C. W. MACKIE PLC / ANNUAL REPORT

Transcription

1 C. W. MACKIE PLC / ANNUAL REPORT -14 1

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5 C. W. MACKIE PLC / ANNUAL REPORT The business was founded in 1900 by late Mr. C. W. Mackie, a Scotsman, who carried on the enterprise as Merchants and Commission Agents under the name of C. W. Mackie & Company. In 1922, the business was incorporated as a private limited company. In 1946, a consortium of Ceylonese and Indian Businessmen bought over the shares of the Company and converted it to a public company. The year 1971 marked a significant change when Ceylon Trading Company Limited, the Sri Lanka based subsidiary of Aarhus United A/S of Denmark, bought a part of the Indian shareholding and took over the management of the Company. In late 1994, shares equivalent to 25% of the total shares in the Company were issued to the public so as to broadbase ownership and give the Company greater access to the capital market of Sri Lanka to raise capital funds for its future diversification and expansion. The Company s shares are quoted on the Colombo Stock Exchange. January 2010 marked another significant change when the principal shareholders, Aarhus United A/S, Denmark (AU) and Ceylon Trading Company Limited (CTC) divested their entire shareholding of 56.56% of the stated capital of the Company and relinquished control of the affairs of the C.W. Mackie PLC of Companies. The AU/CTC shares were acquired by Lankem Ceylon PLC and a connected party, Kotagala Plantations PLC. Lankem Ceylon PLC (Lankem) was established in 1964 in Sri Lanka as a private limited liability company and its shares have been listed on the trading floor of the Colombo Stock Exchange since The Lankem of Companies has a diversified business portfolio which consist of manufacturing (paints, agro/industrial chemicals & bituminous products), distribution of consumer products, rubber and tea plantation management and owning and operating resort hotels. Lankem is a subsidiary of the fully diversified conglomerate, The Colombo Fort Land & Building PLC. This acquisition by Lankem greatly strengthens the overall management capabilities of C. W. Mackie PLC in the conduct of the affairs and enhances business opportunities availing of synergies. The C. W. Mackie PLC presently consists of C. W. Mackie PLC and four subsidiary companies engaged in a diversity of activities such as export of natural rubber and desiccated coconut; rubber-based products for export and sale locally; import, manufacture, distribution and export of branded consumer products including processed tropical fruits; import and distribution of sugar; import and resale of branded marine paints and protective coatings, welding equipment and consumables, refrigeration, air-conditioning components and light engineering products; and motor car rentals to Companies.

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7 C. W. MACKIE PLC / ANNUAL REPORT Financial Highlights For the Year Ended Year Ended Change % revenue Rs. 000's 7,343,741 7,647,208-4% gross profit Rs. 000's 942, ,259 13% net profit Rs. 000's 209, ,513 28% Profit attributed to parent company Rs. 000's 208, ,010 29% earnings per share Rs % Dividend per share Rs % Net return on capital employed % % Net return on shareholders funds % % capital expenditure Rs. 000's 47,003 87,827-46% value added Rs. 000's 1,887,450 1,586,660 19% Value added per employee Rs. 000's 3,495 2,833 23% foreign exchange earnings Rs. 000's 2,202,900 2,341,302-6% Contribution to Government revenue Rs. 000's 1,172, ,090 22% As at 31 March Current ratio 1: Net asset value per share Rs Dividend payout ratio % 52% 22% Market value per share - at year end Rs during the year - Highest Rs during the year - Lowest Rs Number of employees in Value in Rs. at official exchange rate United States Dollar Pound Sterling Euro DKK Revenue (Rs. Mn) Profit Before Tax (Rs. Mn) /14 /14

8 8 C. W. MACKIE PLC / ANNUAL REPORT -14 Structure and Principal Activities PARENT COMPANY C. W. MACKIE PLC Export and sale locally of thick pale crepe rubber (TPC), ribbed smoked sheet rubber (RSS) and desiccated coconut. Import and wholesale distribution of sugar to industrial users. Import and sale of welding equipment and consumables and light engineering products, refrigeration and air-conditioning components and marine paints and protective coatings. Import and wholesale distribution of branded consumer products. Bottling of Sunquick range of fruit squashes and bottling of drinking water under Scan brand for domestic distribution. STATED CAPITAL RS. 507,047,000 NUMBER OF SHARES ISSUED 35,988,556 SUBSIDIARIES CEYMAC RUBBER COMPANY LIMITED Manufacture, export and sale locally of technically specified rubber (TSR) and manufacture and export of plantation sole crepe rubber and specialised industrial sole crepe rubber.. STATED CAPITAL RS. 36,450,000 / NUMBER OF SHARES ISSUED 3,189,375 GROUP INTEREST 98.72% CEYTRA (PRIVATE) LIMITED Manufacture and export of extruded, moulded and calendered rubber products. STATED CAPITAL RS. 30,000,000 / NUMBER OF SHARES ISSUED 3,000,000 GROUP INTEREST 62.82% SCAN TOURS AND TRAVELS (PRIVATE) LIMITED Motor car rentals to Companies STATED CAPITAL RS. 6,000,000 / NUMBER OF SHARES ISSUED 600,000 GROUP INTEREST 100% KELANI VALLEY CANNERIES LIMITED (acquired on 31 March ) Manufacture, export and distribution of a wide range of processed tropical fruits, young coconut/king coconut water and beverage products under KVC brand. STATED CAPITAL RS.5,709,043 / NUMBER OF SHARES ISSUED 34,398,455 GROUP INTEREST 88.23%

9 C. W. MACKIE PLC / ANNUAL REPORT Chairman/Chief Executive Officer s Review For the financial year ended 31 March On behalf of the Board of Directors I am pleased to welcome you to the Ninety Second Annual General Meeting of the Company and to present the Annual Report and the Audited Financial Statements of your Company and its subsidiary companies for the financial year ended 31 March. Organisation The s activities have been divisionalised as follows : Company Division Activities C. W. Mackie PLC Commodity Trading Export and sale locally of thick pale crepe rubber (TPC), ribbed smoked sheet rubber (RSS) and desiccated coconut. Internal Trading Services Import and wholesale distribution of sugar to industrial users. Import and sale of welding equipment and consumables and light engineering products, refrigeration and air conditioning components and marine paints and protective coatings. Wholesale distribution of locally manufactured, imported and branded consumer products. Manufacturing Bottling of Sunquick range of fruit squashes and bottling of drinking water under Scan brand for domestic distribution. Finance; Human Resource Management, MIS and Administration. Ceymac Rubber Company Limited Manufacturing Manufacture and export and sale locally of technically specified rubber (TSR) and manufacture and export of plantation sole crepe rubber and specialised industrial sole crepe rubber. Ceytra (Private) Limited Manufacturing Manufacture and export of extruded, moulded and calandered rubber products. Scan Tours and Travels (Private) Limited Kelani Valley Canneries Limited (acquired on 31.3.) Overall Performance Services Manufacturing Motor car rentals to Companies. Manufacture for sale and distribution locally as well as export of a range of processed tropical fruits and beverage products under KVC brand. The consolidated profit before tax for the financial year ended 31 March was Rs million and the consolidated net profit for the same period was Rs million. Financial Results gross profit An analysis of the s gross profit is given hereunder : Year ended 31 March Rs. Million Year ended 31 March Rs. Million C. W. Mackie PLC Ceymac Rubber Company Limited Ceytra (Private) Limited Scan Tours and Travels (Private) Limited

10 10 C. W. MACKIE PLC / ANNUAL REPORT -14 Chairman/Chief Executive Officer s Review (Contd.) results from operating activities The 's results from operating activities for the year under review was Rs million. profit before tax The 's ordinary activities resulted in a profit before tax of Rs million for the financial year ended 31 March as given hereunder : Year ended 31 March Rs. Million Year ended 31 March Rs. Million Results from operating activities Less : Net financing costs (62.1) (58.8) Profit before taxation total comprehensive income The total comprehensive income of the after adjusting for taxation and non-controlling interests for the financial year ended 31 March was Rs million and is shown in the following analysis : Year ended 31 March Rs. Million Year ended 31 March Rs. Million results from operating activities Less : Net financing costs (62.10) (58.80) profit before taxation Tax expense (103.20) (84.60) profit after taxation Other comprehensive income total comprehensive income Non-controlling interests (1.10) (1.60) Equity holders of the Parent Company Review of Operations C. W. MACKIE PLC (Parent Company) The Company s net revenue in the financial year ended 31 March was Rs.6,266.8 million. The profit from operating activities was Rs million and the profit for the year, after charging income tax of Rs.96.8 million, was Rs million. C. W. MACKIE PLC () The s consolidated net revenue for the financial year ended 31 March was Rs.7,343.7 million as compared with Rs.7,647.2 million in. The major contribution towards the consolidated net revenue was from the Company s internal trading and distribution activities and exports of natural rubber. Revenue from the manufacture for export and sale locally of rubber products from the subsidiary companies showed no growth and remained around levels. The results from operating activities was Rs million and the net profit for the year, after charging income tax of Rs million, was Rs million. The consolidated comprehensive income for the year, after charging income tax of Rs million, was Rs million as compared with Rs million in.

11 C. W. MACKIE PLC / ANNUAL REPORT Commodity Trading Natural Rubber (NR) In the year under review NR trading was affected by several factors, particularly supply and availability of exportable grades of rubber, global prices, exchange rate variations and the pace of economic recovery in NR consumer countries, all of which combined to impact on demand and the capacity to maintain margins. During the year under review the Company exported 2.5 million kg. and sold locally 793 m/t of various grades of NR. 73% of Sri Lanka s NR output is consumed internally in the manufacture of rubber-based products for export and sale locally. The gross trading profit on the export and sale locally of NR for the year under review was Rs.76.0 million as compared with Rs.67.6 million in. In addition, the NR trading activity received Rs.36.1 million as income for handling the trading of technically specified rubber (TSR) and sole crepe rubber for Ceymac Rubber Company Limited. Desiccated Coconut (DC) The manufacture of desiccated coconut (DC) in Sri Lanka is mainly for export. The availability of DC for export trading is largely determined by the availability of coconuts for processing into DC. Estimated coconut crop in Sri Lanka was 2.5 billion nuts for the year ended 31 March as compared with 2.9 billion nuts in. The estimated domestic consumption was 1.8 billion nuts, thus leaving only about 400,000 nuts available for the processing industries of DC and copra for milling coconut oil. The Company s export of DC is mainly to the countries of the European Union (EU) and severe competition from the Philippines, Indonesia and Vietnam eroded margins as a result of having to quote low prices merely to maintain business. During the year under review the Company exported 2.5 million kgs. of DC as compared with 2.3 million kgs. in. The gross trading profit for the year ended 31 March was Rs.4.4 million (-Rs.10.7 million). Spices In the background of diminishing sales in trading natural rubber and desiccated coconut, markets for exporting spices (pepper, cloves, nutmeg and cinnamon) are being explored. Exports of spices would add a new revenue stream to the Company s commodity trading business and has the potential of supplementing earnings from its traditional commodity trading activities. Internal Trading Consumer Products The sales and distribution of Fast Moving Consumer Goods (FMCG) in the food and beverage category is the fastest growing segment of the s business and has the highest potential for growth in the future. The net turnover of FMCG sales for the year under review was Rs.2.1 billion (-Rs.2.1 billion). The net profit for the year under review was Rs million (-Rs million). The profit, although only marginally better than the previous year, was achieved under very challenging market conditions. The principal product in the FMCG category is the Sunquick rage of fruit squashes. Sales of Sunquick during the year was 1.9 million litres (-2.1 million litres) and contributed 55% of total FMCG sales. Scan Bottled Water and Scan Jumbo Peanuts also made significant contributions to both sales and profitability in the FMCG category. It has been observed that the squash/cordial category has been de-growing at about 22% annually in recent times, mainly because of affordability issues and changes in the life styles of consumers. The Company has developed a strategy to mitigate consumer resistance to high prices and is confident of reversing this trend in regard to the Sunquick range of fruit squashes. In the background of rising cost of imported FMCG products due to high import duties and other fiscal levies, the Company policy on expansion is to introduce more locally manufactured food and beverage products for distribution in the domestic market. In pursuance of this policy, the Company in March acquired a major controlling interest in Kelani Valley Canneries Limited, a consumer products business manufacturing a range of food and beverage products out of locally sourced raw materials. Sugar The Company supplies sugar mainly to industrial users because this eliminates credit risk and ensures better margins. Dealing in the wholesale trade results in high exposure to credit risks and generally lower margins. In the background of rising competition which has penetrated into the institutional market as well, the Company has diversified its procurement strategy by sourcing sugar from several suppliers. This has enabled the procurement of sugar at more competitive prices with the resulting advantage of being able to secure higher margins.

12 12 C. W. MACKIE PLC / ANNUAL REPORT -14 Chairman/Chief Executive Officer s Review (Contd.) The Company has also developed retail sales to the catering and restaurant trade during the year. This business has considerable potential for growth. Total sales for the year was 17.4 thousand m/t (-18.9 thousand m/t) and the net profit was Rs.59.3 million (-Rs.21.5 million). The enhanced profit for the year is the outcome of the new procurement strategy that enabled to secure better margins by purchasing at more competitive prices. Industrial Products The Industrial Products segment which is engaged in sales of marine paints and protective coatings, welding products and engineering items and refrigeration and air-conditioning components showed significant growth in both sales and profitability during the year under review. Several new items, mostly in the machinery category, were introduced during the year and for the first time successfully participated in a tender for the supply of refrigeration components for a dairy industry project in Sri Lanka. This helped improve revenue and profits from sales of refrigeration products. The net turnover on sales was Rs million (-Rs million) and net profit Rs.78.9 million (-Rs.44.5 million). This is the highest ever sales and profits achieved by the Industrial Products activity. Sales of welding products, refrigeration and air-conditioning components and marine paints contributed significantly to the high sales and profit achievement. The marine paints and protective coatings business which principally supplies the ship repair industry now supply protective coatings to the telecommunication service sector, energy generating and construction projects and is being developed as a supplementary business that is adding value to profits. Rubber Products Manufacturing The rubber products manufacturing activities of the is carried out by two subsidiary companies, Ceymac Rubber Company Limited and Ceytra (Private) Limited. CEYMAC RUBBER COMPANY LIMITED (Subsidiary Company) The Company s principal activity is the manufacture and sale of technically specified rubber (TSR) and plantation and industrial sole crepe rubber. sole crepe is exclusively exported and TSR is exported as well as sold locally to manufacturers of rubber-based products in Sri Lanka. The Company produced a poor result in 2012/ due to quality issues resulting in the principal buyer of TSR suspending purchases pending rectification of the quality issues. The production line deficiencies that caused some of the quality issues have since been rectified but, owing to continuing low order cover for TSR, the result for the year under review was again a loss. Good margins from the export of sole crepe rubber and a strong performance from TSR during the fourth quarter of the year under review helped reduce the loss for the year to a much lower level than the previous year. The net turnover of the Company was Rs million (-Rs.1.2 billion) on sales of 2.9 million kgs. (-3.0 million kgs.). The Company s manufacturing and sales operations, combined with its ancillary service activities, resulted in a net loss of Rs.5.6 million (-net loss of Rs.56.0 million). CEYTRA (PRIVATE) LIMITED (Subsidiary Company) The Company s principal activity is the manufacture of extruded and moulded products for export. Exports of extruded products (rubber bands) is dependent on a single buyer in Japan and there was a sharp drop in orders from this customer during the year under review because of pricing issues. As a result the extruded section of the Company s Plant in Horana had to be closed for several days a month for lack of orders during the period. The Company s exports of moulded products is also dependent on a limited customer base and the lack of buyers is a major constraint in expanding export sales. Diversifying into manufacturing rubber-based products that have a local market is being explored, subject to investment outlays that such diversification projects may entail. The net turnover for the year was Rs million (-Rs million) on sales of m/t ( m/t). Sales comprised mainly of exports of moulded products. The Company s manufacturing and export operations produced a net profit of Rs.2.9 million (-Rs.5.9 million). SCAN TOURS AND TRAVELS (PRIVATE) LIMITED (Subsidiary Company) The Company provides motor cars on rental basis to companies. During the year under review, the Parent Company introduced a scheme whereby Managers entitled to the use of a Company maintained car were given the option of using an owned or hired car in return for a monthly car allowance, subject to conditions. Several Managers entitled to Company maintained cars opted for the own car scheme and as a result several cars surplus to requirements were disposed. The capital profit from the sale of these cars contributed to the year end result of Rs.11.5 million (-Rs.7.6 million).

