purposeful progress

CIC Holdings PLCA n n u a l R e p o r t 2 0 1 4 / 1 5

PurposefulProgress

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If everyone is moving forward together, then success takes care of itself. - Henry Ford

PurposefulProgressAt CIC we believe in the power of our own potential, our ability to change our destiny and achieve success, whatever the odds. This annual report describes a year of good progress against the challenges and goals we have set ourselves; a record of social and economic development delivered, revenue increased and people empowered.

We shall continue to make purposeful progress in the years ahead, generating real value through real operations, joining our many stakeholders in moving forward, together.

CIC Holdings PLC Annual Repor t 2014/15 2Purposeful Progress

Accountability Customer Satisfaction Good GovernanceIntegrity Mutual RespectOpen-Door Policy Protection of EnvironmentQuality Sustainability

Vision

Mission

Values

To be an innovative Group of Companies creating value through effective fulfilment of market needs.

To enhance the quality of life of people in the region by developing a diverse portfolio in Healthcare, Industrial, Consumer Products, Crop Solutions and Services, driven by customer satisfaction and improvements in technology. We will harness the potential of our people to derive competitive advantage and to add value to stakeholders whilst safeguarding the environment.

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Content

Delivering sustainable growth and returns over the long term...

About the report

All narratives in this report refers to CIC Holdings PLC and its subsidiaries (“the Group”) and covers operations in Sri Lanka both in the local market and export markets. The Information of our financial, social and environmental performance, whilst being comprehensive, has been limited to a review of events and progress within the year.

Reporting Principles

The report is based on the Integrated Reporting Framework issued by the International Integrated Reporting Council and uses the G4 criteria published by the Global Reporting Initiative for Sustainability Reporting which we voluntarily adopted. This is our initial attempt to incorporate the concept of this framework into our annual report and we have reported on the significant features and information as a stepping stone towards integrated reporting.

The financial statements have been prepared based on Sri Lanka Financial Reporting Standards to comply with the Companies Act No.7 of 2007, the Continuing Listing Requirements of the Colombo Stock Exchange, the Code of Best Practice on Corporate Governance jointly issued by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka. We understand that integrated reporting is apprehended and continue to monitor developments in local and the international context to ensure that our reports are in par with best practice.

The focus of the report is to provide relevant financial and non-financial information on material developments to the stakeholders, the capital providers to represent fairly the events that shaped our performance during the reporting period and are likely to impact our future performance.

In identifying the reporting events the materiality principle was applied. Material aspects and boundaries were defined in accordance with the GRI G4 standards and responses obtained from the stakeholder engagement processes. In presenting how we create value for different stakeholders we sought to explain the impacts made to and from different resources- human capital, manufactured capital, financial capital, social and relationship capital.

Milestones of Our Journey 4Financial & Operational Highlights 6Chairman’s Statement 8Managing Director/CEO’s Review 12Board of Directors 16Management Team 21Creating Value for Our Stakeholders 23Enterprise Governance 26Management Discussion and Analysis 47Agriculture & Livestock 52Consumer & Pharmaceuticals 62Industrial Raw materials, Packaging & Construction 70Our Commitment to Customers 76Creating Value for Employees 77Developing Communities 78Environmentally Responsible 83Sustainability Report 84Managing Director’s / CEO’s Message 84Audit Committee Report 120Report of the Human Capital & Compensation Committee 121Nominations Committee Report 122Managing Risk at CIC 123

Financial ReportsAnnual Report of the Directors’ on the Affairs of the Company 130Independent Auditors’ Report 139Statements of Profit or Loss and Other Comprehensive Income 140Statements of Financial Position 141Statements of Changes in Equity 142Cash Flow Statements 144Notes to the Financial Statements 146Shareholder and Investor Information 208Subsidiaries and Equity Accounted Investees 213Ten Year Group Performance 214


Milestones of Our Journey

1964 1968 1974

2002 2003

2010 2011Change of Company name from Chemical Industries (Colombo) PLC to CIC Holdings PLC

Investment in Link Natural Products (Private) Limited

Investment in Chemcel (Private) Limited by the Company.

Writing instruments factory shifted to own premises.

Incorporation of Chemical Industries (Colombo) Limited ( now known as CIC Holdings PLC)

Start of operations of Ratmalana Factory with Agrochemicals Plant

Formation of Chemanex PLC

Purchase of Nutrina (Private) Limited from Cargills Inc. USA & Incorporation of CIC Feeds (Private) Limited

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1991 1992 1993

1995

2012 2014

2001

Investment in Ceylinco Pharmaceuticals Limited (now known as CIC Lifesciences Limited)

Investment in Chemanex PLC

Incorporation of CISCO Speciality Packaging (Private) Limited to manufacture PET Bottles

Purchase of Fertilizer business from British American Tobacco and incorporation of CIC Fertilizers (Private) Limited (now known as CIC Agri Businesses (Private) Limited)

Investment in CIAL

Head office shifting to own premises

Incorporation of CIC Paints (Private) Limited (now known as ‘Akzo Nobel Paints Lanka ( Private) Limited)

Incorporated in 1964, CIC Holdings PLC has withstood the test of time to become one of Sri Lanka’s leading, most long standing conglomerates.

Year of restructure

Shifting of Crop protection manufacturing facility to Godagama


Financial & Operational Highlights

60% 25% 16% 5.5 25%

Agriculture & Livestock

Consumer and pharmaceuticals Packaging Industrial Raw

Materials Construction

Highest contributor to the Group revenue

Second highest contributor to the Group revenue

Best segmental results compared to turnover

Best maintained current ratio of 5.5 times

Contributes for 25% of the Groups Profits

The CIC Group has recordeda Profit after tax of Rs. 1,040.84 Mn for the year ended 31st March 2015. The Group has delivered revenue growth of 3% and a profit before tax of Rs. 1,423.12 Mn which is a complete turnaround in performance.

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Financial Highlights

Group For the year ended 31st March 2015 2014

Earning Highlights and RatiosGroup revenue (Continuing operations) Rs. ‘000 23,582,297 21,559,839 Group profit before interest and tax (Continuing operations) Rs. ‘000 1,897,337 1,086,323 Income tax expense (Continuing operations) Rs. ‘000 397,697 72,047 Profit/(loss) for the year from continuing operations Rs. ‘000 1,025,418 (57,123)Profit/(loss) for the year from discontinued operations Rs. ‘000 15,425 (1,069,716)Other comprehensive income Rs. ‘000 42,084 248 Total comprehensive income Rs. ‘000 1,082,927 (1,126,591)Profit attributable to equity holders of the company Rs. ‘000 761,927 (971,713)Dividends Rs. ‘000 284,310 - Basic/Diluted earnings per share (EPS) Rs. ‘000 8.04 (10.25)Interest cover Number of times 2.75 0.08 Return on equity (ROE) % 12% -14%Return on assets (ROA) % 10% 7%Pre-tax return on capital employed (ROCE) % 10% 5%

Balance Sheet Highlights and RatiosTotal assets Rs. ‘000 26,264,709 25,842,142 Total equity Rs. ‘000 8,843,248 8,200,023 Total debts Rs. ‘000 10,349,517 10,590,781 Equity attributable to equity holders of the company Rs. ‘000 7,120,938 6,711,026 Number of shares in issue Number 94,770,000 94,770,000 Net assets per share Rs. 75.14 70.81 Debt/Equity % 117.03 129.16 Debt/Total assets % 39.40 40.98

Market/Shareholder InformationMarket price per share as at 31st MarchOrdinary Rs. 76.00 45.50 Non-Voting (class x ) Rs. 57.60 37.20 Dividend per shareInterim paid Rs. 2.00 - Final proposed Rs. 1.00 - Market capitalisation Rs. million 6,800 4,133 Price earning ratioOrdinary Number of times 9.46 (4.44)Non-Voting (class x ) Number of times 7.17 (3.64)

Other InformationCredit rating RAM rating A/P2 A/P2Total employees Number 1,952 1,935 Revenue per employee Rs. ‘000 12,081 11,142 Total value addition to employees Rs. ‘000 1,737,270 1,742,792 Value addition to lenders of the capital Rs. ‘000 1,024,802 1,347,218 Total taxes paid to Government Rs. ‘000 830,343 614,532


Chairman’sStatement

An improved performance

The Board re-strategized and embarked on a much needed restructuring programme and focused on businesses with the potential to deliver sustainable growth and returns over the long term.

The improvement in the profitability of the Company from a loss of Rs. 847 Mn to a profit of Rs. 512 Mn is a testimony to the extent of change within the Group.

As another financial year comes to an end, I am pleased to present to you, on behalf of the Board, the Annual Report and Financial Statements of CIC Holdings PLC. for the year ended 31st March 2015.

Performance for the yearIt is my pleasure to report that the CIC Group has recorded a Profit after tax of Rs. 1,040.84 Mn for the year ended 31st March 2015. The Group has delivered revenue growth of 3% and a profit before tax of Rs. 1,423.12 Mn which is a complete turnaround in performance. You may recall that the Company and Group reported a loss of Rs. 847.25 Mn and Rs. 1,089.55 Mn (restated as Rs. 1,126.84 Mn) respectively for the year ended 2013/14. In that light, it is significant that the total equity of the Group also recorded a growth of 8% to Rs. 8,843.25 Mn during the year under review, thereby strengthening its’ financial position. The vastly improved financial performance which has been delivered is the result of the new course charted for the Group by the Board as was adverted to in my report last year. Following the first loss in the history of the Group recorded in 2013/14, the Board re-strategised and embarked on a much needed restructuring programme and during the period under review, focused on businesses with the potential to deliver sustainable growth and returns over the long term. Details of the performance of the constituent business units are provided in the CEO’s report.

This past year has not been easy and the Board as well as the Senior Management had to make many a painful decision in implementing the new strategies and the consequent restructuring programme which tested the resilience of the Company and the Group. However, there was commendable commitment to the process shown by all employees ably led by the senior management who worked closely with the Board, which enabled the Company and the Group to achieve the transformation and the turnaround in the results.

The improvement in the profitability of the Company from a loss of Rs. 847.25 Mn to a profit of Rs. 512.55 Mn and the turnaround of the Agriculture segment which recorded a profit of Rs. 336 Mn in 2014/15 compared to a loss of Rs. 915 Mn in the previous year, is testimony to the extent of change within the Group.

Similarly, through sharper focus on profitable lines and the adoption of deeper market penetration strategies, the Consumer and Pharmaceuticals business also delivered a profit after tax of Rs. 272 Mn for 2014/15 recovering from a loss of Rs. 851 Mn in the previous year.

The operations of all Companies were the focus of deep deliberations by the Board and going forward will remain so. Business rationalisation as well as resource allocations in targeted businesses enabled the turnaround of the Company

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S.H. AmarasekeraChairman


Chairman’sStatement

within this short time frame as was envisaged by the Board last year. As the new business strategies get further embedded and the positive effects of the restructuring and transformation programme mount, I am confident that your Company will grow in strength and deliver sustainable growth in revenue and profit in the years ahead and cement its position as a preeminent corporate in this country.

GovernanceIn order to give full effect to the new direction of the Board, one of the key initiatives implemented during the 1st half of the year was the reconstitution of the Board to include the heads of the three key subsidiaries of the Group. We were of the view that their inclusion to the Board would bring about a better control of the key businesses and encourage more direct intervention in policy making. Accordingly, we welcomed to the Board, Dr. Devapriya Nugawela, Chairman of Link Natural Products, Mr. A.V.P. Silva, Managing Director of the Feeds cluster and Mr. Keerthi Kotagama, Managing Director of Agri Businesses. The Board had identified these clusters as the key drivers of growth for the Group in the coming years.

Their inclusion would have the added advantage of the Board establishing close links with the business clusters of the Group thereby facilitating greater understanding of these businesses which in turn will help the Board to drive a unified strategy consistently across the Group.

In the second half of the year, we were extremely happy to welcome to the CIC Group, two eminent personalities in the mercantile sector renowned for their professionalism and business acumen. Mr. Dinesh Weerakkody joined the Board of CIC Holdings PLC and Mr. Amal Cabraal assumed the role of Chairman of the CIC Feeds cluster. I have no doubt that the Group as a whole will benefit greatly by the contributions that they would make to the continued growth of your Company.

Engaging with StakeholdersThe restructuring process and many of the radical changes made across the Group impacted several stakeholders quite significantly and it was therefore imperative that we kept those stakeholders properly informed of the reasons for such changes and the progress being made subsequent to such changes. Keeping that in mind, I kept our shareholders appraised of the changes and the need for such changes in quite explicit terms in my report last year as well as verbally

at the Annual General Meeting. In the same vein, we kept our bankers, strategic partners and principals also appraised of the ongoing developments and I am grateful that we received, during this last year, their total support and co-operation

Most importantly, the senior management led by the Managing Director kept the lines of communications with the employees open as they were quite obviously the ones most impacted by the changes. I, and on several occasions the Board, conferred regularly with the Senior Management to ensure that all the business units pursued the delivery of the business goals and plans unwaveringly, and made sure that the mood and morale of staff at all levels were maintained at the optimum. At the beginning of the financial year, each of the business segments, after a rigorous process, set themselves ambitious targets. I am pleased to report that other than the Feeds cluster, which underperformed the budget, most of the other segments achieved and in certain cases, exceeded their budgets. In that context, I wish to convey the appreciation of the Board to the staff at all levels for the commitment and dedication shown during what was undoubtedly a difficult year. Many of our employees are acknowledged experts in their respective fields, and this knowledge bank which is available within the Group is a critical factor for both financial success as well as to the value creation process that we have embarked on.

Looking AheadYour Board is confident that the hard decisions taken during the past two years have set the Group on the path to performing at a higher level with the ability to compete effectively in an increasingly challenging environment. Internal governance structures, policy frameworks and business processes have been streamlined and strengthened to deliver value to stakeholders.

CIC’s portfolio is largely made up of essential products that are trusted by Sri Lankans. Many of them play a role in key national initiatives such as food security, nutrition, health and well-being of the people which also has great potential for growth both locally and globally. Additionally, our supply chains support an island-wide network of farmers and distributors who are key stakeholders of the Group. These collaborative win-win partnerships that have been developed over decades in line with our corporate values give CIC Group a unique position of strength. Your Board believes that there are many other avenues for the Group to explore

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CIC Group has recorded a Profit after tax of

and further enhance synergies across the Group and create greater value for which resources will be allocated in the coming year. It is our plan to continue to drive performance in order to deliver sustainable growth with sharp and focused strategies in the coming year. In order to do so, the Company would continue to invest to upgrade the quality of leadership within the Group.

By reason of the turnaround achieved during the year, the Board would now look favorably at new investment opportunities, be it within the Group’s existing portfolio or even in new fields of business provided the opportunities meet the investment criteria and cross the financial hurdle rates of the Group as has been decided by the Board.

AcknowledgementsThe Board joins me in thanking Mr. Franklyn G. Amerasinghe who resigned from the Board in January 2015 having served as an Independent Non-Executive Director for over 12 years. His wise counsel rooted in strong principles contributed to enrich the Board discussions and enhanced the objectivity and the independence of the Board. His contribution to the Company during the re-structuring process has been immense and he will be greatly missed.

The urgency of the transformation process necessitated a high level of involvement from the Board in rigorously evaluating the progress made on structural changes and reviewing results to ensure that performance was on target. Yardsticks for measuring performance set in the previous year with the assistance of MTI Consulting were used to evaluate progress on deliverables for each business unit and subsidiary. Inevitably, there were many issues that arose during the year which were resolved effectively and efficiently to clear potential blocks with, where necessary, the intervention of the Board. The considerable collective expertise of the Board with its combination of executive and non-executive members ensured that domain knowledge

and passion were tempered with objectivity in the evaluations and reaching agreement on solutions. Whilst acknowledging that we have more milestones to reach, I am pleased to note that the Board has been able to broaden its agenda beyond the austerity measures implemented to more forward looking strategies and actions – a sign of our positive recovery.

In the light of the aforesaid, I wish to thank my colleagues on the Board for their unstinting support, advice and for the contribution made during the deliberations of the Board. CIC is fortunate to have a Board which consists of proven leaders in a cross section of fields and they have over this last year made themselves available in order to pilot the restructuring process from what was stormy seas to what is now much calmer waters and I am deeply grateful to them for their time as well as for the support extended.

We are also grateful to the understanding extended by our strategic business partners for their continued confidence in the Group. Our Bankers have supported the transition and maintained a positive outlook of the Group which is greatly appreciated by the Board.

I congratulate the Managing Director, Mr. Samantha Ranatunga and the members of the Management Team who have led their respective teams through a difficult restructuring and transformation process and delivered a commendable performance.

In conclusion, I thank our shareholders, particularly our controlling shareholder, Paints and General Industries Limited for their understanding and continued support. The Board was mindful of the fact that there was no dividend declared in the previous year due to the losses and therefore two interim dividends of Rs. 1/- per share had been paid in September 2014 and March 2015. The Board has also recommended a final dividend of a further Rs. 1/- per share for approval at the Annual General Meeting.

Harsha AmarasekeraChairman

22nd May 2015

Rs. 1,040.84 Mn


Managing Director/ CEO’s Review

S.P.S. RanatungaManaging Director/CEO

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Leaders and teams

Top line growth of 3%, asset growth of 2% and a return to profitability demonstrate our commitment to our corporate vision, efficiency of our business processes,strength of our governance structure and most importantly efforts of our staff.

Ensuring that our strategic business units had leaders and teams in place capable of delivering on the plans coupled with rigorous review of performance was key to delivery.

It is my pleasure to report that CIC Holdings has delivered a profit of Rs.1,040.84 Mn for the year 2014/15 as the result of a carefully orchestrated turnaround in a year that went to plan. The story was about getting back to our core strengths after the painful restructuring in the previous year. Top line growth of 3%, asset growth of 2% and a return to profitability demonstrate our commitment to our corporate vision, efficiency of our business processes,strength of our governance structure and most importantly efforts of our staff.

GovernanceThe Board implemented rigorous performance evaluation systems and strengthened governance structures with a strong focus on the results achieved as well as how it was achieved, ensuring that process changes agreed were delivered to ensure efficient value creation. Reconstitution of the Board in

2013/14 brought in a collective wealth of experience in the corporate sector of the country with diverse perspectives enhancing the objectivity in review of business processes. Ensuring that our strategic business units had leaders and teams in place capable of delivering on the plans coupled with rigorous review of performance was key to delivery. The Chairman played a key role in bringing about greater understanding between the Board and the management which ensured that areas of concern were addressed quickly. High levels of stakeholder engagement in our turnaround resulted in valuable feedback, positive encouragement and support during a period of fast paced change.

PerformanceThe main objective of restructuring was about getting back to our core competencies in 6 industries selected for their growth potential, namely Pharmaceuticals, Dairy, Seeds, Rice, Industrial Chemicals and Strategic Initiaitives.

The Consumer and Pharmaceuticals segment has turned around focusing on a selective growth strategy. The Pharmaceuticals segment focused on surgical products in


Managing Director/ CEO’s Review

Rice exports have been a success with CIC Red Basmathi

Link Natural has taken on leading fast moving consumer good giants with Link Sudantha

niche areas introducing cutting edge technology in an ethical manner by educating the medical profession of potential applications of the product range. Whilst the pharmaceuticals division consolidated on its diverse portfolio of Pharma Agencies, the consumer division turned into profitability with careful management of the distributor system and market expansion.

Link Natural has taken on leading fast moving consumer goods giants with Link Sudantha and has made significant inroads in capturing market share. Samahan is a trusted household name with Sri Lankans all over the world who have opened new avenues in key migrant markets. The Link Naturals distribution network is ranked among the top ten networks in the country and this company is well poised for growth in a sector that has high potential. The company continues to innovate and has launched a further improved, new product range catering to the needs of higher income segments of the market.

Consolidation of Agriculture involved taking a strategic view at where our strengths lie and ensuring that we stayed in businesses that continued to create value for our stakeholders. Consequently, we have focussed on dairy, grain, rice and seeds. Dairy and grain dovetails into our animal feeds presenting opportunities for cross sell and growth. Rice exports have been a success with CIC Red Basmathi which has health benefits being a major success. CIC has been the leading producer of seed paddy in the country. CIC constantly innovates to produce new varieties of rice which are appealing to the high end local and overseas consumers. Our focus on land productivity ensures that CIC gets some of the highest yields in rice which are around three times the national average through sustainable means, managing waste to nourish the soil as an integral part of farming.

The performance of the Construction industry segment was below expectations due to an extremely challenging, environment which curtailed top line growth but the segment has shown signs of improvement in the last quarter. Cisco Packaging had a good year as consumer demand remained strong delivering growth in top line and profitability. Industrial raw materials segment has also performed according to plan supported by strong growth in the industry sector turning in the planned profit.

This has also been a period of significant change for our staff and maintaining morale was critical to implementing enduring change. Many of our staff are experts in their fields making retention and on boarding of key value creators a high priority. Communicating change, inspiring and motivating our team has paved the way for a stronger company.

Delivering Expectations of StakeholdersCIC has a large number of stakeholders and we are committed to delivering their expectations as many rely on CIC to sustain their quality of life.

We have continued to maintain our promise of quality to our consumers who include our products in their regular shopping lists. CIC is the largest producer of fruits and curd and one of the leading players in eggs and chicken. We practice the farm to fork concept in order to guarantee traceability. Key B2B customers have entered in to special programmes with CIC to source chicken and vegetables for their own production because of this promise of quality which relies on a robust system of farmer education and quality control audits of agricultural practices.

Over 20,000 farmers and 2,000 distributors who are located throughout the island forming vital links in our supply chain. Our projects on farmer education have continued unabated and supported the education of over 350 children annually. We carry out various initiatives to encourage youth into farming through education and other social programs.

Our shareholders and bankers who provide capital have been supportive throughout the period of restructuring. We are sincerely appreciative of their understanding and have delivered on our commitments made to our bankers and our shareholders this year achieving the turnaround in performance within the agreed timeframes.

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Way ForwardSri Lanka’s growth of 7.4% and in particular, the increasing contribution to GDP from the provinces, provides a sound platform for growth. Improvement of the country’s infrastructure, particularly the road network, plays a key role in connecting farmers to markets and also enables us to expand distribution chains reaching every village. Agriculture sector’s share of GDP reduced in 2014 to 10.1% turning in a disappointing performance largely attributable to adverse weather conditions. However, Sri Lanka’s self-sufficiency in rice and increasing harvest of vegetables is encouraging as the lustre of export crops dim due to declining prices in global commodity markets.

Government will continue to be a key player in the sector and is also the policy maker which may impact potential entrants. CIC has been a key player in this segment and has proven its ability to compete effectively and profitably, contributing to the country’s food security due to our expertise and experience. It is also noteworthy that policy decisions have a considerable impact on investment decisions such as regulating milk prices and price control of yoghurts.

The country’s progress towards middle income status supports the growth of our consumer segments as non-food expenditure increases with the increased disposable income. Strong distribution networks and a portfolio of brands that are trusted enhance CIC’s competitive positioning in this lucrative segment.

The Industrial Raw Materials, Packaging Materials and Construction segments will benefit from the positive growth observed in key export markets and the growth of the industry segment. Lower oil prices are also expected to boost industry in oil importing countries such as Sri Lanka and this is also expected to support the growth of this business segment.

We are encouraged by the results we have achieved but understand that there is no room for complacency. New opportunities in an environment that is increasingly more favourable to Sri Lanka must be seized and realised without delay. CIC Group continues to focus on innovation, product development, market development and technology to drive growth. Our grounding in sustainability principles facilitates efficient resource allocation in delivering value to our stakeholders.

AcknowledgementsIn a year of unprecedented challenge for CIC, having a strong Board that provides encouragement balanced with a realistic analysis of the ground situation is a solid foundation for driving performance. I wish to thank especially the Chairman for the role he played in this crucial year and the Board of Directors for sharing their industry insights, expertise and business acumen to develop appropriate strategies and ensure that we stayed on track. Our Bankers who have supported the group through our transformation have my sincere respect for continuing to provide the umbrella during the rains. My thanks to the team who have been the implementers of our new corporate architecture and transformation, for delivering the results presented in this report.

Samantha RanatungaManaging Director/CEO


Board of Directors

S.H. AmarasekeraChairman

R.N. AsirwathamDirector

S.M. EnderbyDirector

S.P.S. Ranatunga Managing Director/CEO

R.S. CaptainDirector

M.P. JayawardenaDirector

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A.V.P. SilvaDirector

K.B. KotagamaDirector

Prof. P.W.M.B.B. MarambeDirector

Dr. R.C.W.M.R.D NugawelaDirector

D. S. WeerakkodyDirector

Ms P.D.S. RuwanpuraCompany Secretary


Board of Directors

1. S.H. Amarasekera Chairman

Appointed to the Board of CIC on 28th October 2005 and appointed as Acting Chairman on 1st January 2014 and as the Chairman on 23rd May 2014. Mr. Harsha Amarasekera, President’s Counsel is a leading lawyer in Sri Lanka having a wide practice in the Original Courts as well as in the Appellate Court, specialising in Commercial Law, Business Law, Securities Law, Banking Law and Intellectual Property Law. He also serves as an Independent Director in several leading listed companies in the Colombo Stock Exchange, including Vallibel One PLC, Royal Ceramics Lanka PLC, Expo Lanka Holdings PLC, Chevron Lubricants Lanka PLC, Amana Bank PLC, Keells Food Products PLC, Amaya Leisure PLC and Vallibel Power Erathna PLC. He was also appointed as the Chairman of CIC subsidiary, Chemanex PLC on the 1st of April 2015.

He also serves as a Director in several unlisted companies including some companies within the Group.

2. S.P.S. Ranatunga Managing Director/CEO

Joined the Board of CIC on 21st May 2002, appointed Chief Operating Officer in February 2005 and appointed Managing Director/CEO in April 2009. Holds a degree from the University of Delhi and a Masters in Business Administration, UK. Non-Executive Director of a number of unlisted companies in the CIC Group including Akzo Nobel Paints Lanka (Pvt) Limited, Rahimafrooz CIC Agro Limited, Bangladesh and an Independent Director of Seylan Bank PLC. He is also a Non-Executive Director of Chemanex PLC. He is the Vice - Chairman of the Ceylon Chamber of Commerce, the President of the Sri Lanka - Africa - Middle East Business Council and the Vice President of the Sri Lanka-Maldivian Business Council and has led Sri Lanka Chamber of Commerce delegations to various countries. He is also the Ceylon Chamber of Commerce nominee in the Mercantile Services Provident Society.

In addition, he had been a pioneer in coordinating and setting up of CIC Agri Businesses which is the premier agricultural company in Sri Lanka. He has helped in developing the seed to shelf concept where 20,000 farmer families are helped to bring produce to end consumers. He has also studied

the agricultural measurement and productivity systems in Australia, India, Thailand, Portugal, Chile, South Africa and in many other countries.

3. R.N. Asirwatham Director

Appointed to the Board of Directors on 30th June 2010. Mr. Rajan Asirwatham was the Senior Partner and Country Head of KPMG from 2001 to 2008. Further, he was the Chairman of the Steering Committee for the Sustainable Tourism Project funded by the World Bank for the Ministry of Tourism. Mr. Asirwatham, is a Fellow Member of The Institute of Chartered Accountants of Sri Lanka. He was also a Member of the Presidential Commission on Taxation, appointed by His Excellency the President, a Member of the Ceylon Chamber of Commerce Advisory Council and a Member of the Council of the University of Colombo. He also serves on the Boards of a number of companies amongst which are Ceylon Tea Services PLC, Aitken Spence PLC , Dankotuwa Porcelain PLC, Aitken Spence Hotels PLC, Royal Ceramics PLC and Valibel One PLC. He also serves as a Director of many unlisted companies.

4. R.S. Captain Director

Appointed to the Board on 10th March 2008. Mr. Captain is an entrepreneur and investor in Sri Lankan corporate sector, bringing with him a wealth of knowledge and over 15 years of business experience in a range of manufacturing sectors. His current business interests range from paints, garments, industrial gloves, cutting and polishing diamonds, plastics and other packing material. He is the co-founder of Asia Stock Brokers, Asia Capital, Dutch Lanka Trailers, Asia Siyaka and Asian Alliance. He is also a Non-Executive Director of Hatton National Bank PLC and many other unlisted companies. Mr. Captain was educated at the University of Miami, Florida, USA.

5. S.M. Enderby Director

Appointed to the Board of Directors on 11th April 2013. Mr Enderby has a long and successful track record in the private equity space with Actis, a leading global emerging markets fund. During his career, he has worked for Actis in UK,

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Uganda, Swaziland, Sri Lanka and most recently in India, finally retiring as an Actis Partner in 2011. He has led multiple successful private equity transactions in Sri Lanka, including South Asia Gateway Terminals, Ceylon Oxygen and Millenium Information Technologies.

He has served on the Boards of many leading businesses in India and Sri Lanka including John Keells Holdings PLC, Lion Brewery PLC and Punjab Tractors.

He joined Hemas Holdings PLC in 2013 to head up the Group efforts in merges, acquisitions and strategy and in 2014 was appointed the Group CEO. He is also a Director of Serendib Hotels PLC and J L Morison Son & Jones (Ceylon) PLC.

He holds a Masters of Development Studies from the University of Melbourne, BSc (Econ) Hons. in Economics and Accounting from Queen’s University, Belfast and is also a member of the Chartered Institute of Management Accountants – UK.

6. M.P. Jayawardena Director

Appointed alternate Director to ICI Nominee Director on 21st May 2002, thereafter as a Director on 25th October 2008. A Fellow of The Institute of Chartered Accountants of Sri Lanka and Certified Professional Managers. He is the Chairman of Lanka Rating Agency, Deputy Chairman, Commercial Bank of Ceylon PLC and Non-Executive Director of Keells Food Products PLC, EAP Holdings PLC and a number of other unlisted companies in the CIC Group. Served at Zambia Consolidated Copper Mines Limited for 13 years and held several senior positions including Head of Treasury. He is also the Deputy Chairman of the Executive Council of The Sri Lanka Institute of Directors.

7. K.B. Kotagama Director

Appointed to the Board of Directors on 9th November 2014. Mr. Keerthi Kotagama is a professional Executive in the Agriculture & Business Management fields. He obtained his BSc in Agriculture (Hons) from the University of Peradeniya, Sri Lanka and Master of Business Administration (Finance & Management of Technology) from the Asian Institute of Technology, Thailand.

Presently, Mr. Kotagama is the Managing Director/CEO of CIC Agri Businesses (Pvt) Limited since January 2006.

Mr.Kotagama has been awarded and recognised for his professional services and contributions by several local and international organisations. This includes the Responsible Business Leader Award 2012, presented by the Enterprise Asia, Malaysia and the Outstanding Entrepreneurship Award 2012, presented by the Enterprise Asia, Sri Lanka.

8. Prof. P.W.M.B.B. Marambe Director

Appointed to the Board of Directors on 30th June 2009. Prof. Buddhi Marambe is currently the Director of the Agriculture Education Unit (AEU) of the Faculty of Agriculture, University of Peradeniya. Being the former Dean of the Faculty of Agriculture and the former Head of the Department of Crop Science, Prof. Marambe has been actively involved in and contributed significantly to the betterment of the agriculture education, research and development programmes at national and regional levels. He is the Chairman of the National Experts Committee on Climate Change Adaptation (NECCCA), Chairman of the National Invasive Species Specialist Group (NISSG) and a Member of the National Bio-Diversity Experts Committee (NBDEC) of the Ministry of Mahaweli Development and Environment, Member of the Sectorial Committee on Agriculture, Chairman of the Working Group on Pesticides of the Sri Lanka Standards Institute (SLSI), and a Member of the National Plant Protection Committee (NPPC) of the Sri Lanka Council for Agriculture Research Policy (SLCARP).

9. Dr. R.C.W.M.R.D Nugawela Director

Appointed to the Board of Directors on 9th November 2014. Dr. Devapriya Nugawela is currently the Chairman/Managing Director of Link Natural Products (Pvt ) Ltd. He graduated from the University of Ceylon with an Honours degree in Chemistry and won a British Government postgraduate scholarship to pursue postgraduate studies in UK. He obtained the Ph.D.degree from the University of Manchester. He also has a MBA from the University of Colombo.

Dr. Nugawela pioneered the production of quality essential oils, herbal health care products and Ayurveda pharmaceuticals for export and domestic market as the founder Managing Director of Link Natural Products (Pvt) Ltd in 1982.


Dr. Nugawela was a past Chairman of Spices & Allied Products Producers & Processors Association of Sri Lanka and a Member of the Board of Management of the Postgraduate Institute of Management of the University of Sri Jayewardenepura.

Dr. Nugawela is a member of the Executive Council of International Federation of Essential Oils and Aroma Trade (IFEAT) and is the Honorary Consul for the Republic of Zambia.

10. A.V.P. Silva Director

Appointed to the Board of Directors on 9th November 2014. Mr. A V P Silva is a Fellow Member of the Institute of Chartered Accountants (FCA) and also a Fellow Member of the Association of Accounting Technicians of Sri Lanka (FMAAT). In addition, he has the Certificate of Professional Study (Project Analysis) from Arthur De Little Management Education Institute, USA and the Executive Program on Corporate Management (EPCM) from The Association for Overseas Technical Scholarship (AOTS) Japan.

At present Mr. Silva is the Managing Director/CEO of CIC Feeds (Pvt) Ltd., CIC Vetcare (Pvt) Ltd., CIC Poultry Farms Ltd. and CIC Bio Security Breeder Farms Ltd. He is also a Director of Chemanex PLC, Chemanex Adhesives (Pvt) Ltd., Crop Management Services (Pvt) Ltd. and CAL Exports Lanka (Pvt) Ltd. He is also a Non-Executive Director of Asia Broadcasting Corporation Private Limited.

11. D.S. Weerakkody Director

Appointed to the Board of Directors on 12th February 2015. Mr. Dinesh Weerakkody is Chairman of HR Cornucopia Lanka Ltd. He was the former Chairman of Commercial Bank of Ceylon PLC and of the Employees Trust Fund Board of Sri Lanka and a Director of DFCC Bank. He serves and had served in a number of government and private sector boards. He is also a Vice President of the International Chamber of

Commerce, Sri Lanka Chapter, a Council member of the Employers’ Federation of Ceylon and the Institute of Directors of Sri Lanka.

Mr. Weerakkody was also an Advisor to the Prime Minister of Sri Lanka from 2002 to 2004 and has served in many Cabinet Sub Committees and national level committees on economic affairs, international affairs and labour management.

Mr. Weerakkody is a Graduate in Business Administration, a Fellow of the Chartered Institute of Management Accountants, UK, Fellow Member of the Certified Management Accountants of Sri Lanka, Professional Member of the Singapore Human Resource Institute and has obtained an MBA from the University of Leicester, England.

He has received extensive leadership, HR and management trainings in the UK, USA, France, Japan, Singapore and India. Mr. Weerakkody is currently a Director of many private sector Boards including GlaxoSmithKline Sri Lanka, Ceylon Tobacco PLC, Hemas Holdings PLC, Access Engineering PLC and Director/Advisor of Cornucopia Bangalore, India.

12. Ms P.D.S. Ruwanpura Company Secretary

An Associate of the Chartered Institute of Management Accountants – UK and holds an MBA from the Postgraduate Institute of Management (PIM), University of Sri Jayewardenepura. She is also a Director of many unquoted subsidiaries of the CIC Group.

Board of Directors

21

Management Team

S.P.S. Ranatunga Managing Director/CEO

K.B. Kotagama Managing Director (CIC Agri Businesses)

W.A. Assiriyage Managing Director (CIC Cropguard)

A.V.P. Silva Managing Director (CIC Feeds)

Dr. D. Nugawela Chairman/CEO (Link Natural Products)

G.F.C. De Saram Managing Director (Akzo Nobel Paints)


A. MapalagamaManaging Director (Chemanex)

P.D.S. Ruwanpura CFO

W.S. PremakumarDivisional Director (Consumer & Healthcare)

C.P. Wegiriya Director (CISCO Speciality Packaging)

D. Mutugala Divisional Director (Industrial Chemicals)

I. Gunawardena Divisional Director (Crop Solutions)

Management Team

23

Creating Value for Our Stakeholders

We believe our businesses exist to fulfil market needs and many of them support the country’s socio economic progress addressing fundamental needs of our people. We collaborate with a diverse group of stakeholders to create value through mutually beneficial relationships.

Our Inputs CIC Business processes

Our Products Reaching Customers

Our Outputs

Financial CapitalShareholder EquityRs. 7,121 mnDebt Rs.10,395 mn

Manufactured CapitalCapex Rs.10,611 mn

Intelectual capital

Human & Social CapitalEmployees 1,952

Strategic PartnersSuppliersDealersOutgrowers

Environment CapitalLand 440 acresWater 6,136 M3

Raw MaterialsEnergy 12,543.90 Gj

Governance

Strategy

Stakeholder Engagement

Purposeful Innovation

Supply chain management

Customer Service

Quality Assurance

Talent Management

Financial Planning

Smooth logistics

Agriculture & Livestock Own OutletsRetailWholesaleDealer NetworkB2B Customers

Financial ImpactReturn to ShareholdersRs. 284 mnInterest paid to providers of debt capitalRs. 723 mnProducts sold through distributor network Rs. 20,101B2B Rs. 3,481mn

Payments to suppliersRs. 19,069 mnTaxation 830 mnOther Regulatory Payments

EmissionsCO2 EquivalentsSolid WasteEffluentsDischarge quality

Consumer & Pharmaceuticals

Industrial Raw materials, Packaging& Construction


Stakeholder Identification & Determining Material IssuesOur businesses engage with a number of stakeholders in creating value for the Group and we also create value for other stakeholders in the process. Consequently our activities impact several groups of stakeholders and we seek to conduct business in a manner that balances the diverse interests and concerns of these key stakeholder groups. Key stakeholder groups are defined as those whose activities directly impact our stock of capitals and those whose stock of capitals is directly impacted by our activities. Key stakeholder groups identified in this manner are as follows:

Our/Their Impact Engagement Mechanisms Frequency of Engagement

Cust

omer

s

Customers are the primary focus of the Group as their perception of value drives sustainable growth. High levels of engagement are necessary to understand their requirements and identify changing trends and preferences.

B2B Customersa. Relationship managementb. Customer surveys

Farmersc. Farmer Education Programmesd. Retail customers

Market surveyse. Retail stores Juiceez and Fresheez

a. Continuousb. Monthly and quarterlyc. Continuousd. Continuous e. Continuous

Empl

oyee

s

Employees implement business strategy and drive business growth.

a. Open door policyb. Performance appraisalsc. Employee Opinion Surveysd. Employee Newsletterse. Formal & Informal Team Building Sessionsf. Structured Review Processesg. Worker management committees?

a. Continuousb. Annualc. Bi Annuald. Quarterlye. Ad-hocf. Monthlyg. Bi Annual

Supp

liers

Suppliers are key to our supply chain as we rely on high quality inputs from them to our business processes.

• Relationship management using a wide array of media including visits to customer premises and hosting them at our offices

• Farmer education programmes

Continuous

Inve

stor

s Investors provide financial capital for our business needs in expectation of sustainable growth and returns.

• Interim Financial statements• Annual Report• Press releases• Notifications to CSE

• Quarterly• Annual• As required• As required

Gov

ernm

ent

The government impacts many aspects of our business through policy direction, legislation and regulation.

• Making our expertise available to the government for consultations on agriculture and livestock policy

• Active engagement with central government officials and local government officials on numerous activities

• Representations to government through Chambers of commerce

• Regulatory returns

Ongoing

Com

mun

ity

We recognise that our actions impact communities and we strive to ensure that overall, our impact is positive and that any negative impacts are identified, measured and controlled to minimise the impact.

We engage with communities in our day to day work and our patronage is solicited by community leaders for a variety of causes.

On going

Creating Value for Our Stakeholders

25

14 71

98

3 10

2

1311

12

4 5 6

Sign

ifican

ce to

Sta

keho

lder

s

Significance to Group

1. Economic performance 6. Water 11. Occupational health and safety

2. Procurement practices 7. Emissions 12. Local communities

3. Market presence 8. Effluents and waste 13. Customer health and safety

4. Materials 9. Employment 14. Product and service labelling

5. Energy 10. Compliance

Material issues are determined by identifying the various aspects of our business that impact our value creation processes and prioritising based on its significance to the group and its stakeholders as summarised below:

1. Identify factors impacting our ability to create value

2. Evaluate the probability of occurrence and severity of impact on company and key stakeholder

3. Prioritising material issues

4 Determine reporting boundaries

Accordingly, the material issues identified are given below


Enterprise Governance

Good Corporate Governance practices are not just a concern for the Board but it is at the heart of everything that we do at CIC. It is the system by which a Company is directed, controlled and managed. At CIC, the Corporate Governance Framework guides our Group and drives towards progress by way of developing and implementing appropriate corporate strategies. The approach to governance is predicated on the belief that there is a link between quality of governance and the creation, enhancement and sustenance of long-term shareholder wealth creation, whilst safeguarding the rights. In developing the Corporate Objectives, we have committed to the highest level of governance and strive to foster a culture that values and rewards ethical standards, personal and corporate integrity and mutual respect. The Board of Directors, led by the Chairman, is responsible for the governance of the Group and reviews and suggests improvements to policies to provide transparency and accountability.

All employees, senior management and the Board of Directors are required to embrace this philosophy in the performance of their official duties and in other situations that could affect the Group’s image and it is the duty and the responsibility to uphold and act in the best interest of the company and its stakeholders in fulfilling its stewardship obligations.

While referred to in detail in subsequent sections of this Annual Report, the Group’s governance philosophy is practiced in full compliance with the following Acts, Rules and Regulations;

• Companies Act No. 7 of 2007

• Listing Rules of the Colombo Stock Exchange

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

Assurance Internal Governance Structure

Companies Act No 07 of 2007 External Audit Shareholders

Audit Committee Internal Audit

Nominations Committee

Group Risk Committee

Human Capital & Compensation

Committee

Board of Directors

CIC Group Company Board of Directors

Group Management Committee

Listing rules of the CSE Internal Controls

Code of EthicsCode of best practice on corporate

governance issued jointly by SEC and

ICASL

Appoint

Appoint

Appoint

Appoint

Appoint

Reports

Regulatory Framework

Corporate Governance Framework

27

The table below demonstrates the manner and the extent to which the CIC Holdings PLC adheres to the Code of Best Practice on Corporate Governance issued by The Institute of Chartered Accountants of Sri Lanka. The requirements of the Code are set out in the first column of the table below:

Code of Best Practice on Corporate Governance

Company’s Adherence

A – Directors

A. 1 - The BoardCIC Holdings PLC is headed by an effective Board of Directors with local and international experience and comprises of the Chairman and ten Directors. All the Directors are professionals who have acquired a wealth of experience and have proven ability in the fields of Management, Marketing, Finance, Legal, Human Resource and Agriculture. The Board gives leadership in setting the strategic direction and establishing a sound control framework and is accountable for the governance of the Company. The Board’s composition reflects sound balance of independence and anchors shareholder commitment.

Holding of Regular Board Meetings(Principle A. 1.1)

The Board meets once in two months to review the performance of the Company and Group and take strategic decisions or even more frequently if the necessity arises. The Board met eight times during the year. Scheduled Board and Committee meetings were arranged well in advance and all Directors were expected to attend each Board meeting. Any instance of non-attendance at Board meetings were generally related to prior business, personal commitments or illness. Details of the meetings and attendance of the members are given on page 43.

Role of the Board(Principle A. 1.2 )

The Board is responsible to the shareholders for creating and delivering long term sustainable shareholder value. The Company has a formal schedule of matters as it is necessary given the scale, nature and complexity of the businesses concerned for –

• Deciding, formulating, implementation and review of business strategy

• Ensure effectiveness of the systems to secure integrity of the information, internal controls and risk management

• Ensure compliance with legal & regulatory requirements and ethics

• Approval of budgets, corporate plans, interim and annual Financial Statements for publication

• Deciding and approval of investments and divestments

• Reviewing HR processors with emphasis on ensuring availability of necessary skills, experience and knowledge by the CEO and senior Management team to implement strategy and top management succession planning.

• Ensure all stakeholder interests are considered in corporate decisions.

• Ensuring that the Company’s values and standards are set with emphasis on adopting appropriate accounting policies and compliance with financial regulations.




Compliance with Laws of the country as applicable to the business and procedure to obtain independent professional advice.(Principle A. 1.3)

The Board collectively and Directors individually, act in accordance with the laws of the country, as applicable to the business enterprise. The Board of Directors ensures that procedures and processes are in place to ensure compliance with all applicable laws and regulations. The Board obtains professional advice from external independent parties at the expense of the Company. During the year under review, professional advice was sought on various matters including, employee satisfaction survey, legal, tax and accounting aspects, engineering, architectural, actuarial valuation etc.

Company Secretary(Principle A. 1.4 )

All Directors have access to the advice and services of the Company Secretary as necessary. A Chartered Management Accountant with an adequate experience functions as the Secretary of the Board. She ensures that proper Board procedures are followed and the relevant rules, regulations and requirements are complied with which are relevant to them as individual Directors and collectively to the Board. The Articles of the Company specify that the Board may at their discretion remove the Company Secretary.

Independent Judgment of Directors (Principle A. 1.5)

Directors are required to bring an independent judgment to bear on decisions of the Company. Their duties are to be performed without any influence from other persons. The Board promotes an environment whereby challenging contribution from the Non-Executive Directors are welcomed and encouraged. The Directors are not a party to any decisions made on areas of personal interests. Transactions of the Directors and their family members (arm’s length basis) with the Company are required to be disclosed.

Dedication of Adequate Time and Effort by the Directors(Principle A. 1.6 )

Board meetings are held once in two months. Sufficient time is dedicated at every meeting to ensure all responsibilities are discharged satisfactorily.

Procedures exist to ensure that Directors receive timely information before each meeting with a clear agenda and papers within guidelines on content and presentation. Directors dedicate sufficient time before a meeting to review Board papers and call for additional information and clarification and to follow up on issues.

Training for the Directors(Principle A. 1.7)

The Directors are provided with adequate relevant training opportunities for continuous development. Expert advice is sought from external parties when there are major changes affecting the Company. Every Director is aware of the need for continuous training and expansion of the knowledge to effectively perform their duties.

A. 2 - Chairman and CEOThere is a clear division of Responsibilities in conducting the business of the Board and the day-to-day operations in order to ensure a balance of power and authority. The Chairman is responsible for leading, directing and managing the Board to ensure that it operates effectively and fully discharges its legal and regulatory responsibilities. CEO’s role is primarily to manage the day-to-day operations of the Company.

A decision to combine the posts of Chairman and Chief Executive Officer in one person should be justified and highlighted.

(Principle A. 2.1)

The position of the Chairman and the CEO are separated, preventing unfettered powers for decision making in one person

The Chairman and the CEO have been identified on page 16 of the Annual Report.


29



A. 3 - Chairman’s RoleThe Chairman is responsible for leading, directing and managing the Board to ensure that it operates effectively and fully discharges its legal and regulatory responsibilities. He ensures good Governance and effective discharge of Board functions by the Board Members at all times and implementation of decisions taken.

Conducting Board Proceedings in a Proper Manner(Principle A. 3.1)

The Chairman leads the Board and manages the business of the Board while taking full account of the issues and concerns of the Board and ensure, inter-alia, that;

• the effective participation of both Executive and Non-Executive Directors are secured and views of Directors on issues under consideration are ascertained.

• all Directors are encouraged to make an effective contribution, within their respective capabilities, for the benefit of the Company.

• a balance of power between Executive and Non-executive Directors is maintained.

• the Board is in complete control of the Company’s affairs and alert to its obligations to all shareholders and other stakeholders.

• the new Board members are given appropriate induction.

• approving the agenda for each meeting prepared by the Board Secretary.

• the Board members receive accurate, timely and clear information.

• regular meetings, the minutes of which are accurately recorded and where appropriate include the individual and collective views of the Directors.

• the process for self-assessment of the Board from its members and uses the meaningful feedback to further improve the effectiveness of the Board.

A. 4 - Financial Acumen

The Board comprises of members having sufficient financial acumen and knowledge. There are three senior Chartered Accountants and two Chartered Management Accountants who provide guidance on the financial matters.

A. 5 - Board Balance

There should be a balance of Executive and Non-Executive Directors so that no individual or small group of individuals can dominate the Board’s decision-taking. The Board of CIC comprises of one Executive Director and ten Non-Executive Directors. Of the Non-Executive Directors, five members are Independent Non-Executive Directors. The composition ensures the inability of individuals or small groups to dominate the decision making of the Company.

Presence of Non-Executive Directors

(Principle A. 5.1)

The Board comprises of one Executive Director and ten Non-Executive Directors.

Independent Non-Executive Directors(Principle A. 5.2)

Five of the ten Non-Executive Directors are Independent which is above the minimum prescribed by the code, which is two or one-third of the Non-Executive Directors appointed to the Board whichever is higher. One Independent Non-Executive Director has exceeded the stipulated period of service. However, the Board of Directors of the Company has taken all other matters into consideration and has considered the said Director to be independent.




Independence of Non-Executive Directors (Principle A. 5.3)

All Independent Non-Executive Directors are independent of management and free of any business or other relationship that could materially interfere with or could reasonably be perceived to materially interfere with the exercise of their unfretted and independent judgment.

Annual Declaration (Principle A. 5.4)

Each Non-Executive Director submits a signed declaration of independence /non-independence against the specified criteria.

Determination of independence of the Directors (Principle A. 5.5)

The Board has determined the independence of Directors based on the declaration made of decided criteria and other information available. This is done annually.

The details are given on page 41.

Appointment of an Alternate Director(Principle A. 5.6)

No such appointment at present has arisen. When the situation arises the code would be complied with.

Senior Independent Director(Principle A. 5.7)

The position of the Chairman and the CEO are separated. Therefore the necessity has not arisen to appoint a Senior Independent Director.

Confidential discussions with Senior Independent Director(Principle A. 5.8)

The position of the Chairman and the CEO are separated. Therefore the necessity has not arisen to appoint a Senior Independent Director. However if the need arises Non-Executive Directors meet without the presence of the Executive Director.

Chairman’s meetings with the Non-Executive Directors(Principle A. 5.9)

Chairman in an informal manner meets the Non-Executive Directors without the Executive Director being present and formally meets if necessary.

Recording of concerns in Board Minutes(Principle A. 5.10)

Provision is available to record any issues in the minute book that could not be unanimously resolved.

A. 6 - Supply of InformationThe code requires the Company’s management to provide timely information to the Board with sufficient details to make informed and accurate decisions.

Management has an obligation to provide the Board with appropriate and timely information(Principle A. 6.1 )

Procedures exist to ensure that Directors receive timely information on a quarterly basis or even more frequently and a clear agenda and papers with guidance on contents and presentation for all meetings to facilitate effective conduct. The Board papers are usually sent to the Directors at least a week before the respective Board meeting and on urgent matters every effort is taken to provide the information as early as possible. Monthly accounts are circulated and key financial parameters and performance of each division /subsidiary are discussed and remedial action taken where necessary. Senior managers make presentations on the performance of the business in their charge. When the Board finds that the information provided is insufficient or not clear, they call for additional information which is provided.

Provision of information to Directors with adequate time to facilitate effective conduct of Board Meetings(Principle A. 6.2 )


31



A.7 - Appointments to the BoardA formal and transparent procedure should be followed for the appointment of new Directors to the Board.

The Nominations Committee assesses the suitability of the prospective nominees to the Board and recommends persons for consideration of the entire Board.

Availability of a Nominations Committee for Making Recommendations on all New Board Appointments(Principle A. 7.1)

Nominations Committee comprises of three Non-Executive Directors and the Company’s Managing Director attends by invitation. The Chairman of the Committee is the Non-Executive Chairman, details of which are given on page 122 of the Annual Report. The terms of reference for Nominations Committee are similar to one set out in Schedule A in this code.

Assessment of Board composition by the Nominations Committee(Principle A. 7.2 )

The Nominations Committee assesses the composition of the Board to ascertain whether the combined knowledge and experience of the Board, matches with the strategic demands facing the Company. The findings are taken into account when new appointments are considered.

Disclosure of Details of New Directors to Shareholders(Principle A. 7.3)

Names of the new Directors, a brief résumé, nature of his/her expertise in relevant functional areas, names of companies in which the Director holds directorships or memberships in Board Committees and independence are made available to the shareholders on their appointment by making announcements at the Colombo Stock Exchange. A profile of the Directors’ qualifications, experience and the other directorships are given on pages 18 to 20 of the Annual Report.

A. 8 - Re-election of DirectorsAll Directors should be required to submit themselves for re-election at regular intervals and at least every three years. All Non-Executive Directors should be appointed for a specific term and subject to re-election.

Non-Executive Directors should be appointed for specific terms, subject to re-election and to Companies Act provisions (Principle A. 8.1 )

In terms of the Articles of Association, all Directors are elected by the shareholders at the first Annual General Meeting immediately after their appointment. Thereafter, each year one-third of the Directors, other than the Managing Director retire by rotation. The Directors who hold office for the longest period retire and offer themselves for re-election with the recommendation of the Board of Directors. When they are re-elected at the AGM, immediately after their appointment, they have to come up for re-election in 3 years or a shorter period. The Managing Director neither retires by rotation nor is he counted to determine Directors retiring and coming up for re-election according to the Articles of Association. In terms of Section 210 of the Companies Act No. 07 of 2007, Directors reaching the age of 70 years are recommended for re-election on a substantive motion by a shareholder. The biographical details of the Directors who are subject to re-election at the forthcoming AGM are given in their profiles on pages 18 to 20 of the Annual Report in order to enable shareholders to make an informed decision on their election.

