Annual Report 2016/17 - Colombo Stock Exchange. L. Morison son & Jones (CeyL on) PLC J. L. Morison s...

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J. L. MORISON SON & JONES ( CEYLON ) PLC Annual Report 2016/17

Transcript of Annual Report 2016/17 - Colombo Stock Exchange. L. Morison son & Jones (CeyL on) PLC J. L. Morison s...

J. L. Morison son & Jones (CeyLon) PLC

J. L. Morison son &

Jones (Ceylon) PLC | Annual report 2016/17

Annual Report 2016/17

www.jlmorisons.com

Legal FormQuoted Public Company with Limited Liability.Listed on the Colombo Stock Exchange on 1st January 1964

Date of Incorporation31st January 1939

Date of Re-registration5th September 2007

New Registration NumberPQ 77

Accounting Year End31st March

Registered Office“Hemas House” No. 75 Braybrooke Place,Colombo 2Tel; 0114 731 731 (Hunting)Fax: 0114731777

AuditorsErnst & YoungChartered AccountantsNo. 201, De Saram Place,Colombo 10

DirectorsMr. H.N. Esufally (Chairman)Mr. R. A. J. T. Perera (MD)Ms. B.A. I. RajakarierProfessor P. R. FernandoMr. R. ChakravartiMr. S.M. Enderby

SecretariesHemas Corporate Services (Pvt) Ltd“Hemas House” No. 75 Braybrooke Place,Colombo 2Tel; 0114 731 731 (Hunting)Fax: 0114731777

RegistrarsSSP Corporate Services (Pvt) Ltd101, Inner Flower Road,Colombo 3

Lawyers to the CompanyJulius & CreasyNo. 41, Janadhipathi Mawatha,Colombo 1.

BankersBank of CeylonPeople’s BankStandard Chartered BankNDB BankNations Trust BankHSBC BankSampath BankDeutsche BankCommercial Bank

Corporate InformatIon

Design & Concept by: Optima Designs (Pvt) Ltd.Printed by: Gunaratne Offset Ltd.

Contents

milestones and events 2Chairman’s message 6managing Director’s message 8Directors’ Profiles 10Sustainability Report 12Corporate Governance 15Report of the Board of Directors 20Annual Report of the Directors 21The Audit Committee Report 25The Related Party Transactions Review Committee Report 27Statement of Directors’ responsibility 28Independent auditors’ report 29Statement of Financial Position 30Statement of Profit or Loss 31Statement of Comprehensive Income 32Statement of Changes in Equity 33Statement of Cash Flows 34Notes to the Financial Statements 35Analysis of Shareholders According to the Number of Shares as at 31 March 2017 70Other Information to Shareholders & Investors 71Computation of % of Public Shareholding - 31 March 2017 (Voting) 72Computation of % of Public Shareholding - 31 March 2017 (Non-Voting) 74Group Financial Highlights - 5 Year Summary 76Notice of Meeting 77Notes 78Form of Proxy - J. L. Morison Son & Jones (Ceylon) PLC (Voting) 81Form of Proxy - J. L. Morison Son & Jones (Ceylon) PLC (Non-Voting) 83Corporate Information Inner Back Cover

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J. L. Morison’s is a fully Sri Lankan owned company with seven decades of experience and working relationships in the country.

At J. L. Morison’s our purpose is to offer wellness and a better quality of life to Sri Lankans. We accomplish this through the provision of trusted pharmaceutical and OTC products that are efficacious and of high quality at an affordable cost.

As one of the oldest and largest pharmaceutical manufacturers in Sri Lanka, we take pride in providing for the healthcare needs of the private and public sector.

In addition to manufacturing high quality pharmaceutical and OTC products, we also import and distribute internationally renowned healthcare and consumer products via our island wide distribution network.

J. L. Morison son & Jones (CeyLon) PLC

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Milestones and events

1937-19501937Mr. Russell Elliot was posted by J. L. Morison Son & Jones (UK) as the first agent to set up a trading outpost in Sri Lanka.

1939J. L. Morison Son & Jones (Ceylon) was incorporated on 31 January 1939, on the eve of the Second World War by Mr. J E Ogle, a director of the parent company.

1941-1950During World War IIOperations were temporarily shifted to Kadugannawa in the Kandy district, where business was tapered and remained subdued.

Post World War II Recommenced the Colombo operations and increased brand presence for its earlier products viz. Marmite & Brylcreem.

1950 Secured the agency rights for Mead Johnson Nutritionals Ltd to distribute the brands in its portfolio, leading up to popularising ‘Sustagen’ as a trusted household brand.

1951-19601952Mr. M. B. Ogle took over the reins of J. L. Morison (Ceylon) and went on to extend an invaluable service for over thirty years to the Company.

Mr. Reginald Abeyawira who led J. L. Morison (Ceylon) with farsightedness for over a period of sixty years, joins the cadre as a trainee clerk.

1959MSJ Industries (Ceylon) Ltd, a pioneer in generic pharmaceutical manufacturing is incorporated as a wholly owned subsidiary under the aegis of the Founder/Director, Mr. U. Karunatileka.

1960 Shifted operations to its own premises equipped with modern amenities and factory at 126, Aluthmawatha Road, Colombo 15.

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1961-19701964 Broad based 100% foreign shareholding of J. L. Morison (Ceylon) listed on the Colombo Stock Exchange on 27 March 1964; as one of the first commercial ventures to list in Sri Lanka.

1968Established a subsidiary, MSJ Cargoes (Ceylon) Ltd to offer a one-stop solution for clearing, forwarding, warehousing and transportation.

1969Ventured into trading food products - tinned fruits and juices under the MSJ brand name.

1970 Set up a book division with an agency agreement with Granada Publishing Ltd, UK and began the MSJ picture postcards project.

1971-19801971Commenced importing and distributing agro based products in affiliation with a Japanese company, Tozai Boeki Kaisha Ltd.

Acquired 78% stake of Canned & Preserved Foods Ltd, adding value to the food trading operations with a range of canned and preserved food products including catering to the export market.

1972A new subsidiary, MSJ Foods (Ceylon) Ltd commenced its trading operations.

1977Purchased 6 ½ acres at 620, Biyagama Road, Pethiyagoda, Kelaniya to erect a new office complex to accommodate the growing operations.

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1981-19901981Mr. M. B. Ogle retired after nearly three decades of invaluable service to J. L. Morison (Ceylon)

1983With the parent company in UK winding down its operations, the majority stake of the Company was taken over by nationals, diluting the foreign shareholding from 49% to 33%.

1986Erected a new office premises and shifted part of the operations - the stores and marketing division to Pethiyagoda, Kelaniya.

1991-20001991Pioneered and established Compak Morison (Lanka) Ltd to manufacture particle Board out of paddy straw.

1992Compak Morison (Lanka) Ltd was listed on the Colombo Stock Exchange with an initial public offer which was oversubscribed. Non-viability of the project was subsequently established and discontinued operations in the mid 1990s.

1993Mr. Richard Gunatilake, after a dedicated stint of over 45 years, retired from his duties as a Board Director.

1997Bought over the 33% non-resident shareholding to become a fully owned local entity.

1998Mr. U. Karunatileka, the founding Director of MSJ Industries who played a critical role in taking forward the manufacturing operations and also the generic pharmaceutical industry in Sri Lanka, retired from service after nearly 40 years.

2000In conformance with the Sri Lanka Accounting Standards, J. L. Morison (Ceylon) consolidated its accounts with the Colombo Pharmacy Ltd with which it had an equity investment of 24%.

Milestones and events (Contd.)

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2001-20102002Principals of Godrej Sara Lee and Sara Lee TTK commenced local manufacturing operations in collaboration with J. L. Morison (Ceylon).

2004Shifted the administration and finance division to the new premises in Pethiyagoda, Kelaniya.

Supported the Tsunami affected families with dry rations, clothes, water and pharmaceuticals and initiated a housing project in the Galle district in partnership with the employees and principals.

2011-20162013Diversified conglomerate Hemas Holdings PLC acquired the majority shareholding.

Restructured and streamlined operations at J. L. Morison (Ceylon) with focus on healthcare and wellness products.

2014Upgraded the manufacturing plant at Aluthmawatha Road, Colombo to increase capacity.

2015Signed a five year buy back agreement with the Government of Sri Lanka.

Launched Atorvastatin, a new generic molecule.

2016Launched the Morison’s Rx branded pharmaceuticals range, Gripe Ginger and Lacto Sun Lotion.

The Board of Directors resolved to build a new state of the art pharmaceutical research and manufacturing facility within the SLINTEC Nano Technology Park in Pitipana, Homagama.

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ChairMan’s Message

“We have set a CLear strategy for the CoMPany through effeCtive governanCe foCused on target setting, risk ManageMent and PerforManCe oPtiMisation to Provide aCCountabiLity and ControL”

As a leading player in the healthcare industry, we have a responsibility to help improve access to medicine for patients across Sri Lanka. At J.L. Morison’s, our purpose is to offer our consumers wellness and a better quality of life, through trusted products that are of high quality at an affordable cost. Our strong commitment to this purpose motivates us to strive beyond expectations to patients, healthcare partners and society as we aspire to be a trusted leader in the pharmaceuticals and wellness space.

The company continued to deliver strong performance for the year under review supported by the growth of our core segments, efficiency and capacity gains at our plant, and the strength of the restructured distribution network. These factors helped counter exchange rate volatility and economic slowdown. Revenues grew by 7% over the previous year despite the discontinuation of agricultural and crop care product distribution. The company registered 47% YoY growth of profit after tax to register Rs. 516 Mn, whilst Return on Equity recorded an improvement of 390 basis points from 13.13% in 2015/16. Liquidity further improved during the period due to the slight reduction in our financial gearing burden to 13.27%. Given the strong performance we are pleased to inform that the Board has declared a final dividend per share of Rs. 5.00 apart from the interim dividend of Rs. 10.00 per share which was paid in March 2017, subject to final shareholder approval at the Annual General Meeting.

The revenue growth was mainly led by our pharmaceuticals manufacturing division which supplies pharmaceuticals to government institutions and the private sector. J. L. Morison’s is now a more focused company with leading positions in generic pharmaceuticals and OTC products. We focus our investment on areas where we believe there are the most attractive opportunities, having considered patient need, market opportunity and scientific understanding. We concentrate on mechanisms that might slow down or reverse the course of diseases and present opportunities to achieve remission.

Our Board strongly supports the principles of corporate governance and are committed to maintain high standards. We have set a clear strategy for the company through effective governance focused on target setting, risk management and performance optimisation to provide accountability and control. We continue to enhance our corporate governance approach to create sustainable value.

Whilst we anticipate challenges largely due to the depreciation of the Sri Lankan Rupee, market volatility, price regulations

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imposed by the government and tax implications; we remain confident about long term growth prospects in Sri Lanka and are exploring opportunities abroad. Continuous innovation, strict guidance on quality assurance and ethical corporate practices are at the core. We devise strategies to thrive in such a challenging environment and have taken on several initiatives to inculcate a highly collaborative corporate culture that promotes measures that address swift implementation of calculated strategies to propel our growth going forward.

I wish to congratulate the Managing Director and his team on the outstanding performance achieved during the year and I would also like to express my sincere thanks to my colleagues on the Board, who have readily supported me with their counsel and advice.

In conclusion, to what has been a strong year for the company, my deep appreciation goes to our valued customers and business partners for the continued trust vested on us, and also our shareholders for their confidence in the company.

Husein EsufallyChairman

31 May 2017

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Managing direCtor’s Message

“We beLieve our CoMMitMent to quaLity strengthens the trust that our CustoMers and soCiety PLaCe in us”

It gives me great pleasure to report to you the company performance for the financial year ending March 2017, with a note on another year of solid company performance. It is encouraging to see that the company closed the year with strong positive momentum, paving the way for steady growth in years to come.

The company recorded revenue growth of 7% YoY to reach Rs. 4.02Bn despite the discontinuation of agriculture and crop care product distribution. The company efforts on focused and streamlined product offering continued; and operating processes and efficiencies were significantly improved during the year. This resulted in the company recording a 22% growth of operating profit YoY to reach Rs. 561Mn. Additionally, by utilising the excess funds effectively in tax free investment, the company generated 60% growth in the net finance income which contributed to net earnings growth of 47% YoY to reach Rs. 516Mn.

Growth was led by the pharmaceutical manufacturing division which supplies pharmaceuticals to government institutes and the private sector. The public sector recorded a strong success due to the five year buy back agreement signed with the government in July 2015. The manufacturing facility was able to respond positively to the increasing demand by improving its production output, justifying the capital expenditure incurred over the last two years. Further, our over-the-counter (OTC) brands such as Morison’s Gripe Mixture and Lacto Calamine, trusted by the Sri Lankan consumer for decades, grew steadily contributing to the overall growth.

JLM strengthened its product portfolio during the year by reaping the results of its new product development projects. Atorvastatin, Paracetamol and Cetirizine were the latest additions. We successfully relaunched our flagship OTC brand ‘Morison’s Gripe Mixture’ in PET bottles and introduced its ginger variant. Lacto Sun Lotion is the newest addition to the Lacto therapeutic skin care range which is tailored to the Asian skin tone.

Each year is challenging in its own way and 2016/17 was no different. The Sri Lankan Rupee depreciated significantly against the US dollar during the year with adverse implications to raw material and packing material prices. This gave us the challenge of maintaining margins through improving efficiency of internal processes, as most of our products in the portfolio operate in a price controlled market. The private pharmaceutical industry recorded 11% growth in 2016 (IMS Q3 2016) slowing down slightly from 13% growth recorded in 2015. The growth of the pharmaceutical industry is mainly attributable to non-

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communicable diseases led by the burden of cardiovascular disease and diabetes rising in Sri Lanka. Thus our presence in the market becomes more relevant by providing innovative, efficacious and high quality pharmaceutical products to Sri Lankan consumers at an affordable cost, providing value for money.

Excellence and continuous improvement in quality is a requirement within the industry in which we operate. Our factory at Mutwall adheres to Good Manufacturing Practices (GMP). GMP ensures the products are consistently produced and controlled according to the quality standards and is designed to minimise the risk involved in pharmaceutical production. We continue our efforts in enhancing the quality standard through technology upgrades and training our people by taking multiple initiatives with the help of external consultants and our internal GMP team. We believe our commitment to quality strengthens the trust that our customers and society place in us.

We believe our employees are our most important asset. The team often makes extraordinary efforts to achieve their goals while maintaining high ethical standards. We will continue to invest in building capabilities and leadership among our employees and to attract and retain the best talent in the industry.

It is encouraging to see the government facilitating and promoting local pharmaceutical manufacturing within Sri Lanka, targeting near self-sufficiency. We believe our initiative of constructing a brand new state of the art pharmaceutical research and manufacturing facility will make a significant contribution towards achieving the government’s vision. The new facility will be located within the SLINTEC nano technology park in Pitipana, Homagama. The proposed plant will significantly enhance the manufacturing capacity of the company while complying with global regulatory standards. Commercial operations from the new plant would be expected to commence in 2019.

We have aspired to work towards strong growth in the years ahead. In line with this, we will continue to make investment in strategic priorities while expanding our business portfolio. We strongly believe we need to build our competitive advantage and become more relevant in the fast changing health care and consumer markets.

I wish to thank my Chairman and the Board of Directors for their active participation and guidance to steer the company forward. Our customers and business partners are core to our business,

I thank them for their support and confidence placed by partnering with JLM. I wish to convey my special gratitude to the JLM team who have worked hard to deliver these results. Finally, my sincere thanks to all the shareholders for the faith they have placed in the company and in our future endeavours.

Trihan PereraManaging director

31 May 2017

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the Maldives and in several senior roles at NDB Bank. Prior to this she served as Finance Director of Lanka Cellular Services (Pvt) Ltd. She was trained at Ernst & Young where she served as Senior Manager in both auditing, consultancy and training.

Professor Palamandadige Ravindra Fernando - Independent Non-Executive Director

Professor Ravindra Fernando has served as a Senior Lecturer in the Division of Forensic Medicine of the United Medical and Dental schools of Guy’s and St. Thomas’s hospital, University of London and the Department of Forensic Medicine and Science in the University of Glasgow. He was a Consultant Home Office (England and Wales) and a Crown Office Pathologist in Scotland. Prof. Fernando was the Senior Professor of Forensic Medicine and Toxicology at the University of Colombo, Sri Lanka.

He was a Founder Secretary General of the Indo-Pacific Association of Law, Medicine and Science and past President of the Ceylon College of Physicians, Sri Lanka Medical Association and the College of Forensic Pathologists of Sri Lanka Asia-Pacific Association of Medical Toxicology.

Professor Fernando was the Founder Head of the National Poisons Information Centre, National Hospital of Sri Lanka, Colombo, and he is the Chairman of the National Dangerous Drugs Control Board.

Steven Mark Enderby - Non-Executive Director

Mr. Steven Enderby joined Hemas in March 2013 to head the Group’s efforts in Mergers and Acquisitions. He took up the Office of Deputy CEO and Director of Hemas Holdings PLC in November 2013 and was appointed the Chief Executive Officer of the Company on 1 April 2014. Mr. Enderby has had a successful track record in the private equity space with Actis, a leading global emerging markets fund, until his retirement in 2011 as an Actis Partner. He has led many of the most successful private equity transactions in Sri Lanka including South Asia Gateway Terminal, Ceylon Oxygen and Millennium Information Technologies. Mr. Enderby is also Non-Executive Chairman of Ironwood Capital Partners Sri Lanka’s leading private equity fund. He has also served on the Boards of many leading companies in Sri Lanka and India. He is a Fellow of the Chartered Institute of Management Accountants, UK and holds a Degree in Economics and Accounting from Queens University Belfast, and a Master’s Degree in Development Studies from the University of Melbourne.

direCtors’ ProFiles

Husein Nuruddin Esufally - Non-Executive Chairman

Mr. Husein Esufally serves as the Chairman of the Company. He is also the Chairman of Hemas Manufacturing (Pvt) Ltd and Hemas Holding PLC, the ultimate parent company.

Mr. Husein Esufally started his career with the Group’s FMCG (Fast Moving Consumer Goods) business, where he steered the Company for a period of 19 years, during which, the business established a strong consumer franchise. Thereafter, he served for 13 years as the Chief Executive Officer of the Hemas Group until he relinquished his position in March 2014. Presently, he serves as the Non-Executive Chairman of Hemas Holdings PLC.

Mr. Esufally was appointed as the Non-Executive Chairman of Janashakthi Insurance PLC on 22 July 2015. He also serves on the Boards of several other companies and is involved in several social projects. Mr. Esufally holds a Bachelor of Science (Honours) Degree in Electronics from the University of Sussex, UK having received his primary education at St. Thomas College, Mt Lavinia.

Ranasinghe Arachchige Joseph Trihan Perera - Executive Director

Trihan is the Managing Director of J. L. Morison Son & Jones (Ceylon) PLC. He currently serves as the President of the Sri Lanka Pharmaceutical Manufacturers’ Association. Trihan is an Associate of the Chartered Institute of Management Accountants, UK and holds an MBA with Distinction from Keele University, UK. He has been with the Hemas Group since 2010. He began his career at NDB and moved to management consulting and academia. Trihan has worked in a wide range of industries including banking, shipping and logistics, aviation, plantations and FMCG in Sri Lanka and overseas.

