SATHOSA MOTORS PLC ANNUAL REPORT 2020/21

SATHOSA MOTORS PLCANNUAL REPORT

2020/21

SATH

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A M

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PLC

| AN

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RT 2020/21

Sathosa Motors PLC Annual Report 2020/211

RealignedNo matter the status, the career or the need, every successful journey is a confident one when you are firmly in the driver’s seat. While the year under review did not bring about the results we anticipated due to the pandemic, we chose to keep our hands firmly on the wheel in order to convert challenges into unlimited possibility. This year we mark as one of adaptability, resilience and being more outgoing in our brand presence. And as we venture into diversifying our offerings, we hope to be steered in the right direction realigned towards comprehensiveness and in complete control of our growth.


Contents

overview

About this Integrated Report 3

About Us 4

Group Profile & Group Structure 4

Our Vision, Our Mission & Key Corporate Values 5

Company History 6

Financial Overview 7

Management Reviews

Chairman’s Message 10

Management Review 12

Board of Directors 16

Senior Management 20

Business Model 24

Corporate Governance 26

Enterprise Risk Management 45

Operating Landscape 59

Financial Capital 62

Human Capital 67

Intellectual Capital 71

Manufactured Capital 74

Natural Capital 76

Social and Relationship Capital 80

Financial statements

Audit Committee Report 91

Remuneration Committee Report 93

Related Party Transactions Review Committee Report 94

Strategic Planning Committee Report 96

Annual Report of the Board of Directors on the Affairs

of the Company 97

The Statement of Directors Responsibility 102

Directors Statement on Internal Control Introduction 103

Financial Calendar 104

Independent Auditor’s Report 105

Statement of Profit or Loss and Other

Comprehensive Income 110

Statement of Financial Position 111

Statement of Changes in Equity 112

Statement of Cash Flows 113

Notes to the Financial Statements 114

supplementary Information

SML Branch Network / Locations 178

Decade at a Glance 179

Abbreviations 180

GRI Content Index 181

Notice of Annual General Meeting 185

Form of Proxy 187

Corporate Information Inner Back Cover


ABout thIs IntegRAted RepoRt

About This Report

It is a pleasure to present Sathosa Motors

PLC’s (referred as SML or SATHOSA

Motors) third integrated Annual Report.

This report provides a comprehensive

understanding of Sathosa Motors PLC

referred to as the Company as well as

its subsidiary, Access Motors (Private)

Limited collectively referred to as the

Group. This Report will also share

Sathosa Motors’ financial and operational

performance for the year ending 31

March, 2021 and our collective strategies

to overcome the year’s challenges.

Purpose

We believe this report would provide our

stakeholders an overall understanding of

the challenges, strategies, performance

and direction of the Company within the

external environment, and the Company’s

strategic direction towards achieving

medium and long term value.

Scope and Boundaries

This Report comprise of two main

sections. From pages 4 to 103, it presents

the Management Review and Discussion,

while from pages 104 to 179, it presents

the financial disclosure information.

It will outline the Company’s human

and intellectual capital initiatives

during the pandemic, as well as our

commitment towards the environment

and social capital. We hope this provides

stakeholders an accurate assessment of

SML’s value creation.

Board Responsibility

This Integrated Annual Report was

developed under the guidance and

supervision of the Board and the Senior

Management of Company. This Report is

believed to contain a fair and objective

representation of the integrated

performance of the Company, its impacts

and all other material matters.

Forward Looking Statements

This Annual Report contains predicative

forward looking statements that

may alter, subject to numerous and

unforeseen external and internal factors.

There are risks and conditions that are

solely out of SML’s control, and therefore

the Board cannot be held responsible

for any forward looking statements

which are not assurances of future

performance.

Compliance

In keeping with integrated reporting

standards, this report has been presented

in accordance with GRI Standards:

Comprehensive option. The Board and the

Management have strived to apply the

recommendations of the GRI framework in

this report and conform to the guidelines

and concepts of Global Reporting Initiative

(GRI) Sustainability Reporting Standards,

and the Code of Best Practices on

Corporate Governance issued by CA Sri

Lanka.

This Integrated Annual Report is also

developed in compliance with the

Companies Act No. 07 of 2007 and

guidelines issued by the Securities and

Exchange Commission of Sri Lanka,

the International Integrated Reporting

Framework (IIRC) and the listing rules

of the Colombo Stock Exchange. SML’s

annual financial statements were

prepared in accordance with Sri Lanka

Accounting Standards (LKASs /SLFRSs)

guidelines laid down by the Institute of

Charted Accountants of Sri Lanka.


ABout us

estABLIshed In 1962, sAthosA MotoRs pLC hAs gRoWn to BeCoMe sRI LAnKA’s tRusted LeAdeR In the AutoMotIVe IndustRY. ouR Long-RunnIng pARtneRshIp WIth IsuZu MotoRs Ltd, hAs ALLoWed us to suppLY the doMestIC MARKet WIth the hIghest QuALItY CoMMeRCIAL VehICLes At the Most AFFoRdABLe pRICes. We ARe the nuMBeR one dIstRIButoR oF CoMMeRCIAL VehICLes In the CountRY, CAteRIng to A RAnge oF KeY eConoMIC seCtoRs.

Automobile Industry

01). sathosa Motors pLC

Authorised distributor for ISUZU in Sri Lanka

Sathosa Motors PLC (SML) is the franchise holder for Isuzu vehicles

and spare parts manufactured by Messrs Isuzu Motors Limited.

The key business lines of SML are sales of new vehicles, sales of

spare parts, workshop services and marine engine sales. Over the

decades, SML has created a value proposition to its loyal customer

base by providing unmatched after sales care service. SML caters

to the country’s need for reliable, low maintenance transportation

solutions, especially to the business community. SML will further

expand its position as a trusted leader in the automotive industry.

Staff Composition

Staff category Staff as at 31 March 2021

Managerial 15

Operational 24

Clerical and supportive 142

Total 181

gRoup pRoFILe & gRoup stRuCtuRe

Having been an active participant

in the country’s growth story, our

company is gearing itself to meet the

needs of an economy that is now on

an accelerated growth trajectory. Our

strong relationships with customers in

high-growth sectors such as agriculture,

construction, tourism, transport, fishery

and logistics have us going from strength

to strength.

As a publicly listed company, we are

dedicated to the highest standards of

integrity, transparency, responsibility and

ethical conduct. We believe in cultivating

a dynamic and productive organisational

culture to achieve the highest levels

of customer satisfaction while also

supporting wider economic activity and

deriving maximum benefits to all our

valued stakeholders.

Our dealership network comprises 120

dealers across the island, providing

total coverage in terms of spare parts

availability and comprehensive

after-sales services in all provinces.

02). Access Motors (pvt) Ltd – subsidiary Company

Authorised distributor for Jaguar and Land Rover in Sri Lanka

Established in 2012, Access Motors (Private) Limited is the sole

authorised distributor of Jaguar and Land Rover vehicles and

spare parts in Sri Lanka and operates in a highly competitive

premium automobile segment.

Staff Composition

Staff category Staff as at 31 March 2021

Managerial 14

Operational 56

Clerical and supportive 23

Total 93


ouR MIssIon

KeY CoRpoRAte VALues

To achieve excellence in customer satisfaction by cultivating a dynamic and productive organisational culture with highly motivated staff to provide the best quality vehicles at competitive and affordable prices, thereby generating the maximum benefit to all our stakeholders.

We value and believe in maintaining the highest standards of integrity, honesty, transparency, responsibility and ethical behaviour in all our dealings and transactions.

We respect the dignity of people

We are passionate about delivering the highest levels of service quality to all our internal and external stakeholders.

We encourage and respect diversity among our team in order to create an inclusive organisational culture.

We believe in leading by example.

We firmly believe in taking all prudent and responsible measures to strengthen our Company’s financial foundation.

We believe in the importance of ensuring excellence in all our processes and systems as a means of maintaining a strong niche position in the Sri Lankan market from expanding our dealership network, to introducing innovative product ranges to the market, to market development, to leveraging training as an opportunity to enhance expertise and productivity.

We are committed at all times to strengthening the corporate image of Sathosa Motors by communicating and delivering on our core values.

ouR VIsIon to be the trusted leader in the sri Lankan Automobile Industry by ensuring that we deliver only the best quality to our valued customers.

gRoup pRoFILe & gRoup stRuCtuRe


CoMpAnY hIstoRY

Although the demand for Japanese vehicles, especially for commercial vehicles, was

not encouraging in the 1960’s and early 1970’s, after the liberalisation of imports in

1978, Isuzu became the most sought after vehicle by fleet owners, government sector

etc.

Isuzu vehicles and spare parts imports and sales were handled by the New Vehicles &

Machinery Department of C.W.E. up to 1985.

The Ministry of Trade and Commerce under whose purview C.W.E. operated, decided to

convert the New Vehicles & Machinery Department as a fully owned subsidiary company

of the Co-operative Wholesale Establishment titled as “Sathosa Motors Limited” on

01 January 1985 to give more freedom to carry on business operations efficiently,

facing the competition from other vehicle dealerships.

Sathosa Motors Limited commenced operations with an issued capital of LKR

15,000,007 in 1985. In keeping with the government Policy, the Company was peoplised

on 26 August 1992 and 60% of issued capital was acquired by M/s C Itoch & Co., Limited

(ITOCHU Corporation) Tokyo, Japan, one of the largest trading organisations (Sogo-

Shosa) in Japan. Of the remainder, 10% was gifted to employees and 30% was issued to

the General Public.

In order to comply with new Companies Act No. 7 of 2007 the company was re-

registered as Sathosa Motors PLC.

Access Engineering PLC (AEL), a leading business enterprise in Sri Lanka, acquired the

shareholding held in Sathosa Motors PLC by ITOCHU Corporation of Japan in February

2012. Subsequently through the mandatory share purchase offer Access Engineering

increased their shareholding up to 84.42%.

The Company invested in 50% of the

equity of Access Motors (Private) Limited

on 01 April 2013.

Sathosa Motors PLC is the franchise

holder for Isuzu vehicles and spare parts

manufactured by M/s Isuzu Motors Ltd.

The Isuzu range of vehicles consists of

Double Cab Pickup Trucks, Light Duty

and Heavy Duty Commercial Vehicles,

Luxury Passenger Coaches and Special

Purpose Vehicles such as Fire Trucks,

Logging Trucks, Dump Trucks, Water &

Fuel Bowsers and various other types

of vehicles required in construction,

distribution of goods etc.

Our Head Office is situated at No.

25, Vauxhall Street, Colombo 02,

which comprises new vehicles sales

showrooms, spare parts department

and workshop for Isuzu vehicle repairs.

SML recently opened its latest branch in

Negombo. Accordingly, the SML branch

network has now grown to a total of 07

branches, signalling a steady continuation

of the operation expansion strategy.

the origin of sathosa Motors pLC goes back to 1962, when the Isuzu Agency was secured by the Co-operative Wholesale establishment (C.W.e) in 1962. the first agreement was signed between M/s Isuzu Motors Limited, tokyo, Japan (Manufacturer), M/s C Itoch & Co. Ltd., (distributor) and Co-operative Wholesale establishment (Franchise holder).


FInAnCIAL oVeRVIeW

Financial highlights 2020/21 2019/20 Change (%)

LKR'000 group Company group Company group Company

earnings highlights and RatiosRevenue 3,881,585 2,362,952 4,195,960 2,560,750 (7.5) (7.7)

Gross Profit 635,916 426,203 794,844 434,135 (20.0) (1.8)

EBITDA 289,803 153,401 366,688 152,559 (21.0) 0.6

EBIT 110,533 90,650 194,740 91,960 (43.2) (1.4)

Profit / (loss) before tax (29,867) 4,323 (142,105) (127,021) 79.0 103.4

Profit Attributable to Owners of the Company (3,766) 5,448 (81,028) (81,006) 95.4 106.7

Earnings/ (loss) per Share LKR (0.62) 0.90 (13.43) (13.43) 95.4 106.7

statement of Financial positionhighlights and Ratios

Total Assets 3,871,513 2,859,223 6,547,237 4,802,589 (40.9) (40.5)

Stated Capital 115,924 115,924 115,924 115,924 - -

Retained Earnings 1,535,197 1,491,177 1,537,360 1,484,569 (0.1) 0.4

Total Equity/Shareholders' funds 2,160,081 1,607,102 2,171,017 1,600,493 (0.5) 0.4

Total Liabilities 1,711,432 1,252,122 4,376,221 3,202,096 (60.9) (60.9)

Current Assets 1,737,090 882,710 4,921,562 3,324,209 (64.7) (73.4)

Current Liabilities 1,426,554 1,198,063 4,030,107 3,149,849 (64.6) (62.0)

Net Asset per Share LKR 273.65 266.36 274.01 265.26 (0.1) 0.4

Investor highlights and RatiosPrice Per Share LKR - 225.00 - 260.20 - (13.53)

Gross Profit Margin % 16.4 18.0 18.9 17.0 (13.5) 6.39

Net Profit Margin % (0.3) 0.2 (1.9) (3.2) (82.4) (107.29)

Return on Equity % (0.6) 0.3 (3.7) (5.1) (83.7) (106.70)

Debt/Total Assets % 44.2 43.8 66.8 66.7 (33.9) (34.32)

Gearing times 0.4 0.5 1.4 1.6 (73.6) (67.99)

Current Asset Ratio times 1.2 0.7 1.2 1.1 (0.3) (30.19)

Quick Asset Ratio times 0.6 0.3 0.6 0.6 3.9 (41.62)

Consolidated Revenue

2016/170

2,000

4,000

6,000

8,000

10,000

12,000LKR Mn

2017/18 2018/19 2019/20 2020/21

LKR Mn

total Assets

2016/170

1,000

2,000

3,000

4,000

6,000

5,000

7,000

8,000

2017/18 2018/19 2019/20 2020/21

LKR Mn

net Assets

2016/171,350

1,400

1,450

1,500

1,550

1,650

1,600

1,700

1,750

2017/18 2018/19 2019/20 2020/21


ReALIgned FoR Long teRM gRoWth


ChAIRMAn’s MessAge

The 2020/21 financial year has been

a testing year for all industries across

the globe. The year saw governments

and industries grapple with the second

wave of the COVID-19 outbreak, which

paralysed many economies, including Sri

Lanka’s.

“sML Is WeLL AWARe oF the ChAngIng MARKet dYnAMICs And the need FoR sWIFt AdAptIon. We WILL ContInue to expLoRe neW oppoRtunItIes FoR gRoWth In LIne WIth the gRoup’s stRAtegIC gRoWth oBJeCtIVes. sML Is WeLL posItIoned to Meet these needs eVen In the FACe oF neW ChALLenges to CoMe.”

On the domestic front, the automobile

industry was one of the worst affected in

the 2020/21 financial year, as the state

imposed a vehicle import ban, coupled

with the economic slowdown caused

by the pandemic, had the industry in a

dilemma.

New motor vehicle registrations declined

drastically by 44.8% during the year

as a result of policy measures taken to

curtail non-essential imports, including

the importation of all motor vehicles for

personal use, and most of the vehicles

for commercial use. Notable reductions

in registrations were seen across all


vehicle categories, with new registrations

of motor cars, goods transport vehicles

and dual purpose vehicles declining by

45%, 24%, and 29% respectively.

Despite the challenging external

environment, I am pleased to share that

the perseverance of the management

teams and the strategic re-alignment of

our core business segments have helped

Sathosa Motors PLC (SML) close the year

ended 31 March 2021, on a positive note.

Company Performance

The year presented multiple challenges

for Sathosa Motors PLC. On one hand, the

core business segments of commercial

vehicle sales were negatively impacted

by the vehicle import ban. On the other

hand, vehicle maintenance servicing

was impacted by the COVID-19 lockdown

which restricted customer movement.

However, with the ‘new normal’ setting

in place, investments in main repair

and maintenance workshop, and other

workshops and spare part outlets

in strategic locations and the go-to

market strategies in our lineup of ISUZU

commercial vehicles proved profitable for

the Group.

I am pleased to share that during the year,

the company recorded its highest spare

parts revenue, a historic high for the

spare parts business segment.

Notwithstanding the external macro-

economic environment and COVID-19

challenges, the Company also reported a

LKR 5 Mn profit during the financial year,

compared to the loss of LKR 81 Mn the

previous year.

Strategic Approach

Some of the challenges we’ve faced as a

group were new to us, which meant we

had to understand them and adapt swiftly.

The ability of a business to adapt and

change in a timely manner to the dynamic

and macro environment needs is critical

to its stability and sustenance. The

last two years have tested just that of

companies and industries.

SML is well aware of the changing

market dynamics and the need for swift

adaption. We will continue to explore new

opportunities for growth in line with the

Group’s strategic growth objectives. SML

is well positioned to meet these needs

even in the face of new challenges to

come.

Corporate Governance & Sustainability

Sathosa Motors PLC has in place, a

robust corporate governance framework

that ensures that our financial, social

and natural capital works well. At

each level of our management and

operations, the Company follows

governing principles designed to uphold

transparency and integrity at all levels.

The Company’s Board of Directors, the

Senior Management, and employees

follow a Code of Ethics that is aligned with

regulatory requirements.

As an industry leader in our segment,

we have continued to incorporate

systems, procedures and policies that are

environmentally friendly. Working in close

partnership with government authorities

and partners, we continuously seek better

ways to reduce any negative impacts on

the environment.

Looking Ahead

We believe that the worst has passed, and

the future holds greater opportunities

to expand and grow. The year’s

challenges have made us stronger and

our commitment much sturdier. Sathosa

Motors PLC is determined to seize these

opportunities in broadening our presence,

and diversifying our product and service

portfolio.

We look forward to venturing into new

businesses in line with the company’s

goals and exploring feasible investments

under the government’s vision towards

a booming domestic industrial and

manufacturing sector.

We are confident that SML’s brand equity,

customer confidence and service quality,

together with continuous innovation,

technology infusion and integrity will

steer the Company’s growth into the

future.

Appreciation

2020/21 has been a challenging year,

which Sathosa Motors PLC faced with

courage and confidence. I am thankful

to SML’s Board of Directors who placed

their unwavering trust and confidence

throughout this period. Our employees

have been a strength to SML. Their

commitment to ensure that our services

were available to our consumers was

truly outstanding. Therefore, I would

like to express my sincere gratitude

to our employees whose dedication

and determination has resulted in the

company’s progressive performance. I am

sincerely grateful to ISUZU Motors and

Itochu Corporation for the many years of

trusted partnership. I wish to also thank

our shareholders for their continued faith

in Sathosa Motors PLC.

s J s pereraChairman

04 August 2021


MAnAgeMent ReVIeW

We consider the financial year 2020/21

as a year of many unforeseen challenges

as well as an opportunity to strengthen

our fundamentals despite the COVID-19

pandemic followed by economic

downturn. As was experienced by many

industries, the automobile industry

was affected due to the restrictions

imposed on vehicle importation. The

relentless obstacles of the year tested our

resilience to withstand challenges, and to

overcome them by timely decisions and

perseverance.

The year also tested our ability and

effort in building brand equity, customer

relationships, investment in improving

and expanding our network, focus in value

chain activities, the quality of our product

and service portfolio, and the training

and rewarding our staff. Our sustenance

in 2020/21 relied on all stakeholders’

patronage and brand equity, as well as the

quality of our products and services.

We are pleased to share that at a time

when the automobile industry was feeling

the impacts of the government’s import

restrictions and the unfavourable macro-

economic status, Sathosa Motors PLC has

overcome those challenges and seized

opportunities to end the year positively.

Financial Performance

Sathosa Motors PLC’s revenue during

the year under review was at LKR 2,363

Mn, a drop of 7.7% compared with LKR

2,560.7 Mn reported in the 2019/20

financial year. However, the Company’s

net profits improved to LKR 5 Mn vis-a-

vis a loss of LKR 81 Mn reported during

the corresponding period of the previous

financial year, thereby outperforming

previous year’s performance.

During the first quarter of the year, the

Company was closed due to the COVID-19

lockdown which resulted in a significant

impact on business, on top of the vehicle

import ban. As a result, in the first few

months of the financial year, overhead

costs were higher than the revenue being

generated.

The import restriction led to a vehicle

sales revenue drop of 14% compared

to the previous financial year. However,

SML recorded the highest spare parts

sales in history during the final quarter

of 2020/21. The total spare parts revenue

increased by 17% over the last financial

year.

SML’s investments in workshop

facilities in the previous year, reaped

benefits during the current financial

year contributing LKR 81.1 Mn to the

Company’s total GP, which is an increase

of 20%. All in all, despite the many

economic, pandemic and regulatory

challenges, Sathosa Motors has

performed favourably in 2020/21.

“the ReLentLess oBstACLes oF the YeAR tested ouR ResILIenCe to WIthstAnd ChALLenges, And to oVeRCoMe theM BY tIMeLY deCIsIons And peRseVeRAnCe.”


Reaping Benefits

Sathosa Motors PLC has been investing

extensively in workshop facilities and

by setting up new branches in strategic

locations in selected cities. During the

year, a new branch opened in Negombo

focusing on inboard marine engines

and spare parts sales. The branch’s

performance exceeded expectations, and

the high volumes contributed positively

to overall revenue. Further, the head-

office and Peliyagoda workshop facilities

were upgraded and improved, increasing

workshop capacity. Altogether, the Group

has increased its workshop capacity by

four times than its previous capacity,

catering to a larger clientele in more

regions. Although the sector had a slow

start due to the COVID-19 lockdown,

yet a steady growth in the volumes at

workshops were seen and the year

recorded historic highest in revenue.

In the absence of new vehicle sales

following the import restriction, Access

Motors, a subsidiary of the Group, had to

enter the resale market of luxury vehicles

for Land Rover and Jaguar. However,

the slower economy and increasing

uncertainty that loomed during the year

proved disadvantageous for the resale

vehicle market.

However, the Company’s decision to focus

on increased spare parts sales of both the

passenger vehicle range of Jaguar and

Land Rover and the commercial transport

range of ISUZU trucks brought in top line

performance. Although stock delays were

experienced due to shipping and import

slowdown, the year recorded a growth in

spare parts sales. The Group’s revenue

mostly came from spare parts and

workshop revenues, helped by customer

loyalty and confidence in the quality of our

products and the value of our services.

SML forsees further growth in the

commercial vehicle sales segment in the

coming years boosted by the investment

and construction growth in Sri Lanka.

Leveraging on the global brand equity,

and unparalleled reliability and quality

of ISUZU Motor’s commercial vehicle

range, SML would vigorously expand its

brand availability and presence across Sri

Lanka.

Facing the Future in the ‘New Normal’

We are mindful that during the year, many

external factors have changed beyond

our expectations, and the impacts of

these external factors are likely to remain

longer than initially anticipated.

The COVID-19 pandemic, which has

suffocated many economies is becoming

a way of life to be factored into our short

to medium term planning. The economic

slowdown; the upward trends in the

“We WILL ReVIsIt ouR CoRe BusIness AReAs In ReLAtIon to MARKet CondItIons undeR the ‘neW noRMAL’. ouR MedIuM to Long teRM pLAnnIng WILL tAKe Into ACCount the need to dIVeRsIFY ouR VehICLe pRoduCt oFFeRIngs BeYond RoAd BAsed pAssengeR And goods tRAnspoRtAtIon.”


exchange rate and inflation; shipping

and freight challenges such as limited

container spaces, increased freight

rates and higher shipping costs are of

concerns for our spare parts business.

We anticipate that state regulations

that curtail imports and import related

activities will continue hindering

passenger and commercial vehicle sales.

Further, impending random lockdown

curfews with each new variant of the

COVID-19 virus cannot be disregarded.

Our workshops and facilities will also

have to factor in the health and safety of

our staff, clients and other stakeholders

during the course of the pandemic.

We will revisit our core business areas in

relation to market conditions under the

‘new normal’. Our medium to long term

planning will take into account the need

to diversify our vehicle product offerings

beyond road based passenger and goods

transportation.

The Company plans to grow the after

sales and spare parts segment of the

business and introduce new business

ventures beyond its traditional and

comfort product lines. SML aims to

expand the workshop and spare parts

facilities in the coming year, offering new

and existing customers’ direct access to

obtain after sales services from regional

branches. In addition, where required, the

Company is keen to appoint dealers in

remote areas to support customers.

SML will also re-assess the traditional

methods of client servicing to identify

innovative ways to reach and service

clients more conveniently, safely and

efficiently.

In addition, we are keenly assessing

our internal processes, systems and IT

infrastructure to streamline and increase

efficiencies in our supply chain.

As a service company, our future is

determined by the value we can add

to our customers and their positive

experience with SML. We will continue

to strive to inspire our team whilst

integrating a spontaneous kaizen

culture to adopt a positive and customer

focused mindset as well as to face future

challenges in an ethical manner.

Sathosa Motors is optimistic about the

future and the impending growth potential

across business sectors, both current

and new. We will continue our vigorous

approach in investments towards

achieving sustainable growth despite

market conditions. SML aims to generate

new value additions leveraging on our

unique strengths. We are poised and

equipped to tackle external challenges

and to achieve our short, medium and

long term growth. Throughout these

efforts, SML will reinforce the corporate

“We WILL ContInue ouR VIgoRous AppRoACh In InVestMents toWARds AChIeVIng sustAInABLe gRoWth despIte MARKet CondItIons.”

MANAGEMENT REVIEW


foundation. We are committed to enhance

our shareholders value and to issue

earnings to shareholders frequently. We

are confident that the Group’s profitability

will increase as well as our sustainable

value creation for all stakeholders in the

coming year.

Acknowledgment

We wish to thank the Chairman and the

Board of Directors for their visionary

thinking, strategic guidance and faith in

our efforts in a time of adversity for the

industry and the nation. Sathosa Motors

PLC has sustained its business, while

focusing on all possible growth areas due

to the leadership and intuitive thinking,

and support of its management team.

The senior management and support

teams have contributed tirelessly and

steadfastly towards the growth and

sustenance of the Company despite the

risks presented by the pandemic. We

owe our appreciation and thanks to all of

them for their commitment and prudent

actions during this time which were a

key contributor to our sustainability and

sectorial growth.

Our employees have continued to

provide excellent service to our clients

and support SML to grow despite risks

to their health during the pandemic.

The Management expresses special

appreciation to all its employees for their

dedication and support during this time.

We recognise and appreciate Isuzu

Motors, Itochu Corporation and all our

business partners who have stood by us

through challenging times and we are

grateful for their continuous loyalty, trust

and support. We wish to thank all our

shareholders and all other stakeholders,

including all our loyal and valuable

customers, whose unwavering confidence

in the management has been a source of

strength in performing our duties. We look

forward to your continued support as we

steer through challenging times.

J C JoshuaManaging Director

K A p pereraExecutive Director - Sales & Marketing

M JayahsuriyaExecutive Director

04 August 2021


BoARd oF dIReCtoRs

Manoaj Jayahsuriya Sumal Perera Rohana Fernando

Christopher Joshua Priyantha Perera


Dharshana Munasinghe Sepala Dahanayake

Nelson De Silva Chiran Wijesinghe


Sumal PereraChairman (Non-Executive)

Sumal Perera was appointed to the Board

of Sathosa Motors PLC on 12 June 1998.

He is the Founder Chairman of the Access

Group of Companies founded in 1989.

He continues to be the Chairman of all

companies under the umbrella of the

Access Group. He is a Fellow Member of

the Chartered Institute of Management

Accountants - UK.

It is under his vision and leadership that

the Access Group of Companies has

grown to be a diversified and successful

business enterprise, in a span of over

three decades.

Joseph Christopher Joshua Managing Director (Executive)

Christopher Joshua was appointed to

the Board of Sathosa Motors PLC in April

2012 and also appointed as Managing

Director of Sathosa Motors PLC with

effect from 1 April 2019. He is one of the

Founder Directors and Shareholders of

Access Group of Companies and currently

serves as the Managing Director of

Access Engineering PLC. He is also the

Joint Managing Director of the Access

Group of Companies. He was instrumental

in heading some of the most successful

business units within the Access Group.

Companies under his purview include

Access Engineering PLC, Access Realties

(Private) Limited, Access Realties 2

(Private) Limited, Harbour Village (Private)

Limited, Lanka AAC (Private) Limited,

WUS Logistics (Private) Limited, Access

Logistics (Private) Limited, Access Energy

(Private) Limited, Access Natural Water

(Private) Limited, Eco Friendly Power

Developers (Private) Limited and business

units of Access International (Private)

Limited. He is also a Director of ZPMC

Lanka Company (Private) Limited and ARL

Elevate (Private) Limited.

Priyantha PereraExecutive Director, Sales & Marketing

Priyantha Perera is a Marketer and

Business Administrator by profession

with over 25 years of overall sales and

marketing experience. He has been in

the Automotive Industry for 19 years,

which includes 14 years at Toyota Lanka

(Private) Limited as a Senior General

Manager and 4 years at United Motors

Lanka PLC. He graduated from the

University of Sri Jayawardenepura with a

BSc. Management (Public) Special Degree

in 1999 and was awarded a Master’s

Degree in Business Studies (MBS) from

University of Colombo in 2009. He is also

a member of the Board of Directors at

Access Motors (Private) Limited.

Manoaj JayahsuriyaExecutive Director

Manoaj Jayahsuriya has over 34 years of

experience in diversified fields such as

the Sri Lanka Navy, operations, apparel

manufacturing, corporate planning and

human resources management. He is a

Project Management Professional (PMP)

who holds an MBA from the Postgraduate

Institute of Management (PIM) of

University of Sri Jayewardenepura,

BSc (Honours) from the University of

Colombo and a Postgraduate Diploma

in Psychology as well as several naval

professional qualifications. He is also

a Director of Access Motors (Private)

Limited.

Rohana FernandoNon-Executive Director

Rohana Fernando joined the Board of

Sathosa Motors PLC in September 2012.

He is an Engineer by profession and has

been attached to the Access Group since

1998. He is a Corporate Member of the

Institution of Engineers, Sri Lanka (IESL)

and has a BSc Degree in Civil Engineering

from the University of Peradeniya.

He currently holds the position of Director

/ COO of Access Engineering PLC. He is

also a Director of Access International

(Private) Limited, Eco Friendly Power

Developers (Private) Limited, Access

Realties (Private) Limited, Access Realties

2 (Private) Limited, Harbour Village

(Private) Limited, Access Projects (Private)

Limited, WUS Logistics (Private) Limited,

Access Logistics (Private) Limited, ARL

Elevate (Private) Limited and Lanka AAC

(Private) Limited.

Dharshana MunasingheNon-Executive Director

Dharshana Munasinghe was appointed to

the Board of Sathosa Motors PLC in April

2012. He has been attached to the Access

Group since 1996 and held Executive and

Senior Managerial positions throughout

his successful career.

Having held several positions in the

Group, he now functions as Director

– Business Development at Access

Engineering PLC. He is also a Director of

Access International (Private) Limited,

Access Motors (Private) Limited, Access

Realties (Private) Limited, Access Realties

2 (Private) Limited, ZPMC Lanka Company

(Private) Limited and ARL Elevate

(Private) Limited.

boARd of dIREcToRs


M M Nelson De Silva Independent Non-Executive Director

Nelson De Silva who joined the Board

of Sathosa Motors PLC in February

2009, is an Associate Member of the

Institute of Chartered Accountants of Sri

Lanka. He holds a B.Sc Degree in Public

Administration from the University of

Sri Jayawardenapura. He serves as the

Managing Director of Ned Management

Consultants (Pvt) Ltd and he is the sole

Proprietor of M M N De Silva & Company.

He has been the Group Accountant of

Tisara Group, Senior Accountant of John

Keells Group, Finance Manager of Finlay

Chemicals & Dyes (Pvt) Ltd, Director of PE

Management Consultants (Pvt) Ltd and

Partner of HLB Edirisinghe & Company.

Chiran WijesingheIndependent Non-Executive Director

Chiran Wijesinghe has over 13 years

of experience in Senior Management

positions in different organisations in

Sri Lanka & Overseas. He has worked as

the Manager in Risk Advisory Services

of KPMG Sri Lanka and Group Internal

Auditor of Oman Hotels & Tourism Co.

SAGO (OHTC) managed by Aitken Spence

Hotels (Pvt) Ltd.

He currently holds the position of Chief

Risk Officer of Hirdaramani Group of

Companies. He is a Fellow Member of

Institute of Chartered Accountants of Sri

Lanka (ICASL) and Member of Institute

of Internal Auditors (IIA) USA. He holds

a Master of Business Administration

(MBA) from the University of Southern

Queensland (USQ) and BSc. Business

Administration (Special) – University of

Sri Jayewardenepura.

Sepala DahanayakeIndependent Non-Executive Director

Sepala Dahanayake was appointed to

the Board of Sathosa Motors PLC in

August 2018. He is an attorney-at-law

by profession. He has appeared in both

criminal and civil courts for over 39

years since graduating Law College of Sri

Lanka in 1981. He is an acting magistrate

for more than 20 years. He has held the

Vice Presidency of the Bar Association of

Mount Lavinia (2001-2003).


senIoR MAnAgeMent

Indrajeewa Alahapperuma Priyantha Perera Manoaj Jayahsuriya

Dirk Joshua Christopher Joshua Lasitha Mendis


Joseph Christopher Joshua Managing director (Executive)

Profile given on page 18.

Priyantha PereraExecutive director, sales & Marketing


Manoaj JayahsuriyaExecutive director


Maurice Dirk JoshuaGeneral Manager - Marketing

Dirk Joshua joined Sathosa Motors

PLC in August 2018 with over 14 years'

progressive experience in strategic

planning, improving operational efficiency,

team building and project management.

He was working at Access Engineering

PLC as a Senior Manager – Business

Development, and was in charge of

securing tenders and other projects

through networking and was liaising with

foreign principals to secure exclusive

dealerships for engineering products,

locally and internationally.

Indrajeewa AlahapperumaGeneral Manager – finance

Indrajeewa Alahapperuma was appointed

to the Senior Management team of

Sathosa Motors PLC in August 2018. He

has been attached to the Access Group

since 2012. Having held several positions

in the Group, he presently serves in

the capacity of the General Manager –

Finance.

He is an Associate Member of The

Institute of Chartered Accountants of

Sri Lanka. He holds a B.Sc. Accounting

(Special) Degree from the University of Sri

Jayewardenepura. He has over 13 years

of experience in the field of Finance and

Auditing.

Lasitha Eshan Christopher MendisGeneral Manager – support services

Lasitha Mendis joined Sathosa Motors PLC

in September 2018. His prior appointment

of almost 9 years was with John Keells

Stock Brokers (Pvt) Ltd, as Manager –

Institutional Sales.

He is a Member of the Chartered Institute

of Management Accountants-UK and

holds a MSc. in Financial Mathematics and

a BSc. in Accounting and Finance.


ReALIgned FoR ALL InCLusIVe seRVICe


At the heart of our approach is our purpose: to

achieve excellence in customer satisfaction by

cultivating a dynamic and productive organisational

culture with highly motivated staff to provide the best

quality vehicles at competitive and affordable prices,

thereby generating the maximum benefit to all our

stakeholders.

What Sets Us Apart

We value and believe in maintaining the highest

standards of integrity, honesty, transparency,

responsibility and ethical behavior in all our

dealings and transactions.

We are passionate about delivering the highest

levels of service quality to all our internal and

external stakeholders.

We encourage and respect diversity among our

team in order to create an inclusive organisational

culture.

We believe in the importance of ensuring

excellence in all our processes and systems as a

means of maintaining a strong niche position in the

Sri Lankan market: from expanding our dealership

network, to introducing innovative product

ranges to the market, to market development, to

leveraging training as an opportunity to enhance

expertise and productivity.

We actively manage our business operations through

three principal operational activities.

ouR AppRoACh WhAt We do

Vehicle Sales

Marine Engine Sales

Spare Part Sales

Workshop Services & Repairs

BusIness ModeL


WhAt We ReLY on the VALue We CReAte

1. Financial Capital

Financial capability to

enhance our business

Total Assets LKR 2.9 Bn

Total Equity LKR 1.6 Bn

Non Utilized Bank Facilities more than LKR 2 Bn

Subsidiary of one of the Sri Lanka’s top tier

Engineering Enterprises

2. Human Capital

The skills and experience

of our employees

181 employees including professionals and highly trained technicians

Recruitment of staff possessing appropriate skills in terms of

technical capability and personal strengths

Conduct several in-house and outstation training and development programs

Conduct several Employee Events and Welfare Activities

Creating a Safe Space for Professional Growth

4. Manufactured Capital

Property, plant and

equipment we own and use

Increase the capacity at Peliyagoda workshop

New Branch open at Negombo

Introduce new business line – Isuzu Marine Engine

Investment of SMS verification process of Isuzu Genuine part

5. Natural Capital

The natural resources that

we manage and use

EURO 4 Standard Vehicles

Advance water purification system for workshop operations

Implementing energy saving methods

depth experience and technological prowess in the Japanese

commercial vehicle segment in the automobile industry

successfully completed IFS ERP System post implementation

and continuous improvement

technology knowhow of Isuzu Marine Engine

3. Intellectual capital

Our collective expertise

and processes

strong relationship with business partners

conduct several Promotional Campaigns

Social Attributes and Targeted Marketing

6. Social and relationship capital

reputation and trust that

we have developed

Reinvestment into the business

- Retained earnings LKR 1.491 Bn

We draw upon six capitals in the

management of our business model.

Beyond meeting our income and total return targets we also consider the

wider value we deliver against each capital.


CoRpoRAte goVeRnAnCe

At Sathosa Motors, we strongly believe

good corporate governance to be a

pivotal prerequisite to accomplish

enduring growth in the Company’s value

and that our business approach is as

crucial and decisive as our business

outcomes. Ingrained in our culture

is the fundamental principles good

corporate governance which permeates

our relationships with myriads of

stakeholders. To this end, Sathosa Motors

uses a well-defined and disciplined

corporate governance approach to

formulate and execute decisions in

connection to the Company and will

pursue its vision to be the trusted leader

in the Sri Lankan automobile industry by

ensuring delivery of unparalleled quality

to its valued customers. The Company’s

governance framework is equipped

with its own set of internal policies,

benchmarks and structures in order

to reach beyond mere compliance with

mandatory regulatory requirements and

instigate confidence in our shareholders

while ensuring financial and operational

integrity.

Our Corporate Governance philosophy

pervades aspects of the entire spectrum

of our operations including formulation

and evaluation of corporate strategy,

appointment and removal of directors

and key management personnel,

performance measurement and executive

compensation and risk oversight.

We have a clear and distinct purpose

which is to create unique and novel

products and services and to ensure

delivery of unparalleled quality to all our

valued stakeholders and without good

governance underpinned by our culture

and values; we would simply be unable to

deliver on that promise. We are committed

to high standards of corporate governance

in order to conduct our operations with

utmost propriety.

Corporate Governance Structure

Sathosa Motors employs a governance

and operating model underpinned by

precise and transparent segregation of

responsibilities and judicious mobilisation

of available resources in order to create

long-term sustainable growth for our

shareholders and deliver long-term

value to all stakeholders. We conduct our

business while taking into consideration

our social responsibilities and are

committed to the development of a

sustainable society. Whilst the Company

is in compliance with all mandatory

regulatory requirements of the country’s

laws and regulations, we have also

devised sound governance philosophies,

ethics, policies and values and integrated

and adopted our corporate governance

ethos in an attempt to transcend beyond

regulatory compliance. To this end, the

Company operates within an integrated

governance framework formulated after

taking into consideration the mandatory

provisions of the Companies Act No. 07

of 2007, Listing Rules of the Colombo

Stock Exchange (“CSE”) and rules of the

Securities and Exchange Commission

of Sri Lanka (“SEC”) and voluntary

provisions in the Code of Best Practices

on Corporate Governance (‘Code’) jointly

advocated by the SEC and the Institute of

Chartered Accountants of Sri Lanka (CA

Sri Lanka). Sathosa Motors PLC strongly

believes that avoiding information

asymmetries between stakeholders is of

paramount importance. The Company to

this end consistently strives to disclose

comprehensive, accurate and impartial

information to its numerous stakeholders

thereby enabling them to exercise their

right to well-informed decision making.

Sathosa Motors PLC profoundly believes

that it is of crucial importance to

establish a comprehensive governance

structure which compliments sustainable

growth into the future. Our corporate

governance structure consists of

our Board of Directors and four

Management Committees with well-

defined responsibilities and reporting

lines, clearly segregating management

functions and supervisory and oversight

functions which has led to heightened

transparency and expeditious decision-

making. The responsibilities of the Board

and Management Committees are far-

reaching and they are accountable for

reviewing and guiding corporate strategy,

performance management, ensuring

the integrity of Company’s accounting

and financial reporting systems and

overseeing the formal risk management

process. Under the leadership of our

Board of Directors, the Company has put

in place a comprehensive management

structure accompanied by clearly

defined policies, procedures and limits

of delegated authority. Our integrated

Corporate Governance structure is

outlined in the diagram below.


Aduit Committee

Remuneration Committee

Related Party Transactions

Review Committee

Strategic Planning

Committee

Board of Directors

Mandatory compliance

1. Companies Act No. 07 of 20072. Sri Lanka Accounting and

Auditing Standard Act No. 15 of 1995

3. Listing Rules of Colombo Stock Exchange

4. SEC regulations

Voluntary adherence

1. Code of Best Practices jointly issued by SEC and CA Sri Lanka*

Assurance on the financial statements

1. External Independent Audit.

Internal audit

1. Review of systems, controls, processes and operations.

Compliance and Adherence Shareholders Assurance

Corporate Management

* SML has fully complied with the 2013 “Code” and has complied with almost the full 2017 “Code” to the extent of business exigencies and as required by SML

Leadership

Code of Ethics

At Sathosa Motors, we are committed to the highest standards of ethical behaviour as

outlined in our Code of Ethics and we firmly believe that the focus of good governance

should not be limited to effective functioning of the Board of Directors but also and very

importantly must extend on the culture within which our businesses and employees

operate and conduct themselves. This philosophy of good governance is ingrained and

embedded throughout Sathosa Motors PLC and manifests itself in numerous ways

including compliance with all mandatory regulatory requirements which relate to our

business, an absolute and non-negotiable requirement to maintain a healthy business

environment, ethical conduct of business which fosters accountability and transparency

in all our business dealings and a zero-tolerance approach to corruption and nefarious

conduct. Our Code of Ethics is outlined in the diagram below.

Conducting business in a professional manner

Transparency and accountability

Maintaining a healthy business environment

Recognising and honouring the rights of all stakeholders

Adhering to all regulatory requirements

Carrying out conflict resolution in a just and transparent manner

Chairman

To enable the Directors to generate the

effective Board debate and discussion

and to provide constructive challenge the

Company requires, the Chairman of the

Board provides leadership to the Board

and thereby influences the culture and

‘tone from the top’. He is responsible for

the provision of information to Directors

in order to make informed decisions and

promotion of the culture of openness and

constructive challenge which facilitates

a diversity of views to be expressed. The

Chairman is accountable for directing

the affairs of the Board to ensure the

Board focuses on value for money for

the shareholders and is available for

dialogue on key matters of the Company’s

governance and where shareholders have

particular concerns.

The Board

The Board aims to promote long-term

sustainable growth of our Company

and deliver value to investors and other

stakeholders as well as encouraging

a culture of risk awareness, openness


coRpoRATE GoVERNANcE

and debate about strategic ideas and

ensure the circulation of accurate and

transparent information. The Board

sets the Company’s strategy and risk

appetite and reviews, approves and

guides corporate strategy. It also sets

performance objectives, monitors

implementation and corporate

performance and oversees major

capital expenditures, acquisitions and

divestitures. The Independent Non-

Executive Directors hold management

accountable and ensure Executive

Directors discharge their responsibilities

properly. The role of the Independent

Non-Executive Directors is to challenge

and scrutinise the performance of

management, including Executive

Directors and to guide corporate

strategy while reviewing management’s

performance in connection to

accomplishing agreed goals and

objectives. Decisions regarding new

Board appointments are taken by the

Board collectively and the qualifications

and experience of Board members are

decided based on the nature of the

business of the Company and the value

addition the member is expected to bring

to the Board and the Company. Profiles

of the Board of Directors are set out on

pages 18 to 19.

Board Composition

The Board consists of Directors with the

requisite range of skills, competence,

knowledge, experience and approach,

as well as a diversity of perspectives,

to set the context for appropriate

Board behaviour and to enable

effective discharge of its duties and

responsibilities. All Directors allocate

sufficient time to the Board to perform

their responsibilities effectively.

The Board as at 01 April 2021 comprised

of Nine (09) Directors out of whom three

(03) are Executive Directors and six (06)

are Non-Executive Directors including the Chairman. The Board comprises three (03)

Non-Executive Directors who are also independent. The Board therefore is deemed to

have sufficient balance in line with the requirements of the code.

