jat holdings (pvt) ltd annual report 2017/18 holdings... · 2019-12-12 · 1 jat holdings (pvt) ltd...

JAT Holdings (PvT) lTdANNUAL REPORT 2017/18

About Us 2

Vision, Mission, Our Values 3

OUR VALUE CREATION

Financial Highlights - Group 6

Non Financial Highlights - Company 7

Awards 8

Contribution to the Country 10

Value Added Statement 11

Key Clients of 2017-18 12

Year at a Glance 15

Milestones 18

Sponsorships 20

INTRODUCTION

Introduction to this Report 22

Materiality Assessment 23

Stakeholder Engagement 24

REVIEW

Chairman’s Message 27

Managing Director’s Review 30

ORGANISATIONAL OVERVIEW

Group Structure 36

Business Model 37

Activities, Brands, Products and Services 38

Branch Network 44

CONTENTS

GOVERNANCE

Corporate Governance 48

Compliance with the Code of Best Practice 53

Board of Directors 62

Executive Directors 64

Executive Committee 66

Senior Management 67

Report of the Audit Committee 68

Report of the Remuneration Committee 69

Report of the Related Party Transaction

Report Committee 70

Risk Management Committee 71

PERFORMANCE AND OUTLOOK

Operating Environment 74

Growth Strategy and Resource Allocation 76

Risk Management 78

Managing our Financial Capital 80

Human Capital 84

Manufactured Capital 87

Natural Capital 88

Intellectual Capital 90

SUSTAINABILITY REPORT

Managing our Impacts 92

FINANCIAL REPORTS

Chief Executive Officer’s and Finance Director’s

Responsibility Statement 103

Annual Report of the Board of Directors on the

Affairs of the Company 104

Independent Auditor’s Report 106

Statements of Financial Position 108

Statements of Profit or Loss and other

Comprehensive Income 110

Statements of Changes In Equity 111

Statements of Cash Flow 112

Notes to the Financial Statements 114

Shareholder Information 153

8 Year Summary - Group 154

SUPPLEMENTARY INFORMATION

GRI Index 155

Notice of Meeting 156

Form of Proxy 157

Notes 159

1JAT Holdings (PvT) lTd | ANNUAL REPORT 2017/18

We transform spaces, taking them from ordinary to extraordinary with a range of products and services that are not only necessary but innovative. In the year under review, we looked at our core strengths and paid special attention to consolidation in order to become leaner and more dynamic in the industry, while also focusing on what was important for our customer base. Having reached this stage, we look forward to creating and re-imagining diverse spaces, while adding value to the

lifestyles of our stakeholders.

2JAT HOLDINGS (PVT) LTD | ANNUAL REPORT 2017/18

2JATJATJATJAT HOHOHOHOLDILDILDILDINNGSNN (PPPPVVVTTTT)) LTLTTD D D | ANNANANNANNUALUALUAL REREEREPORPORPORP T 2T 2T 2T 01701701717/18/18/1818

ABOUT US

Founded in 1993, to service the wood coatings industry of the local market, JAT Holdings (Pvt) Ltd, has since then grown rapidly to become Sri Lanka’s premier specialist for finishing and furnishing solutions. Through continuous innovative augmentations, its focus in marketing strength and brand development, dedication to customer service excellence, in-depth technical knowhow and supreme ethical transparency, JAT Holdings has since then become one of the strongest corporate brands in the country.

Symbolic of its commitment to deliver high quality products that are safe to use and environmentally friendly, in the year 2000 JAT transformed the wood coatings industry in Sri Lanka with the pioneering launch of water-based wood coating solutions, a safe and eco-friendly alternative for the conventional solvent-based products. Marketed under the Company’s flagship Sayerlack brand, JAT’s water-based wood coatings has revolutionized Sri Lanka’s building materials market and remains the undisputed market leader with a 55% market share within the segment.

Representing only focused, superior ranges of products and services to retail and commercial customers, in addition to Sayerlack, the portfolio also boasts of world-renowned brands of the highest quality in each respective category such as Crown decorative Paints, Permoglaze Emulsion and Enamel Paints, Borma Wachs wood cosmetics, Norton abrasive products, Armstrong Ceilings, Herman Miller office furniture, Lifewood flooring and SEA kitchen solutions to name a few.

Having consolidated its position as the premier in finishing and furnishing solutions provider in Sri Lanka, JAT is now making its mark in the region, having strategically expanded its presence across the Asian subcontinent in recent years. In 2016, JAT moved forward with its new corporate identity – Transforming Spaces, supporting the company’s long-term growth strategy.


3333JAT HOLDINGS (PVT) LTD | ANNUAL REEEPORPOP T 2T 2T 017/1888

VISION, MISSION, OUR VALUES

VisionBe the brand of choice to the finishing, living and furnishing industries in South Asia.

Mission We are committed to building long-term relationships based on integrity, performance, value, and

exceeding customer satisfaction.

We will continue to meet the changing needs of our clients with our highest quality and innovative solutions delivered by the most qualified people.

We are more than a conglomerate. We are a dedicated team striving to bring growth to our community, helping to maintain existing businesses and assisting our clients in making their dreams become a reality.

Our ValuesAll employees at JAT are required to practice four essential values in order to achieve our mission and vision:

In depth knowledge of entire business. Complete customer satisfaction. Leadership at all levels. Continuous improvement and innovation.


We have always been inspired to re-imagine and create unique spaces in which people work and play and have successfully done so for a quarter of a century. This milestone year is extremely special as we celebrate the future in our own space that's not only state-of-the-art but also encapsulates the best in green innovation.


FINANCIAL HIGHLIGHTS - GROUP

0

2,000

1,000

5,000

16/17 17/18

3,000

7,000

6,000

4,000

Rs. Mn

Revenue

0

2,000

1,000

16/17 17/18

3,000

5,000

4,000

Rs. Mn

Total Net Assets

0

2,000

1,000

5,000

16/17 17/18

3,000

7,000

6,000

4,000

Rs. Mn

Total Assets

Year Ended 31st March 2017/18 2016/2017 Change %

Operating Results

Revenue

- Local Turnover 3,875,605,763 4,400,200,586 -12%

- Export Turnover 1,571,083,237 1,382,764,742 15%

Gross Profit 1,642,155,569 2,071,999,600 -21%

Net Finance Cost (106,198,342) (83,023,258) 28%

Profit for the Year 634,777,719 902,302,683 -30%

Financial Position

Non-Current Assets 1,383,732,441 1,221,933,988 13%

Current Assets 4,851,821,885 4,471,071,096 9%

Total Assets 6,235,554,326 5,693,005,084 10%

Total Equity 3,830,563,732 3,380,983,043 13%

Non-Current Liabilities 265,762,315 255,207,395 4%

Current Liabilities 2,139,228,279 2,056,814,646 4%

Total Equity & Liabilities 6,235,554,326 5,693,005,084 10%

Financial Indicators

Return on Equity (%) 17% 27%

Return on Total Assets (%) 10% 16%

Gross Profit Ratio (%) 30% 36%

Net Profit (After Tax) Ratio (%) 12% 16%

Current Ratio (Times) 2.27 2.17

Liquidity Ratio (Times) 1.51 1.48

Gearing (%) 6% 6%

5.5 BnRevenue

3.8 BnTotal Net Assets

17%Return on Average Equity

6 BnTotal Assets


NON FINANCIAL HIGHLIGHTS-COMPANY

SOCIAL CAPITALRATINGS

ICRA Lanka Limited (SL) A+ (Stable)

Supplier ratings Best Distributor award from Sayerlack

INTELLECTUAL

CAPITAL

Brand Reputation - Market leader in wood coating products

MANUFACTURED CAPITAL

State-of-the-art Corporate office - Investment of Rs 500 million

State-of-the-art factories and Stores complexes-110,000 sq feet facility

NATURAL CAPITALENVIRONMENT

Green Label Award awarded by the prestigious Chartered Institute of Buildings (CIOB) for “Wall Filler” and “Wall Putty” products.

Carbon Footprint 2593.86 T CO2e- (Scope3)

Recycling of water Use of waste water treatment

HUMAN CAPITALEMPLOYEES

Great Place to Work 2016

Employer of Choice at the Sri Lanka Best Employer Brand Awards – 2017


AWARDS

SRI LANKAN ENTREPRENEUR OF THE YEAR - 2017


LMDMr. Aelian Gunawardene, Managing Director

of JAT Holding recognised in the elite list of 23 individuals, amongst other prominent

figureheads of the country as the top business people of the year.

LMDMost Respected JAT Holdings (Pvt) Ltd came

30th amongst the top corporates in the country on the list of ‘Most Respected Entities’ published by LMD Magazine

CNCI Achiever of Industrial Excellence - 2017

Top Achievers Award Winner

CNCI Achiever of Industrial Excellence - 2017

National Merit Award Winner - Extra Large Category Manufacturing Sector

CA Sri Lanka - 53rd Annual Report Awards 2017

Bronze Award - Trading Companies


CONTRIBUTION TO THE COUNTRY

THROUGH TAXESWe contribute substantially to the GDP growth, social stability and improvement of the standard of living in the countries where we operate, through the creation of economic value addition, generation of employment and by payment of taxes to governments. The taxes paid by the Group contributes to the enhancement of economic prosperity and social stability in the country as they provide essential revenues for governments to meet economic and social objectives.

The analysis given below provides the taxes directly borne by the Group as well as the indirect taxes generated as a result of economic activities carried out by the Group

TAXES PAID TO THE GOVERNMENTS IN 2017/18

Tax Type 2017/18Rs.000

Net Value Added Tax (VAT) 72,315

Net Nation Building Tax (NBT) 14,471

Stamp Duty 300

Income Tax/ESC 44,842

Dividend Tax 13,809

THROUGH FOREIGN CURRENCY GENERATIONJAT Holdings (Pvt) Ltd, through its exports business, directly and indirectly contributes significantly towards the foreign currency generation to the country. During the year under review, the Group facilitated the generation of Rs. 1.6 billion in foreign currency to Sri Lanka, through its operations. This was a 15% increase compared to the previous year.

50

10

31

9

Value Added Tax (VAT)Nation Building Tax (NBT)Stamp Duty

Income Tax/ESC Dividend Tax

Taxes paid to the Government 2017/18

%


VALUE ADDED STATEMENT

3.6

35.5

9.411.8

39.6

To GovernmentTo EmployeesTo lenders of capital

To shareholderRetained for reinvestments

Distribution of Wealth Created 2017/18

%

2017/18Rs. ‘000

%

Total revenue 5,446,689

Purchase of goods and services 4,259,847

Other operating and interest income 51,312

Total value added by the Group 1,238,154

Distributed as follows

To Government (income tax and ESC) 44,842 3.6

To Employees (salaries and other costs) 439,882 35.5

To Lenders of capital (interest on loan capital and minority interest) 116,620 9.4

To Shareholders (dividends) 146,323 11.8

Retained for reinvestment and future growth (retained earrings and depreciation)

490,487 39.6

JAT Holdings (pvt) Ltd through its operations has continuously recorded positive wealth creation towards the economies it operates and to its various stakeholders. This wealth creation has been achieved whilst maintaining an unceasing commitment towards the training and skills development, the upliftment of the communities it operates in and to the environment. The value added statement depicts the wealth created by the Group during the year as a result of its activities and how this wealth has been distributed amongst its many stakeholders.

It also provides the quantum of the wealth created that is retained by the Group for future development of its operations and new investments. The Group generated a total wealth of Rs 1,238 million through its operations for the financial year 2017/2018. Of the wealth created during the year 35.5% was distributed amongst the Group employees whilst 3.6% was paid to Governments as taxes. The Group paid Rs 116 million to lenders of capital, amounting to 9.4% of the total wealth for the year, whilst 11.8% was declared as dividends to the shareholders. From the total value created for the year, 39.6% was retained by the Group for re-investment in operations for future growth.

12JAT Holdings (PvT) lTd | ANNUAL REPORT 2017/18

Key Clients of 2017-18

London Stock Exchange Group (Trace City)

� london stock Exchange group

� sri lanka institute of Architects

� indocean developments – Altair

� shangri la Hotel and Commercial Tower

� Access Projects

� HsBC

� diMo

� Tudawe Brothers

� nawaloka Constructions

� MAs Holdings

� design one ltd

� Access Tower

� Asia Pacific Brewery

� Earls Regency

� RH Holdings

� Prime group

� Ceylinco life


SLIA Auditorium

PWA Architects

MISD Associates

Waters Edge

Central Engineering

Ministry of Crab

Sri Lanka Institute of Information

Technology

Sanken Overseas

Park Street Mews

Heritance Ahungala

N&A Engineering

Craft Suppliers

Atkien Spence

Coca Cola

Australian High Commission

Amana Bank

VK Enterprises


Minisrty of Crab

KEY CLIENTS OF 2017-18

Cargills Ceylon

Home Lands

ROCELL

Alucare

Vingayana Reef

SW Plus Architecture

Omesha Enterprises

Amagi Lagoon

De Seram Residencies

77 on Fourth Residencies

Renuka Agri Foods

JR international

Fairway Holdings

Sino Lanka Hotels

Elysian Development

Arpico Interiors


YEAR AT A GLANCE

APRIL 2017 BUILDING SPECIFIERS’ CONFERENCE JAT Holdings was a title sponsor of the highly-successful Building Specifiers’ Conference 2nd Edition. This successive endeavor saw a stellar gathering of the delegates involved in every sphere pertaining to the building industry. Among them were architects, structural engineers, civil engineers, consultants, students, contractors, developers, builders, quantity surveyors, project managers, officials in Government departments, fabricators and university academics.

JULY 2017 CHEMICAL LEASING AGREEMENT As a part of a long-term commitment on environmental sustainability, JAT entered into an agreement with MAS Linea Intimo (Pvt) Ltd as a business solution to encourage local industries to embrace responsible sustainable integration.

SPONSORING INDIA TOUR OF SRI LANKAJAT Holdings continues its contribution to the upliftment of sport in the region by sponsoring the Sri Lanka vs. India Test cricket series 2017 as Associate Gold Sponsor.

AUGUST 2017 AERON 2 LAUNCH JAT Furnishing unveiled the new version of the most famous and best-selling office chair in the world, the Aeron 2 by Herman Miller, at Hilton, Colombo. Aeron 2 has been redesigned in order to satiate different body structures in order to provide the highest level of comfort keeping in mind the rules of ergonomics.

CINNAMON COLOMBOSCOPE As an initiative to promote art, culture and explore environmentalism at Colombo’s biggest multidisciplinary contemporary arts festival JAT Holdings (Pvt) Ltd. partnered up with “Cinnamon Colomboscope 2017”. The festival brought the ongoing environmental crisis under the spotlight, in the hope of using art to inspire new ways of thinking and living in response to the situation.

MAY 2017 CONSTRUCTION EXPO Took part with Crown Paints as the showcase brand over the exhibition’s three days

JUNE 2017 JAT TECH EXPERIENCE CENTRE JAT Technologies launched its new state-of- the-art Audio Visual and ELV experience centre


SEPTEMBER 2017 CH&FC and CR&FC SponsorshipsThe Dialog Rugby League 2017/2018 which kicked off in November saw JAT Holdings sponsor both Ceylonese Rugby & Football Club and the Colombo Hockey & Football Club for the season. This was done in order to reiterate the Company’s commitment to sports and endorsing the spirit of sportsmanship.

SAARC Trade FairOrganised by the SAARC Chamber of Commerce & Industry in collaboration with the Federation of Chambers of Commerce & Industry of Sri Lanka (FCCISL), the forum carried the theme of ‘Unleashing South Asia, JAT Holdings hosted a stall at the Trade Fair which housed stalls with various foreign representation.

NOVEMBER 2017 Big 5 International Building and Construction Show (Dubai)JAT Holdings (Pvt) Ltd participated at the Big 5 International Building and Construction Show, held at the Dubai Word Trade Centre. Products featured were Brush Master, Borma Wachs and Sayerlack.

Re-Launch of Crown The Crown Brilliant White campaign was launched in December of 2017, with the target of pushing the brilliant white emulsion paint to the local market. The brand was revamped and introduced as a whole new entity under the JAT Paints vertical.

LMD Top 23 Business People of the Year Mr. Aelian Gunawardene, Managing Director of JAT Holdings recognised in the elite list of 23 individuals, amongst other prominent figureheads of the country as the top business people of the year.

DECEMBER 2017The new SEA showroomRecently JAT Furnishing unveiled the all new SEA showroom space which delivers a unique experience to the customer who would want to visualise, touch and feel their personalised kitchen before making the investment. Housing exceptional kitchen designs also boasts unparalleled customer service and outstanding quality.

Entrepreneur of the Year The Platinum Award of the 22nd Sri Lankan Entrepreneur of the Year 2017 and the Provincial Gold Award (Extra Large Category – Western Province) was taken home by Managing Director of JAT Holdings (Pvt) Ltd, Mr. Aelian Gunawardene.

Crown Paints Sponsors Miss Intercontinental (Sri Lanka) 2017 Crown Paints and JAT Holdings was the premium sponsor for the glamorous pageant which took place at the Hilton Colombo.

OCTOBER 2017Wood Expo JAT Holdings was also privileged to participate at the third consecutive Wood Expo held in Bangladesh.

Epoxy floor coating Solvent-free epoxy floor coating systems were launched within the year which can be applied upto 3mm thickness levels, especially for industrial/commercial floor areas.

YEAR AT A GLANCE


JANUARY 2018SEA momentum Since partnering with SEA Bauformat, the Company has reached over 1.8 billion confirmed orders for kitchens, wardrobes and vanities. This was done over a span of only eight months.

FEBRUARY 2018 Architects Exhibition 2017JAT Holdings participated with four stalls in the acclaimed Architect Exhibition 2017 and introduced a plethora of innovative and revolutionary products to the Sri Lankan market.

Foundation of JAT StadiumPrince Edward Earl of Wessex and Countess Sophie made a historic visit to the Sri Lanka Tennis Association (SLTA), to lay the foundation stone for a modern Indoor Tennis Complex and showroom space, a first in the country.

MARCH 2018Brush Master Launch - Black Brush The Brush Master Black was launched, establishing the black brush to be used for the wall, whilst Brush Master Gold is perceived as a brush used when applying water base applicants.


1993 1998 20011995 1999 20031996 2000 2005 2010

JAT Holdings incorporated

1st company to introduce PU coatings to wood

finishing industry which revolutionizes market from basic NC coating offering wood coatings

JAT partners Borma Wachs, Europe’s

largest wood cosmetics producers. 1st company to introduce Water Base

Putty into marketJAT enters Bangladesh with Sayerlack, J-Chem

& Borma Wachs

JAT enters Maldives with Sayerlack &

Borma Wachs

JAT partners Sayerlack the global leader in wood coatings

First company to introduce island-wide

training on wood finishing for

applicators,architects, institutes, wood working industries. To date over 20,000 professionals in

South Asia trained

1st company to introduce Water Base Coatings in Sri Lanka & region. Transforming South Asia’s wood coating

industry.

1st company to actively promote environmentally

friendly low VOC products

JAT reaches 10 years

Launches Brush Master, the premium paint brush

made with DuPont filament

MILESTONES


2011 2014 2015 20182013 2016

Reaches Rs 1 billion in sales JAT partners Permoglaze Paints

JAT ranked #9 in Top 10 Conglomerate Brands in

Sri Lanka

JAT dominates 75% of wood coatings market in

Sri Lanka

Partners Tarkett, Rebo and Daso, Global leaders in

environmentally sustainable wooden flooring and

bamboo decking

Partners Armstrong, a global leader in ceilings & flooring

Partners Crown Paints, the world’s premier paint brand

Partners Herman Miller to enter office furnishing

business. The world leader in health-positive office furniture Revolutionizing

“ergonomics” in Sri Lanka

Private placement with 6% of total market

capitalization

JAT commences construction of new

head office, moving all operations to a modern,

state of art location.

Incorporated JAT Global (Pvt) Ltd

Highest Export Turnover recorded at over

USD $10 Mn

Highest Project turnover recorded at Rs 701 Mn

Partners with LIfewood Australia

JAT enters 25 years in operation

JAT Completes the construction of a 45,000 sqft

head office Complex

Reaches 20 years

JAT enters India.

Partners Norton, The world leader in abrasives

2017

Chemical Leasing Agreement

As a part of a long term commitment on Environmental Sustainability, JAT

entered in with MAS Linea Intimo (Pvt)

Listed 30th on ‘Most Respected Entities’ published by LMD.

JAT Acquires Eurometalic Ceiling

manufacturing unit from Access projects Limited.

Partners with SEA Group (Germany) introducing

State of the art Kitchens and Wardrobes.


SPONSORSHIPS


JAT SPONSORSHIPS FOR THE YEAR 2017-2018

Colombo Hockey & Football Club Main Sponsor

Ceylonese Rugby & Football Club Main Sponsor

Helibees Racing Co-main Sponsor

Zimbabwe Tour of Sri Lanka and India’s Tour of Sri Lanka Associate Sponsor

India Tour of Sri Lanka Ground Sponsor

Rodgers & Hammerstein’s Cinderella Main Sponsor

JAT Cricket Wasanthaya

Colombo Masters Cricket Association Team Sponsor

Get into Rugby - Main Sponsor

Ladies College Old Girl’s Association Dinner Dance 2017

Builders Specifies Conference 2017 Co-Sponsor

Cinnamon Colomboscope Event Sponsor


INTRODUCTION TO THIS REPORT

The 2017-18 Annual Report of JAT Holdings is significantly different from our previous annual reports due to our decision to adopt both the International Integrated Reporting Framework 2013 to report on the management of our business operations and financial and non financial capitals. In addition, we have also attempted to align our report with the GRI Standards 2016. However at this initial state of reporting we are not claiming any level of GRI compliance. The objective is to improve our reporting culture through the incorporation of sustainability reporting principles into our Annual Report.

EXTERNAL ASSURANCE FOR SUSTAINABILITY REPORTINGWe have not obtained external assurance for sustainability reporting for this report.

STATEMENT OF RESPONSIBILITY FOR THIS REPORTThe director’s responsibility for this report have been met under the requirements of the Companies Act of 2007 in the Statement of Directors the responsibility and other statutory reports included in this Annual Report.

MEETING INTEGRATED REPORTING PRINCIPLES

Strategic focus and future orientation and connectivity of information

Through the Chairman and Managing Director’s statement we have presented a connected and strategic picture of our operations for the financial year 2017 and also clearly stated our future plans for the Company and the Group.

The Risk Management Report presents an overview of the risk profile of the Company vis a vis future growth plans

Stakeholder relationships Our approach to stakeholder engagement and our engagements during the year have been summarised below in the Stakeholder Engagements section.

Materiality The material topics selected for disclosure were decided by the senior management, based on:1. Regulatory and good governance disclosure requirements 2. A materiality assessment based on the requirements of the Integrated Reporting Framework and GRI Standards

Please refer the Materiality Assessment section below for more information on the process of how we selected material topics for coverage in this report.

Conciseness Information has been presented to be as complete as possible in the most concise manner. We have also attempted to supplement narratives with informative diagrams and charts to concisely present additional information.

Reliability and completeness We have attempted to present a complete picture of material topics by providing a balanced perspective by disclosing both positive and negative aspects where relevant.

For reliability of information, the contents of this report have been approved by relevant senior managers.In addition:1. The Financial Statements of the Company have been audited by Chartered Accountants, Ernst & Young , for

reliability. 2. The Solvency Statement under the Companies Act of 2007 has been duly presented and approved by the Board 3. Annual returns have been duly filed with the Company Registrar under the Companies Act 2007.4. All other statutory statements under the Companies Act are included in this Annual Report


MATERIALITY ASSESSMENT

GRI 102-46

JAT Holdings (Pvt) Limited conducted a materiality assessment to identify issues that are of significant importance to the business and its stakeholders at both internal and external levels. The feedback of this will result in environmental, social and governance matters being identified. The results are then used to determine any risks and opportunities that may be of concern to the ordinations operation.

Identification & Assessment Process.The Company takes into consideration the following, to make sound decisions on identifying issues of material importance.

Regulatory compliance and good governance disclosures

Investor/ Business partner expectations Independent employee/customer satisfaction

research Analysis of its operating environment/

community

INTERNAL PRIORITIESThe identified list of topics were weighed against our Company’s Vision, Mission and Values. We also consider the operating environment we conduct our business in, our future strategy outlook and business model.

The list was then prioritised and topics that were of high importance for both the Company and key stakeholder groups were included in the current annual report.

LIST OF MATERIAL TOPICSGRI 102-47

Material Topic Investor Customer Employee Operating environment/community

Company Chapter

Good governance * * * * * Governance and Compliance chapters

Managing risks * * * Risk Management Report

Financial results * * * Financial Capital Financial Statements

Shareholder Funds * * Financial Capital Financial Statements

Robust work environment * Human Capital

Manufactured Capital

Liquidity position * * Financial Capital

Strategic employee development * * Human Capital

Sustainability Report

Quality control * Social Capital

Ethical business practices * * * Stakeholder engagement

Energy efficiency and emissions * Sustainability Report

Water effluents/waste management * Sustainability Report

Innovation * * Intellectual Capital


Stakeholders are those who are affected by our business and operations or who in turn may affect the environment in which we operate. Reaching out to all our stakeholders in ongoing conversations is vital to achieving our goals and to further developing our long-term vision and strategy in all areas of sustainability. It is why we seek proactive stakeholder engagement that promotes healthy and enlightened dialogue between the Company and all those connected to the business. With this in mind, we have put in place a robust stakeholder engagement framework, which offers clear guidelines to help us identify stakeholders and establish what is perceived as important or material to each group.

STAKE HOLDER ENGAGEMENT PROCESSAs shown above our stakeholders are involved in a recurring process with us. They are identified, ranked and prioritised, following which the needs of the high priority stakeholders are singled out. This leads in value being put forward to the stakeholders, which again leads to identifying relevant stakeholders.

LIST OF STAKEHOLDER GROUPSGRI 102-40

Identifying, Categorizing and Mapping

Our stakeholders can be categorsed into the following spectrums.1. Market place2. Work place3. Society and Environment4. Financial community

COLLECTIVE BARGANING AGREEMENTS GRI 102-41

JAT Holdings employees are not unionised and we do not have collective bargaining agreements. Percentage of total employees covered by collective bargaining agreements is zero.

RANKING & PRIORATISINGGRI 102-42

The basis for identifying and selecting stakeholders with whom to engage.Our stakeholders are ranked according to importance, urgency and legitimacy.

STAKEHOLDER ENGAGEMENT

Company

Stakeholder identification

Value proposition on Stakeholders

Finding out needs of high prioty stakeholders

Stake holder ranking and prioratizing

DIRECT IMPACT

Suppliers

Customers

Community

Government Institution

Environment/Society

Employees

Shareholders

Financial Institution

Financial Community

Market Place Work place


We prioritise our stakeholders and they are as follows:

Employees: Full-time employeesCustomers: Distributors, Export market clients and project/corporate clientsSuppliers: Local and foreign suppliersInvestors: ShareholdersBusiness partners- Financial institutions/JV partnersCommunity and Environment: Govt. regulatory bodies, community at large

Approach to stakeholder engagement and key topics and concerns raised

GRI 102-43 and 102-44

Stakeholder Engagement Approach Frequency Key Topics and Concerns JAT Response

Employees Performance reviews

Employee counselling

Operational guidelines

Open-door policy encourages direct employee/superior dialogue Code of Conduct

Annually/When required

Continuous

Continuous

Continuous

Increments Benefits Training

Focused training Reward and recognition Career progression/work life

balance

Customers One-to-one interviews and tele-conversations

On-site visits to customer points

Agreement on transaction methodology and values

Customer surveys

24/7, 365

Continuous

Monthly

Annually

Product diversity Service quality Product knowledge and

information Brand awareness

Identifying needs and pricing of products

Efficient and timeliness of transactions Complaints handling grievance handling mechanism

Suppliers Dialogue with principals to discuss product quality, customer satisfaction, pricing, promotion etc.

On-site visits to/from principals

Continuous

Continuous

Ethical procurement practices

Timely payments Support to develop the supplier

chain Integrity and responsibility

1. Shareholders2. Customers3. Suppliers4. Employees

5. Financial institutions6. Regulators7. Society & Environment

IMPORTANCE

URGENCY LEGITIMACY

3

16

2

74

5


Stakeholder Engagement Approach Frequency Key Topics and Concerns JAT Response

Shareholders Annual General Meeting – Quarterly Financial statements Company Website

AnnuallyQuarterly24/7, 365

Safeguard sustainable earning growth

Healthy financial returns Exploiting growth

opportunities

Timely payment of returns/dividends and capital gains

Integrity and responsibility

Business partners and Financial Institutions

Financial accounts

Annual report

Management accounts

Annually

Annually

As required

Integrity and responsibility Integrity and responsibility

Regulator Filing of taxes returns Monthly/quarterly Integrity and responsibility Social responsibility

Community and environment

CSR projects Discussions with religious dignitariesSustainability

As required Integrity and responsibility Company/staff recognition for community initiatives

Social inclusivity

STAKEHOLDER ENGAGEMENT


CHAIRMAN’S MESSAGE

Dear shareholders,Your Company has concluded an eventful year despite the general slowdown in the economy of the country. During the year under review, the company focussed on fine tuning its growth strategy and putting in place a solid foundation to build a larger, more resilient and more professionally managed organisation; a stepping stone for the future.

Therefore it is with pleasure that I present to you, on behalf of the Board of Directors, the Annual Report for the year ended 31st March 2018.

The year was not the most conducive for our business, as the economic situation in the country was fairly depressed. The Central Bank economic growth statistics for the year reported a GDP growth rate of 3.1% for 2017, from 4.5% in 2016. The construction sector growth rate, which dictates our demand for JAT products, fell from 8.3% in 2016, to 3.1% in 2017.

In a nutshell, this reiterates that our slice of the economy got smaller than an anticipated increase. However, our shareholders can be assured that your Company has done reasonably well under these unfavourable market conditions.

OUR VALUE CREATION DURING THE YEAR As our shareholders are aware, our contribution to the economy is primarily through the construction sector, for which we provide solutions in the areas of finishing and furnishing where JAT has built an exceptional brand equity for itself.

We try at all times to ensure that our products excel in terms of quality and performance that gives immense satisfaction to the end user and create a value addition to the environment.

We also provide direct employment to almost 450 persons in our offices, showrooms and factories. Through our business network of distributers, agents and suppliers, we indirectly support the livelihoods and incomes of a sizable quantum of individuals in the country and in the South Asian markets where our presence is there.

we try at all times to ensure that our products excel in terms of quality and performance that gives immense satisfaction to the end user and create a value addition to the environment.

Dr S. Selliah Chairman


CHAIRMAN’S MESSAGE

As you are aware, our shareholders continue to benefit from our dividend policy where we distribute over one fourth of our net profits. During the period under review, the Group contributed to our shareholders’ wealth by declaring a dividend of 23% amounting to Rs 146 million which was paid out in March 2018.

Please refer the Financial Capital chapter for more information on our financial status as at end March 2018 and the Managing Director’s Review for a brief operational overview.

