2017annual report renuka capital plc...1. overview the directors of renuka capital plc (previously...

RENUKA CAPITAL PLC2 0 1 7 ANNUAL REPORT

1Renuka Capital PLC Annual Report 2017

Contents

1. Corporate Information 2

2. Chairman’s Report 3

3. Directors’ Profiles 4

4. Report of Director’s 5-13

5. Corporate Governance 14-28

6. Sustainability Report 29-30

7. Risk Management Report 31-39

8. Audit Committee Report 40-42

9. Related Party Transactions Review Committee Report 43-45

10. Remuneration Committee Report 46-47

11. Nomination Committee Report 48

12. Statement of Directors’ Responsibility 49-50

13. Independent Auditor’s Report 51

14. Statement of Financial Position 52

15. Income Statement and Statement of Comprehensive Income 53-54

16. Statement of Changes of Equity 55

17. Cash Flows Statement 56

18. Notes to the Financial statements 57-96

19. Five year Summary 97

20. Shareholders and Investor information 98-100

21. Notice of Meeting 101-102

22. Form of Proxy 103-104

2 Renuka Capital PLC Annual Report 2017

Corporate Information

Name of the CompanyRenuka Capital PLC (Previously known as Kalamazoo Systems PLC)

Registration Number PQ 149

Legal FormQuoted Public Company with Limited Liability

Principal ActivityInvest in equity, Debt and other classes of instruments

Board of DirectorsMr. S. V. Rajiyah Mr. P. GunathilakeMr. S. N. Alles Mr. M. S. Dominic Mr. B.V. Selvanayagam

Company SecretariesRenuka Enterprises (Pvt.) Ltd.

RegistrarSSP Corporate Services (Pvt.) Ltd

Registered Office“Renuka House”No. 69, Sri Jinaratana Road,Colombo 02.

Stock Exchange ListingColombo Stock Exchange

LawyersNithiya Partners - Attorney-at-Law

AuditorsKreston M N S & Co.-Chartered Accountants

Audit CommitteeMr. N. S. Dominic - ChairmanMr. S.N. AllesMr. B.V. Selvanayagam

Remuneration Committee(Remuneration Committee of ultimate parent Renuka Holdings PLC., act as the Remuneration Committee of Renuka Capital PLC.)Mr. M.S. Dominic - ChairmanMr. L. M. AbeywickremaMr. T K Bandaranayake

Related Party Transactions Review Committee(Related Party Transactions Review Committee of ultimate parent Renuka Holdings PLC., act as the Related Party Transactions Review Committee of Renuka Capital PLC.)Mr. T K Bandaranayake - ChairmanMr. M.S. DominicMr. J M Swaminathan

Nomination Committee(Nominations Committee of ultimate parent Renuka Holdings PLC., act as the Nomination Committee of Renuka Capital PLC.)Mr. L. M. Abeywickrema - ChairmanMr. M.S. DominicMr. T K Bandaranayake

BankersCommercial Bank of Ceylon Ltd.National Development Bank PLCNations Trust Bank PLCHatton National Bank PLC


Chairman’s Report

On behalf of the Board of Directors, I welcome you to the sixtieth Annual General Meeting of Renuka Capital PLC and it gives me great pleasure to present to you the Annual Report of the Company for the year ended 31st March 2017.

The Group recorded a turnover of Rs. 11.4 million for the year ended 31st March 2017 (Rs. 11.4 million for the year ended 31st March 2016).

The group recorded a net loss after taxation of Rs. 14.8 million in the current year as against a loss of Rs. 7.8 million in the previous year.

The Company has issued new shares of 1,687,985 by way of rights issue for a consideration of Rs. 877,752,200 in June 2017, which will be utilized for investing activities from July 2017. In conclusion, I wish to thank to all our customers, bankers, suppliers and principals for their patronage and support.

My thanks also to my colleagues on the Board, the management and staff for their commitment and, last but not least, our shareholders for their support and confidence.

SgdS. V. RajiyahChairman

20th July 2017


Director’s Profiles

Mr. S.V. Rajiyah(Executive Chairman)

Mr. S.V. Rajiyah is an Executive Director/CEO of Renuka Holdings PLC, Renuka Foods PLC and an Executive Director of Renuka Agri Foods PLC, Shaw Wallace Ceylon Ltd and Richlife Dairies Ltd. He heads the Business Development, International Marketing and Investment Division of the Group. Mr. Rajiyah is a graduate in Management from the Warwick Business School, University of Warwick, United Kingdom. He has over 15 years of experience in General Management. He is a member of the Economic Fiscal Policy Planning Committee of the Ceylon Chamber of Commerce.

Mr. P. Gunathilake(Executive Director)

Mr. P. Gunathilake is an Executive Director, a fellow member of the Institute of CIMA (UK), and a member of Chartered Institute of Australia. He has more than 15 years of local and international experience of which 6 years with Renuka Group.

Mr. S.N. Alles(Non-Executive/ Independent)

Mr. S. N. Alles is a graduate in Law and Business from the University of Warwick, United Kingdom and holds a Master of Laws (LLM) from the University of Melbourne. He is a Co-founder / Director of Saberion (Pvt) Ltd, Atom Technologies (Pvt) Ltd and Kashmi (Pvt) Ltd and a Director of Cargo Shelters (Pvt) Ltd.

Mr. M. S. Dominic(Non-Executive/ Independent)

Mr. M.S. Dominic is an Independent Non-Executive Director and holds a BSc (Hons) degree in Information Technology from the University of South Bank, United Kingdom. He has over 35 years of experience in the Information Technology field. He is also Director of The Autodrome PLC and Renuka Foods PLC. He is also a Director of Sithi Jaya Fund.

Mr. B.V. Selvanayagam(Non-Executive/ Independent)

Mr. B. V. Selvanayagam is an Associate Member of the Chartered Institute of Management Accountants (UK), Fellow Member of the Institute of Chartered Accountants of Sri Lanka, Chartered Marketers and Fellow Member of the Chartered Institute of Marketing (UK), Fellow Member of the Certified Management Accountants of Sri Lanka and Chartered Member of the Chartered Institute for Securities & Investment.(U.K.) He is a member of the Audit & Risk Committee of the Chartered Institute of Marketing (U.K.) and Chairman of the Chartered Institute of Marketing Sri Lanka, Director of Vision One Private Limited and On’ally Holdings PLC. He counts over 20 years of work experience in fields covering, banking, corporate finance and finance, business development and education and has served at Ernst & Young, DFCC Bank, HSBC Sri Lanka and Dunamis Capital PLC.


Director’s Report

1. Overview The directors of Renuka Capital PLC

(Previously known as Kalamazoo System PLC) pleased to present their report on the affairs of the company together with Audited Financial Statements for the year ended 31st March 2017. The details set out herein provide the pertinent information required under section 168 of Companies Act No. 07 of 2007, Colombo Stock Exchange Listing Rules and the recommended best practices on Corporate Governance.

2. Review of Business

2.1 Principal Business Activities The principal activity of the Company

is changed during the financial year by obtaining shareholders’ approval at the Extra Ordinary General Meeting held in August 2016, to invest in equity, debt and other classes of instruments in order to act as a holding company.

Renuka Capital PLC disposed its only subsidiary company of Kalamazoo Industries (Pvt.) Ltd during the year.

2.2 Review of operations of the company and the group

The company’s businesses and the performance during the year, with comments on financial results, as well as future business developments are presented in the Chairman’s message.

2.3 Financial Statements of the Company and the Group

The Financial Statements of the Company and the Group are given on

pages 52 to 96 of this Annual Report.

2.4 Directors’ Responsibility for Financial Statements

The Statement of Directors’ Responsibilities for the Financial Statements is given on page 49 to 50 of this Annual Report.

2.5 Auditor’s Report The Auditor’s Report on the

Financial Statements of the Company and the Group is given on page 51.

2.6 Accounting Policies and Changes During the Year

The Financial Statements have been prepared in accordance with the


Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 which requires compliance with Sri Lanka Accounting Standards. The detailed accounting policies adopted in the preparation of the Financial Statements are given on pages 57 to 79.

2.7 Performance of the year The group turnover for the year

ended 31st March 2017 was Rs. 11.4 Mn compared to Rs. 11.4 Mn during the previous year. Further Net loss of the group was Rs. 14.8 Mn compared with the net loss of Rs. 7.8 Mn for the previous year.

2.8 Group Investments The company has invested in quoted

shares of wider portfolio during the year amounted to Rs. 8.6 Mn. Detailed portfolio of the investments held by the company is given in Note 10 to the Financial Statements.

2.9 Property, Plant & Equipment There were no additions made to

Property, Plant & Equipment during the year by the group. Detailed information relating to capital assets are given in note 8 to the Financial Statements.

2.10 Stated capital The company did not issue any

shares during the year ended 31st March 2017. The Stated capital of the company as at 31st March 2017 was Rs. 500,000 comprising 50,000 Ordinary Shares.

2.11 Reserves The group reserves consist of

Revenue reserve of Rs. 5.0 Mn and detailed movement of the reserves shown in the Statement of Changes in Equity in the page 55 in the Annual Report.

3. Major Shareholdings Details of the twenty largest

shareholders with the percentage of their respective shareholdings as at 31st March 2017 are given on page 100 together with comparative shareholdings.

3.1 Public Holding There were 572 (2016 - 455)

registered shareholders as at 31st March 2017 with the percentage of shares held by the public, as per the Colombo Stock Exchange rules, being 29.49% (2016-30.0%).

Director’s Report Contd..


3.2 Shareholdings/ Share information Information relating to earnings,

net assets, market value per share, share trading and distribution of shareholding is given on page 97 to 100 to this Annual Report.

3.3 Ratio and market price information The ratios relating to equity as

required by the listing requirement by the Colombo Stock Exchange are given on pages 98 to 99 to this Annual Report.

3.4 Equitable treatment to all shareholders

The company has made every endeavor to ensure the equitable treatment to all shareholders and adopted adequate measures to prevent information asymmetry.

3.5 Information to Shareholders The Board strives to be transparent

and provide accurate information to shareholders in all public material. The quarterly financial information during the year has been sent to the Colombo Stock Exchange in a timely manner.

4. Directors The names of the Directors who

held office during the financial year are given below. Further, director who is appointed subsequent to the financial year is also included below. The brief profile of the Board of Directors appear on page 4 to this Annual Report.



The basis on which Directors are classified as Independent and Non-Executive directors is discussed in the Corporate Governance Report.

4.1 Recommendation for re-election

• To re-elect Mr. M.S.Dominic who retires in terms of Article 26 (2) of the Articles of Association as a Director of the Company.

• To re-elect Mr.S.N.Alles who retires by rotation in terms of Article 28 of the Articles of Association as a Director of the Company.

• To re-elect Mr. B.V. Selvanayagam who retires in terms of Article 26(2) of the

Article of Association as a Director of the Company.

4.2 Entries in the Interest Register The company, in compliance with

the Companies act No. 7 of 2007, maintains the Interest Register. The Directors have made the declarations required by the said Act and they have been entered in to the Interest Register.

4.3 Directors’ Interest in transactions The Company carried out transactions

in the ordinary cause of business with the entries which a Director of the Company is a Director. The transactions with the entries where


Name of Director ExecutiveNon-

ExecutiveIndependent

Mr. S. V. Rajaiyah (Appointed w.e.f. 16.08.2016) X Mr. P. Gunathilake (Appointed w.e.f. 16.08.2016) X Mr. S. N. Alles (Appointed w.e.f. 16.08.2016) X X Mr. M. S. Dominic (Appointed w.e.f. 01.03.2017) X X Mr. D. S. Abeysekera (Resigned w.e.f. 31.08.2016) X Mr. S.B. Dodanwela (Resigned w.e.f. 16.08.2016) X Mr. M.G.C. Seneviratne (Resigned w.e.f. 16.08.2016) X Mr. C.M.U. Weerawardena (Resigned w.e.f. 31.08.2016) X X Mr. H. Shomashantha (Resigned w.e.f. 31.08.2016) X Mr. D.J. Silva (Resigned w.e.f. 31.08.2016) X Mr. P.S.R. Casie Chitty (Resigned w.e.f. 28.02.2017) X X Mr. M.R. Rathnasabapathy (Appointed w.e.f. 16.08.2016 & Resigned w.e.f. 28.02.2017)

X X

Mr. B.V. Selvanayagam (Appointed w.e.f. 20.07.2017) X X


a Director of the company either has control or exercises significant influence have been classified as related party transaction and disclosed in Note 30 to Financial Statements. The Directors have no direct or indirect interest in any other contract or proposed contract with the company.

4.4 Directors’ Interest in Shares Directors of the company and

its subsidiary who have relevant interest in shares of their respective companies have disclosed their shareholdings and any acquisitions/ disposals to their Boards, in compliance with section 200 of the Companies Act.

Directors holdings, in Ordinary Shares of the Company are given in the below table.

Name of DirectorAs at 31st

March 2017As at 31st

March 2016Mr S.V. Rajiyah 10 -Mr. P Gunathilake - -Mr. S N Alles - -Mr. M S Dominic - -Mr. B.V. Selvanayagam - -

10 -

Share dealings by Directors during the year were disclosed to Colombo Stock Exchange.

4.5 Remuneration of Directors The remuneration of Directors in

respect of the company for the year ended 31st March 2017 is given in Note 24 to Financial Statements.

4.6 Directors Meetings Details of Board meetings and

board sub-committee meetings are presented on page 17 to this Annual Report.

4.7 Directors Responsibility for Financial Reporting

The Directors are responsible for the preparation of Financial Statements of the Company to reflect a true & fair view of the status of its affairs. The Directors are of the view that these Financial Statements have been prepared in conformity with the requirements of the Sri Lanka Accounting Standards (SLFRS/LKAS) issued by the Institute of Chartered Accountants of Sri Lanka, Companies Act No. 7 of 2007, Sri Lanka Accounting and Auditing Standards Act no.15 of 1995 and the Listing Rules of Colombo Stock Exchange.

4.8 Board Committees The board has established

committees for better monitoring



and guidance of different aspects of operations and control.

4.9 Audit Committee The composition of Board Audit

Committee comprising of Non-Executive Directors is provided on page 40 to this Annual Report. Detailed scope of the Audit Committee and their work during the year disclosed in Audit Committee Report given on page 40 to 42 this Annual Report.

4.10 Remuneration Committee Remuneration Committee of ultimate

parent company Renuka Holding PLC, act as the Remuneration Committee of Renuka Capital PLC. The scope and meetings of the Remuneration Committee is given in the Remuneration Committee report on pages 46 to 47 in this Annual Report.

4.11 Nomination Committee Nomination Committee of ultimate

parent Renuka Holdings PLC, acts as the Nomination Committee of Renuka Capital PLC. which comprise of three Non Executive Independent Directors. Report of the Nomination Committee is given on page 48 of this Annual Report.

4.12 Related Party Transactions Review Committee

Related Party Transactions Review Committee (RPTR) comprise of three independent non executive Directors. RPTR Committee of Renuka Holdings PLC, the ultimate parent company, act as the RPTR Committee of Renuka Capital PLC. Detailed scope and the meetings held during the year under review is given in the RPTR Committee Report on page 43 to 45 in this Annual Report.

5. Corporate Donations The Company has not made any

donations during the year under review.

6. Future Developments Details of the future developments

of the Company are stated in the Chairman’s Report on page 03 to this Annual Report.

7. Related Party Transactions The Board of Directors has given

the following statement in respect of the related party transactions. The related party transactions of the Company during the financial year have been reviewed by the



Related Party Transactions Review Committee and are in compliance with the Section 09 of the CSE Listing Rules.

8. Statutory Payment The directors, to the best of their

knowledge and belief are satisfied that all statutory payments are due to the Government, other regulatory institutions and those related to employees (if any) have been made on time.

Declaration relating to statutory payments is made in the Statement of Directors’ Responsibilities on the page 50 to this Annual Report.

9. Events Occurred After the Reporting Date

There are no events of material and significance nature that requires adjustment to the Financial Statements, occurred subsequent to the date of the reporting date , other than those disclosed in Note 29 to the Financial Statements.

10. Going Concern The Directors, after considering

the financial position, operating conditions, regulatory and other

factors including matters addressed in the Corporate Governance Code, have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore the going concern basis has been adopted in the preparation of the Financial Statements.

11. Exposure to risk The Company has a structured risk

management process in place to support its operations. The Renuka Capital PLC Board Audit Committee play a major role in this process. The Risk Management Report elaborates these processes and the Company’s risk factors.

12. Capital Commitments No significant capital commitments

exist as at 31st March 2017 other than those disclosed in Note no. 28 on page 95 to this Annual Report

13. Compliance with Laws and Regulations

The Company has complied with all applicable laws and regulations. A compliance checklist is signed-off on a quarterly basis by responsible officers and any violations are



reported to the Board Audit Committee. Detailed report of the Audit Committee is given on pages 40 to 42 to this Annual Report.