13 C. W. MACKIE PLC / ANNUAL REPORT KELANI VALLEY CANNERIES LIMITED (Subsidiary Company) On 31 March the Parent Company acquired 88.23% of the shareholding of Kelani Valley Canneries Limited (KVC) from CIC Agri Businesses (Private) Limited for a purchase consideration of Rs million. KVC has been acquired as a going concern business. The acquisition was financed entirely out of internally generated funds. KVC is engaged in the manufacture, export and distribution of a wide range of processed tropical fruits and beverage products under the `KVC' brand. KVC products are principally sold in the local market through a network of stockists/distributors and direct to modern trade outlets. Several positive synergies in the KVC business have been identified with the Company's food and beverage activities in the FMCG category and the acquisition of a controlling interest in KVC is a reflection of the Company's policy of expanding the FMCG category, currently the fastest growing segment of the 's business. Finance Financing Costs Bank borrowings is the principal source of funds for financing the s working capital requirements and is securitized only by stocks and receivables. The does not carry any major long-term debt and capital expenditure is financed entirely out of internally generated funds. Interest rates on an average was about 12.5%. Average interest rate for the corresponding period was 15%. Net financing cost for the year ended 31 March was Rs.62.1 million (-Rs.58.8 million). This is after adjusting a foreign exchange loss of Rs.2.3 million (-gain of Rs.24.6 million). Debtor management and inventory control is a high priority in keeping financing costs down. Taxation The profit for the year ended 31 March is liable to a tax of Rs million. This is after a deferred tax charge of Rs.3.5 million. Ceymac Rubber Company Limited, which made a loss for the year of Rs.5.6 million has a carried forward tax loss of Rs.82.8 million and Ceytra (Private) Limited, which made a profit of Rs.2.9 million for the year, has a carried forward tax loss of Rs.35.4 million. The has outstanding VAT refunds in respect of prior years. KPMG Tax Advisory Services (KPMG) have been working on an assignment to recover the outstanding VAT refunds of the Parent Company. Considerable progress has been achieved settling a major portion of the refunds due to the Parent Company. A sum of Rs.8 million has been provided as at the reporting date to cover the amounts that KPMG deem may not be recoverable. Industrial Relations The industrial relations environment in all companies within the was stable and employees at all levels co-operated with the Management in the conduct of the s business affairs. The Management looks after the employees by providing relief to alleviate hardship resulting from the high cost of living and the employees appreciates the Management s commitment to ensure their well-being. Ceytra (Private) Limited is the only company in the that is unionised. The industrial relations of Ceytra (Private) Limited is covered by a Collective Agreement renewable every 3 years. The subsisting Collective Agreement was renewed in January. In the background of the Company s poor performance in recent years, a substantive revision of the terms, particularly those relating to wage rates and production incentives that has undermined the Company s capacity to be more competitive, were negotiated favourably with the understanding and co-operation of the union. Manning levels as at 31 March are given below : Company C. W. Mackie PLC Ceymac Rubber Company Limited Ceytra (Private) Limited Kelani Valley Canneries Limited Managerial/ Executives Non Executives Manual Operatives As at 31 March Total As at 31 March N/A Total Dividend The Directors recommend to the shareholders at the Annual General Meeting a first and final dividend of Rs.3/- per share amounting to Rs.108 million out of the profits for the year ended 31 March in accordance with the provisions of the Companies Act No.7 of The Directors have thereby maintained a consistent dividend distribution in recent years.

14 14 C. W. MACKIE PLC / ANNUAL REPORT -14 Chairman/Chief Executive Officer s Review (Contd.) Outlook The economy is forecast to grow by 7% in /2015 with all major sectors of the economy - tourism, industries, agriculture and services expected to perform well. The balance of trade is forecast to further improve with strong export growth and lower imports due to import substitution and likely fall in oil prices. Also, interest rates are expected to drop further and inflation to be maintained at single digit levels. The exchange rate against the US Dollar and the Euro will remain stable at around present levels. The economic recovery in most countries of the EU, USA, Japan and China is likely to make the external environment for doing business much easier. In this background, the outlook for the business activities of the CWM to produce better results in the ensuing year appears to be encouraging. The Company s FMCG sales and distribution activity is expected to grow significantly with the absorption of several new products into distribution channels by the recent acquisition of a controlling interest in Kelani Valley Canneries Limited (KVC). KVC manufactures a wide range of food and beverage products which will add more value to the existing product portfolio of the Scan Products Division. Acknowledgements I am deeply grateful to my colleagues on the Board for their ready counsel and guidance at all times which enables me to conduct the affairs of the Company in the best interests of all stakeholders. The present Board comprises high calibre business leaders and professionals. Their expertise and wide experience collectively adds much value to the deliberations of the Board. My sincere appreciation to our highly competent and committed management team and staff at every level that has helped achieve the result for the year under very challenging and competitive conditions. I thank our customers, suppliers, agents, distributors and bankers as well as our shareholders for their continued confidence in our capacity to produce sustainable results both in terms of growth and profitability. W. T. Ellawala Chairman/Chief Executive Officer Colombo 30 May The Company s internal trading activity which is growing is well positioned to produce a strong result with the FMCG segment contributing a major portion of the profit for /2015. The performance of the commodity trading activities would largely depend on the emerging recovery of the global economy. Natural Rubber (NR) prices have declined to the lowest levels since 2007 and expected to go down to even lower levels in /2015 because of slow off take of global output, particularly by China, the world s largest consumer of NR. In this background, margins will be under pressure in trading NR. In the case of the rubber products manufacturing sector, Ceymac Rubber Company Limited is technologically capable of manufacturing TSR upto customer standards, but much would depend on the demand for TSR by local tyre manufacturers as prospects for export orders under the prevailing global pricing scenario appears to be difficult. The rubber products manufacturing business of Ceytra (Private) Limited will be restructured to manufacture only products for which there is a local and export demand. This would mean closing down product lines for which there is no demand or is not profitable. This would be a challenging task particularly as labour redundancies will be inevitable.

15 C. W. MACKIE PLC / ANNUAL REPORT Product Range Export Division Exporter in all grades of natural rubber, including thin and thick pale latex crepe, thick brown crepe, ribbed smoked sheet, white and coloured sole crepe, technically specified rubber (TSR grades) and also specialty grades of natural rubber such as granulated crepe ZOX crepe and also in a position to manufacture any specialty types of natural rubber grades to cater to customers specific requirements. Coconut export products include desiccated coconut in fine, medium, chips, thread, flakes and toasted grades. Industrial Products Division Engages in import, sale and service of refrigeration and air-conditioning components; power generation equipment and lighting towers, workshop machinery and equipment, light engineering equipment; welding equipment and consumables and a range of automobile engine reconditioning equipment. The Division manages several agencies for sale and service of world renowned brands such as Danfoss (Denmark), Mosa (Italy), Telwin (Italy), Eutectic, Chosun and Esab. The range of products keep growing with many international brand names being added. Hempel Division Engages in import, sale and distribution of marine paints and protective coatings for marine paint related solutions and galvanized structures, including telecommunication towers, both in Sri Lanka and Maldives, under the world renowned brand Hempel.

16 16 C. W. MACKIE PLC / ANNUAL REPORT -14 Product Range (Contd.) Scan Products Division Engages in manufacturing, importing and distribution of branded FMCG products specialising in the food and beverage category which includes well known local and international brands, such as Sunquick fruit squashes, Ovaltine, Star brand Essences & Colourings, Ocean Fresh Tuna Flakes, Kotagala Kahata Tea, Mackgrains Sugar, N- Joy brand Coconut Oil, Scan branded Bottled Drinking Water, Jumbo Peanuts, Chillie Paste, Maldive Fish Sambol and Jack Mackerel etc. Scan Products Division s state of the art factories for the bottling of Sunquick fruit squashes and Scan brand Bottled Drinking Water are fully automated with zero human touch in the processing line. We adhere to EU standards and are certified in SLS, accredited with ISO 9001:2008, ISO 22000:2005, HACCP and GMP to maintain a very high level of quality standards. Sugar Trading Division Importer and supplier of high quality fine granulated refined white sugar. Division provides outsourcing service to the industrial customers and has a centrally located warehouse with infrastructure facilities.

17 C. W. MACKIE PLC / ANNUAL REPORT Ceymac Rubber Company Limited A subsidiary of C. W. Mackie PLC. Is a leading manufacturer of technically specified rubber (TSR), sole crepe and specialty rubber products. A subsidiary of C. W. Mackie PLC. Is a leading manufacturer and exporter of moulded, extruded and calendered rubber products which has been accredited with the Forest Stewardship Council - Chain of Custody (FSC - COC) Certification. Kelani Valley Canneries Limited A subsidiary of C.W. Mackie PLC from 31 March and engages in manufacture, export and distribution of processed tropical fruits, young coconut/king coconut water under the brand name of KVC and equipped to offer both thermally sterilized and frozen products. Product range includes KVC brand nectar (ready-to-drink), jams, sauces, chutneys, pickels, pastes and spicy products and a range of sweet savoury fruits and vegetables which are invaluable to Catering and Hospitality industry. These products are SLS certified, accredited with ISO 22000:2005, HACCP and GMP to maintain a very high level of quality standards.

18 18 C. W. MACKIE PLC / ANNUAL REPORT -14 Board of Directors Mr. W. T. Ellawala Chairman/Chief Excecutive Officer A Director since 24 November 1995 and Chairman/Chief Executive Officer from 1 July An Economics Graduate, he worked for Brooke Bond Ceylon Limited, from 1962 to 1987 and was a director of that company for 17 years. Commercial Director, Ceylon Trading Company Limited since 1988 and Managing Director since December Also holds positions on the Boards of other companies, as a director of Maersk Lanka (Private) Limited and Chairman, Janashakthi Insurance PLC. Currently he is the Chairman of The Sri Lanka Society of Rubber Industry and a past Chairman of The Colombo Rubber Traders Association and The Sri Lanka Shippers Council. He is an Honorary Member of The Colombo Tea Traders Association and President & Trustee of the Singhalese Sports Club. Is a former member of the Committee of the Ceylon Chamber of Commerce and Chairman of its Advisory Council. He was a former Advisor to the Ministry of Ports & Shipping and served as a Consultant on Sea Transport at UN-ESCAP in Bangkok, Thailand. Ms. C. R. Ranasinghe Company Secretary A Director from 14 June Is also the Company Secretary. An Attorney-at-Law by profession. With the since October 1999 on retirement as a Partner of Messrs. Julius & Creasy, Attorneys-at-Law & Notaries Public. She is also Director-Corporate Affairs and Company Secretary of Ceylon Trading Company Limited. Deshabandu A. M. de S. Jayaratne Non-Executive/Independent Director A Director from 23 May He holds a Degree in economics from the University of Southampton in England and is a member of the Institute of Chartered Accountants of England and Wales and Institute of Chartered Accountants of Sri Lanka. He is a former Chairman and Managing Director of Forbes & Walker Limited, Chairman of the Ceylon Chamber of Commerce and Colombo Stock Exchange. Also served as Sri Lanka s High Commissioner in Singapore. Currently he serves on the Boards of several public companies. Mr. R. C. Peries Non-Executive Director A Director from 1 April Having started his career with Carson Cumberbatch & Co., he then moved to George Steuarts, one of the premier Agency Houses. He has served as Manager of some of the most prestigious rubber properties in the low country and also held senior appointments in the industry and served on the Rubber Research Board Advisory Panel. In 1983 he was appointed the Regional Director of the JEDB Hatton Board and in 1988 he was made Director General of Kegalle-Avissawella Zone of the JEDB. In 1992, after the privatisation of the management of plantations, he joined George Steuart Plantation Management Services as the General Manager of low country rubber estates of Kotagala Plantations. He continued to serve in this position even after the takeover by Lankem Tea & Rubber Plantations (Pvt.) Ltd. (LT&RP) in 1995 as Managing Agents for Kotagala Plantations. He was appointed to the directorate of LT&RP in 2002 and to the Board of Kotagala Plantations PLC (KP) in 2005 and is presently the Chief Executive Officer of LT&RP and KP. He is also a member of the Rubber Research Board and Chairman of Lankaprene Marketing Company Limited. He is presently a member of the Rubber Wages Board and a member of the Ceylon Institute of Planting. Mr. Anushman Rajaratnam Non-Executive Director A Director from 1 April He was appointed to the Board of Lankem Ceylon PLC as Deputy Managing Director in 2005 and appointed Managing Director in April He has spent several years working overseas as a Consultant for a leading accountancy firm. He also serves on the Boards of several subsidiaries of the Lankem. He holds a Bachelor of Science in Economics from University of Surrey, UK, CPA Australia and MBA from Massachusetts Institute of Technology, USA.

19 C. W. MACKIE PLC / ANNUAL REPORT Mr. S. D. R. Arudpragasam Non-Executive Director A Director from 1 April He is a Fellow of the Chartered Institute of Management Accountants, London. Having served in many senior financial positions in the mercantile sector, he joined The Colombo Fort Land & Building (CFLB) where he is responsible for the s manufacturing and trading sectors. His contribution to the counts over 25 years and at present holds positions of Deputy Chairman, Lankem Ceylon PLC and Managing Director of E. B. Creasy & Company PLC, in addition to serving on other Boards of the CFLB. Dr. T. Senthilverl Non-Executive Director A Director from 3 May He counts over four decades of active engagement in manufacturing, trading, land development, power and energy sectors, industrial turnkey projections, construction and management. He currently serves on the Boards of several public, public listed and private companies. Mr. H. D. S. Amarasuriya Non-Executive/Independent Director A Director from 22 February He brings to C. W. Mackie PLC an impressive range of management, industrial, marketing and business skills from his tenure as Chairman of the industrial and retailing conglomerate Singer, and his experience on the Boards of such companies as Regnis Lanka and Bata Shoe Company of Ceylon. He also brings with him substantial experience in international management as a former Senior Vice President of Singer Asia Limited, Retail Holdings Limited, USA and Chairman of the Singer Worldwide Business Council. An Accountant by profession, he is a former Chairman of the Employer s Federation of Ceylon, First President of the Chartered Institute of Marketing-Sri Lanka Region and current Chairman of the Industrial Service Committee-Southern Province of the Ministry of Industries & Commerce. He currently serves on the Boards of several public, public listed and private companies. Mr. K. T. A. Mangala Perera Executive Director A Director from 2 April He is a graduate from the University of Sri Jayawardenepura with a degree in B.Sc. (Hons.), Marketing Management (Special) Degree and a post graduate diploma in Business & Financial Administration from the Institute of Chartered Accountants Sri Lanka. He possesses more than 14 years experience in branding, marketing and general management functions. A one-time visiting lecturer at the Management Faculty of the University of Sri Jayawardenepura, he is also a fellow member of the Australian Sales and Marketing Association. He currently serves as Executive Director-Internal Trading of C. W. Mackie PLC. Mr. Alagarajah Rajaratnam Non-Executive Director A Director from 27 June He serves as Chairman of The Colombo Fort Land & Building PLC (CFLB) and several listed companies within the CFLB in addition to holding other Directorships within the. Mr. Rajaratnam is a Fellow of the Institute of Chartered Accountants of Sri Lanka.

20 20 C. W. MACKIE PLC / ANNUAL REPORT -14 Annual Report of the Board of Directors For the financial year ended 31 March The Board of Directors have pleasure in presenting their Annual Report on the affairs of the Company together with the audited Financial Statements for the financial year ended 31 March. Principal Activities The principal activities of the Company and each of its subsidiary companies are described on page 4. The Company, in terms of Share Sale and Purchase Agreement dated 31 March, acquired 30,351,222 ordinary shares (88.23%) in Kelani Valley Canneries Limited for a purchase consideration of Rs million. There were no significant changes in the nature of principal activities of the Company and its subsidiaries during the year under review other than the above. Review of Operations A detailed review of operations by the Chairman/Chief Executive Officer is given on pages 5 to 10. Going Concern The Directors are satisfied that the Company has adequate resources to continue its operations in the foreseeable future. Accordingly, the Financial Statements are prepared based on the going concern concept. Stated Capital The stated capital of the Company is Rs.507,047,000/- as at 31 March represented by 35,988,556 shares. The entire issued stated capital of the Company consisting of 35,988,556 ordinary shares is listed on the trading floor of the Colombo Stock Exchange. Finance Financial Results The significant accounting policies adopted in the preparation of the Financial Statements are given in Note 3. summerised results for the financial year under review are shown in the analysis below: Year ended 31 March Rs. 000 Rs. 000 Revenue 7,343,741 7,647,208 Results from operating activities 374, ,936 Net financing costs (62,146) (58,836) Profit before taxation 312, ,100 Income tax expense (103,154) (84,587) Profit for the year 209, ,513 Non-controlling interests (1,013) (1,503) Profit attributable to equity holders 208, ,010 The Financial Statements of the Company and are set out in pages 22 to 64 of the Annual Report. Dividend The Directors have authorised the distribution of a first and final dividend of Rs.3/- per share for the financial year ended 31 March for approval by the Shareholders at the Annual General Meeting. As required by Section 56(2) of the Companies Act No. 7 of 2007 (the Act) the Directors have confirmed that the Company satisfies the solvency test in terms of Section 57 of the Act and have obtained a certificate from the Auditors. Revenue revenue was Rs.7,343.7 million during the year under review ( - Rs.7,647.2 million). Donations The Directors have approved and made donations of Rs.190,825/- ( - Rs.289,154/-) to charities during the year under review. Taxation The Company has adopted the accounting policy of making provision for deferred taxation. The Company s liability to income tax has been determined according to the provisions of Inland Revenue Act No.10 of 2006 and subsequent amendments thereto. Details are given in Note 9 to the Financial Statements. Capital Expenditure The s capital expenditure on fixed assets and investments other than investments in subsidiaries during the year under review was Rs.47 million ( - Rs.87.8 million). Borrowings total borrowing was Rs million as at 31 March ( - Rs million). Events After the Reporting Date Subsequent to the reporting date, no circumstances have arisen which would require adjustment to or disclosure in the Financial Statements, other than those disclosed in Note 33. Board of Directors The present Directors of the Company are given on page 14 and 15. During the year under review, Deshabandu A. M. de S. Jayaratne and Mr. H. D. S. Amarasuriya served as Non-Executive/ Independent Directors on the Board of the Company. Deshabandu A. M. de S. Jayaratne is a Director of the ultimate parent company, The Colombo Fort Land and Building PLC and on the Boards of some of its subsidiaries. However, the Board of the Company having taken into consideration all other circumstances listed in the Rules of the Colombo Stock Exchange pertaining to the criteria for defining independence is of the opinion that Deshabandu A. M. de S. Jayaratne is nevertheless independent.

