Ambeon Capital Plc Annual Report 2018/19

AMBEON CAPITAL PLC ANNUAL REPORT 2018/19

VISTAS OF OPPORTUNITY ambeoncapital.com Journeying on an entrepreneurial success story, we seek to recreate realms of success with our far-sighted strategies. Moving with agility to seize new opportunities and explore the potential in every scenario is what we stand for in our corporate persona.

We believe that this will create the right mix of strengths to evolve to the next level of opportunity. Contents

Moving First OUR We take the brave steps before anyone else to catalyse opportunities with our financial prowess, market instinct and CORPORATE utmost discipline. Channeling Teamwork VALUES The power of our people is what drives transformation, we harness the collective strength of their diverse minds and competencies to do this.

Actioning Results Mind, body and soul – we are committed to our investments. We put all our energy into creating the necessary interventions for success.

Seeing Beyond There’s no room for complacency. We constantly challenge ourselves to look beyond today, in search of the next frontier. AMBEON CAPITAL PLC 4 ANNUAL REPORT 2018/19 ABOUT THIS REPORT

The Annual Report of Ambeon Capital PLC revolves around its story of value creation. We Navigating this Report strive to uphold best practices in elaborating • Snapshot of the business. Message by Chairman and Group MD/ CEO’s Message. our business strategy as an investment company. The Board’s stewardship brings • Our Story of Transformation and Growth – Synopsis of strategic framework and with it an obligation to be transparent and current positioning. accountable to potential investors who seek • Introduction to Strategic Business Units of the Company’s main subsidiary information relating to the value creating - Ambeon Holdings PLC. This section covers a detailed sectoral analysis of ability of Ambeon Capital PLC in the short to performance and way forward. long term horizons. • Corporate Governance disclosures and a brief overview of Enterprise Risk Reporting Standards & Principles Management. The financial statements included in this Annual Report have been prepared in • Detailed analysis of our financial results, with audited financial statements accordance with the Sri Lanka Accounting prepared in accordance with SLFRSs / LKASs and supplementary information. Standards (SLFRSs/LKASs) and have been duly audited by the external auditors of the Group. In addition, all information disclosed in this Annual Report complies with the Reporting Changes expectations, outlook, plans and forecasts. Companies Act No. 07 of 2007 and the Listing There have been no reporting changes or Shareholders and other stakeholders are Rules of the Colombo Stock Exchange (CSE). re-statement of information pertaining to the advised to be cautious in placing too much financial year 2017/18 included in this Annual emphasis on such statements, as the reality Corporate Governance related disclosures Report, apart from those clearly stated in the may materially differ with the projected adhere to the Code of Best Practice on Financial Statements. and anticipated information. The Company Corporate Governance 2017 issued jointly does not undertake to update publicly the by the Institute of Chartered Accountants of Forward Looking Statements forward-looking statements to reflect the Sri Lanka and the Securities and Exchange changes after the date of this report, except, The Annual Report herein contains forward- Commission of Sri Lanka. in compliance with the applicable rules and looking statements and information. regulations set by the relevant statutory and However, the operational landscape may Scope and Boundary regulatory bodies. require the Company to change its business To provide in-depth understanding of the different operational aspects of the Company, a section is dedicated to the review of operations of the Company’s main subsidiary, Ambeon Feedback and Queries Holdings PLC. (Refer pages 26 to 29). We welcome your comments in our journey of continuous improvement.

The data and information included in the Please contact the undermentioned for any queries on the information provided in this Annual Report is predominantly relating to Annual Report or for providing any constructive feedback. business operations from 1st April 2018 to 31st March 2019. Haritha C. Perera Chief Financial Officer

[email protected] 0115328162, 0777901396 5 MILESTONE 2018 June: Taprobane Holdings PLC transformed into Ambeon Capital PLC

2017 2015 December: Acquisition October: Galle Face Group, of Millennium IT ESP via Hirdaramani Group and Navitas Ambeon Holdings PLC Investments buy into Taprobane Holdings PLC

2014 March: Acquisition of Capital Trust Partners (Pvt) Ltd and Lanka Century Investments PLC becomes 2013 a subsidiary of the Group September: Managed Largest Non-Bank listed debenture issue

2012 May: Obtained Listing on the Colombo Stock Exchange 2011 November: Disposal of January: Browns Investments PLC Commenced Margin Trading November: A 29% Activities investment in Lanka Century Investments PLC (Ambeon Holdings PLC)

2010 2009 March: Commenced September: Corporate Finance Acquisition of Browns Activities Investments Limited

2006 September: Incorporated Taprobane Holdings Limited AMBEON CAPITAL PLC 6 ANNUAL REPORT 2018/19 Ambeon Group of Companies

Ambeon Capital PLC

Lexinton Resorts (Pvt) Ltd Ambeon Holdings PLC (100%) ( 81.43%)

Palla & Co. Ceylon Leather Products South Asia Textiles Dankotuwa Porcelain PLC (99.90%) Ltd (99.90%) (Pvt) Ltd (97.67%) (77.51%)

Ceylon Leather Products Royal Fernwood DPL Trading (Pvt) Ltd Distributors (Pvt) Ltd (100%) Porcelain Ltd (95.69%) (100%)

Fernwood Lanka (Pvt) Ltd Lanka Decals (Pvt) Ltd (100%) (100%)

Investment Footwear Textiles Porcelain AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 7

Heron Agro Products (Pvt) Ltd (100%)

Olancom (Pvt) Ltd EON Tech (Pvt) Ltd Colombo City Holdings PLC Taprobane Capital Plus (Pvt) Ltd (93.15%) (78..00%) (66.40%) (100%)

Millennium IT ESP (Pvt) Ltd Lexinton Holdings (Pvt) Ltd (60.24%) (100%)

Taprobane Wealth Plus Taprobane Securities Taprobane Investments Lexinton Financial (Pvt) Ltd (Pvt) Ltd (Pvt) Ltd Services (Pvt) Ltd (100%) (100%) (100%) (100%)

Technology Property Financial Services AMBEON CAPITAL PLC 8 ANNUAL REPORT 2018/19 Financial Highlights

Group 2018/19 2017/18

Statement of Financial Position (LKR) Cash 611,908,960 1,999,187,137 Other Financial Assets 1,916,753,871 2,409,055,752 Trade & Other Receivables 6,005,043,760 4,009,655,688 Total Current Assets 12,812,556,265 12,192,426,974 Total Long-Term Assets 10,217,822,249 8,742,731,759 Total Current Liabilities 12,439,599,383 11,830,995,476 Total Long-Term Liabilities 3,989,918,795 2,625,485,823 Total Shareholders’ Equity 6,600,860,336 6,478,677,434

Statement of Profit or Loss (LKR) Revenue 17,732,587,184 12,588,656,155 Gross Profit 3,922,607,372 2,500,905,084 EBITDA 2,324,326,252 1,468,567,982 Profit Before Income Tax from Continuing Operations 915,425,176 286,330,112 Profit for the Year from Continuing Operations 513,895,135 372,426,710

KEY RATIOS Profitability Ratios Return on Equity 7.79% 6% Return on Assets 2.23% 2% Gross Profit Margin 22% 20% Asset Turnover Ratio 77% 60% EPS 0.05 0.15 DPS 0.36 -

Leverage and Liquidity Ratios Current Ratio 1.03 1.03 Quick or Acid Test Ratio 0.69 0.71 Long-Term Debt Ratio 0.38 0.29 Debt to Equity Ratio 2.50 2.20

NAV 3.49 4.04

Interest Coverage Ratio 1.90 1.35 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 9

Revenue Assets Equity

Rs. Mn % Rs. Mn % Rs. Mn % 20,000 50 25,000 50 8,000 20

7,000 15 40 40 20,000 10 15,000 6,000 30 30 5 5,000 15,000 0 10,000 20 20 4,000 -5 10,000 3,000 10 10 -10 2,000 5,000 -15 5,000 0 0 1,000 -20

0 -10 0 -10 0 -25 2015/14 2016/15 2017/16 2018/17 2019/18 2015/14 2016/15 2017/16 2018/17 2019/18 2015/14 2016/15 2017/16 2018/17 2019/18 Revenue Revenue Growth Assets Assets Growth Equity Equity Growth

Debt Segmental Revenue Prot/(Loss) for the year

Rs. Mn % Rs. Mn 10,000 50 1,000 1% 3% 12% 500 8,000 40 37% 0

6,000 30 47% -500

-1,000 4,000 20

Manufacturing Footwear IT and related Services -1,500 Manufacturing Porcelain Financial Services 2,000 10 Manufacturing Textile Investment -2,000 Property 0 0 -2,500 2015/14 2016/15 2017/16 2018/17 2019/18 2015/14 2016/15 2017/16 2018/17 2019/18 Debt Debt Growth Revenue

Group Revenue Group Profit After Tax Group Total Assets LKR LKR LKR 17,732 514 23,030 Mn Mn Mn AMBEON CAPITAL PLC 10 ANNUAL REPORT 2018/19

Our Economic Impact

2,950 9.4Bn 3.7Bn Export Revenue Direct Employment Market Capitalisation

Our Investment Case and improved performance in all parameters and results-driven businesses. This new Founded on our core values, the Ambeon through our strategic initiatives, we have positioning enhances the Group’s future Group forges ahead, seeking new frontiers. As transformed Ambeon Capital into a lucrative strategic intent of expanding to new vistas of a business committed to customer-centricity, Holding Company. opportunity by actively seeking geographical we provide our investors and stakeholders expansion. The brand ‘Ambeon’ epitomises a Group with lucrative possibilities that could be which is a future-centric entity, guided Some of our key strengths and differentiating generated through a vibrant portfolio of by ethical business standards, resilience factors are as follows: assets. Through improved utilisation of assets

Well Experience Market Proven established Global presence in ability to Blended in brands portfolio of manufacturing and local Professional key growth execute and positioned for distribution expertise sectors assimilate assets and international technology channel of the acquisitions expansion economy AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 11

MANAGEMENT REPORTS AMBEON CAPITAL PLC 12 ANNUAL REPORT 2018/19 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 13

Chairman’s Review

Dear Shareholders, “During the year under review, the Company was able to build momentum consequent to On behalf of the Board of Directors, it is my privilege to present to you the Annual Report the restructuring progress initiated in 2017/18. of Ambeon Capital PLC for the financial year ‘Vision 2020’ thus created an all-pervasive ended 31st March 2019. transformation across all business verticals Your Company surpassed its previous year’s of the Group thereby acting as a springboard performance to record a profit after tax of Rs. 513 Mn, navigating itself successfully through for exceptional business performance. a very challenging business landscape. This enhanced wealth creation for all our This proves the Company’s resilience and the success of its restructuring initiatives stakeholders.” spearheaded during the previous financial year. The Sri Lankan Rupee depreciated by almost The Central Bank of Sri Lanka maintained A Challenging Operating Environment 16% against the US Dollar during the year a neutral monetary policy as inflationary under review. A widening trade deficit played pressures eased interest rates to 8.5% in It is pertinent to look back at the challenging a significant role in the devaluation of the April 2018 after hikes for two consecutive business environment that prevailed in the Rupee. Furthermore, the heavy foreign years. However, the market interest rates period in which your Company achieved investment outflows due to monetary policy continued to increase thereafter as liquidity these exceptional results. Sri Lanka’s normalisation in the USA and the broad-based deficits in money markets continued to be economic growth in 2018 slowed down to strengthening of the US Dollar in the global high. 3.2% compared to 3.4% during the previous market strengthened the US Dollar. This was year. The marginal growth was spurred aggravated by the political uncertainty which The year 2018 saw a remarkable increase in by the services sector and the recovery of engulfed Sri Lanka during the last quarter export earnings with Sri Lanka’s merchandise the agriculture sector. The services sector of 2018. The resultant down-grading of Sri and service exports reaching an all-time recorded a growth of 4.7% due to robust Lanka’s sovereign rating by three major rating high of USD 17 Bn in 2018 over Rs 11.4 Bn demand in retail and wholesale trade, agencies and the combined effect of domestic achieved in the preceding year 2017. For transportation, food and accommodation. and external developments hitherto exerted Sri Lanka to succeed as a higher income The agriculture sector recorded a growth of further pressure on the exchange rate. The economy and improve the wellbeing of its 4.8% due to the buoyant weather conditions. higher depreciation of the Sri Lankan Rupee people it is imperative that exports are Performance of the industrial sector slowed had a direct impact by driving down margins developed to its full potential. It is envisaged down significantly mainly due to the particularly on segments which relied on that the National Export Strategy (NES) and contraction of the construction sector. imported raw materials. However, this was the New Trade Policy (NTP) implemented offset by the export led revenue streams. will play a pivotal role in enhancing earnings from merchandise and service exports. AMBEON CAPITAL PLC 14 ANNUAL REPORT 2018/19 Chairman’s Review

“Our strategic Overall the subdued economic conditions revenue and profitability mix to a more weakened consumer confidence levels. This equitable and evenly distributed balance acquisition of along with higher inflationary pressures, tight between manufacturing driven and financial Millennium IT ESP liquidity conditions and lower discretionary services sectors. Further, this infused spending negatively impacted the consumer greater sustainability and balance between paved the way for sector. The high interest rates coupled with industries which was heavily skewed towards significant growth increased taxes and volatile foreign exchange manufacturing. Further, the growth prospects rates had a significant impact during the year for the future are positive with plans to make in revenue and under review. Importation of raw materials, inroads into techno-consumerism in the profitability in its first business expansions through additional Region. borrowings, higher outflows on taxes, all had full year of operations. a negative impact on the results. However, During the year, our key brands which went With this investment with the strengthening of our export derived through a strategic re-positioning and re- the Group has been revenue streams and effective process branding exercise in the previous financial management at manufacturing levels to build year achieved breakthrough in their respective able to calibrate cost efficiencies, we managed to minimise platforms locally and globally. Thereby, its revenue and the impact on profitability by recording Dankotuwa Porcelain, South Asia Textiles, significantly improved profitability levels. Royal Fernwood Porcelain and DI emerged profitability mix to a as formidable customer-centric brands by more equitable and Strategic Progress winning the hearts and minds of customers. This was translated into exponential business evenly distributed During the year under review, the Company was able to build momentum consequent growth and significant profitability across the balance between to the restructuring progress initiated in respective subsidiaries. manufacturing driven 2017/18. ‘Vision 2020’ thus created an all-pervasive transformation across all A detailed account of the performance of the and financial services business verticals of the Group thereby acting subsidiaries will be covered by the Group sectors.” as a springboard for exceptional business Managing Director/ Chief Executive Officer’s performance. This enhanced wealth creation Review on pages 16 to 21. for all our stakeholders. Strong Performance Today, we see Ambeon Capital PLC as an The Group posted a profit after tax (PAT) of agile, future-focused and dynamic Investment Rs. 513 Mn during the year under review, Management Group spread across a diverse representing a growth of 34% over the array of business verticals. Porcelain, textiles, previous year’s profit of Rs. 382 Mn. This was leather sectors under its main Investment a significant improvement. Holding and Management company Ambeon Holdings PLC lead the way by collectively Robust Governance Structure contributing a healthy 62% to the Group’s Good corporate governance forms a corner revenues followed by technology which stone of our corporate policy. We are accounted for 37% and financial services and committed to uphold the highest standards investments for the balance. of corporate governance. I am well supported by my colleagues on the Board who bring Our strategic acquisition of Millennium IT balance and a wealth of experience to your ESP paved the way for significant growth Company. Together we continue to maintain in revenue and profitability in its first full oversight of the strategic, operational and risk year of operations. With this investment framework across the Group. the Group has been able to calibrate its AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 15

We strive to provide our employees with Ambeon Holdings PLC, the Holding Company the opportunity to fulfil their potential in an of our diversified subsidiaries, is focused environment which encourages the right on building a sustainable business cluster behaviour. By inculcating our values founded to ensure efficiencies are improved through on the four core pillars of Moving First, Seeing revamped process re-engineering and Beyond, Actioning Results and Channeling realignment in keeping pace with emerging Team Work, we are poised to build the trends. With our foray into the information corporate journey of ‘Ambeon’ as an ethical technology sphere, we hope to move ahead and future centric business brand. by expanding globally to establish ourselves in specialised niche domains of IT expertise. Dividends During the year under review, the Board of With an array of world-renowned brands Directors authorized and approved a sum home-grown brands with an established of Rs. 361 Mn as dividends at Rs. 0.36 per global presence we will continue to maintain share keeping to our continuous commitment leadership, and explore unchartered business towards shareholder returns. territories with new and innovative products to drive growth and earnings capacity. Way Forward The global business environment shows Appreciation modest growth prospects marked by My sincere gratitude is extended to the uncertainty in the short to medium term shareholders for their steadfast support. horizons. In the aftermath of the tragic Easter I wish to express my gratitude to the Board Sunday attacks the heightened security of Directors for their consistent support, condition affected key sectors such as invaluable counsel and guidance. I take this tourism and construction. However, we are opportunity to extend my sincere appreciation optimistic that the strong macro-economic to the Group management teams and the staff fundamentals along with the government’s who have embraced change and spearheaded fiscal consolidation effects will infuse stability the transformation process. I wish to place to a certain extent. on record the astute leadership and direction of Group Managing Director/ CEO Mr Murali As a progressive conglomerate which Prakash in leading the Group to greater heights takes prudent risks, the Company is poised of success. I place my sincere appreciation to move ahead with a growth formula to our valued customers, business partners focused on a two-pronged strategy - an and all other stakeholders for their valued ‘emergent strategy’ on one end and on the patronage and consistent loyalty. other a ‘deliberate strategy’. Thereby, the Group is moving first to capitalise on latent Sgd. opportunities in the dynamic business Sanjeev Gardiner environment whilst executing its sustained Chairman initiatives according to the ‘2020 Strategic Plan’ to drive business growth across its core Ambeon Capital PLC business verticals. 13th August 2019 AMBEON CAPITAL PLC 16 ANNUAL REPORT 2018/19

Group Managing Director/ Chief Executive Officer’s Review

“Your Group posted a healthy Rs. 17.7 Bn of The political instability during the last quarter of 2018 was augmented by continued revenue which reflects a 41% growth over the subdued climate for investments both due to prior year. Whilst the manufacturing sector macro fundamentals and more importantly the general sentiments of investors. This improved, primarily the improvement came lackluster business atmosphere didn’t help through new acquisition of the technology the cause in advancing more rapidly in business. The continued high interest rates company Millennium IT ESP by Ambeon also hampered new and potential investment Holdings PLC.” opportunities. The extremely volatile Forex markets during the year impacted directly on import businesses whilst infusing greater uncertainty. Lending rates continued to It gives me great pleasure to place before you Revenue increased by 41% over the previous be in the double digit levels which was not the Annual Report for the year ended 2018/19 financial year at Group level along with a conducive for an investment vehicle. of Ambeon Capital PLC which demonstrates a corresponding 57% growth over the previous year marked by improved performance levels year at gross margin level. This set the stage Whilst the above factors had a direct impact and corporate agility. for the improved prior year growth based on the final performance, resilience and profitability for the entity at Group level. sustainability is equally a test for any business The year under review, was one filled with a This was significant given that the entity’s entity. I wish to emphasize that your Company myriad of challenges which were beyond the ultimate success depends on the investments performed in a resilient manner to post norms for an investment company, such as and returns in a difficult environment. The extraordinary results in a subdued economic Ambeon Capital. Investments perform at their Company’s ability to post positive results and business landscape. This certainly augurs optimum level when business externalities continuously augurs well of its current well in terms of the strength and viability of and changes are minimal as it is the investments and ensures it remains positive the investments made through subsidiaries confidence and trust that drives investments. about this continued journey to build value for and the decisions made in the restructuring However, the restructuring process that we shareholders. process thus far. We will continue to explore pursued during the previous year and year options to re-focus for better results for the under review at the subsidiary Ambeon The primary investment, Ambeon Holdings shareholders as a primary objective and Holdings PLC paved the way to provide greater PLC’s acquisition of technology business and ensure total compliance with governance and impetus to face the challenges successfully consolidation of the same during the year was other operational requirements. whilst enabling to post improved financial a key strategic decision which contributed performance compared to the previous year. significantly and positively towards overall returns and stability of the business. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 17 AMBEON CAPITAL PLC 18 ANNUAL REPORT 2018/19 Group Managing Director/ Chief Executive Officer’s Review

“As an investment Strategic Alignment strategy of being an investment holding A strategic alignment for the Group as company. Focus is a fundamental reason holding company, detailed in my review last financial year for sustainable business building and this is we placed a detailed was to centralize all investments under a principle on which we are moving ahead. emphasis on the core its main subsidiary. This would make your Building this investment vehicle which will Company an investment vehicle that provides ultimately enhance stakeholder value. financial performance strategic direction dispensing with day to day and to share our operational management. This has enabled us During this process of business re-alignment, to consolidate most of the financial services most of the direct staff were taken off strategies in promoting under Ambeon Holdings PLC. Through this the payroll thus making the entity more a healthy Profit & strategic decision we successfully reduced operationally viable and lean. The new Loss and Balance the debt position of the Company. More positioning and renaming as Ambeon Capital importantly we were able to build a focused infused a fresh outlook and clearer focus Sheet. Our focus on business strategy for investments. to the entity as witnessed by the continued financials for the future positive sentiments in performance and This refocus has enabled your Company to enhanced corporate image. The Company would revolve around be more attentive in areas of governance, continues to hold two properties as part of its finding mechanisms to risk and compliance from a broad group assets which are direct holdings. optimise finance costs perspective. This also extends to the renewed and vigorous action to bring positive results Review of Results for the Year to further and build a in respect of minimum public holding levels, Following a difficult and turbulent financial healthy cash flow and which is currently below the required level as year marked by many challenging per CSE rules. Volatile market conditions did externalities, we as an investment company, shareholder returns.” not permit the introduction of new investors traversed the year with magnanimous to broad base the shareholding. However, the financial results. strategic alignment has imbued clarity and enhanced the opportunities into the future. Your Group posted a healthy Rs. 17.7 Bn of revenue which reflects a 41% growth over the The Company continues to engage in the prior year. Whilst the manufacturing sector activities of capital markets, and more improved, primarily the improvement came specifically, the secondary capital markets of through the acquisition of the technology bonds. As a registered entity we possess the company Millennium IT ESP, by Ambeon capability to conduct such business and the Holdings PLC. At company level the revenue capacity is backed by expertise within. We declined due to the challenging economic believe that we need to keep a primary direct conditions and the net gain from Government source of income as an alternate mechanism securities which were below expectation. to hard investments through subsidiaries. We believe that this makes a viable and strategic The increase in selling and distribution alternative to pursue at this point of time. expenditure along with administrative expenditure at Group level by Rs. 773.5 Mn The real estate business related company, primarily was due to the same reasons of Lexinton Holdings too was disposed off during the acquisition as this was a cost that was the year as part of a restructuring process. not reflected in the last year financial. On This paved the way to reduce our debt levels the positive side of the P&L, the investment and introduce clarity and focus on the overall properties held increased in fair value while AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 19

the fair value change in financial assets were Key performance ratios reflected well with the balance in short term funding towards negative, thus brining a positive cumulative gross margin improving to 22.12% as against long term investments was corrected during effect of Rs. 225.4 Mn. At Company level the 19.87% in the previous year, (signifying the year. This reflects a more prudent and administrative costs reduced substantially due continued business confidence in subsidiary better balance sheet representation at both the divestments as explained earlier. businesses). Basic earnings power depicted the Company and Group levels. through EBITDA return on total assets grew The key problem area in the P&L was the to 8.39% from 5.33% in the prior year which As an investment holding company, we placed continued high finance costs due to having was a 57.5% increase on this return ratio. a detailed emphasis on the core financial funded investments primarily through Continuing, the return on assets stood at performance and to share our strategies in borrowed capital and to some extent the 2.23% against 1.83% during the previous year promoting a healthy Profit & Loss and Balance debt accumulation in the past due to lesser whilst return on equity improved by 31.7% Sheet. Our focus on financials for the future than anticipated returns to service the debt year-on-year to 7.78%. EBITDA is stated as would revolve around finding mechanisms to fully. At Company level, the divestments and a measure for core profit trends as it focuses minimise finance costs to further build healthy renegotiation of better interest rates etc., on financial performance on real operations cash flows and shareholder returns. We would brought the finance cost down by 17% over and in this case acts as the validation of continue to look at strengthening the balance prior year which was significant. However, investment decisions. A growth of 58.3% on sheet and distribute risks as a part of this at Group level total debt increased due to EBITDA in comparison to the previous year is process. acquisitions and the resulting consolidations significant in this context and is a noteworthy at Ambeon Holding PLC level. Part of the performance to report. The Business Focus Summary cost escalation could be attributed to interest The business under Ambeon Capital PLC rates during the year moving on an upward Looking at the liquidity ratios, a marked primarily revolves around the main subsidiary, trajectory due to the AWPLR moving upwards. improvement is visible at Company level Ambeon Holdings PLC (AHL), which is an During the year under review, the Company where both quick ratio and current ratio investment and management company. also received a total dividend of Rs. 363 Mn showing improvements during the year by Ambeon Holdings PLC, engages in strategic from its subsidiaries which helped boost the moving to 0.75 from a very low 0.23 times acquisitions and manages the same for results. The Company also paid Rs. 361 Mn as during the previous year. This introduces optimum results. To this extent, the entity is dividends to its shareholders. greater short-term stability to the Company. focused more on active investments where The restructuring of debts and debt reduction strategic direction, key resource allocations, It is heartening to report a significant through divestments were the main reasons collaborative action within Group companies, increase in profit before tax at Group level for this improvement. At Group level, the shared values across and efficiency by 220%, enabling us to post Rs. 915.4 Mn. current ratio stood at 1.03 times, almost improvement mechanisms along with broad This is an excellent performance given the the same as the year prior once again market development related networking uncertainties and volatility and stands as a demonstrating short to medium term stability. action is being pursued. validation of strategies and initiatives in force. The increased tax liability due to increased However, the debt to equity at Company level During the year, Ambeon Holdings PLC profitability at subsidiary levels reduced the rose to 220% whilst at Group level stood at forayed into the technology sector primarily impact on the bottom line but yet we were 142%. The need for further prudency in debt as a strategic acquisition, both to broad base able to post a 34% increase in net profits. The management is signified. This is an area we the business landscape and to augment the Group surpassed the Rs. 500 Mn net profit would be focusing on during the coming years core competencies. Now the Company is not mark and posted Rs. 513.89 Mn for the year, in order to improve our financial performance. only better balanced in terms of segmental which was a significant improvement. Total assets improved at Group level primarily performance (which earlier was more skewed due to an increase in investment properties towards manufacturing), but also has brought at subsidiary level. The restructuring of debt the ability to lead investments with greater at Company level with a long-term outlook competency on two future centric business reflected the true nature of the business and acumens: technology and finance. This not only gives the Company an edge over others in AMBEON CAPITAL PLC 20 ANNUAL REPORT 2018/19 Group Managing Director/ Chief Executive Officer’s Review

being a more balanced conglomerate in terms transactions and shall remain focused as a tied up capital on idle assets as strategies to of weathering industry based externalities, investment company apart from managing the curtail and reduce debt as we move along. but also equips for greater penetration into the capital markets. Region with technology. The Future What’s Next As an investment Company, there is greater Ambeon Holdings is looking at expanding its With a strong and robust governance platform scope to pursue strategic acquisition and regional footprint on technology and Fintech management of risk and related compliance, transform them into potential high performing business into the future. We are also looking will be further strengthened. The Group entities as has been our experience with at building capacities and capabilities across invested and built a risk-based ERP which Ambeon Holdings and its subsidiaries. The the manufacturing companies on the broad has been rolled out throughout the Group current structure through Ambeon Holdings principles of industry 4.0 practices and to be companies during the year along with risk is a perfect structure conducive to exploring equipped with future centric tech enabled managers at key entities and at Group level. vistas of opportunity. We would be quite open production facilities. Constant reviews by the Management and to opportunities as we move with the aim of Board are a part of the process to further increasing shareholder wealth. Your company, Amebon Capital PLC continued strengthen this area. This will be a focus area to pursue the capital markets, more focused into future. We would continue to pursue avenues to on bond trading in the secondary market, a expand into capital markets which is built business that has stood the test of time for Minimum public float continues to be an issue on clear specialist expertise that has been the entity. However, during the year under as your Company does not have the required nurtured and increased over the years. The review, due to the larger than anticipated minimum 10% required by the ‘Dirisavi’ strength of our eminent Board and their external negatives and macro-economic board. Due to this, the CSE has transferred expertise makes us a perfect contender in this fundamentals, this business did not bring the entity to what’s called a ‘watch list’. The space. This will be a focal area into the future the anticipated results. Nevertheless, as current market condition and the conditions we write this report, the results for the 1st that prevailed throughout last year were Finally, we will focus on reducing direct quarter of the year 2019/2020 along with the not conducive to broad base the ownership expenditure and optimise returns; a strategy market fundamentals are optimistic and this though the Company is keen to do so. The that we commenced during the year under will generate improved performance in this country risk being further increased with review which will continue into future. This segment in the ensuing year. downgrading of the country rating, is also a along with prudent debt management will deterrent to woo overseas investors. Weak form our operational focus. This capital market income, apart from interest and poor sentiments on quoted stocks bringing direct cash and profits to the further dampened our efforts. This is clearly Conclusion Company, acts as a strategic two-pronged demonstrated by the several companies which Amidst numerous external challenges, we income stream action for the Company which are currently on the default board unable to fared well due to the unstinted support of all if not for this the Company would be only broad base their ownership. However, we stakeholders, financial institutions and other dependent on dividend income. assure you that we would focus our efforts to partners who stood committed at all times. I resolve the matter soon. wish to extend my sincere appreciation to all The Company also owns two real estate of them. properties of substantial value. Currently, The debt position remains high fundamentally action is being contemplated on a possible due to having funded long-term investments I wish to place on record the team at Ambeon divesture of the same or to look at any with debt. The mismatch of debt between long the employees, who continued to navigate strategic ventures jointly or otherwise to term investments and short term borrowing and hold fort to post great results. To the optimize returns on these assets. has been resolved, thus creating stability in respected shareholders, for their enduring liability management. We would be looking at trust and faith to be with the Company I wish The Company having divested the rest of the improving results through investments, better financial services business and real-estate returns on capital markets and releasing arm Lexinton Holdings during the year, managed to reduce debt along with these AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 21

to appreciate your support and assure you of our continued efforts to expand your wealth.

I extend my heartfelt appreciation to the Chairman and the Board of Directors of Ambeon Capital PLC and the subsidiary boards for their guidance, advice and support in a dynamic and volatile environment. The support and stability given provides much needed confidence for growth.

As we move ahead on the foundation of a stellar performance, I am sure that Ambeon will continue its journey to deliver beyond ambition.

Sgd. Murali Prakash Group Managing Director/ Chief Executive Officer

Ambeon Capital PLC 13th August 2019 AMBEON CAPITAL PLC 22 ANNUAL REPORT 2018/19

7 8 6 2 1 3 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 23

Board of Directors

1. Mr. Sanjeev Gardiner - Chairman/Non Independent Non-Executive Director

2. Mr. Ajith Devasurendra - Deputy Chairman/Non Independent Non-Executive Director

3. Mr. Murali Prakash - Group Managing Director/ Chief Executive Officer

4. Mr. Priyantha Fernando - Independent Non-Executive Director

5. Mr. Harsha Amarasekera P.C. - Non-Independent Non-Executive Director

6. Mr. Ranil Pathirana - Non-Independent Non-Executive Director

7. Mr. Sarinda Unamboowe - Independent Non-Executive Director 8. Desamanya Deva Rodrigo - Independent Non-Executive Director

4 5 AMBEON CAPITAL PLC 24 ANNUAL REPORT 2018/19 Board of Directors

Mr. Sanjeev Gardiner Water House Coopers, Mumbai - India, on an PLC. He has also served on the Boards Chairman/Non Independent Non-Executive USAID project. He was appointed to the Board of Singer (Sri Lanka) PLC, Singer Finance Director on 20 September 2006 as a Non Independent (Lanka) PLC, and Singer Industries (Ceylon) Non-Executive Director. PLC. Mr. Sanjeev Gardiner counts over 29 years of Management experience in a diverse array Mr. Devasurendra is the Chairman of South Mr. Prakash holds an MBA from University of of businesses and is the Group Chairman Asia Textile (Private) Limited, EON Tech Southern Queensland and is also a Certified and Chief Executive Officer of The Galle Face (Pvt) Ltd, Deputy Chairman of Dankotuwa Professional Marketer (Asia Pacific) and a Hotel Group, which includes Ceylon Hotels Porcelain PLC, and Director of Ceylon Hotels Certified Management Accountant (Aus). He Corporation PLC, of which he is the majority Corporation PLC. also holds an Executive Diploma in Business shareholder and principal owner and Kandy Administration from the University of Colombo Hotels Co.(1938) PLC of which he is the Mr. Murali Prakash and is an Alumnus of the National University Owner / Chairman. He is also a Director of Group Managing Director/ of Singapore and the Asian Institute of many public quoted and unquoted companies Chief Executive Officer Management, Manila. He is also a Fellow including Cargills (Ceylon) PLC. Member of the Chartered Management Mr. Murali Prakash is currently the Group Institute (London) and Certified Professional Mr. Gardiner holds a Bachelor of Business Managing Director / Chief Executive Officer Managers, Sri Lanka. Degree (Economics and Finance) from the of Ambeon Capital PLC and Ambeon Holdings Royal Melbourne Institute of Technology and PLC. Ambeon Capital PLC is the Investment Mr. Priyantha Fernando a Bachelor of Business Degree (Banking & company and the parent of Ambeon Holdings Independent Non-Executive Director Finance) from Monash University, Australia. PLC, the Investment Holding and Management Company of Colombo City Holdings PLC, Mr. Priyantha Fernando holds a B.Sc degree Mr. Sanjeev Gardiner has been a Council Ceylon Leather Products Limited, Dankotuwa from the University of Peradeniya and a M.Sc Member of the Governing Body of HelpAge Porcelain PLC, Millennium IT ESP (Pvt) Ltd, degree in Statistics from the University of Sri Lanka (HASL) for over a decade. He is Royal Fernwood Porcelain Limited, South Asia Birmingham, England. He has over 40 years the Trustee of Sir Chittampalam A Gardiner Textiles Limited and Taprobane Capital Plus of experience in the banking and finance Trust which amongst other donations helps (Pvt) Ltd. Mr Prakash serves as a Director on sectors, as a regulator and Independent several schools around the country with the respective boards of all these private and Non-Executive Director. He was appointed endowments. He is a life member of many public quoted subsidiaries within the Group. to the Board on 27 December 2011 as an prestigious charitable organizations where Independent Non-Executive Director. millions have been donated in the name of He also serves as a Non-Executive Director of the Sanjeev Gardiner Foundation. LAUGFS Holdings Limited, LAUGFS Gas PLC, He was attached to the Central Bank of and several other subsidiaries of the LAUGFS Sri Lanka, serving in senior and diverse Mr. Gardiner was appointed as the Brand Group. capacities. He was the Deputy Governor of Ambassador for the prevention of Chronic the Central Bank of Sri Lanka, from January Kidney Disease in Sri Lanka by His Excellency With over 35 years of experience 2010 to September 2011 in charge of the the President of Sri Lanka handling key management positions Financial System Stability and the Corporate in the areas of general management, Services clusters. Mr. Fernando has extensive Mr. Ajith Devasurendra strategic restructuring, investments/credit experience and expertise in the fields of Deputy Chairman/Non Independent Non- management, manufacturing, marketing / Banking and Financial Sector regulation, Executive Director sales and business consultancy, some of his Information Technology, National Accounting previous roles include serving as the Group and Statistics, Fund Management, Risk Mr. Devasurendra has been in the financial Managing Director/Chief Executive Officer Management, Restructuring, and stabilisation services industry in Sri Lanka and counts of Browns Group of Companies, a public of financial distressed companies. At the over 35 years’ of experience both in Sri quoted conglomerate involved in trading, Central Bank he was the Chairman of the Lanka and overseas. As one of the pioneers manufacturing, finance, leisure, plantations, Financial Stability Committee, Member of in money markets, he was able to bring healthcare and strategic investments, the the Monetary Policy Committee, Member of new dimensions to the local money market Chairman of Galoya Holdings (Private) Limited the Risk Management Committee and the industry. He acted as a consultant to Price and the Sales Director of Singer (Sri Lanka) Chairman of the National Payment Council. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 25

He was an Ex-Officio Board Member in PLC , Chevron Lubricants Lanka PLC, Amana separate charities namely - The Colours of several regulatory organisations namely Bank PLC, Amaya Leisure PLC and Vallibel Courage Trust and The Wheels for Wheels Securities and Exchange Commission of Sri Power Erathna PLC. He is also the Chairman Foundation. Lanka, the Insurance Board of Sri Lanka, of CIC Agri Business (Private) Limited. the Chairman of the Credit Information Deshamanya Deva Rodrigo Bureau of Sri Lanka, Chairman of Institute of Mr. Ranil Pathirana Independent Non-Executive Director Bankers – Sri Lanka and Board Member at Non-Independent Non-Executive Director Employer’s Trust Fund, LankaClear (Pvt) Ltd Deshamanya Deva Rodrigo, a Fellow Member and Lanka Financial Services Bureau. During Mr. Pathirana was appointed to the Board of of the Institute of Chartered Accountants his career he has initiated and spearheaded Ambeon Capital PLC on 26 October 2015. He of Sri Lanka, is the former Territory Senior several key projects of national importance, is a Director of Hirdaramani Apparel Holdings Partner of PWC, Sri Lanka and Maldives, and especially in the area of the advancement of (Private) Limited, Hirdaramani Leisure a past Chairman of the Ceylon Chamber of the national payments and settlement system, Holdings (Private) Limited and Hirdaramani Commerce. He was appointed to the Board infrastructure. Investment Holdings (Private) Limited which on 26 October 2015 as an Independent Non- are the holding companies of the Hirdaramani Executive Director. Mr. Fernando has served in a number of Group. He is also the Managing Director committees at national level covering a range for Hirdaramani International Exports (Pvt) He is a Non-Executive Director of Cargills of subjects representing the Central Bank. Limited, a Director of Star Packaging (Private) Ceylon PLC and has held public sector Limited and Windforce (Private) Limited. appointments as a member of the Monetary Presently, Mr. Fernando holds the positions of Board of the Central Bank of Sri Lanka, the Chairman Commercial Leasing and Finance Mr. Pathirana is a Non-Executive Director of Administrative Reforms Committee, National PLC, Golden Key Hospitals Limited, Golden Sampath Bank PLC, Ceylon Hotels Corporation Council for Administration, Presidential Key Credit Card Company Limited, Deputy PLC, BPPL Holdings PLC, ODEL PLC & Alumex Commission on Trade and Tariffs, Telecom Chairman of Union Bank PLC and a Non- PLC. He is a Fellow Member of the Chartered Regulatory Commission and several others. Executive Independent Director at Millenium Institute of Management Accountants, UK and IT ESP (Pvt) Ltd., Ceylon Leather Products holds a Bachelor of Commerce Degree from Limited, Thomas Cook Travels Sri Lanka the University of Sri Jayewardenepura. (Private) Limited and Imperial Institute of Higher Education. Mr. Sarinda Unamboowe Independent Non-Executive Director Mr. Harsha Amarasekera P.C. Non-Independent Non-Executive Director A Director of MAS’ Apparel Board, Sarinda is currently the CEO & Managing Director of MAS Mr. Harsha Amarasekera, President Counsel Kreeda, the Nike division of MAS Holdings, is a leading light in the legal profession in Sri and heads Environmental Sustainability for the Lanka having a wide practice in the Original Group. Having joined MAS in 2001 as the CEO Courts as well as in the Appellate Courts. His of Linea Aqua, he is also a member of MAS’ fields of expertise include Commercial Law, Innovations Leadership Team and serves on Business Law, Securities Law, Banking Law the Board of Biodiversity Sri Lanka. and Intellectual Property Law. An alumnus of Ithaca College, New York, He also serves as an Independent Director Sarinda received his Executive education in several leading listed companies in the at the INSEAD School of Business, Cornell Colombo Stock Exchange including CIC University and Tuck School of Business at Holdings PLC (Chairman), Swisstek (Ceylon) Dartmouth. He is also a recipient of the PLC (Chairman), & Swisstek Aluminium Humanitarian Alumni Award 2016 conferred Limited (Chairman) Vallibel One PLC, Royal by his alma mater –- Ithaca College for his Ceramics Lanka PLC, Expo Lanka Holdings humanitarian efforts and is a Trustee of two AMBEON CAPITAL PLC 26 ANNUAL REPORT 2018/19 Our Story of Transformation & Growth

Ambeon Holdings PLC business world of tomorrow, the Ambeon Company and reposition itself as a diverse The main subsidiary Ambeon Holdings PLC Group was propelled forward under the conglomerate under the new name-Ambeon. is a public quoted conglomerate in itself and new vision of leadership, to transform the has a diverse portfolio of investments. The conglomerate into a medium sized, future During this period, the Company also broad businesses that were handled by both proof, sustainable business powerhouse. This sought be positioned as the investment and Ambeon Holdings PLC and Ambeon Capital transformation which included restructuring management company of the Group and PLC, were structured over the past one-and- of its diversified businesses bringing about thereby being fully immersed and involved a-half to two years, thus both companies will collective focus, harnessing synergies, in managing its investments. The active reflect its own identity and rise to its potential. manage internal controls, improving investments were enhanced and passive processes, optimising investments and investments were not expanded as part of Ambeon Capital PLC was founded on the improving shareholder value. It is now well this new strategy. The Company also was vision of forming a group of companies to poised to take the leap and transform latent fully involved in drawing up and handholding create a fund base that mobilises capital opportunities into lucrative ventures that subsidiary strategies whilst deploying teams by providing a range of financial services. deliver sustained value. During the year under as required to revitalize and reposition Today, the Company has evolved into an review, the Company managed to reap the businesses where required. The Company investment holding company and parent of full benefits of the restructuring process was rebranded and repositioned during the its main subsidiary Ambeon Holdings PLC, which translated into exponential growth in year, bringing in a totally new set of values which is a public quoted conglomerate and key sectors along with enhanced sustainable and business focus. has a diverse portfolio of investments. The profitability. Today, the Company is recognised broad businesses that were handled by both as a diversified mid-sized corporate that Strategic Framework Ambeon Capital PLC and Ambeon Holdings has created a formidable position within key The Group Vision 2020 and Group PLC, were restructured over the past two sectors such as textiles, porcelain, leather, IT, restructuring is based on five futuristic pillars years, this was done so that both companies financial services and real estate. which were launched during the year under will reflect its individual identity and thus rise review. to its potential. This was further built upon on a strong Governance, Risk and Compliance Corporate Strategy In its diversification endeavour, the strategic (GRC) framework, centralised Treasury An integrated Group structure was launched alliances formed between the Galle Face Hotel Management, Human Resource Management with a legal structure, corporate positioning, Group, textile giant Hirdaramani Group and and an Information Communication values, goals and the business verticals of Navitas Investments further strengthened Technology platform, to create, nurture and the Group. This resulted in creating a unique the Group’s portfolio. In order to streamline develop world-class companies which are positioning for the individual subsidiaries, work processes and frameworks, the Group positioned to grow exponentially in both local resulting in the facilitation of greater value embarked on an extensive restructuring and international spheres. enhancement to all stakeholders. The core program in the financial year 2017/18 across was to understand and nurture the purpose As a responsible corporate citizen, the Group all its subsidiaries. of its existence; this introduced clarity to the hopes to promote sustainable business business verticals to devise suitable strategic practices across the manufacturing and The Group’s portfolio comprises of brands initiatives. which have reigned high on both local and service sectors and promotes energy global platforms. The Group currently employs efficiency, the use of alternative energy and Market Space and Placement over 2900 employees collectively; they forge responsible waste and effluent management The focus of identifying and building ahead as a team, with a spirit of enthusiasm practices. industries and businesses included the active and a corporate entrepreneurship mentality. and passive investments of the Group. These We are committed to building a sustainable Strategic Framework and Current included building business strategies for and driven organisation which will be a Positioning the individual subsidiaries and the Group’s force to be reckoned with in the Sri Lankan Ambeon Holdings PLC commenced a customer value proposition for the year 2020 corporate sphere. restructuring program during the financial and beyond. Accordingly, each of the sectors year 2017/18 which was completed during implemented brand building and developed In a strategic move to reposition the entity the year under review. The primary aim was initiatives across their respective businesses. to represent the Group’s business vision and to broad base the active investments of the This has created a strong foundation for the take on the dynamic, technology - driven AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 27

respective brands within the key segments; it has established a more visible market Management presence locally and globally. The Group has long term hopes to pursue regional and global expansion through strategic alliances.