14. Code of Conduct The Company demands impeccable

standards of conduct from its Directors and employees in the performance of their official duties and in situations that could affect the Company’s image.

15. Internal Controls The Directors acknowledge their

responsibility for the Company’s system of internal control. The system is designed to give assurance, inter alia, regarding the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information generated.

However, any system can only ensure reasonable and not absolute assurance that errors and irregularities are either prevented or detected within a reasonable time period. The Board, having reviewed the system of internal controls, is satisfied with the Group’s adherence to and effectiveness of these

controls for the year up to the date of signing the Financial Statements.

16. Corporate Governance The Company has complied with

the Corporate Governance rules laid down under the Listing Rules of the Colombo Stock Exchange. The Corporate Governance Report on pages 14 to 28 detailed this further.

17. Compliance with Transfer Pricing Regulations

All transactions are entered in to with associated persons during the period are on an arm’s length basis, and are comparable with transactions carried out with non-associated parties.

18. Employees and industrial Relations. The Renuka Group has a structure

to assess the competencies and commitments of its employees.

There are no employees attached to Renuka Capital PLC as such no material issues pertaining to employees and Industrial relations of the entity.



19. Appointment of Auditors Messrs Kreston M N S & Co.,

Chartered Accountants, who are the Company Auditors during the year, are deemed reappointed, in terms of Section 158 of the Companies Act No.7 of 2007, as Auditors of the Company. The retired auditors have expressed their willingness to continue in office. A resolution to re-appoint them as Auditors of the company and authorizing directors to fix their remuneration will be proposed at the forthcoming Annual General Meeting.

20. Auditors’ Remuneration and Interest in contracts

The fee amount paid/payable for the services provided to the company during the year with corresponding figures for the previous year is present in Note No. 24 to Financial Statements.

21. Annual Report The Board of Directors approved the

Consolidate Financial Statements along with Company Financial statements on 20th July 2017. The appropriate no. of copies of this report will be submitted to Colombo Stock Exchange and to the Sri Lanka


Accounting and Auditing Standards Monitoring Board on or before 31st August 2017.

Annual General Meeting The Annual General Meeting will be

held at the Sri Lanka Foundation Institute at 4.45 p.m. on 15th September 2017. The Notice of the Annual General Meeting appears on page 101.

For and on behalf of the Board

SgdS. V.RajiyahChairman

SgdP. GunatilakeDirector

Sgd.Renuka Enterprises (Pvt.) Ltd.Secretaries

20th July 2017


Corporate Governance

Corporate Governance of Renuka Capital PLC is developed on the core principles of accountability, transparency and participation which is based on the creation, enhancement and maintenance of sustainable business model suit the current environment. This model developed and constituted among all levels of processes through well-defined code of conduct. This Governance process essentially involves balancing the interests of the many stakeholders in the company - these include its shareholders, management, customers, suppliers, financiers, government and the community. Further Corporate Governance provides the framework for attaining a company's objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.

The Company holds itself accountable to the highest standards of Corporate Governance and provides public accessibility to the information of the Company. Corporate Governance has been established at all levels in the Group through a strong set of corporate values which have been adhered to by the senior management and Board of Directors in the performance of their official duties and

in other situations which could affect the Group image. The Group is committed to the highest standards of integrity, ethical values and professionalism in all its activities.

In Renuka Capital PLC, we set our framework of Corporate Governance in line with Code of Best Practice on Corporate Governance issued by the Institute of Chartered Accountants of Sri Lanka and the rules set out in the Colombo Stock Exchange Listing Rules and also comply with the Country’s Legislative and Regulatory requirement.

Corporate Governance SystemThe Board of Directors are the ultimate governing body of the Company and have diverse experience, Professionalism and wide range of expertise in diverse fields as set out on page 04 to this Annual Report.

The Board is responsible for the ultimate supervision of the Group. In all action taken by the Board, Directors are expected to exercise their business judgment considering the best interest of the Company. The Directors participate in defining goals, visions, strategies and business targets.


Corporate Governance Contd..

1. Board of Directors

1.1 Board Responsibility The Boards aims at fulfilling its

responsibilities by creating value for all stakeholders that is sustainable and beneficial. Under the direction of the Executive Directors and oversight of the Board, the business of the Company is conducted by its managers, officers and employees to enhance the long term value of the Company.

The key responsibilities of the Board are set out below.

• Provide directions to formulate high level, medium and long term strategies with an objective of sustainable long term success of the company

• Review and approve annual budgets and long term plans and periodic monitoring on the progress

• Review of performance of operations, working capital forecasts and monthly management accounts

• Provide advice and guidelines to senior Managers

• Review and approve major

acquisitions, investments and capital expenditure

• Approve interim and annual reports

1.2 Composition of the BoardThe Group’s policy is to maintain a well balanced Board with Executive, Non-Executive and Independent Directors. Executive Directors contribute their deep knowledge of the businesses where as Non-Executive and Independent Directors contribute their experiences and independent oversight to the business operations.

As at 20th of July 2017 the Board comprised of five directors of which three directors are Non-Executive and Independent. Profiles of the Directors are given on page 04 to this Annual Report.

During the year under review the Board membership has changed as follows.

Mr. S. V. Rajaiyah was appointed w.e.f. 16.08.2016 soon after the acquisition of Renuka Capital PLC by Renuka Group. He serves as the Executive Chairman of the Company.


Mr. P. Gunathilake was appointed on 16.08.2016 with the acquisition of the Company by Renuka Group who is an Executive Director of the company since then.

Mr. S. N. Alles was appointed on 16.08.2016 and he serves as a Non-Executive Independent Director.

Mr. M. S. Dominic was appointed on 01.03.2017 and serves as Non-Executive Independent Director.

The director who was appointed subsequent to the financial year is given bellow.

The Board of Directors determined that the Independence of the Directors are measured in accordance with the Colombo Stock Exchange Rules and the

Independent Non-Executive Directors have submitted signed confirmation of their Independence.

Name of Director Executive Non – Executive IndependentMr S. V. Rajiyah √

Mr. P. Gunathilake √Mr. S. N. Alles √ √

Mr. M. S. Dominic √ √

Mr. B. V. Selvanayagam (Appointed on 20.07.2017)

√ √

Accordingly the composition of the Board as at the end of the Financial Year is illustrated as follows.


Mr. B.V. Selvanayagam recent addition to the Board appointed on 20.07.2017 as an Independent Non Executive Director.

The following directors were resigned during the year under review.

Mr. D. S. AbeysekeraMr. S.B. DodanwelaMr. M.G.C. SeneviratneMr. C.M.U. WeerawardenaMr. H. ShomashanthaMr. D.J. SilvaMr. P.S.R. Casie ChittyMr. M.R. Rathnasabapathy

(Appointed on 16.08.2016)


1.3 Board Balance The balance of Executive, Non-

Executive and Independent Non-Executive Directors on the Board who are professionals/academics/business leaders holding senior positions in their respective fields ensures a right balance between executive expediency and independent judgment as no individual Director or small group of Directors dominate the Board discussion and decision making.

Directors are provided with monthly reports of performance and minutes of the Boards Meetings and are given the specific documentation necessary, in advance of such meetings.

There is a distinct and clear division of responsibilities between the Chairman and the Management to ensure that there is a balance of power and authority.

The roles of the Chairman and the management are separated and clearly defined. The Chairman is responsible for ensuring Board effectiveness and conduct whilst the Management has overall responsibilities over the operating units, organizational effectiveness and implementation of Board policies and decisions.

1.4 Board Meetings The Board convened six times during

the year ended 31st March 2017 and Directors attendance to those meetings is as follows.

Name of the Director Eligible to Attend Attended

Mr. S.V. Rajiyah 4 4/4

Mr. P. Gunathilake 4 4/4

Mr. S.N. Alles 4 3/4

Mr. P.S.R. Casiechitty 6 6/6

Mr. M.R. Rathnasabapathy 4 4/4

Mr. D. Abeysekera 2 2/2

Mr. H. Somashantha 2 2/2

Mr. C. Seneviratne 2 2/2

Mr. S.B. Dodanwela 2 0/2

Mr.C.M.U. Weerawardena 2 0/2

Mr. D.J. Silva 2 0/2

Mr. B .V. Selvanayagam 0 0/0



1.5 Board Appointment and Re-Election of Directors

The Company’s Articles of Association call for one third of the Non-Executive Directors retire at each Annual General Meeting and the Director who retires are those who have served for the longest period after their appointment/re-appointment.

1.6 Access to independent professional advice

In the process of preserving the independence of the Board and for effective decision making process the Directors obtain independent and professional advice where necessary.

1.7 Board sub committees The Board delegates some of its

functions to Board sub-committees whilst retaining final decision making right. The functions and terms of references of the Board Sub-Committee are clearly defined where applicable and comply with the recommendation of the Code of Best Practice on Corporate Governance.

The four Board Sub Committees are as follows.

• Audit Committee

• Remuneration Committee

• Related Party Transactions Review Committee

• Nomination Committee

1.7.1 Audit Committee All members of the Audit

Committee consist of Independent Non-executive Directors who are appointed by and responsible to the Board of Directors.

The Executive Director – Mr S.V. Rajiyah, Chief Executive Officer – Shared Services and Chief Financial Offier attended the meetings by invitation. Other members of the Board, members of Management as well as External Auditors were present when required. The company secretary serves as secretary to the committee.

The Audit Committee reviews issues of accounting policy and presentation for external audit function and ensures that an objectives and professional relationship is maintained with the external auditors. Also audit



Committee review and assist the Board in maintaining a sound system of internal control.

The Committee has full access to the external auditors who, in turn, have access at all times to the Chairman of the Committee. The Committee meets with the external auditors without any executive present at least once a year, in line with good Corporate Governance Practice.

The Report of the Audit Committee is presented on pages 40 to 42 and the duties of the Audit Committee are included therein.

1.7.2 Remuneration Committee The Remuneration Committee

of the ultimate holding company Renuka Holdings PLC serve as the Remuneration Committee of Renuka Capital PLC. There are three independent and non-executive directors in the Committee. The Company secretary serves as secretary to the committee.

The Remuneration Committee is responsible for developing the Groups remuneration policy and determining the remuneration packages of executive employees of the Group. The Committee

recommends to the Board and its subsidiaries the remuneration to be paid to Key Management Personnel.

The Report of the Remuneration Committee is presented on pages 46 to 47 and the duties of the Remuneration Committee are included therein.

1.7.3 Related Party Transactions Review Committee

The Related Party Transactions Review Committee of the ultimate holding company Renuka Holdings PLC serve as the Related Party Transactions Review Committee of Renuka Capital PLC. The committee consist of three Independent & Non-executive Directors who are appointed by and responsible to the Board of Directors.

The Executive Director – Mr S.V. Rajiyah, Chief Executive Officer – Shared Services and Chief Financial Officer attended the meetings by invitation and the company secretary serves as secretary to the committee.

The objective is to ensure on behalf of Board of Directors that all related party transactions of the company



and its subsidiary are complied with the Code of Best Practices on Related Party Transactions issued by Colombo Stock Exchange.

The Report of the RPTR Committee is presented on pages 43 to 45 and the duties of the Committee are included therein.

1.7.4 Nomination Committee The Nomination Committee of

the ultimate holding company Renuka Holdings PLC serve as the Nomination Committee of Renuka Capital PLC. All three directors in the Nomination Committee are Independent and Non-Executive Directors.

The Committee objective is to define and establish the nomination process for non-executive directors, lead the process of Board appointments and make recommendations to the Board. The committee scope out the tasks such as assess skills required to be on the Board, periodic review of the extent of skills required are represent on the Board, Review the clear description of role and capabilities required for a particular board appointment and Identify and recommend suitable candidate to the Board.

2. Stakeholder Management and Shareholder Relationship

The Board considers the Annual General Meeting as a prime opportunity to communicate with shareholders. The Shareholders are given the opportunity of exercising their rights at the Annual General Meeting. The notice of the Annual General Meeting and the relevant documents required are published and sent to the shareholders within the statutory period.

The Company circulates the agenda for the meeting and shareholders vote on each issue separately.

All shareholders are invited and encourage participating at the Annual General Meeting. The Annual General Meeting provides an opportunity for shareholders to seek and obtain clarifications and information on the performance of the Company and to informally meet the Directors. The external Auditors are also present at the Annual General Meeting to render any professional assistance that may be required. Shareholders who are not in a position to attend the Annual General Meeting in person are entitled to have their voting rights exercised by a proxy of their choice.



The Company published quarterly accounts and Annual Report in a timely manner as its principle communication with shareholders and others. This enables stakeholders to make a rational judgment of the Company.

3. Internal Audit and Control The Board is responsible for the

Group’s internal control and its effectiveness. Internal control is established with emphasis placed on safeguarding assets, making available accurate and timely information and imposing greater discipline on decision making. It covers all controls, including financial, operational and compliance control and risk management. It is important to state, that any system can ensure only reasonable and not absolute assurance that errors and irregularities are prevented or detected within a reasonable time.

4. External Audit The Group uses two Processional

Accounting Firms for its external audits. Some of them provide non-assurance services to the Group. The restrictions provided in terms of rulings issued by CSE and other commitments were taken

into consideration when entering engagements with the Group auditor.

The Knowledge and experience of the Audit Committee ensure effective usage of the expertise of the auditors while maintain independence, in order to derive transparent Financial Statements. This Group maintains independence from financial and non-financial interest between auditors and re-assesses the same on a regular basis.

5. Major Transactions There are no transactions during the

year under review which fall within the definition of ‘Major Transaction’ in terms of the Companies Act.

6. Going Concern The Directors, upon making

necessary inquiries and reviews including reviews of the Group budget for the following year, capital expenditure requirements and available financing facilities, have a reasonable expectation of the Company’s existence in the foreseeable future. Therefore, the going concern basis is adopted in the preparation of the Financial Statements.



7. Corporate Governance Compliance Statement

Renuka Capital PLC is complied with the Corporate Governance listing requirement of the Colombo Stock Exchange and adheres to the different regulating authorities including,

• Companies Act No.7 of 2007

• Code of Best Practices on Corporate Governance issued jointly by the CA Sri Lanka and the Securities & Exchange Commission of Sri Lanka

• Inland Revenue Act

• Exchange Control Act

• Board of Investment Regulations

• Customs Ordinance

Compliance SummaryCSE Rule Reference

Corporate Governance Principles

Compliance Status

Company’s Extent of Adoption

7.10 COMPLIANCE

a./b./c. Compliance with Corporate Governance Rules Compliant

This report declares the confirmation on compliance and refer Page 22 for “CORPORATE GOVERNANCE COMPLIANCE STATEMENT”

7.10.1 NON-EXECUTIVE DIRECTORS (NED)

a.At least 2 members or 1/3 of the Board, whichever is higher should be NEDs

Compliant Three out of five Directors are Non-Executive Directors

b.

The Total number of Directors is to be calculated based on the number as at the conclusion of the immediately preceding Annual General Meeting

Compliant

Calculation is based on number as at the conclusion of the immediately preceding Annual General Meeting

c.

Any change occurring to this ratio shall be rectified within ninety (90) days from the date of the change

Compliant No impact to the ratio

7.10.2 INDEPENDENT DIRECTORS

a. 2 or 1/3 of NEDs, whichever is higher shall be ‘independent’ Compliant

Three out of three Non-Executive Directors are independent





Compliance Status


b.

Each NED to submit a signed and dated declaration annually of his/her independence or non-independence

Compliant

All Non-Executive Independent Directors have submitted their confirmation on independence

7.10.3 DISCLOSURES RELATING TO DIRECTORS

a./b.Board shall annually determine the independence or otherwise of NEDs

Compliant

The Board assessed the independence declared by Directors and determined the Directors who are independent.

c.

A brief resume of each Director should be included in the Annual Report including the directors’ experience

Compliant Refer page 04 for a brief resume of each Director

d.Provide a resume of new Directors appointed to the Board along with details

Compliant

All new appointments to the board are given in the pages 15 and 16 to this Annual Report.

7.10.4 CRITERIA FOR DEFINING INDEPENDENCE

a. - h.Requirements for meeting the criteria to be an Independent Director

Compliant

As per 7.10.2 a & b in determining of the independence or otherwise of NEDs, board reviewed the criteria for defining independence as per 7.10.4 a to h

7.10.5 REMUNERATION COMMITTEE

a.1Remuneration Committee shall comprise of NEDs, a majority of whom will be independent

Compliant

The Remuneration Committee comprises of 3 Non-Executive and Independent Directors. Further, ultimate parent Company’s Remuneration Committee is functioning as Renuka Capital PLC Remuneration Committee as well.

