SATHOSA MOTORS PLC · 2019-08-01 · 01) Sathosa Motors PLC Authorised distributor for ISUZU in Sri Lanka Sathosa Motors PLC (SML) is the franchise holder for Isuzu vehicles and spare

SATHOSA MOTORS PLCANNUAL REPORT 2018 | 2019

AT SATHOSA MOTORS, CHALLENGES ARE VIEWED AS OPPORTUNITIES FOR INTROSPECTION AND GROWTH, ALLOWING OUR COMPANY TO PROGRESS, UNHINDERED. IN THE YEAR UNDER REVIEW, SATHOSA MOTORS HAD TO BRAVE MANY A CHALLENGE AND YET EMERGED DETERMINED AND FOCUSED. APPRECIATING THAT FOREWARNED IS FOREARMED, WE HAVE FORTIFIED OUR PATH TOWARDS ACHIEVING OUR VISION BY INVESTING AND EXPANDING. OUR GOAL IS TO MULTIPLY OUR IMPACT ON THE AUTOMOBILE INDUSTRY IN SRI LANKA, BEARING IN MIND THE IMPORTANCE OF SUSTAINABILITY AND RESOURCEFULNESS.

02 Sathosa Motors PLC Annual Report 2018 | 2019

About This Integrated Report

This is the first Integrated Annual Report compiled and presented by SATHOSA Motors PLC. This report covers the financial and operational activities as well as the sustainable strategic direction of the Company, referred to as SATHOSA Motors or SML for the 12 month period spanning from April 2018 to March 2019. The Financial disclosures presented from pages 118 to 171 provides information on the financial reporting boundary of the Company. The Company’s social and environmental impact is discussed within the Management Discussion and Analysis.

In this report, we provide detailed financial and non-financial information on Sathosa Motors PLC referred as the Company and Company along with it's subsidiary (SML Frontier Automotive (Pvt) Ltd) referred to as the Group.

This report has been prepared in accordance with the GRI Standards: Comprehensive option.

Integrated approach and materiality This report discusses material aspects that affect SML's ability to create short, medium and long term value. The value creation model presented on page 78 reveals the Company’s six capitals that provide input for value creation, the role of the Company’s core activities and the output of the Company. Stakeholder engagement, the risk management process and the topics relating to SML’s Management Committees illustrate the importance of each material aspect.

Basis for preparation This report has been prepared in line with the Companies Act No. 07 of 2007 and Sri Lanka Accounting Standards (LKASs /SLFRSs) laid down by the Institute of Charted Accountants of Sri Lanka. The concepts and guidelines used to prepare this report align with the Global

Reporting Initiative (GRI) Sustainability Reporting Standards, Sustainable Development Goals (SDGs) of United Nations as well as the Code of Best Practices on Corporate Governance issued by CA Sri Lanka. We have consulted and complied with the guidelines issued by the Securities and Exchange Commission of Sri Lanka, the International Integrated Reporting Framework (IIRC), Securities and Exchange Commission regulations and the listing rules of the Colombo Stock Exchange.

Independent Assurance We have taken constant measures to provide accurate, timely and complete financial and non-financial information that can be compared over reporting periods and with other organisations.

The Board will obtain the independent Assurance for non financial information in future reports.

External Assurance The Financial Statements were audited by Messrs KPMG Chartered Accountants.

03Sathosa Motors PLC Annual Report 2018 | 2019

Table of Contents

About This ReportAbout This Integrated Report 02

About UsTable of Contents 03About Us 06Our Vision, Key Corporate Values, Our Mission 07Our History 08Group Profile 09Our Milestones 10Financial Overview 11Materiality Mapping Table 12Sustainability the Strategy 14Stakeholder Engagement 16SML Business Model 20Board of Directors 22Senior Management 26Chairman’s Review 28Review of the Managing Director and Chief Operating Officer (Joint Statement) 32

Management Discussion and AnalysisCorporate Governance 38Risk Management Review 70Global & Local Economic Outlook 74Company Performance Review 76Value Creation Model 78Introduction to Capital Management 80Financial Capital 81Human Capital 88Intellectual Capital 92Manufactured Capital 93Natural Capital 95Social & Relationship Capital 96

Statutory Disclosure and Financial StatementsAudit Committee Report 101Remuneration Committee Report 103Related Party Transactions Review Committee Report 104Annual Report of the Board of Directors on the Affairs of the Company 106The Statement of Directors Responsibility 111Directors Statement on Internal Control Introduction 112Financial Calendar 113Independent Auditor’s Report 114Statement of Profit or Loss and other Comprehensive Income 118Statement of Financial Position 119Statement of Changes in Equity 120Statement of Cash Flows 121Notes to the Financial Statements 122

Supplementary informationOur Location 172Decade at a Glance 173Abbreviations 174Awards and Accolades 175Notice of Annual General Meeting 176Note 177Form of Proxy 179Corporate Information Inner Back Cover

BY INVESTING PRUDENTLY ON AREAS OF EXPANSION THAT WILL FURTHER OUR REACH

MULTIPLYING


About Us

ESTABLISHED IN 1962, SATHOSA MOTORS PLC HAS GROWN TO BECOME SRI LANKA’S TRUSTED LEADER IN THE AUTOMOTIVE INDUSTRY. OUR LONG-RUNNING PARTNERSHIP WITH ISUZU MOTORS LTD HAS ALLOWED US TO SUPPLY THE DOMESTIC MARKET WITH THE HIGHEST QUALITY COMMERCIAL VEHICLES AT THE MOST AFFORDABLE PRICES. WE ARE THE NUMBER ONE DISTRIBUTOR OF COMMERCIAL VEHICLES IN THE COUNTRY, CATERING TO A RANGE OF KEY ECONOMIC SECTORS.

HAVING BEEN AN ACTIVE PARTICIPANT IN THE COUNTRY’S GROWTH STORY, OUR COMPANY IS GEARING ITSELF TO MEET THE NEEDS OF AN ECONOMY THAT IS NOW ON AN ACCELERATED GROWTH TRAJECTORY. OUR STRONG RELATIONSHIPS WITH CUSTOMERS IN HIGH-GROWTH SECTORS SUCH AS AGRICULTURE, CONSTRUCTION, TOURISM, TRANSPORT AND LOGISTICS HAVE US GOING FROM STRENGTH TO STRENGTH.

AS A PUBLICLY LISTED COMPANY, WE ARE DEDICATED TO THE HIGHEST STANDARDS OF INTEGRITY, TRANSPARENCY, RESPONSIBILITY AND ETHICAL CONDUCT. WE BELIEVE IN CULTIVATING A DYNAMIC AND PRODUCTIVE ORGANISATIONAL CULTURE TO ACHIEVE THE HIGHEST LEVELS OF CUSTOMER SATISFACTION WHILE ALSO SUPPORTING WIDER ECONOMIC ACTIVITY AND DERIVING MAXIMUM BENEFITS TO ALL OUR VALUED STAKEHOLDERS.

OUR DEALERSHIP NETWORK COMPRISES 139 DEALERS ACROSS THE ISLAND, PROVIDING TOTAL COVERAGE IN TERMS OF SPARE PARTS AVAILABILITY AND COMPREHENSIVE AFTERSALES SERVICES IN ALL PROVINCES.


TO BE THE TRUSTED LEADER IN THE SRI LANKAN AUTOMOBILE INDUSTRY BY ENSURING THAT WE DELIVER ONLY THE BEST QUALITY TO OUR VALUED CUSTOMERS.

Our Vision

TO ACHIEVE EXCELLENCE IN CUSTOMER SATISFACTION BY CULTIVATING A DYNAMIC AND PRODUCTIVE ORGANISATIONAL CULTURE WITH HIGHLY MOTIVATED STAFF TO PROVIDE THE BEST QUALITY VEHICLES AT COMPETITIVE AND AFFORDABLE PRICES, THEREBY GENERATING THE MAXIMUM BENEFIT TO ALL OUR STAKEHOLDERS.

Our Mission

Key Corporate Values � We value and believe in maintaining the highest standards of integrity,

honesty, transparency, responsibility and ethical behaviour in all our dealings and transactions.

� We respect the dignity of people.

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

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

� We believe in leading by example.

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

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

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


Our History

The origin of Sathosa Motors PLC goes back to 1962, when ISUZU Agency was secured by the Co-operative Wholesale Establishment in 1962. The first agreement was signed between M/s ISUZU Motors Limited, Tokyo, Japan (Manufacturer), M/s C Itoch & Co. Ltd., (Distributor) and Co-operative Wholesale Establishment C.W.E. (Franchise holder).

Although the demand for Japanese vehicles, specially for commercial vehicles, was not encouraging in 1960’s and early 1970’s, after the liberalisation of imports in 1978, ISUZU became a sought after vehicle by fleet owners, Government sector etc.

ISUZU vehicles spare parts imports and sales were handled by the New Vehicles & Machinery Department of C.W.E. up to 1985. The Ministry of Trade and Commerce under whose purview C.W.E. operated, decided to convert the New Vehicles & Machinery Department as a fully owned subsidiary company of the Co-operative Wholesale Establishment titled as “Sathosa Motors Limited” on 1 January 1985 to give more freedom to carry on business operations efficiently, facing the competition from other vehicle dealerships.

Sathosa Motors Limited commenced operations with an issued capital of Rs 15,000,007 in 1985. In keeping with the government policy, the Company was peoplised on 26 August 1992 and 60% of issued capital was acquired by M/s C Itoch & Co., Limited (ITOCHU Corporation) Tokyo, Japan, one of the largest trading organisations (Sogo-Shosa) in Japan. Of the remainder, 10% was gifted to employees and 30% was issued to the General Public.

In order to comply with the new Companies Act No. 7 of 2007 the company was re-registered as Sathosa Motors PLC.

Access Engineering (AEL), a leading business enterprise in Sri Lanka, acquired the shareholding held in Sathosa Motors PLC by ITOCHU Corporation of Japan in February 2012. Subsequently through the mandatory share purchase offer Access Engineering increased their shareholding up to 84.42%.

The Company invested in 50% of the equity of SML Frontier Automotive (Pvt) Ltd on 01 April 2013.

Sathosa Motors PLC is the franchise holder for ISUZU vehicles and spare parts manufactured by M/s ISUZU Motors Ltd. The ISUZU range of vehicles consists of Double Cab Pickup Trucks, Light Duty and Heavy Duty Commercial Vehicles, Luxury Passenger Coaches and Special Purpose Vehicles such as Fire Trucks, Logging Trucks, Dump Trucks, Water & Fuel Bowsers and various other types of vehicles required in building construction, distribution of goods etc.

Our Head Office is situated at No 25, Vauxhall Street, Colombo 02, which comprises new vehicles sales showrooms, main spare parts department and workshop for ISUZU vehicle repairs. We also have a spare Parts outlet at Panchikawatte for the convenience of our customers. Our Main Workshop at Peliyagoda handles the major portion of workshop repairs of all models of ISUZU trucks. This has modern equipments to identify and repair any kind of problem.

The Company operates branches in Matara, Kurunegala and Ratnapura along with an island wide dealer network.


Group Profile

Automobile Industry

01) Sathosa Motors PLC

Authorised distributor for ISUZU in Sri Lanka

Sathosa Motors PLC (SML) is the franchise holder for Isuzu vehicles and spare parts manufactured by Messrs Isuzu Motors Ltd. The key business lines of SML are sales of new vehicles, sales of spare parts, and workshop services. Over the years, SML has created a value proposition to its loyal customer base by providing reliable after sales care service. SML caters to the country’s need for reliable, low maintenance transportation solutions, especially to the business community. SML will continue to expand its position as a trusted leader in the automotive industry.

STAFF COMPOSITION Staff category Staff as at 31 March 2019Managerial 12Operational 68Clerical and supportive 95

02) SML Frontier Automotive (Pvt) Ltd – Subsidiary Company Authorised distributor for Jaguar and Land Rover in Sri Lanka

Established in 2012, SML Frontier Automotive (Pvt) Ltd (SMLF) is the sole authorised distributor of Jaguar and Land Rover in Sri Lanka and operates in a highly competitive premium automobile segment. However, bolstered by strength of internationally renowned brands, the company has made commendable progress.

STAFF COMPOSITION Staff category Staff as at 31 March 2019Managerial 20Operational 43Clerical and supportive 36


Our Milestones

2017JULYOpening the Matara Spare Parts and Vehicle Sales showroom.

AUGUSTOpening the Ratnapura Spare Parts Showroom

JANUARYOpening the Kurunegala Workshop (3S concept) .

MARCHUnveiling the 2019 edition of the Isuzu D Max RT66 Double Cab.Opening of the new Isuzu Showroom at Vauxhall Street.

APRILOpening the Kurunegala Spare Parts and Vehicle Sales showroom.

AUGUSTGo Live with fully integrated IFS ERP system

OCTOBERLaunched the new lineup of EURO 4 compliance Vehicles.

NOVEMBERRenovated the Spare Parts Department at Vauxhall street.

2018

2019


Financial Overview

Financial Highlights 2018/19 2017/18 Change (%)

LKR'000 Group Company Group Company Group Company

Earnings Highlights and RatiosRevenue 11,125,760 4,033,390 8,176,898 4,963,088 36.1 (18.7)Gross Profit 1,320,483 697,871 1,497,144 1,037,419 (11.8) (32.7)EBITDA 732,401 391,321 759,363 580,558 (3.6) (32.6)EBIT 594,584 343,772 635,498 546,555 (6.4) (37.1)Earnings before tax 295,743 164,419 530,298 542,327 (44.2) (69.7)Profit Attributable to Equity Holders 134,649 82,891 388,074 400,886 (65.3) (79.3)Dividend - - 271,513 271,513 (100.0) (100.0)Earnings per Share LKR 22.32 13.74 64.32 66.44 (65.3) (79.3)Dividend per Share LKR - - 45.00 45.00 (100.0) (100.0)Dividend Payout % 0% 0% 70% 68% (100.0) (100.0)

Statement of Financial PositionHighlights and RatiosTotal Assets 7,013,712 4,658,529 5,381,964 3,353,081 30.3 38.9Stated Capital 115,924 115,924 115,924 115,924 - -Retained Earnings 1,615,532 1,563,186 1,481,197 1,480,197 9.1 5.6Total Equity/Shareholders’ Funds 2,047,602 1,679,110 1,872,073 1,596,121 9.4 5.2Total Liabilities 4,966,110 2,979,418 3,509,892 1,756,960 41.5 69.6Current Assets 5,102,426 2,828,564 3,696,412 1,755,166 38.0 61.2Current Liabilities 4,811,177 2,935,598 3,336,570 1,704,487 44.2 72.2Net Asset per Share LKR 286.97 278.29 264.70 264.54 8.4 5.2

Investor Highlights and RatiosPrice Per Share LKR - 457.90 - 440 N/A 4.1Gross Profit Margin % 11.9% 17.3% 18.3% 20.9% (35.2) (17.2)Net Profit Margin % 1.6% 2.1% 4.7% 8.1% (66.3) (74.6)Return on Equity % 8.6% 4.9% 20.5% 25.1% (58.1) (80.3)Debt/Total Assets % 70.8% 64% 65.22% 52.4% 8.6 22.1Gearing times 1.7 1.4 1.3 0.7 31.5 102.9Current Asset Ratio times 1.1 1.0 1.1 1.0 (4.3) (6.4)Quick Asset Ratio times 0.6 0.5 0.5 0.4 32.0 17.6

14/1

5

15/1

6

16/1

7

17/1

818

/19

-

400

800

1,200

1,600

2,000

Net AssetsRs. Mn

14/1

5

15/1

6

16/1

717

/18

18/1

9

-

4,000

2,000

6,000

8,000

10,000

12,000

Consolidated RevenueRs. Mn

14/1

5

15/1

6

16/1

7

17/1

818

/19-

4,000

2,000

6,000

8,000

Total AssetsRs. Mn


GRI category Material Topic Materiality Internal External Boundary Reporting Status

Economic

Economic Performance High High High Company and the Government

P. 28 - 35,74 - 77

Market Presence High High High Company P. 28 - 35,74 - 77

Indirect Economic impacts High High High Community and the Government

P. 28 - 35,74 - 77

Procurement practices High High High Company and the Government

P. 17 ,109

Anti-Corruption High High High Company P. 7

Anti-Competitive Behaviour Medium Medium Medium Company and Competitors

P. 76 - 77

Environmental

Materials Not applicable

Energy Medium Medium High Company P. 95

Water Low Low Low Company P. 95

Biodiversity Not applicable

Emissions High High High P. 95

Effluents and Waste Medium Medium Medium Environment P. 95

Products and Services High High High Company P. 20 - 21, 128

Compliance High High High Company P 28 - 35, 95

Transport High High High Company P. 9

Overall High High High Company, Community and the Government

P. 95

Supplier environmental Assessment

High High High Company, Community, customers and the Government

P. 109

Environmental Grievance Mechanism

Low Low Low P. 95

Social - Labour practices and Decent work

Employment High High High Company P. 88,109,146

Labour/Management relations

Medium Medium Low Company P. 88 - 91

Occupational Health and Safety

Medium High High P. 88 - 91

Training and Education High High High Company P. 88 - 91

Diversity and Equal Opportunity

High High High Company P. 88 - 91

Equal Remuneration for women and men

High High High Company P. 88 - 91,131

Supplier Assessment for Labour Practices

High High High Company P. 88 - 91

Labour Practices Grievances High High High Company P. 88 - 91

Materiality Mapping Table


GRI category Material Topic Materiality Internal External Boundary Reporting Status

Social - Human Rights

Investment Medium Medium Medium Company P. 107,124,140, 157-158

Non-Discrimination High High High Company P. 90

Freedom of Association and Collective Bargaining

Not applicable

Child Labour Medium Medium Medium Company P. 88 - 89

Forced and Compulsory Labour

Medium Medium Medium Company P. 88 - 91

Security Practices Medium Medium Medium Company P. 68

Rights of Indigenous People Not applicable

Human Rights Assessments Low Low Low Company P. 88 - 91

Supplier Human Rights Assessments

Not applicable

Human Rights Grievance Mechanism

Low Low Low Company P. 88 - 91

Social - Society

Local Communities Low Low Medium Community P. 96 - 98

Public- Policy High High High Company and the Government

P. 96 - 98

Socio-economic Compliance High High High Company P. 95, 109

Supplier Social Assessment Low Low Medium Suppliers P. 109

Grievance Mechanism for Impacts on Society

Low Low Low Company P. 96

Social - Product Responsibility

Customer Health and Safety High High High Company, Community, Customers and the Government

P.96 - 98

Marketing and Labelling High High High Company P. 32 -35 , 98

Marketing Communications High High High Company and Customers

P. 96 -98

Customer Privacy Low Low Low Customers P. 96 -98

Compliance High High High Company, customers and the Government

P. 96 -98

Product Portfolio High High High Company and Customers

P. 20 - 21

Audit Medium Medium Medium Company P. 38- 43, 101-102, 114 - 117

Active Ownership Low Low Low Company P. 83- 86


Sustainability the Strategy

Our strategic drive to create value for all stakeholders in the short, medium and long term is a holistic one that seeks to create sustainability of operations, financial performance and growth while remaining committed to our social and environmental goals. We craft our strategy through utilizing robust corporate management policies and through the involvement of our employees steered by the Board of Directors and the Chairman. Our core strategy revolves around building a solid business foundation through using our core competencies and prudently allocating our resources to manage our six capitals. This strong combination drives us to create sustainable value for all stakeholders.

We actively work towards strengthening our performance by focusing on customer centricity, enhanced service excellence, adherence to environmental standards and operational excellence.

Sustainable Growth Strategy

Capital Management

Cost optimization

and risk management

Strong governance framework

Improving business partner

relations and employee relations

Adherence to accepted

environmental standards

Business Growth

Maintaining the value

of product and service

offerings

Customer centric service

strategy

Growth in volume

Earning customer

and business partner trust

Leads to

Operational Excellence

Enhanced business

efficiencies

Customer satisfaction

Sustainable Growth Framework In our pursuit of sustainable growth, SML looks to a set of well-defined strategy objectives and indicators to measure the effectiveness of our practices and the direction in which we are headed. Creating long-term value with finite resources is an evolving challenge and our strategy indicators consistently point us in the right direction.

Clear Purpose: Led by the able leadership of our Board of Directors and senior management, our sustainable goals revolve around creating long-term value. We frame decisions in terms of years and decades in place of concentrating on the next year’s profits. At all stages of our business process, our decisions, strategies and practices, we revisit our ultimate goal of sustainable growth. At the same time, we ensure that our goals are attainable and are guaranteed to create value for all stakeholders of the business.

Partnership and Collaboration: The path to sustainable progress requires the support of all parties involved in the business. We maintain transparent communication lines with our shareholders, business partners, employees, customers and regulatory authorities whose decisions impact our business. The management takes inputs given by each stakeholder group into consideration when drafting strategies and implementing new approaches.

Strong BrandThe strength of our value creation process and relations with all stakeholders contribute to our brand equity. A strong reputation, stakeholder confidence is integral parts of building our brand in order to seek sustainable growth. Our brand building efforts align well with our sustainability efforts, thus making the process into an organic one that flows seamlessly.


Retaining Existing Customers Customer retention is a key aspect of long-term growth. Loyal customers not only help the Company to maintain profitability but also create space for focused growth through valuable inputs. We use clear communication lines, interactive business processes, innovation and value addition to our after sales services to nurture our rapport with the existing customer base.

Repeatable Sales Sustainable growth hinges on the ability of the Company to design and implement a sales process that can be effectively deployed repeatedly, each time at a greater scale. Our sales and marketing strategies rely on accurate market research as well as timely changes.

Community We prioritise the act of nurturing our relationships with our stakeholders in our attempts to sustain the ecosystem so vital for growth. The stakeholder engagement process is presented on pages 16 to 19 in detail.

Sustainability in all Operations We focus our market expertise, technical knowledge and skills to maintain high industry standards and ensure that our customers invariably benefit from gaining access to high quality products and services. Our commitment to integrity and transparency encompasses all levels of business operations including adherence to social and environmental regulations. We continue to identify risks and opportunities in the market and formulate necessary strategies to seek sustainable business growth. In addition, we aspire to introduce futuristic trends to our customers in line with our long term growth strategy.


Stakeholder Engagement

Our stakeholders are those who are significantly impacted by our business process, products and services. In turn, our stakeholders’ behaviours and perceptions trigger a powerful impact on our strategic goals and business activities. Nurturing positive stakeholder relationships and adopting effective channels of communication are integral aspects of sustainable growth of the Company as well as all stakeholders. We understand the importance of clear, transparent, consistent engagement with our stakeholder groups, and have implemented strategies to meet their expectations.

In this context, we have created our stakeholder engagement process involving six stages as depicted below. We identify stakeholders based on our strategic objectives

Stakeholder Engagement Process

n Identifying specific stakeholders n Identifying concerns

n Engaging stakeholders through relevant channels

n Prioritising concerns for action

n Identify methods to effectively address concernsn Formulating necessary action stepsn Allocating necessary resources

n Allocating responsibility to relevant departments n Implementation of necessary action steps

n Communicating implemented strategies to stakeholders

Identification Engagement Prioritisation Planning ReportingImplementation

01). Identification of Stakeholders, Key Stakeholder Groups and Their Concerns Our stakeholder identification process pivots around analysis of the internal and external environment, continuous review and monitoring of micro and macro-economic factors as well as our strategic objectives.

Moreover, we integrate the inputs given by the Operational & Marketing Teams to identify stakeholders and their concerns.

Identification of key stakeholders of the group is essential in creating and deriving value for stakeholders. Key stakeholders of the Company are identified through two criteria: the power exerted by them on SML and the level of interest they have on our activities and operations.


Keep satisfied � Government and

regulatory bodies

Key players � Clients and

customers � Investors and

shareholders � Business partners

Minimum effort � Banks and

Prospective lenders

Keep informed � Employees � Suppliers and

subcontractors � Society, Industry

peers

Hig

h

High

Pow

er

Interest

Low

Low

Our Stakeholder Groups � Investors and shareholders � Banks and prospective lenders � Employees � Government and regulatory authorities � Clients and Customers � Suppliers and sub-contractors � Business Partners � Society and the environment � Industry Peers and Competitors

Stakeholder Groups The following outlines the various stakeholder groups of the Company and our methods of engagement:

Investors and Shareholders We have a duty to provide satisfactory returns to our investors and shareholders by pursuing profitability of business operations and ventures. We utilise a number of methods to engage and maintain a healthy, proactive dialogue with our investors and shareholders such as periodic meetings and business promotional meetings. Our shareholders are kept informed through our website, annual and interim reports, press releases and through the Annual General Meeting.

Banks and Prospective Lenders Financial institutions and prospective lenders play a major role in the construction sector. SML maintains good relationships with financial bodies since these entities provide the necessary capital to undertake Business development initiatives. We respond to lenders’ queries and settle any dues in a timely manner.

Employees Employees form the heart of our business operations and we make a concentrated effort to maintain healthy, consistent relationships with them. An engaged employee will be happy and more productive. Through various means, we keep our employees engaged: Periodic meetings, wide-array of benefits, and training programmes. In return for their commitment our employees are provided with a safe working environment, equal opportunities, individual career growth, opportunities for training and development, rewards based on performances, and initiatives to improve work-life balance. Our vision towards sustainability is driven by our employees.

Government and Regulatory Bodies The motor vehicle industry is heavily regulated and SML has always complied with all the necessary regulatory requirements. We keep in touch with relevant regulatory bodies to clearly communicate our grievances. Through the act of paying taxes we contribute to the National treasury.

Clients and Customers SML is in constant contact with our existing and prospective clients and customers as they form the basis of our business operations. We organise meetings to identify their expectations and to better communicate our values. This open dialogue has led to interdependent relationships with our clients and customers.

Suppliers and Sub-Contractors Our procurement policy has clearly outlined the standards that we expect from our suppliers. The supply chain partners are engaged in our business operation in many ways. We also need sub-contractors who are capable of carrying out work in an uninterrupted manner, who are trustworthy, competitive in terms of prices, quality of service offered and flexibility, easy to communicate with, have a good past track record, and adhere to ethical conduct. Our constant engagement with them has led to building strong interdependent relationships.


Business Partners Over the years, we have built lasting relationships with our business partners. We liaise with companies specialising in particular areas, thus generating a valuable knowledge transfer process. We interact with a large number of local and foreign business partners to deliver exceptional value to all our stakeholders.

Society We understand that all our activities have an impact on the local communities and environment we operate in. Our open and transparent policies that are open to the scrutiny of any interested party have led to a healthy channel of communication between the Company and different elements of society. We also create employment opportunities, which bring direct and indirect economic benefits to the communities that we operate in.

Industry Peers and Competitors Over the years, we have built strong relationships with our peers and competitors to uplift the motor vehicle industry as a whole. Collectively, we realise the importance of engaging and promoting ethical business practices, sharing of knowledge, and actively participating in industry initiatives to enhance and develop the Sri Lankan motor vehicle sector.

02). Engagement The methods of engagement with stakeholders involve utilising responsive methods that enable fast decision making. We also consider regulatory and statutory requirements which act as minimal criteria in deciding the frequency of engagement. Our stakeholder engagement process helps us to identify the material issues of internal and external stakeholders. The Board of Directors is responsible for setting up corporate objectives, formulating strategies, representing

Company to external stakeholders, and protecting stakeholder interests. In this endeavour, they are supported by the Corporate Management.

03). Prioritising Concerns for ActionsWe identify and prioritise our stakeholders’ concerns in order to take necessary actions. Our open and frequent lines of communication enable the Company to determine concerns of various stakeholders in a timely manner. Once we identify the concerns of each stakeholder group, we consider the matter in terms of impact on the business, stakeholder interest, the sustainability of operations and the greater impact on the industry and society in order to prioritise the matters.

04). PlanningOnce we prioritise stakeholder concerns, we focus on identifying methods to effectively address their concerns. Once we identify the effective methods to address specific concerns, we allocate necessary resources and formulate action steps to carry out the strategy.

05). Implementation Once the strategy is set in place, we allocate the responsibility of implementing the action steps to relevant departments and monitor the progress. 06). ReportingDuring and after the plan of action, we have put in a well-defined reporting process in place to ensure accountability to stakeholders. The relevant stakeholder group receives communication with regard to the success of the implemented strategy. We believe that robust communication with our stakeholders lead to enhanced performance within the Company. Maintaining transparent lines of

communication allows us to prepare for future challenges and improve our business model to suit futuristic trends as well as changes in the regulatory environment.

Stakeholder Engagement Contd.


Stakeholder Group Stakeholder Concerns and aspirations Method of Engagement Frequency of Engagement

Investors and Shareholders

Financial performance of the Company Periodic meetings with the Board of Directors

Continuing with at least a meeting every quarter

Monetary returns on their investments Annual Report Annually

Business Expansion plans of the Company

The Annual General Meeting Annually

Transparency and disclosure Corporate website Continuously

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

Continuously

Customers

Product Quality Customer engagement events Continuously

Customer Service One-on-one discussions with relevant departments

Continuously

Continuity of services Corporate website Continuously

Employees

Rewards and recognition Staff meetings Continuously

Training and development Discussions with Managers Continuously

Career advancement opportunities Training programmes Continuously

Work life balance Special staff events Continuously

Retirement Benefit plans Evaluation and rewards programme

Annually

Business Partners

Contractual opportunities Special networking events Continuously

Growth potential Meetings Continuously

Future business prospects Timely feedback through submission of reports

Continuously

Timely settlement of dues Participating in various forums and discussions

Continuously

Government and Regulatory Authorities

Regulatory compliance Internal Audit Compliance matrix Continuously

Industry Growth Economic Indicates Continuously

Managing the business impact on the country's economy

Ensuring compliance Continuously

Society and Environment

Environmental and economic impact of the business process

Compliance to regulatory requirements

Continuously

Employment Opportunities Participating in trade events Continuously

Connection with our Stakeholders


SML Business Model

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

What sets us apart

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

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

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

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

WHAT WE DOWe actively manage our business operations through three principal operational activities.

Vehicle sales

Spare part sales

Workshop services & repairs


WHAT WE RELY ONWe draw upon six capitals in the management of our business model.

THE VALUE WE CREATE

Beyond meeting our income and total return targets we also consider the wider value we deliver against each capital.

– Total Assets Rs. 4.658 Bn (38.9 % Year-on-Year increase)

– Inventories Rs. 1.378 Bn (33 % Year-on-Year increase)

– Debt capital net of cash Rs. 2 Bn (100% Year-on-Year increase)

– 175 employees including professionals and highly trained technicians

– Recruited new management team, including directors, general managers and operational managers

– Conduct several in-house and outstation training and development programmes

– Depth experience and technological prowess in the Japanese commercial vehicle segment in the automobile industry

– Implementation of IFS ERP System

– New workshop building at Peliyagoda Increase the capacity to 59,103.62 sqft

– Sustainable industrial practices-Euro 4

– Advance water purification system for workshop operations

– Defensive Driver Training Programme

– Sponsorship for Ceylon Exotic Automobile Club (CEAC)

– Conducted Blood donation campaign

Reinvestment into the business - Retained earnings Rs. 1.563 Bn ( 5.61 % Year-on-Year increase)

Financial CapitalFinancial capability to enhance the business

Human CapitalThe skills and experience of our employees

Intellectual CapitalOur collective expertise and processes

Manufactured CapitalProperty, plant and equipment we own and use

Social and Relationship CapitalReputation and trust that we have developed

Natural CapitalThe natural resources that we manage and use


Board of Directors

Left to Right : Rohana Fernando, Dharshana Munasinghe, Sumal Perera, Christopher Joshua, Eshan Sudesh Coorey.


Left to Right : M M Nelson De Silva, Manoaj Jayahsuriya, Chiran Wijesinghe , Niroshan Thilakarathne, Sepala Dahanayake.


Board of Directors Contd.

Sumal Perera Chairman (Non-Executive)

Sumal Perera was appointed to the Board of Sathosa Motors PLC on 12 June 1998. He is the Founder Chairman of the Access Group of Companies founded in 1989. He continues to be the Chairman of all companies under the umbrella of the Access Group. He is a Fellow Member of the Chartered Institute of Management Accountants - UK.

It is under his vision and leadership that the Access Group of Companies has grown to be a diversified and successful business enterprise, in a span of over three decades.

Eshan Sudesh Coorey Chief Operating Officer (Executive)

A Marketer and Business Administrator by profession, counts close to 20 years in the Brand New Japanese Automobile Industry. His prior appointment of over 12 years was with Toyota Lanka (Pvt) Ltd, as the General Manager in charge of Toyota, Hino and Toyota Industrial Equipment Departments. He began his career at the Motor Directorate of Brown & Co, and thereafter at United Motors Lanka PLC. He holds both Bachelors and Masters Degrees in Business Administration and is a Fellow of the Chartered Institute of Marketing. He is also a member of the Board of Directors at SML Frontier Automotive (Pvt) Ltd.

Manoaj Jayahsuriya Executive Director

Manoaj Jayahsuriya has over 32 years of experience in diversified fields such as the Sri Lanka Navy, operations, apparel manufacturing, corporate planning and human resources management. He is a Project Management Professional (PMP) who holds an MBA from the Postgraduate Institute of Management (PIM) of University of Sri Jayewardenepura, BSc (Honours) from the University of Colombo and a Postgraduate Diploma in Psychology as well as several naval professional qualifications.

Rohana Fernando Non-Executive Director

Rohana Fernando joined the Board of Sathosa Motors PLC in September 2012. He is an Engineer by profession and has been attached to the Access Group since 1998. He currently holds the position of Director / COO of Access Engineering PLC and serves as a Director of Access International (Pvt) Ltd, EcoFriendly power developers (Pvt) Ltd, Access Realties (Pvt) Ltd, Access Realties 2 (Pvt) Ltd, Harbour Village (Pvt) Ltd and Access Projects (Pvt) Ltd. He is a Corporate Member of the Institution of Engineers, Sri Lanka (IESL) and has a BSc Degree in Civil Engineering from the University of Peradeniya.

Dharshana Munasinghe Non- Executive Director

Dharshana Munasinghe was appointed to the Board of Sathosa Motors PLC in April 2012. He has been attached to the Access Group since 1996. Having held several positions in the Group, he now functions as Director – Business Development at Access Engineering PLC and as a Director of Access International (Pvt) Ltd, SML Frontier Automotive (Pvt) Ltd, Access Realties (Pvt) Ltd and Access Realties 2 (Pvt) Ltd.

Joseph Christopher JoshuaManaging Director (Executive)

Christopher Joshua was appointed to the Board of Sathosa Motors PLC in April 2012 and also appointed as Managing Director of Sathosa Motors PLC with effect from 1 April 2019. He is one of the Founder Directors and Shareholders of Access Group of Companies and currently serves as the Managing Director of Access Engineering PLC. He is also the Joint Managing Director of the Access Group of Companies. Companies under his purview include Access Engineering PLC , Access Realties (Pvt) Ltd, Access Realties 2 (Pvt) Ltd, Harbour Village (Pvt) Ltd, Access Energy (Pvt) Ltd, Access Natural Water (Pvt) Ltd, Eco Friendly Power Developers (Pvt) Ltd and business units of Access International (Pvt) Ltd. He was instrumental in heading some of the most successful business units within the Access Group.


Niroshan ThilakarathneNon-Executive Director

Niroshan Thilakarathne was appointed to the Board of Sathosa Motors PLC in April 2019. He has been attached to the Access Group since 2003. He holds experience over a period of almost 16 years. Also, he has over six years of experience before joining AEL having worked in a professional firm which provides Audit, Tax, Finance and Advisory services. He is also a Finalist of The Institute of Chartered Accountants of Sri Lanka.

M M Nelson De SilvaIndependent Non-Executive Director

Nelson De Silva who joined the Board of Sathosa Motors PLC on 11February 2009, is an Associate Member of the Institute of Chartered Accountants of Sri Lanka. Graduated with a B.Sc in Public Administration from the Sri Jayawardenapura University. He serves as the Managing Director of Ned Management Consultants (Pvt) Ltd and he is the sole Proprietor of M M N De Silva & Company. He has been the Group Accountant of Tisara Group, Senior Accountant of John Keells Group, Finance Manager of Finlay Chemicals & Dyes (Pvt) Ltd, Director of PE Management Consultants (Pvt) Ltd and Partner of HLB Edirisinghe & Company.

Chiran Wijesinghe Independent Non-Executive Director

Chiran Wijesinghe has approximately 11 years of experience in Senior Management positions in different organisations in Sri Lanka & Overseas. Manager in Risk Advisory Services of KPMG Sri Lanka, Group Internal Auditor of Oman Hotels & Tourism Co. SAGO (OHTC) managed by Aitken Spence Hotels (Pvt) Ltd. Current Work Experience: Chief Risk Officer of Hirdaramani Group of Companies. He is a Fellow Member of Institute of Chartered Accountants of Sri Lanka (ICASL) and Member of Institute of Internal Auditors (IIA) USA. He holds a Master of Business Administration (MBA) from the University of Southern Queensland (USQ) and BSc. Business Administration (Special) – University of Sri Jayewardenepura.

Sepala DahanayakeIndependent Non-Executive Director

Sepala Dahanayake was appointed to the Board of Sathosa Motors PLC in August 2018. He is an attorney-at-law by profession. He has appeared in both Criminal and Civil courts for over 37 years since graduating Law College of Sri Lanka in 1981. He is an acting magistrate for more than 20 years. He has held the Vice Presidency of the Bar Association of Mount Lavinia (2001-2003).


Senior Management

Left to Right : Christopher Joshua, Eshan Sudesh Coorey, Manoaj Jayahsuriya, Maurice Dirk Joshua, Lasitha Eshan Christopher Mendis, Indrajeewa Alahapperuma.


Lasitha Eshan Christopher MendisGeneral Manager – Support Services

Lasitha Mendis joined Sathosa Motors PLC in September 2018. His prior appointment of almost 9 years was with John Keells Stock Brokers (Pvt) Ltd, as Manager – Institutional Sales.

He is a Member of the Chartered Institute of Management Accountants-UK and holds a MSc. in Financial Mathematics and a BSc. in Accounting and Finance.

Maurice Dirk JoshuaGeneral Manager - Marketing

Dirk Joshua joined Sathosa Motors PLC in August 2018 with 12+ years' progressive experience in strategic planning, improving operational efficiency, team building and project management.

He was working at Access Engineering PLC as a Senior Manager – Business Development, and was in charge of securing tenders and other projects through networking and was liaising with foreign principals to secure exclusive dealerships for engineering products, locally and internationally.

Indrajeewa AlahapperumaGeneral Manager – Finance

Indrajeewa Alahapperuma was appointed to the Senior Management team of Sathosa Motors PLC in August 2018. He has been attached to the Access Group since 2012. Having held several positions in the Group, he presently serves in the capacity of the General Manager – Finance.

