AGALAWATTE PLANTATIONS PLC RE-AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

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1 RE-AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

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7 RE-AUDITED STATEMENT OF COMPREHENSIVE INCOME Rs. 000 Rs. 000 Rs. 000 Rs. 000 Notes Re-audited Restated Re-audited Restated Continuing operations Revenue 4.1 2,002,702 1,964,915 2,182,907 2,118,182 Cost of sales 4.2 (2,032,318) (1,870,065) (2,172,082) (1,990,709) Gross profit / (loss) (29,616) 94,850 10, ,473 Other income 5 166, , ,475 64,003 Selling & distribution expenses (71,370) (76,892) (78,025) (83,231) Administration expenses (390,514) (77,659) (409,431) (94,263) Impairment of fixed assets 6 (11,053) - (11,053) - Other expenses 7 (288,330) (65,903) (288,330) (65,903) Results from operating activities (624,726) (19,139) (640,539) (51,921) Finance income ,126 14,385 13,126 14,385 Finance costs 9.2 (321,032) (194,306) (322,423) (195,359) Net finance income/ (cost) (307,906) (179,921) (309,297) (180,974) Share of profit / (loss) in associate companies ,808 (52,057) Share of profit / (loss) in jointly controlled entity ,741 8,751 Profit / (loss) before tax 10 (932,632) (199,060) (882,286) (276,201) Tax (expenses) / reversal 11 52,799 (178,870) 52,799 (178,870) Profit / (loss) for the year (879,833) (377,930) (829,488) (455,071) Other comprehensive income Items that will never be reclassified to profit or loss Gain / (loss) on AFS financial investments 23.2 (3,123) (27,212) (3,123) (27,212) Acturial gain / (loss) 31 - (6,868) - (6,868) Tax on other comprehensive income Other comprehensive income for the year, net of tax (3,123) (33,149) (3,123) (33,149) Total comprehensive income for the year (882,956) (411,079) (832,611) (488,220) Profit attributable to: Owners of the company (879,833) (377,930) (829,488) (455,071) Non controlling interest Profit / (loss) for the year (879,833) (377,930) (829,488) (455,071) Total comprehensive income attributable to: Owners of the company (882,956) (411,079) (832,611) (488,220) Non controlling interest Total comprehensive income for the year (882,956) (411,079) (832,611) (488,220) Figures in brakets indicate deductions Basic earnings / (loss) per share (Rs.) 12 (35.19) (15.12) (33.18) (18.20) Dividend per share (Rs.) The accounting policies and notes on page 05 to 57 form an integral part of these re-audited financial statements. Page 01

8 RE-AUDITED STATEMENT OF FINANCIAL POSITION As at 31 st December Rs. 000 Rs. 000 Rs. 000 Rs. 000 Notes Re-audited Restated Re-audited Restated ASSETS Non-current assets Leasehold rights to bare land 14/15 161, , , ,319 Immovable estate assets'on finance lease (other than bare land) , , , ,886 Other leased assets 17 27,167 43,958 27,167 43,958 Tangible fixed assets , , , ,407 Consumable biological assets , , , ,737 Bearer biological assets 20 2,194,964 2,068,223 2,194,964 2,068,223 3,369,160 3,302,515 3,389,494 3,322,530 Investments Associates ,250 78,250 42,794 8,986 Subsidiaries 22 12,500 12, Jointly controlled entity 23 19,518 29, , ,913 Long term investment in quoted company ,550 31,673 28,550 31,673 Total non current assets 3,507,978 3,454,898 3,569,448 3,478,102 Current assets Inventories , , , ,761 Trade & other receivables , , , ,054 Amounts due from related parties , , , ,189 Short term deposits 10,620 8,763 10,620 8,763 Cash and cash equivalents 7,135 13,374 7,138 13,435 Total current assets 689,336 1,050, ,267 1,102,202 TOTAL ASSETS 4,197,314 4,504,944 4,321,715 4,580,304 EQUITY AND LIABILITIES Stated capital and reserves Stated capital , , , ,000 General reserves , , , ,000 Retained earnings (980,879) (97,923) (895,532) (62,921) Equity attributable to owners of the (215,879) 667,077 (130,532) 702,079 Non-current liabilities Loans and borrowings , , , ,616 Obligation under finance & operating leases , , , ,334 Retirement benefit obligations , , , ,925 Deferred income 32 58,597 60,987 58,597 60,987 Deferred tax liabilities , , , ,321 Total non current liabilities 2,074,443 1,853,892 2,080,341 1,876,183 Current liabilities Loans and borrowings , , , ,178 Obligation under finance & operating leases 30 24,624 22,374 24,624 22,374 Trade and other payables 33 1,143, ,715 1,163, ,197 Amounts due to related parties , , , ,936 Short term borrowings , , , ,369 Bank overdrafts , , , ,988 Total current liabilities 2,338,750 1,983,975 2,371,906 2,002,042 TOTAL EQUITY AND LIABILITIES 4,197,314 4,504,944 4,321,715 4,580,304 Net assets per share (Rs.) (8.64) (5.22) Figures in brakets indicate deductions It is confirmed that the re-audited financial statements have been prepared in compliance with the requirements of the Companies Act no.07 of 2007 subject to the circumstances and limitations referred in the note nos & Sgd. Chief Financial Officer The board of directors is responsible for the preparation and fair presentation of these re-audited financial statements subject to the circumstances and limitations referred in the note nos & Sgd. Director Sgd. Director The accounting policies and notes on page 05 to 57 form an integral part of these re-audited financial statements. Colombo Page 02

