartoftheoperationwithinthatunitisdisposedof,thegoodwillassociatedwiththedisposedoperationisincludedinthecarryingamount of theoperationwhendetermining thegain or loss on disposal. Goodwill disposed inthese circumstances is measured based on therelativevaluesofthedisposedoperationandtheportionofthecash-generatingunitretained.

3.2.2 Investment in Associates

An associate is an entity over which the Grouphas significant influence. Significant influenceis the power to participate in the financial andoperatingpolicydecisionsofthe investee,but isnotcontroloverthosepolicies.

The considerations made in determiningsignificantinfluencearesimilartothosenecessarytodeterminecontroloversubsidiaries.

The Group’s investments in its associate areaccountedforusingtheequitymethod.

Under the equity method, the investment inan associate is initially recognised at cost. Thecarrying amount of the investment is adjustedtorecognisechangesintheGroup’sshareofnetassets of the associate since the acquisition date. Goodwill relating to the associate is included inthecarryingamountoftheinvestmentandisnottestedforimpairmentindividually.

ThestatementofprofitorlossreflectstheGroup’sshare of the results of operations of the associate. AnychangeinOCIofthoseinvesteesispresentedas part of the Group’s OCI. In addition, whenthere has been a change recognised directly intheequityoftheassociate,theGrouprecognisesitsshareofanychanges,whenapplicable,inthestatementofchanges inequity.Unrealisedgainsand losses resulting from transactions betweentheGroupandtheassociateareeliminatedtotheextentoftheinterestintheassociate.



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The aggregate of theGroup’s share of profit orloss of an associate is shown on the face of the statement of profit or loss outside operatingprofitand representsprofitor lossafter taxandnon-controllinginterestsinthesubsidiariesoftheassociate.

The Financial Statements of the associate areprepared for the same reporting period as theGroup.Whennecessary,adjustmentsaremadetobringtheaccountingpoliciesinlinewiththoseoftheGroup.

After application of the equity method, the

Group determines whether it is necessary torecogniseanimpairmentlossonitsinvestmentinits associate.At each reportingdate, theGroupdetermines whether there is objective evidencethat the investment in theassociate is impaired.Ifthereissuchevidence,theGroupcalculatestheamountofimpairmentasthedifferencebetweenthe recoverableamountof theassociateand itscarrying value, and then recognises the loss as‘Shareofprofitofanassociateinthestatementofprofitorloss.

Upon loss of significant influence over theassociate, the Group measures and recognisesany retained investment at its fair value. Anydifference between the carrying amount of theassociate upon loss of significant influence andthe fair value of the retained investment andproceedsfromdisposalisrecognisedinprofitorloss.

3.3 Current versus Non-Current Classification

The Group presents assets and liabilities instatementoffinancialpositionbasedoncurrent/non - current classification. An asset as currentwhenitis:

• Expectedtoberealisedorintendedtosoldorconsumedinnormaloperatingcycle

• Heldprimarilyforthepurposeoftrading• Expectedtoberealisedwithintwelvemonths

afterthereportingperiod

Or

• Cashorcashequivalentunlessrestrictedfrombeing exchanged or used to settle a liabilityforatleasttwelvemonthsafterthereportingperiod

Allotherassetsareclassifiedasnon-current.

Aliabilityiscurrentwhen:

• Itisexpectedtobesettledinnormaloperatingcycle

• Itisheldprimarilyforthepurposeoftrading

• Itisduetobesettledwithintwelve monthsafterthereportingperiod

Or

• Thereisnounconditionalrighttodeferthesettlement of the liability for at least twelvemonthsafterthereportingperiod

TheGroupclassifiesallotherliabilitiesasnon-current.

Deferredtaxassetsandliabilitiesareclassifiedasnon-currentassetsandliabilities.

3.4 Fair Value Measurement

The Group measures financial instruments andnon-financialassetsatfairvalueateachstatementof financial position date. Fair value relateddisclosures for financial instruments and non-financialassetsthataremeasuredatfairvalueorwherefairvaluesaredisclosedaresummarisedinthefollowingnotes:

• ManagedConsumableBiologicalAssets• ProduceonBearerBiologicalAssets• FinancialInstruments

Fairvalueisthepricethatwouldbereceivedto sell an asset or paid to transfer a liabilityin an orderly transaction between marketparticipants at the measurement date. Thefair value measurement is based on thepresumption that the transaction to sell the assetortransfertheliabilitytakesplaceeither:

• Intheprincipalmarketfortheassetorliability Or

• Intheabsenceofaprincipalmarket,inthemostadvantageousmarketfortheassetorliability

Theprincipalor themost advantageousmarketmustbeaccessiblebytheGroup.

Thefairvalueofanassetoraliabilityismeasuredusing the assumptions that market participantswould use when pricing the asset or liability,assuming that market participants act in theireconomicbestinterest.

Afairvaluemeasurementofanon-financialasset



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takesintoaccountamarketparticipant’sabilitytogenerateeconomicbenefitsbyusingtheassetinitshighestandbestuseorbysellingittoanothermarketparticipantthatwouldusetheassetinitshighestandbestuse.

The Group uses valuation techniques that areappropriate in the circumstances and for which sufficientdataareavailabletomeasurefairvalue,maximisingtheuseofrelevantobservableinputsandminimisingtheuseofunobservableinputs.

All assets and liabilities for which fair value ismeasuredordisclosedintheFinancialStatementsare categorised within the fair value hierarchy,described as follows, based on the lowestlevel input that is significant to the fair valuemeasurementasawhole:

• Level 1 — Quoted (unadjusted) marketpricesinactivemarketsforidenticalassetsorliabilities

• Level2 — Valuation techniques for which the lowestlevelinputthatissignificanttothefairvalue measurement is directly or indirectlyobservable

• Level3 — Valuation techniques for which the lowestlevelinputthatissignificanttothefairvaluemeasurementisunobservable

For assets and liabilities that are recognised inthe financial statements on a recurring basis,the Group determines whether transfers haveoccurredbetween levels in the hierarchy by re-assessing categorisation (based on the lowestlevel input that is significant to the fair valuemeasurement as a whole) at the end of eachreportingperiod.

External valuers are involved for valuation ofsignificant assets, such as managed biologicalassets,andsignificantliabilities,suchasretirementbenefitobligation.Involvementofexternalvaluersis decided upon annually by the ManagementCommittee after discussion with and approvalby the Company’s Audit Committee. Selectioncriteria include market knowledge, reputation,independence and whether professional standards are maintained. The Management Committeedecides,afterdiscussionswiththeGroup’sexternalvaluers,whichvaluationtechniquesandinputstouse for each case.

Forthepurposeoffairvaluedisclosures,theGrouphasdeterminedclassesofassetsandliabilitiesonthebasisofthenature,characteristicsandrisksoftheassetorliabilityandthelevelofthefairvaluehierarchyasexplainedabove.

3.5 Foreign Currency Translation

Transactions in foreign currencies are initiallyrecordedbytheGroup’sentitiesattheirrespectivefunctional currency spot rates at the date the transactionfirstqualifiesforrecognition.Monetaryassets and liabilities denominated in foreigncurrencies are translated at the functional currency spot rates of exchange at the reporting date.Differencesarisingonsettlementortranslationofmonetary items are recognised in profit or losswith the exception of monetary items that aredesignated as part of the hedgeof theGroup’snetinvestmentofaforeignoperation.Thesearerecognised inothercomprehensive incomeuntilthenet investmentisdisposedof,atwhichtime,the cumulative amount is reclassified to profitor loss. Tax charges and credits attributable toexchange differences on those monetary itemsarealsorecordedinothercomprehensiveincome.

Non-monetary assets and liabilities which arecarried in terms of historical cost in a foreigncurrency are retranslated at the exchange ratethatprevailedatthedateofthetransaction.Non-monetaryitemsmeasuredatfairvalueinaforeigncurrencyaretranslatedusingtheexchangeratesat the date when the fair value is determined.The gain or loss arising on retranslation ofnon-monetary items is treated in line with therecognitionofgainorlossonchangeinfairvalueof the item (i.e., translationdifferenceson itemswhose fair value gain or loss is recognised inother comprehensive incomeorprofitor loss isalso recognised inother comprehensive incomeorprofitorloss,respectively).

3.6 Property, Plant and Equipment

Thegroupapplies the requirementsof LKAS16on‘PropertyPlantandEquipment’inaccountingfor its owned assets which are held for and use in theprovisionoftheservices,forrentaltootherorfor administrationpurpose and are expected tobeusedformorethanoneyear.

3.6.1 Basis of Recognition

PropertyPlantandEquipmentisrecognisedifitisprobablethatfutureeconomicbenefitassociatedwiththeassetswillflowtotheGroupandcostoftheassetcanbereliablymeasured.

3.6.2 Measurement

Items of Property, Plant & Equipment aremeasured at cost (or at fair value in the caseof land) less accumulated depreciation andaccumulated impairment losses, if any.



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3.6.3 Owned Assets

ThecostofProperty,Plant&Equipmentincludesexpenditures thataredirectlyattributable to theacquisition of the asset. Such costs includes the costofreplacingpartoftheproperty,plantandequipment and borrowing costs for long termsconstructionprojectsiftherecognitioncriteriaaremet.Thecostofself-constructedassets includesthecostofmaterialsanddirectlabour,anyothercostdirectlyattributabletobringingtheassettoaworkingconditionforitsintendeduse,andthecostsofdismantlingandremovingtheitemsandrestoringthesiteonwhichtheyarelocated.

Purchased software that is integral to thefunctionalityoftherelatedequipmentiscapitalizedas a part of that equipment.

When significant parts of property, plant andequipmentarerequiredtobereplacedatintervals,theentityrecognisessuchpartsasindividualassets(majorcomponents)withspecificusefullivesanddepreciation,respectively.Likewise,whenamajorinspection isperformed, itscost isrecognised inthecarryingamountoftheplantandequipmentas a replacement if the recognition criteria aresatisfied.Allother repairandmaintenancecostsarerecognisedintheStatementofProfitorLossas incurred. The present value of the expectedcostforthedecommissioningoftheassetafteritsuseisincludedinthecostoftherespectiveassetiftherecognitioncriteriaforaprovisionaremet.

Capital work-in-progress is transferred to therespective asset accounts at the time of firstutilisation or at the time the asset is commissioned.

3.6.4 Leased Assets

Thedeterminationofwhetheranarrangementis(orcontains)aleaseisbasedonthesubstanceofthearrangementattheinceptionofthelease.Thearrangement is, or contains, a lease if fulfilmentof thearrangement isdependenton theuseofa specific asset or assets and the arrangementconveys a right to use the asset or assets,even if that right is not explicitly specified in anarrangement.

Group as a lessee

A lease is classified at the inception date as afinanceleaseoranoperatinglease.Aleasethattransfers substantially all the risks and rewardsincidentaltoownershiptotheGroupisclassifiedasafinancelease.

Finance leases are capitalised at the

commencement of the lease at the inception date fairvalueoftheleasedpropertyor,iflower,atthepresent value of the minimum lease payments.Lease payments are apportioned betweenfinancechargesandreductionoftheleaseliabilitysoastoachieveaconstantrateofinterestontheremainingbalanceoftheliability.Financechargesarerecognised infinancecosts in thestatementofprofitorloss.

Aleasedasset isdepreciatedovertheuseful lifeof the asset. However, if there is no reasonablecertaintythattheGroupwillobtainownershipbythe end of the lease term, the asset is depreciated overtheshorteroftheestimatedusefullifeoftheasset and the lease term.

Operating leasepaymentsare recognisedasanoperating expense in the statement of profit orlossonastraight-linebasisovertheleaseterm.

3.6.5 Derecognition

Anitemofproperty,plantandequipmentandanysignificantpartinitiallyrecognisedisderecognisedupon disposal or when no future economic benefits are expected from its use or disposal.Anygainor lossarisingonderecognitionof theasset (calculated as the difference between thenetdisposal proceeds and the carrying amountoftheasset)isincludedintheStatementofProfitorLosswhentheassetisderecognizedandgainsare not classified as revenue. When revaluedassets are sold, any related amount included in theRevaluationReserveistransferredtoRetainedEarnings.

3.6.6 Land Development Cost

Permanent land development costs are thosecosts incurred in making major infrastructuredevelopmentandbuildingnewaccess roadsonleasehold lands.

Thesecostshavebeencapitalisedandamortisedovertheremainingleaseperiod. Permanent impairments to land developmentcosts are charged to the Statement of Profitor Loss in full or reduced to the net carryingamounts of such assets in the year of occurrence afterascertainingtheloss.

3.6.7 Biological Assets

Biological assets are classified into maturebiologicalassetsand immaturebiologicalassets.Mature biological assets are those that haveattained harvestable specifications or are able



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to sustain regular harvests. Immature biologicalassets are those that have not yet attainedharvestable specification. Tea, Rubber andother plantations and nurseries are classified asbiologicalassets.

Biological assets are further classified as bearerbiological assets and consumable biologicalassets. Bearer biological assets include Tea,Rubber and Coconut plants, those that are notintendedtobesoldorharvested,howeverusedto grow for harvesting agricultural produce.Consumable biological assets include managedtimber trees those that are to be harvested asagriculturalproducefrombiologicalassetsorsoldasbiologicalassets.

Theentity recognize thebiologicalassetswhen,and only when, the entity controls the assets as a result of past event, it is probable that futureeconomicbenefitsassociatedwiththeassetswillflow to the entity and the fair value or cost ofthe assets can bemeasured reliably. Permanentimpairments toBiologicalAssetsare charged totheStatementofProfitorLossinfullandreducedtothenetcarryingamountsofsuchassetintheyearofoccurrenceafterascertainingtheloss.

(a) Bearer Biological Assets

Thebearerbiologicalassetsaremeasuredatcostless accumulated depreciation and accumulated impairment losses, ifany, in termsofLKAS16–PropertyPlant&Equipment.

Thecostof landpreparation, rehabilitation,newplanting, replanting, crop diversification, interplantingandfertilizingetc.,incurredbetweenthetimeofplantingandharvesting(whentheplantedareaattainsmaturity),areclassifiedas immatureplantations. These immature plantations areshownatdirectcostsplusattributableoverheads,includinginterestattributabletolong-termloansused for financing immature plantations. Theexpenditure incurredonbearerbiologicalassets(Tea,RubberandTimberfields)whichcomesintobearingduringtheyear, istransferredtomatureplantations.

(b) Consumable Biological Assets

Consumable biological assets include managedtimber that are to be harvested as agriculturalproduceorsoldasbiologicalassets.

Themanagedtimbertreesaremeasuredoninitial

recognition and at the end of each reportingperioditsfairvaluelesscosttosellintermsofLKAS41.The cost is treated as approximation to fairvalueofyoungplantsastheimpactonbiologicaltransformationofsuchplantstopriceduringthisperiodisimmaterial.Thefairvalueoftimbertreesare measured using DCF method taking in toconsiderationthecurrentmarketpricesoftimber,appliedtoexpectedtimbercontentofatreeatthematurity by an independent professional valuer.AllotherassumptionsandsensitivityanalysisaregiveninNote16.2.

The Main Variables in DCF Model Concerns

Nursery cost includes the cost of direct materials, directlyattributableoverheads, lessprovisionforovergrownplants.

Thegainor loss arisingon initial recognitionofconsumablebiologicalassetsatfairvaluelesscosttosellandfromachangeinfairvaluelesscosttosellofconsumablebiologicalassetsareincludedinprofitorlossfortheperiodinwhichitarises.

(c) Produce Growing on Bearer Biological Assets

InaccordancewithLKAS41,Companyrecogniseagriculturalproducegrowingonbearerplantsatfairvaluelesscosttosell.Changeinthefairvalueofsuchagriculturalproducerecognizedinprofitorlossattheendofeachreportingperiod.

Variable Comment

Timbercontent

Estimatebasedonphysicalverificationofgirth, height and considering the growthoftheeachspicesindifferentgeographicalregions.Factor all the prevailing statutoryregulations enforced against harvestingoftimbercoupledwithforestryplanoftheCompany.

Economicuseful life

EstimatedbasedonthenormallifespanofeachspicesbyfactoringtheforestryplanoftheCompany.

Sellingprice

EstimatedbasedonprevailingSri Lankanmarket prices. Factor all the conditionsto be fulfilled in bringing the trees intosaleablecondition.

Plantingcost

Estimatedcostsforthefurtherdevelopmentof immature areas are deducted.

Discountrate

Futurecashflowsarediscountedat14%



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For this purpose, quantities of harvestableagricultural produce ascertained based onharvestingcycleofeachcropcategorybylimitingto one harvesting cycle based on last day ofthe harvest in the immediately preceding cycle.Further,50%ofthecropinthatharvestingcycleconsideredforthevaluation.

For the valuationof the harvestable agriculturalproduce, theCompany uses the followingpriceformulas.

(d) Infilling Cost on Bearer Biological Assets

Thelanddevelopmentcostsincurredintheformof infillinghavebeen capitalised to the relevantmaturefield,onlywheresuchcost increases theexpected futurebenefits fromthatfield,beyondits pre-infilling performance assessment. Infillingcosts so capitalised are depreciated over thenewlyassessedremainingusefuleconomiclifeoftherelevantmatureplantation,ortheunexpiredleaseperiod,whicheverislower.

Infillingcosts thatarenot capitalisedhavebeenchargedtotheStatementofProfitorLossintheyear in which they are incurred.

(e) Borrowing Cost

Borrowing costs that are directly attributableto acquisition, construction or production of a qualifyingasset,whichtakesasubstantialperiodof timetogetreadyfor its intendeduseorsaleare capitalised as a part of the asset.

Borrowing costs that are not capitalised arerecognised as expenses in the period in whichtheyare incurredandchargedtotheStatementofComprehensiveIncome.

The amounts of the borrowing costs whichare eligible for capitalisation are determined inaccordance with the in LKAS 23 – ‘BorrowingCosts’.

TheamountsocapitalisedisdisclosedinNotestotheFinancialStatements.

3.6.8 Depreciation and Amortization

(a) Depreciation

Depreciation is recognised in the Statement ofProfit or Loss on a straight-line basis over theestimateduseful economic lives of eachpart ofan item of Property, Plant & Equipment. Assetsheld under finance leases are depreciated overtheshorteroftheleasetermandtheusefullivesofequivalentownedassetsunlessitisreasonablycertain that the Group will have ownership bythe end of the lease term. Lease period of land acquiredfromJEDB/SLSPCwillbeexpiredinyear2045. The estimated useful lives for the currentandcomparativeperiodsareasfollows:

Category No. of years

Rate (%)

Buildings 40years 2.50

Plant&Machinery 12.5years 8.00

ColourSeparators 20years 5.00

Furniture&Fittings 10years 10.00

Vehicles 5years 20.00

Equipments 8years 12.50

Sanitation,WaterSupply&Electricity 20years 5.00

Computers/ComputerSoftware 8years 12.50

Lines&Latrines 40years 2.50

MaturePlantations-ReplantingandNewPlanting


Rate (%)

Rubber 20years 5.00

Tea 33years 3.33

Coconut 50years 2.00

Depreciationofanassetbeginswhenitisavailablefor use and ceases at the earlier of the date on whichtheasset isclassifiedasheldforsaleor isderecognised.

Depreciation methods, useful lives and residualvaluesare reassessedat the reportingdateandadjusted prospectively, if appropriate. Matureplantationsaredepreciatedovertheirusefullivesorunexpiredleaseperiod,whicheverisless.

Tea Bought Leaf rate (current month) lesscostofharvesting&transport

Rubber LatexPrice (95%of currentRSS1Price)lesscostoftapping&transport

Coconut AuctionPricebyCoconutDevelopmentAuthoritylesscostofpicking&transport



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No depreciation is provided for immatureplantations.

(b) Amortisation

The leasehold rights of assets taken over fromJEDB/SLSPCareamortisedinequalamountsovertheshorteroftheremainingleaseperiodsandtheusefullivesasfollows:


Rate (%)

Leasehold Property 53years 1.89

MaturePlantations 30years 3.33

Buildings 25years 4.00

Machinery 15years 6.67

ImprovementstoLand 30years 3.33

3.7 Intangible Assets

Intangibleassetsacquiredseparatelyaremeasuredoninitialrecognitionatcost.Thecostofintangibleassetsacquiredinabusinesscombinationistheirfair value at the date of acquisition. Followinginitial recognition, intangible assets are carriedat cost less any accumulated amortisation and accumulated impairment losses. Internallygenerated intangibles, excluding capitaliseddevelopment costs, are not capitalised and therelatedexpenditureisreflectedinprofitorlossintheperiodinwhichtheexpenditureisincurred.