He is an Associate Member of The Institute of Chartered Accountants of Sri Lanka. He holds a B.Sc. Accounting (Special) Degree from the University of Sri Jayewardenepura. He has over 11 years of experience in the field of Finance and Auditing.

Joseph Christopher JoshuaManaging Director (Executive)

Please Refer Page 24 for Profile description

Eshan Sudesh Coorey Chief Operating Officer (Executive)


Manoaj Jayahsuriya Executive Director



Chairman’s Review

OUR COMMITMENT TO EXPLORING AVENUES TO BRING ABOUT WELCOME CHANGE THAT ADDRESSES CONTEMPORARY ECONOMIC, SOCIAL AND ENVIRONMENTAL CONCERNS IS TIGHTLY WOVEN INTO THE WAY WE CONDUCT BUSINESS. AS SUCH, OUR FOCUS ON BEING A TRANSFORMATIVE AGENT IN SOCIAL, ECONOMIC AND ENVIRONMENTAL IMPACT OF BUSINESS ON THE GROWTH OF THE NATION STEERED US TO ACTIVELY ADVOCATE FOR EURO 4 STANDARDS IN THE INDUSTRY PUT IN PLACE BY THE GOVERNMENT.


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OUR UNDISPUTED MARKET LEADERSHIP POSITION IN THE CORE BUSINESS AND THE ONGOING EXPANSION DRIVES BODE WELL FOR THE SHORT, MEDIUM AND LONG TERM GROWTH OF THE COMPANY. WHILE WE ACKNOWLEDGE THE CHALLENGES WE CONTINUE TO TACKLE IN THE FACE OF UNSTABLE EXTERNAL FACTORS SUCH AS CHANGES IN KEY GOVERNMENT POLICIES, AS A VETERAN IN THE INDUSTRY, WE ARE CONFIDENT IN OUR ABILITY TO SURPASS CHALLENGES AND EXPLORE GROWTH OPPORTUNITIES.

Chairman’s Review Contd.

It is with great pleasure that we present to you, the Annual Report and audited financial statements of Sathosa Motors PLC (SML) for the financial year ended 31 March 2019. The financial year 2018/19 was a complex one, during which we continued our prudent pursuit of sustainable profitability and growth. While we achieved enhanced volume growth and maintained our market leadership position in our core business within the mid-range new truck segment, we posted a commendable growth across all other business segments in spite of challenging macro-economic and regulatory conditions. In line with our strategic growth plans, we invested in reinforcing our manufactured capital in terms of property acquisition.

Performance Driven by customer confidence in our expertise and the exceptional loyalty that the ISUZU brand commands, our sales volumes increased signaling SML’s robust position as a dominant industry player. Against the backdrop of unfavourable external environment and given our futuristic investments in property acquisition to strengthen manufactured capital, the Company’s bottom-line suffered. However, we were able to post a profit after tax of LKR 82,891,080.

Continuing our well-defined and far reaching strategic expansion, SML opened a new after sales service and spare parts centre in Kurunegala and further strengthened our marketing operations in order to leverage on growth opportunities.

Transformative Agent Our commitment to exploring avenues to bring about welcome change that addresses contemporary economic, social and environmental concerns is tightly woven into the way we conduct business. As such, our focus on being a transformative agent in social, economic and environmental impact of business on the growth of the nation steered us to actively advocate for Euro 4 standards in the industry put in place by the government. The regulation of emissions is a step in the right direction to combat rising climatic concerns.

Contribution to the Nation Our core product portfolio remains a key contributor to commercial activity in the country, generating dynamic economic value. Our contribution to nation building efforts amounted to LKR 81,528,107 in tax revenue, thus fulfilling our commitment to the nation and meeting our statutory obligations and tax obligations. The Company contributed to community building activities through funding a number of selected charitable initiatives.


Corporate Governance We believe that comprehensive corporate governance practices provide a solid platform for business growth. In our pursuit of viable growth, SML adheres to a governing objectives set in the context of wider social, regulatory and market environment. Our Board, senior management and employees follow a set Code of Ethics to conduct business in an ethical, transparent and fair manner.

Sustainability Aspiring to create value through effectively managing our economic, social and environmental impact, we have implemented the necessary management systems to pursue business success in a sustainable manner. Moreover, in our commitment to transparency, we have complied with GRI Standards in reporting matters concerning sustainability.

Employee Engagement The industry expertise, talent and professionalism of our employees lead to further business opportunities and the growth of the Company. As such, we continue to provide our employees with opportunities for professional growth, skills enhancement and training whilst also focusing on acquiring fresh talent as and when required.

Strategic Drive Our ongoing growth strategies revolve around innovation, prudent responses to market and external conditions, pursuit of service excellence and customer relationship management. In addition, we continue to strengthen our six capitals to create a favourable platform for growth. During the year under review, we invested heavily in acquiring land to continue our expansion with the commencement of operations in new regional branches.

Future outlook Our undisputed market leadership position in the core business and the ongoing expansion drives bode well for the short, medium and long term growth of the Company. While we acknowledge the challenges we continue to tackle in the face of unstable external factors such as changes in key government policies, as a veteran in the industry, we are confident in our ability to surpass challenges and explore growth opportunities. In this connection Christopher Joshua, Managing Director of Access Engineering Plc has agreed to perform the responsibility of functioning as Managing Director of Sathosa Motors PLC which I believe will be a huge impetus and strength to the Management Team at SML.

AppreciationI would like to convey my sincere gratitude to our employees who continue to shape the success of SML through their admirable efforts. I am grateful to the persistent support that the Board of Directors extend towards me in our collective efforts to steer SML on an upward trajectory. Sathosa Motors PLC has been the longest standing partner of Isuzu Motors globally. Hence, I would like to express my warm appreciation to Isuzu for the confidence and unwavering support extended towards us. In Conclusion, I wish to thank our shareholders for their trust in our team and the Company.

S J S Perera Chairman9 July 2019


Review of the Managing Director and Chief Operating Officer (Joint Statement)

SML’S STRATEGIC DRIVE IS FUELLED BY CAREFUL AND TIMELY MARKET ANALYSIS, RISK MANAGEMENT AND PRUDENT INFUSION OF INVESTMENTS TO PURSUE GROWTH OPPORTUNITIES. DURING THE YEAR UNDER REVIEW, SML STRENGTHENED THE COMPANY’S MANUFACTURED CAPITAL THROUGH ACQUISITION OF PROPERTY IN ANTICIPATION OF LEVERAGING ON FUTURE GROWTH OPPORTUNITIES. SML MAINTAINED THE MOMENTUM GAINED IN REGIONAL EXPANSION THROUGH ACTIVELY SEEKING TO BOLSTER REGIONAL SALES THROUGH FOCUSED MARKETING CAMPAIGNS. THE COMPANY’S CURRENT STRATEGY IS WELL-POISED TO GROW THE MARKET FOR LIGHT COMMERCIAL VEHICLES IN THE PROVINCES.


SRI LANKA’S BRAND NEW AUTOMOBILE MARKET FACED YET ANOTHER CHALLENGING PERIOD DURING THE YEAR UNDER REVIEW, MAINLY INFLUENCED BY MACROECONOMIC AND POLICY CHANGES. RELATIVELY HIGH INTEREST RATES AND THE DEPRECIATION OF THE RUPEE AGAINST THE YEN COMBINED WITH THE INFLUX OF RECONDITIONED VEHICLES CREATED AN UNFAVOURABLE EXTERNAL ENVIRONMENT FOR BRAND NEW VEHICLE IMPORTS. THE INTRODUCTION OF THE EURO 4 STANDARDS ALTHOUGH COMMENDABLE IN INTENTION TO FOSTER ENVIRONMENTAL SUSTAINABILITY AFFECTED FOB PRICES OF COMMERCIAL VEHICLES TRIGGERING A DROP IN DEMAND.


Review of the Managing Director and Chief Operating Officer (Joint Statement) Contd.

Sri Lanka’s brand new automobile market faced yet another challenging period during the year under review, mainly influenced by macroeconomic and policy changes. Relatively high interest rates and the depreciation of the Rupee against the Yen combined with the influx of reconditioned vehicles created an unfavourable external environment for brand new vehicle imports. The introduction of the EURO 4 standards although commendable in intention to foster environmental sustainability affected FOB prices of commercial vehicles triggering a drop in demand.

As such, the Company’s unit sales plunged from 846 units sold in the financial year 2017/18 to 638 units in the year 2018/19. The dip in vehicle sales during the period under review made the gross profit margins to substantially plummet reducing from 20.9% in the corresponding period during the previous financial year to 17.3%.

Despite the negativities surrounding the market in which we operate, our brand retained our undisputed market leader position in the new Japanese trucks market.

Challenging Year In the financial year 2018/19, fuelled by the influx of reconditioned vehicles, the brand new vehicle market stagnated recording a less than desirable drop of 40 percent. Fiscal policy relaxations favoured the reconditioned vehicles in this segment.

Whilst the Japanese brand new truck market in which Sathosa Motors is the market leader, remained largely untouched by fiscal policy changes, the growing demand for reconditioned trucks on the other hand negatively impacted the segment. During the year under review, the number of reconditioned

vehicles entering the market increased to 67,668 from 47,406 recorded in the year 2017/18. This trend was mainly driven by reconditioned truck importers holding stock imported at lower exchange rates as well as the increase of pricing levels of brand new imports now complying with new E4 specifications.

The government’s introduction of EURO 4 standards from July 1, 2018 further affected the Company’s unit sales, thus curtailing growth prospects. While we welcome the government’s efforts to establish stronger emission standards as well as the efforts to encourage the zero-emission vehicle market, the short period of notice in implementing EURO 4 standards does not align well with existing market dynamics. The implementation affected the year under review as well as the previous year and we forecast our fully-fledged E4 lineup to take as long as the end of the next financial year to reach our shores.

The hasty implementation of EURO 4 standards called for a complete review of existing production lines, specifications, technical proficiency and inventories of Spare Parts. In this context, the Company was compelled to reduce the number of vehicle variants to one third, a drastic reduction which led to a sharp drop in unit sales of the new trucks segment. Moreover, socio-political uncertainty dulled demand for brand new commercial vehicles towards the latter part of the year.

Nevertheless, customer confidence in the technological superiority of the ISUZU brand trucks and SML’s industry expertise somewhat curtailed the encroachment by the reconditioned trucks segment. This allowed the Company to retain the dominant market position with 42.76% market share of the Japanese Truck Market segment.

Furthermore, in the double cab segment, the ISUZU brand continued to make in roads, on a quest to regain its past position as the market leader with remarkable market penetration in both private and public sectors.

Growth Strategy Driven by our undisputed market leadership, technical proficiency and prudent risk management strategies, SML has already chartered the way forward to enhance growth prospects and consolidate our presence.

The Company’s growth strategy involves nurturing partnerships with leading banks and financial institutions and penetrating the regional market opportunities across the nation. In view of this, SML continues to establish branches and service centres in key cities islandwide. During the year under review, we reinforced our presence with the establishment of the Kurunegala showroom and services centre as well as the new showroom in Vauxhall Street dedicated to the double cab segment. SML has already set in motion a plan of action to create and further increase awareness amongst users and business owners of the superior performance of ISUZU trucks in the market outside the main business hubs of the island.

Regional presence and focused marketing strategies will enable business owners to identify the value of genuine spare parts. The Genuine Spare Parts business is poised to double last years’ growth in the coming financial year.

We succeeded in completing a significant part of the fully refurbished workshop premises in Peliyagoda within the year. Our after sales services will continue to grow with the commissioning of the new workshop premises further enhancing customer confidence.


As such, we would like to illustrate the significantly lower mid and long-term economic and environment cost of brand new trucks in comparison to reconditioned vehicles in terms of broader macroeconomic perspectives.

In addition, SML continued to boost the Company’s after sales reach and offer Customer Centric Education programmes to enable vehicle owners to achieve maximum value out of their vehicles. During the year under review, fleet owners visited ISUZU production facilities in Japan to witness the manufacturing process first hand. The Company will continue to organise rapport and trust building events of such nature in the future as well.

SML continues to engage fast growing regional markets through moving towards proprietary facilities in place of third-party dealers and agents.

New TeamWe believe human capital is our most valued assets, and have fully restructured the front line sales divisions (Spare Parts + Vehicle Sales), infusing new blood into the sales forces. Further front line teams have been structured to reach all spheres of the market in a well-focused and structured manner. I.e. fleet owner, government + tender, key account, SME, etc. ensuring island wide penetration.

Strategic Direction SML’s strategic drive is fuelled by careful and timely market analysis, risk management and prudent infusion of investments to pursue growth opportunities. During the year under review, SML strengthened the Company’s manufactured capital through acquisition of property in anticipation of leveraging on future growth opportunities. SML maintained the momentum gained in regional expansion through actively seeking to bolster regional sales through

focused marketing campaigns. The Company’s current strategy is well-poised to grow the market for light commercial vehicles in the provinces.

AcknowledgementsWe would like to express our sincere gratitude to our Chairman for his decades of commitment and inspiring leadership to Sathosa Motors PLC. Our Board of Directors provides vital guidance and governance support to enable SML to seek sustainable growth and create value for all stakeholders. We are thankful for their guidance and unwavering backing. The Company’s senior management as well as employees continues to strengthen SML’s service offering amidst various challenges. Their efforts, dedication and collective expertise play a key role in the Company’s growth. Similarly, we would also like to thank our business partners for their loyalty and trust. Let us continue to pursue a path of excellence, viable growth opportunities and financial stability in the future to create sustainable value.

Future OutlookThe Company’s growth strategy and the sustainable value creation process is being built on its undisputed brand strength, after sales service excellence, industry expertise and prudent risk management strategies.

Strengthened by a well-defined growth strategy and sound risk management practices, SML is geared to tackle the external factors with confidence to pursue and secure short, medium and long term growth, profitability and sustainable value creation for all stakeholders.

J C Joshua E S Coorey Managing Director Chief Operating Officer

9 July 2019, 9 July 2019,Colombo Colombo

WITH OUR LOYAL CUSTOMERS AND DEDICATED STAFF SERVE WHO AS THE BACKBONE OF OPERATIONAL SUCCESS

OUR


Governance of SMLSathosa Motors uses a well-defined and disciplined corporate governance approach to make decisions regarding the Company and execute those decisions. SML strongly believe that a sound corporate governance structure ensures transparency leading to a strong and balanced growth while adding value to all stakeholder groups of the company and its subsidiaries. In the spirit of good governance, Sathosa Motors complies with all applicable laws, rules and regulations. Yet, reaching beyond regulatory requirements, our corporate governance strategy lays a solid foundation to gain and retain shareholder confidence, ensure financial and operational integrity as well as accountability at all levels of the Company.

The Corporate Governance system of SML encompasses every aspect of managing the Company ranging from strategy formulation, appointment of directors and key management personnel to internal controls and performance measurement.

Led by the Board of Directors and the Chairman, we consistently aspire to cultivate good governance across the Company. Our core values set the tone for good governance across the Company.

Corporate Governance Structure The linchpin of our governance structure is a strong set of ethics and values that complies with the nation’s laws and regulations. Sathosa Motors employs a corporate governance model reinforced by well-defined division of responsibilities and prudent resource mobilisation to achieve productive operating results and pragmatic and far-reaching decision making.

Our policy framework goes beyond legal requirements encompassing voluntary frameworks and the Company operates within an integrated governance framework formulated after taking into consideration the mandatory compliance of the Listing Rules of the Colombo Stock Exchange. Voluntary compliance of The Code of Best Practice of Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the Securities and Exchange Commission of Sri Lanka (SEC).

In addition, we consistently disclose unbiased and truthful information about our governance practices stakeholders for enabling them to exercise their right to well-informed decision making. The Company’s core values guide the Board and senior management to provide stewardship to achieve strategic objectives.

The governance structure of Sathosa Motors consists of several governing bodies with well-defined responsibilities and clear reporting lines. These include the Board and Management Committees. The Board and relevant committees are accountable for formulating strategies and delegating execution plans to the senior management.

Corporate Governance Management Structure Under the Board’s leadership, SML has put in place a comprehensive management structure together with clearly defined policies, procedures and limits of delegated authority. Our high level management and governance structure is summarised in the diagram below.

Compliance and AdherenceMandatory compliance1. Companies Act No. 07 of 2007

2. Sri Lanka Accounting and Auditing Standard Act No. 15 of 1995

3. Listing Rules of Colombo Stock Exchange

4. SEC regulations

Voluntary adherence1. Code of Best Practices jointly issued by SEC and CA Sri Lanka

AssuranceAssurance on the financial statements

1. External Independent Audit.

Internal audit1. Review of systems, controls, processes and operations.

Board of Directors

Strategic planning Committee

Audit Committee

Related Party Transactions

Review Committee

Remuneration Committee

Corporate Governance


Leadership Code of Ethics

Carrying out conflict resolution in a just and transparent manner

Adhering to all regulatory requirements

Recognizing and honouring the rights of all stakeholders

Maintaining a healthy business environment

Transparency and accountability

Conducting business in a professional manner

Chairman The Chairman provides leadership to the Board and facilitates Board responsibilities in an efficient and effective manner. The Chairman is accountable for ensuring that the Board receives all information necessary for making informed decisions. The Chairman is responsible for directing the affairs of the Board while maintaining effective external relations.

The Board The Board is responsible for providing leadership to set the strategic direction of the Company. The Board works in harmony with the senior management to ensure sound corporate governance and effective functioning of the organisation. The Board implements the internal control system and makes strategic decisions with regard to the Company’s direction, goals and operations. The Board comprise of ten (10) Directors who enrich the collective set of skills and expertise required to set the strategic direction of the Company. Directors are accountable for constructive scrutiny of Company performance, risk management and control process. Decisions regarding new Board appointments are taken by the Board collectively and the qualifications and experience of Board members are decided based on the nature of the business of the Company and the value addition the member is expected to bring to the Board and the Company. Profiles of the Board of Directors are set out on pages 22 to 25.


Corporate Governance Contd.

Board CompositionAs at 1April 2019, the Board comprised of ten (10) Directors including three (3) Executive Directors and seven (7) Non-Executive Directors. Three out of the seven Non-executive Directors are Non-Executive and Independent Directors.

M M N De Silva, W A C O Wijesinghe and R S Dahanayake qualify against the criteria for independence and based on the declarations submitted by the said Directors, the Board determines that they be independent.

The Period of service of M M N De Silva exceeds 9 years. However, the Board is of the view that the Period of service does not compromise his independence and objectivity in discharging his function as a Director. Therefore, based on the declarations submitted, the Board deems M M N De Silva as an Independent Director.

The Group policy is to maintain a healthy balance between the Executive, Non-Executive and Independent Directors, in keeping with the applicable rules and codes. Executive Directors bring in deep knowledge of the businesses and Non-Executive Independent Directors bringing in experience, objectivity and independent oversight.

Independent

Non Independent

70%30%

Composition of Directors

70%30%

Non Executive DirectorsExecutive Directors

Board of DirectorsExecutive DirectorsJ C Joshua Managing Director - Appointed w.e.f. 1 April 2019T D Gunasekera Managing Director - Resigned w.e.f. 31 March 2019 E S Coorey Director / Chief Operating OfficerM Jayahsuriya Executive Director - Appointed w.e.f. 1 April 2019

Non-Executive DirectorsS J S Perera Chairman S D Munasinghe Director D A R Fernando DirectorS H S Mendis Director - Resigned w.e.f. 31 March 2019T A L Niroshan Director - Appointed w.e.f 1 April 2019

Independent Non-Executive DirectorsM M N de Silva DirectorW A C O Wijesinghe Director R S Dahanayake Director - Appointed w.e.f. 15 August 2018


Attendance of Directors at Board Meetings held during the Period (1 April 2018 to 31 March 2019)Name of the Director Meeting Dates

26.07.2018 18.09.2018 23.10.2018 30.01.2019 25.03.2019

1 S J S Perera x

2 T D Gunasekera x

3 M M N de Silva

4 J C Joshua

5 S D Munasinghe x

6 S H S Mendis

7 D A R Fernando

8 W A C O Wijesinghe x

9 E S Coorey

10 R S Dahanayake -

Board ProcessThe Board meets regularly, with a meeting at least once in every quarter . In addition, the Board meets whenever circumstances so require. The Chairman determines the meeting agenda and ensures that Board members receive Board papers in advance. The Company secretary is responsible for providing Board papers in advance.

Dynamics

Context

Frame work

Organizational and Board Stewardship

Board responsibility

04

03

02

01


Role of the Company Secretary The Company secretary plays a pivotal role in sound corporate governance of the Company. The Company secretary is responsible for conducting Board and General Meetings in accordance with relevant legislations. Whilst facilitating best practices of corporate governance, the Company secretary maintains channels of communication with regulators and shareholders.

Board Committees The Board delegates authority to four (4) committees which manage special matters. However, the Board retains overall responsibility for decisions of committees.

Audit CommitteeThe Audit Committee consists of four (4) Non-Executive Directors. Three out of the four Directors are independent. The Audit Committee is chaired by M M N de Silva.

Audit Committee CompositionName Designation Committee Report

1 M M N De Silva Chairman - Independent Non-Executive Director Refer Page 101

2 W A C O Wijesinghe Independent Non-Executive Director

3 R S Dahanayake Independent Non-Executive Director (Appointed w.e.f. 15 August 2018)

4 J C Joshua Non-Executive Director (Resigned w.e.f. 31 March 2019)

5 T A L Niroshan Non-Executive Director (Appointed w.e.f. 1 April 2019)

Attendance of Directors at Audit Committee Meetings (1 April 2018 to 31 March 2019)Name of the Director Meeting Dates

18.06.2018 23.10.2018 30.01.2019

1 M M N de Silva

2 J C Joshua


4 R S Dahanayake -

Related Party Transaction Review CommitteeThe Company established the Related Party Transactions Review Committee on 31 March 2016 as a Board Sub-Committee.The Related Party Transaction Committee comprises four (04) members including three Non-Executive and Independent Directors and one Non-Executive Director. The Related Party Transaction Committee is chaired by M M N de Silva.



Related Party Transaction Review Committee CompositionName Designation Committee Report

1 M M N de Silva Chairman - Independent Non-Executive Director Refer Page 104


3 R S Dahanayake Independent Non-Executive Director (Appointed w.e.f 15 August 2018)

4 J C Joshua Non-Executive Director (Resigned w.e.f. 31 March 2019)

5 T D Gunasekara Executive Director (Resigned w.e.f. 31 March 2019)

6 T A L Niroshan Non-Executive Director (Appointed w.e.f. 1April 2019)

Attendance of Directors at Related Party Transaction Review Committee Meetings (1 April 2018 to 31March 2019)

Name 26.07.2018 23.10.2018 30.01.2019

1 M M N de Silva

2 J C Joshua


4 T D Gunasekara

5 R S Dahanayake -

Remuneration CommitteeThe Remuneration Committee consists of three (03) non-executive Directors. Two out of the three Directors are Independent. S J S Perera serves as the Chairman of the Remuneration Committee.

Name Designation Committee Report

1 S J S Perera Chairman - Non-Executive Director Refer Page 103

2 M M N de Silva Independent Non-Executive Director


Strategic Planning CommitteeStrategic Planning Committee comprises all three executive directors of the company. J C Joshua serves as the Chairman of the Committee

Name Designation

1 J C Joshua Chairman - Executive Director

2 E S Coorey Executive Director

3 M Jayahsuriya Executive Director

Internal Audit and Internal ControlsThe Board acknowledges overall responsibility and ensures that a sound internal control system is maintained to safeguard shareholders’ investments and company assets.


Principal Description Comment/Reference Compliance Status

CSE Listing Rule 7.6 – Contents of Annual Report

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

Board of Directors Complied

(ii) Principal activities of the Entity and its subsidiaries during the year and any changes therein

Notes to the Financial Statements Complied

(iii) The names and the number of shares held by the 20 largest holders of voting and non-voting shares and the percentage of such shares held

Investor Capital Complied

(iv) The Public Holding percentage number of public shareholders, under which option the entity complies with the minimum public shareholding requirement and total float adjusted market capitalisation,


(v) A statement of each Director’s holding and Chief Executive Officer’s holding in shares of the Entity at the beginning and end of each financial year


(vi) Information pertaining to material foreseeable risk factors of the Entity

Risk Management Review Complied

(vii) Details of material issues pertaining to employees and industrial relations of the Entity

During 2018/19 there were no material issues pertaining to employees and industrial relations of the Entity

(viii) Extents, locations, valuations and the number of buildings of the Entity’s land holdings and investment properties

Annual Report of the Board of Directors Complied

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

Complied

(x) A distribution schedule of the number of holders in each class of equity securities, and the percentage of their total holdings


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

(xii) Significant changes in the Entity’s or its subsidiaries’ fixed assets and the market value of land, if the value differs substantially from the book value


(xiii) Details of funds raised through a public issue, rights issue and a private placement during the year

In 2018/19 no funds were raised through a public issue,rights issue or a private placement

(xiv) Employee Share Option Schemes and Employee Share PurchaseSchemes

The Company does not have any Employee ShareOption Schemes or Employee Share Purchase Schemes

(xv) Disclosures pertaining to Corporate Governance practicesin terms of Rules 7.10.3, 7.10.5 c. and 7.10.6 c. of Section 7 of the Rules

Corporate Governance on pages 38 - 69Refer Board of Directors on pages 22 - 25 Refer Annual Report of the Board ofDirectors on pages 106 - 110Committee Report on pages 101-105

Complied

(xvi) Related Party transactions exceeding 10% of the Equity or 5% of the total assets of the Entity as per Audited Financial Statements, whichever is lower

Related Party Transactions Review Committee ReportNotes to the Financial Statements

Complied



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


CSE Listing Rule 7.10 – Corporate Governance

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

CSE Listing Rule 7.10.1 – Non-Executive Directors

a., b.and c.

Composition of the Non-Executive DirectorsAt least 2 members or 1/3 of the Board, whichever is higher should be NEDs.

Board of Directors/ Board composition3 out of 10 Board members are NEDs

Complied

CSE Listing Rule 7.10.2 – Independent Directors

a. Composition of the Independent Directors Board of Directors/ Board Composition 3 out of 7 NEDs are independent

Complied

b. Signed and dated declaration of each Independent Director

Compliance with Code of Best Practice on CG jointly issued by CA Sri Lanka and SEC

Complied

CSE Listing Rule 7.10.3 – Disclosures Relating to Directors

a. and b. Determination of independence or non independence of each NED

Board of Directors Compliance with Code of Best Practice on CG jointly issued by CA Sri Lanka and SECAll Independent NEDs have submitted declarations as to their independence

Complied

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

d. Brief Résumé of newly appointed Director/s Resumes of newly appointed NEDs during the year under review have been submitted to the CSE.

CSE Listing Rule 7.10.4 – Criteria for Defining ‘Independence’

a. to h. Criteria to meet to be an Independent Director All Independent Directors meet the criteria in this section.

Complied

CSE Listing Rule 7.10.5 – Remuneration Committee

a. Composition Corporate Governance Complied

b. Functions Refer Remuneration Committee report on page 103 Complied

c. Disclosures in the Annual Reporta. Names of the Directors comprising the Remuneration Committeeb. Statement of remuneration policyc. Aggregate remuneration paid to executive and non-executive directors

Refer Remuneration Committee Report on page 103Note No. 25.5 to financial statements on page 152

Complied



CSE Listing Rule 7.10.6 – Audit Committee

a. 1. Composition- Shall comprise of NEDs, a majority of whom shall be independent2. A NED shall be the Chairman of the Committee 3. CEO and CFO should attend AC meetings4. The Chairman of the AC or one member should be a member of a recognised professional accounting body

Refer Audit Committee report on page 101Chairman of AC is an independent NEDThe MD and the GM – Finance attend the AC meetings.The Chairman and one (1) committee member of the AC are members of a recognised professional accounting body

Complied

b. Functions Audit Committee Report Complied

c. Disclosures in the Annual Report1. Names of Directors comprising the AC2. AC shall make a determination of the independence of the External Auditors3. Report on manner AC carries out its functions

Refer Board committees on page 108Refer Audit Committee Report on page 101

Complied

The company’s adherence to code of best practices on corporate governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka.

Principal Description Comment Compliance Status

A Directors

A.1 The Board

A.1 Every public company should be headed by an effective Board, which should direct, lead and control the Company.

Refer Board of directors in the corporate governance section on page no 39

Complied

A.1.1 The Board should meet regularly. Board meetings should be held at least once in every quarter of a financial year, in order to effectively execute the Board’s responsibilities, while providing information to the Board on a structured and regular basis.

During the year four scheduled Board meetings were conducted, all of which were well planned and informed in advance and all Members were eligible to attend. Attendance of Members at meetings is given in page 41

Complied

A.1.2 The Board’s role is to provide entrepreneurial leadership of the Company within a framework of prudent and effective controls, which enables risk to be assessed and managed.

A brief profile of each member of the Board of directors and Senior Management team is given on pages 22 to 27

Complied




A.1.3 The Board collectively, and Directors individually, must act in accordance with the Laws of the Country, as applicable to the business enterprise. There should be a procedure agreed to by the Board of Directors, to obtain independent professional advice where necessary, at the Company’s expense.

The Board collectively and the Directors individually, have recognized their duty to act in accordance with the prevailing Laws of the Country. The Board has put in place the Compliance Committee to ensure compliance with all necessary rules and regulations applicable to the Company.

The Board also complies with the sound framework of business practices in place, which further strengthens compliance with existing laws and regulations. In matters of strategic importance to the company, the Board obtains independent professional advice, if it deems necessary, at the expense of the Company.

Complied

A.1.4 All Directors should have access to the advice and services of the Company Secretary, who is responsible to the Board in ensuring that Board procedures are followed and that applicable rules and regulations are complied with. Any questions of the removal of the Company Secretary should be a matter for the Board as a whole.

All Directors had access to the services of a professional Company secretarial body, which ensured that the Board received information on a timely manner for the effective conduct of meetings. The firm also provided the Board with advice on matters relating to compliance with rules and regulations, proper conduct of meetings and the adoption of best practices of corporate governance. The firm is also responsible for the distribution of the Company’s Annual Report to its shareholders.

Complied

A.1.5 All Directors should bring independent judgment to bear on issues of strategy, performance, resources (including key appointments) and standards of business conduct.

All Directors are encouraged to bring independent judgment on matters relating to strategic direction of the Company, effective utilisation of resources, performance and business conduct. The vast experience and knowledge they possess in their specialised fields ensure the execution of this judgment.

Transparency of the judgments is further enhanced with the existence of three Independent Non-Executive Directors who continue to critically evaluate the decisions of the Executive Directors. The Board has put in place a culture of accepting the contribution of each member and all Directors have an equal opportunity to express their views and ideas. The composition of the Board is sufficient enough to ensure balance of power and no Director dominates the conduct of meetings or the Board’s decision-making process.

Complied



A.1.6 Every Director should dedicate adequate time and effort to matters of the Board and the Company, to ensure that the duties and responsibilities owed to the Company are satisfactorily discharged. It must be recognized that Directors have to dedicate sufficient time before a meeting to review Board papers and call for additional information and clarification, and after a meeting to follow up on issues consequent to the meeting. This should be supplemented by a time allocation for familiarisation with business changes, operations, risks and controls.

All Directors dedicated an adequate amount of time on matters relating to the Company and the Board. Their contribution to the Company was evident in the participation at Board meetings, Board Subcommittee meetings and in the decisions passed through circular resolution. Relevant Board Papers, together with supplementary information, were sent at least a week prior to the Board meetings so as to give them adequate time to critically review and study the contents. In the event additional information was requested by the Board through the Company Secretary the same was made available at the earliest in order to enhance the effectiveness of Board decisions.

Complied

A.1.7 One third of directors can call for a resolution to be presented to the Board where they feel it is in best interest to the company to do so.

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

Complied

A.1.8 Every Director should receive appropriate training when first appointed to the Board of a company, and subsequently as necessary. Training curricula should encompass both general aspects of directorship and matters specific to the particular industry/company concerned. A Director must recognise that there is a need for continuous training and an expansion of the knowledge and skills required to effectively perform his/her duties as a Director. The Board should regularly review and agree the training and development needs of the Directors.

Every Director who appointed newly to the Board will be given adequate training in order to carry out his duties in the capacity of Director. Each Director is well aware of requirement of his continuous professional development in order to serve as a Director. During the year under review, sharing knowledge among board members, attending seminars conducted by professional bodies are some of the initiatives taken with respect to training and development.

Complied

A.2 Chairman and Chief Executive Officer (CEO)

A.2 There are two key tasks at the top of every public company – conducting of the business of the Board, and facilitating executive responsibility for management of the Company’s business. There should be a clear division of responsibilitiesat the head of the Company, which will ensure a balance of power and authority, such that no one individual has unfettered powers of decision.

There is a clear division of responsibilities of the positions of Chairman, Managing Director (MD) and Chief Operating Officer (COO) in order to ensure a balance of power and authority in strategic and operational policy decisions. As such, Chairman is responsible for the leading and effective conduct of the business to the Board and MD and COO are responsible for managing the business in accordance with policy directions formulated by the Board.No one individual has unfettered powers of decision.

Complied




A.2.1 A decision to combine the posts of Chairman and CEO in one person should be justified and highlighted in the Annual Report.

The Chairman is mainly responsible for leading, directing and controlling the affairs of the Board including the Board Balance, effective conduct of Board meetings and Special meetings of the Board. He is also responsible for maintaining effective external relationships. Day-to-day affairs of the Company are headed by the Managing Director who is supported by the Executive Director/Chief Operating Officer (COO). The MD and COO give leadership to the Senior Management team who is collectively responsible for the conduct of day-to-day operations.

Complied

A.3 Chairman’s Role

A.3 The Chairman’s role in preserving good Corporate Governance is crucial. As the person responsible for running the Board, the Chairman should preserve order and facilitate the effective discharge of Board functions.

Refer chairman’s profile on pages 22 - 25 Complied

A.3.1 The Chairman should conduct Board proceedings in a proper manner.

The Chairman is responsible for making sure that the agenda, minutes of prior meetings, Board papers and supplementary information are circulated among the members in advance, giving sufficient time for preparation. Agenda for each Board Meeting is finalised by the Chairman in consultation with the Company Secretary and where necessary, feedback from the other Members is taken.

Complied

A.4 Financial Acumen

A.4 The Board should ensure the availability within it of those with sufficient financial acumen and knowledge to offer guidance on matters of finance.

A brief profile of each member of the Board of directors is given on pages 22 - 25.

Complied

A.5 Board Balance

A.5 It is preferable for the Board to have a balance of Executive and Non-Executive Directors such that no individual or small group of individuals can dominate the Board’s decision-taking.

Refer composition of the board under corporate governance on the page 40

Complied

A.5.1 The Board should include Non-Executive Directors of Sufficient caliber and number for their views to carry significant weight in the Board’s decisions. The Board should include at least two Non-Executive Directors or such number of Non-Executive Directors equivalent to one third of the total number of Directors, whichever is higher. In the event the Chairman and CEO is the same Person, Non-Executive Directors should comprise a majority of the Board.


Complied



A.5.2 Where the constitution of the Board of Directors includes only two Non-Executive Directors, both such Non-Executive Directors should be ‘independent’. In all other instances, two or one third of Non-Executive Directors appointed to the Board of Directors, whichever is higher should be ‘independent’.

Refer composition of the Board under corporate governance on the page 40

Complied

A.5.3 For a Director to be deemed ‘independent’, such Director should be independent of management and free of any business or other relationship that could materially interfere with or could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgment.


Complied

A.5.4 Each Non-Executive Director should submit a signed and dated declaration annually of his/her independence or non-independence against the specified criteria set out in the Specimen in Schedule K.

During the year, each Non-Executive Director submitted a dated and signed declaration regarding their independence against the specified criteria set out in the Code. While this declaration fulfilled the requirements of Schedule J of this Code, on circumstance rose for the determination of independence by the Board outside the criteria set out by the Code.

Complied

A.5.5 The Board should make a determination annually as to the independence or non-independence of each Non-Executive Director, based on such a declaration made of decided criteria and other information available to the Board. The Board should determine whether the Director is independent in character and judgment and whether there are relationships or circumstances which are likely to affect, or could appear to affect, the Director’s judgment. The Board should specify the criteria not met and the basis for its determination in the Annual Report, if it determines that a Director is independent notwithstanding the existence of relationships or circumstances which indicate the contrary and should set out in the Annual Report the names of Directors determined to be ‘independent’.

This is not applicable as there are no Alternate Directors in the Company.

Complied




A.5.6 If an alternate Director is appointed by a Non-Executive Director such Alternate Director should not be an executive of the Company. If an Alternate Director is appointed by an independent Director, the person who is appointed also should meet the criteria of independence and the provision on minimum number of independent Directors also should be satisfied.

This is not applicable as there are no Alternate Directors in the Company.

N/A

A.5.7 In the event the Chairman and CEO is the same person, the Board should appoint one of the Independent Non-Executive Directors to be the ‘Senior Independent Director’ (SID) and disclose this appointment in the Annual Report.

This is not applicable as the Chairman of the Company is not the CEO.

N/A

A.5.8 The Senior Independent Director should make himself available for confidential discussions with other Directors who may have concerns which they believe have not been properly considered by the Board as a whole and which pertain to significant issues that are detrimental to the Company.

Please refer comment under A.5.7. Complied

A.5.9 The Chairman should hold meetings with the Non-Executive Directors only, without the Executive Directors being present, as necessary and at least once each year.

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

Complied

A.5.10 Where Directors have concerns about the matters of the Company, which cannot be unanimously resolved, they should ensure their concerns are recorded in the Board Minutes.

During the year, there were no matters of the Company that the Board was unable to resolve unanimously. However, in the event such matter arises, the Company Secretary records same in sufficient detail in the Board minutes. These minutes are circulated among Board members prior to the next meeting.

Complied



A.6 Supply of Information

A.6 The Board should be provided with timely information in a form and of a quality appropriate to enable it to discharge its duties.

The Board was provided with timely information by way of Management Reports, Proposals and Board Papers during the year. The information was made available by the Company Secretary along with the agenda at least seven days prior to the meeting in order to provide sufficient, time for preparation.In the event, information provided was not sufficient supplementary information was provided on the request of Board Members.

Complied

A.6.1 Management has an obligation to provide the Board with appropriate and timely information, but information volunteered by management may not be enough in all circumstances and Directors should make further inquiries where necessary. The Chairman should ensure all Directors are properly briefed on issues arising at Board meetings.

The Board is provided with management report and performance report in a monthly basis, both in a quantitative and qualitative manner.

Complied

A.6.2 In order to facilitate effective conduct of meetings, the agenda and papers required for a Board Meeting should be provided to Directors at least seven (7) days before the meeting, and the minutes of the meeting should ordinarily be provided to Directors at least two weeks after the meeting date.