Management Corporate Strategy Building an agile and robust management Company Capacities structure supported by clearly defined and Capabilities policies, processes and procedures coupled Ambeon with a strong GRC framework to ensure Group Vision governance, risks and compliances were the 2020 focus and these were properly addressed. The Group strengthened its corporate governance processes and implemented an integrated risk management framework. Market Space and Placement Investor Appetite Company Capacities and Capabilities During the year, the Group built capacities and capabilities encapsulating people, processes, systems and related resources while identifying and filling gaps through skill acquisitions and upgrades. In addition to this, the core ideologies of The Current Positioning Augmented Core each business segment was identified Ambeon Group – Re-engineering Part of Ambeon Holdings’ future thrust was to and nurtured as a part of this process. Success make it a better-balanced entity in terms of Key businesses within the manufacturing Today, the re-emerged Group has ‘re- building a sustainable business and making sector underwent comprehensive product/ engineering success’ as its core business it future-proof. This would ensure that the process developments along with IT backed ideology. Stemming from this, our purpose Group is equipped to weather adversities, innovations to enhanced productivity and is to transform latent business opportunities both external and internal. Having this in efficiency. into lucrative ventures. This makes us a mind, expansions during the year were focused in the areas of financial services Investor Appetite unique catalyst in re-engineering businesses. These are carried forward through a set of and technology. This strategy paved the way In addition to satisfying expectations and carefully defined and nurtured values. Moving for two broad acquisitions during the last aspirations by creating sustainable value, First, the Channeling Team brings together a financial year, namely Millennium IT ESP, who optimising the resource usage and returns value proposition that helps the Group define were into technology business and Taprobane was achieved, whilst ensuring stability based who they are and achieve results beyond the Capital Plus (Pvt) Ltd, who were into financial on prudent risk reward balancing. ordinary. These values are being propagated services. This helped balance the portfolio of and expanded throughout the Group, thus the the overall Group whereby the dependency on forward thrust and collaboration is at its best. the manufacturing sector was lowered and as the results have demonstrated, the entity was able to bring almost 40% of its revenues from the non-manufacturing sector. This has now brought about a great balance which augurs well for the future. AMBEON CAPITAL PLC 28 ANNUAL REPORT 2018/19 Our Story of Transformation & Growth

The second rationale for further non- thereby reduce waste and improve capacity. on assets being more narrowly defined. This manufacturing sector acquisitions was the R&D into new technology such as 3D is includes better usage of existing hard assets future centric vision derived from our values being pursued vigorously, not only in areas to the divesting of non-core assets whilst which were to venture into the Region and of manufacturing but also integrating into building greater efficiencies based on current expand into technology and fintech based the end-customer experience. Building 3D asset deployment. Manufacturing businesses businesses. Globally, this has emerged as simulations into the web-based e-commerce deploy a fair bit of working capital and efforts one of the fastest growing sectors and has sites of Dankotuwa Group was one such are underway to see how best this could opened many opportunities regionally and expansion which perhaps is the first of its be improved. Inventory and management of globally. This, we believe will also serve as kind seen in Sri Lanka. Ambeon Group has receivables are the critical success factors for yet another reduction in the Group’s strategic established innovation as a business discipline a labour and capital-intensive business and risk (through new market expansions). This, within the main management sector, thus this will continue to be a focal area. together with the newly acquired knowledge giving impetus for innovation lead growth. and insights into technology, is expected to Business Sectors and Way Forward help our manufacturing businesses perform The Company is also looking into improved The Company now possesses a greater better through efficiency building measures. business in the areas of Fintech. Given balance as a conglomerate after the The core competencies of financial services global trends, this remains beyond a buzz technology cluster was added and financial and knowledge hub thus gets further word having made in-roads into making services been strengthened. augmented with technology becoming a consumer lives more meaningful in many strategic and core business. markets; with innovative products spanning The Company will continue its efforts in the cashless economic activities to innovative capital markets; they are hopeful of bringing With these latest additions, the Company and disruptive channels. Whilst being about improved and positive results in the now has a solid background comprising of realistic in understanding local compliance year ahead despite the current market knowledgeable/competent management, requirements together with the astuteness sentiments including forex and interest financial services, advisory services along required to adapt such transformations, the rate vacillation. This is expected to give an with technology domain expertise which act exploratory activities to pursue this area is on additional boost to the results (quite apart as the three pillars that consolidate the other the cards. Leading the use of technology to from the other hard asset-based investments). businesses all together. This was an important build efficiencies in financial services is also competency for an entity to transform into an aim. The segmental review included in this an investment and management company. Report will give an overview of all the main Ambeon Holdings is now firmly poised to The effort to rebrand and refocus the business segments (appended for shareholder grow and build stakeholder value across all technology sector is also a part of this information). This would provide you a its investments in a much more positive and efficiency building process within the business summation of the broad activities and future holistic manner. verticals. As much as other businesses focus. have embarked on being more meaningful Building Efficiency for tomorrow, technology businesses in Governance, risk and compliance will be a Ambeon Holding is on a continuous quest to themselves need to build future centric focal point of the Company given the diversity build efficiencies across all its investments, enablement solutions, thereby being a catalyst in business holdings and the ever-changing be it manufacturing or others. The industry in this journey of transformation. The future regulatory and external environment. Group 4.0 based revamping is being driven at business focus under three broad pillars will has not only ensured a robust ERP system to the manufacturing facilities. This means be current business, building efficiencies to capture and monitor activities, but also the understanding future consumer expectations have a better delivery system and having a presence of risk heads (as required) to board and building the manufacturing process to future centric business would form the three committees in order to monitor and advise. cater to the same. The reduced delivery times broad verticals that Millennium IT ESP will The Company at a Group level has risk as a due to technology enabled efficiency building work on in order to build the organization’s key discipline, therefore the focus remains measures using IoT and Artificial intelligence future capabilities. high. (AI) to move through manufacturing faster and efficiently is considered important and The other efficiency-based activity will be The process of strengthening the skills and is being examined in-depth. The factory focusing on operations to ensure greater capabilities of staff across the Organization integration is an effort to be seamless and returns on cash deployed along with return shall continue to remain a core agility-based focus monitored directly by the CEO and HR; AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 29

this will be imperative to build a resilient and markets, improve business efficiencies An Investment Holding and Management future centric workforce. The four pillars of and build sustainable business models that Company, Ambeon Holdings PLC has evolved values explained elsewhere would form to be will continue to create greater wealth for through its many acquisitions and has a the core of this process thus enhancing the its stakeholders. The tag line of Beyond presence in diverse segments catering to local Group-wide HR focus. Ambitions is to be truly lived as the journey and international markets. The subsidiaries of progresses. Ambeon Holdings include:- Ambeon Holdings today stands as one of the most balanced conglomerates in the Introduction to Strategic Business country. The ambitions are to conquer newer Units The strategic subsidiaries are aligned under Ambeon Holdings PLC.

Sector The Company Our People Key Business Manufacturing South Asia Textiles Limited 1,068 number Specialised fabric for leading global brands such as Victoria Secret, Next, Marks & Spencer, Tesco, Calvin Klein, Decathlon and Adidas Dankotuwa Porcelain PLC 669 number Manufacturers of porcelain tableware and gift items for global giants such as Oneida, Macy’s, Country Road, Lenox, John Lewis, Crate & Barrel, Megros, Jashanmal, Ralph Lauren, the Walt Disney Company and Dilmah Royal Fernwood Porcelain 534 number Leading manufacturer and large-scale manufacturer of high quality Limited white and decorated porcelain tableware and figurine ornaments Ceylon Leather Products 337 number A manufacturer of quality leather footwear and accessories Limited Information Technology Millennium IT ESP (Pvt) Ltd 255 number Sri Lanka’s leading Systems Integrator and Information Systems Provider for many industries, including banks and finance, telecommunications, apparel and leading conglomerates Financial Services Taprobane Capital Plus (Pvt) 41 number A leading financial services provider with a wealth of experience in Ltd capital markets in Sri Lanka Real Estate Colombo City Holdings PLC 03 number A Company with a rich heritage of over 100 years with ownership of property in strategic locations.

Performance as a Group Ambeon Holdings PLC posted a PBT of 1.25 billion for 2018/19, almost 118% growth when compared to its 2017/18 PBT of Rs. 571 million. The Operating Cashflow before Working Capital changes surpassing Rs. 1.39 billion was achieved during the reporting year when compared to Rs. 918 million, a growth of 52%. The Group further recorded Revenue surpassing Rs. 17.73 billion compared to that of Rs. 12.27 billion in 2017/18, which was a whopping growth of 45%. Group Profit After Tax (PAT) was Rs. 864.5 million, a growth of 27% when compared to the Rs. 681 million recorded last year. AMBEON CAPITAL PLC 30 ANNUAL REPORT 2018/19

Introduction to Strategic Business Units

Key Indicators at a Glance

LKR 37% Contribution to 5,257 255 Group Revenue Mn Total Employees of Group Assets AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 31

Technology Sector Performance business strategies with Ambeon Group’s Millennium IT ESP was acquired by the Group 2020 vision while re-consolidating its position Millennium I.T.E.S.P. (Pvt) Ltd in December 2017. The year under review as a leading Systems Integrator in Sri Lanka. (Millennium IT ESP) 2018/19 marks the Company’s first year of Therefore, the Company focused its efforts operation under the Ambeon Holdings Group. on re-establishing its market presence under About the Company The Company recorded a significant growth in a new brand and parent by prioritizing in building confidence relevant to the transition Millenium IT ESP is one of Sri Lanka’s leading revenue with an increase of 418% in revenues during the year 2018/19. with key stakeholders. Systems Integrator and Information Systems Providers. Over the years, the Company has Millennium IT ESP’s overall performance Way Forward built a diverse clientele across a wide range during the year under review was satisfactory, As part of its new strategic direction, of industries including telecommunications, achieving substantial growth over prior years. initiatives were introduced to expand the banking/financial services, insurance, apparel The foremost contributor to the Company’s domestic market share which in-turn would manufacturing, and hospitality services. The revenue was the telecommunications sector. act as a springboard to venture into overseas local and international accolades won by the However, this is expected to change within markets within the next few years. Company bear testimony to the Company’s the coming three years with the Banking track record of success. and Financial Services sector significantly Millennium IT ESP partnered with the global increasing its contribution to the CAGR of the consulting firm STAX Inc. to develop a 3-year Strengths & Opportunities Company’s revenue. In the medium term, the strategic plan. As part of this process, the Strengths: Company will focus on transforming itself Company embarked on a re-branding process • Established presence in the Sri Lankan from a predominantly product-based service to focus Millennium IT ESP’s direction and IT sector for two decades provider to a solutions-based service provider. aspirations to be a future centric, customer focused solutions enabler and as a Premier • Strength in emerging and high growth Strategic Focus Technology Company. sectors of telecommunications and The Company’s strategic mandate during the financial services year under review was to build and maintain To execute this plan and propel the Organisation towards the new strategic • Clientele comprising of corporate confidence and trust amongst its existing direction, more resources will be deployed, entities clientele in view of its change in ownership. This was successfully achieved by continuing and innovative solutions will be offered. This • Professional expertise in IT and to serve its clientele at the highest level of would in time increase the client base in the emerging areas such as robotics, expertise and quality. banking, manufacturing, construction and real artificial intelligence, big data and estate sectors, especially as these sectors analytics. The Company’s success is built on the are transforming into highly technologically three pillars of innovation, a ‘customer first’ dependent and technologically driven • Global partnerships with firms including philosophy, operational excellence and global industries. Oracle, Microsoft, IBM, Dell, Hitachi and partnerships with leading brands such as Infosys. Oracle, CISCO, Microsoft, IBM, Dell, Hitachi Both these initiatives are poised to be the key and Infosys. drivers of the Company’s strategic direction Opportunities during the next three years. Implementation • Well-positioned to pursue global Millennium IT ESP increasingly deploys of the business strategy will be the primary opportunities posed by fintech and other resources to offer solutions to clients ranging focus of Millennium IT ESP during this enterprise businesses from simple HR solutions to complex financial timeframe. The strategy will also include solutions. A key development in this area changes to the internal organisational • Create market positioning within the was the deployment of a dedicated team to structure and processes; this will propel fast-developing regional markets oversee development in the emerging areas of the Company towards a direction of growth Artificial Intelligence, Business Analytics, Big and profitability. The Company will also be Data and Robotic Process Automations. enabled to build and strengthen its brand positioning as well as to facilitate market As the newest subsidiary of the Ambeon expansion across local and global platforms. Group, Millennium IT ESP’s strategic priority for the year under review was to align its AMBEON CAPITAL PLC 32 ANNUAL REPORT 2018/19

Introduction to Strategic Business Units

Key Indicators at a Glance

LKR 47% Contribution to 5,396 1,068 Group Revenue Mn Total Employees of Group Assets AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 33

• Penetrating untapped geographical international certification standards and Textile Sector markets for market development implemented quality circle concept to ensure South Asia Textiles (Pvt) Limited quality remains the key focus within entire • Growing demand for specialised fabrics organization. such as pre-washed fabrics in the About the Company international sphere Sustainable manufacturing and business South Asia Textiles (Pvt) Limited (South Asia • Earnings in dollars and the favourable practices also remained an important aspect Textiles) is Sri Lanka’s third largest textile exchange rate conducive for export for South Asia Textiles. During the year, the manufacturer and supplier (exporter) of denominated revenues. Company completed the expansion of the organic certified weft knitted fabrics made effluent treatment facility and has pledged from cotton and polycotton blends. Since its • Comparatively low-cost base as a to become a “Zero discharge” of carbon inception in 2004, South Asia Textiles has competitive advantage emissions by 2020. developed these competencies together with Performance a focused effort on ethical manufacturing Way Forward practices and highest standards of quality. The Company marked a successful year, Innovation and research & development will This has resulted in the Company becoming having achieved revenue increase of 7%, a become the key strategic imperatives for the a principal supplier of knitted, dyed, finished, total sales volume growth of 8% and a gross Company in the ensuing years and will be the printed, brushed, sueded and pre-shrunk profit margin of 15%. Despite challenging primary drivers of sustainable competitive fabrics for globally renowned brands such as market and economic conditions, the advantage. Victoria Secret, Next, Marks & Spencer, Tesco, streamlined and improved programmes Calvin Klein, Decathlon, and Adidas. Today, Its targeting speed and efficiency, loyalty South Asia Textiles continues to be one of manufacturing facility located in Pugoda has a amongst the existing customer base, the five major players in Sri Lanka’s textile capacity to manufacture 800,000 kilograms of maintenance of high-quality standards and industry – one which is dynamically changing textiles per month, the facility is operated by ethical business practices saw the Company due to the developments and enhancements our team of dedicated and highly trained staff. grow impressively when compared to its in technology. South Asia Textiles will previous results. therefore continue to enhance and upgrade Strengths & Opportunities manufacturing processes and procedures to Strategic Focus Strengths: remain relevant within the industry’s operating • Third largest textile manufacturer in Sri During the year, South Asia Textiles continued environment as well as to meet the changing Lanka to focus on increasing its presence in the needs of customers. The new machinery will global market through a market penetration • Developed strong competencies in not only enhance manufacturing processes strategy to ensure that the Company retains but will also help achieve South Asia Textiles’s product development, manufacturing its position as one of the Sri Lanka’s pioneer and customer service sustainable manufacturing goals in the long textile manufacturers. Initiatives were term. • Scale of operations and manufacturing introduced to improve product quality by capabilities enhancing manufacturing processes and investing in new technology and machinery • Established track record in servicing to achieve highest quality standards. South leading international brands Asia Textiles continues to subscribe to • Trained workforce with specialised skills

Opportunities:

• Equipped to meet the evolving needs of the international fabric market.

• Sourcing textiles for local manufacturers who rely on imported fabrics. AMBEON CAPITAL PLC 34 ANNUAL REPORT 2018/19

Introduction to Strategic Business Units

Key Indicators at a Glance

LKR 7% Contribution to 3,657 669 Group Revenue Mn Total Employees of Group Assets AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 35

Performance The Company’s international market reach Porcelain During the year under review, the Company focused was strengthened significantly by renewing Manufacturing Sector on increasing market share. Accordingly, resources its partnerships with existing partners while Dankotuwa Porcelain PLC were allocated to diversify the product range simultaneously acquiring new clients in Europe and from traditional tableware to porcelain gift range, Scandinavia. Its presence in the Middle Eastern jewellery etc. Research and development initiatives Region was strengthened through its local partner About the Company were strengthened for the sector. Innovative within the Region, Jashanmal. Dankotuwa was also The Porcelain Manufacturing Segment of Ambeon marketing practices were also implemented during able to recover and renew its relationship with US – Capital PLC comprises of Dankotuwa Porcelain the year with a special emphasis on improving the retailer Macy’s (US) with the re-instatement of the PLC (Dankotuwa Porcelain) and Royal Fernwood sector’s digital and social media presence. CTPAT certification. Porcelain Limited (Royal Fernwood Porcelain). Both Companies operate in distinct markets and Manufacturing process improvements were Aligning with the Vision 2020 strategy (which enjoy a relatively high combined market share introduced to improve cost efficiencies and included process improvements in manufacturing), of approximately 50% to 60% of the domestic streamline the overall production process. This Dankotuwa undertook a complete process and porcelain market. resulted in the porcelain sector improving its overall value-stream mapping to enable implementation efficiency and meeting new product manufacturing of selective automation of processes and process The Company’s Signature Showroom is located in requirements. re-engineering. While these measures increased Colombo 7, while there are six other showrooms the overall productivity and efficiencies of the in key locations across Colombo and Negombo. The year under review was a year of transformation manufacturing plant, it also enabled maximum The Company’s advanced manufacturing facility for Dankotuwa Porcelain. Many of the strategic capacity utilization and maintained the overall is in the town of Dankotuwa and has a capacity initiatives implemented, ensured positive results annual production capacity without additional to produce approximately 5.4 million pieces per generating a growth in profitability. As a result, the capital infusion. annum. Company was able to turn around from its loss to a profitable scenario. During the year under review, the Company moved Strengths & Opportunities ahead to improve employee motivation levels Strengths: A key development for the Company was the through the I-CARE initiative within the Dankotuwa factory. The management entered into a three-year • Global client-base of leading brands and is increased domestic market penetration achieved collective agreement with the Trade Union of which a supplier to international retailers with the by the consolidation of modern trade channels. 54% of Dankotuwa Porcelains employees are requisite production capacity to handle large In-line with this strategy, the Company was able members. These HR initiatives helped foster cordial, orders. to establish a presence within leading malls such as Arpico and Damro. This together with the inclusive and mutually beneficial management- • Pristine whiteness of porcelain ware – a key enhanced dealer network increased accessibility employee relationship, which is vital to create value differentiator and enhanced island wide presence. Expanding for all stakeholders in the long term. • Track record of offering and delivering distribution channels greatly helped extend the international quality standards. Company’s reach and resulted in a domestic Way Forward All products comply with ISO 9001:2015 and revenue growth of 24% for the year under review. Despite challenges in the external operating CTPAT certification requirements. environment marked by decreased spending on • Island-wide presence through showrooms and The Company’s newly opened showrooms in discretionary items, the Company managed to dealer network Negombo and the Crescat Boulevard which is increase its profitability levels. The concentrated strategically placed in close proximity to five-star strategic focus resulted in an increased domestic • Cruelty free, Lead Cadmium free, hotels, catering to both local and foreign customers, revenue earnings increase of 24% to Rs. 678 environmentally friendly products. have performed well during the year under review. million in the year under review compared to Rs. Opportunities: The newly refurbished Signature Showroom has 549 million in the previous year. Furthermore, • Growing demand for lifestyle products in the also seen increased footfalls during 2018/19. the profitability of the Company saw a complete long term in the local market. turnaround, recording Rs. 238 million compared to • Expanding to international markets and Strategic Focus the loss of Rs. 81 million realised the previous year. unchartered territories To meet new trends in customer preferences for The Company’s main strategic priority for the • Expanding the product line with new gifts, specialised items inspired by traditional lamps future would be to increase market share both innovative products such as porcelain – (pahan or diyas) was introduced. Porcelain jewellery domestically and globally. This will include inspired jewellery. was also introduced during the year under review. Focused efforts were made to partner with gift expanding distribution through partnership with • Leverage new technologies and automation centres and specialist outlets such as the Zesta Tea. retailers including setting up of a new showroom. solutions to increase efficiency levels Dankotuwa Porcelain actively targeted boutique One such showroom will be at the Shangri-La Mall outlets located in urban and semi-urban cities and Colombo, which is expected to be operational by the towns to reach actual and potential target audience third quarter of 2019. with the new range of products. AMBEON CAPITAL PLC 36 ANNUAL REPORT 2018/19

Introduction to Strategic Business Units

Key Indicators at a Glance

LKR 5% 534 Contribution to 1,567 Total Employees Group Revenue Mn of Group Assets AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 37

Porcelain • Capture a niche area in the local market Royal Fernwood Porcelain continued to for lifestyle products which would expand develop new products during the year under Manufacturing Sector with envisaged improvements in the review to create an expansive range of Royal Fernwood Porcelain Limited market. products to be in line with changing consumer Performance trends, preferences and demands. During About the Company the year under review, 62 new products were The Company’s biggest challenge during the Royal Fernwood Porcelain Limited (RFPL) introduced to both the domestic and export year was the subdued Sri Lankan economic mainly focuses on the export market with markets. One innovative product that was conditions which slowed down planned nearly 70% of its revenue generated from introduced for domestic consumers was the business growth in the domestic market. export operations. The Company’s caters to first ever porcelain rice cooker which has However, despite lower consumer spending, the young and contemporary millennials with acclaimed by the target market. the Company was able to increase domestic an affinity towards high-quality, fashionable sales revenue by Rs. 98 million. Increasing and value-for-money porcelain products. An Way Forward fuel costs coupled with the depreciation of the extensive array of glazes, colours, and hand To meet its strategic objectives, the Company Sri Lankan Rupee (which increased the costs painting has created a favoured positioning continued its efforts to enhance internal of imported raw materials), had a formidable amongst the target consumer group. The process efficiencies while upgrading impact on the cost of production. However, Company’s success is proven by the Silver manufacturing processes and equipment this impact was greatly controlled as the Award received in the Minerals and Mineral in an overall effort to deliver higher quality Company’s main source of revenue was from Based Products Sector Large Category at the products. dollar-based exports. NCE Export Awards 2018. Production of porcelainware is labour From a sales perspective, the Company’s Strengths & Opportunities intensive. Therefore, it is imperative that performance significantly improved with sales employees are well-versed in meeting Strengths: volumes increasing by 13% resulting in a new production standards and learn new • Contemporary vibrant designs with an revenue growth of Rs. 107 million during the techniques in porcelain manufacture to cater expansive product range of porcelain year under review to reach Rs. 951 million to tomorrow’s consumer, today. ware and figurines. (compared to Rs. 844 million in the previous financial year). The Company’s extensive • Large scale manufacturing capacity efforts to improve process efficiencies and geared to produce quality products. manage costs helped derive a 13% increase • Established relationships with in gross profits with a resultant 51% increase key brands and well-developed in net profit. departmental stores worldwide.

• Distribution capacity which is built on Strategic Focus the Dankotuwa Porcelain local footprint. As part of its focused efforts to increase share of the domestic market, the Company Opportunities: has embarked on partnerships with local • Leverage new technologies and supermarkets such as Arpico and other retail automation solutions to increase chains to make our products accessible to production efficiency gains. a larger captive market. The Company was • Ability to respond to market needs with also successful in securing orders from the new innovative products. corporate sector. During the year, an order was secured to produce 360,000 mugs for • Expand to unchartered business Milo, a Nestle Group brand as part of their territories globally. efforts to increase company presence in the domestic promotional gift items market. As a result, the Company was nominated as a registered supplier of promotional items to the Nestle South Asia region. AMBEON CAPITAL PLC 38 ANNUAL REPORT 2018/19

Introduction to Strategic Business Units

Key Indicators at a Glance

LKR 3% Contribution to 2,726 337 Group Revenue Mn Total Employees of Group Assets AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 39

Footwear Sector Performance current financial year compared to the previous During the last two years, the Company faced financial year. Ceylon Leather Products Ltd a decline in demand for leather products and accessories owing to the decline in demand for During the year under review, the Company About the Company leather products and accessories by the B2B concentrated on consolidating its DI brand market segment. As an established supplier rejuvenation through innovative marketing and Ceylon Leather Products Limited (Ceylon of military shoes, the Company’s production advertising mechanisms to reach out to fashion Leather Products) was established in 1939 to capacity and sales were predominantly conscious millennials. These initiatives were supply footwear and accessories to the British dependent on this market. This has had a direct also aligned to the DI brand’s renewed focus Armed Forces. Continuing in this tradition impact on the overall financial performance on establishing its presence in the Sri Lankan the Company established itself as the main of the Company over the last two financial footwear market. supplier to the Sri Lankan Armed Forces and is years. Changing demand for traditionally recognised as the largest supplier of footwear established business lines prompted the overall To align the existing practices with modern to key government institutions. Ceylon Leather manufacturing and marketing focus to be re- trends in consumer retailing, Ceylon Leather Products was the first shoe manufacturer aligned with new emerging market trends. Products’s revamped the DI website offers in Sri Lanka to obtain the ISO 9001:2015 for online purchase of shoes. The brand has certification. Strategic Focus also established itself more comprehensively on popular social media platforms such as The Company identified its limited retail The Company’s manufacturing facility located Facebook and Instagram. presence across the island as a barrier in in Balummahara, employs a skilled workforce promoting its products island-wide and creating Success of the Company’s web presence is of 337 employees (including executives). The a brand affinity. The Company embarked on a noted through the increasing hit rates and production plant has a capacity of 40,000 revamping program of its network of DI retail the awards received for the best website in shoes per month. Ceylon Leather Products outlets located across Western Province. A the ‘fashion or beauty’ category at the Web has an island-wide footprint of 10 retail outlets program was also commenced to realign them Marketing Association’s annual Web Awards under the DI brand. to the new branding that was launched during 2018 competition held in September 2018. the 2017/18 financial year. These DI showrooms Strengths & Opportunities are expected to increase traction, footfall and Way Forward Strengths: attract actual and potential customers in the medium and long term. Ceylon Leather Products The Company hopes to expand its product • Manufacturing capacity and capability to also opened its 10th retail outlet in Negombo on range by diversifying to provide a wider range handle large orders June 2018. of leather and non-leather accessories. Ceylon • Track record of servicing government Leather Products hopes to increase its offerings sector As the DI brand garners increased recognition to existing customers while attracting new and acceptability in the domestic footwear customers through this new range of products • Niche in specialised footwear segments and accessories marketplace, the production which are expected to be launched in the future. such as chef shoes, safety shoes and capabilities and processes will need to be school shoes upgraded to adapt to the changing market To give customers a more expansive product offering, the Company hopes to establish • Heritage of a well-established brand, requirements. partnerships with leading international brands home grown brand The Company launched a rebranding exercise in through sole distributorship to market leading • Enhanced distribution network 2017/18 along with the strategic direction and brands in Sri Lanka. A partnership has been established with Sketchers, a renowned sports Opportunities: the overall transformation of the Group. Ceylon Leather Products which was traditionally known brand whereby Sketchers shoes will be available • Increased demand for footwear which is as a footwear company for the military and in our retail outlets from August 2019 onwards. inline with new trends and fashions premier manufacturer of school shoes, focused last financial year on re-building a strategy; The Company’s new strategic direction augurs • Growing urbanisation and demand for transforming itself into a lifestyle brand. a sense of positivity for business growth in the fashionable footwear medium to long term. As an established leather • Customer affinity towards brands and The newly launched brand and revamped retail footwear manufacturer, CLPL hopes to venture international brands outlets created a 71.4% growth in sales volumes into new niche markets to supply customised in the retail channels. However, Ceylon Leather high-quality footwear. Products’s revenue declined by 5.34% in the AMBEON CAPITAL PLC 40 ANNUAL REPORT 2018/19

Introduction to Strategic Business Units

Key Indicators at a Glance

LKR LKR 16 2,381 03 Mn Mn Total Employees Contribution to Group Revenue of Group Assets AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 41

Real Estate Sector Performance The Company is strengthened by its heritage During the year under review, the Company and unique positioning within a diversified acquired Lexinton Holdings (Pvt) Ltd for Group which ideally positions the Company to Colombo City Holdings PLC an investment of Rs. 414 Mn. Through this create a sustainable competitive advantage. strategic investment, the ownership of the These strengths could be harnessed by About the Company Group’s Head Office building located at Gothami Colombo City Holdings to explore the lucrative The real estate segment of the Group Road is also vested with Colombo City Holdings, investment opportunities in Sri Lanka’s comprises of Colombo City Holdings PLC thereby making Colombo City Holdings the burgeoning property market. (Colombo City Holdings). The Company which Group’s dedicated property management and was previously known as Colombo Pharmacy real estate company. has a rich legacy spanning over 100 years in the ownership of prime property at strategic The revenue of the Group mainly consists of locations in Colombo. the rental income from its properties located in Union Place and Gothami Road. Formerly known as the Colombo Pharmacy, the Organisation ventured into real- The cashflow position of the Company estate management in July 2013 and was significantly improved during the current subsequently renamed Colombo City Holdings financial year. The Company’s reserves PLC. Today the Company owns prime real enhanced to Rs. 2 Billion. The Company has estate and manages rental properties as core taken initiatives to prudently invest these funds business areas whilst investing prudently within the Ambeon Group. This strategy has any excess liquidity. Company also manages greatly improved the Group’s overall profitability Ambeon Groups’ corporate office building levels. The Company exercises prudence situated in Gothami Road, Colombo 8. and stringent risk assessment criteria when considering its investment options. Strengths & Opportunities Way Forward Strengths: The Company hopes to leverage its strong • Property located in key strategic financial positioning to make prudent and locations strategic investments which will transform • Expertise in property development and the Company from a rental property holder management. to a modern and niche property developer. Opportunities: Taking cognisance of the emerging trends in the property development arena the Company • Leverage on the growing real-estate hopes to make strategic and opportune market to venture into lucrative business investments in the real estate sector to enhance areas. value for its shareholders in the medium and long-term horizons. AMBEON CAPITAL PLC 42 ANNUAL REPORT 2018/19

Introduction to Strategic Business Units

Key Indicators at a Glance

LKR LKR 41 103Mn Total Employees Contribution to 755 Mn Group Revenue of Group Assets AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 43

Financial Services Opportunities review was to conduct a strategic review in • Mandate to diversify its business consultation with MTI Consulting seeking to Sector interests and optimise synergies across explore and identify future opportunities for Taprobane Capital Plus (Pvt) Ltd the Ambeon Group of companies. Taprobane Capital Plus within the financial services industry in the future. Performance About the Company The financial services business of the Group The Financial Services Segment of Ambeon Way Forward provides the stability and lends support to the Capital PLC comprises of Ambeon Holding Aligning to the direction provided from strategic diversification of the Ambeon Group’s PLC’s wholly owned subsidiary, Taprobane the strategy mapping exercise conducted business interests. Taprobane Capital Plus has Capital Plus (Pvt) Ltd (TCP) with a range of during the year under review, the Company performed satisfactorily during the year under business interests in financial and investment is reviewing an all-encompassing strategic review, considering the challenging business services. Taprobane Capital Plus in turn has direction for the financial services segment of landscape. three subsidiary companies - Taprobane the Group to capitalise on latent opportunities Investments (Pvt) Ltd, Taprobane Securities in the developing financial services sector. Being a part of the financial services (Pvt) Ltd and Taprobane Wealth Plus (Pvt) industry, prevailing global and local economic Ltd. The Company is reviewing its strategic re- conditions negatively impacted business positioning as a ‘boutique financial services operations. As such, the Company’s Taprobane Capital Plus (Pvt) Ltd (TCP) company’ that offers a range of services performance was subdued yet satisfactory, was acquired by Ambeon Holdings PLC to serve lucrative industries and business compared to industry. The Company traversed in February 2018. The Company offers a sectors in Sri Lanka. The Company is well- through challenging business conditions range of financial and investment services positioned to capitalise on such opportunities and subdued market conditions recording to select clientele. The Company’s financial presented by the Fintech industry and it satisfactory results. services business offers money brokering hopes to work towards aligning business services for B2B clients mainly in the banking operations to enable the achievement of the The money brokering operations of the and financial services industry, while the Group’s vision of creating a world-class brand Company achieved a slight growth despite the Stockbroking services business mainly portfolio. challenging market conditions (mainly due to operates within the retail marketspace. The the trustworthy relationships built with our investment services arm of the Company Another area considered to be a step in the clientele over the years). Revenue declined concentrates on Bond investments for third right direction is the strengthening of the by 2.51% to Rs. 82.7 million during the year parties and strategic investments for the regulatory and governance framework in under review compared to Rs. 84.8 million in Ambeon Group. The Company also provides the coming years. Such regulations will go a the previous financial year. Treasury and strategic financial services to long way in improving customer confidence the Ambeon Group of companies. while helping to stabilise the financial and The performance of the Company’s investment services industry thus infusing stockbroking services were below Strengths & Opportunities greater confidence. These developments will expectations however, achieving a revenue of improve overall industry performance while Strengths: Rs. 9.8 million during the year under review enabling Taprobane Capital Plus to take a • Expertise in capital markets and compared to Rs. 20.9 million in the previous longer-term focus on business strategies. well-experienced management team financial year. who counts over two decades of specialised capital market experience. Strategic Focus

• Renowned as a pioneer in the Sri The strategic focus for the year under Lankan bond market and credited to review was to maintain business operations have managed Sri Lanka’s largest non- at acceptable levels despite the prevailing bank listed debt issue. challenges in the operating environment. A key activity of the Company during the year under • Ranked among the top three money brokers in Sri Lanka and is one of the few profitable stockbrokers operating on a lean structure within the country. AMBEON CAPITAL PLC 44 ANNUAL REPORT 2018/19 Corporate Governance

Ambeon Capital’s corporate governance structure has been designed • Appointing and reviewing the performance of the CEO to ensure conformity with regulatory compliance and industry • Monitoring systems of governance and compliance best practices. The central objective is to adhere to principles of accountability, participation and transparency. We believe this is • Overseeing systems of internal control, risk management the bedrock for the creation, enhancement and maintenance of a • Determining discretions/authorities delegated from the Board to the sustainable business model. executive levels

The principles of good governance have been instilled across all levels • Reviewing and approving major acquisitions, disposals and capital of the Group through a commonly held set of corporate values and expenditure code of conduct and an internal control system that is constantly monitored and improved. During the year, all systems and procedures Composition and Balance of the Board were reviewed for compliance, transparency and accountability in The objective in formulating the board composition is primarily to ensure all business activities, and where necessary, have been replaced or regulatory compliance and also to maintain a healthy balance between realigned for greater internal control. the Executive, Non-Executive and Independent Directors to facilitate access to in-depth business knowledge, while also ensuring access to Continually striving to improve the quality of our governance system, experience, objectivity, and independent oversight. the Board confirms that Ambeon Capital PLC has been and is, fully compliant with all the mandatory provisions of the Companies Act No. In line with the above objectives, the present Board comprises of Eight 7 of 2007, Listing Rules of the Colombo Stock Exchange (CSE) and the (08) Directors of whom Seven (07) are Non-Executive Directors and One Securities and Exchange Commission of Sri Lanka Act (SEC), except Executive Director. The Non-Executive Directors provide considerable for the rules on minimum public float and all other legislation and rules depth of knowledge collectively gained from experiences, whilst serving applicable to the businesses of the Group. Further, the Group’s practices in a variety of public and private companies in various industries. The are in line with the Code of Best Practices on Corporate Governance Board includes one qualified Chartered Accountant who provides the jointly advocated by the SEC and the Institute of Chartered Accountants Board with the requisite financial acumen and knowledge on financial of Sri Lanka (CA Sri Lanka). matters.

1. The Board Board Skills The Board is the highest governing body of the Group and during Collectively, the Board represents a wealth of diverse exposure in the the year it continued its efforts to improve governance practices to fields of business, finance, economics and marketing which provides safeguard the best interests of shareholders and other stakeholders. the Company expert knowledge to develop strategies and interpret market trends. Further details of their qualifications and experience are The role of the Board includes: provided under the Board Profiles section of this Annual Report in pages • Providing entrepreneurial leadership to the Group; from 24 to 25.

• Providing strategic guidance and evaluating, reviewing and The Board considers that the composition and expertise of the Board approving corporate strategy and the performance objectives of the is sufficient to meet the present needs of the Group, but will continue Group; to review the composition and the mix of skills and expertise on an • Approving and monitoring financial and other reporting practices ongoing basis to align it to the business needs and complexity of the adopted by the Group; Group’s operations.

• Reviewing management performance in meeting the agreed goals, The composition of Board of Directors during the financial year and as monitoring the reporting of performance and ensuring that the at date was as follows: necessary financial and human resources are in place for the Company to meet its objectives.