Theuseful livesof intangibleassetsareassessedaseitherfiniteorindefinite.

Intangible assets with finite lives are amortisedover the useful economic life and assessed forimpairment whenever there is an indicationthat the intangible asset may be impaired. Theamortisation period and the amortisation method foranintangibleassetwithafiniteusefullifearereviewed at least at the end of each reportingperiod. Changes in the expected useful life orthe expected pattern of consumption of futureeconomic benefits embodied in the asset areconsidered to modify the amortisation period or method, as appropriate, and are treated as changesinaccountingestimates.Theamortisationexpense on intangible assets with finite lives isrecognised in the statement of profit or loss intheexpensecategory that isconsistentwith thefunctionoftheintangibleassets.

Intangibleassetswithindefiniteusefullivesarenot

amortised,butaretestedforimpairmentannually,either individuallyoratthecash-generatingunitlevel.Theassessmentofindefinitelifeisreviewedannually todeterminewhether the indefinite lifecontinues tobe supportable. If not, the changeinusefullifefromindefinitetofiniteismadeonaprospectivebasis.

Gainsor lossesarising fromderecognitionofanintangible asset aremeasured as the differencebetween the net disposal proceeds and thecarryingamountoftheassetandarerecognisedinthestatementofprofitorlosswhentheassetisderecognised.

3.8 Research and Development Costs

Research costs are expensed as incurred.Development expenditures on an individualproject are recognised as an intangible assetwhentheGroupcandemonstrate:

• The technical feasibility of completing theintangible asset so that the asset will beavailableforuseorsale

• Its intention to complete and its ability andintention to use or sell the asset

• Howtheassetwillgenerate futureeconomicbenefits

• The availability of resources to complete theasset

• Theabilitytomeasurereliablytheexpenditureduringdevelopment

Following initial recognitionof thedevelopmentexpenditure as an asset, the asset is carried atcost less any accumulated amortisation and accumulated impairment losses.Amortisationoftheassetbeginswhendevelopmentiscompleteandtheasset isavailableforuse. It isamortisedover the period of expected future benefit.Amortisation isrecorded incostofsales.Duringtheperiodofdevelopment,theassetistestedforimpairment annually.

3.9 Financial Instruments

Afinancial instrument is any contract that givesrisetoafinancialassetofoneentityandafinancialliabilityorequityinstrumentofanotherentity.

3.9.1 Financial Assets

3.9.1.1 Initial Recognition and Measurement

Financialassetsareclassified,atinitialrecognition,asfinancialassetsat fair value throughprofitorloss, loans and receivables, held-to-maturity



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investments,AFSfinancialassets,orasderivativesdesignatedashedginginstrumentsinaneffectivehedge, as appropriate. All financial assets arerecognisedinitiallyatfairvalueplus,inthecaseoffinancialassetsnotrecordedatfairvaluethroughprofitorloss,transactioncoststhatareattributabletotheacquisitionofthefinancialasset.

Purchasesorsalesoffinancialassetsthatrequiredeliveryofassetswithinatimeframeestablishedbyregulationorconvention in themarketplace(regularwaytrades)arerecognisedi.e.,thedatethat theGroup commits topurchaseor sell theasset.

TheGroup’sfinancialassetsincludecashandshort-termdeposits,shortterminvestments,tradeandother receivables, loans and other receivables,quotedandunquotedfinancialinstruments.

3.9.1.2 Subsequent Measurement

Thesubsequentmeasurementoffinancialassetsdependsontheirclassificationasdescribedbelow:

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit orloss include financial assets held-for-tradingand financial assets designated upon initialrecognition at fair value through profit or loss.Financial assets are classifiedasheld-for-tradingiftheyareacquiredforthepurposeofsellingorrepurchasinginthenearterm.

Financial assets at fair value through profit andloss are carried in the Statement of FinancialPositionatfairvaluewithnetchangesinfairvaluepresentedasfinance incomeorfinancecosts intheStatementofProfitorLoss.

TheGrouphasnotdesignatedanyfinancialassetsasatfairvaluethroughprofitorloss.

(b) Loans and receivables

Loansandreceivablesarenon-derivativefinancialassets with fixed or determinable paymentsthat are not quoted in an active market. Afterinitial measurement, such financial assets aresubsequentlymeasuredatamortizedcostusingthe Effective Interest Rate (EIR) method, lessimpairment. Amortized cost is calculated bytakingintoaccountanydiscountorpremiumonacquisitionandfeesorcoststhatareanintegral

partoftheEIR.TheEIRamortizationisincludedinfinanceincomeintheStatementofProfitorLoss.ThelossesarisingfromimpairmentarerecognisedintheStatementofProfitorLossinfinancecosts.

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

(c) Held-to-maturity investments

Non-derivative financial assets with fixed ordeterminablepayments and fixedmaturities areclassified as held-to-maturity when the Grouphasthepositiveintentionandabilitytoholdthemto maturity. After initial measurement, held-to-maturityinvestmentsaremeasuredatamortisedcost using the effective interest method, lessimpairment.

Amortisedcostiscalculatedbytakingintoaccountany discount or premium on acquisition and fees orcoststhatareanintegralpartoftheEIR.TheEIRamortisationisincludedinfinanceincomeintheStatementofProfitorLoss.ThelossesarisingfromimpairmentarerecognisedintheStatementofProfitorLossinfinancecosts.

(d) Available-for-sale financial investments

AFS financial assets include equity investmentsanddebtsecurities.Equity investmentsclassifiedasAFSarethosethatareneitherclassifiedasheldfor tradingnordesignatedat fair value throughprofitorloss.Debtsecuritiesinthiscategoryarethosethatareintendedtobeheldforanindefiniteperiodoftimeandthatmaybesoldinresponsetoneedsforliquidityorinresponsetochangesinthemarketconditions.

After initial measurement, AFS financial assetsare subsequently measured at fair value withunrealisedgainsorlossesrecognisedinOCIandcreditedintheAFSreserveuntiltheinvestmentisderecognised,atwhichtimethecumulativegainor loss is recognised inotheroperating income,orthe investment isdeterminedtobe impaired,whenthecumulative loss isreclassifiedfromtheAFSreserve to thestatementofprofitor loss infinancecosts. InterestearnedwhilstholdingAFSfinancial assets is reported as interest incomeusingtheEIRmethod.

The Group evaluates whether the ability andintention to sell its AFS financial assets in thenear term is still appropriate. When, in rare



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circumstances,theGroupisunabletotradethesefinancialassetsduetoinactivemarkets,theGroupmayelecttoreclassifythesefinancialassetsifthemanagementhastheabilityandintentiontoholdtheassetsforforeseeablefutureoruntilmaturity.

For a financial asset reclassified from the AFScategory, the fair value carrying amount at thedateofreclassificationbecomesitsnewamortisedcostandanypreviousgainor losson theassetthathasbeen recognised inequity isamortisedto profit or loss over the remaining life of theinvestmentusingtheEIR.Anydifferencebetweenthe new amortised cost and the maturity amount is also amortised over the remaining life of theasset using the EIR. If the asset is subsequentlydetermined to be impaired, then the amountrecordedinequityisreclassifiedtothestatementofprofitorloss.

3.9.1.3 Derecognition

A financial asset (or, where applicable, a partofafinancialassetorpartofagroupof similarfinancialassets)isderecognisedwhen:

• Therightstoreceivecashflowsfromtheassethaveexpired

• TheGrouphastransferreditsrightstoreceivecashflowsfromtheassetorhasassumedanobligationtopaythereceivedcashflowsinfullwithout material delay to a third party under a ‘pass-through’arrangement;andeither(a)theGrouphastransferredsubstantiallyalltherisksandrewardsoftheasset,or(b)theGrouphasneither transferred nor retained substantiallyalltherisksandrewardsoftheasset,buthastransferred control of the asset.

When the Group has transferred its rights toreceivecashflowsfromanassetorhasenteredintoapass-througharrangement,itevaluatesifandtowhatextentithasretainedtherisksandrewardsofownership.Whenithasneithertransferrednorretainedsubstantiallyalloftherisksandrewardsof the asset, nor transferred control of the asset, theassetisrecognisedtotheextentoftheGroup’scontinuinginvolvementintheasset.Inthatcase,theGroupalsorecognisesanassociated liability.The transferredassetand theassociated liabilityaremeasuredon a basis that reflects the rightsandobligationsthattheGrouphasretained.

Continuinginvolvementthattakestheformofa

guaranteeoverthetransferredassetismeasuredattheloweroftheoriginalcarryingamountoftheassetandthemaximumamountofconsiderationthattheGroupcouldberequiredtorepay.

3.9.1.4 Impairment of financial assets

The Group assesses at each reporting datewhether there is any objective evidence thata financial asset or a group of financial assetsis impaired and if such has been incurred, theamount of the loss is measured as the difference between the assets carrying amount and thepresentvalueofestimatedfuturecashflows.

Evidenceof impairmentmay include indicationsthat the debtors or a group of debtors isexperiencing significant financial difficulty,default or delinquency in interest or principal payments, the probability that they will enterbankruptcyorotherfinancial reorganisationandwhen observable data indicate that there is ameasurabledecreaseintheestimatedfuturecashflows, such as changes in arrears or economicconditions that correlate with defaults.

3.9.1.4.1 Financial assets carried at amortised cost

For financial assets carried at amortised cost,the Group first assesses whether impairmentexists individually for financial assets that areindividuallysignificant,orcollectivelyforfinancialassets that are not individually significant. If theGroup determines that no objective evidenceof impairmentexists foran individuallyassessedfinancial asset, whether significant or not, itincludes the asset in a groupof financial assetswith similar credit risk characteristics andcollectivelyassessesthemforimpairment.Assetsthatareindividuallyassessedforimpairmentandfor which an impairment loss is, or continues to be, recognised are not included in a collectiveassessment of impairment.

The amount of any impairment loss identifiedis measured as the difference between theasset’s carrying amount and the present valueof estimated future cash flows (excluding futureexpected credit losses that have not yet beenincurred). The present value of the estimatedfuture cash flows is discounted at the financialasset’soriginaleffectiveinterestrate.

The carrying amount of the asset is reducedthroughtheuseofanallowanceaccountandtheloss is recognised in the statement of profit orloss.Interestincome(recordedasfinanceincome



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in the statement of profit or loss) continues tobe accrued on the reduced carrying amountandisaccruedusingtherateofinterestusedtodiscountthefuturecashflowsforthepurposeofmeasuring the impairment loss. Loans togetherwith the associated allowance are written off when there is no realistic prospect of future recoveryandall collateral hasbeen realisedorhasbeentransferred to the Group. If, in a subsequentyear, the amount of the estimated impairment loss increasesordecreasesbecauseofaneventoccurring after the impairment was recognised,the previously recognised impairment loss isincreasedorreducedbyadjustingtheallowanceaccount. If a write-off is later recovered, therecovery is credited to finance costs in thestatementofprofitorloss.

3.9.1.4.2 Available-for-sale financial Assets

For AFS financial assets, the Group assesses ateach reporting date whether there is objectiveevidence that an investment or a group ofinvestmentsisimpaired.

InthecaseofequityinvestmentsclassifiedasAFS,objectiveevidencewouldincludeasignificantorprolongeddeclineinthefairvalueoftheinvestmentbelowitscost.‘Significant’isevaluatedagainsttheoriginal cost of the investment and ‘prolonged’againsttheperiodinwhichthefairvaluehasbeenbelowitsoriginalcost.Whenthereisevidenceofimpairment, the cumulative loss –measured asthedifferencebetween the acquisition cost andthe current fair value, less any impairment losson that investment previously recognised in thestatementofprofitorloss–isremovedfromOCIandrecognisedinthestatementofprofitorloss.Impairmentlossesonequityinvestmentsarenotreversedthroughprofitorloss;increasesintheirfairvalueafterimpairmentarerecognisedinOCI.

The determination of what is ‘significant’ or‘prolonged’ requires judgement. In making thisjudgement, the Group evaluates, among otherfactors, the duration or extent towhich the fairvalueofaninvestmentislessthanitscost.

InthecaseofdebtinstrumentsclassifiedasAFS,the impairment is assessed based on the samecriteriaasfinancialassetscarriedatamortisedcost.However,theamountrecordedforimpairmentisthe cumulative loss measured as the differencebetweentheamortisedcostandthecurrentfairvalue,lessanyimpairmentlossonthatinvestmentpreviously recognised in the statement of profitor loss.

Future interest income continues to be accruedbased on the reduced carrying amount ofthe asset, using the rate of interest used todiscount the future cash flows for the purposeof measuring the impairment loss. The interestincome is recorded as part of finance income.If, ina subsequent year, the fair valueofadebtinstrument increases and the increase can beobjectivelyrelatedtoaneventoccurringaftertheimpairmentlosswasrecognisedinthestatementofprofitor loss, the impairment loss is reversedthroughthestatementofprofitorloss.

3.9.2 Financial Liabilities

3.9.2.1 Initial recognition and measurement

Financial liabilities are classified as financialliabilitiesatfairvaluethroughprofitorloss,loansandborrowings,or asderivativesdesignatedashedging instruments in an effective hedge, asappropriate.

Allfinancialliabilitiesarerecognisedinitiallyatfairvalueand,inthecaseofloansandborrowingsandpayables net of directly attributable transactioncosts.

The Group’s financial liabilities include tradeand other payables, bank overdrafts, loans andborrowings.

3.9.2.2 Subsequent measurement

The subsequent measurement of financialliabilities depends on their classification asdescribedbelow:

(a) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value throughprofitorloss include financial liabilities held for tradingand financial liabilities designated upon initialrecognitionasatfairvaluethroughprofitorloss.

Financialliabilitiesareclassifiedasheldfortradingiftheyareincurredforthepurposeofrepurchasingin the near term. This category also includesderivative financial instruments entered into bythe Group that are not designated as hedginginstrumentsinhedgerelationshipsasdefinedbyLKAS 39. Separated embedded derivatives arealsoclassifiedasheldfortradingunlesstheyaredesignatedaseffectivehedginginstruments.



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Gainsor losseson liabilitiesheld for tradingarerecognisedinthestatementofprofitorloss.

Financial liabilities designated upon initialrecognitionatfairvaluethroughprofitorlossaredesignatedattheinitialdateofrecognition,andonly if the criteria in LKAS 39 are satisfied. TheGrouphasnotdesignatedanyfinancialliabilityasatfairvaluethroughprofitorloss.

(b) Loans and borrowings

After initial recognition, interest bearing loansand borrowings are subsequently measured atamortized cost using the effective interest ratemethod.Gainsand lossesare recognised in theStatement of Profit or Loss when the liabilitiesarederecognisedaswellasthroughtheeffectiveinterestratemethod(EIR)amortizationprocess.

Amortisedcostiscalculatedbytakingintoaccountany discount or premium on acquisition and fees orcoststhatareanintegralpartoftheEIR.TheEIRamortisationisincludedasfinancecostsinthestatementofprofitorloss.

3.9.2.3 Derecognition

A financial liability is derecognised when theobligation under the liability is discharged orcancelledorexpires.

Whenanexistingfinancial liability isreplacedbyanother from the same lender on substantiallydifferentterms,orthetermsofanexistingliabilityare substantiallymodified, such an exchangeormodification is treated as the derecognition oftheoriginalliabilityandtherecognitionofanewliability.Thedifference in therespectivecarryingamountsisrecognisedintheStatementofProfitor Loss.

3.9.3 Offsetting of financial instruments

Financialassetsandfinancialliabilitiesareoffsetif,andonly if, there isacurrentlyenforceable legalrighttooffsettherecognisedamountsandthereisanintentiontosettleonanetbasis,ortorealizetheassetsandsettletheliabilitiessimultaneously

3.10 Inventories

Finish Goods Manufactured from AgriculturalProduceofBiologicalAssets

These are valued at the lower of cost andestimatednet realisablevalue,aftermakingdue

allowance for obsolete and slowmoving items.Netrealisablevalueistheestimatedsellingpriceatwhichstockscanbesoldintheordinarycourseof business after allowing for cost of realisationand/orcostofconversionfromtheirexistingstatetosaleablecondition.

Input Material, Spares and Consumables

Atactualcostonweightedaveragebasis.

Agricultural Produce Harvested from Biological Assets

Thesearemeasuredattheirfairvaluelesscosttosellatthepointofharvest.Thefinishedandsemi-finishedinventoriesfromagriculturalproductsarevaluedbyaddingthecostofconversiontothefairvalueoftheagriculturalproduce.

3.11 Trade and Other Receivables

Trade and other receivables are stated at theirestimated realisable amounts inclusive ofprovisionsforbadanddoubtfuldebts.

3.12 Cash and Cash Equivalents

CashandCashEquivalentsaredefinedascashinhand, call deposits and short-term highly liquidinvestmentsreadilyconvertibletoknownamountsofcashandsubjecttoinsignificantriskofchangesinvalue.

For the purpose of Cash Flow Statement Cashand Cash Equivalent consists of cash in handand deposits in banks net of outstanding bankoverdrafts.Investmentswithshorttermmaturitiesi.e. three months or less from the date of acquisitionsarealsotreatedasCashEquivalents.

3.13 Provisions

Provisions are recognised when the Group hasa present obligation (legal or constructive) as aresultofapastevent,itisprobablethatanoutflowof resources embodying economic benefitswill be required to settle the obligation and areliable estimate can be made of the amountof the obligation. When the Group expectssomeorallofaprovisiontobereimbursed,thereimbursementisrecognisedasaseparateasset,but only when the reimbursement is virtuallycertain.Theexpense relating toanyprovision ispresentedintheStatementofProfitorLossnetofanyreimbursement.



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3.14 Employees’ Benefits

a) Defined Benefit Plan

A defined benefit plan is a post-employmentbenefit plan other than a defined contributionplan. The liability recognised in the FinancialStatements in respect of defined benefit planis the present value of the defined benefitobligation at the Reporting date. The definedbenefitobligationiscalculatedannuallyusingtheprojectedunit creditmethod.Thepresent valueofthedefinedbenefitobligationisdeterminedbydiscountingtheestimatedfuturecashflowsusingthe interest rates that are denominated in the currency inwhich thebenefitswill bepaid, andthathavetermstomaturityapproximatingtothetermsof the related liability.Actuarial gains andlosses arising from experience adjustments andchangesinactuarialassumptionsarerecognisedin other comprehensive income in the periodin which they arise. Actuarial gains & lossesrecognised in other comprehensive income arerecognisedimmediatelyinretainedearningsandarenot reclassified toprofitor loss.Past servicecostsarerecognisedimmediatelyinStatementofProfitorLoss.

The provision has been made for retirementgratuities from the first year of service for allemployees,inconformitywithLKAS19,“EmployeeBenefits”.However,underthePaymentofGratuityActNo.12of1983, the liability toanemployeearisesonlyoncompletionof5yearsofcontinuedservice.

TheLiabilityisnotexternallyfunded.

The key assumptions used in determiningthe retirement benefit obligations include thefollowings:

No Key Assumption 2017 2016

i) RateofDiscount 12.25%(perannum) 11.5%(perannum)

ii) RateofSalaryIncreaseWorkersStaff

16%(everytwoyears)8%(perannum)

16%(everytwoyears)8%(perannum)

iii) RetirementAgeEstateWorkersEstateStaffHeadOfficeStaff

60years58years55years

60years58years55years

iv) TheCompanywillcontinueasagoingconcern. Theactuarialpresentvalueoftheaccruedbenefitsas at 31March2017 isRs. 380,800,362/- (2016–Rs.429,477,999/-).ThisitemisgroupedunderretirementbenefitobligationsintheStatementofFinancialPosition.

b) Defined Contribution Plans – Provident Funds & Employees’ Trust Fund

Adefinedcontributionplanisapost-employmentbenefit plan under which an entity pays fixedcontributions into a separate entity and willhave no legal or constructive obligation to payfurtheramounts.ObligationsforcontributionstoProvidentandTrustFundscoveringallemployeesarerecognisedasanexpenseinprofitandlossinthe periods during which services are renderedbyemployees.