Articles of Association of the Company, should provide for, all Directors including the Chairman of the Board to be subject to election by shareholders at the first opportunity after their appointment, and to re-election thereafter at intervals of no more than three years. (Principle A. 8.2)




A. 9 - Appraisal of Board PerformanceThe Board should periodically appraise its own performance against the preset targets in order to ensure that the Board responsibilities are satisfactorily discharged.

The Board should annually appraise itself in the key responsibilities(Principle A. 9.1)

The Non-Executive Directors evaluate the Executive Directors through the Human Capital & Compensation Committee. This is a continuous process and is done through a healthy dialog. In addition, the Board appraisals are supported by the financial report, statutory status reports, internal audit reports, report from the Risk Committee, management letter from the External Auditors etc.

Further each member of the Board carried out a self-assessment of his own effectiveness as an individual as well as effectiveness of the Board as a team for the year 2014/15.

The Board should annually undertake a self-evaluation of its own performance and that of its Committees (Principle A. 9.2)

Disclosure of performance evaluation criteria (Principle A. 9.3)

Refer Human Capital & Compensation Committee report on page 121 of this report.

A. 10 – Disclosure of Information in Respect of DirectorsDetails in respect of each Director should be disclosed in the Annual Report for information of the shareholders.

Details in respect of Directors

(Principle A. 10.1)

The following information in relation to the Directors is disclosed in this Annual Report

• Name, qualifications and brief profile (pages 18 to 20 )

• The nature of his expertise (pages 18 to 20)

• Directors’ interest in contracts (page 195)

• Executive/ non-executive/ Independence (page 42)

• Names of listed companies each Director serves as a Director (page 18 to 20)

• Names of other companies each Director serves as a Director (page 18 to 20)

• Total Board seats held by each Director (page 42)

• Number of Board and Committee meetings held and attendance (page 43)

• Names of Committees in which the Director serves as the Chairman or a member (page 134)


33



A.11 - Appraisal of the CEOThe Board should be required, at least on an annual basis to assess the performance of the CEO

Setting of Annual targets for the CEO at the commencement of every fiscal year(Principle A. 11.1)

Prior to commencement of the financial year, the Human Capital & Compensation Committee sets objectives in consultation with the CEO based on long, short and medium term business targets (financial and non-financial) considering all stakeholder interest. These are confirmed by the Board. The personal goals set for the CEO are assessed annually by the Human Capital & Compensation Committee and the assessment is ratified by the Board. The CEO is responsible to provide the Board with explanations for any adverse variances together with actions to be taken.Performance of the Chief

Executive Officer should be evaluated by the Board at the end of each fiscal year (Principle A. 11.2)

B - Directors’ Remuneration

B.1 - Remuneration ProcedureThe Company should have a formal and transparent procedure for developing policy on executive remuneration and fixing the remuneration packages of individual Directors. No Director is involved in deciding perquisites to themselves. The Human Capital & Compensation Committee reviews the remuneration policy, makes recommendations and provides guidance on implementation. Remuneration levels based on the qualifications and experience are designed to attract, retain and motivate the staff who has made contributions to the corporate objectives.

Establishment of Remuneration Committee(Principle B. 1.1)

The Human Capital & Compensation Committee consists of four Non-Executive Directors and the Company CEO attends meetings by invitation. The Committee sets policies on remuneration, perquisites and allowances based on the market and industry.

Composition of the Remuneration Committee (Principle B. 1.2)

The Human Capital & Compensation Committee consists of four Non-Executive Directors who bring independent judgment on the issues. The chairman of the Committee is appointed by the Board.

The members of the Remuneration Committee(Principle B. 1.3)

A complete list of the members of Human Capital & Compensation Committee is given in the Report of the Human Capital & Compensation Committee on page 121.

Determination of remuneration of Non-Executive Directors(Principle B. 1.4)

Non-Executive Directors’ fees is linked to CEO’s remuneration. The Board believes that it is in line with the current market conditions. Shareholders of the Company approve the remuneration through approval of the Financial Statements

Consultation of the Chairman and/or CEO and access to professional advice(Principle B. 1.5)

The CEO of the Company attends the meetings by invitation. The Committee has access to obtain professional advice from external sources.




B 2 - Level and Make-up of RemunerationThe level of remuneration of both Executive and Non-Executive Directors should be sufficient to attract and retain the Directors. Remuneration of all staff including Executive Directors is based on the achievements of the Company and on individual achievements. A balance is maintained between fixed and variable percentage. Non-Executive Directors’ fees is linked to CEO’s remuneration.

Executive Director’s remuneration package(Principle B. 2.1)

The Human Capital & Compensation Committee provides the package needed to attract, retain and motivate Executive Directors of the required quality.

Comparison of remuneration with other companies(Principle B. 2.2)

Members of the Human Capital & Compensation Committee have expertise based on their association with a variety of companies. Chairman of the Committee is a HR specialist with international expertise. Improvement in performance has been factored into compensation structures. Surveys are conducted as and when necessary to ensure that the remuneration is competitive with those of comparable companies.

Comparison of remuneration with other companies in the Group(Principle B. 2.3)

The Human Capital & Compensation Committee reviews the policies concerning executive benefits among the Group Companies.

Performance related elements of remuneration of Executive Directors(Principle B. 2.4)

Performance based benefits have been designed by the Human Capital & Compensation Committee to ensure that the total earnings of the Executive Directors are aligned with the performance of the Company

Executive Share Options(Principle B. 2.5)

The Employee Share Option Scheme of the Company which is extended to the Executive Directors are offered as per the guidelines of the Listing Rules of the CSE where exercise price is based on the market price and it is uniformly applicable to all staff members (as per the individual category.). Details are given on page 194.

Executive Directors’ remuneration(Principle B. 2.6)

The Human Capital & Compensation Committee follows the provisions set out in Schedule E of the code as required.

Early termination of Executive Directors(Principle B. 2.7)

No special provision is made. Executive Directors are entitled to the gratuity payment in a uniform manner available to all employees of the Company.

Early termination of Executive Directors excluding poor performance as a reason(Principle B. 2.8)

Levels of remuneration for Non-Executive Directors(Principle B. 2.9)

Non-Executive Directors are paid a monthly fee and a compensation on a fixed basis for Committee participation. Market practices are followed.


35



B. 3 - Disclosure of RemunerationDisclosure of Remuneration to the Board as a Whole and Statement in the Annual Report on the Policy Adopted in Remuneration. The Report issued by the Human Capital & Compensation Committee is disclosed on page 121.

Disclosure of remuneration(Principle B. 3.1)

Names of the Directors comprising the Human Capital & Compensation committee are given on page 121.

Remuneration and fees paid to both Executive and Non-Executive Directors are given on page 165.

C - Relationships with Shareholders

C. 1 - Constructive use of the General Meeting and Conduct of General Meetings and building up relationships with Shareholders. The Company always encourages active participation of the shareholders at the General Meetings and solicits their views all the time, thus promoting a healthy dialogue.

Use of proxy votes at the General Meetings(Principle C. 1.1)

All proxy votes are counted and documented when a resolution is proposed at an AGM.

Separate resolution at the AGM on each substantially separate issue(Principle C. 1.2)

Each substantially different issue is proposed as separate resolution. The adoption of the Annual Report of the Board of Directors on the affairs of the Company and Financial Statements with Independent Auditors’ report is also proposed as a separate resolution.

Availability of Board Sub-Committee Chairmen at the AGM(Principle C. 1.3)

The Chairman of the Audit Committee, Chairman of the Human Capital & Compensation Committee and the Chairman of the Nominations Committee are generally present at the AGM.

Adequate notice of AGM(Principle C. 1.4)

According to the Companies Act No. 07 of 2007, the period for notice required to be given to the Shareholders is 15 working days. In addition, as per the Articles of Association of the Company, 3 more days have to be kept for posting.

Procedures governing voting at General Meetings(Principle C. 1.5)

A summary of the procedures governing voting at the Annual General Meeting is given on the Proxy Form.

C. 2 – Communication with ShareholdersThe Board should implement effective communication with shareholders.

A channel to disseminate timely information to shareholders(Principle C.2.1)

The Company uses many methods to disseminate information to the shareholders including the annual and quarterly financials, shareholder meetings, other company publications, information sent to CSE etc




Disclosure of policy and methodology of communication and implementation(Principle C. 2.2 & C.2.3)

The Company will focus on open communication and fair disclosure, with emphasis on integrity, timeliness and relevance of the information provided. The Company will ensure information is communicated accurately and in such a way as to avoid the creation or continuation of a false market.

Disclosure of the contact person for communication(Principle C. 2.4)

Details are given in the shareholder and investor section of this Annual Report.

Process to make the directors aware of issues and concerns of the shareholders and disclosing same.(Principle C. 2.5)

The Company Secretary shall maintain a record of all correspondence received and will refer such correspondence to the Board as applicable.

The Board will respond to all validly received shareholder correspondence and will direct the Company Secretary to send the response to the particular shareholder.

Person of contact for shareholder matters(Principle C. 2.6)

Person to contact in relation to shareholder matters is the Company Secretary and in the absence of her, the Managing Director.

Disclosure process for responding to shareholder matters(Principle C. 2.7)

Refer comment given to Principle C. 2.5

C. 3 – Major and material TransactionsDirectors should disclose to shareholders all proposed material transactions which would materially alter the net asset position of the Company, if entered into.

Disclosure on ‘Major Transactions’(Principle C. 3.1)

This will be practiced where relevant. The Company has not committed to such transaction as per Section 185 of the Companies Act No7 of 2007 during the financial year 2014/15 other than what is disclosed in the Annual Report.

D - Accountability and Audit

D. 1 - Financial ReportingThe Board should present a balanced and understandable assessment of the company’s financial position, performance and prospects.

The Board’s responsibility for statutory and regulatory reporting(Principle D. 1.1)

The Company gives high priority to timely publication of annual and quarterly results with comprehensive details enabling the stakeholders to make informed decisions. All publications comply with the statutory requirements, procedures laid down by the Colombo Stock Exchange and the Sri Lanka Accounting Standards issued by The Institute of Chartered Accountants of Sri Lanka. Mediums of publication include specified printed documents, newspaper advertisements and the website of the Company.

Annual Report should contain a Declaration by the Directors(Principle D. 1.2)

‘Annual Report of the Board of Directors on the Affairs of the Company’ containing the subject declarations are given on page 130.


37



Presenting a Statement Setting out the Responsibilities of the Directors for Financial Statements and a Statement by the Auditors about their Reporting Responsibilities(Principle D. 1.3)

The Statement of Directors’ Responsibility for Financial Reporting is given on page 137.

Independent Auditors’ Report on the Financial Statements of the Company for the year ended 31st March 2015 containing the Auditor’s reporting responsibility is given on page 139.

Management Discussion & Analysis (Principle D. 1.4)

This information is given under Business Review starting from page 8.

Declaration by the Board on the going concern of the company

(Principle D. 1.5)

This is given in the ‘Annual Report of the Board of Directors on the Affairs of the Company’ on pages 130 to 136.

Summoning an EGM to notify the Shareholders if Net Assets fall below One-Half of the Shareholders’ Funds(Principle D. 1.6)

There has not been any such situation in the past. However, if such situation arises, an Extraordinary General Meeting will be called for and shareholders will be notified.

Disclosure of related party transactions adequately and accurately(Principle D. 1.7)

Please refer note 43 on page 195 of this annual report for related party transactions.

D. 2 - Internal ControlsThe Board should have a sound system of internal controls to safeguard shareholders’ investments and the Company’s assets. The Board of Directors has overall responsibility for the Company’s systems of internal control and for reviewing its effectiveness. Systems have been designed to provide the Directors with reasonable assurance that assets are safeguarded, transactions are authorised and recorded properly and that material errors and irregularities are either prevented or detected within a timely period.




Reviewing of the Effectiveness of Internal Controls Periodically by the Directors and reporting thereon to the Shareholders(Principle D. 2.1)

The Board is responsible for the effectiveness of the internal controls. The system is designed to give assurance, inter-alia, safeguarding of assets, the maintenance of proper accounting records and the reliability of the 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 effectiveness of the internal control systems is periodically reviewed by the Board Audit Committee and major observations are reported to the Board. The internal audit function is outsourced to Messrs PricewaterhouseCoopers. The Board reviews the reports arising from the internal and external audits and monitors the progress of the Company by evaluating the actual results against the budgets and industry standards.

The Board having reviewed the system of internal control, is satisfied with the Group’s adherence to and effectiveness of these controls for the period up to the date of signing the Financial Statements.

Reviewing the need for internal audit function(Principle D. 2.2)

The Company has an Audit Committee and the Internal Audit function is outsourced to Messrs PricewaterhouseCoopers.

D. 3 - Audit CommitteeEstablish formal and transparent arrangements for considering how they should apply the financial, reporting and internal control principles and for maintaining an appropriate relationship with the Company’s Auditors

The Audit Committee among other functions review the operation and effectiveness of Internal Control systems, ensuring that a good financial reporting system is in place and is well-managed and monitor the internal and external audit functions. The internal controls within the Company are designed to provide reasonable, though not absolute, assurance to the Directors and assist them to monitor the financial position of the Group. The Company ensures cordial relationship with the External Auditors, Messrs KPMG.

Composition of the Audit Committee(Principle D. 3.1)

The Audit Committee comprises of four Independent Non- Executive Directors. The CEO and the CFO attend meetings by invitation. The full Report of this Committee including the terms of reference and specific tasks carried out during the year is given on page 120.

Duties of the Audit Committee (Principle D. 3.2 )

The duties of the Audit Committee include keeping under review the scope and results of the audit and its effectiveness and the independence and objectivity of the Auditors. During the year, provision of non-audit services to the Company by them was limited to tax consultancy work and other assurance reports.

Terms of Reference of the Audit Committee (Principle D. 3.3 )

The Terms of Reference of the Audit Committee have been agreed by the Board. The full Report of this Committee including the terms of reference and specific tasks carried out during the year is given on page 120.

Disclosures of the Audit Committee(Principle D. 3.4 )

Names of the members of the Audit Committee and the independence of the External Auditors’ are disclosed in the Audit Committee Report on page 120 on the recommendation of the Board, the shareholders have approved the rotation of the External Auditor in keeping with the principles of good Corporate Governance


39



D. 4 – Code of Business Conduct & EthicsThe Company should develop a Code of Business Conduct and Ethics for Directors and members of the Senior Management team.

Disclosure of code of Business Conduct and Ethics(Principle D. 4.1)

A comprehensive Corporate Governance and Business conduct and ethics have been adopted by the Board and is in compliance. Deviations from the agreed status is considered serious & addressed.

D. 5 – Corporate Governance DisclosuresThe Company should disclose the extent of adoption of best practice in Corporate Governance.

Disclosure of Corporate Governance(Principle D. 5 & 5.1)

In order to further strengthen the Good Corporate Governance practices already in the Company, latest best practices around the world are identified and where relevant, they are applied. Our Company is committed to the Code of Best Practice for Corporate Governance, issued by SEC, The Institute of Chartered Accountants of Sri Lanka and upholds a policy of accountability and public frankness. We maintain the fullest transparencies in all our business transactions. We have carried out transactions as per the laid down rules and regulations of The Institute of Chartered Accountants of Sri Lanka, the Colombo Stock Exchange, the Department of Exchange Control, the Department of Inland Revenue and other governing bodies.

The extent to which the Company has complied with the Good Corporate Governance Principles is given as above in this Report.

Shareholders

E – Institutional Investors

E. 1 – Shareholder VotingInstitutional Shareholders should make use of their votes and encouraged to ensure their voting intentions are translated into practice.

Communication with Shareholders (Principle E.1.1)

Company uses the Annual General Meeting as one mode of communication with the shareholders. Chairman ensures that all views are communicated to the Board as a whole. Voting of the shareholders is important in carrying out a resolution at the AGM. The Quarterly & the Annual Financial Statements are considered the main mode of communication with the shareholders. The reports are available on the CSE web site and the Company’s web site. Once the Financial Reports are released the shareholders who have concerns contacts the Chairman, Managing Director or CFO.

All price sensitive information and as per requirements of the corporate disclosures of Listing Rules, the Company has disseminated the information to public.

E 2- Evaluation of Governance DisclosuresInstitutional investors are encouraged to give due weight to all relevant factors drawn to their attention.

Due weight by the Institutional Investors(Principle E.2)

The institutional investors are encouraged to give due weight to all relevant matters relating to Board structure and composition.




F – Other Investors

F 1 – Investing/ Divesting Decision

Individual investors(Principle F.1)

Individual investors are encouraged to carry out adequate analysis or seek independent advice in investing or divesting decisions. The investors are provided information through company web site, CSE web site and other public announcements

F 2 – Shareholder Voting

Individual shareholder voting(Principle F.2)

Individual shareholders are encouraged to participate at the General meetings of the Company and exercise their voting rights.

G – Sustainability Reporting

G.1 – Principles of Sustainability ReportingSustainability reporting is the practice of recognising, measuring, disclosing and being accountable to internal and external stakeholders for organisational performance towards the goals of sustainable development in the context of the overall business activities and strategy of the entity and directed to the target stakeholders

Reporting of Economic Sustainability(Principle G.1.1)

Please refer pages 95 to 99 of this Annual Report

Reporting on the Environment(Principle G.1.2)


Reporting on Labour Practices(Principle G.1.3)


Reporting on Society(Principle G.1.4)


Reporting on Product Responsibility(Principle G.1.5)


Reporting on Stakeholder identification, engagement and effective communication(Principle G.1.6)


Sustainability Reporting to be formalised as part of the reporting process and to take place regularly. (Principle G.1.7)

Please refer page 84 of this Annual Report


41

1. In terms of Section 7.10.2 (b) of the Listing Rules of the Colombo Stock Exchange, each Non-Executive Director is required to submit a declaration annually on his independence/non-independence, against the criteria specified by the Colombo Stock Exchange. Accordingly, the Company has obtained declarations from the Non-Executive Directors. The related entries were made in the Interest Register during the year under review.

2. Listing Rule 7.10.4 requires the Board to make a determination annually, as to the independence or non-independence of each Non-Executive Director, based on such declaration and other information available to the Board.

On Perusal of the declarations the Board noted that -

(a) Mr. R. N. Asirwatham, Mr. S. M. Enderby, Prof. P.W.M.B.B. Marambe and Mr. D. S. Weerakkody are Independent Directors.

(b) The specified criteria categorise the following Directors as Non-Independent Directors:

Name of Director Specific criteria, with the application of which, the Director shall not be considered independent.

Mr. S. H. Amarasekera Served on the Board for a period exceeding 9 years.

Mr. R. S. Captain Director of another company which has a significant shareholding in the Company

Mr. M. P. Jayawardena Director of sub-subsidiaries of the Company

Mr. K. B. Kotagama Director of subsidiaries of the Company

Mr. A. V. P. Silva Director of subsidiaries of the Company

Dr. R. C. W. M. R. D. Nugawela Director of a subsidiary of the Company

3. According to Rule 7.10.3 (b), in the event a Director does not qualify as ‘Independent’ against any of the criteria, but if the Board, taking into account all the circumstances, is of the opinion that the Director is nevertheless ‘Independent’, the Board shall specify the criteria not met and the basis for its determination in the Annual Report.

4. When applying 7.10.4.the Board considered all related issues and the contributions made by such Directors, including the application of the following tests, to determine whether the Directors, whose names are given in (b) above could be considered independent.

The simple meaning of the word ‘Independent’ is “not depending on authority or control”, “self-governance”.

i. Whether a Director uses his position (eg. Long standing position or other influential position) to influence the Board to take decisions

• to his benefit or

• according to his wishes or

• against the wishes of the majority of the other Directors or

• against the interests of the Company.

ii. Whether he uses his position to prevent the other Directors from expressing their views and opinions at Board meetings or at any other discussions.

iii. Whether the views of the others (Directors, Professionals etc) are disregarded or ignored.

iv. Whether the matters are only referred to such Director for a decision, generally or as a practice, without referring these matters to other Directors.

v. Whether the other Directors feel that their presence and their contribution is immaterial.


vi. Whether the Directors are not given an opportunity to assess the performance of the Board, which includes the performance of every single Director.

vii. One reason for non-existence of team spirit is undue influence of one or more Directors. The test to be used is whether there is adequate team spirit in the Board.

viii. Whether there is a practice to refer matters, which can be dealt with at a lower level, to such Director.

ix. Whether third parties deal with such Director on matters which can be easily finalised by any other party at a lower level.

On the above basis, the Board determined that Mr S H Amarasekera, too, could be considered Independent

The total number of Board seats (excluding directorship in CIC) held by each director as at 31st March 2015, can be summarised as follows;

Name of the Director Type Shareholding Management Involvement/

Interest

Material Business

No. of Board Seats held

in listed Companies-

Executive


in listed Companies-

Non Executive


in Un-listed Companies-

Executive


in Un-listed Companies-

Non Executive

Mr. S. H. Amarasekera NED/ID No No No 7 12

Mr. S. P. S. Ranatunga ED Yes Yes No 2 18

Mr. R. N. Asirwatham NED/ID No No No 5 6

Mr. R. S. Captain NED Yes No Yes 1 16

Mr. S. M. Enderby NED/ID No No No 1 2 21

Mr. M. P. Jayawardena NED Yes No No 2 11

Mr. K. B. Kotagama NED No Yes No 1 10

Prof. P. W. M. B. B. Marambe NED/ID No No No - - - 1

Dr. R. C. W. M. R. D. Nugawela NED No Yes No - 1

Mr. A. V. P. Silva NED No Yes No 1 8

Mr. D. S. Weerakkody NED/ID No No No - 2 - 4

ED - Executive DirectorNED - Non-Executive DirectorID - Independent Director


43

The attendance of each Director at Main Board, Audit, Remuneration and Nominations Committee meetings is set out in the table below:

Main Board Committee

Audit Committee

Remuneration Committee

Nominations Committee

Committee/Composition Eligible to Attend

Attended Eligible to Attend



Attended

Mr. S. H. Amarasekera 8 8 5 5 2 2 1 1

Mr. S. P. S. Ranatunga 8 8

Mr. R. N. Asirwatham 8 7 5 5 2 2 1 1

Mr. R. S. Captain 8 8 2 2 1 1

Mr. S. M. Enderby 8 7 5 4 2 1

Mr. M. P. Jayawardena 8 7

Mr. K. B. Kotagama (appointed w.e.f. 9th November 2014)

5 5

Prof. P. W. M. B. B. Marambe 8 5

Dr. R. C. W. M. R. D. Nugawela (appointed w.e.f.9th November 2014)

5 5

Mr. A. V. P. Silva (appointed w.e.f. 9th November 2014)

5 5

Mr. D. S. Weerakkody (appointed w.e.f.12th February 2015)

3 2

Mr. E. F. G. Amerasinghe (retired w.e.f.2nd January 2015)

5 5 4 4 2 2 1 1

The disclosures above demonstrate the Company’s adherence to Section 7.10 of the continuing listing requirements issued by the Colombo Stock Exchange. This also indicates the level of conformance to the Code of Best Practice on Corporate Governance issued jointly by the Securities and Exchange Commission of Sri Lanka and The Institute of Chartered Accountants of Sri Lanka in 2013. Further, the Board of Directors to the best of their knowledge and belief is also satisfied that all statutory payments have been made on time and the other regulatory requirements are complied with.


Company’s Adherence with the Corporate Governance Rules as required by Section 7.10 of the Listing Rules of the Colombo Stock Exchange

Corporate Governance Rule Company’s Adherence

Directors

Non-Executive Directors(a) The Board of Directors of a listed company shall include at least -

(i) Two Non-Executive Directors; or

(ii) Such number of Non-Executive Directors equivalent to one-third of the total number of Directors whichever is higher

Complied with.

(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.

Complied with.

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

Not applicable.

Independent Directors

(a) Where the constitution of the Board of Directors includes only two Non-Executive Directors as mentioned above, both such Non-Executive Directors shall be ‘independent’. In all other instances two or one-third of Non-Executive Directors appointed to the Board of Directors, whichever is higher shall be ‘independent’.

Complied with.

As per the Board’s determination on independence of each Director, based on Directors’ Declarations, as provided by Section 7.10.3 (a) of the Listing Rules.

(b) The Board shall require each Non-Executive Director to submit a signed and dated declaration annually of his/her independence or non-independence against the criteria specified in the Code.

Complied with.

Disclosures Relating to Directors

(a) The Board shall make a determination annually as to the independence or non-independence of each Non-Executive Director based on such declaration and other information available to the Board and shall set out in the Annual Report the names of Directors determined to be ‘independent’.

Complied with.

Please refer page 41 of this Annual Report for details.

(b) In the event a Director does not qualify as ‘independent’ against any of the criteria set out in Section 7.10.4, but if the Board, taking into account all the circumstances, is of the opinion that the Director is nevertheless ‘independent’, the Board shall specify the criteria not met and the basis for its determination in the Annual Report.

Complied with.

(c) In addition to disclosures relating to the independence of a Director set out above, the Board shall publish in its Annual Report a brief résumé of each Director on its Board, which includes information on the nature of his/her expertise in relevant functional areas.

Complied with.

Please refer pages 18 to 20 of this Annual Report.

(d) Upon appointment of a new Director to its Board, the Company shall forthwith provide to the Exchange a brief résumé of such Director for dissemination to the public. Such résumé shall include information on the matters itemised in paragraphs (a) and (c) above.

Complied with.


45


Corporate Governance

Remuneration Committee

A listed Company shall have a Remuneration Committee in conformity with the following requirements:

(a) Composition

The Remuneration Committee shall comprise a minimum of -

(i) Two Independent Non-Executive Directors (in instances where a company has only two Directors on its Board); or

(ii) Non-Executive Directors a majority of whom shall be independent, whichever shall be higher.

Complied with.

Remuneration Committee of the Parent Company may be permitted to function as the Remuneration Committee of the subsidiary.

However, if the Parent Company is not a listed company, then the Remuneration Committee of the Parent Company is not permitted to act as the Remuneration Committee of the subsidiary. The subsidiary shall have a separate Remuneration Committee.

Complied with.

One Non-Executive Director shall be appointed as Chairman of the Committee by the Board of Directors

Complied with.

(b) Functions

The Remuneration Committee shall recommend the remuneration payable to the Executive Directors and Chief Executive Officer of the listed company and/or equivalent position thereof, to the Board of the listed company, which will make the final determination upon consideration of such recommendations.

Complied with.

(c) Disclosures

The Annual Report should set out the names of Directors (or persons in the Parent Company’s Committee in the case of a Group Company) comprising the Remuneration Committee, contain a statement of the remuneration policy and set out the aggregate remuneration paid to Executive and Non-Executive Directors.

The term ‘remuneration’ shall make reference to cash and all non-cash benefits whatsoever received in consideration of employment with the listed company (excluding statutory entitlements such as Employees’ Provident Fund and Employees’ Trust Fund).

Complied with.

Please refer page 121 of this Annual Report for the names of the Committee Members and Note 11 to the Financial Statements for the details on remuneration paid.

Audit Committee

A listed company shall have an Audit Committee in conformity with the following requirements:

(a) Composition

The Audit Committee shall comprise a minimum of -(i) Two Independent Non-Executive Directors (in instances where a company

has only two Directors on its Board); or(ii) Non-Executive Directors a majority of whom shall be independent, whichever

shall be higher.

Complied with.Please refer the ‘Board Audit Committee Report’ on page 120 of this Annual Report for the details.



In a situation where both the Parent Company and the subsidiary are ‘listed companies’, the Audit Committee of the Parent Company may function as the Audit Committee of the Subsidiary.

However, if the Parent Company is not a listed company, then the Audit Committee of the Parent Company is not permitted to act as the Audit Committee of the subsidiary. The subsidiary should have a separate Audit Committee.

Complied with.

One Non-Executive Director shall be appointed as Chairman of the Committee by the Board of Directors.

Complied with.

Unless otherwise determined by the Audit Committee, the Chief Executive Officer and the Chief Financial Officer of the listed company shall attend Audit Committee meetings.

Complied with.

The Chairman or one member of the Committee should be a Member of a recognised professional accounting body.

Complied with.

(b) Functions

Shall include –

(i) Overseeing of the preparation, presentation and adequacy of disclosures in the Financial Statements of a listed company, in accordance with the Sri Lanka Accounting Standards.

Complied with.

(ii) Overseeing of the Company’s compliance with financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting – related regulations and requirements.

Complied with.

(iii) Overseeing of the processes to ensure that the Company’s internal controls and risk management are adequate, to meet the requirements of the Sri Lanka Auditing Standards.

Complied with.

(iv) Assessment of the independence and performance of the Company’s External Auditors.

Complied with.

(v) To 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.

Complied with.

(c) Disclosures in the Annual Report

The names of the Directors (or persons in the Parent Company’s Committee in the case of a Group Company) comprising the Audit Committee should be disclosed in the Annual Report.

Complied with.

The Committee shall make a determination of the independence of the Auditors and shall disclose the basis for such determination in the Annual Report.

Complied with.

Please refer the ‘Board Audit Committee Report’ on page 120 of this Annual Report.

The Annual Report shall contain a report by the Audit Committee, setting out the manner of compliance by the Company in relation to the above, during the period to which the Annual Report relates.

Complied with.


47

Management Discussion and Analysis

Operating Environment

Global growth maintained pace at 3.4% in 2013 and 2014 marked by divergent growth in major economies. US economic growth was positive beating forecasts with 2.4% growth and a positive outlook supported by decreasing unemployment and increasing consumption. UK growth also gathered momentum recording 2.6% growth for 2014. Euro Area growth was disappointing at 0.9% although the outlook is more positive with the sharp decline in oil prices increasing consumption and net exports. Emerging markets and developing economies growth moderated to 4.6%, impacted by weak external demand, tightening of domestic policy and political uncertainities. Whilst oil importing countries are expected to benefit from the declining oil prices, it will increase the vulnerability of economies such as the Middle East and Nigeria where growth forecasts have been cut sharply. Despite the moderation, emerging markets accounted for 3/4 of global growth.

In 2015, global growth is expected to rise moderately, to 3.0% supported by emerging markets and developing countries growth is projected to gradually rise to 4.8% and 5.4% by 2017. Lower oil prices will contribute to diverging prospects for oil-exporting and -importing countries, particularly in 2015.

In 2014, the US Dollar appreciated whilst the Euro and other key currencies depreciated. Geopolitical risks increased

during 2014 mainly due to oil producing countries and mining dependent countries struggle to cope with declining global market prices.

Sri Lankan EconomyThe GDP of Sri Lanka grew at 7.4% in 2014, marginally higher than the growth in 2013 of 7.2%. The growth was driven by rapid expansion in the construction industry, which offset substantially weaker growth in agriculture. Per capita income grew to US$ 3,625 and trade deficit narrowed as a percentage of GDP from 11.3% in 2013 to 10.5% in 2014.

The Sri Lankan rupee remained relatively stable depreciating 0.26% against a strengthening US dollar but appreciating against the sterling pound by 5.65% and the Euro by 13.19%. Interest rates continued to be historically low, whilst inflation decreased averaging 3.3% for the year. 2015 growth rates will be affected by the political transition. Construction is expected to slow after prominent growth in recent years. Consumption is expected to pick up as a result of price reductions for food and fuel from the recent budget. The agriculture sector again will heavily depend on the weather patterns but the government-guaranteed prices for several agricultural products should boost production. Overall the economy is predicted to grow at 7% in 2015.


Industry EnvironmentThe overall industry sector growth was 11.4% accounting for 32.3% of the country’s GDP supported by construction of infrastructure projects and growth in apparel exports which, in turn, was supported by recovery in key export markets. Consumption remained the main driver of growth. The Service sector growth was stable at 6.5% accounting for 57.6% of GDP as increased tourist arrivals boosted earnings from this key sector. Performance of the agricultural sector was disappointing at 0.3% accounting for 10.1% of GDP as it was impacted by adverse weather conditions.

World population is expected to grow to 9 billion in 2050 and the food requirements are expected to grow by 30% in the next five years. Sri Lanka’s population is expected to grow to 24 million by 2050 and the food requirements are expected to grow tandem in the next five years. Per capita consumption of rice of 120 kgs per persons per annum and meats of 7.2kg per person per annum. The increased rates in growths are a positive outlook to the Group.

Financial ReviewThe financial performance of the Group is commendable as we achieved 3% growth in revenue and 2% growth in assets during the year. This was strongly supported by the stringent management processes implemented during the year which has resulted in closure of loss making lines, strict control over operational and administration expenses and management of accounts receivables.

RevenueThe Agricultural and Livestock Industry segment which contributes over 60% to the total revenue of the Group has recorded a growth of 5% compared to a negative of 5% in previous year. The growth was supported by investments in research and development of technology and the continued focus on farmers and growers to enhance their income and develop the industry. Although this segment was impacted by adverse weather conditions, sustained investments in supply chain management and technology enabled the segment to turn in a strong performance.

The Consumer and Pharmaceutical segment, the second highest contributor to total revenue of the Group has recorded growth of 25%, an increase from Rs. 4.71 Bn in 2013/14 to Rs.5.82 Bn in the current fiscal year. Revenue of its Pharmaceutical business which contributes to its segment revenue has increased by 64% and Link Natural the second

highest contributor to segmental revenue has increased its revenue by 15%.

Industrial raw material and the packaging sectors also contributed with a growth in revenue of 4% and 50% respectively.

Gross ProfitThe Company and the Group has maintained consistent Gross Profit Margins of 24% and 26% respectively.

Operating ExpensesThe Group has reduced its overall Operating Costs from Rs.4,395 Million in 2013/14 to Rs.4,303 Million in 2014/15, results of stringent management processes introduced during the year. The increased cost of distribution expenses is in line with the growth in revenue, specifically the Consumer and Pharmaceutical sector.

Further, the Group’s administration expenses have reduced by 8.7% from Rs.2,151 million in 2013/14 to Rs.1,964million in 2014/15. The cut down in loss making operating lines and the streamline of businesses has brought upon these reductions.


Construction Packaging material Agri and Livestock Consumer

and pharmaceuticals Industrial raw material Other

20142015 2013

Revenue for each segment Rs. Mn

49

EBITThe Group is pleased to highlight the turnaround in overall net profits during the year, from Rs.2,105 million net loss in 2013/14 to Rs.1,356 million profit. The effects of the re-structuring of the Group’s business and new business strategies in 2014/15 are sanctioned by these results.

The major contributor to the net profit of the Group has been from the Consumer and Pharmaceutical sector which is a 26% increase in contribution from previous year, from Rs.851 million loss to a Rs. 272 million profit. The Largest segment of the Group, the Agriculture and Livestock sector has increased its EBIT by 78.8% compared to previous year.

Finance CostsThe Group has consistently maintained an A/P2 rating assigned by RAM Ratings Lanka.

As in the past, interest bearing funds are mainly tied up in the subsidy driven fertilizer business, which possesses an inherent strategic importance in developing value added agricultural businesses. Delays in receiving the fertilizer-subsidy payments, the indications of financial pressure resulted in the re-structuring of business to identify and suspend loss making business lines and better management of its customers to reduce the risk. As a result the Group’s

exposure to subsidy has reduced from Rs.3.3 billion in 2013/14 to Rs.2.9 billion in the F/Y under review. The reduction in interest bearing borrowing and the low interest rates have resulted in a reduction in Finance cost of the Group by 46%, from Rs.1,297 million in 2013/14 to Rs.697 million in 2014/15.

Pre and Post Tax ProfitGrowth in Revenue by 3% , the consistency in Gross Profit Margins and the control of operating and administration expenses and the reduction in finance expenses have enabled the Group to make a turn-around from a Rs.1,126.8 Million net loss in 2013/14 to a Rs.1,040.8 Million Net profit during the year. This recovery showcases our Group managements’ commitment to it’s shareholders.

Shareholders’ FundsShareholders’ funds have grown by 6.1% strengthening the balance sheet as the Group performance turned around during the year.

DividendsEndorsing a successful financial year, CIC proposed a final dividend of Rs. 1.00 per share, which makes a cumulative annual dividend of Rs.3 per share. In 2013/14 no dividends were declared.

Capital ExpenditureThe Group has continued to look for growth opportunities. During the year CIC Feeds group has invested in a new Hatchery with state of the art equipment. A new Breeder

2014/15 2013/14 2012/13 2011/12 2010/11

EBIT

Construction Packaging material Agri and Livestock Consumer

and Pharmaceuticals Industrial raw material

Other

Industrial raw material

Packaging material Agri and

Livestock

Construction

Other

14%

0%

74%

1%

4%

17%

Finance cost

Consumer and pharmaceuticals


farm with improved technologies has been set up to cater to the additional Day Old Chick requirement of the new Broiler Farm established and thus the Processing plant capacities have also been enhanced accordingly. The investments, was also aimed at installing sophisticated machinery to reduce human handling in the production process to enhance the food safety and shelf life of product and includes features for environmental performance.

Cash flow and debt coverageThe Group’s cash flow from operating activities showed a strong position with improved working capital management. Further a significant decrease in financing cash flows has recorded a healthy net cashflow of Rs.1.8 Billion during the year under review.

Liquidity positionCapital StructureThe Groups’ Current Ratio and Quick Ratio are at acceptable levels when calculated excluding the temporary short term funding taken for long term investments.

Trade Receivables and Other Receivables have reduced by 5% compared to previous year mainly due to the re-focus of business lines. The collection of subsidy receivable has resulted in the reduction in other receivables and the stringent controls over trade receivables is evident from the reduced percentage compared to turnover.

The Group’s total debt has reduced by 2.3% compared to the previous year.

Return to ShareholdersDuring the year under review, the Group’s return on capital employed (ROCE) increased to 10% from 5% per cent recorded in the previous year.

2015 2014

Market price per share-V 76.00 45.50

Market price per share-NV 57.60 37.30

Market capitalisation (Mn) 6,800 4,133

No. of shares in issue (Mn) 94.77 94.77

Earnings per share 8.04 (10,25)

Dividend per share 3.00 -


51

Operational Review The Group operates under the following segments which have performed combined to turnaround the performance.

Agriculture and Livestock

Consumer and Pharmaceuticals

PackagingIndustrial

Raw MaterialsConstruction

CIC Holdings PLC

Key Business Lines Description Significance

Agriculture and Livestock

CIC Agri Businesses Group, CIC Crop Solutions, CIC Crop Guard, CIC Feeds, CIC Poultry Farms and CIC Vetcare are companies / SBU under this segment that works closely with farmers and growers to enhance their income and to develop the Agriculture and Livestock industry.

60.52% of Revenue54.77% Contribution37.82% of PBT60.95 % of Assets73.18% of Liabilities

Consumer and Pharmaceuticals

CIC Pharmaceuticals, Johnson & Johnsons, Link Natural, Medical Devices, Writing Instruments and CIC Lifescienses are divisions operating under this segment.

24.72% of Revenue27.24% of PBT14.97% of Assets13.11% of Liabilities

Packaging Cisco Speciality Packaging and other packaging related businesses operate under this segment. Specialising in manufacturing of PET Bottles and PET Preforms, Plastic containers & HDPE/PP containers suppliers, water bottles in Sri Lanka.


Industrial Raw Material

Chemanex, Industrial Chemical Division and Nalco are businesses operating under this segment that trades imported and locally produced chemicals and industrial intermediates, manufactures binders and adhesives for the coating, rubber, food and personal care sectors and in operators of water treatment plants / Chemicals.


Construction Akzo Nobel Paints is the main contributor to this segment which is a leading global paints and coatings manufacturer.




14.3Bn.

336Mn.

Rs.

Rs.

Turnover

Net Profit

Supply chains connect rural farmers to urbanconsumers facilitating the socio economic progress of rural communities with the guarantee of CIC quality.

Agriculture & LivestockThe Agriculture and Livestock sector is a key sector for the group catering to the country’s food security, nutrition and import substitution initiatives. Our businesses in this segment are market leaders with a portfolio of household brands that are easily recognised by our ultimate customers. Supply chains connect rural farmers to urban consumers facilitating the socio economic progress of rural communities with the guarantee of CIC quality. It comprises the following sub sectors:

Our businesses in this segment are market leaders with a portfolio of household brands that are easily recognised by our ultimate customers.


53


CIC Agri Businesses Group

CIC Feeds Group

Crop Solutions SBUCIC Cropguard


M.T.D. Wasantha – Dairy Farmer

I started working at the CIC Dairy farm in Hingurakkgoda when there only 10 to 15 cows and learned dairy farming while I was working there. Later on, I decided to set up my own herd of cows using the knowledge gained at CIC. Today, I have my own herd of cows which I own with my brother and we supply milk to CIC which is an additional source of income to my family apart from my regular employment. This has enabled us to improve our house which was a wattle and daub house to a strong structure and enabled my family to progress. I am very grateful to CIC for showing me the way to supplement my income and improve our lives.


The name CIC Feeds - has been synonymous with quality and expertise in the livestock industry maintaining long lasting relationships with small and medium scale poultry farmers

55

Feeds Agribusiness Crop Solutions Cropguard

Manufactures, formulates and supplies animal feed and day old broiler chicks and chicken. Also distributes renowned vetcare products

Agri Businesses have an extensive product range for the Agriculture industry, such as seed paddy, fertilizer, rice, fruit, vegetables, eggs, yoghurt, curd, etc which are marketed under the CIC brand name in local and international markets

Crop protection solutions catering to the management of weeds, insects, and diseases (ranging from organic and bio pesticides to synthetic chemicals), including plant stimulants and liquid fertilizers.

Formulates and markets pesticides to protect agricultural crops from pests and disease

Contribution to the Group (%)

60.52%

60.95%

Revenue

PBT

Total AssetsPerformance

2015 2014

Revenue 14,271.23 13,560.63PBT 538.22 (475.70)PAT 336.10 (914.97)Total Assets 16,009.22 15,063.42Total Liabilities 12,749.89 12,077.02

Sustained investments in supply chain management and technology enabled a strong performance with a PBT of Rs.538 mn.

37.82%


Climatic conditions have a strong impact on these businesses. The year started with inadequate water in reservoirs of the dry zone that delayed the cultivation. As a result, the Yala season cultivation was dropped by 30%. However the second half of the year was more favourable for cultivation with ample water and escalated farm gate prices for rice & vegetables.

The Agricultural and Livestock Industry sector recorded a top line growth of 5% compared to a negative 5.7% in 2013/14. This was supported by investments on research and development of technology, continued focus on farmers and growers to enhance their income and development of the industry underpinned by CIC’s relentless focus on quality. Whilst this segment was impacted by adverse weather conditions, sustained investments in supply chain management and technology enabled the segment to turn in a strong performance with a PBT of Rs.538 mn.

Operating EnvironmentFor seeds, the paddy seed market is estimated at Rs.4 bn whilst the vegetable seeds market is estimated at Rs.12 bn and forecast to grow in line with population and per capita income.

FeedsThe CIC Feeds cluster manufactures, formulates and supplies animal feed, day-old broiler chicks, processed and chilled chicken products and veterinary pharmaceuticals and feed additives. It has been synonymous with quality and expertise in the livestock industry maintaining long lasting relationships with small and medium scale poultry farmers and also operating as a large scale producer of broiler chickens, required for its own processing of chicken while providing animal health products to the sector.

Of this, nearly 90% will be coined with the poultry segment which is the least resource intensive animal with regards to land, water and conversion of cereals to protein. As poultry is also classified as a white meat which is a healthier option and it also has less religious strictures associated with it. Hence the outlook for CIC Feeds, CIC Poultry, CIC Vetcare and CIC Bio Security are positive as they all cater to the needs of poultry and dairy farmers in the country who rely on us to supply high quality feed, vaccinations and veterinary requirements. CIC is fast becoming a leading player in the processed chicken market and a company with its presence across the entire supply chain from breeder stock, hatching eggs to day-old-chicks, furthering to rearing broiler chicken and processing and distribution. The products are renowned for processed quality and traceability from an ISO 22000 certified plant.


Revenue - External Segment NP

2014/15 2013/14 2012/13 2011/12 2010/11

Agriculture and Livestock sector Rs. Mn

14,271,230 13,560,634

14,383,388 14,550,200 14,677,937

334,089

(509,788)

(100,219)

517,577

707,434

57

The Agricultural and Livestock Industry sector recorded a top line growth of 5% compared to a negative 5.7% in 2013/14, supported by investments on research and development of technology, continued focus on farmers and growers to enhance their income and development of the industry underpinned by CIC’s relentless focus on quality.

Sri Lanka’s consumption of chicken is at a relatively low level at 600 grams per month as per the most recent Household Income & Expenditure Survey 2012/13. Similarly consumption of eggs is also estimated at 9 per month per person. It is expected to rise in tandem with the increase in per capita income in line with world trends observed that rising incomes are accompanied by a trend of increasing meat consumption. The annualised per capita consumption of chicken has been estimated by FAO to be 7.2kg which is relatively a low number compared with 8.8 kg for Asia and 13.6 kg for the world indicating the potential for growth in this industry. Chicken is also the cheapest animal protein making this industry vital for improved nutrition. Chicken is price controlled by the government since 2008 fuelled by a shortage in supply due to rising demand.

Price control is an impediment to the growth of the poultry industry which impacts 75,000 farm families directly and around 1,000,000 livelihoods of people indirectly. Given the fact that all input products have been impacted by inflation and global price increases since fixing of the price in 2008 and revised as far back as in 2012. The fixed price appears overdue for revision in order to protect the livelihoods of those affected by the poultry industry.

Profitability of the Animal Feed, day-old-chicks, Processed Chicken and Veterinary Pharmaceutical segment was lower then the previous year as feed raw materials prices increased globally with soya bean meal reaching the highest recorded prices. Adverse weather conditions with floods and droughts adversely impacted poultry farming in the country affecting demand for day-old-chicks. We observed many farmers giving up poultry farming due to insufficiency of controlled price in 2014 and unless the controlled price is increased the self-sufficiency in Poultry products achieved over the years will be badly affected.

CIC Feeds started operation of a new hatchery during the latter part of the year with state of the art equipment and also commenced a new breeder farm with latest technology increasing breeder capacity. A new broiler farm increased the capacity of chicken rearing whilst the capacity of the processing plant was increased accordingly. New equipment installed to increase automation to reduce human handling enhances the food safety and shelf life of product. These investments have improved environmental performance by way of reduced emissions. The outlook for this sector is positive as the impact of these investments will be felt in 2015/16.

CIC Feeds Plant and CIC Poultry Processing plants are ISO 22000/HACCP certified and have received the Gold award for the ‘Extra Large’ category of the Livestock and Fisheries Sector at the National Business Excellence Awards 2009, the Gold award in the ‘Large Scale Producer’ category for 2008 and 2009 at the Ag-Biz Awards and the ‘Best Feed Manufacturer’ award for 2007.


Agri BusinessesCIC Agri Businesses manages over 10,000 acres of farmland supporting livelihoods of over 20,000 rural farmers and is poised for growth with the development of the North and East. It is the only company that manages the entire supply chain from seed to shelf and innovates from its research and development facilities which includes laboratories for soil, seed and tissue culture. CIC Agri Businesses innovations include high yielding and pest resistant seed varieties which serve to enhance the country’s land productivity contributing directly to the nation’s food security with a 30% market share in paddy seed. We have implemented strategies to increase market share in the fast growing vegetable seed market which is estimated to be 3 times the size of the paddy market working with globally renowned players in the field. These include marketing of Sakata Seeds Japan, Tokita Seeds Japan, Syngenta and Chia Tai who are leading innovators in the field as its exclusive distributor in the country. New products from these companies are tested in controlled environments at farms to assess the adaptability of these seeds to Sri Lankan conditions. A new variety of corn seed was introduced in to the market on completion of testing and new technologies such as seed coatings have been introduced to increase productivity. These measures have enabled us to increase market share up to 20% in the vegetable seed market and well positioned for aggressive growth. The sector also has a rice processing plant in Maho which markets the rice under the brand Gourmet Rice/Golden Crop which holds a premium position in the market. Strategies implemented which included a restructuring and improved focus on core business enabled a relatively quick turnaround of this segment to record a profit. Higher demand was observed for seeds due to adverse weather conditions which resulted in reduced use of informal seeds.

A state of the art yoghurt plant established in Dambulla produces CIC yoghurt with milk collected from a network of over 400 farms addressing the countries nutrition issues. In a relatively short time frame, CIC yoghurt has managed to capture 16% market share, effectively challenging well entrenched competitors in a market with a forecasted annual growth of 10-12% per annum. Financial performance was disappointing due to low milk production as farms were affected by foot and mouth disease although current production volumes increased over previous year. Government policy also plays a key role in determining the profitability of this segment and the November budget had an adverse impact with the price of raw milk price increasing by Rs.10 per litre and yoghurt price was decreased by Rs.3

squeezing margins. Marketing activities have increased to leverage the CIC strengths, a reputation for high quality and islandwide networks. Consequently, a dealer network covering the entire island is now in place and a focus on new product development has enhanced the attractiveness of this business segment despite policy constraints.

CIC Agri Businesses even though being severely impacted by the unpredictable changes in weather patterns has achieved a growth in revenue by 10%. The positive results are mainly due to continued focus in investments on research and development of technology and on farmers and growers to enhance their income and develop the industry.

The company is proud to boast about its research and development unit of hybrid rice paddy, the first ever private sector breeding program initiated in the country. Area allocated to breeding, selection and improving the paddy varieties in the field condition and the production of high quality CIC paddy varieties are amongst its processes. Under the Accelerated Breeding Program paddy varieties are grown in green houses to overcome environmental barrier and to cultivate three seasons.


Over 10,000 acres of farmland supporting livelihoods of over 20,000 rural farmers

59

The company expects a high growth in its dairy farms, specifically its yoghurt industry which has a year on year growth rate of 12% in the current year and is expected to grow by 16% in 2015/16.

Crop SolutionCIC’s Crop Solution is a leading supplier of crop protection solutions in Sri Lanka for the agricultural and foliar businesses for management of weeds, insects, and diseases ranging from organic and bio pesticides to synthetic chemicals, and also includes plant stimulants and liquid fertilisers.

Even with adverse weather conditions the business unit which contributes substantially to total segmental revenue. The growth was mainly due to the sales of its two flagship herbicide products “Solito” and “Profit”. The company is pleased to highlight that there has been minimum impact as a result of the banning of certain types of pesticides as the company was not marketing most of the these banned products. Further, in anticipation of banning of more of the pesticides products the company have already started registering alternative molecules to ensure minimum adversities.

The newly formed Lawn & Garden division, performed commendably during the year exceeding the expectations

CIC CropguardCIC Cropguard imports, formulates and markets agricultural crop pesticides, working closely with the farming community to formulate non-residual pesticides that work effectively against any pest or disease affecting the crop. Farmers are educated on the use of technology in agriculture and the safe, effective use of pesticides, enabling costs to be reduced and yields maximised. Cropguard’s suppliers comprise some of the world’s leading agrochemical companies and all pesticides are approved by the Registrar of Pesticides.

Performance was effected by adverse weather conditions in the first part of the year and by regulatory decisions to ban certain pesticides. The ban of Glyphosate made a severe impact to the sales volumes. However, the increase in sales in other product lines helped to sustain a reasonable growth in revenue of 10%.

The company is researching a number of new molecules to introduce new products to the market in the coming year which is expected to boost sales.

CIC FertiliserThe market for fertiliser is 826000 tonnes per annum, dominated by the state sector which accounts for approximately about 75% of the market. The private sector competes for a the remaining 25% amounting to 256k tonnes and CIC is the largest private sector player in the market with a market share of around 34%. A heavily subsidised sector, consumption patterns are highly influenced by government policy which varies from legislation to prevent abuse to

The company is proud of its research and development unit of hybrid rice paddy, the first ever private sector breeding program initiated in the country.


subsidies which lead to lengthy working capital cycles as payments are subject to delays. CIC has adopted a strategy of farmer education on the correct use of fertiliser, pesticides and weedicides in line with its sustainability policies and employs agricultural graduates for this purpose. Our partners are Dow Chemicals of USA and Syngenta of Switzerland who are reputed research based companies adhering to high standards of production. Consequently, we have access to the most environmentally safe products which have been introduced to the market during the year to address issues of public concern. The lower interest rate regime also played a key role as it enabled us to reduce interest costs on receivables from the government. Our focus is increasingly directed towards developing non subsidised segments of the market which demonstrates promising growth and is already turning in healthy profits with the added incentive of being mostly a cash based business.

CIC is the largest private sector player in the fertilizer market


CIC has adopted a strategy of farmer education in line with its sustainability policies and employs agricultural graduates for this purpose

61

OutlookOverall the Agriculture and Livestock segment performed creditably compared to previous year. The segment will focus on aggressive expansion of seeds, feeds and yoghurt while maintaining its market share in agro chemicals. Improved focus on these lucrative segments will facilitate economies of scale, innovation and optimal resource allocation to maximise the group’s potential to create value. Government policy plays a key role in determining profitability of this segment which directly impacts livelihoods of rural farmers and the socio economic progress of the provinces. Given the important role of this sector in the country’s progress, CIC’s market dominance in key segments and forecast growth rates makes this a sector a key asset in the group portfolio.



5.9Bn.

272Mn.

Rs.

Rs.

Turnover

Net Profit

Consumer & PharmaceuticalsConsumer & Pharmaceuticals caters to the needs of Sri Lankans focussing on supporting health and well-being of our people and also supporting the educational needs of the country. Our products are made available islandwide through a distribution network that has developed to rank amongst the top ten networks in the country. Many of our products are included in the monthly shopping lists of Sri Lankans by brand name and are trusted to deliver on the product promise. We are encouraged by the demand for our indigenous products from the Sri Lankan diaspora who have opened up new markets for this segment overseas as they continue to rely on our health and well-being products. This lucrative business segment comprises the following sub sectors:

Our products are made available islandwide through a distribution network that has developed to rank amongst the top ten networks in the country.