9 RE-AUDITED STATEMENT OF CHANGES IN EQUITY Stated General Retained capital reserves earnings Total Rs'000 Rs'000 Rs'000 Rs'000 Balance as at 01 st January 2013 (Restated) (Note ) 250, , ,156 1,128,156 Total comprehensive income for the year Profit for the year - - (377,930) (377,930) Total other comprehensive income - - (33,149) (33,149) Total comprehensive income for the year (Restated) - - (411,079) (411,079) Transactions with owners,recorded directly in equity Dividends - - (50,000) (50,000) Balance as at 31 st December 2013 (Restated) 250, ,000 (97,923) 667,077 Total comprehensive income for the year Profit for the year - - (879,833) (879,833) Total other comprehensive income - - (3,123) (3,123) Total comprehensive income for the year (Re-audited) - - (882,956) (882,956) Balance as at 31 st December 2014 (Re-audited) 250, ,000 (980,879) (215,879) Stated General Retained capital reserves earnings Total Rs'000 Rs'000 Rs'000 Rs'000 Balance as at 01 st January 2013 (Restated) (Note ) 250, , ,299 1,240,299 Total comprehensive income for the year Profit for the year - - (455,071) (455,071) Total other comprehensive income - - (33,149) (33,149) Total comprehensive income for the year (Restated) - - (488,220) (488,220) Transactions with owners,recorded directly in equity Dividends - - (50,000) (50,000) Balance as at 31 st December 2013 (Restated) 250, ,000 (62,921) 702,079 Total comprehensive income for the year Profit for the year - - (829,488) (829,488) Total other comprehensive income - - (3,123) (3,123) Total comprehensive income for the year (Re-audited) - - (832,611) (832,611) Balance as at 31 st December 2014 (Re-audited) 250, ,000 (895,532) (130,532) Figures in brakets indicate deductions The accounting policies and notes on page 05 to 57 form an integral part of these re-audited financial statements. Page 03

10 RE-AUDITED CASH FLOW STATEMENT Rs. 000 Rs. 000 Rs. 000 Rs. 000 Re-audited Restated Re-audited Restated CASH FLOW FROM OPERATING ACTIVITIES Profit / (loss) before tax (932,632) (199,060) (882,286) (276,201) Adjustments for : Interest expenses 319, , , ,745 Share of profit / (loss) in associate companies - - (33,808) 52,057 Share of profit / (loss) in jointly controlled entity - - (33,741) (8,751) Impairment of fixed assets, net of depreciation 11,053-11,053 - Provision for doubtful debts on amounts due from related parties 228, ,612 - Depreciation & amortisation 151, , , ,040 Provision for defined benefit plan cost 86,807 45,157 87,879 44,879 Dividend received (30,682) (42,462) - - Income on share repurchase (22,891) - (25,301) - Interest income (13,126) (14,385) (13,126) (14,385) Amortisation of grants (2,934) (3,287) (2,934) (3,287) Operating profit / (loss) before working capital changes (205,118) 106,948 (189,463) 118,097 Working capital changes (Increase) / decrease in inventories 50,230 43,561 52,081 45,696 (Increase) / decrease in trade and other receivable 24,599 (38,025) 7,019 (39,227) (Increase) / decrease in amounts due from related parties 52,887 (188,731) 57,783 (179,532) Increase / (decrease) in trade and other payables 281, , , ,097 Increase / (decrease) in amounts due to related parties 116, , , ,702 Cash generated from / (used in) operations 320, , , ,833 Interest paid (273,126) (208,931) (302,325) (209,984) Retiring gratuity paid (18,039) (19,729) (18,161) (20,172) Net cash generated from operating activities 29, ,675 83, ,677 CASH FLOW FROM INVESTING ACTIVITIES Investments in bearer biological assets (192,568) (217,699) (192,568) (217,699) Purchase of other property, plant & equipment (36,342) (105,580) (38,784) (108,191) Proceeds on shares repurchased on JV 33,333-33,333 - Capital grants received Dividened income 30,682 42, Net cash used in investing activities (164,351) (280,770) (197,475) (325,843) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from long term borrowings 948, , , ,189 Repayment of long term borrowings (736,490) (458,504) (752,861) (460,259) Receipts of short term borrowings - (net of payment) 17,428 33,530 17,428 33,530 Interest received 13,126 14,385 13,126 14,385 Lease rentals paid (14,892) (20,669) (14,892) (20,669) Government lease rentals paid (9,947) (18,450) (9,947) (18,450) Dividend paid - (11,552) - (11,552) Net cash from financing activities 217, , , ,174 Net increase / (decrease) in cash and cash equivalents 82,564 4,236 87,571 3,009 Cash & cash equivalents at beginning of the year (184,830) (189,066) (200,790) (203,799) Cash & cash equivalents at end of the year (a) (102,266) (184,830) (113,219) (200,790) (a) Analysis of cash & cash equivalents at end of the year Cash in hand & at bank 17,755 22,137 17,758 22,198 Bank overdrafts (120,021) (206,967) (130,977) (222,988) (102,266) (184,830) (113,219) (200,790) Figures in brakets indicate deductions The accounting policies and notes on page 05 to 57 form an integral part of these re-audited financial statements. Page 04

