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Millennium Housing Developers PLC

ANNUAL REPORT 2019/20

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CONTENTS

02 About this Report

03 About Us

04 Highlights

06 Chairman’s Letter

09 Deputy Chairman’s Message

11 Chief Executive Officer’s Review

13 - 42Governance and Accountability

14 Board of Directors

17 Senior Management

18 Corporate Governance

29 Composition of the Board of Directors

30 Annual Report of the Board of Directors on the Affairs of the Company

33 Directors’ Statement on Internal Control Over Financial Reporting

34 Statement on Directors Responsibility

35 Audit Committee Report

37 Remuneration and Nomination Committee Report

38 Related Party Transactions Review Committee Report

39 Risk Management

42 Deputy Chairman’s and Deputy Finance Controller’s Statement of Responsibility

43 - 86Financial Reports

44 Independent Auditors’ Report

47 Statement of Profit or Loss and Other Comprehensive Income

48 Statement of Financial Position

49 Statement of Changes in Equity

50 Statement of Cash Flows

51 Notes to the Financial Statements

87 - 92Annexes

88 Investor Information

90 Ten Year Summary

92 Notice of Meeting

Enclosed Form of Proxy

Inner back cover Corporate Information

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One of Millennium’s greatest strengths

is the macroscopic focus we bring to bear on

our every undertaking. Our familiarity with relevant ground

realities and operating environment, among other factors,

helps us hone in on the optimal solution that satisfies the customer.

We then deploy a well calibrated mix of the best in design,

space usage, materials, skills and professionalism and

more, that sync together constituting the Millennium

proposition. Our focus on planet and people places all

such effort within the context of a heightened approach to

eco-consciousness. Given the current tumultuous context

we face, the Company has every confidence that this

business model has relevance and efficacy for

the unfolding years. We are very optimistic about the future.

Millennium Housing Developers PLC Annual Report 2019/20

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This Annual Report describes concisely the activities and results obtained for the Company for the year 2019/20. It also gives some insights into the future prospects for the Company. The Company creates value through a strategic framework, and the financial performance is evaluated in the context of the operating environment of the industry. The Report describes briefly the expansion of the Company in its different business segments.

REPORT BOUNDARY

The Report covers the principal Company Millennium Housing Developers PLC and its wholly-owned subsidiaries, Millennium Housing Limited (MHL), Millennium Villa Housing Development Limited (MVHDL), Millennium Housing Construction Limited (MHCL), MC Urban Developers Limited (MCUDL), and MC Universal Limited (MCUL). In this Report all companies are referred to as the Millennium Group. All information is presented and discussed in the context of the Company and the Group, broadly covering all the activities that are initiated by the parent company and are executed through its subsidiaries.

COMPLIANCE

The activities and operations of the Millennium Group inclusive of its subsidiaries are compiled for the period 1 April 2019 to 31 March 2020 in this Report. The Report maintains the customary annual cycle for all financial information. The most recent previous report was for the period 1 April 2018 to 31 March 2019. The Group consistently abides by all applicable laws, rules, regulations, directions, and standards and pays particular attention to the guidelines for voluntary disclosures. No changes in reporting or restatements were made of previously reported financial, social, or environmental information.

COMMENTS AND QUERIES

We welcome your comments or inquiries on this Annual Report 2019/20 which could be addressed to the

Deputy Finance Controller, Millennium Housing Developers PLC, No. 28, Dr Lester James Peiris Mawatha,Colombo 5.

ABOUT THIS REPORT


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Millennium Housing Developers PLC has taken urban and township development to unprecedented heights. Since 1999, the Company has been revolutionising mega township projects by identifying and catering to the progressive lifestyles of prospective clients around the island. The tenacity of the Company has been rightly acknowledged as it is one of the private property developing companies that is listed in the Colombo Stock Exchange.

The Company has a diverse portfolio; which includes lands, homes, apartments, and villas in diverse settings. Heartland, Olympus, Paradise, Orchid, and Tulip are a few of the branded housing schemes that are secure, eco-friendly, and modern.

They are strategically positioned and intelligently planned to cater to target markets. The latest addition to the portfolio is the Heights Apartments in Nawala (The Heights – Colombo 5) , Green Terrace Polgasowita and Katunayake Review View housing projects.

Among other forthcoming projects are the apartment complexes which are to be located in Battaramulla and Koswatta and Housing project at Moragahahena.

The company consistently meets impeccable standards of raw material and construction. Constantly striving and engaged in many community service responsibilities in rural Sri Lanka and continues to transform lifestyles and cityscapes around the country by taking pride of our loyal customer base that’s built on years of relationship excellence.

VISION

“To create a landmark in the industry by crafting innovative, unique, eco-friendly, and residential neighbourhood solutions in vertical and horizontal living”

MISSION

“To provide housing solutions to middle, upper middle, and elite class customer segments while preserving individuality and presenting a wider choice of standard housing to luxury apartments together with all facilities in flexible terms by the leader in mega township developments”

CORPORATE OBJECTIVES OUR CORE VALUES

Provide quality houses to our customers HONOUR AND INTEGRITY

Maximise customer satisfaction ENTREPRENEURSHIP

Enhance shareholder value PROFESSIONALISM

Maintain dynamic, satisfied, and motivated staffs, who are directed towards our mission

TEAMWORK

Satisfy our obligation towards society at large PASSION AND PRIDE

Contribute to the development of the country SENSE OF PURPOSE

ABOUT US


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HIgHLIgHTS


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HIgHLIgHTS

Millennium receives a distinctive accoladeHaving built and delivered over 3,000 houses and over 10,000 communities Millennium received

a major boost to its brand image when the Company was awarded ”Asia’s Most Trusted Real-Estate Company 2019“ at a ceremony held in Thailand on 11 December. “Asia’s Most Trusted Brand Awards” is a

noteworthy recognition for a brand, conferring the status of being, “Most Trusted” in its industry category

based on current year market standing. The evaluation process for this award, is based on quantified

consumer survey, expert analysis, and attributes based qualitative research. The last is conducted by

International Brand Consulting Corporation (IBC), USA.

CEO Arjuna Waidyasekera receiving award from Chief Guest and President of IBC

Considering our role as a large-scale developer

sustainability is built into our corporate strategy.

Our townships are designed and developed with

a view creating a positive social, economic, and

environmental impact. We seek to provide our

customers with well-planned aesthetic living

spaces, highest quality of design and construction,

timely delivery, and a tranquil environment.

Our pursuit of operational and customer excellence,

ethical conduct, innovativeness, and domain

knowledge have all contributed to our brand image.

This award is a tribute to the trust and confidence

our customers have placed in us. While we accept it

with humility, all our stakeholders can rest assured

that it will motivate us to strive to reach even greater

heights in the future.


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HIgHLIgHTS

2020 2019 Change%

Earning highlights and ratios

Revenue LKR ’000 1,294,463 1,004,825 28.82

Gross profit LKR ’000 400,002 375,860 6.42

Results from operating activities LKR ’000 188,938 165,909 13.88

Profit/(loss) before tax LKR ’000 172,016 157,964 8.90

Profit/(loss) after tax LKR ’000 173,378 114,924 50.86

Dividends LKR ’000 – 47,138 (100.00)

Gross profit margin % 30.90 37.41 (17.39)

Operating profit/(loss) margin % 14.60 16.51 (11.60)

Net profit/(loss) margin % 13.39 11.44 17.11

Earnings per share LKR 1.29 0.85 51.45

Interest

Interest cover Number of times 8.95 12.18 (26.46)

Financial position highlights and ratios

Equity attributable to owners LKR ’000 962,681 795,318 21.04

Total assets LKR ’000 2,622,390 2,978,219 (11.95)

Total borrowings LKR ’000 781,320 708,867 10.22

Debt to equity % 81.16 89.13 (8.94)

Gearing % 44.80 47.13 (4.94)

Current asset LKR ’000 2,521,302 2,878,416 (12.41)

Current liability LKR ’000 1,215,923 1,623,170 (25.09)

Inventory LKR ’000 2,055,478 2,195,178 (6.36)

Current asset ratio Number of times 2.07 1.77 16.93

Quick asset ratio Number of times 0.38 0.42 (8.99)

Net asset per share LKR 7.15 5.91 21.04

Share in issue No. Mn. 134.68 134.68 –

Market/Shareholders' information

Market value per share as at 31 March LKR 4.90 7.00 (30.00)

Market capitalisation as at 31 March LKR ’000 659,938 942,769 (30.00)

Price earnings ratio Number of times 3.81 8.20 (53.55)

Dividend per share LKR – 0.35 (100.00)

Dividend yield ratio % – 5.00 (100.00)

Dividend paid out % – 41.02 (100.00)

Dividend cover Number of times – 2.44 (100.00)

CHAIRMAN’S LETTER

LIFESTYLE CHANgES WILL CONTINUE TO DRIVE THE MIgRATION FROM RURAL LOCATIONS TO SUBURBAN TOWNSHIPS AND URBAN HIgH-RISES


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CHAIRMAN’S LETTER

Dear shareholders,

It is my pleasure to report on the performance of Millennium Housing Developers PLC (MHDPLC) at the end of another year, when whatever headwinds the Company encountered, we weathered the storm and proved our resilience.

OPERATINg ENVIRONMENT

The global economy recorded a dampened performance with a growth rate of only 2.9%. This was the lowest growth rate recorded since the global financial crisis of 2008/09. Trade barriers, geopolitical tensions, low growth in productivity and aging populations in certain advanced countries are the main reasons for the slower growth. There were also country-specific weaknesses in certain emerging economies such as Brazil, India, Mexico and Russia. Weather-related events in several parts of the world including the Caribbean, Africa, and Australia also impeded growth. On the other hand, relaxed monetary policy was one factor that stimulated growth. Lower interest rates stimulated purchases of non-durable goods and services. With the uncertainty in the global environment, firms approached capital investment decisions with caution with resulting decreases in global purchases of machinery and equipment. While the manufacturing and trading sectors stagnated the service sector recorded satisfactory growth.

The COVID-19 pandemic which broke out in early 2020 is having a devastating impact, both economic and social. Besides the tragic loss of over a million lives, the global economy is expected to contract by 4.9% according to latest estimates, which will be the deepest global recession in decades. Lockdowns and other restrictions, while being imperative to address the health risks, drastically affected economic activity by both producers and consumers. The recovery is now likely to be more gradual than previously forecast.

The performance of the construction industry in 2019 globally, reflected that of the economy in general, with a growth of only 2.6%. This was the slowest growth rate in a decade. Some major economies such as the US and Canada suffered a contraction. In China, where the Government boosted investment in infrastructure, growth remained positive.

The performance of the Sri Lankan economy was also lacklustre recording a growth of only 2.3%, compared with 3.3% in 2018. The tourism sector was devastated by the Easter Sunday terrorist attacks but picked up towards the end of the year. Of the three main sectors, the industry sector performed best but still grew only by 2.7%. Extreme weather conditions also caused disruption to food supplies, in turn causing volatility in prices. Political uncertainties also contributed to the slowdown.

Curtailing of imports helped improve the balance of payments and stabilised the exchange rate. The Central Bank followed an accommodating monetary policy aimed at reducing market interest rates through regulatory action. While the Sri Lankan economy was also devastated by the COVID-19 pandemic, the timely imposition of rigid lockdowns contained its spread, resulting in minimal loss of life. Airline, tourism and export industries have been greatly affected; accurate forecasting is hard to make at this moment in real estate and construction industries.

CONSTRUCTION INDUSTRY

The construction industry, which suffered a slump in 2018, recovered somewhat in 2019, with a growth in value added of 4%. The growth was mainly driven by large scale infrastructure projects, such as the extension of the Southern Expressway, Outer Circular Highway, and the Central Expressway. The recovery was reflected in an increase of the availability of cement as well as local cement production. Long delays in obtaining payment for Government-initiated projects hampered the growth of the industry. Significantly, the loans granted by Licensed Commercial Banks for personal housing construction grew by 5.4% in 2019, seeming to show a reverse trend from the construction industry in general.

THE MARKET

Despite the economic challenges, the market-demand for housing, especially for first time purchasers, remains robust and is likely to continue for the foreseeable future. MHDPLC caters to two major market segments with differentiated product offerings; the semi-luxury, high-rise apartments, and the affordable township houses. In 2018/19 our focus was on sustainability and in the year under review we continued with the same focus and executed the existing plans. With the Easter Sunday attacks at the beginning of the year and the period of uncertainty prior to the elections, there was little space for strategic changes. With social and economic changes, the movement from a rural or provincial setting to a semi-urban or urban location continues. Furthermore, those who are already in a suburban location, whether a MHDPLC property or otherwise, often wish to move to an urban high-rise. Lifestyle changes and needs such as schooling continue to drive this trend. However, this scenario has brought with it a shortage of supply in the lower and middle range of the market. The development of the housing sector has been adversely affected by high interest rates though this has been alleviated in 2020.

With the aging population there is trend for senior citizens to seek the convenience, comfort and safety of an apartment. The availability of uninterrupted facilities such as electricity and water is also an added attraction for this customer group.


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CHAIRMAN’S LETTER

SUSTAINABILITY

As a major real estate developer sustainability is a key focus. We are very much concerned with providing a conducive and healthy environment for our customers to live in. MHDPLC also strives to minimise any damage to the natural environment.

We fervently believe that our ethos will contribute to our survival and prosperity in the long term. Through excellence of service and delivering on our commitments, we have built a loyal customer base.

This will help us to grow both through repeat customers as well as enhancing our reputation.

THE CHALLENgES

We are however confronted with issues that affect the industry in general. High prices have led to a constraint in affordability; it has also led to a reluctance on the part of banks to lend for apartment purchasing as they are not certain of the real value of their collateral. We would welcome some regulatory intervention on the part of the Government to correct this anomaly.

Another social factor that constrains our growth is the tendency among a certain class of potential customers to give preference to other luxury purchases over the more basic need of housing. We need to do more to educate customers on the importance of housing.

The construction industry in general in Sri Lanka has been beset with many challenges. These include high costs, low productivity of labour, and high interest rates. In 2019, there were the slowdowns due to first the Easter Sunday terrorist attacks and second the period of uncertainty prior to the elections. Despite these constraints we achieved a satisfactory financial performance by the year end. In 2020, the COVID-19 pandemic has had a major negative impact due to the lockdown prevailing for two months. Sales to expatriate Sri Lankans have also dried up due to the restrictions on travel. However, in the medium- to long-term we expect an increase in expatriate Sri Lankans opting to return to their country of origin.

LOOKINg AHEAD

Looking to the future, whatever temporary challenges COVID-19 may have brought, the basic demand parameters will remain in place. The move from rural to semi-urban or urban-housing will still be driven by socio-economic factors. However due to the oversupply in the apartment segment we anticipate a certain shift in focus from the semi-luxury apartments to affordable township housing. With the advent of the highways, we have seen a new phenomenon; that of property development adjacent to the highways. This leads us to envision township development spreading through the country. Given the ease of travelling that the highways provide, distance from the urban metropolis is becoming less of a constraint. With our track record and reputation, we can indeed look forward to the future with optimism.

APPRECIATION

I wish to express my appreciation for the dedication and commitment of our Management Team in difficult times. I also wish to thank my fellow Directors for their professional guidance and support and our shareholders for their continued confidence in us. My thanks also go out to all the MHDPLC subsidiaries, project heads, and multiple teams at all our locations. Finally, I should not forget our loyal customers and shareholders for their continued trust and confidence in us.

U Harshith DharmadasaChairman

30 September 2020


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DEPUTY CHAIRMAN’S MESSAgE

OUR CULTURE OF ETHICS AND TRANSPARENCY AND OUR RECORD OF DELIVERINg ON COMMITMENTS ARE THE CORNERSTONE OF OUR CUSTOMER RELATIONSHIPS AND REPUTATION



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Our stakeholders,

Formulating and executing our business strategies involves balancing the interests of a range of stakeholders.

Our customers are the raison d’être of our business and we have to keep their loyalty by providing a product of maximum quality at an affordable price.

Our investors would expect security of their investment with a steady and adequate return. A contented and productive workforce is a necessity to execute our projects in a timely manner and at the required standards. The nature of our projects carries a risk of environmental damage, and it is our social responsibility to leave a minimal possible footprint.

gOVERNANCE

Our business is founded on a belief in the importance of good governance, ethics, and transparency. The structures of governance we have put in place guarantee legal compliance, professionalism, ethical conduct, effectiveness, and customer satisfaction. Our reputation for transparency stands us in good stead with all our stakeholders especially our customers. We take great care to deliver our products according to our obligations in the sales contracts. Our governance framework ensures compliance with best practices, the rules of the Colombo Stock Exchange, and other regulatory provisions. The Board of Directors set the strategic direction and monitor the effectiveness of its implementation. The Board has a diverse composition and is comprised with professionals from various fields; banking, accountancy, financial analysis and real estate. The governance structure and related committees ensure alignment with corporate strategies and regulatory compliance.

MITIgATINg RISK

As in any other commercial activity, risk is inherent in our business. Risk can never be entirely eliminated but it can be mitigated in a proactive manner. Our risk management procedures follow a cycle of identifying, assessing, and managing the risk and finally monitoring the management process. Risks have to be evaluated considering the magnitude of loss if the event occurs against the probability of occurrence. Risks can be categorised into diverse types such as market risk, operational risk, credit risk, legal risk, liquidity risk, and reputational risk. Specific mitigation strategies have been identified and implemented for each type of risk. The COVID-19 pandemic underlined the importance of identifying all types of risk.

IMPACT OF COVID-19

The COVID-19 pandemic has had a very detrimental impact on the construction industry. The lockdown period effectively halted all construction work. Workers who returned to their homes did not return for an extended period even after curfews ended. The moratorium on payments caused a short-term financial tightening. Compliance with health and safety guidelines was possible in the case of disinfecting. However, adhering completely to social distancing proved more challenging, especially in construction.

APPRECIATION

To conclude, I wish to thank our Chairman and the Board of Directors for their guidance and support in crafting strategies for MHDPLC. I must acknowledge the role played by our CEO, Management Team and staff members in implementing strategies and continuing the operations uninterrupted in the face of obstacles. My thanks also go out to all our stakeholders including customers, suppliers, business partners, investors, financiers, and government institutions.

Victor R RamananDeputy Chairman

30 September 2020


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THROUgH OUR AFFORDABLE TOWNSHIP PROJECTS, WE BUILD NOT ONLY HOUSINg BUT ALSO COMMUNITIES

CHIEF EXECUTIVE OFFICER’S REVIEW


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SERVINg THE CUSTOMER

Our customers are the raison d’être of our existence. We are committed to deliver the best possible in products and services to our customers. While MHDPLC has gone far in this respect, we intend to go the extra mile and give our customers not merely satisfaction but also delight. We unfailingly honour all commitments made in our sales agreements and do not compromise on quality. This is built into our ethos and implemented through our stringent corporate governance procedures and business ethics.

A large percentage of our sales come from repeat customers. This is something we take great pride in as it mirrors the degree of customer satisfaction and the quality of our product. Those who have purchased one residence from us do not hesitate to purchase another for their children or their extended family. The Asia’s Most Trusted Real Estate Company award we received in December 2019 as being the Trusted Real Estate Partner is a tribute to the high degree of trust and loyalty our customers have placed in us. This accolade was awarded at the “Asia’s Most Trusted Brand Awards“ event held in Thailand.

Considering the profile of today’s customer, we have to move beyond the confines of traditional advertising. We rely more and more on digital advertising where we have the opportunity to personalise our offering much more than is possible in mass media.

PROJECT PROFILE

We have two major market segments, the semi-luxury apartments and the affordable housing. The first is located in urban high-rises while the second consists of the suburban or semi-urban townships. The clientele for the first would be the moderately affluent while buyers for the township houses would be more middle income. Our brand is thus two-faceted; the Millennium Brand reflecting the horizontal segment while the Heights Brand reflects the vertical segment. Through this diversified portfolio we are able to cater to different customer tastes and income brackets. Regarding the specific projects, having completed the Piliyandala Siddamulle project, we are close to completing the Ja-ela Township project and Polgasowita Green Terrace Project, while at the time of writing the Katunayake project has been commenced. The latter was scheduled to commence somewhat earlier but was delayed owing to the COVID-19 pandemic. The Moragahahena project is due to be launched during 2020/21.

HOLISTIC TOWNSHIP CONCEPT

Our township projects do not merely provide housing but are crafted with a broad holistic concept encompassing sustainability, innovativeness, wellness and tranquillity. Our projects are located around lakes and such naturally salubrious environments. We do our utmost to preserve the biodiversity in the locality. The designs of our residences and ancillary facilities take into account the need to minimise electricity and water consumption, use of eco-friendly materials, and minimising waste. We build communities and not merely housing.

THE PEOPLE FACTOR

The execution of our projects is possible due to the commitment of our professionally qualified and highly skilled employees. Conceptualisation of MHDPLC's cutting-edge designs has been made possible because of the calibre of our professionals. While their contribution is beyond question, we have to do more to make optimum use of their talent. While we do provide formal training we emphasise more on learning through the job. We also encourage our staff to venture beyond rigid boundaries of formal disciplines. It is not uncommon for a legal professional to become involved in discussions with local bodies or for an engineer to contribute to sales.

FINANCIAL RESULTS

In the light of ongoing COVID-19 situation, the company operations were adversely affected starting from the second half of March 2020.The pandemic and the subsequent measures adopted in containing the spread of the virus has heightened the level of uncertainty across the Sri Lankan economy and has impacted all aspects of operations resulting in a challenging environment to the real-estate and construction industry in the country. The pandemic situation has caused shifts in customer behaviour and expectations; restricted working environments within social distancing; affected sustainability of employees; caused supply chain restrictions and embargos; and most importantly impacted the financial environment in terms of debt recovery, borrowing and moratorium grants. Many of these impacts are likely to continue into the post-COVID-19 “new normal” scenario.

First time housing purchasing remains robust and is likely to continue for the foreseeable future. Restricted travel & tourism industry and closure of schools will impact on rental market of housing although the move from rural to semi-urban or urban housing will still be driven by socio-economic factors. Owing to risk of one on one operations, conducting construction and sales functions was challenging adhering to social distance protocol and may continue depending on the uncertain future.

Despite an unfavourable environment I am proud to report that we ended the year with a very commendable financial performance. We recorded a revenue of LKR 1,294 Mn., which is an increase of 28% over the previous year, compared with a 3% growth in 2018/19. Our gross profit grew by 6.5%, while our net profit grew by approximately 16% comparing growth percentage of last year.

APPRECIATION

I wish to express my appreciation of the guidance and direction given by the Chairman, Deputy Chairman and the Board of Directors. My thanks also go out to our shareholders, financiers, suppliers, contractors, regulatory bodies, and Government institutions. Our achievements would not have been possible without the hard work and dedication of our Management Team and staff. I also wish to express my unstinted appreciation for the loyalty and confidence reposed in us by our customers. I look forward to the continued contribution of MHD PLC in enhancing the lives of Sri Lankans by providing comfortable and aesthetic living spaces at an affordable price.

Arjuna WaidyasekeraChief Executive Officer

30 September 2020



Governance and Accountability14/ Board of Directors17/ Senior Management18/ Corporate Governance29/ Composition of the Board of Directors30/ Annual Report of the Board of Directors on the Affairs of the Company33/ Directors’ Statement on Internal Control Over Financial Reporting34/ Statement on Directors Responsibility35/ Audit Committee Report37/ Remuneration and Nomination Committee Report38/ Related Party Transactions Review Committee Report39/ Risk Management42/ Deputy Chairman’s and Deputy Finance Controller’s Statement of Responsibility


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BOARD OF DIRECTORS

Mr U Harshith DharmadasaChairman/Non-Executive Director

Mr Victor R RamananDeputy Chairman/ Non-Executive Director

Mr K C Chandana PereraExecutive Director

Mr Jayaprakash RudraNon-Executive Independent Director

Mr gihan De ZoysaNon-Executive Independent Director

Mr U H PalihakkaraNon-Executive Independent Director

Mr H Jayantha C Perera)

Non-Executive Independent DirectorMr Rajiv Perera)

Non-Executive Independent Director

* Resigned w.e.f. 15 September 2020 * Resigned w.e.f. 15 September 2020


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BOARD OF DIRECTORS

MR U HARSHITH DHARMADASAChairman/Non-Executive Director

Mr Harshith Dharmadasa has been the Chairman of the Company since 2011. He has 23 years of experience in Executive Management. He is an Associate Member of the Institute of Certified Professional Managers. He also served as a Director at the Export Development Board of Sri Lanka and Sathosa Retail Ltd., during 2003/04. He has acquired experience in the field of trading, manufacturing, and construction sector. He is the Managing Director of Ceyoka (Pvt) Ltd., Nawaloka Trading (Pvt) Ltd., Nawaloka Agri (Pvt) Ltd., Ceyoka Engineering (Pvt) Ltd., Nawaloka MEP Concepts (Pvt) Ltd., Koala (Pvt) Ltd., East West Marketing (Pvt) Ltd., Nawaloka Steel Industries (Pvt) Ltd., Ceylon Nutrinut Holding (Pvt) Ltd., and Nawaloka Construction Company (Pvt) Ltd.

Mr H Dharmadasa is also a Director of Nawaloka Holdings (Pvt) Ltd., Nawaloka Hospitals PLC, Nawaloka College of Higher Studies (Pvt) Ltd., Nawaloka Guardian International (Pvt) Ltd., Nawaloka Medicare (Pvt) Ltd., Nation Lanka Finance PLC, and JDC Printing Technologies (Pvt) Ltd.

MR VICTOR R RAMANANDeputy Chairman/Non-Executive Director

Victor Ramanan is a Sri Lankan born British National residing in London. Being educated in Sri Lanka and the UK, Victor is a BSc Graduate and holds a Diploma in Software Engineering, Business Admin and Sales Techniques (UK). He is a versatile marketer and administrator with more than 30 years of hands on experience working in many countries including United Kingdom, Kuwait, Dubai, Baharain, Germany, France, USA and Sri Lanka. He has worked in areas such as IT, HR, Marketing and Business Development of which more than 17 years has been in the fields of Oil, Gas, Logistics and Real Estate sectors.

Presently holds positions as the Deputy Chairman of Nawaloka College of Higher Studies (NCHS) and Millennium Housing Developers PLC. He is also a Director of Nawaloka Hospitals PLC, Nation Lanka Finance PLC, Ideal Gateways (Pvt) Ltd., and Jilani Group (Dubai).

MR K C CHANDANA PERERAExecutive Director

Mr Chandana Perera has been a Director of the Company since 2015. He has accounted over 32 years of Senior Management experience. Mr Perera started his career at John Keells Holdings in 1985. During his tenure at John Keells Holdings, he held the positions of Manager Walkers Tours, Director, Mack International Freight, and Country Manager of DHL Worldwide Express. Mr Perera also held the positions of Country Manager for Aramex International in Vietnam and as the Regional General Manager for Aramex overlooking North Indian region covering over nine states. Mr Perera also, held the position of Country Manager – Hayleys Advantis, freight operations in India from 2008-2011.

Mr Chandana Perera holds an MBA from the University of Western Sydney and currently serves as The Director General Manager for Ceyoka (Pvt) Ltd., Nawaloka Trading (Pvt) Ltd., Ceyoka Health (Pvt) Ltd., Ceyoka Engineering (Pvt) Ltd., Nawaloka Agri (Pvt) Ltd., Nawaloka MEP Concepts (Pvt) Ltd., Ceyoka Exports (Pvt) Ltd., Koala (Pvt) Ltd. Mr Perera is also a Director of Millennium Housing Developers PLC and Tea & Herb Co (Pvt) Ltd.

MR gIHAN DE ZOYSANon-Executive Independent Director

Mr De Zoysa was appointed to the Board in March 2011. He was an Associate Director and Consultant for Taru Villas (Pvt) Ltd., during 2007-2010. He is in charge of Special Projects and Technical Services. He has more than 26 years experience in building construction, hotel construction and hotel maintenance management. He has worked overseas in the Seychelles, United Kingdom, and Sri Lanka. He has work experience with International Non-Governmental Organisations (INGOs’) in rebuilding houses, medical centres and hospitals. He excelled as a leading sportsman in his schooling days. Currently, Mr De Zoysa serves as a Director for Millennium Housing Limited, Millennium Villa Housing Development Limited, MC Urban Developers Limited and MC Universal Limited.

MR H JAYANTHA C PERERANon-Executive Independent Director

Mr H Jayantha C Perera is a CFA Charter holder from the CFA Institute, Charlottesville, USA. He is also a Diploma Holder from the National Computing Centre, UK. Mr Perera is licensed by the Securities and Exchange Commission of Sri Lanka to Trade and Provide Investment Advise on Securities.

Mr Perera has well over two and a half decades of work experience in the corporate sector having worked in many divisions and in many capacities in many business establishments. He brings with him experiences in Management, Strategy, Treasury, Finance, Corporate Finance and Sales. He is the Executive Director cum Chief Executive Officer at Nation Lanka Finance PLC and has previously worked in the Finance/Financial Services areas in the capacities of Managing Director, Director/CEO at Richard Pieris Securities Private Ltd., as the CEO of Richard Pieris Arpico Finance Limited, As the CFO of Nawaloka Hospitals PLC, as the Senior Manager heading Capital markets at the Merchant Bank of Sri Lanka, and also as the VP Head of Research at DFCC Stock Brokers Private Limited. Prior to these appointments, he worked at NDBs Stock Brokers as an Investment Advisor, Stock Broker and Floor Trader and later became the Research Manager at Lanka Securities Private Limited. Mr Perera resigned from the Company on 15 September 2020.