Contd...






Compliance Status


a.2

One Non-Executive Director shall be appointed as Chairman of the Committee by the board of directors

Compliant

Mr. M.S. Dominic is the Chairman of the Committee who is a Non-Executive Director

b.

Remuneration Committee shall recommend the remuneration of the CEO and the Executive Directors

CompliantRefer Pages 46 to 47 for Remuneration Committee scope

c.1 Names of Remuneration Committee members Compliant

Refer pages 46 to 47 for names of the Committee members

c.2 Statement of Remuneration policy Compliant Refer pages 46 to 47

c.3 Aggregate remuneration paid to EDs and NEDs Compliant Refer to page 93

7.10.6 AUDIT COMMITTEE

a.1Audit Committee shall comprise of NEDs,or a majority of whom should be independent

Compliant

The Audit Committee comprises of three Non-Executive Independent Directors.

a.2 A NED shall be the Chairman of the committee Compliant

The Chairman of the Committee is an Independent Non-Executive Director

a.3 CEO and CFO should attend Audit Committee meetings Compliant Refer to pages 40 to 42

a.4

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

Compliant

One member of the Audit Committee is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka, Associate Member of Chartered Institute of Management Accountants of United Kingdom and also Fellow Member of Certified Management Accountant of Sri Lanka.

Contd...





Compliance Status


b. Functions of the Audit Committee

b.1

Overseeing of the preparation, presentation and adequacy of disclosure in the Financial Statements in accordance with SLFRS/LKAS

CompliantRefer pages 40 to 42 for Audit Committee Report

b.2

Overseeing the compliance with financial reporting requirements, information requirements as per the laws and regulations


b.3

Ensuring the internal controls and risk management, are adequate, to meet the requirements of the SLFRS/LKAS


b.4Assessment of the independence and performance of the Entity’s External Auditors


b.5

Make recommendations to the Board pertaining to appointment, re-appointment and removal of External Auditors and to approve the remuneration and terms of engagement of the External Auditors.


c.1Names of the Audit Committee members shall be disclosed


c.2

Audit Committee shall make a determination of the independence of the External Auditors


c.3Report on the manner in which Audit Committee carried out its functions


Contd...




Compliance Status


9.2 RELATED PARTY TRANSACTIONS REVIEW COMMITTEE

9.2.1 & 9.2.3

Related Party Transactions Review Committee Compliant

The Functions of the Committee are stated in the Report of the Related Party Transaction Review Committee on Pages 43 to 45

9.2.2 Composition CompliantRefer the report of RPTR Committee on pages 43 to 45

9.2.4 Meetings CompliantRefer the report of RPTR Committee on pages 43 to 45

9.3.1 Immediate Disclosures CompliantPlease refer Note 30 to the Financial Statements on Page 96

9.3.2 (a) & (b)

Disclosure of recurrent and non-recurrent Related Party Transactions

CompliantPlease refer Note 30 to the Financial Statement on Page 96

9.3.2 (c )Report by the Related Party Transactions Review Committee

CompliantRefer the report of RPTR Committee on pages 43 to 45

9.3.2. (d) A declaration by the Board of Directors Compliant

Please refer the Report of Board of Directors for an affirmative statement of compliance of the Board on pages 5 to 13.

Contd...



Below summary list the Company compliance with Companies Act No 7 of 2007

Section Compliance status Reference

168 (1) (a) The state of the Company’s affairs and nature of the business of the Company or any of its subsidiaries together with any change thereof during the accounting period

Compliant Refer Note 01 of the Financial Statements

168 (1) (b) Signed Financial Statement of the Company and its subsidiaries for the accounting period completed

Compliant Refer page 52 of the Annual Report

168 (1) (c) Auditors Report on Financial Statements of the Group and the Company


168 (1) (d) Accounting Policies and any changes therein

Compliant Refer Note 01 to 05 of the Financial Statements

168 (1) (e) Particulars of the entries made in the interests Register during the accounting period

Compliant Refer pages 14 to 28 of the Annual Report

168 (1) (f) Remuneration and other benefits paid to Directors of the Company during the accounting period

Compliant Refer Note 24 of the Financial Statements

168 (1) (g) Corporate donations made by the Company during the accounting period


168 (1) (h) Names of the Directors of the Company and its Subsidiaries at the end of the accounting period and name of Directors who ceased to hold office during the accounting period


168 (1) (i) Amounts paid/payable to the External Auditor as audit fees and fees for other services rendered during the accounting period

Compliant Refer Note 24 of the Financial Statement



Section Compliance status Reference

168 (1) (j) Other relationships or any interest of Auditors with the Company and its subsidiaries

Compliant Refer pages 40 to 42 of the Annual Report for Audit Committee Report

168 (1) (k) Acknowledgment of the content of this report and signature on behalf of the Board

Compliant Refer page 13 of the Annual Report for Report of the Board of Directors



Sustainability Report

OverviewSustainability is the key element of our strategy for future growth where the utilization of resources efficiently, environmentally responsible provision of services that deliver sustainability benefits which can leverage commercial advantage for the Company.

The key business drives for sustainability are internal operations and stakeholder engagement. The first focuses on our internal operations and provision of our services more efficiently using limited resources. This approach helps us to reduce costs of supply of services and at the same time reduces our impact on the environment. The second approach focuses on our partnerships with our stakeholders. Stakeholders are any individual or party that has an interest in our group, and who are affected by or can affect out organizational activities. Partnerships help to build trust among our key stakeholders and to reach better understanding on a variety of issues. It can also pave the way for more successful solutions to problems, concerns and challenges.

Impact on economic performanceIn economic performance, Group focused on operational excellence across all its business divisions and value addition

to economic development. Operational excellence measured in terms of efficiency and effectiveness of internal process, improvements to processes and reduces waste. Further investment in IT/ERP helps measurement of operational results on time with increase accuracy.

Renuka Capital PLC Sustainability Policy and GuidelinesIdentify the stakeholders and rate them in line with the degree of influence and importance. Such stakeholders thus identified are,

• Investors

• Employees

• Customers

• Key suppliers and business partners

• Environment

Renuka Capital PLC has formulated sustainability strategies to create value for those identified stakeholders. We have created formal and informal channels in line ultimate Group (Renuka Holdings PLC) policies to develop effective communication systems and engagement programs to involve our stakeholders and implement continuous monitoring systems through the management team in order to gauge our impact on the stakeholders.


Renuka Capital PLC has strived to ensure that all processes will not knowingly harm people and will minimize the negative impact our businesses will have on human life as well as environment.Our Stakeholder Engagement Process

• Investors Support

Shareholder engagement is important to have access to growth capital and in turn provide a sound return to them. In meeting global challenges and evolving consumer needs we must be geared to be proactive with new ideas and investment opportunities and ready with the output as well. When we operate according to these principles the shareholders should realize a fair return.

• Employees Support

At Renuka group level we have created a work place policy and created employee awareness for the total group as a whole. With an employee base of over 1,855 in the Renuka Group, Renuka Capital PLC also included in creation of Group identity and belongingness is priority. We care for our employees and their health and safety is priority, keeping much attention at work place.

• Customers Support

The company uses its competencies and decades of experiences to identify the needs and wants of our customers in order to provide quality product and services creating value-for-money.

• Suppliers Support

We always try to build business relationships all over the world and not only centered in Sri Lanka. It is through our future developments, business partners will attract to full fill customer needs and wants.

Sustainability Report Contd..


Risk Management

Risk Management is an integral part of our business, since management of risks against returns is a critical trade off decision business have to make every day when it comes to investment and operational decision making.

We reviewed and refined our investment and business processes balancing rigor and consistency with responsiveness and flexibility. The aim was to lay a sound foundation to integrate our risk management activities as part and parcel of our business operations.

Our Approach to Risk Management

Our definition for risk is the potential occurance of an external or internal event that may negatively impact our ability to achieve the Groups’ business objectives.

The process of embedding risk management system within our groups systems and procedure can be outline as below:

1. Identify Controls that are already operating

2. Monitor those controls to ensure their effectiveness

3. Improve and refine as per the requirement

4. Document evidence of monitoring and control operation

Group’s risk management framework takes into account the range of risks to be managed, and summery in to below categories.

1. Strategic Risk - A possible source of loss that might arise from an unsuccessful strategic decision taken by the organization. These content strategies related to growth and strategic positioning which ultimately affect the overall mission of the group.

2. Operational Risk - is the potential loss that might arise in business operation resulting from inadequate or failed internal processes, people and system or external events which ultimately affect the day to day activities of the Group.

3. Financial Risk- The likelihood of loss inherent in financing procedures which may weaken the ability to deliver adequate return to the Group. This may include liquidity risk, currency risk, and interest rate risk.


Risk Management Contd..

The systems and process are in place to deal with these risks, and the chain of responsibility within the organization to monitor the effectiveness of our mitigation measures.

Enterprise Risk Management Process

Risk Identification, Prioritization and Assessment

As the initial step of the risk framework it is important to identify risks for efficient management. Renuka Capital PLC identifies all the risks by key stakeholders.

We consider risk identification to be a key component of a robust Risk management framework. In the absence of a proper risk identification process, the organization is incapable of effectively managing its key risks.

We evaluate risks according to the likelihood of occurrence and magnitude of impact. This assessment provides a prioritized risk list, identifying those risks that need the most urgent attention.

Low Medium High

High

Medium

LowPro

ba

bilit

y

Impact

Develop Risk management Strategy

The Risk management strategies address how Group intend to assess risk, respond to risk and making explicit and transparent the risk perceptions that organization routinely use in making both investment and operational decisions.

The above concept has been embedded with risk mapping in order to develop a robust framework to determine an appropriate risk management strategy as shown below.

Mitigate or Reduce the Risk

Avoid the Risk

Accept the RiskShare or Transfer

the Risk

Event Impact

Hig

h

High

Eve

nt P

rob

ab

ility


The Risk Management process in place ensures the clear allocation and segregation of responsibilities relating to risk identification, assessment, mitigation, monitoring, control and communication.

We have in place several measures to strengthen our risk management process which are linked to our business processes. These include policies to mitigate business risks along with the upgrading of the support system that enable easy monitoring and management risks.

The main categories of risks that we take into account in the pursuit of our business goals are detailed below.



Strategic Risk

Risk Impact Risk Management Strategies

Competitive Risk

Risks to the group’s reputation and Brand image

Reduced market share and rates reducing revenue, cash flow and profitability.

Increased promotional Expenditure.

The positive correlation between cost of resources and competition.

Aim to have a broad appeal in price, range and format in a way that allows us to compete effectively in different markets.

Formed strategic relationships with a diverse pool of suppliers, enabling flexibility in pricing contracts and hedging mechanisms are used wherever possible to mitigate exposure to commodity price fluctuations.

The Group’s service excellence, committed and award winning staff, uniqueness of properties, innovative products and service developments and the strength of its brands enables the group to counter threats from new and existing players.

Maintaining a positive relationship with employees with a better remuneration and performance appraisal scheme.

Operational risk


Employee Risk

Risk from not being able to attract and retain skilled and experienced staff

Reduced productivity. Significant resources are invested in strengthening our human capital through the deployment of the latest Human Resource Information Systems, regular staff training & development, succession planning and fostering a performance-based culture.



Operational risk


Employee Risk

Reduced quality of service resulting in reduced market share and Group’s image.

Maintaining cordial relationships with labour unions and adopting interest based negotiations for win-win solutions.

Implemented well structured talent management process to Identify critical employees and retain them in the long run.

Periodic employee satisfaction surveys to ensure that remuneration is in line with the market.

Investments in strengthening employee brand image.

Issue Pertaining to Employees and industrial Relationship

Adverse impact on service levels, expected quality standards, operational efficiency and group reputation.

Loss of revenue.

Review all the issues with regard to employees and Industrial Regulations which affect the performance of the Group.

Steps taken to ensure employees are satisfied at all the levels and their issues are addressed in order to retain talented employees.

Maintain cordial relationship with Trade Unions and adopting interest-based negotiations for win-win solutions.

Well structured grievance handling system is in place to handle the grievance of employees at all levels and development of a Multi-skilled work force through structured and focused training programmes.

Ensure proper industrial relationships with all the government agencies.



Operational risk


IT systems and infrastructure

Inability to obtain timely and accurate information due to failures in IT systems.

Potential disruption to operations

Significant financial losses.

Implementation of effective IT infrastructure and to ensure consistency of delivery,

All relevant staffs are effectively engaged to mitigate IT related risks through effective policy and procedures as well as increased awareness.

Implementation of a comprehensive IT policy within the Group, supported by adequate systems and controls, ensure the safety and security of data. Contingency plans are in place to mitigate any short term loss on IT services.

All employees are bound by the code of conduct to safeguard the Group’s information, irrespective of its physical form.

A dedicated central IT team is in place to support all IT related aspects of the group.

Product Risk Product risk implies any effect of perceived impact of our product on stakeholders in general which could bring down our market share.

In order to eliminate loss of market share or market leadership, we monitor market leadership and customer needs.

Develop innovation that add value to our customers.

Enhance productivity and efficiency to improve price competitiveness and investing in high quality machinery and equipment.

Employ established operating procedures to review and approve all raw material prior to use to ensure that quality control is maintained.



Operational risk


Take into account safety, health and environmental hazards to cover all avenues of possible negative publicity.

Research and development team is equipped to field any technical questions about our product,

Marketing and distribution procedures ensure complete control of the supply chain.

Supply Chain and Operational Risk

Operational disruption can occur due to inadequate quantity or quality of raw material supplies, longer lead time, supply disruption caused by global Supply and Demand.

Unable to maintain strong bond with critical suppliers over the period.

Operational risks cover the areas of system failure, continuity of decision making, dealing with contingencies and ensuring there are know deficiency in operations, application of recommended management practices.

Consistent engagement with a diverse pool of suppliers to maintain strong relationships

Structured processes are in place to add value to our supplier base through livelihood development programmes.

Technical support and guidance on enhancing quality.

Manage operational risks by identifying areas of risk, formulating plans for their management, promoting best practices.

Implement internal controls and systems and monitoring compliance.


Operational risk


Legal Regulatory Compliance

Risk of legal action due to non performance of legal and statutory requirements

Result high cost of legal and penalty fees that reduced profitability

Adversely impact to the Groups’ reputation and brand image.

The legal support services to Renuka Capital PLC management come through the legal department which ensure all legal and regulatory provisions are complied with .

The legal function proactively identified and sets up appropriate system and processes for legal regulatory compliance in any foreign country that we operate in, and in such instances through legal council retained in those environments.

Internal audit function of the Group ensures the safeguarding of company assets and recommends process improvements in areas where process control failure are noted.

The operations of the Renuka Capital PLC come within the rules and regulations applicable to companies listed on the CSE and regulations applicable to securities trading set by the Securities and Exchange Commission of Sri Lanka. Our systems and processes are structured to satisfy the criteria set by these regulations and staffs are constantly kept aware of the compliance needs imposed by these regulation.

Break down of Internal Controls

Wastage of management time and resources.

Possible loss of data.

Increased possibility of fraud and misuse.

Disruptions to the normal course of operations.

Regular reviews of the effectiveness of internal controls by the corporate internal audit department supplemented by regular management audits carried out by internal teams within the Group ensures the robustness of internal controls. The Company uses comprehensive general and specific reporting and monitoring systems to identify, assess and manage risks.


Operational risk


lack of ability to track performance against budgets, forecasts and schedules.

Illegal transactions including theft or misappropriation of assets by employees.

Making each employee accountable for ethical behavior, high standards for business conduct and adherence to laws ensures that transactions occur in a reliable way.

Staff rotation and Special verification audits across the Group.

Internal auditors are also engaged to carry out special reviews wherever necessary.

The Company uses comprehensive general and specific reporting and monitoring systems to identify, assess and manage risks.

Ensuring that only trained, trustworthy, knowledgeable and competent personnel perform tasks, prevents errors, irregularities and fraud.

Financial Risk

Financial risk management obligations and policies have been described in the Note No. 06 to the Financial Statements.


Report of Audit Committee

In keeping with the Code of the Best Practice on Corporate Governance and the requirement of the Securities and Exchange Commission for Public Listed Companies, Renuka Capital PLC has established an Audit Committee. The role of the Audit Committee are,

• To assist the Board in fulfilling its oversight responsibilities in relation to the integrity of the Financial Statements of the Company.

• To assess whether the internal and risk management system of the company compliance with legal and regulatory requirements.

• To assess the external Auditor’s performance, qualifications and independence.

• To assess the adequacy and performance of internal audit function of the Company.

The scope of functions and responsibilities are set out, in the terms of reference of the Committee which has been approved by the Board and is reviewed annually.