The Group contributes 12% on consolidatedsalary of the employees to Ceylon Planters’Provident Society (CPPS)/Estate Staff ProvidentSociety(ESPS)/Employees’ProvidentFund(EPF).

AlltheemployeesoftheGrouparemembersofthe Employees’ Trust Fund (ETF), to which theCompany contributes 3% on the consolidatedsalary of such employees.

3.15 Deferred Income - Grants and Subsidies

Government grants are recognised where thereis reasonable assurance that the grant will bereceived and all attached conditions will becomplied with. When the grant relates to anexpense item, it is recognised as income overthe period necessary to match the grant on asystematicbasistothecoststhatitisintendedtocompensate.Wherethegrantrelatestoanasset,itisrecognisedasdeferredincomeandreleasedto income in equal amounts over the expecteduseful life of the related asset.

WheretheGroupreceivesnon-monetarygrants,the asset and the grant are recorded gross atnominal amounts and released to the Statement of Profit or Loss over the expected useful lifeandpatternofconsumptionofthebenefitoftheunderlying asset by equal annual instalments.



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Where loans or similar assistance are providedby governments or related institutions with aninterestratebelowthecurrentapplicablemarketrate, the effect of this favourable interest isregardedasadditionalgovernmentgrant.

Grants related to Property, Plant & Equipmentother than grants received for forestry areinitially deferred and allocated to income on a systematicbasisovertheusefullifeoftherelatedProperty, Plant & Equipment as follows: Assetsareamortisedovertheirusefullivesorunexpiredleaseperiod,whicheverisless.

Buildings 40years

Grants received for forestryare initiallydeferredand credited to income once when the related blocksoftreesareharvested.

3.16 Trade and Other Payables

Tradeandotherpayablesarestatedattheircosts.

3.17 Capital Commitments and Contingencies

CapitalcommitmentsandcontingentliabilitiesoftheGrouphavebeendisclosedintherespectiveNotestotheFinancialStatements.

3.18 Events Occurring after Reporting Period

All material post events after the Statement ofFinancial Position date have been consideredwhereappropriate;eitheradjustmentshavebeenmade or adequately disclosed in the FinancialStatements.

3.19 Earnings Per Share

TheGrouppresentsbasicearningspershare(EPS)foritsordinaryshares.BasicEPSiscalculatedbydividingtheprofitorlossattributabletoordinaryshareholders of the Group by the weightedaveragenumberofordinary sharesoutstandingduringtheperiod.

3.20 Impairment of Non Financial Assets

The Group assesses, at each reporting date,whetherthereisanindicationthatanassetmaybeimpaired.Ifanyindicationexists,orwhenannualimpairment testing for an asset is required, the

Groupestimatestheasset’srecoverableamount.An asset’s recoverable amount is the higher ofan asset’s or cash-generating unit’s (CGU) fairvalue less costsofdisposal and its value inuse.The recoverable amount is determined for anindividualasset,unlesstheassetdoesnotgeneratecashinflowsthatarelargelyindependentofthosefromotherassetsorgroupsofassets.Whenthecarrying amount of an asset or CGU exceedsits recoverable amount, the asset is consideredimpaired and iswritten down to its recoverableamount.

Inassessingvalueinuse,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheasset.Indeterminingfairvaluelesscostsofdisposal,recentmarkettransactionsare taken into account. If no such transactionscanbeidentified,anappropriatevaluationmodelis used. These calculations are corroboratedby valuation multiples, quoted share prices forpubliclytradedcompaniesorotheravailablefairvalueindicators.

The Group bases its impairment calculation ondetailedbudgetsandforecastcalculations,whichareprepared separately for eachof theGroup’sCGUstowhichtheindividualassetsareallocated.Thesebudgetsandforecastcalculationsgenerallycoveraperiodoffiveyears.Forlongerperiods,along-termgrowth rate is calculatedandappliedtoprojectfuturecashflowsafterthefifthyear.

Impairment losses of continuing operations,including impairment on inventories, arerecognised in the statement of profit or loss inexpensecategoriesconsistentwiththefunctionoftheimpairedasset,exceptforpropertiespreviouslyrevaluedwith the revaluation taken toOCI. Forsuchproperties,theimpairment isrecognisedinOCIuptotheamountofanypreviousrevaluation.

For assets excluding goodwill, an assessmentis made at each reporting date to determinewhether there is an indication that previouslyrecognised impairment losses no longer existor have decreased. If such indication exists, theGroupestimatestheasset’sorCGU’srecoverableamount. A previously recognised impairmentloss is reversedonly if therehasbeenachangein the assumptions used to determine the asset’s recoverableamountsincethelastimpairmentlosswasrecognised.Thereversalislimitedsothatthecarrying amount of the asset does not exceed



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itsrecoverableamount,norexceedthecarryingamount that would have been determined, netof depreciation, had no impairment loss beenrecognised for the asset in prior years. Suchreversal is recognised in the statement of profitor loss unless the asset is carried at a revaluedamount,inwhichcase,thereversalistreatedasarevaluationincrease.

Goodwill is tested for impairmentannuallyasat31Marchandwhencircumstances indicate thatthecarryingvaluemaybeimpaired.

Impairment is determined for goodwill byassessing the recoverable amount of each CGU(orgroupofCGUs)towhichthegoodwillrelates.WhentherecoverableamountoftheCGUislessthan its carrying amount, an impairment loss isrecognised.Impairmentlossesrelatingtogoodwillcannotbereversedinfutureperiods.

Intangible assets with indefinite useful lives aretested for impairment annually as at 31 Marchat the CGU level, as appropriate, and whencircumstances indicate that the carrying valuemaybeimpaired.

3.21 Statement of profit or Loss

ForthepurposeofpresentationoftheStatementofProfitorLoss,thefunctionofexpensesmethodis adopted, as it represents fairly the elements of theGroup’sperformance.

3.21.1 Revenue Recognition

Revenue is recognized to the extent that it isprobable that the economic benefits will flowto the Group and the revenue and associatedcosts incurred or to be incurred can be reliablymeasured.Revenueismeasuredatthefairvalueof the consideration received or receivable netoftradediscountsandsalestaxes.Thefollowingspecific criteria are used for the purpose ofrecognitionofrevenue.

(a) Sale of Goods

Revenue from the sale of goods is recognisedwhenthesignificantrisksandrewardsofownershipof the goods have passed to the buyer, usuallyondeliveryofthegoods.Revenueisrecordedatinvoicevaluenetofbrokerage,saleexpensesandotherleviesrelatedtorevenue.

(b) Interest

Interest Income is recognized as the interestaccrues(takingintoaccounttheeffectiveyieldontheasset)unlesscollectabilityisindoubt.

(c) Dividends

Dividend income is recognised in theStatementofProfitorLossonthedatetheentity’srighttoreceivepaymentisestablished,whichinthecaseofquotedsecuritiesistheex-dividenddate.

(d) Rental income

Rentalincomeisrecognizedonanaccrualbasis.

(e) Royalties

Royalties are recognized on an accrual basis inaccordance with the substance of the relevantagreement.

(f) Others

Otherincomeisrecognizedonanaccrualbasis.

NetGainsandlossesofarevenuenatureonthedisposal of property, plant & equipment andother noncurrent assets including investmentshave been accounted for in the Statement ofprofitorloss,havingdeductedfromproceedsondisposal, the carryingamountof theassetsandrelatedsellingexpenses.Ondisposalofrevaluedproperty,plantandequipment,amountremainingin Revaluation Reserve relating to that asset istransferreddirectlytoRetainedProfit/(Loss).

Gainsandlossesarisingfromincidentalactivitiestomain revenuegeneratingactivities and thosearisingfromagroupofsimilartransactionswhichare notmaterial, are aggregated, reported andpresentedonanetbasis.

3.21.2 Expenditure Recognition

Expenses are recognized in the Statement ofProfitorLossonthebasisofadirectassociationbetween the cost incurred and the earning ofspecificitemsofincome.Allexpenditureincurredintherunningofthebusinessandinmaintainingthe property, plant & equipment in a state ofefficiencyhasbeenchargedtoincomeinarrivingattheProfit/(Loss)fortheyear.



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a) Financing Income and Expenses

Finance income comprises interest income onfundsinvested,andgainsontranslationofforeigncurrency. Interest income is recognised in theStatementofProfitorLossasitaccrues.

Finance expenses comprise interest payableon loans and borrowings. The interest expensecomponentoffinanceleasepaymentsisallocatedto each period during the lease term so as toproduce a constant periodic rate of interest on theremainingbalanceoftheliability.

b) Taxes

Income tax expense comprises current anddeferredtax.Incometaxexpenseisrecognisedinprofitor loss except to theextent that it relatesto items recogniseddirectly inequity,when it isrecognisedinequity.

Current Income Tax

Current income tax assets and liabilities aremeasuredattheamountexpectedtoberecoveredfromorpaid to the taxationauthorities.The taxratesandtaxlawsusedtocomputetheamountare those that are enacted or substantivelyenacted, at the reporting date in the countrieswheretheGroupoperatesandgeneratestaxableincome.

Current income tax relating to items recogniseddirectly inequityisrecognisedinequityandnotin the statement of profit or loss. Managementperiodically evaluates positions taken in thetax returns with respect to situations in whichapplicable tax regulations are subject tointerpretation and establishes provisions whereappropriate.

Deferred Tax

Deferredtaxisprovidedusingtheliabilitymethodontemporarydifferencesbetweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsforfinancial reportingpurposesat thereportingdate.

Deferred tax liabilities are recognised for alltaxabletemporarydifferences,except:

• When the deferred tax liability arises fromthe initial recognition of goodwill or anassetor liability ina transaction that isnota

businesscombinationand,atthetimeofthetransaction, affects neither the accountingprofitnortaxableprofitorloss

• In respect of taxable temporary differencesassociated with investments in subsidiaries,associatesandinterestsinjointventures,whenthe timing of the reversal of the temporarydifferencescanbecontrolledanditisprobablethatthetemporarydifferenceswillnotreverseintheforeseeablefuture.

Deferred tax assets are recognised for alldeductible temporary differences, the carryforwardofunusedtaxcreditsandanyunusedtaxlosses.Deferredtaxassetsarerecognisedtotheextentthatitisprobablethattaxableprofitwillbeavailableagainstwhichthedeductibletemporarydifferences,andthecarryforwardofunusedtaxcredits and unused tax losses can be utilised,except:

• When the deferred tax asset relating to thedeductible temporary difference arises fromtheinitialrecognitionofanassetorliabilityinatransactionthatisnotabusinesscombinationand, at the time of the transaction, affects neithertheaccountingprofitnortaxableprofitor loss

• Inrespectofdeductibletemporarydifferencesassociated with investments in subsidiaries,associates and interests in joint ventures,deferredtaxassetsarerecognisedonlytotheextent that it isprobable that the temporarydifferences will reverse in the foreseeablefuture and taxable profit will be availableagainstwhich the temporarydifferences canbeutilized.

The carrying amount of deferred tax assets isreviewed at each reporting date and reducedto the extent that it is no longer probable thatsufficient taxableprofitwillbeavailable toallowallorpartofthedeferredtaxassettobeutilised.Unrecogniseddeferredtaxassetsarere-assessedateachreportingdateandarerecognisedtotheextent that it has become probable that futuretaxableprofitswillallowthedeferredtaxassettoberecovered.

Deferredtaxassetsandliabilitiesaremeasuredatthetaxratesthatareexpectedtoapplyintheyearwhentheassetisrealisedortheliabilityissettled,basedontaxrates(andtaxlaws)thathavebeenenactedorsubstantivelyenactedatthereportingdate.



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Deferredtaxrelatingtoitemsrecognisedoutsideprofitor loss isrecognisedoutsideprofitor loss.Deferred tax itemsare recognised in correlationto the underlying transaction either in OCI ordirectly in equity.

Deferredtaxassetsanddeferredtaxliabilitiesareoffset if a legally enforceable right exists to setoffcurrenttaxassetsagainstcurrenttaxliabilitiesandthedeferredtaxesrelatetothesametaxableentityandthesametaxationauthority.

Tax benefits acquired as part of a businesscombination, but not satisfying the criteria forseparaterecognitionatthatdate,arerecognisedsubsequently ifnewinformationaboutfactsandcircumstances change. The adjustment is eithertreated as a reduction in goodwill (as long asit does not exceed goodwill) if it was incurredduringthemeasurementperiodorrecognisedinprofitorloss.

3.22 Statement of Cash Flow

The Cash Flow Statement has been preparedusing the ‘indirect method’. Interest paid isclassified as operating cash flows, interest andgovernment grants received are classified asinvesting cash flows while dividends paid andreceivedareclassifiedasfinancingcashflows infinancialactivities, for thepurposeofpresentingtheCashFlowStatement.

3.23 Segment Reporting

Segmental information is provided for thedifferent business segments of the Group.Business segmentation has been determinedbased on the nature of goods provided by theGroupafter considering the risk and rewardsofeach type of product.

Since the individual segments are locatedclose to each other and operate in the same industrialenvironment,theneedforgeographicalsegmentationhasnomaterialimpact.

The activities of the segments are describedonNote6intheNotestotheFinancialStatement.

Revenueandexpensesdirectlyattributabletoeachsegmentareallocatedtotherespectivesegments.Revenue and expenses not directly attributabletoasegmentareallocatedonthebasisof theirresourceutilisation,whereverpossible.

Assetsand liabilitiesdirectlyattributable toeachsegmentareallocatedtotherespectivesegments.Assets and liabilities, which are not directlyattributable to a segment, are allocated on areasonablebasiswhereverpossible.Unallocateditems comprise mainly interest bearing loans,borrowings,andexpenses.

Segment capital expenditure is the total costincurred during the period to acquire segmentassetsthatareexpectedtobeusedformorethanoneaccountingperiod.

3.24 Change in Accounting Policies and Disclosures

Amendment to LKAS 41 & 16 - HarvestableProduceGrowingonBearerBiologicalAssets

Amendments to LKAS 16 - Property, Plant &Equipment and LKAS 41 - Agriculture, requireentitytorecognizeagriculturalproducegrowingon Bearer Plants at fair value less cost to sellseparatelyfromitsbearerplantspriortoharvest.Afterinitialrecognition,changesinthefairvalueof such agricultural produce growing on BearerPlants, recognised inprofitor lossat theendofeachreportingperiod.

Accordingly, the Company has applied theseamendments retrospectively in the FinancialStatements.ForthedetailsreferNote37.

4 USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of Financial Statements inconformitywithSLFRS/LKASrequiresmanagementtomake judgments, estimates and assumptionsthatinfluencetheapplicationofaccountingpoliciesand the reported amounts of assets, liabilities,incomeandexpenses. Judgmentsandestimatesare based on historical experience and otherfactors, including expectations that are believedtobereasonableunderthecircumstances.Hence,actual experience and results may differ fromthesejudgmentsandestimates.

Estimates and underlying assumptions arereviewed on an ongoing basis. Revisions toaccountingestimatesarerecognisedintheperiodin which the estimate is revised, if the revisionaffects only that period and any future periods affected.Informationaboutsignificantareasofestimationuncertainty and critical judgments in applyingaccountingpoliciesthathavethemostsignificanteffectontheamountsrecognisedintheFinancial



111

Statementsisincludedinthefollowingnotes:

• DeferredTaxation• Measurement of the Defined Benefit

Obligations• BiologicalAssets

4.1 Deferred Taxation

Deferredtaxassetsarerecognisedforunusedtaxlossestotheextentthatitisprobablethattaxableprofitwillbeavailableagainstwhichthelossescanbeutilised.Significantmanagementjudgementisrequiredtodeterminetheamountofdeferredtaxassets that can be recognised, based upon thelikelytimingandtheleveloffuturetaxableprofitstogether with future tax planning strategies.Unusedtaxlossesasof31March2017aregiveninNote27.

4.2 Retirement Benefit Obligations

The present value of the retirement benefitobligationsdependsonanumberoffactorsthatare determined on an actuarial basis using anumberofassumptions.KeyassumptionsusedindeterminingtheretirementbenefitobligationsaregiveninaccordingpolicyNote3.14.Anychangesin these assumptions will impact the carryingamountofretirementbenefitobligations.

4.3 Biological Assets

Thefairvalueofmanagedtimbertreesdependsonanumberof factors that aredeterminedonadiscountedmethodusingvariousfinancialandnon financial assumptions. The growth of thetrees isdeterminedbyvariousbiological factorsthat are highly unpredictable. Any change tothe assumptionswill impact to the fair value ofbiologicalassets.Keyassumptionsandsensitivityanalysisof thebiologicalassetsaregiven in theNote16.

5 STANDARDS ISSUED BUT NOT YET EFFECTIVE

Standards issuedbutnotyeteffectiveup to thedate of issuance of the Company’s FinancialStatements are listed below. This listing ofstandards and interpretations issued are those that the Company reasonably expects to havean impact on disclosures, financial position orperformancewhenappliedatafuturedate.TheCompanyintendstoadoptthesestandardswhentheybecomeeffective.

SLFRS 9 Financial Instruments

SLFRS9,asissuedreflectsthefirstphaseofworkon measurement of LKAS 39 and applies toclassificationandmeasurementoffinancialassetsand liabilities. This standard is effective for theannualperiodsbeginningonorafter01January2018.

SLFRS 15 Revenue from Contracts with Customers

SLFRS15establishesacomprehensiveframeworkfor determining whether, how much and whenrevenueisrecognized.Itreplacesexistingrevenuerecognitionguidance,includingLKAS18Revenue,LKAS 11 Construction Contracts and IFRIC 13Customer Loyalty Programs. This standard iseffectivefortheannualperiodsbeginningonorafter01January2018.

SLFRS 16 - Leases

SLFRS16setsouttheprinciplesfortherecognition,measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on balance sheet modelsimilartotheaccountingforfinanceleases,underLKAS17exceptforfewexemptionsforleasesfor“low value” assets and short term leaseswith aleasetermof12monthsorless.Thisstandardiseffectivefortheannualperiodsbeginningonorafter01January2019.