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BOARD OF DIRECTORS

MR U H PALIHAKKARANon-Executive Independent Director

Mr Palihakkara was appointed to the Board in 2011. He holds nearly 43 years of post-qualifying experience in divers fields. He has worked in a number of private and public sector organisations in Sri Lanka and overseas, which includes; Chairman, Acland Insurance Services, Deputy Chairman, Ceylon Electricity Board, Director/General Manager People’s Merchant Bank, Deputy General Manager DFCC, Financial Specialist Commonwealth Secretariat (CFTC). He has also worked in a number of projects funded by the World Bank (WB), Asian Development Bank (ADB), African Development Bank (AFDB), International Fund for Agricultural Development (IFAD), and Commonwealth Secretariat and JIAC. He was the former president of The Institute of Chartered Accountants of Sri Lanka and the Sri Lanka branch of Chartered Institute of Management Accountants (CIMA) UK, and the Chartered Association of Certified Accountants (ACCA) UK. He was a Council member of the Securities Council of Sri Lanka for four years, Postgraduate Institute of Management, Open University of Sri Lanka and the Central Culture Fund National Institute of Business Management, CINTEC. He was the President of the Organisation of the Professional Associations (OPA) in Sri Lanka (2010/11).

MR RAJIV PERERANon-Executive Independent Director

Mr Perera was appointed to the Board of MHDPLC in 2011. He counts over 23 years of experience in marketing, property and real estate business, both in the United Kingdom and Sri Lanka. Mr Rajiv is currently a Director of Nation Lanka Equities, Nation Lanka Promotions and Nation Lanka Capital. He worked as the Head of Marketing of Primer Communication International London and Directors of Capital CLS, Air Line Suppliers in UK. Currently, Mr Perera serves as a Director for MC Urban Developers Limited. Mr Perera resigned from the Company on 15 September 2020.

MR JAYAPRAKASH RUDRANon-Executive Independent Director

Appointed to the Board on 6 May 2015. He is a well-established businessman, Served as a Director in many companies. He has wide experience especially in the property development sector.

SENIOR MANAgEMENT

MR ARJUNA WAIDYASEKERAChief Executive Officer

Mr Arjuna Waidyasekera, having joined the business middle of 2018 with a career mainly in the apparel and investment sectors in terms of marketing locally and internationally, production, procurement, supply-chain coordination, LEAN manufacturing, recruitment and training alongside driving strategic business opportunities across Group companies. A multi-disciplined professional encompassing an unparalleled management style, experience in relationship management, top and bottom line growth through decisive, effective and efficient handling of sales management, marketing management, project management, research and development, sourcing, thrives on challenging entrepreneurial environments, to re-engineer and improve processes to drive efficiency to support revenue and profitability growth.

Mr Arjuna Waidyasekera holds a MBA from Bedfordshire University (Luton, UK) and a Diploma in CIM. During his career of 25 years he has accounted over 20 years of Senior Management experience and held positions of Marketing Manager, Manager Research and Development, Senior Manager Sales, Head of sales and Director Sales. Mr Waidyasekera started his career at John Keells Holdings in 1994, went on to serve at Coats Thread Lanka, Hayleys MGT, Janashakthi Insurance, International trimmings and Labels, MAS Holdings – Stretchline (pvt) Ltd., and, Blue Mountain.


17

SENIOR MANAgEMENT

Mr Arjuna WaidyasekeraChief Executive Officer

Mr R Hasitha WanniarchchiDeputy Financial Controller

Mr Samitha WaidyasekaraChief Quantity Surveyor

Mr K S Dishan FernandoHead of Sales and Marketing

Mr Chanadana MuhandiramHead of Project Management

Ms A M K SepaliHead of Legal

Mr W A L Ajith KumaraManager – Security andProject Administration


18

CORPORATE gOVERNANCE

PHILOSOPHY

The Company firmly believes in and continues to adopt practices relative to good corporate governance. Corporate governance seeks to raise the standards of corporate management, strengthens the systems, significantly increases effectiveness and ultimately serves the objective of maximising shareholders value. Transparency, integrity, professionalism and accountability-based values form the basis of Company’s philosophy for corporate governance. The philosophy of the Company is in consonance with the accepted principles of good governance.

COMPLIANCE WITH THE CODE OF BEST PRACTICE AND LISTINg RULES

The Company complies with the Code of Best Practice for Corporate Governance issued by The Institute of Chartered Accountants of Sri Lanka and the Rules on Corporate Governance contained in the Listing Rules of the Colombo Stock Exchange.

ROLE OF DIRECTORS

The Board’s core responsibility is to lead the Company to attain long-term success. There is a division of responsibilities between the Chairman (responsible for running the Board) and the Executive Director (responsible for running the Company’s business). The Board oversees the targets

and controls within which the Company’s Management may operate. The Board culture is one of openness and constructive debate and the Chairman is responsible for maintaining this culture. Information of an appropriate quality is provided in a timely manner before Board meetings, and the Chairman maintains a collaborative atmosphere and ensures that all Directors contribute to debates. The Board meets once in a quarter and also when the need arises to review matters of importance and also the performance of the Company. The Board has met six (06) times during the year under review.

COMPOSITION OF BOARD OF DIRECTORS

The Company’s Board consists of eight (8) Directors, as mentioned in the Annual Report of the Board of Directors on the Affairs of the Company on page 30 of this Report. The Board comprises a strong mix of highly qualified professional and experienced individuals, with the majority being Non-Executive Directors (seven) and five of them are Independent Non-Executive Directors who are independent and can offer an external perspective on the business. The Non-Executive Directors scrutinise the performance of Management in meeting their agreed goals and objectives, and monitor the reporting of performance.

ATTENDANCE OF THE DIRECTORS FOR THE BOARD MEETINgS DURINg THE YEAR 2019/20

Name Executive/Non-Executive Independent/Non-Independent Meetings attended/Meetings held

Mr U H Dharmadasa (Chairman) Non-Executive Non-Independent 5/6

Mr V R Ramanan (Deputy Chairman) Non-Executive Non-Independent 5/6

Mr K C Chandana Perera Executive Non-Independent 4/6

Mr G D Zoysa Non-Executive Independent 5/6

Mr U H Palihakkara Non-Executive Independent 5/6

Mr Rajiv Perera* Non-Executive Independent 0/6

Mr Jayaprakash Rudra Non-Executive Independent 6/6

Mr Jayantha C Perera* Non-Executive Independent 2/6

*Resigned w.e.f. 15 September 2020

BOARD’S SKILLS/EXPERTISE AND INDEPENDENT ADVICE

The Board is balanced in its composition; It has qualified Chartered Accountants, Chartered Financial Analysis, experienced bankers and experienced Property Development Consultants. Expertise process by them enables to contribute effectively to the Board's deliberations in respect of the affairs of the Company. The Board of Directors may seek independent professional advice when necessary to achieve the objectives of the organisation. The Board of Directors ensure complete disclosure of financial and non-financial information, and report financial information in accordance

with Sri Lanka Financial Reporting Standards (SLFRSs) and Sri Lanka Accounting Standards (LKASs), Listing Rules of Colombo Stock Exchange and the Companies Act No. 07 of 2007.

The profiles of the Directors are set out on pages 14, 15 and 16.


19


BOARD SUBCOMMITTEES

The Board has appointed committees to carry out certain of its duties and each committee has written Terms of Reference (TOR). Reports of these committees are set out in the pages 35 to 38 of the Annual Report.

The subcommittees are:

1. Audit Committee

2. Remuneration and Nomination Committee

3. Related Party Transactions Review Committee

RE-ELECTION

According to the Articles of Association of the Company, three (3) Directors should retire from the office at each Annual General Meeting (AGM) and offer themselves for re-election. Any Directors appointed during the year also seek re-election at the AGM.

COMPANY SECRETARY

The Company Secretary attends all Board and Board subcommittee of Remuneration and Nomination Committee meetings and is responsible for advising the Board on CSE rules on corporate governance and facilitating the flow of information to and from the Board.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an internal Control system well documented in the form a SOP that is periodically reviewed, commensurate with the size, scale, and complexity of its operations.

The scope of the internal audit as defined in the Internal Audit Charter covers the evolution of internal control system. To maintain its objectivity and independence, the Internal Auditor reports to the Chairman of the Audit Committee. The Internal Auditor monitors and evaluates the efficacy and adequacy of the internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the Report of Internal Auditor, process owners undertake corrective actions in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee.

THE WHISTLE-BLOWER POLICY

The Company has a Whistle-blower Policy which aims to provide a channel to the Directors, employees and other stakeholders to report genuine concerns about unethical behaviour, actual or suspected default or violation of codes of conduct or policy.

The said vigil mechanism shall provide safeguards against victimisation of employee(s) who availed of the mechanism and also to provide for direct access to the Internal Audit team/Chairman of the Audit Committee in exceptional circumstances.

The said vigil mechanism is being overseen by the Audit Committee.

COMPLIANCE WITH THE COLOMBO STOCK EXCHANgE LISTINg RULES ON SECTION 7.10 – CORPORATE gOVERNANCE

The corporate governance practice adopted by the Company, including the adoption of Code of Best Practices issued by The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) as per the rules set out in Section 7.10 of the Colombo Stock Exchange Listing Rules on corporate governance are given in the following table:

Rule No. Subject Applicable requirement Compliance status

Company extent of adoption/Reference

7.10.1 (a) Non-Executive Two or one third of Directors, whichever is higher

Complied Seven out of eight Directors are Non-Executive Directors

7.10.2 (a) Independent Directors Two or one-third of Non-Executive Directors, whichever is higher should be independent

Complied Five out of seven Non-Executive Directors are independent

7.10.2 (b) Independent Directors Each Non-Executive Director should submit a declaration of Independence/Non-Independence in the prescribed format

Complied Refer Annual Report of theBoard of Directors on theAffairs of the Company onpages 30 to 32

7.10.3 (a) Disclosure relating to Directors

The Board shall annually make a determination as to the independence of the Non-Executive Directors and names of Independent Directors should be disclosed in the Annual Report

Complied Refer page 18

7.10.3 (b) Disclosure relating to Directors

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

Notapplicable


20


Rule No. Subject Applicable requirement Compliance status

Company extent of adoption/Reference

7.10.3 (c) Disclosure relating to Directors

A brief résumé of each Director Complied Refer Directors Profile on pages 14, 15 and 16

7.10.3 (d) Disclosure relating to Directors

Forthwith provide a brief résumé of new Directors appointments to the Board with details specified in 7.10.3 (a), (b) and (c) to the Rules of the Colombo Stock Exchange

Complied at the time of new appointments

A brief résumé of new Directors and the appointments were submitted to the Colombo Stock Exchange when such appointments were made

7.10.5 Remuneration Committee A listed company shall have a Remuneration Committee


7.10.5 (a) Composition of Remuneration Committee

Shall comprise Non-Executive Directors, at which a majority of whom shall be independent

Complied All are Independent Directors and Non-Executive Directors

7.10.5 (b) Function of Remuneration Committee

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

Complied Remuneration Committee reported on page 37 of the report which set out the functions of the Committee

7.10.5 (c) Disclosure relating to Remuneration Committee

a. Names of Directors of the Committee and Statement of Remuneration Policy


b. Aggregate remuneration paid to Executive and Non-Executive Directors

Emoluments on page 60

7.10.6 Audit Committee The Company shall have an Audit Committee Complied Names of the members of the Audit Committee Stated on pages 35 and 36

7.10.6 (a) Composition of Audit Committee

Shall comprise Non-Executive Directors, a majority of whom shall be independent

Complied All are Independent and Non-Executive Directors

a. Non-Executive Director shall be appointed as the Chairman of the Committee meetings

Complied Chairman of the Audit Committee is an Independent Non-Executive Director, CEO, Executive Director, Deputy Financial Controller participated for the meetings by invitations

b. The Chairman of the Audit Committee or one member should be a member of a professional accounting body

Complied Chairman of the Audit Committee is a qualified Chartered Accountant

7.10.6 (b) Audit Committee functions

Functions of the Audit Committee Complied Refer pages 35 and 36 for the functions of Audit Committee

7.10.6 (c) Disclosure in the Annual Report relating to Audit Committee

a. Names of Directors comprising the Audit Committee

Complied Refer page 35 for the functions of Audit Committee

b. The Audit Committee shall make a determination of the independence of the Auditors and disclose the basis for such determinations

Refer page 36 for the functions of Audit Committee

c. The Annual Report shall contain a report of the Audit Committee setting out the manner of compliance with their functions

Refer pages 35 and 36 for the functions of Audit Committee


21


COMPLIANCE WITH THE CODE OF BEST PRACTICE ON CORPORATE gOVERNANCE ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF SRI LANKA IN 2017

Corporate governance principle

SEC and CA Sri Lanka code reference

Adoption status

Level of compliance by the MHDPLC

A. DirectorsA.1 The Board

Presence of an effective Board to Direct, Lead and Control the Company.

Meeting A.1.1 Adopted During the financial year 2019/20, there were 06 Board meetings held towards reviewing the contemporary organisational strategy.

Decisions in relevance to the Organisation’s strategy were made as and when required.

All meetings are called well in advance and Directors are expected to participate at the meetings.

Attendance of the Board of Directors:

Name of director Number ofmeetingsattended

Attended%

Mr U H Dharmadasa 5 83

Mr Victor R Ramanan 5 83

Mr K C C Perera 4 67

Mr Gihan De Zoysa 5 83

Mr Rajiv Perera* 0 0

Mr U H Palihakkara 5 83

Mr Jayaprakash Rudra 6 100

Mr H Jayantha C Perera* 2 33

*(Resigned w.e.f. 15 September 2020)

Board Responsibilities

A.1.2 Adopted The Board possesses the required skills and qualifications in the following:

Setting strategic direction and monitoring its effective implementation.

The Non-Executive Directors collaborating with the Executive Directors to evaluate the systems of risk management, internal control and compliance.

The Management appoints the External Auditors of the Company.

The Non-Executive Directors are provided with the opportunity to criticise and question the actions of the Board especially related to the integrity of the financial reporting process.

The Non-Executive Directors ensure that the strategies fall under the scope of ethical standards.

Rules and Regulations

A.1.3 Adopted The Board collectively acted in accordance with the rules and regulations of the country which are applicable to the Company.

The following rules and regulations are adhered to in relevance to Corporate Governance by the Company:

Companies Act No. 07 of 2007.

Listing Rules of CSE (Colombo Stock Exchange).

The Code of Best Practice on Corporate Governance as published by the SEC (Securities and Exchange Commission of Sri Lanka), and The Institute of Chartered Accountants of Sri Lanka.

Company Secretaries

A.1.4 Adopted All Directors have direct access to the Company Secretaries which is a firm consisting of members of the Legal Profession and qualified Company Secretaries comprising a Senior Attorney-at-Law and several Associates who are also Attorneys-at-Law.

The Company Secretaries ensure the effective circulation of information among Executive and Non-Executive Directors.

The Company Secretaries facilitate the Board meetings and the Annual General Meeting.


22




Adoption status


Independent Judgement

A.1.5 Adopted The Directors are welcome to bring their independent professional judgement towards the decision-making process.

The Board will create a forum to discuss the suggestions and select the best solution for the Company.

Adequate time and Effort

A.1.6 Adopted The Chairman and the members dedicate adequate time for their duties.

All Board meetings are organised well in advance. The Company Secretaries ensure that all requested information is delivered to the Directors for their independent judgement.

In addition to the Board meetings, the Directors attend to the following Subcommittee meetings:

Audit Committee

Remuneration and Nomination Committee

Related Party Transaction Review Committee

Resolution A.1.7 Adopted One third of Directors can call resolution

Training A.1.8 Adopted New Directors are provided with adequate inductions and grooming for their Director roles. All Directors have well recognised the need for continuous training and expansion of knowledge and skills required to effectively perform their duties.

There is no new Director appointment during the financial year 2019/20.

A.2 The Chairman and Chief Executive Officer

The code requires clear division of responsibilities of the Chairman and Chief Executive Officer.

Division of responsibilities of the Chairman and Chief Executive Officer

Chairman and CEO roles are two separate individuals.

A.3 Chairman's Role

The Chairman's role for good Corporate Governance.

The Chairman is responsible for an effective Board. The Chairman should ensure effective discharge of Board functions.

A.3.1 Adopted The Chairman is responsible for leadership of the Board. The Chairman facilitates the effective contribution and performance of all Board members whilst identifying any development needs of the Board.

He plays the role as a mediator of communication among the shareholders and the Management towards resolving issues of concern.

Further, the Chairman ensures that the balance of power between Executive Directors and Non-Executive Directors are adequate.

A.4 Financial Acumen

The Board to ensure the availability within it of those with sufficient financial acumen and knowledge to offer guidance on matters of finance.

Availability of sufficient financial acumen

A.4 Adopted The Board is consistently endowed with sufficient financial acumen as two of the Board members have sound financial knowledge and hold fellowships of respective professional accounting bodies.

A.5 Board Balance

It is preferred that the Board has a balance of Executive Directors and Non-Executive Directors such that no individual or small group of individuals can dominate the Board's decision-making.

Adequate number of Non-Executive Directors

A.5.1 Adopted The Board consists of eight Directors out of which seven Directors are Non-Executive Directors. This has ensured that no additional powers are vested by an individual or small group of individuals to dominate the Board. Furthermore, the composition of Non-Executive Directors exceeds the required 1/3 proportion of the Board.

Adequate number of IndependentNon-Executive Directors

A.5.2 Adopted The Board consists of five Independent Non-Executive Directors out of seven Non-Executive Directors.


23




Adoption status


Independency of Directors

A.5.3 Adopted All five Independent Non-Executive Directors are free from any material relationship with the Company which ensures their independence is not compromised.

Signed declaration of independence by the Non-Executive Directors

A.5.4 Adopted All Non-Executive Directors have made written submissions to declare their level of independence.

Declaration in the Annual Report

A.5.5 Adopted The Board has determined the Independence and Non-Independence of the Non-Executive Directors based on the declaration and all other available information.

No circumstances have arisen for the determination of independence by the Board, beyond the criteria set out in the Code.

The following Non-Executive Directors have been declared as the Independent Non-Executive Directors:

Mr U H Palihakkara

Mr Rajiv Perera

Mr Jayaprakash Rudra*

Mr H Jayantha C Perera*

Mr Gihan De Zoysa


Alternate Director A.5.6 N/A During the course of the year there had not been any appointments of Alternate Directors.

Senior Independent Director

A.5.7 Adopted Mr U H Palihakkara has been appointed as the Senior Independent Director (SID), as the role of the Chairman is non-independent Director

Confidential Discussion with Senior Independent Director

A.5.8 Adopted The Senior Independent Director has made himself available for any material discussion with any of the Directors.

Meeting with the Chairman and Non-Executive Directors

A.5.9 Adopted The Chairman meets with the Non-Executive Directors when the need arises.

Recording of concerns in Board minutes

A.5.10 Adopted All concerns arisen had been resolved unanimously, resulting in the requirement for recording such concerns in minutes being limited.

A.6 Supply of Information

The Board should be fully equipped with timely information to discharge their duties.

Timely Information A.6.1 Adopted The Management has provided the Board with the required information to discharge their duties effectively.

Additional information is dispersed by the Management as and when required.

Board Papers A.6.2 Adopted The Board paper is sent seven days in advance of the Board meeting for initial preparation.

A.7 Appointments to the Board

Presence of a formal and transparent procedure for the appointment of new Directors to the Board.


A.7.1 Adopted The Remuneration and Nomination Committee makes recommendations to the Board for all new appointments. The Remuneration and Nomination Committee will consist of the following:

Mr U H Palihakkara – Chairman (Senior Independent Non-Executive Director)

Mr Jayaprakash Rudra – Member(Independent Non-Executive Director)

Mr Gihan de Zoysa – Member(Independent Non-Executive Director)


24




Adoption status


Assessment of Board Composition

A.7.2 Adopted The Board as a whole annually assesses the composition of the Board to ascertain whether combined knowledge and experience of the Board match with the strategic demands faced by the Company.

New Board Members will be appointed as and when the need arises.

Disclosure to Shareholders

A.7.3 Adopted The Board has disclosed the appointments of new Directors to the shareholders with the material information.

A.8 Re-election

All Directors should be required to submit themselves for re-election at regular intervals and at least once in every three years.

Appointment of Non-Executive Directors

A.8.1 Adopted Re-election procedure of the Board of Directors has been performed as per the Articles of Association of the Company.

Election of the Directors

A. 8.2 Adopted The Directors are appointed at the Annual General Meeting.

Resignation of Director

A. 8.3 Adopted Reasons for resignation are communicated to the Board in writing.

A.9 Appraisal of Board Performance

The Board should appraise their own performance in order to ensure that the Board responsibilities are satisfactorily discharged.

Appraisal of Board Performance

A.9.1 Adopted The Board’s performance is assessed annually against present targets relating to self-evaluation of individual performance and collective performance of the Board as a whole.

Appraisal of self- performance

A.9.2 Adopted Please refer above comment. (A.9.1)

Performance criteria A.9.3 Adopted Please refer above comment. (A.9.1)

A.10 Disclosure of Information in Respect of Directors

The shareholders are to be kept advised of relevant details in respect of Directors.

Disclosure in Annual Report

A.10.1 Adopted Please refer pages 14 to 16 for the profiles of the Directors.

A.11 Appraisal of the Chief Executive Officer

The Board should be required to evaluate annually the performance of the Chief Executive Officer.

Targets A.11.1 Adopted In each financial year, the Board has set short-term, medium-term and long-term targets with the consultation of the Chief Executive Officer along with its objectives. This includes financial and non-financial targets.

Evaluation of the Targets

A.11.2 Adopted There is an ongoing process of evaluating the performance of the Chief Executive Officer in achieving the set targets.

B. Directors' Remuneration

B.1 Remuneration Procedure

Establish a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual Directors.


B. 1.1 Adopted The Company has established a Remuneration and Nomination Committee to make recommendations to the Board within the agreed Terms of Reference for compensating the Executive Directors.

Refer page 37.

Composition of the Remuneration Committee

B. 1.2 Adopted The Remuneration and Nomination Committee comprises the following Non-Executive Directors:

Refer page 37.

B. 1.3 Adopted Mr Jayaprakash Rudra – Chairman(Independent Non-Executive Director)

Mr U H Palihakkara – Member(Independent Non-Executive Director)

Mr Gihan De Zoysa – Member(Independent Non-Executive Director)


25




Adoption status


Remuneration of the Non-Executive Directors

B. 1.4 Adopted The Board collectively decides the remuneration of the Non-Executive Directors. Non-Executive Directors receive a fee for their presence in the Board as well as in the Committees.

Advices to the Chairman and the Chief Executive Officer

B. 1.5 Adopted The Chairman and the Chief Executive Officer obtain advice from the Remuneration and Nomination Committee in relevance to the procedure in compensating the Executive Directors. The Remuneration and Nomination Committee consults the Chairman in relevance to the remuneration of other Executive Directors and if required access to professional advice from within and outside the Company.

B.2 The Level and Make-up of Remuneration

Ensure adequate level of remuneration to retain and motivate the Directors both Executive and Non-Executive to operate the Company effectively. Further, a proportion of the Executive Directors' remuneration should be structured to link rewards to the achievement of corporate objectives.

Remuneration for Executive Directors

B.2.1 Adopted The Company is mindful of adequate remuneration to the Executive Directors to retain and motivate them. The Remuneration package has been designed to enhance the value of the shareholders through achieving the Company's short-term, medium-term and the long-term objectives.

Comparison between similar companies

B. 2.2 Adopted The Remuneration and Nomination Committee decides the remuneration taking into consideration the comparative levels of remuneration paid by other similar companies.

Comparison of remuneration across the Group

B.2.3 Adopted Consistent reviews are made in relevance to information related to executive remuneration to ensure that the Company is on a par with the market/industry rates as well as it is aligned to the strategic objectives of the Company.

Performance-based remuneration to the Executive Directors

B.2.4 Adopted The Company provides compensation which is variable to the performance of the allocated responsibilities of the Executives.

Executive Share Option Schemes

B.2.5 N/A The Company has not offered any share option schemes during the financial year under review.

Deciding the performance-related remuneration

B.2.6 Adopted The Company has taken into consideration the guidelines given in Schedule D in decisions pertaining to performance remuneration related.

Early termination of Director

B.2.7 N/A Not applicable to the Board except to the CEO whose terms of employment are governed by the contract of service.

Early termination of Director not included in the contract

B.2.8 N/A Refer above comment.

Remuneration to the Non-Executive Directors

B.2.9 Adopted Non-Executive Directors receive a fee in line with the market price.

No share option scheme has been offered to the Non-Executive Directors.

B.3 Disclosure of Remuneration

Disclosure of the Remuneration policy in the Annual Report.

Disclosure of Remuneration

B.3.1 Adopted The Remuneration and Nomination Committee is headed by a Non-Executive Director. Please refer to the comment on B. 1.3 for further information. Refer page 37.

Remuneration policy focuses on the compensation to employees for the services provided and to retain employees with skills required to effectively manage the operations.


26




Adoption status


C. Relations with Shareholders

C.1 Constructive use and conduct of general Meetings

The Board to use the Annual General Meeting to communicate with the shareholders and encourage their participation.

Use of proxy votes C.1.1 Adopted The Company has a mechanism to record the proxy votes and proxy votes lodged for each resolution.

Separate resolutions C.1.2 Adopted The Company proposes separate resolutions for each substantial item towards providing shareholders the opportunity to cast their votes separately in relevance to the above items.

Proxy appointments are properly recorded

C.1.3 Adopted All proxy appointment received are properly recorded.

Availability of the Chairmen of Audit, Remuneration, and Nomination Committees

C.1.4 Adopted The Chairmen of Audit, Remuneration, and Nomination Committees are made available by the Company to clarify any queries, especially at the time of the Annual General Meeting.

Notice of Meeting C.1.5 Adopted Voting procedures at the General Meetings have been communicated to the shareholders.

All queries are clarified at the Annual General Meeting.

C.2 Communications with shareholders

The Board should implement effective communication with the shareholders.

Communication Channels

C.2.1 Adopted The Board engages with the shareholders in the following ways to communicate relevant information.

Communication Methodology

C.2.2 Adopted Annual General Meetings and Extraordinary General Meetings to address matters which are relevant and of concern to the General Membership.

Implementation C.2.3 Adopted – Access to the Board and the Company Secretaries.

– The Company website which is accessible to all stakeholders and the general public.

– Interim Reports – www.cse.lk

Responsibility of Communication

C.2.4C.2.5C.2.6

Adopted The Board of Directors includes one Employee Director namely, the Executive Director and the Company Secretaries to bridge the communication gap between the rest of the shareholders and the Board.

Shareholder Matters C.2.7 Adopted Please refer C.2.4

C.3 Major Transactions

Disclosure of all material transactions to the shareholders which would materially alter/vary the Company's net assets base or in the case of a company with subsidiaries, the consolidated Group net assets base.

Shareholder Matters C.3.1 Adopted All material transactions have been disclosed to the shareholders.

D. Accountability and Audit

D.1 Financial Reporting

To present a balanced and understandable assessment of the Company's financial position, performance and prospects.

Statutory Reporting D.1.1 Adopted Adhering to the statutory and legal requirements, the Company has published the following reports to disclose relevant information to the stakeholders:

– Quarterly Financial Statements

– Annual Reports

The Company has strictly complied with the requirements of the Companies Act No. 07 of 2007 and amended hereto. The Financial Statements are prepared based on the International Financial Reporting Standards (IFRS).

Directors’ Report D.1.2 Adopted Refer pages 30 to 32.


27




Adoption status


Auditors’ Report D.1.3 Adopted Refer pages 44 to 46.

Management Discussion and Analysis

D.1.4 Adopted Refer pages 30 to 32.

Declaration by the Board that the business is a going concern

D.1.5 Adopted Refer pages 30 to 32.

Summon an Extraordinary General Meeting to notify loss of capital

D.1.6 Adopted Likelihood of such circumstances is remote; if such a situation arises an Extraordinary General Meeting would be summoned to inform the shareholders.

D.2 Internal Controls

The Board should maintain a sound system of internal controls to safeguard the shareholders’ investments and the Company assets.

Review of the Internal Control System

D.2.1 Adopted The Board continuously evaluates the effectiveness of the internal control system in the Company to safeguard the shareholder investment.

The Board of Directors is satisfied with the presence of the level of internal controls in business operations.

Refer page 33 – Internal Controls and Internal Audit.

Need for Internal Audit Function

D.2.2 Adopted An in-house internal audit functions in the Company.

Regular Reviews of Internal Controls

D.2.3 Adopted Our internal audit function carries out regular reviews, spot audits to identify the effectiveness of the internal controls established.