21 C. W. MACKIE PLC / ANNUAL REPORT Mr. S. D. R. Arudpragasam retires by rotation in terms of Article 89 of the Articles of Association and being eligible, offers himself for re-election with the unanimous support of the Board of Directors. As Mr. W. T. Ellawala, Deshabandu A. M. de S. Jayaratne, Mr. R. C. Peries and Mr. Alagarajah Rajaratnam are over the age of 70 years, their appointment as Directors of the Company require the approval of a resolution of the Company in general meeting. Notices dated 19 May have been received by the Company from shareholders in regard to the resolutions for the approval of their appointment under and in terms of Section 211 of the Companies Act No. 7 of 2007 and this is referred to in the Agenda of the Notice convening the Annual General Meeting on page 69. The appointment of Mr. W. T. Ellawala, Deshabandu A. M. de S. Jayaratne, Mr. R. C. Peries and Mr. Alagarajah Rajaratnam have the unanimous support of the Board of Directors. As Mr. H. D. S. Amarasuriya has attained 70 years of age, his appointment as a Director of the Company also requires the approval of a resolution of the Company in general meeting. Notice dated 19 May has been received by the Company from a shareholder in regard to the resolution for the approval of his appointment under and in terms of Section 211 of the Companies Act No. 7 of 2007 and this is referred to in the Agenda of the Notice convening the Annual General Meeting on page 69. The appointment of Mr. H. D. S. Amarasuriya has the unanimous support of the Board of Directors. Directors Interest in Transactions The Company maintains an Interest Register as required by the Companies Act No. 7 of 2007 (Act). The Directors of the Company have made the general disclosures provided for in Sections 192, 197 and 200 of the Act. Note 32 to the Financial Statements dealing with related party disclosures include details of their interests in transactions. None of the Directors of the Company had, directly or indirectly, during the financial year under review any material beneficial interest in any contract to which the Company or any of its subsidiaries was a party or which is or was significant in relation to the Company s business, other than those disclosed in Note 32 to the Financial Statements and declared at meetings of the Directors. Details of the remuneration and other benefits received by the Directors are set out in Note 32.2 to the Financial Statements. The shareholdings of the Directors at the beginning and at the end of the financial year were as follows: Shareholding as at 31 March Shareholding as at 1 April W. T. Ellawala (Chairman/CEO) Ms. C. R. Ranasinghe A. M. de S. Jayaratne Nil Nil R. C. Peries Nil Nil Anushman Rajaratnam Nil Nil S. D. R. Arudpragasam Nil Nil Dr. T. Senthilverl 10,765,575 10,765,575 H. D. S. Amarasuriya Nil Nil K. T. A. Mangala Perera Nil Nil Alagarajah Rajaratnam Nil Nil Directors Responsibility for Financial Reporting The Directors are responsible for the preparation of the Financial Statements to reflect a true and fair view of the state of affairs of the Company for the financial year. The Directors are of the opinion that the Financial Statements for the financial year ended 31 March have been prepared in conformity with the requirements of the Companies Act No.7 of 2007 and the Sri Lanka Accounting Standards and provide the information as required under the Listing Rules of the Colombo Stock Exchange. Related Party Transactions There were no transactions entered into by the Company during the year in the ordinary course of business, the value which exceeded 10% of the shareholders equity or 5% of the total assets of the Company as at 31 March. The details of the related party transactions are given in Note 32 on pages 54 to 56 to the Financial Statements. Statutory Payments The Directors confirm that, to the best of their knowledge, all taxes and duties payable by the Company and all contributions, levies and taxes payable on behalf of and in respect of the employees and all other known statutory dues as at the reporting date have been paid and/or provided.

22 22 C. W. MACKIE PLC / ANNUAL REPORT -14 Annual Report of the Board of Directors (Contd.) Corporate Governance The Directors are committed to maintain the highest standards of corporate governance practiced in the interest of stakeholders (notwithstanding that during the year under review the principal shareholders held 88.83% of the issued stated capital of the Company) having regard to the requirements of the Companies Act No.7 of 2007, Securities and Exchange Commission of Sri Lanka and Colombo Stock Exchange and to this end, inter alia, have established internal control systems, including a comprehensive risk identification, measurement and mitigation process which is in place designed to carry on the business of the Company in an orderly manner, to safeguard its assets and secure as far as possible the accuracy and reliability of the records and protect the rights and interests of shareholders and accountable to them for the overall management of the Company. The corporate governance of the Company is reflected in its strong belief in protecting and enhancing stakeholder value in a sustainable manner, supported by a sound system of policies and practices. Prudent internal controls ensure professionalism, integrity and commitment of the Board of Directors, Management and employees. Remuneration Committee The following were members of the Remuneration Committee of the Company during the period under review: A. M. de S. Jayaratne - Non-Executive/Independent Director (Chairman) H. D. S. Amarasuriya - Non-Executive/Independent Director S. D. R. Arudpragasam - Non-Executive Director The Remuneration Committee determines the remuneration levels of Executive Director/s, Management/Senior Executives based on a structured methodology in evaluating the performance of the employees annually. Auditors The Auditor s Report on the Financial Statements for the year under review is given on page 21. The Financial Statements of the Company for the financial year under review have been audited by KPMG, Chartered Accountants, the retiring Auditors, who being eligible, offer themselves for re-appointment. The Audit fee for the year amounted to Rs.1.62 million ( - Rs.1.47 million) for the Company and Rs.2.63 million ( - Rs.2.37 million) for the, respectively. As far as the Directors are aware, the Auditors do not have any relationship (other than that of an Auditor) with the Company or any of its subsidiaries. The Auditors also do not have any interests in the Company or any of its Companies. By Order of the Board W. T. Ellawala K. T. A. Mangala Perera Chairman/CEO Executive Director Ms. C. R. Ranasinghe Company Secretary Colombo 30 May The remuneration policy of the Company is to attract, motivate and retain high quality executive talent by reference to corporate goals and objectives resolved by the Board from time to time. Audit Committee The Audit Committee consists of two (2) Non-Executive/ Independent Directors and one (1) Non-Executive Director. The Audit Committee is satisfied that organisational controls and risk management framework that in place provide reasonable assurance as to the reliability of the Company s financial reporting, safeguarding of its assets and compliance with statutory requirements, as also the Listing Rules of the Colombo Stock Exchange. The Audit Committee Report is set out on page 19.

23 C. W. MACKIE PLC / ANNUAL REPORT Report of the Audit Committee The Audit Committee of the Board of Directors of C. W. Mackie PLC consists of the two (2) Non-Executive/ Independent Directors, viz. Deshabandu A. M. de S. Jayaratne (Chairman of the Committee) and Mr. H. D. S. Amarasuriya and Non-Executive Director, Mr. Anushman Rajaratnam. They possess a wide range of financial knowledge, professional skills and business acumen in order to efficiently and effectively carry out their functions. Mr. W. T. Ellawala (Chairman/Chief Executive Officer of the Company) and Mr. A. I. Piyadigama (Chief Financial Officer) attend meetings as ex-officio members. The Company Secretary functions as Secretary to the Audit Committee. Written Terms of Reference approved by the Board of Directors deal clearly with the authority and duties of the Audit Committee. It is, inter alia, empowered to review the adequacy and effectiveness of internal control systems and business risk identification and review the interim and annual financial statements, particularly by reference to compliance with statutory requirements of Sri Lanka Accounting Standards, Sri Lanka Auditing Standards and the Companies Act No.7 of Having reviewed the performance of the External Auditors, KPMG, Chartered Accountants, the Audit Committee has no reason to doubt their effectiveness and independence. The Audit Committee recommended to the Board of Directors that KPMG, Chartered Accountants, be re-appointed as Auditors for the financial year ending 31 March 2015 at a remuneration to be determined by the Board, subject to the approval of the Shareholders at the Annual General Meeting. A. M. de S. Jayaratne Chairman Board of Directors Audit Committee 30 May During the financial year ended 31 March the Audit Committee had four (4) meetings. The Audit Committee, inter alia, reviewed the quarterly and annual financial statements of the Company prior to their release to the Shareholders and the Colombo Stock Exchange. Reports of the proceedings of the Audit Committee meetings are made to the full Board of the Company. The Audit Committee has met the Company s External Auditors KPMG, Chartered Accountants, regarding the scope and conduct of the annual audit. Risks and Controls: In view of the fact that the Company has adopted a risk based audit approach, the effectiveness of the internal control procedures in place to identify and manage all significant risks are being reviewed by the Audit Committee. A Risk Management Framework (Risk Grid and Risk Register) has been adopted for assessing and measuring all risks. The Audit Committee seeks and obtains the required assurances from the Management Committee and Internal Audit on the remedial action in respect of the identified risks in order to maintain the effectiveness of internal control procedures in place. Accordingly, the Audit Committee is satisfied that organisational controls and the Risk Management Framework in place provide reasonable assurance as to the reliability of the Company s financial reporting, safeguarding of its assets and compliance with statutory requirements, as also the Listing Rules of the Colombo Stock Exchange.

24 24 C. W. MACKIE PLC / ANNUAL REPORT -14 Financial Statements Independent Auditors' Report Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Cash Flow Statement Notes to the Financial Statements

25 C. W. MACKIE PLC / ANNUAL REPORT Independent Auditors Report KPMG Tel : (Chartered Accountants) Fax : A, Sir Mohamed Macan Markar Mawatha, P. O. Box 186, Colombo 00300, Sri Lanka. Internet : TO THE SHAREHOLDERS OF C. W. MACKIE PLC Report on the Financial Statements We have audited the accompanying financial statements of C. W. Mackie PLC (the Company ), the consolidated financial statements of the Company and its subsidiaries (the ) as at 31 March which comprise the statement of financial position as at 31 March, and the statement of comprehensive income, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes set out on pages 22 to 64. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Opinion - Company In our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31 March and the financial statements give a true and fair view of the financial position of the Company as at 31 March, and of its financial performance and its cash flow for the year then ended in accordance with Sri Lanka Accounting Standards. Opinion - In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Company and its subsidiaries dealt with thereby as at 31 March and of its financial performance and its cash flows for the year then ended in accordance with Sri Lanka Accounting Standards. Report on Other Legal and Regulatory Requirements These financial statements also comply with the requirements of Sections 153(2) to 153(7) of the Companies Act No. 07 of Scope of Audit and Basis of Opinion Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. Chartered Accountants 30 May Colombo An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion. KPMG, a Sri Lankan Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International cooperative ("KPMG International"), a Swiss entity. M.R. Mihular FCA P.Y.S. Perera FCA C.P. Jayatilake FCA T.J.S. Rajakarier FCA W.W.J.C. Perera FCA Ms. S. Joseph ACA Ms. S.M.B. Jayasekara ACA W.K.D.C. Abeyrathne ACA S.T.D.L. Perera ACA G.A.U. Karunaratne ACA R.M.D.B. Rajapakse ACA Ms. B.K.D.T.N. Rodrigo ACA Principals - S.R.I. Perera ACMA, LLB, Attorney-at-Law, H.S. Goonewardene ACA

26 26 C. W. MACKIE PLC / ANNUAL REPORT -14 Statement of Comprehensive Income For the year ended 31 March Note Rs. 000's Rs. 000's Rs. 000's Company Rs. 000's Revenue 5 7,343,741 7,647,208 6,266,782 6,279,568 Cost of sales (6,401,050) (6,812,949) (5,368,456) (5,460,226) Gross profit 942, , , ,342 Other operating income 6 95,704 89,817 90,685 95,867 Distribution expenses (325,257) (321,092) (360,744) (343,433) Administrative expenses (325,588) (296,048) (279,109) (247,883) Other expenses 7.4 (12,921) Results from operating activities 7 374, , , ,893 Finance income ,318 6,977 37,786 Finance costs (62,669) (84,154) (43,784) (61,405) Net financing costs 8 (62,146) (58,836) (36,807) (23,619) Profit before taxation 312, , , ,274 Income tax expense 9 (103,154) (84,587) (96,859) (89,912) Profit for the year 209, , , ,362 Other comprehensive income, net of income tax Actuarial gain on defined benefit plans 2, , Fair value gain/(loss) on available-for-sale investments (21) 101 (21) 101 Other comprehensive income for the year, net of tax 2, , Total comprehensive income for the year 211, , , ,220 Profit attributable to: Equity holders of the parent company 208, , , ,362 Non-controlling interests 1,013 1, Profit for the year 209, , , ,362 Total comprehensive income attributable to: Equity holders of the parent company 210, , , ,220 Non-controlling interests 1,171 1, Total comprehensive income for the year 211, , , ,220 Basic earnings per share (Rupees) Dividend per share (Rupees) Figures in brackets indicate deductions. The Financial Statements are to be read in conjunction with the related notes, which form an integral part of the Financial Statements set out on pages 28 to 64.

27 C. W. MACKIE PLC / ANNUAL REPORT Statement of Financial Position As at 31 March The Financial Statements are to be read in conjunction with the related Notes, which form an integral part of the Financial Statements set out on pages 28 to 64. I certify that the Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 7 of Company Assets Note Non-current assets Property, plant and equipment 12.1 / , , , ,298 Investment property ,050 52,856 48,050 52,856 Investments in subsidiaries , ,282 Available-for-sale investments 14 1,171 1,192 1,171 1,192 Deferred tax asset ,885 7, Total non-current assets 886, , , ,628 Current assets Inventories , , , ,761 Trade and other receivables 16 1,623,929 1,341,517 1,456,292 1,221,619 Other current assets , , , ,980 Held to maturity investments 18 3, Cash and cash equivalents 19 66,542 70,106 36,659 57,929 Total current assets 2,514,238 2,102,243 2,153,792 1,866,289 Total assets 3,400,517 2,954,471 3,129,813 2,723,917 Equity and liabilities Equity Stated capital , , , ,047 Capital reserves 21 8,734 8,734 14,909 14,909 Revenue reserves 22 1,247,551 1,144,983 1,250,270 1,139,994 Available-for-sale reserve 23 1,094 1,115 1,094 1,115 Equity attributable to equity holders of the Parent 1,764,426 1,661,879 1,773,320 1,663,065 Non-controlling interests 46,190 29, Total equity 1,810,616 1,691,696 1,773,320 1,663,065 Liabilities Non-current liabilities Interest bearing long term borrowings Lease payable after one year ,506 76,290 3,301 5,512 Retirement benefit obligation 26 45,877 39,236 21,604 22,483 Deferred tax liability ,162 43,567 37,396 35,210 Total non-current liabilities 150, ,093 62,301 63,205 Current liabilities Current portion of long term borrowings Lease payable within one year ,316 37,304 2,208 2,845 Interest bearing short term borrowings , , , ,789 Income tax payable 29 43,905 48,797 42,714 46,976 Trade and other payables , , , ,462 Other current liabilities 31 97,391 93,117 90,744 81,028 Bank overdrafts , ,176 84,954 90,547 Total current liabilities 1,439,356 1,103,682 1,294, ,647 Total Liabilities 1,589,901 1,262,775 1,356,493 1,060,852 Total equity and liabilities 3,400,517 2,954,471 3,129,813 2,723,917 Net asset value per share (Rupees) A. I. Piyadigama Chief Financial Officer The Board of Directors are responsible for preparation and presentation of these Financial Statements. The Financial Statements on pages 22 to 64 were approved by the Board of Directors on 30 May and were signed in Colombo on 30 May on its behalf by : W.T. Ellawala Director K. T. A. Mangala Perera Director

28 28 C. W. MACKIE PLC / ANNUAL REPORT -14 Statement of Changes in Equity For the year ended 31 March Stated capital Attributable to equity holders of the parent Capital reserves Available for sale reserve General reserve Retained earnings Total Noncontrolling interests Total equity Balance as at 1 April ,047 8,734 1,014 7,000 1,011,527 1,535,322 28,397 1,563,719 Total comprehensive income for the year Profit for the year , ,010 1, ,513 Other comprehensive income, net of tax Total comprehensive income for the year , ,546 1, ,108 Contributions by and distributions to equity holders Dividends (35,989) (35,989) - (35,989) Purchase of subsidiary shares from non-controlling interests (32) (32) Subsidiary dividend to non-controlling interests (110) (110) Total distributions to equity holders (35,989) (35,989) (142) (36,131) Balance as at 31 March 507,047 8,734 1,115 7,000 1,137,983 1,661,879 29,817 1,691,696 Balance as at 1 April 507,047 8,734 1,115 7,000 1,137,983 1,661,879 29,817 1,691,696 Total comprehensive income for the year Profit for the year , ,316 1, ,329 Other comprehensive income, net of tax - - (21) - 2,218 2, ,355 Total comprehensive income for the year - - (21) - 210, ,513 1, ,684 Contributions by and distributions to equity holders Dividends (107,966) (107,966) - (107,966) Acquisition of subsidiary ,202 15,202 Total distributions to equity holders (107,966) (107,966) 15,202 (92,764) Balance as at 31 March 507,047 8,734 1,094 7,000 1,240,551 1,764,426 46,190 1,810,616 Figures in brackets indicate deductions. The Financial Statements are to be read in conjunction with the related Notes, which form an integral part of the Financial Statements set out on pages 28 to 64.