Many of our products are included in the monthly shopping lists of Sri Lankans by brand name and are trusted to deliver on the product promise.

63


Link Natural

Pharmaceuticals

Medical DevicesCIC Lifesciences

Writing InstrumentsJohnson & Johnson


“At Link Natural, we are passionate about perfection and accuracy in everything we do, with our focus on the highest standards of quality. The research facilities at Link Naturals are amongst the most advanced in the country and I am honoured to work alongside experienced mentors who are dedicated to their research to find solutions for common ailments.

On a personal note, I have received training. Our stakeholders are important to us, and we keep their best interests at heart to ensure we offer the best possible outcome, creating value and striving towards a sustainable future for all.”


The Company takes pride in its modern research anddevelopment facility and in maintaining uncompromisedstandards in total quality management

W. Jayasundara - R & D Scientist

65

Pharmaceuticals & Healthcare Writing Instruments Baby Care and Home Care

Link Natural - herbal healthcare, personal care and ayurvedic pharmaceutical products, oleo resins and essential oils.

Pharmaceuticals - markets and distributes pharmaceutical finished formulation in Sri Lanka.

Medical Devices - provides surgical theatre equipment for the medical care industry, 24 hour troubleshooting support.

CIC Lifesciense - manufactures antibiotics and imports analgesics, anti-ulcer drugs, diabetic drugs and cough expectorants.

Marketing of household brands Platignum and Chemifix.

Writing and coloring consumables pens offered under the brand “ CIAL” “Platignum” are manufactured by an Associate company, Colombo Industrial Agencies Ltd while Chemifix is the pioneer in the PVA based adhesive market.

Johnson & Johnson baby care range of products

Clean and Clear, and Stay Free.

Sector Contribution

24.72%

27.74%

14.97%

Revenue

PBT

Total Assets

Performance

2015 2014

Revenue 5,828.88 4,710.33PBT 394.76 (242.73)PAT 272.16 (850.59)Total Assets 3,932.74 3,511.50Total Liabilities 2,284.15 2,457.93

We are encouragedby the demand for our indigenous products from the Sri Lankan diaspora who have opened up new markets for this segment overseas


Operating EnvironmentConsumption is the main driver of growth in Sri Lanka and accounted for 78.9% of GDP and consumer confidence as measured by the Nielsen Consumer Confidence Index is at an all-time high touching 87 which was last seen only in December 2011. Reduction of fuel prices and tax reductions on a host of essential items by the new government has supported the increased confidence as consumers were able to purchase more products. The number of ayurvedic practitioners has also been growing in the country as more people turn to alternative medicine due to the increasing popularity of indigenous alternatives such as ayurvedic systems. Link Natural caters to the requirements of this growing sector with a wide range of commonly used remedies. The market for Baby care products and writing instruments is also a growing market with 9% of the population comprising pre-schoolers and 25% accounting for school going children.

Link NaturalEstablished In 1982, Link Natural Products (LNP) a knowledge based research oriented Company is driven by the challenging and inspiring Corporate Philosophy of providing innovative, safe and effective herbal products that are of exceptionally high international standards. This is achieved by effectively blending ancient Ayurvedic wisdom with modern science and state of the art technology.

The range of products of LNP include herbal healthcare products, general ayurvedic pharmaceuticals, personal care products and essential oils. LNP has successful household brands which include Link Samahan, Link Sudantha, Link enriched Paspanguwa and Link Kesha.

The Company takes pride in its modern research and development facility and in maintaining uncompromised standards in total quality management. LNP has a comprehensively integrated manufacturing facility which complies to ISO 9001, ISO 14001, GMP standards and HACCP for products.

All raw materials selected for the production process are chosen from approved supply sources or cultivated under the supervision of the Company. The manufacturing facility of LNP is a totally friendly “green complex” where “zero waste” is maintained with one of the most modern waste water recycling plants and energy regeneration from solid waste.

LNP creates a sustainable business while safeguarding the interests of all the stakeholders. A strong emphasis is placed upon caring for the community, employee responsibility and satisfaction, protection of the environment, satisfaction of customers and a very sound investor relationship. The First Aid Project to provide drinking water to the people in the North Central Province who were suffering from the draught was one of the premier projects undertaken during the year.

LNP continued to be recognised at several national forums. At the national awards for Science and Technology achievements (NASTA Awards)-2014, we were awarded a Certificate of Merit for excellence in multi disciplinary team efforts in the application of Science and Technology.

The year was marked by new investments, aggressive expansion and strict financial controls which helped in building up a better portfolio to the Company. The Company achieved encouraging results despite a challenging year due

Consumption is the main driver of growth in Sri Lanka and accounted for 78.9% of GDP and consumer confidence is at an all-time high which was last seen only in December 2011.


Revenue - External Segment NP

2014/15 2013/14 2012/13 2011/12 2010/11

Consumer & Pharma Rs. Mn

5,828,881

4,710,3344,433,407

5,275,081

3,945,177

266,441

(211,201)

(67,777)

61,071 132,998

67

to volatile market conditions. The turnover reflected a growth of 15% over the previous financial year.

The Profit after tax showed a growth of 63% over the previous year.

The adjacent land totaling in extent of four and a half acres was purchased by the Company in order to expand our present storage, production, laboratory and office facilities to support the growing demand for our products.

The Company hopes to meet the expectations of all the stakeholders with continuous innovation of new products meeting the highest international quality and technologically advanced manufacturing facilities.

CIC PharmaceuticalsCIC Pharmaceuticals is primarily involved in marketing and distribution of pharmaceutical finished formulation in Sri Lanka, representing world renowned manufacturers of both researched based and branded products.

Current years’ growth was exceptional with growth in revenue by 65% and PBT by 172% compared to previous year.

The company intends to continue its success in business by its investment on the cloud based sales force automation system where customer profiles are built to maximise the

promotional efforts on the understanding of customer expectations.

Medical Devices Provides surgical theatre equipment and comsumables for the medical care industry, 24 hour troubleshooting support, advice on upgrade decisions, regular monitoring of capital equipment usage and audits on the accuracy of results serving a range from private medical institutes to government hospitals to individual surgeons.

The company is also engaged in blood screening with state -of-the-art equipment used in many large and medium scale labs, in the island.

The year has been a successful one, with growth in turnover by 38% and PAT by 120%. The introduction of new homeostatic agents and the increase turnover of the existing products have contributed to the growth. The company expects to continue its growth rates in the following year by introduction of more products and continued service.

CIC Lifescienses.Acquired in year 2012 to locally manufacture antibiotics (own brands and generics) and import analgesics, antiulcer drugs, diabetic drugs and cough expectorants under own brand name from leading pharmaceutical manufactures.


With the government policy focusing on manufacturing pharmaceuticals in Sri Lanka the company sees wide opportunities in the future.

Writing InstrumentsThis segment showed a turnover growth of 60% over the previous year. The writing instruments are marketed under our own brand CIAL and also under the name of Platignum.

The segment future focus will be mainly on stationery products where necessary. steps have been taken to introduce our own brand of exercise books and stationery for office use.

Baby Care and Home CareJohnson and Johnson Sri Lanka continues to uphold its known reputation, providing customers with high quality product lines such as Johnson Baby, Clean and Clear, and Stay Free.

The business continued its growth during the year. The streamlining of distribution lines and the 100% increase of direct distribution lines have contributed to the growth. Also, the successful launch of the Johnsons Elite Program, the first ever trade loyalty program scheme contributed with growths of 23% in Average Revenue Per Outlet.

Johnson and Johnsons Baby was awarded with the Gold award for ‘Best International Brand in Sri Lanka’ at the SLIM Brand excellence award 2014.

Successful launch of the Johnsons Elite trade loyalty program


69

OutlookThe outlook for this segment is positive as consumer confidence has increased and the government policy direction appears favourable. Growth in per capita income and the forecast increase in disposable income as the impact of declining oil prices impact the market will support the growth of this segment. We will continue to innovate and develop our distribution networks to realise the business opportunities that exist in this rapidly evolving market segment.

The outlook for this segment is positive as consumer confidence has increased and the government policy direction appears favourable.


Industrial Raw materials, Packaging & Construction

3.5Bn.

453Mn.

Rs.

Rs.

Revenue

Profit after tax

Industrial Raw materials, Packaging & ConstructionThis segment deals with highly reputed brands such as Dulux, Pentalite, Glidden, CISCO, and Nalco.

These segments cater to the needs of the manufacturing sector, supplying their requirements of high quality raw material inputs in to industrial processes.


The Industry Sector has demonstrated healthy growthaccounting for 32.3% of GDP and 48.2% of GDP growth.

71

Chemanex

Industrial Chemicals Division

Cisco Speciality PackagingNalco Water Treatment

Industrial Raw materials, Packaging & Construction

Akzo Nobel Paints Lanka


C. Sandaruwan - Plant Operator

I was referred to Industrial Packaging by one of my uncles who served here for 25 years and recommended the organisation as a good employer. Joining as a casual worker, I was very happy when I was made permanent and was motivated to do even better as I received encouragement and training in an environment where our contribution is valued. The managers enhance our knowledge about work processes and the machines we work, explaining things to make sure we understand the reasons for their recommendations. As a responsible employer, Industrial Packaging ensures that we use the safety equipment provided and maintains a safe and pleasant working environment. The benefits are good and we have the opportunity to discuss our concerns. I have been with the company for 14 years and enjoy working here as part of a team that is empowered and trusted.


The Industry Sector has demonstrated healthy growth accounting for 32.3% of GDP and 48.2% of GDP growth.

73

Sector Contribution

14.76%

35.89%

16.80%

Revenue

PBT

Total Assets

Performance

2015 2014

Revenue 3,481.15 3,287.60PBT 510.70 747.24PAT 453.21 652.62Total Assets 4,412.43 4,886.02Total Debt 1,136.31 1,399.73

The Industrial Chemicals Division continued to penetrate the market with trading and manufactured product range…

Industrial Chemicals Packaging Construction Materials

Manufacturing, merchandising and export of chemicals. Chemanex, Industrial Chemicals and NALCO operates under this segment.

CISCO - Manufactures speciality plastic packaging

Manufacturing under license and sale of materials for the construction industry. Akzo Nobel Paints operate under this segment.


Operating EnvironmentThe Industry Sector has demonstrated healthy growth accounting for 32.3% of GDP and 48.2% of GDP growth. It was supported by strong growth in the construction and manufacturing sub sectors which accounted for 9.7% and 17.2% of GDP in 2014. Strengthening internal and external demand contributed to the growth of the manufacturing sector as growth in key export markets picked up pace. The government continues its support of the industrial sector through fiscal concessions and technical assistance for large scale manufacturers and a growing small and medium enterprises sector. Establishment of Industrial Estates, the Sri Lanka Gamma Centre, Sri Lanka Institute of Nano Technology supports the growth of this sector.

ChemanexChemanex trades imported and locally produced chemicals and industrial intermediates and have expanded into the manufacture of intermediates for work-wear, additives to automobile fluids and of specialty chemicals for international markets such as the European, Middle Eastern and Asian regions. Chemanex is ISO 9001:2000 certified and its production facility is Central Environmental Authority approved.

The years’ performance was disappointing with only a 7.6% growth in revenue and reduction in EBIT from a Rs.308 million profit in 2013/14 to a Rs.16 million profit during the year. The reduction in export sales was mainly due to market economic down-turn and the drop in sales of its CAL operation.

The company is expecting a rebound in export economies in the coming year and also exploring possibilities to expand its operations to other markets such as Vietnam and Bangladesh.

Industrial ChemicalsPrimarily Industrial Chemicals Division in B2B, focuses on the manufacture of binders and adhesives for the coating, rubber, food and personal care sectors. The Division creates superior quality products through a focus on expert knowledge sharing and research and development. The production

Cisco was the first company in Sri Lanka to start PET operations


75

process and facilities have been awarded ISO 9001:2008 and ISO 14001:2004 certifications.

During the year the business continued to penetrate the market with trading and manufactured product range, newly developed paint lattices, the introduction of more specialty additives for food and beverage industry and by offering a wider product range for rubber manufacturing industry enabling higher bottom line growth of 70% whilst revenue was marginally lower.

The division is focussing at enhancing the productivity, gaining cost leaderships and introducing new products to sustain the business growth.

NALCONalco, the water treatment department of CIC continues to sustain its higher market share in speciality chemicals while diversifying into services & basic chemicals. In spite of the slow down in some of the power plants, the department has shown significant increase in profits during the year. The business will drive towards a One Stop Solution Provider, totally focusing on sustainable chemistry solutions with expanded margins to give improved bottom line.

PackagingCisco Speciality Packaging was the first company in Sri Lanka to start PET operations specialising in manufacturing of PET bottles and PET preforms, plastic containers and HDPE/PP containers and water bottles. CISCO Speciality Packaging is accredited with ISO9001:2008

The business, even though heavily impacted by the significant drop in sales of high margin products, maintained a recognisable growth in revenue and EBIT.

Construction MaterialAkzo Nobel, the world’s largest performance coatings company-producers of speciality products and coatings. Akzo Nobel Paints Lanka is the market leader in decorative paints in Sri Lanka through the brands of Dulux, Pentalite, Glidden and Sikkens for automotive coatings.

The financial results shows a decline in sales by 4% compared to previous year mainly due to the loss of sales during peak sales season and the continued business promotion expenses incurred by the company. The company expects to continue to penetrate into the market by new product development and by its business promotions. The lattices for the paint is manufactured by CIC Holdings PLC.

OutlookThe outlook for this segment continues to be positive as growth in per capita income and the forecast increase in disposable income is expected to increase as a result of the positive government policies and the declining oil prices, the impact to the market will support the growth of this segment. We will continue to innovate, introduce new products and develop our distribution networks to look for business opportunities.

We will continue to innovate, introduce new products and develop our distribution networks to look for business opportunities.


We rely on the continued patronage of our customers for sustained growth of our businesses. Consequently, considerable resources are allocated to ensure that their perception of value is upheld by our delivery. Our customer commitment can be summarised as follows:

Our Commitment to Customers

Customer Health & SafetyMany of our products impact customer health and safety as they are consumed or directly impact products that are consumed by the customer. Therefore, customer health and safety is of the utmost importance to the CIC Group, particularly with regards to consumer goods, pharmaceuticals, and agriculture and food related products.

All products manufactured and marketed by the Group have been through stringent health and safety testing and have been developed into the final products that are produced by the Company today. The necessary certifications have also been obtained by the various entities within the Group, where required. For example, all products imported by the Healthcare Division of CIC Holdings must obtain a certificate from the CDDA. Similarly, companies operating in the food and beverage sector under CIC Agri Businesses and CIC Poultry hold ISO22000:2005 and HACCP food safety management system certifications, while Link Natural also holds HACCP certification.

At CIC Agri Businesses, SHE impacts are assessed, reported, and corrected in all production units and farms. Similarly at CIC Poultry, all processed chicken sold by the company complies with the highest safety controls and regulations.

PET bottles manufactured and sold by CISCO have gone through stringent testing in order to ensure that products sold are of food and beverage packaging grade.

In terms of analysis of products for customer health and safety at the disposal stage, any crop protection chemicals not sold within 2 years of manufacture, are recalled and disposed of by the Company in a safe manner. However, though farmers have been educated on the safe disposal of fertilizer and crop protection chemical products, actual methods of disposal by consumers of our products across the Group have not been assessed thus far.

All companies within the CIC Group ensure that their products and services satisfy the requirements of all relevant government organisations and local authorities, including the Sri Lanka Standards Institute, Board of Investment, Central Environmental Authority, Industrial Technology Institute, and so on. Companies within the group also have the necessary certifications related to their products or services.

As such, none of the entities covered by the boundary of this report have faced any monetary fines for non-compliance with laws and regulations concerning the provision and use of products or services in general.

In addition, none of the entities have faced any monetary fines or non-monetary sanctions for non-compliance with laws and regulations in general during the period under review.

Product Labelling Being a company that operates both in the B2B and B2C fields, CIC feels it is of vital importance to have an up to date understanding of customers’ views with regards to the products or services that it markets.

Details of practices and compliances are given under sustainability report given on page 113.

Marketing Communications Details are given under sustainability report on page 115.

CustomerSatisfaction

ProductLabelling

Health & Safety

MarketingCommunications

Customer Commitment


77

Creating Value for Employees

As a responsible employer, CIC has a policy framework and systems in place to ensure that our employees have a work environment that enables optimal performance.

Equal Opportunity & Human Rights

Remuneration & Benefits

Training & Development

Health & Safety

Retention


The CIC Group has 1952 employees working in the group companies and head office whom we rely on to create value for the organisation.

As a responsible employer, CIC has a policy framework and systems in place to ensure that our employees have a work environment that enables optimal performance. The following aspects are important to both the company and the employee and have been enumerated in this report under sustainability report on page 87.


Developing Communities

Developing Livelihoods

Community Health

Education & Child Protection


Manussakama (Humanity) ProgramFarmer Education

Diabetes ChallengeSupport For Schools

Dulux Child Protection Trust Fund

Local communities are a vital stakeholder of the CIC Group, particularly for CIC Agri Businesses and Link Natural where out-grower networks are established. Through these programs, the company reaches and engages with a large

number of small scale farmers, thereby contributing towards the upliftment of their living standards and towards their economic and social development as a whole. Out-growers are typically family units, whereby both men and women are involved.

Developing LivelihoodsCIC Agri Businesses works with a network of over 20,000 farmer families covering over 15,000 acres through its out-grower programs for seed paddy, consumption paddy, soya, maize and milk. In addition, Link Natural’s out-grower network in the areas of Anamaduwa and Ampara consists of over 350 farmer families spanning over 125 acres of herbal plants.

The Group strongly believes in giving back to society and the community in which it operates. Whist investing in varied community need projects, the Group gives preference to investing in education as we believe that education and knowledge will help raise the standards of living of rural communities, in which we predominantly operate

CIC Manussakama’ (Humanity) programme is set-up for uplifting of social and economic status of the rural communities in which we operate by enhancing knowledge and skills of the rural farmers and their families.

Many programmes and development centres have been set up for the development of the farmer and for knowledge sharing.

Nucleus farms have been established around the country which practices modern technology and farmers are free to visit these farms to enhance their knowledge. In association with the Ministry of Education model farms are set-up in schools to educate future generations. Navagoviya, a trilingual website, www.navagoviya.org , Agri bi-annual magazine, telephone advisory service, Agri media fusions – Agri Radio and Agri Television have been designed to freely access technological knowledge.

Formal impact assessments have not been conducted thus far in terms of community development activities conducted by the Group’s companies.

In addition, while at Chemanex all new operations are evaluated through a rigorous process prior to embarking in order to mitigate possible impacts on the community, no formal impact assessments have been conducted by other entities of the Group in terms of their operations.

It is deemed however, that due to the location of our operations across the Group, where with the exception of our


79

CIC employee participating in a blood donation campaign Drinking water distribution system in Polonnaruwa by Link Natural

Dental Clinic conducted at Galenbindunuwewa by Link NaturalComprehensive Farmer training programme by CIC Agri

Local communities are a vital stakeholder of the CIC Group, particularly for CIC Agri Businesses and Link Natural where out-grower networks are established.


farms, other operations are not located in residential areas, that we do not have any significant negative impacts on the local communities through our business. The companies

Public awareness programme on Diabetes

within the Group take steps to ensure this as legally required for example by conducting regular noise testing, etc.

HealthIn view of combatting diabetes the Group implemented an extensive awareness program for employees of the Group as well as for community members in certain locations, on the causes and prevention of diabetes. Employees were also encouraged to make at least one of 3 pledges: to walk daily, eat healthy, and live actively, in an effort towards preventing diabetes.

Given the nature of its business and the product it markets, CIC Agri Business and Link have also been involved in awareness programs on oral hygiene through mobile health service camps, which has benefited a number of families within the local community. CIC Agri Business also concentrates on promotion of healthy food consumption such as fresh fruits and vegetables and high in fibre G1 and G2 red basmati rice.

Where we do have an actual or potential impact on local communities is in the localities of the end users of our fertilizer and crop protection chemicals, where it is alleged that products of the agricultural inputs industry as a whole is contributing towards Chronic Kidney Disease prevalent in the North Central province of Sri Lanka. This is described in more detail along with how we respond to this concern under the Marketing Communications section of this report.

For the last 05 years, Link Natural Products has helped the Provincial Health Authorities to maintain the Pediatric Ward which has 15 beds at the Dompe Base Hospital to ensure its highest standards in hygiene. (require visuals) During the year under the Jana Sahanaya project the company distributed drinking water by establishing twenty water tanks in selected areas in the Polonnaruwa and Anuradhapura districts who were suffering from the droughts. The project cost approximately Rs.2.1 million have benefited over 24,900 families on these areas. (require visuals). Spending approximately Rs.840,000 the company also renovated the Galenbinduwewa Model Primary school dental clinic benefiting over 700 students. The Company has also invested in sign-boards to promoted dental and oral hygiene in the North Central Province.


Medical Camp in Makola

81

EducationIn addition to this, companies across the CIC Group also get involved in various community investment initiatives with the aim of uplifting living standards and contributing towards community development. These initiatives have been primarily in the field of education. Under CIC Manussakama (Humanity) Program financial assistance for building renovations, supplying drinking water, improving library facilities, distribution of books financial assistance to volunteer teachers are provided and educational programmes are sponsored under the Danuma Danaya seminars for development of English, literature, aesthetic studies and folk.

Annually, seventy five scholarships are awarded to students for their secondary education

CIC Feeds has invested in human capital during the past year through providing scholarships for students, while Chemanex has taken a long term mantle of improving the standard of English education in the Sangabodhi Vidyalaya situated in Mahiyanganaya.

The CIC Charitable and Educational Trust Fund support the children of employees and other deserving children focusing on supporting children who excel at the Grade 5 Scholarship Examination, the Ordinary Level Examination, and deserving undergraduates.

Additionally through the Chemanex Trust Fund, students in secondary and higher education are supported as the Company provides commercial training for undergraduates from various local universities, thereby providing them with practical work experience and making them more employable and attractive to recruiters.

Link Natural is also involved in the uplifting education standards, and to this effect, conducts curricular and co-curricular activities in ten selected schools in the Dompe Education Zone under the Ugathamana school development project. These include providing equipment, school books, educational needs, special seminars and motivational programs for teachers and students, leadership training programs for students, attitude development programs for students and parents, as well as teach training programs and parental awareness sessions. This gives access to children in

companies across the CIC Group also get involved in various community investment initiatives with the aim of uplifting living standards and contributing towards community development.



the Dompe area high standard of education without having to go to schools in Colombo and the Gampaha Districts, creating a new generation of youth. During the year Link Natural has invested in educational projects, healthcare projects and community relation projects. The company was awarded with the Best Corporate Citizen for CSR and Sustainability Business at the Ceylon Chamber of Commerce awards in 2011. Further Link Natural sponsors the gold medal – Dr. Nugawela Gold Medal to the undergraduate of the Colombo University for the best overall performance at the Bachelor of Business Administration (HRM) annually.

On a segmental level, CIC Agri Businesses has established RUHUSEF - Rural Humanity Services Foundation, a non-profit organisation under which the company conducts CSR activities, with an emphasis on uplifting rural education and during the year donated towards the uplifting of facilities at a rural school and a Church.

One of our most successful flagship projects within the Group, the Dulux Child Protection Trust Fund (DCPTF) was launched in 2001 by Akzo Nobel Paints Lanka (Pvt) Limited to aid the prevention of child abuse. The DCPTF provides financial assistance to needy children and to institutions engaged in caring for abused children, while creating public awareness on the rights of children with the aim of eradicating child abuse in Sri Lanka. Parents and adults, including teachers and caregivers, are also educated on the dangers abused children may encounter and potential signs of abuse.

During the year Link Natural was also involved in setting up a drinking water system in Polonnaruwa which has benefited a large number of families in the area.

GovernmentNo reporting entity has received financial assistance from the Government.

However, government policies on the industry have a direct for the various segments of business of the Group. For instance, imposing restrictions on the importation of

processed chicken and eggs helps to safeguard the industry by restricting unsafe cheap products coming into the market and also preventing the possible infiltration of poultry diseases, zero duty granted on the importation of hatchery and poultry equipment encourages large-scale investors in the industry to expand and upgrade their operations consequently improving the stability of the industry, restrictions on fertilizer markets have dampened sales of certain products.

83

Environmentally Responsible

Raw Materials

Energy

Water

Emissions

Effluents

Waste

Inputs Outputs

CIC is committed to sustainable development in all its operations and has in a place a robust policy framework to ensure that the environment impact of its activities is minimised and that value created for key stakeholders balances their diverse needs.

CIC, being one of the largest agriculture company in Sri Lanka that manages over 10,000 acres of farm land and works directly with over 20,000 farmers are emotionally involved with the environment. Being environmentally responsible has been embedded in the culture of Group since inception that looks at ways and means of waste management practices, water preservation and energy conservation. Most of our subsidiaries comply with ISO standards, and some have taken a step further to gain ISO:14001 environmental standardisation as well.

Responsibilities and practices under the above heading are elaborated under the sustainability report on pages 100 to 102.


CIC, being the agriculture trailblazer that we are, have worked closely with nature for over 50 years. We understand like few do the relationship between the environment, the people and the economy. Needless to say Sustainability comes naturally to CIC and we are committed to upholding it and all it stands for.

This year’s Sustainability Report incorporates elements of the G4 reporting principles introduced by the Global Reporting Initiative (GRI) in their Sustainability Reporting Guidelines. We are working towards making our Sustainability Report G4 compliant in the coming year.

This year the Group achieved turnover of 23.86Bn and Profits of 1.04Bn.

CIC has always believed that for agriculture to be sustainable in this country, the people engaged in it should be knowledgeable and have access to information. To this end, we continue to be committed to uplifting rural communities, through education and knowledge sharing.

At CIC our main mode of knowledge sharing with the community is our ‘Out Grower’ model. This model operates on the principle, that we impart to farmers, technical know how and knowledge on sustainable farming and on adding value to farm produce and then buy back their produce at a competitive price. This model is very successful because it brings mutual benefits. Farmers gains knowledge on improved farming and related practices and enjoy the peace of mind and security that comes with the assurance that their produce will be bought back by CIC. CIC benefits because we get produce that meets our high standards of quality. This year too we worked with over 20,000 out-growers in the agriculture sector.

Training suppliers (farmers) and then linking them to the supply chain is sustainability at its best. Through our ‘out grower’ model CIC brings to life, one of the best examples of linking both stakeholder and shareholder expectations, in corporate Sri Lanka.

With the population growing and agricultural lands dwindling the demand for nutritious food is on the increase. This poses a major threat to the food security of a nation. At CIC we are

concerned about our nation’s food security and have been working towards overcoming this threat for many years, even organising the first ever ‘Conference on National Food and Nutrition Security’ in 2012. We believe that the only way to overcome this challenge is to increase the productivity of agricultural lands. This can be achieved only by using sustainable modern technologies developed in this sector.

As explained above through our ‘out grower programs’ we are involved in imparting to farmers knowledge on modern farming methods and introducing them to the latest technology. CIC, through our seeds business, have introduced a series of high quality seed paddy and vegetable seeds to the market. These seeds enable farmers to reap better yields. CIC has also introduced hybrid seeds that are high yielding, weather resistant and pest resistant, which has enabled vegetables like beetroot and cauliflower that were once grown only in temperate climates to be now grown in areas such as Kurunegala, Kalpitiya and Dambulla.

The biggest challenge faced by the agriculture industry today is the overuse of certain agricultural inputs by the farming community. This problem has escalated to the extent that ground water, rivers and reservoirs have become polluted. As we see it, the solution to this issue lies in educating the farmer on scientific crop management. At CIC we firmly believe in this principle and are committed to share this message with the farming community.

This year too, the Crop Protection businesses of the Group continued to experience the negative effects of the tightened regulatory processes imposed by the Government authorities on crop protection chemicals. As always here too whilst promoting the judicious use of chemicals we ensure that our products are sourced from the best global manufacturers. These manufactures supply products that have been widely researched and have minimal negative effects to humans and the environment.

With the per capita consumption of chicken continuing to rise, our poultry business invested substantially in their breeder and boiler operations. We also continued to train and provide technical assistance to 2,500 poultry farmers.

We have also invested heavily in the dairy sector. Our new

Sustainability Report

Managing Director’s / CEO’s Message

85

state-of-the-art milk processing facility commissioned in Dambulla last year, currently produces approximately 150,000 cups of Yoghurt a day. We also manage dairy farms located in Mutuwella and Siddhapura and work closely with over 5000 out-grower farmers in the North and East. Our dream is to see the East re-established as the dairy heartland of the country and to increase the production of milk in this country.

Our herbal care business Link Natural Product’s flagship brands ‘Samahan’ and ‘Sudantha’, consolidated their respective market positions this year. Link Natural through its “out grower” model works with 350 farmers who are engaged in cultivating 120 acres of herbal plants.

The Group is continually looking at ways of optimising energy and water usage and the responsible disposal of waste. In optimising the usage of natural resources, one performance indicator we use when measuring the viability of any crop in our farms is “output per litre of water”. The other indicator is “output per land unit”.

Next year too we will continue to safeguard our environment and community. We will continue to uphold our governing philosophy, which is to educate farmers in sustainable agriculture practices and proper use of technology, and uplift farmer communities by way of education and knowledge sharing. We will offer our customers the safest products available, manufactured by world renowned companies. We will continue to work towards ensuring food Security of the nation.

As a result of the re-strategising process undertaken during the year 2013/14 the Group continued to strengthened its consolidation in identified industry segments, namely Agriculture, Healthcare, Animal Feed, Nutrition and Ventures and progressively divest the non–core businesses.

Next year too, the Group will continue to invest in focused industry segments and build on our competitive advantage.


CIC has worked closely with nature for over 50 years and understand like few do the relationship between the environment, the people and the economy.


Organisational ProfileWe are CIC Holdings PLC, a public quoted Company with limited liability incorporated in Sri Lanka in 1964 and re-registered under the Companies Act of No.7 of 2007 on 21st November 2007. Our headquarters are at CIC House, 199, Kew Road Colombo 2.

CIC Holdings Link Natural CIC Agri Businesses Group

CIC Feeds Group Chemanex CISCO

Brands under our Crop Solution business include Solito and Virtako. Pharmaceutical products we carry include Sita, Betaserc and Duphaston, while neutraceuticals include Ensure Glucerna and Pediasure . We are also the local agent for the Surgical appliances of DepuySynthes. Oppo and Smith and Nephew -Advanced Wound care. Our consumer brands include writing instruments Platignum and Cial and personal care products Johnson’s Baby . Industrial inputs offered by us include Chemifix Adhesive and Nalco water treatment products. All products are marketed island-wide in Sri Lanka

Link Samahan, Link Sudantha Link Kesha, Samahan Balm, Muscle Guard, SwasthaThripala, Five Herbs, Link Hair Care Cool, Gotukola Tea and Earth Essence are some of the products manufactured and retailed by Link Natural Products as part of their herbal health and personal care ranges.

The company’s products are exported to several countries from across all continents, including the UK, USA, UAE, Europe, East Asia, South America, and India.

CIC Agri Businesses Group’s main brands are CIC Pohora, CIC Seeds, CIC Rice, Juiceez, Fresheez, and CIC Yoghurt.

The main products the Group deals with are fertilizer, seeds, rice, poultry products, and milk based products.

We also provide advisory services. Our products and services are mainly sold in Sri Lanka, but we do export to countries such as USA, Canada, and Australia.

The main beneficiaries of these products and services are the farmers , plantations and retail consumers.

The Feeds Group has invested in brands such as CIC Feeds, CIC Day Old Chicks and CIC Chicken.

The Group also represents international brands in the veterinary medicine sector.

The Group deals with products that fall under the category of animal feed, day old chicks, chicken, veterinary medicine, vaccines etc.

Our services also encompass veterinary and technical aspects.

Our operations are within Sri Lanka and we cater to small and medium scale livestock farmers, retail outlets, supermarkets, hotels, veterinarians, and pet owners

The current main brands in Chemanex Group’s portfolio are Stop Brake Oil, NexoBleech, Menara Hosen and Panora.

Our product categories include specialty chemicals and additives, break oil, bleaching agents, yarn sizing chemicals, seamless knitted gloves & liners,

The Group exports mainly to Europe, the Middle East, Africa, Asia, Australia and New Zealand.

Customers are all in the B2B category

CISCO manufactures PET bottles and bottle caps.

Customers are in the B2B category, and are all locally based.

CISCO operates solely within Sri Lanka

The products and services offered by key entities of our Company as well as the markets to which we export and types of customers we serve are presented below:


87

As reported last year, due to the area surrounding the Crop Protection Chemicals Repacking Centre in Piliyandala becoming residential, a decision was taken to shift the repacking operations to Panagoda. This shift was completed during the reporting period and operations commenced in their new location.

In addition, our new state-of-the-art milk processing facility commissioned in Dambulla last year for the production of yoghurt, became fully operational during the year under review. This increase in operations is reflected in the performance of CIC Agri Businesses, particularly in terms of increased energy consumption.

Beyond this, there have been no other changes reported in terms of share capital structure, and no significant changes in the nature and structure of the supply chain.

Scale of the CompanyThe scale of the CIC Group is reflected by the number of employees which to date stands at 1,952 employees across the Group. In addition, the CIC Group consists of 26 number of operations, including 10 within the CIC Agri Businesses Group, and 4 within the CIC Feeds Group. Net sales/ net revenues for the year were Rs. 23.87 Bn.

Information presented below on the employment numbers of CIC Holdings, Link Natural, CIC Agri Businesses, CIC Feeds, Chemanex, and CISCO, provide further insight into the scale of the organisation:

Total Employees by Employment Type and ContractCIC

HoldingsLink Natural CIC Agri

BusinessesCIC Feeds Chemanex CISCO

Full-time employees 446 501 529 233 143 28Part-time employees - - - - - -Outsourced employees 234 150 - 301 26 87Total 680 651 529 534 169 115

Permanent employees 423 493 426 227 99 28Fixed term/ contract employees 23 8 103 6 44 -Outsourced employees 234 150 - 301 26 87Total 680 651 529 534 169 115

Total Employees by Region Central Province 40 32 57 - - -Eastern Province 20 10 19 - - -North Central Province 36 8 185 - -- -Northern Province 16 7 - - - -North Western Province 17 31 55 - - -Sabaragamuwa Province 19 31 9 - - -Southern Province 34 29 13 - - -Uva Province 4 11 15 - - -Western Province 494 492 176 534 169 115Total 680 651 529 534 169 115

The majority of the Company’s work is performed by workers who are legally recognised as full-time employees of the Group, or who are supervised contract workers, as can be seen in the table above.

Despite having operations in the agricultural industry, which is typically seasonal by nature, there is no significant variation in the employment numbers of the Group within the year.

Of the total employees within the CIC Group, approximately 4 % are covered by collective bargaining agreements.


Our Supply ChainThe smooth running of the supply chain is essential to the Group, because the continuity of the different businesses in the Group are dependent on it.

Potential suppliers both local and foreign are assessed for the quality and safety of their products, cost, reliability of delivery, reputation credit terms, minimum order quantities and lead times. Once selected, supplier agreements are entered into and the supply of goods and services begin. In order to ensure business continuity more than one supplier is identified for a given product and service. Periodic assessments are carried out by business heads/operation heads to evaluate supplier performance. If performance is not satisfactory and performance cannot be improved by further negotiations the supplier is changed.

The supply chain starts with manufacturers of either raw materials for manufacturing businesses or finished goods and packing material. Labour suppliers provide outsourced labourers for certain manufacturing operations. Once the goods are ready for sale transport suppliers provide transportation facilities to wholesaler, distributor warehouses and to retail supermarket and shops. Labour suppliers provide some outsourced labour for product promotion activities.

CIC and the Precautionary Principle The “precautionary principle” is a notion which supports taking protective action before there is complete scientific proof of a risk; that is, action should not be delayed simply because full scientific information is lacking. Being in the

food, poultry and healthcare industries we follow the precautionary approach very strictly. If there is an indication of disease to our poultry, the entire flock is culled. If there is the slightest doubt of contamination to our food products i.e. rice and yoghurt all batches are recalled and destroyed. No drug or device can be imported to this country unless approval is obtained by the Cosmetics Drugs and Devices Authority of Sri Lanka. Even so, in the event a contamination or product defect is suspected or identified in a batch imported subsequently, all stocks are recalled and destroyed. In the Crop Protection chemicals industry, every imported consignment is tested (ROP for Crop protection chemicals, National Fertilizer Secretariat for fertilizer). If any of these samples fail to pass the quality assurance test, the entire consignment is shipped back to the supplier in the Crop Protection chemicals industry, all chemicals are recalled 3 months before their expiry date. In the crop Protection chemical and industrial chemical industries too if a product defect is suspected all batches are recalled.

Involvement in external initiatives and organisationsCIC upholds values and principles as per international charters. To this effect, CIC respects the United Nations Universal Declaration of Human Rights and supports the Principles of the UN Global Compact.

In addition, CIC and its subsidiary companies are involved in industry associations operating in Sri Lanka, as follows:

Company

CIC Holdings Link Natural CIC Agri Businesses

CIC Feeds Chemanex CISCO

Associations in which the Company holds a position on the Board

Corporate:• Ceylon Chamber of

Commerce – Vice President

Healthcare:NoneCrop Solutions:• CropLife Sri Lanka –

Chairman• Department of

Agribusiness Management, Faculty of Agriculture, Sabaragamuwa University of Sri Lanka – Board member

• Exporters’ Association of Sri Lanka – Vice Chairman

• National Agri Business Council – Secretary

• CSR Lanka – Board member

None None None


89

Company



Associations in which the Company participates as a member

Operator:• National Chamber of

CommerceHealthcare: • Ceylon Chamber of

Commerce• Sri Lanka Pharmaceutical

Manufacturing Association

• Sri Lanka Pharmaceutical Importers Association

Crop Solutions:• CropLife Asia • National Toxicological

Association• National Agribusiness

Council• National Research

Council & Department of Agriculture

• National Apprentice and Industrial Training Authority

• Ceylon Chamber of Commerce

• International Federation of Essential Oils and Aroma Traders

• Export Development Board

• The National Chamber of Exporters of Sri Lanka

• The Spice Council of Sri Lanka

• International Chamber of Commerce of Sri Lanka

• The Ceylon National Chamber of Industries

• Industrial Technology Institute

• Sri Lanka Association of Testing Laboratories

• Sri Lanka Association for the Advancement of Science

• Royal Society of Chemistry

• International Chamber of Commerce - Sri Lanka

• Sri Lanka Australia - New Zealand Business Community

• Perfumer & Flavorist

• British Herbal Medicine Association


• National Chamber of Industries


• National Chamber of Commerce

• Sri Lanka Poultry Forum

• Sri Lanka Poultry Producers Association

• World Poultry Science – Sri Lanka


• National Chamber of Commerce

• Ceylon National Chamber of Industries

• National Chamber of Exporters of Sri Lanka

• United Nations Global Compact

• Sri Lanka Institute of Directors

• Sri Lanka Institute of Packaging

• Plastic & Rubber Institute

• Exporter’s Association of Sri Lanka

• Sri Lanka-Germany Business Council

• Sri Lanka-Malaysia Business Council

• Sri Lanka-Nordic Business Council

• Sri Lanka-China Business Council

None


Identified Material Aspects and BoundariesAll entities included in the Company’s consolidated financial statements can be found listed on page 130 of this Annual Report. Of this list, our subsidiaries CIC Cropguard (Pvt) Ltd, Crop Management Services (Pvt) Ltd, Colombo Industrial Agencies Limited, and CIC Lifesciences Limited, as well as our associate company Akzo Nobel Paints Lanka (Pvt) Ltd are not covered by this Sustainability Report.

Steps will be taken to include these entities in future sustainability reports of CIC Holdings PLC.

In determining aspects to be included within the scope of this report, CIC analysed the full list of aspects as set out in the GRI G4 Guidelines against the activities of each key subsidiary of the Company, as well as against the activities of the Holding company itself, taking into account areas where the Group entities could cause significant actual or potential impacts. Having undertaken this exercise at Group level, the Company then went on to hold discussions with key representatives from each subsidiary in order to validate the identified aspects. Through this process, material aspects were determined for each key entity of the Group, and aspect boundaries were determined as highlighted below.

When analysing and identifying aspects to be reported, CIC also took into account aspects that have been addressed previously through its sustainability reports. In addition, discussions around each aspect also took into account the extent to which stakeholders are affected by each entity’s impacts, as well as the aspects that would be most salient to report from the point of view of the Company’s key stakeholder groups.

Discussions also took into account the wider context of sustainability. For example, the use of agro and crop protection chemicals is linked either directly or indirectly to chronic kidney disease which is prevalent in the North Central Provinces of Sri Lanka, while the manufacture of PET bottles contributes to waste generated by both businesses and households.

The Company strives to make its reporting process as complete as possible, but recognises that some gaps may still prevail, particularly with regards to those entities who have been brought into the reporting process more recently.

The identified material aspects and corresponding aspect boundaries are as follows:

CIC Holdings

CIC Agri CIC Feeds Chemanex Link Natural Cisco

Categories Aspects Materiality and Aspect BoundaryEconomic

Economic performance √ √ √ √ √ √Market presence √ √ √ √ √ √Indirect economic impacts √ √ √ √ √ √Procurement practices √ √ √ √ √ √

EnvironmentalMaterials √ √ √ √Energy √ √ √ √ √ √Water √ √ √ √ √ √Biodiversity √ √ √ Emissions √ Effluents and waste √ √ √ √ √ √Products and services √ √ √ √ √Transport √ √ √ √ √ √Supplier environmental assessment √ √


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CIC Holdings

CIC Agri CIC Feeds Chemanex Link Natural Cisco

Categories Aspects Materiality and Aspect BoundaryLabour Practices and Decent Work

Employment √ √ √ √ √ √Occupational health and safety √ √ √ √ √ √Training and education √ √ √ √ √ √Diversity and equal opportunity √ √ √ √ √ √Labour practices grievance mechanisms

√ √ √ √ √ √

Human RightsNon discrimination √ √ √ √ √ √Freedom of association and collective bargaining

√ √ √ √ √ √

Child labour √ √ Supplier human rights assessment √ √

SocietyLocal communities √ √ √ √ √ √Compliance √ √ √ √ √ √

Product ResponsibilityCustomer health and safety √ √ √ √ √Product and service labeling √ √ √ √ √ √Marketing communications √ √ √ Compliance √ √ √ √ √ √

Some limitations regarding aspect boundaries do exist within the Company as there are some entities of the business that have not yet been included in the reporting process, as described previously. In addition, at this stage materiality has only been determined for within the Company and not outside of the Company. For all identified aspects however,

it is deemed that that the aspect is material for the entire geographical boundary of each entity to which it is relevant.

One significant change in the overall boundary of this report in comparison to previous reports of CIC, is the inclusion of CISCO into this year’s reporting process.


Stakeholder EngagementAt CIC, we maintain a constant and fruitful dialogue with our key stakeholders, namely customers, employees, shareholders, suppliers, the Government and the communities in our various areas of operation.

These groups are considered to be our most important stakeholders and are continually engaged with according to the rationale described below:

Stakeholder Group Importance to the Group Methods of Engagement Areas discussed throughEngagement

Customers They are the focus of our business

• Regular customer visits• Technical training sessions

and on-going technical advice

• Educational programs• Partner development

programs – e.g. educating farmers on financial literacy

• Continuous dialogue to improve product quality and widen application

• Supply goods that fulfil the requirements of the customer at affordable prices

• Dialogue and training on correct use of fertilizers and use and safe disposal of chemicals through the agriculture, crop protection and industrial chemicals divisions

• As a result of feedback from our customers, an informative website has been established for rural farmers, in order to spread knowledge of agriculture of common crops, management practises and pest and disease control. www.navagoviya.org can be accessed in both Sinhala and Tamil.

Employees Employees drive Companystrategy and are our most valuable asset

Annual performance reviews

• Employee Opinion Surveys done once every two years

• In house newsletters • Formal and informal team

building sessions• Informal gatherings in the

form of picnics, christmas parties, etc.

• Monthly meetings, reviews, etc.

• An open door policy is maintained so that staff can share their concerns with the relevant parties at any time

• Constant engagement in order to develop skills and


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Shareholders Shareholders are the owners of the company and provide equity

• Annual General Meetings• Extraordinary General

Meetings

• Shareholders are kept informed of the progress of the company through the AGM. Shareholders also get an opportunity to raise concerns and get clarification of issues concerning them

Suppliers Our supply chain is integral to our operations and our suppliers help us keep the customer happy with reliable products available at the right time, at the expected levels of quality

• Regular supplier visits both local and foreign to their offices and factories

• Inviting suppliers to visit our premises in return

• Suppliers are informed of changes in regulations and their support is sought in order to confirm to the requirements

• Constant dialogue, particularly with agro chemicals, industrial chemicals, and pharmaceuticals suppliers, to ensure product quality and safety

• Out-grower farmers are provided with training and knowledge sharing opportunities

• Better terms and conditions are negotiated

Government/ Regulators

The Government and other regulators are the implementers of policy and regulation, which can impact our strategy formulation and business operations

• Advising the Government on agricultural and livestock policy setting

• Meeting with Government officials as the need arises - on community investment activities, utilisation of state land, taxes, subsidies, national issues such as ground water contamination etc.

• Sharing world trends and knowledge with regulators

• On-going discussions on the increased regulation and tightening of the registration process for crop protection chemicals

• Discussion on price controls as and when required

• CIC is present on Advisory Boards on agriculture and livestock policy



Local Communities Local communities are the wider population whose lives we impact through our operations

• Regular dialogue is undertaken with these parties

• Regular educational focus on agriculture to provide exposure to farmers

• Internship programs for students in our factories and farms

• Community investment activities

• Providing employment opportunities – through direct employment as well as through our out-grower programs

• CIC recruits staff as far as possible from the environs of the company operations to ensure adequate infusion of local knowledge and culture

• CIC engages in numerous community development activities

• We are also involved in raising the financial literacy of farmers

Report ProfileCIC continues to follow an annual reporting cycle in its sustainability reporting efforts. The reporting period for this report is therefore the fiscal year 1st April 2014 till 31st March 2015. The most recent previous report for the period 1st April 2013 – 31st March 2014 was published in June 2014. Up to date, CIC has not sought external assurance for its reporting process. External assurance of the reporting process and content will be pursued in the coming years.

This year’s Sustainability Report incorporates elements of the G4 reporting principles introduced by the Global Reporting Initiative (GRI) in their Sustainability Reporting Guidelines. We are working towards making our Sustainability Report fully G4 compliant in the coming year. As such, this year’s report includes a merger of elements of the GRI G4 Guidelines in accordance with the Core level of reporting, as well as GRI G3.1 at application level C.

There are no restatements of information provided in previous reports of CIC Holdings PLC. However a significant change from the previous report of the Company is the effort to align this report with the GRI G4 Guidelines, and the more specific assignment of aspect boundaries, as set out by the new reporting Guidelines.

Any questions regarding the report or its content could be directed to:

Ms. P.D.S. RuwanpuraGroup Chief Financial OfficerCIC Holdings PLC199, Kew Road, Colombo 2Tel: 2359359


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Governance Details with regards to CIC Holdings PLC’s governance systems and processes are addressed in the chapter titled Enterprise Governance on page xxx within this Annual Report. This chapter addresses the Company’s governance structure and composition of the Board as well as the committees responsible for specific functions. Currently there is no specific committee established that is responsible for decision making on economic, environmental or social impacts. However, the Board of Directors takes a keen interest in this area and overlooks these aspects at an overall level.

Also presented through the Enterprise Governance chapter, are details with regards to relationships with shareholders and other stakeholders and mechanisms for stakeholders to provide recommendations to the Board, as well as other pertinent information which enables the reader to assess the foundations upon which the Company operates.

Ethics and Integrity CIC Holding’s vision, mission, and values are described on page xxx of this annual report. While these values cascade across the group, each subsidiary also has its own codes of conduct or ethics providing employees with guidance on how they should behave in order to work in line with the Company’s values.

Specific Standard Disclosures Category – EconomicEconomic PerformanceCIC believes in value generation and its distributions amongst the widest possible cross section of the stakeholder community.

We are fully aware of our responsibility to monitor and govern the economic impact of our activities across the three pillars of sustainability – economy, society, and environment.

The chart below depicts the economic value generated by CIC Group during the year under review.

Value added statement 2014/15 % 2013/14 % Rs ‘000 Rs ‘000

Revenue 23,868,737 23,238,142 Adjustment for-Other income and finance income 212,284 635,348 Share of profits of equity accounted investees 207,636 270,071 Less : Cost of material & services purchase (19,069,497) (20,568,897)

Total Value Added 5,219,160 3,574,664

Distributed as follows: To employees - Salaries,wages & other benefits 1,737,270 33.29 1,742,792 48.75

To Government Value Added Tax 434,827 386,524 Income Tax & ESC 251,733 77,601 NBT 141,940 148,433 Stamp duty 1,843 830,343 15.91 1,974 614,532 17.19

To the providers of capital - As interest on Loan 745,886 14.29 1,502,344 42.03 As non controlling interest 278,916 5.34 (155,126) (4.34)To shareholders as a dividend 189,540 3.63 - - Donation and community Investments 3,743 0.07 5,938 0.17Retained within the Business As Depreciation and impairment 671,535 12.87 835,897 23.38 As Reserves 761,927 14.60 (971,713) (27.18)Total Value Distributed 5,219,160 100.00 3,574,664 100.00


Employees’ Benefit PlanCIC Holdings PLC and companies within the Group contribute 12% of gross salary towards the Mercantile Service Provident Society (MSPS) Fund, or towards the Employees’ Provident Fund (EPF). All companies covered by this report also contribute 3% of gross salary towards the Employees’ Trust Fund (ETF)

The retirement benefit obligation that is reflected in the Statement of Financial Position is calculated annually by a qualified actuary according to SLAS 16 stipulations.

Provision for retirement benefit obligation is computed from the first year of service for all employees. But under the payment of gratuity Act No 12 of 1983, the liability to an employee arises only on completion of 5 years of continued service.

Expenses (Rs '000) 2014/15 2013/14EPF/MSPS (12%) 123,008 121,215

ETF (3%) 30,752 30,235

Gratuity 102,034 94,794

Retirement Benefit Obligations 2014/15 2013/14Opening Balance 522,688 472,140Disposal of Subsidiary (1,012) (5,702)Classified as Held for Sale - 7,718Provision for the Year 93,089 96,066Benefits paid by the Plan (48,832) (32,098)Closing Balance 565,933 (522,588)


2015 2014

Value Addition

Retained for Reinvestment & Future Growth To Government To Employees To providers of Capital To Shareholders

28%

(4%)

17%

49%

38%

0%

16%

33%

20%

4%

The Company is committed to paying our employees a fair and reasonable wage and the wages paid are above the industry minimum.

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Significant Financial Assistance Received From the GovernmentNo reporting entity has received financial assistance from the Government.

Though CIC Feeds have not received any specific Government Assistance during the year under review, Government policies on the industry have impacted indirectly for the betterment of the business. For instance, imposing restrictions on the importation of processed chicken and eggs helps to safeguard the industry by restricting unsafe cheap products coming into the market and also preventing the possible infiltration of poultry diseases. In addition zero duty granted on the importation of hatchery and poultry equipment encourages large-scale investors in the industry to expand and upgrade their operations consequently improving the stability of the industry.

Market PresenceThe Company is committed to paying our employees a fair and reasonable wage and the wages paid are above the industry minimum. Further no wage discrepancies are made based on gender.

For technical, professional and senior management positions priority it given to those with the required ability and qualifications. For lower levels whilst skills are important, close proximity to the work place is considered an advantage and local hiring is encouraged.

Comparative Entry Level Wage StructuresAt CIC Feeds the company maintained a fair and reasonable entry level wage for each category of employees when compared to the generally acceptable industry standards. Our entry level staff is entitled to a wage which is around 8%-15% above the industry average. Similar jobs across the organisation benefit equally, whereas different wage levels are maintained for different levels. The physical work environment and the nature of the job are not unique. Therefore entry level wages may differ by considering the above factors.

Every financial year the company review employee benefits by taking in to consideration factors such as; cost of living, government statutory requirements, similar and different industry standards. Entry level employees also enjoy most of the benefits which are provided for the other job categories such as accommodation, over time benefit, meal and transport. Once they are permanent employees get they will get all the benefits which provided for the permanent employees for instance comprehensive medical insurance cover for the member and the immediate family, which includes hospitalisation and OPD treatments, Un-utilised leave encashment for non-executive staff, annual bonus and uniforms.

At Chemanex the standard entry level salaries are based on the minimum salary standards set by the BOI of Sri Lanka for BOI approved companies & as per the Shop & Office Act No.19 of 1954 for the rest of the companies. The ratio of basic salary and remuneration of women and men at all locations of operations is 1.1.

The following benefits are provided to the fulltime employees of Chemanex: reimbursement of education expenses at selected streams, reimbursement of medical and healthcare expenses, financial assistance to the employees and close family members’ memorial service and loan schemes at subsidised interest rates to the staff members for selected purposes.

At CISCO workers are out-sourced from two registered labour outsourcing companies. Minimum wages are governed by rubber & plastic wages board. Salary increments are given every year depending on performance displayed in 4 aspects of work, i.e. knowledge, obedience, cooperation and punctuality. There is no difference in salary between male & female.