GOVERNANCE AND COMPLIANCEI am pleased to report to you that JAT Holdings is fully compliant with all applicable regulations to us. The company strictly adheres with all compliance requirements including routine environmental reporting. All compliance reports are submitted to Board and are reviewed by the Board, to ensure statutory reports are submitted on a timely manner. This is a key component of our sustainable business model and good governance practices.

We have also compiled a Sustainability Report demonstrating progress of our sustainable business practices during the year.

The Board has delegated certain of its functions to Board sub committees established in line with the corporate governance framework to administer and ensure that the company operates to highest level of standards creating value to both internal and external environments. The Board and other board sub committees met regularly during the year to deliberate the Company performance.

As part of overall risk management, we strengthened the Internal Audit Department by adding more experienced and qualified professionals to the department. In fact, during the current year we strengthened the professionalism of our entire teams and built up human resource capacities with qualified personnel in all functional areas, starting with the recruitment of an experienced Chief Executive Officer to overlook operational aspects. We also maintained tight controls over our cash flows and debts. I would like to point out that our expansion activities have been largely internally funded with little debt burdening the Company.

PROGRESS OF GROWTH PLANS Our new Head Office building is now almost complete and will be ready for occupation during the middle of 2018. We have invested in excess of Rs 500 mn on designing and constructing this 45,000 square foot green, environmentally friendly complex and I believe this will be a land mark in the JAT Holdings history. This State of the Art building is equipped with all modern human resource training facilities and other corporate facilities such as meeting rooms, sound proof state of the art auditorium, a restaurant and gymnasium in addition to other integrated facilities. I would like to stress that our new complex has been constructed under futuristic green building guidelines to be extremely resource efficient and environmentally friendly. This is the physical representation of our vision for a sustainable business as we expand and grow.

Our market expansion plans are also now making headway under the guidance of the new Marketing Director and CEO and the company is geared to override our ambitious plans and reach the goal of success.

I would like to stress that our new complex has been constructed under futuristic green building guidelines to be extremely resource efficient and environmentally friendly. This is the physical representation of our vision for a sustainable business as we expand and grow.


JAT has always been committed to deploying the latest and most convenient facilities to its customers and employees, hence has installed a Sales Force Automation facility to its sales team and distributors to facilitate efficient business operations.

OUTLOOK AND GROWTH PLANSJAT Holdings is ready and equipped to cater to this demand in the construction industry with new product lines and innovations. We are also constantly looking for lateral growth opportunities in new, niche segments. During the year we also got the agency for the world renowned kitchens from Germany/Austria namely SEA. We have already secured some landmark projects which will be installed with these kitchens and wardrobes.

Where export markets are concerned I believe we have adequate space for organic growth. We are present in Bangladesh, Pakistan, India and the Maldives, where we will continue to push for growth while also looking for new export markets.

We have also relocated our ceiling factory to our current premises. We intend to bring all our manufacturing and warehousing units which are currently located in multiple locations to a central location in the near future.

Going forward we will continue to set new milestones in the industry and work towards achieving the goal of being the market leader for all products we market.

DIRECTORATEAnother key development during the year was the appointment of a very experienced the Marketing professional Mr. Nandana Wickramage to the Board. We are confident that his proven track record in the field of Marketing and business will contribute to the success of the company in its future growth strategy.

CONCLUSIONTo conclude I wish to extend my gratitude to my fellow members of the Board and loyal employees for the contribution in continually elevating the standards of the company. We also sincerely appreciate all our loyal customers for their trust in our products and also to our distributors and dealers for their continued support. Finally I wish to reiterate that our group is always committed to delivering greater value to our shareholders and we look forward to continued success ahead.

Dr S. Selliah

30th May 2018


MANAGING DIRECTOR’S REVIEW

I would like to start my review of the year by thanking God for the blessings we have received during the year. The knowledge that his blessings are with me, gives me the fortitude to overcome all challenges however daunting they may be and the intuition to achieve all the goals I have set for myself and for my team at JAT.

We are indeed blessed to be where we are today and I believe the 2017-18 financial year, was a turning point in the evolution of JAT Holdings. The many changes and adjustments to the Company’s business model effected during the year has positioned the Company on the cusp of a new era of growth. The Company has taken its first steps towards calibrating itself in keeping with its vision for the future; an operation that spans the South Asian region and beyond.

A key change made during the year was to invest in a new talent at the highest level to drive the Company into its new destiny. When I started this Company 25 years ago, it was operated as a small family run business and was built around my values and my vision. In 2014, we made a conscious decision to divert from this family-business model to a far more corporate style of management, to prepare the Company for a higher level of growth. Based on this thinking, in 2017, for the first time in our history, we brought on board a CEO to oversee the functional aspects of the Company on a full-time basis. Our new CEO Nishal Ferdinando has the quintessential credentials, proficiency and experience in running business operations. Moreover, the transfer of authority over the operational aspects of the Company will result in the allocation of invaluable time for me to devote to the more strategic aspects of chartering JAT to new vistas. In this regard, my focus over the short term will be on developing new business lines and new export markets.

BUSINESS PERFORMANCEOur turnover in the local market fell by about 12% compared to the previous year, which caused a larger 30% drop in our bottom-line. However, our business was cushioned against serious losses because of gains from export markets, with exports growing by about 15%. This also helped in hedging against a portion of the loss incurred due to the appreciation of the Euro.

Locally our lower performance was due to an overall lower rate of demand growth for paints and furnishings, which are the primary revenue streams of the Group, as the construction industry, which is the main demand driver for paints and furnishings, continued to slow down as the year advanced. In addition, on top of a shrinking and already crowded paint market, we find that there are Companies still getting in to this market creating even more competition. Given the already highly competitive nature of the domestic paint market, the addition of another brand will continue to exert downward pressure on margins of all manufacturers. However, mitigating this congestion in the paint market, the brush market opened up an opportunity with a leading brush brand facing serious financial difficulty, which subsequently created an opening for our Brush Master brand to expand. Aelian Gunawardene

Managing Director


Although domestic interest rates remained high throughout the year, our strong internal financial discipline enabled us to negotiate probably some of the best interest rates in the market among local companies. In fact, we have also obtained extremely advantageous rates with some of our dollar funding, which has assisted us in diminishing some of the losses caused by sharp exchange rate fluctuations. Since we are still dependent on approximately 60% of turnover from the local market, the fact that both the US dollar and Euro continued to appreciate created a challenging financing landscape for the Company. Again, nevertheless, we were able to counter the unfavourable foreign exchange environment by growing our export volumes substantially.

Our subsidiaries were also negatively impacted by prevailing market conditions, more so than JAT Holdings, which is more solidly anchored due to its longer period of existence. Our Indian operation, JAT Global, recorded a loss of Rs 45 mn and the others made marginal profits, performing below expectations. However, we are bullish about the New Year and anticipate a turnaround in our subsidiaries to add considerable value to the bottom-line.

The silver lining in the current situation is that the slow-moving market conditions have given us the space to re-evaluate our inventories and product strategies. We have used this opportunity to clear our shelves of all slow-moving stocks and have addressed any overstocking situations. While this clearing operation also contributed towards a dip in incomes, I believe it will facilitate more stable outcomes in the future, because the Company is now stocked to meet current market demand trends. The entire business model has been structured from a previous supplier driven approach towards a demand driven platform. This approach ensures more sustainable benefits on long term basis as opposed to short term profit growth.

Laying a stronger foundation to support future growth, we devised some serious product development and value engineering with some of our prime suppliers from Italy and Germany. In a new development, we entered into an agreement with a leading German kitchen cabinet exporter, SEA Bauformat and have commenced importing kitchens, wardrobes and vanities from Germany and Austria. This new product line has opened up a very large market in Sri Lanka’s growing real estate sector. Within a few months of introducing this product range to the local market, we have already captured new projects to the tune of Rs 8 million Euros.

We also tied up with Lifewood, an Australian timber flooring company with a patented design, which is also another extremely lucrative niche market. With this partnership, it is my intention to position JAT Holdings as the premier timber flooring company in Sri Lanka.

The aluminium and steel ceiling factory, which was acquired by JAT Holdings from Access Projects in 2017, started commercial operations in June 2017. We have now completed moving the entire operation to the JAT Factory premises in kahathuduwa by increasing our existing factory and warehousing space by 8,000 sq. feet. We now have a manufacturing cluster within our own premises, which allows us a higher degree of flexibility in responding to market needs, while generating cost efficiencies and better oversight facilities over crosscutting operations.

The entire business model has been structured from a previous supplier driven approach towards a demand driven platform. This approach ensures more sustainable benefits on long term basis as opposed to short term profit growth.


SUSTAINABLE GROWTH MODELAs we grow our business and expand into new sectors, I believe it is vital to ensure our growth will be environmentally and socially sustainable. This is the business ethic that I, as the founder of this Company, desire for the JAT Group. It is my firm belief that by God, our moral obligation is to protect our country and environment. Hence our business models and achievements must incorporate a social conscience.

In order to move forward with this sustainable growth model, we have already established a new division entrusted with inculcating sustainable business concepts and practices into the functional aspects of the business. Please refer to the Sustainability Report for information regarding these achievements during the year under review.

OUR FUTURE OUTLOOK I believe the outlook for JAT Holdings is extremely favourable, both in Sri Lanka and in our export destinations and the current downturn will be reversed within the next financial year. In spite of the economic downturn in Sri Lanka during the 2017-18 financial year, many major real estate projects are being realised, although at a slower pace than originally anticipated. These projects provide many growth opportunities for the future, as JAT Holdings is now geared to win extremely competitive contracts. While we will continue to expand our operations in Sri Lanka, a key growth focus will be outside the country. We are looking strategically to grow exports, as this is the only way to overcome domestic market risks, while capitalising on opportunities in neighbouring countries. In fact, we are looking beyond the SAARC region to countries such as Myanmar, particularly in respect to our finishing business lines.

With Bangladesh and Maldives growing steadily we have put renewed efforts into India and Pakistan and we can expect improvements in the new financial year. The Indian market has always been difficult to penetrate but we are strategically addressing these challenges and I am confident we can gain some ground in India in the new financial year.

In Sri Lanka, we will maintain growth momentum by introducing innovations and new products to the market. In fact, this has been the mark of JAT Holdings from its inception. We have led the way in pioneering new concepts and have guided local customers to new, more efficient solutions. We have moved the market from polyurethane to polyester finishes, given consumers access to superior interior décor from German Kitchens and the latest design and quality options for flooring, as opposed to traditional flooring options.

I believe contemporary, western furniture is an unmet need in the local market. We will step in and address this gap in the new financial year, by opening a mega mall featuring the latest in high quality international furniture designs for the retail sector that will be ideal for apartment living. Sri Lanka is experiencing a rapid shift in lifestyles with apartments replacing traditional homes in urban centres across the country. These modern structure require high quality, western furnishings. We also plan to expand our current furnishing portfolio from kitchens, to office spaces, to cater to the furnishing requirements of all modern living spaces.

MANAGING DIRECTOR’S REVIEW

In Sri Lanka, we will maintain growth momentum by introducing innovations and new products to the market. In fact, this has been the mark of JAT Holdings from its inception. We have led the way in pioneering new concepts and have guided local customers to new, more efficient solutions.


Factory capacity enhancements and upgrades will be a vital sector of resource allocation to accommodate growth plans both locally and in export markets. During the current financial year, we increased our warehousing space by about 30%; a practice we will continue to do. In addition, we effected numerous improvements to internal systems, from automation in filling and packing, to workflows, to a Sales Force Automation system to boost efficiencies and quality. We will continually evaluate and introduce improvements to our systems and process. We are also looking at a leaner organisation, driven by a smaller, but more professional team, backed by more productive systems, which would reduce our workforce by about 25% over the next 2 years.

With our backend operations aligning with our forward vision, I am upbeat about our returns for the new financial year. We have targeted a 40% increase in turnover and profits for the financial year 2018-19, compared to 2017-18. The main area of growth as we anticipate, will be from our project portfolio, as we had already locked-in over 50% of the targeted revenues from this sector within the first quarter of 2018. Some big-name clients include, the Ritz Carlton, the J W Marriott and the third Commercial Tower under The One project. These landmark developments have selected JAT to be their preferred supplier covering all JAT products, from paints to wardrobes to flooring, to aluminium foam work, self climbing frames and other components. These orders will translate into revenues of around Rs 4 Billion within the next 2 to 3 years. Our shareholders and other stakeholders will benefit from these growth opportunities in the new future.

I would like to conclude by thanking the senior team for their indefatigable efforts at gearing the Company for its next phase of growth, our suppliers for being exceptional partners, our bankers for supporting us with economical funding assistance when needed, and as always our loyal customers for their continued patronage. I look forward to another year of mutual cooperation and benefits in 2018-19.

Sincerely

Aelian Gunawardene

30th May 2018

The main area of growth as we anticipate, will be from our project portfolio, as we had already locked-in over 50% of the targeted revenues from this sector within the first quarter of 2018.


GROUP STRUCTURE

JAT Property Group(Dealing in real estate and

condominiums)

JAT Holdings (Pvt) Ltd

JAT Agri (Pvt) Ltd(Dealing in plantation management,

agricultural items and fertiliser)

JAT Trading (Pvt) Ltd(Trading paints in Pakistan)

JAT Bangladesh (Pvt) Ltd(Trading paints in Bangladesh)

JAT Technologies (Pvt) Ltd (In the Business of Telco solution, audio visual and ELV solution and

Green Energy Solution)

SUBSIDIARIES

AFFILIATES

Worldwide Resins (Pvt) Ltd(Trading in Local Market)

100% Brush Masters (Pvt) Ltd(Manufacturing Arm of Brushes)

99.9% JAT Global (Pvt) Ltd(Distribution of JAT Products in India)

98.8%


BUSINESS MODEL

VISION MISSION VALUES

EXTERNAL ENVIRONMENTBusiness Activities

INDUSTRY TRENDSValue Adding Processes

Manufacturing Financial Management

Warehousing

Branding Workforce Management

Distribution

Marketing Environmental Management

Local Sales

Export Sales

Research and Development

Quality Control

Community Development

Innovative and Premium Quality Products Widespread Distribution Network

Market Leadership

Responsible Business Practices

Financial Stability

Regulatory Compliance Transparent Reporting

Risk Management

Corporate Governance

KEY DELIVERABLES

STAKEHOLDER VALUE


PAINTS

ACTIVITIES, BRANDS, PRODUCTS AND SERVICES


FURNISHING



LIVING



BRANCH NETWORK

25Technical Experts

105Sales

Professionals

8JAT

Showroom

4,800+Dealers

33Distributors


INTERNATIONALHead Office - BangladeshJAT Holdings Bangladesh (Pvt) LtdHouse 5, Road 8, Block J,Baridhara, Dhaka 1212 Bangladesh.Tel: +88 028822243, 8826827Fax: + 88 028821830E mail : [email protected]

Head Office - IndiaJAT Global (Pvt) Ltd(A Subsidiary of JAT Holdings (Pvt) Ltd) No. 52, S. P. D. PlazaKoramangala, Bangalore 560034, India. Phone: Office +91 81 23113218Hotline: +91 73 37799122E-mail: [email protected] Web: www.jatholdings.com

Head Office - MaldivesMalza (Pvt) LtdSifa Building, 5Th Floor, Boduthakurufaanu Magu, Male’ 20094MaldivesTel: 0096 03015566Fax: 0096 03015577E-mail: [email protected]

Head Office – PakistanJAT Trading (Pvt) Ltd11/A Block-D Commercial Area, Valencia Housing Society, Lahore Punjab, Pakistan Tel: +92 4235188586Fax: +92 4235210788E-mail: [email protected]

India

Pakistan

Maldives

Bangladesh


CORPORATE GOVERNANCE

Governance is a responsibility of the Board of Directors for competent and ethical operations of the business on day to day basis. JAT Holdings (Pvt) Ltd understands the paramount importance on practicing corporate governance where non-adherence would leads to severe penalties. We believe it is good corporate governance to disclose the way the company carried out its business in a transparent and accountable manner.

The corporate governance framework of the company is a reflection of our culture, policies, relationship with stakeholders and commitment to values. It also expects a high level of commitment across the Company and creation of awareness at all levels.

The Corporate Governance framework has been incorporated within the Company with adherence to the following:

Complying with laws, rules and regulations within the territory Allegiance to the Group Values Ensuring that no individual has unfettered decision-making powers

Board of Directors & Committees

Legal & Regulatory

Business Practices &

Ethics

Disclosure & Transparency

Risk & Performance Management

Monitoring

Communication

Shareholders Board of Directors Management Team

External Auditors

Board Sub-Committees

Internal Control Mechanism

Code of Conduct and Values

Audit CommitteeRemuneration

Committee

Related Party Transaction Committee

Risk Management Committee

JAT Corporate Governance Framework

Exercising professionalism and integrity in all business transactions Timely and efficient decision making and resource allocation within a framework which is

compliant with the laws of the territory and standards of governance

Since the inception, JAT Holdings (Pvt) Limited and its Group companies has continued to apply high corporate governance standards aimed at ensuring the Company’s ongoing sustainability.

The organisations governance structure supports its ability to create value in the short, medium-and long-term to its stakeholders.

Headed by the Board of Directors, the Company’s governance framework ensures sound corporate governance principles that reflect JAT’s mission and core values and promote good governance practices across the business.

INTERNAL GOVERNANCE STRUCTURE


STATEMENT OF COMPLIANCEThe Board of Directors wishes to confirm to the best of their knowledge and belief that the Company has complied with all requirements in terms of regulations and statutory payments under the Companies Act No. 7 of 2007 and Inland revenue Act number 24 of 2017.

The Company has satisfied all requirements as per accepted labour regulations and financials are prepared according to the standards of SLFRSs and LKASs.

1. Board of DirectorsThe Board is responsible for the Group’s corporate governance which is ensured by providing leadership and strategic guidance to create enhanced stakeholder value within a framework of effective controls to ensure long- term sustainable development.

Role of the boardThe Board is ultimately responsible for the performance of the Company while retaining full and effective control. The Board provides strategic direction and is responsible for setting strategic objectives and key policies, major plans of action, the risk policy and annual budgets and business plans. The Board also ensures that stakeholder objectives are achieved through performance monitoring systems and reporting frameworks in place across the Company.

ROLE OF THE BOARD

Board composition The JAT Board comprises seven Directors, which includes two Executive Directors and five Non-Executive Directors. The mix between Executive and Non-Executive Directors is deemed appropriate as it provides a good balance between knowledge, competencies and experience, and ensures members are able to deal with the substantial workload. The JAT Board consists of;

Name Designation

Dr. S. Selliah Chairman

Mr. Aelian Gunawardena Managing Director

Mr. Jehan Amaratunga Non-Executive Director

Ms. Joyce Gunawardena Non-Executive Director

Mr. Hussain Akbarally Non-Executive Director

Mr. Senaka Kakiriwaragodage Non-Executive Director

Mr. Nandana Wickramage Executive Director

ResponsibilityImpartialityAccountability Transparency

Corporate Governance

Directing the conduct of operationsEnsures that our business operations revolve around our values and ethical standards

Providing leadership to CEO and management and monitor performance of Board committeesSets the strategic vision and long-term goals

Ultimate ResponsibilityAccountable for strategy, risk management and financial performance



Quality of the BoardThe Board has an appropriate balance of skills, experience and independence to manage its duties and responsibilities effectively. All the Directors are professionals who have a wealth of knowledge in the field of management, marketing and finance. Please refer page 63 of this report for the profiles of each Board member.

Each year the Board of Directors carries out a self-evaluation of its competencies and skills, including those of the Chairman and of individual Board members. The evaluation is carried out systematically; using clearly defined criteria to ensure the Board constantly improves its own performance.

Delegation by the BoardWhile the Board is responsible for decisions in relation to strategy development, corporate goal setting, and providing oversight for the achievement of overall management objectives, due to the diversity and volume of the JAT portfolio, responsibilities in relation to the daily operations and execution of strategic business units have been delegated to the Management Team headed by the CEO of the Company.

The Board provides clear directions as to the powers of the Management team, and periodically reviews the level of delegation to ensure that such delegations are appropriate and continue to be beneficial to the Company as a whole. The Management team is responsible for managing the day-to-day operations, implementing the strategies set by the Board, and assisting the Board in formulating and implementing corporate strategies.

The Management team reports back and, in certain situations obtains prior approval from the Board before making decisions on the Company’s behalf.

In the reporting period, the Management team was led by the CEO guided by the Managing Director, together with a team of senior managers who have wide experience and expertise in different areas.

Attendance at Board MeetingsThe Board convened nine times during the financial year with all meetings presided over by the Chairman. The table below reflects the attendance of members at Board meetings for the reporting period.

ATTENDANCE AT BOARD MEETINGS

Dire

cto

r

16-M

ay

14-J

ul

13-S

ep

19-O

ct

17-N

ov

19-D

ec

16-J

an

23-F

eb

22-M

ar

Dr. S. Selliah 9/9

Mr. Aelian Gunawardena 9/9

Mr. Jehan Amaratunga x x x 6/9

Ms. Joyce Gunawardena x 8/9

Mr. Hussain Akbarally x x 7/9

Mr. Senaka Kakiriwaragodage

9/9

Mr. Nandana Wickramage x x x x 5/9 All Board meetings are conducted as per a pre-determined agenda. The notices of Board meetings along with the agenda and Board papers, are circulated among the Directors at least four days prior to the scheduled meeting, giving adequate time for the Directors to review and request for any additional information or clarifications needed in order to prepare for the meetings.

In such instances where decisions are made by way of special resolutions, all relevant information pertaining to the resolution are sent along with the relevant resolution to enable the Directors to clearly understand the purpose for which a resolution is being circulated.

Role of the Company SecretaryThe Company Secretary plays a pivotal role in the Company’s corporate governance framework. The Company Secretary assists the Chairman in preparing the agenda for each Board meeting, keeping minutes of Board meetings and ensures that all applicable rules and regulations are followed. The Company Secretary has the task of circulating the draft Board minutes to all Directors for comment as soon as practicable after the meeting.

Independent Professional AdviceIf considered to be necessary and appropriate by the Directors, they may upon reasonable request seek independent professional advice at the Company’s expense.


Directors’ TrainingAll Directors, including Non-Executive Directors, are expected to keep abreast of their collective responsibilities as Directors. And in order to safeguard the interests of the Company, all Directors are also expected to stay updated on the statutory compliance and regulatory obligations that may become relevant from time to time. To facilitate this, the Company encourages Directors to enhance their knowledge on the latest developments by attending forums and workshops organised by industry bodies and regulatory authorities.

Board CommitteesRefer Board Committee reports on pages 68 to 71.The Board has delegated certain of its functions to Board committees established in line with the corporate governance framework of the Company.

The Board committees comprise Non-Executive Directors and the Chairman. In deciding the composition of committees the Board considers the skills and experience of the members and the committee mandate that specifies the scope, responsibility and procedure which is reviewed periodically.

The committee chairman reports to the Board on the activities of the respective committee at the Board meetings and are accountable for the effective functioning of the committees.

Committee Composition and meetings Focus area

Board Audit Committee Comprises three Non-Executive directors

Ensures financial reporting according to standards, statutory compliance, Internal control and risk management. Assess the independence and performance of internal and external auditors.Five meetings

Remuneration Committee Comprises two Non-Executive directors

Determines the rewards strategy and assists the Board in succession planning.One meeting

Related Party Transaction Review Committee

Consists of two Non-Executive directors

Ensure that interests of shareholders as a whole are taken into account when entering into transactions with related parties and avoidance of conflict in interests.Four meetings

Committee Composition and meetings Focus area

Risk Management Committee

Consists of seven members including two Non-Executive Directors, Managing Director, Chief Executive Officer, Finance Director and two Department Heads

Works closely with the corporate management supervising broad risk categories such as credit, market and operational risks and implemented decisions with Board approval.

Three meetings KEY FOCUS AREAS OF THE BOARD IN 2017/18

Governance Review and update the Procedure Manuel

Review of organisational structure and development of succession plan for Key Management Personnels.

Reviewed and developed the ERP system for the company and its Distributors for stakeholder reporting

Strategy & Business Monitored and reviewed monthly business performance

Took stock of market position of products being marketed

Approved budgets for 18/19

Initiated a three-year business plan

Risk & Reporting Reviewed the reports of the Board committees

Reviewed monthly and quarterly financials

Approved Annual Report for 2016/2017

Reviewed Company solvency and approved dividends

Stakeholder Engagement Held Annual General Meeting for 2017

Review Compliance Statement of the Company submitted by the Finance Director.

Role of the Chief Executive Officer (CEO)The CEO of the Company is responsible for the day-to-day operations with the guidance of the Managing Director. The CEO is accountable to the Board, and also responsible to recommend the Company strategy and ensure implementation whilst ensuring proper internal controls are in place. The CEO represents the management at meetings of the Board.



2. Leadership in Governance and Corporate Ethics.Commitment to Ethical Standards and SustainabilityThe Company has in place a formal Code of Conduct, which all JAT employees including Senior Management and the Board of Directors, are expected to adhere to in carrying out their assigned duties.

The objectives of the Code of Conduct of the company are further affirmed by a strong set of corporate values which are well-institutionalised at all levels within the JAT Group

We believe sustainability is a main factor to achieve company long-term goals. The Sustainability Department headed by the head of HR works on identifying economic, social and environmental factors that impact the business operation.

Executive Committees Role in Governance (EXCO)The EXCO consists of all Heads of Departments, chaired by the CEO of the Company with the participation of the Managing Director. The members meet twice a month to discuss all operational issues and way forward strategies of the Company ensuring that all operations are performed within ethical and governance parameters.

Governance through Whistle-blower PolicyThe Company has a Whistle-blowing Policy which has been reviewed and approved by the

Board Audit Committee. The policy enables employees who observe any improper practice or fraud to report to the Audit Committee with proper evidence. This policy serves as a widespread informal channel for management to identify any unethical conduct or corporate fraud.

3. Our ValuesOur core values are the foundation on which we build stakeholder confidence. 4. ComplianceInternal AuditThe Internal audit function is responsible for providing an independent overview to the Audit Committee.

Risk ManagementTaking calculated risk is a crucial factor for the sustainability of the Company’s operation. Therefore the company operates through a comprehensive risk management framework.Refer page 78 for risk management.

Internal controlsThe Board with the assistance of the Audit Committee and Risk Management Committee overseas the systems of internal controls and reviews same regularly.

Statutory ComplianceA statement of statutory compliance is submitted to the Board at every meeting to ensure the Company is statutorily compliant according to the said requirements.

Indepth knowledge of

entire business

Leadership at all levels

Complete customer

satisfaction

5. Engagement with StakeholdersShareholdersThe Company is committed to maintaining a high level of transparency and employs a policy of open and timely disclosure of relevant information to its shareholders.

The Company’s Annual General Meeting (AGM) serves an effective communication channel for the Board to meet and exchange views with the Company’s shareholders. The Chairmen of the Audit and Remuneration Committees and a representative from the External Auditors are also present to answer questions at the AGM.

Commitment for the FutureJAT is committed to conduct all its operations, under a stakeholder model, with integrity, efficiency and fairness. As such, the Company will continue its stringent focus on corporate governance, reflecting the increasing emphasis on stakeholder satisfaction, both internal and external.


COMPLIANCE WITH THE CODE OF BEST PRACTICE

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)This provides prerequisites for the establishment and maintenance of a sound corporate governance environment within the Company.

RULE COMPLIANCE STATUS

THE COMPANY’S ACTION

A. DIRECTORS

A.1 The Board

A.1 Regular Board meetings

The Company to be headed by an Effective Board to direct and control the Company.

The Company is headed by an effective Board of Directors who are responsible and accountable for the Stewardship function of the Company.

A.1.1. Regular Board meetings. The Board meets at least every other month and as and when necessary.

A.1.2. Board should be responsible for the implementation of business strategy, skills and succession of the management team, integrity of information, internal controls and risk management, compliance with laws and ethical standards, stakeholder interests, adopting appropriate accounting policies and fostering compliance with financial regulations and fulfilling other Board functions.

Powers specifically vested in the Board to execute their responsibility include: Providing direction and guidance to the Company in the formulation of its strategies, with

emphasis on the medium-and long-term, in the pursuance of its operational and financial goals. Reviewing and approving annual budget plans. Reviewing HR processes with emphasis on

top management succession planning. Monitoring systems of governance and compliance Overseeing systems of internal control and risk management. Determining any changes to the directions/authorities delegated from Board to executive

levels. Reviewing and approving major acquisitions, disposals and capital expenditure. Approving any amendments to constitutional documents.

A.1.3. Act in accordance with the laws of the country and obtain professional advice as and when required.

The Board seeks independent professional advice when deemed necessary. During the year under review, professional advice was sought on various matters, including the following:

Legal, tax and accounting aspects, particularly where independent external advice was deemed necessary in ensuring the integrity of the subject decision.

Market surveys, as necessary for business.

Valuation of property including that of investment.

Biological assets. Specific technical know-how and domain knowledge required for identified project feasibilities

and evaluations.

A.1.4. Access to advice and services of the Company Secretary. To ensure robust deliberation and optimum decision-making, 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 judgement on various business issues and standards of business conduct.

Collectively, the Non-Executive Directors bring a wealth of value-adding knowledge, ranging from domestic and international experience to functional know-how, thus ensuring adequate Board diversity in accordance with the principles of corporate governance. Furthermore, every member of the Board brings independent judgment on various business issues.

A.1.6. Dedication of adequate time and effort. Allowing for Non-Executive Directors’ 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.

A1.7. 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 Chairman and the Chief Executive Officer.

Presently the Company has a Chairman and a Chief Executive Officer.

A.3 Chairman’s role

A.3.1. The Chairman should ensure that Board proceedings are conducted in a proper manner.

The Chairman attends all Board meetings

A.4. Financial acumen

A.4. The Board should ensure the availability of persons with adequate financial acumen and knowledge to offer guidance on matters of finance.

Two Board members hold membership in professional accounting bodies. Refer Board Member Profiles for more information.





A.5 Board balance

A.5.1. The Board should include Non-Executive Directors of sufficient calibre.

As at 31st March 2018, the Board consisted of seven Directors, with a majority being Non-Executive Directors.

A.5.2. Where the constitution of the Board of Directors includes only two Non-Executive Directors, both such Non-Executive Directors should be Independent Directors.

N/A Not applicable as the Board comprises more than two Non-Executive Directors.

A.5.3. Definition of Independent Directors. N/A Both the Independent Directors of the Company 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 judgement.

A.5.4. Declaration of Independent Directors. N/A Each Non-Executive Director has submitted a signed and dated declaration of his/her independence.

A.5.5. Board determinations on independence or non-independence of Non-Executive Directors

N/A Both of the Independent Directors of the Company meet the criteria for independence specified in this rule.

A.5.6. Alternate Director. Not Applicable.

A.5.7. In the event the Chairman and the CEO are the same person, the Board should appoint one of the Independent Non-Executive Directors to be the ‘Senior Independent Director’ (SID).

Not Applicable.

A.5.8. The Senior Independent Director should make himself available for confidential discussions with other Directors who may have concerns.

Not Applicable.

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

Not Applicable.

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

All the Board meeting proceedings are comprehensively recorded in the Board Minutes.





A.6 Supply of information

A.6.1. Te Board should be provided with timely information to enable it to discharge its duties.