D.3 Audit Committee

The Board is required to establish formal and transparent arrangements for considering as to how they should select and apply accounting policies, financial reporting and internal control principles and maintaining appropriate relationship with the Company's Auditors.

Composition of Audit Committee

D.3.1 Adopted The Audit Committee comprised four Independent Non-Executive Directors:

Mr U H Palihakkara – Chairman (Independent Non-Executive Director)

Mr H Jayantha C Perera – Member (Independent Non-Executive Director)*

Mr Jayaprakash Rudra – Member (Independent Non-Executive Director)**

Mr Gihan De Zoysa – Member (Independent Non-Executive Director)

* Resigned w.e.f. 15 September 2020** Member – w.e.f. 11 September 2019

Duties of Audit Committee

D.3.2 Adopted The Audit Committee continuously evaluates the independence, effectiveness and objectivity of the Auditors.

Further, the Committee evaluates the nature of the non-audit services carried out by the Auditors.

Terms of Reference of the Audit Committee

D.3.3 Adopted The Audit Committee is guided by the Committee Charter which is reviewed annually.

The Committee assists the Board to oversee the following aspects:

– Preparation, presentation, and adequacy of disclosures in the Financial Statements.

– Compliance with financial reporting requirements, information requirements of the Companies Act No. 07 of 2007 and other financial reporting related regulations and requirements.

– Ensuring that the Internal Control System of the Company is effective.

– Ability to continue as a going concern in the foreseeable future.

– Assessing the independence and performance of the Company’s External Auditors.

Disclosure D.3.4 Adopted Refer pages 35 and 36.


28




Adoption status


D.4 Code of Business Conduct and Ethics

The Company to develop a Code of Ethics for Directors and members of the Senior Management team and promptly disclose if there are any waivers of the Code for Directors and others.

Code of Business Conduct and Ethics

D.4.1 Adopted The Company has developed a Code of Business Conduct and Ethics focusing on the following important areas:

– Integrity

– Objectivity

– Professional competence and due care

– Confidentiality

– Fair dealing

– Encouraging the reporting of any illegal or unethical behaviour

– Conflict of interest

– Bribery and corruption

– Entertainment and gifts

– Integrity of Financial Statements

– Corporate opportunities

– Protection and proper use of the Company assets

– Compliance with rules and regulations

All our Directors and Senior Executives have declared their commitment to operate in adherence to these principles.

Affirmation of the Code of Business Conduct and Ethics (Report by the Chairman affirming that there were no incidents involving the breach of mentioned ethical policies)

D.4.2 Adopted Refer the Chairman's Report on pages 06 to 08.

D.5 Corporate governance Disclosures

The Directors are required to disclose the extent to which the Company adheres to established principles and practices of Good Corporate Governance.

Disclosure of Corporate Governance

D.5.1 Adopted The Report on pages 18 to 28 provides a detailed disclosure on our Corporate Governance practices.

E. Institutional Investors

E.1 Shareholder Voting

The institutional shareholders are required to make considered use of their votes and should be encouraged to ensure that their voting intentions are translated into practice.

Dialogue with the Shareholders

E.1.1 Adopted – The Annual General Meeting provides a platform for effective communication with the shareholders.

– All concerns of the shareholders are recorded in the minutes of the meeting and addressed thereafter.

– The Board reviews the minutes of the meetings and ensures that the shareholders’ issues are resolved systematically.

E.2 Evaluation of governance Disclosure

The Company should encourage institutional investors to provide due diligence to all relevant factors in the Board Structure and Composition.

F. Other Investors

F.1 Investing/Divesting Decision

Individual Shareholders

F.1 Adopted Individual shareholders are encouraged to carry out adequate analysis or seek out independent advice for matters related to investing/divesting decisions.

F.2 Shareholder Voting

Individual Shareholder Voting

F.2 Adopted Individual shareholders are encouraged to participate at General Meetings and exercise their voting rights.


29

COMPOSITION OF THE BOARD OF DIRECTORS

No. Name of the Director Nature of Directorship Remuneration and Nomination

Committee

AuditCommittee

RPT review Committee

Executive Non-Executive/Non-Independent

Non-Executive/ Independent

Chairman Member Chairman Member Finance professional

Chairman Member

1. Mr Ugitha Harshith Dharmadasa

2. Mr Victor Rajamanner Ramanan

3. Mr Kankanige Cyril Chandana Perera

4. Mr Gihan De Zoysa

5. Mr Hettiaratchige Jayantha Christopher Perera*

6. Mr Uditha Harilal Palihakkara

Member CASL ACCA CIMA

7. Mr Rajiv Perera

8. Mr Jayaprakash Rudra**

* Resigned w.e.f. 15 September 2020

** Member w.e.f. 11 September 2019

LIST OF DIRECTORS OF THE MILLENNIUM HOUSINg DEVELOPERS PLC

1. Mr Ugitha Harshith Dharmadasa – (Chairman) Non-Executive/Non-Independent Director

2. Mr Victor Rajamanner Ramanan – (Deputy Chairman) Non-Executive/Non-Independent Director

3. Mr Kankanige Cyril Chandana Perera – Executive Director/Non-Independent

4. Mr Gihan De Zoysa – Non-Executive/Independent Director

5. Mr Hettiaratchige Jayantha Christopher Perera – Non-Executive/Independent Director (Resigned w.e.f. 15 September 2020)

6. Mr Uditha Harilal Palihakkara – Non-Executive/Independent Director

7. Mr Rajiv Perera – Non-Executive/Independent Director (Resigned w.e.f. 15 September 2020)

8. Mr Jayaprakash Rudra – Non-Executive/Independent Director

MEMBERS OF THE REMUNERATION AND NOMINATION COMMITTEE

Mr Jayaprakash Rudra (Chairman)

Mr Uditha Harilal Palihakkara (Member)

Mr Gihan De Zoysa (Member)

MEMBERS OF THE AUDIT COMMITTEE

Mr Uditha Harilal Palihakkara (Chairman)

Mr Hettiaratchige Jayantha Christopher Perera (Member) – Resigned w.e.f. 15 September 2020


Mr Jayaprakash Rudra (Member) – w.e.f. 11 September 2019)

MEMBERS OF THE RELATED PARTY TRANSACTIONS REVIEW COMMITTEE

Mr Uditha Harilal Palihakkara (Chairman)

Mr Hettiaratchige Jayantha Christopher Perera (Member) – Resigned w.e.f. 15 September 2020


Mr Jayaprakash Rudra – w.e.f. 11 September 2019

COMPOSITION OF THE BOARD – MILLENNIUM HOUSINg LIMITED

Mr Gihan De Zoysa

Mr Kankanige Cyril Chandana Perera

Mr Hettiaratchige Jayantha Christopher Perera – Resigned w.e.f. 15 September 2020

COMPOSITION OF THE BOARD – MILLENNIUM VILLA HOUSINg DEVELOPMENT LIMITED

Mr Gihan De Zoysa

Mr Kankanige Cyril Chandana Perera

Mr Hettiaratchige Jayantha Christopher Perera – Resigned w.e.f. 15 September 2020

COMPOSITION OF THE BOARD – MILLENNIUM HOUSINg CONSTRUCTION LIMITED

Mr Gihan De Zoysa

Mr Rajiv Perera – Resigned w.e.f. 15 September 2020

Mr Chandana Perera – w.e.f. 15 September 2020


30

ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY

The Directors of Millennium Housing Developers PLC have pleasure in presenting their report, together with the Audited Financial Statements for the year ended 31 March 2020.

MISSION STATEMENT AND CORPORATE gOALS

The Mission Statement and Corporate Goals are set out on page 03 in this Report.

PRINCIPAL ACTIVITY

The principal activity of the Company is the sale of houses/land, and Construction of houses, apartments, flats, housing units, and condominium units.

REVIEW OF THE OPERATIONS

Millennium Housing Developers PLC, a BOI – approved Company, being the pioneer township developer in Sri Lanka, has continued its stellar performance by achieving a remarkable profit during the year under review.

The “Millennium City” housing project Ja-Ela Millennium City having completed around 95% which offers more than four unique residential house types that differ in size, type and price accordingly. “Villa” houses at Ja-Ela are exclusive supreme quality house constructed with additional land area, allowing our customers to have a wide range of houses to match their needs. During the year under review two new Villa categories were introduced to the customers. Further, Millennium Housing Limited Ja-Ela project which target lower middle income earners consists 834 housing units that nearing its completion.

There is a continuous demand for housing in and around Colombo and its suburbs. In addition to the main projects MHDPLC has embarked on new projects at Polgassowita, Moragahahena and Katunayake in order to exploit this potential market opportunity. During the year under review Siddamulle Project and Polgassowita Green Terrace project targeting lower/middle income earners were fully completed during the year in review.

MHDPLC under the fully-owned subsidiaries of MC Urban Developers Limited, and MC Universal Limited to undertook the development of residential vertical living housing projects at Kirulapone that’s fully completed and Nawala consist of 64 units that’s on the verge of handing over to residents.

REVIEW OF THE YEAR

The Chairman’s letter and Deputy Chairman’s letter describe in detail the Company’s performance, affairs, and important events of the year.

Financial Statements of the Company and the GroupFinancial Statements of both the Company and the Group given on pages 47 to 86 of this Annual Report.

AUDITORS’ REPORT

Auditors’ report on the Financial Statements of the Company and the Group are given on pages 44 to 46.

ACCOUNTINg POLICIES

The accounting policies adopted in preparation of Financial Statements are given on pages 52 to 59. These accounting policies have been applied consistently to all periods.

ENTRIES IN INTEREST REgISTER

The Company, in compliance with Companies Act No. 07 of 2007, maintains an interest registry. All Directors of the Company and subsidiaries, have made relevant disclosures under Section 192 (2) of the Companies Act No. 07 of 2007.

CORPORATE DONATIONS

Donations given as CSR activities are disclosed under the Sustainability Report.

REVENUE

The total revenue of the Group for the year under review was LKR 1,294.46 Mn. (LKR 1,004.82 Mn. in 2019) The Company’s revenue year under review was LKR 37.8 Mn., (LKR 228.37 Mn. in 2019) of which details are disclosed in Note 5 to the Financial Statements.

PROFITABILITY

The profit before tax of the Group amounted to LKR 172.01 Mn. in 2020 (LKR 157.96 Mn. in 2019) while the Company made a loss before tax of LKR 66.81 Mn. 2020 (LKR 31.84 Mn. Loss in 2019). Overall Group profit before tax has increased compared to previous year.

PROVISION FOR TAXATION

The tax status of the Group and the Company has been explained in Note 9 to the Financial Statements.

STATED CAPITAL

The total stated capital of the Company as at 31 March 2020 is LKR 293,802,200/- comprising 134,681,320 ordinary shares. There were no changes in the stated capital during the year.

STATED CAPITAL AND RESERVES

The stated capital and reserves of the Company as at 31 March 2020 is LKR 261.46 Mn. (LKR 335.33 Mn. in 2019). The stated capital and reserves of the Group as at 31 March 2020 is LKR 963.32 Mn. (LKR 795.32 Mn. in 2019).

The composition of the reserve is shown in the Statement of Changes in Equity of the Financial Statement.


31

ANNUAL REPORT OF THE BOARD OF DIRECTORS ONTHE AFFAIRS OF THE COMPANY

SHARE INFORMATION

Information relating to earnings, dividends, market value of shares, and distribution of shareholding is given on pages 88 and 89.

SHAREHOLDINgS

There were 890 registered shareholders as at 31 March 2020 (814 in 2019) holding ordinary voting shares, the distribution of shareholding is given on pages 88 and 89.

SUBSTANTIAL SHAREHOLDINg

The top twenty shareholders’ list is given on page 88.

DIRECTORATE

There were eight Board members at the beginning and end of the financial year 2019/20,

Name of director Executive/Non-ExecutiveIndependent status

Mr U Harshith Dharmadasa Chairman/Non-Executive Director

Mr V R Ramanan Deputy Chairman/ Non-Executive Director

Mr Gihan De Zoysa Non-Executive/Independent Director

Mr Rajiv Perera* Non-Executive/Independent Director

Mr U H Palihakkara Non-Executive/Independent Director

Mr Jayaprakash Rudra Non-Executive/Independent Director

Mr K C Chandana Perera Executive Director

Mr H Jayantha C Perera* Non-Executive/Independent Director


The profiles of the Board of Directors of the Company are given on pages 14 and 16.

DIRECTORS SHAREHOLDINgS

No. Name No. of shares Percentage(%)

1. Mr U H Dharmadasa 24,384,672 18.11

Pan Asia Banking Corporation PLC/Mr U H Dharmadasa 5,000,000 3.71

2. Mr V R Ramanan 37,969,373 28.19

3. Mr K C C Perera 1,300,000 0.97

4. Richard Pieris Financial Services (Pvt) Ltd./ Mr H J C Perera 4,665,760 3.46

Mr H J C Perera 1,000,000 0.74

5. Mr G De Zoysa* – –

6. Mr R Perera* – –

7. Mr J Rudra – –

8. Mr U H Palihakkara 130,000 0.10


DIRECTORS’ INTEREST IN CONTRACTS WITH THE COMPANY

The Directors have no direct or indirect interest in contracts with the Company, other than those disclosed in Note 28 to the Financial Statements and the same have been declared at the meetings of the Board.

DIRECTORS’ REMUNERATION

The remunerations paid to the Executive and Non-Executive Directors during the financial year under review is given in Note 7 to the Financial Statements.

RETIREMENT OF DIRECTORS BY ROTATION OR OTHERWISE AND THEIR RE-ELECTION

In accordance with Article 95 of the Articles of Association of the Company Mr V R Ramanan and Mr K C C Perera, and Mr H Jayantha C Perera retired by rotation is eligible for re-election, and Mr U H Palihakkara who is over seventy years eligible for re-election.

DIRECTORS’ RESPONSIBILITY AND FINANCIAL REPORTINg

The Directors are responsible for the preparation of the Financial Statements to reflect a true and fair view of the state of its affairs. The Directors are of the view that these Financial Statements have been prepared in conformity with the requirements of the Sri Lanka Accounting Standards, Companies Act No. 17 of 1982, Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995.

DIRECTORS’ MEETINgS

Details of Directors’ meetings, including Board meetings, Audit Committee meetings and Remuneration and Nomination Committee meetings and Related Party Transactions Review Committee meetings and attendance for the meetings are disclosed in Corporate Governance report, Audit Committee report and Remuneration and Nomination Committee report and Related Party Transactions Review Committee report.

INTERNAL CONTROL SYSTEM

Directors acknowledge their responsibility of Group’s system and internal controls. The Directors Statement of Internal Controls on page 33 provides further details.

PROPERTY, PLANT AND EQUIPMENT

Capital expenditure during the year on acquisition of property, plant and equipment for the Group and the Company LKR 4.76 Mn. (LKR 2.67 Mn. 2019) and LKR 4.39 Mn. (LKR 1.35 Mn. 2019) respectively.


32

SUBSIDIARIES

The performance and information of the subsidiaries are presented on pages 76 and 77 in the Annual Report.

SEgMENTAL REPORTINg

There are no specific segments that can be identified in the Group, although we operate in separate sites. The risk and returns from those sites cannot be differentiated. Therefore, we have not presented segmental reports.

AFTER THE REPORTINg DATE

There were no material post-balance sheet events which require adjustment to or disclosure to the Financial Statements.

LITIgATIONS AND CLAIMS

In the opinion of the Directors and the Company’s lawyers, pending litigation against the Company will not have a material impact on the reported financial results or future operations of the Company.

STATUTORY PAYMENTS

The statutory payments relating to employees and the Government have been made up to date or provided for the same.

AUDITORS

The Financial Statements for the year under review have been audited by Messrs KPMG, Chartered Accountants. Audit Committee has recommended their reappointment as Auditors in terms of the Section 158 of Companies Act No. 07 of 2007. The Auditors Messrs KPMG, Chartered Accountants audit fees for the Company is LKR 825,000/- (LKR 825,000/- in 2019) and the subsidiaries LKR 625,000/- (LKR 625,000/- in 2019).

gOINg CONCERN

The Board of Directors of the Company is satisfied that the Company has adequate resources to continue its operation in the forceable future. Therefore, the Company continues to adopt going concern concept in preparing the accounts of the Company.

In light of ongoing COVID-19 situation, the Group has assessed its going concern and a summarised disclosure of its assessment is provided below. With the onset of COVID-19 in Sri Lanka and the consequent business and movement restrictions, the Group’s operations were adversely affected starting from the second half of March 2020.

Further outbreak of the pandemic has increased the uncertain estimates used in the preparation of the Financial Statements. The extent and the duration of the spread of the virus and economic downturn due to the pandemic will impact to the level of uncertainty. The impact of the pandemic on accounting estimates where necessary is further listed under the relevant Notes to these Financial Statements.

ENVIRONMENT PROTECTION

Millennium Housing Developers PLC has obtained the approvals of the relevant Environmental Authority in doing their business and has not-engaged in any activities, which have caused detriment to the environment. Further we have developed lakes, parks, and green pockets to ensure the eco-friendly environment of the projects.

NOTICE OF MEETINg

Annual General Meeting will be held on 17 December 2020 at 10.00am via virtual platform meeting in accordance with the guidelines issued by the Colombo Stock Exchange (CSE) on holding virtual shareholder meetings as well as following all health and safety protocol guidelines.

K C C PereraExecutive Director

Gihan De ZoysaNon-Executive Independent Director

First Corporate Solutions Ltd.Company Secretaries for Millennium Housing Developers PLC

30 October 2020

ANNUAL REPORT OF THE BOARD OF DIRECTORS ONTHE AFFAIRS OF THE COMPANY


33

DIRECTORS’ STATEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTINg

RESPONSIBILITY

In accordance with the Companies Act No. 07 of 2007, the Directors are responsible to prepare the Financial Statements which giving a true and fair view of the state of affairs of the Company and the Group as at end of the financial year and the profit and cash flows of the Company and the Group for the financial year.

Accordingly, the Financial Statements have been prepared in conformity with the Sri Lanka Accounting Standards (SLFRS/LKAS) and provide the information required by the Companies Act No. 07 of the 2007 and the Listing Rules of the Colombo Stock Exchange.

The Board of Directors (the Board) of the Millennium Housing Developers PLC has understood that maintaining a sound and effective internal control mechanism is one of the main objectives. The Board has introduced an effective risk management system within the Company and it includes internal control over financial reporting process which is regularly reviewed by the Board.

The Directors have also taken appropriate steps to safeguard the assets of the Company and of the Group and to establish proper systems of internal control with a view to detect and prevent irregularities and malpractices.

KEY FEATURES OF THE PROCESS ADOPTED IN APPLYINg AND REVIEWINg THE DESIgN AND EFFECTIVENESS OF THE INTERNAL CONTROL SYSTEM OVER FINANCIAL REPORTINg

Below mentioned process have been established in reviewing the adequacy and integrity of the system of internal controls with respect to the financial reporting;

The Company formed various committees in ensuring the effectiveness of the Company’s daily operations. These committees always on alert to confirm that the Company’s operations are in accordance with the corporate objectives, strategies and the annual budget as well as the policies and directions which have been approved by the Board.

The internal audit functions are outsourced to an established audit firm which always check the adherence to the Company laid down procedures and other statutory and regulatory requirements are fulfilled.

The Company has introduced a Procedure Manual by considering the internal control and the practicality of the procedures.

The procedures stipulated in the Procedure Manual are properly evaluated by the Audit Committee and approved by the Board. Further such procedures are continuously reviewed by the management Audit Committee and the Board and adjust whenever there is a necessity.

The Board Audit Committee meets regularly and discuss the issues highlighted in the Internal Audit reports and evaluated the recommendations made by the Internal Auditors. The Audit Committee makes its final recommendations to the Board after having discussions with the Management and the Internal Auditors too.

RISK ASSESSMENT

The Company regularly assess the risk elements of the Company and do the necessary changes in the procedures to manage the risk factor in time. Furthermore, the Company has formed various management committees such as IRMC to assess the risk element periodically.

CONFIRMATION

Based on the above processes, the Board confirms that the financial reporting system of the Company has been designed to provide a reasonable assurance regarding the reliability of financial reporting and the preparation of Financial Statements for external purposes and has been done in accordance with Sri Lanka Accounting Standard.

The Board is of the view that the system of Internal Control over financial reporting in place, is sound and adequate to provide a reasonable assurance on the reliability of financial reporting and also the preparation of Financial Statements for the stakeholders is in accordance with the relevant accounting principles and the regulatory requirements.

The Directors confirm hereby that to the best of their knowledge, all statutory payments relating to the employees and the government that were due in respect of the Company and its subsidiaries as at the reporting period have been paid or where relevant provided for in the Financial Statements.

REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS

The External Auditors, KPMG have reviewed the above Directors’ Statement on Internal Control over Financial Reporting included in the Annual Report of the Company for the year ended 31 March 2020 and reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the process adopted by the Board in the review of the design and effectiveness of the Internal Control over Financial Reporting of the Company. Their Report on the Statement of Internal Control over Financial Reporting is given in Auditors’ Report of this Annual Report.

By Order of the Board,

U Harshith DharmadasaChairman

K C C PereraDirector

U H PalihakkaraChairman of the Audit Committee

24 September 2020


34

STATEMENT ON DIRECTORS RESPONSIBILITY

The statement of Directors responsibility in relation to preparation of Financial Statements of Millennium Housing Developers PLC is set out in this report in terms of the provisions of the Companies Act No. 07 of 2007.

As per Section 150 (1), 151, 152 (1) and 153 of the Companies Act No. 07 of 2007, the Directors are responsible to ensure the compliance with the requirements set out therein to prepare;

a. Financial Statements for each financial year by giving a true and fair view of the state of the affairs of the Company at 31 March 2020.

b. Financial performance of the Company for the financial year ended on 31 March 2020.

Further as per the Section 148 of the Companies Act No. 07 of 2007 it is the responsibility of the Board of Directors to maintain proper accounting records with reasonable accuracy, the financial position of the Company and to enable the Management to prepare the Financial Statements in the most appropriate manner.

The Board accepts responsibility for the integrity of the Financial Statements presented. The Directors confirm that in preparing Financial Statements, appropriate accounting policies have been selected and applied, so that the form and substance of transactions are properly reflected. The Financial Statements provide the information required by the Companies Act, Listing Rules of Colombo Stock Exchange and Sri Lanka Accounting Standards. The Directors are responsible for measures taken to safe guard the assets of the Group and in that concepts have instituted appropriate system of internal control, with a view to prevent and detect fraud and other irregularities.

The External Auditors Messrs KPMG was reappointed as the External Auditors for the financial year 2019/20 in accordance with a resolution passed at the Annual General Meeting. Further the Company arranged all the facilities for the External Auditors to conduct the annual audit and provided all the required information.

The Board accepts the responsibility for accuracy of the Financial Statements presented. Accordingly, the Board of Directors confirms that in preparing these Financial Statements,

a. Appropriate accounting policies have been selected and applied in a consistent manner.

b. The material changes if any have been disclosed and explained.

c. Complied in order to meet all relevant Sri Lanka Accounting Standards.

d. All the judgements and estimates have been made in the most reasonable and prudent manner.

e. Provides the information required by the Companies Act No. 07 of 2007 and the Listing Rules released by the Colombo Stocks Exchange.

The Directors have taken reasonable measures to maintain an adequate and reliable internal control. The External Auditors Report shown on pages 44 to 46 sets out their responsibility in relation to the Financial Statements.

The Directors consider that the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.

The Group Financial Statements given a true and fair view of the assets, liabilities, financial position, and profit of the Group; and the Directors’ Report includes a fair review of the development and performance of the business, and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

The Board of Directors confirms that to the best of their knowledge, all statutory payments relating to employees and the Government that were due in respect of the Company and its subsidiaries as at the reporting date have been paid or provided for, in arriving at the financial results for the year under review.


First Corporate Solutions Ltd.Company Secretaries for Millennium Housing Developers PLC

30 September 2020


35

AUDIT COMMITTEE REPORT

AUDIT COMMITTEE CHARTER AND THE TERMS OF REFERENCES

The Company Audit Committee is governed by the Board approved Audit Committee Charter which clearly defined the Terms of Reference (TOR) of the Audit Committee. The Audit committee Charter is continuously reviewed by the Board of Directors to ensure that the functions of the Company Audit Committee is in line with the new changes in the industry and the rapid development of the Company.

OBJECTIVES OF THE AUDIT COMMITTEE

Assisting the Board of Directors to maintain the good governance of the Company has become the Prime Objective of the Audit Committee. Liaising with the External Auditors, Discussing the internal audit reports and considering the recommendations made by the internal auditors on certain issues and to ensure the compliance with the rules and regulations laid down by the regulatory bodies such as CSE, SEC, Companies Act etc. are the other objectives of the Company.

AUDIT COMMITTEE (2019/20)

The Audit Committee of Millennium Housing Developers PLC consist with below mentioned Non-Executive Directors up to 11 September 2019.

Name Directorate Membership

Mr U H Palihakkara Non-Executive Independent Chairman

Mr Gihan De Zoysa Non-Executive Independent Member

Mr Jayantha Perera* Non-Executive Independent Member

Mr Jayaprakash Rudra** Non-Executive Independent Member


**Member – w.e.f. 11 September 2019

Mr J P Rudra was nominated for the Audit Committee with effect from 11 September 2019 by the Board to further strengthen the functions of the Audit Committee.

The composition of the Audit Committee

Accordingly, the composition of the Audit Committee from 11 September 2019 is as follows.





Mr J P Rudra** Non-Executive Independent Member



The credential of the members of the Audit Committee is given on pages 14 to 16 of the Annual Report.

The Company has complied with the below mentioned requirements of Section 7.10.6.a of the Continuing Listing Requirement released by the Securities and Exchange Commission of Sri Lanka (SEC).

a. Majority of members are Independent Directors

b. Chairman Mr U H Palihakkara is an independent Non-Executive Director and hold the membership of three professional accounting bodies namely CA Sri Lanka, CIMA, and ACCA.

PARTICIPATION OF THE MEMBERS

During the Financial Year 2019/20 the Audit Committee held fourteen meetings and the attendance of the members are shown in the below mentioned table.

Name Attendance

Mr U H Palihakkara 14/14

Mr Gihan De Zoysa 14/14

Mr Jayantha Perera* 4/14

Mr J P Rudra** 5/8



ATTENDANCE BY INVITATION

The Chairman of the Company Mr Harshith Dharmadasa and Deputy Chairman of the Company Mr Victor Ramanan participated for one meeting and the CEO Mr Arjuna Waidyasekera, Deputy Financial Controller Mr Hasitha Wanniarachchi participated for all 14 meetings on invitation of the Audit Committee Chairman.

Secretaries

Sarukkali Associates (Chartered Accountants) to which the Internal Audit functions assigned by the Company acted as the Secretary to the Audit Committee also. Minutes of the Audit Committee were kept by the Secretaries and tabled at the immediate next Board meeting.

MAIN ACTIVITIES PERFORMED BY THE AUDIT COMMITTEE DURINg THE FINANCIAL YEAR 2019/20

a. Discussed the Audit Committee Charter for the financial year 2019/20 and obtained the Board approval.

b. Approved the Annual Internal Audit Plan of the Company for the financial year 2019/20.

c. Monitored closely the functioning of the other management committees such as IRMC and ALCO which helped the Company to enhance the corporate governance of the Company.


36

AUDIT COMMITTEE REPORT

d. Reviewed the quarterly accounts and the annual accounts and expressed the views of the committee to the Board together with the recommendations with special reference to –

(i) Preparation, presentation and adequacy of disclosures in the Financial Statements, in accordance with the Sri Lanka Accounting Standards.

(ii) Compliance with the financial reporting requirements, information requirements of the Companies Act, and other relevant financial reporting related regulations and requirements.

e. Advised the Management for managing the risk factors, and to achieve the Company objective and goals.

f. Held meetings to discuss the Internal Audit Reports.

g. Evaluated the recommendations made by the Internal Auditors and discussed with the Management the ways of executing those recommendations.

h. Held two meetings with the External Auditors to clarify the matters referred in the Management Letter released by them for the financial year 2018/19. At this meeting the Audit Committee paid special attention for the shortcomings highlighted in the Management Letter together with the recommendations made by the External Auditors.

i. Held a meeting with the Management to discuss the matters referred in the Management Letter together with the explanations made by the Management on the shortcomings highlighted therein. Based on the discussion with the External Auditors and with the Management, the Audit Committee made recommendations to the Board on improving the quality and timeliness of information and also on improvements to internal control systems.

j. Approved the changes suggested by the Management and the Audit Committee for changing few directions appeared in the existing Procedure Manual.

k. Discussed few queries received from the regulatory bodies.

MINUTES OF THE MEETINg

Secretary keeps the minutes of the Audit Committee. The minutes of the Audit Committee meeting is tabled at the immediate next Audit Committee for adopting purposes. As a practice the Chairman of the Audit Committee tables the minutes of the Audit Committee at the Board meeting with a brief description about the salient points and the recommendations of the Audit Committee.