M M N De Silva, W A C O Wijesinghe and R S Dahanayake who are the Non-Executive

Independent Directors qualify against the criteria for independence laid down by the

regulatory authorities and the aforesaid Directors have submitted signed declarations

to affirm their independence. The period of service of M M N De Silva exceeds nine (09)

years. However, the Board is of the view that the period of service does not compromise

his independence and objectivity in discharging his functions as an Independent Non-

Executive Director. Therefore, based on the declarations submitted, the Board deems M

M N De Silva as an Independent Director.

Board of Directors

Executive Directors

J C Joshua Managing Director

M Jayahsuriya Executive Director

K A P Perera Executive Director

Non-Executive Directors

S J S Perera Chairman

S D Munasinghe Director

D A R Fernando Director

Independent Non-Executive Directors

M M N De Silva Director

W A C O Wijesinghe Director

R S Dahanayake Director

Composition of Directors

Overall classification of the Board of Directors is depicted below

Board Balance and its Independence Tenure of Board Members

INED - 03

NED - 03

ED - 03

More than 05 years

06

03

Less than 05 years

INED - Independent Non-Executive Directors | NED - Non-Executive Directors | ED - Executive Directors


Board Process

The Board meets regularly, at least, once every quarter and whenever the circumstances so require. The Directors are encouraged

to have free and open contact with management at all levels and full access to all relevant information. The Chairman of the

Board determines and decides on the subjects to be covered and it is the responsibility of the Company Secretary to circulate the

Board papers in advance. Any absences are excused in advance and are briefed immediately on the discussions held and actions

implemented during the meeting. The Board met four times during the financial year under review. Information pertaining to the

attendance of the meetings is illustrated below.

Name of the

Director

Board Meeting Attendance

18 May

2020

29 July

2020

09 November

2020

02 February

2021

S J S Perera Non-Executive Chairman / Non-Independent √ √ √ √

J C Joshua Executive Director √ √ √ √

M Jayahsuriya Executive Director √ √ √ √

K P Perera Executive Director √ √ √ √

M M N De Silva Non-Executive Director / Independent √ √ √ √

W A C O Wijesinghe Non-Executive Director / Independent √ √ √ √

R S Dahanayake Non-Executive Director / Independent √ √ X √

D A R Fernando Non-Executive Director / Non-Independent √ √ √ √

T A L Niroshan Non-Executive Director / Non-Independent √ √ √ *N/A

S D Munasinghe Non-Executive Director / Non-Independent √ √ √ √

* Resigned w.e.f. 31 December 2020


The Board’s duties and responsibilities

and key functions, for which they are

accountable, include:

Provision of entrepreneurial

leadership to the Company. To this

end, the Board reviews, approves

and directs corporate strategy, major

plans of actions, risk policy, annual

budgets and business plans; set

performance objectives; monitor

implementation and corporate

performance; and oversee major

capital expenditures.

Overseeing systems of internal

controls, in particular, financial and

operational controls and a formal

risk management process to enable

effective assessment of relevant

risks and ensure the integrity of the

Company’s accounting and financial

reporting systems.

Ensuring a transparent Board

nomination and election process,

selection and scrutiny of key

management and executive personnel

and to oversee succession planning.

Ensuring the Board and key executive

remuneration is aligned with the long-

term interests of the Company and

shareholders.

Managing potential conflicts of

interests of management, Board

members, shareholders and other

external parties and monitoring

the effectiveness of the Company’s

governance practices.

Conducting objective self-evaluation

with the aim to foster a culture of

effective Board behaviour.

Be available for dialogue with

shareholders and oversee the process

of communication and disclosure.

Dynamics

Framework

ContextOrganisational and Board Stewardship




Role of the Company Secretary

The Company Secretary acts as a crucial

resource for the chair and for the Board

as a whole, ensuring the provision of

information and practical guidance,

the Directors require to effectively

discharge their duties and responsibilities

under relevant laws and regulations.

The secretary is also responsible for

the induction of new Directors and

conducting Board and General Meetings.

Furthermore, the Company Secretary

plays a pivotal role in sound corporate

governance and in ensuring that the

Board receives independent expertise and

advice where appropriate.

Board Committees

Audit Committee

The Audit Committee monitors the

integrity of the financial statements

and in the absence of a separate risk

committee, reviews the effectiveness of

the Company’s internal controls, internal

audit function and risk management

systems. It is responsible to provide

recommendations to the Board in relation

to the appointment, re-appointment

and removal of the external auditor

and approve the remuneration and

terms of engagement of the auditor. The

Committee keeps a close track of the

external auditors’ independence and

objectivity. The Audit Committee ensures

that there are opportunities ingrained

throughout the Company for employees

to act as ‘whistleblowers’ and report

improprieties and nefarious conduct. The

Audit Committee consists of three (03)

Non-Executive Directors and all of them

are independent directors. The Audit

Committee is chaired by M M N De Silva.

Audit Committee Composition

Name of the Director Designation Committee Report

M M N De Silva Chairman - Independent Non-Executive Director Refer Pages 91 to 92.

W A C O Wijesinghe Independent Non-Executive Director

R S Dahanayake Independent Non-Executive Director

Attendance of Directors at Audit Committee Meetings (01 April 2020 to 31 March 2021)

Name of the Director Designation Board Meeting Attendance

18 May

2020

29 July

2020

09 November

2020

02 February

2021

M M N De Silva Chairman - Independent Non-Executive Director √ √ √ √

W A C O Wijesinghe Independent Non-Executive Director √ √ √ √

R S Dahanayake Independent Non-Executive Director √ √ X √

T A L Niroshan Non-Executive Director √ √ √ *N/A


Related Party Transactions Review Committee

Established on 31 March 2016, the objective of the Related Party Transactions Review Committee is to ensure that appropriate and

supervising authority relating to the related party transactions exposures, and policies on conflicts of interest or potential conflicts of

the interest between the its subsidiaries and other respective related party. The Committee also performs the oversight function on

behalf of the Board in complying with the Listing Rules of the Colombo Stock Exchange and with the Code of Best Practices on Related

Party Transactions issued by the Securities and Exchange Commission Sri Lanka. The Related Party Transactions Review Committee

comprises three (03) members and all of them are Independent Non-Executive Directors. The Related Party Transactions Committee

is chaired by M M N De Silva.

Related Party Transactions Review Committee Composition


M M N De Silva Chairman - Independent Non-Executive Director Refer Pages 94 to 95.


R S Dahanayake Independent Non-Executive Director


Attendance of Directors at Related Party Transactions Review Committee Meetings (01 April 2020 to 31 March 2021)

Name of the

Director

Designation Board Meeting Attendance

18 May 2020 29 July 2020 09 November

2020

02 February

2021

M M N De Silva Chairman - Independent Non-Executive Director √ √ √ √

W A C O Wijesinghe Independent Non-Executive Director √ √ √ √

R S Dahanayake Independent Non-Executive Director √ √ X √

T A L Niroshan Non-Executive Director √ √ √ *N/A


Remuneration CommitteeThe main objective of the Remuneration Committee is to determine the remunerations framework (pay scales applied to Director’s packages and the proportions of different types of reward within the overall package) on behalf of the Board and shareholders. This framework includes, but is not limited to, establishing stretching performance related elements of reward and is intended to promote the long term success of the company. The Remuneration Committee consists of three (03) Non-Executive Directors and two (02) out of the aforesaid Non-Executive Directors are Independent. S J S Perera serves as the chairman of the Remuneration Committee.

Remuneration Committee Composition


S J S Perera Chairman - Non-Executive Director Refer Page 93.

M M N De Silva Independent Non-Executive Director


Strategic Planning CommitteeThe Committee assists the Board and the Management in fulfilling its oversight responsibilities relating to strategic plans, which identify specific long-term goals and business objectives determined to be in the Company’s best interest. This includes helping the Board and the Management identify opportunities such as mergers and acquisitions, joint ventures, new markets or product lines, acquisition or disposition of capital assets, equity and debt funding and modifications of existing capital structure, dividend policy, and stock offerings, repurchase programmes and etc. Additionally, the Committee evaluates the progress of execution and effectiveness of the strategic plan, recommend changes to the plan where necessary or advisable and evaluate other issues or opportunities. The Committee comprises all three (03) Executive Directors of the Company. J C Joshua serves the Chairman of this Committee.

Strategic Planning Committee Composition


J C Joshua Chairman - Executive Director Refer Page 96.



Internal Audit and Internal ControlsThe Internal Audit Department acts as an important line of defense in creating a robust control environment to manage risks. The primary role of the Internal Audit function is to help the Board and management protect assets, reputation and the sustainability of the group. To this end, the Internal Audit provides an independent and an objective assurance on the design and operating effectiveness of the Company’s governance, risk management and control framework and processes, prioritising the heightened areas of risk. The independence of the Internal Audit function from the day-to-day line management responsibility is pivotal to its effective functioning as it assists to maintain an objective stance.

The Head of Internal Audit has a functional reporting line to the Audit Committee Chair. Results of the audit work together with an assessment of the Company’s overall governance, risk management and control framework and processes are regularly reported to the Audit Committee. These reports highlight key risks identified in connection with operational activities and regulatory requirements and provide an independent view of possible detrimental outcomes. The Audit Committee is ultimately responsible for the appointment, performance assessment and dismissal of the Head of Internal Audit.



Statement of Compliance under Section 7.6 of the Listing Rules of the Colombo Stock Exchange on Corporate Governance

Principal Description Comment/Reference Compliance

Status

CSE Listing Rule 7.6 – Contents of Annual Report

(i) Names of persons who during the financial year were

directors of the Entity

Board of Directors Complied

(ii) Principal activities of the Entity and its subsidiaries

during the year and any changes therein

Notes to the Financial Statements Complied

(iii) The names and the number of shares held by the 20

largest holders of voting and non-voting shares and the

percentage of such shares held

Investor Capital Complied

(iv) The public holding percentage number of public

shareholders, under which option the entity complies

with the minimum public shareholding requirement and

total float adjusted market capitalisation.


(v) A statement of each Director’s holding and Chief

Executive Officer’s holding in shares of the Entity at the

beginning and end of each financial year


(vi) Information pertaining to material foreseeable risk

factors of the Entity

Risk Management Review Complied

(vii) Details of material issues pertaining to employees and

industrial Relations of the Entity.

During 2020/21 there were no material issues pertaining

to employees and industrial relations of the Entity

(viii) Extents, locations, valuations and the number of buildings

of the Entity’s land holdings and investment properties


(ix) Number of shares representing the Entity’s stated capital Annual Report of the Board of Directors on the

affairs of the Company

Complied

(x) A distribution schedule of the number of holders in each

class of equity securities, and the percentage of their

total holdings


(xi) Financial ratios and market price information Investor Capital Complied

(xii) Significant changes in the Entity’s or its subsidiaries’

fixed assets and The market value of land, if the value

differs substantially from the book value.


(xiii) Details of funds raised through a public issue, rights

issue and a private placement during the year.

In 2020/21 no funds were raised through a public issue,

rights issue or a private placement

(xiv) Employee Share Option Schemes and Employee Share

Purchase Schemes

The Company does not have any Employee Share Option

Schemes or Employee Share Purchase Schemes

(xv) Disclosures pertaining to Corporate Governance

practices in terms of Rules 7.10.3, 7.10.5 c. and 7.10.6 c.

of Section 7 of the Rules

Corporate Governance on pages 26 to 44

Refer Board of Directors pages 16 to 19

Refer annual Report of the Board of

Directors on pages 97 to 101

Committee Report on pages 91 to 96

Complied

(xvi) Related Party transactions exceeding 10% of the Equity

or 5% of the Total assets of the Entity as per Audited

Financial Statements, whichever is lower.

Related Party Transactions Review

Committee Report on pages 94 to 95

Notes to the Financial Statements on

pages 153 to 156

Complied


Statement of Compliance under Section 7.10 of the Listing Rules of the Colombo Stock Exchange on Corporate Governance


Status

CSE Listing Rule 7.10 – Corporate Governance

a. and b. Compliance with corporate governance rules Annual Report of the Board of Directors on the


Complied

CSE Listing Rule 7.10.1 – Non-Executive Directors

a., b.

and c.

Composition of the Non-Executive Directors. At least

2 members or 1/3 of the Board, whichever is higher

should be NED’s

Board of Directors / Board Composition 06 out

of 9 Board members are NED’s

Complied

CSE Listing Rule 7.10.2 – Independent Directors

a. Composition of the Independent Directors Board of Directors / Board Composition 03 out

of 06 NED’s are independent.

Complied

b. Signed and dated declaration of each Independent

Director

Compliance with Code of Best Practice on

Corporate Governance jointly issued by CA Sri

Lanka and SEC

Complied

CSE Listing Rule 7.10.3 – Disclosures Relating to Directors

a. and b. Determination of independence or non-independence of

each NED

Board of Directors

Compliance with Code of Best

Practice on Corporate Governance jointly

issued by CA Sri Lanka and SEC

All Independent NED’s have submitted

declarations as to their independence.

Complied

c. A brief Resume of each Director Board of Directors Complied

d. Brief Resume of newly appointed Director/s No new Directors were appointed during the financial year.

CSE Listing Rule 7.10.4 – Criteria for Defining ‘Independence’

a. to h. Criteria to meet to be an Independent Director Compliance with code of Best Practice on

Corporate Governance jointly issued by CA

Sri Lanka and SEC.

Complied

CSE Listing Rule 7.10.5 – Remuneration Committee

a. Composition Corporate Governance Complied

b. Functions Remuneration Committee report on page 93 Complied

c. Disclosures in the Annual Report

a) Names of the Directors comprising the

Remunerations Committee

b) Statement of remuneration policy

c) Aggregate remuneration paid to executive and non-

executive directors.

Refer Remuneration Committee report on

page 93

Note No to financial statements

Annual Report of the Board of Directors on


Complied




Status

CSE Listing Rule 7.10.6 – Audit Committee

a. 1. Composition – Shall Comprise of NED’s, a majority of

whom shall be independent

2. A NED shall be the Chairman of the Committee

3. CEO and CFO should attend Audit Committee

meetings

4. The Chairman of the Audit Committee or one member

should be a member of a recognised professional

accounting body

Audit Committee report on pages 91 to 92

Chairman of Audit Committee is an

independent NED

The MD and the GM – Finance attend to

Audit Committee meetings

The Chairman and one (01) committee

member of the Audit Committee are

members of a recognised professional

accounting body

Complied

b. Functions Audit Committee Report Complied

c. Disclosures in the Annual Report

1. Names of Directors comprising the Audit Committee

2. Audit Committee shall make a determination of the

independence of the External Auditors

3. Report on manner AC carries out its functions

Audit Committee report on pages 91 to 92 Complied

The Company’s Adherence to Code of Best Practices on Corporate Governance Issued Jointly by the Institute of Chartered

Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka.

Principal Comment Compliance

Status

A Directors

A.1 The Board

A.1 Board of directors in the corporate governance section on pages 27 to 31 Complied

A.1.1 During the year four scheduled Board meetings were conducted, all of which were well planned and

informed in advance and all Members were eligible to attend. Attendance of members at meetings is

given in page 29

Complied

A.1.2 A brief profile of each member of the Board of directors and Senior Management team is given in pages

18 to 21

Complied

A.1.3 The Board collectively and the Directors individually, have recognised their duty to act in accordance

with the prevailing laws of the country. The Board has taken measures to ensure compliance with all

necessary rules and regulations applicable to the Company. The Board also complies with the sound

framework of business practices in place, which further strengthens compliance with existing laws

and regulations. In matters of strategic importance to the Company, the Board obtains independent

professional advice, if it deems necessary, at the expense of the Company.

Complied

A.1.4 All Directors had access to the services of a professional company secretarial body, which ensured

that the Board received information on a timely manner for the effective conduct of meetings. The

firm also provided the Board with advice on matters relating to compliance with rules and regulations,

proper conduct of meetings and the adoption of best practices of corporate governance. The firm is also

responsible for the distribution of the Company’s Annual Report to its shareholders.

Complied



Status

A.1.5 All Directors are encouraged to bring independent judgment on matters relating to strategic direction

of the Company, effective utilisation of resources, performance and business conduct. The vast

experience and knowledge they possess in their specialised fields ensure the execution of this judgment.

Transparency of the judgments is further enhanced with the existence of three Independent Non-

Executive Directors who continue to critically evaluate the decisions of the Executive Directors. The Board

has put in place a culture of accepting the contribution of each member and all Directors have an equal

opportunity to express their views and ideas. The composition of the Board is sufficient enough to ensure

balance of power and no Director dominates the conduct of meetings or the Board’s decision making

process.

Complied

A.1.6 All Directors dedicated an adequate amount of time on matters relating to the Company and the

Board. Their contribution to the Company was evident in the participation at Board meetings, Board

Subcommittee meetings and in the decisions passed through circular resolution. Relevant Board Papers,

together with supplementary information, were sent at least a week prior to the Board meetings so as to

give them adequate time to critically review and study the contents. In the event additional information

was requested by the Board through the Company Secretary the same was made available at the earliest

in order to enhance the effectiveness of Board decisions.

Complied

A.1.7 One third of the directors could request for a resolution to be presented to the Board for the best interest

of the Company.

Complied

A.1.8 Every Director who is appointed newly to the Board will be given adequate training in order to carry

out his duties in the capacity of Director. Each Director is well aware of requirement of his continuous

professional development in order to serve as a Director. During the year under review, sharing

knowledge among board members, attending seminars conducted by professional bodies are some of

the initiatives taken with respect to training and development.

Complied

A.2 Chairman and Chief Executive Officer (CEO)

A.2 Company does not have a CEO position. The duties and responsibilities of the CEO is performed by the

MD. There is a clear division of responsibilities of the positions of Chairman and Managing Director (MD)

in order to ensure a balance of power and authority in strategic and operational policy decisions. As

such, Chairman is responsible for the leading and effective conduct of the business to the Board and MD

is responsible for managing the business in accordance with policy directions formulated by the Board.

Decision making at the highest level happens by adopting the rule of simple majority. Decision-making

of the highest level occurs by adopting the roles of simple majority. No one individual is vested with

unfettered powers of decision-making.

Complied

A.2.1 The Chairman is mainly responsible for leading, directing and controlling the affairs of the Board

including the Board balance, effective conduct of Board meetings and special meetings of the Board. He is

also responsible for maintaining effective external relationships. Day-to-day affairs of the Company are

headed by the Managing Director who is supported by the Executive Directors. MD gives leadership to the

Senior Management team who is collectively responsible for the conduct of day-to day operations.

Complied

A.3 Chairman’s Role

A.3 Chairman’s profile on page 18 Complied

A.3.1 The Chairman is responsible for making sure that the agenda, minutes of prior meetings; Board papers

and supplementary information are circulated among the members in advance, giving sufficient time

for preparation. Agenda for each Board Meeting is finalised by the Chairman in consultation with the

Company Secretary and where necessary, feedback from the other members is taken.

Complied




Status

A.4 Financial Acumen

A.4 A brief profile of each member of the Board of directors is given on pages 18 to 19 Complied

A.5 Board Balance

A.5 Refer composition of the board under corporate

governance on the page 28

Complied

A.5.1 Refer composition of the board under corporate


Complied

A.5.2 Refer composition of the Board under corporate


Complied

A.5.3 Three Non-Executive Directors on the Board are not involved in day-to-day affairs of the Company and

they do not have any business or other relationship that could materially interfere with the exercise

of their unfettered and independent judgment. Additionally, each independent Non-Executive Director

submits a written declaration of his independence to the Board on an annual basis. This written annual

submission is also considered as part of their annual performance evaluation. Based on the written

declaration submitted by the independent NED’s for the financial year 2020/21, they were considered as

continuing to be independent.

Complied

A.5.4 During the year, each Non-Executive Director submitted a dated and signed declaration regarding

their independence against the specified criteria set out in the code. While this declaration fulfilled the

requirements of Schedule J of this code, on circumstance rose for the determination of independence by

the Board outside the criteria set out by the Code.

Complied

A.5.5 Based on the declarations submitted to the Board and other information available the following Non-

Executive Directors of the Board were decided to be independent as at the end of the financial year.

M M N De Silva

W A C O Wijesinghe

R S Dahanayake

Complied

A.5.6 This is not applicable as there are no Alternate Directors in the Company N/A

A.5.7 This is not applicable for the Company as the Chairman of the Company is not the CEO. N/A

A.5.8 Please refer comment under A.5.7 Complied

A.5.9 The Chairman holds meetings with the NEDs’ without the presence of Executive Directors as and when

necessary.

Complied

A.5.10 During the year, there were no matters of the Company that the Board was unable to resolve

unanimously. However, in the event such matter arises, the Company Secretary records same in

sufficient detail in the Board minutes. These minutes are circulated among Board members prior to the

next meeting.

Complied

A.6 Supply of Information

A.6 The Board was provided with timely information by way of Management Reports, Proposals and Board

Papers during the year. The information was made available by the Company Secretary along with the

agenda at least seven days prior to the meeting in order to provide sufficient, time for preparation. In the

event, information provided was not sufficient supplementary information was provided on the request of

Board Members.

Complied

A.6.1 Members of the Board (mainly executive) are provided with Management Reports and Performance

report on a monthly basis, both in a quantitative and qualitative manner. In addition to this, the entire

Board is provided with Board Papers and other relevant information by the Corporate Management.

Complied



Status

A.6.2 As a norm, all Board Papers are circulated to the Board Members 10 working days before hand for them

to study the material and prepare themselves for the meeting and within two weeks of the meeting the

decisions taken and the discussion points are minuted and circulated for their review / comments and

finalisation.

Complied

A.7 Appointments to the Board

A.7 All Board appointments are based on the capacity of the individual concerned to pass the “fit and proper”

test, which in turn is based on the qualifications, experience and the value that can be added by the

individual to the Board as well as to the Company. Existing Directors are vested with the autonomy to

critically evaluate the potential candidate in the above test and a final decision Is taken by the Board

collectively.

Complied

A.7.1 The Company does not have a Nomination Committee in place. However, the existing Board members

function in a manner that is similar to a formally appointed Nomination Committee in matters concerning

new appointments to the Board.

Complied

A.7.2 The Board is satisfied with its composition and the level of qualifications, knowledge and experience it

possesses as a whole in order to meet strategic demands facing the Company.

Complied

A.7.3 No new Director was appointed during the year. However, all new appointments are promptly

communicated to the CSE together with brief resume containing the member's expertise, other

Directorships held and Independence for public dissemination.

N/A

A.8 Re-Election

A.8 Directors are re-elected with the sanction of the shareholders at the Annual General Meeting of the

Company. The Articles of Association of the Company requires one third of the Non Directors (other than

nominee Directors of the Major Shareholder) to appear for re-election at each Annual General Meeting.

Recommendations on the re-election of Directors are given by the Company Secretary and the same is

reviewed by the Board.

Complied

A.8.1 In terms of the Articles of Association of the Company, one third of the Non Executive Directors is

required to retire by rotation every year. The re-election of Non Executive Director is sanctioned by the

shareholders at the AGM of the Company

Complied

A.8.2 In the event a new Director is appointed to the Board, he/she will offer himself/herself for election by the

shareholders at the first opportunity.

Complied

A.8.3 Resignation

A.8.3 Before the formal resignation the Directors explain their reasons for the resignation decision and the

same is being minuted under the Board meeting minutes. Also when Directors send their resignation

letters, they explain the decisive factors in the resignation letter for documentation purposes.

Complied

A.9 Appraisal of Board Performance

A.9 Performance of the Board is evaluated from time to time with at least once a year to ensure that

responsibilities are satisfactorily discharged. Appraisal of Board performance is usually coordinated by

the Company Secretary and overseen by the Chairman.

Complied

A.9.1 Performance of the Board for the financial year 2020/21 was assessed at the first Board Meeting

conducted for the financial year 2021/22. The evaluation was done against the targets and goals set at

the beginning of the financial year 2020/21 covering areas such as, strategic direction of the Company,

regulatory and legal compliance, corporate governance, risk management, financial performance,

systems management and internal audit function among others. The Board was satisfied as a whole of its

performance in the year 2020/21.

Complied




Status

A.9.2 Members of the Board and Board Committees carried out self-assessments of their performance for the

FY 2020/21 against targets set at the beginning of the year. Minutes of the results of these assessments

were recorded by the Company Secretary and areas for improvement in the FY 2021/22 were identified.

Over the years, both individual and collective performance appraisal of the Board has facilitated

continuous development and improvement.

Complied

A.9.3 When a member’s name is up for re-election the rest of the Board members discuss the value addition

brought by that particular member to the Board and the contribution made thereof. Based on the

discussion points the decision is made on to re-elect. The discussion points are being minuted under the

Board meeting minutes.

Complied

A.9.4 The performance of the Board has been appraised though a formalised process of individual appraisal by

enabling each member to self – appraise on an anonymous basis.

Complied

A.10 Disclosure of Information in Respect of Directors

A.10 Shareholders are informed as and when necessary about changes to the Board, interest in the shares of

the Company and other relevant details through disclosures and financial results released to the CSE for

public dissemination.

Complied

A.10.1 Board of director’s section on pages 18 to 19 Complied

A.11 Appraisal of Chief Executive Officer

A.11 Not applicable as the Company does not have a CEO N/A

A.11.1 Not applicable as the Company does not have a CEO N/A

A.11.2 Not applicable as the Company does not have a CEO N/A

B Directors’ Remuneration

B.1 Remuneration Procedure

B.1 Remuneration payable to the Executive Directors of the Company is recommended by the Remuneration

Committee. Remuneration payable to the Non-Executive Directors of the Company is recommended by

the Board as a whole. No Director is involved in deciding his own remuneration.

Complied

B.1.1 The Remuneration Committee is responsible for recommending the remuneration payable to Executive

Directors. The Committee makes recommendations to the Board, which is responsible for the final

determination.

Complied

B.1.2 The Remuneration Committee appointed by the Board consisted of three Non-Executive Directors out of

which two were independent.

Complied

B.1.3 Details of the Remuneration Committee are given in page 93 of this Report. Complied

B.1.4 Remuneration payable to the Non-Executive Directors is decided by the Board as a whole. The Non-

Executive Directors are paid a monthly fee for being a Member of the Board and its Subcommittees.

Since the Non-Executive Directors are not involved in the day-to-day affairs of the Company they are not

entitled to any performance incentives.

Complied

B.1.5 The Remuneration Committee consulted the Chairman and the Managing Director in providing

recommendations regarding the remuneration of other Executive Directors. The Chairman and the

Managing Director are not remunerated by the Company.

Complied



Status

B.2 Level and Make Up of Remuneration

B.2 The remuneration package of both Executive and Non-Executive Directors is based on a variety of factors

including their contribution to the Company, market rates of remuneration and their expectation. The

Board is aware of the fact that the level of remuneration should be sufficient enough to attract and retain

Directors of high caliber to direct the Company. Portion of the remuneration of the Executive Directors’

is linked to their performance which is evaluated against targets set and agreed at the beginning of the

period.

Complied

B.2.1 The Remuneration Committee considers the value addition of Executive Directors and their contribution

to the achievement of short and long-term objectives in structuring their remuneration packages so as to

ensure that nothing is paid more than necessary

Complied

B.2.2 As the remuneration of the key personnel are being decided and approved by the Board based on the

evaluation and recommendation made by the Remuneration committee in parity with the current market

rates and packages provided, the Executive Director’s remuneration also follows the same process,

also providing specific targets in the ED’s TOR which directs the ED in achieving the organisational

performance goals overall.

Complied

B.2.3 The Committee conducts an analysis of other companies in the industry in deciding the levels of

remuneration of the Company. If the need arises the Company carries out an annual salary survey in

determining the level of remuneration of key positions and their increment.

Complied

B.2.4 Companies within the Group operate in different market sectors where the remuneration and

employments conditions are substantially different to those of the Company.

Complied

B.2.5 The extent of contribution and value addition towards achieving the set targets and objectives of a

particular year is the key determinant in deciding the performance related element of the remuneration

of the Executive Directors.

Complied

B.2.6 Not applicable as there are no executive share options in the Company. N/A

B.2.7 Provisions of Schedule E of the Code were followed in designing schemes of performance related

remuneration.

Complied

B.2.8 There are no compensation commitments (including pension contributions) in Directors contracts of

service.

N/A

B.2.9 Not applicable as the Company’s objective is to avoid early termination by all means. N/A

B.2.10 The remuneration of Non-Executive Directors reflects the degree of responsibilities and the level of time

commitment extended by them in contributing and adding value to the Company’s decision-making. The

NEDs’ do not have any share options in the Company.

Complied

B.3 Disclosure of Remuneration

B.3 Compensation paid to Key Management Personnel is given in page 156 of this Report. Remuneration

Committee Report is given in the page 93

Complied

B.3.1 Names of the members of the Remuneration Committee and the compensation paid to Key Management

Personnel are given in pages 93 & 156 of this Report respectively.

Complied




Status

C Relations with Shareholders

C.1 Constructive Use of the Annual General Meeting (AGM) and conduct of General Meetings

C.1 The Company considers the AGM as the primary tool of communication with shareholders. The Notice of

Meeting inviting all shareholders is given on page 185 of this Report. All shareholders are free to raise

any queries from the Board, on matters relating to the Company at the AGM. The Board encourages an

open dialogue with shareholders at the AGM. Usual proposals adopted at the AGM include the Annual

Report and the Accounts, reappointment of Directors and Auditors and any other matter that require

shareholder approval as per the provisions of the Articles Association of the Company.

Complied

C.1.1 All related papers and the Notice of Meeting are sent to the shareholders 15 days before the AGM through

the Company Secretary

Complied

C.1.2 To receive and consider the Annual Report and Accounts is the first resolution adopted at every AGM.

Further, the Company proposes separate resolutions on each substantially separate issue. Hence

shareholders are given the opportunity to vote separately on each substantial issue.

Complied

C.1.3 The secretariat and admin teams have strict follow up from the day the notice of the meeting along

with the Annual report which is sent to the shareholders. They track the appointed proxies at the time

of the registration of the AGM and the team notes the casted votes in favour of the passed resolutions

accordingly.

Complied

C.1.4 Before the AGM date, the Company Board and the respective sub committees meet and organise how the

AGM should process and run through the possible questions that the management may face. Accordingly

all the committee heads are prepared in an instance where a related question is post to answer them.

Complied

C.1.5 The Notice of Meeting and related documents is circulated to the shareholders 15 working days prior to

the AGM. Summary of the procedures governing voting at the AGM is provided in the proxy form, which is

circulated to shareholders together with the notice of meeting 15 working days prior to the AGM.

Complied

C.2 Communication with Shareholders

C.2 The AGM, Annual Report and other General Meetings (as and when required) are the primary means of

communication with shareholders. Additionally, the Company makes disclosures on material and price

sensitive matters from time to time to the CSE for dissemination among the public.

Complied

C.2.1 Refer comment given under C.2. Complied

C.2.2 The Company’s policy on information dissemination is based on the prime need of creating a fair market

for the Company’s securities among all market participants. Hence the Company focuses on accurate,

timely, relevant and open information dissemination and communication so as to avoid any market

malpractice or doubt.

Complied

C.2.3 The Company has disclosed the contact information in all their publications and always encourages

our shareholders to connect with us. Apart from that in our website we have allocated a separate page

indicating Investor information such as the market price per share

Complied

C.2.4 The point of contact is given in the Corporate information of this Report Complied

C.2.5 The shareholders are free to correspond with the Board either directly or through the Company Secretary

as they wish. The Directors can also be met by the shareholders on appointment. The Company Secretary

keeps a record of all valid correspondence from the shareholders and directs them to the appropriate

Board member who in return would respond as necessary.

Complied

C.2.6 Both the Company Secretary as well as members of the Board act as contact points in relation to

shareholder matters.

Complied



Status

C.2.7 Responses for shareholder queries directly sent to individual members of the Board are sent by the

respective members. Queries directed to the Company Secretary are responded by the Directors via the

Company Secretary.

Complied

C.3 Major and Material Transactions

C.3 Refer the Related Party Transactions Review Committee Report on page 93 and Note 27 of Notes to the

Financial Statements.

Complied

C.3.1 Refer the Related Party Transactions Review Committee Report on page 93 and Note 27 of Notes to the


Complied

C.3.2 Refer the Related Party Transactions Review Committee Report on page 93 and Note 27 of Notes to the


Complied

D Accountability and Audit

D.1 Financial Reporting

D.1 The Annual Report of the Board of Directors on the Affairs of the Company making the relevant

declarations is given on page 97 to 101 of this Report.

Complied

D.1.1 Refer Financial Report on Pages 110 to 177 Complied

D.1.2 Audited Financial Statements give a true and Fair view of the operations of the Company, Interim

Financial Statements and other price sensitive disclosures are made by the Company periodically and

as and when required in accordance with the applicable rules and regulations. In these aspects the

Company complied with the requirements of the Companies Act No. 07 of 2007, Registrar of Companies,

Department of Inland Revenue and Sri Lanka Accounting Standards and reporting requirements of the

Colombo Stock Exchange and the Securities and Exchange Commission of Sri Lanka.

Complied

D.1.3 The Financial statements itself has the respective declaration stating that all standards, legal

requirements are met with and the GM - Finance signs the financial statements below that declaration.

Apart from that the annual declaration is also signed by the GM - Finance confirming the same.

Complied

D.1.4 The Annual Report of the Board of Directors on the Affairs of the Company making the relevant

declarations, is given on page 97 to 101 of this Report

Complied

D.1.5 ‘Directors responsibility for Financial Reporting’, ‘Statement of Auditors’ and the ‘Directors Statement on

Internal Control’ are given on page 102, 105 to 109 & 103 respectively

Complied

D.1.6 ‘Management Discussion and Analysis’ is given on pages 10 to 103 of this Report Complied

D.1.7 Not applicable as there was no serious loss of capital during the year N/A

D.1.8 The Company has set in place an effective and comprehensive system of internal control for identifying,

recording and disclosing related party transactions. This system ratified by the Board ensures that there

is no conflict of interest when transacting with related parties and that there will be no bias or favourable

treatment. All related party transactions as defined in Sri Lanka Accounting Standards – LKAS 24

‘Related Party Transactions’ are disclosed in Note 27 to the Financial Statements.

Complied

D.2 Risk Management and Internal Control

D.2 The Company operates with a sound system of internal control within an integrated risk management

framework that is formulated and ratified by the Board. This system ensures that Shareholders

interests and Company assets are safeguarded. The Board Audit Committee is responsible to the Board

for ensuring the effective operation of the system of internal controls to achieve the objectives of the

Company.

Complied




Status

D.2.1 The Board is responsible for formulating and implementing appropriate systems of internal control for

the Group and in turn assessing its effectiveness. The Group's internal audit division assists the Board

of Directors and the Audit Committee in carrying out the above task. Any internal control system has its

inherent limitations. The Board is aware of the inherent limitations and has taken appropriate steps to

minimise same. The Directors' responsibility for maintaining a sound system of internal control is given

in the Board of Directors' Statement on Internal Control on page 103

Complied

D.2.2 The confirmation of the risk assessment conducted and the principal risks faced by the Company are

disclosed in the Risk Management Review which is given on pages 45 to 58 of this Report.

Complied

D.2.3 The Company Internal Audit function has been carried out by the Holding Company internal audit team

and overseen by the Board Audit Committee.

Complied

D.2.4 Operation and review of internal controls is done by the Internal Audit function as a continuous and

on-going process including internal control over financial reporting. These reports are forwarded to

the Audit Committee for review to ensure that the system of internal control and the risk management

process are effective. The Board is responsible for making disclosures on internal controls. In 2020/21

the Board reviewed the effectiveness of the system of internal control in place within the Company and

directed to upgrade same as required

Complied

D.2.5 Refer page 103 for the ‘Directors Statement on Internal Controls’. Complied

D.3 Audit Committee

D.3 Accounting policies and financial reporting principles of the Company are formulated so as to ensure

compliance with all applicable standards, rules and other regulations. At times the guidance of the

External Auditors is also sought in this process.

Complied

D.3.1 The Audit Committee comprises three Independent Non-Executive Directors and one Non-Executive

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

Complied

D.3.2 SML has developed a Charter for the Audit Committee clearly defining the objective/duties of the

Committee, each member’s duties and responsibilities and administrative arrangements etc.

Complied

D.3.3 Disclosures

D.3.3 The Audit Committee report enhances a descriptive note regarding the Audit committee and how they

discharge their duties and also show how they have allocated their valuable time by participating in the

meetings and decision making. (Ref. Pages 91 to 92)

Complied

D.4 Related Party Transaction Review Committee

D.4 As a group norm when transacting with related parties of the group the responsible parties stress on

the price at which the transaction takes place to make sure that neither the buyer nor the seller will gain

extra ordinary gain through the same.

Complied

D.4.1 Company has considered the guidelines provided in the LKAS 24 in defining the related parties, in

developing the charter for the Related Party Transaction Committee.

Complied

D.4.2 In compliance with the requirements of the voluntary code of the Corporate Governance the Related Party

Transaction Review Committee comprise of three Non-Executive Directors who are also independent.

Also the Executive Director attends the meetings upon invitation by the committee.

Complied

D.4.3 Company has developed a charter for the Related Party Transaction Review Committee clearly defining

the objective/duties of the Committee, each member’s duties and responsibilities and administrative

arrangements etc.

Complied



Status

D.5 Code of Business Conduct and Ethics

D.5 Refer pages 26 to 31 of this Report. – Corporate governance – Board of Directors. Complied

D.5.1 Sathosa Motors PLC has a Code of Ethics which includes the code of conduct and is circulated to

Directors and all employees. The Board ensures that the Directors and the employees strictly adhere to

the Code of Ethics of the Company in their duties so as not to adversely affect the brand of access in any

manner. The violation of the code of ethics is an offence which is subject to disciplinary action.

Complied

D.5.2 The price sensitive transactions relating to Investments are monitored through the Audit Committee.

Significant matters are informed to the Board for further action

Complied

D.5.3 Refer the report of the Related Party Transaction Review Committee on pages 94 to 95 Complied

D.5.4 Refer page 27 – Corporate Governance – Board of Directors. Complied

D.6 Corporate Governance Disclosures

D.6 This Report on the Company’s compliance with the CA Sri Lanka/SEC ‘Code of Corporate Governance’

meets this requirement

Complied

D.6.1 Same as D.5 Complied

E Institutional Investors

E.1 Shareholder Voting

E.1 Board encourages the active participation of Institutional shareholders at the AGM. In addition, Executive

Directors meet institutional shareholders upon their request to discuss about the Company’s past

performance and future strategies.

Complied

E.1.1 The most structured and continuous dialogue the Company has with the shareholders is the AGM. The

Chairman is available to meet shareholders at the end of each AGM and can be met on appointment on

other occasions. The Chairman then communicates the views and concerns of shareholders to the Board

as a whole.

Complied

E.2 Evaluation of Governance Disclosure

E.2 Institutional investors are encouraged to give due weight to all relevant factors drawn to their attention in

evaluating Companies’ governance arrangements.

Complied

F.1 Investing/Divesting Decisions

F.1 The Company encourages individual shareholders to carry-out adequate analysis or seek independent

advice in investing or divesting decisions. The Company facilitates this process by providing information

necessary for the same on a timely and unbiased basis.

This Integrated Report prepared by the Company gives sufficient information to shareholders to carry out

their own analysis of the Company and its operations.

Complied

F.2 The Company encourages individual shareholders to participate in General Meetings and exercise their

voting rights.

Complied

G Internet of things and cyber security.

G.1 Refer Risk Management on pages 45 to 58 of this Annual Report (Information & Technology Risk) Complied

G.2 The functions of the CISO is carried out by the Manager IT reported to Executive Director Complied

G.3 Relevant risks are discussed at internal audit report and reported the same to Audit committee. High risk

matters referred to the Board for further actions

Complied

G.4 Address issues at IRM annual Audit done by an independent third party and issues reported through a

Management Letter

Complied

G.5 Company adheres to the required level of cyber security by analysing the gravity of the requirement. IT

Department takes necessary precautionary measures to mitigate related risks.

Complied



Status

H Environment, Society and Governance (ESG)

H.1 Refer Pages 62 to 87 of the Annual Report - Human, Intellectual, Manufacturing, Natural, Social and

Relationship Capital

Complied

H.1.2 Refer Pages 62 to 87 of the Annual Report Human, Intellectual, Manufacturing, Natural, Social and

Relationship Capital

Complied

H.1.3 Refer Pages 62 to 87 of the Annual Report Complied

H.1.4 Refer Pages 26 to 44 of the Annual Report Corporate Governance for this requirement Complied

H.1.5 SML understands its role and responsibility in ESG reporting and ensure that the Company adheres to the

ESG reporting requirements.

Complied

Statement of Compliance under Section 168 of Companies Act No. 7 of 2007

Principal Description Comment Compliance

Status

Section 168 – Contents of Annual Report

(1) (a) The nature of the business of the Group and the Company

together with any change thereof during the accounting

period


(1) (b) Signed Financial Statements of the Group and the

Company for the accounting period completed

Financial Statements Complied

(1) (c) Auditor’s Report on the Financial Statements and any group

Financial Statements

Independent Auditors’ Report Complied

(1) (d) Change in accounting policies made during the

accounting period


(1) (e) Particulars of entries in the interests register made during

the accounting period

Annual Report of the Board of

Directors

Complied

(1) (f) Remuneration and other benefits of Directors during the

accounting period


(1) (g) Total amount of donations made by the Company during the

accounting period


Directors

Complied

(1) (h) Names of the persons holding office as Directors of the

Company as at the end of the accounting period and the

names of any persons who ceased to hold office as Directors

of the Company during the accounting period

Board of Directors Complied

(1) (i) Amounts payable by the Company to the person or firm

holding office as Auditor of the Company as audit fees and

as a separate item, fees payable by the Company for other

services provided by that person or firm


(1) (j) Particulars of any relationship (other than that of Auditor)

which the Auditor has with or any interests which the Auditor

has in, the Company or any of its subsidiaries


Directors

Complied

(1) (k) Be signed on behalf of the Board by two Directors of

the Company

Financial Statements Complied



enteRpRIse RIsK MAnAgeMent

SML’s risk management process continues to evolve to ensure it is reflective of the

shape of the business and its operations. The internal audit function has been founded

to be fully aligned with the Board and the Board subcommittees to further sharpen the

focus on the Company’s internal risk and control environment. The Company recognises

that a consistent, agile, and responsive approach to risk management is crucial to the

sustainable delivery of its business objectives.

SML`S Direction to Risk Management

Company follows the three lines of defence concept to strengthen our overall

responsibility and mitigate the risk to acceptable level. The Three Lines of Defence

model distinguishes among three groups (or lines) involved in effective risk

management. In the first line of defence, the risk is owned and managed by operational

managers and they are responsible for implementing corrective actions to address

process and control deficiencies. The

second line of defence provides the

policies, frameworks, tools, techniques

and support to enable risk and

compliance to be managed in the first

line and conducts monitoring to manage

risk effectively. The third line of defence

is executed by the internal auditors as the

governing body and Senior Management

with comprehensive assurance based on

the highest level of independence and

objectivity within the organisation.

External Audit

Regulator

1st Line of Defence 2nd Line of Defence 3rd Line of Defence

Internal Audit

Financial Control

Security

Risk Management

Quality

Inspection

Compliance

Management Controls

Internal Control Measures

COVERING BODy/AUDIT COMMITTEE

SENIOR MANAGEMENT


ENTERpRIsE RIsK MANAGEMENT

Risk Management Responsibility

Board of directors The Board is responsible for maintaining a sound risk management policy and monitor & modify the policy

as required to safeguard the stakeholders’ interest. The Board is responsible to clearly identify as to who is

responsible for implementation of each element of the plan, facilitate and authorise those who identified to

achieve each such element of the plan and allocate the resources for effective implementation of the plan.

Board subcommittees

Responsible for

overseeing the Board in

setting risk strategies,

polices, framework,

models & procedures in

liaison with management

and in the discharge

of its duties relating to

corporate accountability

and associated risk in

terms of management

assurance and reporting.

Audit Committee

The key functions of the

Audit Committee are

usually associated with

internal control and risk

management, financial

reporting, compliance

with legal and regulatory

requirements and

relevant issue related to

the process of external

and internal audit.

Related Party Transaction

Review Committee.

The objective of the

Committee is to ensure

appropriate authority

relating to the related

party transactions

exposures, policies on

conflicts of interest or

potential conflicts of

the interest between

its subsidiaries and

other respective related

parties is exerted. The

Committee also performs

the oversight function

on behalf of the Board

in complying with the

Listing Rules of the

Colombo Stock Exchange

and the Code of Best

Practices on Related

Party Transactions issued

by the Securities and

Exchange Commission Sri

Lanka.

Remuneration Committee.

The Remuneration

Committee`s main

objective is to determine

the framework, broad

policy and levels of

remuneration for the

executives as deemed

appropriate. This

framework includes,

but is not limited

to, establishing and

stretching performance

related elements of

reward and is intended

to promote the long term

success of the Company.