• Reviewing HR processes with emphasis on succession planning for the top management AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 45

Name of Director Position the year’s Board meetings into their respective calendars. The Board’s annual meeting calendar is prepared with the consensus of all directors Mr. Sanjeev Gardiner Chairman/Non Independent Non- and is tabled at a Board meeting held in the final quarter of the financial Executive Director calendar of each preceding year. Mr. Ajith Devasurendra Deputy Chairman/Non-Independent Non-Executive Director To ensure that Board meetings are conducted effectively and efficiently, Mr. Murali Prakash Group Managing Director/CEO the time allocation for each agenda item is determined. Members of the Mr. Priyantha Fernando Independent Non-Executive Director management and external advisors are invited as and when required to Mr. Harsha Amarasekera Non-Independent Non-Executive attend Board meetings to present proposals and provide further clarity Director to the Board. Mr. Ranil Pathirana Non-Independent Non-Executive The Board meets quarterly with a view to discharging its duties Director effectively. In addition, special Board meetings are also held whenever Mr. Sarinda Unamboowe Independent Non-Executive Director necessary to deal with specific matters. A total of 3 meetings were held Desamanya Deva Rodrigo Independent Non-Executive Director during the financial year. The attendance of directors at these meetings Table 1 – Composition of the Board is set out in the table below:

Board Independence Name of Director Position The Board accommodates independent Directors in line with regulatory Mr. Sanjeev Gardiner – Chairman 3/3 stipulations. Based on the annual declarations made by each of the non- Mr. Ajith Devasurendra – Deputy Chairman 3/3 executive directors in accordance with the requirements of the Listing Mr. P.D. J. Fernando - Director 2/3 Rules of the CSE, Mr. Priyantha Fernando, Mr. Sarinda Unamboowe and Mr. Murali Prakash – Group Managing Director/CEO 3/3 Desamanya Deva Rodrigo are considered independent. Mr. Harsha Amarasekera – Director 3/3 The Board considers the other four non-executive directors, namely Mr. Mr. Ranil Pathirana – Director 2/3 Sanjeev Gardiner, Mr Ajith Devasurendra, Mr. Harsha Amarasekera and Mr. Sarinda Unamboowe – Director 1/3 Mr. Ranil Pathirana as non-independent, as they are nominees of CHC Desamanya Deva Rodrigo - Director 3/3 Investment (Private) Limited and ARRC Capital (Private) Limited, the Table 2 – Board Meeting Attendance major shareholders of the Company. Access to Information Division of Responsibilities To enable the Board to make informed decisions, the Board is supplied The roles of the Chairman and the CEO are separate with a clear with complete and adequate information in advance of each meeting, distinction of responsibilities between them, which ensures the balance which includes an agenda, minutes, board papers with background or of accountability and authority between the running of the Board, and explanatory information, financial and operational performance reports. the executive responsibility for the running of the Group’s business. The Board also receives regular review reports and presentations on business development, risk profiles and regulatory updates. Any The role of the Chairman, Mr. Sanjeev Gardiner, is to provide leadership additional information may be requested by any director as and when to the Board, for the efficient organisation and conduct of the required. Board’s function, and to ensure the integrity and effectiveness of the relationship between the non-executive and executive director. The Board has separate and independent access to the Group’s Senior Management. All Directors have access to the advice and services of The role of the Group Managing Director/CEO, Mr. Murali Prakash, is to the Company Secretary, who is responsible to the Board for ensuring implement policies and strategies approved by the Board and develop that Board procedures and applicable rules and regulations are and recommend to the Board the business plans and budgets that complied with. support the Group’s long-term strategy and vision that would lead to the maximization of shareholder value. The directors, especially non-executive directors, have access to independent professional advice in the course of fulfilling their Board Meetings and Attendance responsibilities, at the Company’s expense. The Board meetings for each calendar year are scheduled in advance to enable the directors and management to plan accordingly and fit AMBEON CAPITAL PLC 46 ANNUAL REPORT 2018/19 Corporate Governance

Professional Development and Performance Evaluation Committee are required to exercise independent judgement in carrying The directors are provided with the opportunity to update and enhance out their functions. their skills and knowledge through training conducted by both external The activities conducted by the Audit Committee are set out in the Audit and in-house facilitators, and are periodically briefed on changes to Committee Report on pages 49 and 50. relevant laws, regulations and accounting standards which impact the Group’s business and the directors. b. Remuneration Committee The Remuneration Committee is responsible for evaluating the Board’s The role of the remuneration committee is to formulate, review, performance and decides how the Board’s performance may be approve and make recommendations to the Board with regard to the evaluated and also proposes the objective criteria. remuneration of the executive and non-executive directors and key positions within the senior management. Delegation of Authority and Board Committees The Remuneration Committee also ensures that it receives quarterly Other than the matters reserved for the Board, the Board has adopted updates from the HR Division on staff related matters. Policies and Limits of Authority framework applicable to the Group, by which the Board has delegated authority to its Board Committees c. Related Party Transactions Review Committee and management. The Group policies state the principles and sets out the tone by which business is to be conducted, whereas the primary The primary function of the Related Party Transactions Review purpose of the Limits of Authority is to set out clear guidance to Committee is to review related party transactions as prescribed by management as to the matters over which the Board reserves authority Section 09 of the Listing Rules of the Colombo Stock Exchange. and those which it delegates to management. The Limits of Authority has established a sound framework of authority and accountability, The above-mentioned Board committees are supported by a which facilitates timely, effective and quality decision making at the comprehensive and effective internal governance structure, consisting appropriate level. of the Group Managing Director/CEO to oversee the overall operations of the Group. Reporting to the Group Managing Director/CEO are the The Board is supported by the following Board Committees which have Chief Executive Officers of the subsidiaries that oversee the effective been delegated with certain specific responsibilities: management of the subsidiaries. a. Audit Committee Re-appointment and Re-election b. Remuneration Committee In accordance with the Company’s Articles of Association, directors who were appointed during the year must submit themselves to the c. Related Party Transactions Review Committee shareholders for re-election at the first AGM following their appointment and one of the directors for the time being shall retire from office and All Board Committees have written Terms of Reference approved by re-appointment by rotation at every AGM. The directors who retire the Board and the Board, receives reports of their proceedings and by rotation are those who have been longest in office since their deliberations. In instances where committees have no authority to make appointment/reappointment. decisions on matters reserved for the Board, recommendations are highlighted for approval by the Board. The Chairpersons of each of the 2. Remuneration Board Committees report the outcome of the Committee meetings to the Board and the relevant decisions are incorporated in the minutes of The Company’s remuneration policy endeavours to attract, retain and the Board meetings. M/s Managers & Secretaries (Private) Limited acts motivate directors of the quality and experience commensurate with the as the secretary to all Board Committees. stature and operational complexity of the Company. The remuneration policy for directors is proposed, evaluated and reviewed by the A brief description of each Board Committee is provided below: Remuneration Committee, in keeping with criteria of reasonability. a. Audit Committee The remuneration of non-executive directors comprises of fixed allowance paid during the year 2018/19. The Audit Committee ensures that the Company and the Group complies with applicable financial standards and laws. In addition, it ensures high standards of transparency and corporate disclosure and endeavours to maintain appropriate standards of corporate responsibility, integrity and accountability to the shareholders. The appointed members of the Audit AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 47

3. Accountability and Audit Internal Audit Financial Reporting Internal audits are conducted by Pricewaterhouse Coopers (Pvt) Ltd The Board believes that independent verification is necessary to which are independent of management. The Internal Auditor has safeguard the integrity of the Group’s accounting and financial access to management and the authority to seek information, records, reporting. properties and personnel relevant to the subject of audit review. Once an audit review is completed, a report is submitted to the Audit The Board aims to provide and present a balanced and understandable Committee. assessment of the Group’s position and prospects. Therefore, the Board has established a formal and transparent process to independently The Audit Committee oversees the scope of the internal audit and has verify and safeguard the integrity of the Group’s accounting and access to the internal audit without the presence of management. financial reporting and internal control systems which are periodically In order to ensure independence, objectivity and enhance performance reviewed and monitored to ensure effectiveness. of the internal audit function, a direct reporting line has been created The Head of Finance has declared in writing to the Board that the from the internal audit function to the Audit Committee. The activities of Company’s financial reports present a true and fair view, in all material the Group’s internal audit are detailed in the Audit Committee Report on respects, of the Company’s financial condition and that operational pages 49 and 50. results are stated in accordance with relevant accounting standards. 5. Responsible Decision-Making 4. Recognize and Manage Risk The Board of Directors are fully aware of their responsibilities in the Internal Control capacity of directors and adopt an attitude of prudent responsibility with regards to all decision making in relation to Group activities. The The Board is committed to comply with all regulatory provisions and Group’s Code of Business Ethics and Employee Code of Conduct actively to follow best practices in ensuring adequate internal controls in the promotes ethical and responsible decision-making and endeavours to Group. In this regard, the Board acknowledges its overall responsibility influence and guide the directors, employees and other stakeholders of in ensuring that a sound system of internal control is maintained to the practices necessary to maintain confidence in the Group’s integrity safeguard shareholders’ investment and Group’s assets. and to demonstrate the commitment of the Group to ethical practices.

The Audit Committee conducts a review of the effectiveness of the 6. Respect for the Rights of Shareholders Group’s system of internal controls and reports its findings to the Board. The review covers all material controls, including financial, operational The Company is committed to having regular, proactive and effective and compliance controls and risk management systems. Upon receiving communication with the investors and shareholders. The Company confirmation from the CEO’s of the subsidiaries, Head of Finance respects the rights of the shareholders and seeks to empower them provide the Audit Committee with a certificate of compliance confirming by communicating effectively and providing ready access to balanced compliance with all applicable statutory and regulatory requirements on information about the Company. a quarterly basis. Communication with Shareholders Enterprise Risk Management System The Company communicates with the shareholders through the The Group has established and implemented an Enterprise Risk following means of communication: - Management system for identifying, assessing, monitoring and a) Annual General Meeting managing material risk throughout the organization, which includes: The AGM is the main event for the shareholders to meet with the Board a) Oversight of the risk management system; which allows reasonable opportunity for informed shareholders to communicate their views on various matters affecting the Company b) Examination of the Company’s risk profile which contains a and the forthcoming AGM will be used to effectively communicate with description of the material risks facing the Company including shareholders. The AGM is also attended by the Management & External financial and non-financial matters; Auditors. c) Assessment of compliance and control; d) Assessment of effectiveness – mechanism to review, at least annually, the effectiveness of the Company’s implementation of the risk management system AMBEON CAPITAL PLC 48 ANNUAL REPORT 2018/19 Corporate Governance

b) Announcements to the Colombo Stock Exchange (CSE) Announcements of quarterly interim financial results and announcements on corporate actions are disclosed to the CSE in a prompt and timely manner in compliance with the Listing Rules of the CSE. c) Media Releases The Company ensures that media releases are made to the media on all significant Group developments and business initiatives through its Group Companies.

Investor Relations The Group Investor Relations (IR) Team proactively disseminates relevant information about the Group Companies to the investor community, specifically the institutional fund managers and analysts. The IR team maintains close contact with the investor community by means of one-on-one meetings, teleconferences, emails etc. to ensure that the Group’s strategies, operational activities and financial performance are well understood and that such information is made available to them in a timely manner.

Major Transactions There were no transactions during the financial year deemed as a “major transaction” in terms of the definition stipulated in the Companies Act No. 7 of 2007. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 49 AUDIT COMMITTEE REPORT

Composition of The Board Audit Committee (i) Ensure that financial reporting system in place is effective and well The Audit Committee appointed by the Board of Directors of Ambeon managed to provide reliable, appropriate and timely information to Capital PLC functions as a Board Subcommittee and is responsible to the Board, Regulatory Authorities and other stakeholders. the Board. (ii) Oversee the accounting function and review the Annual Financial It consists of three Non-Executive Directors all of whom are members of Statements and Interim Financial Statements prior to publication recognized professional bodies. They possess wide ranging experience to obtain comfort that they comply with statutory requirements, in finance, audit, regulatory affairs and management. The Chairman accounting standards and accounting policies which are of the Committee is a Fellow of the Institute of Chartered Accountants consistently applied. Sri Lanka and a former senior partner of big four accounting firm in Sri (iii) Ensure that Risk Management Systems and Internal Controls of the Lanka. Two members of the Committee are Independent Non-Executive Company are adequate and effective in operation. Directors. The biographical details of the members of the Audit Committee, are set out in the Directors Profiles section of the Annual (iv) Assess the independence and review adequacy of the scope, Report. functions and resources of the Internal Audit Team. Meetings (v) Review and monitor the External Auditors’ independence and The Board Audit Committee held five meetings during the period under objectivity and the effectiveness of the audit process. review. (vi) Ensure that sound corporate governance practices are upheld The quorum for a meeting of the Committee is two Audit Committee within the Company members. Financial Reporting The Chief executive officer, the Chief financial officer, Members of The Committee reviewed the interim and year-end financial statements the firm of Chartered Accountants providing Internal Audit services and conveyed to the board their adoption and issue to the CSE. The and other Executive Directors attend meetings of the Committee Committee considered reports from the External Auditors, Ernst & by invitation. The Committee also invited members of the Senior Young, on the scope of the annual audit and its findings. Management of the Company to participate in the meetings from time to time on a need basis. The External Auditors also attend the meetings These reviews facilitated the work of the Committee to monitor whenever they are invited. compliance with SLFRS/LKAS and the other related legislation and also to ensure the integrity of the information provided to the Company’s The Company Secretary, functions as the secretary to the Audit stakeholders. Committee.

At the conclusion of the statutory audit the BAC had a meeting A summary of the proceedings in the form of key is regularly reported to exclusively with the External Auditors to give them unhindered access the Board in writing. to the independent directors to discuss matters relevant to the audit and audit findings, including any matter they did not wish to report in writing On average the Committee members attendance at meetings was 67%. or take up with the management. The Role and Responsibilities of the Audit Committee Risk Management and Internal Control The scope and responsibilities of the Board Audit Committee emanates The Committee reviewed the process by which Ambeon Capital from its Terms of Reference. The Board periodically reviews the Terms evaluated its control environment, its risk assessment process and of Reference of the Committee. The Board Audit Committee also the way in which significant business risks were managed. It also assists the Board in its general oversight of financial reporting, internal considered the Internal Auditor’s reports on the effectiveness of internal controls and functions relating to internal and external audits. controls, frauds, errors and took corrective action in this regard. The The main objective of the Audit Committee is to assist the Board Committee continues to strengthen the internal controls of the Company of Directors in exercising its fiduciary responsibilities towards its where necessary. stakeholders. The Committee is entrusted by the Board to: AMBEON CAPITAL PLC 50 ANNUAL REPORT 2018/19 AUDIT COMMITTEE REPORT

External Auditors Evaluation of The Committee The Committee reviewed the services provided by the External Auditors, An independent evaluation of the effectiveness of the Committee was Ernst & Young, to evaluate their independence and objectivity. It also carried out by the members of the Board during the year. Considering reviewed and approved the scope of non-audit services provided by the the overall conduct of the Committee and its contribution on the overall External Auditors, to ensure that their independence was not in any way performance of the Company, the Committee has been rated as highly compromised. effective.

Prior to commencement of the annual audit, the Committee discussed Conclusion with the External Auditors, their audit plan, audit approach, and matters Based on the review of reports submitted by the External and Internal relating to the scope of the audit. Auditors, the information obtained by the Committee and having examined the adequacy and effectiveness of the internal controls which Internal Audit have been designed to provide a reasonable assurance to Directors The Committee monitored and reviewed the scope, extent and that the assets of the Company are safeguarded, the Audit Committee effectiveness of the activities of the Internal Audit Firm. The Committee is satisfied that the financial position of the Company is regularly engaged in the discussion and review of the internal audit plan for monitored and that steps are being taken to continuously improve the the year. During the year the Committee also reviewed the audit control environment in which the Company operates. reports covering matters pertaining to Company & its subsidiaries and implementation of audit recommendations. Audit findings presented Sgd. in the reports were prioritized based on the level of risk involved. The Chairman Audit Committee provided advice to Corporate Management on the Audit Committee precautionary measures that were necessary with regard to significant audit findings. Internal audit reports were made available to the External 13th August 2019 Auditors as well. Colombo Statutory and Regulatory Compliance The Committee reviewed the procedures established by the Management for compliance with the requirements of various regulatory bodies. The Chief Financial officer submitted a report to the Audit Committee on a quarterly basis, indicating the extent to which Ambeon Capital was in compliance with statutory requirements. Due compliance with all requirements are monitored through this process. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 51 Report of the Remuneration Committee

Role of the Remuneration Committee Responsibility The Committee reviews the performance of the executive staff against During the period under review, the committee continued its the set objectives and goals, and determines the remuneration policy responsibility of formulating & recommending to the Board, of the Company for all levels of employees. The Committee supports Remuneration policy which would help the organization to attract, retain and advises the Board on remuneration related matters and makes and to motivate its staff taking into consideration industrial norms. decisions under delegated authority with a view to aligning the interests of employees and shareholders. Details of executive remuneration are included under key management personnel compensation as disclosed in Page 139 of Annual report. Composition of the Remuneration Committee The Remuneration Committee is a sub - committee of the main Board, The committee has reviewed the remuneration policy of the Company to which it is accountable. The present Remuneration Committee and made its recommendations and has also advised on structuring comprises of the following Directors. remuneration packages in order to attract, motivate and retain quality staff personnel. Mr. R.P. Pathirana - Chairman Mr. P.D.J. Fernando Sgd. Mr. S.W. Unamboowe Ranil Pathirana Chairman - Remuneration Committee The Chief Executive Officer attends the Committee meeting by invitation and the Company secretary serves as the Secretary of the Committee. 13 August 2019

The Committee members possess wide experience in the fields of business management, human resources management & labour relations. Hence the Committee has adequate expertise in remuneration policy and management to deliberate and propose necessary changes, improvements to meet the roles and responsibility of the Committee.

AMBEON CAPITAL PLC 52 ANNUAL REPORT 2018/19 RELATED PARTY TRANSACTION REVIEW COMMITTEE REPORT

Purpose of the Committee Necessary steps have been taken by the Committee to avoid any The Board established the Related Party Transactions Review conflicts of interests that may arise in transacting with related parties. Committee on 04 December 2015 as per Listing Rules of the Colombo The Policies and Procedures Adopted by the Committee for Stock Exchange (CSE). The purpose of the Related Party Transactions Reviewing Related Party Transactions. Review Committee (the Committee) is to conduct an appropriate review The Committee formulated and recommended a process for adoption of the Company’s Related Party Transactions (RPTs) and to ensure on RPTs for the Company, which is consistent with the operating model that the Company complies with the Listing Rules of the CSE. The and the delegated decision rights. primary objectives of the said rules are to ensure that the interests of the shareholders as a whole are taken into account when entering into The Committee in discharging its functions introduced processes and related party transactions and to prevent Directors, Key Management periodic reporting by the relevant entities with a view to ensure that; Personnel or substantial shareholders taking advantage of their positions. • There is compliance with the Rules • Shareholder interests are protected and Composition • Fairness and transparency are maintained The Committee consists of three members with a combination of Independent Non-Executive Director and Non-Independent Non- Any member of the Committee, who has an interest in RPT under Executive/Executive Directors. The members of the Committee are; discussion, shall abstain from voting on the approval of such transaction. A RPT entered into without pre-approval of the committee, Mr. P. D. J. Fernando - Chairman/Independent Non-Executive Director shall not be deemed to violate this policy, be invalid or unenforceable Mr. Ranil Pathirana - Non-Independent Non-Executive Director so long as the transaction is brought to the notice of the Committee as promptly as reasonably practical, after it is entered into or after it Mr. N.M. Prakash – Managing Director/CEO becomes apparent that the transaction is covered by the policy. As The above composition is in compliance with the provisions of the such all RPTs, other than the exempted transactions, will be reviewed Listing Rules. Brief profiles of the members are given on pages 24 and either prior to the transaction is entered into or if the transaction is 25 of the Annual Report. expressed to be conditional on such review, prior to the completion of the transaction. M/s. Managers & Secretaries (Private) Limited functions as the Secretary to the Committee. All forecasted recurrent RPTs are submitted by Management on a quarterly basis to the Committee for consideration and review. Non- Role and Responsibilities recurrent RPTs are also reviewed and approved by the Committee prior The mandate of the committee, derived from the Rules includes the to the transaction being entered into or if the transaction is expressed to following; be conditional on such review, prior to the completion of the transaction and the recommendation communicated to the Board for consideration. • To develop and recommend a related party transaction policy The Committee is satisfied that all RPTs have been reviewed by the • To ensure that the Company complies with the Rules Committee during the financial year and have communicated their • To review in advance all proposed RPTs to ensure compliance with observations to the Board. The details of related party transactions the Rules entered into during the financial year are given on Note 30 to the • To update the Board of Directors on the related party transactions of Financial Statements, on pages 136 to 140 of this Annual Report. the Company on a quarterly basis Meetings • Define and establish the threshold values in setting a benchmark The Committee met 04 times during the financial year under review. for related party transactions, RPTs which have to be pre-approved Proceedings of the Committee meetings are reported to the Board of by the Board, RPTs which require to be reviewed in advance and Directors. annually and similar issues relating to listed Companies. • To make immediate market disclosures on applicable RPTs as Sgd. required by the Rules P D J Fernando • To include appropriate disclosures on RPTs in the annual report as Chairman required by the Rules 13th August 2019 Policies and procedures in related party transactions are being reviewed and strengthened on an ongoing basis. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 53 Annual Report of the Board of Directors on the Affairs of the Company - 2018/19

The Directors of Ambeon Capital PLC have pleasure in presenting to the Executive Director Shareholders their Annual Report together with the Audited Financial Mr. N.M. Prakash – Group MD/CEO Statements of the Company for the year ended 31st March 2019. Non-Executive Directors General Mr. S.E. Gardiner - Chairman Ambeon Capital PLC is a public limited liability Company incorporated Mr. A. L. Devasurendra - Deputy Chairman and domiciled in Sri Lanka. The registered office and the principal place Mr. P. D. J. Fernando of business of the Company is located at No 10, Gothami Road, Colombo Mr. S.H. Amarasekera 08. Mr. R.P. Pathirana Principal Activities Mr. S.W. Unamboowe During the year the principal activities of the Group were money Mr. P.D. Rodrigo broking, stock broking, manufacturing of footwear, porcelain, textiles and managing property, IT solutions and investments. Interests Register In terms of the Companies Act No. 7 of 2007 an Interests register was Review of Operations maintained during the accounting period under review. This Annual The Chairman’s Review on Pages 13 to 15 which forms an integral Report also contains particulars of entries made in the Interests part of these reports provides an overall assessment of the financial register. performance and the financial position of the Company. Directors’ Remuneration Financial Statements The Director’s remuneration is disclosed in Note 9 to the financial The financial statements of the Group and Company are given on Pages statements on Page 93. 60 to 151. Summarized Financial Results. The Auditors Group (Rs.’000) Company (Rs.’000) The financial statements for the year ended 31st March 2019 have been Y/E 31 March 2019 2018 2019 2018 audited by Messrs Ernst & Young (Chartered Accountants). As far as Revenue 17,732,587 12,588,656 7,036 280,869 directors are aware the auditors do not have any relationship (other than Profit/ (Loss) that of an Auditor) with the Company except for those disclosed above. before tax for 915,425 286,330 (153,684) 413,268 the year The auditors also do not have any interest in the Company.

Auditors’ Report The audit fee payable to the auditors for the year under review is Rs. 365,000. (Group - Rs. 8,675,352) The Independent Auditors’ Report on the financial statements is given on Pages 57 to 59. Stated Capital Accounting Policies The Stated Capital of the Company as at 31st March 2019 was Rs.1,053,643,405/- (1,002,724,815 Shares). The accounting policies adopted by the Company in the preparation of financial statements are given on Pages from 69 to 87 which are Directors’ Shareholding consistent with those of the previous period. The shareholdings of the Directors of the Company are as follows. Directors As at 31.3.2019 31.3.2018 The names of the Directors who held office as at the end of the Mr. A.L.Devasurendra 138 138 accounting period are given below and their brief profiles appear on Mr. R. P. Pathirana 500,000 500,000 Pages 24 and 25. Mr. S.W. Unamboowe 768,783 915,700 Mr. Murali Prakash 20,477 20,477 AMBEON CAPITAL PLC 54 ANNUAL REPORT 2018/19 Annual Report of the Board of Directors on the Affairs of the Company - 2018/19

Major Shareholders, Distribution Schedule and Other Audit Committee Information Mr. Deva Rodrigo - Chairman Information on the twenty largest shareholders of the Company, Mr. Priyantha Fernando distribution schedule of the number of shareholders, percentage of Mr. Ranil Pathirana shares held by the public as per the Listing Rules of the Colombo Stock Exchange are given on Page 154 under Investor Information. Related Party Transactions Review Committee Public Holding Mr. Priyantha Fernando - Chairman The percentage of public shareholding as at the 31st March 2019 was Mr. Ranil Pathirana 2.62%. Mr. Murali Prakash

Capital Commitments RELATED PARTY TRANSACTIONS There were no material capital expenditure commitments as at 31st The Board of Directors has given the following statement in respect of March 2019 other than those disclosed in Note 29. the related party transactions.

Statutory Payments The related party transactions of the Company during the financial The Directors, to the best of their knowledge and belief, are satisfied year have been reviewed by the Related Party Transactions Review that all statutory dues have been paid up to date, or have been provided Committee and are in compliance with the Section 09 of the CSE Listing for in the financial statements. Rules.

Donations Remuneration Committee There were no donations made by the Company during the year. Mr. Ranil Pathirana - Chairman Mr. Priyantha Fernando Events Occurring After The Reporting Period Mr. Sarinda Unamboowe No circumstances have arisen after the reporting period which would require adjustment to or disclosure in the financial statements By Order of the Board other than those disclosed in Note 31 on Page 140 of the financial Ambeon Capital PLC statements. Sgd. Going Concern Chairman The Board of Directors is satisfied that the Company has adequate resources to continue its operations in the foreseeable future. Sgd. Accordingly, the financial statements are prepared based on the going Managing Director/CEO concern concept.

Corporate Governance Sgd. Corporate Governance practices and principles with respect to the Managers & Secretaries (Pvt) Ltd management and operations of the Company are set out on Pages from Secretaries 44 to 48. 13th August 2019 An Audit Committee, Related Party Transactions Review Committee Colombo as well as a Remuneration Committee function as sub-committees of the Board and they are composed of Directors with the requisite qualifications and experience. The composition of the said Committees is as follows: AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 55 Statement of Directors’ Responsibilities

The Directors are required by the Companies Act No. 7 of 2007 to prepare Financial Statements for each financial year, which give a true and fair view of the statement of affairs of the Company as at the end of the financial year and the income and expenditure of the Company for the financial year.

The Directors are also required to ensure that the financial statements comply with any regulations made under the Companies Act which specifies the form and content of financial statements and any other requirements which apply to the Company’s financial statements under any other law.

The Directors consider that the financial statements presented in this annual report have been prepared using appropriate accounting policies, consistently applied and supported by reasonable and prudent judgments and estimates and in compliance with the Sri Lanka Financial Reporting Standards (SLFRS) and Sri Lanka Accounting Standards (LKAS), Companies Act No. 7 of 2007, Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995.

The Directors are responsible to ensure that the Company keeps sufficient accounting records, which disclose the financial position of the Company with reasonable accuracy and enable them to ensure that the financial statements have been prepared and presented as aforesaid. They are also responsible for taking measures to safeguard the assets of the Company and in that context to have proper regard to the establishment of appropriate systems of internal control with a view to prevention and detection of fraud and other irregularities.

The Directors continue to adopt the going concern basis in preparing the financial statements. The directors, after making inquiries and review of the Company’s business plan for the financial year 2019/2020, including cash flows and borrowing facilities, consider that the Company has adequate resources to continue in operation.

By Order of the Board Ambeon Capital PLC

Sgd. Managers & Secretaries (Pvt) Ltd

Secretaries 13th August 2019 Financial Information Financial Calendar 1st Quarter Interim Report 13 August 2018 2nd Quarter Interim Report 12 November 2018 3rd Quarter Interim Report 12 February 2019 4th Quarter Interim Report 30 May 2019 Annual Report 2018/19 13 August 2019 Annual General Meeting 30 September 2019 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 57 Independent Auditors’ Report

INDEPENDENT AUDITOR’S REPORT (Code of Ethics) and we have fulfilled our other ethical responsibilities in TO THE SHAREHOLDERS OF AMBEON CAPITAL PLC accordance with the Code of Ethics. We believe that the audit evidence Report on the audit of the Consolidated Financial Statements we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion Key Audit Matters We have audited the Financial Statements of Ambeon Capital PLC (the “Company”), and the consolidated Financial Statements of the Company Key audit matters are those matters that, in our professional judgment, and its subsidiaries (the “Group”), which comprise the statement of were of most significance in our audit of the Financial Statements of financial position as at 31 March 2019, and the statement of profit the current period. These matters were addressed in the context of or loss, statement of comprehensive income, statement of changes our audit of the Financial Statements as a whole, and in forming the in equity and statement of cash flows for the year then ended, and auditor’s opinion thereon, and we do not provide a separate opinion on notes to the Financial Statements, including a summary of significant these matters. For each matter below, our description of how our audit accounting policies. addressed the matter is provided in that context.

In our opinion, the accompanying Financial Statements of the Company We have fulfilled the responsibilities described in the Auditor’s and Group give a true and fair view of the financial position of the responsibilities for the audit of the Financial Statements section of Company and Group as at 31 March 2019, and of their financial our report, including in relation to these matters. Accordingly, our performance and cash flows for the year then ended in accordance with audit included the performance of procedures designed to respond to Sri Lanka Accounting Standards. our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the Basis for Opinion procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements. We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuS). 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

Key audit matter How our audit addressed the key audit matter Intangible assets with infinite useful life and re-measurement of provisional goodwill during the measurement period Intangible assets include Goodwill on consolidation and Brands with infinite We performed the following procedures amongst others; useful life. • We used our internal specialists to assist us, in evaluating the Goodwill and intangible assets are subject to an annual impairment test. This appropriateness of the models and reasonableness of estimates, used by annual impairment test was significant to our audit because the balance of the management. Rs. 1.2 Bn as of 31 March 2019 is material to financial statement. Further, • In evaluating the purchase price allocation and re-measurement of during the year Group re-measured the provisional goodwill on acquisitions goodwill for business combination completed during the year, we tested of previous years’ for the allocation of the purchase price to the identifiable management’s identification and valuation of the assets acquired, assets and liabilities assumed. liabilities assumed and allocation of total purchase price paid. In addition, management’s assessment process is complex and highly • We also focused on the adequacy of the related disclosures about the judgmental and is based on assumptions as disclosed in Note 13 to the assumptions to which the outcome of the impairment test is most Financial Statements. significant, that is, those that have the most significant effect on the Therefore, we have determined this to be a Key audit matter. determination of the recoverable amount of goodwill. The Group’s disclosures about goodwill are included in Note 13 to the Financial Statements. AMBEON CAPITAL PLC 58 ANNUAL REPORT 2018/19 Independent Auditors’ Report

Valuation of lands and buildings

As at 31 March 2019, land and building carried at fair value amounted to Our audit procedures focused on the valuations performed by external valuers Rs. 3 Bn and Rs. 3.6 Bn classified as Property, Plant and Equipment and engaged by the Group, and included the following; Investment Property respectively. The Group has recorded revaluation gain • Assessing the competency, capability and objectivity of the external of Rs. 632 Mn and fair value gain of Rs. 831 Mn during the year, in respect of valuers engaged by the Group. Property, Plant and Equipment and investment property respectively. The fair value of such property was determined by external valuers engaged by the • Reading the professional valuers’ reports and understood the key Group. The valuation of land and building was significant to our audit due to estimates made and the approach taken by the valuers in determining the the use of significant estimates such as per perch price and value per square valuation of each property. feet disclosed in Note 12 and 15 to the Financial Statements. • Engaging our internal specialised resources to assess the reasonableness of the valuation technique, per perch price and value per square feet.

• We also assessed the adequacy of the disclosures made in Note 12 and 15 to the Financial Statements relating to the valuation technique and estimates used by the professional valuers.

Revenue recognition During the year, the Group adopted SLFRS 15 - Revenue from Contracts Our audit procedures focused on the Group’s adoption of the New Revenue with Customers (the New Revenue Standard) which specifies how and when Standard and included, amongst others, the following: an entity should recognize revenue along with the need to provide users of • We assessed the process followed by the Group to ensure all revenue financial statements with more informative, relevant disclosures. streams are considered in its assessment and that the related contracts Group’s involvement in diversified industries and wide spectrum of businesses reviewed are representative of specified revenue streams & contractual such as Manufacturing (Footwear, Textile and Porcelain), Information terms. Technology, Financial Services and Property, the Group was required to • We perused Management’s correspondence with consultants to assess the consider relevant clarifications and guidance specifically relating to point of reasonability of the final conclusions reached on matters such as point and revenue recognition i.e. at a point in time or over the period, agent vs principal amount of revenue recognition for adoption of the new revenue standard. relationships in adoption of the new revenue standard. We also assessed the adequacy of enhanced disclosures made in Note 2.11.1 As more fully described in Note 2.11.1 to the financial statements the to the financial statements. process of adoption involved consideration of relevant legal aspects, industry practices, use of management critical judgments and estimates.

Considering all the above matters, we determined the Group’s adoption of the New Revenue Standard during the current year audit and a key audit matter.

Other information included in the Group’s 2019 Annual materially misstated. If, based on the work we have performed, we Report conclude that there is a material misstatement of this other information, we are required to report that fact. Other information consists of the information included in the Annual Report, other than the financial statements and our auditor’s report Responsibilities of management and those charged with thereon. The Management is responsible for the other information. governance Other information is expected to be made available to us after the date of this auditor’s report. Management is responsible for the preparation of Financial Statements that give a true and fair view in accordance with Sri Lanka Accounting Our opinion on the financial statements does not cover the other Standards, and for such internal control as management determines is information and we do not express any form of assurance conclusion necessary to enable the preparation of financial statements that are free thereon. from material misstatement, whether due to fraud or error.

In connection with our audit of the financial statements, our In preparing the Financial Statements, management is responsible for responsibility is to read the other information identified above when assessing the Group’s ability to continue as a going concern, disclosing, it becomes available and, in doing so, consider whether the other as applicable, matters related to going concern and using the going information is materially inconsistent with the financial statements concern basis of accounting unless management either intends to or our knowledge obtained in the audit or otherwise appears to be liquidate the Group or to cease operations, or has no realistic alternative but to do so. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 59

Those charged with governance are responsible for overseeing the • Evaluate the overall presentation, structure and content of the Company’s and the Group’s financial reporting process financial statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and Auditor’s responsibilities for the audit of the Financial events in a manner that achieves fair presentation. Statements Our objectives are to obtain reasonable assurance about whether the • Obtain sufficient appropriate audit evidence regarding the financial financial statements as a whole are free from material misstatement, information of the entities or business activities within the Group to whether due to fraud or error, and to issue an auditor’s report that express an opinion on the consolidated financial statements. We are includes our opinion. Reasonable assurance is a high level of assurance, responsible for the direction, supervision and performance of the but is not a guarantee that an audit conducted in accordance with Group audit. We remain solely responsible for our audit opinion. SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered We communicate with those charged with governance regarding, material if, individually or in the aggregate, they could reasonably be among other matters, the planned scope and timing of the audit and expected to influence the economic decisions of users taken on the significant audit findings, including any significant deficiencies in basis of these Financial Statements internal control that we identify during our audit.

As part of an audit in accordance with Sri Lanka Auditing Standards, we We also provide those charged with governance with a statement that exercise professional judgment and maintain professional skepticism we have complied with ethical requirements in accordance with the throughout the audit. We also: Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to • Identify and assess the risks of material misstatement of the bear on our independence, and where applicable, related safeguards. Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit From the matters communicated with those charged with governance, evidence that is sufficient and appropriate to provide a basis for our we determine those matters that were of most significance in the audit opinion. The risk of not detecting a material misstatement resulting of the financial statements of the current period and are therefore from fraud is higher than for one resulting from error, as fraud may the key audit matters. We describe these matters in our auditor’s involve collusion, forgery, intentional omissions, misrepresentations, report unless law or regulation precludes public disclosure about the or the override of internal control. matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse • Obtain an understanding of internal control relevant to the audit consequences of doing so would reasonably be expected to outweigh in order to design audit procedures that are appropriate in the the public interest benefits of such communication. circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal controls of the Company and Group. Report on other Legal and Regulatory Requirements As required by section 163 (2) of the Companies Act No. 07 of 2007, we • Evaluate the appropriateness of accounting policies used and the have obtained all the information and explanations that were required reasonableness of accounting estimates and related disclosures for the audit and, as far as appears from our examination, proper made by management. accounting records have been kept by the Company.

• Conclude on the appropriateness of management’s use of the going CA Sri Lanka membership number of the engagement partner concern basis of accounting and, based on the audit evidence responsible for signing this independent auditor’s report is 1697. 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, 13th August 2019 if such disclosures are inadequate, to modify our opinion. Our Colombo 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. AMBEON CAPITAL PLC 60 ANNUAL REPORT 2018/19 STATEMENT OF PROFIT OR LOSS

Year ended 31 March Group Company 2019 2018 2019 2018 Continuing Operations Notes LKR LKR LKR LKR

Revenue 5 17,732,587,184 12,588,656,155 7,036,462 280,869,653 Direct Cost 6 (13,809,979,812) (10,087,751,071) - - Gross Profit 3,922,607,372 2,500,905,084 7,036,462 280,869,653

Investment and Other Income 7 340,791,529 397,008,438 365,046,183 14,938,972 Selling and Distribution Expenses (747,735,633) (448,865,633) - - Administrative Expenses (2,268,046,337) (1,793,441,082) (45,064,369) (142,431,390) Change in Fair Value of Financial Assets Held for Trading (145,624,635) 222,469,300 2,435,719 - Change in Fair Value of Investment Property 15 831,355,019 237,834,192 1,500,000 4,000,000 Reversal /(Impairment) of investment in subsidiary - - (8,443,566) 218,707,472 Gain From Disposal of subsidiaries 16 - - 531,286 609,911,667 Finance Cost 8 (1,017,922,140) (829,580,187) (476,726,534) (572,728,205) Profit /(Loss) Before Income Tax from Continuing Operations 9 915,425,175 286,330,112 (153,684,821) 413,268,169 Income Tax Expense 10 (401,530,041) 86,096,598 (1,068,362) 17,324,614 Profit/(Loss) for the Year from Continuing Operations 513,895,134 372,426,710 (154,753,183) 430,592,783

Discontinued Operations Profit/(Loss) after tax for the year from discontinued operations 4 (659,193) 9,870,089 - - Profit/(Loss) for the year 513,235,941 382,296,799 (154,753,183) 430,592,783

Profit / (Loss) Attributable to: Equity Holders of the Company 47,147,271 151,541,224 (154,753,183) 430,592,783 Non - Controlling Interests 466,088,670 230,755,575 - - 513,235,941 382,296,799 (154,753,183) 430,592,783

Basic Earnings / (Loss) Per Share 11 0.05 0.15 (0.15) 0.43 Basic Earnings / (Loss) Per Share from Continuing Operations 11 0.05 0.14 (0.15) 0.43

The Notes from pages 69 to 151 form an integral part of these Financial Statements. Figures in bracket indicate deductions. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 61 STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 March Group Company 2019 2018 2019 2018 Notes LKR LKR LKR LKR

Profit/ (Loss) for the Year 513,235,941 382,296,799 (154,753,183) 430,592,783

Other Comprehensive Income Items that will never be reclassified to profit or loss Defined Benefit Obligations Actuarial Gain / (Loss) 23 26,703,131 (32,800,240) - 163,962 Tax on Actuarial Gain /(Loss) on Defined Benefit Plans 25 (12,092,447) 8,636,253 - (45,910) Gain/(Loss) From Change in Fair Value of Financial Assets (153,757,244) - - - Revaluation Gain on Land and Building 12 632,299,068 1,068,005,405 - - Tax on Revaluation Gain 25 (145,989,358) (519,300,584) - - 347,163,150 524,540,834 - 118,052

Items that are or may be reclassified to profit or loss Currency Translation of Foreign Operation (378,266,928) (40,515) - - Related Tax 52,957,057 - - - (325,309,871) (40,515) - - Total Other Comprehensive Income 21,853,279 524,500,319 - 118,052

Total Comprehensive Income for the Year 535,089,220 906,797,118 (154,753,183) 430,710,835

Total Comprehensive Income Attributable to: Equity Holders of the Company 21,875,941 545,857,053 (154,753,183) 430,710,835 Non - Controlling Interests 513,213,279 360,940,065 - - 535,089,220 906,797,118 (154,753,183) 430,710,835

The Notes from pages 69 to 151 form an integral part of these Financial Statements. Figures in bracket indicate deductions. AMBEON CAPITAL PLC 62 ANNUAL REPORT 2018/19 STATEMENT OF FINANCIAL POSITION

As at 31 March Group Company 2019 2018 2019 2018 Notes LKR LKR LKR LKR

ASSETS Non-Current Assets Property, Plant & Equipment 12 5,115,420,533 5,465,161,313 16,427,629 446,108 Intangible Assets 13 1,252,382,685 1,241,505,969 - - Biological Assets 14 50,381,950 48,281,950 - - Investment Property 15 3,612,851,650 1,688,188,153 30,500,000 29,000,000 Investment in Subsidiaries 16 - - 4,872,609,624 5,149,202,174 Other Financial Assets 17 23,236,379 22,451,836 - - Deferred Tax Asset 25 160,761,323 274,360,132 17,202,174 18,270,536 Deposit with Colombo Stock Exchange 2,787,729 2,782,406 - - 10,217,822,249 8,742,731,759 4,936,739,427 5,196,918,818

Current Assets Inventories 18 4,240,916,106 3,758,051,548 - - Other Financial Assets 17 1,916,753,871 2,409,055,752 895,197,720 757,790,604 Trade & Other Receivables 19 6,005,043,760 4,009,655,688 88,663,548 104,765,555 Income Tax Recoverable 37,933,568 16,476,850 - - Cash & Cash Equivalents 20 611,908,960 1,999,187,137 1,212,412 372,368 12,812,556,265 12,192,426,974 985,073,680 862,928,527 Total Assets 23,030,378,514 20,935,158,732 5,921,813,107 6,059,847,345

EQUITY AND LIABILITIES Equity Stated Capital 21 1,053,643,405 1,053,643,405 1,053,643,405 1,053,643,405 Foreign Currency Translation Reserve (258,957,376) (435,510) - - Retained Earnings 1,730,353,845 2,140,513,431 517,675,172 1,033,409,287 Amalgamation Reserve 21.1 - - 258,920,263 258,920,263 Fair Value through OCI Reserve (209,184,472) - - - Revaluation Reserves 1,186,791,520 856,717,592 - - Equity Attributable to Equity Holders of the Company 3,502,646,922 4,050,438,918 1,830,238,840 2,345,972,955 Non Controlling Interests 3,098,213,414 2,428,238,516 - - Total Equity 6,600,860,336 6,478,677,434 1,830,238,840 2,345,972,955

Non-Current Liabilities Other Financial Liabilities 27 21,886,803 32,935,638 20,965,777 32,038,552 Interest Bearing Loans & Borrowings 22 2,756,476,036 1,562,021,994 2,748,685,133 - Retirement Benefit Obligations 23 400,791,670 410,048,970 - 4,615,058 Deferred Tax Liability 25 810,764,286 620,479,220 - - 3,989,918,795 2,625,485,822 2,769,650,910 36,653,610 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 63

As at 31 March Group Company 2019 2018 2019 2018 Notes LKR LKR LKR LKR

Current Liabilities Trade and Other Payables 26 4,922,462,303 3,678,206,382 43,669,324 31,460,607 Income Tax Payable 193,412,133 177,629,834 - - Contract Liability 24 706,864,079 748,150,496 - - Interest Bearing Loans & Borrowings 22 6,616,860,868 7,227,008,764 1,278,254,033 3,645,760,172 12,439,599,383 11,830,995,476 1,321,923,357 3,677,220,779 Total Equity and Liabilities 23,030,378,514 20,935,158,732 5,921,813,107 6,059,847,345

Net Assets Per Share (Rs.) 11 3.49 4.04 1.83 2.34

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

Haritha C. Perera Chief Financial Officer

The Board of Directors is responsible for these Financial Statements. Signed for and on behalf of the Board by;

Ajith Devasurendra Murali Prakash Deputy Chairman Group Managing Director/ Chief Executive Officer

The Notes from pages 69 to 151 form an integral part of these Financial Statements. Figures in bracket indicate deductions.