INTERNAL AUDITORS

Company Internal Audits are assigned to a reputed audit firm namely “Sarukkali Associates”. The Internal Audits are conducted according to the Audit Plan approved by the Audit Committee. Further the Audit Committee closely monitors the activities of the Internal Auditors and ensures the Internal Audits are done according to the approved Internal Audit Plan.

SELECTION OF EXTERNAL AUDITOR

The Audit Committee recognises the importance of the independency status of the External Auditor. Therefore, the Audit Committee evaluates the qualifications, performance and independence of the External Auditor and determines whether to reappoint as the External Auditor.

Accordingly, the Audit Committee recommends to reappoint KPMG Sri Lanka (Chartered Accountants) as the External Auditor for 2020/21 as well. However, the Audit Committee recommends getting the shareholders' consent at the AGM to ratify the appointment of the External Auditors. KPMG Sri Lanka acts as the External Auditor for the Company since 2009. Though the service of the External Auditor is more than 10 years, the Audit Committee is satisfied about the independency of the External Auditor since the External Audit is carried out under the supervision of a new managing partner from 2018/19 as per their policy of confirming the independency status.

The Audit Committee held several meetings with the External Auditors to discuss the key areas of the 2018/19 Management Letter and specially the recommendations made therein.

OPINION OF THE AUDIT COMMITTEE

The Audit Committee is of the opinion that the internal controls and procedures were in place for assessing and managing the risks provide reasonable assurance regarding the reliability of financial reporting of the Company. Further the Audit Committee confirm that the Company has complied with the statutory rules and regulations as well as the other guidelines recommended by The Institute of Charted Accountants of Sri Lanka specially to maintain the corporate governance of the Company.

The Audit Committee is also of the view that the Company maintains good governance in all its activities up to the maximum level.

U H PalihakkaraThe Chairman – Audit Committee

15 October 2020


37

REMUNERATION AND NOMINATION COMMITTEE REPORT

The Report on Board Remuneration and Nomination Committee of Millennium Housing Developers PLC is set up according to the rules and recommendations of the “Code of Best Practices on Corporate Governance 2017” issued by The Institute of Chartered Accountants of Sri Lanka.

The Company Remuneration and Nomination Committee functions within agreed Terms of Reference and its committed to the principles of accountability and transparency and ensuring that remuneration arrangements align rewards with performance.

It is important to note that the term remuneration shall make reference to both cash and non-cash benefits whatsoever received in consideration of employment with the Company.

SCOPE OF THE COMMITTEE

Main scope of the Company Remunerations and Nomination Committee is, assist the Board of Directors in ensuring the remuneration arrangements in the Company align with the performance of the staff members at all levels.

The scope of the Remuneration and Nomination Committee is set according to the scope of the Remunerations and Nomination Committee started in the Code of Best Practices on Corporate Governance 2017 issued by The Institute of Chartered Accountants of Sri Lanka.

COMPOSITION OF THE REMUNERATION AND NOMINATION COMMITTEE

The Company Remuneration and Nomination Committee comprises with a minimum of three Non-Executive Directors a majority of whom shall be independent Directors.

Name Capacity in the committee

Status

Mr Jayaprakash Rudra Chairman Non-Executive/Independent

Mr Uditha Palihakkara Member Non-Executive/Independent

Mr Gihan De Zoysa Member Non-Executive/Independent

ATTENDANCE OF MEMBERS

Company held one (01) meeting in the financial year. Chief Executive Officer (CEO) Mr Arjuna Waidyasekera attended for the meeting on invitation of the chairman of the Remuneration Committee.

The Chairman of the Remuneration and Nomination Committee possess a vast exposure in the field of business management and prevailing labour regulations in the country.

INDEPENDENCE OF THE COMMITTEE

The Chairman of the Remuneration and Nomination Committee is an independent of management and is completely free from any business, personal or other relationship, that may interfere with the exercise of their independent, unbiased judgement. The Chairman of the Committee refrain from taking part in determining his own remuneration.

PERFORMANCE-BASED REMUNERATION

The Committee evaluated the performance of the CEO, Head of Divisions and Senior Management of the Strategic Business Units. Further Key Performance Indicators (KPls) are assigned to each Heads of Department and the members of the Management Team where the performance is evaluated in each quarter against the set KPI’s and realigned based on the Company’s strategic direction if necessary.

Remuneration and Nomination Committee further evaluated the available succession planning to ensure the continuity of the business after a potential disaster or crisis situation and suitable contingency to formulate an operational plan for business existence with minimal and key resources bases.

THE REMUNERATION POLICY

The Company follows a formal and transparent procedure to ascertain the remuneration packages for the key officers. The Committee considers the importance of formulating remuneration packages that are sufficient to motivate, attract and retain the key staff members for a considerable period. The Company remuneration policy which was reviewed by the Committee remained unchanged during the year under review.

AUTHORITY

The Committee has the authority to discuss issues under its purview and report to the Board with recommendations for enabling the Board to take the final decision.

CONCLUSION

The Committee is satisfied that it has fulfilled the expectations placed by the Board in the year under review and it has achieved the targets set by the Board.

Jayaprakash Rudra Chairman – Remuneration and Nomination Committee

12 October 2020


38

RELATED PARTY TRANSACTIONS REVIEW COMMITTEE REPORT

RPT-RC CHARTER AND THE TERMS OF REFERENCES

The Company RPT-RC is governed by the Board approved Charter which clearly defined the Terms of Reference (TOR) of the RPT-RC. The RPT-RC Charter is continuously reviewed by the Board of Directors.

Secretaries to the RPT-RC

Sarukkali Associates (Chartered Accountants) acted as the Secretary to the RPT-RC. Minutes of the RPT-RC were kept by the Secretaries and tabled a Board Paper by explaining the activities performed by the RPT-RC at each Board meeting.

Objectives of the Committee

The prime objective of the RPT-RC is to assist the Board to confirm that all related party transactions were carried out by the Company as per the rules and regulations of the CSE Listing Rule No. 9, Code of Best practices issued by SEC and LKAS 24.

RELATED PARTY TRANSACTIONS REVIEW COMMITTEE

The Related Party Transactions Review Committee (RPT-RC) functioned at the Company in the Financial Year 2019/20 as per the requirements of the below mentioned documents.

a. Code of Best Practice issued by the Securities and Exchange Commission of Sri Lanka (SEC).

b. The Listing Rule No. 9 released by the Colombo Stocks Exchange (CSE).

c. Sri Lanka Accounting Standards (LKAS) No. 24.

The RPT-RC of the Company comprises with below mentioned three Non-Executive, Independent Directors up to the 11 September 2019.

Composition of the Committee and the participation of the members






Mr J P Rudra was nominated for the RPT-RC with effect from 11 September 2019 by the Board to further strengthen the functions of the RPT-RC.

Accordingly, the composition of the RPT-RC from 11 September 2019 is as follows.





Mr J P Rudra Non-Executive Independent Member


Accordingly, the Company RPT-RC is in line with the requirements of the Section 9.2.2 of the Listing Rule No. 9 released by the CSE. A brief profile of each member is given in the pages 14 to 16 of this Annual Report.

Activities and focus of the Company RPT-RC Prepared the RPT-RC Charter by including the Terms of Reference also and obtained the Board approval.

Updating the Board on the related party transactions incurred at the Company and the views of the RPT-RC on such related party transactions.

Making immediate disclosures on applicable related party transactions if any as required by the Section No. 9.3.1 of the Continuing Listing Rules of the Colombo Stock Exchange (CSE).

Making required disclosures in the Annual Report on related party transactions if any as required by the Section No. 9.3.2 of the Continuing Listing Rules of the Colombo Stock Exchange (CSE).

The Committee reviewed the related party transactions and communicated its views to the Board. The Committee was satisfied with the quality and adequacy of the information pertaining to related party transactions presented to it by the management in compliance with Section No. 9 of the Listing Rules of the Colombo Stock Exchange.

NUMBER OF MEETINgS HELD AND THE PARTICIPATION OF THE MEMBERS

During the financial year 2019/20 the RPT-RC held four meetings and the attendance of the members are shown in the below mentioned table.

Name Attendance

Mr U H Palihakkara 4/4

Mr Gihan De Zoysa 4/4

Mr Jayantha Perera* 2/4

Mr J P Rudra** 2/4

*Resigned w.e.f. 15 September 2020 ** w.e.f. 11 September 2020

Attendance by invitation

CEO Mr Arjuna Waidyasekera and Deputy Financial Controller Mr Hasitha Wanniarachchi participated for all 4 meetings on invitation of the RPT-RC Chairman.

CONCLUSION

Related Party Transactions Review Committee confirmed hereby that the Company has acted on all the related party transactions incurred at the Company according to the rules and regulations of the CSE Listing Rule No. 9, Code of Best practices issued by SEC and LKAS 24 and not favoured to the related party in offering the activity and while performing the work.

U H PalihakkaraChairman – Related Party Transactions Review Committee

15 October 2020


39

RISK MANAgEMENT

The risk can be identified as an event or incident that if occurs will adversely affect to the achievement of expected goals and objectives.

The Board has understood that upholding of prudent risk management mechanism within the Company and systematic implementation of the said risk management mechanism is one of its prime responsibilities.

Accordingly, the Company has implemented various risk management techniques to identify, manage and mitigate the risk factors. Further, the risk management techniques are continuously reviewed by the Management to ensure the adequacy and effectiveness.

The Company has formed the Integrated Risk Management Committee (IRMC) and held monthly meetings to discuss the possible risk factors and the management mechanism to mitigate the risk factors.

The Company has introduced a well-designed procedure Manual also with the consultation of the Internal Auditors and having series of discussions with operational staff also. Therefore, the present Procedure Manual is a balanced document for strengthening the internal control and the operational work.

The Company acknowledges the significance of the implementations of the procedures stipulated in the Procedure Manual and the Company Internal Audit Team draws the management attention for the deviations from the standard procedures by stating in their Internal Audit Reports.

RISK MANAgEMENT APPROACH

Risk management approach of Millennium Housing Developers (MDH) PLC is depicted in the diagram below.

AUDITCOMMITTEE

INTERNAL AUDIT

BOARD OF DIRECTORSBOARD OF

DIRECTORS

CHIEFEXECUTIVE

OFFICER

CORPORATEMANAgEMENT

gENERALMANAgEMENT

RISK MANAgEMENT PROCESS

The risk management process in place at the Company is explained below.

IDENTIFYINgTHE RISKELEMENT

MANAgINgTHE RISKELEMENT

ASSESSMENTAND

EVALUATINgTHE RISK

MONITORINgTHE

MANAgEMENTPROCESS


40

RISK MANAgEMENT

The Company approaches risk management in a proactive manner and has implemented systems where possible to avoid or mitigate the risk. Necessary control mechanisms are in place to track the exposure to risk as well, giving the Management signals as to when and where control is needed.

Response of our Company against the risk factor is explained in below mentioned diagram.

RISK LEVELS AND THE COMPANY RESPONSE TOWARDS THE RISK FACTOR

Risk (Magnitude of Loss)

Un

cert

ain

ty(P

rob

abili

ty o

f O

ccu

rren

ce)

RISK ACCEPTANCE

RISK MITIgATION

RISK MITIgATION

RISK TRANSFER

RISK CATEgORIES AND MITIgATION TECHNIQUES

Business and operational risk

Business and operational risks, common for many organisations, can come from a variety of sources – both internal and external and generally include the entire spectrum of risks which a company can encounter. Partly this is due to the human errors, frauds, malpractices, failures or break downs in the system and in the procedures and deviations due to the negligence or deliberately from laid down procedures.

Mitigation strategies;

The below mentioned mitigation strategies are designed by the Company to mitigate operational risk.

Company has introduced a “Procedure Manuals” to maintain the uniformity and the quality transactions. This Procedure Manual is designed with the guidance of the Audit Committee. Furthermore, the Procedure Manual is approved by the Board of Directors.

Standard qualification and required experience for each job category are predetermined by the Company. Therefore, the Company is able to get the well experienced and qualified staff members.

The Company keep backups in all the important electronic data and raw data as well. Further, a trial run on disaster recovery is made by the Internal Audit Division to ensure the smooth retrieval of the backups. This exercise is done in a different platform to ensure the retrieval of backups under any circumstances.

The Company has designed a well-planned Business Continuity Plan to face any unforeseen situation.

If the probability of occurrence the risk element is high and the magnitude of the loss is also comparatively high the Company takes steps to transfer the risk to a third party by taking a reasonable insurance coverage.

The Company has introduced a sound “Whistle Blowing Policy” within the Company to quick and easy identification of frauds, malpractices and the errors.

PROCUREMENT RISK

Since the Company is in the construction industry the procurement process plays a significant position in the operation. The Company understands that if the quality of the raw material is not up to the standard it may lead to erode the goodwill of the Company. Therefore, the Company intends to purchase the Raw Material from the agents and from the reputed suppliers wherever possible.


A separate Procurement Division has been established at the Company to coordinate with suppliers to procure the raw material on time to minimise stockout situations in construction activities.

Priority is given to the agents of the products when procuring the raw materials.

Timely settlement of suppliers’ bills and advance payments prior to supply has ensured timely delivery of quality raw material at the right quantity.

SOCIO-ECONOMIC POLITICAL AND ENVIRONMENTAL RISK

The company faces this risk factor due to;

a. Major events affecting either economic or political stability on a global and local level.

b. Risk of delaying the construction work due to natural epidemics or pandemics.

Possible bad impacts of this risks are significant for a company engages in construction industry in the current context.


41

RISK MANAgEMENT

Mitigating strategies

Transferring risk factors to third parties through insurance policies is another way of mitigating the risk factor.

LEgAL RISK

Legal risk is the risk resulting from the legal or regulatory framework that govern the Company and its transactions with a third party.


The Company operates the below mentioned strategies to mitigate the legal risk.

The Company always takes necessary steps to be complied with the legal, statutory requirement and special attention has been given to maintain the ethics, standards, and transparency.

The Company always obtain services of the well reputed legal firm for handling the legal issues of the company.

The Company operates a Compliance Division also in addition to the Internal Audit Division.

LIQUIDITY RISK

Liquidity risk is the risk of inability of meeting the funds requirements for the operational activities.


The below mentioned mitigation strategies are available at present.

The Company operations are controlled by the pre-prepared budgets which carefully scrutinising the cost headings. Furthermore, the budgetary control meetings are being held to manage the actual costs with the budget.

The regular preparation and follow up of cash flows.

The Company makes every effort to maintain the current ratio and the quick assets ratio at its optimum level.

The Company has formed an Assets and Liability Committee (ALCO) to safeguard the assets and identify the Liability well in advance.

MIS's are prepared on monthly basis and discussed at the Board level.

REPUTATION RISK

Goodwill is the most important intangible asset of the Company. MHDL has realised the importance of maintaining a sound reputation to retain and improve its customer base, and also to have a better public image in the eyes of all stakeholders.


The Below mentioned mitigation strategies are available at present.

The Company always takes every effort to satisfy its stakeholders.

Company operates a separate unit namely “Customer Service Unit” to address the grievances of the customers.

Company operates a whistle blowing technique for timely identification of frauds and malpractices.

Organising the training programmes and awareness programmes to develop the skills of the employees.

Hold regular meetings with the customers, suppliers, contractors, and the staff members. The Company gives the special emphasis to the constructive suggestions received from the above parties.

CONCLUSION

Risk is correlated with returns but it cannot be fully eliminated by a business enterprise. Therefore, only available alternative is to manage the risk factor.

Accordingly, the Management is of the opinion that the Company has well managed the risk factor up to a satisfactory level.


42

DEPUTY CHAIRMAN’S AND DEPUTY FINANCE CONTROLLER’S STATEMENT OF RESPONSIBILITY

The Financial Statements of Millennium Housing Developers PLC (the Company), and the Consolidated Financial Statements of the Company and its subsidiaries (the Group), as at 31 March 2020 are prepared and presented in conformity with the requirements of the following:

Sri Lanka Accounting Standards issued by The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka);

Companies Act No. 07 of 2007;

Sri Lanka Accounting and Auditing Standards Act No. 07 of 1995;

Listing Rules of the Colombo Stock Exchange (CSE); and

Code of Best Practice on Corporate Governance issued CA Sri Lanka.

The formats used in the preparation of the Financial Statements and disclosures made comply with the specified formats prescribed by the CBSL. The Group presents the financial results to its shareholders on a quarterly basis.

The significant accounting policies have been consistently applied by the Group. Application of Significant Accounting Policies and Estimates that involve a high degree of judgement and complexity were discussed with the Board Audit Committee (BAC), and the Company’s External Auditors. We confirm that to the best of our knowledge, the financial statements, significant accounting policies, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of the operations and the cash flows of the Group during the year under review. We also confirm that the Group has adequate resources to continue in operation and have applied the going concern basis in preparing these Financial Statements.

We are responsible for establishing, implementing and maintaining Internal Controls and Procedures within the Company and all of its subsidiaries. We ensure that effective Internal Controls and Procedures are in place, ensuring material information relating to the Group are made known to us for safeguarding assets, preventing and detecting fraud and/or error as well as other irregularities, which are reviewed, evaluated and updated on an ongoing basis. We have evaluated the Internal Controls and Procedures of the Group for the financial period under review and are satisfied that there were no significant deficiencies and weaknesses in the design or operation of the Internal Controls and Procedures, to the best of our knowledge. We confirm, based on our evaluations that there were no significant deficiencies and material weaknesses in the design or operation of internal controls and fraud that involves Management or other employees. The Company’s Internal Audit Department also conducts periodic reviews to ensure that the Internal Controls and Procedures are consistently followed.

The Financial Statements of the Group were audited by Messrs KPMG, Chartered Accountants and their Report is given on pages 44 to 46 The BAC pre-approves the audit and non-audit services provided by Messrs KPMG, in order to ensure that the provision of such services does not impair KPMG’s independence and objectivity.

The BAC, reviewed the Internal Audit Programmes and External Audit Plan, the efficiency of Internal Control Systems and procedures, and also reviewed the quality of significant accounting policies, and their adherence to statutory and regulatory requirements based on the new accounting standard of SLRFSs 16 respectively, the details of which are given in the “Board Audit Committee Report” appearing on pages 35 and 36. To ensure independence, the External Auditors and the Internal Auditors have full and free access to the members of the BAC to discuss any matter of substance. However, there are inherent limitations that should be recognised in weighing the assurances provided by any system of internal control and accounting.

It is also declared and confirmed that the Group and the Company have complied with, and ensured compliance with the guidelines for the audit of listed companies where mandatory compliance is required.

We confirm that to the best of our knowledge – The Company and the Group have complied with all applicable laws and regulations and guidelines, and there is no material litigation against the Company/Group.

All taxes, duties, levies and all statutory payments by the Company/Group, and all contributions, levies and taxes payable on behalf of, and in respect of the employees of the Company/Group as at 31 March 2020 have been paid, or where relevant provided for.

Victor R RamananDeputy Chairman

Hasitha WanniarachchiDeputy Financial Controller

30 October 2020Colombo

FINANCIALREPORTS44/ Independent Auditors’ Report47/ Statement of Profit or Loss and Other Comprehensive Income48/ Statement of Financial Position 49/ Statement of Changes in Equity 50/ Statement of Cash Flows 51/ Notes to the Financial Statements

FINANCIAL CALENDAR – 2019/20

20th Annual General Meeting held on 17 December 2020.

Unaudited Interim Financial Statements submitted to the Colombo Stock Exchange in terms of Rule 7.4.

First quarter ended 30 June 2019 – 21 August 2019

Second quarter ended 30 September 2019 – 15 November 2019

Third quarter ended 31 December 2019 – 14 February 2020

Fourth quarter ended 31 March 2020 – 09 September 2020

PROPOSED FINANCIAL CALENDAR – 2020/21

21st Annual General Meeting to be held on 30 September 2021.

Unaudited Interim Financial Statements submitted to the Colombo Stock Exchange in terms of Rule 7.4.

First quarter ended 30 June 2020 – 15 September 2020

Second quarter ended 30 September 2020 – 16 November 2020

Third quarter ended 31 December 2020 – On or before 15 February 2021

Fourth quarter ended 31 March 2021 – On or before 31 May 2021

44


To the Shareholders of Millennium Housing Developers PLC

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

OpinionWe have audited the Financial Statements of Millennium Housing Developers PLC (“the Company”) and the consolidated Financial Statements of the Company and its subsidiaries (“the Group”), which comprise the statement of financial position as at 31 March 2020, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the Financial Statements, including a summary of significant accounting policies and other explanatory information set out on pages 47 to 86 of the Annual Report.

In our opinion, the accompanying Financial Statements give a true and fair view of the financial position of the Company and the Group as at 31 March 2020, and of their financial performance and their cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Basis for opinionWe conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics), and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit mattersKey audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements of the current period. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

M.R. Mihular FCA P.Y.S. Perera FCA C.P. Jayatilake FCAT.J.S. Rajakarier FCA W.W.J.C. Perera FCA Ms. S. Joseph FCAMs. S.M.B. Jayasekara ACA W.K.D.C Abeyrathne FCA S.T.D.L. Perera FCAG.A.U. Karunaratne FCA R.M.D.B. Rajapakse FCA Ms. B.K.D.T.N. Rodrigo FCAR.H. Rajan FCA M.N.M. Shameel ACA Ms. C.T.K.N. Perera ACAA.M.R.P.Alahakoon ACA

Principals - S.R.I. Perera FCMA(UK), LLB, Attorney-at-Law, H.S. Goonewardene ACA, Ms. P.M.K. Sumanasekara FCA

KPMG, a Sri Lankan partnership and a member firm

of the KPMG network of independent member firms

affi l iated with KPMG International Cooperative

(“KPMG International”) , a Swiss entity.

Carrying value of inventories(Refer to Note 4.7 significant accounting policies and explanatory Note 17 to the Financial Statements).

Description Our response

The Group has significant inventory balance amounting to LKR 2,055,478,495/-, representing 78% of the total assets at the reporting date.

Given the current circumstances, the demand for condominiums and residential housing units are likely to slowdown with a probability that they recover over the medium and long-term as the economy recovers. Further, COVID-19 outbreak resulted in interruption in business activities and resulted in loss of income from some of the individuals which would adversely affect the ability to sell the real estate units under normal course of business with a reasonable margin which would potentially impact on the net realisable value of the inventories. Therefore, the assessment requires the exercise of significant management judgement in assessing future selling prices of inventory.

Understanding and evaluating the design, implementation and operating effectiveness of Management’s key internal controls over inventory management including the purchases of inventories, inventory valuation, and cycle counts of inventories and reviews of the status of inventories.

Comparison of inventory levels, to sales data to corroborate whether slow moving and obsolete inventories had been appropriately identified and challenge the Group’s categorisation as obsolete or slow moving.

Comparing, on a sample basis, the carrying value of inventories with sales prices subsequent to the end of the reporting period.

Performing recalculations on inventory valuation for selected samples in accordance with the Group’s valuation policy.

Obtaining the surveyor’s (In-house) progress report on the work in progress as at 31 March 2020 and inquired the Management over the reasonableness of the valuation performed by the surveyor.

INDEPENDENT AUDITORS’ REPORT


45


Other informationManagement is responsible for the other information. The other information comprises the information included in the annual report but does not include the Financial Statements and our auditor’s report thereon.

Our opinion on the Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and those charged with governance for the Financial StatementsManagement is responsible for the preparation of Financial Statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as Management determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, Management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

As part of an audit in accordance with SLAuSs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management.

Conclude on the appropriateness of Management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to

Description Our response

We considered the carrying value of inventories as a key audit matter because there is an uncertainty with regard to the subsequent selling prices and judgement involve in marking down prices for if there any difficulties in selling due to the current prevailing market conditions arising of COVID-19 impact.

Performing the physical inventory count after the reporting date and a roll-back procedure for the year end date.

Performing, on sample basis, a net realisable value test for the inventories as at the reporting date.


46


draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirementsAs required by Section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.

CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditor’s report is 3544.

KPMGChartered AccountantsColombo, Sri Lanka

17 November 2020


47

Group Company

For the year ended 31 MarchNote

2020LKR

2019 LKR

2020LKR

2019LKR

Revenue 5 1,294,462,979 1,004,824,916 37,801,522 228,374,923

Cost of sales (894,461,404) (628,964,649) (27,102,230) (152,566,429)

Gross profit 400,001,575 375,860,267 10,699,292 75,808,494

Other operating income 6 40,781,853 31,212,871 10,681,548 7,725,201

Administration expenses (240,000,006) (213,207,560) (85,809,619) (108,450,362)

Selling and marketing expenses (11,845,245) (27,956,321) (1,562,873) (6,787,240)

Results from operating activities 7 188,938,177 165,909,257 (65,991,652) (31,703,907)

Finance income 4,704,586 6,181,381 569,469 1,164,345

Finance costs (21,626,965) (14,126,900) (1,394,718) (1,300,197)

Net finance income/(cost) 8 (16,922,379) (7,945,519) (825,249) (135,852)

Profit/(loss) before income tax 172,015,798 157,963,738 (66,816,901) (31,839,759)

Income tax expense 9 1,362,266 (43,039,427) (726,797) (985,123)

Profit/(loss) for the year 173,378,064 114,924,311 (67,543,698) (32,824,882)

Other comprehensive income

Items that will not be reclassified to profit or loss

Re-measurements of defined benefit liability/(assets) 25 (5,797,542) 11,435,734 (5,900,760) 9,795,494

Related tax on re-measurement of defined benefit liability/(assets) 811,655 (3,200,504) 826,106 (2,930,391)

Net change in fair value of financial assets – FVOCI (1,029,822) (1,011,737) (1,029,822) (1,011,737)

Other comprehensive income for the year net of tax (6,015,709) 7,223,493 (6,104,476) 5,853,366

Total comprehensive income for the year net of tax 167,362,355 122,147,804 (73,648,174) (26,971,516)

Profit/(loss) attributable to:

Owners of the Company 173,378,064 114,924,311 (67,543,698) (32,824,882)

Non-controlling interest – – – –

Profit/(loss) for the year 173,378,064 114,924,311 (67,543,698) (32,824,882)

Total comprehensive income attributable to:

Owners of the Company 167,362,355 122,147,804 (73,648,174) (26,971,516)

Non-controlling interest – – – –

Total comprehensive income for the year net of tax 167,362,355 122,147,804 (73,648,174) (26,971,516)

Earnings/(loss) per share

Basic and diluted earnings/(loss) per share 10 1.29 0.85 (0.50) (0.24)

The Notes to the Financial Statements set out on pages 51 to 86 form an integral part of these Financial Statements.

Figures in brackets indicate deductions.

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


48

Group Company

As at 31 MarchNote

2020LKR

2019 LKR

2020LKR

2019 LKR

Assets

Non-current assetsProperty, plant and equipment 11 25,060,399 35,528,540 15,858,725 23,208,129

Investment property 12 54,500,000 52,500,000 – –

Intangible assets 13 467,096 1,394,261 366,316 1,142,445

Investment in subsidiaries 14 – – 285,124,223 294,830,332

Right-of-use assets 15 9,402,339 – 9,402,339 –

Financial assets – FVOCI 16 9,350,019 10,379,841 9,350,019 10,379,841

Deferred tax asset 24 2,307,310 – 1,958,473 1,859,164

Total non-current assets 101,087,163 99,802,642 322,060,095 331,419,911

Current assetsInventories 17 2,055,478,495 2,195,178,012 200,599,642 82,813,669

Trade and other receivables 18 391,316,703 581,351,321 45,061,541 102,988,511

Amounts due from related companies 19 47,308,992 45,257,198 29,388,020 50,714,528

Income tax receivable 8,473,280 5,654,837 554,052 541,877

Cash and cash equivalents 20 18,724,887 50,975,411 9,404,010 11,779,672

Total current assets 2,521,302,357 2,878,416,779 285,007,265 248,838,257

Total assets 2,622,389,520 2,978,219,421 607,067,360 580,258,168

Equity and liabilities

Equity Stated capital 21 293,802,200 293,802,200 293,802,200 293,802,200

Reserves 22 16,400,503 17,430,325 16,400,503 17,430,325

Retained earnings/(accumulated losses) 652,478,067 484,085,890 (48,515,926) 24,102,426

Equity attributable to owners of the Company 962,680,770 795,318,415 261,686,777 335,334,951

Non-controlling interests – – – –

Total equity 962,680,770 795,318,415 261,686,777 335,334,951

Non-current liabilitiesInterest-bearing borrowings 23 417,839,663 539,832,000 6,664,663 –

Deferred tax liability 24 – 429,158 – –

Retirement benefit obligation 25 25,945,781 19,469,988 21,843,344 15,923,145

Total non-current liabilities 443,785,444 559,731,146 28,508,007 15,923,145

Current liabilities Trade and other payables 26 848,497,022 1,448,896,013 65,322,388 64,464,937

Interest bearing borrowings 23 325,988,836 107,352,089 3,868,874 1,440,290

Debentures 27 3,250,000 3,250,000 3,250,000 3,250,000

Amounts due to related companies 28 2,239,710 2,022,490 242,213,019 154,581,365

Income tax payable 1,705,832 3,216,001 – –

Bank overdraft 20 34,241,906 58,433,267 2,218,295 5,263,480

Total current liabilities 1,215,923,306 1,623,169,860 316,872,576 229,000,072

Total liabilities 1,659,708,750 2,182,901,006 345,380,583 244,923,217

Total equity and liabilities 2,622,389,520 2,978,219,421 607,067,360 580,258,168


It is certified that the Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 7 of 2007.