29 C. W. MACKIE PLC / ANNUAL REPORT Statement of Changes in Equity For the year ended 31 March Company Stated capital Capital reserves Available for sale reserve General reserve Retained earnings Total Balance as at 1 April ,047 14,909 1,014 7, ,864 1,487,834 Total comprehensive income for the year Profit for the year , ,362 Other comprehensive income, net of tax Total comprehensive income for the year , ,220 Contributions by and distributions to equity holders Dividends (35,989) (35,989) Total distributions to equity holders (35,989) (35,989) Balance as at 31 March 507,047 14,909 1,115 7,000 1,132,994 1,663,065 Balance as at 1 April 507,047 14,909 1,115 7,000 1,132,994 1,663,065 Total comprehensive income for the year Profit for the year , ,492 Other comprehensive income, net of tax - - (21) - 2,750 2,729 Total comprehensive income for the year - - (21) - 218, ,221 Contributions by and distributions to equity holders Dividends (107,966) (107,966) Total distributions to equity holders (107,966) (107,966) Balance as at 31 March 507,047 14,909 1,094 7,000 1,243,270 1,773,320 Figures in brackets indicate deductions. The Financial Statements are to be read in conjunction with the related Notes, which form an integral part of the Financial Statements set out on pages 28 to 64.

30 30 C. W. MACKIE PLC / ANNUAL REPORT -14 Cash Flow Statement For the year ended 31 March Rs. 000's Rs. 000's Company Rs. 000's Cash flows from operating activities Profit before taxation 312, , , ,274 Adjustments for : Depreciation of investment property and property, plant and equipment 83,817 83,349 33,035 31,904 Profit on disposal of property, plant and equipment (18,273) (15,866) (3,067) (4,155) Profit on disposal of long term investments (76) - (76) - Write-off of available-for-sale investments Impairment loss on goodwill 12, Provision for retirement benefit 11,124 10,349 6,276 5,829 Finance income (523) (679) (6,977) (16,117) Finance costs 60,329 84,154 42,579 61,405 Dividend received from subsidiaries (8,501) Write-off of expenses capitalised - 1, Write back of payables (3,583) - (3,583) - Provision for slow moving inventories 36,289 30,413 36,039 27,216 Provision for impairment of trade receivables 9,645 3,033 8,710 3,033 Provision for impairment of other receivables 3,462 5,398 1,518 3,560 Operating profit before working capital changes 507, , , ,698 Changes in working capital Change in inventories (135,661) 75,027 (101,263) 3,695 Change in trade and other receivables (231,032) 80,927 (243,383) 37,108 Change in other current assets (6,407) 152,890 (10,394) 147,948 Change in trade and other payables 57,646 (117,031) 59,453 (85,203) Change in other current liabilities 540 (12,269) 9,716 (10,262) Cash generated from operating activities 192, , , ,984 Interest paid (45,019) (64,710) (41,575) (59,421) Payments to gratuity fund (5,931) (9,399) (4,405) (5,242) Income tax/esc paid (104,562) (144,561) (98,935) (126,305) Net cash flows from/(used in) operating activities 37, ,786 (3,981) 307,016 Cash flows used in investing activities Purchase of property, plant and equipment (30,100) (63,836) (24,649) (23,050) Proceeds from disposal of property, plant and equipment 25,062 22,970 3,141 4,351 Proceeds from disposal of long term investments Investment in subsidiaries (Note A and B) (129,444) - (126,874) - Purchase of subsidiary shares from non-controlling interests - (32) - (32) Dividend received ,599 Net cash flows used in investing activities (134,404) (40,800) (148,304) (10,132) Cash flows from/(used in) financing activities Long term borrowings repayments - (32,114) - (32,114) Short term borrowings obtained/(repayments) 259,048 (284,993) 241,453 (281,401) Lease rental paid (55,206) (62,783) (3,854) (6,579) Interest received ,975 16,019 Dividend paid (107,966) (36,099) (107,966) (35,989) Net cash flows from/(used in) financing activities 96,397 (415,408) 136,608 (340,064) Net decrease in cash and cash equivalents (818) (45,422) (15,677) (43,180) Cash and cash equivalents at beginning of the year (46,070) (648) (32,618) 10,562 Cash and cash equivalents at the end of the year (Note 19) (46,888) (46,070) (48,295) (32,618) Figures in brackets indicate deductions. The Financial Statement are to be read in conjunction with the related Notes, which form a part of the Financial Statements set out on pages 28 to 64.

31 C. W. MACKIE PLC / ANNUAL REPORT Note - Acquisition of Kelani Valley Canneries Limited (A) The Company, in terms of Share Sale and Purchase Agreement dated 31 March, acquired 30,351,222 ordinary shares (88.23%) held by CIC Agri Businesses (Private) Limited in Kelani Valley Canneries Limited for a purchase consideration of Rs million. The acquisition had the following effects on the assets and liabilities: Assets Property, plant and equipment 80,564 Inventories 20,910 Trade and other receivables 67,934 Held to maturity financial assets 3,010 Cash and cash equivalents 7, ,073 Liabilities Retirement benefit obligation 3,824 Finance lease liability 1,216 Trade and other payables 35,653 Bank overdraft 10,225 (50,918) Non controlling interest (15,202) Net assets acquired 113,953 Net cash consideration 126,874 Goodwill on acquisition written off (Note 7.4) 12,921 (B) Analysis of net outflow of cash and cash equivalents in respect of the acquisition of subsidiary: Net cash consideration 126,874 Cash and cash equivalents at the time of acquisition (7,655) Bank overdraft at the time of acquisition 10,225 Net cash outflow on acquisition of subsidiary 129,444

32 32 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements 1. Reporting Entity 1.1 Domicile and legal form C. W. Mackie PLC is a incorporated and domiciled in Sri Lanka. The registered office of the and principal place of business is located at No.36, D. R. Wijewardena Mawatha, Colombo 10. The Company, in terms of Share Sale and Purchase Agreement dated 31 March, acquired 30,351,222 ordinary shares (88.23%) held by CIC Agri Businesses (Private) Limited in Kelani Valley Canneries Limited for a purchase consideration of Rs Mn. The C. W. Mackie PLC presently consists of C. W. Mackie PLC and four subsidiary companies namely, Ceymac Rubber Company Limited, Ceytra (Private) Limited Scan Tours and Travels (Private) Limited and Kelani Valley Canneries Limited. 1.2 Principal activities and nature of operations The C. W. Mackie PLC is engaged in a diversity of activities such as export of natural rubber and desiccated coconut; rubber-based products for export and sale locally; import, manufacture, distribution and export of branded consumer products including processed tropical fruits; import and distribution of sugar; import and resale of branded marine paints and protective coatings, welding equipment and consumables, refrigeration and air-conditioning components and light engineering products; and motor car rentals to Companies. 1.3 Ultimate parent enterprise The Company is a subsidiary of Lankem Ceylon PLC, whilst its ultimate holding company is The Colombo Fort Land & Building PLC. 2. Basis of Preparation 2.1 Statement of compliance The Financial Statements have been prepared in accordance with the Sri Lanka Accounting Standards issued by the Institute of Chartered Accountants of Sri Lanka and the Companies Act No. 7 of Basis of measurement The Financial Statements have been prepared on historical cost basis except where appropriate disclosures are made with regard to fair value under relevant Notes. Assets and liabilities are grouped by nature and in an order that reflect their relative liquidity. The Financial Statements have been prepared on the assumption that the will continue as a going concern for the foreseeable future. 2.3 Functional and presentation currency The Financial Statements of the are presented in Sri Lankan Rupees, which is the s functional currency. All values presented in the Financial Statements are in Sri Lanka Rupees unless otherwise indicated. 2.4 Use of estimates and judgments The preparation of the Financial Statements in conformity with Sri Lanka Accounting Standards requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the s Financial Statements is included in the respective notes. 3. Significant Accounting Policies The accounting policies set out below have been applied consistently to all periods presented in these Financial Statements, unless otherwise indicated. 3.1 Basis of consolidation The Consolidated Financial Statements comprise those of the Company and its subsidiary companies Subsidiaries Subsidiaries are entities controlled by the Company. The Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the.

33 C. W. MACKIE PLC / ANNUAL REPORT Non-controlling interest The total profits and losses of the subsidiary companies are included in the Consolidated Statement of Comprehensive Income and the proportion of the profit or loss after taxation applicable to outside shareholders of the have been shown as non-controlling interest. All assets and liabilities of the Company and its subsidiaries are included in the Statement of Financial Position. The interest of outside shareholders in the net assets employed, represented by the paid up value of shareholders and the respective reserves and retained profits, is stated separately in the Consolidated Statement of Financial Position under the heading Non-controlling interests Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the Consolidated Financial Statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. 3.2 Foreign currency translations Transactions in foreign currencies are translated to Sri Lanka Rupees at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to Sri Lanka Rupees at the foreign exchange rate ruling as at the reporting date. Non-monetary assets and liabilities which are stated at historical cost denominated in foreign currencies are translated to Sri Lanka Rupees at the exchange rate ruling at the dates of the transactions. Non-monetary assets and liabilities that are stated at fair value, denominated in foreign currencies are translated to Sri Lanka Rupees at the exchange rate ruling at the dates that the fair value were determined. Foreign exchange differences arising on translation are recognised in the Statement of Comprehensive Income. 3.3 Financial instruments Non-derivative financial assets The initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the becomes a party to the contractual provisions of the instrument. The derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the is recognised as a separate asset or liability. Financial assets and liabilities are offset and the net amount is presented in the Statement of Financial Position when, and only when, the has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The s non-derivative financial assets comprise loans and receivables and available-for-sale financial assets Loans and receivables Loans and receivables comprise trade and other receivables. Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in any of the previous categories. The s investments in equity securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and are recognised in other comprehensive income and presented within equity in the fair value reserve. When an investment is derecognised, the cumulative gain or loss in other comprehensive income is transferred to profit or loss. The s non-derivative financial assets comprise loans and receivables and available-for-sale financial assets.

34 34 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) Cash and cash equivalents Cash and cash equivalents comprise cash in hand and bank balances. Bank overdrafts that are repayable on demand which form an integral part of the Company s cash management are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flow Held to maturity Held to maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity Non-derivative financial liabilities The initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which the becomes a party to the contractual provisions of the instrument. The derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The non-derivative financial liabilities of the comprise loans and borrowings, finance lease payable, bank overdrafts, trade and other payables. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method Stated capital and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self constructed assets include the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use. Expenditure incurred for the purpose of acquiring, extending or improving assets of a permanent nature by means of which is to carry on the business or to increase the earning capacity of its business has been treated as capital expenditure. The carrying values of property, plant and equipment are reviewed for impairment when there are indications of impairments that the carrying value of the assets may not be recoverable Subsequent costs The cost of replacing of a part of an item of Property, Plant and Equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The cost of the day-to-day servicing of Property, Plant and Equipment are recognised in the Statement of Comprehensive Income as an expense as incurred Depreciation Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of Property, Plant and Equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative periods are as follows: Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. 3.4 Property, plant and equipment Recognition and measurement Buildings on freehold land Buildings on leasehold land Plant, machinery and tools Motor vehicles Furniture and fittings Computer and other installations 40 years 40 years or period of the lease, whichever is less 6 2/3 years 5 years 6 2/3 years 6 2/3 years Items of property, plant and equipment are measured at cost or revalued amount less accumulated depreciation Depreciation of an asset begins when it is available for use, i.e. when it is in the location and condition necessary for

35 C. W. MACKIE PLC / ANNUAL REPORT to be capable of operating in the manner intended by the Management. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised Capital work-in-progress Capital expenses incurred during the period which are not completed as at the reporting date are shown as capital work-in-progress, whilst the capital assets which have been completed during the period and put to use have been transferred to property, plant and equipment, if any. 3.5 Investment property The land and buildings held 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 are classified as investment properties to be accounted on the cost model. However, if there is impairment in value, other than of a temporary nature, the carrying amount is reduced to recognise the decline. 3.6 Leased assets Leases in terms of which the assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. 3.7 Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in-first-out and weighted average principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. The practises first-in-first-out inventory valuation method for consumer products (FMCG) and weighted average valuation for their inventory categories other than consumer products (FMCG). Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. 3.8 Impairment Financial assets (including derivatives) A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. The considers evidence of impairment for receivables at collective level. All receivables with similar risk characteristics are grouped together and collectively assessed for any impairment that has been incurred but not yet identified. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss Non financial assets The carrying amounts of the s non financial assets, other than inventories, 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. Goodwill and indefinite lived intangible assets are tested annually for impairment. An impairment loss is recognised if the carrying amount of an asset or cash generating unit (CGU) exceeds its recoverable amount. The recoverable amount of an asset or CGU 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 risks specific to the asset or CGU. For 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 CGUs.