Bodiyabaduge Arundathi Indira Rajakarier - Independent Non-Executive Director

Ms. Rajakarier has over 25 years working experience as a finance professional and is a founder Director of SheConsults (Pvt) Ltd., a financial consulting company. She serves on the Boards of J.L.Morison Son & Jones (Ceylon) PLC and John Keells PLC as an Independent Director and previously served on the Board of NCAP as an Independent Non- Executive Director, the Chairperson of the Audit, Risk and Compliance Committee and the Remuneration Committee and a member of the Investment Committee. An Associate member of the Institute of Chartered Accountants, Sri Lanka, she served as the Country Manager for ACCA Sri Lanka with additional responsibility for

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Ranjan Chakravarti - Independent Non-Executive Director

Mr. Ranjan Chakravarti is a Management Consultant & Certified Executive & Life Coach. He is a Science graduate with post-graduate in Business Management.

Mr. Chakravarti has over 40 years’ experience in the global pharmaceutical industry, of which 17 years have been with innovator companies like Boehringer-Knoll, Reckitt & Colman, and Eskayef Ltd. and 23 years with leading Indian multinational companies like Lupin Laboratories and Ranbaxy.

The last 26 years he has been in senior leadership roles in India and other geographies like Asia, Middle East, Africa and Latin America, Russia, CIS & EEU. The most recent position prior to retirement in 2015 was as Head Global Pharmaceutical Business (excluding US), in Ranbaxy.

Mr. Chakravarti has worked as a lead member of the Integration Team post merger oftwo of the largest pharmaceutical companies from India- Sun Pharmaceuticals & Ranbaxy Laboratories.A veteran of Pharmaceutical Industry worked extensively in multicultural environments in Functional and General Management positions across geographies. As a Marketing & Sales professional Mr. Chakravarti has launched & built strong brands in ethical/OTC and successfully led large teams in India & overseas.

He has handled many responsibilities in areas as varied as Marketing and Sales; Restructuring and Revitalising Businesses, Setting up and managing large operations in overseas markets, Head Global Strategy & Business Development; Head Formulation Sourcing and Alliance Management; Acquisition and Divestment projects; and Organisation Restructuring & Business Processes.

Mr. Chakravarti has developed many leaders over the years who are currently occupying senior leadership roles in large & successful organisations.

Mr. Chakravarti has served on the Board of 15 Subsidiaries of Ranbaxy spread across Western Europe, Africa, Canada, Brazil, Russia, Ukraine & Romania either as a Director or Chairman of the Board.

Currently, working as a Management Consultant and Executive & Life Coach specialising in helping organisations in transition & successful high potential professionals in achieving their life goals.

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An outbound training conducted to cater to identified skill development requirements

A few triumphant winners of the JLM Awards Night 2016

At J.L. Morison’s, we are dedicated to continuously improving our value creation process through a sustainable stance towards managing key stakeholder relations. Thus, our sustainability strategy primarily focuses on nurturing our employees, winning consumer trust, giving back to the community we operate in, and maintaining optimal environmental resource utilisation.

Our EmployeesEvery employee of the workforce plays a pivotal role in enabling the company to achieve set targets and serve the consumers in the best way possible. Therefore, the company focuses on sustaining regular engagement with our employees with the intention of constructing sound employer-employee relations, drive performance improvements and to better respond to their expectations. The open-door culture prevailing in the workplace, which allows any employee to voice their concerns or grievances to the management, has greatly influenced in reaching the desired level of employee engagement. In the year under review, the company did not record any significant incidents of industrial disputes, signifying the prevailing harmonious work environment. Numerous activities were held during the year to uphold team motivation, increase job satisfaction and strengthen employee bonding. The Poson Dansala was held at the company premises, to which the employees invested their valuable time and energy in preparation and distribution of refreshments to the

surrounding community. The Children’s Art Competition provided a delightful opportunity for not only the employees, but also their families to get together for a pleasurable day that rewarded the talents of their children. A Six-a-Side Cricket Tournament was held at P. Saranawanamuththu Oval Cricket Stadium with the participation of teams representing employees across the company, facilitating an opportunity to reinforce team spirit and celebrate their passion for cricket. The Annual Dharma Deshana and Pirith Ceremony were some of the other key initiatives set in motion, which brought the JLM family together during the past year.

The year ended reinforces our commitment towards creating a progressive work culture for the employees, while fostering their talents and empowering them to build a strong career path. Much focus was given on training needs analysis this year, leading to customised training programmes to meet identified technical and soft skills requirements. The Lead Squared program was carried out successfully for the second consecutive year, with the intention of building a pool of individuals competent for the leadership pipeline, enabling them to rise to their true potential. The Annual JLM Awards Night was conducted to recognise the success of high performers and to reward them for their hard work. Service Excellence, Brand of the year, Best Sales Representative and Best Agency were few of the many titles awarded in this grandiose occasion.

sustainability rePort

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Pharmaceuticals and OTC products are manufactured at our GMP certified plant, ensuring the highest quality standards

We continuously ensure and make it our utmost priority to assure the health and safety of our team. Thus, a Health and Safety Committee was brought together this year, to regularly review and recognise operational risk factors while taking preventive and corrective action to minimise workplace accidents. Safety training and regular observation tours are conducted in the premises to prevent health and safety hazards. Introduction of a new medical insurance scheme, opening of the company gymnasium and a free annual health check-up facility were some of the other noteworthy initiatives taken up by the company to further increase employee wellbeing. At JLM, we are committed to function as an equal opportunity provider, where measures are taken to improve equality and diversity by avoiding discrimination based on gender, age, religion, race or physical ability.

Our CustomersAs depicted in our purpose, we strive to offer our customers wellness and better quality of life through trusted products that are efficacious and of high quality, that provide value for money. J.L Morison’s strictly adheres to all regulatory testing and evaluations for its product portfolio, while adopting best practices in ensuring the safety of its products. A consumer hotline as well as a digital media platform are open for customers in case of queries, complaints and providing feedback.

Our CommunityJLM has placed great emphasis on maintaining harmonious relations and giving back to the communities around the organisation. In an effort to fulfill our social responsibility, the company organised several CSR projects during the year.

Two Medical Camps were held during the year at neighbouring temples in Kelaniya and Mutwall, where free medical consultation and medicine were given to the participants surrounding our office premises. In October 2016, the J.L Morison’s team joined hands with Rajamaha Viharaya Kotahena where over 175 persons around the area benefited through the endeavour. The second Community Medical Camp was held in February 2017 in conjunction with Baraneskanda Rajamaha Viharaya with around 150 surrounding residents coming together in participation. The active employee volunteerism played a significant role in making these events a success.

Other notable projects conducted during the year include, the free of charge feeding area installation at the Pettah main bus stand and conducting regional seminars around the country for pregnant mothers, providing education through doctors and midwives. During the year charitable donations amounting to Rs. 542,955/- were made by the company.

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Community projects conducted to serve our surrounding residents: Medical Camp at Kotahena Rajamaha Viharaya and Poson Dansala

Our EnvironmentAs a responsible corporate citizen, we strive to operate in ways which minimise any adverse effects on the surrounding environment. Conserving energy by investing in energy efficient systems, the reduction of the carbon footprint, optimisation of water usage and efficient waste management are our main focus areas in maintaining environmental sustainability. As such, conversion to LED lights has taken us a step forward in our efforts to reduce the energy footprint. Concurrently, JLM actively engages in creating environmental awareness among its stakeholders.

This year has been a period of success for the company on all fronts. With this winning momentum, we aspire to continue our efforts with a constant look out for opportunities to enhance our sustainability initiatives towards stakeholders in the value creation process.

Sustainability Report (Contd.)

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CorPorate governanCe

The Board of Directors has the overall responsibility to ensure that proper standards of Governance are maintained. The Board of Directors of J.L. Morison Son & Jones (Ceylon) PLC is committed to maintaining the highest standards of corporate governance in line with the Code of Best Practice on Corporate Governance and the Listing Rules of the Colombo Stock Exchange.

Set out below is a report on the Company’s corporate governance principles, which were in place throughout the reporting period under review. The report also attempts to explain how power is exercised to ensure that the objectives of the Company are achieved lawfully and ethically.

1. The BoardCode Provision:- “Every company should be headed by an effective Board, which should direct, lead and control the Company”

The Board met regularly during the period under review with an effective participation of all members of the Board. The Board Meetings were held once in the first, second and third quarters and twice in the fourth quarter ended 31.03.2017.

The Board’s role is to provide entrepreneurial leadership to the Company within a framework of prudent and effective controls which enables risks to be assessed and managed. In effectively executing the Board’s role, the meetings held during the year focused on the long term vision, objectives and strategy of the Company and the Group, ensuring the formulation and implementation of a sound business strategy, ensuring that the management team possess the skills, experience and knowledge to implement the strategy, the performance of the Company and the Group, ensuring effective system to secure integrity of information, internal controls, business continuity and risk management, operational performance and quality, statutory and regulatory compliance, approval of the operating and capital expenditure budgets, oversight of the group’s operations, financial reporting and control, internal controls, proposals for major capital projects, Human Resources, Corporate Governance and approval of policies. The Company has arranged appropriate insurance cover.

The Board collectively and Directors individually ensure that actions have been carried out in accordance with the laws of the Country, as applicable to the business of the Company and the Group. The Board ensures that ethical standards, all stakeholder interests are considered in corporate decisions, recognising sustainable business development in corporate strategy, decisions

and activities, and that the Company’s values and standards are set with emphasis on adopting appropriate accounting policies and fostering compliance with financial regulations. The Board has agreed to and also advised the management to obtain independent professional advice where necessary.

During the year, the Directors have dedicated adequate time and effort to the matters of the Board, the Company and the Group. The agenda and the connected Board Papers of each Board Meeting are circulated to the Board by the Company Secretary, providing adequate time for review. The Directors call for clarification or additional information directly from the Management and also through the Company Secretary. All Directors have access to the advice and services of the Company Secretary at all times.

The names of the Directors who served during the year under review are disclosed in the Annual Report of the Directors. The table below records the attendance of each director at Board and Committee Meetings held during the period under review.

Board Audit Committee

Related PartyTransactions

ReviewCommittee

Mr. Husein Esufally 4

Mr. Trihan Perera 5 3 (Appointed to the committee w.e.f.

31 May 2016)

Mr. Steven Enderby 5 4 3

Mr. Asoka Abeyewardene (Resigned w.e.f. 24 November 2016)

3 3 3

Prof. Ravindra Fernando 4 2 3

Mr. Ranjan Chakravarti (Appointed w.e.f. 1 October 2017)

3

Ms. Arundathi Rajakarier(Appointed w.e.f. 4 January 2017)

2 1 1

2. Chairman and Chief Executive Officer (CEO)Code Provision:- “There should be a clear division of responsibilities at the head of the company, which will ensure a balance of power and authority, such that no one individual has unfettered powers of decision”

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Corporate Governance (Contd.)

The roles of the Chairman and CEO have been divided between two members of the Board providing a better balance of power on the Board. Accordingly, a clear division of responsibilities is ensured at the head of the Company and a balance of power and authority. The Chief Executive holds responsibility for the Executive management. Chairman’s role is pivotal in creating the conditions for the effectiveness of the Board as a whole and the individual Directors. Chairman of the Company is a Non-Executive Director of the Board.

3. Chairman’s RoleCode Provision:- “Chairman should preserve order and facilitate the effective discharge of Board functions”

The Chairman leads the Board, ensuring its effectiveness, while taking account of the interests of the Company and the Group. The Chairman ensures that adequate notice of meetings is provided to the members of the Board through the Company Secretary. The agenda of all Board Meetings are prepared by the Company Secretary under the advice and approval of the Chairman. Chairman facilitates effective discharge of Board functions. In conducting Board proceedings in a proper manner, Chairman ensures effective participation of both Executive and Non- Executive Directors and that the expertise they bring in is received by the Company to better run its functions.

4. Financial AcumenCode Provision:- “ the board should ensure the availability within it of those with sufficient financial acumen and knowledge to offer guidance on matters of finance”

The Board comprises members with a wide range of expertise. The Independent Non- Executive Director, who also serves as Chairperson of the Audit Committee is a financial professional.

5. Board Balance and IndependenceCode Provision “The Board should have a balance of Executive and Non-Executive Directors such that no individual or small group of individuals can dominate the Board’s decision taking”

As at 31 March 2017, the Board comprised three Independent Non-Executive Directors, two Non-Executive Directors and one Executive Director. The Independent Non- Executive Directors are deemed independent in accordance with the Listing Rules of

the Colombo Stock Exchange and the Code of Best Practice on Corporate Governance. The Board of Directors of J.L. Morison Son & Jones (Ceylon) PLC believes that the composition of the Board is of sufficient size and ensures a balance of skills and experience appropriate for the requirements of the business.

6. Appointments to the BoardCode provision;- “There should be a formal, rigorous and transparent procedure for the appointment of new Directors to the board”

The Board has not established a Nominations Committee for making recommendations on Board appointments. The appointments to the Board are decided as a whole assessing the requirements and strategic demands of the Company. However, any director appointed by the Board within a financial year will vacate office at the Annual General Meeting held immediately following the appointment and on the recommendation of the Board present himself/ herself for re-election by the shareholders. During the year under review, two new directors were appointed to the Board. Mr. Ranjan Chakravarti was appointed as an Independent Non-Executive Director w.e.f. 1 October 2016 and Ms. Arundathi Rajakarier was appointed as an Independent Non-Executive Director w.e.f. 4 January 2017.

7. Supply of InformationCode Provision:- “The Board should be provided with timely information in a form and of a quality appropriate to enable it to discharge its functions”

The Management has an obligation to provide the Board with appropriate and timely information, and Directors make further inquiries where necessary. The Chairman is responsible for ensuring that the Directors receive accurate, timely and clear information.Under the direction of the Chairman, the Company Secretary makes certain that the minutes of the previous meeting, the agenda and connected papers required for a Board Meeting are provided to all members of the Board in a timely and effective manner to facilitate effective conduct of the Board.

8. Re-ElectionCode provision:-“all directors should be required to submit themselves for re-election at regular intervals”

17 J. L. Morison son and Jones (CeYLon) PLCannuaL rePort 2016 / 17

The Articles of Association require Directors to seek re-election, in line with the provisions of the Code of Best Practice on Corporate Governance. A Director who retires by rotation is eligible for re-election by the shareholders at the Annual General Meeting. A Director who has reached the age of seventy years of age shall present himself for re-appointment in accordance with section 211 (1) of the Companies Act.

9. Appraisal of Board PerformanceCode provision:-“Board should periodically appraise their own performance in order to ensure that Board responsibilities are satisfactorily discharged.”

The Board conducts an internal Board evaluation each year. The review is led by the Chairman and the evaluation considers a range of factors relevant to the effectiveness of the Board.

10. Disclosure of Information In Respect of DirectorsCode Provision:- “Shareholders should be kept advised on relevant details in respect of Directors”

The Directors’ Profiles on page 10 provide relevant details of the Directors of the Company.

11. Appraisal of Chief Executive Officer (CEO)Code Provision:- “The Board should be required at least annually, to assess the performance of the CEO”

The performance of the CEO is reviewed annually against the Goals which are set at the beginning of the financial year.

12. RemunerationCode provisions:- “Companies should establish a formal and transparent procedure for developing policy on Executive remuneration and for fixing remuneration packages.”

The Remuneration Committee of the ultimate parent company functions as the remuneration committee of the Company. The Remuneration Committee has been delegated with responsibility for both developing remuneration policy and for setting the remuneration for all Executive Directors and Senior Executives.

The Composition of the Remuneration Committee is provided in Page 23 of this report.

13. Relations With ShareholdersCode Provision:- “boards should use the agM to communicate with Shareholders and should encourage their participation”

The Notice of the Annual General Meeting and a copy of the Annual Report are sent out to the shareholders 21 days prior to the date of the AGM. This year the AGM is scheduled to be held on 23 June 2017, at the Auditorium of the Institute of Chartered Accountants, 30A Malalasekera Mawatha, Colombo 7.

14. Accountability and AuditCode Provision:- “The Board should present a balanced and understandable assessment of the Company’s financial position, performance and prospects”

The Financial Review from Page 30 to 69 provides a fair assessment of the Company’s performance and plans for the future.

15. Internal ControlCode Provision:- “The Board must have a process of risk management and a sound system of internal control”

The risk and control division of the ultimate parent company, Hemas Holdings PLC, conducts regular internal audits to assess and evaluate the internal control systems in place and reports the findings to the Audit Committee of the Company regularly. Any significant issues would be reported to the Board thereafter.

16. Financial ReportingCode Provision:- “the board should establish formal and transparent arrangements for considering how they should select and apply accounting policies, financial reporting and internal control principles”

The responsibility of the Directors in relation to the Financial Statements is set out in the Statement of Directors’ Responsibility on Page 28

17. Audit Committee and AuditorsThe Audit CommitteeThe Audit Committee reviews and monitors the integrity of the Company’s annual and interim financial statements and any formal statements relating to the company and the group’s financial performance including significant financial judgments contained in them.

18 J. L. Morison son and Jones (CeYLon) PLCannuaL rePort 2016 / 17

Corporate Governance (Contd.)

Ultimate responsibility for the approval of the annual and interim financial statements, however, rests with the Board. At least once each year, the committee meets with the external auditors to discuss issues arising from their respective audits.

The Composition and functions of the Audit Committee are set out in page 25 and 26 of this report.

Auditor Independence and objectivityThe Company has adopted a policy on the use of non–audit services provided by the Company’s external auditors Messrs. Ernst & Young. The Committee’s prior approval is required before the Company uses non audit services. Such services will only be used where the Company benefits in a cost effective manner and the auditor maintains the necessary degree of independence and objectivity.

Code of Ethics and ConductThe Directors exercise their independent and objective judgment on issues of strategy, policy, resources and standards of conduct. The Directors ensure that all information is of confidential nature except those disclosed in the Annual Report.

Directors’ DeclarationThe Directors declare that:

(a) the Company complied with all applicable laws and regulations in conducting its business;(b) all material interests in contracts involving the Company have been declared and they have refrained from voting on matters in which

they were materially interested;(c) the Company has made all endeavours to ensure the equitable treatment of shareholders;(d) the business is a going concern with supporting assumptions or qualifications as necessary; and(e) they have conducted a review of internal controls covering financial operational and compliance controls and risk management and

have obtained a reasonable assurance of their effectiveness and successful adherence herewith.

19 J. L. Morison son and Jones (CeYLon) PLCannuaL rePort 2016 / 17

Compliance With The Rules On Corporate Governance Of The Colombo Stock ExchangeCode Provision:- “ Directors must disclose the extent to which the Company adheres to established principles and practices of good governance”

CSE RulE NO. REquIREMENT STATuS OF COMPlIANCE

7.10.1 Two or at least one third of the total number of Directors should be Non-Executive Directors (NEDs)

Complied.The Board of Directors as at 31 March 2017 comprised 6 Directors 5 of whom, were Non- Executive Directors.

7.10.2(a) Two or at least one third of the NEDs (whichever is higher) should be independent

Complied.Three Non- Executive Directors have been declared as independent.

