C M HOLDINGS PLC AND ITS SUBSIDIARIES 1. Corporate Information. Annual Report of the Board of Directors. Corporate Governance. Audit Committee Report

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2 C M HOLDINGS PLC AND ITS SUBSIDIARIES 1 CONTENTS Corporate Information Notice of Meeting Chairman s Review Directors Profiles Annual Report of the Board of Directors Corporate Governance Audit Committee Report Remuneration Committee Report Independent Auditors Report Statement of Financial Position Statement of Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Share Information Proxy Form

3 2 C M HOLDINGS PLC AND ITS SUBSIDIARIES CORPORATE INFORMATION BOARD OF DIRECTORS Chairman A.Rajaratnam FCA Deputy Chairman S.D.R. Arudpragasam FCMA (UK) Managing Director R.M.M.J. Ratnayake MBA, FCMA (UK), CGMA Directors J.M. Swaminathan LLB., LLM, M. Phil., Attorney-at-Law A.M.de S. Jayaratne B.Sc.(Econ.), FCA S. Rajaratnam B.Sc., CA Anushman Rajaratnam B.Sc (Hons.), CPA, MBA SECRETARIES Corporate Managers & Secretaries (Private) Limited REGISTERED OFFICE 297, Union Place, Colombo 02. LEGAL FORM Public Quoted with Limited Liability Domiciled in Sri Lanka DATE OF INCORPORATION 09 July 1909 COMPANY NUMBER PQ 169 STOCK EXCHANGE LISTING The Ordinary Shares of the are Listed with the Colombo Stock Exchange of Sri Lanka. BANKERS People s Bank Hatton National Bank PLC Bank of Ceylon LAWYERS AUDITORS Messrs Julius & Creasy PricewaterhouseCoopers

4 C M HOLDINGS PLC AND ITS SUBSIDIARIES 3 NOTICE OF MEETING Notice is hereby given that the 102nd Annual General Meeting of C M Holdings PLC will be held at the Grand Oriental Hotel, No. 2, York Street, Colombo 1, on 29th August 2014 at 9.45 a.m. for the following purposes: To receive and consider the Annual Report of the Board of Directors and the Statements of Accounts for the year ended 31st March, 2014 with the Report of the Auditors thereon. To declare a First and Final Dividend of Rs per share for the year ended 31st March 2014 as recommended by the Directors. To re - elect as a Director, Mr. Anushman Rajaratnam who retires in accordance with Article 95 of the Articles of Association. To authorize the Directors to determine contributions to charities. To reappoint as Auditors, Messrs PricewaterhouseCoopers and to authorize the Directors to determine their remuneration. By Order of the Board Corporate Managers & Secretaries (Private) Limited Secretaries Colombo. 30th July To re-elect as a Director, Mr. S.D.R.Arudpragasam who retires in accordance with Articles 88 and 89 of the Articles of Association. To reappoint Mr. A.M. de S. Jayaratne who is over seventy years of age as a Director. Special Notice has been received from a shareholder of the intention to pass a Resolution which is set out in the notes in relation to his reappointment (see Note No.4 on page 4). To reappoint Mr. J.M. Swaminathan who is over seventy years of age as a Director. Special Notice has been received from a shareholder of the intention to pass a Resolution which is set out in the notes in relation to his reappointment (see Note No.5 on page 4). To reappoint Mr. A. Rajaratnam who is over seventy years of age as a Director. Special Notice has been received from a shareholder of the intention to pass a Resolution which is set out in the notes in relation to his reappointment ( see Note No.6 on page 4). Note: 1. A member of the who is entitled to attend and vote at this meeting may appoint a proxy to attend and vote instead of him or her. A proxy need not be a member of the. 2. A Form of Proxy is enclosed in this Report. 3. The instrument appointing a proxy must reach the Registered Office of the s Secretaries, Corporate Managers & Secretaries (Private) Limited, No. 8-5/2, Leyden Bastian Road, York Arcade Building, Colombo 01, not less than forty eight (48) hours before the time fixed for the meeting.

5 4 C M HOLDINGS PLC AND ITS SUBSIDIARIES 4. Special Notice has been received by the from a shareholder giving notice of the intention to move the following Resolution as an Ordinary Resolution at the Annual General Meeting. Resolved- That Mr. A.M. de S. Jayaratne who is seventy four years of age be and is hereby reappointed a Director of the and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No.7 of 2007 shall not apply to the said Director, Mr. A.M. de S. Jayaratne. 6. Special Notice has been received by the from a shareholder giving notice of the intention to move the following Resolution as an Ordinary Resolution at the Annual General Meeting: Resolved That Mr. A. Rajaratnam who is seventy three years of age be and is hereby reappointed a Director of the and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Director, Mr. A. Rajaratnam. 5. Special Notice has been received by the from a shareholder giving notice of the intention to move the following Resolution as an Ordinary Resolution at the Annual General Meeting: Resolved That Mr. J.M. Swaminathan who is seventy three years of age be and is hereby reappointed a Director of the and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No.7 of 2007 shall not apply to the said Director, Mr. J.M. Swaminathan.