Hasitha Wanniarachchi Deputy Financial Controller

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.

Approved and signed for and on behalf of the Board;

U H Dharmadasa K C C PereraChairman Director 17 November 2020

STATEMENT OF FINANCIAL POSITION


49

For the year ended 31 March 2020 Attributable to owners of the Company

Total equity

LKR

Group Statedcapital

LKR

Capital redemption

reserveLKR

FVOCI

LKR

Retained earnings/ (accumulated

losses) LKR

Balance as at 1 April 2018 293,802,200 25,000,000 (6,557,938) 408,064,811 720,309,073

Profit for the year – – – 114,924,311 114,924,311

Other comprehensive expenses (Net of tax) – – (1,011,737) 8,235,230 7,223,493

Total comprehensive income for the year – – (1,011,737) 123,159,541 122,147,804

Dividend paid – – – (47,138,462) (47,138,462)

Balance as at 31 March 2019 293,802,200 25,000,000 (7,569,675) 484,085,890 795,318,415


Profit for the year – – – 173,378,064 173,378,064

Other comprehensive income (Net of tax) – – (1,029,822) (4,985,887) (6,015,709)

Total comprehensive income for the year – – (1,029,822) 168,392,177 167,362,355


Company Statedcapital

LKR

Capital redemption

reserveLKR

FVOCI

LKR

Retained earnings/ (accumulated

losses)

LKR

Total equity

LKR


Loss for the year – – – (32,824,882) (32,824,882)

Other comprehensive expenses (Net of tax) – – (1,011,737) 6,865,103 5,853,366

Total comprehensive income for the year – – (1,011,737) (25,959,779) (26,971,516)

Dividend paid – – – (47,138,462) (47,138,462)



Loss for the year – – – (67,543,698) (67,543,698)

Other comprehensive income (Net of tax) – – (1,029,822) (5,074,654) (6,104,476)

Total comprehensive income for the year – – (1,029,822) (72,618,352) (73,648,174)

Balance as at 31 March 2020 293,802,200 25,000,000 (8,599,497) (48,515,926) 261,686,777

NoteCapital redemption reserveCapital redemption reserve built up is equal to the nominal value of the preference shares already redeemed by Millennium Housing Developers PLC.



STATEMENT OF CHANGES IN EQUITY


50

Group Company

For the year ended 31 MarchNote

2020LKR

2019 LKR

2020LKR

2019 LKR

Cash flows from operating activities

Profit/(loss) before tax 172,015,798 157,963,738 (66,816,901) (31,839,759)

Adjustments for:

Depreciation on property, plant and equipment 11 11,349,315 11,974,061 7,861,655 8,473,615

Fair value gain on investment property 12 (2,000,000) (2,500,000) – –

Amortisation on intangible assets 13 1,007,165 998,724 826,129 826,127

Gain on fixed assets disposal 6 (2,314,277) – (2,314,277) –

Depreciation on right-of-use assets 15 4,572,121 – 4,572,121 –

Interest expense 8 21,626,965 14,126,900 1,394,718 1,300,197

Provision for retirement benefit obligation 25 4,818,725 5,913,653 3,654,023 4,591,557

Impairment on investment in subsidiary 14 – – 9,706,109 12,639,668

Provision on due from related parties 19 – – 153,314 55,075

Write off of trade and other receivables 18 13,811,731 15,752,931 14,170,019 13,109,450

Interest Income 8 (4,704,586) (6,181,381) (569,469) (1,164,345)

Operating profit/(loss) before working capital changes 220,182,957 198,048,626 (27,362,559) 7,991,585

Decrease/(increase) in inventories 148,861,106 33,944,827 (117,785,973) 142,462,442

Decrease/(increase) in trade and other receivables 176,222,887 (139,581,235) 43,756,951 (28,852,277)

Decrease/(increase) in amounts due from related companies (2,051,794) (45,257,198) 21,173,194 129,796,866

Increase/(decrease) in trade and other payables (600,398,991) 374,235,193 857,451 (133,498,940)

Increase/(decrease) in amounts due to related companies 217,220 (19,637,257) 87,631,654 80,997,124

Cash generated from operations (56,966,615) 401,752,956 8,270,718 198,896,800

Income tax paid 9 (4,891,158) (35,449,036) (12,174) (33,824)

Gratuity paid 25 (4,140,474) (5,934,305) (3,634,584) (5,261,745)

Interest paid 8 (19,724,054) (14,126,900) (70,988) (1,300,197)

Net cash flow generated from (used in) operating activities (85,722,301) 346,242,715 4,552,972 192,301,034

Cash flows from investing activities

Purchase of property, plant and equipment 11 (881,174) (2,670,373) (512,251) (1,356,753)

Purchase of intangible assets 13 (80,000) (15,000) (50,000) –

Sales proceeds from sale of motor vehicle 6 2,314,277 – 2,314,277 –

Interest received 8 4,704,586 6,181,381 569,469 1,164,345

Cash generated from/(used in) investing activities 6,057,689 3,496,008 2,321,495 (192,408)

Cash flows from financing activities

Loans obtained 23 152,000,000 124,162,500 – –

Re-payment of borrowings 23 (70,293,299) (416,635,301) – (141,750,650)

Dividend paid – (47,138,462) – (47,138,462)

Lease rentals paid 23 (10,101,252) (1,339,217) (6,204,944) (1,339,217)

Cash generated from financing activities 71,605,449 (340,950,480) (6,204,944) (190,228,329)

Net increase/(decrease) in cash and cash equivalents (8,059,163) 8,788,243 669,523 1,880,297

Cash and cash equivalents at the beginning of the year (7,457,856) (16,246,099) 6,516,192 4,635,895

Cash and cash equivalents at the end of the year 20 (15,517,019) (7,457,856) 7,185,715 6,516,192



STATEMENT OF CASH FLOWS


51

1. CORPORATE INFORMATION

1.1 Domicile and legal formMillennium Housing Developers PLC (the Company) is a public listed company incorporated and domiciled in Sri Lanka. The Registered Office of the Company is situated at No. 28, Dr Lester James Peiris Mawatha, Colombo 05.

The Consolidated Financial Statements of Millennium Housing Developers PLC for the year ended 31 March 2020 comprises the Company and its subsidiaries (together referred to as “Group”).

All the subsidiaries of the Group are limited liability companies, incorporated and domiciled in Sri Lanka.

1.2 Principal activities and nature of operationThe principal activities of the Company and its subsidiaries are construction and sale of constructed houses, land sales and apartments.

1.3 Parent company and ultimate parent companyThe Company does not have identifiable parent on its own. However, one Director in Nawaloka Holdings and one company in Nawaloka Holdings, Ceyoka Private Limited collectively hold more than 50% of stated capital.

This is the first set of the Annual Financial Statements in which SLFRS 16, Leases has been applied. Changes to significant accounting policies are described in Note 3.

2. BASIS OF PREPARATION

2.1 Statement of complianceThe Consolidated Financial Statements have been prepared in accordance with Sri Lanka Accounting Standards (SLFRS/LKAS) issued by The Institute of Chartered Accountants of Sri Lanka and the requirements of the Companies Act No. 07 of 2007 and the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995.

The Financial Statements were authorised for issue by the Company’s Board of Directors on 17 November 2020.

2.2 Going concernIn light of ongoing COVID-19 situation, the Group/Company has assessed its going concern and a summarised disclosure of its assessment is provided below. With the onset of COVID-19 in Sri Lanka and the consequent business and movement restrictions, the Group's/Company's operations were affected starting from the second half of March 2020.

The pandemic and the subsequent measures adopted in containing the spread of the virus has heightened the level of uncertainty across the Sri Lankan economy and has impacted all aspects of operations resulting in a challenging environment to the real estate and construction industry in the country, especially adapting to the new normalcy Post COVID to shifts in customer behaviour and expectations; restricted working environments within social distancing, sustainability of employees, supply chain restrictions and embargos and most importantly the financial influence in terms of debt recovery, borrowing and moratorium grants.

Further outbreak of the pandemic has increased the uncertain estimates used in the preparation of the Financial Statements. The extent and the duration of the spread of the virus and economic downturn due to the pandemic will impact to the level of uncertainty. The impact of the pandemic on accounting estimates where necessary is further listed under the relevant notes to these Financial Statements.

2.3 Basis of measurementThe Financial Statements of the Group/Company are prepared and presented on the historical cost basis except for the following material items in the Statement of Financial Position:

By employee defined benefit obligation is measured based on actuarial valuation LKAS 19.

By financial assets and financial liabilities that have been measured at fair value SLFRS 9.

By investment property that has been measured at fair value LKAS 40.

2.4 Functional and presentation currencyThe Consolidated Financial Statements are presented in Sri Lankan Rupees, which is also the Group's/Company's functional currency. These Financial Statements are presented in Sri Lanka Rupees (LKR), unless stated otherwise.

NOTES TO THE FINANCIAL STATEMENTS


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2.5 Use of estimates and judgementsThe preparation of the Financial Statements in conformity with Sri Lanka Accounting Standards (SLFRS and LKAS) requires Management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future period affected. Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the Financial Statements are included in the respective Notes.

Judgements, estimates and assumptions made by Management in preparing of these Financial Statements are described in following Notes:

Accounting policies Note

Revenue recognition 4.10.1

Impairment of financial assets 4.2

Current tax and deferred tax 4.10.6

Useful time of property, plant and equipment 4.3.3

Provision of impairment of trade receivable 4.2

Employee benefits 4.8

Right or use assets 4.3.4

2.6 Transactions in foreign currenciesAll transactions in foreign currencies are translated at the rate of exchange prevailing at the time the transaction was affected. All monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date.

Non-monetary assets and liabilities which are carried in terms of historical cost denominated in foreign currencies are translated using the exchange rate at the date of transaction. The resulting gains or losses on translations are dealt within the Statement of Profit or Loss and Other Comprehensive Income.

2.7 Comparative informationThe presentation and classification of the Financial Statements of the previous years have been amended/restated, where relevant for better presentation and to be comparable with those of the current year.

3. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES AND DISCLOSURESThe Group/Company initially adopted SLFRS 16 Lease from 1 April 2019. SLFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right of use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low value items. Lessor accounting remains similar to the current standard (LKAS 17 Leases) – i.e. lessors continue to classify leases as finance or operating leases.

The Group/Company applied SLFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is not recognised in retained earnings at 1 April 2019. Accordingly, the comparative information presented for 2019 is not restated – i.e. it is presented, as previously reported, under LKAS 17 and related interpretations. The details of the changes in accounting policies are disclosed below. Additionally, the disclosure requirements in SLFRS 16 have not generally been applied to comparative information.

(a) Definition of a Lease Previously, the Group determined at contract inception whether an arrangement is or contains a lease under IFRIC 4 Determining whether an arrangement contains a Lease. The Group now assesses whether a contract is or contains a lease based on the definition of a lease according to SFLRS 16.

On transition to SLFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transaction are leases. It applied SLFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under LKAS 17 and IFRIC 4 were not reassessed for whether there is a lease under SLFRS 16. Therefore, the definition of a lease under SLFRS 16 was applied only to contracts entered into or changed on or after 1 April 2019.

(b) As a lesseeThe Group/Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Group/Company. Under SLFRS 16, the Group/Company recognises right-of-use assets and lease liabilities for leases – i.e. these leases are on-balance sheet.

At commencement or on modification of a contract that contains a lease component, the Group/Company allocates the consideration in the contract to each lease component on the basis of its relative stand-alone price.

However, for leases of property the Group/Company has elected not to separate non-lease components and account for the lease and associated non-leases components as a single lease component.

(i) Leases Classified as Operating Leases Under LKAS 17

Previously, the Group/Company classified property lease as operating leases under LKAS 17, where the lease payments are recognised as an operating expense in the Statement of Comprehensive Income on a straight-line basis over the lease term. At transition, the lease liability and the right-of-use asset arising from the leases were measured at the present value of the remaining lease payments, discounted at the Group's/Company's incremental borrowing rate as at 1 April 2019.

Right-of-use of assets are measured an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments: The Group/Company has applied this approach to all other leases.


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The Group/Company measures a financial asset at amortised cost if it meets both conditions required by the standard. As well as debt investment is measured at FVOCI if it meets both the conditions required by the standard.

On the initial recognition an equity investment that is not held for trading, the Group/Company may irrevocably elect to present subsequent changes in the investment fair value in OCI. This election is made on an investment by investment basis.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivatives financial assets. On initial recognition, the Group/Company may irrevocably designate the financial assets that otherwise mean mix the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminate or significantly reduces an accounting mismatch that would otherwise arise.

Financial liabilityFinancial liabilities are classified as measured at amortised cost of FVTPL. Financial liability is classified as FVTPL if it is classified as held for trading, is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense is recognised in profit or loss.

(c) Derecognition

Financial assetsThe Group/Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial assets are transferred or in which the Group/Company neither transfers nor retain substantially all of the risks and rewards of ownership and does not retain control of the financial assets.

Financial liabilityThe Group/Company derecognises the financial liability when its contractual obligation is discharged or cancelled or expired. The Group/Company also derecognises financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified term is recognised at fair value.

OffsettingFinancial assets and financial liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Group/Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

The Group/Company used a number of practical expedients when applying SLFRS 16 to leases previously classified as operating leases under LKAS 17. In particular, the Group/Company:

– did not recognised right-of-use assets and liabilities for leases for which the lease term ends within 12 months of the date of initial application;

– did not recognise right-of-use assets and liabilities for leases of low value assets;

– excluded initial direct costs from the measurement of the right-of-use asset at the date of initial application; and

– used hindsight when determining the lease term.

(d) Impact on financial statementsOn transition to SLFRS 16, the Group/Company recognised additional right-of-use assets, and additional lease liabilities. The impact on transition is summarised below.

1 April 2019LKR

Right-of-use assets presented in Note 15 and 17 23,136,049

Lease liabilities 23,136,049

Retained earnings –

When measuring lease liabilities for leases that were classified as operating leases, the Group/Company discounted lease payments using its incremental borrowing rate as at 1 April 2019. The incremental borrowing rate applied is 11%.

1 April 2019LKR

Discounted using the incremental borrowing rate as at 1 April 2019 23,136,049

Lease liabilities recognised as at 1 April 2019 23,136,049

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4.1 Financial instruments

(a) Recognition and initial measurementThe Group/Company initially recognises trade receivable and debt securities issued when they are originated. Loans and receivables and deposits on the date that they originated. All other financial assets and financial liabilities are recognised initially on the trade date at which the Group/Company becomes a party to the contractual provisions of the instrument.

(b) Classification and subsequent measurementFinancial assetsOn initial recognition, the financial assets is classified as measured at; amortised cost; FVOCI – debt investment; FVOCI – equity investment; or FVTPL.


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4.2 Impairment

Financial assetsGroup/Company makes impairment for financial assets measured at amortised cost, debt investments measured at FVOCI and contract assets.

The Group measures loss allowances at an amount equal to lifetime ECLs, except for other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition which are measured as 12-month ECLs.

Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime ECLs as per the simplified approach. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group's/Company's historical experience and informed credit assessment an including forward-looking information.

Measurement of ECLsECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group/Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

Presentation of allowance for ECL in the Statement of Financial PositionLoss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

Non-financial assetsThe carrying amounts of the Group's/Company's non-financial assets other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risk specific to the asset, or the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).

The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amounts of other assets in the unit (group of units) on a pro rata basis. Impairment losses recognised in prior are assessed at each reporting date for any indicators that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

4.3 Property, plant and equipmentItems of property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

The cost of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use.

This also includes costs of dismantling and removing the items and restoring the site on which they are located.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment which can be measured reliably. All other costs are recognised in the Statement of Comprehensive Income as an expense as incurred.

4.3.1 Subsequent expenditureThe Group/Company recognises in the carrying amount of an item of property, plant and equipment the costs of replacing part of an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group/Company and the cost of the item can be measured reliably. All other costs are recognised in the Statement of Comprehensive Income as expenses as incurred.

4.3.2 DerecognitionThe carrying amount of an item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised at net within “other income” in profit or loss.


55


4.3.3 DepreciationDepreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component. Depreciation is not provided on freehold land and assets under construction. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group/Company will obtain ownership by the end of the lease term. Land is not depreciated.

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised.

The estimated useful lives are as follows:

Class of assets Useful lifetimeyears

Building 5

Motor vehicles 5

Furniture and fittings 5

Generator 5

Air conditioner and installation 5

Office equipment 5

Play equipment 5

Computers 4

4.3.4 Leased assetsThe Group/Company has applied SLFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under LKAS 17 and IFRIC 4. The details of accounting policies under LKAS 17 and IFRIC 4 are disclosed separately.

Policy applicable from 1 April 2019At inception of a contract, the Group/Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group/Company uses the definition of a lease in SLFRS 16.

This policy is applied to contracts entered into, on or after 1 April 2019.

i. As a lessee

At commencement or on modification of a contract that contains a lease component, the Group/Company allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Group/Company has elected not to separate non-lease components and account for the lease and non-lease component as a single lease component.

The Group/Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The Group/Company determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased. Lease payments included in the measurement of the lease liability comprise the following:

– Fixed payments, including in-substance fixed payments;

– Variable lease payments that depends on an index or a rate, initially measured using the index or rate as at the commencement date;

– Amounts expected to be payable under a residual value guarantee; and

– The exercise price under a purchase option that the Group/Company is reasonably certain to exercise, lease payments in an optional renewal period if the Group/Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group/Company is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is re-measured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's/Company's estimate of the amount expected to be payable under a residual value guarantee, or if the Group/Company changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.


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Short-term leases and leases of low-value assetsThe Group/Company has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group/Company recognises the lease payments associated with these lease as an expense on straight line basis over the lease term.

ii. As a lessor

When the Group/Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, the Group/Company makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group/Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

If an arrangement contains lease and non-lease components, then the Group applies SLFRS 15 to allocate the consideration in the contract.

Policy applicable before 1 April 2019For contracts entered into before 1 April 2019, the Group/Company determined whether the arrangement was or contained a lease based on the assessment of whether,

– fulfillment of the arrangement was dependent on the use of a specific asset or assets; and.

– the arrangement had conveyed a right-of-use asset. An arrangement conveyed the right to use the asset if one of the following was met.

– the purchaser had the ability or right to operate the asset while obtaining or controlling more than an insignificant amount of the output;

– the purchaser had the ability or right to control physical access to the asset while obtaining or controlling more than an insignificant amount of the output; or

– facts and circumstances indicated that it was remote that other parties would take more than an insignificant amount of the output, and the price per unit was neither fixed per unit of output nor equal to the current market price per unit of output.

i. As a lessee

In the comparative period, as a lessee the Group/Company classified leases that transferred substantially all of the risks and rewards of ownership as finance leases. When this was the case, the leased assets were measured initially at an amount equal to the lower of their fair value and present value of the minimum lease payments. Minimum lease payments were the payments over the lease term that the lessee was required to make, excluding any contingent rent. Subsequent to initial recognition, the assets were accounted for in accordance with the accounting policy applicable to that asset.

Assets held under other leases were classified as operating leases and were not recognised in the Group's/Company's statement of financial position. Payments made under operating leases were recognised in profit or loss in a straight line basis over the term of the lease. Lease incentives received were recognised as an integral part of the total lease expense, over the term of the lease.

ii. As a lessor

When the Group/Company acted as a lessor, it determined at lease inception whether each lease was a finance lease or an operating lease.

To classify each lease, the Group/Company made an overall assessment of whether the lease transferred substantially all of the risks and rewards incidental to ownership of the underlying asset. If this was the case, then the lease was a finance lease; if not, then it was an operating lease. As part of this assessment, the Group/Company considered certain indicators such as whether the lease was for the major part of the economic life of the asset.

4.4 Investment propertyInvestment property, principally comprise freehold land and building held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at cost on initial recognition and subsequently at fair value with any change therein recognised in profit or loss.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investments property includes the cost of materials and direct labour, any other costs directly attributable to bring the investment property to a working condition for their intended use and capitalised borrowing costs. Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.

When an investment property that was previously classified as property, plant and equipment is sold, any related amount included in the revaluation reserve is transferred to retained earnings.

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

Investment property is carried at fair value determined annually by an external, independent property valuer. A gain or loss arising from a change in the fair value of investment property is recognised in profit or loss for the period in which it arises.


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4.5 Intangible assetsAll software licensed for the use of the Group/Company, not constituting an integral part of related hardware are included in the Statement of Financial Position under the category intangible assets and carried at cost less accumulated amortisation and any impairment losses.

The initial acquisition cost comprises license fee paid at the inception, import duties, non-refundable taxes and levies, cost of customising the software to meet the specific requirements of the Group/Company and other directly attributable expenditure in preparing the assets for its intended use. All software acquired is amortised over a period of four years.

4.6 Assets held for saleNon-current assets, or disposal groups comprising assets and liabilities, are classified as held for sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use. Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less cost to sell. Any impairment loss on the disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets or investment property, which continue to be measured in accordance with the Group/Company other accounting policies. Impairment losses on initial classification as held for sale and subsequent gain and losses on pre-measurement are recognised in profit or loss.

4.7 InventoriesInventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price less estimated cost of completion and estimated costs necessary to make to the sale. The cost of inventories is based on the weighted average cost principle.

Cost incurred in bringing inventories to its present location and condition, are accounted for as follows:

4.7.1 Raw materialRaw material stock is valued at lower of cost and net realisable value.

4.7.2 Work-in-progressWork-in-progress represents the cost of partly constructed houses and the cost of other infrastructure facilities incurred as at the reporting date.

4.7.3 Finish goodsFinished goods include the fully completed houses which are not sold as at the balance sheet date. These are valued at cost of construction plus attributable over heads.

4.8 Employee benefits

(a) Defined contribution plansA defined contribution plan is a post-employment benefit plan under which contributions are made into a separate fund and the entity will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plan are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

Defined contribution plans – EmployeesEmployees Provident Fund and Trust Fund

All employees who are eligible for Employees’ Provident Fund contribution and Employees’ Trust Fund contribution are covered by relevant contribution funds in line with respective statutes and regulations. The Group/Company contributes 12% and 3% of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively.

(b) Defined benefit plan – GratuityA defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Retiring gratuity.

The Retirement Benefit Plan adopted is as required under the Payment of Gratuity Act No. 12 of 1983. This item is grouped under Retirement Benefit Obligation in the Statement of Financial Position. However, under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of five years of continued service. The Company and Group has adopted Sri Lanka Accounting Standard 19 on “Employee Benefits”.

Defined benefit plans define an amount of benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the Statement of Financial Position in respect of defined benefit plans is the present value of the defined benefit obligation at the reporting date, then deducting the fair value of any plan assets. The discount rate is the yield at the reporting date on Government Bonds that have maturity dates approximating to the terms of the Group/Company obligations. The Group/Company carries out an actuarial valuation of the gratuity fund in March each year (from this year onwards) to ascertain the full liability of fund. The calculation is performed by a qualified actuary using the project unit credit method which is recommended by LKAS 19 – “Employee Benefits”.

The key assumptions used in the computation are stated in the Note 25 to the Financial Statements.

Short-term benefitsShort-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.


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4.9 ProvisionsProvisions are recognised if a result of a past event the Group/Company has a present legal or constructive obligation that can be estimated reliably and it is probable that an outflow of economic benefit will be required to settle the obligation. Provisions and liabilities are recognised in the Statement of Financial Position.

4.10 Statement of Profit or Loss and Other Comprehensive Income

4.10.1 Revenue

Revenue recognitionThe Group/Company is in the business of providing real estate units. Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group/Company expects to be entitled in exchange for those goods or services.

SLFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers.

The Group/Company applied the following judgements that significantly affect the determination of the amount and timing of revenue from contracts with customers:

Determining the timing of satisfaction of performance obligation

In recognising revenue from sale of real estate units, Management applies judgement ascertaining when the control of the good is transferred to the customer. The Group/Company recognises the revenue when the possession of the real estate unit is passed to the customer or at the time of notice of possession is given as it is the point in time that control is passed.

Houses

The income from sale of houses and extra works are recognised when the Group/Company satisfies a performance obligation by transferring a promised good or service to a customer on which the customer obtains control of the asset as per the SLFRS 15. It is deemed to have been transferred when the sale agreement is signed between the buyer and the Group/Company, substantial construction of the house is completed and possession is given or notice of possession has been send to customer which proved the commercial viability of the customer.

Land

The income from sale of land is recognised as per the SLFRS 15 when the Group/Company satisfies a performance obligation by transferring a promised good or service to a customer on which the customer obtains control of the asset. It is deemed to have been transferred when the sale agreement is signed between the buyer and the Group/Company and possession is given or notice of possession has been send to customer which proved the commercial viability of the customer.

Significant financial component

A contract with a customer would not have a significant financing component if the difference between the promised consideration and the cash selling price of the good or service arises for reasons other than the provision of finance to either the customer or the entity, and the difference between those amounts is proportional to the reason for the difference. As there is no major change between the amount of promised consideration and the cash selling price of the promised real estate unit, the Group/Company does not recognise the financial component.

4.10.2 Finance income and expensesFinance income comprises interest income on easy payment loans granted and interest on fixed deposits and related party receivables, and finance expenses comprise interest expense on borrowings.

Interest income is recognised as it accrues in profit or loss using effective interest method.

Finance expenses comprise interest expense on borrowings.

4.10.3 Other incomeOther income comprises dividend income, fair value gain from revaluation of investment property, gains on the disposal of financial assets held at FVOCI. Other income is recognised as it accrues in profit or loss on the date that the Group’s right to receive payment is established.

4.10.4 Expenditure recognition

(a) All expenditure incurred in running of the business and in maintaining the property, plant and equipment in a state of efficiency has been charged to revenue in arriving at the profit for the year.

(b) or the purpose of presentation of Statement of Comprehensive Income, the Directors are of the opinion that the function of expenses method presents fairly the elements of the enterprise’s performance, hence such presentation method is adopted.

4.10.5 Borrowing costsBorrowing costs are recognised as an expense in the period in which they are incurred, except to the extent that they are directly attributable to the acquisition, construction or production of a qualifying asset, in which case they are capitalised as part of the cost of that asset.

4.10.6 Income tax expenseIncome tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity or other comprehensive income.


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(a) Current taxCurrent tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividend.

(b) Deferred taxDeferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Income tax expense for the year comprises current and deferred tax. Income tax is recognised in the Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

4.11 Earnings per shareThe Group/Company presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

4.12 Related party transactionsDisclosure has been made in respect of the transactions in which one party has the ability to control or exercise significant influence over the financial and operating policies/decisions of the other, irrespective of whether a price is being charged.

Temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future.

4.13 Cash Flow StatementThe Cash Flow Statement is prepared under the Indirect Method. Interest paid is classified as operating cash flows whereas interest received and dividend received are classified as investing cash flows.

4.14 Events after the reporting dateAll material events after the reporting date have been considered and where appropriate adjustments or disclosures have been made in the Financial Statements.

4.15 Commitments and contingenciesCommitments and contingencies as at the reporting date are disclosed in the Financial Statements.

4.16 Operating segmentThe Group’s/Company’s operations are solely selling of real estate units (houses, lands and apartments). The operations of the Group/Company are looked at as a single operating segment.

The Chief Operating Decision Maker (CODM) of the Group/Company is the Chief Executive Officer (CEO). The CEO considers the performance of the Group/Company as a whole considering the total operations of the Group/ Company as one segment in assessing the performance of the Group/Company and making decisions about the resource allocation within the Organisation.