7.10.2(b) Each Non-Executive director should submit a declaration of independence in the prescribed format

Complied.The three Independent Directors have submitted a declaration confirming their independence

7.10.3 (a) and (b) Names of the Independent Directors should be disclosed in the Annual Report

Complied.The relevant disclosures are made in the Annual Report of the Directors

7.10.3 (c ) A brief resume of each Director should be included in the Annual Report, including his area of expertise

Complied.A brief profile of each director is provided in the Annual Report

7.10.5 (a), (b) and(c )

Remuneration Committee – composition, functions and relevant disclosures

Complied.The Annual Report sets out the composition and the relevant disclosures

7.10.6 (a), (b) and(c )

The Audit Committee – Composition, functions and report of the Audit Committee

Complied.The Audit Committee Report sets out the composition and the relevant disclosures

20 J. L. Morison son and Jones (CeYLon) PLCannuaL rePort 2016 / 17

rePort oF the board oF direCtors

DIRECTORS’ INTEREST IN CONTRACTS WITH THE COMPANYThe Directors have made general declarations as provided for in section 192 (2) of the Companies Act No. 7 of 2007.

The remuneration paid to Directors is included in page 66 and the share ownership of Directors during the year is indicated in page 22.

Details of transactions carried out in the ordinary course of business with the Directors and related entities during the year 2016/2017 are set out below.

NAME OF RElATED PARTY NAME OFDIRECTOR

DETAIlSBAlANCE

OuTSTANDINGAS AT 31.03.2017

M.S.J.Industries (Ceylon)(Private) Limited Trihan Perera

Steven Enderby

Rent- Rs. 627,928/-

Rs. 134,532,799/-Purchase of goods - Rs. 581,421,505/-

Administrative staff salary - Rs. 38,070,797/-

M.S.J. Promotional Services(Private) Limited

Trihan PereraSteven Enderby

Sales commission - Rs. 1,376,548/-Nil

Management fees - Rs. 18,750/-

M.S.J. Cargoes (Ceylon) (Private)Limited Trihan Perera

Steven Enderby

Agency commission for goods - Rs. 853,280/-

NilManagement fee - Rs. 18,750/-

Staff salary - Rs. 740,142/-

Hemas Holdings PLC Husein EsufallySteven Enderby

Payment for expenses - Rs. 47,463,530/-Rs. 20,169,040/-

Settlement of loan by Rs. 50,000,000/-

Hemas Corporate Services (Private) Limited Steven Enderby Secretarial services - Rs 1,181,386/- Rs. 1,175,413/-

Vishwa BPO (Private) Limited Steven Enderby Payment for service rendered - Rs 453,664/- Rs. 144,914/-

Hemas Capital Hospital (Private)Limited Steven Enderby Sales of goods - Rs. 16,579,425/- Rs. 2,449,543/-

Hemas Hospitals (Private)Limited Steven Enderby Sales of goods - Rs. 5,925,714/- Rs. 548,796/-

Hemas Southern Hospitals(Private) Limited Steven Enderby Sales of goods - Rs. 8,335,032/- Rs. 1,739,426/-

Hemas Pharmaceuticals(Private) Limited Steven Enderby Sales of goods - Rs. 861,702/- Nil

Hemas Travels (Private) Limited Steven Enderby Payment for service rendered - Rs. 4,692,009/- Rs. 201,504/-

Unicorn Investment (Private) Limited Trihan PereraSteven Enderby

Research and development expenses Rs. 7,350,000/-

Rs. 3,937,131

21 J. L. Morison son and Jones (CeYLon) PLCannuaL rePort 2016 / 17

annual rePort oF the direCtors

The Directors have pleasure in presenting to the Members their report together with the audited financial statements of the Company and the Group, for the year ended 31 March 2017.

1. Principal Activities of the GroupManufacturing and trading in Pharmaceuticals and Cosmetics, Importing and distribution of pharmaceuticals, medical aid, hair care products, diagnostics reagent and equipment, and other consumer products. The Chairman’s Report and the MD’s Review on page 6 to 7 and 8 to 9 of this report, respectively, describe in detail the year’s operations and all important events that occurred during the accounting period under review.

2. Financial Statements of the Company and the GroupThe financial statements of the Company and the Group, duly certified by the Finance Director and signed by the Directors of the Company, in compliance with sections 152, 153 and 168 of the Companies Act No. 7 of 2007 are given on page 30 of the Annual Report.

3. Property, Plant & EquipmentMovements in Property, Plant & Equipment during the year are set out in Note 3 to the Financial Statements.

4. 2016/17 ResultsThe total revenue of the Group for the year ended 31 March 2017 was reported as Rs. 4,018,065,104 (for the year ended 31 March 2016 - Rs. 3,765,494,797)

The profit before income tax of the Group for the year ended 31 March 2017 was Rs. 646,284,881 (for the year ended 31 March 2016 - Rs. 500,116,001) and Profit after tax for the year ended 31 March 2017 was reported as Rs. 516,716,126 (for the year ended 31 March 2016 - Rs. 351,178,633).

5. DividendsAn Interim Dividend of Rs. 10.00 per Ordinary Voting and Non- Voting share was declared for FY 2016/17 and paid to the shareholders on 28 March 2017.

The Directors recommend a Final Dividend of Rs. 5.00 per Ordinary Voting and Non-Voting share for the year ended 31 March 2017, which will be payable on 4 July 2017 to the members registered as at 27 June 2017. The total dividend for the year under review will then amount to Rs. 15.00 per Ordinary Voting and Non- Voting share (FY 2015/16 Rs. 10.00).

6. DirectorsThe Board of Directors of the Company as at the date of this report comprises 6 Directors. The profiles of the Directors are set out in pages 10 and 11.

The names of the persons who held office as Directors of the Company during the year under review are as follows.

1 Mr. Husein Esufally - Non-Executive Director/ Chairman

2 Mr. Trihan Perera - Executive Director/ Managing Director

3 Professor Ravindra Fernando

- Independent Non-Executive Director

4 Mr. Steven Enderby - Non-Executive Director

5 Mr. Ranjan Chakravarti - Independent Non-Executive Director, appointed w.e.f. 1 October 2016

6 Ms. Arundathi Rajakarier

- Independent Non-Executive Director, appointed w.e.f. 4 January 2017

7 Mr. Asoka Abeyewardene

- Independent Non-Executive Director, resigned w.e.f. 24 November 2016

Mr. Abeyewardene was an Independent Non-Executive Director of the Board and he also served as the Chairman of the Audit Committee and the Related Party Transactions Review Committee of the Company. Upon completion of 9 consecutive years of service on the Board, Mr. Abeyewardene retired on 24 November 2016.

6.1 Independence of DirectorsThe board has made a determination as to the independence of each non- executive director and confirms that three of the non- executive directors meet the criteria of independence in terms of Rule 7.10.4 of the Listing Rules of the Colombo Stock Exchange.

Each of the independent directors has submitted a signed and dated declaration of his/her independence against the specified criteria.

a. Re-election of DirectorsMr. Steven Mark Enderby retires by rotation in accordance with Article 85 of the Articles of Association, but being eligible, offers himself for re-election with the unanimous support of the Board.

22 J. L. Morison son and Jones (CeYLon) PLCannuaL rePort 2016 / 17

Annual Report of the Directors (Contd.)

Mr. Ranjan Chakravarti who retires in accordance with Article 92 of the Articles of Association, but being eligible, offers himself for re-election with the unanimous support of the Board.

Ms. Arundathi Rajakarier who retires in accordance with Article 92 of the Articles of Association, but being eligible, offers herself for re-election with the unanimous support of the Board.

6.2 Directors’ Disclosure in dealing in sharesDirectors’ Interest in Ordinary Voting Shares of the Company - Direct

31.03.2017 31.03.2016

Mr. Husein Esufally (Chairman) Nil Nil

Mr. Trihan Perera (MD/CEO) 151,555 151,555

Prof. Ravindra Fernando Nil Nil

Mr. Steven Enderby Nil Nil

Ms. Arundathi Rajakarier Nil Nil

Mr. Ranjan Chakravarti Nil Nil

Directors’ Interest in Ordinary Non- Voting Shares of the Company - Direct

31.03.2017 31.03.2016

Mr. Husein Esufally (Chairman) 600 600

Mr. Trihan Perera (MD/CEO) 120 120

Prof. Ravindra Fernando Nil Nil

Mr. Steven Enderby Nil Nil

Ms. Arundathi Rajakarier Nil Nil

Mr. Ranjan Chakravarti Nil Nil

Directors’ Interest in Ordinary Voting and Non- Voting Shares of the Company - Indirect

31.03.2017 31.03.2016

Mr. Husein Esufally (Chairman) Nil Nil

Mr. Trihan Perera (MD/CEO) Nil Nil

Prof. Ravindra Fernando Nil Nil

Mr. Steven Enderby Nil Nil

Ms. Arundathi Rajakarier Nil Nil

Mr. Ranjan Chakravarti Nil Nil

7. Share InformationInformation relating to earnings, dividend, net assets and market price per share is given in the 5 year summary on page 76

8. DonationsDuring the year charitable donations amounting to Rs. 542,955/- were made by the Company. (2015/16 - Rs. 410,160/-)

9. Segmental AnalysisA segmental analysis of Group operations is given in Note 28 on page 67 to the accounts.

10. Major ShareholdingDetails of the 20 largest shareholders of Voting & Non-Voting shares of the Company as at 31.03.2017 are given on page 71

11. Public holding of sharesThe number of ordinary voting shares held by the public as at 31 March 2017 was 394,596 amounting to 6.79% of the issued share capital of the Company and the number of ordinary non-voting shares held by the public as at 31 March 2017 was 161,345 amounting to 9.26% of the issued share capital of the Company.

12. Statutory PaymentsThe Directors, to the best of their knowledge and belief, are satisfied that all statutory payments due to the Government and in relation to employees have been made up to date.

13. ReservesDetails of Capital and Revenue Reserves of the Company are given in Note 11 on pages 55 and 56 to the Financial Statements.

14. Articles of AssociationThe Articles of Association of the Company may be amended by passing a special resolution.

An Extraordinary General Meeting has been convened to be held immediately after the conclusion of the Annual General Meeting scheduled for 3.00 PM on Friday, 23 June 2017, for the purpose of seeking shareholders’ approval to amend the Articles of Association.

15. Stated CapitalDetails of the Stated Capital of the Company are given in Note 10 to the financial statements. There was no movement in the stated capital during the accounting period under review.

16. Events occurring after the Reporting dateThere have been no material events which occurred after the Reporting date that would require adjustments to or disclosure in the Financial Statements.

23 J. L. Morison son and Jones (CeYLon) PLCannuaL rePort 2016 / 17

17. Interest RegisterThe Company has maintained an Interest Register in accordance with the Companies Act No. 7 of 2007 and is available for inspection as required by Section 119 (1) (d) of the aforesaid Act.

18. Environmental ProtectionThe Directors to the best of their knowledge and belief are satisfied that the Company has complied with the applicable environmental regulations and have not engaged in any activities, which may cause detriment to the environment.

19. Significant Accounting PoliciesSignificant Accounting Policies adopted by the Company in the preparation of the Financial Statements are given on pages 35 to 69 of the Annual Report.

20. Going ConcernThe Directors, having reviewed the basis of the current financial projections and resources available to continue business operations, are confident that the Company has adequate resources to continue business operations in the foreseeable future. Accordingly, the Directors consider that it is appropriate to adopt the going concern basis in preparing the financial statements.

21. Audit CommitteeThe Composition of the Audit Committee and their report is given on pages 25 and 26 of this report.

22. Related Party Transactions Review CommitteeThe Composition of the Related Party Transactions Review Committee (the Committee)and their report is given on page 27 of this report.

The Committee has reviewed the related party transactions of the company during the financial year and reported their comments and observations to the Board of Directors. The details of the related party transactions carried out during the year are set out in page 66 of the Annual Report. The Directors declare that the Company is in compliance with the Rules of the Colombo Stock Exchange and the Code of Best Practices on Related Party Transactions and that the Company has not entered into any related party transactions during the year which would require Shareholders’ approval or an immediate market disclosure to be made to the Colombo Stock Exchange.

23. Remuneration CommitteeThe Remuneration Committee of the ultimate parent company, Hemas Holdings PLC functions as the Remuneration Committee of the Company. The remuneration committee comprises two Independent Non-Executive Directors, Dr. Anura Ekanayake and Mr. Shakta Amaratunga, and one Non-Executive Director, Mr. Husein Esufally. In addition, Mr. Murtaza Esufally attends meetings by invitation.

24 J. L. Morison son and Jones (CeYLon) PLCannuaL rePort 2016 / 17

Annual Report of the Directors (Contd.)

24. External AuditorsThe following payments were made to the Group’s External Auditors, Messrs. Ernst & Young. Group Company Rs. Rs. Rs. Rs. 2017 2016 2017 2016

Audit Fees and Expenses 3,717,004 2,910,945 2,000,004 1,638,443Fees for other services and Expenses 879,844 735,939 724,424 563,695

As far as the Directors are aware, the Auditors do not have any interest or relationship with the Company or any of its subsidiaries other than those disclosed above.

The Report of the Auditors on the Financial Statements of the Company and the Group is set out on Page 29 of the Annual Report.

A resolution to re-appoint the present Auditors, Messrs Ernst & Young, who have expressed their willingness to continue, will be proposed at the Annual General Meeting.

25. Annual General Meeting (AGM)The AGM of the Company for the financial year 2016/17 will be held at 3.00 PM on Friday, 23 June 2017 at the Auditorium of the Institute of Chartered Accountants of Sri Lanka, No 30A, Malalasekera Mawatha, Colombo 7.

Acknowledgement of Contents of the ReportAs required by Section 168 (1) (K) of the Companies Act No. 7 of 2007, the Board of Directors hereby acknowledge the contents of this Report.

Signed for and on behalf of the Board

Husein Esufally Trihan Pereradirector director

Hemas Corporate Services (Pvt) ltdsecretaries

Colombo

17 May 2017

25 J. L. Morison son and Jones (CeYLon) PLCannuaL rePort 2016 / 17

the audit CoMMittee rePort

The members of the Audit Committee as at the Balance sheet date were as follows.

Ms. Arundathi Rajakarier - Independent Non-Executive Director (Chairperson)

Prof. Ravindra Fernando - Independent Non-Executive Director (Member)

Mr. Steven Enderby - Non- Executive Director (Member)

The Audit Committee (“the Committee”) is formally appointed by the Board of Directors of the Company in conformity with the Listing Rules of the Colombo Stock Exchange. The Committee comprises two Independent Non-Executive Directors and a Non- Executive Director. The Chairperson of the Audit Committee is an Independent Non-Executive Director.

During the year under review, Mr. Asoka Abeyewardene served as the Chairman of the Audit Committee till 24 November 2016. Mr. Abeyewardene was an Independent Non-Executive Director of the Board and upon completion of 9 consecutive years of service on the Board, Mr. Abeyewardene retired on 24 November 2016.

Ms. Arundathi Rajakarier was appointed to the Board as an Independent Non-Executive Director w.e.f. 4 January 2017 and, Ms. Rajakarier was also appointed as the Chairperson of the Audit Committee w.e.f. 4 January 2017.

The main role, functions and responsibilities of the Audit Committee include:• Assisting Board oversight of the preparation, presentation

and adequacy of disclosures in the financial statements, in accordance with Sri Lanka Accounting Standards;

• Overseeing the Company’s compliance with financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting related regulations and requirements;

• Overseeing processes to ensure that the Company’s internal controls and risk management procedures are adequate to meet the requirements of the Sri Lanka Accounting and Auditing Standards;

• Assessing the Company’s ability to continue as a going concern in the foreseeable future;

• Assessing the independence and performance of the Company’s external Auditors; and

• 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.

The Audit Committee held 4 meetings during the year under review. Mr. Trihan Perera- Managing Director, Mr. Dinesh Athapaththu – Finance Director and Mr. Prasenna Balachandran- General Manager Risk & Control attended all meetings by invitation of the audit committee. The minutes of all audit committee meetings have been documented and communicated to the Board.

During the year under review, the Committee reviewed and discussed in detail with the management, the unaudited quarterly financial statements and the audited financial statements of the Company and the Group, prior to recommendation for approval of the Board. The audited financial statements were reviewed and discussed with Ernst and Young, external auditors in attendance. The Audit Committee has committed adequate time to ensure that the financial statements have been prepared in accordance with the Sri Lanka Accounting Standards and that the Company and the Group have complied with all regulatory compliances.

The Audit Committee also committed adequate time during year to review the overall regulatory compliance, internal controls and risk management of the Company and the Group. Accordingly, the Committee has reviewed the internal audit reports of the Company and Group, and discussed in detail with the Management, General Manager Risk and Control and the Internal Auditors of the Company. The Committee has also reviewed the agreed follow up action plans of the internal audits. Progress on follow up action plans have been closely monitored by the Committee. A progress update on all agreed follow up action plans is presented to the Audit Committee on a quarterly basis, by General Manager Risk and Control.

During the year the Committee has also dedicated its time to monitor the progress made in IT, regulatory compliance, Human Resources Management, and the policies and practices with respect to risk management of the Company and the Group. The Risk Highlights in respect of each quarter were reviewed and discussed by the Committee at the meeting held in the preceding quarter to ensure that the necessary risk mitigation plans were implemented in a timely and effective manner.

At each Audit Committee meeting, a quarterly compliance statement was presented by the Management, confirming compliance with all internal policies and processes of the Group.

26 J. L. Morison son and Jones (CeYLon) PLCannuaL rePort 2016 / 17

The Audit Committee is of the view that adequate internal controls and procedures have been established by the management to ensure the effectiveness of the operations of the Company and to safeguard its assets.

The Audit Committee has recommended to the Board of Directors that Messrs Ernst & Young, Chartered Accountants, be re-appointed as external auditors of the company for the financial year ending 31 March 2018, subject to approval of the shareholders at the next Annual General Meeting.

Ms. Arundathi RajakarierChairperson

Colombo17 May 2017

The Audit Committee Report (Contd.)

27 J. L. Morison son and Jones (CeYLon) PLCannuaL rePort 2016 / 17

Ms. Arundathi Rajakarier - Independent Non-Executive Director (Chairperson)

Prof. Ravindra Fernando - Independent Non-Executive Director (Member)

Mr. Steven Enderby - Non- Executive Director (Member)

Mr. Trihan Perera - Executive Director (Member)

The Related Party Transactions Review Committee (“the Committee”) is formally appointed by the Board of Directors. As noted above, the committee comprises two Independent Non – Executive Directors, one Non- Executive Director and one Executive Director. During the year under review, Mr. Trihan Perera – Executive Director/ Managing Director was appointed to the Committee w.e.f. 31 May 2016. Mr. Asoka Abeyewardene served as the Chairman of the Committee till 24 November 2016 and, upon completion of 9 consecutive years of service on the Board, Mr. Abeyewardene retired on 24 November 2016. Ms. Arundathi Rajakarier was appointed to the Board as an Independent Non-Executive Director w.e.f. 4 January 2017 and Ms. Rajakarier was also appointed as the Chairperson of the Committee w.e.f. 4 January 2017.

The Committee meetings are held at least once in every quarter or more frequently, as required. Mr. Dinesh Athapaththu - Finance Director attends the meetings by invitation.

The main objective and role of the Committee is to assist Board oversight on Related Party Transactions (“RPT”) of the Company and ensure that compliance with the Listing Rules of the Colombo Stock Exchange (“Listing Rules”) and the Code of Best Practices on Related Party Transactions, issued by the Securities and Exchange Commission of Sri Lanka (“the Code”) is attained at all times. The RPTs that are subject to review of the Committee are all RPTs of the Company other than those set out in Section 9.5 of the Listing Rules and exempted by the Code.