6 C M HOLDINGS PLC AND ITS SUBSIDIARIES 5 CHAIRMAN S REVIEW On behalf of the Board of Directors it is my pleasure to welcome you to the 102nd Annual General Meeting of C M Holdings PLC and present the Annual Report together with the Audited Financial Statements for the year ended 31st March The group recorded a healthy turnover of Rs Mn in comparison to the previous year s Rs Mn. The group gross profit increase from Rs Mn to Rs. 341 Mn was due to the increase in sales of spare parts and workshop repairs. Despite the restrictions for import of Motor Vehicles the performance of the motor vehicle segment had been encouraging. The achieved a net profit of Rs Mn from real estate and investment activities. The drop in revenue of the was due to the motor vehicle business being phased out and continued under its fully owned subsidiary Colonial Motors (Ceylon) Ltd. Mr. Mohan Ratnayake was appointed as Managing Director of Colonial Motors (Ceylon) Limited during the year under review. Mr. Ratnayake will relinquish his position as Director of C M Holdings PLC at the conclusion of the Annual General Meeting. The restructuring process undertaken during the financial year has been completed and C M Holdings PLC now functions as a Property Holding and Investment. The is formulating plans for the development of the Union Place property as a mixed development project which is expected to bring a regular revenue stream by way of commercial rents. The s main subsidiaries have their own Management Boards and functions independent of each other. In conclusion on behalf of the Directors I take this opportunity to thank our customers and stakeholders for their continued support and patronage of our products and the employees for their dedication towards the and its success. A. Rajaratnam Chairman

7 6 C M HOLDINGS PLC AND ITS SUBSIDIARIES DIRECTORS PROFILES A. Rajaratnam - Chairman FCA Mr. A. Rajaratnam joined the Board in 1998 and was appointed Chairman in the year He serves as Chairman of The Colombo Fort Land & Building PLC (CFLB) and on the Boards of several listed and unlisted companies within the CFLB in addition to holding other Directorships within the. S.D.R. Arudpragasam Deputy Chairman FCMA (UK) Mr. S.D.R. Arudpragasam joined the Board in 1999 and was appointed Deputy Chairman in November He serves as Chairman of several subsidiaries of The Colombo Fort Land & Building PLC (CFLB) and holds the position of Deputy Chairman on the Boards of The Colombo Fort Land & Building PLC and Lankem Ceylon PLC. Mr. Arudpragasam also functions as Managing Director of E.B. Creasy & PLC in addition to serving on the Boards of other companies within the CFLB. R.M.M.J. Ratnayake Managing Director MBA, FCMA (UK), CGMA Mr. R.M.M.J. Ratnayake holds an MBA in Finance and is a Fellow Member of the Institute of Chartered Management Accountants U.K. and is also a Fellow Member of the Society of Certified Management Accountants. He has expertise in the fields of Tea Exports, Tea Plantations, Telecommunications and Motor Industry. Mr. Ratnayake joined the as Chief Executive Officer on 1st July 2008, was appointed to the Board as Director/Chief Executive Officer on 1st April 2010, and as Managing Director on 1st May J.M. Swaminathan Director Attorney-at Law, LLB (Ceylon), LLM M.Phil. (Colombo) Mr. J.M. Swaminathan was appointed to the Board in the year He holds LLB (Ceylon), LLM, M.Phil (Colombo) Degrees and is an Attorney-at- Law. He has been in the legal profession for over 40 years.

8 C M HOLDINGS PLC AND ITS SUBSIDIARIES 7 He is the precedent partner of Messrs Julius & Creasy and was a Member of the Council for Legal Education. He is a Member of the Law Advisory Commission and Intellectual Property Law Advisory Commission and Law Commission of Sri Lanka. He is a Member of the Board of the Faculty of Law of the University of Colombo. He is also a Visiting Lecturer and an Examiner at the Faculty of Law, University of Colombo and a Lecturer at the Advanced Legal Studies Unit at the Sri Lanka Law College. He is also a Director of several public and private companies. Mr. A. M. de S. Jayaratne Director B.Sc.(Econ), FCA (Eng. and Wales), FCA(ICASL) Mr. A.M.de S. Jayaratne having joined the Board in 1981 was appointed Chairman in He resigned in the year 2003 and rejoined the Board in He is a former Chairman of Forbes & Walker Ltd, Colombo Stock Exchange, Ceylon Chamber of Commerce and The Finance Commission. He also served as Sri Lanka s High Commissioner in Singapore. Mr. Jayaratne is a Director of several listed and unlisted companies. Mr. S. Rajaratnam - Director B.Sc., CA Mr. Sanjeev Rajaratnam was appointed to the Board in the year He holds a Bachelor of Science Degree in Business Administration from Boston College, U.S.A. and is a member of the Institute of Chartered Accountants in Australia. He has been associated with overseas companies in the field of Finance and currently holds the position of Deputy Managing Director of E.B. Creasy & PLC amongst other Directorships. Anushman Rajaratnam - Director B.Sc (Hons.), CPA, MBA Mr. Anushman Rajaratnam was appointed to the Board in October He has spent several years working overseas as a Consultant for a leading Accountancy Firm. He also serves on the Board of The Colombo Fort Land & Building PLC and functions as Managing Director, Lankem Ceylon PLC in addition to serving on the Boards of several subsidiaries of the Lankem.

9 8 C M HOLDINGS PLC AND ITS SUBSIDIARIES Annual Report of the Board of Directors The Board of Directors of C M Holdings PLC present their Report on the affairs of the together with the Audited Financial Statements for the year ended 31st March, The details set out herein provide the pertinent information required by the Companies Act No.7 of 2007, and the Colombo Stock Exchange Listing Rules and are guided by recommended best practices General The was re-registered on 1st July, 2008 as required under the Companies Act No. 7 of In the year under review, shareholder sanction was obtained to restructure the business activities of the by phasing out the motor vehicle business and restricting the business activities of the primarily of a property holding and investment company. In keeping with the above and having obtained the required approvals, the name of the was changed from Colonial Motors PLC to C M Holdings PLC. The name change was effective from 4th October Principal Activities / Business Review The principal activities of the together with those of its subsidiary companies are given in Note 1 to the financial statements on page 25. A review of the s business and its performance during the year with comments on financial results is contained in the Chairman s Review which together with the financial statements reflect the state of affairs of the. The Directors to the best of their knowledge and belief confirm that the has not engaged in any activities that contravene laws and regulations. Financial Statements The Financial Statements of the and the are given on pages 20 to 83. Auditors Report The Auditors Report on the Financial Statements is given on page 18 and 19. Accounting Policies The Accounting Policies adopted in the preparation of the Financial Statements are given on pages 26 to 43. Interest Register Directors Interest in transactions The Directors have made general disclosures as provided for in Section 192(2) of the Companies Act No.7 of Arising from this, details of contracts in which they have an interest are disclosed in Note 32 to the financial statements on pages 79 to 82. Directors Interest in Shares The Directors of the who have an interest in the shares of the have disclosed their shareholdings and any acquisitions / disposals to the Board in compliance with Section 200 of the Companies Act.