Strategic Planning Committee.

The Committee assists the Board and the Management in fulfilling its responsibilities relating to strategic

plans, to determine specific long-term goals and business objectives to be in the Company’s best interest. This

includes helping the Board and the Management to identify opportunities such as mergers and acquisitions,

joint ventures, new markets or product lines, acquisition or disposition of capital assets, equity and debt

funding and modifications of existing capital structure, dividend policy, and stock offerings, repurchase

programmes etc. Additionally, the Committee evaluates the progress of execution and effectiveness of the

strategic plan.


Management Corporate Management

Corporate management team ensures that the

organisation is operating adequately and effectively

by taking on responsibility for implementation of

strategies and allocating resources towards success

by reviewing operating and financial performance of

Company’s operational divisions/subsidiaries. The

management also assures that the Company is in

line with internal control framework in all material

aspects.

Group Risk Management

The Audit Committee performs quarterly based risk

management assessments through the Internal

Audit Reports and findings of the Company and

its subsidiaries and reviews the internal control

processes, and evaluates the adequacy and

effectiveness of the risk management and internal

control system. The Committee also seeks the

observations of the Independent External Auditors of

the Company.

operations Each business unit’s risk management function is led

by the respective head of the unit, supported by its

General Manager. Executive Directors together with

the Senior Management considers the operational

risks that arise from the execution of the Company’s

business including risks that arise from changes

in the macro and micro environmental factors. The

consolidated risks and the mitigating actions are

presented to the Strategic Planning Committee and

the Audit Committee for review.

The Board

The ultimate

responsibility for setting

the risk appetite for the

Effective Management

of risk rests with the

Board. Acting within the

authority delegated by

the Board, the Strategic

Planning Committee and

the Audit Committee

review specific risk

profiles and receives

regular reports on risk

management, which

include the Company’s

portfolio trends, policies,

standards and soundness

of internal controls,

infrastructure and

regulatory compliance.

These Committees are

authorised to investigate

or seek any information

relating to an activity

within the Terms of

Reference.

Internal Audit

The Company Internal

Audit Department

focuses on providing an

independent oversight

to the Board and the

Audit Committee on the

processes and controls

that help to mitigate

major risks.



Risk Management Process

Identify the Risk

Measure /Rating Risks

Examine Solutions

Implementation Solutions

Monitor Results

Risk Management Process

to mitigate impacts. In addition to the

above the Company’s Risk Management

process would cover curbing the loss of

valuable resources including time, assets,

income, property and people, protecting

the reputation and public image of the

organisation, preventing or reducing legal

liabilities and enhancing the Company’s

smooth operations.

Risk Matrix for Risk Assessment

The following risk matrix is developed as

a technique for analysing and evaluating

risk. This matrix mainly focuses on risk

analysis based on qualitative perception.

The likelihood of occurrence of a risk is

determined based on past experience,

industry and organisational trends and

judgment. The severity of a risk is the

potential financial or a non-financial loss/

damage to the Organisation. This can

also be determined based on experience,

discussion, calculation, judgment etc.

Based on likelihood and severity, risks

are categorised into three categories

where relevant actions are proposed.

Accordingly risks need to be monitored,

communicated and controlled. These

three areas are identified based on the

risk tolerance (appetite) limits agreed as

given below.

SML defines the pivotal area of Risk

Management as the organised application

of management policies, procedures

and practices to identify potential risks,

measure their frequency and severity,

examine alternative solutions, decide

which solution to use and monitor the

results. Through a dynamic process,

risks are identified and evaluated at

appropriate levels throughout the

Company. This process is regularly

reviewed by the Management Committee

as a part of the Company’s organisational

and operational approach to Risk

Management.

The Company risk management process

ensures option to accept, avoid, control,

or transfer a risk. Moreover, the Company

has set up an effective plan to prevent

and mitigate risk along with mechanisms

to reduce the impact if and when a

risk occurs. The timely recognition and

appropriate handling of these operational

threats is incorporated into the Company’s

Risk Management process.

The Board accepts overall responsibility

for risk management and determines

the nature and extent of the principal

risks to be taken and assesses the

effectiveness of the risk management and

internal control systems that are in place

IMPA

CT

Significant Plan for action (Mitigate or transfer) Immediate action (Mitigate or avoid) Immediate action (Mitigate or avoid)

Moderate No action (Accept or avoid) Plan for action (Mitigate or transfer) Immediate action (Mitigate or share)

Minor No action (Accept) No action (Accept) Plan for action (Mitigate or transfer)

Low Medium High

LIKELIHOOD


Risk Assessment

The Board and the Audit Committee analyses the level of risk associated with the Company’s principal risks and whether these risks

are consistent with the Company’s overall appetite in relation to these risks. The “heat map” sets out the positioning of the Company’s

principal risks by impact and probability both before and after any mitigation measures are taken into account.

The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that

would threaten its business model, future performance, solvency, or liquidity.

IMPA

CT

Significant 1 2 4 11 7 8 9 13 3 5 12 6 10 14

Moderate 1 2 4 11 7 8 9 13 3 5 12 6 10 14

Minor

Low Medium High

LIKELIHOOD

Risk position before mitigation action Risk position after mitigation action

Mitigating Top Risks

The Company determines the top risks through a review process that analyses the risks facing the company and its business units, in

relation to SML’s near to medium-term strategy and longer-term aspirations, in the context of the external and internal environment.

Top risks include those risks and opportunities that have a direct potential impact on income, expenditure and capital as these are the

main drivers of the approved financial risk appetite and tolerance metrics.

Risk Risk description Risk mitigation strategies 2019/20 2020/21

Increased Increased

1

Finance/Credit

Risk

Probability of loss inherent in

financing methods which may impair

the ability to provide an adequate

return.

Credit risk is the possibility of a loss

resulting from a buyer’s failure to

meet contractual obligations.

It refers to the risk that a seller

may not receive the owed

receivable balance, which results

in an interruption of cash flows and

increased costs for collection.

Interest rate risk exists in an

interest-bearing asset and liabilities,

such as deposits, loans or bonds,

due to the possibility of a change in

the asset’s value resulting from the

variability of interest rates.

Evaluate the customer

creditworthiness before allocating

the credit facilities, introduced

additional discounts for early

settlements, closely monitor

until settlement and obtain bank

guarantees as collaterals to mitigate

the credit risk at affordable level.

Evaluate the recoverability of

outstanding balances at each

reporting period and make the

necessary adjustment to the

financial statements.

Liquidity risk is managed by effective

utilisation of existing bank facilities.

Negotiate with banks to obtain the

competitive rates.

Manage the cash flow and working

capital at its optimal level.

Mitigating the credit risk

through weekly recovery

meetings and effective customer

creditworthiness evaluations.




Unchanged Unchanged

2

Technological

risk

Company is reliant on sufficient

management and technical skills,

including qualified professionals

such as technicians, automobile

engineers and operators as well as

seasoned managers, to improve and

optimise our existing businesses and

advance the Company growth

Company has a strategic talent

management framework in

place that spans the key talent

management drivers of attraction,

development and retention.

Company focus on developing levels

of competence, as well as in a wide

range of skills development and

learner-ship programmers, whereby

technical staff is sent to ISUZU Japan

on training and to face the technical

competitions organised by them.

Succession management and

development is crucial for our

growth and the development of

critical skills in our businesses. The

company has refocused its critical

skills programmers to address the

skills gaps.

Company provides attractive

performance-based incentives to

retain the valuable employees.

Keep developing that acquired

new technologies on a par with

global industry practices.

Unchanged Unchanged

3

Compliance risk

This risk is associated with changes

in Government policies, laws,

regulations and statutes. Compliance

Risk relates to a company being

able to comply with all the laws,

regulations and statutes applicable

to a country.

The Company constantly keeps

abreast of changes to the Regulatory

framework to mitigate the risk

associated therein.

Company is focused on identifying

changes in the regulatory landscape

and ensuring that Company is

prepared to respond to these

changes.

Company has systems and

processes in place to ensure

compliance with applicable laws and

regulations.

Setting the appropriate policies and

procedures to improve the control

environment.

Company adopted its risk

mitigation strategies to maintain

a high standard of regulatory

compliance.



Increased Increased

4

Competition

Risk

Risk due to increase in competition,

has the possibility of reducing

market share and margins.

Increasing productivity and

efficiency in order to ensure that

the prices remain competitive

despite increasing efficiency

through Research and Development

investments and the adoption of best

practices.

Maintain the differentiation from

competitors through offering the

best product and attractive after

sales services.

Company remained alert

with regard to ensuring its

competitiveness. The Company

has always been on alert with the

re-condition market.

Increased Increased

5

Socioeconomic

and political

risk

Company’s ability to sustain

the business and execute on its

growth strategy depends on key

macroeconomic factors that drive

near to medium-term business plans

and long-term strategic decisions.

Unexpected changes or sustained

periods of unfavorable macro-

economic conditions may impact

earnings and profitability, cash flow,

liquidity and growth.

Our planning assumptions take

account of important near to

medium-term and long-term drivers

related to key macro-economic

factors.

Adhering to government direction

with regard to COVID-19 pandemic.

Company monitors the external

environment continuously and

adjusts planning assumptions

accordingly.

Company implemented the Business

Performance Enhancement

Programmes to assist the

organisation in responding to

unfavorable macroeconomic

conditions.

Company is closely monitoring

the Board-approved risk appetite

measures for specific financial

metrics and actively manages cash

flow and liquidity.

Due to COVID-19 impact during the

year, many economic activities of

the country were affected.




Increased Increased

6

Operation Risk

Poor level of long-term

macroeconomic factors as a result

of market weaknesses may have

adverse impacts on capital available

to achieve growth targets. This may

impact on the Company’s ability to

timely execute its growth targets in

line with the strategy.

Company is focusing on identifying

the necessary business development

and other activities that should

be prioritised and executed in this

current low capital environment.

Company is aligning capital

allocation principles with Company

earnings growth and asset return

targets, taking balance sheet and

funding risks into consideration.

Company is refocusing its capital

portfolio to enable flexibility in terms

of investment strategies and choices

aligned to Company financial growth

and return targets.

The Company changes its operation

to adhere to the impact from

COVID-19 pandemic to ensure the

growth target of the Company.

Operational expansion to new

locations and introduce new

segments to the business operation.

Due to import restriction on

vehicles and high competition for

resale vehicle market.



Unchanged Increased

7

Information

Technology

related Risk

Breakdowns and failures in

information systems and the use

of obsolete systems will adversely

affect the smooth operations of the

Company.

Facilitating internet and access to

the system for employees to work

from home could be susceptible to

cyber-attacks/viruses.

A well designed and secured

Information Technology security

infrastructure has been implemented

throughout the organisation. The

security infrastructure includes:

recovery strategies, data back –ups

stored at off-site locations, virus

scanners, proxy servers etc.

Compliance of security infrastructure

is regularly monitored.

The Company carries out regular

meetings with the IT service provider

to identify the requirement to

upgrade the present system and in-

house repairs initiated.

Making use of various tools such as

proxies, firewalls and administrative

restrictions to allow for the

organisation to alleviate or decrease

downtime and increase operational

efficiency.

Organisation-wide awareness on IT,

cyber security and training staff on

various ways of handling sensitive

information.

Evaluating IT and cyber security

risks, discussing with the

management regarding the potential

outcomes and creating a course of

action to minimise the risk.

Thoroughly evaluating and

regulating external suppliers

providing IT infrastructure/services

to ensure security and smoothness

of operations

Centralisation of IT system to

standardise the process.

Increase the remote access to the

system due to implementation of

work from home.




Unchanged Unchanged

8

Fraud risk

Fraud risk arises due to weaknesses

in the internal controls, which could

result in financial losses and loss of

customer confidence.

The Internal Audit Department

conduct audits on a regular basis in

the areas, which are susceptible to

the occurrence of frauds.

Authority and approval limits are

implemented for all the functions of

the Company, making the employees

accountable for their actions.

Ensuring appropriate segregation of

duties.

Every key activity is subjected to the

scrutiny of another suitably skilled

and authorised employee.

When a fraud is detected, immediate

remedial action is taken to prevent

repetition.

Introduce whistleblowing policy and

procedures to the Company.

Company has managed to

continue with robust internal

controls to mitigate risks

associated with frauds and build-

up ethical working environment

for employees.



Unchanged Unchanged

9

Reputation Risk

Reputation risk is the risk that an

event or incident could damage the

image of the Company.

Having in place a budgetary process

and a budgetary control mechanism

on a monthly basis to ensure that the

Company’s performance is in line

with its targets.

Adopting stringent quality assurance

policies with regard to inventory &

services bought from third parties as

well as the inputs.

Ensuring all tractable stakeholders

including customers & suppliers are

in compliance with relevant laws and

regulations.

The Code of Ethics of the Company

is expected to be followed by all

without any exception.

Maintain suggestion box at each

location, customer inquiry/

suggestions through company

website, introduce SMS based spare

part verification system to promote

ISUZU genuine spare parts.

Company’s policies, procedures

and best practices continued

to be the foundation of its

uncompromising approach to

ethical and transparent business

during financial year.

Increased Increased

10

Foreign

currency risk

Foreign currency risk, also known as

exchange rate risk, is the financial

risk arising from fluctuations in the

value of a base currency against a

foreign currency in which a company

has assets or obligations.

There are three types of foreign

exchange risk. Those are Transaction

risk, Translation risk & Economic

risk. Company is mainly faced to

Transaction risk.

Continuously monitoring the

movements of the exchange rate

to identify potential exchange rate

trend.

Enter into forward rate booking

agreements with banks to mitigate

the foreign currency fluctuation risk.

Operating foreign currency bank

accounts to minimise the currency

conversion risk.

Negotiate with banks to get the best

exchange rate for foreign currency

conversions.

Exchange rate fluctuation

negatively affected the Company’s

operations.




Unchanged Increased

11

Liquidity Risk

Liquidity risk is finance risk that the

Company not meeting their short

term financial obligation, especially

because inability to convert assets in

to cash without incurring a loss.

Continuously monitor the cash flow

position and manage the cash flow of

the Company to ensure the optimal

level of working capital.

Obtain bank facilities to meet the

unexpected liquidity demands at a

competitive rate.

Planning and monitoring of

operational targets, cash flow

forecasts and capital expenditure.

Uncertainty in the market due

to the impact of the COVID-19

pandemic on the economy.

Unchanged Increased

12

Supply Chain

Risk

Supply chain risk is the probability

that an inbound supply problem will

disrupt a business. This includes

issues with suppliers, shipments

and markets that disrupt production,

operation & sales. This risk creates

reputational issues.

Enter into long-term supply

contracts with suppliers and

ensure more favorable conditions

in the contract by using the strong

negotiation position of the company.

Maintain good relationships with

suppliers.

Introduce new product lines which

are not restricted to import by

Government.

Import restriction by Government

was directly affected the core

business of the Company.



Increased

13

Human capital

and labour risk

Failure to attract and retain key

management could lead to a lack

of necessary expertise or lack of

continuity in executing strategy.

Potential impact on operational

performance due to COVID-19 as

there may be health and safety

concerns for employees.

Recruit /retain of the best talent pool

in the industry.

Conducting periodic performance

appraisals of staff to monitor the

performances.

Continuous training and development

of staff both on-site and off-site.

Adopt market-based compensation,

including appropriate incentive

packages.

Introduce whistleblowing policy and

procedures to the Company.

Offices/ branches adhere to the

DReAM concept to control COVID 19

by:

Maintaining distance.

Wearing mask.

Practicing personal hygiene.

Notifying relevant authorities

in case of complications or

symptoms.

Adhering to government directions

with regards to the work

environment.

Observing the bio-secure bubble

concept whereby, the number of

employees working in a particular

area is limited to and secluded. This

reduces health and safety concerns

and allows for rapid implementation

of COVID-19 control measures.

Company placed a strong

emphasis on retaining key

talent through performance

recognition and reward schemes,

succession planning, leadership

and career development

programmes, ensuring that high

quality employees are retained,

despite the highly competitive

environment.




Increased

14

Procurement

Risk

Material/services price variations

and non-availability of them will

adversely affect the progress of the

business.

Reduction in the ability to supply

spare parts due to the ongoing

pandemic as vendors may have

difficulties in securing the supplies.

Potential delays expected while

receiving spare parts leading to an

overall decline in performances

across various business activities.

Delays due to import restrictions

imposed by the government,

affecting the overall operation and

increasing lead times due to surge in

prices of imported supplies.

Establishing relationships with many

global and local suppliers for raw

materials and commodities in order

to reduce over-dependency on a

single supplier/brand.

Entering into forward contracts with

suppliers.

Introduce supplier registration

process.

Regular supplier evaluations

are conducted to ascertain their

product capacity, product quality,

performance, risk and sustainability

of suppliers.

The procurement risk has

primarily increased due to the de-

valuation of the Sri Lankan Rupee

and import restriction imposed by

the government.

The prevailing pandemic situation

has increased the lead times of

procurement.


opeRAtIng LAndsCApe

Global Outlook

Impacted by the COVID-19 pandemic, the

global economy continued to decelerate

in 2020. The global economy contracted

by 3.3% in 2020, compared to a growth

of 2.8% in 2019, according to the

International Monetary Fund. For most

nations, the immediate dual priority was

to ensure adequate resources for health

care systems and to limit economic

damage.

Global unemployment was one of

the worst affected by the pandemic.

According to the International Labour

Organisation, the global reduction in

work hours in the second quarter of 2020

compared with the fourth quarter of 2019

was equivalent to the loss of 400 million

full-time jobs.

While manufacturing and other

production sectors had a slow recovery

during the year, the services and

telecommunications sectors grew in 2020

on increased demand.

However, the global economic momentum

is forecasted to pick up supported by

anticipated vaccine powered recovery in

the second half of 2021, and continued

adaptation of economic activity.

Advanced economies are expected to

recover faster than most emerging

market economies, due to increased

access to vaccines and large policy space

available to maintain accommodative

macroeconomic policies for an extended

period. Accordingly, advanced economies

are projected to grow by 5.1% and 3.6%, in

2021 and 2022, respectively.

Sri Lankan Economy

The Sri Lankan economy contracted by

3.6% in 2020 recording a negative GDP

growth rate vis a vis a growth rate of 2.3%

in 2019.

The major reasons for the downturn

were mobility restrictions and other

containment measures imposed locally

and internationally to prevent the

spread of COVID-19. This impacted real

economic activity across all sectors,

but the industrial sector was one of

the worst affected. Services also had a

notable contraction due to the pandemic

driven deceleration in transportation,

accommodation services and other

personal services.

However, the information and

communication sector showed a 13.7%

growth during the year fuelled by the

demand for digital education, banking,

shopping, and other activities during the

lockdown.

Unemployment rate in Sri Lanka also rose

above 5% for the first time since 2009, as

labor-force participation rate declined,

due to uncertainties surrounding the

pandemic.

The overall size of Sri Lanka’s economy

fell to US dollars 80.7 billion in 2020 from

US dollars 84.0 billion in 2019 due to the

pandemic’s overall impacts.

Resulting from the combined effects of

the contraction in Gross Domestic Product

(GDP) at current market prices and the

depreciation of the Sri Lankan Rupee

against the US dollar, GDP per capita

declined to US dollars 3,682 in 2020 from

US dollars 3,852 in the previous year.

Inflation

Inflation remained broadly within the

desired range of 4-6% during 2020,

while core inflation continued to stay low

throughout the year. Subdued demand

conditions, well anchored inflation

expectations, and downward revisions

to administered prices helped maintain

inflation at the targeted level, despite

upward pressures from food inflation,

particularly due to elevated prices of

certain essential food items.

Headline inflation (Colombo Consumer

Price Index - CCPI based), recorded at

4.2% by end 2020, compared to 4.8%

recorded in December 2019. Headline

inflation (National Consumer Price

Index – NCPI base), which attaches a

relatively high weight to food items,

broadly followed the trend in CCPI based

headline inflation. NCPI based year-on-

year headline inflation decelerated to

4.6% by end 2020, compared to 6.2%

recorded in December 2019. Meanwhile,

core inflation, which excludes the

subcategories of volatile food, energy,

and transport from headline inflation, and

reflects the underlying inflationary trends

by removing seasonal price fluctuations

and the effects of key administratively

determined prices, remained subdued

throughout 2020, as per the CCPI and

the NCPI. Accordingly, year-on-year core

inflation based on the CCPI and the NCPI

decelerated to 3.5% and 4.7% respectively

by end 2020, compared to 4.8% and 5.2%,

recorded at the end of 2019, respectively.

Further, CCPI core inflation was 3.1%

while NCPI core inflation was 4.3% by

March 2021.

Interest Rates

Interest rates in 2020 were relaxed by

the Central Bank to support economic

recovery of industries affected by the

COVID-19 pandemic.Monetary policy

efforts to contain interest rates and

improve liquidity helped improve the

downward trend of the overall economy

and stabilise it during the year. The

Standing Deposit Facility Rate (SDFR)

and the Standing Lending Facility Rate

(SLFR), were reduced by a total of 250

basis points on five occasions to their

historically lowest levels of 4.50% and

5.50%, respectively, during 2020. The SRR


applicable on rupee deposit liabilities was reduced on two occasions by a total of 3%

age points to 2.00% during 2020.

The Central Bank also implemented regulatory measures to reduce excessive interest

rates charged on certain financial products, including credit cards and pawning, to

help ease the monetary policy transmission process and to support borrowers. Based

on the operational and regulatory measures, aggregate market lending rates declined

to historic lows, and new lending rates declined to single digit levels. This led market

deposit rates to also decrease substantially.

Exchange Rate

The depreciating Sri Lanka Rupee against the JPY had a negative impact on the import

sector during the year. While essential goods imports continued despite the pressures

on the exchange rate, non-essential goods imports such as vehicles and spare parts

were restricted by the government as a way of managing the exchange rate fluctuation.

As at the financial year end of 31 March 2021, the Sri Lanka Rupee traded at a nominal

rate of LKR 1.7987 against the JPY. (CBSL: JPY-LKR Indicative Rate Chart | Central Bank

of Sri Lanka

Source: cbsl.gov.lk

nominal exchange Rate - JpY

Apri

l 202

0

May

202

0

June

202

0

July

202

0

Augu

st 2

020

Sept

embe

r 20

20

Oct

ober

202

0

Nov

embe

r 20

20

Dec

embe

r 20

20

Janu

ary

2021

Febr

uary

202

1

1.65

1.70

1.75

1.80

1.85

1.90

The depreciation of the rupee increased the cost of vehicle and spare parts imports

during the reporting year. The Government’s import policy restrictions on vehicles

and spare parts to manage the foreign currency outflow impacted both of SML’s key

business segments. Further, the Government imposed restrictions on opening LC at

sight, permitting LCs only on issuance with a minimum 180 days credit period. This

regulation further increased the cost of spare parts. Inability to import new vehicles and

higher cost of spare parts imports, lowered the Company’s profitability in the reporting

financial year.

Automobile Industry

The automobile industry performance in 2020/21 financial year, was impacted by the

COVID-19 lockdown as well as the state imposed ban on vehicle imports.

opERATING LANdscApE

According to the Registrar of Motor

Vehicles, new motor vehicle registrations

declined by 44.8% during the year as

a result of policy measures to curtail

vehicle imports, including the importation

of motor vehicles for personal use. As a

result, a notable reduction in registration

of vehicles were seen across all vehicle

categories with new registrations of

motor cars, goods transport vehicles and

dual purpose vehicles declining by 45%,

24%, and 29%, respectively.

Company Performance review

Despite the challenging external

environment, Sathosa Motors PLC (SML)

performed relatively better compared

to the overall industry performance.

While SML’s passenger vehicle segment

was heavily impacted by government

regulatory measures, the commercial

vehicle category continued imports for

a limited period under essential imports

category.

With the increase in demand for the

domestic essential services sector during

the year, the requirement for island-wide

transportation of goods offered SML an

opportunity to import vehicles to serve

this need. However these imports were

subject to case by case approval of the

Import Controller, and therefore were

limited.

Vehicle maintenance, servicing and

spare parts segment grew during

the few months post lockdown while

mobility restrictions during COVID-19

lockdown affected customer servicing.

Revenue generated from spare parts sale

increased to LKR 425Mn from LKR 364Mn

in 2020, which is a growth of 16.5%. In

2020, the Company recorded its highest

spare parts revenue, a historic high for

the spare parts business segment.


Under the ‘new normal’, investments into

the repair and maintenance of existing

workshops in strategic locations and the

go-to market strategies in our lineup

of ISUZU commercial vehicles proved

profitable for the Company.

Notwithstanding the external macro-

economic environment and COVID-19

challenges, the Company reported a LKR

6.6Mn profit during the financial year,

compared to the loss of LKR 78.6Mn in the

previous year, which is encouraging.

SML’s strategic initiative to increase is

branches and service outlets helps the

Company remain profitable during the

year. The Company also launched a new

branch in Negombo expanding into the

marine engineering sector, with the aim of

providing spare parts and servicing to the

fishing, and boating community in general.

This strategic decision of the marine

division in Negombo has proved profitable

during the year the Company is confident

that it will be a key profit venture in the

coming years.

Vehicle sales

year Number of

Vehicles Sold

2020/21 254

2019/20 323

Vehicle sales is SML’s core business

segment, and traditionally comprise

of 75% of Sathosa Motors’ revenue.

With the COVID-19 pandemic and the

vehicle import restriction imposed by

the government, vehicle sales segment

saw a drastic drop in revenue due to

unavailability of vehicles to sell. The

subsidiary Company re-strategised to

enter the re-sale market of the Land

Rover and Jaguar range of luxury vehicles

as a means of sustaining this segment of

the business.

However, SML’s ISUZU commercial vehicle

segment which includes ISUZU brand

trucks, ISUZU double cabs, remained

strong during the year benefitting from

the Company’s ability to import a limited

fleet of commercial vehicles required for

the construction, agriculture and other

active sectors including government

institutions during the year. SML has

maintained its leadership position in the

Japanese commercial vehicle import

market in Sri Lanka thanks to the ISUZU

brand equity and strong customer

relationships with stakeholders over the

years.

ISUZU branded commercial vehicle

sales have decreased by 14% in the

2020.The number of new vehicles sold

during 2019 and 2020 were 254 and 323

respectively. Vehicle sales revenue was at

LKR 1,777Mn in 2020 compared with LKR

2,068Mn in 2019.

Spare parts/ Workshop sales

2020/21

(LKR)

2019/20

(LKR)

Spare

Parts

424,571,435 364,369,357

Workshop

Repairs

154,224,800 128,213,325

Sathosa Motors’ after sales and spare

part sales have increased significantly

during the year under review, despite

challenges arising from external factors

and policy decisions. Revenue from spare

parts sales increased to LKR 427,7Mn

from LKR 364,3Mn in 2019, which is a

growth of 16.5%. The company recorded

its highest spare parts revenue, a

historic high for the spare parts business

segment during 2020.

SML has maintained its brand promise

of providing authentic and genuine

spare parts to our customers and our

partner ISUZU Motors have supported

SML continuously during the pandemic

to make available promptly all spare

parts required by our commercial vehicle

owners.

New workshops were added to support

the regional customer base by investing

in two state of the art workshop facilities

in Kurunegala and Negombo. In addition,

regional agents for SML’s range of

vehicles have been appointed to service

customers in key regional towns and

villages. Further investments were

made to develop the spare part sales

and facilities at the Peliyagoda head

office premise, which has contributed

immensely towards our success. SML

invested LKR 100Mn to upgrade the

Peliyagoda premise with advanced

facilities, equipment and tools. The

Colombo (head office) workshop premise

also got a facelift with the workshop

entrance to the workshop being revamped

with asphalt paving in the entrance access

road and the parking areas.

The workshops have been strengthened

to meet the demand by providing

additional technical and skilled human

resources whilst providing training

opportunities for existing teams to

improve their knowledge and skills.

Further, SML has invested in improving its

brand equity as well as customer service

experience, and safety at all workshops,

and continue to explore convenient and

innovative ways to better serve our

customers in the ‘new normal’.


FInAnCIAL CApItAL


Sathosa Motors PLC had a slow start

to the financial year with the COVID-19

lockdown continuing into the first few

months of the year. Further, SML’s core

business of vehicle sales was impacted

by the government vehicle import

restriction gazette in May 2020. However,

the Company re-strategised its business

for the remainder of the financial year

optimising the investments in workshop

upgrades and expansions into regional

facilities during the current year and

previous years.

The Company launched a new branch

in Negombo expanding into the marine

engine sector, with the aim of providing

spare parts and servicing to the fishing,

and boating community. The new branch

is well equipped with expert engineers

and service technicians to support any

marine engine after sale services. This

strategic decision proved profitable

during the year and the Company is

confident that its profitability will grow in

the coming years.

Although SML couldn’t achieve forecasted

targets due to external challenges

that hindered continuity of operations

during most of the year, the Company

managed to close the year positively. The

Company’s revenue was at LKR 2,363

Mn in the year, drop of 7.7% from LKR

2,561Mn in the last year.

The investments into expanding the

workshop operations towards the

year’s revenue and generated a revenue

increase by LKR 26Mn, which was a 20%

growth rate, vis a vis last year. Despite

import challenges, the spare parts

segment of the business also reported

a sales increase by LKR 60Mn, which

is a growth rate of 17% compared with

the same period last year. Although a

recent addition to SML, the Marine Engine

segment contributed LKR 7.3Mn of sales

during the year.

However, vehicle sales decreased

significantly due to lower inventories

caused by import restrictions. Vehicle

sales revenue decreased by LKR 291.3Mn,

14% lower as against the last year.

Revenue - group

New Vehicles - LKR 2,844.23 Mn

Spare Parts - LKR 799.29 Mn

Work Shop Repairs - LKR 230.75 Mn

Marine Engine Sales - LKR 7.31 Mn

0%

73%

6%

21%

Revenue - Company

New Vehicles - LKR 1,776.84 Mn

Spare Parts - LKR 424.57 Mn

Work Shop Repairs - LKR 154.22 Mn

Marine Engine Sales -LKR 7.31 Mn

0%

75%

7%

18%

Profit for the year

The Group reported a 20% drop in gross

profits at LKR 635.9Mn for the year

compared with LKR 794.8Mn reported

the last year. The Company earned

LKR 426.2Mn in gross profits in 2021

compared with LKR 434.1Mn reported the

last year, recording a 1.8% drop in gross

profits for the year.

Earnings before Interest and Tax (EBIT)

Group EBIT declined sharply by 43.2%

during the year under review from

LKR 110.5Mn in 2020. Company EBIT

decreased by 1.4% during the financial

year under review.

Net Finance Costs

SML net finance costs were significantly

lower when compared with the previous

financial year. The net finance cost

of Group and Company decreased by

58% and 61% vis a vis the last year

respectively. The decrease in finance

costs was due to lower debtors and

stocks held during the year and low

interest rate compare with last year.

Operating Expenses

The Group’s operating expenses

decreased by 6% while the Company’s

operating expenses also increased by 6%.

Group reported a loss of LKR 12.9Mn in

the reporting financial year from LKR

79.9Mn last year. This was a decreased

loss recorded by 84% vis a vis last

year. However, the Company reported a

marginal profit for the current financial

year of LKR 5.4Mn as against the loss

reported of LKR 81Mn reported during the

last financial year.

Review of Financial Position

The Group as well as the Company’s

property, plant and equipment increased

during the year from 41% to 54%

respectively, as SML acquired an adjoining

land to the existing head office premises

in Vauxhall Street, adding to its property

assets.

SML’s inventories decreased during

the year due to import restriction of

vehicles. Subsequently, a decrease was

seen in the inventories and trade debtors

by 68% and 50% in Group and 69% of

Company inventories and trade debtors


respectively. Insufficient vehicle stock due to import restrictions was the main reason for the decrease.

Trade creditors also decreased during the year by 42% and 52% in the Group and Company respectively.

The year was marked by financial constraints caused mainly by government policy decision to restrict vehicle and vehicle related

imports while the COVID-19 pandemic had a lesser impact on the overall financial position of SML.

The restriction in imports reduced the working capital requirement of the business which in turn lowered the loan and borrowing

requirement. Loans and borrowings reduced by 73% and 67% in the Group and Company respectively.

Debentures held by the Company matured during the reporting year and the Company has no debentures on hold at the end of the

financial year 2021/22.

Direct Economic Value Generated and Distributed

Direct Economic Value Generated And Distributed Group Company

2020/21 2019/20 2020/21 2019/20

Value Created

Gross Revenue 3,881,584,608 4,195,960,439 2,362,952,341 2,560,749,579

(-) Cost of Goods and Services (Excluding

Depreciation and remuneration to employees)

(3,278,009,439) (3,434,924,436) (1,969,089,682) (2,160,422,011)

Value added from operations 603,575,169 761,036,003 393,862,659 400,327,568

Other Income 177,614,571 153,127,365 32,551,321 13,292,788

Finance Income 41,382,983 70,438,071 39,205,290 62,022,541

total Value Created 822,572,723 984,601,439 465,619,270 475,642,897

Value distributed

Operating Costs 183,437,058 216,010,227 78,190,040 53,105,091

Remuneration to the Employees 280,228,804 296,172,973 169,315,587 172,794,143

Directors' Fees and Remuneration 24,827,700 25,908,667 24,827,700 25,908,667

Community Investments - - - -

Government Levies 879,029 325,785 879,029 325,785

Corporate Taxes - - - -

Interest Cost 181,782,810 407,283,285 125,531,993 281,003,868

Dividends - - - -

total Value distributed 671,155,401 945,700,937 398,744,349 533,137,554

total Value Retained 151,417,322 38,900,501 66,874,921 (57,494,658)

total Value distributed and Retained 822,572,723 984,601,439 465,619,270 475,642,897

Value Retained

Profit Retained (27,852,345) (133,666,746) 4,124,033 (118,713,253)

Depreciation & Amortisation 179,269,667 172,567,247 62,750,889 61,218,595

total Value Retained 151,417,322 38,900,501 66,874,921 (57,494,658)

fINANcIAL cApITAL


Categories of Shareholders

Categories of

Shareholders

31 March 2021 31 March 2020

Number of

Shareholders

Number of

Shares

Percentage

(%)

Number of

Shareholders

Number of

Shares

Percentage (%)

Local Individuals 1,048 252,282 4.18 999 254,028 4.21

Local Institutions 41 5,749,793 95.29 40 5,747,947 95.26

Foreign Individuals 143 29,983 0.50 143 30,083 0.5

Foreign Institutions 4 1,564 0.03 4 1,564 0.03

1,236 6,033,622 100.00 1,186 6,033,622 100.00

Investor Capital Structure

Number of Shares Held 31 March 2021 31 March 2020

From To Number of

Shareholders

Number of

Shares

Percentage

(%)

Number of

Shareholders

Number of

Shares

Percentage

(%)

1 1,000 1,183 178,003 2.95 1,138 167,478 2.78

1,001 10,000 49 110,719 1.84 43 101,068 1.68

10,001 100,000 2 25,820 0.43 3 45,996 0.76

100,001 1,000,000 1 625,335 10.36 1 625,335 10.36

Over 1,000,000 1 5,093,745 84.42 1 5,093,745 84.42

1,236 6,033,622 100.00 1,186 6,033,622 100.00

Directors’ Shareholding As At 31 March 2021

Name of Director Number of Shares Percentage (%)

1. S J S Perera Nil Nil

2. M M N De Silva 1,100 0.018

3. J C Joshua Nil Nil

4. S D Munasinghe Nil Nil

5. D A R Fernando Nil Nil

6. W A C O Wijesinghe Nil Nil

7. R S Dahanayake Nil Nil

8. M Jayahsuriya Nil Nil

9. K A P Perera Nil Nil

Share Prices for the year

Market Price per Share 2020/21

LKR

Date 2019/20

LKR

Date

Highest Price during the year 300.00 30 December 2020 449.00 5 April 2019

Lowest Price during the year 215.50 18 March 2021 250.00 12 March 2020

Closing Price 225.00 260.20


Public Holding

As at 31 March 2021 2020

Public Holding % 15.559 15,543

Number of public shareholders 1,234 1,183

Float adjusted market capitalisation (LKR. Mn) 211 244

Ordinary Voting shares of Sathosa Motors PLC have been transferred from the Main Board to Diri Savi Board, with effect from 02 July

2018.

The Float adjusted market capitalisation of the Company falls under Option 2 of Rule 7.13.1 (b) of the Listing Rules of the Colombo

Stock Exchange and the Company has complied with the minimum public holding requirement applicable under the said Option.

Twenty Major Shareholders

31 March 2021 31 March 2020

NAME Number of

Shares

Percentage

(%)

Number of

Shares

Percentage

(%)

1. Access Engineering PLC 5,093,745 84.423 5,093,745 84.423

2. Lakshmans Housing and Construction Co Pvt Ltd 625,335 10.364 625,335 10.364

3. Bank of Ceylon No. 1 Account 13,194 0.219 13,194 0.219

4. Mr M Mahibalan 12,626 0.209 16,601 0.275

5. Mr R D Leelaratna 9,900 0.164 8,898 0.147

6. Mr U I Suriyabandara 7,127 0.118 6,202 0.103

7. Mr N A N D D Gunasekara 5,450 0.090 5,450 0.090

8. Mr K C Vignarajah 4,209 0.070 4,209 0.070

9. Mr G C Goonetilleke 4,050 0.067 4,050 0.067

10. Mr R D U A Ranamuka 4,000 0.066 4,000 0.066

11. Mrs M P R Silva 3,655 0.061 - -

12. Mr A H Munasinghe 3,598 0.060 3,598 0.060

13. Mr S Gowrisangar 3,300 0.055 3,300 0.055

14. Tea Ceylon Investments (Pvt) Ltd 2,850 0.047 2,850 0.047

15. Ms S N Dias 2,600 0.043 1,700 0.028

16. Mr L M Dias 2,400 0.040 2,400 0.040

17. Mr P K Sambasivam 2,260 0.037 2,260 0.037

18. Mr N Anoshan 2,115 0.035 - -

19. Mrs A N Herath / Mrs N E Herath 2,107 0.035 4,826 0.080

20. Mrs R R Rumy 2,059 0.034 2,059 0.034

Sub Total 5,806,580 96.237 5,804,677 96.206

Other 227,042 3.763 228,945 3.794

Total 6,033,622 100 6,033,622 100

fINANcIAL cApITAL


huMAn CApItAL


Sathosa Motors consider its human

capital as its most valued resource. The

professional and skilled teams at SML

have been a key factor in maintaining the

Company’s industry leadership position.

Our human resource play a crucial role in

achieving the Company’s short, medium

and long term goals and objectives. SML

human resource policies and strategies

therefore are developed to ensure that

our human capital is well optimised and

equally well rewarded.

Our surveys have identified the Top 5

reasons why candidates opt to work with

SML. They are:

Corporate Stability

Positive Work Environment

Higher Job Security

Fair Pay

Job Satisfaction

SML Code of Business Ethics, Conduct

and Integrity

We have set in place a well put together

code of conduct and ethics that support

SML’s values. Our employees adhere to

these rules and regulations in the Code of

Business Conduct and Ethics throughout

their tenure with SML which has been a

secret to our success.

Developing a KAIZEN Culture

During the year under review, the

Company has focused on introducing

the KAIZEN culture within our Company.

KAIZEN is a Japanese term meaning

"change for the better" or "continuous

improvement." It is a Japanese business

philosophy regarding the processes that

continuously improve operations and

involve all employees. Kaizen aims to

improve productivity as a gradual and

methodical process where employee

opinion is given an opportunity to be

heard so that leaders become aware of

the problems on ground that employees

face daily. SML is keen to develop a

culture that encourages employees to constantly improve and through this influence

and change the way people think, by exposing and problem solving.

This approach will deliver an elevated level of stability in the organisation, as it

develops a culture where employees can overcome any future challenges through joint

problem solving and decision making. In this culture, employees will be the drivers of

change and problem solvers of the Company as they are trained to identify and provide

simple solutions to recurring problems.

We use PDCA Cycle, Root Cause Analysis as tools to help data-based decision-making.

This culture provides organisations with stability and more secure operational

processes.

SML understands and acknowledges that our workforce is diverse. Therefore, the

Company welcomes the multiple ideas for problem solving from the employees who

represent diverse backgrounds and cultures. We believe this philosophy will inspire

innovation and build positive attitudes that would translate into to quantifiable benefits

to the organisation in future.

Workforce Composition

Our workforce is a representation of our strong HR policies that foster non-

discriminatory and inclusive approach in recruitment. The multi-disciplinary expertise

and experience of our workforce has immensely contributed towards value creation

in our customer service and support. While we are an equal opportunity provider, our

industry is traditionally a male dominated one due to the nature of the technical and

mechanical services that we offer.

Staff Composition

00

Age Group18-20

142

Age Group21-25

329

Age Group26-30

1810

Age Group31-35

294

Age Group36-40

143

Age Group41-45

221

Age Group46-50

133

Age Group51-55

70

Age GroupAbove 55

ManagerialMale -14 | female -1

15

Number ofEmployees

OperationalMale -24

24

Number ofEmployees

Clerical & SupportiveMale -111 | female -31

142Number ofEmployees

huMAN cApITAL


Human Capital Development

Developing the capacities, skills and knowledge of our human capital is of utmost importance to SML. The automobile industry

is a dynamic industry where technology and services are rapidly changing. To remain current and updated, our human resource

is provided with ample opportunities both overseas and locally to enhance and refine their skills and knowledge. Whilst career

advancement is nurtured, SML also provides a healthy work environment that is both enabling and inspiring our human resource to

create value to their professional and personal growth.

Training and Development

Training Programme Target Group Type Date Total

Training

hrs.

Duration

hrs.

No. of

Participants

Advanced excel training programme - 1st Batch

All divisions External 12 December 2020 & 19 December 2020

144 16 9

Advanced excel training Programme - 2nd Batch

All divisions External 16 January 2021 & 23 January 2021

224 16 14

Technical training programme - Introduction to transmission system

Vehicle Sales Division

Internal 27 January 2021 30 3 10

Drivers training - Basic vehicle maintenance tips and effective driving

All Drivers Internal 12 February 2021 31.5 3.5 9

IFS User training - Functions & Tips

Workshop Divisions / Spare Parts Divisions

Internal 13 February 2021 16 4 4

Technical training (Operating a paint booth)

Workshop Divisions External 01 March 2021 28 3.5 8

Training on general company policies and how to maintaining safety & personal hygiene

Workshop Divisions Internal 22 March 2021 15 0.5 30

System training - Subcontract manual invoices

Workshop Divisions Internal 19 March 2021 6 1 6

General training on how to fairly & legally terminate an employee

Human Resources Divisions

External 25 March 2021 16 8 2

Recruitment and Retention

SML’s recruitment policy is based on the below guidelines:

Recruitment of staff possessing appropriate skills in terms of technical capability and personal strengths

Maintain consistency of recruitment and selection process between all business units

Safeguard transparency in the recruitment process

Our recruitment policies are transparent and merit based. Providing our human resource with due rewards and recognitions are

considered integral in inspiring loyalty, commitment and employee retention.

Performance Evaluation

SML currently implements a comprehensive evaluation of performance that identifies learning needs and provides valuable feedback

for improvement. Our performance evaluation and appraisal process instils a performance driven culture within the company. Human

capital development has been in-built into our strategic growth in the long term, and therefore, the Company has taken initiative to

increase employee satisfaction, whilst pursuing our corporate objectives.


huMAN cApITAL

Creating a Safe Space for Professional

Growth

The COVID-19 pandemic has reinforced

the need for safe and healthy work

environments across all SML facilities.

In addition to ensuring staff safety, the

Company is equally concerned with the

physical, emotional and psychological

wellbeing of our employees.

We encourage professionalism,

cooperation and healthy competition

amongst our employees that have led to

higher productivity and innovation within

the Company. The Company continues

to provide employees with a learning

and growth work environment that is

satisfying, informative and engaging to all

our employees.

Employee Events and Welfare Activities

Over the year, SML has developed

teamwork, cooperation, mutual respect,

empathy and kindness amongst our

human capital through events and

activities that have given the employees

an opportunity to engage socially within

their colleagues and extended teams.

While we have focused our human capital

develop beyond training and development,

we have also implemented recognition

and rewards events and welfare schemes

to support our employees.

COVID-19 Response

SML introduced a COVID-19 preparedness

and response plan in October 2020,

intended to provide a planned and

strategic approach to manage business

continuity during the COVID-19 pandemic.

In keeping with the guidelines of this

plan, pandemic related risk levels

in workplaces were identified and

appropriate controls and measures were

implemented as a preventive effort to

minimise the spread of the COVID-19

pandemic. This supported our business

continuity during the first and second

waves of the pandemic.

During the year, our welfare activities

were limited to COVID-19 related efforts.

SML distributed dry ration packs worth

LKR 10,000 amongst employees who

underwent self-quarantine due to

exposure to the COVID-19 virus. The dry

rations were of immense assistance to

the employees who were not in a position

to purchase or source necessary food

items during the quarantine period.