As a norm all board papers are circulated to the members 10 working days in advance for them to study the material and prepare themselves.

Complied

A.7 Appointments to the Board

A.7 There should be a formal and transparent procedure for the appointment of New Directors to the Board.

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

Complied

A.7.1 The Nomination Committee should be established to make recommendations to the Board on all new Board appointments. Terms of Reference for Nomination Committees are set out in ScheduleA. The Chairman and members of the Nomination Committee should be identified in the Annual Report.

The Company does not have a Nomination Committee in place. However, the existing Board members function in a manner that is similar to a formally appointed Nomination Committee in matters concerning new appointments to the Board.

Will be complied




A.7.2 The Nomination Committee or in the absence of a nomination committee, the Board as a whole should annually assess Board composition to ascertain whether the combined knowledge and experience of the Board matches the strategic demands facing the Company. The findings of such assessment should be taken into account when new Board appointments are considered and when incumbent Directors come up for re-election.

The Board is satisfied with its composition and the level of qualifications, knowledge and experience it possesses as a whole in order to meet strategic demands facing the Company.

Complied

A.7.3 Upon the appointment of a new Director to the Board, the Company should forthwith disclose to shareholders:A brief résumé of the Director The nature of his expertise in relevant functional areas The names of companies in which the Director holds Directorships or memberships in Board Committees and Whether such Director can be considered independent.

A brief résumé containing all required and relevant information in respect of each newly appointed director and submitted to CSE in time.

Complied

A.8 Re-Election

A.8 All Directors should be required to submit themselves for re-election at regular intervals and at least once in every three years.

Directors are re-elected with the sanction of the shareholders at the Annual General Meeting of the Company. The Articles of Association of the Company requires one NED to appear for re-election every two years. Recommendations on the re-election of Directors are given by the Company Secretary and the same is reviewed by the Board.

Complied

A.8.1 Non-Executive Directors should be appointed for specified terms subject to re-election and to the provisions in the Companies Act relating to the removal of a Director and their re appointment should not be automatic.

In terms of the Articles of Association of the Company, one NED is required to retire by rotation every ear. The re-election of NEDs’ is sanctioned by the shareholders at the AGM of the Company.

Complied



A.8.2 All Directors including the Chairman of the Board, should be subject to election by shareholders at the first opportunity after their appointment, and to re-election thereafter at intervals of no more than three years. The names of Directors submitted for election or re-election should be accompanied by a resume minimally as set out in paragraph A.7.3 above, to enable shareholders to make an informed decision on their election.

In the event a new Director is appointed to the Board, he/she will offer himself/herself for election by the shareholders at the first opportunity.

Complied

A.8.3 Resignation

A.8.3 In the event of a resignation of a director prior to completion of his appointed term, the director should provide a written communication to the board of his reasons for resignation.

Before the formal resignation the directors explain their reasons for the resignation decision and the same is being minute under the Board meeting minutes. Also when Directors send their resignation letters, they explain the decision factors in the resignation letter for the documentary purposes.

Complied

A.9 Appraisal of Board Performance

A.9 Boards should periodically appraise their own performance in order to ensure that Board responsibilities are satisfactorily discharged.

Performance of the Board is evaluated from time to time with at least once a year to ensure that responsibilities are satisfactorily discharged. Appraisal of Board performance is usually coordinated by the Company Secretary and overseen by the Chairman.

Complied

A.9.1 The board should have in place a formal and rigorous process for annually reviewing the performance of the board and its committees and should address any matters that may arise from such review, in the discharge of its key responsibilities as set out in A.1.2.

In order to retain the enthusiasm in company operations overall the Board members meet the chairman and conduct face to face discussions on the members anticipated suggestions for the betterment of the Company and the Chairman there address the performance remarks of the individual Board members that he has observed during the year.

Complied

A.9.2 The Board should also undertake an annual self evaluation of its own performance and that of its committees.

Members of the Board and Board Committees carried out self-assessments of their performance for the FY 2018/19 against targets set at the beginning of the year. Minutes of the results of these assessments were recorded by the Company Secretary and areas for improvement in the FY 2019/20 were identified. Each individual Director was satisfied of his performance in the FY 2018/19. Over the years, both individual and collective performance appraisal of the Board has facilitated continuous development and improvement.

Complied




A.9.3 The Board should have a process to review the participation, contribution and engagement of each director at the time of re-election.

When a member ‘s name is up for re election the rest of the Board members discuss the value addition brought by that particular member to the Board and the contribution made thereof. And based on the discussion points the decision is made as to re elect the member or not to. The discussion points are being minuted under the Board meeting minutes.

Complied

A.9.4 The Board should state how such performance evaluations have been conducted, in the Annual Report.

The performance of the Board has been appraised though a formalised process of individual appraisal by enabling each member to self – appraise on an anonymous basis.

Complied

A. 10 Disclosure of Information in Respect of Directors

A.10 Shareholders should be kept advised of relevant details in respect of Directors.

Shareholders are informed as and when necessary about changes to the Board, interest in the shares of the Company and other relevant details through disclosures and financial results released to the CSE for public dissemination.

Complied

A.10.1 The Annual Report of the Company should set out the relevant information in relation to each Director.

Refer Board of director’s section on pages 22 - 25 Complied

A.11 Appraisal of Chief Executive Officer

A.11 The Board should be required at least annually to assess the performance of the CEO.

Functions of the CEO are performed by the MD and his performance is evaluated annually.

Complied

A.11.1 At the commencement of every financial year, the Board in consultation with the CEO, should set, in line with the short, medium and long-term objectives of the Company, reasonable financial and non-financial targets that should be met by the CEO during the year.

The Board in consistence with the MD sets out annual, medium and long term objectives.

Complied

A.11.2 The performance of the CEO should be evaluated by the Board at the end of each financial year to ascertain whether the targets set by the Board have been achieved and if not, whether the failure to meet such targets was reasonable in the circumstances.

Performance of the MD is evaluated by the board at the end of each financial year.

Complied



B Directors’ Remuneration

B.1 Remuneration Procedure

B.1 Companies should establish a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual Directors. No Director should be involved in deciding his/her own remuneration.

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

Remuneration payable to the Non-Executive Directors of the Company is recommended by the Board as a whole. No Director is involved in deciding his own remuneration.

Complied

B.1.1 To avoid potential conflicts of interest, the Board of Directors should set up a Remuneration Committee to make recommendations to the Board, within agreed terms of reference, on the Company's framework of remunerating executive directors. (These also include Post-Employment Benefits as well as Terminal Benefits).

The Remuneration Committee is responsible for recommending the remuneration payable to Executive Directors. The Committee makes recommendations to the Board, which is responsible for the final determination.

Complied

B.1.2 Remuneration Committees should consist exclusively of Non-Executive Directors and should have a Chairman, who should be appointed by the Board.

The Remuneration Committee appointed by the Board consisted of three Non-Executive Directors out of which two were independent.

Complied

B.1.3 The Chairman and the members of the remuneration committee should be listed in the Annual Report each year.

Details of the Remuneration Committee are given in page 103 of this Report.

Complied

B.1.4 The Board as a whole, or where required by the Articles of Association the shareholders, should determine the remuneration of Non-Executive Directors, including members of the Remuneration Committee, within the limits set in the Articles of Association. Where permitted by the Articles, the Board may delegate this responsibility to a subcommittee of the Board, which might include the CEO.

Remuneration payable to the Non-Executive Directors is decided by the Board as a whole. The Non-Executive Directors are paid a monthly fee for being a Member of the Board and its Subcommittees. Since the Non-Executive Directors are not involved in the day-to-day affairs of the Company they are not entitled to any performance incentives.

Complied

B.1.5 The Remuneration Committee should consult the Chairman and/or CEO about its proposals relating to the remuneration of other Executive Directors and have access to professional advice from within and outside the Company, in discharging their responsibilities.

The Remuneration Committee consulted the Chairman and the Managing Director in providing recommendations regarding the remuneration of other Executive Directors. The Chairman and the Managing Director are not remunerated by the Company.

Complied




B.2 Level and Make Up of Remuneration

B.2 Levels of remuneration of both Executive and Non-Executive Directors should be sufficient to attract and retain the Directors needed to run the Company successfully. A proportion of Executive Directors’ remuneration should be structured to link rewards to corporate and individual performance.

The remuneration package of both Executive and Non-Executive Directors is based on a variety of factors including their contribution to the Company, market rates of remuneration and their expectation. The Board is aware of the fact that the level of remuneration should be sufficient enough to attract and retain Directors of high caliber to direct the Company.

Portion of the remuneration of the Executive Directors’ is linked to their performance which is evaluated against targets set and agreed at the beginning of the period.

Complied

B.2.1 The Remuneration Committee should provide packages needed to attract, retain and motivate Executive Directors of the quality requires but should avoid paying more than is necessary for this purpose.

The Remuneration Committee considers the value addition of Executive Directors and their contribution to the achievement of short and long-term objectives in structuring their remuneration packages so as to ensure that nothing is paid more than necessary.

Complied

B.2.2 Executive directors' remuneration should be designed to promote the long-term success of the company.

As the remuneration of the key personnel are being decided and approved by the Board based on the evaluation and recommendation made by the Remuneration committee in parity with the current market rates and packages provided, the executive Director’s remuneration also followed by the same process, also providing specific targets in the ED’s TOR which directs the ED in achieving the organisational performance goals in overall.

Complied

B.2.3 The Remuneration Committee should judge where to position levels of remuneration of the Company, relative to other companies. It should be aware what comparable companies are paying and should take account of relative performance, but should use such comparisons with caution, mindful of the risk that they can result in an increase of remuneration levels with no corresponding improvement in performance.

The Committee conducts an analysis of other companies in the industry in deciding the levels of remuneration of the Company.If the need arises the Company carries out an annual salary survey in determining the level of remuneration of key positions and their increment.

N/A

B.2.4 The Remuneration Committee should be sensitive to remuneration and employment conditions elsewhere in the Company or Group of which it is a part, especially when determining the annual salary increases.

Annual salary increments are decided after taking in to consideration of Remuneration and employments conditions of the company.

Complied



B.2.5 The performance related elements of remuneration of Executive Directors should be designed and tailored to align their interest with those of the Company and main stakeholders and to give these Directors appropriate incentives to perform at the highest level

The extent of contribution and value addition towards achieving the set targets and objectives of a particular year is the key determinant in deciding the performance related element of the remuneration of the Executive Directors.

N/A

B.2.6 Executive share options should not be offered at a discount (i.e less than market price prevailing at the time the exercise price is determined), save as permitted by the Listing Rules of the Stock Exchange.

Not applicable as there are no Executive share optionsin the Company.

Complied

B.2.7 In designing schemes of performance related remuneration, Remuneration Committee should follow the provisions set out in Schedule E.

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

N/A

B.2.8 The remuneration committee should consider what compensation commitments (including pension contributions) their Directors contracts of service, if any, entail in the event of early termination. Remuneration Committees should in particular, consider the advantages of providing explicitly for such compensation commitments to apply other than in the case of removal for misconduct, in initial contracts.

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

N/A

B.2.9 Where the initial contract does not explicitly provide for compensation commitments, Remuneration Committees should, within legal constraints tailor their approach in early termination cases to the relevant circumstances. The Board’s aim should be, to avoid rewarding poor performance while dealing fairly with case where departure is not due to poor performance.

Not applicable as the Company’s objective is to avoid early termination by all means.

Complied

B.2.10 Levels of remuneration for Non-Executive Directors should reflect the time commitment and responsibilities of their role, taking in to consideration market practices. Remuneration for Non-Executive Directors should not normally include share options. If exceptionally options are granted, shareholder approval should be sought in advance and any shares acquired by exercise of the options should be held until at least one year after the Non-Executive Director leaves the Board. Holding share options could be relevant to the determination of a Non-Executive Director’s independence.

The remuneration of Non-Executive Directors reflects the degree of responsibilities and the level of time commitment extended by them in contributing and adding value to the Company’s decision-making. The NEDs’ do not have any share options in the Company.

Complied




B.3 Disclosure of Remuneration

B.3 The Company’s Annual Report should contain a Statement of Remuneration Policy and details of the Board as a whole.

Compensation paid to Key Management Personnel is given in page 152 of this Report. Remuneration committee Report is given in the page no. 103

Complied

B.3.1 The Annual Report should set out the names of Directors (or persons in the parent company’s committee in the case of a group company) compromising the Remuneration Committee, contain a statement of remuneration policy and set out the aggregate remuneration paid to Executive and Non-Executive Directors.

Names of the members of the Remuneration Committee and the compensation paid to Key Management Personnel are given in pages 103 & 152 of this Report respectively.

Complied

C. Relations with Shareholders

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

C.1 Board should use the AGM to communicate with shareholders and should encourage their participation.

The Company considers the AGM as the primary tool of communication with shareholders. The Notice of Meeting inviting all shareholders is given on page 176 of this Report. All shareholders are free to raise any queries from the Board, on matters relating to the Company at the AGM. The Board encourages an open dialogue with shareholders at the AGM.Usual proposals adopted at the AGM include the Annual Report and the Accounts, reappointment of Directors and Auditors and any other matter that require shareholder approval as per the provisions of the Articles Association of the Company.

Complied

C.1.1 Companies should arrange for the Notice of the AGM and related papers to be sent to shareholders as determined by statute, before the meeting.

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

Complied

C.1.2 Companies should propose a separate resolution at the AGM on each substantially separate issue and should in particular propose a resolution at the AGM relating to the adoption of the report and accounts.

To receive and consider the Annual Report and Accounts is the first resolution adopted at every AGM. Further, the Company proposes separate resolutions on each substantially separate issue. Hence shareholders are given the opportunity to vote separately on each substantial issue.

Complied



C.1.3 The Company should ensure that all valid proxy appointments received for general meetings are properly recorded and counted. For each resolution, where a vote has been taken on a show of hands, the Company should ensure that the relevant information is given at the meeting and made available as soon as reasonably practicable on a website which is maintained by or on behalf of the Company.

The secretariat and admin teams have strict follow up from the day the notice of the meeting along with the Annual report is sent to the shareholders. They track the appointed proxies at the time of the registration of the AGM and the Secretary team do note the casted votes in favor of the passed resolutions accordingly.

Complied

C.1.4 The Chairman of the Board should arrange for the Chairmen of the Audit, Remuneration, Nomination and Related Party Transactions Review Committees and the Senior Independent Director where such appointment has been made, to be available to answer questions at the AGM if so requested by the Chairman.

Before the AGM date, the company Board and the respective sub committees meet and organise how the AGM should process and run through the possible questions that the management may face. Accordingly all the committee heads are prepared in an instance where a related question is post to answer them.

Complied

C.1.5 Adequate notice of all meetings to Shareholders together with the summary of the procedure to be adopted by Shareholders

The Notice of Meeting and related documents is circulated to the shareholders 15 working days prior to the AGM.Summary of the procedures governing voting at the AGM is provided in the proxy form, which is circulated to shareholders together with the notice of meeting 15 working days prior to the AGM.

Complied

C2 Communication with Shareholders

C2 The Board should implement effective communication with shareholders

The AGM, Annual Report and other General Meetings (as and when required) are the primary means of communication with shareholders. Additionally, the Company makes disclosures on material and price sensitive matters from time to time to the CSE for dissemination among the public.

Complied

C.2.1 There should be a channel to reach all shareholders of the Company in order to disseminate timely information.

Refer comment given under C.2. Complied Complied

C.2.2 The Company should disclose the policy and methodology for communication with shareholders

The Company’s policy on information dissemination is based on the prime need of creating a fair market for the Company’s securities among all market participants. Hence the Company focuses on accurate, timely, relevant and open information dissemination and communication so as to avoid any market malpractice or doubt.

Complied




C.2.3 The Company should disclose how they implement the above policy and methodology.

The Company has disclosed the contact information in all their publications and always encourage our shareholders to connect with us. Apart from that in our website we have allocated a separate page indicating Investor information such as the market price per share

Complied

C.2.4 The Company should disclose the contact person for such communication.

The point of contact is given in the Corporate information of this Report

Complied

C.2.5 There should be a process to make all Directors aware of major issues and concerns of shareholders, and this process has to be disclosed by the Company.

The shareholders are free to correspond with the Board either directly or through the Company Secretary as they wish. The Directors can also be met by the shareholders on appointment. The Company Secretary keeps a record of all valid correspondence from the shareholders and directs them to the appropriate Board member who in return would respond as necessary.

Complied

C.2.6 The Company should decide the person to contact in relation to shareholder matters. The relevant person with statutory responsibilities to contact in relation to shareholder matters is the Company Secretary or his/her absence should be a member of the Board of Directors.

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

Complied

C.2.7 The process for responding to shareholder matters should be formulated by the Board and disclosed.

Responses for shareholder queries directly sent to individual members of the Board are sent by the respective members. Queries directed to the Company Secretary are responded by the Directors via the Company Secretary.

Complied

C.3 Major and Material Transactions

C.3 Further to complying with the requirements under the Companies Act, Securities and Exchange Commission law and Colombo Stock Exchange regulations; as applicable, Directors should disclose to shareholders all proposed material transactions, which if entered into, would materially alter/vary the Company's net assets base or in the case of a Company with subsidiaries, the consolidated group net asset base.

Refer the Related Party Transactions Review Committee Report on page 104 and Note 25 of Notes to the Financial Statements.

Complied



C.3.1 Prior to a company engaging in or committing to a major related party involving the acquisition, sale or disposition of greater than one-third of the value of the Company’s assets or that of a subsidiary which has a material bearing on the Company and/or consolidated net assets of the Company, or a transaction which has or is likely to have the effect of the Company acquiring obligations and liabilities, of greater than one-third of the value of the Company’s assets, Directors should disclose to shareholders the purpose and material facts of such transactions and obtain shareholders’ approval by ordinary resolution at an Extraordinary General Meeting, It also applies to transactions which have the purpose or effect of substantially altering the nature of the business carried on by the Company.


Complied

C.3.2 Public listed companies should in addition comply with the disclosure requirements and shareholder approval by special resolution as required by the rules and regulation of the Securities Exchange Commission and by the Colombo Stock Exchange


Complied

D. Accountability and Audit

D.1 Financial Reporting Complied

D.1 The Board should present a balanced and understandable assessment of the Company's financial position, performance, business model, governance structure, risk management, internal controls and challenges, opportunities and prospects.

The Annual Report of the Board of Directors on the Affairs of the Company making the relevant declarations is given on page 106 of this Report.

Complied

D.1.1 The Board should present an annual report including financial statements that is true and fair, balanced and understandable and prepared in accordance with the relevant laws and regulations and any deviation being clearly explained.

Refer Financial Report on Pages 118 to 171 Complied




D.1.2 The Board's responsibility to present a balanced and understandable assessment extends to interim and other price-sensitive public reports and reports to regulators, as well as to information required to be presented by statutory requirements.

Audited Financial Statements giving a true and fair view of the operations of the Company, Interim Financial Statements and other price sensitive disclosures are made by the Company periodically and as and when required in accordance with the applicable rules and regulations.

In these aspects the Company complied with the requirements of the Companies Act No. 07 of 2007, Registrar of Companies, Department of Inland Revenue and Sri Lanka Accounting Standards and reporting requirements of the Colombo Stock Exchange and the Securities and Exchange Commission of Sri Lanka.

Complied

D.1.3 The Board should, before it approves the Company's financial statements for a financial period, obtain from its Chief Executive Officer and Chief Financial Officer a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the Company and that the system of risk management and internal control was operating effectively.

The Financial statements itself has the respective declaration stating that all standards, legal requirements are met with and the GM - Finance signs the financial statements below that declaration. Apart from that and annual declaration is also signed by the GM - Finance confirming the same.

Complied

D.1.4 The Directors' Report, which forms part of the Annual Report, should contain declarations by the Directors to the effect that

The Annual Report of the Board of Directors on the Affairs of the Company making the relevant declarations, is given on page 106 of this Report.

Complied

D.1.5 The Annual Report should contain a statement setting out the responsibilities of the Board for the preparation and presentation of financial statements, together with a statement by the Auditors about their reporting responsibilities. Further, the Annual Report should contain a Report/Statement on Internal Control. (Refer Schedule L for the contents of the Statement on Internal Control).

‘Directors responsibility for Financial Reporting’, ‘Statement of Auditors’ and the ‘Directors Statement on Internal Control’ are given on pages 111, 114 to 117 and 112 respectively.

Complied

D.1.6 The Annual Report should contain a ‘Management Discussion and Analysis’

‘Management Discussion and Analysis’ is given on pages 02 to 11 of this Report

Complied

D.1.7 In the event the net assets of the Company fall below 50% of the value of the Company’s shareholders’ funds, the Directors shall forthwith summon an Extraordinary General Meeting of the Company to notify shareholders of the position and of remedial action being taken

Not applicable as there was no serious loss of capital during the year.

N/A



D.1.8 The Board should adequately and accurately disclose the related party transactions in its Annual Report

The Company has set in place an effective and comprehensive system of internal control for identifying, recording and disclosing related party transactions. This system ratified by the Board ensures that there is no conflict of interest when transacting with related parties and that there will be no bias favorable treatment.

All related party transactions as defined in Sri Lanka Accounting Standards – LKAS 24 ‘Related Party Transactions’ are disclosed in Note 25 to the Financial Statements.

Complied

D2 Risk Management and Internal Controls

D2 The board is responsible for determining the nature and extent of the principal risks it is willing to take in achieving its strategic objectives. The Board should have a process of risk management and a sound system of internal control to safeguard shareholders' investments and the Company's assets. Broadly, risk management and internal control is a process, effected by a Company's Board of Directors and management, designed to provide reasonable assurance regarding the achievement of Company's objectives

The Company operates with a sound system of internal control within an integrated risk management framework that is formulated and ratified by the Board. This system ensures that shareholders interests and Company assets are safeguarded.The Board Audit Committee is responsible to the Board for ensuring the effective operation of the system of internal controls to achieve objectives of the Company.

Complied

D2.1 The board should monitor the company's risk management and internal control systems and, at least annually, carry out a review of their effectiveness, and report on that review in the annual report. The monitoring and review should cover all material controls, including financial, operational and compliance controls.

The Board is responsible for formulating and implementing appropriate systems of internal control for the Group and in turn assessing its effectiveness. The Group's internal audit division assists the Board of Directors and the Audit Committee in carrying out the above task. Any internal control system has its inherent limitations. The Board is aware of the inherent limitations and has taken appropriate steps to minimise same.

The Directors' responsibility for maintaining a sound system of internal control is given in the Board of Directors' Statement on Internal Control on page 112

Complied

D2.2 The directors should confirm in the annual report that they have carried out a robust assessment of the principal risks facing the company, including those that would threaten its business model, future performance, solvency or liquidity. The directors should describe those risks and explain how they are being managed or mitigated.

The confirmation of the Risk assessment conducted and the principal risks faced by the Company are disclosed in the Risk Management Review is given on page 70 of this Report.

Complied




D2.3 Companies should have an internal audit function.

The company internal audit function has been carried out by holding company internal audit team and overseen by the Board Audit Committee.

Complied

D2.4 The Board should require the Audit Committee to carry out reviews of the process and effectiveness of risk Management and internal controls and to document to the Board and Board takes the responsibility for the disclosures on internal controls.

Operation and review of internal controls is done by the Internal Audit function as a continuous and on going process including internal control over financial reporting. These reports are forwarded to the Audit Committee for review to ensure that the system of internal control and the risk management process are effective. The Board is responsible for making disclosures on internal controls.

In 2018/19 the Board reviewed the effectiveness of the system of internal control in place within the Company and directed to upgrade same as required

Complied

D2.5 The responsibilities of Directors in maintaining a sound system of internal control and the contents of the Statement of Internal Control should be in accordance with the Schedule K

Refer page 112 for the ‘Directors Statement on Internal Controls’.

Complied

D.3 Audit Committee

D.3 The Board should establish formal and transparent arrangements for considering how they should select and apply accounting policies, financial reporting and internal control principles and maintaining an appropriate relationship with the Company’s Auditors

Accounting policies and financial reporting principles of the Company are formulated so as to ensure compliance with all applicable standards, rules and other regulations. At times the guidance of the External Auditors is also sought in this process.

Complied

D.3.1 The Audit Committee should be comprised a minimum of two independent Non-Executive Directors (in instances where a Company has only two Directors on its Board) or exclusively by Non-Executive Directors, a majority of whom should be independent, whichever is higher. The Chairman of the Committee should be a Non-Executive Director appointed by the Board.

The Audit Committee comprises three Independent Non-Executive Directors and one Non-Executive Director of the Board. The Chairman of the Committee is an Independent Non-Executive Director

Complied

D.3.2 The Audit Committee should have a written Terms of Reference, dealing clearly with its authority and duties. The Audit Committee's written Terms of Reference must address

SML has developed a Charter for the Audit Committee clearly defining the objective/ Duties of the Committee, each member’s duties and responsibilities and administrative arrangements etc.

Complied



D3.3 DISCLOSURES

D.3.3 A separate section of the annual report should describe the work of the committee in discharging its responsibilities.

The Audit committee report enhances a descriptive note regarding the Audit committee and how they discharge their duties and also show how they have allocated their valuable time by participating to the meetings and decision making. (Ref. Page 101)

Complied

D4 Related Party Transaction Review Committee

D4 The Board should establish a procedure to ensure that the Company does not engage in transactions with "related parties" in a manner that would grant such parties "more favorable treatment" than that accorded to third parties in the normal course of business.

As a group norm when transacting with Related parties of the group the responsible parties stress on the price at which the transaction takes place to make sure that neither the buyer nor the seller will gain extra ordinary gain through the same.

Complied

D4.1 A related party and related party transactions will be as defined in LKAS 24.

Company has considered the guidelines provided in the LKAS 24 in defining the Related parties, in developing the charter for the Related Party Transaction committee.

Complied

D4.2 The Board should establish a Related Party Transactions (RPT) Review Committee consisting exclusively of Non-Executive Directors with a minimum of three Non-Executive Directors of whom the majority should be independent. Executive Directors may attend by invitation. The Chairman should be an Independent Non-Executive Director appointed by the Board.

In compliance with the requirements of the voluntary code of the Corporate Governance the Related Party Transaction Review Committee comprise of three Non-Executive Directors who are also independent. Also the COO/Executive Director attend the meetings upon invitation by the committee.

Complied

D4.3 RPT Review Committee should have written terms of reference dealing clearly with its authority and duties which should be approved by the Board of Directors

Company has developed a Charter for the Related Party Transaction Review Committee clearly defining the objective/ Duties of the Committee, each member’s duties and responsibilities and administrative arrangements etc.

Complied

D5 Code of Business Conduct and Ethics

D5 Companies must adopt a Code of Business Conduct & Ethics for Directors and Key Management Personnel and must promptly disclose any waivers of the Code for Directors or others.

Refer pages 38 to 69 of this Report. – Corporate governance – Board of Directors.

Complied

D5.1 All Companies must disclose whether they have a Code of Business Conduct and Ethics for Directors and Key Management Personnel and if they have such a Code, make an affirmative declaration in the Annual Report that all Directors and Key Management Personnel have declared compliance with such Code and if unable to make that declaration, state why they are unable to do so. Each Company may determine its own policies in the formulation of such a Code.

Access Engineering Group has a Code of Ethics which includes the code of conduct and is circulated to Directors and all employees. The Board ensures that the Directors and the employees strictly adhere to the Code of Ethics of the Company in their duties so as not to adversely affect the brand of access in any manner. The violation of the code of ethics is an offence which is subject to disciplinary action.

Complied




D5.2 The Company should have a process in placed to ensure that material and price sensitive information is promptly identified and reported in accordance with the relevant regulations.

The price sensitive transactions relating to Investments are monitored through the Audit Committee. Significant matters are informed to the board for further action

Complied

D5.3 The Company should establish a policy, process for monitoring, and disclosure of shares purchased by any director, Key Management Personnel or any other employee involved in financial reporting.

Refer the report of the Related Party Transaction Review Committee on page 104

Complied

D5.4 The Chairman must affirm in the Company's Annual Report that a code of conduct and ethics has been introduced companywide and the procedure for disseminating, monitoring and compliance with that code. He must also disclose that he is not aware of any violation of any of the provisions of the Code of Business Conduct & Ethics.

Refer pages 38 to 69 of this Report. – Corporate governance – Board of Directors.

Complied

D6 Corporate Governance Disclosures

D6 Directors should be required to disclose the extent to which the Company adheres to established principles and practices of good Corporate Governance

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

Complied

D6.1 The Directors should include in the Company's Annual Report, a Corporate Governance Report setting out the manner and extent to which the Company has complied with the principles and provisions of this Code.

Same as D.5 Complied

E. Institutional Investors

E.1 Shareholder Voting

E.1 Institutional shareholders have a responsibility to make considered use of their votes and should be encouraged to ensure their voting intentions are translated into practice.

Board encourages the active participation of Institutional shareholders at the AGM. In addition, Executive Directors meet institutional shareholders upon their request to discuss about the Company’s past performance and future strategies.

Complied

E.1.1 A listed company should conduct a regular and structured dialogue with shareholders based on a mutual understanding of objectives. Arising from such dialogue, the Chairman should ensure the views of shareholders are communicated to the Board as a whole

The most structured and continuous dialogue theCompany has with the shareholders is the AGM.The Chairman is available to meet shareholdersat the end of each AGM and can be met onappointment on other occasions. The Chairmanthen communicates the views and concerns ofshareholders to the Board as a whole.

Complied



E.2 Evaluation of Governance Disclosure

E.2 When evaluating Companies’ governance arrangements, particularly those relating to Board structure and composition, institutional investors should be encouraged to give due weight to all relevant factors drawn to their attention.

Institutional investors are encouraged to givedue weight to all relevant factors drawn to theirattention in evaluating Companies’ governancearrangements.

Complied

F.1 Investing/Divesting Decisions

F.1 Individual shareholders, investing directly in shares of companies should be encouraged to carry out adequate analysis or seek independent advice in investing or divesting decisions.

The Company encourages individual shareholdersto carry-out adequate analysis or seek independent advice in investing or divesting decisions. The Company facilitates this process by providing information necessary for the same on a timely and unbiased basis.This Integrated Report prepared by the Company gives sufficient information to shareholders tocarry out their own analysis of the Company andits operations.

Complied

F.2 Individual shareholders should be encouraged to participate in General Meetings of companies and exercise their voting rights.

The Company encourages individual shareholdersto participate in General Meetings and exercisetheir voting rights.

Complied

G Internet of things and cyber security.

G.1 Process to identify how the externel IT devices Report could connect to the organisation's network

Refer Risk Management on pages 70 - 73 of this Annual Report (Information & Technology Risk)

Complied

G.2 Appointment of a Chief Information Security Officer (CISO)

The functions of the CISO is carried out by the Manager IT reported to Executive Director

G.3 Allocation of adequate time on the board hewn; ig agenda for discussions on cyber risk management

Relevant risks are discussed at internal audit report and reported the same to Audit committee. High risk matters referred to the Board for further actions

G.4 Independent peroicdic review of the effectiveness on the cyber security risk management and the scope and the frequency of the review

Address issues at IRM annual Audit done by an independent third party and reported issues through Management Letter

Complied

G.5 Cyber security process Company adhere required level of Cyber security analysing the gravity of requirement. IT division doing routing process to mitigate the risk

Complied

H Environment, Society and Governance (ESG)

H.1.1 Reporting of ESG Factors Refer Pages 88 to 98 of the Annual Report - Human, Intellectual, Manufacturing, Natural, Social and Relationship Capital

Complied

H.1.2 Environmental Factors Refer Pages 88 to 98 of the Annual Report Human, Intellectual, Manufacturing, Natural, Social and Relationship Capital

Complied




H.1.3 Social Factors Refer Pages 88 to 98 of the Annual Report Complied

H.1.4 Governance Refer Pages 38 to 69 of the Annual Report – Corporate Governance for this requirement

Complied

H.1.5 Board’s role on ESG Factors SML understands its role and responsibility in ESG reporting and ensure that the company adheres to the ESG reporting requirements.

Complied

Complied

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


Section 168 – Contents of Annual Report

(1) (a) The nature of the business of the Group and theCompany together with any change thereof during the accounting period


(1) (b) Signed Financial Statements of the Group and the Company for the accounting period completed

Financial Statements Complied

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

Independent Auditors’ Report Complied

(1) (d) Change in accounting policies made during theaccounting period


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


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


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


(1) (h) Names of the persons holding office as Directors of the Company as at the end of the accounting period and the names of any persons who ceased to hold office as Directors of the Company during the accounting period

Board of Directors Complied

(1) (i) Amounts payable by the Company to the person or firm holding office as Auditor of the Company as audit fees and as a separate item, fees payable by the Company for otherservices provided by that person or firm


(1) (j) Particulars of any relationship (other than that of Auditor) which the Auditor has with or any interests which the Auditor has in, the Company or any of its subsidiaries


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

Financial Statements Complied


The way we manage risk

Shaped by Our culture and values,

guiding our approach to risk management

Determined byOur overall strategy and objectives

reflective our risk appetite

Governed byPolicies defining risk

management and control standards for all our operations

Supported byTraining on topics such as internal control, ethics, anti-fraud, authority limits. crisis and business continuity

management and compliance

Risk Management

Pillars

The company reviews principal risks regularly, because it is operated in a dynamic environment where new risks may arise or previously identified risks may have a different impact. Effectively managing risks is the responsibility of all employees. Managers are accountable for allocating required resources to successfully manage the risks they own. Risk management responsibilities

The Board of Directors

� Approves strategic objectives and validates risk appetite � Reviews the Group’s key risks and mitigating measures � Reviews the Company’s risk management and internal control systems � Assesses these systems’ effectiveness through its Audit committee

Senior Management � Established effective internal control systems through standard operating procedures � Defines and allocates risk appetite � Makes decisions when substantial risk is at stake � Evaluates the adequacy of risk mitigation plans

� Provides independent assurance of the effectiveness of the company’s risk management and internal control frameworks and activities.

Internal Audit

� Develops and promotes Enterprise risk management framework to help managers identify, assess, manage, monitor and report risks.

� Facilitates reviews of the design and implementation of internal controls.

Corporate Risk Management

� Identifies, takes and manages risks in their areas of responsibility

� Maintains day-to-day internal control

Business Management

� Define internal control policies and provide guidance in their areas.

� Develop risk management culture and awareness of internal controls.

� Establish discipline and act as guardrails.

Support Functions

The Risk Management Review aims to provide an inclusive view of the Risk Management Systems, procedures and protocols that operate throughout the Company. The Board needs reasonable assurance that our risk management and reporting systems remain sound. So we have a range of policies and processes involving both internal and independent controls: Internal Audit and external auditors. These are designed to strike the right balance between cost and effectiveness. Together, they aim to help us achieve our business objectives while cutting to an acceptable minimum the risk of operational failures, misstatements, inaccuracies and errors, fraud and non-compliance with laws and regulations.

Risk Management Review


Company Risk Management Process has Five Key Elements:

Establish the Context

Risk Identification

Risk Analysis

Risk Evaluation

Risk Treatment

Communication and Consultation

Monitoring and Review

Risk Assessments

SML defines the pivotal area of Risk Management as the organized application of management Policies, procedures and practices for the establishment of relevant context, identification, analysis, mitigation, monitoring and thereby and communication of all risks. While the Company’s Risk Management framework is efficiently incorporated into the planning process, itself focuses on the effective achievement of objectives through mitigation, monitoring and thereby communication of all risks. Through a dynamic process, risks are identified and evaluated at appropriate levels throughout the company. This process is regularly reviewed by the Management Committee as a part of the company’s organisational and operational approach to Risk Management.

The company’s Risk Management Process ensures comprehensive identification and understanding of the risks, and enables the design and implementation of an effective plan to prevent losses or minimise the impact of any loss in the event that it occurs. The timely recognition and appropriate handling of these operational threats is incorporated into the company’s Risk Management process.

Substantial strategic controls of operational risks which require efficient management is enabled through policies and procedures which are covered by the company’s internal audit process. This includes the strict financial controls, and processes and systems which focus on monitoring and reporting matters related to the continued effectiveness of the system of internal controls. Having an accurate understanding of all possible risks enables the company to mitigate risks by implementation of timely decisions.

In addition to the above the company’s Risk Management process would cover curbing the loss of valuable resources including time, assets, income, property and people, protecting the reputation and public image of the organization, preventing or reducing legal liabilities and enhancing the Company’s smooth operations.


Mitigating Top RisksWe determine our company top risks through a review process that analyses the risks facing the company and it's business units, in relation to SML’s near- to medium-term strategy and longer-term aspirations, in the context of the external and internal environment.Top risks include those risks and opportunities that have a direct potential impact on income, expenditure and capital as these are the main drivers of the approved financial risk appetite and tolerance metrics, achievement of longer-term strategic objectives, reputation and/or delivery on near- to medium-term business plans.

Top Risk Context Mitigation

Finance Risk (Credit risk, Exchange rate fluctuation risk and interest rate change risk)

Probability of loss inherent in financing methods which may impair the ability to provide an adequate return.

Credit risk is the possibility of a loss resulting from a buyer's failure to meet contractual obligations. It refers to the risk that a seller may not receive the owed receivable balance, which results in an interruption of cash flows and increased costs for collection.

Interest rate risk exists in an interest-bearing asset, such as a loan or a bond, due to the possibility of a change in the asset's value resulting from the variability of interest rates.

� Evaluate the customer financial background, operational risk before allocating the credit facilities, introduced higher discount for early settlements, closely monitor the credit customer settlements, and obtain the bank guarantees as collaterals to mitigate the credit risk at affordable level.

� Evaluate the recoverability of outstanding balances at each reporting period end.

� Liquidity risk is managed by enhancing the existing bank facilities, registered new banks to the company with new bank facilities.

� Negotiate with banks to reduce the interest rate on bank term loans, import loans and bank OD facilities.

Risk of non-availability of sufficient management and technical skills

Company is reliant on sufficient management and technical skills, including qualified professionals such as technicians, engineers and operators as well as seasoned managers, to improve and optimize our existing businesses and advance the company growth.

� We have a strategic talent management framework in place that spans the key talent management drivers of attraction, development and retention.

� We focus on developing levels of competence, as well as in a wide range of skills development and learner-ship programmes aimed at the skill sets we require. Whereby technical staff is sent to ISUZU Japan on training and to face the technical competitions organized by them.

� Succession management and development is crucial for our growth and the development of critical skills in our businesses.

� We have refocused our critical skills programmes to address our skills gaps.

� SML provides attractive performance based incentives.

Risk of complexity of public policy and regulatory developments and non compliance with laws, regulations and standards

This risk is associated with changes in Government policies, laws, regulations and statutes. Compliance Risk relates to a company being able to comply with all the laws, regulations and statutes applicable to a country.