10 C M HOLDINGS PLC AND ITS SUBSIDIARIES 9 Details pertaining to Directors direct shareholdings are set out below: No. of No. of Name of Director Shares Shares as at as at Mr. A. Rajaratnam Mr. S.D.R. Arudpragasam 50,500 50,500 Mr. J.M. Swaminathan Mr. A.M. de S. Jayaratne Mr. S. Rajaratnam 28,571 28,571 Mr. R.M.M.J. Ratnayake Mr. Anushman Rajaratnam - - (Appointed w.e.f ) Directors Remuneration Key management compensation in respect of the and the for the financial year 2013/2014 is given in Note 24 to the financial statements on page 76. Corporate Donations No donations were made by the for the financial year 2013/2014. (2012/ Rs. 85,068) Directorate The names of the Directors who held office during the financial year are given below and their brief profiles appear on pages 6 and 7. Mr.A. Rajaratnam - Chairman Mr. S.D.R. Arudpragasam - Deputy Chairman Mr. R.M.M.J. Ratnayake - Managing Director Mr. J.M. Swaminathan - Director Mr. A.M. de S. Jayaratne - Director Mr. S. Rajaratnam - Director Mr. Anushman Rajaratnam - Director Mr. Anushman Rajaratnam was appointed to the Board on 8th October 2013 and in terms of Article 95 of the Articles of Association he retires and being eligible offers himself for re-election. In terms of Article Nos. 88 and 89 of the Articles of Association, Mr. S.D.R. Arudpragasam retires by rotation and being eligible offers himself for re-election. Mr. A.M.de.S. Jayaratne, Director, being over seventy years of age retires and offers himself for reappointment under and by virtue of the Special Notice received from a shareholder of the which is referred to in the Notice of Meeting. Mr. J.M. Swaminathan, Director, being over seventy years of age retires and offers himself for reappointment under and by virtue of the Special Notice received from a shareholder of the which is referred to in the Notice of Meeting. Mr. A. Rajaratnam, Director, being over seventy years of age retires and offers himself for reappointment under and by virtue of the Special Notice received from a shareholder of the which is referred to in the Notice of Meeting. Independent Auditors The Financial Statements of the for the year have been audited by Messrs PricewaterhouseCoopers who were reappointed as Auditors at the Annual General Meeting held on 27th September The remuneration payable by the and the to the Independent Auditors is given in Note 24 to the Consolidated Financial Statements on page 76.

11 10 C M HOLDINGS PLC AND ITS SUBSIDIARIES The Directors are satisfied that based on written representations made by the Independent Auditors to the Board, the Auditors do not have any relationship or any interest with the and its subsidiaries that would impair their independence. Revenue The Revenue of the for the year was Rs. 851 Mn. (2012/ Rs. 795 Mn) Results The made a loss before Tax of Rs. 71 Mn against a profit of Rs. 434 Mn in the previous year. The detailed results are given in the Statement of Comprehensive Income on page 21. Dividends The Directors are pleased to recommend the payment of a First and Final Dividend of Rs per share on the Ordinary Shares of the for the year ended 31st March, 2014 for approval by the Shareholders at the Annual General Meeting to be held on 29th August The Directors have confirmed that the satisfies the solvency test requirement under Section 56 of the Companies Act No. 07 of 2007 for the dividend proposed. A solvency certificate has been sought from the Auditors in respect of the aforementioned dividend. Investments Investments made by the and the are given in Notes 10 and 11 on pages 50 to 70. Property, Plant & Equipment During 2013/2014 the invested Rs.95,167,751 in Property, Plant & Equipment (2012/2013- Rs.437,117,110). Further your Directors are of the opinion that the net amounts at which Land and other Property, Plant & Equipment appear in the Balance Sheets are not greater than their market value as at 31st March, Stated Capital The Stated Capital of the as at 31st March, 2014 was Rs. 288,386,885/- and is represented by 15,200,000 issued and fully paid Ordinary Shares. Reserves The total reserves and their composition are set out in Note 17 on page 73 to the consolidated financial statements. The movements are shown in the Statement of Changes in Equity in the Financial Statements. Taxation The s liability to taxation has been computed in accordance with the provisions of the Inland Revenue Act No.10 of 2006 and subsequent amendments thereto. Income Tax and other taxes paid and liable by the are disclosed in Note 27 on page 77. Share Information Information relating to earnings, dividend, net assets, market value per share and share trading is given on pages 84 and 85.