COMPOSITION OF THE AUDIT COMMITTEEThe Audit Committee consist of three Independent Non-executive Directors who are appointed by and responsible to the Board of Directors. The Chairman of the Committee also an Independent Non-Executive Director.

Audit Committee MembersMr. M.S. Dominic (Independent Non-Executive Director) - Chairman

Mr. S. N. Alles (Independent Non-Executive Director)

Mr. B. V. Selvanayagam (Independent Non-Executive Director)

Brief profiles of each member are given on page 04 of this report. Their individual and collective financial knowledge and business acumen and the independence of the Committee are brought to bear on their deliberations and judgments on the matters that come within the Committee’s purview.

Number of Committee MeetingsThe committee has met four times during the year under review. The attendance of the members of Audit Committee meeting is stated in the table on page 41.


Report of Audit Committee Contd..

Name of DirectorEligible

to Attended

Attended

Mr. M.S. Dominic 0 0/0Mr. P.S.R. Casiechitty (Resigned on 28.02.2017) 4 4/4

Mr. S.N. Alles 2 1/2Mr. M.R. Rathnasabapathy(Resigned on 28.02.2017) 2 2/2

Mr. H. Somashantha(Resigned on 31.08.2016) 2 2/2

Mr. C.M.U. Weeraardena(Resigned on 31.08.2016) 2 1/2

Mr. B. V. Selvanayagam 0 0/0

Attendance by InvitationThe Executive Director – Mr S.V. Rajiyah, Chief Executive Officer – Shared Services and Chief Financial Officer attended the meetings by invitation. Other members of the Board, Management members as well as External Auditors were present at the discussions when required.

DUTIES AND RESPONSIBILITIES OF THE AUDIT COMMITTEE

FINANCIAL REPORTING AND FINANCIAL CONTROL

• The Committee review the Company’s quarterly and Annual Financial Statements that are prepared in compliance with the Companies Act No. 7 of 2007, Sri Lanka Accounting

Standards and any other requirements of regulatory atuthorities where applicable.

• The Committee reviews the Financial Statements to ensure consistence of the accounting policies and their compliance with the Sri Lanka Accounting Standards.

• The Committee has also regularly discussed the operations of the Company and its future prospects with the management and is satisfied that all reverent matters have been taken into account in the preparation of the Financial Statements.

• Review the operational and any other management information reports submitted to the Committee.

INTERNAL AUDIT

The Committee reviewed the process to assess the effectiveness and coverage of the internal financial controls that have been designed to provide reasonable assurance to the Directors that assets are safeguarded, and that the financial reporting system can be relied upon in preparation and presentation of Financial Statements.


• Also evaluates compliance with laws, regulations and established policies and procedures of the Company.

CONTROLS AND RISKSDuring the year, the Committee reviewed the effectiveness of the Company’s system of Internal Control. The Committee also assessed the major business and control risks and the control environment prevalent in the Company and advised the Board on action to be taken where weaknesses were observed.

EXTERNAL AUDITORSThe Audit Committee evaluated the independence of the External Auditors and the effectiveness of the audit process. The Committee met with the External Auditors in relation to the scope of the audit and also to discuss the Management letter at the conclusion of the Audit.

The Committee reviewed the Audited Financial Statements with the External Auditors who are responsible to express an opinion on its conformity with the Sri Lanka Accounting Standards. And also the External Auditor’s kept the Audit Committee advised on an on-going basis regarding any unresolved matters of significance.

The Audit Committee evaluated the independence of the External Auditors and recommended to the Board of Directors that M/s Kreston MNS & Co be appointed as Auditors for the financial year ending 31st March 2018 subject to the approval of the shareholders at the Annual General Meeting.

EVALUATION OF THE EFFECTIVENESS OF THE COMMITTEE

The Audit Committee is satisfied that the Group’s accounting policies and operational controls provide reasonable assurance that affairs of the Group are managed in accordance with Group policies and that Group assets are properly accounted for and adequately safeguarded.

Sgd.M. S. Dominic

Chairman

20th July 2017

Report of Audit Committee Contd..


Report of Related Party Transactions Review Committee

The Related Party Transactions Review Committee (RPTRC) was constituted with an objective of keeping in line with the Code of Best Practice on Corporate Governance and the requirement of the Securities and Exchange Commission with a view to ensure that the interests of shareholders as a whole are taken into account by Renuka Capital PLC and are consistent with the Code when entering into Related Party Transactions and made required disclosures in a timely manner. The Committee has also adopted the Brest Practices as recommended by the Institute of Chartered Accountants of Sri Lanka and CSE. RPTRC of ultimate parent, Renuka Holdings PLC, acts as the RPTRC of Renuka Capital PLC.

Composition of the Related Party Transactions Review Committee (RPTR)The committee comprises three Independent Non-Executive Directors who are appointed by and responsible to the Board of Directors. The Chairman of the Committee also an Independent Non- Executive Director.

Members of Related Party Transactions Review CommitteeMr. T.K. Bandaranayake (Independent Non-Executive Director) – Chairman

Mr. M.S. Dominic (Independent Non-Executive Director)

Mr. J. M. Swaminathan (Independent Non-Executive Director) Appointed w.e.f. 01.08.2016

Mr. C.J. De S. Amarathunga (Independent Non-Executive Director) Resigned w.e.f. 01.08.2016

Brief profiles of each member are given on page 04 of this Annual Report and as below.

Mr T.K.Bandaranayake Mr. T.K. Bandaranayake is an Independent Non-Executive Director of Renuka Holdings PLC. He is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka. He was in public practice with Ernst & Young for 27 years since 1982. He was a Senior Partner managing a large portfolio of clients. He is also a Director of Renuka Foods PLC, Nawaloka Hospitals PLC, Overseas Realty (Ceylon) PLC, Samson International PLC, Laugfs Gas PLC, Browns & Company PLC, Harischandra Mills PLC, Micro Holdings Ltd.


Report of Related Party Transactions Review Committee Contd..

Dr. J. M. SwaminathanDr. J. M. Swaminathan is an independent, Non-Executive Directors of Renuka Holdings PLC. He holds LLB (Ceylon), LLM, M. Phil. (Colombo) and LLD (Honoris Causa) Degrees and is an Attorney-at-Law. He has been in the legal profession for over 53 years. He is the Precedent Partner of Messrs. Julius & Creasy and is a Member of the Law Commission of Sri Lanka and Former Member of the Council of Legal Education. He is also a Member of the Company Law Advisory Commission and Intellectual Property Law Advisory Commission. He was a Member of the Board of the Faculty of Law of the University of Colombo. He also served as a Member of the Legal Cluster of the National Council for Economic Development and the Financial Systems Stability Committee of the Central Bank of Sri Lanka. He has also served as a Visiting Lecturer and an Examiner at the Faculty of Law, University of Colombo and was a Lecturer at the Institute of Advanced Legal Studies Unit of the Sri Lanka Law College and was also a Faculty Member for the LLM Courses of the University of Wales and LLM Colombo. He is a member of the Council of the University of Colombo and serves on the Board of Management of the University School of Computing. He is also a Member of the Standing Committee on Legal Studies of

the University Grants Commission. He also serves on the Boards of several public and private companies.

Their individual and collective financial knowledge and business acumen and the independence of the Committee are brought to bear on their deliberations and judgments on the matters that come within the Committee’s purview.

Number of Committee MeetingsThe committee has met four times during the period under review. The attendance of the members of Committee meeting is stated in the table below.

NAME OF DIRECTORELIGIBLE

TO ATTEND

ATTENDED

Mr. T.K. Bandaranayake 4 4/4Mr. M.S. Dominic 4 3/4Mr. J. M. Swaminathan 3 3/3Mr. C.J. De. S. Amaratunga (Resign on 03.08.2016)

1 0/1

Attendance by InvitationThe Executive Director – Mr S.V. Rajiyah and Chief Executive Officer – Shared Services attended the meetings by invitation.

Policies and procedures of Related Party Transactions Review Committee

• Establishing and defining the threshold values of each listed


related party transaction as per the Code which require discussion in detail and disclose.

• Identifying related party transactions that need per-approval from the Board of Directors and need immediate market disclosure. And identify transactions that need shareholder approval and disclosure in the Annual Report.

• Formulating a standard template to implement to all listed subsidiaries in the group to follow when documenting Related Party Transactions when presenting to RPTR committee.

• Establishing proper guide lines to identify recurrent & non-recurrent related party transactions to review economic and commercial substance of the related party transaction.

• Establishing a method of having access to adequate knowledge or expertise to assess all aspects of proposed related party transactions where necessary, and procedure for obtaining appropriate professional and expert advice from appropriately qualified persons.

Report of Related Party Transactions Review Committee Contd..

• Providing guidelines which Senior management must follow in dealing with related parties.

• Quarterly reviewing to ensure that adequate disclosures have been done in the Interim or Annual Report as required by the code.

• The committee communicates its comments/observations to the Board of Directors after each review of related party transactions.

Task of the CommitteeThe committee reviewed the related party transactions presented to them by the management and their compliances in Renuka Capital PLC and communicated the same to the Board of Directors.

The Board of Directors declare that related party transactions entered into by the Company during the financial year 2016/17 are complied with CSE rules other than discussed in Note 30 on page 96 to the Annual Report.

Sgd.Tissa K. BandaranayakeChairman20th July 2017


Report of the Remuneration Committee

Composition of the Committee

The committee consists of three non-executive directors of which all Directors are independent. The members of the committee have wide experience and knowledge of the business industry we are engage in. Remuneration Committee of ultimate parent, Renuka Holdings PLC., acts as the Remuneration Committee of Renuka Capital PLC.

Members of Remuneration Committee

Mr. M. S. Dominic (IND/NED) - Chairman

Mr.T.K.Bandaranayake (IND/NED)

Mr.L.M. Abeywickrema (IND/NED)

IND - Independent director, NED - Non-Executive Director

The brief profile of the directors are given below and on page 04 of the Annual Report.

Mr L.M.Abeywickrama

Mr. Lasantha Abeywickrama is a Non-Executive Director of Renuka Holdings PLC. He is a Management consultant and trainer with over 30 years of management experience in the private sector both Sri Lanka and Overseas. He holds a Bachelors Degree in Science from the University of Colombo, a Post Graduate Diploma in

Marketing from the Chartered Institute of Marketing (CIM) and MBA from the American University Washington DC. He is a fellow of the Chartered Institute of Marketing and a past Chairman of the CIM Sri Lanka region. He serves as a Non-Executive Director on the Boards of Renuka Agri Foods PLC and Renuka Foods PLC.

Mr T.K.Bandaranayake

Mr. T.K. Bandaranayake is an Independent Non-Executive Director of Renuka Holdings PLC. He is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka. He was in public practice with Ernst & Young for 27 years since 1982. He was a Senior Partner managing a large portfolio of clients. He is also a Director of Renuka Foods PLC, Nawaloka Hospitals PLC, Overseas Realty (Ceylon) PLC, Samson International PLC, Laugfs Gas PLC, Browns & Company PLC, Harischandra Mills PLC, Micro Holdings Ltd.

Meetings

The Committee met once during the year under review. Attendances of the Directors in such meetings are given below.


Report of the Remuneration Committee Contd..

Attendance of the Committee

NAME OF DIRECTORSELIGIBLE

TO ATTEND

ATTENDED

Mr. M.S. Dominic 1 1/1

Mr. T.K. Bandaranayake 1 1/1

Mr. L.M. Abeywickrema 1 1/1

Attendance by Invitation

The managing director may attend the Committee meetings on invitation and consult on the performance and remuneration of the Key management staff to make recommendations.

Independence of the Committee

The committee is independent from the management of the business and not involve in any business operations.

The scope of the Committee• The committee study and

recommends the remuneration policy of Directors & Key Management Personnel

• Review the performances of Key Management personnel on periodic basis

• The Committee recommends the remuneration based on the prevailing market rates and

perquisites applicable to the Key Management Personnel of the Company and makes appropriate recommendations to the Board of Directors for Approval.

• The Committee also carries out periodic reviews to ensure that the remunerations are in line with market conditions.

The Remuneration policy is to attract and retain best professional managerial talent within the Renuka Group and also to motivate and encourage them to perform at the highest possible level. The Group has a structure and professional methodology in evaluating the performance of employees. The policy ensure equity and fairness between the various employees is maintained.

Sgd. M.S. Dominic Chairman 20th July 2017


Report of the Nomination Committee

The Nomination Committee of Renuka Capital PLC as at 31st March 2017 was consist of three Non-Executive Directors of which all Directors are Independent, as follows. Nomination Committee of ultimate parent, Renuka Holdings PLC., at as the Nomination Committee of Renuka Capital PLC.

Members of the Nomination Committee

Mr. L. M. Abeywickrema - Chairman (Independent Non - Executive)

Mr. M.S. Dominic - (Independent Non - Executive)

Mr. T K Bandaranayake - (Independent Non - Executive)

The brief profile of the Directors are given on page 04 and page 46 of the Annual Report.

The directives of the Committee are,

• To identify suitable persons who could be considered to become Board member as a Non-Executive Director

• To recommend to the Board the process of selection of Chairman and Deputy Chairman

• Make necessary recommendation to the board as and when needed by the Board

The Scope of the Committee are,

• To define and establish the nomination process for Non-

Executive Directors,

• Lead the process of Board appointments and make recommendations to the Board.

• The committee scope out the tasks such as assess skills required to be on the Board.

• Periodic review of the extent of skills required which are represent on the Board.

• Review description of role and capabilities required for a particular board appointment and Identify and recommend suitable candidate to the Board.

During the period under review, the Committee had met once, with all members in attendance. The attendances of the meetings are given below.

NAME OF DIRECTORSELIGIBLE

TO ATTEND

ATTENDED

Mr.L.M. Abeywickrema

1 1/1

Mr. M.S. Dominic 1 1/1

Mr. T K Bandaranayake

1 1/1

Company Secretary acts as the secretary to the committee.

Sgd.L. M. AbeywickremaChairman

20th July 2017


Statement of Directors’ Responsibility

The responsibility of the Directors in relation to the Financial Statements for the year ended 31st March 2017 which have been prepared and presented in accordance with the requirements of the Sri Lanka Accounting Standards, the Listing Rules of the Colombo Stock Exchange and the Companies Act No.7 of 2007 is set out in the following statement.

As per the provisions of the Companies Act No. 7 of 2007, the Directors are required to prepare Financial Statements, for each financial year and present before a General Meeting which comprise

a) A statement of Income and Statement of Comprehensive Income of the Company and its subsidiary which present a true and fair view of the profit or loss of the Company for the financial year

b) A Statement of Financial Position, which presents a true and fair view of the state of affairs of the Company as at the end of the financial year together with explanatory notes to the Financial Statements

c) A statement of Changes in Equity which presents a true and fair view of the changes in the Company’s

and its Subsidiary’s retained earnings for the financial year

d) A Statement of Cash Flows which presents a true and fair view of the flow of cash in and out of the Company and its subsidiary for the financial year and notes to the Financial Statements and which comply with the requirements of the Act.

The Directors are of the view that, in preparing these Financial Statements:

a) the appropriate accounting policies have been selected and applied in a consistent manner, material deviations if any have been disclosed and explained;

b) all applicable Accounting Standards, in accordance with the Sri Lanka Accounting Standards (SLFRS/LKAS) as relevant have been applied

c) reasonable and prudent judgments have been made so that the form and substance of transactions properly reflected

d) it provide the information required by and otherwise complies with the Companies Act No. 7 of 2007, Listing Rules of Colombo Stock Exchange and requirement of any other regulatory authority as applicable to the company.


Further the Directors have a responsibility to ensure that the Company maintains sufficient accounting records to disclose, with reasonable accuracy of the financial position of the Company also to reflect the transparency of transactions and to ensure that the Financial Statements presented comply with the requirements of the Companies Act.

The External Auditors, M/s Kreston M N S & Co. who were deemed reappointed in terms of the Companies Act No. 07 of 2007 were provided with every opportunity to undertake the inspections they considered appropriate to enable them to form their opinion on the Financial Statements. The Report of the Auditors, shown on page 51 set out their responsibilities in relation to the Financial Statements.

The Directors are also of the view that the Company and its subsidiary have adequate resources to continue in operations and have applied the going concern basis in preparing these Financial Statements.

The Directors are also responsible for taking reasonable steps to safeguard the assets of the Company and in this

regard to give proper consideration to the establishment of appropriate internal control systems with a view to preventing and detecting fraud and other irregularities.

COMPLIANCE REPORTThe Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the company, all contributions, levies and taxes payable on behalf of and in respect of the employees of the company and its group and all other known statutory dues as were due and payable by the company and its group companies as at the reporting date have been paid or where relevant provided for.