The Board has adopted a Policy, which sets out principles, guidelines and procedures related to RPTs, including the following:• Threshold values for RPTs which require discussion in detail,

RPTs which have to be pre-approved by the Board and RPTs which require to be reviewed annually.

• Guidelines on which RPTs require pre approval of the Board and which transactions do not require prior Board approval and therefore, can be reviewed retrospectively.

• Guidelines and processes to ensure accurate identification of recurrent RPTs.

• Guidelines which the senior management must follow in dealing with Related Parties, including conformity with Transfer Pricing regulations.

• Instances where an immediate market disclosure of the RPT is required in terms of the Listing Rules of the Colombo Stock Exchange.

• Instances where RPTs would require approval of the shareholders.

• Documentation formats to be used by the management in presenting the RPT information to the Related Party Transactions Review Committee

During the year under review, the Committee held four meetings. All RPTs entered into by the Company during the year have been reviewed and discussed by the Committee and, comments and observations have been communicated to the Board. The proceedings of the meetings are recorded and through the Company Secretary, the Minutes of the Committee Meetings are forwarded to the Board.

During the year, the Company has not entered in to any RPTs that would require an immediate market disclosure or approval of the shareholders. The RPTs entered into by the Company have been in conformity with the Listing Rules of the Colombo Stock Exchange (“CSE”). A Declaration of the Directors confirming that no RPT exceeding the thresholds provided in Section 9 of the CSE rules or the Code, requiring an immediate market disclosure or share holders’ approval has been entered into by the Company during the year under review and that compliance with said the Listing rules and the Code have been ensured, is set out in page 23

Ms. Arundathi RajakarierChairperson

Colombo17 May 2017

the related Party transaCtions revieW CoMMittee rePort

28 J. L. Morison son and Jones (CeYLon) PLCannuaL rePort 2016 / 17

stateMent oF direCtors’ resPonsibility

In keeping with the provisions of the Companies Act No. 7 of 2007 the Directors of J.L. Morison Son & Jones (Ceylon) PLC acknowledge their responsibility to prepare and present the Financial Statements of both the Company and the Group in accordance with the relevant sections of the aforesaid Act and the Sri Lanka Accounting Standards (SLFRSs/ LKASs).

The Financial Statements for the year ended 31 March 2017, presented in this Report have been prepared in compliance with the requirements of the Sri Lanka Accounting Standards, the Companies Act No. 7 of 2007 and the Listing Rules of the Colombo Stock Exchange. The Directors consider that appropriate accounting policies and Standards have been applied and reasonable estimations made when preparing the statements presented in this annual report. A material deviation, if any, from these Standards has been disclosed where necessary.

The Directors confirm their responsibility for ensuring the maintenance of proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and Group and, enable them to ensure that its Financial Statements comply with the Companies Act No. 7 of 2007. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

In compliance with the Companies Act No. 7 of 2007 and the Listing Rules of the Colombo Stock Exchange, the Directors have caused to issue a copy of the annual report of the Company in a CD ROM, to every shareholder, 21 days before the date of the Annual General Meeting. A copy of the Financial Statements has also been delivered to the Registrar General of Companies.

Responsibility Statement of the Directors in respect of the Annual ReportWe, the Directors of the Company, confirm that to the best of our knowledge the Financial Statements of the Company and the Group have been prepared in accordance with applicable laws and regulations and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and the Directors’ Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that face the Group.

Husein EsufallyChairman

Trihan PereraMd/Ceo

Dinesh AthapaththuFinance director

Colombo17 May 2017

29 J. L. Morison son and Jones (CeYLon) PLCannuaL rePort 2016 / 17

indePendent auditors’ rePort

TO THE SHAREHOlDERS OF J. l. MORISON SON & JONES (CEYlON) PlCReport on the Financial StatementsWe have audited the accompanying financial statements of J. L. Morison Son and Jones (Ceylon) PLC, (“the Company”), and the consolidated financial statements of the Company and its subsidiaries (“Group”), which comprise the statement of financial position as at 31 March 2017, and the statement of profit or loss, Statement of comprehensive income, statement of changes in equity and, statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Board’s Responsibility for the Financial StatementsThe 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.

Auditor’s 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 auditor’s judgement, 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 31 March 2017, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

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

a) The basis of opinion, 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, 2017, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards, and

- 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.

17 May 2017Colombo

30 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

stateMent oF FinanCial Position Group CompanyAs at 31 March 2017 Note 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

ASSETSNon-Current AssetsProperty, Plant and Equipment 3 1,396,296,717 1,295,710,756 326,244,048 242,457,422Intangible Assets 4 15,000,000 15,000,000 15,000,000 15,000,000Investments in Subsidiaries 5 1 1 57,700,000 62,900,000Investments in Associates 6 1 1 - -Other Financial Assets 7 - 4,616,271 - 4,616,271 1,411,296,719 1,315,327,029 398,944,048 324,973,693

Current AssetsInventories 8 796,769,138 772,560,759 633,152,171 607,619,291Trade and Other Receivables 9 901,482,914 783,310,480 668,145,492 803,605,652Advances and Prepayments 39,116,828 16,405,617 17,971,046 11,701,117Cash and Cash Equivalents 16 1,448,017,600 1,311,041,898 1,123,650,633 910,252,550 3,185,386,481 2,883,318,754 2,442,919,343 2,333,178,610Total Assets 4,596,683,200 4,198,645,783 2,841,863,390 2,658,152,303

EquITY AND lIABIlITIESStated Capital 10 7,924,800 7,924,800 7,924,800 7,924,800Reserves 11 1,536,392,775 1,537,990,992 858,068,828 859,667,044Retained Earnings 1,488,766,109 1,128,083,136 644,613,713 542,001,626Equity Attributable to Equity Holders of Parent 3,033,083,684 2,673,998,928 1,510,607,341 1,409,593,470Non Controlling Interest - 107,231 - -Total Equity 3,033,083,684 2,674,106,159 1,510,607,341 1,409,593,470

Non-Current liabilitiesInterest Bearing Loans and Borrowings 12 125,024,000 250,016,000 125,024,000 250,016,000Deferred Tax Liabilities 21 86,686,083 75,617,382 10,179,625 15,018,151Retirement Benefit Liability 13 93,151,155 85,142,981 48,137,162 45,654,977 304,861,238 410,776,363 183,340,787 310,689,128

Current liabilitiesTrade and Other Payables 14 860,912,913 819,665,650 867,319,082 722,366,073Interest Bearing Loans and Borrowings 12 339,163,726 234,074,934 259,614,241 204,978,874Income Tax Liabilities 47,145,722 55,278,971 9,466,023 5,781,052Dividends Payable 15 11,515,916 4,743,706 11,515,916 4,743,706 1,258,738,278 1,113,763,261 1,147,915,262 937,869,705Total Equity and liabilities 4,596,683,200 4,198,645,783 2,841,863,390 2,658,152,303

These financial statements are in compliance with the requirements of the Companies Act No.07 of 2007.

Dinesh AthapaththuFinance director

The Board of Directors is responsible for the preparation and presentation of these financial statements. Signed for and on behalf of the Board by,

Husein Esufally Trihan PereraChairman Md/ Ceo

The Accounting Policies and Notes on pages 35 through 69 form an integral part of these financial statements.

17 May 2017Colombo

31 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

stateMent oF ProFit or loss Group CompanyYear ended 31 March 2017 Note 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Revenue 17 4,018,065,105 3,765,494,797 3,320,196,544 3,245,454,048

Cost of Sales (2,527,981,588) (2,389,253,794) (2,354,026,427) (2,274,187,419)

Gross Profit 1,490,083,517 1,376,241,003 966,170,117 971,266,629

Other Operating Income and Gains 18 20,753,126 12,782,363 71,928,941 11,339,777

Selling and Distribution Costs (531,700,157) (563,082,841) (530,982,293) (547,427,447)

Administrative Expenses (418,430,630) (365,424,719) (266,132,523) (243,363,720)

Operating Profit 560,705,856 460,515,806 240,984,243 191,815,239

Finance Cost 19.1 (45,431,198) (42,251,461) (35,679,555) (41,118,243)

Finance Income 19.2 131,010,224 81,851,656 98,471,709 81,851,656

Profit Before Tax 20 646,284,881 500,116,001 303,776,397 232,548,652

Income Tax Expense 21 (129,568,755) (148,937,368) (46,346,087) (58,943,982)

Profit for the Year 516,716,126 351,178,633 257,430,310 173,604,670

Attributable to:Equity Holders of the Parent 516,716,126 351,178,633

Non controlling Interest - - 516,716,126 351,178,633

Earnings Per Share - Basic 22 68.43 46.51 34.09 22.99

The Accounting Policies and Notes on pages 35 through 69 form an integral part of these financial statements.

32 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

stateMent oF CoMPrehensive inCoMe

Group CompanyYear ended 31 March 2017 Note 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Profit for the Year 516,716,126 351,178,633 257,430,310 173,604,670

Other Comprehensive IncomeOther comprehensive income/(loss) to be reclassified  to profit or loss in subsequent periodsNet Losses on Available-for-Sale Financial Assets (1,598,216) (929,550) (1,598,216) (929,550)Impairment on Available-for-Sale Financial Assets - 583,300 - -Net other comprehensive income/(loss) to be  reclassified to profit or loss in subsequent periods (1,598,216) (346,250) (1,598,216) (929,550)

Other comprehensive income not to be  reclassified to profit or loss in subsequent periodsActuarial Gains / (Losses) on Defined Benefit  Plans - Net of Tax effect 13 (5,124,784) 8,677,150 (3,802,622) 4,234,154

Revaluation of Land and Buildings - Net of Tax effect 11.1 - 68,773,081 - 11,707,327

Net other comprehensive income / (loss) not to be  reclassified to profit or loss in subsequent periods (5,124,784) 77,450,231 (3,802,622) 15,941,481

Other Comprehensive Income/(loss) for the Year, net of tax (6,723,000) 77,103,981 (5,400,838) 15,011,931

Total Comprehensive Income for the Year, net of tax 509,993,127 428,282,614 252,029,472 188,616,601

Attributable to:Equity Holders of the Parent 509,993,127 428,282,614Non-controlling Interest - - 509,993,127 428,282,614

The Accounting Policies and Notes on pages 35 through 69 form an integral part of these financial statements.

33 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

stateMent oF Changes in eQuity

Year ended 31 March 2017 Available Non-Group Stated Revaluation General for Sale Retained controlling Total Capital Reserve Reserve Reserve Earnings Total Interest Equity Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

As at 01 April 2015 7,924,800 736,819,694 730,800,000 1,944,467 860,053,984 2,337,542,945 107,231 2,337,650,176Super Gain Tax - - - - (61,623,511) (61,623,511) - (61,623,511)Profit for the year - - - - 351,178,633 351,178,633 - 351,178,633Other Comprehensive Income - 68,773,081 - (346,250) 8,677,150 77,103,981 - 77,103,981Total Comprehensive Income - 68,773,081 - (346,250) 359,855,783 428,282,614 - 428,282,614

Dividend for 2014/2015 - - - - (30,203,120) (30,203,120) - (30,203,120)As at 31 March 2016 7,924,800 805,592,775 730,800,000 1,598,217 1,128,083,136 2,673,998,928 107,231 2,674,106,159

Profit for the year - - - - 516,716,126 516,716,126 - 516,716,126Other Comprehensive Income - - - (105,541) (5,124,784) (5,230,324) - (5,230,324)Transfers during the year - - - (1,492,676) 107,231 (1,385,445) (107,231) (1,492,676)Total Comprehensive Income - - - (1,598,217) 511,698,574 510,100,357 (107,231) 509,993,126

Final Dividend - 2015/16 - - - - (75,507,800) (75,507,800) - (75,507,800)Interim Dividend - 2016/2017 - - - - (75,507,800) (75,507,800) - (75,507,800)

As at 31 March 2017 7,924,800 805,592,775 730,800,000 - 1,488,766,109 3,033,083,684 - 3,033,083,684

Available Company Stated Revaluation General for Sale Retained Capital Reserve Reserve Reserve Earnings Total Rs. Rs. Rs. Rs. Rs. Rs.

As at 01 April 2015 7,924,800 117,433,379 728,928,122 2,527,766 423,340,983 1,280,155,050Super Gain Tax - - - - (28,975,061) (28,975,061)Profit for the year - - - - 173,604,670 173,604,670Other Comprehensive Income - 11,707,327 - (929,550) 4,234,154 15,011,931Total Comprehensive Income - 11,707,327 - (929,550) 177,838,824 188,616,601

Dividend for 2014/2015 - - - - (30,203,120) (30,203,120)As at 31 March 2016 7,924,800 129,140,706 728,928,122 1,598,216 542,001,626 1,409,593,470

Profit for the year - - - - 257,430,310 257,430,310Other Comprehensive Income - - - (105,541) (3,802,622) (3,908,163)Transfers during the year - - - (1,492,675) - (1,492,675)Total Comprehensive Income - - - (1,598,216) 253,627,688 252,029,472

Final Dividend - 2015/16 - - - - (75,507,800) (75,507,800)Interim Dividend - 2016/2017 - - - - (75,507,800) (75,507,800)

As at 31 March 2017 7,924,800 129,140,706 728,928,122 - 644,613,713 1,510,607,341

The Accounting Policies and Notes on pages 35 through 69 form an integral part of these financial statements.

34 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

stateMent oF Cash FloWs

Group CompanyYear ended 31 March 2017 Note 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Cash Flows From Operating ActivitiesProfit before Income Tax Expense 646,284,881 500,116,001 303,776,397 232,548,652

Adjustments forDividend Income 18 (193,615) (40,145) (49,963,615) (3,842,722)Depreciation 3 68,243,820 58,541,323 43,209,368 38,098,362Profit on Sales of Property, Plant and Equipment 18 (13,914,939) (6,601,175) (13,914,939) (4,080,175)Profit on Disposal of Available-for-Sale Investment (1,492,675) - (1,492,675) -Interest Income 19.2 (131,010,224) (81,851,656) (98,471,709) (81,851,656)Finance Costs 19.1 45,431,198 42,251,461 35,679,555 41,118,243Impairment of Investment - 583,300 5,200,000 -Provision for Defined Benefit Plans - Gratuity 13 16,548,786 16,075,478 9,794,638 9,367,987Operating Profit before Working Capital Changes 629,897,232 529,074,587 233,817,020 231,358,691

Increase in Inventories (24,208,379) (132,493,197) (25,532,881) (177,651,693)Increase in Trade and Other Receivables (118,172,434) (82,255,732) 135,390,074 (245,205,288)(Increase) / Decrease in Advances and Prepayments (22,711,212) 12,458,853 (6,269,930) 12,582,313Increase in Trade and Other Payables 41,247,262 230,319,977 144,953,010 223,149,794Cash Generated from Operations 506,052,470 557,104,488 482,357,293 44,233,817

Finance Costs Paid 19.1 (45,431,198) (42,251,461) (35,679,555) (41,118,243)Defined Benefit Plan Costs Paid 13 (15,658,367) (12,204,277) (12,593,873) (10,493,479)Tax Paid (124,640,330) (154,471,853) (45,950,759) (84,993,335)Net Cash Flows from Operating Activities 320,322,575 348,176,897 388,133,107 (92,371,240)

Cash Flows From / (used in) Investing ActivitiesAcquisition of Property, Plant and Equipment 3.1.4 (186,321,101) (129,634,305) (144,487,316) (44,580,330)Proceeds from Sale of Property, Plant and Equipment 31,406,260 9,031,177 31,406,261 4,080,175Dividends Received 193,615 40,145 49,963,615 3,842,722Proceeds from Disposal of Available-for-Sale Investments 4,510,730 - 4,510,730 -Investments In Unit Trust/Money Market Funds - 25,316,714 - 25,316,714Interest Received 131,010,224 81,851,656 98,471,709 81,851,656Net Cash Flows Used in Investing Activities (19,200,273) (13,394,613) 39,864,999 70,510,938

Cash Flows From / (used in) Financing ActivitiesProceeds From Interest Bearing Loans and Borrowings 12.1.1 345,598,056 42,671,550 225,822,241 42,671,550Repayment of Interest Bearing Loans and Borrowings 12.1.1 (334,708,789) (129,966,728) (260,415,974) (129,966,727)Principal Payments under Finance Lease Liabilities - (415,141) - (415,141)Dividends Paid (144,243,390) (29,623,314) (144,243,390) (29,623,314)Net Cash Flows Used in Financing Activities (133,354,123) (117,333,633) (178,837,123) (117,333,632)

Net Increase in Cash and Cash equivalents 167,768,178 217,448,651 249,160,983 (139,193,934)

Cash and Cash equivalents at the beginning of the year 16 1,246,182,937 1,028,734,286 874,489,650 1,013,683,584Cash and Cash equivalents at the end of the year 16 1,413,951,115 1,246,182,937 1,123,650,633 874,489,650

The Accounting Policies and Notes on pages 35 through 69 form an integral part of these financial statements.

35 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the FinanCial stateMents

1. CORPORATE INFORMATION1.1 GENERAlJ. L. Morison Son & Jones (Ceylon) PLC (“Company”) is a Public Limited Liability Company, incorporated and domiciled in Sri Lanka. The registered office is located at “Hemas House”, No. 75, Braybrooke Place, Colombo 2 and the principal place of business of the Company is situated at No. 620, Biyagama Road, Pethiyagoda, Kelaniya.

Ordinary shares of the Company are listed on the Colombo Stock Exchange.

The financial statements for the year ended 31 March 2017, comprises “the Company” referring to J. L. Morison Son & Jones (Ceylon) PLC as the holding company, and “the Group” referring to the companies whose accounts have been consolidated therein.

1.2 Principal Activities and Nature of OperationsDuring the year, the principal activities of the Group were as follows;

J. L. Morison Son and Jones (Ceylon) PLC - Importing and distribution of pharmaceuticals, agro chemicals, medical aid, hair care products, diagnostics reagent and equipments, and other consumer products.

M.S.J. Industries (Ceylon) (Private) Limited - Manufacturing and Trading in Pharmaceuticals and Cosmetics.

M.S.J. Promotional Services (Private) Limited - Promotional Activities (Currently it is in the process of being liquidated).

M.S.J. Cargoes (Ceylon) (Private) Limited - Wharf Clearing Activities (Currently it is in the process of being liquidated).

1.3 Parent and ultimate Parent EntityThe Company’s parent undertaking is Hemas Manufacturing (Private) Limited with the Company’s ultimate parent undertaking and controlling party being Hemas Holdings PLC, incorporated in Sri Lanka.

1.4 Date of Authorisation for IssueThe financial statements of J.L. Morison Son & Jones (Ceylon) PLC and its Subsidiaries for the year ended 31 March 2017 were authorised for issue in accordance with a resolution of the Board of Directors on 17 May 2017.

2. SIGNIFICANT ACCOuNTING POlICIES2.1 GENERAl ACCOuNTING POlICIES2.1.1 Statement of ComplianceThe Financial Statements of J.L Morison Son and Jones (Ceylon) PLC comprise the Statement of Financial Position and the Statement of Profit or Loss, Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows, together with the Accounting Policies and Notes to the Financial Statements.