� The Company constantly keeps abreast of changes to the Regulatory framework to mitigate the risk associated therein.

� We are focused on identifying changes in the regulatory landscape and ensuring that we are prepared to respond to these changes.

� We have systems and processes in place to ensure compliance with applicable laws and regulations.

� Setting the appropriate policies and procedures to improve the control environment.

Risk Management Review Contd.


Top Risk Context Mitigation

Competition Risk

Increased competition has the possibility of reducing market share and margins

� Increasing productivity and efficiency in order to ensure our prices remain competitive despite

� Increasing efficiency through Research and Development, investment in new technology and the adoption of best practices

� Company offers free service clinics in different locations with the presence of Japanese engineers and offering a warranty period , free of charge services during the warranty period

Risk of macroeconomicFactors impacting onSML’s ability to sustain the business and execute our growth strategy

Company’s ability to sustain the business and execute on its growth strategy depends on key macro-economic factors that drive near- to medium-term business plans and long-term strategic decisions.Unexpected, unanticipated changes or sustained periods of unfavourable macro-economic conditions may impact earnings, cash flow, liquidity and growth.

� Our planning assumptions take account of important near- to medium-term and long-term drivers related to key macro-economic factors.

� We monitor the external environment continuously and adjust our planning assumptions accordingly.

� We implemented the Business Performance Enhancement Programme to assist the organisation in responding to unfavourable macro-economic conditions.

� We closely monitor the Board-approved risk appetite measures for specific financial metrics and actively manage cash flow and liquidity.

Risk of not delivering on strategic growth objectives

Lower long-term macroeconomic factors, as a result of market weakness, which impacts capital available to achieve growth targets, may impact the company’s ability to timeously execute its growth initiatives in line with the strategy.

� We are focusing on identifying the necessary business development and other activities that should be prioritised and executed in this current low capital environment.

� We are aligning capital allocation principles with company earnings growth and asset return targets, taking balance sheet and funding risks into consideration.

� We are refocusing our capital portfolio to enable flexibility in terms of investment strategies and choices aligned to company financial growth and return targets.

Information Technology related Risk

Breakdowns and failures in information systems and the use of obsolete systems will adversely affect the smooth operations of the Company

� A well designed and secured Information Technology security infrastructure has been implemented throughout the organization. The security infrastructure includes: recovery strategies, data back –ups stored at off- site locations, virus scanners, proxy servers.

� Compliance of security infrastructure is regularly monitored. � The company carries out regular meetings with the IT service provider

to identify the requirement to upgrade the present system.

Fraud risk Fraud risk arises due to weaknesses in the internal controls, which could result in financial losses

� The Internal Audit Department conducts audits on a regular basis in the areas, which are susceptible to the occurrence of frauds

� Authority and approval limits are implemented for all the functions of the Company, making the employees accountable for their actions

� Ensuring appropriate segregation of duties � Every key activity is subjected to the scrutiny of another suitably skilled

and authorised employee � When fraud is detected, immediate remedial action is taken to prevent

repetition � Employees are encouraged to report any genuine concerns regarding

fraud and malpractice


Global Economic OutlookGlobal economic expansion decelerated to 3.3 percent in the second half of the year 2018 from 3.8 percent in 2017. China’s growth dropped due to trade tensions with the United States as well as required regulatory constrictions to curb shadow banking. Euro area too experienced a slow down as car production in Germany experienced a disruption following the introduction of new emission standards. Lack of confidence from consumers and businesses contributed to the economic slowdown in the Euro area. Following trade tensions and tariff increases between the United States and China, business confidence dropped and financial conditions tightened.

Nevertheless, financial and economic conditions eased in 2019, following US Federal Reserves more accommodative monetary policy stance. Following a US-China trade deal, markets became more optimistic even though more cautiously than before.

The economic outlook for many countries is still damp driven by considerable uncertainties, in particular in advanced economies.

In the second half of the year 2019, economic activity is expected to pick up backed by more accommodative monetary policy stances from the European Central Bank, the Bank of Japan, and the Bank of England. The US Federal Reserve too paused interest rates and indicated no increase for the remaining part of the year in response to accelerating global risks. Tensions between US and China are on the mend given the prospects of a trade agreement.

Global & Local Economic Outlook

These policy reverses have helped the financial market to recover to some degree. Developing markets have witnessed a recommencement in portfolio flows and a strengthening of currencies in relation to the dollar.

With measures of industrial production and investment continuing to be weak for both developed and developing economies, improvements in the real economy is lagging behind the rapid recovery of the financial market.

The truce on trade policy is subject to sudden flare ups which could lead to instability in areas such as the auto industry with disruptions in the global supply chains. Growth prospects in China may decrease and heightened risks surround the possibility of a no deal Brexit.

Given a favourable scenario where downside risks do not materialise and policy support remains strong, global growth will return to 3.6 percent in 2020. Nevertheless, if major risks occur, expected recoveries in export-dependent, stressed economies as well as highly indebted economies remain doubtful.

Local Economic OutlookSri Lanka economic GDP GrowthSri Lanka’s real GDP growth was at 3.2 percent in 2018 in comparison to the growth of 3.4 recorded in 2017. This moderate growth was supported by the 4.7 percent growth experienced in services activities as well as the recovery in agricultural activities following more favourable weather conditions. Agricultural activities recorded a growth of 4.8 percent in comparison to the contraction of 0.4 percent experienced in the year before. Industry activities however slowed down to a 0.9 percent in 2018. Manufacturing activities grew by 3.0 percent in 2018 driven by production in food and beverage sectors, apparel production, coke and refined petroleum products as well as textiles. Transportation activities which accounted for 10.8 percent of GDP, grew by 2.8 percent in 2018. InflationIn spite of rupee depreciation against major currencies as well as price pressure from increasing domestic petroleum prices, headline and core inflation remained moderate in 2018. This status quo was the result of well-defined inflation expectations and an enhanced and appropriate monetary policy framework.

Apart from a shortlived hike in mid-2018, headline inflation measured by the year-on-year change in the Colombo Consumer Price Index (CCPI, 2013=100) indicated a downward trend. The mid-year hike was the result of increase in domestic petroleum prices and unstable food prices. By end of the year, headline inflation based on CCPI dropped to 2.8 percent from 7.1 percent in 2017. Headline inflation calculated by the the year-on-year change in the National Consumer Price Index (NCPI 2013=100), mirrored the same movement with a sharp decline to 0.4 percent in December 2018 from 7.3 percent recorded by end 2017.


Interest RatesMarket lending rates and deposit interest rates of commercial banks to remained high amidst constricted liquidity conditions and tight monetary policy stances that were maintained up until April 2018. With policy rate adjustments in April 2018, some deposit rates declined but most deposit and lending rates of commercial banks increased. As such, the Average Weighted Deposit Rate (AWDR dropped to 8.81 percent by end 2018 from 9.07 percent recorded at end 2017.

The Average Weighted Lending Rate (AWLR) increased to 14.40 per cent by end 2018 from 13.88 at end 2017. This rise in interest rate was driven by tight liquidity conditions and high demand for credit.

Exchange RateThe Sri Lankan rupee depreciated by 16.4 percent against the US dollar in 2018. While exchange rate remained stable during the first four months of 2018, a combination of domestic and external factors caused the Sri Lankan rupee to depreciate against major currencies, illustrating pressure generated by constricted liquidity conditions in the domestic foreign exchange market and global financial market environment.

Regulatory DevelopmentsFrom October 2018, a hundred percent minimum cash requirement (later raised to 200 percent) was imposed against Letters of Credit (LC) for the importation of motor vehicles. The Central Bank issued Banking Act directions to all licensed banks informing Loan to Value Ratios (LTV) when granting credit facilities for purchase or utilisation of vehicles. Nevertheless, businesses engaged in tourism and business that import vehicles for core business operations were exempt from the LTV ratios.


Company Performance Review

Vehicle Sales Vehicle Sales is the core business of SATHOSA Motors (SML) with focus on the Japanese truck (ISUZU brand) market. In addition to ISUZU brand trucks, SML’s vehicle portfolio includes ISUZU Double Cabs and Buses. Technological expertise and long-term and cordial relations with Japanese vehicle manufacturers sets SML apart from the rest in the industry. Our after sales services, supply of genuine spare parts and customised and excellent customer care contribute to reinforce SML’s product and service offerings.

Vehicle sales in the industry as well as SML are heavily impacted by interest rates, exchange rate fluctuations, economic stability and policy changes. In 2018, SML’s vehicle sales recorded a drop in the backdrop of pressure imposed by the abrupt implementation of EURO 4 standards as well as the influx of reconditioned and used vehicles.

Company Revenue within the Past Five Years

14\15 18/1916/17 17/1815/160

5001,0001,500

3,000

2,000

3,500

5,000

2,500

4,5004,000

Revenue Comparison (Company)

Vehicle Sales Workshop RepairSpare Part

(Rs. Mn)

Key risks and mitigation

Risks

Sensitivity to Currency Rates

and Interest Rates Fluctuations.

Government Regulations

Competition from the used vehicle

segment

Mitigation Tactics

Strengthening technological

proficiency and brand differentiation

Strong governance framework

Comprehensive warranty for brand

new vehicles

14/1

5

18/1

9

16/1

7

17/1

8

15/1

6

-

100

500

200

600

300

700

400

800900

No of Units


After Sales Services and Spare Parts SML provides genuine spare parts for ISUZU brand vehicles. Moreover, we provide unparalleled after sales services at our state-of-the art workshops. Revenue generated from Spare Parts sales and after sales services account for 11.5% of overall revenue of SML. While we fulfill the requirement for genuine spare parts for ISUZU brand commercial vehicles, SML’s technological expertise adds value to the services we provide our customers. SML workshops engage skilled and technologically proficient professionals who continue to upgrade their skills through periodical training provided by the Company.

While SML faces competition from grey spare parts markets, customer brand loyalty and knowledge drives demand for genuine spare parts. Ongoing regional developments of commercial vehicle sales by SML and infrastructure development across the country will contribute to increase the running mileage of vehicles which in turn will increase demand for spare parts.

After sales services add value to our service offerings and provides an incentive to customers to remain loyal to SML. Mindful of this, we invested heavily in establishing new workshop facilities and upgrading the existing workshops with the latest tools and machinery in the market to provide our customers with enhanced services. Moreover, we continue to nurture our relationships with customers through providing them opportunities to acquire technical skills with regard to ISUZU brand vehicles through various programmes including visits to ISUZU manufacturing plants in Japan. We also provide after sale services free of charge to newly purchased vehicles.

SML will continue to invest in modernising workshops to continue to offer exceptional after sales services and offer training to employees to enhance technical skills and knowledge.

Key Risks and Mitigation

Risks Mitigation Tactics

Substitute service stations

SML offers exceptional

and extensive after sales care

to gain and retain customer

confidence. Enhanced technical

proficiency of SML

differentiates its services.

Availability of grey spare

parts

Focused communication

strategy to educate

customers of the importance and efficiency

of genuine spare parts

Sensitivity to currency and Interest Rate Fluctuation

Comprehensive warranty for brand

new vehicles

Competition from the

used vehicle segment


Value Creation Model

Financial CapitalShareholder’s Funds Other Economic Resources

Manufactured CapitalOwn & Leased Land and BuildingsMachineryEquipment

Human CapitalEmployee BaseEmployee Competencies

Intellectual CapitalInternal SystemsProcessesIndustry Expertise

Relationship CapitalCustomer PortfolioBusiness Partner PortfolioBrand Value

Natural CapitalUtilities

Inp

uts

Op

erat

ion

s

Core

Act

ivit

ies

VEHICLE SALES

RISK MANAGEMENT

MARKETING AND SALES

REPAIR, SERVICE &

MAINTENANCE

SPAREPARTS


VEHICLE SALES

ShareholdersProfits Retained - LKR 75,742,092Dividends - Nil

CustomersSales - LKR 4,136,237,229

Business PartnersPurchases - LKR 3,500,229,980Finance Cost LKR 255,506,018

EmployeesRemuneration LKR 166,623,907Ou

tpu

t(V

alu

e C

reat

ed)

ECO

NO

MIC

, SO

CIA

L A

ND

EN

VIR

ON

MEN

TAL

VA

LUE

SERVICE

GovernmentTaxes LKR 90,586,349

STRIVING FOR SUSTAINABILITY


Introduction to Capital Management

Our six capitals form the basis of our value creation process. The quality of the capitals and the way we mix those have a significant impact on our ability to create short, medium and long term value. SML’s capitals store required value for long-term value creation on behalf of all stakeholders of the Company. Hence, the effective management of the six capitals is a criterion of the Company’s success.

Financial Capital

Human Capital

Manufactured Capital

Intellectual Capital

Natural Capital

Social and Relationship Capital


Financial Capital

Financial Capital plays a vital role in facilitating expansion of operations, acquisition of property (manufactured capital) and ultimately creation of economic value. SML employs multiple methods to effectively manage financial capital and to optimize value creation. These methods include efficient allocation of financial resources, managing monetized capital and reviewing financial performance in a consistent manner.

Creating Value Through Effective Utilisation of Financial Capital

� Equity � Working

Capital � Non-current

assets

� Cost of capital � Liquidity � Profitability

� Brand value � Economic

value � Shareholder

value

INP

UTS

OU

TP

UTS

VA

LUE

CR

EAT

ED

Financial Performance Review RevenueDuring the year under review, SML recorded a revenue drop of 18.7 percent in comparison to the previous financial year. The less than desirable external environment in view of restrictions imposed by the implementation of EURO 4 standards and the influx of reconditioned and used vehicles contributed to the slow growth stance. Nevertheless, the Group recorded a revenue increment of 36.1 percent in comparison to the previous financial year.

14\1

5

18\1

9

16\1

7

17\1

8

15\1

6

-

1,000

2,000

3,000

4,000

5,000

Revenue Comparison (Company)

Vehicle Sales

Spare Part SalesWorkshop Repair

Rs. Mn

14\1

5

18\1

9

16\1

7

17\1

8

15\1

6

-

2,000

6,000

8,000

10,000

12,000

Revenue Comparison (Group)

Vehicle Sales

Spare Part SalesWorkshop Repair

Rs. Mn

4,000


Operating ExpensesThe Group operating expenses increased by 40 percent while the Company operating expenses decreased by 16.4 percent.

Profitability SML’s Gross Profit Ratio measured as a percentage of gross profits and net revenues was 11.87 percent (last year 18.31percent). The Company’s gross profits dropped to 17.3 percent (last year 20.9 percent) mainly due to increase in the vehicle landed cost.

Earnings Before Interest and Tax (EBIT)The Group EBIT decreased from 7.77 percent in 2018 to 5.34 percent in 2019 while the Company EBIT dropped from 11.01 percent to 8.52 percent year on year.

Net Finance ExpensesThe Company’s financial cost increased significantly due to capacity enhancement of the workshop operation through construction of the new workshop building in Peliyagoda as well as the increase in working capital requirements driven by the increase in the vehicle landed cost. Accordingly, the net finance expenses of the Group and the Company increased by 122 percent and 268 percent respectively.

Profit for the Year The profits of the Group decreased during the year by 54.1 percent while the profits of the Company decreased by 79.3 percent. Profit attributable to owners of the Company at the Group level stood at Rs. 134.6 Mn while the Company recorded a decrease of 65.3 during the year under review. Profit attributable to non-controlling interests stood at Rs. 41.6 Mn and a loss of Rs 3.8 Mn was recorded for the last year.

Review of Financial PositionThe Company’s total assets increased within the financial year under review driven by property investments and implementation of the fully fledged ERP system within the Company. The Company’s current assets increased as a result of higher working capital requirement .

I. Non-Current AssetsThe non-current assets of the Group and the Company increased by 13.4 percent and 14.5 percent respectively as a result of the value of the new workshop at Peliyagoda.

II. Current AssetsThe current assets of the Group and the Company increased by 38 percent and 61.2 percent respectively, driven by the increase of inventories at the Company level as well as the increase in trade receivables.

III. Total AssetsThe total assets of the Group and Company increased by 30.3 percent and 38.9 percent respectively.

IV. Non-Current LiabilitiesNon-current liabilities of the Company decreased by 16.5 percent driven by the reversal of deferred tax liability. At the Group level, non-current liabilities decreased by 10.6 percent as a result of the repayment of term loan during the year.

V. Current LiabilitiesCurrent liabilities of the Group and Company increased by 44.2 percent and 72.23 percent respectively due to obtaining short term loans from Banks and related companies to fulfill the working capital requirement.

VI. Total LiabilitiesTotal liabilities of the Group and Company increased by 30.3 percent and 38.9 percent respectively.

Financial Capital Contd.


Direct Economic Value Generated and Distributed Group Company

2018/19 2017/18 2018/19 2017/18Revenue and other income 11,276,026,427 8,272,253,862 4,136,237,229 5,055,970,879

Cost of materials and services bought in (10,147,848,639) (7,177,673,874) (3,500,229,980) (4,263,781,964)

Value Distributed 1,128,177,788 1,094,579,988 636,007,249 792,188,915

To employees as salaries

- incentive & other benefits 312,176,755 27.67% 265,208,069 24.23% 166,623,907 26.20% 144,011,000 18.18%

To providers of capital 378,375,931 33.54% 170,400,889 15.57% 255,506,018 40.17% 69,429,062 8.76%

To Government revenue 115,345,766 10.22% 133,846,214 12.23% 90,586,349 14.24% 130,563,394 16.48%

To shareholders as dividend - - 271,512,990 24.81% - - 271,512,990 34.27%

Value Retained for Expansion and Growth

Depreciation and amortisation 137,817,066 12.22% 123,865,378 11.32% 47,548,883 7.48% 34,002,764 4.29%

Profit retained 184,462,270 16.35% 129,746,448 11.85% 75,742,092 11.91% 142,669,705 18.01%

1,128,177,788 100.00% 1,094,579,988 100.00% 636,007,249 100.00% 792,188,915 100.00%

Investor CapitalAccess Engineering PLC, the parent Company of SML owns 84.42 percent of the shares.

Investor Capital StructureFrom To 31 March 2019 31 March 2018

No of Holders No of Shares % No of Holders No of Shares %

1 1,000 1,097 165,135 2.74 1,089 167,011 2.77

1,001 10,000 46 103,818 1.72 46 105,508 1.75

10,001 100,000 2 45,589 0.76 2 45,454 0.75

100,001 1,000,000 1 625,335 10.36 1 621,904 10.31

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

1,147 6,033,622 100.00 1,139 6,033,622 100.00

Categories of ShareholdersCategories of Shareholders 31March 2019 31 March 2018

No of Holders No of Shares % No of Holders No of Shares %

Local Individuals 959 252,916 4.19 949 250,498 4.15

Local Institutions 40 5,748,659 95.28 39 5,749,462 95.29

Foreign Individuals 144 30,483 0.5 147 32,098 0.53

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

1,147 6,033,622 100.00 1,139 6,033,622 100.00


Directors Shareholding as at 31 March 2019 and 2018No. Name of Director 31 March 2019 31 March 2018

No of Shares % No of Shares %

1 S J S Perera Nil Nil Nil Nil

2 HNB / T D Gunasekera 1,464 0.02 5,875 0.10

3 M M N De Silva 1,100 0.02 1,100 0.02

4 J C Joshua Nil Nil Nil Nil

5 S H S Mendis Nil Nil Nil Nil

6 S D Munasinghe Nil Nil Nil Nil

7 D A R Fernando Nil Nil Nil Nil

8 W A C O Wijesinghe Nil Nil Nil Nil

9 E S Cooray Nil Nil Nil Nil

10 R S Dahanayake Nil Nil N/A N/A

Share Price for the YearMarket price per share 2018 /19 (LKR) 2017 /18 (LKR)

Highest 550.00 448.00

12 November 2018 19 March 2018

Lowest 300.00 250.10

25 July 2018 9 August 2017

As at end of the year 457.90 440.00

Public Holding The shares that are held publicly account for 15.535 % of the total shareholding comprising 1,144 shareholders. Ordinary Voting shares of Sathosa Motors PLC have been transferred from the Main Board to Diri Savi Board, with effect from 02 July 2018.The Float adjusted market capitalisation of the Company was Rs. 429.2 Mn. The float adjusted market capitalisation of the Company falls under Option 2 of Rule 7.13.1 (b) of the Listing Rules of the Colombo Stock Exchange and the Company has complied with the minimum public holding requirement applicable under the said Option.



25 Major ShareholdersNo. Name 31 March 2019 31 March 2018

No. of shares (%) No. of shares (%)

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

2 Lakshmans Housing and Construction Co Pvt Ltd 625,335 10.364 621,904 10.307

3 Mr. M Mahibalan 32,395 0.537 32,078 0.532

4 Bank of Ceylon No. 1 Account 13,194 0.219 13,376 0.222

5 Mr. R.D. Leelaratna 8,080 0.134 5,875 0.097

6 Mr. N.A.N.D. Gunasekara 6,000 0.099 5,700 0.094

7 Mr. U.I. Suriyabandara 5,421 0.09 5,221 0.087

8 Mrs. A.N. Herath / Mrs. N.E. Herath 4,981 0.083 5,000 0.083

9 Mr. K.C. Vignarajah 4,208 0.07 4,208 0.07

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

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

12 Mr. A.H. Munasinghe 3,598 0.06 3,598 0.06

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

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

15 Mrs. S.A. Kaleel 2,500 0.041 2,500 0.041

16 Mr. N.L. Dias (Deceased) 2,400 0.04 2,400 0.04

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

18 Mr. N.I. Wikramanayake & Mr. S.N. Wikramanayake 2,206 0.037 2,206 0.037

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

20 Mr. H. Nagashima 2,000 0.033 1,000 0.017

21 Mrs. N.G.A.A.P. Ratnasekera 2,000 0.033 1,000 0.017

22 Shalshi Investments (Pvt) Ltd 2,000 0.033 2,000 0.033

23 Mr. N. Tamaguchi 2,000 0.033 2,000 0.033

24 Mrs. D.N.G. Seneviratna 2,000 0.033 2,000 0.033

25 Mr. C.J.E. Corea 2,000 0.033 2,000 0.033

5,834,582 96.701 5,826,330 96.565

Other 199,040 3.299 207,292 3.435

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


Investor RelationsClear, consistent communication with our investors is a top priority at SML. We recognise that providing accurate and timely information has always led to building long-standing relationships with them. The trust that we have built over the years with our investors have helped gain investor confidence.All material and price sensitive information is communicated to the Colombo Stock Exchange immediately. The Company website is also frequently updated with price sensitive information. Real-time trading information, Financial Statements and Company research reports are freely available online on www.sathosamotorsplc.com. We also maintain a dedicated investor relations mail.

Release Date of Interim Financial Statements 2018 / 19Quarter Due date Actual release date

1 15 August 2018 14 August 2018

2 15 November 2018 30 October 2018

3 15 February 2019 1 February 2019

4 31 May 2019 21 May 2019

Release Date of Annual Reports 2017 / 18 Due date Actual release date

Annual Report 31 August 2018 29 August 2018

AGM 30 September 2018 20 September 2018

Earnings and Dividends Last 5 Years2018/19 2017/18 2016/17 2015/16 2014/15

Group Company Group Company Group Company Group Company Group Company

22.32 13.74 64.32 66.44 43.51 48.31 53.22 52.33 43.32 41.93

EPS (LKR) 22.32 13.74 64.32 66.44 43.51 48.31 53.22 52.33 43.32 41.93

DPS (LKR)

- - 45.00 45.00 30.00 30.00 12.00 12.00 7.00 7.00

Payout (%)

- - 69.96% 67.73% 68.95% 62.10% 22.55% 22.93% 16.16% 16.69%



Risk ProfilesMindful of the risks involved in the automobile industry and the socio economic sensitive nature of the industry, SML takes prudent measures to adhere to a sound Risk Management Framework which recognises the unpredictability of the financial market. The Sri Lankan rupee depreciated against the US dollar significantly during the year under review and the current financial realities project a similar trend within the next year. As such, the Company takes prudent and appropriate measures to effectively manage foreign exchange exposure.

Financial PrioritiesSML’s strategic objectives for the next year and beyond will focus on the Company’s gross profits margins, expense management and managing external risks. The Company plans to enhance asset utilisation and manage working capital in a more efficient manner. SML will continue to manage both external and internal risk through implementing timely measures while making cost effective investments to pursue sustainable growth.


Human Capital

Our employees are the change agents that execute the Company strategy to achieve growth objectives. They are vital stakeholders in SML’s ability to create value. The Company’s Human Capital development strategy aligns with the corporate objectives, overall growth strategy and value creation objectives. This fit, or the lack of it, will ultimately impact the bottom line. When determining our HR strategy and executing it, we always base it on the Company’s strategic direction.

Creating Value through Human Capital Growth

� Skills and Knowledge Development

� Ensuring employee health and safety

� Workforce compensation and incentive plans

� Workforce demographies and diversity

� Training and development

� Employee recognition and career development opportunities

� Promoting and enabling work-life balance

� Personal accident and medical insurance cover

� Increased intellectual capital

� Employee satisfaction and retention

� Employee engagement

� Employee commitment

� Skill and Team cohesion

INP

UTS

OU

TPU

TS

VA

LUE

CR

EATE

D

Composition of the Work ForceAs at 31 March 2019, the total workforce of SML stood at 175. Since SML fulfills the demand for unskilled labour through casual or subcontract workers, the size of the workforce has to be viewed in the context of business volume and geographical spread. As a direct result of the nature of work involved, the majority of our workforce, in particular in the skilled and unskilled category is male. Nevertheless, we strive for diversity within the workplace in terms of age, experience and skills to build a strong workforce to strengthen our human capital.

Total Workforce by Category and Gender

Category Male Female Total

Management and Professional 31 08 39Technical 39 - 39Clerical and Supportive (Operational) 67 30 97Total 137 38 175

Man

agem

ent and

Profess

ional

Clerical

and Su

pportive

(Opera

tional)

Tech

nical

0

40

20

60

80

Workforce by Category and Gender

Male

Female


Total Workforce by Age Group and Gender

Age Group Male Female Total

18-20 2 - 221-25 19 2 2126-30 25 12 3731-35 18 8 2636-40 20 7 2741-45 18 4 2246-50 18 1 1951-55 14 4 18Above 55 3 - 3Total 137 38 175

18-2

0

Abo

ve 5

5

51-5

5

46-5

0

41-4

5

36-4

0

31-3

5

26-3

0

21-2

5

-

5

10

15

25

20

30

Total Workforce by Age Group and Gender

Male

Female

Province Wise Breakdown of Work Force

Province Total

Western 155Eastern 10Southern 7Other Provinces 3Total 175

Provincial wise work forces

88%

6%4% 2%

Western Southern

Eastern Other Provinces

Creating Value Through Human Capital DevelopmentSML’s human capital acts as a linchpin to drive growth and enhance the Company’s intellectual capital through knowledge and technical skill acquisition. Whilst providing employees with ample opportunities for training and skills enhancement, we simultaneously focus on rewarding and compensating employees to ensure that they are satisfied. We believe that a workforce with a continuously improving knowledge base and due compensation for their commitment leads to business growth as well as to a positive impact on the livelihoods of employees. These desired goals directly correlate with the Company’s strategic outcomes.

Training and DevelopmentOur main approach to developing our talent pool and thereby strengthening our human capital is to provide training to employees. We provide training both locally and overseas through internal and external resource persons. The training programmes were funded by the Company.


Training & DevelopmentTraining Programme within the Country

� Excel Training programme for a group of 45 employees in January & February 2019

� Budget seminar conducted by CA Sri Lanka (March 2019 at Hilton Colombo)

� Annual conference conducted by CA Sri Lanka (October 2018)

� IFS training programme conducted by IFS research and Development ( Pvt) Ltd (2018)

� Income Tax & other related tax training programme (1 month course - March 2019)

� Paperless Environment for Custom Clearance, A Seminar conducted by SL Customs

� Integrated Reporting Seminar conducted by CA Sri Lanka

Overseas Training � Service Training Programme – Euro IV

in Japan – 02 employees (04 days in August 2018)

� IGP I – LCV – 2018 in Thailand – 03 employees (04 days in September 2018)

� IGP I -13th ISUZU World Technical Championship in Japan – 03 employees (06 days in December 2018)

� Training for new ISUZU D-Max RT66 cab was held on 27 March 2019 at ISUZU Motors Thailand.

During the year we were able to provide industrial training to 32 Apprentices

Recruitment and RetentionSML’s recruitment and employee rewarding policies revolve around non-discrimination and each employee receives timely recognition and rewards based on individual merit and performance. Mindful of the fact that engaged and satisfied employees are an integral facet of human capital reinforcement, we maintain an open door policy to allow employees to voice their concerns.

� The Company has established a set of clear guidelines to:

� Recruit staff with the appropriate skills, both technical and personal in order to meet the Company’s current and future needs.

� Ensure consistency among all business units in the recruitment and selection process and in terms and conditions presented to the recruited employees.

� Ensure transparency in the recruitment and selection process.

Human Capital Contd.

In 2018/19, we achieved a slight increase in the staff turnover ratio. The ratio was 18%, compared to 14% in the previous year.

Performance EvaluationIn pursuing set goals of the Company, we look to align our employees’ views, approach to work and commitment towards realising the Company vision. To this end, we need to establish a clear line of communication to educate employees about Company expectations, provide them with necessary skills through training, provide employees with timely rewards and increments and finally share honest feedback with each employee in a confidential and professional manner. As such, we are in the process of revising our appraisal method. The revamped performance appraisal method will revolve around accurate evaluation of performance, identification of learning needs and the provision of appropriate feedback. Our fundamental goal is to establish a performance driven culture.

Creating a Satisfactory Working EnvironmentIn addition to ensuring a professional, safe and conducive working culture within the organisation, our endeavour to create a pleasant working environment include periodical staff events designed to allow employees to strengthen their working relationships.

We fervently believe that the Company can achieve a high level of productivity through providing a satisfactory working environment and timely rewards to employees. We therefore encourage and facilitate our employees to participate in other activities outside of work to achieve work-life balance.


The Company provides a working environment which is interesting and stimulating. Our employees therefore are satisfied with their work lives, which gives them peace of mind to attend to their personal lives.

During the year under review, we initiated a number of welfare and community initiatives to engage employee interest and uplift their morale.

Blood Donation Campaign 2018The annual blood donation campaign was held on 25 May 2018 at the company premises in association with the Ragama National Hospital. A large number of employees were pleased to take part in this worthy cause to save lives.

All Night Pirith Chanting Ceremony 2019Employees’ welfare society of the company organised an All Night Pirith Chanting Ceremony to invoke blessings upon the SML family and their extended families.This was a great opportunity for all our employees to take part in a religious activity with their families. All employees along with their family members were invited for this event.

Future OutlookThe Company intends to further strengthen our human capital through attracting talented, self-motivated employees to our workforce. In view of this, SML took part in a number of university career fairs and exhibitions within the year under review. We plan to reinforce our digital media platforms in future to engage skilled professionals.

We are well aware that satisfied employees are part and parcel of organisational success. Striving to maintain employee morale, the Company will seek to present them with stimulating and varied work and career growth opportunities. We will also implement practices targeted at increasing employee engagement within the organisation.

The automobile industry by nature possesses a technological focus and innovation is an integral part of growth. In the near future, we will take steps to encourage innovation amongst employees through incorporating the spirit of innovation in the new performance appraisal criterion.


Intellectual Capital

Fuelled by our in depth experience and technological prowess in the Japanese commercial vehicle segment in the automobile industry, SML has built up a wealth of Intellectual Capital in terms of knowledge and processes. Our store of knowledge hinges on the expertise, insights and proficiency of our employees while our processes consistently create value and differentiate our value proposition.

Creating value through Intellectual Capital We combine our efforts to enhance our Human Capital through providing training opportunities to employees and employee retention strategies to sustain and capitalise on our Intellectual Capital.

Knowledge Enhancement

� Knowledge � Processes

� Innovation � Efficiency

� Customer satisfaction

� Improved brand reputation

INP

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Employee Retention Identifying the stores of knowledge each employee possess and taking strategic measures to retain employees are crucial aspects of safeguarding our Intellectual Capital. Our employee retention tactics involve timely rewards and recognition and employee engagement.

Event Location Created value

� Service Training Programme – Euro IV Japan

� Enhanced knowledge base for long-term sales growth and reinforcing Natural Capital

Japan � IGP I -13th Isuzu World Technical Championship

� Enhanced knowledge base

Thailand

� IGP I – LCV – 2018 Isuzu World Technical Championship for Light Commercial Vehicles

� Enhanced knowledge base

Thailand � Technical training for

new Isuzu D-Max RT66 cab

� Enhanced knowledge base and sales growth

Colombo � Implementation of the IFS ERP System

� Enhanced the volume of the data base and analitical techniques.

Key TakeawaysIntellectual Capital refers to the intangible assets that contribute to a company's bottom line. These assets include the expertise of employees, organisational processes and the sum of knowledge contained within the organisation.There is no standard method to measure intellectual capital and standards for measurement vary across organisations.


Manufactured Capital

Our Manufactured Capital consists of our islandwide showrooms, workshops and other properties that allow SML to provide value added services to customers. The efficient usage of our Manufactured Capital allows the Company to address relevant market needs and create value for all stakeholders. During the year under review, we focused our efforts on acquiring more property to reinforce our Manufactured Capital in order to pursue sustainable business growth and innovation through the use of our resources in a creative and forward thinking manner.

Creating Value Through Manufactured Capital Growth

� Investments in acquiring property

� Developing existing facilities through acquisition of machinery and refurbishment

� Availability of faster and more efficient services to customers

� Providing customers with access to readily available genuine spare parts

� Enhancing the efficiency and productivity of the overall business

� Increased profitability

� Brand image enhancement IN

PU

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Customer ServiceOur customers continue to benefit from our after sales services and the ready availability of genuine vehicle spare parts to pursue business growth in their respective fields. As a leader in the commercial vehicle segment in the country, the efficacy and the quality of our services impact the nation’s economic growth. We strive to provide our customers with consistent services that maintain high standards through our showrooms, spare parts outlets and workshops. Mindful of the fact that our customers can benefit from ready access to our services any time of the day in any part of the island, we deliver spare parts to customers’ doorstep.


Our reach to customers

� ISUZU Vehicle Showrooms

� ISUZU Spare Parts Outlets

� Workshops

� Vauxhall street/ Matara/ Kurunegala

� Panchkawatte/Matara/Ratnapura/Kurunegala/ Vauxhall street

� Peliyagoda / Vauxhall street / Kurunegala

� Accessibility to ISUZU brand veheicles

� Avialbility of genuine spare parts and accompanying service requirements islandwide

� Enhanced access to high quality, technologically superior and professional services

INP

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Strengthening Manufactured Capital During the year under review, we opened a state of the art workshop facility in Kurunegala as well as a new showroom in the same locality for sales, services and spare parts. Later in the year, we opened a new ISUZU showroom in Vauxhall Street.

SML invested Rs 400 million to build a state-of-the-art workshop in Peliyagoda.. During the year under review, we completed the first floor of the building and currently the workshop is in operation. We plan to use the building’s entire capacity from 2020. Accordingly, the new workshop will allow us to increase the capacity of the Peliyagoda workshop from 11,635 sqft to 59,103.62 sqft.

The workshop is well-equipped with skilled mechanics who can provide exceptional services to customers to address their specific needs. The workshop is equipped with the following equipment to enable a high standard of services.

Advanced Oil and Fluid Disposal SystemsElectronic Test equipment that includes vehicle scanners to communicate with OBD-II (On-Board Diagnostic) systems, DVOM (Digital Volt and Ohm Meter) for an accurate diagnosis, circuit testers and other specialty equipment

Complete Set of Mechanic’s Tools

� Air tools � Injector cleaner � Micro meter � Tap and die set

The new additions are in line with our greater focus on exploring regional growth opportunities. During the year ahead, we will continue to grow our Manufactured Capital to ensure long-term value creation.

Manufactured Capital Contd.


Natural Capital

Natural Capital is a shared and finite resource which calls for collective efforts to strive for sustainable usage of the said resource. The scarcity of natural resources invariably necessitates, SML to be responsible for the efficient use of those resources. Our environmental management goals are designed to reduce our carbon footprint through improving energy efficiency, responsible waste management and adherence to product standard concepts such as EURO 4.

� Energy - Efficient use of energy

� Water - Water purification system

� Sustainable consumption of natural resources

� Internalised environmental sustainable concepts


� Enhanced monetized performance

INP

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Water Purification System Three of our workshops are equipped with purpose designed, sophisticated water treatment systems to dispose used water in a responsible manner. We adhere to local and international standards in disposing harmful substances as well as water treatment. The water purification systems purify contaminated water before disposing of the said water in a responsible manner.

Responsibly Disposing Waste and Reducing WastageWe sell disposable and potentially environmentally harmful items such as burnt oil, e-waste and packaging cardboards to a third party for the purpose of recycling and re-use.

SML staff follows the environmentally friendly practice of minimising paper consumption through reducing the number of printed documents and through the efficient use of available paper.

Efficient and Responsible Consumption of Energy We strive to manage our energy usage in an efficient manner. While our energy requirement is subject to changes based on our throughput levels, at all levels of the value chain, we focus our efforts on effective usage of energy.

We monitor the consumption of energy at all locations including branches on a monthly basis. We take necessary steps when and where necessary to reduce the inefficient usage of energy and implement a feasible system of energy consumption. Such initiatives include regular inspection of lightening systems and fixing LED lighting wherever

possible as well as educating Company staff on the efficient use of energy.

Adherence to the Environmentally Sustainable Industrial Practices-Euro 4In July 2018, Euro 4 emissions standard Diesel and Petrol replaced the existing Super Diesel and Petrol stocks in the market. Vehicles engines that meet the Euro 4 standard emit 68 per cent less particulate matter (PM), 57 per cent less nitrogen oxide, and 50 per cent less carbon monoxide in comparison to Euro 2 standard vehicles that are currently in use in Sri Lanka since 2003. The implementation of EURO 4 standards is timely in view of the significant amount of active vehicle fleet, high level of annual fuel consumption as well as the high average fuel economy per passenger. EURO 4 Standard vehicles can greatly reduce carbon emission and contribute to a better air pollution management approach within the country. The government of Sri Lanka plans to reduce carbon emissions considerably by 2025 and completely go green by 2045.

In line with this vision, we have shifted our product portfolio to EURO 4 Standard enabled commercial vehicles.

SML’s Environmental Pledge We continue to pursue our environmental management goals of reducing our environment footprint by improving energy efficiency, reducing water use and curtailing and responsibly disposing of waste.