At Link Natural the Company has taken action to increase the minimum level (entry level) of wages by Rs 2,000/- with effect from 1st January 2015 and salary anomaly minimised by matching to the minimum wage limit.


Local HiringLocal hiring is encouraged across the CIC Group, and the operations falling directly under the purview of CIC Holdings also practice this. Potential workers residing in the areas of operation of the Company are preferred for employment, dependent on possessing the required skills for the job in question.

At CIC Feeds, positions of technical, professional and important positions including senior managers are hired from the local community by considering their skills, competencies, capabilities, knowledge and experience. Close proximity to the location is considered as an added advantage. Company out-sources less important, highly labour intensive jobs and operates through a reputed labour supplying company and most of these employees are chosen from the local community. The entire operations of the company are based in the western province.

At present Chemanex has two locations of operations. i.e. the head office at Colombo and the production facility at Ratmalana. For all significant vacancies, advertisements are placed and employees are selected through well documented procedure. If specialised roles are required, they are filled through headhunting or referral. All senior managers at present are locally hired from Sri Lanka.

At CISCO internal promotions are encouraged.

At Link Natural, as a common practice we publish job advertisements in local newspapers & web sites giving the priority to local residents and if required we seek the service of domestic recruitment companies to attract the best talents form Sri Lankans.

Indirect Economic ImpactsThe Company believes that it can give back to the society and the community in which it operates by way of infrastructure investment. Whist investing in varied community need projects, the company gives preference to investing in education. This is because we believe that education and knowledge will help raise the standards of living in rural communities, in which we predominantly operate. Also it is from these communities that our future farmers, out-growers and employees will emerge.

The Company is committed to invest in education related community investments. Hence the company identifies where the need is greatest and where most relevant to the community in which it operates and commits to invest in that particular activity.

Within the year under review, CIC Feeds and Link Natural were involved in infrastructure development activities in their areas of operation, which would have significant indirect economic as well as social impacts.

CIC Feeds donated towards the uplifting of facilities at a school, while the Company was also involved in the renovation of a Church.

Link Natural was involved in infrastructure development in the education and health sector. The Company undertook the renovation of the children’s ward at the Dompe District Hospital, and also renovated the school dental clinic at the Galenbindunuwewa Model Primary School, both of which have benefited number of children per year.

In addition, Link Natural was also involved in setting up a drinking water system which has benefited a large number of families in the area.


Percentage by which entry level wage exceeds national minimum wages, by gender



Male Female Male Female Male Female Male Female Male Female Male Female

Approximate Ratios (%)

47% 47% 16.7% 16.7% 15-20% 15-20% 8-15% 8 – 15% 66.7% 66.7% 0% 0%

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Procurement PracticesThe policy of the Group is to source high quality material/supplies. Whilst preference is given to local suppliers, in order to maintain the high standards of quality required, where necessary, supplies are imported from reputed reliable international suppliers.

Policy, practices, and proportion of spending on locally-based suppliers For CIC Agri Businesses, the main factors that influence local purchasing are cost, easy access to perform quality checks and on-time delivery. Purchase of milk for milk based products and paddy for rice are 100% from local out-grower farmers.

At CIC Feeds as a common practice the organisation gives priority to local raw material suppliers and service providers whilst ensuring that the quality standards of our products are not compromised. This is applicable for all the operations within the Group. Corn, rice polish and wheat midds are the main ingredients that are commercially available in the local market. Around 70% of raw materials used for animal feed production are purchased locally. Further, the raw material requirement in the production of chicken such as feeds, DOCs and vaccines are sourced within the Feeds Group other than for the packing material.

However, when the company is making decisions with regards to technology and technology based solutions, the deciding factor will be the best or optimum solution rather than whether it is sourced locally or imported.

Reliability and credibility of the supplier, trustworthiness, future potential, cost of the supplies, transportation cost, quality parameters, environmental and social performance, technical soundness, and supplier’s financial stability are the main factors considered when selecting a supplier.

At Chemanex, the general practice of the company is to procure goods and services to meet our requirements and standards at the lowest available price.

At CISCO our main material (PET resin) are imported from India, China and Pakistan. There are no local producers for resin. Packing material, polybags, and gum tapes are purchased from local suppliers, which is around 20% of total material used. Our policy is to have more than three suppliers for each material. Quality is predetermined & every delivery is checked for quality. Supplier factories are visited every year to monitor their operations.

At Link Natural, the important facts that we look into in a supplier are reliability, value for money, clear communication, delivery on time, and financial security. The company is sourcing materials from herbal cultivations in the Dompe area, and we also work with out-grower farmers to source the necessary ingredients.

Medical Camp in Makola


Local Procurement



Proportion of spending on locally based suppliers (%)

14% 70% 15% 61% 48% 20%

Category – EnvironmentalCIC believes that the environment is an integral ‘pillar’ of sustainability and CIC acknowledges the absolute necessity to manage both the use of resources as well as the impact our business may exert on the environment. To this end, the Ratmalana factory and the Repacking Center of CIC Holdings, as well as Link Natural, have environmental management systems in place that are certified to ISO14001:2004 standards.

Material UsageAt Chemanex the total input materials used by the Group during 2014/2015 is 4,403 Mts, which is a 7% reduction compared to the 2013/2014 period. The main reason for this decrease is the reduced level of operations of Yasui Lanka (Pvt) Ltd, which is one of the subsidiaries of Chemanex Group.

At CISCO, PET Resin is used as a raw material which is a by-product of oil. For packaging, polybags are used which is an oil based product too. There are no local manufacturers for PET resin, and resins are imported from India, China and Pakistan. Prices change in line with international oil prices. Resin count 80% of total material cost.

Use of Recycled Input MaterialsAt CIC Feeds, 20% of chicken processing waste is recycled and used as a raw material in the feed manufacturing process. At Chemanex too, 1% of the total input materials are recycled input materials.

At CISCO, 10% of initial rejects are crushed and reused, though market returns are not recycled. Initial rejects of bottles are crushed on the same day and 10% of this recycled material is mixed with virgin material and reused for production.

At Link Natural too, approximately 1.5% of input material is recycled.

Energy ConsumptionThe Company believes in the efficient use of energy. We are committed to reduce energy consumption where possible, and optimise it elsewhere. Renewable energy sources are used where possible.

The Head Office of CIC Holdings is in the process of implementing recommendations made through an energy saving audit that was done in late 2013. The Company also monitors electricity consumption on a daily basis, in order to take further action in terms of reducing usage.

At the Ekala stores, employees are briefed daily on the importance of conserving energy, and on minimal wastage of resources. Energy efficient lighting has been installed to reduce electricity consumption. Similarly at the repacking center, LED bulbs have been installed in order to conserve energy. Boilers are also regularly checked and adjusted for maximum efficiency in terms of fuel usage.

CIC Agri Businesses is currently in the process of changing all electrical light fixtures to LED, which would significantly reduce the consumption of energy by the Company. In addition, CIC Agri Businesses uses paddy husks, which is a waste material of its production process, as a source of fuel in its boilers. However, the significant increase in energy consumption within this reporting period in comparison to the previous reporting period can be attributed to the fact that the Yoghurt Plant in Dambulla became fully operational during the year under review.

At CIC Feeds, petrol is used to operate mist blowers, grass cutters, and egg vans, while diesel is used to operate generators and to operate vehicles including forklifts, feed lorries, tractors etc. Furnace oil is used for boiler operations


101

and LP gas is used at the breeder farm and poultry farm to fumigate the cages and to operate heaters.

According to the energy audit done with the supervision of an outside firm, Feeds is now operating as per the recommendations of that audit to reduce energy consumption in all locations of operation. Feeds is also taking steps to replace old machinery with new more efficient and low energy consuming machinery in breeder and hatchery farms.

Chemanex is not subject to any country, regional, or industry regulations and policies for energy. However, an Energy Committee has been established at Chemanex to observe and initiate all possible energy conservation measures. This committee meets once a month or more frequently as the need arises. Additionally, energy consumption is one of the main discussion topics at the Monthly Factory Meetings. Some initiatives taken as a result of these meetings are

switching off of lights and fans during lunch time, the use of transparent roofing sheets and the use of low power consuming lamps in the Ratmalana factory premises.

For CISCO too, there are no industry regulations or policies with regards to energy. CISCO is aware of the high impact it has on energy as a result of its operations, as the production machines are operated 24 hours a day.

At Link Natural, steam and electricity are the main sources of energy for the factory. The bio fuel steam boiler in place at Link Natural is an environmentally friendly method of generating energy. At Link Natural, the installation of new machinery and process improvements, for example improvements to the extraction process and particle size reduction process, as well as upgrading the utility systems such as the steam distribution system, result in the conservation of energy.

Energy Consumed



Petrol use (litres)

416 1,150 53,310 4,179 50,717 600

Diesel use (litres)

11,703 4,419 259,965 152,578 30,586 13,200

Furnace oil used (litres)

188,571 - 39,000 408,778 - -

Electricity consumption (kWh)

1,616,150 777,642 5,844,978 7,979,447 390,519 4,707,678

Energy consumption (Gj)

14,158.4 3,010.5 34,588 51,843.5 4,355 17,479.5

*In addition, Link Natural and CISCO also source energy from LP Gas, while Link Natural also uses biofuels and organic material to generate steam.


Water Consumption CIC believes in the efficient use of water. Being a predominant player in the agriculture industry we are well aware of the need to optimise the use of water. We take this very seriously and one performance indicator we use when measuring the viability of any crop in our farms is “output per litre of water”.

CIC Holdings records water usage on a daily basis and compares this with previous data on usage in order to identify areas of waste and control water consumption.

At CIC Agri Businesses, ground water is the main source of water used in all locations of operations. Of the water utilised, approximately 20% of treated waste water is recycled for gardening purposes at the premises of the yoghurt plant in Dambulla.

At CIC Feeds, all farms and plants use a combination of water from municipal pipelines, tube wells, and dug wells for the normal course of operations. The waste water treatment plant at the processing plant of CIC Feeds treats all water which goes out from the processing area.

At Chemanex, municipal water is used, and therefore natural water sources in the surrounding areas are not affected. Also

at present, the Company does not require large quantities of water for day to day operations. There is also no release of waste water to the environment.

The total water consumption in the financial year 2014/2015 was 6,136 m3 whereas last year it was 11,178 m3, which is a 45 % decrease in water consumption. This is mainly due to reduced level of operations at Yasui lanka (Pvt) Ltd and the closure of the CSD unit (stores complex run on behalf of an associate company) in the Ratmalana factory premises.

CISCO also only uses municipal water, which is purified internally for daily drinking purposes. At CISCO only 20% of total water consumption is used for the machines, which is then totally reused through the chiller system. As a result there is no waste water from the machines released into the environment.

At Link Natural, approximately 96% of water required is taken from a well which is maintained by the company, located close to the factory, and the remaining 4% is obtained from municipal sources as well as from rain water. Approximately 15% of treated waste water is reused for gardening purposes and for the plant nursery.

Water withdrawn and reused



Volume of water withdrawn for use (m3)

21,692 22,442 11,874,556 113,403 6,541 5,400

Percentage of water recycled or reused (%)

0.1% 15% 2% 20% 0 10%

BiodiversityCIC’s policy across all its businesses is to ensure that at every juncture, the biodiversity found within the habitat we share with others, is nourished and protected.

We strive to ensure that our operations do not harm or upset the delicate balance of Sri Lanka’s biodiversity, and in fact we promote its well-being, particularly across the eco‐ systems

prevalent on our farms where we employ green zones to help them thrive.

CIC Holdings PLC does not own or have any interests in property within or adjacent to any areas of sensitivity in terms of biodiversity. However, CIC Agri Businesses’ farm at Hingurakgoda is a heaven for the resident spotted deer population of Sri Lanka.


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As a responsible corporate citizen CIC has taken on a national biodiversity concern and is funding the study of Sloth Bears in the Wilpattu National Park. CIC Holdings is conducting this study in partnership with the Sri Lanka Business and Biodiversity Platform and Biodiversity Education And Research (BEAR). The project is funded by CIC and implemented under the supervision of the Department of Wildlife Conservation (DWC)

EmissionsCIC is mindful of the emissions that result from its business operations and is committed to minimise their negative effect, by taking steps to reduce the amount of fossil fuels used, as well as reducing the amount energy consumed that is produced from other non-renewable sources. These efforts have been described in more detail under the Energy and Transport sections of this report.

Effluents and WasteIn addition to air emissions, CIC is also mindful of the liquid and solid substances that are emitted into the environment as a result of its business operations, in the form of effluents and waste materials. The Company takes steps to reduce these to as great an extent as possible, and to make improvements in the quality and quantity of these substances that are discharged into the environment.

Water discharge At CIC Holdings, all waste water is treated prior to discharge, and the quality of treated water is tested on a quarterly basis. In some operations of CIC Holdings, treated water is reused.

At CIC Agri Businesses this is applicable only to the rice processing unit and the yoghurt processing unit, where effluent water is treated and discharged only after it is within the allowed BOD and COD parameters. This is a strict requirement in order to obtain the Environmental Protection License renewal each year.

At CIC Feeds waste water is treated using a biological treatment method involving bacteria. After purification, the treated water is stored for reuse.

At Chemanex a number of programs focusing primarily on waste and water management have been successfully implemented. Our product and storage sites as well as our effluent management initiatives are certified and licensed by the Central Environment Authority (CEA). The CEA also

conducts audits on a regular basis to ensure we comply with and conform to the stringent standards highlighted within the licensing process.

At Link Natural too, an aerobic effluent treatment plant functions 24 hours a day in order to treat waste water generated from the factory, canteen and office, and other operations. Total weight of waste by type and disposal methodAt the Ratmalana facilities of CIC Holdings, quantity of waste products is recorded and monitored on a monthly basis. Waste is also separated for recycling or composting. Johnson and Johnson also ensures that all waste paper is recycled by an external agency, while at the Platignum operations, waste plastic is recycled and added into the daily production process.

CIC Agri Businesses has found an innovative solution to one of its key sources of waste – paddy husks. The Company uses these husks as a source of energy in their boiler.

At CIC Feeds, most waste is organic and disposal channels are well established. In the event of any unusual situation, the management will assess the situation and decide on the proper method of disposal and obtain advice from a competent outside party or authority.

Average weight of waste per month amounts to 295,500 Kg. Accordingly, total waste up to date stands at 3,546,000 kg, which comprises of 3,382,320 kg of organic and garden waste, 153,952 kg of plastic, 1,305 kg of scrap metal and 8,423 kg of paper.

Around 72% of the organic waste includes litter from breeder farms, poultry farms and hatchery waste. This waste is sold as agricultural fertilizer to farmers who use this as an alternative organic fertilizer. The conversion is 100% of the waste produced. Another 12% of the organic waste is poultry processing waste. This is further processed into value added by-products such as render meal and poultry fat, which is used in feed production. Here also the conversion rate is 100% of waste. As a result, no residue discarded into the environment. The balance comprises of feed raw material waste and used paddy husks in the poultry cages. Around 60% of the paddy husks are collected in a network of soakage pits with zero harm to the environment.


Empty poly propylene bags, plastic barrels, and cans which come with raw materials as packaging are considered as waste, out of which 86% is recycled, 13% reused and the remainder is discarded.

Newspaper and other paper waste is reused to the maximum extent and the balance is incinerated. Around 96% of paper is sent to the hatchery to be laid in chick boxes.

At Chemanex during 2014/15, 93% of production related waste has been recycled. The remainder is disposed of after the necessary approvals are obtained, and is disposed through a CEA authorised member.

At CISCO 10% of rejects are reused as input material along with virgin material. Other scraps are sold for recycling and waste is segregated composted where possible.

At Link Natural, the percentage of the non-hazardous vs hazardous waste is high at approximately 99.96% of total waste, and hence the impact to the environment is low. The total amount of hazardous waste is 37 kg [0.03% of total waste] and is disposed of through incineration.

Waste Generated by Type



Hazardous waste (kg)

- 37 - - - -

Non-hazardous waste (kg)

157,660 68,140 4,217,300 3,453,379 56,058 2,300

Total Number and Volume of Significant SpillsNo significant spills have been reported during the reporting period by any of the companies within the CIC Group.

Products and Services The company is committed to supplying high quality products to its customers, but is mindful that some of its products may impact the environment in a negative manner. The Company strives to source raw materials and products from reputed suppliers, where extensive research has gone into such products to ensure that minimal damage is caused to humans and the environment.

Extent of Impact Mitigation of Environmental Impacts of Products and ServicesCIC Holdings and CIC Agri Businesses produce fertilizers and crop protection chemicals, which if not properly used, could cause harm to the environment. This has become an issue of contention for the whole industry, particularly in the North Central province of Sri Lanka. CIC takes steps to combat this by educating the farming community on the proper application and disposal of these chemicals. However, overuse of such agricultural inputs by farmers remains a

principal challenge faced by the agriculture inputs industry as a whole.

CIC Feeds attempts to minimise the negative environmental impact that could occur from its packaging. As a result, packaging material used by the company for animal feed and day old chicks, is recyclable.

Chemanex has always placed emphasis on building relationships between manufacturers and users, ensuring a dialogue which could lead to a culture of continuous product improvement and development. This has led to Chemanex becoming established as a pioneer of safe, lead-free pigments and innovative products which have no negative impact on the environment.

CISCO understands the significant negative impact on the environment that is created by the disposal of its product, PET bottles, by end consumers. As a result, the Company has plans to introduce bio-degradable material to reduce the negative effects of its product on the environment. CISCO is now in the testing phase of production using bio-degradable materials and is committed to introduce this innovation in Sri Lanka in the near future.


105

TransportThe policy of the company is to minimise the negative environmental effects of transportation, by route planning and using new more environmental friendly, fuel efficient vehicles for transportation.

The Ekala stores of CIC Holdings ensures that goods to be transported are clubbed together into one delivery run, and that maximum vehicle space is utilised, thereby reducing the need for multiple vehicle runs. Vehicles of the Ekala stores as well as of the Ratmalana factory are also randomly checked for emissions, and are regularly maintained in order to ensure minimal impact in terms of air pollution.

At CIC Agri Businesses transport is necessary for the distribution of products as well as for the procurement of raw material. The Company has few delivery vehicles of its own, but all are maintained to the required standards by which emissions are kept to a minimum. Hired vehicles too are monitored to the best of the organisation’s ability, in order to reduce the negative environmental impact.

At CIC Feeds, old vehicle fleets have been replaced with new more efficient vehicles which are low on fuel consumption, create less pollution, and require less maintenance.

CISCO’s lorries are also checked and maintained periodically in order to ensure minimal emissions.

Link Natural recognises that emissions, dust, and noise are negative environmental impacts created through their transportation process. Here too, regular inspections and testing is carried out, together with regular engine maintenance. Link Natural also strives to use new vehicles throughout the transportation process to as great an extent as possible.

Supplier Environmental AssessmentThe Company sources products from reputed suppliers, who provide products that have been extensively researched. As we are present in the crop protection and industrial chemical/ input industries, it is paramount that the products we supply have minimal negative effects on humans and the environment.

An Independent environment assessment/impact report issued by the United States Environmental Protection Agency

is one report among many that is submitted to the Registrar of Pesticides, when the company registers a new crop protection chemical in Sri Lanka.

Category – Social

Labour Practices and Decent WorkEmploymentEmployees are the most important asset of the CIC Group, and the success of the Company as a whole depends on the contribution of each employee. All employment undertaken by CIC falls within the nationally established institutional and legal frameworks, and all statutorily required payments towards provident funds are made on behalf of staff. CIC strictly adheres to all labour laws of Sri Lanka including the Shop and Office Employees’ Act, Factories Ordinance and Gratuity Act. The Company ensures that a safe, healthy, and decent working environment is provided for all categories of employees without any discrimination. CIC also enters into clearly defined employment relationships with its staff, with the exception of outsourced staff who are instead directly employed by third party labour contractors.

Despite outsourced workers not falling under the purview of CIC, the Company maintains a strong interest in the wellbeing of these workers. As such, if these workers were to bring any issues with the conditions of their employment to the attention of the Company, CIC would take steps to take these issues up with the labour contractors in question.

The labour turnover across the CIC Group can be taken as an indication of the satisfaction of our employees, and their commitment to continue to serve the Company. Low rates of turnover can be observed within most subsidiaries of the Group.

Where higher rates are observed, this can be attributed to structural changes that have occurred during the year under review. For example, employee turnover at CIC Agri Businesses was high during the reporting period due to the restructuring program that was carried out across the Group.

Similarly the high turnover at Chemanex during the 2014/15 period was due to the transferring of the Colombo South Depot from Chemanex’s responsibility to a third party. As a result, employees who previously came under the direct payroll of Chemanex, now fall under the purview of the new operator of this part of the business.


New Hires by GenderCIC Holdings Link Natural CIC Agri


Male Female Male Female Male Female Male Female Male Female Male FemaleNumber of New Hires

91 10 13 2 - - 9 3 2 - - -

Rate of New Hires

20% 2% 2.6% 0.3% - - 3.8% 1.2% 1.4% - - -

New Hires by Age GroupCIC Holdings Link Natural CIC Agri


No. % No. % No. % No. % No. % No. %

Under 30 years

49 11% 15 2.9% - - 9 3.8% 2 1.4% - -

30 – 49 years 44 10% - - - - 1 0.4% - - - -

50 years and above

8 1% - - - - 2 0.8% - - - -

New Hires by RegionCIC Holdings Link Natural CIC Agri


No. % No. % No. % No. % No. % No. %

Central Province

6 1.25% 1 0.18% - - - - - - - -

Eastern Province

5 1.1% - - - - - - - - - -

North Central Province

7 1.5% 1 0.18% - - - - - - - -

Northern Province

6 1.25% 1 0.18% - - - - - - - -

North Western Province

3 0.65% 1 0.18% - - - - - - - -

Sabaragamuwa Province

5 1.1% 1 0.18% - - - - - - - -

Southern Province

8 1.75% - - - - - - - - - -

Uva Province 1 0.4% - - - - - - - - - -

Western Province

60 13% 10 2% - - 12 5% 2 1.4% - -


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Employee Turnover by GenderCIC Holdings Link Natural CIC Agri


Male Female Male Female Male Female Male Female Male Female Male FemaleTurnover (No.) 59 11 5 1 125 5 11 5 34 3 - -Turnover Rate (%)

12.9% 2.4% 1% 0.2% 23.6% 0.9% 4.7% 2.1% 23.7% 2.1% - -

Total Turnover Rate (%)

15.3% 1.2% 24.5% 6.8% 24.5% -

Employee Turnover by Age GroupCIC Holdings Link Natural CIC Agri


No. % No. % No. % No. % No. % No. %Under 30 years

22 4.8% 3 0.6% 80 15% 11 4.7% 6 4.1% - -

30 – 49 years 36 7.9% 3 0.6% 42 8% 3 1.3% 20 14% - -50 years and above

12 2.6% - - 8 1.5% 2 0.8% 11 7.7% - -

Employee Turnover by RegionCIC Holdings Link Natural CIC Agri


No. % No. % No. % No. % No. % No. %Central Province

4 0.9% 1 0.2% 26 5% - - - - - -

Eastern Province

1 0.2% - - 5 0.9% - - - - - -

North Central Province

4 0.9% 1 0.2% 14 2.7% - - - - - -

Northern Province

1 0.2% - - 11 2% - - - - - -

North Western Province

1 0.2% 1 0.2% 14 2.7% - - - - - -

Sabaragamuwa Province

2 0.4% - - 15 2.8% - - - - - -

Southern Province

4 0.9% - - 7 1.3% - - - - - -

Uva Province 53 11.6% - - 5 0.9% - - - - - -Western Province

- - 3 0.6% 33 6.2% 16 6.8% 37 25.8% - -


Health and SafetyHealth and safety in general and occupational health and safety in particular are a key priority across the CIC Group. Across the Group, senior level staff are appointed, who are responsible for managing this area within each company.

All staff across the Group are exposed to annual fire drills while staff working in factories, repacking centers and similar operations are also exposed to annual first aid training. In addition, staff working in operations that could be considered to be potentially hazardous, are trained on the health and safety aspects related to their job at the time of recruitment and on a regular basis thereafter. All staff across the Group are also entitled to annual health checks at a predetermined medical center contracted by the Company. The Repacking Centre of CIC Holdings is also currently in the process of implementing OHSAS 18001:2007 for further stringency in their health and safety management systems.

CIC as a Group also took on the challenge of combatting diabetes within the year under review. In November 2014, an extensive awareness program was conducted for employees of the Group as well as for community members in certain locations, on the causes and prevention of diabetes. Employees were also encouraged to make at least one of 3 pledges: to walk daily, eat healthy, and live actively, in an effort towards preventing diabetes.

As a result of the Group’s stringent health and safety standards, CIC Holdings, CIC Agri Businesses, CIC Feeds, Chemanex, and CISCO did not report any injuries, occupational diseases, unusual absenteeism or fatalities within the year under review.

At Link Natural, though no major accidents occurred during the reporting period, a minor injury was recorded for one staff member whose 5th finger was injured as a result of moving parts of a machine, and 14 days of work were lost for this individual as a result.

Training and Education CIC recognises the importance of training, education, and development for the wellbeing and progress of its employees, and each entity of the Group is committed to providing timely and relevant training for their employees. Though each subsidiary of the Company manages the aspect of training independently, they each strive to ensure that all employees irrespective of staff grade have an equal opportunity for training and development.

CIC Holdings undertakes a combination of training programs depending on the nature of each individual’s job role. Employees within the Healthcare Division undergo constant on the job training, while employees in other parts of the business have also benefited from training on leadership skills, communication skills, and motivation, during the year under review.

At CIC Feeds, staff members are constantly encouraged to attend seminars and other training programs which will develop and enhance their knowledge while providing them with the opportunity to learn new skills, methods, and technologies.

Similarly Chemanex provides both local and international training in order to enhance employees’ self-development and enhance their career progression while also ensuring a satisfied and motivated workforce.

CISCO employees are also trained on the job and are also encouraged to undergo professional examinations in their respective fields.

At Link Natural, employees benefit from a wide variety of training programs. During the year under review, the Company has provided its employees with on the job training, soft skills development training, leadership training, motivational training, managerial skills training, job knowledge training, training on standards and health and safety, as well as outbound training.


Staff participation at fire drill

109

Average Hours of Training per Year per Employee by Gender CIC Holdings Link Natural CIC Agri


Male Female Male Female Male Female Male Female Male Female Male FemaleTotal Hours of Training

2393 529 7806 2602 1229 47 1806 451 231 108 90 -

Average Hours of Training

6 10 20 20 3 0.5 9 15.5 2 4 3 -

Average Hours of Training per Year per Employee by Employee CategoryCIC Holdings Link Natural CIC Agri


Executive Board Members

- 15 7.5 - - N/A

Divisional Directors

26 N/A 2 N/A N/A N/A

Group Heads/ General Managers

16 N/A 2 5 7.5 N/A

Senior Managers/ Managers

4 27 14 6 4 5

Junior Managers/ Senior Executives

18 31 3 6 8 N/A

Executives/ Junior Executives

5 22 3 5 - 5

Non-Executives

2 18 1 12 2 2.5

Performance and Career Development Reviews Regular performance and career development reviews are an important aspect of employee progress within the CIC Group. The fundamental premise of this is to strive to further the development of all employees across the Company, and gender is not a factor that is taken into consideration when undertaking performance and career development reviews.

At all companies within the Group with the exception of Chemanex, annual performance and career development

appraisals are carried out for all employees, whereby each individual is afforded the opportunity to assess themselves against the previous year’s appraisal, self-assess their strengths and weaknesses, while also being given the opportunity to express their future training requirements and concerns if any. All remuneration in the form of salary increments and bonuses are based on each employees’ achievement of the objectives stated through the appraisal. Therefore, the reward system of the Company is directly connected to the appraisal system, driving employees to achieve their stated objectives.


Through this process, the Company is also able to identify key performance and likely candidates to be developed to higher levels of management.

Performance and career development reviews are not undertaken for outsourced employees, as their direct employers are responsible for undertaking reviews in that regard.

Employee Performance and Career Development ReviewsCIC Holdings Link Natural CIC Agri


Male Female Male Female Male Female Male Female Male Female Male FemalePercentage of employees who received a formal performance review

100% 100% 75.5% 84.5% 100% 100% 100% 100% 23% 50% 60% 60%

At Link Natural, those employees who did not receive performance reviews during the year under review were employed for 6 months or less. 100% of employees who have been with the Company for over 6 months are entitled to performance and career development reviews.

At Chemanex, annual performance and career development reviews are undertaken with management staff only.

Diversity and Equal OpportunityCIC strives to cultivate a diverse workforce and provides equal opportunities for all employees and prospective employees, regardless of gender, age, race, religion, sexual orientation, political belief, or any other characteristic. At the time of recruitment, none of these factors are considered, and an applicant is judged purely on merit of qualification, experience, and suitability for the role in question. Additionally while on the job, employees are not discriminated against for any reason, and their success within the Company is solely based on each individual’s unique capabilities and performance.

The breakdown of employees within the CIC Group by gender and other indicators of diversity is presented below. Though females are not represented on the CIC Holdings Board, females are represented on the Boards of CIC Feeds, CISCO, as well as a number of other subsidiaries not covered by the scope of this report.

In addition, while CIC as a Group maintains strong levels of diversity in administrative positions, due to the nature of the businesses including factory operations and field-based activities in some of our subsidiaries, lower levels of diversity may be indicated at subsidiary level.


111

Composition of Governance Bodies by GenderCIC Holdings Link Natural CIC Agri


Male Female Male Female Male Female Male Female Male Female Male FemaleBoard of Directors (%)

100% - 100% - 100% - 90% 10% 100% - 86% 14%

Senior Management Team (%)

92.5% 7.5% 63% 37% 85% 15% 95% 5% 100% - 100% -

Breakdown of Employees by GenderCIC Holdings Link Natural CIC Agri


Male Female Male Female Male Female Male Female Male Female Male FemaleGender

Diversity (%)88% 12% 75% 25% 80% 20% 87% 13% 81% 19% 80% 20%

Breakdown of Employees by Age Group



Under 30 years

30% 51% 44% 23% 17% 65%

30 – 49 years 58% 41% 52% 69% 64% 35%

50 years and above

12% 8% 4% 8% 19% 0

Equal Remuneration for Women and MenBeing home to the world’s first female head of state, the socio-economic environment within Sri Lanka seems to encourage equal participation in the workforce of both men and women. While women’s workforce participation rates vary by industry, CIC as a Group strives to ensure an equal platform for all employees regardless of gender, or any other characteristic. Within the Group, a number of subsidiaries have Boards that consist of female representation, including CIC Feeds and CISCO which are covered within the boundary of this report.

Companies across the CIC Group provide equal remuneration for work of equal value, and there is no difference in remuneration paid to women and men. The ratio of basic salary and remuneration of women and men at all locations of operation and across all employee categories is 1:1.

Labour Practices Grievance MechanismsWhile there is no formal channel within the CIC Group whereby employees could voice their grievances with regards to labour practices, there are informal channels in place which would serve to address this. An open door culture is in place across the Group where any employee can access any other member of staff or management, in order to voice any concerns they may have. In addition, non-management staff at CIC Holdings PLC are unionised and are covered by a collective agreement which seeks to protect their labour related interests.

During the year under review, there have been no grievances about labour practices filed at any of the companies within the CIC Group.


Human RightsNon-discrimination CIC is a strong believer of equal opportunities in the workplace and prides itself on respecting its workforce equally, regardless of gender, age, race, religion, sexual orientation, political beliefs, or any other factor.

All companies within the Group fill vacancies only on the basis of the right fit for the job, and all staff also have equal access to training and development accordingly. CIC also believes in equal pay for work of equal value, as described in previous sections of this report.

There have been no incidents of discrimination reported by any of the companies within the CIC Group during the year under review.

Though there is no formal channel for voicing such incidents if they do occur, the Group operates an open door culture where any staff member can access and voice their concerns to any member of management within the Company.

Freedom of Association and Collective BargainingCIC recognises its employees’ rights to freedom of association and collective bargaining, and non-management employees of CIC Holdings PLC are covered by a collective agreement. Employees recruited under the management category are automatically excluded from joining trade unions however, as the unions themselves have been created solely for non-management grades.

While Link Natural does not have any politically affiliated unions present within the Company, 3 employee associations have been established, including an in-house union for staff, an in-house union for workers, and a welfare association for the welfare of employees. 90% of Link Natural employees are covered by these associations.

Further, while unions are not present at CIC Agri Businesses, CIC Feeds, Chemanex or CISCO, as a result collective bargaining agreements are not in place within these companies, employees from all companies are given a fair opportunity to express their opinions and the companies have not discouraged them from collectively voicing their concerns to the management, or violated their fundamental rights in this regard at any point to date.

Child Labour and Forced or Compulsory LabourCIC strictly ensures that child labour does not and will not occur within its operations. The Company conforms to the labour laws of Sri Lanka, and as such, does not employ any person under the age of 18 years. Ages of applicants are verified prior to the commencement of formal interviews with potential new recruits. This approach is also adopted as regards outsourced contract employees and relevant clauses are in place within the agreements entered into with our labour contractors. There have been no incidents of child labour reported within the Group to date.

CIC is equally strict with regards to forced or compulsory labour, and neither is tolerated within the Group. Towards ensuring this, the Group as a policy neither retains any original documents belonging to its employees, nor requires any form of guarantee or cash deposit. No employee is made to work against his or her will or is subject to corporal punishment or coercion of any sort. As a consequence, no incidents of forced or compulsory labour have been reported within the CIC Group to date.

Supplier Human Rights Assessment CIC, and in particular CIC Agri Businesses and Link Natural who work closely with farming families through their out-grower networks, recognises that as for any business, child labour may not be present within its own operations, but it is a potential area of risk in the supply chain.

The Group also recognises the inherent nature of small holder farming, which is typically a family activity where all members of a family would participate. In this regard, CIC acknowledges that family labour, where children assist their parents with farming activities after having completed their daily schooling and education requirements, may occur within the Company’s supply chain. While this is permitted, child labour, where children are forced to engage in work rather than pursuing their education, is not permitted within the supply chain of the Group.

CIC Agri Businesses and Link Natural have not identified any actual or potential incidents of child labour within their supply chains thus far. However, formal methods of screening for child labour and other human rights risks in the supply chain have not yet been implemented by these entities or others within the Group.


113

SocietyLocal communities Local communities are a vital stakeholder of the CIC Group, particularly for CIC Agri Businesses and Link Natural where out-grower networks are established. Through these programs, the company reaches and engages with a large number of small scale farmers, thereby contributing towards the upliftment of their living standards and towards their economic and social development as a whole. Out-growers are typically family units, whereby both men and women are involved.

CIC Agri Businesses works with a network of over 20,000 farmer families covering over 15,000 acres through its out-grower programs for seed paddy, consumption paddy, soya, maize and milk. In addition, Link Natural’s out-grower network in the areas of Anamaduwa and Ampara consists of over 350 farmer families spanning over 125 acres of herbal plants.

CIC Feeds too ensures that employment opportunities are given to the local community surrounding its farms and plants, thereby contributing towards the development of the community in their vicinity.

In addition to this, companies across the CIC Group also get involved in various community investment initiatives with the aim of uplifting living standards and contributing towards community development. These initiatives have been primarily in the field of education. CIC Feeds has invested in human capital during the past year through providing scholarships for students, while Chemanex has taken a long term mantle of improving the standard of English education in the Sangabodhi Vidyalaya situated in Mahiyanganaya.

Additionally through the Chemanex Trust Fund, students in secondary and higher education are supported as the Company provides commercial training for undergraduates from various local universities, thereby providing them with practical work experience and making them more employable and attractive to recruiters.

Link Natural is also involved in uplifting education standards, and to this effect, conducts curricular and co-curricular activities in ten selected schools in the Dompe Education

Zone. These include special seminars and motivational programs for teachers and students, leadership training programs for students, attitude development programs for students and parents, as well as teach training programs and parental awareness sessions.

Given the nature of its business and the product it markets, Link has also been involved in awareness programs on oral hygiene, which has benefited a number of families within the local community.

CIC Holdings through its Sports Club organised a blood donation campaign at the CIC Head Office in Colombo. A total of 73 CIC employees donated blood at the event.

Formal impact assessments have not been conducted thus far in terms of community development activities conducted by the Group’s companies.

In addition, while at Chemanex all new operations are evaluated through a rigorous process prior to embarking in order to mitigate possible impacts on the community, no formal impact assessments have been conducted by other entities of the Group in terms of their operations.

It is deemed however, that due to the location of our operations across the Group, where with the exception of our farms, other operations are not located in residential areas, that we do not have any significant negative impacts on the local communities through our business. The companies within the Group take steps to ensure this as legally required for example by conducting regular noise testing, etc.

Where we do have an actual or potential impact on local communities is in the localities of the end users of our fertilizer and crop protection chemicals, where it is alleged that products of the agricultural inputs industry as a whole is contributing towards Chronic Kidney Disease prevalent in the North Central province of Sri Lanka.


Product ResponsibilityCustomer Health and Safety At CIC, customer health and safety is of the utmost importance, particularly with regards to consumer goods, pharmaceuticals, and agriculture and food related products.

All products manufactured and marketed by the Group have been through stringent health and safety testing and have been developed into the final products that are produced by the Company today. The necessary certifications have also been obtained by the various entities within the Group, where required. For example, all products imported by the Healthcare Division of CIC Holdings must obtain a certificate from the CDDA. Similarly, companies operating in the food and beverage sector under CIC Agri Businesses and CIC Feed hold ISO22000:2005 and HACCP food safety management system certifications, while Link Natural also holds HACCP certification.

At CIC Agri Businesses, SHE impacts are assessed, reported, and corrected in all production units and farms. Similarly at CIC Feeds, all processed chicken sold by the company complies with the highest safety controls and regulations.

PET bottles manufactured and sold by CISCO have gone through stringent testing in order to ensure that products sold are of food and beverage packaging grade.

In terms of analysis of products for customer health and safety at the disposal stage, any crop protection chemicals not sold within 2 years of manufacture, are recalled and disposed of by the Company in a safe manner. However, though farmers have been educated on the safe disposal of fertilizer and crop protection chemical products, actual methods of disposal by consumers of our products across the Group have not been assessed thus far.

Products and Services – Customer Satisfaction and Labelling Being a company that operates both in the B 2 B and B 2 C fields, CIC feels it is of vital importance to have an up to date understanding of customers’ views with regards to the products or services that it markets.

To this end, CIC believes in providing its customers, whether dealers or end consumers, with as much information on its products and services as possible, in line with statutory requirements. This is particularly important due to the nature of CIC’s businesses, in particular for products related to agriculture, pharmaceuticals, food, or chemicals.

For example the Healthcare Division of CIC Holdings is required to provide certain product information, including details on manufacturers as well as information on safe usage of products including how to use products, dosage, etc.

At CIC Agri Businesses, product information on fertilizer should be made available as per the National Fertilizer Secretariat regulations, and SLS and ISO requirements. In addition as per the Consumer Affairs regulations, SLS, and ISO, rice, yoghurt, and eggs sold by the company must also carry specific information through their product labelling.

Similarly at Chemanex, certain information must be maintained and communicated regarding a number of products. For example, Dot 3 Break Oil is manufactured according to the international standard of SAE 71703, and for Nexobleech, a quality assurance certificate is obtained from the Rubber Research Institute for each batch.

Additionally for Link Natural, though information on ingredients is not required for ayurvedic products, for any products that have a healthcare application, information on ingredients must be made available through the product packaging and labelling.

CIC and its subsidiaries have in built regular systems for measuring customer satisfaction as described below. In addition to specific channels or engagement with customers to ascertain their levels of satisfaction, companies within the CIC group also maintain open channels through which customers could provide their feedback as and when desired.


115

Company/ Division Frequency of measuring customer satisfaction

Methodology Other mechanisms by which customers provide feedback

Customer feedback and actions taken

CIC Holdings – Industrial Chemicals

Annually Interviews, questionnaires

Customer feedback brought to light the necessity to improve the colour of some of the paint binders produced. As a result, root cause analysis was undertaken and corrections were made so that the colour produced would be within the accepted limits.

CIC Holdings – Crop Solutions

Annually Surveys and interviews

Questionnaires Customers maintain a good attitude towards the agro chemicals and liquid fertilizers marketed as well as the service provided. The need of most customers is for portable pack sizes and concessional rates for products specifically during the season. Steps are taken by the company to address these.

CIC Holdings – Healthcare Division

For medical devices – monthly and upon the introduction of new products. For pharmaceuticals – monthly.

Face to face interviews

Customer satisfaction is obtained for all product categories. In general, feedback has been positive.

Johnson & Johnson Daily, weekly, and annually

Usage and attitude surveys, through independent research agencies

Mom helpline, telephone, social media

Depends on the objective of the survey undertaken. Examples of feedback received include top of mind awareness, consumer behaviour patterns, and feedback on specific products.

CIC Agri Businesses Monthly Monthly visits by marketing and field staff

One on one meetings, email, telephone

On receipt of any formal complaints regarding any of the products that CICAB deals with, it’s immediately dealt with by either or both the production team and marketing team depending on the nature and relevance of the complaint

CIC Feeds Monthly Monthly visits to dealers and customers by our field force

Dedicated 24 hour customer care hotline

Our field forces regularly visit the customers and the customer satisfaction feedback is received on a continuous basis, allowing CIC Feeds to take necessary action when required


Company/ Division Frequency of measuring customer satisfaction

Methodology Other mechanisms by which customers provide feedback

Customer feedback and actions taken

Chemanex Monthly Customer visits by product managers

Visits, email, telephone

In general, customer feedback for our products is positive. Appropriate action would be taken immediately if any negative concerns are reported from our customers. We have been recognised for 100% vendor compliance and as a most preferred supplier by our international buyers. All customer complaints are properly recorded and promptly attended.

CISCO Once a year Feedback forms as per ISO requirements

Emails. telephone Customer feedback is assessed in management meetings and immediate action is taken whenever necessary

Link Natural Once a year Qualitative research is done on usage and attitudes, validated by quantitative research where relevant. Regular customer feedback is also obtained

Email, telephone, interviews done for the purpose of research

Research on Sudantha is currently ongoing. Samahan and Kesha will be considered for research during the next financial year.


117

Marketing Communications Companies within the CIC Group do not market or sell any products that are banned, or that are disputed. However, the use of fertilizer and crop protection chemicals continues to be a matter of stakeholder question and public debate on a national level, due to the alleged link to Chronic Kidney Disease particularly in the North Central province of Sri Lanka.

The biggest challenge faced by the agriculture industry today is the overuse of certain agricultural inputs by the farming community, which by now has escalated to the extent where ground water, rivers, and reservoirs have become contaminated.

We continue to believe that the solution to this problem lies in education and awareness, and we continuously educate the farming community on scientific crop management and on the judicious use of our products. In addition, we ensure that the products we market consist of raw materials that are sourced from the best global manufacturers, which are widely researched and have minimal negative impacts on humans and the environment.

None of the entities within our Group have faced any incidents of non-compliance with regulations or voluntary codes concerning marketing communications, including advertising, promotion, or sponsorships, within the period under review.

Product and Service Related Compliance All companies within the CIC Group ensure that their products and services satisfy the requirements of all relevant government organisations and local authorities, including the Sri Lanka Standards Institute, Board of Investment, Central Environmental Authority, Industrial Technology Institute, and so on. Companies within the group also have the necessary certifications related to their products or services.

As mentioned previously, all products imported by the Healthcare Division of CIC Holdings must obtain a certificate from the CDDA, while companies operating in the food and beverage sector under CIC Agri Businesses and CIC Feeds hold ISO22000:2005 and HACCP food safety management system certifications. Link Natural holds HACCP certification as well.

As such, none of the entities covered by the boundary of this report have faced any monetary fines for non-compliance with laws and regulations concerning the provision and use of products or services.

In addition, none of the entities have faced any monetary fines or non-monetary sanctions for non-compliance with laws and regulations in general during the period under review.


GRI Content Index for ‘In accordance’ – CoreGeneral Standard DisclosuresGeneral Standard Disclosures Page External Assurance

Strategy and AnalysisG4-1 CEO” statement 84 NoneOrganisational ProfileG4-3 Name of organization 86 NoneG4-4 Primary brands/products and Services 86 NoneG4-5 Location of org. headquarters 86 NoneG4-6 No. of countries where the org operates 86 NoneG4-7 Nature of ownership and legal form 86 NoneG4-8 Markets sectors, customers served 86 NoneG4-9 Scale of the org. no of employees, operations ect 87 NoneG4-10 No of employees by contract and gender, employment type , region etc 87 NoneG4-11 % of employees covered by collective bargaining agreements 87 NoneG4-12 Describe the Org’s supply chain 88 NoneG4-13 Significant changes during the year re Org. size, structure etc 88 NoneG4-14 How the precautionary approach is addressed 88 NoneG4-15 External Charters principles the Org Subscribes to 88 NoneG4-16 List of membership associations the Org is attached to 89 NoneIdentified Material Aspects and BoundariesG4-17 List of All entities included in the Org. consolidated Financial Statements 90 NoneG4-18 Report content and aspect boundries 90 NoneG4-19 List all material Aspects 90 NoneG4-20 Aspect Boundary for each Material aspect 90 NoneG4-21 Report the Aspect boundry outside the Org. 90 NoneG4-22 effect of Restatements of info 91 NoneG4-23 Significant changes from previous reporting period 91 NoneStakeholder EngagementG4-24 List of stakeholder group 92 NoneG4-25 Basis of identification of Stakeholder 92 NoneG4-26 Approach to stakeholder engagement 92 NoneG4- 27 key topics, concerns raised thro’ stakeholder engagement 93 NoneReport ProfileG4-28 Reporting period 94 NoneG4-29 Date of most recent previous report 94 NoneG4-30 reporting cycle 94 NoneG4-31 contact point re report 94 NoneG4-32 Report the “In accordance” option chosen 94 NoneG4-33 Policy on external assurance 94 NoneGovernanceG4-34 Governance structure 95 NoneEthics and IntegrityG4-56 Vales principles, standards etc 95 None


119

Specific Standard DisclosuresMaterial Aspects DMA and Indicators Page Omissions External AssuranceEconomicEconomic performance G4-EC1 95 None

G4-EC3 96 NoneG4-EC4 97 None

Market presence G4-EC5 97 NoneG4-EC6 98 None

Indirect economic impacts G4-EC8 98 NoneProcurement practices G4-EC9 99 NoneEnvironmentalMaterials G4-EN1 100 None

G4-EN2 100 NoneG4-EN3 100 None

Energy G4-EN6 100 NoneWater G4-EN8 102 None

G4-EN10 102 NoneBiodiversity G4-EN11 102 NoneEmissionsEffluents and waste G4-EN22 103 None

G4-EN23 103 NoneG4-EN24 104 None

Products and services G4-EN27 104 NoneTransport G4-EN30 105 NoneSupplier environmental assessmentSocialLabour practices and decent workEmployment G4-LA1 105 NoneOccupational health and safety G4-LA6 108 NoneTraining and education G4-LA9 108 None

G4-LA11 109 NoneDiversity and equal opportunity G4-LA12 110 NoneEqual remuneration for women and men G4-LA13 111 NoneLabour practices grievance mechanisms G4-LA16 111 NoneHuman rights 112 NoneNon discrimination G4-HR3 112 NoneFreedom of association and collective bargaining G4-HR4 112 NoneChild labour G4-HR5 112 NoneForced or compulsory labour G4-HR6 112 NoneSupplier human rights assessment G4-HR11 112 NoneSocietyLocal communities G4-SO1 113 None

G4-SO2 113 NoneCompliance G4-SO8 113 NoneProduct responsibility G4-PR1 114 NoneCustomer health and safety G4-PR3 114 NoneProduct and service labelling G4-PR5 114 NoneMarketing communications G4-PR7 115 NoneCompliance G4-PR9 117 None


Audit Committee Report

Composition of the CommitteeIn accordance with the Corporate Governance Guidelines, the Board appointed Audit Committee comprises of three Non-Executive Directors, namely, Messrs R.N. Asirwatham, who functions in the capacity of Chairman, S.H. Amarasekera and S.M. Enderby. The Managing Director/CEO, Mr. S.P.S. Ranatunga and the CFO, Ms. P.D.S. Ruwanpura, attend meetings by invitation. The financial knowledge and the business acumen and the independence of the members are brought to bear on the deliberations and judgements on matters that come within their purview.

Role of the CommitteeThe role and the responsibility of the Committee is defined in the Audit Committee Charter, which is reviewed annually to ensure that new developments and other issues are properly addressed. The Committee among other functions reviews the operation and effectiveness of Internal Control Systems, ensuring that a good financial reporting system is in place, is well-managed and oversees the preparation, presentation and adequacy of disclosures in the Financial Statements in accordance with Sri Lanka Accounting Standards, Companies Act and other relevant financial reporting regulations. The Committee monitors the internal and external audit functions. The internal controls within the Company are designed to provide reasonable but not absolute assurance to the Directors and assist them to monitor the financial position of the Group.

The Audit Committee is empowered to review any activity within the Company. The Committee defines the responsibility for the internal audit function, considers recommendations made by the Internal and External Auditors, reviews their reports and takes necessary action.

The Committee makes recommendations to the Board on appointment, re-appointment and removal of External Auditors and approval of terms of engagement and remuneration.

MeetingsThe Committee held 5 meetings during the year. The attendance of the Committee members are given on page 43 The Internal Auditors, Messrs PricewaterhouseCoopers attend meetings when required and the Audit Committee makes inquiries from any officer of the Company as deemed necessary.

ActivitiesDuring the year, the Committee reviewed 4 reports forwarded by the Internal Auditors. The reports are submitted on a quarterly basis as they carry out the audits according to a scheduled programme. In addition, they carry out special audits if the need arises. Having assessed the internal financial controls, the

Committee is of the view that adequate controls and procedures are in place to provide reasonable assurance that the Company’s assets are safeguarded.

The Company’s procedures are in place to ensure compliance with statutory requirements. The compliances are monitored through the quarterly ‘Statutory Compliance Report’.

The committee had a meeting with the External Auditors in relation to the annual audit to ensure the independence in their approach and methodology. The Committee reviewed the Management Letter submitted by the External Auditors, Messrs KPMG, along with the management response. These recommendations are implemented by the management and the Audit Committee follows up on the implementation of these recommendations. The Committee also reviewed the Audited Financial Statements with the External Auditors.

The Company’s Code of Ethics educates and encourages staff at all levels to pave the way for Good Corporate Governance and encourages to resort to whistle-blowing, when they suspect wrong doing by other employees.

The Audit Committee has recommended to the Board of Directors, that Messrs KPMG, be re-appointed as Auditors for the financial year ending 31st March 2016 subject to the approval of shareholders at the Annual General Meeting to be held on 30th June 2015.

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

Finally, I would like to thank my present colleagues in the Committee, Harsha Amarasekera and Steven Enderby for their immense contribution with their vast commercial experience and professional expertise, and Franklyn Amerasinghe who resigned with effect from 02nd January 2015 as a Director of the company and thereby as a member of this committee for the colossal contribution made over the years, and also the Managing Director, CFO of the Company and the Secretary to the Committee for their contribution.

R.N. AsirwathamChairman - Audit Committee

22nd May 2015

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Report of the Human Capital & Compensation Committee

Human Capital is critical to enhance the performance and productivity of our organisation. Thus, we have implemented an attractive and flexible working environment to attract, motivate, develop and retain our skilled employees. Our goal is to have people with the required capabilities and commitment to support our current and future organisational success.

The table below reflects the employment report as at 31st March 2015:

Levels Total

Top management 22Senior management 68Professionally qualified and experienced specialists and mid-management 245Skilled technical and academically qualified staff, junior management, supervisors and clerical staff 1,122Workers 380Total permanent 1,765Employees on contract 187Total 1,952Outsourced employees 500Total with outsourced employees 2,452

The composition of the Human Capital & Compensation Committee1) Mr. D. S. Weerakkody, Chairman2) Mr. S. H. Amarasekera3) Mr. R. N. Asirwatham4) Mr. R. S. Captain5) Mr. S. M. Enderby

The Human Capital & Compensation Committee is responsible for developing the Group’s 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 Committee reviews the policies pertaining to remuneration and perquisites of the Executives of the Company annually with the assistance of external consultants.

The committee held two meetings during the year under review. The Chairman of the Committee can convene a special meeting in the event a requirement arises provided all members are given sufficient notice of such special meeting. The quorum for a meeting is two members. The CEO was invited to participate at the sittings of the Committee meetings as and when required by the Chairman considering the topics for deliberation at such meetings. The proceedings of the

Committee meetings were regularly reported to the Board of Directors.

Employee RelationsWe continue to engage our employees through various initiatives.

Employee DevelopmentThe group’s employee development interventions are an on-going effort on the part of the organisation to ensure our employees have the knowledge and skills required to deliver on our expectations for customers, investors, and communities.

RemunerationThe Company’s remuneration philosophy is anchored on a total reward approach. The remuneration strategy has been designed to enable the company to develop, motivate and retain an internal talent pipeline; and when necessary to attract key talent externally to sustain the performance of the group. The remuneration policy codifies the remuneration principles, processes, practices and procedures to give effect to the company’s remuneration philosophy and strategy. The pay mix may comprise a combination of Guaranteed Pay (Fixed Pay and Bonus) and Variable Pay (Short-Term Incentives) depending on the level in the organisational hierarchy and performance.

Leadership Development & Succession PlanningThe Committee believes that the quality of leadership will drive the performance of the group. Therefore, to build our leadership depth we are focussed on creating a robust pipeline of rising and capable talent to fill the key positions in the group.

The company will continue to focus on introducing and strengthening HR policies, practices & systems in the areas of performance management, employee recognition and employee engagement to deepen the talent management practices.