At this challenging time, SML considered

the safety of our employees and our

customers as a key priority in continuing

our business. In order to ensure the

safety and wellbeing of the staff, SML

sponsored PCR testing of employees. This

measure safeguarded the workplaces

and workshops from the potential risk

of COVID-19 spread within the Company

and helped to maintain health and safety

among all employees.


InteLLeCtuALCApItAL


We believe that SML’s intellectual capital has helped the Company maintain its leadership status in the industry. Over the years, SML

has built on the knowledge, skills, experience, and expertise that has evolved, passed on and grown. Our collective intellectual capital

drives the dynamic business strategy of the Company and has helped us remain relevant and technologically advanced.

We see a harmonious synergy between intellectual capital and our human capital through employee proficiency, training, work ethics,

knowledge and experience. Therefore, SML has invested in enhancing the Company’s intellectual capital through human resource

development.

In 2020, despite being a year under lockdown during most months, SML’s commitment to enriching and enhancing our intellectual

capital continued. We have focused mainly in developing the knowledge and skills of workshop teams in line with SML’s strategic

decision to increase the number of regional after sales service points and increase workshop capacities.

During the year under review, 15 training sessions have been conducted within 12 months, completing 690 trainings hours, training

150 employees. Details of the intellectual training sessions are provided in the table below:

Training Programme Target Group Type Date Total

Training

hrs.

Duration

hrs.

No. of

Participants

Overall understanding about

Isuzu competitiveness and to

work efficiently & effectively to

meet shareholders expectations

and customer satisfaction while

building personal responsibility

and team work

Workshop Divisions Internal 12 July 2020 105 3.5 30

Budget Webinar - Comprehensive

study on the new budget

proposals and implementation

Finance Division External 19 November 2020 16 8 2

Customer Creation Awareness Finance Division/

Workshop Divisions

Internal 11 December 2020 10 2 5

Soft Skill Development

Programme

Finance Division/

Human Resources

Divisions

Internal 22 January 2021 32 2 16

Webinar on Conducting Industrial

Accident Instigations

HR Divisions /

Workshop Divisions

External 26 January 2021 10.5 3.5 3

Sri Lanka Customs Finance Division External 30 March 2021 6 3 2

Knowledge and Experience

SML places utmost importance in the knowledge and experience of our staff, which forms the basis of our intellectual capital, towards

which the Company continuously invests in building the team’s expertise and experience.

We are proud of the fact that most of our employees have served the Company for over 5 years, and during which time we have

extensively invested in growing them. With each year at SML, the staff accumulated a broad base of new knowledge in their expert

areas. Their skills are continuously enhanced and their technical and professional knowledge and know how improved with training,

overseas exposure and associations with our principals and partners.

INTELLEcTuAL cApITAL


Maintaining our market leadership in the

Japanese commercial vehicle segment

over the years, has given SML capabilities,

insights, and specialist knowledge

that has clearly set us apart from the

competition in the rapidly diversifying

industry of vehicle import, sales and

servicing.

Corporate Culture

Our performance based culture ensures

that every individual has the opportunity

to shine and be recognised for the value

and contribution they make towards

the organisation. Every member of our

team is encouraged to add value to the

workplace and be held accountable for

their actions. Our corporate culture is

one that fosters open communication and

employee engagement.

Systems and Processes

SML’s systems and processes form the

backbone of our business and its day

to day functions. Our teams rely on the

comprehensive and efficient systems and

processes the Company has set in place

to guide their operations for seamless

business.

The Company has designed systems,

procedures and processes in keeping

with industry and regulatory ethics and

frameworks. These can be found in the

company’s procedure manuals, SOPs, ERP

systems and financial controls that have

been introduced over the years.

During the year 2018, SML invested in an

advanced ERP solution which has helped

maximise operational efficiencies across

all business areas. This has enhanced the

Company’s customer service efficiencies

and responsiveness, increased business

performance, and streamlined business

processes whilst lowering operational

costs. SML has enabled this software to

manage all sales and operational data,

and to better organise it and make data

retrieval easy.

SML is a Member of;

The Ceylon Chamber of Commerce

Ceylon Motor Traders Association


MAnuFACtuRedCApItAL


SML’s manufactured capital is an area

that the Company considers important

in achieving our strategic objectives.

Our manufactured capital includes value

driven initiatives that have enriched

SML brand and our service offer to our

customers. This is synonymously tied with

our brand promise and brand values that

SML upholds.

During the year, SML’s manufactured

capital has expanded into the regions,

strengthening our brand presence and

increasing customer value additions at

the regional level. We have invested in

acquiring new property, expanding our

workshops and upgrading them with

state of the art facilities, improving the

availability, delivery and efficiency of

our spare parts business and customer

service aspects.

The total investment in manufactured

capital in 2020 was LKR 553.5Mn.

Workshops and Service Centers

Peliyagoda workshop service center

was upgraded with advanced facilities.

In our service and repair solutions, the

workshops provide services that include

all minor and major vehicle spare parts

supply and repair as well as lubricant

support.

The Company has invested in improving

workshop and service facilities with high

quality equipment which has increased

productivity, safety and reliability. As

at 31 March 2021, SML reported a net

book value of LKR 27.7Mn in machinery

and tools. SML purchased LKR 12.3Mn

worth of machinery, tools and equipment

to enhance the workshop capacity and

efficiency.

Equipment

Our workshop facilities are equipped

with advance machinery including

compressors, tools, hoists as well

as heavy duty hydraulic vehicle lifts

required for inspection and diagnostics in

mechanical repairs.

SML workshops rely on a range of

advanced technology equipment installed

for collision repair and analytics.

These machinery are operated by

skilled and versatile technicians trained

locally and overseas, to the stringent

manufacturers’ standards of operation.

In addition to above, the Company also

possess a range of office equipment,

fixtures and fittings utilised in regular

administration activities.

SML’s equipment and infrastructure

was further expanded during the year

with extensive investments in workshop

facilities.

New SML Branch in Negombo

A new branch selected for its strategic

location close to marine activities and

livelihoods was opened in Negombo

focusing on inboard marine engines and

spare parts sales.

Lands

Details of the land held by the company

are disclosed in note 13 to the financial

statements.


nAtuRALCApItAL


SML place immense value in upholding

sustainable environment policies and

practices in our business. Our natural

capital consist of both renewable and

non-renewable energy sources, and all

other natural resources that are used in

our processes, production of goods and

providing of services.

SML’s approach to environmental

sustainability aims to mitigate any

potentially harmful waste that are

released to the environment by nature of

the industry we operate in. The Company

is aware of its responsibility towards

minimising our carbon footprint and the

conservation of the environment and its

limited resources. We have committed

to include the environment as a key area

of concern in all our strategic initiatives

which includes a systematic approach to

reduce our carbon footprint in our daily

operations.

Environment Compliance

SML has obtained the necessary

approvals and authorisations to

discharge, deposit effluents, waste and

air emissions that may arise as a result of

SML’s operations and processes.

Across the divisions and branches of

the company, we have implemented

guidelines to avoid usage of

environmentally hazardous material. We

also prioritise suppliers who are abide by

environment standards and implement

environmentally safe practices. SML’s

supplier evaluation includes this aspect

as well.

In accordance with the standards and

criteria prescribed by the National

Environmental (Protection and Quality)

Regulations No. I of 2008, waste water

treatment, sampling and safety aspects

have been implemented in our workshops.

In addition, SML has introduced multiple

initiatives to reduce the Company’s carbon

footprint and minimise waste. In doing so,

we have focused on below key areas:

Energy Efficiency

Water Management

Waste Management

Other Environmental Friendly

Practices

Water Management

SML operates in a high water

consumption business environment.

We are conscious that water is a

scarce resource which needs greater

conservation. We are also concerned

that our operations do not pollute the

environment, and other water resources

within the environment. To minimise

water pollution and efficient water

management, SML has introduced

sophisticated water purification

systems in workshops to ensure that no

contaminated water is released to the

environment. Instead, our purification

systems make sure that chemicals, oils,

residues and other harmful and toxic

material is removed from the water prior

to release.

All waste water generated from our

operations in the service station

are treated conforming to Central

Environment Authority approved

standards.

SML also initiates below activities:

Installation of efficient taps and other

equipment that reduce water waste

Internal awareness campaigns on

water resource and its best usage

practices

Training on water purification and

waste water treatment at workshop

facilities

Water Consumption

Month Total Units used

Head

Office

Peliyagoda

WS

Matara

Branch

Panchikawaththa

Branch

Negombo

Branch

Total

Apr-20 160 75 17 0 - 252

May-20 274 178 16 1 - 469

Jun-20 314 195 17 1 - 527

Jul-20 286 254 18 1 - 559

Aug-20 247 241 20 2 - 510

Sep-20 248 276 19 1 - 544

Oct-20 166 219 19 1 - 405

Nov-20 215 343 18 0 - 576

Dec-20 188 299 19 2 - 508

Jan-21 247 271 19 0 3.67 541


NATuRAL cApITAL

Month Total Units used

Head

Office

Peliyagoda

WS

Matara

Branch

Panchikawaththa

Branch

Negombo

Branch

Total

Feb-21 237 270 18 1 3.67 530

Mar-21 234 290 16 2 3.67 546

Total 2,816.00 2,911.00 216.00 12.00 11.00 5,966

Waste Management

SML has continued to ensure safe waste

disposal methods across our workshops

and other facilities. These initiatives

are implemented for all potentially

environmentally harmful residues such

as burnt oil, electronic waste, packaging

cardboards and other items.

The Company also follows

environmentally friendly practices to

minimise solid as well as other types of

waste generated by staff.

Our environment friendly waste

management includes:

Less paper policy – by introducing

digital sharing in place of printed copy

sharing, we have cut down on the

need for paper use.

Awareness – frequent campaigns

internally to create staff awareness

to minimise waste and best disposal

practices.

Recycle - recyclable waste generated

within our workplaces are handed

over to CEA approved recycling

partners who will ensure they are

recycled in a safe manner. This

includes e-waste, residual oil and

cardboard/paper.

Energy Efficiency

SML’s energy policy ensure that periodical

review of energy usage and consumption

is conducted to ensure that the Company’s

energy resource is optimised. This

has allowed the Company to increase

energy efficiency and provide valuable

information for energy planning for the

future. Our energy usage varies based on

the Company’s throughput level at each

segment of the value chain.

SML ensures therefore that all

branches and processes are monitored

continuously and necessary steps are

taken to reduce our carbon footprint

through minimising energy wastage and

increasing energy efficiency through staff

awareness, installation of energy efficient

appliance and similar initiatives.

In addition, the Company has

implemented:

Planning to install solar panels - the

Peliyagoda facility will be installed

with solar panels in the future with a

view to minimise grid energy usage

Thermal insulation on roofs - by

installing thermal insulation we have

managed heating within our premises

to minimise use of air conditioning.

CFL and LED lighting – by converting

to CFL and LED lighting has reduced

the electricity consumption across the

buildings and increased our energy

efficiency

Smart machinery - by investing in

environmentally friendly and energy

efficient machinery and equipment

has helped bring down the energy

consumption and release of harmful

elements to the environment

Efficient energy zones – by identifying

energy zones and dividing the lighting

control system into several zones with

separate switches, we have increased

energy optimisation and reduced

energy waste

Electricity Consumption

Month Total units consumed during the period

Head Office Peliyagoda

WS

Matara

Branch

Kurunegala

Branch

Rathnapura

Branch

Panchikawaththa

Branch

Negombo

Branch

Total

Apr-20 4,885 1,802 813.5 974 232.5 182 8,889

May-20 10,460 4,785 663.5 974 465 182 17,530

Jun-20 16,282 6,591 663.5 1,184 462 650 25,833

Jul-20 16,736 9,484 2,414 1,436 593 522 31,185

Aug-20 15,099 5,926 1,375 1,257 354 469 24,480


Month Total units consumed during the period

Head Office Peliyagoda

WS

Matara

Branch

Kurunegala

Branch

Rathnapura

Branch

Panchikawaththa

Branch

Negombo

Branch

Total

Sep-20 13,286 5,967 1,831 1,278 536 417 23,315

Oct-20 13,131 5,920 1,641 1,414 301 0 22,407

Nov-20 10,499 5,581 612 1,239 331 444 18,706

Dec-20 12,033 7,066 631 1,016 305 134 21,185

Jan-21 13,204 6,190 553 900 278 347 653 22,125

Feb-21 13,041 5,530 599 1,149 369 464 653 21,805

Mar-21 14,655 8,387 777 1,295 324 472 653 26,563

Total 153,311 73,229 12,574 14,116 4,551 4,283 1,958 264,021

EURO 4 Standard Vehicles

SML was amongst the first in the industry

to introduce EURO 4 standard vehicle in

Sri Lanka specifically designed for the

local market. This initiative continued

in the commercial vehicle category of

SML during the year under review and

offered a range of Euro 4 standard model

options in the Japanese truck range.

Euro 4 standard vehicles emit 68% less

particulate matter (PM), 57% less nitrogen

oxide, and 50% less carbon monoxide in

comparison to Euro 2 standard vehicles.

SML achieved a steady rate of above 65%

market leadership in the EURO 4 segment

since the introduction of the product line

up. We are determined to work towards

achieving the Sri Lankan Government’s

plans to reduce carbon emission

considerably by 2025.

Other Environment Friendly Practices

and Processes

In addition to above areas, SML has

initiated processes and practices in

keeping the environment safe. These

focus on air and noise pollution as

well as minimising soil pollution in our

environment.

Fuel

By procuring fuel efficient machinery,

we have saved on energy usage in our

workshops. In addition, SML ensures that

all vehicles and machines are regularly

maintained and assessed for fuel

consumption; fuel consumption against

mileage of vehicles and machinery for

any deviation; disposal of redundant

machinery; avoidance of fuel driven

equipment including generators.

Emission

We understand the need to keep

emissions low to minimise our carbon

footprint. Towards this, SML has taken

multiple initiatives to track our emissions

and reduce it. Some of these include:

Measuring emissions of generators,

vehicles, and other machinery to

identify any abnormal compositions in

the emission.

Emissions in fuel-driven equipment

such as generators are measured

and appropriate action such as filter

replacement or servicing is done to

rectify any irregularities.

Ensuring that all our products

(vehicles) are equipped with the latest

technology for lower carbon emission

and energy efficiency.

Noise and Soil Pollution

We are mindful that by the nature of our

operations, noise and soil pollution are

potential environment risks. In order

to lower these pollutants from being

released to the environment. We have

isolated high noise generating equipment

and replaced them with less noisy

machinery. On soil pollution, SML has

developed secondary containment options

to contain lubricants, oil and fuel stored

within our workshops to ensure that any

leak or spill is prevented.

Future Outlook

With a view to minimising grid energy

usage and to optimise natural energy

resources, SML plans to invest in solar

panels at our flagship workshop at

Peliyagoda, with the capacity to generate

sufficient energy to manage the electricity

usage of Peliyagoda Workshop.


soCIAL And ReLAtIonshIp CApItAL


Sathosa Motors has a rich and extensive

social and relationship capital built on

years of trust, brand equity, and loyalty.

Our philosophy to foster this capital is

built into our commitment and promise

towards our multiple stakeholders:

customers, business partners, community

and suppliers. We have remained credible,

transparent, trustworthy and committed

to serving each stakeholder relationship

which has strengthened our social and

relationship capital over the years.

Our stakeholders include individuals,

organisations and institutes, groups and

communities that directly or indirectly

associate with SML in our end-to-end

process of delivering our products and

services. This includes those who are

directly or indirectly be impacted by

the operations, policies and procedures

of our company. This is important in

creating value to our stakeholders and

these stakeholders are determined by the

authority they exert on SML and the level

of interest they have in SML operations.

Stakeholder engagement process

Identifications - Stakeholders and

their concerns

engagement and prioritisation

- Engaging stakeholders and

prioritising concerns

planning and Implementation - Identifying methods to address concerns and

allocating resources to relevant teams to implement solutions

Reporting - Communicating implemented solutions to stakeholders

Business Partners

Government and Regulatory Bodies

Industry Peers and Competitors

Society

Investors and Shareholders

Suppliers and Sub-Contractors

Banks and Prospective Lenders

Employees

Customers

SATHOSAMOTORS PLC

Customers

Our customer is a key stakeholder in our business whose patronage of our products and services has ensured the

growth and sustenance of our business. SML initiates multiple engagement opportunities with customers through

events that provide them with necessary updates and information on our dynamic portfolio of products and services.


Business Partners

We have built a strong relationship with our business partners who have strengthened our business over the years.

Our business partners who are both local and foreign have been instrumental in technology and knowledge sharing

that has helped SML maintain our industry leadership position.

SML has continuously achieved targets and met business partner expectations. As part of achieving this, we ensure

our products are available to our customers at all times and conduct multiple customer awareness, brand loyalty

initiatives that keep our customers updated on products and services. We have expanded SML’s product presence

and customer base through similar efforts.

Our main foreign business partners are;

ISUZU Japan

ITOCHU Corporation – Japan

Isuzu Motors International Operation – Thailand

ISUZU Motors Limited

Isuzu is filling a significant role in the world as a manufacturer of commercial vehicles, light commercial vehicles and diesel engines.

Isuzu's sophisticated technological strength and various fruits are expected to meet further social demands and produce good

prospects for the future.

Name Isuzu Motors Limited

Foundation/

Establishment

1916/April 1937

Capital Capital 40.6 billion yen(March 2021)

President Masanori Katayama, President and Representative Director

Sales Consolidated 1,908,1 bilion yen

Non-Consolidated 922,6 bilion yen

(April 2020-March 2021)

Employees Consolidated 36,624

Non-Consolidated 8,149

(March 2021)

Major Products

Isuzu Corporate Vision

Isuzu Corporate Mission

Address

Heavy- medium- and light-duty trucks, buses, passenger vehicle engines, industrial-use diesel engines.

Isuzu will always mean the best

A leader in transportation, commercial vehicles and diesel engines, supporting our customers and

respecting the environment

Trust, Action, Excellence

A global team delivering inspired products and services committed to exceeding expectations

6-26-1 Minami-Oi, Shinagawa-ku, Tokyo 140-8722 Japan

Tel. 81-3-5471-1141

socIAL ANd RELATIoNshIp cApITAL


ITOCHU Corporation

ITOCHU was established in 1949, but was founded in 1858.

ITOCHU has introduced a “division company” structure to facilitate prompt responses to the needs of markets and customers since

April 1997. At present, the company consists of 8 division companies.

Name ITOCHU Corporation

Foundation/

Establishment

In year 1858 / 1949

Capital 253,448 million yen (March 2021)

President /Chairman /

CEO

Masahiro Okafuji, Chairman & Chief Executive Officer

Sales Consolidated 10,362,628 million yen

Non-Consolidated 3,575,369 million yen


Employees Consolidated 125,944

Non-Consolidated 4,215

(March 2021)

Major Products

Corporate Vision

(Guideline of Conduct)

Corporate Mission

Address

Various products such as textile, machinery, metals, minerals, energy, chemicals, food, general products,

realty, information and communications technology, and finance, as well as business investment in Japan

and overseas.

The ITOCHU Group declares “I am One with Infinite Missions” as our new Guideline of Conduct. These

are words that realise our thoughts behind “Sampo-yoshi” and provide direction for ITOCHU Group

employees in performing ideal business operations.

The ITOCHU group declares the spirit of “Sampo-yoshi” as our new corporate mission, which spirit

originates from the message of our founder Chubei Itoh.

"Sampo-yoshi" means good for the seller, good for the buyer, good for society.

Tokyo Headquarters :

5-1, Kita-Aoyama 2-chome,

Minato-ku, Tokyo 107-8077, Japan / TEL : +81-3-3497-2121

Osaka Headquarters :

1-3, Umeda 3-chome,

Kita-ku, Osaka, 530-8448, Japan / TEL : +81-6-7638-2121



Isuzu Motors International Operations (Thailand) Co., Ltd (IMIT)

Isuzu Motors International Operations (Thailand) Co., Ltd (IMIT) is a subsidiary of Isuzu Motors Limited. Of the production base in

Thailand, ISUZU group is the sole exporter of ISUZU LCV (Light Commercial Vehicle) to more than one hundred countries all over the

world.

The Company established in 2002 under the name of "Isuzu Operations (Thailand) Co., Ltd. to increase its business coverage and

to strengthen the quality of the service. The business expanded into 3S (Sales, Service, Spare Part) and the company was renamed

"Isuzu Motors International Operations (Thailand) Co., Ltd." in 2011.

Name Isuzu Motors International Operations (Thailand) Co., Ltd (IMIT)

Foundation/

Establishment

In year 2002

Capital 678,000,000 THB (March 2021)

President /Chairman /

CEO

Kimitoshi Kurokawa

Sales Consolidated Nil

Non-Consolidated 57,836,496,861 THB


Employees Non-Consolidated 164 Person

(March 2021)

Major Products

Corporate Vision

Corporate Mission

Address

CBU, CKD, Service Parts: ACS, CSO, Spare Parts

ISUZU will always mean the best.

ISUZU will always contribute to make an affluent society by supporting "Transportation".

We for stabilisation and expansion of LCV export business as a core leading business in ISUZU. We

deliver the best satisfaction to our customers throughout the life-cycle from vehicle purchase to after-

sales.

ISUZU MOTORS INTERNATIONAL OPERATIONS (THAILAND) CO., LTD.

1010 Shinawatra Tower III, 24th-25th Floor,

Vibhavadi Rangsit Road, Chatuchak, Bangkok 10900.


Investors and Shareholders

SML frequently engages with our investors and shareholders through meetings and promotional activities. We

keep our investors and shareholders informed and updated continuously enabling informed decision making about

their investments. We are committed to provide them with satisfactory returns on their investments and maintain

transparency throughout our business operations.

Suppliers and Sub-Contractors

Our suppliers and sub-contractors are part of the backbone of our business. They ensure that SML’s supply chain

is undisturbed so that we can provide efficient services to our clients. We have built strong relationships with

our suppliers and sub-contractors over the years which has been instrumental in creating value addition to our

customers. They are continuously kept informed of our expectations, standards, compliance requirements, quality of

service as well as procurement policies.

Government and Regulatory Bodies

The Government and its regulatory bodies are a key stakeholder of the automobile industry. SML maintains cordial

relations with the government and regulatory authorities in resolving industry grievances whilst complying with

regulatory requirements.

Banks and Prospective Lenders

Financial institutions are a valuable partner for SML as they provide necessary capital to fund our development

activities. SML has ensured that our relationship with our banks and prospective lenders have been honest and

trustworthy, which has led to mutual respect and trust in all our dealings with our banking and lending partners.

Employees

Our employees are the brand ambassadors of our Company. Ensuring that our employees are content through

recognitions, rewards, professional and career growth opportunities and personal goal achievement ensures that

our employees can contribute productively and efficiently towards achieving SML’s targets and objectives. The

Company also provide a safe and secure working environment that encourage work-life balance.

Industry Peers and Competitors

Our industry peers and competitors have been a strength during challenging times in voicing common grievances

and seeking benefits for the industry’s growth. SML conducts and participates in multiple events and activities in

maintaining positive relationships with the industry peers and competitors.

Society

The society and the environment we have a direct or indirect impact on is an important stakeholder in our growth.

SML has encouraged transparent and honest communications with our societal stakeholders to ensure that our

business has a positive impact on their lives as well as on the environment.



Nurturing Key Relationship

Strengthening robust relationships with stakeholders is an ongoing process within SML. We have put in place a sound communication

method and tools and engage the right people and processes to do so. Our employees are well-equipped to deliver service excellence

and they too benefit from processes and systems that are in place. Maintaining loyalty and trust through exceptional services remain

underpinned by open channels of communication.

Stakeholder Group Stakeholder concerns and aspirations Method of Engagement Frequency of

Engagement

Investors and

Shareholders

Financial performance of the Company Periodic meetings with the Board of

Directors

When required

Monetary returns on their investments Annual Report Annually

Business Expansion plans of the Company The Annual General Meeting Annually

Transparency and disclosure Corporate website Continuously

Risk management One-to-one discussions with the Board of

Directors

When required

Customers Product Quality Customer engagement events Periodically

Customer Service One-on-one discussions with relevant

departments

When required

Continuity of services corporate website Continuously

Employees Rewards and recognition Staff meetings Periodically

Training and development Discussions with Managers When required

Career advancement opportunities Training programmes Periodically

Work life balance Special staff events Periodically

Retirement Benefit plans Evaluation and rewards programme Annually

Business Partners Contractual opportunities Special networking events Periodically

Growth potential Meetings When required

Future business prospects Business Proposals When required

Timely settlement of dues Reminder Letters / Confirmations Periodically

Government and

regulatory authorities

Regulatory compliance Timely feedback through submission of

reports

Periodically and

when required

Industry growth Participating in various forums and

discussions

Periodically and

when required

Managing the business impact on the

country's economy

Ensuring compliance Continuously

Society and

Environment

Environmental and economic impact of the

business process

Compliance to regulatory requirements Continuously

Employment Opportunities Participating in trade events Periodically

Communicating through print and

electronic media channels

When required


Strengthening Social and Relationship Capital

SML actively engages with our stakeholders through events and sponsorships that

support and benefit our stakeholders. These activities nurture the social relationships

between SML and our partners, as well as enhance our operational value. A series of

events are initiated throughout the year to build this social relationship.

Customer Awareness Campaigns organised by the Company - 2021

Peliyagoda Fish Market Complex & Manning Market Promotion 16.03.2021

Garage Campaign - Colombo Team 27.03.2021

Kudawella fish market - Matara Team 27.03.2021

Campaign - Ratnapura Team 27.03.2021

Dambulla Dedicated Economic Center - Kurunegala Team 24.03.2021

Negombo Fish Market Complex - Negombo Team 19.03.2021

Social Attributes and Targeted Marketing

The Company has effectively utilised social and digital media platforms to engage our

multiple audiences. We have been successful in reaching potential customers through

social media networks increasing SML’s reach to a wider audience as well as increasing

brand awareness.

Our social media campaigns have been developed with different target groups and

target specific activities. The customised content for each target group of SML’s product

and service categories are placed in different social media platforms to suit the target

groups.

Some of our key social media platforms include:

Facebook / Instagram

Sathosa Motors facebook Homepage; https://www.facebook.com/SathosaMotorsPlc

Sathosa Motors Instagram Homepage; https://www.instagram.com/isuzusrilanka/

For SML , Facebook, Instagram and Whats App applications provide real time interaction,

customer analytics, group behaviour information as well as better customer feedback.

This has enabled us to better strategise our campaigns and our stakeholder approach.

Non-digital marketing

The Company has implemented multiple

awareness and promotional campaigns

through non-digital channels such as

through partnerships with dealers

and promotions carried out at various

locations.

Future Outlook

SML believes that digital reach is the most

effective and efficient methods to reach

our customer base. Therefore, we hope

to expand our digital media presence by

increasing our digital media activities

in the coming year. The innovative

methods of digital marketing can feature

personalised content that appeals and

engages our stakeholders.

Whilst our digital marketing efforts will

be enhanced, we will continue to engage

our customers through traditional media

as well.


ReALIgned FoR stRength And duRABILItY


Financial statementsAudit Committee Report 91

Remuneration Committee Report 93

Related Party Transactions Review Committee Report 94

Strategic Planning Committee Report 96

Annual Report of the Board of Directors on the Affairs

of the Company 97

The Statement of Directors Responsibility 102

Directors Statement on Internal Control Introduction 103

Financial Calendar 104

Independent Auditor’s Report 105


Comprehensive Income 110

Statement of Financial Position 111

Statement of Changes in Equity 112

Statement of Cash Flows 113

Notes to the Financial Statements 114


AudIt CoMMIttee RepoRt

Audit committee of SML is established

under the Corporate Governance rules of

section 7.10.6 of Colombo Stock Exchange

and Code of best practices on corporate

governance issued jointly by the Institute

of Chartered Accountants of Sri Lanka and

the Securities and Exchange Commission

of Sri Lanka.

Role of the Committee

The role of the Audit Committee is

to oversight of the Accounting and

financial reporting system, design and

implementation of internal control system

and risk management procedures, assure

compliance with accounting standards,

applicable laws, regulations and best

practice and review the independence of

external auditors and the scope, result

and effectiveness of audit process.

Terms of Reference

The Audit Committee terms of reference

encompass managing its authority and

duties, established for the purpose of

assisting the Board in fulfilling their

responsibilities that include the Financial

reporting, Internal control and risk

management, Internal audit, compliance

with Laws and regulation and External

audit.

Financial Reporting

The Audit committee responsible to

oversight the company’s financial

reporting process on behalf of the board

to ensure that financial statements are

prepared in compliance with regulatory

requirements including the Sri Lanka

Accounting Standards and Company Act

No 7 of 2007.

The Audit Committee reviewed the

Group’s quarterly and annual Financial

Statements prior to its publication and the

review included:

Appropriateness and changes in

Accounting Policies

Significant estimates and highly

judgmental areas

Compliance with relevant Accounting

Standards and applicable regulatory

requirements

Issues arising from the Internal Audit

and Independent External Audit

The Group’s/Company’s ability to

continue as a going concern

Internal Controls & Risk Management

The Committee assessed an effective

Internal control system is in place

to provide reasonable assurance on

safeguarding the Company’s assets

and reliability of Financial Statements.

Effectiveness of the Company’s internal

control system is evaluated through

reports provided by the management,

Internal Auditors and Independent

External Auditors. And also committee

reviewed and assessed the capability

of the company’s risk management

process to identified significant risk and

addressed those significant risk areas

effectively.

Internal Audit

The Committee is responsible for

oversight the role and effectiveness of

the internal audit function by monitoring

the results of its work and the responses

of management to its recommendations.

The Audit Committee meets the Internal

Auditors on a quarterly basis and reviews

their findings in order to identify risks

attached to different areas of operation

and effectiveness of internal controls.

The Committee reviewed and approved

the 2021/22 internal audit plan at its

meeting in May 2021 and continued to

monitor progress against this plan during

the year. Results and management actions

arising from the reviews undertaken in

2020/21 were discussed in detail at each

of the Committee’s meetings.

Compliance of Laws and Regulations


reports submitted by the management

and the Internal Auditors on compliance

with applicable laws and regulations.

The Committee is satisfied that laws

and regulations are duly complied and

statutory payments have been made on a

timely basis.

Independent External Auditors


independence and objectivity of the

Independent External Auditors, Messrs

KPMG Sri Lanka, Chartered Accountants.

The Audit Committee has met with the

External Auditors to review their audit

plan and any observations made by them.

The Committee has received a declaration

from the External Auditors, confirming

that they do not have any relationship

or interest in the Company or its

subsidiaries. The Committee reviewed the

non-audit services and its impact on the

independence of the External Auditors.

The Audit Committee has recommended

to the Board that Messrs KPMG be re-

appointed as the Independent External

Auditor and that the re-appointment be

included in the agenda of the Annual

General Meeting.


Committee Composition

The committee continued to comprise of the four non-executive directors as set out

below. To ensure compliance with the requirements of the rule 7.10.6 of Listing Rules

of the Colombo Stock Exchange and Code of Best Practices on Corporate Governance

issued jointly by the Institute of Chartered Accountants and Securities Exchange

Commission of Sri Lanka, Committee membership comprises three (3) Independent

Non-Executive Directors and one (1) Non-Executive Director of the Company.

Category Number of Directors

Name

Independent Non-Executive Directors 3

Non-Executive Directors 1

The Committee is authorised by the Board to seek any information necessary to fulfill its

duties, call any member of staff to be questioned at a meeting of the Committee, as and

when required, and obtain independent legal, accounting or other professional advice, at

the Company’s expense, which might be necessary for the fulfillment of its duties.

The brief profiles of the existing members of the Committee are given on pages 18 to 19

of the Annual Report.

Meeting Attendance

The Committee met on the following occasions to discuss matters relating to the

financial year. Members’ attendance was as follows:

Attendance of Audit Committee During the Period 01 April 2020 to 31 March 2021

18 May

2020

29 July 2020 09 November

2020

02 February

2021

1. M M N de Silva √ √ √ √

2. W A C O Wijesinghe √ √ √ √

3. R S Dahanayake √ √ x √

4. T A L Niroshan √ √ √ *N/A


In addition to the Committee members,

the meetings were attended by the

Executive Directors, General Managers

and the Internal Auditor by invitation. The

Company secretaries were also present at

every meeting.

Conclusion

The Audit Committee is satisfied that

the effectiveness of the organisational

structure of the Company and of the

implementation of Company’s Accounting

Policies and operational controls provide

reasonable assurance that the affairs of

the Company are managed in accordance

with Company policies and that the

Company assets are properly accounted

for and adequately safeguarded. The

Committee is also satisfied that the

Company and its subsidiaries are able to

continue as a going concern.

M M n de silvaChairman – Audit Committee

04 August 2021

AudIT coMMITTEE REpoRT


ReMuneRAtIon CoMMIttee RepoRt

Remuneration Committee was

established to ensure compliance with

the requirements of Section 7.10.5 of

the Listing Rules of the Colombo Stock

Exchange and the Code of Best Practices

on Corporate Governance issued jointly

by the Institute of Chartered Accountants

of Sri Lanka and Securities Exchange

Commission of Sri Lanka.

Role of the committee

The remuneration committee

determine the remuneration policy

for Senior Management and making

recommendations to the Board

on recruitment, remuneration and

performance evaluation on Senior

Management including Executive

Directors of the company.

Terms of Reference

The Remuneration Committee functions

within the parameters of agreed

terms of reference. The Committee

is accountable for ensuring that

remuneration arrangements are align

with performance.

Remuneration committee Responsibilities

includes,

Review the framework for the

remuneration and terms and

conditions of employment of the

chairman of the board and of

executive directors.

Monitor the level and structure of the

remuneration of senior managers.

Set detailed remuneration of the executive directors and chairman including

termination payments.

Ensure that executive directors are fairly rewarded for their contribution to the

performance of the company.

Ensure transparency to shareholders that remuneration of the executive directors

is set by individuals with no personal interest in the outcome of the committee

decisions.

Remuneration Policy

The company remuneration policy is designed to motivate, attract and retain the

executive directors and key management personal. Remunerations which are linked

to the individual skills, experiences and performances that align with the company

strategy. Salaries and other benefit are reviewed periodically considering the peer

group companies and institutional guidelines.

All the non-executive directors receive a fee for represents on the board and board

Committees. They do not receive any performance related incentive payments.

Composition and Meeting Attendance

Composition of the Board appointed Remuneration Committee is comprised of two (2)

Independent Non-Executive Directors and One (1) Non-Executive Director. There were no

changes to the composition of the committee as at 31 March 2021.

S J S Perera Chairman, Non – Executive Director

M M N de Silva Independent Non – Executive Director

W A C O Wijesinghe Independent Non – Executive Director

The Committee is authorised by the Board to seek appropriate professional advice

within the Company as and when it considers necessary.

s J sumal pereraChairman


04 August 2021


ReLAted pARtY tRAnsACtIons ReVIeW CoMMIttee RepoRt

I am pleased to present the report of

the Related Party Transactions Review

Committee for the financial year ended

31 March 2021. During the year, the

Committee has continued to review

and report to the Board on the Group's

Related Party Transactions. The Board

has established the Related Party

Transactions Review Committee based on

the terms of the Code of Best Practice on

Related Party Transactions issued by the

Securities and Exchange Commission of

Sri Lanka and the Section 9 of the Listing

Rules of the Colombo Stock Exchange.


The role of the Related Party Transaction

review Committee exercises oversight

function on behalf of the Board in

complying with the Listing Rules of the

Colombo Stock Exchange and with the

Code of Best Practices on Related Party

Transactions (“the Code”) issued by the

Securities and Exchange Commission

of Sri Lanka. The Committee has also

adopted best practices as recommended

by the Institute of Chartered Accountants

of Sri Lanka.

Terms of Reference

The terms of reference of the Related

Party Transactions Committee

encompasses aspects relating to matters

outlined in the Listing Rule of the Colombo

Stock Exchange.

Analysing and reviewing all proposed

Related Party Transactions with the

exception of those exempted by the

Code.

Identify whether proposed Related

Party Transactions require Board or

Shareholder approval.

Directors of the Company are not

allowed to take part in any discussion

regarding proposed Related Party

Transactions for which they are

related parties with the exception of

occasions in which the Committee

requests Directors to give information

with regard to Related Party

Transactions.

Recommendation of creating a special

committee to review and provide

approval for proposed Related Party

Transactions in view of any conflict of

interest.

Duties of the Committee

Reviewing in advance all proposed

related party transactions of the

Company except those explicitly

exempted by the terms of Rule 9.5 of


Exchange

Reviewing if there are any proposed

material changes of previously

reviewed related party transaction

before the completion of the

transaction

To review a related party transaction,

the Committee will be provided with

all relevant material information

of the related party transaction,

including the terms of the transaction,

business purpose of the transaction,

benefits to the Company and to the

related party, and any other relevant

matters. In determining whether to

approve a Related Party Transaction,

the Committee will consider the

following factors, among others, to the

extent relevant to the related party

transaction:

1. Whether the terms of the related

party transaction are fair and on arms

length basis to the Company and

would apply on the same basis if the

transaction did not involve a related

party.

2. Whether there are any compelling

business reasons for the Company

to enter into the Related Party

Transaction and the nature of

alternative transactions, if any.

3. Whether the related party transaction

would present an improper conflict

of interest for any Director or Key

Managerial Personnel of the Company,

taking into account the size of the

transaction, the overall financial

position of the Director, Executive

Officer or other related party, the

direct or indirect nature of the

Director’s, Key Managerial Personnel’s

or other related party’s interest in the

transaction and the ongoing nature

of any proposed relationship and any

other factors the Board/ Committee

deems relevant.

Determining whether related party

transactions that are to be entered

into by the Company require the

approval of the Board or shareholders

of the Company;

Review, revise, formulate and approve

policies and procedures on related

party transactions

Establishing guidelines for the Senior

Management to follow regarding

dealings with recurrent related party

transactions

Ensuring that immediate market

disclosures and disclosures in the

Annual Report are made as required

by the applicable rules/ regulations in

a timely and detailed manner.

Policies and Procedures

As per the existing practice, all related

party transactions must be reported to

the Audit Committee and referred for

approval by the Committee in accordance

with this policy. Such transactions are

also disclosed to stakeholders through

the Company’s Financial Statements.

In case of frequent/repetitive/regular

transactions which are in the normal

course of business of the Company, the

Committee may grant standing pre-

approval.


Performance Review during the year

During the year, there were no non-recurrent or recurrent related party transactions

that exceeded the respective thresholds mentioned in the Listing Rules requiring

disclosure in the Annual Report. Details of other related party transactions entered into

by the Company/Group of Companies during the year are disclosed in Note 27 of Notes

to the Financial Statements.

Committee Composition

In accordance with Section 9.2.2 of the Listing Rule of the Colombo Stock Exchange,

the Related Party Transactions Review Committee comprises three Independent Non-

Executive Directors and one Non-Executive Director, who were appointed by resolution

at a Board meeting. The Committee comprised the following members:

Category Number of Directors

Independent Non Executive Directors 3

Non Executive Directors 1

The brief profiles of the existing members of the Committee are given on pages 18 and

19 of the Annual Report.

Meeting Attendance

During the year 2020/21, the Committee members attended meetings as set in the

following table:

Attendance of Related Party Transactions Review Committee

(01 April 2020 to 31 March 2021)

Name

18 May

2020

29 July

2020

09 November

2020

02 February

2021

1 M M N de Silva √ √ √ √

2 Chiran Wijesinghe √ √ √ √

3 R S Dahanayake √ √ x √

4 T A L Niroshan √ √ √ NA *


Declaration

There were no recurrent or non-recurrent

related party transactions which required

additional disclosures in the 2020/21

Annual Report under Colombo Stock

Exchange Listing Rule 9.3.2.

A Declaration by the Board of Directors

on compliance with the rules pertaining

to the Related Party Transactions appears

in the Report of the Board of Directors on

pages 98 to 99 of the Report.

M M nelson de silvaChairman

Related Party Transactions Review

Committee

04 August 2021


stRAtegIC pLAnnIng CoMMIttee RepoRt

Strategic Planning Committee Report

Strategic Planning Committee was

established to focus on planning and

setting strategic directions to achieve

goals and objectives of the Company.

During the year the committee has

continued to review and report to the

Board on the Company’s strategic

direction, trends and issues in achieving

its goals and objectives.


The role of the Committee is to assist

the Board with its responsibilities for the

Company’s vision, mission and strategic

direction. The Committee complies

with the best practices in corporate

governance.

The Committee met several times during

the year to discuss the Company’s

strategic direction and its major strategic

issues.

Responsibilities Includes,

Periodically reviewing the Company’s

vision, mission, strategic initiatives,

major programs and services and

making recommendations to the

Board.

Identifying critical strategic issues facing the Company and assisting in the analysis

of alternative strategic options.

Ensuring that the Management has established an effective strategic planning

process with time lines and targets.

Reviewing new products, services and business opportunities go in line with current

business operation.

Advising the Board on the trends in Organisation industry, market/ community, and

core competencies.

Develop key performance indicators for the company level to measure the objectives

achievement.

Reviewing and forwarding to the Board, strategic plans of subsidiary organisations

to assure they are aligned with the system’s strategic direction and goals.

Composition

The Committee comprised three (3) Executive Directors of the Board. J C Joshua serves

as the Chairman of this Committee.

Name of the Director Designation

J C Joshua Chairman - Executive Director



J C Joshua Chairman

Strategic Planning Committee

04 August 2021


AnnuAL RepoRt oF the BoARd oF dIReCtoRs onthe AFFAIRs oF the CoMpAnY

The Directors of Sathosa Motors PLC

have pleasure in presenting their Annual

Report of the Company, together with

the Audited Financial Statements of the

Company for the year ended 31 March

2021. This Report covers Chairman’s

Message, Corporate Governance and

Management Structure, Enterprise Risk

Management, Sustainability and all other

relevant information for the year ended

31 March 2021, in addition to the Audited


The Company’s Board of Directors is

responsible for confirming that the

information stated in the Annual Report

on the Affairs of the Company, contains

the information required in terms of the

Companies Act No.07 of 2007, the Listing

Rules of the Colombo Stock Exchange and

is guided by recommended best practices.

General

Sathosa Motors PLC was incorporated in

Sri Lanka on 11 March 1982 under the

Companies Ordinance No: 51 of 1938

and re-registered under the Companies

Act No.7 of 2007. Listed on the Colombo

Stock Exchange on 07 November 1993.

The registration number of the Company

is PQ 105.

Principal Activities of the Company and

Review of Performance during the year

SML is the authorised distributor for

ISUZU in Sri Lanka. Access Motors

(Private) Limited is the subsidiary of

Sathosa Motors PLC and authorised

distributor for Jaguar and Land Rover in

Sri Lanka.

Review of the Performance

Review of the financial and operational

performance of the Company and the

Group are described in the Management

Review and under the review of business

operations in Pages 12 to 15 Segment-

wise contribution to Group revenue,

profits, assets and liabilities are provided

in Note 6 (page 121) of the Financial

Statements.


The Financial Statements of the Group

prepared in line with Sri Lanka Accounting

Standards (SLFRs/LKASs), inclusive of

specific disclosures, duly signed by two

Directors on behalf of the Board and

the Auditors are included in this Annual

Report and forms part and parcel hereof.

Financial Results and Appropriations

Revenue

Revenue generated by the Company

amounted to LKR 2,363Mn (2020 - LKR

2,561Mn) whilst Group revenue amounted

to LKR 3,882Mn (2020 - LKR 4,196Mn).

Profits and Appropriations

The profit after tax of the Company was

LKR 5.4Mn (2020 – Loss is LKR 81Mn),

whilst the Group loss attributable to

owners of the Company for the year was

LKR 3.8Mn (2020 – Loss is LKR 81Mn)

Dividend

The Company has not paid dividends

during the year under review.

Reserves

The reserves of the Company and

Group as at 31 March 2021 amounted

to LKR 1,491Mn (2020 – LKR 1,485 Mn)

and LKR 1,535 Mn (2020 - LKR 1,537

Mn) respectively. The movement and

composition during the year are given in

the Statement of Changes in Equity on

page 112.

Accounting Policies

The Accounting Policies adopted in the

preparation of Financial Statements of the

Company and the Group is given on pages

114 to 177 of the Annual Report.

The financial statements of the Company

have been prepared in accordance with

the Sri Lanka Accounting Standards

(SLFRSs and LKASs) and the policies

adopted thereof are given on pages 110

to 177 Figures pertaining to the previous

period have been re-stated where

necessary to conform to the presentation

for the year under review.

Donations

The Company did not make any donations

during the year under review and the

previous year.

Corporate Social Responsibility

The Company continued its Corporate

Social Responsibility initiatives with a

range of Programs, details of which are

set out on Pages 68 to 70 of this Report.

