Annual Report 2016-17

Reg No. PV 64165 PB/PQ

Contents
Financial Highlights 2
Management Discussion and Analysis 3
Board of Directors 6
Corporate Governance 8
Risk Management 23
Annual Report of the Board of Directors 25
Audit Committee Report 29
Remuneration Committee Report 30
Related Party Transactions Review Committee Report 31
Statement of Directors’ Responsibilities 32
Independent Auditors’ Report 34
Statement of Profit or Loss and other Comprehensive Income 35
Statement of Financial Position 36
Statement of Changes in Equity - Group 38
Statement of Changes in Equity - Company 39
Statement of Cash Flow 40
Notes to the Financial Statement 42
Subsidiaries and Sub subsidiaries 141
Details of Leasehold / Freehold Land and Buildings 142
Historical Financial Data at a Glance - Group 144
Shareholders Information 146
Glossary of Financial & Non-Financial Terms 149
Notice of the Annual General Meeting 153
Notes 154
Form of Proxy 155
Corporate Information Inner Back Cover
2 Annual Report 2016-17 | Browns Capital PLC

Financial Highlights

Group Company
Year ended 31st March 2016/17 2015/16 Change 2016/17 2015/16 Change

EARNINGS HIGHLIGHTS AND RATIOS

Revenue - consolidated (Rs.’000) 5,949,443 5,529,031 7.6% 20,149 50,621 -60.2%
Gross profit/(loss) (Rs.’000) 721,611 (97,763) 838.1% 20,149 50,621 -60.2%
Finance costs (Rs.’000) 542,044 266,221 103.6% 78,020 9,201 747.9%
Change in fair value of biological assets (Rs.’000) 229,288 (194,354) 218.0% - - -
Profit before taxation (Rs.’000) 4,293,854 (488,521) 978.9% 5,093,732 59,070 8,523.2%
Profit/(loss) for the year (Rs.’000) 3,949,435 (476,276) 929.2% 5,085,528 46,333 10,876.1%
Actuarial gain/(loss) on defined benefits
plans (Rs.’000) 53,191 546,519 -90.3% - - -
Gross profit ratio (%) 12.13 (1.77) 786.0% 100.00 100.00 0.0%
Net profit ratio (%) 66.38 (8.61) 870.6% 25,240 91.53 -27,476.1%
Earnings per share (Rs.) 2.77 (0.16) 1,831.2% 3.72 0.03 10,876.1%
Dividends per share (Rs.) 0.05 - 100% 0.05 - 100%
Interest cover (No of times) 8.92 (0.84) 1,168.4% 66.29 7.42 793.4%

HIGHLIGHTS OF FINANCIAL POSITION

Total assets (Rs.’000) 15,821,130 18,274,251 -13.4% 9,242,667 3,103,892 197.8%
Stated capital (Rs.’000) 2,568,000 2,568,000 0.0% 2,568,000 2,568,000 0.0%
No. of shares in issue (Nos./’000) 1,368,000 1,368,000 0.0% 1,368,000 1,368,000 0.0%
Net assets per share (Rs) 6.57 3.82 71.9% 5.77 2.10 174.6%
Non-controlling interests (Rs.’000) 912,815 5,496,419 -83.4% - - -
Property, plant and equipment (Rs.’000) 3,110,683 3,398,916 -8.5% 7,498 2,617 186.5%
Bearer biological assets (Rs.’000) 1,125,033 4,786,745 -76.5% - - -
Consumable biological assets (Rs.’000) 2,984,091 6,150,990 -51.5% - - -
Non current assets (Rs.’000) 9,434,626 16,254,652 -42.0% 2,108,734 2,592,008 -18.6%
Current assets (Rs.’000) 6,386,503 2,019,599 216.2% 7,133,933 511,884 1,293.7%
Non-current liabilities (Rs.’000) 3,046,757 5,606,469 -45.7% - - -
Current liabilities (Rs.’000) 2,880,422 1,947,924 47.9% 1,352,400 230,753 486.1%
Long term borrowings (Rs.’000) 1,809,719 1,640,405 10.3% - - -
Loans from related parties - non current (Rs.’000) 19,445 1,031,037 -98.1% - - -
Total equity (Rs.’000) 9,893,951 10,719,858 -7.7% 7,890,267 2,873,139 174.6%
Debt to equity ratio (%) 39.32 34.09 15.4% 15.85 2.33 579.9%
Return on total assets (%) 24.96 (2.72) 1,017.7% 82.38 1.52 5,314.8%
Current ratio (No of times) 2.21 1.04 113.4% 5.28 2.22 137.8%
Quick ratio (No of times) 2.12 0.77 175.8% 5.28 2.22 137.8%
 Annual Report 2016-17 | Browns Capital PLC 3

Management Discussion
and Analysis
Business Review GDP growth level of 4.4% in 2016/17 as respectively. Although the production was
The 2016/17 financial year proved compared to 4.8% in the preceding year. lower, the auction averages were higher
extremely challenging for the Company’s While the industrial and service sectors than those in the prior year. Increased
main business of plantations. Tea and grew at 6.7% and 4.2% respectively, the auction average is the main reason to
rubber cultivation was affected due to agricultural sector recorded a negative manage the earnings of the plantations
heavy rains further compounded by growth of 4.2%. sector even though there was a decline of
a prolonged period of drought, which crops due to bad weather conditions.
created havoc in the agriculture sector, The high levels of inflation observed
besides causing devastation to the during some months in 2016/17 as well The Colombo Tea Auction prices in
country’s socio-economic infrastructure. as in the first quarter of 2017 were mainly 2016/17 registered a significant
The impact on the plantation industry was due to the adverse impact of weather improvement in all elevations by the end
even more severe because the sector was related disruptions, tax adjustments, and of the year compared to the year 2015/16.
already facing the adverse impact of the rising international commodity prices, On the whole, the Colombo Tea Auction
fertilizer subsidies ban and labour related but the increasing demand pressures price averages stood at Rs. 468.61,
issues from the previous year. of the economy were evident in core gaining Rs. 66/- when compared to Rs.
inflation remaining at elevated levels. As 402.31 in 2015.
Further, the prevailing unfavourable the private sector credit growth increased
weather conditions negatively impacted from 2015 through 2016, interest rates By the end of 2016, the renewable energy
the Company’s foray into hydro and too began to increase as liquidity declined. capacity stood at a level of 2,017 GW of
solar power generation during the year As a result, within the first four months of which hydropower contributes 1,096 GW.
under review. This situation was further the year under review, rates had gone up The solar PV, wind and hydro contributed
exacerbated by poor grid infrastructure by more than 200 basis points. 47%, 34% and 15.5% of the total capacity
and political and financial instability addition respectively during the year.
restraining the growth of the industry. Industry Review As a country, electricity generation was
Globally, governments are exploring the The Sri Lankan tea industry in 2016 was increased by 8.1%. The addition of hydro
adoption of renewable energy sources to affected by adverse weather conditions and solar power however served to ease
reduce their carbon footprint. Sri Lanka that prevailed in the year, ranging from the pressure on the national grid.
too is foraying into renewable energy drought to heavy rainfall. The national tea
resources to reduce dependence on production was at its lowest - registering Financial Review
thermal energy. a decline of 36.4 million kilograms Group Performance
to reach 292.5 million kilograms, For Browns Capital PLC, 2016/17 was a
According to statements made by the compared to over 328.9 million kilograms watershed year as the Group reported its
Renewable Energy Policy Network, the recorded in the previous year, marking highest net profit after tax, amounting to
year 2016 was the third consecutive year a 11% decline. Both high and low grown Rs 3.94 Billion against Rs. 476 Million net
where global energy related CO2 emissions elevations recorded a 16% and 10% loss in the preceding year. Browns Capital
from fossil fuels and industry remained decrease in production levels respectively. PLC turned around its operation from a
stable despite a 3% growth in the global gross loss of Rs. 98 Million recorded in
economy due to the increased demand for As a result of raging economic and the year 2015/16 to a gross profit of Rs.
energy. On the global stage, inconsistent geopolitical uncertainties in Sri Lanka’s 722 Million for the current financial year,
market conditions as well as geo-political key export markets including Russia, reflecting the exceptional performance
tensions caused the global economy to Ukraine and the Middle East, the country’s and the effort made by the Group in
flounder in comparison to the previous overall exports of Ceylon tea declined effecting this turnaround.
year, where more encouraging global by 6.0%. Exports also declined, given
economic growth was witnessed. the lower levels of production of Ceylon The strategic decisions taken by the
Tea. The drought and overcast weather Group with the focus of optimising
Economic Review conditions continued to affect the the synergies of the LOLC Group with
During the period under consideration, mid-year Uva season. The first quarter Browns Capital PLC and the streamlined
Sri Lanka’s economy faced challenging production declined by 11% compared systems and processes for achieving
conditions amid tightened fiscal and to the corresponding period in 2015. operational excellence in the plantation
monetary policies, adverse climate The production levels of high and low companies have mainly contributed
change effects and sluggish performance grown teas also decreased in the second to this turnaround. The unfavourable
by its export sector. Sri Lanka recorded a and third quarters by 10% and 19% performance recorded in the previous
4 Annual Report 2016-17 | Browns Capital PLC

Management Discussion and Analysis

year has been converted into a portion of the cost of production. Timber
favourable position for the Company. Therefore, the Group has effectively The Group has a timber stock carrying a
This was achieved by streamlining and managed its operations by accelerating value of Rs 2.98 Billion as at the reporting
improving processes, the effective use of its profitability despite challenges faced date, which was Rs 6.15 Billion in the
resources and greater automation and during the financial year under review. previous year. The previous year carrying
implementation of comprehensive internal value consisted of the timber stock of
audit processes across all the subsidiaries Rubber Pussellawa Plantations Limited, a sub
in the Browns Capital PLC Group to The rubber plantation business too subsidiary which was disposed of during
establish Group best practices. managed its profitability by converting the current financial year. The carrying
the gross loss of Rs. 10.76 Million earned value of the timber stock recorded an
Segmental Performance in the previous financial year to a gross increase in its fair value by Rs 204.5
Tea profit of Rs 2.4 Million, which is admirable Million compared to the fair value drop
Due to the prevailing adverse weather considering the challenging year. Rubber recorded by Rs 194.35 Million in the
conditions during the year under review, crop harvested during the year increased previous financial year.
the Group’s plantation business witnessed by 13.33% while the rubber crop sold
a decline in the yield of tea crop by during the year increased by 13.91%, Hydro Power
14.95%, compared to the previous year. despite the adverse weather conditions The turnover from the Group’s hydro
The tea crop sold declined by 17.62%, thus and industry-wide trade union activities. power business declined by 63.55%
deteriorating the profitability of the Group. Net sale average per Kilograms of rubber compared to the previous year since the
Even though the crop has deteriorated continued to decline by 1% with an Group divested its stake in the hydro
drastically, Colombo tea auction prices average reduction of Rs 2.12 per Kilogram power business during the second quarter
showed a significant improvement as a from the contribution. The rubber of the financial year. The gross profit of
result of the increased global demand businesses was able to manage its cost of Rs 39.12 Million earned from the hydro
for Ceylon tea, resulting in a favourable production, reducing cost of production power business represents the earnings
impact on the country’s tea industry. by 2.08% thereby having a positive impact generated in the first two quarters of the
The net sale average per Kilograms of and making a contribution of Rs. 5.59 financial year.
tea increased by 29.97% by adding an per Kilogram, which is an impressive
average of Rs. 109.57 to its contribution. achievement by any standards. Solar Power
This can be considered as the main Saga Solar, the first privately-owned solar
factor which contributed towards the Coconut power plant in Sri Lanka with a capacity of
significant increase in the profitability of During the year, Group’s gross profit on 10 MW was opened during the year under
the plantation businesses. coconut reduced by Rs. 1.3 Million as a review. The utility scale power project
result of the decline in the yield by 4.67% located in Buruthankanda, Hambantota, is
Meanwhile, cost of production increased and the decline in the net sales average expected to add 19GWh of clean energy to
by 7.29%, equivalent to Rs 28.64 per by 11.98%, reflecting a negative effect of the national grid annually for upwards of
Kilograms compared to the previous year. Rs 4.12 per nut to the contribution of the 25 years. At full capacity, the plant could
This is mainly due to the wage increase segment. contribute 19,000 MWh to the national
that took place in the year 2016 by grid, plus generate enough electricity
revising the collective agreement of the Cinnamon for roughly 10,000 homes. The gross
plantations’ workers, thereby increasing During the year, the Group’s cinnamon profit of the sector recorded Rs. 93.06
their daily basic wage rate by Rs 50. plantation yield remained in line with that Million during the year under review. With
Revision of this wage rate significantly of the previous year, increasing marginally Saga Solar Power (Pvt) Ltd, the Browns
impacted the cost of production of the by 1%. Net selling average of cinnamon Capital PLC Group has entered into the
plantation businesses, but was astutely increased by 32.07% with an addition of non-conventional renewable energy,
managed by controlling other than wage Rs 427.29 per Kilogram as its segment which is the key driver in the Sri Lanka’s
related production costs. Stringent contribution. As a result, this segment of sustainability goals.
policies implemented as a form of cost the plantation business recorded a gross
controls during the current and previous profit of Rs 5.3 Million compared to the Property
financial year resulted in the Company gross profit of Rs 2.8 Million earned in the Property values in Sri Lanka have
managing the significant hit on wage previous year. been increasing over time with the
related cost which would have otherwise rapid infrastructure development
accrued, since it constitutes a significant by the Government, which includes
 Annual Report 2016-17 | Browns Capital PLC 5

improvements in the road network. environment. Under this initiative, a another property in Colombo 08, currently
Demand for office space and warehousing cinnamon cultivation programme was being used as a car park for tenants.
have also been increasing with the growth initiated a few years ago and the total Browns Properties (Pvt) Ltd remained
in economic activity in the country. The extent under cinnamon cultivation now profitable in the year under review and the
gross profit of the sector has increased stands at 174.84 hectares. Company is still in the tax holiday period.
by Rs. 3.35 Million in comparison to the The income generated through rent of
previous year, contributing to a 4.22% Creating a scalable platform for growth commercial space led to an operating
increase in the gross profit of the sector for both tea and rubber is the main gross profit of Rs 82.59 Million, which is
compared to the previous financial year. priority in the next few years. At the a 4.23% increase for the current financial
same time, Maturata Plantations Ltd., year compared to the previous financial
Despite all the challenges faced by would also need to consider aggressive year.
the Group from internal and external crop diversification strategies further to
conditions, the Group was able to manage reduce the over-reliance on traditional The Group divested subsidiaries - Browns
its operations smoothly in the current crops and safeguard the bottom-line Hydro Power PLC (currently known as
financial year, thereby contributing to from unforeseen changes in the external Lotus Hydro Power PLC) and FLMC
the Group’s profitability by increasing environment. Plantations (Pvt) Limited during the year
shareholder wealth. and reported a net gain of Rs 2.65 Billion
Sagasolar Power (Pvt) Limited to the Group profit for the year, which has
Subsidiary Performance The Government has a vision of increasing contributed to a significant increase in the
Maturata Plantations Limited the share of electricity generation from profit for the year in the Group financial
Maturata Plantations Ltd a sub subsidiary renewable energy sources from 50% statements.
of the Group with a total forestry extent of in 2014 to 60% by 2020, to reduce the
1,162.57 hectares, has 961.53 hectares of carbon footprint of the energy sector Future Outlook
commercial timber and 201.04 hectares by 5% by 2025, and finally, to meet The plantation segment in the Group
of fuelwood in the 19 estates under its total demand from renewable and other is considering aggressive crop
purview. These are distributed in two indigenous energy resources by 2030. diversification strategies to reduce
geographical regions, with 11 estates Currently, the demand for electricity is over-reliance on traditional crops and to
situated in Nuwara Eliya and 8 estates catered through hydro power (38%), protect the bottom-line from unforeseen
situated in the Deniyaya-Akuressa region. coal (34%), fuel oil (17%) and non- challenges in the external environment.
Of the 8 estates in the Deniyaya-Akuressa conventional renewable energy (11%). Creating a scalable platform for growth
region, 5 estates bordering the Sinharaja Hence, the Government requires the for both tea and rubber is the main priority
Forest Reserve act as a buffer zone to the mix to be changed and to adopt a more in the next few years. Several successful
Sinharaja Forest. There are a number of sustainable approach. steps were taken to rationalise the Group’s
natural forest patches on these estates factories coupled with outsourcing
in addition to the planted commercial Against this backdrop, the Browns strategies.
timber areas. The Company is engaged in Capital PLC Group entered into solar
continuous commercial timber planting power generation. Sagasolar Power Even though plantations are enjoying
on unproductive lands. (Pvt) Ltd, the first privately owned solar remarkable profits at present due to
plant in Sri Lanka with a capacity of 10 favourable conditions in the global tea
Plans have been drawn up to plant MW was opened during the year under market, the low cost of production in
300,000 Eucalyptus Grandis plants on review. During the year, the Company has other tea and rubber producing countries
degraded tea lands in the upcountry contributed Rs 93.06 Million to the Group’s is a threat to competitiveness of local tea
estates as commercial timber and to gross profit by adding a sustainable profit and rubber.
plant Albiziamolucana on Deniyaya source to the Group’s profitability.
Estates as commercial timber and for
the conservation of stream reservations Browns Properties (Pvt) Limited
in the near future. The Company has Browns Properties (Pvt) Ltd, which owns
initiated crop diversification strategies and manages the Browns Capital building
to reduce the over-reliance on traditional on 49.5 perches located in Colombo
crops and safeguard the bottom-line 08 with 12 floors, is fully occupied and
from unforeseen changes in the external has been rented out to a number of
companies. The Company also owns
6 Annual Report 2016-17 | Browns Capital PLC

Board of
Directors
KAPILA JAYAWARDENA KALSHA AMARASINGHE SUNJEEVANI KOTAKADENIYA
Non-Executive Chairman Non-Executive Director Executive Director
Kapila Jayawardena holds an MBA in Kalsha Amarasinghe holds an Honours Sunjeevani Kotakadeniya a Fellow member
Financial Management and is a Fellow Degree in Economics. She serves on the of CIMA (UK), CGMA (USA) and holds an
member of the Institute of Bankers and an Boards of Lanka ORIX Leasing Company MBA from the University of Colombo. She
Associate member of the Institute of Cost PLC, LOLC Finance PLC, LOLC Micro Credit is the Chief Financial Officer of LOLC Group
and Executive Accountants, London. He Ltd, LOLC Life Assurance Limited, Palm and counts thirty years’ of experience
served as the Country Head and the CEO Garden Hotels PLC, Riverina Resorts in financial management, general
(Sri Lanka and Maldives) of Citibank NA (Pvt) Ltd and Eden Hotel Lanka PLC. She management, treasury management,
from 1998 to 2007. also serves as a Director on the Boards corporate planning, fund management
of Commercial Leasing & Finance PLC, in the financial services sector including
He has varied experience in the fields of Browns Investments PLC and Brown & leasing, finance, factoring, stock broking
Investment Banking, Banking Operations, Company PLC. and insurance companies. She also
Audit, Relationship Management, has wide experience in Leisure, Trading
Corporate Finance, Corporate Banking and and Manufacturing, Construction,
Treasury Management. Agriculture and Plantation sectors. She
KAMANTHA AMARASEKERA has been involved in several mergers and
Kapila Jayawardena was appointed as Non-Executive Director acquisitions, business transformations,
the Chairman of the Sri Lanka Banks’ Kamantha Amarasekera is a member of new business set ups and has been a
Association (SLBA) in 2003/04. He has the Institute of Chartered Accountants of proponent of change management,
also served as the President of the Sri Lanka and is an Attorney-at-Law of the steering change management initiatives.
American Chamber of Commerce in Sri Supreme Court of Sri Lanka. He also holds Mrs. Kotakadeniya is a Director of several
Lanka in 2006/2007 and was appointed to a degree in Business Administration from companies in the LOLC Group.
the Financial Sector Reforms Committee the University of Sri Jayewardenepura and
(FSRC) and was a member of the National began his career in the year 1998.
Council of Economic Development (NCED).
He also served as a Board Member of Mr. Amarasekera is an eminent Tax INDRAJITH FERNANDO
the United States - Sri Lanka Fulbright Consultant and the Senior Tax and Legal Independent Non-Executive Director
Commission. Partner of M/s. Amarasekera & Company, Indrajith Fernando is a thought leader
a leading tax consultancy firm in the and has over 26 years of experience
He joined LOLC in the year 2007 as the country. He is serving on the Boards of in business and the profession. His
Group Managing Director/CEO. He is the a number of listed companies including contribution is beyond the confines of the
Chairman of the following companies and Kelani Tyres PLC, Browns Investments PLC, profession which include the corporate
is also on the Boards of the subsidiaries of Lanka Milk Foods (CWE) PLC, Madulsima world and the community at large. He
the LOLC Group. Plantations PLC, Balangoda Plantations was a past president of the Institute of
PLC, Eden Hotel Lanka PLC, Ceylon Hotels Chartered Accountants of Sri Lanka (ICA),
1 Chairman - Eden Hotel Lanka PLC
Corporation PLC, Palm Garden Hotels PLC, Member of International Federation of
and AgStar PLC. Accountants (IFAC) Developing Nations
2 Chairman - LOLC General Insurance Ltd
Committee, President–South Asian
Federation of Accountants, Advisor/
3 Chairman - LOLC Securities Ltd
Chairman SAFA Committee on improving
Transparency, Accountability and
4 Chairman - Palm Garden Hotels PLC
Governance (CiTAG). He is a Fellow of
He also serves as a Non-Executive the ICA-SL, CIMA UK and CMA Sri Lanka.
Director on the Boards of Brown & He holds an MBA from the University of
Company PLC, Browns Investments PLC Queensland, Australia. He is a Senior
and Seylan Bank PLC. Member of CPA-Maldives and the CISI
(Advisory Committee member of Sri
Lanka). Mr. Fernando serves as a Non-
 Annual Report 2016-17 | Browns Capital PLC 7

Executive Director, Chairman of the the Open University of Sri Lanka, the
Audit Committee and the Integrated Risk Central Cultural Fund, National Institute
Management Committee of several listed of Business Management and CINTEC. He
companies. was the President of the Organisation of
the Professional Associations (OPA) in Sri
He is a Director of Crescent Global South Lanka (2010/2011).
Asia Pvt Limited. He serves on the Boards
of Orient Finance Ltd., BeyondWealth Mr. Palihakkara holds an MBA from the
Pvt Ltd., and Stromme Microfinance Asia University of Aston (UK), Post Graduate
(Guarantee) Ltd. Diploma in Economic Development and
International Affairs. He is also a Fellow
member of the institute of Chartered
Accountants (SL) and the institute of
UDITHA PALIHAKKARA Chartered Management Accountants (UK).
Independent Non-Executive Director
Uditha Palihakkara has more than 35
years of post-qualifying experience
in Accounting, Auditing, Finance,
Consultancy, Development, Banking/
Merchant/Investment Banking, Education
and Training, General Management,
Project Implementation & Management,
Project Rehabilitation, Marketing and
Promotion, Privatisation and Sector
Studies. During his professional career
he has worked in a number of Private
Sector and Public Sector Organisations
in Sri Lanka and overseas which includes:
Chairman, Acland Insurance Services,
Deputy Chairman, Ceylon Electricity
Board, Director/ General Manager People’s
Merchant Bank, Deputy General Manager
DFCC, Financial Specialist Commonwealth
Secretariat (CFTC). He has also worked
in a number of Projects funded by the
World Bank (WB), Asian Development
Bank (ADB), African Development Bank
(AFDB), International Fund for Agricultural
Development (IFAD), Commonwealth
Secretariat and JICA. He had been
the Past-President of the Institute of
Chartered Accountants of Sri Lanka
and the Sri Lanka Branch of Chartered
Institute of Management Accountants
(CIMA), and the Chartered Association
of Certified Accountants (ACCA) Sri
Lanka. He was a Council Member of the
Securities Council of Sri Lanka for 4 years,
Post Graduate Institute of Management,
8 Annual Report 2016-17 | Browns Capital PLC

Corporate
Governance
(Sir Adrian Cadbury, the Committee on the
Financial Aspects of Corporate Governance)

Board of Directors
& Committees

Monitoring Legal & Regulatory

Communication

Risk & Performance Business Practices

Management & Ethics

Disclosure &
Transparency

We firmly believe that a robust, efficient communication and role modelling c) Regulatory Framework
and effective governance framework is in keeping with acceptable business Regulatory framework governs the
essential to support the management practices. Company’s operations. This includes
in delivering the Company’s long-term
Articles of Association of the Company,
business success. Good governance not The Board ensures compliance with the Companies Act No. 07 of 2007, Listing
only supports the work of the Board in key components of Corporate Governance Rules of the CSE, Rules of the SEC and
the development of long-term plans, structure of the Company, which has been other applicable laws, regulations and
but also ensures delivery of short-term effectively communicated to all levels of best practices.
performance. We have reviewed our management and staff in performing their
governance framework with reference to official duties set out below. 1) INTERNAL GOVERNANCE STRUCTURE
the Code of Best practices on Corporate The Chairman and the Board of Directors
Governance issued jointly by the Securities a) Internal Governance Structure The Chairman’s primary role is to ensure
& Exchange of Commission and the It comprises of units or committees that the Board is effective in its tasks of
Institute of Chartered Accountants of Sri within the Company that ensure effective setting and implementing the Company’s
Lanka and a statement of compliance with monitoring and execution of governance directions and strategy. The Board of
the Listing Rules of the Colombo Stock related processes, policies and systems. Directors, along with the Chairman is the
Exchange on Corporate Governance. This ensures the accountability and ultimate governing body of the Company
sustainability of the business. and is abundant in experience and
According to our Corporate Governance professionalism and has a wide range of
philosophy, the Board of Directors b) Assurance of Compliance expertise in diverse fields.
are committed to uphold the highest The supervisory arm of the Company’s
standards of business integrity, Corporate Governance which guides the The primary responsibility of the Board
transparency, accountability and Company’s progress by way of developing is to promote the long-term success of
professional ethics as good Corporate and implementing appropriate corporate the Company and deliver sustainable
Governance practices towards rewarding strategies. This supervisory arm enables shareholder value. The Board has ultimate
all its stakeholders with greater creation regular review of progress, highlights responsibility for the management,
of value within the Group. Directors and deviations (if any), suggests corrective direction and performance of the
employees of the Company and the Group methods and ultimately ensures the Company, and leads and controls the
at all levels are expected to display ethical integrity of operations. Company’s business. The Board is also
and transparent behaviour through responsible for ensuring appropriate
 Annual Report 2016-17 | Browns Capital PLC 9

resources are in place to achieve Board and its committees, and have and the Group. The questions raised by
its strategy and deliver sustainable a wealth of experience and business shareholders at General Meetings are
performance. Through authorities knowledge from other sectors and readily answered by the Board members
delegated to its committees, the Board industries. Independence of the Directors and they maintain an appropriate dialogue
directs and reviews the operations of the have been determined in terms of the with them.
Company within an agreed framework prevailing CSE Listing Rules. The two
of controls, allowing risk to be assessed Independent Non-Executive Directors All the Directors have access to the
and managed in an effective manner. The have submitted signed confirmations Company Secretaries, who are responsible
Board is collectively accountable to the of their independence. Apart from the for advising the Board on compliance
Company’s shareholders for the proper determination of independence, each and Corporate Governance matters and
conduct and success of the business. Director has a continuing responsibility facilitate smooth flow of information
to determine whether he or she has a between the Board and the Management.
As at date, the Board consists of six (06) potential or actual conflict of interest
members comprising of; arising from external associations, Board Meetings
• 3 Non-Executive Directors interests or personal relationships in Board Meetings are scheduled for the
• 2 Independent Non-Executive Directors material matters. All Directors make a following purposes:
• 1 Executive Director
• To review strategic and operational
issues.
No Name of Director Executive/ Independent/ Gender
Non-Executive Non-Independent representation • To approve interim and full year
financial statements and annual
01 Mr. Kapila Jayawardena Non-Executive Non-Independent Male budgets.
02 Mrs. Kalsha Non-Executive Non-Independent Female • To review profit and working capital
Amarasinghe forecasts and monthly management
accounts.
03 Mr. Kamantha Non-Executive Non-Independent Male
Amarasekera • To provide advice and guidelines to
Divisional Heads and Senior Managers.
04 Mr. Indrajith Fernando Non-Executive Independent Male
• To provide and circulate timely and
05 Mr. Uditha Palihakkara Non-Executive Independent Male
periodic reports to shareholders.
06 Mrs. Sunjeevani Executive Non-Independent Female
• To sanction major investments.
Kotakadeniya
• To adopt annual and interim reports
before they are published.
The structure, size and composition formal declaration of all their interests on
of the Board remains suitable for the an annual basis. In addition, ad hoc meetings are
needs of the business. The current scheduled to discuss and review specific
balance of the Board’s gender diversity, All Directors are able to and willingly matters.
skills, experience, independence and add value and independent opinion on
knowledge, together with regular briefings the decision making process, which For the financial year ending 31st March
by executives below Board level, ensures is of immense benefit to the effective 2017 there has been a total number
that views, perceptions and discussions functioning of the Board. The Board of three (03) Board Meetings and the
are not dominated by any one specific of Directors is accountable to the Directors’ attendance for the same is
individual. The profiles of the Chairman shareholders for the governance of shown below. Any instances of non-
and the Directors with their experience the Company. All the Directors are attendance at Board meetings were
in businesses, professionalism and accountable for the proper stewardship generally related to prior business,
capacities are set out in pages 06 to 07. of the Company’s affairs and share a personal commitments or illness.
responsibility in ensuring the highest
Non-Executive Directors provide strong, standards of disclosure and reporting,
independent and external insight to the ethics and integrity across the Company
10 Annual Report 2016-17 | Browns Capital PLC

Corporate Governance

Name of Director 06.04.2016 08.02.2017 28.03.2017 Total number

of meetings
attended
Mr. Ishara Nanayakkara (Resigned wef 31st March 2017) - 02/03
Mr. Kapila Jayawardena - 02/03
Mrs. Kalsha Amarasinghe - - 01/03
Mr. Kamantha Amarasekera 03/03
Mrs. Sunjeevani Kotakadeniya 03/03
Mr. Indrajith Fernando 03/03
Mr. Uditha Palihakkara - 02/03

All Directors actively participate in The Sub-Committees are;

discussions about strategy, trading
• Audit Committee - Oversight of Internal Controls and Financial Reporting
and financial performance, and
risk management of the Company. • Remuneration Committee - Recommendation of the remuneration framework of the
Comprehensive briefing papers are Company
circulated to all Directors before each
• Related Party Transactions Review Committee - To assist the Board in reviewing all
meeting. Transactions which have
related party transactions
a material bearing on the Company
are disclosed by way of circulars to The compositions of the Sub-Committees as at date are as follows:
shareholders and by announcements
to the Colombo Stock Exchange. The Audit Committee Remuneration Committee Related Party Transactions
Directors are provided with monthly Review Committee
reports of performance and minutes of
Two Independent Two Independent One Independent
the Board Meetings and are given the
Non-Executive Directors Non-Executive Directors Non-Executive Director
specific documentation necessary, in
advance of such meetings. One Non-Executive One Non-Executive Three Non-Executive
Director Director Directors
Re-appointment and Re-election One Executive Director
of Directors
The Articles of Association of the Audit Committee
Company provides the basis for Directors The Audit Committee is established to approve the quarterly and annual Financial
to retire at each Annual General Meeting. Statements and to recommend the same to the Board prior to its issuance. As at date the
Accordingly, and also in compliance with Committee comprises of:
the Companies Act. No. 07 of 2007, the
names of Directors submitted for re- Mr. Indrajith Fernando/ Independent Non-Executive Director Chairman
appointment and re-election are given in Mr. Uditha Palihakkara / Independent Non-Executive Director Member
the Agenda of the Annual General Meeting
Mr. Kamantha Amarasekera / Non-Executive Director Member
on page 153.
The Chairman, Group Chief Financial Officer and representatives of the Internal Auditors
Board Sub-Committees and other representatives of Senior Management join the meetings of the committee by
The Board has delegated some of its
invitation when necessary.
functions to Board committees while
retaining final decision rights pertaining The Company Secretaries function as the Secretary to the Committee.
to matters under the purview of these
committees. For the financial year ending 31st March 2017 there has been a total number of five (05)
Audit Committee Meetings and the attendance of the members is as follows:
 Annual Report 2016-17 | Browns Capital PLC 11

Name of Member Date of Meeting Attendance

10.05.2016 30.05.2016 09.08.2016 11.11.2016 08.02.2017
Mr. Indrajith Fernando 05/05
Mr. Uditha Palihakkara 05/05
Mr. Kamantha Amarasekera - - - 02/05

The Committee members and invitees together with the Group’s External Auditors met The Related Party Transactions Review
and discussed matters in relation to the scope and significant matters arising from Committee is responsible for:
the Group audits for the year. The Audit Committee report is given on page 29 and the
Independent Auditors’ report is given on page 34. • Reviewing in advance all proposed
Related Party Transactions of the
Remuneration Committee Company except those explicitly
As at date the Remuneration Committee comprises of two Independent Non-Executive exempted;
Directors and one Non-Executive Director as follows:
• Adopting policies and procedures to
Mr. Indrajith Fernando - Independent Non-Executive Director Chairman review Related Party Transactions of the
Company and reviewing and overseeing
Mr. Uditha Palihakkara - Independent Non-Executive Director Member
existing policies and procedures;
Mrs. Kalsha Amarasinghe - Non-Executive Director Member
• Determining whether Related Party
The Company Secretaries function as the Secretary to the Committee. Transactions that are to be entered into
by the Company require the approval
The Remuneration Committee is responsible for: of the Board or Shareholders of the
Company;
• assisting the Board of Directors in establishing remuneration policies and practices in
the Group. • Establishing separate guidelines
• evaluating the performance of the Executives of the Group. to follow recurrent Related Party
Transactions of the Company;
• reviewing and recommending to the Board appropriate remuneration packages based
on industry standards and contributions made to the organisation. • Ensuring that no Director of the
Company shall participate in any
The Remuneration Committee report is available on page 30. discussion of a proposed Related Party
Transaction for which he or she is a
Related Party Transactions Review Committee related party, unless such a Director is
The Related Party Transactions Review Committee comprises of; requested to do so by the Committee
for the express purpose of providing
Mr. Indrajith Fernando Independent Non-Executive Director/ Chairman information concerning the Related
Mr. Kamantha Amarasekera Non-Executive Director/ Member Party Transactions to the Committee;
Mr. Kapila Jayawardena Non-Executive Director/ Member
• If there is any potential conflict in
Mrs. Kalsha Amarasinghe Non-Executive Director/ Member any Related Party Transactions, the
Mrs. Sunjeevani Kotakadeniya Executive Director/ Member Committee may recommend the
creation of a special committee to
The purpose of the Committee is to review in advance all proposed Related Party review and approve the proposed
Transactions of the Company as per the terms given in the Listing Rules of the CSE. Related Party Transaction;
12 Annual Report 2016-17 | Browns Capital PLC

Corporate Governance

• Ensuring that immediate market are proposed and implemented towards a Going Concern and Financial
disclosures and disclosures in the sound governance system. Reporting
Annual Report as required by the The Directors are satisfied that the
applicable rules/ regulations are made The Board is conscious of its responsibility Company has sufficient resources to
in a timely and detailed manner. to the shareholders, the Government continue in operation for the foreseeable
and the society in which it operates future. The Company has adopted the
The detailed Related Party Transactions and is committed to uphold the highest going concern principle in preparing the
Review Committee Report is given on standards of ethical behaviour in financial statements. All statutory and
page 31 of the Annual Report. conducting its business. The Board, material declarations are highlighted in
through the Group Legal Division, the the Directors’ Report.
Internal Controls Group Finance Division and its other
These are designed to support operating structures, monitors and The Board ensures that the Quarterly
and maintain a transparent and assesses the level of compliance of the and Annual Financial Statements of the
effective internal control system and Company with laws and regulations. It Company are prepared and published in
institutionalisation of the best processes also reviews the changes in regulations compliance with the requirements of the
of governance. Some of the policies which and strives to ensure that the Company Companies Act. No. 7 of 2007, Sri Lanka
play a key role in this respect are; is in compliance with the regulatory Accounting Standards and the Colombo
requirements of the country. Stock Exchange.
• Code of Business Conduct and Ethics
-This applies to all the employees Report to the Shareholders & The Statement of Directors’
of the Company. The code ensures Public Responsibilities in relation to financial
that there is no conflict of interest The Board considers the Annual General reporting is given on page 32. The
where individuals’ interest conflicts Meeting as a prime opportunity to Directors’ Interests in contracts of the
with the interests of the Company, communicate with shareholders and Company are disclosed in Note 45 to the
and makes timely disclosures of such encourage their participation. A Form Financial Statements.
situations; maintains confidentiality of of Proxy accompanies each Notice of
information, ensures fair dealing with Meeting giving opportunity to those who Major Transactions
the Company’s customers and suppliers are unable to attend to cast their vote. There were no major transactions during
and refrains from any unfair dealing the year as defined by Section 185 of the
and manipulations, thereby promoting The Company published through the Companies Act. No. 07 of 2007, which
ethical behaviour within the Company. Colombo Stock Exchange and its could materially affect the net asset base
Company’s website the Quarterly Interim of the Company or Group.
• IT Governance- the strong IT and Annual Financial Statements
governance structure at Browns Capital as its principal communication with Corporate Social Responsibility
ensures that the effective and efficient shareholders and others enabling the The Group recognises sensitively the
use of IT enables the Company to stakeholders to make a rational judgment need to look after the rights and claims
achieve its goals. of the Company and the Group. of non-shareholder groups such as
employees, consumers, suppliers, lenders
• Internal Auditors- The Group Internal The Directors have taken all reasonable and the Government. The Group is mindful
Auditors review and report the steps in ensuring the accuracy and when making corporate decisions, of
adequacy and the effectiveness of the timeliness of published information the outcome affecting the stakeholder
internal controls in order to strengthen and in presenting a fair and balanced groups.
the systems and controls of the Group. assessment of results in the Interim and
Annual Financial Statements. The Notice We consider the natural environment as
2) COMPLIANCE of the Annual General Meeting and the one of the key and important stakeholders
Assurance of compliance is the relevant documents are published and and make deliberate efforts to take care
supervisory module of the Group dispatched to the shareholders fifteen of it in the best possible manner. Taking
Corporate Governance structure, where working days prior to the meeting as care of the natural environment is the
a range of assurance mechanisms such required by the Companies Act No. 7 of foundation on which the Group is built on.
as monitoring and tests on effectiveness 2007.
are carried out while corrective actions
 Annual Report 2016-17 | Browns Capital PLC 13

Our business units including the plantations, tea and rubber manufacturing, boutique hotels and hydropower generation adhere to
stringent eco-friendly practices, which ensure outputs that contribute towards a sustainable environment.

External Audit
The External Audit report enables the Board to determine the adequacy and effectiveness of the Company’s internal controls. M/s. KPMG,
Chartered Accountants have been appointed as the External Auditors of the Company.

3) REGULATORY FRAMEWORK
This refers to the regulatory structure within which the Company operates in conformity with the established governance related laws
and regulations.

STATEMENT OF COMPLIANCE UNDER SECTION 7.10 OF THE RULES OF THE COLOMBO STOCK EXCHANGE (CSE) ON CORPORATE
GOVERNANCE. (Implemented on 1st April 2009 and includes amendments to date)

CSE Rule Compliance Company’s action

status
7.10 Compliance
Compliance with Corporate Governance Rules The Company is in compliance with the Corporate
Governance Rules and any deviations are explained
where applicable
7.10.1 Non-Executive Directors (NED)
At least 02 members or 1/3 of the Board, whichever Five out of the six Directors are Non-Executive Directors
is higher should be NEDs
7.10.2 Independent Directors
a. 02 or 1/3 of NEDs, whichever is higher shall be Two out of the five Directors are independent
“independent”
b. Each NED to submit a signed and dated declaration All Non-Executive Directors have submitted their
of his/her independence or non-independence declarations for the year 2016/2017
7.10.3 Disclosures relating to Directors
a. Names of the independent Directors should be Refer profiles of Directors
disclosed in the Annual Report
b. The Board shall annually determine the The Independent Directors of the Company met the
independence or otherwise of NEDs criteria of independence specified in this rule
c. A brief resume of each Director should be included Refer profiles of Directors
in the Annual Report including the Director’s
experience
d. Upon appointment of a new Director to its board, Details of the new Directors as and when appointed had
the Entity shall forthwith provide to the Exchange a been submitted to the Colombo Stock Exchange
brief resume of such Director
7.10.4 Criteria for defining independence
Requirements for meeting the criteria to be an All of the Independent Directors of the Company met
Independent Director the criteria for independency specified in this rule
14 Annual Report 2016-17 | Browns Capital PLC

Corporate Governance

CSE Rule Compliance Company’s action

status
7.10.5 Remuneration Committee
a. Shall comprise of Non-Executive Directors, a The Remuneration Committee comprises of two
majority of whom shall be Independent and one Independent Non-Executive Directors and one Non-
Non-Executive Director shall be appointed as Executive Director
the Chairman of the Committee by the Board of One Independent Non-Executive Director was the
Directors Chairman of the Committee during the financial year
b. The Remuneration Committee shall recommend The remuneration of the Executive Directors have been
the remuneration of the CEO and the Executive determined as per the remuneration principles of the
Directors Group
c. The Annual Report should set out: Refer Remuneration Committee Report & the notes to
- Names of the Remuneration Committee members the Financial Statements
- Statement of Remuneration Policy
- Aggregate remuneration paid to EDs and NEDs
7.10.6 Audit Committee
a. Audit Committee (AC) shall comprise of NEDs, a The Audit Committee comprises of two Independent
majority of whom should be independent Non-Executive Directors and one Non-Executive
Director
One Non-Executive Director shall be the Chairman The Chairman of the Committee is an Independent Non-
of the Committee Executive Director
The Chairman of the Audit Committee or one The Chairman is a Fellow of the ICASL and CIMA (UK)
member should be member of professional
accountancy body
b. Functions of the Audit Committee shall include: Refer Audit Committee Report
• Overseeing the preparation, presentation
and disclosures in the financial statements
in accordance with Sri Lanka Accounting
Standards.
• Overseeing the entity’s compliance with related
regulations and requirements
• Overseeing the processes to ensure that internal
controls and risk management are adequate as
per the Sri Lankan reporting standards
• Assessment of the performance & independence
of the External Auditors
• Recommendation to the board on appointment,
re–appointment and removal of External Auditors
and their remuneration
c. Disclosures in the Annual Report: Refer Audit Committee Report
Names of the Audit Committee members shall be
disclosed
Audit Committee shall make a determination of the Refer Audit Committee Report
independence of the External Auditors
Report on the manner in which the Audit Refer Audit Committee Report
Committee carried out its functions
 Annual Report 2016-17 | Browns Capital PLC 15

CODE OF BEST PRACTICES OF CORPORATE GOVERNANCE JOINTLY ISSUED BY THE SECURITIES AND EXCHANGE COMMISSION OF SRI
LANKA (SEC) AND THE INSTITUTE OF CHARTERED ACCOUNTANTS OF SRI LANKA (CA SRI LANKA)
(Issued on 1st July 2008 and includes amendments to date)

A. Directors
Section Compliance Company’s Action
status
A.1 The Board
A.1 The Company to be headed by an effective The Company is headed by an effective Board of Directors
Board to direct and control the Company who is responsible and accountable for the stewardship
function of the Company
A.1.1. Regular Board meetings The Board meets as and when required
A.1.2 The Board should be responsible for Powers specifically vested in the Board to execute their
matters including implementation of responsibility include:
business strategy, skills and succession • Providing direction and guidance to the Company in the
of the management team, integrity of formulation of its strategies, with emphasis on the medium
information, internal controls and risk and long term, in the pursuance of its operational and
management, compliance with laws and financial goals
ethical standards, stakeholder interests, • Reviewing and approving annual budget plans
adopting appropriate accounting policies • Monitoring systems of governance and compliance
and fostering compliance with financial • Reviewing and approving major investments, acquisitions,
regulations and fulfilling other Board disposals and capital expenditure
functions • Approving of the Company’s equity/debt securities
A.1.3 Act in accordance with the laws of the The Board seeks independent professional advice when
country and obtain professional advice as deemed necessary
and when required
A.1.4 Access to advice and services of the To ensure robust deliberation and optimum decision making,
Company Secretary the Directors have access to the services of the Company
Secretaries whose appointment and/or removal is the
responsibility of the Board
A.1.5 Bring independent judgment on various Collectively, the Non-Executive Directors bring a wealth
business issues and standard of business of value adding knowledge, ranging from domestic and
conduct international experience to functional know-how, thus
ensuring adequate Board diversity in accordance with
principles of Corporate Governance. Furthermore, every
member of the Board brings independent judgment on
various business issue
A.1.6 Dedication of adequate time and effort Allowing for Non-Executive Director involvement in various
Board Committees and time spent by them in considering
various matters that require discussion and decision in
between the formal Board meetings, the Company estimates
that Non-Executive Directors devoted sufficient time for the
Group during the year
16 Annual Report 2016-17 | Browns Capital PLC

Corporate Governance

Section Compliance Company’s Action

status
A.1.7 Board induction and training In instances where Non-Executive Directors are newly
appointed to the Board, they are apprised of the:
• Values and culture
• Operations of the Group and its strategies
• Operating model
• Policies, governance framework and processes
• Responsibilities as a Director in terms of prevailing
legislation
• Important developments in the business activities of the
Group
A.2 The Chairman
A.2.1 Maintain a clear division between the Presently the Company has a Non -Executive Chairman. The
Chairman and the Chief Executive Officer appropriateness of having only the Chairman was established
after rigorous evaluation and debate both internally and
externally. The appropriateness continues to be discussed
periodically, and at least, once a year
A.3 The Chairman’s role
A.3.1 The Chairman should ensure Board Refer Chairman’s role in Corporate Governance section in the
proceedings are conducted in a proper Annual Report
manner
A.4. Financial acumen
A.4 The Board should ensure the availability Refer Board Directors’ Profiles
within it of those with sufficient financial
acumen and knowledge to offer guidance
on matters of finance
A.5 Board balance
A.5.1 The Board should include Non-Executive Majority of the Directors are Non-Executive Directors
Directors of sufficient calibre. Complied with
A.5.2 Where the constitution of the Board of Not Applicable
Directors includes only two Non-Executive
Directors, both such Non-Executive
Directors should be independent
A.5.3 Definition of Independent Director All the Independent Directors of the Board are independent of
management and free of any business or other relationship
that could materially interfere with or could reasonably be
perceived to materially interfere with the exercise of their
unfettered and independent judgment
A.5.4 Declaration of Independent Directors Each Non-Executive Director has submitted a signed and
dated declaration of his independence
A.5.5 Board determinations on independence All of the Independent Directors of the Company met the
or non-independence of Non-Executive criteria for independency specified in this rule
Directors
 Annual Report 2016-17 | Browns Capital PLC 17

Section Compliance Company’s Action

status
A.5.6 Alternate Director Not Applicable
A.5.7 In the event the Chairman and the CEO are Not Applicable
the same person, the Board should appoint
one of the Independent Non-Executive
Directors to be the ‘Senior Independent
Director’ (SID)
A.5.8 The Senior Independent Director should Not Applicable
make himself available for confidential
discussions with other Directors who may
have concerns
A.5.10 Where Directors have concerns about the All Board meeting proceedings are duly recorded in a
matters of the Company which cannot be comprehensive manner
unanimously resolved, they should ensure
their concerns are recorded in the Board
minutes
A.6 Supply of information
A.6.1 The Board should be provided with timely The Board is provided with: Information as is necessary to
information to enable it to discharge its carry out their duties and responsibilities effectively and
duties efficiently, information updates from management on topical
matters, new regulations and best practices as relevant
to the Group’s business, External and Internal Auditors’
opinions, experts and other external professional services,
the services of the Company Secretaries
A.6.2 Timely submission of the minutes, agenda Board agendas and necessary Board Papers and minutes are
and papers required for the Board meeting dispatched in advance of the Board meetings
A.7 Appointment to the Board
A.7.1 Formal and transparent procedure for Board appointments follow a transparent and formal process
Board appointments
A.7.2 Assessment of the capability of Board to The Board as a whole assesses its own composition to
meet strategic demands of the Company ascertain whether the experience and exposure of the Board
members are adequate to meet the strategic demands faced
by the Company. Refer Profiles of Directors for more details
A.7.3 Disclosure of new Board member profile All appointments of new Directors are informed to the
and interests shareholders via the Colombo Stock Exchange
18 Annual Report 2016-17 | Browns Capital PLC

Corporate Governance

Section Compliance Company’s Action

status
A.8 Re-election
A.8.1/ Re-election at regular intervals and should Directors retiring by rotation or a Director who is subject
A.8.2 be subject to election and re-election by to appointment is eligible for re-election by a shareholder
Shareholders resolution at the AGM
A.10 Disclosure of information in respect of
Directors
A.10.1 • Profiles of the Board of Directors Refer Board profiles section and Corporate Governance
• Directors’ interests
• Board meeting attendance
• Board Committee memberships

B. Directors’ Remuneration
B.1 Remuneration procedure
B.1.1 The Board of Directors should set up a Refer Corporate Governance Section
Remuneration Committee
B.1.2. Remuneration Committees should consist All members of the Remuneration Committee are NEDs
exclusively of Non–Executive Directors
B.1.3. The Chairman and members of the Refer Board Committees
Remuneration Committee should be listed
in the Annual Report each year
B.1.4. Determination of the remuneration of Non- The remuneration for NEDs are determined by the Board as
Executive Directors a whole considering the market adjustment rates and their
time and devotion in performing their roles as NEDs
B.1.5 The Remuneration Committee should The Committee consults the Chairman about any proposals
consult the Chairman about its proposals relating to the remuneration of Executive Directors
relating to the remuneration of other
Executive Directors
B.2 The level and make up of remuneration
B.2.1 The Remuneration Committee should The Board determines the total remuneration package for
provide the packages needed to attract, Executive Directors in line with market trends, performance
retain and motivate Executive Directors and past remuneration
B.2.2 The Remuneration Committee should judge Based on remuneration policy of the Group and industry
where to position levels of remuneration of trends
the Company, relative to other companies
B.2.3/ Comparison of remuneration with other The compensation is based on the Group remuneration policy
B2.4 Companies in the Group and in line with the market norms
B.2.5 Executive share options not to be offered No share options were given during the year under review
at a discount
B.2.9 Level of remuneration of NEDs The compensation of Non-Executive Directors is determined
in reference to that of other comparable companies and is in
line with the Group policy
 Annual Report 2016-17 | Browns Capital PLC 19

Section Compliance Company’s Action

status
B.3 Disclosure of remuneration
B.3 Disclosure of remuneration policy and Please refer Annual Report of the Directors & the
aggregate remuneration Remuneration Committee Report

C. Relations with Shareholders

Shareholders have the opportunity at the AGM, to put forward questions to the Chairman and the Board of Directors, to have better
familiarity with the Company’s business and operational workings.