The Board is provided with, Information as is necessary to carry out their duties and responsibilities effectively and

efficiently. Information updates from management on topical matters, new regulations and best

practices as relevant to the Group’s business. External and Internal Auditor’s opinions. Experts and other external professional services. The services of the Company Secretary. Periodic performance reports.

A.6.2. Timely submission of the minutes, agenda and papers required for the Board meeting.

Board agendas and necessary Board Papers and minutes are dispatched at least four days prior to the Board meeting.

A.7 Appointment to the Board

A.7.1. Formal and transparent procedure for Board appointments. Board appointments follow a transparent and formal process.

A7.2. Assessment of the capability of the Board to meet strategic demands of the Company.

The Board as a whole assesses its own composition to ascertain whether the experience and exposure of the Board members are adequate to meet the strategic demands faced by the Company.

Currently, the Board members have varying qualifications in economic, environmental and social topics and are involved in many committees and associations that serve the business community as a whole.

A.7.3. Disclosure of new Board member profile and interests. Refer Board Member Profiles for more information.

A.8 Re-election

A.8.1. / 8.2. Re-election at regular intervals and should be subject to election and re-election by shareholders.

The Non-Executive Directors are appointed and recommended for re-election until their prescribed Company retirement age.

The Directors are subject to re-election on the basis of ‘longest in the office’ as provided in the Articles of Association.




A.9 Appraisal of Board performance

A.9.1. The Board should annually appraise itself on its performance in the discharge of its key responsibilities.

N/A

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

N/A

A.9.3. The Board should state how such performance evaluations have been conducted.

N/A

A.10 Disclosure of information in respect of Directors

A.10.1. Profiles of the Board of Directors. Directors’ interests.Board meeting attendance.Board Committee memberships.

Refer Board Profiles section

B. DIRECTORS’ REMUNERATION

B.1 Remuneration procedure

B.1.1. The Board of Directors should set up a Remuneration Committee.

The Remuneration Committee primarily focuses on the remuneration policies and practices of the Group including the Chairman and the Board of Directors.The Remuneration Committee is entrusted with the following duties and responsibilities:

Review and approval of the overall compensation and benefit policy for the Group. Review performance, compensation and benefits of the Board of Directors and Key

Executives who support and implement at an apex level the overall business strategy and make recommendations thereon to the Board of Directors.

Review and monitor the performance of the Company’s top talent for purposes of organisational growth and succession planning, with particular emphasis on succession at Key Executive level.

B.1.2. Remuneration Committees should consist exclusively of Non-Executive Directors.

All members of the Remuneration Committee are Non-Executive Directors.

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

Refer Board Committees.

B.1.4. Determination of the remuneration of Non-Executive Directors. Compensation is determined in reference to fees paid to other NEDs of comparable companies. NEDs receive a fee for devoting time and expertise for the benefit of the Group in their capacity as Director and additional fees for either chairing or being a member of a Committee.





B.1.5. The Remuneration Committee should consult the Chairman about its proposals relating to the remuneration of other Executive Directors.

N/A The Chairman of the Company is the Chairman of the Remuneration Committee.

B.2 The level and makeup of remuneration

B.2.1. Performance-related elements in pay to structure and alignment to industry practices.

The Remuneration Committee as a whole is aware that the reward structure should be designed to attract and motivate high-calibre people in a highly-competitive environment.

B.2.2. Competitiveness of levels of remuneration. Having taken into account the complexities associated with the Group, it was established that the compensation is in line with the market.

B.2.3./ B.2.4. Comparison of remuneration with other companies in the Group. In line with the Group Remuneration Policy.

B.2.5. Executive share options not to be offered at a discount. N/A

B.2.9. Level of remuneration of Non-Executive Directors. The fees received by NEDs are determined by the Board and reviewed annually.

B3 Disclosure of Remuneration

B.3. Disclosure of remuneration policy. Please refer to the Remuneration Committee report

C. RELATIONS WITH SHAREHOLDERSShareholders have the opportunity at the AGM to question the Chairman and the Board of Directors in order to gain greater familiarity with the Group’s business and operational workings.

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

C.1.1. Counting of proxy votes. As a matter of practice, proxy votes together with the votes of the shareholders present at the AGM are considered for each resolution.

C.1.2. Separate resolution to be proposed for each item. The Company proposes separate resolutions on each item giving shareholders the opportunity to vote on each issue separately.

C.1.3. Heads of Board subcommittees to be available to answer queries.

All the Non-Executive Directors who are the heads of Board subcommittees are available to answer queries.

C.1.4. Notice of Annual General Meeting to be sent to shareholders with other papers as per statute.

Notice of the AGM and related documents are sent to 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 general meetings to be informed.

Refer Form of Proxy.




C.2. Major transactions

C.2.1. Disclosure of all material facts involving any proposed acquisition, sale or disposition of assets.

N/A

D. ACCOUNTABILITY AND AUDIT

D.1. Financial reporting

D.1.1. Disclosure of interim and other price sensitive and statutorily mandated reports to regulators.

The Board of Directors in consultation with the Audit Committee, has taken all reasonable steps to ensure the accuracy and timeliness of published information and to present an honest and balanced assessment of results in the quarterly and annual Financial Statements.

D.1.2. Declaration by the Directors that the Company has not engaged in any activities, which contravene laws and regulations, declaration of all material interests in contracts, equitable treatment of shareholders and going concern with supporting assumptions or qualifications as necessary.

Refer Report of the Board of Directors.

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 a going concern, with supporting assumptions or qualifications as necessary

The Board of Directors, upon the recommendation of the Audit Committee, is satisfied that the Company has sufficient resources to continue in operation for the foreseeable future.

D.1.6. Remedial action at Extraordinary General Meeting (EGM) if net assets fall below half of value of shareholders’ funds

In the unlikely event that the net assets of the Company fall below a half of shareholders’ funds, shareholders would be notified and an extraordinary resolution passed on the proposed way forward.

D.1.7. Disclosure of Related Party Transactions. Refer Notes to the Financial Statements.

D.2 Internal Control

D.2.1. Annual review of effectiveness of the system of internal control and report to shareholders as required.

The Board has taken the necessary steps to ensure the integrity of the Company’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 in Group companies is not outsourced to the External Auditor of the Company in a further attempt to ensure External Auditor independence.

The Auditor’s 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./ D.2.4. Maintaining sound system of internal control. Refer Corporate Governance Report.

D.3 Audit Committee

D.3.1. The Audit Committee should comprise a minimum of two independent Non-Executive Directors or exclusively Non-Executive Directors, a majority of whom should be independent, whichever is higher. The Chairman of the Committee should be a Non-Executive Director, appointed by the Board.

The Audit Committee comprises three Non-Executive Directors.

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 for recommending to the Board the adoption of best accounting policies.

The Committee is also responsible for maintaining the Company’s relationship with the External Auditors.

D.3.3. The Audit Committee to have written terms of reference covering the salient aspects as stipulated in the section.

Complied with

D.3.4. Composition of the Audit Committee and independence of the Auditors.

Refer the Audit Committee Report.

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 disclosures

D.5.1. The Directors should include a Corporate Governance Report in the Company’s Annual Report.

Refer the Corporate Governance Section.




E. INSTITUTIONAL INVESTORS

E.1 Shareholder voting

E.1.1. A listed Company should conduct a regular and structured dialogue with shareholders based on a mutual understanding of objectives.

N/A

E.2 Evaluation of governance disclosures

E.2.1. When evaluating the Company’s governance arrangements, particularly those relating to the Board structure and composition, institutional investors should be encouraged to give due weight to all relevant factors drawn to their attention.

N/A

F. OTHER INVESTORS

F.1 Investing divesting decisions

F.1.1. Individual shareholders, investing directly in shares of Companies should be encouraged to carry out adequate analysis or seek independent advice in investing or divesting decisions.

The Company maintains an active dialogue with shareholders, potential investors, investment banks, and other interested parties.Any concerns raised by a shareholder are addressed promptly and forwarded when necessary to the Company Secretary for consideration and advice.

F.2 Shareholder voting

F.2.1. Individual shareholders should be encouraged to participate in General Meetings of Companies and exercise their voting rights.

All steps are taken to facilitate the exercise of shareholder rights at AGMs, including the receipt of notice of the AGM and related documents within the specified period. Shareholders exercise their voting rights for the election of new Directors or any other issue of materiality that requires shareholders’ approval.

G. SUSTAINABILITY REPORTING

G.1 Sustainability Reporting

G.1.1. Disclosure on adherence to the sustainability principles. Refer Introduction to the Report and Social and Relationship Capital Report.


BOARD OF DIRECTORS

DR. S. SELLIAHChairman (MBBS, M.PHIL)Dr. S. Selliah has been the the Chairman of JAT Holdings (Pvt) Ltd , from 2014. Dr. Selliah holds a MBBS Degree and a Master’s Degree (M.Phil). He has over two decades of experience in diverse fields which include manufacturing, healthcare, plantation, logistics, packaging, retail and insurance.

Dr. Selliah is currently the Deputy Chairman of Asiri Hospital Holdings PLC, Asiri Surgical Hospital PLC and Central Hospitals Private Ltd. He is a Director of Lanka Tiles PLC, HNB Assurance PLC, Softlogic Holdings PLC, ODEL PLC, Lanka Walltiles PLC, Lanka Ceramic PLC, ACL Cables PLC, Swisstek Ceylon PLC, and Swisstek Aluminium Private Ltd. Dr. Selliah is also the Chairman of Cleanco Lanka Pvt Ltd and Vydexa Lanka Power Corporation Private Ltd. He also serves on the Audit Committee, Investment committee, Strategic planning committee, Related party transaction committee and Human Resource and Remuneration committee of some of the companies listed above.

Left to RightJehan Amaratunga - Independent Director | Nandana A. Wickramage - Board Director/ Strategic Advisor of Jat Holdings | Dr. S. Selliah - Chairman | Senaka Kakiriwaragodage - Non-Executive Director | Aelian Gunawardene - Managing Director | Hussain Akbarally - Non-Executive Director | Joyce Gunawardene - Non-Executive Director


AELIAN GUNAWARDENEManaging DirectorAelian - Founder of JAT Holdings and Managing Director since 1993 has been the focal asset of the company, pioneering new innovations and steering JAT towards unchartered terrain, while increasing market share and helping build unequivocal brand equity.

Aelian, holds a Diploma in Marketing Management from the Chartered Institute of Marketing. He is one of Sri Lanka’s most respected corporate leaders, bringing more than 25 years of leadership experience and strategic expertise to the Board.

He was recognized as Sri Lanka’s Top Entrepreneur of the Year 2017.

JEHAN PRASANNA AMARATUNGAIndependent DirectorMr. Jehan Prasanna Amaratunga is the Executive Deputy Chairman of MTD Walkers PLC, Sri Lanka. He is a Fellow Member of The Institute of Chartered Accountants of Sri Lanka and a Fellow Member of the Chartered Institute of Management Accountants, UK.

Mr. Amaratunga was awarded First in Order of Merit Prize at the final examination of the Institute of Chartered Accountants of Sri Lanka. Mr. Amaratunga currently serves as a Director of People’s Bank, People’s leasing and Finance PLC and JAT Holdings (Pvt) Ltd. He is also the Chairman of People’s Insurance Limited and a Member of the Council of University of Colombo.

He counts over 25 years of experience as a connoisseur of Finance and Management. Mr. Amaratunga has served as a Consultant and Director to a number of Corporations and Private Business entities. At the National Conference of the Institute of Chartered Accountants of Sri Lanka, he presented a paper titled “Value for Money Accounting” which is one of the many notable achievements that stand out in his career. He was also a member of the Governing Council of the Institute of Chartered Accountants of Sri Lanka.

JOYCE GUNAWARDENENon-Executive DirectorJoyce was appointed to the Board of Directors of the Company in June 2007 and held the post of Director Promotions at JAT Holdings from 2006 till 2017.

She possesses a B.Sc. Degree in Psychology from the University of NSW Australia and has over 15 years experience in the field of Advertising and Promotion.

HUSSAIN AKBARALLYNon-Executive DirectorMr. Hussain Akbarally currently serves as an executive Director of Akbar Brothers (Pvt) Ltd, and its subsidiaries. Akbar Brothers is Sri Lanka’s largest exporter of Ceylon Tea to the international market and has diversified interests in the areas of pharmaceuticals, import trading, renewable energy, property management, manufacturing, hospitality, agriculture and environmental control.

Mr. Akbarally has spearheaded the Group’s ventures into the avenues of solar power, hospitality and agriculture amongst others.

He holds a degree in Science from the University of Melbourne, and an MBA from Harvard Business School.

SENAKA KAKIRIWARAGODAGENon-Executive DirectorMr. Senaka Kakiriwaragodage is the Managing Director of NDB Zephyr Partners Lanka (Pvt) Limited, the management company of Emerald Sri Lanka Fund I Limited, a USD 42.5 million private equity fund dedicated for Sri Lanka. Prior to his Private Equity role, he was the Vice-president of NDB Investment Bank and possesses over 10 years of wide-ranging experience in investment banking activities such as IPOs, debt and equity placements, mergers and acquisitions, corporate restructurings, advisory services and project financing. Prior to joining the NDB Group, Mr. Kakiriwaragodage served as a Software Engineer at Virtusa (Pvt.) Ltd.

Mr. Kakiriwaragodage holds a B.Sc. First Class Degree in Computer Science and Engineering from the University of Moratuwa and a MBA from the University of Manchester, UK. He is also a fellow member of the Chartered Institute of Management Accountants, UK, a Chartered Global Management Accountant (CGMA) and a CFA Charterholder. He served as a member of the CIMA Sri Lanka Board in 2015 and 2016. He also serves on the boards of Idea Group Limited and Cleanline Linen Management (Pvt) Limited.

NANDANA A. WICKRAMAGE Executive Director/Strategic Advisor of JAT Holdings. Nandana A. Wickramage also serves as a Director at Prime Finance PLC, a Consultant to CBL Group’s food cluster, Strategic Advisor to De Samson & Sons (DSI) and as a Regional Strategic Advisor for Chint Power Solutions. He is professionally qualified in the fields of marketing management, sales management and retail management. He is a certified master practitioner of NLP (Neuro Linguistic Programming) and a licensed master trainer. With over 37 years of hands-on experience, he is one of the most awarded & renowned marketers in the country, well-known for his ability to turn around brands driving them to leadership through his strategic and innovative thinking. His continuous success in this highly challenging task proves the efficacy of his practical and creative approach to strategic planning and brand building. Nandana A. Wickramage, an international award winner, a practical & qualified marketer, creative conceptualizer, brilliant strategist, local & international effective trainer & peak performance coach under the title “The practical coach”, a master practitioner of NLP, great motivator and popular lyricist; always takes pleasure in sharing his knowledge experience and expertise with any company or individual who aspires to reach greater heights.


EXECUTIVE DIRECTORS

Left to RightAelian Gunawardene - Managing Director | Nishal Ferdinando - Chief Executive Officer | Wasantha Gunarathne - Director Sales & Technical - South Asia | Rizna Dilshard - Director Finance | Indika Chandrasekara - Director Operations and Head of Commercial | Nayantha Delpechitra - Head of Legal & Corporate Affairs


AELIAN GUNAWARDENEManaging DirectorSee Page 63 for the Profile

NISHAL FERDINANDOChief Executive Officer (CEO)Nishal Ferdinando has over seven years of experience functioning as an Executive Director and over 12 years’ experience in the construction, manufacturing and trading industry. He also serves as a Board Director in JAT Global (Pvt) Ltd and Flexo Span (Pvt) Ltd.

He is currently reading for his MBA from the University of Wales and also holds an Advanced Diploma in Management Accounting from Chartered Institute of Management Accountants (CIMA) as well as a Post Graduate Certificate in Project Management from University of Southern Queensland.

He brings strong leadership, management experience and skills to his position as CEO, providing strategic direction to the Company to achieve short-and long-term objectives.

WASANTHA GUNARATHNEDirector Sales & Technical - South AsiaWasantha Gunaratne, with 18 years’ experience at JAT Holdings in sales, marketing and technical training, has become a face synonymous with quality and stringent standards. Currently he is the Head of Bangladesh, Pakistan and Maldives for export sales and manages the local sales and technical operations, including Sri Lanka. Wasantha has received extensive training from

our principals in Italy, UK, USA and continues to expend this knowledge to all our customers in the Subcontinent. He is currently reading for his MBA from the Anglia Ruskin University UK.

RIZNA DILSHARD Director Finance Rizna Dilshard is Director Finance of JAT Holdings (Pvt) Limited and also serves as a Board Director of JAT Technologies (Pvt) Limited. She is a Fellow Member (FCMA) of the Chartered Institute of Management Accountants-UK and counts over 21 years’ experience in the field of finance and management in Sri Lanka. She is a prize winner of the CIMA Institute of Sri Lanka.

Her well-founded finance and management knowledge coupled with her expertise and experience provides effective direction to the Company’s financial strategy formulation.

INDIKA CHANDRASEKARA Director Operations and Head of Commercial Indika Chandrasekara was an instrumental part of formation of the manufacturing arm of JAT Holdings and transforming it from a trading company to a manufacturing company. Indika has experience in local manufacturing and sales for 20 years. He is currently he is reading for his MBA from the Cardiff Metropolitan University of London.

NAYANTHA DELPECHITRAHead of Legal & Corporate Affairs Nayantha Delpechitra in an Attorney-at-Law and Notary and holds a in Bachelor of Arts with Honours in Human Resource Management and a Post Graduate Diploma in Intellectual Property Law. She is also a Registered Company Secretary. Nayantha has working experience of over 24 years specialising in Corporate Law, Intellectual Property Law and Conveyancing.


EXECUTIVE COMMITTEE

Seated Left to RightKaushalya Kotuwage - Head of HR & Corporate Sustainability | Aelian Gunawardene - Managing Director | Nishal Ferdinando - Chief Executive Officer |

Standing Left to RightWasantha Gunarathne - Director Sales & Technical - South Asia | Rizna Dilshard - Director Finance | Gavin vanDort - General Manager Project Sales | Richard Gunawardene - Head of Marketing | Nayantha Delpechitra - Head of Legal & Corporate Affairs | Indika Chandrasekara - Director Operations and Head of Commercial | Charith Peramune - General Manager Factory


SENIOR MANAGEMENT

Seated Left to RightIndika Chandrasekara - Director Operations and Head of Commercial | Nirosha Thawalampitiya - GM Commercial | Wasantha Gunarathne - Director Sales & Technical - South Asia | Nishal Ferdinando - CEO | Aelian Gunawardene - Managing Director | Rizna Dilshard - Director Finance | Joyce Gunawardene - Director

Standing Left to RightMaithri Vithanage - Senior Manager – National Sales | Jude Fredrick - Manager internal Audit | D D Rubasinghe - Manager – Investigation & Recoveries | Lasantha Ranawaka Manager R & D | Nuwan Pinto - Stores Manager | Dinidu Malinga - Finance Manager | Chaminda Gulawita - Senior Manager Sales & Technical | Janaka Hathurusinghe - Production Manager | Nayantha Delpechitra - Head of Legal & Corporate Affairs | Richard Gunawardene - Head of Marketing | Shantha Geethadewa - Credit Control Manager | Kaushalya Kotuwage - Head of HR & Corporate Sustainability | Viraj Maddumage - Manager IT | S. Sivasubramaniam - Head of Treasury & Credit Controls | Gavin vanDort - GM Project Sales | Upul Weerasinghe - Consultant Projects | Kumara Ranawaka - Stores Manager | Charith Peramune - General Manager Factory |

Absent: Dharmendra Ramamoorthy - Country Head – India | Shane Dirckze - GM Project Management


REPORT OF THE AUDIT COMMITTEE

The Audit Committee is appointed by the Board of Directors of the Company and reports directly to the Board of Directors.

MEMBERS OF THE AUDIT COMMITTEEThe Audit Committee comprises three Independent Directors. The committee is headed by Mr. Jehan Amaratunga, a member of the Institute of Chartered Accountants of Sri Lanka.Dr. Sivakumar Selliah and Mr. Senaka Kakiriwaragodage represent the Committee as members.

The Head of the Group Internal Audit serves as the Secretary to the Audit Committee.

The procedure in place is for the Company Managing Director, Chief Executive Officer and Finance Director to attend meetings when scheduled as and when required by invitation.

The overall function of the Committee is to review the Company’s internal control systems and risk management systems, and make recommendations to the Board for implementation.

The Audit Committee is responsible for formulating and implementing appropriate and adequate internal control systems. The proceedings of the Audit Committee meetings are recorded with adequate details and reported to the Board of Directors.

MEETINGSThe Audit Committee held five meetings during the financial year under review. The attendance of the Committee members at the meetings was as follows.

Name of the Member Meeting attendance

Mr. Jehan Amaratunga 5/5

Dr. Sivakumar Selliah 5/5

Mr. Senaka Kakiriwaragodage 5/5

Brief profiles of the members of this Committee are given on page 63 of this report.

FUNCTION OF THE COMMITTEEFinancial ReportingEnsures the preparation, presentation and adequacy of disclosures in the annual Financial Statements of the Company, in accordance with the Sri Lanka Accounting Standards.

ComplianceEnsure the Company’s compliance with financial reporting requirements and information requirements under the Companies Act.

Internal Controls & Risk ManagementEnsure the Company’s internal control and risk management are adequate to manage and mitigate the risks that may occur in the day-today operations of the Company.

Internal AuditsEnsure that the Internal Audit function is independent of the activities it audits and that it is performed with impartiality, proficiency and due professional care.

External AuditsAssess the independence and performance of the External Auditors and make recommendations to the Board on the appointment /re-appointment of External Auditors.

Whistle-blowing PolicyThe Company has a Whistle-blowing Policy which has been reviewed and approved by the Board Audit Committee. The process is in place and proper arrangements are in effect to conduct fair and independent investigation and appropriate follow up action regarding any concerns raised by the employees of the Company.

The Policy allows any team member who has a legitimate concern on an existing or potential wrongdoing by any person within the Company, to come forward voluntarily, and bring such concerns to the notice of the Board Audit Committee. Concerns raised are investigated and the identity of the person raising the concern is kept confidential, as even anonymous complaints are investigated. This procedure is monitored by the Board Audit Committee.

As such, there have been no reported incidents either internal or external regarding the breach of ethics or unlawful behaviour by any of our employees, in a way that would bring into question the integrity of the Company.

Jehan AmaratungaChairman – Audit Committee

Independent Director – JAT Holdings (Private) Limited.

30th May 2018


REPORT OF THE REMUNERATION COMMITTEE

The Remuneration Committee operates within Board-approved terms of reference and assists the Board of Directors to ensure that the remuneration policies in the Company align with its objectives.

COMPOSITION OF THE COMMITTEE AND MEETINGS OF THE COMMITTEEThe Remuneration Committee members of JAT Holdings (Pvt) Limited consists of two independent Directors Dr. S. Selliah and Mr. J. Amaratunga. The Committee is chaired by Dr. S. Selliah.

The Committee meets annually. The Managing Director Mr. Aelian Gunawardene and Chief Executive Office Mr. Nishal Ferdinando attend these meetings on invitation to participate in the deliberations.

Profiles of the members of this committee are given on page 63 of this report.

SCOPE OF THE COMMITTEEThe committee operates within the Board- approved terms of reference.

The Remuneration Committee studies the recommendations forwarded and recommends the remuneration package applicable to the Executive Directors and the Senior Management of the Company and makes its recommendations to the Board for approval.

REMUNERATION POLICYThe policy of the Company is to retain and attract high-profile executives to the Company. In this context, the Committee has taken into consideration competition, individual and collective performance and target achievements in declaring the overall remuneration policy for the Company.

Remuneration and other benefits Directors the Board as a whole decides the remuneration of the Non-Executive Directors based on the recommendations of the committee. The Non-Executive Directors receive a fixed fee for attending meetings and committees.

Employees-The remuneration package of employees consists of a fixed and variable component which is influenced by factors such as qualification and experience, performance of individual and business, comparison with market available rates, etc. In addition they are also entitled to many other facilities offered by the company.

Dr. S. SelliahChairman-Remuneration Committee

30th May 2018


REPORT OF THE RELATED PARTY TRANSACTION REPORT COMMITTEE

The Related Party Transaction Review Committee assists the Board to ensure that interests of shareholders as a whole are taken into account when entering into transactions with related parties and avoidance of conflict of interests.

COMPOSITION AND COMMITTEE MEETINGSThe Related Party Transaction Review Committee is appointed by the Board of Directors of the company.

The Related Party Transaction Review Committee of JAT Holdings (Pvt) Limited consists of two Independent Directors. The Chairman is Mr. Jehan Amaratunga a Non-Executive Director, and Dr. Sivakumar Selliah serves as a member.

The Managing Director, Chief Executive Officer and Finance Director of the company attend the meetings when required by invitation.

The Committee held four meetings during the financial year under review. The attendance of the Committee members at the meetings was as follows.

Name of the Member Meeting attendance

Mr. Jehan Amaratunga 4/4

Dr. Sivakumar Selliah 4/4

Brief profiles of the members of this Committee are given on page 63 of this report.

DUTIES AND RESPONSIBILITIES. Review the aggregate value of transactions

with Related Party (RPT) Review the value of individual transactions

with Related Party (Major Transactions) Review the Related Party Transactions that

require shareholder approval Review the Related Party Transactions that

require immediate disclosure Review the Related Party Transactions that

require disclosure in the Annual Report

POLICIES AND PROCEDURES ON RELATED PARTY TRANSACTIONSThe company has in place a Board-approved policy where categories of persons/entities that shall be considered as “Related Parties”.

The policy ensures that procedures are in place to ensure that the Company does not engage in any transactions with related parties in a manner that would be more advantages to such parties.

TRANSACTIONS DURING THE YEAR Details of transactions with related parties during the year are set out on pages 147 to 150 of this report.

Jehan AmaratungaChairman – Related Party Transaction Review Committee

Independent Director – JAT Holdings (Private) Limited.

30th May 2018


RISK MANAGEMENT COMMITTEE

The Board of Directors of JAT Holdings (Pvt) Limited has appointed a subcommittee, the Risk Management Committee (RMC) to review and assess the adequacy and effectiveness of the risk profile of the Company.

COMPOSITIONThe Risk Management Committee for the financial year 2017/2018 comprised the following members whose profiles are given on pages 63 to 65.

Dr. Sivakumar Selliah - Chairman Mr. Jehan Amaratunga - DirectorMr. Aelian Gunawardene - Managing DirectorMr. Nishal Ferdinando - Chief Executive OfficerMs. Rizna Dilshard - Finance DirectorMr. Jude Fredrick - Manager - Internal AuditMr. Kaushalya Kotuwage - Manager - Head of HR & Corporate Sustainability

MEETINGS.The committee held three meetings during the year under review.

SCOPE AND ACTIVITIESThe committee works closely with the Corporate Management, Heads of Divisions, Consultants and Senior Managers supervising risk on broad categories such as credit, market and operational risks and suggests solutions for implementation to overcome and minimise these risks.

The risk management committee adheres to the following key objectives to operate in an effective and efficient manner.

To minimise the organisation’s business goal deviation,

To enhance corporate governance, To minimise the organisational risk with

proactive measures To use as a decision-making tool in

operations and new business opportunities

Risk management committee defined risk categories to make it easy to focus and prioritise. All risks are evaluated under the following four categories. 1) Business and Operational Risks2) Financial Risks3) Legal and Regulatory Risks4) Strategic Risks

JAT Holdings Management consider this risk management as an integrated model into business and decision-making processes including strategy formulation, business vertical enrichment, business vertical enhancement, business planning, capital allocation, investment decisions, internal control and all day-to-day operations. The Company recognises that the risk management is the responsibility of all employees, rather than being a separate and standalone process. The company is following the COSO frame work as the risk management model.

RISK ASSESSMENT CRITERIA

RISK RATING PROCESS

Internal Environment

Objective setting

Event Identification

Risk Assessment

Risk Response

Control Activities

Information and CommunicationMonitoring

Compliance

Reporting

Operations

Strategic

Risk CAT FocusModerate

Low

Low

Low

Low

Moderate

Moderate

Moderate

Low

Low

High

High

Moderate

Moderate

Low

Significant

High

High

Moderate

Low

Significant

Significant

High

Moderate

Moderate

5

5

4

4

3

3

2

2

1

1Impact/Consequence

Like

liho

od

O

ccur

ance

/Fre

que

ncy

Significant

High

Moderate

Low

Immediate action required

Near-term attention and action required

Action required to control the risk

Action required agrred-in-time/ No action required

Identify the Activity

Risk Rating (Risk Assessment Matrix)

Risk Category (Business and Operational, Finance, Legal, Strategic)

Existing Control Methods

Identified Risk

Impact of Risk


The performance of the Sri Lankan economy in 2017 was sub-par having recorded a growth of 3.1% (year-on-year) compared to the growth of 4.5% in 2016. This lower rate of the national economy impacted all industries including the business sectors of JAT Holdings during the financial year 2017-18.

Overall, there was a drop in demand for paints in Sri Lanka due to the slower growth of the construction and real-state sectors. The construction sector contracted by about 15% against the previous year, which had a larger negative knock-on effect on demand for paints. This trend was echoed in the domestic and retail markets, where private households spent about 20% less on painting, renovations and new furnishings, compared to 2016-17.

In addition, the rupee depreciation against the Euro had adverse effect on the gross profit of all European brands imported by the Company.

OPERATIONAL PERFORMANCE The sluggish economic growth and demand conditions experienced throughout the year exerted a downward pressure on revenue and margins. Therefore, the company took action to address the situation by strengthening internal processes and improving operational efficiency to rebalance margins. A sales force automation system was implemented where all retailers, distributers and sales personnel are interconnected to facilitate rapid and smooth business transactions and communications.

OPERATING ENVIRONMENT

The system has contributed towards efficiency gains as the company continues to expand and increase the number of partners in its business network.

Despite obstacles in the operating environment, we remain the market leader in wood coatings with Sayerlack maintaining the dominance in the market and contributing nearly 50% of the company revenue.

CORE BUSINESS – WOOD COATINGS, PAINTS & RELATED PRODUCTS Local SalesThe JAT product portfolio continued to perform strongly in the market with Sayerlack retaining its top position as the market leader in wood coatings. Brush Master meanwhile gained market share as an emerging premium brush brand and the emulsion range consisting of Crown and Permoglaze made steady progress. The Borma brand for wood putty penetrated the market and positioned itself as the market leader.

Market development activities We are looking at taking advantage of the development activities in the east and have taken steps to strengthen our market share through aggressive marketing and additional resources.

A key development during the year aimed at driving the marketing and brand development functions of the Company was the addition of

marketing expertise to the Board with Mr. Nandana Wickramage joining the JAT Board of Directors in July 2017.

To enhance front-end efficiency we introduced a sales force automation system.

Relaunch of Crown paintsThe Crown paint brand was relaunched to the local market in November 2017 with a new brand positioning to target the decorative paints niche market. Crown is a premium decorative emulsion brand which has the royal warranty and is manufactured under franchise of Crown.

Introduction of Brush Master – Black A new brush, specialised for wall finishes, was introduced to the market under the Brush Master Black brand.