By order of the BoardRenuka Enterprises (Pvt) Ltd

SgdCompany Secretaries

20th July 2017

Statement of Directors’ Responsibility Contd..


Independent Auditor’s Report

TO THE SHAREHOLDERS OF RENUKA CAPITAL PLC

Report on the Financial StatementsWe have audited the accompanying Financial Statements of RENUKA CAPITAL PLC (Formerly Kalamazoo Systems PLC), (“the Company”), and the Consolidated Financial Statements of the Company and its subsidiary (“the Group”), which comprise the Statement of Financial Position as at 31st March 2017, and the Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity and Cash Flow Statement for the year then ended, and notes comprising a summary of significant accounting policies and other explanatory notes, exhibited on pages 52 to 96.

Board’s Responsibility for the Financial StatementsThe Board of Directors (“the Board”) is responsible for the preparation of these Financial Statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as Board determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility 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 comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Financial Statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Financial Statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the Financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the Financial Statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by Board, as well as evaluating the overall presentation of the Financial Statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the Consolidated Financial Statements give a true and fair view of the financial position of the Group as at 31st March 2017, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on Other Legal and Regulatory Requirements As required by section 163 (2) of the Companies Act No. 07 of 2007, we state the following:

a) The basis of opinion and scope and limitations of the audit are as stated above.b) In our opinion:

• we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.

• the Financial Statements of the Company give a true and fair view of its financial position as at 31st March 2017, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

• the Financial Statements of the Company and the Group, comply with the requirements of Section 151 and 153 of the Companies Act No. 07 of 2007.

CHARTERED ACCOUNTANTSCOLOMBO20TH JULY 2017


Statement of Financial PositionGroup Company

As at 31.03.2017 31.03.2016 31.03.2017 31.03.2016Note Rs. Rs. Rs. Rs.

ASSETSNon Current AssetsProperty,Plant & Equipment 8 - 2,454,079 - 97,373 Investment In Subsidiary 9 - - - 8,000,000 Investments - Held for Trading 10 8,630,455 - 8,630,455 - Deferred Tax Assets 11 3,700,913 6,016,731 3,700,913 3,272,719 Total Non Current Assets 12,331,368 8,470,810 12,331,368 11,370,092

Current AssetsTrade and Other Receivables 12 - 8,899,959 - 1,813,660 Amount Due From Related Companies 13 - 7,598,866 - 147,970 Financial Assets - Held to Maturity 14 - 5,087,281 - - Income Tax Refund Due 15 - 4,970,916 - 4,373,416 Cash & Cash Equivalents 16 80,484 4,150,155 80,484 4,004,163 Total Current Assets 80,484 30,707,177 80,484 10,339,209 Total Assets 12,411,852 39,177,987 12,411,852 21,709,301

EQUITY & LIABILITIESCapital and ReservesStated Capital 17 500,000 500,000 500,000 500,000 Retained Earnings 4,995,058 17,944,181 4,995,058 9,701,967 Equity attributable to Equity Holders of the Company 5,495,058 18,444,181 5,495,058 10,201,967 Non Controlling Interest - 5,089 - - Total Equity 5,495,058 18,449,270 5,495,058 10,201,967

Non Current LiabilitiesRetirement Benefit Obligation 18 - 4,625,845 - - Total Non Current Liabilities - 4,625,845 - -

Current LiabilitiesTrade & Other Payables 19 125,000 13,232,338 125,000 11,504,334 Amount Due to Related Companies 20 2,900,000 1,060,682 2,900,000 3,000 Bank Overdraft 16 3,891,794 1,809,852 3,891,794 - Total Current Liabilities 6,916,794 16,102,872 6,916,794 11,507,334 Total Equity and Liabilities 12,411,852 39,177,987 12,411,852 21,709,301

The accounting policies and notes on pages 57 to 96 form an integral part of these Financial Statements.

I certify that the Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007.

P. H. P. Namali Financial Controller The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Approved and Signed for and on behalf of the Board

S.V. Rajiyah P. Gunathilake Director Director

20th July 2017 (Colombo)


Income Statement

Group CompanyFOR THE YEAR ENDED 31ST MARCH 2017 2016 2017 2016

Note Rs. Rs. Rs. Rs. Revenue 11,400,000 11,400,000 - -

Cost of Sales - - - -

Gross Profit 11,400,000 11,400,000 - -

Other Operating Income / (Expenses) 21 164,330 (709,112) 1,364,330 376,258

Administrative Expenses (21,381,898) (20,908,797) (1,609,891) (6,196,891)

Loss from Operation (9,817,568) (10,217,909) (245,561) (5,820,633)Finance Income 22 496,659 392,641 - 43,849

Finance Cost 22 (348,571) (144,555) - (31,337)

Loss on Fair Value Changes of Investments Held for Trading

10 (409,628) - (409,628) -

Other Operating Expenses 21 (4,479,914) - (4,479,914) -

Loss on disposal of Subsidiary 25 (754,713) - - -

Loss Before Taxation 24 (15,313,734) (9,969,823) (5,135,103) (5,808,121)Income Tax Expense 23 513,127 2,434,202 428,194 1,385,195

Loss for the year from Continuing Operations (14,800,607) (7,535,621) (4,706,909) (4,422,926)Loss from Discontinued Operation - (260,547) - (260,547)

Loss for the Year (14,800,607) (7,796,168) (4,706,909) (4,683,473)

Loss attributable to

Equity Holders of the Parent (14,797,223) (7,795,525) (4,706,909) (4,683,473)

Non Controlling Interest (3,385) (643) - -

(14,800,607) (7,796,168) (4,706,909) (4,683,473)

Loss per Share (Rs) 26 (295.94) (155.91) (94.14) (93.67)



Statement Of Comprehensive Income

Group CompanyFOR THE YEAR ENDED 31ST MARCH 2017 2016 2017 2016

Rs. Rs. Rs. Rs.

Loss for the year (14,800,607) (7,796,168) (4,706,909) (4,683,473)

Other comprehensive Income/(expense) not to be classified to profit or loss in Subsequent period

Acturial gain/(loss) on Defined Benefit Plan 1,848,701 (788,718) - -

Other comprehensive income /(expense) to be classified to profit or loss in Subsequent period

- - - (174,843)

Total other comprehensive income/(expense for the year

1,848,701 (788,718) - (174,843)

Total Comprehensive Expense for the year (12,951,906) (8,584,886) (4,706,909) (4,858,316)

Total Comprehensive Expense Attributable to

Equity Holders of the Parent (12,949,122) (8,583,987) - -

Non Controlling Interest (2,784) (899) - -

(12,951,906) (8,584,886) (4,706,909) (4,683,473)



Statement Of Changes In Equity

Group StatedCapital

Available for Sale

Reserve

RetainedEarnings

Non Controlling

Interest

Total

Rs. Rs. Rs. Rs. Rs.Balance as at 01st April 2015 500,000 268,525 26,528,167 1,464,288 28,760,981

Loss for the Year - - (7,795,525) (643) (7,796,168)

Other Comprehensive Expense - - (788,461) (256) (788,718)Total Comprehensive Expense for the Year - - (8,583,987) (899) (8,584,886)

Adjustment due to Disposal of Subsidiary - (268,525) - (1,458,300) (1,726,825)

Balance as at 31st March 2016 500,000 17,944,181 5,089 18,449,270

Loss for the year - - (14,797,223) (3,385) (14,800,607)

Other Comprehensive Income - - 1,848,100 601 1,848,701

Total comprehensive expense for the Year (12,949,122) (2,784) (12,951,906)

Adjustment due to Disposal of Subsidiary - - - (2,305) (2,305)

Balance as at 31st March 2017 500,000 - 4,995,058 - 5,495,058

Company Stated Available Retained TotalCapital for Sale Earnings

ReserveRs. Rs. Rs. Rs.

Balance as at 1st April 2015 500,000 174,853 14,385,440 15,060,293 Loss for the Year - (4,683,473) (4,683,473)

Other Comprehensive Expense (174,853) - (174,853)

Total Comprehensive Expense for the Year - (174,853) (4,683,473) (4,858,326)

Balance as at 31st March 2016 500,000 - 9,701,967 10,201,967

Loss for the Year - - (4,706,909) (4,706,909)

Other Comprehensive Income - - - -

Total Comprehensive Expense for the Year - - (4,706,909) (4,706,909)

Balance as at 31st March 2017 500,000 - 4,995,058 5,495,058



Cash Flow Statement

FOR THE YEAR ENDED 31ST MARCH NoteGroup Company

2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Cash Flows from Operating ActivitiesLoss before Taxation Continuing Operations (15,313,734) (9,969,823) (5,135,103) (5,808,121)Discontinuing Operations - (260,547) - (260,547)

Adjustments :Depreciation 8 924,000 1,101,049 - 57,639 Interest Expenses 22 348,571 144,555 - 31,337 Interest Income 22 (496,659) (392,641) - (43,849)Dividend Income 21 (11,327) (33,750) (11,327) (33,750)Provision for Retirement Gratuity Obligation 18 993,060 780,124 - - Loss on Disposal of Subsidiary 25 754,713 1,085,370 - - Investment Disposal gain / (loss) - (217,178) (1,200,000) (217,178)Impairment Loss on Property, Plant & Equipment 8 97,373 - 97,373 - Income Tax Refund Due Written off 15 4,382,541 - 4,382,541 -Gain on fair value of Investments Held for Trading 10 409,628 - 409,628 -

Operating Loss before changes in Working Capital (7,911,833) (7,762,841) (1,456,888) (6,274,469)Changes in Working CapitalDecrease in Inventories - 3,064,274 - 3,064,274 Decrease in Trade & Other Receivables 1,460,264 552,277 1,813,660 4,187,640 Decrease in Amount Due From Related Companies 5,632,703 2,825,341 147,970 - Increase / (Decrease) in Trade & Other Payables (11,077,674) - (2,179,334) 1,899,313 Increase in Amount Due to Related Companies 4,144,037 - 2,897,000 -

Cash Generated from/(used in) Operations (7,752,503) (1,320,949) 1,222,408 2,876,758 Interest Paid (348,571) (144,555) - (31,337)Income Tax Paid (99,541) (2,025,515) (9,125) (1,923,717)Gratuity Paid - (294,250) - -

Net Cash from / (used in) Operating Activities (8,200,615) (3,785,269) 1,213,283 921,704 Cash Flow from Investing ActivitiesProceeds from disposal of Investment - 227,325 - 302,325 Net Proceeds from disposal of Subsidiary 11,037,030 (131,961) - - Investment in Quoted Shares (9,040,083) - (9,040,083) - Net Investment in Fixed Deposits (455,930) 5,427,078 - 2,310,583 Interest Received 496,659 392,641 - 43,849Dividend Received 11,327 33,750 11,327 33,750

Net Cash Flow from / (used in) Investing Activities 2,049,003 5,948,833 (9,028,757) 2,690,507 Cash Flow from Financing ActivitiesNet Cash Flow from / (used in) Financing Activities - - - -

Net Increase / (Decrease) in Cash and Cash Equivalents (6,151,613) 2,163,564 (7,815,473) 3,612,210 Cash and Cash Equivalents at Beginning of the Year 2,340,303 176,739 4,004,163 391,953 Cash and Cash Equivalents at end of the Year 16 (3,811,310) 2,340,303 (3,811,310) 4,004,163



1. CORPORATE INFORMATION1.1. REPORTING ENTITY The RENUKA CAPITAL PLC (Formerly

known as Kalamazoo Systems PLC) is a public limited liability company incorporated and domiciled in Sri Lanka and listed on Colombo Stock Exchange. The Company’s Registered Office and the principal place of business is located at “RENUKA HOUSE”, No. 69, Sri Jinaratana Road, Colombo 02.

The name of the Company was changed to RENUKA CAPITAL PLC from KALAMAZOO SYSTEMS PLC with effect from 14th June 2017.

The Financial Statements were authorized for issue by the Directors on 20th July 2017.

1.2. PRINCIPAL ACTIVITIES AND NATURE OF OPERATIONS

The Company is in the Business of investing and trading in debt, equity and other alternative asset classes.

The Principal activity of the subsidiary was hiring of printing machines.

1.3. PARENT ENTERPRISE AND ULTIMATE PARENT ENTERPRISE

The Company’s parent undertaking and ultimate parent Enterprise is Renuka Holdings PLC which holds 70.39% of the shares of the Company.

2. STATEMENT OF COMPLIANCE The Statement of Financial

Position, Income Statement and Statement of Other Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows, together with Notes to the Financial Statements (“Financial Statements”) of the Group as at 31st March 2017 and for the year then ended, comply with the Sri Lanka Accounting Standards (SLFRSs / LKASs) as laid down by the Institute of Chartered Accountants of Sri Lanka and the requirements of the Companies Act No. 07 of 2007.

2.1. BASIS OF PREPARATION These financial statements for

the year ended 31st March 2017 are prepared in accordance with Sri Lanka Accounting Standards (SLFRS& LKAS) effective for the periods beginning on or after 01st January 2012.

Notes To The Financial Statements


The Consolidated Financial Statements have been prepared on a historical cost basis, except for the financial instruments which have been measured at fair value.

The preparation and presentation of these Financial Statements is in compliance with the Companies Act No. 07 of 2007.

The Consolidated Financial Statements are presented in Sri Lankan Rupees (Rs.)

2.2. BASIS OF MEASUREMENT The Financial Statements have been

prepared on the historical cost basis except for the following material items in the Statement of Financial Position:

• Investments held for trading are measured at fair value.

• Liability for Defined Benefit Obligations is recognized at the present value of the defined benefit obligation.

2.3. BASIS OF CONSOLIDATION The consolidated Financial

Statements comprise the Financial

Statements of the Group and its subsidiaries as at 31st March 2017.

Control over an investee is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

• Power over the investee (i.e., existing rights that give the current ability to direct the relevant activities of the investee)

• Exposure, or rights, to variable returns from its involvement with the investee

• The ability to use its power over the investee to affect its returns when the Group has less than a majority of the voting or similar rights of an investee; the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of the investee;

• Rights arising from other contractual arrangements; and

Notes To The Financial Statements Cont..


• The Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee, if facts and circumstances indicate that there are changes to one or more of the three elements of control.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

The Financial Statements of the subsidiaries are prepared for the same reporting period as the

parent Company, using consistent accounting policies. All intra-group balances, transactions, unrealized gains and losses resulting from intra-group transactions and dividends are eliminated in full.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognized in the Income Statement. Any investment retained is recognized at fair value. The total profits and losses for the year of the Company and of its subsidiaries included in consolidation are shown in the consolidated Income Statement and consolidated Statement of Comprehensive Income and all assets and liabilities of the Company and of its subsidiaries included in consolidation are shown in the Consolidated statement of Financial Position. Non-controlling interest which represents the portion



of profit or loss and net assets not held by the Group, are shown as a component of profit for the year in the Consolidated Income Statement and statement of Comprehensive Income and as a component of equity in the Consolidated Statement of Financial Position, separately from equity attributable to the shareholders of the parent. The Consolidated Statement of Cash flows includes the Cash Flows of the Company and its subsidiary.

The following company, with equity control equal to or more than 50%, has been consolidated as subsidiary based on the power to govern the financial and operating policies of those entities.

% Holding01. Kalamazoo Industries 99.7% (Pvt) Ltd

This Subsidiary was disposed as at 31st

March 2017.

2.4. SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES APPLIED

2.4.1. CHANGES IN ACCOUNTING

POLICIES The accounting policies adopted are

consistent with those of the previous financial year.

The following are the significant accounting policies applied by the Group in preparing its Consolidated Financial Statements:

2.4.2.COMPARATIVE INFORMATION The presentation and classification

of the Financial Statements of the previous year has been amended, where relevant for better presentation and to be comparable with those of the current year.

The following are the significant accounting policies applied by the Group in preparing its Consolidated Financial Statements:

2.5. BUSINESS COMBINATIONS AND

GOODWILL Business combinations are

accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured



at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree at the fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition related costs incurred are expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is

achieved in stages, the previously held equity interest is re-measured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss. Any contingent consideration to be transferred by the acquirer will

be recognised at fair value at the acquisition date. Contingent consideration which is deemed to be an asset or liability that is a financial instrument and within the scope of LKAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with changes in fair value either in profit or loss or as a change to other comprehensive income (OCI). If the contingent consideration is not within the scope of LKAS 39, it is measured in accordance with the appropriate SLFRS.

Contingent consideration that is classified as equity is not remeasured and subsequent settlement is measured at fair value with changes in fair value either in a profit or loss or as a change to the Other Comprehensive Income (OCI). If the contingent consideration is not within the scope of LKAS 39, it is measured in accordance with the appropriate SLFRS. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.



Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the gain is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units that are expected to benefit from the combination.

Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the

operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

2.6. FOREIGN CURRENCY TRANSLATION

The Group’s Consolidated Financial Statements are presented in Sri Lankan Rupees, which is also the Parent Company’s functional currency. For each entity the Group determines functional currency and items included in the Financial Statements of each entity are measured using that functional currency.

2.6.1. TRANSACTIONS AND BALANCES

Transactions in foreign currencies are initially recorded by the Group entities at their functional currency spot rate at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date. Differences arising on settlement or



translation of monetary items are recognised in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary measured at fair value is treated in line with the recognition of gain or loss on change in fair value in the item (i.e., the translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively).

2.7. INCOME TAX Income Tax expense comprises

current and deferred tax. Income tax expense is recognized in Income Statement except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Income Tax has

been computed in accordance with the provisions of the Inland Revenue Act No.10 of 2006 and amendments thereto. Income Tax details of the group companies are as follows.

I. Renuka Capital PLCa. Profit on Sale of Shares According to the section 13 (t) of the

Income Tax Act No.10 of 2006, profit earned on sale of shares on which share transaction levy under Section 7 of the Finance Act No.05 of 2005, is paid is exempt from income tax.

b. Interest Income Liable to income tax at 28%.

II. Kalamazoo Industries (Pvt) Limited The Company is liable to income tax

on income at 28%.

2.8. DEFERRED TAX Deferred tax is provided using the

liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused



tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.

The carrying amount of deferred

tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on Tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is

recognised outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

2.9. PROPERTY, PLANT & EQUIPMENT

Property, Plant & Equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses. The cost of property, plant & equipment is the cost of acquisition or construction with any incidental expenses thereon.

Depreciation is calculated on the straight line method to write-off the cost of each asset, to their residual values over their estimated useful lives which are reviewed annually are as follows:



Percentage Plant & Machinery 12.5% Furniture & Fittings 25% Office & Other Equipment 10% Motor Vehicles 10% Computer 100%

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

Gains and losses on disposal of Property, Plant & Equipment are determined by comparing proceeds with carrying amount and are taken into account in determining operating profit.

2.10. BORROWING COSTS Borrowing costs directly attributable

to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs

in connection with the borrowing of funds.

2.11. RELATED PARTY TRANSACTIONS

Disclosures are made in respect of the transactions in which one party has the ability to control or exercise significant influence over the financial and operating policies or decisions of the other irrespective of whether price is being charged.

2.12. EVENTS OCCURRING AFTER THE REPORTING PERIOD.

All material events occurring after the reporting period have been considered and where necessary adjustments to or disclosure have been made in the Financial Statements.

2.13. GOING CONCERN The Board of Directors are of the

view that the company had adequate resources to continue its operations in the foreseeable future.

Therefore, going concern basis has been adopted in preparing these Financial Statements.



2.14. USE OF ESTIMATES & JUDGMENTS

The preparation of Financial Statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of Assets, Liabilities, Income and Expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.

2.15. MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation and fair presentation of these Financial Statements in accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the

preparation and fair presentation of Financial Statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

2.16. EMPLOYEE BENEFIT COST

2.16.1.DEFINED BENEFIT PLAN – GRATUITY Defined benefit plan defines an

amount of benefit that an employee will receive on retirement, usually dependent on one or more factors such as years of service and compensation. The defined benefit plan comprises the gratuity provided under the Payment of Gratuity Act, No 12 of 1983.

The liability is valued using the gratuity formula prescribed by the Institute of Chartered Accountants of Sri Lanka. The charge of the year and interest for the year computed based on above formula is recorded in the Income Statement. Deficit/surplus for the year is charged/credited to other comprehensive income. The liability is not externally funded.



However, according to the Payment of Gratuity Act No. 12 of 1983, the liability for the gratuity payment to an employee arises only on the completion of 5 years of continued service with the Company.

2.16.2.DEFINED CONTRIBUTION PLAN-EMPLOYEE’S PROVIDENT FUND AND EMPLOYEE’S TRUST FUND.

All employees who are eligible for Employee’s Provident Fund Contribution and Employee’s Trust Fund Contributions are covered by relevant contribution funds in line with respective Statutes and Regulations.

Contribution to Provident Fund and Trust Fund covering the employees are recognized as an expense in the Income Statement in the period in which it is incurred.

2.17. CASH AND CASH EQUIVALENTS Cash and cash equivalents are

defined as cash in hand, demand deposits and short-term highly liquid investments, readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

For the purpose of Statement of Cash Flow, Cash and Cash Equivalents consist of cash in hand and deposits in banks net of outstanding bank overdrafts.

2.18. PROVISIONS Provisions are recognized when

the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

2.19. CAPITAL COMMITMENTS AND CONTINGENCIES

All material capital commitments and contingencies of the Group as at the Statement of Financial Position date are disclosed in the notes to the Financial Statements.

2.20. CONTINGENT ASSETS AND CONTINGENT LIABILITIES

All contingent liabilities are disclosed as a note to the Financial Statements unless the outflow of resources is remote. Contingent assets are disclosed, where inflow of economic benefit is probable.



2.21 TRANSFER PRICING REGULATION The Company is subject to income-

taxes and other taxes including transfer pricing regulations, prevailing uncertainties with respect to the interpretation of respective transfer pricing regulations, necessitated using management judgment to determine the impact of transfer pricing regulations. Accordingly critical judgments and estimates were used in applying the regulations in aspects including but not limited to identifying associated undertakings, estimation of the respective arm’s length prices and selection of appropriate pricing mechanism. The current tax charge is subject to such judgments. Differences between estimated income tax charge and actual payable may arise as a result of management’s interpretation and application of transfer pricing regulation.

3. FINANCIAL INSTRUMENTS- INITIAL RECOGNITION AND SUBSEQUENT MEASUREMENT

3.1. FINANCIAL ASSETS

3.1.1. INITIAL RECOGNITION AND MEASUREMENT

Financial assets within the scope of LKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets or, as appropriate. The Group determines the classification of its financial assets at initial recognition.

All financial assets other than those classified as fair value through profit or loss are recognised initially at fair value plus transaction costs.

3.1.2. SUBSEQUENT MEASUREMENT The subsequent measurement of

financial assets depends on their classification as described below:

3.2. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at fair value through profit or loss include financial assets held-for-trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held-for-trading if they are



acquired for the purpose of selling or repurchasing in the near term. Financial assets at fair value through profit and loss are carried in the Statement of Financial Position at fair value with changes in fair value recognised in the Income Statement.

The Group evaluates its financial

assets held-for-trading, to determine whether the intention to sell them in the near term is still appropriate. When the Group is unable to trade these financial assets due to inactive markets and management the Group may elect to reclassify these financial assets in rare circumstances. The reclassification to loans and receivables, available-for-sale or heldto-maturity depends on the nature of the asset. This evaluation does not affect any financial assets designated at fair value through profit or loss using the fair value option at designation.

3.3. LOANS AND RECEIVABLES Loans and receivables are non-

derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently

measured at amortised cost using the effective interest rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR.

The EIR amortisation is included

in finance income in the Income Statement. The losses arising from impairment are recognised in the Income Statement in finance costs.

Discounting is omitted where the effect of discounting is immaterial or where the balances are recoverable on demand.

3.4. HELD-TO-MATURITY INVESTMENTS

Non derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Group has the positive intention and ability to hold them to maturity. After initial measurement, held-to-maturity investments are measured at amortised cost using the effective interest method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or



costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Income Statement. The losses arising from impairment are recognised in the Income Statement in finance costs.

The Group has not designated any financial assets upon initial recognition as Held–to–maturity investments.

3.5. AVAILABLE-FOR-SALE FINANCIAL INVESTMENTS

Available-for-sale financial investments held at the reporting date consists of equity securities. Equity investments classified as available-for-sale are those, neither classified as held-for-trading nor designated at fair value through profit or loss.

After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale reserve until the investment is derecognised, at which time, the cumulative gain or loss is recognised in other operating income, or determined to be impaired, at

which time the cumulative loss is reclassified to the Income Statement in finance costs and removed from the available-for-sale reserve.

3.5.1. DE-RECOGNITION A financial asset (or, where

applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• The rights to receive cash flows from the asset have expired

• The Group has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass through” arrangement; and either (a) the Group/Company has transferred substantially all the risks and rewards of the asset, or (b) the Group/ Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all of the risks and



rewards of the asset nor transferred control of it, the asset is recognised to the extent of the Group’s continuing involvement in it.

In such case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

3.5.2.IMPAIRMENT OF FINANCIAL ASSETS

The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred’ loss event’) and

that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

3.6. FINANCIAL ASSETS CARRIED AT AMORTISED COST

For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset carrying amount



and the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the Income Statement . The assets are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to the Income Statement .

3.7. AVAILABLE-FOR-SALE FINANCIAL INVESTMENTS

For available-for-sale financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.

In the case of equity investments

classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. “Significant is evaluated against the original cost of the investment and “prolonged” against the period in which the fair values has been below its original cost.

Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the Income Statement -is removed from other comprehensive income and recognised in the Income Statement . Impairment losses on equity investments are not reversed through the Income Statement ; increases in their fair value after impairment are recognised directly in other comprehensive income.

3.8. FINANCIAL LIABILITIES

3.8.1. INITIAL RECOGNITION AND MEASUREMENT

Financial liabilities within the scope



of LKAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings or, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, carried at amortised cost. This includes directly attributable transaction costs.

3.8.2.SUBSEQUENT MEASUREMENT OF LOANS AND BORROWINGS

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the Income Statement when the liabilities are derecognised as well as through the effective interest rate method (EIR) amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the Income Statement .

3.8.3.DERECOGNITION A financial liability is derecognised

when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Income Statement

3.9. OFFSETTING OF FINANCIAL INSTRUMENTS

Financial assets and financial liabilities are offset with the net amount reported in the Consolidated Statement of Financial Position only if there is a current enforceable Legal right to offset the recognised amounts and intent to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.



3.10. IMPAIRMENT OF NON- FINANCIAL ASSETS

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is higher of asset’s or cash generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

Impairment losses of continuing operations are recognised in the Income Statement in those expense categories consistent with the function of the impaired asset.

For assets, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment

losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of the recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. However the increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Income Statement .

3.11. DETERMINATION OF FAIR VALUE

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place



either:• in the principal market for the asset

or liability or• in the absence of a principal market,

in the most advantageous market for the asset or liability.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

Level 1 When available, the Company

measures the fair value of an instrument using active quoted prices or dealer price quotations (assets and long positions are

measured at a bid price; liabilities and short positions are measured at an asking price), without any deduction for transaction costs. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis.

Level 2 If a market for a financial

instrument is not active, then the Company establishes fair value using a valuation technique. Valuation techniques include using recent arm’s length transactions between knowledgeable, willing parties (if available), reference to the current fair value of other instruments that are substantially the same, discounted cash flow analyses, credit models, option pricing models and other relevant valuation models. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Company, incorporates all factors that market participants would consider in setting a price, and is



consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. The Company calibrates valuation techniques and tests them for validity using prices from observable current market transactions in the same instrument or based on other available observable market data.

The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e. the fair value of the consideration given or received, unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument, i.e. without modification or repackaging, or based on a valuation technique whose variables include only data from observable markets. When transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially measured at the transaction price and any difference between this price and

the value initially obtained from a valuation model is subsequently recognised in profit or loss on an appropriate basis over the life of the instrument but not later than when the valuation is supported wholly by observable market data or the transaction is closed out.

Level 3 Certain financial instruments are

recorded at fair value using valuation techniques in which current market transactions or observable market data are not available. Their fair value is determined by using valuation models that have been tested against prices or inputs to actual market transactions and also using the best estimate of the most appropriate model assumptions. Models are adjusted to reflect the spread for bid and ask prices to reflect costs to close out positions, credit and debit valuation adjustments, liquidity spread and limitations in the models. Also, profit or loss calculated when such financial instruments are first recorded (‘Day 1’ profit or loss) is deferred and recognised only when the inputs become observable or on derecognition of the instrument.



4. INCOME STATEMENT

4.1. REVENUE RECOGNITION Revenue is recognised to the extent

that it is probable that the economic benefit will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised.

4.2. SALE OF GOODS Revenue from the sale of goods is

recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods.

4.3. RENDERING OF SERVICES Revenue from rendering of services

is recognised in the accounting period in which the services are rendered or performed.

4.4. INTEREST For all financial instruments

measured at amortised cost and interest bearing financial assets classified as available for sale, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated

future cash payments or receipts through the expected life of the financial instrument or a shorter period.

4.5. DIVIDEND INCOME Dividend is recognised when the

Group`s right to receive the payment is established, which is generally when shareholders approve the dividend.

Others gains or losses of a revenue nature on the disposal of Property, Plant & Equipment have been accounted for in the Income Statement.

4.6. EXPENDITURE RECOGNITION

4.6.1. REVENUE EXPENDITURE All expenditure incurred in the

running of the business and in maintaining the capital assets in a state of efficiency, has been charged to revenue in arriving at the profit or loss for the year.

4.6.2.CAPITAL EXPENDITURE Expenditure incurred for the

purpose of acquiring, extending or improving assets of a permanent



nature by means of which to carry on the business or for the purpose of increasing the earning capacity of the business has been treated as capital expenditure.

For the purpose of presentation of the Income Statement, the Directors are of the opinion that function of expenses method fairly present the elements of the Company’s performance, hence such presentation method is adopted.

5. EFFECT OF SRI LANKA ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE

The Standards and interpretations that are issued but not yet effective up to the date of issuance of the Group’s Financial Statements are disclosed below. The Group intends to adopt these Standards, if applicable, when they become effective.

(a) Sri Lanka Accounting Standard – SLFRS 9 on “Financial Instruments”

SLFRS 9 replaces the existing guidance in Sri Lanka Accounting Standard – LKAS 39 on “Financial Instruments: Recognition

and Measurement”. SLFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from LKAS 39.

SLFRS 9 is effective for annual reporting periods beginning on or after 1st January 2018, with early adoption permitted.

(b) Sri Lanka Accounting Standard – SLFRS 15 on “Revenue from Contracts with Customers”

SLFRS 15 establishers a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including Sri Lanka Accounting Standard – LKAS 18 on “Revenue”, Sri Lanka Accounting Standard – LKAS 11 on “Construction Contract” and IFRIC 13 on “Customer Loyalty Programmes”.



SLFRS 15 is effective for annual reporting periods beginning on or after 1st January 2018, with early adoption permitted.

(c) Sri Lanka Accounting Standard – SLFRS 16 on “Leeses”

SLFRS 16 requires lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value even though lessor’s accounting remains similar to current practice. This replaces: Sri Lanka Accounting Standard LKAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement Contains a Lease”, SIC 15 “Operating Leases - Incentives”; and SIC 27 “Evaluating the substance of Transactions Involving the Legal form of a Lease”. Earlier application is permitted for entities that apply SLFRS 15 “Revenue from Contracts with Customers”.

SLFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019.

6. RISK MANAGEMENT DISCLOSURES

Financial Risk ManagementThe group is exposed to a range of financial risks through its number of financial instruments. In particular,the key financial risk categories are:

• Credit Risk / Counter party risk • Liquidity risk • Market risk • Operational risk

This note presents information about the group’s exposure to each of the above risks, the objectives, policies and processes for measuring and managing risk and management of capital. Further quantitative disclosures are included throughout these financial statements.

Risk Management FrameworkThe Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The group risk management processes are established to identify and analyse the risks faced by the group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the group’s activities.



The Board of Directors oversees how management monitors compliance with the group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the group.

Credit Risk / Counter party risk

Credit risk arises from credit exposure to unsecured customers and cash and cash equivalents and deposits/investments with banks and financial institutions and when banks/financial institutions fail to discharge their contractual interest and principal on their debt obligations due to declining financial strength. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings or to historical information about counter party default rates.

Liquidity risk

Liquidity risk is the risk that the group will encounter difficulty in meeting the obligation associated with its financial liabilities that are settled by delivering cash or other financial assets.

Management of Liquidity Risk

The group’s approach to managing liquidity is to ensure, that it will always have sufficient liquidity to meet its

liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to its reputation. The group’s approach to managing its liquidity risk is as follows:

• Regularly monitoring of the group’s assets and liabilities in order to forecast cash flows for up to Future period.

• Monitoring the facility limits i.e. overdrafts with banks.

The table below summarizes the maturity profile of the group’s financial liabilities based on contractual undiscounted payments.