11 ACCOUNTING POLICIES AND 1. CORPORATE INFORMATION 1.1. General Domicile and legal form of reporting entity The was incorporated on 22 nd June1992 under the Companies Act No. 17 of 1982 (The company re-registered under the Companies Act No 7 of 2007) in terms of the provisions of the conversion of Public Corporations or Government owned Business Undertakings into Public Companies Act No. 23 of Since January 1996 the 's shares are quoted in the Colombo Stock Exchange. At incorporation the took over specified assets and liabilities of 17 estates from two State Agencies related to the plantation industry owned by the Government of Sri Lanka. Of the estate assets taken over, all immovable assets (i.e. bareland and other immovable assets) have been obtained on long-term lease while ownership of movable assets were vested with the. The registered office of the as at the initial date of authorization of audited financial statements for issue was No. 10, Gnanartha Pradeepa Mawatha, Colombo Consolidated financial statements The financial statements for the year ended 31 st December 2014 comprise the referring to Agalawatte Plantations PLC as the holding and the referring to the Companies whose accounts have been consolidated therein Re- audit of financial statements The had prepared the financial statements for the year ended 31 st December 2014 which was circulated to its shareholders. The said financial statements together with the Auditors Report thereon were duly adopted by the shareholders of the at the Annual General Meeting held on 29 th June However, by virtue of power vested in the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) under sub section (2) of section 28 of Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 and in accordance with a resolution passed at the meeting of their Board held on 27 th September 2016, SLAASMB issued a direction to Agalawatte Plantations PLC by its letter dated 28 th September 2016 addressed to the then Chairman of the, to have the financial statements of the for the year ended 31 st December 2014 be re-audited. Consequent to the acquisition of controlling interest in Agalawatte Plantations PLC by Browns Power Holdings (Pvt) Ltd on 14 th July 2016, the previous Board of Directors whose names are listed below tendered their resignations prioir to attending to the re-audit for 2014 as requested by SLAASMB and also before audit of the financial statements for the year 2015 are concluded : Dr. C N A Nonis Mr. R K Man Ng Mr. F L Fonseka Mr. S C J Devendra Mrs. S M A Nonis Ranaweera Resigned w.e.f 11/11/2016 (Chairman at the time of resignation) Resigned w.e.f 11/11/2016 Resigned w.e.f 11/11/2016 (Managing Director at the time of resignation) Resigned w.e.f 11/11/2016 (CEO at the time of resignation) Resigned w.e.f 11/11/2016 The name of the Directors who held office during the financial year 2014 are available on page 03 of the Annual Report of the for the year ended 31 st December Page 05

12 ACCOUNTING POLICIES AND Re- audit of financial statements Cont.. Subsequently, the new Board of Directors was appointed as follows: Mr. K A K P Gunawardena Mr. D S K Amarasekera Mrs. V G S S Kotakadeniya Mr. A S Perera Mr. K G Punchihewa Appointed w.e.f 20/10/2016 and appointed as the chairman w.e.f 18/01/2017 Appointed w.e.f 20/10/2016 Appointed w.e.f 20/10/2016 Appointed w.e.f 20/10/2016 Appointed w.e.f 18/01/2017 The present External Auditors, Ms. Hulugalle Samarasighe & Co, Chartered Accountants were appointed by the new Board of Directors to carry out the re-audit of the financial statements for the year ended 31 st December 2014 as requested by SLAASMB. The present Board of Directors and Chief Financial Officer who did not hold any office during the year 2014 merely facilitated the external auditors to the best of their knowledge exercising reasonable care as practical as possible to carry out the re-audit with available information and encountered limitations in addition to the notes referred bellow in the process of re-audit which may have affected the fair presentation of financial statements for the year ended 31 st December Attention is drawn to note nos. 10.1, 17.1, 18.2, 18.3, 19.1, 20.3, 21.1, 21.2, 22.2, 23.2, 24.1, 26.1, 27.1, 29.1, 31.2, 32.1, 33.1, 34.1, 34.5, 36.1, 38.3, 39, 40 and 41 of the re-audited financial statements highlighting some of the limitations experienced during the re-audit, instances of non compliance with Sri Lanka Accounting Standards (SLFRS / LKAS) and mis-representations previously incorporated in the initial audited financial statements of the year The comparative figures were restated as appropriate relating to the period prior to the year 2014 based on the audit findings during the re audit of year 2014 but not subjected to a comprehensive re-audit for the previous years. The previous Directors are responsible for the compliance on Good Corporate Governance including maintenance of proper books of accounts, preparation of financial statements and to ensure compliance as per Section 150, 151,152 & 153 of the Companies Act No. 07 of 2007 during the financial year ended 31 st December Serious loss of capital As per the re-audited financial statements for the year ended 31 st December 2014, the net assets of Agalawatte Plantations PLC and its group have become negative. The new Board of Directors will make due arrangements to comply with the section 220 of the Companies Act No. 07 of Authorisation for issue The financial statements of Agalawatte Plantations PLC already published by the for the year ended 31 st December 2014 were authorised for issue in accordance with a resolution of the board of directors of the on 28 th May The re-audited financial statements of Agalawatte Plantations PLC for the year ended 31 st December 2014 were authorised for issue in accordance with a resolution of the board of directors of the on 06 th March Principal activities and nature of operations A. Holding During the year the principal activities of Agalawatte Plantations PLC consist of cultivation, production, processing and sale of tea, rubber and oil palm. Page 06