Sika waterproofing The agency was secured for Sika a Swiss brand, which is a world leader for specialty chemicals for buildings, including waterproofing, admixture etc. The brand will be promoted extensively in the local market in the new financial year.

Valspar powder coating from Italy The agency was obtained for the leading Italian powder coating brand Valspar. The brand will be introduced to the market in the new financial year.

Distribution network As at end March 2018, our distribution network comprised over 4,800 dealers and 33 distributers with three new business partners added during the year.

Our franchise strategy for Crown paints gained headway with 18 franchise outlets being opened up.

MARKETING AND PROMOTIONS Marketing and promotions for all brands were carried out including comprehensive, ALT & BLT campaigns. In addition, we continued to patronise the country’s leading sports such as cricket, rugby and tennis, while contributing to local arts such dramas, exhibitions.

Attaining Brand Equity The main focus of the year for paints was on the following brands; Sayerlack, Crown Paints and Brush Master. Under each brand, activations were carried out to attain Brand Equity.

There were Crown and Sayerlack dealer boards put up across the island to initiate and increase Brand Presence amongst its consumers.

In parallel a 360 Water base campaign and the ‘Don’t just Paint it, Crown it’ campaign was carried out with focus on TV, radio and press. Through this the Brand Trust, Brand Knowledge and the Brand Message were driven home. Brush Master took a different turn and introduced new danglers for hardware


shops and solely focused on radio and press advertisements to reach the target audience. There was also an internal and Tech Center wide promotion that brought in customer and generated Brand Awareness towards Sayerlack, Crown and Brush Master, along with the distribution of t-shirts at both external training sessions and for internal staff.

The launch of sayerlack.com and crownit.lk were milestones that initiated more customer awareness, engagement and interaction. Crown Paints were versatile enough to push sales via platforms such as takas.lk and wow.lk, increasing their Brand Presence online. The recently concluded Architect Expo generated more customer engagement and boosted brand knowledge for all three brands.

ExportsJAT Holdings’ predominant export is Sayerlack paint which is currently exported to SAARC countries. The exports sector enjoyed a strong year in Bangladesh capitalising on the Bangladesh economy showing a significant growth. We have also made inroads in Maldives and Pakistan and we have a strategic presence in India.

However, the export markets are still in early stages and as at end March 2018. Our vision is to be a leading wood coating solutions provider to the SAARC region over the medium-term and we have allocated necessary resources in the said countries.

Projects-FurnishingThe Group’s furnishings business caters to project specific demand from high-end real estate development projects, hotels and commercial properties. Our value proposition brings globally reputed brands such as; Herman Miller seating, Armstrong ceilings and other high quality flooring and partitioning solutions to the local market.

SEA Modular Kitchens and WardrobesDuring the year we introduced SEA Modular Kitchen and Wardrobe solutions from Germany to cater to the country’s emerging high rise market. JAT Holdings has been appointed the sole agent for SEA Boufarmart Germany. To ensure correct technical use and to generate maximum benefits for our customers we employ eight German nationals including a designer, implementer and installers and showroom mangers, to manage the range and provide adequate customer support services. During the current financial year the furnishing segment almost doubled turnover year-on-year through strategic introduction of high value, high finish, convenient solutions to secure a project pipeline of over Rs 1 bn. As at end March 2018, furnishing accounted for 7% of total turnover.


STRATEGIC OBJECTIVES

OUR GROWTH STRATEGY

Become the dominate player in the emulsion paints sector in Sri Lanka

Becoming a leading contractor for furnishing in Sri Lanka

Become a leader in the wood coating sector in Sri Lanka and in South Asia

GROWTH STRATEGY AND RESOURCE ALLOCATION

Our growth strategy is based on a three pronged approach to push business growth in Sri Lanka and in the SAARC region. This will be achieved by:1. Penetrating Sri Lankan market by expanding our distribution network across the highest and

breadth of the country through dealerships, distributorships and franchising agreements2. Diversifying our product portfolio and revenue streams by introducing more new products to our

markets3. Developing exports markets for growth opportunities

COMPETITIVE STRATEGY Our competitive strategy is based on value for money, accessibility and cost efficiency.

1. We will endevour to source for our customers the best value for their money by continually monitoring external market trends to identify emerging new products.

2. We will ensure more people have access to our products by taking our distribution network deeper into the country (and outside the country).

3. We will continue to streamline internal operations, through technology incorporation and adoption of modern management systems to build an efficient, flexible and productive business operation.

Penetrate local markets

Expand distribution network

Existing

Exi

stin

gN

ew

New

Enter new overseas markets Strategic partnerships in

SAARC countries Utilise FTAs and bilateral

trade agreemnts

Inovation Diversification

Introduce new products to local market

New, niche products

Products

Mar

kets

Customer value

Accessibility

Value for money

Specialised products


RESOURCE ALLOCATION PLANNING PROCESS

Based on our current growth strategy, we have allocated financial and non-financial resources to our business sectors of paints, furnishings and exports. Key resource allocations

1. Allocate financial resources for factory capacity enhancement2. Upgrade quality and safety systems 3. Allocate resource for human capital development through training and foreign exposure 4. Improve internal operations through injection of new technologies5. Allocate resources for marketing and brand development

OUTLOOK AND PLANS We are targeting strong year-on-year growth locally and in our export markets in the new financial year.

Our targets for the new financial year Targets for 2018-19

Local market growth Y-O-Y 30%

Export market growth Y-O-Y 10%

Project market growth Y-O-Y 100%

In the export sector, Bangladesh is currently the most promising growth market for JAT Holdings due to high economic growth rates, commercial building activities and changing lifestyles associated with increasing disposable incomes and an emerging middle class. In the SAARC region, India and Pakistan evince high potential for growth but on a more measured scale and through strategic partnerships.

We are also scanning the global horizons for opportunities beyond the SAARC realm. Other emerging nations such as Myanmar and Fiji demonstrate new opportunities that we are monitoring. We will attempt to utilise existing trade agreements between Sri Lanka and other countries to facilitate market entry as much as possible.

In Sri Lanka, despite the somewhat downcast economic conditions at present, we believe the construction and real-estate sector will revive within the short-term. Therefore, we are positioning our business lines to supply to the demand growth when it arises by providing multiple innovative solutions.

Over the short-term our objective is to further penetrate the Sri Lankan emulsion market with Crown which is a premium quality product. We will also continue to introduce new products to tap niche markets by securing international agencies. By introducing more new brushes and expanding our range of brushes we are developing a strong brand image and market position in Sri Lanka. We believe our investments during the current financial year in new product development and distribution expansion will commence returns in the new financial year, thereby boosting our bottomline.

Board sets business

growth targets

Management evaluates

market risks and opportunities in

paints, furnishing and export

sectors

Match opportunities

with resources

Allocate financial and non-financial

resources

Board and Audit Committee

monitor implementation


RISK MANAGEMENT

OVERVIEWRisk is inherent in the environment in which our Company operates in. This demands a proactive approach to Risk Management and the support of an effective risk management framework in order to identify risks and then manage them so that they can be mitigated, transferred or avoided.

JAT’s overall risk management Framework is overseen by the Board through the Audit Committee as part of the overall Corporate Governance framework.

The Company recognises that risk management is the responsibility of all employees, rather than being a separate and standalone process.

We understand our risk based on our core business model, strategic objectives and external environment in which we operate in.

Cognisant to this, risk management is integrated into business and decision-making processes, business development, business planning, capital allocation, investment decisions, internal control and all day-to-day operations.

Facilitates risk identification and escalation whilst providing assurance to the Board

Assigns clear roles and responsibilities and facilitates implementation with guidelines and tools

Consists of multiple layers of roles and responsibilities aimed at building a proactive risk culture

Risk and Control OwnershipBusiness Units, Group Functions and

Individuals

Risk Reporting and CommunicationChief Financial officer and Group

Executive Committee

Risk and Control Oversight FunctionsFinance, Risk, Management, Internal

Control, Tax, Operations, IT, Legal, HR, Sustainability

Independent AssuranceGroup Internal Audit

Board OversightAudit Committee

Involves establishing the context, identifying risks, assessing their consequences and likelihood, evaluating risk level, control gaps and priorities, and developing control and mitigation plans.

A continuous process with periodic monitoring and review

An interactive process supported by stakeholder communication and consultation

Business Development

Day-to-Day Operations Management

Str

ateg

y Fo

rmul

atio

nR

oles

and

Res

pons

ibilit

ies;

Gui

delin

es a

nd T

ools

Risk E

scalation and Assurance

Business P

lanning

Investment Decision

Internal Control

Capital Allocation

Monitoring and Review

Communication and Consultation

Analyse EvaluateIdentify

Ris

k G

over

nanc

e S

truc

ture

Ris

k M

anag

emen

t Pro

cess

Establish Context

Mitigate and

Control


JAT HOLDINGS (PVT) LIMITED RISK REGISTERGRI 102-11

Risk Assessment Potential Impact Risk Response Rating

Control measures and plans to mitigate

Business riskThe inability of the Company to achieve its business objectives.

Adverse impact on planned profitability.

Moderate Corporate plans are formulated on an annual basis, approved by the Board and monitored and reviewed on an ongoing basis.

Negotiate with main suppliers for cost reductions to ensure planned margins are earned.Internal Operational ProcessesRisk of financial loss due to breakdown in internal controls.

Disruption of operations due to ineffective use of assets causing loss of profits.

Low Clearly defined systems and procedures are in place. A reference document of the Procedure Manual is available for easy reference. Outsourced internal audit verifications take place on a structured basis and suggestions made are

reviewed by Audit Committee and corrective action taken.Financial RiskLiquidity risk of insufficient credit facilities to meet expenses of the company.

Foreign Currency Risk is identified as the risk associated with fluctuations in foreign currency transactions.

Inability to perform business operations due to inadequate funds for work in capital requirements.

Loss that can arise due to fluctuation in foreign currency rates which can adversely affect the proceeds from exports.

Low The company ensures that only 55% of banking facilities approved are utilised and the balance is left to meet any unforeseen liquidity requirements.

Export proceeds, which are in excess of import settlements act as a natural hedge against adverse currency fluctuations.

Credit RiskNon-payment by customers on time.

The company being unable to meet its financial obligations.

Moderate The Company implements proper credit control policies, which evaluates customers periodically, obtaining adequate securities via bank guarantees, and debt collection policies to ensure that the company selects and maintains only a reliable customer base.

Interest Rate RiskFluctuation on interest rates on an upward trend.

Impact to Company earnings due to interest rate fluctuations.

Low The Company’s financial strength enables it to finance its borrowing requirements at the best available rates.

Product RiskProducts can turn out to be inappropriate for the market in terms of functionality.

Consumer dissatisfaction and consequent rejection of the product, which will result in products being returned.

Moderate Establish quality control measures as well as product testing, through sampling are performed on all product lines.

Company’s plant and equipment are rigorously maintained and upgraded where necessary. Ongoing R & D to ensure timely release of products to the market

Market RiskLoss of market share

Impact to profitability due to loss of market share.

Moderate Continuous market research to remain competitive in terms of quality and service. Leverage on the assurance provided by JAT’s A+ mark of excellence to mitigate risks.

Personnel riskRisk of losing skilled staff members

Risk associated due to shortage of labour, which can adversely affect the operations of the company.

Moderate Structured training arising from performance appraisal process. Recognising and rewarding superior performances. Employer branding strategies to enhance JAT’s position as an employer of Choice

Statutory & legal RiskImplications resulting from noncompliance of legal and statutory obligations.

Financial and reputational loss, which may arise due to noncompliance with statutes.

Low Strong Corporate governance framework to ensure compliance with all legal and statutory obligations Statutory returns including taxes are regularly reviewed and ensured that they are as per required

regulations. Compliance reports are reviewed and tabled at all Board meetings


MANAGING OUR FINANCIAL CAPITAL

In this chapter we explain the status of JAT Holdings’ Group financial capital base as at end March 2018 and the changes to our funds as a result of business operations during the year.

OVERALL GROUP PERFORMANCEThe financial year 2017/2018 proved to be a challenging year due to the operating conditions that prevailed in the retail market which affected most of the sales channels in the group. Amidst these trials, the Group recorded a turnover of Rs 5.5 billion which reported a gross profit of Rs 1.6 billion that resulted in a profit after tax of Rs 635 million.

The total equity of the group as at end of 2017-18 remained at Rs 3.8 billion of which 24% consists of stated capital and 76% consists of Revenue reserves. This represents Rs 1.3 billion in non-current assets and Rs 4.3 billion invested in terms of inventory and receivables, whilst Rs 1 billion is debt and Rs 1.4 billion is payables.

BASIS OF PRESENTATION AND PREPARATION OF FINANCIAL STATEMENTSThe financial statements of the Group are presented in accordance with SLFRSs and LKASs using appropriate accounting policies which are applied in a consistent manner disclosing and explaining material departures there from, if any.

FINANCIAL CAPITAL MANAGEMENT The financial risks associated with the operations of the Group and its risk management processors are discussed in detail in the risk management report on page 78.

The main financial risks faced by the company in the financial year 2017-18 were the Foreign currency risk, this is discussed under Risk Management on page 78 of this report.

CHANGES TO FINANCIAL CAPITAL STRUCTUREThe JAT Group’s financial capital structure comprises of both equity and debt. Equity includes stated capital and Revenue reserves.Debt consists of interest bearing borrowings.

EquityThe group did not experience changes to its share capital during the year and total issued share capital remained at Rs 918,770,013.

The Groups main source of capital continued to be the retained earnings which stood at Rs 2.9 billion at the end of the financial year. Total shareholder funds amounted to Rs 3.8 billion against the prior year standing of Rs 3.38 billion which reported a 13% improvement.

Debt As at end March 2018, the debt capital of the group was Rs 232 million from Rs 230 million in 2016-17. And the gearing ratio remained unchanged at 6%.

The weighted average cost of capital increased from 9% to 10% , due to the slight increase in interest rates in the market.

During the year the group accessed financial facilities from banks for its imports, capital and working capital requirements to the value of Rs 367 million which comprised both rupee loans and US$ loans.

Funds from operations Cash flows from operating activities came to Rs 745 million in the group whilst the company reported a Rs 457 million.

Changes to financial capital structure in 2017-18

Capital component Group Company

Value in 2017-18

Rs.

Value in 2016-17

Rs.

Change%

Value in 2017-18

Rs.

Value in 2016-17

Rs.

Change%

Debt

US$ debt

Long term debt

326 Mn 300 Mn 9 326 Mn 300 Mn 9

- 21 Mn (100) - 1 Mn (100)

Retained profits 2,939 Mn 2,455 Mn 19 2,997 Mn 2,498 Mn 21

Shareholder’s equity 3,831 Mn 3,380 Mn 13 3,942 Mn 3,023 Mn 15

Cash from operations 745 Mn 585 Mn 27 457 Mn 887 Mn (48)


DEBT TO EQUITY

0

2,000

5,000

6,000

7,000

1,000

12/13 13/14 14/15 15/16 17/1816/17

4,000

3,000

8,000

Rs. Mn

Capital Structure (Debt vs Equity)

Total Equity Total Liability

0

2,000

1,000

12/13 13/14 14/15 15/16 17/1816/17

4,000

3,000

5,000

Rs. Mn

Total Equity

Turnover and profitsTurnover: Group revenue recorded was Rs 5.5 billion for the current financial year, a drop of 6% compared to the previous year, whilst the Company’s turnover recorded for 2017/18 was Rs 5.1 billion.

The drop in revenue was experienced across the entire product portfolio marketed to the local market which was due to the adverse economic conditions. Following is a graphical form of the turnover spread.

Whilst the Company local turnover dropped the company recorded a consistent growth in turnover of the export sector.

Gross profit: Gross profit margins earned in the group and Company were 30% as all operations ensured that proper sourcing and managing of product mix continued through out the year in order to maintain acceptable Gross profit levels within the Group of Companies.

Profit after tax: Group Profit after tax reported for the financial year 2017/2018 was Rs 634 million against the prior year of Rs 902 million.

Company profit after tax reported for the financial year 2017/2018 was Rs 674 million.

0

2,000

4,000

1,000

2017 2018

3,000

5,000

Rs. Mn

Local Vs. Export turnover of Company

Local SalesExport Sales

0

400

1,000

200

12/13 13/14 14/15 15/16 17/1816/17

800

600

1,200

Rs. Mn

Group-Profit After Tax

0

2,000

1,000

12/13 13/14 14/15 15/16 17/1816/17

4,000

5,000

6,000

3,000

7,000

Rs. Mn

Group Revenue

28

11

236

12

110

Export SalesDecorative PaintsBrush MasterWood Coating

Business Development ProjectProject IncomeOther Companies

Company Revenue Spread 2017/18

%

SHAREHOLDER EQUITY


The Group expects profits in the next few years to show a sharp increase, envisaged from export markets such as India, Pakistan and Maldives.

Cost of Sales and Operating Expense AnalysisCost of Sales :The cost of sales of the Group increased from Rs 3.7 billion in the financial year 2016/17 to Rs 3.8 billion during the year under review, growing by 3%, and absorbing 70% of Group revenue.

The Company’s Cost of sales absorption too was reported at 70%.

The main reason for increase in cost of sales composition was due to depreciation of the Sri Lankan Rupee against the US $ and the Euro which effected the company’s cost of sales, as

major component of the cost of production is based on raw material imports.

Administration overheads - Administration costs of the Group was Rs. 371 million during the year under review, absorbing 7% of the Groups revenue. Administration cost increased by Rs 36 million compared to the previous year, mainly due to the annual salary increments.

The Group’s selling and distribution costs, which include advertising and promotional costs and commissions paid on sales volumes, reached Rs. 617 million during the year, accounting for 11% of the total revenue. This cost was in line with the volume movement and other marketing related activities and showed a 10% drop in composition compared to the last financial year.

In cumulative terms the Group’s administration and distribution costs, along with the cost of sales, comprised 89% of the revenue during the financial year 2017/2018, whilst these expense categories in the Company added up to 88%.

Net finance cost to the Group during 2017/2018 was reported at Rs 106 million as against a comparison of Rs 83 million last year. The main reason for the increase was the increase in cost of funds compared to both years investments made for expansion of the office complex and investment in a new production unit to manufacture ceilings.

InvestmentsFixed AssetsNet book value of fixed assets of the Group amounts Rs 1,316 million which mainly consists of Land and building Rs 634 million and Plant and equipment Rs 84 million.

The parent company invested in a ceiling manufacturing plant and commenced the construction of a four-storey office complex to house all subsidiaries of the Group under one roof, construction is expected to be completed by April 2018.

Investment in SubsidiariesThere was no investment made in setting up subsidiary companies during the year and as a strategic business decision the investment in the JAT Technologies (Pvt) Ltd was disposed during the year.

Work In Capital InvestmentInvestment in work in capital as at 31st March 2018 by the Group amounts to Rs 2.7 billion, against last year’s comparison of Rs 2.4 billion.

During the year the current assets of the group increased to Rs 4.9 billion from Rs 4.4 billion, whilst current liabilities reduced to 2.1 billion from Rs 2 billion.

Accordingly by the year end the total current assets of the Group accounted for 78% of its total assets whilst total current liabilities accounted for 89% of the total liabilities.

Consequently the current ratio of the group was reported as 2.2 against a prior year reporting of 2.1.

0

400

1,000

200

12/13 13/14 14/15 15/16 17/1816/17

800

600

1,200

Rs. Mn

Operating Profit

0

2.00

1.00

0.50

1.50

2.50

12/13 13/14 14/15 15/16 17/1816/17

3.00

Current ratio and Quick ratio

Current Ratio Quick Ratio

MANAGING OUR FINANCIAL CAPITAL

%


Cash flowDuring the period 2017/18, the company generated operational cash flow of Rs 343 million which was mainly derived from the profits and the changes in working capital elements.

The movement of the working capital structure of the group over the years is as follows.

0

400

200

100

300

500

700

12/13 13/14 14/15 15/16 17/1816/17

600

800

Rs. Mn

Working Capital Structure

(Current assets Vs. Current liabilities)

Current Assets Current Liabilities

Finance activities of the Group comprises the movement of the borrowings and dividend payments. The net movement of those items during the year 2017/18 was Rs 4 million.

Futuristic outlookDue to the stringent treasury procedures adopted by the Group the gearing ratio remained unchanged at 6%.

The Group’s key sources of finance, for the foreseeable future are likely to be cash generated from operations, with a combination of long-term and short-term borrowings. Therefore it is expected that the said sources of finance will provide adequate liquidity to service debt and meet future working capital and capital expenditure requirements.

DividendThe Company maintains a consistent dividend policy in line with profitability and investor expectations.

Total dividend declared during the financial year 2017/2018 amounted to Rs 146 million against a prior year comparison of Rs 286 million, a decline due to the decline in profits and expansions in operations that was lined up during the year.

A solvency test was conducted as required under the Companies Act of 2017 which was approved by the auditors and Board.

Shareholder ValueThe Company’s strategic priorities are primarily focused on delivering shareholder value through the achievement of sustainable, long term growth.

Accounting Policies Group and Company Financial Statements for the period ended 31st March 2018 presented in this Annual Report are prepared and illustrated in accordance with SLFRSs and LKASs and applicable accounting policies with effect from 31st March 2017 and the requirements of the Companies Act No. 07 of 2007 respectively.

0

20

10

30

13/14 14/15 15/16 17/1816/17

40

%

Return on Equity

0

0.20

0.10

0.30

13/14 14/15 15/16 17/1816/17

0.40

Times

Dividend Payout Ratio

0

0.20

0.10

0.30

0.40

13/14 14/15 15/16 17/1816/17

0.70

0.60

0.50

Rs.

Dividend Per Share

The Group’s spent on capital expenditure amounted to Rs 362 million which consisted of additions made to Property, Plant and Equipment, which mainly consists of expenditure incurred by the company.


HUMAN CAPITAL

This chapter described the workforce of JAT Holdings (Pvt) Ltd and its subsidiaries. Some relevant information pertaining to human resources can also be found in the Sustainability Report of this annual report.

A significant development during the year was that JAT Holdings (Pvt) Limited was recognised for the quality of its human resource management as an ‘Employer of Choice’ at the Sri Lanka Best Employer Brand Awards 2017.

STATUS OF COMPLIANCE WITH LABOUR REGULATIONSThe Company is fully complied with all applicable labour regulations and did not face any fines or penalties for non compliance during the year. All EPF and ETF and other statutory payments have been made on time. There are no complaints against statutory payments made by the Company.

HUMAN CAPITAL BASE BY EMPLOYMENT GRADE AND GENDER AS AT MARCH 31, 2018 As at end March 2018, the total workforce of JAT Holdings (Pvt) Ltd and its subsidiaries 437.

JAT HOLDINGS

Employment grade Male Female

Senior Management and above 65 11

Executive Staff 107 24

Non-Executive Staff 139 33

Total 311 68

JAT SUBSIDIARIES

Employment grade Male Female


Executive Staff 4 3


Total 28 30

CHANGES TO HUMAN CAPITAL IN 2017-18 There were no significant changes to human resource management policies during the year.

Certain internal structural changes were implemented during the year to enhance efficiency within the Company. This included merging the Human Resource Management Department and the Corporate Sustainability Department in 2018. The integration did not cause job losses and has been conducted in a most acceptable manner.

The Company has no employee unions. The Company makes all efforts to meet employee expectations in terms of job satisfaction and personal growth and development.

The 25th anniversary celebrations of the Company is planned to be held in a glamorous manner where the Company will recognise and reward the star performers.

JAT HUMAN RESOURCE STRATEGY Our HR strategy has been structured to harness our human capital to meet Company growth and its long term objectives. In this regard, during the year under review the company enhanced its professional management cadre through strategic recruitments, including the recruitment of a CEO. The HR strategy for the future will be focusing on corporate sustainability.

NEW RECRUITMENT BY EMPLOYMENT CONTRACT AND GENDERDuring the current year 97 new recruitments were made to enhance the company’s talent pool and fulfil replacements for resignations.

Employment contract Male Female


Executive Staff 30 7


Total 83 14


PERFORMANCE EVALUATIONS The Company evaluates each employee annually and all increments and bonuses are performance driven based on these evaluations.

EMPLOYEE BENEFITSThe Company invests funds and resources to create a healthy, happy working environment for all employees, as we believe satisfied employees are motivated to be more productive. In line with this policy we have allowed our employees to balance work and personal life by implementing a five-day working policy in most of the divisions

Some of the JAT Holdings employee welfare initiatives are described below.

Medical facilitiesHospitalisation expenses of any employee, his or her spouse and dependent children are reimbursed by the Company to a limit dependent on employment category.

Death donation fundAn outright grant of Rs. 40,000 is made on the death of an immediate family member of an employee and all funeral expenses are borne by the Company at the death of an employee.

WeddingsA one-time gift of Rs. 40,000 is made by the company to any employee for his or her wedding.

Transport benefitsThe senior management team is provided with Company maintained vehicles and other managers are provided with vehicle and fuel allowances. In addition the company provides transport to office staff who work extended hours, by the corporate official transport provider Pick-Me transport services.

Free Meals All staff members are provided tea at mid-morning and mid-afternoon. In addition, all employees are provided a buffet lunch free of charge, which is appreciated greatly by the staff. Work life balanceThe JAT cricket team: A cricket team was formed to promote work-life balance and to find talent to represent the Company at the Mercantile Cricket Tournament.

The JAT Basketball team which was formed during the year emerged as the runners-up at the Mercantile Basketball Championship 2017 -“D”-Division

Buffet Lunch for Staff The JAT Cricket Team

Mercantile Basketball Championship 2017


HUMAN CAPITAL

Employee’s Recreation and Sports Club : The objective of the club is to relieve work stress and allow employees space to socialise and have fun with employees of inter departments in order to build up and refresh their relationship with one another.

During the year Sport Days were organised with the participation of JAT Group companies where employees displayed their talent in various sports. Health programmeA health programme was conducted for individuals above manager level to promote healthy lifestyles by encouraging weight loss of the participants. The winner was recognised with an attractive award.

Annual Inter Department Cricket tournament

Herman miller seating at office

JAT Initiates a corporate wellness programme

Internal Induction Program

Internal Induction ProgramAll new staff members go through a comprehensive induction program which educates them on all HR practices, office code of conducts, JAT brands and products, business verticals and so on.

Herman Miller Office seating for Employees All employees seat and work at Herman Miller office seating and workstations which promotes the most ergonomic working style. We are proud to say that this helps their health in the long run and improves comfort and productivity.


This State of the Art building is equipped with all modern facilities including training facilities and other corporate facilities such as meeting rooms, an auditorium, a restaurant and a gymnasium.

MANUFACTURED CAPITAL

This chapter presents the changes to our manufactured capital base during the year 2017-18. JAT Holdings (Pvt) Limited’s manufactured capital comprises plant and machinery and factory buildings. Our factories are located in Kahathuduwa and Horana and we also have storage units in Kahathuduwa, Hokandara and Kaduwela. The warehouse in Kaduwela was constructed during the current financial year with an investment of 15 million.

During the year, we continued to maintain and repair our factory and warehouse premises and plant and machinery asset base to ensure the value of our physical assets continue to bring in smooth a smooth operation.

The net book value of the group assets and value additions during the year are listed below.

Value of additions made during the year

Net book value as of 31st March 2018

Plant and Machinery (Rs. ’000) 4,065 88,400

Factory buildings (Rs. ’000) 22,184 174,638 DETAILS OF MANUFACTURING PLANTS AND WAREHOUSING UNITS OF THE COMPANY

Location Purpose Sq ft

Kahathuduwa Main manufacturing plant and warehouse

59,000

Horana Manufacturing plant 14,000

Hokandara Finished goods warehouse 30,000

Kaduwela Finished goods warehouse 10,000 CHANGES TO CAPITAL DURING THE YEARInvestments were made in order to develop additional warehousing space at Kaduwela warehousing location. Also new investment is underway to develop additional space at the Kahathuduwa plant to house the ceiling operation at the companies own premises.

A key augmentation to the Company’s physical asset base is the new JAT Head Office building in Thalawathugoda. The new complex is now almost complete and will be ready for occupation during the early part of 2018/2019. The Company has invested in excess of Rs 500 million on the designing and constructing this 45,000 square foot complex creating the platform for a centralised operation.

Kahathuduwa Factory

Emulsion plant in Kahathuduwa


NATURAL CAPITAL

This chapter explains how the Company attempts to mitigate harmful environmental impacts and conserve natural resources. The Company policy has always been complete compliance with all environmental regulations in all its operations. Therefore, our approach towards natural capital is built on the three pillars of regulatory compliance, international best practice and conservation.

COMPLIANCEThe Company has fulfilled all environment-related rules and regulation while maintaining an environment management system beyond regulatory compliance. Further, the Company complies with the Responsible Care standard in chemical handling.

JAT Holdings complies to an Integrated Management System which includes ISO 14001, ISO 9001 and OHSAS 18001.

BEST PRACTICESIn 2017, JAT Holdings (Pvt) Ltd Achieved a Merit Award from Responsible care for chemical handling best practices.

Further, the company has calculated its carbon footprint under all three scopes and is the only Sri Lankan paint company conscious of GHG emissions. The Company is focusing on being carbon neutral in 2020. As the based year for the calculation the company is looking forward to neutralise the carbon footprint by offsetting and moving into renewable energy sources.

Compliance Environmental impacts

are monitored regularly against regulatory standards

Regular environmental impacts audits are conducted

All regulatory licenses are renewed on time

Best practice Adopted ISO 14001:

2015 Developed the carbon

footprint up to scope 3

Conservation Adopting renewable

energy sources

Solar System Installed at Kathuduwa Factory

Further company has launched an environment “project called “Mihikathata Dayawen”, to improve environmental contributions. As part of the project, an awareness campaign was done focusing on corporate exhibitions.

CARBON OFFSETTING The Company is moving to renewable energy sources such as solar energy for factory operations. The Company’s solar energy production will be contributed to the national grid directly. In addition, the Company in investing in a sandalwood plantation which is an investment and a carbon offset approach.

JAT “MIHIKATHATA DAYAWEN”

JAT Holdings participated in the “SOBA 2017” – Environment Day Commemoration

Event organised by United Nations Sri Lanka on 09th and 10th July 2017. Environmental

& social contributions by JAT holdings under the concept of “Mihikathata Dayawen”,

were shared with the audience along with unique environmentally friendly products and

services. JAT Holdings represented its corporate image among 24 local authorities, 27

NGOs, 9 companies, UN Agencies and Universities.


RESPONSIBLE CARE AWARD 2017JAT Holdings was awarded the Merit Award in the national manufacturing category in recognition of good industrial practices related to responsible care standards . This is the first RC award presented to a paint company in Sri Lanka. JAT holdings is authorised to use the Responsible Care international logo on their products by complying with the international standard. This RC award is a milestone in the JAT sustainability journey.

Responsible Care is an initiative developed and adopted by chemical companies to continuously improve environmental, health and safety (EHS) performance of their operations. It is overseen by the International Council of Chemical Associations (ICCA) through its Responsible Care Leadership Group. This national award ceremony was held on 13 June 2017 at Water’s Edge with the participation of chief guest Mr. Barry Dyer, International Council of Chemicals Association.