13th August 2019 Colombo AMBEON CAPITAL PLC 64 ANNUAL REPORT 2018/19 STATEMENT OF CHANGES IN EQUITY

GROUP Attributable to Equity Holders of the Group Non Controlling Total Equity Notes Stated Capital Fair Value throgh Revaluation Foreign Currency Retained Earnings Total Interests OCI Reserve Reserve Translation Reserve LKR LKR LKR LKR LKR LKR LKR LKR

Balance as at 31 March 2017 1,053,643,405 - 445,801,569 (394,995) 2,016,509,172 3,515,559,151 2,069,496,197 5,585,055,348

Profit for the year - - - - 151,541,224 151,541,224 230,755,575 382,296,799 Other Comprehensive Income - - 410,916,023 (40,515) (16,559,679) 394,315,829 130,184,490 524,500,319 Total Comprehensive Income for the year - - 410,916,023 (40,515) 134,981,545 545,857,053 360,940,065 906,797,118

Transactions with owners of the Group Contributions and Distributions Subsidiary Dividend Paid to Minority Share Holders 34.1 ------(12,248,532) (12,248,532) Total Contributions and Distributions ------(12,248,532) (12,248,532)

Effect of Change in Percentage Holding in Subsidiary - - - - (10,977,286) (10,977,286) 10,050,786 (926,500) Total changes in ownership interest - - - - (10,977,286) (10,977,286) 10,050,786 (926,500) Total Transactions with owners of the Group - - - - (10,977,286) (10,977,286) (2,197,746) (13,175,031) Balance as at 31 March 2018 1,053,643,405 - 856,717,592 (435,510) 2,140,513,431 4,050,438,918 2,428,238,516 6,478,677,434 Impact of adapting SLFRS 9 28.3 (83,979,949) - - 10,735,990 (73,243,959) (53,278,501) (126,522,460) Restated- Balance as at 1 April 2018 1,053,643,405 (83,979,949) 856,717,592 (435,510) 2,151,249,421 3,977,194,959 2,374,960,015 6,352,154,974 Profit for the year - - - - 47,147,271 47,147,271 466,088,670 513,235,941 Other Comprehensive Income - (125,204,523) 335,884,768 (258,521,866) 22,570,292 (25,271,329) 47,124,609 21,853,280 Total Comprehensive Income for the year - (125,204,523) 335,884,768 (258,521,866) 69,717,563 21,875,942 513,213,279 535,089,221

Revaluation Reserve Transfer - - (5,810,840) - 5,810,840 - - - Transactions with owners of the Group Contributions and Distributions Subsidiary Dividend Paid to Minority Share Holders 34.1 ------(171,181,230) (171,181,230) Dividends paid ( LKR 0.36 per share ) 21.3 - - - - (360,980,933) (360,980,933) - (360,980,933)

Total Contributions and Distributions - - (5,810,840) - (355,170,093) (360,980,933) (171,181,230) (532,162,163)

Effect of Change in Percentage Holding in Subsidiary - - - - (135,443,046) (135,443,046) 381,221,350 245,778,304 Total changes in ownership interest - - - - (135,443,046) (135,443,046) 381,221,350 245,778,304 Total Transactions with owners of the Group - - (5,810,840) - (490,613,139) (496,423,979) 210,040,120 (286,383,859) Balance as at 31 March 2019 1,053,643,405 (209,184,472) 1,186,791,520 (258,957,376) 1,730,353,845 3,502,646,922 3,098,213,414 6,600,860,336

The Notes from pages 69 to 151 form an integral part of these Financial Statements. Figures in bracket indicate deductions. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 65

Balance as at 31 March 2017 1,053,643,405 - 445,801,569 (394,995) 2,016,509,172 3,515,559,151 2,069,496,197 5,585,055,348

Total Contributions and Distributions - - (5,810,840) - (355,170,093) (360,980,933) (171,181,230) (532,162,163)

The Notes from pages 69 to 151 form an integral part of these Financial Statements. Figures in bracket indicate deductions. AMBEON CAPITAL PLC 66 ANNUAL REPORT 2018/19 STATEMENT OF CHANGES IN EQUITY

COMPANY Stated Capital Amalgamation Retained Earnings Total Equity Reserve LKR LKR LKR LKR

Balance as at 31 March 2017 1,053,643,405 - 602,698,453 1,656,341,858

Profit for the year - - 430,592,783 430,592,783 Other Comprehensive Income - - 118,052 118,052 Net Result to the Equity on Amalgamation - 258,920,263 - 258,920,263 Total Comprehensive Income for the year - 258,920,263 430,710,835 689,631,098

Balance as at 31 March 2018 1,053,643,405 258,920,263 1,033,409,288 2,345,972,956

Loss for the year - - (154,753,183) (154,753,183) Other Comprehensive Income - - - - Total Comprehensive Income for the year 1,053,643,405 258,920,263 (154,753,183) (154,753,183)

Dividends paid ( LKR 0.36 per share ) 21.3 - - (360,980,933) (360,980,933)

Balance as at 31 March 2019 1,053,643,405 258,920,263 517,675,172 1,830,238,840

The Notes from pages 69 to 151 form an integral part of these Financial Statements. Figures in bracket indicate deductions. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 67 STATEMENT OF CASH FLOWS

Year ended 31 March Group Company 2019 2018 2019 2018 Notes LKR LKR LKR LKR

Cash Flows From Operating Activities Profit/(Loss) before Taxation 915,425,175 286,330,112 (153,684,821) 413,268,169 Profit/(Loss) before tax from Discontinuing Operations 4 (659,193) 13,144,636 - - Adjustment for Depreciation of Property, Plant & Equipment 12 382,674,182 340,343,584 4,018,479 289,906 Interest on Other Financial Liabilities 23,940 23,940 - - Impairment of Goodwill (171,371,893) - - - Amortization of Intangible Assets 13 8,304,754 12,314,099 - - Change in Fair Value of Financial Assets Held for Sale 145,624,635 (222,469,300) - - Provision for Retirement Benefit Obligation 23 80,836,405 62,963,136 - 890,966 Change in Fair Value of Investment Property 15 (831,355,019) (237,834,192) (1,500,000) (4,000,000) Profit from Disposal of Current Investment 9,934,834 - - - Amortization of Deferred Income 24 - (387,745) - - Gain on disposal of Property, Plant & Equipment 7 (7,155,621) (1,277,631) - - Impairment of provision of Trade and Other Receivables 19.2 2,133,261 25,569,882 - 2,083,386 Changes in fair value of Biological Assets 14 (2,100,000) (2,400,000) - - Interest Income of Deposit with CSE - (32,406) - - Fixed Assets Write Off - - - - (Reversal)/ Provision of investment in subsidiaries 16 - - 8,443,568 (218,707,472) Gain on Loan Write Back (153,859,921) - - - Provision / (Reversal) of provision on Inventories 18 (123,686,758) 81,134,087 - - Interest Expense 8 1,017,922,140 829,580,187 - - Gain on disposal of Assets Held for Sale - (47,223,506) - - Gain on Disposal of Subsidiary - - (531,286) (609,911,667) Employee Share Appreciation Rights 27 1,174,613 61,612,600 1,174,613 61,612,600 Operating Profit before Working Capital Changes 1,273,865,534 1,201,391,483 (142,079,447) (354,474,112)

Increase in Inventories (606,551,316) (980,719,808) - - (Increase)/Decrease in Trade & Other Receivables (2,166,898,420) (676,601,091) 16,102,007 (61,003,692) Increase/(Decrease) in Contract Liablity (41,286,417) 241,731,816 - - Increase/(Decrease) in Trade & Other Payable 1,244,255,921 336,598,342 (38,672) (2,915,202) Cash Generated from Operations (296,614,698) 122,400,742 (126,016,112) (418,393,006)

Retirement Gratuity Paid 23 (62,910,528) (35,677,973) (4,615,058) - Interest Paid (430,533,726) (802,990,718) - - Income Tax Paid (165,590,742) (158,388,903) - - Net Cash Flow from/ (used in) Operating Activities (955,649,694) (874,656,852) (130,631,170) (418,393,006) AMBEON CAPITAL PLC 68 ANNUAL REPORT 2018/19 STATEMENT OF CASH FLOWS

Year ended 31 March Group Company 2019 2018 2019 2018 Notes LKR LKR LKR LKR

Cash Flow from Investing Activities Acquisition of Property, Plant & Equipment 12 (676,343,256) (196,550,798) (20,000,000) (38,500) Investment in Subsidiaries - - (30,000,000) - Acquisition from other financial assets (543,004,020) (978,464,969) - - Acquisition of Intangible Assets 13 (19,181,470) (9,948,144) - - Acquisition of Investment Properties 15 (7,542,453) (4,835,475) - - Disposal of Other Financial Assets 501,697,082 538,848,506 - - Assets Classified as Held for Sale - (7,706,197) - - Liabilities Directly Associated with Assets Classified as Held For Sale - (3,732,224) - - Net Proceeds from Government Securities (137,407,115) 13,715,047 (137,407,115) (613,846,352) Proceeds from disposal of Subsidiaries - - 298,680,270 671,345,000 Investment in Subsidiaries - (122,684,068) - (513,416,776) Redemption of Preference Shares - - - 560,000,000 Proceed from Assets Held for Sales - 1,000,000,000 - - Proceeds on Disposal of Property, Plant & Equipment 38,159,725 23,129,099 - - Investment in Current Assets (30,399,815) - - - Net Cash Flow From / (Used) in Investing Activities (874,021,322) 251,770,777 111,273,155 104,043,372

Cash Flow from Financing Activities Loan Received 80,765,246,188 181,358,319,324 68,482,453,133 173,334,199,226 Dividend Paid to Non-Controlling Interest 34.1 (171,181,230) (12,248,531) - - Effect of Exchange Rate Changes in Loans & Borrowings (2,233,893) 30,783,651 - - Repayment of Finance Lease 22.2 (3,400,000) (3,400,000) - - Proceeds from Non-Controling Interest Through Holding Change 245,778,304 - - - Repayment of Loans (78,693,383,252) (178,927,746,614) (66,126,149,624) 173,162,993,569) Dividend paid to equity holders of parent 21.3 (360,980,933) - (360,980,933) - Net Cash Flow Used in Financing Activities 1,779,845,184 2,445,707,830 1,995,322,576 171,205,657 Net Increase/(Decrease) in Cash & Cash Equivalent during the year (49,825,832) 1,822,821,755 1,975,964,561 (143,143,977)

Cash & Cash Equivalents Net movement during the year (49,825,832) 1,822,821,755 1,975,964,561 (143,143,977) At the beginning of the year (761,812,454) (2,584,634,209) (2,009,722,837) (1,866,578,860) At the end of the year (Note A) 20 (811,638,286) (761,812,454) (33,758,276) (2,009,722,837)

Note A-Cash and Equivalents are as follows Cash in Hand & Bank 611,908,960 1,999,187,137 1,212,412 372,368 Bank Overdraft (1,423,547,246) (2,760,999,591) (34,970,688) (2,010,095,205) (811,638,286) (761,812,454) (33,758,276) (2,009,722,837)

The Notes from pages 69 to 151 form an integral part of these Financial Statements. Figures in bracket indicate deductions. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 69 NOTES TO THE FINANCIAL STATEMENTS

1. CORPORATE INFORMATION Sub - subsidiary – through Ambeon Holdings PLC - Ceylon Leather Products Limited 1.1 Reporting Entity During the period, the principal activities of the Company were Ambeon Capital PLC is a public limited liability Company manufacturing and selling of Leather, Leather Footwear and incorporated and domiciled in Sri Lanka and listed on the Leather Goods. This was a PLC Company & has obtained Colombo Stock Exchange. The registered office and the delisting approval with effect from 01 June 2018, thereby the principal place of Business are located at 01st Floor, No 10, name was changed as Ceylon Leather Products Limited. Gothami Road, Colombo 08.

Sub-subsidiary - through Ceylon Leather Products Limited – 1.2 Consolidated Financial Statements Ceylon Leather Products Distributors (Pvt) Ltd The Financial Statements for the year ended 31 March 2019, The principal activity of the Company was retail selling of comprise “the Company” referring to Ambeon Capital PLC Leather Footwear and Leather Goods. as the holding Company and “the Group” referring to the companies whose accounts have been consolidated therein. Sub -subsidiary – through Ambeon Holdings PLC - South Asia Textile Ltd 1.3 Parent Entity During the year, the principal activity of the Company was The Company’s ultimate parent is CHC Investment (Private) manufacturing and sale of knitted fabrics for the export and Limited, Private Limited Liability Company incorporated and local markets. domiciled in Sri Lanka.

Sub- Subsidiary – through Ambeon Holdings PLC - Palla & 1.4 Approvals of Financial Statements Company (Pvt) Ltd The Financial Statements for the year ended 31 March 2019 The principal activity of the Company was manufacturing shoes were authorized for issue in accordance with a resolution by for exports and the Company ceased operations with effect the board of directors on 13 August 2019. from 31 August 2015.

1.5 Principal Activities & Nature of Operations Sub- subsidiary – through Ambeon Holdings PLC-Dankotuwa Holding Company Porcelain PLC Ambeon Capital PLC, the Group’s holding Company, operated During the period, the principal activity of the Company was as the Investments holding Company of the Group and is to manufacture porcelain tableware to export and domestic presently engaged in carrying out investment related activities. market.

Subsidiary – Ambeon Holdings PLC Sub-subsidiary through Dankotuwa Porcelain PLC – Royal Ambeon Holdings PLC, manages a portfolio of holdings Fernwood Porcelain Ltd consisting of a range of diverse business operations, which During the period, the principal activity of the Company was together constitute the Ambeon Group, and provides function- to manufacture porcelain tableware to export and domestic based services to its subsidiaries and associates. Subsidiaries market. of the Group were engaged in manufacturing of footwear, porcelain, textiles and managing property, IT services and Sub-subsidiary through Dankotuwa Porcelain PLC – Lanka investments. Decals (Pvt) Ltd The principal activity of the Company was to manufacture Subsidiary- Lexinton Resorts (Pvt) Ltd Decals. However, there were no operations during the year. During the year, the principle activity of the Company was managing the real estate. Sub-subsidiary through Dankotuwa Porcelain PLC – Fernwood Lanka (Pvt) Ltd Subsidiary -Heron Agro Products (Pvt) Ltd The principal activity of the Company was the sale of porcelain During the period, the principal activity of the Company was tableware to domestic market. However, there were no involved in Estate Management. operations during the year. AMBEON CAPITAL PLC 70 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

Sub-subsidiary through Dankotuwa Porcelain PLC - DPL Sub-subsidiary through Taprobane Capital Plus (Pvt) Ltd - Trading (Private) Limited Taprobane Investments (Private) Limited The principal activity of the Company was retail selling of The principal activity of the Company is conducting Money porcelain tableware domestic market. Broking transactions in the open market.

Sub-subsidiary through Ambeon Holdings PLC - Colombo Sub-subsidiary through Taprobane Capital Plus (Pvt) Ltd - City Holdings PLC Taprobane Wealth Plus (Private) limited During the period, the principal activity of the Company was to The principal activity of the Company is conducting Corporate engage in Real Estate Finance activities. However, there were no operations during the year Sub-subsidiary - through Colombo City Holdings PLC - Lexinton Holdings (Pvt) Ltd Sub-subsidiary through Taprobane Capital Plus (Pvt) Ltd - On 31.01.2019 Colombo City Holdings PLC acquired 100% Lexinton Financial Services (Private) limited stake in Lexinton Holdings (Pvt) Ltd which was a subsidiary of Taprobane Capital Plus (Pvt) Ltd acquired 100% of Lexinton Ambeon Capital PLC During the period, the principal activity of Financial Services (Pvt) Ltd from Lexinton Holdings (Pvt) Ltd the Company was lending & maintaining commercial property, on 30.11.2018. The principal activity of the Company was dwelling flats for lease. conducting Margin Trading activities. However, there were no operations during the year. Sub -subsidiary – through Ambeon Holdings PLC - Olancom (Pvt) Ltd 1.6 Responsibility for Financial Statements The Company is the Investment Holding Company of Roomsnet The responsibility of the Directors in relation to the Financial International Limited. Statements is set out in the Statement of Directors’ Responsibility report in the Annual report. Sub -subsidiary – through Ambeon Holdings PLC - Millennium IT ESP (Pvt) Limited 2. BASIS OF PREPARATION During the period, the principal activity of the Company 2.1 Basis of Measurement was specializing in the Integration Business provides a The consolidated Financial Statements have been prepared host of specialized, scalable solutions ranging from Core on an accrual basis and under the historical cost convention Infrastructure, Information Security, Business Collaboration, except for investment properties, land and buildings, derivative Near-Field Communications, Business Productivity. Managed financial instruments, fair value through profit or loss financial Solutions and Customer Relationship Management. assets, available-for-sale financial assets (before 31/03/2018), financial instruments Fair Value Through Other Comprehensive Sub - subsidiary – through Ambeon Holdings PLC - Eon Tec Income (from 01/04/2018) that have been measured at fair (Private) Lmited value. The Company is the Investment Holding Company 2.2 Statement of Compliance Sub - subsidiary - through Ambeon Holdings PLC - The Financial Statements which comprise the Statement of Taprobane Capital Plus (Pvt) Ltd Profit or Loss, Statement of Comprehensive Income, Statement Taprobane Capital Plus (Private) Limited was incorporated to of Financial Position, Statement of Changes in Equity and the hold the investments Taprobane Securities (Private) Limited, Statement of Cash Flows together with the Accounting Polices Taprobane Investments (Private) Limited, Taprobane Wealth and notes (the “Financial Statements”) have been prepared Plus (Private) Limited & Lexinton Financial Services (Pvt) Ltd. in accordance with Sri Lanka Accounting Standards (SLFRS/ LKAS) as issued by the Institute of Chartered Accountants of Sub-subsidiary through Taprobane Capital Plus (Pvt) Ltd - Sri Lanka (CA Sri Lanka) and the requirement of the Companies Taprobane Securities (Private) Limited Act No. 7 of 2007. The principal activity of the Company is functioning as a stock broker in the Colombo Stock Exchange. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 71

2.3 Comparative Information • Power over the investee (i.e., existing rights that give it The presentation and classification of the Financial Statements the current ability to direct the relevant activities of the of the previous years have been amended, where relevant for investee) better presentation and to be comparable with those of the • Exposure, or rights, to variable returns from its involvement current year. Refer Note 2.9 for adaption of SLFRS 9 and 15 with the investee and Note 35 for the SLFRS 3. • The ability to use its power over the investee to affect its returns 2.4 Going Concern The Board of Directors have made an assessment of the When the Group has less than a majority of the voting Group’s ability to continue as a going concern and they do not or similar rights of an investee, the Group considers all intent either to liquidate or cease trading. relevant facts and circumstances in assessing whether it has power over an investee, including:

2.5 Presentation and Functional Currency • The contractual arrangement with the other vote holders of The consolidated Financial Statements are presented in Sri the investee; Lankan Rupees, the Group’s functional and presentation • Rights arising from other contractual arrangements; and currency, which is the primary economic environment in which the Holding Company operates. Each entity in the Group uses • The Group’s voting rights and potential voting rights the currency of the primary economic environment in which they operate as their functional currency. The Group re-assesses whether or not it controls an investee, if facts and circumstances indicate that there are changes to The subsidiary mentioned below is using functional currency one or more of the three elements of control. Consolidation other than Sri Lankan Rupees (LKR.). of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of Name of the Subsidiary Functional Currency the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included South Asia Textile Limited United States Dollar (USD) in the consolidated Financial Statements from the date the Group gains control until the date the Group ceases to control 2.6 Basis of Consolidation the subsidiary. The consolidated Financial Statements comprise the Financial Statements of the Company and its subsidiaries as at 31 Profit or loss and each component of other comprehensive March 2019. The Financial Statements of the subsidiaries are income (OCI) are attributed to the equity holders of the parent prepared in compliance with the Group’s accounting policies of the Group and to the non-controlling interests, even if this unless otherwise stated. results in the non-controlling interests having a deficit balance. The Financial Statements of the subsidiaries are prepared for All intra-Group balances, income and expenses, unrealized the same reporting period as the parent Company, which is 12 gains and losses resulting from intra-Group transactions and months ending 31 March, using consistent accounting policies. dividends are eliminated in full. a. Losses within a subsidiary are attributed to the non-controlling 2.7 Subsidiary interest even if that results in a deficit balance. Control over an investee is achieved when the Group is b. A change in the ownership interest of a subsidiary, without a exposed, or has rights, to variable returns from its involvement loss of control, is accounted for as an equity transaction. with the investee and has the ability to affect those returns through its power over the investee. c. If the Group loses control over a subsidiary, it: Specifically, the Group controls an investee if, and only if, the - Derecognizes the assets (including goodwill) and liabilities Group has: of the subsidiary

- Derecognizes the carrying amount of any non-controlling interest AMBEON CAPITAL PLC 72 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

- Derecognizes the cumulative translation differences, 2.9 Significant Accounting Judgements Estimates and recorded in equity Assumptions

- Recognizes the fair value of the consideration received Summary of Significant Accounting Policies

- Recognizes the fair value of any investment retained Except for the Changes in Significant Accounting Policies given - Recognizes any surplus or deficit in profit or loss below the accounting policies have been applied consistently for all periods presented in the financial statements by the - Reclassifies the parent’s share of components previously Group and the Company. recognized in other comprehensive income to profit or loss or retained earnings, as appropriate. Changes in Significant Accounting Policies – Adoption of New Accounting Standards The total profits and losses for the year of the Company and of its subsidiaries included in consolidation are shown The Group initially applied SLFRS 15 - Revenue from Contracts in the consolidated income statement and statement of with Customers and SLFRS 09 - Financial Instruments from comprehensive income and all assets and liabilities of the 1st April 2018. Due to the transition methods chosen by the Company and of its subsidiaries included in consolidation are Group in applying these standards, comparative information shown in the statement of financial position. throughout these financial statements has not been restated to reflect the requirements of the new standards. Non-controlling interest which represents the portion of profit or loss and net assets not held by the Group, are shown as a • SLFRS 15 Revenue from Contracts with Customers component of profit for the year in the consolidated income SLFRS 15 Revenue from Contracts with Customers supersedes statement and statement of comprehensive income and as a LKAS 11 Construction Contracts, LKAS 18 Revenue and component of equity in the consolidated statement of financial related Interpretations and it applies to all revenue arising position, separately from parent’ shareholders’ equity. from contracts with customers, unless those contracts are in the scope of other standards. The new standard establishes a The consolidated statement of cash flow includes the cash five-step model to account for revenue arising from contracts flows of the Company and its subsidiaries. with customers. Under SLFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity In the separate financial statement investment in subsidiaries expects to be entitled in exchange for transferring goods or are accounted at cost. services to a customer.

2.8 Transactions with Non-Controlling Interests The standard requires entities to exercise judgement, taking The profit or loss and net assets of a subsidiary attributable to into consideration all of the relevant facts and circumstances equity interests that are not owned by the parent, directly or when applying each step of the model to contracts with their indirectly through subsidiaries, is disclosed separately under customers. The standard also specifies the accounting for the the heading ‘Non- Controlling Interest’. incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. Based on the impact assessment The Group applies a policy of treating transactions with non- performed, the Group concluded that SLFRS 15 does not controlling interests as transactions with parties external to the have a material impact on the Group’s consolidated financial Group. statements.

Losses within a subsidiary are attributed to the non-controlling • SLFRS 9 - Financial Instruments interest even if that results in a deficit balance. SLFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, FVOCI and FVTPL. The classification of financial assets under SLFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. SLFRS 9 eliminates the previous LKAS 39 categories of held to maturity loans and receivables and available for sale. SLFRS AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 73

9 largely retains the existing requirements in LKAS 39 for the The methods used to determine the fair value of the investment classification and measurement of financial liabilities. property and property plant and equipment’s carried at fair value are further explained in Note 12 and Note 15. Changes in accounting policies resulting from the adoption of SLFRS 9 have been applied retrospectively, except as described • Impairment of non-financial assets below. Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which The Group has used an exemption not to restate comparative is the higher of its fair value less costs to sell and its value in information for prior periods with respect to classification and use (VIU). The fair value less costs to sell calculation is based measurement (including impairment) requirements. Therefore, on available data from an active market, in an arm’s length comparative periods have not been restated. Differences in transaction, of similar assets or observable market prices less the carrying amounts of financial assets and financial liabilities incremental costs for disposing of the asset. The value in use resulting from the adoption of SLFRS 9 are recognised in calculation is based on a discounted cash flow model. The retained earnings and reserves as at 1 April 2018. Accordingly, cash flows are derived from the budget for the next five years the information presented for 2017/18 does not generally and do not include restructuring activities that the Group is reflect the requirements of SLFRS 9, but rather those of LKAS not yet committed to or significant future investments that will 39. The effect of adopting SLFRS 9 on the carrying amounts enhance the asset’s performance of the cash generating unit of financial assets at 1 April 2018 relates solely to the new being tested. The recoverable amount is most sensitive to the impairment requirements. Impact of adopting SLFRS 9 - discount rate used for the discounted cash flow model as well “Financial Instruments” refer the note 28.3. as the expected future cash inflows and the growth rate used for extrapolation purposes. 2.10 Significant Judgments, estimates and assumptions The preparation of the Financial Statements of the Group The key assumptions used to determine the value in use (VIU) require the management to make judgments, estimates are further explained in Note 13.2 and assumptions, which may affect the amounts of income, expenditure, assets, liabilities and the disclosure of contingent • Fair value of financial instruments liabilities, at the end of the reporting period. In the process of Where the fair value of financial assets and financial liabilities applying the Group’s accounting policies, the key assumptions recorded in the statement of financial position cannot be made relating to the future and the sources of estimation at the derived from active markets, their fair value is determined reporting date together with the related judgments that have a using valuation techniques including the discounted cash flow significant risk of causing a material adjustment to the carrying model. The inputs to these models are taken from observable amounts of assets and liabilities within the financial year are markets where possible. Where this is not feasible, a degree of discussed below. judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit • Revaluation of property, plant and equipment and fair risk and volatility. Changes in assumptions about these factors valuation of investment properties could affect the reported fair value of financial instruments. The Group measures land and buildings at revalued amounts Refer Note No.28 for financial instrument classification and fair with changes in fair value being recognized in Other value hierarchy. Comprehensive Income and in the Statement of Changes in Equity. In addition, it carries its investment properties at • Deferred Tax Assets/ Liabilities fair value, with changes in fair value being recognized in the Deferred tax assets are recognised for all unused tax losses statement of profit or loss. The Group engaged independent to the extent that it is probable that taxable profit will be valuation specialists to determine fair value of investment available against which the losses can be utilised. Significant property and land and buildings as at 31 March 2019. management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the The valuer has used valuation techniques such as market likely timing and the level of future taxable profits together approach, cost approach and income approach. with future tax planning strategies. Further details on taxes are disclosed in Note 25. AMBEON CAPITAL PLC 74 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

• Employee benefit liability the progress towards complete satisfaction of that performance obligation. The employee benefit liability of the Group determines using actuarial valuation carried out by an independent actuarial specialist. The actuarial valuations involve making assumptions d. Dividend about discount rates and future salary increases. The Dividend income is recognized when the Group’s right to complexity of the valuation, the underlying assumptions and receive the payment is established. its long-term nature, the defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are e. Finance income reviewed at each reporting date. Finance income comprises interest income on funds invested, dividend income, gains on the disposal of available-for-sale Details of the key assumptions used in the estimates are financial assets, (before 31/03/2018) fair value gains on the contained in Note 23. financial assets at fair value through profit or loss, gains on the re-measurement to fair value of any pre-existing interest in an 2.11 Summary of Significant Accounting Policies acquiree that are recognized in income statement. The presentation and classification of the Financial Statements of the previous period have been amended, where relevant, Interest income or expense is recorded as it accrues using for better presentation and to be comparable with those of the the Effective Interest Rate (EIR), which is the rate that exactly current period. discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a These accounting policies have been applied consistently by shorter period, where appropriate, to the net carrying amount Group’s entities. of the financial asset or liability. Interest income is included in finance income in the income statement. 2.11.1 Revenue from contract with customers Revenue from contracts with customers is recognized when f. Commissions control of the goods or services is transferred to the customer When the Group acts in the capacity of an agent rather than as at an amount that reflects the consideration to which the Group the principal in a transaction, the revenue recognised is the net expects to be entitled in exchange for those goods or services. amount of commission made by the Group. a. Goods transferred at a point in time g. Rental Income Under SLFRS 15, revenue is recognized upon satisfaction of Rental income arising from operating leases on investment a performance obligation. The revenue recognition occurs at properties is accounted for on a straight-line basis over the a point in time when control of the asset is transferred to the lease terms. customer, generally, on delivery of the goods. h. Gains and losses b. Revenue recognition multiple element arrangements Net gains and losses of a revenue nature arising from the The Group recognizes revenue on multiple element disposal of property, plant and equipment and other noncurrent arrangements and design and build software contracts. assets, including investments, are accounted for in the income Multiple element arrangements require management judgment statement, after deducting from the proceeds on disposal, in determining unit of accounting for such arrangement. Design the carrying amount of such assets and the related selling and build software contracts uses percentage of completion expenses. method relies on output method, which is the contract milestones, supported by user acceptance confirmation. i. Other income Other income is recognized on an accrual basis. c. Rendering of services Under SLFRS 15, the Group determines, at contract inception, whether it satisfies the performance obligation over time or at a point in time. For each performance obligation satisfied over time, the Group recognizes the revenue over time by measuring AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 75

2.11.2 Expenditure recognition major inspection is performed, its cost is recognized in the Expenses are recognized in the income statement on the basis carrying amount of the plant and equipment as a replacement of a direct association between the cost incurred and the if the recognition criteria are satisfied. All other repair and earning of specific items of income. All expenditure incurred maintenance costs are recognized in the income statement as in the running of the business and in maintaining the property, incurred. plant and equipment in a state of efficiency has been charged to the income statement. Land and buildings are measured at fair value less accumulated depreciation on buildings and impairment charged subsequent For the purpose of presentation of the income statement, the to the date of the revaluation. “function of expenses” method has been adopted, on the basis that it presents fairly the elements of the Company and Group’s The carrying values of property, plant and equipment performance. are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. 2.11.3 Finance costs

Finance costs comprise interest expense on borrowings, Any revaluation surplus is recognized in other comprehensive unwinding of the discount on provisions, losses on disposal of income and accumulated in equity in the asset revaluation available for- sale financial assets, (before 31/03/2018) fair reserve, except to the extent that it reverses a revaluation value losses on financial assets at fair value through profit or decrease of the same asset previously recognized in the loss, impairment losses recognized on financial assets (other income statement, in which case the increase is recognized than trade receivables) that are recognized in the income in the income statement. A revaluation deficit is recognized statement. in the income statement, except to the extent that it offsets an existing surplus on the same asset recognized in the asset Borrowing costs directly attributable to the acquisition, revaluation reserve. construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or Accumulated depreciation as at the revaluation date is sale are capitalized as part of the cost of the respective assets. eliminated against the gross carrying amount of the asset and All other borrowing costs are expensed in the period they the net amount is restated to the revalued amount of the asset. occur. Borrowing costs consist of interest and other costs that Upon disposal, any revaluation reserve relating to the particular the Group incurs in connection with the borrowing of funds. asset being sold is transferred to retained earnings.

2.11.4 Property, plant and equipment The fair valuation are perform with every 5 year to ensure that the carrying amount of the revalued assets do not differ Basis of recognition materiality from their fair value. Property, plant and equipment are recognized if it is probable that future economic benefits associated with the asset will Derecognition flow to the Group and the cost of the asset can be reliably measured. An item of property, plant and equipment are derecognized upon replacement, disposal or when no future economic benefits are expected from its use. Any gain or loss arising on Basis of measurement derecognition of the asset is included in the income statement Plant and equipment are stated at cost less accumulated in the year the asset is derecognized. depreciation and any accumulated impairment losses, (except for land and building). Such cost includes the cost of replacing Depreciation component parts of the plant and equipment and borrowing costs for long-term construction projects if the recognition Depreciation is calculated by using a straight-line method on criteria are met. When significant parts of plant and equipment the cost or valuation of all property, plant and equipment, other are required to be replaced at intervals, the Group derecognizes than freehold land, in order to write off such amounts over the the replaced part, and recognizes the new part with its own estimated useful economic life of such assets. associated useful life and depreciation. Likewise, when a AMBEON CAPITAL PLC 76 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

Depreciation methods, useful life values are assessed at the classified into mature biological assets and immature biological reporting date. The estimated useful lives for the current year assets. Mature biological assets are those that have attained are as follows. harvestable specifications or are able to sustain regular harvests. Immature biological assets are those that have not Assets Category 2018/19 2017/18 yet attained harvestable specifications. Land Development Cost 10 Years 10 Years The cost of the land preparation, rehabilitation, new planting, Buildings 10-50 Years 10-50 Years replanting, crop diversifications, inter-planting and fertilizing, Plant & Machinery 10-15 Years 10-15 Years etc., incurred between the time of planting and harvesting Tools & Equipment 5-18 Years 5-18 Years (when the planted area attains maturity), are classified as Furniture Fittings & Office 5-7 Years 5-7 Years immature plantations. These immature plantations are shown Equipment at direct costs plus attributable overheads, including interest Motor Vehicles 4-6 Years 4-6 Years attributable to long-term loans used for financing immature Waste-water Purification 15 Years 15 Years plantations. The expenditure incurred on bearer biological Project assets (Tea, Rubber fields) which comes into bearing during Kilns & Kiln Furniture 3-15 Years 3-15 Years the year, is transferred to mature plantations. Expenditure incurred on consumable biological assets is recorded at cost at Computer Equipment 1-5 Years 1-5 Years initial recognition and thereafter at fair value at the end of each reporting period. 2.11.5 Leases The determination of whether an arrangement is, or contains, Biological assets are further classified as bearer biological a lease is based on the substance of the arrangement at the assets and consumable biological assets. inception date. The arrangement is assessed for whether fulfillment of the arrangement is dependent on the use of a a. Bearer Biological Assets specific asset or assets or the arrangement conveys a right Bearer biological assets include tea, rubber & coconut trees to use the asset or assets, even if that right is not explicitly that are not intended to be sold or harvested, but are grown specified in an arrangement. for harvesting agricultural produce from such biological assets. The bearer biological assets are measured at cost less A leased asset is depreciated over the useful life of the asset. accumulated depreciation and accumulated impairment losses, However, if there is no reasonable certainty that the Group will if any, in terms of LKAS 16 – Property Plant & Equipment. obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. b. Consumable Biological Assets Consumable biological assets include managed timber trees Operating lease payments are recognized as an operating that are to be sold as biological assets. The managed timber expense in the income statement on a straight-line basis over trees are measured on initial recognition and at the end of each the lease term. reporting period at its fair value less cost to sell in terms of LKAS 41. The cost is treated as approximation to fair value of 2.11.6 Lease rentals paid in advance (Leasehold Properties) young plants as the impact on biological transformation of such Prepaid lease rentals paid to acquire land use rights are plants to price during this period is immaterial. amortized over the lease term in accordance with the pattern of The gain or loss arising on initial recognition of biological benefits provided. assets at fair value less cost to sell and from a change in fair value less cost to sell of biological assets are included in 2.11.7 Biological Assets Comprehensive Income Statement for the period in which it The entity recognizes the biological assets when, and only arises. when, the entity controls the assets as a result of a past event, it is probable that future economic benefits associated with the assets will flow to the entity and the fair value for cost of the assets can be measured reliably, Biological assets are AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 77

c. Infilling Cost on Bearer Biological Assets 2.11.9 Intangible assets Where infilling results in an increase in the economic life of Intangible assets acquired separately are measured on initial the relevant field beyond its previously assessed standard recognition at cost. The cost of intangible assets acquired of performance, the costs are capitalized and depreciated in a business combination is their fair value as at the date of over the useful life at rates applicable to mature plantations. acquisition. Following initial recognition, intangible assets Infilling costs that are not capitalized have been charged to the are carried at cost less accumulated amortization and Statement of comprehensive income in the year in which they accumulated impairment losses, if any. Internally generated are incurred. intangible assets, excluding capitalized development costs, are not capitalized and expenditure is recognized in the income 2.11.8 Investment Property statement when it is incurred. Investment properties are measured initially at cost, including The useful lives of intangible assets are assessed as either transaction costs. The carrying value of an investment property finite or indefinite. Intangible assets with finite lives are includes the cost of replacing part of an existing investment amortized over their useful economic lives and assessed for property, at the time that cost is incurred if the recognition impairment whenever there is an indication that the intangible criteria are met, and excludes the costs of day-to-day servicing asset may be impaired. The amortization period and the of the investment property. Subsequent to initial recognition, amortization method for an intangible asset with a finite useful the investment properties are stated at fair values, which life is reviewed at least at the end of each reporting period. reflect market conditions at the reporting date. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the Gains or losses arising from changes in fair value are included asset is accounted for by changing the amortization period in the income statement the year in which they arise. Fair or method, as appropriate, and are treated as changes in values are evaluated at frequent intervals by an accredited accounting estimates. The amortization expense on intangible external, independent valuer. assets with finite lives is recognized in the income statement The unobservable data of the Investment Property are showing in the expense category consistent with the function of the in the note no 15.4.1. intangible assets.

Investment properties are derecognized when disposed, or Intangible assets with indefinite useful lives are not amortized, permanently withdrawn from use because no future economic but are tested for impairment annually, either individually or at benefits are expected. Any gains or losses on retirement or the cash-generating unit level. The assessment of indefinite disposal are recognized in the income statement in the year of life is reviewed annually to determine whether the indefinite retirement or disposal. life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. (Note Transfers are made to or from investment property only when No. 13) there is a change in use. For a transfer from investment property to owner occupied property or inventory (WIP), the Gains or losses arising from derecognition of an intangible deemed cost for subsequent accounting is the fair value at the asset are measured as the difference between the net date of change in use. If owner occupied property becomes an disposal proceeds and the carrying amount of the asset and investment property or inventory (WIP), the Group accounts are recognized in the income statement when the asset is for such property in accordance with the policy stated under derecognized. property, plant and equipment up to the date of change in use. 2.11.10 Business combinations and goodwill Where Group companies occupy a significant portion of Acquisition of subsidiaries are accounted for using the the investment property of a subsidiary, such investment acquisition method. The cost of an acquisition is measured properties are treated as property, plant and equipment in the as the aggregate of the consideration transferred, measured Consolidated Financial Statements, and accounted using Group at the acquisition date fair value and the amount of any accounting policy for property, plant and equipment. non-controlling interest in the acquire. For each business combination, the Group elects whether to measure the non-controlling interest in the acquire at fair value or at the AMBEON CAPITAL PLC 78 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

proportionate share of the acquire at the fair value or at the 2.11.11 Common Control Business Combinations proportionate share of the acquire’s identifiable net assets. Business combinations between entities under common Acquisition-related costs are expensed as incurred and control are accounted for using pooling of interest method. included in administrative expenses. Accordingly,

When the Group acquires a business, it assesses the financial . The assets and liabilities of the combining entities are assets and liabilities assumed for appropriate classification reflected at their carrying amounts. and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the . No new goodwill is recognised as a result of the acquisition date. This includes the separation of embedded combination. Any difference between the consideration derivatives in host contracts by the acquire. paid/transferred and the equity acquired is reflected within equity. If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition 2.11.12 Foreign currencies date fair value and any resulting gain or loss is recognized in profit or loss. Any contingent consideration to be transferred by Foreign currency transactions and balances the acquirer will be recognized at fair value at the acquisition The Group’s consolidated Financial Statements are presented date. Contingent consideration which is deemed to be an asset in Sri Lankan Rupees, which is also the parent Company’s or liability that is a financial instrument and within the scope of functional currency. For each entity the Group determines SLFRS 9 Financial Instruments: Recognition and Measurement, the functional currency and items included in the Financial is measured at fair value with changes in fair value either in Statements of each entity are measured using that functional profit or loss or as a change to other comprehensive income currency. The Group uses the direct method of consolidation (OCI). and has elected to recycle the gain or loss arises from this method. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount Transactions and balances recognized for non-controlling interest over the net identifiable Transactions in foreign currencies are initially recorded by the assets acquired and liabilities assumed. If this consideration Group entities at their respective functional currency spot rate is lower than the fair value of the net assets of the subsidiary at the date the transaction first qualifies for recognition. acquired, the difference is recognized in profit or loss. Monetary assets and liabilities denominated in foreign After initial recognition, goodwill is measured at cost less any currencies are retranslated at the functional currency spot rate accumulated impairment losses. For the purpose of impairment of exchange ruling at the reporting date. testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s Non-monetary items that are measured in terms of historical cash-generating units that are expected to benefit from the cost in a foreign currency are translated using the exchange combination, irrespective of whether other assets or liabilities rates as at the dates of the initial transactions. Non-monetary of the acquiree are assigned to those units. items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair Impairment is determined by assessing the recoverable amount value is determined. The gain or loss arising on translation of of the cash-generating unit to which the goodwill relates as non-monetary measured at fair value is treated in line with the further explained in Note 13.1.1. recognition of gain or loss on change in fair value in the item (i.e., the translation differences on items whose fair value gain Where goodwill forms part of a cash-generating unit and part or loss is recognized in other comprehensive income (OCI) of the operation within that unit is disposed of, the goodwill or profit or loss are also recognized in OCI or profit or loss, associated with the operation disposed of is included in the respectively). carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion the cash-generating unit retained. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 79

Foreign operations rate is calculated and applied to project future cash flows after The statement of financial position and income statement of the fifth year. overseas subsidiaries and the subsidiaries which are have functional currencies other than LKR, which are deemed to be Impairment losses of continuing operations, including foreign operations are translated to Sri Lanka rupees at the impairment on inventories, are recognized in the income rate of exchange prevailing as at the reporting date and at the statement in those expense categories consistent with average annual rate of exchange for the period respectively. the function of the impaired asset, except for a property previously revalued where the revaluation was taken to other The exchange differences arising on the translation are taken comprehensive income. In this case, the impairment is also directly to other comprehensive income. On disposal of a recognized in other comprehensive income up to the amount of foreign entity, the deferred cumulative amount recognized in any previous revaluation. other comprehensive income relating to that particular foreign operation is recognized in the income statement. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication The Group treated goodwill and any fair value adjustments to that previously recognized impairment losses may no longer the carrying amounts of assets and liabilities arising on the exist or may have decreased. If such indication exists, the acquisition as assets and liabilities of the parent. Therefore, Group estimates the asset’s or CGU’s recoverable amount. A those assets and liabilities are non-monetary items already previously recognized impairment loss is reversed only if there expressed in the functional currency of the parent and no has been a change in the assumptions used to determine the further translation differences occur. asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor 2.11.13 Impairment of non-financial assets exceed the carrying amount that would have been determined, The Group assesses at each reporting date whether there is net of depreciation, had no impairment loss been recognized an indication that an asset may be impaired. If any indication for the asset in prior years. Such reversal is recognized in the exists, or when annual impairment testing for an asset is income statement unless the asset is carried at a revalued required, the Group estimates the asset’s recoverable amount. amount, in which case the reversal is treated as a revaluation An asset’s recoverable amount is higher of asset’s or cash increase. generating unit’s (CGU) fair value less costs to sell and its value in use. It is determined for an individual asset, unless the asset 2.11.14 Government grants does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the Government grants are recognized where there is reasonable carrying amount of an asset or CGU exceeds its recoverable assurance that the grant will be received and all attached amount, the asset is considered impaired and is written down conditions will be complied with. When the grant relates to to its recoverable amount. In assessing value in use, the an expense item, it is recognized as income on a systematic estimated future cash flows are discounted to their present basis over the periods that the costs, which it is intended to value using a pre-tax discount rate that reflects current market compensate, are expensed. Where the grant relates to an assessments of the time value of money and the risks specific asset, it is recognized as income in equal amounts over the to the asset. In determining fair value less costs to sell, recent expected useful life of the related asset. market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation When the Group receives non-monetary grants, the asset and model is used. These calculations are corroborated by valuation the grant are recorded gross at nominal amounts and released multiples, quoted share prices for publicly traded subsidiaries to profit or loss over the expected useful life in a pattern of or other available fair value indicators. consumption of the benefit of the underlying asset by equal annual installments. The Group bases its impairment calculation on detailed budgets and forecasts which are prepared separately for each of the When loans or similar assistance are provided by governments Group’s CGU to which the individual assets are allocated. These or related institutions with an interest rate below the current budgets and forecast calculations are generally covering a applicable market rate, the effect of this favorable interest is period of five years. For longer periods, a long-term growth regarded as a government grant. AMBEON CAPITAL PLC 80 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

2.11.15 Taxes • In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint a. Current income tax ventures, deferred tax assets are recognized only to the extent Current income tax assets and liabilities for the current period that it is probable that the temporary differences will reverse are measured at the amount expected to be recovered from in the foreseeable future and taxable profit will be available or paid to the taxation authorities. The tax rates and tax laws against which the temporary differences can be utilized. used to compute the amount are those that are enacted or substantively enacted, at the reporting date. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer Current income tax relating to items recognized directly in probable that sufficient taxable profit will be available to allow equity is recognized in equity and not in the income statement. all or part of the deferred tax asset to be utilized. Unrecognized Management periodically evaluates positions taken in the deferred tax assets are reassessed at each reporting date and tax returns with respect to situations in which applicable are recognized to the extent that it has become probable that tax regulations are subject to interpretation and establishes future taxable profits will allow the deferred tax asset to be provisions where appropriate. recovered. b. Deferred tax Deferred tax assets and liabilities are measured at the tax rates Deferred tax is provided using the liability method on temporary that are expected to apply in the year when the asset is realized differences between the tax bases of assets and liabilities and or the liability is settled, based on tax rates (and tax laws) that their carrying amounts for financial reporting purposes at the have been enacted or substantively enacted at the reporting reporting date. date.