The Committee wishes to convey its sincere gratitude to Mr. E F G Amerasinghe for the contribution and leadership provided by him as Committee Chairman since 2005.

I would like to thank my colleagues for their valuable contribution towards the progress of the Committee.

D.S. WeerakkodyChairman, of the Human Capital & Compensation Committee

22nd May 2015


Nominations Committee Report

The Nominations Committee consisted of the Non-Executive Chairman, Mr. S H Amarasekera, and two Non-Executive Directors, namely, Messrs, E.F.G. Amerasinghe and R.N. Asirwatham. Mr. Rusi Captain was invited to join the Committee on 06th February 2015. Managing Director, Mr. S.P.S. Ranatunga attended the meetings by invitation.

The role and responsibilities of the Committee are-

• to recommend to the Board the process of selecting the Chairman and CEO

• to identify suitable persons who could be considered for appointment to the Board as Executive and Non-Executive Directors

• to make recommendations on matters referred to it by the Board

During the year under review, the Committee met once.

The Committee continues to work closely with the Board in reviewing its skill needs.

It has now being agreed that the Committee shall identify suitable persons for appointment to the Board of subsidiaries and ratify the appointment of any Director selected by them in order to ensure that required competencies are available in such companies.

Mr. E.F.G. Amerasinghe resigned as a Director of CIC Holdings PLC on 02nd January 2015 and consequently as a member of this Committee from that date. On behalf of the Committee, I wish to place on record its appreciation for the invaluable contributions made by Mr. Amerasinghe during the deliberation of the Committee over the several years in which he served on the Committee.

S H AmarasekeraChairman - Nominations Committee

22nd May 2015

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MANAGING RISK AT CICRisk can be defined as the combination of the probability of an event and its consequences. Risk is a part of life. Avoiding all risk would result in no achievement, no progress and no reward.

At CIC we have objectives at strategic, tactical and operational levels - anything that makes achieving these objectives uncertain is a risk. Therefore Risk Management is a central part of CIC’s strategic Plan. At CIC, the focus of the risk management process is the identification and mitigation of risks impacting the Group. Moreover, the objective of our risk management is to add maximum sustainable value to all the activities of the organisation. It marshals the understanding of the potential benefits and threats of all those factors which can affect the organisation. Further it increases the probability of success, and reduces both the probability of failure and uncertainty of achieving the organisation’s overall objectives. As the Group is exposed to a wider range of risks arising from a dynamic business environment which it operates, it has to address the risks based on its risk appetite and significance.

The Annual risk management cycle begins in the third quarter of the year where all risks impacting the business are identified in detail at the business unit level, prior to the preparation of the annual budgets. Then these risks are being communicated to the senior management where the severity and the likelihood of the impact are discussed. Appropriate actions to be taken to mitigate the risks are then discussed and a mechanism to monitor the progress of it is being arrived at.

The following are an overview of the main type of risks faced by CIC Group.

1. Financial risks (i). Interest Rate Risk Interest rate risk is the exposure of a company’s financial

condition to adverse movements in interest rates. Accepting this risk is a normal part of operation of a company and can be an important link to profitability, cash flow and shareholder value. However, excessive levels can pose a significant threat to a company’s earnings.

The impact on net interest cost of a change in interest rates depends on the interest terms of assets or liabilities. The Group’s Interest rate risk arises in two ways:

• The Group have invested in interest-bearing assets, the value of which changes when the interest rate changes.

• The cost of the company’s borrowing fluctuates when the general interest rate situation changes.

CIC majority of its capital employed is financed through debt. Further increased exposure to short term and floating rate borrowings has increased the exposure to the interest rate risk. Accordingly, an effective risk management that maintains this risk at prudent levels is essential to the safety and soundness of the Group.

Interest rate exposure is managed through the optimal structure decisions, striking a balance between short terms vs. long term and fixed vs. floating rate borrowings. Maintaining a deposit with higher return than interest paid on borrowings. Furthermore, negotiations with Banks/financiers are actively supported. Interest rates and socio- economic circumstances are monitored by the finance officers to allow accurate and prudent forecasts to be built. Sensitivity analyses are carried out to regularly to assess the impact of the movements of interest rates on the financial statements.

(ii). Foreign Exchange Risk Foreign Exchange Risk is the risk of an investment/

receivable/payable’s value changing due to changes in currency exchange rates.

Being a net importer, fluctuations in the exchange rate can significantly impact the financial results and the pricing policy which could in turn impact the competitive position of CIC Group.

Potential impact on the business by an adverse movement in exchange rates is captured through sensitivity analysis. Also the pricing is linked to the exchange rates. Further Group wide Foreign exchange exposures are monitored and appropriate actions such as forward exchange contracts and leading and lagging of payments/receipts are recommended to reduce inherent risks and minimise adverse impacts of currency rate movement of assets and liabilities.

Managing Risk at CIC


(iii). Liquidity Risk Liquidity risk is the risk of not having sufficient funds to

meet its financial commitments in a timely manner. The two key elements of liquidity risk are: short-term cash flow risk and long-term funding risk. The long-term funding risk includes the risk that loans may not be available when the business requires them or that such funds will not be available for the required term or at acceptable cost.

Unforeseen short fall in cash can sometimes lead to liquidity risk due to factors such as: seasonal fluctuations, unplanned reduction in revenue, business disruption and sustained reduction in profitability, unplanned capital expenditure and increase in operational costs, future debt repayments, delays in subsidy settlements and inadequate or non-existent financing facilities.

Business models and working capital management are reviewed periodically to ensure cash flow alignment as far as possible and minimise dependence on unexpected external borrowings. Trade cycles are analysed with a view to generating liquidity from operations. Also the bank relationships are managed with involvement of the Holding Company to ensure access to essential credit and cash management services.

(iv). Debtor Default Risk This is the risk of losses arising from a debtor being unable

to pay its loan obligations in full or the debtor is more than 90 days or overdue.

CIC is rooted island-wide and has its presence in few international markets. Adverse economic conditions may result in diminishing the customer credit worthiness and thereby increasing the default risk to the Company.

CIC extends credit facilities to customers based on the credit policy which entails evaluating customers periodically. Further, controls include structured approval levels, supervision and recovery procedures on overdue amounts and legal procedure for long outstanding receivables. Bank guarantees and cash deposits are made a requirement where practical and other limit exposure on unsecured credit is after a careful scrutiny. Presently, an evaluation is being carried out on all debtors of CIC Holdings PLC to further limit and strengthen the exposure.

(v). Fraud Risk Fraud essentially involves using deception to dishonestly

make a personal gain for oneself and/or create a loss for another. The term ‘fraud’ commonly includes activities such as theft, corruption, conspiracy, embezzlement, money laundering, bribery and extortion.

Fraud may be attempted as the organisation has valuable property such as cash, inventory and information and also due to human interfaces in the processors.

In order to counter this, we are striving to strengthen an ethical culture and also to improve the effectiveness of the internal controls. Effective internal controls reduce exposure to fraud risks and contribute to the safeguarding of assets; however, a sound system of internal control cannot provide complete protection against all fraudulent behaviour. As a further measure, new areas have been added and the existing areas have been strengthened in the internal audit plan for the current year.

2. Information Technology Risks of the Group Information technology (IT) plays a critical role in business

of the group. As the group manages their businesses using IT, it is important to identify risks to the IT systems and data and to reduce or manage those risks by developing a response plan in the event of an IT crisis. The group has legal obligations in relation to privacy, electronic transactions, and staff training that influence IT risk management strategies. IT risks include hardware and software failure, human error, spam, viruses and malicious attacks, as well as natural disasters such as fires, cyclones or floods.

In order to mitigate software failures system backups are taken and software’s are regularly updated to the latest versions while root causes are found and problems are fixed in respect of application failures. Backups are restored in the event of a data base corruption and system logs are daily monitored to identify hardware failures while life cycle performance of hardware is checked and hardware’s are replaced if there is a necessity. Latest anti-virus and anti-spyware protection are installed in order to protect computers from virus while firewall & other security controls are in place to prevent hacking, unauthorised intrusions to the computers, servers and wireless networks of the company. If communications, connectivity failures occurs service providers are informed


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and it’s being followed up so as to keep the outage to minimum. In order to protect the vital information, the company uses data backups that include off site or remote storage. Further the management trains the staff regularly in IT policies and procedures which cover areas such as safe handling of infected emails, protecting the privacy of customer details, and priority actions in the event of an online security breach. Moreover the management conducts workshops to identify potential IT risks, costs and impacts of those risks, and possible actions to minimise exposure.

3. Business risks(i). Outbreak of diseases The Poultry can be severely affected with an outbreak of

Avian Influenza like diseases. People will reduce chicken consumption in large extent if such event occurs.

Department of Animal Production and Health acts as the regulatory body to control or eradicate such occurrence by enforcing the rules and regulations to stop possible chances of entering such disease in to the Island; the Group strictly follows the enforced regulations. Further the Group has implemented Biosecurity program for each farm sites and strict cleaning and hygiene programs are in place. Monitoring of the flock health status is done as per schedule to identify any early signs of outbreak of disease.

(ii). Community factors and Expectations Even though all the locations meet the legal and

environment compliance requirements some social unrest and resistance may come across.

In order to address this concerns relationship building program with immediate local community are conducted on a regular basis. The group complies with all the environment laws and regulations specially the Central Environment Authority license requirements. Further the group continuously pursues internationally accepted solutions to minimise possible negative environmental factors due to the operations. All systems are in place to systematically dispose waste and had equipped the plants with odour control systems.

(iii). Dealing with perishable and short life products We deal with poultry and dairy products. These outputs

have been planned far ahead and any temporary or high

demand fluctuations due to unforeseen reasons could possibly affect the performance of the company. Meat and dairy products can only be stored or distributed in the cold rooms/freezer trucks under frozen conditions.

At present the Group has capacity in its processing plant to meet the demands and has adequate cold room facilities and freezer trucks to manage the present distribution needs.

(iv). Natural events risk Adverse weather conditions may result in reduced

demand for CIC Products given the fact that it is one of the largest agriculture companies in the country.

The tacit knowledge gathered from running the agriculture business during adverse weather conditions in the country has been of paramount importance in managing this risk. Performance, position and cash flow and where necessary realignment of investments are made with a view to making the business model flexible enough to absorb the pressure from unexpected conditions.

(v). The scarcity of raw materials. Scarcity may occur due to usage of seasonal outputs,

natural disaster, import bans and other events beyond the control of the Group.

In order to mitigate the risk the company has increased the storage capacity and has upgraded the storage conditions for storing seasonal herbal materials. Further special growing project with farmers (seeds and technical support is given to the farmers by the company and harvest is purchased at an agreed prices). Cultivation of scared medicinal plants in company owned lands, enhancement of the supply chain by providing proper awareness and training to the farmers, collectors and suppliers about the quality controls and technical problems.

(vi). Quality failure risk Quality failure is a major risk to the company as it deals

with pharmaceuticals and edible items. Therefore all employees are responsible for the quality of the product.

Proper training and awareness are given to the all levels of the employees relating to the production and quality processes. Moreover process/product improvements


are implemented and the current processes are revised periodically. Further internal/external audits conducted regularly. Research and development /quality assurance department periodically revises quality control methods and testing methods according to the local and international standards.

(vii). Handling of chemicals Due to the risk of handling chemicals, all the operations

of factories are managed through the ISO 14001:2004 management system to minimise the environmental impacts. All contaminated waste is disposed according to the government regulations. Further the factories have effluent treatment plants inside the premises and maintains fully equipped laboratory to check the required standards. Treated water is reused within the premises for gardening and flushing purposes.

Industry is tightly regulated by the Government Regulatory bodies such as Register of Pesticides, Central Environmental Authority, National Fertilizer Secretariat, Local governing councils etc. Industry related policies may change time to time according to the political situation of the country.

The Group strictly follows the current regulations relevant to the respective industry and maintains a close relationship with the regulatory bodies to implement sudden changes of the regulations.

In order to mitigate the risk, all the products repacked in the factory are rated according to the Hazardous Material Identification System. According to the rating of repacking product, required personnel protection equipment is provided to employees to minimise risk of exposure. Moreover annual medical testing is carried out to monitor employee’s health.

4. Human resources risks In relation to human resources the risks which have been

identified are alignment of pay and performance, meeting organisational objectives through efficient/effective use of human resources and finding right talent for the job whilst keeping labor costs at moderate limits.

The group has Introduced a performance driven culture where objectives get measured and individuals rated as per performance with due recognition on pay and

succession planning. Introduction of a Position Requisition Procedure, where all replacements/new positions are to be justified with the financial benefit to the organisation has ensured that right talent is obtained while keeping the cost at a reasonable level.

5. Compliance, regulatory & legal risks The risk of possible legal actions against the company

by an individual or a corporate entity in the process of business conduct has been identified as the primary legal risks of the company.

Company has identified such risks and, gaged the impact and taken necessary actions to educate the respective staff members. Best practices and processes of better business conduct is included in Standard Operating Procedures (SOP) and frequently reviewed.

Impose of new regulations or sudden changes of existing regulations related to the business conduct of Company could lead to issues such as banned marketing and selling of products, advertising restrictions, pricing so forth.

CIC has implemented numerous steps to foresee the possible risks and taken preventive actions beforehand. To mitigate the risks of breaching contractual obligations and prevent CIC entering in to unfavorable contracts, company constantly involves internal and external legal experts.

6. Strategic risk Strategic risk of a company refers to the risk to its

earnings and profitability that could arise from strategic decisions, changes in the business conditions and improper implementation of decisions. Thus, strategic risk could materialise due to internal or external factors. CIC considers strategic risk as one of the key elements in its risk profile.

The Group has identified the following strategic risks that would arise through internal factors:

• Risks in connection with decisions about outsourcing or maintaining processes and competencies in-house

• Risks concerning new product developments, such as new innovations, R&D, new product lines


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• Risks concerning acquisitions or disposals including the likelihood of achieving organisational objectives or destroying Shareholder value

The Board critically reviews the strategic goals of the Group through its well defined corporate planning and its budgeting process. This robust process ensures that the

above strategic risks are well managed in all activities of the Group.

The following strategic risks have been identified as most relevant to business of CIC which could arise through external factors:

• Risk concerning changes in customer demand

• Risk in technology developments

• Risk in changes in the industry and the economic environment

• Risk in regulatory requirements.

7. Reputational Risk Being a Company which has customers at every level

of the community, CIC has recognised the importance of aligning the corporate objectives and shareholder requirements. Further, the Company has identified that maintaining and developing the credibility of the Group and its brands, and most importantly, its standing in the eyes of its stakeholders is a crucial exercise in ensuring sustainable success. Accordingly, like all of the intangible assets of the Group (such as goodwill, talent, knowledge, know-how, and intellectual capital and brand equity) whose value has escalated in recent years, value of its reputation has been identified as a direct effect on its share price, market share and brand value. In addition, CIC always supports the idea of maintaining the Group’s integrity and reputation at any cost.

CIC is sensitive to the attitude of local communities in which the Company operates, the satisfaction and fidelity of customers and the positive inclination of media towards the Company. CIC uses ‘transparency’ as one of its best tools in managing its image. Further, through its community engagement and social infrastructure projects, CIC is receiving a wide and positive media exposure. In addition, the Group is also focused on establishing

strategic relationships with reputed third parties (i.e., supply agreements, joint ventures, etc.). When it comes to product liability, CIC ensures stringent quality assurance processes. Further, whilst being sensitive to the policy making decisions of regulators and legislators, CIC adhere to all local and international laws and regulations pertaining to advertising and marketing.

The risk management policy of the CIC group sets out the responsibility for risk management through the organisation. The Board has the responsibility for determining the strategic direction of the organisation and for creating the environment and the structure for risk management to operate effectively while the Strategic Business units have the responsibility for managing the risk on a day to day basis and promoting risks awareness within their operations. Internal audit too play a pivotal role in managing the risks of the group by way of identifying and evaluation of key risks and coaching the management in responding to risks through written reports.

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Financial ReportsAnnual Report of the Directors’ on the Affairs of the Company 130Independent Auditors’ Report 139Statements of Profit or Loss and Other Comprehensive Income 140Statements of Financial Position 141Statements of Changes in Equity 142Cash Flow Statements 144Notes to the Financial Statements 146Shareholder and Investor Information 208Subsidiaries and Equity Accounted Investees 213Ten Year Group Performance 214

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The Directors have pleasure in presenting to members the 52nd Annual Report together with the Audited Statement of Accounts for the year ended 31st March 2015 of CIC Holdings PLC, a public limited liability Company.

GeneralCIC Holdings PLC (formerly known as Chemical Industries (Colombo) PLC) was incorporated on 12th May 1964 under the Companies Ordinance No. 51 of 1938 quoted in the Colombo Brokers Association (now Colombo Stock Exchange) from 1964 and re-registered as per the Companies Act No. 7 of 2007 on 21st November 2007. The name of the company was changed to CIC Holdings PLC from 14th January 2011.

The registered office of the Company is at No. 199, Kew Road, Colombo 02, at which the Company’s head office is situated.

Review of the YearThe Statement of Accounts was approved by the Board of Directors on 22nd May 2015. The Chairman’s Statement, Managing Director’s Statement and Review of the Business set out the state of affairs and performance of the Company during the year and incorporates events subsequent to the date of the Balance Sheet.

Principal ActivitiesThe Company carries on the business of merchandising and manufacturing as its principal activities. There were no significant changes in the activities of the Company in the year under review. There has been no changes in subsidiary companies which include Chemanex PLC and its subsidiaries, CIC Agri Businesses (Private) Limited and its subsidiaries (other than disposal of Sunhill Tea Factory), CISCO Speciality Packaging (Private) Limited, CIC Feeds (Private) Limited and its subsidiaries, Link Natural Products (Private) Limited, CIC Cropguard (Private) Limited, Crop Management Services (Private) Limited, Colombo Industrial Agencies Limited and CIC Lifesciences Limited.

Ultimate ParentThe ultimate holding company is Paints & General Industries Limited.

Subsidiaries• CIC Agri Businesses (Private) Limited and its subsidiaries

blends and markets fertilizer, seed, planting material,

fruit, vegetable, animal based farm produce and grains, namely, Rice and Corn. Subsidiary companies of CIC Agri Businesses (Private) Limited are:

CIC Seeds (Private) Limited, Wayamba Agro Fertilizers Company Limited, CIC Agri Biotech (Private) Limited, CIC Agri Produce Exports (Private) Limited, CIC Dairies (Private) Limited. and N. Chandraratne (Decorators) Limited. CIC Dairy Breeding & Manufacturing (Private) Limited and CIC Agri Produce Marketing (Private) Limited are subsidiaries of CIC Seeds (Private) Limited. Chandraratne Constructors Limited is a subsidiary of N. Chandraratne (Decorators) Limited., Rahimafrooz CIC Agro Limited is a Equity Accounted Investee of CIC Agri Businesses (Private) Limited.

• CIC Feeds (Private) Limited markets animal feed and day old chicks, while its subsidiaries market Veterinary Medicines and produces and processes Poultry products. The subsidiary companies of CIC Feeds (Private) Limited are: CIC Vetcare (Private) Limited, CIC Poultry Farms Limited and CIC Bio Security Breeder Farms Limited.

• Chemanex PLC carries on the business of merchandising and manufacturing as its principal activity and while its subsidiary companies export Chemicals. The subsidiary companies of Chemanex PLC are:

CAL Exports Lanka (Private) Limited and Chemanex Exports (Private) Limited. Subsidiary company Yasui Lanka (Private) Limited is under liquidation.

The associate companies are Commercial Insurance Brokers (Private) Limited, Rainforest Eco Lodge (Private) Limited and Chemcel (Private) Limited

• CISCO Speciality Packaging (Private) Limited manufactures speciality Plastic Packaging.

• Link Natural Products (Private) Limited manufactures and markets Herbal Pharmaceuticals, Herbal Healthcare products and essential oils.

• Colombo Industrial Agencies Limited owns and manages a Stores Complex at Ekala.

• Crop Management Services (Private) Limited remains an investment company since losing the management contract of Maturata Plantations Limited.

CIC Holdings PLC Annual Repor t 2014/15 Purposeful Progress

Annual Report of the Directors’ on the Affairs of the Company

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• CIC Cropguard (Private) Limited markets a range of Pesticides from principals other than Syngenta.

• CIC Lifesciences Limited manufactures and markets Pharmaceuticals.

Principal Activities of the Equity Accounted InvesteesAkzo Nobel Paints Lanka (Pvt) Ltd markets Surface Coatings, Automotive Paints and ancillaries.

Corporate DonationsDonations made during the year amounted to Rs. 638,000/- (2014 – Rs. 1,196,110)

Future DevelopmentsGroup companies looks to further market access for fresh fruit, processed food, manufactured pharmaceuticals and milk products and to develop export markets for speciality rice, adhesives, writing instruments and speciality chemicals.

Financial StatementsThe Financial Statements of the Company and the Group which are duly certified by the CFO and approved by the Board of Directors and signed by Chairman, CEO together with the Company Secretary in compliance with the requirements of the Sections 151, 152 and 168 of the Companies Act No 07 of 2007 are given on pages 140 to 207 of the Annual Report.

Profits and Appropriations(In thousands of Rupees)

For the Year ended 31st March 2015 2014Company Group Company Group

Profit for the year after depreciation 605,056 1,423,115 (247,474) 14,924From which a deduction is made for taxation and (98,233) (397,697) 44,534 (72,047)discontinued operations 5,728 15,425 (644,309) (1,069,716)

512,551 1,040,843 (847,249) (1,126,839)

from which a deduction is made for non controlling interest 278,916 (155,126)512,551 761,927 (847,249) (971,713)

To which must be added Other Comprehensive Income 2,568 3,380 (3,980) (1,372)Total Comprehensive Income 515,119 765,307 (851,229) (973,085)

To which must be added the unappropriated profit brought forward 298,161 3,128,231 1,244,160 4,170,518from the previous year and

adjustment due to first time adoption of SLFRS 11 5,121and adjustment due to disposal of subsidiary 12,526 17,715and realisations on disposals of subsidiary 2,732and change in effective holding of the subsidiary (191,385)and adjustment for stamp duty (654)

Making available for appropriation an amount of 813,280 3,714,025 392,931 3,223,001

Out of which an interim dividend of Rs.2.00 Per share (2015), (2014 - Rs.1.00 per share)

(189,540) (189,540) (94,770) (94,770)

So that the unappropriated profit carried forward will be 623,740 3,524,485 298,161 3,128,231

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DividendsFor the year ended 31st March 2015, the Directors have recommended the payment of a final dividend of Rs. 1.00 per share amounting to Rs. 94,770,000 on Ordinary & Non-Voting (Class X) shares.

As required by Section 56 (2) and 56 (3) of the Companies Act No. 7 of 2007, the Board of Directors signed a certificate stating that in their opinion that the Company, based on the information available as at present, satisfies the solvency test immediately after distribution, in accordance with Section 57 of the Companies Act No. 7 of 2007, and have obtained a certificate from the Auditors, prior to recommending the final dividend of Rs. 1.00 per share for the year ended 31.03.2015, which is to be approved by the shareholders at the Annual General Meeting to be held on 30th June 2015.

Independent Auditor’s ReportThe Company’s Auditors Messrs KPMG, Chartered Accountants performed the audit on the Consolidated Financial Statements for the year ended 31, March 2015 and the Independent Auditor’s Report on the Financial Statements is given on page 139 of the Annual Report as required by Section 168(1) (C ) of the Companies Act No 07 of 2007.

Significant Accounting Policies and changes during the yearThe Company and the Group prepared their Financial Statements in accordance with Sri Lanka Accounting Standards (SLFRS/LKAS). The significant Accounting Policies adopted in the Financial Statement is given on pages 146 to 161 of the Annual Report as required by the Section 168 (1) (d) of the Companies Act No. 7 of 2007, the Board of Directors wish to confirm that there were no changes to the Accounting Policies used by the Company and the Group during the year.

Interests RegisterThe Interests Register is maintained by the Company as per the Companies Act No. 7 of 2007. All Directors have made declarations as provided for in Section 192 (2) of the said Act. The related entries were made in the Interests Register during the year under review.

The share ownership of the Directors is indicated on of the Annual Report.

Directors’ interest in contracts and remuneration paid to Directors, etc., have been included in the Interests Register which is made available for inspection under the Companies Act No. 7 of 2007 under reference. The details are given on pages 165 and 195 of this Annual Report.

DirectorsThe qualifications and experience of the Directors is provided on pages 18 to 20 The following persons were Directors of the Company at the end of the financial year.

Mr. S.H. Amarasekera – ChairmanMr. S.P.S. Ranatunga – Managing Director/ Chief Executive OfficerMr. R N AsirwathamMr. R.S. CaptainMr. S.M. EnderbyMr. M.P. Jayawardena Mr. K.B. KotagamaProf P W M B B Marambe Dr. R C W M R D Nugawela Mr. A.V.P. SilvaMr. D.S. Weerakkody

Appointments & ResignationsDuring the year M/s K B Kotogama, A V P Silva, D S Weerakkody and Dr. R C W M R D Nugawela joined the Board and Mr. E F G Amerasigne retired from the board.

Retirement by Rotation and Re-election• Mr. R N Asirwatham, retires in pursuant to Section 210 of

the Companies Act No.7 of 2007.

Pursuant to Section 211 of the Companies Act No.7 of 2007, special notice of the following Ordinary Resolution has been received by the Company from a Member of the Company.

“That Mr. R N Asirwatham, who reached the age of 70 years on 26th August 2012 be re-elected a Director of the Company and it is hereby declared that the provision of Section 210 of the Companies Act No.7 of 2007 shall not apply to Mr. R N Asirwatham”.



133

• Mr R N Asirwatham being eligible offers himself for re-election with the unanimous support of the Board.

To resolve that Mr. R N Asirwatham being eligible be recommended for re-election

• Mr K B Kotagama retires in terms of Article 25 (2) of the Articles of Association of the Company and being eligible, offers himself for re-election with the unanimous support of the Board.

• Dr R C W M R D Nugawela retires in terms of Article 25 (2) of the Articles of Association of the Company and being eligible, offers himself for re-election with the unanimous support of the Board.

• Mr A V P Silva retires in terms of Article 25 (2) of the Articles of Association of the Company and being eligible, offers himself for re-election with the unanimous support of the Board.

• Mr D S Weerakkody retires in terms of Article 25 (2) of the Articles of Association of the Company and being eligible, offers himself for re-election with the unanimous support of the Board.

• Mr S H Amarasekera retires in terms of Article 25 (6) of the Articles of Association of the Company and being eligible, offers himself for re-election with the unanimous support of the Board.

• Mr M P Jayawardena retires in terms of Article 25 (6) of the Articles of Association of the Company and being eligible, offers himself for re-election with the unanimous support of the Board.

• Mr S M Enderby retires in terms of Article 25 (6) of the Articles of Association of the Company and being eligible, offers himself for re-election with the unanimous support of the Board.

Directors’ RemunerationDirectors’ remuneration in respect of the Group and the Company, for the financial year ended 31st March 2015 are given in Note 11 of the Financial Statement on page 165 of this Annual Report.

List of Directors of Subsidiaries and Associates of the Company Names of Directors of all Subsidiaries and Associates of the Company are given on page 213 of this Annual Report.

Related Party TransactionsRelated party transactions have been declared at meetings of the Directors and are detailed in Note 43 to the Financial Statements.

Employee Share Option Scheme (ESOS)ESOS of the company was approved by the shareholders of the Company on 29th December 2010. Under this plan the company was authorised to issue upto 2% of the issued share capital. The option granted under this plan has to be exercised within 5 years of such grant. No employees have been provided with any financial assistance to exercise the option.

Options available for the Directors of the Company are as follows;

Voting Non-Voting

S P S Ranatunga 18,954 50,718

M P Jayawardena 6,537 21,571

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Directors’ ShareholdingThe Directors together with their spouses’ and minor children’s shareholdings in the Company are as follows:

As at 31st March 2015 2014

Voting Non-Voting Voting Non-Voting

S.H. Amarasekera -- – – –

S.P.S. Ranatunga – 22,950 – 22,950

R. N. Asirwatham – – – –

R.S. Captain 80 139 80 139

S.M. Enderby – – – –

M.P. Jayawardena – 16,200 – 16,200

K.B. Kotagama – 17,100 – 17,100

Prof P. W. M. B. B. Marambe – – – –

R. C. W. M. R. D. Nugawela – – – –

A.V.P. Silva – 13,500 – 13,500

D.S. Weerakkody – – – –

E.F.G Amerasinghe (retired w.e.f 02.01.2015) – – – –

Directors’ Responsibility for Financial ReportingThe Directors are responsible for the preparation of the Financial Statements of the Company and the Group, which reflect a true and fair view of the state of affairs. The Directors’ Responsibility in relation to the Financial Statements is detailed on page 136

Audit CommitteeThe following Non-Executive Directors of the Board are members of the Audit Committee. Mr R N Asirwatham (Chairman), Mr. S.H. Amarasekera and Mr. S M Enderby.

Mr. S.P.S. Ranatunga and Ms. P.D.S. Ruwanpura attended the meetings by invitation. Details of the Audit Committee are given on page 139

Human Capital & Compensation Committee (Remuneration Committee)

The following Non-Executive Directors of the Board are members of the Remuneration Committee.

Mr. D.S. Weerakkody (Chairman), Mr. S.H. Amarasekera , Mr R N Asirwatham, Mr R S Captain and Mr S M Enderby.

Mr. S.P.S. Ranatunga attended the Meetings by invitation.

Nominations CommitteeThe following Non-Executive Directors of the Board and the Chairman of the Company are members of the Nominations Committee. M/s S.H. Amarasekera (Chairman), R.S. Captain and R N Asirwatham.

Mr. S.P.S. Ranatunga attended the Meetings by invitation.

Enterprise GovernanceSystems and procedures are in place as good Enterprise Governance is an essential component in today’s corporate culture.

The practices in this regard are given in Enterprise Governance of this Annual Report on pages 26 to 40



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Vision, Mission and Corporate ConductThe Company’s Vision and Mission are given on page 02 of this Report. The business activities of the Company are conducted with the highest level of ethical standards in achieving its Vision and Mission. The Company issues a copy of its code of ethics to each and every employee who are required to abide by the Company’s code of conduct.

Equitable Treatment to ShareholdersThe Company has made all endeavours to ensure equitable treatment to all shareholders.

Risk ManagementSpecific actions taken by the Group in this regard are given under the Risk Management section of this Report on pages 123 to 127.

Systems and Internal ControlsThe Directors acknowledge their responsibility for the Group’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 the 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 control, is satisfied with the Group’s adherence to and effectiveness of these controls for the period up to the date of signing the Financial Statements.

Income Tax ExpensesIncome Tax expenses have been computed at the rates given in Note 12 to the Financial Statements. The Group has also provided deferred tax on all known temporary differences under the liability method, as permitted by the Sri Lanka Accounting standards – LKAS 12 on “ Income Taxes”

Revenue The revenue of the Group was Rs 23.86 billion (2014 – Rs 23.23 billion). A detailed analysis of the Group revenue that identifies the contributions from different segments of the Group businesses is given in Note 162 to 163 the Financial Statements.

Capital ExpenditureDetails of property, plant & equipment and their movements during the year are listed in Note 16 to the Financial Statements. Capital Expenditure approved and contracted for are given Note 39.

Market Value of Freehold PropertiesAll freehold land of the Group Companies were re-valued by professionally qualified independent valuers as at 31, March 2013 and brought into Financial Statements. The Directors are of the opinion that the re-valued amounts are not in excess of the current market values of such properties. Details of revaluations are listed in Note 16 to the Financial Statements.

InvestmentsDetails of investments and their movements during the year are listed in Notes 23,24,25 and 29 to the Financial Statements.

ReservesTotal reserves of the Group stood at Rs 6,112.94 million as at 31st March 2015 (Rs. 5,702.58 million as at 31st March 2014) details of which are given in the Statement of Changes in Equity.

Stated CapitalThe Stated Capital is the total of all amounts received by the Company in respect of the issue of shares. The Stated Capital of the Company amounts to Rs. 1,008,450,000/- comprising of 72,900,000 Ordinary Shares and 21,870,000 Non-Voting (Class X) Shares.

Share InformationInformation relating to earnings, dividends, net assets per share, market value of a share and information on share trading are stated under Shareholder and Investor Information.

ShareholdingA list of top 20 shareholders for both Voting and Non-Voting is given on page 209 of the Annual Report.

Environmental ProtectionThe Company has not engaged in any activity which is harmful to the environment. Measures taken to protect the environment are given under Sustainability Report of this Annual Report on page 103.

136

Compliance with Laws and RegulationsThe Company has not engaged in any activity against the prevailing laws and regulations. Compliances with provisions in laws and regulations are confirmed to the Board of Directors at all Board Meetings.

Statutory PaymentsThe Directors are satisfied that all Statutory Payments to the Government and other Statutory Institutions including employee related payments have been made on time to the best of their knowledge and belief.

Human ResourceThe Company’s Human Resource Management Policies and Practices are designed to improve efficiency, effectiveness and productivity and also nurture collaborative teams that enrich the work and learning environment of all our staff.

Information relating to Human Resource & Employment Policies is given under Sustainability Report of this Annual Report on page 105.

Corporate Social ResponsibilityAll activities embarked by the Company in this regard are given under Sustainability Report of this Annual Report on page 84.

Going ConcernAfter considering the financial position, operating conditions, regulatory and other factors together with such matters required to be addressed in the Corporate governance Code, the Directors have reasonable expectation that the Company possesses adequate resources to continue to be in operation for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Financial Statements.

Events after Balance Sheet DateNo material events have taken place after the Balance Sheet date which require an adjustment to or a disclosure in the Financial Statements.

Auditors’ Remuneration and Interest in Contracts with the CompanyThe Company’s auditors during the period under review were Messrs KPMG, Chartered Accountants. A sum of Rs. 7.76

million was paid to them as consolidated audit fees during the year under review (Company – Rs. 1.54 million) and a sum of Rs 14.02 million was paid by the Company for tax and other related services.

Based on the declaration from Messrs KPMG, and as far as the Directors are aware, the auditors do not have any relationship or interest in the Company or its subsidiaries other than those disclosed in the above paragraph.

Re-Appointment of AuditorsThe retiring auditors Messrs KPMG have intimated their willingness to continue in office and a resolution to re-appoint them as auditors and authorising the Directors to fix their remuneration will be proposed at the upcoming Annual General Meeting.

Notice of MeetingNotice of Meeting of the Fifty Second Annual General Meeting is enclosed herewith.

As required by the Section 168 (1) (k) of the Companies Act No 07 of 2007, the Board of Directors does acknowledge the contents of this Annual Report.

By Order of the Board,

S H Amarasekera S P S Ranatunga Chairman Managing Director/CEO

P D S Ruwanpura Secretary

May 22nd 2015



137

The Directors’ responsibility in relation to the Financial Statements is detailed below. The Report of the Auditors sets out their responsibility in relation to the Financial Statements.

The Companies Act No. 07 of 2007 requires that the Directors prepare the Financial Statements for each financial year, which reflect a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and the profit/ loss for that financial year. In preparation of these statements, the Directors are required to ensure that,

1. Appropriate accounting policies have been selected and applied based on the new financial reporting frame work on a consistent basis while reasonable and prudent judgments have been made so that the form and substance of transactions are properly reflected. Material departures, if any, are disclosed and explained. The Board of Directors accepts responsibility for the integrity and objectivity of the Financial Statements presented in this Annual Report.

2. Financial Statements prepared and presented in this Annual Report have been prepared based on new Sri Lanka Accounting Standards (SLFRS/LKAS) which came to effect from 1st January 2012 and are in agreement with the underlying books of account and in conformity with the requirements of the Sri Lanka Accounting Standards, Companies Act No. 07 of 2007, Sri Lanka Accounting and Auditing Standards Act No.15 of 1995, the Listing Rules of the Colombo Stock Exchange and the Code of Best Practice on Corporate Governance issued jointly by The Institute of Chartered Accountants of Sri Lanka (CASL) and the Securities and Exchange Commission (SEC) of Sri Lanka.

3. The Company keeps sufficient accounting records to disclose, with reasonable accuracy, the financial position of the Company and that of the Group and to enable them to ensure that the Financial Statements comply with the Companies Act No. 07 of 2007. Also reasonable steps are taken to safeguard the assets of the Company and to establish appropriate systems of internal controls, which provide reasonable though not absolute assurance to the Directors that assets are safeguarded and internal controls are in place with a view to the prevention and detection of frauds and errors.

4. As required by Sections 56 (2) and 56 (3) of the Companies Act No. 07 of 2007, the Board of Directors signed a certificate stating that in their opinion the Company, based on the information available as at present, satisfies the solvency test immediately after distribution, in accordance with Section 57 of the Companies Act No. 07 of 2007, and has obtained a certificate from the Auditors, prior to recommending the final dividend of Rs. 1.00 per share for this year, which is to be approved by the Shareholders at the Annual General Meeting to be held on 30th June 2015.

5. The Directors are required to prepare the Financial Statements and the Company’s External Auditors, Messrs KPMG who were appointed in terms of the Section 158 of the Companies Act No. 7 of 2007 and in accordance with a resolution passed at the last Annual General Meeting, were provided with every opportunity to undertake the inspections they considered appropriate. They carried out reviews and sample checks on the system of internal controls as they considered appropriate and necessary for expressing their opinion on the Financial Statements and maintaining accounting records. They have examined the Financial Statements made available to them by the Board of Directors of the Company together with all the financial records, related data and Minutes of shareholders’ and Directors’ meetings and expressed their opinion which appears as reported by them on page 139.

6. As required by the Sections 166 (1) and 167 (1) of the Companies Act, they have prepared this Annual Report in time and ensured that a copy thereof is sent to every shareholder of the Company, who have expressed desire to receive a hard copy or to other shareholders a soft copy each in a CD containing the Annual Report within the stipulated period of time as required by the Rule No. 7.5 (a) and (b) on Continuing Listing Requirements of the Listing Rules of the Colombo Stock Exchange. The Directors also wish to confirm that all shareholders in each category have been treated equitably in accordance with the original terms of issue.

7. The Company and its quoted subsidiary, have met all the requirements under Section 7 on the Continuing Listing Requirements of the Listing Rules of the Colombo Stock Exchange, wherever applicable.

The Directors are of the view that they have discharged their responsibilities as set out in this statement.

COMPLIANCE REPORT The Directors confirm that to the best of their knowledge,

all taxes, duties and levies payable by the Company and its Group companies, all contributions, levies and taxes payable on behalf of and in respect of the employees of the Company and its Group companies, 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 Board,

P.D.S. Ruwanpura Company Secretary

22nd May 2015

Directors’ Responsibility for Financial Reporting

138

Chief Executive Officer’s and Chief Financial Officer’s Responsibility Statement

The Financial Statements are prepared in conformity with requirements of the Sri Lanka Accounting Standards issued by The Institute of Chartered Accountants of Sri Lanka, Companies Act No. 07 of 2007, Sri Lanka Auditing Standards, the Listing Rules of the Colombo Stock Exchange and Code of Best Practice on Corporate Governance issued jointly by The Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka.

The Board of Directors and the management of our Company accept responsibility for the integrity and objectivity of these Financial Statements. The estimates and judgements relating to the Financial Statements were made on a prudent and reasonable basis, in order that the Financial Statements reflect in a true and fair manner, the form and substance of transactions, and reasonably present the Company’s state of affairs. To ensure this, the Company has taken proper and sufficient care in installing a system of internal controls and accounting records, for safeguarding assets, and for preventing and detecting frauds as well as other irregularities, which is reviewed, evaluated and updated on an ongoing basis. Our Internal Auditors have conducted periodic audits to provide reasonable assurance that the established policies and procedures of the Company were consistently followed. However, there are inherent limitations that should be recognised in weighing the assurances provided by any system of internal controls and accounting.

The Financial Statements were audited by Messrs KPMG, Chartered Accountants, the Independent Auditors.

The Audit Committee of our Company meets periodically with the Internal Auditors and the Independent Auditors to review the manner in which these auditors are performing their responsibilities, and to discuss auditing, internal control and reporting issues. To ensure complete independence, the Independent Auditors and the Internal Auditors have full and free access to the members of the Audit Committee to discuss any matter of substance.


P.D.S. RuwanpuraChief Financial Officer

22nd May 2015


139

Independent Auditors’ Report

TO THE SHAREHOLDERS OF CIC HOLDINGS PLC

Report on the Financial StatementsWe have audited the accompanying financial statements of CIC Holdings PLC (“the Company”), and the consolidated financial statements of the Company and its subsidiaries (“Group”), which comprise the statement of financial position as at March 31, 2015, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information set out on pages 140 to 207 of the annual report.

Board’s Responsibility for the Financial Statements The Board of Directors (“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.

Auditors’ ResponsibilityOur 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.

OpinionIn our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at March 31, 2015, 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 March 31, 2015, 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 sections 151 and 153 of the Companies Act No. 07 of 2007.

CHARTERED ACCOUNTANTSColombo

22 May 2015

140CIC Holdings PLC Annual Repor t 2014/15 Purposeful Progress

Statements of Profit or Loss and Other Comprehensive Income

Company Group For the year ended 31st March 2015 2014 2015 2014

(Restated)Note Rs.’000 Rs.’000 Rs.’000 Rs.’000

Continuing operationsRevenue 6 6,979,046 5,827,098 23,582,297 21,559,839Cost of sales (5,086,903) (4,360,308) (17,473,786) (16,309,342)Gross profit 1,892,143 1,466,790 6,108,511 5,250,497

Other income 7 389,496 333,095 155,490 577,839Distribution expenses (756,280) (843,669) (2,339,088) (2,243,016)Administrative expenses (757,017) (744,017) (1,964,221) (2,151,782)Other expenses 8 (150) (259,238) (63,355) (347,215)Results from operating activities 768,192 (47,039) 1,897,337 1,086,323Financing cost (net) 9 (163,136) (200,435) (681,858) (1,341,470)Share of profit of equity accounted investees (net of tax) 10 - - 207,636 270,071

Profit/(loss) before tax 11 605,056 (247,474) 1,423,115 14,924

Income tax expense 12 (98,233) 44,534 (397,697) (72,047)Profit/(loss) from continuing operations 506,823 (202,940) 1,025,418 (57,123)

Discontinued operationsProfit/(loss) from discontinued operations (net of tax) 13 5,728 (644,309) 15,425 (1,069,716)

Profit/(loss) for the year 512,551 (847,249) 1,040,843 (1,126,839)

Other comprehensive incomeItems that will never be reclassified to profit or lossSurplus on revaluation of land - - 10,994 2,807Actuarial gains/(losses) on retirement benefit obligations 3,566 (3,980) 8,895 (1,104)Actuarial gains/(losses) on retirement benefit

obligations-discontinued operations - - 250 825Income tax on other comprehensive income (998) - (3,792) -Item that are or may be reclassified to profit or lossNet gains/(losses) on remeasuring available for

sale financial assets 11,340 (2,747) 25,737 (2,280)Other comprehensive income for the year 13,908 (6,727) 42,084 248Total comprehensive income for the year 526,459 (853,976) 1,082,927 (1,126,591)

Profit/(loss) attributable to :Equity holders of the Company 512,551 (847,249) 761,927 (971,713)Non-Controlling interests - - 278,916 (155,126)Profit/(loss) for the year 512,551 (847,249) 1,040,843 (1,126,839)

Total comprehensive income attributable to :Equity holders of the Company 526,459 (853,976) 791,491 (973,861)Non-Controlling interests - - 291,436 (152,730)Total comprehensive income for the year 526,459 (853,976) 1,082,927 (1,126,591)

Earnings/(deficit) per shareBasic/diluted earnings/(deficit) per share (Rs.) 14 5.41 (8.94) 8.04 (10.25)

Earnings/(deficit) per share-continuing operationsBasic/diluted earnings/(deficit) per share (Rs.) 5.35 (2.14) 7.93 (0.73)

Notes from pages 146 to 207 form an integral part of these Financial Statements.Figures in brackets indicate deductions.

141

Statements of Financial Position

Company GroupAs at 31st March 2015 2014 2015 2014 2013

(Restated) (Restated)Note Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

ASSETSNon-current assetsProperty, plant and equipment 16 2,210,101 2,287,251 10,610,666 9,414,735 8,706,775Investment property 17 - - 51,400 51,400 14,607Capital work-in-progress 18 46,088 50,920 353,518 763,412 1,072,154Deposit on leasehold property 19 - - - - 16,152Biological assets 20 - - 65,708 67,366 86,262Intangible assets 21 - - 27,683 27,683 147,911Deferred tax assets 22 25,610 69,268 52,498 133,721 18,382Investment in subsidiaries 23 992,436 734,983 - - -Equity accounted investees 24 36,000 36,000 1,444,484 1,530,973 789,585Other non-current financial assets 25 120,000 120,000 12,622 9,425 8,883

3,430,235 3,298,422 12,618,579 11,998,715 10,860,711Current assetsInventories 26 1,880,689 2,193,778 5,840,816 5,059,698 5,393,800Trade receivables 27 1,579,538 1,383,226 3,162,497 3,142,935 4,907,881Other receivables 28 268,162 327,340 3,731,932 4,120,195 6,433,122Other current financial assets 29 35,946 24,606 79,213 66,460 69,308Cash in hand and at bank 30 134,901 186,916 737,353 964,651 1,021,121

3,899,236 4,115,866 13,551,811 13,353,939 17,825,232Assets classified as held for sale 13 20,580 213,272 94,319 489,488 118,383

3,919,816 4,329,138 13,646,130 13,843,427 17,943,615Total assets 7,350,051 7,627,560 26,264,709 25,842,142 28,804,326

EQUITY AND LIABILITIESEquity attributable to equity holders of the CompanyStated capital 31 1,008,450 1,008,450 1,008,450 1,008,450 1,008,450Capital reserves 32 1,016,018 1,016,018 1,711,501 1,718,327 1,737,451Revenue reserves 33 1,408,813 1,071,894 4,400,987 3,984,249 5,033,888

3,433,281 3,096,362 7,120,938 6,711,026 7,779,789Non-controlling interests - - 1,722,310 1,488,997 1,663,008Total equity 3,433,281 3,096,362 8,843,248 8,200,023 9,442,797Non-current liabilitiesLoans and borrowings 34 123,355 276,115 1,106,895 857,121 997,729Retirement benefit obligations 35 209,387 201,568 565,933 522,688 472,140Grants 36 - - 18,175 23,409 31,512Deferred tax liabilities 22 - - 304,814 280,883 296,052

332,742 477,683 1,995,817 1,684,101 1,797,433Current liabilitiesTrade payables 37 1,112,312 1,296,011 5,070,780 4,569,381 5,809,084Income tax payable 38 - - 186,105 39,412 38,816Accruals and other payables 311,937 331,786 894,467 1,170,390 711,694Loans and borrowings 34(g) 2,150,665 2,411,339 9,242,622 9,733,660 11,004,502

3,574,914 4,039,136 15,393,974 15,512,843 17,564,096Liabilities classified as held for sale 13 9,114 14,379 31,670 445,175 -

3,584,028 4,053,515 15,425,644 15,958,018 17,564,096Total liabilities 3,916,770 4,531,198 17,421,461 17,642,119 19,361,529Total equity and liabilities 7,350,051 7,627,560 26,264,709 25,842,142 28,804,326Net assets per share 36.23 32.67 75.14 70.81 82.09

Notes from pages 146 to 207 form an integral part of these Financial Statements. It is certified that the Financial Statements have been prepared in accordance with the requirements of the Companies Act No. 07 of 2007.

P D S Ruwanpura Chief Financial Officer/Company Secretary

The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Signed for and on behalf of the Board;

S H Amarasekera S P S Ranatunga Chairman Managing Director/ CEO22 May 2015, Colombo


Stated Revaluation General Available for Retained Total Capital Reserve Reserves sale Reserve Earnings

Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

CompanyAs at 1st April 2013 1,008,450 1,016,018 782,604 (6,124) 1,244,160 4,045,108 Loss for the year - - - - (847,249) (847,249)Other comprehensive income - - - (2,747) (3,980) (6,727)Total comprehensive income for the year - - - (2,747) (851,229) (853,976)Dividends (Note 15) - - - - (94,770) (94,770)Total contributions by and distributions to

owners of the Company - - - - (94,770) (94,770)As at 31st March 2014 1,008,450 1,016,018 782,604 (8,871) 298,161 3,096,362 Profit for the year - - - - 512,551 512,551 Other comprehensive income - - - 11,340 2,568 13,908 Total comprehensive income for the year - - - 11,340 515,119 526,459 Dividends (Note 15) - - - - (189,540) (189,540)Total contributions by and distributions to

owners of the Company - - - - (189,540) (189,540)As at 31st March 2015 1,008,450 1,016,018 782,604 2,469 623,740 3,433,281

Dividends per shareCompany

For the year ended 31st March 2015 2014Note Rs. Rs.

Interim paid 15 2.00 -Final proposed 1.00 -


Statements of Changes in Equity

143

Attributable to the owners of the company

StatedCapital

RevaluationReserve

Foreign currency

translationReserve

Available for Sale Reserve

GeneralReserves

Retained earnings

Total

Non- controlling

interests

Total Equity

Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

GroupBalance as at 1st April 2013 as reported previously 1,008,450 1,737,451 (27) (3,349) 861,598 4,170,518 7,774,641 1,659,508 9,434,149 Adjustment due to first time adoption of SLFRS 11 and reclassification (Note 44) - - 27 - - 5,121 5,148 3,500 8,648 Restated balance as at 01st April 2013 1,008,450 1,737,451 - (3,349) 861,598 4,175,639 7,779,789 1,663,008 9,442,797 Loss for the year - - - - - (971,713) (971,713) (155,126) (1,126,839)Other comprehensive income - 1,455 - (2,231) - (1,372) (2,148) 2,396 248 Total comprehensive income for the year - 1,455 - (2,231) - (973,085) (973,861) (152,730) (1,126,591)Dividend paid to equity holders of the parent (Note 15) - - - - - (94,770) (94,770) - (94,770)Subsidiary dividend to non-controlling interest - - - - - - - (31,538) (31,538)Total contributions by and distributions to owners of the Company - - - - - (94,770) (94,770) (31,538) (126,308)Transfer of revaluation reserve on disposal of subsidiaries

- (17,847) - - - 17,715 (132) (128) (260)

Changes in effective holding of subsidiaries - - - - - - - 10,385 10,385 Changes in ownership interests in subsidiaries - (17,847) - - - 17,715 (132) 10,257 10,125Transactions with owners of the Company - (17,847) - - - (77,055) (94,902) (21,281) (116,183)Realisation of revaluation surplus on disposal - (2,234) - - - 2,234 - - - Realisation of the capital reserve of subsidiary - (498) - - - 498 - - -As at 31st March 2014 1,008,450 1,718,327 - (5,580) 861,598 3,128,231 6,711,026 1,488,997 8,200,023

Profit for the year - - - - - 761,927 761,927 278,916 1,040,843 Other comprehensive income - 5,700 - 20,484 - 3,380 29,564 12,520 42,084Total comprehensive income for the year - 5,700 - 20,484 - 765,307 791,491 291,436 1,082,927Dividend paid to equity holders of the parent (Note 15)

- - - - - (189,540) (189,540) - (189,540)

Subsidiary dividend to non-controlling interest - - - - - - - (51,061) (51,061)Total contributions by and distributions to owners of the Company - - - - - (189,540) (189,540) (51,061) (240,601)Transfer of revaluation reserve on disposal of subsidiary - (12,526) - - - 12,526 - - - Changes in effective holding of subsidiaries - - - - - (191,385) (191,385) (7,062) (198,447)Changes in ownership interest in subsidiaries - (12,526) - - - (178,859) (191,385) (7,062) (198,447)Transactions with owners of the company - (12,526) - - - (368,399) (380,925) (58,123) (439,048)Stamp duty on right issue - - - - - (654) (654) - (654)As at 31st March 2015 1,008,450 1,711,501 - 14,904 861,598 3,524,485 7,120,938 1,722,310 8,843,248



Cash Flow Statements

Company Group For the year ended 31st March 2015 2014 2015 2014 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Cash flow from operating activities

Cash generated from/(used for) operations (Note A) 775,825 207,792 2,877,393 4,023,589 Interest paid(net) (163,136) (301,903) (704,703) (1,531,963)Retirement benefits paid (27,326) (9,454) (52,323) (32,098)Income tax paid (14,017) (262) (121,768) (104,947)

Net cash inflow/(outflow) from operating activities 571,346 (103,827) 1,998,599 2,354,581

Cash flow from investing activities

Additions to property, plant and equipment (47,573) (48,552) (246,449) (685,002)Additions to capital work-in-progress (14,801) (392,641) (1,354,377) (1,254,012)Additions to biological assets - - (61,290) (80,576)Proceeds from disposal of property, plant and equipment 7,543 87,349 111,342 298,155 Proceeds from disposal of assets held for sale 9,871 83,328 67,441 83,328 Proceeds from disposal of investments - - 20,230 - Proceeds from sale of biological assets - - 8,943 98,115 Proceeds from disposal of subsidiaries (Note B) - - 318 129,443 Change in cash reserve due to deemed disposal - - - (4,804)Dividends received from subsidiaries 62,665 44,763 - - Dividends received from equity accounted investees 278,100 221,400 278,100 221,400 Dividends received from other financial assets 1,261 1,260 5,946 7,051 Investment in subsidiaries and equity accounted investees (317,453) (1,200) (198,448) (12,670)Right issue cost paid - - (654) - Other current financial assets - - (112) - Subsidiary dividends to non-controlling interests - - (51,061) (31,538)Net cash outflow from investing activities (20,387) (4,293) (1,420,071) (1,231,110)

Net Cash inflow/(outflow) before financing activities 550,959 (108,120) 578,528 1,123,471

Cash flow from financing activities

Dividends paid to equity holders of the parent (189,540) (94,770) (189,540) (94,770)Capital payment on finance leases (22,473) (54,486) (100,506) (235,980)Long-term borrowings obtained - 323,000 11,366,653 3,261,190 Repayment of long-term borrowings (144,680) (88,540) (9,815,354) (2,853,328)

Net cash (outflow)/inflow from financing activities (356,693) 85,204 1,261,253 77,112 Net increase/(decrease) in cash and cash equivalents during the year 194,266 (22,916) 1,839,781 1,200,583 Cash and cash equivalents at the beginning of the year (2,110,785) (2,087,869) (7,388,175) (8,575,338)Effect of exchage rate fluctuations on cash and cash equivalent - - - (13,420)Cash and cash equivalents at the end of the year (Note 30) (1,916,519) (2,110,785) (5,548,394) (7,388,175)


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Company Group For the year ended 31st March 2015 2014 2015 2014 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Note A - Cash generated from / (used for) operations

Profit/(loss) before interest and tax from continuing operations 768,192 (47,039) 1,897,337 1,086,323 Profit/(loss) before interest and tax from discontinued operations 6,739 (648,987) 38,984 (964,981)

Adjustments for:Depreciation on property, plant and equipment 136,663 130,912 662,455 786,872 Impairment of property, plant and equipment - 30,000 9,080 48,799 (Gain)/loss on disposal of property, plant and equipment 150 (24,481) (19,985) (17,469)(Gain) /loss on disposal of assets held for sale (1,828) (4,485) (31,894) (4,485)Loss on share transfer-Chemcel (Private) Limited - - - 13,874 Gain on deemed disposal of subsidiary - - (3,881) (451,257)Gain on disposal of subsidiary (Note B) - - (6,262) - Gain on deemed disposal of equity accounted investee - - (392) - Gain on disposal of investments - - (9,939) - Provision for retirement benefit 38,711 35,616 102,708 95,787 Impairment of goodwill - - - 96,489 Amortisation of deposit paid for leasehold property - - - 211 Provision for fall in value of other financial assets 60,000 83,950 - 26 (Reversal)/provision for inter-company receivables (6,098) 73,919 - - (Reversal)/provision for bad and doubtful debts (2,754) 212,541 48,670 367,126 (Reversal)/provision for write-down of inventories (97,963) 306,280 (56,630) 528,147 (Gain)/loss from changes in fair value of biological assets - - (4,858) (2,478)Grants amortised - - (5,234) (8,103)Dividend income (342,026) (267,423) (5,946) (7,051)

Operating profit before working capital changes 559,786 (119,197) 2,614,213 1,567,830 (Increase)/decrease in trade and other receivables (99,056) 749,700 477,667 3,468,770 (Increase)/decrease in inventories 523,908 (849,366) (477,015) (433,785)Increase/(decrease) in trade and other payables (208,813) 426,655 262,528 (579,226)Cash generated from operations 775,825 207,792 2,877,393 4,023,589

Note B - Disposal of Sunhill Tea Factory (Private) Limited during the year ended 31st March 2015

Property, plant and equipment 60,213Deferred tax asset 438Inventories 12,333Trade receivables 3,785Other receivables 1,457Cash in hand and at bank 1,318Retirement benefit obligations (683)Accruals and other payables (83,487)Total net assets (4,626)Purchase consideration received 1,636Gain on disposal of subsidiary (6,262)

Net cash receivedPurchase consideration received 1,636Disposal commission paid (1,318) 318


Notes to the Financial Statements

1. Reporting Entity CIC Holdings PLC (formerly known as Chemical Industries

(Colombo) PLC) is a public limited liability Company incorporated and domiciled in Sri Lanka. The ordinary shares of the Company are listed on the Colombo Stock Exchange. The address of the Company’s registered office and the principal place of business is No. 199, Kew Road, Colombo 2.