13 ACCOUNTING POLICIES AND Principal activities and nature of operations Cont.. B. Subsidiaries, associates and joint ventures Name of the Relationship Principal business activity Mackply Industries (Pvt) Ltd (MIPL) Subsidiary Manufacturing of ply wood sheets & wooden flush doors Mackwoods Rubber Products (Pvt) Ltd Associate Invested in a involved in manufacturing of centrifuge latex Taprospa Resorts (Pvt) Ltd Associate Owned and managed tourist hotels and bungalows AEN Palm Oil Processing (Pvt) Ltd Joint Venture Processing and selling palm oil Immediate and ultimate parent enterprise In the opinion of the Directors, the s immediate parent undertaking as at the date of statement of financial position was Mackwoods Plantations (Pvt) Ltd and the ultimate parent undertaking and controlling party was Mackwoods (Pvt) Ltd, a incorporated in Sri Lanka. 1.2 Statement of compliance Subject to the note & and based on the available information & best of the knowledge of present Board, the re audited financial statements of the and the separate re audited financial statements of the are prepared in accordance with Sri Lanka Accounting Standard, LKASs/SLFRSs laid down by the Institute of Chartered Accountants of Sri Lanka and in compliance with the requirements of the Companies Act No.07 of 2007 and Sri Lanka Accounting and Auditing Standards Act No. 15 of Basis of preparation Subject to the note & and based on the available information & best of the knowledge of present Board, the re audited financial Statements are prepared in accordance with Sri Lanka Accounting and Auditing Standards Act No.15 of 1995,which requires compliance with Sri Lanka Accounting Standards (SLFRS/LKAS) and Statements of Recommended practices promulgated by The Institute of Chartered Accountants of Sri Lanka and with the requirements of the Companies Act No 07 of The financial statements were prepared on a going concern basis under the historical cost convention except for leasehold rights to bare land, managed consumable biological assets, inventories and retirement benefits obligation which have been valued at fair value. No adjustments have been made for inflationary factors in the financial statements. The preparation of financial statements in accordance with SLFRS requires the use of certain critical accounting estimates. The areas of accounting that require a high degree of judgment or which are based upon significant estimates are disclosed on note 3.B. Page 07

14 ACCOUNTING POLICIES AND 1.4 Basis of consolidation (a) Subsidiaries Subsidiaries are those enterprises controlled by the. Control exists when the has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The consolidated financial statements incorporate the results, and assets and liabilities of the and its subsidiary, associate and joint venture Companies. Uniform accounting policies have been adopted by the and its subsidiary in all significant respects in the preparation and presentation of financial statements. Intra group balances and transactions and any unrealised gains from intra group transactions are eliminated in preparing the consolidated financial statements. The investment in subsidiary is shown at cost in the 's financial statements. (b) Associates Associates are those enterprises in which the has significant influence, but not control, over financial and operating policies. The Associates are accounted at cost in the whereas consolidated financial statements include the 's share of the total recognised gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. (c) Jointly Control entities Jointly controlled entities are those entities over whose activities of the have joint control, established by contractual agreement. The consolidated financial statements include the s share of the total recognised gains and losses of joint venture on an equity accounted basis (LKAS-31), from the date that joint control commences until the date that joint control ceases. Financial period of subsidiary, associates and joint venture represents twelve months period from 01 st April to 31 st March. These consolidated financial statements are expected to be based on audited financial statements of the year ended 31 st March 2014 after due adjustments for results of activities to match the financial period of the parent. (d) Compliance Subject to the note nos and 1.1.4, the consolidated financial statements are prepared in accordance with Section 152 (1) of the Companies Act No 7 of 2007 and the Sri Lanka Accounting Standards 27 - "Consolidated & Separate Financial Statements". 1.5 Segment reporting A segment is a distinguishable component of the group that is engaged either in providing product or services (business segments), or in providing products or services within a particular economic environment (geographical segments), which is subject to risks and rewards that are different from those of other segments. Segment information is presented in respect of the 's business. There are no distinguishable components to be identified as geographical segment for the. The business segments are reported based on the management and reporting structure. Inter segment pricing is determined at prices mutually agreed between the Companies. Segment result, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Page 08