Section Compliance Company’s Action

Status
C.1 Constructive use of the Annual General Meeting (AGM) and conduct of General Meetings
C.1.1. Counting of proxy votes All proxy votes are counted for each resolution at the
Annual General and Extra Ordinary General Meetings
C.1.2. Separate resolution to be proposed for each item Separate resolutions are proposed for each item that
is taken up at the AGM and shareholders are given an
opportunity to vote on each item separately
C.1.3. Heads of Board subcommittees to be available to All the NEDs who are the Heads of Board
answer queries sub-committees are available at the Meeting to answer
queries
C.1.4. Notice of Annual General Meeting to be sent to Notice of the AGM and related documents are sent to
shareholders with other papers as per statute shareholders along with the Annual Report within the
specified period. The contents of this Annual Report will
enable existing and prospective stakeholders to make
better informed decisions in their dealings with the
Company
C.1.5. Summary of procedures governing voting at Refer Form of Proxy
General meetings to be informed
C.2 Major transactions
C.2.1. Disclosure of all material facts involving any All material and price sensitive information about the
proposed acquisition, sale or disposition of Company is promptly communicated to the Colombo
assets Stock Exchange where the shares of the Company
are listed, and released to the employees, press and
shareholders
20 Annual Report 2016-17 | Browns Capital PLC

Corporate Governance

D. Accountability and Audit

Section Compliance Company’s Action
Status
D.1. Financial reporting
D.1.1. Disclosure of interim and other price sensitive and The Audit Committee together with the Board of
statutorily mandated reports to regulators Directors have taken all reasonable steps to ensure
accuracy and timeliness of published information
with a view of presenting the true and fair view of
the Interim and Annual Financial statements

D.1.2. Declaration by the Directors that the Company has Refer Corporate Governance and Annual Report of
not engaged in any activities, which contravene laws the Board of Directors
and regulations, declaration of all material interests
in contracts, equitable treatment of shareholders
and going concern with supporting assumptions or
qualifications as necessary
D.1.3. Statement of Directors’ Responsibility Refer Statement on Directors’ Responsibility
D.1.4. Management Discussion and Analysis Refer Management Discussion and Analysis
D.1.5. The Directors should report that the business is The Board of Directors, upon the recommendation
a going concern, with supporting assumptions or of the Audit Committee, is satisfied that the
qualifications as necessary Company has sufficient resources to continue in
operation for the foreseeable future
D.1.6. Remedial action at Extraordinary General Meeting In the unlikely event that the net assets of the
(EGM) if net assets fall below half of value of Company fall below a half of Shareholders funds,
Shareholders funds shareholders would be notified and the requisite
resolution would be passed on the proposed way
forward
D.2 Internal Control
D.2.1. Annual review of effectiveness of system of internal The Board has taken the necessary steps to
control and report to shareholders as required ensure the integrity of the Group’s accounting and
financial reporting systems and internal control
systems remain effective via the review and
monitoring of such systems on a periodic basis
D.2.2. Internal Audit Function The internal audit function of the Company is
not outsourced to the External Auditors of the
Company to ensure the independence of the
External Auditors of the Company. The Auditors’
report on the Financial Statements of the
Company for the year under review is found in the
financial information section of the Annual Report
D.2.3/ Maintaining sound system of internal control Refer Corporate Governance Report
D.2.4
 Annual Report 2016-17 | Browns Capital PLC 21

Section Compliance Company’s Action

Status
D.3 Audit Committee
D.3.1. The Audit Committee should be comprised of The Audit Committee comprises of three
a minimum of two Independent Non-Executive Non-Executive Directors out of which two are
Directors or exclusively by Non-Executive Directors, a independent. The Chairman is a Non-Executive
majority of whom should be independent, whichever Director.
is higher. The Chairman of the Committee should be a
Non-Executive Director, appointed by the Board
D.3.2. Terms of reference, duties and responsibilities The Audit Committee has the overall responsibility
for overseeing the preparation of Financial
Statements in accordance with the laws and
regulations of the country and also recommending
to the Board on the adoption of best accounting
policies. The Committee is also responsible for
maintaining the relationship with the External
Auditors
D.3.3 The Audit Committee to have written terms of The Audit Committee has written terms of
reference covering the salient aspects as stipulated reference outlining the Scope
in the section
D.3.4. Composition of the Audit Committee independence of Refer Audit Committee Report
the Auditors.
D.4 Code of Business Conduct and Ethics Business ethics at the Company ensure the
business is carried out in an ethical manner
D.5 Corporate Governance disclosure
D.5.1. The Directors should include in the Company’s Annual Refer the Corporate Governance Section
Report a Corporate Governance Report

E. Institutional Investors
Section Compliance Company’s Action
Status
E.1Shareholder voting
E.1.1 A listed Company should conduct a regular and The Company communicates with its shareholders
structured dialogue with shareholders based on a via announcements made to the CSE, Annual &
mutual understanding of objectives Quarterly Reports, and the AGM
E.2 Evaluation of governance disclosures
E.2.1. When evaluating the company’s governance Institutional investors are informed of any changes
arrangements, particularly those relating to the to the governance structure
Board structure and composition, institutional
investors should be encouraged to give due weight to
all relevant factors drawn to their attention
22 Annual Report 2016-17 | Browns Capital PLC

Corporate Governance

F. Other investors
Section Compliance Company’s Action
Status
F.1 Investing/divesting decisions
F.1.1. Individual shareholders investing directly in shares The Company maintains an active dialogue with
of companies should be encouraged to carry out shareholders, potential investors, investment
adequate analysis or seek independent advice in banks, stock brokers and other interested
investing or divesting decisions parties. Any concerns raised by a Shareholder
are addressed promptly and forwarded, when
necessary, to the Company Secretaries for
consideration and advice
F.2 Shareholder voting
Individual shareholders should be encouraged to All steps are taken to facilitate the exercise of
participate in General Meetings of Companies and shareholder rights at AGMs, including the receipt of
exercise their voting rights notice of the AGM and related documents within the
specified period. Shareholders exercise their voting
rights for each resolution passed at the AGM
 Annual Report 2016-17 | Browns Capital PLC 23

Risk
Management
Risk management is the identification, The Group is exposed to a multitude of Risk management has become vital in the
assessment, and prioritisation of risks risks as any other organisation and risks Browns Capital Group with the expansion
followed by coordinated and economical which are specific to its business sectors into diversified business sectors. The
application of resources to minimise, namely plantation, hydro power, solar Group has understood the importance of
monitor, and control the probability and/ power, leisure and real estate sectors. The risk management especially in the current
or impact of unfortunate events or to specific risk of the plantation sector is context of doing business in a dynamic
maximise the realisation of opportunities. associated with the cultivation/processing and volatile environment.
of Rubber, Tea, Coconut, Cinnamon and
Risk is a measure of a group’s inability Fuel wood and the economic environment Through a risk management process, the
to achieve system life cycle objectives in which it operates. Group identifies key risks faced by the
and arises in all business activities. It individual companies within the Group.
comprises of two components which The Board of Directors therefore places During the year, the Group has disposed
are the probability of failing to achieve special attention on the management of Browns Hydro Power PLC operated in
particular system life cycle objectives and business risks to ensure sound financial hydro power sector.
the consequences of failing to achieve and operational control systems are put
those objectives. in place. Enterprise Risk Management These identified risks have been reported
unit (ERM), Internal auditors and the to the management of Group companies
The Group operates in an evolving management team of the Group review and they have analysed the impact and
environment which exposes itself to the systems’ viability from time to time the actions to mitigate those risks. The
different types of risks particularly to address prevailing risks to eliminate identified principal risks associated within
agricultural sector is one of the major or downside risks and make the use of the Group in order to enhance the value of
sectors of the Group, which is very risks, in order to safeguard shareholders’ shareholder investment and safeguarding
sensitive to weather patterns. investment and assets. assets are set out below;

Risk Category Identified Risks Strategies and Mitigating Actions

Environmental Extreme weather conditions such as prolonged Having in place sustainable and accepted agricultural practices
Risk droughts, natural disasters and unexpected depending on the climatic conditions.
weather patterns are detrimental to plantations Diversify into different business areas in order to minimise
as well as to hydro power generation. It will drastic fluctuations in Group’s revenue due to unexpected
affect the crops, quality and operations which weather conditions.
will result in fluctuations in revenue.
Impact of natural disasters such as Insurance covers in place to mitigate the damages caused by
earthquakes and cyclones on real estate (i.e. natural disasters.
Browns Capital Building). Corresponding mitigation actions have been taken in selecting
Uncertainty in resource, modelling and inter- material and technology.
annual variation in the solar resources. An electrical fence has been constructed
The presence of wildlife in the vicinity of solar
power plant.
Social Risk Pressure from environmental groups about Pressure from environmental groups about the effect on the
the effect on the environment and negative environment and negative response from the public when
response from the public when building hydro building hydro power plants.
power plants.
Financial Risk Interest rate risk and gearing risk - Volatility Minimise interest rate risk through internal hedging techniques
in interest rates can adversely impacts the such as matching by having balance between variable and fixed
Group earnings and investment decisions due portion of interest income and expense.
to unexpected changes. (Refer the pages 131 Maximum utilisation of the concessionary funding available to
and 132) the Plantation sector.
24 Annual Report 2016-17 | Browns Capital PLC

Risk Management

Risk Category Identified Risks Strategies and Mitigating Actions

Financial Risk Credit risk - the risk that counterparty will not Most of the agricultural produce sales are made through auction
meet its obligations under a customer contract and brokers assure the settlement.
leading to a financial loss or substantial delay in Follow stringent assessment procedures to ensure the credit
receiving funds. worthiness of the investing financial institutions prior to
depositing funds.
Obtaining bank/corporate guarantees.
Liquidity risk - arises from the financial Regular financial planning and monitoring, especially working
liabilities of the entity and the entity’s capital planning and cash flow management.
subsequent ability to meet the obligation to Maintaining effective budgetary control systems.
repay the financial liabilities as and when they
fall due.
Regulatory and Changes in regulation by environmental Draw up a Forestry Management Plan in compliance with new
Legal Risk authorities on forestry resources affect the rules and regulations.
future programmes on planting and harvesting. Concentrate on timber planting in areas where restrictions are
unlikely to be imposed.
Environmentally sensitive areas will be planted with species
having fewer restrictions for harvesting.
Changes in policy decisions of governing Periodic reviews about the possible changes in policy decisions,
agencies such as Public Utilities Commission, risks arising due to them and strategies to mitigate those risks.
Ceylon Electricity Board and Sustainable Energy Get the assistance of the Small Hydro Association for policy
Authority. changes that are for the betterment of the hydro power industry.
Changes in regulatory requirements by Organise the organisation and reporting structures to meet the
Securities & Exchange Commission. new requirements.
Operational Risk Information Systems Risk is concerned with Maintaining of spare servers and mirroring of hard disks with
minimising the risk associated with data critical data.
security, hardware, communication and Data back-ups stored in off site locations.
software. Regular updating of virus scanners, firewalls etc.
Regularly monitor access control policy.
Human Resources Structured training, performance evaluation and feedback
Affect the smooth flow of operations because of programme to enhance career development and support career
undue disruptions. goals of staff members.
Loss of workers due to retirement and Entering into collective agreements and maintaining healthy
migration. relationships with trade unions.
Social Stigma. Carry out identified social and welfare programmes with a view to
Frequent absenteeism. retain workers.
Mechanise all the possible activities.
Outsource all possible activities
Encourage incentives on attendance.
Procurement Risk Establishing relationships with many suppliers for bought
Risk of unavailability of materials and drastic leaf and latex in order to reduce over-dependency on a single
price changes. supplier.
Entering into forward contracts for purchases of certain raw
materials and other supplies.
Capital Risk of not meeting profit expectations. Adopting a stringent approval procedure for Capital expenditure
Investments Unexpected cost overruns due to increase in based on the level of investment and the expected pay back.
Risk input costs. Monitor the progress of projects periodically in regard to the
budget and time limits.
 Annual Report 2016-17 | Browns Capital PLC 25

Annual Report of the

Board of Directors
The Board of Directors of Browns Capital Report. The Financial Highlights and On 14th July 2016 Browns Power Holdings
PLC has pleasure in presenting the Historical Financial Information of the (Pvt) Ltd. purchased 15,200,000 shares
Annual Report and the Audited Financial Group are available on pages 02 and 144 of Agalawatte Plantations PLC at Rs.
Statements of the Company and its Group respectively. 20/- per share constituting 60.80%
for the financial year ended 3lst March from Mackwoods Plantations (Pvt) Ltd.
2017 together with the Auditors Report Revenue Subsequently, Browns Power Holdings
thereon. The Revenue generated by the Company (Pvt) Ltd. disposed 15,274,527 per shares
amounted to Rs. 20,148,754/- whilst held in Agalawatte Plantations PLC at Rs.
The Financial Statements and the Group Revenue amounted to Rs. 18/- per share.
disclosures made herein conform to 5,949,443,247/-for the year under review.
the requirements of the Companies Act On 27th March 2017 the Company
No. 7 of 2007. The Report also includes The details of the contribution to the disposed 4,510,000 shares equivalent
relevant disclosures required to be Group revenue from different business to 45.10% held in F L M C Plantations
made under the Listing Rules of the segments with the comparative figures (Pvt) Ltd for a total consideration of Rs.
Colombo Stock Exchange and is guided are provided in Note 49 to the financial 4,694,546,981/- to Damro Group and
by the recommended best practices on statements on page Nos. 138 and 139. retained the balance 990,000 shares
accounting and Corporate Governance. (9.90%) as at the financial reporting
Investment date. On 02nd June 2017 the Company
Principal Activities The details of investment of the Company disposed its remaining shares of
Browns Capital PLC is a diversified in its subsidiaries and sub-subsidiaries 990,000 for a total consideration of Rs.
holding company that has interests in the amounted to Rs. 1,886,727,311/- are 1,948,000,000/-.
Plantation sector, Power sector, Leisure provided in Note 20.
sector, and Real Estate sector through Stated Capital
its Subsidiaries and Sub-subsidiary Investment Property The Stated Capital of the Company as
companies. The principal activities of the The Investment Property represents the at 31st March 2017 amounting to Rs
Companies within the Group are detailed total land value of 83.25 perches located 2,568,000,000 consists of 1,368,000,000
in the Management Discussion and in Borella and its building at No. 19, ordinary shares. There was no change in
Analysis Report on pages 03 to 05 of the Dudley Senanayake Mawatha, Colombo the Stated Capital of the Company during
Annual Report. 08 recorded at fair value amounting the year under review.
to Rs. 1,529,489,481/- (last year – Rs.
The Company has not engaged in any 1,123,845,357/-) carried out by an Reserves
activity which contravenes with laws and independent valuer as detailed in Note 14 The total Group reserves as at 31st March
regulations of the country. to the financial statements. 2017 amounted to Rs. 6,413,136,251/-
(last year – Rs. 2,655,438,991/-). The
The Group has disposed during the year Property, Plant and Equipment movements and composition of reserves
its ownership in Browns Hydro Power The written down value Property, Plant and is detailed in the statement of changes in
PLC, a sub-subsidiary of the Group and Equipment of the Company and the Group equity.
its 45.10% holding out of 55.0% in FLMC amounted to Rs. 7,498,335/- and Rs.
Plantations (Pvt) Ltd, a subsidiary of 3,110,683,315/- respectively as detailed Taxation
the Group. There have been no other in Note 15. The Company has provided Rs.
significant changes in the nature of the 8,203,885/- for income taxes (last year
activities of the Group and the Company Disposal of Investments Rs. 12,737,374/-) and the Group has
during the financial year under review. On 13th July 2016 Browns Power Holdings provided an expense of Rs. 344,418,951/-
(Pvt) Ltd which is fully owned by the (last year reversal of Rs. 12,244,681/-).
Management Discussion and Company disposed 37,044,056 shares The details are given in Note 10 to the
Analysis Report held in Browns Hydro Power PLC at Rs. financial statements.
The financial review and the performance 7/- per share to Lotus Renewable Energy
of each sector of the Group during the (Pvt) Ltd.
year under review are described in the
Management Discussion and Analysis
26 Annual Report 2016-17 | Browns Capital PLC

Annual Report of the Board of Directors

Shareholdings/Share Information The Group Internal Auditors provide assurance on the overall system of internal controls
An analysis of shareholders based on and in recommending policies and procedures of the Group.
shares held, the distribution of ownership
category, shareholdings of Directors The Company conducts review of internal controls covering financial, operational,
and the list of top twenty shareholders compliance controls and risk management assuring of their effectiveness and successful
together with the last year’s comparatives adherence.
are provided on pages 146 to 148.
Going Concern
The Company has made all endeavours The Board of Directors is satisfied that the Company has adequate resources to continue
to ensure the equitable treatment of in operational existence for the foreseeable future to justify adopting the “Going Concern
shareholders. Basis” in the preparation of the Financial Statements.

Events Occurring after Reporting Financial Results

Date The audited results of the Group and of the Company for the financial year ended 31st
Subsequent to the financial reporting March 2017 and its last year’s comparatives are as follows
date, no circumstances have arisen
that require adjustments or disclosures Group
in the financial statements other than For the year ended 31st March 2017 2016
those stated in Note 42 to the financial Rs. Rs.
statement. Profit/(loss) before taxation 4,293,853,673 (488,521,171)
Income tax (expense)/reversal (344,418,951) 12,244,681
Contingent Liabilities
The details of contingent liabilities Profit/(loss) for the year 3,949,434,723 (476,276,490)
are given in Note 43 to the financial Add: Other comprehensive income 44,027,940 464,493,527
statements. Total comprehensive income 3,993,462,662 (11,782,963)
Total comprehensive income attributable to:
Corporate Governance
The Board of Directors ensured that the Owners of the Company 3,818,740,647 15,774,928
Company has complied with the Listing Non controlling interest 174,722,015 (27,557,891)
Rules of the Colombo Stock Exchange
and the Code of Best Practices on
Corporate Governance issued jointly by the Company
Securities and Exchange Commission and For the year ended 31st March 2017 2016
the Institute of Chartered Accountants of Rs. Rs.
Sri Lanka.
Profit/(loss) before taxation 5,093,732,221 59,069,956

The Corporate Governance practice Income tax (expense)/reversal (8,203,885) (12,737,374)

followed by the Group is set out in the Profit for the year 5,085,528,336 46,332,582
Corporate Governance statement on Retained earnings brought forward 305,138,625 258,806,043
pages 08 to 22.
Profit before distribution & transfers 5,390,666,961 305,138,625
Dividends for the year (68,400,000) -
Internal Controls and Risk
Management Retained earnings carried forward 5,322,266,961 305,138,625
The Directors acknowledge their
responsibility for the Group’s system and
internal controls. Accounting Policies
The financial statements for the year ended 31st March 2017 and comparatives have
been prepared in accordance with the new Sri Lanka Accounting Standards (SFFRS/
LKAS) and in compliance with the Companies Act No. 7 of 2007.
 Annual Report 2016-17 | Browns Capital PLC 27

Directorate Board Committees

The Directors of the Company as at date are as follows: Audit Committee
The Audit Committee comprises of :
Mr. Ishara Nanayakkara Chairman/ Non-Executive Director (Resigned on 31st
March 2017) Mr. Indrajith Chairman/Independent
Mr. Kapila Jayawardena Non-Executive Director (Appointed Chairman w.e.f 31st Fernando Non-Executive Director
March 2017) Mr. Uditha Member/Independent
Mrs. Kalsha Amarasinghe Non-Executive Director Palihakkara Non-Executive Director

Mr. Kamantha Amarasekera Non-Executive Director Mr. Kamantha Member/Non-Executive

Amarasekera Director
Mr. Indrajith Fernando Independent Non-Executive Director
Mr. Uditha Palihakkara Independent Non-Executive Director Remuneration Committee
Mrs. Sunjeevani Kotakadeniya Executive Director The Remuneration Committee comprises
of :
Mr. R.M. Nanayakkara Non-Executive Director (demised on 22nd March 2017)

The names and brief profile of each Director who served as Directors of the Company Mr. Indrajith Chairman/Independent
during the year under review are given on pages 06 to 07. Fernando Non-Executive Director
Mr. Uditha Member/Independent
Demise of Non-Executive Director Palihakkara Non-Executive Director
With regret we write of the demise of Mr. Rajah Nanayakkara, Non-Executive Director on Mrs. Kalsha Member/Non-Executive
22nd March 2017. Amarasinghe Director

Resignation of Chairman/Non-Executive Director The report of the Remuneration

Mr. Ishara Nanayakkara, Chairman/Non-Executive Director resigned from the Board of committee is given on page 30.
Directors with effect from 31st March 2017.
Related Party Transactions Review
Appointment of the Chairman Committee
Mr. Kapila Jayawardena, Non-Executive Director was appointed as the Chairman of the The Related Party Transactions Review
Company with effect from 31st March 2017 consequent to the resignation of Mr. Ishara Committee comprises of:
Nanayakkara as the Chairman of the Company.
Mr. Indrajith Independent Non-
Re-Election of Directors Fernando Executive Director
In accordance with Article No. 23(6) of the Articles of Association of the Company Mr. Mr. Kamantha Non-Executive Director
Indrajith Fernando Independent Non-Executive Director retires by rotation and being Amarasekera
eligible offers himself for re-election.
Mr. Kapila Non-Executive Director
Jayawardena
In accordance with Article No. 23(6) of the Articles of Association of the Company Mr.
Kapila Jayawardena,Non-Executive Director retires by rotation and being eligible offers Mrs. Kalsha Non-Executive Director
himself for re-election. Amarasinghe
Mrs. Sunjeevani Executive Director
In accordance with Section 210 of the Companies Act No. 7 of 2007 Mr. Uditha Kotakadeniya
Palihakkara, Independent Non-Executive Director retires and offers himself for re-
election. A Special notice has been received pursuant to Sections 145 and 211 of the Directors’ Indemnity and
Companies Act No. 7 of 2007 of the intention to propose an ordinary resolution for such Insurance
re-election notwithstanding the age limit of 70 years stipulated by Section 210 of the The Company has obtained a Directors’
said Companies Act for a period of one year or until the conclusion of the next Annual and Officers’ Liability Insurance cover for
General Meeting whichever occurs first. its Directors and Officers. The Insurance
cover indemnifies the Directors to the
extent permitted by Law and the Articles
28 Annual Report 2016-17 | Browns Capital PLC

Annual Report of the Board of Directors

of Association of the Company in respect Annual General Meeting The fees paid to the Auditors are disclosed
of all losses arising out of or in connection The Ninth Annual General Meeting will be in Note 9 to the financial statements.
with the execution of their powers, duties held at Park Premier, Excel World, No. 338, As far as the Directors are aware, the
and responsibilities T B Jayah Mawatha, Colombo 10 on the Auditors do not have any relationship with
19th day of September 2017 at 10.45 the Company or any of its subsidiaries
Directors’ Interests in Contracts a.m. The Notice of Meeting appears on other than that of an Auditor. The Auditors
The Directors have declared all material page 153. also do not have any interest in the
interests in contracts involving the Company or any of its Group Companies.
Company. The Directors’ interests in Auditors
contracts is disclosed in the related In accordance with Section 154 (1) of the For and on behalf of the Board
party transactions under Note 45 to the Companies Act No. 7 of 2007 a resolution
financial statements. proposing the re-appointment of Messrs.
KPMG, Chartered Accountants as the
Remuneration of Directors Auditors of the Company for the ensuing
The remunerations paid to the Directors year will be proposed at the Annual Kapila Jayawardena
of the Company and its Subsidiaries General Meeting. Non-Executive Chairman
are disclosed in Note 9 to the financial
statements. The Company has paid Rs In terms of Section 155 (a) of the
1,540,677/- during the year (Last year Companies Act No. 7 of 2007 a resolution
Rs. 480,000/- as remunerations to Non- authorising the Directors to fix the
Executive Directors. remuneration of the Auditors Messrs. Mr. Kamantha Amarasekera
KPMG, Chartered Accountants for the Non-Executive Director
Subsidiaries and Sub-Subsidiary ensuing year will be proposed at the
Companies and its Directors Annual General Meeting.
The Directors of subsidiaries and
sub-subsidiary companies as at 31st The Audit Report is found in the financial
March 2017 are given on page 141 of the report section of the Annual Report. The S.F.L. SERVICES (PVT) LTD
Annual Report. involvements of the Audit Committee with SECRETARIES
the work of the Auditors are set out in the Colombo
Annual Report Audit Committee Report.
The Board of Directors approved the 15th June 2017
consolidated financial statements on
15th June 2017. The appropriate number
of copies of this report will be submitted
to the Colombo Stock Exchange and to
the Sri Lanka Accounting and Auditing
Standards Monitory Board on or before
25th August 2017.
 Annual Report 2016-17 | Browns Capital PLC 29

Audit Committee
Report
The composition of the committee as at Financial Reporting audit. The Audit Committee evaluates the
date is as follows; Throughout the year, the Committee independence of the External Auditors
focused on the integrity of the Company’s and makes recommendations to the
Mr. Indrajith Fernando/ Chairman financial reporting, the quality of the Board pertaining to the appointment,
Independent Non-Executive external and internal audit processes and re-appointment and removal of External
Director the appropriateness of internal controls. Auditors.
Mr. Uditha Palihakkara/ Member The Committee received in-depth
Independent Non-Executive presentations from the management and
Director the Internal Auditors including the key
risks impacting the businesses.
Mr. Kamantha Amarasekera/ Member
Non-Executive Director Mr. Indrajith Fernando
The Committee is responsible for
reviewing the Financial Statements to Chairman
The members of the Committee have been
ensure consistency of the accounting
chosen to provide a wide range of financial 15th June 2017
policies and their compliance with the Sri
and commercial experience needed to
Lanka Accounting Standards and other
fulfil the duties of the Committee and
statutory requirements.
the Committee is well placed to continue
its oversight and governance role in the
The Committee assists the Board in
year ahead, including oversight of the
fulfilling its Corporate Governance
impact of the business models and the
and oversees responsibilities for the
associated risks. The Chairman of the
system of internal control, internal
Committee is a Fellow member of the
audit processes, risk management and
ICASL and CIMA, UK and also a Fellow
monitors compliance with relevant laws
member of CMA Sri Lanka.
and regulations. The Committee also
monitored the IPO fund utilisation during
The Group Chief Financial Officer attends
the period under review.
meetings of the Committee by invitation.
The other Executive Directors, Senior
The Committee oversees the Consolidated
Managers, Group Internal Auditors and
Financial Reporting on behalf of the Board
External Auditors are requested to be
of Directors as part of its responsibility
present when required. The Company
and reviews the Quarterly and Annual
Secretaries function as the Secretary to
Financial Statements and recommends
the Committee.
them to the Board for its approval prior to
their issuance.
Meetings
The Audit Committee met five times
External Auditors
during the financial year under review.
The Committee meets with the External
The attendance of the members at
Auditors in relation to the scope and
the meetings is given on the Report of
significant matters arising from the
Corporate Governance. The minutes of the
audit and also discusses the Company’s
Audit Committee meetings are circulated
Management Letter at the conclusion of
among the members of the Audit
the audit. The External Auditors consults
Committee.
with the Audit Committee the matters of
significant importance pertaining to the
30 Annual Report 2016-17 | Browns Capital PLC

Remuneration
Committee Report
The Remuneration Committee comprises of two Independent Non-Executive Directors
and one Non-Executive Director while the Company Secretaries function as its Secretary.

The composition of the Remuneration Committee as at date is as follows;

Mr. Indrajith Fernando/ Chairman

Independent Non-Executive
Director

Mr. Uditha Palihakkara/ Member

Independent Non-Executive
Director

Mrs. Kalsha Amarasinghe/ Member

Non-Executive Director

The Committee is responsible for setting up the remuneration policies and making
recommendations to the Board. The remuneration paid to the Directors during the year
under consideration has been duly approved by the Board and disclosed in the Directors’
Report.

The remuneration arrangements ensure that right incentives are in place to support the
delivery of new strategies. Reward focus is on value creation and long-term in order to
align the executives with business transformation and the delivery of outcomes.

Meetings
The Remuneration Committee meets as and when required and interacts with the Board
members to keep them informed of the decisions of the committee.

Mr. Indrajith Fernando

Chairman

15th June 2017

 Annual Report 2016-17 | Browns Capital PLC 31

Related Party Transactions Review

Committee Report
The Committee comprises of a The role of the Committee further • Ensure that immediate market
combination of an Executive Director, includes; disclosures and disclosures in the
Non-Executive Directors, and Independent Annual Report as required by the
Non-Executive Directors. One Independent • Formulating and recommending a applicable rules/ regulations are made
Non-Executive Director was appointed as policy for adoption on related party in a timely and detailed manner.
the Chairman of the Committee. transactions for the Company which is
consistent with the Operating Model of The Committee in discharging its function
The members are; the Company and the Listing Rules. ensures:

Mr. Indrajith Fernando/ Chairman • Reviewing in advance all proposed • that there is compliance with the Listing
Independent Non-Executive Related Party Transactions of the Rules of the CSE;
Director Company except those explicitly
exempted (if the transaction is • that shareholder interests are
Mr. Kamantha Amarasekera/ Member
expressed to be conditional on such protected; and
Non-Executive Director
review, prior to the completion of the
Mr. Kapila Jayawardena/ Non- Member transaction to be reviewed). • that fairness and transparency are
Executive Director maintained.
Mrs. Kalsha Amarasinghe/ Member • Determining whether Related Party
Non-Executive Director Transactions that are to be entered into The Committee has drafted a policy to be
Mrs. Sunjeevani Member by the Company require the approval adopted by the Committee for reviewing
Kotakadeniya/ Executive of the Board or Shareholders of the the Related Party Transactions.
Director Company.
Committee Meetings
The Chief Financial Officer attends • Establishing separate guidelines The Committee met twice during the year
meetings by invitation and the Company to follow recurrent Related Party under review. The minutes of all meetings
Secretaries function as its Secretary. Transactions of the Company. are properly documented and circulated
to the Committee.
Role of the Committee • Ensuring that no Director of the
The role of the Committee is to review Company shall participate in any
in advance all proposed Related Party discussion of a proposed Related Party
Transactions other than those exempted Transaction for which he or she is a
under Rule 9.5 of the CSE Listing Rules. related party, unless such Director is
requested to do so by the Committee Mr. Indrajith Fernando
The Committee ensures that the interests for the express purpose of providing Chairman
of shareholders as a whole are taken into information concerning the Related
account by the Company when entering Party Transaction to the Committee. 15th June 2017
into Related Party Transactions, so that
it provides certain safeguards to prevent • If there is any potential conflict in
Directors, Chief Executives or Substantial any Related Party Transaction, the
Shareholders taking advantage of their Committee recommends the creation
positions. of a special committee to review and
approve the proposed Related Party
Transaction.
32 Annual Report 2016-17 | Browns Capital PLC

Statement of Directors’
Responsibilities
The responsibility of the Directors in The Directors are of the opinion based Compliance Report
relation to the Financial Statements for on their knowledge of the Company that The Directors confirm that to the best
the year ended 31st March 2017 which the Company has adequate resources to of their knowledge and belief that
have been prepared and presented in continue in operation and have applied the all statutory payments in relation to
conformity with the requirements of the going concern basis in preparing these regulatory and statutory authorities that
Sri Lanka Financial Reporting Standards, Financial Statements. were due in respect of the Company,
the Listing Rules of the Colombo Stock Subsidiaries and its Sub Subsidiaries as
Exchange and the Companies Act. No. Further, the Directors have a responsibility at the date of the Statement of Financial
7 of 2007, is set out in the following to ensure that the Company maintains Position have been paid or, where relevant
statement. sufficient accounting records to disclose, provided for.
with reasonable accuracy the financial
As per the provisions of the Companies position of the Company and of the By order of the Board
Act. No. 7 of 2007, the Directors are Group, and to ensure that the Financial
required to prepare Financial Statements Statements presented comply with the
for each financial year and place before a requirements of the Companies Act. No. 7
general meeting which comprise; of 2007.

1. Statement of Comprehensive Income The Directors are also responsible for Mr. Kapila Jayawardena
which presents a true and fair view taking reasonable steps to safeguard the Chairman
of the financial performance of assets of the Company and that of the
the Company and its Group for the Group and in this regard to give proper 15th June 2017
financial year and; consideration to the establishment of
appropriate internal control systems with
2. Statement of Financial Position a view to preventing and detecting fraud
which presents a true and fair view of and other irregularities.
the state of affairs of the Company
and its Group as at the end of the The External Auditors were provided with
financial year which complies with the all the information and explanations
requirements of the Companies Act. which were necessary enabling them
No. 7 of 2007. to form their opinion on the Financial
Statements. The Independent Auditors’
The Directors are of the view that, in Report available on page 34 sets out their
preparing these Financial Statements: responsibilities in relation to the Financial
Statements.
1. The appropriate accounting policies
have been selected and applied The Directors are of the view that they
consistently. Material deviations, if have discharged their responsibilities as
any, have been disclosed and duly set out in this statement.
explained;

2. All applicable Accounting Standards as

relevant have been followed;

3. Judgments and estimates used are

reasonable and prudent.
Annual Report 2016-17 | Browns Capital PLC 33
34 Annual Report 2016-17 | Browns Capital PLC

INDEPENDENT AUDITORS’ REPORT

TO THE SHAREHOLDERS OF reasonable assurance about whether Report on Other Legal and
BROWNS CAPITAL PLC the financial statements are free from Regulatory Requirements
material misstatement. As required by section 163 (2) of the
Report on the Financial Companies Act No. 07 of 2007, we state
An audit involves performing procedures the following:
Statements to obtain audit evidence about the
We have audited the accompanying amounts and disclosures in the financial a) The basis of opinion and scope and
financial statements of Browns statements. The procedures selected limitations of the audit are as stated
Capital PLC, (“the Company”), and the depend on the auditors’ judgment, above
consolidated financial statements of the including the assessment of the risks of
Company and its subsidiaries (“Group”), material misstatement of the financial b) In our opinion:
which comprise the statement of financial statements, whether due to fraud or error.
position as at March 31, 2017, statements In making those risk assessments, the - we have obtained all the information
of profit or loss and other comprehensive auditor considers internal control relevant and explanations that were required
income, changes in equity and cash to the entity’s preparation of the -financial for the audit and, as far as appears
flows for the year then ended, and notes, statements that give a true and fair view from our examination, proper
comprising a summary of significant in order to design audit procedures that accounting records have been kept by
accounting policies and other explanatory are appropriate in the circumstances, the Company,
information set out on pages 35 to 140 of but not for the purpose of expressing
the annual report. - The financial statements of the
an opinion on the effectiveness of the
Company give a true and fair view of
entity’s internal control. An audit also
Board’s Responsibility for the includes evaluating the appropriateness
its financial position as at March 31,
Financial Statements 2017, and of its financial performance
of accounting policies used and the
The Board of Directors (“Board”) is and cash flows for the year then
reasonableness of accounting estimates
responsible for the preparation of these ended in accordance with Sri Lanka
made by Board, as well as evaluating
financial statements that give a true and Accounting Standards.
the overall presentation of the financial
fair view in accordance with Sri Lanka statements.
Accounting Standards, and for such - The financial statements of the
internal control as Board determines is Company, and the Group comply with
We believe that the audit evidence
necessary to enable the preparation of the requirements of sections 151 and
we have obtained is sufficient and
financial statements that are free from 153 of the Companies Act No. 07 of
appropriate to provide a basis for our
material misstatement, whether due to 2007.
audit opinion.
fraud or error.
Opinion
Auditors’ Responsibility In our opinion, the consolidated financial
Our responsibility is to express an opinion statements give a true and fair view of the
on these financial statements based financial position of the Group as at March
CHARTERED ACCOUNTANTS
on our audit. We conducted our audit 31, 2017, and of its financial performance
Colombo
in accordance with Sri Lanka Auditing and cash flows for the year then ended
Standards. Those standards require that in accordance with Sri Lanka Accounting June 15, 2017
we comply with ethical requirements Standards.
and plan and perform the audit to obtain
 Annual Report 2016-17 | Browns Capital PLC 35

STATEMENT OF PROFIT OR LOSS AND

OTHER COMPREHENSIVE INCOME

Group Company
For the year ended 31st March, Notes 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Revenue 4.1 5,949,443,247 5,529,030,772 20,148,754 50,620,996

Cost of sales 4.2 (5,227,832,469) (5,626,794,135) - -
Gross profit/(loss) 4.3 721,610,778 (97,763,363) 20,148,754 50,620,996

Other income 5 327,783,546 290,139,054 30,028,094 3,311,964

Impairment loss of investments in subsidiaries 20 - - (2,649,484) (10,000,000)
Change in fair value of investment property 14 404,749,148 111,314,027 - -
Change in fair value of biological assets 6 229,287,886 (194,353,741) - -
Change in fair value of financial assets at fair value
though profit or loss 27.3 892,000,000 - 892,000,000 -
Administrative expenses (356,926,438) (293,355,987) (16,989,335) (13,562,792)
Other expenses 7 (101,401,258) (76,883,456) (6,095,540) (28,747,857)
Results from operating activities 2,117,103,662 (260,903,466) 916,442,489 1,622,311

Finance income 8.1 68,693,913 38,603,216 111,512,217 66,648,950

Finance costs 8.2 (542,044,419) (266,220,921) (78,020,466) (9,201,305)
Net finance income/(costs) (473,350,506) (227,617,705) 33,491,751 57,447,645

Gain / (loss) on disposal of subsidiaries 20.2 2,650,100,517 - 4,143,797,981 -

Profit/(loss) before taxation 9 4,293,853,673 (488,521,171) 5,093,732,221 59,069,956

Income tax (expense)/reversal 10 (344,418,951) 12,244,681 (8,203,885) (12,737,374)

Profit/(loss) for the year 3,949,434,723 (476,276,490) 5,085,528,336 46,332,582

Other comprehensive income

Net changes in fair value of available-for-sale investments 21 (1,304,900) (1,063,873) - -

Actuarial gain/( loss ) on defined benefits plans 35.1 53,190,501 546,519,414 - -
Tax on other comprehensive income 10.2 (7,857,661) (80,962,014) - -
Other comprehensive income for the year, net of tax 44,027,940 464,493,527 - -
Total comprehensive income for the year 3,993,462,662 (11,782,963) 5,085,528,336 46,332,582

Profit attributable to : -
- Owners of the Company 3,794,491,850 (215,956,601) 5,085,528,336 46,332,582
- Non-controlling interests 154,942,873 (260,319,889) - -
Profit/(loss) for the year 3,949,434,723 (476,276,490) 5,085,528,336 46,332,582

Total comprehensive income attributable to :

- Owners of the company 3,818,740,647 15,774,928 5,085,528,336 46,332,582
- Non-controlling interests 174,722,015 (27,557,891) - -
Total comprehensive income for the year 3,993,462,662 (11,782,963) 5,085,528,336 46,332,582

Basic earnings/(loss) per share (Rs.) 11.1 2.77 (0.16) 3.72 0.03
Diluted earnings/(loss) per share (Rs.) 11.2 2.77 (0.16) 3.72 0.03

Figures in brackets indicate deductions

The notes on the pages 42 to 140 form an integral part of these financial statements
36 Annual Report 2016-17 | Browns Capital PLC

STATEMENT OF FINANCIAL POSITION

Group Company
As at 31st March, Notes 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

ASSETS
Non-current assets `
Rights to use the leasehold land 13 260,742,491 447,232,281 - -
Investment property 14 1,529,489,481 1,123,845,357 - -
Property, plant and equipment 15 3,110,683,315 3,398,915,648 7,498,335 2,616,785
Intangible assets 16 169,803,550 166,210,384 - -
Bearer biological assets 17 1,125,032,834 4,786,745,491 - -
Consumable biological assets 18 2,984,090,919 6,150,989,629 - -
Investments in subsidiaries 20 - - 1,886,727,311 2,450,257,897
Other financial assets- non current 21 40,275,613 41,580,513 - -
Long term investments 22 214,507,887 139,132,887 214,507,887 139,132,887
Total non-current assets 9,434,626,090 16,254,652,190 2,108,733,533 2,592,007,569

Current assets
Agricultural Produce attached to bearer biological assets 19 14,472,570 - - -
Inventories 23 259,541,797 520,875,706 - -
Trade and other receivables 24 300,896,109 891,320,273 2,169,293 689,804
Loans to related parties 25 - - 1,611,776,655 361,550,000
Amounts due from related parties 26 90,011,047 26,286,682 132,155,117 88,639,791
Other financial assets-current 27 1,012,616,192 50,890,658 1,000,000,000 -
Cash and cash equivalents 28 4,708,965,758 530,225,432 4,387,832,015 61,004,339
Total current assets 6,386,503,473 2,019,598,751 7,133,933,079 511,883,934

Total assets 15,821,129,564 18,274,250,941 9,242,666,612 3,103,891,503

EQUITY AND LIABILITIES

Equity
Stated capital 29 2,568,000,000 2,568,000,000 2,568,000,000 2,568,000,000
Reserves 30 (9,710,191) 109,907,728 - -
Retained earnings 6,422,846,442 2,545,531,263 5,322,266,961 305,138,625
Total equity attributable to equity holders of the Company 8,981,136,251 5,223,438,991 7,890,266,961 2,873,138,625

Non-controlling interests 31 912,814,647 5,496,418,809 - -

Total equity 9,893,950,898 10,719,857,800 7,890,266,961 2,873,138,625

Non-current liabilities
Loans and borrowings 32 1,809,718,979 1,640,404,773 - -
Deferred tax liabilities 34 155,026,672 627,173,311 - -
Retirement benefit obligations 35 839,606,279 1,578,374,576 - -
Deferred income 36 157,004,724 640,869,959 - -
Deposits and rent advances 65,955,603 88,610,060 - -
Loans from related parties 37 19,444,521 1,031,036,671 - -
Total non-current liabilities 3,046,756,778 5,606,469,350 - -
 Annual Report 2016-17 | Browns Capital PLC 37

Group Company
As at 31st March, Notes 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Current liabilities
Trade and other payables 38 627,023,394 840,283,582 19,097,873 16,661,629
Loans from related parties 37 1,545,546,323 482,272,701 1,250,226,655 66,958,000
Amounts due to related parties 39 178,645,568 122,564,722 78,304,098 144,323,014
Income tax payable 40 13,164,736 2,642,593 4,771,026 2,810,235
Short term borrowings 33 115,918,492 45,136,735 - -
Loans and borrowings 32 275,935,860 338,367,470 - -
Bank overdrafts 28 124,187,515 116,655,988 - -
Total current liabilities 2,880,421,888 1,947,923,791 1,352,399,651 230,752,878

Total liabilities 5,927,178,666 7,554,393,141 1,352,399,651 230,752,878

Total equity and liabilities 15,821,129,564 18,274,250,941 9,242,666,612 3,103,891,503

Net assets per ordinary share (Rs.) 41 6.57 3.82 5.77 2.10

Figures in brackets indicate deductions

The notes on pages 42 to 140 form an integral part of these financial statements.