Deferred tax liabilities are recognized for all taxable temporary Deferred tax relating to items recognized outside profit or loss differences, except: is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in • When the deferred tax liability arises from the initial recognition other comprehensive income or directly in equity. of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, Deferred tax assets and deferred tax liabilities are offset, if affects neither the accounting profit nor taxable profit or loss. a legally enforceable right exists to set off current tax assets against current tax liabilities and when the deferred taxes • In respect of taxable temporary differences associated with relate to the same taxable entity and the same taxation investments in subsidiaries, associates and interests in joint authority. ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the Deferred tax assets and deferred tax liabilities are stated in the temporary differences will not reverse in the foreseeable future. Note No. 25

Deferred tax assets are recognized for all deductible temporary c. Sales Tax differences, carry forward of unused tax credits and unused Revenues, expenses and assets are recognized net of the tax losses, to the extent that it is probable that taxable profit amount of sales tax except: will be available against which the deductible temporary differences, and the carry forward of unused tax credits and • where the sales tax incurred on a purchase of asset or service unused tax losses can be utilized, except: is not recoverable from the taxation authorities in which case the sales tax is recognized as a part of the cost of the asset or • When the deferred tax asset relating to the deductible part of the expense item as applicable and temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business • receivable and payable that are stated with the amount of sales combination and, at the time of the transaction, affects neither tax included. the accounting profit nor taxable profit or loss. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 81

The net amount of sales tax recoverable and payable in respect Consumables & Spares - At purchase cost on weighted average of taxation authorities is included as a part of receivables and basis. payables in the Statement of Financial Position. Goods in Transit - At purchase price 2.11.16 Non-current Assets Held for Sale and Discontinued operations 2.11.18 Financial instruments-initial recognition and subsequent The Group classifies non-current assets and disposal groups measurement as held for sale if their carrying amounts will be recovered Accounting Policy after 01 April 2018. principally through a sale rather than through continuing use. The Group has adopted SLFRS 9 –Financial Instruments, Non-current assets and disposal groups are measured at the SLFRS 15 - Revenue from Contracts with Customers, effective lower of their carrying amount and fair value less costs to sell. for annual periods beginning on or after 01 January 2018, The criteria for held for sale classification is regarded met only for the first time. The Group has not adopted early any other when the sale is highly probable and the asset or disposal standard, interpretation or amendment that has been issued group is available for immediate sale in its present condition. but is not yet effective. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within SLFRS 9 -Financial Instruments one year from the date of classification. The Group has initially adopted SLFRS 9 with the date of Discontinued operations are excluded from the results of transition as 01January 2018. The Group has not early adopted continuing operations and are presented as a single amount this standard in previous periods. The adoption of SLFRS 9 has as profit or loss after tax from discontinued operations in the resulted in changes in accounting policies for recognition, income statement. classification and measurement of financial assets and financial liabilities and impairment of financial assets. SLFRS 9 Property, plant and equipment and intangible assets once significantly amends the other standards dealing with financial classified as held for sale/distribution to owners are not instruments such as SLFRS 7 Financial Instruments: Disclosure depreciated or amortized. ‘.

Additional disclosures are provided in Note 4. All other notes to As permitted by the transitional provisions of SLFRS 9, the Financial Statements mainly include amounts for continuing the Group elected not to restate comparative figures. Any operations, unless otherwise mentioned. adjustments to the carrying amounts of financial assets and liabilities, at the date of transition were recognized in 2.11.17 Inventories the retained earnings as at 1 April 2018. Accordingly, the information presented for year 2017 /2018 does not reflect the Inventories are valued at the lower of cost and net realizable requirements of SLFRS 9 and therefore not comparable to the value, after making due allowances for obsolete and slow- information presented for the year 2018/2019 under SLFRS 9. moving items. Net realizable value is the price at which inventories can be sold in the ordinary course of business SLFRS 9 sets out the requirements for recognizing and less the estimated cost of completion and the estimated cost measuring financial assets and financial liabilities. This necessary to make the sale. standard replaces LKAS 39 Financial Instruments: Recognition and Measurement. The requirements of SLFRS 9 represent a The cost incurred in bringing inventories to its present location significant change from LKAS 39. This new standard brings and condition is accounted using the following cost formula :- fundamental changes to the accounting for financial assets and to certain aspects of accounting for financial liabilities. Raw Materials - At purchase cost on weighted average basis

The key changes to the Group’s accounting policies resulting Finished Goods & Work-in-Progress - At the cost of direct from its adoption of SLFRS 9 are summarized below. The materials, direct labour and an appropriate proportion of fixed full impact of adopting SLFRS 9 is set out in Note 28.3 to the production overheads based on normal operating capacity, but Financial Statements. excluding borrowing Costs on weighted average basis. AMBEON CAPITAL PLC 82 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

Classification of Financial Assets & Financial Liabilities For trade receivables and contract assets, the Group applies a SLFRS 9 contains three principal classification categories simplified approach in calculating ECLs. Therefore, the Group for financial assets: measured at amortized cost, fair does not track changes in credit risk, but instead recognizes a value through other comprehensive income (FVOCI) and Fair loss allowance based on lifetime ECLs at each reporting date. value through Profit & Loss (FVTPL).SLFRS 9 classification The Group has established a provision matrix that is based is generally based on the business model in which a on its historical credit loss experience, adjusted for forward- financial asset is managed and its contractual cash flow looking factors specific to the debtors and the economic characteristics. The LKAS 39 measurement categories of environment. financial assets (fair value through profit or loss (FVTPL), available for sale (AFS), held-to-maturity, loans & receivables Accounting Policy before 01 April 2018 and amortized cost) have been replaced by: a. Financial assets

- Debt instruments at amortized cost Initial recognition and measurement

- Debt instruments at fair value through other comprehensive Financial assets within the scope of LKAS 39 are classified income (FVOCI), with gains or losses recycled to profit or as financial assets at fair value through profit or loss, loans loss on derecognition and receivables, held-to-maturity investments, available-for- sale financial assets, or as derivatives designated as hedging - Equity instruments at FVOCI, with no recycling of gains or instruments in an effective hedge, as appropriate. The Group losses to profit or loss on derecognition determines the classification of its financial assets at initial - Financial assets at FVTPL recognition.

SLFRS 9 largely retains the existing requirements in LKAS 39 All financial assets are recognized initially at fair value plus for classification of Financial Liabilities. However, although transaction costs, in the case of assets not at fair value through under LKAS 39 all fair value changes of liabilities designated profit or loss. under the fair value option were recognized in profit or loss, under SLFRS 9 fair value changes are generally presented as Purchases or sales of financial assets that require delivery follows. of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are - The amount of change in the fair value that is recognized on the trade date, i.e., the date that the Group attributable to changes in the credit risk of the liability commits to purchase or sell the asset. is presented in OCI; and Subsequent measurement - The remaining amount of change in the fair value is The subsequent measurement of financial assets depends on presented in profit or loss. their classification as described below:

The Group’s classification of its financial assets and liabilities Financial assets at fair value through profit or loss is explained in Note 17 & 27 to the Financial Statements. The quantitative impact of applying SLFRS 9 as at 01 April 2018 is Financial assets at fair value through profit or loss includes disclosed in Note 28.3 to the Financial Statements. financial assets held-for-trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held-for-trading if Impairment of financial assets they are acquired for the purpose of selling or repurchasing The adoption of SLFRS 9 has fundamentally changed the in the near term. This category includes derivative financial Group’s accounting for loan loss impairments by replacing instruments entered into by the Group that are not designated LKAS 39‘s Incurred Loss approach with a forward looking as hedging instruments in hedge relationships as defined Expected Credit Loss (ECL) approach. The SLFRS 9 requires by LKAS 39. Derivatives, including separated embedded the Group to record an allowance for ECLs for all loans and derivatives are also classified as held-for-trading unless they other debt financial assets not held at FVTPL, together with are designated as effective hedging instruments. Financial loan commitments and financial guarantee contracts. assets at fair value through profit and loss are carried in the statement of financial position at fair value with changes in AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 83

fair value recognized in finance income or finance costs in the After initial measurement, available-for-sale financial income statement. investments are subsequently measured at fair value with unrealized gains or losses recognized as other comprehensive The Group evaluates its financial assets held-for-trading, (other income in the available-for-sale reserve until the investment than derivatives), to determine whether the intention to sell is derecognized, at which time, the cumulative gain or loss them in the near term is still appropriate. When the Group is is recognized in other operating income, or determined to be unable to trade these financial assets due to inactive markets impaired, at which time the cumulative loss is reclassified to and management the Group may elect to reclassify these the income statement in finance costs and removed from the financial assets in rare circumstances. The reclassification to available-for-sale reserve. Interest income on available-for-sale loans and receivables, available-for-sale or held-to-maturity debt securities is calculated using the effective interest method depends on the nature of the asset. This evaluation does not and is recognized in profit or loss. affect any financial assets designated at fair value through profit or loss using the fair value option at designation. The Group evaluates its available-for-sale financial assets to determine whether the ability and intention to sell them in Loans and receivables the near term is still appropriate. When the Group is unable to trade these financial assets due to inactive markets and Loans and receivables are non-derivative financial assets with management’s intention to do so significantly changes in fixed or determinable payments that are not quoted in an active foreseeable future, the Group may elect to reclassify these market. After initial measurement, such financial assets are financial assets in rare circumstances. subsequently measured at amortized cost using the effective interest rate method (EIR), less impairment. Amortized cost is Reclassification to loans and receivables is permitted when the calculated by taking into account any discount or premium on financial assets meet the definition of loans and receivables acquisition and fees or costs that are an integral part of the and the Group has the intent and ability to hold these assets for EIR. The EIR amortization is included in finance income in the the foreseeable future or until maturity. Reclassification to the income statement. The losses arising from impairment are held-to-maturity category is permitted only when the entity has recognized in the income statement in finance costs. the intention and ability to hold the financial asset accordingly.

Held-to-maturity investments For a financial asset reclassified out of the available-for-sale Non-derivative financial assets with fixed or determinable category, any previous gain or loss on that asset that has been payments and fixed maturities are classified as held-to- recognized in equity is amortized to profit or loss over the maturity when the Group has the positive intention and ability remaining life of the investment using the EIR. Any difference to hold them to maturity. After initial measurement, held-to- between the new amortized cost and the expected cash flows maturity investments are measured at amortized cost using is also amortized over the remaining life of the asset using the the effective interest method, less impairment. Amortized cost EIR. If the asset is subsequently determined to be impaired, is calculated by taking into account any discount or premium then the amount recorded in equity is reclassified to the income on acquisition and fees or costs that are an integral part of statement. the EIR. The EIR amortization is included in finance income in the income statement. The losses arising from impairment are Derecognition recognized in the income statement in finance costs. A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is Available-for-sale financial investments derecognized when: Available-for-sale financial investments include equity and debt securities. Equity investments classified as available- • The rights to receive cash flows from the asset have expired for-sale are those, neither classified as held-for-trading nor designated at fair value through profit or loss. Debt securities • The Group has transferred its rights to receive cash flows from in this category are those which are intended to be held for an the asset or has assumed an obligation to pay the received indefinite period of time and which may be sold in response cash flows in full without material delay to a third party under a to needs for liquidity or in response to changes in the market ‘pass through’ arrangement; and either (a) the Group/Company conditions. has transferred substantially all the risks and rewards of the asset, or (b) the Group/Company has neither transferred nor AMBEON CAPITAL PLC 84 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

retained substantially all the risks and rewards of the asset, but impairment loss is, or continues to be, recognized are not has transferred control of the asset. included in a collective assessment of impairment.

When the Group has transferred its rights to receive cash flows If there is objective evidence that an impairment loss has been from an asset or has entered into a pass-through arrangement, incurred, the amount of the loss is measured as the difference and has neither transferred nor retained substantially all of between the asset’s carrying amount and the present value of the risks and rewards of the asset nor transferred control of it, estimated future cash flows (excluding future expected credit the asset is recognized to the extent of the Group’s continuing losses that have not yet been incurred). The present value of involvement in it. the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable In such case, the Group also recognizes an associated liability. interest rate, the discount rate for measuring any impairment The transferred asset and the associated liability are measured loss is the current effective interest rate. on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a The carrying amount of the asset is reduced through the use of guarantee over the transferred asset is measured at the lower an allowance account and the amount of the loss is recognized of the original carrying amount of the asset and the maximum in the income statement. Interest income continues to be amount of consideration that the Group could be required to accrued on the reduced carrying amount and is accrued using repay. the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest b. Impairment of financial assets income is recorded as part of finance income in the income statement. Loans together with the associated allowance The Group assesses at each reporting date whether there are written off when there is no realistic prospect of future is any objective evidence that a financial asset or a group of recovery and all collateral has been realized or has been financial assets is impaired. A financial asset or a group of transferred to the Group. If, in a subsequent year, the amount of financial assets is deemed to be impaired if, there is objective the estimated impairment loss increases or decreases because evidence of impairment as a result of one or more events of an event occurring after the impairment was recognized, that has occurred after the initial recognition of the asset (an the previously recognized impairment loss is increased or incurred’ loss event’) and that loss event has an impact on the reduced by adjusting the allowance account. If a write-off is estimated future cash flows of the financial asset or the group later recovered, the recovery is credited to finance costs in the of financial assets that can be reliably estimated. Evidence of income statement. impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability c. Financial liabilities that they will enter bankruptcy or other financial reorganization Initial recognition and measurement and where observable data indicate that there is a measurable Financial liabilities within the scope of LKAS 39 are classified decrease in the estimated future cash flows, such as changes as financial liabilities at fair value through profit or loss, loans in arrears or economic conditions that correlate with defaults. and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group Financial assets carried at amortized cost determines the classification of its financial liabilities at initial For financial assets carried at amortized cost, the Group first recognition. assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, All financial liabilities are recognized initially at fair value and, or collectively for financial assets that are not individually in the case of loans and borrowings, carried at amortized cost. significant. If the Group determines that no objective evidence This includes directly attributable transaction costs. of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a The Group’s financial liabilities include trade and other group of financial assets with similar credit risk characteristics payables, bank overdrafts, loans and borrowings, financial and collectively assesses them for impairment. Assets that guarantees contracts, and derivative financial instruments. are individually assessed for impairment and for which an AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 85

Subsequent measurement offset the recognized amounts and an intent to settle on a The measurement of financial liabilities depends on their net basis, or to realize the assets and settle the liabilities classification as follows: simultaneously.

Loans and borrowings e. Fair value of financial instruments After initial recognition, interest bearing loans and borrowings The fair value of financial instruments that are traded in active are subsequently measured at amortized cost using the markets at each reporting date is determined by reference to effective interest rate method. Gains and losses are recognized quoted market prices or dealer price quotations (bid price for in the income statement when the liabilities are derecognized long positions and ask price for short positions), without any as well as through the effective interest rate method (EIR) deduction for transaction costs. amortization process. For financial instruments not traded in an active market, the Amortized cost is calculated by taking into account any fair value is determined using appropriate valuation techniques. discount or premium on acquisition and fees or costs that are Such techniques may include: an integral part of the EIR. The EIR amortization is included in finance costs in the income statement. • Using recent arm’s length market transactions; • Reference to the current fair value of another instrument Financial guarantee contracts that is substantially the same;

Financial guarantee contracts issued by the Group/Company • A discounted cash flow analysis or other valuation models. are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified An analysis of fair values of financial instruments and further debtor fails to make a payment in accordance with the terms details as to how they are measured are provided in Note 28. of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for 2.11.19 Cash and short-term deposits transaction costs that are directly attributable to the issuance Cash and short-term deposits in the statement of financial of the guarantee. position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present For the purpose of the consolidated statement cash flows, cash obligation at the reporting date and the amount recognized less and cash equivalents consist of cash and short-term deposits cumulative amortization. as defined above, net of outstanding bank overdrafts.

Derecognition 2.11.20 Employee benefits liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Defined Benefit Plan - Gratuity: Gratuity is a defined benefit plan. The Group is liable to pay When an existing financial liability is replaced by another gratuity in terms of the relevant statute. from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such The Group measures the present value of the promised an exchange or modification is treated as a derecognition of retirement benefits for gratuity, which is a defined benefit plan the original liability and the recognition of a new liability. The with the advice of an independent professional actuary using difference in the respective carrying amounts is recognized in the Projected Unit Credit Method (PUC) as required by LKAS 19, the income statement. Employee Benefits. d. Offsetting of financial instruments The item is stated under Defined Benefit Liability in the Statement of Financial Position. Financial assets and financial liabilities are offset with the net amount reported in the consolidated statement of financial position only if there is a current enforceable legal right to AMBEON CAPITAL PLC 86 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

Recognition of Actuarial Gains and Losses Subsequently, it is measured at the higher of: Any actuarial gains and losses arising are recognized immediately in Other Comprehensive Income. • The amount that would be recognized in accordance with the general guidance for provisions above (LKAS 37)

Defined Contribution Plans: Or

The Group also operates a defined contribution plan. The • The amount initially recognized less, when appropriate, contribution payable to a defined contribution plan is in cumulative amortization Contingent assets are disclosed, proportion to the services rendered to group by the employees where inflow of economic benefit is probable. and is recorded as an expense. Unpaid contributions are recorded as a liability. Contract liabilities Contract liabilities are the Group’s obligation to transfer goods Employees’ Provident Fund and Employee’ Trust Fund or services to a customer for which the Group has received Employees are eligible for Employees’ Provident Fund and consideration (or the amount is due) from the customer. Employee’ Trust Fund contributions, in line with respective Contract liabilities include long-term advances received to statute and regulations. The Group and employee contribute deliver goods and services, short-term advances received to 12% and 8% respectively of the employee’s month gross salary render certain services as well as transaction price allocated (excluding overtime) to the provident fund. to unexpired service warranties, and loyalty points not yet redeemed. The Group contributes 3% of the employee’s monthly salary excluding overtime to the Employees’ Trust Fund maintained by Contract liabilities of the Group have been disclosed in current Employees Trust Fund Board. liabilities in note 24.

The used assumptions and the sensitivity analysis will be state 2.11.22 Segmental Information in the Note No. 23.6 The Group’s internal organization and management is structured based on individual products and services which 2.11.21 Provisions, contingent assets and contingent liabilities are similar in nature and process and where the risk and return Provisions are recognized when the Group has a present are similar. The primary segments represent this business obligation (legal or constructive) as a result of a past event, it structure. is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable In addition, segments are determined based on the Group’s estimate can be made of the amount of the obligation. Where geographical spread of operations as well. The geographical the Group expects some or all of a provision to be reimbursed, analysis of turnover and profits are based on location of for example under an insurance contract, the reimbursement customers and assets respectively. is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to As such for management purposes, the Group is organized into any provision is presented in the income statement net of any business units based on their products and services and has reimbursement. seven reportable operating segments as follows:

If the effect of the time value of money is material, provisions Manufacturing Ceylon Leather Products Limited and Palla are discounted using a current pre-tax rate that reflects, where Footwear & Company (Pvt) Ltd (Discontinued in appropriate, the risks specific to the liability. Where discounting 2016) is used, the increase in the provision due to the passage of time Manufacturing South Asia Textiles Ltd is recognized as a finance cost. Textile

All contingent liabilities are disclosed as a note to the Financial Manufacturing Dankotuwa Porcelain PLC and Royal Statements unless the outflow of resources is remote. A Porcelain Fernwood Porcelain Ltd and its contingent liability recognized in a business combination is Subsidiaries initially measured at its fair value. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 87

Property Colombo City Holdings PLC, Lexinton 3. STANDARDS ISSUED BUT NOT YET EFFECTIVE Holdings (Pvt) Ltd, Lexinton Resorts (Pvt) The following SLFRS has been issued by the Institute of Ltd, Heron Agro Products (Pvt) Ltd. Chartered Accountants of Sri Lanka, effective in the future IT and related Millennium I.T.E.S.P (Pvt) Limited, Eon and therefore has not been applied in preparing these financial Services Tech (Pvt) Ltd statements. This SLFRS will have an effect on the accounting policies currently adopted by the Group and may have an Investments Ambeon Holdings PLC and Olancom (Pvt) impact on the future financial statements. Ltd, Ambeon Capital PLC Financial Taprobane Securities (Private) Limited, The Group intends to adopt this standard, if applicable, when it Services Taprobane Investments (Private) Limited becomes effective. and Taprobane Wealth Plus (Private) limited. Taprobane Capital Plus (Pvt) Ltd. SLFRS 16-LEASES [Effective on or after 1 January 2019 (early Lexinton Financial Services (Pvt) Ltd. adoption permitted)]

The principal activities of the cash generating units SLFRS 16 sets out the principles for the recognition, (Companies) related to each segment have been discussed measurement, presentation and disclosure of leases and under “Principal activities and nature of operations” section to requires lessees to account for all leases under a single the Financial Statements. on-balance sheet model similar to the accounting for finance leases under LKAS 17. It will result in almost all leases being The accounting policies adopted for segment reporting are the recognized on the statement of financial position by lessees, same accounting policies adopted for preparing and presenting as the distinction between operating and finance leases is consolidated Financial Statements of the Group. removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are The segment wise performance is state in the Note No. 5 recognized. The only exceptions are short-term and low value leases. 2.11.23 Share-based payments Estimating fair value for share-based payment transactions The objective is to ensure that lessees and lessors provide requires determination of the most appropriate valuation relevant information in a manner that faithfully represents model, which depends on the terms and conditions of the those transactions. This information gives a basis for the users grant. This estimate also requires determination of the most of financial statements to assess the effect that leases have on appropriate inputs to the valuation model including the the financial position. expected life of the share option or appreciation right, volatility and dividend yield and making assumptions about them. The The impact on the adoption of the above standard has not been Group initially measures the cost of cash-settled transactions quantified yet. with employees using a binomial model to determine the fair value of the liability incurred. For cash-settled share-based payment transactions, the liability needs to be remeasured at the end of each reporting period up to the date of settlement, with any changes in fair value recognised in profit or loss. This requires a reassessment of the estimates used at the end of each reporting period. For the measurement of the fair value of equity-settled transactions with employees at the grant date, the Group uses a binomial model. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 27.2. AMBEON CAPITAL PLC 88 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

4. DISCONTINUED OPERATIONS AND ASSETS CLASSIFIED AS HELD FOR SALE Footwear segment includes the clearing activities of Palla and Company (Private) Limited a subsidiary of Ambeon Holdings PLC and a major line of business under the “footwear manufacturing” segment. The Company suspended its operation with effect from 31st August 2015.

4.1 The results of the subsidiaries in the “manufacturing footwear” after intercompany eliminations is presented below;

Footwear Total Footwear Total Year ended 31 March 2019 2019 2018 2018 LKR LKR LKR LKR

Revenue - - - - Cost of Sales - - - - Other Income - - 20,914,720 20,914,720 Administrative Expenses (659,193) (659,193) (9,958,203) (9,958,203) Finance Cost - - - - Finance Income - - 2,188,119 2,188,119 Gain on realization of liabilities upon liquidation - - - - Profit/(loss) before tax from discontinued operations (659,193) (659,193) 13,144,636 13,144,636 Income tax Expenses - - (3,274,547) (3,274,547) Profit/(Loss) for the year from discontinued operations (659,193) (659,193) 9,870,089 9,870,089

Profit / (Loss) Attributable to: Equity Holders of the Company (659,193) (659,193) 11,982,400 11,982,400 Non - Controlling Interests - - (2,112,311) (2,112,311) (659,193) (659,193) 9,870,089 9,870,089

Basic Earnings/ (Loss) per share from Discontinued Operations (0.00) 0.01 Diluted Earnings/ (Loss) per share from Discontinued Operations (0.00) 0.01

Cash flows Net Cash Flows from Operating Activities 436,195 436,195 (41,587,538) (41,587,538) Net Cash Flows used in Investing Activities - - 128,546,845 128,546,845 Net Cash Flows from Financing Activities - - (23,266,660) (23,266,660) 436,195 436,195 63,692,647 63,692,647 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 89

GROUP

4.2 Assets Classified as Held for Sale The Board of Directors on the meeting held on 14th October 2015 decided in principle to dispose the land and buildings owned by the Colombo City Holdings at Union Place, Colombo 02 subject to obtaining offers from prospective buyers and approval from shareholders. On 1st March 2017, a registered license surveyor segregated the investment property to 3 lots. The Board considered one of the lots to meet the criteria to be classified as held for sale. The Assets and associate liabilities are as follows:

2019 2018 2019 2018 LKR LKR LKR LKR

Assets Liabilities Investment Property (Note 15) - 945,070,313 Refundable deposits - 3,732,224 Additions - 7,706,197 Payment made during - (3,732,224) the year Disposal - (952,776,510) ------

In 2017/18, the Colombo City Holdings PLC disposed the above land and building and received proceeds amounting to LKR 1,000,000,000/- AMBEON CAPITAL PLC 90 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

5. SEGMENTAL INFORMATION

Group Manufacturing Footwear Manufacturing Porcelain Manufacturing Textile Investments Property IT and related Services Financial Services Total 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR

Total Revenue 602,444,243 636,698,891 2,178,649,472 2,082,525,521 8,296,138,014 7,744,924,982 7,139,780 320,608,238 11,581,515 126,914,228 6,533,340,789 1,562,444,695 103,293,371 114,539,599 17,732,587,184 12,588,656,155

Segment Results Gross Profit/(Loss) (33,300,258) (35,886,814) 653,168,108 485,780,370 1,243,852,794 1,063,202,700 3,536,004 320,608,238 9,295,652 44,716,849 1,945,452,015 517,797,759 100,603,058 104,685,984 3,922,607,372 2,500,905,084

Finance Cost (88,383,504) (13,640,682) (89,494,262) (48,493,995) (89,430,987) (68,588,493) (568,429,662) (651,027,827) (23,155,344) (9,402,233) (156,609,473) (37,371,125) (2,418,908) (1,055,832) (1,017,922,140) (829,580,187) Change in Fair value of Investment Property 434,969,475 - 293,029,150 - - - 1,500,000 4,000,000 100,856,394 232,834,192 - - 1,000,000 1,000,000 831,355,019 237,834,192 Profit /(Loss) before Income Tax 47,192,702 (310,273,278) 458,059,806 (54,407,424) 518,921,549 387,832,863 (756,777,591) (377,216,914) 127,595,377 315,122,562 531,492,889 283,258,824 (11,059,555) 42,013,479 915,425,175 286,330,112 Income Tax Expense (76,344,742) 45,811,837 (61,445,358) 80,851,294 (34,320,735) (63,561,715) (130,853,720) 25,531,321 21,527,474 (35,861,960) (108,652,999) 53,019,246 (11,439,961) (19,693,425) (401,530,041) 86,096,598 Profit/(Loss) after tax for the year from continuing operations (29,152,040) (264,461,441) 396,614,448 26,443,870 484,600,814 324,271,148 (887,631,312) (351,685,593) 149,122,851 279,260,602 422,839,890 336,278,070 (22,499,516) 22,320,054 513,895,134 372,426,710

Profit/(Loss) after tax for the year from discontinued operations (659,193) 9,870,089 ------(659,193) 9,870,089

Profit/(Loss) for the year (29,811,233) (254,591,352) 396,614,448 26,443,870 484,600,814 324,271,148 (887,631,312) (351,685,593) 149,122,851 279,260,602 422,839,890 336,278,070 (22,499,516) 22,320,054 513,235,941 382,296,799

Assets and Liabilities Non-Current Assets * 2,122,286,872 1,565,735,992 2,392,513,078 1,793,728,583 2,364,577,585 2,088,841,885 994,824,394 1,223,669,999 1,736,968,211 1,634,327,931 377,866,214 210,808,282 228,785,896 225,619,086 10,217,822,249 8,742,731,759

Current Assets 603,654,435 888,697,455 1,989,443,757 1,532,372,784 3,031,096,765 3,241,177,927 1,761,110,317 2,327,821,980 423,857,215 558,769,505 4,878,792,321 3,522,836,522 124,601,455 120,750,801 12,812,556,265 12,192,426,974

Total assets 2,725,941,307 2,454,433,447 4,381,956,835 3,326,101,367 5,395,674,350 5,330,019,811 2,755,934,711 3,551,491,979 2,160,825,427 2,193,097,437 5,256,658,535 3,733,644,804 353,387,351 346,369,886 23,030,378,514 20,935,158,732

Non-Current Liabilities 429,063,299 327,983,033 487,147,170 680,449,047 646,066,988 617,108,112 2,277,739,305 841,286,589 28,055,990 59,324,243 110,936,131 92,682,497 10,909,910 6,652,301 3,989,918,795 2,625,485,822 Current Liabilities 648,123,477 776,563,991 1,239,845,218 914,575,580 3,087,865,029 2,844,753,969 2,195,569,391 3,885,158,531 269,605,447 87,582,017 4,957,911,422 3,301,243,072 40,679,401 21,118,314 12,439,599,383 11,830,995,476

Total Liabilities ** 1,077,186,776 1,104,547,025 1,726,992,388 1,595,024,627 3,733,932,017 3,461,862,081 4,473,308,696 4,726,445,120 297,661,437 146,906,260 5,068,847,554 3,393,925,569 51,589,311 27,770,615 16,429,518,177 14,456,481,298

*Segment Non current Assets do not include investment in subsidiary and intercompany receivables. **Segment Liabilities do not include intercompany payables including loans. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 91

5. SEGMENTAL INFORMATION

Profit/(Loss) after tax for the year from discontinued operations (659,193) 9,870,089 ------(659,193) 9,870,089

5. SEGMENTAL INFORMATION (Contd…) GROUP COMPANY 5.1 Revenue 2019 2018 2019 2018 LKR LKR LKR LKR

Sale of Goods Footwear 602,444,243 636,698,891 - - Porcelain 2,178,649,472 2,082,525,521 - - Textile 8,296,138,014 7,744,924,982 - -

Stock Broking / Money Broking Brokerage Income 103,293,371 114,539,601 - -

Finance & Investment Interest Income 34,760,933 186,678,658 40,547,411 141,541,739 Investment Trading (51,998,545) 157,353,800 (51,998,545) 157,353,800 Change in Fair Value of Financial Assets Held for Trading 18,487,596 (18,025,885) 18,487,596 (18,025,885)

Services IT Services 6,533,340,789 1,562,444,695 - -

Other Rent Income 15,177,511 13,959,133 - - Sale of Real State - 105,000,000 - - Gain/ (Loss) on Fair Value of Biological Assets 2,100,000 2,400,000 - - Sale of Agriculture Produce 193,800 156,760 - - 17,732,587,184 12,588,656,155 7,036,462 280,869,653

6. DIRECT COST GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Cost of Goods Sold 13,806,376,036 10,075,334,766 - - Discount on Brokerage 3,603,776 11,578,700 - - Others - 837,604 - - 13,809,979,812 10,087,751,071 - - AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 93

7. INVESTMENT AND OTHER INCOME GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Interest Income on Over Due Balances and Deposits 142,880,191 109,166,263 1,502,605 178,383 Dividend Income 814 698 363,246,721 3,422,089 Gain on Sale of Financial Assets held for Trading - 1,305,468 - 116,627 Gain / (Loss) on Disposal of Property, Plant & Equipment 7,155,621 1,277,631 (3,144) - Scrap Sales 25,824,315 - - - Other Income 11,070,666 71,529,687 300,000 11,221,873 Gain on disposal of Assets Held for Sale - 47,223,506 - - Reversal of Provisions and Write back of Interest Bearing Borrowings 153,859,921 166,505,185 - - 340,791,529 397,008,438 365,046,183 14,938,972

7.1 Write back of Interest Bearing Borrowings includes Loan write back resulting from execution of Novation agreement with Brown and Company PLC and Ambeon Holdings PLC.

8. FINANCE COST GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Loan Interest 816,555,789 449,544,819 381,707,097 274,473,852 Exchange Loss 5,398,913 853,291 - - Bank Overdraft Interest 195,967,438 379,182,077 95,019,437 298,254,353 1,017,922,140 829,580,187 476,726,534 572,728,205

9. PROFIT/ (LOSS) BEFORE TAXATION Profit before taxation is stated after charging all expenses including the following:

GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Auditors' Remuneration - Statutory Audit 8,675,352 8,080,194 365,000 330,000 Directors' Fee 45,102,793 80,304,179 9,475,778 38,371,800 Professional Fees 6,476,340 3,811,041 3,799,913 1,883,009 Depreciation on Property, Plant and Equipment 390,965,850 340,343,584 4,015,329 289,906 Amortization of Intangible Assets 8,304,754 12,314,099 - - Staff Cost (Note 9.1) 2,742,949,300 2,625,734,774 - 19,472,004 Allowance for Obsolete & Slow Moving Inventories (123,686,758) 81,134,091 - -

9.1 Staff Cost Salaries & Other Related Costs 2,412,733,092 2,319,624,992 - 16,333,098 Defined Benefit Plan Cost - Retiring Gratuity 81,259,311 62,963,136 - 727,004 Defined Contribution Plan Cost - EPF & ETF 248,956,897 243,146,646 - 2,411,902 2,742,949,300 2,625,734,774 - 19,472,004 AMBEON CAPITAL PLC 94 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

10. INCOME TAX GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Current Tax Expense 182,397,787 141,270,539 - - Under/ (Over) Provision in Respect of Previous Year (22,481,462) 14,927,725 - - 159,916,325 156,198,265 - -

Deferred Tax Expenses - Origination / (Reversals) of Temporary Differences (Note 25) 241,613,716 (242,294,863) 1,068,362 (17,324,614) 401,530,041 (86,096,598) 1,068,362 (17,324,614)

Reconciliation of Accounting Profit to Income Tax Expense Profit/(Loss) Before Tax* 914,765,982 299,474,748 (153,684,821) 413,268,169 914,765,982 299,474,748 (153,684,821) 413,268,169 Income Not Liable for Income Tax (417,476,656) (698,770,882) (387,172,128) (1,021,070,871) Disallowable Expenses 1,659,226,768 505,473,517 510,051,743 80,682,280 Capital Allowances Claimed & Allowable Expenses (925,346,095) (618,937,397) (107,896) (285,071) Business Profit/(Loss) 1,231,169,999 (512,760,014) (30,913,102) (527,405,493) Operating losses incurred during the year (329,681,978) 1,304,144,619 - - Tax Loss from Business - - - - Tax Exempt (Income) / Expenses - - - - Total Statutory Income 901,488,022 791,384,604 - -

Interest Income 210,949,724 150,846,419 1,502,606 - Tax loss utilized during the year (579,409,043) (122,126,961) (1,502,606) - Qualifying Payments - (14,631,555) - - Assessable / Taxable Income 533,028,703 805,472,506 - -

Income Tax @ 14% / 12% 46,738,433 67,351,378 - - Income Tax @ 28% 84,174,812 48,219,428 - - Income tax on dividend Income 51,484,542 25,699,734 - -

Taxation on Profit for the Year 182,397,787 141,270,539 - -

Income Tax Attributable to Discontinued Operations - 3,274,547 - - Income Tax Attributable to Continuing Operations 182,397,787 141,270,539 - -

* Includes Profit / (Loss) before tax from discontinued operations as disclosed in note 4. * All Subsidiaries are taxed at 28% except for South Asia Textiles Limited , which is taxed at 14%.

10.1 Tax Losses GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Tax loss brought forward 3,407,635,611 2,429,022,579 1,321,922,049 794,562,466 Income tax intimation direction / Tax Filing Differences 5,618,426 (23,011,199) - - Loss incurred during the year 635,678,160 1,123,751,191 30,913,102 527,359,583 Business acquisition 1,646,842 - Loss utilized during the year (579,409,043) (122,126,961) (1,502,606) - Tax loss carried forward 3,471,169,996 3,407,635,611 1,351,332,545 1,321,922,049 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 95

10. INCOME TAX (Contd...)

10.2 Pending Tax matters

10.2.1 Lexinton Holdings (Pvt) Ltd Lexinton Holdings (Pvt) Ltd appealed against the assessment No. ITA14281100120 VI issued by the Department of Inland Revenue relating to the year of assessment 2011/12. The appeal was determined favoring Commissioner General of Inland Revenue by the Commissioner of Large Corporate entities, Audit Unit - 1 and a petition of appeal has been filed with Tax Appeals Commission on 06th April 2017. Having sought professional advice, Management is confident that the grounds for the appeal are strong and as such no liability would arise. Total Tax assessed was Rs.50,787,184/-. Tax appeal commission hearing is still pending.

11. EARNINGS / (DEFICIT) PER SHARE

11.1 Basic Earnings / (Deficit) per Share The calculation of basic earnings / (deficit) per share is based on the profit / (loss) attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding during the year.

For the Year Ended 31st March GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Profit / (Loss) attributable to Ordinary Shareholders 47,147,271 151,541,224 (154,753,183) 430,592,783 Weighted Average Number of Ordinary Shares (11.1.1) 1,002,724,815 1,002,724,815 1,002,724,815 1,002,724,815 Basic Earnings Per Share 0.05 0.15 (0.15) 0.43

11.1.1 Weighted Average Number of Ordinary Shares Issued Ordinary shares at the beginning of the year 1,002,724,815 1,002,724,815 1,002,724,815 1,002,724,815 Weighted average number of ordinary shares at the end of the year 1,002,724,815 1,002,724,815 1,002,724,815 1,002,724,815

11.2 Basic Earnings / (Deficit) per Share for Continuing Operations Profit / (Loss) attributable to Ordinary Shareholders from Continuing Operating 47,806,464 139,558,824 (154,753,183) 430,592,783 Weighted Average Number of Ordinary Shares (11.1.1) 1,002,724,815 1,002,724,815 1,002,724,815 1,002,724,815 Basic Earnings Per Share for Continuing Operations 0.05 0.14 (0.15) 0.43

Basic earnings / (deficit) per share is calculated for continuing operations by dividing the net profit /(loss) from continuing operations for the year attributable to the ordinary shareholders by the weighted average number of shares outstanding during the year.

There were no potentially dilutive ordinary shares outstanding at any time during the year, hence diluted earnings per share is equal to basic earnings per share.