36 36 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs) and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. For other assets, 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 amortization, if no impairment loss had been recognised. 3.9 Provisions A provision is recognised in the Statement of Financial Position when the has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation Employee benefits Defined contribution plans A defined contribution plan is a post employment plan under which an entity pays fixed contribution into a separate entity and will have no legal or constructive obligation to pay a further amount. Obligations for contributions to defined contribution plans are recognised as expense in profit or loss in the period during which services are rendered by employees. Mercantile Service Provident Society The and employees contribute 15% and 10% respectively on the gross salary of each employee to the approved Provident Fund. Employees Provident Fund The and employees contribute 12% and 8% respectively on the gross salary of each employee to the approved Provident Fund. Employees Trust Fund The contributes 3% of the gross salary of each employee to the Employees Trust Fund Defined benefit plans A defined benefit plan is a post employment benefit plan other than a defined contribution plan. The defined benefit plan expense is recognised immediately in profit or loss and the recognises all actuarial gains and losses arising from defined benefit plans in other comprehensive income. Retiring gratuity The retirement benefit plan adopted is as required under the Payment of Gratuity Act No. 12 of This item is grouped under retirement benefit obligation in the Statement of Financial Position. Provision for retirement benefit obligation on the employees of the is on an actuarial basis using the Projected Unit Credit Method (PUC Method) as recommended by LKAS 19, Employee Benefits. The continues to use actuarial method under Sri Lanka Accounting Standard 19, Employee Benefits. However, under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of 5 years of continued service. The assumptions based on which the results of actuarial revaluation was determined are included in Note 26 to the Financial Statements Commitments and contingencies Contingencies are possible assets or obligations that arise from past events and whose existence will be confirmed only by occurrence or non-occurrence of uncertain future events not wholly within the control of the. Contingencies and capital commitments of the are disclosed in Note 34 and 35 respectively to the Financial Statements Events after the reporting period The materiality of the events after the reporting period has been considered and appropriate adjustments and provisions have been made in the financial statements wherever necessary Revenue Sale of goods Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing

37 C. W. MACKIE PLC / ANNUAL REPORT management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized Rendering of services Revenue from rendering of services is recognized in the accounting period in which the services are rendered or performed Other income Rental income Rental income from investment property is recognised in profit or loss on an accrual basis. Rental income is recognised as other income Lease payments Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability Other expenditure All expenditure incurred in running of the business and in maintaining the capital assets in a state of efficiency has been charged to Revenue in arriving at the profit for the year. Expenditure incurred for the purpose of acquiring, expanding or improving assets of a permanent nature by means of which to carry on the business or for the purpose of increasing the earning capacity of the business has been treated as capital expenditure. Repairs and renewals are charged to Revenue in the year in which the expenditure is incurred Finance income and finance costs Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income and gains on the disposal of availablefor-sale financial assets. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the s right to receive payment is established, which in the case of quoted securities is the ex-dividend date. Finance Costs comprise interest expense on borrowings recognized in profit or loss using the effective interest method. Foreign currency gains and losses are reported on a net basis Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in Equity or in Other Comprehensive Income. Current tax Current tax is the expected tax payable or receivable on the taxable income or loss 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. Deferred tax Deferred tax is recognized 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 recognized for the following temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit nor loss 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 for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

38 38 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) 3.16 Segment reporting An operating segment is a component of the that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the s other components, of which the operating results are reviewed regularly by the Management Committee to make decisions about resources allocated to each segment and assess its performance, and for which discrete financial information is available Basic earnings per share The 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 by the weighted average number of Ordinary Shares outstanding during the period Statement of cash flows The Cash Flows Statement has been prepared using the indirect method. Interest paid is classified as operating cash flows, interest received is classified as investing cash flows for the purpose of presenting the Cash Flows Statement 3.19 Related party transactions Disclosure has been made in respect of the transactions in which one party has the ability to control or exercise significant influence over the financial and operating policies/decisions of the other, irrespective of whether a price is charged Comparative information The comparative information is re-classified wherever necessary to conform with the current year s presentation in order to provide a better presentation. 4.1 SLFRS 9 - Financial Instruments: Classification and Measurement The objective of this SLFRS is to establish principles for the financial reporting of financial assets and liabilities that will present relevant and useful information to users of Financial Statements for their assessment of the amounts, timing and uncertainty of an entity s future cash flows. SLFRS 9, as issued, reflects the first phase of work on replacement of Sri Lanka Accounting Standards (LKAS 39) - Financial Instruments Recognition and Measurements and applies to classification and measurement of financial assets and liabilities. The application of this standard has been currently deferred by the Chartered Accountants of Sri Lanka consequent to the International Accounting Standards Board s (IASB) decision, to defer the mandatory effective date of IFRS 9. However SLFRS 9 will be available for early adoption. 4.2 SLFRS 13 - Fair Value Measurement This SLFRS defines fair value, set out in a single SLFRS framework for measuring fair value and requires disclosures about fair value measurements. This SLFRS will become effective to the Company from 1 January. Early adoption is permitted. This SLFRS shall be applied prospectively as of the beginning of the annual period in which it is initially applied. The disclosure requirements of this SLFRS need not be applied in comparative information provided for periods before initial application of this SLFRS. 4.3 SLFRS 10 - Consolidated Financial Statements The objective of this SLFRS is to establish principles for the presentation and preparation of Consolidated Financial Statements when an entity controls one or more other entities. SLFRS 10 will become effective from 1 January for the with early adoption permitted. This SLFRS will supersede the requirements relating to Consolidated Financial Statements in LKAS 27 Consolidated and Separate Financial Statements. 4. Effect of Accounting Standards Issued but not yet Effective The Institute of Chartered Accountants of Sri Lanka has issued the following new Sri Lanka Accounting Standards which will become applicable for financial periods beginning and after the 1 January and Accordingly, these Standards have not been applied in preparing these Financial Statements.

39 C. W. MACKIE PLC / ANNUAL REPORT For the year ended 31 March Company 5. Revenue Gross Revenue 7,653,932 7,948,314 6,570,566 6,573,722 Less: Turnover related taxes (310,191) (301,106) (303,784) (294,154) Net revenue 7,343,741 7,647,208 6,266,782 6,279,568 Turnover related taxes includes Value Added Tax (VAT) and Nation Building Tax (NBT). 5.1 Operating segments Segment information is presented in respect of the 's business segments. Business segments are based on the 's management and internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than a period of one year. The comprises the following main business segments: Commodity trading Rubber-based products manufacturing Industrial products Consumer goods Other Other results mainly comprise vehicle hire income and rent income from investment property.

40 40 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) For the year ended 31 March Business segments Commodity Trading Rubber-Based Products Manufacturing Industrial Products Consumer Goods Other Consolidated Total Revenue 1,932,498 1,120, ,850 3,942,370 44,849 7,548,373 Inter-segment revenue (4,026) (42,568) - (115,936) (42,102) (204,632) Revenue from external customers 1,928,472 1,078, ,850 3,826,434 2,747 7,343,741 Segment gross profit/(loss) 151,503 83, , ,149 (29,818) 942,691 Operating overheads (102,604) (27,825) (67,225) (344,753) (3,852) (546,259) Impairment loss on goodwill (12,921) Depreciation (1,528) (19,325) (1,441) (19,108) (42,415) (83,817) Employee benefits (628) (4,847) (1,255) (2,511) (1,883) (11,124) Provision for impairment of trade debtors - (935) (267) (8,443) - (9,645) Other operating income 2,277 1, ,109 84,557 95,704 Results from operating activities 49,020 32,874 78, ,443 6, ,629 Finance income Finance costs (18,384) (10,624) (544) (18,766) (14,351) (62,669) Profit/(loss) before taxation 30,901 22,400 78, ,724 (7,751) 312,483 Income tax expense (9,476) (2,496) (25,071) (55,329) (10,782) (103,154) Profit/(loss) for the year 21,425 19,904 53, ,395 (18,533) 209,329 Total assets 527, , ,653 1,631, ,959 3,400,517 Total liabilities 345, ,655 57, , ,929 1,589,901 Capital expenditure 3,703 6,410 1,239 10,768 24,883 47,003 Total depreciation 1,528 19,325 1,441 19,108 42,415 83,817

41 C. W. MACKIE PLC / ANNUAL REPORT For the year ended 31 March Business segments Commodity Trading Rubber-Based Products Manufacturing Industrial Products Consumer Goods Other Consolidated Total Revenue 1,878,493 1,421, ,403 4,103,934 48,787 7,865,305 Inter-segment revenue (11,849) (44,947) - (115,262) (46,039) (218,097) Revenue from external customers 1,866,644 1,376, ,403 3,988,672 2,748 7,647,208 Segment gross profit/(loss) 158,078 48, , ,989 (30,690) 834,259 Operating overheads (100,779) (40,800) (60,841) (320,844) 2,855 (520,409) Depreciation (758) (18,077) (524) (18,935) (45,055) (83,349) Employee benefits (583) (4,520) (1,165) (2,332) (1,749) (10,349) Provision for impairment of trade debtors - - (1,044) (1,989) - (3,033) Other operating income ,793 8,315 77,253 89,817 Results from operating activities 56,795 (14,312) 60, ,204 2, ,936 Finance income 20,368 3, ,565 25,318 Finance costs (23,068) (10,904) - (28,523) (21,659) (84,154) Profit/(loss) before taxation 54,095 (21,978) 60, ,685 (17,480) 248,100 Income tax expense (26,744) 7,339 (20,170) (30,827) (14,186) (84,587) Profit/(loss) for the year 27,352 (14,639) 40, ,858 (31,666) 163,513 Total assets 363, , ,141 1,435, ,242 2,954,471 Total liabilities 269, ,910 50, , ,010 1,262,775 Capital expenditure 3,693 34,603 4,621 15,098 29,812 87,827 Total depreciation , ,935 45,055 83,349

42 42 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) For the year ended 31 March Company 6. Other operating income Sundry income 6,215 10,220 16,402 19,480 Dividend received from subsidiaries ,501 Profit on disposal of long term investments Profit on disposal of property, plant and equipment 18,273 15,866 3,067 4,155 Rent income 71,140 63,731 71,140 63,731 95,704 89,817 90,685 95, Results from operating activities 7.1 Results from operations is stated after charging: Depreciation on - Property, plant and equipment 79,011 78,598 28,229 27,153 - Investment property 4,806 4,751 4,806 4,751 Directors emoluments 20,470 22,542 18,610 13,777 Personnel expenses (Note 7.3) 248, , , ,373 Other expenses (Note 7.4) 12, Auditors remuneration - Audit fees and expenses 2,635 2,375 1,625 1,475 - Non-audit services 1,250 1,417 1,250 1,417 Provision for obsolete inventories 36,289 30,413 36,039 27,216 Provision for impairment of trade receivables 9,645 3,033 8,710 3,033 Provision for impairment of other receivables 3,462 5,398 1,518 3, Results from operations comprise those of the: Company 349, , , ,893 Subsidiary companies 25,471 (16,957) , , , , Personnel expenses : Salaries and wages 214, , , ,311 Contribution to defined contribution plans (EPF/MSPS/ ETF) 23,551 25,065 14,358 14,233 Contribution to defined benefit plan for gratuity 11,124 10,349 6,276 5, , , , , Other expenses Impairment loss on goodwill 12, ,

43 C. W. MACKIE PLC / ANNUAL REPORT For the year ended 31 March Company 8. Net financing costs Interest costs Interest on other borrowings 45,019 64,710 36,442 54,253 Lease interest 15,310 19,444 1,004 1,984 Interest on inter company balances - - 5,133 5,168 Net foreign exchange loss 2,340 1,205-62,669 84,154 43,784 61,405 Interest income Interest on fixed deposits/savings accounts (521) (581) (371) (313) Interest from inter company balances - - (6,604) (15,706) Net foreign exchange gain - (24,639) - (21,669) Dividend income on available-for-sale investments (2) (98) (2) (98) (523) (25,318) (6,977) (37,786) 62,146 58,836 36,807 23, Income tax expense 9.1 Current tax expense Income tax on current year's profit (Note 9.3) 101,476 90,569 96,628 86,134 Under/(over) provision for previous year (1,806) 982 (1,955) 1,461 99,670 91,551 94,673 87,595 Deferred tax expense Deferred taxation (Note 27) 3,484 (6,964) 2,186 2,317 3,484 (6,964) 2,186 2, ,154 84,587 96,859 89, The Company and subsidiaries are liable for income tax at 12% on taxable profits on non-traditional exports and 28% on other profits in accordance with the provisions of Inland Revenue Act No. 10 of 2006, as amended.

44 44 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) For the year ended 31 March Company 9.3 Reconciliation of accounting profit to income tax: Profit before income tax 312, , , ,274 Less: Other sources of income (14,816) (78,753) (6,977) (78,753) Aggregate disallowable expenses 199, , ,672 63,136 Aggregate allowable expenses (132,748) (129,251) (70,583) (50,092) Aggregate disallowable income (18,272) (7,546) (3,065) 4,165 Other sources of income 12,593 80,691 6,638 73,677 Total statutory income 359, , , ,407 Set off of accumulated tax losses (3,651) (4,669) - - Assessable income 355, , , ,407 Taxable income 355, , , ,407 Applicable tax rates: Income 28% 99,878 88,539 95,172 85,136 Income 12% 1,598 2,030 1, Total income tax on taxable profit 101,476 90,569 96,628 86, Accumulated tax losses Tax losses at the beginning of the period 96,945 41, Adjustment to the tax loss brought forward 10, Loss for the year 14,900 60, Acquisition of subsidiary 157, Tax loss set off during the year (3,651) (4,669) - - Tax losses at the end of the year 275,823 96, Economic service charge Balance at the beginning of the year 1,907 2, Payments made during the year 1,635 9,752-8,221 Set off against income tax (899) (9,918) - (8,221) Balance at the end of the year 2,643 1, Basic earnings per share (Rupees) The calculation of earnings per share is based on the profit for the year attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding during the year as given below, as per the requirements of the Sri Lanka Accounting Standard (LKAS 33) - Earnings per Share. For the year ended 31 March Company Net profit attributable to ordinary shareholders () 208, , , ,362 Weighted average number of ordinary shares 35,988,556 35,988,556 35,988,556 35,988,556 Basic earnings per share (Rupees) Dividend per share (Rupees) Gross dividend paid during the year (Rupees) 107,965,668 35,988, ,965,668 35,988,556 Weighted average number of ordinary shares 35,988,556 35,988,556 35,988,556 35,988,556 Dividend per share (Rupees)

45 C. W. MACKIE PLC / ANNUAL REPORT C. W. MACKIE PLC / ANNUAL REPORT Property, plant and equipment 12.1 Property, plant and equipment - As at 31 March Cost Balance at the beginning of the year Additions during the year Buildings on Leasehold Land Freehold Land Freehold Buildings Plant, Machinery and Tools Computer and other Installations Leasehold Motor Vehicles Freehold Motor Vehicles Furniture and Fittings Capital Work-in- Progress Total Total 38, , , ,504 31, ,233 53,300 40,661 3,038 1,250,067 1,200, ,293 8,153 7,366 18,264 5,483 5, ,003 87,063 Acquisition of subsidiary - 33,000 39,507 19,778 7, ,575 1, ,516 - Disposals during the (900) - (32,287) (4,312) (152) - (37,651) (35,382) year Transfers - - 3, (3,038) - (1,695) Balance at the end of 38, , , ,535 46, ,072 58,046 47, ,364,935 1,250,067 the year Accumulated depreciation Balance at the beginning of the year Depreciation charge for the year 6,402-11, ,383 19,584 85,360 42,106 25, , ,625 2,463-5,975 25,718 3,394 35,235 3,328 2,898-79,011 78,598 Acquisition of subsidiary - - 4,182 12,114 4, ,318 1,043 24,952 - Disposals during the (900) - (25,572) (4,310) (80) - (30,862) (28,278) year Transfers (284) Balance at the end of 8,865-21, ,315 27,054 95,242 44,442 29, , ,661 the year Written down value : As at 31 March 29, , ,403 96,220 19,083 82,830 13,604 18, ,173 As at 31 March 32, , , ,121 12, ,873 11,194 15,368 3, ,406

46 46 C. W. MACKIE PLC / ANNUAL REPORT -14 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) 12.2 Property, plant and equipment - Company As at 31 March Buildings on Leasehold Land Freehold Land Freehold Buildings Plant, Machinery and Tools Computer and other Installations Leasehold Motor Vehicles Freehold Motor Vehicles Furniture and Fittings Cost Balance at the beginning of the year 38, , , ,857 34,055 20,898 38,579 27, , ,414 Additions during the year ,772 7,046-5,483 5,348 24,649 25,700 Disposals during the year (900) - (850) (3,688) (152) (5,590) (5,451) Balance at the end of the year 38, , , ,729 41,101 20,048 40,374 32, , ,663 Total Total Accumulated depreciation Balance at the beginning of the year 6,402-5, ,989 23,793 12,816 29,045 18, , ,467 Depreciation charge for the year 2,463-2,820 11,789 3,284 2,881 3,047 1,945 28,229 27,153 Disposals during the year (900) - (850) (3,686) (80) (5,516) (5,255) Balance at the end of the year 8,865-8, ,878 27,077 14,847 28,406 20, , ,365 Written down value : As at 31 March 29, , ,375 32,851 14,024 5,201 11,968 11, ,644 As at 31 March 32, , ,195 37,868 10,262 8,082 9,534 8, ,298

47 C. W. MACKIE PLC / ANNUAL REPORT Investment property As at 31 March Company Cost Balance at the beginning of the year 62,344 61,580 62,344 61,580 Additions Balance at the end of the year 62,344 62,344 62,344 62,344 Accumulated depreciation Balance at the beginning of the year 9,488 4,737 9,488 4,737 Depreciation charge for the year 4,806 4,751 4,806 4,751 Balance at the end of the year 14,294 9,488 14,294 9,488 Written down value as at 31 March 48,050 52,856 48,050 52,856 The Company has rented out a part of C. W. Mackie PLC building complex and the value of land and buildings of that portion has been classified as' investment property' and accounted on cost model as required by LKAS 40-Investment Property. As per the valuation carried out on 31 March 2011, by Mr. K. T. D. Tissera, an independent professional Valuer J. P. U. M., Diploma in Valuation (Sri Lanka), F. R. I. C. S.(Eng.), F. I. V. (Sri Lanka), Chartered Valuation Surveyor, fair value of the investment property is Rs.62 million. The properties were valued on an open market value for existing use basis. Rent income is included in the Statement of Comprehensive Income as: For the year ended 31 March Rent income 71,140 63,731 71,140 63,731 Direct operating expenses arising from investment property that generated rental income during the year 21,127 27,658 21,127 27, (i) Fully depreciated property, plant and equipment still in use The gross carrying amount of fully depreciated property, plant and equipment still in use as at 31 March is Rs.253 million. Company The gross carrying amount of fully depreciated property, plant and equipment still in use as at 31 March is Rs.118 million. (ii) Leasehold motor vehicles The has taken on lease motor vehicles under a number of finance lease agreements. At the end of the primary period of such leases, the has the option to purchase the equipment at a beneficial price. (iii) Leasehold land and buildings The has taken certain land and buildings on lease. In terms of the Grant to the Company dated 22 September 1964 under the Crown Lands Ordinance, premises No.34 and 36, D. R. Wijewardena Mawatha, Colombo 10 has been leased for a period of 60 years, 8 months and 10 days (being the residue of the unexpired term under Indenture of Lease by the Crown dated 10 June 1925 granting the Company a 99 year lease of the premises from the said date). At the time of handing over the possession of the premises, the Company is not entitled to any compensation in respect of the land, buildings or improvements thereon. (iv) Assets pledged as securities against bank borrowings The Company's freehold property and machinery at Munagama, Horana factory has been pledged as security to Hatton National Bank PLC under primary mortgage in favour of the bank.