12 C M HOLDINGS PLC AND ITS SUBSIDIARIES 11 Events Occurring after the Balance Sheet Date Events occurring after the Balance Sheet date that would require adjustments to or disclosure are disclosed in Note 33 on page 83. Capital Commitments and Contingent Liabilities Capital commitments and contingent liabilities as at the Balance Sheet date are disclosed in Notes 34 and 35 on page 83. Employment Policy The does not employee any staff. The s Secretaries Corporate Managers and Secretaries (Pvt) Ltd have also been appointed as Managers of the effective from 1 st April Shareholders It is the s policy to endeavour to ensure equitable treatment to its shareholders. Internal Control The Board of Directors takes overall responsibility for the s internal control system. A separate Internal Audit section is to be set-up to review the effectiveness of the s internal controls in order to ensure reasonable assurance that assets are safeguarded and all transactions are properly authorized and recorded. The Board reviews the recommendations of External Auditors and takes appropriate action to maintain an adequate internal control system. Going Concern The Board of Directors after making necessary inquiries and reviews including reviews of the s budget for the subsequent year, capital expenditure requirements, future prospects and risks, cash flows and borrowing facilities have a reasonable expectation that the has adequate resources to continue its operations in the foreseeable future. Therefore the Going Concern basis has been adopted in the preparation of the financial statements. Statutory Payments The Directors to the best of their knowledge and belief are satisfied that all statutory payments of the have been made. For and on behalf of the Board Environmental Protection (Sgd) R M M J Ratnayake Director (Sgd) S D R Arudpragasam Director The s business activities can have direct and indirect effects on the environment. It is the s policy to minimize any adverse effect its activities have on the environment and to promote co-operation and compliance with the relevant authorities and regulations. The Directors confirm that the has not undertaken any activities which have caused or are likely to cause detriment to the environment. By Order of the Board (Sgd) Corporate Managers & Secretaries (Private) Limited Secretaries 21st July 2014

13 12 C M HOLDINGS PLC AND ITS SUBSIDIARIES Corporate Governance The business and affairs of the and its subsidiaries are managed and directed with the objective of balancing the attainment of corporate objectives with the alignment of corporate behaviour within the legal good governance framework of the industry and the country and also the accountability to shareholders and responsibility to other stakeholders. Board Composition of the Board The Directors are from varied business and professional backgrounds. Their expertise enables them to exercise independent judgement and their views carry substantial weight in decision making. The Board comprises of one Executive Director and six Non-Executive Directors of whom two are Independent. These Directors are listed below: Mr. A. Rajaratnam - Chairman Non- Executive Mr. S.D.R. Arudpragasam - Deputy Chairman Non-Executive Mr.R. M.M.J. Ratnayake - Managing Director- Executive Mr. J.M. Swaminathan - Independent Non-Executive Mr. A.M. de S. Jayaratne - Independent Non-Executive Mr. S. Rajaratnam - Non Executive Mr. Anushman Rajaratnam - Non Executive (Appointed w.e.f ) The Non-Executive Directors have submitted their declarations of their Independence or Non Independence to the Board of Directors. Mr. J.M. Swaminathan has served on the Board for more than nine years. He also serves on the Boards of the subsidiaries of C M Holdings PLC and a majority of the Directors of the are on the Boards of the subsidiary companies and other listed entities. However, the Board after taking into consideration all other circumstances listed in the Rules pertaining to the Criteria for Defining Independence, is of the opinion that Mr. J.M. Swaminathan is nevertheless Independent. Mr.A.M. de S. Jayaratne is a Director of the Parent. He has served on the Board of the and its Parent for more than nine years. He also serves on the Boards of the subsidiaries of C M Holdings PLC and a majority of the Directors of the are on the Boards of the subsidiary companies and other listed entities. However, the Board after taking into consideration all other circumstances listed in the Rules pertaining to the Criteria for Defining Independence, is of the opinion that Mr. A.M. de S. Jayaratne is nevertheless Independent. Decision Making of the Board The Board has met four times during the year under review. In addition to Board Meetings, matters are referred to the Board and decided by Resolutions in writing. The Board is responsible for: Determining the strategic direction of the and also setting corporate values. Implementation and monitoring of business strategy of the. Ensuring an effective internal control system and a proactive risk management system. Ensuring compliance with ethical, legal, health, environment and safety standards. Approval of Interim and Annual Financial Statements. Approval of budgets, corporate plans, major capital investments, divestments and acquisitions

14 C M HOLDINGS PLC AND ITS SUBSIDIARIES 13 Secretaries and Independent Professional Advice The and all the Directors may seek advice from Corporate Managers & Secretaries (Private) Limited who are qualified to act as Secretaries as per the provisions of the Companies Act No. 07 of Advice is also sought from independent external professionals whenever the Board deems it necessary. Independent Judgement The Board is committed to exhibit high standards of integrity and independence of judgement. Each Director dedicates the time and effort necessary to carry out his responsibilities. Financial Acumen The Board includes six Finance Professionals who possess the knowledge and the competence to offer the Board the necessary guidance on matters of Finance. Supply of Information Directors are furnished with monthly reports on Performance comprising of Financial Statements. Appointments to the Board The Board as a whole decides on the appointments of Directors in accordance with the Articles of Association of the and in compliance with the rules on Governance. The details of new appointments to the Board are made available to the shareholders by making announcements to the Colombo Stock Exchange. Re-election of Directors In terms of the Articles of Association any Director appointed by the Board holds office until the next Annual General Meeting at which he seeks re-election by the Shareholders. The Articles of Association require one third or a number nearest to one third of the Directors in office to retire at each Annual General Meeting. The Directors to retire in each year are those who have been longest in office since their last election or appointment. Retiring Directors are eligible for re-election by the Shareholders. A Director appointed to the office of Chairman, Managing or Joint Managing Director shall not whilst holding that office be subject to retirement by rotation. Directors Remuneration Remuneration Committee The Remuneration Committee comprises of Mr. J.M. Swaminathan, Chairman, Mr. A.M. de S. Jayaratne, Independent Non-Executive Directors and Mr. S.D.R. Arudpragasam, Non-Executive Director. The Remuneration Committee Report is set out on page 16 of this Report. Disclosures Aggregate remuneration paid to Directors is disclosed in Note 24 to the Financial Statements on page 76.