15 ACCOUNTING POLICIES AND 1.6 Comparative figures Prior year figures and phrases are re-arranged/re-stated to conform to current year s presentation, where ever relevant. 1.7 Foreign currency translations All foreign exchange transactions are converted to Sri Lanka Rupees, which is the reporting currency, at the rates of exchange prevailing at the time the payment was made. Monetary assets and liabilities denominated in foreign currencies are translated to Sri Lanka Rupee equivalents using year-end spot foreign exchange rates. Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined. The resulting gains and losses are accounted for in the statement of comprehensive income. 2 SIGNIFICANTACCOUNTING POLICIES 2.1 Assets and bases of their valuation Leased assets Property, plant and equipment financed by leasing arrangements which transfer substantially all the risks and rewards incidental to ownership, (i.e. finance leases) are treated as if they have been purchased outright and are classified as such in the financial statements. The capital element of the leasing commitment is shown as an obligation under finance leases. Lease rentals are treated as consisting of a capital and an interest element. The capital element is applied to reduce the outstanding obligation while the interest element is charged against profit in proportion to the reducing capital element outstanding. The finance charges allocated to future periods are separately disclosed under Note 30. Leasehold rights are amortised / depreciated in equal annual amounts over the following periods: Bare land Mature plantations Buildings Machinery Improvements to land Motor vehicles Other vested assets Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation. Cost for this purpose includes the cost of acquisition or construction, and any further expenses incurred to bring the asset to its working condition or intended use. Expenditure incurred on existing property, plant and equipment are capitalized when it is expected that such expenses would result in future economic benefits in excess of those originally assessed. All fully depreciated motor vehicles were fair valued and those fair values were used as deemed cost as at that date Permanent land development costs 53 years (i.e. period of lease) 30 years 25 years 15 years 30 years 5 years 30 years Permanent land development costs are costs incurred to make major changes to land contours, to build new access roads and on other major infrastructure development. These costs are amortised over the remaining period of the lease. Page 09

16 ACCOUNTING POLICIES AND Biological assets Biological assets are broadly classified as bearer biological assets and consumable biological assets and mature biological assets and immature biological assets are categorized again according to harvestable specifications under the broad classification of bearer biological assets. Tea, rubber, oil palm, other plantations and nurseries are classified as bearer biological assets. The bearer biological assets are measured at cost less accumulated depreciation and impairment losses, if any, in terms of LKAS 16- Property Plant & Equipment as per the ruling issued by ICASL. Cost incurred on land preparation, rehabilitation, new planting, replanting, crop diversification and inter-planting up to the point of commercial harvesting are reflected as immature plantations on which no depreciation is provided. The cost incurred on bearer biological assets which comes in to bearing are transferred to Mature Plantations and are depreciated over their useful lives as follows. Rubber 5% Tea 3% Oil palm 5% Consumable biological assets include managed biological assets. The gain or loss arising on initial recognition of biological assets less cost to sell and from a change in fair value less cost to sell of biological assets are included in the profit or loss for the period in which it arises. However, the has not carried out any valuation of consumable biological assets after its initial recognition in the year As a result, the is unable to assess the change in its fair value as at the reporting date subsequent to its initial valuation carried out in Capitalisation of borrowing costs Borrowing costs are recognised as an expense in the period in which they occur. However, where such costs are directly attributable to the acquisition, construction or production of qualifying assets (development of immature plantations) they are capitalised as a part of these assets Infilling costs timber those that are to be harvested as agricultural produce or sold as The managed timber are expected to be measured on initial recognition and at the end of each reporting period at its fair value less costs to sell in terms of LKAS 41. The fair value of timber trees are measured using DCF method where the current market prices of timber, applied to expected timber content of a tree at the maturity by an independent professional valuer. All the assumptions and factors considered in the initial valuation are given in note 19. Infilling costs are those costs incurred in replacing plant vacancies in mature fields of perennial crops. Where such costs are expected to increase the future benefits from that field beyond its previously assessed standard of performance, these costs are capitalised. Such capitalised costs are depreciated over the newly assessed remaining useful life of the relevant field. Infilling costs, which are not capitalised, are recognised as an expense in the period in which they occur. Page 10

17 ACCOUNTING POLICIES AND Depreciation Depreciation is charged on all property, plant and equipment on a straight-line basis so as to write-off the cost over the estimated useful life of these assets. Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecogniesd. The principle annual rates of depreciation used are as follows: Buildings 2.50% Plant and machinery 7.5% to 20.0% Equipment 12.5% to 33.33% Motor vehicles 20% Furniture & fittings 10% Sanitation, water and electricity schemes 5% Investments Long term investments Long term investments are stated at cost. Carrying amounts are reduced to recognise a decline other than temporary, determined for each investment individually. These reductions for other than temporary declines in carrying amounts are charged to the statement of comprehensive income Inventories Finished agricultural produce of biological assets These are valued at lower of cost and net realizable value after making due allowances for slow moving and obsolete items. In general cost is determined on a first-in first-out basis and includes all directly attributable expenses incurred in bringing the inventories to its present condition and location. Net realizable value is the estimated selling price less the costs estimated for the realization of such sale. Input materials, spares & consumables are valued at weighted average cost formula. Agricultural produce harvested from biological assets represents the tea leaves, latex and coconut harvested at the reporting date which are not further processed at the end of the reporting period. It is measured at their fair value less cost to sell at the point of harvest Trade and other receivables Debtors and other receivables are stated at amounts they are estimated to be realised. (i.e. Net of provision for doubtful debts) Cash and cash equivalents Cash and Cash Equivalents are defined as cash in hand and cash at bank. Cash flow statement has been prepared using the indirect method Restoration costs Expenditure incurred on repairs or maintenance of property, plant and equipment in order to restore or maintain the future economic benefits expected from originally assessed standard of performance, is recognized as an expense when incurred. Page 11