I certify that the financial statements for the year ended 31st March 2017 are in compliance with the requirements of the Companies Act No.7 of 2007.

Mr. Priyantha Fernando

Chief Financial Officer

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 Browns Capital PLC.

Mrs. Sunjeevani Kotakadeniya Mr. Kamantha Amarasekera

Director Director

Colombo
15th June 2017
 Attributable to owners of the company 38
As at 31st March, Stated capital Revaluation Available-for- Retained Total Non-controlling Total equity
surplus sale reserve earnings interests
Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Group
Balance as at 01st April 2015 (Restated) 2,568,000,000 118,313,019 (7,674,996) 2,534,079,408 5,212,717,431 5,182,235,615 10,394,953,046

Profit for the year - - - (215,956,601) (215,956,601) (260,319,889) (476,276,490)

Other comprehensive income - - (730,295) 232,461,825 231,731,530 232,761,997 464,493,527

Total comprehensive income for the year - - (730,295) 16,505,224 15,774,928 (27,557,891) (11,782,963)

Expense incurred for share issue - - - (2,004,839) (2,004,839) (1,996,836) (4,001,675)

Acquisition through business combinations - - - - - 379,495,562 379,495,562
Annual Report 2016-17 | Browns Capital PLC

Transactions with owners, recorded directly in equity

Preference share dividends - - - (3,048,529) (3,048,529) 3,048,529 -

Dividends to non-controlling interests by subsidiaries - - - - - (38,806,170) (38,806,170)
Total contributions and distributions recognized - - - (5,053,368) (5,053,368) 341,741,085 336,687,717
directly in equity

Balance as at 31st March 2016 2,568,000,000 118,313,019 (8,405,291) 2,545,531,263 5,223,438,991 5,496,418,809 10,719,857,800

Profit for the year - - - 3,794,491,850 3,794,491,850 154,942,873 3,949,434,723

Other comprehensive income - - (1,304,900) 25,553,697 24,248,797 19,779,142 44,027,940

Total comprehensive income for the year - - (1,304,900) 3,820,045,547 3,818,740,647 174,722,015 3,993,462,662
STATEMENT OF CHANGES IN EQUITY - GROUP

Disposal of subsidiaries - (118,313,019) - 128,718,161 10,405,142 (4,773,105,777) (4,762,700,635)

Transactions with owners, recorded directly in equity

Subsidiary share issue to non controlling interest - - - - - 37,401,102 37,401,102
Preference share dividends - - - (3,048,529) (3,048,529) 3,048,529 -
Dividends paid by the parent company - - - (68,400,000) (68,400,000) - (68,400,000)
Dividends to non-controlling interests by subsidiaries - - - - - (25,670,032) (25,670,032)
Total contributions and distributions recognized - (118,313,019) - 57,269,632 (61,043,387) (4,758,326,177) (4,819,369,564)
directly in equity

Balance as at 31st March 2017 2,568,000,000 - (9,710,191) 6,422,846,442 8,981,136,251 912,814,647 9,893,950,898

During the year 2016/17

Dividend per share (Rs.) (Note 12) 0.05
Figures in brackets indicate deductions
The notes on pages 42 to 140 form an integral part of these financial statements.
 Annual Report 2016-17 | Browns Capital PLC 39

STATEMENT OF CHANGES IN EQUITY - COMPANY

As at 31st March, Stated capital Retained Total

earnings
Rs. Rs. Rs.

Company -
Balance as at 01st April 2015 2,568,000,000 258,806,043 2,826,806,043

Profit for the year - 46,332,582 46,332,582

Total comprehensive income for the year - 46,332,582 46,332,582

Transactions with owners, recorded directly in equity - - -

Balance as at 31st March 2016 2,568,000,000 305,138,625 2,873,138,625

Profit for the year - 5,085,528,336 5,085,528,336

Total comprehensive income for the year - 5,085,528,336 5,085,528,336

Transactions with owners, recorded directly in equity

Dividends - (68,400,000) (68,400,000)

Balance as at 31st March 2017 2,568,000,000 5,322,266,961 7,890,266,961

During the year 2016/17

Dividend per share (Rs.) (Note 12) 0.05

Figures in brackets indicate deductions

The notes on pages 42 to 140 form an integral part of these financial statements.
40 Annual Report 2016-17 | Browns Capital PLC

STATEMENT OF CASH FLOWS

Group Company
For the year ended 31st March, Notes 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Cash flows from operating activities

Profit/(Loss) before taxation 4,293,853,673 (488,521,171) 5,093,732,221 59,069,956
Adjustments for;
Provision for retirement benefit obligations - retiring gratuity 219,870,365 259,348,829 - -
Depreciation/amortization - property, plant and equipment,
Intangible assets 186,951,428 172,122,029 2,048,055 1,584,080
Amortisation of Intangible assets 3,162,834 - - -
Amortisation of leasehold assets 15,257,725 15,592,388 - -
Depreciation/amortization-biological assets 181,347,390 164,815,055 - -
(Gain)/loss on changes in fair value of biological assets (229,287,886) 194,353,741 - -
Deferred income amortized (31,642,719) (32,416,387) - -
Finance costs 497,983,590 285,720,023 78,020,466 9,201,305
Foreign exchange (gain)/loss 44,060,829 (19,499,102) - -
Interest income (68,693,913) (38,603,216) (111,512,217) (66,648,950)
Change in fair value of other financial assets - 3,538,696 - (556,304)
Change in fair value through profit or loss financial assets (892,000,000) - (892,000,000) -
Impairment loss of investments in subsidiaries - - 2,649,484 10,000,000
Impairment loss on inventories 554,379 2,858,378 - -
Impairment loss/provision on amount due from related parties 6,770,019 83,785 3,663,860 4,257,632
Impairment loss/(reversal) on trade receivable 714,746 10,407,181 - -
Loans written off - - - 24,490,225
Written-off of immature plantations 15,711,509 10,149,983 - -
Written-off of property plant and equipments 796,686 - - -
Gain on change in fair value of investment property (404,749,148) (111,314,027) - -
Gain on disposal of property, plant and equipment (6,868,390) (10,524,980) - -
Gain on disposal of subsidiaries (2,650,100,517) - (4,143,797,981) -
Loss on disposal of other investments 33,458,414 - - -
Capital work in progress written off 4,000,000 12,997,914 - -
Gain on sale of bearer biological assets (54,674,014) (77,620,771) - -
Dividend income (618,946) (614,977) - -
Operating profit before working capital changes 1,165,858,055 352,873,370 32,803,888 41,397,944

Working capital changes

(Increase) / decrease in inventories (143,898,434) 26,892,671 - -
(Increase) / decrease in trade and other receivables 294,929,276 (420,641,515) (1,479,489) (689,804)
(Increase) / decrease in loans to related parties - - (1,250,226,655) (10,323,558)
(Increase) / decrease in amounts due from related parties (684,028,221) (18,300,949) (47,179,186) (14,131,916)
Increase / (decrease) in trade and other payables 249,563,940 (39,860,624) 2,436,246 202,873
Increase / (decrease) in amounts due to related parties 628,036,397 99,530,668 (66,018,916) 71,706,499
Cash generated from / (used in) operations 1,510,461,014 493,621 (1,329,664,112) 88,162,038
Income tax/ESC paid (26,095,853) (43,368,273) (6,243,097) (19,503,611)
Retiring gratuity paid (190,496,736) (224,917,080) - -
Interest paid (541,412,578) (253,607,581) (78,020,466) (9,201,305)
Net cash generated from / (used in) operating activities 752,455,847 (521,399,313) (1,413,927,675) 59,457,122
 Annual Report 2016-17 | Browns Capital PLC 41

Group Company
For the year ended 31st March, Notes 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Cash flows from investing activities

Acquisition/investments in subsidiaries - (389,824,456) (39,118,898) (407,064,217)
Acquisition of other investments (306,166,000) - - -
Investment in investment property (894,975) (1,975,146) - -
Additions to intangible assets (17,250,000) (21,873,753) - -
Acquisition and construction of property, plant & equipment (1,543,547,771) (1,079,082,544) (6,929,605) -
Investment in biological assets (367,740,193) (323,070,765) - -
Capital grants received 20,721,452 74,752,993 - -
Interest income received 68,693,913 38,603,216 111,512,217 66,648,950
Proceeds from sale of property, plant and equipment 7,243,837 18,738,396 - -
Proceeds from sale of bearer/consumable biological assets 124,317,826 123,001,739 - -
Net proceeds from disposal of subsidiaries 4,932,202,385 - 4,635,797,981 -
Net proceeds from disposal of other investments 272,707,586 - - -
Long term investments (75,375,000) (139,132,887) (75,375,000) (139,132,887)
Investments in other financial assets-current (267,952,079) (36,400,658) - -
Proceeds from disposal of other financial assets - 843,788,729 - 263,788,729
Dividend income received 618,946 614,977 - -
Net cash generated from / (used in) investing activities 2,847,579,926 (891,860,159) 4,625,886,696 (215,759,425)

Cash flows from financing activities

Repayment of finance lease liabilities (36,188,116) (91,460,745) - -
Repayment of loans and borrowings (296,844,190) (310,288,429) - -
Term and other loans received 807,948,946 1,203,958,737 - -
Loans from related parties-obtained 1,691,450,986 1,456,304,889 1,250,226,655 66,958,000
Loans from related parties-paid (1,618,577,970) (404,173,272) (66,958,000) (61,550,000)
Receipts of short term borrowings - ( net of payments ) 102,706,757 (295,774,177) - -
Deposits and rent advances (22,654,457) - - -
Cost of share issue - (4,001,675) - -
Subsidiary share issue to non controlling interest 37,401,102 - - -
Dividends paid to shareholders with non-controlling interest (25,670,032) (38,806,170) - -
Dividends paid to equity holders of the parent (68,400,000) - (68,400,000) -
Net cash flows generated from / (used in) financing activities 571,173,027 1,515,759,158 1,114,868,655 5,408,000

Net increase / (decrease) in cash and cash equivalents 4,171,208,799 102,499,686 4,326,827,676 (150,894,303)
Cash and cash equivalents at beginning of the year 413,569,444 311,069,758 61,004,339 211,898,642
Cash and cash equivalents at end of the year 4,584,778,243 413,569,444 4,387,832,015 61,004,339

Figures in brackets indicate deductions

The notes on pages 42 to 140 form an integral part of these financial statements.
42 Annual Report 2016-17 | Browns Capital PLC

NOTES TO THE FINANCIAL STATEMENT

1 Corporate Information 1.6 Principal activities and nature of operations of the Company and its subsidiaries and
1.1 Domicile and legal form of reporting sub-subsidiaries.
entity (a) Holding company
Browns Capital PLC is a public limited Browns Capital PLC is a diversified holding company making investments through its
liability Company incorporated on 22nd subsidiaries in plantations, mini hydro power, solar power, leisure and real estate property
May 2008 under the Companies Act No. sectors.
07 of 2007 of Sri Lanka and domiciled
in Sri Lanka and listed on the Colombo (b) Subsidiaries, sub-subsidiaries and associates
Stock Exchange.
The companies within the Group and its business activities are as follows.
The registered office and principal place
of business of the Company is located at Name Relationship Principal business activity
level 12, Browns Capital Building, No 19,
F L P C Management (Pvt) Ltd., (FLPC) Subsidiary Management and investment
Dudley Senanayake Mawatha,
company for plantation.
Colombo 08.
Maturata Plantations Ltd., (MPL) Subsidiary Cultivation, manufacture and sale
Ordinary shares of the Company are of FLPC of orthodox tea, rubber, coconut
listed on the Diri Savi Board of the and other agricultural products.
Colombo Stock Exchange. Browns Power Holdings (Pvt) Ltd., Subsidiary Investing company.
(BPHL)
1.2 Consolidated financial statements
Dolekanda Power (Pvt) Ltd., (DPL) Subsidiary Hydro power generation
The consolidated financial statements
(Non operating)
of the Company as at, and for the year
ended 31st March 2017 comprise the Enselwatte Power (Pvt) Ltd., (EPL) Subsidiary Hydro power generation
financial statements of Company and (Non operating)
its subsidiaries (together referred to as
Browns Properties (Pvt) Ltd., (BPL) Subsidiary Renting of office premises.
the “Group” and individually as “Group
entities”) Sagasolar Power (Pvt) Ltd., (SSPL) Subsidiary Incorporated to undertake solar
power projects.
1.3 Immediate and ultimate parent The Tea Leaf Resort Holdings (Pvt) Ltd., Subsidiary Incorporated to construct, own
enterprise (TLRHL) and operate boutique style hotels.
In the opinion of Directors, the Group’s
ultimate parent undertaking and
controlling party as at the date of There were no significant changes in the nature of the principal activities of the Company and
statement of financial position is Lanka the Group during the financial year under review other than the divestments of Browns Hydro
ORIX Leasing Company PLC, a company Power PLC and FLMC Plantations (Pvt) Ltd.
incorporated in Sri Lanka.
2 Basis of preparation
1.4 Financial period 2.1 Statement of compliance
The financial period of the company and The consolidated financial statements of the Group have been prepared and presented
its group represents twelve months’ in accordance with Sri Lanka Accounting Standards, which comprise Sri Lanka Financial
period from 01st April 2016 to 31st Reporting Standards (SLFRSs), Sri Lanka Accounting Standards (LKASs), relevant
March 2017. interpretations of the Standing Interpretations Committee (SIC) and International Financial
Reporting Interpretations Committee (IFRIC) laid down by the Institute of Chartered
Accountants of Sri Lanka (CA Sri Lanka) which are collectively referred to as SLASs and
1.5 Date of authorization for issue
in compliance with the requirements of the Companies Act No.07 of 2007 and Sri Lanka
The financial statements for the year
Accounting Standards Act No. 15 of 1995.
ended 31st March 2017 were authorized
for issue by the directors on 15th June,
2017 in accordance with the resolution The Group did not adopt any inappropriate accounting treatment, which is not in compliance
of the Board of Directors of the with the requirements of the SLF RSs and LKASs, regulations governing the preparation and
Company. presentation of the financial statements.
 Annual Report 2016-17 | Browns Capital PLC 43

2.2 Directors’ responsibility for the financial statements 2.5 Presentation of financial statements
The Board of Directors is responsible for the preparation and fair presentation of these The assets and liabilities of the Group
financial statements in accordance with Sri Lanka Accounting Standards (SLFRSs/LKASs) presented in its statement of financial
issued by the Institute of Chartered Accountants of Sri Lanka and as per the provisions of the position are grouped by nature and listed
Companies Act No.07 of 2007. in an order that reflects their relative
liquidity and maturity pattern.
This responsibility includes: designing, implementing and maintaining internal controls
relevant to the preparation and fair presentation of financial statements that are free from 2.6 Current versus non-current
material misstatement, whether due to fraud or error; selecting and applying appropriate classification
accounting policies; and making accounting estimates that are reasonable in the The Group presents assets and
circumstances. liabilities in the statement of financial
position based on current/non-current
These financial statements include the following components; classification.

• A statement of financial position providing the information on the financial position of the An asset is current when it is expected
Company and Group as at the year end. to be realised or intended to be sold or
consumed in the normal operating cycle
• A statement of profit or loss and other comprehensive income providing the information and held primarily for the purpose of
on the financial performance of the Company and Group for the year under review. trading.

• A statement of changes in equity depicting all changes in shareholders’ funds during the Or
year under review of the Company and Group. Is cash or cash equivalent unless
restricted from being exchanged or used
to settle a liability for at least twelve
• A statement of cash flows providing the information to the users, on the ability of the
months after the reporting period.
Company and Group to generate cash and cash equivalents and the needs of entities to
utilize those cash flows, and
All other assets are classified as non-
current.
• Notes to the financial statements comprising accounting policies and other explanatory
information.
A liability is current when it is expected
to be settled in the normal operating
2.3 Basis of measurement
cycle and is held primarily for the
The financial statements of the Group and Company have been prepared on an accrual basis
purpose of trading and is due to be
under the historical cost basis, except for the following material items in the statement of
settled within twelve months after the
financial position, which are measured on an alternative basis on each reporting date.
reporting period

Item Measurement bases Or

There is no unconditional right to defer
Rights to use the leasehold land At revalued amount as described in Note 13 to the
the settlement of the liability for at least
financial statements.
twelve months after the reporting period.
Investment property At fair value.
Consumable biological assets At fair value less cost to sell. The Group classifies all other liabilities
as non-current.
Inventories At valued as described in Note 3.2.11.1.
Liability for defined benefit obligations At present value of the defined benefit obligations 2.7 Materiality and aggregation
based on the actuarial valuation. Each material class of similar items is
Financial instruments at fair value At fair value. presented separately in the financial
statements. Items of dissimilar nature or
Available for sale financial assets At fair value. function are presented separately unless
Agricultural produce attached to bearer At fair value. they are immaterial as permitted by the
biological assets Sri Lanka Accounting Standard-LKAS 1
-‘Presentation of Financial Statements’.
No adjustments have been made for inflationary factors in the financial statements.
Financial assets and financial liabilities
are offset and the net amount reported
2.4 Functional and presentation currency
in the statement of financial position,
The consolidated financial statements are presented in Sri Lankan Rupees, the Group’s
only when there is a legally enforceable
functional and presentation currency, which is the primary economic environment in which
right to offset the recognized amounts
the holding company operates. Each entity in the Group uses the currency of the primary
and there is an intention to settle on
economic environment in which they operate as their functional currency.
a net basis, or to realize the assets
and settle the liability simultaneously.
44 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

Income and expenses are not offset in the income statement unless required or permitted The fair value for financial instruments
by any accounting standard or interpretation, and as specifically disclosed in the accounting traded in active markets at the reporting
policies. date is based on their quoted market
price or dealer price quotations, without
2.8 Use of judgments and estimates any deduction for transaction costs.
In preparing the financial statements in conformity with Sri Lanka Accounting Standards
(SLFRSs/LKASs), management has made judgments, estimates and assumptions that Level II : Inputs other than quoted
affect the application of the Group’s accounting policies and the reported amounts of assets, market prices included within Level I that
liabilities, income and expenses. are observable for the asset or liability,
either directly (i.e. as prices) or indirectly
Estimates and underlying assumptions are based on historical experience and various other (i.e. derived from prices).
factors that are believed to be reasonable under the circumstances. Hence, actual results
may differ from these judgments and assumptions. For all other financial instruments not
traded in an active market, the fair value
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to is determined by using appropriate
accounting estimates are recognized in the period in which the estimates are revised, if the valuation techniques. Valuation
revision affects only that period and any future periods affected. techniques include the discounted
cash flow method, comparison with
(a) Assumptions and estimation uncertainties similar instruments for which market
Information about the assumptions about the future and other major sources of estimation observable prices exist, options pricing
uncertainties that the management has made at the end of reporting period that have a models, credit models and other relevant
significant risk of resulting in a material adjustment to the carrying value of assets and valuation models.
liabilities within the next financial year is included in the following notes.
Level III : Inputs for the asset or liability
that are not based on observable market
Note 35.2 Measurement of defined benefit obligations: Key actuarial assumptions. data (unobservable inputs).

Certain financial and non-financial

instruments are recorded at fair
Note 10.3 Recognition of deferred tax assets: Availability of future taxable profit against
value using valuation techniques in
which carry-forward tax losses can be used.
which current market transactions
or observable market data are not
available. Their fair value is determined
Note 43 Recognition and measurement of provisions and contingencies: Key
using a valuation model that has been
assumptions about the likelihood and magnitude of an outflow of resources.
tested against prices or inputs to actual
market transactions and using the best
Note 18 Measurement of fair value of consumable biological assets. estimate of the most appropriate model
assumptions.
(b) Measurement of fair value
If the inputs used to measure the
A number of accounting policies and disclosures require the measurement of values, for both
fair value of an asset or a liability
financial and non-financial assets and liabilities.
fall into different levels of the fair
value hierarchy, then the fair value
The Group has an established control framework with respect to the measurement of fair measurement is categorized in its
values. This includes a responsible officer who has overall responsibility for overseeing all entirety in the same level of the fair
significant fair value measurements, including Level 3 fair values, and report direct to Chief value hierarchy as the lowest level
Financial Officer. The said officer regularly reviews significant unobservable inputs and input that is significant to the entire
valuation adjustments. measurement.

Significant valuation issues are referred to the Group’s Audit Committee. The Group recognizes transfers between
When measuring the fair value of an asset or a liability, the Group uses observable market levels of the fair value hierarchy at the
data as far as possible. Fair values are categorized into different levels in a fair value hierarchy end of the reporting period during which
based on the inputs used in the valuation techniques as follows. the change has occurred.

Fair Value Measurement Hierarchy Further information about the

Level I : Quoted market prices (unadjusted) in active markets for identical assets or liabilities assumptions made in measuring fair
that the Company can access at the measurement date. values is included in the following notes.
 Annual Report 2016-17 | Browns Capital PLC 45

2017 comprises the Company, and its If the business combination is achieved
Note 18 Consumable biological
subsidiaries. in stages, the acquisition date fair value
assets – Managed timber
of the acquirer’s previously held equity
plantations.
The Group accounts for business interest in the acquire is re measured to
Note 19 Agricultural produce on combinations using the acquisition fair value at the acquisition date through
bearer biological assets. method, when control is transferred to profit or loss.
Note 48 Financial instruments. the Group. Control is the power to govern
the financial and operating policies of an After the control of an entity is obtained,
2.9 Offsetting entity under a statute or an agreement, changes in ownership interest that
Financial assets and financial liabilities so as to obtain benefits from its do not result in a loss of control are
are offset and the net amount reported activities. accounted as equity transactions
in the statement of financial position, and gain or loss from these changes
only when there is a legally enforceable The consideration transferred in the are not recognized in statement of
right to offset the recognised amounts acquisition is measured at fair value. Any comprehensive income.
and there is an intention to settle on a goodwill that arises is tested annually
net basis or to realise the assets and for impairment. Any gain on bargain 3.1.2 Subsidiaries
settle the liabilities simultaneously. purchase is recognized in profit or loss Subsidiaries are entities controlled by
Income and expenses are not offset in immediately. Transaction costs are the Group. The Group (investor) has the
the income statement, unless required expensed as incurred and included in control over an entity (investee), when
or permitted by Sri Lanka Accounting administrative expenses, except if it is it is exposed, or has rights to, variable
Standards and as specifically disclosed related to the issue of debt or equity returns from its involvement with the
in the significant accounting policies. securities. investee and has the ability to affect
those returns through its power over the
2.10 Going concern The consideration transferred does not entity. Thus, the Group controls an entity,
The financial statements of the Group include amounts related to any pre- if and only if the Group meets all of the
have been prepared on the assumption existing relationships. Such amounts are following criteria.
that the Group is a going concern. generally recognized in profit or loss.
The Board of Directors has made an (a) Power over the entity
assessment of its ability to continue Any contingent consideration to Group has the power over the entity,
as a going concern and is satisfied be transferred by the acquirer will when the Group has existing rights that
that it has the resources to continue be recognized at fair value at the gives it the current ability to direct the
in business for the foreseeable future. acquisition date. If an obligation to pay relevant activities, i.e., the activities
Furthermore, management is not aware contingent consideration that meets that significantly affect the investee’s
of any material uncertainties that may the definition of a financial instrument returns.
cast significant doubt upon the Group’s is classified as equity, then it is not re-
ability to continue as a going concern. measured and settlement is accounted (b) Exposure, or rights, to variable returns
Therefore, the financial statements for within the equity. Otherwise, from its involvement with the entity
continue to be prepared on a going subsequent changes in the fair value of Group is exposed, or has rights to
concern basis. the contingent consideration which is variable returns from its involvement
deemed to be an asset or liability will be with the investee, when the investor’s
2.11 Comparative information recognized in profit and loss. return from its involvement has the
Previous period figures and notes have potential to vary as a result of investee’s
been restated and reclassified wherever For each business combination, the performance.
necessary to conform to the current Group elects whether it measures
year’s presentation. the non-controlling interest in the (c) The ability to use its power over the
acquire either at fair value or at the entity to affect the amount of the
3 Summary of significant accounting proportionate share of the acquirer’s Group’s returns
policies identifiable net assets. Group controls an entity, if the Group
The accounting policies set out below not only has power over the entity and
have been applied consistently to all When the Group acquires a business, exposure or rights to variable returns
periods presented in these consolidated it assesses the financial assets and from its involvement with the entity,
financial statements. The accounting liabilities assumed for appropriate but also has the ability to use its power
policies of the Group have been applied classification and designation in to affect the Group’s returns from its
consistently by the Group where accordance with the contractual terms, involvement with the entity.
applicable and deviations, if any, have economic circumstances and pertinent
been disclosed accordingly. conditions as at the acquisition Group considers all facts and
date. This includes the separation of circumstances when assessing whether
3.1 Basis of consolidation embedded derivatives in host contracts it controls an investee. The group
3.1.1 Business combinations and Goodwill by the acquire. reassess whether it controls an investee,
The Group’s financial statements as if facts and circumstances indicate that
at and for the year ended 31st March, there are changes to one or more of the
above three elements of control.
46 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

Where two or more investors collectively The Group applies a policy of treating 3.1.8 Transactions eliminated on
control an investee when they must act transactions with non-controlling consolidation
together to direct the relevant activities, interests as transactions with parties All intra-group balances, income and
no investor individually controls the external to the Group. expenses, unrealized gain and losses
investee. Because, no investor can direct resulting from intra-group transactions
the activities without the co-operation 3.1.4 Loss of control and dividends, are eliminated in full in
of the others and no investor individually The parent can lose control of a preparing the consolidated financial
controls the investee. Therefore, each subsidiary with or without a change in statements.
investor accounts for its interest in the absolute or relative ownership levels.
investee in accordance with the relevant When the Group loses control over a Unrealized gains arising from
SLFRS/LKAS such as SLFRS 11 - ‘Joint subsidiary, it derecognizes the assets transactions with equity-accounted
Arrangements’, LKAS 28 - ‘Investments and liabilities of the subsidiary, and any investees are eliminated against the
in Associates and Joint Ventures’ or related non-controlling interest (NCI) investment to the extent of the Group’s
SLFRS 9 - ‘Financial Instruments’. and other components of equity related interest in the investee. Unrealized
to the subsidiary. Any resulting gain or losses are eliminated in the same way as
The financial statements of subsidiaries loss is recognized in the statement of unrealized gains, but only to the extent
are included in the consolidated financial profit or loss. that there is no evidence of impairment.
statements from the date on which
control effectively commences, until the Any interest retained in the former 3.1.9 Interests in equity accounted investees
date that control effectively ceases. subsidiary is measured at fair value, (investments in associates)
when control is lost. Subsequently, it is The Group’s interests in equity-
The financial statements of the accounted for as an equity accounted accounted investees comprise interests
subsidiaries are prepared for the same investee or as an other financial asset in associates.
reporting period as the parent company, depending on the level of influence
which is 12 months ending 31stMarch, returned. Associates are those entities over which
using consistent accounting policies. the Group has significant influence, but
3.1.5 Profits and losses not control or joint control, over financial
3.1.2.1 List of subsidiaries The total profits and losses for the year and operating policies. Significance
List of material subsidiaries of the Group of the company and of its subsidiaries influence is the power to participate
are set out in note 1.6 (b) to the financial included in consolidation are shown in in the financial and operating policy
statements. the consolidated statement of profit or decisions of the investee but is not
loss and comprehensive income. control or joint control of those policies.
3.1.3 Non-controlling interests Significant influence is presumed to
Non-controlling interests (NCIs) are 3.1.6 Assets and liabilities exist when the Group holds directly or
measured at their proportionate share of All assets and liabilities of the Company indirectly, (e.g. through subsidiaries)
the acquiree’s identifiable net assets at and of its subsidiaries included between 20% and 50% of the voting
the date of acquisition. in consolidation are shown in the power of the investee.
statement of financial position.
Changes in the Group’s interest in a Associates are accounted for using
subsidiary that do not result in a loss of Non-controlling interest which the equity method and are initially
control of the subsidiary are accounted represents the portion of profit or loss recognized at cost.
for as equity transactions. and net assets not held by the Group,
are shown as a component of profit for The consolidated financial statements
Non-controlling interests which the year in the consolidated statement include the Group’s share of income
represents the portion of profit or loss of comprehensive income and as a and expenses and equity movements
and net assets not held by the Group, are component of equity in the consolidated of equity accounted investees, from
shown as a component of profit for the statement of financial position, the date that significant influence
year in the consolidated statement of separately from parent shareholders’ commences until the date of significant
profit or loss and other comprehensive equity. influence ceases.
income and as a component of equity in
the consolidated statement of financial The consolidated statement of cash flow When the Group’s share of losses
position, separately from parent includes the cash flows of the Company exceeds its investment in an equity-
shareholder’s equity. and its subsidiaries. accounted investee, the carrying amount
of that interest is reduced to nil and
The profit or loss and net assets of 3.1.7 Intra-group transactions the recognition of further losses is
a subsidiary attributable to equity Transfer prices between Group entities discontinued except to the extent that
interests that are not owned by the are set on an arms-length basis in a the Group has incurred obligations or
parent directly or indirectly through manner similar to transactions with third has made payments on behalf of the
subsidiaries, is disclosed separately parties. investee.
under the heading ‘Non-controlling
interests’ under equity in the statement
of financial position.
 Annual Report 2016-17 | Browns Capital PLC 47

The financial statements of the Carrying amount of the goodwill reporting date. Subsequent to the initial
associates are prepared for the same arising on acquisition of subsidiaries recognition of an asset at cost, revalued
reporting period as the Group. Where is presented as an intangible and the property, plant and equipment are
necessary, adjustments are made to goodwill on an acquisition of an equity carried at revalued amounts less any
bring the accounting policies in line with accounted investment is included in the subsequent accumulated depreciation
those of the Group. carrying value of the investment. thereon and accumulated impairment
in value, if any. All other property, plant
Upon loss of significant influence over 3.1.11 Gain on bargain purchase and equipment are stated at historical
the associates, the Group measures and If the Group’s interest in the net fair cost less accumulated depreciation and
recognizes any retaining investment at value of the identifiable assets, liabilities accumulated impairment losses, if any.
its fair value. Any difference between the and contingent liabilities exceeds the
carrying amount of the associate upon cost of the acquisition of the entity, the When an asset is revalued, any increase
loss of significant influence and the fair Group will reassess the measurement in the carrying amount is credited
value of the retaining investment and of the acquirer’s identifiable assets directly to a revaluation surplus unless it
proceeds from disposal is recognized and liabilities and the measurement of reverses a previous revaluation decrease
in the statement of comprehensive the cost and recognize the difference relating to the same asset which was
income. immediately in the consolidated previously recognized as an expense.
statement of profit or loss. In these circumstances, the increase is
3.1.10 Goodwill on acquisition recognized as income to the extent of
Goodwill represents the excess of the 3.2 Assets and bases of their valuation the previous written down value. When
cost of any acquisition of a subsidiary or 3.2.1 Property, plant and equipment asset’s carrying amount is decreased as
an associate over the Group’s interest (a) Basis of recognition a result of a revaluation, the decrease
in the net fair value of the identifiable Property, plant and equipment are is recognized as an expense unless it
assets, liabilities and contingent recognized, if it is probable that future reverses a previous increment relating
liabilities acquired. Goodwill arising on an economic benefits associated with the to that asset, in which case it is charged
acquisition of a non-controlling interest asset will flow to the Group and the cost against any related revaluation surplus,
in a subsidiary represents the excess of the asset can be reliably measured. to the extent that the decrease does
of the cost of the additional investment not exceed the amount held in the
over the carrying amount of the interest (b) Basis of measurement revaluation surplus in respect of that
in the net assets acquired at the date of Items of property, plant and equipment asset.
exchange. are stated at cost/revalued amount,
excluding the cost of day to day Any balance remaining in the revaluation
The Group tests the goodwill for servicing, less accumulated depreciation surplus in respect of an asset is
impairment annually and assesses and any accumulated impairment loss, if transferred directly to Retained Earnings
for any indication of impairment to any. on retirement or disposal of such asset.
ensure that its carrying amount does
not exceed the recoverable amount. Cost includes expenditure that is directly (c) Subsequent costs
If an impairment loss is identified, attributable to the acquisition of the When significant parts of plant and
it is recognized immediately to the asset. The cost of self-constructed equipment are required to be replaced
consolidated statement of profit or assets includes the cost of materials at intervals, the Group derecognizes
loss. For the purpose of impairment and direct labour, any other costs the replaced part, and recognizes the
testing, goodwill acquired in a business directly attributable to bringing the new part with its own associated useful
combination is, from the acquisition assets to a working condition for their life and depreciation. Likewise, when a
date, allocated to groups of cash- intended use, the costs of dismantling major inspection is performed, its cost is
generating units that are expected and removing the items and restoring recognized in the carrying amount of the
to benefit from the synergies of the the site at which they are located and plant and equipment as a replacement, if
combination. capitalized borrowing costs. the recognition criteria are satisfied. All
other repair and maintenance costs are
The impairment loss is allocated first The carrying values of property, plant recognized in the statement of profit or
to reduce the carrying amount of any and equipment are reviewed for loss and other comprehensive income,
goodwill allocated to the unit and then to impairment when events or changes in as incurred.
the other assets pro-rata to the carrying circumstances indicate that the carrying
amount of each asset in the unit. Where value may not be recoverable. (d) Depreciation
goodwill forms part of a cash-generating Depreciation is based on the cost of an
unit and part of the operation within Where items of property, plant and asset less its residual value. Significant
that unit is disposed of, the goodwill equipment are subsequently revalued, components of individual assets are
associated with the operation disposed the entire class of such asset is assessed and if a component has a
of is included in the carrying amount of revalued. Revaluations are made with useful life that is different from the
the operation when determining the gain sufficient intervals to ensure that remainder of that asset, that component
or loss on disposal of the operation. their carrying amounts do not differ is depreciated separately.
materially from their fair values at the
48 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

Depreciation is recognized in the statement of profit or loss and other comprehensive Depreciation methods, useful lives
income on a straight-line basis over the estimated useful lives of each part of an item of and residual values are reassessed
property, plant and equipment based on the cost or revalued amount of all property, plant at the reporting date and adjusted
and equipment other than freehold land. Assets held under finance leases are depreciated prospectively, if appropriate. Mature
over the shorter of the lease term and the useful lives of equivalent owned assets unless it plantations are depreciated over their
is reasonably certain that the group will have ownership by the end of the lease term. Lease useful lives or unexpired lease period,
period of land acquired from JEDB/SLSPC will be expired in year 2045. whichever is less.

The estimated useful lives of each class of asset of property, plant & equipment for the No depreciation is provided for immature
current and comparative periods are as follows. plantations.

Category No. of years range Rate range

Buildings 11 to 40 Years 5% to 9.09%
Plant and machinery 5 to 15 Years 6.66% to 20%
Motor vehicles 4 to 10 Years 10% to 25%
Equipment 8 to 20 Years 5% to 12.5%
Computers 4 to 8 Years 12.5% to 25%
Furniture and fittings 5 to 10 Years 10% to 20%
Ergonomic equipment 25 Years 4%
Other-power/electricity supply 13 1/3 Years 7.5%
Water sanitation and others 20 Years 5%
Roads and bridges 50 Years 2%
Penstock pipeline 11 to 20 Years 5% to 9.09%
Security fencing 03 Years 33.33%
Land development 50 Years 2%

The cost of areas coming into bearing are transferred to mature plantations and depreciated
as follows.

Bearer biological assets (mature plantations) at cost - replanting and new planting
Category No. of years range Rate range
Tea 30 to 33.33 Years 3 to 3.33%
Rubber 20 Years 5%
Coconut 50 Years 2%
Cinnamon 30Years 3.33%
Mixed/other crops 10 to 30 Years 3.33% to 10%

Depreciation of an asset begins when it is available for use and ceases at the earlier of the
date on which the asset is classified as held for sale or is derecognized.
 Annual Report 2016-17 | Browns Capital PLC 49

(e) Amortization c) Subsequent expenditure

The leasehold rights of assets taken over from JEDB/SLSPC are being amortized in equal Subsequent expenditure on intangible
amounts over the shorter of lease term and the expected useful life of the assets as follows. assets is capitalized only when it
increases the future economic benefits
embodied by these assets. All other
Category No. of years range Rate range expenditure is expensed when incurred.
Bare land 53 Years 1.89%
Mature plantations –tea 30 Years 3.33% d) De recognition
Intangible assets are de-recognized on
Other crops 15 Years 6.67% disposal or when no future economic
Buildings 25 Years 4% benefits are expected from its use. The
gain or loss arising from de-recognition
Machinery 15 Years 6.67% of intangible assets are measured as
Water and sanitation 15 to 20 Years 6.67% to 5% the difference between the net disposal
proceeds and the carrying amount of the
Other vested assets 15 to 30 Years 6.67% to 3.33% asset.
Permanent land development 53 Years 1.89%
e) Amortization
(f) Amortization of revaluation surplus Amortization is recognized in profit or
In compliance with the Sri Lanka Accounting Standards Application Guidance Abstract No.11 loss on a straight-line basis over the
of the Institute of Chartered Accountants of Sri Lanka, the valuation of the leasehold rights to estimated useful lives of intangible
the bare land was carried out by the professionally qualified value, Mr. K. Arthur Perera as at assets, other than goodwill, from the
31st December, 2005 and the excess over the book value as at the date of valuation has been date that they are available for use. The
treated as revaluation surplus. estimated useful life of each intangible
asset is as follows;
The difference between depreciation based on the revalued carrying amount of the bare land
and depreciation based on the original book value of the same is directly transferred from Licenses and permits 20 Years
revaluation surplus to the retained earnings in the statement of changes in equity over the
remaining leasehold period. Amortization methods, useful lives
and residual values are reviewed at
(g) Significant component of property, plant and equipment each reporting date and adjusted if
When parts of an item of property, plant and equipment have different useful life than the appropriate.
underlying assets, they are identified and accounted separately as major components of
property, plant and equipment and depreciated separately. 3.2.3 Biological assets
a) Basis of recognition
(h) De-recognition The entity recognizes the biological
An item of property, plant and equipment is de-recognized upon replacement, disposal or assets when, and only when, the entity
when no future economic benefits are expected from its use. Any gain or loss arising on de- controls the assets as a result of a
recognition of the asset is included in the statement of profit or loss and other comprehensive past event, it is probable that future
income in the year the asset is de-recognized. economic benefits associated with the
assets will flow to the entity and the
3.2.2 Intangible assets fair value or cost of the assets can be
a) Basis of recognition measured reliably.
An Intangible Asset is recognized if it is probable that future economic benefits that are
attributable to the assets will flow to the entity and the cost of the assets can be measured b) Basis of classification
reliably. Biological assets are classified into
mature biological assets and immature
b) Basis of measurement biological assets. Mature biological
Intangible assets acquired separately are measured as initial recognition at cost. Following assets are those that have attained
initial recognition intangible assets are carried at cost less any accumulated amortization harvestable specifications or are able
and any accumulated impairment losses. The useful life of intangible assets is assessed to to sustain regular harvests. Immature
be either finite or indefinite. Intangible assets with finite useful life are amortized over the biological assets are those that have not
useful economic life and assessed for impairment whenever there is an indication that the yet attained harvestable specifications.
intangible asset may be impaired. The amortization period and the method for an intangible Tea, rubber, coconut, other plantations
asset with a finite useful life is reviewed at least at each financial year end. Intangible assets and nurseries are classified as biological
with indefinite useful lives are tested for impairment annually either individually or at the cash assets.
generating unit level.
50 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

The cost of land preparation, (a) Immature and mature plantations In order to ascertain the fair value of
rehabilitation, new planting, replanting, The cost of replanting and new planting produce growing on trees 50% of the
crop diversification, inter-planting and are classified as immature plantations estimated crop in that harvesting cycle
fertilizing, etc., incurred between the up to the time of being ready for is used for the valuation as follows.
time of planting and harvesting (when harvesting.
the planted area attains maturity), are • Tea – 3 days crop (50% of 6 days
classified as immature plantations. Cycle)
Further, the general charges incurred
These immature plantations are on the plantation are apportioned based • Rubber 1 day Crop (50% of 2 days
shown at direct costs plus attributable on the worker days spent on respective Cycle)
overheads, including interest replanting and new planting areas and
attributable to long-term loans used capitalized on the immature areas. The • Coconut 1 months (50% of 2 months
for financing immature plantations. The remaining portion of the general charges Cycle)
expenditure incurred on bearer biological is expensed in the accounting period in
assets (tea, rubber and coconut fields) which it is incurred. For the valuation of the produce it was
which comes into bearing during agreed to use the farm gate price of the
the year, is transferred to mature The cost of areas coming into bearing is produce adjusted for the cost of harvest.
plantations. transferred to mature plantations at end Hence market value on the crop in the
of the financial year. bush should be based on the selling
Biological assets are further classified as value of agricultural produce adjusted
bearer biological assets and consumable for the cost of harvesting and transport.
(b) Infilling Costs on Bearer biological
biological assets. assets
The land development costs incurred • Tea – Bought Leaf rate (current month)
Expenditure incurred on consumable in the form of infilling have been less cost of harvesting & transport
biological assets is recorded at cost capitalized to the relevant mature field, • Rubber – latex Price (95% of current
at initial recognition and thereafter at only where the number of plants per RSS1 Price) less cost of tapping &
fair value at the end of each reporting hectare exceeded 3,000 plants and, transport
period. also if it increases the expected future
benefits from that field, beyond its Further it was not considered the risk
Bearer biological assets include tea, pre-infilling standard of performance adjustments for weather and other
rubber and coconut plants, those that assessment. Infilling costs so capitalized factors of the plant in to biological
are not intended to be sold or harvested, are depreciated over the newly assessed transformation in the valuation.
however used to grow for harvesting remaining useful life of the relevant
agricultural produce. Consumable mature plantation or the unexpired lease 3.2.3.3 Consumable biological assets -
biological assets include managed period, whichever is lower. managed timber plantations
timber trees those that are to be Consumable biological assets include
harvested as agricultural produce from Infilling cost that are not capitalized managed timber trees that are to be
biological assets or sold as biological have been charged to the Profit or loss harvested as agricultural produce or sold
assets. for the year in which they are incurred. as biological assets.