15 14 C M HOLDINGS PLC AND ITS SUBSIDIARIES Relations with Shareholders Constructive use of AGM / General Meetings The Board considers the Annual General Meeting/ General Meetings an opportunity to communicate with shareholders and encourages their participation. Questions raised by the Shareholders are answered and an appropriate dialogue is maintained with them. Others The s principal communicator with all its stakeholders are its Annual Report and Quarterly Financial Statements. Accountability and Audit Financial Reporting The Board places emphasis on complete disclosure of financial and non-financial information within the bounds of commercial reality. This enables both existing and prospective shareholders to make fair assessment on the s performance and future prospects. The Financial Statements are prepared in accordance with Sri Lanka Accounting Standards. Going Concern The Directors are of the belief that the is capable of operating in the foreseeable future after the adequate assessment of the s Financial position and resources. Therefore the Going Concern principle has been adopted in the preparation of these Financial Statements. Internal Control The Board of Directors is responsible for the s system of internal controls and for reviewing its effectiveness. The system is designed to safeguard assets against unauthorized use or disposal and to ensure that proper records are maintained. It includes all controls including financial, operational and compliance controls and risk management. However any system can ensure only reasonable and not absolute assurance that errors and irregularities are prevented or detected within a reasonable time frame. Audit Committee The Audit Committee Report is set out on page 15 of this Report. Disclosures The Annual Report of the Board of Directors is given on pages 8 to 11 in this Report. The Auditor s Report on the Financial Statements is given on pages 18 and 19 of the Report.

16 C M HOLDINGS PLC AND ITS SUBSIDIARIES 15 AUDIT COMMITTEE REPORT The Audit Committee Report focuses on the activities of the for the year under review, which the Audit Committee has reviewed and monitored so as to provide an additional assurance on the reliability of the financial statements. Composition The Audit Committee comprises of three Non- Executive Directors of whom two are independent. The names of the members are set out below. M. A. M de S. Jayaratne - Chairman Independent Non-Executive Director Mr. J. M Swaminathan Mr. S.D.R. Arudpragasam - Member Independent Non-Executive Director - Member Non-Executive Director The Committee has a blend of experience in the commercial sector, audit exposure, corporate law and business acumen to carry out their role efficiently and effectively. The Committee consists of two finance professionals. Role of Audit Committee internal controls and risk control measures, efficient management reporting systems and adherence to other statutory requirements. In fulfilling this role the Audit Committee is empowered to examine the financial records of the and other communications as necessary in order to ensure that the adheres to accepted norms of ethical guidelines, rules and regulations. The Audit Committee recommends the appointment of external auditors ensuring independence and maintains a close professional relationship with them. The Committee also recommends the fees payable to external Auditors. Meetings and Attendance The Audit Committee has met on four occasions during the financial year ended 31 March 2014 and the attendance was as follows: Mr. A. M. de S. Jayaratne - Chairman - 4/4 Mr. J. M. Swaminathan - 4/4 Mr. S. D. R. Arudpragasam - 4/4 The s secretaries, Corporate Managers and Secretaries (Private) Limited functions as the secretaries to the Audit Committee. Senior Management personnel of the are invited to the meetings as and when required. The proceedings of the Audit Committee are regularly reported to the Board. The Audit Committee acts as the advisory to the Board and its main objective is to assist the Board of Directors by giving recommendations to ensure that the follows best practices in line with best Corporate Governance practices. The Committee is responsible for ensuring a sound financial reporting system adhering to relevant accounting standards and principles, adequacy of

17 16 C M HOLDINGS PLC AND ITS SUBSIDIARIES External Audit The has appointed Pricewaterhouse- Coopers as its external auditor for the financial year ended 31 March 2014 and the services provided by them are segregated between audit/ assurance services and other advisory services such as tax consultancy. PricewaterhouseCoopers has also issued a declaration as required by the s Act No. 7 of 2007 that they do not have any relationship or interest in any of the Companies in the, which may have a bearing on the independence of their role as auditors. The Committee after evaluating the independence and performance of the External Auditors has recommended to the Board the reappointment of Messrs PricewaterhouseCoopers for the financial year ending 31 March 2015 subject to the approval of the Shareholders at the Annual General Meeting of the. (Sgd). A M de S. Jayaratne Chairman Audit Committee 21st July 2014

18 C M HOLDINGS PLC AND ITS SUBSIDIARIES 17 Remuneration COMMITTEE REPORT The Remuneration Committee of C M Holdings PLC comprise of the following members: Mr. J.M. Swaminathan Mr. A.M.de S. Jayaratne Mr. S.D.R. Arudpragasam - Chairman / Independent Non-Executive - Independent Non-Executive - Non-Executive The main function of the Remuneration Committee is to assist the Board in developing and administering an equitable and transparent method for setting policy on the overall human resources strategy of the and the remuneration of Directors and senior management of the. The key objective of the committee is to attract, motivate and retain qualified and experienced personnel throughout the and to ensure that the remuneration of executives at each level of management is competitive and are rewarded in a fair manner based on their performance. (Sgd) Mr. J. M. Swaminathan Chairman Remuneration Committee 21st July 2014

19 18 C M HOLDINGS PLC AND ITS SUBSIDIARIES INDEPENDENT AUDITORS REPORT To the shareholders of C M Holdings PLC Report on the Financial Statements 1. We have audited the accompanying financial statements of C M Holdings PLC, the consolidated financial statements of the and its subsidiaries, which comprise the statement of financial position as at 31 March 2014, the comprehensive income statement, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 25 to 83. Management s Responsibility for the Financial Statements 2. Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards (SLFRSs). This responsibility includes: designing, implementing and maintaining internal controls 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. Scope of Audit and Basis of Opinion 3. 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. 4. 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 principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 5. 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. Independent Auditors Report Continued on page 19 PricewaterhouseCoopers, P. O. Box 918, 100 Braybrooke Place, Colombo 2, Sri Lanka T: +94 (11) , , F: +94 (11) , Partners Y. Kanagasabai FCA, D.T.S.H. Mudalige FCA, C.S. Manoharan ACA, N.R. Gunasekera FCA, S. Gajendran FCA, Ms. S. Hadgie FCA, Ms. S. Perera ACA PricewaterhouseCoopers is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