18 ACCOUNTING POLICIES AND 2.2 Liabilities and provisions Current and non-current liabilities Liabilities are classified as current liabilities in the statement of financial position when such liabilities are payable on demand or fall due within one year of the reporting date. Current portion of long-term liabilities are classified as current liabilities except to the extent that the has reasonable assurance that they will be re-financed on a long-term basis. All other amounts are shown as non-current liabilities Terminal benefits/retirement benefits The is required to pay terminal benefits under the Payment of Gratuity Act No. 12 of 1983 and the Indian Repatriates Law No. 34 of 1978 while its Subsidiary is required to pay such benefits under the first mentioned Act. Gratuity provision for daily paid employees are made on the basis of an actuarial valuation carried out by a professional actuary for which purpose the Projected Unit Credit (PUC) method is expected to be used. Actuarial valuation is carried out every two years. The gratuity provision for employees other than daily paid employees is provided on the basis of half month for each year of completed service. It is assumed that all such employees will continue in service for five years or more and qualify for gratuity. No part of the gratuity liability is externally funded. The and its subsidiary are also required to make Provident and Trust Fund contributions (Defined Contribution Plans) in respect of all employees. Such contributions are recognised as expenses during the year in which they are incurred Income tax expense The tax liability is computed according to the provisions of the Inland Revenue Act using tax rates enacted at the reporting date and any adjustments to tax payable in respect of previous years. Deferred tax is recognized using the liability method, providing for timing differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date Events occurring after the reporting date All material post financial position events up to 28 th May 2015 being the initial date of authorization of the financial statements and matters arisen during the re audit are considered, and where necessary adjustments are made in the financial statements or appropriate disclosures made in accompanying notes. Refer note 40 for more details Capital commitments & contingent liabilities As per the information available all known material capital commitments and contingent liabilities are disclosed in notes 39 and note 41 to the financial statements. Page 12

19 ACCOUNTING POLICIES AND 2.3 Statement of comprehensive income For the purpose of presentation of the statement of comprehensive income, the nature of expenses method is adopted, as it represents fairly the elements of the company performance Revenue recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and sales taxes. The following criteria are used for the purpose of recognition of revenue Sale of goods Revenue from the sale of goods in the ordinary course of activities is measured at the fair value of the consideration received or receivable, net of brokerage, public sale expenses and other levies related to turnover. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards incidental to the ownership of the goods have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized. The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreement Other income Other income is recognised on an accrual basis Grants Grants related to assets are recognised as income in the Statement of Comprehensive Income over the related assets useful life so as to match them with the related costs which they are intended to compensate. Other grants are set-off against related expenses and the net amount is reflected in the Statement of Comprehensive Income. Grants relating to assets, including non-monetary grants at fair value, are presented in the Statement of Financial Position by setting up the grant as deferred income. 3.A IMPAIRMENT 3A.1. Recognition The carrying value of the s assets, are reviewed at each Reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognized in the Statement of Comprehensive Income. For the assets that have indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each reporting date. 3A.2 Calculation of recoverable amount The recoverable amount is the greater of their net selling and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using pre tax discount rate that reflects the current market assessment of their time value of money and the risk specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Page 13

20 ACCOUNTING POLICIES AND 3.A.3 Reversal of impairment An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. There are no evidences to establish the facts that the has carried out a comprehensive impairment tests covering all the assets as at the current reporting date. 3.B Significant accounting judgments, estimates and assumptions To facilitate the timely preparation of financial statements in conformity with SLFRS management has made estimates and assumptions regarding reported assets, liabilities, income and expenses based on historical experience, trends and expectations that are believed to be reasonable under the circumstances. Accordingly actual results may differ from these judgments, assumptions and estimates. Estimates and underlying assumptions are reviewed on a continuing basis to ensure the validity of same and accordingly any changes due to the revision of estimates are recognized in the period the estimate is revised. The areas of accounting that require a high degree of judgment or which are based upon significant estimates are as follows. Consumable biological assets The fair value of managed timber plantations depends on several financial and biological factors and assumptions that are highly unpredictable thus a change in same would affect the fair value of biological assets. Key assumptions made in the fair valuation of biological assets are given in note 19. Retirement benefit obligations The present value of the retirement benefit obligation is determined on an actuarial basis using a number of key assumptions given in note 31 thus any changes in these key assumptions would affect the carrying amount of retirement benefit obligations. Income taxes The recognized liabilities for estimated tax may differ from the final outcome which depends on interpretations by tax authorities and accordingly would affect the current and deferred tax liabilities in the period the determination is made. 3.C Standards issued but not yet effective Standard issued but not yet effective up to the date of issuance of the group s interim financial statements listed below are those that the group reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. SLFRS 9 - Financial Instruments SLFRS as issued reflects the first phase of work on replacement of LKAS 39 and applies to classification and measurement of financial assets and liabilities. This standard was originally effective for annual periods commencing on or after 01 st January However effective date has been deferred subsequently. SLFRS 14 - Regulatory Deferral Accounts This standard specify that the financial reporting requirements for regulatory deferral account balances that arise when an entity provides goods or services to customers at a price or rate that is subject to rate regulation. This standard becomes effective for annual periods beginning on or after 01 st January Earlier application is permitted. If an entity applies SLFRS 14 for an earlier period, the amendment shall be applies for that earlier period. Page 14