4.17 New accounting standards/amendments issued but not effective as at the reporting dateThe Institute of Chartered Accountants of Sri Lanka has issued the following new amendments to the Sri Lanka Accounting Standards which will become applicable for financial periods beginning after the current financial year. Accordingly, these Standards have not been applied in preparing these Financial Statements and the Group plans to apply these standards if applicable as and when they become effective. The following amendments to the standards are not expected to have a significant impact on the Group’s consolidated financial statements.

i. Amendments to References to Conceptual Framework in SLFRS Standards

ii. Definition of a Business (Amendments to SLFRS 3)

iii. Definition of Material (Amendments to LKAS 1 and LKAS 8)

iv. Interest Rate Benchmark Reform (Amendments to SLFRS 9, LKAS 39 and SLFRS 7)

v. COVID-19-Related Rent Concessions (Amendment to SLFRS 16)

vi. Other annual improvements to the SLFRSs


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5. REVENUE

Group Company

For the year ended 31 March 2020LKR

2019 LKR

2020LKR

2019 LKR

Income from sale of houses 1,272,388,490 992,392,348 31,217,000 228,374,923

Income from sale of land 14,265,000 12,432,568 – –

Income from extra work of houses 7,809,489 – 6,584,522 –

1,294,462,979 1,004,824,916 37,801,522 228,374,923

6. OTHER OPERATING INCOME

Profit on disposal of property, plant and equipment 2,314,277 500,000 2,314,277 500,000

Sundry income 36,467,576 28,212,871 8,367,271 7,225,201

Fair value change in investment property 2,000,000 2,500,000 – –

40,781,853 31,212,871 10,681,548 7,725,201

7. RESULTS FROM OPERATING ACTIVITIESResults from operating activities is stated after charging all expenses including the following;

Director's remuneration 10,850,000 14,538,800 8,150,000 11,813,800

Audit and audit related services

Current year 1,450,000 1,450,000 825,000 825,000

Prior year under provision – 1,582,526 – 1,122,952

Depreciation on property, plant and equipment 11,349,315 11,974,061 7,861,655 8,473,615

Amortisation on intangible assets 1,007,165 998,724 826,129 826,127

Depreciation of right-of-use assets 4,572,121 – 4,572,121 –

Impairment of subsidiary – – 22,345,777 12,639,668

Provision for amount due from related parties 153,314 – 153,314 55,075

Provision for doubtful receivable 15,267,200 12,000,000 15,267,200 12,000,000

Write-off of bad debts – – – 571,650

Personnel costs (Note 7.1) 108,395,995 96,791,659 25,309,614 31,896,466

7.1 Personnel costs

Salaries and wages 90,471,145 76,875,567 19,056,965 21,972,742

Defined contribution plan cost – EPF and ETF 13,106,125 10,869,017 2,598,626 2,866,690

Defined benefit plan cost – Retirement gratuity 4,818,725 5,913,653 3,654,023 4,591,557

Bonus – 3,133,422 – 2,465,477

108,395,995 96,791,659 25,309,614 31,896,466


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8. NET FINANCE INCOME/(COSTS)

Group Company


2019 LKR

2020LKR

2019 LKR

Finance income

Interest on easy payment schemes 38,793 91,010 38,793 69,992

Interest on money market investments 3,995,518 5,088,451 279,638 551,877

Interest on HNB – Fixed deposits 650,275 669,684 231,038 210,240

Interest on customer late payments 20,000 332,236 20,000 332,236

4,704,586 6,181,381 569,469 1,164,345

Finance costs

Overdraft interest 275,195 422,141 – 6,958

Interest on borrowings 17,252,871 13,704,759 – 1,293,239

Interest on lease liabilities 1,973,899 – 1,394,718 –

Default interest 2,125,000 – – –

21,626,965 14,126,900 1,394,718 1,300,197

Net finance costs (16,922,379) (7,945,519) (825,249) (135,852)

9. INCOME TAX EXPENSE Group Company


2019 LKR

2020LKR

2019 LKR

Recognised in the profit or loss

Current income tax (Note 9.2) 562,547 41,152,287 – 1,192,284

Reversal of deferred taxation (Note 24) (1,924,813) 1,887,140 726,797 (207,161)

(1,362,266) 43,039,427 726,797 985,123

Recognised in the other comprehensive income

Reversal of deferred taxation (Note 24) (811,655) 3,200,504 (826,106) 2,930,391

(811,655) 3,200,504 (826,106) 2,930,391

(2,173,921) 46,239,931 (99,309) 3,915,514

9.1 Details of current tax computation

Millennium Housing Developers PLCThe Company has entered into an agreement with the Board of Investment of Sri Lanka (BOI) on 26 November 1998. Under Section 17 of the BOI Law No. 4 of 1978, the Company’s profit has been exempt from income tax for a period of 12 years reckoned from the year of assessment 1999/2000 till 2010/11. After the expiration of the exempt period, the provisions of the Inland Revenue Laws for the time being in force shall apply to the Company in relation to the said business.

Millennium Housing LimitedThe Company has entered into an agreement with the Board of Investment of Sri Lanka (BOI) on 21 May 2003. Under Section 17 of the BOI Law No. 4 of 1978, the Company’s profit will be exempted from income tax for a period of three years reckoned from the year of assessment 2004/05 till 2006/07. After the expiration of the aforesaid tax exemption period, the profits and income of the Company shall be charged at the rate of 10% for a period of two years from the year of assessment 2007/08 till 2008/09. After the expiration of the aforesaid concessionary tax rate of 10%, the profits and income of the Company shall be charged at the rate of 20% for any year of assessment.

Millennium Villa Housing Development LimitedThe Company has entered into an agreement with the Board of Investment of Sri Lanka (BOI) on 12 February 2003. Under Section 17 of the BOI Law No. 4 of 1978, the Company’s profit will be exempted from income tax for a period of three years reckoned from the year of assessment 2004/05 till 2006/07. After the expiration of the aforesaid tax exemption period, the profits and income of the Company shall be charged at the rate of 10% for a period of two years from the year of assessment 2007/08 till 2008/09. After the expiration of the aforesaid concessionary tax rate of 10%, the profits and income of the Company shall for any year of assessment be charged at the rate of 20%.


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Millennium Housing Construction LimitedThe Companies are liable for income tax at the rate of 28% (2013 : 28%) in terms of the provisions of the Inland Revenue Act No. 24 of 2017 and subsequent amendments thereto.

MC Urban Developers LimitedThe Company has entered into an agreement with the Board of Investment of Sri Lanka (BOI) on 10 December 2015. Under Section 17 of the BOI Law No. 4 of 1978, the Company’s profit will be exempted from income tax for a period of five years reckoned from the year starting the commercial operations. After the expiration of the aforesaid tax exemption period, the profits and income of the Company shall be charged at the rate of 10% for a period of two years. After the expiration of the exempt period, the provisions of the Inland Revenue Laws for the time being in force shall apply to the Company in relation to the said business.

MC Universal LimitedThe Company has entered into an agreement with the Board of Investment of Sri Lanka (BOI) on 10 December 2015. Under Section 17 of the BOI Law No. 4 of 1978, the Company’s profit will be exempted from income tax for a period of five years reckoned from the year starting the commercial operations. After the expiration of the aforesaid tax exemption period, the profits and income of the Company shall be charged at the rate of 10% for a period of two years. After the expiration of the exempt period, the provisions of the Inland Revenue Laws for the time being in force shall apply to the Company in relation to the said business.

9.2 Reconciliation of the accounting profit to income tax expense

Group Company

For the year ended 31 March 2020 LKR

2019 LKR

2020 LKR

2019 LKR

Accounting profit before tax 172,015,798 157,963,738 (66,816,901) (31,839,759)

Add: Aggregate disallowed expenses/(income) 42,429,327 48,254,562 38,463,716 44,599,836

Less: Aggregate allowable income/(expenses) (19,753,741) (16,783,226) (12,451,169) (8,501,922)

194,691,384 189,435,073 (40,804,354) 4,258,155

Interest income/other liable income 4,684,586 (10,696,221) 549,469 1,164,345

Exempt income 271,769,991 – – –

Taxable profit/(loss) from business (81,763,192) 178,738,852 (41,353,823) 3,093,810

Other income liable for tax @ 28% and 24% (Note 9.2.1) 562,547 2,994,942 – 326,017

Business income liable for tax @ 14% and 28% – 38,157,345 – 866,267

Income tax expense 562,547 41,152,287 – 1,192,284

9.2.1 Though the legislative process relating to the amendment to law needs to be completed in order for the tax rate to be considered as substantively enacted as at the reporting date, the difference between computing the current tax liability using the proposed rate 24% and the existing 28% amounts to LKR 20,835 for the Group, which have an immaterial impact on the results.

9.3 Accumulated tax losses

Group Company


2019LKR

2020 LKR

2019 LKR

Balance at the beginning of the year 48,038,685 38,360,078 14,843,062 19,859,836

Loss incurred during the year 91,405,736 15,576,687 41,353,823 –

Loss utilised during the year (2,601,079) (5,898,080) (549,469) (5,016,774)

Balance at the end of the year 136,843,341 48,038,685 55,647,416 14,843,062

As at 31 March 2020, a deferred tax asset was not recognised for accumulated tax losses, as it is not probable that taxable profit will be available in the foreseeable future.


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10. BASIC EARNINGS PER SHARE/DIVIDEND PER SHARE

10.1 Basic and diluted earnings/(loss) per shareBasic and diluted earnings/(loss) per share is calculated based on the profit for the year attributable to the equity holders of the Company divided by the weighted average number of ordinary shares outstanding during the year.

Group Company


2019LKR

2020 LKR

2019 LKR

Profit/(loss) attributable to equity holders (LKR) 173,378,064 114,924,311 (67,543,698) (32,824,882)

Weighted average number of ordinary shares 134,681,320 134,681,320 134,681,320 134,681,320

Basic and diluted earnings/(loss) per share (LKR) 1.29 0.85 (0.50) (0.24)

During the year Company has not issued ordinary share and therefore no dilution on earnings/(loss) per share.

10.2 Dividend per shareThe Group/Company has not paid dividend during the year 2019/20. (2018/19 LKR 47,138,462 – Dividend per share LKR 0.35).

11. PROPERTY, PLANT AND EQUIPMENT

11.1 Company

Freeholdland

LKR

Freeholdbuildings

LKR

Office andsite

equipmentLKR

Motorvehicles

LKR

Containers

LKR

Leaseholdmotor

vehiclesLKR

Total

LKR

Cost

Balance as at 1 April 2018 2,724,468 7,331,541 56,900,615 12,102,477 6,746,497 7,075,000 92,880,598

Additions/transfers during the year – – 1,356,753 – – – 1,356,753

Disposals during the year – – – (2,757,850) – – 2,757,850

Balance as at 31 March 2019 2,724,468 7,331,541 58,257,368 9,344,627 6,746,497 7,075,000 91,479,501

Balance as at 1 April 2019 2,724,468 7,331,541 58,257,368 9,344,627 6,746,497 7,075,000 91,479,501

Additions/transfers during the year – – 512,251 3,885,000 – (3,885,000) 512,251

Disposals during the year – – (1,143,850) – – (1,143,850)

Balance as at 31 March 2020 2,724,468 7,331,541 58,769,619 12,085,777 6,746,497 3,190,000 90,847,902

Accumulated depreciation

Balance as at 1 April 2018 – 6,183,892 39,237,040 10,287,229 3,533,696 3,313,750 62,555,607

Charge/transfers for the year – 469,478 4,956,719 748,218 884,200 1,415,000 8,473,615


Balance as at 31 March 2019 – 6,653,370 44,193,759 8,277,597 4,417,896 4,728,750 68,271,372

Balance as at 1 April 2019 – 6,653,370 44,193,759 8,277,597 4,417,896 4,728,750 68,271,372

Charge/transfers for the year – 422,925 4,557,374 4,175,478 884,203 (2,178,325) 7,861,655


Balance as at 31 March 2020 – 7,076,295 48,751,133 11,309,225 5,302,099 2,550,425 74,989,177

Carrying value

Balance as at 31 March 2019 2,724,468 678,171 14,063,609 1,067,030 2,328,601 2,346,250 23,208,129

Balance as at 31 March 2020 2,724,468 255,246 10,018,486 776,552 1,444,398 639,575 15,858,725

Note 01Land owned by the Company depicted in plan No. 2327 Lot No. 01, situated at Piliyandala, Kahapola. Land extent 58 perches.

Note 02 The Right of use on motor vehicles are shown under property, plant and equipment. This includes cost of three motor vehicles. Two motor vehicles (LKR 3,885,000) have been already transferred to owner occupied motor vehicles during the year. The carrying value of LKR 639,575 represents the remaining motor vehicle of which the title will be transferred to the entity upon the expiry of the lease.


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11.1 Group

Freeholdland

LKR

Freeholdbuildings

LKR

Office andsite

equipmentLKR

Playequipment

LKR

Motorvehicles

LKR

Containers

LKR

Leaseholdmotor

vehiclesLKR

Total

LKR

Cost

Balance as at 1 April 2018 2,724,468 11,524,940 73,398,845 222,000 12,102,477 9,936,115 7,075,000 116,983,845

Additions/transfers during the year – – 2,670,373 – – – – 2,670,373


Balance as at 31 March 2019 2,724,468 11,524,940 76,069,218 222,000 9,344,627 9,936,115 7,075,000 116,896,368

Balance as at 1 April 2019 2,724,468 11,524,940 76,069,218 222,000 9,344,627 9,936,115 7,075,000 116,896,368

Additions/transfers during the year – – 881,174 – 3,885,000 – (3,885,000) 881,174

Disposals during the year – – – – (1,143,850) – – 1,143,850

Balance as at 31 March 2020 2,724,468 11,524,940 76,950,392 222,000 12,085,777 9,936,115 3,190,000 116,633,692


Balance as at 1 April 2018 – 9,774,523 44,167,377 222,000 10,287,228 4,386,739 3,313,750 72,151,617

Charge/transfers for the year – 871,323 7,417,396 – 748,218 1,522,124 1,415,000 11,974,061

Disposals during the year – – – – (2,757,850) – – (2,757,850)

Balance as at 31 March 2019 – 10,645,846 51,584,773 222,000 8,277,596 5,908,863 4,728,750 81,367,828

Balance as at 1 April 2019 – 10,645,846 51,584,773 222,000 8,277,596 5,908,863 4,728,750 81,367,828

Charge/transfers for the year – 623,848 7,206,187 – 4,175,478 1,522,127 (2,178,325) 11,349,315

Disposals during the year – – – – (1,143,850) – – 1,143,850

Balance as at 31 March 2020 – 11,269,694 58,790,960 222,000 11,309,224 7,430,990 2,550,425 91,573,293

Carrying value

Balance as at 31 March 2019 2,724,468 879,094 24,484,445 – 1,067,031 4,027,252 2,346,250 35,528,540

Balance as at 31 March 2020 2,724,468 255,246 18,159,432 – 776,553 2,505,125 639,575 25,060,399

Note 01Land owned by the Company depicted in plan No. 2327 Lot No. 01, situated at Piliyandala, Kahapola. Land extent 58 perches.

Note 02The Right of use on motor vehicles are shown under property, plant and equipment. This includes cost of three motor vehicles. Two motor vehicles (LKR 3,885,000) have been already transferred to owner occupied motor vehicles during the year. The carrying value of LKR 639,575 represents the remaining motor vehicle of which the title will be transferred to the entity upon the expiry of the lease.

11.2 Cost of fully-depreciated property, plant and equipment still in use at the reporting date is as follows:

Group Company

For the year ended 31 March 2020 LKR

2019LKR

2020LKR

2019LKR

Freehold buildings 8,190,566 6,706,473 3,997,168 4,998,065

Office and site equipment 47,721,325 31,632,620 46,103,832 30,097,248

Play equipment 222,000 222,000 – –

Motor vehicles 13,286,650 8,361,377 13,286,650 8,361,377

Container 1,896,496 2,155,497 1,896,496 2,155,497

71,317,037 49,077,967 65,284,147 45,612,187


65


12. INVESTMENT PROPERTY

12.1 Reconciliation of carrying amount Group Company

As at 31 March 2020LKR

2019LKR

2020LKR

2019 LKR

Balance at the beginning of the year 52,500,000 50,000,000 – –

Change in fair value 2,000,000 2,500,000 – –

Balance at the end of the year 54,500,000 52,500,000 – –

The investment properties of the Group includes the following, which was valued by chartered valuer Mr D C Sosa on 31 March 2020.

Owning company Location Land in extent 2020LKR

2019LKR

Millennium Housing Limited Athurugiriya 0A-2R-20.0P 54,500,000 52,500,000

54,500,000 52,500,000

Change in fair value is recognised as gain in profit or loss and included in “other income” and gain represent the unrealised amount.

12.2 Measurement of fair valuesThe fair value of investment property was determined by external, independent property valuer, Mr D C Sosa having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued.

The fair value measurement of the investment property has been categorised as a Level 3 fair value based on the inputs to the valuation techniques are used (Note 31).

12.3 Valuation techniques and significant unobservable inputs

Valuation technique Significant unobservable inputs Inter-relationship between key significant unobservable inputs and fair value measurement

Market comparable method considering evidence of transactional price of similar properties giving further consideration to approximate adjustments based on size, future usage, condition of property and location.

The price per perch for similar properties is within the range of LKR 500,000 and LKR 600,000.

The estimate fair value would increase (decrease) if;- – expected market rental growth were higher (lower);

– development takes place in the surrounding area

12.4 Sensitivity analysis of perch priceThe following table demonstrates the sensitivity to a reasonably possible change in the per perch price in the investment property value measurement.

Comprehensive incomeincrease/(decrease)

LKR

Investment propertyincrease/(decrease)

LKR

Increase in per perch price (10%) 5,000,000 5,000,000

Decrease in per perch price (10%) (5,000,000) (5,000,000)

13. INTANGIBLE ASSETS Group Company


2019LKR

2020LKR

2019LKR

Cost


Additions during the year 80,000 15,000 50,000 –

Balance as at end of the year 4,512,394 4,432,394 3,784,507 3,734,507

Accumulated amortisation


Charge for the year 1,007,165 998,724 826,129 826,127

Balance as at end of the year 4,045,298 3,038,133 3,418,191 2,592,062

Balance as at 31 March 467,096 1,394,261 366,316 1,142,445

The intangible assets represent cost of acquisition of computer software.


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14. INVESTMENTS IN SUBSIDIARIES

Group Company

As at 31 March 2020 LKR

2019 LKR

2020 LKR

2019 LKR

Millennium Housing Limited – – 25,010,000 25,010,000

Millennium Villa Housing Development Limited – – 132,460,000 132,460,000

Millennium Housing Construction Limited – – 3,500,000 3,500,000

MC Urban Developers Limited – – 75,000,000 75,000,000

MC Universal Limited – – 75,000,000 75,000,000

– – 310,970,000 310,970,000

Less: Provision for impairment (Note 14.1) – – (25,845,777) (16,139,668)

– – 285,124,223 294,830,332

14.1 Provision for impairment

Balance as at the beginning of the year – – 16,139,668 3,500,000

Provision made during the year – – 9,706,109 12,639,668

Balance as at 31 March – – 25,845,777 16,139,668

MC Universal Limited has been impaired LKR 9,706,109 during the year 2019/20 (2018/19 LKR 12,639,668) due to accumulated losses.

14.2 Investments in subsidiaries

Name of the Company Name of business Location Ownershippercentage

%

Carrying value

LKR

Millennium Housing Limited (MHL) Property development Ja-Ela/Piliyandala/Seeduwa

100 25,010,000

Millennium Villa Housing Development Limited (MVHDL) Property development Ja-Ela 100 132,460,000

Millennium Housing Construction Limited (MHCL) Construction Ja-Ela 100 –

MC Urban Developers Limited (MCUDL) Property development Kirillapone 100 75,000,000

MC Universal Limited (MCUL) Property development Rajagiriya 100 52,654,223

285,124,223

Summarised information of subsidiary companies of the Group

MHL LKR

MVHDLLKR

MHCLLKR

MC Urban LKR

MC UniversalLKR

Revenue – 77,361,407 – 1,165,035,050 14,265,000

Profit/(loss) after tax 740,591 (34,969,156) (216,880) 272,158,522 (6,650,735)

Other comprehensive income/(expenses) 607,213 (518,446) – – –

Total comprehensive income/(expenses) 1,347,804 (35,487,602) (216,880) 272,158,522 (6,650,735)

Total comprehensive income

Attributable to non-controlling interests – – – – –

Attributable to the Group 1,347,804 (35,487,602) (216,880) 272,158,522 (6,650,735)

1,347,804 (35,487,602) (216,880) 272,158,522 (6,650,735)


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Summary of the Statement of Financial Position of subsidiary companies

MHL LKR

MVHDLLKR

MHCLLKR

MC Urban LKR

MC UniversalLKR

Non-current assets 92,278,885 7,289,436 – 754,827 994,500

Current assets 385,297,359 538,310,833 5,366,828 1,606,960,799 534,367,439

Total assets 477,576,243 545,600,269 5,366,828 1,607,715,626 535,361,939

Non-current liabilities 122,718,246 2,684,193 – 289,875,000 –

Current liabilities 137,536,411 174,705,167 18,589,804 926,163,767 491,976,567

Total liabilities 260,254,657 177,389,359 18,589,804 1,216,038,767 491,976,567

Net assets

Attributable to non-controlling interests – – – – –

Attributable to the Group 217,321,586 368,210,910 (13,222,976) 391,676,859 43,385,373

217,321,586 368,210,910 (13,222,976) 391,676,859 43,385,373

Summary of the Statement of Cash Flows of subsidiary companies

MHL LKR

MVHDLLKR

MHCLLKR

MC Urban LKR

MC UniversalLKR

Net cash inflow/(outflow) from operating activities (7,063,930) (16,471,295) – (100,008,579) 29,372,225

Net cash inflow/(outflow) from investing activities 1,547,682 746,099 – (15,000) 153,453

Net cash inflow/(outflow) from financing activities – – – 122,781,870 (39,771,209)

Net increase/(decrease) of cash and cash equivalents (5,516,248) (15,725,196) – 22,758,291 (10,245,531)

15. RIGHT OF USE ASSETSThe right of use of assets includes the lease of the office premises by the Group/Company.

Group Company


2019LKR

2020LKR

2019LKR

Cost

Balance as at beginning of the year – – – –

SLFRS 16 adjustments 13,974,460 – 13,974,460 –

Additions to right-of-use assets during the year – – – –

Balance as at end of the year 13,974,460 – 13,974,460 –


As at the beginning of the year – – – –

(+) Amortisation for the year 4,572,121 – 4,572,121 –

Balance as at the end of the year 4,572,121 – 4,572,121 –

Carrying amount 9,402,339 – 9,402,339 –

16. INVESTMENT IN PREFERENCE SHARES

Group Company

As At 31 March 2020LKR

2019LKR

2020LKR

2019 LKR

Investment in preference shares (Note 16.1) – – – –

– – – –

16.1 Investment in preference shares

Tropical Foliage and Flowers Limited 2,500,000 2,500,000 2,500,000 2,500,000

Less: Provision for impairment (2,500,000) (2,500,000) (2,500,000) (2,500,000)

– – – –


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16.2 FINANCIAL ASSETS – FVOCI

Group Company

As at 31 March 2020 2019 2020 2019

Cost

LKR

Marketvalue/

Fair valueLKR

Cost

LKR

Marketvalue/

Fair valueLKR

Cost

LKR

Marketvalue/

Fair valueLKR

Cost

LKR

Market value/

Fair valueLKR

Seraka Investment Limited 250,000 – 250,000 – 250,000 – 250,000 –

Ceylinco Investments Limited 125,000 – 125,000 – 125,000 – 125,000 –

Ceylinco Travels and Tours Limited 400,000 – 400,000 – 400,000 – 400,000 –

CEG Holdings (Private) Limited 125,000 – 125,000 – 125,000 – 125,000 –

Ceylinco Profit Sharing Investment Corporation Limited 125,000 – 125,000 – 125,000 – 125,000 –

Ceylinco CISCO Ranawiru Services (Private) Limited 125,000 – 125,000 – 125,000 – 125,000 –

E.Ceylinco Company Limited 87,500 – 87,500 – 87,500 – 87,500 –

IC & CS Software Solution Co. (Private) Limited 50,000 – 50,000 – 50,000 – 50,000 –

The Finance & Guarantee Co. Limited 250,000 – 250,000 – 250,000 250,000 –

Corporate Finance Limited 250,000 250,000 – 250,000 – 250,000 –

Ceylinco Venture Capital Limited 140,000 – 140,000 – 140,000 – 140,000 –

CTV Creation (Private) Limited 40,000 – 40,000 – 40,000 – 40,000 –

Economic Resurgence Association (Private) Limited 1,000,000 – 1,000,000 – 1,000,000 – 1,000,000 –

Ceylinco Niranjan Invention (Private) Limited 37,500 – 37,500 – 37,500 – 37,500 –

Ceylinco Coloured Stone (Private) Limited 1,400,000 – 1,400,000 – 1,400,000 – 1,400,000 –

Ceylinco Cellular Communications (Private) Limited 200,000 – 200,000 – 200,000 – 200,000 –

The Sitar (Private) Limited 65,000 – 65,000 – 65,000 – 65,000 –

People's Realty Limited 29,516 – 29,516 – 29,516 – 29,516 –

Ceylinco Pharmaceuticals Limited 250,000 – 250,000 – 250,000 – 250,000 –

Nation Lanka Promotions Limited 13,000,000 9,350,019 13,000,000 10,379,841 13,000,000 9,350,019 13,000,000 10,379,841

17,949,516 9,350,019 17,949,516 10,379,841 17,949,516 9,350,019 17,949,516 10,379,841

Less: Provision for impairment (7,569,675) – (6,557,938) – (7,569,675) – (6,557,938) –

Less: Loss on fair value changes in equity investment (1,029,822) – (1,011,737) – (1,029,822) – (1,011,737) –

Fair value for equity investment 9,350,019 9,350,019 10,379,841 10,379,841 9,350,019 9,350,019 10,379,841 10,379,841

17. INVENTORIES

Group Company

As at 31 MarchNote

2020LKR

2019LKR

2020LKR

2019 LKR

Raw materials 85,651,759 31,132,777 6,971,834 9,167,995

Work-in-progress 710,795,133 882,193,525 32,304,784 33,046,853

Finished goods – houses 139,458,906 162,414,584 32,375,494 32,752,043

Land 17.2 1,111,337,362 1,120,363,380 129,703,602 8,602,850

Right-of-use assets – Land 17.3 9,161,589 – – –

2,056,404,749 2,196,104,266 201,355,714 83,569,741

Less: Provision for slow-moving inventories 17.1 (926,254) (926,254) (756,072) (756,072)

2,055,478,495 2,195,178,012 200,599,642 82,813,669


69


Group Company

As at 31 MarchNote

2020LKR

2019LKR

2020LKR

2019 LKR

17.1 Provision for slow-moving inventoriesBalance as at the beginning of the year 926,254 926,254 756,072 756,072

Balance as at the end of the year 926,254 926,254 756,072 756,072

17.2 Security offered for term loan facilityLand value – LKR 225.68 Mn. (Sampath Bank – LKR 90 Mn. and LKR 300 Mn. facility – Note 23.1.5, Note 23.1.8)Primary mortgage of land owned by MC Urban Developers Limited depicated in Plan No. 6339A, located at Colombo 05, Narahenpita.

Land value – LKR 369.7 Mn. (Sampath Bank – LKR 347.85 Mn. facility – Note 23.1.7)Primary mortgage of land owned by MC Urban Developers Limited depicated in Plan No. 6335, located at Subuthipura, Battaramulla.

Land value – LKR 211.88 Mn. (Sampath Bank LKR 200 Mn. facility – Note 23.1.9)Primary mortgage of land owned by Millennium Housing Limited depicted in Plan No. 4357 lot 5A and 5B, located at Moragahahena.

17.3 Right-of-use assets – LandThis right of use asset has arised as a result of a lease agreement prevailing between the Board of Investment and the Company. The land is used for construction of houses.

18. TRADE AND OTHER RECEIVABLES

Group Company


2019LKR

2020LKR

2019 LKR

Trade receivables 281,810,865 363,693,320 10,296,280 54,654,559

Other receivables 155,670,542 250,010,974 78,644,772 78,043,444

437,481,407 613,704,294 88,941,052 132,698,003

Less: Provision for impairment (Note 18.1) (46,164,704) (32,352,973) (43,879,511) (29,709,492)

391,316,703 581,351,321 45,061,541 102,988,511

18.1 Provision for impairment

Balance as at the beginning of the year 32,352,973 16,600,042 29,709,492 16,600,042

Provision for trade and other receivable 13,811,731 15,752,931 14,170,019 13,109,450

Balance as at the end of the year 46,164,704 32,352,973 43,879,511 29,709,492

19. AMOUNT DUE FROM RELATED COMPANIES

Group Company


2019LKR

2020LKR

2019 LKR

Millennium Housing Construction Limited – – 15,910,674 15,757,360

MC Universal Limited – – 8,946,689 3,825,821

Millennium Villa Housing Development Limited – – 19,725,876 46,173,252

Koala (Pvt) Ltd. 43,857,976 43,446,399 – –

Nawaloka Agri (Pvt) Ltd. 1,099,314 358,193 – –

Ceyoka Pharmaceuticals (Pvt) Ltd. 481,756 162,401 – –

Ceyoka Engineering (Pvt) Ltd. 1,869,946 1,290,205 715,455 715,455

47,308,992 45,257,198 45,298,694 66,471,888

Less: Provision for impairment (Note 19.1) – – (15,910,674) (15,757,360)

47,308,992 45,257,198 29,388,020 50,714,528


70


Group Company


2019LKR

2020LKR

2019 LKR

19.1 Provision for impairmentBalance as at 1 April – – 15,757,360 15,702,285

Provision/(reversal) for the year – – 153,314 55,075

Balance as at 31 March – – 15,910,674 15,757,360

20. CASH AND CASH EQUIVALENTS

Group Company


2019LKR

2020LKR

2019 LKR

Favourable balances

Cash in hand 5,583,841 17,948,761 5,072,341 5,897,970

Cash at bank 5,629,987 26,165,865 1,904,394 3,685,465

Fixed deposits 7,511,059 6,860,785 2,427,275 2,196,237

18,724,887 50,975,411 9,404,010 11,779,672

Unfavourable balances

Bank overdrafts (34,241,906) (58,433,267) (2,218,295) (5,263,480)

(34,241,906) (58,433,267) (2,218,295) (5,263,480)

Cash and cash equivalents for the cash flows purpose (15,517,019) (7,457,856) 7,185,715 6,516,192

NoteThe Group has been granted an over draft facility which amounts to only LKR 35 Mn.