Risk Management Disclosures

As at 31st March 2017

Description NoteOn

DemandLess than 3 Months

3 to 12 Months

1 to 5 years

>5 Years Total

Trade and Other Payable 19 - 125,000 - - - 125,000

Amounts Due to Related Companies

20 - 2,900,000 - - - 2,900,000

Bank Over Draft 16 3,891,794 - - - - 3,891,794

3,891,794 3,025,000 - - - 6,916,794

As at 31st March 2016

Description NoteOn

DemandLess than 3 Months

3 to 12 Months

1 to 5 years

>5 Years Total

Trade and Other Payable 19 - 13,232,338 - - - 13,232,338

Amounts Due to Related Companies

20 - 1,060,682 - - - 1,060,682

Bank Over Draft 16 1,809,852 - - - - 1,809,852

1,809,852 14,293,020 - - - 16,102,872

Market RiskMarket risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risks;• Foreign exchange risk• Interest rate risk• Equity price risk

Foreign Exchange RiskForeign currency risk is the risk that the value of a financial instrument will


fluctuate due to changes in foreign exchange rates. The group does not use any derivative financial instruments to hedge the risk. The group is not exposed to foreign currency risk as it does not operate internationally.

Interest Rate RiskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The


group is exposed to the risk of changes in market interest. Rates relate primarily to the group’s long-term debt obligations with floating interest

Equity Price RiskThe Group’s listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities

Operational RiskOperational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the group’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the group’s operations.

• Requirements for appropriate segregation of duties, including the independent authorization of transactions

• Compliance with regulatory and other legal requirements

• Training and professional development

• Ethical and business standards

Capital ManagementThe group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide reasonable returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Consistent with others in the industry, capital is monitored on the basis of the gearing ratio.



07. FINANCIAL ASSETS AND LIABILITIESThe carrying amounts of Financial Assets and Financial Liabilities in each category are as follows.

31st March 2017 Group /Company Financial Assets

Note Fair Value Through Profit/(Loss)

(at Fair Value)

Loans & Receivables (at Amortised Cost)

Total

Rs. Rs. Rs.Investment - Held for Trading 10 8,630,455 - 8,630,455

Cash and Cash Equivalents 16 - 80,484 80,484

8,630,455 80,484 8,710,939

Liabilities (at Amortised Cost)

Total

Rs. Rs.Financial LiabilitiesTrade & Other Payables 19 125,000 125,000 Amount Due to Related Companies 20 2,900,000 2,900,000

Bank Overdraft 16 3,891,794 3,891,794

6,916,794 6,916,794

31st March 2016 CompanyFinancial Assets

Note Fair Value Through Profit/(Loss)

(at Fair Value)

Loans & Receivables (at Amortised Cost)

Total

Rs. Rs. Rs.Trade & Other Receivable 12 - 1,813,660 1,813,660 Amount Due from Related Companies 13 - 147,970 147,970

Cash and Cash Equivalents 16 - 4,004,163 4,004,163

- 5,965,793 5,965,793

Liabilities (at Amortised Cost)

Total

Rs. Rs.Financial LiabilitiesTrade & Other Payables 19 172,700 172,700

Amount Due to Related Companies 20 3,000 3,000

175,700 175,700



Depreciation / Impairment

Balance on01.04.2016

Charge for the Year

Impaired During

the Year

Adjustment due to Disposal of Subsidiary

Balance on31.03.2017

Rs. Rs. Rs. Rs Rs.Plant & Machinery 12,032,214 924,000 - (12,956,214) - Furniture & Fittings 1,207,914 - - (726,811) 481,103 Office Appliances 2,660,390 - 68,873 (1,865,704) 863,559 Computers 2,950,820 - - (1,597,859) 1,352,961 Electric Installation 4,733,616 - 28,500 (1,498,829) 3,263,287 Motor Vehicles 6,726 - - (6,726) - Stores 134,750 - - (134,750) - Tools 115,280 - - (115,280) -

23,841,708 924,000 97,373 (18,902,173) 5,960,910

Written Down Value As at31.03.2017

As at31.03.2016

Rs. Rs.Plant & Machinery - 2,356,706 Furniture & Fittings - - Office Appliances - 68,873 Computers - - Electric Installation - 28,500 Motor Vehicles - - Stores - - Tools - -

- - - 2,454,079

08. PROPERTY, PLANT & EQUIPMENT

Group Balance on01.04.2016

Additionsduring the year

Adjustment due to Disposal of Subsidiary

Balance on 31.03.2017

Rs. Rs Rs.Cost Plant & Machinery 14,388,920 - (14,388,920) - Furniture & Fittings 1,207,913 - (726,810) 481,103 Office Appliances 2,729,263 - (1,865,704) 863,559 Computers 2,950,820 - (1,597,859) 1,352,961 Electric Installation 4,762,116 - (1,498,829) 3,263,287 Motor Vehicles 6,725 - (6,725) - Stores 134,750 - (134,750) - Tools 115,280 - (115,280) -

26,295,787 - (20,334,877) 5,960,910



Company Balance on Additions Disposals Balance on01.04.2016 during the

yearduring the year 31.03.2017

Rs. Rs. Rs. Rs.Cost Furniture & Fittings 481,103 - - 481,103

Office Appliances 863,559 - - 863,559

Computers 1,352,961 - - 1,352,961

Electric Installation 3,263,287 - - 3,263,287

5,960,910 - - 5,960,910

Depreciation / Impairment Balance on01.04.2016

Chargefor the year

Impaired During

the Year

OnDisposals

Balance on 31.03.2017

Rs. Rs. Rs. Rs. Rs.Furniture & Fittings 481,103 - - - 481,103

Office Appliances 794,686 - 68,873 - 863,559

Computers 1,352,961 - - - 1,352,961

Electric Installation 3,234,787 - 28,500 - 3,263,287

5,863,537 - 97,373 - 5,960,910

As at As atWritten Down Value 31.03.2017 31.03.2016

Rs. Rs.Furniture & Fittings - -

Office Appliances - 68,873

Computers - -

Electric Installation - 28,500

-

- 97,373

Contd..Property, Plant & Equipment



10. INVESTMENTS - HELD FOR TRADINGGroup Company

As at31.03.2017

As at31.03.2016

As at31.03.2017

As at31.03.2016

Rs. Rs. Rs. Rs.Balance on 1st April - - - - Additions During the year 9,040,083 - 9,040,083 - Disposals During the year - - - - Fair Value Gain / Loss on Investments (409,628) - (409,628) - Balance on 31st March 8,630,455 - 8,630,455 -

10(a) INVESTMENTS IN QUOTED SHARES31.03.2017

No. of Cost Market Value Market Value Name of the Company Shares per Share

Rs. Rs. Rs.AIA Insurance Lanka PLC 102 29,774 300 30,631 Aitken Spense PLC 100 6,990 56 5,620 Asiri Hospitals Holdings PLC 100 2,970 26 2,580 Blue Diamonds Jewellery Worldwide PLC 100 200 1 90 Browns & Company PLC 100 8,820 71 7,100 Cargills Ceylon PLC 100 17,420 184 18,390 Cargo Boat Development Company PLC 100 9,360 82 8,230 Carsons Cumberbatch PLC 100 18,010 163 16,320 Central Finance Company PLC 207 22,563 86 17,843 Chevron Lubricants Lanka PLC 200 32,780 170 34,000 CIC Holdings PLC 100 10,000 80 8,010 Commercial Bank of Ceylon PLC 105 15,876 130 13,692 DFCC Bank PLC 5,000 589,500 114 570,000 Dialog Axiata PLC 100 1,160 11 1,130 DIMO Diesal & Motor Engineering PLC 100 58,990 560 55,990 EXPO Lanka holdings PLC 100 660 8 820 The Colombo Fort Land & Building PLC 100 2,070 18 1,810 Haycarb PLC 4,000 620,400 151 604,000 Hemas Holdings PLC 100 10,410 109 10,850

09. INVESTMENT IN SUBSIDIARY

Company Percentage of Holding

No.of Shares

Cost as at 31.03.2017

Percentage of Holding

No. of Shares

Cost as at 31.03.2016

Rs. Rs.

Kalamazoo Industries (Pvt) Ltd - - - 99.97 800,000 8,000,000 - 8,000,000



11. DEFERRED TAX ASSET Group Company As at As at As at As at

31.03.2017 31.03.2016 31.03.2017 31.03.2016Rs. Rs. Rs. Rs.

Balance on 1st April 6,016,731 3,511,069 3,272,719 1,879,543 Transferred from Income Statement 513,127 2,505,662 428,194 1,393,176 Adjustment due to Disposal of Subsidiary (2,828,945) - - - Balance on 31st March 3,700,913 6,016,731 3,700,913 3,272,719

Deferred Tax liabilityAccelerated depreciation for tax purpose - (225,696) - (27,264)

- (225,696) - (27,264)

Deferred tax assetAccelerated depreciation for tax purpose - - - - Assessable tax loss carried forward 3,700,913 4,947,190 3,700,913 3,299,983 Retirement benefit obligation - 1,295,237 - -Net deferred tax Asset 3,700,913 6,016,731 3,700,913 3,272,719

31.03.2017No. of Cost Market Value Market Value

Name of the Company Shares per Share Rs. Rs. Rs.

Janashakthi Insurance Company PLC 25,304 442,820 15 382,090 John Keells Holdings PLC 43,774 6,211,531 138 6,036,435 Lankem Ceylon PLC 100 7,000 44 4,400 LB Finance PLC 180 22,806 118 21,312 Lee Hedges PLC 100 40,480 65 6,500 Lanka Orix Leasing Company PLC 100 7,990 61 6,100 MTD Walkers PLC 7,500 336,750 35 262,500 National Development Bank PLC 107 17,333 134 14,295 Nations Trust Bank PLC 100 8,120 74 7,400 Nestle Lanka PLC 100 209,970 2,089 208,930 Overseas Reality Ceylon PLC 10,100 207,000 20 204,828 Printcare PLC 100 3,710 35 3,460 Renuka City Hotel PLC 100 29,200 295 29,450 Richard Peiris & Company PLC 100 790 8 830 Singer Srilanka PLC 100 12,800 140 13,990 Sri Lanka Telecom PLC 100 3,600 33 3,330 Softlogic holdings PLC 100 1,410 12 1,190 Sunshine Holdings PLC 100 5,020 46 4,610 United Motors Lanka PLC 150 13,800 78 11,700

9,040,083 8,630,455


10(a) INVESTMENTS IN QUOTED SHARES Contd.


12. TRADE AND OTHER RECEIVABLES Group Company

As at As at As at As at 31.03.2017 31.03.2016 31.03.2017 31.03.2016

Rs. Rs. Rs. Rs.Financial AssetsTrade Debtors - 814,161 - 814,161

Advances - 812,307 -

Deposit - 1,347,299 - 996,299

Other Receivables - 3,200 - 3,200

Loan Temporary - 4,000,000 - -

Non Financial AssetsVAT Receivable - 1,920,295 - -

WHT Receivable - 2,697 - -

- 8,899,959 - 1,813,660

13. AMOUNT DUE FROM RELATED COMPANIES Group Company


Rs. Rs. Rs. Rs.

Office Equipment PLC - 2,210,963 - 6,000 Ceylon Printers PLC - 5,383,902 - 133,969

Kalamazoo Industries (Pvt) Ltd - - - 4,000

International Computers (Ceylon) Ltd - 4,001 - 4,001

- 7,598,866 - 147,970

14. FINANCIAL ASSETS - HELD TO MATURITY Group Company


Rs. Rs. Rs. Rs.

Investment in Fixed Deposit - 5,087,281 - - - 5,087,281 - -



15. INCOME TAX REFUND DUE Group Company


Rs. Rs. Rs. Rs.Balance on 1st April (4,970,916) (3,016,029) (4,373,416) (2,457,680)Provision for the year - 71,460 - 7,981

(4,970,916) (2,944,569) (4,373,416) (2,449,699)

Withholding Tax Paid (38,541) (36,839) - - Payments made during the year (24,994) (47,055) (9,125) (15,728)Payments made for previous years (36,005) (1,942,453) - (1,907,989)Adjustment due to disposal of Subsidiary 687,917 - - - Written off during the year 4,382,541 - 4,382,541 -Balance on 31st March - (4,970,918) - (4,373,416)

16. CASH AND CASH EQUIVALENTS Group Company


Rs. Rs. Rs. Rs.

Favourable cash and cash equivalent balancesCast at Bank 80,484 4,112,104 80,484 3,974,162 Cash In Hand - 38,051 - 30,001

80,484 4,150,155 80,484 4,004,163

Unfavourable cash and cash equivalent balancesBank Overdrafts (3,891,794) (1,809,852) (3,891,794) -

(3,891,794) (1,809,852) (3,891,794) - Net Balance (3,811,310) 2,340,303 (3,811,310) 4,004,163

17. STATED CAPITAL Group Company


Rs. Rs. Rs. Rs.Number of Ordinary Shares Issued and Fully Paid 50,000 50,000 50,000 50,000

Stated Capital on 31 st March 500,000 500,000 500,000 500,000



18. RETIREMENT BENEFIT OBLIGATION Group Company


Rs. Rs. Rs. Rs.Balance as at 1st April 4,625,845 3,351,254 - - Provision made during the year/ (Reversal) (855,641) 1,568,841 - - Payments made during the year - (294,250) - - Adjustment due to disposal of Subsidiary (3,770,204) - - - Balance as at 31 st March - 4,625,845

Change in the Present Value of defined obligationBalance as at 01 st April 4,625,845 3,351,254 - - Interest for the year 527,614 233,477 - - Charge for the year 465,446 546,646 - - Deficit / Surplus charge for the year (1,848,701) 788,718 - - Benefits paid - (294,250) - - Adjustment due to disposal of Subsidiary (3,770,204) - - - Balance as at 31 st March - 4,625,845 - -

19. TRADE AND OTHER PAYABLES Group Company


Rs. Rs. Rs. Rs.Financial LiabilitiesExpense Creditors 125,000 1,537,467 125,000 172,700

125,000 1,537,467 125,000 172,700 Non Financial LiabilitiesAdvances from Debtors - 1,006,142 - 642,905 Provision for Bad Debts - 288,729 - 288,729 Advance received from Ceylon Printers PLC - 10,400,000 - 10,400,000

- 11,694,871 - 11,331,634 125,000 13,232,338 125,000 11,504,334



20. AMOUNT DUE TO RELATED COMPANIES Group Company


Rs. Rs. Rs. Rs.Paragon Ceylon PLC - 986,256 - 3,000 Renuka Holdings PLC 2,900,000 - 2,900,000 - International computers (Ceylon) Ltd - 74,426 - -

2,900,000 1,060,682 2,900,000 3,000

21. OTHER OPERATING INCOME/(EXPENSES) Group Company

For the year ended 31st March 2017 2016 2017 2016Rs. Rs. Rs. Rs.