21 Rs. 000 Rs.000 Rs. 000 Rs. 000 Re-audited Restated Re-audited Restated 4. SEGMENTAL INFORMATION 4.1. Revenue Rubber 659, , , ,033 Tea 808, , , ,337 Oil palm 254, , , ,197 1,722,284 1,783,567 1,722,284 1,783,567 Tea centre 280, , , ,348 Others , ,267 2,002,702 1,964,915 2,182,907 2,118, Cost of sales Rubber 741, , , ,818 Tea 903, , , ,153 Oil palm 114, , , ,858 1,759,659 1,693,829 1,759,659 1,693,829 Tea centre 272, , , ,236 Others , ,644 2,032,318 1,870,065 2,172,082 1,990, Gross profit / (loss) Rubber (81,412) 152,215 (81,412) 152,215 Tea (95,378) (175,816) (95,378) (175,816) Oil palm 139, , , ,339 (37,375) 89,738 (37,375) 89,738 Tea centre 7,759 5,112 7,759 5,112 Others ,441 32,623 (29,616) 94,850 10, , Assets Rubber 1,413,445 1,307,443 1,413,445 1,307,443 Tea 1,134,019 1,129,865 1,134,019 1,129,865 Oil palm 635, , , ,406 Head office / subsidiaries 1,014,534 1,489,230 1,138,935 1,564,590 4,197,314 4,504,944 4,321,715 4,580, Liabilities Rubber 346, , , ,365 Tea 684, , , ,197 Head office / subsidiaries 3,382,437 2,871,305 3,421,491 2,911,663 4,413,193 3,837,867 4,452,247 3,878,225 Page 15

22 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Re-audited Restated Re-audited Restated 5. Other income Amortization of capital grants 2,934 3,287 2,934 3,287 Dividend income 30,682 42, Income on share repurchase 22,891-22,891 - Sale of rubber trees 81,279 25,985 81,279 25,985 Sundry income 25,943 32,012 25,943 32,012 Rent income 2,428 2,719 2,428 2, , , ,475 64, Impairment of fixed assets (Net of depreciation) impairment of tudugala log cabin 6.1 2,720-2,720 - impairment of racecourse shop 6.2 8,333-8,333-11,053-11, Tudugala log cabin :- The company has spent Rs 2,719, for partly constructed thudugala log cabin during the year 2013 and abandoned subsequently. The had not adjusted its original audited financial statements of 2014 to reflect the impairment Racecourse shop :- Under the previous management, the company has spent and capitalized Rs 8,332, for a tea shop at racecourse, not owned & operated by the company. These capital expenses has no benefit to the company whatsoever. 7. Other expenses Provision for doubtful debts 228, ,612 - Surcharges on EPF/ETF/ESPS/CPPS/Gratuity 59,718 65,903 59,718 65, ,330 65, ,330 65, Managing agent's fee As per the management agreement entered into with the Managing Agents, Mackwoods Plantations (Pvt) Ltd, the basis of computing management fee is at the rate of 25% of net profits before depreciation, amortization, interest and tax (EBITDA) inclusive of all sundry and other income or such other percentage or basis to be mutually agreed between the parties from time to time. There is no management fee in the current year as well as in the previous year since the EBITDA of the is negative. No evidences are available for any other percentage of management fee agreed on EBITDA between the parties. 9. Net finance income / (cost) 9.1. Finance income Interest income 13,126 14,385 13,126 14,385 13,126 14,385 13,126 14, Finance cost Interest on government lease 41,440 39,421 41,440 39,421 Interest on other leases 5,845 13,637 5,845 13,637 Interest on plantation reform project loans 8,405 10,922 8,405 10,922 Loans and overdraft interest 286, , , ,425 Foreign currency exchange (gain) / loss 1,569 (8,386) 1,569 (8,386) 343, , , ,019 Less: Borrowing cost capitalised during the year (22,911) (45,660) (22,911) (45,660) 321, , , ,359 Net finance income / (cost) (307,906) (179,921) (309,297) (180,974) Page 16