112

6. REVENUE Company Group

6.1. Summary 2017Rs.'000

2016 Rs.'000

2017 Rs.'000

2016Rs.'000

Sale of Goods

RubberTeaCoconutOtherCropsSaleofRubberTrees

1,057,0381,030,36939,4942,229

158,031

941,732877,10845,394501

68,328

1,057,0381,030,36939,4942,229

158,031

941,732877,10845,394501

68,328

TotalRevenue 2,287,161 1,933,063 2,287,161 1,933,063

6.2. OPERATING SEGMENTS Company Group

Geographical Segments - Revenue 2017Rs.'000

2016 Rs.'000

2017 Rs.'000

2016Rs.'000

LocalRevenueExportRevenue

2,185,963101,198

1,769,402163,661

2,185,963101,198

1,769,402163,661

TotalRevenue 2,287,161 1,933,063 2,287,161 1,933,063

6.3. Business Segments Company Group

Rubber2017

Rs.'000 2016

Rs.'000 2017

Rs.'000 2016

Rs.'000

RevenueRevenueExpenditureDepreciation&AmortisationOtherNonCashExpenditure-Gratuity

1,057,038(904,780)(75,747)(44,324)

941,732(813,219)(74,348)(43,347)

1,057,038(904,780)(75,747)(44,324)

941,732(813,219)(74,348)(43,347)

SegmentResult-GrossProfit 32,187 10,818 32,187 10,818

Tea


1,030,369(943,271)(32,424)(31,357)

877,108(902,838)(33,365)(36,275)

1,030,369(943,271)(32,424)(31,357)

877,108(902,838)(33,365)(36,275)

SegmentResult-GrossProfit/(Loss) 23,317 (95,370) 23,317 (95,370)

Coconut

RevenueRevenueExpenditure

39,494(27,139)

45,394(20,872)

39,494(27,139)

45,394(20,872)


Other Crop


2,229(131)

501(18)

2,229(131)

501(18)

SegmentResult-GrossProfit 2,098 483 2,098 483

Sale of Rubber Trees


158,031(795)

68,328(493)

158,031(795)

68,328(493)


Total Segments


2,287,161(1,876,116)(108,171)(75,681)

1,933,063(1,737,440)(107,713)(79,622)

2,287,161(1,876,116)(108,171)(75,681)

1,933,063(1,737,440)(107,713)(79,622)

TotalSegmentResults-GrossProfit 227,193 8,288 227,193 8,288



113

Company Group

2017Rs.'000

2016 Rs.'000

2017 Rs.'000

2016Rs.'000

Total Segment Results - Gross Profit 227,193 8,288 227,193 8,288

Gains/(Loss)onfairvalueofbiologicalassetsOtherIncome&GainAdministrativeExpensesManagementFeeFinanceIncomeFinanceCostShareofResultofAssociates

5,914116,407(46,710)(44,660)199,131(258,101)

-

5,617114,607(43,166)(6,543)183,284(198,223)

-

5,91437,238(52,703)(44,660)199,131(258,101)228,756

5,61735,651(50,761)(6,543)183,284(198,223)140,827

ProfitBeforeTax 199,174 63,862 342,768 118,139

6.4. Business Segments - Assets Company Group

2017Rs.'000

2016 Rs.'000

2017 Rs.'000

2016Rs.'000

Non Current Assets

RubberTeaOtherCropsUnallocated

1,668,334745,617145,553

1,755,554

1,596,398713,258145,959

1,734,176

1,668,334745,617145,553

2,134,853

1,596,398713,258145,959

2,003,263

TotalNonCurrentAssets 4,315,058 4,189,791 4,694,357 4,458,878

Current Assets


280,003193,13521,173

1,595,013

773,407740,68330,902623,571

280,003193,13521,173

1,566,687

773,407740,68330,902594,121

TotalCurrentAssets 2,089,324 2,168,563 2,060,998 2,139,113

6.5. Business Segments - Liabilities Company Group

2017Rs.'000

2016 Rs.'000

2017 Rs.'000

2016Rs.'000

Non Current Liabilities


198,960261,15451,082

1,392,221

1,045,416518,94552,038829,136

198,960261,15451,082

1,392,318

1,045,416518,94552,038830,456

TotalNonCurrentLiabilities 1,903,417 2,445,535 1,903,514 2,446,855

Current Liabilities RubberTeaOtherCropsUnallocated

112,048111,41321,842

1,633,963

667,737337,27233,096438,406

112,048111,41321,842

1,647,104

667,737337,27233,096451,369

TotalCurrentLiabilities 1,879,266 1,476,511 1,892,407 1,489,474

6.6. Segment Capital Expenditure Company Group

2017Rs.'000

2016 Rs.'000

2017 Rs.'000

2016Rs.'000


140,75724,3361,0049,828

175,99132,3151,34610,996

140,75724,3361,0049,828

175,99132,3151,34610,996

TotalCapitalExpenditure 175,925 220,648 175,925 220,648



114

7. OTHER INCOME AND GAIN Company Group

2017Rs.'000

2016 Rs.'000

2017 Rs.'000

2016Rs.'000

SaleofProperty,Plant&Equipment 1,959 2,439 1,959 2,439

AmortisationofCapitalGrants 13,257 15,636 14,483 19,988

DividendIncome 82,215 45,765 - -

DeemedDisposalGain - 32,280 - 5,818

DeemedDisposalLoss - - - (12,761)

SundryIncome 18,976 18,487 20,796 20,167

TotalOtherIncome&Gain 116,408 114,607 37,238 35,651

Therearenounfulfilledconditionsorcontingenciesattachedtothegrants.

8. PROFIT BEFORE TAXATION IS STATED

AFTER CHARGING FOLLOWINGS Company Group

2017Rs.'000

2016 Rs.'000

2017 Rs.'000

2016Rs.'000

Auditors'Remuneration 2,818 2,610 2,890 2,679

Depreciation&Amortization 112,273 109,549 112,273 109,549

Directors'Remuneration 800 800 800 800

DefinedBenefitPlanCost 75,681 79,623 75,681 79,623

DefinedContributionPlans-EPF&ETF 117,108 120,780 117,108 120,780

Others-StaffCost 941,573 957,107 941,573 957,107

9. FINANCE INCOME Company Group

2017Rs.'000

2016 Rs.'000

2017 Rs.'000

2016Rs.'000

InterestIncome 199,131 183,284 199,131 183,284

TotalInterestIncome 199,131 183,284 199,131 183,284

10. FINANCE COST Company Group

2017Rs.'000

2016 Rs.'000

2017 Rs.'000

2016Rs.'000

OverdraftInterest 79,913 19,074 79,913 19,074

InterestonGovernmentLease 10,740 10,932 10,740 10,932

VariableLeaseRental 41,198 40,028 41,198 40,028

TermLoanInterest 157,039 155,603 157,039 155,603

288,890 225,637 288,890 225,637

Less:InterestCapitalised (30,789) (27,414) (30,789) (27,414)

TotalFinanceCost 258,101 198,223 258,101 198,223



115

11. SHARE OF RESULT OF ASSOCIATES

TheGroupcaninfluenceupto35.11%ofthevotingrightsoftheRichardPierisNaturalFoamsLtdandupto40.29%ofthevotingrightsoftheArpicoInsurancePLC. TheGroup’sshareoftheincomeoftheentitiesfortheyearsending31March2017and2016,whichareaccountedundertheequitymethod are as follows.

Group

11.1. Statement of Profit or Loss 2017Rs.’000

2016Rs.’000

Richard Pieris Natural Foams Ltd

Group'sShareofProfit/(Loss)BeforeTax 184,734 128,608

Taxonassociateresults (21,610) (15,507)

GroupShareofProfit/(Loss)AfterTax 163,124 113,101

Arpico Insurance PLC


Taxonassociateresults - -


ThereisnoincometaxexpensesrecognisedaslifeinsurancedoesnothaveanincometaxexpensesofarasArpicoInsurancePLCisconcerned.

Group

Total Group Share of Result 2017Rs.’000

2016Rs.’000


Taxonassociateresults (21,610) (15,507)


Group

11.2. Statement of Other Comprehensive Income (OCI) 2017Rs.’000

2016Rs.’000

Richard Pieris Natural Foams Ltd

Gain/(Loss)onActurialValuation (332) 33

IncomeTaxEffect 40 (6)

GroupShareofOtherComprehensiveIncome/(Loss) (292) 27

Arpico Insurance PLC

Gain(/Loss)onActurialValuation (174) 92

IncomeTaxEffect - -


Total Group Share of Result

Gain/(Loss)onActurialValuation (506) 125

IncomeTaxEffect 40 (6)




116

12. CURRENT TAX EXPENSES Company Group

2017

Rs.'000

2016 Rs.'000

2017

Rs.'000

2016Rs.'000

12.1. Statement of Profit or Loss

(I) Current Income Tax:CurrentincometaxchargeTaxondividendpaidbyGroupCompanies(II) Deferred Tax:

(4,744)-

2,343-

16,8669,135

17,8505,085

Relatingtooriginationand(reversal)oftemporarydefferences(Note27.1) (13,345) (39,811) (13,345) (39,811)

Income Tax charge/(reversal) reported in Statement of Profit or Loss (18,089) (37,468) 12,656 (16,876)

12.2. Statement of Other Comprehensive Income (OCI)

Deferred tax relating to items (charges)/credited directly to OCI during the year:

Netgain/(loss)onactuarialgains/lossesondefinedBenefitPlans(Note27.1) (6,837) (13,625) (6,837) (13,625)

Income Tax charge directly to Other Comprehensive Income (6,837) (13,625) (6,837) (13,625)

12.3. Reconciliation between Current Tax Expense and Accounting Profit Company Group

2017

Rs.'000

2016 Rs.'000

2017

Rs.'000

2016Rs.'000

AccountingProfitBeforeTax 199,174 63,862 342,768 118,139

AggregateDisallowedItemsAggregateAllowableItemsTaxExemptIncome

198,694(587,826)(5,914)

240,356(635,472)(5,617)

198,694(587,826)(5,914)

240,356(689,748)(5,617)

TotalStatutoryIncomeLiableInterestIncome

(195,872)26,461

(336,871)11,608

(52,278)26,461

(336,870)11,608

(169,411) (325,263) (25,816) (325,262)

TaxLossesUtilizedDuringtheYear (9,261) (3,241) (9,261) (3,241)

TotalAssessableIncome/TaxableIncome (178,672) (328,504) (35,078) (328,503)

AssessableIncome/TaxableIncomefromAgricultureAssessableIncome/TaxableIncomeotherthanAgriculture

(195,872)17,200

(336,871)8,367

(195,872)17,200

(336,871)8,367

TotalAssessableIncome/TaxableIncome (178,672) (328,504) (178,672) (328,504)

IncomeTax@10%IncomeTax@28%

-4,816

-2,343

-4,816

-2,343

IncomeTaxonCurrentYearProfits 4,816 2,343 4,816 2,343

LessOverProvisionpreviousyears (9,560) - (9,560) -

(4,744) 2,343 (4,744) 2,343

ShareofEquityAccountedInvestees'IncomeTax - - 21,610 15,507

CurrentIncomeTaxExpenses (4,744) 2,343 16,866 17,850

Details of Business Losses Carried Forward

LossBroughtForwardLossincurredduringtheyearLossAppropriateduringtheyear

758,912195,873(9,261)

440,830321,323(3,241)

758,912195,873(9,261)

440,830321,323(3,241)

LossCarriedForward 945,524 758,912 945,524 758,912



117

13. EARNINGS PER SHARE

13.1. ThecalculationofthebasicearningspershareisbasedonaftertaxprofitfortheyeardividedbytheweightedaveragenumberofOrdinarySharesoutstandingduringtheperiod.

13.2. Thefollowingreflectstheincomeandsharedatausedinthebasicearningspersharecomputations.

Company Group

2017Rs.'000

2016 Rs.'000

2017 Rs.'000

2016Rs.'000

Amounts used as the Numerator :

Net profit/ (loss) applicable to Ordinary Shareholders for basicearningspershare 217,263 101,330 330,112 135,014

217,263 101,330 330,112 135,014

Amounts used as the Denominator : Nos’000 Nos’000 Nos’000 Nos’000

WeightedaveragenumberofOrdinarySharesinissueapplicabletobasicearningspershare

25,000

25,000

25,000

25,000

25,000 25,000 25,000 25,000

Earnings Per Share (EPS) 8.69 4.06 13.20 5.41

14. LEASEHOLD PROPERTY, PLANT & EQUIPMENT

Company Group

Asat31March Notes 2017Rs.'000

2016 Rs.'000

2017 Rs.'000

2016Rs.'000

Right-to-useoflandImmovableleasedbearerbiologicalassetsImmovable Leased assets (other than right-to-use landandbearerbiologicalassets)

14.114.214.3

138,58769,158580

143,49578,0022,657

138,58769,157580

143,49578,0022,657

208,326 224,154 208,326 224,154

14.1. RIGHT-TO-USE OF LAND (REVALUED)

“Right-To-UseofLandonLease”asabovewaspreviouslytitled“LeaseholdRighttoBareLand”.ThechangeisinordertocomplywithStatementofRecommendedPractice(SoRP)issuedbytheInstituteofCharteredAccountantsofSriLankadated21August2013.Suchleaseshavebeenexecutedforallestatesforaperiodof53years.

Thisright-to-uselandisamortizedovertheremainingleasetermorusefullifeoftherightwhicheverisshorterandisdisclosedundernon-currentassets.TheStatementofRecommendedPractice(SoRP)forright-to-useof landdoesnotpermitfurtherrevaluationofright-to-useland.ThevaluestakenintotheStatementofFinancialPositionasat22June1992andamortizationoftherighttouseoflandupto31March2017areasfollows.

Company Group

2017Rs.'000

2016 Rs.'000

2017 Rs.'000

2016Rs.'000

CapitalisedValueAsat22.06.1992 260,142 260,142 260,142 260,142

Accumulated Amortization

AtthebeginningoftheYearAmortizationchargefortheyear

116,6474,908

111,7394,908

116,6474,908

111,7394,908

Asat31March 121,555 116,647 121,555 116,647

Carrying Amount 138,587 143,495 138,587 143,495



118

14.2. Immovable Leased Bearer Biological Assets IntermsoftherulingoftheUITFoftheInstituteofCharteredAccountantsofSriLankaprevailedatthetimeofprivatisationofPlantationEstates,all immovableassets intheseestatesunderfinanceleaseshavebeentakenintothebooksoftheCompanyretroactiveto22June1992.ForthispurposetheBoarddecidedatitsmeetingonMarch8,1995thattheseassetswouldbetakenattheirbookvaluesastheyappearinthebooksoftheSLSPC,onthedayimmediatelyprecedingthedateofformationoftheCompany.Theseassetsaretakenintothe22June1992Statementsoffinancialpositionandtheamortisationofimmovableestateassetsto31March2017areasfollows.

InvestmentinImmaturePlantationsatthetimeofhandingovertotheCompanyasat22June,1992bywayofestateleaseswereshownunderImmaturePlantations. However,sincethenallsuchinvestments inImmaturePlantationsattributabletoJEDB/SLSPCperiodhavebeentransferredtoMaturePlantations.ThesematureteaandrubberwereclassifiedasbearerbiologicalassetsintermsofLKAS41-Agriculture.ThecarryingvalueofthebearerbiologicalassetsleasedfromJEDB/SLSPCisrecognisedatcostlessamortisation.FurtherinvestmentsinsuchplantationstobringthemtomaturityareshowninNote16.1

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

Note: Matureplantations/improvementtoland 30years Buildings 25years Machinery 15years

CompanyMature Plantations

GroupMature Plantations

2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

CapitalisedValueasat22ndJune,1992 262,680 262,680 262,680 262,680

Accumulated Amortisation

AtthebeginningoftheYear 184,678 175,930 184,678 175,930

Amortisationfortheyear 8,844 8,749 8,844 8,749

Asat31March 193,522 184,678 193,522 184,678

CarryingAmount 69,158 78,002 69,158 78,002

Company Group

Improvement to LandRs.’000

Buildings

Rs.’000

Plant &Machinery

Rs.’000

Total

Rs.’000

Improvement to LandRs.’000

Buildings

Rs.’000

Plant &Machinery

Rs.’000

Total

Rs.’000

CapitalisedValueasat22.06.1992 192 53,935 24,289 78,416 192 53,935 24,289 78,416

Amortisation

AccumulatedAmortisationasat01.04.2016Amortisationfortheyear

1523

51,3182,074

24,289-

75,7592,077

1523

51,3182,074

24,289-

75,7592,077

AccumulatedAmortisationasat31.03.2017 155 53,392 24,289 77,836 155 53,392 24,289 77,836

Written down value as at 31.03.2017 37 543 - 580 37 543 - 580

Written down value as at 31.03.2016 40 2,617 - 2,657 40 2,617 - 2,657



119

Company Group

Balanceas at

01.04.2016

Rs.'000

Additions for the year

Rs.'000

Disposals during the

year

Rs.'000

Balance as at

31.03.2017

Rs.'000

Balance as at

01.04.2016

Rs.'000


Rs.'000

Disposals during the

year

Rs.'000

Balance as at

31.03.2017

Rs.'000

Cost/Valuation

BuildingsMotorVehiclesFurniture&FittingsEquipmentWaterSanitationComputers&ComputerSoftwarePlant&MachineryOtherAssetsonGrants

71,255127,6255,55658,8182,15015,833337,126214,593

445--

166-

4712,02660

-(4,825)

------

71,700122,8005,55658,9842,15016,304339,152214,653

111,805127,6255,63359,4912,15016,211406,157214,593

445--

166-

4712,02660

-(4,825)

------

112,250122,8005,63359,6572,15016,682408,183214,653

832,956 3,168 (4,825) 831,299 943,665 3,168 (4,825) 942,008

Balanceas at

01.04.2016

Rs.'000

Chargefor theYear

Rs.'000

Accumlated deprecitionon disposal

Rs.'000

Balanceas at

31.03.2017

Rs.'000

Balanceas at

01.04.2016

Rs.'000

Chargefor theYear

Rs.'000

Disposal/Impairment Loss during

the year Rs.'000

Balanceas at

31.03.2017

Rs.'000

Depreciation

BuildingsMotorVehiclesFurniture&FittingsEquipmentWaterSanitationComputers&ComputerSoftwarePlant&MachineryOtherAssetsonGrants

16,524104,1103,71653,7191,75814,449233,55282,658

4,6039,828183

1,03430370

19,0737,791

-(4,825)

------

21,127109,1143,89954,7531,78814,819252,62590,449

37,520104,1103,76854,0121,75814,957279,75982,658

4,6039,828183

1,03430370

19,0737,791

2,346(4,825)

----

2,772-

44,469109,1143,95155,0461,78815,327301,60490,449

510,486 42,912 (4,825) 548,574 578,542 42,912 293 621,748

Written Down Value 322,470 282,725 365,123 320,260

Assets acquired on Finance Leases

Cost

Plant&Machinery 8,417 - - 8,417 8,417 - - 8,417

8,417 - - 8,417 8,417 - - 8,417

Depreciation

Plant&Machinery 8,222 195 - 8,417 8,222 195 - 8,417

8,222 195 - 8,417 8,222 195 - 8,417

Written Down Value 195 - 195 -

Capital Work-in-Progress

Balanceas at

01.04.2016

Rs.'000


Rs.'000

Capitalised/Transfer

during theyear

Rs.'000

Balance as at

31.03.2017

Rs.'000

Balance as at

01.04.2016

Rs.'000


Rs.'000

Capitalised/Transfer

during theyear

Rs.'000

Balance as at

31.03.2017

Rs.'000

CapitalWork-in-Progress 1,313 - 1,313 1,313 - - 1,313

Total Written Down Value 323,978 284,038 366,631 321,573

TheassetsshownabovearethosemovableassetsvestedintheCompanybyGazetteNotificationatthedateofformationofheCompany(22June1992)andallinvestmentsintangibleassetsbytheCompanysinceitsformation.TheassetstakenoverbywayofestateleasesaresetoutinNotes14.

Further,thevaluationofimmovableJEDBestateassetsonfinancelease(otherthanleaseholdland)andtangibleassetsotherthanimmature/matureplantationstakenoverasatJune22,1992isbasedonnetbookvalueasatsuchdate.ThesevalueswerenotavailabletoCompanybyindividualasset.

NoborrowingcostshavebeencapitalisedintoCapitalWork-in-Progress.

15. FREEHOLD PROPERTY, PLANT AND EQUIPMENT



120

Immature Plantations Mature Plantations Total

TeaRs.'000

RubberRs.'000

CoconutRs.'000

OthersRs.'000

TeaRs.'000

RubberRs.'000

CoconutRs.'000

OthersRs.'000 Rs.'000

Cost

Atthebeginningoftheyear01/04/2016

194,465 892,047 17,206 58,543 171,269 957,805 27,958 14,374 2,333,667

Additions 22,878 139,148 1,004 2,461 - - - - 165,491

Transfers (20,944) (72,570) (562) - 20,944 72,570 562 - -

At the end of the year 31/03/2017

196,399

958,625

17,648

61,004

192,213

1,030,375 28,520

14,374 2,499,158

Depreciation

Atthebeginningoftheyear01/04/2016

- - - - 55,774 359,949 1,464 5,891 423,078

Chargefortheyear - - - - 5,233 47,117 563 424 53,337

At the end of the year 31/03/2017 - - - - 61,007 407,066 2,027 6,315 476,415

Written Down Value - as at 31.03.2017 196,399 958,625 17,648 61,004 131,206 623,309 26,493 8,059 2,022,742

Written Down Value - as at 31.03.2016 194,465 892,047 17,206 58,543 115,495 597,856 26,494 8,483 1,910,589

16. BIOLOGICAL ASSETS - COMPANY / GROUP 16.1. BEARER BIOLOGICAL ASSETS - COMPANY / GROUP

Theseareinvestmentsinimmature/matureplantationssincetheformationoftheCompany.Theassets(includingplantationassets)takenoverbywayofestateleasesaresetoutinNotes14.Furtherinvestmentinimmatureplantationstakenoverbywayoftheseleasesareshownintheabovenote.Whensuchplantationsbecomemature,theadditionalinvestments,sinceinitialinvestmenttobringthemtomaturity,willbemovedfromimmaturetomatureunderthisnote.