Social & Relationship Capital

SML’s ability to grow in volume and create value in the long-term pivots on our ability to nurture relations with customers, business partners and communities. The quality of our Social and Relationship Capital today determines our brand value and in turn the ability to generate financial value for all stakeholders of the Company. In view of this, we have adopted a well-defined stance on strengthening our customer and business partner relations through rewarding and mutually beneficial interactions while also engaging the greater community through CSR efforts.

� Customer engagemnt

� Business partner insights and engagement

� Community engagement

� Creating positive customer and business partner experiences

� Meeting customer and business partner expectations

� Positive interactions with the community


� Improved business partner relations

� Long-term financial gain

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Our efforts to nurture customer, business partner and community relations entail numerous strategic activities designed to generate positive experiences.

Customer Relations We conduct periodical market research to gather customer insights in order to comprehend evolving customer needs. We differentiate our value proposition to customers through innovation, focus on quality, excellence in after sales services and customized customer interactions. We combine our Human Capital development activities with Social and Relationship Capital development through upgrading employee technical expertise, ability to innovate and knowledge through consistently offering training opportunities. Our interactions with customers reach beyond the conventional methods to provide them with opportunities to acquire technical knowledge with regard to their commercial fleets. SML organizes driver training and knowledge building programmes frequently to offer added value to customers and enable them to improve the performance of their own lines of business through increased technological awareness and expertise.

Business Partner Relations As a representative of ISUZU brand commercial vehicles in Sri Lanka, our business partners are an integral part of our overall value proposition and customer engagement. SML carefully foster relations with our foreign partners through mutually beneficial interactions, responsible beahviour, improved trust and consistent meeting of expectations. SML conducts awareness building programmes for customers and

employees to promote the Isuzu band reputation and take part in motor shows to promote the Isuzu brand and genuine spare parts. Our islandwide dealers form a critical part of our business operations and success. SML organizes periodical awareness building and networking events to nurture positive relations with dealers.

Shareholder RelationsReinforcing and nurturing shareholder relations contribute to the sustainable growth and development of the Company and creating value not only for shareholders but also for all stakeholders of the Company. As such, we have built a functioning and two way communication platform to interact with our shareholders and obtain their matters of concern, ideas and viewpoints. In addition, we provide accurate and timely financial information to shareholders.

Social Relations Our policy on nurturing social relations hinges on ethical behaviour, compliance with rules and regulations, building strong relationships with our stakeholders and giving back to society through CSR activities. Mindful of impacts our activities have on the society and the environment, we constantly strive to manage the impact in a positive manner.


Reinforcing Social and Relationship Capital

Event Location Created value

� Ceylon Motor show Customer relations/Business partner relations

� Building brand reputation/Increased sales

Customer relations/Business partner relations � Euro 4 Line Up Launch

� Contributing to building Natural Capital/ Long-term growth opportunities

Customer relations/ Social relations

� Ceylon Exotic Automobile Club (CEAC) sponsorship


Customer relations/ Social relations

� Improved brand reputation/Customer satisfaction/Increased spare parts sales/Contribution to road safety Increased sales

� Defensive Driver Training Programme

Business partner relations � Increased sale of genuine spare parts � Dealer conference

� Improved brand recognition/ Increased genuine spare parts sales

Business partner relations � Regional Mechanic Meeting

� Improved brand image Customer Relations � Service Clinic

� Nurturing relationships with the community .(It is social relations and the value created it improved brand image)

Social Relations � Blood donation campaign

Events in detail Ceylon Motor Show SML unveiled the 2019 edition of our Ceylon Motor Show ISUZU D Max RT66 Double Cab at the Ceylon Motor Show held from March 15 to 17 2019. A delegation from ISUZU Motors Thailand, comprising of Miss Thidarat Prupong and Mr Masaru Eshima took part in the unveiling.

Euro 4 line up launch SML launched the new lineup of EURO 4 trucks on 17 October, 2018 at the new vehicle showroom at the head office in the presence of representatives from ISUZU Motors Japan & Itochu Corporation Japan.

CEAC Sponsorship SML sponsored the annual get-together of the Ceylon Exotic Automobile Club which was held on 24th March, 2019 at the Blue Water Hotel Wadduwa with the participation of over 100 exotic car owners.

Annual Blood Donation Campaign SML’s annual blood donation campaign is an important event in the CSR calendar. This annual event brings together the Company’s employees to discharge their social obligations. The latest blood donation campaign was held on 25 May 2018 at SML premises with the participation of all employees of the Company.


Defensive driver training programme SML organized a defensive driver training programme at the hotel Clarion Kiribathgoda on 6 October 2018 to reach out to current owners of ISUZU vehicles.

SML organized a defensive driver training programme at the SML Colombo workshop for 30 drivers from “Access Natural Water” on 27 October 2018.

Dealer Conference SML organized a Dealer Conference at the Mount Lavinia Hotel on 22 October 2018 to nurture relations with dealers.

Regional Mechanic MeetingsSML organised a regional mechanic meeting at the Rose Garden, Kadawatha on 30 January 2019 to educate professionals in the region and build relationships.

SML organized a regional mechanic meeting at the Wasantha Holiday Resort, Elpitiya on 23 March 2019 to educate professionals in the region and build relationships.

Service Clinic SML Workshop team conducted a service clinic during 2018 at the ‘Nipuna Rice Mills’ premises to offer value added services to customers.

Sales Promotional CampaignsSML organised the ‘Kick Off ’ sales promotional campaign in January 2019 to encourage sales teams to increase sales volume.

SML organised a sales promotional campaign targeting customers at the Central Fish Market – Peliyagoda to build long term relationships with customers in the region and to promote the Panchikawatte genuine parts branch.

Social & Relationship Capital Contd.

FINANCIAL REPORTSAudit Committee Report 101Remuneration Committee Report 103Related Party Transactions Review Committee Report 104Annual Report of the Board of Directors on the Affairs of the Company 106The Statement of Directors Responsibility 111Directors Statement on Internal Control Introduction 112Financial Calendar 113Independent Auditor’s Report 114Statement of Profit or Loss and other Comprehensive Income 118Statement of Financial Position 119Statement of Changes in Equity 120Statement of Cash Flows 121Notes to the Financial Statements 122



Audit Committee Report

Audit committee of SML is established under the Corporate Governance rules of section 7.10.6 of Colombo Stock Exchange and Code of best practices on corporate governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka. During the year under review, the Committee has continued to review and report to the Board on the Company’s financial reporting, internal control and risk management processes and the performance, independence and effectiveness of external auditors.

Role of the Committee

The role of the Audit Committee is to oversee the financial reporting system of the Company to safeguard the interests of shareholders and all other stakeholders. The assurance framework required by the Audit Committee is provided by complementary contributions from management reports, internal and external audit reports and from risk management reports.

Committee Composition

The Committee continued to comprise of the Four Non-Executive Directors as set out below. To ensure compliance with the requirements of the rule 7.10.6 of Listing Rules of the Colombo Stock Exchange and Code of Best Practices on Corporate Governance issued jointly by the Institute of Chartered Accountants and Securities Exchange Commission of Sri Lanka, Committee membership comprises three (3) Independent Non-Executive Directors and one (1) Non-Executive Director of the Company.

Category Number of Directors

Independent Non Executive Directors 3

Non Executive Directors 1

The Committee is authorised by the Board to seek any information necessary to fulfill its duties, call any member of staff to be questioned at a meeting of the Committee, as and when required, and obtain independent legal, accounting or other professional advice, at the Company’s expense, which might be necessary for the fulfillment of its duties.

The brief profiles of the existing members of the Committee are given on pages 24 and 25 of the Annual Report.

Meeting AttendanceThe Committee met on the following occasions to discuss matters relating to the financial year. Members’ attendance was as follows:

Attendance Of Audit Committee During The Period

1 April 2018 To 31 March 2019

Name 18/06/2018 23/10/2018 30/01/2019

1 M M N de Silva

2 J C Joshua *


4 R S Dahanayake ** -

* J C Joshua – Resigned w.e.f 31 March 2019 from the committee

** R S Dahanayake – Appointed w.e.f 15 August 2018 to the committee

In addition to the Committee members, the meetings were attended by the Director/COO, GM-Marketing, GM-Finance, GM-Support Services and the Internal Auditor by invitation. The Company secretaries were also present at every meeting.

Terms of Reference

The Audit Committee terms of reference encompass managing its authority and duties, established for the purpose of assisting the Board in fulfilling their responsibilities that include the integrity of the Financial Statements, risk management, business ethics, internal control, compliance with legal and regulatory requirements, review of Independent External Auditors’ performance and the Internal Auditors Report made on quarterly basis.


Compliance

Financial Reporting and Significant JudgmentsThe Committee is responsible for reviewing whether appropriate accounting policies have been adopted and whether management has made appropriate estimates and judgments in the preparation of the financial statements. As part of its review, the Committee considers the clarity and completeness of disclosures in the financial statements to assess whether these have been set appropriately in the context. The Committee also keeps under review the impact of any actual or expected changes to accounting standards applicable to the Company and provides general oversight in relation to the financial policies of the Company.

The Audit Committee reviewed the quarterly and annual Financial Statements prior to its publication and the review included:

� Appropriateness and changes in Accounting Policies

� Significant estimates and judgments made by the management

� Compliance with relevant Accounting Standards and applicable regulatory requirements

� Impairment of assets

� Issues arising from the Internal Audit and Independent External Audit

� The Group’s/Company’s ability to continue as a going concern

Laws and Regulations

The Audit Committee reviewed the reports submitted by the Management and the Internal Auditors on compliance with applicable laws and regulations. The Committee is satisfied that laws and regulations are duly complied with and statutory payments have been made on a timely basis.

Audit and Accountability

Internal ControlsThe Committee is satisfied that an effective system of internal control is in place to provide reasonable assurance on safeguarding the Company’s assets and reliability of Financial Statements. Effectiveness of the Company’s system of internal controls is evaluated through reports provided by the management, Internal Auditors and Independent External Auditors.

Internal Audit

The Committee is responsible for reviewing the role and effectiveness of the internal audit function by monitoring the results of its work and the responses of Management to its recommendations. The Audit Committee meets the Internal Auditors on a quarterly basis and reviews their findings in order to identify risks attached to different areas of operation and effectiveness of internal controls.

The Committee reviewed and approved the 2019/20 internal audit plan at its meeting in May 2019 and continued to monitor progress against this plan during the year. Results and management actions arising from the reviews undertaken in 2018/19 were discussed in detail at each of the Committee’s meetings. The Head of Internal Audit attended all of the Committee’s meetings during 2018/19.

Independent Auditors

The Audit Committee reviewed the independence and objectivity of the Independent External Auditors, Messrs KPMG Sri Lanka, Chartered Accountants. The Audit Committee has met with the External Auditors to review their audit plan and any observations made by them.

The Committee has received a declaration from the External Auditors, confirming that they do not have any relationship or

interest in the Company or its subsidiaries. The Committee reviewed the non-audit services and its impact on the independence of the External Auditors.The Audit Committee has recommended to the Board that Messrs KPMG be re-appointed as the Independent External Auditor and that the re-appointment be included in the agenda of the Annual General Meeting.

Conclusion

The Audit Committee is satisfied that the effectiveness of the organisational structure of the Company and of the implementation of Company’s Accounting Policies and operational controls provide reasonable assurance that the affairs of the Company are managed in accordance with Company policies and that the Company assets are properly accounted for and adequately safeguarded. The Committee is also satisfied that the Company and its subsidiaries are able to continue as a going concern.

M M Nelson De SilvaChairman – Audit Committee

9 July 2019

Audit Committee Report Contd


Remuneration Committee was established to ensure compliance with the requirements of Section 7.10.5 of the Listing Rules of the Colombo Stock Exchange and the Code of Best Practices on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and Securities Exchange Commission of Sri Lanka.

Composition

Composition of the Board appointed Remuneration Committee is comprised of two (2) Non Executive Independent Directors and One (1) Non Executive Director. There were no changes to the composition of the committee as at 31 March 2019.

S J S Perera Chairman, Non – Executive Director

M M N de Silva Independent Non – Executive Director

W A C O Wijesinghe Independent Non – Executive Director

Terms of Reference

The Remuneration Committee functions within the parameters of agreed terms of reference. The Committee is accountable for ensuring that remuneration arrangements are in line with performance.


The role of the Remuneration Committee is to set up the remuneration policy for Senior Management and making recommendations to the Board on recruitment, remuneration and performance evaluation on Senior Management including Executive Directors of the Company.

Responsibilities Includes,

� Review the framework for the remuneration and terms and conditions of employment of the Chairman of the Board and of Executive Directors.

� Monitor the level and structure of the remuneration of Senior Managers.

� Set detailed remuneration of the Executive Directors and Chairman including termination payments

� Ensure that Executive Directors are fairly rewarded for their contribution to the performance of the Company

� Ensure transparency to shareholders that remuneration of the Executive Directors is set by individuals with no personal interest in the outcome of the Committee decisions

� The Committee is authorised by the Board to seek appropriate professional advice within and outside the Company as and when it considers necessary.

Sumal PereraChairmanRemuneration Committee

9 July 2019

Remuneration Committee Report


I am pleased to present the report of the Related Party Transactions Review Committee for the financial year ended 31March 2019. During the year, the Committee has continued to review and report to the Board on the Group’s Related Party Transactions. The Board has established the Related Party Transactions Review Committee based on the terms of the Code of Best Practice on Related Party Transactions issued by the Securities and Exchange Commission of Sri Lanka and the Section 9 of the Listing Rules of the Colombo Stock Exchange.


The role of the Related Party Transactions Review Committee is to ensure that the interests of shareholders as a whole are taken in to account by a listed entity when entering into related party transactions.

Committee Composition

In accordance with Section 9.2.2 of the Listing Rule of the Colombo Stock Exchange, the Related Party Transactions Review Committee comprises three (03)Independent Non-Executive Directors and one (01) Non-Executive Director, who were appointed by resolution at a Board meeting. The Committee comprised the following members:

The brief profiles of the existing members of the Committee are given on pages 24 and 25 of the Annual Report.

Related Party Transactions Review Committee Report

Category Number of Directors

Independent Non Executive Directors 3

Non Executive Directors 1

Meeting Attendance

During the year 2018/19, the Committee members attended meetings as set in the following table:

Attendance of Related Party Transactions Review Committee

(1 APRIL 2018 TO 31 MARCH 2019)

Name 26/07/2018 23/10/2018 30/01/2019

1 M M N de Silva

2 J C Joshua*

3 T D Gunasekara


5 R S Dahanayake** -

* J C Joshua – Resigned w.e.f 31 March 2019 from the committee

** R S Dahanayake – Appointed w.e.f 15 August 2018 to the committee

Terms of Reference

The terms of reference of the Related Party Transactions Committee encompasses aspects relating to matters outlined in the Listing Rule of the Colombo Stock Exchange.

� Analysing and reviewing all proposed Related Party Transactions with the exception of those exempted by the Code.

� Identify whether proposed Related Party Transactions require Board or Shareholder approval.

� Directors of the Company are not allowed to take part in any discussion regarding proposed Related Party Transactions for which they are related parties with the exception of occasions in which the Committee requests Directors to give information with regard to Related Party Transactions.

� Recommendation of creating a special committee to review and provide approval for proposed Related Party Transactions in view of any conflict of interest.

Duties of the Committee

Reviewing in advance all proposed related party transactions of the Company except those explicitly exempted by the terms of Rule 9.5 of the Listing Rules of the Colombo Stock Exchange Reviewing if there are any proposed material changes of previously reviewed related party transaction before the completion of the transaction To review a related party transaction, the Committee will be provided with all relevant


material information of the related party transaction, including the terms of the transaction, business purpose of the transaction, benefits to the Company and to the related party, and any other relevant matters. In determining whether to approve a Related Party Transaction, the Committee will consider the following factors, among others, to the extent relevant to the related party transaction: Whether the terms of the related party transaction are fair and on arms length basis to the Company and would apply on the same basis if the transaction did not involve a related party. Whether there are any compelling business reasons for the Company to enter into the Related Party Transaction and the nature of alternative transactions, if any. Whether the related party transaction would present an improper conflict of interest for any Director or Key Managerial Personnel of the Company, taking into account the size of the transaction, the overall financial position of the Director, Executive Officer or other related party, the direct or indirect nature of the Director’s, Key Managerial Personnel’s or other related party’s interest in the transaction and the ongoing nature of any proposed relationship and any other factors the Board/ Committee deems relevant.

� Determining whether related party transactions that are to be entered into by the Company require the approval of the Board or shareholders of the Company;

� Review, revise, formulate and approve policies and procedures on related party transactions

� Establishing guidelines for the Senior Management to follow regarding dealings with recurrent related party transactions

� Ensuring that immediate market disclosures and disclosures in the Annual Report are made as required by the applicable rules/ regulations in a timely and detailed manner.

Policies and Procedures

As per the existing practice, all related party transactions must be reported to the Related Party Transaction Review Committee and referred for approval by the Committee in accordance with this policy. Such transactions are also disclosed to stakeholders through the Company’s Financial Statements. In case of frequent/repetitive/regular transactions which are in the normal course of business of the Company, the Committee may grant standing pre-approval.

Performance Review During the Year

Every year the Related Party Transaction Review Committee must review and evaluate its performance and submit the observations to the Board of Directors. All disclosures as per Section 9.3 of the Listing Rules of the Colombo Stock Exchange are given under declaration of this report. Details of other related party transactions entered into by the Company/Group of Companies during the year are disclosed in Note 28 of Notes to the Financial Statements.

Declaration

� There were no recurrent or non-recurrent related party transactions which required additional disclosures in the 2018/19 Annual Report under Colombo Stock Exchange Listing Rule 9.3.2.

A Declaration by the Board of Directors on compliance with the rules pertaining to the Related Party Transactions appears in the Report of the Board of Directors on page 108 of the Report.

M M Nelson de SilvaChairman Related Party Transactions Review Committee

9 July 2019


Annual Report of the Board of Directors on the Affairs of the Company

The Directors of Sathosa Motors PLC have pleasure in presenting their Annual Report of the Company, together with the Audited Financial Statements of the Company for the year ended 31 March 2019. This Report covers Chairman’s Message, Corporate Governance and Management Structure, Enterprise Risk Management, Sustainability and all other relevant information for the year ended 31 March 2019, in addition to the Audited Financial Statements.

The Company’s Board of Directors is responsible for confirming that the information stated in the Annual Report on the Affairs of the Company, contains the information required in terms of the Companies Act No.07 of 2007, the Listing Rules of the Colombo Stock Exchange and is guided by recommended best practices.

General

Sathosa Motors PLC was incorporated in Sri Lanka on 11 March 1982 under the Companies Ordinance No: 51 of 1938 and re-registered under the Companies Act No.7 of 2007. Listed on the Colombo Stock Exchange on 07 November 1993. The registration number of the Company changed to PQ 105.

Principal Activities of the Company And Review of Performance During the Year

SML is the authorised distributor for ISUZU in Sri Lanka.

SML Frontier Automotive (Pvt) Ltd (SMLF) is the subsidiary of Sathosa Motors PLC and authorised distributor for Jaguar and Land Rover in Sri Lanka.

Review of the Performance

Review of the financial and operational performance of the Company and the Group are described in the joint

statements of Managing Director and Chief Operating Officer and under the review of business operations in Page 32 To 35 Segment-wise contribution to Group revenue, results, assets and liabilities are provided in Note 05 (pages 127 to 128) of the Financial Statements.

Financial Statements`

The Financial Statements of the Group prepared in line with Sri Lanka Accounting Standards (SLFRs/LKASs), inclusive of specific disclosures, duly signed by two Directors on behalf of the Board and the Auditors are included in this Annual Report and forms part and parcel hereof.

Financial Results and Appropriations

RevenueRevenue generated by the Company amounted to LKR 4,033 Mn (2018 - LKR 4,963 Mn) whilst Group revenue amounted to LKR 11,126 Mn (2018 - LKR 8,177 Mn).

Profits and Appropriations

The profit after tax of the Company was LKR 83 Mn (2018 – LKR 401 Mn), whilst the Group profit attributable to equity holders of the Parent for the year was LKR 135 Mn (2018 – LKR 388 Mn)

Dividend

The Company has not paid dividends during the year under review.

Reserves

The reserves of the Company and Group as at 31 March 2019 amounted to LKR. 1,563 Mn (2018 – LKR 1,480 Mn) and LKR 1,616 (2018 - LKR. 1,481 Mn) respectively. The movement and composition during the year are given in the Statement of Changes in Equity on page 120

Accounting Policies

The Accounting Policies adopted in the preparation of Financial Statements of the Company and the Group are given on pages 122 to 171 of the Annual Report.

The financial statements of the Company have been prepared in accordance with the Sri Lanka Accounting Standards (SLFRSs and LKASs) and the policies adopted thereof are given on pages 122 to 171 Figures pertaining to the previous period have been re-stated where necessary to conform to the presentation for the year under review.

Donations

The company did not make any donations during the year under review and the previous year.

Corporate Social Responsibility

The Company continued its Corporate Social Responsibility initiatives with a range of Programs, details of which are set out on Pages 96 to 98 of this Report.

Property Plant and Equipment (PPE) and Intangible Assets

The Company’s and Group’s capital expenditure on PPE amounted to LKR 310 Mn (2018 – LKR 491 Mn) and LKR 393 Mn (2018 –LKR 532 Mn) respectively and all other related information and movements have been disclosed in note 12 (Page135 to138) to the Financial Statements.

The Company’s and the Group’s capital expenditure on intangible assets amounted to LKR 33 Mn (2018 – LKR 3 Mn) and LKR 34 Mn (2018 –LKR 3 Mn) respectively and all other related information and movements have been disclosed in note 13 (Page 138 - 139) to the Financial Statements.


InvestmentsA detailed description of the Company’s investment in debentures held as at 31 March 2019, is given in Note 16 (Page140) to the Financial Statements.

Stated CapitalThe Stated Capital of the Company is LKR. 115,924,290/- representing 6,033,622 ordinary shares (2018 – LKR. 115,924,290/- representing 6,033,622 ordinary shares), as given in note 20 (Page 143 ) to the Financial Statements.

Share InformationShareholdersThere were 1147 shareholders registered as at 31 March 2019 (1139 shareholders as at 31 March 2018). The details of distribution are given on Page 83 of this Report.

Major Shareholders, Distribution Schedule and Other Information

Information on the distribution of shareholding, analysis of shareholders, market values per share, earnings, dividends, net assets per share, twenty largest shareholders of the Company, percentage of shares held by the public as per the Listing Rules of the Colombo Stock Exchange are given on Pages 83 to 87 under Investor Capital.

The Board of Directors

Directors’ Responsibility for Financial ReportingThe Directors are responsible for the preparation of Financial Statements of the Company to reflect a true and fair view of the state of its affairs. The Directors are of the view that these financial statements have been prepared in conformity with requirements of the Sri Lanka Accounting Standards (SLFRSs/LKASs), the Companies Act No.7 of 2007 and the Listing Rules of the Colombo Stock Exchange.

The Statement of Directors’ Responsibility is given on Page 111.

Names of Directors

The names of the Directors who held office as at the end of the accounting period are given below and their brief profiles appear on pages 24 to 25.

Executive Directors

J C Joshua Managing Director Appointed w.e.f. 01 April 2019

T D Gunasekera Managing Director Resigned w.e.f. 31 March 2019

E S Coorey Director / Chief Operating Officer

M Jayahsuriya Executive Director Appointed w.e.f. 01 April 2019

Non - Executive Directors

S J S Perera Chairman

S D Munasinghe Director

D A R Fernando Director

S H S Mendis Director - Resigned w.e.f. 31 March 2019

T A L Niroshan Director - Appointed w.e.f. 1 April 2019

Independent Non - Executive Directors

M M N de Silva Director

W A C O Wijesinghe Director

R S Dahanayake Director - Appointed w.e.f. 15 August 2018

R S Dahanayake was appointed to the Board on 15 August 2018.

T D Gunasekera and S H S Mendis resigned with effect from 31 March 2019.

J C Joshua was appointed the Managing Director and E S Coorey was appointed Chief Executive Officer on 1 April 2019.

W A C O Wijesinghe retires by rotation at the conclusion of the Annual General Meeting in terms of Article 88(i) of the Articles of Association and being eligible is recommended by the Directors for re-election.


Annual Report of the Board of Directors on the Affairs of the Company Contd

M Jayahsuriya and T A L Niroshan who were appointed to the Board on 1 April 2019 shall retire in terms of Article 95 of the Articles of Association of the Company and being eligible are recommended by the Directors for re-election.

Board Committees

The Audit Committee, Remuneration Committee, Strategic Planning Committee and the Related Party Transactions Review Committee function as Board Sub Committees, with Directors, who possess the requisite qualifications and experience. The composition of the said Committees as at 31 March 2019 is as follows.

Audit Committee

M M N de Silva Chairman

J C Joshua Resigned w.e.f. 31 March 2019

W A C O Wijesinghe

T A L Niroshan Appointed w.e.f. 01 April 2019


S J S Perera ChairmanM M N de SilvaW A C O Wijesinghe

Related Party Transaction Review Committee

M M N de Silva Chairman

J C Joshua Resigned w.e.f. 31 March 2019

W A C O Wijesinghe

T D Gunasekera Resigned w.e.f. 31March 2019

T A L Niroshan Appointed w.e.f. 01 March 2019

Interests Register

The Company maintains an Interests Register in terms of the Companies Act, No. 7 of 2007, which is deemed to form part and parcel of this Annual Report and available for inspection upon request.

All related party transactions which encompasses the transactions of Directors who were directly or indirectly interested in a contract or a related party transaction with the Company during the accounting period are recorded in the Interests Register in

due compliance with the applicable rules and regulations of the relevant Regulatory Authorities.

The relevant interests of Directors in the shares of the Company as at 31 March 2019 as recorded in the Interests Register are given in this Report under Directors’ shareholding.

Related Party Transactions

The Company’s transactions with Related Parties, given in note 25.3 to the Financial Statements, have complied with Colombo Stock Exchange Listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Securities Exchange Commission Directive issued under Section 13(c) of the Securities Exchange Commission Act as declared by the Board of Directors.

Directors’ Remuneration

The Directors’ remuneration is disclosed under key management personnel compensation in Note 25.5 to the Financial Statements on page 152.

Directors’ Interests In Contracts

Directors’ interests in contracts with the Company are stated below. The Directors have no direct or indirect interest in any other contract or proposed contract with the Company. Except for the transactions referred to in Note 25 to the Financial Statements, the Company did not carry out any transaction with any of the Directors.

Directors’ Shareholding

The relevant interests of the Directors in the shares of the Company as at 31 March 2019 are as follows.

Shareholding as at 31/03/2019

Shareholding as at 31/03/2018

S J S Perera Nil Nil

T D Gunasekera / HNB

1,464 5,875

M M N De Silva 1,100 1,100

J C Joshua Nil Nil

S D Munasinghe Nil Nil

S H S Mendis Nil Nil

D A R Fernando Nil Nil

W A C O Wijesinghe Nil Nil

E S Coorey Nil Nil


Corporate Governance

The Board of Directors confirm, that they are in compliant with section 7.10 of the Listing Rules of the CSE. The Chairman, the Board of Directors and the Key Management Staff is dedicated towards upholding an effective Corporate Governance Framework in compliance with the Code of Business Conduct, Ethics of the Company and in implementing systems and structures required to ensuring best practices within the Company.

The Corporate Governance of the Company is reflected in its strong belief in protecting and enhancing stakeholder value in a sustainable manner, supported by a sound system of policies and practices. Prudent internal controls ensure professionalism, integrity and commitment of the Board of Directors, Management and employees.

The Corporate Governance Statement on Pages 38 to 69 explains the measures adopted by the Company during the year of review.

Sustainability

The Company pursues its business goals based on a model of stakeholders’ governance. Finding of the continuous internal stakeholder engagements have enabled the Company to focus on material issues highlighted by other stakeholders such as employees, customers, suppliers and the community. These steps have been encapsulated in a Company-wide strategy focused on sustainable development which is continuously evolving based on the above mentioned stakeholder engagements. Refer Capital Formation and Distribution on Pages 81 to 87.

Employment Policy

The Company’s employment policy is totally non-discriminatory which respects individuals and provides carrier opportunities irrespective of the gender, race or religion.

At a Company level as at 31 March 2019 a total of 180 persons were in employment ( 156 persons as at 31 March 2018). Refer Human Capital on Pages 88 to 91 for more information.

Supplier Policy

The Company applies an overall policy of agreeing and clearly communicating terms of payment as part of the commercial agreements negotiated with suppliers and endeavors to pay for all items properly charged in accordance with these agreed terms. As at 31 March 2019 trade and other payables of the Company and Group amounted to LKR 249 Mn (2018 –LKR 512 Mn ) and LKR 925 Mn ( 2018 – LKR1,018 Mn ) respectively.

The Company strives to integrate principles of sustainable practices in its value chain through extensive stakeholder consultations, the findings of which are integrated in to work plans.

Environmental Protection

The Company complies with appropriate environmental laws and regulations to fulfill the best practices applicable in the country of operation. After making adequate enquiries from the management, the Directors are satisfied that the Company operates in a manner that minimises the detrimental effects on the environment and provides products and services that have a beneficial effect on the customers and the communities within, which the Company operates. Refer Environmental Capital on Page 95 for more information.

Research And Development

The Company has an active approach to research and development and recognises the contribution that it can make to the Company’s operations. Significant expenditure has taken place over the years and substantial effort will continue to be made to introduce new products and processes and develop existing products and processes to improve operational efficiency.

Statutory Payments

The Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its subsidiaries, all contributions, levies and taxes payable on behalf of, and in respect of employees of the Company and the Group and all other known statutory dues as were due and payable by the Company and the Group as at the Statement of Financial Position date have been paid or, where relevant provided for, except as specified in Note 26 (Page 153) to the Financial Statements covering commitments and contingencies.

Contingent Liabilities

Except as disclosed in Note 26 (Page 153) to the Financial Statements, there were no material Contingent Liabilities as at the Statement of Financial Position date.

Risk Management

An ongoing process is in place to identify and manage the risks that are associated with the business and operations of the Company and the Group on a quarter basis. The Directors review this process through the Audit Committee, to identify the competence and success of internal controls.

Specific steps taken by the Company in managing the risks are detailed in the section on Enterprise Risk Management on Pages 70 to 73.


Events Occurring After the Balance Sheet Date

Except for the matters disclosed in Note 28 (Page 155) to the Financial Statements, there were no material events as at the date of the Auditor’s Report, which require adjustment to or disclosure in the Financial Statements.

Going Concern

The Financial Statements are prepared on going concern principles. After making adequate enquires from the Management, the Directors are satisfied that the Company has adequate resources to continue its operations in the foreseeable future.

Independent Auditors’ Report

The Report of the Independent Auditor on the Financial Statements of the Company is given on Page 114 to 117.

Auditors

Messrs KPMG, Chartered Accountants served as the Auditors during the year under review and also provided non audit/ consultancy services. They do not have any interest in the Company other than that of Auditor and provider of non-audit/ consultancy services.

A total amount of LKR 2,381,709 is payable by the Company to the Auditors for the year under review comprising LKR 1,470,000 as audit fees and LKR 911,709 for non-audit services.

The Auditors have expressed their willingness to continue in office. The Audit Committee at a meeting held on 20 Septembet 2018 recommended that they be re-appointed as Auditors. A resolution to re-appoint the Auditors and to authorise the Directors to determine their remuneration will be proposed at the Annual General Meeting.

Tax Related Services

All tax related services are provided by Ms. Ernst & Young, Chartered Accountants.

Compliance With Laws and Regulations.

To the best of knowledge and belief of the Directors, the Group/Company has not engaged in any activity, which contravenes laws and regulations of the country.

Annual Report

The Board of Directors approved the consolidated Financial Statements on 09 July 2019.

Annual General Meeting

The thirty Fifth ( 35th) Annual General Meeting will be held on 26 August 2019

The notice of the Annual General Meeting appears on Page 176.

This Annual Report is signed for and on behalf of the Board of Directors by

S J S PereraChairman

J C JoshuaManaging Director

P W Corporate Secretarial (Pvt) LtdSecretaries

9 July 2019Colombo

Annual Report of the Board of Directors on the Affairs of the Company Contd.


The Statement of Directors Responsibility

This Statement sets out the responsibility of the Board of Directors in relation to the Financial Statements of the Company and its Subsidiaries. Responsibility of the Auditors in relation to the Financial Statements of the Company and its Subsidiaries is set out in the ‘Independent Auditors Report’ given in page 114 to 117.

The Directors are responsible for the proper recording and maintenance of books of accounts of all transactions of the Company and its Subsidiaries under the provisions of the Companies Act No. 07 of 2007.

In terms of this Act the Directors are responsible for preparing Financial Statements that give a true and fair view of the state of the affairs of the Company and its Subsidiaries at the end of each financial year. These statements consist of the Statement of Comprehensive Income giving a true and fair view of the profit or loss of the Company and its Subsidiaries for the financial year, the Statement of Financial Position giving a true and fair view of the state of affairs of the Company and its Subsidiaries as at the end of the financial year, Statement of Changes in Equity, Statement of Cash Flows & the Notes thereto.

In preparing these Financial Statements the Directors are required to ensure that;

� Appropriate accounting policies have been selected and applied in a consistent manner and material departures, if any, have been disclosed and explained;

� Financial Statements are presented in accordance with Sri Lanka Accounting Standards (SLFRS/LKAS); and reasonable and prudent judgments and estimates have been made so that the form and substance of transactions are properly reflected;

� Financial Statements provide the information required by and otherwise comply with the Companies Act and the Listing Rules of the Colombo Stock Exchange;

� The Company maintains with reasonable accuracy sufficient accounting records to disclose the financial position of the Company and the Group;

� Financial Statements have been prepared on a going concern basis and they are of the view that sufficient resources are available to justify it

Further, the Directors confirm that they have taken reasonable measures to safeguard the assets of the Company and Group and in this regard have established appropriate systems of internal control with a view to preventing and detecting fraud and other irregularities.

The External Auditors were provided with all information and explanations necessary to enable them to form their independent opinion on the Financial Statements.

Compliance Report

The Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its Subsidiaries, all contributions, levies and taxes payable on behalf of and in respect of the employees of the Company and its Subsidiaries and all other known statutory dues as were due and payable by the Company and its Subsidiaries as at reporting date have been paid or, where relevant, provided for, except as specified in Note No 26 to the Financial Statements covering commitments and contingencies.

By Order of the Board,

P W Corporate Secretarial (Pvt) LtdSecretaries

9 July 2019Colombo


This Statement is presented by the Board based on the recommendation made by the ‘Code of Best Practice on Corporate Governance 2013’ jointly issued by the Securities & Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka.

Board’s Responsibility

The Board of Directors is responsible for the adequacy and effectiveness of the Company’s system of internal controls. However, such a system is designed to manage the Company’s key exposure areas within an acceptable risk profile rather than eliminating the risk of failure to achieve the Company’s objectives. Accordingly the system of internal controls can only provide a reasonable assurance but not absolute against the material misstatement of management and financial information and records or against financial losses or fraud. The Board has established an ongoing process for identifying, evaluating and managing the significant exposures faced by the Company and this process includes enhancing the system of internal controls as and when there are changes for the business environment or regulatory framework.

Key Internal Control Processes

Following features of the System of Internal Control put in place by the Board provide reasonable assurance regarding the reliability of financial reporting. They also ensure the adequacy and effectiveness of the system.

� Committees appointed by the Board to assist them in ensuring the effectiveness of Company’s daily operations, and to ensure that these daily operations are within the corporate objectives, strategies and annual budget ratified by the Boar

Directors Statement on Internal Control Introduction

� Internal Audit Department which is headed by the Chief Internal Auditor carries out periodic audits on an on-going basis covering all operational units to ensure the effectiveness of the system of internal control. These audits are carried out in accordance with the Annual Audit Plan approved by the Board Audit Committee and findings of the same are submitted to the Board Audit Committee for their review on a quarterly basis. Additionally Special Audits are conducted as and when the need arises and findings of the same are submitted to the Board Audit Committee for their review.

� The Board Audit Committee reviews internal control issues identified by the Internal Audit Department, regulatory bodies and the management, and evaluates the adequacy and effectiveness of the risk management and internal control systems. They also review the internal audit functions with particular emphasis on the scope of audits and quality of internal audits.

� In accordance with Sri Lanka Accounting Standards comprising SLFRS and LKAS, processes that are required to comply with requirements of recognition, measurement, presentation and disclosures were introduced and implemented. Continuous monitoring is in progress to enhance the system’s effectiveness and efficiency.

� The comments made by External Auditors in connection with the internal control system during the financial year 2017/18 were taken into consideration and appropriate steps have been taken to incorporate them where appropriate

Confirmation Statement

Based on the above processes, the Board of Directors confirms that the financial reporting system of the Company has been designed to provide reasonable assurance regarding the reliability of

financial reporting and the preparation of Financial Statements for external purposes has been done in accordance with the Sri Lanka Accounting Standards (SLFRS/LKASs), requirements of the Company’s Act No 7 of 2007 and Listing Rules of the Colombo Stock Exchange.

S J S PereraChairman

J C JoshuaManaging Director

M M N De SilvaChairman, Audit Committee

9 July 2019


Financial Calendar

Interim Financial Statements - 2018/2019 Submitted On

- Three months ended 30th June 2018 14 August 2018

- Six months ended 30th September 2018 30 October 2018

- Nine months ended 31st December 2018 01 February 2019

- Twelve months ended 31st March 2019 21 May 2019

Annual Report – Financial year ended 31st March 2019 2 August 2019

35th Annual General Meeting to be held on 26 August 2019


Independent Auditor’s Report

To the Share Holders Sathosa Motors PLC

Report on the Audit of financial statements

Opinion

We have audited the financial statements of Sathosa Motors PLC (“the Company”) and the consolidated financial statements of the Company and its subsidiaries (“the Group”), which comprise the statement of financial position as at 31st March 2019, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information as set out on pages 122 to 171.

In our opinion, the accompanying financial statements of the Company and the Group give a true and fair view of the financial position of the Company and the Group as at 31st March 2019, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Basis for Opinion

We conducted our audit in accordance with Sri Lanka Auditing Standards

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

Key Audit Matters

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

1. Carrying Value of Inventories As described in note number 17 inventories, the carrying value of Group’s inventories amount to Rs. 2,057 Mn as at 31st March 2019.

Risk Description

Inventories are significant to the group due to inventories held by the Company and its subsidiary, SML Frontier Automotive (Pvt) Ltd.

Changes in economic sentiment or consumer preferences and the introduction of newer models with the latest design and technologies by vehicle manufacturers to these different markets could result in inventories on hand no longer being sought after or being sold at a discount below their cost.

Estimating future demand for and the related selling prices of vehicle is inherently subjective and uncertain because it involves management estimating the extent of markdown of selling prices necessary to sell the older or slow moving models in the period subsequent to the reporting date.