3.2.3.1 Bearer biological assets (c) Growing crop nurseries The managed timber trees of the Group
The cost of land preparation, Nursery cost includes the cost of are measured on initial recognition and
rehabilitation, new planting, replanting, direct materials, direct labour and at the end of each reporting period at
crop diversification, inter-planting and an appropriate proportion of directly its fair value less cost to sell in terms
fertilizing, etc., incurred between the attributable overheads. of LKAS 41. The cost of young plants
time of planting and harvesting (when which are below four years is treated
the planted area attains maturity), are 3.2.3.2 Agricultural produce attached to Bearer as approximation to fair value as the
classified as immature plantations. biological assets impact on biological transformation of
These immature plantations are The fair value of produce growing on such plants to price during the period
shown at direct costs plus attributable trees prior to year end is classified as is immaterial. All assumptions and
overheads, including interest agricultural produce attached to bearer sensitivity analysis are given in note 18.
attributable to long-term loans used biological assets. Such agricultural
for financing immature plantations. produce prior to harvest continues to be Nursery cost includes the cost of
The expenditure incurred on bearer in the scope of LKAS 41 and measured at direct materials, direct labour and
plants (Tea, Rubber and Coconut fields), fair value less cost to sell. an appropriate proportion of directly
which come into bearing during the attributable overheads, less provision for
year, has been transferred to mature overgrown plants.
When deriving the estimated quantity,
bearer biological assets and depreciated
the company limits to one harvesting
over their useful life in accordance The gain or loss arising on initial
cycle and the quantity is ascertained
with the LKAS16 – Property, Plant and recognition of biological assets at fair
based on last day of harvest in the
Equipment. value less cost to sell and from a change
immediately preceding cycle.
in fair value less cost to sell of biological
assets are included in the Statement of
 Annual Report 2016-17 | Browns Capital PLC 51

profit or loss and other comprehensive amount equal to the lower of its fair greater of its value in use and its fair
Income for the period in which it arises. value and the present value of minimum value less costs to sell. Where the
lease payments. Subsequent to initial carrying amount of an asset exceeds
3.2.4 Borrowing costs recognition, the asset is accounted its recoverable amount, the asset is
Borrowing costs that are directly for in accordance with the accounting considered impaired and is written down
attributable to the acquisition, policy applicable to that asset. The to its recoverable amount. In assessing
construction or production of a corresponding principal amount payable value in use, the estimated future cash
qualifying asset, which takes a to the lesser is shown as a liability. flows are discounted to their present
substantial period of time to get value using a pre-tax discount rate that
ready for its intended use or sale, are The finance charges allocated to future reflects current market assessments
capitalized as a part of the asset. periods are separately disclosed in the of the time value of money and the risk
financial statements. specific to the asset. These calculations
Borrowing costs that are not capitalized are collaborated by valuation multiples,
are recognized as expenses in the period The interest element of the rental quoted share prices or other available
in which they are incurred and charged obligation applicable to each financial fair value indicators. A cash generating
to the Statement of profit or loss. year is charged to the statement of unit is the smallest identifiable asset
profit or loss and other comprehensive group that generates cash flows that are
income over the period of the lease so largely independent from other assets
The amounts of the borrowing costs
as to produce a constant periodic rate of and groups.
which are eligible for capitalization are
determined in accordance with LKAS 23 interest on the remaining balance of the
- ‘Borrowing Costs’. liability for each period. An impairment loss is recognized if
the carrying amount of an asset or
The cost of improvements to or on CGU exceeds its recoverable amount.
Borrowing costs incurred in respect
leased property is capitalized, and Impairment losses of continuing
of specific loans that are utilized for
depreciated over the unexpired period of operations are recognized in the
field development activities have been
the lease or the estimated useful lives of statement of profit or loss in those
capitalized as a part of the cost of
the improvements, whichever is shorter. expense categories consistent with
the relevant immature plantation. The
the function of the impaired asset,
capitalization will cease when the crops
except for property previously revalued
are ready for commercial harvesting. (b) Operating leases
where the revaluation was taken to
Leases where the lesser effectively
other comprehensive income (OCI).
The amount so capitalized and the retains substantially all the risks and
In this case, the impairment is also
capitalization rates are disclosed in the benefits of ownership over the leased
recognized in OCI up to the amount of
notes to the financial statements. term are classified as operating leases.
any previous revaluation. Impairment
losses recognized in respect of CGU are
3.2.5 Permanent land development costs Payments under operating leases are allocated first to reduce the carrying
Permanent land development costs are recognised as an expense in the income amount of any goodwill allocated to the
those costs incurred making significant statement on a straight-line basis over CGU and then to reduce the carrying
infrastructure development and building the term of the lease or any other basis amount of the Group of other assets in
new access roads on leasehold lands. more representative of the time pattern the CGU on pro rata basis.
of the benefits derived from the lease.
These costs have been capitalized and Impairment losses recognized in prior
amortized over the remaining lease 3.2.7 Impairment/reversal of impairment of periods are assessed at each reporting
period. non-financial assets date for any indications that the loss
The Group assesses at each reporting has decreased or no longer exists. A
Permanent impairments to land date whether there is an indication previously recognized impairment loss
development costs are charged to the that an asset may be impaired. If any is reversed, only if there has been a
statement of profit or loss and other such indication exists, or when annual change to determine the recoverable
comprehensive income in full or reduced impairment testing for an asset is amount of asset or CGU. An impairment
to the net carrying amounts of such required, the Group makes an estimate loss is reversed only to the extent that
assets in the year of occurrence after of the assets recoverable amount. For the asset’s or CGU’s carrying amount
ascertaining the loss. goodwill and intangible assets that does not exceed its carrying amount
have indefinite lives or that are not yet that would have been determined, net
available for use, recoverable amounts of depreciation or amortization, had no
3.2.6 Accounting for leased assets where the
are estimated at each reporting date or impairment loss has been recognized
Group is the lessee
more frequently, if events or changes in for the asset or CGU in previous years.
(a) Finance leases
circumstances indicate that they might Such reversal is recognized in the
Leases in terms of which the Group
be impaired. statement of profit or loss, unless the
assumes substantially all the risks and
rewards of ownership are classified as
finance leases. On initial recognition, The recoverable amount of an asset
the leased assets under property, plant or cash generating unit (CGU) is the
and equipment, is measured at an
52 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

asset or CGU is carried at revalued for-sale (AFS) financial assets, as into account any discount or premium
amount, in which case, the reversal is appropriate. The Group determines the on acquisition and fees or costs that are
treated as a revaluation increase. After classification of its financial assets at an integral part of the EIR.
such a reversal, depreciation charge is initial recognition.
adjusted in future periods to allocate the Loans and receivables of the Group
asset’s revised carrying amount, less All financial assets are recognized comprise of trade receivables, loans
any residual value, on a systematic basis initially at fair value plus, in the case of to related parties, amounts due from
over its remaining useful life. financial assets not at fair value through related parties, other receivables and
profit or loss, transaction costs that are other financial assets.
3.2.8 Capital work–in–progress directly attributable to the acquisition or
The cost of capital work-in-progress issue of such financial assets. (c) Available-for-sale financial assets
is the cost of purchase or construction Available-for-sale financial investments
together with any related expenses Purchases or sales of financial assets include equity investments and debt
thereon. that require delivery of assets within a securities. Equity investments classified
time frame established by regulation or as available for sale are those that are
Capital work–in-progress is transferred convention in the marketplace (regular neither classified as held for trading nor
to the respective asset accounts at the way trades) are recognized on the designated at fair value through profit or
time of first utilization or at the time the trade date, i.e., the date that the Group loss. Debt securities in this category are
asset is commissioned. commits to purchase or sell the asset. those that are intended to be held for an
indefinite period of time and that may
3.2.9 Investments The Group’s financial assets include be sold in response to needs for liquidity
In the Company’s separate financial cash and short-term deposits, trade or in response to changes in the market
statement, investments in subsidiaries and other receivables, loans and other conditions.
and associates are stated at cost less receivables.
accumulated impairment losses. Where After initial measurement, available-
an indication of impairment exists, the 3.2.10.2.2 Subsequent measurement for-sale financial investments are
carrying amount of the investment is The subsequent measurement of subsequently measured at fair value with
assessed and written down immediately financial assets depends on their unrealized gains or losses recognized
to its recoverable amount. classification as described below. as other comprehensive income in
the available-for sale reserve until the
3.2.10 Financial instruments (a) Financial assets at fair value through investment is derecognized, at which
3.2.10.1 Derivative financial assets profit or loss time the cumulative gain or loss is
3.2.10.1.1 Initial recognition and subsequent Financial assets at fair value through recognized in other operating income,
measurement profit or loss include financial assets or the investment is determined to be
The Group uses derivative financial held-for-trading and financial assets impaired, when the cumulative loss is
instruments such as forward currency designated upon initial recognition at reclassified from the available-for- sale
contracts to hedge the its foreign fair value through profit or loss. Financial reserve to the income statement in
currency risks. Derivative financial assets are classified as held-for-trading finance costs. Interest earned whilst
instruments are initially recognised if they are acquired for the purpose holding available-for-sale financial
at fair value on the date on which a of selling or repurchasing in the near investments is reported as interest
derivative contract is entered into and term. Financial assets at fair value income using the EIR method.
are subsequently re-measured at fair through profit and loss are carried in
value. Derivatives are carried as financial the statement of financial position at Subsequent to initial recognition, these
assets when the fair value is positive and fair value with net changes in fair value are measured at fair value and changes
as financial liabilities when the fair value presented as finance income or finance therein, other than impairment losses
is negative. costs in the statement of profit or loss. are recognized in other comprehensive
income and presented within the equity.
Any gains or losses arising from changes The Group has not designated any When an investment is derecognized,
in the fair value of derivatives are taken financial assets as at fair value through the cumulative gain or loss in other
directly to the statement of profit or profit or loss. comprehensive income is transferred to
loss. profit or loss.
(b) Loans and receivables
3.2.10.2 Non-derivative financial assets Loans and receivables are non- The Group evaluates whether the ability
3.2.10.2.1 Initial recognition and measurement derivative financial assets with fixed or and intention to sell its available-
Financial assets within the scope of determinable payments that are not for-sale financial assets in the near
LKAS 39 - ‘Financial Instruments: quoted in an active market. After initial term is still appropriate. When, in rare
Recognition and Measurement’ are measurement, such financial assets are circumstances, the Group is unable
classified as financial assets at fair value subsequently measured at amortized to trade these financial assets due to
through profit or loss (FVTPL), loans cost using the effective interest inactive markets and management’s
and receivables (L&R) and available- rate (EIR) method, less impairment. intention to do so significantly changes
Amortized cost is calculated by taking in the foreseeable future, the Group may
elect to reclassify these financial assets.
 Annual Report 2016-17 | Browns Capital PLC 53

Reclassification to loans and receivables all of the risks and rewards of the asset will enter bankruptcy or other financial
is permitted when the financial assets nor transferred control of it, the asset is reorganization and where observable
meet the definition of loans and recognized to the extent of the Group’s data indicate that there is a measurable
receivables and the Group has the intent continuing involvement in it. decrease in the estimated future cash
and ability to hold these assets for the flows, such as changes in arrears or
foreseeable future or until maturity. In that case, the Group also recognizes economic conditions that correlate with
Reclassification to the held to maturity an associated liability. The transferred defaults.
category is permitted only when the asset and the associated liability are
entity has the ability and intention to measured on a basis that reflects the (a) Financial assets carried at amortized
hold the financial asset accordingly. rights and obligations that the Group has cost
retained. Impairment losses on financial assets
For a financial asset reclassified from carried at amortized cost are measured
the available-for-sale category, the Continuing involvement that takes the as the difference between the carrying
fair value carrying amount at the date form of a guarantee over the transferred amount of the financial asset and the
of reclassification becomes its new asset is measured at the lower of present value of estimated future cash
amortized cost and any previous gain the original carrying amount of the flows discounted at the asset’s original
or loss on the asset that has been asset and the maximum amount of effective interest rate.
recognized inequity is amortized to consideration that the Group could be
profit or loss over the remaining life required to repay. Impairment losses are recognized in
of the investment using the EIR. Any the statement of profit or loss. When a
difference between the new amortized Any interest in transferred financial subsequent event causes the amount
cost and the maturity amount is also assets that qualify for de-recognition of impairment loss to decrease, the
amortized over the remaining life of that is created or retained by the Group decrease in impairment loss is reversed
the asset using the EIR. If the assets is recognized as a separate asset or through the statement of profit or loss.
subsequently determined to be impaired, liability in the statement of financial
then the amount recorded in equity is position. On de-recognition of a financial (b) Available-for-sale financial investments
reclassified to the statement of profit or asset, the difference between the Impairment losses on available-for-sale
loss. carrying amount of the asset (or the investment securities are recognized by
carrying amount allocated to the portion transferring the cumulative loss that has
3.2.10.2.3 De recognition of financial assets of the asset transferred), and the sum of been recognized in other comprehensive
A financial asset (or, where applicable (i) the consideration received (including income (OCI) to the statement of profit
apart of a financial asset or part of a any new asset obtained less any new or loss as a reclassification adjustment.
group of similar financial assets) is liability assumed) and (ii) any cumulative
derecognized when: gain or loss that had been recognized The cumulative loss that is reclassified
in other comprehensive income is from other comprehensive income (OCI)
• The rights to receive cash flows from recognized in profit or loss. to the statement of profit or loss is the
the asset have expired. difference between the acquisition costs,
• The Group has transferred its right 3.2.10.2.4 Impairment of financial assets net of any principal repayment and
to receive cash flows from the asset The Group assesses at each reporting amortization, and the current fair value,
or has assumed an obligation to pay date whether there is any objective less any impairment loss previously
the received cash flows in full without evidence that financial asset or a recognized in the statement of profit or
material delay to a third party under group of financial assets is impaired. A loss. Changes in impairment provisions
‘pass-through’ arrangement; and financial asset or a group of financial attributable to time value are reflected
either; assets is deemed to be impaired if, and as a component of interest income.
only if, there is objective evidence of Any subsequent recovery in the fair
impairment as a result of one or more value of an impaired available-for-sale
a) The Group has transferred substantially events that has occurred after the initial equity security is recognized in other
all the risks and re wards of the asset, or recognition of the asset (an incurred comprehensive income (OCI).
‘loss event’) and that loss event has an
b) The Group has neither transferred nor impact on the estimated future cash 3.2.10.3 Non-derivative financial liabilities
retained substantially all the risks and flows of the financial asset or the Group 3.2.10.3.1 Initial recognition
rewards of the asset, but has transferred of financial assets that can be reliably Financial liabilities within the scope
control of the asset. estimated. of LKAS 39 are classified as financial
liabilities at fair value through profit
When the Group has transferred its Evidence of impairment may include or loss and loans and borrowings, as
rights to receive cash flows from an indications that the debtors or a appropriate. The Group determines the
asset or has entered into a pass- group of debtors is experiencing classification of its financial liabilities at
through arrangement, and has neither significant financial difficulty, default initial recognition.
transferred nor retained substantially or delinquency in interest or principal
payments, the probability that they
54 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

All financial liabilities are recognized 3.2.10.3.3 De-recognition of financial liabilities 3.2.10.6 Amortized cost of financial
initially at fair value and, in the case A financial liability is derecognized instruments
of loans and borrowings, carried at when the obligation under the liability is The amortized cost of a financial
amortized cost. This includes directly discharged or cancelled or expires. asset or liability is the amount at
attributable transaction costs. which the financial asset or liability is
When an existing financial liability is measured at initial recognition, minus
The Group’s financial liabilities include replaced by another from the same principal repayments, plus or minus
trade and other payables, amounts due lender on substantially different terms, the cumulative amortization using
to related parties, loans from related or the terms of an existing liability the effective interest method of any
parties, loans and borrowings and bank are substantially modified, such an difference between the initial amount
overdrafts. exchange or modification is treated as recognized and the maturity amount,
the de-recognition of the original liability minus any reduction for impairment.
3.2.10.3.2 Subsequent measurement and the recognition of a new liability.
The measurement of financial liabilities The difference in the respective carrying 3.2.11 Current assets
depends on their classification as amounts is recognized in the statement Assets classified as current assets in the
follows. of profit or loss. statement of financial position are those
expected to realize during the normal
(a) Financial liabilities at fair value through 3.2.10.4 Offsetting of financial instruments operating cycle of business or within one
profit or loss Financial assets and liabilities are offset year from the reporting date, whichever
Financial liabilities at fair value through and the net amount presented in the is longer and cash balances. Assets
profit or loss include financial liabilities statement of financial position when, other than current assets are those
held-for-trading and financial liabilities and only when, the Group has a legal which the Group intends to hold beyond
designated upon initial recognition as at right to offset the amounts and intends the one year period from the reporting
fair value through profit or loss. Financial either to settle on a net basis or to date.
liabilities are classified as held-for- realize the asset and settle the liability
trading, if they are acquired for the simultaneously. 3.2.11.1 Inventories
purpose of selling in the near term. Gains Inventories are measured at the lower of
or losses on liabilities held for trading 3.2.10.5 Fair value of financial instruments cost and net realizable value.
are recognized in the statement of profit The fair value of financial instruments
or loss. that are traded in active markets at The cost of inventories includes
each reporting date is determined by expenditure incurred in acquiring the
The Group has not designated reference to quoted market prices or inventories, production or conversion
any financial liabilities upon initial dealer price quotations (bid price for costs and other costs incurred in
recognition as at fair value through long positions and ask price for short bringing them to their existing location
profit or loss. positions), without any deduction for and condition.
transaction costs. A market is regarded
(b) Loans and borrowings as active if quoted prices are readily In the case of manufactured inventories
After initial recognition, interest bearing and regularly available and represent and work in progress, cost includes
loans and borrowings are subsequently actual and regularly occurring market an appropriate share of production
measured at amortized cost using the transactions on an arm’s length basis. overheads based on normal operating
effective interest rate (EIR) method. capacity. Net realizable value is the
Gains and losses are recognized in For financial instruments not traded estimated selling price in the ordinary
the statement of profit or loss when in an active market, the fair value is course of business, less the estimated
the liabilities are derecognized as well determined using appropriate valuation costs of completion and selling
as through the effective interest rate techniques. Such techniques may expenses.
method (EIR) amortization process. include:
The cost incurred in bringing inventories
Amortized cost is calculated by taking • Using recent arm’s length market to its present location and condition
into account any discount or premium transactions is accounted using the following cost
on acquisition and fees or costs that formula:
• Reference to the current fair value
are an integral part of the EIR. The EIR of another instrument that is
amortization is included in finance costs substantially the same (a) Finished goods manufactured from
in the statement of profit or loss. agricultural produce of biological
• A discounted cash flow analysis or assets.
Other financial liabilities comprise other valuation models These are valued at the lower of cost
interest bearing loans and borrowings, and estimated net realizable value, after
trade payables, other payables, amounts An analysis of fair values of financial making due allowance for obsolete and
due to related parties, loans from related instruments and further details as to
parties and bank overdrafts. how they are measured are provided in
notes 48 and 3.2.10 respectively.
 Annual Report 2016-17 | Browns Capital PLC 55

slow moving items. Net realizable value course of business. If collection is 3.2.13 Provisions and liabilities
is the estimated selling price at which expected in one year or less (or in the (a) Provisions
inventories can be sold in the ordinary normal operating cycle of the business Provisions are recognized when the
course of business after allowing cost if longer), they are classified as current Group has a present legal or constructive
of realization and/or cost of conversion assets. If not, they are presented as obligation as a result of past events
from their existing state to saleable non-current assets. when it is more probable that an outflow
condition. of resources will be required to settle the
Trade and other receivables are stated obligation and when a reliable estimate
(b) Input materials, spares and at the amounts they are estimated to of the amount can be made. Provisions
consumables realize, net of provisions for bad and are not recognized for future operating
At actual cost using weighted average doubtful receivables. A provision for losses.
cost formula. doubtful debts is made where as there
is objective evidence that the Group Where there are number of similar
(c) Agricultural produce harvested from will not be able to recover all amounts obligations, the likelihood that an
biological assets due according to the original terms of outflow will be required in settlement
Agricultural produce represent the tea receivable. Bad debts are written-off is determined by considering the class
leaves, latex and coconut harvested when identified. of obligations as a whole. A provision is
at the reporting date and which were recognized, even if the likelihood of an
not further processed at the end of the 3.2.11.3 Cash and cash equivalents outflow with respect to any one item
reporting period. Agricultural produce Cash and cash equivalents are defined included in the same class of obligations
harvested from its biological assets are as cash in hand, demand deposits and may be small.
measured at their fair value less cost to short term highly liquid investments
sell at the point of harvest. readily convertible to known amounts of Provisions for asset retirement
cash and subject to insignificant risk of obligations are measured at the present
The finished and semi-finished changes in value. value of the expenditures expected to be
inventories from agricultural produce are required to settle the obligation using a
valued by adding the cost of conversion For the purpose of cash flow statement, pre-tax rate that reflects current market
to the fair value of agricultural produce. cash and cash equivalents consists of assessments of the time value of money
The policy for valuation is adopted based cash in hand and deposits in banks net and the risks specific to the obligation.
on the LKAS 41 – ‘Agriculture’. of outstanding bank overdrafts that The increase in the provision due to
are repayable on demand and form passage of time is recognized as finance
(d) Certified emission reduction (CER) an integral part of the Group’s cash cost.
Carbon credit units as at the reporting management.
date have been valued at their estimated (b) Liabilities
net realizable value as inventories and 3.2.12 Stated capital Liabilities classified as current liabilities
disclosed in the financial statements as (a) Classification on the statement of financial position
certified emission reduction (CER). Ordinary shares with discretionary are those which fall due for payment
dividends are classified as equity. Other on demand or within one year from
CER represents units of greenhouse shares are classified as equity or liability the statement of financial position
gas reduction that has been generated according to the economic substance of date. Non-current liabilities are those
certified by the United Nations under the the particular instrument. Distribution balances that fall due for payment after
Cleaned Development Mechanism (CDM) to holders of a financial instrument one year from the statement of financial
provision of the Kyoto Protocol. These classified as an equity instrument is position date.
CERs can be traded and sold and used by charged directly to equity.
industrialized countries to meet part of All known liabilities have been accounted
their emission reduction targets. (b) Share issue expenses for in preparing these financial
Incremental costs directly attributable statements.
According to the ruling issued by to the issuance of new shares, net of
Sri Lanka Accounting and Auditing any tax effect, are shown in equity as a Provisions and liabilities are recognized
Standards Monitoring Board (SLAASMB), deduction. when the Group has a legal or
CER units have been recognized as an constructive obligation as a result of
asset and disclosed under inventories. (c) Dividend to shareholders of the past events and it is probable that an
These inventories have been measured company outflow of economic benefits will be
at net realizable value (NRV) and any Dividend distribution to the Company’s required to settle the obligation.
changes in value as at reporting date is shareholders is recognized as a liability
recognized in the profit or loss. in the company’s financial statements 3.2.14 Retirement benefit obligations
in the period in which the dividends (a) Defined contribution plans – EPF, ETF,
3.2.11.2 Trade and other receivables are approved by the company’s CPPS and ESPS
Trade receivables are amounts due shareholders. A defined contributed plan is a post-
from customers for merchandise sold employment benefit plan under which
or services performed in the ordinary an entity pays fixed contributed into a
56 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

separate entity and will have no legal or When the benefits of a plan are A contingent asset is a possible asset
constructive obligation to pay further improved, the portion of the increased that arises from past events whose
amounts. Obligations for contributions benefit related to past service by existence will be confirmed by uncertain
to Provident and Trust Funds covering employees is recognized in profit or loss future events beyond the control of the
all employees are recognized as an on a straight-line basis over the average Group. The Group does not recognize
expense in profit and loss in the period period until the benefits become vested. a contingent asset but discloses its
during which services are rendered by To the extent that the benefits vest existence, where inflows of economic
employees. immediately, the expense is recognized benefits are probable, but not virtually
immediately in profit or loss. certain.
The Companies within the Group
contribute 12% on consolidated The Group recognizes all actuarial gains 3.2.16 Deferred income
salaries/wages of the employees to and losses arising from the defined (a) Government grants and subsidies
Ceylon Plantation Provident Society benefit plan in other Comprehensive Government grants are recognized
(CPPS)/Estate Staff Provident Society income (OCI). where there is reasonable assurance
(ESPS)/Employees Provident Fund that the grant will be received and all
(EPF). This retirement benefit obligation is not attached conditions will be compiled
externally funded. with. When the grant relates to an
All the employees of the Group are expense item, it is recognized as income
members of the Employees Trust Fund (c) Short term employee benefits over the period necessary to match
(ETF), to which the Companies within the Wages, salaries, paid annual leave and the grant on a systematic basis to the
Group contribute 3% on the consolidated sick leave, bonuses and non-monetary costs that it is intended to compensate.
salaries/wages of such employees. benefits are accrued in the period in Where the grant relates to an asset, it
which the associated services are is recognized as deferred income and
(b) Defined benefits plans - Gratuity rendered by employees of the Company released to income in equal amounts
A defined benefit plan is a post- and the Group. over the expected useful life of the
employment benefit plan other than a related asset.
defined contribution plan. The liability (d) Termination benefits
recognized in the financial statements Termination benefits are payable Where the Group receives non-monitory
in respect of defined benefit plan is the whenever an employee’s service grants, the asset and the grant are
present value of the defined benefit is terminated before the normal recorded gross at nominal amounts and
obligation at the reporting date. The retirement date or whenever an released to the statement of profit or
present value of the defined benefit employee accepts voluntary redundancy loss over the expected useful life and
obligation is determined by discounting in exchange for these benefits. The pattern of consumption of the benefit
the estimated future cash flows using Group recognizes termination benefits of the underlying asset by equal annual
the interest rates that are denominated when it is demonstrably committed installments.
in the currency in which the benefits will to either terminate the employment
be paid, and that have terms to maturity of current employees according to a Where loans or similar assistance are
approximating to the terms of the detailed formal plan without possibility provided by governments or related
related liability. of withdrawal or to provide termination institutions with an interest rate below
benefits as a result of an offer made to the current applicable market rate,
The calculation is performed maximum encourage voluntary redundancy. the effect of this favourable interest
of every year by a qualified actuary is regarded as additional government
using the projected unit credit (PUC) 3.2.15 Contingent liabilities and contingent grant.
method as recommended by LKAS 19 - assets
‘Employee Benefits’. The Group does not recognize a Grants related to property, plant and
contingent liability but disclose its equipment other than grants received
Provision has been made for retirement existence in the financial statements. for biological assets are initially deferred
gratuities from the first year of service A contingent liability is a possible and allocated to the statement of profit
for all employees, in conformity with obligation that arises from past events or loss on a systematic basis over the
LKAS 19 – ‘Employee Benefits’. However, whose existence will be confirmed useful life of the related property, plant
under the Payment of Gratuity Act No.12 by uncertain future events beyond and equipment.
of 1983, the liability to an employee the control of the Group or a present
arises only on completion of five years of obligation that is not recognized Government grant related to the
continued service. because it is not probable that an consumable biological assets if any
outflow of resources will be required which are measured at fair value less
The key assumptions used by the to settle the obligation. A contingent point of sale cost is directly charged
actuary in determining the retirement liability also arises in the extremely rare to the carrying value of such assets in
benefit obligations are disclosed in Note circumstance where there is a liability accordance with the applicable financial
35 to the financial statements. that cannot be recognized because it framework.
cannot be measured reliably.
 Annual Report 2016-17 | Browns Capital PLC 57

(b) PHDT lease rentals Interest, dividends, losses and gains income on impaired loan and receivables
Premises at St.Andrew’s Drive in Nuwara relating to a financial instrument, or a are recognized using the original
Eliya has been leased out to Plantation component part, classified as a liability effective interest rate.
Human Development Trust (PHDT) for is reported within finance cost in the
a period of 20 years commencing from statement of profit or loss. (b).2 Guarantee fee income
August 2005 at a total lease rental of Guarantee fee income represents the
Rs.10,734,696/=. Preference shares, which are fee income from companies within the
mandatorily redeemable on a specific Group for granting corporate guarantees
Lease rentals received are deferred date, are classified as liabilities. The on behalf of group companies to the
and amortized over the lease period dividends on these preference shares financial institutions from which group
commenced from August 2005. are recognized in the statement of profit companies obtain financial assistances
or loss as finance cost. and are accounted on accrual basis.
(c) Rain Forest Eco Loge (Private) Limited
(RFELPL) Borrowings are classified as current (b).3 Gain and losses on disposal of property,
Value of 6,399,375 ordinary shares liabilities unless the Group has an plant and equipment
received by Maturata Plantations Ltd., unconditional right to defer settlement Net gains and losses of a revenue
which is equivalent to 14.5% of the of the liability for at least twelve (12) nature on the disposal of property, plant
issued ordinary shares of RFELPL at months after the date of statement of & equipment and other non-current
Rs.10/= each in lieu of releasing the financial position. assets including investments have been
Group’s right to use the leasehold land accounted for in the statement of profit
of 488 Hectares in Enselwatte, Deniyaya 3.3 Statement of profit or loss or loss within ‘other operating income’,
to RFEPL for Eco Tourism Projects For the purpose of presentation of the having deducted from proceeds on
deferred and amortized as income to statement of profit or loss, the Directors disposal, the carrying amount of the
the statement of profit or loss over the are of the opinion that function of assets and related selling expenses.
unexpired balance lease period. expenses method presents fairly the
elements of the Group’s performance On disposal of revalued property, plant
(d) Profit on sale and lease back and hence such presentation method is and equipment, amount remaining in
transactions adopted. revaluation reserve relating to that asset
If a sale and lease back transaction is transferred directly to retained profit/
results in a finance lease, any excess of 3.3.1 Revenue recognition (loss).
sales proceeds over the carrying amount Revenue is recognized to the extent that
of the asset sold and leased back is it is probable that the economic benefits Gains and losses arising from incidental
deferred and amortized over the lease will flow to the Group and the revenue activities to main revenue generating
term. and associated costs incurred or to activities and those arising from a group
be incurred can be reliably measured. of similar transactions which are not
3.2.17 Trade and other payables Revenue is measured at the fair value of material, are aggregated, reported and
Trade and other payables are obligations the consideration received or receivable, presented on a net basis.
to pay for goods or services that have net of trade discounts and sales taxes.
been acquired in the ordinary course 3.3.1.1 Significant accounting policies
of business from suppliers. Accounts The following specific criteria are that are specific to the business of
payable are classified as current used for the purpose of recognition of subsidiaries, sub-subsidiaries which are
liabilities, if payment is due within revenue. in the plantation industry
one (1) year or less (or in the normal Maturata Plantations Limited (MPL)
operating cycle of the business if (a) Dividend income which is engaged in the plantation
longer). If not, they are presented as Dividend income is recognized in the industry.
non-current liabilities. statement of profit or loss on the date
the company’s right to receive payment Revenue is recognized to the extent that
Trade and other payables are stated at is established. it is probable that the economic benefits
their cost. will flow to the company and the revenue
(b) Sundry income and associated costs incurred or to
3.2.18 Borrowings (b).1 Interest income be incurred can be reliably measured.
Borrowings are recognized initially at fair Interest income is recognized using the Revenue is measured at the fair value of
value, net of transaction costs incurred. effective interest method. When a loan the consideration received or receivable,
In subsequent periods, borrowings are granted or a receivable is impaired, the net of trade discounts and sales taxes.
stated at amortized cost using the company reduces the carrying amount
effective interest (EIR) method; any to its recoverable amount, being the The following specific criteria are
difference between proceeds (net of estimated future cash flow discounted used for the purpose of recognition of
transaction costs) and the redemption at the original effective interest rate of revenue.
value is recognized in the statement the instrument, and continues unwinding
of profit or loss over the period of the the discount as interest income. Interest
borrowings.
58 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

(a) Sale of goods Other government grants are recognized 3.3.1.3 Browns Properties (Pvt) Ltd., which is
Revenue from the sale of goods in initially as deferred income at fair value engaged in the business of letting out
the ordinary course of activities is when there is reasonable assurance office premises for commercial purpose
measured at the fair value of the that they will be received and the (a) Investment property rental income
consideration received or receivable, company will comply with the conditions Rental income arising from operating
net of brokerage, public sale expenses associated with the grant and are then leases on investment property is
and other levies related to turnover. recognized in the statement of profit or accounted for on a straight-line basis
Revenue is recognized when persuasive loss as other income on a systematic over the terms of the lease.
evidence exists, usually in the form of basis over the useful life of the asset.
an executed sales agreement, that the 3.3.2 Expenditure recognition
significant risks and rewards incidental Grants that compensate the company Expenses are recognized in the Income
to the ownership of the goods have been for expenses incurred are recognized in Statement on the basis of a direct
transferred to the customer, recovery the statement of profit or loss as other association between the cost incurred
of the consideration is probable, the income on a systematic basis in the and the earning of specific items of
associated costs and possible return of same periods in which the expenses are income. All expenditure incurred in
goods can be estimated reliably, there is recognized. the running of the business and in
no continuing management involvement maintaining the property, plant and
with the goods, and the amount of (d) Gains arising from changes in fair value equipment in a state of efficiency has
revenue can be measured reliably. of biological assets been charged to income in arriving at
Gains or losses arising on initial the profit/(loss) for the year.
If it is probable that discounts will recognition of biological assets at fair
be granted and the amount can be value less estimated point of sale costs Preliminary and pre-operational
measured reliably, then the discount is are recognized in the statement of expenditure is recognized in the Income
recognized as a reduction of revenue as profit or loss. Gains or losses arising on Statement.
the sales are recognized. The timing of change in fair value due to subsequent
the transfer of risks and rewards varies measurements are recognized in the Repairs and renewals are charged to the
depending on the individual terms of the statement of profit or loss in the period Income Statement in the year in which
sales agreement. in which they arise. the expenditure is incurred.

(b) Sale of live timber trees and rubber Gains and losses arising from incidental (a) Financing income and expenses
trees activities to main revenue generating Finance income comprises interest
Revenue from the sale of live timber activities and those arising from a group income on funds invested. Interest
trees and Rubber trees is recognized at of similar transactions which are not income is recognized in the statement of
the point that the legal ownership, risk of material, are aggregated, reported and profit or loss as it accrues.
loss and the rewards have been passed presented on a net basis.
to the purchaser and the quantity sold is
Finance expenses comprise interest
determinable. 3.3.1.2 Browns Power Holdings (Pvt) Ltd and payable on loans and borrowings. The
other subsidiaries which are engaged in interest expense component of finance
Revenue on harvesting of live timber the business of generating hydro power lease payments is allocated to each
trees and rubber trees is recognized Revenue is recognized to the extent that period during the lease term so as to
when the purchaser acquires the right it is probable that the economic benefits produce a constant periodic rate of
to harvest specified no of trees on a will flow to the company and the revenue interest on the remaining balance of the
tract of land, at an agreed-to price by and associated costs incurred or to liability.
entering into a contractual agreement be incurred can be reliably measured.
at which point the risk and rewards are Revenue is measured at the fair value of (b) Tax expense
transferred. the consideration received or receivable, Income tax expense comprises current
net of trade discounts and sales taxes. and deferred tax and other statutory
Those revenues are deducted from the taxes. Income tax expense is recognized
relevant biological assets to arrive at The following specific criteria are in income statement except to the
gain/(loss) on valuation in statement of used for the purpose of recognition of extent that it relates to items recognized
profit or loss. revenue. directly in equity, when it is recognized in
equity.
(c) Amortization of government grants (a) Sale of electrical energy
received Electrical energy generated by the hydro (b).1 Current income tax
An unconditional government grant power plants is sold to the national Current tax is the expected tax payable
related to a biological asset is electricity grid and are accounted for on or receivable on the taxable income or
recognized in the statement of profit accrual basis. loss for the year, using tax rates enacted
or loss as other income when the grant or substantively enacted at the reporting
becomes receivable. date, and any adjustment to tax payable
in respect of previous years.
 Annual Report 2016-17 | Browns Capital PLC 59

The provision for income tax is based on recognition of an asset or liability in (b).3 Withholding tax on dividends
the elements of income and expenditure a transaction that is not a business Dividend distributed out of taxable profit
as reported in the financial statements combination and, at the time of of the local companies attracts a 10%
and computed in accordance with the transaction, affects neither the deduction at source and is not available
the provisions of the Inland Revenue accounting profit nor taxable profit or for set off against the tax liability of the
Act. No 10 of 2006 and subsequent loss; and Group.
amendments thereto.
• in respect of deductible temporary Withholding tax that arises from the
Current tax assets and liabilities for the differences associated with distribution of dividends by the Group
current and prior periods are measured investments in subsidiaries, associates is recognized at the same time as the
at the amount expected to be recovered and interests in joint ventures, liability to pay the related dividend is
from or paid to the Commissioner deferred tax assets are only recognized recognized.
General of Inland Revenue. to the extent that it is probable that
the temporary differences will reverse (c) Economic service charge (ESC)
(b).2 Deferred tax in the foreseeable future and taxable As per the provisions of Economic
Deferred income tax is provided, using profit will be available against which Service Charge Act No.13 of 2006
the liability method, on all temporary the temporary differences can be amendments thereto, ESC is payable
differences at the statements of utilized. on the liable turnover at specified rates.
financial position date between the tax ESC is deductible from the income tax
bases of assets and liabilities and their The carrying amount of deferred tax liability. Any unclaimed amount can
carrying amounts for financial reporting assets is reviewed at each statements be carried forward and set off against
purposes. of financial position date and reduced the income tax payable in the four
to the extent that it is no longer subsequent years as per the relevant
Deferred income tax liabilities are probable that sufficient taxable profit provision in the Act.
recognized for all taxable temporary will be available to allow all or part of
differences except: the deferred income tax asset to be (d) Sales taxes
utilized. Revenues, expenses and assets are
• when the deferred income tax liability recognized net of the amount of sales
arises from initial recognition of Deferred income tax assets and tax except for the following;
goodwill amortization or the initial liabilities are measured at the tax
recognition of an asset or liability in rates that are expected to apply to the • Sales tax incurred on a purchase of a
a transaction that is not business year when the asset is realized or the assets or services is not recoverable
combination and, at the time of liability is settled, based on tax rates from the taxation authority, in which
the transaction, affects neither the and tax laws that have been enacted case the sales tax is recognized as
accounting profit nor taxable profit or or substantively enacted at the part of the cost of acquisition of the
loss; and statements of financial position date. asset or as part of the expense item as
applicable; and
• in respect of taxable temporary Deferred tax assets and liabilities are
differences associated with offset if there is a legally enforceable • Receivables and payables that are
investments in subsidiaries, associates right to offset current tax liabilities stated with the amount of sales tax
and interests in joint ventures, and assets, and they relate to income included.
when the timing of the reversal of taxes levied by the same tax authority
the temporary differences can be on the same taxable entity, or on The net amount of sales tax
controlled and it is probable that the different tax entities, but they intend recoverable from, or payable to, the
temporary differences will not reverse to settle current tax liabilities and taxation authority is included as part of
in the foreseeable future. assets on a net basis or their tax other receivables or other payables in
assets and liabilities will be realized the statement of financial position.
Deferred income tax assets are simultaneously.
recognized for all deductible temporary 3.3.3 Earnings per share
differences, carry-forward of unused Deferred tax assets and liabilities are The Group presents basic and diluted
tax assets and unused tax losses, not discounted. earnings per share data for its ordinary
to the extent that it is probable that shares. Basic earnings per share is
taxable profit will be available against The net increase in the carrying calculated by dividing the profit or loss
which the deductible temporary amount of deferred tax liability net of attributable to ordinary shareholders
differences, and the carry-forward of deferred tax asset is recognized as of the Group by the weighted average
unused tax credits and unused tax deferred tax expense and conversely number of ordinary shares outstanding
losses can be utilized except: any net decrease is recognized as during the year. Diluted earnings per
reversal to deferred tax expense, in the share is determined by adjusting the
• where the deferred income tax asset statement of profit or loss. profit or loss attributable to ordinary
relating to the deductible temporary shareholders and the weighted average
difference arises from the initial
60 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

number of ordinary shares outstanding, possible. Other items comprise mainly prospectively, with some limited
for the effects of all dilutive potential interest bearing loans, borrowings, and exceptions.
ordinary shares. expenses.
The Group plans to adopt the new
3.4 Statement of cash flows 3.6 Events after the reporting period standard on the required effective date.
The statement of cash flow has been All material post events after the Overall, the Group expects no significant
prepared using the ‘Indirect Method’ of statement of financial position date have impact on its balance sheet and equity.
preparing cash flows in accordance with been considered and where appropriate;
the LKAS 7 – ‘Statement of cash flows’. either adjustments have been made or (b) SLFRS 15 – Revenue from Contracts
adequately disclosed in the financial with Customers– effective for annual
Interest paid is classified as operating statements as required by LKAS 10 - periods beginning on or after 1st of
cash flows. Interest received is ‘Events after the reporting period’. January 2018
classified as investing cash flows while SLFRS 15 establishes a five-step
government grants received is classified 3.7 Capital commitments model to account for revenue arising
as investing cash flows, for the purpose Capital commitments of the Group have from contracts with customers. Under
of presenting the cash flow statement. been disclosed in the respective notes to SLFRS 15, revenue is recognised at an
the financial statements. amount that reflects the consideration
Cash and cash equivalents comprise to which an entity expects to be entitled
of cash in hand and cash at banks and 3.8 Related party disclosures in exchange for transferring goods or
other highly liquid financial assets Disclosure has been made in respect services to a customer.
which are held for the purpose of of the transactions in which one party
meeting short-term cash commitments has the ability to control or exercise The new revenue standard will supersede
with original maturities of less than significant influence over the financial all current revenue recognition
three months which are subject to and operating policies / decisions of the requirements under SLFRS. Either a full
insignificant risk of changes in their fair other, irrespective of whether a price is retrospective application or a modified
value. being charged or not. retrospective application is required
for annual periods beginning on or
3.5 Segment reporting 3.9 Effect of accounting standards issued after 1 January 2018. Early adoption is
Operating segments but not effective as at the reporting date permitted. The Group plans to adopt the
Segmental information is provided for The Institute of Chartered Accountants new standard on the required effective
the different business segments of of Sri Lanka has issued the following date using the full retrospective method.
the Group. Business segmentation has standards which become effective for
been determined based on the nature annual periods beginning after the (c) SLFRS 16 – Leases – effective for annual
of goods provided by the Group after current financial year. Accordingly, periods beginning on or after 1st of
considering the risk and rewards of each these standards have not been January 2019
type of product. applied in preparing these financial SLFRS 16 replaces LKAS 17
statements. The Group I currently in Leases and related interpretations
Since the individual segments are the process of evaluating the potential (IFRIC 4 Determining whether an
located close to each other and operate effect of adoption of these standards Arrangement contains a Lease, SIC
in the same industrial environment, the and amendments on its financial -15 Operating Leases-Incentives and
need for geographical segmentation has statements. Such impact has not been SIC -27 Evaluating the Substance
no material impact. quantified as at the reporting date. The of Transactions Involving the Legal
Group will be adopting these standards Form of a Lease). SLFRS 16 sets out
The activities of the segments are as and when they become effective. the principles for the recognition,
described in Note 49 to the financial measurement, presentation and
statements. (a) SLFRS 9 – Financial Instruments – disclosure of leases and requires
effective for annual periods beginning lessees to account for all leases under
on or after 1st of January 2018 a single on-balance sheet model
Revenue and expenses directly
SLFRS 9 brings together all three similar to the accounting for finance
attributable to each segment are
aspects of the accounting for the leases under LKAS 17. The standard
allocated intact to the respective
financial instruments project: includes two recognition exemptions
segments. Revenue and expenses not
classification and measurement; for lessees – leases of ’low-value’
directly attributable to a segment are
impairment; and hedge accounting. assets (e.g., personal computers) and
allocated on the basis of their resource
SLFRS 9 is effective for annual periods short-term leases (i.e., leases with a
utilization, wherever possible.
beginning on or after 1 January 2018, lease term of 12 months or less). At the
with early application permitted. Except commencement date of a lease, a lessee
Assets and liabilities directly attributable will recognise a liability to make lease
for hedge accounting, retrospective
to each segment are allocated to payments (i.e., the lease liability) and an
application is required, but providing
the respective segments. Assets asset representing the right to use the
comparative information is not
and liabilities, which are not directly underlying asset during the lease term
compulsory. For hedge accounting,
attributable to a segment, are allocated (i.e., the right of- use asset). Lessees will
the requirements are generally applied
on a reasonable basis wherever
 Annual Report 2016-17 | Browns Capital PLC 61

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 1st 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.
62 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

Group Company
For the year ended 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

4 Revenue
Total revenue 6,284,574,329 5,670,106,391 20,148,754 50,620,996
Less : Inter group revenue (335,131,082) (141,075,619) - -
5,949,443,247 5,529,030,772 20,148,754 50,620,996

4.1 Industry segment (revenue)

Tea 4,301,877,966 4,017,872,406 - -
Rubber 1,116,577,231 988,131,279 - -
Coconut 14,886,057 17,573,787 - -
Cinnamon 20,425,589 15,301,395 - -
Hydro power 60,968,961 167,274,754 - -
Solar power 172,215,328 - - -
Real estate 94,260,295 88,658,740 - -
Others 168,231,820 234,218,411 20,148,754 50,620,996
5,949,443,247 5,529,030,772 20,148,754 50,620,996

4.2 Cost of sales

4.2.1 Industry segment (cost of sales)
Tea 3,814,694,835 4,315,824,800 - -
Rubber 1,114,179,260 998,890,715 - -
Coconut 9,044,092 10,428,708 - -
Cinnamon 15,120,831 12,430,717 - -
Hydro power 21,840,929 88,952,942 - -
Solar power 79,151,112 - - -
Real estate 11,670,541 9,421,017 - -
Others 162,130,869 190,845,236 - -
5,227,832,469 5,626,794,135 - -

4.3 Gross profit/(loss)

4.3.1 Industry segment gross profit
Tea 487,183,131 (297,952,394) - -
Rubber 2,397,971 (10,759,436) - -
Coconut 5,841,965 7,145,079 - -
Cinnamon 5,304,758 2,870,678 - -
Hydro power 39,128,032 78,321,812 - -
Solar power 93,064,216 - - -
Real estate 82,589,754 79,237,723 - -
Others 6,100,952 43,373,175 20,148,754 50,620,996
721,610,778 (97,763,363) 20,148,754 50,620,996
 Annual Report 2016-17 | Browns Capital PLC 63

Group Company
For the year ended 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

5 Other income
Amortisation of deferred income 31,642,719 32,416,390 - -
Gain on disposal of property, plant and equipment 6,868,390 10,524,980 - -
Other sundry income 38,627,861 12,617,056 2,750,000 2,755,660
Rent income 77,412,711 42,168,824 - -
Sale of firewood 2,837,754 2,420,794 - -
Gain on sale of bearer biological assets 54,674,014 77,620,771 - -
Related party loan written back - - 27,278,094 -
Sale of refuse tea 115,101,151 73,280,374 - -
Gain on changes in fair value of money market investments - (3,538,696) - 556,304
Compensation received for lands acquired by the government - 42,013,584 - -
Dividend income 618,946 614,977 - -
327,783,546 290,139,054 30,028,094 3,311,964

6 Change in fair value of biological assets

Consumable biological assets (Note 18.3) 204,491,575 (194,353,741) - -
Agricultural Produce attached to bearer biological assets (Note 19) 24,796,311 - - -
229,287,886 (194,353,741) - -

7 Other expenses
Loss on divestment in Agalawatta Plantations PLC 33,458,414 - - -
Biological assets and property plant and equipment written off 16,602,543 8,835,326 - -
Surcharge on gratuity 10,396,155 15,164,311 - -
Other 40,944,146 52,883,819 6,095,540 28,747,857
101,401,258 76,883,456 6,095,540 28,747,857

8 Net finance income/(costs)

8.1 Finance income
Interest income 68,693,913 38,603,216 111,512,217 66,648,950
68,693,913 38,603,216 111,512,217 66,648,950

8.2 Finance costs

Interest on bank overdrafts 28,384,976 11,872,593 - -
Lease interest to JEDB/SLSPC 55,219,032 54,178,593 - -
Lease interest to others 5,030,081 18,323,299 - -
Interest on short term loans 19,334,334 8,910,617 - -
Interest on other loans 489,450,468 233,090,294 78,020,466 9,201,305
Foreign exchange loss/(gain) 44,060,829 (19,499,102) - -
Other finance charges 4,242,800 19,233,179 - -
645,722,520 326,109,473 78,020,466 9,201,305
Less : Borrowing costs capitalized during the year (103,678,101) (59,888,552) - -
542,044,419 266,220,921 78,020,466 9,201,305

Net finance income/(costs) (473,350,506) (227,617,705) 33,491,751 57,447,645

64 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

Group Company
For the year ended 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

9 Profit/(loss) before taxation

Profit/(loss) before tax is stated after charging all expenses including
the following.
Directors' emoluments 30,004,000 31,127,393 1,540,677 480,000
Auditors' remunerations:
- Audit services 9,053,228 7,014,021 656,880 586,500
- Non audit fees & expenses 1,743,876 - - -
Depreciation/amortization - property, plant and equipment 186,951,428 172,122,029 2,048,055 1,548,080
Amortization of rights to use the leasehold land 15,257,725 15,592,388 - -
Depreciation /amortization - biological assets 181,347,390 164,815,055 - -
Charity and donations 75,000 - 50,000 -
Staff costs:
Salaries and wages 2,680,067,038 2,710,640,079 - -
Defined contribution plan costs - EPF, ETF, CPPS and ESPS 396,898,360 455,685,890 - -
Defined benefit plan costs - retiring gratuity 219,870,365 259,348,829 - -
Gratuity surcharge for the year 10,396,155 15,164,311 - -

10 Income tax expense

a) Current income tax expense / (reversal)
Income tax for the year (Note 10.1) 50,994,761 36,233,195 8,203,885 12,737,374
(Over)/under provision in respect of previous years 2,379,626 (179,525) - -
Total current income tax expense 53,374,387 36,053,670 8,203,885 12,737,374

b) Deferred tax expense/(reversal)

Origination/(reversal) of temporary differences (Note 10.2) 291,044,564 (48,298,351) - -
Income tax expense/(reversal) 344,418,951 (12,244,681) 8,203,885 12,737,374
 Annual Report 2016-17 | Browns Capital PLC 65

10.1 Numerical reconciliation between the tax expense/(income) and the product of accounting profit/(loss).
Numerical reconciliation between the tax expense/(income) and the product of accounting profit/(loss) multiplied by the applicable tax rate
disclosing the basis on which the applicable tax computed are given below.