TheCompanyhaselectedtomeasurethebearerbiologicalassetsatcostusingLKAS16-Property,Plant&Equipment. Specificborrowingshavebeenobtainedtofinancetheplantingexpenditure.Hence,borrowingcostsRs.30,789,149/- (2015/16-Rs.27,413,656/-)werecapitalizedduringtheyearunderImmaturePlantations.



121

16.2. CONSUMABLE BIOLOGICAL ASSETS - TIMBER PLANTATIONS

Company/Group

2017Rs.'000

2016Rs.'000

Asat1AprilIncreaseduetodevelopmentDecreaseduetoHarvestGain/(loss)fairvalueofBiologicalAssets

94,9197,266

-5,035

78,74610,827(382)5,728

Asat31March 107,220 94,919

Managedtreesincludecommercialtimberplantationscultivatedonestates.Thecostofimmaturetreesistreatedasapproximatefairvalueparticularlyonthegroundoflittlebiologicaltransformationhastakenplaceandimpactofthebiologicaltransformationonpriceisnotmaterial.WhensuchPlantationsbecomemature,theadditionalinvestmentssincetakenovertobringthemtomaturityaretransferredfromImmaturetoMature. ThefairvalueofmanagedtreeswasascertainedinaccordancewiththeLKAS41.ThevaluationwascarriedbyMessers.Ariyathillaka&Co,accreditedCharteredValuers,usingDiscountedCashFlow(DCF)methods.Inascertainingthefairvalueoftimberaphysicalverificationwascarriedcoveringalltheestates. The future cash flows aredeterminedby reference to current timberpriceswithout considering the future increaseof timberprice.Followingassociatedfactorsaretakenintoconsiderationindeterminingthepresentvalueoftimberprices.

16.2.1. Information about Fair Value Measurements using Significant Unobservable Inputs (Level 3)

Non Financial Asset Valuation Technique

Unobservable Inputs

Range of Unobservable Inputs (Probability weighted average)

Relationship of Unobservable Inputs to Fair Value

ConsumableManagedBiologicalAssets

DCF DiscountingRate 14.0% Thehigherthediscountrate,thelesserthefairvalue

Optimumrotation(Maturity)

20-25Years Lower the rotation period, the higherthefairvalue

Price per cu.ft. Rs.132/-toRs.850/- Thehigherthepricepercu.ft.,thehigherthefairvalue

Otherkeyassumptionsusedinvaluation;

1. The harvesting is approved by the PlantationManagementMonitoringDivision (PMMD) and Forest Department based on theforestrydevelopmentplan.

2. Thepricesadoptedarenetofexpenditure. 3. Thoughthereplantingisaconditionprecedentforharvesting,yetthecostarenottakenintoconsideration.

Thevaluations,aspresentedintheexternalvaluationmodelsbasedonnetpresentvalues,takeintoaccountthelongtermexploitationofthetimberplantations.Becauseoftheinherentuncertaintyassociatedwiththevaluationatfairvalueofthebiologicalassetsduetothevolatilityofthevariables,theircarryingvaluemaydifferfromtheirrealisablevalue.Hence,thesensitivityanalysisregardingsellingpriceanddiscountratevariationsasincludedinthisnoteallowseveryinvestortoreasonablychallengethefinancialimpactoftheassumptionsusedintheLKAS41againsthisownassumptions.

Sensitivity Analysis

Sensitivity variation on sales price

Valuesasappearing intheStatementofFinancialPositionareverysensitivetopricechangeswithregardtotheaveragesalespricesapplied.Simulationsmadefortimbershowthatariseordecreaseby10%oftheestimatedfuturesellingpricehasthefollowingeffectonthenetpresentvalueofbiologicalassets:

Company Rs.'000 Rs.'000ManagedTimber -10% +10%Asat31March2017 (10,722) 10,722Asat31March2016 (9,492) 9,492

Sensitivity variation on discount rate

ValuesasappearingintheStatementofFinancialPositionareverysensitivetochangesofthediscountrateapplied.Simulationsmadefortimbertreesshowthatariseordecreaseby1.5%ofthediscountratehasthefollowingeffectonthenetpresentvalueofbiologicalassets: Company Rs.'000 Rs.'000ManagedTimber -1.5% +1.5%Asat31March2017 8,741 (6,259)Asat31March2016 10,009 (7,875)



122

16.3. PRODUCE ON BEARER BIOLOGICAL ASSETS

Company Group

2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

Asat1stApril-aspreviouslyreported 3,312 - 3,312 -

ImpactoftheAmendmentSofLKAS16&LKAS41 - 3,423 - 3,423

Changeinfairvaluelesscosttosell 879 (111) 879 (111)

Attheendoftheyear 4,191 3,311 4,191 3,312

16.4. GAIN/(LOSS) ON FAIR VALUE OF BIOLOGICAL ASSETS

Company Group

2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

Consumable Biological Assets Gain/(loss) arising fromchangeinfairvaluelesscosttosell(Note16.2)

5,035 5,728 5,035 5,728

Produce on Bearer Biological Assets Gain/(loss) arisingfromchangeinfairvaluelesscosttosell(Note16.3)

879 (111) 879 (111)

TotalchangeinfairvalueofBiologcalAssets 5,914 5,617 5,914 5,617

17. FINANCIAL ASSETS/LONG TERM INVESTMENTS

Company Group

2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

Quoted Investment

RichardPierisandCompanyPLC 17.1 1,000,000 1,000,000 1,000,000 1,000,000

Unquoted Investment

RichardPierisFinanceLtd 17.2 200,880 144,300 200,880 144,300

Total Financial Assets 1,200,880 1,144,300 1,200,880 1,144,300

17.1. QUOTED INVESTMENT

HELD-TO-MATURITY FINANCIAL ASSETS

Quoted Debt Securities Held by the Company Company Group

Quoted Debentures - Richard Pieris and Company PLC 2017 2016 2017 2016

YearofMaturity 2019 2019 2019 2019

NoofDebentures Nos’000 10,000 10,000 10,000 10,000

FaceValueperDebenture Rs. 100 100 100 100

CarryingValue Rs.‘000 1,000,000 1,000,000 1,000,000 1,000,000

FairValue Rs.’000 1,000,000 1,000,000 1,000,000 1,000,000

InMay2014, theCompany invested in10.0Mn, Rs.100/-eachfiveyearFixedRatedListedDebentures(11.25%p.a.)PayableSemiAnnuallyIssuedbytheUltimateParentCompany(RichardPieris&CompanyPLC)amountingtoRs.1.0Bn. subsequentprofitorlossonfairvaluerecognisedinOtherComprehensiveincome.



123

17.2. UNQUOTED INVESTMENT AVAILABLE-FOR-SALE FINANCIAL ASSETS

Non-Quoted Equity Shares Held by the Company Company Group

Non-Quoted Ordinary Shares - Richard Pieris Finance Ltd 2017 2016 2017 2016

No of Shares Nos’000 12,000 12,000 12,000 12,000%Holding % 10.21 10.21 10.21 10.21FaceValuePerShare Rs. 10.00 10.00 10.00 10.00CarryingValueasat31March2016 Rs.’000 144,300 152,280 144,300 152,280EquityValuePerShareasat31March2017 Rs. 16.74 12.03 16.74 12.03DeemedDisposalGain/(Loss) Rs.’000 56,580 (7,980) 56,580 (7,980)CarryingValueasat31March2017 Rs.’000 200,880 144,300 200,880 144,300

17.2.1. CORRECTION OF ERROR

IncorrectequitypricetakenforthevaluationofAvailable-for-SaleFinancialAsset(AFS)duetoanoversightin2016correctedandrestatedthebalance.

STATEMENT OF COMPREHENSIVE INCOME2016

PreviouslyReportedAmountRs.‘000

2016AdjustedAmount

Rs.‘000

2016RestatedAmount

Rs.‘000

Other Comprehensive income to be reclassified to profit or loss in Subsequent periods (net of tax)

NetGain/(Loss)onAvailable-for-SaleFinancialAssets 49,320 (57,300) (7,980)

STATEMENT OF FINANCIAL POSITION

FinancialAssets-attheendoftheyear 201,600 (57,300) 144,300

17.3. FAIR VALUE HIERARCHY

Allassetsand liabilities forwhich fairvalue ismeasuredordisclosed in theFinancialStatementsarecategorisedwithin the fairvaluehierarchy,describedasfollows,basedonthelowestlevelinputthatissignificanttothefairvaluemeasurementasawhole.

Level1—Quoted(unadjusted)marketpricesinactivemarketsforidenticalassetsorliabilities. Level2—Valuationtechniquesforwhichthelowestlevelinputthatissignificanttothefairvaluemeasurementisdirectlyorindirectlyobservable. Level3—Valuationtechniquesforwhichthelowestlevelinputthatissignificanttothefairvaluemeasurementisunobservable.

NON FINANCIAL ASSETS - CONSUMABLE BIOLOGICAL ASSETS

Level 1 Level 2 Level 3

Date of Valuation

2017Rs.’000

2016Rs.’000

2017Rs.’000

2016Rs.’000

2017Rs.’000

2016Rs.’000

Assets measured at fair value

Available-for-SaleFinancialAsset 31March - - 200,880 144,300 - -

ConsumableBiologicalAssets-Timber 31March - - - - 107,220 94,919

ProduceonBearerBiologicalAssets 31March 4,191 3,312 - -



124

18. LONG TERM INVESTMENTS 18.1. Investments in Subsidiaries Company Unquoted Investments Hamefa Kegalle (Pvt) Ltd

InitialInvestmentinHamefaKegalle(Pvt)LtdstatedatcostofRs.14Mn.SinceitwasprovidedfordiminishinginvalueofRs.14Mnupto2008,thecarryingamountofinvestmentshowsnobalanceattheendoftheyear.

18.2. Investments in Associates

Quoted Investment - Arpico Insurance PLC Company Group

2017 2016 2017 2016

Holding % 40.29 40.29 40.29 40.29

No of Shares Nos ‘000 26,685 26,685 26,685, 26,685

Value Rs.’000 266,850 266,850 307,935 264,087

Unquoted Investment - Richard Pieris Natural Foams Ltd Company Group

2017 2016 2017 2016

Holding % 35.11 35.11 35.11 35.11

No of Shares Nos ‘000 22,500 22,500 22,500 22,500

Value Rs.’000 225,000 225,000 525,681 454,198

Company Investments in Associates, Total Rs.’000 491,850 491,850 833,616 718,285

18.3. Other Long Term Investments

2017 2016 2017 2016

No of Shares Nos Nos Nos Nos

MaskeliyaTeaGardenCeylonLtdExoticHorticulture(Pvt)Ltd

11

11

11

11

TotalInvestment 2 2 2 2

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

MaskeliyaTeaGardenCeylonLtdExoticHorticulture(Pvt)Ltd

--

--

--

--

Long Term Investments - Others - - - -

Long Term Investments - Total 491,850 491,850 833,616 718,285



125

18.4 Summarised Financial Information of Associates

Richard Pieris Natural Foams Ltd 2017Rs.'000

2016Rs.'000

Revenue 2,614,626 1,905,089

Profit/(Loss)BeforeTaxGroup'sShareofProfit/(Loss)BeforeTaxGroup'sShareofOtherComprehensiveIncomeProfit/(Loss)AfterTax

526,159184,734(292)

464,610

366,301128,608

27322,135

OtherComprehentiveIncomeTotalComprehentiveIncomeDividendsReceived

(831)463,77982,215

78322,21345,765

CurrentAssetsNonCurrentAssetsTotalAssetsCurrentLiabilitiesNonCurrentLiabilitiesTotalLiabilities

1,069,768502,172

1,571,940525,40340,825566,228

966,393391,136

1,357,529543,65411,767555,421

TheGroupcaninfluenceupto35.11%ofthevotingrightsoftheRichardPierisNaturalFoamsLtdwitheffectivedatefrom31March2010.

Arpico Insurance PLC 2017Rs.'000

2016Rs.'000

Revenue 803,015 516,816

Profit/(Loss)BeforeTaxGroup'sShareofProfit/(Loss)BeforeTaxGroup'sShareofOtherComprehensiveIncomeDeemedDisposalGainProfit/(Loss)AfterTax

109,26344,022(174)

-109,263

30,32812,219

925,81830,328

OtherComprehentiveIncomeTotalComprehentiveIncomeDividendsReceived

(432)108,831

-

22730,555

-

CurrentAssetsNonCurrentAssetsTotalAssetsCurrentLiabilitiesNonCurrentLiabilitiesTotalLiabilities

463,6201,221,4171,685,03798,744819,431918,175

793,783456,014

1,249,79787,039504,725591,765

TheGroupcaninfluenceupto40.29%ofthevotingrightsoftheArpicoInsurancePLCwitheffectivedatefrom01April2015.



126

19. INVENTORIES Company Group

2017Rs.'000

2016Rs.'000

2017Rs.’000

2016Rs.'000

InputMaterialsGrowingCrop-NurseriesProduceStockSparesandConsumables

45,98622,480197,6492,006

27,9779,018

196,8252,134

52,81422,480197,6492,006

34,8049,018

196,8252,134

268,121 235,954 274,949 242,781

(-)Provisionforslowmovingstocks - - (7,500) (7,500)

268,121 235,954 267,449 235,281

20. TRADE AND OTHER RECEIVABLES Company Group

2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

ProduceDebtors Advances&PrepaymentsOtherDebtors

RelatedCompanies(20.1)Others

134,06285,12810,68958,067

50,18236,3518,30139,684

134,06185,12810,68966,362

50,18236,3518,30147,979

287,946 134,518 296,240 142,813

20.1. TRADE RECEIVABLES FROM RELATED COMPANIES Company Group

Relationship 2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

RichardPierisNaturalFoamsLtdArpicoNaturalLatexFoam(Pvt)LtdRichardPierisExportsPLCRichardPierisRubberCompoundsLtdRichardPierisDistributorsLtdArpitalianCompactSoles(Pvt)LtdArpitech(Pvt)Ltd

AssociateCompanyRelatedCompanyRelatedCompanyRelatedCompanyRelatedCompanyRelatedCompanyRelatedCompany

110,82032,05518,466538

1,511873

1,853

40,53732,0559,645

----

110,82032,05518,466538

1,511873

1,853

40,53732,0559,645

----

166,116 82,237 166,116 82,237

(-)Provisionfordoubtfulreceivables (32,055) (32,055) (32,055) (32,055)

134,062 50,182 134,061 50,182

21. AMOUNTS DUE FROM RELATED COMPANIES Company Group


2016Rs.'000

2017Rs.'000

2016Rs.'000

MaskeliyaPlantationsPLCHamefaKegalle(Pvt)LimitedRPCPlantationManagementServices(Pvt)LtdRPCManagementServices(Pvt)Ltd

RelatedCompanySubsidiaryCompanyParentCompanyRelatedCompany

1,78290,847

-533

-91,9702,328466

1,782--

533

--

2,328466

93,162 94,765 2,315 2,794

(-)Provisionfordoubtfulreceivables (54,891) (54,891) - -

38,271 39,873 2,315 2,794

22. SHORT TERM INVESTMENTS Company Group

2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

InvestmentinTreasuryBills,REPO&Others 1,420,892 1,692,867 1,420,892 1,692,867

23. STATED CAPITAL

Issued and Fully Paid Ordinary Shares Company Group

2017 2016 2017 2016

NumberofOrdinarySharesincludingonegoldenshareheldbytheTreasurywhichhasspecialrights Nos’000 25,000 25,000 25,000 25,000

Value ofOrdinary Shares including one golden shareheldbytheTreasurywhichhasspecialrights Rs.'000 250,000 250,000 250,000 250,000

TheholdersofOrdinarySharesareentitledtoreceivedividendsasdeclaredfromtimetotimeandareentitledtoonevotepershareatmeetingsoftheCompany.SpecialrightsoftheGoldensharearegivenintheAnnualReporttotheBoardofDirectorsontheaffairsoftheCompany



127

24.1. LONG TERM LOANS (Secured) (Cont…)

2017 Repayable

within1 year

Rs.'000

2017 Repayable after one year less than five

yearsRs.'000

2017 Repayable

after five year

Rs.'000

2017

Sub Total

Rs.'000

2017Total as at

31.03.2017

Rs.'000

2016Total as at

31.03.2016

Rs.'000

Rate of Interest Terms of Repayment

NDB/DFCC

Disbursement1

3,651 - - -

3,651 13,083 10.99%

1MonthInstallment@Rs.

507,091and71Installments

@Rs.786,000commencing

from30.09.2011Disbursement2 2,446 - - - 2,446 7,338 11.30% 1MonthInstallment@Rs.

407,645and71Installments

@Rs.407,668commencing

from31.10.2011ADB/NDB 23,064 - - - 23,064 57,665 AWPLR+0.5% 1MonthInstallment@Rs.

2,880,209and59Installments

@Rs.2,883,395commencing

from31.12.2012NDB 73,857 73,859 - 73,859 147,716 221,573 AWPLR+0.25% 1MonthInstallment@Rs.



from31.05.2012IOB/IB/SBI 79,800 140,650 - 140,650 220,450 300,250 AWPLR+0.9% 1MonthInstallment@Rs.



from31.01.2015IOB-Dollar 202,074 560,608 - 560,608 762,682 915,818 6Months

LIBOR+5.5%

1MonthInstallment@

Rs.17,256,610and71

[email protected],487,090

commencingfrom

31.10.2014Commercial-Doller 151,989 228,288 - 228,288 380,277 511,718 1Month

LIBOR+5.0%

1MonthInstallment@

Rs.11,265,571and59

[email protected],001,431

commencingfrom

31.10.2014Sri Lanka Tea Board 5,111 17,889 - 17,889 23,000 - MonthlyReviewed 36MonthlyInstallments@Rs.

638,888commencingfrom

31.08.2016 541,993 1,021,294 - 1,021,294 1,563,286 2,027,445

24. LOANS AND BORROWINGS

Company/Group 2017 2016

Repayable within1 year

Rs.'000

Repayable after one year

less than five yearsRs.'000

Repayable after five year

Rs.'000

Sub Total

Rs.'000

Total as at 31.03.2017

Rs.'000

Total as at31.03.2016

Rs.'000

LongTermLoans24.1ShortTermLoansBankOverDraft

541,993-

1,013,209

1,021,294--

---

1,021,294--

1,563,286-

1,013,209

2,027,444148,000552,069

1,555,202 1,021,294 - 1,021,294 2,576,495 2,727,513

23.1. General Reserve

GeneralReserverepresentsamountsset-asidefromtimetotimebytheDirectorsoftheCompanyforpurposeofgeneralapplication.ThesehavebeenappropriatedbytheBoardincompliancewiththeArticles,whichprovidesforsuchamountsbeingset-asideforfutureandutilizedafterappropriateBoardApprovals.



128

25. RETIRING BENEFIT OBLIGATIONS

Company Group

2017 2016 2017 2016

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

Provision for retiring gratuity

AtthebeginningoftheyearInterestCostCurrentServiceCostGratuityPaymentsfortheyearActuarial(Gain)/LossarisingfromchangesinfinancialassumptionsActuarial(Gain)/Lossarisingfromexperienceadjustments

429,47849,39026,291(80,978)(16,976)(26,405)

486,07549,82329,800(49,768)(36,503)(49,948)

429,57449,39026,291(80,978)(16,976)(26,405)

486,16949,82329,800(49,768)(36,503)(49,948)

Attheendoftheyear 380,800 429,478 380,895 429,573 The actuarial valuations had been carried out,Messrs. Actuarial &Management Consultants (Pvt) Ltd, for retiring gratuity for all theemployeesof theCompanyasat31March2017,whichamounts toRs. 380,800,362/-. If theCompanyhadprovided forgratuity forworkersonthebasisof14dayswagesandforstaffandexecutiveahalfmonthsalaryforeachcompletedyearofserviceasat31March2017,inlinewiththeGratuityActNo.12of1983theliabilitywouldhavebeenRs.529,786,330/-.Hence,thereisacontingentliabilityofRs.148,985,967/-whichwouldcrystaliseonlyiftheCompanyceasestobeagoingconcern,ortheresignationorterminationofemployeeswhicheverisearliest. LKAS19requirestheuseofactuarialtechniquestomakeareliableestimateoftheamountofretirementbenefitthatemployeeshaveearnedinreturnfortheirserviceinthecurrentandpriorperiodsusingtheProjectedUnitCreditMethodanddiscountthatbenefitinordertodeterminethepresentvalueoftheretirementbenefitobligationandthecurrentservicecost.Thisrequiresanentitytodeterminehowmuchbenefitisattributabletothecurrentandpriorperiodsandtomakeestimatesaboutdemographicvariablesandfinancialvariablesthatwillinfluencethecostofthebenefit. ThePresentValueofRetirementBenefitObligationiscarriedonannualbasis. Thefollowingpaymentsareexpectedfromthedefinedbenefitplanobligationinfutureyears.