Our Response: Our audit Procedures included;

� Testing the Group Key Control over Inventory Valuation and the identification of slow moving and/or obsolete inventories.

� Comparison of inventory levels, by product group, to sales data to corroborate whether slow moving and obsolete inventories had been


appropriately identified and challenge the Group’s categorisation as obsolete or slow moving.

� Assessing whether the inventory provision at the end of the reporting period was determined on a basis consistent with the Group’s inventory provisioning policy by recalculating the inventory write-downs and provisions based on expected selling prices.

2. Recoverability of Trade ReceivablesAs described in note number 18 Trade and other receivables, Group’s trade receivables as amount to Rs 2,457 Mn as at 31st March 2019.

Risk Description

Trade Receivables are significant to the Group due to trade Receivables of Sathosa Motors PLC and its Subsidiary company, SML Frontier Automotive (Private) Limited.

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

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

We identified assessing the recoverability of trade receivables as a key audit matter because the significance of the trade receivables to the consolidated financial statements and the assessment of the

recoverability is inherent subjectivity and required significant management judgment, which increases the risk of error or potential management bias.

Our Response: Our audit Procedures included;

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

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

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

� Challenging the appropriateness of the selection of accounting policies based on the requirements of the new standards, our business understanding and industry practice.

� Evaluating the appropriateness of the management approach over adoption, transition and practical expedients applied for SLFRS 9.

3. Revenue recognitionAs described in note number 06 Revenue, Group’s Revenue as amount to Rs. 11,126 Mn as at 31st March 2019.

Risk Description

The Group’s revenue principally comprises sales of new vehicles and the provision of aftersales services to a significant number of individual customers. Sale of vehicles are recognised when the goods are delivered and have been accepted by the customers. Revenue arising from after sale services and repairs are recognised when the relevant work is completed or proportioning to the stage of completion when the outcome of service/repair of vehicle can be estimated reliably. We identified the recognition of revenue as a key audit matter because revenue is one of the key performance indicators of the Group and is, therefore subject to an inherent risk of manipulation by management to meet targets or expectations and because errors in the recognition of revenue could have a material impact on the Group’s profit for the year.

Our Response: Our audit Procedures included

� Obtaining an understanding of and assessing the design, implementation and operating effectiveness of the Group’s key internal controls over revenue recognition.

� Scrutinising all the revenue invoices raised throughout the reporting period and comparing details of a sample of these invoices, which met certain risk-based criteria, with relevant underlying documentation.


� Inspecting significant manual adjustments to revenue raised during the reporting period, inquiring of management the reasons for such adjustments and comparing the details of the adjustments with relevant underlying documentation.

� Assessing whether revenue had been recognised in the appropriate accounting period by comparing a sample of sales transactions around the year end with relevant underlying documents, which included customers’ signed acknowledgement of delivery.

� Assessing the adequacy of enhanced disclosures made in note 6 and note 33 to the financial statements on the Group’s adoption of the SLFRS 15 Revenue from contracts with customers

Other Information

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

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

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

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we

are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

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

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

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

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,

individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with SLAuSs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

� Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

� Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and the Group’s internal control.

� Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

� Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material

Independent Auditor’s Report Contd.


uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

� Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

� Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

As required by section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.

CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditor’s report is 2618.

CHARTERED ACCOUNTANTS Colombo, Sri Lanka

9th July 2019


Statement of Profit or Loss and other Comprehensive Income

Group Company

For the year ended 31 March Note 2019 2018 2019 2018 LKR LKR LKR LKR

Revenue 06 11,125,759,978 8,176,897,533 4,033,389,599 4,963,087,977Cost of sales (9,805,277,012) (6,679,753,925) (3,335,518,750) (3,925,669,391)Gross profit 1,320,482,966 1,497,143,608 697,870,849 1,037,418,586Other Income 07 70,731,695 30,155,429 26,694,563 27,682,002Administrative expenses (697,318,410) (774,913,290) (335,173,266) (449,663,844)Selling and distribution expenses (99,114,350) (116,675,670) (45,620,008) (68,881,754)Other operating expenses (197,917) (212,335) - -Operating profit 594,583,984 635,497,742 343,772,138 546,554,990Finance income 79,534,754 65,200,900 76,153,067 65,200,900Finance costs (378,375,931) (170,400,889) (255,506,018) (69,429,062)Net finance cost 08 (298,841,177) (105,199,989) (179,352,951) (4,228,162)Profit before tax 09 295,742,807 530,297,753 164,419,187 542,326,828Income tax expense 10 (119,484,841) (146,024,984) (81,528,107) (141,440,585)Profit for the year 176,257,966 384,272,769 82,891,080 400,886,243

Other Comprehensive Income:Items that will not be reclassified to profit or lossRe-measurements of defined benefit liability 23.2 1,807,165 271,203 1,195,897 (1,587,170)Related tax 10.1 (506,006) (75,936) (334,851) 444,408Other Comprehensive income for the year, net of tax 1,301,159 195,267 861,046 (1,142,762)Total Comprehensive income for the Year 177,559,125 384,468,036 83,752,126 399,743,481

Profit attributable to:Owners of the Company 134,649,174 388,074,388 82,891,080 400,886,243Non-controlling interests 41,608,792 (3,801,619) - - 176,257,966 384,272,769 82,891,080 400,886,243

Total Comprehensive income attributable to:Owners of the Company 135,730,276 387,600,642 83,752,126 399,743,481Non-controlling interests 41,828,849 (3,132,606) - - 177,559,125 384,468,036 83,752,126 399,743,481

Earnings per shareBasic earnings per share 11 22.32 64.32 13.74 66.44

The Accounting Policies and Notes form an integral part of these Financial Statements.Figures in brackets indicate deductions.


Statement of Financial Position

Group Company

As at 31 March Note 2019 2018 2019 2018 LKR LKR LKR LKR

AssetsProperty, plant and equipment 12 1,250,543,681 973,084,493 934,980,023 666,279,353Intangible assets 13 31,088,022 2,630,357 30,389,450 1,858,246Prepaid lease payments 14 37,383,745 53,960,009 7,383,746 8,960,010Investment in subsidiaries 15 - - 264,940,092 264,940,092Investments in debentures 16 592,271,384 655,877,464 592,271,384 655,877,464Non current assets 1,911,286,832 1,685,552,323 1,829,964,695 1,597,915,165

Inventories 17 2,056,960,655 2,086,217,477 1,378,125,565 1,035,781,854Trade and other receivables 18 2,456,841,853 1,492,343,995 936,721,884 632,153,372Amounts due from related parties 25.1 32,183,356 24,328,669 398,359 5,553,492Current tax assets 10.4 47,283,452 - 16,131,554 -Cash and cash equivalents 19 509,156,273 93,521,637 497,186,563 81,677,251Current assets 5,102,425,589 3,696,411,778 2,828,563,925 1,755,165,969Total assets 7,013,712,421 5,381,964,101 4,658,528,620 3,353,081,134

EquityStated capital 20 115,924,290 115,924,290 115,924,290 115,924,290Retained earnings 1,615,531,687 1,481,197,397 1,563,186,198 1,480,196,899Equity attributable to owners of the Company 1,731,455,977 1,597,121,687 1,679,110,488 1,596,121,189Non-controlling interests 316,146,505 274,950,815 - -Total equity 2,047,602,482 1,872,072,502 1,679,110,488 1,596,121,189

LiabilitiesLoans and borrowings 21 83,052,000 108,405,134 - -Deferred income 22 5,704,096 5,923,485 5,704,096 5,923,485Employee benefits 23.1 38,671,069 35,215,674 25,307,698 24,594,341Deferred tax liabilities 10.5 27,505,970 23,777,090 12,808,032 21,955,167Non-current liabilities 154,933,135 173,321,383 43,819,826 52,472,993

Trade and other payables 24 925,166,109 1,018,459,269 249,230,334 511,759,120Amounts due to related parties 25.2 511,256,892 160,814,724 103,541,208 26,353,970Loans and borrowings 21 3,224,356,757 2,018,545,626 2,552,573,952 1,084,650,898Unclaimed dividend 4,168,960 4,525,028 4,168,960 4,525,028Current tax liabilities 10.4 - 60,074,071 - 58,178,606Bank overdraft 19 146,228,086 74,151,498 26,083,852 19,019,330Current liabilities 4,811,176,804 3,336,570,216 2,935,598,306 1,704,486,952Total liabilities 4,966,109,939 3,509,891,599 2,979,418,132 1,756,959,945Total Equity and liabilities 7,013,712,421 5,381,964,101 4,658,528,620 3,353,081,134Net Assets per Share 286.97 264.70 278.29 264.54 The Accounting Policies and Notes form an integral part of these Financial Statements.It is certified that the Financial statements have been prepared in compliance with the requirements of the Companies Act, No 07 of 2007.

Indrajeewa AlahapperumaGeneral Manager Finance

The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Approved and signed for and on behalf of the Board of Directors of Sathosa Motors PLC.

J C Joshua E S CooreyManaging Director Chief Operating Officer

9 July 2019,Colombo


Statement of Changes in Equity

Attributable to owners of the Company

Group Stated Retained Non-controlling Total capital earnings Total interests equity LKR LKR LKR LKR LKR

Balance as at 01 April 2017 115,924,290 1,365,109,746 1,481,034,036 178,113,389 1,659,147,425Profit for the year - 388,074,388 388,074,388 (3,801,619) 384,272,769Other comprehensive income for the year net of tax - (473,748) (473,748) 669,015 195,267Total comprehensive income for the year - 387,600,640 387,600,640 (3,132,605) 384,468,036Cash dividends (Note 20.1) - (271,512,990) (271,512,990) - (271,512,990)Non-controlling interest of SMLF right issue - - - 99,970,031 99,970,031Balance as at 31 March 2018 115,924,290 1,481,197,397 1,597,121,687 274,950,815 1,872,072,502Adjustment on initial application of SLFRS 9 (Note 33) - (1,395,986) (1,395,986) (633,159) (2,029,145)Adjusted balance as at 01 April 2018 115,924,290 1,479,801,411 1,595,725,701 274,317,656 1,870,043,357Profit for the year - 134,649,174 134,649,174 41,608,792 176,257,966Other comprehensive income for the year net of tax - 1,081,102 1,081,102 220,057 1,301,159Total comprehensive income for the year - 135,730,276 135,730,276 41,828,849 177,559,125Balance as at 31 March 2019 115,924,290 1,615,531,687 1,731,455,977 316,146,505 2,047,602,482

Company Stated Retained Total capital earnings equity LKR LKR LKR

Balance as at 01 April 2017 115,924,290 1,351,966,408 1,467,890,698Profit for the year - 400,886,243 400,886,243Other comprehensive income for the year net of tax - (1,142,762) (1,142,762)Total comprehensive income for the year - 399,743,481 399,743,481Cash dividends (Note 20.1) - (271,512,990) (271,512,990)Balance as at 31 March 2018 115,924,290 1,480,196,899 1,596,121,189Adjustment on initial application of SLFRS 9 (Note 33) - (762,827) (762,827)Adjusted balance as at 01 April 2018 115,924,290 1,479,434,072 1,595,358,362Profit for the year - 82,891,080 82,891,080Other comprehensive income for the year net of tax - 861,046 861,046Total comprehensive income for the year - 83,752,126 83,752,126Balance as at 31 March 2019 115,924,290 1,563,186,198 1,679,110,488

The accounting policies and notes form an integral part of these financial statements.Figures in brackets indicate deductions.


Statement of Cash Flows

Group Company

Note 2019 2018 2019 2018 LKR LKR LKR LKR

Cash flows from operating activitiesProfit before tax 295,742,807 530,297,753 164,419,187 542,326,828Adjustments for:Depreciation of property plant and equipment 115,642,902 105,559,072 41,169,759 31,937,665Amortisation of intangible assets/pre-paid lease rentals 22,174,164 18,306,306 6,379,124 2,065,099Amortisation of grants received (219,389) (219,389) (219,389) (219,389)Provision/ (reversal) of inventories and impairment of debtors (3,760,704) 55,435,438 (1,384,691) 53,877,634Profit on sale of property, plant and equipment (11,729,262) (33,500) (188,600) (9,296,650)Provision for employee benefit 8,560,405 7,891,226 4,983,103 4,641,947Loss of inventory 38,044,016 87,550,588 38,044,016 87,550,588Write back of warranty claim and other - (11,382,111) - (11,382,111)Net finance costs 298,841,177 105,199,989 179,352,951 4,228,163Operating profit before working capital changes 763,296,116 898,605,372 432,555,460 705,729,774

Changes inInventories 1,146,845 (419,209,900) (374,406,975) 133,347,633Trade and other receivables (973,612,784) (724,902,783) (310,351,147) (89,381,000)Amount due to related parties (7,854,687) 149,394,421 5,155,134 26,213,969Amount due from related parties 350,438,412 (19,868,984) 77,187,239 (5,260,319)Trade and other payables (93,649,228) (420,174,461) (262,884,854) (647,225,226)Cash generated from/(used) in operation 39,764,674 (536,156,335) (432,745,143) 123,424,831Interest paid (378,375,931) (170,400,889) (255,506,018) (69,429,062)Income tax paid (222,703,289) (83,364,788) (164,896,509) (81,839,057)Gratuity paid (3,297,845) (2,222,686) (3,073,849) (2,222,686)Net cash flows used in operating activities (564,612,391) (792,144,698) (856,221,519) (30,065,974)

Cash flows from investment activitiesPurchase of property, plant & equipment 12.1 (393,102,090) (529,809,690) (309,870,429) (479,859,751)Purchase of intangible assets 13.1 (34,055,565) (3,097,079) (33,334,064) (3,097,079)Investing in operating lease - (4,500,000) - (4,500,000)Proceeds from sale of property, plant & equipment 11,729,262 33,500 188,600 33,500Investment in subsidiary company - - - (99,970,041)Proceeds from issue of shares to NCI - 99,970,031 - -Consideration on maturity of investment in debentures 39,850,000 - 39,850,000 -Interest received 103,290,834 42,700,900 99,909,147 42,700,900Net cash flows used in investing activities (272,287,559) (394,702,338) (203,256,746) (544,692,471)

Cash flows from financing activitiesProceed for borrowings 21 6,943,669,609 6,945,369,401 5,052,916,656 4,352,022,290Repayment of loan 21 (5,763,211,612) (5,449,059,775) (3,584,993,602) (3,441,371,392)Dividends paid - (271,512,990) - (271,512,990)Net cash flows from financing activities 1,180,457,997 1,224,796,636 1,467,923,054 639,137,908

Net increase in cash and cash equivalents 343,558,047 37,949,599 408,444,789 64,379,461Cash and cash equivalents as at 1 April 19,370,140 (18,579,459) 62,657,922 (1,721,539)Cash and cash equivalents as at 31 March 362,928,187 19,370,140 471,102,711 62,657,922

Cash and cash equivalents includes bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management.The accounting policies and notes form an integral part of these financial statements.Figures in brackets indicate deductions.


Notes to the Financial Statements

01. Corporate information

1.1 Reporting EntitySathosa Motors PLC is a public quoted company incorporated and domiciled in Sri Lanka, registered under the Companies Act No. 7 of 2007 and is listed on the Colombo Stock Exchange. The registered office and principal place of business of the Company is situated at No. 25, Vauxhall Street, Colombo 02.

The consolidated Financial Statements of Sathosa Motors PLC as at and for the year ended 31 March 2019 comprise the Company and its Subsidiary, SML Frontier Automotive (Pvt) Ltd. (together referred to as the ‘Group’). Sathosa Motors PLC holds 50% of SML Frontier Automotive (Pvt) Ltd.

The Financial Statements of the Company and its subsidiary have a common financial year which ends on 31 March and are prepared using uniform accounting policies.

1.2 Principal Activities and Nature of OperationsThe principal activity of the Company is importing and distribution of Isuzu new vehicles and spare parts and operating workshops for vehicle repairs.

SML Frontier Automotive (Pvt) Ltd (SMLF) is the subsidiary of Sathosa Motors PLC. SMLF is in the business of importation and sale of Land Rover vehicles and Jaguar vehicles, the Subsidiary Company operates workshops and sale of Land Rover and Jaguar spare parts.

1.3 Parent CompanyThe Parent Company of Sathosa Motors PLC is Access Engineering PLC (AEL). AEL is primarily involved in the business of Construction activities and supply of construction – related services and materials.

02. Basis of preparation

2.1 Statement of ComplianceThe Financial Statements of the Company and those consolidated comprise the Statement of Financial Position, the Statement of Profit or Loss and other Comprehensive Income, Statement of Changes in Equity, and Statement of Cash Flows together with the Accounting Policies and Notes to the Financial Statements

These Financial Statements have been prepared and presented in accordance with Sri Lanka Accounting Standards (SLFRSs / LKASs) as issued by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and with the requirements of the Companies Act No. 7 of 2007 and the Listing Rules of the Colombo Stock Exchange.

2.2 Responsibilities of the Financial StatementsThe Board of Directors is responsible for preparation and presentation of the Financial Statements of the Company and its subsidiaries as per provisions of the Companies Act No. 07 of 2007 and the Sri Lanka Accounting Standards (LKASs/SLFRSs).

The Board of Directors acknowledges this responsibility as set out in the Statement of "Directors’ Responsibilities for Financial Statements" [Refer page 111], "Annual Report of the Board of Directors"[Refer page 106] and in the statement of appearing with the Statement of financial position [Refer page 119] of the annual report.

The consolidated and separate Financial Statements were approved and authorised for issue by the Board of Directors on 09 July 2019.

2.3 Basis of MeasurementThe Consolidated Financial Statements have been prepared on the historical cost basis except for the following material items in the Statement of Financial Position.

� Financial Assets and Financial Liabilities that have been measured at fair value- SLFRS 9 (Note 30)

� Employee benefit liability recognised based on the actuarial valuation - LKAS 19 (Note 23)

2.4 Functional and Presentation CurrencyThese Consolidated Financial Statements are presented in Sri Lankan Rupees (LKR), which is the Group's functional and presentation currency.

2.5 Significant Accounting Judgments, Estimates and AssumptionsThe preparation of the Group's Consolidated Financial Statements in conformity with Sri Lanka Accounting Standards (SLFRSs/LKASs) requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

The key assumptions concerning the future and other key resources estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets, liabilities within next financial year, are also described in the individual notes of the related Financial Statement


line items below. The group based its assumptions and estimates on parameters available when the consolidated Financial Statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

Management considered the following items, where significant judgments, estimates and assumptions have been used in preparing these Financial Statements.

Going Concern

The Management has made an assessment of its ability to continue as going concern and is satisfied that it has the resources to continue in business for the foreseeable future. Furthermore, Management is not aware of any material uncertainties related to event or conditions that may cast significant doubt upon the Group's/Company's ability to continue to be prepared on a going concern basis.

Information about assumptions and estimate uncertainties as at 31 March 2019 that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next financial year is included in the following notes:

� Revenue recognition [Note 06]

� Measurement of defined benefit obligation: key actuarial assumptions [Note 23]

� Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources [Note 26]

� Fair value measurement of financial instruments [Note 31]; Key assumptions used discounted cash flow (DCF) model

� Provision for expected credit losses of trade receivables and contract assets; Key assumptions for provision matrix to calculate ECL. [Note 30]

2.6 Materiality and AggregationEach material class of similar items is presented separately in the Financial Statements. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by the Sri Lanka Accounting Standard - LKAS 1 on 'Presentation of Financial Statements' and amendments thereto.

Notes to the Financial Statements are presented in a systematic manner which ensures the understandability and comparability of Financial Statements of the Group and the Company. Understandability of the Financial Statements is not compromised by obscuring material information with immaterial information or by aggregating material items that have different natures or functions.

2.7 OffsettingFinancial assets and financial liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or to settle the liabilities simultaneously. Income and expenses are not offset in the income statement, unless required or permitted by Sri Lanka Accounting Standards (SLFRSs/LKASs) and as specifically disclosed in the Significant Accounting Policies of the Company.

2.8 Comparative InformationThe presentations and classification of Consolidated Financial Statements of the previous years have been amended for better presentation and to be comparable with those of the current year.

03 Summary of Significant Accounting Policies

Significant accounting policies have been disclosed along with the relevant individual notes in the subsequent pages.Those accounting policies presented with each note, have been applied consistently by the Group except for the SLFRS 9 and SLFRS 15 related notes.Following accounting policies which have been applied consistently by the Group, are considered to be significant but are not covered in any other sections.

3.1 Basis of ConsolidationThe Consolidated Financial Statements comprise the Financial Statements of the Group and its subsidiaries prepared in terms of Sri Lanka Accounting Standards (SLFRS 10)- Consolidated Financial Statements. Control is achieved when group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Specifically, the Group controls an investee if, and only if, the Group has:

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

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

� The ability to use its power over the investee to affect its returns.


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

� "The contractual arrangement(s) with the other vote holders of the investee"

� Rights arising from other contractual arrangements

� The Group’s voting rights and potential voting rights

Business combinations are accounted for using the acquisition method as at the acquisition date - i.e. when control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group also takes into consideration potential voting rights that are currently exercisable.

The group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses controls of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated Financial Statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

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

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components

of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

3.1.1 Business Combinations and Goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of SLFRS 9 Financial Instruments, is measured at fair value with the changes in fair value recognised in the statement of profit or loss in accordance with SLFRS 9. Other contingent consideration that is not within the scope of SLFRS 9 is measured at fair value at each reporting date with changes in fair value recognised in profit or loss.

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.

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

3.1.2 Subsidiary

Subsidiary entity is controlled by the Parent. The Financial Statements of subsidiary is included in the Consolidated Financial Statements from the date that control commences, until the date that control ceases. In separate Financial Statements, investment in subsidiary is stated at cost.

3.1.3 Transactions Eliminated on Consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated Financial Statements. Unrealised losses are

Notes to the Financial Statements Contd.


eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

3.2 Foreign Currency TransactionsTransactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in profit or loss.

3.3 Impairment of Non-Financial AssetsThe Group assesses at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating units (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects

current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded Companies or other available fair value indicators.

Impairment losses are recognised in the Profit or Loss in those expense categories consistent with the function of the impaired asset, except for a property previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset's or cash generating unit's recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of Profit or Loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

3.4 Statement of Cash FlowsThe statement of cash flows has been prepared using the ‘indirect method’ in accordance with Sri Lanka Accounting Standard - LKAS 7 on ‘Statement of Cash Flows’. Cash and cash equivalent comprise of cash in hand, cash at bank and short term investments that are readily convertible to known amount of cash and subject to an insignificant risk of change in value.

Interest received and dividends received are classified as investing cash flows, while dividend paid is classified as financing cash flow and interest paid is classified under the operating cash flows for the purpose of presentation of Statement of Cash Flows.

Bank overdrafts and short term borrowings that are re payable on demand and forming an integral part of the Group’s cash management are included as a component of cash and cash equivalent for the purpose of the Statement of Cash Flow.

3.5 Current Versus Non-Current ClassificationThe Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:

� Expected to be realised or intended to sold or consumed in the normal operating cycle.

� Held primarily for the purpose of trading.

� Expected to be realised within twelve months after the reporting period:

OrCash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the Reporting Period.All other assets are classified as non-current.


A liability is current when: � It is expected to be settled in the

normal operating cycle

� It is held primarily for the purpose of trading

� It is due to be settled within twelve months after the reporting period

Or � There is no unconditional right to defer

the settlement of the liability for at least twelve months after the reporting period.

The Group classifies all other liabilities including deferred tax liabilities as non-current.

04 Accounting Standards Issued but not yet Effective

The Institute of Chartered Accountants of Sri Lanka has issued the following standards which become effective for the financial periods beginning on or after 1

January 2019. Accordingly these standards have not been applied in preparing theses financial statements and the company plans to apply these standards on the respective effective dates. The company is currently in the process of evaluating the potential effect of adoption of these standards and amendments on its financial statements. Such impact has not been quantified as at the balance sheet date. The company will be adopting these standards as and when they become effective.

SLFRS 16 – Leases – Effective for Annual Periods Beginning on or After 1 of January 2019

SLFRS 16 replaces LKAS 17 Leases and related interpretations (IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease).

SLFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under LKAS 17. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under SLFRS 16 is substantially unchanged from the current requirements under LKAS 17. Lessors will continue to classify all leases using the same classification principle as in LKAS 17 and distinguish between two types of leases: operating and finance leases.

SLFRS 16 also requires lessees and lessors to make more extensive disclosures than under LKAS 17.

SLFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted, but not before an entity applies SLFRS 15. A lessee can choose to apply the standard using

either a full retrospective or a modified retrospective approach. The standard’s transition provisions permit certain reliefs.The impact on the implementation of the above standard has not been quantified yet by the Group.



05. Operating Segments

Accounting policy

The Segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), or in providing Products or Services within a particular Economic Environment (Geographical Segment), which is subject to risks and returns that are different from those of the Segments. The Group's primary format for segmental reporting is based on Business Segments. The Business segments are determined based on the Group's management and internal reporting structure.

The following summary describes the operations of each reportable segment.

Reportable segments Operations

Vehicle sales Importation and distribution of brand new ISUZU, RANGE ROVER and JAGUAR vehicles as authorised agent in Sri Lanka

Spare sales Importation and distribution of brand new ISUZU, RANGE ROVER and JAGUAR spare parts

Workshop services Carry out workshop repair services for ISUZU, RANGE ROVER, JAGUAR

Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.The activities of the Group are located mainly in Sri Lanka. Consequently, the economic environment in which the Group operated is not subject to risks and rewards that are significantly different on a geographical basis. Hence disclosure by geographical region is not provided.

The Board of Directors monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the consolidated financial statements.

05.1 Business Segment

Group Vehicle sales Spare Parts sales Workshop repair & services Total

For the year ended 31 March 2019 2018 2019 2018 2019 2018 2019 2018 LKR LKR LKR LKR LKR LKR LKR LKR

RevenueExternal customers 10,126,189,982 7,141,651,673 721,157,388 661,022,368 278,412,608 324,617,492 11,125,759,978 8,127,291,533

Inter-segment - (25,000,000) - - - 74,606,000 - 49,606,000

Total revenue Net of Tax 10,126,189,982 7,116,651,673 721,157,388 661,022,368 278,412,608 399,223,492 11,125,759,978 8,176,897,533

Segment Operating Profit 1,142,381,467 1,141,791,196 148,474,945 166,459,351 29,626,554 188,893,061 1,320,482,966 1,497,143,608

Operating profit 594,583,984 635,497,742

Net finance Cost (298,841,177) (105,199,989)

Profit before tax 295,742,807 530,297,753

Income tax expenses (119,484,841) (146,024,984)

Profit for the year 176,257,966 384,272,769

Capital expenditures (427,157,655) (537,406,769)

Depreciation and amortisation 137,817,066 123,865,378


05 Operating Segments (Contd...)

Company Vehicle sales Spare Parts sales Workshop repair & services Total

For the year ended 31 March 2019 2018 2019 2018 2019 2018 2019 2018 LKR LKR LKR LKR LKR LKR LKR LKR

RevenueExternal customers 3,567,506,175 4,423,152,345 275,584,087 241,483,864 190,299,337 223,813,768 4,033,389,599 4,888,449,977

Inter-segment - - - - - 74,638,000 - 74,638,000

Total revenue Net of Sales Tax 3,567,506,175 4,423,152,345 275,584,087 241,483,864 190,299,337 298,451,768 4,033,389,599 4,963,087,977

Segment Operating Profit 566,619,657 756,641,178 109,359,766 106,331,214 21,891,426 174,446,194 697,870,849 1,037,418,586

Operating profit 343,772,138 546,554,990

Net finance cost (179,352,951) (4,228,162)

Profit before tax 164,419,187 542,326,828

Income tax expenses (81,528,107) (141,440,585)

Profit for the year 82,891,080 400,886,243

Capital expenditures (343,204,493) (487,456,830)

Depreciation and amortisation 47,548,883 34,002,764

06. Revenue

Accounting Policy

Revenue represents the amounts derived from importing and distribution of vehicles, spare parts and provision of workshops repair services and local charges which fall within the Group’s ordinary activities net of trade discounts and turnover related taxes.SLFRS 15 establishes a five step model to account revenue arising from contracts with customers. Under SLFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods and services to a customer. Determining the timing of transfer of control at a point in time or over time requires judgment. Further, revenue is recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognition will not occur.

The following specific criteria are used for the purpose of recognition of revenue.

Revenue Streams

The Group generates revenue primarily from Sale of brand new vehicles, spare parts and providing workshop repair services.Performance obligations and revenue recognition policies:

Type of Product/ services

Nature and timing of satisfaction of performance obligations, including significant payment terms

Revenue recognition under SLFRS 15 (applicable from 1 April 2018)

Sale of vehicles and spare parts

Customers obtain control of vehicles when the goods are delivered to and have been accepted at their premises. Invoices are generated at that point in time. Invoices are usually payable in full in terms of cash or original Bank purchase order before delivery.

“Revenue is recognised when the goods are delivered and have been accepted by customers at their premises. Advances received are included in liabilities as advance received from customers.

Workshop sales

Company undertakes repairs and services on Isuzu and range rover/Jaguar vehicles. Each job commences with/without receipt of advance payment from customer depending on the service to be carried out.

Revenue from workshop services/ repairs are recognised at the time of relevant job is completed or in proportion to the stage of completion of the job when the outcome of service/ repair of the vehicle can be estimated reliably.



Group Company

For the year ended 31st March 2019 2018 2019 2018 LKR LKR LKR LKRNew Vehicles 10,108,098,536 7,072,547,358 3,567,515,692 4,423,315,344Spare Parts 728,402,711 667,658,218 278,382,858 243,929,032Work Shop Repairs 284,013,294 405,767,929 194,171,109 303,019,396Vehicles Local Charges 18,470,370 45,168,078 - - 11,138,984,911 8,191,141,584 4,040,069,659 4,970,263,772NBT (13,224,933) (14,244,051) (6,680,060) (7,175,795)Net Revenue 11,125,759,978 8,176,897,533 4,033,389,599 4,963,087,977

07. Other Income

Accounting Policy

Income earned in other sources, which are not directly related to the ordinary course of business are recognised as other operating income.

Group Company

For the year ended 31 March 2019 2018 2019 2018 LKR LKR LKR LKR

Sundry income 36,132,351 25,205,870 3,635,881 13,469,293Profit on sale of property, plant and equipment 11,729,262 33,500 188,600 9,296,650Agency commission 9,251,271 4,696,670 9,251,271 4,696,670Amortisation of asset related grants 219,389 219,389 219,389 219,389Foreign exchange gain 13,399,422 - 13,399,422 - 70,731,695 30,155,429 26,694,563 27,682,002

Dividend Income

Revenue is recognised in profit or loss on the date on which the Group’s right to receive the payment is established, which is generally when shareholders approve the dividend.

08. Finance Income/(Cost)

Accounting Policy

The Group’s finance income and finance costs include: � Interest income- include interest earned from investment in debentures and money market investments.

� Interest expenses - include interest payment on bank loan, bank overdraft and finance lease liabilities.

Interest income or expense is recognised using the effective interest method.

The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

� the gross carrying amount of the financial asset; or

� the amortised cost of the financial liability


08 Finance Income/(Cost) (Contd..)

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset or to the amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.

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

Group Company


Finance IncomeInterest Income 79,534,754 65,200,900 76,153,067 65,200,900 79,534,754 65,200,900 76,153,067 65,200,900Finance CostInterest on short term loan (328,591,021) (140,642,199) (236,639,013) (41,826,511)Interest on bank overdraft (48,583,767) (27,602,551) (18,867,005) (27,602,551)Interest on finance lease (1,201,143) (2,156,139) - - (378,375,931) (170,400,889) (255,506,018) (69,429,062)

Net finance cost (298,841,177) (105,199,989) (179,352,951) (4,228,162)

09. Profit Before Income Tax Expenses

Accounting Policy

Expenditure Recognition

All expenditure incurred in the running of the business and in maintaining the Property, Plant and Equipment in a state of efficiency has been charged to revenue in arriving at the profit for the year. Expenses are recognised in the Statement of Profit or Loss on the basis of a direct association between the cost incurred and the earning of specific items of income.

For the purpose of presentation of Statement of Profit or Loss, the Directors are of the opinion that "function of expenses" method presents fairly the elements of the enterprises performance; hence such presentation method is adopted.



Group Company


Profit before tax is stated after charging all expenses including following:Directors’ Emoluments and Fees 26,825,667 34,199,982 26,825,667 31,699,982Auditors’ remuneration - Statutory Audit 2,597,500 2,075,000 1,470,000 1,050,000 - Non Audit services 1,431,709 1,138,366 911,709 478,553Legal Expenses 2,096,896 579,002 2,096,896 579,002Depreciation on Property, Plant & Equipment 115,642,902 105,559,070 41,169,759 31,937,666Amortisation of intangible assets/ pre-paid lease rentals 22,174,164 18,306,306 6,379,124 2,065,098Personnel Cost ( Note 9.1) 306,440,956 256,254,295 166,839,089 148,128,678Professional fees & Secretarial Fees 4,139,122 5,020,536 3,273,797 3,611,622Provision for impairment and bad debts written off 6,173,335 14,169,868 4,596,061 809,707Loss of inventory (9.2) 38,044,016 87,550,588 38,044,016 87,550,588Provision for /(reversal of ) Inventories (9,934,039) 54,625,731 (5,980,752) 53,067,927

9.1 Personnel CostSalaries, Wages and Other related costs 271,833,283 225,547,374 147,051,624 131,040,251Defined benefit plan cost -Retirement gratuity 8,560,405 7,891,226 4,983,103 4,641,947Defined contribution plan - EPF and ETF 26,047,268 22,815,695 14,804,362 12,446,480 306,440,956 256,254,295 166,839,089 148,128,678

9.2 Loss of Inventory“Loss of inventories due to misappropriation, amounting to LKR 38,044,016/- (2018: LKR 87,550,588/-) net of advance received from customers and recoveries was expensed under Administrative expenses for the year ended 31 March 2019.”

10. Income Tax

Accounting Policy

Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI.

Current Tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

Current tax assets and liabilities are offset only if certain criteria are met.

Current tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.


10 Income Tax (Contd...)

Deferred Tax

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

� temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

� temporary differences related to investments in Subsidiaries, Associates and Joint Arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

� taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversal of existing temporary differences, are considered, based on the business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.

Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption.Deferred tax assets and liabilities are offset only if certain criteria are met.

Sales Tax

Expenses and assets are recognised net of the amount of sales tax, except: � When the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the sales

tax is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable.

� When receivables and payables are stated with the amount of sales tax included

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



10.1 Current TaxThe major components of income tax expenses

Group Company

For the year ended 31March 2019 2018 2019 2018 LKR LKR LKR LKR

Amounts recognised in the statement of profit or lossCurrent income taxCurrent income tax (Note 10.2) 81,798,887 133,845,842 57,322,990 130,563,022Adjustments for the prior year 33,546,879 372 33,263,359 372Deferred tax:Relating to origination and reversal of temporary differences (Note 10.5) 4,139,075 12,178,770 (9,058,242) 10,877,191Income tax expense reported in the statement of profit or loss 119,484,841 146,024,984 81,528,107 141,440,585

Amounts recognised in the Consolidated statement of other comprehensive incomeNet loss/(gain) on actuarial gains and losses 506,006 75,936 334,851 (444,408)Deferred tax charged to other comprehensive income 506,006 75,936 334,851 (444,408)

10.2 Reconciliation of Accounting Profit to Taxable ProfitAccounting profit before income tax expense 295,742,807 530,297,753 164,419,187 542,326,828Aggregated disallowable items 180,409,882 163,501,645 89,339,537 67,776,325Aggregated allowable items (184,013,807) (151,239,104) (49,033,758) (79,267,215)(-) Investment income (76,439,008) (64,870,165) (76,439,008) (64,870,165)Income from other sources - 330,735 - 330,735Total statutory income 215,699,874 478,020,864 128,285,958 466,296,508Statutory tax rate 28% 28% 28% 28%Income tax expense 60,395,965 133,845,842 35,920,068 130,563,022Tax on investment income @ 28% 21,402,922 - 21,402,922 -Total current tax expense 81,798,887 133,845,842 57,322,990 130,563,022

10.3 Reconciliation of Effective Tax RateProfit for the year 176,257,966 384,272,769 82,891,080 400,886,243Total tax expenses 119,484,841 146,024,984 81,528,107 141,440,585Profit excluding tax 295,742,807 530,297,753 164,419,187 542,326,828

Effective tax rate 40% 28% 50% 26%

10.4 Current Tax Liabilities / (Assets)Balance at the beginning of the year 60,074,071 9,592,644 58,178,606 9,454,269Provision made during the year 81,798,887 133,845,842 57,322,990 130,563,022Under provision for last year 33,546,879 372 33,263,359 372Payments made during the year (136,953,224) (83,364,787) (136,953,224) (81,839,057)ESC recoverable (81,720,554) - (24,075,856) -WHT recoverable (4,029,511) - (3,867,429) -Balance at the end of the year (47,283,452) 60,074,071 (16,131,554) 58,178,606


10 Income Tax (Contd...)

10.5 Deferred Tax Liabilities

Group Company

2019 2018 2019 2018 LKR LKR LKR LKR

Balance at the beginning of the year 23,777,090 11,522,384 21,955,167 11,522,384Origination of temporary differencesRecognised in equity (916,201) - (423,744) -Recognised in profit or loss 4,139,075 12,178,770 (9,058,242) 10,877,191Recognised in OCI 506,006 75,936 334,851 (444,408)Balance at the end of the year 27,505,970 23,777,090 12,808,032 21,955,167Deferred Tax (asset)/liability as at the year end is made up of the following ;

Property, Plant and Equipment 41,996,140 51,318,625 22,315,439 28,841,583Retirement Benefit Obligations (10,827,899) (9,860,390) (7,086,155) (6,886,416)Unutilised tax losses - (17,681,145) - -Provision for inventory (2,501,485) - (2,013,448) -Provision for impairment (1,160,786) - (407,804) - 27,505,970 23,777,090 12,808,032 21,955,167

10.6 Movement of Deferred Tax (Assets)/ Liabilities

Recognised in Recognised in other Recognised in other Balance as at Recognised in comprehensive Balance as at the retained Recognised in comprehensive Balance as at 31/03/2017 profit or loss income 31/03/2018 earnings profit or loss earnings 31/03/2019 LKR LKR LKR LKR LKR LKR LKR LKR

GroupProperty plant and equipment 38,573,698 12,744,927 - 51,318,625 - (9,322,484) - 41,996,141Retirement benefit obligations (8,349,134) (1,587,192) 75,936 (9,860,390) - (1,473,518) 506,006 (10,827,902)Carried forward tax loss (18,702,180) 1,021,034 - (17,681,145) - 17,681,145 - -Provision for inventory - - - - - (2,501,484) - (2,501,484)Provision for impairment - - - - (916,201) (244,584) - (1,160,785) 11,522,384 12,178,770 75,936 23,777,090 (916,201) 4,139,075 506,006 27,505,970

CompanyProperty plant and equipment 17,286,998 11,554,585 - 28,841,583 - (6,526,143) - 22,315,440Retirement benefit obligations (5,764,614) (677,394) (444,408) (6,886,416) - (534,592) 334,851 (7,086,157)Provision for inventory - - - - - (2,013,448) - (2,013,448)Provision for impairment - - - - (423,744) 15,941 - (407,803) 11,522,384 10,877,191 (444,408) 21,955,167 (423,744) (9,058,242) 334,851 12,808,032



10.7 Applicable Rates of Income TaxUnder the provisions of the Inland Revenue Act No.24 of 2017 and amendments thereto, the Company and its Subsidiary is liable for income tax at the rate of 28% on Sales of vehicle, spare parts and workshop services. Deferred tax has been calculated at the rate of 28%.