20 C M HOLDINGS PLC AND ITS SUBSIDIARIES 19 INDEPENDENT AUDITORS REPORT To the shareholders of C M Holdings PLC Report on the Financial Statements (Contd) Opinion 6. In our opinion, so far as appears from our examination, the maintained proper accounting records for the year ended 31 March 2014 and the financial statements give a true and fair view of the s state of affairs as at 31 March 2014 and of its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards. 7. In our opinion, so far as appears from our examination, the maintained proper accounting records for the year ended 31 March 2014, and the consolidated financial statements give a true and fair view of the s state of affairs as at 31 March 2014 and of its result of financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards, of the and its subsidiaries dealt with thereby, so far as concerns the members of the. Report on Other Legal and Regulatory Requirements 8. These financial statements also comply with the requirements of sections 151 (2) and 153 (2) to 153 (7) of the Companies Act, No. 07 of (Sgd) PricewaterhouseCoopers CHARTERED ACCOUNTANTS COLOMBO 24th July 2014

21 20 STATEMENT OF FINANCIAL POSITION C M HOLDINGS PLC AND ITS SUBSIDIARIES Note 31 March March March March 2013 ASSETS Non-current assets Property, plant and equipment 6 1,131,160,451 1,305,503, ,305, ,203,791 Capital work in progress 7 54,655,474 8,033,126 Nil Nil Investment property 8 28,640,770 30,160, ,500, ,943,488 Intangible assets 9 8,453,463 7,249,107 Nil Nil Investment in subsidiaries 10 Nil Nil 264,310, ,318,300 Deferred income tax assets 12 6,258,803 15,725,440 5,581,868 15,725,440 Available - for - sale financial assets ,170, ,246, ,265, ,963,291 Trade and other receivables ,000,000 10,000,000 Nil Nil 2,256,339,287 2,320,918,444 1,591,963,479 1,635,154,310 Current assets Inventories ,777, ,670,080 Nil 86,083,687 Trade and other receivables ,520, ,081, ,847, ,824,634 Financial assets at fair value through profit or loss ,833, ,180,819 52,123,304 87,036,781 Income tax receivables 104,579 Nil Nil Nil Cash and cash equivalents ,501, ,292,804 2,205,049 5,062,701 2,341,736,441 2,097,225, ,175, ,007,803 Total assets 4,598,075,728 4,418,143,701 1,779,139,194 1,917,162,113 EQUITY Stated capital ,386, ,386, ,386, ,386,885 Retained earnings 17 3,011,124,515 3,216,654,298 1,383,702,561 1,426,387,760 3,299,511,400 3,505,041,183 1,672,089,446 1,714,774,645 Non-controlling interest 353,336, ,155,649 Nil Nil Total equity 3,652,848,068 3,930,196,832 1,672,089,446 1,714,774,645 LIABILITIES Non-current liabilities Borrowings ,937 25,647, ,937 16,763,918 Deferred income tax liabilities 12 3,279,211 Nil Nil Nil Retirement benefit obligations 20 13,198,502 20,517,322 Nil 11,846,444 16,889,650 46,164, ,937 28,610,362 Current liabilities Trade and other payables ,408, ,931,442 95,967,140 21,450,165 Current income tax liabilities 40,417,869 39,671,946 1,682,218 1,683,443 Borrowings ,511, ,178,691 8,988, ,643, ,338, ,782, ,637, ,777,106 Total liabilities 945,227, ,946, ,049, ,387,468 Total equity and liabilities 4,598,075,728 4,418,143,701 1,779,139,194 1,917,162,113 Net Asset Value per share I certify that these financial statements have been prepared in compliance with the requirements of the Companies Act, No. 07 of (Sgd) A. L. Rajapaksha Accountant 21st July 2014 The Board of Directors are responsible for the preparation and presentation of these financial statements. Approved and signed for and on behalf of the Board of Directors: (Sgd) R M M J Ratnayake (Sgd) S D R Arudpragasam Director Director 21st July st July 2014 The accounting policies and notes as set out in pages 25 to 83 form an integral part of these financial statements.

22 C M HOLDINGS PLC AND ITS SUBSIDIARIES 21 Statement of comprehensive income Note Year ended 31 March Year ended 31 March Revenue ,474, ,494,094 84,684, ,957,809 Cost of sales (510,239,281) (588,499,622) (84,684,518) (151,582,685) Gross profit 341,235, ,994,472 Nil 46,375,124 Other income ,686, ,187,184 77,890,417 89,574,396 Other (losses) / gains 23 (65,932,482) 17,646,632 (1,609,339) 7,739,201 Administrative expenses (385,660,005) (256,005,848) (19,941,654) (65,007,764) Provision for loss on land acquisition 6 (230,017,270) Nil Nil Nil Distribution costs (46,687,363) (78,988,726) (290,910) (11,917,684) Operating (loss) / profit (60,375,898) 405,833,714 56,048,514 66,763,273 Finance income 26 50,943,619 71,668, ,914 1,202,862 Finance costs 26 (62,038,120) (43,917,798) (15,287,390) (30,788,645) Finance costs - net (11,094,501) 27,751,198 (14,293,476) (29,585,783) (Loss) / profit before tax (71,470,399) 433,584,912 41,755,038 37,177,490 Income tax 27 (62,339,911) (117,368,626) (10,142,347) 17,089,543 (Loss) / profit for the year (133,810,310) 316,216,286 31,612,691 54,267,033 Attributable to : Owners of the parent (80,908,087) 222,036,366 31,612,691 54,267,033 Non - controlling interest (52,902,223) 94,179,920 Nil Nil Other comprehensive income: (133,810,310) 316,216,286 31,612,691 54,267,033 Change in value of available - for - sale financial assets (78,087,810) (185,991,415) (28,697,890) (149,312,670) Remeasurements on defined benefit obligations (1,418,595) 922,154 Nil 330,442 (79,506,405) (185,069,261) (28,697,890) (148,982,228) Total comprehensive income for the year (213,316,715) 131,147,025 2,914,801 (94,715,195) Attributable to : Owners of the parent (159,929,783) 36,955,176 2,914,801 (94,715,195) Non - controlling interest (53,386,932) 94,191,849 Nil Nil (213,316,715) 131,147,025 2,914,801 (94,715,195) Earnings per share attributable to equity holders of the Basic earnings per share 28 (8.80) Diluted earnings per share 28 (8.80) The accounting policies and notes as set out in pages 25 to 83 form an integral part of these financial statements.