Company

As at 31 March 2017

Rs.'000

Withinthenext12monthsBetween2and5yearsBeyond5years

89,753101,509189,539

TotalRBO 380,801 TheweigtedaveragedurationoftheDefindBenefitplanobligationattheendofthereportingperiodis3.62yearsand7.47Yearsforstaffandworkersrespectively. ThekeyassumptionsusedbyMessers.Actuarial&ManagementConsultants(Pvt)LtdwhendeterminingtheretirementbenefitobligationsaregiveninAccountingPolicyNote3.14.

Sensitivity Analysis - Salary/ Wage Escalation Rate

ValuesappearingintheFinancialStatementsareverysensitivetothechangesinfinancialandnon-financialassumptionsused.Asensitivitywascarriedoutasfollows:

Company Workers Staff

+1% -1% +1% -1%

A one percentage point change in the discount rate.

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

Asat31March2017Asat31March2016

(20,187)(24,553)

22,99128,135

(1,884)(2,814)

2,0833,170

+1% -1% +1% -1%

A one percentage point change in the salary / wage increment rate.

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Asat31March2017Asat31March2016

10,48814,241

(9,970)(13,476)

8993,343

(862)(2,995)

Financial Reports | Notes to the Financial Statements


129

26. DEFERRED INCOME Company Group

2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

Deferred Grants and Subsidies

Balanceatthebeginningoftheyear 203,037 207,126 204,262 212,704

Add:Grants/Subsidyreceivedduringtheyear 6,399 11,546 6,399 11,546

Less:Amortisationfortheyear (13,257) (15,636) (14,483) (19,988)

Balanceattheendoftheyear 196,178 203,037 196,178 204,262

TheCompanyhasreceivedfundingfromthePlantationHumanDevelopmentTrustandAsianDevelopmentBankforthedevelopmentofworkerfacilitiessuchasre-roofingoflinerooms,latrines,watersupplyandsanitationetc.TheamountsspentareincludedundertherelevantclassificationofProperty,Plant&EquipmentandthegrantcomponentisreflectedunderDeferredGrantsandSubsidies.

27. DEFERRED TAX ASSETS AND LIABILITIES Company Group

2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

Temporary Differences,

AtthebeginningoftheyearAmountoriginating/(Reversal)duringtheyear

1,007,1388,525

1,104,784(97,646)

1,007,1388,525

1,104,784(97,646)

Attheendoftheyear 1,015,663 1,007,138 1,015,663 1,007,138

Temporary Differences of,

Property,Plant&Equipment(includingBiologicalAssets)RetirementBenefitObligationsCarriedforwardTaxLosses

2,341,987(380,800)(945,524)

2,213,446(429,478)(758,912)

2,341,987(380,800)(945,524)

2,213,446(429,478)(758,912)

Attheendoftheyear 1,015,663 1,025,056 1,015,663 1,025,056

Tax Effect,

AtthebeginningoftheyearTransferfrom/(to)IncomeStatement

53,368(6,506)

79,555(26,186)

53,368(6,506)

79,555(26,186)


Deferred Tax Liabilities

Property,Plant&Equipment(includingBiologicalAssets) 255,890 243,620 255,890 243,620

255,890 243,620 255,890 243,620

Deferred Tax Assets

RetirementBenefitObligationsCarriedforwardTaxLosses

(60,014)(149,014)

(67,686)(122,566)

(60,014)(149,014)

(67,686)(122,566)

(209,028) (190,251) (209,028) (190,251)

DeferredTax(Asset)/Liability 46,862 53,369 46,862 53,369

27.1. Reconciliation of deferred tax charge / (reversal) Company Group

2017Rs.'000

2016Rs.’000

2017Rs.'000

2016Rs.’000

Atthebeginningoftheyear 53,369 79,555 53,369 79,555

Taxcharge/(reversal)duringtheperiodrecognisedStatementofprofitorloss. (13,345) (39,811) (13,345) (39,811)

Taxcharge/(reversal)duringtheperiodrecognisedinotherComprehensiveIncome. 6,837 13,625 6,837 13,625




130

Theleaseoftheestateshavebeenamended,witheffectfrom11June1996toanamountsubstantiallyhigherthanthepreviousleaserentalofRs.500/-perestateperannum.ThefirstrentalpayableundertherevisedbasisisRs.15,744,000from11June1997.ThisamountistobeinflatedannuallybytheGrossDomesticProduct(GDP)deflator,andisintheformofContingentrental. ThecontingentrentalduringthecurrentyearchargedtotheIncomeStatementamountedtoRs.41,198,830/-whichinbasedonGDPdeflatorof2.1%(2016-40,027,631/-5.1%) TheStatementofRecommendedPractice(SoRP)forRight-to-useofLandonLeasewasapprovedbytheCounciloftheInstituteofCharteredAccountantsofSriLankaon19December2012.Subsequently,theamendmentstotheSoRPalongwiththemodificationtothetitleasStatementof Alternative Treatment (SoAT) were approved by the Council on 21 August 2013. The Company has not reassessed the Right-to-use ofLandbecause this is not amandatory requirement.However, if the liability is reassessedaccording to the alternative treatment (SoAT)ontheassumption that the lease rent is increasedconstantlyby GDPdeflatorof4%anddiscountedata rateof13% , liabilitywouldbeasfollows. Rs.’000

GrossLiability = 3,016,050 FinanceCharges = (2,011,827) NetLiability = 1,004,223

TheabovereassessedliabilityisnotreflectedintheseFinancialStatements.

28. LIABILITY TO MAKE LEASE PAYMENT Company Group

2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.'000

Gross Liability

AtthebeginningoftheyearRepaymentduringtheyearAttheendoftheyearFinancecostallocatedtofutureperiods

459,974(15,744)444,230

(180,741)

475,718(15,744)459,974

(191,480)

459,974(15,744)444,230

(180,741)

475,718(15,744)459,974

(191,480)

NetLiability 263,489 268,493 263,489 268,493

Payable within one year

GrossliabilityFinancecostallocatedtofutureperiods

15,744(10,539)

15,744(10,740)

15,744(10,539)

15,744(10,740)

Netliabilitytransferredtocurrentliabilities 5,205 5,004 5,205 5,004

Payable within two to five years


62,976(39,989)

62,976(40,874)

62,976(39,989)

62,976(40,874)

Netliability 22,987 22,102 22,987 22,102

Payable after five years


365,510(130,212)

381,254(139,867)

365,510(130,212)

381,254(139,867)

Netliability 235,298 241,387 235,298 241,387

Netliabilitypayableafteroneyear 258,284 263,489 258,284 263,489

29. TRADE AND OTHER PAYABLES Company Group

2017Rs.'000

2016Rs.'000

2017Rs.'000

2016Rs.’000

TradeCreditorsOtherCreditors

222,41628,695

177,89024,796

226,29732,836

182,93827,591

251,111 202,685 259,133 210,529

30. DIVIDEND PAYABLE Company Group

2017Rs.'000

2016Rs.’000

2017Rs.'000

2016Rs.'000

DividendPayable 26,576 21,354 26,576 21,354

26,576 21,354 26,576 21,354



131

32. ASSETS PLEDGED AS SECURITIES Thefollowingassetshavebeenpledgedassecuritiesforliabilities.

Name of BankLoan

FacilityRs/USD (Mn)

SecurityNature

ofLiability

Carring Amount Pledged

2017Rs.’000

2016Rs.’000

BankofCeylon 35.0Mn PrimarymortgageoverleaseholdrightsofGampahaEstate. Overdraft 114,257 114,784

HattonNationalBankPLC 50.0Mn PrimarymortgageoverleaseholdrightsofLuckylandEstate. Overdraft 185,295 185,841

AsianDevelopmentBank/National

DevelopmentBankPLC

1,051.7Mn Primaryandsecondarymortgageoverleaseholdrightsof

Atale,Pallegama,Parambe,Weniwella,andYataderiyaEstates.

FurthermortgageoverPallegama,Parambe,Weniwella,and

YataderiyaEstates.

TermLoan 1,029,466 987,814

IndianOverseaseBank(IOB)

StateBankofIndia(SBI)/IndianBank(IB)

400.0Mn PrimarymortgageoverleaseholdrightsofMadeniyaand

HiggodaEstates.

TermLoan 209,590 201,171

IndianOverseasBank(IOB) USD8.0Mn PrimarymortgageoverleaseholdrightsofAmbadeniya,

HathbawaandUdapolaEstates.

TermLoan 458,527 450,672

CommercialBankofCeylonPLC USD5.0Mn PrimarymortgageoverleaseholdrightsofEtana,Doteloya,

andKirkleesEstates.

TermLoan 339,589 332,304

NationsTrustBankPLC 150.0Mn PrimarymortgageoverProduceStocks(Rubber,Teaand

Coconut).

TermLoan/

Overdraft

- 201,522

Notes: 1.CorporateGuaranteebytheCompanyforRs.25MngiventoMaskeliyaTeaGardenCeylonLtd. 2.CorporateGuaranteetoHSBCbytheCompanyforUSD450,000onbehalfofRichardPeirisNaturalFormsLtd.

33. CAPITAL COMMITMENTS

FollowingsarethecapitalcommitmentsasattheStatementofFinancialPositiondate;

Company Group

2017 2016 2017 2016

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

ApprovedbytheBoard&ContractedforApprovedbytheBoard&notContractedfor

-515,105

-295,753

-515,105

-295,753

515,105 295,753 515,105 295,753

34. COMMITMENTS AND CONTINGENCIES

Contingentliabilitythatmayresult,dependingonthetimingofthetaxabilityofcertainfairvalueadjustmentsamounttoapproximatelyRs.591,448/-.

35. EVENTS AFTER REPORTING PERIOD

NocircumstenceshavearisensincetheStatementofFinancialPositiondate,whichwouldrequireadjustmentordisclosuerintheFinancialStatements.

31. AMOUNTS DUE TO RELATED COMPANIES Company Group


2016Rs.'000

2017Rs.'000

2016Rs.'000

MaskeliyaPlantationsPLCNamunukulaPlantationsPLCRPCLogistics(Pvt)LtdRichardPieris&CompanyPLCRichardPierisPlantations(Pvt)LtdRPCPlantationManagementServices(Pvt)LtdRichardPierisDistributorsLtdMaskeliyaTeaGardenCeylonLtd

RelatedCompanyRelatedCompanyRelatedCompanyUltimateParentCompanyRelatedCompanyParentCompanyRelatedCompanyRelatedCompany

-18,385

56347-

22,19213559

1,1217,07514

7,832--1658

-18,385

565,466

-22,19213559

1,1217,07514

12,951--1658

41,174 16,116 46,293 21,235



132

36. RELATED PARTY DISCLOSURES 36.1. Transaction with related entities

Company Group

Nature of Transaction 2017 Rs.'000

2016 Rs.'000

2017 Rs.'000

2016Rs.'000

36.1.1. Parent Company

Amount Payable as at 31 March (22,192) 2,328 (22,192) 2,328

ManagingAgent’sFeeSettlementofManagementFeeRecoveryofexpenses

(44,741)20,000221

(6,666)-

(299)

(44,741)20,000221

(6,666)-

(299)

36.1.2. Subsidiaries

Amount Receivable as at 31 MarchAdministrativeExpenses

35,956 (1,123)

37,079 (645)

- -

- -

36.1.3. Associates

Amount Receivable as at 31 MarchAmount Payable as at 31 MarchSaleofLatexSettlementAmountShareofResultofEquityAccountedInvesteesInsurancePremiumInsurancePremiumSettlementsDividendReceivableDividendSettlementDeemedDisposalGain/(Loss)-InitialRecognition

602,670 -

524,376(454,093)

-(1,598)1,59882,215(82,215)

-

532,387 -

429,676(471,561)

-(1,485)1,48545,765(45,765)

-

944,435 -

524,376(454,093)206,680(1,598)1,598

-(91,350)

-

758,822 -

429,676(471,561)125,439(1,485)1,485

-(50,850)5,818

36.1.4. Related Companies

Amount Receivable as at 31 MarchAmount Payable as at 31 MarchSalaries,Rent,VehicleRepairs&OtherExpensesPurchaseofGoodsSettlementofDuesSaleofGoodsSalesCashReceiptsSecretarialFeesFreightChargesRepo/DebentureInterestReceivableRepo/DebentureInterestsettlementDeemedDisposalGain-InitialRecognition(P&L)DeemedDisposalGain-SudsequentRecognition(OCI)

1,224,925 (18,982)(6,834)(97,577)185,389173,546(161,742)

(200)(1,679)102,781(182,616)

-56,580

1,154,412 (16,116)(14,460)(62,552)80,422168,175(174,176)

(200)(1,821)113,858(131,172)32,280(7,980)

1,224,925 (18,982)(6,834)(97,577)185,389173,546(161,742)

(200)(1,679)102,781(182,616)

-56,580

1,154,412 (16,116)(14,460)(62,552)80,422168,175(174,176)

(200)(1,821)113,858(131,172)32,280(7,980)

36.1.5. Terms and Conditions

Transactionswithrelatedpartiesarecarriedoutintheordinarycourse of business on an relevant commercial terms (Arm’slengthtransactions).Outstandingbalancesattheyearendareunsecured and net settlement occurs in cash. Non Recurrent Related Party Transactions Therewerenononrecurrentrelatedpartytransactionswhichinaggregate valueexceeds10%of theequityor5%of thetotal assets which ever is lower of the Company as per 31March 2016 audited Financial Statements, which requiredadditional disclosures in the 2016/17 Annual Report underColomboStockExchange listing rule9.3.2andcodeofbestpractices on related party transactions under the security exchangecommissiondirective issuedundersection13(c)oftheSecurityExchangeCommissionAct.

Recurrent Related Party Transactions Therewere no recurrent relatedparty transactionswhich inaggregatevalueexceeds10%oftheconsolidatedrevenueoftheGroupasper31March2016auditedFinancialStatements,which required additional disclosures in 2016/17 AnnualReportunderColomboStockExchangelistingrule9.3.2andcode of best practices on related party transactions underthe security exchange commission directive issued undersection13(c)oftheSecurityExchangeCommissionAct,exceptfollowingrelatedpartytransactionsexceeds10%ofthegrossrevenue/incomeasrequired.



133

36.4. Related Party Transactions

There are no related party transactions other than thosedisclosedinNotes11,17.1,17.2,18,20.1,21,31,32&36totheFinancialStatements.

36.5. Details of material issues pertaining to employees and Industrial relations of the Company.

Therewerenomaterial issuespertaining to employees andindustrial relationspertainingto theCompanythatoccurredduringtheyearunderreview.

37. IMPACT OF AMENDMENTS TO LKAS 16 AND LKAS 41

TheprioryearfigureshavebeenrestatedduetothefollowingadjustmentandthetotaleffecttotheFinancialStatementsissummarizedbelow.

Amendment toLKAS16andLKAS41,onbearerplantsareeffective forannual reportingperiodsbeginningonorafter1 January 2016. Accordingly harvestable biological assetsgrowingonthebearerplantsaremeasuredattheirfairvaluelesscosttoharvestandaccountedretrospectively.

STATEMENT OF PROFIT OR LOSS

2016PreviouslyReportedAmountRs.‘000

2016AdjustedAmount

Rs.‘000.

2016RestatedAmount

Rs.‘000.

ChangeinFairValueofBiologicalAssets 5,728 (111) 5,617

STATEMENT OF FINANCIAL POSITION

Produce on Bearer Biological AssetsAsatthebeginningoftheyearAsattheendoftheyear

--

3,4233,312

3,4233,312

Accumulated Profit / (Loss)

Asatthebeginningoftheyear Asattheendoftheyear

2,934,6361,957,492

3,4233,312

2,938,0591,960,803

Company Group

Disclosures2017

Rs.'000 2016

Rs.'000 2017

Rs.'000 2016

Rs.'000

a. Nameoftherelatedparty;RichardPierisNaturalFoamsLtd

b. Relationship,AssociateCompany

c. Natureoftransaction;SaleofCentrifugedLatex

d. Aggregate value of related party transactions entered into during thefinancialyear 524,376 429,676 524,376 429,676

ConsolidatedrevenueasperlatestauditedFinancialStatements 1,933,063 2,023,911 1,933,063 2,023,911

e. Aggregate value of related party transactions as a% of net revenue/income 27.1% 21.2% 27.1% 21.2%

f. Termsandconditionsoftherelatedpartytransactions;Transactionswithrelatedpartiesarecarriedoutintheordinarycourseofbusinessonanarm’slengthbasis.

36.1.6. Management Fees

AspertheagreememtismadeandenteredintoatColomboasof10September2013,theManagingAgentshallbepaidfor each fiscal year fifteenpercent (15%)of the earningsofthe Company before interest received/paid, corporate tax,depreciationandamortizationof landandmanagment fees (EBIDTA)applicableinthatfiscalyear.

36.2. Transactions with key management personnel of the Company There were no transactions with the key managementpersonneloftheCompanyanditsparentfortheyearended31 March 2017. Further there were no key managementcompensationpaidduringtheyearotherthanthosedisclosedinNote8.

36.3. Other related party disclosures Legal fees amounting to Rs. 1,083,257/- was paid by theCompany last year 2015/16, to an entity in which a keymanagementpersonnelwasa partner.



134

38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

TheGroup’sprincipal financial liabilities,other thanderivatives, comprise loansandborrowings, tradeandotherpayables. ThemainpurposeofthesefinancialliabilitiesistofinancetheGroup’soperationsandtoprovideguaranteestosupportitsoperations.TheGrouphasloanandotherreceivables,tradeandotherreceivables,andcashandshort-termdepositsthatarisedirectlyfromitsoperations.TheGroupalsoholdsavailable-for-saleinvestmentsandheldtomaturityinvestment. Accordingly, the Group has exposure to namely Credit Risk, Liquidity Risk, Currency Risk andMarket Risks from its use of financialinstruments. ThisnotepresentsinformationabouttheGroup’sexposuretoeachoftheaboverisks,theGroup’sobjectives,policiesandprocessesformeasuringandmanagingrisk.

38.1. FINANCIAL RISK MANAGEMENT FRAMEWORK

TheBoardofDirectors has theoverall responsibility for the establishment andoversight of theGroup’s financial riskmanagementframeworkwhichincludesdevelopingandmonitoringtheGroup’sfinancialriskmanagementpolicies.

38.2. CREDIT RISK

CreditRiskistheriskoffinanciallosstotheGroup’sifacustomerorcounterpartytoafinancialinstrumentfailstomeetitscontractualobligations,andariseprincipallyfromtheGroup’sreceivablefromcustomers.

38.2.1. TRADE AND OTHER RECEIVABLES

TheGroup’sexposuretocreditriskisinfluencedmainlybytheindividualcharacteristicsofeachcustomer.However,managementalsoconsiders the demographics of the Group’s customer base, including the default risk of the industry and the country in which thecustomersoperate,asthesefactorsmayhaveaninfluenceoncreditrisk. TheGroupreviewsexternalratingsandbankreferencesofthecustomerwhenavailable.Purchaselimitsareestablishedforeachcustomer,which are reviewedquarterly. Inmonitoring credit risk, customers are categorised according to their credit characteristics, includingwhether theyarean individualor legalentity,whether theyareawholesaleor retailcustomer,geographical location, industry,agingprofile,maturityandexistenceofpreviousfinancialdifficulties.TheGroupestablishesanallowance for impairment that represents itsestimateofincurredlossesinrespectoftradeandotherreceivables. ThemaximumexposuretocreditriskfortradeandotherreceivablesatthereportingdateisRs.296Mn(2015/16–Rs.142Mn). KegallePlantationsPLChasaminimalcreditriskofitstradereceivablesastherepaymentisguaranteedwithinsevendaysbytheTeaandRubberAuctionSystems.