11. Earnings Per Share

Accounting Policy

Basic Earnings Per Share

Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Sathosa Motors PLC by the weighted average number of ordinary shares in issue during the year.

Diluted Earnings per Share

Diluted Earnings per Share is determined by adjusting the profit or loss attributable to ordinary share holders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

As there were no potential Dilutive Ordinary Shares outstanding as at the year end, Diluted Earnings per share is equal to Basic Earnings per share.

11.1 Earnings Per Share

Group Company


Amounts used as the NumeratorProfits attributable to ordinary shareholders 134,649,174 388,074,389 82,891,080 400,886,243

Amounts used as the DenominatorWeighted average number of ordinary shares as at the end 6,033,622 6,033,622 6,033,622 6,033,622Basic earnings per share 22.32 64.32 13.74 66.44

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of authorisation of these Financial Statements.

12. Property Plant and Equipment

Accounting Policy

Property, plant and equipment are tangible items that are held for use in the production or supply of goods or services, for rental to others, or for administrative purpose and are expected to be used during more than one period. The group applies the requirements of LKAS 16 in accounting of property, plant and equipment.

Property, Plant and Equipment are recognised if it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be reliably measured. Construction in progress is stated at cost net of accumulated impairment losses if any.


12. Property Plant and Equipment (Contd...)

The cost of an item of property, plant and equipment comprise its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. The cost of self-constructed assets includes the cost of materials, direct labour, and any other costs directly attributable to bringing the asset to the working condition for its intended use. This also includes cost of dismantling and removing the items and restoring in the site on which they are located and borrowing costs on qualifying assets.Purchased software that is integrated to the functionality of the related equipment is capitalised as part of equipment.When parts of an item of Property, Plant and Equipment have different useful lives, they are accounted for as separate items (major component) of Property, Plant and Equipment.

Leases in terms of which the Group assumes substantially all the risk and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured and capitalised at an amount equal to the lower of its fair value and the present value of minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and, except for investment property, the leased assets are not recognised in the Group’s Statement of Financial Position.

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the company and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

Depreciation is recognised in Statement of Profit or Loss on the straight-line basis over the estimated useful lives of each part of item of Property, Plant and Equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Depreciation of an asset begins when it is available for use whereas depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale (or included in a disposal group that is classified as held for sale) and the date that the asset is de-recognised. Depreciation is not charged on Freehold Land and Capital Work in Progress.

Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:

Asset Category Useful life (Years)

Freehold Building 50Leasehold Building 8-9Plant, Machinery and tolls 5-8Motor Vehicles 5Office Equipment 5Furniture & Fittings 5Tools 5

The residual value, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss when the asset is derecognised. Gains are not classified as revenue.



Reconciliation of beginning and ending balances by classes of Assets

12.1 Group Freehold Leasehold

Plant, Machinery and Motors Office Furniture & Capital work Total Total Land Building Tools Vehicles Equipment Fittings Building in progress 2019 2018 LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR

Cost

Balance at the beginning of the year 326,086,000 35,576,161 87,785,673 182,467,196 92,042,370 81,649,007 457,994,225 77,668,389 1,341,269,021 821,414,838

Additions - 5,589,888 24,151,647 74,265,900 10,611,060 6,052,857 18,031,622 254,399,116 393,102,090 531,546,540

Disposals - - - (5,418,071) - - - - (5,418,071) (11,692,357)

Transfers - 1,260,000 - - - - 26,980,567 (28,240,567) - -

Balance at the end of the year 326,086,000 42,426,049 111,937,320 251,315,025 102,653,430 87,701,864 503,006,414 303,826,938 1,728,953,040 1,341,269,021

Accumulated Depreciation and impairment

Balance at the beginning of the year - 59,294 44,140,818 108,901,805 56,603,476 45,649,538 112,829,597 - 368,184,528 272,580,965

Charge for the year - 736,674 10,476,948 36,039,028 13,125,014 14,157,668 41,107,570 - 115,642,902 105,559,070

Disposals - - - (5,418,071) - - - - (5,418,071) (9,955,507)

Balance at the end of the year - 795,968 54,617,766 139,522,762 69,728,490 59,807,206 153,937,167 - 478,409,359 368,184,528

Carrying value as at 31 March 2019 326,086,000 41,630,081 57,319,554 111,792,263 32,924,940 27,894,658 349,069,247 303,826,938 1,250,543,681 -

Carrying value as at 31 March 2018 326,086,000 35,516,867 43,644,855 73,565,391 35,438,894 35,999,469 345,164,628 77,668,389 - 973,084,493

Group property plant and equipment with a cost of LKR 172,870,622/-(2018: LKR 86,797,653/-) have been fully depreciated and continue to be in use by the Group.

Freehold Leasehold

12.2 Company Plant, Machinery and Motors Office Furniture & Capital work Total Total Land Building Tools Vehicles Equipment Fittings Building in progress 2019 2018 LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR

Cost

Balance at the beginning of the year 326,086,000 35,576,161 18,564,944 109,019,297 52,160,655 14,100,488 211,148,808 77,668,389 844,324,742 365,157,347

Additions - 5,589,888 6,653,599 19,765,900 8,559,572 4,237,542 17,342,622 247,721,306 309,870,429 490,859,751

Disposals - - - (418,071) - - - - (418,071) (11,692,357)

Transfers - 1,260,000 - - - - 26,980,567 (28,240,567) - -

Balance at the end of the year 326,086,000 42,426,049 25,218,543 128,367,126 60,720,227 18,338,030 255,471,997 297,149,128 1,153,777,100 844,324,742

Accumulated Depreciation and

impairment

Balance at the beginning of the year - 59,294 14,980,305 61,373,680 37,891,906 11,033,012 52,707,192 - 178,045,389 156,063,230

Charge for the year - 736,674 1,023,462 19,709,654 5,199,855 1,107,942 13,392,172 - 41,169,759 31,937,666

Disposals - - - (418,071) - - - - (418,071) (9,955,507)

Balance at the end of the year - 795,968 16,003,767 80,665,263 43,091,761 12,140,954 66,099,364 - 218,797,077 178,045,389

Carrying value as at 31 March 2019 326,086,000 41,630,081 9,214,776 47,701,863 17,628,466 6,197,076 189,372,633 297,149,128 934,980,023 -

Carrying value as at 31 March 2018 326,086,000 35,516,867 3,584,639 47,645,617 14,268,749 3,067,476 158,441,616 77,668,389 - 666,279,353

Building on leasehold land was revalued as at 31 March 2012 for Rs. 20,829,851/- by R.T.K. Sirisena, an independent professional valuer on depreciated replacement cost basis for buildings as at the date of the valuation. The resulting gain was not incorporated in the financial statements as the revaluation surplus was not material amounting to Rs. 73,200/-.


12. Property Plant and Equipment (Contd...)

Company property, plant and equipment with a cost of LKR 117,690,199/-( 2018: LKR 86,797,653/-) have been fully depreciated and continue to be in use by the company.

Location and extent of Group’s freehold land at the reporting date as follows:

Location Extent

Sathosa Motors PLCLand depicted at No. 86, Vauxhall Street, Colombo 02 28.70 Perches

Capital working progressGroup’s Capital work in progress includes, construction cost incurred to build new workshop at 25/11, New Nuge Road, Peliyagoda and construction of Body shop at No.156, Divulapitiya, Raththanapitiya, Boralasgamuwa.

All the assets carried at cost less accumulated depreciation and accumulated impairment as at the reporting date.As at reporting date no assets have been pledged in order to fulfil the collateral requirements.

13. Intangible Assets

Accounting Policy

Intangible Assets are recognised if it is probable that economic benefits are attributable to the assets will flow to the entity and cost of the assets can be measured reliably. Intangible assets that are acquired by the Group/Company are measured at cost less accumulated amortisation and accumulated impairment losses.

All computer software cost incurred, which are not internally related to associate hardware, which can be clearly identified, reliably measured and its probable that they will lead to future economic benefits, are included in the Statement of Financial Position under the category of intangible assets.

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure including expenditure on internally generated goodwill and brands is recognised in profit or loss as incurred.

Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives, and is recognised in profit or loss.

The estimated useful lives for current and comparative years are as follows

� Computer software 5 Years

� Enterprise Resource Planning (ERP) 5 Years

Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted prospectively, if appropriate.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.



13.1 Reconciliation of Beginning and Ending Balances

Group Company

As at 31 March 2019 2018 2019 2018 LKR LKR LKR LKR

CostBalance at the beginning of the year 9,303,119 6,206,040 3,097,079 -Additions 34,055,565 3,097,079 33,334,064 3,097,079Balance at the end of the year 43,358,684 9,303,119 36,431,143 3,097,079

Accumulated amortisationBalance at the beginning of the year 6,672,762 4,192,722 1,238,833 -Charge for the year 5,597,900 2,480,040 4,802,860 1,238,833Balance at the end of the year 12,270,662 6,672,762 6,041,693 1,238,833

Carrying value 31,088,022 2,630,357 30,389,450 1,858,246

Software balance in intangible assets mainly consists of the IFS Enterprise Resource Planning system software and IFS user license acquired by the Company.

14. Pre-Paid Lease Rentals

Accounting Policy

Leasehold property comprises of land use rights and is amortised on a straight-line basis over the period of the lease in accordance with the pattern of benefits expected to be derived from the lease. Leasehold property is tested for impairment annually and is written down where applicable. The impairment loss if any is recognised in the Statement of Profit or Loss.

Group Company


CostBalance at the beginning of the year 102,050,366 97,550,366 12,050,366 7,550,366Additions - 4,500,000 - 4,500,000Balance at the end of the year 102,050,366 102,050,366 12,050,366 12,050,366

Accumulated amortisationBalance at the beginning of the year 48,090,357 32,264,091 3,090,356 2,264,090Charge for the year 16,576,264 15,826,266 1,576,264 826,266Balance at the end of the year 64,666,621 48,090,357 4,666,620 3,090,356Carrying value 37,383,745 53,960,009 7,383,746 8,960,010

Leasehold Land relate to the property persistently known and called “ SATHOSA MOTORS WORKSHOP” is located at No: 25/11, New Nuge Road, Peliyagoda acquired by Sathosa Motors PLC on a 99 years lease commencing from 1987. The total gross area of the land is 343.93 perches. The estimated useful life of leasehold right as at 31 March 2019 is sixty seven years (remaining lease period).

SML Frontier Automotive (Pvt) Ltd recognised prepaid lease payments in respect of Welisara workshop premises which has been subleased by Frontier Automotive (Pvt) Ltd. Remaining lease period as at 31 March 2019 is two Years.


15. Investments in Subsidiaries

Accounting Policy

Investment in subsidiaries are initially recognised at cost in the financial statements of the Company. Any transaction cost relating to acquisition of investment in subsidiaries are immediately recognised in the income statement. Following initial recognition, Investment in subsidiaries are carried at cost less any accumulated impairment losses. The net assets of each subsidiary are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the recoverable amount of the investment is estimated and the impairment loss is recognised to the extent of its net assets loss.

Company 2019 2018 Effective holding No. of shares percentage Cost Cost LKR LKR

SML Frontier Automotive (Pvt) Ltd 19,500,006 50% 264,940,082 264,940,082SML Realties (Pvt) Ltd 1 100% 10 10 19,500,007 264,940,092 264,940,092

Net realisable value of above investments is greater than carrying value.

16. Investments in Debentures

Accounting Policy

The Company intends to hold the assets to maturity for the contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding.

Group / CompanyAs at 31 March 2019 2018 LKR LKR

Nation Development Bank PLC 211,245,347 249,730,670Hatton National Bank PLC 200,184,931 222,684,932Access Engineering PLC 180,841,106 180,841,106People’s Leasing and Finance PLC - 2,620,756 592,271,384 655,877,464

Accounting policy is described in note 30- Financial instruments and initial impact on SLFRS 09 is described in note 33.

Reconciliation of Carrying Amount

Opening carrying value at the beginning of the year 655,877,464 633,377,463Interest capitalised during the year 63,374,595 64,870,166Maturity of investments (39,850,000) -Interest received during the year (87,130,675) (42,370,165)Carrying value at the end of the year 592,271,384 655,877,464



17. Inventories

Accounting Policy

Inventories are stated at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. The cost of inventories is comprised of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition, but excluding borrowing costs. Net realisable value is the estimated selling price in the normal course of business less estimated cost of realisation and/or cost of conversion from their existing state to saleable condition.

Inventory movement, mainly with respect to spare parts is reviewed at the end of reporting period by an experienced staff member (head of the division) who has a fair knowledge / expertise to assess the recoverability of inventory and the items that are identified as irrecoverable are written off during the year. For this purpose the Company gets the support of the workshop manager who possesses a fair amount of technical expertise, which helps to identify the technical obsolescence of the inventory items.

Group Company


New Vehicles 1,556,710,798 1,626,607,453 1,163,811,269 915,975,560Spare Parts 364,351,890 248,319,505 119,788,859 85,365,045Work in Progress 37,411,046 39,420,609 2,763,972 5,243,000General Stores 7,892,299 9,277,591 7,892,299 9,277,591Goods in Transit 143,092,583 225,024,319 134,624,139 76,656,383 2,109,458,616 2,148,649,477 1,428,880,538 1,092,517,579Provision for Inventories (Note 17.1) (52,497,961) (62,432,000) (50,754,973) (56,735,725) 2,056,960,655 2,086,217,477 1,378,125,565 1,035,781,854

17.1 Provision for InventoriesBalance at the beginning of the year 62,432,000 7,806,269 56,735,725 3,667,798Provision 8,933,875 54,625,731 7,190,887 53,067,927Reversal for the year (18,867,914) - (13,171,639) -Balance at the end of the year 52,497,961 62,432,000 50,754,973 56,735,725


18. Trade and Other Receivables

Accounting policy

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Other financial nature receivables are recognised as other receivables. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.Trade and other receivables are initially measured at fair value and subsequently measured at amortised cost using the Effective Interest Rate method (EIR) less any provision for impairment calculated using expected credit loss method.

Group Company


Trade Receivables - New Vehicles 1,358,870,174 730,006,401 270,263,213 242,130,998 - Spare Parts 72,246,996 40,467,378 72,246,996 40,467,378 - Work Shop 106,564,680 33,202,358 26,725,757 33,202,358 1,537,681,850 803,676,137 369,235,966 315,800,734Provision for impairment (Note 18.1) (5,715,270) (1,949,771) (1,456,440) (326,802)Deposits and prepayments 28,125,206 25,039,896 16,701,852 11,488,542Advances given to suppliers 644,880,575 461,697,104 494,529,162 218,731,480VAT receivable 53,191,190 8,883,270 47,232,715 8,883,270Loans to employees 2,251,855 1,881,421 2,145,318 1,779,421Other receivables 196,426,447 193,115,938 8,333,311 75,796,727 2,456,841,853 1,492,343,995 936,721,884 632,153,372

Set out below is the movement in the allowance for expected credit losses of trade receivables ;

18.1 Provision for Impairment

Group Company

2019 2018 2019 2018 LKR LKR LKR LKRBalance at the beginning of the year 1,949,771 1,949,771 326,802 326,802Impact due to initial application of SLFRS 9 2,941,590 - 1,186,571 -Provision / (Reversals) for the year 823,909 - (56,933) -Balance at the end of the year 5,715,270 1,949,771 1,456,440 326,802



19. Cash and Cash Equivalents

Accounting policy

Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group’s cash management.

Group Company


Short term call deposits 389,165,779 25,072,423 389,165,779 25,072,423Cash in hand 3,305,692 2,801,477 321,944 -Cash at Bank 116,684,802 65,647,737 107,698,840 56,604,828Cash and cash equivalents in the statement of financial position 509,156,273 93,521,637 497,186,563 81,677,251

Bank Overdraft (146,228,086) (74,151,498) (26,083,852) (19,019,330)Cash and cash equivalents in the statement cash flows 362,928,187 19,370,140 471,102,711 62,657,922

20. Stated Capital

2019 2018

Value of Value of Number of Shares Number of Shares Shares LKR Shares LKR

Issued and fully paidAt the beginning of the Year 6,033,622 115,924,290 6,033,622 115,924,290At the end of the Year 6,033,622 115,924,290 6,033,622 115,924,290

The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.


20. Stated Capital (Contd...)

20.1 DividendsThe following dividends were declared and paid by the Company for the year ;

Group Company 2019 2018 LKR LKR

Final dividend* - 30,168,110Interim dividend - 60,336,220Second interim dividend - 181,008,660Total Dividends - 271,512,990

Dividend per share - 45

*Dividend paid out of previous year's profits.

21. Loans and Borrowings

Accounting policy

Loans and borrowings are initially recognised at fair value net of directly attributable transaction costs. Subsequently they are measured at amortised cost.

Group Company


Current interest bearing loans and borrowingsTerm loan 21.1 14,280,000 14,280,000 - -Import and short term loan 21.2 3,210,076,757 2,004,265,626 2,552,573,952 1,084,650,898 3,224,356,757 2,018,545,626 2,552,573,952 1,084,650,898

Non-current interest bearing loans and borrowingsTerm loan 21.1 83,052,000 108,405,134 - - 83,052,000 108,405,134 - -



Group Company


21.1 Term LoanBalance at the beginning of the year 122,685,134 150,055,134 - -Obtained during the year - - - -Repayment during the year (25,353,134) (27,370,000) - -Balance at the end of the year 97,332,000 122,685,134 - -

Payable within one year 14,280,000 14,280,000 - -Payable after one year 83,052,000 108,405,134 - - 97,332,000 122,685,134 - -

21.2 Import and Short Term LoanBalance at the beginning of the year 2,004,265,626 480,586,000 1,084,650,898 174,000,000Obtained during the year 6,943,669,609 6,945,369,401 5,052,916,656 4,352,022,289Repayment during the year (5,737,858,478) (5,421,689,775) (3,584,993,602) (3,441,371,392)Balance at the end of the year 3,210,076,757 2,004,265,626 2,552,573,952 1,084,650,898

Payable within one year 3,210,076,757 2,004,265,626 2,552,573,952 1,084,650,898 3,210,076,757 2,004,265,626 2,552,573,952 1,084,650,898

Information about the Group's exposure to interest rate and liquidity risks is included in Note 32.3

21.3 Terms and Repayment ScheduleThe terms and conditions of outstanding loans and faculties are as follows:

Company name

Lending institution

Nature of the facility

Interest rate MaturityFace value 2019 2018 Details of

collateralsLKR LKR LKR

Company

Sathosa

Motors PLC

Bank of

Ceylon

Revolving short

term LoanAWPLR + 0.5% 01 Month 500,000,000 500,000,000 240,000,000 -

Commercial

Bank

Revolving short

term Loan

Market rate

over AWPLR01 Month 1,070,000,000 1,070,000,000 278,718,176 -

Import loanMarket rate

over AWPLR01 Month 328,785,751 328,785,751 343,932,722 -

Hatton

National Bank

Revolving short

term LoanAWPLR + 1%

03

Months240,000,000 - 222,000,000 -

Import loan AWPLR + 1% 01 Month 353,788,201 353,788,201 - -

National

Development

Bank

Revolving short

term Loan

Market rate

over AWPLR

03

Months300,000,000 300,000,000 - -


Company name

Lending institution

Nature of the facility

Interest rate MaturityFace value 2019 2018 Details of

collateralsLKR LKR LKR

Subsidiary

SML Frontier

Automotive

(Pvt) Ltd

National

Development

Bank

Short-Term LoanInterest rate

16%3 Months 200,000,000 193,244,055 200,000,000

Corporate

guarantees

of Sathosa

Motors

PLC and

Foresight

Engineering

(Pvt) Ltd

Hatton

National BankBank Loan

AWPLR +

2% (Renew

monthly)

84

Months200,000,000 97,332,000 122,685,134

Hatton

National BankShort-Term Loan AWPLR + 2% 4 Months 550,000,000 464,258,750 719,614,728

22. Deferred Income

Accounting Policy

Grants received are recognised initially as deferred income at fair value when there is a reasonable assurance that they will be received and the Group will comply with the conditions associated with the Grant, and are then recognised in the Statement of Comprehensive income as other income on a systematic basis over the useful life of the asset. Grants that compensate the Group for expenses incurred are recognised in the Statement of Comprehensive income as other income on a systematic basis in the periods in which the expenses are recognised.

Group/Company 2019 2018 LKR LKR

Balance at the beginning of the year 5,923,485 6,142,874Amortisation (219,389) (219,389)Balance at the end of the year 5,704,096 5,923,485

The above represents the grants received for the construction of work shop at Peliyagoda and are amortised over a period of fifty (50) years (remaining period of amortisation is 26 years).

23. Employee Benefits

Accounting Policy

Short Term Employee Benefits

Short term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employees and the obligation can be estimated reliably.

Employee Contribution Plans-EPF and ETF

A defined contribution plan is a post-employment benefit plan under which an entity pays a fixed contribution to a separate entity and will have no legal or constructive obligation to pay further amounts. All employees who are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions are covered by relevant contributions funds in line with the relevant statutes. Employer’s contributions to the defined contribution plans are recognised as an expense in profit or loss when incurred.

21. Loans and Borrowings (Contd...)



Defined Employee Benefit Plans

The liability recognised in the Statement of Financial Position in respect of defined benefit plan is the present value of defined benefit obligation at the reporting date. The defined benefit obligation is calculated annually by independent actuary using Project Unit Credit (PUC) method as recommended by LKAS 19 - ‘Employee Benefits. Actuarial gains and losses for the defined benefit plans are recognised in full in the period in which they occur in Other Comprehensive Income.

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

The Defined benefit plan liability has not been externally funded by the Company as well as subsidiaries of the group.

Group Company

2019 2018 2019 2018 LKR LKR LKR LKR

23.1 Reconciliation from the Opening Balances to the Closing Balances for the net Employee Defined Benefit Liability.

Balance at the beginning of the year 35,215,674 29,818,337 24,594,341 20,587,910Current service cost 4,657,696 4,560,036 2,277,725 2,171,398Interest cost 3,902,709 3,331,190 2,705,378 2,470,549Actuarial gains (1,807,165) (271,203) (1,195,897) 1,587,170 41,968,914 37,438,360 28,381,547 26,817,027Less: Payments made during the year (3,297,845) (2,222,686) (3,073,849) (2,222,686)Balance at the end of the year 38,671,069 35,215,674 25,307,698 24,594,341

23.2 Expense Recognised in Statement of Profit or Loss and other Comprehensive IncomeCurrent service cost 4,657,696 4,560,036 2,277,725 2,171,398Interest cost 3,902,709 3,331,190 2,705,378 2,470,549Expense recognised in Statement of profit or loss 8,560,405 7,891,226 4,983,103 4,641,947Actuarial gains recognised in Other comprehensive income (1,807,165) (271,203) (1,195,897) 1,587,170Total provision for the year 6,753,240 7,620,023 3,787,206 6,229,117

Company

An actuarial valuation of the provision for defined benefit plan was carried out as at 31 March 2019 by Actuarial & Management Consultants (Pvt) Ltd. The valuation method used by the actuaries to value the employee benefits obligation is the ''Projected Unit Credit (PUC) method'', the method recommended by the Sri Lanka Accounting Standard (LKAS 19) '' Employee Benefits''.

Subsidiary

The defined benefit obligation of the subsidiary has been calculated using the "Projected Unit Credit (PUC) method" in compliance with LKAS 19 "Employee Benefits".


23. Employee Benefits (Contd...)

23.3 Key Assumptions and Quantitative Sensitivity AnalysisThe cost of the defined benefit plan are determined using actuarial valuations and it involves making various assumptions. These include the determination of the discount rate, future salary increases, staff turnover and retirement age (mortality in service). Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

23.3 Key Assumptions and Quantitative Sensitivity AnalysisThe following were the principal actuarial assumptions at the reporting date

Company Subsidiary

2019 2018 2019 2018

Discount Rate 12% 11% 12% 11%Expected Annual Average Salary Increment Rate 10% 10% 10% 10%Staff Turnover Factor 18% 14% 17% 16%Retirement Age 55 Years 55 Years 55 Years 55 Years

23.4 Sensitivity of Assumptions UsedA quantitative sensitivity analysis for significant assumptions as at 31 March is, as shown below:

Group Company

2019 2018 2019 2018 LKR LKR LKR LKR

Discount rate 1% less 40,051,947 36,759,369 26,136,085 25,599,185 1% More 37,376,982 33,781,421 24,534,587 23,663,002

Salary increment rate 1% less 37,253,816 33,663,836 24,425,335 23,557,626 1% More 40,159,722 36,859,857 26,238,732 25,695,878

The sensitivity analyses above have been determined based on a method that extrapolates the impact on the defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. The sensitivity analyses are based on a change in a significant assumption, keeping all other assumptions constant. The sensitivity analyses may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation of one another.



23.5 Future Expected Contributions to the Defined Benefit PlansThe following payments are expected contributions to the employee benefit obligation in future years:

Company 2019 2018 LKR LKR

Within the next 12 months 6,109,755 3,669,604Between 1 and 2 years 8,352,522 7,834,747Between 2 and 5 years 6,248,723 7,263,609Between 5 and 10 years 3,552,506 4,022,090Beyond 10 years 1,044,193 1,804,291Total expected payments 25,307,699 24,594,341

The average duration of the defined benefit plan obligation at the end of the reporting period is 3.5 years (2018: 4.3 years)

24. Trade and Other Payables

Accounting policy

Trade payables are the aggregate amount of obligation to suppliers for goods delivered to or services consumed by the group in the ordinary course of business. Trade payables are classified as current liabilities if they are payable within one year or less.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.Trade and other payables are normally none interest bearing liabilities.

Group Company

2019 2018 2019 2018 LKR LKR LKR LKR

Trade payable 357,876,282 363,986,039 167,719,139 310,724,030Accrued expenses 156,109,037 78,667,266 48,233,963 45,507,939Retention payable 5,559,409 153,775,174 5,559,409 3,422,647Statutory payment liabilities 29,036,962 13,148,653 9,575,207 661,110Advance received 362,663,389 382,753,595 10,514,506 137,336,429Finance lease liabilities 6,292,920 12,021,577 - -Other payables 7,628,110 14,106,965 7,628,110 14,106,965 925,166,109 1,018,459,269 249,230,334 511,759,120

25. Related Party Disclosure

Terms and Conditions of Transactions with Related Parties

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. All outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 March 2019, the Group has recorded the impairment of receivable from related parties based on Expected Credit Loss (ECL) amounting to LKR. 53,360/- (2018: Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.


25. Related Party Disclosure (Contd...)

25.1 Amount due from Related Parties

Group Company

2019 2018 2019 2018 LKR LKR LKR LKR

Access Lifestyle (Pvt) Ltd 196,786 79,233 196,786 79,233Access International (Pvt) Ltd 81,861 455,124 81,861 455,124Access Engineering PLC 10,500,003 5,183,585 - 4,835,000Access International Projects (Pvt) Ltd 73,296 78,883 73,296 78,883ZPMC Lanka (Pvt) Ltd 46,416 36,325 46,416 36,325Access Natural (Pvt) Ltd - 68,927 - 68,927Access Transport & Services (Pvt) Ltd 18,500,000 18,000,000 - -Foresight Engineering (Pvt) Ltd 249,155 49,957 - -S D Munasinghe 1,310,197 - - -Sheran Fernando 1,279,002 376,635 - - 32,236,716 24,328,669 398,359 5,553,492(-) Provision for impairment (53,360) - - - 32,183,356 24,328,669 398,359 5,553,492

25.2 Amount due to Related PartiesAccess Projects (Pvt) Ltd 6,796,014 7,796,014 - -Access Engineering PLC 103,409,349 45,620,469 103,409,349 25,625,969Access Natural Water (Pvt) Ltd 116,701 67,367 95,775 47,213Access International (Pvt) Ltd 54,050 - - -ARL Elevate (Pvt) Ltd 19,980,778 1,302,016 - 543,216Reprographics (Pvt) Ltd - 128,858 - 101,488Loan received from Directors 5,900,000 5,900,000 - -Foresight Engineering (Pvt) Ltd (Note 25.2.1) 375,000,000 100,000,000 - -SML Frontier Automotive (Pvt) Ltd - - 36,084 36,084 511,256,892 160,814,724 103,541,208 26,353,970

25.2.1 Details of Related Party Loans

Details of related party loans and facilities outstanding together with the related securities offered as at the reporting date are set out below;

Principal Interest SecurityName of the Company Amount (LKR) rate offered

Foresight Engineering (Pvt) Ltd Short term loan 375,000,000 AWPLR + 1.5% None



25.3 Transactions with Related Companies

Group Compay

2019 2018 2019 2018 LKR LKR LKR LKR

Holding CompanySales of Goods / Rendering of services 324,138,056 28,528,120 6,055,741 6,987,639Purchases of Goods / Receiving of services (13,442,475) (10,418,100) - -Interest received 17,868,825 17,868,825 17,868,825 17,868,825Construction of Peliyagoda workshop building (240,938,789) (25,625,969) (240,938,789) (25,625,969)

Subsidiary CompanyPurchases of Goods / Receiving of Services - - (268,000) (36,084)Purchase of Vehicles - - (19,500,000) (25,000,000)Subscription to right issue - - - (99,970,031)

Other related party companiesSales of Goods / Rendering of Services 139,146,697 54,193,295 1,397,542 16,143,338Purchases of Goods / Receiving of Services (21,204,750) (2,120,493) (1,148,996) (1,314,169)Purchase of Fixed Assets (10,767,114) - (3,971,100) -Loan Obtained 908,000,000 - - -Loan Repayment (533,000,000) - - -Subscription to right issue - 99,970,031 - -

25.4 Directorship held by Directors in other Group of Companies

Company Name Company ( SML) Subsidiary ( SMLF)

S J S Perera

J C Joshua D A R Fernando

S D Munasinghe

S H S Mendis *

T D Gunasekara *

E S Coorey T T B C Fernando

S M P Dissanayake

Holding company

Access Engineering PLC - - - -

Subsidiary Company

SML Frontier Automotive (Pvt) Ltd

- -

Other related party companies

A R L Elevate (Pvt) Ltd. - - - -

Access Projects(Pvt) Ltd - - - - - -

ZPMC Lanka Company (Pvt) Ltd

- - - - - -

Access International (Pvt) Ltd

- - - -

Access Natural Water (Pvt) Ltd

- - - - - - -

Access Energy Solutions (Pvt) Ltd

- - - - - - -

Access Industrial Systems (Pvt) Ltd

- - - - - - - -


Company Name Company ( SML) Subsidiary ( SMLF)

Access International Project (Pvt) Ltd

- - - - - - - -

Reprographics (Pvt) Ltd - - - - - - - -

Access Lifestyle (Pvt) Ltd - - - - - - - -

Foresight Engineering (Pvt) Ltd

- - - - - - -

Access Transport & Services (Pvt) Ltd

- - - - - - - -

* - Resigned from the company Board with effect from 31 March 2019Following company directors neither held shareholding nor directorship of above companies.- M M N De Silva- W A C O Wijesinghe- R S Dahanayake- M Jayahsuriya **- T A L Niroshan **** - Appointed to the company board on 01 April 2019

25.5 Transactions, Arrangements and Agreements Involving Key Management Personal (KMP) and their Close Family Members (CFM)According to LKAS 24 “Related Party Disclosures”, Key Management Personnel are those having authority and responsibility for planning, directing and controlling the activities of the entity. Accordingly Board of Directors (including executive and non -executive Directors) have been classified as key Management Personnel of the Group.

Compensation of Key Management Personnel of the Group

Group Company

2019 2018 2019 2018 LKR LKR LKR LKR

Total compensation paid to Key Management Personnel 26,825,667 34,199,982 26,825,667 31,699,982

Close Family Members (CFM) of the KMPs are those family members who may be expected to influence or be influenced by that KMPs in their dealing with the entity. They may include KMPs domestic partner and children of the KMPs domestic partner and dependents of the KMPs domestic partner. During the year no transactions have been done with CFMs.

Directors Loan

No loans have been given to the directors of the Company.

25. Related party disclosure (Contd...)



26. Provisions, Commitments and Contingencies

Accounting Policy

Provisions are recognised when the Group/Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed the reimbursement is recognised as a separate asset when the reimbursement is virtually certain. The expense relating to provision is presented in income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Provisions are calculated based on the historical experience and the specific terms in the individual cases. The Group arrives at an estimate on the basis of an evaluation of the most likely outcome.

All known provisions have been accounted for in preparing the Financial Statements.

Contingent Liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present obligations where the transfer of economic benefit is not probable or cannot be readily measured. All contingent liabilities are disclosed as a note to the financial statements unless the outflow of resources is remote. A contingent liability recognised in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of the amount that would be recognised in accordance with the general guidance for provisions above (LKAS 37) or the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the guidance for revenue recognition. Contingent assets are disclosed, where inflow of economic benefit is probable.

Currently the Group/Company is involved in pending litigations and claims arising out of the normal conduct of the business. The Group/ Company does not expect the pending litigations and claims, individually and in aggregate, to have a material impact on Group’s Financial Position, operating profit or cash flow in addition to amounts accrued as provision for legal disputes.

Outcome of the current/pending tax assessments are as follows,

26.1 Pending Litigation for the Year ended 31 March 2019 and as at date Tax Assessments 2009/2010 and 2010/2011Revenue authorities are of the view 2/3rd disallowance is applicable for NBT paid on imports. However the Company is claiming the position that 2/3rd disallowance is applicable for NBT paid quarterly only.

Assessment No. 01

The Company has been issued an assessment for Nation Building Tax for the year of assessment 2009/10 for sum of LKR 7,350,762/- and LKR 3,675,381/- as penalty thereon.

The Company submitted an appeal against the above assessment and the Commissioner General of Inland Revenue made a determination affirming the said assessment at the conclusion of the appeal hearing. The Company appealed to the Tax Appeals Commission and Tax Appeals Commission also confirmed the determination of the Commissioner General of Inland Revenue. The Company, thereafter appealed against the said decision of the Tax Appeals Commission to the Court of Appeal and the Court of Appeal affirmed the decision of the Tax appeal Commission.

The Company finally appealed to the Supreme Court and the case is pending before the Supreme Court.


26. Provisions, Commitments and Contingencies (Contd...)

Assessment No. 02

The Company has been issued an assessment for Nation Building Tax for the year of assessment 2010/11 for sum of LKR 7,790,377/- and LKR 3,895,189/- as penalty thereon.

The Company submitted an appeal against the above assessments and the Commissioner General of Inland Revenue made a determination affirming the said assessments at the conclusion of the appeal hearing. The Company appealed to the Tax Appeals Commission and Tax Appeals Commission also confirmed the determination of the Commissioner General of Inland Revenue. The Company, thereafter appealed against the said decision of the Tax Appeals Commission to the Court of Appeal and the case is pending before the Court of Appeal.However, the Company decided to make a provision in full for these assessments during current financial year.

26.2 Corporate GuaranteeCorporate guarantee issued by Sathosa Motors PLC on behalf of SML Frontier Automotive (Private) Limited is LKR 1,077.30 million as at the reporting date for the purpose of working capital requirement.

27. Leases

Accounting Policy

Determination Whether an Arrangement Contains Lease

At inception of an arrangement, the Group determines whether the arrangement is or contains a lease. At inception on reassessment of an arrangement that contains a lease, Group separates payments and other consideration required by the arrangement into those for the lease and those for other elements on the basis of their relative fair values.

Leased Assets

Leases of property, plant and equipment that transfer to the Group substantially all of the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset.

Assets held under other leases are classified as operating leases and not recognised in the Group’s statement of financial position.

Lease Payments

Payments made under operating leases are recognised in the statement of profit or loss on straight-line basis over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

The Group leases its branches/outlets under operating leases. The leases typically run for a period of 10 years, with an option to renew the lease after that date.



Non cancellable future minimum lease payments are payable as follows:

Group Company 2019 2018 LKR LKR

Within one year 4,964,500 4,590,0001 to 5 years 25,771,032 26,058,056More than 5 years 10,699,862 15,377,338Total 41,435,394 46,025,394

The above rentals are payable with respect to Matara, Ratnapura and Kurunegala branch outlets’ operating lease.

The details are as follows:

Branch Operating lease period

Matara 01 December 2016 31 October 2026

Ratnapura 01 May 2017 30 April 2022

Kurunegala 01 August 2017 31 August 2027

28. Events Occurring After the Reporting Date

There have been no material events after the reporting date, except for the following, that would require adjustments to or disclosure in the Financial Statements.

The Company purchased 13,003,900 shares, per share price being LKR 15.38 of SML Frontier Automotive (Pvt) Limited, through rights issue for a consideration of LKR 199,999,982 /-on 22 April 2019.

29. Non-Controlling Interest (NCI)

NCI are measured initially at their proportionate share of acquiree’s identifiable net assets at the date of acquisition. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

The total profit or loss for the year of the Company and its subsidiary included in consolidation are shown in the consolidated Statement of Profit or Loss and other Comprehensive income with the proportion of profit or loss after taxation pertaining to minority shareholders of subsidiary being deducted as “Non controlling interest”. All assets and liabilities of the Company and of its subsidiary included in consolidation are shown in the consolidated Statement of Financial Position. The interest of minority shareholders of subsidiary in the fair value of net assets of the Group is indicated separately in the consolidated Statement of Financial Position under the heading “Non-controlling interest”. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as, equity transactions. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary.


29. Non-Controlling Interest (NCI) (Contd...)

Ownership interest held by NCI

Principal place of business Nature of the business 2019 2018

SML Frontier Automotive (Pvt) Limited Sri LankaAuthorised distributor for Jaguar and Land Rover in Sri Lanka

50% 50%

The following are summarised financial information of SML Frontier Automotive (Pvt) Ltd. The information is before inter-company eliminations.