The consolidated financial statements of CIC Holdings PLC, as at and for the year ended 31st March 2015 comprise of the Company and its subsidiaries (together referred to as the ‘Group’ and individually as ‘Group entities’) and the Group’s interest in equity accounted investees. Descriptions of the nature of the operations and principal activities of the Company, its subsidiaries and equity accounted investees are given on page 213.

Ultimate Parent Company of CIC Holdings PLC is Paints & General Industries Limited, a Company incorporated and domiciled in Sri Lanka.

The financial statements of all Companies in the Group as mentioned in Notes 23 and 24 to the financial statements are prepared for a common financial year, which ends on 31st March, other than Commercial Insurance Brokers (Private) Limited which has been prepared up to 31st December as per their reporting requirements.

The Board of Directors of the Company is responsible for the preparation and presentation of the financial statements. The consolidated financial statements were authorised for issue by the Directors on 22nd May 2015.

2. Basis of Preparation

2.1 Statement of Compliance The consolidated financial statements have been prepared

in accordance with Sri Lanka Accounting Standards (Here in after referred to as SLFRS/LKAS ), issued by The Institute of Chartered Accountants of Sri Lanka (ICASL) and the requirements of the Companies Act No. 7 of 2007 and Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995.

2.2 Basis of Measurement The consolidated financial statements have been prepared

on the historical cost basis, except that land and short-term investments are measured at fair value and the retirement benefit obligations are measured at the present value of the defined benefit plans as explained in the respective notes to the financial statements.

When measuring fair value of an asset or liability, the Group uses observable market data as far as possible. Fair values are

categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows,

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices)

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

If inputs used to measure the fair value of an asset or liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

2.3 Functional and Presentation Currency The consolidated financial statements are presented in Sri

Lankan Rupees, which is the Group’s functional currency. All financial information presented in Sri Lankan Rupees has been rounded to the nearest thousand, unless stated otherwise.

2.4 Use of Estimates and Judgements and Assumptions The preparation of Consolidated Financial Statements in

conformity with Sri Lanka Accounting Standards (SLFRS/LKAS) requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reporting amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised in any future periods effected.

2.4.1 Revaluation of Property, Plant and Equipment The Group carries its land at revalued amounts with changes in

fair value being recognised in other comprehensive income. The Group engaged independent valuation specialists to determine fair value as at 31st March 2015. The inputs used to determine the fair value of the land are further explained in Note 16.

2.4.2 Impairment of Non-Financial Assets The carrying amounts of the Group’s non-financial assets, other

than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the recoverable amounts of such assets are estimated.

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The recoverable amount of goodwill is estimated at each reporting date, or as and when an indication of impairment is identified.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets. Impairment losses are recognised in the income statement.

Impairment losses recognised in respect of cash-generating units on acquisition of subsidiaries are allocated first to reduce the carrying amount of any goodwill allocated to the unit, and then to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are recognised in profit or loss.

2.4.3 Retirement Benefits The cost of defined benefit plan is determined using actuarial

valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. In determining the appropriate discount rate, management considers the weighted average cost of capital. The mortality rate is based on publicly available mortality tables for the specific country. Future salary increases are based on expected future inflation rates for the respective country.

2.4.4 Fair Value of Financial Instruments When the fair value of financial assets and financial liabilities

recorded in the Statement of Financial Position can’t be derived from the active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. The judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in the assumptions about these factors could affect the reported fair value of financial instruments.

2.4.5 Development Costs Development costs are capitalised in accordance with the

accounting policy in Note 21 initial capitalisation of cost is based on management’s judgment that technological and economical feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. In determining the amounts to be capitalised, management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of benefits.

Information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the Financial Statements is included in the following notes;

• Note 21- Measurement of the recoverable amounts of cash generating units containing goodwill

• Note 12- Utilization of tax losses

• Note 35- Measurement of retirement benefit obligations

• Note 39- Commitment and contingencies

2.4.6 Recognition of Deferred Tax Assets Management applies significant judgement on the extent to

which deferred tax assets can be recognised based on an assessment of the probability of the Group’s future taxable income against which the deferred tax assets can be utilised. In addition, significant judgement is required in assessing the impact of any legal or economic limits or uncertainties in various future tax jurisdictions.



3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1. Change in Accounting Policies. Except for the changes below, the Group has consistently

applied the accounting policies below mentioned to all periods presented in these consolidated financial statements.

The Group has adopted the amendments to SLFRS 11 and new interpretation

The accounting policies adopted are consistent with those of the previous financial year. There has been no significant effect to the accounting policies due to the adoption of Sri Lanka Accounting Standard (SLFRS 10) - ‘Consolidated Financial Statements’, and Sri Lanka Accounting Standard (SLFRS 12) ‘Disclosure of Interests in Other Entities’. Changes to the disclosure requirements on the adoption of Sri Lanka Accounting Standard (SLFRS 13) - ‘Fair Value Measurement’ have been disclosed under Note 45.

The impact of Sri Lanka Accounting Standard (SLFRS 11) – ‘Joint Arrangements’ is discussed below.

SLFRS 11 replaces Sri Lanka Accounting Standard (LKAS 31) – “Interest in Joint Ventures”. SLFRS 11 classifies a joint arrangement as either a joint operation or a joint venture based on the parties’ rights and obligations under the arrangement. SLFRS 11 removed the option to account for Jointly Controlled Entities (JCEs) using proportionate consolidation method. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. The effect of this change to the consolidated financial statements of the Group is given in Note 44.1 to the financial statements.

SLFRS 11 Joint Arrangements

The impact on the Group’s consolidated financial statements is presented in the note 44.1 to the financial statements.

The accounting policies set out below have been consistently applied to all periods presented in these consolidated financial statements and have been applied consistently by Group entities. The Directors have made an assessment of the Group’s ability to continue as a going concern, and being satisfied that it has the resources to continue in business for the foreseeable future confirm that they do not intend either to liquidate or to cease operations of any business unit of the Group other than those disclosed in the notes to the financial statements.

3.2. Business Consolidation

a) Business Combinations Business combinations are accounted for using the acquisition

method as at the acquisition date, which is the date on which control is transferred to the Group.

The Group measures goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus

• the recognised amount of any non-controlling interests in the acquiree; less

• if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquire; less

• the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in the profit or loss.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

If share based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market based value of the replacement awards compared with the market based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service.

b) Non-Controlling Interests For each business combination, the Group elects to measure

any non-controlling interests in the acquiree either:

• at fair value; or

• at their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value.

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The acquisition of an additional ownership interest or a disposal of ownership interest in a subsidiary without a change of control is accounted for as an equity transaction. Any excess or deficit of consideration paid over the carrying amount of the non-controlling interests is recognised in equity of the parent. No adjustment is made to goodwill as a result of such transactions.

c) Subsidiaries Subsidiaries are entities controlled by the Group. The group

controls an investee when it 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. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The Group controls an investee if, and only if, the Group has:

• Power over the investee (i.e., existing rights that give it 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

The Group considers all relevant facts and circumstances in assessing whether it has power over an investee which includes; the contractual arrangement with the other vote holders of the investee, Rights arising from other contractual arrangements and The Group’s voting rights and potential voting rights over the investee.

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.

Summarised financial Information in respect of subsidiaries that have non-controlling interests that are material to the reporting entity (i.e., the Group) is disclosed separately when applicable.

d) Loss of Control On the loss of control, the Group derecognises the assets and

liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any

surplus or deficit arising on the loss of control is recognized in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value as at the date that control is lost. Subsequently it is accounted for as equity accounted investee or as an available-for –sale financial asset depending on the level of influence retained.

e) Associates and Joint Venture An associate is an entity in which the Group has significant

influence, but no control over the financial and operating policies. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but does not have the control or joint control over those policies.

Joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The Group determines significant influence or joint control by taking into account similar considerations necessary to determine control over subsidiaries.

The Group’s investment in associate and joint venture are accounted for using the equity method and are recognised initially at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment individually.

The statement of profit or loss reflects the Group’s share of the results of operations of the associate or joint venture. Any change in other comprehensive income of those investees is presented as part of the Group’s other comprehensive income. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture.

The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture.


The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

At each reporting date, the Group determines whether there is objective evidence that the investment in associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss as ‘Share of profit of an associate and a joint venture’ in the income statement.

When the Group’s share of losses exceeds its interest in the associate, the carrying amount of that interest, including any long term investments, is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associate. If the associate subsequently reports profits, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

The Group discontinues the use of the equity method from the date that it ceases to have significant influence over an associate or joint control over the joint venture and accounts for the investment in accordance with the Group’s accounting policy for financial instruments. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

There are no significant restrictions on the ability of the associate to transfer funds to the Group in the form of cash dividends or repayment of loans and advances.

Details of the associates within the Group are provided in Note 24 to the financial statements and the details of the joint venture are provided in Note 24 to the financial statements.

f) Intra-Group Transactions Pricing policies of all intra-group sales are identical to those

adopted for normal trading transactions, which are at market prices.

g) Transactions Eliminated on Consolidation Intra-group balances and transactions, and any unrealised

income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to

the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

3.3 Foreign Currencya) Foreign Currency Transactions

Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency spot rates 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 at the reporting date. All differences arising on settlement or translation of monetary items are taken to the profit or loss with the exception of monetary items that are designated as part of the hedge of the Group’s net investment of a foreign operation. These are recognised in other comprehensive income until the net investment is disposed, at which time, the cumulative amount is reclassified to the income statement. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.

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 retranslation of non-monetary items is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).

Foreign currency differences arising on retranslation are recognised in the income statement, except for differences arising on the retranslation of available for sale equity investments, a financial liability designated as a hedge of the net investment in a foreign operation, or qualifying cash flow hedges, which are recognised in other comprehensive income.

b) Group Companies On consolidation the assets and liabilities of foreign operations

are translated into Sri Lankan rupees at the rate of exchange prevailing at the reporting date and their income statements are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the income statement.


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3.4 Revenue Revenue is recognised to the extent that it is probable that

the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates, taking into account contractually defined terms of payment. The Group assesses its revenue arrangements against specific criteria to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The specific recognition criteria described below must also be met before revenue is recognised.

(i) Sale of Goods Revenue from the sale of goods in the course of ordinary

activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have been transferred to the customer, usually on delivery of the goods, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably.

(ii) Rendering of Services Revenue from rendering of services is recognized in profit or

loss in proportion to the stage of completion of the transaction at the reporting date.

(iii) Interest Income Interest income is recognised in profit or loss as it accrues and

is calculated by using the effective interest rate method.

(iv) Dividend Income Dividend Income is recognised when the Group’s right to

receive the payment is established.

(v) Rental Income Rental income arising from operating leases on investment

properties or renting out of premises are recognised as revenue on a straight-line basis over the term of the lease or agreement.

(vi) Commissions When the Group acts in the capacity of an agent rather than as

the principal in a transaction, the revenue recognised is the net amount of commission made by the Group.

(vii) Others Other income is recognised on an accrual basis.

Net gains and losses on the disposal of Property, Plant and Equipment and other non-current assets including investments have been accounted for in profit or loss, having deducted from proceeds on disposal, the carrying amount of the assets and related selling expenses.

3.5 Grants Grants are recognised where there is reasonable assurance

that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised in profit or loss as other income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. When the grant relates to an asset, it is recognised as deferred income and released to income in equal amounts over the expected useful life of the related asset.

When the Group receives non-monetary grants, the assets and the grants are recorded gross at nominal amounts and released to the profit or loss over the expected useful life and pattern of consumption of the benefit of the underlying asset by equal annual installments.

3.6 Tax

Current Income Tax Current income tax is recognised in profit or loss except to

the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates and tax laws enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends.

Current income tax relating to items recognised directly in equity is recognised in equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred Tax Deferred tax is recognised in respect of the temporary

differences between the assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is recognised for all taxable temporary differences, except for:


• Temporarily differences on the initial recognition of asset or liability in a transaction that is not a business combination and, at the time of the transaction, that affects neither the accounting profit nor taxable profit or loss;

• Temporary differences associated with investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and

• Taxable temporary differences arising on the initial recognition of goodwill.

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 is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates (and tax laws) 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 recognised 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 tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognised subsequently if new information about facts and circumstances changed. The adjustment would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or in profit or loss.

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

3.7 Assets Held for Sale and Discontinued Operations

(i) Assets Held for Sale Non-current assets and disposal groups classified as held for

sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Impairment losses on initial classification as held for sale and subsequent gains and losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss. Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised.

(ii) Discontinued Operations A discontinued operation is a component of the Group’s

business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:

• represents a separate major line of business or geographical area of operations;

• is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or

• is a subsidiary acquired exclusively with a view to re-sale.

Classification as a discontinued operation occurs on disposal or when the operation meets the criteria to be classified as held for sale, if earlier.

When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative year.

3.8 Property, Plant and Equipment

Initial Recognition and Measurement Items of property, plant and equipment are measured at

cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes expenditure that is directly attributable to the acquisition of the asset and includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met.


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The cost of self-constructed assets includes the following:

• the cost of materials and direct labour;

• any other costs directly attributable to bringing the assets to a working condition for their intended use;

• when the Group has an obligation to remove the asset or restore the site, an estimate of the costs of dismantling and removing the items and restoring the site on which they are located; and

• capitalised borrowing costs.

When significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

Subsequent Costs Subsequent expenditure is capitalised only when it is

probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance is expensed as incurred.

The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. Refer to Significant accounting judgements, estimates and assumptions and Provisions (Note 5) for further information about the recorded decommissioning provision.

Land is measured at fair value. Valuations are performed frequently to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Any revaluation surplus is recorded in other comprehensive income and hence, credited to the asset revaluation reserve in equity, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the profit or loss, in which case, the increase is recognised in the profit or loss. A revaluation deficit is recognised in the profit or loss, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.

Depreciation Items of property, plant and equipment are depreciated on a

straight-line basis over the estimated useful lives of the each component.

Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

• Buildings 10 to 40 years

• Plant and equipment 6 to 20 years

• Computers and allied equipment 3-20 years

• Motor Vehicles 4-5 years

• Furniture & Fittings 4-20 years

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

De-recognition An item of property, plant and equipment is de recognised

upon disposal of or when no future economic benefits are expected from its use or disposal. Gains and losses arising on de-recognition of assets are determined by comparing the proceeds from the disposal with the carrying amount of property, plant and equipment and are recognised net within “Other Income” in profit or loss.

3.9 Leased Assets The determination of whether an arrangement is, or contains,

a lease is based on the substance of the arrangement at inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

Finance leases that transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in profit or loss. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.


Operating lease payments are not recognised in the Group’s statement of financial position and recognised as an operating expense in the income statement on a straight-line basis over the lease term.

3.10 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 asset. 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.

3.11 Investment Properties Investment property is property held either to earn rental

income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes.

The Group adopts cost model to measure investment property. Investment properties are measured initially at cost. Subsequently to initial recognition investment property is measured at cost less accumulated depreciation and impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.

Investment properties are de-recognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period of de-recognition. When an investment property that was previously classified as property, plant and equipment is sold, any related amount included in the revaluation reserve is transferred to retained earnings.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use.

3.12 Intangible Assets Intangible assets acquired separately are measured on initial

recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition.

Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Expenditure on internally generated intangible assets, excluding capitalised development costs, is recognised in profit or loss in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite. Except for goodwill, intangible assets with finite lives are amortised on a straight-line basis in profit or loss over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible assets.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is de-recognised.

Research and Development Costs Expenditure on research activities is recognised in profit or loss

as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Group can demonstrate:

• The technical feasibility of completing the intangible asset so that it will be available for use or sale

• The intention to complete and the ability to use or sell the asset

• Probability of generating future economic benefits


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• The availability of resources to complete the asset

• The ability to measure reliably the expenditure during development

The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and capitalised borrowing costs. Other development expenditure is recognised in profit or loss as incurred.

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation is recorded in cost of sales. During the period of development, the asset is tested for impairment annually.

3.13 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 estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating units (CGU) 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. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses of continuing operations, including impairment on inventories, are recognised in profit or loss in expense categories consistent with the function of the impaired

asset, except for a property previously revalued and the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the assets or CGUs recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor 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 profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.

The following assets have specific characteristics for impairment testing:

Goodwill Goodwill is tested for impairment annually (as at 31 March) and

when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

Intangible Assets Intangible assets with indefinite useful lives are tested for

impairment annually as at 31st March either individually or at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired.

3.14 Financial Instruments

i) Financial AssetsInitial 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 as appropriate. The Group determines the classification of its financial assets at initial recognition.


All financial assets are recognised initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset. The Group’s financial assets include cash and short-term deposits, trade and other receivables, loans and other receivables, quoted and unquoted financial instruments.

Subsequent Measurement The subsequent measurement of financial assets depends on

their classification as described below:

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 (EIR) 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 profit or loss as finance income. The losses arising from impairment are recognised in profit or loss.

Cash and Cash Equivalents Cash and short-term deposits in the statement of financial

position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.

Available-For-Sale Financial Investments Available-for-sale financial investments include equity

investments and debt securities. Equity investments classified as available-for-sale are those that are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those that are intended to be held for an indefinite period of time and that may be sold in response to needs for liquidity or in response to changes in the market conditions. 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 the investment is determined to be impaired, when the cumulative loss is reclassified from the available-for sale reserve to profit or

loss as finance costs. Interest earned whilst holding available-for-sale financial investment is reported as interest income using the EIR method.

The Group evaluates whether the ability and intention to sell its available-for-sale financial assets in the near term is still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the Group may elect to reclassify these financial assets. Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Group has the intent and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held-to-maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly.

For a financial asset reclassified from the available-for-sale category, the fair value carrying amount at the date of reclassification becomes its new amortised cost and any previous gain or loss on the asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortised cost and the maturity amount is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to profit or loss.

De-recognition of Financial Assets A financial asset (or, where applicable, a part of a financial asset

or part of a group of similar financial assets) is de-recognised when:

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

• The Group has transferred its rights 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

- The Group has transferred substantially all the risks and rewards of the asset, or

- The Group 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, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor


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retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that 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.

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, and only 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 interest or principal payments, the probability that they will enter bankruptcy or other financial re-organisation and when 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.

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, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original

effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. 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 future write-off is later recovered, the recovery is credited to finance costs in the income statement.

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 value has been below its original cost. When 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.

In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement. Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment


loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through the income statement.

iii) Non-Derivative Financial Liabilities

Initial Recognition and Measurement The Group initially recognises debt securities issued and

subordinated liabilities on the date that they are originated. All other financial liabilities are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

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

All financial liabilities are recognised initially at fair value plus, in the case of loans and borrowings, directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings.

Subsequent Measurement The measurement of financial liabilities depends on their

classification as described below:

Financial Liabilities at Fair Value through Profit or Loss Financial liabilities at fair value through profit or loss include

financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term and are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument at fair value less any directly attributable transaction costs.

Gains or losses on liabilities held for trading are recognised in profit or loss.

Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

Loans and Borrowings After initial recognition, interest bearing loans and borrowings

are subsequently measured at amortised cost using the effective interest rate (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the 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 profit or loss as finance costs.

De-recognition of Financial Liabilities A financial liability is derecognised when its contractual

obligations under the liability are discharged, cancelled or expired. 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 the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss.

iii) Off-Setting of Financial Instruments Financial assets and financial liabilities are offset and the net

amount reported in the consolidated statement of financial position if, and only if:

• There is a currently enforceable legal right to offset the recognised amounts

And

• There is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously

iv) Fair Value of Financial Instruments The fair value of financial instruments that are traded in an

active market at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask prices for short term positions), without any deduction for transaction costs. For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include;

• Using recent arm’s length market transactions;

• Reference to the current fair value of the instrument that is substantially the same:

• A discounted cash flow analysis or other valuation models.

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 45.

3.15 Biological Assets Biological assets are measured at fair value less cost to sell,

with any change therein recognized in profit or loss. Biological assets held as inventory are measured at cost

inclusive of overheads on a proportionate basis.


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3.16 Inventories Inventories are measured at the lower of cost or net realisable

value. The cost of finished goods is computed, based on the weighted average cost method and includes material, labour and appropriate share of production overheads, based on normal operating capacity. In the case of purchased inventories, cost includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their existing location and condition. The cost of raw material is computed at weighted average cost.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Provision for Inventory Specific provisions are made giving considerations to the

condition of inventory held by the Company/Group.

3.17 Provisions A provision is recognized if, as a result of a past event, the

Group has a present legal or constructive obligation that an outflow of economic benefits will be required to settle the obligations.

3.18 Employment Benefits

Defined Benefit Plans A defined benefit plan is a post-employment benefit plan, other

than a defined contribution plan. The liability recognised in the financial statements in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted.

The calculation is performed annually by a qualified actuary using the projected unit credit method.

The Group recognises all actuarial gains and losses arising from defined benefit plans immediately in other comprehensive income and all expenses related to defined benefit plans in personnel expenses in profit or loss.

Defined Contribution Plan - Employees’ Provident Fund/ Mercantile Services Provident Society and Employees’ Trust Fund

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and has no further legal or constructive obligation to pay further amounts. The Group contributes 12%, 12% and 3% of gross emoluments of employees to the Employees’ Provident Fund, Mercantile Services Provident Society and the Employees’ Trust Fund respectively. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

3.19 Share-Based Payment Transactions - ESOS Shareholders of the Company resolved on 29th December

2010 the issue if Three Hundred and Seventy Nine Thousand and Eighty (379,080) Voting and One Million Five Hundred and Sixteen Thousand Three Hundred and Twenty (1,516,320) Non- Voting (Class X), Ordinary Shares (constituting approximately 2% of the issued shares as at 18th November 2010) to the eligible employees of the Company under an Employee Share Option Scheme (ESOS). Options were granted for no consideration. The entire of the share options were offered to the employees in one block to be exercised by eligible employees within a period of 5 years from 01st of January 2011. The shares under ESOS was priced at average of volume weighted average market price of the Company’s share for the ten (10) market days immediately prior to the date of offer.

The Company has issued share options directly to specified employees of the Company, Managing Directors and Executive Directors of Subsidiaries where the Company holds 50% of more in ordinary shares.

The cost of equity – settled transactions is recognised, together with a corresponding increase in other capital reserves in equity if management intends that the eligible employees will exercise the option right in foreseeable future. (Further details are given in Note 41).

3.20 Earnings Per Share The Group presents basic Earnings Per Share (EPS) for its

ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted number of ordinary shares outstanding during the period.

3.21 Cash Flow Statement The cash flow statement has been prepared using the indirect

method.


3.22 Segment Reporting Segment results that are reported to the Group’s CEO (the chief

operating decision maker) include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated expenses comprise mainly corporate assets (primarily the Company’s head office), head office expenses and tax assets and liabilities.

3.23 Events Occurring after the Reporting Date All material events occurring after the reporting date have been

considered and where appropriate adjustment or disclosures have been made in these Financial Statements.

4 New Accounting Standards Issued but not Effective as at the Reporting Date

The Institute of Chartered Accountants of Sri Lanka has issued the following standards which become effective for annual periods beginning after the current financial year. Accordingly these standards have not been applied in preparing theses financial statements. The Group expects that these standards when applied will have substantial impact on the financial performance, financial position and disclosures. The Group will be adopting these standards when they become effective.

SLFRS 9 – Financial Instruments – effective for annual periods beginning

on or after 1st of January 2018.

SLFRS 14 – Regulatory Deferral Accounts– effective for annual periods

beginning on or after 1st of January 2016

SLFRS 15 – Revenue from Contracts with Customers– effective for annual

periods beginning on or after 1st of January 2018

Amendment to LKAS 16 and LKAS 41 – Agriculture; Bearer Biological Plants - effective for annual periods beginning on or after 1st of January 2016

Amendments to SLFRS 10, SLFRS 12 and LKAS 28 – Investment Entities: Applying the Consolidation Exception - effective for annual periods beginning on or after 1st of January 2016

Amendments to LKAS 27 – Equity Method in Separate Financial Statements - effective for annual periods beginning on or after 1st of January 2016

Amendments to SLFRS 10 and LKAS 28 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - effective for annual periods beginning on or after 1st of January 2016

Amendments to SLFRS 11 – Accounting for Acquisitions of Interests in Joint Operations - effective for annual periods beginning on or after 1st of January 2016

5 Determination of Fair Values A number of the Group’s accounting policies and disclosures

require the determination of fair values, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and disclosure purposes based on the following methods. Where applicable further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability

5.1 Property, Plant and Equipment Acquired in Business Combinations

The fair value of Property, plant and equipment recognised as a result of a business combination is the estimated amount for which a property could be exchanged on the date of acquisition between a willing buyer and a willing seller in an arm’s length transaction. The fair value of items of plant, equipment fixtures and fittings is based on market prices for similar items when available and depreciated replacement cost when appropriate.

5.2 Property, Plant and Equipment Owned by the Group External, independent qualified valuers having appropriate

experience in valuing properties in locations of properties being valued, value the land owned by the Group based on the market values. This is the estimated amount for which land could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction.


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5.3 Investment Property Investment property is valued for disclosure purposes by the

directors based on the market value, being the estimated amount for which the property could be exchanged on the reporting date between a willing buyer and a willing seller in an arm’s length transaction.

5.4 Equity Securities The fair value of the equity securities is determined by reference

to their quoted share price at the reporting date if quoted; or if unquoted either using discounted cash flow analysis using expected future cash flows and a market related discounted rate, or based on the net assets of the investee company.

Financial instruments other than equity securities carried at fair value through profit or loss and available-for-sale investments

Fair value of these financial instruments is estimated by discounting the difference between the contractual price of the instrument price and the current price of the instrument for the residual maturity of the contract based on quoted price, or obtained from brokers if not quoted, using a credit adjusted risk free interest rate.

5.5 Defined Benefit Plan – Retirement Benefit Obligations The define benefit plan is valued by a professionally qualified

external actuary using the projected unit credit method using the standard rate of inflation, an appropriate discount rate and anticipation of future salary increases.

5.6 Contingent Consideration The fair value of contingent consideration arising in a business

combination is calculated based on the expected payment amount and their associated probabilities discounted to present value when appropriate.


5. Segmental Information Construction Agriculture & Industrial Packaging Consumer & Others Group Livestock Raw Materials Materials Pharmaceuticals

2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Profit or Loss Revenue 421,328 717,507 14,378,976 13,750,444 1,793,448 1,725,773 1,340,593 922,468 5,961,027 4,711,294 1,040 1,274 23,896,412 21,828,760 Inter segmental revenue - - (107,746) (189,810) - (1,974) (74,223) (76,177) (132,146) (960) - - (314,115) (268,921) Total revenue to external customers 421,328 717,507 14,271,230 13,560,634 1,793,448 1,723,799 1,266,370 846,291 5,828,881 4,710,334 1,040 1,274 23,582,297 21,559,839 Segmental results 57,384 64,816 1,044,212 584,061 92,182 385,943 201,686 125,353 510,973 (25,060) (20) 9 1,906,417 1,135,122 Impairment loss on property,

plant and equipment - - - - - - (9,080) (18,799) - (30,000) - - (9,080) (48,799) Financing cost (net) (25,109) (31,381) (505,995) (1,048,292) (6,351) (25,775) (28,176) (48,341) (116,210) (187,669) (17) (12) (681,858) (1,341,470) Share of profit of equity

accounted investees 228,162 295,422 - (11,470) - - - - - - (20,526) (13,881) 207,636 270,071 Profit/(loss) before tax 260,437 328,857 538,217 (475,701) 85,831 360,168 164,430 58,213 394,763 (242,729) (20,563) (13,884) 1,423,115 14,924 Income tax (7,784) (18,859) (204,128) (34,087) (20,685) (42,638) (36,708) (7,979) (128,322) 31,528 (70) (12) (397,697) (72,047) Profit/(loss) after tax 252,653 309,998 334,089 (509,788) 65,146 317,530 127,722 50,234 266,441 (211,201) (20,633) (13,896) 1,025,418 (57,123) Profit/(loss) from discontinued operations - - 2,013 (405,182) 7,684 (25,144) - - 5,728 (639,390) - - 15,425 (1,069,716) Profit/(loss) for the year 252,653 309,998 336,102 (914,970) 72,830 292,386 127,722 50,234 272,169 (850,591) (20,633) (13,896) 1,040,843 (1,126,839) Attributable to : Equity Holders of the company 252,653 310,516 302,706 (466,923) 59,740 172,636 65,000 26,006 102,461 (1,000,052) (20,633) (13,896) 761,927 (971,713) Non-Controlling Interests - (518) 33,396 (448,047) 13,090 119,750 62,722 24,228 169,708 149,461 - - 278,916 (155,126) Profit or loss for the year 252,653 309,998 336,102 (914,970) 72,830 292,386 127,722 50,234 272,169 (850,591) (20,633) (13,896) 1,040,843 (1,126,839) Assets and Liabilities Non-current assets Property, plant and equipment 163,424 323,110 6,965,203 5,997,899 128,672 211,540 740,912 657,303 1,009,248 843,096 - - 9,007,459 8,032,948 Unallocated property, plant

and equipment - - - - - - - - - - - - 1,603,207 1,381,787 Other non-current assets 813,114 886,114 356,711 875,251 477,050 439,973 3,144 8,672 139,972 87,617 217,922 286,353 2,007,913 2,583,980 Total non-current assets 976,538 1,209,224 7,321,914 6,873,150 605,722 651,513 744,056 665,975 1,149,220 930,713 217,922 286,353 12,618,579 11,998,715 Current assets 279,436 275,340 8,687,301 8,190,274 1,209,213 1,796,509 597,463 287,460 2,783,524 2,580,789 89,193 713,055 13,646,130 13,843,427 Total assets 1,255,974 1,484,564 16,009,215 15,063,424 1,814,935 2,448,022 1,341,519 953,435 3,932,744 3,511,502 307,115 999,408 26,264,709 25,842,142 Non-current liabilities 12,193 - 1,399,410 1,035,567 52,085 89,209 129,138 146,728 349,290 235,939 53,701 176,658 1,995,817 1,684,101 Current liabilities 199,110 32,695 11,350,475 11,041,449 216,598 807,899 527,190 323,200 1,934,858 2,221,993 1,197,413 1,530,782 15,425,644 15,958,018 Total liabilities 211,303 32,695 12,749,885 12,077,016 268,683 897,108 656,328 469,928 2,284,148 2,457,932 1,251,114 1,707,440 17,421,461 17,642,119 Inter segment pricing on the basis of arm’s length transactions.

Secondary geographical segmentation is not given since the dispersion of the group operations does not construe an objective segmentation.


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5. Segmental Information Construction Agriculture & Industrial Packaging Consumer & Others Group Livestock Raw Materials Materials Pharmaceuticals

2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Profit or Loss Revenue 421,328 717,507 14,378,976 13,750,444 1,793,448 1,725,773 1,340,593 922,468 5,961,027 4,711,294 1,040 1,274 23,896,412 21,828,760 Inter segmental revenue - - (107,746) (189,810) - (1,974) (74,223) (76,177) (132,146) (960) - - (314,115) (268,921) Total revenue to external customers 421,328 717,507 14,271,230 13,560,634 1,793,448 1,723,799 1,266,370 846,291 5,828,881 4,710,334 1,040 1,274 23,582,297 21,559,839 Segmental results 57,384 64,816 1,044,212 584,061 92,182 385,943 201,686 125,353 510,973 (25,060) (20) 9 1,906,417 1,135,122 Impairment loss on property,

plant and equipment - - - - - - (9,080) (18,799) - (30,000) - - (9,080) (48,799) Financing cost (net) (25,109) (31,381) (505,995) (1,048,292) (6,351) (25,775) (28,176) (48,341) (116,210) (187,669) (17) (12) (681,858) (1,341,470) Share of profit of equity

accounted investees 228,162 295,422 - (11,470) - - - - - - (20,526) (13,881) 207,636 270,071 Profit/(loss) before tax 260,437 328,857 538,217 (475,701) 85,831 360,168 164,430 58,213 394,763 (242,729) (20,563) (13,884) 1,423,115 14,924 Income tax (7,784) (18,859) (204,128) (34,087) (20,685) (42,638) (36,708) (7,979) (128,322) 31,528 (70) (12) (397,697) (72,047) Profit/(loss) after tax 252,653 309,998 334,089 (509,788) 65,146 317,530 127,722 50,234 266,441 (211,201) (20,633) (13,896) 1,025,418 (57,123) Profit/(loss) from discontinued operations - - 2,013 (405,182) 7,684 (25,144) - - 5,728 (639,390) - - 15,425 (1,069,716) Profit/(loss) for the year 252,653 309,998 336,102 (914,970) 72,830 292,386 127,722 50,234 272,169 (850,591) (20,633) (13,896) 1,040,843 (1,126,839) Attributable to : Equity Holders of the company 252,653 310,516 302,706 (466,923) 59,740 172,636 65,000 26,006 102,461 (1,000,052) (20,633) (13,896) 761,927 (971,713) Non-Controlling Interests - (518) 33,396 (448,047) 13,090 119,750 62,722 24,228 169,708 149,461 - - 278,916 (155,126) Profit or loss for the year 252,653 309,998 336,102 (914,970) 72,830 292,386 127,722 50,234 272,169 (850,591) (20,633) (13,896) 1,040,843 (1,126,839) Assets and Liabilities Non-current assets Property, plant and equipment 163,424 323,110 6,965,203 5,997,899 128,672 211,540 740,912 657,303 1,009,248 843,096 - - 9,007,459 8,032,948 Unallocated property, plant

and equipment - - - - - - - - - - - - 1,603,207 1,381,787 Other non-current assets 813,114 886,114 356,711 875,251 477,050 439,973 3,144 8,672 139,972 87,617 217,922 286,353 2,007,913 2,583,980 Total non-current assets 976,538 1,209,224 7,321,914 6,873,150 605,722 651,513 744,056 665,975 1,149,220 930,713 217,922 286,353 12,618,579 11,998,715 Current assets 279,436 275,340 8,687,301 8,190,274 1,209,213 1,796,509 597,463 287,460 2,783,524 2,580,789 89,193 713,055 13,646,130 13,843,427 Total assets 1,255,974 1,484,564 16,009,215 15,063,424 1,814,935 2,448,022 1,341,519 953,435 3,932,744 3,511,502 307,115 999,408 26,264,709 25,842,142 Non-current liabilities 12,193 - 1,399,410 1,035,567 52,085 89,209 129,138 146,728 349,290 235,939 53,701 176,658 1,995,817 1,684,101 Current liabilities 199,110 32,695 11,350,475 11,041,449 216,598 807,899 527,190 323,200 1,934,858 2,221,993 1,197,413 1,530,782 15,425,644 15,958,018 Total liabilities 211,303 32,695 12,749,885 12,077,016 268,683 897,108 656,328 469,928 2,284,148 2,457,932 1,251,114 1,707,440 17,421,461 17,642,119 Inter segment pricing on the basis of arm’s length transactions.

Secondary geographical segmentation is not given since the dispersion of the group operations does not construe an objective segmentation.


Company Group For the year ended 31st March 2015 2014 2015 2014 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

6 Revenue Revenue 6,979,046 5,827,098 23,582,297 21,559,839

Net Revenue

Local 6,971,311 5,818,917 23,027,938 21,042,348 Exports 7,735 8,181 554,359 517,491 Total 6,979,046 5,827,098 23,582,297 21,559,839

7 Other Income Rent 34,218 30,773 33,568 29,569 Dividend income

Quoted 5,231 12,772 5,946 7,051 Unquoted 336,795 254,651 - -

Net gain on disposal of property, plant and equipment - 24,481 19,985 16,220 Gain on disposal of assets held for sale 1,828 4,485 3,218 4,485 Gain on disposal of other financial assets - - 9,939 - Gain on deemed disposal of equity accounted investee - - 392 - Gain from changes in fair value of biological assets - - 4,858 2,478 Gain on disposal of subsidiary - - 3,881 - Gain on deemed disposal of subsidiary* - - - 451,257 Grants amortised - - 5,234 8,103 Reversal of provision relating to inter-company receivable 6,098 - - - Sundry Income 5,326 5,933 68,469 58,676 Total 389,496 333,095 155,490 577,839

* Further to a special resolution passed by Chemcel (Private) Limited, 195,360,000 shares were issued to Archer Daniels Midland BV for a consideration of Rs. 1,866 million. The Group’s effective holding in Chemcel (Private) Limited reduced to 21.93% as a result of the same and has therefore been reflected as an equity accounted investee as at 31st March 2014. The profit on deemed disposal of subsidiary amounting to Rs. 451 million has been reflected within other income.

8 Other Expenses Impairment loss on property, plant and equipment - 30,000 9,080 48,799 Net loss on disposal of property, plant and equipment 150 - - - Impairment of goodwill - - - 96,489 Provision for diminution in value of investments - 83,950 - 26 Provision relating to scaling down of continuing operations* - 145,288 54,275 188,027 Loss on share transfer-Chemcel (Private) Limited - - - 13,874 Total 150 259,238 63,355 347,215

*The scaling down of continuing operations relate to consumer business of CIC Holdings PLC and the operations of CIC Lifesciences Limited and Crop Management Services (Private) Limited.


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9 Financing Cost (Net)

Finance Cost Long-term loans 24,880 17,244 239,765 263,323 Finance leases 2,081 8,589 12,849 55,726 Short-term loans and overdrafts 153,690 183,827 470,427 992,736 Staff loans 2,501 4,259 6,429 8,026 Foreign exchange loss - - 3,220 92,826 183,152 213,919 732,690 1,412,637

Finance Income Staff loans 2,302 4,359 7,230 9,324 Foreign exchange gain 16,312 6,504 25,155 13,732 Deposits 1,402 2,621 18,447 48,111 20,016 13,484 50,832 71,167 Financing Cost (Net) 163,136 200,435 681,858 1,341,470

10 Share of Profit of Equity Accounted Investees (Net of Tax) Commercial Insurance Brokers (Private) Limited 826 7,898 Akzo Nobel Paints Lanka (Private) Limited 228,162 295,422 Rainforest Ecolodge (Private) Limited (13,799) (7,027) Chemcel (Private) Limited (7,553) (14,752) Rahimafrooz CIC Agro Limited - (11,470) Total 207,636 270,071

11 Profit/(Loss) Before Tax is Stated after Charging all Expenses Including the Following:

Directors’ emoluments and retirement benefits 21,928 24,463 154,158 137,261 Depreciation on property, plant and equipment 136,663 130,912 658,704 758,048 Directors’ fees 18,834 18,121 26,664 27,547 Donations 1,000 1,000 3,743 5,938 Staff training and development 3,120 5,179 4,592 11,095 Legal fees 2,828 3,018 7,962 7,398 Auditor’s remuneration Statutory audit fees 1,541 1,315 7,760 8,195 Audit related fees 3,551 677 5,807 3,615 Non-audit fees 1,265 1,465 8,024 7,085 Professional fees 22,085 37,851 23,595 58,396 Provision/(reversal) for impairment of trade receivables (2,754) 212,541 48,670 367,126 Provision/(reversal) for impairment and write off of inventories (97,963) 306,280 (56,630) 528,147 Personnel costs * (Note 11.1) 445,998 425,252 1,737,270 1,742,792

* Includes Directors’ emoluments and retirement benefits



11.1 Personnel Costs Salaries 336,831 331,358 1,357,761 1,382,440 EPF/MSPS - Defined contribution plan 34,030 33,961 123,008 121,215 ETF - Defined contribution plan 8,508 8,503 30,752 30,235 Bonus 27,918 15,814 123,715 114,108 Provision for retirement benefits 38,711 35,616 102,034 94,794 Total 445,998 425,252 1,737,270 1,742,792

The number of employees as at the end of the year 441 414 1,952 1,935

12 Income Tax Expense Current tax expense on ordinary activities for the year Current tax expense on profits for the year 59,489 - 248.015 91,757 (Over provision)/under provision in respect of previous years (3,916) (5,184) 204 (14,224) Irrecoverable ESC written off - - 5,419 3,445 Tax on dividend income - - 40,335 30,934 55,573 (5,184) 293,973 111,912 Deferred tax expense Orgination/(reversal) of temporary differences 42,660 (39,350) 103,724 (39,865) 42,660 (39,350) 103,724 (39,865) Total 98,233 (44,534) 397,697 72,047

12.1 Reconciliation of the Accounting Profit and Taxable Profit Profit/(loss) before tax-continuing operations 605,056 (247,474) 1,423,115 14,924 Profit/(loss) before tax-discontinued operations 6,739 (750,455) 16,139 (1,155,540) Intra-group adjustments - - 329,631 (294,267) 611,795 (997,929) 1,768,885 (1,434,883) Share of profit of equity accounted investees - - (207,636) (270,071) Other sources of income 1,402 2,912 50,960 2,912 Disallowable expenses 348,555 658,228 1,816,809 2,971,511 Tax deductible expenses (276,239) (242,269) (2,130,399) (1,861,110) Tax exempt income (342,026) (267,424) (557,992) (636,185) Tax loss for the year - 847,501 476,167 1,604,180 Tax loss utilised during the year (127,544) (1,019) (292,219) (41,060) Taxable profit 215,943 - 924,575 335,294 Income tax @ 12% 49 - 5,514 1,645 Income tax @ 28% 60,451 - 246,015 90,044 60,500 - 251,529 91,689 Current tax on discontinued operations (1,011) - (3,514) 68 Current tax on continuing operations 59,489 - 248,015 91,757 Tax loss brought forward 846,482 - 2,306,683 912,302 Tax loss for the year - 847,501 476,167 1,604,180 Tax loss from acquisitions/(disposals) - - (50,579) (168,739) Tax loss utilised during the year (127,544) (1,019) (292,219) (41,060) Tax loss carried forward 718,938 846,482 2,440,052 2,306,683 Effective Tax Rate 10% 14%


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12.2 Group tax expense is based on the taxable profit of each Company in the Group. At present the tax laws of Sri Lanka do not provide for Group Taxation.

12.3 Irrecoverable Economic Service Charge has been charged to the Profit or Loss.

12.4 Details of the Current Tax Computation As per the Inland Revenue Act No. 10 of 2006 and subsequent amendments thereto, CIC Holdings PLC and all other companies within the

Group, excluding those which enjoy a tax holiday or concessionary rate of taxation as referred to below are liable to income tax at 28% of the adjusted taxable profits for the year.

The profits and income of CIC Feeds (Private) Limited is liable for income tax at the rate of 12% (2014 - 12%) in terms of the provisions of the Inland Revenue Act No. 10 of 2006 and subsequent amendments thereto.

In terms of the provisions of Inland Revenue Act No. 10 of 2006 and subsequent amendments thereto, the profits and income of CIC Poultry Farms Limited is taxed at the rate of 10% (2014 - 10%) and other income are liable for income tax at the rate of 28%.

In terms of Sections 51and 52 of the Inland Revenue Act, profits from qualifying exports of Chemanex Exports (Private) Limited, enjoys a concessionary rate of tax of 12%.

The profits of Yasui Lanka (Private) Limited, are taxable at a concessionary rate of 15% up to and including the year of assessment 2016/17, in terms of the Agreement entered into with the Board of Investment. However, in accordance with the Inland Revenue (Amendment) Act No. 18 of 2013, the profits of the Company, is liable for Income Tax only at 12% effective from 1st April 2013, irrespective of the terms stated in the BOI Agreement.

The profits of CAL Exports Lanka (Private) Limited, enjoyed a five year tax holiday period up to and including the year of assessment 2008/09, and a concessionary rate at 10% for two years thereafter,in terms of the agreement entered into with the Board of Investment. In accordance with the Inland Revenue (Amendment) Act No. 18 of 2013, the profits of the Company is liable for Income Tax only at 12% effective from 1st April 2013.


13 Discontinued Operations Discontinued operations include CIC Agri Biotech (Private) Limited, CIC North and East Agri Development (Private) Limited, Sunhill Tea Factory

(Private) Limited, Yasui Lanka (Private) Limited and food and selected personal care product lines of CIC Holdings PLC. Disposal transaction of Sunhill Tea Factory (Private) Limited was completed by 31st March 2015. Yasui Lanka (Private) Limited is under liquidation. The final negotiations for the disposal of other discontinued assets and liabilities are in progress and is due to be completed by 31st December 2015.

The results of aforesaid operations for the year are presented below: Company Group For the year ended 31st March 2015 2014 2015 2014 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

13.1 Profit/(loss) after Tax from Discontinued Operations Revenue 113,006 793,001 286,440 1,678,303 Cost of sales (209,294) (785,006) (362,468) (1,573,099) Gross profit/(loss) (96,288) 7,995 (76,028) 105,204 Other income - - 38,347 9,398 (Expense)/reversal of provision for receivables and inventories 103,027 (656,982) 76,665 (1,079,583) Financing cost (net) - (101,468) (22,845) (190,559)

Profit/(loss) before tax from discontinued operations 6,739 (750,455) 16,139 (1,155,540) Tax expense: Current tax (1,011) - (3,514) 68 Deferred tax - 106,146 2,800 90,643 Loss on sale of discontinued operations - - - (4,887)

Profit/(loss) for the year from discontinued operations 5,728 (644,309) 15,425 (1,069,716)

Other Comprehensive Income Actuarial gains on retirement benefit obligations - - 250 825 Total comprehensive Income 5,728 (644,309) 15,675 (1,068,891)

13.2 Major Classes of Assets and Liabilities Classified as Held for Sale Company Group As at 31st March 2015 2014 2015 2014 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Assets Property, plant and equipment - 8,043 40,319 79,617 Trade receivables 12,299 64,241 16,995 150,975 Other receivables - 19,851 3,446 30,469 Inventories 8,281 121,137 19,097 220,040 Cash in hand and at bank - - 14,462 8,387 Assets classified as held for sale 20,580 213,272 94,319 489,488

Liabilities Loans and borrowings - - - 10,858 Retirement benefit obligations - - 4,701 7,718 Trade and other payables 9,114 14,379 18,383 64,490 Bank overdrafts - - 8,586 362,109 Liabilities directly associated with assets classified as held for sale 9,114 14,379 31,670 445,175 Net assets directly associated with disposal group 11,466 198,893 62,649 44,313


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13.3 Cash Flows Generated From/(Used in) Discontinued Operations Net cash generated from/(used in) operating activities 193,155 (318,400) 298,003 (367,634) Net cash from investing activities - - 8,285 9,172 Net cash used for financing activities - (5,390) (5,420) (5,390) Net cash inflow/(outflow) 193,155 (323,790) 300,868 (363,852)

13.4 Earnings/(Deficit) per Share: Basic/diluted earnings/(deficit) per share for the year from

discontinued operations 0.06 (6.80) 0.11 (9.52)

14 Earnings/(Deficit) per Share Profit/(loss) attributable to equity holders of the Company 512,551 (847,249) 761,927 (971,713) The share capital is as follows : Ordinary Shares Weighted average number of shares 72,900,000 72,900,000 72,900,000 72,900,000 Non-Voting (Class X) shares Weighted average number of shares 21,870,000 21,870,000 21,870,000 21,870,000 Total weighted average number of shares 94,770,000 94,770,000 94,770,000 94,770,000 Basic/Diluted earnings/(deficit) per share (Rs.) 5.41 (8.94) 8.04 (10.25)

Basic Earnings/(Deficit) per Share The calculation of basic earnings/(deficit) per share is based on the profit/(loss) attributable to ordinary shareholders and the weighted average

number of shares outstanding during the year.

Diluted Earnings/(Deficit) per share The calculation of diluted earnings/(deficit) per share is based on the profit/(loss) attributable to ordinary shares outstanding after adjustment for

the effect of all potentially dilutive ordinary shares. There were no potentially dilutive ordinary shares at any time during the year/previous year.

There is no material impact on diluted earnings per share arising from Employee Share Option Scheme.


15 Gross Dividend Interim Dividend Interim dividend paid per share Rs.2.00 (2014-Nil) 72,900,000 Ordinary Shares 145,800 - 145,800 - 21,870,000 Non-Voting (Class X) Shares 43,740 - 43,740 - 189,540 - 189,540 -

Final Dividend No final dividend was paid (2014) (2013-Rs.1.00 per share) 72,900,000 Ordinary Shares - 72,900 - 72,900 21,870,000 Non-Voting (Class X) Shares - 21,870 - 21,870 - 94,770 - 94,770 Total 189,540 94,770 189,540 94,770

Directors have recommended the payment of a final dividend of Rs. 1.00 per share on Ordinary and Non-Voting (Class X) shares for the year ended 31st March 2015. This proposed dividend has not yet been recognised as a liability as at 31st March 2015. This would result in a total dividend per share of Rs. 3.00 (2014-Nil) once it is approved at the Annual General Meeting.

The interim dividend of Rs. 2.00 per share for 2014/15 distributed to shareholders are paid out of dividends received from Companies within the Group on which 10% withholding tax has been paid.