Group Company
For the year ended 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Profit / (loss) before tax 4,293,853,673 (488,521,171) 5,093,732,221 59,069,956

Consolidation adjustments 1,983,475,276 53,284,857 - -
Adjusted profit before income tax 6,277,328,950 (435,236,315) 5,093,732,221 59,069,956

Non-business income (1,096,407,841) (314,679,456) (111,512,217) (67,205,252)

Aggregate allowable expense (1,704,030,092) (916,604,417) (210,394) (54,297)
Aggregate disallowable expense 859,541,739 1,090,756,938 33,502,593 40,331,937
Income from other sources and exempted income (5,255,684,242) (102,259,053) (5,097,724,829) (30,482,940)
Tax loss of subsidiaries 132,640,065 808,114,121 - -
Statutory income / (loss) from business (786,611,421) 130,091,817 (82,212,626) 1,659,404

Interest income 170,768,140 73,688,108 111,512,217 43,831,218

Tax loss utilised during the year (11,511,238) (985,707) - -
Other deductions under section 32 (2,311,132) - - -
Taxable income / (loss) 156,945,770 202,794,217 29,299,591 45,490,622

Taxable income
Taxable income at 12% 229,601,399 128,432,414 - -
Taxable income at 28% 83,723,550 74,361,803 29,299,591 45,490,622
313,324,949 202,794,217 29,299,591 45,490,622

Income tax charged at;

Concessionary rate of 12% (previous year 12%) 27,552,167 15,411,890 - -
Standard rate of 28% (previous year 28%) 23,442,594 20,821,305 8,203,885 12,737,374
Tax on profit for the year 50,994,761 36,233,195 8,203,885 12,737,374

The Group tax expense is based on the taxable profits of the individual companies within the Group. At present, tax laws of Sri Lanka do not provide
for the group taxation.

Group Company
For the year ended 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

10.2 Deferred tax expenses

Origination/(reversal) of temporary differences 298,902,225 32,663,663 - -
298,902,225 32,663,663 - -

Break up of deferred tax expense

Expense recognized in;
Statement of profit or loss 291,044,564 (48,298,351) - -
Statement of other comprehensive income 7,857,661 80,962,014 - -
298,902,225 32,663,663 - -

Deferred tax for the year has been computed at rates applicable to respective subsidiaries of the Group ranging from 10% to 13.69.%. (Previous
year - 10% to 15.45.%.)
66 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

10. Income tax expense (Contd.)

Group Company
For the year ended 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

10.3 Tax losses carried forward

Tax losses brought forward 4,739,587,774 3,932,459,360 - -
Less : Adjustments on finalization of tax liability 1,178,336 - - -
Utilization of tax losses (11,511,238) (985,707) - -
4,729,254,871 3,931,473,653 - -
Add : Tax loss for the year 132,640,065 808,114,121 - -

Less: Disposal of subsidiaries (750,140,546) - - -

4,111,754,391 4,739,587,774 - -

10.4 Companies exempt from income tax/liable to tax at concessionary rates

a) Companies exempt from income tax:

Company Statute Exemption Period
Thebuwana Hydro Power (Pvt) Ltd., Section 17 of BOI Law No. 04 of 1978. 05 years (note 10.4.1)
Stellenberg Hydro Power (Pvt) Ltd., - do - - do -
Sagasolar Power (Pvt) Ltd - do - 10 years (note 10.4.1)
Browns Properties (Pvt) Ltd., Section 17 of BOI Law No. 04 of 1978. 07 years (note 10.4.1)

b) Companies liable to tax at concessionary rates:

Company Concessionary tax rate and statute Concessionary period
Maturata Plantations Ltd., 10% under section 48A-14A of the Inland Revenue (amendment) Act Indefinite
No. 22 of 2011.
Pussellawa Plantations Ltd., - do - - do -
Browns Hydro Power PLC 12% under section 59E of the Inland Revenue (amendment) Act No.18 - do -
of 2013 (Mini hydro power project).
F L M C Plantations (Pvt) Ltd., 12% under section 46 of the Inland Revenue (amendment) Act No. 22 of - do -
2011 (with effect from year 2010).
F L P C Management (Pvt) Ltd., - do - - do -
Melfort Green Teas (Pvt) Ltd 10% under section 16 of the Inland Revenue Act No. 10 of 2006. - do -

10.4.1 Pursuant to the agreements entered into with the Board of Investments of Sri Lanka, the tax exemption period shall be reckoned from the
year in which the company commences to make profits or any year of assessment not later than two (02) years reckoned from the date of
commencement of commercial operations or production whichever year is earlier.
 Annual Report 2016-17 | Browns Capital PLC 67

11 Earnings/(loss) per share

11.1 Basic earnings/(loss) per share
The computation of the basic earnings/(loss) per ordinary share has been done based on net profit/(loss) attributable to ordinary shareholders for
the year divided by weighted average number of ordinary shares in issue as at the reporting date and calculated as follows.

Group Company
For the year ended 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Net profit/(loss) attributable to ordinary shareholders (Note 11.1.1) 3,791,443,321 (219,005,130) 5,085,528,336 46,332,582

Weighted average number of ordinary shares in issue 1,368,000,000 1,368,000,000 1,368,000,000 1,368,000,000

Basic earnings/(loss) per share (Rs.) 2.772 (0.160) 3.717 0.034

11.1.1 Net profit/(loss) attributable to ordinary shareholders of the parent

company
Net profit/(loss) as per statement of profit or loss and other 3,794,491,850 (215,956,601) 5,085,528,336 46,332,582
comprehensive income
Less : Dividend on cumulative preference shares (3,048,529) (3,048,529) - -
3,791,443,321 (219,005,130) 5,085,528,336 46,332,582

11.2 Diluted earnings/(loss) per share

The calculation of diluted earnings/(loss) per ordinary share is based on net profit/(loss) attributable to ordinary shareholders and weighted
average number of ordinary shares outstanding after adjustment for the effect of all dilutive potential ordinary shares. There were no potentially
dilutive shares outstanding at any time during the year/previous year. Hence, diluted earnings/(loss) per share is equal to the basic earnings/(loss)
per share.

Group Company
For the year ended 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

12 Dividend per share

At Rs.0.05 per ordinary share 68,400,000 - 68,400,000 -
68,400,000 - 68,400,000 -

Dividend per ordinary share (Rs.) 0.05 - 0.05 -

13 Rights to use the leasehold land

Lease agreements of all JEDB/SLSPC estates handed over to the Company’s sub subsidiaries have been executed to date. All of these leases are
retroactive to 15th/22nd June 1992, the dates of formation of the Company’s sub subsidiaries. The leasehold rights to the bare land on all of these
estates have been taken into the books of the Company’s sub subsidiaries on 15th/22nd June 1992, immediately after formation of the Company’s
sub subsidiaries, in terms of the ruling obtained from the Urgent Issue Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka. For
this purpose, Board of the Company’s sub subsidiaries decided at its meetings that leased bare land would be revalued at the value established
for this land by Valuation Specialist Dr. Wickramasinghe just prior to the formation of the company’s sub subsidiaries. The values as at 22nd June
1992 and 15th June 1992 were taken in to the books of Maturata Plantations Limited and Pussellawa Plantations Limited respectively.

The rights to use bare land on lease of JEDB/SLSPC estates is being amortised by equal amounts over a 53 year period. The unexpired period of the
lease as at the financial reporting date is 28.25 years.
68 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

13 Rights to use the leasehold land (Contd.)

Group Company
As at 31st March 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

13.1.1 Capitalised value ( 15th/22nd June 1992 ) 642,856,059 642,856,059 - -

Leasehold rights acquired/subsequently revalued 684,781,696 684,781,696 - -
Less : Disposal of subsidiaries (320,203,696) - - -
Balance at end of the year 364,578,000 684,781,696 - -

13.1.2 Accumulated amortization

Balance at the beginning of the year 237,549,415 221,957,027 - -
Add : Charge for the year 15,257,725 15,592,388 - -
Less : Disposal of subsidiaries (148,971,631) -
Balance at end of the year 103,835,509 237,549,415 - -

13.1.3 Total net carrying value as at 31st March 260,742,491 447,232,281 - -

13.2 Maturata Plantations Limited

Leasehold Rights to Bare Land of JEDB/SLSPC Estate Assets and Immovable (JEDB/SLSPC) Estates Assets on Finance Lease obtained on a long
term basis, are stated at the recorded carrying values as at the effective date of Sri Lanka Accounting Standard No.19 – Leases, in line with Ruling
of the Urgent Issues Task Force of the Institute of Chartered Accountants of Sri Lanka. Such carrying amounts are amortized over the remaining
Lease term or useful life of such asset whichever is shorter.

Since the fair value of revalued assets differs materially from its carrying amount, the Board of Directors of Maturata Plantations Limited on 20th
December 2005 has decided a further revaluation to be carried out as at 31st December 2005. The net amounts have been restated to the new
valuation carried out by an independent and qualified valuer, Mr.K. Arther Perera. The values of bare land which was not subjected to a land survey
has been based on the current freehold bare land values which varies from District to District and estate to estate depending on demand. The
freehold values have been converted into leasehold value depending on the balance period of the lease. The revised UITF ruling does not permit
further revaluation of Leasehold lands.

13.3 Carrying value of revalued leasehold property of Maturata Plantations Limited (MPL) at initial valuation
The carrying value of leasehold rights to bare land of JEDB/SLSPC Estates of MPL that would have been included in the financials statements as at
31st March 2017 had the asset been carried at initial valuation less accumulated amortisation is as follows.

Written down value (W.D.V)

Group
As at 31st March, 2017 2016
Rs. Rs.

Rights to use bare land of JEDB/SLSPC estates on lease 175,355,623 181,568,625

13.4 Land acquired/ in the process of being acquired by the government and divested as at 31st March 2017 - Group
Maturata Plantations Limited (MPL)
The Government of Sri Lanka has already acquired a total land extent of 218.1915 hectares (As at 31st March 2016 - 218.1915 hectares) and in
the process of acquiring a further total land extent of 1,282.3620 hectares (As At 31st March 2016 - 1,282.3620 hectares).

Land divested is totalling to 822.00 hectares. (As at 31st March 2016 - 822.00 hectares).

No adjustments have been made to the Financial Statements in respect of the lands acquired as the compensations receivable on the major
acquisitions are not known and the transactions pertaining to those acquisitions have been incomplete as at 31st March 2017
 Annual Report 2016-17 | Browns Capital PLC 69

Group
2017 2016
As at 31st March Land & Buildings Land at No.05, Total Total
at No.19, Dudley Sumner Place,
Senanayake Colombo 08
Mawatha,
Colombo 08
Rs. Rs. Rs. Rs.

14 Investment property
14.1 Reconciliation of carrying amount
14.1.1 Land
Balance at the beginning of the year 322,225,436 135,000,000 457,225,436 372,991,399
Add :Additions during the year - - - -
Less : Group occupied component (Note 14.3) - - - -
322,225,436 135,000,000 457,225,436 372,991,399
Change in fair value 201,554,455 67,000,000 268,554,455 84,234,037
Balance at the end of the year 523,779,891 202,000,000 725,779,891 457,225,436

14.1.2 Building
Balance at the beginning of the year 666,619,921 - 666,619,921 637,564,785
Add :Additions during the year 894,975 - 894,975 1,975,146
667,514,896 - 667,514,896 639,539,931
Change in fair value 136,194,694 - 136,194,694 27,079,990
Balance at the end of the year 803,709,590 - 803,709,590 666,619,921

14.1.3 Total at the end of the year 1,327,489,481 202,000,000 1,529,489,481 1,123,845,357

Change in fair value of investment property is recognized as a gain or loss in the statement of profit or loss and disclosed therein as a separate line
item. All gains are unrealized.

14.1.4 Valuation technique and significant unobservable inputs

The following table shows the valuation techniques used by the Group in measuring Level 3 fair values and the significant unobservable inputs
used.

Valuation technique Significant unobservable inputs Inter relationship between key inputs and fair
value measurement
Market comparable method Value per square feet determined based on The estimated fair value would increase
similar properties value and depreciated for (decrease) if price per square feet value was
Depreciated replacement cost method period used. higher / (lesser).
In the current market situation, comparable The estimated fair value would (decrease) /
properties in Dudley Senanayake Mawatha, increase if depreciation was higher / (lower).
Colombo 08 indicate prices ranging from
Rs 10 million to Rs 15 million per perch and
properties in Sumner place, Colombo 08
indicate prices ranging from Rs 5 million to
10 million.
The price per square feet has been estimated
within a range of Rs 140 to Rs 165
The depreciation rate used for the building has
been determined based on the condition of
the property at 2.5%
70 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

14 Investment property (Contd.)

14.2 Valuation details of investment property
Fair value of the above investment property has been ascertained by an independent valuation carried out by Mr.P.W.Senaratne, a Chartered
Valuation Surveyor, who has experience in valuing properties of akin locations.

Properties Effective date of valuation

Land & Building at No.19, Dudley Senanayake Mawatha, Colombo 08. 31st March 2017
Land at No.05, Sumner Place, Colombo 08. 31st March 2017

Investment Property is appraised in accordance with LKAS 40 - “Investment Property” and International Valuation Standards published by the
Royal Institute of Chartered Surveyors (RICS), by an independent valuer.

In determining the fair value, the current condition of the properties, future usability and associated re-development requirements have been
considered. Also, the valuer has made reference to market evidence of transaction prices for similar properties, with appropriate adjustments for
size and location. The appraised fair values are rounded within the range of values.

a) Investment properties of the Group include the following

a).1 Lands
Total value
As at 31st March Extent in 2017 2016
Perches Rs. Rs.

Land at No.19, Dudley Senanayake Mawatha, Colombo 08. 49.50 643,000,000 396,000,000
Land at No.05, Sumner Place, Colombo 08 33.75 202,000,000 135,000,000

a).2 Building
Total value
As at 31st March 2017 2016
Rs. Rs.

Building at No.19, Dudley Senanayake Mawatha, Colombo 08 684,489,481 592,845,357

Consolidated rental income earned from investment property by the company amounts to Rs 114,389,597/- (2016 - Rs. 88,658,740/-) and direct
operating expenses incurred by the company amounted to Rs 11,670,541/-.(2016 - Rs. 9,421,017/-).
 Annual Report 2016-17 | Browns Capital PLC 71

14.3 Investment property used by the companies within the Group

Land and buildings at No.19, Dudley Senanayake Mawatha, Colombo 08 owned by Browns Properties (Pvt) Ltd., (BPL) a fully owned subsidiary of
the Company, are leased out and occupied by the related companies and BPL receives rental income.

Accordingly, this land and buildings are classified as investment property in the statement of financial position of BPL. However, according to Sri
Lanka Accounting Standard (LKAS 40) - “Investment Property”, the said portion of land and buildings is treated as property, plant and equipment
in the consolidated statement of financial position, since the Group uses a significant portion of said land and buildings for use in the production or
supply of goods and services.

Group Company
As at 31st March Notes 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

15 Property, plant and equipment

Immovable (JEDB/SLSPC) assets on finance lease (other than 15.1 2,162,444 8,633,678 - -
rights to use the bare land)
Tangible assets other than biological assets 15.2 3,099,692,166 2,244,906,227 7,498,335 2,616,785
Capital work-in-progress 15.3 8,828,705 1,145,375,743 - -
3,110,683,315 3,398,915,648 7,498,335 2,616,785
72 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

15 Property, plant and equipment (Contd.)

15.1 Immovable (JEDB/SLSPC) assets on finance lease (other than bare land) - Group
As fully explained in note 13, all JEDB/SLSPC estate lease deeds have been executed to date. In terms of the ruling of the UITF of the Institute of
Chartered Accountants of Sri Lanka, all immovable assets in the JEDB/SLSPC estates under finance leases have been taken into the books of the
company’s sub subsidiaries retroactive to 15th/22nd June 1992. For this purpose, the Board of the Company’s sub subsidiaries decided at their
meetings, that these assets be revalued at their book values as they appear in the books of the JEDB/SLSPC, on the day immediately preceding the
date of formation of the Company’s sub subsidiaries. These assets are taken into the statement of financial position of company’s sub subsidiaries
as at 15th/22nd June 1992 and the amortisation of immovable lease assets as at 31st March 2017 are as follows.

Vested Improvements Buildings Machinery

un-improved land to land
Rs. Rs. Rs. Rs.

15.1.1 Capitalised value (15th/22nd June 1992) 888,869 6,843,925 113,366,225 27,872,377
As at 31st March 2016 888,869 6,843,925 113,366,225 27,872,377
Disposal of subsidiaries (888,869) (271,307) (31,123,030) (11,074,038)
As at 31st March 2017 - 6,572,618 82,243,195 16,798,339

15.1.2 Amortization
As at 01st April 2016 672,881 5,401,867 107,634,647 27,872,377
Charge for the year 29,627 228,132 4,534,645 -
Disposal of subsidiaries (702,508) (202,783) (30,676,424) (11,074,038)
As at 31st March 2017 - 5,427,216 81,492,868 16,798,339

15.1.3 Written down value

As at 31st March 2017 - 1,145,402 750,327 -

As at 31st March 2016 215,988 1,442,058 5,731,578 -

 Annual Report 2016-17 | Browns Capital PLC 73

Water Permanent land Roads and Other Total Total

sanitation development bridges vested assets 2017 2016
Rs. Rs. Rs. Rs. Rs. Rs.

16,383,042 500,779 1,276,634 4,457,518 171,589,369 171,589,369

16,383,042 500,779 1,276,634 4,457,518 171,589,369 171,589,369
(9,773,152) - (1,276,634) (3,134,036) (57,541,066) -
6,609,890 500,779 - 1,323,482 114,048,303 171,589,369

16,348,339 224,615 997,695 3,803,270 162,955,691 157,995,891

34,703 9,449 42,559 104,463 4,983,577 4,959,800
(9,773,152) - (1,040,254) (2,584,251) (56,053,409) -
6,609,890 234,064 - 1,323,482 111,885,859 162,955,691

- 266,715 - - 2,162,444

34,703 276,164 278,939 654,248 8,633,678

74 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

15 Property, plant and equipment (Contd.)

15.2 Tangible assets other than biological assets - Group

Land and Plant and Motor Equipment Computers Furniture and

buildings machinery vehicles fittings

Rs. Rs. Rs. Rs. Rs. Rs.

15.2.1 Gross carrying amount

a) Freehold asset
Balance at the beginning of the year 1,352,727,096 854,686,934 397,204,800 480,833,161 14,313,972 70,810,233
Additions 2,047,210 10,292,867 14,984,152 5,102,214 1,350,773 738,308
Transfer from Investment Property 201,795 - - - -
Transfer from capital work-in-progress 4,474,271 2,671,112,009 - 199,984 - -
Written off - - - - - -
Disposals - - (9,246,542) (31,369) - -
Acquisition through business
combinations - - - - - -
Disposal of subsidiaries (1,036,778,770) (613,599,045) (301,740,812) (444,767,050) (4,811,618) (54,609,973)
As at 31st March 2017 322,671,603 2,922,492,765 101,201,598 41,336,940 10,853,127 16,938,567

b) Leasehold asset
Balance at the beginning of the year 12,496,703 45,846,085 23,275,000 - - -
Additions - - - - - -
Disposals - - - - - -
Disposal of subsidiaries (12,496,703) - (10,375,000) - - -
As at 31st March 2017 - 45,846,085 12,900,000 - - -

Total gross carrying amount 322,671,603 2,968,338,850 114,101,598 41,336,940 10,853,127 16,938,567
 Annual Report 2016-17 | Browns Capital PLC 75

Ergonomic Water sanitation Land Roads and Penstock Security fences Total Total
equipment and others development bridges pipe line 2017 2016
cost
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

9,386,060 53,276,996 60,769,184 151,949,969 260,996,430 4,079,749 3,711,034,584 3,368,571,837

- 107,622 - - - - 34,623,146 355,523,251
- - - - - - 201,795 -
- - - - - - 2,675,786,264 -
- - (796,686) - - - (796,686) -
- (102,193) - - - - (9,380,105) (13,228,821)

- - - - - - - 168,317
- (26,795,529) - (151,949,969) (260,996,430) (4,079,749) (2,900,128,944) -
9,386,060 26,486,897 59,972,498 - - - 3,511,340,054 3,711,034,584

- - - - - - 81,617,788 72,633,085
- - - - - - - 12,496,703
- - - - - - - (3,512,000)
- - - - - - (22,871,703) -
- - - - - - 58,746,085 81,617,788

9,386,060 26,486,897 59,972,498 - - - 3,570,086,139 3,792,652,372

76 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

15 Property, plant and equipment (Contd.)

15.2 Tangible assets other than biological assets - Group

Land and Plant and Motor Equipment Computers Furniture and

buildings machinery vehicles fittings

Rs. Rs. Rs. Rs. Rs. Rs.

15.2.2 Depreciation
a) Freehold assets
Balance at the beginning of the year 218,136,864 624,693,974 351,511,910 183,996,944 11,748,160 36,947,054
On disposals - - (8,992,625) (12,033) - -
Acquisition through business
combinations - - - - - -
Charge for the year 28,422,397 97,795,590 17,474,722 13,539,700 1,344,569 5,785,597
Disposal of subsidiaries (193,058,166) (492,919,260) (268,464,930) (172,149,459) (4,555,351) (33,169,486)
As at 31st March 2017 53,501,094 229,570,304 91,529,077 25,375,152 8,537,378 9,563,165

b) Assets on finance leases

Balance at the beginning of the year 1,229,127 3,601,311 14,532,480 - - -
On disposals - - - - - -
Charge for the year 1,266,789 3,438,456 2,600,000 - - -
Disposal of subsidiaries (2,495,916) - (10,375,000) - - -
As at 31st March 2017 - 7,039,767 6,757,480 - - -

c) Total depreciation 53,501,094 236,610,071 98,286,557 25,375,152 8,537,378 9,563,165

15.2.3 Written down value as at ;

- 31st March 2017 269,170,508 2,731,728,779 15,815,040 15,961,788 2,315,749 7,375,402

- 31st March 2016 1,145,857,808 272,237,734 54,435,410 296,836,217 2,565,812 33,863,179

The immovable/movable assets vested in the Company’s sub subsidiary namely Maturata Plantations Ltd. (MPL), by gazette notification on the date
of formation of the MPL and all the investments made in the tangible assets by the MPL since their formation have been included as above. The
assets taken over by way of finance leases by the company’s sub subsidiary are set out in notes 13 and 15.1.

15.2.4 The cost of fully depreciated property, plant & equipment of the Group which are still in use as at the date of the statements of financial position is
Rs.137,982,257/= (2016-Rs.701,925,115//=).
 Annual Report 2016-17 | Browns Capital PLC 77

Ergonomic Water sanitation Land Roads and Penstock Security fences Total Total
equipment and others development bridges pipe line 2017 2016
cost
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

9,027,516 33,980,744 9,395,583 21,322,351 23,797,219 3,824,908 1,528,383,227 1,374,213,246

- - - - - - (9,004,658) (7,156,262)

- - - - - - - 10,130
172,775 2,219,088 188,896 3,112,331 4,552,905 54,034 174,662,605 161,316,113
- (16,464,048) - (24,434,682) (28,350,124) (3,878,942) (1,237,444,449) -
9,200,291 19,735,784 9,584,479 - - - 456,596,725 1,528,383,227

- - - - - - 19,362,918 14,887,945
- - - - - - - (1,371,143)
- - - - - - 7,305,246 5,846,116
- - - - - - (12,870,916) -
- - - - - - 13,797,248 19,362,918

9,200,291 19,735,784 9,584,479 - - - 470,393,972 1,547,746,145

185,769 6,751,112 50,388,019 - - - 3,099,692,166

358,544 19,296,252 51,373,601 130,627,618 237,199,211 254,841 2,244,906,227

78 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

15 Property, plant and equipment (Contd.)

15.2 Tangible assets other than biological assets - Company
Motor vehicles Computers Furniture and Total Total
fittings 2017 2016
Rs. Rs. Rs. Rs. Rs.

15.2.1 Gross carrying amount

At cost
Balance at the beginning of the year 7,577,500 254,200 50,299 7,881,999 7,881,999
Additions 6,200,000 713,517 16,088 6,929,605 -
Balance at the end of the year 13,777,500 967,717 66,387 14,811,604 7,881,999

Total gross carrying amount as at ;

- 31st March 2017 13,777,500 967,717 66,387 14,811,604
- 31st March 2016 7,577,500 254,200 50,299 7,881,999

15.2.2 Accumulated depreciation

At cost
Balance at the beginning of the year 5,051,667 206,022 7,525 5,265,214 3,681,134
Charge for the year 1,928,833 113,522 5,700 2,048,055 1,584,080
Balance at the end of the year 6,980,500 319,544 13,225 7,313,269 5,265,214

Total accumulated depreciation as at ;

- 31st March 2017 6,980,500 319,544 13,225 7,313,269
- 31st March 2016 5,051,667 206,022 7,525 5,265,214

15.2.3 Written down value as at;

- 31st March 2017 6,797,000 648,173 53,162 7,498,335
- 31st March 2016 8,725,833 761,695 42,774 2,616,785

Group
As at 31st March 2017 2016
Rs. Rs.

15.3 Capital work-in-progress

Balance at the beginning of the year 1,145,375,743 333,564,747

Add :Acquisition through business combinations - 53,857,768

Amount incurred during the year 1,612,400,928 1,109,084,690
2,757,776,671 1,496,507,205
Less :Amount capitalised during the year (2,675,786,264) (338,133,548)
Amount written-off (4,000,000) (12,997,914)
Disposal of subsidiaries (69,161,701) -
Balance at the end of the year 8,828,705 1,145,375,743

15.3.1 Class of asset-wise break-up

Buildings 2,923,720 52,711,983
Plant and machinery 5,904,985 1,326,391
Mini hydro power - 15,022,182
Solar power - 1,076,315,187
8,828,705 1,145,375,743
 Annual Report 2016-17 | Browns Capital PLC 79

15.4 Property, plant and equipment pledged as collaterals

Property, plant and equipment pledged by the Group as collaterals to obtain financial assistance from various financial institutions have been
disclosed in note 46 to the financial statements.

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

16 Intangible assets
Licenses and permits (16.1) 143,755,919 129,668,753 - -
Goodwill (16.2) 26,047,631 36,541,631 - -
169,803,550 166,210,384 - -

16.1 Licenses and permits

Gross carrying amount
At cost
Balance at the beginning of the year 129,668,753 - - -
Acquisition through business combinations - 107,795,000 - -
Additions during the year 17,250,000 21,873,753 - -
Balance at the end of the year 146,918,753 129,668,753 - -

Amortization
Balance at the beginning of the year - - - -
Charge for the year 3,162,834 - - -
Balance at the end of the year 3,162,834 - - -

Written-down value at the end of the year 143,755,919 129,668,753 - -

The licences and permits represent the approvals and licenses obtained by Sagasolar Power (Pvt) Ltd (SPPL) for the solar power project. The SPPL
has obtained these approvals and licenses from its initial shareholders.

16.2 Goodwill
The carrying value of goodwill as at 31st March 2017 represents the goodwill on acquisition of net assets of Sagasolar Power (Pvt) Ltd by the
Company in the previous financial year.

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

Reconciliation of carrying amount

Balance at the beginning of the year 36,541,631 10,494,000 - -
Add : - 26,047,631 - -
Less : Disposal of subsidiaries (10,494,000) - - -
Balance at the end of the year 26,047,631 36,541,631 - -

Goodwill as at the reporting date has been tested for impairment and during the year and it was concluded that no impairment loss for the year.
The recoverable amount of goodwill is determined based on value-in-use calculations. These calculations use cash flow projections based on
financial budgets approved by management. The key assumptions used are given below;
Business growth rate – Based on the long term average growth rate for each business unit.
Inflation rate – Based on current inflation rate.
Discount rate – Risk free rate adjusted for the specific risk relating to the industry.
80 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

17 Bearer biological assets - Group

2017
As at 31st March, Note Tea Rubber Coconut Mixed Crop Total
Rs. Rs. Rs. Rs. Rs.

Bearer biological assets 17.1 529,362,883 409,392,255 13,732,053 172,545,643 1,125,032,834

Total carrying amount 529,362,883 409,392,255 13,732,053 172,545,643 1,125,032,834

17.1 Bearer biological assets

17.1.1 Reconciliation of carrying amount
On finance lease 17.1.1.1 45,329,995 7,171,513 1,895,251 - 54,396,759
Investments by the Group 17.1.1.2 481,678,240 401,403,092 11,836,802 170,411,229 1,065,329,363
Growing crop nurseries 17.1.1.3 2,354,648 817,650 - 2,134,414 5,306,712
529,362,883 409,392,255 13,732,053 172,545,643 1,125,032,834

17.1.1.1 On finance lease

a) Balance at the beginning of the year 371,934,362 212,787,257 11,585,507 - 596,307,126
Disposal of subsidiaries (168,662,060) (182,170,540) (3,314,848) - (354,147,448)
Balance at the end of the year 203,272,302 30,616,717 8,270,659 - 242,159,678

b) Amortisation
Balance at the beginning of the year 275,640,008 156,567,391 8,420,170 - 440,627,569
Amortisation for the year 12,250,203 7,092,912 386,183 - 19,729,298
Disposal of subsidiaries (129,947,904) (140,215,099) (2,430,945) - (272,593,948)
Balance at the end of the year 157,942,307 23,445,204 6,375,408 - 187,762,919

c) Written down value at the end of the year 45,329,995 7,171,513 1,895,251 - 54,396,759
 Annual Report 2016-17 | Browns Capital PLC 81

2016
Tea Rubber Coconut Mixed Crop Total
Rs. Rs. Rs. Rs. Rs.

1,562,129,809 3,009,370,473 24,751,181 190,494,028 4,786,745,491

1,562,129,809 3,009,370,473 24,751,181 190,494,028 4,786,745,491

96,294,354 56,219,866 3,165,337 - 155,679,557

1,454,002,513 2,948,644,890 21,585,844 184,461,753 4,608,695,000
11,832,942 4,505,717 - 6,032,275 22,370,934
1,562,129,809 3,009,370,473 24,751,181 190,494,028 4,786,745,491

371,934,362 212,787,257 11,585,507 - 596,307,126

- - - - -
371,934,362 212,787,257 11,585,507 - 596,307,126

263,389,814 149,474,483 8,033,986 - 420,898,283

12,250,194 7,092,908 386,184 - 19,729,286
- - - - -
275,640,008 156,567,391 8,420,170 - 440,627,569

96,294,354 56,219,866 3,165,337 - 155,679,557

82 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

17 Bearer biological assets - Group (Contd.)

2017
As at 31st March, Note Tea Rubber Coconut Mixed Crop Total
Rs. Rs. Rs. Rs. Rs.

17.1.1.2Investments by the Group

a) Immature plantations
Balance at the beginning of the year 425,591,165 1,589,356,326 - 102,603,255 2,117,550,746
Additions during the year 51,651,346 192,763,517 437,274 60,545,503 305,397,640
Transfer out (171,558,311) (247,346,140) - (34,997,585) (453,902,036)
Transfer out to consumable biological (1,242,663) - - - (1,242,663)
assets
Written off during the year (9,772,000) - - (867,128) (10,639,128)
Disposal of subsidiaries (289,604,743) (1,241,895,335) - (70,451,233) (1,601,951,311)
Balance at the end of the year 5,064,794 292,878,368 437,274 56,832,812 355,213,248

b) Mature plantations
Balance at the beginning of the year 1,465,497,632 1,977,074,763 27,830,539 84,983,943 3,555,386,877
Transfer in 171,558,311 247,346,140 - 34,997,585 453,902,036
Disposal of subsidiaries (897,440,683) (2,045,115,266) (12,185,398) - (2,954,741,347)
Balance at the end of the year 739,615,260 179,305,637 15,645,141 119,981,528 1,054,547,566

c) Accumulated depreciation
Balance at the beginning of the year 437,083,831 617,788,676 6,244,694 3,125,446 1,064,242,647
Charge for the year 49,258,553 108,577,462 504,412 3,277,665 161,618,092
Disposal of subsidiaries (223,340,570) (655,585,225) (2,503,493) - (881,429,288)
Balance at the end of the year 263,001,814 70,780,913 4,245,613 6,403,111 344,431,451

d) Written down value at the end of the year 481,678,240 401,403,092 11,836,802 170,411,229 1,065,329,363

17.1.1.3Growing crop nurseries

Balance at the beginning of the year 11,832,942 4,505,718 - 6,032,275 22,370,935
Increase/(decrease) (2,143,462) 695,503 - 2,552,439 1,104,480
Disposal of subsidiaries (7,334,832) (4,383,571) - (6,450,300) (18,168,703)
Balance at the end of the year 2,354,648 817,650 - 2,134,414 5,306,712
 Annual Report 2016-17 | Browns Capital PLC 83

2016
Tea Rubber Coconut Mixed Crop Total
Rs. Rs. Rs. Rs. Rs.

446,994,803 1,814,512,572 - 102,861,776 2,364,369,151

57,487,019 209,300,610 - 50,376,573 317,164,202
(75,853,368) (434,456,856) - (43,522,400) (553,832,624)
- - - - -

(3,037,289) - - (7,112,694) (10,149,983)

- - - - -
425,591,165 1,589,356,326 - 102,603,255 2,117,550,746

1,389,644,264 1,542,617,907 27,830,539 41,461,543 3,001,554,253

75,853,368 434,456,856 - 43,522,400 553,832,624
- - - - -
1,465,497,632 1,977,074,763 27,830,539 84,983,943 3,555,386,877

389,864,445 521,452,427 5,704,568 2,135,414 919,156,854

47,221,839 96,333,772 540,127 990,031 145,085,769
- - - - -
437,086,284 617,786,199 6,244,695 3,125,445 1,064,242,623

1,454,002,513 2,948,644,890 21,585,844 184,461,753 4,608,695,000

18,859,519 6,668,703 - 1,523,512 27,051,734

(7,026,577) (2,162,986) - 4,508,763 (4,680,800)
- - - - -
11,832,942 4,505,717 - 6,032,275 22,370,934
84 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

17 Bearer biological assets - Group (Contd.)

The above represents the investments in bearer biological assets carried at cost comprising immature and mature plantations since the formation
of the sub subsidiaries including nurseries. The assets taken over by way of estate leases are set out in the notes 13 and 15 to the financial
statements.

These are investments in bearer biological assets carried at cost (Tea, Rubber, Coconut and Mixed Crop) which comprises of immature/mature
plantations since the formation of the sub subsidiaries. The assets (including plantations assets) taken over by way of estate leases are set out
in the notes 13 and 15.1 to the financial statements. Further investments in immature plantations taken over by way of leases are shown in this
note. When such plantations become mature, the additional investments since taken over to bring them to maturity will be moved from immature
to mature under this note. A corresponding movement from immature to mature of the investment undertaken by JEDB/SLSPC on the same
plantation prior to the lease will also be carried out under this note.

Pursuant to the amendments on Agriculture: Bearer Plants (Amendments to LKAS 16 and LKAS 41), issued in March 2015 by the Institute of
Chartered Accountants of Sri Lanka the Group has adopted the said amendments voluntarily in the year 2015/16, converting from its existing
accounting policy on Bearer Biological Assets on fair value to Historical Cost Model in compliance to the LKAS 16. The bearer biological assets
of rubber and coconut were previously measured at fair value less cost to sale ,under LKAS 41. Accordingly the requirement of recognition of
bearer biological assets at its fair value under LKAS 41 has now been changed with the aforesaid amendments issued in March 2015. The Group
has elected to measure the bearer biological assets i.e. tea, rubber, coconut and mixed crop using LKAS 16 – Property Plant & Equipment and
continued the historical cost model of recording them.

18 Consumable biological assets - Group

18.1 Reconciliation of carrying amount
Group
As at 31st March, 2017 2016
Rs. Rs.

Balance at the beginning of the year 6,150,989,629 6,380,136,975

Additions during the year 62,479,987 8,648,231
Written offs during the year (5,072,381) -
Decrease due to harvesting of timber trees (69,643,812) (45,380,968)
Increase/(decrease) in growing crop nurseries at cost 749 1,939,132
6,138,754,172 6,345,343,370
Changes in fair value less cost to sell 204,491,575 (194,353,741)
Disposal of subsidiaries (3,359,154,828) -
Carrying value as at 31st March 2,984,090,919 6,150,989,629

Timber trees include commercial timber plantations cultivated on estates. The above carrying amount as at 31st March 2017 includes a sum of
Rs. 40,906,095/= (As at 31st March 2016- Rs. 26,005,222/=) which is the cost of immature trees up to the age of 04 years which is treated as
approximate fair value particularly on the ground of little biological transformation taken place and impact of such transformation on price is
expected to be immaterial.

Borrowing costs of Rs. 807,204/= (Previous year - Rs. 3,677,161/=) have been capitalized during the year in to immature trees.
 Annual Report 2016-17 | Browns Capital PLC 85

18.2 The carrying value of consumable biological assets as at the reporting date is as disclosed below.
Consumable biological assets - Group

Group
As at 31st March, 2017 2016
Rs. Rs.

Fair value less cost to sell attributable to both price and physical change of mature trees 2,941,487,945 6,122,018,317
Add : Cost of timber plants below four years of age as at reporting date not considered for valuation. 40,906,095 26,005,222
Cost of growing crop nurseries 1,696,879 2,966,090
Carrying value as at 31st March 2,984,090,919 6,150,989,629

18.3 Measurement of fair value

The fair value of managed trees was ascertained since the LKAS 41 - “Agriculture” is only applicable for managed agricultural activity in terms
of the ruling issued by the Institute of Chartered Accountants of Sri Lanka. The valuation was carried out by Mr. K.T.D.Tissera, an independent
Chartered Valuation Surveyor, using Discounted Cash Flow (DCF) methods. In ascertaining the fair value of timber, a physical verification was
carried out covering all the estates.

The future cash flows are determined by reference to current timber prices.

a) Fair value hierarchy

The fair value measurement for the consumable assets has been categorized as Level 3 fair value based on the inputs to the valuation technique
used.

b) Level 3 fair value

Breakdown of the total gains/(losses) recognized in respect of Level 3 fair values of consumable biological assets namely, managed timber
plantation, are given below.

Group
As at 31st March, 2017 2016
Rs. Rs.

Gain/(loss) included in profit or loss

Change in fair value (unrealized) 204,491,575 (194,353,741)
204,491,575 (194,353,741)

Gain/(loss) included in other comprehensive income - -

Total gain/(loss) 204,491,575 (194,353,741)
86 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

18 Consumable biological assets - Group (Contd.)

18.3 Measurement of fair value (Contd.)

c) Valuation techniques and significant unobservable inputs

Following table shows the valuation techniques in measuring Level 3 fair value of consumable biological asses as well as the significant
unobservable inputs used.

Type Valuation technique used Significant unobservable inputs Inter-relationship between key
unobservable inputs and fair
value measurement
Timber older than Discounted cash flows. Determination of timber content The estimated fair value would
4 years. increase/(decrease) if;
The valuation model considers present Timber trees in inter-crop areas and pure -the estimated timber content
value of future net cash flows expected crop areas have been identified field-wise and were higher/(lower).
to be generated by the plantation from spices were identified and harvestable trees -the estimated timber prices
the timber content of managed timber were separated, according to their average per cubic meter were higher/
plantation on a tree-per-tree basis. girth and estimated age. (lower).
- the estimated selling related
Expected cash flows are discounted Timber trees that have not come up to a
costs were lower/(higher).-
using a risk-adjusted discount rate of harvestable size are valued working out the
- the estimated maturity age
16% comprising a risk premium of 4%. period that would take for those trees to grow
were higher/(lower).
up to a harvestable size.
Determination of price of timber
Trees have been valued as per the current
timber prices per cubic meter based on the
price list of the State Timber Corporation and
prices of timber trees sold by the estates and
prices of logs sawn timber at popular timber
traders in Sri Lanka.
In this exercise, following factors have been
taken into consideration.
a) Cost of obtaining approval of felling.
b) Cost of felling and cutting into logs.
c) Cost of transportation.
d) Sawing cost.
Risk-adjusted discount rate.
2016/2017 16% (risk premium - 4%).
2015/2016 15% (risk premium - 4%).

18.4 Sensitivity analysis

a) Sensitivity variation on sales price:
Values as appearing in the statement of financial position are very sensitive to price changes with regard to the average sales prices applied.
Simulations made for timber show that an increase or decrease by 10% of the estimated future selling price has the following effect on the net
present value of biological assets.

As at 31st March, -10% Variance Value +10% Variance

Rs. Rs. Rs.

Consumable biological assets - timber trees

As at 31st March 2017 (294,148,795) 2,941,487,945 294,148,795

As at 31st March 2016 (612,201,832) 6,122,018,317 612,201,832

 Annual Report 2016-17 | Browns Capital PLC 87

b) Sensitivity variation on discount rate:

Values as appearing in the statement of financial position are very sensitive to changes of the discount rate applied. Simulations made for timber
show that an increase or decrease by 1% of the estimated future discount rate has the following effect on the net present value of biological
assets.

As at 31st March, -1% Variance Value +1% Variance

Rs. Rs. Rs.

Consumable biological assets - timber trees

As at 31st March 2017 75,217,418 2,941,487,945 (66,334,639)

As at 31st March 2016 212,929,866 6,122,018,317 (181,826,242)

18.5 Financial risk management strategies relating to agricultural activities

The Group is exposed to the following risks relating to managed timber plantations.

a) Supply and demand risk

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

b) Regulatory and environmental risk

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

c) Climate and other risks

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

18.6 Consumable biological assets pledged as security for liabilities

Details of consumable biological assets that have been pledged as security for liabilities are disclosed in note 46 to the financial statements.

19 Agricultural produce attached to bearer biological assets

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Balance at the beginning of the year - - - -

Change in fair value less cost to sell 24,796,311 - - -
Less: Disposal of subsidiaries (10,323,741) - - -
Carrying value at the end of the year 14,472,570 - - -

Carrying value of agricultural produce attached to bearer biological

assets as at the reporting date is as disclosed below

Tea 9,665,507 - - -
Rubber 217,027 - - -
Coconut 1,396,182 - - -
Cinnamon 3,193,854 - - -
14,472,570 - - -

The fair value of agricultural produce attached to bearer biological assets as at 31st March 2016 has not been measured since the fair value as at
that date is not significant to the consolidated financial statements.
88 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

20 Investments in subsidiaries
20.1 Unquoted
20.1.1 Ordinary shares
Company
No. of shares Company and group holding Carrying Carrying
Value Value
As at 31st March, 2017 2016 2017 2016 2017 2016
Nos. Nos. % % Rs. Rs.

F L M C Plantations (Pvt) Ltd - 5,500,000 0.00% 55.00% - 600,000,000

F L P C Management (Pvt) Ltd 92,052,838 92,052,838 95.34% 95.34% 357,650,000 357,650,000
Browns Power Holdings (Pvt) Ltd 100,000,000 100,000,000 100.00% 100.00% 100,000,000 100,000,000
Enselwatte Power (Pvt) Ltd 10,000,000 10,000,000 100.00% 100.00% 10,000,000 10,000,000
The Tea Leaf Resort Holdings
(Pvt) Ltd 250,000 250,000 50.00% 50.00% 2,500,000 2,500,000
Dolekanda Power (Pvt) Ltd 10,000,000 10,000,000 100.00% 100.00% 10,000,000 10,000,000
Browns Properties (Pvt) Ltd 82,500,000 82,500,000 100.00% 100.00% 825,000,000 825,000,000
Sagasolar Power (Pvt) Ltd 42,537,022 38,703,370 50.10% 50.10% 446,183,115 407,064,217
1,751,333,115 2,312,214,217
Less : Provision for impairment (13,605,804) (10,956,320)
1,737,727,311 2,301,257,897

20.1.2 Preference shares

Company
No. of shares Company and group holding Carrying Carrying
Value Value
As at 31st March, 2017 2016 2017 2016 2017 2016
Nos. Nos. % % Rs. Rs.

a) Non-redeemable and non-voting

8% cumulative preference shares
at Rs. 10/= each.

Maturata Plantations Ltd., 1,535,581 1,535,581 30.28% 30.28% 4,000,000 4,000,000

b) Redeemable 10% cumulative

preference shares at Rs. 10/=
each.

Browns Properties (Pvt) Ltd., 14,500,000 14,500,000 100.00% 100.00% 145,000,000 145,000,000
149,000,000 149,000,000

1,886,727,311 2,450,257,897

Provision for impairment:

An impairment loss of Rs. 2,500,000/- has been recognized during the year in the Company’s financial statements in respect of the investment
made in Tea Leaf Resorts Holdings (Pvt) Ltd due to the extraordinary delays in starting commercial operation by the Subsidiary. An additional
impairment of Rs. 149,484 has been recognized in respect of Dolekanda Power (Pvt) Ltd as at 31st March 2017.
 Annual Report 2016-17 | Browns Capital PLC 89

20.1.3 Group holdings in subsidiaries

As at 31st March 2017 2016

Subsidiary Principal Activity No of Control No of Control
Shares Holding % Shares Holding %

FLPC Management (Pvt) Ltd Plantation management 92,052,838 95% 92,052,838 95%
Maturata Plantation Ltd Plantations 25,200,000 72% 25,200,000 72%
Browns Power Holdings (Pvt) Ltd Investing 100,000,000 100% 100,000,000 100%
Dolekanda Power (Pvt) Ltd Hydro power generation
(Non Operating) 10,000,000 100% 10,000,000 100%
Enselwatte Power (Pvt) Ltd Hydro power generation
(Non Operating) 10,000,000 100% 10,000,000 100%
Browns Properties (Pvt) Ltd Real estate 60,000,000 100% 60,000,000 100%
The Tea Leaf Resort Holdings Leisure (Non Operating)
(Pvt) Ltd 250,000 50% 250,000 50%
Sagasolar Power (Pvt) Ltd Solar power generation 38,703,370 50% 38,703,370 50%

20.2 Net assets disposed due to disposal of subsidiaries

Divestment of Lotus Hydro Power PLC (Formerly known as Browns Hydro Power PLC) and FLMC Plantations Private Limited

During the year, the Group divested its controlling stake (72.13%) in Lotus Hydro Power PLC (formerly known as Browns Hydro Power PLC) for a
consideration of Rs. 540.53Mn.