As at/ for the year ended 31 March 2019 2018 LKR LKR

Statement of profit or loss and other comprehensive incomeRevenue 7,092,370,379 3,238,840,933Profit /(Loss) for the year 83,217,584 (3,141,106)Profit / (Loss) attributable to NCI 41,608,792 (3,801,619)Other Comprehensive Income 440,113 1,338,029Total Comprehensive Income 83,657,697 (1,803,077)Total Comprehensive Income attributable to NCI 41,828,849 (3,132,606)

Statement of financial positionCurrent assets 2,300,552,627 1,950,545,033Non-current assets 349,585,294 356,786,467Current liability 1,902,269,468 1,632,119,347Non-current liability 111,113,309 120,848,389Net assets 636,755,144 554,363,764Inter-company transaction/unrealised profit elimination at group level (4,462,134) (4,462,134) 632,293,010 549,901,630Net assets attributable to NCI 316,146,505 274,950,815

Statement of cash flowsCash flow generated/ (used in) operating activities 304,253,964 (766,911,109)Cash flow from/(used in) investing activities (81,675,649) (45,117,543)Cash flow generated/(used in) from financing activities (287,465,057) 785,598,790Net increase /(decrease) in cash and cash equivalents 64,886,742 (26,429,862)

30. Financial Instruments

The Group has initially applied SLFRS 9 from 1 April 2018. Information about transitional impact on the application of SLFRS 9 is disclosed in Note 33.2 to the financial statementsFinancial assets – Policy applicable from 1 April 2018

(a) Recognition and initial measurement

Trade receivables are initially recognised when they are originated. All other financial assets are initially recognised when the Group becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) is initially measured at fair value plus, for an item not at fair value through profit and loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.



(b) Classification and subsequent measurement

On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (FVOCI)- debt investment; fair value through other comprehensive income (FVOCI) – equity investment; or fair value through profit and loss (FVTPL).

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• it’s contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount of outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial Assets - Business Model Assessment:

The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

• the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets;

• how the performance of the portfolio is evaluated and reported to the Group’s management;

• the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

• how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

• the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

Transfers of financial assets to third parties in transactions that do not qualify for de recognition are not considered sales for this purpose, consistent with the Group’s continuing recognition of the assets. Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.


30. Financial Instruments (Contd...)

Financial Assets –Assessment Whether Contractual Cash Flows are Solely Payments of Principal and Interest:

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:• contingent events that would change the amount or timing of cash flows;

• terms that may adjust the contractual coupon rate, including variable-rate features;

• prepayment and extension features; and

• terms that limit the Group’s claim to cash flows from specified assets (e.g. nonrecourse features).

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par-amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

Financial Assets - Subsequent Measurement and Gains and losses:

Financial assets at FVTPL These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.

Financial assets at amortised cost These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

Debt investments at FVOCI These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On derecognition. Gains and losses accumulated in OCI are reclassified to profit or loss.

Equity investments at FVOCI These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

Financial Assets - Policy Applicable Prior to 1 April 2018

The Group classified its financial assets into one of the following categories• loans and receivables;

• held to maturity;

• available for sale; and

• at FVTPL, and within this category as

- held for trading

- derivative hedging instruments; or

- designated as at FVTPL



Financial Assets - Subsequent Measurement and Gains and Losses:

Financial assets at FVTPLMeasured at fair value and changes therein, including any interest or dividend income, were recognised in profit or loss.

Held-to-maturity financial assets Measured at amortised cost using the effective interest method.

Loans and receivables Measured at amortised cost using the effective interest method.

Available-for-salefinancial assets

Measured at fair value and changes therein, other than impairment losses, interest income and foreign currency differences on debt instruments, were recognised in OCI and accumulated in the fair value reserve. When these assets were derecognised, the gain or loss accumulated in equity was reclassified to profit or loss.

Financial Liabilities - Classification, Subsequent Measurement and Gains and Losses

Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

(c) Derecognition

Financial assets

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Group enters into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets.

In these cases, the transferred assets are not derecognised.

Financial Liabilities

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.

(d) Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.



Non-Derivative Financial AssetsFinancial Instruments and contract AssetsLoss allowances for trade receivables is always measured at an amount equal to lifetime ECLs.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information.

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.The Group considers a financial asset to be in default when:

• the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or

• the financial asset is more than 360 days past due.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

Impairment Policy: Applicable from 1 April 2018Non-derivative Financial AssetsFinancial Instruments and Contract AssetsThe maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

ECLs are discounted at the effective interest rate of the financial asset.

Credit-Impaired Financial Assets

At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a Financial Asset is Credit-impaired Includes the Following Observable data:• significant financial difficulty of the borrower or issuer;

• a breach of contract such as a default or being more than 360 days past due;

• the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;

• it is probable that the borrower will enter bankruptcy or other financial reorganisation; or

• the disappearance of an active market because of financial difficulties.

Presentation of allowance for ECL in the statement of financial positionLoss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.



Write-off

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures to recovery of amounts due.

Impairment Policy: Applicable Prior to 1 April 2018Non-Derivative Financial assetsFinancial assets not classified as at FVTPL were assessed at each reporting date to determine whether there was objective evidence of impairment.

Objective Evidence that financial Assets were impaired Included: - default or delinquency by a debtor;

- restructuring of an amount due to the Group on terms that the Group would not consider

otherwise;

- indications that a debtor or issuer would enter bankruptcy;

- adverse changes in the payment status of borrowers or issuers;

- the disappearance of an active market for a security because of financial difficulties; or

- observable data indicating that there was a measurable decrease in the expected cash flows from a group of financial assets.

Financial assets measured at amortised cost

The Group considered evidence of impairment for these assets at both an individual asset and a collective level. All individually significant assets were individually assessed for impairment. Those found not to be impaired were then collectively assessed for any impairment that had been incurred but not yet individually identified. Assets that were not individually significant were collectively assessed for impairment. Collective assessment was carried out by grouping together assets with similar risk characteristics.

In assessing collective impairment, the Group used historical information on the timing of recoveries and the amount of loss incurred, and made an adjustment if current economic and credit conditions were such that the actual losses were likely to be greater or lesser than suggested by historical trends.

An impairment loss was calculated as the difference between an asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses were recognised in profit or loss and reflected in an allowance account. When the Group considered that there were no realistic prospects of recovery of the asset, the relevant amounts were written off. If the amount of impairment loss subsequently decreased and the decrease was related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss was reversed through profit or loss.

Available-for-sale financial assets

Impairment losses on available-for-sale financial assets were recognised by reclassifying the losses accumulated in the fair value reserve to profit or loss. The amount reclassified was the difference between the acquisition cost (net of any principal repayment and amortisation) and the current fair value, less any impairment loss previously recognised in profit or loss. If the fair value of an impaired available-for-sale debt security subsequently increased and the increase was related objectively to an event occurring after the impairment loss was recognised, then the impairment loss was reversed through profit or loss. Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available-for-sale were not reversed through profit or loss.



30.1 Analysis of Financial Instruments by Measurement Basis

Group Company


Financial assets at amortised cost non-current assetsCorporate debt securities 592,271,384 655,877,464 592,271,384 655,877,464

Financial assets at amortised cost-CurrentTrade and other receivables excluding pre-payments 2,375,525,458 1,464,575,956 872,787,317 622,076,864Amounts due from related parties 32,183,356 24,324,913 398,359 5,553,492Cash and cash equivalents 509,156,273 93,521,637 81,677,252 81,677,251

Financial Liabilities measured at amortised cost- non-currentInterest bearing borrowings 83,052,000 108,405,134 - -

Financial Liabilities measured at amortised cost- currentTrade and other payables 527,906,349 864,493,651 223,581,213 370,281,044Interest bearing borrowings 3,224,356,757 2,018,545,626 2,552,573,952 1,084,650,898Amounts due to related parties 511,256,892 160,814,724 103,541,208 26,353,970Bank overdraft 146,228,086 74,151,498 26,083,852 19,019,330

31. Fair Value Measurements and Related disclosures

The Group measures financial instruments such as derivatives, and non-financial assets such as investment properties, at fair value at each balance sheet date.

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

Or

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

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

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

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

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

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



Level 1 - Input that are quoted market prices (unadjusted) in active markets for identical assets or liabilities.Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or

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

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

Involvement of external valuers is decided upon annually by the management. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Management decides, after discussions with the Group’s external valuers, which valuation techniques and inputs to use for each case.

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

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

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

31.1 Financial Assets by Fair Value Hierarchy The following table shows fair value measurement hierarchy of the Group’s assets, liabilities. It does not includes fair value information for financial assets and financial liabilities not measured at fair value if carrying amount is a reasonable approximation of fair value.

Fair Value hierarchy

Level 1 Level 2 Level 3 Total 2019 2018 2019 2018 2019 2018 2019 2018

LKR LKR LKR LKR LKR LKR LKR LKR

Group

Corporate debt securities 592,271,384 655,877,464 - - - - 592,271,384 655,877,464

Interest bearing borrowing - - 3,307,408,757 2,126,950,760 - - 3,307,408,757 2,126,950,760

Company

Corporate debt securities 592,271,384 655,877,464 - - - - 592,271,384 655,877,464

Interest bearing borrowing - - 2,552,573,952 1,084,650,898 - - 2,552,573,952 1,084,650,898

During the reporting year ended 31 March 2019 and 2018, there were no transfers between level 1 and level 2 fair value measurements.

32. Financial Risk Management

The Group has exposure to the following risks arising from financial instruments:- Credit risk

- Liquidity risk

- Market risk

This note represents information about the Group’s exposure to each of the above risks, the Group’s objectives policies and processes for measuring and managing risk.


32. Financial Risk Management (Contd...)

Risk Management Framework

The Company’s board of directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The board of directors has established the risk management policies to identify and analyse the risks face by the group and set appropriate risk limits and controls and to monitor risk and adherence to limits. Risk management policies and systems are reviewed regularly, and aim to develop a disciplinary constructive control environment, in which all employees understand their roles and obligations through training, management standards and procedures.

The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risk face by the Group. The Group Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and adhoc reviews of risk management controls and procedures, the result of which are reported to the Audit Committee. The committee reports regularly to the board of directors on its activities.

The board of Directors reviews, verifies, agree the policies for managing each type of risk which are summarised below.

32.1 Credit RiskCredit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from Group’s receivables from customers and investment securities.The carrying amounts of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows.

Group Company

2019 2018 2019 2018 LKR LKR LKR LKR

Investment in debentures 592,271,384 655,877,464 592,271,384 655,877,464Trade receivables and other receivables 2,456,841,853 1,469,467,318 936,721,884 632,473,507Amounts due from related parties 32,183,356 24,328,669 398,359 5,553,492Cash and cash equivalents 509,156,273 93,521,637 497,186,563 81,677,251 3,590,452,866 2,243,195,088 2,026,578,190 1,375,581,714

32.1.1 Trade Receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer based including default risk associate with the industry and country in which customers operate. Each new customer is analysed individually for credit worthiness, reviews external ratings, if they are available financial statements, credit agency information, industry information, and in some cases bank references. Each business units monitor the customers’ financial standing (financial insolvency) and outstanding customer receivables are regularly monitored. An impairment analysis is performed at each reporting date on an individual basis. The calculation is based on actual incurred historical data. The minimum exposure to credit risk at the reporting date is the carrying value of the each class of financial assets disclosed in Note 32.1.



Age analysis of trade receivables as at reporting date as follows:

Group Company


0-30 Days 957,059,589 395,030,233 159,634,752 146,775,66131-60 Days 245,734,268 120,869,967 91,014,452 66,213,08761-90 Days 70,077,307 46,550,719 70,077,307 46,550,71991- 365 Days 192,924,788 200,770,216 47,881,550 56,029,206>365 Days 71,885,898 40,455,002 627,905 232,061 1,537,681,850 803,676,137 369,235,966 315,800,734(-) Provision impairment (5,715,270) (1,949,771) (1,456,440) (326,802) 1,531,966,580 801,726,366 367,779,526 315,473,932

The Group believes that the unimpaired amounts that are past due by more than 30 days are still collectible, based on historic payment pattern and extensive analysis and follow up procedures implemented on the customer credit risk.

32.1.2 Short Term Deposits and Cash and Cash Equivalents

Credit risk from balances with banks and financial institution is managed by the Group’s treasury management in accordance with the Group’s policy.

The Group held Short Term deposits and cash and cash equivalent as at 31 March 2019 which represents its maximum credit exposure on these assets.

As at 31 March 2019 -100% (2018 - 100%) of the favourable balances of bank and financial institution were rated ‘A’ or better for the Group.

32.1.2 Short Term Deposits and Cash and Cash Equivalents

2019 % 2018 %Fitch Rating group LKR LKR

GroupAA+ 2,202,730 0% 11,192,235 12%AA 77,387 0% 40,006,301 44%AA- 496,351,582 98% 30,754,511 34%A+ 7,218,882 2% 8,767,113 10% 505,850,581 100% 90,720,160 100% CompanyAA+ 2,202,730 0% 11,192,235 14%AA 77,387 0% 40,006,301 49%AA- 487,688,270 98% 25,100,670 31%A+ 6,896,232 2% 5,378,046 7% 496,864,619 100% 81,677,252 100%



32.1.3 Investment in Debentures

As at 31 March 2019 -100%, (2018 – 100%) were guaranteed by a banking institution with a rating of “A” or better for the Group.

Company 2019 2018 LKR LKR

AA- 200,184,931 34% 225,305,688 34%A+ 392,086,453 66% 430,571,776 66% 592,271,384 100% 655,877,464 100%

32.2 Liquidity RiskLiquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group monitors its risk of a shortage of funds using a liquidity planning tools. The group’s approach of managing liquidity risk is to ensure as far as possible that it will always have sufficient liquidity meets its liability when due, and maintaining the balance between financial assets and liabilities and forecasting cash flows from operating activities, without incurring unacceptable losses or risking damages to the group’s reputation.

Maturity Profile

The following are the remaining contractual maturities of the financial liabilities at the reporting date.

Group On Within Within More than Carrying demand 1 year 1-2 years 2 years amount LKR LKR LKR LKR LKR

Non- Derivative Financial Liabilities Interest bearing borrowings - 3,224,356,757 83,052,000 - 3,307,408,757Trade and other payables - 925,166,109 - - 925,166,109Bank Overdraft - 146,228,086 - - 146,228,086Amounts due to related parties - 511,256,892 - - 511,256,892Income tax payable - - - - -Unclaimed dividend 4,168,960 - - - 4,168,960 4,168,960 4,807,007,844 83,052,000 - 4,894,228,804

Company Non- Derivative Financial LiabilitiesInterest bearing borrowings - 2,552,573,952 - - 2,552,573,952Trade and other payables - 249,230,334 - - 249,230,334Bank Overdraft - 26,083,852 - - 26,083,852Amount due to related parties - 103,541,208 - - 103,541,208Income tax payable - - - - -Unclaimed dividend 4,168,960 - - - 4,168,960 4,168,960 2,931,429,346 - - 2,935,598,306

Trade and other payables are settled during the availability of the credit terms.



32.3 Market RiskMarket risk is the risk that changes in the market process- e.g. foreign exchange rates, interest rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. All such transactions are carried out within the guidelines set by the Group Management.

Market risk comprise of the following types of risk:

I. Interest rate risk

II. Currency risk

III. Commodity price risk

IV. Equity price risk

32.3.1 Interest Rate RiskInterest rate risk is the risk that the fair value of future cash flows of a financial instrument fluctuate because of changes in the market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long term debt obligation. The Group utilises various financial instruments to manage exposures to interest rate risks.

At the reporting date, the Group’s interest - bearing financial instruments were as follows:

Group Company


Fixed Rate InstrumentsFinancial AssetsDebentures 592,271,384 655,877,464 592,271,384 655,877,464Short term call deposits 389,165,779 25,072,422 389,165,779 25,072,423 981,437,163 680,949,886 981,437,163 680,949,886

Variable Rate InstrumentsFinancial LiabilitiesTerm Loan (97,332,000) (122,685,134) - -Short term and import loans (3,210,076,757) (2,004,265,626) (2,552,573,952) (1,084,650,898)Bank Overdraft (146,228,086) (74,151,498) (26,083,852) (19,019,330) (3,453,636,843) (2,201,102,258) (2,578,657,804) (1,103,670,228)

32.3.1 Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group exposes to the foreign currency risk on purchases, foreign operations that are denominated in a foreign currencies.



The summary quantitative data about the Group’s exposure to currency risk as reported to the management of the Group is as follows,

2019 2018

GBP USD THB JPY GBP USD THB JPY

Trade Payables - Foreign Creditors 618,221 175,571 7,648,824 56,427,200 167,037 18,966 - 206,336,470

Gross Statement of

Financial Position Exposure 618,221 175,571 7,648,824 56,427,200 167,037 18,966 - 206,336,470

The summary quantitative data about the Company’s exposure to currency risk as reported to the management of the Company is as follows,

Trade Payables - Foreign Creditors - - 7,648,824 56,427,200 - - - 206,336,470

Gross Statement of

Financial Position Exposure - - 7,648,824 56,427,200 - - - 206,336,470

32.3.1 Currency Risk

The following significant exchange rates were applicable during the year 2018/19 and 2017/18

Group/ Company

Average Rate Reporting Date Spot RateAs at 31 March 2019 2018 2019 2018GBP 224.85 206.36 230.16 219.54USD 166.05 154.94 176.13 155.97THB 5.26 4.69 5.54 4.98JPY 1.54 1.42 1.62 1.46

Sensitivity Analysis

A strengthening of the Rupee as indicated below, against the USD,THB, JPY at 31 March 2019 would have increased/ (decreased) the equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant.



Group Company

Strengthening Weakening Strengthening Weakening LKR LKR LKR LKR

31 March 2019USD (10% movement) (3,092,332) 3,092,332 -THB (10% movement) (4,237,143) 4,237,143 (4,237,143) 4,237,143JPY (10% movement) (9,144,028) 9,144,028 (9,144,028) 9,144,028GBP (10% movement) (14,228,856) 14,228,856 - -

31 March 2018USD (10% movement) (295,824) 295,824 - -JPY (10% movement) (30,197,342) 30,197,342 (30,197,342) 30,197,342GBP (10% movement) (3,667,126) 3,667,126 - -

32.4 Capital ManagementThe Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future deployment of the business. The Group’s management and Board of Directors monitors the return on capital, as well as the level of dividends to ordinary shareholders.

In order to achieve this overall objective, the Group’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches of the financial covenants of any interest-bearing loans and borrowing in the current period.

The Group’s Net Debt to adjusted Equity ratio at the end of the reporting period was as follows:

Carrying amount

Group CompanyAs at 31 March 2019 2018 2019 2018 LKR LKR LKR LKR

Total Liabilities 4,966,109,939 3,509,891,599 2,979,418,132 1,756,959,945Less: Cash and Cash Equivalents (509,156,273) (93,521,637) (497,186,563) (81,677,251)Net Debt 4,456,953,666 3,416,369,962 2,482,231,569 1,675,282,694

Total Equity 1,731,455,977 1,597,121,687 1,679,110,488 1,596,121,189

Net Debt to Equity Ratio 257% 214% 148% 105%

There were no changes in the Group’s approach to capital management during the year and the Group is not subject to externally imposed capital requirements.


33. Changes in Accounting Policies and Disclosures

Impact on Adoption of new Standards

The Group has initially applied the SLFRS 15 and SLFRS 9 from 01 April 2018. Due to the transition methods chosen by the Company and Group in applying these standards, comparative information throughout these financial statements has not been restated to reflect the requirements of the new standards.

33.1 SLFRS 15-Revenue from Contract with CustomersSLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces LKAS 18 Revenue, LKAS 11 Construction contracts and other related interpretations.

The Group has adopted SLFRS 15 using the cumulative effect method (without practical expedients), with the effect of initially applying this standard recognised at the date of initial application (01 April 2018). Accordingly, the information presented for 2018 has not been restated – i.e. it is presented, as previously reported, under IAS 18, IAS 11 and related interpretations.

Based on the impact analysis carried out by the Board of Directors, they are of the view that there will not be any changes to the existing revenue recognition criteria of the Company and Group. Therefore, adopting SLFRS 15 does not have significant material impact on the Group’s Statement of financial position as at 31 March 2019 and its statement of comprehensive profit or loss and OCI and statement of cash flows for the year then ended 31 March 2019.

33.2 SLFRS 9 Financial InstrumentsSLFRS 9 Financial Instruments replaces LKAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 01 April 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement, impairment.

The Group applied SLFRS 9 prospectively, with an initial application date of 01 April 2018. The Group has not restated the comparative information, which continues to be reported under LKAS 39.



33.2.1 Classifications and Measurements

The following table below explain the original measurement categories under LKAS 39 and the new measurement categories under SLFRS 9 for each class of the Group’s financial assets as at 1 April 2018. The Group has not designated any financial liabilities as at fair value through profit and loss. There are no changes in classification and measurement for Group’s financial liabilities.

Group Company

Carrying value Carrying value as at 01 Remeasurement Amortised cost as at 01 Remeasurement Amortised cost April 2018 April 2018 LKR LKR LKR LKR LKRLKAS 39 measurement category Held to maturityCorporate debt securities 655,877,464 - 655,877,464 655,877,464 - 655,877,464

Loans and receivablesTrade receivable and other receivables excluding pre-payments 1,467,517,546 2,941,590 1,464,575,956 623,263,435 1,186,571 622,076,864 Amounts due from Related Parties 24,328,669 3,756 24,324,913 5,553,492 - 5,553,492Cash and cash equivalents 68,449,214 - 68,449,214 56,604,828 - 56,604,828Available for sale financial assetsShort term Call deposits 25,072,423 - 25,072,423 25,072,423 - 25,072,423 2,241,245,316 2,945,346 2,238,299,970 1,366,371,642 1,186,571 1,365,185,071

33.2.2 Impairment

SLFRS 9 replaces the incurred loss model in LKAS 39 with an “Expected credit loss (ECL) model. The new impairment model applied to financial assets measured at amortised cost. Under SLFRS 9, credit losses are recognised earlier than under LKAS 39.

The Group has determined the application of the impairment requirements of SLFRS 9 at 01 April 2018.

The following table summarises the impact net of tax of transition to SLFRS 9 on the opening balance of reserves and retained earnings.

Retained Earnings

Group Company NCI LKR LKR LKR

Closing balance as at 31 March 2018 1,481,197,397 1,480,196,899 274,950,815Recognition of expected impairment loss under SLFRS 9for financial assets at amortised costImpact on SLFRS 09-Trade receivable adjustment (2,064,081) (1,186,571) (877,510)Amount due from related party (1,878) - (1,878)Related tax 669,973 423,744 246,229Total impact (net of tax) as at 01 April 2018 (1,395,986) (762,827) (633,159)Adjusted balance as at 01 April 2018 1,479,801,411 1,479,434,072 274,317,656


Our LocationBo

ard

of D

irect

ors

Vehicle Sales Showrooms

Workshop Operations

Finance Department

Spare PartsShowrooms

HR & Admin. Department

IT Department

Seni

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anag

emen

t

HEAD

OFF

ICE

MAT

ARA

RATN

APUR

A

PELIY

AGOD

A

KURU

NEGA

LA

PANC

HIKA

WAT

TA

1 2 3 4 5 6

Locations

1. Head Office

No. 25, Vauxhall Street, Colombo 02.No. 86, Vauxhall Street, Colombo 02.

2. Peliyagoda

No.25/11, New Nuge Road, Peliyagoda.

3. MataraNo. 679, Galle Road, Walgama, Matara.

4. KurunegalaN0.78. Colombo Roadd, Dambokka, Kurunegala.

5. RatnapuraNo. 1/1, Colombo Road, Weeragoda, Hidellana, Rathnapura.

6. PanchikawattaNo.42, Panchikawatta Road, Colombo 10.


Decade at a Glance

Ten Year Summary 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19

Statement of Profit or Loss and Other

Comprehensive Income Highlights

Revenue Rs.Mn 818 1,432 1,883 2,311 3,041 3,503 4,048 5,221 8,177 11,126

Gross Profit Rs.Mn 143 249 342 404 847 849 967 897 1,497 1,320

EBITDA Rs.Mn 55 182 249 294 449 433 557 416 759 732

EBIT Rs.Mn 48 176 242 286 424 401 491 309 635 595

Net Finance Income/(Cost) Rs.Mn (6) (0) - - (9) (19) (28) 1 (105) (299)

Profit After Tax Rs.Mn 27 111 173 206 288 270 327 234 384 176

Profit Attributable to Owners Rs.Mn 27 111 173 206 260 261 321 263 388 135

Statement of Financial Position Highlights

Property Plant and Equipment Rs.Mn 45 41 39 45 173 332 513 549 973 1,251

Total Non Current Assets Rs.Mn 45 42 39 67 247 451 1,318 1,250 1,686 1,911

Cash and Cash Equivalent Rs.Mn 28 309 536 101 6 45 (229) (19) 19 363

Total Assets Rs.Mn 469 1,040 1,416 1,443 2,014 2,485 3,197 3,900 5,382 7,014

Stated Capital Rs.Mn 116 116 116 116 116 116 116 116 116 116

Retained Earnings Rs.Mn 80 178 324 655 884 1,115 1,283 1,365 1,481 1,616

Equity Attributable to Equity Holders Rs.Mn 351 450 595 771 1,000 1,231 1,399 1,481 1,597 1,731

Loans and Borrowings Rs.Mn - - - - 59 213 368 631 2,127 3,307

Total Non Current Liabilities Rs.Mn 25 27 25 28 32 113 225 183 173 155

Statement of Cash Flow Highlights

Cash Flows from Operating Activities Rs.Mn 130 279 234 (405) 17 142 460 69 (792) (565)

Cash Flows From Investing Activities Rs.Mn 4 14 23 1 (197) (208) (788) 126 (395) (272)

Cash Flows From/(used in)

Financing Activities Rs.Mn (113) (12) (30) (30) 84 105 54 15 1,225 1,180

Key Financial Ratios

EPS Rs. 4.47 18.32 28.68 34.10 43.09 43.32 53.22 43.51 64.32 22.32

DPS Rs. 2.00 5.00 5.00 5.00 5.00 7.00 12.00 30.00 45.00 0.00

Net Assets Per Share Rs. 58.19 74.51 98.64 127.76 165.76 204.02 231.82 245.46 264.70 286.97

Dividend Payout % 45% 27% 17% 15% 12% 16% 23% 69% 70% 0%

ROE % 8% 24.6% 29.1% 26.7% 26.4% 20.2% 21.7% 14.1% 20.5% 8.6%

ROCE % 7.2% 23.2% 27.9% 25.8% 25.6% 18.7% 18.9% 12.7% 18.8% 8.0%

Gearing % - 0.0 - - 0.0 0.2 0.4 0.4 1.2 1.7

Current Ratio times 4.53 1.77 1.73 2.14 1.99 1.96 1.28 1.29 1.11 1.06

Quick Ratio times 2.52 0.85 0.83 0.74 1.15 0.97 0.47 0.37 0.48 0.63

Price Per Share Rs. 143.00 222.10 249.90 229.20 240.00 275.10 300.00 300.00 440.00 457.90

Investor Highlights

Total Number of Shareholders No. 1,507 1,457 1,437 1,296 1,206 1,196 1,193 1,173 1,139 1,147

% of Public Holding % 11.85% 10.14% 22.78% 15.57% 15.54% 15.48% 15.46% 15.46% 15.46% 15.54%


Abbreviations

3S Vehicle Sales, Spare Parts, Services

AC Audit Committee

AEL Access Engineering PLC

AGM Annual General Meeting

AWPLR Average Weighted Prime Lending Rate

Bn Billion

BSc Bachelor of Science

CA Sri Lanka

Institute of Chartered Accountants of Sri Lanka

CCPI Colombo Consumer Price Index

CEAC Ceylon Exotic Automotive Club

CEO Chief Executive Officer

CFM Close Family Member

CFO Chief Financial Officer

CG Corporate Governance

CGU Cash Generating Unit

CISO Chief Information Security Officer

COO Chief Operating Officer

CSE Colombo Stock Exchange

CSR Corporate Social Responsibility

CWE Co-Operative Wholesale Establishment

DPS Dividend Per Share

EBIT Earnings Before Interest and Taxes

EBITDA Earning Before Interest, Tax, Depreciation and Amortisation

ECL Expected Credit Loss

ED Executive Director

EIR Effective Interest Rate

EPF Employees’ Provident Fund

EPS Earnings Per Share

ERP Enterprise Resource Planning

ESC Economic Service Charge

ESG Environmental, Social and Governance

ETF Employees’ Trust Fund

FOB Free On Board

FVOCI Fair Value Through Other Comprehensive Income

FVTPL Fair Value Through Profit or Loss

FY Financial Year

GBP Great British Pound(s)

GDP Gross Domestic Product

GM General Manager

GRI Global Reporting Initiative

HR Human Resources

IAS International Accounting Standards

ICASL Institute of Chartered Accountants of Sri Lanka

IESL Institute of Engineers of Sri Lanka

IFRIC International Financial Reporting Interpretations Committee

IIA Institute of Internal Auditors

IIRC International Integrated Reporting Council

IT Information Technology

JPY Japanese Yen

KMP Key Management Personnel

LC Letter of Credit

LCV Light Commercial Vehicles

LED Light Emitting Diode

LKASs Sri Lanka Accounting Standards

LKR Sri Lankan Rupees

LTD Limited

LTV Loan to Value Ratio

MBA Master of Business Administration

MD Managing Director

Mn Million

MSc Master of Science

N/A Not Applicable

NBT Nation Building Tax

NCI Non-Controlling Interest

NCPI National Consumer Price Index

NED Non-Executive Director

OCI Other Comprehensive Income

OD Overdraft

OHTC Oman Hotels and Tourism Corperation

PIM Postgraduate Institute of Management

PLC Public Limited Company

PMP Project Management Professional

PPE Property Plant and Equipment

PUC Projected Unit Credit

PVT Private

ROCE Return on Capital Employed

ROE Return on Equity

RPT Related Party Transactions

SDGs Sustainable Development Goals

SEC Securities and Exchange Commission

SIC Standard Interpretations Committee

SID Senior Independent Director

SLAuS Sri Lanka Auditing Standards

SLFRSs Sri Lanka Financial Reporting Standards

SME Small and Medium-Sized Enterprises

SML Sathosa Motors PLC

SMLF SML Frontier Automotive (Private) Limited

THB Thai Baht(s)

UK United Kingdom

US United States

USA United States of America

USD United States Dollar(s)

USQ University of Southern Queensland

VAT Value Added Tax


Awards and Accolades

Annual Report Awards 2018Bronze Award in Motor Companies Sector - Institute of Chartered

Accountants of Sri Lanka (CA Sri Lanka)

Company Awards – 2018/2019

Isuzu Distributor & Dealer After sales Award 2018

Sathosa Motors PLC was awarded with the Star Distributor & Dealer Prize From Isuzu Motors Limited,

Japan for the year 2018


NOTICE IS HEREBY GIVEN that the Thirty Fifth (35th) Annual General Meeting of the Shareholders of Sathosa Motors PLC will be held at The Institute of Chartered Accounts of Sri Lanka, 30 A, Malalasekera Mawatha, Colombo 7, Sri Lanka on 26 August 2019, at 2.00 p.m for the following purposes.

1. To receive and consider the Annual Report of the Board of Directors on the affairs of the Company and the Statement of Accounts for the year ended 31 March 2019 with the Report of the Auditors thereon.

2. To re-elect Mr. W A C O Wijesinghe who retires by rotation in terms of Article 88(i) of the Articles of Association of the Company.

3. To elect Mr. M Jayahsuriya as a Director in terms of Article 95 of the Articles of Association of the Company.

4. To elect Mr. T A L Niroshan as a Director in terms of Article 95 of the Articles of Association of the Company.

5. To re-appoint Messrs KPMG, Chartered Accountants as Auditors for the year ending 31 March 2019, and to authorise the Board of Directors to determine their remuneration.

6. To authorise the Directors to determine contributions to charities and other donations for the year 2019/2020.

By order of the BoardSATHOSA MOTORS PLC

P W CORPORATE SECRETARIAL (PVT) LTDDirector / Secretaries

9 July 2019Colombo

Notes1. Any member of the Company unable to attend the meeting may appoint another person (whether a member or not) as a proxy to

attend and vote for him/her

2. A proxy need not be a member of the Company. A proxy form is attached for your use. The completed form of proxy should be lodged with the Secretaries of the Company P W Corporate Secretarial (Pvt) Ltd, No. 3/17, Kynsey Road, Colombo 08 not less than 36 hours before the holding of the Annual General Meeting.

3. Shareholders appointing proxies (other than Directors of the Company) to attend the meeting are requested to indicate the number of the National Identity Card of the Proxy holder on the form or proxy.

4. Only registered Proxy holders will be permitted to attend the Annual General Meeting. Shareholders/Proxy holders attending the Annual General Meeting are kindly requested to bring with them their National Identity Card or any other form of valid identification.

Notice of Annual General Meeting


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I/We ............................................................................................................................................................................................................................ (NIC No. ...............................................)

of .....................................................................................................................................................................................................................................................................................................

being a member/members of SATHOSA MOTORS PLC hereby appoint;

.......................................................................................................................................................................................................................................................................................................of

...........................................................................................................................................................................................................................................................................................................

.................................................................................................................................................................................................................................................................(or failing him/her). Mr. S J S Perera of Colombo or failing him*Mr. J C Joshua of Colombo or failing him*Mr. M M N De Silva of Colombo or failing him*Mr. S D Munasinghe of Colombo or failing him*Mr. D A R Fernando of Colombo or failing him*Mr. W A C O Wijesinghe of Colombo or failing him*Mr. E S Coorey of Colombo or failing him*Mr. R S Dahanayake of Colombo or failing him*Mr. M Jayahsuriya of Colombo or failing him*Mr. T A L Niroshan of Colombo or failing him*

.......................................................................................................................................................................................................................................................................................................of

..................................................................................................................................................................................... holder of NIC No. ............................................................................

as my/our* proxy represent me/us and vote for me/us* and on my/our* behalf at the Thirty Fifth (35th) Annual General Meeting of the Company to be held on 26 August 2019, at 2.00 p.m at The Institute of Chartered Accounts of Sri Lanka, 30A, Malalasekera Mawatha, Colombo 7 and at any adjournment thereof and every poll which may be taken in consequence thereof.

Please indicate your preference by placing a against the following

For Against

1. To re-elect Mr. W A C O Wijesinghe who of the Articles of Association of the Company. retires in terms of Article 88(i)

2. To elect Mr. Manoaj Jayahsuriya in terms of Article 95 of the Articles of Association of the Company.

3. To elect Mr. T A L Niroshan in terms of Article 95 of the Articles of Association of the Company.

4. To re-appoint Messrs KPMG Chartered Accountants as Auditors for the year ending 31 March 2020 and to authorise the Board of Directors to determine their Remuneration.

As witness my/our* hands this ............................................................................. day of .......................................................................... Two Thousand and Nineteen.

*Please delete as appropriate

…………………. …………………………NIC/REG.No. Signature of Member/s

Notes: 1. A proxy need not be a member of the Company. 2. Instructions as to completion appear overleaf.

Form of Proxy


Instructions for the Completion of Proxy

1. Please perfect the Form of Proxy overleaf by filling in legibly your full name address and the National Identity Card number and signing in the space provided and filling in the date of signature.

2. Please return the completed Form of Proxy after deleting one or other of the alternative words indicated by asterisk in the body of the form.

3. To be valid the completed Form of Proxy should be deposited with the Company Secretaries, P W Corporate Secretarial (Pvt) Ltd., No. 3/17, Kynsey Road, Colombo 08 not less than 36 hours before the time appointed for the holding of the meeting

4. If the Form of proxy has been signed by an attorney, the relative Power of Attorney should also accompany the completed form of Proxy for registration, If such Power of Attorney has not already been registered with the Company.

5. If the shareholder is a Company or a Corporate body, the Proxy should be executed under its common seal in accordance with its Articles of Association or Constitution.

6. A shareholder appointing a proxy (other than a Director of the Company) to attend the meeting should indicate the proxy holder’s National Identity Card (NIC) number on the Form of Proxy and request the proxy holder to bring his/her National Identity Card with him/her.

Name of the Company

Sathosa Motors PLC

Registered Office

Sathosa Motors PLC25,Vauxhall Street,Colombo 02,Sri Lanka.Tel:- +94 112 432 858 Fax:- +94 112 446 129 Web:- www.sathosamotorsplc.comE mail :- [email protected]

Legal Form

A public Limited Liability Company incorporated in Sri Lanka on 11 March 1982 under the Companies Ordinance No: 51 of 1938 and re-registered under the Companies Act No.7 of 2007. Listed on the Colombo Stock Exchange on 07 November 1993.

Company Registration Number

PQ 105

Board of Directors

S J S Perera ChairmanJ C Joshua Managing Director T D Gunasekera Managing Director *E S Coorey Director / Chief Operating OfficerM Jayahsuriya Executive Director **S D Munasinghe DirectorD A R Fernando DirectorS H S Mendis Director *T A L Niroshan Director **M M N de Silva DirectorW A C O Wijesinghe DirectorR S Dahanayake Director***

Audit Committee

M M N de Silva - ChairmanJ C Joshua *W A C O WijesingheR S Dahanayake***T A L Niroshan **


S J S Perera - ChairmanM M N de SilvaW A C O Wijesinghe

Corporate Information

Related Party Transaction Review Committee

M M N de Silva - ChairmanJ C Joshua *W A C O WijesingheT D Gunasekera *R S Dahanayake***T A L Niroshan **

Strategic Planning Committee

J C Joshua - ChairmanE S CooreyM Jayahsuriya

* Resigned w.e.f. 31 March 2019 ** Appointed w.e.f. 1 April 2019 *** Appointed w.e.f. 15 August 2018

Bankers

Hatton National Bank PLC Commercial Bank of Ceylon PLC Bank of Ceylon People’s Bank DFCC Bank PLC Sampath Bank PLC National Development Bank PLC

Auditors

Messrs KPMGChartered Accountants32 A, Sir Mohomad Macan Marker Mawatha,Colombo 03,Sri Lanka.Tel: +94 112 426 426Fax: +94 112 445 872

Secretaries & Registras

P W Corporate Secretarial (Pvt) LtdNo: 3/17, Kynsey Road,Colombo 08,Sri Lanka.Tel: +94 114 640 360Fax: +94 114 740 588

www.sathosamotorsplc.com

SATHOSA MOTORS PLC · 2019-08-01 · 01) Sathosa Motors PLC Authorised distributor for ISUZU in Sri Lanka Sathosa Motors PLC (SML) is the franchise holder for Isuzu vehicles and spare

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