These financial statements are prepared in accordance with the Sri Lanka Accounting Standards laid down by the Institute of Chartered Accountants of Sri Lanka, and also in compliance with the requirements of the Companies Act No. 7 of 2007.

2.1.2 BasisofPreparationThe financial statements have been prepared on a historical cost basis, except for the following material items in the statement of Financial Position,

• Available-for-sale financial assets are measured at fair value• Land and Buildings are measured at cost at the time of the

acquisition and are subsequently revalued

The financial statements are presented in Sri Lankan Rupees.

2.1.3 ComparativeInformationThe accounting policies have been consistently applied by the Company and, are consistent with those used in the previous year. Previous year’s figures and phrases have been re-arranged whenever necessary to conform to current presentation.

2.2 SuMMARY OF SIGNIFICANT ACCOuNTING POlICIES2.2.1 BasisofConsolidationThe consolidated financial statements comprise the financial statements of J. L. Morison Son & Jones (Ceylon) PLC and its Subsidiaries, M.S.J. Industries (Ceylon) (Private) Limited, M.S.J. Cargoes (Ceylon) (Private) Limited, and M.S.J. Promotional Services (Ceylon) (Private) Limited, for the year ended 31 March 2017, which are incorporated in Sri Lanka.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

36 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

The financial statements of Compak Morison (Lanka) Limited, have been excluded from consolidation from the year 1998 under Section 146 (2) B (ii) of the Companies Act. No 17 of 1982 and under the Section 153 (6) (B) of the Companies Act No.7 of 2007.

As per the letter given by Messrs. Julius & Creasy, on February 11, 1998, the movable and immovable properties of Compak Morison (Lanka) Limited, which were under mortgage to the National Development Bank (NDB) were handed over to the NDB in exercise of the rights of parate execution, NDB having advertised the property for sale in the public auction brought it in, at the auction towards the claim of NDB.

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

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

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

3) The ability to use its power over the investee to affect its returns

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

1) The contractual arrangement with the other vote holders of the investee

2) Rights arising from other contractual arrangements3) The Group’s voting rights and potential voting rights

Subsidiaries are fully consolidated from the date of acquisition or incorporation, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, which is for the 12 months ending 31 March, using consistent accounting policies.

2.2.2 ForeignCurrencyTranslationThe Financial Statements are presented in Sri Lankan Rupees, which is the Company’s functional and presentation currency. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are taken to the income statement. 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 was determined.

2.2.3 Taxationa) Current Income TaxCurrent income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income.

Current income taxes relating to items recognised directly equity is also recognised in equity and not in the Statement of 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.

b) Deferred TaxDeferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except:

• Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

37 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:

• Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss

• In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

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

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

Current tax and deferred tax relating to items recognised directly in equity are also recognised in equity and not in the statement of profit or loss.

Deferred tax assets and liabilities are set off 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.

c) Sales TaxRevenues, expenses and assets are recognised net of the amount of sales tax, except:

• Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable

• Receivables and payables are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

2.2.4 LeasesThe determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfilment 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.

Group as a lesseeFinance leases which 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. 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 the statement of 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 recognised as an operating expense in the income statement on a straight-line basis over the lease term.

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

2.3 ASSETS AND BASES OF THEIR VAluATIONAssets classified as current assets in the Statement of Financial Position are cash and those which are expected to be realised in cash during the normal operating cycle of the Company’s business or within one year from the reporting date.

38 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

Assets other than current assets are those which the Company intends to hold beyond a period of one year from the reporting date.

2.3.1 Property, Plant and Equipment(1) ValuationProperty, Plant & Equipment are stated at cost or valuation less accumulated depreciation, provided on the basis stated in (3) below.

(2) CostCost of Property, Plant & Equipment is the cost of acquisition or construction together with any expenses incurred in bringing the assets to its working condition for its intended use.

Expenditure incurred for the purpose of acquiring, extending or improving assets of a permanent nature by means of which to carry on the business or to increase the earning capacity of the business has been treated as capital expenditure.

(3) DepreciationThe provision for depreciation is calculated by using a straight line method on the cost or valuation of all Property, Plant & Equipment other than freehold land, in order to write off such amounts over the estimated useful lives.

The principal annual rates used are:

Freehold Buildings 35 Years

Plant and Machinery 5-13.33 Years

Furniture and Fittings 10 Years

Motor Vehicles 5 Years

Office Equipment 5 Years

Computer Hardware 5 Years

Office Software 5 Years

No depreciation is provided on freehold land.

Depreciation of an asset begins when it is available for use whereas depreciation of an asset is ceased at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised.

The appropriateness of useful lives of the assets and the residual value is assessed annually.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

2.3.2 IntangibleAssetsIntangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the statement of profit or loss in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortised 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 is reviewed at least at each financial year end. 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 treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit or loss in the expense category consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable.

If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

2.3.3 FinancialInstruments–initialrecognitionandsubsequentmeasurement

i) Financial assetsInitial recognition and measurementFinancial assets within the scope of LKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition.

39 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

All financial assets are recognised initially at fair value plus, in the case of assets not at fair value through profit or loss, directly attributable transaction costs.

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, loans and receivables and available for sale financial instruments.

Subsequent measurementThe subsequent measurement of financial assets depends on their classification as described below:

a) Trade and Other receivablesTrade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are initially recognised at fair value plus any directly attributable transaction cost. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment. The losses arising from impairment are recognised in the profit or loss as a part of administration costs.

b) Available-for-sale financial investmentsAvailable-for-sale financial investments include equity securities. Equity investments classified as available-for-sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss.

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

Quoted 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 the income statement in finance costs.

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.

DerecognitionA financial asset or a part of a financial asset or part of a group of similar financial assets is derecognised when:

• The rights to receive cash flows from the asset have expired• The Group has transferred its 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(a) The Group has transferred substantially all the risks and

rewards of the asset, or(b) 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 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.

40 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

ii) Impairment of financial assetsThe 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.

Financial assets carried at amortised costFor 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 carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred).

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 statement of profit or loss. 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.

iii) AFS financial assetsFor AFS financial assets, 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 AFS, 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 statement of profit or loss – is removed from OCI and recognised in the statement of profit or loss. Impairment losses on equity investments are not reversed through profit or loss; increases in their fair value after impairment are recognised in OCI.

The determination of what is ‘significant’ or ‘prolonged’ requires judgement. In making this judgement, the Group evaluates, among other factors, the duration or extent to which the fair value of an investment is less than its cost.

In the case of debt instruments classified as AFS, the 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 statement of profit or loss.

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 statement of profit or loss, the impairment loss is reversed through the statement of profit or loss.

iv) Financial liabilitiesInitial recognition and measurementFinancial liabilities within the scope of LKAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, 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 and loans and borrowings.

Subsequent measurementTrade and other payables are measured at amortised cost.

41 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

loans and borrowingsAfter initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the income statement 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 finance costs in the income statement.

DerecognitionA financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the income statement.

v) Offsetting of financial instrumentsFinancial 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

vi) Fair value of financial instrumentsThe fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

For financial instruments that do not have a quoted market price in an active market and whose fair value cannot be reliability measured are carried at cost.

2.3.4 InventoriesInventories are valued at the lower of cost and net realisable value except commodity broker – traders. Costs incurred in bringing each

product to its present location and conditions are accounted for as follows:

Raw materials:Purchase cost on a first in, first out basis

Finished goods and work in progress:Cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

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

For the purpose statement of cash flow, cash and cash equivalents consist of cash in hand and deposits in banks net of outstanding bank overdrafts. Investments with short maturities (including investment in money market funds) i.e. three months or less from the date of acquisition are also treated as cash equivalents.

2.3.6 Impairmentofnon-financialassetsThe Company assesses at each reporting date whether there is any objective evidence that a non-financial asset or a group of non-financial assets is impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the group of non-financial asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell or 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 group of non-financial assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

2.4 lIABIlITIES AND PROVISIONSLiabilities classified as current liabilities in the Statement of Financial Position are those obligations payable on demand or within one year from the reporting date. Items classified as non-

42 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

current liabilities are those obligations which become payable beyond a period of one year from the reporting date. All known liabilities have been accounted for in preparing these Financial Statements. Provisions and liabilities are recognised when the Company has a legal or constructive obligation as a result of past events and it is probable that an outflow of economic benefits will be required to settle the obligation.

2.4.1 RetirementBenefitObligationsa) Defined Contribution Plans – Employees’ Provident Fund &

Employees’ Trust FundEmployees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions in line with the respective statutes and regulations in Sri Lanka. The Company contributes 12 % and 3% of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively.

Defined Benefit Plan – GratuityA 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 are 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 unrecognised past service costs and the fair value of any plan assets are deducted.

The valuation is performed annually by the management of each company, using the projected unit credit method in accordance with LKAS 19, “Employee Benefits”.

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 the Statement of Profit or Loss.

The key assumptions used in the computation are stated in the Note 13 to the Financial Statements.

This liability is not externally funded and the item is grouped under non-current liabilities in the Statement of Financial Position.

2.4.2 CapitalCommitmentsandContingenciesAll material capital commitments and contingent liabilities which exist as at the reporting date are disclosed in the respective notes to the Financial Statements.

2.5 STATEMENT OF PROFIT OR lOSS2.5.1 RevenueRevenue 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, taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The following specific recognition criteria must also be met before revenue is recognised:

a) Sale of GoodsRevenue from the sale of goods is recognised when the significant risk and rewards of ownership of the goods have passed to buyer with the Company retaining neither continuing managerial involvement to the degree usually associated with ownership, nor an effective control over the goods sold.

b) Rendering of ServicesRevenue from rendering of services is recognised in the accounting period in which the services are rendered or performed.

c) Interest IncomeFor all financial instruments measured at amortised cost and interest bearing financial assets classified as available for sale, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the statement of profit or loss.

d) DividendsDividend income is recognised when the shareholder’s right to receive payment is established.

e) Rental IncomeRental income is recognised on an accrual basis.

f) Gains and lossesNet gains and losses of a revenue nature on the disposal of Property, Plant & Equipment and other non current assets including investments are accounted for in the statement of profit or loss, after deducting from proceeds on disposal, the carrying amount of the assets and related selling expenses. On the disposal of revalued Property, Plant and Equipment, the amount remaining

43 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

in the Revaluation Reserve, relating to that particular asset is transferred directly to Retained Earnings.

Gains and losses arising from activities incidental to the main revenue generating activities and those arising from a group of similar transactions which are not material, are aggregated, reported and presented on a net basis.

g) Other IncomeOther income is recognised on an accrual basis.

2.5.2 ExpenditureRecognitionThe expenses are recognised on an accrual basis. All expenditure incurred in the ordinary course of business and in maintaining the Property, Plant & Equipment in a state of efficiency has been charged to income in arriving at the profit for the year.

For the purpose of presentation of the statement of profit or loss, the Directors are of the opinion that “function of expenses” method presents fairly the elements of the Company’s performance, and hence such presentation method is adopted.

2.6 SEGMENT REPORTINGAn operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. All operating segments’ operating results are reviewed regularly by the senior management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to the senior management and board of directors include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during the period to acquire Property, Plant and Equipment.

2.7 RElATED PARTY DISClOSuRESDisclosures are made in respect of related party transactions in accordance with LKAS 24.

2.8 CRITICAl ACCOuNTING ESTIMATES AND JuDGEMENTSThe preparation of financial statements in conformity with Sri Lanka Accounting Standards requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Estimates/Judgements made by management in the application of Sri Lanka Accounting Standards that have a significant effect on the financial statements are mentioned below.

Policy Note

Property, plant & equipment 2.3.1 03

Valuation and depreciation 2.3.1 03

Impairment of assets 2.3.3/2.3.6 -

Employee benefit liabilities 2.4.1 13

Financial Instruments-AFS 2.3.3 7 2.9 CuRRENT VERSuS NON-CuRRENT ClASSIFICATIONThe Company presents assets and liabilities in statement of financial position based on current/non-current classification. An asset as current when it is:

• Expected to be realised or intended to sold or consumed in normal operating cycle

• Held primarily for the purpose of trading• Expected to be realised within twelve months after the

reporting period Or• Cash or cash equivalent unless restricted from being exchanged

or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when:

• It is expected to be settled in normal operating cycle• It is held primarily for the purpose of trading• It is due to be settled within twelve months after the reporting

period Or• There is no unconditional right to defer the settlement of the

liability for at least twelve months after the reporting periodThe Company classifies all other liabilities as non-current.

44 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

2.10 FAIR VAluE MEASuREMENTThe Company measures financial instruments such as investment in equity instruments, and non-financial assets such as Biological assets, Land, at fair value at each reporting date. Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed are summarised in the following notes:

Disclosures for valuation methods, significant estimates and assumptions

Note 2.8

Quantitative disclosures of fair value measurement hierarchy

Note 7

Investment in unquoted equity shares Note 7

Property, plant and equipment under revaluation model

Note 3

Financial instruments Note 7

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability or• In the absence of a principal market, in the most advantageous

market for the asset or liability

The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

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

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

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

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

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

External valuers are involved for valuation of significant assets, such as Land. Involvement of external valuers is decided upon annually by the Management after discussion with and approval by the Company’s Audit Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Management decides, after discussions with the Company’s external valuers, which valuation techniques and inputs to use for each case.

At each reporting date, the Management analyses the movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Company’s accounting policies. For this analysis, the Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.

The Management presents the valuation results to the Audit Committee and the Company’s independent auditors. This includes a discussion of the major assumptions used in the valuations.

45 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

The Management, in conjunction with the Company’s external valuers, also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

2.11 NEW AND AMENDED STANDARDS AND INTERPRETATIONSThe standards and amendments and interpretations that are issued but not yet effective up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.

(i) SlFRS 9 -Financial InstrumentsSLFRS 9 replaces the existing guidance in LKAS 39 Financial Instruments: Recognition and Measurement. SLFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from LKAS 39.

SLFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. (ii) SlFRS 14 –Regulatory Deferral AccountsSLFRS 14 is an interim standard which provides relief for first time adopters of SLFRS in relation to the accounting for certain balances that arise from rate-regulated activities (‘regulatory deferral accounts’). The standard permits these entities to continue to apply their previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral accounts.

SLFRS 14 is effective for annual periods beginning on or after 1 January 2016.

(iii) SlFRS 15 -Revenue from Contracts with CustomersSLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including LKAS 18 Revenue, LKAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes.

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

Management believes that the SLFRS 14 would not be applicable for the Group, as it is an existing IFRS preparer/does not involve in rate regulatory activities. Pending the completion of the detailed impact analysis, possible impact from SLFRS 9 and SLFRS 15 is not reasonably estimable as of the reporting date.

The following amendments and improvements are not expected to have a significant impact on the Company’s/Group’s consolidated financial statements.

• Accounting for Acquisitions of Interests in Joint Operations (Amendments to SLFRS 11).

• Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to LKAS 16 and LKAS 38).

• Equity Method in Separate Financial Statements (Amendments to LKAS 27).

• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to SLFRS 10 and LKAS 28).

• Annual Improvements to SLFRSs 2012–2014 Cycle – various standards.

• Investment Entities: Applying the Consolidation Exception (Amendments to SLFRS 10, SLFRS 12 and LKAS 28).

• Disclosure Initiative (Amendments to LKAS 1).

46 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

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- (8,

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(3,79

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) (65

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9,622

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- (2,

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As at

31 M

arch

2017

68

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2,631

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As at

31 M

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2017

-

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1,317

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30

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As at

31 M

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2017

68

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0 19

1,314

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14

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68

10,07

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47

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90

10,23

8,330

4,8

68,91

7 1,3

96,29

6,717

As at

31 M

arch

2016

68

5,082

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360,9

17,50

1 14

9,676

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35,30

0,177

1,7

81,52

0 8,5

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3.1.5Inform

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Ow

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Exte

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o. o

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clud

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J. L.

Mor

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Son

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(Cey

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PLC

No.

126,

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47 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

3.1.6 The land and buildings belonging to J. L. Morison Son & Jones (Ceylon) PLC, situated at No. 126, Aluthmawatha Road, Colombo 15 and the land and buildings of its fully owned Subsidiary M.S.J.Industries (Ceylon) (Private) Limited, situated at 126/2, Aluthmawatha Road, Colombo 15 and No.618, Biyagama Road, Kelaniya were revalued during the financial year 2016 by M/S Sunil Fernando & Associate (Private) Limited, an independent valuer. The results of such revaluation were incorporated in these financial statements from its effective date which is 31 March 2016. The surplus arising from the revaluation was transferred to the revaluation reserve.

Significant unobservable valuation input: ValuationDate

Extent Range Method ofValuation

level of Fair Value

Indicative price per Sq.ft (Aluthmawatha Building) 31.03.2016 43,911 Sq.ft Rs 65 -Rs 93 Investment Method

Level 3Indicative price per Sq.ft (Pethiyagoda Building) 31.03.2016 83,552 Sq.Ft Rs 15- Rs 45 Indicative price per perch (Aluthmawatha Land) 31.03.2016 2R-06.93P Rs 2,925,000 Investment MethodIndicative price per perch (Pethiyagoda Land) 31.03.2016 7A-3R-0.25P Rs 65,000 -

Rs 380,000

Significant increases / (decreases) in Indicative price per perch would result in a significantly higher (lower) fair value measurement.

The carrying amount of revalued assets that would have been included in the financial statements had the assets been carried at cost less depreciation is as follows;

Cumulative Depreciation Net Carrying Net Carrying if assets were Amount Amount Cost carried at cost 2017 2016 Rs. Rs. Rs. Rs.

Class of AssetFreehold Land 31,170,380 - 31,170,380 31,170,380Freehold Buildings 236,906,054 52,538,796 184,367,258 191,024,705

48 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

3.

PRO

PERT

Y, P

lAN

T AN

D Eq

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ontd

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2 Co

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re

Capit

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Com

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Build

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. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

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01 A

pril 2

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81,96

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48

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2017

81

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As at

31 M

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2017

81

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4,230

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4,247

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6 4,8

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7 32

6,244

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As at

31 M

arch

2016

81

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48,21

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ese

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49 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

Significant unobservable valuation input: Valuation Date

Extent Range Method of Valuation

level of Fair Value

Indicative price per Sq.ft (Aluthmawatha Building) 31.03.2016 16,070 Sq.Ft Rs 15 -Rs 45 Investment Method Level 3

Significant increases (decreases) in Indicative price per perch would result in a significantly higher (lower) fair value measurement.

The carrying amount of the revalued assets that would have been included in the financial statements had the assets been carried at cost less depreciation is as follows;

Cumulative Depreciation Net Carrying Net Carrying if assets were Amount Amount Cost carried at cost 2017 2016 Rs. Rs. Rs. Rs.

Class of AssetFreehold Land 912,900 - 912,900 912,900Freehold Buildings 4,128,177 4,128,177 - -

4. INTANGIBlE ASSETS Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Trade MarkAs at 1 April 16,500,000 16,500,000 16,500,000 16,500,000Addition made during the year - - - -Less - Provision for impairment (1,500,000) (1,500,000) (1,500,000) (1,500,000)As at 31 March 15,000,000 15,000,000 15,000,000 15,000,000

The Company acquired the Trademark "Sagara" to import & distribute Sagara Jack Mackerel on 16 November 2006. As at 31 March 2014 management has fully impaired "Sagara" Trade Mark.