48 48 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) 12.5 Property, plant and equipment extent Location Extent No of Buildings Leasehold Land and Buildings No. 36, D. R. Wijewardena Mawatha, Colombo 10 1A, 2R, 13.86P 4 Investment Property No. 36, D. R. Wijewardena Mawatha, Colombo 10 52,923 Sq Ft 2 Freehold Land and Building Sunquick/Scan Water Bottling Plant - Munagama, Horana 3A,3R,4.00P 13 Ceymac Rubber Company Limited - Aramangagolla, Horana 5A,0R,0.45P 11 Ceymac Rubber Company Limited - Thebuwana, Narthupana 5A,1R,10.00P Capitalisation of borrowing costs During the year under review, the has not capitalised any borrowing costs. As at 31 March Company 13. Investments in subsidiaries Ceymac Rubber Company Limited , ,823 Ceytra (Private) Limited ,652 34,652 Scan Tours and Travels (Private) Limited ,807 25,807 Kelani Valley Canneries Limited , , ,282 Subsidiaries - Unquoted Ceymac Rubber Company Limited Principal Activity Manufacture, export and sale locally of technically specified rubber and manufacture and export of plantation sole crepe rubber and specialised industrial sole crepe rubber. Holding % Deemed Cost % 424, ,823 Ceytra (Private) Limited Manufacture and export of extruded, moulded and calendared rubber products % 34,652 34,652 Scan Tours and Travels (Private) Limited Motor car rentals to Companies. 100% 25,807 25,807 Kelani Valley Canneries Limited Manufacture,export and distribution of a wide range of processed tropical fruits, young coconut/king coconut water and beverage products under KVC brand % 126,874 -

49 C. W. MACKIE PLC / ANNUAL REPORT Available-for-sale investments As at 31 March No. of Shares Cost Company Quoted investments - at market value Trans Asia Hotels PLC Hotel Sigiriya PLC 14, ,092 1,106 1,092 1,106 Colombo Dockyard PLC ,171 1,192 1,171 1, Inventories Raw materials and consumables 127, ,240 76,040 73,168 Work-in-progress 3,826 2, Finished goods 575, , , , , , , ,166 Less: Provision for slow moving inventories (Note 15.1) (49,908) (20,347) (19,212) (15,405) 656, , , , Provision for slow moving inventories Balance at the beginning of the year 20,347 21,705 15,405 19,960 Acquisition of subsidiary 25, Provision made during the year 36,289 30,413 36,039 27,216 Write-off during the year (32,232) (31,771) (32,232) (31,771) Balance at the end of the year 49,908 20,347 19,212 15,405 Inventories mentioned above are stated at the lower of cost and net realisable value. Inventories amounting to Rs.557 million ( Rs.488 million) have been pledged as security for short term loans and overdraft facilities obtained from banks (Note 28.2)

50 50 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) As at 31 March Company 16. Trade and other receivables Trade receivables from related parties (Note 16.1) ,727 99,633 Trade receivables (Note 16.2) 1,534,017 1,288,356 1,261,388 1,077,243 Deposits 10,261 9,882 9,123 9,155 Loans to employees (Note 16.4) 9,508 6, Other receivables 69,745 35,828 68,653 35,564 1,623,929 1,341,517 1,456,292 1,221, Trade receivable from related parties: Ceymac Rubber Company Limited ,789 96,578 Ceytra (Private) Limited ,297 Scan Tours and Travels (Private) Limited Kelani Valley Canneries Limited - 4,530 - Ceylon Trading Company Limited E. B. Creasy & Company PLC ,727 99,633 The Company recognises interest on the amount due from subsidiary companies based on the monthly average outstanding balance at the rate of 10.5% per annum (-13.5%) Trade receivables: Trade receivables - Local sales 1,311,544 1,106,405 1,052, ,970 - Export sales 282, , ,983 94,682 1,594,534 1,305,765 1,286,088 1,094,652 Less : Provision for impairment loss (Note 16.3) (60,517) (17,409) (24,700) (17,409) 1,534,017 1,288,356 1,261,388 1,077,243 Trade Debtors amounting to Rs.1,286 million ( Rs.1,094 million) have been pledged as security for short term loans and overdraft facilities obtained from banks (Note 28.2) Provision for impairment loss: Balance at the beginning of the year 17,409 15,591 17,409 15,591 Acquisition of subsidiary 34, Provision made during the year 9,645 3,033 8,710 3,033 Write-off during the year (1,419) (1,215) (1,419) (1,215) Balance at the end of the year 60,517 17,409 24,700 17, Loans to employees: Balance at the beginning of the year 6,946 8, ,817 Acquisition of subsidiary Loans granted during the year 16,147 13,632 6,985 5,612 23,971 22,114 7,009 7,429 Recovered during the year (14,463) (15,168) (6,608) (7,405) Balance at the end of the year 9,508 6, Loans to employees represent short term staff loans and staff advances, where repayment terms are less than 12 months.

51 C. W. MACKIE PLC / ANNUAL REPORT As at 31 March Company 17. Other current assets Payments in advance 101,517 74, ,822 72,984 Tax refunds due/economic service charge 12,687 22,664 3,145 20,581 VAT/NBT receivable 52,269 52,569 21,583 21,172 Prepayments 10,077 17,803 4,557 5,803 Other receivables 4, , , , ,540 Less : Provision for receivables (Note17.1) (16,743) (13,281) (8,078) (6,560) 163, , , , Provision for receivables Balance at the beginning of the year 13,281 14,131 6,560 3,000 Provision made during the year 3,462 5,398 1,518 3,560 Reversal due to recoveries - (6,248) - - Balance at the end of the year 16,743 13,281 8,078 6, Held to maturity investments Fixed deposits 3, , Cash and cash equivalents Bank balances 65,797 69,535 36,089 57,428 Cash in hand ,542 70,106 36,659 57,929 Bank overdraft 113, ,176 84,954 90,547 Cash and cash equivalents for cash flow purpose (46,888) (46,070) (48,295) (32,618) 20. Stated capital Ordinary shares (No. of shares-35,988,556) 507, , , , , , , , Capital reserves* Adjustment due to merger of subsidiary ,909 14,909 Export development grant reserve 8,734 8, ,734 8,734 14,909 14, Revenue reserves* General reserves 7,000 7,000 7,000 7,000 Retained earnings 1,240,551 1,137,983 1,243,270 1,132,994 1,247,551 1,144,983 1,250,270 1,139,994 * Capital reserves and general reserves represent the amounts set aside by the Directors for future expansion and to meet any contingencies.

52 52 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) As at 31 March Company 23. Available-for-sale reserve Change in fair value of available-for-sale investments 1,094 1,115 1,094 1,115 1,094 1,115 1,094 1, Interest bearing long term borrowings Balance at the beginning of the year - 32,114-32,114 Obtained during the year Paid during the year - (32,114) - (32,114) Balance at the end of the year With the disposal of shareholding of The Industrialisation Fund for Developing Countries (IFU) in the Company in February 2010, AAK Treasury (AAK), having disposed of its entire holding in January 2010, in keeping with an undertaking to IFU that until the loan has been fully paid it will not divest its interest in the Company, AAK took over the remaining portion of the loan from IFU on the same terms and conditions of the restructured repayment plan of The balance portion of the long term loan owed by the Company to IFU was transferred to AAK in August Remaining balance of the IFU loan amounting to Rs.32.1 million (DKK 1.3 million) was paid in full in December 2012, together with interest. As at 31 March Company 25. Finance lease liability Balance at the beginning of the year 144, ,980 11,085 12,870 Obtained during the year 24,031 35,086-5,035 Acquisition of subsidiary 1, Early settlement discounts (603) (876) - - VAT in suspense clearance (241) (241) (241) (241) Paid during the year (55,206) (62,783) (3,854) (6,579) Balance at the end of the year 113, ,166 6,990 11,085 Interest in suspense (21,713) (30,572) (1,481) (2,728) Capital outstanding at the end of the year 91, ,594 5,509 8, Payable after one year less than five years Lease rental payable 70,970 96,129 4,021 6,990 Interest in suspense (10,464) (19,839) (720) (1,478) 60,506 76,290 3,301 5, Payable within one year Lease rental payable 42,566 48,037 2,969 4,095 Interest in suspense (11,250) (10,733) (761) (1,250) 31,316 37,304 2,208 2,845

53 C. W. MACKIE PLC / ANNUAL REPORT As at 31 March Company 26. Retirement benefit obligation Present value of defined benefit obligation (Note 26.2) 85,220 80,601 50,505 46,844 Fair value of plan assets (Note 26.3) (43,208) (43,162) (31,454) (26,052) Unrecognised actuarial gain/(loss) (Note 26.4) ,012 37,439 19,051 20,792 Arrears payable to the CWM Staff Non-Contributory Gratuity Fund (Note 26.5) 3,865 1,797 2,553 1,691 45,877 39,236 21,604 22,483 The contributions of the Company and its subsidiaries (Ceymac Rubber Company Limited and Ceytra (Private) Limited) to the defined benefit plan are determined by a formula stated in the Indenture establishing the CWM Staff Non-Contributory Gratuity Fund (Gratuity Fund). As required by the Sri Lanka Accounting Standard 19 (LKAS 19) - Employee Benefits, the Fund was actuarially valued by Mr. Piyal S. Goonetilleke, Fellow of the Society of Actuaries (USA), Member of American Academy of Actuaries, Consulting Actuary of Messrs. Piyal S. Goonetilleke and Associates, as at 31 March and the appropriate adjustments have been effected in the Financial Statements. As at 31 March Company 26.1 Plan assets consist of the following: Treasury bills 37,737 39,574 27,397 23,744 Balance with Companies 3,871 1,804 2,830 1,083 Others 1,600 1,784 1,227 1,225 43,208 43,162 31,454 26, Movement in present value of defined benefit obligations Balance at the beginning of the year 80,601 80,102 46,844 41,293 Acquisition of subsidiary 3, Current service cost 6,720 5,533 4,038 3,325 Interest cost 8,060 8,563 4,684 4,462 Benefits paid by the plan (12,181) (13,788) (2,943) (2,194) Actuarial (gain)/loss (1,804) 191 (2,118) (42) Balance at the end of the year 85,220 80,601 50,505 46, Movement in fair value of plan assets Balance at the beginning of the year 43,162 44,937 26,052 20,766 Contribution paid into gratuity fund 7,999 7,581 5,267 4,807 Benefits paid by the gratuity fund (12,181) (13,788) (2,943) (2,194) Expected return on plan assets 3,656 3,747 2,446 1,958 Actuarial (gain)/loss Balance at the end of the year 43,208 43,162 31,454 26, Unrecognised actuarial (gain)/loss Balance at the beginning of the year Actuarial (gain)/loss for year - obligation (1,804) 191 (2,118) (42) Actuarial (gain)/loss for year - plan assets (572) (685) (632) (715) Actuarial (gain)/loss recognised during the year 2, , Balance at the end of the year

54 54 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) As at 31 March Company 26.5 Arrears payable to the CWM Staff Non-Contributory Gratuity Fund Balance at the beginning of the year 1,797 3,615 1,691 2,126 Contribution for the year 7,999 7,581 5,267 4,807 Paid to the fund (5,931) (9,399) (4,405) (5,242) Balance at the end of the year 3,865 1,797 2,553 1, Amount recognised in the Statement of Comprehensive Income Recognised in profit or loss Current service cost 6,720 5,533 4,038 3,325 Interest cost 8,060 8,563 4,684 4,462 Expected return on plan assets (3,656) (3,747) (2,446) (1,958) 11,124 10,349 6,276 5,829 Recognised in the other comprehensive income Recognition of actuarial gain (2,376) (494) (2,750) (757) Total amount recognised in the Statement of Comprehensive Income 8,748 9,855 3,526 5, Actuarial assumptions Discount rate 10.50% 10% 10.50% 10% Expected return on plan assets 10.50% 10% 10.50% 10% Future salary increases 12% 12% 12% 12% Retirement age: Management staff 60 years 60 years 60 years 60 years Allied staff 60 years 60 years 60 years 60 years Other staff 55 years 55 years 55 years 55 years 26.8 Sensitivity of assumptions employed in actuarial valuation The following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed with all other variables held constant in the employment benefit liability measurement. The sensitivity of the total Comprehensive Income and Statement of 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 Sensitivity effect on Total Comprehensive Income increase/ (reduction) Company Employment benefit increase/ (reduction) in the liability Company Decrease in discount rate (1%) (7,987) (5,001) 7,987 5,001 Increase in discount rate (1%) 6,917 4,311 (6,917) (4,311) Decrease in salary escalation rate (1%) 8,244 4,945 (8,244) (4,945) Increase in salary escalation rate (1%) (9,342) (5,654) 9,342 5,654

55 C. W. MACKIE PLC / ANNUAL REPORT As at 31 March Company 27. Deferred taxation Balance at the beginning of the year 35,793 42,757 35,210 32,893 (Charge)/reversal for the year 3,484 (6,964) 2,186 2,317 Balance at the end of the year 39,277 35,793 37,396 35, Deferred tax asset (4,885) (7,774) - - Deferred tax liability 44,162 43,567 37,396 35,210 39,277 35,793 37,396 35, The effective tax rate of 28% (-28%), 17% (-15%), 13% (-19%) and 28% (-28%) were applied respectively by the Company and subsidiaries: Ceymac Rubber Company Limited, Ceytra (Private) Limited and Scan Tours and Travels (Private) Limited, for calculation of deferred tax asset/liability for the current year The deferred tax asset/ liability recognised on temporary differences is as follows: As at 31 March Temporary differences Tax Effect Temporary differences Tax Effect On property, plant and equipment 295,524 67, ,139 60,752 On retirement gratuity (45,877) (9,369) (39,236) (8,950) On tax losses carried forward (118,268) (18,688) (96,945) (16,009) 131,379 39, ,958 35,793 Company Temporary differences Tax Effect Temporary differences Tax Effect On property, plant and equipment 155,162 43, ,233 41,505 On retirement gratuity (21,604) (6,049) (22,483) (6,295) 133,558 37, ,750 35, Deferred tax asset - Kelani Valley Canneries Limited Kelani Valley Canneries Limited has not recognised the deferred tax asset amounting to Rs.39 million for the year ended 31 March, as the Management was of the view that the asset will not be crystallised in the foreseeable future. The unrecognised deferred tax asset on temporary differences is as follows: As at 31 March Temporary Tax effect differences On property, plant and equipment 21,915 6,136 On retirement gratuity (3,825) (1,071) On tax losses carried forward (157,555) (44,116) (139,465) (39,051)

56 56 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) As at 31 March Company 28. Interest bearing short term borrowings Short term money market loans 780, , , , , , , , Sources of finance Hatton National Bank PLC 229, , , ,035 Commercial Bank of Ceylon PLC 118,000 86, ,000 86,500 NDB Bank PLC 343,201 73, ,201 73,254 Standard Chartered Bank PLC 90,000 90,000 90,000 90, , , , , Assets pledged as securities against short term borrowings Lending Institution Facility Obtained Assets Pledged Interest Rate C. W. Mackie PLC Hatton National Bank PLC For financing of exports, imports and working capital requirements Commercial Bank of Ceylon PLC For financing of exports, imports and working capital requirements NDB Bank PLC For financing of exports, imports and working capital requirements Standard Chartered Bank PLC For financing of exports, imports and working capital requirements Ceymac Rubber Company Limited Hatton National Bank PLC To finance the manufacture and export of rubber and for working capital requirements Primary and secondary mortgage over stocks and book debts. Registered primary floating mortgage over land, building and machinery at the Munagama, Horana factory Primary and secondary mortgage over stocks and book debts Primary and secondary mortgage over stocks and book debts Primary mortgage over stocks and book debts Registered primary floating mortgage over stocks and book debts Corporate guarantee of C. W. Mackie PLC Rs.99 million Available money market rates Available money market rates Available money market rates Available money market rates Available money market rates