21. STATED CAPITAL

Group Company


2019LKR

2020LKR

2019 LKR

Ordinary shares (Number of shares 134,681,320) (Note 21.1) 293,802,200 293,802,200 293,802,200 293,802,200

21.1 Ordinary shareHolders of these shares are entitled to dividends declared from time to time and entitled to one vote per share at general meetings of the Company.

22. RESERVES

Group Company


2019LKR

2020LKR

2019 LKR

Capital redemption reserve (Note 22.1) 25,000,000 25,000,000 25,000,000 25,000,000

FVOCI (Note 22.2) (8,599,497) (7,569,675) (8,599,497) (7,569,675)

16,400,503 17,430,325 16,409,503 17,430,325

22.1 Capital redemption reserveCapital redemption reserve built is equal to the nominal value of the preference shares already redeemed by Millennium Housing Developers PLC.

22.2 Fair value through other comprehensive income reserveFair value through other comprehensive income reserve comprises of the cumulative net change in fair value of equity instruments until the investments are derecognised or impaired.


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23. INTEREST-BEARING BORROWINGS

Group Company


2019LKR

2020LKR

2019 LKR

Bank loans (Note 23.1) 727,450,500 645,743,799 – –

Lease liability (Note 23.2) 16,377,999 1,440,290 10,533,537 1,440,290

743,828,499 647,184,089 10,533,537 1,440,290

Amount payable within one year 325,988,836 107,352,089 3,868,874 1,440,290

Amount payable after one year 417,839,663 539,832,000 6,664,663 –

743,828,499 647,184,089 10,533,537 1,440,290

23.1 Bank loans

Hatton National Bank PLC (Note 23.1.1) – 29,323,000 – –

Hatton National Bank PLC (Note 23.1.2) – 211,090 – –

Hatton National Bank PLC (Note 23.1.3) – 10,448,209 – –

Hatton National Bank PLC (Note 23.1.4) – – – –

Sampath Bank PLC (Note 23.1.5) – 3,750,000 – –

Sampath Bank PLC (Note 23.1.6) 4,993,000 14,161,500 – –




727,450,500 645,743,799 – –

23.1.1 Hatton National Bank Loan 01 – LKR 112 Mn. (Interest AWPLR+1%)

Balance as at the beginning of the year 29,323,000 61,327,000 – –

Loan obtained during the year – – – –

Repayments during the year (29,323,000) (32,004,000) – –

Balance at the end of the year – 29,323,000 – –

SecurityPrimary mortgage of land owned by MC Universal Limited, depicted in Plan No. 6241.

23.1.2 Hatton National Bank Loan 01 – LKR 120 Mn. (Interest AWPLR+1.5%)

Balance as at the beginning of the year 211,090 101,211,090 – –


Re-payments during the year (211,090) (101,000,000) – –

Balance at the end of the year – 211,090 – –

SecurityPrimary mortgage of land owned by MC Urban Developers Limited, depicted in Plan No. 3285.




Repayments during the year (10,448,209) (32,751,791) – –




72


Group Company


2019LKR

2020LKR

2019 LKR


Balance as at the beginning of the year – 43,000,000 – –


Repayments during the year – (43,000,000) – –

Balance at the end of the year – – – –


23.1.5 Sampath Bank PLC Loan 01 – LKR 90 Mn. (Interest AWPLR+1.5%)

Balance as at the beginning of the year 3,750,000 26,250,000 – 26,250,000

Loan obtained during the year – 15,000,000 – –

Repayments during the year (3,750,000) (37,500,000) – (26,250,000)


SecurityPrimary Mortgage of land owned by MC Universal Limited depicted in Plan No. 1557.

23.1.6 Sampath Bank PLC Loan 02 – LKR 40 Mn. (Interest AWPLR+2%)


Loan obtained during the year – 19,162,500 – –

Repayments during the year (9,168,500) (29,164,500) – (24,163,500)


SecurityPrimary mortgage of land owned by MC Urban Developers Limited, depicted in Plan No. 6339A.

23.1.7 Sampath Bank PLC Loan 02 – LKR 347.85 Mn. (Interest AWPLR+2%)



Repayments during the year (17,392,500) – – –


SecurityPrimary mortgage of land owned by MC Urban Developers Limited, depicted in Plan No. 6335.



Loan obtained during the year 152,000,000 90,000,000 – –

Repayments during the year – (91,337,150) – (91,337,150)


SecurityPrimary mortgage of land owned by MC Urban Developers Limited, depicted in Plan No. 6339A.


73


Group Company


2019LKR

2020LKR

2019 LKR




Repayments during the year – (49,877,860) – –


SecurityPrimary mortgage of land owned by Millennium Housing Limited, depicted in Plan No. 4357 lot 5A and 5B.

23.2 Lease liability

Finance lease liability (Note 23.2.1) 115,663 1,440,290 115,563 1,440,290

Operating lease liability (Note 23.2.2) 16,262,336 – 10,417,874 –

16,377,999 1,440,290 10,533,357 1,440,290

23.2.1 Finance lease liability

Balance as at the beginning of the year 1,440,290 2,779,507 1,440,290 2,779,507

Lease obtained during the year – – – –

Repayments during the year (1,324,627) (1,339,217) 1,324,627 (1,339,217)

Balance as at end of the year 115,663 1,440,290 115,663 1,440,290

23.2.2 Operating lease liabilityThe carrying amounts of lease liability (included under current and non current liabilities) and its movements during the year.

Balance as at beginning of the year – – – –

SLFRS 16 adjustments 23,136,049 – 13,974,460 –

Accretion of interest 1,902,912 – 1,323,730 –

Payments during the year (8,776,625) – (4,880,317) –

Balance as at end of the year 16,262,336 – 10,417,874 –

24. DEFERRED TAX ASSET/(LIABILITY)

Group Company


2019LKR

2020LKR

2019 LKR

Balance as at 1 April (429,158) 4,658,486 1,859,164 4,582,394

Recognised in the profit and loss

Charge/(reversal) during the year 1,924,813 (1,887,140) (726,797) 207,161

Recognised in other comprehensive income

Charge/(reversal) during the year 811,655 (3,200,504) 826,106 (2,930,391)

Balance as at 31 March (Note 24.1) 2,307,310 (429,158) 1,958,473 1,859,164


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24.1 The provision for deferred tax of the Group and Company is attributable to the followings:

2020 2019

Temporary difference

LKR

Tax effect

LKR

Temporarydifference

LKR

Tax effect

LKR

Group

On property, plant and equipment (14,896,420) (2,085,499) (16,486,927) (4,138,498)

On retirement benefit obligation 25,945,783 3,632,410 19,469,988 5,319,440

On fair value of investment property (2,000,000) (200,000) (16,101,000) (1,610,100)

On right-of-use assets (9,402,339) (1,316,328) – –

On lease liability 16,262,335 2,276,727 – –

15,909,359 2,307,310 (13,117,939) (429,158)

Company

Property, plant and equipment (8,869,782) (1,241,770) (9,283,274) (2,599,317)

Retirement benefit obligation 21,843,344 3,058,069 15,923,145 4,458,481

On right-of-use assets (9,402,339) (1,316,328) – –

On lease liability 10,417,873 1,458,502 – –

13,989,096 1,958,473 6,639,871 1,859,164

25. RETIREMENT BENEFIT OBLIGATION

Group Company


2019LKR

2020LKR

2019 LKR

Balance as at 1 April 19,469,988 30,926,374 15,923,145 26,388,827

Recognised in profit and loss

Current service cost 2,677,028 3,214,121 1,902,478 2,266,293

Interest cost 2,141,697 2,699,532 1,751,545 2,325,264

Recognised in other comprehensive income

Actuarial gain/(loss) 5,797,542 (11,435,734) 5,900,760 (9,795,494)

Payments made during the year (4,140,474) (5,934,305) (3,634,584) (5,261,745)

Balance as at 31 March 25,945,781 19,469,988 21,843,344 15,923,145

The cost of the defined benefit plan are determined using actuarial valuation and it involves making various assumptions, these include the determination of the discount rate, future salary increases, staff turnover, and retirement age (monthly in service). Due to that complexity involved in the valuation and its long-term nature, a defined obligation is highly sensitive to change in these assumptions. All assumptions are reviewed at each reporting date.

An independent actuarial valuation of the retirement benefit obligation was carried out as at 31 March 2020 by Mr Priyal S Goonetilleke, Ms Piyal S Goonetilleke and Associates, a firm of professional actuaries.

The valuation method used by the actuaries to the retirement benefit obligation is the “projected unit credit method”. The method recommended by the LKAS 19 – “Employee Benefits”.

Key assumptions used in the computation includes the following:

As at 31 March 2020 2019

Rate of discount (%) 8 11

Salary incremental rates (%) 10 10

Employee turnover factor (%) 10 10

Retirement age (years) 55 55


75


25.1 Sensitivity of assumptions employed in the valuation of the retirement benefit obligationThe following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed with all other variables held constant in the employment benefit liability measurement.

The sensitivity of the total comprehensive income and financial position is the effect of the assumed changes in discount rate and salary increment rate on to total comprehensive income and employment benefit obligation for the year.

As at 31 March Total comprehensive income increase/

(reduction) LKR

Benefit obligationincrease/(reduction)

in the liability LKR

Increase in discount rate (1%) (1,835,753) 1,835,753

Decrease in discount rate (1%) 2,100,283 (2,100,283)

Increase in salary escalation rate (1%) (1,953,527) 1,953,527

Decrease in salary escalation rate (1%) 1,748,093 (1,748,093)

26. TRADE AND OTHER PAYABLES

Group Company


2019LKR

2020LKR

2019 LKR

Trade payables 156,592,800 184,620,028 31,511,972 35,490,195

Accrued expenses 85,418,403 58,858,521 12,945,902 13,334,479

Advance received from customers 579,687,908 1,183,447,298 18,981,066 14,691,815

Other payables 26,797,911 21,970,166 1,883,448 948,448

848,497,022 1,448,896,013 65,322,388 64,464,937

27. DEBENTURES

Group Company


2019LKR

2020LKR

2019 LKR

Matured debentures 3,250,000 3,250,000 3,250,000 3,250,000

3,250,000 3,250,000 3,250,000 3,250,000

The Group/Company has issued these debentures at an interest rate of 13.5% per annum and they were matured on 31 March 2009. The Group/Company has not accrued interest on these debentures from the date of maturity since the management is of the view that interest need not be accrued since they are matured.

Balance represents the value redeemable to debenture holder upon submission of the original certificate.

28. AMOUNTS DUE TO RELATED COMPANIES

Group Company


2019LKR

2020LKR

2019 LKR

Millennium Housing Limited – – 100,524,998 74,714,433

MC Urban Developers Limited – – 140,279,248 78,675,379

Nation Lanka Finance PLC 2,239,710 2,022,490 1,408,773 1,191,553

2,239,710 2,022,490 242,213,019 154,581,365


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29. RELATED PARTY DISCLOSURES

29.1 Transactions with subsidiaries

Name of the Company Names of Directors Relationship Nature of the transactions Amount Outstanding as at 31 March Aggregate

value during the year

Aggregatevalue as a %of revenue

2020LKR

2019LKR

2020LKR

2019LKR

Millennium Housing Limited Mr K C C Perera Subsidiaries Payments made on behalf of 1,104,930 (21,979,055) (100,524,998) (74,714,433) (25,810,565) 0

Mr H J C Perera Payments made by (262,476) 1,144,956

Mr Gihan De Zoyza Fund transfers made by 18,700,000 20,100,000

Fund transfers to (45,464,519) (4,500,000)

Material transfers from 150,000 30,850

Material transfers to (38,500) (798,106)

Expenditure apportionment – 4,297,872

Millennium Villa Housing Development Limited Mr K C C Perera Subsidiaries Payments made on behalf of (5,684,959) (20,585,697) 19,725,876 46,173,252 (26,447,376) –34%

Mr J Rudra Payments made by 1,750,086 10,416,245

Mr Gihan De Zoyza Fund transfers made by (76,003,900) –

Fund transfers to 2,503,900 (117,400,000)

Material transfers from (1,824,208) 3,664,494

Material transfers to 1,129,331 (1,711,315)

Expenditure apportionment 51,682,374 77,010,037

Millennium Housing Construction Limited Mr Gihan De Zoyza Subsidiaries Payments made on behalf 153,314 55,075 15,910,674 15,757,360 153,314 –

Mr J Rudra

MC Urban Developers Limited Mr K C C Perera Subsidiaries Payment made on behalf of (5,477,517) (171,179,812) (140,279,248) (78,675,379) (61,603,869) –5%

Mr J Rudra Payment made by 18,275,485 26,169,292

Mr Gihan De Zoyza Fund transfers to 7,500,000 19,100,000

Mr Rajiv Perera Fund transfers from (129,250,000) (19,900,000)

Material transfers to 543,104 129,919

Expenditure apportionment 46,805,059 –

MC Universal Limited Mr K C C Perera Subsidiaries Payment made on behalf of (1,067,303) (755,164) 8,946,689 3,825,821 5,120,868 36%



Fund transfers from (2,000,000) 3,000,000

Material transfers from (70,615) 415,540

Material transfers to 113,046 (116,391)

Expenditure apportionment 537,989 1,549,847

29.2 Related party disclosure – Recurrent nature

Name of the related party Relationship Nature of the transaction Aggregate value of related party transactions entered in to during

the financial year

Aggregatevalue of related

Terms and conditions of the related party transactions

Closing balance31 March 2020

Opening balance1 April 2019

Nation Lanka Finance PLC Common Director Head office rent and electricity expenses 4,840,219 0.48% None (1,408,773) (2,022,490)

Ceyoka Engineering (Pvt) Ltd. Common Director Disposal of Slow moving Inventory/Wages on allocated security staff 1,533,614 0.15%

None 1,869,946 1,290,205

Ceyoka Pharmaceuticals (Pvt) Ltd. Common Director Wages on allocated security staff 1,184,181 0.12% None 481,756 162,400

Nawaloka Agri (Pvt) Ltd. Common Director Wages on allocated security staff 2,339,798 0.23% None 1,099,314 358,192

Nawaloka Construction Company (Pvt) Ltd. Common Director Payments for provision of services 248,524,521 24% Payment made on work done – –

Koala (Pvt) Ltd. Common Director Sale of land 567,065 0.06% None 43,857,976 43,446,399

Please note that this had been disclosed in the previous year's annual report under the related party transaction Note 28.2 and this amount represent the payment made for work done on the construction of Nawala project.


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29. RELATED PARTY DISCLOSURES

29.1 Transactions with subsidiaries

Name of the Company Names of Directors Relationship Nature of the transactions Amount Outstanding as at 31 March Aggregate

value during the year

Aggregatevalue as a %of revenue

2020LKR

2019LKR

2020LKR

2019LKR

Millennium Housing Limited Mr K C C Perera Subsidiaries Payments made on behalf of 1,104,930 (21,979,055) (100,524,998) (74,714,433) (25,810,565) 0

Mr H J C Perera Payments made by (262,476) 1,144,956

Mr Gihan De Zoyza Fund transfers made by 18,700,000 20,100,000

Fund transfers to (45,464,519) (4,500,000)

Material transfers from 150,000 30,850

Material transfers to (38,500) (798,106)

Expenditure apportionment – 4,297,872

Millennium Villa Housing Development Limited Mr K C C Perera Subsidiaries Payments made on behalf of (5,684,959) (20,585,697) 19,725,876 46,173,252 (26,447,376) –34%

Mr J Rudra Payments made by 1,750,086 10,416,245

Mr Gihan De Zoyza Fund transfers made by (76,003,900) –


Material transfers from (1,824,208) 3,664,494

Material transfers to 1,129,331 (1,711,315)

Expenditure apportionment 51,682,374 77,010,037

Millennium Housing Construction Limited Mr Gihan De Zoyza Subsidiaries Payments made on behalf 153,314 55,075 15,910,674 15,757,360 153,314 –

Mr J Rudra

MC Urban Developers Limited Mr K C C Perera Subsidiaries Payment made on behalf of (5,477,517) (171,179,812) (140,279,248) (78,675,379) (61,603,869) –5%


Mr Gihan De Zoyza Fund transfers to 7,500,000 19,100,000

Mr Rajiv Perera Fund transfers from (129,250,000) (19,900,000)

Material transfers to 543,104 129,919

Expenditure apportionment 46,805,059 –

MC Universal Limited Mr K C C Perera Subsidiaries Payment made on behalf of (1,067,303) (755,164) 8,946,689 3,825,821 5,120,868 36%



Fund transfers from (2,000,000) 3,000,000

Material transfers from (70,615) 415,540

Material transfers to 113,046 (116,391)

Expenditure apportionment 537,989 1,549,847

29.2 Related party disclosure – Recurrent nature

Name of the related party Relationship Nature of the transaction Aggregate value of related party transactions entered in to during

the financial year

Aggregatevalue of related

Terms and conditions of the related party transactions

Closing balance31 March 2020

Opening balance1 April 2019

Nation Lanka Finance PLC Common Director Head office rent and electricity expenses 4,840,219 0.48% None (1,408,773) (2,022,490)

Ceyoka Engineering (Pvt) Ltd. Common Director Disposal of Slow moving Inventory/Wages on allocated security staff 1,533,614 0.15%

None 1,869,946 1,290,205

Ceyoka Pharmaceuticals (Pvt) Ltd. Common Director Wages on allocated security staff 1,184,181 0.12% None 481,756 162,400

Nawaloka Agri (Pvt) Ltd. Common Director Wages on allocated security staff 2,339,798 0.23% None 1,099,314 358,192

Nawaloka Construction Company (Pvt) Ltd. Common Director Payments for provision of services 248,524,521 24% Payment made on work done – –

Koala (Pvt) Ltd. Common Director Sale of land 567,065 0.06% None 43,857,976 43,446,399

Please note that this had been disclosed in the previous year's annual report under the related party transaction Note 28.2 and this amount represent the payment made for work done on the construction of Nawala project.


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29.3 Transaction with Key Management PersonnelAccording to the Sri Lanka Accounting Standard 24 – (LKAS 24) ”Related Party Disclosures”, Key Management Personnel (KMP) are those having responsibility for planing, directing and controlling the activities of the entity. Accordingly, the Board of Directors (including Non-Executive and Executive Directors) have been classified as KPM of the Company. Immediate family members are defined as spouse or dependant. Dependant is defined as anyone who depends on the respective KMP for more than 50% of his/her financial needs.

Group Company


2019LKR

2020LKR

2019 LKR

Short-term employee benefits 10,850,000 14,538,800 8,150,000 11,813,800

30. FINANCIAL RISK MANAGEMENT

OverviewThe Group has exposure to the following risk arising from the financial instruments:

a. Credit risk

b. Liquidity risk

c. Market risk

The note presents information about the Group’s exposure to each of the above risks, the Group’s risk management objectives, policies and processes for measuring and managing risk, and the Group’s management of capital.

Risk management frameworkThe Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. Parent company has established the Risk Management Committee, which is responsible for developing and monitoring the Group’s risk management policies. The Committee reports regularly to the Board of Directors on its activities.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Group Audit Committee oversees how Management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

30.1 Credit riskCredit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.

Exposure to credit riskThe carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows:

Group Company


2019LKR

2020LKR

2019 LKR

Trade and other receivables 391,316,703 581,351,321 45,061,541 102,988,511

Amounts due from related companies 47,308,992 45,257,198 29,388,020 50,714,528

Cash at bank 18,724,887 50,975,411 9,404,010 11,779,672

457,350,582 677,583,930 83,853,571 165,482,711


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The maximum exposure to credit risk for loans and receivables at reporting date by geographic region was:

Group Company

2020LKR

2019LKR

2020LKR

2019 LKR

Athurugiriya 9,931,280 10,860,376 9,931,280 10,860,376

Ja-Ela 93,197,668 288,216,105 – 9,743,439

Homagama 365,000 4,570,161 365,000 4,570,160

Siddamulla – 19,918,000 – 19,918,000

Piliyandala 2,206,892 13,803,476 – 9,562,584

Nawala 155,930,623 – – –

Edmenton 20,179,402 25,119,602 – –

Polgasowita – 1,205,600 – –

281,810,865 363,693,320 10,296,280 54,654,559

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, Management also considers the demographics of the Group’s customer base, as these factors may have an influence on credit risk. The majority of the Group’s revenue was attributable to sales transactions with Ja-Ela geographical region. However, there is no concentration on credit risk attributable to a single customer.

Properties are sold subject to retention of title causes, so that in the event of non-payment the Group have a secured claim. Hence the Group does not keep an additional collateral in respect of trade receivable.

When granting easy payment loan facility, the Group has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes earning patterns of individuals and bank references.

Impairment lossesThe aging of trade and other receivables at the reporting date is as follows:

Group

As at 31 March 2020 2019

GrossLKR

ImpairmentLKR

GrossLKR

ImpairmentLKR

Current balance 35,163,049 – 276,898,068 –

Past due 1 ≥ 3 months 1,714,584 – 26,796,686 –

Past due 3 ≥ 6 months 11,347,628 – 5,491,527 –

Past due 6 ≥ 9 months 58,744,355 – 1,384,296 –

Past due 9 ≥ 12 months 49,088,562 – 1,505,605 –

Over 12 months 125,752,687 (930,469) 51,617,139 3,752,931

281,810,865 (930,469) 363,693,320 3,752,931

Company

As at 31 March 2020 2019

GrossLKR

ImpairmentLKR

GrossLKR

ImpairmentLKR

Current balance – – 39,438,167 –

Past due 1 ≥ 3 months – – 249,936 –

Past due 3 ≥ 6 months – – 684,005 –

Past due 6 ≥ 9 months – – 1,384,296 –

Past due 9 ≥ 12 months – – 1,505,605 –

Over 12 months 10,296,280 (572,181) 11,392,550 1,109,450

10,296,280 (572,181) 54,654,559 1,109,450


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Considering prevailing market conditions, the Group has mutually agreed with some of its customers to revise the terms of its receivables. Included in the Group receivables are customer balances which are past due but not impaired at the reporting date for which no allowance has been provided for as there was no significant change in the credit quality of the customers and the amounts are still considered as recoverable.

Cash and cash equivalentsThe Group held cash and cash equivalents of LKR 18,724,887/- as at 31 March 2020 (2019: LKR 50,975,411/-), which represents its maximum credit exposure on these assets. The cash and cash equivalents are held with bank and financial institution counterparties.

30.2 Liquidity riskLiquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible; that it will always have sufficient liquidity to meet its liabilities when due under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

Group

As at 31 March 2020 Carryingamount

LKR

Contractualcash flows

LKR

6 monthsor less

LKR

6-12months

LKR

1-2years

LKR

2-5years

LKR

More than 5 years

LKR

Non-derivative financial liabilities

Trade and other payables 848,497,022 848,497,022 848,497,022 – – – –

Interest-bearing borrowings 743,828,499 743,828,499 4,215,663 321,773,172 125,434,663 280,810,000 11,595,000

Debentures 3,250,000 3,250,000 3,250,000 – – – –

Amounts due to related companies 2,239,710 2,239,710 2,239,710 – – – –

Bank overdraft 34,241,906 34,241,906 34,241,906 – – – –

1,632,057,137 1,632,057,137 892,444,301 321,773,172 125,434,663 280,810,000 11,595,000


LKR


LKR

6 monthsor less

LKR

6-12months

LKR

1-2years

LKR

2-5years

LKR

More than 5 years

LKR


Trade and other payables 1,448,896,013 1,448,896,013 1,448,896,013 – – – –

Interest-bearing borrowings 647,184,089 647,184,089 56,720,076 43,937,285 47,134,152 499,392,576 –

Debentures 3,250,000 3,250,000 3,250,000 – – – –


Bank overdraft 58,433,267 58,433,267 58,433,267 – – – –

2,159,785,859 2,159,785,859 1,569,321,846 43,937,285 47,134,152 499,392,576 –


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Company


LKR


LKR

6 monthsor less

LKR

6-12months

LKR

1-2years

LKR

2-5years

LKR

More than 5 years

LKR



Interest-bearing borrowings 10,533,537 10,533,537 3,868,874 – 6,664,663 – –

Debentures 3,250,000 3,250,000 3,250,000 – – – –


Bank overdraft 2,218,295 2,218,295 2,218,295 – – – –

323,537,239 323,537,239 316,872,576 – 6,664,663 – –

Company


LKR


LKR

6 monthsor less

LKR

6-12months

LKR

1-2years

LKR

2-5years

LKR

More than 5 years

LKR



Interest-bearing borrowings 1,440,290 1,440,290 1,440,290 – – – –

Debentures 3,250,000 3,250,000 3,250,000 – – – –


Bank overdraft 5,263,480 5,263,480 5,263,480 – – – –

229,000,072 229,000,072 229,000,072 – – – –

The gross inflows/(outflows) disclosed in the above tables represent the contractual undiscounted cash flows relating to financial liabilities held for risk management purposes and which are usually not closed out prior to contractual maturity.

30.3 Market riskMarket risk is the risk that changes in market prices, such as interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Interest rate riskAt the reporting date, the interest rate profile of the Group’s interest-bearing financial instruments are as follows:

Group Company


2019LKR

2020LKR

2019 LKR

Fixed rate instruments

Financial assets – Fixed deposit 7,511,059 6,860,785 2,427,275 2,196,237

7,511,059 6,860,785 2,427,275 2,196,237

Variable rate instruments

Bank overdraft 34,241,906 58,433,267 2,218,295 5,263,480

Financial liability – Term loan 727,450,500 645,743,799 – –

761,692,406 704,177,066 2,218,295 5,263,480


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Cash flow sensitivity analysis for variable rate instrumentsThe Company is exposed to changes in market interest rates through bank overdraft borrowings which were borrowed at a variable interest rate.

Comprehensive income

Group Company

100 bp increase LKR

100 bp decrease LKR

100 bp increase LKR

100 bp decrease LKR

31 March 2020

Variable rate instruments (7,616,924) 7,616,924 (22,183) 22,183

Cash flow sensitivity (Net) (7,616,924) 7,616,924 (22,183) 22,183

31 March 2019

Variable rate instruments (7,041,771) 7,041,771 (52,635) 52,635

Cash flow sensitivity (Net) (7,041,771) 7,041,771 (52,635) 52,635

Capital managementThe Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of ordinary shares and retained earnings of the Group. The Board of Directors monitors the return on capital as well as the level of dividend to ordinary shareholders.

The Group’s main objective is when managing capital are:

1. To safeguarded the Group ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders.

2. To provide an adequate return to shareholders by pricing products commensurately with the level of risk.

Further, the Board seeks to maintain a balance between higher targeted returns that might be possible with higher level of borrowing, and the advantages and security afforded by the strong capital position of the Group.

The Group’s net debt to adjusted equity ratio at the reporting date was as follows:

Group Company

2020LKR

2019LKR

2020LKR

2019 LKR

Total liabilities 1,659,708,750 2,182,901,006 345,380,583 244,923,217

Less: Cash and cash equivalents (18,724,887) (50,975,411) (9,404,010) (11,779,672)

Net debt 1,640,983,863 2,131,925,595 335,976,573 233,143,545

Total equity 962,680,770 795,318,415 261,686,777 335,334,951

962,680,770 795,318,415 261,686,777 335,334,951

Net debt to adjusted equity ratio at 31 March 1.70 2.68 1.30 0.70

31. FAIR VALUESThe Company and the Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.

Level I: quoted market price (unadjusted) in an active market for an identical instrument.

Level II: valuation techniques based on observable inputs, either directly – i.e. as prices or indirectly – i.e. derived from prices. This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.


83


Level III: valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices similar instruments where significant unobservable adjustments or assumptions are required for reflect difference between instruments.

31.1 Fair values versus the carrying amountsThe fair values of financial assets and liabilities, together with the carrying amounts shown in the Statement of Financial Position, are as follow;

Group Company

31 March 2020 31 March 2020

Carrying amountLKR

Fair valueLKR

Carrying amountLKR

Fair valueLKR

Assets carried at amortised cost

Trade and other receivables 391,316,703 391,316,703 45,061,541 45,061,541

Amounts due from related companies 47,308,992 47,308,992 29,388,020 29,388,020

Cash and cash equivalents 18,724,887 18,724,887 9,404,010 9,404,010

457,350,582 457,350,582 83,853,571 83,853,571

Liabilities carried at amortised cost

Trade and other payables 848,497,022 848,497,022 65,322,388 65,322,388

Debt securities 3,250,000 3,250,000 3,250,000 3,250,000

Borrowings 743,828,499 743,828,499 3,868,874 3,868,874

Amounts due to related companies 2,239,710 2,239,710 242,213,019 242,213,019

Bank overdraft 34,241,906 34,241,906 2,218,295 2,218,295

1,632,057,137 1,632,057,137 316,872,576 316,872,576

31.2 Financial instruments not valued at fair valueThe table below analyses fair value of the financial instruments measured at amortised cost at the end of the reporting date, by the level of the fair value hierarchy.