23 22 C M HOLDINGS PLC AND ITS SUBSIDIARIES STATEMENT OF CHANGES IN EQUITY (a) Note Stated capital Retained earnings Non - controlling interest Total Balance at 1 April ,348,225 3,520,590,932 1,629,158 3,613,568,315 Rights issue ,038,660 Nil Nil 197,038,660 Rights issue expenses 17 Nil (2,204,375) Nil (2,204,375) Loss on dilution of holding at KIA Motors Lanka Limited 17 Nil (302,190,149) Nil (302,190,149) Addition to non controlling interest arising from dilution of holding of parent 17 Nil Nil 329,334, ,334,642 Profit for the year Nil 222,036,366 94,179, ,216,286 Other comprehensive income Nil (185,081,190) 11,929 (185,069,261) Total comprehensive income for the year Nil 36,955,176 94,191, ,147,025 Dividends Nil (36,497,286) Nil (36,497,286) Balance at 31 March ,386,885 3,216,654, ,155,649 3,930,196,832 Balance at 1 April ,386,885 3,216,654, ,155,649 3,930,196,832 Rights issue Nil Nil 2,568,007 2,568,007 Profit for the year Nil (80,908,087) (52,902,223) (133,810,310) Other comprehensive income Nil (79,021,696) (484,709) (79,506,405) Total comprehensive income for the year Nil (159,929,783) (53,386,932) (213,316,715) Dividends Nil (45,600,000) (21,000,056) (66,600,056) Balance at 31 March ,386,885 3,011,124, ,336,668 3,652,848,068 The accounting policies and notes as set out in pages 25 to 83 form an integral part of these financial statements.

24 C M HOLDINGS PLC AND ITS SUBSIDIARIES 23 STATEMENT OF CHANGES IN EQUITY (b) Note Stated capital Retained earnings Total Balance at 1 April ,348,225 1,559,804,616 1,651,152,841 Rights issue ,038,660 Nil 197,038,660 Rights issue expenses 17 Nil (2,204,375) (2,204,375) Profit for the year Nil 54,267,033 54,267,033 Other comprehensive income Nil (148,982,228) (148,982,228) Total comprehensive income for the year Nil (94,715,195) (94,715,195) Dividends Nil (36,497,286) (36,497,286) Balance at 31 March ,386,885 1,426,387,760 1,714,774,645 Balance at 1 April ,386,885 1,426,387,760 1,714,774,645 Profit for the year Nil 31,612,691 31,612,691 Other comprehensive income Nil (28,697,890) (28,697,890) Total comprehensive income for the year Nil 2,914,801 2,914,801 Dividends Nil (45,600,000) (45,600,000) Balance at 31 March ,386,885 1,383,702,561 1,672,089,446 The accounting policies and notes as set out in pages 25 to 83 form an integral part of these financial statements.

25 24 STATEMENT OF CASH FLOWS C M HOLDINGS PLC AND ITS SUBSIDIARIES Cash flows from operating activities Note Year ended 31 March Year ended 31 March Cash (used in) / generated from operating activities 30 (47,852,298) 39,365, ,046,352 34,439,955 Interest paid (62,038,120) (43,917,798) (15,287,390) (30,788,645) Retirement benefit obligations paid 20 (5,326,028) (3,740,770) (5,282,153) (3,607,820) Income tax paid (33,158,913) (350,693,831) Nil (1,862,675) Net cash (used in) / generated from operating activities (148,375,359) (358,986,710) 127,476,809 (1,819,185) Cash flows from investing activities Purchase of property, plant and equipment 6 (95,167,751) (445,150,326) Nil (20,714,474) Proceeds from sale of property, plant and equipment 2,845,206 17,454,455 Nil Nil Purchase of intangible assets 9 (2,279,806) (2,505,339) Nil Nil (Purchase) / disposals of investments Nil Nil 25,687,460 (224,287,475) Dividends received 22 64,616,072 22,140,234 47,766,351 67,542,696 Net cash (used in) / generated from investing activities (29,986,279) (408,060,976) 73,453,811 (177,459,253) Cash flows from financing activities Proceeds from borrowings 453,226,693 94,126,264 Nil 94,126,264 Proceeds from a rights issue 16 2,568, ,038,660 Nil 197,038,660 Repayment of loans (44,913,416) (85,138,110) (44,913,416) (85,138,110) Dividends paid (66,600,056) (36,497,286) (45,600,000) (36,497,286) Finance lease principal payment (738,000) (738,000) (738,000) (738,000) Net cash generated from / (used in) financing activities 343,543, ,791,528 (91,251,416) 168,791,528 Increase / (decrease) in cash and cash equivalents 165,181,589 (598,256,159) 109,679,204 (10,486,910) Movement in cash and cash equivalents At 1 April 287,611, ,867,843 (115,826,678) (105,339,768) Increase / (decrease) 165,181,589 (598,256,159) 109,679,204 (10,486,910) At 31 March ,793, ,611,684 (6,147,474) (115,826,678) The accounting policies and notes as set out in pages 25 to 83 form an integral part of these financial statements.