11.3 Net Assets Per Share GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Equity Attributable to Equity Holders of the Company 3,502,646,922 4,050,438,918 1,830,238,840 2,345,972,955 Weighted Average Number of Ordinary Shares (11.1.1) 1,002,724,815 1,002,724,815 1,002,724,815 1,002,724,815 Net Assets Per Share * 3.49 4.04 1.83 2.34

* Net assets per share has been calculated, for all periods, based on the net assets of the Group and number of shares in issue as at 31 March 2019. AMBEON CAPITAL PLC 96 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

12. PROPERTY, PLANT AND EQUIPMENT Group

12.1 Cost or Valuation Balance as at Business Balance as at Additions Revaluation Acquisition of Transfers Disposals Exchange Balance as at 01.04.2018 Acquisition 01.04.2018 Subsidiaries Difference 31.03.2019 LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR Reported Revised* Revised Freehold Land 1,808,591,585 - 1,808,591,585 - 425,182,951 143,575,000 (1,048,723,985) (154,075,000) - 1,174,550,551 Buildings 1,024,142,602 - 1,024,142,602 2,138,570 56,323,707 128,625,000 (56,478,360) (134,625,000) - 1,020,126,518 Land Development Cost 67,887,287 - 67,887,287 180,050 - - - - (2,354,545) 65,712,792 Computer Equipment 438,528,160 (177,187,506) 261,340,654 61,732,019 - 644,970 (1,564,594) (2,843,118) (1,666,304) 317,643,627 Furniture & Office Equipment 404,051,685 (2,852,010) 401,199,675 41,160,506 - 9,991,311 30,006,905 (13,949,748) (5,542,745) 462,865,904 Kiln and Kiln Furniture 285,439,710 - 285,439,710 8,912,364 - - (125,264,278) - (2,441,877) 166,645,919 Motor Vehicles 91,492,298 - 91,492,298 20,000,000 - - (1) (2,350,833) (1,828,319) 107,313,144 Tools & Equipment 2,213,011 - 2,213,011 - - - (2,000,114) (70,860) - 142,037 Plant and Machinery 3,799,745,684 - 3,799,745,684 64,609,431 - - 78,755,132 (190,310,522) (73,665,577) 3,679,134,148 Waste Water Purification Project 77,627,323 - 77,627,323 51,541,849 - - - - (2,811,830) 126,357,342 7,999,719,343 (180,039,517) 7,819,679,827 250,274,789 481,506,658 282,836,281 (1,125,269,296) (498,225,081) (90,311,198) 7,120,491,980 Leasehold Building 730,700,000 - 730,700,000 8,314,495 94,199,947 - 47,000,788 - (22,308,208) 857,907,022 730,700,000 - 730,700,000 8,314,495 94,199,947 - 47,000,788 - (22,308,208) 857,907,022

Capital Work in Progress 125,666,800 - 125,666,800 417,753,973 - - (91,376,551) - (17,505,210) 434,539,011

Total 8,856,086,143 (180,039,517) 8,676,046,628 676,343,256 575,706,605 282,836,281 (1,169,645,060) (498,225,081) (130,124,616) 8,412,938,012

Accumulated Depreciation Balance as at Business Balance as at Charge for Revaluation Acquisition of Transfers Disposals Exchange Balance as at 01.04.2018 Acquisition 01.04.2018 the Year Subsidiaries Difference 31.03.2019 LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR Reported Revised* Revised Freehold Buildings 5,789,243 - 5,789,243 43,725,089 (37,845,713) - (8,964,535) (125,749) - 2,578,336 Land Development Cost 52,067,882 - 52,067,882 3,055,325 - - 72,134 - (1,915,892) 53,279,449 Computer Equipment 389,991,582 (168,287,723) 221,703,859 25,206,539 - - (848,062) (2,843,118) (1,867,710) 241,351,508 Furniture & Office equipment 296,328,425 (1,974,943) 294,353,481 44,535,149 - 7,621,286 12,445,871 (10,549,766) (5,214,223) 343,191,799 Kiln and Kiln Furniture 198,094,710 - 198,094,710 8,282,944 - - (109,910,508) - (1,597,636) 94,869,510 Motor Vehicles 67,437,232 - 67,437,232 13,345,673 - - - (2,087,333) (1,746,825) 76,948,747 Tools & Equipment 1,455,684 - 1,455,684 15,042 - - (1,325,796) (14,671) - 130,259 Plant and Machinery 2,320,169,149 - 2,320,169,149 209,815,252 - - 102,266,714 (177,086,247) (33,685,836) 2,421,479,032 Waste Water Purification Project 45,254,772 - 45,254,772 9,859,142 - - - - (1,802,739) 53,311,175 3,376,588,679 (170,262,666) 3,206,326,013 357,840,156 (37,845,713) 7,621,286 (6,264,182) (192,706,884) (47,830,861) 3,287,139,814 Leasehold Building 4,559,303 - 4,559,303 24,834,025 (18,746,750) - (268,914) - - 10,377,665 4,559,303 - 4,559,303 24,834,025 (18,746,750) - (268,914) - - 10,377,665

Total 3,381,147,982 (170,262,666) 3,210,885,316 382,674,181 (56,592,463) 7,621,286 (6,533,095) (192,706,884) (47,830,861) 3,297,517,479 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 97

12. PROPERTY, PLANT AND EQUIPMENT Group

Capital Work in Progress 125,666,800 - 125,666,800 417,753,973 - - (91,376,551) - (17,505,210) 434,539,011

Total 8,856,086,143 (180,039,517) 8,676,046,628 676,343,256 575,706,605 282,836,281 (1,169,645,060) (498,225,081) (130,124,616) 8,412,938,012

Total 3,381,147,982 (170,262,666) 3,210,885,316 382,674,181 (56,592,463) 7,621,286 (6,533,095) (192,706,884) (47,830,861) 3,297,517,479 AMBEON CAPITAL PLC 98 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

12. PROPERTY, PLANT AND EQUIPMENT (Contd…) Net Book Value 2019 2018 LKR LKR

Freehold Land 1,174,550,551 1,808,591,585 Buildings 1,017,548,182 1,018,353,359 Land Development Cost 12,433,342 15,819,405 Computer Equipment 76,292,118 39,636,794 Furniture & Office equipment 119,674,105 106,846,193 Kiln and Kiln Furniture 71,776,408 87,345,000 Motor Vehicles 30,364,398 24,055,066 Tools & Equipment 11,778 757,327 Plant and Machinery 1,257,655,116 1,479,576,535 Waste Water Purification Project 73,046,167 32,372,551

Leasehold Building 847,529,357 726,140,697

Capital Work in Progress 434,539,011 125,666,800

Carrying Amount 5,115,420,533 5,465,161,313

12.1.1 During the financial year the Group acquired Property, Plant & Equipment to the aggregate value of LKR 676,343,256 /- (2018- LKR 196,550,798/-).

12.1.2 Details of Property, plant and equipment pledged for borrowings are disclosed in Note 32.

12.1.3 Revaluation of Land and Building The Group uses the revaluation model of measurement of land and buildings. The Group engaged independent expert valuer to determine the fair value of its land and buildings. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 99

Details of Group’s land, building and other properties stated at valuation are indicated below;

Value Method of 2019 2018 Effective Date of Company Property Valuation LKR LKR Valuers Details Valuation

Ceylon Leather Land at Market - 934,875,000 Mr. Chulananda 31 March 2018 Products Limited. Mattakkuliya Approach Wellappili, Buildings at Cost - 38,706,025 Independent Mattakkuliya Approach Incorporated Valuer Land at Market - 10,500,000 Mr. Chulananda 31 March 2018 Mattakkuliya Approach Wellappili, Buildings at Cost - 6,030,000 Independent Mattakkuliya Approach Incorporated Valuer Land at Market 170,799,250 144,256,500 Mr. Chulananda 31 March 2019 Balummahara Approach Wellappili, Building at Cost 221,862,450 213,868,894 Independent Balummahara Approach Incorporated Valuer Dankotuwa Land at Market 655,552,000 409,720,000 Mr. S.Sivaskantha 31 March 2019 Porcelain PLC Dankotuwa Approach , an independent Buildings at Cost 381,985,250 324,461,825 incorporated valuer Dankotuwa Approach South Asia Textile Buildings at Income 805,500,000 730,700,000 Mr. Chulananda 31 March 2019 Ltd Pugoda Approach Wellappili, Independent Incorporated Valuer Royal Fernwood Land at Kosgama Market 204,624,300 184,296,100 Mr. S.Sivaskantha 31 March 2019 Porcelain Limited Approach , an independent Buildings at Cost incorporated valuer Kosgama Approach 283,362,790 290,929,395 Lexinton Holdings Market Sunil Fernando 31 March 2019 (Pvt) Limited Land at Rajagiriya Approach 143,575,000 123,280,000 and Associate (Pvt) Buildings at Cost Limited-incorporated Rajagiriya Approach 128,625,000 137,720,000 valuer AMBEON CAPITAL PLC 100 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

12.1.4 Description of Significant Unobservable Inputs to Valuation The significant assumptions used by the valuer for valuations are follows;

Property Method Inputs used for Area Range Sensitivity of of measurement Fair value to Valuation unobservable inputs

South Asia Textile Ltd 2019 Building on Leasehold Land Pugoda Income Per sq.ft. rate 405,430 sq. feet LKR 12 - 50 Positively (Remaining leasehold period - Approach correlated 35 years)

2018 Building on Leasehold Land Pugoda Income Per sq.ft. rate 405,430 sq. feet LKR 12 - 25 Positively (Remaining leasehold period - Approach correlated 36 years)

Royal Fernwood Porcelain Ltd 2019 Freehold Land Kosgama Market Per perch rate 2,178 Perches LKR 60,000 - Positively Approach 150,000 correlated Freehold Buildings Kosgama Cost Per sq.ft. rate 177,630 sq. feet LKR 1,250 - 4,000 Positively Approach correlated 2018 Freehold Land Kosgama Market Per perch rate 2,178 Perches LKR 40,000 - Positively Approach 150,000 correlated Freehold Buildings Kosgama Cost Per sq.ft. rate 177,630 sq. feet LKR 300 - 2,800 Positively Approach correlated

Dankotuwa Porcelain PLC 2019 Freehold Land Dankotuwa Market Per perch rate 3,277.76 Perches LKR 200,000 Positively Approach correlated Freehold Buildings Dankotuwa Cost Per sq.ft. rate 260,015sq. feet LKR 2,000 - 4,000 Positively Approach correlated 2018 Freehold Land Dankotuwa Market Per perch rate 3,277.76 Perches LKR 125,000 Positively Approach correlated Freehold Buildings Dankotuwa Cost Per sq.ft. rate 260,015sq. feet LKR 500 - 4,000 Positively Approach correlated AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 101

Property Method Inputs used for Area Range Sensitivity of of measurement Fair value to Valuation unobservable inputs

Ceylon Leather Products Limited 2019 Freehold Land Balummahara Market Per perch rate 474 Perches LKR 175,000 - Positively Approach 475,000 correlated Freehold Buildings Balummahara Cost Per sqft. rate 76,720 sq feet LKR 1,400 - 5,000 Positively Approach correlated 2018 Freehold Land Balummahara Market Per perch rate 474 Perches LKR150,000 - Positively Approach 400,000 correlated Mattakkuliya - Market Per perch rate 748 Perches LKR 1,250,000 Positively Factory Approach correlated Mattakkuliya Market Per perch rate 6 Perches LKR 1,750,000 Positively Tannery House Approach correlated Freehold Buildings Balummahara Cost Per sqft. rate 76,720 sq feet LKR 1,400 - 4,700 Positively Approach correlated Mattakkuliya - Cost Per sqft. rate 75,010 sq. feet LKR 650 - 3,250 Positively Factory Approach correlated Mattakkuliya Cost Per sqft. rate 2,010 sq. feet LKR 3,750 Positively -Tannery House Approach correlated

Lexinton Holdings (Pvt) Limited 2019 Freehold Land Rajagiriya Market Per perch rate 17.15 Perches LKR 7,250,000 Positively Approach correlated Freehold Buildings Rajagiriya Cost Per sq.ft. rate 17,150 sq feet LKR 7,500 Positively Approach correlated 2018 Freehold Land Rajagiriya Market Per perch rate 17.15 Perches LKR 7,000,000 Positively Approach correlated Freehold Buildings Rajagiriya Cost Per sq.ft. rate 17,150 sq feet LKR 8,000 Positively Approach correlated AMBEON CAPITAL PLC 102 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

12.1.5 The carrying amount of revalued assets of the Group that would have been included in the financial statements had that been carried at cost less depreciation is as follows: Ceylon Leather Products Limited Cumulative Depreciation Net Carrying Net Carrying If assets were Amount Amount Class of Asset Cost carried at cost 2019 2018 LKR LKR LKR LKR

Land-Freehold 32,046,453 - 32,046,453 32,046,453 Buildings on Freehold Land 126,026,497 (3,150,662) 122,875,835 83,389,056 158,072,950 (3,150,662) 154,922,288 115,435,509

Cumulative Dankotuwa Porcelain PLC Depreciation Net Carrying Net Carrying If assets were Amount Amount Cost carried at cost 2019 2018 Class of Asset LKR LKR LKR LKR

Land-Freehold 250,000 - 250,000 250,000 Building - Freehold 165,081,657 100,984,090 64,097,567 73,258,488 165,331,657 100,984,090 64,347,567 73,508,488

South Asia Textile Ltd Cumulative Net Carrying Net Carrying Depreciation Amount Amount If assets were Class of Asset Cost carried at cost 2019 2018 LKR LKR LKR LKR

Building on Leasehold Land 306,985,578 73,366,309 233,619,269 236,886,970 306,985,578 73,366,309 233,619,269 236,886,970

Lexinton Holdings (Pvt) Limited Cumulative Net Carrying Net Carrying Depreciation Amount Amount Class of Asset If assets were Cost carried at cost 2019 2018 LKR LKR LKR LKR

Land-Freehold 60,000,000 - 60,000,000 60,000,000 Buildings-Freehold 115,000,000 55,200,000 59,800,000 64,400,000 175,000,000 55,200,000 119,800,000 124,400,000 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 103

Royal Fernwood Porcelain Ltd Cumulative Net Carrying Net Carrying Depreciation Amount Amount Class of Asset If assets were Cost carried at cost 2019 2018 LKR LKR LKR LKR

Land-Freehold 18,590,108 - 18,590,108 18,590,108 Buildings-Freehold 15,849,645 880,536 14,969,109 15,849,645 34,439,753 880,536 33,559,217 34,439,753

Land-Freehold 143,575,000 - 143,575,000 - Buildings-Freehold 128,625,000 - 128,625,000 - 272,200,000 - 272,200,000 -

12.2 Company Balance as at Additions Disposals Balance as at 01.04.2018 31.03.2019 Cost LKR LKR LKR LKR

Freehold Motor Vehicles - 20,000,000 - 20,000,000 Computer Equipment 2,425,525 - (437,630) 1,987,895 Office Equipment 252,905 - - 252,905 Tools & Equipment 20,650 - (3,150) 17,500 Office Furniture 526,198 - - 526,198 Total 3,225,278 20,000,000 (440,780) 22,784,498

Balance as at Charge for Disposals Balance as at 01.04.2018 the Year 31.03.2019 Accumulated Depreciation LKR LKR LKR LKR

Freehold Motor Vehicles - 3,750,000 - 3,750,000 Computer Equipment 2,150,340 224,665 (437,630) 1,937,375 Office Equipment 233,180 10,310 - 243,490 Tools & Equipment 13,358 4,375 (3,150) 14,583 Office Furniture 382,292 29,129 - 411,421 Total 2,779,170 4,018,479 (440,780) 6,356,869

2019 2018 Net Book Value LKR LKR

Freehold Motor Vehicles 16,250,000 - Computer Equipment 50,520 275,185 Office Equipment 9,415 19,725 Tools & Equipment 2,917 7,292 Office Furniture 114,777 143,906

Total Carrying Amount of Property, Plant & Equipment 16,427,629 446,108 AMBEON CAPITAL PLC 104 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

13. INTANGIBLE ASSETS (GROUP) Software License Fees Brand Name Goodwill Total As at 31st March 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR Cost Revised Balance at the beginning of the year 46,303,004 48,645,257 23,516,552 1,082,500 324,644,574 9,723,614 847,041,839 - 1,241,505,969 59,451,371 Business Acquired during the period - - - 22,457,754 - - - 847,041,839 - 869,499,594 Additions during the year 7,550,096 9,948,144 11,631,374 - - 314,920,960 - - 19,181,470 324,869,104 Amortized during the year (5,896,696) (12,290,397) (2,408,058) (23,702) - - - - (8,304,754) (12,314,099) Balance at the end of the year 47,956,404 46,303,004 32,739,868 23,516,552 324,644,574 324,644,574 847,041,839 847,041,839 1,252,382,684 1,241,505,969

13.1 Goodwill represents the excess of an acquisition over the Company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities at the date of acquisition, and is carried at cost less accumulated impairment losses.

Goodwill is not amortized, but is reviewed for impairment annually and whether there is an indication that goodwill may be impaired. For the purpose of testing goodwill for impairment, goodwill is allocated to the operating entity level, which is the lowest level at which the goodwill is monitored for internal management purpose.

13.1.1 Impairment Testing of Goodwill and Intangible Assets with Indefinite Lives

The aggregate carrying amount of Goodwill and Brand Name allocated to each entity is as follows

Goodwill Brand Name 2019 2018 2019 2018 LKR LKR LKR LKR Revised

Royal Fernwood Porcelain Limited - - 9,723,614 9,723,614 Millennium I.T.E.S.P (Pvt) Ltd 13.1.2 847,041,839 847,041,839 314,920,960 314,920,960 847,041,839 847,041,839 324,644,574 324,644,574

13.1.2 During the year, upon the completion of purchase price allocation in relation to the acquisition of Millennium IT ESP (Pvt) Ltd, the Group identified Brand value of Rs. 315 Mn for the brand name of Millennium IT ESP (Pvt) Ltd and the residual Goodwill as LKR 847 Mn. Management determined that both Brand name and Goodwill to have infinite useful lives.

13.2 Impairment of goodwill Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use (VIU). The fair value less costs to sell calculation is based on available data from an active market, in an arm’s length transaction, of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes. The key assumptions used to determine the recoverable amount for the different cash generating units, are as follows; AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 105

13.1 Goodwill represents the excess of an acquisition over the Company’s interest in the net fair value of the identifiable assets, liabilities and Gross Margins contingent liabilities at the date of acquisition, and is carried at cost less accumulated impairment losses. The basis used to determine the value assigned to the budgeted gross margins/contributions is the gross margins/contributions achieved in the year preceding the budgeted year adjusted for projected market conditions. Goodwill is not amortized, but is reviewed for impairment annually and whether there is an indication that goodwill may be impaired. For the purpose of testing goodwill for impairment, goodwill is allocated to the operating entity level, which is the lowest level at which the goodwill Discount Rates is monitored for internal management purpose. The discount rate used is the risk free rate which is the long term bond rate as published by Central Bank of Sri Lanka, adjusted by the 13.1.1 Impairment Testing of Goodwill and Intangible Assets with Indefinite Lives addition of an appropriate risk premium.

The aggregate carrying amount of Goodwill and Brand Name allocated to each entity is as follows Inflation The basis used to determine the value assigned to the budgeted cost inflation, is the inflation rate, based on projected economic conditions Goodwill Brand Name as published by Central Bank of Sri Lanka. 2019 2018 2019 2018 LKR LKR LKR LKR Volume Growth Revised Volume growth has been budgeted on a reasonable and realistic basis by taking into account the growth rates of one to four years immediately subsequent to the budgeted year based on Industry growth rates. Cash flows beyond the five year period are extrapolated using Royal Fernwood Porcelain Limited - - 9,723,614 9,723,614 0% growth rate. Millennium I.T.E.S.P (Pvt) Ltd 13.1.2 847,041,839 847,041,839 314,920,960 314,920,960 847,041,839 847,041,839 324,644,574 324,644,574 Sensitivity to Changes in Assumptions A 0.5% change in the discount rate does not result in an impairment Loss. 13.1.2 During the year, upon the completion of purchase price allocation in relation to the acquisition of Millennium IT ESP (Pvt) Ltd, the Group identified Brand value of Rs. 315 Mn for the brand name of Millennium IT ESP (Pvt) Ltd and the residual Goodwill as LKR 847 Mn. 13.3 Software of the Group represents Microsoft Office and new ERP system. Management determined that both Brand name and Goodwill to have infinite useful lives. 13.4 The management identified the brand names of Royal Fernwood Porcelain Ltd and Millennium IT ESP (Pvt) Limited as an intangible asset 13.2 Impairment of goodwill with an indefinite useful life arising from business combination. The management is of the view that the brand name will be a key attraction Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its in the Porcelain Sector and Information Technology Sector. The brand name has been tested for impairment along with other intangible fair value less costs to sell and its value in use (VIU). The fair value less costs to sell calculation is based on available data from an active assets of the Royal Fernwood Porcelain Ltd and Millennium IT ESP (Pvt) Ltd as further explained under note 13.2. market, in an arm’s length transaction, of similar assets or observable market prices less incremental costs for disposing of the asset. The 13.5 License fees represents license obtained by Taprobane Securities (Pvt) Ltd from the Colombo Stock Exchange and the license obtained for a value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and Solar Power Project from Sustainable Energy Authority by Ambeon Holdings PLC do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes. The key assumptions used to determine the recoverable amount for the different cash generating units, are as follows; AMBEON CAPITAL PLC 106 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

14. BIOLOGICAL ASSETS (GROUP) Balance Changes in Fair Balance as at 01.04.2018 Value Less Cost as at to Sell 31.03.2019 LKR LKR LKR

Teak 47,410,000 2,060,000 49,470,000 Lunumidella 790,000 40,000 830,000 Coconut 81,950 - 81,950 48,281,950 2,100,000 50,381,950

14.1 Heron Agro Products (Pvt) Ltd, subsidiary of the Ambeon Capital PLC has leased out a land from Mahaweli Authority of Sri Lanka under Government Land Ordinance for 30 years commencing from 18th January 1993. The lease period will expire on 17th January 2023. However, the lease period could be extended further period 15 years in accordance with the Memorandum of Understanding (MOU) signed with Mahaweli Authority of Sri Lanka.

14.2 Determination of Market Value

Teak “Market price is mainly obtained from International Market price of Teak Timber, State Timber Corporation and the local market prices. Cost of sawing and other outgoings have been deducted to obtain the net value of sawn timber per mature tree. Value of a Sq Ft of teak is assumed to be LKR 1,900 - LKR 3,800 (discounted) for the purpose of valuation as at 31st March 2019.

Lunumidella Market Price of a mature tree is determined based on local market and State Timber Corporation price. Cost of sawing and other outgoing have been deducted to obtain the net value of sawn timber per mature tree. Value of a Sq Ft of Lunumidella tree is assumed to be LKR 210 (discounted) for the purpose of valuation as at 31st March 2019.

2019 2018 Discount Rate 17% 17%

The market related systemic risk factor is taken at 2% - 2.65%, unsystemic risk of 3.5% was subject to the assumed probability. Thus the 3.5% adjustment was assumed with a final adjustment by a premium of 6% to arrive at the discounting rate of 17%.

Methodology The estimation of value of stumpage in timber stands depends on the age of plantation. These are categorized merchantable and pre merchantable.

The young plantation between age 10-15 are termed pre-merchantable and the other merchantable. Merchantable are valued based on market prices discounted to harvesting DCF Method.

Pre merchantable are valued based on replacement cost basis. The costs are compounded to recognize the return on investment, the compounding rate is the opportunity cost which is taken at Weighted Average Cost of Capital. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 107

Key Assumptions 1. The harvesting is approved by the forest Department and other relevant authorities. 2. The prices adopted are net of expenditure. 3. Discount rate is 17% 4. Compounding rate is 15% (assumed WACC) 5. Pre- merchantable are valued on replacement cost basis, compounded at 15%

2017/18 Key assumptions were also same as above.

14.3 Potential Risks Timber Plantations The Group is exposed to the following risks in relation to timber plantations:

Supply and Demand Risk The Group is exposed to risks arising from fluctuations in the price and sales volume of time. When possible, the Group manages this risk by aligning its harvest volume to market supply and demand. Management performs regular industry trend analyses to ensure that the Group’s pricing structure is in line with the market and to ensure that projected harvest volumes are consistent with the expected demand identified.

Regulatory and Environmental Risks The Group is subject to laws and regulations in Sri Lanka. The Group has established environmental policies and procedures aimed at compliance with local environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure that the systems in place are adequate to manage those risks.

Climate and Other Risks The Group’s timber plantations are exposed to the risk of damage from climatic changes, diseases, forest fires and other natural forces. The Group has extensive processes in place aimed at monitoring and mitigating those risks, including regular forest health inspections and industry pest and disease surveys.

15. INVESTMENT PROPERTIES GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Balance at the Beginning of the Year 1,688,188,153 1,164,600,686 29,000,000 25,000,000 Additions 7,542,453 4,835,475 - - Transfer from Property Plant and Equipment 1,085,766,025 280,917,800 - - Net gain from Fair Value Adjustments 831,355,019 237,834,192 1,500,000 4,000,000 3,612,851,650 1,688,188,153 30,500,000 29,000,000 Balance at the End of the Year 3,612,851,650 1,688,188,153 30,500,000 29,000,000

15.1 Group’s Investment Properties are stated at fair value, fair value has been determined on the basis of market value of land and buildings. Investment Properties are appraised in accordance with SLFRS 13, LKAS 40 and International Valuation Standards. Professional valuation was performed on the investment properties as at 31 March 2019 by the following Independent professional Valuers. AMBEON CAPITAL PLC 108 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

15.1.1 Company

Property Valuer 2019 2018

Colombo City Holdings PLC Union Place Mr. S.Sivaskanth Mr.S.Sivaskanth Dankotuwa Porcelain PLC Dankotuwa Mr. S.Sivaskanth Mr.Chulananda Wellappili Royal Fernwood Porcelain Ltd Kosgama Mr. S.Sivaskanth Mr.Chulananda Wellappili Taprobane Securities (Pvt) Ltd Kosgama Mr. W.M Chandrasena Mr. W.M Chandrasena Ceylon Leather Products Limited Mattakkuliya Mr. Chulananda Wellappili - Lexinton Resorts (Pvt) Ltd Kosgoda Sunil Fernando Associates Sunil Fernando Associates Ambeon Capital PLC Sigiriya Mr. W.M. Chandrasena Mr.W.M. Chandrasena

15.2 Group reclassified a part of land and buildings located in Mattakkuliya as investment property after engaging an independent valuer to determine the fair value of the property due to the change in use of the property.

15.3 Colombo City Holdings PLC has reported rental income amounting to LKR 8,893,895/- (2018 - LKR 9,279,413/-) from this investment property and incurred direct operating expenses (including repairs and maintenance) amounting to LKR 1,294,382/- (2018 - LKR 3,994,642/-).

15.4 The significant assumptions used by the valuer in the years 2019 and 2018 are as follows.

Method of Inputs used for Company Property Valuation measurement 2019 2018 LKR LKR

Colombo City Holdings PLC Land and Open Market Value Per perch rate 18,000,000 16,000,000 Buildings (Union Place, Replacement Cost Per sq.ft. rate 5250-2500 4,750 - 2,000 Colombo) Dankotuwa Porcelain PLC Land Open Market Value Per perch rate 5,000-145,000 3,125-65,000 (Dankotuwa) Royal Fernwood Porcelain Ltd Land (Kosgama) Open Market Value Per perch rate 60,000 40,000 Taprobane Securities (Pvt) Ltd Land (Kosgama) Open Market Value Per perch rate 70,000 68,000 Ceylon Leather Products Limited Land Open Market value Per perch rate 2,000,000 - (Mattakkuliya) Building Replacement Cost Per sq.ft. rate 650 - 3,250 - (Mattakkuliya) Lexinton Resorts (Pvt) Ltd Kosgoda- Open Market Value Per perch rate 395,000 385,000 Balapitiya Ambeon Capital PLC Sigiriya Open Market Value Per Acre Rate 4,550,000 4,500,000 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 109

15.4.1 Description of significant unobservable inputs to valuation: The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy together with a quantitative sensitivity analysis as at 31 March 2019 and 2018 are as shown below;

Investment Property Valuation Significant Rate Sensitivity of technique unobservable input to Fair value inputs

Colombo City Holdings PLC As at 31 March 2019 Land 47.2 perches (Street line 13.38 Open Market value Per perch rate LKR 18,000,000 Per Perch Positively correlated Perches) Pharmacy Building 4,344 sqft Replacement Cost Per sqft. rate LKR 5,250Per Sqft. Positively correlated Mezzanine floor 1,100 sqft Replacement Cost Per sqft. rate LKR 2,500 Per Sqft. Positively correlated

As at 31 March 2018 Land 47.2 perches (Street line 13.38 Open Market value Per perch rate LKR 16,000,000 Per Perch Positively correlated Perches) Pharmacy Building 4,344 sqft Replacement Cost Per sqft. rate LKR 4,750 Per Sqft. Positively correlated Mezzanine floor 1,100 sqft Replacement Cost Per sqft. rate LKR 2,000 Per Sqft. Positively correlated

Dankotuwa Porcelain PLC As at 31 March 2019 Land 3,985.95 perches Open Market value Per perch rate LKR 5,000 - 145,000 Positively correlated

As at 31 March 2018 Land 3,985.95 perches Open Market value Per perch rate LKR 3,125 - 65,000 Positively correlated

Royal Fernwood Porcelain Ltd As at 31 March 2019 Land 1,753.07 perches Open Market value Per perch rate LKR 60,000 Per Perch Positively correlated As at 31 March 2018 Land 1,753.07 perches Open Market value Per perch rate LKR 40,000 Per Perch Positively correlated

Taprobane Securities (Pvt) Ltd As at 31 March 2019 Land 1,162.5 perches Open Market value Per perch rate LKR 70,000 Per Perch Positively correlated

As at 31 March 2018 Land 1,162.5 perches Open Market value Per perch rate LKR 68,000 Per Perch Positively correlated

Ceylon Leather Products Limited As at 31 March 2019 Land 748 perches Open Market value Per perch rate LKR 2,000,000 Per Perch Positively correlated Buildings 75,010 sqft Replacement Cost Per sqft. rate LKR 650- 3,250 Per Sqft. Positively correlated

Lexinton Resorts (Pvt) Ltd As at 31 March 2019 Land 1,373 perches Open Market value Per perch rate LKR 395,000 Per Perch Positively correlated

As at 31 March 2018 Land 1,373 perches Open Market value Per perch rate LKR 385,000 Per Perch Positively correlated

Ambeon Capital PLC As at 31 March 2019 Land 8 Acres Open Market value Per Acre Rate LKR 4,550,000 Per Acre Positively correlated As at 31 March 2018 Land 8 Acres Open Market value Per Acre Rate LKR 4,500,000 Per Acre Positively correlated AMBEON CAPITAL PLC 110 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

16. INVESTMENT IN SUBSIDIARIES

16.1 Investment in subsidiaries 16.1.1 Ordinary shares Effective Holdings Direct Holding No of Shares Company

Place of 2019 2018 2019 2018 2019 2018 2019 2018 As at 31 March Principal %%%% Nos. Nos. LKR LKR Business

Lexinton Holdings No 10, Gothami 54.07 94.80 - 72.00 - 49,616,300 - 476,820,829 (Pvt) Ltd (16.1.6) Road, Colombo 08. Heron Agro No 10, Gothami 100.00 100.00 100.00 100.00 740,000 740,000 2,960,000 2,960,000 Products (Pvt) Ltd Road, Colombo 08. Lexinton Resorts No 10, Gothami 100.00 100.00 100.00 100.00 229,000,000 229,000,000 513,416,776 513,416,776 (Pvt) Ltd Road, Colombo 08. Ambeon Holdings No 10, Gothami 81.43 81.43 81.43 81.43 290,597,377 290,597,377 4,334,676,415 4,334,676,415 PLC Road, Colombo 08.

16.1.2 Preference shares

Heron Agro 30,000,000 - 30,000,000 - Products (Pvt) Ltd 4,881,053,191 5,327,874,020 Impairment on (8,443,566) (178,671,845) investment- (16.1.2.1) 4,872,609,624 5,149,202,175

16.1.2.1 Impairment (178,671,845) (397,379,317) Provision - Lexinton Holdings (Pvt) Ltd Reversal during 178,671,845 218,707,472 the year - Lexinton Holdings (Pvt) Ltd Impairment (8,443,566) - during the year - Heron Agro Products (Pvt) Ltd Impairment on (8,443,566) (178,671,845) investment

16.1.3 Millennium I.T.E.S.P (Pvt) Ltd

Disposal of shares On 4 April 2018, Ambeon Holdings PLC has disposed 547,575 of shares to Millennium Capital Investment Limited for a consideration of LKR 132 Mn. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 111

16.1.4 Disposal of investment in Millenium I.T.E.S.P (Pvt) Ltd to Eon Tec (Pvt) Ltd On 02 August 2018 Ambeon Holdings PLC disposed 77.23% holdings in Millennium IT ESP (Pvt) Ltd to Eon Tec (Pvt) Ltd for a total consideration of LKR 927 Mn. Eon Tec (Pvt) Limited was incorporated to hold investment in Millennium IT ESP (Pvt) Ltd. Ambeon Holdings PLC holds 78% in Eon Tec (Pvt) Limited.

16.1.5 Acquisition of Lexinton Financial Services (Pvt) Ltd by Taprobane Capital Plus (Pvt) Ltd On 10 December 2018, Taprobane Capital Plus (Pvt) Limited acquired 100% of the issued shares of Lexinton Financial Services (Pvt) Ltd for a total consideration of Rs. 5,236,007/- from Lexinton Holdings (Pvt) Ltd

16.1.6 Disposal of Lexinton Holdings (Pvt) Ltd Disposal of Lexinton Holdings (Pvt) Ltd - On 28 January 2019, Ambeon Capital PLC (72%) & Taprobane Investments (Pvt) Ltd (28%) disposed 100% of issued shares of Lexinton Holdings (Private) Limited to Colombo City Holdings PLC for a total consideration of LKR 414,833,710/-.

16.2 Investments in Sub Subsidiaries

Effective Holding % Sub Subsidiaries Investor 2019 2018 Principal Activity Place of Principal Business

Lexinton Financial Services Taprobane Capital 81.43 94.80 Carrying out Margin Trading No. 10, Gothami Road, (Pvt) Ltd Plus (Pvt) Ltd No operations during the period Colombo 08 Ceylon Leather Products Ltd Ambeon Holdings 81.35 81.35 Manufacturing and selling of No.64, PLC Leather, Leather Footwear and Belummahara,Mudungoda Leather Goods Ceylon Leather Products Ceylon Leather 81.35 81.35 Retail selling of leather No.64, Distributors (Pvt) Ltd Products Ltd footwear and leather goods Belummahara,Mudungoda South Asia Textiles Ltd Ambeon Holdings 79.53 79.48 Manufacturing and selling of No.70, Felix Dias PLC knitted fabrics for the export Bandaranayake Mawatha, and local markets Pugoda, Sri Lanka Palla & Company (Pvt) Ltd Ambeon Holdings 81.35 81.35 Manufacturing shoes for export Spur Rd. 4, Lot 25B, PLC market - Ceased Operations Katunayake Export during the period Promotion Zone Dankotuwa Porcelain PLC Ambeon Holdings 63.12 63.12 Manufacturing and selling of Factory and the showroom, PLC porcelain tableware to export Kurunegala Road, and local markets Dankotuwa Royal Fernwood Porcelain Ltd Dankotuwa 60.40 60.40 Manufacturing and selling of Werellamandiya Estate, Porcelain PLC porcelain tableware to export Police station road, and local markets Kosgama Lanka Decals (Pvt) Ltd Royal Fernwood 60.40 60.40 Manufacturing Decals - No Werellamandiya Estate, Porcelain Ltd operations during the period Police station road, Kosgama Fernwood Lanka (Pvt) Ltd Royal Fernwood 60.40 60.40 Selling of porcelain tableware Werellamandiya Estate, Porcelain Ltd to domestic market - No Police station road, operations during the period Kosgama Colombo City Holdings PLC Ambeon Holdings 54.07 54.07 Renting out properties No.505, Union Place, PLC Colombo 02 AMBEON CAPITAL PLC 112 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

16. INVESTMENT IN SUBSIDIARIES (Contd…)

Effective Holding % Sub Subsidiaries Investor 2019 2018 Principal Activity Place of Principal Business

Olancom (Pvt) Ltd Ambeon Holdings 75.85 75.85 Engage in networking business No 10, Gothami Road, PLC solutions - No operations Colombo 08 during the period Taprobane Investments Taprobane Capital 81.43 81.43 Money Broking No. 10, Gothami Road, (Pvt) Ltd Plus (Pvt) Ltd Colombo 08 Taprabane Securities Taprobane Capital 81.43 81.43 Share Broking No. 10, Gothami Road, (Pvt) Ltd Plus (Pvt) Ltd Colombo 08 Taprobane Wealth Plus Taprobane Capital 81.43 81.43 Corporate Finance No. 10, Gothami Road, (Pvt) Ltd Plus (Pvt) Ltd Colombo 08 Taprobane Capital Plus Ambeon Holdings 81.43 81.43 Investment Management No. 10, Gothami Road, (Pvt) Ltd PLC Colombo 08 Eon Tech (Pvt) Ltd Ambeon Holdings 63.52 - Investment Holding No. 10, Gothami Road, PLC Colombo 08 Lexinton Holdings (Pvt) Ltd Colombo City 54.07 - Real estate Management No. 10, Gothami Road, Holdings PLC Colombo 08 Millenium I.T.E.S.P (Pvt) Ltd Ambeon Holdings 49.05 81.43 IT Solutions 48 Sir Marcus Fernando PLC Road, Colombo 07

17. OTHER FINANCIAL ASSETS GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR Non Current Investments Amortized Cost 17.1 23,236,379 22,451,836 - - 23,236,379 22,451,836 - -

Current Investments Amortized Cost 17.2 287,403,237 374,997,868 - - Fair Value through Profits or Losses 17.3.1 167,447,645 1,276,267,279 - - Fair value through OCI 17.3.2 566,705,269 - - - Investment in Government Securities at amortized Cost 17.4 895,197,720 757,790,605 895,197,720 757,790,604 1,916,753,871 2,409,055,752 895,197,720 757,790,604 17.1 Amortized Cost Investment in Government Securities 23,236,379 22,451,836 - - 23,236,379 22,451,836 - - 17.2 Amortized Cost Current Bank Deposits 265,375,931 374,997,868 - - Commercial Paper * 22,027,306 - - - 287,403,237 374,997,868 - - *Terms and conditions ; Rate of interest at 15.75% - 17% AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 113

17.3 Investment in Equity Securities As at 31st March 2019 2018 No. of Shares Cost Market Value No. of Shares Cost Market Value LKR LKR LKR LKR

GROUP Incorporated in Sri Lanka 17.3.1 Fair Value through Profits or Losses Aitken Spence PLC 399 88,785 16,359 399 88,785 20,189 Browns Investments PLC 16,295,761 31,138,931 24,443,640 134,469,935 454,310,883 363,068,825 Pan Asia Banking - - - 43,930,641 823,593,973 720,462,512 Corporation PLC B P P L Holdings PLC 645,100 7,578,680 6,386,490 645,100 7,578,680 8,515,320 Seylan Bank PLC 2,175,175 203,356,714 136,600,990 2,122,122 203,356,714 184,200,190 Ambeon Capital PLC 45 - 166 45 - 243 242,163,110 167,447,645 1,488,929,035 1,276,267,279

17.3.2 Fair value through OCI Pan Asia Banking 43,930,641 823,593,973 566,705,269 - - - Corporation PLC 823,593,973 566,705,269

17.4 Investment in Government Securities GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Cost of the portfolio 892,762,001 776,278,201 892,762,001 776,278,201 Change in fair value 2,435,719 (18,487,596) 2,435,719 (18,487,595) 895,197,720 757,790,605 895,197,720 757,790,604 AMBEON CAPITAL PLC 114 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

18 INVENTORIES GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Raw Material 986,488,999 1,817,822,245 - - Work in Progress/ Project in Progress 2,086,983,807 780,233,446 - - Finished Goods 1,001,024,813 921,538,075 - - Indirect Material 20,623,200 30,380,247 - - Spare Stock 24,940,897 31,381,652 - - Consumables 52,620,748 53,442,313 - - General Stock 16,477,780 15,889,549 - - Semi Finished Goods 206,543,119 173,270,980 - - Packing Material 23,790,867 20,849,063 - - Others 24,105,747 20,949,387 - - Less : Allowance for Obsolete & Slow Moving Inventories 18.2 (468,764,827) (440,201,391) - - 3,974,835,150 3,425,555,566 - - Consumables and Spares 104,985,065 105,415,187 - - Goods Held for resale and maintenance inventory 18.1 7,543,185 81,669,021 - - Goods-In-Transit 153,552,706 145,411,774 - - 4,240,916,106 3,758,051,548 - - Total Inventories at the Lower of Cost and Net Realizable Value 4,240,916,106 3,758,051,548 - -

18.1 Goods held for resale 1,768,926 300,603,810 - - Maintenance Inventory 154,271,320 81,812,466 - - 156,040,246 382,416,276 - - Provision for fall in value 18.2 (148,497,061) (300,747,255) - - 7,543,185 81,669,021 - -

18.2 Allowance for Obsolete & Slow Moving Inventories GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Balance at the Beginning of the Year 740,948,646 359,067,304 - - Business Combination - 300,747,255 - - Provision/(Reversal) Made During the Year (123,686,758) 81,134,087 - - Balance at the End of the Year 617,261,888 740,948,646 - -

18.2.1 Details of inventories pledged for borrowings are disclosed in Note 32. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 115

19. TRADE AND OTHER RECEIVABLES GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Trade Receivables 5,300,778,712 4,310,265,134 21,837,958 19,486,824 Provision for Bad and Doubtful Debts 19.2 (1,239,142,574) (1,068,813,663) (21,640,227) (19,289,094) 4,061,636,138 3,241,451,471 197,730 197,730 Loans Granted 19.1 124,552,803 131,211,224 678,741 678,741 Other Receivables 271,205,804 347,169,300 41,207,046 40,975,520 Other Receivables - Related Parties 19.3 12,905,130 42,690,109 45,342,649 60,734,793 Provision for Bad and Doubtful Debts 19.2 (34,498,849) (37,583,933) - - 4,435,801,027 3,724,938,172 87,426,166 102,586,785 Advances and Prepayments 1,569,242,733 284,717,516 1,237,381 2,178,770 6,005,043,760 4,009,655,688 88,663,548 104,765,555

19.1 Loans Granted GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Loans Granted - Individuals 2,065,060 66,315,749 - - Loans Granted - Institutions 124,447,934 66,855,666 1,191,674 1,191,674 Provision for Bad and Doubtful Debts (1,960,191) (1,960,191) (512,933) (512,933) 124,552,803 131,211,224 678,741 678,741

19.2 Provision for Bad and Doubtful Debts GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Balance as at the beginning of the year 1,106,397,596 314,834,172 19,289,094 17,205,708 Business Combination - 765,993,541 - - Provision/ (Reversal) made during the year (2,133,261) 25,569,882 2,351,134 2,083,386 SLFRS 9 Impact 169,377,088 - - - Balance at the end of the year 1,273,641,423 1,106,397,596 21,640,227 19,289,094

19.3 Amounts Due From Related Parties Relationship Roshan Antony Group Employee - 1,671,586 - - Heron Agro Products (Pvt) Ltd Subsidiary Company - - 22,598,508 45,761,087 Taprobane Capital Plus (Pvt) Ltd Sub Subsidiary Company - - 14,729,065 -

Lexinton Resorts (Pvt) Ltd Subsidiary Company - - 8,015,076 - Ambeon Holdings PLC Subsidiary Company - - - 14,973,706 Loan Given to Directors Group Director 12,905,130 13,940,586 - - Murali Prakash Group MD - 27,077,938 - - 12,905,130 42,690,109 45,342,649 60,734,793

19.4 “An analysis of the age of financial assets that are past due as at the end of the reporting period but not impaired” as per SLFRS 7 is disclosed under note 28. AMBEON CAPITAL PLC 116 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

20. CASH AND CASH EQUIVALENTS GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Cash at Bank 328,365,028 1,015,749,345 1,172,412 332,368 Cash in Hand 40,000 40,000 40,000 40,000 Short Term Investments 283,503,932 983,397,792 - - 611,908,960 1,999,187,137 1,212,412 372,368 Bank Overdrafts used for cash management purposes (1,423,547,246) (2,760,999,591) (34,970,688) (2,010,095,205) Cash & Cash Equivalents in the statement of cash flow (811,638,286) (761,812,454) (33,758,276) (2,009,722,837)

21. STATED CAPITAL GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Issued Capital 1,002,724,815 Ordinary Shares Issued & Fully Paid 1,053,643,405 1,053,643,405 1,053,643,405 1,053,643,405

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 Company.