This chapter describes the intellectual capital base of JAT Holdings as at end March 2018 and how the Company added value to intellectual capital during the year under review.

JAT Holdings is the pioneer in water base wood-coatings in Sri Lanka and is the market leader in the industry.

JAT HOLDINGS INTELLECTUAL CAPITAL ASSETS The following brands have been registered as intellectual assets of the Company

The JAT brand name Masters waterbase Brush Masters J-Chem paints

In addition to the above registered trade marks the Company’s intellectual capital base includes a locally developed Enterprise Resource Planning system on which Rs 15 million has been invested.

RESEARCH AND DEVELOPMENT (R&D)As a means of enhancing our intellectual capital base we invest in ongoing R&D initiatives to develop new products. During the year a range of new products were developed as listed below.

Solvent base 2K epoxy floor coating system Solvent base wood filler Solvent base resin barrier for wood Water base acrylic adhesives

INTELLECTUAL CAPITAL

Our R&D team of experts has benefited from years of specialisation and market testing in creating innovative and effective products for the local market. Our R&D expertise has also been strengthened through foreign collaboration in the form of knowledge and technical skills transfer from more advanced nations. Therefore, we are continually trying out innovative new ideas and we have a pipeline of new products lined up to debut in the new financial year. These new products will enhance overall revenues of the Company while adding to brand equity.

1. Heat reflective roofing paint (Developed in collaboration with Adgreencoat of Japan)

2. Water base interior/exterior base coat sealer for wood

3. Water base interior self-sealer for wood4. Water base parquet floor coating systems5. Solvent base adhesives6. PU floor coatings system Main Laboratory


SUSTAINABILITY REPORT


MANAGING OUR IMPACTS

Social: GRI 400Management Approach (This MA applies to the topics of employment (401), Labour management relations (402) and Diversity and equal opportunity (405)

Disclosure 103-1

At JAT, we work with the understanding that our people are a fundamental driver of our corporate strategy. It is why we remain committed to recruit, retain and develop a high calibre, professional workforce capable of responding proactively to industry challenges. While our HR strategies and initiatives are geared towards achieving these objectives, they also focus on positioning JAT as an Employer of Choice in Sri Lanka, vis-à-vis the following;

Disclosure 103-2

JAT is an equal opportunity employer and is committed to treat people with dignity and respect. As such, all employees are treated fairly and their prospects within the Company are determined solely on merit. A non-discriminatory approach ensures we do not discriminate based on race, colour, religion, sex, sexual orientation, gender identity and expression, age, marital status, disability or any other status protected by laws. This policy is applicable to all employees and covers all terms and conditions of employment, including, hiring, placement, promotion, termination, layoff, recall, transfers, leaves of absence, compensation, and training.

Human rights We believe that all employees are employed at their own will and should remain employed at JAT only if they wish to do so. Further, all managers have been educated regarding the right of employees to enter, remain and terminate employment voluntarily, and that no employee should not be subjected to, or coerced to work more overtime hours other than stipulated by labour regulations.

Ethics and values JAT has a documented code of conduct, which all employees are expected to read, understand and sign at the time of recruitment.

The Company maintains a zero tolerance policy towards corruption with all employees expected to report on any breach of the Code of Conduct. Multiple channels of communication have been established to enable employees to report on any such breaches. A Whistle-blowing Policy was introduced with the intention of creating yet another platform for employees to report irregularities in good faith, without fear that their actions may have adverse consequences.

Employee relationsThe Company has always promoted an open-door communication culture, which has led to the development of strong relationships with all levels of the employees. As a result, the need for trade unions has not arisen and no union representation is present.

We encourage openness and transparency where employees are free to approach any manager at any time, to raise material issues concerning their employment and also address any other work-related grievances that they may have.

Employees also have the opportunity to offer their suggestions and to freely contribute their views for the betterment of their own unit and or the Company as a whole.

Work-life balanceAt JAT we know that committed employees are our most important resource which is why we provide our employees with space for personal development and to showcase their creativity and talent.

The Employee Recreation and Sports Club was formed with the objective of assisting our employees to relieve work stress and allowing them time to mingle with their colleagues to strengthen the bonds of friendship and team spirit. Meanwhile, the JAT cricket team was formed to provide a platform to discover hidden talent and to give employees the opportunity to represent the Company at the Mercantile Cricket Tournament.

The JAT basketball team was formed to enhance employee talents in a multi-disciplinary manner and last year the team won the Runners-Up cup in the D division at the mercantile basketball

tournament. It is a milestone for the organisation and Human Capital of the Company.

Disclosure 103-3

To be able to provide employees with the best possible opportunities, we offer all permanent employees regular performance evaluations. These evaluations help determine the growth potential of each employee and identify leadership capacity of each individual. The findings are also used to map out the training requirements and also form the basis on which promotions are established.

SOCIAL: EMPLOYMENTDisclosure 401-1

a. The Company recruited 97 new employees. The total hiring ratio was 23.29%

b. Total resignations were 88 employees. The ratio was 21.1%

Disclosure 401-2

There are several benefits that have been given to the permanent employee as mentioned below.

Disclosure 401-3

Only one female employee has taken maternity leave in the last financial year.


SOCIAL: LABOUR MANAGEMENT RELATIONS 402

Gender Distribution (%)

Employee Category Employee Age Distribution (No. of Employees)

M F < - 20 20 – 35 Years

36 – 50 years

51 – 65 years

5 2 Directors 0 1 4 2

10 2 AGM and Above 0 3 7 2

50 7 Managers and Assistant Managers

0 25 30 2

107 24 Senior Executive/ Executive / Junior Executive

0 104 26 1

60 7 Office Staff / Supervisors 0 45 16 6

79 26 Minor Staff 10 49 35 11

311 68 Total 10 227 118 24

Disclosure 402-1

SOCIAL: DIVERSITY & EQUAL OPPORTUNITY 405Disclosure 405-1 a. and b.

Gender Distribution (%) Employee Age Distribution (No. of Employees)

M F < - 20 20 – 35 Years 35 – 50 years 50 – 65 years

309 70 10 227 117 25

Disclosure 405-2

a. The following salary scales are applicable to the whole Company for all operational locations and there is no gender discrimination.

Employee category Ratio

Male: Female

Minor Staff 1:1

Staff 1:1

Junior Executive 1:1

Executive 1:1

Senior Executive 1:1

Assistant Manager 1:1

Manager 1:1

Assistant General Manager 1:1

General Manager 1:1

Director 1:1 b. All benefits allocated for permanent

employees of JAT Holdings (Pvt) Ltd are applicable regardless of operational location.

SOCIAL: OCCUPATIONAL HEALTH AND SAFETY 403Management approach (This management approach is applicable for Occupational Health and Safety (403)

Disclosure 103-1

The JAT Holdings makes every effort to ensure a safe working environment not only for its own employees and customers, but also for other stakeholders as well. This has improved morale, productivity and efficiency of JAT.

Where relevant, JAT Holdings has obtained OHSAS 18001 Occupational Health and Safety management systems. As a diversified conglomerate with interests in wide-ranging economic activities including manufacturing, logistics operations and warehouse operations, it is imperative that we make our workplaces safe. Occupational Health and Safety remains a high priority for the JAT Holdings and we have taken numerous steps to ensure, to the best of our ability, that the workplace is safe. Our manufacturing processes conform to accepted industry guidelines and practices in safety management and we have set for ourselves a target of ‘a zero accident workplace’. Against this background, the negative risk of Health and safety remains low.

Disclosure 103-2

JAT has established ‘Safety First’ as a key employee behaviour and Health and Safety is a pillar of its Transforming Space programme. The safety programme aims at enhancing global standards, organisation and processes, and strengthening safety leadership and safety behaviours. Continuous improvement is achieved through compliance monitoring, systematic gap-closing and central reporting of accidents, incidents and near-misses. The Company conducted a “Health Screening Programme” to ensure fitness for the jobs they perform for all employees and to identify and take action on any illnesses found.



Health and safety practices carried out during the year included:

Conducting safety induction trainings. Health screening for all employee categories

at the factory. Setting operational controls for critical

activities. First aid training and fire training. Display of safety signage. Training and awareness on hazard

identification, risk assessment and establishment of controls.

JAT Holdings successfully enrolled with the Responsible Care Counsil Sri Lanka for responsible chemical industry practices and chemical safety. JAT Holdings is the first company in the paint industry to comply with the international responsible care standard.

Disclosure 103-3

JAT Holdings achieved a zero accident target by striving to ensure a safe and healthy working environment in line with the JAT Holdings’ Health and Safety Policy. Training on health and safety as well as fire drills and fire safety and first aid are conducted as an Initiative for the zero accident target. JAT Holdings always motivates employees to practice safety by providing a Monthly Safety and Cleanliness award. The department with the best safety & housekeeping practices gets this award with a cash price.

Disclosure 403-1

a. The Management is involved when conducting committee meetings regarding occupational health and safety. Ex: tackle the risk; toolbox meetings, fire team meetings etc. Regular inspections are done by the Management regarding near misses, and investigation of past accidents and possible threats according to employee complaints. The Management is always concerned about health and safety of the employee and tries to minimise accidents to zero.

b.

Percentage of total

employees

Tackle the risk

Manager representation

1.2%

Executive representation

4.8%

Labour representation

28.8%

Fire team


0.96%


7.9%


10.8%

First aid team


0.48%


3.8%


5.7%

Disclosure 403-2

a. The only place that experienced accidents was the Kahathuduwa factory premises. Those recorded accidents were:

Types of injury Hand injury 2

Leg injury 4

Eye injury 1

Head injury 1

Backbone injury 1

Chest injury 2

Finger injury 3

Body injury 0

Injury rate 3.3%

Occupational disease rate (ODR 0%

Lost day rate (LDR),

June 2017 2.47

July 2017 2.88

August 2017 4.1

September 2017 4.3

October 2017 4.7

November 2017 5.9

December 2017 6.1

January 2018 0.617

February 2018 0.617

March 2018 0.823

Total 3.25

Absentee rate (AR) 3.8%

Work-related fatalities

There were no fatalities experienced by the factory premises. The following injury types were identified under severity

Fatal 0

Major 0

Moderate 4

Minor 10 b. There were no accidents reported excluding

employees whose work, or workplace is controlled by the organisation

c. System of rules applied in recording and reporting accident statistics is;

After an accident the patient is take for medical treatment (if it is a major accident, the patient is taken to the nearest hospital, if it is a minor accident the patient is taken to the medical room of the location).

Then a safety officer will visit the patient and fill the accident flash report according to the patient’s answers about the accident.

After that, the safety officer visits the accident location and make an investigation about the accident and identify the causes for the accident.

Then a complete report will be submitted to the HR Department and Corporate Sustainability Department.


After that a medical claim will be provided to the patient and arrangements will be made to evacuate the risk of having the next accident in that location.

Disclosure 403-3

Due to PU production in the Nitro-Cellular Department there is a possibility of chronic diseases in the lungs. However, those employees are informed of the risk of having the disease and take action to minimise the risk as much as possible.

SOCIAL: TRAINING AND DEVELOPMENT – 404 Management Approach

Disclosure 103-1, 103-2, 103-3

JAT has in place a comprehensive training agenda to drive the importance of a learning culture at all levels of the business.

During the year, a considerable amount was invested in training programmes to develop both technical skills and soft skills of the workforce. This translated into 325 training hours, with a total of 399 employees receiving training for the year under review. Knowledge-sharing workshops were also conducted to enable benefits of training to reach a larger number of employees within the Company.

Regular impact assessments are conducted to establish the effectiveness of the employee training programmes.

A robust leadership development programme is also in place. Developed in consultation with Colombo School of Business Management, the programme aims to develop a suitable leadership pipeline to drive the Company’s strategic objectives in the long-term. Underpinning career development is JAT’s “Develop from Within” philosophy, where as a policy we first look inward to see if vacancies could be filled from within the Company. As a first step towards achieving this, we promote employee goal congruence to ensure employees learn to grow and thrive along with the Company. Strategic goal setting is therefore an integrated process that encourages employees to become active participants in driving the business forward.

Our performance-driven environment combines training and development with our mentoring programmes.

Disclosure 404-1

a.

Employee category

Director/GM/AGM

Manager/Assistant Manager

Senior Executive/Executive/ Junior Executive

Staff/Minor Staff

Male/female Male Female Male Female Male Female Male Female

Training hours 32 32 70 70 100 100 120 120

% 9.8 9.8 21.5 21.5 30.7 30.7 36.9 36.9

Disclosure 404-2

a. JAT Holdings (Pvt) Ltd entered in to an agreement with SLIM, the national body for marketing via a MOU with the intent of enhancing effective performances of the its sales staff by sending them for the SLIM Diploma Programme in Professional Selling (DPS). The MOU was signed at the JAT Holdings Head Office in Thalawathugoda. JAT Holdings aims to groom its sales staff to think out of the box while enabling personal development and growth of the sales staff.

Qualifying in the SLIM DPS will open up new vistas in the professional development of JAT Holdings’ sales personnel. The DPS will enable them to follow the SLIM NDSM (National Diploma in Sales Management) and eventually obtain a Post Graduate Diploma from SLIM.

b. JAT Holdings facilitates higher career development of sales personnel who are qualified enough to continue their careers in any business stream by providing skill development training as listed below;

Communication skill development programmes

Sales automation training programmes

PRODUCTS AND SERVICES: 416 & 417Management Approach

Disclosure 103-1

JAT Holdings has critically examined the possible impacts to customers and consumers during application and after application ofthe Company’s products. Suppliers are asked to ensure the safety of customers when products are developed.

Disclosure 103-2

Customer health and safety is integrated into the business at product level through a number of initiatives, including better quality, safer products, and the maintenance of Material Safety Data Sheets. These are explained below.

As an alternative solution for a PU (Polyurethane) product, the Sayerlack water base has been introduced to the market which is a safer product as spillage on skin does not harm the user.

The Crown breathe-easy technology does not emit any VOC vapors even immediately after a paint application.



Crown – Timonox which is a fire retardant paint ensures consumer safety from fire spreading. The Regulatory Reform (Fire Safety) Order 2005 (England & Wales) & the Fire (Scotland) Act 2005 underline the potential hazard of flames spreading on painted surfaces as a fire risk. Timonox offers a cost-effective solution to this risk.

All products have a MSDS (Material Safety Data Sheet) which is maintained by the HR & Sustainability Department.

All products are heavy metal free which has minimise the impact on environment pollution

For the permoglaze water-based enamel range the Company has obtained the CIOB Green Mark Silver Award, demonstrating the green friendliness of the Company

For Permoglaze – Exterior, Interior Emulsion, wall filler and wall putty, the Company has obtained the CIOB green mark Gold award.

All products are certified by green label which is an accredited standard.

To ensure further safety of the product JAT Holdings’ technical team is conducting technical training sessions for local painters about professional application of paints and the techniques to get the correct finish. Any painter can get guidelines for the application of paints over the phone, by calling the JAT general number.

Disclosure 103-3

The factory has a Research and Development department which is making further improvements to ensure customer safety through quality controls before products are issued to the market. Customer complaints are thoroughly investigated to enhance the quality of the product while ensuring product safety.

SOCIAL: CUSTOMER HEALTH AND SAFETY 416

Disclosure 416-1

Safety assessments are done by the original paint maker. In paint production at JAT Holdings, those safety procedures are strictly followed and a quality measurement is done for every batch by the Research and Development division. Other than that, the Corporate Sustainability Department conducts a life-cycle assessment for two products covering safety issues and environmental impacts.

There are no numerical figures to illustrate the percentage of significant product and service categories for which health and safety impacts are assessed for improvement.

Disclosure 416-2

Within the reporting period there were no incidents of non-compliance with regulations resulting in a fine, penalty, warning towards the Company regarding health and safety impacts of products and services.

JAT Holdings’ compliance standards are upheld through multiple methods. These include: The Company is an accredited merit member of Responsible Care (dedicated to the chemical

industry) Annual audit is undertaken by the ISO certification regarding ISO 9001: 2015, OHSAS 18001:

2007 and ISO 14001: 2015. Regular investigations and supervision is done by the safety and compliance officer who is a

dedicated position in the Company, for health and safety of employees and external stakeholders regarding our products and services.

SOCIAL: MARKETING AND LEBELLING 417

Disclosure 417-1

a.

Type of information Required/Not required by the organisation

The sourcing of components of the product or service

Not required

Content, particularly with regard to substances that might produce an environmental or social impact

Required and mentioned

Safe use of the product or service Required and mentioned

Disposal of the product and environmental or social impacts

Required and mentioned

Other Brand name, generic name, certification logos, brand elements, product specification, product benefits, contact details, safety health and environmental information

Material Safety Data Sheet Required and mentioned


b. All products (100%) of JAT Holdings are to ISO 14001, ISO 9001, OHSAS 18001 compliant.

Further all chemical products of JAT Holdings are in line with Responsible Care compliances.

ENVIRONMENT Management approach

Disclosure 103-1

The Company is focusing on a sustainable management approach in each operation of the organisation while integrating sustainability on material handling, energy, water, effluent and waste and environment compliance. In that sense JAT Holdings (Pvt) Ltd is seeking financial and non-financial benefits through enhancing productivity and efficiency. For this attempt the Company has established a dedicated department to integrate sustainability to all other departments to achieve sustainable goals. The Corporate Sustainability Department is solely responsible on efficiency and profitability enhancement with a scope of sustainability.

About Corporate sustainability Integration, JAT Holdings recognises the necessity of sustainability integration into Group dynamics. The JAT Corporate Sustainability Department was set up a few years back with the intention of enhancing the triple bottom line. The

Corporate Sustainability Department focuses on environmental and social sustainability, business and strategic streamline, process excellence and occupational Health and safety. Now corporate sustainability has become the integrated strategy of the Company vision.

Business sustainability, Focus on business process re-engineering

(BPR) and streamlining to enhance the Company bottom line with minimum resources utilisation effect and efficient manner.

The Corporate Sustainability Department ensures the non-financial compliances, by complying with international standards such as the IFC Standard (International Finance Cooperation) , RC Standards (Responsible Care), ISO Standards and SLS Standards.

The Department has implemented and is monitoring an Integrated Management System (IMS) consisting of a quality management system, an environmental management system and an Occupational health and safety management system. JAT Holdings is certified with ISO 9001, ISO 14001 and OHSAS 18001 international standards and the Department complies with and monitors and continuously improves the system.

JAT pioneered “Chemical Leasing” as a business solution to encourage local industries to embrace responsible sustainable integration. The Chemical Leasing concept is a well known

sustainability strategic model practiced by leading global industries. JAT’s Chemical Leasing solutions aim to promote the responsible disposal of chemical waste, thereby providing multiple benefits to the client by helping to reduce direct cost as well as indirect costs to the environment. The Chemical Leasing agreement was signed with MAS Linea Intimo (Pvt) Ltd and became the First-ever chemical leasing project in the Sri Lanka.

Environment & Social Sustainability At JAT Holdings, we take the global

challenge of climate change seriously. We invest in developing products that help our customers achieve their environmental targets and reduce the environmental foot print. Our products prolong the service life of structures and equipment, and so help reduce their overall impact on the environment.

JAT Holdings initiated the carbon footprint disclosure in the paint industry. This year we have calculated a detailed carbon footprint disclosure covering all three scopes. JAT sustainability is concerned with the reduction of Green House Gas (GHG) emission with the ultimate goal of reaching “Zero Emissions by 2020” with carbon offsetting projects.

This year, the Sustainability team will go for water footprint disclosure and Cleaner production integration with manufacturing.

Waste management is a key area the department has successfully addressd.

The Company adheres to the 3R concept to reduce and minimise waste generation considering it as a responsibility. Since Paint manufacturing is related to the chemical industry, hazardous waste management and hazardous material management are given high priority.

Currently the Department is engaged in conduting product Life Cycle Assessments (LCA) and CP Assessments, to improve the manufacturing process and reduce consumption of energy, waste and natural resources.

In recognition of the commitment to embed an ‘Earth First’ policy in the product development process, JAT was awarded two Green Labels by the prestigious Chartered Institute of Buildings (CIOB) for; the newly launched “Wall Filler” and the “Wall Putty” products.

JAT Sustainability department played a leadership role in the corporate sector at the “SOBA 2017 World Environmental Day” exhibition collaborative with United Nations (UN) Sri Lanka. In this event JAT introduced and shared knowledge regarding its environmentally friendly product range where the product supports to minimise the environmental degradation.

JAT created an Environmental Concept titled “Mihikathata Dayawen” along with Zero tolerance policies to ensure the environmental governance.



A Rs 30 million state-of-the-art Training and Simulation Centre was set up under the auspices of the College of Obstetricians & Gynaecologists of Sri Lanka (SLCOG) at Model Farm Road, Colombo 8, Sri Lanka. The centre is equipped with the latest robotic mannequins from the USA, to train labour and delivery teams on high-risk situations, while care providers can set-up and operate real equipment, interpret critical information and follow protocols, just as they would in real clinical situations.

Disclosure 103-2

Materials The floor of the raw materials warehouse was elevated and re-constructed during the year. A drive in racking system for the same premises is already ordered and installation will be completing soon. A new warehouse with an area of 6,000 sqft for Sayerlack water based products was built at Kahathuduwa. It was installed with 30ft height drive through racking system with an isle space of six feet for the first time in JAT Holdings ware houses. A specially designed narrow isle truck from Godrej is being used in this warehouse.

Stringent quality control processes are continuously being adapted in the production department according to the guidelines given by Crown Paints, UK. The quality control lab has been strengthened with modern high-tech laboratory equipment to carry out the required tests. Permoglaze interior and exterior

emulsion has been certified with SLS 533 & SLS 557 standards respectively. Both of these are undoubtedly the best environment friendly decorative wall paints available in current Sri Lankan market with low VOC and free from heavy metals.

Also Permoglaze interior emulsion, Permoglaze exterior emulsion and Permoglaze water based enamel were awarded for Green Mark by Ceylon Institute of Builders (CIOB) in this year. The following products are planning to obtain the SLS certification within the year.1. Permoglaze solvent based enamel2. J Chem Anti Corrosive Paint3. J Chem NC thinner

The manufacturing plant is annually audited for ISO 9001:2008, 14000:2008 and OSHAS 18001:2007 Certification by TUV SUD and for SLS marking by Sri Lankan Standards Institute (SLSI).

Energy and emissions Energy security is one of the greatest challenges faced by society today in ensuring the sustainable development of Sri Lanka. With the formation of the Sustainability division, energy management, and carbon footprint assessment has moved to the foreground. Measurement of carbon emissions is carried out according to the Greenhouse Gas Protocol. Starting with the Carbon footprint Scope 3 emission calculation JAT is moving forward towards comprehensive carbon audit in this year. Carbon

emission factors found in the DEFFRA (UK) & IPCC Guidelines for National Greenhouse Gas Inventories published by the Institute of Global Environmental Strategies have also been used for calculation purposes. JAT Holdings’ energy usage data for the financial year 2017/18 is listed under Energy Consumption. Total electricity consumption from the national grid was 508,472 kilowatt hours (kWh).

The carbon footprint only for scope 3 is 2593.86 T CO2e in the financial year 2017/18, which is the base year for the carbon footprint calculation, which has developed into a calculation of all three scopes.

JAT is currently investing in solar energy for the production plants and to opting a “Zero Emissions Policy” by offsetting energy from the national grid. JAT Holdings’ vision is to be the industrial benchmark in environmental governance.

Waste & EffluentsJAT’s corporate sustainability division has started to look into water usage and effluent management in production plants where special attention and consideration to sources of local water supply is given. JAT manufacturing practices ensure minimum impact to the surrounding environment and community. JAT sustainability division with production personnel continuously identifies opportunities to improve its processes to manage water efficiently. Water consumption reduction, reusing and recycling

and waste water discharge standards are prioritised throughout the production year. JAT has complied with local laws and regulations related to the treated water discharge and ground water usage, drinking water quality. Annual water withdrawal from the national water supply on production for the financial year 2017/18 is 7858 units. The factory effluent treatment plant has been optimised and a few modifications done to reduce the chemical usage in the treatment process and enhance the water quality in discharged water.

JAT will move forward to calculate the water foot print in forthcoming year where the sustainability division along with top management has identify the financial value and the social responsibility value in relation to water resources.

Waste managementJAT’s Corporate sustainability division has declared the waste management policy and procedures where the disposal of waste takes place through licensed third party contractors. An awareness programme has been designed to share the importance of waste management and educate employees on segregation of waste and appropriate disposal methods to carry out transparent compliances in waste disposal. The Company has started to monitor waste generation through dispatch and issue notes at security at the factory. The Company has given clear Standard Operating Procedures for disposal of waste. In the upcoming year the waste inventory management process will


be streamlined with the introduction of waste management templates and enhancements to the Standard Operating Procedures for disposal of waste. JAT has identified third party contractors approved by the Central Environmental Authority for waste handling and disposal.

Chemical Leasing Business ModelThe chemical leasing concept is a wel-known sustainability model in the world market. Chemical leasing will reduce the cost, energy, waste and environmental impact on both parties involved in the business. JAT Holdings has initiated this chemical leasing practice as a service model to serve corporate clients with responsible integration of sustainability. JAT has given the paint industry a broader and meaningful platform. JAT is Sri Lanka’s first Company engaged in paint chemical leasing.

Disclosure 103-3

The Corporate sustainability department is highly-focused on the above mentioned areas and the sole purpose of these approaches are to enhance productivity of the Company and to enhance the quality of the surrounding environment.

Regarding this effort, JAT Holdings (Pvt) Ltd has launched an environment protection project called “Mihikathata Dayawen”. As a part of the project JAT Holdings participated in the SOBA - 2017 exhibition to enhance awareness about the Company’s environmental consciousness.

MATERIALSDisclosure 301-1

a. Weight and material type

Category Quantity Non-/renewable

Raw materials 6,968,574 kg Non-renewable

Associated process materials 6,831,271 kg Non-renewable

Materials for packaging purposes

6,888,014 kg Non-renewable

2.1.2 – There is no product sourced internally to the Company2.1.3 – These data are sourced from estimated figures 2.1.4 – These data were gathered from the ERP system summary reports. Several minor changes

may have occurred against actual data.

Disclosure 301-2

No recycled materials were used for the manufacturing processes.

Disclosure 301-3

There is no product and packaging reclamation process at JAT Holdings (Pvt) Ltd.

Environment: Energy 302

Disclosure 302-1

Total energy consumption a,c,e,

Energy type Fuel type Quantity Energy (kilojoules)

Fuel Petrol 8,075 liters 106.6 million

Diesel 37,700 liters 497.7 million

Electricity consumption Electricity 191,473 kWh 689.3 million

Total energy 1,293.6 million

*There are no renewable sources used for energy

f. Petrol and diesel records were collected by daily monitoring reports Electricity consumption records were collected by monthly electricity bills

g. Petrol and diesel liters were converted into joules by sourcing –www.calculateme.com/energy/gallonofgas/tojoules.html

Disclosure 302-1

No electricity consumption was done outside of the organisation and no information is available for this.

Disclosure 302-3

Energy consumption per unit 342.1 kilojoule per unit

Energy consumption per employee 3.065 million kilojoule per employee


Disclosure 302-4

There is no information available on reduction of energy consumption

Standards, methodologies, assumptions, and/or calculation tools usedExact amount has been calculated referring monthly electricity bills.

Environment: water 303

Disclosure 303-3

Total volume of water consumption – 7858 m3Total water withdrawal of the manufacturing process – 6012 m3There is no mechanism to collect rain water There is no waste water sourced from another organisation Water source is the Water Board for the whole organisation in all locations

Disclosure 303-2

No water body is affected by the water withdrawal of the organisation. Further, all waste water withdrawals are treated through the waste water treatment plant and discharged to the final water checking pond in the factory premises. After that, the treated water is discharged to the natural water body.

Disclosure 303-3

There is no water recycling and reuse process in operation within the organisation’s manufacturing processes.

EMISSIONS Environment: Emissions 305

Disclosure 305-1

a. CO2e – Scope one - 790.8 tCO2eb. Included gas - CO2, CH4, N2Oc. Biogenic CO2 (Separately) – 774.2 tCO2d. Base year – 2017/18 (This is the first year

that the Company has initiated the carbon footprint calculation for scope 3).

e. Emission conversion factor DEFRA 2017, version 1.0

f. Organisation is looking forward to become carbon neutral in 2020

g. Assumptions made: Boundaries are set for imports and exports

from/to seaport or airport without concerning outer regional emission outputs due to lack of information

Fuel consumption of generators was calculated by converting monetary value to litres. There may be slight changes when converting the factors

Fuel consumption of the smoking machine was taken on an average rate. Fuel charges are minor and are not recorded specifically.

Airconditioner refilling was not clearly mentioned in payment records. A/C repairs were identified as a higher repair cost. Oral evidence was also considered before reporting.

Fuel emission for allowances were considered as those employees consumed the total allowed fuel litres.

All Pick-me transport were assumed as

Trishaws and all Uber transport were assumed as mini-car category in hired vehicles. All land travel in foreign countries are not counted into the calculation due to insufficient data Local outbound deliveries are counted as a one unit due to large size of the list. All unmentioned travelling methods of employees was taken as bus travel and those near to the

head-office and factory (within 1.5 km) are assumed to travel by foot.

Disclosure 305-2

a. CO2e – Scope two – 249.1 tCO2eb. 238.4 tCO2c. Included gas - CO2, CH4, N2Od. Base year - 2017/18 (This is the first year that the Company has initiated the carbon footprint

calculation for scope 3)e. Emission conversion factor DEFRA 2017, version 1.0f. Organisation is looking forward to be carbon neutral on 2020g. Assumptions made:Refer Disclosure305-1 g above

Disclosure 305-3

a. CO2e – scope three – 1553.8 tCO2eb. Included gas - CO2, CH4, N2Oc. Biogenic CO2 (Separately) - 1492.8 tCO2d. Scope three included, electricity transmission and distribution lost, hired vehicles emission, third

party deliveries, air travels, employee commuting, waste and waste transportatione. Base year – 2017/18 (this is the first year that the Company has initiated the carbon footprint

calculation for scope 3)f. Emission conversion factor DEFRA 2017, version 1.0g. Assumptions made: Refer Disclosure 305-1 g above

Disclosure 305-4

a.

Head Office Kahathuduwa Hokandara Horana

Total CFP 29.6% 56.7% 3% 10.52%



Per product carbon footprint calculation – 1.45 kgCO2ePer employee GHG intensity – 6.14 tCO2e

b. Litres production of the year Each scope carbon footprint calculation Data sources from each location Average employees

c. CFP by scope – Scope one 30%, Scope two, 9.6%, and Scope three 59.9%

d. CO2, CH4 and N2O

Disclosure 305-5

a. Currently there is a plantation project being done by the Company which has offset 519.4 tCO2e via a sandalwood tree project.

b. CO2, CH4 and N2Oc. Base year – 2017/18 (this is the first year

that the Company has initiated the carbon footprint calculation for scope 3).

d. Scope one took the reduction place and with the carbon offsetting proposal.

e. Assume that all trees have the same width that five sample trees have. In that sense some trunk width may have minor variances.

Disclosure 305-6

No significant emissions were identified which emitted from JAT Holdings’ operations which could cause ozone-depletion.