Property Plant and Equipment (PPE) and

Intangible Assets

The Company’s and Group’s capital

expenditure on PPE amounted to LKR

553.5 Mn (2020 – LKR 61.4 Mn) and

LKR 712.4 Mn (2021 –LKR 197.4 Mn)

respectively and all other related

information and movements have been

disclosed in note 13 (Pages 133 to 136) to

the Financial Statements.

The Company did not incur capital

expenditure on intangible assets

during the year under review (2020

– Nil). Group’s capital expenditure on

intangible assets amounted to LKR 1 Mn

(2020 – LKR 1 Mn) and all other related

information and movements have been

disclosed in note 14 (Page 136) to the


Investments Matured during the Financial

year 2020/21

A detailed description of the Company’s

investment in debentures given in Note 18

(Page 142) to the Financial Statements.


Stated Capital

The Stated Capital of the Company

is LKR 115,924,290/- representing

6,033,622 ordinary shares (2020 – LKR

115,924,290/- representing 6,033,622

ordinary shares), as given in Note 22

(Page 146) to the Financial Statements.

Share Information

Shareholders

There were 1,236 shareholders registered

as at 31 March 2021 (1,186 shareholders

as at 31 March 2020). The details of

distribution are given on Pages 64 to 66 of

this Report.

Major Shareholders, Distribution

Schedule and other information

Information on the distribution of

shareholding, analysis of shareholders,

market values per share, earnings,

dividends, net assets per share, twenty

largest shareholders of the Company,

percentage of shares held by the public

as per the Listing Rules of the Colombo

Stock Exchange are given on Page 66

under Investor Capital.

The Board Of Directors

Directors’ Responsibility for Financial

Reporting

The Directors are responsible for the

preparation of Financial Statements of the

Company to reflect a true and fair view of

the state of its affairs. The Directors are of

the view that these financial statements

have been prepared in conformity

with requirements of the Sri Lanka

Accounting Standards (SLFRSs/LKASs),

the Companies Act No. 7 of 2007 and


Exchange.

The Statement of Directors’ Responsibility

is given on Page 102. .

Names of Directors

The names of the Directors who held

office as at the end of the accounting

period are given below and their brief

profiles appear on pages 18 to 19.

Executive Directors

J C Joshua Managing Director

M Jayahsuriya

K A P Perera

Non - Executive Directors


S D Munasinghe

D A R Fernando

Independent Non - Executive Directors

M M N de Silva

W A C O Wijesinghe

R S Dahanayake

Board Committees

The Audit Committee, Remuneration

Committee, Strategic Planning Committee

and the Related Party Transactions

Review Committee function as Board

Sub Committees, with Directors, who

possess the requisite qualifications and

experience. The composition of the said

Committees as at 31 March 2021 is as

follows.

Audit Committee

M M N de Silva Chairman

W A C O Wijesinghe

R S Dahanayake



M M N de Silva

W A C O Wijesinghe

Related Party Transaction Review

Committee

M M N de Silva Chairman

W A C O Wijesinghe

R S Dahanayake

Strategic Planing Committee

J C Joshua Chairman

M Jayahsuriya

K A P Perera

Interests Register

The Company maintains an Interests

Register in terms of the Companies Act,

No. 7 of 2007, which is deemed to form

part and parcel of this Annual Report and

available for inspection upon request.

All related party transactions which

encompasses the transactions of

Directors who were directly or indirectly

interested in a contract or a related party

transaction with the Company during the

accounting period are recorded in the

Interests Register in due compliance with

the applicable rules and regulations of the

relevant Regulatory Authorities.

The relevant interests of Directors in the

shares of the Company as at 31 March

2021 as recorded in the Interests Register

are given in this Report under Directors’

shareholding.

Related Party Transactions

The Company’s transactions with Related

Parties, given in note 27 to the Financial

Statements, have complied with Colombo

Stock Exchange Listing Rule 9.3.2 and

Code of Best Practices on Related Party

Transactions under the Securities

Exchange Commission Directive issued

under Section 13(c) of the Securities

Exchange Commission Act as declared by

the Board of Directors.

ANNuAL REpoRT of ThE boARd of dIREcToRs oNThE AffAIRs of ThE coMpANy


Directors’ Remuneration

The Directors’ remuneration is disclosed under key management personnel

compensation in Note 27.5 to the Financial Statements on page 156.

Directors’ Interests In Contracts

Directors’ interests in contracts with the Company are stated below. The Directors

have no direct or indirect interest in any other contract or proposed contract with the

Company. Except for the transactions referred to in Note 27.5 (page 156) to the Financial

Statements, the Company did not carry out any transaction with any of the Directors.

Directors’ Shareholding

The relevant interests of the Directors in the shares of the Company as at 31 March

2021 are as follows.

Shareholding

as at 31 March 2021

Shareholding as at

31 March 2020

S J S Perera Nil Nil

J C Joshua Nil Nil

M M N De Silva 1,100 1,100

S D Munasinghe Nil Nil

D A R Fernando Nil Nil

W A C O Wijesinghe Nil Nil

R S Dahanayake Nil Nil

M Jayahsuriya Nil Nil

T A L Niroshan N/A* 1,000

K A P Perera Nil Nil


Corporate Governance

The Board of Directors confirms, that they are in compliant with section 7.10 of the

Listing Rules of the CSE. The Chairman, the Board of Directors and the Key Management

Staff is dedicated towards upholding an effective Corporate Governance Framework

in compliance with the Code of Business Conduct, Ethics of the Company and in

implementing systems and structures required to ensuring best practices within the

Company.

The Corporate Governance of the Company is reflected in its strong belief in protecting

and enhancing stakeholder value in a sustainable manner, supported by a sound system

of policies and practices. Prudent internal controls ensure professionalism, integrity

and commitment of the Board of Directors, Management and employees.

The Corporate Governance Statement on Pages 26 to 44 explains the measures adopted

by the Company during the year of review.

Sustainability

The Company pursues its business

goals based on a model of stakeholders’

governance. Finding of the continuous

internal stakeholder engagements have

enabled the Company to focus on material

issues highlighted by other stakeholders

such as employees, customers, suppliers

and the community. These steps have

been encapsulated in a Company-

wide strategy focused on sustainable

development which is continuously

evolving based on the above mentioned

stakeholder engagements. Refer Capital

Formation and Distribution on Pages 64

to 66.

Employment Policy

The Company’s employment policy

is totally non-discriminatory which

respects individuals and provides carrier

opportunities irrespective of the gender,

race or religion.

At a Company level as at 31 March 2021 a

total of 181 persons were in employment

(188 persons as at 31 March 2020). Refer

Human Capital on Pages 67 to 70 for more

information.

Supplier Policy

The Company applies an overall policy

of agreeing and clearly communicating

terms of payment as part of the

commercial agreements negotiated with

suppliers and endeavors to pay for all

items properly charged in accordance

with these agreed terms. As at 31 March

2021 trade and other payables of the

Company and Group amounted to LKR 236

Mn (2020 –LKR 494 Mn) and LKR 456 Mn

(2020 – LKR 793 Mn) respectively.

The Company strives to integrate

principles of sustainable practices in its

value chain through extensive stakeholder


consultations, the findings of which are

integrated in to work plans.

Environmental Protection

The Company complies with appropriate

environmental laws and regulations

to fulfill the best practices applicable

in the country of operation. After

making adequate enquiries from the

management, the Directors are satisfied

that the Company operates in a manner

that minimises the detrimental effects on

the environment and provides products

and services that have a beneficial effect

on the customers and the communities

within, which the Company operates.

Refer Environmental Capital on Pages 76

to 79 for more information.

Research and Development

The Company has an active approach

to research and development and

recognises the contribution that it can

make to the Company’s operations.

Significant expenditure has taken place

over the years and substantial effort will

continue to be made to introduce new

products and processes and develop

existing products and processes to

improve operational efficiency.

Statutory Payments

The Directors confirm that to the best

of their knowledge, all taxes, duties and

levies payable by the Company and its

subsidiaries, all contributions, levies and

taxes payable on behalf of, and in respect

of employees of the Company and the

Group and all other known statutory dues

as were due and payable by the Company

and the Group as at the Statement of

Financial Position date have been paid

or, where relevant provided for, except as

specified in Note 11.2 (Page 128) to the

Financial Statements covering uncertainty

over income tax treatments.

Contingent Liabilities

Except as disclosed in Note 28 (Page 156)

to the Financial Statements, there were

no material Contingent Liabilities as at the

reporting date.

Risk Management

An ongoing process is in place to identify

and manage the risks that are associated

with the business and operations of the

Company and the Group on a quarter

basis. The Directors review this process

through the Audit Committee, to identify

the competence and success of internal

controls.

Specific steps taken by the Company in

managing the risks are detailed in the

section on Enterprise Risk Management

on Pages 45 to 58 .

Events Occurring after the Balance Sheet

Date

Except for the matters disclosed in Note

29 (Page 157) to the Financial Statements,

there were no material events as at

the date of the Auditor’s Report, which

require adjustment to or disclosure in the


Going Concern

The Financial Statements are prepared

on going concern principles. After making

adequate enquires from the Management,

the Directors are satisfied that the

Company has adequate resources to

continue its operations in the foreseeable

future.

Independent Auditors’ Report

The Report of the Independent Auditor on

the Financial Statements of the Company

is given on Pages 105 to 109.

Auditors

Messrs KPMG, Chartered Accountants

served as the Auditors during the year

under review. They do not have any

interest in the Company other than that of

Auditor.

A total amount of LKR 1,322,500 is

payable by the Company to the Auditors

for the year under review as audit fees.

The Auditors have expressed their

willingness to continue in office. A

resolution to re-appoint the Auditors and

to authorise the Directors to determine

their remuneration will be proposed at the

Annual General Meeting.

Independence of Auditors

Based on the declaration provided by

Messrs KPMG, Chartered Accountants and

to the extent that the Directors are aware,

the Auditors do not have any relationship

with (other than that of the Auditor), or

interest in, the Company, which in the

opinion of the Board, may reasonably be

considered to have a bearing on their

independence within the meaning of the

Code of Professional Conduct and Ethics

issues by The Institute of Chartered

Institute of Sri Lanka as at the reporting

date.

Tax Related Services

All tax related services are provided

by Messrs Ernst & Young, Chartered

Accountants.

ANNuAL REpoRT of ThE boARd of dIREcToRs oNThE AffAIRs of ThE coMpANy


Compliance with Laws and Regulations

To the best of knowledge and belief

of the Directors, the Group/Company

has not engaged in any activity, which

contravenes laws and regulations of the

country.

Annual Report

The Board of Directors approved the

consolidated Financial Statements on 04

August 2021.

Annual General Meeting

The thirty sixth (37th) Annual General

Meeting will be held on 15 September

2021.

The notice of the Annual General Meeting

appears on Page 185.

This Annual Report is signed for and on

behalf of the Board of Directors by

s J s perera Chairman


p W Corporate secretarial (private) LimitedSecretaries

04 August 2021

Colombo


the stAteMent oF dIReCtoRs ResponsIBILItY

This Statement sets out the responsibility

of the Board of Directors in relation to

the Financial Statements of the Company

and its Subsidiaries. Responsibility of

the Auditors in relation to the Financial

Statements of the Company and its

Subsidiaries is set out in the ‘Independent

Auditors Report’ given in pages 105 to

109.

The Directors are responsible for the

proper recording and maintenance of

books of accounts of all transactions of

the Company and its Subsidiaries under

the provisions of the Companies Act No.

07 of 2007.

In terms of this Act the Directors are

responsible for preparing Financial

Statements that give a true and fair view

of the state of the affairs of the Company

and its Subsidiaries at the end of each

financial year. These statements consist

of the Statement of Comprehensive

Income giving a true and fair view of

the profit or loss of the Company and its

Subsidiaries for the financial year, the

Statement of Financial Position giving a

true and fair view of the state of affairs

of the Company and its Subsidiaries as at

the end of the financial year, Statement

of Changes in Equity, Statement of Cash

Flows & the Notes thereto.

In preparing these Financial Statements

the Directors are required to ensure that;

Appropriate accounting policies

have been selected and applied in

a consistent manner and material

departures, if any, have been disclosed

and explained;

Financial Statements are presented in

accordance with Sri Lanka Accounting

Standards (SLFRS/LKAS); and

reasonable and prudent judgments

and estimates have been made

so that the form and substance of

transactions are properly reflected;

Financial Statements provide the

information required by and otherwise

comply with the Companies Act and


Exchange;

The Company maintains with

reasonable accuracy sufficient

accounting records to disclose the

financial position of the Company and

the Group;

Financial Statements have been

prepared on a going concern basis

and they are of the view that sufficient

resources are available to justify it

Further, the Directors confirm that they

have taken reasonable measures to

safeguard the assets of the Company and

Group and in this regard have established

appropriate systems of internal control

with a view to preventing and detecting

fraud and other irregularities.

The External Auditors were provided

with all information and explanations

necessary to enable them to form their

independent opinion on the Financial

Statements.

Compliance Report

The Directors confirm that to the best

of their knowledge, all taxes, duties and

levies payable by the Company and its

Subsidiaries, all contributions, levies

and taxes payable on behalf of and in

respect of the employees of the Company

and its Subsidiaries and all other known

statutory dues as were due and payable

by the Company and its Subsidiaries as

at reporting have been paid or, where

relevant, provided for, except as specified

in Note No 28 (156 to 157) to the Financial

Statements covering commitments and

contingencies.

By Order of the Board,

p W Corporate secretarial (private) LimitedSecretaries

04 August 2021

Colombo


dIReCtoRs stAteMent on InteRnAL ContRoL IntRoduCtIon

Introduction

This Statement is presented by the Board

based on the recommendation made by

the ‘Code of Best Practice on Corporate

Governance 2013’ jointly issued by the

Securities & Exchange Commission of

Sri Lanka and the Institute of Chartered

Accountants of Sri Lanka.

Board’s Responsibility

The Board of Directors are responsible

for the adequacy and effectiveness of the

Company’s system of internal controls.

However, such a system is designed to

manage the Company’s key exposure

areas within an acceptable risk profile

rather than eliminating the risk of failure

to achieve the Company’s objectives.

Accordingly the system of internal

controls can only provide a reasonable

assurance but not absolute against the

material misstatement of management

and financial information and records

or against financial losses or fraud. The

Board has established an ongoing process

for identifying, evaluating and managing

the significant exposures faced by the

Company and this process includes

enhancing the system of internal controls

as and when there are changes for the

business environment or regulatory

framework.

Key Internal Control Processes

Following features of the System of

Internal Control put in place by the Board

provide reasonable assurance regarding

the reliability of financial reporting.

They also ensure the adequacy and

effectiveness of the system.

Committees appointed by the Board

to assist them in ensuring the

effectiveness of Company’s daily

operations, and to ensure that these

daily operations are within the

corporate objectives, strategies and

annual budget ratified by the Board

Internal Audit Department which is

headed by the Chief Internal Auditor

carries out periodic audits on an on-

going basis covering all operational

units to ensure the effectiveness of

the system of internal control. These

audits are carried out in accordance

with the Annual Audit Plan approved

by the Board Audit Committee and

findings of the same are submitted

to the Board Audit Committee for

their review on a quarterly basis.

Additionally Special Audits are

conducted as and when the need

arises and findings of the same

are submitted to the Board Audit

Committee for their review.

The Board Audit Committee

reviews internal control issues

identified by the Internal Audit

Department, regulatory bodies and

the management, and evaluates

the adequacy and effectiveness of

the risk management and internal

control systems. They also review the

internal audit functions with particular

emphasis on the scope of audits and

quality of internal audits.

In accordance with Sri Lanka

Accounting Standards comprising

SLFRS and LKAS, processes that are

required to comply with requirements

of recognition, measurement,

presentation and disclosures were

introduced and implemented.

Continuous monitoring is in progress

to enhance the system’s effectiveness

and efficiency.

Confirmation Statement

Based on the above processes, the Board

of Directors confirms that the financial

reporting system of the Company has

been designed to provide reasonable

assurance regarding the reliability of

financial reporting and the preparation

of Financial Statements for external

purposes has been done in accordance

with the Sri Lanka Accounting Standards

(SLFRS/LKASs), requirements of the

Company’s Act No 7 of 2007 and Listing

Rules of the Colombo Stock Exchange.

s J s pereraChairman


M M n de silvaChairman, Audit Committee

04 August 2021


FINANCIAL CALENDAR

Thirty Sixth (36th) Annual General Meeting 28 September 2020

Annual Report 2019/20 04 September 2020

Interim Financial Statements – 2020/21

Interim Financial Statements as of 30 June 2020

(First Quarter Report)

12 August 2020

Interim Financial Statements as of 30 September 2020

(Second Quarter Report)

10 November 2020

Interim Financial Statements as of 31 December 2020

(Third Quarter Report)

03 February 2021

Interim Financial Statements as of 31 March 2021

(Fourth Quarter Report)

19 May 2021


To the Shareholders of Sathosa Motors PLC Report on the Audit of Financial Statements

Opinion We have audited the financial statements of Sathosa Motors PLC (“the Company”) and the consolidated financial statements of the Company and its subsidiaries (“the Group”), which comprise the statement of financial position as at 31 March 2021, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information as set out on pages 110 to 177 of this Annual Report.

In our opinion, the accompanying financial statements of the Company and the Group give a true and fair view of the financial position of the Company and the Group as at 31 March 2021, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Basis for Opinion We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics), and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the company financial statements and the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the company financial statements and the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Independent AudItoR’s RepoRt


1. Management assessment of the Company’s ability to continue as going concern due to pandemic

Risk Description Our Response

The Group incurred a net loss of LKR 12.98 Mn for the year ended 31 March

2021.

However, the financial statements have been prepared on a going concern

basis. In adopting the going concern basis of preparation of the financial

statements, the directors have reviewed the company’s cash flow

projections prepared by the management. The cash flow projections were

based on management’s assumptions and estimation of future cash inflows

and outflows, also taking into consideration the impact of COVID-19 global

pandemic and government restrictions imposed.

Notes to the financial statements, describes the impact of COVID-19

outbreak to the current year financial statements and possible effects to

the Company’s future prospects, performance and cash flows. Further the

management considered it appropriate to adopt the going concern basis of

accounting in preparing financial statements and their identification of any

material uncertainties to the Company’s ability to continue to do so over a

period of at least twelve months from the date of approval of the financial

statements.

We identified the assessment of impacts of COVID-19 related events as a key

audit matter because the cash flow projections referred to above involves

consideration of future events and circumstances which are inherently

uncertain, and effect of those uncertainties may significantly impact the

resulting accounting estimates.

Therefore, the assessment requires the exercise of significant management

judgement in assessing future cash inflows and outflows which could be

subject to potential management bias.

Our audit procedures included;

Assessing the directors’ assessment of the

Company’s ability to continue as a going

concern, including the underlying data and key

assumptions used to make the assessment, and

evaluated the directors’ plans for future actions

in relation to their going concern assessment.

Obtaining the Company’s cash flow projections

covering a period of twelve months from

the reporting period end date and assessing

these key assumptions used in preparing the

projections.

Evaluating the sensitivity of the projected

available cash by considering downside

scenarios together with reasonably plausible

changes to the key assumptions and

considering whether there were any indicators

of management bias in the selections of the

assumptions.

Inspecting the facility agreements for the

Company’s long-term loans to identify any

financial covenants or similar terms and

assessing the implication of these on the

Company’s liquidity;

Assessing the adequacy of disclosures in the

financial statements in relation to the impact

of prevailing pandemic situation to sustain

its operations in the foreseeable future with

reference to the requirements of the prevailing

standards.

INdEpENdENT AudIToR’s REpoRT


2. Recoverability of Trade ReceivablesAs described in Note 20 Trade Receivables, Group’s Trade Receivables amount to LKR 470 Mn as at 31 March 2021.

Risk Description Our Response

Trade Receivables are significant to the Group due to trade Receivables of Sathosa Motors PLC and its Subsidiary company, Access Motors (Pvt) Ltd.

The Group’s allowances for doubtful debts are based on management’s estimate of the expected credit losses to be incurred, which is estimated by taking into account the credit history of the Group’s customers and current market and customer-specific conditions, all of which involve a significant degree of management judgement.

The Group’s allowances for doubtful debts include a specific element based on individual debtors and a collective element based on historical experience adjusted for certain current factors.

The uncertainty on the impact of COVID-19 introduced significant estimation uncertainty in relation to the measurement of the Group’s allowance for doubtful debts. The rapidly evolving consequences of COVID-19 and government, business and consumer responses could result in significant adjustments to the allowance within the current financial years.We identified assessing the recoverability of trade receivables as a key audit matter because the significance of the trade receivables to the consolidated financial statements and the assessment of the recoverability is inherent subjectivity and required significant management judgment, which increases the risk of error or potential management bias.

Our audit procedures included; Understanding and evaluating the design, implementation and

operating effectiveness of management’s key internal controls in respect of the valuation of trade debtors, which included credit control procedures and the application of the Group’s doubtful debt provisioning policy.

Assessing how management had assessed the impact of Covid-19 within the credit losses model to assess whether that it was appropriately considered in the measurement of doubtful debts at year end. In particular, we assessed Management’s assessment of the likelihood of a severe economic downturn caused by Covid-19 at the reporting date with reference to the reasonable and supportable information available to management at that date.

On a sample basis, assessing whether items in the trade debtors’ ageing report were classified within the appropriate ageing bracket by comparing individual items in the report with underlying documentation, which included sales invoices and goods delivery notes.

Assessing the assumptions and estimates made by the management for the allowances for doubtful debts with reference to our understanding of the debtors’ financial condition, the industry in which the debtors are operating, the ageing of overdue balances and historical and post year-end cash receipts from the debtors and by performing a retrospective review of the historical accuracy of these estimates.

Assessing the adequacy of financial statements disclosure as per the required accounting standards.


Other InformationManagement is responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our Auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial StatementsManagement is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

INdEpENdENT AudIToR’s REpoRT

Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with SLAuSs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit 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 Company and the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.


We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matter in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory RequirementsAs required by section 163 (2) of the Companies Act No. 07 of 2007, 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.

CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditor’s report is 2618.

ChARteRed ACCountAnts Colombo, Sri Lanka 04 August 2021


stAteMent oF pRoFIt oR Loss And otheR CoMpRehensIVe InCoMe

group CompanyFor the year ended 31 March 2021 2020 2021 2020 note LKR LKR LKR LKR

Revenue 07 3,881,584,608 4,195,960,439 2,362,952,341 2,560,749,579

Cost of sales (3,245,668,639) (3,401,116,550) (1,936,748,882) (2,126,614,125)

gross profit 635,915,969 794,843,889 426,203,459 434,135,454

Other Income 08 177,614,571 153,127,365 32,551,321 13,292,788

Administrative expenses (680,993,980) (670,622,469) (361,811,737) (310,475,037)

Selling and distribution expenses (29,574,205) (82,541,890) (13,863,518) (44,992,987)

Other operating expenses 11.2 7,570,570 (66,680) 7,570,570 -

operating profit 110,532,925 194,740,215 90,650,095 91,960,218

Finance income 41,382,983 70,438,071 39,205,290 62,022,541

Finance costs (181,782,810) (407,283,285) (125,531,993) (281,003,868)

net finance costs 09 (140,399,827) (336,845,214) (86,326,703) (218,981,327)

profit / (loss) before tax 10 (29,866,902) (142,104,999) 4,323,392 (127,021,109)

Income tax (expense)/ reversal 11.1 16,886,808 62,193,628 1,124,315 46,014,721

profit/ (loss) for the year (12,980,094) (79,911,371) 5,447,707 (81,006,388)

other Comprehensive Income:Items that will not be reclassified to profit & LossRe-measurements of defined benefit liability 25.2 2,690,347 4,618,662 1,527,377 3,318,068

Related tax 11.1 (645,683) (1,293,225) (366,570) (929,059)

other Comprehensive income for the year, net of tax 2,044,664 3,325,437 1,160,807 2,389,009

total Comprehensive income for the year (10,935,430) (76,585,934) 6,608,514 (78,617,379)

profit/ (loss) attributable to:Owners of the Company (3,766,192) (81,028,416) 5,447,707 (81,006,388)

Non-controlling interests (9,213,902) 1,117,045 - -

(12,980,094) (79,911,371) 5,447,707 (81,006,388)

total Comprehensive income attributable to:Owners of the Company (2,163,456) (78,171,193) 6,608,514 (78,617,379)

Non-controlling interests (8,771,974) 1,585,259 - -

(10,935,430) (76,585,934) 6,608,514 (78,617,379)

earnings/(Loss) per shareBasic / diluted earnings/(loss) per share 12 (0.62) (13.43) 0.90 (13.43)

The Accounting Policies and Notes form an integral part of these Financial Statements.

Figures in brackets indicate deductions.


stAteMent oF FInAnCIAL posItIon

group CompanyAs at 31 March, 2021 2020 2021 2020 note LKR LKR LKR LKR

AssetsProperty, plant and equipment 13 1,852,732,135 1,315,020,107 1,433,601,234 931,847,253Intangible assets 14 17,594,802 23,826,742 15,816,986 22,483,802Right -of- use assets 16.1 219,748,080 257,348,311 35,612,339 32,455,213Deferred tax assets 11.6 44,347,703 29,480,376 26,542,853 26,653,747Investment in subsidiary 17 - - 464,940,064 464,940,074non current assets 2,134,422,720 1,625,675,536 1,976,513,476 1,478,380,089

Inventories 19 838,009,215 2,638,593,133 475,068,772 1,519,545,441Investments in debentures 18 - 614,935,154 - 614,935,154Trade and other receivables 20 713,161,383 1,431,392,038 317,898,911 1,019,545,746Amounts due from related parties 27.1 3,842,251 97,788,672 1,243,403 89,906,502Current tax assets 11.5 52,265,082 75,892,191 44,729,236 34,397,086Cash and cash equivalents 21 129,812,340 62,960,694 43,769,541 45,878,676Current assets 1,737,090,271 4,921,561,882 882,709,863 3,324,208,605total assets 3,871,512,991 6,547,237,418 2,859,223,339 4,802,588,694

equityStated capital 22 115,924,290 115,924,290 115,924,290 115,924,290Retained earnings 1,535,197,038 1,537,360,494 1,491,177,333 1,484,568,819equity attributable to owners of the Company 1,651,121,328 1,653,284,784 1,607,101,623 1,600,493,109Non-controlling interests 508,959,772 517,731,746 - -total equity 2,160,081,100 2,171,016,530 1,607,101,623 1,600,493,109

LiabilitiesInterest bearing loans and borrowings 23 - 54,492,000 - -Deferred income 24 5,265,318 5,484,707 5,265,318 5,484,707Employee benefits 25.1 36,527,017 38,576,603 22,078,228 24,673,603Lease liabilities 16.2 243,085,677 247,560,241 26,714,886 22,088,035non current liabilities 284,878,012 346,113,551 54,058,432 52,246,345

Trade and other payables 26 456,416,469 792,831,145 235,999,651 494,323,946Amounts due to related parties 27.2 131,832,101 143,609,495 131,671,904 143,197,959Interest bearing loans and borrowings 23 816,000,000 2,984,500,194 816,000,000 2,494,343,500Lease liabilities 16.2 11,092,427 10,696,366 3,178,847 2,749,774Unclaimed dividend 4,146,312 4,146,312 4,146,312 4,146,312Bank overdraft 21 7,066,570 94,323,825 7,066,570 11,087,749Current liabilities 1,426,553,878 4,030,107,337 1,198,063,284 3,149,849,240total liabilities 1,711,431,891 4,376,220,888 1,252,121,716 3,202,095,585total equity and liabilities 3,871,512,991 6,547,237,418 2,859,223,339 4,802,588,694

net assets per share 38 273.65 274.01 266.36 265.26

The Accounting Policies and Notes form an integral part of these Financial Statements.It is certified that the Financial statements have been prepared in compliance with the requirements of the Companies Act, No 07 of 2007.

s I AlahapperumaGeneral Manager Finance

The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Approved and signed for and on behalf of the Board of Directors of Sathosa Motors PLC.

M Jayahsuriya K A p pereraDirector Director

04 August 2021Colombo


stAteMent oF ChAnges In eQuItY

Attributable to the equity holders of the Companygroup stated Retained non-controlling total capital earnings total interests equity LKR LKR LKR LKR LKR

Balance as at 01 April 2019 115,924,290 1,615,531,687 1,731,455,977 316,146,505 2,047,602,482

Profit for the year - (81,028,416) (81,028,416) 1,117,045 (79,911,371)

Other comprehensive income

for the year net of tax - 2,857,223 2,857,223 468,214 3,325,437

total comprehensive income for the year - (78,171,193) (78,171,193) 1,585,259 (76,585,934)

Non controlling interest of Access

Motors (Private) Limited right issue - - - 199,999,982 199,999,982

Balance as at 31 March 2020 115,924,290 1,537,360,494 1,653,284,784 517,731,746 2,171,016,530

Loss for the year - (3,766,192) (3,766,192) (9,213,902) (12,980,094)

Other comprehensive income for

the year net of tax - 1,602,736 1,602,736 441,928 2,044,664

total comprehensive income for the year - (2,163,456) (2,163,456) (8,771,974) (10,935,430)

Balance as at 31 March 2021 115,924,290 1,535,197,038 1,651,121,328 508,959,772 2,160,081,100

Company stated Retained total capital earnings equity LKR LKR LKR

Balance as at 01 April 2019 115,924,290 1,563,186,198 1,679,110,488

Profit for the year - (81,006,388) (81,006,388)

Other comprehensive income for the year net of tax - 2,389,009 2,389,009

total comprehensive income for the year - (78,617,379) (78,617,379)

Balance as at 31 March 2020 115,924,290 1,484,568,819 1,600,493,109

Profit for the year - 5,447,707 5,447,707

Other comprehensive income for the year net of tax - 1,160,807 1,160,807

total comprehensive income for the year - 6,608,514 6,608,514

Balance as at 31 March 2021 115,924,290 1,491,177,333 1,607,101,623

The accounting policies and notes form an integral part of these Financial Statements.

Figures in brackets indicate deductions.


stAteMent oF CAsh FLoWs

group CompanyFor the year ended 31 March 2021 2020 2021 2020 note LKR LKR LKR LKR

Cash flows from/ (used in) operating activitiesProfit / (loss) before tax (29,866,902) (142,104,999) 4,323,392 (127,021,109)Adjustments for:Depreciation of property plant and equipment 13.1/ 13.2 129,703,986 118,969,262 51,753,319 47,530,719Amortisation of intangible assets 14.1 6,991,733 7,498,147 6,666,816 7,286,233Impairment of intangible assets 14.1 - 619,415 - 619,415Depreciation of right-of-use assets 16.1 42,573,937 45,480,423 4,330,754 5,782,228Amortisation of grants received 24 (219,389) (219,389) (219,389) (219,389)Provision for /(reversal of) inventories 19.1 56,549 (18,106,695) 56,549 (19,849,103)Provision for/write off debtors 20.1 10,664,446 3,727,373 5,479,946 5,125,547Profit on sale of property, plant and equipment 8 (55,046,812) (11,761,977) - (735,107)Provision for employee benefits 25.2 8,732,363 9,353,148 5,415,989 5,718,387Write back of advances 8 (23,446,617) (4,757,595) (2,315,843) (4,757,595)Net finance costs 9 140,399,827 336,845,214 86,326,703 218,981,327operating profit before working capital changes 230,543,121 345,542,327 161,818,236 138,461,553

Working Capital Changes :Inventories 1,800,527,369 (563,525,783) 1,044,420,120 (121,570,773)Trade and other receivables 742,030,627 1,017,075,742 696,166,899 (92,596,109)Amount due to related parties (11,777,394) (367,647,397) (11,526,055) 39,656,751Amount due from related parties 93,946,421 (65,605,316) 88,663,099 (89,508,143)Trade and other payables (312,968,059) (134,982,779) (256,008,452) 242,445,798Cash generated from operating activities 2,542,302,085 230,856,795 1,723,533,847 116,889,077Interest paid (150,414,421) (367,740,738) (122,522,410) (270,455,012)Income tax paid (9,463,511) (24,694,682) (9,463,511) (12,641,650)Gratuity paid 25.1 (8,091,602) (4,828,952) (6,483,987) (3,034,414)net cash flows from/ (used in) operating activities 2,374,332,551 (166,407,577) 1,585,063,939 (169,241,999)

Cash flows from/ (used in) investment activitiesPurchase of property, plant & equipment 13.1/ 13.2 (712,437,102) (197,497,582) (553,507,300) (61,476,712)Purchase of intangible assets 14.1 (759,793) (856,282) - -Proceeds from sale of property, plant & equipment 101,205,046 25,813,870 - 17,813,870Investment in subsidiary company - - - (199,999,982)Consideration on maturity of investment in debentures 18.1 580,790,000 - 580,790,000 -Interest received 75,528,138 47,774,301 73,350,445 39,858,771net cash flows from/ (used in) investing activities 44,326,289 (124,765,693) 100,633,145 (204,304,053)

Cash flows from/ (used in) financing activitiesProceed for borrowings 23.2 11,988,504,483 19,707,362,280 11,325,963,423 17,960,381,535Repayment of loans 23.1/ 23.2 (14,211,496,677) (19,975,778,843) (13,004,306,923) (18,018,611,987)Repayment of lease liabilities 16.2 (41,557,745) (34,701,467) (5,441,540) (4,535,280)Proceeds from issue of shares to NCI - 199,999,982 - -net cash flows used in financing activities (2,264,549,939) (103,118,048) (1,683,785,040) (62,765,732)

net increase/(decrease) in cash and cash equivalents 154,108,901 (394,291,318) 1,912,044 (436,311,784)Cash and cash equivalents as at 01 April (31,363,131) 362,928,187 34,790,927 471,102,711Cash and cash equivalents as at 31 March 122,745,770 (31,363,131) 36,702,971 34,790,927

Analysis of cash and cash equivalentsCash and cash equivalents 21 129,812,340 62,960,694 43,769,541 45,878,676Bank overdraft 21 (7,066,570) (94,323,825) (7,066,570) (11,087,749) 122,745,770 (31,363,131) 36,702,971 34,790,927

Cash and cash equivalents includes bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management.The accounting policies and notes form an integral part of these financial statements.Figures in brackets indicate deductions.


01 Corporate information 1.1 Reporting entity Sathosa Motors PLC is a public quoted

company incorporated and domiciled

in Sri Lanka, registered under the

Companies Act No. 7 of 2007 and is listed

on the Colombo Stock Exchange. The

registered office and principal place of

business of the Company is situated at No.

25, Vauxhall Street, Colombo 02.

The consolidated Financial Statements

of Sathosa Motors PLC as at and for the

year ended 31 March 2021 comprise

the Company and its Subsidiary, Access

Motors (Private) Limited. Sathosa Motors

PLC holds 50% of Access Motors (Private)

Limited.

The Financial Statements of the

Company and its subsidiary have a

common financial year which ends on 31

March and are prepared using uniform

accounting policies.

1.2 Principal activities and nature of operations

The principal activity of the Company is

importing and distribution of Isuzu new

vehicles, Marine engines, spare parts

and operating workshops for vehicle

repairs.

Access Motors (Private) Limited is in the

business of importation and sale of Land

Rover vehicles and Jaguar vehicles, the

Subsidiary Company operates workshops

and sale of Land Rover and Jaguar spare

parts.

SML Realities (Private) Limited has been

wind up due to the non-operation of

the Company during the financial year

2020/21.

1.3 Parent Company The Parent Company of Sathosa Motors

PLC is Access Engineering PLC (AEL).

AEL is primarily involved in the business

of Construction activities and supply

of construction – related services and

materials.

02 Basis of preparation 2.1 Statement of compliance The Financial Statements of the Company

and those consolidated comprise the

Statement of Financial Position, the


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 have been

prepared and presented in accordance

with Sri Lanka Accounting Standards

(SLFRSs / LKASs) as issued by the

Institute of Chartered Accountants of

Sri Lanka (CA Sri Lanka) and with the

requirements of the Companies Act No.

7 of 2007 and the Listing Rules of the

Colombo Stock Exchange.

2.2 Responsibilities of the Financial Statements

The Board of Directors is responsible

for preparation and presentation of the

Financial Statements of the Company and

its subsidiaries as per provisions of the

Companies Act No. 07 of 2007 and the Sri

Lanka Accounting Standards (SLFRSs/

LKASs).

The consolidated and separate Financial

Statements were approved and

authorised for issue by the Board of

Directors on 04 August 2021.

2.3 Basis of Measurement The Consolidated Financial Statements

have been prepared on the historical cost

basis except for the following material

items in the Statement of Financial

Position.

Financial Assets and Financial

Liabilities that have been measured at

fair value- SLFRS 9 (Note 32)

Employee benefit liability recognised

based on the actuarial valuation -

LKAS 19 (Note 25)

2.4 Functional and Presentation Currency

These Consolidated Financial Statements

are presented in Sri Lankan Rupees

(LKR), which is the Group's functional and

presentation currency.

2.5 Significant accounting judgments, estimates and assumptions

The preparation of the Group's

Consolidated Financial Statements in

conformity with Sri Lanka Accounting

Standards (SLFRSs/LKASs) requires

management to make judgments,

estimates and assumptions that affect

the application of accounting policies and

the reported amounts of assets, liabilities,

income and expenses. Actual results may

differ from these estimates.

The estimates and underlying

assumptions are reviewed on an ongoing

basis. Revisions to accounting estimates

are recognised in the period in which the

estimates are revised and in any future

periods affected.

The key assumptions concerning the

future and other key resources estimation

uncertainty at the reporting date that

have a significant risk of causing a

material adjustment to the carrying

amounts of assets, liabilities within next

financial year, are also described in the

individual notes of the related Financial

Statement line items below. The Group

based its assumptions and estimates

on parameters available when the

consolidated Financial Statements were

notes to the FInAnCIAL stAteMents


prepared. Existing circumstances and

assumptions about future developments,

however, may change due to market

changes or circumstances arising that

are beyond the control of the Group. Such

changes are reflected in the assumptions

when they occur.

Management considered the following

items, where significant judgments,

estimates and assumptions have been

used in preparing these Financial

Statements.

Information about assumptions and

estimate uncertainties as at 31 March

2021 that have a significant risk of

resulting in a material adjustment to the

carrying amounts of assets and liabilities

in the next financial year is included in the

following notes:

Revenue recognition [Note 07]

Income tax - Current tax and deferred

tax [Note 11]

Measurement of defined benefit

obligation: key actuarial assumptions

[Note 25]

Recognition and measurement of

provisions and contingencies: key

assumptions about the likelihood and

magnitude of an outflow of resources

[Note 28]

Fair value measurement of

financial instruments [Note 33]; Key

assumptions used discounted cash

flow (DCF) model

Depreciation of Property, Plant and

Equipment [Note 13]

Amortisation of Intangible Assets

[Note 14]

Provision for expected credit losses of

trade receivables and contract assets;

Key assumptions for provision matrix

to calculate ECL. [Note 32]

going ConcernIn light of ongoing COVID-19 pandemic

situation, the Group and the Company has

assessed its going concern and a detailed

disclosure of its assessment is provided

below.

The COVID-19 pandemic, which has

suffocated many economies is becoming

a way of life to be factored into our

short to medium term planning. The

economic slowdown; the upward trends

in the exchange rate and inflation;

shipping and freight challenges such

as limited container spaces, increased

freight rates and higher shipping costs

are of concerns for our spare parts

business. We anticipate that state

regulations that curtail imports and

import related activities will continue

hindering passenger and commercial

vehicle sales. Further, impending random

lockdown curfews with each new

variant of the COVID-19 virus cannot be

disregarded.

In determining the basis of preparing

the financial statements for the year

ended 31 March 2021, the directors are

responsible for assessing the Group's

and the Company's ability to continue as

a going concern and based on available

information, the management has

assessed the existing and anticipated

postlockdown economic implications

on the group of companies and the

appropriateness of the use of the

going concern basis. The management

performed multiple stress tested

scenarios considering cost management

practices, cash reserves, ability to secure

additional funding to finance the adverse

effect to the cash flow, ability to secure

supplies, expected revenue streams,

credit and collection management

practices and ability to defer non-

essential capital expenditure. Unutilised

bank facilities of the Group as at 31 March

2021 are disclosed in Note 23.3.

After considering the risks and likelihood

of outcomes, the Board of Directors

is satisfied that the Company and its

subsidiary have adequate liquidity and

business plans to continue to operate the

business operations for the foreseeable

future and have therefore continued

to adopt the going concern basis in

preparing the financial statements.

Furthermore, Management is not aware

of any material uncertainties related

to events or conditions that may cast

significant doubt upon the Group's/

Company's ability to continue to be

prepared on a going concern basis other

than disclosed above.

estimation uncertainity in preparation of financial statements due to the post-lockdown economic implications of CoVId-19 pandemicThe post-lockdown implications have

increased the uncertainty of estimates

made in preparation of the Financial

Statements. The estimation uncertainty is

associated with:

The extent and duration of the

disruption to businesses arising

from the actions of stakeholders

such as government, businesses and

customers

The extent and duration of the

expected economic downturn due

to impact on GDP capital markets,

credit risk of our customers , impact

of unemployment and possible

decline in consumer discretionary

spending

The effectiveness of government and

central bank measures that have

and will be put in place to support

businesses through this disruption

and economic downturn.

The significant accounting estimates

impacted by these forecasts and

associated uncertainties are related to

expected credit losses and recoverable

amount assessments of non-financial

assets, recoverable value of property

plant and equipment and net realisable

value of inventory.


Collectively assessed allowance for expected credit losses The post-lockdown economic implications

on the country’s economy and how

businesses and consumers respond

to same are uncertain. There could be

a possible increase in credit risk due

to the loss of income by some of the

businesses and the individuals who are

our customers, which would delay the

settlements of customer dues whilst the

possibility of default also exists.

This uncertainty is reflected in the Group’s

assessment of expected credit losses

from its credit portfolio which are subject

to a number of management judgements

and estimates. Judgements relevant to

expected credit loss computations are

further discussed in note 34.1.1 to these

financial statements.

2.6 Materiality and aggregation Each material class of similar items is

presented separately in the Financial

Statements. Items of dissimilar nature or

function are presented separately unless

they are immaterial as permitted by the

Sri Lanka Accounting Standard - LKAS 1

on 'Presentation of Financial Statements'

and amendments thereto.

Notes to the Financial Statements are

presented in a systematic manner which

ensures the understandability and

comparability of Financial Statements

of the Group and the Company.

Understandability of the Financial

Statements is not compromised by

obscuring material information with

immaterial information or by aggregating

material items that have different natures

or functions.

2.7 Offsetting Financial assets and financial liabilities

are offset and the net amount reported

in the statement of financial position only

when there is a legally enforceable right to

offset the recognised amounts and there

is an intention to settle on a net basis or to

settle the liabilities simultaneously. Income

and expenses are not offset in the income

statement, unless required or permitted by

Sri Lanka Accounting Standards (SLFRSs/

LKASs) and as specifically disclosed in

the Significant Accounting Policies of the

Company.

2.8 Comparative information The presentations and classification of

Consolidated Financial Statements of

the previous years have been amended,

where relevant for better presentation

and to be comparable with those of the

current year.

03 Summary of significant accounting policies

The Group has initially adopted Definition

of a Business (Amendments to IFRS 3)

from 1 April 2020. A number of other

new standards are also effective from

1 April 2020 but they do not have a

material effect on the Group’s financial

statements.

The Group applied Definition of a Business

(Amendments to IFRS 3) to business

combinations whose acquisition dates

are on or after 1 April 2020 in assessing

whether it had acquired a business or a

group of assets. The details of accounting

policies are set out in Note 3.1.

The accounting policies set out below

have been applied consistently to all the

periods presented in these Financial

Statements and have been applied

consistently by the Group, unless

otherwise stated.

3.1 Basis of consolidation The Consolidated Financial Statements

comprise the Financial Statements of the

Group and its subsidiaries prepared in

terms of Sri Lanka Accounting Standards

(SLFRS 10)- Consolidated Financial

Statements. Control is achieved when

group is exposed, or has rights, to

variable returns from its involvement with

the investee and has the ability to affect

those returns through its power over the

investee.

Specifically, the Group controls an

investee if, and only if, the Group has:

Power over the investee (i.e. existing

rights that give it the current ability

to direct the relevant activities of the

investee)

Exposure or rights, to variable

returns from its involvement with the

investee.

The ability to use its power over the

investee to affect its returns.

"Generally, there is a presumption that a

majority of voting rights results 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:

The contractual arrangement(s) with

the other vote holders of the investee

Rights arising from other contractual

arrangements

The Group’s voting rights and potential

voting rights

Business combinations are accounted

for using the acquisition method as at

the acquisition date - i.e. when control

is transferred to the Group. Control is

the power to govern the financial and

operating policies of an entity so as to

obtain benefits from its activities. In

assessing control, the Group also takes

into consideration potential voting rights

that are currently exercisable.