Further, the Group divested its controlling stake by disposing 4.51Mn number of shares (45.1%) in FLMC Plantations (Pvt) Ltd for a consideration
of Rs. 4,635.80Mn., keeping the remaining stake of (9.9%)

Fair values of the identifiable assets and liabilities of the disposed entity at the date of disposal as disclosed below;
90 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

20 Investments in subsidiaries (Contd.)

Subsidiary Lotus Hydro FLMC Total

Power PLC Plantations
(Pvt) Ltd
Rs. Rs.
Rs.

Cash and cash equivalents 35,720,179 275,102,930 310,823,109

Other financial assets - 306,226,545 306,226,545
Amounts due from related parties 65,301,209 248,102,155 313,403,364
Loans to related parties - 18,666,667 18,666,667
Trade and other receivables 61,106,336 221,901,761 283,008,097
Inventories 8,158,065 396,519,899 404,677,964
Agricultural produce attached to bearer biological assets - 10,323,741 10,323,741

Bearer biological assets - 3,774,985,573 3,774,985,573

Consumable biological assets - 3,359,154,828 3,359,154,828
Property, plant and equipment 860,211,429 883,123,216 1,743,334,645
Rights to use the leasehold land 4,280,129 166,951,943 171,232,072
Total assets 1,034,777,347 9,661,059,258 10,695,836,605

Bank overdraft 1,706,724 64,986,964 66,693,688

Income tax payable 3,831,990 12,924,401 16,756,391
Trade and other payables 33,386,970 434,618,455 468,005,424
Amounts due to related parties 65,417,051 204,492,553 269,909,604
Loans from related parties - 45,681,770 45,681,770
Retirement benefit obligation 3,579,374 711,372,052 714,951,426
Deferred tax liability 56,888,069 714,160,792 771,048,861
Deferred income - 472,943,965 472,943,965
Loans and borrowings 136,367,853 347,039,699 483,407,552
Total liabilities 301,178,031 3,008,220,651 3,309,398,681

Net assets disposed 733,599,316 6,652,838,607 7,386,437,924

Net assets attributable to the Group 344,351,518 2,160,980,629 2,505,332,147

Goodwill and consolidation adjustments 20,899,142 - 20,899,142

Fair value of consideration received (net of transaction cost) 540,533,825 4,635,797,981 5,176,331,806

Gain on disposal of subsidiaries 175,283,165 2,474,817,352 2,650,100,517

20.3 Investment in Agalawatte Plantations PLC

In July 2016, the Group acquired a 60.80% stake in Agalawatte Plantations PLC (APL) with a long term view and considered it as an investment in
Subsidiary of the Group. Accordingly, Agalawatte Plantations PLC was consolidated and unaudited financial statements for the quarters ended
30th September 2016 and 31st December 2016 were presented.

By a letter dated 28th September 2016, The Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB), issued a direction to
the Board of Directors of APL to re-audit the published audited financial statements of the company for the year ended 31st December 2014.
Consequent to the re-audit, which was finalized in March 2017, it was revealed that the liabilities of APL were significantly higher than what was in
the publicly available audited financial statements at the time of acquisition. The management evaluated the significance of such risk that poses
on the Group and consequently the management changed its intention on the investment in APL and divested the investment in March 2017.
 Annual Report 2016-17 | Browns Capital PLC 91

Subsequent to the re-audit, the auditor of APL has issued a disclaimed audit opinion on the re-audited financial statements for the financial year
ended 31st December 2014 and as at the date on which the financial statements of the Group are authorised for issue by the Board of Directors,
the audited financial statements of APL for financial years 2015 and 2016 were not available. Since it was impracticable to obtain reliable financial
information after making every reasonable effort to do so and considering the significant limitations and uncertainty described above, the
management is of the view that consolidation of the results of APL may not represent a true and fair view of the consolidated financial statements
of Browns Capital PLC. Consequently, in order to present the substance of the transaction and its effect, the management concluded that the
investment in APL not to be treated as an investment in subsidiary from the date of acquisition for the purpose of preparing consolidated financial
statements of Browns Capital PLC for the year ended 31st March 2017.

The details of the investment in APL, disposal and resultant loss on disposal recognized in the Group and the Company financial statements for the
year ended 31st March 2017 are stated below.

Date of the transaction Description Value (Rs)

14th July 2016 Cost of acquisition of APL Group 306,166,000

28th March 2017 Disposal proceeds from APL Group 272,707,586
Loss on disposal (33,458,414)

Since the Group acquired and disposed the total investment in APL within the financial year ended 31st March 2017, there is no impact on the
profit and other comprehensive income in the statement of profit or loss and other comprehensive income for the year ended 31st March 2017
and total assets, total liabilities and total equity in the consolidated statement of financial position as at 31st March 2017 even though APL has not
been consolidated with the Group for the preparation of the consolidated financial statements

20.4 Country of incorporation

All companies have been incorporated under the Companies Act No. 07 of 2007 and are domiciled in Sri Lanka.

Maturata Plantations Limited has been incorporated under the Companies Act No. 07 of 2007 in terms of the Provisions contained in the
conversion of public corporations or government owned business undertakings into Public Companies Act No. 23 of 1987 and is domiciled in Sri
Lanka.

20.5 Maturata Plantations Ltd, a subsidiary of F L P C Management (Pvt) Ltd

The holders of ordinary shares and the golden share are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at meetings of the company.

A golden share has been allotted to the secretary to the treasury by capitalization of revaluation reserve on 1st August, 1995. Articles of
Association of the plantation companies embody the specific rights assigned to the golden shareholder on behalf of the State of Democratic
Socialist Republic of Sri Lanka. In addition to the rights of the normal ordinary shareholder, in terms of the Articles of the company, following
special rights are vested with the golden shareholder.

“The golden share of Rs. 10/- held by the secretary to the treasury in Maturata Plantations Ltd enjoys the following special rights:

“a) The concurrence of the golden shareholder should be obtained to sub-lease estate lands and amend the Articles of Association of the
plantation companies in which the golden shareholder’s rights are given.

“b) The golden shareholder and or his nominee shall be entitled to inspect the books of account of the company after giving two weeks written
notice to the company.

c) The plantation companies shall submit to the golden shareholder within 60 days of the end of each quarter a quarterly report relating to the
performance of the plantation companies during the said quarter in a pre-specified format agreed to by the golden shareholder.

d) The golden shareholder shall be entitled to call upon the board of directors once in three months to meet him or his nominee to discuss
matters of the plantation companies of interest to the estate.

e) The plantation companies shall submit to the golden shareholder, within 90 days of the end of each fiscal year, information related to the
plantation companies in a pre-specified format agreed to by the golden shareholder with the plantation companies.

The golden share has been allotted to the secretary to the treasury by capitalization of revaluation reserve on 01st August 1995. Articles
of Association of the plantation companies embodies the specific rights assigned to the golden shareholder on behalf of the State of
Democratic Socialist Republic of Sri Lanka.
92 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

20 Investments in subsidiaries (Contd.)

Definition of the ‘golden share’ - a share allotted to the secretary to the treasury in his official capacity and not in his own name, for and on behalf
of the state of the Democratic Socialist Republic of Sri Lanka, and or by any transferee permitted in terms of the Articles. Definition of ‘golden
shareholder’ – the holder of the ‘golden share’.

20.6 Maturata Plantations Ltd.,

Debentures issued on 19th June, 1997 to the value of Rs 150 Mn have been converted to ordinary shares on 22nd June 2002 as stipulated in
the agreement. The basis and/or ratio of conversion has been contested by the golden shareholder in year 2008. The details of conversion are as
follows:

i. Basis of conversion
Nos. 4.575000732 ordinary shares at par value of Rs 10/= each per debenture of par value of Rs 10/- each.

ii. Number of shares resulting from the above conversion

Nos. 15,000,000 ordinary shares (i.e. 21% incremental shareholding to the Group from 51% to 72%).

iii. Possible impact on group shareholding of Maturata Plantations Ltd.,

The number of shares resulting from the above conversion would be reduced from Nos. 15,000,000 to 3,278,688 ordinary shares in the event the
conversion is made as suggested by the golden shareholder. (i.e. incremental shareholding to the Group would be reduced from 72% to 57.90%).

21 Other financial assets- non current

21.1 Available for sale financial assets
21.1.1 Rain Forest Eco Lodge (Pvt) Ltd., (RFELL)
Group
As at 31st March, 2017 2016
Rs. Rs.

a) Group holding % 13.44% 14.50%

b) No. of shares owned by group 6,399,375 6,399,375

Maturata Plantations Ltd (MPL) a sub-subsidiary of the Group received 20% of the issued ordinary shares of Rs. 10/= each of (6,399,375 no.
of ordinary shares) from Rain Forest Eco Lodge (Pvt) Ltd., incorporated to promote eco tourism in lieu of releasing the leasehold rights of 488
hectares from Enselwatte Estate, Deniyaya. As per the agreement entered into with RFELL, MPL is also entitled to receive 1.50 % of the annual total
turnover of RFELL.

However due to the subsequent rights issued by RFELL, MPL’s share holding percentage has come down from 20% to 13.44%, and ‘equity
accounted’ treatment of accounting ceased to exist consequently during 2014/15 financial year. The carrying amount has been subsequently
recognised as an ‘other financial assets-non current’.

Group
As at 31st March, 2017 2016
Rs. Rs.

c) Reconciliation of carrying value

Balance at the beginning of the year 41,580,513 42,644,386
Loss on change in fair value (1,304,900) (1,063,873)
Balance at the end of the year 40,275,613 41,580,513

d) Measurement of fair value

The fair value measurement of investments made in RFELL has been categorized as Level 3 based on the observable market data, and
unobservable inputs.
 Annual Report 2016-17 | Browns Capital PLC 93

e) Valuation technique used and significant unobservable data

Price to book value (P/BV) Multiple Method is used to measure the fair value of investments made in RFELL as at the reporting date due to the
following reasons.

- Listed prices are not available for RFELL.

- PE multiple method can not be applied as the RFELL is currently making losses.

Also, free cash flows method has not been used in this fair value measurement, as it is highly subjective and involves making assumptions.

Valuation technique used

Price to book value multiples (P/BV) method
Respective market multiple of selected peers have been taken and adjusted for the specific nature of the RFELL. Peers are mostly listed entities
who conduct same business activities which have similar characteristics to valued entity. However, RFELL does not have exactly identical peers and
this has been adjusted with the respective discount or premium.

22 Long term investments

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

22.1 Available for sale financial assets

Bodufaru Beach Resort (Private) Limited (note 22.1.1) 139,132,887 139,132,887 139,132,887 139,132,887
LOLC (Private) Limited (note 22.1.2) 75,375,000 - 75,375,000 -
214,507,887 139,132,887 214,507,887 139,132,887

22.1.1 Bodufaru Beach Resort (Private) Limited

a) Group holding % 18.15% - 18.15% -
b) No. of shares owned by the Group 10,000 - 10,000 -
c) Reconciliation of carrying value
Balance at the beginning of the year 139,132,887 - 139,132,887 -
Additions - 139,132,887 - 139,132,887
Balance at the end of the year 139,132,887 139,132,887 139,132,887 139,132,887

22.1.2 LOLC (Private) Limited

a) Group holding % 2.14% - 2.14% -
b) No. of shares owned by the Group 706,600 - 706,600 -
c) Reconciliation of carrying value
Balance at the beginning of the year - - - -
Additions 75,375,000 - 75,375,000 -
Balance at the end of the year 75,375,000 - 75,375,000 -

The investment in Bodufaru Beach Resorts (Private) Limited and LOLC (Private) Limited have been stated at cost in accordance with paragraph
46 of LKAS 39 - Financial Instruments : Recognition and Measurement, as they are an investment in equity instruments that do not have a quoted
price in an active market and whose fair value cannot be reliably measured.
94 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

23 Inventories
Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Input materials 36,078,483 108,241,764 - -

Harvested crop
Tea 211,437,805 304,048,358 - -
Rubber 5,295,682 54,593,199 - -
Coconut 31,544 834,284 - -
Produce tea for exports - 21,072,938 - -
Consumables and spares 6,698,283 35,917,728 - -
259,541,797 524,708,271 - -
Less : Provision for non-moving inventories - (3,832,565) - -
259,541,797 520,875,706 - -

24 Trade and other receivables

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Produce trade receivable 128,265,214 175,152,323 - -

Withholding tax recoverable 1,721 7,555 - -
Economic service charge recoverable 26,985,190 27,217,092 - -
Other debtors 113,996,448 145,748,408 1,260,993 208,600
Value added tax recoverable - 5,511,479 - -
Advances and prepayments 31,647,536 549,018,671 908,300 481,204
300,896,109 902,655,528 2,169,293 689,804
Less : Provision for impairment of trade receivables - (11,335,255) - -
300,896,109 891,320,273 2,169,293 689,804
 Annual Report 2016-17 | Browns Capital PLC 95

25 Loans to related parties

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

a) Master summary
Balance at the beginning of the year - - 361,550,000 375,716,667
Add : New loans granted during the year 18,666,667 - 1,250,226,655 29,000,000
18,666,667 - 1,611,776,655 404,716,667
Less : Repayments during the year - - - (18,676,442)
Amount written off - - - (24,490,225)
Less : Disposal of subsidiaries (18,666,667) - - -
Balance at the end of the year - - 1,611,776,655 361,550,000

b) Maturity analysis
Amount receivable within one year - - 1,611,776,655 361,550,000
Amount receivable after one year & less than five years - - - -
Amount receivable after five years - - - -
- - 1,611,776,655 361,550,000

c) Related party wise summary

Maturata Plantations Ltd - - 1,611,776,655 361,550,000
- - 1,611,776,655 361,550,000

d) Rate of interest per annum, terms of repayment and securities obtained.

Name of related party Amount (Rs.) Terms and conditions Security obtained

Maturata Plantations Ltd. 361,550,000 Refer note 45 On promissory notes of Rs 365.0 Mn.
1,250,226,655 Refer note 45
96 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

26 Amounts due from related parties

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

Ceylon Estate Teas (Pvt) Ltd 28,784,909 - 31,310,083 -

Melfort Green Teas (Pvt) Ltd 1,305,028 - 1,143,745 -
Maturata Plantations Ltd - - 82,183,749 78,033,450
Pussellawa Plantations Ltd 17,516,747 - 6,446,139 1,143,407
Agalawatta Plantations PLC 41,315,067 - 933,542 -
Enselwatte Power (Pvt) Ltd - - 4,325,952 4,257,632
Browns Power Holdings (Pvt) Ltd - - 9,480,991 -
Browns Capital Holdings (Pvt) Ltd - 5,867,394 - 5,867,394
FLMC Sudima Timber Products (Pvt) Ltd - 1,071,673 - -
The Tea Leaf Resort Holding (Pvt) Ltd - - 3,595,540 3,595,540
Ceylon Estate Projects (Pvt) Ltd - 38,400 - -
Pussellawa Teas (Pvt) Ltd - 41,400 - -
Ceylon Roots (Pvt) Ltd 8,249,484 1,963,310 - -
Ajax Engineers (Pvt) Ltd 512,809 3,559,194 - -
Lanka ORIX Finance PLC - 14,896,784 - -
Browns Global Farm (Private) Limited 196,789 - 196,789 -
Sagasolar Power (Pvt) Ltd - - 408,372 -
F L C Estate Bungalows (Pvt) Ltd 51,707 - 51,707 -
97,932,539 27,438,155 140,076,609 92,897,423
Less : Provision for impairment of amounts due from related parties (7,921,492) (1,151,473) (7,921,492) (4,257,632)
90,011,047 26,286,682 132,155,117 88,639,791

27 Other financial assets-current

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

Investments in marketable equity securities 27.1 - 14,490,000 - -

Savings and other deposits 27.2 12,616,192 36,400,658 - -
Financial assets at fair value through profit or loss 27.3 1,000,000,000 - 1,000,000,000 -
1,012,616,192 50,890,658 1,000,000,000 -

27.1 Investments in marketable equity securities

Balance at the beginning of the year 14,490,000 281,817,425 - 263,232,425
Gain /(loss) on investment in marketable securities - (3,538,696) - 556,304
Withdrawals - (263,788,729) - (263,788,729)
Disposal of subsidiaries (14,490,000) - - -
Balance at the end of the year - 14,490,000 - -
 Annual Report 2016-17 | Browns Capital PLC 97

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

27.2 Savings and other deposits

Fixed deposits 12,616,192 36,400,658 - -
12,616,192 36,400,658 - -

27.3 Financial assets - Fair value through profit or loss

Balance at the beginning of the year - - - -
Add : Remaining stake from the divestments of subsidiaries
- F L M C Plantations (Pvt) Ltd 108,000,000 - 108,000,000 -
Add : Fair value gain recognised in the profit or loss 892,000,000 - 892,000,000 -
Balance at the end of the year 1,000,000,000 - 1,000,000,000 -

No of shares Cost Carrying value

As at 31st March, 2017 2016 2017 2016 2017 2016
Nos Nos Rs. Rs. Rs. Rs.

Fair value through profit or loss

F L M C Plantations (Pvt) Ltd. 990,000 - 108,000,000 - 1,000,000,000- -

The Group disposed of 45.1% of its interest in its Subsidiary, FLMC Plantations (Pvt) Ltd in March 2017. Consequently, the Group classified its
remaining 9.9% interest in FLMC Plantations (Pvt) Ltd as held-for-trading as the intention was to dispose the remaining interest held. Subsequent
to the reporting date, the said investment was disposed.

28 Cash and cash equivalents

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

Favourable balances
Cash in hand 4,583,249 1,024,581 30,000 30,000
Short term investments 28.1 4,650,552,570 439,667,981 4,367,900,084 54,000,000
Cash in transit - 7,958,134 - -
Cash at banks 53,829,939 81,574,736 19,901,931 6,974,339
4,708,965,758 530,225,432 4,387,832,015 61,004,339

Unfavourable balances
Less: Bank overdrafts 124,187,515 116,655,988 - -
Cash and cash equivalents for the purpose of cash flow 4,584,778,243 413,569,444 4,387,832,015 61,004,339
statement

The investments with short term maturities within three months or less from the date of acquisitions are treated as cash and cash equivalents.
98 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

28 Cash and cash equivalents (Contd.)

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

28.1 Short term investments

Fixed deposits 14,384,331 133,441,572 14,384,331 54,000,000
Call deposits 65,364,713 1,257,875 - -
Repos - 149,218,534 - -
Commercial papers 4,570,803,526 155,750,000 4,353,515,753 -
4,650,552,570 439,667,981 4,367,900,084 54,000,000

29 Stated capital
As at 31st March, Nos. Nos. Nos. Nos.

29.1 Ordinary shares

a) No. of shares
Balance at the beginning of the year 1,368,000,000 1,368,000,000 1,368,000,000 1,368,000,000
Issue of shares during the year for cash consideration - - - -
Balance at the end of the year 1,368,000,000 1,368,000,000 1,368,000,000 1,368,000,000

b) Value of Shares Rs. Rs. Rs. Rs.

Balance at the beginning of the year 2,568,000,000 2,568,000,000 2,568,000,000 2,568,000,000
Issue of shares during the year for cash consideration - - - -
Balance at the end of the year 2,568,000,000 2,568,000,000 2,568,000,000 2,568,000,000

c) Rights, preferences and restrictions attached to ordinary share capital

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.

30 Reserves
Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

30.1 Revaluation surplus

Balance at the beginning of the year 118,313,019 118,313,019 - -
Disposal of subsidiaries (118,313,019) - - -
Balance at the end of the year - 118,313,019 - -

This represented the Group’s share of the surplus on revaluation of freehold building, electrical equipment and penstock pipe lines owned by Lotus
Hydro Power PLC, a sub subsidiary of the Group which was disposed during the year.
 Annual Report 2016-17 | Browns Capital PLC 99

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

30.2 Available-for-sale reserve

Balance at the beginning of the year (8,405,291) (7,674,996) - -
Loss on change in fair value (1,304,900) (730,295) - -
Balance at the end of the year (9,710,191) (8,405,291) - -

This represents the cumulative net change in the fair value of available-
for-sale financial assets until the investments are derecognised or
impaired.

Total reserve at the end of the year (9,710,191) 109,907,728 - -

31 Non-controlling interests (NCIs)

Non-controlling interests is the equity in a subsidiary/sub subsidiaries not attributable directly or indirectly to the parent and are presented in the
statement of financial position within equity, separately from the equity attributable to share holders of the parent company.

The following table summarises the information relating to each of group’s subsidiaries/sub subsidiaries that has material NCI, before any intra-
group eliminations.

31st March 2017 Plantation Hydro power Renewable Total

sector sector energy sector
Rs. Rs. Rs. Rs.

a) Net assets
Non-current assets 5,639,440,180 - 2,742,185,636 8,381,625,816
Current assets 631,915,315 - 109,628,546 741,543,861
Non-current liabilities (1,107,499,880) - (1,715,496,846) (2,822,996,726)
Current liabilities (3,013,506,486) - (339,896,497) (3,353,402,983)
Total net assets 2,150,349,128 - 796,420,840 2,946,769,968
Total carrying amount of NCI 515,400,648 - 397,413,999 912,814,647

b) Revenue 5,453,766,843 60,968,961 172,215,328 5,686,951,132

Profit/(loss) from continuing operations 362,588,859 153,686,129 (51,486,185) 464,788,802
Other comprehensive income (OCI) 44,027,940 - - 44,027,940
Total comprehensive income 406,616,798 153,686,129 (51,486,185) 508,816,742

Profit/(loss) allocated to NCI 165,881,613 14,752,866 (25,691,606) 154,942,873

OCI allocated to NCI 19,779,142 - - 19,779,142
Total comprehensive income to NCI 185,660,755 14,752,866 (25,691,606) 174,722,015

c) Cash flows from/(used in);

Operating activities 177,933,533 953,129 573,569,185 752,455,847
Investing activities 4,312,927,986 1,394,979 (1,466,743,039) 2,847,579,926
Financing activities (288,116,784) (38,318,581) 897,608,392 571,173,027
Net increase/(decrease) in cash and cash equivalents 4,202,744,735 (35,970,473) 4,434,537 4,171,208,799
100 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

31 Non-controlling interests (NCIs) (Contd.)

31st March 2017 Plantation Hydro power Renewable Total

sector sector energy sector
Rs. Rs. Rs. Rs.

31.1 Non-controlling interests (NCIs)

a) Net assets
Non-current assets 12,788,423,532 1,355,013,759 1,206,140,103 15,349,577,394
Current assets 1,212,021,282 162,782,943 610,338,742 1,985,142,967
Non-current liabilities (4,312,401,691) (170,200,078) (1,015,813,076) (5,498,414,845)
Current liabilities (2,143,988,184) (129,168,760) (29,278,744) (2,302,435,688)
Total net assets 7,544,054,939 1,218,427,864 771,387,025 9,533,869,828
Total carrying amount of NCI 4,719,853,537 391,886,318 384,922,125 5,496,661,980

b) Revenue 5,273,097,278 167,274,774 - 5,440,372,052

Profit/(Loss) from continuing operations (662,936,760) 377,370 14,876,550 (647,682,840)
Other comprehensive income (OCI) 463,701,649 791,878 - 464,493,527
Total comprehensive income (199,235,111) 1,169,248 14,876,550 (183,189,313)

Profit/(loss) allocated to NCI (274,921,732) 7,253,181 7,423,398 (260,245,153)

Add : loss allocated to NCI directly by the sub-subsidiaries 159,718,703 - - 159,718,703
OCI allocated to NCI 72,623,096 420,199 - 73,043,295
Total comprehensive income to NCI (42,579,933) 7,673,380 7,423,398 (27,483,155)

c) Cash flows from/(used in);

Operating activities (303,967,491) 137,217,098 (449,720,765) (616,471,158)
Investing activities (118,519,860) (26,938,559) (437,224,234) (582,682,653)
Investing activities 563,718,909 (125,191,678) 1,029,543,659 1,468,070,890
Net increase/(decrease) in cash and cash equivalents 141,231,558 (14,913,139) 142,598,660 268,917,079
 Annual Report 2016-17 | Browns Capital PLC 101

32 Loans and borrowings

Group Company
As at 31st March, Notes 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Term loans 32.1 a) 2,005,913,714 1,651,698,705 - -

Net liability to lessor of JEDB/SLSPC estates 32.2 c) 52,528,437 285,446,815 - -
Other finance lease obligations 32.3 c) 27,212,687 41,626,723 - -
2,085,654,838 1,978,772,243 - -

Maturity analysis - master summary

Amount payable within one year
Term loans 32.1 b).1 258,144,135 318,627,296 - -
Net liability to lessor of JEDB/SLSPC estates 32.2.2 a) 1,035,863 5,326,138 - -
Other finance lease obligations 32.3 a) 16,755,862 14,414,036 - -
Current potion of loans and borrowings 275,935,860 338,367,470 - -

Amount payable after one year & less than five years
Term loans 32.1 b).2 597,556,686 866,868,383 - -
Net liability to lessor of JEDB/SLSPC estates 32.2.2 b) 4,574,705 23,521,944 - -
Other finance lease obligations 32.3.1 b) 10,456,825 27,212,687 - -
612,588,216 917,603,014 - -

Amount payable after five years

Term loans b).3 1,150,212,894 466,203,026 - -
Net liability to lessor of JEDB/SLSPC estates 32.2.2 c) 46,917,869 256,598,733 - -
Other finance lease obligations 32.3.1 c) - - - -
1,197,130,763 722,801,759 - -
Amount payable after one year 1,809,718,979 1,640,404,773 - -

Grand total of maturity analysis - master summary 2,085,654,838 1,978,772,243 - -

102 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

32 Loans and borrowings (Contd.)

Group Company
As at 31st March, Notes 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

32.1 Term loans

a) Master Summary
Balance at the beginning of the year 1,651,698,705 755,844,288 - 61,550,000
Add : New loans obtained during the year 874,949,503 1,203,958,737 - -
Acquisition through business combinations - 2,184,109 - -
2,526,648,208 1,961,987,134 - 61,550,000
Less : Repayments during the year (296,844,190) (310,288,429) - (61,550,000)
Disposal of Subsidiaries (223,890,304) - - -
Balance at the end of the year 2,005,913,714 1,651,698,705 - -

b) Maturity analysis
b).1 Amount payable within one year 258,144,135 318,627,296 - -
b).2 Amount payable after one year and less than five years 597,556,686 866,868,383 - -
b).3 Amount payable after five years 1,150,212,893 466,203,026 - -
2,005,913,714 1,651,698,705 - -

c) Lender-wise summary
Bank of Ceylon PLC - 167,192,450 - -
National Development Bank PLC 127,095,881 261,328,813 - -
Sampath Bank PLC - 158,554,000 - -
Hatton National Bank PLC 443,678,945 -
DFCC Bank PLC 826,388,888 654,550,205 - -
Sri Lanka Tea Board 22,000,000 - - -
Commercial Bank of Ceylon PLC 586,750,000 410,073,237 - -
2,005,913,714 1,651,698,705 - -

32.2 Net liability to lessor of JEDB/SLSPC estates

Net liability to lessor is the net present value of annual lease rentals over the remaining life period of the estate leases. This is made up as follows.

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

a) Gross liability
Balance at the beginning of the year 489,109,911 505,853,911 - -
Less : Repayments during the year (16,744,000) (16,744,000) - -
Less : Disposal of subsidiaries (383,745,661) - - -
Balance at the end of the year 88,620,250 489,109,911 - -

b) Finance charges allocated to future periods

Balance at the beginning of the year 203,663,096 215,285,808 - -
Less : Finance charges written off during the year (11,417,871) (11,622,712) - -
Less : Disposal of subsidiaries (156,153,412) - - -
Balance at the end of the year 36,091,813 203,663,096 - -

c) Net liability 52,528,437 285,446,815 - -

 Annual Report 2016-17 | Browns Capital PLC 103

32.2.1 Maturata Plantations Ltd.

Leasehold Right to Bare Land of JEDB/SLSPC Estates assets and immovable (JEDB/SLSPC) assets on finance lease
Leasehold rights to bare land of JEDB/SLSPC Estate assets and immovable (JEDB/SLSPC) estates assets on finance lease obtained on a long term
basis, are stated at the recorded carrying values as at the effective date of Sri Lanka Accounting Standard No.17 – “Leases”, in line with ruling of
the urgent issues task force (UITF) of the Institute of Chartered Accountants of Sri Lanka. Such carrying amounts are amortized over the remaining
lease term or useful life of such asset whichever is shorter.

Gross contingent rental in respect of leasehold rights to bare land for remaining 28.25 years of the lease term at the current contingent rental is
estimated as Rs.109,753,955/= as at 31st March 2017. (As at 31st March 2016 - Rs.110,406,912/=).

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

32.2.2 Maturity analysis

a) Amount payable within one year 3,137,000 16,744,000 - -
Less : Finance charges allocated to future periods (2,101,137) (11,417,862) - -
1,035,863 5,326,138 - -

b) Amount payable after one year and less than five years 12,548,000 66,976,000 - -
Less : Finance charges allocated to future periods (7,973,295) (43,454,056) - -
4,574,705 23,521,944 - -

c) Amount payable after five years 72,935,250 405,389,911 - -

Less : Finance charges allocated to future periods (26,017,381) (148,791,178) - -
46,917,869 256,598,733 - -

d) Grand total 52,528,437 285,446,815 - -

32.2.3 Maturata Plantations Ltd.

The lease rentals have been amended with effect from 15th/21st June, 1996 to a substantially higher amounts than the previous nominal lease
rentals of Rs.500/- per estate per annum.

The basic rental payable under the revised basis is Rs. 3,137,000/- per annum and this amount is to be inflated annually by the Gross Domestic
Production (GDP) Deflator and is in the form of contingent lease rental. Consequently, contingent lease rentals charged for the current year in the
statement of comprehensive income amounts to Rs. 8,194,423/- (Last year - Rs.7,961,362/-).

The lease agreements were further amended on 15th/21st June 2002, freezing annual lease rentals at Rs.22,928,105/- for a period of six years
commencing from 15th/21st June, 2002. Hence, the GDP Deflator adjustment has been frozen at Rs.6,184,105/- per annum until 15th/21st June,
2008.

Lease rentals have been revised by the Ministry of Finance after the relief period of 2002 to 2008. The rentals have been computed in accordance
with amendment of leases.

1) Future liability on annual lease payments of Rs.3,137,000/- would continue until year 2045. The net present value of this liability at 4% discounting
rate (as recommended by UITF) would result in a liability of Rs. 52,528,427/-. (Last year - Rs.53,524,458/-.)

2) The Net Present Value of Rs. 52,528,427/- (as at 31st March 2016 - Rs 53,524,458/-) is presented by gross liability of Rs. 88,620,250/- (As at 31st
Match 2016 - Rs.91,757,250/-) and interest in suspense of Rs. 36,091,813/- .(As at 31st March 2016 - Rs. 38,232,792/- ).

3) The charge to the comprehensive income statement during the current year is Rs. 2,140,978/- (Last year - Rs.2,179,295/-).
104 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

32 Loans and borrowings (Contd.)

32.3 Other finance lease obligations
Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

a) Gross liability
Balance at the beginning of the year 49,755,049 70,814,685 - -
49,755,049 70,814,685 - -
Less : Repayment during the year (19,444,116) (21,059,636) - -
Balance at the end of the year 30,310,933 49,755,049 - -

b) Finance charges allocated to future periods

Balance at the beginning of the year 8,128,326 15,350,397 - -
8,128,326 15,350,397 - -
Less : Finance charges written off during the year (5,030,080) (7,222,071) - -
Balance at the end of the year 3,098,246 8,128,326 - -

c) Carrying value of finance lease obligation 27,212,687 41,626,723 - -

32.3.1 Maturity analysis

a) Amount payable within one year
Amount payable 19,444,116 19,444,116 - -
Less : Finance charges allocated to future periods (2,688,254) (5,030,080) - -
16,755,862 14,414,036 - -

b) Amount payable after one year and less than five years
Amount payable 10,866,817 30,310,933 - -
Less : Finance charges allocated to future periods (409,992) (3,098,246) - -
10,456,825 27,212,687 - -

c) Amount payable after five years

Amount payable after five years - - - -
Less : Finance charges allocated to future periods - - - -
- - - -

d) Grand total 27,212,687 41,626,723 - -

 Annual Report 2016-17 | Browns Capital PLC 105

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

32.3.2 Lender-wise summary

a) Gross liability
Peoples Leasing Finance PLC 19,789,208 33,010,244 - -
Merchant Bank of Sri Lanka PLC 10,521,725 16,744,805 - -
30,310,933 49,755,049 - -

b) Finance charges allocated to future periods

Peoples Leasing Finance PLC 2,147,546 5,587,304 - -
Merchant Bank of Sri Lanka PLC 950,700 2,541,022 - -
3,098,246 8,128,326 - -

c) Net liability 27,212,687 41,626,723 - -

33 Short term borrowings

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Lanka Commodity Brokers Ltd 27,757,806 - - -

Asia Siyaka Commodities PLC 3,429,452 12,576,999 - -
Forbes & Walker Tea Brokers (Pvt) Ltd 41,700,506 697,200 - -
Forbes & Walker Commodity Brokers (Pvt) Ltd 3,466,451 - - -
Ceylon Tea Brokers PLC 10,416,779 14,718,775 - -
John Keells PLC 29,147,498 1,169,761 - -
Sri Lanka Tea Board - 15,974,000 - -
115,918,492 45,136,735 - -

34 Deferred tax liabilities

Group Company
As at 31st March, Notes 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Deferred tax liabilities attributable to;

Unutilised tax losses (482,006,444) (107,603,411) -
Retirement benefit obligations (129,215,406) (102,573,985) -
Property, plant and equipment 23,402,115 106,956,504 -
Investment properties 155,026,672 -
Bearer biological assets 173,142,554 399,617,642 -
Consumable biological assets 414,677,181 330,776,561 -
Net deferred tax liabilities 34.1 155,026,672 627,173,311 -

34.1 Movement in recognised deferred tax liabilities

Balance at the beginning of the year 627,173,311 594,509,648 -
Originations of temporary differences -
- Recognized in profit/(loss) 291,044,564 (48,298,351) -
- Recognized in other comprehensive income 7,857,661 80,962,014 -
Disposal of subsidiaries (771,048,864) -
Balance as at the end of the year 155,026,672 627,173,311 -
106 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

35 Retirement benefit obligations

Group Company
As at 31st March, Notes 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Present value of unfunded obligations 839,606,279 1,578,374,576 - -

Total present value of the obligations 35.1 839,606,279 1,578,374,576 - -

35.1 Movement in the present value of the retirement benefit

obligations
Retirement benefit obligations at the beginning of the year 1,578,374,576 2,090,462,241 - -
Expenditure recognized in profit or loss
- Current service cost 109,390,820 91,995,429 - -
- Interest cost 110,479,546 167,353,400 - -

Expenditure recognized in other comprehensive income

- Actuarial (gain)/loss (53,190,501) (546,519,414) - -

Others
- Benefits paid by the plan (190,496,736) (224,917,080) - -
Disposal of subsidiaries (714,951,426) - - -
839,606,279 1,578,374,576 - -

This liability is not externally funded.

As required by the Sri Lanka Accounting Standard (LKAS 19) - “Employee Benefits”, the Group measures its benefit obligations together with
following sub-subsidiary using actuarial valuations carried out by Messer’s. Actuarial & Management Consultants (Pvt) Ltd.

- Maturata Plantations Limited

35.2 The principal assumptions used by the Group

The key assumptions used by M/s. Actuarial & Management Consultants (Private) Limited include the followings:

2017 2016

Discount rate 12.00% 11.00% Per annum

Future salary increases
- For staff 7.50% 7.50% Per annum
- For workers 18.00% 18.00% Once in two years
Retirement age
- For staff 60 Yrs. 60 Yrs.
- For workers 60 Yrs. 60 Yrs.
Daily wage rate
- Tea Rs.500/- Rs.450/-
- Rubber Rs.500/- Rs.450/-
 Annual Report 2016-17 | Browns Capital PLC 107

35.3 Sensitivity analysis - Group

a) Sensitivity variation on rate of wages increment
Values appearing in the financial statements are very sensitive to the changes of financial and non-financial assumptions used. Simulations made
for retirement obligation show that a rise or decrease by 1% of the rate of wage has the following effect on the retirement benefit obligation:

As at 31st March 2017 Variance Variance

-1% +1%
Staff (Rs.) (4,211,848) 4,720,324
Worker (Rs.) (16,673,680) 17,538,154
Total (20,885,528) 22,258,478

As at 31st March 2016 Variance Variance

-1% +1%
Staff (Rs.) (9,777,862) 11,008,775
Worker (Rs.) (43,747,697) 46,172,338
Total (53,525,559) 57,181,113

b) Sensitivity variation on discount rate

Values as appearing in the financial statements are very sensitive to changes of the discount rate applied. Simulations made for retirement
obligation show that a rise or decrease by 1% of the estimated future discount rate has the following effect on the retirement benefit obligation:

As at 31st March 2017 Variance Variance

-1% +1%
Staff (Rs.) 4,275,490 (3,768,169)
Worker (Rs.) 38,751,495 (33,935,169)
Total 43,026,985 (37,703,338)

As at 31st March 2016 Variance Variance

-1% +1%
Staff (Rs.) 14,886,702 (6,973,969)
Worker (Rs.) 102,845,221 (89,336,947)
Total 117,731,923 (96,310,916)

35.4 Demographic assumptions

In addition to the above, demographic assumptions such as mortality, withdrawal and disability, and retirement age were considered for the
actuarial valuation. “A 67/07 mortality table” issued by the Institute of Actuaries, London was used to estimate the gratuity liability of the Group.
108 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

36 Deferred income
Group Company
As at 31st March, Notes 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Capital grants 36.1 99,149,332 580,194,243 - -

PHDT lease rentals 36.2 4,484,780 5,021,508 - -
Rain Forest Eco Lodge (Pvt) Ltd., 36.3 52,525,866 54,387,038 - -
Profit on sale & lease back transactions 36.4 844,747 1,267,170 - -
157,004,724 640,869,959 - -

36.1 Capital grants

a) Total capital grants received
Balance at the beginning of the year 856,351,458 781,598,465 - -
Add : Total grants received during the year 20,721,452 74,752,993 - -
Less : Disposal of subsidiaries (716,565,262) - - -
Balance at the end of the year 160,507,648 856,351,458 - -

b) Total amortisation
Balance at the beginning of the year 276,157,215 246,561,160 - -
Add : Amount amortized during the year 28,822,395 29,596,055 - -
Less : Disposal of subsidiaries (243,621,294) - - -
Balance at the end of the year 61,358,316 276,157,215 - -

c) Total unamortised capital grants at the end of the year 99,149,332 580,194,243 - -

The above represents the following;

The funds received from the Plantation Housing and Social Welfare Trust (PHSWT), MTIP, PDP and PHDT for the development of workers’ welfare
facilities and improvements to institutional facilities.

The funds received from the plantation reform project for the development of forestry plantations.

The amount spent is capitalised under the relevant classification of property, plant and equipment and corresponding grant component is reflected
under deferred grants and subsidies and is being amortized over the useful life span of the related asset.

Grants related to the biological assets which are measured at fair value less point to sell cost is directly charged to the carrying value of such
assets in accordance with the applicable financial framework.

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

36.2 PHDT lease rentals

Balance at the beginning of the year 5,021,508 5,558,143 - -
Less : Amount amortized during the year (536,728) (536,635) - -
Balance at the end of the year 4,484,780 5,021,508 - -

Premises at St. Andrew’s Drive in Nuwara Eliya has been leased out to Plantation Human Development Trust (PHDT) for a period of 20 years
commencing from August 2005 at a total lease rental of Rs.10,734,696/=.

Lease rentals received are deferred and amortized over the lease period commencing from August 2005.
 Annual Report 2016-17 | Browns Capital PLC 109

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

36.3 Rain Forest Eco Lodge (Pvt) Ltd (RFELL)

Balance at the beginning of the year 54,387,038 56,248,211 - -
Less : Amount amortized during the year (1,861,172) (1,861,173) - -
Balance at the end of the year 52,525,866 54,387,038 - -

This represents the value of Nos.6,399,375 of ordinary shares received by Maturata Plantations Ltd., equivalent to 13.44% as at the reporting date
of the issued ordinary shares of RFELL at Rs.10/= each in lieu of releasing the leasehold rights of 488 hectares in Enselwatte Estate, Deniyaya for
an Eco Tourism Project. The value of ordinary shares are deferred and amortized over the unexpired balance lease period.

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

36.4 Profit on sale & lease back transactions

Balance at the beginning of the year 1,267,170 1,689,694 - -
1,267,170 1,689,694
Less : Amount amortized during the year (422,423) (422,524) - -
Balance at the end of the year 844,747 1,267,170 - -

36.5 Maturity analysis - master summary

a) PHDT lease rentals
Not later than one year 536,635 536,735 - -
Later than one year and not later than five years 2,146,939 2,146,939 - -
Later than five years 1,801,206 2,337,834 - -
4,484,780 5,021,508 - -

b) Rain Forest Eco Lodge (Pvt) Ltd

Not later than one year 1,861,172 1,861,173 - -
Later than one year and not later than five years 7,444,691 7,444,690 - -
Later than five years 43,220,003 45,081,175 - -
52,525,866 54,387,038 - -

c) Profit on sale & lease back transactions

Not later than one year 422,423 422,423 - -
Later than one year and not later than five years 422,324 844,747 - -
Later than five years - - - -
844,747 1,267,170 - -
110 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

37 Loans from related parties

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

a) Master summary
Balance at the beginning of the year 1,513,309,372 461,177,755 66,958,000 -
Add :New loans obtained during the year 1,715,941,211 1,456,304,889 1,250,226,655 66,958,000
3,229,250,583 1,917,482,644 1,317,184,655 66,958,000
Less : Repayments during the year (1,618,577,970) (404,173,272) (66,958,000) -
Disposal of subsidiaries (45,681,770) - - -
Balance at the end of the year 1,564,990,844 1,513,309,372 1,250,226,655 66,958,000

b) Maturity analysis
Amount payable within one year 1,545,546,323 482,272,701 1,250,226,655 66,958,000
Amount payable after one year & less than five years 19,444,521 1,031,036,671 - -
Amount payable after five years - - - -
1,564,990,844 1,513,309,372 1,250,226,655 66,958,000

c) Related party wise summary

Lanka ORIX Leasing Company PLC 42,400,576 1,191,873,594 - -
Brown & Company PLC - 66,958,000 - 66,958,000
Seylan Bank PLC 103,111,111 254,477,778 - -
Browns Capital Holdings (Pvt) Ltd 40,000,000 - - -
LOLC Factors Ltd 1,334,979,157 - 1,250,226,655 -
Pussellawa Plantations Limited 44,500,000 - - -
1,564,990,844 1,513,309,372 1,250,226,655 66,958,000
 Annual Report 2016-17 | Browns Capital PLC 111

d) Terms of repayment and securities pledged

Name of the Loan taken by Nature of the Facility Amount Terms of repayment Securities pledged
related party facility obtained outstanding
as at
31.03.2017
Rs. Rs.

Lanka ORIX Leasing Maturata PDP Loan 59,205,582 7,400,576 Repayable in 96 Primary continuing mortgage bond for
Co. PLC Plantations under ADB equated monthly Rs.42.93 Mn over the unexpired leasehold
Limited, a sub Plantation instalments of rights over the land called Anningkanda
subsidiary Development Rs.616,725 together and Panilkanda Estates in Deniyaya.
Project. with interest, with a
grace period of one year
started from May 2010
Primary continuing mortgage bond on
all unexpired leasehold rights over land,
estate and premises called "Hayes group"
in Deniyaya/Ratnapura.
Lanka ORIX Leasing Browns Working 35,000,000 - Loan repayable on Mortgage over the fixed deposits of
Co. PLC Properties Capital loan demand or at any time FD No-487182 - Rs 15,303,565
(Pvt) Ltd, a
subsidiary FD No-487419 - Rs 12,616,192
FD No-487181 - Rs 10,688,436

Grand total 94,205,582 7,400,576

Seylan Bank PLC Maturata Term Loan 100,000,000 41,666,667 Repayable in 48 Mortgage over leasehold rights of
Plantations equated monthly Bramley estate for Rs.13.0 Mn.
Limited, a sub instalments of
subsidiary Rs.2,083,333/=.
Term Loan 133,000,000 42,000,000 Repayable in 19 equal Corporate Guarantee of M/s Browns
monthly instalments of Capital PLC for Rs.75.00 Mn.
Rs.7,000,000/=.
Primary Mortgage for Rs.36.0 Mn
Secondary Mortgage bond for Rs.50 Mn
over leasehold rights of Gonapitiya Estate.
Mortgage over leasehold rights of Alma
Estate for Rs.26.0Mn.
Total 233,000,000 83,666,667
112 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

37 Loans from related parties (Contd.)

Name of the Loan taken by Nature of the Facility Amount Terms of repayment Securities pledged
related party facility obtained outstanding
as at
31.03.2017
Rs. Rs.
Seylan Bank PLC Maturata Permanent 125,000,000 124,187,515 Repayable on demand Mortgage over leasehold rights of Ragala
Plantations overdraft Estate for Rs.120.0Mn.
Limited, a sub
subsidiary
Mortgage over leasehold rights of estate
land, buildings, fixed and floating assets
of Maha Uva Estate for Rs.19.50Mn.
Mortgage over leasehold rights of estate
land, buildings, fixed and floating assets
of Enselwatte Estate for Rs.160.25Mn.
Total 125,000,000 124,187,515

Seylan Bank PLC Browns Term loan 250,000,000 19,444,444 Repayable after a Primary mortgage over freehold land &
Properties grace period of one buildings in extent of 49.5 perches at
(Pvt) Ltd, a year starting from May No.19, Dudley Senanayake Mawatha,
fully owned 2015 in 35 equated Colombo 08.
subsidiary monthly instalments
of Rs.1,400,000/=
and a final instalment
of Rs.1,000,000/=
together with interest.
Total 250,000,000 19,444,444

Browns Capital Maturata Term loan 40,000,000 40,000,000 The capital is payable
Holdings (Private) Plantations after six months grace
Limited Limited, a sub period, the balance in
subsidiary 10 equated monthly
installments.

Total 40,000,000 40,000,000

 Annual Report 2016-17 | Browns Capital PLC 113

Name of the Loan taken by Nature of the Facility Amount Terms of repayment Securities pledged
related party facility obtained outstanding
as at
31.03.2017
Rs. Rs.

LOLC Factors Ltd Maturata Loan 17,759,000 32,640,954 Capital is payable on On demand promissory notes of
Plantations (Beverly demand/or at any time Rs.17.759Mn.
Limited, a sub Factory) the capital and interest
subsidiary exceed the maximum
credit limit.