16. Property, Plant and EquipmentA. Company

Land Buildings Plant & Equipment Computers Furniture Motor Total Total Machinery & Fittings Vehicles 2015 2014 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Freehold Cost/Valuation At the beginning of the year 1,185,500 927,197 176,948 301,519 94,421 44,069 54,632 2,784,286 2,357,401 Additions 1,144 4,565 695 20,206 2,871 3,913 14,179 47,573 48,552

Disposals - - - - (150) (572) (2,009) (2,731) (76,365) Transferred from capital work-in-progress - 2,859 2,424 13,460 890 - - 19,633 460,664 Transferred to assets classified as held for sale - - - - - - - - (5,966) At the end of the year 1,186,644 934,621 180,067 335,185 98,032 47,410 66,802 2,848,761 2,784,286

Depreciation/Impairment At the beginning of the year - 76,970 122,288 187,542 81,998 14,240 38,049 521,087 430,040

Depreciation for the year - 46,728 16,306 37,019 9,279 4,257 10,689 124,278 103,308 Impairment for the year - - - - - - - - 30,000

On disposals - - - - (62) (191) (1,311) (1,564) (42,038) Transferred to assets classified as held for sale - - - - - - - - (223) At the end of the year - 123,698 138,594 224,561 91,215 18,306 47,427 643,801 521,087

Leasehold Cost/Valuation At the beginning of the year - - - - - - 71,061 71,061 156,366 Disposals - - - - - - (16,153) (16,153) (68,250)

Transferred to assets classified as held for sale - - - - - - - - (17,055) At the end of the year - - - - - - 54,908 54,908 71,061

Depreciation/Impairment At the beginning of the year - - - - - - 47,009 47,009 73,869

Depreciation for the year - - - - - - 12,385 12,385 27,604 On disposals - - - - - - (9,627) (9,627) (39,709)

Transferred to assets classified as held for sale - - - - - - - - (14,755) At the end of the year - - - - - - 49,767 49,767 47,009

Carrying value as at 31st March 2015 1,186,644 810,923 41,473 110,624 6,817 29,104 24,516 2,210,101

Carrying value as at 31st March 2014 1,185,500 850,227 54,660 113,977 12,423 29,829 40,635 2,287,251

i. Carrying amount of property, plant and equipment pledged as securities for bank facilities obtained amounted to Rs.114.80 million. (2014 - Rs.122.15 million)

ii. No borrowing cost was capitalised during the year. (2014 - Rs.19.96 million)


171

B. Group

Land Buildings Plant & Equipment Computers Furniture Motor Total Total Total Machinery & Fittings Vehicles 2015 2014 2013 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Freehold Cost/Valuation At the beginning of the year 2,902,016 3,207,467 3,024,440 1,009,760 266,572 111,328 729,232 11,250,815 10,130,905 8,459,043 Additions 9,033 6,394 91,477 80,511 11,990 6,613 32,758 238,776 522,864 646,819 Revaluation/deemed cost on transition to SLFRS - - - - - - - - 2,807 628,114 Reclassification to assets held for sale - - - - - - - - (150,774) - Impairment-write off - - (5,615) (15,582) - - - (21,197) (76,907) (12,456) Transferred from leasehold - - - - - - 17,910 17,910 273,537 - Transferred from capital work-in-progress 161,452 737,741 751,765 47,954 1,208 4,198 36,291 1,740,609 1,260,304 445,332 On disposal of subsidiary (1,700) (42,905) (37,570) (2,055) (769) (227) (8,557) (93,783) (113,747) - Reclassification to investment property - - - - - - - - (37,500) - Disposals - - (4,647) (9,473) (1,932) (784) (108,409) (125,245) (560,674) (35,947) At the end of the year 3,070,801 3,908,697 3,819,850 1,111,115 277,069 121,128 699,225 13,007,885 11,250,815 10,130,905

Depreciation/Impairment At the beginning of the year - 453,525 960,465 593,554 227,358 54,884 456,237 2,746,023 2,435,284 1,940,004 Depreciation for the year - 121,376 206,400 116,050 25,811 11,097 92,620 573,354 617,158 526,951 Impairment-write off - - (1,624) (10,493) - - - (12,117) (28,108) (9,264) Transferred from leasehold - - - - - - 10,804 10,804 189,400 - Reclassification to assets held for sale - - - - - - - - (122,627) - On disposal of subsidiary - (7,070) (18,143) (648) (717) (118) (6,874) (33,570) (30,568) - On disposals - - (1,640) (6,135) (1,639) (318) (57,031) (66,763) (314,516) (22,407) At the end of the year - 567,831 1,145,458 692,328 250,813 65,545 495,756 3,217,731 2,746,023 2,435,284

Leasehold Cost/Valuation At the beginning of the year 232,898 780,670 - - - - 301,317 1,314,885 1,516,345 1,340,939 Additions - 7,673 - - - - 4,565 12,238 181,845 196,696 Transferred to freehold - - - - - - (17,910) (17,910) (273,537) - Transferred from capital work-in-progress - 23,662 - - - - - 23,662 18,500 - Reclassification to assets held for sale - - - - - - - - (45,996) - On disposal of subsidiary - - - - - - - - (3,142) - Disposals - (3,396) - - - - (100,322) (103,718) (79,130) (21,290) At the end of the year 232,898 808,609 - - - - 187,650 1,229,157 1,314,885 1,516,345

Depreciation/Impairment At the beginning of the year 28,248 192,335 - - - - 184,359 404,942 505,191 355,322 Depreciation for the year 2,926 38,459 - - - - 43,965 85,350 169,714 164,431 Transferred to freehold - - - - - - (10,804) (10,804) (189,400) - Reclassification to assets held for sale - - - - - - - - (34,774) - On disposal of subsidiary - - - - - - - - (1,187) - On disposals - (2,421) - - - - (68,422) (70,843) (44,602) (14,562) At the end of the year 31,174 228,373 - - - - 149,098 408,645 404,942 505,191

Carrying value as at 31st March 2015 3,272,525 3,921,102 2,674,392 418,787 26,256 55,583 242,021 10,610,666



i. Carrying amount of property, plant and equipment pledged as securities for bank facilities obtained amounted to Rs.966.89 million.(2014 - Rs.1,079.67 million)

ii. Borrowing cost capitalised during the year is Rs.79.37 million. (2014 - Rs.33.93 million)

iii. Impairment losses -During the year 2014/15 a subsidiary carried out a review of the recoverable amount of its equipment manufacturing plant and machinery. The assets for which an impairment loss is recognised belongs to Group’s packaging material reportable segment. The review led to the identification of an asset which is impaired and the entire asset was de-recognised from its asset base. The net loss on the impairment is Rs.9.08 million (2014-Rs18.79 million) which has been recognised in the Statement of Profit or Loss and Other Comprehensive Income. Further the Company has recognised as impairment loss of Rs.30 million against plant and machinery in last year.

iv. Unexpired lease period of land belonging to CIC Agri Businesses (Private) Limited is 76 years.


Company Group As at 31st March 2015 2014 2015 2014 2013 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

C. Carrying value At cost 1,018,316 1,077,699 6,810,166 5,634,091 4,822,453 At valuation 1,186,644 1,185,500 2,979,988 2,870,701 2,873,168 On finance lease 5,141 24,052 820,512 909,943 1,011,154 Total 2,210,101 2,287,251 10,610,666 9,414,735 8,706,775

D. The values of the land if it had been carried under cost model

Company Group As at 31st March 2015 2014 2015 2014 2013 Rs.Million Rs.Million Rs.Million Rs.Million Rs.Million

Land 209.45 208.31 1,153.36 974.34 891.84

E. Value of land and ownership

Company Location Land Extent Number of Carrying Value in Acres/ Roods /Perches Buildings Rs. million

CIC Holdings PLC Kew Road, Colombo 02 1 rood and 30.25 perches 1 456.50 Sri Sasanajothi Mawatha, Ratmalana 4 acres,3 roods and 21 perches 9 259.50 Sirimavo Bandaranaike Mawatha,

Colombo 14 1 acre and 32 perches 3 288.00 Pellanwatta, Pannipitiya 7 acres,2 roods and 15.45 perches 17 106.50 Lenagala Estate, Dedigamuwa 10 acres 1 rood and 29.9 perches 12 76.15

Chemanex PLC Sri Sasanajothi Mawatha, Ratmalana 2 acres and 2 roods 1 99.89

CIC Agri Businesses (Private) Limited Mahiella, Kurunegala 2 acres, 3 roods and 31.25 perches 4 37.70 Aluwihare,Matale 3 acres,1 rood and 38 perches 1 22.99 New Nuge Road, Peliyagoda 1 acre and 4 roods 1 182.00 Udahaduwa,Naula 15 acres,3 roods and 39.9 perches 7 14.04

Wayamba Agro Fertilizer Company Limited Maho 16 acres and 30.8 perches 15 90.00

CISCO Speciality Packaging (Private) Limited Pellanwatta, Pannipitiya 2 acres, 3 roods and 18.07 perches 3 86.00

CIC Vetcare (Private) Limited Galla Estate, Ekala 3 roods and 1 perche 3 18.30 Madampalle Estate, Madampalle 15 acres - 37.50

CIC Poultry Farms Limited Molahena Estate, Badalgama 25 acres and 29.95 perches 31 63.00 Iswetiya Elies, Horakandawila, Dunagaha 17 acres and 16.8 perches 17 54.80 Amunuwela Estate,Kuliyapitiya 47 acres, 3 roods and 3 perches 24 111.03 Katuwahenawatta, Walpita, Waradala 50 acres, 1 rood - 122.00

CIC Bio Security Breeder Farms Limited Molahena Estate, Badalgama 27 acres,1 rood and 57.6 perches - 70.50

CIC Feeds (Private) Limited Galla Estate, Ekala 6 acres and 33.4 perches 17 109.75 Heeralugedara, Kotadeniyawa 18 acres and 2 roods 17 46.25 Madampalle Estate, Madampalle 25 acres 25 62.50 Nabirithankadawara,

Welipennagahamulla, Pannala 50 acres,1 rood and 32.5 perches 15 126.00 Agalagedarawatta, Walpita, Kotadeniyawa 48 acres, 3 roods 17.9 perches - 122.00

Colombo Industrial Agencies Limited Temple Lane, Ekala 3 acres 4 124.40

Link Natural Products (Private) Limited Malinda, Kapugoda 9 acres, 2 roods and 26.74 perches 19 197.25 Dambukanda 21 acres, 2 roods and 24 perches 1 56.25 Dompe, Giridara 2 acres and 17.6 perches 1 18.50 kahatagahawatte,Dompe 3 roods and 37.80 perches - 11.50 3,070.80


173

The last revaluation of land has been as follows;

CIC Holdings PLC March 2013 Chemanex PLC and its’ subsidiaries April 2013 CIC Agri Businesses (Private) Limited and its’ subsidiaries March 2013 CISCO Speciality Packaging (Private) Limited March 2013 CIC Feeds (Private) Limited and its’ subsidiaries March 2013 CIC Vetcare (Private) Limited March 2013 Link Natural Products (Private) Limited March 2013 Colombo Industrial Agencies Limited March 2013

Revaluations are based on market value and the valuations were carried out by Perera Sivaskantha & Company, an incorporated valuer.

The revalued figures were incorporated in these Financial Statements from the above dates.

F. Depreciation has been provided on a straight-line basis at the following rates: Company Buildings Plant & Equipment Computers Motor Furniture & Machinery Vehicles Fittings Years Years Years Years Years Years

CIC Holdings PLC 20 8 5 3 5 10 Chemanex PLC 10 6 3 3 4 4 CISCO Speciality Packaging (Private) Limited 20 20,12,10 20 3 5 20 CIC Agri Businesses (Private) Limited* 20 8 4 3 5 10 Colombo Industrial Agencies Limited 20 - - - - -

CIC Feeds (Private) Limited 40 20 20 5 5 8 Link Natural Products (Private) Limited 40 10 10,8,5 3 4 10 CIC Cropguard (Private) Limited - - 5 5 5 10 CIC Lifesciences Limited - 8 4 4 - 4

* Land development cost is depreciated over 30 years.

G. Cost of fully depreciated property, plant and equipment still in use at the reporting date is as follows:

Company Group As at 31st March 2015 2014 2015 2014 2013 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Buildings - - 68,243 64,524 24,109 Plant & machinery 103,900 94,569 309,282 243,859 279,602 Equipment 148,408 120,997 506,931 459,168 336,373 Furniture & fittings 4,488 4,300 22,454 21,391 21,567 Motor vehicles 23,419 3,885 306,967 249,183 198,926 Computers 72,882 64,883 134,976 113,406 103,943 Total 353,097 288,634 1,348,853 1,151,531 964,520


Group As at 31st March 2015 2014 2013 Rs. ‘000 Rs. ‘000 Rs. ‘000

17 Investment Property At the beginning of the year 51,400 14,792 99,095 Reclassification from property, plant and equipment - 37,500 - Reclassified to assets held for sale - (892) (86,181) Gain on deemed cost adjustment - - 1,878 At the end of the year 51,400 51,400 14,792

Depreciation At the beginning of the year - 185 96 Depreciation for the year - - 89 Reclassified to assets held for sale - (185) - At the end of the year - - 185 Carrying Value 51,400 51,400 14,607

A. Details of Investment Property

Group

Ownership Location Land extent Carrying value As at 31st March 2015 2014 2013 Rs.’000 Rs.’000 Rs.’000

Chemanex PLC Building at Nugape - - - 707

CIC Agri Businesses Pagoda, Nugegoda 15.5 perches 11,500 11,500 11,500 (Private) Limited Bogahapitiya Estate, Kengalle 12.00 perches 2,400 2,400 2,400 Galle Road, Weligama 2 roods and 20.06 perches 37,500 37,500 - Total 51,400 51,400 14,607

B. Income and Expenditure on Investment Property

Group For the year ended 31st March 2015 2014 2013 Rs. ‘000 Rs. ‘000 Rs. ‘000

Rental income - 16,133 17,121 Direct operating expenses - (1,075) (1,740) Total - 15,058 15,381

C. Carrying value of investment properties are equal to its fair value.

D. There has been no impairment on investment property which requires a provision.

E. Chemanex PLC depreciates its investment property over 10 years.


175

Company Group As at 31st March 2015 2014 2015 2014 2013 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

18 Capital Work-in-Progress At the beginning of the year 50,920 118,943 763,412 1,072,154 531,459 Expenditure incurred 14,801 392,641 1,354,377 1,254,012 989,674 Amount capitalised (19,633) (460,664) (1,764,271) (1,278,804) (445,332) Amount expensed - - - - (3,647) Disposal of subsidiaries - - - (283,950) - At the end of the year 46,088 50,920 353,518 763,412 1,072,154

19 Deposit on Leasehold Property At the beginning of the year - 16,152 13,678 Additions - - 2,807 Disposal of subsidiaries - (15,940) - Amortisation - (212) (333) At the end of the year - - 16,152

The above deposit on leasehold property relates to Chemcel (Private) Limited. This was an up front payment for the right to use the land and was stated at cost, less amortisation. The deposit was derecognised due to loss of control of subsidiary during the year 2013/14.

A. Details of lease rentals Company Chemcel (Private) Limited Location Board of Investments of Sri Lanka in Mirigama Export Processing Zone Land extent 6 acres, 3 roods and 27 perches Lease period 50 years commencing from 22nd January 2010 Rental US$ 3,700 per acre per annum

Group For the year ended 31st March 2015 2014 2013 Rs. ‘000 Rs. ‘000 Rs. ‘000

B. Lease payments recognised as an expense Total lease payments made - - 13,840 Amount recognised as an expenses - - 10,476 - - 3,364

C. Future minimum lease payments under operating lease of land in US$ is as follows.

Not later than one year - - 33,947 Later than one year and not later than five years - - 135,790 Later than five years - - 1,296,810 Total - - 1,466,547



20 Biological Assets At the beginning of the year 67,366 86,262 78,737 Additions 61,290 80,576 95,935 Reclassified as inventories (58,863) (3,835) - Gain from changes in fair value 4,858 2,478 1,599 Disposals (8,943) (98,115) (90,009) At the end of the year (Note 20.1) 65,708 67,366 86,262

Note 20.1 Poultry Cattle Teak Total

Matured (Rs.’000) 13,478 16,496 - 29,974 Immatured (Rs.’000) - 27,442 8,292 35,734 Total 13,478 43,938 8,292 65,708

Note 20.2 Nature of Group’s Biological Assets The Group has biological assets comprising of poultry for producing eggs, cattle for raw milk and teak for timber.

Note 20.3 Non - Financial Measures of Biological Assets

Quantities Poultry Pigs Cattle Goat Teak No. of Birds No. of Animals No. of Animals No. of Animals Cubic Meters

At the end of the period 2015 25,000 - 1,044 - - 2014 31,431 - 946 - 1,717 2013 65,114 166 984 94 1,717

Quantities Poultry Pigs Cattle Goat No. of Birds No. of Animals No. of Animals No. of Animals

Produce during the year 2015 5,379,148 - 72 - 2014 5,806,007 166 278 94 2013 7,878,112 232 190 55

Note 20.4 There are no commitments for development or acquisition of biological assets.

Note 20.5 Valuation of Biological Assets

The CIC Agri Businesses (Private) Limited uses the following valuation techniques to measure their biological assets

Description Valuation Technique Valuation Input Poultry Discounted Cashflow No. of Produce Market Price Cattle Discounted Cashflow Weight in relation to the category Teak Discounted Cashflow Annual marginal increase of timber content

(0.55 - 1.5cm per year for a tree of diameter girth over 10cm) Discount rate - 13% - 15%


177

Group As at 31st March 2015 2014 2013 Rs.’000 Rs.’000 Rs.’000

21 Intangible Assets Goodwill Gross amount At the beginning of the year 167,293 158,346 158,346 Goodwill on acquisition during the year (i) - 11,585 - Disposal of subsidiaries - (2,638) - At the end of the year 167,293 167,293 158,346

Impairment At the beginning of the year 139,610 43,121 32,015 Charge for the year - 96,489 11,106 At the end of the year 139,610 139,610 43,121

Goodwill (ii) 27,683 27,683 115,225

Development cost capitalised (iii) - - 32,686 Total 27,683 27,683 147,911

As at 31st March 2015 2014 2013 Rs. Million Rs. Million Rs. Million

(i) Goodwill on Acquisition Originated from the Following Investments: Investment by the Company in CIC Lifesciences Limited - 11.58 -

(ii) Aggregate Carrying Amounts of Goodwill Allocated to Each Unit is as Follows; CIC Holdings PLC 11.06 11.06 74.82 CIC Agri Businesses (Private) Limited - - 23.78 CIC Feeds (Private) Limited 16.62 16.62 16.62

(iii) The research and development expenditure on a super absorbent with technical collaboration from a multinational company was capitalised by Chemcel (Private) Limited. However, this amount was derecognised due to loss of control of subsidiary.

(iv) There has been no permanent impairment of intangible assets that requires an additional provision.


Company Group As at 31st March 2015 2014 2015 2014 2013

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

22 Deferred Tax At the beginning of the year (69,268) 76,228 147,162 277,670 303,574 Amount origination/(reversal) of temporary differences Recognised in profit or loss 42,660 (39,350) 103,724 (39,865) (24,836) Recognised in profit or loss (discontinued operations) - (106,146) (2,800) (90,643) - Recognised in other comprehensive income 998 - 3,792 - (1,068) Disposal of subsidiaries - - 438 - - At the end of the year (25,610) (69,268) 252,316 147,162 277,670

Deferred tax assets 25,610 69,268 52,498 133,721 18,382 Deferred tax liabilities - - 304,814 280,883 296,052 Net liabilities/(assets) (25,610) (69,268) 252,316 147,162 277,670

A. Deferred Tax (Assets)/Liabilities Originated Due to Temporary Timing Differences of Following Asset and Liability Bases.

On property, plant and equipment 149,985 140,434 608,300 522,404 418,624 On retirement benefit obligations (58,628) (56,439) (134,076) (123,234) (86,271) On tax losses (116,967) (153,263) (221,908) (252,008) (54,683) At the end of the year (25,610) (69,268) 252,316 147,162 277,670

The Group recognised deferred tax assets of Rs.52.49 million (2014-Rs.133.72 million) as at the reporting date, as the management is confident that the deferred tax asset would be realised in the future due to the availability of taxable profits in future periods.

B. Movement in Deferred Tax (Assets)/Liabilities

The analysis of deferred tax assets and deferred tax liabilities is as follows Company Group

As at 31st March 2015 2014 2015 2014 2013 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Deferred tax assets Deferred tax assets to be recovered after more than 12 months (175,595) (209,702) (355,984) (375,242) (140,954) Deferred tax assets to be recovered within 12 months - - - - - (175,595) (209,702) (355,984) (375,242) (140,954) Deferred tax liabilities Deferred tax liabilities to be recovered

after more than 12 months 149,985 140,434 608,300 522,404 418,624 Deferred tax liabilities to be recovered within 12 months - - - - - 149,985 140,434 608,300 522,404 418,624 Deferred tax (assets)/liabilities - net (25,610) (69,268) 252,316 147,162 277,670


179

Company Deferred tax assets Deferred tax liabilities

As at 31st March Retirement Tax losses Total Property, Total benefit plant and obligations equipment Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

As at 1 April 2013 (47,999) - (47,999) 124,227 124,227 Recognised in profit or loss and other comprehensive income (8,440) (153,263) (161,703) 16,207 16,207 As at 31 March 2014 (56,439) (153,263) (209,702) 140,434 140,434 Recognised in profit or loss (3,187) 36,296 33,109 9,551 9,551 Recognised in other comprehensive income 998 - 998 - - As at 31 March 2015 (58,628) (116,967) (175,595) 149,985 149,985

Group Deferred tax assets Deferred tax liabilities

As at 31st March Retirement Tax losses Total Property, Total benefit plant and obligations equipment Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

As at 1 April 2012 (91,734) (21,046) (112,780) 416,354 416,354 Recognised in profit or loss and other comprehensive income 5,463 (33,637) (28,174) 2,270 2,270 As at 31 March 2013 (86,271) (54,683) (140,954) 418,624 418,624 Recognised in profit or loss and other comprehensive income (36,963) (197,325) (234,288) 103,780 103,780 As at 31 March 2014 (123,234) (252,008) (375,242) 522,404 522,404 Recognised in profit or loss (14,634) 30,100 15,466 85,896 85,896 Recognised in other comprehensive income 3,792 - 3,792 - - As at 31 March 2015 (134,076) (221,908) (355,984) 608,300 608,300

The Group recognised deferred tax assets of Rs.52.49 million (2014-Rs.133.721 million) as at the reporting date, as the management is confident that the deferred tax asset would be realised in the future due to the availability of taxable profits in future periods.

C. Unrecognised Deferred Tax Assets

Company Group As at 31st March 2015 2014 2015 2014 2013

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Deductible temporary differences - - - - 2,181 Tax losses 84,335 83,752 461,306 393,863 200,763 84,335 83,752 461,306 393,863 202,944


2015 2014 As at 31st March Market Value Holding No. of Cost No. of Cost

Shares Shares Rs. ‘000 % ‘Rs. ‘000 ‘Rs. ‘000

23 Investment in Subsidiaries

Company Quoted Chemanex PLC 595,453 50.41 7,939,373 136,683 7,939,373 136,683 7,939,373 136,683 7,939,373 136,683 Unquoted - Subsidiaries Crop Management Services (Private) Limited 100.00 780,000 202,144 780,000 202,144 CISCO Speciality Packaging (Private) Limited 50.00 5,525,005 55,250 5,525,005 55,250 CIC Agri Businesses (Private) Limited 50.76 8,040,000 62,800 8,040,000 62,800 Colombo Industrial Agencies Limited 83.06 830,598 9,130 830,598 9,130 CIC Feeds (Private) Limited 82.44 3,710,000 217,434 3,710,000 217,434 Link Natural Products (Private) Limited

Ordinary Shares 65.17 5,170,858 311,990 2,675,000 66,875 Non-Voting Shares - 2,333,333 46,667

CIC Cropguard (Private) Limited 100.00 500,000 5,000 500,000 5,000 CIC Lifesciences Limited 99.89 120,574,918 130,855 1,570,018 11,850 994,603 677,150

Provision for fall in value of investments (138,850) (78,850) Total 992,436 734,983

(i) The company has made a provision against the investment in CIC Lifesciences Limited of Rs. 71.85 million and Rs.67 million against the investment in Crop Management Services (Private) Limited.

(ii) The subsidiaries of the Company are incorporated in Sri Lanka.

(iii) The Company has neither contingent liabilities nor capital commitment in respect of subsidiaries.

(iv) The main activities of the subsidiary companies are given in page 213.

2015 2014 For the year ended 31st March Shares Cost Shares Cost

Rs. ‘000 Rs. ‘000

(v) Investments made by the Company were as follows,

CIC Lifesciences Limited 119,004,900 119,005 120,000 1,200 Link Natural Products (Private) Limited 165,525 198,448 - - Total 317,453 1,200

The Company acquired a further 2% stake in Link Natural Products (Private) Limited and in addition converted the total non-voting shares to voting shares.


181

Inter-Company Shareholdings

As at 31st March 2015 2014 2013 2015 2014 2013 % Holding Number of Shares

Investor Investee Chemanex PLC CIC Agri Businesses

(Private) Limited 16.92 16.92 16.92 2,680,001 2,680,001 2,680,001

Chemanex PLC CIC Feeds (Private) Limited 11.11 11.11 11.11 500,000 500,000 500,000

CIC Agri Businesses (Private) Limited Chemanex PLC 2.84 2.84 2.84 446,604 446,604 446,604

Crop Management Services (Private) Limited CIC Feeds (Private) Limited 6.44 6.44 6.44 290,100 290,100 290,100

24 Equity Accounted Investees 2015 2014 Holding No. of Cost No. of Cost % Shares ‘Rs. ‘000 Shares ‘Rs. ‘000

Company Unquoted Akzo Nobel Paints Lanka (Private) Limited Ordinary Shares 49.37 2,340,000 23,400 2,340,000 23,400 Non-Voting Shares 100.00 1,260,000 12,600 1,260,000 12,600 Total 36,000 36,000

2015 2014 2013 Holding No. of Cost No. of Cost No. of Cost % Shares Rs. ‘000 Shares Rs. ‘000 Shares Rs. ‘000

Group Unquoted Akzo Nobel Paints Lanka (Private) Limited Ordinary Shares 49.37 2,340,000 23,400 2,340,000 23,400 2,340,000 23,400 Non-Voting Shares 100.00 1,260,000 12,600 1,260,000 12,600 1,260,000 12,600 Group share of net assets on deemed disposal 280,922 280,922 280,922

Rainforest Ecolodge (Private) Limited 22.60 9,950,968 99,510 9,950,968 99,510 9,950,968 99,510 Commercial Insurance Brokers (Private) Limited 40.00 239,999 200 239,999 200 239,999 200 Chemcel (Private) Limited 33.07 97,897,143 705,847 97,897,143 705,847 - - Rahimafrooz CIC Agro Limited 49.00 212,928 32,573 212,928 32,573 144,328 21,318 1,155,052 1,155,052 437,950 Share of equity accounted investees retained earnings 307,130 408,494 372,953 Share of equity accounted investees other reserves 14,875 - - Share of losses absorbed-Rahimafrooz CIC Agro Limited (32,573) (32,573) (21,318) Total 1,444,484 1,530,973 789,585


The Group’s interest in equity accounted investee relates to the CIC Agri Businesses (Private) Limited’s 49% interest in equity shareholding of Rahimafrooz CIC Agro Limited, an entity established in 2011/12 in Bangladesh. In adopting SLFRS 11 – Joint Arrangements, the Group was required to recognise its interest in a joint venture using the equity method in accordance with LKAS 28 - Investments in Associates and Joint Ventures. When changing from proportionate consolidation to the equity method, the Group recognised its investment in the joint venture as at the beginning of the immediately preceding period. Such was measured at the aggregate of the carrying amounts of the assets and liabilities that the entity had previously proportionately consolidated. The opening balance of the investment determined is regarded as the deemed cost of the investment at initial recognition. As the total of previously proportionately consolidated assets and liabilities resulted in negative net assets, CIC Agri Businesses (Private) Limited assessed whether it has legal or constructive obligations in relation to the negative net assets. The consolidated financial statements have disclosed the cumulative unrecognised share of losses of its joint ventures as at the beginning of the immediately preceding period and other required disclosures in these financial statements.

(1) Except for Rahimafrooz CIC Agro Limited incorporated in Bangladesh all the other equity accounted investees are incorporated in Sri Lanka.

(2) Unrecognised share of losses of the equity accounted investees as at 31st March 2015 is Rs. 112.9 million arising from Rahimafrooz CIC Agro Limited.

(3) The main activities of the equity accounted investees are given in page 213.

(4) The Group has neither contingent liabilities nor capital commitments in respect of equity accounted investees.

(5) Summarised information of equity accounted investees;

Group For the year ended 31st March 2015 2014 2013 Rs. ’000 Rs. ’000 Rs. ’000

Revenue 5,873,448 6,248,659 6,078,560 Expenses 5,736,223 5,860,986 5,638,781 Profit after tax 137,225 387,673 439,779

Non-current assets 1,046,664 1,039,415 696,482 Current assets 4,364,214 4,453,347 2,473,972 Total assets 5,410,878 5,492,762 3,170,454

Non-current liabilities 288,082 330,104 154,145 Current liabilities 1,761,661 1,545,909 1,506,986 Total liabilities 2,049,743 1,876,013 1,661,131 Net assets 3,361,135 3,616,749 1,509,323


25 Other Non Current Financial Assets Equity securities-available for sale 120,000 120,000 12,622 9,425 8,883 120,000 120,000 12,622 9,425 8,883

2015 2014 No. of Cost No. of Cost Shares ‘Rs. ‘000 Shares ‘Rs. ‘000 Company Unquoted Yasui Lanka (Private) Limited 660,000 6,600 660,000 6,600 Chemcel (Private) Limited 29,369,142 120,000 29,369,142 120,000 126,600 126,600 Provision for diminution of value investment (6,600) (6,600) Total 120,000 120,000

Company has made a full provision against the investment in Yasui Lanka (Private) Limited amounting to Rs.6.6 million.


183

2015 2014 2013 No. of Fair Value No. of Fair Value No. of Fair Value Shares ‘Rs. ‘000 Shares ‘Rs. ‘000 Shares ‘Rs. ‘000

Group Quoted Commercial Bank of Ceylon PLC

Non-voting 42,454 5,570 41,663 4,041 20,000 4,020 Voting 20,653 3,416 20,334 2,501 20,000 2,298

Muller & Phipps PLC 300 - 300 - 300 2 Chevron Lubricants Lanka PLC 8,000 3,141 8,000 2,115 8,000 1,735 Dipped Products PLC 2,500 345 2,500 218 2,500 278 12,472 8,875 8,333

Unquoted Ceylon Tapes (Private) Limited - - 80,000 400 40,000 400 Equity Investments (Lanka) Limited 15,000 150 15,000 150 15,000 150 Roma Cosmetics (Private) Limited 200,000 2,000 200,000 2,000 200,000 2,000 NTS Interlining (Private) Limited 650,000 6,500 650,000 6,500 650,000 6,500 8,650 9,050 9,050 Provision for diminution in value of investment (8,500) (8,500) (8,500) 12,622 9,425 8,883

The Group has made a full provision for NTS Interlining (Private) Limited and Roma Cosmetics (Private) Limited.

The fair value of financial instruments traded in active markets is based on quoted market prices as at the reporting date. The disclosures relating to fair value measurement are given in the note 45.


26 Inventories Raw materials and consumables 162,974 140,898 1,407,361 1,292,371 1,768,143 Work-in-progress - - 224,241 162,368 211,637 Finished goods 1,754,944 2,045,989 2,808,640 3,092,940 2,694,765 Biological assets - - 473,608 408,977 311,722 Goods-in-transit 86,082 113,208 1,104,677 269,166 436,794 2,004,000 2,300,095 6,018,527 5,225,822 5,423,061 Provision for inventories (123,311) (106,317) (177,711) (166,124) (29,261) Total 1,880,689 2,193,778 5,840,816 5,059,698 5,393,800

Inventories are stated at cost or net realisable value, whichever is lower. The break up of the carrying value of inventories is as follows:

At cost 1,872,825 2,162,170 5,832,952 4,939,577 5,393,800 At net realisable value * 7,864 31,608 7,864 120,121 - Total 1,880,689 2,193,778 5,840,816 5,059,698 5,393,800

* Cost of Inventories carried at NRV 16,761 36,375 60,143 256,436 -

Inventories written off against opening provision 21,493 7,787 21,493 65,736 5,338

Bank facilities have been obtained on negative pledge of inventories.



27 Trade Receivables

Trade receivables from Group companies (Note 27.1) 698 561 - - -

Other trade receivables 1,728,792 1,512,410 3,516,661 3,437,676 5,176,305 Bills receivable - - 88,721 77,206 76,797 Total 1,729,490 1,512,971 3,605,382 3,514,882 5,253,102

Less : Provision for doubtful debts (149,952) (129,745) (442,885) (371,947) (345,221) Total 1,579,538 1,383,226 3,162,497 3,142,935 4,907,881

Bank facilities have been obtained on negative pledge of trade receivables

Note 27.1 - Trade Receivables from group companies Company 2015 2014 Rs. ‘000 Rs. ‘000

CIC Agri Businesses (Private) Limited 232 2,521 Chemanex PLC - 250 CIC Feeds (Private) Limited - 211 Link Natural Products (Private) Limited 21 - CISCO Speciality Packaging (Private) Limited 411 - CIC Cropguard (Private) Limited 34 - 698 2,982 Provision for doubtful debts - (2,421) Total 698 561

Note 27.2 - Trade Receivables Currency-wise Company Group As at 31st March 2015 2014 2015 2014 2013 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Sri Lankan Rupees 1,579,538 1,383,226 3,098,475 3,030,977 4,758,530 US Dollars - - 63,314 105,133 149,351

Aus. Dollars - - 416 2,539 - Euros - - 292 4,286 - Total 1,579,538 1,383,226 3,162,497 3,142,935 4,907,881


185


28 Other Receivables Non trade receivables from group companies

(Note 28.2) 32,761 35,881 - - - Other non-trade receivables 201,383 219,393 630,901 611,524 706,168 Short term loans granted to subsidiaries 29,914 64,000 - - - Subsidy receivable - - 2,915,423 3,311,538 5,548,329 VAT receivable 104 5,062 104 5,062 - Income tax receivable (Note 38) 2,850 45,417 122,185 120,311 102,002 Loans to employees (Note 28.1) 18,283 13,431 63,851 52,958 55,937 Pre-paid staff cost 6,068 4,156 22,669 18,802 20,686 Less: Provision for doubtful debts (23,201) (60,000) (23,201) - - Total 268,162 327,340 3,731,932 4,120,195 6,433,122

28.1 Loans to Employees The number of employees who have obtained

loans as at 31st March 109 116 272 375 338

28.2 Non Trade Receivable from Group Companies Company 2015 2014 Rs. ‘000 Rs. ‘000

Cisco Speciality Packaging (Private) Limited 2,382 208 CIC Agri Businesses (Private) Limited 3,931 769 CIC Feeds (Private) Limited 227 810 Colombo Industrial Agencies Limited 20,174 26,571 CIC Cropguard (Private) Limited 2,816 7,503 Crop Management Services (Private) Limited 8 - CIC Lifesciences (Private) Limited 11,023 13,919 Link Natural Products (Private) Limited 21 20 40,582 49,800 Less: Provision for doubtful debts (7,821) (13,919) Total 32,761 35,881


2015 2014 No. of Fair value No. of Fair value Shares Shares ‘Rs. ‘000 ‘Rs. ‘000

29 Other Current Financial Assets Company Quoted Ceylon Hospitals PLC 5,628 647 5,628 647 Renuka Agri Foods PLC 153,200 721 153,200 475 Hatton National Bank PLC - Voting 144,794 32,144 144,794 21,719 Hatton National Bank PLC - Non-Voting 14,709 2,434 14,709 1,765 Total 35,946 24,606

2015 2014 2013 No. of Fair Value No. of Fair Value No. of Fair Value Shares ‘Rs. ‘000 Shares ‘Rs. ‘000 Shares ‘Rs. ‘000

Group Quoted Ceylon Hospitals PLC 5,628 647 5,628 647 5,628 563 Renuka Agri Foods PLC 153,200 720 153,200 475 153,200 628 Hatton National Bank PLC - Voting 219,944 49,131 221,314 33,197 219,944 37,025 Hatton National Bank PLC - Non-Voting 14,709 2,434 14,709 1,765 14,709 1,938 Commercial Bank of Ceylon PLC - Non-Voting 339 58 345 34 332 32 Kelani Tyres PLC 400 31 400 21 400 14 Tokyo Cement Company (Lanka) PLC 2,700 163 2,970 107 2,700 63 Hotel Services (Ceylon) PLC 350,000 5,600 350,000 4,480 350,000 4,690 John Keells Hotels PLC 450,000 6,435 450,000 5,625 450,000 5,940 Hydro Power Free Lanka PLC 6,300 38 6,300 30 6,300 35 Merchant Bank of Sri Lanka PLC 300,000 4,740 300,000 4,167 300,000 4,830 Laugfs Gas PLC - Voting 106,900 3,635 106,900 3,474 106,900 2,619 Laugfs Gas PLC - Non-Voting 5,900 212 5,900 156 5,900 105 ODEL PLC 2,500 53 2,500 48 2,500 53 National Development Bank PLC 24 6 40,024 7,164 40,024 6,603 Lanka Orix Leasing Company PLC 50,000 3,830 50,000 3,750 50,000 2,850 Richard Pieris Distributors Company PLC 200,000 1,480 200,000 1,320 200,000 1,320 Colombo Land & Development Company PLC - - - - 101,500 - 79,213 66,460 69,308


187


30 Cash and Cash Equivalents

30.1 Favourable cash and cash equivalents Cash and bank balances 134,901 186,916 717,022 964,651 1,021,121 Short term deposits - - 20,331 - - 134,901 186,916 737,353 964,651 1,021,121

30.2 Unfavourable cash and cash equivalents Bank overdrafts (170,492) (571,059) (1,462,115) (2,577,987) (3,884,574) Short term bank loans (1,880,928) (1,726,642) (4,829,508) (5,421,117) (5,711,885) (2,051,420) (2,297,701) (6,291,623) (7,999,104) (9,596,459)

Cash and cash equivalents classified as assets held for sale - - 5,876 (353,722) -

Cash and cash equivalents for the purpose of cash flow statements (1,916,519) (2,110,785) (5,5548,394) (7,388,175) (8,575,338)

Company/Group Company/Group Company/Group 2015 2014 2013 No.of shares Rs. No.of shares Rs. No.of shares Rs.

31 Stated Capital Issued and Fully Paid Ordinary Shares At the beginning of the year 72,900,000 789,750,000 72,900,000 789,750,000 72,900,000 789,750,000 At the end of the year 72,900,000 789,750,000 72,900,000 789,750,000 72,900,000 789,750,000

Non-Voting (Class X) Shares At the beginning of the year 21,870,000 218,700,000 21,870,000 218,700,000 21,870,000 218,700,000 At the end of the year 21,870,000 218,700,000 21,870,000 218,700,000 21,870,000 218,700,000 Total 94,770,000 1,008,450,000 94,770,000 1,008,450,000 94,770,000 1,008,450,000

The holders of Ordinary shares (Voting) are entitled to receive dividend as declared from time to time and are entitled to one vote per share at meetings of the Company

The holders of Ordinary shares (Non-voting) are entitled to receive dividend as declared from time to time and are not entitled to vote at meetings of the Company



32 Capital Reserves At the beginning of the year 1,016,018 1,016,018 1,718,327 1,737,451 1,231,163 Surplus on revaluation - - 5,700 1,455 507,811 Realization of surplus on disposal - - - (2,234) (830) Translation of foreign entity - - - 641 (720) Effect due to changes in accounting policy - - - (641) 27 Disposal of subsidiaries - - (12,526) (18,345) - At the end of the year 1,016,018 1,016,018 1,711,501 1,718,327 1,737,451

Capital reserve consists of revaluation reserve, reserve on scrip issue, and the foreign currency translation reserve. Revaluation reserve relates to revaluation of land and represent the increase in the fair value of the land. Reserve on scrip issue originated from post-acquisition scrip issues made by the subsidiaries.

The foreign currency translation reserve arose on the translation of foreign joint venture into reporting currency.

33 Revenue Reserves Revenue reserves comprises of retained earnings, general reserves and available for sale reserves.

General reserve is the amount appropriated by the Board of Directors.

The available for sale reserve arises on the fair value change of available for sale financial assets recognised in the other comprehensive income.


34 Loans and BorrowingsA. Loans and borrowings repayable

after one year Bank loans 122,100 266,780 1,085,000 779,584 764,876 Finance lease obligations 1,255 9,335 21,895 77,537 232,853 123,355 276,115 1,106,895 857,121 997,729

B. Loans and borrowings repayable within one year

Bank loans 94,680 94,680 2,924,185 1,671,907 1,278,755 Finance lease obligations 4,565 18,958 26,814 62,649 129,288 99,245 113,638 2,950,999 1,734,556 1,408,043


189


C Bank loans At the beginning of the year 361,460 127,000 2,451,491 2,043,631 1,139,932 Transfers - - - - 3,225 Obtained during the year - 323,000 11,366,653 3,261,190 3,545,583 Repayments during the year (144,680) (88,540) (9,808,959) (2,853,330) (2,645,109) At the end of the year 216,780 361,460 4,009,185 2,451,491 2,043,631 Less: Repayable within one year (94,680) (94,680) (2,924,185) (1,671,907) (1,278,755) Repayable after one year 122,100 266,780 1,085,000 779,584 764,876

Finance lease obligations repayable after one year 1,255 9,335 21,895 77,537 232,853 Total 123,355 276,115 1,106,895 857,121 997,729

TherearenobankloanspayableafterfiveyearsintheCompanyorGroup.

D Finance lease obligations At the beginning of the year 28,293 82,779 140,186 362,141 421,312 Obtained during the year - - 4,565 19,707 85,121 Disposal of subsidiaries - - - (1,216) - Repayments during the year (22,473) (54,486) (96,042) (235,982) (144,292) Transferred to liabilities classified as held for sale - - - (4,464) - At the end of the year 5,820 28,293 48,709 140,186 362,141 Less: Repayable within one year (4,565) (18,958) (26,814) (62,649) (129,288) Repayable after one year 1,255 9,335 21,895 77,537 232,853

E Analysis of finance lease obligations by year of repayment

Finance lease obligations repayable within 1 year from the year end

Gross liability 5,081 21,724 30,851 81,818 162,987 Finance charges unamortised (516) (2,766) (4,037) (14,705) (33,699) Transferred to liabilities classified as held for sale - - - (4,464) - Net lease obligations 4,565 18,958 26,814 62,649 129,288

Finance lease obligations repayable between 1 to 5 years from the year end

Gross liability 1,329 10,258 24,231 90,223 263,898 Finance charges unamortised (74) (923) (2,336) (12,686) (31,045) Net lease obligations 1,255 9,335 21,895 77,537 232,853

TherearenoleaseliabilitiespayableafterfiveyearsintheCompanyorGroup.


F Analysis of loans and borrowings payable after one year

2015 2014 2013Company Lender Interest Rate Currency Rs.million Rs.million Rs.million Security

CIC Holdings PLC Commercial Bank of Ceylon PLC

AWPLR + 0.75% LKR 122.10 266.78 108.53 Project land & plant & machinery

CISCO Speciality Packaging (Private) Limited

Commercial Bank of Ceylon PLC

AWPLR + 2.5% LKR - 30.71 92.27 Land & buildings

NDB Bank PLC AWPLR + 1% LKR 21.11 22.19 - Land & buildings and machinery

CIC Agri Businesses (Private) Limited

Hatton National Bank PLC

AWPLR(monthly review)

LKR - 1.03 13.53 Letter of comfort


8.00% LKR 31.67 - -

DFCC Bank AWPLR LKR 340.00 - - Bank Of Ceylon 15.00% LKR - 83.41 128.38 Corporate guarantee Lanka Puthra Bank 8.00% LKR 10.42 15.42 21.67 Primary mortgage over

landLink Natural Products (Private) Limited

People's Bank AWPLR+1% LKR 35.83 37.53 101.45 Secondary mortgage over property- factory Premises


AWPLR+1% LKR 3.36 0.30 3.86 Primary mortgage over the motor vehicle

AWPLR LKR 53.48 - - Primary mortgage over land

DFCC Bank PLC AWPLR+1% LKR 4.38 11.88 19.38 Mortgage over land & buildings


AWPLR LKR 14.62 - - Mortgage over machinery

CIC Feeds (Private) Limited


AWPLR+1.5% LKR 442.90 280.37 275.81 Negative pledge over stock, debtors and project related assets

CIC Lifesciences Limited

Ceylinco Investment and Reality Limited

AWPLR + 1% LKR 1.00 - -

Seylan Bank PLC AWPLR+1% LKR 4.13 29.97 - Mortgage over machinery & fixed deposit

Total 1,085.00 779.58 764.88

Finance Lease Obligations 2015 2014 2013

CIC Holdings PLC Commercial Leasing Company PLC

0.62 1.38 5.34

Central Finance Company PLC

- 0.01 3.92

DFCC Bank PLC 0.63 7.95 41.46 CISCO Speciality Packaging (Private) Limited


1.07 11.38 16.44

CIC Cropguard (Private) Limited


0.73 12.10 23.39

DFCC Bank PLC - 2.23 3.36 Bank of Ceylon 5.14 9.17 12.63



1.62 3.49 5.10


3.94 19.43 121.21

Commercial Leasing Company PLC

- - -

Siyapatha Finance PLC

8.14 10.40 -

Total 21.89 77.54 232.85


191


G Loans and borrowings repayable within one year from the year end

Bank loans 94,680 94,680 2,924,185 1,671,907 1,278,755 Finance lease obligations 4,565 18,958 26,814 62,649 129,288 Bank overdrafts 170,492 571,059 1,462,115 2,577,987 3,884,574 Short term loans 1,880,928 1,726,642 4,829,508 5,421,117 5,711,885 Total 2,150,665 2,411,339 9,242,622 9,733,660 11,004,502

35 Retirment Benefit Obligations Present value of gratuity At the beginning of the year 201,568 171,426 522,688 472,140 374,970 (Over)/Under provision for previous years - - - (1,133) 3,271 Current service cost 18,872 17,616 50,146 50,990 46,764 Benefits paid by the plan (27,326) (9,454) (48,832) (32,098) (24,132) Interest cost 19,839 18,000 51,888 45,930 38,322 Actuarial (gains)/losses (3,566) 3,980 (8,945) 279 32,945 Classified as liability on behalf of assets

held for sale - - - (7,718) - Disposal of subsidiaries - - (1,012) (5,702) - At the end of the year 209,387 201,568 565,933 522,688 472,140

B Retirement benefit cost is recognised in the following line items in the Statement of Profit or Loss and Other Comprehensive Income

Cost of sales 2,340 4,271 15,072 14,107 14,803 Distribution expenses 1,828 3,461 10,678 8,716 6,725 Administrative expenses 34,543 27,884 76,284 72,964 66,829 38,711 35,616 102,034 95,787 88,357 Other comprehensive income (3,566) 3,980 (8,895) 279 32,945 Total 35,145 39,596 93,139 96,066 121,302

The gratuity liability of the Company, and the Group is based on the actuarial valuation carried out by Actuarial and Management Consultants (Private) Limited, a firm of professional actuaries. The liability is not externally funded.


B LKAS 19 requires the use of actuarial techniques to make a reliable estimate of the amount of retirement benefits that employees have earned in retrun for their service in the current and prior periods and discount that benefit using projected unit credit method in order to determine the present value of the retirement benefit obligation and the current service cost. This requires an entity to determine how much benefit is attributable to the current and prior periods and to make estimates about demographic variables and financial variables that will influence the cost of the benefit. The following key assumptions were made in arriving at the above figure.

Rate of discount 9% (2014 -10%) Salary increase 10% (2014- 10%) Retirement age Management staff 55 years Clerical staff 60 years

Assumptions regarding future mortality are based on a 67/70 mortality table, issued by Institute of Actuaries, London.

The demographic assumptions underlying the valuation with respect to retirement age, early withdrawals from the services and retirement on medical grounds.

C Sensitivity of assumptions used A change in discount rate would change the present value of the retirement benefit obligations as follows:

Increase by 1% Decrease by 1% Discount Future Discount Future Rate Salary Growth Rate Salary Growth

Company 198,632 197,687 218,864 219,702

Group 539,745 571,230 592,552 560,702


36 Grants At the beginning of the year 23,409 31,512 22,774 Received during the year - - 14,753 Amortised during the year (5,234) (8,103) (6,015) At the end of the year 18,175 23,409 31,512

Grants are amortised over the useful life of the asset. Details of grants are as follows;

Carrying value

Beneficiary Purpose Grantor Amount ReceivedRs. ‘000

2015

Rs. ‘000

2014

Rs. ‘000

2013

Rs. ‘000

CIC Agri Businesses(Private) Limited

Dairy development inthe Eastern Province

Land O’Lakes, Inc 33,600 17,755 22,919 28,233

CIC Agri Businesses(Private) Limited

Purchase ofenvironmental friendlydust extraction system

Ceylon Chamber ofCommerce

5,000 - - 1,719

CIC Poultry FarmsLimited

Construction of wastemanagement system

Ceylon Chamber ofCommerce

5,000 - - 999

Link Natural Products(Private) Limited

Out grower medicinalcrops cultivation andprocessing project inMonaragala andAmpara district.

Connecting RegionalEconomies (USAID/CORE)

655 420 490 561

18,175 23,409 31,512


193

Company Group As at 31st March 2015 2014 2015 2014 2013 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

37 Trade Payables Trade payables to Group Companies (Note 37.1) 22,484 6,160 - - - Bills payable 660,426 645,608 4,132,439 3,396,417 4,503,420 Other trade payables 429,402 644,243 938,341 1,172,964 1,305,664 Total 1,112,312 1,296,011 5,070,780 4,569,381 5,809,084

Note 37.1 - Trade Payables to Group Companies CISCO Speciality Packaging (Private) Limited 11,140 6,160 CIC Lifesciences Limited 11,344 - 22,484 6,160

Note 37.2 - Currency-wise Trade Payables US Dollars 597,607 592,079 3,926,130 3,249,482 4,382,852 Euros 662 13,669 22,750 61,051 54,397 Sterling Pounds 2,508 629 3,470 646 4,150 Singapore Dollars 4,486 21,741 4,486 22,678 20,141 Swiss Franc 31,607 12,290 31,607 12,290 3,481 Bangaladesh Taka - - - 18,458 - Sri Lankan Rupees 475,442 655,603 1,082,337 1,204,776 1,344,063 1,112,312 1,296,011 5,070,780 4,569,381 5,809,084

38 Income Tax Payable/(Receivable) At the beginning of the year (45,417) (39,971) (80,899) (63,186) 25,584 Provision made during the year

- continuing operations 55,573 (5,184) 293,973 111,912 122,384 - discontinued operations 1,011 - 3,514 (68) 1,949 Tax on dividends received from associates - - (30,900) (24,600) (23,040) Payments made during the year (14,017) (262) (121,768) (104,947) (190,063) At the end of the year (2,850) (45,417) 63,920 (80,899) (63,186)

Income tax payable - - 186,105 39,412 38,816 Income tax receivable 2,850 45,417 122,185 120,311 102,002 Total (2,850) (45,417) 63,920 (80,899) (63,186)

39 Capital Expenditure Commitments The following commitments for capital expenditure approved by the Directors as at the reporting date have not been provided for in the

financial statements.

Company Nature

CIC Feeds (Private) Limited New Bagging system of Rs. 57 Mn out of which Rs. 39.51 Mn has been spent as at the reporting date.

CIC Poultry Farms Limited During the year company installed a new Cooker and expansion of existing water treatment plant with a modern equipments in order to facilitate the enhanced capacity. Total committed Rs.121.44Mn. and Rs.101.41Mn spent on as at the reporting date.


40 Contingent Liabilities Company Group For the year ended 31st March 2015 2014 2015 2014 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Letter of Credit Singapore Dollars 33 284 33 284 Euros 15 16 186 16 US Dollars 1,385 2,028 4,329 9,627 Sri Lankan Rupees 156,886 121,229 156,886 131,658

Shipping guarantees not under letter of credit Sri Lankan Rupees 15,183 63,630 152,623 63,630

BID Tender Bond Sri Lankan Rupees 82,249 84,270 82,249 84,270 US Dollars - 250 - 250

40.2 Contingencies There were no material contingent liabilities as at the reporting date which require adjustment to or disclosure in the financial statements.

41 Employee Share Option Scheme Shareholders of the Company resolved on 29th December 2010 the issue of Three Hundred and Seventy Nine Thousand and Eighty

(379,080) Voting and One Million Five Hundred and Sixteen Thousand Three Hundred and Twenty (1,516,320) Non-Voting (Class X), Ordinary Shares (constituting approximately 2% of the issued shares as at 18th November 2010) to the eligible employees of the Company under an Employee Share Option Scheme (ESOS). Options were granted for no consideration. The entirety of the share options were offered to the employees in one block to be exercised by eligible employees within a period of 5 years from 1st January 2011. The shares under ESOS was priced at the average of volume weighted average market price of the Company’s shares for the ten (10) market days immediately prior to the date of offer. The share options will be exercised at following prices:

Ordinary Shares - Rs. 136.12 Non-Voting (Class X) Shares - Rs. 95.19

The fair value at the grant date was Rs. 146.60 for Ordinary Shares and 104.30 for Non-Voting (Class X) Shares.

There will be no financial assistance granted to employees with regard to the ESOS

• The Company has issued share options directly to specified employees of the Company and Managing Directors and Executive Directors of Subsidiaries where the Company holds 50% or more in Ordinary Voting Shares.

• Employees are eligible for ESOS based on eligibility criteria decided by the Board of Directors which is as follows:

Ordinary (379,080 shares) - Executive Staff on average 3 years’ performance

Non-Voting (Class X) (1,516,320 shares) - 303,264 shares for Non-Executive staff on length of service (minimum 10 years) - 303,264 shares for Executive Staff on length of service (minimum 10 years) 909,792

Executive Staff on average 3 years’ performance

• No option with regard to Ordinary and Non-Voting Shares were exercised as at the reporting date.