The Group reassesses whether or

not it controls an investee if facts and

circumstances indicate that there are

changes to one or more of the three

NoTEs To ThE fINANcIAL sTATEMENTs


elements of control. Consolidation of a

subsidiary begins when the Group obtains

control over the subsidiary and ceases

when the Group loses controls of the

subsidiary. Assets, liabilities, income

and expenses of a subsidiary acquired or

disposed of during the year are included

in the consolidated Financial Statements

from the date the Group gains control

until the date the Group ceases to control

the subsidiary.

Profit or loss and each component

of OCI are attributed to the equity

holders of the parent of the Group and

to the non controlling interests,even

if this result in the non controlling

interest having a deficits balance.When

necessary,adjustments are made to the

financial statements of subsidiaries

to bring their accounting policies

in line with the Group's accounting

policies.All intra group assets and

liabilities,equity,income,expenses and

cash flows relating to transactions

between members of the group are

eliminated in full on consolidation.

A change in the ownership interest of a

subsidiary, without a loss of control, is

accounted for as an equity transaction.

If the Group loses control over a

subsidiary, it derecognises the related

assets (including goodwill), liabilities,

non-controlling interest and other

components of equity, while any resultant

gain or loss is recognised in profit or loss.

Any investment retained is recognised at

fair value.

3.1.1 Business Combinations The Group accounts for business

combinations using the acquisition

method when the acquired set of activities

and assets meets the definition of a

business and control is transferred to the

Group (see 3.1.2). In determining whether

a particular set of activities and assets is

a business, the Group assesses whether

the set of assets and activities acquired

includes, at a minimum, an input and

substantive process and whether the

acquired set has the ability to produce

outputs.

The Group has an option to apply a

‘concentration test’ that permits a

simplified assessment of whether an

acquired set of activities and assets is not

a business. The optional concentration

test is met if substantially all of the

fair value of the gross assets acquired

is concentrated in a single identifiable

asset or group of similar identifiable

assets.

The consideration transferred in the

acquisition is generally measured at fair

value, as are the identifiable net assets

acquired. Any goodwill that arises is

tested annually for impairment (see

3.8). Any gain on a bargain purchase is

recognised in profit or loss immediately.

Transaction costs are expensed as

incurred, except if related to the issue of

debt or equity securities.

The consideration transferred does not

include amounts related to the settlement

of pre-existing relationships. Such

amounts are generally recognised in

profit or loss.

Any contingent consideration is measured

at fair value at the date of acquisition.

If an obligation to pay contingent

consideration that meets the definition

of a financial instrument is classified

as equity, then it is not remeasured,

and settlement is accounted for within

equity. Otherwise, other contingent

consideration is remeasured at fair value

at each reporting date and subsequent

changes in the fair value of the contingent

consideration are recognised in profit or

loss.

If share-based payment awards

(replacement awards) are required

to be exchanged for awards held by

the acquiree’s employees (acquiree’s

awards), then all or a portion of the

amount of the acquirer’s replacement

awards is included in measuring the

consideration transferred in the business

combination. This determination is

based on the market-based measure

of the replacement awards compared

with the market-based measure of the

acquiree’s awards and the extent to

which the replacement awards relate to

precombination service.

3.1.2 Subsidiary

Subsidiary entity is controlled by the

Parent. The Financial Statements of

subsidiary is included in the Consolidated

Financial Statements from the date that

control commences, until the date that

control ceases. In separate Financial

Statements, investment in subsidiary is

stated at cost.

3.1.3 Transactions eliminated on consolidation

Intra-group balances and transactions,

and any unrealised income and expenses

arising from intra-group transactions, are

eliminated in preparing the consolidated

Financial Statements. Unrealised losses

are eliminated in the same way as

unrealised gains, but only to the extent

that there is no evidence of impairment.

Appropriate classification is made when

the classification of subsidiary differs

from classification of the parent

3.1.4 Loss of control When the Group loses control over a

subsidiary, it derecognises the assets

and liabilities of the subsidiary, and

any related NCI and other components

of equity. Any resulting gain or loss is

recognised in profit or loss. Any interest


retained in the former subsidiary is

measured at fair value when control is

lost.

3.2 Foreign currency transactions Transactions in foreign currencies are

translated into the respective functional

currencies of Group companies at the

exchange rates at the dates of the

transactions.

Monetary assets and liabilities

denominated in foreign currencies are

translated into the functional currency at

the exchange rate at the reporting date.

Non-monetary assets and liabilities that

are measured at fair value in a foreign

currency are translated into the functional

currency at the exchange rate when the

fair value was determined. Non-monetary

items that are measured based on

historical cost in a foreign currency are

translated at the exchange rate at the

date of the transaction and no translation

is made subsequently unless determined

to realise at fair value. Foreign currency

differences are generally recognised in

profit or loss.

3.3 Impairment of non-financial assets

The Group assesses at each reporting

date, whether there is an indication

that an asset may be impaired. If any

indication exists, the Company estimates

the asset’s recoverable amount. An

asset’s recoverable amount is the higher

of an asset’s or cash-generating units

(CGU) fair value less costs to sell and its

value in use and is determined for an

individual asset, unless the asset does

not generate cash inflows that are largely

independent of those from other assets

or groups of assets. Where the carrying

amount of an asset or CGU exceeds

its recoverable amount, the asset is

considered impaired and is written down

to its recoverable amount. In assessing

value in use, the estimated future cash

flows are discounted to their present

value using a pre-tax discount rate that

reflects current market assessments of

the time value of money and the risks

specific to the asset. In determining fair

value less costs to sell, recent market

transactions are taken into account, if

available. If no such transactions can

be identified, an appropriate valuation

model is used. These calculations are

corroborated by valuation multiples,

quoted share prices for publicly traded

Companies or other available fair value

indicators.

Impairment losses are recognised in

the Profit or Loss in those expense

categories consistent with the function of

the impaired asset, except for a property

previously revalued where the revaluation

was taken to other comprehensive

income. In this case, the impairment is

also recognised in other comprehensive

income up to the amount of any previous

revaluation.

For assets excluding goodwill, an

assessment is made at each reporting

date as to whether there is an indication

that previously recognised impairment

losses may no longer exist or may have

decreased. If such indication exists, the

Company estimates the asset's or cash

generating unit's recoverable amount. A

previously recognised impairment loss is

reversed only if there has been a change

in the assumptions used to determine

the asset's recoverable amount since the

last impairment loss was recognised. The

reversal is limited so that the carrying

amount of the asset does not exceed

its recoverable amount, nor exceed the

carrying amount that would have been

determined, net of depreciation, had no

impairment loss been recognised for

the asset in prior years. Such reversal

is recognised in the statement of Profit

or Loss unless the asset is carried at

a revalued amount, in which case the

reversal is treated as a revaluation

increase.

Based on the assessments made to the

recoverable amounts of non-financial

assets, including investments in

subsidiaries, there were no indications

that require an adjustment in the financial

statements.

3.4 Statement of cash flows The statement of cash flows has been

prepared using the ‘indirect method’ in

accordance with Sri Lanka Accounting

Standard - LKAS 7 on ‘Statement of

Cash Flows’. Cash and cash equivalent

comprise of cash in hand, cash at bank

and short term investments that are

readily convertible to known amount of

cash and subject to an insignificant risk of

change in value.

Interest received and dividends received

are classified as investing cash flows,

while dividend paid is classified as

financing cash flow and interest paid

is classified under the operating cash

flows for the purpose of presentation of

Statement of Cash Flows.

Bank overdrafts that are re payable on

demand and forming an integral part

of the Group’s cash management are

included as a component of cash and

cash equivalent for the purpose of the

Statement of Cash Flow.

3.5 Current versus non-Current classification

The Group presents assets and

liabilities in the statement of financial

position based on current/non-current

classification. An asset is current when it

is:

Expected to be realised or intended

to sold or consumed in the 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 the

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 period.

The terms of the Liability that could,at

the option of the counterparty,result

in its settelment by the issue of

equity instruments do not affect its

classification

The Group classifies all other liabilities

including deferred tax liabilities as non-

current.

Deffered Tax assets and liabilities are

classified as non current assets and

liabilities

04 Changes in accounting policies and disclosures

The Group applied for the first time,

certain standards and amendments,

which are effective for annual periods

beginning on or after 1 April 2020. The

Group has not early adopted any other

standard, interpretation or amendment

that has been issued but is not yet

effective

4.1 Amendments to SLFRS 3: Definition of a Business

The amendment to SLFRS 3 Business

Combinations clarifies that to be

considered a business, an integrated set

of activities and assets must include, at

a minimum, an input and a substantive

process that, together, significantly

contribute to the ability to create output.

Furthermore, it clarifies that a business

can exist without including all of the

inputs and processes needed to create

outputs. These amendments had no

impact on the consolidated financial

statements of the Group, but may impact

future periods should the Group enter into

any business combinations

4.2 Amendments to LKAS 1 and LKAS 8 Definition of Material

The amendments provide a new definition

of material that states, “information

is material if omitting, misstating or

obscuring it could reasonably be expected

to influence decisions that the primary

users of general purpose financial

statements make on the basis of those

financial statements, which provide

financial information about a specific

reporting entity.” The amendments

clarify that materiality will depend on

the nature or magnitude of information,

either individually or in combination with

other information, in the context of the

financial statements. A misstatement

of information is material if it could

reasonably be expected to influence

decisions made by the primary users.

These amendments had no impact on the

consolidated financial statements of, nor

is there expected to be any future impact

to, the Group

4.3 Annual Ammendments to Conceptual Framework for Financial Reporting

The Conceptual Framework is not a

standard, and none of the concepts

contained therein override the concepts

or requirements in any standard. The

purpose of the Conceptual Framework

is to assist the ICASL in developing

standards, to help preparers develop

consistent accounting policies where

there is no applicable standard in place

and to assist all parties to understand

and interpret the standards. This will

affect those entities which developed

their accounting policies based on the

Conceptual Framework. The revised

Conceptual Framework includes some

new concepts, updated definitions

and recognition criteria for assets and

liabilities and clarifies some important

concepts. These amendments had no

impact on the consolidated financial

statements of the Group

4.4 Amendments to SLFRS 16 Covid-19 Related Rent Concessions

On 28 May 2020, the ICASL issued

Covid-19-Related Rent Concessions -

amendment to SLFRS 16 Leases The

amendments provide relief to lessees

from applying SLFRS 16 guidance

on lease modification accounting for

rent concessions arising as a direct

consequence of the Covid-19 pandemic.

As a practical expedient, a lessee may

elect not to assess whether a Covid-19

related rent concession from a lessor

is a lease modification. The amendment

applies to annual reporting periods

beginning on or after 1 June 2020. Earlier

application is permitted. This amendment

had no impact on the consolidated

financial statements of the Group.

05 New accounting standards issued but not effective as at reporting date

A number of new standards are effective

for annual periods beginning after 1

April 2021 and earlier application is


permitted; however, the Group has not

early adopted the new or amended

standards in preparing these financial

statements.

The following amended standards and

interpretations are not expected to have a

significant impact on the Group’s financial

statements.

5.1 Amendments to LKAS 1: Classification of Liabilities as Current or Non-current

In January 2020, the ICASL issued

amendments to paragraphs 69 to 76 of

LKAS 1 to specify the requirements for

classifying liabilities as current or non-

current. The amendments clarify:

What is meant by a right to defer

settlement

That a right to defer must exist at the

end of the reporting period

That classification is unaffected

by the likelihood that an entity will

exercise its deferral right

That only if an embedded derivative

in a convertible liability is itself

an equity instrument would the

terms of a liability not impact its

classification

The amendments are effective for annual

reporting periods beginning on or after

1 January 2023 and must be applied

retrospectively. The Group is currently

assessing the impact the amendments

will have on current practice and whether

existing loan agreements may require

renegotiation

5.2 Reference to the Conceptual Framework – Amendments to SLFRS 3

In May 2020, the ICASL issued

Amendments to SLFRS 3 Business

Combinations - Reference to the

Conceptual Framework. The amendments

are intended to replace a reference to

the Framework for the Preparation and

Presentation of Financial Statements,

issued in 1989, with a reference

to the Conceptual Framework for

Financial Reporting issued in March

2018 without significantly changing its

requirements.

The Board also added an exception to

the recognition principle of SLFRS 3

to avoid the issue of potential ‘day 2’

gains or losses arising for liabilities and

contingent liabilities that would be within

the scope of LKAS 37 or IFRIC 21 Levies, if

incurred separately.

At the same time, the Board decided

to clarify existing guidance in SLFRS

3 for contingent assets that would not

be affected by replacing the reference

to the Framework for the Preparation

and Presentation of Financial

Statements.

The amendments are effective for annual


1 January 2022 and apply prospectively.

The amendments are not expected to

have a material impact on the Group

5.3 Proceeds before intended use Property, Plant and Equipment:

In May 2020, the ICASL issued Property,

Plant and Equipment — Proceeds before

Intended Use, which prohibits entities

from deducting from the cost of an item

of property, plant and equipment, any

proceeds from selling items produced

while bringing that asset to the location

and condition necessary for it to be

capable of operating in the manner

intended by management. Instead, an

entity recognises the proceeds from

selling such items, and the costs of

producing those items, in profit or

loss.


The amendment is effective for annual


1 January 2022 and must be applied

retrospectively to items of property, plant

and equipment made available for use

on or after the beginning of the earliest

period presented when the entity first

applies the amendment.


have a material impact on the Group

5.4 IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities

As part of its 2018-2020 annual

improvements to SLFRS standards

process the ICASL issued amendment

to SLFRS 9. The amendment clarifies

the fees that an entity includes when

assessing whether the terms of a

new or modified financial liability are

substantially different from the terms of

the original financial liability. These fees

include only those paid or received by the

borrower and the lender, including fees

paid or received by either the borrower

or lender on the other’s behalf. An entity

applies the amendment to financial

liabilities that are modified or exchanged

on or after the beginning of the annual

reporting period in which the entity first

applies the amendment. The amendment

is effective for annual reporting periods

beginning on or after 1 January 2022 with

earlier adoption permitted. The Group

will apply the amendments to financial

liabilities that are modified or exchanged

on or after the beginning of the annual

reporting period in which the entity first

applies the amendment.


have a material impact on the Group.


6. Operating segments

Accounting policyThe Segment is a distinguishable component of the Group that is engaged either in providing related products or services (business

segment), or in providing Products or Services within a particular Economic Environment (Geographical Segment), which is subject

to risks and returns that are different from those of the Segments. The Group's primary format for segmental reporting is based on

Business Segments. The Business segments are determined based on the Group's management and internal reporting structure.

The following summary describes the operations of each reportable segment.

Reportable segments Operations

Vehicle sales Importation and distribution of brand new Isuzu, Range Rover and Jaguar vehicles as authorised

agent in Sri Lanka

Marine Engine Sales Importation and distribution of brand new Isuzu Marine Engines

Spare sales Importation and distribution of brand new Isuzu, Range Rover and Jaguar spare parts

Workshop services Carry out workshop repair services for Isuzu, Range Rover and Jaguar vehicles

Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.

The activities of the Group are located mainly in Sri Lanka. Consequently, the economic environment in which the Group operated is

not subject to risks and rewards that are significantly different on a geographical basis. Hence disclosure by geographical region is

not required.

The Board of Directors monitors the operating results of its business units separately for the purpose of making decisions about

resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured

consistently with profit or loss in the consolidated financial statements.

6.1 Business Segment

group Vehicle spare parts Workshop repair Marine engine total

sales sales & services sales

For the year ended 31 March, 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020

LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR

Revenue

Segment revenue 2,844,231,291 3,189,216,897 802,479,484 792,700,058 253,861,671 235,311,006 7,314,815 - 3,907,887,261 4,217,227,961

Inter-segment elimination - - (3,194,342) - (23,108,311) (21,267,522) - - (26,302,653) (21,267,522)

total revenue net of tax 2,844,231,291 3,189,216,897 799,285,142 792,700,058 230,753,360 214,043,484 7,314,815 - 3,881,584,608 4,195,960,439

segment gross profit 206,489,526 451,873,990 334,462,157 261,579,318 93,945,429 81,390,581 1,018,857 - 635,915,969 794,843,889

Operating profit 110,532,925 194,740,215

Finance income 41,382,983 70,438,071

Finance costs (181,782,810) (407,283,285)

net finance costs (140,399,827) (336,845,214)

profit /(Loss) before tax (29,866,902) (142,104,999)

Income tax reversal 16,886,808 62,193,628

profit/(Loss) for the year (12,980,094) (79,911,371)

Capital expenditures (713,196,896) (198,353,864)

Depreciation and amortisation 179,269,667 171,947,832


Company Vehicle spare parts Workshop repair Marine engine total

sales sales & services sales

For the year ended 31 March, 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020

LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR

Revenue

Segment revenue 1,776,841,291 2,068,166,897 427,765,777 364,369,357 177,333,111 149,480,847 7,314,815 - 2,389,254,994 2,582,017,101

Inter-segment elimination - - (3,194,342) - (23,108,311) (21,267,522) - - (26,302,653) (21,267,522)

total revenue net of tax 1,776,841,291 2,068,166,897 424,571,435 364,369,357 154,224,800 128,213,325 7,314,815 - 2,362,952,341 2,560,749,579

segment gross profit 163,964,707 204,583,441 180,108,095 167,094,564 81,111,799 62,457,449 1,018,858 - 426,203,459 434,135,454

Operating profit 90,650,095 91,960,218

Finance income 39,205,290 62,022,541

Finance costs (125,531,993) (281,003,868)

Net finance costs (86,326,703) (218,981,327)

profit /(Loss) before tax 4,323,392 (127,021,109)

Income tax (expense)/reversal 1,124,315 46,014,721

profit/(Loss) for the year 5,447,707 (81,006,388)

Capital expenditures (553,507,300) (61,476,712)

Depreciation and amortisation 62,750,889 60,599,180

7. Revenue from contracts with customers

Accounting policyRevenue represents the amounts derived from importing and distribution of vehicles, marine engines, spare parts and provision of

workshops repair services and local charges which fall within the Group’s ordinary activities net of trade discounts and turnover

related taxes.

Revenue from contracts with customers is recognised when control of the goods or services is transferred to the customer at an

amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Timing of

transferring the goods and services to the customer is determined based on judgments taking into the consideration of the nature

of the goods and services that offers to the customers. Further, revenue is recognised to the extent that it is highly probable that a

significant reversal in the amount of cumulative revenue recognition will not occur.

Five-step model with reference to SLFRS 15, Revenue from contracts with customers is applied before the revenue is recognised in

books.

1. identify the contract with customers

2. Identify the separate performance obligations

3. Determine the transaction price of the contract

4. Allocate the transaction price to each of the separate performance obligations, and;

5. Recognise the revenue as each performance obligation is satisfied.

Performance obligation is satisfied, an entity recognises as revenue the amount of the transaction price (which excludes estimates of

variable considerations, if any) that is allocated to that performance obligation. Transaction prices are explicitly stated in the contract

with customers and agreed upon.



The following specific criteria are used for the purpose of recognition of revenue.

Revenue streamsThe Group generates revenue primarily from Sale of brand new vehicles, marine engines, spare parts and providing workshop repair

services.

performance obligations and revenue recognition policies:

Type of Product/ services Nature and timing of satisfaction of performance obligations, including significant payment terms

Revenue recognition

Sale of Vehicles,Marine

Engines and Spare Parts

Customers obtain control of goods when the goods

are delivered to and have been accepted at their

premises. Invoices are generated at that point in time.

"Revenue is recognised when the goods

are delivered and have been accepted by

customers at their premises. Advances

received are included in liabilities as

advance received from customers.

Workshop Repair Services Company undertakes repairs and services on

Isuzu and Range Rover/Jaguar vehicles. Each job

commences with/without receipt of advance payment

from customer depending on the service to be

carried out.However, the stage of completion is not

significant for the group and company.

Revenue from workshop services/ repairs

are recognised at the time of relevant job

is completed or in proportion to the stage

of completion of the job when the outcome

of service/ repair of the vehicle can be

estimated reliably.

group CompanyFor the year ended 31 March 2021 2020 2021 2020 LKR LKR LKR LKR

New Vehicles 2,844,231,291 3,189,216,897 1,776,841,291 2,068,166,897

Spare Parts 799,285,142 797,160,766 424,571,435 365,974,320

Work Shop Repairs 230,753,360 218,525,359 154,224,800 131,630,529

Marine Engine Sales 7,314,815 - 7,314,815 -

3,881,584,608 4,204,903,022 2,362,952,341 2,565,771,746

NBT - (8,942,583) - (5,022,167)

Net Revenue 3,881,584,608 4,195,960,439 2,362,952,341 2,560,749,579

As instructed by the Ministry of Finance and approved by the Cabinet of Ministers, NBT has been abolished with effect from 01

December 2019


8. Other Income

Accounting policyIncome earned in other sources, which are not directly related to the ordinary course of business are recognised as other operating

income.


Sundry income 77,905,185 129,995,125 9,019,521 1,187,417

Profit on sale of property, plant and equipment 55,046,812 11,761,977 - 735,107

Agency commission 5,125,200 5,621,052 5,125,200 5,621,052

Amortisation of asset related grants 219,389 219,389 219,389 219,389

Write back of advances/ Inventory 23,446,617 4,757,595 2,315,843 4,757,595

Foreign exchange gain 15,871,368 772,227 15,871,368 772,228

177,614,571 153,127,365 32,551,321 13,292,788

gain on disposal of property, plant and equipmentThe gain on disposal of property, plant and equipment is determined as the difference between the carrying amount of the property,

plant and equipment at the time of disposal and the proceeds from disposal net of expenses incurred in disposal.

9. Finance Income/ (Costs)

Accounting policyThe Group’s finance income and finance costs include:

Interest income- include interest earned from investment in debentures and money market investments.

Interest expenses - include interest payment on bank loan, bank overdraft and lease liabilities.

Interest income or expense is recognised using the effective interest method.

The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of

the financial instrument to:

the gross carrying amount of the financial asset; or

the amortised cost of the financial liability

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset or to the

amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition,

interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer

credit-impaired, then the calculation of interest income reverts to the gross basis.

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial

period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are

expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with

the borrowing of funds.




Finance IncomeInterest Income 41,382,983 70,438,071 39,205,290 62,022,541

41,382,983 70,438,071 39,205,290 62,022,541

Finance CostsInterest on short term loan (144,548,397) (346,659,347) (122,415,930) (268,733,516)

Interest on bank overdraft (5,866,024) (28,108,611) (106,480) (9,104,258)

Interest on lease liabilities (31,368,389) (32,515,327) (3,009,583) (3,166,094)

(181,782,810) (407,283,285) (125,531,993) (281,003,868)

net finance costs (140,399,827) (336,845,214) (86,326,703) (218,981,327)

10. Profit before income tax expenses

Accounting policyExpenditure recognition

All expenditure incurred in the running of the business and in maintaining the Property, Plant and Equipment in a state of efficiency

has been charged to profit & loss in arriving at the profit for the year. Expenses are recognised in the Statement of Profit or Loss on

the basis of a direct association between the cost incurred and the earning of specific items of income.

For the purpose of presentation of Statement of Profit or Loss, the Directors are of the opinion that "function of expenses" method

presents fairly the elements of the enterprises performance; hence such presentation method is adopted.


Profit/(Loss) before tax is stated after charging all

expenses including following:

Directors' Emoluments and Fees (Note 27.5) 24,827,700 25,908,667 24,827,700 25,908,667

Auditors' remuneration - Statutory Audit 2,567,500 2,567,500 1,322,500 1,322,500

- Non Audit services 140,000 133,000 - -

Legal Expenses 1,762,318 3,593,569 1,762,318 3,593,569

Depreciation of property plant and

equipment (Note 13.1/13.2) 129,703,986 118,969,262 51,753,319 47,530,719

Amortisation of intangible assets (Note 14.1) 6,991,733 7,498,147 6,666,816 7,286,233

Impairment of intangible assets (Note 14.1) - 619,415 - 619,415

Amortisation of right-of-use assets (Note 16.1) 42,573,948 45,480,423 4,330,754 5,782,228

Personnel Cost ( Note 10.1) 280,228,804 296,172,974 169,315,587 172,794,144

Professional fees & Secretarial Fees 5,673,944 2,994,494 4,735,405 1,574,053

Provision for/ (reversal of) impairment of

Trade receivables (Note 20.1) 10,664,446 3,727,373 5,479,946 5,125,547

Provision for /(reversal of) inventories (Note 19.1) 56,549 (18,106,695) 56,549 (19,849,103)



10.1 Personnel Cost

Salaries, Wages and Other related costs 242,451,133 258,326,187 146,115,424 150,080,687

Provision for employee benefits (Note 25.2) 8,732,363 9,353,148 5,415,989 5,718,387

Defined contribution plan - EPF and ETF 29,045,308 28,493,639 17,784,174 16,995,070

280,228,804 296,172,974 169,315,587 172,794,144

11. Income tax

Accounting policyIncome tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a

business combination, or items recognised directly in equity or in OCI.

The Group has determined that interest and penalties related to income taxes, including uncertain tax treatments, do not meet

definition of income taxes, and therefore accounted for them under LKAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Current taxCurrent Income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation

authorities.

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the

tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the

tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. The tax rates and tax laws used

to compute the amount are those that are enacted or substantively enacted at the reporting date. Current tax also includes any tax

arising from dividends.

Current tax assets and liabilities are offset only if certain criteria are met.

Current tax relating to items recognised directly in equity is 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.

deferred taxDeferred tax is provided using the liability method on temporary differences between the tax base of the assets and liabilities and

their carring amount for financial reporting purposes at the reporting date.

deferred tax liabilities are recognised for all taxable temporary differences except:When the deferred tax liability arises from the initial recognition of goodwill or 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 tempory differences associated with investments in subsidiaries,associates and interests in joint

arrangements,when the timing of reversal of the temporary difference can be controlled and it is probable that the temporary

differances will not reverse in the foreseeable future.



deferred tax assets are recognised for all deductible temporary differences,the carry forward of unused tax credits and any unused

tax losses. Deferred tax assets are recognised to the extent that is probable that taxable profit will be available against which the

deductible temporary differance, and the carry forward of unused tax credits and unused tax losses can be utilised, except.

When the deferred tax assets relating to the deductible temporary differences arises from the initial recognision of an asset or

liability in a transaction that is not a business combination and at the time of the transaction,affects niether the accounting profit nor

taxable profit or loss.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates

enacted or substantively enacted at the reporting date.

In respect of deductible temporary differences associated with investments in subsidiaries,associate and interest in joint

arrangements, deferred tax assets are recognised only to extent that it is probable that the temporary difference will reverse in the

foreseeable future and taxable profit will be available against which the temporary difference 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 re assessed at each reporting date and are recognised to the extent that is has become probable that future taxable profits

will allow the deferred tax assets to be recovered.

Deferred tax assets and liabilities measured at the tax rates that are expected to apply in the year when the assets are realised or

liability is settled,base on tax rates (and tax laws)that have been enacted or substatively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the

reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset only if certain criteria are met.

significant judgments relating to deferred taxesDeferred tax assets are recognised in respect of tax losses to the extent that it is probable that future taxable profits will be available

and can be utilised against such tax losses. Judgement is required to determine the amount of deferred tax assets that can be

recognised, based upon the likely timing and level of future taxable profits, together with future tax-planning strategies.

sales taxExpenses and assets are recognised net of the amount of sales tax, except:

When 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

When 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.


11.1 Current tax

the major components of income tax expenses


Amounts recognised in the statement of profit or lossCurrent income taxCurrent income tax expense (Note 11.3) - 798,685 - -

Over provision in respect of previous years (1,373,797) (4,712,742) (868,639) (5,623,883)

deferred tax:Relating to origination of temporary differences (Note 11.6) (15,513,011) (58,279,571) (255,676) (40,390,838)

Income tax reversals reported in the consolidated

statement of profit or loss (16,886,808) (62,193,628) (1,124,315) (46,014,721)

Amounts recognised in the consolidated statement of other comprehensive incomeRelating to origination of temporary differences (Note 11.6) 645,683 1,293,225 366,570 929,059

Deferred tax charged to other comprehensive income 645,683 1,293,225 366,570 929,059

11.2 IFRIC 23 Uncertainty over Income Tax Treatments

two Income tax Assessments; 2009/2010 and 2010/2011Revenue authorities are of the view 2/3rd disallowance is applicable for Nation Building Tax (NBT) paid on imports. However the

Company is claiming the position that 2/3rd disallowance is applicable for NBT paid quarterly only.

Assessment no. 01 – 2009/10The Company has been issued an assessment for Nation Building Tax for the year of assessment 2009/10 for sum of LKR 7,350,762/-

and LKR 3,675,381/- as penalty thereon.

The Company submitted an appeal against the above assessment and the Commissioner General of Inland Revenue made a

determination affirming the said assessment at the conclusion of the appeal hearing. The Company appealed to the Tax Appeals

Commission and Tax Appeals Commission also confirmed the determination of the Commissioner General of Inland Revenue. The

Company thereafter appealed against the said decision of the Tax Appeals Commission to the Court of Appeal and the Court of Appeal

affirmed the decision of the Tax appeal Commission. The Company finally appealed to the Supreme Court and Supreme Court refused

to grant leave for this case (SC (Spl) LA 43) at the hearing taken place on 21 January 2020.

Based on the decision of the Supreme Court in not granting leave to appeal for the case 2009/10 (SC (Spl) LA43), Sathosa Motors PLC

decided to concede to court decision and withdraw from the case filed.

Assessment no. 02 2010/11The Company has been issued an assessment for Nation Building Tax for the year of assessment 2010/11 for sum of LKR 7,790,377/-

and LKR 3,895,189/- as penalty thereon (Similar case as 2009/10).

The company’s legal professionals are of the opinion that the Company will not be able to defend against these case. Therefore the

Company compelled to withdraw from this case considering the unfavourable verdict delivered by court in respect of previous case.



Accordingly the Company has made a provision in full for these assessments during the financial year ended 31 March 2019.

Afterwards, the management carried out necessary communications with the Commissioner-Large Corporate Unit-IRD and explained

how the import restrictions and current economic and social changes have impacted our business negatively.

The Commissioner expressed his concurrence for the facts we explained and was agreed to wave off the full penalty amount (LKR

7.57Mn) and charge only the tax liability in order to settle these two cases.

Accordingly we have made the full payment for the remaining tax liability which is LKR 9.47Mn and got these two cases settled. Now

both cases have been eliminated from the IRD pending cases list (Legacy Division)."

11.3 Reconciliation of accounting profit to income tax expense


Accounting profit / (loss) before income tax expense (29,866,902) (142,104,999) 4,323,392 (127,021,109)

Aggregated disallowable items 304,211,959 158,580,853 102,098,203 35,090,573

Aggregated allowable items (349,554,686) (235,307,099) (139,950,432) (121,337,623)

Income from Investment Income 39,205,290 70,687,870 39,205,290 62,272,340

Current year tax loss carried forward / (claimed)

during the year (Note 11.4) 36,004,339 150,995,819 (5,676,453) 150,995,819

total taxable income - 2,852,444 - -

Tax @ 24% (2020 - 28% ) - 798,685 - -

Current tax on profit for the year - 798,685 - -

11.4 Tax loss reconciliation

group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR

Tax Losses Brought forward 150,995,819 - 150,995,819 -

Tax Loss incurred/ (utilised) during the year 36,004,339 150,995,819 (5,676,453) 150,995,819

Tax Losses carried forward 187,000,158 150,995,819 145,319,366 150,995,819


11.5 Current tax liabilities / (assets)


Balance at the beginning of the year (75,892,191) (47,283,452) (34,397,086) (16,131,554)

Provision made during the year - 798,685 - -

Over provision in respect of previous years (1,373,797) (4,712,742) (868,639) (5,623,883)

Payments made during the year (9,463,511) (1,233,490) (9,463,511) (563,410)

ESC recoverable 34,450,072 (21,096,953) - (10,134,477)

WHT recoverable 14,345 (2,364,239) - (1,943,762)

Balance at the end of the year (52,265,082) (75,892,191) (44,729,236) (34,397,086)

11.6 Deferred tax liabilities/ (assets)

Balance at the beginning of the year (29,480,376) 27,505,970 (26,653,747) 12,808,032

origination of temporary differencesRecognised in profit or loss (22,904,295) (58,279,571) (4,679,485) (40,390,838)

Recognised in OCI 645,683 1,293,225 366,570 929,059

Effect of changes in tax rate in Profit or Loss 7,391,285 - 4,423,809 -

Balance at the end of the year (44,347,703) (29,480,376) (26,542,853) (26,653,747)

11.7 Reconciliation of Deferred tax assets and liabilities


deferred tax liabilityTemporary differences arising from Property,

Plant & Equipment 130,008,341 131,045,871 100,564,133 98,935,835

Total temporary difference of deferred tax liability 130,008,341 131,045,871 100,564,133 98,935,835

Closing Deferred tax liability @ 24% (2020 - 28%) 31,202,001 36,692,844 24,135,392 27,702,034

deferred tax assetsTemporary difference arising from retirement

benefit obligations (36,527,022) (38,576,611) (22,078,232) (24,673,606)

Temporary difference arising from unutilised tax losses (182,822,467) (150,995,818) (145,319,366) (150,995,819)

Temporary difference arising from provision for inventories (34,447,813) (12,525,000) (30,962,417) (9,039,607)

Temporary difference arising from impairment of

trade receivables (20,107,090) (7,873,032) (12,061,933) (6,581,987)

Temporary difference arising from Right -of- use assets (40,886,044) (26,362,468) (737,404) (2,836,770)

total temporary difference of deferred tax assets (314,790,436) (236,332,929) (211,159,352) (194,127,789)

Closing Deferred tax asset at 24% (2020 - 28%) (75,549,705) (66,173,220) (50,678,245) (54,355,781)

net temporary differences (184,782,096) (105,287,058) (110,595,219) (95,191,954)

Net deferred tax liability/ (asset) (44,347,703) (29,480,376) (26,542,853) (26,653,747)



11.8 Movement in Deferred tax assets and liabilities during the year

group Balance Recognised Recognised Balance Recognised Recognised Balance as at in profit in as at in profit in as at 01.04.2019 or loss oCI 31.03.2020 or loss oCI 31.03.2021 LKR LKR LKR LKR LKR LKR LKR

Property plant and equipment 41,996,141 (5,303,297) - 36,692,844 (5,490,849) - 31,201,995

Retirement benefit obligations (10,827,902) (1,266,774) 1,293,225 (10,801,451) 1,389,282 645,683 (8,766,485)

Carried forward tax loss - (42,278,829) - (42,278,829) (1,598,562) - (43,877,391)

Provision for inventories (2,501,484) (1,005,516) - (3,507,000) (4,760,474) - (8,267,475)

Provision for impairment

of trade receivables (1,160,785) (1,043,664) - (2,204,449) (2,621,252) - (4,825,701)

Right -of- use assets (7,381,491) (7,381,491) (2,431,159) (9,812,651)

27,505,970 (58,279,571) 1,293,225 (29,480,376) (15,513,011) 645,683 (44,347,703)

CompanyProperty plant and equipment 22,315,440 5,386,594 - 27,702,034 (3,566,645) - 24,135,389

Retirement benefit obligations (7,086,157) (751,512) 929,059 (6,908,610) 1,243,264 366,570 (5,298,776)

Carried forward tax loss - (42,278,829) - (42,278,829) 7,402,183 - (34,876,646)

Provision for inventories (2,013,448) (517,642) - (2,531,090) (4,899,890) - (7,430,980)

Provision for impairment

of trade receivables (407,803) (1,435,153) - (1,842,956) (1,051,907) - (2,894,865)

Right -of- use assets - (794,296) - (794,296) 617,319 - (176,977)

12,808,032 (40,390,838) 929,059 (26,653,747) (255,676) 366,570 (26,542,853)

11.9 Recoverability of temporary differences arising from tax losses

The Company recognised a Deferred Tax asset consequent to the changes in the Inland Revenue Act No. 24 of 2017. As per the said

Act, which was effective from 01 April 2018, 100% of taxable income is allowed to be deducted against the tax losses incurred.

According to the transitional provisions of the new act, the brought forward tax loss can be claimed against taxable income for a

period of 6 years.

The Management carefully analysed the availability of the future taxable profits against which the unused tax losses can be utilised.

In this assessment the Company estimated the profitability using the internal budgets and plans in a conservative manner. In this

assessment, directors noted the composition of the carried forward tax loss as given in the Note 11.4 Current estimated duration of

recoverability of deferred tax asset is 6 years until March 2027.

The Tax loss amounting to LKR 4,177,694 of the Group has not been been considered for deferred tax due to the suspicion in

availability of profit for the upcoming years caused by the import restrictions imposed by the Government of Sri Lanka amidst the

Covid 19 situation in the country.


11.10 Applicable rates of income tax

The income tax provision for the Company is computed in accordance with the Bill to amend the Inland Revenue Act No. 24 of 2017,

which was issued on 18 March 2021. The Bill has been passed in the Parliament and Certified by the Honorable Speaker on 13 May

2021 and it incorporates all the income tax proposals announced to date and implemented by way of guidelines issued by the Inland

Revenue Department at the instruction of the Ministry of Finance. CA Sri Lanka through a guideline issued on “Application of Tax

Rates in Measurement of Current Tax and Deferred Tax in LKAS 12” dated 23 April 2021 has acknowledged that an Inland Revenue

(Amendment) Bill which is presented to the Parliament for the first reading is ‘Substantively enacted’ as per LKAS 12 – Income Tax

and the proposed tax rules and rates given in the Inland Revenue (Amendment) Bill can be used to measure the current tax and

deferred tax.

Accordingly, the new tax rate of 24% has been considered to be substantially enacted as at reporting date for the computation of

current and deferred tax computation in these Financial Statements for the year ended 31 March 2021

12. Earnings per share

Accounting policyBasic earnings/(Loss) per shareBasic Earnings/(Loss) per share is calculated by dividing the net profit attributable to equity holders of the Sathosa Motors PLC by the

weighted average number of ordinary shares in issue during the year.

diluted earnings/(Loss) per shareDiluted Earnings/(Loss) per Share is determined by adjusting the profit or loss attributable to ordinary share holders and the

weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

group CompanyFor the year ended 31 March 2021 2020 2021 2020

Amount used as the numeratorProfit / (Loss) attributable to ordinary shareholders (LKR) (3,766,192) (81,028,416) 5,447,707 (81,006,388)

Amount used as the denominatorWeighted average number of ordinary shares as at the end 6,033,622 6,033,622 6,033,622 6,033,622

Basic / diluted earnings/(loss) per share (LKR) (0.62) (13.43) 0.90 (13.43)

There were no potentially dilutive ordinary shares in issue at any time during the year/previous year. Hence diluted earning/(loss) per

share is same as the basic earning/(loss) per share.

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date

of authorisation of these financial statements.



13. Property plant and equipment

Accounting policyProperty, plant and equipment are tangible items that are held for use in the production or supply of goods or services, for rental to

others, or for administrative purpose and are expected to be used during more than one period. The Group applies the requirements

of LKAS 16 in accounting of property, plant and equipment.

Property, Plant and Equipment are recognised if it is probable that future economic benefits associated with the asset will flow to the

Group and the cost of the asset can be reliably measured. Items of property, Plant and Equipment including construction in progress

are stated at cost less accumulated depreciation and accumulated impairment losses, if any.

The cost of an item of property, plant and equipment comprise its purchase price and any directly attributable costs of bringing the

asset to working condition for its intended use. The cost of self-constructed assets includes the cost of materials, direct labor, and

any other costs directly attributable to bringing the asset to the working condition for its intended use. This also includes cost of

dismantling and removing the items and restoring in the site on which they are located and borrowing costs on qualifying assets.

Purchased software that is integrated to the functionality of the related equipment is capitalised as part of equipment.

When parts of an item of Property, Plant and Equipment have different useful lives, they are accounted for as separate items (major

component) of Property, Plant and Equipment.

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable

that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The

carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are

recognised in profit or loss as incurred.

Depreciation is recognised in Statement of Profit or Loss on the straight-line basis over the estimated useful lives of each part of

item of Property, Plant and Equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless

it is reasonably certain that the Group will obtain ownership by the end of the lease term. Depreciation of an asset begins when it

is available for use whereas depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale

(or included in a disposal group that is classified as held for sale) and the date that the asset is de-recognised. Depreciation is not

charged on Freehold Land and Capital Work in Progress.

Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:

Asset Category Useful life (years)

Freehold Building 50

Leasehold Building 8-20

Plant Machinery and Tools 5-8

Motor Vehicles 5

Office Equipment 5

Furniture & Fittings 5

The residual value, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end

and adjusted prospectively, if appropriate.

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future

economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the

difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss when

the asset is derecognised. Gains are not classified as revenue.


13. Property plant and equipment (Contd.)

Reconciliation of beginning and ending balances by classes of Assets

13.1 Group

Freehold Leasehold

Cost plant, Capital

Machinery Motor office Furniture work in

Land Building and tools Vehicles equipment & Fittings Building progress total

LKR LKR LKR LKR LKR LKR LKR LKR LKR

Balance as at 01 April 2019 326,086,000 42,426,049 111,937,320 251,315,025 102,653,430 87,701,864 503,006,414 303,826,938 1,728,953,040

Additions - - 39,964,723 59,000,000 4,003,319 5,224,838 3,540,255 85,764,447 197,497,582

Disposals - - - (31,777,834) - - - - (31,777,834)

Transfers - - - - - - 338,165,910 (338,165,910) -

Balance as at 31 March 2020 326,086,000 42,426,049 151,902,043 278,537,191 106,656,749 92,926,702 844,712,579 51,425,475 1,894,672,788

Additions 511,318,080 - 36,559,108 59,579,269 11,438,260 70,314,299 23,228,086 - 712,437,102

Disposals - - (17,460,235) (110,803,654) - (6,674,789) - - (134,938,678)

Transfers - - 51,425,475 - - - - (51,425,475) -

Balance as at 31 March 2021 837,404,080 42,426,049 222,426,391 227,312,806 118,095,009 156,566,212 867,940,665 - 2,472,171,212

Accumulated depreciation

Balance as at 01 April 2019 - 795,968 54,617,766 139,522,762 69,728,490 59,807,206 153,937,167 - 478,409,359

Charge for the year - 848,520 16,211,106 36,209,242 12,914,969 14,426,497 38,358,928 - 118,969,262

Disposals - - - (17,725,940) - - - - (17,725,940)

Balance as at 31 March 2020 - 1,644,488 70,828,872 158,006,064 82,643,459 74,233,703 192,296,095 - 579,652,681


Disposals - - (12,723,425) (71,367,690) - (5,826,475) - - (89,917,590)


Carrying value as at 31 March 2021 837,404,080 39,933,041 142,682,852 108,350,837 23,043,136 72,941,116 628,377,073 - 1,852,732,135

Carrying value as at 31 March 2020 326,086,000 40,781,561 81,073,171 120,531,128 24,013,290 18,692,999 652,416,484 51,425,475 1,315,020,107



13.2 Company

Freehold Leasehold

Cost plant, Capital

Machinery Motor office Furniture work in

Land Building and tools Vehicles equipment & Fittings Building progress total

LKR LKR LKR LKR LKR LKR LKR LKR LKR

Balance as at 01 April 2019 326,086,000 42,426,049 25,218,543 128,367,126 60,720,227 18,338,030 255,471,997 297,149,128 1,153,777,100

Additions - - 14,730,997 - 1,719,319 469,359 3,540,255 41,016,782 61,476,712

Disposals - - - (25,208,589) - - - - (25,208,589)

Transfers - - - - - - 338,165,910 (338,165,910) -


Additions 511,318,080 - 12,308,061 - 2,950,248 3,765,525 23,165,386 - 553,507,300


Accumulated depreciation

Balance as at 01 April 2019 - 795,968 16,003,767 80,665,263 43,091,761 12,140,954 66,099,364 - 218,797,077


Disposals - - - (8,129,826) - - - - (8,129,826)




Carrying value as at 31 March 2021 837,404,080 39,933,041 27,758,915 11,683,234 11,919,416 4,309,282 500,593,266 - 1,433,601,234

Carrying value as at 31 March 2020 326,086,000 40,781,561 20,405,141 17,727,025 14,450,023 3,707,971 508,689,532 - 931,847,253

(a) Freehold Land and Building carried at cost (Company / group)

Location Land Building

extent Cost / Carrying Value

(LKR)

extent Cost (LKR)

Carrying value (LKR)

number of Buildings

No. 86, Vauxhall Street, Colombo 02 83.07 Perches 837,404,080 3763 Sqft. 42,426,049 39,933,041 1

(b) Capital work-in-progressCapital work-in-progress includes the construction of capital assets which mainly consists of building and plant & machinery. Working

progress has been completed and transfer to the respective assets during the year.