21.1 Amalgamation Reserve Ambeon Capital PLC obtained a certificate of amalgamation from the Registrar of Companies to amalgamate its wholly owned subsidiary, Taprobane Equities (Private) Limited (TEL) with effective from 30 November 2017. The effect of this amalgamation is LKR 258 Mn.

21.2 Foreign Currency Translation Reserve As at the reporting date, the assets and liabilities of the Indian Branch Operated by Dankotuwa Porcelain PLC and South Asia Textiles Limited were translated into the presentation currency at the exchange rate prevailing at the reporting date and the Income Statement is translated at the average exchange rate for the period. The exchange rate differences arising on the translation were taken directly in to Currency Conversion Reserve, which is classified as a part of equity.

21.3 Dividend Per Share

COMPANY 2019 2018 DPS LKR DPS LKR

Equity dividend on ordinary shares declared and paid during the year Final dividend 0.36 360,980,933 - - Total Dividend 0.36 360,980,933 - -

AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 117

22. INTEREST BEARING LOANS AND BORROWINGS GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Repayable after one year Loans from Non-Financial Institutions 22.1 - 316,919,661 - - Finance Leases 22.2 18,139,229 17,491,528 - - Bank Loans 22.3 2,738,336,807 1,227,610,805 1,926,486,512 - Loans granted by Related Parties 22.4 - - 822,198,621 - 2,756,476,036 1,562,021,994 2,748,685,133 - Repayable within one year Loans from Non-Financial Institutions 22.1 4,623,849 4,226,399 4,623,849 4,226,399 Finance Leases 22.2 1,441,953 3,400,000 - - Short Term Loan 22.5 1,645,628,275 2,254,332,825 - - Bank Loans 22.3 3,535,880,234 2,199,411,811 1,173,438,419 986,552,219 Loans granted by Related Parties 22.4 5,739,310 4,638,140 65,221,077 644,886,349 Bank Overdrafts 1,423,547,246 2,760,999,591 34,970,689 2,010,095,205 6,616,860,868 7,227,008,764 1,278,254,033 3,645,760,172

9,373,336,904 8,789,030,758 4,026,939,167 3,645,760,172

22.1 Loans from Non-Financial Institutions As at Loans Repayments Interest As at 01.04.2018 Write off payable 31.03.2019 LKR LKR LKR LKR LKR

Repayable after one year GROUP Browns Investments 22.1.1 78,222,653 (37,975,967) (43,401,105) 3,154,419 - PLC S.F.L. Services 22.1.1 83,802,959 (40,685,127) (46,497,289) 3,379,457 - (Pvt) Ltd. Brown & Company PLC 22.1.1 154,894,049 (75,198,827) (85,941,516) 6,246,294 - 316,919,661 (153,859,921) (175,839,910) 12,780,170 - Repayable within one year GROUP ASR Holdings (Pvt) Ltd 22.1.1 4,226,399 - - 397,451 4,623,849 4,226,399 - - 397,451 4,623,849

COMPANY ASR Holdings (Pvt) Ltd 4,226,399 - - 397,451 4,623,849 4,226,399 - - 397,451 4,623,849 AMBEON CAPITAL PLC 118 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

22. INTEREST BEARING LOANS AND BORROWINGS (Contd..) 22.1.1 Upon the completion of the novation of debt between Ambeon Holdings PLC and its Subsidiary (Dankotuwa Porcelain PLC), as per the agreement the debt has been transferred from Dankotuwa Porcelain PLC to Ambeon Holdings PLC on 28 December 2018. Accordingly LKR 329,557,668/- was transferred during the year. There was no outstanding relating to this at the end of the year.

GROUP Interest Repayments Terms

ASR Holdings (Pvt) Ltd 10% on demand Browns Investments PLC 6% By way of a “debt Novation Agreement S.F.L. Services (Pvt) Ltd. 6% By way of a “debt Novation Agreement Brown & Company PLC 6% By way of a “debt Novation Agreement

22.2 Finance Leases As at New As at 01.04.2018 Lease Repayments 31.03.2019 LKR LKR LKR LKR

Board of Investment of Sri Lanka 34,000,000 - (3,400,000) 30,600,000 Gross Liability 34,000,000 - (3,400,000) 30,600,000

Gross Liability 34,000,000 30,600,000 Finance Charges allocated to future periods (13,108,472) (11,018,818) Net liability 20,891,528 19,581,182

Security: Absolute ownership of the assets under lease will be with the lessor untill the expiration of the lease period.

22.2.1 This represents the finance lease arrangement between the Board of Investment of Sri Lanka and South Asia Textiles Ltd. which has a remaining lease period of 35 years.

22.3 Bank Loans

At the Beginning Business Loans Repayment Accrued Exchange At the End of of the Year Acquisition Obtained Interest Gain / Loss the year

LKR LKR LKR LKR LKR LKR LKR

GROUP 2019 3,427,022,616 - 72,962,152,006 (70,336,002,608) 220,817,881 227,146 6,274,217,041 2018 1,320,588,968 824,578,467 174,583,610,147 (173,536,375,012) 222,061,480 12,558,566 3,427,022,616

2019 2018 Repayable after one year 2,738,336,807 1,227,610,805 Repayable within one year 3,535,880,234 2,199,411,811 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 119

At the Beginning Business Loans Repayment Accrued Exchange At the End of of the Year Acquisition Obtained Interest Gain / Loss the year

LKR LKR LKR LKR LKR LKR LKR COMPANY 2019 986,552,219 - 67,894,225,574 (65,813,951,016) 33,098,154 - 3,099,924,931 2018 431,045,313 - 172,685,318,501 (172,248,181,952) 118,370,357 - 986,552,219

2019 2018 Repayable after one year 1,926,486,512 - Repayable within one year 1,173,438,419 986,552,219

22.3.1 Terms and Conditions Company Lender/rate of interest 2019 2018 Repayment Security (p.a.) LKR LKR

Ambeon Capital National Development 307,273,973 312,253,793 05 year term loan Primary mortgage over 594 Perch PLC Bank PLC -15% with One Year Grace freehold property in Hiddaruwa, period for Capital Re Balapitiya held by Lexinton Resorts payment (Pvt) Ltd.

Seylan Bank PLC - 10% 792,650,959 674,298,423 Due on accepted Related treasury bond date

Seylan Bank PLC - Term- 1,000,000,000 - 05 year term loan 112,790,122 Number Shares of Ambeon Loan (AWPLR +2.75%) with One Year Grace Holdings PLC period for Capital Re payment

Pan Asia Banking 1,000,000,000 - 04 year term loan 177,807,255 Number of shares of Corporation PLC - Term with One Year Grace Ambeon Holdings PLC period for Capital Re Loan 15.5% payment

Royal Fernwood Hatton National Bank PLC Porcelain Ltd -Term loan USD (LIBOR + 115,370,890 130,724,896 83 Equal monthly Instalments of Rs. 5.25%) Primary mortgage bond over 14,473/ immovable property in the factory at - Term loan LKR (AWPLR + 19,001,000 13,406,995 83 Equal monthly Kosgama 2.0% p.a.) Instalments of Rs. 235,490/ - Import loan - EUR 2,017,017 - - Packing Credit loan - 50,806,023 56,796,850 Settlements through Primary mortgage bond over USD(AWPLR+2%) sales proceeds immovable property in the factory at Kosgama AMBEON CAPITAL PLC 120 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

22. INTEREST BEARING LOANS AND BORROWINGS (Contd..)

Company Lender/rate of interest 2019 2018 Repayment Security (p.a.) LKR LKR

- Packing Credit loan 20,000,000 - Settlements through Primary mortgage bond over sales proceeds immovable property in the factory at Kosgama - Import loan 14,562,138 - Settlements Trough Secondary mortgage bond over land & (AWPLR+2%) sales proceeds building at Kosgama for Rs.40Mn

People’s Bank

- Import loan (AWPLR + - 27,142,338 90 days from the Corporate guarantee of Parent company 2.0% to 4%) loan granted - Ambeon Holdings PLC Packing credit loan - USD 33,563,766 26,204,712

DFCC Bank PLC - Import loan (AWPLR 34,486,592 - 120 days from the Primary mortgage for Rs.200,000,000/- +1.5%) loan granted or Dollars up to a limit of USD 1,250,000 - Packing credit loan USD 106,294,925 - as the case may be over stocks kept/ - Packing credit loan EUR 1,811,240 - to and book debts of the Company together with in favour of the bank

South Asia Textiles Sampath Bank PLC Limited Term loan - 1 (4 % p.a + 3 34,307,095 53,057,266 Monthly LKR Months LIBOR with a Floor 2,050,747 rate of 4.75% p.a.) Nations Trust Bank PLC- 186,207,393 - Monthly LKR Term loan - 3 (LIBOR with 4,910,848 a floor rate of 4.5% p.a Machineries, Leasehold Building and Nations Trust Bank PLC - 136,619,879 - Monthly LKR Inventory Term loan - 4 (LIBOR with 3,858,535 a floor rate of 4.5% p.a People's Bank - Term loan - 2 (4 .5% p.a 320,663,259 419,653,200 Monthly LKR + 6 Months LIBOR with a 12,291,010 Floor rate of 5.25% p.a.)

Dankotuwa Sampath Bank PLC Porcelain PLC AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 121

Company Lender/rate of interest 2019 2018 Repayment Security (p.a.) LKR LKR - Packing credit loan 50,000,000 - Maximum 3 months (AWPLR+2.0% p.a) hypothecation Bond for Rs.100Mn over - Packing credit loan 15,131,436 - stocks and book debts of the Company (LIBOR+2% subject to minimum of 5.25%) - Overdraft facility 25,000,000 - (AWPLR +2.0% p.a) Pan Asia Banking Corporation PLC - Packing credit loan 56,242,054 - Maximum 4 months (3 months LIBOR+4.% Mortagage bond for US $ 1,000,000 subject to minimum over stocks and book debts for the value of 1.5 times of the facility. - Short term loan 30,912,329 136,884,581 (16.5% p.a)

DFCC Bank PLC - Short term loan 43,553,151 - Maximum 3 months (AWPLR+1.25%p.a) - Packing Credit loans (3 40,756,164 - Maximum 4 months Mortagage bond for Rs. 80,000,000 months LIBOR+3.25% over stocks and book debts for the value subject to minimum of 1.5 times of the facility.

Ambeon Holdings Seylan Bank PLC PLC - Term loan 1 ( 01 Month 600,000,000 1,000,000,000 12 quarterly equal AWPLR + 2.5%) installments of LKR 100 Mn each - Term loan - 2 (01 Month 225,000,000 300,000,000 12 quarterly equal AWPLR + 3.0%) installments of LKR Quoted Shares 25 Mn each National Development Bank PLC - Loan (14.75% p.a.) 29,000,000 - Seylan Bank - STL loan 50,000,000 - (16% p.a.)

Milleninum I.T.E.S.P Honkong & Shanghai (Pvt) Ltd Banking Corporation - Import Finance loan 932,985,760 276,599,560 Within 180 Days Mortgage over Inventory and Debtors (Tenor linked COF+2.5% per annum) 6,274,217,041 3,427,022,616 AMBEON CAPITAL PLC 122 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

22. INTEREST BEARING LOANS AND BORROWINGS (Contd..)

22.4 Loans Payable to Related Parties As at 31st March GROUP COMPANY Repayment 2019 2018 2019 2018 Interest rate Terms LKR LKR LKR LKR

Mr.Eric Wikramanayake 13.50% On Demand 5,739,310 4,638,140 - - Taprobane Investments (Pvt) Ltd 12.00% On Demand - - 144,140,870 65,578,432 Taprobane Securities (Pvt) Ltd 13%-13.5% On Demand - - 172,369,812 178,918,109 Lexinton Holdings (Pvt) Ltd 11.5%-12% On Demand - - 162,506,058 122,523,663 Taprobane Wealth Plus (Pvt) Ltd 12.00% On Demand - - 3,896,401 3,557,944 Ceylon Leather Products Ltd 13.00% On Demand - - - 122,074,918 Colombo City Holdings PLC 13.00% On Demand - - - 152,233,283 Ambeon Holdings PLC 14%-15.75% On Demand - - 74,948,486 - Millennium I.T.E.S.P. (Pvt) Ltd 14.25% On Demand - - 170,800,559 - South Asia Textiles Limited 13.50% On Demand - - 158,757,511 -

5,739,310 4,638,140 887,419,697 644,886,349

Repayable after one year - - 822,198,621 - Repayable within one year 5,739,310 4,638,140 65,221,077 644,886,349

22.4.1 Repayable to related parties GROUP COMPANY

Balance as at 01.04.2018 4,638,140 644,886,349 Loan Obtained - 1,096,814,555 Loan Repayment - (965,759,908) Accrued Interest 1,101,170 111,478,701 Balance as at 31.03.2019 5,739,310 887,419,697 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 123

22.5 Short Term Loans At the Beginning Loans Repayment Exchange Accrued At The End of the Year Obtained Gain/ Loss Interest of the year LKR LKR LKR LKR LKR LKR

GROUP 2019 2,254,332,825 7,212,776,968 (7,823,974,721) (2,461,039) 4,954,242 1,645,628,275 2018 1,092,848,231 7,332,654,779 (6,215,365,243) 18,225,085 25,969,973 2,254,332,825

22.5.1 Company Lender/rate of interest (p.a.) 2019 2018 Repayment Security LKR LKR

South Asia People’s Bank Textiles Ltd - Trust Receipt Loans (2.75% p.a + 3 139,833,066 195,064,735 within a period of Machineries, Leasehold months LIBOR with a Floor rate of 4.25% 90 days Building and Inventory were p.a.) pledged as security. Seylan Bank PLC - Revolving Import Loans (3 months 227,686,762 512,980,180 within a period of Machineries, Leasehold LIBOR + 2.8% p.a with a floor rate of 60 days Building and Inventory were 4% p.a) pledged as security. Nations Trust Bank PLC - Import finance loan (3.% p.a + 3 months LIBOR with a Floor 141,338,392 89,278,365 within a period of Machineries, Leasehold rate of 3.25% p.a.) 90 days Building and Inventory were pledged as security. DFCC Bank PLC - Import/Export Finance Loan (1 month 297,912,812 96,053,632 within a period of Machineries, Leasehold LIBOR + 2.75% p.a) 120 days Building and Inventory were pledged as security. Ceylon Leather Peoples Bank Products Limited - STL (AWPLR+2% p.a) 180,100,000 229,170,483 within a period of Mortgage over Land, 150 days building and Immovable Machinery at Mattakuliya and Balummahara. Hatton National Bank PLC - STL (AWPLR+2.5% p.a) 223,948,660 157,112,131 within a period of 150 days Bank of Ceylon 82,852,410 117,673,298 within a period of Inventory and book debt were 150 days pledged - STL (AWPLR+1.75% p.a) Milleninum Seylan Bank PLC I.T.E.S.P (Pvt) Ltd STL-One month AWPLR + 2% per annum 351,956,172 857,000,000 Bullet Payment Corporate guarantee from ( interest to be Import Finance loan - - Ambeon Holding PLC serviced monthly ) 1,645,628,275 2,254,332,825 AMBEON CAPITAL PLC 124 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

23. RETIREMENT BENEFIT OBLIGATION GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Present value of unfunded gratuity 400,791,670 410,048,970 - 4,615,058 400,791,670 410,048,970 - 4,615,058

23.1 Provision for Retiring Gratuity Balance at the beginning of the year 410,048,970 260,078,371 4,615,058 3,888,054 Current service cost 23.2 38,861,097 30,830,872 - 424,400 Interest cost 23.2 41,975,308 32,132,264 - 466,566 Actuarial losses/(gains) 23.3 (26,703,131) 32,800,239 - (163,962) Business acquisitions during the year - 89,636,996 - - Exchange Adjustment (2,003,754) - - - Payment made during the year (62,910,528) (35,677,973) - - Transfers 1,523,707 248,201 (4,615,058) - Balance at the end of the year 400,791,670 410,048,970 - 4,615,058

23.2 Expenses recognized in Comprehensive Income Current service cost 38,861,097 30,830,872 - 424,400 Interest cost 41,975,308 32,132,264 - 466,566 80,836,405 62,963,136 - 890,966

23.3 Expenses recognized in Other Comprehensive Income Actuarial losses/(gains) (26,703,131) 32,800,239 - (163,962) (26,703,131) 32,800,239 - (163,962)

23.4 The cost of gratuity is determined using actuarial valuations. An actuarial valuation involves making various assumptions which may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, staff withdrawals, and mortality rates. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, the defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

GROUP 2019 2018 23.5 Principal actuarial assumptions used are as follows : (i) Rate of interest 11.25% 10% (ii) Rate of salary increment 7.50% 7.5% - 10% (iii) Staff turnover factor (as a % ) 5.00% 5% - 10% (iv) Retirement Age 55 Years 55 Years (v) The Company will continue as a going concern AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 125

23.6 Sensitivity Analysis Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would affected the defined benefit obligation by the amounts shown below.

GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Discount Rate - (1% Increase) (17,031,938) (25,499,223) - (404,490) Discount Rate - (1% Decrease) 18,805,033 27,885,691 - 453,985 Salary Increment Rate - (1% Increase) 22,817,395 28,084,184 - 488,426 Salary Increment Rate - (1% Decrease) (21,222,448) (14,810,464) - (439,830)

23.7 Maturity Profile of the Defined Benefit Plan GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Within Next 12 Months 67,232,393 62,879,949 - 29,761 Between 1 - 2 Years 84,936,783 67,967,490 - - Between 2 - 5 Years 104,481,259 100,638,380 - 194,158 Between 5- 10 Years 90,605,685 103,303,666 - 4,391,139 Beyond 10 years 53,535,550 75,259,485 - - 400,791,670 410,048,970 - 4,615,058

24 CONTRACT LIABILITY

GROUP 2019 2018 LKR LKR

24.1 Deferred Income -Grant Balance at the beginning of the year - 387,745 Amortization for the year - (387,745) Balance at the end of the year - -

The Waste Water treatment project of Dankotuwa Porcelain PLC was completed on March 2008 & it is capitalized under the relevant classification of Property, Plant & Equipment. Hence corresponding grant component is reflected under Deferred Income -Grant is amortized over the useful life (10 years), which is the estimated life of the asset. AMBEON CAPITAL PLC 126 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

24 CONTRACT LIABILITY (Contd...)

24.2 Contract Liability - Service Agreements GROUP 2019 2018 LKR LKR

Balance at the beginning of the year 748,150,496 - Business Acquisition - 506,418,642 Deferred During the year 705,392,567 1,003,611,016 Transferred to revenue during the year (746,678,985) (771,257,634) Derecognized during the year - 9,378,472 Balance at the end of the year 706,864,079 748,150,496

Revenue from Contract Liability is recognized periodically throughout the service agreement period entered between Millennium IT ESP (Pvt) Ltd and service clients and expected to be completed in year 2020/21.

25. DEFERRED TAX GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Deferred Tax Asset Balance as at the beginning of the year 274,360,132 71,588,610 18,270,536 991,831 Business Acquisition - 91,839,883 - - Recognized in profit or loss (68,292,426) 112,776,412 (1,068,362) 17,324,614 Recognized in other comprehensive income - (230,058) - (45,909) Business Disposal - (1,614,715) - - Impact of adapting SLFRS 9 33,302,256 - - - Assets Classified as Held for Sale/ Discontinued Operations 1,129,376 - - - Transfers between Deferred Tax Liability and (Asset) (79,738,014) - - - Balance as at the end of the year 160,761,323 274,360,132 17,202,174 18,270,536

Deferred Tax Liability Balance as at the beginning of the year 620,479,220 239,772,085 - - Business Acquisition 3,136,002 - - - Exchange Equalization Reserve (52,957,057) - - - Recognized in profit or loss 168,490,087 (129,602,226) - - Recognized in other comprehensive income 160,906,385 510,518,046 - - Business Disposal - (208,685) - - Impact of adapting SLFRS 9 (9,552,373) - - - Transfers between Deferred Tax Liability and (Asset) (79,737,978) - - - Balance as at the end of the year 810,764,286 620,479,220 - -

Net Deffered Tax Asset / (Liability) (650,002,963) (346,119,088) 17,202,174 18,270,536 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 127

GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR Transfer from/(to) Statement of Profit or Loss Transfer from accelerated depreciation and others (241,613,716) 242,294,863 (1,068,362) 17,324,614 (241,613,716) 242,294,863 (1,068,362) 17,324,614

Transfer from/(to) Other Comprehensive Income Tax on Revaluation Gain (145,989,358) (519,300,584) - - Employee Benefit Liability (12,092,447) 8,636,253 - (45,910) (158,081,805) (510,664,331) - (45,910)

Composition of deferred tax assets/ (liabilities) as follows; Property, Plant and Equipment (442,012,453) (363,741,201) (28,245) (73,208) Retirement Benefit Obligation 91,168,328 102,078,383 - 1,292,216 Revaluation of Land and Building to Fair Value (869,798,913) (639,733,674) (350,000) (200,000) Losses available for offset against future Taxable Income 321,861,180 390,309,945 - - Others* 248,778,895 164,967,459 17,580,419 17,251,528 (650,002,963) (346,119,088) 17,202,174 18,270,536

The above deferred tax asset arising from carried forward tax losses has been determined based on a financial budget approved by senior management to the extent of sufficient taxable profit are available.

The above deferred tax arises from timing difference of depreciation, impairment of debtors, unutilized portion of carried forward tax losses and gratuity. The deferred tax arising from the unused tax losses amounting to LKR 877 million has not been recognised as the management is not certain whether there will be sufficient taxable profit to be utilized.

*Others represent Deferred Tax Asset recognised on provision for debtors, provision for inventory and share based payment provision.

26. TRADE AND OTHER PAYABLES GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Trade Payables 3,838,541,519 3,052,564,686 - - Other Payables 339,645,203 332,489,121 - - Employee Share Appreciation Rights (ESAR) 27.2 41,821,436 29,574,048 41,821,436 29,574,048 Accrued & Other Payables 702,454,145 263,578,527 1,847,888 1,886,559 4,922,462,303 3,678,206,382 43,669,324 31,460,607 AMBEON CAPITAL PLC 128 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

27. OTHER FINANCIAL LIABILITIES GROUP COMPANY 2019 2018 2019 2018 LKR LKR LKR LKR

Preference Shares 27.1 921,026 897,086 - - Employee Share Appreciation Rights (ESAR) 27.2 20,965,777 32,038,552 20,965,777 32,038,552 21,886,803 32,935,638 20,965,777 32,038,552

27.1 Preference Shares GROUP COMPANY Carrying Carrying Carrying Carrying No of Value Value Value Value shares 2019 2018 2019 2018 LKR LKR LKR LKR

Financial Liabilities at amortised cost Preference Shares 170,625 921,026 897,086 - - 921,026 897,086 - -

27.2 Employee Share Appreciation Rights (ESAR) Group CEO receives benefits in the form of Share based payments, whereby, he renders services to increase performance of the Group. Liability is recognized for the fair value of cash settled transactions. The fair value is measured initially and at each reporting date up to and including the settlement date, with changes in fair value recognized in employee benefit expense. The fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The fair value is determined using the binomial model.

Granting of the variable ESAR will be dependent on the achievement of pre-determined performance target.

Movement In the Year Group Company Repayable Repayable Repayable Repayable after one within one after one within one year year year year 2019 2018 2019 2018 2019 2018 2019 2018 LKR LKR LKR LKR LKR LKR LKR LKR

Outstanding at the 32,038,552 - 29,574,048 - 32,038,552 - 29,574,048 - beginning of the year Adjustment during the (11,072,775) 32,038,552 12,247,388 29,574,048 (11,072,775) 32,038,552 12,247,388 29,574,048 Year Outstanding at the end of 20,965,777 32,038,552 41,821,436 29,574,048 20,965,777 32,038,552 41,821,436 29,574,048 the year

Following table lists the inputs to the binomial model used for valuation of the liability as at 31st March 2019.

2018/19 2017/18

Expected Volatility 59.30% 73.22% Risk free interest rate 10.40% 10.68% Expected Life of ESAR 5 4

Expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome at a future date. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 129 ------Total 895,197,720 895,197,720 167,447,645 6,867,595,748 ------3,612,851,650 3,612,851,650 2,192,098,733 3,612,851,650 2,192,098,733 5,804,950,383 LKR ------Fair Value Fair ------Level 1 Level 2 Level 3 167,447,645 - - Total 22,027,306 23,236,379 895,197,720 895,197,720 895,197,720 734,152,914 734,152,914 611,908,960 611,908,960 265,375,931 4,435,801,027 1,629,350,634 1,062,645,365 5,358,349,603 ------Liabilities Financial 5,739,310 5,739,310 4,623,849 4,623,849 19,581,183 19,581,183 20,965,777 20,965,777 20,965,777 4,178,186,722 4,178,186,722 6,274,217,041 6,274,217,041 6,274,217,041 1,423,547,246 1,423,547,246 1,645,628,275 1,645,628,275 13,572,489,403 13,572,489,403 ------Cost LKR Amortized 22,027,306 23,236,379 611,908,960 611,908,960 265,375,931 4,435,801,027 5,358,349,603 Carrying Amount ------Fair value through OCI 566,705,269 566,705,269 ------Fair value through P&L 895,197,720 895,197,720 167,447,645 1,062,645,365 12 19 15 20 26 20 17.1 17.4 17.2 17.3 17.2 27.2 22.1 22.4 22.5 22.3 22.2 Notes ccounting Classification and FairValues he following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their in levels the fair value hierarchy. It does not include fair value A A T information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

Bank Overdraft Trade andTrade Other Payables Short Loan Term Loans granted by Related Parties Related by granted Loans Bank Loans Bank Finance Leases Finance Loans Non-Financial from Institutions Financial Liabilities not measured at at measured not Liabilities Financial fair value Share Appreciation RightsEmployee (ESAR) Cash & Cash Equivalents Investment in Commercial Papers Trade Receivables Trade Bank Deposits Financial Assets not measured at fair value Securities Government in Investment Property Plant and Equipment Investment Property Investment in Government Securities Government in Investment Financial Assets and Non Financial Assets Financial Non Financial and Assets measured at fair value Securities Quoted in Investment GROUP 31 March 2019 31 28. 28.1 SSETS AND LIABILITIES The carrying amount of cash and bank balances are approximate fair values due to the relatively short maturity of the financialinstruments. For other receivables the carrying value has been considered as the fair value due to uncertainty of the timing of the cash flows. AMBEON CAPITAL PLC 130 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS ------Total 757,790,604 757,790,604 1,276,267,279 1,276,267,279 6,549,190,981 6,549,190,981 ------1,688,188,153 1,688,188,153 4,515,133,097 4,515,133,097 2,826,944,944 2,826,944,944 ------Level 1 Level 2 Level 3 - - Total 22,451,836 374,997,868 374,997,868 757,790,604 757,790,604 757,790,604 1,999,187,137 6,121,575,013 3,724,938,172 3,724,938,172 1,276,267,279 1,276,267,279 1,276,267,279 2,034,057,883 2,034,057,883 ------Liabilities Financial 4,638,140 4,638,140 4,638,140 20,891,528 20,891,528 20,891,528 32,038,552 32,038,552 321,146,060 321,146,060 321,146,060 3,427,022,616 3,427,022,616 3,427,022,616 2,760,999,591 2,760,999,591 2,254,332,825 2,254,332,825 12,206,123,119 12,206,123,119 3,385,053,807 3,385,053,807 ------Cost Amortized 22,451,836 374,997,868 374,997,868 1,999,187,137 6,121,575,013 3,724,938,172 3,724,938,172 ------Fair value through OCI ------Fair value through P&L 757,790,604 757,790,604 1,276,267,279 1,276,267,279 2,034,057,883 12 19 15 20 26 20 17.1 17.4 17.2 17.3 27.2 22.1 22.4 22.5 22.3 22.2 Notes A

Bank Overdraft Trade andTrade Other Payables Short Loan Term Loans granted by Related Parties Related by granted Loans Bank Loans Bank Finance Leases Finance Loans Non-Financial from Institutions Financial Liabilities not measured not Liabilities Financial fairat value Share AppreciationEmployee Rights (ESAR) Cash & Cash Equivalents Trade Receivables Trade Bank Deposits Financial Assets not measured at fair value Investment Government in Securities Property Plant and Equipment Investment Property Investment Government in Securities GROUP March 2018 31 Financial Assets Non Financial and Financial Assets measured at fair value Securities Quoted in Investment The carrying amount of cash and bank balances are approximate fair values due to the relatively short maturity of the financialinstruments. Carrying values of financialliabilities have been considered as the fair value, due to uncertainty of the timing of the cash flow. 28. SSETS AND LIABILITIES (Contd) AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 131 ------Total 895,197,720 895,197,720 925,697,720 925,697,720 ------30,500,000 30,500,000 30,500,000 30,500,000 LKR ------Fair Value Fair ------Level 1 Level 2 Level 3 895,197,720 895,197,720 895,197,720 895,197,720 - - Total 1,212,412 87,426,166 87,426,166 88,638,578 892,762,001 892,762,001 ------Liabilities Financial 4,623,849 4,623,849 34,970,688 34,970,688 20,965,777 20,965,777 20,965,777 887,419,697 887,419,697 887,419,697 4,047,904,943 4,047,904,943 4,047,904,943 3,099,924,931 3,099,924,931 ------Cost LKR 1,212,412 Amortized 87,426,166 87,426,166 88,638,578 Carrying Amount ------Fair value through OCI ------Fair value through P&L 892,762,001 892,762,001 15 19 20 20 17.4 17.3 27.2 22.1 22.4 22.3 Notes he following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their in levels the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. A T

Bank Overdraft Loans granted by Related Parties Related by granted Loans Bank Loans Bank Loans Non-Financial from Institutions Financial Liabilities not measured at at measured not Liabilities Financial fair value Share Appreciation RightsEmployee (ESAR) Cash & Cash Equivalents Financial Assets not measured at fair value Receivables Trade Investment in Government Securities Government in Investment Investment Property Financial Assets measured at fair value Securities Quoted in Investment COMPANY 31 March 2019 31 28.2 ccounting Classification and FairValues The carrying amount of cash and bank balances are approximate fair values due to the relatively short maturity of the financialinstruments. For other receivables the carrying value has been considered as the fair value due to uncertainty of the timing of the cash flows. AMBEON CAPITAL PLC 132 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS ------Total 757,790,605 757,790,605 786,790,605 ------29,000,000 29,000,000 29,000,000 29,000,000 29,000,000 ------Level 1 Level 2 Level 3 757,790,605 757,790,605 757,790,605 757,790,605 - - Total 372,368 102,959,153 102,959,153 102,586,785 102,586,785 776,278,201 776,278,201 776,278,201 776,278,201 ------Liabilities Financial 4,226,399 4,226,399 32,038,552 32,038,552 986,552,219 986,552,219 644,886,349 644,886,349 3,677,798,724 3,677,798,724 2,010,095,205 2,010,095,205 ------Cost 372,368 Amortized 102,959,153 102,959,153 102,586,785 102,586,785 ------Fair value through OCI ------Fair value through P&L 776,278,201 776,278,201 776,278,201 776,278,201 15 19 20 20 17.4 17.3 27.2 22.1 22.4 22.3 Notes A

Bank Overdraft Loans granted by Related Parties Related by granted Loans Bank Loans Bank Loans Non-Financial from Institutions Financial Liabilities not measured not Liabilities Financial fairat value Share AppreciationEmployee Rights (ESAR) Cash & Cash Equivalents Financial Assets not measured at fair value Receivables Trade Investment Property Investment Government in Securities COMPANY March 2018 31 Financial Assets measured at fair value Securities Quoted in Investment 28. SSETS AND LIABILITIES (Contd) The carrying amount of cash and bank balances are approximate fair values due to the relatively short maturity of the financialinstruments. Carrying values of financialliabilities have been considered as the fair value, due to uncertainty of the timing of the cash flow. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 133 Group 374,997,868 374,997,868 610,926,847 610,926,847 307,662,388 555,804,767 01 April 2018 1,999,187,137 2,151,249,422 7,227,008,765 2,374,960,015 2,374,960,015 1,562,021,994 3,678,206,382 3,840,278,600 Restated ------83,979,949 (83,979,949) (83,979,949) 720,462,512 720,462,512 (720,462,512) Classifications ------SLFRS 9 ancial liabilities as at 1 April 2018. n fi (9,552,373) 33,302,256 (53,278,501) (169,377,088) (126,522,459) (126,522,459) Impact - Group - - ancial assets and n fi Group 274,360,132 274,360,132 374,997,868 374,997,868 620,479,220 620,479,220 1,999,187,137 2,140,513,431 2,140,513,431 (73,243,958) 7,227,008,765 1,276,267,279 1,276,267,279 1,562,021,994 2,428,238,516 2,428,238,516 3,678,206,382 4,009,655,688 31 March 31 2018 Reported - Fair Value through OCI - - New Classification New ancial liabilities n fi Amortized Cost Amortized Cost Amortized Cost Amortized Cost Amortized Cost Amortized Cost - Amortized Cost Amortized Cost Amortized Cost Amortized Cost - - Fair Value through P/L Fair Value through P/L Amortized Cost Amortized Cost - - Original Classification Original ancial assets and n fi ation and measurement of c fi ther Financial Assets - B eferred Liability - C he adoption of SLFRS 9 has fundamentally changed the Group accounting for debtors impairments replacing by LKAS incurred 39’s loss approach with a forward-looking expected credit he Group has remeasured the Financial assets under fair value through profit or loss and reclassified the financial assets asfair value through profit or loss and fair value through OCI he Group has accounted Deferred impact Tax on expected credit loss approach for debtors impairment. he following table shows and reconciles the original measurement categories as per LKAS 39 - “Financial Instruments: Recognition and measurement” and the new measurement rade & Other Receivables - A T T O T D T loss (ECL) approach. financial assets, based on the Group business module for managing assets. Accordingly, the reclassificationimpact has been transferred from retained earnings to fair value through OCI reserve. C categories as per SLFRS 9 - “Financial Instruments” along with their carrying amounts for each class of the Company’s T

Equity Retained Earnings Interest Bearing Loans & Borrowings OCI Reserve Non Controlling Interest Trade and Other PayablesTrade Interest Bearing Loans & Borrowings Liabilities Deferred Liability Tax - C Cash Hand in and at Bank Other Financial Assets - Bank Deposits Other Financial Assets - Fair Value through OCI - B Other Financial Assets - Fair Value through P/L - B Trade & OtherTrade Receivables - A Assets Asset Tax Deferred

28.3 lassi

AMBEON CAPITAL PLC 134 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

29. COMMITMENTS AND CONTINGENT LIABILITIES

29.1 Commitments and Contingent Liabilities - Company The Company does not have significant capital commitment and contingent liabilities as at the reporting date.

29.2 Commitments and Contingent Liabilities - Group

29.2.1 Ambeon Holdings PLC Bank Guarantees 2019 2018 LKR Mn LKR Mn

Guarantees given to Tax Appeal Commission on behalf of the Company - 8.25 Guarantees given to following facilities on behalf of South Asia Textiles Ltd; People’s Bank PLC (USD 4.4Mn) 804 - Guarantees given to following facility on behalf of Royal Fernwood Porcelain Ltd; People’s Bank PLC 65 65 Guarantees given to following facility on behalf of Millennium IT ESP (Pvt) Limited; Seylan Bank PLC 2,000 2,000

29.2.2 Ceylon Leather Products Limited Letters of Credit and Bank Guarantees 2019 2018 LKR Mn LKR Mn

Letters of Credit Opened with Banks favoring suppliers 10.15 24.30 Guarantees Issued by Banks on behalf of the Company 33.86 33.40

29.2.3 Royal Fernwood Porcelain Limited Letter of Credit 2019 2018 LKR Mn LKR Mn

Letter of credit opened with Banks favoring suppliers 50 50 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 135

29.2.4 South Asia Textiles Ltd Operating Lease Commitments

The Company has an operating lease for land. This lease has a term of renewal but no purchase option and escalation clause. Renewals are at the option of the specific entity that holds the lease. Future lease payments under operating lease contract are as follows;

2019 2018 LKR Mn LKR Mn

Within one year 3 3 After one year but not more than five years 15 15 More than five years 12 12 Present value of minimum lease payments 30 30

29.2.5 Lexinton Holdings (Pvt) Limited Bank Guarantee 2019 2018 LKR Mn LKR Mn

Guarantees given to Tax Appeal Commission on behalf of the Company 18.90 18.90

29.2.6 Taprobane Securities (Pvt) Limited Bank Guarantee 2019 2018 LKR Mn LKR Mn

Guarantees given to Colombo Stock Exchange on behalf of the Company 1.75 1.75

29.2.7 Millennium I.T.E.S.P (Pvt) Limited 2019 2018 LKR Mn LKR Mn

Performance Bonds 109 138 Tender Bonds 18 10

USD Mn USD Mn

Performance Bonds 0.96 1.40 Tender Bonds 0.05 0.05

29.2.8 There are no material issues pertaining to employees and industrial relations of the Group during the financial year. AMBEON CAPITAL PLC 136 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

30. RELATED PARTY TRANSACTIONS

30.1 Identity of related parties The Company has related party relationship with its subsidiaries, associates, affiliate companies.

30.2 Transaction with / between subsidiaries and the parent company

Company Relationship Nature of transaction Amount Balance (due)/ Balance (due)/ Aggregate Terms & from as at from as at Value of RPT Conditions of 31/3/2019 31/3/2018 exceeds 10% the RPT exceeds of the Gross 10% of Gross Revenue * Revenue

Taprobane Investments Sub Brokerage on money (Pvt) Ltd subsidiary broking (440,051) - - - - Brokerage paid 501,658 - - - - Common expenses -reimbursement 150,656 - - - - Common expenses - allocation (1,727,874) - - - - Settlement - Fund Transfers 1,577,217 - - - - Shared service & consultancy fees - - (61,607) - -

Loan taken (123,350,000) - - - - Loan settlement 54,380,000 - - - - Interest charged (9,592,438) (144,140,870) (65,578,432) - -

Lexinton Holdings Sub Common expenses (Pvt) Ltd subsidiary -reimbursement 6,166 - - - - Common expenses - allocation (2,025,326) - - - - Settlement - Fund Transfers 2,019,160 - - - -

Loan taken (44,679,621) - - - - Loan settlement 21,649,622 - - - - Interest charged (16,952,395) (162,506,057) (122,523,663) - -

Taprobane Sub Common expenses Securities (Pvt) Ltd subsidiary -reimbursement 195,822 - - - - Common expenses - allocation (357,562) - - - - Settlement - Fund Transfers 161,740 - - - -

Loan taken (75,784,648) - - - - Loan settlement 104,268,738 - - - - Interest charged (21,935,794) (172,369,813) (178,918,109) - -

Taprobane Wealth Sub Plus (Pvt) Ltd subsidiary Loan settlement 100,000 - - - - Interest charged (438,457) (3,896,401) (3,557,944) - - AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 137

30.2 Transaction with / between subsidiaries and the parent company

Heron Agro Fully owned Products (Pvt) Ltd subsidiary Loan granted 2,308,400 - - - - Settlement -fund transfers (30,000,000) - - - - Interest income on loans and borrowings 4,529,021 22,598,508 45,761,088 - -

Lexinton Resorts Fully owned (Pvt) Ltd subsidiary Loan granted 7,370,000 - - - - Settlement -fund transfers - - - - - Interest income on loans and borrowings 645,076 8,015,076 - - -

Ambeon Holdings PLC Subsidiary Loan taken (337,973,993) - - - - Loan settlement 259,063,822 - - - - Interest charged (11,012,022) (74,948,487) 14,973,706 - -

Ceylon Leather Sub Products Ltd subsidiary Loan settlement 123,256,877 - - - - Interest charged (1,181,959) - (122,074,918) - -

Colombo City Sub Holdings PLC subsidiary Loan settlement 172,474,337 - - - - Interest charged (20,241,054) - - - - Disposal of Subsidiary 298,680,270 - (152,233,283) - -

Millennium I.T.E.S.P. (Private) Limited Subsidiary Loan taken (150,000,000) - - - - Interest charged (20,800,559) (170,800,559) - - -

South Asia Textiles Limited Subsidiary Loan taken (150,000,000) - - - - Interest charged (8,757,511) (158,757,511) - - - AMBEON CAPITAL PLC 138 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

30. RELATED PARTY TRANSACTIONS (Contd…) 30.2 Transaction with / between subsidiaries and the parent company (Contd…)

Company Relationship Nature of transaction Amount Balance (due)/ Balance (due)/ Aggregate Terms & from as at from as at Value of RPT Conditions of 31/3/2019 31/3/2018 exceeds 10% the RPT of the Gross exceeds Revenue * 10% of Gross Revenue

ARRC Capital Affiliated Common expenses (Pvt) Ltd Company -reimbursement 6,166 - - - - Shared service & consultancy fees 300,000 - - - - Settlement -fund transfers (306,166) - - - -

Loan taken (230,000,000) - - - - Loan settlement 230,566,513 - - - - Interest charged (566,513) - - - -

Taprobane Capital Plus Affiliated Common expenses (Pvt) Ltd Company -reimbursement 5,546 - - - - Common expenses - allocation (4,226,481) - - - - Shared service & consultancy fees (10,800,000) - - - - Settlement -fund transfers 29,750,000 14,729,065 - - -

* Recurrent related party transactions

There were no recurrent related party transactions which in aggregate value exceeds 10% of the consolidated revenue of the Group as per 31 March 2019 audited financial Statements, which required additional disclosures in the 2018/19 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. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 139

30.3 Transaction with other entities

GROUP 2019 2018 LKR LKR

Other Related Parties

Sale of Goods 1,109,224,225 990,813,277 Loan Interest Receivable / (Payable) 9,342,268 (1,620,000) Investment in Shares - 533,358 Investment in Commercial Papers 21,200,000 - Loans Granted 54,500,000 40,000,000 Interest earned on Investment in Commercial Papers 827,306 - (Receipts) / Payments for Goods / Services (1,033,989,541) (907,519,434)

Transaction, arrangements and agreements involving Key Management Personnel (KMPs) and their Close Family Members (CFMs), and Entities which are controlled, jointly controlled or significantly influenced by the KMPs and their CFMs or shareholders who have either control, jointly control or significant influence over the entity.