38.2.2. INVESTMENTS

CreditrisksfrominvestedbalancewiththefinancialinstitutionsaremanagedbytheBoardofDirectors.Investmentsofsurplusfundsaremadeonlywithapprovedcounterpartiesandwithincreditlimitsassignedtothem.Thelimitsaresettominimizetheconcentrationofrisksandthereforemitigatefinanciallossthroughpotentialcounterparty’sfailure. TheGroupheldshortterminvestmentsofRs.1,421Mnasat31March2017(2015/16–Rs.1,693Mn)whichrepresentsthemaximumcreditexposureontheseassets.



135

38.2.3. CASH AND CASH EQUIVALENTS TheGroupheldcashatbankandinhandofRs.17Mnasat31March2017(2015/16–Rs.23Mn)whichrepresentsitsmaximumcreditexposureontheseassets.

38.3. LIQUIDITY RISK LiquidityriskistheriskthattheGroupwillencounterdifficultyinmeetingtheobligationsassociatedwithitsfinancialliabilitiesthataresettledbydeliveringcashoranotherfinancialasset.TheGroup’sapproachtomanagingliquidityistoensure,asfaraspossible,thatitwillalwayshavesufficientliquiditytomeetitsliabilitieswhendue,underbothnormalandstressedconditions,withoutincurringunacceptablelossesorriskingdamagetotheGroup’sreputation. TheGroupdoesnotconcentrateonasinglefinancialinstitution,therebyminimizingtheexposuretoliquidityriskthroughdiversificationoffundingsources.TheGroupaimstofundinvestmentactivitiesoftheindividualandGrouplevelbyfundingthelong-terminvestmentwithlongtermfinancialsourcesandshortterminvestmentwithshorttermfinancing.WherenecessarytheGroupconsultstheTreasuryDepartmentandStrategicBusinessDevelopmentUnitinParentCompanyforscrutinizingthefundingdecisions. TheTablebelowsummarizesthematurityprofileoftheGroupfinancialliabilitiesbasedoncontractualundiscountedpayments.

As at 31 March 2017 On Demand

Rs.'000

Less than 3 Months

Rs.'000

3 to 12 Months Rs.'000

2 to 5 years

Rs.'000

>5 years

Rs.'000

Total

Rs.'000

Group

Interestbearingloans&borrowing 1,023,164 139,492 442,439 1,502,936 - 3,108,031

Trade&otherpayables 259,133 - - - - 259,133

1,282,297 139,492 442,439 1,502,936 - 3,367,164

Company

Interestbearingloans&borrowing 1,023,164 139,492 442,439 1,502,936 - 3,108,031


1,274,275 139,492 442,439 1,502,936 - 3,359,142

As at 31 March 2016 On Demand

Rs.'000

Less than 3 Months

Rs.’000

3 to 12 Months Rs.'000

2 to 5 years

Rs.'000

>5 years

Rs.'000

Total

Rs.'000

Group

Interestbearingloans&borrowing 705,430 135,872 425,926 2,046,151 - 3,313,379


915,960 135,872 425,926 2,046,151 - 3,523,908

Company

Interestbearingloans&borrowing 705,430 135,872 425,926 2,046,151 - 3,313,379


908,115 135,872 425,926 2,046,151 - 3,516,064

38.4. MARKET RISK

Marketriskistheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinmarketprices.Marketpricescomprisefourtypesofrisk:interestraterisk&otherpricerisksuchasequitypricerisk.Financialinstrumentaffectedbymarketriskincludeloans&borrowings,deposits&derivativefinancialinstruments.

38.4.1. INTEREST RATE RISK

Interestrateriskistheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinmarketinterest rates. The Group’s exposure to the risk of changes inmarket interest rates relates primarily to the Group’s long-term debtobligationswithfloatinginterestrates.TheGroupmanagesitsinterestrateriskbyhavingabalancedportfoliooffixedandvariablerateloansandborrowings.TheGrouphasnotengagedinanyinterestrateswapagreements. TheGroupheldlongtermborrowingswithfloatinginterestratesofRs.1,557Mn(2015/16–Rs.2,007Mn)whichrepresentsitsmaximumcreditexposureontheseliabilities.



136

INTEREST RATE SENSITIVITY

Thefollowingtabledemonstratesthesensitivitytoareasonablypossiblechangeininterestratesonthatportionofloansandborrowingsaffected.Withallothervariablesheldconstant,theGroup’sProfitBeforeTaxisaffectedthroughtheimpactonfloatingrateborrowingsasfollows:

Increase/ Decrease in Interest Rate

Effect onProfit Before Tax

Group Rs.'000

2016/17 1%-1%

(13,934)13,934

2015/16 1%-1%

(18,612)18,612

Company

2016/17 1%-1%

(13,934)13,934

2015/16 1%-1%

(18,612)18,612

38.4.2. FOREIGN CURRENCY SENSITIVITY

ThefollowingtablesdemonstratethesensitivitytoareasonablypossiblechangeintheUSDexchangerates,withallothervariablesheldconstant.TheimpactontheGroup’sProfitBeforeTaxisduetochangesinfairvalueofmonetaryassetsandliabilities.

Increase/ Decrease in Basis Points

Effect onProfit Before Tax

Rs.’000

Company/Group 2016/17USDUSD

5%-5%

(4,029)4,029

Company/Group2015/16

USDUSD

5%-5%

(4,365)4,365

38.4.3. EQUITY PRICE RISK

TheGroup’slisted&unlistedequitysecuritiesaresusceptibletomarketpriceriskarisingfromuncertaintiesaboutfuturevaluesoftheinvestmentsecurities.TheGroupmanagestheequitypriceriskthroughdiversificationandbyplacinglimitsonindividualandtotalequityinstruments.ManagementoftheGroupmonitorsthemixofdebt&equitysecuritiesinitsinvestmentportfoliobasedonmarketindices.MaterialinvestmentwithintheportfolioaremanagedonanindividualbasisandallbuyandselldecisionsareapprovedbytheBoard.EquitypriceriskisnotmaterialtotheFinancialStatements.

38.4.4. CAPITAL MANAGEMENT

TheGroup’s policy is to retain a strong capital base so as tomaintain investor, creditor&market confidence and to sustain futuredevelopmentofthebusiness.Capitalconsistsofsharecapital,reservesandretainearnings.TheBoardofDirectorsmonitorsthereturnoncapital,interestcoveringratio,dividendtoOrdinaryShareholders.

Thegearingratioatthereportingdateisasfollows.

As at 31.03.2017Rs.'000

As at 31.03.2016Rs.'000

Interest bearing borrowings

CurrentportionoflongterminterestbearingborrowingsPayableafteroneyear

1,555,2021,021,294

1,231,3511,496,162

2,576,496 2,727,513

Equity 2,621,694 2,436,309

TotalEquity&Debts 5,198,190 5,163,822

GearingRatio 50% 53%

Financial Reports | Notes to the Financial Statements

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Ten Year Summary ................................ 138 Historical Note ......................... 139Shareholder & Investor Information .......... 142Glossary of Financial Terminology ............ 145Notice of Meeting .................................... 147Form of Proxy ........................................... 149

Demand for Palm Oil

The edible oil requirement of Sri Lanka is day bydayincreasingandtheCoconutindustryisfailingtocater therequirement.The importationofPalmOilasanedibleoilhasincreasedtoover180,000mtperyearandtheoutflowofforeignexchangeincreasingtoUSD120mnapproximately,withtheimprovepercapitaincomeofSriLankatheconsumptionofOiltoohaveincreasedrapidly,thereforeitisexpectedtoincreasetheimportationofPalmOil.

With cultivation of approximately 1,000 HectaresKPLisalsotryingtohelpthecountrytoreducetheoutflowofforeignexchange.Sincethiscropproducethe highest Oil production per hectare. With theforegoing we are in the correct direction with thediversification of a reasonable extent to a nationalcause.

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138

Year Ended 31 March 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008

Operating Results

Turnover

OperatingProfitbeforeMgtFee

ProfitbeforeInterestandTax

ProfitAfterTax

Dividends

Rs'000

Rs'000

Rs'000

Rs'000

Rs'000

2,287,161

302,804

457,275

217,263

125,000

1,933,063

85,344

262,085

101,330

1,125,000

2,023,911

62,710

274,227

127,034

50,000

2,414,220

409,416

564,605

345,993

337,500

2,587,558

670,346

710,927

473,186

-

2,940,027

930,179

990,709

769,842

200,000

2,991,762

1,150,845

1,031,593

883,127

75,000

2,216,497

492,193

410,000

376,030

75,000

1,927,762

423,185

351,436

177,411

25,000

2,163,030

589,392

481,984

427,597

125,000

CapitalExpenditure Rs'000 175,925 220,648 305,851 294,468 253,721 249,656 200,244 183,036 165,940 119,209

Financial Position

FixedAssets

Investments

CurrentAssets

CurrentLiabilities

Shareholders'Funds

ShareCapital

Reserves

Rs'000

Rs'000

Rs'000

Rs'000

Rs'000

Rs'000

Rs'000

2,622,327

1,692,730

2,089,323

1,879,268

2,621,694

250,000

2,371,697

2,553,641

1,693,150

2,165,252

1,476,510

2,436,309

250,000

2,186,309

2,437,195

1,611,850

3,078,052

771,499

3,412,393

250,000

3,162,393

2,232,039

611,850

4,102,606

560,053

3,342,520

250,000

3,092,520

2,024,766

597,000

3,028,955

373,638

3,336,956

250,000

3,086,956

1,872,057

450,000

2,421,056

347,441

2,841,915

250,000

2,591,915

1,707,820

225,000

1,847,793

366,372

2,272,074

250,000

2,022,074

1,814,679

225,000

1,325,104

317,718

1,698,311

250,000

1,448,311

1,564,998

80,298

946,549

196,801

1,347,281

250,000

1,097,281

1,466,538

75,000

863,732

214,234

1,219,870

250,000

969,870

Key Financial Indicators

CurrentRatio

QuickAssetRatio

DebtEquityRatio

InterestCover

Equity/AssetRatio

EarningsperShare

MarketPriceofaShare

PriceEarningRatio

DividendCover

DividendPayOutRatio

Times

Times

Times

Times

Times

Rs.

Rs.

Times

Times

%

1.11

0.97

0.50

1.77

0.41

8.69

52.00

5.98

1.74

57.54

1.47

1.31

0.53

1.32

0.38

4.05

50.70

12.51

0.09

1,110.28

3.99

3.64

0.41

1.55

0.48

5.08

85.80

16.89

2.54

39.36

7.33

6.76

0.41

3.15

0.48

13.84

105.00

7.59

1.03

97.55

8.11

7.46

0.25

5.02

0.59

18.93

112.00

5.92

-

-

6.97

6.39

0.20

9.21

0.60

30.79

103.00

3.34

3.85

25.98

5.04

4.39

0.14

9.01

0.60

35.33

207.50

5.87

11.78

8.49

4.17

3.39

0.19

6.22

0.54

15.04

47.00

3.12

5.01

19.95

4.81

4.07

0.21

5.90

0.54

7.10

19.00

2.68

7.10

14.08

4.03

3.09

0.19

10.53

0.52

17.10

60.00

3.51

3.42

29.24

Annual Production

Rubber

Tea

Coconuts

kg'000

kg'000

nuts'000

3,742

2,165

1,471

3,353

2,375

1,559

3,534

2,094

1,549

4,016

2,243

1,596

4,076

2,162

1,713

4,155

2,630

1,731

4,082

2,773

1,413

4,578

2,479

1,572

5,102

2,492

1,610

5,436

2,797

1,472

TEN YEAR SUMMARY

- 10 20 30 40 50 60 70 80 90 100

Funding

Assets

Assets & FundingIn percentage

Inflow OutflowCurrent Liabilities Land Deferred Income Other Fixed AssetsLong Term Liabilities InvestmentsShareholders' Funds Current Assets

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Shareholders' FundsIn Million Rupees

Supplementary Reports | Ten Year Summary Historical Note | Supplementary Reports


139

PARAMBE ESTATE – Undugoda, Kegalle

ParambeEstateinitiallyconsistedof998Acres(620Ha),plantedintheyear1905.TheestatewasmanagedbyMessrs.LewisBrown&Co.LtdandtheSuperintendentMr.Fairweather.

GolindaEstateconsistedof1,380Acres(857Ha)plantedin the year 1912 and had been managed by Messrs.WhittallBousteadandCo.Ltd.

Parambeestatewasunderprivateownershipsuntilupto1959inwhichyeartheestatewastakenoverbytheStatePlantationsCorporationandGolindaEstatemanagedbyWhittallBousteadLtd.Untilupto1976,wasvestedwiththeGovernment.

Subsequently both estates were managed by JanathaEstatesDevelopmentBoarduntilupto1992inwhichyeartheestateswerevestedwithRPCsandaccordinglytheabovetwoestateswereallocatedtoKegallePlantationsPLC. In the year 1993 the above two estates wereamalgamatedforadministrativereasons.

The estates are located geographically in the KegalleDistrict, inUndugodaVillage.Thedistanttotheestatefrom Kegalle Town is around 13 km situated in theKegalle/BulathkohupitiyaRoad.

Parambe estate has a Superintendent, an AssistantSuperintendentsand21estatestaffswithaworkforceofnearly388,outofwhich367workersforrubberand21workersfortea.

Land Extent of Parambe Estate - Hectares

Division Extent - haMabopitiya 141.63Ilwana 81.75Parambe 59.26Bossella 51.18Hunugala 28.91Wewatenna 256.05Moragahakande 115.83Malawita 60.80Total Land Extent 795.41

Crop Wise Extent - Hectares

Cultivation Extent - haRubber 513.66Tea 30.02MinorCrops 40.00Other Lands, buildings/jungle/roads & bridges/line gardens/rocks.Etc

211.73

Total Land Extent 795.41

PAST SUPERINTENDENTS:

The estate was entrusted with Senior Superintendentsformanagementwhosenamesarelistedbelow:

Name of Superintendent PeriodMr.Fairweather,D. 1905-1909Mr.Thistle,J.R. 1912-1917Mr.Smale,Jackson 1912-1914Mr.Shuffrey,S.J. 1914-1914Mr.Russel,A.F. 1920-1921Mr.Thomson,F.G. 1920-1929Mr.Walker,A.W. 1920-1921Mr.Lee,A. 1923-1923Mr.Lee,J.H.R. 1924-1925Mr.Ross,W.l. 1926-1929Mr.JohnKent Unknown-1955Mr.RichardLavesonLevett 1955-1967Mr.R.Wijayaratnam 1967-1971Mr.DayaThissaKarunanayaka 1971-1976Mr.LilanGaminideSilva 1976-1978Mr.SriyanP.JosephWijesekara 1978-1979Mr.D.AnilalErangeAlgama 1979-1983Mr.A.A.CyrilPerera 1983-1989Mr.SunilPoholiyadde 1989-1996Mr.GLHDAmaratunge 1996-2000Mr.UdaraS.Premathilake 2000-2002Mr.N.D.W.Kalyanaratne 2002-2004Mr.D.D.Wekunagoda 2004-2008Mr.S.A.A.PJayathilake 2008-2015Mr.N.D.Madawala 2015uptonow

HISTORICAL NOTE

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140

Assistance for Landslide victims:

ParambeEstatehandedover10.75Acresof cultivatedland from the following Divisions, to the Governmentto be distributed to landslide victims from Aranayake,Bulathkohupitiya etc. and pleased to record that theyhavesettleddownwithhousesbuilt.

1. 4.23AcresfromParambeDivision2. 2.50AcresfromBossellaDivision3. 4.02AcresfromDandeniyaofParambeDivision

Parambealsoextendscholarshipassistancetoworkers’childrenwhoareselectedforUniversityEducation.

Future Development Plans

TheCompanyhasmadeplansforacropdiversificationProgramme and accordingly planting of oil palm hasbeen commenced in an extent of 36.45 hectares onMabopitiya,Parambe&IlwanaDivisionsduringthe2017/2018season.ThisProgrammewillbecontinuedinthefollowingextents.

Year2018/201936.18hectaresYear2019/20109.68hectares

Past Achievements

1. Year 1999 obtained in the Taiki Akimoto 5SAwardCompetition1999conductedbyJapanSriLankaTechnical&CulturalAssociation(JASTECA)in association with the Ministry of IndustrialDepartmentSriLankaundertheSuperintendentofMr.GLHDAmaratunge.

2. Plantation Awards 2010 organized by ArpicoGroup, Lowest Waste Category, Rubber Sector– under the Superintendent of Mr. AsankaJayathilake.

3. ForthethirdhighestqualitysoldthroughMessrs.JohnKeellsPLCintheyear2013of298,080kgsofrubber–undertheSuperintendentofMr.AsankaJayathilake.

4. ForthethirdhighestqualitysoldthroughMessrs.JohnKeellsPLCintheyear2016of273,957kgsofrubber.–undertheSuperintendentofMr.NalakaMadawala.

Mr. Richard Laveson LevettSuperintendent (1955-1967)


141

Supirintendent’s Bunglow

Parambe Factory

Estate Office

Bridge between Village and Factory Constructed in 1897


142

1. Stock Exchange Listing

TheissuedOrdinarySharesofKegallePlantationsPLC,arelistedwithColomboStockExchange(CSE)ofSriLanka(Quoted1996.01.08).

2. Distribution of Shareholders

No of Shares Held 2017No of Share Holders

2017No of Shares

2017% Holdings

2016% Holdings

1- 1,0001,001- 10,00010,001-100,000100,001-1,000,0001,000,001-&above

8,6363063961

1,857,4871,051,2401,099,2201,221,57719,770,477

7.43%4.20%4.40%4.89%79.08%

7.52%4.21%4.09%5.10%79.08%

Total 8,988 25,000,001 100.00% 100.00%

ResidentInvestorsNonResidentInvestors

8,96622

24,351,508648,493

97.41%2.59%

97.41%2.59%

Total 8,988 25,000,001 100.00% 100.00%

IndividualInvestorsInstitutionalInvestors

8,89098

3,489,62921,510,372

13.96%86.04%

14.06%85.94%

Total 8,988 25,000,001 100.00% 100.00%

RelatedCompanyCompanyDirectorsHoldingGeneralPublicincludingEmployees

31

8,984

19,783,8773,307

5,212,817

79.14%0.01%20.85%

79.14%0.01%20.85%

Total 8,988 25,000,001 100.00% 100.00%

Public Holding: The percentage of shares held by the public is 20.85% of the issued Share Capital of the Company as at 31 March 2017 (31 March 2016 – 20.85%).

3. The Golden Shareholder

TheGoldenShareofRs.10/-iscurrentlyheldbytheSecretarytotheTreasuryandshouldbeownedeitherdirectlybytheGovernmentofSriLankaorbya100%GovernmentownedPublicCompany.Inadditiontotherightsofthenormalordinaryshareholder,theGoldenShareholderhasthefollowingrights;

1) TheconcurrenceoftheGoldenShareholderwillberequiredfortheCompanytosubleaseanyoftheestatelandleased/tobeleasedtotheCompanybytheJanathaEstateDevelopmentBoard/SriLankaStatePlantations.

2) TheconcurrenceoftheGoldenShareholderwillberequiredtoamendanyclauseinthearticleofassociationoftheCompanywhichgrantsspecialrightstotheGoldenShareholder.

3) TheGoldenShareholderorhisnomineewillhavetherighttoexaminethebooksandaccountsoftheCompanyatanytimewithtwoweeksofwrittennotice.

4) TheCompanywillberequiredtobesubmittedadetailedquarterlyaccountsreporttotheGoldenShareholderinaspecifiedformatwithin60daysoftheendofeachquarter.AdditionalinformationrelatingtotheCompanyina

SHAREHOLDER & INVESTOR INFORMATION

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143

specifiedformatmustbesubmittedtotheGoldenShareholderwithin90daysoftheendofeachfinancialyear.