(c) Capitalised borrowing costsThere were no capitalised borrowing costs related to the acquisition of property, plant and equipment during the year 2021 (2020 –

Nil).


(d) Fully depreciated but still in useThe cost of fully depreciated property, plant and equipment of the Group and the Company which are still in use amounted to:


Fully depreciated property, plant and equipment 276,695,522 197,511,052 171,662,353 149,654,253

(e) property, plant and equipment pledged as security for liabilitiesThere were no items of property, plant and equipment pledged as securities for liabilities of the Group as at the reporting date.

(f) title restriction on property, plant and equipmentThere were no restrictions existed on the title of the property, plant and equipment of the Group as at the reporting date.

(g) Impairment of property, plant and equipmentDue to the temporary ceasing of operations because of the lockdown in the country, property, plant and equipment (PPE) is under-

utilised or not utilised for a period and capital work – in - progress is suspended. It is also possible that carrying value of property

plant and equipment may get affected. Based on the assessment carried out by the Management with the following judgements on the

potential impairment loss of property, plant and equipment, the management has concluded that no impairment provision is required

to be made in the financial statements as at the reporting date in respect of property, plant and equipment.

The Management currently believes that it has adequate liquidity and business plans to continue to operate the business and mitigate

the risks associated with COVID-19 pandemic for the next 12 months from the date of this report. Therefore, currently, the Group/

Company does not have an intention to discontinue any operation to which an asset belongs or plans to dispose of an asset before the

previously expected date. Thus, there will be no change in the manner in which the asset is used or is expected to be used.

(h) temporarily idle property, plant and equipmentThere are no temporarily idle property, plant and equipment as at the reporting date.

14. Intangible assets

Accounting policyIntangible Assets are recognised if it is probable that economic benefits are attributable to the assets will flow to the entity and

cost of the assets can be measured reliably. Intangible assets that are acquired by the Group/Company are measured at cost less

accumulated amortisation and accumulated impairment losses.

All computer software cost incurred, which are not internally related to associate hardware, which can be clearly identified, reliably

measured and its probable that they will lead to future economic benefits, are included in the Statement of Financial Position under

the category of intangible assets.

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which

it relates. All other expenditure including expenditure on internally generated goodwill and brands is recognised in profit or loss as

incurred.

Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method

over their estimated useful lives, and is recognised in profit or loss.



The estimated useful lives for current and comparative years are as follows

- Computer software 5 Years

- Enterprise Resource Planning (ERP) 5 Years

Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted prospectively, if

appropriate.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds

and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.

14.1 Reconciliation of beginning and ending balances


CostBalance at the beginning of the year 44,214,966 43,358,684 36,431,143 36,431,143

Additions 759,793 856,282 - -

Balance at the end of the year 44,974,759 44,214,966 36,431,143 36,431,143

Accumulated impairment and amortisationBalance at the beginning of the year 20,388,224 12,207,662 13,947,341 6,041,693

Charge for the year 6,991,733 7,498,147 6,666,816 7,286,233

Impairment provided during the year - 619,415 - 619,415


Carrying value 17,594,802 23,826,742 15,816,986 22,483,802

Intangible assets mainly consists of the IFS Enterprise Resource Planning system software and IFS user license acquired by the

Company.

(a) Capitalised borrowing costsThere were no capitalised borrowing costs related to the acquisition of intangible assets during the year 2021 (2020 – Nil).

(b) Fully amortised but still in useThe cost of fully amortised intangible assets of the Group and the Company which are still in use amounted to:


Fully depreciated intangible assets 9,303,119 9,303,119 3,097,079 3,097,079

(c) Intangible assets pledged as security for liabilitiesThere were no items of intangible assets pledged as securities for liabilities of the Group as at the reporting date.


(d) title restriction on intangible assetsThere were no restrictions existed on the title of the intangible assets of the Group as at the reporting date.

(e) Impairment of Intangible AssetsDue to the temporary ceasing of operations because of the lockdown in the country, intangible asset is under-utilised. It is also

possible that carrying value of intangible assets may get affected. Based on the assessment carried out by the Management with

the following judgements on the potential impairment loss of intangible assets, the management has concluded that no impairment

provision is required to be made in the financial statements as at the reporting date.

The Management currently believes that it has adequate liquidity and business plans to continue to operate the business and mitigate

the risks associated with COVID-19 pandemic for the next 12 months from the date of this report. Therefore, currently, the Group/

Company does not have an intention to discontinue any operation to which an asset belongs or plans to dispose of an asset before the

previously expected date. Thus, there will be no change in the manner in which the asset is used or is expected to be used.

(f) temporarily idle Intangible AssetsThere are no temporarily idle intangible assets as at the reporting date.

15. Pre-paid lease payments

Accounting policyLeasehold property comprises of land use rights and is amortised on a straight-line basis over the period of the lease in accordance

with the pattern of benefits expected to be derived from the lease. Leasehold property is tested for impairment annually and is

written down where applicable. The impairment loss if any is recognised in the Statement of Profit or Loss.


CostBalance at the beginning of the year - 102,050,366 - 12,050,366

Transfer to Right of Use Assets - (102,050,366) - (12,050,366)

Balance at the end of the year - - - -

Accumulated amortisationBalance at the beginning of the year - 64,666,621 - 4,666,620

Transfer to Right of Use Assets - (64,666,621) - (4,666,620)

Balance at the end of the year - - - -

Carrying value - - - -



16. Right of Use Assets and Leases

As a lesseeAt commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the

contract to each lease component on the basis of its relative stand-alone prices. However. for the leases of property the Company has

elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially

measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the

commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or

to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the

lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the

right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over

the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the

right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re measurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,

discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing

rate (IBR). Generally, the Group uses its IBR as the discount rate.

The Group determines its IBR by obtaining interest rates from various external financing sources and makes certain adjustments to

reflect the terms of the lease and type of the asset leased. The IBR is the rate of interest that the Group would have to pay to borrow

over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset

in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when

no observable rates are available and is required to make certain entity-specific estimates (such as the entity’s stand-alone credit

rating).

Lease payments included in the measurement of the lease liability comprise the following:

fixed payments. including in-substance fixed payments;

variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement

date;

amounts expected to be payable under a residual value guarantee; and

the exercise price under a purchase option that the Group is reasonably certain to exercise. lease payments in an optional renewal

period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the

Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future

lease payments arising from a change in an index or rate. if there is a change in the Group's estimate of the amount expected to be

payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or

termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use

asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use assets that do not meet the definition of investment property in 'Right-of-use asset' and lease

liabilities in 'lease liability' in the statement of financial position.


short-term leases and leases of low-value assetsThe Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases.

The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Amounts recognised in the statement of financial position and statement of profit or loss

Set out below are the carrying amounts of the Group's right of use assets and the movements for the period ended 31 March 2021.

16.1 Right of use assets


Cost Balance at the beginning of the year 367,495,355 - 42,904,061 -

Transfer from prepaid lease rentals - 102,050,366 - 12,050,366

Transfer from prepaid advances - 4,646,700 - 4,646,700

Impact due to initial application of SLFRS 16 - 260,798,289 - 26,206,995

Adjusted balance at the beginning of the year 367,495,355 367,495,355 42,904,061 42,904,061

Addition during the year 7,487,880 - 7,487,880 -

Disposal during the year (91,879,177) - - -


Accumulated AmortisationBalance at the beginning of the year 110,147,044 - 10,448,848 -

Transfer from prepaid lease rentals - 64,666,621 - 4,666,620


Amortisation of right-of-use during the year 42,573,937 45,480,423 4,330,754 5,782,228

Disposal Amortisation of prepaid lease rental (89,365,003) - - -


Carrying value 219,748,080 257,348,311 35,612,339 32,455,213

CompanyLeasehold Land relate to the property persistently known and called " SATHOSA MOTORS WORKSHOP" is located at No: 25/11, New

Nuge Road, Peliyagoda acquired by Sathosa Motors PLC on a 99 years lease commencing from 1987. The total gross area of the land

is 343.93 perches.The estimated useful life of leasehold right as at 31 March 2021 is sixty five (65) years (remaining lease period).

Details of the leasehold buildings are as follows;

property located at extent Commencing date total Lease Remaining lease (sq Ft) of lease period period period

No.78, Colombo Road, Dombokka, Kurunegala 7680 01 August 2017 10 years 6 years & 4 months

No.679, Galle Road, Walgama, Matara 5310 01 November 2016 10 years 5 years & 7 months

No.42, Panchikawatta Road, Colombo 10 440 01 October 2020 3 years 2 years & 6 months

No.1/1, Colombo Road, Weeragoda, Hidellana, Ratnapura 828 01 May 2017 5 years 1 year & 1 month

No.231, Nalallawatta, Pitipana North, Negombo 1600 05 January 2021 10 years 9 years & 9 months



subsidiaryAccess Motors (Private) Limited recognised prepaid lease payments in respect of Welisara workshop premises which has been

subleased by Frontier Automotive (Private) Limited. Remaining lease period as at 31 March 2021 is one year.

The Group does not foresee any impairment of right -of- use assets due to the post-lockdown economic implications of COVID-19

pandemic and does not anticipate discontinuation of any asset for which the Group possesses the right to use. Lease liabilities are not

reassessed as there are no known moratoriums received for the lease payments so far.

16.2 Lease liability


Balance at the beginning of the year 258,256,607 - 24,837,809 -

Impact due to initial application of SLFRS 16 - 260,798,289 - 26,206,995


Addition during the year 7,487,881 - 7,487,881 -

Interest expense charged to income statement 31,368,389 32,159,785 3,009,583 3,166,094

Repayments (41,557,745) (34,701,467) (5,441,540) (4,535,280)

Disposal of lease (1,377,028) - - -


Current 11,092,427 10,696,366 3,178,847 2,749,774

Non current 243,085,677 247,560,241 26,714,886 22,088,035

total lease liability 254,178,104 258,256,607 29,893,733 24,837,809

(a) Maturity analysis - contractual undiscounted cash flowsWithin the next 12 months 41,753,716 39,136,991 6,333,075 5,230,500

Between 1 and 2 years 42,164,970 41,281,490 6,303,765 5,388,350




Beyond 5 years 237,252,614 239,376,160 11,440,388 11,008,539

total undiscounted lease liabilities 464,099,768 453,738,506 42,568,388 36,779,571

(b) Amount recognised in profit or lossAmortisation of right-of-use asset 42,573,937 45,480,423 4,330,754 5,782,228

Interest on lease liabilities 31,368,389 32,159,785 3,009,583 3,166,094

73,942,326 77,640,208 7,340,337 8,948,322

(c) Amount recognised in the statement of cash flowsTotal cash outflow for lease (41,557,745) (34,701,467) (5,441,540) (4,535,280)

(41,557,745) (34,701,467) (5,441,540) (4,535,280)


17. Investments in subsidiaries

Accounting policyInvestment in subsidiaries are initially recognised at cost in the financial statements of the Company. Any transaction cost relating

to acquisition of investment in subsidiaries are immediately recognised in the income statement. Following initial recognition,

Investment in subsidiaries are carried at cost less any accumulated impairment losses. The net assets of each subsidiary are

reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the

recoverable amount of the investment is estimated and the impairment loss is recognised to the extent of its net assets.

CompanyAs at 31 March, 2021 2020 effective holding no.of shares Cost no.of shares Cost percentage LKR LKR

Access Motors (Private) Limited 50% 32,503,906 464,940,064 32,503,906 464,940,064

SML Realities (Private) Limited 100% - - 1 10

32,503,906 464,940,064 32,503,907 464,940,074

SML Realities (Private) Limited has been wind up due to the non-operation since incorporation of the Company.

An impairment assessment was carried out as at 31 March 2021 and it was concluded that net realisable value of the investment in

subsidiary exceed its carrying value.

18. Investments in debentures

Accounting policyThe Company intends to hold the assets to maturity for the contractual cash flows and these cash flows consist solely of payments of

principal and interest on the principal amount outstanding.

This consists investment in quoted debentures which have been designated as financial assets at amortised cost and measured at

amortised cost using EIR method and are subject to impairment.

group / CompanyAs at 31 March, Interest Maturity Face value 2021 2020 Investment Institution rate date (LKR) LKR LKR

Nation Development Bank PLC 9.40% 22 June 2020 206,460,000 - 211,298,517

Hatton National Bank PLC 11.25% 27 March 2021 200,000,000 - 222,746,575

Access Engineering PLC 10.25% 16 November 2020 174,330,000 - 180,890,062

- 614,935,154



18.1 Reconciliation of carrying amount

group / CompanyAs at 31 March, 2021 2020 LKR LKR

Carrying value at the beginning of the year 614,935,154 592,271,384Interest capitalised during the year 38,008,840 59,939,835Maturity of investments during the year (580,790,000) -Interest received during the year (72,153,994) (37,276,065)Carrying value at the end of the year - 614,935,154

19. InventoriesAccounting policyInventories are stated at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. The cost of inventories is comprised of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition, but excluding borrowing costs. Net realisable value is the estimated selling price in the normal course of business less estimated cost of realisation and/or cost of conversion from their existing state to saleable condition.

Inventory movement, mainly with respect to spare parts is reviewed as at the end of reporting period by an experienced staff member (head of the division) who has a fair knowledge / expertise to assess the recoverability of inventory and the items that are identified as irrecoverable are written off during the year. For this purpose the Company gets the support of the workshop manager who possesses a fair amount of technical expertise, which helps to identify the technical obsolescence of the inventory items.

The cost of each category of inventory is determined on the following basis:

New Vehicles, Marine Engines , Work in Progress and Goods in Transit - At actual costSpare Parts and General Stores - At actual cost on weighted average basisAllowance for impairment - All inventory items are tested for impairment periodically

Work in progressThe on-going workshop repairs that are not fully completed as at the reporting date are classified as work in progress.

goods in transitThe goods where the risk and rewards are passed to the entity based on the shipping terms but not yet received to the entity.


New Vehicles 330,966,190 1,671,288,135 271,141,785 887,505,160Spare Parts 453,977,597 328,568,841 217,030,704 111,509,577Marine Engines 12,591,915 - 12,591,915 -Work in Progress 20,070,578 25,552,621 1,425,366 2,670,439General Stores 3,841,421 4,572,746 3,841,421 4,572,746Goods in Transit 51,009,329 643,002,056 - 544,193,389 872,457,030 2,672,984,399 506,031,191 1,550,451,311Provision for Inventories (Note 19.1) (34,447,815) (34,391,266) (30,962,419) (30,905,870)

838,009,215 2,638,593,133 475,068,772 1,519,545,441



19.1 Provision for inventories

Balance at the beginning of the year 34,391,266 52,497,961 30,905,870 50,754,973

Provision made during the year 13,545,286 9,041,160 12,646,702 7,298,752

Reversal for the year (13,488,737) (27,147,855) (12,590,153) (27,147,855)


19.2 Inventories pledged as security for liabilities

There were no items of inventory pledged as securities for liabilities of the Group as at the reporting date.

19.3 COVID-19 impact on inventory provision

The Board of Directors has assessed the potential impairment loss of inventory as at 31 March 2021 by considering the potential

impact of COVID-19 on net realisable value based on the implications on subsequent selling prices and cost to complete in additional

to the normal assessment process, where applicable, declines in inventory values were recognised in the income statement. Based on

the assessment carried no further impairment provision is required to be made in the financial statements as at the reporting date in

respect of inventory provision other than the disclosed provision in Note 19.1 of these financial statements.

20. Trade and other receivables

Accounting policyTrade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Other

financial nature receivables are recognised as other receivables. If collection is expected in one year or less (or in the normal

operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade and other receivables are initially measured at fair value and subsequently measured at amortised cost using the Effective

Interest Rate method (EIR) less any provision for impairment calculated using expected credit loss method.

Measurement of eCLsECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e.

the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects

to receive). ECLs are discounted at the effective interest rate of the financial asset.




Trade Receivables - New Vehicles 327,127,186 563,755,988 85,164,237 328,386,765

- Spare Parts 81,528,505 51,926,278 81,528,505 51,926,278

- Work Shop 54,005,822 130,855,909 54,005,822 37,903,510

- Marine Engines 6,900,000 - 6,900,000 -

469,561,513 746,538,175 227,598,564 418,216,553

Provision for impairment (Note 20.1) (20,107,089) (9,442,643) (12,061,933) (6,581,987)

449,454,424 737,095,532 215,536,631 411,634,566

Deposits and prepayments 28,519,531 24,702,738 18,705,014 14,888,221

Advances given to suppliers 97,917,606 584,546,258 28,075,423 547,988,062

VAT receivable 37,815,049 37,749,472 36,133,812 37,224,231

Loans and advances to employees 6,194,824 2,896,642 6,096,823 2,781,605

Other receivables 93,259,949 44,401,396 13,351,208 5,029,061

713,161,383 1,431,392,038 317,898,911 1,019,545,746

Set out below is the movement in the allowance for expected credit losses of trade receivables ;


20.1 Provision for impairment


Provision for the year 10,664,446 3,727,373 5,479,946 5,125,547


20.2 COVID-19 impact on impairment provision

The Board of Directors has assessed the potential impairment loss of trade debtors as at 31 March 2021 by considering the potential

impact of COVID-19 on recoverability when assessing the trade recoverable balances. The impact is incorporated within the Expected

Credit Loss (ECL) computation to reflect the differences between the economic conditions duirng the year under review over which

the historical data has been collected, current conditions and the Group’s view of economic conditions over the expected recovery

period. Based on the assessment carried no further impairment provision is required to be made in the financial statements as at the

reporting date in respect of impairment provision other than the disclosed provision in Note 20.1 of these financial statements.


21. Cash and cash equivalents

Accounting policyCash and cash equivalents in the statement of financial position comprise cash at banks and on hand and short-term deposits with a

maturity of three months or less, which are subject to an insignificant risk of changes in value.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as

defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group’s cash management.


Short term call deposits 893,091 19,345,826 893,091 19,345,826

Cash in hand 2,743,091 2,650,354 613,499 373,227

Cash at Bank 126,176,158 40,964,514 42,262,951 26,159,623

Cash and cash equivalents in the

statement of financial position 129,812,340 62,960,694 43,769,541 45,878,676

Bank Overdraft (7,066,570) (94,323,825) (7,066,570) (11,087,749)

Cash and cash equivalents in the statement of cash flows 122,745,770 (31,363,131) 36,702,971 34,790,927

22. Stated capital

2021 2020 number Value number Value of shares of shares of shares of shares Issued and fully paid LKR LKR

At the beginning of the Year 6,033,622 115,924,290 6,033,622 115,924,290

At the end of the Year 6,033,622 115,924,290 6,033,622 115,924,290

The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share

at meetings of the shareholders or one vote per share in case of a poll. All shares rank equally with regard to the Company's residual

assets.

22.1 Company has neither declared nor paid dividends to the Company shareholders during the financial year ended 31 March 2021.

(2020- Nil)



23. Loans and borrowings

Accounting policyLoans and borrowings are initially recognised at fair value net of directly attributable transaction costs. Subsequently they are

measured at amortised cost.


Current interest bearing loans and borrowingsTerm loan (Note23.1) - 14,280,000 - -

Import and short term loan (Note23.2) 816,000,000 2,970,220,194 816,000,000 2,494,343,500

816,000,000 2,984,500,194 816,000,000 2,494,343,500

non-current interest bearing loans and borrowingsTerm loan (Note 23.1) - 54,492,000 - -

- 54,492,000 - -

total loans and borrowings 816,000,000 3,038,992,194 816,000,000 2,494,343,500

23.1 Term loan

Balance at the beginning of the year 68,772,000 97,332,000 - -

Repayment during the year (68,772,000) (28,560,000) - -

Balance at the end of the year - 68,772,000 - -

Payable within one year - 14,280,000 - -

Payable after one year - 54,492,000 - -

- 68,772,000 - -

23.2 Import and Short term loan

Balance at the beginning of the year 2,970,220,194 3,210,076,757 2,494,343,500 2,552,573,952

Obtained during the year 11,988,504,483 19,707,362,280 11,325,963,423 17,960,381,535

Repayment during the year (14,142,724,677) (19,947,218,843) (13,004,306,923) (18,018,611,987)

Balance at the end of the year 816,000,000 2,970,220,194 816,000,000 2,494,343,500

Payable within one year 816,000,000 2,970,220,194 816,000,000 2,494,343,500

816,000,000 2,970,220,194 816,000,000 2,494,343,500

Information about the Group's exposure to liquidity risks and interest rate is included in Note 34.2 and 34.3.1


23.3 Terms and repayment schedule

The terms and conditions of outstanding loans and facilities are as follows:

Company name Lending institution

nature of the facility

Interest rate

Maturityperiod

Face value LKR

2021 LKR

2020 LKR

details of collaterals

Company

Sathosa Motors PLC Bank of Ceylon Revolving short term Loan

Market rate over AWPLR

01 Month -

-

594,000,000

-

Commercial Bank

Revolving short term Loan


01 Month -

-

935,000,000

-

Import loan Market rate over AWPLR

01 Month -

-

265,343,500

-

National Development Bank

Revolving short term Loan


03 Months 155,000,000 155,000,000 300,000,000 -

Seylan Bank Revolving short term Loan


03 Months 661,000,000 661,000,000 400,000,000 -

816,000,000 2,494,343,500

subsidiary

Access Motors (Private) Limited

National Development Bank

Import loan/ Short-Term Loan

Interest rate 12.75%

04 Months - - 200,000,000 Corporate Guarantees issued by Sathosa Motors PLC and Foresight Engineering (Private) Limited on equal basis

Guarantee Interest rate 1.5%

04 Months -

Hatton National Bank

Bank Loan AWPLR + 1% (Renew monthly)

84 Months - - 68,772,000

LC/ Short-Term Loan & TOD facilities

AWPLR + 1%

04 Months - - 275,876,694

- 544,648,694

816,000,000 3,038,992,194



24. Deferred income

Accounting policyGrants received are recognised initially as deferred income at fair value when there is a reasonable assurance that they will be

received and the Group will comply with the conditions associated with the Grant, and are then recognised in the Statement of

Comprehensive income as other income on a systematic basis over the useful life of the asset. Grants that compensate the Group for

expenses incurred are recognised in the Statement of Comprehensive income as other income on a systematic basis in the periods in

which the expenses are recognised.

group/CompanyAs at 31 March, 2021 2020 LKR LKR

Balance at the beginning of the year 5,484,707 5,704,096

Amortisation during the year (219,389) (219,389)

Balance at the end of the year 5,265,318 5,484,707

The above represents the grants received for the construction of work shop at Peliyagoda and are amortised over a period of fifty (50)

years (remaining period of amoritisation is 24 years).

25. Employee benefits

Accounting policyshort term employee benefitsShort term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected

to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the

employees and the obligation can be estimated reliably.

employee contribution plans-epF and etFA defined contribution plan is a post-employment benefit plan under which an entity pays a fixed contribution to a separate entity and

will have no legal or constructive obligation to pay further amounts. All employees who are eligible for Employees’ Provident Fund

Contributions and Employees’ Trust Fund Contributions are covered by relevant contributions funds in line with the relevant statutes.

Employer’s contributions to the defined contribution plans are recognised as an expense in profit or loss when incurred.

employee defined benefit plansThe liability recognised in the Statement of Financial Position in respect of defined benefit plan is the present value of defined benefit

obligation at the reporting date. The defined benefit obligation is calculated annually by independent actuary using Project Unit

Credit (PUC) method as recommended by LKAS 19 - ‘Employee Benefits. Actuarial gains and losses for the defined benefit plans are

recognised in full in the period in which they occur in Other Comprehensive Income.

However, according to the Payment of Gratuity Act No. 12 of 1983, the liability for gratuity payment to an employee arises only after

the completion of 5 years of continued service.

The Defined benefit plan liability has not been externally funded by the Company as well as subsidiaries of the group.


25.1 Reconciliation from the opening balances to the closing balances for the net employee defined benefit liability.



Current service cost 5,325,916 5,015,630 2,948,629 2,681,463

Interest cost 3,406,447 4,337,518 2,467,360 3,036,924

Actuarial gains (2,690,347) (4,618,662) (1,527,377) (3,318,068)

44,618,619 43,405,555 28,562,215 27,708,017

Less: Payments made during the year (8,091,602) (4,828,952) (6,483,987) (3,034,414)


25.2 Expense recognised in statement of profit or loss and

other comprehensive income

Current service cost 5,325,916 5,015,630 2,948,629 2,681,463

Interest cost 3,406,447 4,337,518 2,467,360 3,036,924

expense recognised in statement of profit or loss 8,732,363 9,353,148 5,415,989 5,718,387

Actuarial (gains)/ losses recognised in

Other comprehensive income (2,690,347) (4,618,662) (1,527,377) (3,318,068)

total provision for the year 6,042,016 4,734,486 3,888,612 2,400,319

CompanyAn actuarial valuation of the provision for defined benefit plan was carried out as at 31 March 2021 by Actuarial & Management

Consultants (Private) Limited. The valuation method used by the actuaries to value the employee benefits obligation is the ''Projected

Unit Credit (PUC) method'', the method recommended by the Sri Lanka Accounting Standard (LKAS 19) '' Employee Benefits''.

subsidiaryThe defined benefit obligation of the subsidiary has been calculated using the "Projected Unit Credit (PUC) method" in compliance with

LKAS 19 "Employee Benefits".

25.3 Key assumptions and quantitative sensitivity analysis

The cost of the defined benefit plan is determined using actuarial valuations and it involves making various assumptions. These

include the determination of the discount rate, future salary increases, staff turn over and retirement age (mortality in service). Due to

the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these

assumptions. All assumptions are reviewed at each reporting date.

The following were the principal actuarial assumptions at the reporting date.

Company subsidiaryAs at 31 March, 2021 2020 2021 2020

Discount Rate 7% 10% 8% 10%

Expected Annual Average Salary Increment Rate 5% 8% 4.13% 6%

Staff Turnover Factor 15.17% 11% 15.34% 16.5%

Retirement Age 55 Years 55 Years 55 Years 55 Years



discount rateIn the absence of a deep market in long-term bonds in Sri Lanka, a long-term interest rate of 7% p.a. for Sathosa Motors PLC and 8%

for Access Motors ( Private) Limited (2019/20 – 10% p.a.) has been used to discount future liabilities considering yield available on

high quality government bonds with anticipated long-term rate of inflation.

Given the sudden fall in markets and the decline in high-quality corporate bond rates that has occurred as a result of COVID-19, the

Group has considered the impact on the defined benefit obligations with the independent actuarial specialists as at the reporting date.

Since the complexity of the valuation and the underlying assumptions are based on long-term nature including the application of risk

discount rate which is formulated on the market yield of long-term government and corporate bonds, there is no significant impact on

retirement benefit obligation from COVID-19 pandemic.

expected annual average salary increment rateBased on the actual salary increment rates of the Group over the past few years, future economic outlook of the country an increase

in the long term salary increment rate is factored into the valuation for the current year.

staff turnover factorBased on the actual staff turnover of the Company over the past few years, Group has used staff turnover factor of 15.17 % p.a

(Sathosa Motors PLC) and 15.34 % p.a (Access Motors Private Limited) to value future liabilities.

25.4 Sensitivity of assumptions used

A quantitative sensitivity analysis for significant assumptions as at 31 March is, as shown below:


discount rate 1% less 38,178,228 40,300,568 23,077,252 25,776,922

1% More 34,994,035 36,983,443 21,159,276 23,665,705

salary increment rate 1% less 34,839,613 36,817,212 21,032,923 23,526,502

1% More 38,316,271 40,450,739 23,196,960 25,909,158

The sensitivity analyses above have been determined based on a method that extrapolates the impact on the defined benefit

obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. The sensitivity analyses

are based on a change in a significant assumption, keeping all other assumptions constant. The sensitivity analyses may not be

representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in

isolation of one another.


25.5 Future expected contributions to the defined benefit plans

The following payments are expected contributions to the employee benefit obligation in future years:

CompanyAs at 31 March, 2021 2020 LKR LKR

Within the next 12 months 3,684,669 5,648,465

Between 1 and 2 years 3,188,137 6,106,420



Beyond 10 years 2,002,490 2,204,091

Total expected payments 22,078,228 24,673,603

The Weighted average duration of the defined benefit plan obligation at the end of the reporting period is 4.59 years (2020: 4.64 years)

25.6 Number of employees

The number of employees at the end of the year are as follows:

sathosa Motors pLC Access Motors (private) LimitedAs at 31 March, 2021 2020 2021 2020

Number of Employees 179 188 93 101

26. Trade and other payables

Accounting policyTrade payables are the aggregate amount of obligation to suppliers for goods delivered to or services consumed by the group in the

ordinary course of business. Trade payables are classified as current liabilities if they are payable within one year or less.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Trade and other payables are normally non-interest bearing liabilities.


Trade payables 344,737,037 562,422,743 184,285,019 423,805,919

Accrued expenses 31,172,312 62,105,687 17,254,114 23,846,087

Retention payables 1,578,729 860,690 1,578,729 860,690

Statutory payment liabilities 3,006,186 10,610,686 2,505,153 10,109,653

Advance received 58,645,569 150,355,652 13,100,016 29,775,671

Finance lease liabilities - 549,761 - -

Other payables 17,276,636 5,925,926 17,276,620 5,925,926

456,416,469 792,831,145 235,999,651 494,323,946



27. Related party disclosure

terms and conditions of transactions with related partiesThe sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. All

outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees

provided or received for any related party receivables or payables. The Group has not recorded impairment of receivable from related

parties based on Expected Credit Loss (ECL) for the year ended 31 March 2021 ( 2020 - Nil) .This assessment is undertaken each

financial year through examining the financial position of the related party and the market in which the related party operates.

27.1 Amount due from related parties


Access Engineering PLC 980,716 3,416,924 868,897 50,067

Access Natural Water (Private) Limited 24,940 5,704,726 24,940 5,704,726

Access Industrial Systems (Private) Limited 295,362 84,101,086 295,362 84,101,086

Access International Projects (Private) Limited 30,736 20,709 30,736 20,709

Access International (Private) Limited 217,523 29,914 - 29,914

Access Real Estate (Private) Limited 23,468 - 23,468 -

S D Munasinghe 528,520 510,197 - -

Sheran Fernando 1,279,002 1,279,002 - -

Foresight Engineering (Private) Limited 461,984 - - -

ARL Elevate (Private) Limited - 2,726,114 - -

3,842,251 97,788,672 1,243,403 89,906,502

27.2 Amount due to related parties

Access Engineering PLC 131,527,809 143,254,968 131,527,809 143,074,591

Access Natural Water (Private) Limited 94,179 182,278 94,179 123,368

Reprographics (Private) Limited 85,275 64,715 41,060 -

Loan received from Directors 107,534 107,534 - -

Access Transport & Services (Private) Limited 17,304 - - -

Access Motors (Private) Limited - - 8,856 -

131,832,101 143,609,495 131,671,904 143,197,959


27.3 Transactions with related parties


holding CompanySales of Goods / Rendering of services 41,928,944 2,119,242 41,283,521 307,506

Purchases of Goods / Receiving of services (17,375,810) (17,091,863) (2,400,000) (2,612,500)

Interest received 11,314,515 17,917,781 11,314,515 17,917,781

Construction of Peliyagoda workshop building (28,762,569) (39,435,243) (28,762,569) (39,435,243)

subsidiary CompanyPurchases of Goods / Receiving of Services - - (148,145) -

Subscription to right issue - - - (199,999,982)

other related party companiesSales of Goods / Rendering of Services 66,739,012 105,754,361 30,175,049 102,743,743

Purchases of Goods / Receiving of Services (3,896,815) (1,878,736) (1,003,759) (1,160,012)

Purchase of Fixed Assets (124,982,118) (64,715) (1,528,918) -

Disposal of Fixed Assets 36,112,554 17,750,000 - 17,750,000

Loan Obtained 417,500,000 435,000,000 - -

Loan Repayment (417,500,000) (418,500,000) - -

Loan given 566,000,000 (205,000,000) - -

Loan settlement (566,000,000) 205,000,000 - -

Subscription to right issue - 199,999,982 - -

(a) Recurrent Related party transactionsThere were no recurrent related party transactions which in aggregate value exceeds 10% of the consolidated revenue, which

required additional disclosures in the 2020/21 Annual Report under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best

Practices on Related Party Transactions under the Securities and Exchange Commission Directive issued under Section 13 (c) of the

Securities and Exchange Commission Act.

(b) non-Recurrent Related party transactionsThere were no non-recurrent related party transactions which in aggregate value exceeds 10% of the equity or 5% of the total assets

whichever is lower, which required additional disclosures in the 2020/21 Annual Report other than the transactions specified above

under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Securities and

Exchange Commission Directive issued under Section 13 (c) of the Securities and Exchange Commission Act.



27.4 Directorship held by Directors in other Group of Companies

Company name Company (sML) subsidiary

s J

s p

erer

a

J C

Josh

ua

d A

R F

erna

ndo

s d

Mun

asin

ghe

M J

ayah

suri

ya

K A

p p

erer

a

t t

B C

Fer

nand

o

s M

p d

issa

naya

ke

t A

A F

erna

ndo

holding company

Access Engineering PLC √ √ √ √

subsidiary Company

Access Motors (Private) Limited √ √ √ √ √ √ √

other related party companies

A R L Elevate (Private) Limited. √ √ √ √

Access Projects (Private) Limited √ √

ZPMC Lanka Company (Private) limited √ √

Access International (Private) Limited √ √ √ √ √

Access Natural Water (Private) Limited √ √

Access Industrial Systems (Private) Limited √

Access International Projects (Private) Limited √

Access Real Estate (Private) Limited √ √

Reprographics (Private) Limited √

Foresight Engineering (Private) Limited √ √ √

J C J Hodings (Private) Limited √ `

Access Transport & Services (Private) Limited √ √ √

Access Residencies (Private) Limited √ √ √

Following company directors neither hold shareholding nor directorship of above companies except for the shareholding of T A L

Niroshan in Access Engineering PLC.

- M M N De Silva

- W A C O Wijesinghe

- R S Dahanayake

- T A L Niroshan (Resigned w.e.f. 31 December 2020)


27.5 Transactions, arrangements and agreements involving Key Management Personal (KMP) and their Close Family Members

(CFM)

According to LKAS 24 “Related Party Disclosures”, Key Management Personnel are those having authority and responsibility for

planning, directing and controlling the activities of the entity. Accordingly Board of Directors (including executive and non -executive

Directors) have been classified as key Management Personnel of the Group.

Compensation paid to Key Management personnel of the group


Total compensation paid to Key Management Personnel 24,827,700 25,908,667 24,827,700 25,908,667

Close Family Members (CFM) of the KMPs are those family members who may be expected to influence or be influenced by that KMPs

in their dealing with the entity. They may include KMPs domestic partner and children, children of the KMPs domestic partner and

dependents of the KMP or the KPMs's domestic partner. During the year no transactions have been done with CFMs.

directors LoanNo loans have been given to the directors of the Company.

other transactions with Key Management personnelThere were no other transactions with Key Managerial Personnel other than those disclosed in Note 27.3 to these Financial

Statements.

28. Provisions, commitments and contingencies

Accounting policyProvisions are recognised when the Group/Company has a present obligation (legal or constructive) as a result of a past event, it is

probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate

can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed the reimbursement

is recognised as a separate asset when the reimbursement is virtually certain. The expense relating to provision is presented in

income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when

appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is

recognised as a finance cost.

Provisions are calculated based on the historical experience and the specific terms in the individual cases. The Group arrives at an

estimate on the basis of an evaluation of the most likely outcome.

All known provisions have been accounted for in preparing the Financial Statements.



Contingent Liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present

obligations where the transfer of economic benefit is not probable or cannot be readily measured. All contingent liabilities are

disclosed as a note to the financial statements unless the outflow of resources is remote. A contingent liability recognised in a

business combination is initially measured at its fair value. Subsequently, it is measured at the higher of the amount that would be

recognised in accordance with the general guidance for provisions above (LKAS 37) or the amount initially recognised less, when

appropriate, cumulative amortisation recognised in accordance with the guidance for revenue recognition. Contingent assets are

disclosed, where inflow of economic benefit is probable.

Currently the Group/Company is involved in pending litigations and claims arising out of the normal conduct of the business. The

Group/ Company does not expect the pending litigations and claims, individually and in aggregate, to have a material impact on

Group’s Financial Position, operating profit or cash flow in addition to amounts accrued as provision for legal disputes.

28.1 Contingencies

(a) pending litigation for the year ended 31 March 2021There were no material contingencies as at the reporting date for the Company and its subsidiaries

(b) Corporate guaranteeCorporate guarantee issued by Sathosa Motors PLC on behalf of Access Motors (Private) Limited is LKR 481.5 Mn and USD 1 Mn as at

31 March 2021 for the purpose of working capital requirement.

There were no material contingencies as at the reporting date except for disclosed above for the Company and its subsidiaries.

28.2 Commitments

There were no material commitments, which have been approved or contracted for by the Company and its subsidiaries as at the

reporting date.

29. Events occurring after the reporting date

There were no material events occurred subsequent to the reporting date as at 31 March 2021 that require adjustments to or

disclosure in the Financial Statements.

30. Group Impact of COVID-19 on Financial Statements

The COVID-19 pandemic, which has suffocated many economies is becoming a way of life to be factored into our short to medium

term planning. The economic slowdown; the upward trends in the exchange rate and inflation; shipping and freight challenges such

as limited container spaces, increased freight rates and higher shipping costs are of concerns for our spare parts business. We

anticipate that state regulations that curtail imports and import related activities will continue hindering passenger and commercial

vehicle sales. Further, impending random lockdown curfews with each new variant of the COVID-19 virus cannot be disregarded.

After a strict lockdown period of over a month, curfew has been gradually eased off. Whilst the operations have resumed, it is

encouraging that there is no indication of community spread in the country as of now. This has allowed the Group to commence

operations with arrangements to permit only the staff whose physical presence is required to come to the workplace with others

working from home on a roster basis under the Health and Safety Guidelines issued by the government with the safety of staff being

paramount. The Group has developed requisite Health and Safety Guidelines to ensure a safe environment for employees, customers

and other stakeholders.

The new limitations recently imposed on the importation of commercial vehicles by the Government Gazette notification no. 2176/19 dated 22 May 2020, is negatively impacting the regular business, which is sales of vehicles and spare parts. In order to minimise


the negative impact of the limitation imposed on imports, Sathosa Motors PLC has negotiated with the Import Controller to get the required approvals for importation of commercial vehicles and spare parts in order to service all customers who are in the provision of essential services to the nation, and Access Motors (Private) Limited is still on the negotiation process with Jaguar Land Rover regarding the payment terms as the Government has granted permission to import vehicles and spare parts on the basis that the payment can be made after six month. Until such time, the Group carry out its vehicle sales with the available inventory and accepts sales orders by obtaining a reservation advance for future vehicle delivery. Furthermore, the Group is focusing more on generating revenue from the sale of spare parts and after sales services to mitigate the impact from import limitation.

The full extent and duration of the post-lockdown economic implications on the Group’s/Company’s operations and financial performance will be felt during the financial year 2020/21. The Group has been closely monitoring the impact of the developments on the Group’s businesses as to how the entity will continue its operations in the future in a manner it will continue to operate in its optimum capacity to generate profits and meet its commitments and has developed comprehensive action plans to mitigate the future risk associated with post-lockdown economic implications that resulted to put in place contingency measures. These contingency measures include controlling budget, initiating cost savings, re-allocating resources to unaffected business lines, re-prioritising its services with available staff, obtaining approval from Government authorities to meet export orders, increasing safety stock levels used for spare parts division, maintaining regular contacts with debtors and increasing market responsiveness by adopting new sales strategies.

The global situation is extremely volatile at present and since the impact of the pandemic on the Group’s business is closely linked to the suppliers in other countries, an estimate of the long term outlook may not be realistic at this stage as it requires more time to access and quantify the impact of Covid-19 at Company level in consultation with the immediate and ultimate parent companies. However, the Management will continue to monitor developments both locally and globally and take timely action to mitigate any risks to the financial stability of the Group.

As far as the Group’s businesses are concerned, this has forced to operate below its normal capacity. However, the Group is confident that it has the adequate resources and capability to withstand the uncertainty this pandemic has created, and most importantly the management are of the opinion that the workshop repairs and spare parts sales shall have very minimal impact as there is no any other authorised agent in Sri Lanka for Isuzu, Landrover and Jaguar, additionally the Group also has readily available financial support from its Parent Group and availability of banking facilities to continue its operations smoothly, hence the Group is satisfied of the ability of continuing its operations for the foreseeable future.

The Company response to the pandemic focused on securing a safe work environment for our employees, continuing our business operations, providing our customers with quality services while supporting our communities as a socially responsible corporate citizen.

31. Non-controlling interest (NCI)NCI are measured initially at their proportionate share of acquiree's identifiable net assets at the date of acquisition. Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

The total profit or loss for the year of the Company and its subsidiary included in consolidation are shown in the consolidated Statement of Profit or Loss and other Comprehensive income with the proportion of profit or loss after taxation pertaining to minority shareholders of subsidiary being deducted as “Non controlling interest”. All assets and liabilities of the Company and of its subsidiary included in consolidation are shown in the consolidated Statement of Financial Position. The interest of minority shareholders of subsidiary in the fair value of net assets of the Group is indicated separately in the consolidated Statement of Financial Position under the heading “Non-controlling interest”. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as, equity transactions. Adjustments to non-controlling interests are based on a proportionate amount of the net assets

of the subsidiary.



ownership interest held by nCI

principal place of business

nature of the business 2021 2020

Access Motors (Private)

Limited

Sri Lanka Authorised distributor for Jaguar and Land

Rover in Sri Lanka

50% 50%

The following are summarised financial information of Access Motors (Private) Limited. The information is before inter-company

eliminations.

As at/ for the year ended 31 March, 2021 2020 LKR LKR

statement of profit or loss and other comprehensive incomeRevenue 1,518,780,411 1,635,210,860

Profit /(Loss) for the year (18,427,804) (2,228,044)

Profit / (Loss) attributable to NCI (9,213,902) 1,117,045

Other Comprehensive Income 883,857 936,428

Total Comprehensive Income (17,543,947) (1,291,617)

Total Comprehensive Income attributable to NCI (8,771,974) 1,585,259

Inter-company transaction elimination at group level (148,145) -

statement of financial positionNon-current assets 622,849,296 612,235,518

Current assets 854,389,264 1,597,353,278

Non-current liability 230,819,581 293,867,207

Current liability 228,499,436 880,258,097

Net assets 1,017,919,543 1,035,463,491

net assets attributable to nCI 508,959,772 517,731,746

statement of cash flowsCash flows generated from operating activities 791,446,307 11,249,951

Cash flows used in investing activities (58,484,549) (128,877,151)

Cash flows generated from/(used in) financing activities (580,764,900) 159,647,666

net increase in cash and cash equivalents 152,196,858 42,020,466

Having evaluted the business continuity plans and the cash flows (where necessary) of the subsidiary, the Group determined that no

impairment provision is required for the carrying value of non-controlling interest due to the COVID-19 pandemic as at 31 March 2021.


32. Financial Assets and Financial Liabilities

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of

another entity.

32.1 Financial assets

(a) Initial Recognition and measurementFinancial assets within the scope of SLFRS 9 are classified as amortised cost, fair value through other comprehensive income (FVOCI),

and fair value through profit or loss (FVTPL).

The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and

the Group's business model for managing them. With the exception of trade receivables that do not contain a significant financing

component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value

plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain

a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price

determined under SLFRS 15.

(b) Classification and measurementIn order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash

flows that are "solely payments of principal and interest (SPPI)" on the principal amount outstanding. This assessment is referred to

as the SPPI test and is performed at an instrument level.

The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash

flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial

assets, or both.

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.

(c) subsequent measurementFor purposes of subsequent measurement, financial assets are classified in to four categories based on the entity's business model

and the cash flow characteristics:

(a) financial assets at amortised cost;

(b) financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments);

(c) Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity

instruments);

(d) financial assets at fair value through profit or loss.

Financial assets at amortised costThe Group measures financial assets at amortised cost if both of the following conditions are met:

(a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash

flows and

(b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and

interest on the principal amount outstanding.

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to

impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group's

financial assets at amortised cost includes trade receivables, short term deposits, corporate debt securities and other current

financial assets.



Financial Assets at fair value through oCI (debt instruments)The Group measures financial assets at fair value through OCI if both of the following conditions are met:

(a) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and

selling financial assets; and

(b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and

interest on the principal amount outstanding.

For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are

recognised in the statement of profit or loss and computed in the same manner as for financial assets measured at amortised cost.

The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value change recognised in OCI is

recycled to profit or loss.