Revolving 275,000,000 52,111,548 Capital is payable on A counter guarantee was given by MPL
Credit Facility demand/or at any time for Rs. 275.0 Mn in favour of Browns
the capital and interest Capital PLC on the same terms and
exceed the maximum conditions with 1% guarantee fee.
credit limit. On demand promissory note
Rs.275.0Mn.
Total 292,759,000 84,752,502

LOLC Factors Ltd Browns Working 1,250,226,655 1,250,226,655 Interest is payable LOLC Factors Ltd reserve the right to
Capital PLC capital loan on at the end of the require additional securities from time
each month and the to time.
capital shall be paid in
full at the expiry of 12
months from the date
of disbursement.
Total 1,250,226,655 1,250,226,655
Grand total 1,542,985,655 1,334,979,157

Pussellawa Maturata Loan 55,000,000 44,500,000 Repayable on demand

Plantations Plantations
Limited Limited, a sub
subsidiary
Grand total 55,000,000 44,500,000
114 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

38 Trade and other payables

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Trade payables 180,594,281 336,350,551 - -

VAT payable 18,130,420 10,866,536 - -
NBT payable 2,888,134 767,518 - -
Accrued charges 4,618,327 66,687,105 - -
Employees' profit share - 8,781,978 - -
Payable on share acquisition 11,650,000 11,650,000 11,650,000 11,650,000
Dividend payable - 3,448,709 - -
Rent received in advance 2,930,001 3,356,225 - -
Retention money - Browns Capital Building - 261,449 - -
Other payables 406,212,231 398,113,511 7,447,873 5,011,629
627,023,394 840,283,582 19,097,873 16,661,629

39 Amounts due to related parties

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Name of related parties

Pussellawa Plantations Ltd 25,826,976 - - -
Cricket Club Café (Pvt) Ltd 8,190 8,190 - -
Lanka ORIX Finance PLC 2,229,450 - - -
Browns Hydro Power PLC 9,298 - - -
Browns Properties (Pvt) Ltd - - 40,866,381 55,412,733
Sierra Civil Engineering (Pvt) Ltd 1,000,000 1,000,000 - -
Agstar PLC 16,381,558 22,034,884 - -
Agstar Cropcare (Pvt) Ltd - 111,210 - -
LOLC Insurance Ltd 2,296,651 1,097,057 - -
Sierra Cables PLC 2,500,000 2,500,000 - -
LOLC Motors (Pvt) Ltd - 11,354 - -
Browns & Co PLC - 5,940,165 - 5,940,165
Lanka ORIX Leasing Company PLC 6,192,884 89,861,862 6,192,884 73,984,671
Lanka ORIX IT Services Limited 1,147,954 - 1,112,750 -
Lanka ORIX Factors (Pvt) Ltd 117,620,538 - 21,215,258 -
Ceylon Estate Teas (Pvt) Ltd 516,282 - - -
Dolekanda Power (Pvt) Ltd - - 8,916,825 8,985,445
Browns Capital Holdings (Pvt) Ltd 2,915,787 - - -
178,645,568 122,564,722 78,304,098 144,323,014
 Annual Report 2016-17 | Browns Capital PLC 115

40 Income tax payable

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Balance at the beginning of the year 2,642,593 4,854,917 2,810,235 9,576,474

Add : Tax on profit for the year (Note 10.1) 50,994,761 36,233,195 8,203,885 12,737,374
Income tax (over)/under-provision in respect of previous year 2,379,626 (179,525) - -
Adjustments - ESC transferred to ESC receivable - 5,102,279 - -
56,016,980 46,010,866 11,014,120 22,313,848

Less : Self assessment tax paid (18,934,398) (24,756,014) (6,077,842) (18,532,687)

ESC set off (46,777) (2,120,511) - -
Withholding tax set off (6,178,394) (5,021,556) (165,252) (970,926)
Notional tax credit (672,415) (1,190,427) - -
Balance tax payment (263,869) (10,279,765) - -
(26,095,853) (43,368,273) (6,243,094) (19,503,613)

Less : Disposal of subsidiaries (16,756,391) - - -

Balance at the end of the year 13,164,736 2,642,593 4,771,026 2,810,235

41 Net assets per ordinary share (Rs.)

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Total equity attributable to equity holders of the Company 8,981,136,251 5,223,438,991 7,890,266,961 2,873,138,625

No. of shares in issue (Note 29) 1,368,000,000 1,368,000,000 1,368,000,000 1,368,000,000

Net assets per ordinary share (Rs.) 6.57 3.82 5.77 2.10

42 Events after the reporting date

There were no material events occurring after the reporting date that require adjustments to or disclosure in the financial statements other than
those disclosed below:

42.1 Browns Capital PLC disposed its remaining stake of 9.9% (990,000 shares) held in FLMC Plantations (Pvt) Ltd during the month of June 2017 for a
total consideration of Rs 1,948,000,0000. Fair value of this investment was recorded under the fair value through profit or loss investments as at
the reporting date.
116 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

43 Contingent liabilities and assets

43.1 Contingent liabilities
43.1.1 Company
The Company does not anticipate any contingent liabilities which require adjustment to or disclosure in financial statements other than the
contingent liability on the corporate guarantees (refer note 46)

43.1.2 Group
a) Maturata Plantations Ltd
The 8% cumulative preference dividends computed up to 31st March, 2017 of the non-controlling interests amounted to Rs. Rs.28,285,909/=
(2015/16 - Rs.25,237,380=). However, this amount has not been accrued as payable in the financial statements as this has been classified under
stated capital. However, due provision has been made in the statement of equity at the group level.

44 Contractual commitments
44.1 Company
There have been no capital commitments contracted but not provided for, or authorized by the board but not contracted for, outstanding as at the
reporting date.

44.2 Group
There have been no capital commitments contracted but not provided for, or authorized by the board but not contracted for, outstanding as at the
reporting date.

45 Related party disclosures

The Group and the Company carried out transactions in the ordinary course of business with parties who are defined as related parties as per
Sri Lanka Accounting Standard 24 - “Related Party Disclosure” which are transacted at normal business terms.

45.1 Immediate parent and ultimate controlling party

As at the reporting date, the immediate parent enterprise of Browns Capital PLC is M/s. Browns Capital Holdings (Pvt) Ltd., which holds 60.79%
shares in Browns Capital PLC, a fully owned subsidiary of Browns Investments PLC.

In the opinion of Board of directors, the Group’s ultimate parent undertaking and controlling party as at the reporting date is Lanka ORIX Leasing
Company PLC.

45.2 Key management personnel information

According to Sri Lanka Accounting Standard 24 “ Related Party Disclosures”, key management personnel are those having authority and
responsibility for planning, directing and controlling activities of the entity. Accordingly, the Board of Directors has been classified as key
management personnel of the company.

The Directors of the Company have interest in the transactions detailed below and some Directors held the post of directors of such related
companies during the year. The transactions listed below have been carried out under normal commercial terms.

During the year under review Mr. I.C Nanayakkara, Mr. D.S.K Amarasekara, Mr. A.I Fernando, Mr. U.H Palihakkara, Mr. W.D K. Jayawardana, Mrs. K.U
Amarasinghe, Mrs. S Kotakadeniya, and Mr. R. M Nanayakkara (expired on 22.03.2017), the Directors of the Company were also directors of the
companies identified in note 45.2 and have had transactions as disclosed in Note 45.3 below.

Particulars of the Directors who have resigned from the Board of Directors of the Company and who have been appointed to the Board of Directors
of the Company are given below.

a) Resignation of the Chairman/Non-Executive Director

Mr. Ishara Nanayakkara, the Chairman/Non-Executive Director of the Company resigned from the Board of Directors on 31st March 2017.

b) Appointment of the Chairman

Mr. Kapila Jayawardena, Non Executive Director was appointed as the Chairman of the Company with effect from 31st March 2017 consequent to
the resignation of Mr. Ishara Nanayakkara.

c) Demise of Non- Executive Director

With regret we inform our shareholders the demise of Mr. R. M. Nanayakkara, Non Executive director on 22nd March 2017.
 Annual Report 2016-17 | Browns Capital PLC 117

45.2 Key management personnel information

The particulars of the directorships held by each director of the company during the year under review in ultimate and immediate parent
companies and also in each of the subsidiary and sub-subsidiary companies have been disclosed in the following table.

LOLCFPLC
CLFCPLC
LOLCPLC

B&CPLC

LOLCGIL
FLPCML

LOLCPL
SBPLC
TLRHL

FLEBL
BIPLC

BPHL

BBRL
BCHL

SSPL

APLC
MPL
DPL

BPL

CRL
EPL

AEL
Name of the director

Mr. Ishara Nanayakkara **

Mr. W D K Jayawardana
Mr. D S K Amarasekera
Mr. U H Palihakkara
Mrs. K U Amarasinghe
Mrs. S Kotakadeniya
Mr. R M Nanayakkara *
Mr. Indrajith Fernando
* Expired on 22.03.2017
** Mr. Ishara Nanayakkara resigned from the Board of Directors of Sagasolar Power (Pvt) Ltd and Browns Capital PLC w.e.f. 07th and 31st March
2017 respectively.
Full name of the abbreviations used in the above table for the companies in which the directors of the company held other directorships and the
nature of relationship the parent company has with such companies are given below.

Name of the company Abbreviations Nature of the relationship

Lanka ORIX Leasing Company PLC LOLCPLC Ultimate parent undertaking and controlling party
Brown & Company PLC B&CPLC Intermediate parent company
Browns Investments PLC BIPLC Intermediate parent company
Browns Capital Holdings (Pvt) Ltd BCHL Immediate parent company
F L P C Management (Pvt) Ltd FLPCML Subsidiary
Browns Power Holdings (Pvt) Ltd BPHL Subsidiary
Dolekanda Power (Pvt) Ltd DPL Subsidiary
Enselwatte Power (Pvt) Ltd EPL Subsidiary
Browns Properties (Pvt) Ltd BPL Subsidiary
The Tea Leaf Resort Holdings (Pvt) Ltd TLRHL Subsidiary
Sagasolar Power (Pvt) Ltd SSPL Subsidiary
Maturata Plantations Ltd MPL Sub Subsidiary
F L C Estate Bungalows (Pvt) Ltd FLEBL Other related companies
Agstar PLC APLC Other related companies
Commercial Leasing & Finance Co. PLC CLFCPLC Other related companies
LOLC Finance PLC LOLCFPLC Other related companies
Bodufaru Beach Resort (Pvt) Ltd BBRL Other related companies
Ajax Engineers (Pvt) Ltd AEL Other related companies
Ceylon Roots (Pvt) Ltd CRL Other related companies
Seylan Bank PLC SBPLC Other related companies
LOLC General Insurance Ltd LOLCGIL Other related companies
LOLC (Pvt) Ltd LOLCPL Other related companies
118 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

45 Related party disclosures (Contd.)

As at 31st March, 2017 2016

Rs. Rs.

45.2.1 Transactions with key management personnel (KMPs)

a) Compensations to KMPs
Compensations to KMPs include following.
Short-term employee benefits - directors remunerations 30,004,000 31,127,393
Post-employment benefits - -
Other long-term benefits - -
Termination benefits - -
Share-based payments - -
30,004,000 31,127,393

Directors, where applicable are paid their remunerations by the Companies that they represent.

b) Loans to directors
No loans have been given to the directors of the company during year under review. (Previous year - Nil)

45.3 Transactions with related parties

The Company carries out transactions in the ordinary course of its business with parties who are defined as related parties in Sri Lanka Accounting
Standards 24 “Related Party Disclosures.

Company
For the year ended 31st March 2017 2016
Rs. Rs.

45.3.1 Transactions with subsidiaries, sub subsidiaries and affiliates

Ultimate Parent, Intermediate Parents and Immediate Parent Companies
Fund received 127,000,000 -
Loan Interest charged 28,179,098 9,201,305
Loan Interest settled 17,972,268 7,601,793
Short term deposits 4,353,515,753 54,000,000
Loan and Other Settlements 245,012,390 -
Expenses Shared 42,601,073 -

Subsidiaries & sub subsidiaries

Expenses shared 1,764,406 2,962,405
Receipt of dividends 20,148,754 50,620,996
Loans granted 1,251,226,655 -
Loans settlement 76,000,000 18,676,442
Interest income on loans 58,573,814 36,229,426
Guarantee fee income 2,750,000 2,755,660
Investments in subsidiaries - 407,064,217
Interest on preference shares 14,500,000 14,500,000

Other related companies

Expenses shared 196,789 -
Investment in commercial papers 4,353,515,753 -
 Annual Report 2016-17 | Browns Capital PLC 119

45 Related party disclosures (Contd.)

Group
For the year ended 31st March 2017 2016
Rs. Rs.

45.3.2 Transactions with subsidiaries, sub subsidiaries and other related companies
Other related companies
Expenses shared 4,165,074 830,546
Receipt of dividends 618,946 614,977
Payment of dividends 69,726,434 11,123,997
Receipt of loans 22,650,920 1,446,351,372
Interest charges 30,914,737 44,154,498
Short term deposits 14,384,331 264,750,000
Loan obtained 1,250,226,655 -
Loans settlement 157,350,920 369,399,053
Trading transactions:
- Purchase of material/services 43,500,342 75,126,139
Vehicle rent income - 90,813
120 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

45 Related party disclosures (Contd.)

45.4 Disclosures on related party transactions according to the section 9 of the listing rules
The Group has entered in to following recurrent related party transactions which exceed 10% of the gross revenue/income as disclosed below.

Name of the Relationship Nature of the transaction Aggregate value Aggregate Terms and conditions of the related
related party of related party value of party transactions
transactions Related
entered into Party
during the Transaction
financial year as a
percentage
of net
Rs. revenue
Lanka Orix Leasing Ultimate Repayment of loans - A sub 1,187,728,644 21.48% Repayable on Demand.
Co. PLC. parent subsidiary company of the Group, Interest at the market rate.
Company Maturata Plantations Ltd has
obtained a loan for the working
capital purpose during the
2015/16 financial year. Maturata
Plantations Ltd has fully settled
the said loan during the current
financial year with interest.
- do - - do - Short term investments - 4,353,515,753 78.74% Interest at the market rate.
Investments in commercial
papares
Maturata Sub Loan granted - Browns Capital 1,250,226,655 22.61% Repayable within one year.
Plantations subsidiary PLC (the Company) granted a Interest at the market rate.
Limited. short term loan to the Maturata
Plantations Limited for the
purpose of working capital
management.
LOLC Factors Other related Loan obtained - Browns Capital 1,250,226,655 22.61% Repayable within one year.
Limited companies PLC obtained a short term loan Interest at the market rate.
from LOLC factors Limited .
 Annual Report 2016-17 | Browns Capital PLC 121

45.5 Terms and conditions of transactions with related parties

Transactions with related parties are carried out in the ordinary course of the business. Outstanding current account balances at year end are
unsecured, interest free except as disclosed in Note 37. d) to the financial statements and settlements made in cash.

The pricing applicable to related party transactions is based on the assessment of risk and pricing model of the Company and is comparable with
that is applicable to transactions between the Company and its unrelated customers. Therefore all the related party transactions are carried out at
the arm’s length price under the ordinary course of business.

46 Assets pledged as collaterals

Following assets of the parent Company and other companies within the Group have been pledged as collaterals to obtain various financial
assistance by such companies as detailed below.

46.1 Assets pledged as collaterals by the company

Please refer the note 46.2 below.

46.2 Assets pledged as collaterals by the companies in the Group

46.2.1 Maturata Plantations Limited (sub subsidiary)
Name of financial Nature of the Facility Balance Securities pledged
institution facility granted outstanding
as at
31.03.2017
Rs. Rs.

a) Seylan Bank PLC Term loan 100,000,000 41,666,667 Mortgage for Rs. 13 Mn over leasehold rights
of Bramely estate.

Concessionary loan 133,000,000 42,000,000 Corporate Guarantee of M/s Browns Capital

PLC for Rs.75.00 Mn.
Permanent 125,000,000 124,187,515 Primary Mortgage for Rs.36.0 Mn Secondary
overdrafts Mortgage bond for Rs.50 Mn over leasehold
rights of Gonapitiya Estate.
Mortgage over leasehold rights of Alma
Estate for Rs.26.0Mn.
Mortgage over leasehold rights of Ragala
Estate for Rs.120.0Mn.
Mortgage over leasehold rights of estate land,
buildings, fixed and floating assets of Maha
Uva Estate for Rs.19.50Mn.
Mortgage over leasehold rights of estate
land, buildings, fixed and floating assets of
Enselwatte Estate for Rs.160.25Mn.
358,000,000 207,854,182
122 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

46 Assets pledged as collaterals (Contd.)

Name of financial Nature of the Facility Balance Securities pledged

institution facility granted outstanding
as at
31.03.2017
Rs. Rs.

b) Lanka ORIX Leasing Co. PLC PDP Loan under 59,205,582 7,400,682 Primary continuing mortgage bond for Rs.
ADB Plantation 42.93 Mn over the unexpired leasehold
Development rights over the land called Anninkanda and
Project Panilkanda estates in Deniyaya.
Corporate guarantee of M/s. Browns Capital
Holdings (Pvt) Ltd., for Rs. 36.11 Mn.
Primary continuing mortgage bond on
all unexpired leasehold rights over land,
estate and premises called "Hayes Group" in
Deniyaya/Ratnapura.
Loan - (Beverly 17,759,000 32,640,954 On demand promissory notes Rs. 17.759 Mn.
factory)
Revolving credit 275,000,000 52,111,548 Corporate guarantee of M/s. Browns Capital
facility PLC for Rs. 275.00 Mn.
A counter guarantee was given by MPL for
Rs. 275.0 Mn in favour of Browns Capital PLC
on the same terms and conditions with 1%
guarantee fee payable by MPL.
On demand promissory note Rs. 275 Mn.
Total 351,964,582 92,153,184

c) Browns Capital PLC Loan 365,000,000 361,550,000 On promissory notes of Rs 365.0 Mn.
Loan 1,250,226,655 1,250,226,655

d) Browns Capital Holdings (Pvt) Ltd Loan 40,000,000 40,000,000 -

d) National Development Bank PLC Loan 500,000,000 127,095,881 Securitised debt certificates of Rs. 500 Mn.

e) Merchant Bank of Sri Lanka PLC Finance Lease 18,777,350 9,571,025 Absolute ownership of the asset on finance
lease.

f) Peoples Leasing & Finance PLC Hire Purchase 40,068,735 17,641,662 Absolute ownership of the asset on hire
purchase.
Total 2,214,072,740 1,806,085,223
 Annual Report 2016-17 | Browns Capital PLC 123

46.2.2 Browns Properties (Pvt) Ltd., (subsidiary)

Name of financial Nature of the Facility Balance Securities pledged
institution facility granted outstanding
as at
31.03.2017
Rs. Rs.
a) Seylan Bank PLC Term loan 250,000,000 19,444,444 Primary mortgage over freehold land & building in extent
of 49.5 Perches at No. 19, Dudley Senanayake Mawatha,
Colombo 08.

b) Lanka ORIX Finance PLC Term loan 35,000,000 35,000,000 FD No-487182 - Rs. 15,303,565
FD No-487419 - Rs. 12,616,192
FD No-487181 - Rs. 10,688,436

Total 285,000,000 54,444,444

46.2.3 Sagasolar Power (Pvt) Ltd, (subsidiary)

Name of financial Nature of the Facility Balance Securities pledged
institution facility granted outstanding
as at
31.03.2017
Rs. Rs.
a) DFCC Bank Term Loan 850,000,000 826,388,889 Primary sum of Rs. 723 Mn to be secured by a concurrent
mortgage over the leasehold rights of land together
with proposed buildings, solar power plant complete
with civil structures, solar panels and the electrical grid
station and everything else standing thereon of the
10MW solar power plant located in Baruthankanda village
in Hambanthota together with specific machinery and
everything else thereon.
A sum of Rs. 127,000,000.00 to be secure under a
primary concurrent mortgage over 73,109,000/- ordinary
shares of the company to the value of Rs. 731,090,000/-
held by the Promoters. The Company holds 38,703,370
shares of Sagasolar Power (Pvt) Ltd.
Additional primary concurrent mortgage of project
documents.(license/approvals/agreements/contracts/
bonds etc.)
Undertaking by the shareholders that they will meet
project cost overrun.
124 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

46 Assets pledged as collaterals (Contd.)

Name of financial Nature of the Facility Balance Securities pledged

institution facility granted outstanding
as at
31.03.2017
Rs. Rs.

b) Commercial Bank of Ceylon Term Loan 606,000,000 586,750,000 Primary concurrent mortgage bond for Rs.100Mn over
PLC the leasehold rights of land at Baruthankanda village in
Hambanthota owned by Mahaweli Authority of Sri Lanka
and immovable project asset including plant ,machinery
and accessories in favour of DFCC bank (No Suggestions)
Bank Ceylon PLC and Hatton National Bank PLC
(participating lenders) securing interest of commercial
bank up to Rs 28 Mn.

Primary mortgage for Rs. 1,405.5Mn over movable

project assets in favour of DFCC Bank (No Suggestions)
Bank and HNB PLC Securing interest of Commercial Bank
up to Rs. 393 Mn
Primary concurrent mortgage bond for Rs. 264,5 Mn
over all shares of the company securing interest of
commercial bank up to Rs. 74 Mn.
Additional primary mortgage for Rs 264.5 Mn over book
debts, insurance proceeds and receivables of the project
company in favour of participating lenders securing the
interest of Commercial Bank up to Rs 74 Mn
Additional concurrent mortgage over all the project
documents (Power Purchase Agreement and other
approvals) in favour of the participating lenders and
lodging them with one of the banks.

c) Hatton National Bank PLC Term Loan 425,000,000 443,678,945 Construction primary mortgage for Rs. 1,446 Mn over the
immovable and movable project assets with HNB's share
of interest at Rs.361.5Mn.
Concurrent primary mortgage bond for Rs. 254 Mn over
all ordinary shares of the company, Special power of
Attorney in favour of the lenders with the right to transfer
the shares mortgaged, share transfer forms signed
in blank and letters from the shareholders informing
bank, company secretary and the company that they are
mortgaging their shares in the company.
1,881,000,000 1,413,138,888
 Annual Report 2016-17 | Browns Capital PLC 125

47 Financial risk management

47.1 Financial risk factors
The Group’s principal financial liabilities comprise with loans and borrowings and trade and other payables, amounts due to related companies,
loans from related companies and loans and borrowings. The main purpose of these financial liabilities is to finance the Group’s operations and to
provide guarantees to support its operations. Further, the Group has amounts due from related companies, trade and other receivables and cash
and short term deposits that arrive directly from its operations.

Accordingly, the Group’s activities are exposed to variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash
flow interest rate risk and price risk), credit risk and liquidity risk from its use of financial instruments.

47.2 Risk management framework

The Group’s overall financial risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential
adverse effects on the financial performance of the Group. Financial risk management is carried out through risk reviews, internal control systems,
insurance programmes and adherence to the Group’s financial risk management policies. The board of directors regularly reviews these risks and
approves the risk management policies, which covers the management of these risks.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s
risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and
to monitor risks and adherence to limits. The Group’s 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 risks faced by the Group.

47.2.1 Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.
The Group is exposed to credit risk from its operating activities (primarily trade receivables).

a) Credit risk management

The Group trades only with recognized, creditworthy third parties. It is the Group’s policy that all clients who wish to trade on credit terms are
subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s
exposure to bad debts is not significant. Credit risk is insignificant on trade receivables, since it’s produce debtors are settled through a regulated
auction.

With respect to credit risk arising from the other financial assets of the Group, such as cash and cash equivalents, available-for-sale financial
investments, the Group’s exposure to credit risk arises from default of the counterparty. The Group manages its operations to avoid any excessive
concentration of counterparty risk and the Group takes all reasonable steps to ensure the counterparties fulfil their obligations.
126 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

47 Financial risk management (Contd.)

47.2.1 Credit risk (Contd.)
b) Credit risk exposure
The maximum risk positions of financial assets which are generally subject to credit risk are equal to their carrying amounts (without consideration
of collateral, if available). Following table shows the maximum risk positions.

Risk exposure - Group

As at 31st March, 2017
Note Other Available for sale Trade and Loans to Amounts Other Cash and Total % of
financial assets financial assets other related due from financial cash Allocation
non-current - non current receivables parties related assets equivalent
parties
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Trade and other receivables 24 - - 300,896,109 - - - - 300,896,109 5%

Amounts due from related parties 26 - - - - 90,011,047 - - 90,011,047 1%
Other financial assets-current 27 - - - - - 1,012,616,192 - 1,012,616,192 17%
Cash and cash equivalents 28 - - - - - - 4,708,965,758 4,708,965,758 77%
Total credit risk exposure - - 300,896,109 - 90,011,047 1,012,616,192 4,708,965,758 6,112,489,106 100%

Other financial assets- non 21

current 40,275,613 - - - - - - 40,275,613 -
Available for sale financial assets - 22
non current - 214,507,887 - - - - - 214,507,887 -
Total equity risk exposure 40,275,613 214,507,887 - - - - - 254,783,500 -

Total 40,275,613 214,507,887 300,896,109 - 90,011,047 1,012,616,192 4,708,965,758 6,367,272,606 -

Risk exposure - Company

As at 31st March, 2017
Note Other Available for sale Trade and Loans to Amounts Other Cash and Total % of
financial assets financial assets other related due from financial cash Allocation
non-current - non current receivables parties related assets equivalent
parties
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Trade and other receivables 24 - - 2,169,293 - - - - 2,169,293 0%

Loans to related parties 25 - - - 1,611,776,655 - - - 1,611,776,655 23%
Amounts due from related parties 26 - - - - 132,155,117 - - 132,155,117 2%
Other financial assets-current 27 - - - - - 1,000,000,000 - 1,000,000,000 14%
Cash and cash equivalents 28 - - - - - - 4,387,832,015 4,387,832,015 62%
Total credit risk exposure - - 2,169,293 1,611,776,655 132,155,117 1,000,000,000 4,387,832,015 7,133,933,079 100%

Available for sale financial assets - 22 - 214,507,887 - - - - - 214,507,887 -

non current
Total equity risk exposure - 214,507,887 - - - - - 214,507,887 -

Total - 214,507,887 2,169,293 1,611,776,655 132,155,117 1,000,000,000 4,387,832,015 7,348,440,966 -

 Annual Report 2016-17 | Browns Capital PLC 127

2016
Other Available for sale Trade and Loans to Amounts Other Cash and Total % of
financial assets financial assets other related due from financial cash Allocation
non-current - non current receivables parties related assets equivalent
Rs. parties
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

- - 891,320,273 - - - - 891,320,273 59%

- - - - 26,286,682 - - 26,286,682 2%
- - - - - 50,890,658 - 50,890,658 3%
- - - - - - 530,225,432 530,225,432 35%
- - 891,320,273 - 26,286,682 50,890,658 530,225,432 1,498,723,045 100%

41,580,513 - - - - - - 41,580,513 -

139,132,887 139,132,887 -
41,580,513 139,132,887 - - - - - 180,713,400 -

41,580,513 139,132,887 891,320,273 - 26,286,682 50,890,658 530,225,432 1,679,436,445 -

2016
Other Available for sale Trade and Loans to Amounts Other Cash and Total % of
financial assets financial assets other related due from financial cash Allocation
non-current - non current receivables parties related assets equivalent
Rs. parties
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

- - 689,804 - - - - 689,804 0%
- - - 361,550,000 - - - 361,550,000 71%
- - - - 88,639,791 - - 88,639,791 17%
- - - - - - - - 0%
- - - - - - 61,004,339 61,004,339 12%
- - 689,804 361,550,000 88,639,791 - 61,004,339 511,883,934 100%

- 139,132,887 - - - - - 139,132,887 -

- 139,132,887 - - - - - 139,132,887 -

- 139,132,887 689,804 361,550,000 88,639,791 - 61,004,339 651,016,821 -

128 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

47 Financial risk management (Contd.)

c) Trade and other receivables
Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Neither past due nor impaired 300,896,109 902,655,528 - -

Past due but not impaired - - - -
Existing customers with default history (impaired) - - - -
Gross carrying value 300,896,109 902,655,528 - -

Less : Impairment provision

-Individually assessed impairment provision - (11,335,255) - -
-Collectively assessed impairment provision - - - -

Total 300,896,109 891,320,273 - -

d) Amounts due from related parties

The Group’s and company’s amounts due from related parties mainly consist of balances due from companies under common control and from
affiliate companies.

e) Cash and cash equivalents

In order to mitigate the concentration, settlement and operational risks related to cash and cash equivalents, the Group consciously manages the
exposure to a single counterparty taking into consideration, where relevant, the rating or financial standing of the counterparty, where the position
is reviewed as and when required, the duration of the exposure in managing such exposures and the nature of the transaction and agreement
governing the exposure.

47.2.2 Liquidity risk (funding risk)

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset.

The Group monitors its risk to a shortage of funds using a daily cash management process. This process considers the maturity of Group’s financial
assets (e.g. accounts receivable) and projected cash flows from operations.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of multiple sources of funding including
bank loans, overdrafts, temporary advances from produce brokers and finance leases over a broad spread of maturities.
 Annual Report 2016-17 | Browns Capital PLC 129

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

a) Net debt/(cash)
Short term investments 1,012,616,192 50,890,658 1,000,000,000 -
Other financial assets-current 4,708,965,758 530,225,432 4,387,832,015 61,004,339
Cash and cash equivalents 5,721,581,949 581,116,090 5,387,832,015 61,004,339
Total liquid assets
Non-current portion of borrowings 1,809,718,979 1,640,404,773 - -
Loans from related parties
- Non-current portion 19,444,521 1,031,036,671 - -
- Current portion 1,545,546,323 482,272,701 1,250,226,655 66,958,000
Trade and other payables 627,023,394 840,283,582 19,097,873 16,661,629
Short term borrowings 115,918,492 45,134,365 - -
Current portion of borrowings 275,935,860 338,367,470 - -
Bank overdrafts 124,187,515 116,655,988 - -
Total liabilities 4,517,772,714 4,494,155,550 1,269,324,528 83,619,629

Net debt/(cash) 1,203,809,236 (3,913,039,460) 4,118,507,487 (22,615,290)

b) Liquidity risk management

The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when
due, without incurring unacceptable losses or risking financial position of the Group while maintaining regulatory requirements and debt covenants
agreed with the fund providers. The Group treasury manages the liquidity position as per the treasury policies and procedures.

c) Exposure to liquidity risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted and
include estimated interest payments.

Maturity analysis - Group

The table below summarizes the maturity profile of the Group’s financial liabilities as at 31st March 2017 based on contractual undiscounted
payments.

Contractual cash flows

As at 31st March 2017 Carrying Total Less than 3 to 12 More than
amount 3 months months 12 months
Rs. Rs. Rs. Rs. Rs.

Trade and other payables 627,023,394 (627,023,394) (445,366,580) (158,023,804) (23,633,010)

Loans from related parties ;
- Non-current portion 19,444,521 (19,444,521) - - (19,444,521)
- Current portion 1,545,546,323 (1,545,546,323) - (1,545,546,323) -
Amounts due to related parties 178,645,568 (178,645,569) (25,126,644) (153,518,925) -
Short term borrowings 115,918,492 (115,918,492) (115,918,492) - -
Loans and borrowings ;
- Non-current portion 1,809,718,979 (1,809,718,979) - - (1,809,718,979)
- Current portion 275,935,860 (275,935,860) - (275,935,860) -
Bank overdrafts 124,187,515 (124,187,515) (124,187,515) - -
Total 4,696,420,652 (4,696,420,652 ) (710,599,231) (2,133,024,911) (1,852,796,510)
130 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

47 Financial risk management (Contd.)

The table below summarises the maturity profile of the Group’s financial liabilities as at 31st March 2016 based on contractual undiscounted
payments.

Contractual cash flows

As at 31st March 2016 Carrying Total Less than 3 to 12 More than
amount 3 months months 12 months
Rs. Rs. Rs. Rs. Rs.

Trade and other payables 840,283,582 (840,283,582) (538,233,839) (254,257,495) (47,792,248)

Loans from related parties ;
- Non-current portion 1,031,036,671 (1,031,036,671) - - (1,031,036,671)
- Current portion 482,272,701 (482,272,701) (91,109,408) (391,163,293) -
Amounts due to related parties 122,564,722 (122,564,722) (16,588,406) (105,976,316) -
Short term borrowings 45,136,735 (45,136,735) (45,136,735) - -
Loans and borrowings ;
- Non-current portion 1,640,404,773 (1,640,404,773) - - (1,640,404,773)
- Current portion 338,367,470 (338,367,470) - (338,367,470) -
Bank overdrafts 116,655,988 (116,655,988) (116,655,988) - -
Total 4,616,722,642 (4,616,722,642) (807,724,376) (1,089,764,574) (2,719,233,692)

Maturity Analysis - Company

The table below summarizes the maturity profile of the company’s financial liabilities as at 31st March 2017 based on contractual undiscounted
payments.

Contractual cash flows

As at 31st March 2017 Carrying Total Less than 3 to 12 More than
amount 3 months months 12 months
Rs. Rs. Rs. Rs. Rs.

Trade and other payables 19,097,873 (19,097,873) - (19,097,873) -

Amounts due to related parties 78,304,098 (78,304,098) - (78,304,098) -
Loans from related parties
- Non-current portion - - - - -
- Current portion 1,250,226,655 (1,250,226,655) - (1,250,226,655) -
Total 1,347,628,626 (1,347,628,626) - (1,347,628,626) -

The table below summarizes the maturity profile of the company’s financial liabilities as at 31st March 2016 based on contractual undiscounted
payments.

Contractual cash flows

As at 31st March 2016 Carrying Total Less than 3 to 12 More than
amount 3 months months 12 months
Rs. Rs. Rs. Rs. Rs.

Trade and other payables 16,661,629 (16,661,629) - (16,661,629) -

Amounts due to related parties 144,323,014 (144,323,014) - (144,323,014) -
Loans from related parties
- Non-current portion - - - - -
- Current portion 66,958,000 (66,958,000) - (66,958,000) -
Total 227,942,643 (227,942,643) - (227,942,643) -

Note : It is not expected that cash flows included in the above maturity analyses could occur significantly earlier, or at significantly different
amounts.
 Annual Report 2016-17 | Browns Capital PLC 131

47.2.3 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s income or the value
of its holdings of financial instruments or in other wards, market risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the
return.

Market risk comprise of the following types of risk:

a) Foreign currency risk

b) Interest rate risk
c) Equity price risk
d) Commodity price risk
a) Foreign 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 is exposed to currency risk mostly on purchases that are denominated in a currency other than Sri Lankan Rupees (LKR). The foreign
currencies in which these transactions primarily denominated are United Stated Dollars (USD). Since the frequency of the transactions done in
foreign currency is very low, the Group is not exposed to a higher degree of currency risk.

b) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest
rates.

Interest rate risk management

The Group manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings.

Exposure to interest rate risk

The Group’s and company’s exposure to the risk of changes in the market interest rate relates primarily to company’s long term debt obligations
with floating interest rates.

Interest rate profile - Group

The interest rate profile of the Group’s interest bearing financial instruments as reported to the management of the Group is as follows.

Nominal amount
at end of 31st March
2017 2016
Rs. Rs.

Fixed rate financial instruments

Financial assets 4,650,552,570 439,667,981
Financial liabilities 2,857,318,720 1,703,917,636
7,507,871,290 2,143,585,617

Variable rate financial instruments

Financial assets - -
Financial liabilities 689,095,612 2,023,941,373
689,095,612 2,023,941,373
132 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

47 Financial risk management (Contd.)

Interest rate profile - Company
The interest rate profile of the company’s interest bearing financial instruments as reported to the management of the Group is as follows.
Nominal amount at end of 31st
March
2017 2016
Rs. Rs.

Fixed rate financial instruments

Financial assets 5,979,676,739 415,550,000

Financial liabilities 1,250,226,655 -
7,229,903,394 415,550,000

Variable rate financial instruments

Financial assets - -
Financial liabilities 27,408,142 140,942,671
27,408,142 140,942,671

Sensitivity analysis - Group & Company

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the
Group’s profit before tax (through the impact on floating rate borrowings).

Group Company
Increase/(decrease) in basic point Effect on Effect on Effect on Effect on
profit before tax equity, net of tax profit before tax equity, net of tax
Rupee borrowings Rs. Rs. Rs. Rs.

2017 +1% (6,890,956) (4,961,488) (274,081) (197,339)

-1% 6,890,956 4,961,488 274,081 197,339

2016 +1% (20,239,414) (17,768,912) (1,409,427) (1,014,787)

-1% 20,239,414 17,768,912 1,409,427 1,014,787

Note : The assumed spread of basic point for the interest rate sensitivity analysis is based on the currently observable market environment
changes to base floating interest rates.

c) Equity price risk

Equity price risk is the risk that the fair value of equities decreases as a result of changes in the levels of equity indices and the value of individual
stocks.

However, group is not exposed to equity price risk as the Company does not have investments in marketable equity securities.
 Annual Report 2016-17 | Browns Capital PLC 133

47.2.4 Operational risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Company’s processes, personnel,
technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and
regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Company’s operations.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management. This
responsibility is supported by the development of overall company standards for the management of operational risk in the following areas:
• Requirements for appropriate segregation of duties, including the independent authorization of transactions
• Requirements for the reconciliation and monitoring of transactions
• Compliance with regulatory and other legal requirements
• Documentation of controls and procedures
• Requirements for the periodic assessment of operational risks faced and the adequacy of controls and procedures to address the risks
identified
• Requirements for the reporting of operational losses and proposed remedial actions
• Development of contingency plans
• Training and professional development
• Ethical and business standards
• Risk mitigation, including insurance when this is effective

47.2.5 Capital management

The primary objective of the Group’s and company’s capital management is to ensure that it maintains a strong financial position and healthy
capital ratios in order to support its business and maximize shareholder value.

The Company and group manage its capital structure and make adjustments to it in light of changes in economic conditions. To maintain or adjust
the capital structure, the Group and the Company may or may not make dividend payments to shareholders, return capital to shareholders or issue
new shares or other instruments.

Consistent with others in the industry, the Group and the Company monitors capital on the basis of the gearing ratio. This ratio is calculated as
total borrowings by total equity. Total borrowings including non-current and current borrowings as shown in the statements of financial position.
Total equity is calculated as ‘Total equity’ in the statements of financial position.

The Group’s and company’s debt to equity ratio at the end of the reporting periods is as follows:

Group Company
As at 31st March, 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Total borrowings 3,890,751,689 3,653,874,338 1,250,226,655 66,958,000

Total equity 9,893,950,898 10,719,857,800 7,890,266,961 2,873,138,625

Debt to equity ratio (gearing ratio) 39.32% 34.09% 15.85% 2.33%

134 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

48 Financial instruments
48.1 Financial assets and liabilities by categories - Group
Financial assets and liabilities in the tables below are split into categories in accordance with LKAS 39.
a) Financial assets by categories - Group
Loans and receivables Available-for-sale financial assets Fair value through profit or loss Total
(FVTPL)
As at 31st March, Note 2017 2016 2017 2016 2017 2016 2017 2016
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Financial assets measured at fair

value
Other financial assets- non current 21 - - 40,275,613 41,580,513 - - 40,275,613 41,580,513
- -
Financial assets fair value through
profit or loss 27 - - - - 1,000,000,000 - 1,000,000,000 -
Other financial assets-current 27 - - - - - 14,490,000 - 14,490,000

Financial assets not measured at

fair value
Trade and other receivables 24 242,261,662 320,900,731 - - - - 242,261,662 320,900,731
Amounts due from related parties 26 90,011,047 26,286,682 - - - - 90,011,047 26,286,682
Other financial assets 27 12,616,192 36,400,658 - - - - 12,616,192 36,400,658
Available for sale financial assets -
non current 22 214,507,887 139,132,887 - - 214,507,887 139,132,887
Cash and cash equivalents 28 - - - - - - 4,708,965,758 530,225,432
Total 344,888,901 383,588,071 254,783,500 180,713,400 1,000,000,000 14,490,000 6,308,638,159 1,109,016,903

The carrying amount of loans and receivables is not significantly different from the value based on amortized cost methodology.

b) Financial liabilities by categories - Group

Other financial liabilities Total
As at 31st March, Note 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Financial liability not measured at fair value - non current

Loans and borrowings 32 1,809,718,979 1,640,404,773 1,809,718,979 1,640,404,773
Loans from related parties 37 19,444,521 1,031,036,671 19,444,521 1,031,036,671

Financial liability not measured at fair value - current

Trade and other payables 38 622,405,067 773,596,477 622,405,067 773,596,477
Loans from related parties 37 1,545,546,323 482,272,701 1,545,546,323 482,272,701
Amounts due to related parties 39 178,645,568 122,564,722 178,645,568 122,564,722
Income tax payable 40 13,164,736 2,642,593 13,164,736 2,642,593
Short term borrowings 33 115,918,492 45,136,735 115,918,492 45,136,735
Loans and borrowings 32 275,935,860 338,367,470 275,935,860 338,367,470
Bank overdrafts 28 - - 124,187,515 116,655,988
Total 4,580,779,546 4,436,022,142 4,704,967,061 4,552,678,130

The management assessed that, the fair value of cash and short-term deposits, trade receivables, trade payables, bank overdrafts and other
current financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction
between knowledgeable and willing parties, other than in a forced sale or on liquidation.
 Annual Report 2016-17 | Browns Capital PLC 135

48.2 Financial assets and liabilities by categories - Company

Financial assets and liabilities in the tables below are split into categories in accordance with LKAS 39.
a) Financial assets by categories - Company
Loans and receivables Available-for-sale financial assets Fair value through profit or loss Total
(FVTPL)
As at 31st March, Note 2017 2016 2017 2016 2017 2016 2017 2016
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Financial assets measured at fair

value
Financial assets fair value through 27 - - - - 1,000,000,000 - 1,000,000,000 -
profit or loss

Financial assets not measured at

fair value
Trade and other receivables 24 2,169,293 689,804 - - - - 2,169,293 689,804
Loans to related parties 25 1,611,776,655 361,550,000 - - - - 1,611,776,655 361,550,000
Amounts due from related parties 26 132,155,117 88,639,791 - - - - 132,155,117 88,639,791
Available for sale financial assets 22 - - 214,507,887 139,132,887 - - 214,507,887 139,132,887
Cash and cash equivalents 28 4,708,965,758 530,225,432 - - - - 4,708,965,758 530,225,432
Total 6,455,066,822 981,105,027 214,507,887 139,132,887 1,000,000,000 - 7,669,574,709 1,120,237,914

The carrying amount of loans and receivables is not significantly different from the value based on amortized cost methodology.

b) Financial liabilities by categories - Company

Other financial liabilities Total
As at 31st March, Note 2017 2016 2017 2016
Rs. Rs. Rs. Rs.

Financial liability not measured at fair value - current - -

Trade and other payables 38 19,097,873 16,661,629 19,097,873 16,661,629
Amounts due to related parties 39 78,304,098 144,323,014 78,304,098 144,323,014
Income tax payable 40 4,771,026 2,810,235 4,771,026 2,810,235
Loans from related parties 36 1,250,226,655 66,958,000 1,250,226,655 66,958,000
Total 1,352,399,651 230,752,878 1,352,399,651 230,752,878

The management assessed that the fair value of cash and short-term deposits, trade receivables, trade payables, bank overdrafts and other
current financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction
between knowledgeable and willing parties, other than in a forced sale or on liquidation.
136 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

48 Financial instruments (Contd.)

48.3 Financial assets and liabilities by fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique as explained in
Note 2.7 b) to the financial statements:

Level 1 : Quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2 : Other techniques for which all inputs with significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3 : Techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

The Company/Group held the following financial instruments carried at fair value in the statement of financial position:

48.3.1 Group
a) Financial assets by fair value hierarchy
Level 1 Level 2 Level 3 Total
As at 31st March, 2017 2016 2017 2016 2017 2016 2017 2016
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Other financial assets- non current -AFS - - - - 40,275,613 41,580,513 40,275,613 41,580,513
Long term investments - AFS - - - - - - 214,507,887 139,132,887
Other financial assets-current FVTPL - 14,490,000 - - - - - 14,490,000
Financial assets fair value through profit or loss - - - - 1,000,000,000 - 1,000,000,000 -
Total - 14,490,000 - - 1,040,275,613 41,580,513 1,254,783,500 195,203,400
 Annual Report 2016-17 | Browns Capital PLC 137

48.3.2 Company
a) Financial assets by fair value hierarchy
Level 1 Level 2 Level 3 Total
As at 31st March, 2017 2016 2017 2016 2017 2016 2017 2016
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Long term investments - AFS - - - - 214,507,887 139,132,887 214,507,887 139,132,887

Financial assets fair value through profit or loss - - - - 1,000,000,000 - 1,000,000,000 -
Total - - - - 1,214,507,887 139,132,887 1,214,507,887 139,132,887

b) Financial liabilities by fair value hierarchy

The Company did not hold any financial liabilities carried at fair value in the statement of financial position as of 31st March 2017 and 31st March
2016.
138 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

49 Business segments
For management purposes, the Group is organised into business units based on their products and services and has six reportable operating
segments as follows.

The following table presents the revenue, profit information and other disclosures regarding group’s business segments.

Segment Products & services

Tea Cultivation, manufacture and sale of orthodox, CTC and green tea.
Rubber Cultivation, manufacture and sale of rubber.
Hydro power Building, owning, operating and maintaining hydro power generation facilities.