Other Related Parties include; Hirdaramani International Exports (Pvt) Ltd, CHC Investments (Pvt) Ltd, United Hotels Company (Pvt) Ltd, Suisse Hotel Kandy (Pvt) Ltd and Ceylon Hotel Corporation Ltd.

30.4 Transactions with Key Management Personnel

Key management personnel include members of the Board of directors of Ambeon Capital PLC and its subsidiary companies. The transactions with key management personnel are carried out on an arms length basis.

GROUP COMPANY As at 31 March 2019 2018 2019 2018 LKR LKR LKR LKR

30.4.1 Key Management Personnel Compensation Short-term employee benefits 151,351,770 170,714,269 9,475,378 13,949,800 Share-based Payment - 29,000,000 - 29,000,000 Loan Obtained - - - - Settlement of Loan (27,475,337) - - - Net Interest 397,399 1,629,783 - - AMBEON CAPITAL PLC 140 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

30.5 Terms and conditions of transactions with related parties Transactions with related parties are carried out in the ordinary course of the business. Outstanding current account balances at year end are unsecured and settlement occurs in cash. Interest bearing borrowings are at pre-determined interest rates and terms.

30.6 Non Recurrent Related Party Transactions There was one non-recurrent related party transactions that exceeded the thresholds that required the immediate market disclosure or shareholder approval as required under Section 9 of the Continuing Listing Requirement of the Colombo Stock Exchange.

Name of the Related Relationship Value of the Related Aggregate Value Terms and The Rational for Party Party Transactions of Related Party Conditions of Entering into the Entered into During Transactions as a % of the Related Party Transaction the Financial Year Net Revenue / Equity Transactions LKR and Total Assets

Colombo City Holdings 7.72% (Total Assets), Group PLC Sub- Subsidiary 467,586,660 19.93% (Equity) Fair Value Restructuring

31. EVENTS OCCURRING AFTER REPORTING PERIOD No circumstances have arisen since the reporting date, which would require adjustment to or disclosure in the financial statements.

32. ASSETS PLEDGED Carrying Amount Pledged 2019 2018 Nature of Assets Nature of Liability LKR mn LKR mn Included under

32.1 Assets Pledged by Ambeon Capital PLC Investment in Shares - 290.6 Mn Pledge for Facility Granted by 4,075 4,075 Investments in Ambeon Holdings PLC Shares Subsidiaries Seylan Bank PLC & Pan Asia Bank

32.2 Assets Pledged by Lexinton Resorts (Pvt) Ltd Land Primary Mortgage 542 - Investment Property for Loans and Borrowings NDB Bank

32.3 Assets Pledged by Ambeon Holdings PLC Quoted Equity Investments Overdraft Facility 1,975 2,228 Investments in Revolving Loan Subsidiaries and Other for Loans and Borrowings Current Financial Assets AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 141

Carrying Amount Pledged 2019 2018 Nature of Assets Nature of Liability LKR mn LKR mn Included under 32.4 Assets Pledged by Ceylon Leather Products Ltd Immovable Properties Floating Mortgage 1,917 1,323 Property, Plant & for Loans and Borrowings Equipment

Plant & Machinery Floating Mortgage - 36 Property, Plant & Other than leased for Loans and Borrowings Equipment

Raw Materials, Finished Goods Floating Mortgage 350 531 Inventory and Work in Progress for Loans and Borrowings

Trade Debtors Floating Mortgage 200 225 Debtors for Loans and Borrowings 2,467 2,115

32.5 Assets Pledged by South Asia Textiles Ltd Machineries Primary Mortgage 1,040 1,199 Property, Plant & Equipment for Loans and Borrowings

Raw Materials, Finished Goods Primary/Concurrent Mortgage 2,102 1,877 Inventories and Work in Progress for Loans and Borrowings

Trade Debtors Primary/Concurrent Mortgage 811 890 Trade and Other Receivables for Loans and Borrowings

Margin Accounts Primary Mortgage 14 13 Other Financial Assets for Loans and Borrowings 3,967 3,979

32.6 Assets Pledged by Dankotuwa Porcelain PLC

Inventory and Trade Debtors For Loans and Borrowings 730 490 Inventory and Trade Debtors

Machinery Primary Mortgage for Loans and - 14.1 Property, plant and Borrowings equipment 730 504 32.7 Royal Fernwood Porcelain Limited

Land and Buildings & immovable Term loans and short term 566 580 Property, plant and machinery borrowings equipment 566 580 AMBEON CAPITAL PLC 142 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

33. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.

The Group’s risk management policies are established to identify and analyses the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. All the Group level risks are escalated to the parent company and the Board. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.

The Group Audit Committee oversees the reports submitted by the Enterprise Risk Management and monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced. The Group Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and adhoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.

The Group has exposure to the following risks from its use of financial instruments:

(i) Credit risk (ii) Liquidity risk (iii) Market risk

(i) Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group’s exposure to credit risk is as indicated by the carrying amount of its financial assets which consist principally of bank balance, due from related parties, trade and certain other receivables.

Exposure to credit risk The Group limits its exposure to credit risk by investing only in liquid debt securities.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

GROUP COMPANY As at 31st March Note 2019 2018 2019 2018 LKR LKR LKR LKR

Fair Value Through Profit & Loss 17.4 895,197,720 2,034,057,883 895,197,720 757,790,604 Held to Maturity Financial Assets 17.1 23,236,379 22,451,836 - - Loans & Receivables 17.2 287,403,237 374,997,868 - - Trade & Other Receivables 19 6,005,043,760 4,009,655,688 88,663,548 104,765,555 Cash & Cash Equivalents 20 611,908,960 1,999,187,137 1,212,412 372,368 7,822,790,056 8,440,350,413 985,073,680 862,928,527 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 143

The financial assets that are past due and but not impaired and neither past due or impaired as follows:

GROUP COMPANY As at 31st March 2019 Neither Past due and but Total Neither Past due Total past due or not impaired past due or and but not impaired impaired impaired LKR LKR LKR LKR LKR LKR

Fair Value Through Profit - 1,040,822,355 1,040,822,355 - 892,762,001 892,762,001 & Loss - Change in fair value of - (145,624,635) (145,624,635) - 2,435,719 2,435,719 investments - 895,197,720 895,197,720 - 895,197,720 895,197,720 Investments in other - 310,639,616 310,639,616 - - - financial assets

Trade and other - 7,244,186,334 7,244,186,334 - 110,303,775 110,303,775 receivables - Impairment of trade - (1,239,142,574) (1,239,142,574) - (21,640,227) (21,640,227) receivables - 6,005,043,760 6,005,043,760 - 88,663,548 88,663,548

Cash and cash 611,908,960 - 611,908,960 1,212,412 - 1,212,412 equivalents 611,908,960 7,210,881,096 7,822,790,056 1,212,412 983,861,268 985,073,680

GROUP COMPANY As at 31st March 2018 Neither Past due and but Total Neither Past due Total past due or not impaired past due or and but not impaired impaired impaired LKR LKR LKR LKR LKR LKR

Fair Value Through - 1,811,588,583 1,811,588,583 - 757,790,604 757,790,604 Profit & Loss - Change in fair value of - 222,469,300 222,469,300 - - - investments - 2,034,057,883 2,034,057,883 - 757,790,604 757,790,604 Investments in other - 397,449,704 397,449,704 - - - financial assets

Trade and other - 5,078,469,351 5,078,469,351 - 124,054,648 124,054,648 receivables - Impairment of trade - (1,068,813,663) (1,068,813,663) - (19,289,094) (19,289,094) receivables - 4,009,655,688 4,009,655,688 - 104,765,555 104,765,555

Cash and cash 1,999,187,137 - 1,999,187,137 372,368 - 372,368 equivalents 1,999,187,137 6,441,163,276 8,440,350,413 372,368 862,556,159 862,928,527 AMBEON CAPITAL PLC 144 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

33. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Contd…)

(ii) Liquidity risk Liquidity risk is the risk that cash may not be available to pay obligations when due. The Group manages its liquidity needs by carefully monitoring scheduled payments for financial liabilities as well as cash-outflows due in day-to-day business.

The following are the contractual maturities of non-derivative financial liabilities:

Group Company As at 31 March 2019 Carrying Contractual cash On demand Less than 3 3 to 12 months 1 to 5 years > 5 years Carrying Contractual cash On demand Less than 3 1 to 5 years Amounts out flows months Amounts out flows months LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR

Non-derivative financial liabilities

Employee Share Appreciation 20,965,777 20,965,777 - - - 20,965,777 - 20,965,777 20,965,777 - - 20,965,777 Rights (ESAR) Loans and borrowings 7,949,789,658 8,839,479,691 - 1,817,339,242 3,197,481,059 3,813,881,686 10,777,705 3,991,968,478 4,692,945,735 - 1,243,283,345 3,449,662,390 Trade & Other payables 4,922,462,303 4,922,462,303 4,922,462,303 - - - - 43,669,324 43,669,324 43,669,324 - - Bank Overdraft 1,423,547,246 1,423,547,246 - 1,423,547,246 - - - 34,970,689 34,970,689 - 34,970,689 - 14,316,764,984 15,206,455,018 4,922,462,303 3,240,886,488 3,197,481,059 3,834,847,463 10,777,705 4,091,574,267 4,792,551,524 43,669,324 1,278,254,033 3,470,628,167

Group Company As at 31 March 2018 Carrying Contractual cash On demand Less than 3 3 to 12 months 1 to 5 years > 5 years Carrying Contractual cash On demand Less than 3 1 to 5 years Amounts out flows months Amounts out flows months LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR

Non-derivative financial liabilities

Employee Share Appreciation 32,038,552 32,038,552 - - - 32,038,552 - 32,038,552 32,038,552 - - 32,038,552 Rights (ESAR) Loans and borrowings 6,028,031,169 6,341,790,485 237,287,000 2,147,573,363 2,241,448,275 1,702,593,172 12,888,675 1,635,664,967 1,635,664,967 1,635,664,967 - - Trade & Other payables 3,678,206,382 3,678,206,382 3,678,206,382 - - - - 31,460,607 31,460,607 31,460,607 - - Bank Overdraft 2,760,999,591 2,760,999,591 - 2,760,999,591 - - - 2,010,095,205 2,010,095,205 - 2,010,095,205 - 12,499,275,694 12,813,035,009 3,915,493,382 4,908,572,954 2,241,448,275 1,734,631,724 12,888,675 3,709,259,331 3,709,259,331 1,667,125,573 2,010,095,205 32,038,552

(iii) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and 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 optimizing the return.

Currency risk Currency risk is the risk that the value of financial instruments will fluctuate due to changes on foreign exchange rates. All purchases and related payments due to suppliers are termed In Sri Lankan (“RS”), US Dollar (USD) and Euro (“EUR”). RS is pegged against USD and hence, the Group’s exposure to currency risk in terms of USD is minimal. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 145

33. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Contd…)

The following are the contractual maturities of non-derivative financial liabilities:

Non-derivative financial liabilities

Interest rate risk Interest rate risk is the risk to earnings or capital arising from movement of interest rates. The Group has negotiated overdrafts at a fixed interest rate basis, hence not subject to the interest rate risk.

Capital management The capital management strategy adopted by the Group is aimed at maintaining sufficient and adequate levels of working capital for day to day operations and long term capital for investment and growth. A suitability structured capital base is essential in order to maintain investor confidence in the Group, and ensures that it achieves sustained long term growth while maintaining the capability to withstand fluctuating economic fortunes. The capital of the Group consists of equity and debt. The components of the equity capital are the stated capital, retained earnings and reserves while the debt capital consist of short term debt sources. AMBEON CAPITAL PLC 146 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

34. MATERIAL PARTLY-OWNED SUBSIDIARIES Financial information of subsidiaries that have material non-controlling interests is provided below;

34.1 Proportion of equity interest held by non-controlling interests:

Name Proportion of NCI Accumulated Balances of NCI Profit allocated to NCI 2019 2018 2019 2018 2019 2018 LKR LKR LKR LKR

Non-Controlling Interests material individually Ambeon Holdings PLC 18.57% 18.57% 1,009,336,039 1,126,308,662 (5,455,415) 135,560,510 South Asia Textiles Limited 20.47% 20.47% 418,447,413 420,230,834 (475,712,109) 13,676,775 Ceylon Leather Products Ltd 18.65% 18.65% 264,732,458 266,331,469 (93,836,905) 29,431,133 Dankotuwa Porcelain PLC 36.88% 36.88% 597,198,419 682,083,235 88,032,805 (14,836,584) Colombo City Holdings PLC 45.93% 45.93% 925,893,781 863,834,782 79,622,069 71,785,028 Millennium I.T.E.S.P (Private) Limited 50.95% 18.57% 182,804,685 136,556,049 207,848,069 62,446,838

Non-controlling interest material in (300,199,380) (1,067,106,515) 665,590,158 (67,308,125) aggregate

Total 3,098,213,414 2,428,238,516 466,088,670 230,755,575

Dividend Paid to NCI Shareholders 2019 2018 Ambeon Holdings PLC 82,820,115 - South Asia Textiles Limited 5,853,581 5,833,333 Colombo City Holdings PLC 12,830,940 6,415,199 Millennium I.T.E.S.P (Private) Limited 69,676,594 - 171,181,230 12,248,532

The summarised financial information of these subsidiaries is provided below. This information is based on amounts before inter-company eliminations.

34.2 Summarised statement of Profit or Loss for the period ending 31 March

Ambeon Holdings PLC South Asia Textiles Limited Ceylon Leather Products Limited Dankotuwa Porcelain PLC Colombo City Holdings PLC Millennium I.T.E.S.P (Private) Limited 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 - 03 Months LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR

Revenue 465,472,936 713,263,710 8,296,190,582 7,744,989,024 605,926,792 640,108,270 1,233,709,907 1,276,617,363 8,893,895 114,879,413 6,533,340,789 1,562,444,695 Operating Income/(Costs) (103,112,442) 217,042,366 (7,734,132,744) (7,314,434,205) (927,787,002) (85,215,159) (908,770,138) (1,456,641,351) 71,541,045 131,093,192 (5,922,025,700) (1,249,773,297) Finance Costs (330,753,496) (234,215,154) (89,430,987) (68,588,493) (106,960,826) (48,359,914) (63,093,475) (21,776,925) (2,315,262) (183,158) (155,907,739) (34,454,602) Finance Income - - 37,405,994 8,900,140 1,643,480 51,841,571 36,590,018 48,546,894 139,447,437 41,242,795 61,218,932 5,042,029 Tax Expense (60,984,572) 33,906,442 (34,320,735) (63,561,715) (75,969,390) 109,918,734 (59,735,648) 72,254,183 (44,211,859) (24,664,668) (108,652,999) 53,019,246 Profit or Loss from Continuing (29,377,574) 729,997,364 475,712,110 307,304,752 (503,146,946) 668,293,502 238,700,664 (80,999,836) 173,355,256 262,367,575 407,973,283 336,278,070 Operations

Other Comprehensive Income (154,436,385) 112,825 (220,111,545) 121,504,268 113,273,905 90,597,016 249,804,622 203,626,284 (33,408) (47,605) 576,873 - Total Comprehensive Income (183,813,959) 730,110,189 255,600,564 428,809,020 (389,873,041) 758,890,518 488,505,286 122,626,448 173,321,848 262,319,970 408,550,157 336,278,070 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 147

34. MATERIAL PARTLY-OWNED SUBSIDIARIES Financial information of subsidiaries that have material non-controlling interests is provided below;

34.1 Proportion of equity interest held by non-controlling interests:

Name Proportion of NCI Accumulated Balances of NCI Profit allocated to NCI 2019 2018 2019 2018 2019 2018 LKR LKR LKR LKR

Non-controlling interest material in (300,199,380) (1,067,106,515) 665,590,158 (67,308,125) aggregate

Total 3,098,213,414 2,428,238,516 466,088,670 230,755,575

The summarised financial information of these subsidiaries is provided below. This information is based on amounts before inter-company eliminations.

34.2 Summarised statement of Profit or Loss for the period ending 31 March

34. MATERIAL PARTLY-OWNED SUBSIDIARIES (Contd..)

34.3 Summarised Statement of Financial Position for the period 31st March

Current Assets 1,331,725,184 1,660,339,606 3,055,273,314 3,446,910,557 637,908,352 1,008,237,686 1,194,304,817 1,051,687,796 498,774,646 1,126,707,288 5,007,942,552 3,522,836,522 Non-current Assets 6,503,516,988 6,873,229,617 2,754,391,302 2,088,841,886 2,117,304,402 1,560,178,944 2,462,644,637 1,884,777,667 1,803,119,630 793,133,994 423,492,332 220,585,137 Asset Classified as Held for Sale ------Total Assets 7,835,242,172 8,533,569,223 5,809,664,615 5,535,752,442 2,755,212,754 2,568,416,630 3,656,949,454 2,936,465,463 2,301,894,276 1,919,841,282 5,431,434,884 3,743,421,659

Current Liabilities 1,071,866,221 1,663,730,703 3,119,131,457 2,865,464,656 907,531,161 876,599,209 981,335,364 553,688,328 263,955,646 38,009,021 4,961,681,720 2,915,380,799 Non-current Liabilities 1,328,071,488 804,633,014 646,066,988 617,108,112 428,204,604 327,499,691 346,924,852 533,491,529 22,058,420 1,088,184 110,936,131 92,682,494 Liabilities Directly associated with ------the Asset Classified as Held for Sale - - - - - Total Liabilities 2,399,937,709 2,468,363,717 3,765,198,445 3,482,572,768 1,335,735,765 1,204,098,900 1,328,260,216 1,087,179,857 286,014,066 39,097,205 5,072,617,851 3,008,063,293

34.4 Summarised Cash Flow Information for the year ending 31 March

Operating (128,375,173) 346,489,451 694,730,137 920,332,893 (231,238,006) (504,830,615) (265,625,876) (47,747,462) (8,336,491) 24,031,528 (633,080,756) (353,622,318) Investing 494,401,132 (1,343,850,340) (699,602,723) (278,153,174) (16,629,812) 26,114,009 (12,363,150) (15,100,927) (147,606,768) (10,819,280) (43,001,541) (16,455,427) Financing (720,417,593) 1,702,915,821 (83,832,778) (115,908,395) 111,197,915 185,567,718 (13,052,327) 65,585,211 (38,185,710) (183,157) (148,900,991) 309,021,093 Net increase/(decrease) in cash and cash equivalents (354,391,634) 705,554,932 (88,705,364) 526,271,325 (136,669,903) (293,148,888) (291,041,353) 2,736,822 (194,128,969) 13,029,092 (824,983,288) (61,056,652)

34.5 Increase in interests in Material Subsidiaries

Colombo City Holdings PLC Acquisition of Lexinton Holdings (Pvt) Ltd by Colombo City Holdings PLC - On 28 January 2019, Colombo City Holdings PLC acquired the entire issued shares of Lexinton Holdings (Private) Limited held by Ambeon Capital PLC and Taprobane Investments (Private) Limited for a total consideration of LKR 414.8 Mn.

Millenium I.T.E.S.P. (Pvt) Limited On 4 April 2018, Ambeon Holdings PLC disposed 547,575 of shares to Millennium capital Investment Limited for a total consideration of LKR 132 Mn.

On 02 August 2018 Ambeon Holdings PLC disposed 77.23% of its holding in Millennium IT ESP (Pvt) Ltd to Eon Tec (Pvt) Ltd for a total consideration of LKR 927 Mn. Eon Tec (Pvt) Limited was incorporated to hold the investment in Millennium IT ESP (Pvt) Ltd. Ambeon Holdings PLC holds 78% of Eon Tec (Pvt) Limited.

Taprobane Capital Plus (Pvt) Ltd On 10 December 2018, Taprobane Capital Plus (Pvt) Limited acquired 100% of the issued shares of Lexinton Financial Services (Pvt) Ltd for a total consideration of Rs. 5,236,008/- held by Lexinton Holdings (Pvt) Limited. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 149

34. MATERIAL PARTLY-OWNED SUBSIDIARIES (Contd..)

34.3 Summarised Statement of Financial Position for the period 31st March

34.4 Summarised Cash Flow Information for the year ending 31 March

35. BUSINESS COMBINATIONS AND ACQUISITION OF NON-CONTROLLING INTERESTS

35.1 Acquisition of Millennium Information Technologies (Pvt) Limited During 2017/18, Ambeon Holdings PLC acquired 100% of the issued shares of Millennium IT ESP (Pvt) Limited, an unlisted company specialised in the Integration Business provides a host of specialised, scalable solutions ranging from Core Infrastructure, Information Security, Business Collaboration, Near-Field Communications, Business Productivity, Managed Solutions and Customer Relationship Management. Millennium IT ESP (Pvt) Limited was acquired to expand the presence in the industry of Information Technology.

The Group elected to report provisional amounts for items to which accounting is incomplete. During the measurement period, the Group adjusted the provisional amounts recognised at the acquisition to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognised as of that date as stated by SLFRS 3 - Business Combinations.

Based on an assessment carried out by the management of Millennium IT ESP (Pvt) Limited, the fair value of the identifiable assets acquired and liabilities assumed were revised during the measurement period as stated below: AMBEON CAPITAL PLC 150 ANNUAL REPORT 2018/19 NOTES TO THE FINANCIAL STATEMENTS

35. BUSINESS COMBINATIONS AND ACQUISITION OF NON-CONTROLLING INTERESTS (Contd..)

Impact on MIT Financial Statements Impact on 2018 Annual Report Millennium Measurement Acquisition for 31 March 2018 Measurement 31 March 2018 I.T.E.S.P (Pvt) Period the period Published Period Revised Limited Adjustment - Adjustment - SLFRS 3 SLFRS 3 LKR LKR LKR LKR LKR LKR

Assets Property, Plant & Equipment 64,212,371 (9,776,857) 54,435,514 5,474,938,163 (9,776,857) 5,465,161,306 Biological Assets - - - 48,281,950 - 48,281,950 Investment Property - - - 1,688,188,153 - 1,688,188,153 Intangible Assets 296,296 - 296,296 845,866,849 395,639,120 1,241,505,969 Other Financial Assets - - - 22,451,836 - 22,451,836 Deposit with Colombo Stock Exchange - - - 2,782,406 - 2,782,406 Deferred Tax Asset 90,433,851 - 90,433,851 274,360,132 - 274,360,132 Inventories 450,651,762 - 450,651,762 3,758,051,548 - 3,758,051,548 Trade & Other Receivables 1,557,085,844 - 1,557,085,844 4,009,655,688 - 4,009,655,688 Other Financial Assets - - - 2,409,055,751 - 2,409,055,751 Income Tax Receivables - - - 16,476,850 - 16,476,850 Cash in Hand and at Bank 1,042,719,907 - 1,042,719,907 1,999,187,137 - 1,999,187,137 3,205,400,031 (9,776,857) 3,195,623,173 20,549,296,463 385,862,263 20,935,158,726

Liabilities Other Financial Liabilities - - - 32,935,638 - 32,935,638 Interest Bearing Loans & Borrowings - - - 1,562,021,994 - 1,562,021,994 Deferred Tax Liability - - - 620,479,220 - 620,479,220 Retirement Benefit Obligations 89,765,971 - 89,765,971 410,048,970 - 410,048,970 Trade and Other Payables 1,277,440,574 389,931,940 1,667,372,514 3,292,344,120 385,862,263 3,678,206,383 Income Tax Payable 108,116,081 - 108,116,081 177,629,826 - 177,629,826 Deferred Income 506,418,642 - 506,418,642 748,150,496 - 748,150,496 Interest Bearing Loans & Borrowings 824,578,467 - 824,578,467 7,227,008,765 - 7,227,008,765 2,806,319,735 389,931,940 3,196,251,674 14,070,619,029 385,862,263 14,456,481,293 Total identifiable net assets at fair value 399,080,297 (399,708,797) (628,500) Goodwill arising on acquisition (Note 13.2) 766,323,679 395,639,120 1,161,962,799 Purchase consideration transferred 1,165,403,975 (4,069,676) 1,161,334,299

Net Cash Acquired with the subsidiary 1,042,719,907 - 1,042,719,907

Net Cash outflow from the Acquisition 122,684,068 (395,639,120) 118,614,392 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 151

35.2 The Group identified intangible asset as follows upon the completion of the acquisition of Millennium IT ESP (Pvt) Limited.

2017/18 2018/19 LKR LKR Reported Revised

Provisional Goodwill 766,323,679 - Goodwill - 847,041,839 Brand Name - 32,739,868 766,323,679 879,781,707

DETAILS OF GROUP PROPERTIES

Cost/Valuation Company Property Location Extent No of Buildings LKR

Colombo City Holdings PLC Freehold Land & Building Union Place 47.2 p 1 864,294,700 Lexinton Holdings (Pvt) Ltd Freehold Land Colombo 08 17.15 Perches 1 143,575,000 Freehold Building Colombo 08 17,150 sq.ft 128,625,000 Ceylon Leather Products Ltd Freehold Land Mattakkuliya 747.9 p - 1,495,800,000 Freehold Building Mattakkuliya 75,010 sq.ft 16 24,935,500 Freehold Land Belummahara 474 p - 170,799,250 Freehold Building Belummahara 76,720 sq.ft 11 221,862,450 Dankotuwa Porcelain PLC Freehold Land Dankotuwa 3,277.76 p - 655,552,000 Freehold Building Dankotuwa 260,015 sq.ft 29 381,985,250 Freehold Land Dankotuwa 3,985.95 p - 468,762,750 South Asia Textiles Ltd Building on Leasehold Land Pugoda 405,430 sq.ft 24 805,500,000 Royal Fernwood Porcelain Ltd Freehold Land Kosgama 2,178 p - 204,624,300 Freehold Building Kosgama 177,630 sq.ft 19 283,362,790 Freehold Land Kosgama 1,753.07 p - 105,184,200 Taprobane Securities (Pvt) Ltd Freehold Land Kosgama 1,162.37 p - 81,000,000 Lexinton Resorts (Pvt) Ltd Freehold Land Kosgoda 1,373 P - 542,400,000 Ambeon Capital PLC Freehold Land Sigiriya 1,277 P - 30,500,000 - 6,608,763,190 AMBEON CAPITAL PLC 152 ANNUAL REPORT 2018/19 FIVE YEAR SUMMARY OF PROFIT OR LOSS

For the year ended 31st March, 2019 2018 2017 2016 2015 LKR 000 LKR 000 LKR 000 LKR 000 LKR 000

Revenue 17,732,587 12,588,656 10,967,821 9,506,231 9,733,107 Direct Cost (13,809,980) (10,087,751) (9,112,771) (7,904,990) (7,798,644) Investment and Other Income 340,792 397,008 276,089 228,497 143,795 Finance Cost (1,017,922) (829,580) (713,808) (472,333) (459,526) Profit /(Loss) Before Income Tax from 915,425 286,330 102,101 (1,852,603) 268,901 Continuing Operations Income Tax Expense (401,530) 86,097 (125,169) (22,284) (67,306) Profit/(Loss) for the Year from 513,895 372,427 (23,068) (1,874,887) 201,596 Continuing Operations Profit/(Loss) after tax for the year from (659) 9,870 144,976 (145,692) (198,052) discontinued operations Profit/(Loss) for the year 513,236 382,297 121,908 (2,020,579) 3,544 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 153 FIVE YEAR SUMMARY OF FINANCIAL POSITION

As at 31st March 2019 2018 2017 2016 2015 LKR 000 LKR 000 LKR 000 LKR 000 LKR 000

ASSETS Non-Current Assets Property, Plant & Equipment 5,115,421 5,465,161 4,785,157 4,952,487 3,769,174 Leasehold Property - - - 25,114 25,276 Intangible Assets 1,252,383 1,241,506 81,613 75,895 34,915 Biological Assets 50,382 48,282 45,882 39,702 53,178 Investment Property 3,612,852 1,688,188 1,164,601 1,802,670 1,500,012 Investments in Equity Accounted Investees - - - - 2,608,241 Other Financial Assets 23,236 22,452 36,167 35,345 590,177 Deferred Tax Asset 160,761 274,360 71,589 78,657 26,153 Deposit with Colombo Stock Exchange 2,788 2,782 2,750 2,750 2,750 10,217,822 8,742,732 6,187,758 7,012,621 8,609,875

Current Assets Inventories 4,240,916 3,758,052 2,407,814 2,418,686 2,272,837 Other Financial Assets 1,916,754 2,409,056 1,746,970 2,223,351 1,516,417 Trade & Other Receivables 6,005,044 4,009,656 1,801,539 1,865,425 2,203,989 Income Tax Recoverable 37,934 16,477 32,258 30,031 19,076 Cash & Cash Equivalents 611,909 1,999,187 815,416 438,104 364,221 Assets classified as Held for Sale - - 945,070 - 44,618 12,812,556 12,192,427 7,749,068 6,975,597 6,421,157 Total Assets 23,030,379 20,935,159 13,936,825 13,988,218 15,031,032

EQUITY AND LIABILITIES Equity Stated Capital 1,053,643 1,053,643 1,053,643 1,053,643 1,053,643 Retained Earnings 1,730,354 2,140,513 2,016,509 2,218,277 3,683,431 Available For Sale Reserve - - - - 33,175 Foreign Currency Translation Reserve (258,957) (436) (395) (6,023) - Fair Value through OCI Reserve (209,184) - - - - Revaluation Reserves 1,186,792 856,718 445,802 407,065 - Other Capital Reserves - - - - 192,364 Equity Attributable to Equity Holders of the 3,502,647 4,050,439 3,515,559 3,672,962 4,962,614 Company Non Controlling Interests 3,098,213 2,428,239 2,069,496 1,730,158 1,834,860 Total Equity 6,600,860 6,478,677 5,585,055 5,403,120 6,797,474

Non-Current Liabilities Other Financial Liabilities 21,887 32,936 873 - - Interest Bearing Loans & Borrowings 2,756,476 1,562,022 913,472 583,396 516,176 Retirement Benefit Obligations 400,792 410,049 260,078 267,158 236,741 Deferred Tax Liability 810,764 620,479 239,772 250,823 274,205 Deferred Income - - 388 811 1,234 3,989,919 2,625,486 1,414,583 1,102,187 1,028,356 Current Liabilities Trade and Other Payables 4,922,462 3,678,206 1,648,731 1,864,301 2,044,188 Income Tax Payable 193,412 177,630 52,648 46,551 82,682 Contract Liability 706,864 748,150 - - - Interest Bearing Loans & Borrowings 6,616,861 7,227,009 5,232,075 5,572,058 5,040,062 Liabilities Directly Associated with Assets - - 3,732 - 38,270 Classified as Held For Sale 12,439,599 11,830,995 6,937,187 7,482,910 7,205,202 Total Equity and Liabilities 23,030,379 20,935,159 13,936,825 13,988,218 15,031,032 AMBEON CAPITAL PLC 154 ANNUAL REPORT 2018/19 Investor Information

STOCK EXCHANGE LISTING The issued Ordinary Shares of Ambeon Capital PLC are listed with the Colombo Stock Exchange

SHARE INFORMATION Share Structure as at 31 March 2019.

No. of Total Holding % Holding Holders

Range of Shareholdings 1 to 1,000 Shares 430 72,367 0.01 1,001 to 10,000 Shares 132 448,757 0.04 10,001 to 100,000 Shares 82 2,578,204 0.26 100,001 to 1,000,000 Shares 21 6,340,319 0.63 1,000,001 to 10,000,000 Shares - - - Over 10,000,001 Shares 4 993,285,168 99.06 669 1,002,724,815 100.00

Categories of Shareholders Local Individuals 628 7,358,914 0.73 Local Institutions 32 994,995,602 99.23 Foreign Individuals 8 262,060 0.03 Foreign Institutions 1 108,239 0.01 669 1,002,724,815 100.00

The Twenty Largest Shareholders of the Company as at 31 March 2019 Were; No. of Shares %

1 CHC Investment (Pvt) Ltd 568,327,024 56.68 2 Seylan Bank PLC/ARRC Capital (Pvt) Ltd 355,526,332 35.46 3 Commercial Bank Ceylon PLC/ARRC Capital (Pvt) Ltd 51,190,106 5.11 4 Seylan Bank Limited/Ruwan Prasanna Sugathadasa 18,233,891 1.82 5 Ms. Fleur Annaleen Ann Mack 800,000 0.08 6 Mr. Sarinda Wasanth Unamboowe 768,783 0.08 7 Mr. Ranil Prasad Pathirana 500,000 0.05 8 Hatton National Bank PLC/Sanka Ramoorthy Nadaraj Kumar 497,709 0.05 9 Seylan Bank PLC/Dr.Thirugnanasambandar Senthilverl 413,353 0.04 10 Mr. Joseph Callistus Ethelred Alles 342,810 0.03 11 Mrs .Banuri Kumari Vanya Wickramasinghe 267,500 0.03 12 Mrs. Shirani Sunila Silva 260,900 0.03 13 Mr. Ram Pritamdas/’593403092Vn’,’498112668Vn’ 243,982 0.02 14 Merchant Bank Of Sri Lanka & Finance PLC 01 220,000 0.02 15 Mr. Kangasu Chelvadurai Vignarajah 207,547 0.02 16 Mr. Pathirage Hemantha Devapriya Perera 157,380 0.02 17 Mr. Ravindra Earl Rambukwella 153,430 0.02 18 Asha Financial Services Limited/Mr.C.N.Pakianathan 152,399 0.02 19 Mr. Michael De Saram 140,000 0.01 20 Mr. Mohamed Thasim Rajabkhan 132,800 0.01 Sub Total 998,535,946 99.58 Others 4,188,869 0.42 Grand Total 1,002,724,815 100.00 AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 155

PUBLIC HOLDINGS Percentage of Shares held by the Public 2.62% No of public share holders as at 31st March 2019 659

The Company is listed on the Diri Savi Board of the Colombo Stock Exchange and its float adjusted market capitalization as at 31 March 2019 is LKR 97,194,456 whereas it is less than LKR 1 Billion as such should maintain 10% minimum public holding.

The Company is not in compliance with the minimum public shareholding as required by the CSE Listing Rules.

MARKET VALUE The Market Value of Ambeon Capital PLC Ordinary Shares: 2019 2018

Highest during the year 5.90 6.70 Lowest during the year 3.20 4.00 As at end of the year 3.70 5.40 AMBEON CAPITAL PLC 156 ANNUAL REPORT 2018/19 NOTICE OF MEETING

NOTICE IS HEREBY GIVEN that the Eighth Annual General Meeting NOTE: of Ambeon Capital PLC will be held at “The Lighthouse Auditorium” 1. A member entitled to attend and vote at the above meeting is Lakshman Kadirgamar Institute of International Relations and Strategic entitled to appoint a proxy to attend and vote on his/her behalf. A Studies, No. 24, Horton Place Colombo 7 on Monday, 30 September proxy need not be a member of the Company. 2019 at 3.30 p.m. for the following purposes: 2. A form of proxy is enclosed for this purpose.

1. To receive and consider the Annual Report of the Board of 3. The instrument appointing a proxy must be completed and Directors and the Financial Statements of the Company for the deposited at the Registered Office of the Company, No.10, Gothami year ended 31st March 2019 and the Report of the Auditors Road, Colombo 8, not less than forty eight hours prior to the time thereon. appointed for holding the meeting.

2. To re-elect as a Director, Mr. S.W. Unamboowe who retires by rotation in terms of Article 87 of the Articles of Association.

3. To propose the following resolution as an ordinary resolution for the re-appointment of Mr. Parakrama Devasiri Rodrigo who is over 70 years of age.

“IT IS HEREBY RESOLVED that the age limit referred to in section 210 of the Companies Act No.07 of 2007 shall not apply to Mr. Parakrama Devasiri Rodrigo who is over 70 years of age prior to the Annual General Meeting and that he be re-appointed as a Director of the Company”.

4. To re- appoint the retiring Auditors Messrs. Ernst & Young, Chartered Accountants as the Auditors of the Company to hold office from the conclusion of this meeting until the conclusion of the next Annual General Meeting and to authorize the Directors to determine their remuneration.

By Order of the Board Ambeon Capital PLC

Sgd. MANAGERS & SECRETARIES (PRIVATE) LIMITED Director/Secretaries

13th August 2019 Colombo. AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 157 NOTES AMBEON CAPITAL PLC 158 ANNUAL REPORT 2018/19 NOTES AMBEON CAPITAL PLC ANNUAL REPORT 2018/19 FORM OF PROXY

I/We,...... of...... being a member/s* of Ambeon Capital PLC do hereby appoint...... of...... or failing him

Mr. S.E. Gardiner or failing him,

Mr. A.L. Devasurendra or failing him,

Mr. N.M. Prakash or failing him,

Mr. P.D. Rodrigo or failing him,

Mr. S.W. Unamboowe or failing him,

Mr. S.H. Amarasekara or failing him,

Mr. R.P. Pathirana or failing him,

Mr P. D. J. Fernando

As my/our* Proxy to vote and speak as indicated hereunder for me/us* and on my/our* behalf at the Eighth Annual General Meeting of the Company to be held on Monday, 30 September 2019 at 3.30 p.m at “The Lighthouse Auditorium” Lakshman Kadirgamar Institute of International Relations and Strategic Studies No. 24, Horton Place Colombo 7 and at any adjournment thereof, and at every poll which may be taken in consequence thereof:

For Against

1. To receive and consider the Annual Report of the Board of Directors and the Financial Statements of the Company for the year ended 31st March 2019 and the Report of the Auditors thereon.

2. To re-elect as a Director, Mr. S.W. Unamboowe who retires by rotation in terms of Article 87 of the Articles of Association of the Company and being eligible, offers himself for re-election as a Director.

3. To propose the re- appointment of Mr. Parakrama Devasiri Rodrigo who is over 70 years of age.

Signed this ……...... day of...... Two Thousand and Nineteen ...... Signature of Shareholder/s

Note: 1. * Please delete the inappropriate words.

2. Instructions as to completion are noted on the reverse hereof. Instructions for Completion of Form of Proxy 1. Kindly perfect the Form of Proxy by filling in legibly your full name and address, signing in the space provided and filling in the date of signature.

2. In the case of a company/corporation, the proxy must be under its common seal, which should be affixed and attested in the manner prescribed by its Articles of Association.

3. The completed Form of Proxy should be deposited at the Registered Office of the Company at No.10, Gothami Road, Colombo 8, not less than forty eight hours prior to the time appointed for holding the meeting. Corporate Information

The Company Company Secretary Ambeon Capital PLC Mangers & Secretaries (Pvt) Ltd. No. 08, Tickell Road, Colombo 08. Legal Form Tel : +94112015900 The company was incorporated in Fax : +94112015960 Sri Lanka on 20th September 2006 as a E-mail : [email protected] public limited liability company and re-registered under the Company Act Auditors to the Company No. 07 of 2007 on 3rd August 2009. Messer’s Ernst & Young On 17th May 2012 the company was Chartered Accountants successfully listed on the Diri Savi No. 201, De Saram Place, Colombo 10 Board of Colombo Stock Exchange. Bankers to the Company Company Registered No National Development Bank PLC PB 1090 PQ No. 40, Nawam Mawatha, Colombo 02

Registered & Business Ofﬁce Seylan Bank PLC No. 10 Gothami Road, Colombo 08. No. 90, Galle road, Colombo 03. Tel : +94115328100 Fax : +94115328109 Pan Asia Banking Corporation PLC E-mail : [email protected] No. 450, Galle Road, Colombo 03. Website : www.ambeoncapital.com

Board of Directors Mr. Sanjeev Gardiner - Chairman Mr. Ajith Devasurendra - Deputy Chairman Mr. Murali Prakash - Group Managing Director/CEO Mr. Priyantha Fernando – Director Mr. Harsha Amarasekara – Director Mr. Ranil Pathirana – Director Mr. Sarinda Unamboowe – Director Deshamanya Deva Rodrigo - Director