Financial assets designated at fair value through oCI (equity instruments)Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair

value through OCI when they meet the definition of equity under LKAS 32 Financial Instruments: Presentation and are not held for

trading. The classification is determined on an instrument-by-instrument basis.

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the

statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a

recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair

value through OCI are not subject to impairment assessment.

Financial Assets at fair value through profit or lossFinancial Assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial

recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets

are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including

separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments.

Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value

through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at

amortised cost or fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss

on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in

the fair value recognised in the statement of profit or loss. This category includes listed equity investments which the Group had not

irrevocably elected to classify at fair value through OCI. Dividends on listed equity investments are also recognised as other income in

the statement of profit or loss when the right of payment has been established.

(d) derecognitionA financial asset (or, where applicable, apart of a financial asset or part of a group of similar financial assets) is primarily

derecognised (i.e., removed from the Group's consolidated statement of financial position) when:

The rights to receive cash flows from the asset have expired, or

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 Group continues to recognise the

transferred asset to the extent of its continuing involvement. 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.

(e) Impairment of Financial AssetsThe Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or

loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows

that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will

include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since

initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a

12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss

allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a

lifetime ECL).

For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not

track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has

established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to

the debtors and the economic environment.

For debt instruments at fair value through OCI, the Group applies the low credit risk simplification. At every reporting date, the

Group evaluates whether the debt instrument is considered to have low credit risk using all reasonable and supportable information

that is available without undue cost or effort. In making that evaluation, the Group reassesses the internal credit rating of the debt

instrument.

The Group’s debt instruments at fair value through OCI comprise solely of quoted bonds that are graded in the top investment

category (Very Good and Good) by the Good Credit Rating Agency and, therefore, are considered to be low credit risk investments. It is

the Group’s policy to measure ECLs on such instruments on a 12-month basis. However, when there has been a significant increase in

credit risk since origination, the allowance will be based on the lifetime ECL. The Group uses the ratings from the Good Credit Rating

Agency both to determine whether the debt instrument has significantly increased in credit risk and to estimate ECLs.

Aside from this note, other disclosures relating to impairment of financial assets (trade receivables) are included in Note 20.1

32.2 Financial liabilities

(a) Initial recognition and measurementFinancial liabilities are classified, at initial recognition as financial liabilities at fair value through profit or loss, loans and borrowings,

payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly

attributable transaction costs.

The Group financial liabilities include trade and other payables, loans and borrowings including bank overdraft.



(b) Classification and measurementThe measurement of financial liabilities depends on their classification, as described below:

Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss incurred financial liabilities held-for-trading and financial liabilities designated

upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held-for-trading if they are incurred for the purpose of repurchasing in the near term. This

category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in

hedge relationships as defined by SLFRS 9. Separated embedded derivatives are also classified as held for trading unless they are

designated as effective hedging instruments.

Gains or losses on liabilities held-for-trading are recognised in the Statement of Profit or Loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of

recognition, and only if the criteria in SLFRS 9 are satisfied. The Group has not designated any financial liability as at fair value

through profit or loss.

Loans & 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 profit or loss when the liabilities are derecognised as well as through the EIR amortisation

process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral

part of the EIR. The EIR amortisation is included in finance costs in the Statement of Profit or Loss. This category generally applies to

interest-bearing loans and borrowings.

(c) 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 Statement of Profit or Loss.

offsetting of Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if

there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise

the assets and settle the liabilities simultaneously.


32.3 Financial Instruments - Statement of Financial Position

group CompanyAs at 31 March 2021 2020 2021 2020 note LKR LKR LKR LKR

(a) Financial AssetsAmortised CostInvestment in debentures 18 - 614,935,154 - 614,935,154

Trade receivables 20 449,454,424 737,095,532 215,536,631 411,634,566

Amounts due from related parties 27.1 3,842,251 97,788,672 1,243,403 89,906,502

453,296,675 1,449,819,358 216,780,034 1,116,476,222

Cash and Cash Equivalents 21 129,812,340 62,960,694 43,769,541 45,878,676

total 583,109,015 1,512,780,052 260,549,575 1,162,354,898

(b) Financial Liabilitiesother Financial LiabilitiesLoans and borrowings 23 816,000,000 3,038,992,194 816,000,000 2,494,343,500

Trade payable and Finance Lease Liability 26 344,737,037 562,972,504 184,285,019 423,805,919

Lease liabilities 16.2 254,178,104 258,256,607 29,893,733 24,837,809

Amounts due to related parties 27.2 131,832,101 143,609,495 131,671,904 143,197,959

Unclaimed dividend 4,146,312 4,146,312 4,146,312 4,146,312

Bank overdraft 21 7,066,570 94,323,825 7,066,570 11,087,749

total 1,557,960,124 4,102,300,937 1,173,063,538 3,101,419,248

33. Fair value measurements and related fair value disclosures

33.1 Fair value measurement

Fair-value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values

are disclosed in this note.

Accounting policyFair 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 Group.



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 Group 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 - Input that are quoted market prices (unadjusted) 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 at fair value on a recurring basis, the Group 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.

For the purpose of fair value disclosures, the Group 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.

33.2 Fair Value Hierarchy

The Group does not anticipate the fair value of the above to be significantly different to their carrying values and considers the impact

as not material for the disclosure.

The Group has not disclosed the fair values for fnancial instruments such as investment in debentures, trade receivables, amounts

due from/to related parties, trade payables, lease liabilities and unclaimed dividends, since their carrying value are a reasonable

approximation of fair values, due to short term maturity periods.


33.2.1 Fair Value Hierarchy - GroupThe following table shows the carrying amount and fair value measurement hierarchy of the Group's financial assets and liabilities in

the statement of financial position.

Carrying Amount Fair Value

As at 31 March 2021 Financial Assets at

Amortised Cost

Financial

Liabilities at

Amortised Cost

total Level 1 Level 2 Level 3 total

note LKR LKR LKR LKR LKR LKR LKR

Financial Assets

Trade receivables 20 449,454,424 - 449,454,424 - - - -

Amounts due from related parties 27.1 3,842,251 - 3,842,251 - - - -

Cash and Cash Equivalents 21 129,812,340 - 129,812,340 - - - -

total Financial Assets 583,109,015 - 583,109,015 - - - -

Financial Liabilities

Loans and borrowings 23 - 816,000,000 816,000,000 - 816,000,000 - 816,000,000

Trade payable and Finance Lease

Liability

26 - 344,737,037 344,737,037 - - - -

Lease liabilities 16.2 - 254,178,104 254,178,104 - - - -

Amounts due to related parties 27.2 - 131,832,101 131,832,101 - - - -

Unclaimed dividend - 4,146,312 4,146,312 - - - -

Bank overdraft 21 - 7,066,570 7,066,570 - - - -

total Financial Liabilities - 1,557,960,124 1,557,960,124 - 816,000,000 - 816,000,000


As at 31 March 2020 Financial Assets at

Amortised Cost

Financial

Liabilities at

Amortised Cost



Financial Assets

Investment in debentures 18 614,935,154 - 614,935,154 - - - -




total Financial Assets 1,512,780,052 - 1,512,780,052 - - - -


Loans and borrowings 23 - 3,038,992,194 3,038,992,194 - 3,038,992,194 - 3,038,992,194


Liability

26 - 562,972,504 562,972,504 - - - -




Bank overdraft 21 - 94,323,825 94,323,825 - - - -

total Financial Liabilities - 4,102,300,937 4,102,300,937 - 3,038,992,194 - 3,038,992,194



33.2.2 Fair Value Hierarchy - CompanyThe following table shows the carrying amount and fair value measurement hierarchy of the Company's financial assets and liabilities

in the statement of financial position.


As at 31 March 2021 Financial

Assets at

Amortised

Cost

Financial

Liabilities at

Amortised

Cost



Financial Assets




total Financial Assets 260,549,575 - 260,549,575 - - - -


Loans and borrowings 23 - 816,000,000 816,000,000 - 816,000,000 - 816,000,000


Liability

26 - 184,285,019 184,285,019 - - - -




Bank overdraft 21 - 7,066,570 7,066,570 - - - -

total Financial Liabilities - 1,173,063,538 1,173,063,538 - 816,000,000 - 816,000,000


As at 31 March 2020 Financial

Assets at

Amortised

Cost

Financial

Liabilities at

Amortised

Cost



Financial Assets

Investment in debentures 18 614,935,154 - 614,935,154 - - - -




total Financial Assets 1,162,354,898 - 1,162,354,898 - - - -


Loans and borrowings 23 - 2,494,343,500 2,494,343,500 - 2,494,343,500 - 2,494,343,500


Liability

26 - 423,805,919 423,805,919 - - - -




Bank overdraft 21 - 11,087,749 11,087,749 - - - -

total Financial Liabilities - 3,101,419,248 3,101,419,248 - 2,494,343,500 - 2,494,343,500


34. Financial Risk Management

The Group has exposure to the following risks arising from financial instruments:

Credit risk

Liquidity risk

Market risk

This note represents information about the Group's exposure to each of the above risks, the Group's objectives policies and processes

for measuring and managing risk.

Risk management frameworkThe Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework.

The Board of Directors has established the risk management policies to identify and analyse the risks face by the group and set

appropriate risk limits and controls and to monitor risk and adherence to limits. Risk management policies and systems are reviewed

regularly, and aim to develop a disciplinary constructive control environment, in which all employees understand their roles and

obligations through training, management standards and procedures.

The Group Audit Committee oversees how management monitors compliance with the Group's risk management policies and

procedures, and reviews the adequacy of the risk management framework in relation to the risk face by the Group. The Group Audit

Committee is assisted in its oversight role by Internal Audiao undertakes both regular and adhoc reviews of risk management

controls and procedures, the result of which are reported to the Audit Committee. The committee reports regularly to the board of

directors on its activities.

The board of Directors reviews, verifies, agree the policies for managing each type of risk which are summarised below.

34.1 Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual

obligations and arises principally from Group's receivables from customers and investment securities.

The carrying amounts of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the

reporting date was as follows.


Investment in debentures - 614,935,154 - 614,935,154

Trade receivables 449,454,424 737,095,532 215,536,631 411,634,566

Amounts due from related parties 3,842,251 97,788,672 1,243,403 89,906,502

Cash and Cash Equivalents 129,812,340 62,960,694 43,769,541 45,878,676

583,109,015 1,512,780,052 260,549,575 1,162,354,898

34.1.1 Trade receivablesThe Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management

also considers the factors that may influence the credit risk of its customer based including default risk associate with the industry

and country in which customers operate. Each new customer is analysed individually for credit worthiness, reviews external ratings,

if they are available financial statements, credit agency information, industry information, and in some cases bank references. Each

business units monitor the customers' financial standing (financial insolvency) and outstanding customer receivables are regularly

monitored. An impairment analysis is performed at each reporting date on an individual basis. The calculation is based on actual



incurred historical data. The minimum exposure to credit risk at the reporting date is the carrying value of the each class of financial

assets disclosed in Note 34.1

The Group evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several

industries and operate in largely independent markets and material payments being backed by guarantees and enters contractual

agreements with client before starting the operations.

Impact of CoVId-19 pandemicThe COVID-19 pandemic post lockdown situation of the country has impacted to the country's economy and business activities which

would delay the settlements of customer dues. Composition of significant amount of government debtors and guarantee private

debtors will reduce the possibility of default in payments.

Age analysis of trade receivables as at reporting date as follows:

As at 31 March, 2021 2020 trade provision for trade provision for receivables impairment receivables impairment LKR LKR LKR LKR

groupNeither past due nor impaired - - - -

Past due but not impaired 131,244,215 - 358,585,498 -

< 30 days 129,892,861 2,502,725 17,653,701 266,696

30–60 days 28,985,912 1,116,318 55,151,052 715,142

61–90 days 9,514,205 379,098 83,534,586 601,122

91–120 days 2,423,249 138,049 18,653,624 257,422

> 120 days 167,501,071 15,970,899 212,959,714 7,602,261

total 469,561,513 20,107,089 746,538,175 9,442,643

Gross carrying value 469,561,513 746,538,175

Allowance for expected credit losses (20,107,089) (9,442,643)

net carrying value 449,454,424 737,095,532

CompanyNeither past due nor impaired - - - -

Past due but not impaired 131,244,215 - 358,585,498 -

< 30 days 59,903,483 2,249,663 1,843,835 741

30–60 days 19,292,992 938,626 19,068,022 569,295

61–90 days 4,583,807 353,698 22,830,213 510,536

91–120 days 979,926 130,805 2,804,041 128,664

> 120 days 11,594,141 8,389,141 13,084,944 5,372,751

total 227,598,564 12,061,933 418,216,553 6,581,987

Gross carrying value 227,598,564 418,216,553

Allowance for expected credit losses (12,061,933) (6,581,987)

net carrying value 215,536,631 411,634,566

The Group believes that the unimpaired amounts that are past due by more than 30 days are still collectible, based on historic

payment pattern and extensive analysis and follow up procedures implemented on the customer credit risk.


The movement in the allowance for impairment in respect of trade receivables during the year is disclosed in Note 20.1 to the


expected Credit Loss (eCL) AssessmentThe aging of trade receivables at the reporting date that were impaired was as follows;

The Group uses a provision matrix to calculate ECLs for trade receivables and contract assets. The provision rates are based on days

past due for groupings of various customer segments that have similar loss patterns (i.e., product type, customer type and rating, and

coverage by letters of credit etc).

The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust

the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions (i.e., gross

domestic product) are expected to deteriorate over the next year which can lead to an increased number of defaults in the sector, the

historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the

forward-looking estimates are analysed.

However the Group has taken into account the changes to macro economic factors and risk due to COVID -19 impact and formulated

necessary alterations to the impairement templates. The resultant increase in impairment provision due to this change is

incorporated to the carrying value of trade and other receivables as at the year end.

The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant

estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical

credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future.

34.1.2 Short term deposits and Cash and Cash Equivalents

Credit risk from balances with banks and financial institution is managed by the Group’s treasury management in accordance with the

Group’s policy.

The Group held Short Term deposits and cash and cash equivalent as at 31 March 2021 which represents its maximum credit

exposure on these assets.

As at 31 March 2021, 91% of the favorable balances of bank and financial institution were rated ‘AA-’ or better for the Group.

group

As at 31 March, 2021 2020Fitch Rating group LKR % LKR %

AA+ - 0% 16,469,435 27%

AA - 0% 3,068,920 5%

AA- 116,095,007 91% 34,169,281 57%

A+ 8,711,433 7% 5,293,755 9%

A 2,262,809 2% - 0%

A- - 0% 1,308,950 2%

127,069,249 100% 60,310,340 100%



Company

As at 31 March, 2021 2020Fitch Rating group LKR % LKR %

AA+ - 0% 16,469,435 36%

AA - 0% 3,068,920 7%

AA- 34,414,562 80% 19,387,040 43%

A+ 6,478,671 15% 5,271,105 12%

A 2,262,809 5% - 0%

A- - 0% 1,308,950 3%

43,156,042 100% 45,505,449 100%

34.1.3 Investment in debenturesAs at 31 March no any debenture investment (2020 – 100%) were guaranteed by a banking institution with a rating of “A” or better for

the Group.

Fitch rating group / CompanyAs at 31 March, 2021 2020 LKR % LKR %

AA- - 0% 222,746,575 36%

A+ - 0% 392,188,580 64%

- 0% 614,935,155 100%

34.2 Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that

are settled by delivering cash or another financial asset. The Group monitors its risk of a shortage of funds using a liquidity planning

tools. The Group’s approach of managing liquidity risk is to ensure as far as possible that it will always have sufficient liquidity meets

its liability when due, and maintaining the balance between financial assets and liabilities and forecasting cash flows from operating

activities, without incurring unacceptable losses or risking damages to the Group’s reputation.

The Board of Directors is satisfied that the Company and its subsidiaries have adequate liquidity and business plans to continue to

operate the business and to mitigate the increased liquidity risks arising from the business and movement restrictions made due to

COVID-19 pandemic, for the next 12 months from the date of this report.


Maturity profileThe following are the remaining contractual maturities of the financial liabilities at the reporting date.

(a) the maturity analysis of Liabilities - group

Contractual Cashflows

Carrying on Within Within More than

As at 31 March 2021 amount total demand 1 year 1-2 years 2 years

LKR LKR LKR LKR LKR LKR

Loans and borrowings 816,000,000 816,000,000 - 816,000,000 - -

Trade payable and Finance Lease Liability 344,737,037 344,737,037 - 344,737,037 - -

Lease liabilities 254,178,105 464,099,768 - 41,753,716 42,164,970 380,181,082

Amounts due to related parties 131,832,101 131,832,101 - 131,832,101 - -

Unclaimed dividend 4,146,312 4,146,312 4,146,312 - - -

Bank overdraft 7,066,570 7,066,570 - 7,066,570 - -

1,557,960,125 1,767,881,788 4,146,312 1,341,389,424 42,164,970 380,181,082





Loans and borrowings 3,038,992,194 3,038,992,194 - 2,984,500,194 54,492,000 -





Bank overdraft 94,323,825 94,323,825 - 94,323,825 - -

4,102,300,937 4,297,782,836 4,146,312 3,824,543,010 95,773,490 373,320,025

(a) the maturity analysis of Liabilities - Company





Loans and borrowings 816,000,000 816,000,000 - 816,000,000 - -





Bank overdraft 7,066,570 7,066,570 - 7,066,570 - -

1,173,063,538 1,185,738,193 4,146,312 1,145,356,568 6,303,765 29,931,548







Loans and borrowings 2,494,343,500 2,494,343,500 - 2,494,343,500 - -





Bank overdraft 11,087,749 11,087,749 - 11,087,749 - -

3,101,419,248 3,113,361,010 4,146,312 3,077,665,627 5,388,350 26,160,721

Trade and other payables are settled during the availability of the credit terms.

34.3 Market Risk

Market risk is the risk that changes in the market process- e.g. foreign exchange rates, interest rates will affect the Group's income

or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk

exposures within acceptable parameters, while optimising the return. All such transactions are carried out within the guidelines set

by the Group Management.

Market risk comprise of the following types of risk:

I. Interest rate risk

II. Currency risk

III.Commodity price risk

IV.Equity price risk

34.3.1 Interest rate riskInterest rate risk is the risk that the fair value of future cash flows of a financial instrument fluctuate because of changes in the

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 obligation. The Group utilises various financial instruments to manage exposures to interest rate risks.


At the reporting date, the Group's interest - bearing financial instruments were as follows:


Fixed Rate InstrumentsFinancial AssetsDebentures - 614,935,154 - 614,935,153

Short term call deposits 893,091 19,345,826 893,091 19,345,826

893,091 634,280,980 893,091 634,280,979

Fixed Rate InstrumentsFinancial LiabilitiesShort term and import loans - 200,000,000 - -

- 200,000,000 - -

Variable Rate InstrumentsFinancial LiabilitiesTerm Loan - 68,772,000 - -

Short term and import loans 816,000,000 2,770,220,194 816,000,000 2,494,343,500

Bank Overdraft 7,066,570 94,323,825 7,066,570 11,087,749

823,066,570 2,933,316,019 823,066,570 2,505,431,249

During the financial year, consecutive reductions in policy rates and monetary easing policies by Central Bank of Sri Lanka to

encourage banks and finance companies to reduce lending rates.

sensitivity AnalysisA reasonable possible change of 100 basis points in interest rates at the reporting date would have increased (decreased) profit

or loss by the amounts shown below. The analysis assumes that all other variables, in particular, foreign currency exchange rates,

remain constant.


Fixed Rate Instruments - Financial Liabilities100 bp Increase - (2,000,000) - -

100 bp Decrease - 2,000,000 - -

Variable Rate Instruments - Financial Liabilities100 bp Increase (8,230,666) (29,333,160) (8,230,666) (25,054,312)

100 bp Decrease 8,230,666 29,333,160 8,230,666 25,054,312



34.3.2 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 exposes to the foreign currency risk on purchases, foreign operations that are denominated in a

foreign currencies.

Impact of CoVId-19 pandemicDue to the loss of foreign currency inflows to the country during the lockdown period of the covid 19 pandemic, resulted in an increase

in USD exchange rates against Sri Lankan Rupee (LKR) as at 31 March 2021. USD appreciated at the second half of March 2021, group

has taken several measures to manage risk as the group deals with foreign currency outflows to their suppliers.

The summary quantitative data about the group's exposure to currency risk as reported to the management of the Group is as follows,

2021 2020

gBp usd sgd JpY gBp usd sgd JpY

Trade Payables - Foreign

Creditors 43,856 19,412 373,588 70,199,215 236,411 278,850 - -

Gross Statement of Financial

Position Exposure 43,856 19,412 373,588 70,199,215 236,411 278,850 - -

The summary quantitative data about the Company's exposure to currency risk as reported to the management of the Company is as

follows,

2021 2020

gBp usd sgd JpY gBp usd sgd JpY

Trade Payables - Foreign

Creditors - - - 70,199,215 - - - -

Gross Statement of Financial

Position Exposure - - - 70,199,215 - - - -

The following significant exchange rates were applicable during the year 2020/21 and 2019/20

group/ Company Average Rate Reporting date spot RateAs at 31 March, 2021 2020 2021 2020 LKR LKR LKR LKR

GBP 274.06 231.41 269.88 232.67

USD 199.83 182.38 197.62 188.62

SGD 148.16 130.53 145.62 132.47

JPY 1.81 1.68 1.80 1.74


sensitivity AnalysisA strengthening or weakening of the Rupee as indicated below, against the USD,THB, JPY, GBP would have increased/ (decreased)

the equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that

the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in

particular interest rates, remain constant.

group Company strengthening Weakening strengthening Weakening profit or Loss profit or Loss profit or Loss profit or Loss LKR LKR LKR LKR

31 March 2021

USD (10% movement) (383,619) 383,619 -

THB (10% movement) (5,440,054) 5,440,054 - -

JPY (10% movement) (12,626,733) 12,626,733 (12,626,733) 12,626,733

GBP (10% movement) (1,183,613) 1,183,613 - -

31 March 2020USD (10% movement) (5,184,320) 5,184,320 - -

THB (10% movement) - - - -

JPY (10% movement) - - - -

GBP (10% movement) (5,500,509) 5,500,509 - -

35. Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future

deployment of the business. The Group's management and Board of Directors monitors the return on capital, as well as the level of

dividends to ordinary shareholders.

In order to achieve this overall objective, the Group’s capital management, amongst other things, aims to ensure that it meets financial

covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the

financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches of the financial

covenants of any interest-bearing loans and borrowing in the current period.



The Group’s Net Debt to adjusted Equity ratio at the end of the reporting period was as follows:

Carrying amount group CompanyAs at 31 March, 2021 2020 2021 2020 LKR LKR LKR LKR

Total Liabilities 1,711,431,891 4,376,220,888 1,252,121,716 3,202,095,585

Less: Cash and Cash Equivalents (129,812,340) (62,960,694) (43,769,541) (45,878,676)

Net Debt 1,581,619,551 4,313,260,194 1,208,352,175 3,156,216,909

Equity attributable to owners of the company 1,651,121,328 1,653,284,784 1,607,101,623 1,600,493,109

Net Debt to Equity Ratio 96% 261% 75% 197%

There were no changes in the Group’s approach to capital management during the year and the Group is not subject to externally

imposed capital requirements.

36. Comparative Information

Except for the adoption of new accounting standards and interpretations (as disclosed in Note 4 to these financial statements) with

effect from 01 April 2020, the Group has consistently applied the accounting policies with those adopted in the previous financial year.

The presentation and classification of the financial statements of the previous period, have been adjusted, where relevant, to conform

to current year's presentation and classification.

37. Directors Responsibilities

The Board of Directors is responsible for the preparation and presentation of the Financial Statements in accordance with Sri Lanka

Accounting Standards.

38. Net Assets Per Share

group CompanyAs at 31 March 2021 2020 2021 2020

Net assets attributable to ordinary shareholders (LKR) 1,651,121,328 1,653,284,784 1,607,101,623 1,600,493,109

Weighted average number of ordinary shares in issue 6,033,622 6,033,622 6,033,622 6,033,622

Net assets per share (LKR) 273.65 274.01 266.36 265.26


sML BRAnCh netWoRK / LoCAtIons

7 Branches of Island wide reach

1. Colombo - Head Office : No. 25, Vauxhall Street, Colombo 02.

2. Panchikawatta Branch : No. 42, Panchikawatta Road, Colombo 10.

3. Peliyagoda Branch : No. 25/11, New Nuge Road, Peliyagoda.

4. Negombo Branch : No. 231, Nalallawatta, Pitipana North, Negombo.

5. Matara Branch : No. 679, Galle Road, Walgama, Matara.

6. Kurunegala Branch : N0. 78. Colombo Road, Dambokka, Kurunegala.

7. Ratnapura Branch : No. 1/1, Colombo Road, Weeragoda, Hidellana, Ratnapura.

* For other main cities, we have appointed dealers.

* Sathosa Motors PLC has been investing extensively in workshop facilities and by setting up new branches in strategic locations in

selected cities. During the year, a new branch opened in Negombo focusing on inboard marine engines and spare parts sales.

Based on your need;

7. Ratnapura

1. Colombo (Head Office) 2. Panchikawatta 3. Peliyagoda

4. Negombo 5. Matara 6. Kurunegala

1. Colombo (Head Office) 2. Matara 3. Kurunegala

1. Colombo (Head Office) 2. Peliyagoda 3. Matara

4. Kurunegala

1. Negombo

Vehicle Sales Showrooms

Spare Parts Outlets

Marine Engine Operations

Workshop Operations


deCAde At A gLAnCe

Sathosa Motors PLC Group

ten Year summary 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21

Statement of Profit or Loss and

Other Comprehensive Income Highlights

Revenue LKR Mn 1,883 2,311 3,041 3,503 4,048 5,221 8,177 11,126 4,196 3,882

Gross Profit LKR Mn 342 404 847 849 967 897 1,497 1,320 795 636

EBITDA LKR Mn 249 294 449 433 557 416 759 732 367 290

EBIT LKR Mn 242 286 424 401 491 309 635 595 195 111

Net Finance Income/(Cost) LKR Mn - - (9) (19) (28) 1 (105) (299) (337) (140)

Profit / (Loss) after tax LKR Mn 173 206 288 270 327 234 384 176 (80) (13)

Profit Attributable to Owners of

the company LKR Mn 173 206 260 261 321 263 388 135 (81) (4)

Statement of Financial Position Highlights

Property Plant and Equipment LKR Mn 39 45 173 332 513 549 973 1,251 1,315 1,853

Total Non Current Assets LKR Mn 39 67 247 451 1,318 1,250 1,686 1,911 1,626 2,134

Cash and Cash Equivalent LKR Mn 536 101 6 45 (229) (19) 19 363 (31) 123

Total Assets LKR Mn 1,416 1,443 2,014 2,485 3,197 3,900 5,382 7,014 6,547 3,872

Stated Capital LKR Mn 116 116 116 116 116 116 116 116 116 116

Retained Earnings LKR Mn 324 655 884 1,115 1,283 1,365 1,481 1,616 1,537 1,535

Equity Attributable to Owners of

the company LKR Mn 595 771 1,000 1,231 1,399 1,481 1,597 1,731 1,653 1,651

Loans and Borrowings LKR Mn - - - 213 368 631 2,127 3,307 3,039 816

Total Non Current Liabilities LKR Mn 25 28 32 113 225 183 173 155 346 285

Statement of Cash Flow Highlights

Cash Flows from/ (used in)

Operating Activities LKR Mn 234 (405) 17 142 460 69 (792) (565) (166) 2,374

Cash Flows From / (used in)

Investing Activities LKR Mn 23 1 (197) (208) (788) 126 (395) (272) (125) 44

Cash Flows From/(used in)

Financing Activities LKR Mn (30) (30) 84 105 54 15 1,225 1,180 (103) (2,264)

Key Financial Ratios

EPS LKR 28.68 34.10 43.09 43.32 53.22 43.51 64.32 22.32 (13) (0.62)

DPS LKR 5.00 5.00 5.00 7.00 12.00 30.00 45.00 0.00 0.00 0.00

Net Assets Per Share LKR 98.64 127.76 165.76 204.02 231.82 245.46 264.70 286.97 274.01 273.65

Dividend Payout % 17 15 12 16 23 69 70 0 0 0

ROE % 29.1 26.7 26.4 20.2 21.7 14.1 20.5 8.6 -3.7 -0.6

ROCE % 40.7 37.1 38.8 25.9 26.2 13.5 15.9 11.1 3.7 3.7

Gearing times - - - 0.2 0.4 0.4 1.2 1.7 1.4 0.4

Current Ratio times 1.73 2.14 1.99 1.96 1.28 1.29 1.11 1.06 1.22 1.22

Quick Ratio times 0.83 0.74 1.15 0.97 0.47 0.37 0.48 0.63 0.56 0.63

Price Per Share LKR 249.90 229.20 240.00 275.10 300.00 300.00 440.00 457.90 260.20 225.00

Investor Highlights

Total Number of Shareholders No. 1437 1296 1206 1196 1193 1173 1139 1147 1186 1236

Public Share Holdings % 22.78 15.57 15.54 15.48 15.46 15.46 15.46 15.54 15.54 15.56


ABBReVIAtIons

Short form DefinitionAC Audit CommitteeACA Associate Member of the Institute of Chartered

Accountants of Sri Lanka AEL Access Engineering PLC AGM Annual General Meeting AWDR Average Weighted Deposit Rate AWLR Average Weighted Lending Rate AWPLR Average Weighted Prime Lending Rate Bn BillionBSc Bachelor of Science CA Chartered Accountants CCPI Colombo Consumer Price IndexCEO Chief Executive Officer CFL Compact Fluorescent LampCFM Close Family Members CFO Chief Financial Officer CGU Cash Generating Unit CISO Chief Information Security Officer COO Chief Operating Officer CSE Colombo Stock Exchange CWE Co-operative Wholesale Establishment DPS Dividend Per Share E-WASTE Electronic Waste EBIT Earnings Before Interest and Taxes

EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation

ECL Expected Credit LossED Executive Director EIR Effective Interest Rate EPF Employees’ Provident Fund EPS Earnings Per Share ERP Enterprise Resource Planning ESC Economic Service ChargeESG Environmental, Social and Governance ETF Employees’ Trust Fund FCA Fellow member of the Institute of Chartered

Accountants of Sri Lanka

FVOCI Fair Value through other Comprehensive Income FVTPL Fair value through Profit or Loss FY Financial Year GBP British Pound Sterling GDP Gross Domestic Product GM General Manager HR Human Resources IFRIC International Financial Reporting Interpretations

CommitteeIIA Institute of Internal Auditors IBR Incremental Borrowing Rate ICASL Institute of Chartered Accountants of Sri Lanka

Short form DefinitionIESL Institute of Engineers, Sri Lanka INED Independent Non-Executive DirectorIT Information Technology JPY Japanese YenKMP Key Management Personnel LED Light Emitting DiodeLKAS Sri Lanka Accounting Standards LKR Sri Lankan Rupee LTD Limited MBA Master of Business Administration MD Managing Director Mn Million MSc Master of ScienceN/A Not Applicable NBT Nation Building Tax NCI Non-Controlling InterestNCPI National Consumer Price IndexNED Non-Executive Director OCI Other Comprehensive Income OHTC Oman Hotels & Tourism Co. SAGOPAYE Pay As You Earn PLC Public Liability Company PMP Project Management Professional PIM Postgraduate Institute of Management PPE Property Plant and Equipment/Personnel

Protective Equipment PUC Projected Unit Credit ROCE Return on Capital Employed ROE Return on Equity RPT Related Party Transactions SDFR Standing Deposit Facility RateSEC Securities and Exchange Commission of Sri

Lanka SIC Standard Interpretations CommitteeSID Senior Independent Director SLAuS Sri Lanka Auditing Standards SLFRS Sri Lanka Financial Reporting Standards SLFR Standing Lending Facility RateSML Sathosa Motors PLC SPPI Solely Payments of Principal and Interest SRR Statutory Reserve RequirementTHB Thai Bhatt TOR Term of Reference USD United States Dollar USQ University of Southern Queensland VAT Value Added Tax WEF With Effect From WHT Withholding Tax


gRI Content Index

GRI Standard Disclosure Page Number

GRI 102: General Disclosures 102-1 Name of the organisation Inner back cover

102-2 Activities, brands, products, and services 4

102-3 Location of headquarters Inner back cover

102-4 Location of operations 178

102-5 Ownership and legal form Inner back cover

102-6 Markets served 4 and 24

102-7 Scale of the organisation 7

102-8 Information on employees and other workers 67-70

102-9 Supply chain 80-87

102-10 Significant changes to the organisation and its supply chain N/A

102-11 Precautionary Principle or approach N/A

102-12 External initiatives 59-61

102-13 Membership of associations 73

102-14 Statement from Senior Decision-Maker 10-11

102-16 Values, principles, standards, and norms of behaviour 26-27

102-18 Governance structure 26-31

102-40 List of stakeholder groups 80-87

102-41 Collective bargaining agreements N/A

102-42 Identifying and selecting stakeholders 80-87

102-43 Approach to stakeholder engagement 80-87

102-44 Key topics and concerns raised 80-87

102-45 Entities included in the Consolidated Financial Statements 3

102-46 Defining report content and topic Boundaries 2

102-47 List of material topics N/A

102-48 Restatements of information N/A

102-49 Changes in reporting N/A

102-50 Reporting period 3

102-51 Date of most recent report 3

102-52 Reporting cycle 3

102-53 Contact point for questions regarding the report 3

102-54 Claims of reporting in accordance with the GRI Standards 3

102-55 GRI content index 181-185

102-56 External assurance 105-109

GRI 201: Economic

103-1 Explanation of the material topic and its boundaries N/A

Performance 103-2 The management approach and its components 12-15

103-3 Evaluation of the management approach 12-15

201-1 Direct economic value generated and distributed 64

201-3 Defined benefit plan obligations and other retirement plans 149-152

201-4 Financial assistance received from Government N/A



GRI 202: Market Presence 103-1 Explanation of the material topic and its boundaries 10-15

103-2 The management approach and its components 10-15


202-1 Ratios of standard entry level wage by gender compared to local

minimum wage

N/A

202-2 Proportion of senior management hired from the local community N/A

GRI 203: Indirect Economic

Impacts

103-1 Explanation of the material topic and its boundaries 10 -15 & 59- 61



203-1 Infrastructure investments and services supported 75

203-2 Significant indirect economic impacts 10-15 & 59-61

GRI 204: Procurement

Practices

103-1 Explanation of the material topic and its boundaries 56-61



204-1 Proportion of spending on local suppliers N/A

GRI 205: Anti-corruption 103-1 Explanation of the material topic and its boundaries 27

103-2 The management approach and its components 27

103-3 Evaluation of the management approach 27

205-1 Operations assessed for risks related to corruption N/A

205-2 Communication and training about anti-corruption policies and

procedures

27

205-3 Confirmed incidents of corruption and actions taken N/A

GRI 206: Anti-competitive

Behaviour

103-1 Explanation of the material topic and its boundaries 10-15 & 49-58



206-1 Legal actions for anti-competitive behaviour, anti-trust, and

monopoly practices

N/A

GRI 302: Energy 103-1 Explanation of the material topic and its boundaries 76-79



302-1 Energy consumption within the organisation 76-79

302-3 Energy intensity 76-79

GRI 201: Economic

Performance




201-1 Direct economic value generated and distributed 64

201-3 Defined benefit plan obligations and other retirement plans 149-152

201-4 Financial assistance received from Government N/A

GRI coNTENT INdEx



GRI 303: Water 103-1 Explanation of the material topic and its boundaries 76-79



303-1 Water withdrawal by source 76-79

303-3 Water recycled and reused 76-79

GRI 304: Biodiversity 103-1 Explanation of the material topic and its boundaries 76-79



304-1 Operational sites owned, leased, managed in, or adjacent to,

protected areas and areas of high biodiversity value outside protected

areas

N/A

GRI 305: Emissions 103-1 Explanation of the material topic and its boundaries 76-79



305-1 Direct (Scope 1) GHG emissions N/A

305-2 Energy indirect (Scope 2) GHG emissions N/A

GRI 401: Employment 103-1 Explanation of the material topic and its boundaries 67-70



401-1 New employee hires and employee turnover 67-70

401-2 Benefits provided to full-time employees that are not provided to

temporary or part-time employees

67-70

401-3 Parental leave N/A

GRI 402: Labour/

Management Relations




402-1 Minimum notice periods regarding operational changes N/A

GRI 403: Occupational Health

and Safety




403-2 Types of injury and rates of injury, occupational diseases, lost days,

and absenteeism, and number of work-related fatalities

N/A



GRI 404: Training and

Education




404-1 Average hours of training per year per employee 67-73

404-2 Programmes for upgrading employee skill and transition assistance

programmes

67-73

404-3 Percentage of employees receiving regular performance and career

development reviews

N/A

GRI 405: Diversity and Equal

Opportunity




405-1 Diversity of governance bodies and employees N/A

405-2 Ratio of basic salary and remuneration of women to men N/A

GRI 406: Non-discrimination 103-1 Explanation of the material topic and its boundaries N/A

103-2 The management approach and its components N/A

103-3 Evaluation of the management approach N/A

406-1 Incidents of discrimination and corrective actions taken N/A

GRI 413: Local Communities 103-1 Explanation of the material topic and its boundaries 80-87



413-1 Operations with local community engagement, impact assessments,

and development programmes

80-87

GRI 416: Customer Health

and Safety




416-2 Incidents of non-compliance concerning the health and safety

impacts of products and services

N/A

GRI 419: Socio-economic

Compliance




419-1 Non-compliance with laws and regulations in the social and

economic area

N/A

GRI coNTENT INdEx


notICe Is heReBY gIVen that the Thirty Seventh (37th) Annual General Meeting of Sathosa Motors PLC will be held by way

of electronic means centered at the Board Room of Access Engineering PLC, No. 278, Union Place, Colombo 2 on the 15 day of

September 2021 at 1.00 p.m. for the following purposes:

1. To receive and consider the Annual Report of the Board of Directors on the affairs of the Company and the Statement of Accounts

for the year ended 31 March 2021 with the Report of the Auditors thereon.

2. To re-elect Mr. M M N de Silva who retires by rotation in terms of Article 88(i) of the Articles of Association of the Company.

3. To re-appoint Messrs KPMG, Chartered Accountants as Auditors for the year ending 31 March 2022, and to authorise the Board of

Directors to determine their remuneration.

4. To authorise the Directors to determine contributions to charities and other donations for the year 2021/22.

By order of the Board

SATHOSA MOTORS PLC

p W CoRpoRAte seCRetARIAL (pRIVAte) LIMItedDirector / Secretaries

04 August 2021

Colombo

Notes

1. A member entitled to attend and vote at the meeting is entitled to appoint a Proxy to attend and vote instead of him/her.

2. A Proxy need not be a member of the Company.

3. A Form of Proxy is enclosed for this purpose.

4. The completed form of Proxy should be deposited at the Registered Office of the Company, No. 25, Vauxhall Street, Colombo 2, not

less than thirty six (36) hours before the time fixed for the commencement of the Meeting.

notICe oF AnnuAL geneRAL MeetIng


notes


FoRM oF pRoxY

I/We..……………………………………………………………………….......................................................................................................................................................

(NIC No. …………………….....................................) of .…………………………………………………………………………………………………………........................................

being a member/members of Sathosa Motors PLC hereby appoint;

…………………………………………………………………………………………………………….…of ………………………………………………………………………………………………....

(or failing him).

Mr. Sumal Joseph Sanjiva Perera of Colombo or failing him*

Mr. Joseph Christopher Joshua of Colombo or failing him*

Mr. Muthu Muni Nelson de Silva of Colombo or failing him*

Mr. Saumaya Dharshana Munasinghe of Colombo or failing him*

Mr. Dalpadoruge Anton Rohana Fernando of Colombo or failing him*

Mr. Wijesinghe Appuhamilage Chiran Okullo Wijesinghe of Colombo or failing him*

Mr. Ranjith Sepala Dahanayake of Colombo or failing him*

Mr. Manoaj Jayahsuriya of Colombo or failing him*

Mr. Kasthuri Arachchige Priyantha Perera of Colombo or failing him*

…………………………………………………………………………………..………………………………............................................................................................................ of

……………………………………………………................................................................. holder of NIC No……………….………………………….......................................

as my/our* Proxy represent me/us and vote for me/us* and on my/our* behalf at the Thirty Seventh (37th) Annual General Meeting

of the Company to be held on 15 September 2021 at 1.00 p.m. and at any adjournment thereof and every poll which may be taken in

consequence thereof.

Please indicate your preference by placing a against the following

For Against

1. To re-elect Mr. M M N de Silva who retires in terms of Article 88(i) of the Articles of Association of the Company.

2. To re-appoint Messrs KPMG Chartered Accountants as Auditors for the year ending 31 March 2022 and to

authorise the Board of Directors to determine their Remuneration.

3. To authorise the Directors to determine contributions to charities and other donations for the year 2021/22.

As witness my/our* hands this ……………. day of ……………. Two Thousand and One.

*Please delete as appropriate

…………………........................................ …………………………..................

NIC/REG.No. Signature of Member/s

Notes: 1. A Proxy need not be a member of the Company.

2. Instructions as to completion appear overleaf.


INSTRUCTIONS FOR THE COMPLETION OF PROXy

1. The full name, National Identity Card number and the registered address of the shareholder

appointing the Proxy and the relevant details of the Proxy should be legibly entered in the Form of

Proxy which should be duly signed and dated.

2. The Proxy shall –

(a) In the case of an individual be signed by the shareholder or by his/her attorney, and if signed

by an Attorney, a notarially certified copy of the Power of Attorney should be attached to the

completed Proxy if it has not already been registered with the Company.

(b) In the case of a company or corporate / statutory body either be under its Common Seal or

signed by its Attorney or by an Officer on behalf of the company or corporate / statutory body

in accordance with its Articles of Association or the Constitution or the Statute (as applicable).

3. Please indicate with a ‘X’ how the Proxy should vote on each resolution. If no indication is given,

the Proxy in his/her discretion will vote as he/she thinks fit.

4. To be valid, the completed Form of Proxy must be deposited with the Company Secretaries, P W

Corporate Secretarial (Private) Limited at No. 3/17, Kynsey Road, Colombo 08, Sri Lanka or must

be emailed to [email protected] before the time fixed for the meeting.

foRM of pRoxy

Name of the Company

Sathosa Motors PLC

Registered Office

25,Vauxhall Street,

Colombo 02,

Sri Lanka.

Tel :- +94 112 432 858

Fax :- +94 112 446 129

Web :- www.sathosamotorsplc.com

E mail :- [email protected]

Legal Form

A public Limited Liability Company

incorporated in Sri Lanka on 11 March

1982 under the Companies Ordinance No:

51 of 1938 and re-registered under the

Companies Act No.7 of 2007. Listed on the

Colombo Stock Exchange on 07 November

1993.

Company Registration Number

PQ 105

Board of Directors

S J S Perera - Chairman

J C Joshua - Managing Director

M Jayahsuriya - Executive Director

S D Munasinghe - Director

D A R Fernando - Director

T A L Niroshan * - Director

M M N de Silva - Director

W A C O Wijesinghe - Director

R S Dahanayake - Director

K A P Perera - Executive Director –

Sales & Marketing


Audit Committee

M M N de Silva - Chairman

W A C O Wijesinghe

R S Dahanayake

T A L Niroshan *


S J S Perera - Chairman

M M N de Silva

W A C O Wijesinghe

Related Party Transaction Review

Committee

M M N de Silva - Chairman

W A C O Wijesinghe

R S Dahanayake

T A L Niroshan *

Strategic Planning Committee

J C Joshua - Chairman

M Jayahsuriya

K A P Perera

Bankers

Hatton National Bank PLC

Commercial Bank of Ceylon PLC

Bank of Ceylon

People’s Bank

DFCC Bank PLC

Sampath Bank PLC

National Development Bank PLC

Seylan Bank PLC

Auditors

Messrs KPMG

Chartered Accountants

32 A, Sir Mohomad Macan Marker

Mawatha,

Colombo 03,

Sri Lanka.

Tel: +94 112 426 426

Fax: +94 112 445 872

Secretaries & Registras

P W Corporate Secretarial (Private) Limited

No: 3/17, Kynsey Road,

Colombo 08,

Sri Lanka.

Tel: +94 114 640 360

Fax: +94 114 740 588

Lawyers

Nithi Murugesu & Associates

Attorney-at-Law, Notary Public,

Commissioner for Oaths,

No. 28 (Level 2),

W. A. D. Ramanayake Mawatha,

Colombo 02,

Sri Lanka.

Tel: + 94 11 2 302 900

Fax: + 94 11 2 302 911

CORPORATE INFORMATION

SATHOSA MOTORS PLC ANNUAL REPORT 2020/21

Documents

Transcript of SATHOSA MOTORS PLC ANNUAL REPORT 2020/21