49 Business segments (Contd.)

Tea Rubber Hydro power Renewable energy
31.03.2017 31.03.2016 31.03.2017 31.03.2016 31.03.2017 31.03.2016 31.03.2017 31.03.2016
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

49.1 Group
49.1.1 Segmental results
Revenue 4,301,877,966 4,017,872,406 1,116,577,231 988,131,279 60,968,961 167,274,754 172,215,328 -
Revenue expenditure (3,814,694,835) (4,315,824,800) (1,114,179,260) (998,890,715) (21,840,929) (88,952,942) (79,151,112) -
Gross profit/(loss) 487,183,131 (297,952,394) 2,397,971 (10,759,436) 39,128,032 78,321,812 93,064,216 -

Add : Other income 115,101,151 73,280,374 54,674,014 77,620,771 - - - -

Finance income - - - - 1,402,017 2,425,149 6,603,236 -
Change in fair value of investment - - - - - - -
property
Change in fair value of biological 17,511,502 - 1,531,101 - - - - -
assets
Change in fair value of fair value - - - - - - - -
through profit or loss investments
Less : Administrative expenses - - - - (13,544,794) (35,976,295) (18,115,550) -
Other expenses - - - - - - (9,004,381) -
Finance costs (335,215,067) (36,356,564) (86,341,733) (15,561,110) (3,910,720) (12,923,671) (122,831,916) -
Gain / (Loss)on disposal of Subsidiaries - - - - - - - -
Profit/(loss) before taxation 284,580,716 (261,028,584) (27,738,646) 51,300,225 23,074,535 31,846,995 (50,284,396) -
Less : Taxation - - - - (4,628,144) (31,648,557) (1,201,789) -
Net profit/(loss) for the year 284,580,716 (261,028,584) (27,738,646) 51,300,225 18,446,391 198,438 (51,486,185) -

Other comprehensive income

Net changes in fair value of available-for- - - - - - - - -
sale investments
Actuarial gain/( loss ) on defined benefits - - - - - 899,861 - -
plans
Tax on other comprehensive income - - - - - (107,983) - -
Other comprehensive income for the year, - - - - - 791,878 - -
net of tax
Total comprehensive income for the year 284,580,716 (261,028,584) (27,738,646) 51,300,225 18,446,391 990,316 (51,486,185) -

49.1.2 Segmental assets

Non-current assets 1,383,030,675 2,693,258,472 358,973,586 3,896,737,054 - 880,037,718 2,742,185,636 1,206,140,103
Current assets 385,142,267 595,397,526 99,965,896 108,576,384 227,564,720 162,782,943 109,628,546 610,338,742
1,768,172,942 3,288,655,998 458,939,482 4,005,313,438 227,564,720 1,042,820,661 2,851,814,182 1,816,478,845

49.1.3 Segmental liabilities

Non-current liabilities 879,278,163 2,724,493,399 228,221,717 233,842,244 - 170,200,078 1,715,496,846 1,015,813,076
Current liabilities 2,372,749,407 1,927,670,056 615,860,790 89,771,663 10,267,224 129,168,760 339,896,497 29,278,744
3,252,027,570 4,652,163,455 844,082,507 323,613,907 10,267,224 299,368,838 2,055,393,343 1,045,091,820

49.1.4 Segmental capital expenses

a) Capital expenditure 49,507,884 96,592,778 193,459,020 251,475,480 3,650 28,733,424 1,599,457,995 1,044,331,172

b) Depreciation/amortization 61,508,756 99,779,410 115,670,375 103,426,677 15,438,258 59,297,064 66,857,016 2,024

 Annual Report 2016-17 | Browns Capital PLC 139

Segment Products & services

Renewable energy Building, owning, operating and maintaining solar power generation facilities.
Timber Cultivation and sale of valuable timber trees.
Real Estate Renting of office space.
Investment Income Investment of additional funds to earn finance income.

Timber Real estate Investment income Other Total

31.03.2017 31.03.2016 31.03.2017 31.03.2016 31.03.2017 31.03.2016 31.03.2017 31.03.2016 31.03.2017 31.03.2016
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

- - 94,260,295 88,658,740 - - 203,543,467 267,093,593 5,949,443,247 5,529,030,772

- - (11,670,541) (9,421,017) - - (186,295,792) (213,704,661) (5,227,832,469) (5,626,794,135)
- - 82,589,754 79,237,723 - - 17,247,675 53,388,932 721,610,778 (97,763,363)

- - - - - - 158,008,381 139,237,909 327,783,546 290,139,054

- - 8,990,407 2,396,579 51,698,253 33,781,488 - - 68,693,913 38,603,216
- - 404,749,148 111,314,027 - - - - 404,749,148 111,314,027

204,491,575 (194,353,741) - - - - 5,753,708 - 229,287,886 (194,353,741)

- - - - 892,000,000 - - - 892,000,000 -

- - (6,144,013) (6,400,639) - - (319,122,081) (250,978,692) (356,926,438) (293,355,626)

- - - - - - (92,396,877) (76,883,456) (101,401,258) (76,883,456)
- - (20,295,692) (19,440,552) - - 26,550,709 (181,939,024) (542,044,419) (266,220,921)
- - - - - - 2,650,100,517 - 2,650,100,517 -
204,491,575 (194,353,741) 469,889,604 167,107,138 943,698,253 33,781,488 2,446,142,033 (317,174,331) 4,293,853,674 (488,520,810)
- - (156,662,926) (436,000) (8,203,885) (12,737,374) (173,722,207) 57,066,612 (344,418,951) 12,244,681
204,491,575 (194,353,741) 313,226,678 166,671,138 935,494,368 21,044,114 2,272,419,826 (260,107,719) 3,949,434,723 (476,276,129)

- - - - - - (1,304,900) (1,063,873) (1,304,900) (1,063,873)

- - - - - - 53,190,501 545,619,553 53,190,501 546,519,414

- - - - - - (7,857,661) (80,854,031) (7,857,661) (80,962,014)

- - - - - - 44,027,940 463,701,649 44,027,940 464,493,527

204,491,575 (194,353,741) 313,226,678 166,671,138 935,494,368 21,044,114 2,316,447,766 218,038,262 3,993,462,663 (11,782,602)

2,984,090,919 6,293,351,584 1,847,459,372 1,799,313,325 2,108,733,533 - (1,989,847,630) (514,186,066) 9,434,626,090 16,254,652,190

- - 189,563,351 114,102,543 7,133,933,079 61,004,339 (1,759,294,386) 367,396,274 6,386,503,473 2,019,598,751
2,984,090,919 6,293,351,584 2,037,022,723 1,913,415,868 9,242,666,612 61,004,339 (3,749,142,016) (146,789,792) 15,821,129,564 18,274,250,941

- - 368,760,052 253,054,504 - - (145,000,000) 1,209,066,049 3,046,756,778 5,606,469,350

- - 60,974,367 28,906,664 1,352,399,651 230,752,878 (1,871,726,049) (487,624,974) 2,880,421,888 1,947,923,791
- - 429,734,419 281,961,168 1,352,399,651 230,752,878 (2,016,726,049) 721,441,075 5,927,178,666 7,554,393,141

62,480,736 15,506,916 - 1,975,146 6,929,605 - 17,594,050 82,989,071 1,929,432,939 1,521,603,987

- - 4,558,533 174,078 2,048,055 1,584,080 117,475,550 88,276,269 383,556,543 352,529,472

140 Annual Report 2016-17 | Browns Capital PLC

Notes to the Financial Statements

49 Business segments (Contd.)

Investment income Other Total

As at 31st March, 31.03.2017 31.03.2016 31.03.2017 31.03.2016 31.03.2017 31.03.2016
Rs. Rs. Rs. Rs. Rs. Rs.

49.2 Company
49.2.1 Segmental results
Revenue 20,148,754 50,620,996 - - 20,148,754 50,620,996
Revenue expenditure - - - - - -
Gross profit/(loss) 20,148,754 50,620,996 - - 20,148,754 50,620,996
Add : Other income 27,278,094 556,304 2,750,000 2,755,660 30,028,094 3,311,964
Finance income 111,512,217 66,648,950 - - 111,512,217 66,648,950
Change in fair value of fair value through
profit or loss investments 892,000,000 - - - 892,000,000 -
Less : Impairment loss of investments in
subsidiaries (2,649,484) (10,000,000) - - (2,649,484) (10,000,000)
Administrative expenses - - (16,989,335) (13,562,792) (16,989,335) (13,562,792)
Other expenses - - (6,095,540) (28,747,857) (6,095,540) (28,747,857)
Finance costs - - (78,020,466) (9,201,305) (78,020,466) (9,201,305)
Gain / (loss)on disposal of subsidiaries 4,143,797,981 - - - 4,143,797,981 -
Profit/(loss) before taxation 5,192,087,562 107,826,250 (98,355,341) (48,756,294) 5,093,732,221 59,069,956
Less : Taxation (8,203,885) (12,737,374) - - (8,203,885) (12,737,374)
Net profit/(loss) for the year 5,183,883,677 95,088,876 (98,355,341) (48,756,294) 5,085,528,336 46,332,582

49.2.2 Segmental assets

Non-current assets 2,108,733,533 2,592,007,569 - - 2,108,733,533 2,592,007,569
Current assets 5,367,900,084 54,000,000 1,766,032,995 457,883,934 7,133,933,079 511,883,934
7,476,633,617 2,646,007,569 1,766,032,995 457,883,934 9,242,666,612 3,103,891,503

49.2.3 Segmental liabilities

Non-current liabilities - - - - - -
Current liabilities - - 1,352,399,651 230,752,878 1,352,399,651 230,752,878
- - 1,352,399,651 230,752,878 1,352,399,651 230,752,878

49.2.4 Segmental capital expenses

a) Long term investments 114,493,898 546,197,104 - - 114,493,898 546,197,104

b) Depreciation/amortization - - 2,048,055 1,584,080 2,048,055 1,584,080

50 Comparative Information
The accounting policies have been consistently applied by the Group with those of the previous financial year in accordance with LKAS 1 “
presentation of financial statements”. Further, comparative year’s information and phrases have been re-arranged, reclassified whenever
necessary, to comply with the current year’s presentation.
 Annual Report 2016-17 | Browns Capital PLC 141

Subsidiaries and
Sub-subsidiaries
Name of Company Directors
AS AT 31ST MARCH 2017

1 F L P C Management (Pvt) Ltd. Subsidiary Mr. Kamantha Amarasekera

Reg. No. PV 18888 Mrs. Sunjeevani Kotakadeniya
Mr.Kithsiri Gunawardena

2 Browns Power Holdings (Pvt) Ltd Subsidiary Mr. Kamantha Amarasekera

Reg. No. PV 70021 Mrs. Sunjeevani Kotakadeniya
Mr.Kithsiri Gunawardena

3 Dolekanda Power (Pvt) Ltd Subsidiary Mr. Kamantha Amarasekera

Reg. No. PV 70023 Mrs. Sunjeevani Kotakadeniya

4 Enselwatte Power (Pvt) Ltd Subsidiary Mr. Kamantha Amarasekera

Reg. No. PV 70025 Mrs. Sunjeevani Kotakadeniya

5 The Tea Leaf Resort Holding (Pvt) Ltd Subsidiary Mr. Kamantha Amarasekera
Reg. No. PV 72507 Mr.Anton Aloysius
Mr.Joseph Aloysius
Mr.Daya Panditha
Mr.Priyantha Perera

6 Maturata Plantations Ltd Sub-subsidiary Mr.Kamantha Amarasekera

Reg. No. PB 214 Mrs.Sunjeevani Kotakadeniya
Mr.Kithsiri Gunawardena
Mr.Robert Puviraj

7 Sagasolar Power (Pvt) Ltd Subsidiary Mr. Kithsiri Gunawardena

Reg No. PV 82845 Mr. Kumara Vidanagamage
Mr Rajeeva Hettiaratchi
Mr. Anand Raheja
Mrs. Sunjeevani Kotakadeniya
Mr. Kamantha Amarasekera
Mr. Sanjaya Fernando
(Alternate Director to Anand Raheja)
Mr. Pradeep Gamlath
(Alternate Director to Mr. Kumara
Vidanagamage)

8 Browns Properties (Pvt) Ltd Subsidiary Mr. Kamantha Amarasekera

Reg No. 75864 Mr.Kithsiri Gunawardena
Mrs. Sunjeevani Kotakadeniya
142 Annual Report 2016-17 | Browns Capital PLC

Details of Leasehold / Freehold

Land and Buildings
Maturata Plantations Ltd (Sub subsidiary)
LANDS BUILDINGS
ESTATE TOTAL LOCATION CROP LEASE HOLD LANDS - W.D. V NO. OF LEASE HOLD BUILDINGS - ADDITIONS TO BUILDINGS -
(EXTENT(HECT) BUILDINGS W.D. V W.D. V
31.03.2017 31.03.2016 31.03.2017 31.03.2016 31.03.2017 31.03.2016
Rs. Rs Rs Rs Rs Rs

High grown
Alma 636.25 Kandapola Tea 16,628,165 17,216,772 115 27,937 150,422 3,411,304 3,538,387
Bramley 224.49 Kandapola Tea 5,727,241 5,929,974 86 32,845 176,850 2,291,093 2,362,002
Gonapitiya 716.00 Kandapola Tea 19,521,108 20,212,120 98 71,741 386,280 3,940,075 4,101,519
High Forest 628.00 Kandapola Tea 16,349,241 16,927,975 225 59,378 319,716 14,693,387 14,865,324
Kabaragalla 504.75 Padiyapalalla Tea 9,029,272 9,348,892 119 9,433 50,789 5,729,458 5,937,114
Liddesdale 639.00 Halgaranoya Tea 16,828,418 17,424,114 198 44,282 238,429 7,058,700 7,319,396
Mahacoodagalla 252.00 Halgaranoya Tea 6,472,468 6,701,582 89 22,932 141,701 5,527,516 5,723,788
Maha Uva 397.25 Walapane Tea 10,273,703 10,637,373 146 26,317 123,477 3,379,110 3,506,393
Maturata 544.74 Kandapola Tea 14,303,797 14,810,127 152 23,797 128,130 2,338,647 2,429,551
Ragalla 640.75 Halgaranoya Tea 16,796,234 17,390,791 110 47,780 257,268 9,254,009 8,061,061
St Leonards 355.65 Halgaranoya Tea 9,204,494 9,530,316 152 20,541 110,599 3,007,160 3,120,106
Sub total 5,538.88 141,134,139 146,130,036 1490 386,982 2,083,661 60,630,458 60,964,641

Low grown
Andapana 348.95 Kamburupitiya Tea/Rubber/ 6,275,791 6,497,943 14 7,437 40,042 667,130 546,707
Coconut/
Cinnamon
Anningkanda 624.00 Deniyaya Tea/Cinnamon 7,434,399 7,697,563 168 45,214 243,448 5,890,836 6,115,882
Beverely 388.00 Deniyaya Tea/Cinnamon 13,981,962 14,476,899 171 78,071 420,362 1,889,637 1,980,660
Diddenipotha 676.05 Mulatiyana Tea/Rubber/ 11,564,620 11,973,987 128 44,649 240,409 1,979,801 2,061,401
Coconut/
Cinnamon
Enselwatta 2,207.63 Deniyaya Tea/Cinnamon 38,995,728 40,376,108 330 145,819 785,146 5,700,095 5,913,395
Hayes 895.75 Deniyaya Tea/Cinnamon 29,519,462 30,564,399 233 15,915 85,692 7,995,619 8,314,074
Lankaberiya 400.40 Ithakanda Tea/Cinnamon 6,615,506 6,849,684 22 14,596 78,588 1,677,517 1,738,459

Wilpita 510.50 Akurassa Tea/Rubber/ 5,220,883 5,405,696 27 11,645 62,707 1,939,314 1,832,014
Coconut/
Cinnamon
Sub total 6,051.28 119,608,351 123,842,279 1093 363,345 1,956,394 27,739,949 28,502,592
Regional Office 1 - 75,408
TOTAL 11,590.16 260,742,491 269,972,315 2,584 750,327 4,040,055 88,370,407 89,542,641
 Annual Report 2016-17 | Browns Capital PLC 143

Browns Properties (Pvt) Ltd (Subsidiary)

LANDS BUILDINGS
ESTATE TOTAL LOCATION CROP LEASE HOLD LANDS - W.D. V NO. OF LEASE HOLD BUILDINGS - ADDITIONS TO BUILDINGS -
(EXTENT(HECT) BUILDINGS W.D. V W.D. V
31.03.2017 31.03.2016 31.03.2017 31.03.2016 31.03.2017 31.03.2016
Rs Rs Rs Rs Rs Rs

Group occupied No.19,Dudley 176,408,420 183,542,679

component Senanayake
Mw,Colombo 08
TOTAL 11,590.16 - - 260,742,491 269,972,315 2,584.00 750,327 4,040,055 264,778,827 273,085,320
144 Annual Report 2016-17 | Browns Capital PLC

Historical Financial Data

at a Glance - Group
Year ended 31st March 2016/17* 2015/16* 2014/15* 2013/14* 2012/13* 2011/12* 2010/11 2009/10
Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Restated Restated

Group revenue 5,949,443 5,529,031 6,472,924 6,498,670 6,243,257 5,719,356 6,494,783 4,885,741
Profit from operations 2,117,104 (260,903) 289,321 542,867 1,087,244 463,357 1,501,444 462,031
Finance income 68,694 38,603 68,840 177,549 258,442 179,991 33,538 2,478
Finance costs (542,044) (266,221) (237,489) (222,778) (203,078) (173,252) (192,092) (170,448)
Share of results of equity accounted - - - - 8,835 (2,659) 9,551 34,319
investees
Profit before taxation 4,293,854 (488,521) 120,672 497,638 1,151,443 467,438 1,352,441 328,380
Tax expense (344,419) 12,245 (59,058) 207,869 (161,920) (105,689) (109,471) (37,782)
Profit after tax 3,949,435 (476,276) 61,614 705,507 989,523 361,749 1,242,970 290,598
Attributable to:
Profit attributable to equity holders 3,794,492 (215,957) (15,148) 317,228 558,189 49,512 477,475 73,729
Non-controlling interests 154,943 (260,320) 76,762 388,277 431,334 312,237 765,495 216,869
Other comprehensive income 44,028 464,494 (296,369) (74,779) (35,394) 67,453 - -

Funds employed
Stated capital 2,568,000 2,568,000 2,568,000 2,568,000 2,568,000 2,568,000 2,568,000 1,068,000
Capital reserves (9,710) 109,908 110,638 113,213 120,733 122,346 169,158 221,993
Revenue reserves 6,422,846 2,545,531 2,534,079 2,770,654 3,743,605 3,493,416 3,681,036 2,468,530
Shareholders’ funds 8,981,136 5,223,439 5,212,717 5,451,867 6,432,338 6,183,762 6,418,195 3,758,523
Non-controlling interests 912,815 5,496,419 5,182,236 5,283,132 7,070,242 6,748,454 5,902,181 5,634,738
Total equity 9,893,951 10,719,858 10,394,953 10,734,999 13,502,580 12,932,215 12,320,376 9,393,261
Total debt (short & long term) 3,890,752 3,653,874 2,073,775 2,001,507 1,547,961 1,651,568 1,487,688 1,616,998
13,784,703 14,373,732 12,468,728 12,736,507 15,050,540 14,583,784 13,808,064 11,010,259

Assets employed
Non-current assets 9,434,626 16,254,652 14,955,145 14,235,915 16,239,771 15,129,870 13,347,246 12,595,087
Current assets 6,386,503 2,019,599 1,788,268 2,361,303 2,866,173 3,096,448 3,537,597 914,206
Current liabilities (net of Borrowings) (818,834) (965,491) (902,571) (1,003,523) (1,207,489) (854,415) (993,286) (746,537)
Provisions (994,633) (2,205,548) (2,684,972) (2,230,657) (2,326,066) (2,250,578) (1,505,739) (1,204,965)
Deferred income (157,005) (640,870) (598,533) (626,532) (521,848) (537,541) (577,754) (547,532)
Capital employed 13,850,658 14,462,342 12,557,338 12,736,506 15,050,540 14,583,784 13,808,064 11,010,259
 Annual Report 2016-17 | Browns Capital PLC 145

Year ended 31st March 2016/17* 2015/16* 2014/15* 2013/14* 2012/13* 2011/12* 2010/11 2009/10
Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Restated Restated

Cash flow
Net cash inflow/(outflow) from operating 752,456 (521,399) (54,556) 135,484 935,310 213,509 1,145,094 532,505
activities
Net cash inflow/(outflow) from investing 2,847,580 (891,860) 56,229 (880,496) (604,935) (1,026,988) (852,479) (615,844)
activities
Net cash inflow/(outflow) from financing 571,173 1,515,759 1,540 291,575 (578,376) (40,951) 1,653,631 115,418
activities
Increase/(decrease) in cash & cash 4,171,209 102,500 3,214 (453,437) (248,000) (854,430) 1,946,246 32,079
equivalents during the year

Key indicators
Earnings per share (Rs.)** 2.772 (0.160) (0.012) 0.23 0.41 0.03 0.44 0.08
Net assets per share (Rs.)*** 6.57 3.82 3.81 3.99 4.70 4.52 4.69 3.52
Return on average shareholders’ funds (%) 53.38 (4.20) (0.32) 5.97 8.80 0.74 9.29 2.06
Return on average capital employed (%) 34.16 (1.65) 2.83 5.66 9.14 4.51 12.45 4.83
Interest cover (times covered) 8.92 (0.84) 1.51 3.23 6.67 3.70 8.04 2.93
Current ratio (times) 2.21 1.04 0.90 1.12 1.56 2.24 2.44 0.83
Turnover to capital employed (times) 0.43 0.38 0.52 0.51 0.41 0.39 0.47 0.44
Property, plant and equipment to 34.64 65.07 46.03 39.88 37.50 32.68 28.61 51.20
shareholders’ funds (%)
Debt to equity ratio (%) 39.32 34.09 19.95 18.64 11.46 12.77 12.08 17.21
Equity to total assets ratio (%) 104.87 65.95 69.51 75.41 70.67 70.95 72.97 69.53
Dividend payout ratio (%) 1.80 - 79.37 - 123.46 - 0.18 1.46

* The figures are derived from financial statements prepared in accordance with Sri Lanka Accounting Standards (SLFRSs/LKASs) for the years ended 31st
March 2016/17, 2015/16, 2014/15, 2013/14, 2012/13 and 2011/12. Figures for the remaining periods are derived from financial statements prepared in
accordance with previous version of Sri Lanka Accounting Standards (SLASs).

** Earnings per share has been computed on weighted average number of shares outstanding during the year.

*** Net assets per share has been computed on total number of shares in issue as at 31st March.
146 Annual Report 2016-17 | Browns Capital PLC

Shareholders Information

Share Analysis as at 31st March 2017

as at 31st March 2017 as at 31st March 2016

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

1 to 1000 shares 1,908 808,877 0.06 1,890 842,533 0.06

1001 to 10,000 shares 11,317 45,499,612 3.33 11,872 48,113,211 3.52
10,001 to 100,000 shares 2,568 64,747,301 4.73 2,844 72,667,059 5.31
100,001 to 1,000,000 shares 415 126,497,802 9.24 425 120,426,633 8.8
over 1,000,000 shares 69 1,130,446,408 82.64 79 1,125,950,564 82.31
TOTAL 16,277 1,368,000,000 100 17,110 1,368,000,000 100

Categories of Shareholders

as at 31st March 2017 as at 31st March 2016

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

Individual 15,967 323,009,542 23.61 16,779 315,576,046 23.07

Institutional 310 1,044,990,458 76.39 331 1,052,423,954 76.93

Total 16,277 1,368,000,000 100 17,110 1,368,000,000 100

as at 31st March 2017 as at 31st March 2016

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

Resident 16,222 1,358,122,059 99.29 17,061 1,361,910,815 99.56

Non-Resident 55 9,877,941 0.71 49 6,089,185 0.44
Total 16,277 1,368,000,000 100 17,110 1,368,000,000 100.00
 Annual Report 2016-17 | Browns Capital PLC 147

Directors’ shareholdings

31st March 31st March

2017 2016
No. of shares No. of shares

Ishara Nanayakkara - -
(Resigned on 31st March 2017)
Kapila Jayawardena - -
Mrs. Kalsha Amarasinghe - -
Kamantha Amarasekera - -
Asela Indrajith Fernando - -
Uditha Palihakkara - -
Mrs.Sunjeevani Kotakadeniya - -
Mr. R.M. Nanayakkara - -
(Demised on 22nd March 2017)

Share Price Information on ordinary shares of the Company

2016/2017 2015/2016 2014/2015 2013/2014 2012/2013

Rs. Rs. Rs. Rs. Rs.

High 1.80 1.80 2.60 3.00 3.40

Low 0.80 0.90 1.50 1.80 1.30

Close 1.50 1.20 1.60 2.10 2.50

148 Annual Report 2016-17 | Browns Capital PLC

Shareholders Information

20 Major shareholders
As at 31.03.2017 As at 31.03.2016
NAME No. of shares % NAME No. of shares %

1 F L C JOINT VENTURE CO., (PVT) LTD 831,578,217 60.79 1 F L C JOINT VENTURE CO., (PVT) LTD 831,578,217 60.79
(presently known as Browns Capital
Holdings (Pvt) Ltd)
2 MRS. J. M. S. ROHINI 65,780,941 4.81 2 LOLC FINANCE PLC / J.M.S.ROHINI 34,499,065 2.52
3 LOLC FINANCE PLC / J.M.S.ROHINI 34,499,065 2.52 3 MRS. J. M. S. ROHINI 23,194,784 1.70
4 SANDY BAY RESORTS COMPANY LIMITED 23,000,000 1.68 4 SANDY BAY RESORTS COMPANY LIMITED 23,000,000 1.68
5 SEYLAN BANK LTD/R.P.SUGATHADASA 15,513,647 1.13 5 MR. W.P.A.S. PERERA 9,728,146 0.71
6 ACUITY PARTNERS (PVT) LTD/ 6,837,285 0.50 6 MS. M D BOLLAGALA 9,431,131 0.69
MR.M.L.M.FERDINANDO
7 SAMPATH BANK PLC/DR.T.SENTHILVERL 6,471,625 0.47 7 SAMPATH BANK PLC/DR.T.SENTHILVERL 9,082,000 0.66
8 PAN ASIA BANKING CORPORATION PLC/ 6,000,000 0.44 8 SEYLAN BANK PLC/MAHWIDANELAGE 8,440,477 0.62
MR.MOHOTTALLAGE NIHAL RANASINGHE LASINTHA MANIL FERNANDO
9 LEXINTON HOLDINGS (PVT)LTD 5,767,000 0.42 9 PAN ASIA BANKING CORPORATION PLC/ 7,350,000 0.54
MR.HIYARE HEWAGE ANURA CHANDRASIRI
10 AMAYA LEISURE PLC 5,320,000 0.39 10 PAN ASIA BANKING CORPORATION PLC/ 6,000,000 0.44
MR.MOHOTTALLAGE NIHAL RANASINGHE
11 PEOPLE'S LEASING & FINANCE PLC/L.T. 5,137,200 0.38 11 LEXINTON HOLDINGS (PVT)LTD 5,767,000 0.42
SAMARAWICKRAMA
12 MR. H.D.A.D.PERERA 5,022,364 0.37 12 MR. BORALA LIYANAGE JAYARATNE 5,479,774 0.40
13 SAMPATH BANK PLC/MR. ARUNASALAM 5,004,500 0.37 13 AMAYA LEISURE PLC 5,320,000 0.39
SITHAMPALAM
14 HI-LINE TRADING (PVT) LTD 4,642,937 0.34 14 HI-LINE TRADING (PVT) LTD 5,320,000 0.39
15 SEYLAN BANK PLC / JAYANTHA DEWAGE 4,582,800 0.34 15 PEOPLE'S LEASING & FINANCE PLC/L.T. 5,137,200 0.38
SAMARAWICKRAMA
16 TIMEX GARMENTS (PVT) LTD 4,514,900 0.33 16 SAMPATH BANK PLC/MR. ARUNASALAM 5,004,500 0.37
SITHAMPALAM
17 ASSOCIATED ELECTRICAL CORPORATION 4,262,900 0.31 17 MR. H.D.A.D.PERERA 5,000,000 0.37
LTD
18 E.W. BALASURIYA & CO (PVT) LTD 3,835,013 0.28 18 SEYLAN BANK PLC / JAYANTHA DEWAGE 4,582,800 0.34
19 SIERRA CONSTRUCTION (PVT) LTD 3,386,900 0.25 19 PAN ASIA BANKING CORPORATION 4,525,000 0.33
PLC/S.S.WEERABAHU
20 MR. BORALA LIYANAGE JAYARATNE & DR. 3,323,676 0.24 20 TIMEX GARMENTS (PVT) LTD 4,514,900 0.33
YASOJA SUJEEWANI LIYANAGE
TOTAL 1,044,480,970 76.35 TOTAL 1,012,954,994 74.05

No. of shares held by public 535,000,883 No. of shares held by public 536,421,783
No. of shareholders representing the 16,275 No. of shareholders representing the 17,109
public holding public holding -
Percentage of shares held by public 39.11% Percentage of shares held by public 39.21%
 Annual Report 2016-17 | Browns Capital PLC 149

Glossary of Financial &

Non-Financial Terms
Financial Terms CASH BASIS OF ACCOUNTING - Recording 3. it is unable to be measured with
A revenues and expenses in the period in sufficient reliability.
ACCRUAL BASIS OF ACCOUNTING - which they are received or disbursed.
Recording revenues and expenses in COST METHOD - Cost method is a method
the period in which they are earned or CASH EQUIVALENTS - Short-term, highly of accounting for investment whereby
incurred regardless of whether cash is liquid investments that are readily the investment is recognised at cost.
received or disbursed in that period. convertible to known amounts of cash and The investor recognises income from
which are subject to an insignificant risk the investment only to the extent that
AMORTISATION - The systematic allocation of change in value. the investor receives distributions from
of depreciable amount of an intangible accumulated profits of the investee
asset over its useful life. CASH GENERATING UNIT - is the smallest arising after the date of acquisition.
identifiable group of assets that generates Distributions received in excess of such
ASSOCIATE - is an entity over which the cash inflows that are largely independent profits are regarded as a recovery of
investor has significant influence. of the cash inflows from another assets or investment and are recognised as a
group of assets. reduction of the cost of the investment.
ASSET TURNOVER - Revenue including
associate company revenue divided by CONSUMABLE BIOLOGICAL ASSETS - CURRENT RATIO - Current assets divided
average total assets. Biological assets that are to be harvested by current liabilities.
as agricultural produce from biological
AVAILABLE-FOR-SALE FINANCIAL assets or sold as biological assets. D
INSTRUMENTS - Non-derivative financial DEFERRED TAXATION - The tax effect
assets that are designated as available CONTROL - The Group (investor) has the of timing differences deferred to/from
for sale or are not classified as (a) loans control over an entity (investee), when it is other periods which would only qualify for
and receivables, (b) held-to-maturity exposed, or has rights to, variable returns inclusion in tax return at a future date.
investments or (c) financial assets at fair from its involvement with the investee
value through profit or loss. and has the ability to affect those returns DEBT/EQUITY RATIO - Debt as a
through its power over the entity. Thus, percentage of shareholders’ funds and
B the Group controls an entity, if and only non-controlling interests.
BASIC EARNINGS PER SHARE - Profit if the Group has all of the following three
attributable to ordinary equity holders criteria. DILUTED EARNINGS PER SHARE - Profit
of the parent (the numerator) divided by attributable to ordinary equity holders
the weighted average number of ordinary • Power over the entity. of the parent divided by the weighted
shares in issue (the denominator) during average number of ordinary shares in
the period. • Exposure, or rights, to variable returns issue during the period adjusted for
from its involvement with the entity and potentially dilutive ordinary shares
BEARER BIOLOGICAL ASSETS - Biological outstanding during the year.
assets that are not intended to be sold • The ability to use its power over the
or harvested, however used to grow for entity to affect the amount of the DIVIDEND PAYABLE - Final dividend per
harvesting agricultural produce. Group’s returns. share multiplied by the latest available
total number of shares as at the date of
BIOLOGICAL ASSETS - A living animal or CONTINGENT LIABILITIES - A condition the report.
plant. or situation existing at the balance
sheet date due to past events, where the DIVIDEND PER SHARE (DPS) - Value of
C financial effect is not recognised because: the dividend proposed and paid out to
CAPITAL EMPLOYED - Shareholders’ funds ordinary shareholders divided by the
plus non-controlling interests and debts. 1. the obligation is crystallised by the number of ordinary shares in issue.
occurrence or non occurrence of one or
CAPITAL RESERVES - Reserves identified more future events or, DIVIDEND PAYOUT RATIO - Dividend as a
for specific purposes and considered not percentage of company profits adjusted
available for distribution. 2. a probable outflow of economic for non-cash gains items.
resources is not expected or,
150 Annual Report 2016-17 | Browns Capital PLC

Glossary of Financial & Non-Financial Terms

E or a cash-generating unit exceeds its N

EBIT - Abbreviation for earnings before recoverable amount. NET ASSETS - Total assets minus current
interest and tax (includes other operating liabilities minus long term liabilities minus
income). INTANGIBLE ASSETS - An identifiable non-controlling interests.
non-monetary asset without physical
EBIT MARGIN - EBIT divided by turnover substance. NET ASSETS VALUE PER SHARE - Net
inclusive of share of associate company assets as at a particular financial year end
turnover. INTEREST COVER - Consolidated profit divided by the number of shares in issue
before interest and tax over finance as at the current financial year end.
EBITDA - Earnings before interest, tax, expenses.
depreciation and amortisation. NET PROFIT RATIO (G/P RATIO) - Profit
J after tax divided by net turnover inclusive
EFFECTIVE RATE OF TAXATION - Current JOINT CONTROL - is the contractually of share of associate company turnover.
tax expense divided by profit before tax. agreed sharing of control of an
arrangement, which exists only when NET WORKING CAPITAL - Current assets
EQUITY METHOD - The equity method decisions about the relevant activities minus current liabilities.
is a method of accounting whereby the require the unanimous consent of the
investment is initially recognised at cost parties sharing control. O
and adjusted thereafter for the post- OCI - Other Comprehensive Income
acquisition change in the investor’s share JOINT VENTURE - is a joint arrangement
of investee’s net assets. The investor’s whereby the parties that have joint control P
profit or loss includes its share of the of the arrangement have rights to the net PARENT - is an entity that has one or more
investee’s profit or loss and the investor’s assets of the arrangement. subsidiaries.
other comprehensive income includes its
share of investee’s other comprehensive K PRICE EARNINGS RATIO (P/E RATIO) -
income. KEY MANAGEMENT PERSONNEL (KMPs) Market price per ordinary share (diluted)
- Those persons having authority and over diluted earnings per share (EPS).
F responsibility for planning, directing and
FAIR VALUE - is the price that would controlling the activities of the entity, PROVISION FOR BAD AND DOUBTFUL
be received to sell an asset or paid to directly or indirectly, including any director DEBTS - Provisions which are established
transfer a liability in an orderly transaction (whether executive or otherwise) of that to reduce the book value of specific assets
between market participants at the entity. (primarily debtors) to estimated realisable
measurement date. values.
L
G LONG TERM DEBT TO TOTAL DEBT - Long PUBLIC HOLDING - Percentage of shares
GENERAL PROVISIONS - Provisions which term loans as a percentage of total debt. held by the public calculated as per the
are established for trading transactions Colombo Stock Exchange’s Listing Rules
and for anticipated losses. M as of the date of the Report.
MARKET CAPITALISATION - Number of
GROSS PROFIT RATIO (G/P RATIO) - Gross shares in issue at the end of period Q
profit divided by net sales. multiplied by the market price at the end QUICK RATIO - Cash plus short term
of period. investments plus receivables, divided by
GROUP - A parent and all its subsidiaries. current liabilities or current assets less
MARKET RISK - The possibility of loss inventories, divided by current liabilities.
I arising from changes in the value of
IFRIC - International Financial Reporting a financial instrument as a result of R
Interpretation Committee. changes in market variables such as RECOVERABLE AMOUNT OF ASSET OR A
interest rates, exchange rates, credit CASH GENERATING UNIT - Is the higher of
IMPAIRMENT LOSS - The amount by spreads and other asset prices. its fair value less costs of disposal and its
which the carrying amount of an asset value in use.
 Annual Report 2016-17 | Browns Capital PLC 151

RELATED PARTY - A person or entity that S T

is related to the entity that is preparing its SEGMENTS - Constituent business TOTAL DEBT - Long term loans plus short
financial statements. units grouped in terms of similarity of term loans plus overdrafts.
operations and location.
Retirement Benefits TOTAL EQUITY - Shareholders’ funds plus
PRESENT VALUE OF A DEFINED BENEFIT SHAREHOLDERS’ FUNDS - Total of stated non-controlling interest.
OBLIGATION - Present value of expected capital, capital reserves and revenue
future payments required to settle the reserves. U
obligation resulting from employee service UITF - Urgent Issues Task Force of the
in the current and prior periods. SIC - Standing Interpretation Committee. Institute of Chartered Accountants of Sri
Lanka.
CURRENT SERVICE COST - Increase in SIGNIFICANT ACCOUNTING POLICIES -
the present value of the defined benefit Specific principles, bases, conventions, V
obligation resulting from employee service rules, and practices adopted by an VALUE IN USE - Is the present value of the
in the current period. enterprise in preparing and presenting future cash flows expected to be derived
Financial Statements. from an asset or cash-generating unit.
INTEREST COST - Increase during a
SIGNIFICANT INFLUENCE - The power to W
period in the present value of a defined
participate in the financial and operating WORKING CAPITAL - capital required for
benefit obligation which arises because
policy decisions of the investee but is not financing day to day operations computed
of the benefits are one period closer to
control or joint control of those policies. as the excess of current assets over
settlement.
current liabilities.
ACTUARIAL GAINS AND LOSSES - Effects of SRI LANKA ACCOUNTING STANDARDS
difference between the previous actuarial (SLFRSs) - Standards and interpretations Non-financial Terms
adopted by the Council of the Institute of C
assumptions and what has actually
Chartered Accountants of Sri Lanka (CA CBSL - Central Bank of Sri Lanka
occurred and the effects of changes in
actuarial assumptions. Sri Lanka) which comprise;
CERTIFIED EMISSION REDUCTION
Sri Lanka Financial Reporting Standards (CER) - Carbon credit units as at the
RETURN ON ASSETS - Profit after tax
(SLFRSs) balance sheet date have been valued
divided by the average total assets.
at their estimated net realisable value
Sri Lanka Accounting Standards (LKASs) as inventories and disclosed in the
RETURN ON AVERAGE CAPITAL EMPLOYED
financial statements as Certified Emission
- Consolidated profit before interest
Statement of Recommended Practices Reduction.
and tax as a percentage of average total
capital employed’ (SoRPs)
COST OF PRODUCTION (COP) - Cost
Statement of Alternative Treatments of producing on kilo of produce (Tea/
RETURN ON CAPITAL EMPLOYED (ROCE)
(SoATs) Rubber).
- Consolidated profit before interest and
tax as a percentage of average capital
Interpretations adopted by the Council of CROP - The total produce harvested
employed.
the Institute of Chartered Accountants of during a financial year.
RETURN ON EQUITY (ROE) - Profit Sri Lanka (IFRIC and SIC).
CSE - Colombo Stock Exchange.
attributable to shareholders as a
percentage of average shareholders’ Financial Reporting guidelines issued by
the Institute of Chartered Accountants of E
funds.
Sri Lanka. EXTENT IN BEARING - The extent of a land
from which crop is being harvested.
REVENUE RESERVES - Reserves
considered as being available for SUBSIDIARY - An entity that is controlled
distribution and investments. by another entity (known as the parent).
152 Annual Report 2016-17 | Browns Capital PLC

Glossary of Financial & Non-Financial Terms

F S
FIELD - A unit extent of land. Estates are SLSPC - Sri Lanka State Plantations
divided into fields in order to facilitate Corporations
management.
Y
G YIELD (YPH) - The average crop per unit
GDP - Gross Domestic Product extent of land over a given period of time
(usually Kgs. per hectare per year)
GROSS SALE AVERAGE (GSA) - Average
sale price obtained (over a period of
time, for a kilo of produce) before any
deductions such as brokerage, etc.

I
IMMATURE PLANTATIONS - The extent of
plantation that is under-development and
is not being harvested.

INFILLING - A method of field development

whereby planting of individual plants
is done in order to fill the vacancies of
existing revenue fields.

J
JEDB - Janatha Estates Development
Board

M
MATURE PLANTATIONS - The extent of
plantation from which crop is being
harvested.

N
NET SALE AVERAGE (NSA) - Average sale
price obtained (over a period of time) after
deducting brokerage fee, etc.,

R
REPLANTING - A method of field
development where an entire unit of land
is taken out of “bearing” and developed
by way of uprooting the existing trees and
replanting with new trees.
 Annual Report 2016-17 | Browns Capital PLC 153

Notice of the
Annual General Meeting
NOTICE IS HEREBY GIVEN that the NINTH Resolution Notes:
ANNUAL GENERAL MEETING of the “That Mr. Uditha Palihakkara who reached
Company will be held at Park Premier, the age of 74 years on 16th January 1 A member entitled to attend and vote
Excel World, No. 338, T. B. Jayah Mawatha, 2017 be and is hereby re-elected as an at the Meeting may appoint a proxy to
Colombo 10 on the Nineteenth day of Independent Non-Executive Director of attend and vote in his stead
September 2017 at 10.45 a.m. the Company for a period of one year or
until the conclusion of the next Annual 2 A proxy need not be a member of the
The business to be brought before the General Meeting whichever occurs first Company. A Form of Proxy is found at
meeting will be : and it is hereby declared that the age limit the end of this Annual Report.
of 70 years referred to in Section 210 of
• To receive, consider and adopt the the Companies Act No. 7 of 2007 shall not 3 The instrument appointing such a proxy
Report of the Directors and the Audited apply to the said Director.” must be deposited with the Secretaries
Financial Statements for the year ended at No.34, Sir Mohamed Macan Markar
31st March 2017 together with the • To re-appoint M/s. KPMG, Chartered Mawatha, Colombo 3, not less than 48
Report of the Auditors thereon Accountants, as the Auditors of the hours before the time appointed for the
Company for the ensuing year. holding of the meeting.
• To re-elect Mr. Indrajith Fernando as an
Independent Non-Executive Director • To authorize the Directors to fix the
who retires by rotation in accordance remuneration of the Auditors.
with Article 23(6) of the Articles of
Association of the Company. • To authorize the Directors to determine
contributions to charities and other
• To re-elect Mr. Kapila Jayawardena as donations for the financial year
a Non-Executive Director who retires 2017/18 or until the next Annual
by rotation in accordance with Article General Meeting.
23(6) of the Articles of Association of
the Company. By Order of the Board

• To re-elect Mr. Uditha Palihakkara as an

Independent Non-Executive Director. In
terms of Section 210 of the Companies
Act No. 7 of 2007 a Special notice has S.F.L. SERVICES (PVT) LTD
been received from a shareholder, Secretaries
pursuant to Sections 145 and 211 of
the Companies Act No. 7 of 2007 of Colombo
the intention to propose the following 15th June 2017
resolution as an ordinary resolution.
154 Annual Report 2016-17 | Browns Capital PLC

Notes
 Annual Report 2016-17 | Browns Capital PLC 155

Form of Proxy

Browns Capital PLC - Reg. No. PV 64165 PB/PQ

I/We .............................................................................................of..........................................................................................................................................

.......................................................................................................... .being a member/members of the above named Company hereby appoint

Mr. Kapila Jayawardena or failing him

Mrs. Kalsha Amarasinghe or failing her

Mr. Kamantha Amarasekera or failing him

Mr. Indrajith Fernando or failing him

Mr. Uditha Palihakkara or failing him

Mrs. Sunjeevani Kotakadeniya or failing her

Mr/ Mrs/Miss..................................................................................................... of....................................................................................................................

as my/our proxy to represent me/us and to vote for me/us and on my/our behalf at the Ninth Annual General Meeting of the

Company to be held on the 19th day of September 2017 and at any adjournment thereof and at every poll which may be taken in

consequence thereof.

Signed this ........................ day of ........................ 2017

......................

Signature/s

Please provide the following details :

Shareholder’s NIC No. .........................................................................................................................................................................................

No. of shares held ................................................................................................................................................................................................

Proxy holder’s NIC No. .........................................................................................................................................................................................

(if not a Director of this Company)

156 Annual Report 2016-17 | Browns Capital PLC

Form of Proxy

Notes:

1 The full name and the registered address of the shareholder

appointing the proxy should be legibly entered in the Form of Proxy

2 If the Form of Proxy is signed by an Attorney, the relative Power of

Attorney should accompany the Form of Proxy for registration, if
such Power of Attorney has not been registered with the company.

3 In the case of a company/corporation, the proxy must be under its

common seal which should be affixed and attested in the manner
prescribed by its Articles of Association.

4 In the case of joint-holders, the senior should sign this form.

Seniority shall be determined by the order in which names stand in
the Register of Members in respect of the joint holding. .

5 Every alteration or addition to the Form of Proxy must be duly

authenticated by the full signature of the person signing on the Form
of Proxy.

6 To be valid the completed Form of Proxy should be deposited with

the Secretaries at No.34, Sir Mohamed Macan Markar Mawatha,
Colombo 3, not less than 48 hours before the time appointed for the
holding of the meeting.

7 Any shareholder/proxy attending the Annual General Meeting is

kindly requested to bring with him/her the National Identity Cards or
any other form of valid identification and produce same at the time
of registration
Corporate Information
Browns Capital PLC

LEGAL FORM A Public Limited Liability Company incorporated in Sri Lanka on 22nd May 2008 registered under
the Companies Act. No. 07 of 2007 and quoted on the Diri Savi Board of the Colombo Stock
Exchange.

COMPANY REGISTRATION NO. PV 64165 PB/PQ

DIRECTORS Mr. Ishara Nanayakkara - Chairman/ Non-Executive Director

(Resigned on 31st March 2017)
Mr. Kapila Jayawardena - Non-Executive Director
(Appointed as the Chairman w.e.f. 31st March 2017)
Mrs. Kalsha Amarasinghe - Non-Executive Director
Mr. Kamantha Amarasekera - Non-Executive Director
Mr. Indrajith Fernando - Independent Non-Executive Director
Mr. Uditha Palihakkara - Independent Non-Executive Director
Mrs. Sunjeevani Kotakadeniya - Executive Director
Mr. Rajah Nanayakkara - Non-Executive Director
(Demised on 22nd March 2017)

REGISTERED OFFICE 19, Dudley Senanayake Mawatha,

Colombo 08
Tel No. 7474500
Fax No. 7474548

BUSINESS OFFICE Level 12, Browns Capital Building,

No. 19, Dudley Senanayake Mawatha,
Colombo 08
Tel No. 7474500
Fax No. 7474548

SECRETARIES S.F.L. Services (Pvt) Ltd

48l T B Jayah Mawatha,
Colombo 10. Sri Lanka.
Tel No. 2663000
Fax No. 2307380

REGISTRARS S S P Corporates (Pvt) Ltd.

No.101, Inner flower Road, Colombo 03.
Tel 011 2573894
Fax 011 2573609

AUDITORS Messrs KPMG

Chartered Accountants
32A, Sir Mohamed Macan Markar Mawatha
Colombo 3. Sri Lanka.
Tel No. 5426462
Fax No. 2445872

BANKERS Pan Asia Banking Corporation PLC

Seylan Bank PLC
Hatton National Bank PLC

Designed & produced by

Printed by Printage (Pvt.) Ltd

www.brownscapital.com