42 Events After the Reporting Date The Board of Directors has recommended a final dividend of Rs.1.00 per share amounting to Rs. 94,770,000 on the issued capital of both

Ordinary and Non Voting (class x) shares which is payable on 10th July 2015 if approved by the shareholders at the Annual General Meeting.

Other than the above no other events have taken place which require adjustment to or disclosure in the financial statements.


195

43 Related Party Transactions

A Parent and Ultimate Controlling Party Ultimate Parent Company of the Company is Paints and General Industries Limited.

2014/15 2013/14 2012/13 Rs. Millions Rs. Millions Rs. Millions

Dividend paid 79.18 39.59 88.28 Sale of goods 449.58 479.68 496.84 Trade receivables 212.79 231.72 166.51

B Transactions with Key Management Personnel (i) Loans to Directors No loans have been granted to the Directors of the Company

(ii) Key Management Personnel Compensation Key management personnel include members of the Board of Directors of the Company and subsidiaries. The details of compensation are

given in Note 11 to the Financial Statements.

(iii) Other Transactions with Key Management Personnel (a) The names of Directors of CIC Holdings PLC, who are also Directors of other subsidiaries and the equity accounted investees, are as

follows: Mr. S.H. Amarasekera Mr. S.P.S. Ranatunga Mr. R.S. Captain Mr. S.M. Enderby Mr. M.P. Jayawardena Mr. K.B. Kotagama Prof P W M B B Marambe Dr. R C W M R D Nugawela Mr. A.V.P. Silva

(b) Details of Directors and their spouses’ shareholdings are given in the Annual Report of the Directors’ on the Affairs of the Company on page 134.

(c) The Directors of the Company were also Directors of the following companies and the Group has carried out transactions in the ordinary course of business. Details are as follows;

Company Name of the Director

Nature of the Transaction

2014/15Rs. Millions

2013/14Rs. Millions

2012/13Rs. Millions

Commercial Bank of Ceylon PLC M.P. Jayawardena Current Account (487.45) (1,038.38) (1,947.61)Long-term loan 1,338.18 837.50 446,18 Short-term loan 1,810.40 1,379.40 900.35Saving account 83.98

Hemas Travels (Private) Ltd S.M. Enderby Payments 23.68 17.66 - CEI Plastics (Private) Limited R.S.Captain Payments for purchase

of goods3.78 0.26 3.21

Polypack Secco Limited R.S.Captain Payments for purchase of goods

24.54 22.12 23.41

Seylan Bank PLC S.P.S. Ranatunga Current Account (21.79) (85.87) (19.47)Long-term loan 24.17 40.00 49.89 Short-term loan 445.62 543.43 617.13

(e) Key Management Personnel interest in the Employee Share Option Scheme of the Company (ESOS)-Key Management Personnel held options to purchase Voting Shares and Non-Voting (Class X) shares as at 31st March 2015 under the ESOS as follows;

Voting Shares - 92,372 at a price of Rs. 136.12 each Non-Voting (Class X) Shares - 270,380 at a price of Rs. 95.19 each

(f) There were no other transactions with Key Management Personnel other than disclosed above.


C Transactions with Subsidiaries and Equity Accounted Investees (i) Companies within the Group engage in trading transactions under normal commercial terms and conditions

(ii) Company provides office space to some of its subsidiaries and equity accounted investees and charges rent. In addition, the Company provides certain shared services such as data processing and administration functions. The related costs are allocated to subsidiaries and equity accounted investees.

Company Relationship Nature of the transaction 2014/15 2013/14Rs. Millions Rs. Millions

Chemanex PLC Subsidiary Sale of goods - 1.97 Dividend received 3.97 11.51 Secretarial fees paid 2.17 1.16 Payables-non-trade 0.56 1.82 Receivables-trade - 0.25

CIC Agri Businesses (Private) Subsidiary Sale of goods - 0.21 Limited Rent paid 6.16 6.45

Staff costs paid 48.26 46.71 Network charges received 0.61 0.61 Receivables-non-trade 3.93 0.77 Rent deposit 1.20 1.20

CISCO Speciality Subsidiary Sale of goods 0.44 - Packaging (Private) Limited Dividend received 22.50 -

Purchase of goods 39.29 40.44 Staff costs paid 9.40 8.91 Network charges received 0.43 0.43 Rent received 0.36 0.33 Payables-trade 11.22 6.16 Receivables-non-trade 2.38 0.21 Receivables short term loan - 4.00

CIC Cropguard Subsidiary Sale of goods 0.18 11.94 (Private) Limited Dividend received 0.50 -

Staff costs paid 14.71 12.90 Handling commission and service charges 58.86 21.14 Receivables-trade 0.03 - Receivables-non-trade 2.82 7.50

CIC Feeds Subsidiary Sale of goods 0.15 0.27 (Private) Limited Dividend received 16.70 16.70

Staff costs paid 2.48 8.88 Receivables-non trade 0.23 0.81


197

Company Relationship Nature of the transaction 2014/15 2013/14Rs. Millions Rs. Millions

CIC Lifesceinces Limited Subsidiary Purchase of goods 131.04 - Payables-trade 11.34 - Receivables-non trade 11.02 13.92 Rent received 0.07 0.66 Receivables-short-term loan 29.91 60.00

Link Natural Products Subsidiary Sale of goods 0.05 - (Private) Limited Dividend received 18.62 15.78

Purchase of goods 0.68 - Rent received 0.26 0.21 Receivables-non-trade 0.02 0.02

Colombo Industrial Agencies Subsidiary Rent paid 8.51 8.51 Limited Royalty 1.06 0.69

Receivables-non-trade 20.17 26.57

Crop Management Services Subsidiary Dividend received 0.39 0.78 (Private) Limited Receivables-non-trade 0.01 -

Agri Produce Marketing Sub-subsidiary Sale of goods 0.39 0.58 (Private) Limited Receivables-trade 0.10 0.06

CIC Seeds (Private) Sub-subsidiary Sale of goods 0.69 1.35 Limited Receivables-trade 0.13 -

CIC Poultry Farms Sub-subsidiary Sale of goods - 0.14 Limited Receivables-trade - -

CIC Vetcare (Private) Limited Sub-subsidiary Sale of goods - 0.99 Receivables-trade - 0.21

Akzo Nobel Paints Lanka Equity accounted Sale of goods - 0.03 (Private) Limited investee Rent received 33.66 29.88

Dividend received 278.10 221.40 Staff costs paid - 5.03 Handling commission and service charges 44.53 35.99 Receivables-non-trade 0.64 15.99 Receivables-trade 14.46 0.02


44.1 Reconciliations- Consolidated Statements of Financial Positions First time adoption of SLFRS 11- Joint Arrangements

Adjustments relate to the Group’s first time adoption of SLFRS 11-Joint Arrangements and reclassification relating to Sunhill Tea Factory

(Private) Limited which was classified as a discontinued operation on account of being disposed during the year.

The impact arising from the change is summarised below,

As at 31st March 2013 As at 31st March 2014 As disclosed Restated in As disclosed Restated in

in 2013 Adjustment 2013 in 2014 Adjustment 2014 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

ASSETS Non-current assets

Property, plant and equipment 8,720,522 (13,747) 8,706,775 9,427,335 (12,600) 9,414,735 Investment property 14,607 - 14,607 51,400 - 51,400 Capital work-in-progress 1,072,154 - 1,072,154 763,412 - 763,412 Deposit on leasehold property 16,152 - 16,152 - - - Biological assets 86,262 - 86,262 67,366 - 67,366 Intangible assets 147,911 - 147,911 27,683 - 27,683 Deferred tax assets 18,382 - 18,382 133,721 - 133,721 Equity accounted investees 789,585 - 789,585 1,440,488 90,485 1,530,973 Other non- current financial assets 8,883 - 8,883 9,425 - 9,425 Total non-current assets 10,874,458 (13,747) 10,860,711 11,920,830 77,885 11,998,715

Current assets Inventories 5,450,425 (56,625) 5,393,800 5,100,338 (40,640) 5,059,698 Trade receivables 4,999,511 (91,630) 4,907,881 3,293,276 (150,341) 3,142,935 Other receivables 6,450,266 (17,144) 6,433,122 4,125,327 (5,132) 4,120,195 Other current financial assets 69,308 - 69,308 66,460 - 66,460 Cash in hand and at bank 1,021,123 (2) 1,021,121 965,648 (997) 964,651 Total current assets 17,990,633 (165,401) 17,825,232 13,551,049 (197,110) 13,353,939

Assets classified as held for sale 118,383 - 118,383 489,488 - 489,488 Total assets 28,983,474 (179,148) 28,804,326 25,961,367 (119,225) 25,842,142

EQUITY AND LIABILITIES Equity attributable to equity holders of the Company

Stated capital 1,008,450 - 1,008,450 1,008,450 - 1,008,450 Capital reserve 1,737,424 27 1,737,451 1,718,941 (614) 1,718,327 Retained earnings 5,028,767 5,121 5,033,888 4,001,327 (17,078) 3,984,249 7,774,641 5,148 7,779,789 6,728,718 (17,692) 6,711,026 Non-controlling interest 1,659,508 3,500 1,663,008 1,410,539 78,458 1,488,997 Total equity 9,434,149 8,648 9,442,797 8,139,257 60,766 8,200,023

Non-current liabilities Loans and borrowings 1,000,262 (2,533) 997,729 942,827 (85,706) 857,121

Employee benefit obligations 473,205 (1,065) 472,140 522,760 (72) 522,688 Grants 31,512 - 31,512 23,409 - 23,409 Deferred tax liabilities 296,052 - 296,052 280,883 - 280,883 1,801,031 (3,598) 1,797,433 1,769,879 (85,778) 1,684,101

Current liabilities Trade payables 5,836,676 (27,592) 5,809,084 4,604,820 (35,439) 4,569,381 Income tax payable 39,500 (684) 38,816 40,227 (815) 39,412 Accruals and other payables 727,497 (15,803) 711,694 1,118,176 52,214 1,170,390 Loans and borrowings 11,144,621 (140,119) 11,004,502 9,843,833 (110,173) 9,733,660 17,748,294 (184,198) 17,564,096 15,607,056 (94,213) 15,512,843

Liabilities classified as held for sale - - - 445,175 - 445,175 Total liabilities 19,549,325 (187,796) 19,361,529 17,822,110 (179,991) 17,642,119 Total equity and liabilities 28,983,474 (179,148) 28,804,326 25,961,367 (119,225) 25,842,142


199

44.2 Reconciliations- Consolidated Statements of Comprehensive Income Adjustments relate to the Group’s first time adoption of SLFRS 11-Joint Arrangements and reclassification relating to Sunhill Tea Factory

(Private) Limited which was classified as a discontinued operation on account of being disposed during the year.

For the year ended 31st March 2014

As disclosed SLFRS Discontinued Restated in in 2014 Adjustment operations 2014

Rs’000 Rs’000 Rs’000 Rs’000 Continuing operations Revenue 21,902,485 (173,995) (168,651) 21,559,839 Cost of sales (16,620,074) 141,308 169,424 (16,309,342) Gross profit 5,282,411 (32,687) 773 5,250,497 Other income 577,864 - (25) 577,839 Distribution expenses (2,249,825) 4,072 2,737 (2,243,016) Administrative expenses (2,142,139) (18,211) 8,568 (2,151,782) Other expenses (347,215) - - (347,215) Results form operating activities 1,121,096 (46,826) 12,053 1,086,323 Net finance costs (1,371,447) 20,579 9,398 (1,341,470) Share of profit of equity accounted investees (net of tax) 281,541 (11,470) - 270,071 Profit before income tax 31,190 (37,717) 21,451 14,924 Tax expense (68,239) 426 (4,234) (72,047) Profit from continuing operations (37,049) (37,291) 17,217 (57,123) Discontinued operations Loss from discontinued operations (net of tax) (1,052,499) - (17,217) (1,069,716) Loss for the year (1,089,548) (37,291) - (1,126,839) Other comprehensive income Net losses on remeasuring available for sale financial assets (2,280) - - (2,280) Actuarial losses on defined benefit plans (1,104) - - (1,104) Actuarial gains on defined benefit plans discontinued operation 825 - - 825 Surplus on revaluation of land 2,807 - - 2,807 Exchange difference on translation of foreign operations 1,076 (1,076) - - Other comprehensive income for the year 1,324 (1,076) - 248 Total comprehensive income for the year (1,088,224) (38,367) - (1,126,591) Loss for the year attributable to: Equity holders of the company (949,514) (22,199) - (971,713) Non-controlling interest (140,034) (15,092) - (155,126) (1,089,548) (37,291) - (1,126,839) Total comprehensive income for the year attributable to: Equity holders of the company (951,021) (22,840) - (973,861) Non-controlling interest (137,203) (15,527) - (152,730) Total comprehensive income for the year (1,088,224) (38,367) - (1,126,591)


45 Financial Instruments

Risk Management The Group’s principal financial liabilities comprise of loans and borrowings and trade and other payables. The main purpose of these financial

liabilities is to finance the Group’s operations and to provide guarantees to support its operations. The Group has trade and other receivables and cash and cash equivalents that derive directly from its operations. The Group also holds available for sale investments. Therefore, the Group is exposed to market risk, credit risk and liquidity risk.

Risk management framework The Group’s senior management oversees the management of these risks. The Group’s senior management is supported by a financial

committee that advises on financial risks and appropriate financial risk governance framework for the Group. The Financial Risk Committee provides assurance to the Group’s senior management that the Group’s financial risk-taking activites are governed by the appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with Group’s policies and Group risk appetite. The Board of Directors review and agree policies for managing each of these risks which are summarised below.

Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual

obligations, and arises principally from the Group’s receivables from customers and investment securities.

Exposure to credit risk

Company 2015 2014

Equity securities-available for sale 120,000 120,000 Trade receivables 1,579,538 1,383,226 Other receivables 268,162 327,340 Other current financial assets 35,946 24,606 Cash and cash equivalents 134,901 186,916 Total 2,138,547 2,042,088 Group 2015 2014 2013

Equity securities available for sale 12,622 9,425 8,883 Trade receivables 3,162,497 3,142,935 4,907,881 Other receivables 3,731,932 4,120,195 6,433,122 Other current financial assets 79,213 66,460 69,308 Cash and cash equivalents 737,353 964,651 1,021,121 7,723,617 8,303,666 12,440,315


201

45 Financial Instruments Contd:

Trade and other receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also

considers the demographic of the Group’s customer base, including the default risk of the industry and area in which customers operate, as these factors may have an influence on credit risk.

The Risk Management Committee has established a credit policy under which each new customer is analysed individually for credit

worthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings,when available, and in some cases bank references. Purchase limits are established for each customer, which represents the maximum open amount without requiring approval from the Risk Management Committee; these limits are reviewed quarterly. Customers that fail to meet the Group’s benchmark credit worthiness may transact with the Group only on a prepayment basis.

Significant percentage of the Group’s customers have been transacting with the Group for over four years. In monitoring customer credit risk,

customers are grouped according to their credit characteristics, including whether they are government or non-government, whether they are wholesale,retail or end-customer, geographic location,industry, aging profile,maturity and existence of previous financial difficulties. Trade and other receivables relate mainly to the Group’s wholesale customers.Customers that are graded as ‘high risk’ are placed on a restricted customer list and monitored by the Risk Management Committee, and future sales are made on a prepayment basis.

The Group is closely monitoring the economic environment in the country and is taking actions to limit its exposure to customers in the

country experiencing particular economic volatility. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables.

The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for Group of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics of those trade receivables.

The maximum exposure to credit risk for trade receivables of the Company at the end of the reporting period by geographical region was as

follows:

2015 2014

Western 1,080,052 942,149 Eastern 64,954 96,538 North-Western 93,948 37,604 Central 137,636 84,813 Sabaragamuwa 59,811 40,332 North 51,113 49,359 Southern 132,461 125,396 Uva 44,813 55,409 North-Central 64,702 81,371 Total 1,729,490 1,512,971


45 Financial Instruments Contd: The Group is engaged in different business industries to mitigate its business risk. So that the credit risk of the trade and other receivables

varies widely. Therefore, the credit risk is analysed based on domestic and foreign basis. Group 2015 2014 2013 Rs.’000 Rs.’000 Rs.’000

Domestic 3,098,475 3,030,977 4,758,530 Foreign 64,022 111,958 149,351

Total 3,162,497 3,142,935 4,907,881

Impairment losses All trade receivables that are past due, have been considered for impairment as at 31 March 2015

The movement in the allowance for impairment of trade receivables is as follows

Company Individual Collective Total impairment impairment Rs.’000 Rs.’000 Rs.’000

Balance as at 1st April 2014 196,586 143,052 339,638 Charge for the year - 20,930 20,930 Write-off/unused amount reversed - (7,259) (7,259) Balance as at 31st March 2015 196,586 156,723 353,309 Balance as at 1st April 2013 98,502 30,500 129,002 Charge for the year 107,574 141,474 249,048 Write-off/unused amount reversed (9,490) (28,922) (38,412) Balance as at 31st March 2014 196,586 143,052 339,638 The above balances include doubtful debtors provision relating to discontinued operations as well.

Debt securities The Group limits its exposure to credit risk by investing only in liquid debt securities The Group did not have any debt securities that were past due but not impaired at 31 March 2015. (2014 and 2013-nil).

Cash and cash equivalents The company held cash and cash equivalents of Rs.134,901 at 31 March 2015 (2014: Rs. 186,916) (in thousands) and Group held Rs.

737,353 as at 31st March 2015 (2014-Rs. 964,651 and 2013- Rs. 1,021,121) (in thousands) which represents its maximum credit exposure on these assets. The cash and cash equivalents are held with bank and financial institution counter-parties, which are rated AA to AA+, based on rating agency ratings.

Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled

by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.


203

45 Financial Instruments Contd: The Group aims to maintain the level of its cash and cash equivalents and other highly marketable debt investments at an amount in excess of expected cash outflows on financial liabilities.

A Risk Management policy is set so as to limit the net financial liabilities to a pre-approved amount. The Group maintains the net financial laibilities to these specified upper limits and any deviation to these upper limits require prior approval.

The Company and the Group held the following short term financial liabilities as at 31st March 2015;(Refer note 34 for maturity analysis of non current financial liabilties).

Company 2015 2014 Rs.’000 Rs.’000

Trade payables Less than 90 days 1,112,312 1,296,011 Accruals and other payables 0-30 days 311,937 331,786 Loans and borrowings payable within one year On demand 99,245 113,638 Short-term loans 0-90 days 1,880,928 1,726,642 Bank overdraft On demand 170,492 571,059

Group 2015 2014 2013 Rs.’000 Rs.’000 Rs.’000

Trade payables Less than 90 days 5,070,780 4,569,381 5,809,084 Accruals and other payables 0-30 days 894,467 1,170,390 711,694 Loans and borrowings payable within one year On demand 2,950,999 1,734,557 1,413,074 Short-term loans 0-90 days 4,829,508 5,499,287 5,846,654 Bank overdraft On demand 1,462,115 2,499,816 3,744,774

Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s

income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Currency risk The Group is exposed to currency risk on sales, purchases that are denominated in a currency other than the respective functional

currencies of entities. The currencies in which these transactions primarily denominated are euro, USD and Sterling Pound.

Effects of currency rate fluctuations of imported materials and finished goods are transferred in a reasonable manner keeping in line with the prices in the market.

Subsidiary companies of the group settle all import bills and the financial liabilities denominated in a currency other than functional currency,

out of US Dollar receipts from their overseas customers.

Following are the exchange rate used for the translation of transactions denominated in foreign currencies. 2015 2014 Selling Buying Average Selling Buying Average

Rate Rate Rate Rate Rate Rate

US Dollar 135.50 131.00 133.25 132.17 129.29 130.69 Euro 146.94 140.75 143.85 182.56 176.78 179.73 Sterling Pound 200.95 192.87 196.96 220.47 214.34 217.37


45 Financial Instruments Contd:

Capital management The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future

development of the business. Capital consists of total equity. The Board of Directors monitors the return on capital as well as the level of dividends to ordinary shareholders.

The Board of Directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and

the advantages and security afforded by a sound capital position. The Group monitors capital using an adjusted net debt to equity ratio, which is adjusted net debt divided by adjusted equity. For this purpose,

adjusted net debt is defined as total liabilities (which includes interest bearing loans and borrowings and obligations under finance leases) plus un-accrued proposed dividends, less cash and cash equivalents. Adjusted equity comprises all components of equity other than amounts recognised in equity relating to cash flow hedges, less un-accrued proposed dividends.

The company’s adjusted net debt to equity ratio at the end of the reporting period is as follows. Company 2015 2014

Total liabilities 2,274,020 2,687,454 Less: cash and cash equivalents (134,901) (186,916) Net debt 2,139,119 2,500,538 Total equity 3,433,281 3,096,362 Adjusted equity 3,433,281 3,096,362 Net debt to adjusted equity ratio at 31 March (Times) 0.62 0.81

Group 2015 2014 2013

Total liabilities 10,349,517 10,590,781 12,002,231 Less: cash and cash equivalents (737,353) (964,651) (1,021,121) Net debt 9,612,164 9,626,130 10,981,110 Total equity 8,843,248 8,200,023 9,442,797 Adjusted equity 8,843,248 8,200,023 9,442,797 Net debt to adjusted equity ratio at 31 March (Times) 1.09 1.17 1.16


205

Accounting classifications and fair value The value of financial assets and liabilities, together with carrying amounts shown in the statement of financial position as follows: Company Fair value Total

through profit Held to Loans and Available Other financial Carrying Fair or loss maturity receivables for sale liabilities amount Value

As at 31/03/2015 Cash and cash equivalents - - 134,901 - - 134,901 134,901 Trade receivables - - 1,579,538 - - 1,579,538 1,579,538 Other receivables - - 268,162 - - 268,162 268,162 Other non-current financial assets - - 120,000 - 120,000 120,000 Other current financial assets - - 35,946 - 35,946 35,946 - - 1,982,601 155,946 - 2,138,547 2,138,547 Secured bank loans - - - - (2,097,708) (2,097,708) (2,097,708) Finance leases - - - - (5,820) (5,820) (5,820) Trade payables - - - - (1,112,312) (1,112,312) (1,112,312) Bank overdraft - - - - (170,492) (170,492) (170,492) - - - - (3,386,332) (3,386,332) (3,386,332) As at 31/03/2014 Cash and cash equivalents - - 186,916 - - 186,916 186,916 Trade receivables - - 1,383,226 - - 1,383,226 1,383,226 Other receivables - - 327,340 - - 327,340 327,340 Other non-current financial assets - - - 120,000 - 120,000 120,000 Other current financial assets - - - 24,606 - 24,606 24,606 - - 1,897,482 144,606 - 2,042,088 2,042,088 Secured bank loans - - - - (2,088,102) (2,088,102) (2,088,102) Finance leases - - - - (28,293) (28,293) (28,293) Trade payables - - - - (1,296,011) (1,296,011) (1,296,011) Bank overdraft - - - - (571,059) (571,059) (571,059) - - - - (3,983,465) (3,983,465) (3,983,465)


Group Fair value Total

through profit Held to Loans and Available Other financial Carrying Fair or loss maturity receivables for sale liabilities amount Value

As at 31/03/2015 Cash and cash equivalents - - 737,353 - - 737,353 737,353 Trade receivables - - 3,162,497 - - 3,162,497 3,162,497 Other receivables - - 3,731,932 - - 3,731,932 3,731,932 Other non-current financial assets - - - 12,622 - 12,622 12,622 Other current financial assets - - - 79,213 - 79,213 79,213 - - 7,631,782 91,835 - 7,723,617 7,723,617 Secured bank loans - - - - (8,838,693) (8,838,693) (8,838,693) Finance leases - - - - (48,709) (48,709) (48,709) Trade payables - - - - (5,070,781) (5,070,781) (5,070,781) Bank overdraft - - - - (1,462,115) (1,462,115) (1,462,115) - - - - (15,420,298) (15,420,298) (15,420,298) As at 31/03/2014 Cash and cash equivalents - - 964,651 - - 964,651 964,651 Trade receivables - - 3,142,935 - - 3,142,935 3,142,935 Other receivables - - 4,120,195 - - 4,120,195 4,120,195 Other non-current financial assets - - - 9,425 - 9,425 9,425 Other current financial assets - - - 66,460 - 66,460 66,460 - - 8,227,781 75,885 - 8,303,666 8,303,666 Secured bank loans - - - - (7,872,608) (7,872,608) (7,872,608) Finance leases - - - - (140,186) (140,186) (140,186) Trade payables - - - - (4,569,381) (4,569,381) (4,569,381)

Bank overdraft - - - - (2,577,987) (2,577,987) (2,577,987) - - - - (15,160,162) (15,160,162) (15,160,162) As at 31/03/2013 Cash and cash equivalents - - 1,021,121 - - 1,021,121 1,021,121 Trade receivables - - 4,907,881 - - 4,907,881 4,907,881 Other receivables - - 6,433,122 - - 6,433,122 6,433,122 Other non-current financial assets - - - 8,883 - 8,883 8,883 Other current financial assets - - - 69,308 - 69,308 69,308 - - 12,362,124 78,191 - 12,440,315 12,440,315 Secured bank loans - - - - (7,755,516) (7,755,516) (7,755,516) Finance leases - - - - (362,141) (362,141) (362,141) Trade payables - - - - (5,809,084) (5,809,084) (5,809,084) Bank overdraft - - - - (3,884,574) (3,884,574) (3,884,574) - - - - (17,811,315) (17,811,315) (17,811,315)


207

Fair value measurement hierarchy

Level 1 Level 2 Level 3 As at 31st March 2015 2014 2015 2014 2015 2014 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Company

Recurring fair value measurements - Assets measured at fair value Freehold land - - - - 1,186,644 1,185,500 Other non-current financial assets -

(available-for-sale financial assets) - - - - 120,000 120,000 Other current financial assets 35,946 24,606 - - - - 35,946 24,606 - - 1,306,644 1,305,500

Non-recurring fair value measurement Net assets classified as held for sale - - - - 11,466 198,893

Level 1 Level 2 Level 3 As at 31st March 2015 2014 2013 2015 2014 2013 2015 2014 2013 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Group

Recurring fair value measurements - Assets measured at fair value Freehold land - - - - - - 3,070,801 2,902,016 2,873,178 Biological assets - - - - - - 65,708 67,366 86,262 Other non current

financial assets - (available-for-sale financial assets) 12,472 8,875 8,333 - - - 150 550 550

Other current financial assets 79,213 66,460 69,308 - - - - - - 91,685 75,335 77,641 - - - 3,136,659 2,969,932 2,959,990

Assets for which fair values are disclosed: Investment property - - - - - - - 51,400 51,400 14,607

Non-recurring fair value measurements Net assets classified as held for sale - - - - - - 56,773 398,035 118,383

Operational Risk Operational 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.

The Group’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

During the year there were no material issues pertaining to employees and industrial relation of the Company/Group.


Shareholder and Investor Information

1. Stock Exchange Listing CIC Holdings PLC is a Public Quoted Company. The issued share capital of the Company consists of 72,900,000 (2014 - 72,900,000)

Ordinary Shares and 21,870,000 (2014 - 21,870,000) Non-Voting (Class X) Shares listed in the Colombo Stock Exchange.

2. Shareholders

There were 2,476 (2014 - 2,617) Ordinary shareholders and 2,847 (2014 - 3,093) Non-Voting (Class X) shareholders as at 31st March 2015, distributed into different categories as follows:

Ordinary Shares2015 2014

Shares held No. ofShareholders

Total Shareholding

% No. ofShareholders

Total Shareholding

%

1-1000 1,507 450,596 0.61 1,619 493,416 0.67 1001-10000 703 2,677,317 3.67 734 2,648,405 3.64 10001-100000 215 7,044,781 9.67 222 7,031,511 9.65 100001-1000000 46 12,477,251 17.12 36 8,715,385 11.95 Over-1000000 5 50,250,055 68.93 6 54,011,283 74.09 Total 2,476 72,900,000 100.00 2,617 72,900,000 100.00

2015 2014


Total Shareholding


Total Shareholding

%

Resident 2,426 71,109,028 97.54 2559 71,429,763 97.98 Non-Resident 50 1,790,972 2.46 58 1,470,237 2.02 Total 2,476 72,900,000 100.00 2,617 72,900,000 100.00

Percentage of shares held by public - 46.69% (includes 6.83% held by Employees Provident Fund) Percentage of shares held by the Directors together with the members of their families - 0.00% Percentage of shares held by the Parent Company - 53.31%

Non-Voting (Class X) Shares2015 2014


Total Shareholding


Total Shareholding

%

1-1000 1676 560,452 2.56 1856 632,136 2.891001-10000 861 3,231,052 14.78 923 3,347,879 15.3110001-100000 275 8,334,411 38.11 280 7,860,676 35.94100001-1000000 34 7,306,996 33.41 33 7,592,220 34.72Over-1000000 1 2,437,089 11.14 1 2,437,089 11.14Total 2,847 21,870,000 100.00 3,093 21,870,000 100.00

2015 2014


Total Shareholding


Total Shareholding

%

Resident 2753 20,109,962 91.95 2,997 20,325,950 92.94 Non-Resident 94 1,760,038 8.05 96 1,544,050 7.06 Total 2,847 21,870,000 100.00 3,093 21,870,000 100.00

Percentage of shares held by public - 96.35% (includes 11.14% held by Employees Provident Fund) Percentage of shares held by the Directors together with the members of their families - 0.33% Percentage of shares held by the Parent Company - 3.32% Employees’ Provident Fund held - 11.14%

209

2015 2014

Name No. ofShareholders


%

3. Twenty Largest Shareholders - Ordinary Shares

1 Paints & General Industries Limited 38,860,349 53.31 38,860,349 53.31 2 Employees’ Provident Fund 4,980,818 6.83 4,669,314 6.41 3 Associated Electrical Corporation Limited 2,845,157 3.90 2,810,113 3.85 4 Hotel International Ltd 2,315,709 3.18 - - 5 Mr. S.K. Wickremesinghe 1,248,022 1.71 1,498,022 2.05 6 Hatton National Bank PLC A/C No.07 676,396 0.93 - - 7 Bank of Ceylon No.01 Account 670,275 0.92 650,100 0.89 8 AIA Insurance Lanka PLC A/C No.02 574,601 0.79 - - 9 Dr. H.R. & Mr. V.K.Wickremasinghe Custodian

Trustees Martin Wickremasinghe Trust Fund 560,491 0.77 310,491 0.43 10 The Ceylon Chamber of Commerce A/C No.02 518,030 0.71 - - 11 Yoropa Investment (Private) Limited 500,000 0.69 - - 12 Elgin Investment Limited 490,000 0.67 - - 13 Mrs. L.K. Goonewardena 422,425 0.58 327,303 0.45 14 Mrs.K.J.M.De Silva 377,850 0.52 377,850 0.52 15 HSBC International Nom Ltd-SSBT-Russell Institutional 352,900 0.48 352,900 0.48 16 Waldock Mackanzie Ltd / Hi-Line Trading (Private) Limited 328,046 0.45 341,530 0.47 17 Colombo Fort Investments PLC 315,000 0.43 315,000 0.43 18 HSBC International Nom Ltd-SSBT-Russell Trust Company 311,400 0.43 311,400 0.43 19 Bank of Ceylon A/C Ceybank Century Growth Fund 304,619 0.42 361,830 0.50 20 Estate of M.Radhakrishnan (Deceased) 303,750 0.42 303,750 0.42

Total 56,955,838 78.14 51,489,952 70.64

Twenty Largest Shareholders - Non-Voting (Class X)Shares

1 Employees’ Provident Fund 2,437,089 11.14 2,437,089 11.142 Deutsche Bank AG as trustee for JB Vantage value E 769,356 3.52 556,417 2.543 Paints & General Industries Limited 726,301 3.32 726,301 3.324 E.W. Balasuriya & Co. (Private) Ltd 632,600 2.89 632,600 2.895 Mrs. M.S.E.V.E.A.U. Von Stumm 399,219 1.83 399,219 1.836 DFCC Bank A/C No.01 389,400 1.78 389,400 1.787 Mrs. C. Jayawardene 261,713 1.20 261,713 1.208 Ceylinco Insurance PLC A/C No.1 (Life Fund) 240,000 1.10 240,000 1.109 Mrs. K.J.M. De Silva 238,710 1.09 238,710 1.0910 National Savings Bank 233,700 1.07 183,700 0.8411 Genesiis Software (Private) Ltd 201,868 0.92 194,799 0.8912 Mr. K.C. Vignarajah 201,717 0.92 218,225 1.0013 Aruna Equity Care (Private) Ltd 188,942 0.86 188,942 0.8614 Employees Trust Fund Board 180,013 0.82 479,477 2.1915 Mrs. N.H. Abdul Husein 165,710 0.76 155,000 0.7116 Mr. M.J. Fernando 163,500 0.75 163,500 0.7517 Commercial Bank of Ceylon PLC A/C No. 04 161,400 0.74 161,400 0.7418 Miss. N.K.R.H. De Silva 151,233 0.69 151,233 0.6919 Mr.D.A.Cabraal 150,000 0.69 95,000 0.4320 Perera & Sons (Bakers) Limited 150,000 0.69 150,000 0.69

Total 8,042,471 36.78 8,022,725 36.68


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Market Capitalisation Rs. Mn

2010 2011 2012 2013 2014 2015

0

10

20

30

40

50

60

70

80

90

Closing Share Price (2014-2015)

April May June July Aug Sept Oct Nov Dec Jan Feb Mar

Voting

Non - Voting

Ordinary Shares Non-Voting SharesAs at 31st March 2015 2014 2015 2014

4. Market Value

Share price (Rs.)As at the end of the year 76.00 45.50 57.60 37.30 Highest price traded 93.00 77.70 72.00 54.20 Lowest price traded 45.10 45.00 37.20 30.50

5. Share Trading

No. of shares traded 20,497,398 1,845,357 5,995,025 1,862,595 No. of transactions 5,288 1,948 3,357 2,536Value of shares traded (Rs.) 1,500,220,753 103,308,869 359,319,141 78,903,435

Shareholder and Investor Information

211

If you need help with the following…. Contact the Registrar

- Corporate information Chemanex PLC- Dividend payments into your bank account P.O Box 118- Changes of address 52,Galle Face Court 2,- Transfer of shares Colombo 03, Sri Lanka.- Loss of share certificates- Consolidation of multiple mailing to one shareholder Telephone : +(94)112326845

Fax : +(94)112445050

If you need help with the following…. Contact the Finance Team

- Latest news releases CIC Holdings PLC- Company developments CIC House- Financial results and clarifications 199, Kew Road,

Colombo 02,Sri Lanka.

Telephone :+(94)112359359Fax :+(94)112446922Web :www.cic.lk

Registered office Auditors

CIC Holdings PLC KPMG CIC House Chartered Accountants199, Kew Road, 32A,Sir Mohamed Macan Markar Mawatha,Colombo 02, Colombo 03,Sri Lanka. Sri Lanka.

Telephone :+(94)112359359Fax :+(94)112446922


Bonus Issue (No. of Shares) Share Capital (No. of Shares) DividendYear to 31st March Proportion Voting Non-Voting Voting Non-Voting Rs.

1965 (Initial issue) 50,0001966 50,000 2.001967 50,000 2.001968 1:1 50,000 100,000 2.001969 100,000 2.001970 1:2 50,000 150,000 2.001971 150,000 1.751972 150,000 2.001973 150,000 2.001974 150,000 2.001975 1:3 50,000 200,000 2.001976 1:2 100,000 300,000 2.001977 300,000 2.001978 300,000 2.001979 1:2 150,000 450,000 2.001980 7:9 350,000 800,000 2.001981 800,000 2.001982 800,000 2.001983 800,000 2.001984 800,000 2.001985 1:2 400,000 1,200,000 2.001986 1:2 600,000 1,800,000 2.501987 1:1 1,800,000 3,600,000 2.501988 3,600,000 2.751989 3,600,000 2.501990 1:2 1,800,000 5,400,000 3.001991 5,400,000 3.251992 5,400,000 4.001993 3 N-V:10 V (Rights) 1,620,000 5,400,000 1,620,000 3.501994 5,400,000 1,620,000 4.001995 5,400,000 1,620,000 4.001996 5,400,000 1,620,000 4.001997 5,400,000 1,620,000 4.001998 5,400,000 1,620,000 2.501999 5,400,000 1,620,000 3.502000 1:6 900,000 270,000 6,300,000 1,890,000 3.752001 6,300,000 1,890,000 4.002002 6,300,000 1,890,000 4.002003 1:7 900,000 270,000 7,200,000 2,160,000 4.252004 7,200,000 2,160,000 4.752005 1:8 900,000 270,000 8,100,000 2,430,000 4.752006 8,100,000 2,430,000 4.752007 1:1 (Rights) 8,100,000 2,430,000 16,200,000 4,860,000 1.44*

3:2 (Bonus) 24,300,000 7,290,000 40,500,000 12,150,0002008 4:5 (Bonus) 32,400,000 9,720,000 72,900,000 21,870,000 1.502009 72,900,000 21,870,000 1.502010 72,900,000 21,870,000 1.852011 72,900,000 21,870,000 2.752012 72,900,000 21,870,000 3.202013 72,900,000 21,870,000 1.632014 72,900,000 21,870,000 -2015 72,900,000 21,870,000 3.00

* Effective rate (Rs. 1.44 per share)

Movement in Issued Capital and Dividend Distribution

213

Company Directors Principal Activity Segment Stated CapitalRs. million

Chemanex PLC S H Amarasekera - Chairman Diversified business Industrial Raw Materials 126.25A. Mapalagama - MD/CEO IndustryProf. U.P. LiyanageS.P.S. RanatungaA.V.P. Silva


S H Amarasekera - Chairman Importation, Blending Agriculture & Livestock 205.50

K.B. Kotagama - Managing Director and Marketing ofW.P. Madawanaarachchi FertilizersJ.D. PierisS.P.S. RanatungaJ. M. Swaminathan

CIC Feeds (Private) Limited D. A. Cabraal - Chairman Manufacture of Animal Agriculture & Livestock 450.50A.V.P. Silva - Managing Director Feeds and HatcheryS.P.S. RanatungaS.M. EnderbyMs. P.D.S. Ruwanpura

Link Natural Products (Private) Limited

Dr. D. Nugawela - Chairman Manufacture of Natural Consumer & Pharmaceuticals

102.67

S H Amarasekera Healthcare Products,C.L. De Alwis Ayurvedic Pharmaceuticals,Prof. Tuley De Silva Herbal Cosmetics andDr. Anura Ekanayake NeutraceuticalsProf. P W M B B MarambeS.P.S. RanatungaK. ShakthidasanR.O.B. Wijesekara

CISCO Speciality Packaging (Private) Limited

S.P.S. Ranatunga - Chairman Manufacture of Packaging Material 110.50

R.S. Captain PolyethyleneMs. L.A. Captain Terephthalate ContainersL. De Mel for Domestic and ExportS. De Silva MarketsW.S. PremakumarD.P.G.C.P. Wegiriya

CIC Cropguard (Private) Limited

W.A. Assiriyage - Managing Director Importation, Repacking & Agriculture & Livestock 5.00

P.S.C. Fernando Marketing of Agro chemicalsR. GanesalingamR.S.I. GunawardeneK.B. KotagamaMs. P.D.S. RuwanpuraR.P.L. Weerasinghe

Crop Management Services S.P.S. Ranatunga Managing Assets - Agriculture & Livestock 199.20(Private) Limited Ms. P.D.S. Ruwanpura Plantations & Investment

A.V.P. Silva CompanyR.P.L. WeerasingheW.P. Madawanaarachchi

Colombo Industrial Agencies Limited

Ms. L.I. Fernando - Chairperson Manufacture of Consumer & Pharmaceuticals

10.57

S. De Silva WritingMs. P.D.S. Ruwanpura Instruments

CIC Lifesciences Limited S.P.S. Ranatunga Manufacture and Importation


136.01

W.S. Premakumar of PharmaceuticalsMs. P.D.S. Ruwanpura

Akzo Nobel Paints Lanka (Private) Limited

B.R.L. Fernando - Chairman Trading in Paints Construction 88.80

G.F.C. De Saram - Managing Director and Surface CoatingsR. RajgopalS.P.S. RanatungaJ. Rowe

Subsidiaries and Equity Accounted Investees


Ten Year Group Performance

Restated Restated Restated2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

SLFRS SLFRS SLFRS SLFRS SLFRS SLFRS SLFRS SLFRS SLFRS SLFRSRs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000

Income StatementTurnover 23,582,297 21,559,839 21,582,348 22,477,151 21,045,301 16,610,474 15,684,055 14,121,787 13,953,749 12,909,060 Operating profit after interest 1,059,989 (832,986) 144,176 943,637 1,171,896 386,111 93,512 702,661 1,006,283 919,961 Other income 155,490 577,839 133,902 152,888 226,936 484,852 411,487 131,761 120,174 99,894 Share of profit of equity accounted investees 207,636 270,071 291,716 277,896 231,179 212,642 264,479 261,385 107,219 123,807 Profit before tax 1,423,115 14,924 605,324 1,374,421 1,630,011 1,083,605 769,478 1,095,807 1,233,676 1,143,662 Taxation (397,697) (72,047) (174,818) (353,890) (466,894) (356,256) (278,429) (323,591) (435,944) (356,580)Profit for the year from continuing operations 1,025,418 (57,123) 430,506 1,020,531 1,163,117 727,349 491,049 772,216 797,732 787,082

Profit/(loss) for the year from discontinued operations 15,425 (1,069,716) (246,530) - - 17,900 (23,710) (27,522) - - Non-controlling interest 278,916 (155,126) (49,339) (157,447) (236,569) (155,678) (64,488) (234,911) (304,396) (270,150)Profit attributable to equity holders of the company 761,927 (971,713) 233,315 863,084 926,548 589,571 402,851 509,783 493,336 516,932

Statement of Financial PositionStated capital 1,008,450 1,008,450 1,008,450 1,008,450 1,008,450 1,008,450 1,008,450 1,008,450 1,008,450 186,300 Capital reserves 1,711,501 1,718,327 1,737,451 1,231,163 1,206,900 627,402 583,535 603,638 615,120 855,628 Revenue reserves 4,400,987 3,984,249 5,033,888 5,060,352 4,526,194 3,405,699 2,958,283 2,686,203 2,295,007 1,994,467 Negative goodwill - - - - - - - - - 41,529 Non-controlling interest 1,722,310 1,488,997 1,663,008 1,683,939 1,641,515 1,321,402 1,092,982 1,081,772 1,159,499 1,122,717 Total equity 8,843,248 8,200,023 9,442,797 8,983,904 8,383,059 6,362,953 5,643,250 5,380,063 5,078,076 4,200,641

Property,plant and equipment 10,610,666 9,414,735 8,706,775 7,504,776 6,404,586 4,473,240 4,159,885 3,916,380 2,867,626 2,880,564 Investment property 51,400 51,400 14,607 98,999 97,141 83,731 - - - - Biological assets 65,708 67,366 86,262 78,737 74,524 60,765 58,833 19,755 9,654 - Deposit on leasehold property - - 16,152 13,678 13,964 15,109 - - - - Capital work-in-progress 353,518 763,412 1,072,154 531,459 199,877 90,668 52,408 102,775 412,843 41,642 Intangible assets 27,683 27,683 147,911 159,017 95,255 79,882 49,541 2,748 2,181 2,702 Investments 1,457,106 1,540,398 798,468 712,909 623,147 545,598 537,919 980,205 538,155 464,432 Net current assets (1,842,163) (2,158,904) 261,136 1,237,260 2,084,896 1,937,514 1,750,165 1,273,776 2,129,424 1,495,845

10,723,918 9,706,090 11,103,465 10,336,835 9,593,390 7,286,507 6,608,751 6,295,639 5,959,883 4,885,185

Deferred liabilities (773,775) (648,946) (662,939) (701,318) (603,471) (431,201) (408,581) (371,328) (360,827) (190,782)Long-term liabilities (1,106,895) (857,121) (997,729) (651,613) (606,860) (492,353) (556,920) (544,248) (520,980) (493,762)

8,843,248 8,200,023 9,442,797 8,983,904 8,383,059 6,362,953 5,643,250 5,380,063 5,078,076 4,200,641

Cash Flow StatementNet cash inflow/(outflow) from operating activities 1,998,599 2,354,581 (1,001,983) (1,307,519) (299,377) 1,341,368 (1,052,191) (132,611) 176,838 1,638,969 Net cash inflow/(outflow) from investing activities (1,470,071) (1,231,110) (1,499,063) (1,663,267) (837,282) (533,763) 306,739 (1,132,965) (791,462) (544,387)Net cash inflow/(outflow) from financing activities 1,261,253 77,112 552,409 (94,104) (214,538) (333,403) (90,137) 172,181 613,547 (50,926)

Other InformationEarnings/(Deficit) per share(Rs.) 8.04 (10.25) 2.46 9.11 9.78 6.22 4.25 5.38 5.23 5.78 Dividend per share(Rs.) 3.00 - 1.63 3.20 2.75 1.85 1.50 1.50 1.44 1.14 Net assets per share(Rs.) 75.14 70.81 82.08 77.02 71.14 53.20 48.01 45.36 41.75 34.40 Market capitalisation(Rs.mn) 6,800.11 4,132.70 5,466.04 8,392.98 13,661.46 5,908.55 2,745.00 2,980.00 4,370.96 1,714.57

Interest cover(No.of times) 2.75 0.08 1.22 2.98 4.26 2.58 2.00 3.50 5.00 4.23 Current Ratio(No.of times) 0.88 0.87 1.02 1.08 1.20 1.22 1.24 1.22 1.50 1.35 Dividend cover(No.of times) 2.68 - 1.51 2.85 3.56 3.36 2.83 3.59 3.60 6.96 Price earnings ratio(No.of times)Ordinary 9.46 (4.44) 26.75 10.49 15.85 10.93 7.40 6.28 17.21 30.94 Non-voting(Class X) 7.17 (3.64) 20.44 7.15 11.05 6.99 4.82 4.41 11.42 19.00

215

Restated Restated Restated2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

SLFRS SLFRS SLFRS SLFRS SLFRS SLFRS SLFRS SLFRS SLFRS SLFRSRs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000

Income StatementTurnover 23,582,297 21,559,839 21,582,348 22,477,151 21,045,301 16,610,474 15,684,055 14,121,787 13,953,749 12,909,060 Operating profit after interest 1,059,989 (832,986) 144,176 943,637 1,171,896 386,111 93,512 702,661 1,006,283 919,961 Other income 155,490 577,839 133,902 152,888 226,936 484,852 411,487 131,761 120,174 99,894 Share of profit of equity accounted investees 207,636 270,071 291,716 277,896 231,179 212,642 264,479 261,385 107,219 123,807 Profit before tax 1,423,115 14,924 605,324 1,374,421 1,630,011 1,083,605 769,478 1,095,807 1,233,676 1,143,662 Taxation (397,697) (72,047) (174,818) (353,890) (466,894) (356,256) (278,429) (323,591) (435,944) (356,580)Profit for the year from continuing operations 1,025,418 (57,123) 430,506 1,020,531 1,163,117 727,349 491,049 772,216 797,732 787,082

Profit/(loss) for the year from discontinued operations 15,425 (1,069,716) (246,530) - - 17,900 (23,710) (27,522) - - Non-controlling interest 278,916 (155,126) (49,339) (157,447) (236,569) (155,678) (64,488) (234,911) (304,396) (270,150)Profit attributable to equity holders of the company 761,927 (971,713) 233,315 863,084 926,548 589,571 402,851 509,783 493,336 516,932

Statement of Financial PositionStated capital 1,008,450 1,008,450 1,008,450 1,008,450 1,008,450 1,008,450 1,008,450 1,008,450 1,008,450 186,300 Capital reserves 1,711,501 1,718,327 1,737,451 1,231,163 1,206,900 627,402 583,535 603,638 615,120 855,628 Revenue reserves 4,400,987 3,984,249 5,033,888 5,060,352 4,526,194 3,405,699 2,958,283 2,686,203 2,295,007 1,994,467 Negative goodwill - - - - - - - - - 41,529 Non-controlling interest 1,722,310 1,488,997 1,663,008 1,683,939 1,641,515 1,321,402 1,092,982 1,081,772 1,159,499 1,122,717 Total equity 8,843,248 8,200,023 9,442,797 8,983,904 8,383,059 6,362,953 5,643,250 5,380,063 5,078,076 4,200,641

Property,plant and equipment 10,610,666 9,414,735 8,706,775 7,504,776 6,404,586 4,473,240 4,159,885 3,916,380 2,867,626 2,880,564 Investment property 51,400 51,400 14,607 98,999 97,141 83,731 - - - - Biological assets 65,708 67,366 86,262 78,737 74,524 60,765 58,833 19,755 9,654 - Deposit on leasehold property - - 16,152 13,678 13,964 15,109 - - - - Capital work-in-progress 353,518 763,412 1,072,154 531,459 199,877 90,668 52,408 102,775 412,843 41,642 Intangible assets 27,683 27,683 147,911 159,017 95,255 79,882 49,541 2,748 2,181 2,702 Investments 1,457,106 1,540,398 798,468 712,909 623,147 545,598 537,919 980,205 538,155 464,432 Net current assets (1,842,163) (2,158,904) 261,136 1,237,260 2,084,896 1,937,514 1,750,165 1,273,776 2,129,424 1,495,845

10,723,918 9,706,090 11,103,465 10,336,835 9,593,390 7,286,507 6,608,751 6,295,639 5,959,883 4,885,185

Deferred liabilities (773,775) (648,946) (662,939) (701,318) (603,471) (431,201) (408,581) (371,328) (360,827) (190,782)Long-term liabilities (1,106,895) (857,121) (997,729) (651,613) (606,860) (492,353) (556,920) (544,248) (520,980) (493,762)

8,843,248 8,200,023 9,442,797 8,983,904 8,383,059 6,362,953 5,643,250 5,380,063 5,078,076 4,200,641

Cash Flow StatementNet cash inflow/(outflow) from operating activities 1,998,599 2,354,581 (1,001,983) (1,307,519) (299,377) 1,341,368 (1,052,191) (132,611) 176,838 1,638,969 Net cash inflow/(outflow) from investing activities (1,470,071) (1,231,110) (1,499,063) (1,663,267) (837,282) (533,763) 306,739 (1,132,965) (791,462) (544,387)Net cash inflow/(outflow) from financing activities 1,261,253 77,112 552,409 (94,104) (214,538) (333,403) (90,137) 172,181 613,547 (50,926)

Other InformationEarnings/(Deficit) per share(Rs.) 8.04 (10.25) 2.46 9.11 9.78 6.22 4.25 5.38 5.23 5.78 Dividend per share(Rs.) 3.00 - 1.63 3.20 2.75 1.85 1.50 1.50 1.44 1.14 Net assets per share(Rs.) 75.14 70.81 82.08 77.02 71.14 53.20 48.01 45.36 41.75 34.40 Market capitalisation(Rs.mn) 6,800.11 4,132.70 5,466.04 8,392.98 13,661.46 5,908.55 2,745.00 2,980.00 4,370.96 1,714.57

Interest cover(No.of times) 2.75 0.08 1.22 2.98 4.26 2.58 2.00 3.50 5.00 4.23 Current Ratio(No.of times) 0.88 0.87 1.02 1.08 1.20 1.22 1.24 1.22 1.50 1.35 Dividend cover(No.of times) 2.68 - 1.51 2.85 3.56 3.36 2.83 3.59 3.60 6.96 Price earnings ratio(No.of times)Ordinary 9.46 (4.44) 26.75 10.49 15.85 10.93 7.40 6.28 17.21 30.94 Non-voting(Class X) 7.17 (3.64) 20.44 7.15 11.05 6.99 4.82 4.41 11.42 19.00

Corporate InformationName of the CompanyCIC Holdings PLC

Company Registration No.PQ 88

Legal FormA Public Quoted Company with limited liability

incorporated in Sri Lanka in 1964. Re-registered under the Companies Act No. 07 of 2007

on 21st November 2007.

Registered Office199, Kew Road, Colombo 2.

DirectorsS.H. Amarasekera (Chairman) S.P.S. Ranatunga (MD/CEO) R.N. Asirwatham R.S. CaptainS.M. EnderbyM.P. JayawardenaK B KotagamaProf. P.W.M.B.B. MarambeDr. R C W M R D NugawelaA V P SilvaD S Weerakkody

Company SecretaryP.D.S. Ruwanpura

AuditorsKPMGChartered Accountants 32A, Sir Mohamed Macan Markar Mawatha, Colombo 3.

BankersAxis BankBank of Ceylon Commercial Bank of Ceylon PLC ICICI BankNDB Bank PLCNations Trust Bank PLC People’s BankPan Asia Bank PLC Standard Chartered Bank

Legal AdvisersNithya PartnersAttorneys-at-Law97A, Galle Road, Colombo 3.

Julius & Creasy Attorneys-at-Law41, Janadhipathi Mawatha, Colombo 1.

Executive DirectorS.P.S. Ranatunga (MD/CEO)

Non-Executive DirectorsS.H. Amarasekera (Chairman) R.N. Asirwatham R.S. CaptainS.M. EnderbyM.P. JayawardenaK B KotagamaProf. P.W.M.B.B. MarambeDr. R C W M R D NugawelaA V P SilvaD S Weerakkody

Audit CommitteeR.N. Asirwatham (Chairman) S.H. AmarasekeraS.M. Enderby

Human Capital &Compensation CommitteeD S Weerakkody (Chairman) S.H. AmarasekeraR.N. Asirwatham R.S. CaptainS.M. Enderby

Nominations CommitteeS.H. Amarasekera (Chairman) R.N. AsirwathamR.S. Captain

Credit RatingA/P2 (RAM rating)

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