Other Operating IncomeDividend Income 11,327 33,750 11,327 33,750 Gain / (loss) on disposal of Investment - (868,192) 1,200,000 217,178 Creditors Written Back 153,003 125,330 153,003 125,330

164,330 (709,112) 1,364,330 376,258 Other Operating ExpensesImpairment on Property, Plant and Equipment ( 97,373) - (97,373) - Income Tax Refund due written off (4,382,541) - (4,382,541) -

(4,479,914) - (4,479,914) -

22. FINANCE INCOME & FINANCE COST Group Company


Finance IncomeInterest Income 496,659 392,641 43,849

496,659 392,641 - 43,849

Finance Cost (348,571 ) (144,555) - (31,337) Interest Expense ( 348,571 ) ( 144,555) - (31,337)




23. TAXATION Group Company


Current Income Tax ExpenseIncome tax on profit for the year - 71,460 - 7,981

- 71,460 - 7,981

Deferred Income Tax ExpenseDeferred Tax charged/(reversed) to income statement (513,127) (2,505,662) (428,194) (1,393,176)

(513,127) (2,434,202) (428,194) (1,385,195)

23.1 RECONCILIATION BETWEEN CURRENT TAX EXPENSE AND ACCOUNTING PROFITGroup Company


Accounting loss before tax (15,313,734) (9,969,823) (5,135,103) (5,808,121)

Aggregate Disallowed Items 6,815,525 3,111,434 4,889,592 1,212,930

Aggregate Allowable Expenses (824,000) (1,118,250) - -

Aggregate Allowable Income (1,211,327) (77,599) (1,211,327) (77,599)

Taxable Loss from Ordinary Activities (10,533,537) (8,054,238) (1,456,888) (4,672,790)

Other Income ( Interest Income ) - 392,641 - 43,849

Tax loss Utilized for the year - (137,424) - (15,347)

Taxable Income - 255,217 - 28,502

Taxable Rate - 28% 28% 28%

Tax on profit for the year - 71,460 - 7,981

Renuka Capital PLC and its subsidiary are liable for income tax at the rate of 28% on its Business profit and Other profits

Deferred Tax has been computed using the effective Tax rate of 28%



24. LOSS BEFORE TAXGroup Company


Stated after Charging : Directors Emoluments 82,584 274,601 - 187,367

Director Fees 166,000 186,000 70,000 90,000

Audit Fee 348,333 446,969 125,000 239,157

Audit Fee under/(over) provision in respect of previous year 71,064 - 71,064 -

Depreciation 924,000 1,101,049 - 57,639

Staff Welfare 3,070 27,153 3,070 27,153

Salaries 13,358,053 8,861,026 - -

EPF 933,265 551,959 - -

ETF 232,919 137,442 - -

Bonus 343,044 301,967 - -

Provision for Retirement Gratuity 933,060 780,123 - -

Income Tax Refund due written off 4,382,541 - 4,382,541 -



25. ADJUSTMENT DUE TO CHANGES IN SUBSIDIARIESDisposal of subsidiary - Kalamazoo Industries (Pvt) Ltd. As at 31st March 2017

Rs.Non - Current AssetsProperty,Plant and Equipment 1,432,704

Deferred Tax Assets 2,828,945

Total Non Current Assets 4,261,649

Current AssetsTrade and Other Receivables 7,439,697

Amounts Due from Related Companies 1,966,163

Other Financial Assets 5,543,211

Income Tax Refund Due 687,917

Cash At Bank & In Hand 148,180

Total Current Assets 15,785,166

TOTAL ASSETS 20,046,817

Non - Current LiabilitiesRetirement Benefit Obligation 3,770,204

Total Non - Current Liabilities 3,770,204

Current LiabilitiesTrade and Other Payables 2,029,665

Amount Due to Related Companies 2,304,719

Bank overdraft 1,985,210

Total Current Liabilities 6,319,593

TOTAL LIABILITIES 10,089,797

Net identifiable Assets 9,957,018

Less - Non Controlling Interest (2,305)

Net identifiable Assets disposed 9,954,713

Consideration Received from Disposal (9,200,000)

Disposal (Gain) / Loss 754,713

The Effect of Disposal on Cash FlowConsideration settled in cash 9,200,000

Cash and Cash Equivalent of Subsidiary - Disposed - Over drawn 1,837,030

Net cash flow on disposal 11,037,030



26. EARNINGS/ (LOSS) PER SHAREGroup Company


26.1 Basic Earnings per Share is calculated by dividing the Loss for the year attributable to ordinary Share holders by weighted average number of ordinary shares outstanding during the year

26.2 The following reflect the Income and share data used in the basic earnings per share calculationAmount used as the NumeratorLoss Attributable to equity holders of the company for Basic Loss per share

(14,797,223) (7,795,525) (4,706,908) (4,683,473)

Number of Ordinary Shares used as DenominatorWeighted Average number of Ordinary Shares in issue applicable to basic Earnings Per Share

50,000 50,000 50,000 50,000

Basic Loss Per Share (295.94) (155.91) (94.14) (93.67)Diluted Loss Per ShareAmount used as the NumeratorLoss Attributable to equity holders of the company for Basic Loss per share

(14,797,223) (7,795,525) (4,706,908) (4,683,473)

Number of Ordinary Shares used as DenominatorWeighted Average number of Ordinary Shares in issue applicable to Diluted Earnings Per Share 50,000 50,000 50,000 50,000 Diluted Loss per Share (295.94) (155.91) (94.14) (93.67)

Diluted earnings per share is calculated by dividing the net Loss for the year attributable to ordinary shareholders by the number of ordinary shares outstanding during the year after adjustment for the effects of all dilutive potential ordinary shares

As at 31.03.2017 & 31.03.2016 there were no dilutive potential ordinary Shares. Hence diluted earnings per share is same as basic earnings per share.

27. CONTINGENT LIABILITIESThere were no material capital commitments which have been approved as at the reporting date.

28. CAPITAL COMMITMENTSThere were no material capital commitments which have been approved as at the reporting date.

29. EVENTS OCCURRING AFTER THE REPORTING DATEThe name of the Company was changed from Kalamazoo Systems PLC to Renuka Capital PLC on 14th June 2017.

The Company increased its Stated Capital by 1,687,985 shares for a total consideration of Rs. 887, 752,200 by way of right issue on 28th June 2017.

There were no other instances which would require adjustments to or disclosure in the Financial Statements.



30. RELATED PARTY TRANSACTIONS

Transactions with Key Managerial PersonsAccording to Sri Lanka Accounting Standards 24 - Related Party Disclosures, Key Managerial Personnel, are those having authority and responsibility for planning, directing and controlling the activities of the entity. Accordingly, the Board of Directors (including Executive & Non-Executive Directors), CEO/COO, Head of the Divisions of the Company have been classified as key Managerial Personnel of the Company. There are no transactions with Key Managerial persons during the year. Transactions with Subsidiary The Group and the Company carries out transactions in the ordinary course of its business with parties who are defined as related parties in Sri Lanka Accounting Standard (LKAS) 24 - “Related Party Disclosures”. Transactions with related parties were made on the basis of the price lists in force with non-related parties (at Arm’s Length), but subject to approved discounts. Outstanding balances with related parties other than balances relating to investment related transactions as at the reporting date are unsecured and interest free. Settlement will take place in cash. Such outstanding balances have been included under respective assets and liabilities. Details of related party transactions are reported below:

Transactions with Related Entities in the Group

RELATED COMPANY RELATIONSHIP NAME OF THE COMMON

DIRECTOR/S

NATURE OF TRANSACTIONS

AGGREGATE VALUE OF RELATED PARTY

TRANSACTIONS ENTERED IN TO

DURING THE FINANCIAL YEAR

Rs.

BALANCE AS AT 31/03/2017

Rs.

BALANCE AS AT 1/04/2016

Rs.Renuka Holdings PLC Parent Dr.S.R.Rajiyah Net Funds

Received2,900,000 2,900,000 -

Transactions with Other Related Companies No transactions have been made with other Related Companies during the year Disclosure in terms of Section 9.3.2 of the Listing Rules of Colombo Stock Exchange There are no recurrent transactions other than what is stated above, that have been entered in to with Related Entities during the year which are more than 10% of the group Turnover as such require disclosure in this Annual Report in Terms of Section 9.3.2 of the Listing Rules of Colombo Stock Exchange. Similarly there are no non-recurrent transactions that have been entered in to with Related Entities during the year which are more than 10% of Equity and 5% of Total assets which ever is lower that required disclosure under the same provision.


Five year Summary

Year Ended 31st March 2017Rs. ‘000

2016Rs. ‘000

2015Rs. ‘000

2014Rs. ‘000

2013Rs. ‘000

a) Summery of OperationRevenue 11,400 11,400 8,591 64,644 79,536

Gross Profit 11,400 11,400 8,591 17,115 14,206

Profit/ (Loss) before finance cost and tax (14,965) (9,825) (7,749) (2,586) 2,731

Profit/(Loss) before taxation (15,314) (9,970) (7,806) (2,704) 2,257

Taxation 513 2,434 882 510 (1,429)

Profit /(Loss) after tax (14,801) (7,536) (6,924) (2,193) 828

Loss attributable to equity holders of the company

(14,797) (7,796) (2,613) (2,254) (1,068)

b) Summery of Financial Position As At 31 March 2017

Rs. ‘0002016

Rs. ‘0002015

Rs. ‘0002014

Rs. ‘0002013

Rs. ‘000Capital and reservesStated capital 500 500 500 500 500

Other components of Equity - - 269 204 188

Retained earnings 4,995 17,944 26,528 29,179 31,577

Shareholders' fund 5,495 18,444 27,297 29,883 32,265

Non Controlling Interest - 5 1,464 1,404 1,365

Total Equity 5,495 18,449 28,761 31,287 33,630 LiabilitiesNon- Current liabilities - 4,626 3,351 2,867 2,093

Current liabilities 6,917 16,103 6,783 6,807 8,061

Total Liabilities 6,917 20,729 10,134 9,674 10,154 Total Equity and Liabilities 12,412 39,178 38,895 40,961 43,784 AssetsProperty, plant and equipment - 2,454 3,555 4,708 6,031

Other non-current assets 8,631 - 412 329 297

Deferred Tax Assets 3,701 6,017 3,511 2,474 1,724

Current assets 80 30,707 31,417 33,450 35,732

Total Assets 12,412 39,178 38,895 40,961 43,784

c) Key IndicatorsLoss per share (Rs.) (295.94) (155.92) (52.26) (45.08) (21.36)

Net profit/ (Loss) margin (%) (129.83%) (68.38%) (29.50%) (3.39%) 1.04%

Net assets value per share (Rs.) 109.90 368.88 545.93 597.66 645.30

Current ratio (times) 0.01 1.91 4.63 4.91 4.43


Shareholders and Investor information

SHARE INFORMATION 2017 2016

Total No of Shareholders 572 455

Total No of Shares 50,000 50,000

PUBLIC SHARE HOLDING 2017 2016The percentage of Ordinary Shares held by the public 29.49% 30.00%

Total number of shareholders representing the Public Holding 568 454

SHARE TRADING INFORMATION

1st of April to 31st March 2017 2016Voting Voting

Share PriceHighest (Rs.) 2,400.00 4,440.00

Lowest (Rs.) 665.20 903.10

As at 31st March 804.80 2,600.10

Market Capitalization 2017 2016As at 31st March (Rs. '000) 40,240 130,005

No of Trades 1,119 2,113

No of shares Traded 40,763 42,506

Value of Shares Traded (Rs.) 57,374,162 58,600,266


Shareholders and Investor information

VOTING SHARES31st March 2017 31st March 2016

No of Shares Held No of Shareholders

No of Shares

% No of Shareholders

No of Shares

%

1 - 1,000 570 12,672 25.34% 452 11,767 23.53%

1,001 - 10,000 1 2,318 4.64% 2 3,893 7.79%

10,001 - 100,000 1 35,010 70.02% 1 34,340 68.68%

100,001 - 1,000,000 - - 0.00% - - 0.00%

1,000,000 & Over - - 0.00% - - 0.00%

572 50,000 100% 455 50,000 100%

VOTING SHARES31st March 2017

Analysis of Shareholders No of Shareholders

No of Shares

%

Individuals 545 11,080 22.16%

Institutions 27 38,920 77.84%

Total 572 50,000 100%

ANALYSIS OF SHAREHOLDERS - VOTING31st March 2017


No of Shares

%

Resident 562 49,060 98.12%

Non Resident 10 940 1.88%

Total 572 50,000 100%

ANALYSIS OF SHAREHOLDERS - VOTING31st March 2017


No of Shares

%

Renuka Group Limited 1 35,194 70.39%

Directors and Spouses 3 60 0.12%

Holding of 10% or more - - 0.00%

Public 568 14,746 29.49%

Total 572 50,000 100.00%

Percentage of Shares held by the Public as at 31st March 2017 is 29.49%


No Name

Voting as at 31.03.2017

Voting as at 31.03.2016

No. of Shares

% No. of Shares

%

1 RENUKA HOLDINGS PLC 35,194 70.39 - -

2 SIR CHITTAMPALAM A GARDINER TRUST 2,318 4.64 2,318 4.64

3 CYRIL GARDINER (PRIVATE) LIMITED 694 1.39 1,575 3.15

4 MRS. M. J. NIHARA 612 1.22 612 1.22

5 MRS. M. I. EMMANUEL 500 1.00 500 1.00

6 MR. S. VIJAYAPASKARAN 300 0.60 300 0.60

6 MS. E. I. AMIRTHANAYAGAM 300 0.60 300 0.60

8 MRS. R. L. D. C. MATOTAARACHCHI 261 0.52 261 0.52

9 MR. L. L. R. MORROW 224 0.45 224 0.45

10 MR. L. THIYAGARAJAH 220 0.44 300 0.60

11 MRS. W. W. S. PRIYANI 198 0.40 198 0.40

12 MR. R. A. S. MADUSANKA 165 0.33 168 0.34

13 MR. R. L. DIAS 160 0.32 160 0.32

13 MS. R. C. M. C. SETHUKAVALER 160 0.32 160 0.32

15 MR. S. G. N. HERATH JOINT WITH MRS. A.N. HERATH & MISS. N. E. HERATH 151 0.30 151 0.30

15 MR. T. SURENDRAN 151 0.30 181 0.36

17 BANSEI SECURITES CAPITAL (PVT) LTD / J. NIROSHKANTH 150 0.30 150 0.30

18 MR. M. G. J. BANDARA 146 0.29 146 0.29

19 MRS. H. D. H. KARUNASEKARA 137 0.27 125 0.25

20 MBSL INSURANCE COMPANY LIMITED 135 0.27 135 0.27

42,176 84.35 42,137 84.27

Top 20 Major Shareholders


Notice of Meeting

Notice is hereby given that the 60th Annual General Meeting of the Company will be held at the Sri Lanka Foundation Institute, No.100, Independent Square, Colombo 07 on the 15th September 2017 at 4.45 p.m. for the following purposes :-

1. To receive and consider the Report of the Directors and the Statement of the Audited Financial Statements for the year ended 31st March 2017 with the Report of the Auditors thereon.

2. To re-elect Mr. M.S. Dominic who retires in terms of Article 26 (2) of the Articles of Association as a Director of the Company.

3. To re-elect Mr. B. V. Selvanayagama who retires in terms of Article 26 (2) of the Articles of Association as a Director of the Company.

4. To re-elect Mr.S.N. Alles who retires by rotation in terms of Article 28 of the Articles of Association as a Director of the Company

5. To authorise the Directors to determine the contribution to charity.

6. To re-appoint Messrs. Kreston M N S & Co. as the Auditors and authorise the Directors to determine their remuneration.

By Order of the Board,

Sgd.Renuka Enterprises (Pvt) LtdCompany Secretaries20th July 2017


Notice of Meeting Cont..

Note:-

(i) A member entitled to attend and vote at the above Meeting is entitled to appoint a proxy to attend and vote instead of the member, such proxy need not be a member.

(ii) A Form of Proxy is enclosed with this Annual Report.

(iii) The completed Form of Proxy should be deposited at the Registered Office of the Company at “Renuka House”, No. 69, Sri Jinaratana Road, Colombo 2, on or before 4.45 p.m. on 13th September 2017, being not less than 48 hours before the time appointed for the holding of the Meeting.


Form of Proxy

I/We............................................................................................................................of…………………………………………..………..........................................….........………….being a member/members of Renuka Capital PLC, hereby appoint; .............................................................................................................…........... (NIC No. …….……………………..) of ………………..…….................................................…….............……………or failing her/himMr. S.V. Rajiyah or failing himMr. P. Gunathilake or failing himMr. S.N. Alles or failing himMr. M.S. Dominic or failing himMr. B.V. Selvanayagamas my/ our proxy to represent me / us and to speak and to vote on my / our behalf at the Annual General Meeting of the Company to be held on the 15th day of September 2017 and at any adjournment thereof and at every poll which may be taken in consequence thereof.

Dated this …………………………. day of ……………………………. 2017.

………………………......…….Signature of Shareholder

Note:(a) A proxy need not be a member of the Company.(b) Instructions regarding completion appear overleaf.

For Against1. To receive and consider the Report of the Directors and the

Statement of the Audited Financial Statements for the year ended 31st March 2017 with the Report of the Auditors thereon.

2. To re-elect Mr. M.S. Dominic as a Director.

3. To re-elect Mr. S.N. Alles as a Director.

4. To re-elect Mr. B.V. Selvanayagam as a Director.

5. To authorise the Directors to determine the contribution to charity.

6. To re-appoint Messrs. Kreston M N S & Co. Chartered Accountants as Auditors to the Company and authorise the Directors to determine their remuneration.


Instructions As To Completion Of The Form Of Proxy

1. To be valid, the completed Form of Proxy should be deposited at the Registered Office of

the Company, at “Renuka House”, No. 69, Sri Jinaratana Road, Colombo 2, on or before 4.45

p.m. on 13th September 2017 being not less than 48 hours before the time appointed for the

holding of the Meeting.

2. In perfecting the Form of Proxy, please ensure that all the details are legible.

3. Please indicate with an ‘X’ in the space provided how your proxy to vote on each resolution. If

no indication is given the proxy, in his discretion, will vote, as he thinks fit.

4. In the case of a Company / Corporation, the proxy must be under its Common Seal which

should be affixed and attested in the manner prescribed by its Articles of Association.

5. In the case of proxy signed by the Attorney, the Power of Attorney must be deposited

at the Registered Office at “Renuka House”, No. 69, Sri Jinaratana Road, Colombo 2, for

registration.

“Renuka House” No. 69, Sri Jinaratana Road, Colombo 2, Sri Lanka.Telephone: 0094-11-2314750-5 Fax : 0094-11-2445549Email: [email protected] Website: www.renukagroup.com

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