Company acquired the Trademark "Paracetol " to manufacture and distribute Paracetol on 31 August 2014. "Paracetol" Trademark has indefinite useful life.

5. INVESTMENTS IN SuBSIDIARIES5.1 Group 2017 2016 Holding Holding % Rs. % Rs.

Non-QuotedCompak Morison (Lanka) Limited 54 1 54 1

This Company has been excluded from consolidation due to the reasons described in Note 2.2.1 under Accounting Policies.

50 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

5.2 Company 2017 2016 Holding Holding % Rs. % Rs.

Non-QuotedM.S.J. Industries (Ceylon) (Private) Limited 100 57,700,000 100 57,700,000M.S.J. Cargoes (Ceylon) (Private) Limited 100 1,550,000 100 1,550,000M.S.J. Tours (Ceylon) Limited * - - 100 1,200,000M.S.J. Promotional Services (Private) Limited 100 5,200,000 100 5,200,000M.S.J. Hotels (Ceylon) Limited * - - 35 488,140Compak Morison (Lanka) Limited 54 1 54 1Total Carrying Value of Investments in Subsidiaries 64,450,001 66,138,141Less - Provision for impairment (6,750,001) (3,238,141) 57,700,000 62,900,000

M.S.J. Industries (Ceylon) (Private) Limited, a fully owned subsidiary of J. L. Morison Son & Jones (Ceylon) PLC holds 64% of M.S.J Hotels (Ceylon) limited. Accordingly total holding % of J.L.Morison Son and Jones (Ceylon) PLC on M.S.J Hotels (Ceylon) Limited is 99%.*M.S.J. Tours (Ceylon) (Private) Limited and M.S.J. Hotels (Ceylon) Limited had been liquidated during the year.

6. INVESTMENTS IN ASSOCIATES6.1 Group 2017 2016 Holding Holding % Rs. % Rs.

Non-QuotedCanned & Health Food Ltd. (Note 6.1.1) 47 1 47 1Total Carrying Value of Investments in Associates 1 1

Investments in Associate Canned & Health Food ltd 2017 2016 Rs. Rs.

Carrying Value as at 1 April 1 1Carrying Value as at 31 March 1 1

6.1.1 The investment cost in Canned and Health Food Ltd., was written off against the post acquisition losses in the consolidated financial statements.

5. INVESTMENTS IN SuBSIDIARIES (Contd.)

51 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

6.2 Company 2017 2016 Holding Holding % Rs. % Rs.

Non-QuotedCanned & Health Food Limited 47 243,028 47 243,028Less - Provision for impairment (243,028) (243,028)Total Carrying Value of Investments in Associate - -

7. OTHER FINANCIAl ASSETS Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Investments in Equity Securities (Note 7.1) - 4,616,271 - 4,616,271 - 4,616,271 - 4,616,271

Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Total Non-current - 4,616,271 - 4,616,271

7.1 Investments in Equity SecuritiesAvailable-for-sale Investments

Group/Company 2017 2016 No. of Shares Rs. No. of Shares Rs.

QuotedSierra Cables PLC - - 9,900 28,710

Non-QuotedCeybank Unit Trust - - 191,388 4,587,561Eastern Hotels Limited * 5,833 - 5,833 -(-) Impairment of investment - - - 4,616,271

* Eastern Hotels Limited has not started its commercial operation and the investment was impaired in full during the year 2015.

7.2.a Available-for-Sale Investments-Non quoted unit Trust InvestmentThe Company held 191,388 units in Ceybank Unit Trust as at 31.03.2016, which were designated as available-for-sale. During the year, these units were disposed for a consideration of Rs. 4,480,383/-.

7.2.b Available-for-Sale Investments-Quoted Equity SharesThe Company held a non controlling interest of very minor percentage (9900 Shares) in Sierra Cable PLC. The fair value of the said investment is determined by reference to published price quotations in the Colombo Stock Exchange. During the year, these shares were disposed for a consideration of Rs. 30,346/-.

52 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

7.3 Fair values7.3.1 GroupSet out below is a comparison by class of the carrying amounts and fair values of the Group that are carried in the financial statements.

Carrying amount Fair value 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Financial assetsOther Financial Assets Available-for-Sale Investments - 4,616,271 - 4,616,271Total - 4,616,271 - 4,616,271

Non Financial assetsProperty, Plant and Equipment Freehold Land 685,082,500 685,082,500 685,082,500 685,082,500 Freehold Buildings 375,743,750 360,917,501 375,743,750 360,917,501 1,060,826,250 1,046,000,001 1,060,826,250 1,046,000,001

The Management assessed that fair value of cash and short-term deposits, trade and other receivables, trade and other payables approximate their carrying amounts largely due to short maturities of these instruments.

As at 31 March 2017, the Group held the following Assets carried at fair value on the statement of financial position:

As atAssets measured at fair value 31 March 2017 level 1 level 2 level 3 Rs. Rs. Rs. Rs.

Non Financial assetsFreehold Land 685,082,500 - - 685,082,500Freehold Buildings 375,743,750 - - 375,743,750 1,060,826,250 - - 1,060,826,250

7. OTHER FINANCIAl ASSETS (Contd.)

53 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

7.3.2 CompanySet out below is a comparison by class of the carrying amounts and fair values of the Company that are carried in the financial statements.

Carrying amount Fair value 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Financial assetsOther Financial Assets Available-for-Sale Investments - 4,616,271 - 4,616,271Total - 4,616,271 - 4,616,271

Non Financial assetsProperty, Plant and Equipment Freehold Land 81,969,600 81,969,600 81,969,600 81,969,600 Freehold Buildings 48,424,230 48,210,000 48,424,230 48,210,000Total 130,393,830 130,179,600 130,393,830 130,179,600

The Management assessed that fair value of cash and short-term deposits,trade and other receivables, trade and other payables approximate their carrying amounts largely due to short term maturities of these instruments.

As at 31 March 2017, the Company held the following Assets carried at fair value on the Statement of financial position:

As atAssets measured at fair value 31 March 2017 level 1 level 2 level 3 Rs. Rs. Rs. Rs.

Non Financial assetsFreehold Land 81,969,600 - - 81,969,600Freehold Buildings 48,424,230 - - 48,424,230Total 130,393,830 - - 130,393,830

8. INVENTORIES Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Raw Materials and Packing Material 164,293,578 181,603,738 - -Work in Progress 19,771,631 11,217,378 - -Finished Goods 543,456,928 604,330,945 573,066,850 637,288,345Goods in Transit 137,214,953 24,918,252 112,735,464 18,234,488 864,737,091 822,070,313 685,802,315 655,522,833(-) Provision for Obsolete Stocks (Note 8.1) (67,967,953) (49,509,554) (52,650,143) (47,903,542) 796,769,138 772,560,759 633,152,171 607,619,291

54 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

8. INVENTORIES (Contd.)8.1 Provision for Obsolete Stocks Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Balance as at 1 April 49,509,554 33,345,895 47,903,542 19,016,280Provision Made During the Year 18,458,399 16,163,659 4,746,601 28,887,262Balance as at 31 March 67,967,953 49,509,554 52,650,143 47,903,542

9. TRADE AND OTHER RECEIVABlES Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Trade Debtors- Third Parties 814,529,704 638,404,474 576,644,866 543,235,909Trade Debtors- Related Parties (Note 9.1) 5,016,583 3,796,072 5,016,583 3,796,072Less: Provision for Bad Debts (Note 9.3) (10,579,198) (13,191,049) (4,614,098) (7,225,949) 808,967,089 629,009,497 577,047,351 539,806,032Non-Trade Debtors - Third Party 92,515,825 104,300,983 91,098,141 103,219,106Other Debtors - Related Parties (Note 9.2) - 50,000,000 - 160,580,514 901,482,914 783,310,480 668,145,492 803,605,652

9.1 Trade Debtors - Related Parties Group Company 2017 2016 2017 2016 Relationship Rs. Rs. Rs. Rs.

Hemas Capital Hospital (Private) Limited Affiliate 2,449,543 635,451 2,449,543 635,451Hemas Hospitals (Private) Limited Affiliate 827,613 1,332,584 827,613 1,332,584Hemas Southern Hospital (Private) Limited Affiliate 1,739,426 1,828,037 1,739,426 1,828,037 5,016,583 3,796,072 5,016,583 3,796,072

9.2 Other Debtors - Related PartiesM.S.J. Cargoes (Ceylon) (Private) Limited Subsidiary - - - 20,328,122Unicorn Investments (Private) Limited Subsidiary - - - 90,252,392Hemas Holdings PLC Ultimate Parent - 50,000,000 - 50,000,000 - 50,000,000 - 160,580,514

All related party transactions have been conducted on agreed commercial terms with respective parties.

9.3 Reconcilation of Trade Debtor Impairment Group Company Rs. Rs.

Balance as at 1 April 13,191,049 7,225,949Provision made during the year (2,611,851) (2,611,851)Balance as at 31 March 10,579,198 4,614,098

55 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

9.4 As at 31 March, the ageing analysis of trade receivables, is as follows:

Group Neither past Past due but not impaired due nor < 30 30-60 61-90 91-120 >120 Total impaired days days days days days Rs. Rs. Rs. Rs. Rs. Rs. Rs.

2017 808,967,089 735,377,409 55,207,571 11,317,015 519,636 2,021,250 4,524,2082016 629,009,497 604,752,147 22,143,720 1,192,529 921,101 - -

Company Neither past Past due but not impaired due nor < 30 30-60 61-90 91-120 >120 Total impaired days days days days days Rs. Rs. Rs. Rs. Rs. Rs. Rs.

2017 577,047,351 553,073,399 17,025,561 - 519,636 2,021,250 4,407,5052016 539,806,032 518,764,512 18,927,890 1,192,529 921,101 - -

10. STATED CAPITAl 2017 2016 Number Rs. Number Rs.

Fully Paid Ordinary Shares 5,808,290 6,182,310 5,808,290 6,182,310Fully Paid Non-Voting Ordinary Shares 1,742,490 1,742,490 1,742,490 1,742,490 7,550,780 7,924,800 7,550,780 7,924,800

10.1 Fully Paid Ordinary Shares (Voting and Non-Voting)Balance at the Beginning of the Year 7,550,780 7,924,800 7,550,780 7,924,800Balance at the End of the Year 7,550,780 7,924,800 7,550,780 7,924,800

10.2 Rights, Preference and Restrictions of Classes of CapitalThe Non-Voting shares are ranked pari passu with the existing Ordinary Shares of the Company including the right to participate in any dividend declared after the date of the issue, but excluding the right to vote.

11. RESERVES Group Company 2017 2016 2017 2016Summary Rs. Rs. Rs. Rs.

(a) Capital ReservesRevaluation Reserve (Note 11.1) 805,592,775 805,592,775 129,140,706 129,140,706General Reserve (Note 11.2) 730,800,000 730,800,000 728,928,122 728,928,122Available for Sale Reserve (Note 11.3) - 1,598,217 - 1,598,216 1,536,392,775 1,537,990,992 858,068,828 859,667,044

56 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

11. RESERVES (Contd.)11.1 Revaluation Reserve Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

On: Property, Plant and EquipmentAs at 1 April 805,592,775 736,819,694 129,140,706 117,433,379Revaluation Surplus/(Deficit) During the Year - 75,388,658 - 12,471,777Tax Effects on Revaluation During the Year - (6,615,577) - (764,450)As at 31 March 805,592,775 805,592,775 129,140,706 129,140,706

11.2 General ReserveGeneral Reserve which is a revenue reserve represents the amounts set aside by the Directors for general application. The movement of the general reserve is as follows;

Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

As at 1 April 730,800,000 730,800,000 728,928,122 728,928,122As at 31 March 730,800,000 730,800,000 728,928,122 728,928,122

11.3 Available for Sale Reserve Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

As at 1 April 1,598,217 1,944,467 1,598,216 2,527,766Impairment On Available for Sale Financial AssetsNet Loss on Available for Sale Financial Assets (1,598,217) (346,250) (1,598,216) (929,550)As at 31 March - 1,598,217 - 1,598,216

12. INTEREST BEARING lOANS AND BORROWINGS12.1 Group 2017 2016 Rs. Rs.

Current Interest Bearing loans and BorrowingsBank Loans (Note 12.1.1) 305,097,241 169,215,973Bank Overdrafts (Note 16.2) 34,066,485 64,858,961 339,163,726 234,074,934

Non-current Interest Bearing loans and BorrowingsBank Loans (Note 12.1.1) 125,024,000 250,016,000 125,024,000 250,016,000

57 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

12.1.1 Bank Loans As at loans As at 01.04.2016 Obtained Repayment 31.03.2017 Current Non-current Rs. Rs. Rs. Rs. Rs. Rs.

Bank of Ceylon 11,091,045 - (11,091,045) - - -Hatton National Bank PLC 1,332,929 - (1,332,929) - - -People's Bank PLC - 31,900,000 (31,900,000) - - -Commercial Bank of Ceylon PLC 375,008,000 - (124,992,000) 250,016,000 124,992,000 125,024,000Nation Trust Bank 31,800,000 256,675,815 (165,392,815) 123,083,000 123,083,000 -Standard Chartered Bank - 57,022,241 - 57,022,241 57,022,241 - 419,231,974 345,598,056 (334,708,789) 430,121,241 305,097,241 125,024,000

12.2 Company 2017 2016 Rs. Rs.

Current Interest Bearing loans and BorrowingsBank Loans (Note 12.2.1) 259,614,241 169,215,974Bank Overdrafts (Note 16.2) - 35,762,900 259,614,241 204,978,874

Non-current Interest Bearing loans and BorrowingsBank Loans (Note 12.2.1) 125,024,000 250,016,000 125,024,000 250,016,000

12.2.1 Bank Loans As at loans As at 01.04.2016 Obtained Repayment 31.03.2017 Current Non-current Rs. Rs. Rs. Rs. Rs. Rs.

Bank of Ceylon 11,091,045 - (11,091,045) - - -Hatton National Bank PLC 1,332,929 - (1,332,929) - - -Commercial Bank of Ceylon PLC 375,008,000 - (124,992,000) 250,016,000 124,992,000 125,024,000Nations Trust Bank 31,800,000 168,800,000 (123,000,000) 77,600,000 77,600,000 -Standard Chartered Bank - 57,022,241 - 57,022,241 57,022,241 - 419,231,974 225,822,241 (260,415,974) 384,638,241 259,614,241 125,024,000

58 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

12. INTEREST BEARING lOANS AND BORROWINGS (Contd.)12.3 Terms and conditions of Bank loanDetails Nature of the Balance 2017 Repayment Term Security Facility (Rs. ‘000)

CompanyCommercial Bank of Ceylon PLC Term Loan 250,016 Repayable in 48 instalments starting Corporate Guarantee (Fixed Interest) from April 2015. from Ultimate ParentNation Trust Bank Short Term Loan 77,600 Repayable in full within 2 months from the dates of drawdown None (Rs. 27,600,000 on 16 February 2017 and Rs. 50,000,000 on 30 March 2017.) Standard Chartered Bank Short Term Loan 57,022 Repayable in full within 2 months from None the date of drawdown on 7 March 2017.

Subsidiary - MSJ Industries (Ceylon) (Private) limitedNation Trust Bank Import Finance 45,483 Repayable in full within 2 months from None loan the dates of drawdown (Rs. 4,389,000 on 20 February 2017 and Rs. 41,094,000 on 24 March 2017.)

13. RETIREMENT BENEFIT OBlIGATION Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

GratuityAs at 01 April 85,142,981 89,966,562 45,654,977 49,304,423Current Service Cost 7,183,059 7,078,822 4,772,591 4,437,545Interest Cost on Benefit Obligation 9,365,727 8,996,656 5,022,047 4,930,442Liability Transferred In - 3,356,815 - 3,356,815Actuarial Loss/(Gain) for the year 7,117,755 (12,051,597) 5,281,420 (5,880,769)Payments During the Year (15,658,367) (12,204,277) (12,593,873) (10,493,479)As at 31 March 93,151,155 85,142,981 48,137,162 45,654,977

13.1 Amounts charged to profit or loss Remeasurement gains/(losses) in other Comprehensive income Actuarial Sub-total changes included in arising from Sub total As at 01 Service Net profit or Benefits changes in Experience included in As at 31 April cost interest loss paid assumptions adjustments OCI March Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Group2017 85,142,981 7,183,059 9,365,727 16,548,786 (15,658,367) 113,281 7,004,474 7,117,755 93,151,1552016 89,966,562 7,078,822 8,996,656 16,075,478 (12,204,277) (8,889,822) (3,161,775) (12,051,597) 85,142,981

Company2017 45,654,977 4,772,591 5,022,047 9,794,638 (12,593,873) 76,132 5,205,288 5,281,420 48,137,1622016 49,304,423 4,437,545 4,930,442 9,367,987 (10,493,479) (5,703,013) (177,756) (5,880,769) 45,654,977

59 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

13.2 The principal assumptions used in determining defined benefit obligation are shown below:

Group Company 2017 2016 2017 2016

Discount Rate 12% 11% 12% 11%Salary Increment 10% 9% 10% 9%Retirement Age 55- 60 years 55- 60 years 55- 60 years 55- 60 years

13.3 Sensitivity of assumptions used Discount Rate Salary Increment Group Company Group Company Rs. Rs. Rs. Rs.

Effect on the defined benefit obligation liabilityIncrease by one percent (5,756,975) (3,868,017) 6,724,394 4,520,538Decrease by one percent 6,659,824 4,477,108 (5,904,268) (3,966,909)

14. TRADE AND OTHER PAYABlES Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Trade Payables - Third Parties 43,081,705 19,961,302 9,531,287 15,181,920 - Related Parties (Note 14.1) - - 134,532,800 -Foreign Bills Payable 520,976,747 534,535,117 484,513,470 472,087,529Non Trade Payables - Related Parties (Note 14.2) 27,703,237 6,618,884 22,010,409 17,939,694Non Trade Creditors including Accrued Expenses 269,151,223 258,550,347 216,731,116 217,156,930 860,912,913 819,665,650 867,319,082 722,366,073

14.1 Trade Payables - Related Parties 2017 2016 2017 2016 Relationship Rs. Rs. Rs. Rs.

M.S.J. Industries (Ceylon) (Private) Limited Subsidiary - - 134,532,800 - - - 134,532,800 -

60 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

14. TRADE AND OTHER PAYABlES (Contd.)14.2 Other Payables - Related Parties 2017 2016 2017 2016 Relationship Rs. Rs. Rs. Rs.

M.S.J. Tours (Ceylon) Private Limited* Subsidiary - - - 211,216M.S.J. Promotional Services (Private) Limited Subsidiary - - - 6,223,060Hemas Holdings PLC Ultimate Parent 21,801,453 5,784,379 20,169,040 5,561,089Hemas Hospitals (Private) Limited Affiliate 278,817 - 278,817 -Hemas Corporate Services (Private) Limited Affiliate 1,201,299 740,678 1,175,413 726,893Vishwa BPO (Private) Limited Affiliate 242,312 - 144,914 -Hemas Travels (Private) Limited Affiliate 201,504 59,900 201,504 59,900Diethelm Travel Lanka (Private) Limited Affiliate 40,721 - 40,721 -M.S.J. Hotels (Ceylon) Limited* Subsidiary - - - 5,157,536Unicorn Investment (Private) Limited Affiliate 3,937,131 33,927 - - 27,703,237 6,618,884 22,010,409 17,939,694

* This Company had been liquidated during the year.