23 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Re-audited Restated Re-audited Restated 10. Profit / (loss) before tax The profit / (loss) before interest expenses is stated after charging / (crediting) the following: Depreciation & amortization 151, , , ,040 Auditor's remunerations 2,500 2,000 2,881 2,370 Directors' remunerations 7,500 6,600 7,500 6,600 Exchange (gain) / loss 1,569 (8,386) 1,569 (8,386) Defined benefit plan costs - Retiring gratuity 86,807 45,157 87,879 44,879 Defined contribution plan cost - EPF / CPPS / ESPS & ETF 116, , , ,655 Provision for doubtful debts 228, ,612 - Surcharges on EPF / ETF/ ESPS / Gratuity 59,718 65,903 59,718 65,903 Salaries,wages including PSS and attendance incentives and other related expenses 1,115,938 1,063,977 1,149,582 1,090, Tax expenses ( including deferred tax) 11.1 Current tax expense lncome tax expense on current year's profit 2,026 2,618 2,026 2,618 (Reversal) / charge of deferred tax (54,825) 176,252 (54,825) 176,252 Total tax expense / (reversal) to profit or loss (52,799) 178,870 (52,799) 178, It was not possible to verify some of the expenses charged to the Statement of Comprehensive Income due to lack of proper supporting documentary evidence. The is liable for income tax at the rate of 10% ( %) on agricultural income and at 28% ( %) on other sources of income. Deferred tax charge / (reversal) on other comprehensive income (Note 11.3) - (931) - (931) Reconciliation between the taxable income and the accounting profit / (loss) Accounting profit / (loss) before tax (932,632) (199,060) (882,286) (276,201) Less : Exempt income Amortization of capital grants 2,934 3,287 2,934 3,287 Accounting loss chargeable to income tax (929,698) (195,773) (879,352) (272,914) Aggregate disallowable expenses 904, , , ,114 Aggregate allowable expenses (360,132) (420,148) (360,132) (420,148) (384,850) (392,807) (334,504) (469,948) Aggregate non business income 11,133 14,385 11,133 14,385 Statutory (loss) / gain from business (373,717) (378,422) (323,371) (455,563) Aggregate interest income considered seperately Less: section 32 deductions Loss claimed (35% of total statutory income) 3,897 5,035 3,897 5,035 3,897 5,035 3,897 5,035 Taxable income at special rate of 10% Taxable income liable at normal rate of 28% 7,236 9,350 7,236 9,350 Total taxable income 7,236 9,350 7,236 9,350 lncome tax expense Taxable income at special rate of 10% Taxable income liable at normal rate of 28% 2,026 2,618 2,026 2,618 Total income tax expense 2,026 2,618 2,026 2, Deferred tax expenses Reversed to the profit or loss (54,825) 176,252 (54,825) 176,252 Charged / (reversed) to other comprehensive income - (931) - (931) (54,825) 175,321 (54,825) 175,321 The deferred tax arising on the temporary difference of the company has not been recognized in the re-audited financial statements as a matter of prudence and the resultant tax effect is disclosed below. The effect is computed at the effective rate ranging from 10% to 14.75% ( % to 13.56%). Page 17

24 12. Earnings / (loss) per share (EPS) The basic earnings / (loss) per share has been calculated based on after tax profit / (loss) for the year divided by the weighted average number of ordinary shares in issue as at the reporting date and calculated as follows; Rs. 000 Rs. 000 Rs. 000 Rs. 000 Re-audited Restated Re-audited Restated Amount used as the numerator Net profit /(loss) for the year (879,833) (377,930) (829,488) (455,071) Amount used as the denominator Weighted average number of ordinary shares in issue (000's ) 25,000 25,000 25,000 25,000 Basic earning/(loss) per share (35.19) (15.12) (33.18) (18.20) 13. Dividend per share At Rs.2.00 per ordinary share - 50,000-50,000 Dividend per ordinary share (Rs.) Page 18

25 14. Leasehold rights to estate assets & lease rental (a) The has obtained 17 estates on lease from Janatha Estates Development Board (JEDB) and Sri Lanka State Plantations Corporation (SLSPC). Some important terms under which these leases have been obtained are as follows: (i) The period of the leases is 53 years from 22nd June 1992 to 21st June (ii) The effective total lease rental for any twelve-month period is the previous twelve-month period's lease rental escalated by the applicable Gross Domestic Product (GDP) deflator. The lease rental is payable quarterly in advance. (b) The leasehold rights to all estate assets obtained on lease have been taken into the books of the. For this purpose the value of the leasehold on bare land has been taken based on a valuation done by a valuation specialist just prior to formation of the. The other leased assets (all of which are immovable assets) have been taken into the books of the at the values they appeared in the books of the Lessors on the day immediately preceding the formation of the. (c) The present value of future lease rentals (excluding the portion arising from the annual escalation of the amount due by using the GDP deflator)is shown as a liability. (d ) In terms of a settlement reached with the and recorded in the courts, the Government of Sri Lanka (GOSL) has initiated actions under provisions of the Land Acquisition act to acquire land from 's Peenkande,Kiribathgalla, Doloswella, Niriella and Noragalla estates located in the Ratnapura district and Ambetenna, Mohamedi, Culloden, Clyde, Pimbura Kiriwanaketiya in the Kalutara district. The total extent of land in question is approximately 275 Ha the possession of which has been taken over. The GOSL has agreed to compensate the for these acquisitions on the basis of commercial value of land. The amount of the compensation to be received is not known and no adjustments have been made to the accounts in this regard. 15. Leasehold rights to bare land ( / group) As explained in note 14 to these accounts, estate assets obtained on lease by the have been taken into the books of the. The leasehold rights to bare land of these estates appear in the books of the are as follows : Rs. 000 Rs. 000 Re-audited Restated Value as at , ,832 Amortisation: Beginning of the year Charge for the year End of the year (113,513) (108,235) (5,283) (5,278) (118,796) (113,513) Net book value as at year-end 161, ,319 Page 19