Environment: effluents and waste 306

Disclosure 306-1

a. Total treated waste water amount – 6000m3. Total water discharged into natural land after carrying out regular Ph testing.

Treatment method - aeration method/aerobic treatment plant treated by chemicals. Test methods are mentioned below. Those tests are done by CEA once in every two months.

Parameter Units Test method

pH Electrometric APHA, 4500 –H+B

Electricity mS/cm Electrometric APHA 2510 B

Turbidity NTU Nephelometric APHA, 2550 B

Temperature 0C Thermometric APHA, 2550 B

COD mg/l Open Reflux Titrimetry APHA, 2550 B

BOD5 mg/lg Membrane Electrode APHA 4500 O – G

TSS mg/l Gravimetric APHA, 2540 D

Chromium as Cr mg/l AAS APHA, 3111 B

Lead as Pb mg/l AAS APHA, 3111 B

Colour

436 cm m-1 APHA 2120C

525cm

620cm Water is discharged to the environment after treating but the Company does not reuse discharged water.

Standards for the water treatment plant are the CEA standards and JAT Holdings is fully complaint with those standards.


Disclosure 306-2

a. Waste sludge has been identified as the only hazardous waste. There is no other hazardous waste. Waste sludge is handed over to a CEA-approved waste collector.

b.

Garbage bags Disposal method – Land fill, total amount – 51,499kg

Metal drums Disposal method - Recycle, Total amount – 53,076kg

Plastic drums Disposal method – Recycle, Total amount – 34,492.5kg

Plastic bucket Disposal method – Recycle, Total amount – 282.45kg

Sayerlack tin Disposal method – Recycle, Total amount – 2,121.2kg

Waste water + drums Disposal method – Disposed, Total amount – 5,6615kg

Plastic can and disposal plastic Disposal method – Recycle, Total amount – 740kg

Polythene Disposal method, recycle, Total amount – 2,212kg

Cardboard Disposal method – recycle, Total amount – 1,984kg

Metal Disposal method – recycle, Total amount – 105kg

Disposable pallet Disposal method – Disposed, Total amount – 6,740kg

IBC tank Disposal method – Recycle, Total amount – 24kg

Paper Disposal method – Recycle, Total amount – 118kg

Pet bottle Disposal method – Recycle, Total amount – 118kg

c. After an evaluation of waste collectors by the Corporate Sustainability Department, the ideal waste collector who would have the most effective ecofriendly disposal method was selected.

The minimum requirement for waste collectors is the permit of the CEA to collect relevant waste. Under the evaluation process those factors are determined.

Waste collectors visit each location of the Company once a week and collect waste with the coordination of the Corporate Sustainability Department

Disclosure 306-5

No water body is affected by the factory and other operations of JAT Holdings (Pvt) Ltd.



CHIEF EXECUTIVE OFFICER’S AND FINANCE DIRECTOR’S RESPONSIBILITY STATEMENT

The Financial Statements of JAT Holdings (Pvt) Ltd (the Company) and the Consolidated Financial Statements of the Company and its subsidiaries (the Group) as at 31 March 2018 are prepared and presented in conformity with the following requirements:

Sri Lanka Accounting Standards issued by The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka),

Companies Act No. 07 of 2007, Sri Lanka Accounting and Auditing

Standards Act No. 15 of 1995, Code of Best Practice on Corporate

Governance issued jointly by The Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission Sri Lanka.

The formats used in the preparation of the Financial Statements and disclosures made comply with the formats prescribed by the Central Bank of Sri Lanka. The Group on a quarterly basis presents Financial Statements to its shareholders in compliance with the Listing Rules of the Colombo Stock Exchange.

The Accounting Policies used in the preparation of the Financial Statements are appropriate and are consistently applied by the Group. There are no departures from the prescribed Accounting Standards in their adoption. Comparative information has been reclassified wherever necessary to comply with the current presentation and material departures, if any, have been disclosed and explained. Significant

accounting policies and estimates that involved a high degree of judgment and complexity were discussed with the External Auditor and the Board Audit Committee.

The Board of Directors and the Management of the Company accept responsibility for the integrity and objectivity of these Financial Statements. The estimates and judgments relating to the Financial Statements were made on a prudent and reasonable basis; in order to ensure that the Financial Statements are reflected in a true and fair manner and the form and substance of transactions and the Company’s state of affairs is reasonably presented. We also confirm that the Group has adequate resources to continue in operation and has applied the going concern basis in preparing these Financial Statements.

To ensure this, the Company and the Group have taken proper and sufficient care in installing a system of internal control and accounting records, for safeguarding assets and for preventing and detecting frauds as well as other irregularities, which is reviewed, evaluated and updated on an ongoing basis.

The Internal Audit Department has conducted periodic audits to provide reasonable assurance that the established policies and procedures of the Company and the Group were consistently followed. However, there are inherent limitations that should be recognised in weighing the

assurances provided by any system of internal controls and accounting.

The Board Audit Committee reviewed all of the internal and external audit and inspection programmes, the efficiency of the internal control systems and procedures, the quality of accounting policies and their adherence to statutory and regulatory requirements, the external audit plan and the management letters and also followed up on any issues raised during the statutory audit, the details of which are given in the ‘Board Audit Committee Report’ on pages 68 of this Annual Report.

The Financial Statements of the Company and the Group were audited by Messrs Ernst & Young, Chartered Accountants and their Report is given on pages 106 to 107 of this Annual Report.

We confirm that: The Group has complied with all applicable

laws and regulations and prudential requirements, there are no material non-compliances,

There are no material litigations that are pending against the Group other than those disclosed in Note 46 of the Financial Statements of this Annual Report,

All taxes, duties, levies and other statutory payments by the Group and all contributions, levies and taxes payable on behalf of and in respect of the employees of the Group as at 31 March 2018 have been paid, or where relevant provided for.

Nishal FerdinandoChief Executive Officer

Rizna DilshardFinance Director

30th May 2018Colombo


ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY

FINANCIAL STATEMENTSThe responsibility of the Directors in relation to the financial statements is set out below.The Financial Statements comprise:

Income Statement: Provides a true and fair view of the profit and loss of the Company and its subsidiaries for the financial year.

Statement of Financial Position: Presents a true and fair view of the state of affairs of the company and its subsidiaries as at the end of the financial year.

The Directors accept the responsibility for the integrity and objectivity of the financial statements presented. The Directors confirm that the financial statements have been prepared;1. Using appropriate accounting policies

which are applied in a consistent manner disclosing and explaining material departures therefrom, if any

2. Presented in accordance with SLFRSs and LKASs.

3. Reasonable and prudentjudgments and estimates have been made so that the form and substance of transactions are properly reflected.

4. Provides the information required by and otherwise comply with the Companies Act.

The responsibility of the auditors in relation to the financial statements prepared in accordance with provisions of the companies Act No 7 of 2007, is set out in the report of the auditors.

CONTROL PROCEDURESThe Directors are responsible for the proper management of the resources of the company, and ensure that the internal control system has been designed and implemented to obtain reasonable assurance that the company is protected from undue risks and frauds. The Directors are satisfied that the control procedures are operated effectively during the year.

GOING CONCERNOn review of the Companies business plans the Board of Directors have a reasonable expectation that the company possessors adequate resources to continue in operation for the foreseeable future. As a result the Directors have adopted the going concern basis for the preparation of these financial statements.

COMPLIANCE REPORTThe Directors confirm that to the best of their knowledge belief that all statutory payments, duties and levies payable by the company and its subsidiaries in relation to regulatory and statutory authorities that were due in respect of the company and its subsidiaries as at the balance sheet date have been duly paid for and where ever relevant provided for.

ENVIRONMENTAL PROTECTIONThe Directors confirm to the best of their knowledge that the company and the Group have not engaged in any activity which causes detrimental effects to the environment.

HUMAN RESOURCESThe company adopts a non-discriminatory employment policy which respects individuals and provides career opportunities irrespective of gender, race or religion.

The Directors are of the view that they have duly discharged their responsibilities as set out in this statement.

By Order of the Board,JAT Holdings (PVT) Ltd

SSP Corporate Services (Pvt) LimitedSecretaries to the Company

30th May 2018


FINANCIAL REPORTS


INDEPENDENT AUDITOR’S REPORT

MPDC/MRK/JJ

INDEPENDENT AUDITOR’S REPORTTO THE SHAREHOLDERS OF JAT HOLDINGS (PRIVATE) LIMITED

Report on the audit of the Financial Statements

OPINIONWe have audited the financial statements of JAT Holdings (Private) Limited (“the Company”) and the consolidated financial statements of the Company and its subsidiaries (“the Group”), which comprise the statement of financial position as at 31 March 2018, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements of the Company and the Group give a true and fair view of the financial position of the Company and the Group as at 31 March 2018, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

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

RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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

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

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

As part of an audit in accordance with SLAuSs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of the Company and the Group.Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.


We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTSAs required by section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.

30 May 2018Colombo

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.


STATEMENTS OF FINANCIAL POSITION

Group CompanyAs at 31 March 2018 2018 2017 2018 2017 Note Rs. Rs. Rs. Rs.

ASSETSNon-Current Assets Property, Plant and Equipment 4 1,316,29 8,723 1,084,679,460 1,299,825,442 1,054,700,700 Intangible Assets 5 20,344,464 80,529,288 12,333,964 14,941,150 Investment In Subsidiary 6 - - 223,011,448 215,986,620 Other Investment 7 14,588,000 14,588,000 14,588,000 14,588,000 Deferred Tax Asset 24.2 6,133,016 25,919,758 6,133,016 25,919,758 Consumable Biological Assets 8 26,368,238 16,217,483 26,368,238 16,217,483 1,383,732,441 1,221,933,988 1,582,260,108 1,342,353,710

Current Assets Inventories 9 1,630,995,735 1,422,601,458 1,476,033,358 1,062,732,511 Income Tax Recoverable 69,943,833 - 70,564,527 - Trade and Other Receivables 10 2,650,414,596 2,482,934,223 2,453,199,275 2,325,204,535 Advances and Prepayments 80,881,780 244,868,438 80,881,780 183,042,446 Amount Due From Related Parties 11 53,550,841 69,718,610 103,920,421 132,908,282 Cash and Cash Equivalents 17.1 366,035,100 250,948,367 362,122,392 238,455,223 4,851,821,885 4,471,071,096 4,546,721,753 3,942,342,997 Total Assets 6,235,554,326 5,693,005,084 6,128,981,861 5,284,696,707 EQUITY AND LIABILITIES Capital and Reserves Stated Capital 12 918,770,013 918,770,013 918,770,013 918,770,013 Retained Earnings 2,939,031,114 2,454,670,452 3,023,711,714 2,498,056,383 Reserves (26,865,305) 4,075,771 - - 3,830,935,822 3,377,516,236 3,942,481,727 3,416,826,396 Non Controlling Interest (372,090) 3,466,807 - - Total Equity 3,830,563,732 3,380,983,043 3,942,481,727 3,416,826,396


Group CompanyAs at 31 March 2018 2018 2017 2018 2017 Note Rs. Rs. Rs. Rs.

Non-Current Liabilities Interest Bearing Loans and Borrowings 14.2 232,205,387 230,879,149 232,205,387 210,203,918 Retirement Benefit Obligation 13 33,556,928 24,328,246 32,900,113 23,948,221 265,762,315 255,207,395 265,105,500 234,152,139 Current Liabilities Trade and Other Payables 15 1,373,465,590 1,275,383,159 1,229,552,255 1,140,643,332 Amount Due to Related Parties 16 20,418,203 17,526,280 991,579 621,300 Interest Bearing Loans and Borrowings 14.1 745,344,486 715,791,679 690,850,800 444,797,511 Income Tax Payable - 48,113,528 - 47,656,029 2,139,228,279 2,056,814,646 1,921,394,634 1,633,718,172 Total Equity and Liabilities 6,235,554,326 5,693,005,084 6,128,981,861 5,284,696,707

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

Rizna Dilshard Finance Director The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Signed for and on behalf of the Board by:

Aelian Gunawardene Managing Director The Accounting Policies and Notes on pages 114 to 152 form an integral part of these financial statements. 30 May 2018 Colombo


STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Group CompanyYear ended 31 March 2018 2018 2017 2018 2017 Note Rs. Rs. Rs. Rs.

Revenue 18 5,446,689,000 5,782,965,328 5,087,339,086 5,424,355,746 Cost of Sales (3,804,533,431) (3,710,965,729) (3,607,081,890) (3,479,777,565)Gross Profit 1,642,155,569 2,071,999,600 1,480,257,196 1,944,578,181 Other Income 19 39,168,328 57,117,237 47,008,678 59,182,689 Selling and Distribution Costs (617,117,357) (684,297,542) (601,539,844) (663,056,370) Administrative Expenses (371,008,549) (334,436,537) (245,725,666) (206,131,587) Finance Cost 20 (118,342,054) (98,503,004) (68,758,339) (83,434,929) Finance Income 21 12,143,712 15,479,746 11,785,476 23,843,468 Gain/(Loss) on Disposal of Subsidiaries 22 (685,473) 4,141,336 255,367 - Profit Before Tax 23 586,314,176 1,031,500,836 623,282,868 1,074,981,452 Income Tax Reversal/(Expense) 24 48,463,543 (129,198,153) 50,913,430 (125,403,253) Profit For The Year 634,777,719 902,302,684 674,196,298 949,578,199

Profit for the year attributable to Owners of the Parent 636,499,267 900,425,284 674,196,298 949,578,199 Non-Controlling Interest (1,721,548) 1,877,399 - - 634,777,719 902,302,683 674,196,298 949,578,199

Other Comprehensive Income Other comprehensive income not to be reclassified to profit or loss in subsequent periods Effect of Translation of Foreign Operation (31,600,750) 4,290,285 - - Actuarial Gains/(Losses) On Defined Benefit Plans (3,079,748) 4,043,904 (3,079,748) 4,043,904 Income Tax Effect 862,329 (1,132,293) 862,329 (1,132,293) Other Comprehensive Income, net of tax (33,818,169) 7,201,896 (2,217,419) 2,911,611 Total Comprehensive Income 600,959,549 909,504,580 671,978,879 952,489,810

Total Comprehensive Income attributable to Owners of the Parent 603,340,772 907,412,666 671,978,879 952,489,810 Non-Controlling Interest (2,381,223) 2,091,913 - - 600,959,549 909,504,579 671,978,879 952,489,810 Earnings Per Share 1.39 2.02 1.47 2.12

The Accounting Policies and Notes on pages 114 to 152 form an integral part of these financial statements.


STATEMENTS OF CHANGES IN EQUITY

Stated Retained Translation Shareholders Non-controlling TotalYear ended 31 March 2018 Capital Earnings Reserve Funds Interest Group Rs. Rs. Rs. Rs. Rs. Rs.

Balance as at 01 April 2016 628,770,000 1,838,256,696 - 2,467,026,696 (593,568) 2,466,433,128 Profit For The Year - 900,425,284 - 900,425,284 1,877,399 902,302,683 Other Comprehensive Income - 2,911,611 4,075,771 6,987,382 214,514 7,201,896 Total Comprehensive Income - 903,336,895 4,075,771 907,412,666 2,091,913 909,504,579 Non-Controlling Interest of Subsidiary acquired - - - - 1,968,462 1,968,462 Shares Issued During The Year 290,000,013 - - 290,000,013 - 290,000,013 Dividend 2015/16 - (81,155,656) - (81,155,656) - (81,155,656) Interim Dividend 2016/17 - (205,767,483) - (205,767,483) - (205,767,483) Balance as at 01 April 2017 918,770,013 2,454,670,452 4,075,771 3,377,516,236 3,466,807 3,380,983,043

Profit for The Year - 636,499,267 - 636,499,267 (1,721,548) 634,777,719 Other Comprehensive Income - (2,217,419) (30,941,076) (33,158,495) (659,675) (33,818,169) Total Comprehensive Income - 634,281,848 (30,941,076) 603,340,772 (2,381,223) 600,959,549 Acquisition of Non-Controlling Interest in Subsidiaries - (3,597,638) - (3,597,638) 505,921 (3,091,717) Disposal of Subsidiary - - - - (1,963,596) (1,963,596) Interim Dividend 2017/18 - (146,323,548) - (146,323,548) - (146,323,548) Balance as at 31st March 2018 918,770,013 2,939,031,114 (26,865,305) 3,830,935,822 (372,090) 3,830,563,732 Stated Capital Retained Earnings TotalCompany Rs. Rs. Rs.

Balance as at 01 April 2016 628,770,000 1,832,489,712 2,461,259,712 Profit for the Year - 949,578,199 949,578,199 Other Comprehensive Income - 2,911,611 2,911,611 Shares Issued During The Year 290,000,013 - 290,000,013 Dividend 2015/16 - (81,155,656) (81,155,656) Interim Dividend 2016/17 - (205,767,483) (205,767,483) Balance as at 01 April 2017 918,770,013 2,498,056,383 3,416,826,396 Profit for the Year - 674,196,298 674,196,298 Other Comprehensive Income - (2,217,419) (2,217,419) Interim Dividend 2017/18 - (146,323,548) (146,323,548) Balance as at 31st March 2018 918,770,013 3,023,711,714 3,942,481,727



Group CompanyYear ended 31 March 2018 2018 2017 2018 2017 Note Rs. Rs. Rs. Rs.

Cash Flows From / (Used in) Operating ActivitiesProfit Before Tax 586,314,176 1,031,500,836 623,282,868 1,074,981,452 Adjustments for, Depreciation 4 93,615,151 94,798,487 81,770,691 89,477,845 Amortization For Intangible Assets 5 3,361,966 3,668,008 2,861,960 3,602,400 Provision For Defined Benefit Plans 13 6,941,241 4,166,779 6,664,451 3,786,754 Inventory Write off/Provision 2,012,298 9,718,845 2,012,298 6,272,100 Disposal (Gain)/Loss on Property, Plant and Equipment 3,664,199 4,626,598 3,664,199 4,626,598 Disposal (Gain)/Loss on Subsidiaries 685,473 (4,141,336) (255,367) - Changes in Fair Value of Biological Assets 8 (10,150,755) (8,323,733) (10,150,755) (8,323,733) Provision for Doubtful Debt 5,504,950 9,819,788 5,504,950 9,819,788 Finance Income 21 (12,143,712) (15,479,746) (11,785,476) (23,843,468) Finance Costs 20 118,342,054 98,503,004 68,758,339 83,434,929 Operating Loss before Working Capital Changes 798,147,041 1,228,857,529 772,328,158 1,243,834,665 (Increase) / Decrease in Inventories (210,406,575) (687,545,056) (415,313,145) (343,830,987) (Increase) / Decrease in Trade and Other Receivables (108,488,438) (303,223,078) (127,620,674) (239,800,769) (Increase) / Decrease in Amount Due From Related Parties 16,167,769 101,429,934 28,987,861 59,429,698 (Increase)/Decrease in Advances & Prepayments 163,986,658 (76,888,854) 102,160,666 (21,417,802) Increase / (Decrease) in Amount Due To Related Parties 2,891,923 17,526,280 370,279 (486,134) Increase / (Decrease) in Trade & Other Payables 83,510,514 305,097,865 96,157,396 188,846,392 Cash Generated From Operations 745,808,891 585,254,620 457,070,541 886,575,063 Tax Paid (44,842,611) (176,497,147) (43,879,422) (163,886,268) Gratuity Paid 13 (792,307) (52,260) (792,307) (52,260) Finance Costs Paid (118,342,054) (98,503,004) (68,758,339) (83,434,929)Net Cash From/(Used In) Operating Activities 581,831,919 310,202,209 343,640,473 639,201,606

STATEMENTS OF CASH FLOW


Group CompanyYear ended 31 March 2018 2018 2017 2018 2017 Note Rs. Rs. Rs. Rs. Cash Flows From / (Used in) Investing Activities Acquisition of Property, Plant and Equipment (355,024,852) (303,267,921) (342,490,289) (278,831,648) Acquisition of Intangible Assets (908,438) (25,704,686) (254,774) (17,284,436) Proceeds From Property, Plant and Equipment Disposal 2,516,000 197,199 2,516,000 197,199 Acquisition of a Subsidiary, net of cash acquired - - (3,233,821) (145,091,987) Disposal of a Subsidiary, net of cash - (1,602,600) - (1,602,600) Investment in Other Assets - (14,588,000) - (14,588,000) Proceeds from Sale of Equity Shares - 330 - 330 Investment Income Received 12,143,712 15,479,746 11,785,476 23,843,468 Net Cash Flows Used In Investing Activities (341,273,578) (329,485,932) (331,677,408) (433,357,674) Cash Flows from Financing Activities Shares Issued During The Year - 290,000,013 - 290,000,013 Net Increase of Import Loan 215,341,857 (287,769,100) 188,856,206 (275,742,100) Bank Loan Repayments (224,457,571) (32,437,459) (137,029,645) (32,437,459) Bank Loan Obtained 152,390,000 305,542,926 152,390,000 218,115,000 Lease Rentals Paid (987,166) (791,678) (987,166) (791,678) Dividends Paid (146,323,548) (286,923,139) (146,323,548) (286,923,139)Net Cash Flows From Financing Activities (4,036,428) (12,378,436) 56,905,847 (87,779,363) Net Decrease in Cash and Cash Equivalents 236,521,913 (31,662,159) 68,868,912 118,064,569 Cash & Cash Equivalents at the beginning of the year 17 (21,560,796) 10,101,363 170,187,532 52,122,963 Cash & Cash Equivalents at the end of the year 17 214,961,117 (21,560,796) 239,056,444 170,187,532



1. CORPORATE INFORMATION1.1 Reporting Entity1.1.1 GeneralJAT Holdings (Private) Limited (Parent Company) is a limited liability company incorporated and domiciled in Sri Lanka. The registered office of the Company is located at No. 351, Pannipitiya Road, Thalawathugoda and the principal place of business is located at the above address.

1.1.2 Principal Business Activities, Nature of operations of the group and ownership by the parent Company in its Subsidiaries

JAT Holdings (Private) Limited - The Company carries on businesses of importers, exporters, agents, distributors, manufacturers, representatives, international traders, suppliers of and dealers in chemicals and chemical products, furniture, electrical and electrical goods, local produce and products.

Worldwide Resins & Chemicals (Pvt) Limited – A fully owned subsidiary and carries on the business of trading to the local market.

Brush Master (Pvt) Limited - Carries on the business of manufacturing and trading of paint related brushes. At the reporting date, the parent company held 99.99% of the equity shares of the company. On 10th January 2018 additional shares of 230,601 were authorized to issue and group ownership decreased to 55% but those shares have not been registered with Registrar of Companies as of 31st March 2018.

JAT Global (Pvt) Limited – The company carries on the business of importing and trading of parent related products. The company is incorporated and domiciled in India. At the reporting date, the parent company held 98.37% of the equity shares of the company.

JAT Technologies (Pvt) Limited – The company carries on business activities of telecommunication engineering, IT solutions, Radio network planning and optimization, optical fibre networking, telecommunications, smart solutions, facility management & trading of telecommunication equipment.

On 22 March 2018, the Board of Directors resolved to divest the full stake (85%) of JAT Technologies (Pvt) Ltd.

1.1.3 Number of EmployeesThe number of employees of the Group at the end of the year was 437 (2017 – 577), Company – 379 (2017– 399).

1.1.4 Date of Authorization for IssueThe Financial Statement of JAT Holdings (Private) Limited for year ended 31 March 2018 was authorized for issue in accordance with a resolution of the Board of Directors dated 30 May 2018. 1.2 Basis of Preparation 1.2.1 Statement of Compliance The consolidated Financial Statements of the Group and the separate Financial Statements

of the Company, have been prepared and presented in accordance with the Sri Lanka Accounting Standards (SLFRSs and LKASs), laid down by The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka). These Financial Statements, except for information on cash flows have been prepared following the accrual basis of accounting.

These SLFRSs and LKASs are available at www.casrilanka.com

The Group did not adopt any inappropriate accounting treatments, which are not in compliance with the requirements of the SLFRSs and LKASs, regulations governing the preparation and presentation of the Financial Statements

The preparation and presentation of these financial statements is in compliance with the requirements of the Companies Act No.07 of 2007.

1.2.2 Basis of Measurement The financial statements of the Company and the Group have been prepared on a historical cost basis, except for the following material items in the statement of financial position,

The liability of defined benefit obligations are measured at present value

Consumable Biological Assets are measured at fair value

1.2.3 Going ConcernWhen preparing financial statements, management has made assessments of the ability of the constituents of the Company to continue as going concern, taking into account all available information about the future, including intentions of curtailment of business, as decided by Board.

1.2.4 Events Occurring After the Reporting Period

The materiality of the events occurring after the reporting date is considered and appropriate adjustments or disclosures are made in the Financial Statements.

1.2.5 Functional and Presentation Currency The functional currency is the currency of the primary economic environment in which the entities of the Group operate.

The Financial Statements are presented in Sri Lankan Rupees which is the functional currency of the Company and its Subsidiaries except for JAT Global (Pvt) Ltd.

Functional currency of all the group companies is Sri Lankan Rupees, other than the following companies whose functional currency is given below.

Company Country of

Incorporation

Functional

Currency

JAT Global (Pvt) Ltd

India Indian Rupees

NOTES TO THE FINANCIAL STATEMENTS


1.2.6 Changes in Accounting Policies The Group and the Company has consistently applied the Accounting Policies as set out in Notes from page 8 to 24 to all periods presented in these Financial Statements

1.2.7 Use of Estimates and Judgments The preparation of the Financial Statements in conformity with SLFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The Estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results which form the basis of making the judgments about the carrying amount of assets and liabilities that are not readily apparent from other sources. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are included in the following notes to these financial statements.

Critical accounting estimate/judgement

Note

Consumable Biological Assets 2.3.3/8

Goodwill on Acquisition 2.1/5.2

Retirement Benefit Obligations 2.6.2/13

Deferred Tax Assets/ Liabilities 2.9.3.2/24.2

Useful lives of Property, Plant and Equipment

2.3.1/4

Useful lives of Intangible Assets 2.3.2/5

Provisions and contingencies 26

1.2.8 Comparative Information Previous period figures and notes have been restated and reclassified wherever necessary to conform to the current year’s presentation.

1.2.9 Materiality and AggregationEach material class of similar items is presented separately in the Financial Statements. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by the Sri Lanka Accounting Standard – LKAS 1 on ‘Presentation of Financial Statements’ and amendments to the LKAS 1 on ‘Disclosure Initiative’ which was effective from January 01, 2016.

Notes to the financial statements are presented in a systematic manner which ensures the understandability and comparability of financial statements of the Group and the Company. Understandability of the financial statements

is not compromised by obscuring material information with immaterial information or by aggregating material items that have different natures or functions.

1.2.10 OffsettingFinancial assets and financial liabilities are offset and the net amount reported in the statement of financial position, only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or to realise the assets and settle the liabilities simultaneously. Income and expenses are not offset in the income statement, unless required or permitted by Sri Lanka Accounting Standards and as specifically disclosed in the significant accounting policies.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Business Combination and GoodwillBusiness combinations are accounted for using acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity under a statute or an agreement, so as to obtain benefits from its activities. The Group considers all relevant facts and circumstances in assessing whether it has power over an investee which includes; the contractual arrangement with the other vote holders of the investee, rights arising from other contractual arrangements and the Group’s voting rights and potential voting rights over the investee.

Goodwill arising on an acquisition represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets and liabilities of the acquired entity. Negative Goodwill arising on an acquisition represents the excess of Group’s interest in the fair value of the assets and liabilities acquire over the cost of acquisition. Negative Goodwill is recognised immediately in the profit or loss.

After the control of an entity is obtained, changes in ownership interest that do not result in a loss of control is accounted as equity transactions and gain or loss from these changes are not recognised in the profit or loss.

The goodwill arising on acquisition of subsidiaries is presented as an intangible asset. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

2.1.1 Basis of ConsolidationThe Group’s Financial Statements at 31st March 2018 comprise, Consolidated Financial Statements of the Company and its Subsidiaries in terms of the Sri Lanka Accounting Standard – SLFRS 10 on ‘Consolidated Financial Statements’.

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


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

2.1.2 SubsidiariesSubsidiaries are entities controlled by the Group. The Group ‘controls’ an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Financial Statements of Subsidiaries are included in the Consolidated Financial Statements from the date on which control commences until the date when control ceases.

2.1.3 Non-Controlling Interests (NCI)NCI are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date. Changes in the Group’s interest in a Subsidiary that do not result in a loss of control are accounted for as equity transactions.

2.1.4 Loss of ControlWhen the Group losses control over subsidiary derecognises the assets and liabilities of the Subsidiary, any non-controlling interests and other components of equity. Any surplus or deficit arising on the loss of control is recognised in the Profit or Loss. Any interest retains in the previous Subsidiary, is measured at fair value as at the date that control is lost.

2.1.5 Transactions Eliminated on Consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions are eliminated in preparing the Consolidated Financial Statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

2.2 Foreign Currency 2.2.1 Foreign Currency Translations and

BalancesTransactions in foreign currencies are translated into the respective functional currencies of Group Companies at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the Reporting date are translated into the functional currency at the exchange rate at the Reporting date. Nonmonetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Foreign currency differences are generally recognised in profit and loss. Nonmonetary items that are measured based on historical cost in a foreign currency are not translated

2.2.2 Foreign Operations The results and financial position of overseas operations that have a Functional Currency different from the company’s Presentation Currency are translated into the company’s Presentation Currency as follows:

Assets and liabilities are translated at the rates of exchange ruling at the Reporting date. Income and expenses are translated at the average exchange rate for the period, unless this average rate is not a reasonable approximation of the rate prevailing at the transaction date, in which case income and expenses are translated at the exchange rates ruling at the transaction date.

All resulting exchange differences are recognised in the OCI and accumulated in the Foreign Currency Translation Reserve (Translation Reserve), which is a separate component of Equity, except to the extent that the translation difference is allocated to the NCI.

2.3 Assets and Bases of their ValuationAssets classified as current assets in the Statement of Financial Position are cash and those which are expected to be realized in cash during the normal operating cycle of the Company’s business or within one year from the reporting date.

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

2.3.1 Property, Plant and Equipment Property, plant and equipment are initially stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing parts of the property, plant and equipment if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Group & Company recognise such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in the statement of profit or loss as incurred.

Depreciation is calculated on a straight line basis over the useful life of the assets.

The depreciation rates for the current and comparative periods are as follows.

2018 %

2017 %

Buildings 2 6.67- 10

Office Equipment 15 15

Furniture and Fittings

10 15

Motor Vehicles 16.67-25 25

Stores Equipment 10-16.67 25

Computer Hardware

25 25



2018 %

2017 %

Sign Board 20 20

Plant and Machinery

10 25

Lab Equipment 15 15

Factory Equipment 15 15

An estimation change in the useful life of fixed asset during the period has occurred and the underlying assumptions considered are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised prospectively.

An item of Property, Plant and Equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognizing of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss statement in the year the asset is derecognized.

The asset’s residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at end of each reporting period.

Capital expenditure incurred in relation to fixed assets which are not completed as at the reporting date are shown as capital work-in-progress and is stated at cost.