15. DIVIDENDS PAYABlE Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Unclaimed Dividends 11,515,916 4,743,706 11,515,916 4,743,706 11,515,916 4,743,706 11,515,916 4,743,706

16. CASH AND CASH EquIVAlENTS Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

16.1 Favourable Cash and Cash EquivalentsCash at Banks and in Hand 116,733,272 38,970,712 99,904,820 38,181,364Investment in Money Market Funds (Note 16.3) 577,040,055 1,272,071,186 371,602,910 872,071,186Investment in Short Term Deposits 754,244,274 - 652,142,903 - 1,448,017,600 1,311,041,898 1,123,650,633 910,252,550

16.2 unfavourable Cash and Cash EquivalentsBank Overdrafts (34,066,485) (64,858,961) - (35,762,900)Total Cash and Cash Equivalents 1,413,951,115 1,246,182,937 1,123,650,633 874,489,650

61 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

16.3 Investment in Money Market Funds Group Company 2017 2016 2017 2016 No of units Value (Rs.) No of units Value (Rs.) No of units Value (Rs.) No of units Value (Rs.)

JB Vantage Money Market Fund 15,160,362 269,530,009 18,402,074 294,825,146 15,160,362 269,530,009 18,402,074 294,825,146NDB Wealth Money Plus Fund 15,618,592 247,532,812 39,961,587 577,246,040 2,656,113 42,095,667 39,961,587 577,246,040Capital Alliance High Yield Fund 3,567,377 59,977,235 27,698,913 400,000,000 3,567,377 59,977,235 - - 577,040,055 1,272,071,186 371,602,910 872,071,186

17. REVENuE Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Gross Revenue 4,257,390,420 3,968,491,567 3,559,521,860 3,444,316,148Less: Sales Taxes (239,325,316) (202,996,770) (239,325,316) (198,862,100)Sales Net of Tax 4,018,065,105 3,765,494,797 3,320,196,544 3,245,454,048

18. OTHER OPERATING INCOME AND GAINS Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Profit on Disposal of Property, Plant and Equipment 13,914,939 6,601,175 13,914,939 4,080,175Profit on Disposal of Investments 1,492,675 - 6,650,211 -Sundry Income 5,151,898 6,141,043 1,400,176 3,416,880Dividend Income 193,615 40,145 49,963,615 3,842,722 20,753,126 12,782,363 71,928,941 11,339,777

19. FINANCE COST AND INCOME Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

19.1 Finance CostInterest Expense on Overdrafts 11,318,136 1,707,922 3,640,688 574,704Interest Expense on Interest Bearing Loans and Borrowings 33,475,305 40,468,178 31,401,111 40,468,178Bank Guarantee Charges 637,756 - 637,756 - 45,431,198 42,176,100 35,679,555 41,042,882Finance Charges on Lease Liabilities - 75,361 - 75,361 45,431,198 42,251,461 35,679,555 41,118,243

19.2 Finance IncomeIncome from Investments-Return on investment in Money Market Funds and other 131,010,224 81,851,656 98,471,709 81,851,656 131,010,224 81,851,656 98,471,709 81,851,656

62 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

20. PROFIT BEFORE TAX Group Company 2017 2016 2017 2016Stated after Charging /Crediting Rs. Rs. Rs. Rs.

Included in Cost of SalesEmployees Benefits Including the Following- Defined Contribution Plan Costs - EPF and ETF 10,002,409 8,672,310 - -- Salary Related Expenses 72,227,611 86,936,967 - -Depreciation 16,311,007 18,074,170 - -

Included in Administrative ExpensesEmployees Benefits including the following- Defined Benefit Plan Costs -Gratuity 16,548,786 16,043,664 9,794,638 9,336,172- Defined Contribution Plan Costs - EPF and ETF 13,541,468 12,399,445 4,660,875 3,728,589- Salary Related Expenses 130,065,068 92,159,168 54,319,070 27,299,718Depreciation 51,598,648 35,991,639 42,875,204 33,622,849Auditors' Remuneration - Audit Fees 3,717,004 2,910,945 2,000,004 1,638,443 - Non-Audit Fees 879,844 985,939 724,424 563,695

Included in Selling and Distribution CostsDepreciation 334,164 4,475,513 334,164 4,475,513Transport Costs 41,875,435 47,798,440 39,198,482 31,867,720Advertising and Sales of Promotion 184,972,513 179,696,470 184,771,728 179,566,502

21. INCOME TAX EXPENSEThe major components of income tax expense for the years ended 31 March are as follows:

Group CompanyIncome Statement 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Current Income TaxCurrent Income Tax charge (Note 21.1) 132,848,580 133,878,313 45,679,912 53,453,578Under/(Over) Provision of current taxes in respect of prior years (16,341,498) (4,439,213) 4,025,905 938,157 116,507,081 129,439,100 49,705,817 54,391,735

Deferred Income TaxDeferred Taxation Charge/(Reversal) (Note 21.2) 13,061,673 19,498,268 (3,359,729) 4,552,247 129,568,755 148,937,368 46,346,087 58,943,982

63 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

21.1 A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows:

Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Accounting Profit before Tax 646,284,881 500,116,001 303,776,397 232,548,652Non Deductible Expenses 128,671,735 133,576,204 92,690,250 92,940,651Deductible Expenses (307,664,775) (160,558,505) (238,390,106) (139,586,798)Interest Income 7,167,372 5,003,132 5,066,002 5,003,132Taxable Profit 474,459,213 478,136,832 163,142,543 190,905,637 474,459,213 478,136,832 163,142,543 190,905,637

Statutory Tax Rate 28% 28% 28% 28%Dividend Tax 10% 10% 10% 10%

Income Tax Expense 132,848,580 133,878,313 45,679,912 53,453,578 132,848,580 133,878,313 45,679,912 53,453,578

21.2 Deferred income tax21.2.1 Group Statement of Statement of Financial Position Comprehensive Income 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Deferred Tax liabilityCapital Allowances for Tax Purposes 79,209,944 65,898,954 (13,310,990) (21,522,112)Revaluation of Buildings 33,558,463 33,558,463 - - 112,768,407 99,457,417 (13,310,990) (21,522,112)

Deferred Tax AssetsDefined Benefit Plans 26,082,323 23,840,035 249,317 2,023,844 26,082,323 23,840,035Deferred Income Tax Income/(Expense) (13,061,673) (19,498,268)

Other Comprehensive Income 2017 2016 Rs. Rs.

Defined Benefit Plans (1,992,971) 3,374,447Revaluation of Buildings - 6,615,577 (1,992,971) 9,990,024Net Deferred Tax Liability 86,686,083 75,617,382

64 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

21.2.2 Company Statement of Statement of Financial Position Comprehensive Income 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Deferred Tax liabilityCapital Allowances for Tax Purposes 10,230,751 14,374,266 4,143,515 (5,177,017)Revaluation of Buildings 13,427,279 13,427,279 - - 23,658,030 27,801,545 4,143,515 (5,177,017)

Deferred Tax AssetsDefined Benefit Plans 13,478,405 12,783,394 (783,786) 624,770 13,478,405 12,783,394 (783,786) 624,770

Deferred Income Tax Income/(Expense) 3,359,729 (4,552,247)

Other Comprehensive Income 2017 2016 Rs. Rs.

Defined Benefit Plans 1,478,798 (1,646,615)Revaluation of Buildings - (764,450) 1,478,798 (2,411,065)Deferred Tax Liability/(Asset) 10,179,625 15,018,151

22. EARNINGS PER SHARE22.1 Basic Earnings Per Share is calculated by dividing the profit for the year attributable to ordinary shareholders of the Company by the

weighted average number of ordinary shares outstanding during the year.

22.2 The following reflects the income and share data used in the basic Earnings Per Share computation.

Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Amount used as the Numerator:Profit Attributable to Equity Holders of the Parent 516,716,126 351,178,633 257,430,310 173,604,670

2017 2016 2017 2016 Number Number Number Number

Number of Ordinary Shares used as Denominator:Weighted Average Number of Ordinary Shares in Issue Applicable to Basic Earnings per Share 7,550,780 7,550,780 7,550,780 7,550,780

21. INCOME TAX EXPENSE (Contd.)

65 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

23. DIVIDENDS Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

23.1 Declared and paid during the yearEquity Dividends on Ordinary Shares :Final Dividend - 2016 75,507,800 30,203,120 75,507,800 30,203,120Interim Dividend - 2017 75,507,800 - 75,507,800 - 151,015,600 30,203,120 151,015,600 30,203,120

24. COMMITMENTS AND CONTINGENT lIABIlITIESa) Capital Expenditure CommitmentsSubsequent to Board approval, the Company is in the process of constructing a plant focusing on research and manufacturing within the Sri Lanka Institute of Nanotechnology (SLINTEC) Nano Technology Park in Pitipana, Homagama. Accordingly, the following contracts and commitments have been entered into this regard:

Lease Agreement with SLINTEC - The Company has entered into a lease agreement with SLINTEC to lease the premises in Homagama for a period of 27 years. The ground rent for the first year has been paid in the current year.

The Company has also entered into agreements with a design consultant for which an advance of 10% of the total sum has already been paid in the current year, and with an architecture firm for which an advance of 30% of the total sum has already been paid in the current year.

b) Contingent liabilitiesThere are no Significant contingent liabilities as at reporting date.

25. ASSETS PlEDGEDAs at the reporting date the following assets have been pledged, as securities for liabilities.

Carrying Amount Carrying Amount Pledged Pledged Group CompanyNature of Assets Nature of liability 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Inventory Documents of Title to Goods Shipped 796.7 Mn 772.5 Mn 633.1 Mn 607.6 MnTrade Debtors Charged Over Trade Finance Facilities 581.7 Mn 547.0 Mn 581.7 Mn 547.0 Mn

66 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

26. EVENTS OCCuRRING AFTER THE REPORTING DATEThere have been no material events occurring after the reporting date that require adjustments to or disclosure in the financial statements.

27. RElATED PARTY DISClOSuRESDetails of significant related party disclosures are as follows:

27.1 Transactions with the related entities

M.S.J. Industries (Ceylon) (Private) limited Hemas Holdings PlC Other Related Parties* Total Subsidiary ultimate Parent 2017 2016 2017 2016 2017 2016 2017 2016 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Nature of TransactionAs at 1 April 90,252,392 (11,016,297) 44,438,911 42,718,128 11,745,588 11,044,760 146,436,891 42,746,591Sale / (Purchase) of Goods (581,421,505) (580,944,935) - - 24,842,635 18,798,402 (556,578,870) (562,146,533)Expenses Incurred on Behalf of Others 167,436,314 171,643,117 (62,071,481) (50,583,932) 6,605,212 2,887,189 111,970,045 123,946,374Settlement of Funds 162,200,000 507,470,800 47,463,530 52,304,715 (40,018,222) (20,984,763) 169,645,308 538,790,752Settlement of Intercompany Loan - - (50,000,000) - - - (50,000,000) -Dividends Paid / (Received) 27,000,000 3,099,708 - - - - 27,000,000 3,099,708As at 31 March (134,532,800) 90,252,392 (20,169,040) 44,438,911 3,175,213 11,745,588 (151,526,626) 146,436,891

All related party transactions have been conducted on agreed commercial terms with respective parties.

Non-recurrent Related Party TransactionsThere were no other non-recurrent Related Party Transactions which in aggregate value exceeds 10% of the equity or 5% of the total assets whichever is lower of the Company as per 31 March 2017 audited financial statements, which required additional disclosures in the 2016/17 Annual Report under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Security Exchange Commission Directive issued under Section 13(c) of the Security Exchange Commission Act.

Recurrent Related Party TransactionsThere were no other recurrent Related Party Transactions which in aggregate value exceeds 10% of the consolidated revenue of the Group as per 31 March 2017 audited financial statements, which required additional disclosures in the 2016/17 Annual Report under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Security Exchange Commission Directive issued under Section 13(c) of the Security Exchange Commission Act.

*Other Related parties includes M.S.J. Cargoes (Ceylon) (Private) Limited, M.S.J. Promotional Services (Ceylon) (Private) Limited, M.S.J. Hotels (Ceylon) Limited, Hemas Corporate Services (Private) Limited and other etc.

27.2 Transactions with Key Management Personnel of the Company The key management personnel of the Company are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly including directors (whether executive or otherwise) of the Company. There have been no transactions with key management during the year except below.

Key Management Personnel Compensation 2017 2016 Rs. Rs.

Group/CompanyShort-term employee benefits 39,138,430 19,248,060

67 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

28. SEGMENTAl INFORMATION Consumer Agro Chemicals Pharmaceuticals Group Total 2017 2016 2017 2016 2017 2016 2017 2016 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

REVENuETotal Gross Income 1,224,322,417 1,133,790,879 148,532,442 361,605,619 3,222,924,119 2,841,771,973 4,595,778,979 4,337,168,471Less: Inter Segment Income - - - - (577,713,874) (571,673,674) (577,713,874) (571,673,674)Segment Revenue 1,224,322,417 1,133,790,879 148,532,442 361,605,619 2,645,210,246 2,270,098,299 4,018,065,105 3,765,494,797

RESulTGross Profit 500,685,717 477,200,472 35,438,082 98,302,857 953,959,718 800,737,674 1,490,083,517 1,376,241,003Administrative and Selling and  Distribution Cost (329,606,026) (372,536,301) (27,451,400) (69,699,407) (593,073,362) (486,271,852) (950,130,788) (928,507,560)Other Operating income 6,323,570 2,011,800 767,163 535,949 13,662,393 10,234,613 20,753,126 12,782,362Operating Profit/(Loss) 177,403,262 106,675,971 8,753,845 29,139,399 374,548,748 324,700,435 560,705,855 460,515,805

Finance Cost (45,431,198) (42,251,461)Finance Income 131,010,224 81,851,656Income Tax Expense (129,568,755) (148,937,368)Profit for the Year 516,716,126 351,178,633

OTHER INFORMATIONSegment Assets 4,596,683,200 4,198,645,783Investment in Equity method Associate 1 1Consolidated Total Assets 4,596,683,201 4,198,645,784

Segment Liabilities 1,563,599,516 1,524,539,624

OTHERSPurchase of Property Plant and Equipment 186,321,101 129,634,305Depreciation 68,243,820 58,541,323

29. FINANCIAl RISK MANAGEMENT OBJECTIVES AND POlICIESThe Group’s principal financial liabilities, comprise 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 loans and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. The Company also holds available-for-sale investments.

The Group is exposed to market risk, credit risk and liquidity risk.

“The Group’s senior management oversees the management of these risks. The senior management is supported by the Board of Directors (BOD) that advises on financial risks and the appropriate financial risk governance framework for the Group. BOD provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with group policies and group risk appetite. It is the Group’s policy that all activities for risk management purposes are required to be approved by Board of Directors of J.L. Morrison Son & Jones (Ceylon) PLC.”

68 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notes to the Financial statements (Contd.)

29. FINANCIAl RISK MANAGEMENT OBJECTIVES AND POlICIES (Contd...)The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.

Market RiskMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise four types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits and available-for-sale investments.

The overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the entity’s financial performance.

Interest Rate RiskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with fixed interest rates.

The Group manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. The Group’s policy is to maintain an appropriate balance between fixed and variable rate borrowings.

Foreign Currency RiskForeign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the import of raw materials, finished goods and packing materials.

The major part of the foreign transactions is dealt with US Dollars. Change in uS Dollar Rate 1% increase 1% decrease Rs. Rs.

Effect on Profit of the Group (18,916,046) 18,916,046

Equity Price RiskThe Group’s quoted and unquoted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group’s Board of Directors reviews and approves all equity investment decisions.

Credit RiskCredit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

Trade ReceivablesCustomer credit risk is managed by each company subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed based on the established credit risk evaluation policy and individual credit limits are defined in accordance with this assessment.

Outstanding customer receivables are regularly monitored.

Minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actual incurred historical data.

69 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

Cash DepositsCredit risk from balances with banks is managed in accordance with the Group treasury policy. Investments of surplus funds are made only with approved counterparties as per this policy.

liquidity RiskThe Group monitors its risk to a shortage of funds by setting up a minimum liquidity level. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, and finance leases. The Group assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Access to sources of funding is sufficiently available and debt maturing within 12 months can be rolled over with existing lenders.

The table below summarises the maturity profile of groups financial liabilities based on contractual undiscounted payments. On less than AboveGroup Demand 1 year 1 year Total

Bank Overdraft 34,066,485 - - 34,066,485Bank Loans - 305,097,241 125,024,000 430,121,241Trade and Other Liabilities - 860,912,913 - 860,912,913 34,066,485 1,166,010,154 125,024,000 1,325,100,639

On less than AboveCompany Demand 1 year 1 year Total

Bank Overdraft - - - -Bank Loans - 305,097,241 125,024,000 430,121,241Trade and Other Liabilities - 867,319,082 - 867,319,082 - 1,172,416,323 125,024,000 1,297,440,323

Capital ManagementCapital includes ordinary shares. The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes managing capital during the years ended 31 March 2017 and 31 March 2016.