57 C. W. MACKIE PLC / ANNUAL REPORT As at 31 March Company 29. Income tax payable Balance at the beginning of the year 48, ,807 46,976 85,686 Add: Income tax provision for the year 101,476 90,569 96,628 86,134 Under/(over) provision in respect of previous year (1,806) 982 (1,955) 1,461 Less: Income Tax/ESC Payments during the year (104,562) (144,561) (98,935) (126,305) Balance at the end of the period 43,905 48,797 42,714 46, Trade and other payables Trade payables to related parties (Note 30.1) 1,978 9,722 67,646 59,109 Other trade payables 277, , , ,400 Dividends payable 3,486 2,717 3,486 2,717 Accruals 34,982 32,955 27,184 29,797 Other payables 55,426 45,680 43,837 42, , , , , Trade payables to related parties: Scan Tours and Travels (Private) Limited ,842 3,849 Ceytra (Private) Limited ,826 17,974 Ceymac Rubber Company Limited ,564 Lankem Tea and Rubber Plantations (Private) Limited 22 9, Union Commodities (Private) Limited 1,956 1,956-1,978 9,722 67,646 59,109 The Company recognises interest on the amount due from subsidiary companies based on the monthly average outstanding balance at the rate of 10.5% per annum (-13.5%). 31. Other current liabilities VAT/NBT payables 31,180 15,630 26,985 15,469 Provisions 65,944 68,357 63,492 63,576 Other payables 267 9, ,983 97,391 93,117 90,744 81,028

58 58 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) 32. Related party disclosures 32.1 Related party transactions Transactions with subsidiary companies Name of the Related Party Relationship Nature of the Transaction Amounts (Paid) / Received For the year ended 31 March Rs. Ceymac Rubber Company Limited Subsidiary Interest on current account balance 6,604,549 15,705,979 Service fees 6,600,000 6,560,000 Directors: Dividend received - 8,501,355 Mr. W. T. Ellawala, Mr. E. A. A. K. Edirisinghe, Mr. A. I. Piyadigama Corporate guarantee of C. W. Mackie PLC for packing credit/short term loans and export bill discounting facilities of Rs.99.0 million to Hatton National Bank PLC Rs. Scan Tours and Travels (Private) Limited Subsidiary Interest on current account balance (2,961,124) 1,294,867 Vehicle hire charges (44,002,966) (45,481,898) Directors: Mr. W. T. Ellawala, Ms. C. R. Ranasinghe, Mr. E. A. A. K. Edirisinghe, Mr. K. T. A. Mangala Perera Ceytra (Private) Limited Subsidiary Interest on current account balance (2,180,327) 3,393,198 Service fees 3,600,000 2,700,000 Directors: Inter company purchases 4,025,720 11,848,650 Mr. W. T. Ellawala, Mr. E. A. A. K. Edirisinghe, Mr. A. I. Piyadigama, Mr. G. A. de Silva Corporate guarantee of C. W. Mackie PLC for packing credit/short term loans and export bill discounting facilities of Rs.8.0 million to Hatton National Bank PLC. Kelani Valley Canneries Limited Subsidiary Inter company purchases 8,587,950 - Directors: Mr. K. T. A. Mangala Perera*, Mr. Anushman Rajaratnam*, Ms. C. R. Ranasinghe* Transactions with other related companies Ceylon Trading Company Limited Affiliate Rent income 2,100,000 2,100,000 Secretarial and legal fees (11,636,244) (7,463,885) Directors: Management fees overheads (15,034,941) (12,285,603) Mr. W. T. Ellawala, Ms. C. R. Ranasinghe Maersk Lanka (Private) Limited Affiliate Rent income 18,263,972 16,820,578 Recovery of overheads 11,438,218 12,410,407 Director: Mr. W. T. Ellawala

59 C. W. MACKIE PLC / ANNUAL REPORT Name of the Related Party Relationship Nature of the Transaction Amounts (Paid) / Received For the year ended 31 March Rs. Janashakthi Insurance PLC Common director Insurance premium paid 4,612,950 6,604,694 Rs. Director/Chairman: Mr. W. T. Ellawala Kotagala Plantations PLC Common directors Purchase of rubber through commodity brokers at the auction 117,607,875 99,320,350 Directors: Mr. R. C. Peries, Mr. S. D. R. Arudpragasam Lankem Tea & Rubber Plantations (Private) Limited Common directors Purchase of tea (28,957,126) (101,601,308) Directors: Mr. A. Rajaratnam, Mr. S. D. R. Arudpragasam, Mr. Anushman Rajaratnam Union Commodities (Private) Limited Common directors Purchase of tea (36,168,187) - Directors: Mr. A. Rajaratnam, Mr. Anushman Rajaratnam Lankem Ceylon PLC Common directors Short term fund transfers (64,000,000) (25,000,000) Directors: Mr. A. Rajaratnam, Mr. S. D. R. Arudpragasam, Mr. Anushman Rajaratnam E. B. Creasy & Company PLC Common directors Sales of sugar and Scan branded products 115, ,118 Directors: Mr. A. Rajaratnam, Mr. S. D. R. Arudpragasam C. W. Mackie Staff Non-Contributory Gratuity Fund Defined benefit plan Amount paid to gratuity fund (4,404,856) (5,241,870) Amount paid by gratuity fund to employees 2,943,125 2,194,300 * Mr. K. T. A. Mangala Perera, Mr. Anushman Rajaratnam, Ms. C. R. Ranasinghe - Appointed on 31 March There were no transactions entered into by the Company during the year in the ordinary course of business, the value which exceeded 10% of the shareholders equity or 5% of the total assets of the Company as at 31 March.

60 60 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) 32.2 Compensation of key management personnel Key management personnel include members of the Board of Directors of the Company and Subsidiaries. Company For the year ended 31 March Short-term employee benefits 20,470 19,985 18,610 13,777 Termination benefits - 2, Total compensation paid to key management personnel 20,470 22,542 18,610 13, Events after the reporting date The Directors of C. W. Mackie PLC have recommended the payment of a first and final dividend of Rs.3/- per ordinary share amounting to Rs.107,965,668/- for the year ended 31 March for approval by the shareholders at the Annual General Meeting to be held on 27 June. In accordance with Sri Lanka Accounting Standard 10 (LKAS 10)- Events after the Reporting Period, this proposed dividend has not been recognised as a liability as at 31 March. Subsequent to the reporting date, no other circumstances have arisen that would require adjustment to or disclosure in the Financial Statements other than as disclosed above. 34. Contingent liabilities The following contingent liabilities exist as at the reporting date on account of the letters of comfort and guarantees given by the Company: Outstanding as at 31 March (Rs. Mn) Letters of comfort and guarantees provided on behalf of the subsidiaries (Rs. Mn) Ceymac Rubber Company Limited Ceytra (Private) Limited 8 8 Total Outstanding short term loan facility Ceymac Rubber Company Limited Total These corporate guarantees have been provided for Hatton National Bank PLC on behalf of the subsidiary companies Ceymac Rubber Company Limited and Ceytra (Private) Limited, for short term loan facilities, where repayment terms are less than 12 months. There are no material contingent liabilities outstanding as at the reporting date other than those disclosed above which require adjustments to or disclosures in Financial Statements. 35. Capital commitments There are no material capital commitments as at the reporting date. 36. Comparative figures Comparative figures have been reclassified to conform to the current year presentation.

61 C. W. MACKIE PLC / ANNUAL REPORT Financial risk management The Board of Directors have overall responsibility for the establishment and oversight of the risk management framework, including policies and procedures. In discharging its governance responsibility it operates through two key committees - the Management Committee and the Board of Directors Audit Committee. Risk management framework is reviewed regularly to reflect changes. The Company has exposure to the following risks from its use of financial instruments: Credit risk (Note 37.1) Liquidity risk (Note 37.2) Market risk (Note 37.3) Operational risk (Note 37.4) This Note presents information about the s exposure to each of the above risks, the s objectives, policies and processes for measuring and managing risks and the s management of capital Credit risk Credit risk is the risk of financial loss to the Company if a customer fails to meet its contractual obligations and arises principally from the Company s receivables from customers. Exposure to credit risk As at 31 March Carrying amount Company Trade receivables from related parties ,727 99,633 Trade receivables 1,534,017 1,288,356 1,261,388 1,077,243 Deposits 10,261 9,882 9,123 9,155 Loans to employees 9,508 6, Other receivables 69,745 35,828 68,653 35,564 Held to maturity investments 3, Balances with banks 65,797 69,535 36,089 57,428 Total 1,692,736 1,411,052 1,492,381 1,279,047 Trade and other receivables The s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, the Management also considers the demographics of the s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk. However, geographically there is no concentration of credit risk.

62 62 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) Impairment losses The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance is a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets. The aging of trade receivables at the reporting date was as follows: As at 31 March Gross Balance Impairment Gross Balance Impairment Past due 0-30 days 1,117, ,016 3,743 Past due days 324,622 3, ,806 2,734 Past due days 99,928 6,982 59,507 3,496 More than one year 52,131 50,131 7,436 7,436 Total 1,594,534 60,517 1,305,765 17,409 Company As at 31 March 31 March Gross Balance Impairment Gross Balance Impairment Past due 0-30 days 925, ,990 3,743 Past due days 271,547 2, ,196 2,734 Past due days 69,779 4,720 53,030 3,496 More than one year 19,533 17,533 7,436 7,436 Total 1,286,088 24,700 1,094,652 17,409 The Company holds collateral against some long outstanding customers in the form of bank guarantees and they have been considered when assessing impairment loss. The maximum exposure to credit risk for trade receivables as at the reporting date by geographic was as follows: As at 31 March Carrying amount Company Domestic 1,230,283 1,088,997 1,007, ,561 Asian region 112,433 93,483 84,603 16,130 European region 176,818 89, ,366 75,566 African region - 1, Latin American region - 2,986-2,986 Northern American region 14,483 11,182 11,738 - Total 1,534,017 1,288,356 1,261,388 1,077,243

63 C. W. MACKIE PLC / ANNUAL REPORT Available-for-sale investments Sector wise analysis of available-for-sale equity securities: Company As at 31 March 31 March Sector Cost Market % Cost Market % Value Value Hotels and travels 66 1,124 96% 66 1,124 96% Construction and engineering % % Total 68 1, % 68 1, % As at 31 March 31 March Sector Cost Market % Cost Market % Value Value Hotels and travels 66 1,134 95% 66 1,134 95% Construction and engineering % % Total 68 1, % 68 1, % Held to maturity investments The has invested Rs.3.01 million on fixed deposits as at 31 March which represent its maximum credit exposure on these assets. Cash and cash equivalents The and Company held cash and cash equivalents of Rs.66.5 million ( - Rs.70.1 million) and Rs.36.6 million ( - Rs.57.9 million) retrospectively at 31 March which represent its maximum credit exposure on these assets. Guarantees The s policy is to provide financial guarantees only to wholly-owned subsidiaries. These corporate guarantees have been provided for Hatton National Bank PLC on behalf of the subsidiaries' short term loan facilities where repayment terms are less than 12 months. Outstanding as at 31 March Rs. Mn. Letters of comfort and guarantees provided on behalf of the subsidiaries Rs. Mn. Ceymac Rubber Company Limited Ceytra (Private) Limited 8 8 Total Outstanding short term loan facility Ceymac Rubber Company Limited Total 89 71

64 64 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) 37.2 Liquidity risk Liquidity risk is the risk that the will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The 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 s reputation. As at 31 March, has unutilsed bank facilities amounting to Rs.333 million representing 32% of the total bank facilities from the principal bankers, i.e. Hatton National Bank PLC, Commercial Bank of Ceylon PLC, NDB Bank PLC and Standard Chartered Bank PLC. The following are the contractual maturities of financial liabilities: As at 31 March Carrying amount 0-12 months More than 1 year Carrying amount 0-12 months More than 1 year Financial liabilities (Non derivatives) Interest bearing short term borrowings 780, , , ,197 - Finance lease liability 91,822 31,316 60, ,594 37,304 76,290 Trade and other payable 371, , , ,369 - Trade payables to related parties 1,978 1,978-9,722 9,722 - Bank overdraft 113, , , ,176 - Total 1,358,566 1,298,060 60,506 1,038, ,768 76,290 Company As at 31 March Carrying amount 0-12 months More than 1 year Carrying amount 0-12 months More than 1 year Financial liabilities (Non derivatives) Interest bearing short term borrowings 691, , , ,789 - Interest bearing long term borrowings Finance lease liability 5,509 2,208 3,301 8,357 2,845 5,512 Trade and other payable 314, , , ,353 - Trade payables to related parties 67,646 67,646-59,109 59,109 - Bank overdraft 84,954 84,954-90,547 90,547 - Total 1,164,035 1,160,734 3, , ,643 5,512 It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

65 C. W. MACKIE PLC / ANNUAL REPORT Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the 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 Currency risk The is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than Sri Lankan Rupees (LKR), The foreign currencies in which the set transactions primarily denominated are United Stated Dollars (USD) and Euro. Exposure to currency risk The s exposure to foreign currency risk was as follows based on notional amounts: As at 31 March USD Euro USD Euro Short term borrowings - - (563,373) - Trade and other payables (198,438) (481,968) (124,807) (458,552) Trade and other receivables 2,099,487 63,300 1,260, ,850 Cash and cash equivalents 278,300 15, ,321 1,725 Gross statement of financial position exposure 2,179,349 (402,937) 1,556,690 (299,977) Company As at 31 March USD Euro USD Euro Trade and other payables (198,438) (481,968) (124,807) (458,552) Trade and other receivables 1,865,551 63, ,317 85,000 Cash and cash equivalents 163,311 15, , Gross statement of financial position exposure 1,830,424 (402,937) 1,408,588 (372,747) The following significant exchange rates were applicable during the year: Average rate Reporting date spot rate Rs. Rs. Rs. Rs. USD Euro

66 66 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) Sensitivity Analysis A strengthening or weakening of the LKR, as indicated below, against the USD and Euro at 31 March would have increased/ (decreased) the equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. Strengthening Profit or Loss Weakening Profit or Loss As at 31 March USD (10% movement) (28,549) 28,549 Euro (10% movement) 7,239 (7,239) As at 31 March USD (10% movement) (19,731) 19,731 Euro (10% movement) 4,861 (4,861) Company As at 31 March USD (10% movement) (23,979) 23,979 Euro (10% movement) 7,239 (7,239) As at 31 March USD (10% movement) (17,854) 17,854 Euro (10% movement) 6,041 (6,041) Interest rate risk The s objective is to maintain an efficient operational interest cost structure to minimise the adverse effects of fluctuating interest rates. At the reporting date, the Company s interest-bearing financial instruments were as follows: As at 31 March Carrying amount Company Fixed rate instruments Financial assets Related party receivables - subsidiaries ,789 99,128 Financial liabilities Related party payables - subsidiaries - - (65,668) (49,387) ,121 49,741 Variable rate instruments Financial assets RFC deposits 39,348 50,539 24,199 39,025 Fixed deposit 3, Bank overdrafts (113,430) (116,176) (84,954) (90,547) Short term money market borrowings (780,240) (521,197) (691,240) (449,789) (851,312) (586,834) (751,995) (501,311)

67 C. W. MACKIE PLC / ANNUAL REPORT Sensitivity analysis for variable rate instruments The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the profit before tax: As at 31 March Profit or Loss Profit or Loss Variable rate instruments (1% decrease) 8,543 5,868 Variable rate instruments (1% increase) (8,543) (5,868) Company Variable rate instruments (1% decrease) 7,520 5,013 Variable rate instruments (1% increase) (7,520) (5,013) 37.4 Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the s processes, personnel, technology and infrastructure and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the s operations. The s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity Capital management The 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. The Board of Directors monitors the return on capital, which the defines as result from operating activities divided by total shareholders equity, excluding no controlling interests. The Board of Directors also monitors the level of dividends to ordinary shareholders. The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. Accordingly, major part of the borrowings comprise short term money market loans and bank overdrafts with variable interest rates being used only to manage the working capital requirements of the day-to-day operations of the. The s debt to adjusted capital ratio at the end of the reporting period was as follows: As at 31 March Company Total liabilities 1,589,901 1,262,775 1,356,493 1,060,852 Less: Cash and cash equivalents (66,542) (70,106) (36,659) (57,929) Net debts 1,523,359 1,192,669 1,319,834 1,002,923 Total equity 1,764,426 1,661,879 1,773,320 1,663,065 Net debt to equity ratio There were no changes in the Company s approach to capital management during the year and the Company is not subject to externally imposed capital requirements.