On completion, the related assets are transferred to property, plant and equipment. Depreciation on capital work-in-progress commences when the assets are ready for their intended use.

2.3.2 Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the profit or loss statement in the year in which the expenditure is incurred.

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

The estimated useful lives of intangible assets with finite lives are as follows.

Asset class Useful life

Computer software 4 years

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is

accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the profit or loss statement in the expense category consistent with the function of the intangible asset.

2.3.3 Biological Assetsa) Fair Valuation of Biological Assets The fair value of managed timber determined

based on discounted cash flow method using various financial and non-financial assumptions. The growth of the trees is determined by various biological factors that are highly unpredictable. Any change to the assumptions will impact to the fair value of biological assets.

(i) Bearer biological assets & consumer biological assets

Biological assets are classified in to mature biological assets and immature biological assets. Mature biological assets are those that have attained harvestable specifications or are able to sustain regular harvests. Immature biological assets are those that have not yet attained harvestable specifications.

The cost of land preparation, rehabilitation, new planting, re-planting, crop diversifying, inter-planting and fertilizing, etc. ,incurred between the time of planting and harvesting (when the planted area attains maturity), are

classified as immature plantations. These immature plantations are shown at direct costs plus attributable overheads, including interest attributable to long term loans used for financing immature plantations.

Biological assets are further classified as bearer biological assets and consumable biological assets. Bearer biological asset includes tea and rubber trees, those that are not intended to be sold or harvested, however used to grow for harvesting agricultural produce from such biological assets. Consumable biological assets includes managed timber trees those that are to be sold as biological assets.

The expenditure incurred on bearer biological assets fields, which come in to bearing during the year, has been transferred to mature plantations. Expenditure incurred on consumable biological assets is recorded at cost at initial recognition and thereafter at fair value at the end of each reporting period.

The entity recognize the biological assets when, and only when, the entity controls the assets as a result of past event, it is probable that future economic benefits associated with the assets will flow to the entity and the fair value or cost of the assets can be measured reliably.

The managed timber trees are measured on initial recognition and at the end of each reporting period at its fair value less cost to sell in terms of LKAS 41- Agriculture. The cost is


treated as approximation to fair value of young plants as the impact on biological transformation of such plants to price during this period is immaterial. The fair value of timber trees are measured using discounted cash flow method taking in to consideration the current market prices of the Sandalwood of the root per kg, applied to estimated Scented of Heart wood of a sandlewood tree at the maturity by an independent professional valuer.

The main variables in Discounted Cash Flow model concerns,

Variable Comment

Timber content Estimate based on physical verification of girth, height and considering the growth of the each species.

Factor all the prevailing statutory regulations enforced against harvesting of timber coupled with forestry plan of the Company.

Economic useful life Estimated based on the normal life span of each species by factoring the forestry plan of the Company.

Selling price Estimated based on prevailing Sri Lankan market price. Factor all the conditions to be fulfilled in bringing the trees in to saleable condition

Discount Rate Discount rate reflects the possible variations in the Cash flows and the risk related to the biological assets.

Nursery cost includes the cost of direct materials, direct labour and an appropriate proportion of directly attributable overheads, less provision for overgrown plants.

The gain or loss arising on initial recognition of biological assets at fair value less cost to sell and from a change in fair value less cost to sell of biological assets are included in the Statement of Profit or Loss for the period in which it arises.

Permanent impairments to Biological Assets are charged to the Statement of Profit or Loss in full and reduced to the net carrying amounts of such asset in the year of occurrence after ascertaining the loss.

(ii) Infilling cost on biological assetsThe land development costs incurred in the form of infilling have been capitalised to the relevant mature field, only if it increases the expected future benefits from that field, beyond its pre-infilling

performance assessment. Infilling costs so capitalised are depreciated over the newly assessed remaining useful economic life of the relevant mature plantation, or the unexpired lease period, whichever is lower.

Infilling costs that are not capitalized have been charged to the Statement of Profit or Loss in the year in which they are incurred.

2.3.4 InventoriesInventories are valued at the lower of cost and net realizable value, after making due allowances for obsolete and slow moving items. Net realizable value is the price at which inventories can be sold in the ordinary course of business less the estimated cost of completion and the estimated cost necessary to make the sale.

The cost incurred in bringing inventories to its present location and condition is accounted using the following cost formulae:-

Finished goods and work-in-progressFinished Goods and Work- In- ProgressAt the cost of direct materials, direct labor and an appropriate portion of factory overhead on normal operating capacity.

Raw MaterialsAt purchase cost on weighted average cost basis.

Goods in TransitAt actual cost

2.3.5 Financial InstrumentsFinancial Assets

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

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

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.

The Company’s financial assets include cash and short-term deposits, loans, trade and other receivables. Accordingly the Company financial assets have been classified as Loans and Receivables.

Subsequent Measurement The subsequent measurement of financial assets depends on their classification:



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

DerecognitionA financial asset (or, where applicable a part of a financial asset or part of a Company of similar financial assets) is derecognized when:

The rights to receive cash flows from the asset have expired

The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full.

Impairment of Financial AssetsThe Company assesses at each reporting date whether there is any objective evidence that a financial asset impaired. A financial is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset

or the Company of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a Company of debtors is experiencing significant financial difficulty, default or delinquency in payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial Assets Carried at Amortized CostFor financial assets carried at amortized cost, the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a Company of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred).

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the statement of comprehensive income. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized; the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the statement of comprehensive income.

2.3.6 Financial Liabilities

Initial Recognition and MeasurementFinancial liabilities within the scope of LKAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, carried at amortized cost. This includes directly attributable transaction costs.

The Company’s financial liabilities include trade and other payables, bank overdrafts and loans and borrowings.

Accordingly Company financial liabilities have been classified as loans and borrowings.

Subsequent Measurement The measurement of financial liabilities depends on their classification:

a) Loans and BorrowingsAfter initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest rate method. Gains and losses are recognized in the statement of profit or loss when the liabilities are derecognized as well as through the effective interest rate method (EIR) amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs those are an integral part of the EIR. The EIR amortization is included in finance costs in the statement of profit or loss.

DerecognitionA financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

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


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

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

An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell or its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of non-financial assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The amount of impairment losses are recognized in the profit and loss during the reporting period.

2.5 Liabilities and ProvisionsLiabilities classified as current liabilities in the Statement of Financial Position are those obligations payable on demand or within one year from the reporting date. Items classified as

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

2.6 Retirement benefit Obligations2.6.1 Defined Contribution Plans– Employees’

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

2.6.2 Defined Benefit Plan – Gratuity A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The defined benefit is calculated by independent actuaries. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related liability.

The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a

number of assumptions. Key assumptions used in determining the defined retirement benefit obligations are given in Note 13. Any changes in these assumptions will impact the carrying amount of defined benefit obligations.

The gratuity liability is not funded in the planned assets.

2.7 LeasesThe determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

Group as a LesseeFinance leases which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in the statement of profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership

by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognized as an operating expense in the statement of profit or loss on a straight-line basis over the lease term.

2.8 Capital Commitments and Contingencies

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

2.9 Statement of Profit or Loss2.9.1 RevenueRevenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The following specific recognition criteria must also be met before revenue is recognized:

a) Sale of GoodsRevenue from the sale of goods is recognized when the significant risk and rewards of ownership of the goods have passed to buyer



with the Company retaining neither continuing managerial involvement to the degree usually associated with ownership, nor an effective control over the goods sold.

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

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

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

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

f) Gains and LossesNet gains and losses of a revenue nature on the disposal of Property, Plant & Equipment and

other non-current assets including investments are accounted for in the Statements of Profit or Loss, after deducting from proceeds on disposal, the carrying amount of the assets and related selling expenses.

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

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

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

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

2.9.3 Taxation2.9.3.1 Current Income TaxCurrent income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the

taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income.

Current income taxes relating to items recognized directly in Other Comprehensive Income are also recognized in Other Comprehensive Income and not in the statement of profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

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

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

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

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

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

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


The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Current tax and deferred tax relating to items recognized directly in statement of other comprehensive income are also recognized in statement of other comprehensive income and not in the statement of profit or loss.

Deferred tax assets and liabilities are set off if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

2.9.3.3 Sales TaxRevenues, expenses and assets are recognized net of the amount of sales tax, except:

Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the

sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable

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

2.9.4 Borrowing CostBorrowing costs are recognized as an expense in the period in which they are incurred, except to the extent where borrowing costs that are directly attributable to the acquisition, construction, or production of an asset that takes a substantial period of time to get ready for its intended use or sale, are capitalized as part of that asset.

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit or loss using the effective interest method.

2.9.5 Related Party DisclosuresDisclosures are made in respect of related party transactions in accordance with LKAS 24.

2.9.6 Fair Value Measurement The Company measures financial instruments such as investment in equity instruments, and non-financial assets such as Biological assets and Land, at fair value at each reporting date.

Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed are summarized in the following notes:

Disclosures for valuation methods, significant estimates and assumptions Investment in unquoted equity shares Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability or

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

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

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

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

it to another market participant that would use the asset in its highest and best use.

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

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

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

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

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

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



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

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

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

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

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

2.9.7 Critical Accounting Estimates and Judgments

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

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

Estimates/Judgments made by management in the application of Sri Lanka Accounting Standards that have a significant effect on the

financial statements are mentioned below. Property, Plant & Equipment Valuation and Depreciation Impairment of Assets Employee Benefit Liabilities Fair Valuation of biological assets

2.9.8 Current versus Non-Current

Classification The Company presents assets and liabilities in statement of financial position based on current/non-current classification. An asset as current when it is:

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

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

months after the reporting period Or Cash or cash equivalent unless restricted

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

All other assets are classified as non-current.

A liability is current when:

it is expected to be settled in normal operating cycle

It is held primarily for the purpose of trading It is due to be settled within twelve months

after the reporting period Or There is no unconditional right to defer the

settlement of the liability for at least twelve months after the reporting period

The Company classifies all other liabilities as non-current.

3. NEW AND AMENDED STANDARDS AND INTERPRETATIONS

The Institute of Chartered Accountants of Sri Lanka has issued the following standards which become effective for annual periods beginning in the current reporting period. Accordingly these standards have not been applied in preparing these financial statements. The Group is currently in the process of evaluating the potential effect of adoption of these standards and amendments on its financial statements. Such impact has not been quantified as at the reporting date. The Group will be adopting these standards for the effective financial year as applicable.

(i) SLFRS 9 -Financial Instruments: Classification and Measurement

SLFRS 09 establishes principles for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users for assessment of amount, timing and uncertainty of entity’s future cash flows.

SLFRS 9 brings together all three aspects of the accounting for the financial instruments project: classification and measurement; impairment; and hedge accounting. SLFRS 9 is effective for reporting periods beginning on or after 1 January 2018, with early application permitted. Except for


hedge accounting, retrospective application is required, but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

(ii) SLFRS 15 -Revenue from Contracts with Customers

SLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. SLFRS 15 establishes a five-step model to account for revenue arising from contracts with customers. Under SLFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

It replaces existing revenue recognition guidance, including LKAS 18 Revenue, LKAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. This standard is effective for the reporting periods beginning on or after 01 January 2018.

(iii) SLFRS 16 - LeasesSLFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under LKAS 17. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets and short-term. At the commencement date of a lease, a lessee will

recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. SLFRS 16 also requires lessees and lessors to make more extensive disclosures than under LKAS 17.

SLFRS 16 is effective for reporting periods beginning on or after 1 January 2019. Early application is permitted, but not before an entity applies SLFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard’s transition provisions permit certain reliefs.

None of these new standards and interpretations is expected to have a material effect on the Financial Statements of the Group. Pending the detailed assessment which the management plans to make in 2017/18 of such standards and interpretations, the extent of the impact has not been determined by the management.



4. PROPERTY, PLANT AND EQUIPMENT4.1 Gross Carrying Amounts

Group Balance As at Additions/ Disposals/ Disposal of Balance As atYear ended 31 March 2018 01.04.2017 Transfers Transfers Subsidiary 31.03.2018At Cost Rs. Rs. Rs. Rs. Rs.

Freehold Land 242,488,600 10,971,500 - - 253,460,100 Office and Factory Building 433,732,225 38,746,176 - - 472,478,401 Office Equipments 24,648,416 10,514,958 - (3,125,792) 32,037,582 Computers 23,111,885 13,467,630 (60,460) (8,474,394) 28,044,661 Furniture and Fittings 48,124,048 5,561,966 (6,537,235) (6,098,281) 41,050,498 Motor Vehicles 110,239,158 35,089,752 (15,670,425) - 129,658,485 Store Equipments 21,307,067 7,830,192 - - 29,137,259 Sign Boards 7,935,196 - (66,354) - 7,868,842 Factory Equipments 59,750,169 554,099 (399,174) (852,072) 59,053,022 Lab Equipments 26,234,579 - - - 26,234,579 Tools 4,067,459 780,283 - (4,847,742) - Plant and Machinery 124,641,851 6,123,027 (10,886,935) (1,261,849) 118,616,094 1,126,280,653 129,639,583 (33,620,583) (24,660,130) 1,197,639,523 Leasehold Motor Vehicles 17,443,062 - (298,130) (925,000) 16,219,932 Plant and Machinery 18,375,000 - - 18,375,000 18,375,000 35,818,062 - (298,130) (925,000) 34,594,932 Total Value of Depreciable Assets 1,162,098,715 129,639,583 (33,918,713) (25,585,130) 1,232,234,455 In the Course of Construction Capital Work in Progress 152,269,588 232,531,343 - - 384,800,931 152,269,588 232,531,343 - - 384,800,931 Total Gross Carrying Amount 1,314,368,303 362,170,926 (33,918,713) (25,585,130) 1,617,035,386


4.2 Depreciation

Balance Charge for Disposals/ Disposal Balance As at the year Transfers of As atYear ended 31 March 2018 01.04.2017 Subsidiary 31.03.2018At Cost Rs. Rs. Rs. Rs. Rs.

Freehold Office and Factory Building 83,466,153 7,540,694 - - 91,006,847Office Equipments 7,102,197 7,100,923 - (1,410,108) 12,793,012Computers 9,033,685 9,231,622 - (3,827,492) 14,437,815Furniture and Fittings 14,032,828 7,084,186 (1,340,681) (2,569,896) 17,206,437Motor Vehicles 32,122,225 26,481,080 (10,962,503) - 47,640,802Store Equipments 7,493,033 2,318,795 - - 9,811,828Sign Boards 2,962,015 2,021,279 (19,950) - 4,963,344Factory Equipments 18,967,417 10,826,563 (443,858) (426,036) 28,924,086Lab Equipments 7,198,996 4,600,522 - - 11,799,518Tools 530,753 392,653 - (903,218) 20,188Plant and Machinery 22,718,050 10,690,756 - (241,592) 33,167,214 205,627,352 88,309,261 (12,766,992) (9,378,342) 271,771,091 LeaseholdMotor Vehicles 11,505,764 4,474,565 (186,620) (215,188) 15,578,521Plant and Machinery 12,555,726 831,325 - - 13,387,051 24,061,490 5,305,890 (186,620) (215,188) 28,965,572Total Depreciation 229,688,842 93,615,151 (12,953,612) (9,613,718) 300,736,663



4.3 Net Book Values

2018 2017Group Rs. Rs.

FreeholdLand 253,460,100 242,488,600Office and Factory Building 381,471,554 350,266,072Office Equipments 19,244,570 17,546,219Computers 13,606,846 14,078,200Furniture and Fittings 23,844,061 34,091,220Motor Vehicles 82,017,683 78,116,933Store Equipments 19,325,431 13,814,034Sign Boards 2,905,498 4,973,181Factory Equipments 30,108,748 40,782,752Lab Equipments 14,435,061 19,035,583Tools - 3,536,706Plant and Machinery 85,448,880 101,923,800 925,868,432 920,653,300

LeaseholdMotor Vehicles 641,411 5,937,298Plant and Machinery 4,987,949 5,819,274 5,629,360 11,756,572

In the Course of ConstructionCapital Work in Progress 384,800,931 152,269,588 384,800,931 152,269,588

1,316,298,723 1,084,679,460

4.4 During the financial year, the Group acquired Property, Plant and Equipment to the aggregate value of Rs. 362,170,926/- (2017 - Rs. 304,304,430/-). Cash payments amounting to Rs. 355,024,852/- (2017 - Rs. 303,267,921/-) were made during the year for purchase of Property, Plant and Equipment.


4.5 Gross Carrying Amounts

Company Balance As at Additions Disposals/Transfers Balance As atAt Cost 01.04.2017 31.03.2018 Rs. Rs. Rs. Rs.

FreeholdLand 242,488,600 10,971,500 - 253,460,100Office and Factory Building 433,732,225 38,746,176 - 472,478,401Office Equipments 24,260,239 3,538,099 - 27,798,338Computers 17,861,102 7,860,590 - 25,721,692Furniture and Fittings 23,797,264 1,411,474 - 25,208,738Motor Vehicles 109,942,058 35,089,752 (15,670,425) 129,361,385Store Equipments 21,307,067 7,830,192 - 29,137,259Sign Boards 7,868,842 - - 7,868,842Factory Equipments 57,806,315 445,411 - 58,251,726Lab Equipments 26,234,579 - - 26,234,579Plant and Machinery 117,759,692 4,065,752 (10,886,935) 110,938,509 1,083,057,983 109,958,946 (26,557,360) 1,166,459,569

LeasholdMotor Vehicles 16,406,552 - (186,620) 16,219,932Plant and Machinery 18,375,000 - - 18,375,000 34,781,552 - (186,620) 34,594,932Total Value of Depreciable Assets 1,117,839,536 109,958,946 (26,743,980) 1,201,054,501

In the Course of ConstructionCapital Work in Progress 152,269,588 232,531,343 - 384,800,931 152,269,588 232,531,343 - 384,800,931Total Gross Carrying Amount 1,270,109,123 342,490,289 (26,743,980) 1,585,855,432



4.6 Depreciation Balance As at Charge for the year Disposals/Transfers Balance As at 01.04.2017 31.03.2018At Cost Rs. Rs. Rs. Rs.

FreeholdOffice and Factory Building 83,466,153 7,540,694 - 91,006,847Office Equipments 6,691,132 4,883,851 - 11,574,983Computers 6,901,490 6,398,049 - 13,299,539Furniture and Fittings 7,638,124 2,284,237 - 9,922,361Motor Vehicles 32,033,095 26,406,804 (10,962,503) 47,477,396Store Equipments 7,493,033 2,318,795 - 9,811,828Sign Boards 2,942,065 2,021,279 - 4,963,344Factory Equipments 17,785,052 10,483,886 - 28,268,938Lab Equipments 7,198,996 4,600,522 - 11,799,518Plant and Machinery 19,227,222 9,712,435 - 28,939,657 191,376,362 76,650,552 (10,962,503) 257,064,411

LeasholdMotor Vehicles 11,476,327 4,288,814 (186,620) 15,578,521Plant and Machinery 12,555,726 831,325 - 13,387,051 24,032,053 5,120,139 (186,620) 28,965,572Total Depreciation 215,408,415 81,770,691 (11,149,123) 286,029,983


4.7 Net Book Values

2018 2017Company Rs. Rs.

FreeholdLand 253,460,100 242,488,600Office and Factory Building 381,471,554 350,266,072Office Equipments 16,223,348 17,569,100Computers 12,422,153 10,959,612Furniture and Fittings 15,286,377 16,159,140Motor Vehicles 81,883,989 77,908,964Store Equipments 19,325,431 13,814,034Sign Boards 2,905,498 4,926,777Factory Equipments 29,982,788 40,021,262Lab Equipments 14,435,061 19,035,583Plant and Machinery 81,998,852 98,532,469 909,395,151 891,681,614

LeasholdMotor Vehicles 641,411 4,930,223Plant and Machinery 4,987,949 5,819,274 5,629,360 10,749,498

In the Course of ConstructionCapital Work In Progress 384,800,931 152,269,588 384,800,931 152,269,588Total Carrying Amount of Property,

Plant and Equipment 1,299,825,442 1,054,700,700

4.8 During the financial year, the Company acquired Property, Plant and Equipment to the aggregate value of Rs.342,490,289/- (2017- Rs.278,831,648/-). Cash payments amounting to Rs. 342,490,289/- (2017- Rs.278,831,648/-) were made during the year for purchase of Property, Plant and Equipment.


5. INTANGIBLE ASSETS5.1 Company

2018 2017 Rs. Rs.

Computer Software CostAs at 1 April 23,965,435 6,680,999Additions during the year 254,774 17,284,436As at 31 March 24,220,209 23,965,435

AmortizationAs at 1 April 9,024,285 5,421,885Charge for the year 2,861,960 3,602,400As at 31 March 11,886,245 9,024,285

Carrying Value as at 31 March 12,333,964 14,941,150


5.2 Group

Goodwill Computer Software 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

5.2.1 CostAs at 1 April 64,896,521 57,233,496 24,722,660 6,680,999Additions during the year - - 908,438 18,041,661Acquired on Business Combination - 7,663,025 - -Disposal of Subsidiary during the year (57,233,496) - (746,700) -As at 31 March 7,663,025 64,896,521 24,884,398 24,722,660

5.2.2 Amortization/ImpairmentAs at 1 April - - 9,089,893 5,421,885Charge for the year - - 3,361,966 3,668,008As at 31 March - - 12,202,959 9,089,893Carrying Value as at 31 March 7,663,025 64,896,521 12,681,439 15,632,767

2018 2017 Rs. Rs.

Carrying value of Intangible Assets as at 31 March 20,344,464 80,529,288

6. INVESTMENT IN SUBSIDIARY

2018 2017Company Rs. Rs.

JAT Technologies (Pvt) Ltd - 60,894,633World wide Resins (Pvt) Ltd 10,000,000 10,000,000JAT Global (Pvt) Ltd 173,011,448 105,091,987Brush Master (Pvt) Ltd 40,000,000 40,000,000 223,011,448 215,986,620


7. OTHER INVESTMENTS

2018 2017Company/ Group Rs. Rs.

JAT Trading (Pvt) Ltd 14,588,000 14,588,000

8. CONSUMABLE BIOLOGICAL ASSETS

2018 2017Company/ Group Rs. Rs.

At the beginning of the year 16,217,483 7,893,750Changes in Fair Value less costs to sell 10,150,755 8,323,733At the end of the year 26,368,238 16,217,483

9. INVENTORIES

Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Raw Materials 460,358,843 440,194,056 394,986,017 365,204,308Goods In Transits 118,481,224 107,600,954 118,481,224 102,848,259Work in Progress 96,332,127 119,917,898 90,857,578 37,120,678Finished Goods 1,015,688,604 812,141,315 930,973,602 614,812,031 1,690,860,798 1,479,854,223 1,535,298,421 1,119,985,276Less-Provision For Obsolete Stocks (59,865,063) (57,252,765) (59,265,063) (57,252,765) 1,630,995,735 1,422,601,458 1,476,033,358 1,062,732,511



10. TRADE AND OTHER RECEIVABLES Group Company

2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Trade Receivables (10.1) 2,461,352,386 2,412,280,838 2,308,941,600 2,268,007,112Other Receivables 112,552,119 70,653,385 83,107,675 57,197,423Proceeds Receivable for Disposal of Subsidiary 61,150,000 - 61,150,000 - 2,650,414,596 2,482,934,223 2,453,199,275 2,325,204,535

10.1 Trade Receivables Group Company

2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Trade Debtors - Local 1,474,179,195 1,893,748,717 1,321,768,409 1,749,474,991Less - Provision for Doubtful Debtors (10.2) (67,081,134) (74,684,488) (67,081,134) (74,684,488) 1,407,098,061 1,819,064,229 1,254,687,275 1,674,790,503Project Debtors 360,011,000 120,772,668 360,011,000 120,772,668Export Debtors 694,243,325 472,443,941 694,243,325 472,443,941 2,461,352,386 2,412,280,838 2,308,941,600 2,268,007,112

10.2 Provision for Doubtful Debtors


Balance at the Beginning of the Year 74,684,488 76,507,563 74,684,488 76,507,563Provision for the Year 5,504,950 9,819,788 5,504,950 9,819,788Written off during the Year (13,108,304) (11,642,863) (13,108,304) (11,642,863)Balance at the Year End 67,081,134 74,684,488 67,081,134 74,684,488


10.3 Ageing of the debtors as at the reporting date are as follows

Past Due Total Neither 01-60 61-90 Over 90 Past Due days days days Nor Impaired Rs. Rs. Rs.

GroupLocal Debtors 1,474,179,195 1,122,066,959 151,623,009 41,371,169 159,118,058Project Debtors 360,011,000 291,080,778 2,021,363 2,646,626 64,262,233Export Debtors 694,243,325 447,769,344 91,864,163 22,417,368 132,192,450 2,528,433,520 1,860,917,081 245,508,535 66,435,163 355,572,741

CompanyLocal Debtors 1,321,768,409 1,087,423,742 113,120,597 24,721,415 96,502,655Project Debtors 360,011,000 291,080,778 2,021,363 2,646,626 64,262,233Export Debtors 694,243,325 447,769,344 91,864,163 22,417,368 132,192,450 2,376,022,734 1,826,273,864 207,006,123 49,785,409 292,957,338

11. AMOUNT DUE FROM RELATED PARTIES

Group Company Relationship 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Brush Master (Pvt) Ltd Subsidiary - - 463,628 -JAT Holdings Bangladesh (Pvt) Ltd Affiliate Company - 5,092,600 - 5,092,600JAT Agri (Pvt) Ltd Affiliate Company 17,248,879 17,241,620 17,248,879 17,241,620JAT Technology (Pvt) Ltd Affiliate Company - - - 796,805JAT Trading (Pvt) Ltd Affiliate Company 4,606,200 - 4,606,200 -JAT Global (Pvt.) Ltd. Subsidiary - - 40,316,394 55,354,167Masters Home Improvement (Pvt) Ltd Affiliate Company 31,695,762 47,384,390 31,695,762 47,384,390Worldwide Resins & Chemicals (Pvt) Ltd Subsidiary - - 9,589,558 7,038,700 53,550,841 69,718,610 103,920,421 132,908,282



12. STATED CAPITAL

2018 2017 Number of Number of Company/Group shares Rs. shares Rs.

Fully Paid Ordinary SharesBalance at the Beginning of the Year 457,261,073 918,770,013 443,716,000 628,770,000Issued During The Year - - 13,545,073 290,000,013Balance at the Year End 457,261,073 918,770,013 457,261,073 918,770,013

13. RETIREMENT BENEFIT OBLIGATION


Balance as at 1 April 24,328,246 24,257,631 23,948,221 24,257,631Current Service Cost 4,067,454 2,347,457 3,790,664 1,967,432Interest Cost 2,873,787 1,819,322 2,873,787 1,819,322Actuarial (Gain)/Loss 3,079,748 (4,043,904) 3,079,748 (4,043,904)Payments During the Year (792,307) (52,260) (792,307) (52,260)As at 31 March 33,556,928 24,328,246 32,900,113 23,948,221

The Principal Assumptions used in determining Defined Benefit Obligation are shown below:

Group Company 2018 2017 2018 2017

Discount Rate 11.18% 12% 11.18% 12.00%Salary Increment 8% 10% 8% 10%Staff Turnover 24% 24.0% 24% 24%Retirement Age 50-55 years 50-55 years 50-55 years 50-55 years


Sensitivity of assumptions used

Discount Rate Salary Increment Group Company Group Company Rs. Rs. Rs. Rs.

Effect on the Defined Benefit Obligation LiabilityIncrease by one Percentage Point 31,870,170 31,870,170 34,139,655 34,139,655Decrease by one Percentage Point 33,993,927 33,993,927 31,715,204 31,715,204

14. INTEREST BEARING LOANS AND BORROWINGS14.1 Current Interest Bearing Loans and Borrowings


Finance Leases (14.3) 1,127,200 985,358 1,127,200 985,358Bank Loans (14.4 & 14.5) 93,993,807 158,489,518 93,993,807 91,736,823Import and Short Term Loans 499,149,496 283,807,639 472,663,845 283,807,639Bank Overdrafts(17.2) 151,073,983 272,509,164 123,065,948 68,267,691 745,344,486 715,791,679 690,850,800 444,797,511

14.2 Non-current Interest Bearing Loans and BorrowingsFinance Leases (14.3) - 1,127,201 - 1,127,201Bank Loans (14.4) 232,205,387 229,751,949 232,205,387 209,076,718 232,205,387 230,879,149 232,205,387 210,203,918



14.3 Finance Leases

As At New Leases As At 01.04.2017 Obtained Repayment 31.03.2018 Current Non-CurrentGroup/Company Rs. Rs. Rs. Rs. Rs. Rs.

Gross Liability 2,409,872 - (1,205,844) 1,204,028 1,204,028 -Finance Charges Allocated to Future Periods (295,506) - 218,678 (76,828) (76,828) -Net Liability 2,114,366 - (987,166) 1,127,200 1,127,200 -

14.4 Group

Exchange Bank Loans As At Loans Rate Effect As At 01.04.2017 Obtained Repayment 31.03.2018 Current Non-Current Rs. Rs. Rs. Rs. Rs. Rs. Rs. Hatton National Bank PLC 199,486,875 - (57,591,875) 4,101,875 145,996,875 58,398,750 87,598,125 Peoples Bank 60,000,000 - (60,000,000) - - - - Commercial Bank 20,675,231 - (20,675,231) - - - - HSBC 6,752,695 - (6,752,695) - - - - HSBC USD Loan 101,326,666 152,390,000 (79,437,770) 5,923,423 180,202,319 35,595,057 144,607,262 388,241,467 152,390,000 (224,457,571) 10,025,298 326,199,194 93,993,807 232,205,387

14.5 Bank Loans

Group/Company As At Loans Exchange Rate As At 01.04.2017 Obtained Repayment Effect 31.03.2018 Current Non-Current Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Hatton National Bank PLC 199,486,875 - (57,591,875) 4,101,875 145,996,875 58,398,750 87,598,125HSBC USD Loan 101,326,666 152,390,000 (79,437,770) 5,923,423 180,202,319 35,595,057 144,607,262 300,813,541 152,390,000 (137,029,645) 10,025,298 326,199,194 93,993,807 232,205,387

14.6 During the period an amount of Rs. 13,649,063/- borrowing cost was capitalized using the capitalization rate at 7.76% per annum. The capitalized borrowing cost is included as a part of Capital Work in Progress.


15. TRADE AND OTHER PAYABLES Group Company

2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Trade Payables 717,885,562 919,360,575 625,037,507 807,055,384Provisions and Other Payables 606,319,376 315,808,009 555,254,105 299,613,320Advances Received 43,298,597 29,678,834 43,298,597 29,678,834Sundry Creditors Including Accrued Expenses 5,962,055 10,535,741 5,962,046 4,295,794 1,373,465,590 1,275,383,159 1,229,552,255 1,140,643,332

16. AMOUNT DUE TO RELATED PARTIES

Group Company 2018 2017 2018 2017 Relationship Rs. Rs. Rs. Rs.