70 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

analysis oF shareholders aCCording to the nuMber oF SHARES AS AT 31 MARCH 2017

Voting Shareholders

Resident Non Resident TotalShareholdings Number of Percentage Number of Percentage Number of Percentage Shareholders No of Shares (%) Shareholders No of Shares (%) Shareholders No of Shares (%)

1 to 1000 Shares 517 49,768 0.86 5 787 0.01 522 50,555 0.871001 to 10,000 Shares 57 211,933 3.65 4 8,710 0.15 61 220,643 3.8010,001 to 100,000 Shares 6 130,068 2.24 2 25,830 0.44 8 155,898 2.68100,001 to 1000,000 Shares 1 151,555 2.61 0 0 0.00 1 151,555 2.61Over 1,000,000 Shares 1 5,229,639 90.04 0 0 0.00 1 5,229,639 90.04 582 5,772,963 99.40 11 35,327 0.60 593 5,808,290 100.00

Categories of Shareholders No of Shareholders No of Shares

Individual 566 521,937Institutional 275 286,353 593 5,808,290

Non-Voting Shareholders

ANALYSIS OF SHAREHOLDERS ACCORDING TO THE NUMBER OF SHARES AS AT 31 MARCH 2016

Resident Non Resident TotalShareholdings Number of Percentage Number of Percentage Number of Percentage Shareholders No of Shares (%) Shareholders No of Shares (%) Shareholders No of Shares (%)

1 to 1000 Shares 420 50,221 2.88 4 1,921 0.11 424 52,142 2.991001 to 10,000 Shares 37 94,923 5.45 0 0 0.00 37 94,923 5.4510,001 to 100,000 Shares 1 15,000 0.86 0 0 0.00 1 15,000 0.86100,001 to 1000,000 Shares 1 102,076 5.86 0 0 0.00 1 102,076 5.86Over 1,000,000 Shares 1 1,478,349 84.84 0 0 0.00 1 1,478,349 84.84 460 1,740,569 99.89 4 1,921 0.11 464 1,742,490 100.00

Categories of Shareholders No of Shareholders No of Shares

Individual 449 154,539Institutional 15 1,587,951 464 1,742,490

71 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

other inForMation to shareholders & investors

J.l.MORISON SON & JONES (CEYlON) PlC - VOTINGlist of 20 Major Shareholders based on their Shareholdings as at 31 March 2017 2017 2016 No of Shares (%) No of SharesHEMAS MANUFACTURING (PRIVATE) LIMITED 5,229,639 90.04 5,229,639MR R A J T PERERA 151,555 2.61 151,555MR UDESHI ANANT HARGOVIND 36,048 0.62HEMAS HOLDINGS PLC 32,500 0.56MR C F G PERERA (DECEASED) 20,160 0.35 20,160MR Y I JAFFERJEE 15,120 0.26 15,120MR H W M WOODWARD 15,070 0.26 15,070MS D PEIRIS 13,820 0.24 13,820MR G C GOONETILLEKE 12,420 0.21 12,420BNYMSANV RE-MILLVILLE OPPORTUNITIES MASTER FUND, LP 10,760 0.19MRS H A D WIJESUNDERA 10,000 0.17 10,000MR KATHIRGAMATAMBY (DECEASED) 10,000 0.17 10,000MRS D KUMARANAYAGAM 10,000 0.17 10,000MR R MAHESWARAN 9,047 0.16MISS M P RADHAKRISHNAN 9,047 0.16MISS A RADHAKRISHNAN 9,046 0.16MR M H M SANOON 8,600 0.15 8,600MRS MATHEW CLARICE 8,553 0.15 10,570DR T A WEERASURIYA 8,100 0.14 8,100MRS L S TUDUGALLE 7,860 0.14 7,860 5,627,345 96.70

J.l.MORISON SON & JONES (CEYlON) PlC - NON VOTING List of 20 Major Shareholders based on their Shareholdings as at 31 March 2017 2017 2016 No of Shares (%) No of SharesHEMAS MANUFACTURING (PRIVATE) LIMITED 1,478,349 84.84 1,478,349HEMAS HOLDINGS PLC 102,076 5.86MR G C GOONETILLEKE 15,000 0.86 15,000MRS E E M WOODWARD 6,620 0.38 6,620MR C F G PERERA (DECEASED) 6,040 0.35 6,040MR R J G DE MEL 4,860 0.28 4,860MR Y I JAFFERJEE 4,530 0.26 4,530MRS D PIERIS 4,140 0.24 4,140DR H W E TISSERA 3,990 0.23 3,990MS PEOPLES LEASING & FINANCE PLC/C D KOHOMBANWICKRAMAGE 3,473 0.20MR M H M SANOON 3,420 0.20 3,420MRS R G ABDULHUSSEIN 3,140 0.18 3,900MRS H A D WIJESUNDERA 3,000 0.17 3,000MR N KATHIRGAMATAMBY (DECEASED) 3,000 0.17 3,000MRS D KUMARANAYAGAM 3,000 0.17 3,000MR R MAHESWARAN 2,714 0.16MISS M P RADHAKRISHNAN 2,713 0.16MISS A RADHAKRISHNAN 2,713 0.16MR S S B KARUNARATNE 2,700 0.15 2,700MRS C MATHEW 2,700 0.15 2,700 1,658,178 95.17

72 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

COMPUTATION OF % OF PUBLIC SHAREHOLDING - 31 MARCH 2017 (VOTING)

NuMBER OF SHARES

ultimate Parent Company

Hemas Holdings PLC 32,500

32,500

Parent Company

Hemas Manufacturing (Private) Limited 5,229,639

5,229,639

Subsidiaries or Associate Companies

MSJ Industries (Ceylon) (Private) Limited -

MSJ Cargoes (Ceylon) (Private) Limited -

MSJ Promotional Services (Private) Limited -

Agranta (Private) Limited -

-

Directors’ Shareholding

Mr. H.N.Esufally -

Mr. S.M.Enderby -

Mr. R.A.J.T.Perera 151,555

Mr. P.R.Fernando -

Mrs. B.A.I.Rajakarier -

Mr. R. Chakravarti -

151,555

Spouses and Children under 18 of Directors

Mrs. S.R.A.Esufally -

Mrs. M. Enderby -

Mrs. N.S.S.Perera -

Mrs. P.N.S.Fernando -

Mr. T. J. S. Rajakarier -

Mrs. S. Chakravarti -

-

CEO, Spouse & Children

Mr. R.A.J.T.Perera (refer above) -

Mrs. N. S.S.Perera (refer above) -

-

73 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

NuMBER OF SHARES

Over 10% Holding

Hemas Manufacturing (Private) Limited (Refer above) -

-

Issued Share Capital as at 31 March 2017 5,808,290

Less

Ultimate Parent Company 32,500

Parent Company 5,229,639

Subsidiaries or Associate Companies -

Directors shareholding 151,555

Spouses and Children under 18 of Directors -

CEO, Spouse & Children -

Over 10% holding -

Public Holding 394,596

Public Holding as a % of Issued Share Capital 6.79%

Number of Public Shareholders 593

Number of persons holding shares excluded when computing public holding % 3

Number of Shareholders Representing the Public Holding 590

74 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

COMPUTATION OF % OF PUBLIC SHAREHOLDING - 31 MARCH 2017 (NON-VOTING)

NuMBER OF SHARES

ultimate Parent Company

Hemas Holdings PLC 102,076

102,076

Parent Company

Hemas Manufacturing (Private) Limited 1,478,349

1,478,349

Subsidiaries or Associate Companies

MSJ Industries (Ceylon) (Private) Limited -

MSJ Cargoes (Ceylon) (Private) Limited -

MSJ Promotional Services (Private) Limited -

Agranta (Private) Limited -

-

Directors’ Shareholding

Mr. H.N.Esufally 600

Mr. S.M.Enderby -

Mr. R.A.J.T.Perera 120

Mr. P.R.Fernando -

Mrs. B.A.I.Rajakarier -

Mr. R. Chakravarti -

720

Spouses and Children under 18 of Directors

Mrs. S.R.A.Esufally -

Mrs. M. Enderby -

Mrs. N.S.S.Perera -

Mrs. P.N.S.Fernando -

Mr. T. J. S. Rajakarier -

Mrs. S. Chakravarti -

-

75 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

NuMBER OF SHARES

CEO, Spouse & Children

Mr. R.A.J.T.Perera (refer above) -

Mrs. N.S.S. Perera (refer above) -

-

Over 10% Holding

Hemas Manufacturing (Private) Limited -

(Refer above) -

-

Issued Share Capital as at 31 March 2017 1,742,490

Less

Ultimate Parent Company 102,076

Parent Company 1,478,349

Subsidiaries Companies or Associate Companies -

Directors shareholding 720

Spouses and Children under 18 of Directors -

CEO, Spouse & Children -

Over 10% holding -

Public Holding 161,345

Public Holding as a % of Issued Share Capital 9.26%

Number of Public Shareholders 464

Number of persons holding shares excluded when computing public holding % 4

Number of Shareholders Representing the Public Holding 460

76 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

GROUP FINANCIAL HIGHLIGHTS - 5 YEAR SUMMARY

TRADING RESulTS: 2012/13 2013/2014 2014/2015 2015/2016 2016/2017

Profit Before Tax 202,450,511 279,687,415 352,255,227 500,116,001 646,284,881Taxation (62,532,415) (68,930,170) (105,164,380) (148,937,368) (129,568,755) 139,918,096 210,757,245 247,090,847 351,178,633 516,716,126Minority Interest (2,474) (3,032) (666) - -Group Profit After Tax 139,915,622 210,754,213 247,090,181 351,178,633 516,716,126 FuNDS EMPlOYED: Stated Capital 7,924,800 7,924,800 7,924,800 7,924,800 7,924,800Revaluation Reserve 713,174,119 736,819,694 736,819,694 805,592,775 805,592,775General Reserve 730,800,000 730,800,000 730,800,000 730,800,000 730,800,000Investment Function Reserve - - - - -Available for Sale Reserve 1,829,531 2,453,323 1,944,467 1,598,217 -Retained Earnings 455,742,282 653,053,784 860,053,984 1,128,083,136 1,488,766,109Shareholders’ Funds 1,909,470,732 2,131,051,601 2,337,542,945 2,673,998,928 3,033,083,684Minority Interest (2,474) 107,967 107,231 107,231 -Total Equity 1,909,478,258 2,131,159,568 2,337,650,176 2,674,106,159 3,033,083,684Long Term Liabilities 50,869,580 6,979,705 376,050,070 250,016,000 125,024,000Deferred Liabilities 115,722,728 113,170,323 136,095,653 160,760,363 179,837,238 2,076,060,566 2,251,309,596 2,849,795,899 3,084,882,522 3,337,944,922

ASSETS EMPlOYED:Current Assets 1,655,425,037 1,562,288,052 2,420,686,720 2,883,318,754 3,185,386,481Current Liabilities 617,246,853 384,253,684 743,095,760 1,113,763,261 1,258,738,278Net Current Assets 1,038,178,184 1,178,034,368 1,677,590,960 1,769,555,493 1,926,648,203Investment in Associate/Subsidiary Companies 2 2 2 2 2Long Term Investments 5,430,885 6,054,677 5,545,821 4,616,271 -Property, Plant & Equipment 1,020,013,979 1,067,220,549 1,151,659,116 1,295,710,756 1,396,296,717Intangible Assets 1,500,000 - 15,000,000 15,000,000 15,000,000Deferred Tax Assets 11,044,925 - - - - 2,076,167,975 2,251,309,596 2,849,795,899 3,084,882,522 3,337,944,922

Return on Equity 7.33% 9.89% 10.57% 13.13% 17.04%Current Ratio 2.68 4.07 3.26 2.59 2.53Gearing Ratio 11.79% 0.61% 17.82% 15.33% 13.27%Earnings per Share (Rs.) 18.53 27.91 32.72 46.50 68.43Net Assets per Share (Rs.) 252.90 282.24 309.59 354.15 401.69Dividend per Share (Rs.) - Declared & Paid - 3.00 - - 10.00 - Proposed 2.00 - 4.00 10.00 5.00Dividend Cover 9.26 9.30 8.18 4.65 4.56Price/Earning Ratio 9.44 9.07 8.71 7.31 4.97Market Value per Share (Voting) Rs. 175.00 253.10 285.00 340.00 340.00Market Value per Share (Non-Voting) Rs. 101.00 210.00 230.00 290.10 339.20Dividend Payout Ratio 0.11 0.11 0.12 0.21 0.22

The following stable market prices were recorded for the year Voting Non-Voting

Highest - Rs. 399.80 350.00Lowest - Rs. 330.00 280.00

Market prices recorded as at the end of the financial year 340.00 339.20

77 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

notiCe oF Meeting

NOTICE IS HEREBY GIVEN that the Seventy Eighth (78th) Annual General Meeting of the Company will be held at 3.00 pm on Friday, 23 June 2017, at the Auditorium of the Institute of Chartered Accountants of Sri lanka, No 30A, Malalasekera Mawatha, Colombo 7, for the following purpose:-

AGENDA

1. To receive and consider the Statements of Accounts of the Company and the Group for the year ended 31 March 2017, together with the Reports of the Directors and Auditors thereon.

2. To re-elect as Director, Mr. Steven Mark Enderby retiring in terms of Article 85 of the Articles of Association of the Company.

3. To re-elect Ms. Bodiyabaduge Arundathi Indira Rajakarier as director in terms of Article 92 of the Articles of Association.

4. To re-elect Mr. Ranjan Chakravarti as director in terms of Article 92 of the Articles of Association.

5. To declare a final dividend of Rs. 5.00 per ordinary voting and non-voting share as recommended by the Directors.

6. To re-appoint Messrs Ernst & Young, Chartered Accountants as Auditors for the ensuing year and to authorise the Directors to determine their remuneration.

7. To authorise the Directors to determine and make donations to Charity.

By Order of the Board ofJ. L. Morison Son & Jones (Ceylon) PLC

Hemas Corporate Services (Pvt) ltdsecretaries

31 May 2017

NoteA member entitled to attend and vote at the Meeting may appoint a Proxy to attend and vote in his/her place.A Proxy need not be a Member of the Company.A Form of Proxy accompanies this Notice.

• Please bring a valid document of identity for registration purposes.

78 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

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79 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

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80 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

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81 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

FORM OF PROXY - J. L. MORISON SON & JONES (CEYLON) PLC (VOTING)

I/We .....................................................................................................................................................................................................................

of .............................................................................................................................................being a member/members of the above named company hereby appoint:

Mr. Husein Esufally of Colombo or failing himMr. Trihan Perera of Colombo or failing him Ms. Arundathi Rajakarier of Colombo or failing himProf. Ravindra Fernando of Colombo or failing him Mr. Ranjan Chakravarti of Colombo or failing him Mr. Steven Enderby of Colombo or failing him

………………………………………………………………………………………………………………………………. of ....................................................................................

………………………………………………………………………………………………………………………………………………………………… as my/our* Proxy to represent me/us* and vote for me/us* on my/our* behalf at the Annual General Meeting of the Company to be held on Friday, the 23rd day of June, 2017 at 3.00 pm at the Auditorium of the Institute of Chartered Accountants of Sri Lanka, No 30A, Malalasekera Mawatha, Colombo 7 and at any adjournment thereof.

For Against 1. To receive and consider the Statements of Accounts of the Company and the Group for the year ended

31.03.2017 together with the Reports of the Directors and Auditors thereon. 2. To re-elect as Director, Mr. Steven Mark Enderby retiring in terms of Article 85 of the Articles of Association

of the Company.

3. To re-elect Ms. Bodiyabaduge Arundathi Indira Rajakarier as director in terms of Article 92 of the Articles of Association

4. To re-elect Mr. Ranjan Chakravarti as director in terms of Article 92 of the Articles of Association as recommended by the Board.

5. To declare a final dividend of Rs.5.00 per ordinary voting and non-voting share as recommended by the Board.

6. To re-appoint M/s Ernst & Young, Chartered Accountants, as auditors of the Company and authorise the Directors to determine their remuneration.

7. To authorise the Directors to determine and make donations to Charity.

*The Proxy may vote as he/she thinks fit on any other resolution brought before this meeting.

…………………… Date:Signature/s

Note:* Please delete the inappropriate words.The proxy holder is kindly requested to bring a valid document of identity. Instructions as to completion are noted on the reverse hereof.

82 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

Form of Proxy - J. L. Morison Son & Jones (Ceylon) PLC(Voting) (Contd.)

Instructions as to Completion of Form of Proxy

1. Kindly perfect the Form of Proxy after filling in legibly your full name and address and by signing in the space provided. Please fill in the date of signature.

2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of him/her.

3. In the case of Corporate Members, the Form of Proxy must be completed under the Common Seal, which should be affixed and attested in the manner prescribed by the Articles of Association /Statutes.

4. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy.

5. The completed Form of Proxy, addressed to the Secretaries should be deposited at Hemas House, No. 75, Braybrooke Place, Colombo 2 not less than Forty Eight (48) hours before the time appointed for the Meeting.

83 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

FORM OF PROXY - J. L. MORISON SON & JONES (CEYLON) PLC (NON-VOTING)

I/We .....................................................................................................................................................................................................................

of .............................................................................................................................................being a member/members of the above named company hereby appoint:

Mr. Husein Esufally of Colombo or failing himMr. Trihan Perera of Colombo or failing himMs. Arundathi Rajakarier of Colombo or failing himProf. Ravindra Fernando of Colombo or failing himMr. Ranjan Chakravarti of Colombo or failing himMr. Steven Enderby of Colombo or failing him

………………………………………………………………………………………………………………………………. of ....................................................................................

………………………………………………………………………………………………………………………………………………………………… as my/our* Proxy to represent me/us* on my/our* behalf at the Annual General Meeting of the Company to be held on Friday, the 23rd day of June 2017 at 3.00pm at the Auditorium of the Institute of Chartered Accountants of Sri Lanka, No 30A, Malalasekera Mawatha, Colombo 7 and at any adjournment thereof.

…………………… Date:Signature/s

Note:* Please delete the inappropriate words.

The Proxy holder is kindly requested to bring a valid document of identity.Instructions as to completion are noted on the reverse hereof.

84 J. L. MORISON SON AND JONES (CEYLON) PLCANNUAL REPORT 2016 / 17

Form of Proxy - J. L. Morison Son & Jones (Ceylon) PLC(Non-Voting) (Contd.)

Instructions as to Completion of Form of Proxy1. Kindly perfect the Form of Proxy after filling in legibly your full name and

address and by signing in the space provided. Please fill in the date of signature.

2. In the case of Corporate Members, the Form of Proxy must be completed under the Common Seal, which should be affixed and attested in the manner prescribed by the Articles of Association/Statutes.

3. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy.

4. The completed Form of Proxy, addressed to the Secretaries should be deposited at Hemas House, No. 75, Braybrooke Place, Colombo 2 not less than Forty Eight (48) hours before the time appointed for the Meeting.

Legal FormQuoted Public Company with Limited Liability.Listed on the Colombo Stock Exchange on 1st January 1964

Date of Incorporation31st January 1939

Date of Re-registration5th September 2007

New Registration NumberPQ 77

Accounting Year End31st March

Registered Office“Hemas House” No. 75 Braybrooke Place,Colombo 2Tel; 0114 731 731 (Hunting)Fax: 0114731777

AuditorsErnst & YoungChartered AccountantsNo. 201, De Saram Place,Colombo 10

DirectorsMr. H.N. Esufally (Chairman)Mr. R. A. J. T. Perera (MD)Ms. B.A. I. RajakarierProfessor P. R. FernandoMr. R. ChakravartiMr. S.M. Enderby

SecretariesHemas Corporate Services (Pvt) Ltd“Hemas House” No. 75 Braybrooke Place,Colombo 2Tel; 0114 731 731 (Hunting)Fax: 0114731777

RegistrarsSSP Corporate Services (Pvt) Ltd101, Inner Flower Road,Colombo 3

Lawyers to the CompanyJulius & CreasyNo. 41, Janadhipathi Mawatha,Colombo 1.

BankersBank of CeylonPeople’s BankStandard Chartered BankNDB BankNations Trust BankHSBC BankSampath BankDeutsche BankCommercial Bank

Corporate InformatIon

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Contents

milestones and events 2Chairman’s message 6managing Director’s message 8Directors’ Profiles 10Sustainability Report 12Corporate Governance 15Report of the Board of Directors 20Annual Report of the Directors 21The Audit Committee Report 25The Related Party Transactions Review Committee Report 27Statement of Directors’ responsibility 28Independent auditors’ report 29Statement of Financial Position 30Statement of Profit or Loss 31Statement of Comprehensive Income 32Statement of Changes in Equity 33Statement of Cash Flows 34Notes to the Financial Statements 35Analysis of Shareholders According to the Number of Shares as at 31 March 2017 70Other Information to Shareholders & Investors 71Computation of % of Public Shareholding - 31 March 2017 (Voting) 72Computation of % of Public Shareholding - 31 March 2017 (Non-Voting) 74Group Financial Highlights - 5 Year Summary 76Notice of Meeting 77Notes 78Form of Proxy - J. L. Morison Son & Jones (Ceylon) PLC (Voting) 81Form of Proxy - J. L. Morison Son & Jones (Ceylon) PLC (Non-Voting) 83Corporate Information Inner Back Cover

J. L. Morison son & Jones (CeyLon) PLC

J. L. Morison son &

Jones (Ceylon) PLC | Annual report 2016/17

Annual Report 2016/17

www.jlmorisons.com