68 68 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes to the Financial Statements (Contd.) 37.6 Accounting classification and fair value Fair value vs the carrying amount The fair values of financial assets and liabilities, together with the carrying amounts shown in the Statement of Financial Position, are as follows: As at 31 March Carrying amount Rs. 000's Fair value Rs. 000's Carrying amount Rs. 000 s Fair value Rs. 000's Assets Trade receivables from subsidiaries Trade receivables 1,534,017 1,534,017 1,288,356 1,288,356 Deposits 10,261 10,261 9,882 9,882 Loans to employees 9,508 9,508 6,946 6,946 Other receivables 69,745 69,745 35,828 35,828 Held to maturity financial assets 3,010 3, Balances with banks 65,797 65,797 69,535 69,535 1,692,736 1,692,736 1,411,052 1,411,052 Liabilities Interest bearing short term borrowings 780, , , ,197 Finance lease liability 91,822 91, , ,594 Trade and other payable 371, , , ,369 Trade payables to related parties 1,978 1,978 9,722 9,722 Bank overdraft 113, , , ,176 1,358,566 1,358,566 1,038,058 1,038,058 Company As at 31 March Carrying amount Rs. 000's Fair value Rs. 000's Carrying amount Rs. 000's Fair value Rs. 000's Assets Trade receivables from subsidiaries 116, ,727 99,633 99,633 Trade receivables 1,261,388 1,261,388 1,077,243 1,077,243 Deposits 9,123 9,123 9,155 9,155 Loans to employees Other receivables 68,653 68,653 35,564 35,564 Balances with banks 36,089 36,089 57,428 57,428 1,492,381 1,492,381 1,279,047 1,279,047 Liabilities Interest bearing short term borrowings 691, , , ,789 Finance lease liability 5,509 5,509 8,357 8,357 Trade and other payable 314, , , ,353 Trade payables to related parties 67,646 67,646 59,109 59,109 Bank overdraft 84,954 84,954 90,547 90,547 1,164,035 1,164, , ,155

69 C. W. MACKIE PLC / ANNUAL REPORT Ten Year Historical Summary Year December 31 March OPERATING RESULTS Revenue 2,435,190 2,565,339 4,326,909 4,409,163 5,322,668 4,622,730 9,317,046 9,703,084 7,647,208 7,343,741 Results from operating 162, , , , , , , , , ,629 activities Net financing costs (56,433) (21,243) (81,295) (91,552) (100,472) (97,336) (64,987) (77,604) (58,836) (62,146) Other operating expenses (23,803) (51) Profit before taxation 106, , , ,137 49, , , , , ,483 Tax expense (37,139) (40,245) (35,682) 10,748 (3,297) (66,286) (94,232) (115,972) (84,587) (103,154) Profit after tax 69,326 60, , ,885 46, , , , , ,329 Non-controlling interests (2,685) 1,507 (3,505) (7,469) (702) (11,820) (1,592) (2,296) (1,503) (1,013) Profit for the year 66,641 62, , ,415 45, , , , , ,316 FINANCIAL POSITION Assets Non-current assets 421, , , , , , , , , ,279 Current assets 787, ,083 1,214,775 1,120,507 1,176,989 1,149,967 2,227,319 2,427,909 2,102,243 2,514,238 Total assets 1,208,808 1,274,243 1,671,228 1,808,923 1,938,212 1,896,665 3,013,288 3,281,685 2,954,471 3,400,517 Equity and liabilities Equity Share capital 359, , , Share pemium 161, , , Stated capital , , , , , , ,047 Capital reserves 305, , , , , ,359 8,734 8,734 8,734 8,734 Revenue reserves (404,673) (342,581) (213,673) (110,519) (69,714) 24, ,808 1,018,527 1,144,983 1,247,551 Available-for-sale reserve ,172 1,014 1,115 1,094 Equity attributable to equity holders of the Company 421, , , , , ,004 1,223,761 1,535,322 1,661,879 1,764,426 Non-controlling interests 4,353 3,280 5,078 13,431 14,133 25,953 26,620 28,397 29,817 46,190 Total equity 426, , , , ,275 1,001,957 1,250,381 1,563,719 1,691,696 1,810,616 Non-current liabilities 276, , , , , , , , , ,545 Current liabilities 505, , , , , ,030 1,557,335 1,532,809 1,103,682 1,439,356 Total equity and liabilities 1,208,808 1,274,243 1,671,228 1,808,923 1,938,212 1,896,665 3,013,288 3,281,685 2,954,471 3,400,517 RATIOS Basic earnings per share (Rupees) Revenue growth rate (%) 37.8% 5.3% 68.7% 1.9% 20.7% -13.2% 101.5% 4.1% -21.2% -4.0% Net profit ratio (%) 2.7% 2.4% 3.2% 2.5% 0.9% 2.3% 2.7% 4.0% 2.1% 2.8% Current ratio (1:) Net asset per share (Rupees) Net return on capital 5.7% 4.8% 8.6% 6.5% 2.4% 6.3% 8.5% 12.0% 5.5% 6.2% employed (%) Dividends per share (Rupees) Dividend payout ratio (%) 0% 29% 26% 24% 59% 34% 14% 19% 22% 52%

70 70 C. W. MACKIE PLC / ANNUAL REPORT -14 Consolidated Statement of Value Added Organisations utilise raw materials and other inputs to create a saleable product. The difference between the sales income and the cost of bought-in-materials and services is generally regarded as the value added by the organisation. Value added, therefore, denotes the contribution made to the nation s economy by the efforts of employers and employees, i.e. the wealth created by an organisation s activities. The following statement shows the contribution made to the Sri Lankan economy by C.W.Mackie PLC and its subsidiary companies and their employees during the last two (2) years. This total value added was distributed to the employees, the Government of the Democratic Socialist Republic of Sri Lanka, lenders and providers of capital, with a part being retained for use within the : For the year ended 31 March Rs. million Rs. million Value added Sales made to external customers 7, ,647.2 Less: material and services brought in from outside (5,551.9) (6,150.4) 1, ,496.8 Add : other income/expenses (net) Total value added available for distribution 1, ,586.6 % % Distribution To employees as wages, salaries and benefits Taxation to Government -import duties and VAT/NBT 1, export duties income tax Economic Service Charge 1.6 1, To lenders -interest Providers of equity capital -dividends Retained in business -depreciation on fixed assets retained earnings Total value added distributed 1, , No. of employees in * Value added per employee ( Rs.000) 3,495 2,833 * Excluding KVC employees Distribution of Value Addition

71 C. W. MACKIE PLC / ANNUAL REPORT Investor Information Financial Calendar Ninety First Annual General Meeting - 27 June Interim Reports First Quarterly Report 3 months to 30 June - 8 August Second Quarterly Report 6 months to 30 September - 8 November Third Quarterly Report 9 months to 31 December - 7 February Fourth Quarterly Report 12 months to 31 March - 12 May Annual Report - Financial Year - 30 May Ninety Second Annual General Meeting - 27 June Distribution Schedule of Shareholders Holdings (Shares) No. of Holders 31 March 31 March Total Shares Holdings % No. of Holders Total Shares Holdings % 1-1,000 1, , , , ,001-10, , , , , ,055, ,114, ,001-1,000, ,857, ,739, Over - 1,000, ,970, ,970, ,962 35,988, ,002 35,988,

72 72 C. W. MACKIE PLC / ANNUAL REPORT -14 Investor Information (Contd.) Twenty Largest Shareholders as at 31 March Name of Shareholder 31 March 31 March No. of Shares (Voting) % No. of Shares (Voting) % 1 Lankem Ceylon PLC 12,267, ,267, Seylan Bank PLC/ Dr. T. Senthilverl 10,765, ,765, Kotagala Plantations PLC 7,157, ,157, Pan Asia Banking Corporation PLC/ Lankem Ceylon PLC 1,779, ,779, Amana Bank Limited , Mr. P. Anandarajah 155, , Mr. M. A. Lukmanjee 155, , Navara Capital Limited 147, , Employees Provident Fund 139, , Nuwara Eliya Property Developers (Private) Limited 138, , Mr. T. L. M. Imtiaz 135, , Mr. M. Radhakrishnan (deceased) 130, , Mr. H. N. De Silva 125, , Sir F. I. Rahimtoola 90, , Mr. M. M. M. Mizver 76, , Mr. C. R. D. Fernando 65, , Dr. M. A. M. Arafath Akram 58, Mr. Z. G. Carimjee 57, , Mr. R. A. Rishard 54, , Andaradeniya Estate (Private) Limited 50, , Categories of Shareholders Categories No. of Holders 31 March 31 March Share Holding Total % No. of Holders Share Holding Total % Individuals 1,883 2,546, ,923 2,646, Institutions 79 33,442, ,342, ,962 35,988, ,002 35,988, Public 1,959 4,018, ,999 4,018,

73 C. W. MACKIE PLC / ANNUAL REPORT Notice of Meeting NOTICE IS HEREBY GIVEN that the Ninety Second Annual General Meeting of C. W. Mackie PLC will be held in the Auditorium, Sri Lanka Foundation Institute, 100, Independence Square, Colombo 7 on Friday, 27 June at 2.30 p.m. for the following purposes : 1. To receive and consider the Annual Report of the Board of Directors and Financial Statements for the year ended 31 March with the Report of the Auditors thereon. 2. To declare a Dividend as recommended by the Directors. 3. To re-elect Mr. S. D. R. Arudpragasam, who retires by rotation in terms of Article 89 of the Articles of Association, as a Director of the Company. 4. To approve the re-appointment of Mr. W. T. Ellawala, who is over 70 years of age, under and in terms of Section 211 of the Companies Act No. 7 of 2007 as a Director of the Company*. 5. To approve the re-appointment of Deshabandu A. M. de S. Jayaratne, who is over 70 years of age, under and in terms of Section 211 of the Companies Act No. 7 of 2007 as a Director of the Company**. 6. To approve the re-appointment of Mr. R. C. Peries, who is over 70 years of age, under and in terms of Section 211 of the Companies Act No. 7 of 2007 as a Director of the Company***. 7. To approve the re-appointment of Mr. Alagarajah Rajaratnam, who is over 70 years of age, under and in terms of Section 211 of the Companies Act No. 7 of 2007 as a Director of the Company****. 8. To approve the re-appointment of Mr. H. D. S. Amarasuriya, who has attained 70 years of age, under and in terms of Section 211 of the Companies Act No. 7 of 2007 as a Director of the Company*****. 9. To authorise the Directors to determine and make donations. 10. To re-appoint KPMG, Chartered Accountants, as Auditors to the Company and authorise the Directors to determine their remuneration. By Order of the Board Ms. C. R. Ranasinghe Director/Company Secretary Colombo 30 May

74 74 C. W. MACKIE PLC / ANNUAL REPORT -14 Notice of Meeting (Contd.) Note: * A Notice dated 19 May has been received by the Company from a shareholder of the Company giving notice of intention to move the undernoted resolution, with regard to the approval of the re-appointment of Mr. W. T. Ellawala as a Director of the Company under and in terms of Section 211 of the Companies Act No. 7 of 2007: That Mr. William Tissa Ellawala who is over 70 years of age be and is hereby re-appointed a Director of the Company and it is further specially declared that the age limit of 70 years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Mr. William Tissa Ellawala. ** A Notice dated 19 May has been received by the Company from a shareholder of the Company giving notice of intention to move the undernoted resolution, with regard to the approval of the re-appointment of Deshabandu A. M. de S. Jayaratne as a Director of the Company under and in terms of Section 211 of the Companies Act No. 7 of 2007: That Deshabandu Ajit Mahendra de Silva Jayaratne who is over 70 years of age be and is hereby re-appointed a Director of the Company and it is further specially declared that the age limit of 70 years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Deshabandu Ajit Mahendra de Silva Jayaratne. *** A Notice dated 19 May has been received by the Company from a shareholder of the Company giving notice of intention to move the undernoted resolution, with regard to the approval of the re-appointment of Mr. R. C. Peries as a Director of the Company under and in terms of Section 211 of the Companies Act No. 7 of 2007: That Ranjit Crisantha Peries who is over 70 years of age be and is hereby re-appointed a Director of the Company and it is further specially declared that the age limit of 70 years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Mr. Ranjit Crisantha Peries. **** A Notice dated 19 May has been received by the Company from a shareholder of the Company giving notice of intention to move the undernoted resolution, with regard to the approval of the re-appointment of Mr. Alagarajah Rajaratnam as a Director of the Company under and in terms of Section 211 of the Companies Act No. 7 of 2007: That Mr. Alagarajah Rajaratnam who is over 70 years of age be and is hereby re-appointed a Director of the Company and it is further specially declared that the age limit of 70 years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Mr. Alagarajah Rajaratnam. ***** A Notice dated 19 May has been received by the Company from a shareholder of the Company giving notice of intention to move the undernoted resolution, with regard to the approval of the re-appointment of Mr. H. D. S. Amarasuriya as a Director of the Company under and in terms of Section 211 of the Companies Act No. 7 of 2007: That Mr. Hemaka Devapriya Senarath Amarasuriya who has attained 70 years of age be and is hereby re-appointed a Director of the Company and it is further specially declared that the age limit of 70 years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Mr. Hemaka Devapriya Senarath Amarasuriya. (i) (ii) (iii) (iv) A member of the Company entitled to attend and vote at the Meeting is entitled to appoint a Proxy to attend and vote on his behalf. A Proxy need not be a member of the Company. A Form of Proxy is enclosed for this purpose. The instrument appointing the Proxy must be deposited at the Registered Office of the Company, No. 36, D. R. Wijewardena Mawatha, Colombo 10 before 2.30 p.m. on 25 June.

75 C. W. MACKIE PLC / ANNUAL REPORT Notes

76 76 C. W. MACKIE PLC / ANNUAL REPORT -14 Notes

77 C. W. MACKIE PLC / ANNUAL REPORT Form of Proxy I/We of being a member/members of C.W. Mackie PLC hereby appoint... of or failing him/her William Tissa Ellawala Camani Renuka Ranasinghe Ajit Mahendra de Silva Jayaratne Ranjit Crisantha Peries Anushman Rajaratnam Sri Dhaman Rajendram Arudpragasam Thirugnanasambandar Senthilverl Hemaka Devapriya Senarath Amarasuriya Karawa Thanthrige Aruna Mangala Perera Alagarajah Rajaratnam or failing him or failing her or failing him or failing him or failing him or failing him or failing him or failing him or failing him as my/our Proxy to represent me/us and speak and vote on my/our behalf as indicated below at the Ninety Second Annual General Meeting of the Company to be held on Friday, 27 June and at any adjournment thereof and at every poll which may be taken in consequence thereof : For Against 1. To receive and consider the Annual Report of the Board of Directors and Financial Statements for the year ended 31 March with the Report of the Auditors thereon. 2. To declare a Dividend as recommended by the Directors. 3. To re-elect Mr. S. D. R. Arudpragasam, who retires by rotation in terms of Article 89 of the Articles of Association, as a Director of the Company. 4. To approve the re-appointment of Mr. W. T. Ellawala, who is over 70 years of age, under and in terms of Section 211 of the Companies Act No. 7 of 2007 as a Director of the Company. 5. To approve the re-appointment of Deshabandu A. M. de S. Jayaratne, who is over 70 years of age, under and in terms of Section 211 of the Companies Act No. 7 of 2007 as a Director of the Company. 6. To approve the re-appointment of Mr. R. C. Peries, who is over 70 years of age, under and in terms of Section 211 of the Companies Act No. 7 of 2007 as a Director of the Company. 7. To approve the re-appointment of Mr. Alagarajah Rajaratnam, who is over 70 years of age, under and in terms of Section 211 of the Companies Act No. 7 of 2007 as a Director of the Company. 8. To approve the re-appointment of Mr. H. D. S. Amarasuriya, who has attained 70 years of age, under and in terms of Section 211 of the Companies Act No. 7 of 2007 as a Director of the Company. 9. To authorise the Directors to determine and make donations. 10. To re-appoint KPMG, Chartered Accountants, as Auditors to the Company and authorise the Directors to determine their remuneration. Signed this.day of.... Signature of Member/s NOTE: (1) The Proxyholder may vote as he thinks fit on any other resolution, of which due notice has been given, brought before the Meeting. (2) A Proxyholder need not be a member of the Company. (3) Instructions for completion of the Proxy are contained overleaf.

78 78 C. W. MACKIE PLC / ANNUAL REPORT -14 Form of Proxy (Contd.) INSTRUCTIONS FOR COMPLETION OF PROXY 1. Please perfect the Form of Proxy overleaf by signing in the space provided and filling in legibly your full name, address and other required details. 2. If you wish to appoint a person other than the Directors named overleaf as your Proxy, please insert legibly the relevant details in the space provided overleaf and initial against this entry. 3. If the Form of Proxy is signed by an Attorney, 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 member is a company or body corporate, the Form of Proxy should be executed under its common seal in accordance with its Articles of Association or Constitution. 5. Please indicate with an `X in the space provided how your Proxy is to vote on each resolution. If there is any doubt as to how the vote is to be exercised by the Proxyholder, by reason of the manner in which the Form of Proxy has been completed, the Proxyholder will vote as he thinks fit. 6. The completed Form of Proxy should be deposited at the Registered Office of the Company at No.36, D. R. Wijewardena Mawatha, Colombo 10 not later than 2.30 p.m. on 25 June being 48 hours before the time appointed for the holding of the Meeting.

79 C. W. MACKIE PLC / ANNUAL REPORT

80 80 C. W. MACKIE PLC / ANNUAL REPORT -14