Group

As at 31 March 2020 Note Level ILKR

Level IILKR

Level IIILKR

TotalLKR

Assets

Cash and cash equivalents 20 – 18,724,887 – 18,724,887

Trade and other receivables 18 – – 391,316,703 391,316,703

Amounts due from related companies 19 – – 47,308,992 47,308,992

– 18,724,887 438,625,695 457,350,582

Liabilities

Bank overdraft 20 – 34,241,906 – 34,241,906

Trade and other payables 26 – – 848,497,022 848,497,022

Debt securities 27 – – 3,250,000 3,250,000

Borrowings 23 – – 743,828,499 743,828,499

Amounts due to related companies 28 – – 2,239,710 2,239,710

– 34,241,906 1,597,815,231 1,632,057,137

There were no transfers between Level I, Level II, and Level III during the year 2019/20 for the financial instruments.


84


Company

As at 31 March 2020Note

Level ILKR

Level IILKR

Level IIILKR

TotalLKR

Assets

Cash and cash equivalents 20 – 9,404,010 – 9,404,010

Trade and other receivables 18 – – 45,061,541 45,061,541

Amounts due from related companies 19 – – 29,388,020 29,388,020

– 9,404,010 74,449,561 83,853,571

Liabilities

Bank overdraft 20 – 2,218,295 – 2,218,295

Trade and other payables 26 – – 65,322,388 65,322,388

Debt securities 27 – – 3,250,000 3,250,000

Borrowings 23 – – 3,868,874 3,868,874

Amounts due to related companies 28 – – 242,213,019 242,213,019

– 2,218,295 314,654,281 316,872,576

There were no transfers between Level I, Level II, and Level III during the year 2019/20 for the Financial instruments.

32. CATEGORISATION OF FINANCIAL ASSETS AND LIABILITIES AS AT THE REPORTING DATEThe Group has classified the following financial assets and liabilities to each respective financial instrument category explained in SLFRS 9 “Financial Instruments”

Company

Classification

Amortised cost

LKR

Financial asset –FVOCI

LKR

Financial assets

Investment in unquoted companies – 9,350,019

Trade and other rececivables 45,061,541 –

Amounts due from related companies 29,388,020 –

Income tax receivable 554,051 –

Cash at bank and in hand 9,404,010 –

Classification

Amortised costLKR

Financial liabilities

Trade and other payables 65,322,388

Debt securities 3,250,000

Interest-bearing borrowings 3,868,874

Amounts due to related companies 242,213,019

Bank overdraft 2,218,295


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Group

Classification

Amortised cost

LKR

Financial asset –FVOCI

LKR

Financial assets

Investment in unquoted companies – 9,350,019

Trade and other receivables 391,316,703 –

Amounts due from related companies 47,308,992 –

Income tax receivable 8,473,280 –

Cash at bank and in hand 18,724,887 –

Classification

Amortised costLKR

Financial liabilities

Trade and other payables 848,497,022

Debt securities 3,250,000

Borrowings 743,828,499

Income tax payable 1,705,822

Amounts due to related company 2,239,710

Bank overdraft 34,241,906

33. CONTINGENT LIABILITYThere were no significant contingent liabilities at the reporting date which require adjustment to or disclosure in the Financial Statements.

34. CAPITAL COMMITMENTSThere are no capital commitments outstanding as at the reporting date.

34.1 Lease commitmentsFuture minimum lease payments under operating leases as at the reporting date are as follows:

Group Company


2019LKR

2020LKR

2019 LKR

Not later than one year 6,570,169 6,570,169 2,181,304 2,181,304

Later than one year and not later than five years 43,459,763 24,099,373 2,181,305 6,543,913

Later than five years – – – –

50,029,932 30,669,542 4,362,609 8,725,217


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35. EVENTS OCCURRING AFTER THE REPORTING DATENo Material events have occurred since the reporting date which would require any adjustments to or disclosure in the Financial Statements.

36. COMPARATIVE FIGURESComparative figures have been reclassified to conform to the current year presentation.

37. IMPACT OF COVID-19 PANDEMICIn light of the ongoing COVID-19 situation, the Group has assessed its going concern and a summarised disclosure of its assessment is provided below. With the onset of COVID-19 in Sri Lanka and the consequent business and movement restrictions, the Group’s operations were adversely affected starting from the second half of March 2020. The pandemic and the subsequent measures adopted in containing the spread of the virus has heightened the level of uncertainty across the Sri Lankan economy and has impacted all aspects of operations resulting in a challenging environment to the real-estate and construction industry in the country, especially adapting to the new normalcy post COVID-19 to shifts in customer behaviour and expectations; restricted working environments within social distancing, sustainability of employees, supply chain restrictions and embargos and most importantly the financial influence in terms of debt recovery, borrowing and moratorium grants. Upon restart of business in June 2020 post-lockdown period, operations in construction was challenging and progressed slowly adhering to health and safety guidelines. Reduced interest rates on fixed deposits and lending to property and housing encouraged the market to purchase housing, resulting in good sales. Central Bank accommodating a monetary policy, helping to reduce interest rates enabled the clients to restructured payment schemes and low lending rates made it possible for recoveries as the Company maintained a positive cash flow during this time, as the market went into an investment mode. First time housing purchasers, remains robust and is likely to continue for the foreseeable future. The restricted travel and tourism industry and closure of schools will impact on rental market of housing although the move from rural to semi-urban or urban-housing will still be driven by socio-economic factors.

Owing to risk of one-on-one operations, conducting construction and sales functions was challenging adhering to social distance protocol and may continue depending on the uncertain future. Keeping a well-maintained stock of regular core materials helped us to continue operations amidst sanctions on imports. The pandemic accelerated our process of venturing towards efficient working practices, lean material management and staffing.

Seeking regulatory, government and local authority approvals, especially for new projects, remains to be a challenge as priority is given to working within a health and safety bubble, travel restrictions and lockdowns that limit the scope of field work. Further outbreak of the pandemic has increased the uncertain estimates used in the preparation of the Financial Statements. The extent and the duration of the spread of the virus and economic downturn due to the pandemic will impact to the level of uncertainty. The impact of the pandemic on accounting estimates where necessary is further listed under the relevant notes to these Financial Statements.


Annexes88/ Investor Information 90/ Ten Year Summary92/ Notice of Meeting


88

TWENTY ONE LARGEST SHAREHOLDERS

Name Number of sharesas at

20 March 2020

Percentage%

Number of sharesas at

31 March 2019

Percentage%

01. Ceyoka (Pvt) Ltd. 38,090,670 28.28 38,090,670 28.28

02. Mr V R Ramanan 37,969,373 28.19 37,969,373 28.19

03. Mr U H Dharmadasa 24,384,672 18.11 24,384,672 18.11

Pan Asia Banking Corporation PLC/Mr U H Dharmadasa 5,000,000 3.71 5,000,000 3.71

04. Richard Pieris Financial Services (Pvt) Ltd./Mr H J C Perera 4,665,760 3.46 4,665,760 3.46

Mr H J C Perera 1,000,000 0.74 1,000,000 0.74

05. Richard Pieris Financial Services (Pvt) Ltd./Mr R N R Kurukulasuriya 2,500,000 1.86 2,500,000 1.86

06. Mrs S M E Perera 2,250,000 1.67 2,250,000 1.67

07. Sandwave Limited 1,529,339 1.14 463,625 0.34

08. Trading Partners (Pvt) Ltd. 1,353,508 1.00 1,421,225 1.06

09. Mr K C C Perera 1,300,000 0.97 1,300,000 0.97

10. The Finance Company PLC A/C No. 1 1,200,000 0.89 1,200,000 0.89

11. Ceylinco Homes International Limited 900,000 0.67 900,000 0.67

12. Mr M V Rudra 875,786 0.65 875,786 0.65

13. Mr K D H Palihakkara 841,429 0.62 841,429 0.62

14. Mr F N Herft 831,900 0.62 1,006,223 0.75

15. J B Cocoshell (Pvt) Ltd. 504,573 0.37 783,770 0.58

16. NDB Capital Holdings PLC 473,655 0.35 – –

17. Seylan Bank PLC/Mr M M Fuad 389,444 0.29 1,489,244 1.11

Dialog Finance PLC/Mr M M Fuad 243,684 0.18 – –

Mr M M Fuad 19,816 0.01 98,068 0.07

18. Mr M R Rasheed 332,647 0.25 372,500 0.28

19. Arrow International (Pvt) Ltd. A/C No. 1 317,234 0.24 412,886 0.31

20. The Golden Key Company Ltd. 300,000 0.22 300,000 0.22

21. The Finance and Guarantee Company Ltd. 300,000 0.22 300,000 0.22

DIRECTORS SHAREHOLDINGS AS AT 20 MARCH 2020

No. Name Number of shares

Percentage%

01. Mr U H Dharmadasa 24,384,672 18.11

Pan Asia Banking Corporation PLC/Mr U H Dharmadasa 5,000,000 3.71

02. Mr V R Ramanan 37,969,373 28.19

03. Mr K C C Perera 1,300,000 0.97

04. Richard Pieris Financial Services (Pvt) Ltd./Mr H J C Perera 4,665,760 3.46

Mr H J C Perera 1,000,000 0.74

05. Mr G De Zoysa – –

06. Mr R Perera – –

07. Mr J Rudra – –

08. Mr U H Palihakkara 130,000 0.10

INVESTOR INFORMATION


89

INVESTOR INFORMATION

DISTRIBUTION OF SHAREHOLDINGS – AS AT 20 MARCH 2020

Resident Non-Resident Total

Value Band Number of shareholders

Number ofshares

Percentage%

Number of shareholders

Number ofshares

Percentage%


Number ofshares

Percentage%

1 – 1,000 583 130,253 0.10 04 1,360 – 587 131,613 0.10

1,001 – 10,000 175 769,548 0.57 01 2,000 – 176 771,548 0.57

10,001 – 100,000 98 3,364,383 2.50 02 106,682 0.08 100 3,471,065 2.58

100,001 – 1,000,000 26 8,947,984 6.64 02 1,115,588 0.83 28 10,063,572 7.47

1,000,001 and above 09 80,744,810 59.95 02 39,498,712 29.33 11 120,243,522 89.28

Total 891 93,956,978 69.76 11 40,724,342 30.24 902 134,681,320 100.00

CATEGORIES OF SHAREHOLDERS

2019/20 2018/19

Categories of shareholders Number ofshares

Number ofshareholders

Percentage%

Number ofshares


Percentage%

Individuals 74,488,946 835 55.31 74,636,044 755 55.42

Institutions 60,192,374 67 44.69 60,045,276 59 44.58

Total 134,681,320 902 100.00 134,681,320 814 100.00

Shares traded 31 March 2020 31 March 2019

Market price per share – Last traded – LKR 4.90 7.00

Market price per share – Highest – LKR 8.50 8.90

Market price per share – Lowest – LKR 4.50 6.00

Float adjusted market capitalisation (LKR Mn.) 108 155


90

TEN YEAR SUMMARY

Year Ended 31 March 2019/20*

LKR

2018/19*

LKR

2017/18*Restated

LKR

2016/17*

LKR

2015/16*

LKR

2014/15*

LKR

2013/14*

LKR

2012/13*

LKR

2011/12*

LKR

2010/11*

LKR

Result

Turnover 1,294,462,979 1,004,824,916 972,550,113 1,305,737,786 820,265,186 688,963,588 714,363,392 578,745,720 320,234,240 218,421,221

Net profit/(loss) before tax 172,015,798 157,963,738 (97,928,445) 198,605,943 117,329,144 153,387,091 169,535,542 130,206,892 34,312,166 14,943,279

Income tax 1,362,266 (43,039,427) (4,754,862) (50,237,812) (28,868,833) (39,459,706) (42,454,090) (32,674,170) (3,132,367) (113,732)

Net profit/(loss) after tax 173,378,064 114,924,310 (102,683,308) 148,368,131 88,460,311 113,927,385 127,081,452 97,532,722 31,179,799 14,829,547


Ordinary share capital 293,802,200 293,802,200 293,802,200 293,802,200 293,802,200 293,802,200 293,802,200 197,802,200 197,802,200 98,901,100

Preference share capital – – – – – – – – – –

Capital reserves 16,400,503 17,430,325 25,000,000 25,000,000 25,000,000 66,000,000 66,000,000 66,000,000 66,000,000 66,000,000

Available for sale – – – – – – – – – 19,977,512

Retain earnings 652,478,067 484,085,889 434,760,387 586,119,299 468,543,600 376,469,002 263,888,686 182,449,844 104,697,737 91,940,031

Equity attributable to owners of the Company 962,680,770 795,318,414 753,562,587 904,921,499 787,345,800 736,271,202 623,690,886 446,252,044 368,499,937 276,818,643

Non-controlling interest – – – – – 0 – – – 35,635,063

Total equity 962,680,770 795,318,414 753,562,587 904,921,499 787,345,800 736,271,202 623,690,886 446,252,044 368,499,937 312,453,706

Borrowings (both long and short terms) 778,070,405 705,617,356 997,927,006 805,925,515 347,099,501 67,243,417 32,671,000 33,248,000 37,924,575 41,152,874

Debentures 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000

1,744,001,175 1,504,185,770 1,754,739,593 1,714,097,014 1,137,695,301 806,764,619 659,611,886 482,750,044 409,674,512 356,856,580

Assets employed

Non-current assets 101,087,163 99,802,641 113,260,252 109,195,295 108,474,831 73,969,253 64,256,181 24,219,084 8,814,751 64,169,945

Current assets 2,521,302,357 2,878,416,780 2,795,467,621 2,519,249,657 1,563,027,039 1,118,308,287 956,411,510 869,952,654 761,884,214 583,666,119

Current liabilities net of borrowings (852,442,564) (1,454,134,505) (1,123,061,906) (880,830,976) (498,281,904) (357,045,978) (339,532,174) (396,310,405) (348,737,444) (280,627,955)

Deferred liability (25,945,781) (19,899,146) (30,926,374) (33,516,962) (35,524,665) (28,466,943) (21,523,631) (15,111,289) (12,287,009) (10,351,529)

Capital employed 1,744,001,175 1,504,185,770 1,754,739,593 1,714,097,014 1,137,695,301 806,764,619 659,611,886 482,750,044 409,674,512 356,856,580

Cash flow

Net cash inflow/(outflow) from operating activities (85,722,301) 346,242,714 (142,853,995) (413,102,016) (224,234,288) (127,484,090) 40,228,429 62,496,491 (78,909,910) 913,664

Net cash inflow/(outflow) investing activities 6,057,689 3,496,008 (9,622,253) (5,010,389) (20,817,941) 10,162,939 (13,952,713) 6,771,018 10,971,624 8,551,097

Net cash inflow/(outflow) financing activities 71,605,449 (340,950,480) 106,182,725 458,454,014 192,381,636 25,025,000 49,857,508 (24,457,190) 79,842,739 (14,067,413)

Increase/(decrease) in cash and equivalents (8,059,163) 8,788,243 (46,293,523) 40,341,609 (52,670,593) (92,296,151) 76,133,224 44,810,318 11,904,454 (4,602,652)

Key indicators

Earnings per share (basics) (LKR) 1.29 0.85 (0.76) 1.10 0.66 0.85 1.06 0.82 0.28 1.50

Net assets per share (LKR) 7.15 5.91 5.60 6.72 5.85 5.47 5.18 3.76 3.36 27.99

Return on equity (%) 18.01 14.45 (13.63) 16.40 11.24 15.47 20.38 21.86 8.46 5.36

Return on capital employed (equity+debt) (%) 9.94 7.64 (5.85) 8.66 7.78 14.12 19.27 20.20 7.61 4.16

Return on gross assets (%) 6.61 3.86 (3.53) 5.64 5.29 9.56 12.45 10.91 4.05 2.29

Dividend per share (LKR) – 0.350 0.350 0.275 0.275 0.275 0.25 0.17 0.75 –

Current ratio (times) 2.07 1.77 1.40 1.84 2.49 2.88 2.68 2.14 2.03 1.80

Quick ratio (times) 0.38 0.42 0.29 0.61 0.79 1.27 1.22 0.78 0.72 0.52

Turnover to equity (times) 1.34 1.26 1.29 1.44 1.04 0.94 1.15 1.30 0.87 0.79

Property, plant and equipment to equity (%) 2.60 4.47 5.95 4.42 5.07 2.35 1.34 1.63 1.26 1.71

Turnover to property, plant and equipment (LKR) 51.65 28.28 21.69 32.64 20.54 39.87 85.26 79.34 69.00 46.03

Borrowings to equity ratio (%) 81.16 89.13 132.86 89.42 44.50 9.57 5.76 8.18 11.17 16.04

Equity to total assets ratio (%) 36.71 26.70 25.91 54.14 47.10 61.75 61.11 49.91 47.81 42.73

* Figures are based on new Sri Lanka Accounting Standards (SLFRSs)

** Figures are based on previous Sri Lanka Accounting Standards (SLASs)


91

TEN YEAR SUMMARY

Year Ended 31 March 2019/20*

LKR

2018/19*

LKR

2017/18*Restated

LKR

2016/17*

LKR

2015/16*

LKR

2014/15*

LKR

2013/14*

LKR

2012/13*

LKR

2011/12*

LKR

2010/11*

LKR

Result

Turnover 1,294,462,979 1,004,824,916 972,550,113 1,305,737,786 820,265,186 688,963,588 714,363,392 578,745,720 320,234,240 218,421,221

Net profit/(loss) before tax 172,015,798 157,963,738 (97,928,445) 198,605,943 117,329,144 153,387,091 169,535,542 130,206,892 34,312,166 14,943,279

Income tax 1,362,266 (43,039,427) (4,754,862) (50,237,812) (28,868,833) (39,459,706) (42,454,090) (32,674,170) (3,132,367) (113,732)

Net profit/(loss) after tax 173,378,064 114,924,310 (102,683,308) 148,368,131 88,460,311 113,927,385 127,081,452 97,532,722 31,179,799 14,829,547


Ordinary share capital 293,802,200 293,802,200 293,802,200 293,802,200 293,802,200 293,802,200 293,802,200 197,802,200 197,802,200 98,901,100

Preference share capital – – – – – – – – – –

Capital reserves 16,400,503 17,430,325 25,000,000 25,000,000 25,000,000 66,000,000 66,000,000 66,000,000 66,000,000 66,000,000

Available for sale – – – – – – – – – 19,977,512

Retain earnings 652,478,067 484,085,889 434,760,387 586,119,299 468,543,600 376,469,002 263,888,686 182,449,844 104,697,737 91,940,031

Equity attributable to owners of the Company 962,680,770 795,318,414 753,562,587 904,921,499 787,345,800 736,271,202 623,690,886 446,252,044 368,499,937 276,818,643

Non-controlling interest – – – – – 0 – – – 35,635,063

Total equity 962,680,770 795,318,414 753,562,587 904,921,499 787,345,800 736,271,202 623,690,886 446,252,044 368,499,937 312,453,706

Borrowings (both long and short terms) 778,070,405 705,617,356 997,927,006 805,925,515 347,099,501 67,243,417 32,671,000 33,248,000 37,924,575 41,152,874

Debentures 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000

1,744,001,175 1,504,185,770 1,754,739,593 1,714,097,014 1,137,695,301 806,764,619 659,611,886 482,750,044 409,674,512 356,856,580

Assets employed

Non-current assets 101,087,163 99,802,641 113,260,252 109,195,295 108,474,831 73,969,253 64,256,181 24,219,084 8,814,751 64,169,945

Current assets 2,521,302,357 2,878,416,780 2,795,467,621 2,519,249,657 1,563,027,039 1,118,308,287 956,411,510 869,952,654 761,884,214 583,666,119

Current liabilities net of borrowings (852,442,564) (1,454,134,505) (1,123,061,906) (880,830,976) (498,281,904) (357,045,978) (339,532,174) (396,310,405) (348,737,444) (280,627,955)

Deferred liability (25,945,781) (19,899,146) (30,926,374) (33,516,962) (35,524,665) (28,466,943) (21,523,631) (15,111,289) (12,287,009) (10,351,529)

Capital employed 1,744,001,175 1,504,185,770 1,754,739,593 1,714,097,014 1,137,695,301 806,764,619 659,611,886 482,750,044 409,674,512 356,856,580

Cash flow

Net cash inflow/(outflow) from operating activities (85,722,301) 346,242,714 (142,853,995) (413,102,016) (224,234,288) (127,484,090) 40,228,429 62,496,491 (78,909,910) 913,664

Net cash inflow/(outflow) investing activities 6,057,689 3,496,008 (9,622,253) (5,010,389) (20,817,941) 10,162,939 (13,952,713) 6,771,018 10,971,624 8,551,097

Net cash inflow/(outflow) financing activities 71,605,449 (340,950,480) 106,182,725 458,454,014 192,381,636 25,025,000 49,857,508 (24,457,190) 79,842,739 (14,067,413)

Increase/(decrease) in cash and equivalents (8,059,163) 8,788,243 (46,293,523) 40,341,609 (52,670,593) (92,296,151) 76,133,224 44,810,318 11,904,454 (4,602,652)

Key indicators

Earnings per share (basics) (LKR) 1.29 0.85 (0.76) 1.10 0.66 0.85 1.06 0.82 0.28 1.50

Net assets per share (LKR) 7.15 5.91 5.60 6.72 5.85 5.47 5.18 3.76 3.36 27.99

Return on equity (%) 18.01 14.45 (13.63) 16.40 11.24 15.47 20.38 21.86 8.46 5.36

Return on capital employed (equity+debt) (%) 9.94 7.64 (5.85) 8.66 7.78 14.12 19.27 20.20 7.61 4.16

Return on gross assets (%) 6.61 3.86 (3.53) 5.64 5.29 9.56 12.45 10.91 4.05 2.29

Dividend per share (LKR) – 0.350 0.350 0.275 0.275 0.275 0.25 0.17 0.75 –

Current ratio (times) 2.07 1.77 1.40 1.84 2.49 2.88 2.68 2.14 2.03 1.80

Quick ratio (times) 0.38 0.42 0.29 0.61 0.79 1.27 1.22 0.78 0.72 0.52

Turnover to equity (times) 1.34 1.26 1.29 1.44 1.04 0.94 1.15 1.30 0.87 0.79

Property, plant and equipment to equity (%) 2.60 4.47 5.95 4.42 5.07 2.35 1.34 1.63 1.26 1.71

Turnover to property, plant and equipment (LKR) 51.65 28.28 21.69 32.64 20.54 39.87 85.26 79.34 69.00 46.03

Borrowings to equity ratio (%) 81.16 89.13 132.86 89.42 44.50 9.57 5.76 8.18 11.17 16.04

Equity to total assets ratio (%) 36.71 26.70 25.91 54.14 47.10 61.75 61.11 49.91 47.81 42.73

* Figures are based on new Sri Lanka Accounting Standards (SLFRSs)

** Figures are based on previous Sri Lanka Accounting Standards (SLASs)


92

Notice is hereby given that the 21st Annual General Meeting of the shareholders of Millennium Housing Developers PLC will be held on 17 December 2020 at 10.00am through a virtual ZOOM meeting in accordance with the guidelines issued by the Colombo Stock Exchange (CSE) on holding virtual shareholder meetings as well as following all health and safety protocols.

Shareholders who wish to participate through the on-line platform should confirm their participation to the Company Secretary contactable through the following details on or before 8 December 2020 so that the Company may provide access details to join the AGM for the following purposes;

Company Secretary : First Corporate Solutions Ltd.

Name : Ms Deepthi Herath

Contact Number : +94 71 057 0560

Email : [email protected]/[email protected]

Agenda

1. To read the Notice convening the Meeting.

2. To consider and adopt the Annual Report of the Board and the Statements of Accounts for the year ended 31 March 2020, with the report of the Auditors thereon.

3. To reappointment Mr U H Palihakkara, as a Director who is over seventy years of age.

4. To re-elect Mr Victor Rajamanner Ramanan, who retires by rotation at the Annual General Meeting, a Director.

5. To re-elect Mr Kankanige Cyril Chandana Perera, who retires by rotation at the Annual General Meeting, a Director.

6. To authorised the Directors to determine contributions to charities for the financial year 2020/21.

7. To reappoint Messrs KPMG, Chartered Accountants as Auditors of the Company for the ensuing financial year 2020/21 and to authorise the Board of Directors to determine their remuneration.

8. To consider any other business of which due notice has been given.


First Corporate Solutions Ltd. Company Secretaries for Millennium Housing Developers PLC

10 November 2020Colombo

NOTICE OF MEETING


................................................................................................................................... being a shareholder/shareholders* of MILLENNIUM

HOUSING DEVELOPERS PLC hereby appoint,

1. .................................................................................................................................................................................................................................. of

...................................................................................................................................................................................................................................... or

failing him/her,*.

2. UGITHA HARSHITH DHARMADASA (Chairman of the Company) of Colombo, or failing him, one of the Directors of the Company as my/our* Proxy to attend and vote as indicated hereunder for me/us* and on my/our* behalf at the 21st Annual General Meeting of the Company to be held on 17 December 2020 and at every poll which may be taken in consequence of the aforesaid Meeting and at any adjournment hereof:

For Against

1. To read the Notice convening the Meeting.

2. To consider and adopt the Annual Report of the Board and the Statements of Accounts for the year ended 31 March 2020 with the report of the Auditors thereon.

3. To re-appoint Mr U H Palihakkara, as a Director who is over Seventy years of age.

4. To re-elect Mr Victor Rajamanner Ramanan who retires by rotation at the Annual General Meeting, a Director.

5. To re-elect Mr Kankanige Cyril Chandana Perera, who retires by rotation at the Annual General Meeting, a Director.

6. To authorise the Directors to determine contributions to charities for the financial year 2020/21.

7. To re-appoint Messrs KPMG, Chartered Accountants as Auditors of the Company for the ensuing financial year 2020/21 and to authorise the Board of Directors to determine their remuneration.

8. To consider any other business of which due notice has been given.

(**) The proxy may vote as she/he thinks fit on any other resolution brought before the Meeting.

As witness my/our* hands this …...................................................................... day of …............................................................................. 2020.

.................................................... ....................................................NIC/REG NO. Signature of shareholder

FORM OF PROXY


FORM OF PROXY

Instructions for the completion of the Form of Proxy

1. Please perfect the Form of Proxy overleaf, after filling in legibly your full name and address, by signing in the space providing of filling the date of signature and your National Identity Card Number.

2. The completed Form of Proxy should be deposited at the office of the Company Secretaries, First Corporate Solutions Ltd. No. 540, R A De Mel Mawatha, Colombo 3, 48 hours before the time appointed for the holding of the Meeting.

3. If an Attorney has signed the Form of Proxy, the relative Power of Attorney should also accompany the completed Form of Proxy for registration, if such Power of Attorney has not already been registered with the Company.

4. If the shareholder is a company or a corporate body, the proxy should be executed under its common seal in accordance with its Articles of Association or Constitution.

5. If there is any doubt as to how to vote is to be exercised, by reason of the manner in which the Form of Proxy has been completed, no vote will be recorded by the Form of Proxy.


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Name of the Company

Millennium Housing Developers PLC

Statutory status

A Company incorporated in Sri Lanka on 28 July 1998 as a private limited liability company under the Companies Act No. 17 of 1982 and re-registered under the Companies Act No. 07 of 2007. The Company registered with the Board of Investment of Sri Lank (BOI) under Section 17 of the BOI Act No. 04 of 1978. Subsequently converted to a public limited liability company on 22 May 2014 under the Act No. 07 of 2007 and ordinary shares were listed in the Colombo Stock Exchange on 19 February 2014.

Registration number

PB 376 PQ

Board of Directors

Mr Ugitha Harshith Dharmadasa – Chairman

Mr Victor Rajamanner Ramanan – Deputy Chairman

Mr Kankanige Cyril Chandana Perera – Director

Mr Gihan De Zoysa – Director

Mr Hettiaratchige Jayantha Christopher Perera* – Director

Mr Uditha Harilal Palihakkara – Director*

Mr Rajiv Perera – Director

Mr Jayaprakash Rudra – Director* Resigned w.e.f. 15 September 2020

Company Secretaries

First Corporate Solutions Ltd. No. 540, R A De Mel Mawatha, Colombo 3

Registered office address

No. 28, Dr Lester James Peiris Mawatha, Colombo 5

Auditors

KPMG – Chartered Accountants No. 32A, Sir Mohamed Macan Markar Mawatha, Colombo 3

Internal Auditors

Sarukkali Associates – Chartered Accountants

Bankers

Commercial Bank of Ceylon PLC Hatton National Bank PLCSampath Bank PLCSeylan Bank PLCDFCC Bank PLC

Subsidiaries

Millennium Housing Limited

Millennium Villa Housing Development Ltd.

Millennium Housing Construction Ltd.

MC Urban Developers Ltd.

MC Universal Ltd.

Other service partners

Board of Investment of Sri Lanka

Condominium Authority

Colombo Municipal Council

Road Development Authority

Central Environmental Authority

Electricity Board

Water Board

Sri Lanka Telecom (SLT)

Civil Aviation Authority

Sri Lanka Land Reclamation and Development Corporation

Sri Lanka Police

Local Government Authorities

Fire Department

National Water Supply and Drainage Board

Urban Development Authority

CORPORATE INFORMATION


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CORPORATE INFORMATION

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