5) TheGoldenShareholdercanrequesttheBoardofDirectorsoftheCompanytomeetwithhim/hisNominee,onceineveryquartertodiscussissuesrelatedtotheCompany’soperationofinteresttotheGovernment.

4. Share Information

Market Value 2017 2016

HighestPrice -RsLowestPrice -RsClosingPrice -Rs

72.5045.0052.00

(22April2016)(28December2016)(31March2017)

146.6048.0050.70

(13July2015)(10March2015)(31March2016)

Share Trading 2017 2016

No.ofSharesTradedNo.ofTradesValueofSharesTraded-Rs

726,5911,535

40,884,358

1,903,9925,281

209,526,532

Key Ratios 2017 2016

EarningsperShareNetAssetsperShareDividendsperShare

8.69104.875.00

4.0697.4545.00

5. Twenty Largest Shareholders of the Company

As at 31 March 2017 31 March 2016

Name of the Shareholder Number of Shares

% of the Holding

Number of Shares

% of the Holding

1234567891011121314151617181920

RPCPlantationManagementServices(Pvt)LtdDhanasiriRecreation(Pvt)LtdMubasherFinancialServicesBSCHSBCInternationalNomineesLtd-SSBT-DeustcheBankPershingLLCS/AAverbachGrauson&Co.TranzDominion,L.L.CEmployeesProvidentFundSandwaveLimitedMr.D.M.KodikaraMrs.M.S.E.V.E.A.U.VonStummMr.N.BalasingamBankofCeylon-No.1AccountMr.F.G.N.MendisSeylanBankPLC/Dr.ThirugnanasambandarMr.P.F.NandasiriMr.J.G.DeMelAllianceFinanceCompanyPLCMr.H.W.M.WoodwardMr.P.P.SubasingheMr.H.A.Cabraal

19,770,477319,305204,972200,000190,000185,000122,300100,00085,00059,34950,60050,60045,00043,69542,50038,20037,10035,70635,17832,000

79.08%1.28%0.82%0.80%0.76%0.74%0.49%0.40%0.34%0.24%0.20%0.20%0.18%0.17%0.17%0.15%0.15%0.14%0.14%0.13%

19,770,477319,305204,972200,000

-185,000122,300100,00085,00059,34950,60050,60045,000

-42,50037,01037,10035,70628,627

-

79.08%1.28%0.82%0.80%

-0.74%0.49%0.40%0.34%0.24%0.20%0.20%0.18%

-0.17%0.15%0.15%0.14%0.11%

-

Sub Total 21,646,982 86.59% - -

Balanceheldby8,968Shareholders(31March2016-9,023Shareholders)

3,353,019 13.41% 3,294,275 13.18%

Total Shares 25,000,001 100.00% 25,000,001 100.00%

Shareholder & Investor Information | Supplementary Reports


144

6. Exchange Rates - US $ (Selling)

2017 2016 2015 2014 2013

Asat31March(Rs.) 153.91 146.78 134.73 132.17 128.47 7. Other Share Information

TheperformanceofKegallePlantationsPLC’sshareisasfollowscomparedtotheperformancesofAllSharePriceIndex(ASPI),Standard&Poor’sSriLanka20Index(S&PSL20)andPlantationSector Index(PLT) intheShareMarketduringtheyear.

KegallePlantationsPLC’sshareinformationfromColomboStockExchange(CSE)website:

-LogontoColomboStockExchange-website:www.cse.lk -EnterCompanyCode(KGAL.N000)inthesearchboxatthetoprighthandcornerof

CSEhomepageandgototheCompanydescription.

Shareholder Structure As At 31 March 2017

RPC Plantation Management Services (Pvt) Ltd

General Public Holdingincluding Employees

Share Volume Share Price

-

10

20

30

40

50

60

70

-

50

100

150

200

250

300

Apr

-16

May

-16

Jun-

16

Jul-1

6

Aug

-16

Sep-

16

Oct

-16

Nov

-16

Dec

-16

Jan-

17

Feb-

17

Mar

-17

Shar

e Pr

ice

(Rs.

)

Shar

e V

olum

e ('0

00

)

KPL Share Price & Transaction Volume

79.08%

2016/17

20.92%

75

85

95

105

115

125

135

145

Apr

-16

Apr

-16

Apr

-16

May

-16

May

-16

Jun-

16

Jun-

16

Jul-1

6

Jul-1

6

Aug

-16

Aug

-16

Sep-

16

Sep-

16

Sep-

16

Oct

-16

Oct

-16

Nov

-16

Nov

-16

Dec

-16

Dec

-16

Jan-

17

Jan-

17

Feb-

17

Feb-

17

Mar

-17

Mar

-17

Mar

-17

Inde

x Va

lue

KPL Share Price Vs Market Indices

ASPI

ASPI

S&P SL20

S&P SL20

PLT

PLT

KPL Share Price

KPL

Supplementary Reports | Shareholder & Investor Information Glossary of Financial Terminology | Supplementary Reports


145

Financial Terms

Accounting PoliciesThe specific principles, bases, conventions, rules, andpractices adopted by an enterprise in preparing andpresentingFinancialStatement.

Agricultural ActivityAgriculturalactivityisthemanagementbyanentityofthebiologicaltransformationandharvestofbiologicalassetsforsaleorforconversionintoagriculturalbiologicalassets.

AmortisationThesystematicallocationofthedepreciableamountofanintangibleassetoveritsusefullife.

AssociateAn associate is an entity, including an unincorporatedentitysuchasapartnership,overwhichtheinvestorhassignificantinfluenceandthatisneitherasubsidiarynoraninterestinajointventure.

AWPLRAverageWeightedPrimeLendingRate.

Bearer Biological AssetsBiological assets those are not to be harvested asagricultural produce or sold as biological assets. Thebiological assets other than the consumable biologicalassets.

Biological AssetsIsalivinganimalorplant.

Borrowing CostsBorrowingCostsareinterestandothercostsincurredbyanenterpriseinconnectionwithborrowingoffunds.

Capital EmployedThesumofShareholders’Funds,LongTerm&ShortTermInterestbearingBorrowings.

Consumable Biological AssetsThe biological assets those that are to be harvested asagriculturalproduceorsoldasbiologicalassets.

Contingent LiabilitiesCondition or situations at the Balance Sheet date, thefinancialeffectsofwhicharetobedeterminedbyfutureevents,whichmayormaynotoccur.

Current RatioCurrentAssetsdividedbyCurrentliabilities.

Deferred TaxationThe Tax effect of timing differences deferred to/ fromother periods, which would only qualify for inclusion on a taxreturnatafuturedate.

Dividend CoverProfitsaftertaxdividedbyDividends.

Earnings Per ShareProfit after Taxdividedbyweighted averagenumberofOrdinarySharesoutstandingduringtheperiod.

EBITDAAbbreviationforEarningsbeforeInterest,Tax,Depreciation,andAmortization.

Enterprise ValueMarketCapitalizationplusnetdebt.

Equity/Assets RatioShareholders’ Funds divided by Long Term Assets plusCurrentAssets.

Fair ValueFair value is the amount for which an asset could beexchangedbetweenaknowledgeable,willingbuyingandaknowledgeablewillingsellerinarm’slengthtransaction.

Gearing (D/E ratio)Long Term Interest bearing Borrowings/Liabilities as apercentageofShareholders’FundsplusLongTermInterestbearingBorrowings/Liabilities.

General ReserveReserveavailablefordistributionandinvestment.

IFRSInternationalFinancialReportingStandards

Interest CoverProfitbeforeTaxplusInterestChargesdividedbyInterestCharges,includingInterestCapitalized.

Market CapitalizationNumberofsharesinissue,multipliedbythemarketvalueof each shares at the year end.

Net AssetsSumofFixedAssetsandCurrentAssetslessTotalLiabilities.

Net Assets per ShareShareholders’ fundsdividedby thenumberofOrdinaryShares.

Glossary of Financial Terminology | Supplementary Reports

GLOSSARY OF FINANCIAL TERMINOLOGY


146

Net price Per ShareNetAssetsattheendofperioddividedbythenumberofOrdinarySharesissued.

Price Earnings RatioMarketpriceofasharedividedbyEarningsperShare.

Related PartiesParties who could control or significantly influence thefinancialandoperatingpoliciesoftheCompany.

Return on Average EquityNet income expressed as a percentage of AverageShareholders’Funds.

Return on Capital Employed (ROCE)Profit before Tax plus Interest on Loans divided by theEquityFunds,LongTermLoansandShortTermLoans.

RSS-1RibbedSmokedSheet-Grade1.

Shareholders’ FundsFundsattributabletoShareholderswhichconsistofShareCapital,ReservesandRetainedProfit.

SLASSriLankaAccountingStandards.

SLFRS/LKASSriLankaFinancialReportingStandards.

SoATStatementofAlternativeTreatmentissuedbytheInstituteofCharteredAccountantsofSriLanka.

SoRPStatement of Recommended Practices issued by theInstituteofCharteredAccountantsofSriLanka.

SubsidiaryAsubsidiaryisanentity,includinginunincorporatedentitysuchasapartnership,thatiscontrolledbyanotherentity.

Turnover per EmployeeConsolidated turnover of the Company for the yeardividedbythenumberofemployeesattheyearend.

UITFUrgentIssuesTaskForceoftheInstituteofTheCharteredAccountantsofSriLanka.

Value AdditionThequantumofwealthgeneratedbytheactivitiesoftheCompanyanditsapplication.

Working CapitalCurrent assets exclusive of liquid funds and interest-bearingfinancial receivables lessoperating liabilitiesandnon-interest-bearingprovisions.

Non - Financial Terms

CDACoconutDevelopmentAuthority.

COPCost of Production. Generally refers to the cost ofproducingonekiloofproduce(Tea/Rubber).

CropThetotalproduceharvestedduringafinancialyear.

Extent in bearingTheextentofalandfromwhichcropisbeingharvested.Alsosee“ImmaturePlantation”.

FieldAunitextentofland.Estatesaredividedintofieldsinordertofacilitatemanagement.

GSAGrossSaleAverage.Averagesalepriceobtained(overaperiodoftime,forakiloofproduce)beforeanydeductionssuchasbrokerage,etc.

HACCPHazard Analysis and Critical Control Point System,Internationallyacceptedfoodsafetystandard.

Immature PlantationTheextentofplantationthatisunderdevelopmentandisnotbeingharvested.

InfillingA method of field development whereby planting ofindividualplants isdone inorder tofill thevacanciesofexistingrevenuefields.

ISOInternationalStandardsOrganization.

Mature PlantationThe extent of plantation from which crop is beingharvested.

NSANetSalesAverageperkilo.

ReplantingAmethodof field developmentwhere an entire unit ofland is takenoutof “bearing”anddevelopedbywayofuprooting the existing trees/bushes and replanting withnewtrees/bushes.

Yield (YPH)Average yearly output of produce from a hectare ofplantation.

Supplementary Reports | Glossary of Financial Terminology Notice of Meeting | Supplementary Reports


147

NOTICE OF MEETINGNOTICE ISHEREBYGIVENthattheTwentyFourth(24th)AnnualGeneralMeetingofKegallePlantationsPLCwillbeheldattheRegisteredOffice,No.310,HighLevelRoad,Nawinna,MaharagamaonFriday,30June2017at10.00a.m.andthebusinesstobebroughtbeforethemeetingwillbeasfollows;

1. ToconsidertheReportoftheDirectorsandtheStatementofAccountsfortheyearended31March2017withtheReportoftheAuditorsthereon.

2. ToapprovetheappointmentofDr.SenaYaddehigeasaDirector

PursuanttoSection211oftheCompaniesActNo.07of2007,aNoticeofthefollowingOrdinaryResolutionhasbeenreceivedbytheCompany,fromRPCPlantationManagementServices(Private)Limited,310,HighLevelRoad,Nawinna,Maharagama,ashareholderoftheCompany.

“ThatDr.SenaYaddehigeofLeNeuf,Chemin,St.Saviours,Guernsey,UnitedKingdomwhois71yearsofagebeandisherebyappointedaDirectoroftheCompanyintermsofsection211oftheCompaniesActNo.07of2007,anditisfurtherspeciallydeclaredthattheagelimitof70yearsreferredtoinSection210oftheCompaniesActno.07of2007shallnotapplytothesaidDr.SenaYaddehige”

3. ToapprovetheappointmentofDr.GerryJayawardenaasaDirector

PursuanttoSection211oftheCompaniesActNo.07of2007,aNoticeofthefollowingOrdinaryResolutionhasbeenreceivedbytheCompany,fromRPCPlantationManagementServices(Private)Limited,310,HighLevelRoad,Nawinna,Maharagama,ashareholderoftheCompany.

“ThatDr.GerryJayawardenaofNo.134,Batagama(North)Ja-Ela,whois74yearsofagebeandisherebyappointedaDirectoroftheCompanyintermsofsection211oftheCompaniesActNo.07of2007,anditisfurtherspeciallydeclaredthattheagelimitof70yearsreferredtoinSection210oftheCompaniesActNo.07of2007shallnotapplytothesaidDr.GerryJayawardena”

4. Tore-electMr.SunilPoholiyaddewhoretiresbyrotationintermsofArticle92attheAnnualGeneralMeeting,aDirector.

5. Tore-appointMessrs.Ernst&Young,CharteredAccountantsasAuditorsoftheCompanyandtoauthorizetheDirectorsto determine their remuneration.

6. ToauthorizetheDirectorstodeterminecontributionstocharities.

7. Toconsideranyotherbusinessofwhichduenoticehasbeengiven.

ByOrderoftheBoard

(Sgd.)RichardPierisGroupServices(Private)LimitedSecretaries

No.310,HighLevelRoad,Nawinna,Maharagama.

31May2017

Notes:

a) Amemberentitledtoattendandvoteatthemeetingisentitledtoappointaproxytoattendandvoteinsteadofhim/her.

b) AproxyneednotbeamemberoftheCompany.TheformofproxywillbefoundinsertedintheAnnualReport.

c) ThecompletedformofproxyshouldbedepositedatNo.310,HighLevelRoad,Nawinna,Maharagama.notlessthan48hoursbeforethetimeappointedfortheholdingofthemeeting.

Notice of Meeting | Supplementary Reports


148

NOTES

Supplementary Reports | Notes Form of Proxy | Supplementary Reports


149

I/We*(inblockletters).……………..………………………………….……………..………of….…………………………….……………………………………………

……………………beingamember/membersoftheKEGALLEPLANTATIONSPLC,herebyappoint…………………………………………

….…….………………………………………………………………of………………………………………………….………………………………………………………………..

..........................................................................................................................................................................................................….whomfailingDR.SENAYADDEHIGEwhomfailingSUNILSOMINDRANATHPOHOLIYADDEwhomfailingPROF.ASOKANUGAWELAwhom failingDR. GERRY JAYAWARDENAwhom failing SHAMINDA YADDEHIGE * asmy/our proxy torepresentme/usandtovoteonmy/ourbehalfatthe24THANNUALGENERALMEETINGoftheCompanytobeheldon30June2017andanyadjournmentthereof,andateverypollwhichmaybetakeninconsequencethereoftovote:-

In favour Against

1.

2.

3.

4.

5.

6.

7.

ToconsidertheReportoftheDirectorsandtheStatementofAccountsfor

theyearended31March2017withtheReportoftheAuditorsthereon.

ToapproveunderandintermsofSection211oftheCompaniesActNo.07of2007,theappointmentofDr.SenaYaddehigeatthisAnnualGeneralMeeting,aDirector

ToapproveunderandintermsofSection211oftheCompaniesActNo. 07 of 2007, the appointment of Dr. Gerry Jayawardena at thisAnnualGeneralMeeting,aDirector

Tore-electMr.SunilPoholiyaddewhoretiresbyrotation intermsofArticle92asaDirector

Tore-appointMessrs.Ernst&Young,CharteredAccountantsasAuditorsof

theCompanyandtoauthorisetheDirectorstodeterminetheirremuneration.

ToauthorizetheDirectorstodeterminecontributionstocharities

Toconsideranyotherbusinessofwhichduenoticehasbeengiven

Datedthis……………………………….dayof……………………2017

……………………………….Signature of Shareholder

Notes: (i) Pleasedeletetheinappropriatewords.(ii) AproxyneednotbeamemberoftheCompany.(iii) Instructionastocompletionappearsonthereverseofthisform.

FORM OF PROXY

Form of Proxy | Supplementary Reports


150

INSTRUCTIONS AS TO COMPLETION OF PROXY FORM

● Tobevalid,thisFormofProxymustbedepositedatNo.310,HighLevelRoad,Nawinna,Maharagama.,notlaterthan10.00a.m.onWednesday,28June2017.

● InperfectingtheFormofProxy,pleaseensurethatalldetailsarelegible.

● InthecaseofaCompany/Corporation,theproxymustbeunderitsCommonSeal,whichshouldbeaffixedandattestedinthemannerprescribedbyitsArticlesofAssociation.

● Pleaseindicatewithan‘X’inthespaceprovidedhowyourproxyistovoteoneachresolution.Ifnoindicationisgiventheproxyathis/herdiscretionwillvoteashe/shethinksfit.

● ThisFormofProxyshallinthecaseofanindividualbesignedbytheappointororhis/herAttorney.WheretheFormofProxyissignedunderaPowerofAttorney,whichhasnotbeenregisteredwiththeCompany,theoriginalPowerofAttorneytogetherwithaphotocopyofsameoracopycertifiedbyaNotaryPublicmustbelodgedwiththeCompany,alongwiththeFormofProxy.

Supplementary Reports | Instructions as to completion of Proxy Form


CORPORATE INFORMATION

NameoftheCompany : KEGALLEPLANTATIONSPLC

LegalForm : AQuotedPublicCompanywithlimitedliability,IncorporatedinSriLankaundertheCompaniesActNo.07of2007.

DateofIncorporation : 22June1992

CompanyRegistrationNo : NewregistrationNo.PQ135[OldNo.N(PBS/CGB)140]

Head/RegisteredOffice : No.310,HighLevelRoad,Nawinna,Maharagama,SriLanka.

PrincipalBusinessActivities : Cultivation,ManufactureandSaleofRubber,Tea,Coconut,Cardamom&otheragriculturalProduce.

UltimateParentEnterprise : RichardPieris&CompanyPLCNo.310,HighLevelRoad,Nawinna,Maharagama,SriLanka.

BoardofDirectors : Dr.SenaYaddehigeMr.SSPoholiyaddeProf.RCWMRANugawelaDr.SSBDGJayawardenaMr.ShamindaYaddehige

StockExchangeListing : TheOrdinarySharesoftheCompanyarelistedwiththeColomboStockExchangeofSriLanka.

Management : Mr.SSPoholiyaddeMr.SriyanEriyagamaMr.SudheeraEpitakumburaMr.ISDoranegamaMr.TIKodithuwakkuMr.RMSSHerath

Secretaries : RichardPierisGroupServices(Pvt)LimitedNo.310,HighLevelRoad,Nawinna,Maharagama,SriLankaTelephone:+(94)114310500

Auditors : Messrs.Ernst&Young,CharteredAccountants,201,DeSaramPlace,Colombo10.

Bankers : NationalDevelopmentBankPLCBankofCeylon-CorporateBranch&RegionalBranchesHattonNationalBankPLCPeoplesBankSeylanBankPLCCommercialBankofCeylonPLCIndianOverseasBank/IndianBank/StateBankofIndiaNationsTrustBankPLC

ContactDetails : TelephoneFacsimileWebsiteE-mail

-Chairman-Director-Director-Director-Director

-ManagingDirector-Plantations-ActingChiefExecutiveOfficer(Appointedw.e.f.01January2017)-FinancialController-GeneralManager-Accountant-Manager-InformationSystems

:+(94)114310500:+(94)114310799:www.arpico.com:[email protected]

ANNUAL REPORT 2016 / 2017




No. 310, High Level Road, Nawinna, Maharagama, Sri Lanka.Tel : +94 11 4310500Fax : +94 11 4310799Website : www.arpico.comEmail : [email protected]

An

nual Report 2016 / 2017

kegalle plantations plc - arpico...kegalle lanta c 2 0 1 6 17 2 the largest rubber producer of sri...

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