26 C M HOLDINGS PLC AND ITS SUBSIDIARIES 25 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements 1. General information C M Holdings PLC is a public limited company domiciled in Sri Lanka and incorporated on 9 July 1909 under Companies Ordinance. The registered office of the is located at No. 297, Union Place, Colombo 2. The was re-registered under the Companies Act, No. 7 of 2007 on 1 July The principal activity of the was the sale of spare parts, providing vehicle maintenance services, and carrying on the business as an investment company. In the year under review, shareholder sanction was obtained to restructure the business activities of the by phasing out the motor vehicle business and restricting the business activities of the primarily of a property holding and investment company. Carplan Limited, a wholly owned subsidiary of C M Holdings PLC is a limited liability company domiciled in Sri Lanka and incorporated on 16 October 1987 under the Companies Act, No.17 of The was re-registered under the Companies Act, No.7 of 2007 on 19 November The registered office of the is located at No. 297, Union Place, Colombo 2. The principal activity of the company is repairs and servicing of motor vehicles. Union Investments (Private) Limited, a wholly owned subsidiary of C M Holdings PLC is a limited liability company incorporated and domiciled in Sri Lanka. The registered office of the company and the principal place of the business is located at No. 51/1B, Dharmapala Mawatha, Colombo 03. The company was incorporated on 16 February 1978 and re-registered under the Companies Act, No. 7 of 2007 on 29 July The principal activity of the company is carrying on the business of an investment company. KIA Motors (Lanka) Limited, a partially-owned subsidiary of C M Holdings PLC is a limited liability company domiciled in Sri Lanka and incorporated on 14 August 2007 under companies Act, No.7 of The registered office of the company is located at No. 297, Union Place, Colombo 02. The principal activity of the company is import and sale of motor vehicles. The holding percentage of C M Holdings PLC reduced to 70% ( %) on 3 May Guardian Asset Management Limited, a partially - owned subsidiary of C M Holdings PLC is a limited liability company domiciled in Sri Lanka and incorporated on 8 March 1995 under Companies Act, No.17 of The registered office of the company is located at No.51/1B Dharmapala Mawatha, Colombo 3. The principal activities of the company are asset management, fund and portfolio management and the management of all types of trusts. Guardian Trustee Limited is a wholly owned subsidiary of Guardian Asset Management Limited. It is a limited liability company domiciled in Sri Lanka and incorporated on 26 May 1995 under the Companies Act, No.17 of The registered office of the is located at No.51/1B, Dharmapala Mawatha, Colombo 03. The principal activities of the company are asset management, fund and portfolio management and the management of all types of trusts. Colonial Motors (Ceylon) Limited, a wholly owned subsidiary of C M Holdings PLC is a limited liability company domiciled in Sri Lanka and incorporated on 18 November 1996 under the Companies Act, No.17 of 1982, and commenced operations on 23 October The registered office of the company is located at No. 297, Union Place, Colombo 02. The principal activity of the company is import and sale of motor vehicles and spare parts and providing vehicle maintenance services. The ultimate parent of the is the Colombo Fort Land and Building PLC and the structure as at 31 March is as follows: Name of the Relationship Holding Proportion of voting power interest Carplan Limited Subsidiary Direct 99.99% 99.99% Union Investments (Private) Limited Subsidiary Direct 99.99% 99.99% KIA Motors (Lanka) Limited Subsidiary Direct 70.00% 70.00% Guardian Asset Management Limited Subsidiary Direct 93.75% 93.75% Colonial Motors (Ceylon) Limited Subsidiary Direct 99.99% 99.99%

27 26 C M HOLDINGS PLC AND ITS SUBSIDIARIES 2. Summary of significant accounting policies The financial statements are prepared in accordance with and comply with Sri Lanka Financial Reporting Standards issued by the Institute of Chartered Accountants of Sri Lanka. Sri Lanka Accounting Standards (SLASs) were revised to incorporate International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board, (IASB) which requires all entities to apply these standards effective for years beginning on or after 1 January The financial statements of the and have been prepared in accordance with Sri Lanka Accounting Standards, which comprise Sri Lanka Financial Reporting Standards (SLFRSs), Sri Lanka Accounting Standards (LKASs), relevant interpretations of the Standard Interpretations Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC) which are collectively referred to as SLFRSs. The and have consistently applied the accounting policies in the preparation of its financial statements throughout all periods presented, as if these policies had always been in effect. These financial statements have been prepared under the historical cost convention except for financial assets and liabilities which are measured at fair value. The preparation of financial statements in conformity with SLFRSs requires the use of certain critical accounting estimates. It requires management to exercise their judgment in the process of applying the and s accounting policies. The areas where assumptions and estimates are significant to the s and s financial statements are disclosed in Note Changes in accounting policy and disclosures New standards, amendments and interpretations issued but not effective for the financial year beginning after 1 J a n u a r y a n d n o t e a r l y a d o p t e d SLFRS 10, Consolidated financial statements builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The and is yet to assess SLFRS 10 s full impact and intends to adopt SLFRS 10 no later than the accounting period beginning on 1 April SLFRS 12, Disclosures of interests in other entities includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The and is yet to assess SLFRS 12 s full impact and intends to adopt SLFRS 12 no later than the accounting period beginning on 1 April SLFRS 13, Fair value measurement, aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across SLFRSs. The requirements, which are largely aligned between SLFRSs and relevant GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within SLFRSs or relevant GAAP. The and is yet to assess SLFRS 13 s full impact and intends to adopt SLFRS 13 no later than the accounting period beginning on 1 April SLFRS 9, Financial instruments, addresses the classification, measurement and recognition of financial assets and financial liabilities and replaces the areas of LKAS 39 which relate to classification and measurement of financial instruments. SLFRS 9 requires financial assets to be classified in to two measurement categories at initial recognition which are financial assets measured as at fair value and financial assets measured at amortised cost. The classification depends on the