D Design (Pvt) Ltd Affiliate Company - 88,913 - 88,913Jchem Coating (Pvt) Ltd Affiliate Company 17,011,542 17,437,367 - 425,825Brush Master (Pvt) Ltd Subsidiary - - - 106,562Crest Marketing (Pvt) Ltd Affiliate Company 991,579 - 991,579 -Due to Directors 2,415,082 - - - 20,418,203 17,526,280 991,579 621,300



17. CASH AND CASH EQUIVALENTS Group Company

2018 2017 2018 2017 Rs. Rs. Rs. Rs.

17.1 Favourable Cash and Cash Equivalent BalancesCash and Bank Balances 210,084,169 237,748,753 206,171,461 225,255,609Fixed Deposit (3 Months Maturity Period) 155,950,931 13,199,614 155,950,931 13,199,614 366,035,100 250,948,367 362,122,392 238,455,223

17.2 Unfavourable Cash and Cash Equivalent BalancesBank Overdrafts (151,073,983) (272,509,163) (123,065,948) (68,267,691)Total Cash and Cash Equivalents For the Purpose of Cash Flow Statement 214,961,117 (21,560,796) 239,056,444 170,187,532

18. REVENUE


Local Sales 3,174,495,107 4,251,298,118 2,815,145,193 3,892,688,536Export Sales 1,571,083,237 1,382,764,742 1,571,083,237 1,382,764,742Project Sales 701,110,656 148,902,468 701,110,656 148,902,468 5,446,689,000 5,782,965,328 5,087,339,086 5,424,355,746


19. OTHER INCOME Group Company

2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Sundry Income 27,817,573 42,362,992 34,757,923 48,108,334Vehicle Rent Income - 47,622 - 47,622Rent Income 1,200,000 1,200,000 1,200,000 1,200,000Foreign Exchange Gain - 3,292,130 - -Dividend Income - 1,890,760 900,000 1,503,000Changes in fair value of biological Assets 10,150,755 8,323,733 10,150,755 8,323,733 39,168,328 57,117,237 47,008,678 59,182,689

20. FINANCE COST Group Company

2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Overdraft Interest 47,447,834 23,057,770 15,885,637 12,900,941Import Loan Interest 31,226,261 31,571,227 28,777,191 28,949,541Interest on Leases 268,116 381,774 218,067 375,244Loan Interest 25,753,566 27,974,273 10,299,419 25,961,539Foreign Exchange Loss 13,646,277 15,517,960 13,578,025 15,247,664 118,342,054 98,503,004 68,758,339 83,434,929



21. FINANCE INCOME Group Company

2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Interest Income 12,143,712 15,479,746 11,785,476 23,843,468 12,143,712 15,479,746 11,785,476 23,843,468

22. GAIN/(LOSS) ON DISPOSAL OF SUBSIDIARY


JAT Technologies (Pvt) Ltd (Note 22.1) (685,473) - 255,367 -Esteem Plantation (Pvt) Ltd - 4,141,336 - - (685,473) 4,141,336 255,367 -

22.1 Gain/(Loss) on Disposal of JAT Technologies (Pvt) Ltd

Group Company 2018 2018

Sales Proceeds 61,150,000 61,150,000(-) Net Assets @ 85% (4,601,977) -(-) Good Will (57,233,496) -(-) Investment Cost - (60,894,633) (685,473) 255,367


23. PROFIT BEFORE TAX 2018 2017 2018 2017Group Rs. Rs. Rs. Rs.

Include in Cost of SalesEmployees Benefits including the following - Defined Contribution Plan Costs - EPF & ETF 5,190,692 4,429,739 5,190,692 4,429,739Depreciation 30,866,072 48,075,877 30,866,072 48,075,877

Included in Administrative ExpensesEmployees Benefits including the following - Defined Contribution Plan Costs - EPF&ETF 11,654,738 7,337,695 7,117,657 4,709,292Depreciation 34,544,850 28,336,273 23,516,799 24,459,128Amortization of Intangible Assets 3,361,966 3,668,008 2,861,960 3,602,400Auditors Remuneration 1,496,148 1,066,212 972,012 615,004Impairment of doubtful receivables 5,504,950 9,819,788 5,504,950 9,819,788Impairment of obsolete stocks 2,012,298 6,272,100 2,012,298 6,272,100

Included in Selling & Distribution Expenses - Defined Benefit Plan Costs 6,664,451 3,786,754 6,664,451 3,786,754 - Defined Contribution Plan Costs - EPF&ETF 10,407,989 7,904,843 10,407,989 7,904,843Depreciation 27,387,820 20,545,241 27,387,820 20,545,241

24. INCOME TAX EXPENSE Group Company

2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Current Income TaxCurrent Tax Expenses on Ordinary Activities for the Period (Note 24.1) 9,724,780 141,570,202 7,374,893 137,775,302Under/ (Over) provision of current taxes in respect of prior period (78,937,394) - (78,937,394) -Tax on Dividends 100,000 - - - (69,112,614) 141,570,202 (71,562,501) 137,775,302

Deferred Income TaxDeferred Taxation Charge/(Reversal) (Note 24.2) 20,649,071 (12,372,049) 20,649,071 (12,372,049) (48,463,543) 129,198,153 (50,913,430) 125,403,253



24.1 A Reconciliation Between Tax Expense and the Product of Accounting Profit / (Loss)


Profit Before Taxation 586,314,176 1,031,500,836 623,282,868 1,074,981,452Disallowable Expenses 154,362,054 179,165,423 107,031,741 149,575,759Allowable Expenses (192,869,465) (160,486,343) (190,686,517) (186,427,509)Income Considered Separately - Interest Income (11,785,476) (9,996,183) (11,785,476) (9,996,183)Fair Value Changes in Biological Assets (10,150,755) (8,323,733) (10,150,755) (8,323,733)Gain on disposal of subsidiary (255,367) - (255,367) -Dividend Income - - (900,000) (1,503,000)Taxable Profit on sale of Property, Plant & Equipment 516,000 - 516,000 -Income from services rendered outside Sri Lanka (16,275,688) - (16,275,688) -Exempt Profit under section 13(b) of the Inland Revenue Act (471,324,972) (397,232,895) (471,324,972) (397,232,895)Profit exempted under Section 16C of the Inland Revenue Act (12,007,760) (137,775,302) (12,007,760) (137,775,302)Add: Interest Income (Gross) 8,894,828 8,756,061 8,894,828 8,756,061Statutory Income 35,417,575 505,607,865 26,338,902 492,054,650Tax Losses Claimed (686,218) - - -Taxable Income 34,731,357 505,607,865 26,338,902 492,054,650

Tax on balance taxable income (28%) 9,724,780 141,570,202 7,374,893 137,775,302 9,724,780 141,570,202 7,374,893 137,775,302


24.2 Deferred Income Tax

Statement of Financial Position Group Company

2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Deferred Tax Liability Deferred Tax on biological Assets 5,172,857 2,330,645 5,172,857 2,330,645 Deferred Tax on Property, Plant and Equipment 33,283,095 15,397,530 33,283,095 15,397,530 38,455,952 17,728,175 38,455,952 17,728,175

Deferred Tax Assets Defined Benefit Plans 9,212,032 6,705,502 9,212,032 6,705,502 Provision for doubtful debts 18,782,718 20,911,657 18,782,718 20,911,657 Provision for obsolete inventories 16,594,218 16,030,774 16,594,218 16,030,774 44,588,968 43,647,933 44,588,968 43,647,933 Net Differed Tax Asset (Liability) 6,133,016 25,919,758 6,133,016 25,919,758 Deferred tax charge/(reversal) for the period - Reflected in Statement of Profit or Loss 20,649,071 (12,372,049) 20,649,071 (12,372,049)- Reflected in Statement of Other Comprehensive Income (862,329) 1,132,293 (862,329) 1,132,293 19,786,742 (11,239,756) 19,786,742 (11,239,756) Deferred Tax Liability (38,455,952) (17,728,175) (38,455,952) (17,728,175)Deferred Tax Assets 44,588,968 43,647,933 44,588,968 43,647,933 Net Differed Tax Asset (Liability) 6,133,016 25,919,758 6,133,016 25,919,758



25. BUSINESS COMBINATIONS25.1 On 09th January 2017, the Group acquired 99.99% of the voting shares of Brush Masters (Pvt) Ltd, an unlisted company based in Sri Lanka in the business of manufacturing and trading of paint related brushes in Sri Lanka. The consideration was assessed by converting of Rs.40mn liability in to equity. On 10th January 2018, additional shares of 230,601 were authorized to issue and the group ownership decreased to 55% although those shares have not been registered with Registrar of Companies as of 31st March 2018.

25.2 On 1st September 2015, the Group acquired 55% of the voting shares of JAT Technologies (Pvt) Ltd, an unlisted company based in Sri Lanka in the business of providing technology based infrastructure services in Sri Lanka. The consideration was paid fully in cash to the previous owner of the investee. On 01st April 2016 the group further acquired 30% of the voting shares thus as of 31st March 2017 the total ownership was 85%.

On 22nd March 2018, The Board of Director resolved to divest the full stake (85%) of JAT Technologies (PVT) Ltd.

25.3 As at 31 March 2017, the Group held 95% of the voting shares of JAT Global (Pvt) Ltd, an unlisted company based in India in the business of importing and trading of paint related products. On 22nd August 2017, additional shares of 125,000 were aquired and the group ownership increased to 97.5% and the consideration was paid fully in cash to the previous owner of the investee. On 31 March 2018, the group further aquired 2,671,200 voting shares and the group ownership increased to 98.37%. The consideration was assessed by converting of Rs. 65Mn liability into equity.

The fair values of the identifiable assets and liabilities as at the dates of acquisition were as follows:

Fair Value at Acquisition 2018 2017 Rs. Rs.

Assets Property, Plant and Equipment - 4,332,184Inventories - 57,451,765Trade and Other Receivable - 31,930,150Advances and Prepayments - -Cash & Cash Equivalents - 15,273 - 93,729,372

LiabilitiesInterest Bearing Loans & Borrowings - 6,100,253Trade & Other Payables - 7,553,756Amounts due to Related Parties - 47,738,388 - 61,392,397

Total Identifiable Net Assets at Fair Value - 32,336,975

Non-controlling interests measured at fair value - -Goodwill arising on acquisition - 7,663,025Purchase consideration transferred - 40,000,000

Analysis of cash flows on acquisition Purchase consideration transferred - (40,000,000)Net cash acquired with the subsidiary - (6,084,980) - (46,084,980)


26. COMMITMENTS AND CONTINGENCIES26.1 CommitmentsThere are no material commitments as at the reporting date.

26.2 ContingenciesThere are no material contingencies as at the reporting date.

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

28. ASSETS PLEDGEDThe Following assets have been pledged as security for liabilities

Nature of the Assets Pledged Nature of the Liability

Carrying amount pledged

2018Rs.

2017Rs.

Hatton National Bank PLC

1) Documents of titles to Goods Imported Letters of Credit - -

2) Import Loan Documents Import Loan - -

3) Accepted Usance Drafts Term Loan - -

4) SBSL Lien Over Fd 10 Mn Overdraft Rs. 10 Mn Rs. 10 Mn

Commercial Bank of Ceylon

1) Lien Over Savings Deposit Overdraft Rs. 21.89 Mn Rs. 9.9 Mn

2) Floating Primary Mortgate Bond Letter of Credit Rs. 157 Mn Rs. 157 Mn

3) Supplementary Mortgage (Euro 0.3 Mn & USD 0.1 Mn)

Import Loan Rs. 60 Mn -

4) Insurance policy Release of Usance Documents

- -

5) Documents of title over Goods Imported Short Term Loan - -

6) Duly Accepted Drafts Letter of Guarantee

- -

Nature of the Assets Pledged Nature of the Liability

Carrying amount pledged

2018Rs.

2017Rs.

7) Guarantee Indemnity Per-Shipment facility

Rs. 57.69 Mn

Rs. 63.9 Mn

Guarantee facility Rs. 15.57 Mn

Hongkong & Shanghai Banking Corporation

1) Primary Mortgage Over Property Overdraft Rs. 68.67 Mn Rs. 68.67 Mn

2) Primary Mortgage Over Land & Building Guarantees Rs. 202.45 Mn Rs. 197.5 Mn

3) Primary Mortgage Over Stock and Debt Import Loan Rs. 200 Mn Rs. 200 Mn

4) Supplementary Mortgage Over Property Term Loan Rs. 51 Mn Rs. 51 Mn

5) Blanket Counter Indemnity

6) Letter of Negative Pledge

National Development Bank

1) Lien Over Fixed Deposit Letter of Credit - Rs. 225Mn

Short Term Loans - Rs. 3.1Mn

Stand by Letter of Credit

Rs. 3.1 Mn -

Standard Chartered Bank

1) Primary Mortgage Over Stock and Debt Short Term Loans Rs. 742 Mn -

Overdraft -

Shipping Guarantees

-

Financial Guarantees

-



29. RELATED PARTY DISCLOSURESDetails of significant related party transactions are as follows;

Name of the Company Relationship Nature of the Transaction Transaction Amount

2018Rs.

2017Rs.

D Design (Pvt) Ltd Affiliate Expenses on Behalf of D Design (Pvt) Ltd 31,661 2,094,917

Net Fund Transfers 57,252 (2,888,206)

JAT Holdings Bangladesh (Pvt) Ltd Affiliate Trade Sales 1,009,228,048 1,021,376,557

Receipt for Trade Sales (882,744,656) (848,657,250)

Written off of outstanding balances - (587,902)

Current Account Settlement (5,081,457)

Expenses on Behalf of JAT Holdings Bangladesh (Pvt) Ltd 284,956 -

JAT Property Group (Pvt) Ltd Affiliate Expenses on Behalf of JAT Property Group (Pvt) Ltd 5,036,544 3,600,486

Interest charged on current Account balance 1,336,231 2,961,424

Current Account settlement (6,727,916) (407,970,530)

Net Fund Transfers 355,141 288,746,708

Jchem Coating (Pvt) Ltd Affiliate Interest charged on current Account balance - 110,166

Expenses on Behalf of Jchem Coating (Pvt) Ltd 62,657 10,616

Current Account settlement 367,500 (4,342,678)




2018Rs.

2017Rs.

JAT Global (Private) Limited Subsidiary Net Fund transfers 73,814,866 -

Transfer of Investments (20,154,919) 20,154,919

Loan given to JAT Global (Pvt) Ltd - 773,808

Expenses on behalf of JAT Global (Pvt) Ltd 1,104,871 17,088,751

Expenses on behalf of JAT Holdings (Pvt) Ltd (4,682,331)

Trade Sales 11,164,836 45,436,428

Receipt from Trade Sales (4,133,092) (4,872,413)

Timber Lake International (Pvt) Ltd Affiliate Expenses on behalf on Timber Lake International (Pvt) Ltd - 2,625,549

Net Fund Transfers - (2,648,372)

Interest charged on current Account balance - 25,162

Written off of receivables - (94,991)

Crest Marketing (Pvt) Ltd Affiliate Expenses on behalf of Crest Marketing (Pvt) Ltd 3,708,421 397,408

Current Account settlement (4,700,000) (731,501)

Brush Master (Pvt) Ltd Subsidiary Net Fund Transfers 2,931,699 (32,338,568)

Expenses on behalf of Brush Master (Pvt) Ltd 726,912 658,905

Expenses on behalf of JAT Holdings (Pvt) Ltd (350,000) -

Interest charg to Current Account - 2,244,572

Royalty Expenses (1,479,458)

Rent Income Receivable 1,380,000 (115,000)

Trade Purchases (95,431,645) (112,876,914)

Settlement to Trade Purchases 13,196,243 103,415,698

Trade Sales 1,947,421 3,438,410

Receipts for Trade Sales (2,172,226) (2,667,525)

Set off against Trade creditor (2,630,524) -



2018Rs.

2017Rs.

Worldwide Resins & Chemicals (Pvt) Ltd(WWRC)

Subsidiary Raw Material Sales 17,146,726 -

Receipts for Raw Material Sales (13,346,017) -

Current Account Settlements (4,500,000) -

Expenses on Behalf of World Wide Resins & Chemicals (Pvt) Ltd 12,858 -

Payment on behalf JAT Holdings (Pvt) Ltd - 700

Management fee 7,038,000 6,000,000

Fund Transfer to WWRC - 1,107,434

ATLI Industries (Pvt) Ltd Affiliate Fund Transfers - (10,000)

Dian Venture (Pvt) Ltd Affiliate Loan Granted for Dian Venture (Pvt) Ltd - 2,000,000

Loan settlement - (2,000,000)

JAT Technologies (Pvt) Ltd. Affiliate Loans Granted - 17,000,000

Interest charge for Current Account 225,556 3,705,699

Expenses on Behalf of JAT Technologies (Pvt) Ltd 1,850,914 1,162,399

Transfer of JAT Project debtor - 26,124,593

Supply of Solar and ELV Projects (76,046,018) -

Payment for Solar and ELV Projects 58,804,267 -

Set-Off with Trade Debtors 866,309 -

Net Fund Transfers (25,808) (64,726,871)

Esteem Lumbers (Pvt) Ltd Affiliate Expenses on Behalf of Esteem Lumbers (Pvt) Ltd - 5,550

Written Off - (12,923)



2018Rs.

2017Rs.

Master Home Improvements (Pvt) Ltd Affiliate Expenses on behalf of Master Home Improvements (Pvt) Ltd 1,843,204 32,266,261

Net Fund Transfer 9,420,150 8,910,000

Interest charge for Current Account 2,316,116 2,173,461

Fixed Assets & Inventory Transferred (29,268,157) -

Trade Sales - 30,263,831

Receipt for Trade Sales - (14,267,408)

Media Track (Pvt) Ltd. Affiliate Written Off - (58,470)

JAT Agri (Pvt) Ltd Affiliate Expenses incurred on behalf of JAT Agri (Pvt) Ltd 3,724,640 -

Net Fund Transfers (4,932,044) 17,241,620

Interest charged on current Account balance 1,214,662 -

JAT Trading (Pvt) Ltd Affiliate Trade Sales 26,796,402 -

Receipts for Trade Sales (5,317,839) -

Net Fund Transfers 4,606,200 -

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

29.1 Transactions with Key Management Personnel of the CompanyThe key management personnel of the Company are the members of its Board of Directors. There are no transaction with such KMP and their close family members, other than mention below.

2018 2017 Rs. Rs.

Short-term Employee Benefits 60,756,325 52,419,055Proceeds receivable on disposal of subsidiary 61,150,000 - 121,906,325 52,419,055



30. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group’s principal financial liabilities, comprise loans and borrowings and trade and other payables. The main purpose of these financial liabilities is to finance the Group’s operations and to provide guarantees to support its operations. The Group has loans and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. The Group is exposed to market risk, credit risk and liquidity risk. “The Group’s senior management oversees the management of these risks. The senior management is supported by the Board of Directors (BOD) that advises on financial risks and the appropriate financial risk governance framework for the Group. BOD provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with group policies and group risk appetite. It is the Group’s policy that all activities for risk management purposes are required to be approved by Board of Directors of JAT Holdings (Private) Limited.”

The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below. Market Risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise four types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits and available-for-sale investments. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the entity’s financial performance. Interest Rate 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. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with fixed interest rates. The Group manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. The Group’s policy is to maintain an appropriate balance between fixed and variable rate borrowings.

Foreign Currency 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’s exposure to the risk of changes in foreign exchange rates relates primarily to the import of raw materials, finished goods and packing materials. The major part of the foreign transactions is dealt with US Dollars.

1% increase 1% decrease Rs. Rs.

Effect on Equity of the Company - Change in US Dollar Rate (1,787,533) 1,787,533 - Change in Euro Rate 293,717 (293,717)

Equity Price Risk The Group’s quoted and unquoted equity securities are securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group’s Board of Directors reviews and approves all equity investment decisions. At the reporting date, the exposure to listed and unlisted equity securities at fair value was NIL (2017 - NIL). Credit Risk Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments. Trade Receivables Customer credit risk is managed by each company subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed based on the established credit risk evaluation policy and individual credit limits are defined in accordance with this assessment.


Outstanding customer receivables are regularly monitored. Minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actual incurred historical data. Cash Deposits Credit risk from balances with banks is managed in accordance with the Group treasury policy. Investments of surplus funds are made only with approved counterparties as per this policy. Liquidity Risk The Group monitors its risk to a shortage of funds by setting up a minimum liquidity level. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, and finance leases. The Group assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Access to sources of funding is sufficiently available and debt maturing within 12 months can be rolled over with existing lenders. The table below summarises the maturity profile of groups financial liabilities based on contractual undiscounted payments.

Less than Above Year ended 31 March 2018 1 year 1 year Total

Bank Loans 744,217,286 232,205,387 976,422,673 Finance Lease 1,127,200 - 1,127,200 Trade and Other Liabilities 1,373,465,590 - 1,373,465,590 2,118,810,075 232,205,387 2,351,015,463

Capital Management Capital includes ordinary shares. The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. .



SHAREHOLDER INFORMATION

Distribution of Shareholders as at 31st March 2018

No Shareholders Number of Shares % of share holdingas at 31.03.2018

Number of Shares % of share holdingas at 31.03.2017

1 Mr. A.W. Gunawardene 326,369,429 71.37% 326,369,429 71.37%

2 J Chem Coatings (Pvt) Ltd 40,068,000 8.76% 40,068,000 8.76%

3 Dr. S. Selliah 1,320,000 0.29% 1,320,000 0.29%4 Ms. A. Selliah 4,240,000 0.93% 4,240,000 0.93%5 Ms. A. Kailasapillai 4,240,000 0.93% 4,240,000 0.93%6 Mr. K. Aravinthan 1,320,000 0.29% 1,320,000 0.29%7 Arunodhaya (Pvt) Ltd 3,360,000 0.73% 3,360,000 0.73%8 Arunodhaya Industries (Pvt) Ltd 3,360,000 0.73% 3,360,000 0.73%9 Arunodhaya Investments (Pvt) Ltd 3,360,000 0.73% 3,360,000 0.73%10 Andysel (Pvt) Ltd 2,120,000 0.46% 2,120,000 0.46%11 Adamjee Lukmanjee & Sons (Pvt) Ltd 5,332,000 1.17% 5,332,000 1.17%12 Mr. M.A. Lukmanjee 2,668,000 0.58% 2,668,000 0.58%13 Mr. J.P. Amaratunga 2,668,000 0.58% 2,668,000 0.58%

14 SDS Spices (Pvt) Ltd 2,668,000 0.58% 2,668,000 0.58%15 Falcon Trading (Private) Limited 27,077,498 5.92% 27,077,498 5.92%

16 Emerald Sri Lanka Fund 1 Limited 27,090,146 5.92% 27,090,146 5.92%

Total 457,261,073 100% 457,261,073 100%

Composition Of Shareholders as at 31st March 2018

Category No. of holders as at31.03.2018

Total Holding No. of holders as at31.03.2017

Total Holding

Individual shareholders 7 342,825,429 7 342,825,429

Institutional shareholders 9 114,435,644 9 114,435,644

Total 16 457,261,073 16 457,261,073

Director’s Shareholdings as at 31st March 2018

No Name of shareholders No of Shares as at 31st March 2018 No of Shares as at 31st March 2017

1 Mr.A.W. Gunawardene 326,369,429 326,369.4292 Dr.S. Selliah 1,320,000 1,320,0003 Mr.J.P. Amaratunga 2,668,000 2,668,000Total 330,357,429 330,357,429


8 YEAR SUMMARY - GROUP

2017/18 2016/17 2015/16 2014/15 2013/14 2012/13 2011/12 2010 /11 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Financial Performance Gross Turnover 5,446,689,000 5,782,965,328 4,904,771,722 3,546,165,115 2,992,617,332 2,175,402,931 1,634,296,588 724,604,697 Profit from operating activities 692,512,518 1,114,524,093 1,045,035,975 670,724,834 481,609,454 397,057,721 281,127,901 78,981,240 Net Finance Cost (106,198,342) (83,023,258) (40,110,597) (30,818,974) (36,489,142) (26,267,924) (22,958,649) (12,042,425)Profit before taxation 586,314,176 1,031,500,836 1,004,925,378 639,905,861 445,120,312 370,789,797 258,169,252 66,938,815 Tax expenses 48,463,543 (129,198,153) (155,865,854) (98,273,619) (54,222,352) (28,242,704) (34,959,339) (21,665,454)Profit for the year 634,777,719 902,302,684 849,059,524 541,632,242 390,897,961 342,547,093 223,209,913 45,273,361 Financial Position Assets Property, plant and equipment 1,316,298,723 1,084,679,460 875,595,866 598,750,044 459,713,230 484,726,481 358,411,422 344,693,185 Intangible assets 20,344,464 80,529,288 58,492,610 1,550,552 1,571,052 3,133,518 3,879,482 Long term investment 26,368,238 16,217,483 7,893,750 7,500,000 7,500,000 5,625,000 7,500,000 6,977,626 Other Investment 14,588,000 14,588,000 - - - - - - Deferred tax asset 6,133,016 25,919,758 15,527,397 847,395 988,101 - - - Current assets 4,851,821,885 4,471,071,096 3,367,120,429 2,478,369,884 2,106,372,795 1,495,409,445 1,057,894,618 363,193,361 Total Assets 6,235,554,327 5,693,005,084 4,324,630,052 3,087,017,875 2,575,157,077 1,988,894,444 1,428,673,623 714,864,172

Equity and liabilities Share capital 918,770,013 918,770,013 628,770,000 628,770,000 628,770,000 10,900,100 10,900,100 10,900,100 Retained earnings 2,939,031,114 2,454,670,452 1,838,256,696 1,200,909,270 860,592,113 877,276,020 556,077,180 336,867,307 Non Controlling Interest (372,090) 3,466,807 (593,568) - - - - - Reserves (26,865,305) 4,075,771 - - - - - - Finance lease obligation 1,127,200 1,127,201 1,977,070 3,072,793 2,589,179 4,505,216 10,929,116 13,281,811 Employee benefits 33,556,928 24,328,246 24,257,631 23,019,385 16,624,393 14,658,069 11,920,418 6,387,045 Long term loan 232,205,387 230,879,149 115,136,000 5,666,680 12,376,448 24,215,162 - - Deferred tax liability - - - 4,644,867 1,498,163 2,435,183 - - Current liabilities 2,139,228,278 2,056,814,646 1,716,826,223 1,220,934,880 1,052,706,781 1,054,904,693 838,846,809 347,427,909 Total Equity and liabilities 6,235,554,326 5,693,005,084 4,324,630,052 3,087,017,875 2,575,157,077 1,988,894,443 1,428,673,623 714,864,172

Ratios NP Ratio (%) 12% 16% 17% 18% 15% 17% 16% 9%Return On Equity (%) 17% 27% 34% 30% 26% 39% 39% 13%Return on Total Assets (%) 10% 16% 20% 18% 15% 17% 16% 6%Current Ratio (Times) 2.27 2.17 1.96 2.03 2 1.42 1.26 1.05Quick Ratio (Times) 1.51 1.48 1.52 1.45 1.23 1.09 1.01 1.03Gearing (%) 6% 6% 4.53% 0.48% 0.99% 3.13% 1.89% 3.68%


GRI INDEX

GRI DISCLOSURE Page No.

GRI 301: MATERIALS 2016

GRI 103 Management Approach

Disclosure 301-1 Materials used by weight or volume 99

GRI 302: ENERGY2016


Disclosure 302-1 Energy consumption within the org. 99

Disclosure 302-3 Energy intensity 99

Disclosure 302-4 Reduction of energy consumption 99

GRI 303: WATER2016


Disclosure 303-1 Water withdrawal by source 100

Disclosure 303-2 Water sources significantly affected by withdrawal of water

100

Disclosure 303-3 Water recycled and reused 100

GRI 305: EMISSIONS2016


Disclosure 305-1 Direct (Scope 1) GHG emissions 100

Disclosure 305-2 Energy indirect (Scope 2) GHG emissions 100

Disclosure 305-3 Other indirect (Scope 3) GHG emissions 100

Disclosure 305-4 GHG emissions intensity 100

Disclosure 305-5 Reduction of GHG emissions 100

GRI 103 Management Approach 97

Disclosure 306-1 Water discharge by quality and destination 101

Disclosure 306-2 waste by type and disposal method 102

Disclosure 306-5 Water bodies affected by water discharges and/or runoff 102

GRI 401: EMPLOYMENT 2016


Disclosure 401-1 New employee hires and employee turnover 92

GRI DISCLOSURE Page No.

Disclosure 401-2 Benefits provided to full-time employees that are not provided to temporary or part-time employees

93,95

Disclosure 401-3 Parental leave 92

GRI 402: LABOR/MANAGEMENT RELATIONS 2016

Disclosure 402-1 Minimum notice periods regarding operational changes 93

GRI 403: OCCUPATIONAL HEALTH AND SAFETY 2016

Disclosure 403-1 Workers representation in formal joint management–worker health and safety committees

94

Disclosure 403-2 Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities

94

Disclosure 403-3 Whether there are workers whose work, or workplace, is controlled by the organization, involved in occupational activities who have a high incidence or high risk of specific diseases.

95

GRI 404: TRAINING AND EDUCATION 2016

Disclosure 404-1 Average hours of training per year per employee 95

Disclosure 404-2 Programs for upgrading employee skills and transition assistance programs

95

GRI 405: DIVERSITY AND EQUAL OPPORTUNITY 2016

Disclosure 405-1 Diversity of governance bodies and employees 93

Disclosure 405-2 Ratio of basic salary and remuneration of women to men 93

GRI 416: CUSTOMER HEALTH AND SAFETY 2016


Disclosure 416-1 Assessment of the health and safety impacts of product and service categories

96

Disclosure 416-2 Incidents of non-compliance concerning the health and safety impacts of products and services

96

GRI 417: MARKETING AND LABELING 2016

Disclosure 417-1 Requirements for product and service information and labeling

96


NOTICE OF MEETING

NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of JAT Holdings (Private) Limited will be held at the Main Board Room of JAT Holdings (Private) Limited, No 351, Pannipitiya Road, Thalawathugoda 29th June 2018 at 3.00 p.m. to transact the following business.

1. To read the notice convening the meeting.2. To receive and adopt the Annual Report of the Board of Directors and Audited Financial Statements for the year ended 31st March 2018 and the

report of the Auditors thereon.3. To appoint Auditors and to authorize the Directors to determine their remuneration.4. To authorize the Board of Directors to determine contributions for charities and other purposes for the ensuing year.5. To transact any other business of which due notice has been given.

By order of the Board

S S P Corporate Services (Pvt) LtdCompany Secretaries

101, Inner Flower Road, Colombo 03

Date:

Note:1. A member entitled to attend and to vote at the meeting is entitled to appoint a proxy to attend and vote instead of him/her.2. A proxy need not be a member of the Company.3. A form of proxy is enclosed for this purpose.4. The completed form of proxy should be deposited at the registered office of the Company, No. 351, Pannipitiya Road, Thalawathugoda not less than

24 hours before the time appointed for holding the Meeting.


JAT HOLDINGS (PRIVATE) LIMITED

I/We* the undersigned………………….........................................………………………………................................................................…………………..of

……………….....................................................................................................................................…………………………..................…………………….

being a member/members of JAT HOLDINGS (PRIVATE) LIMITED hereby appoint……………………………..................................................................... of

………….....................................................................................…….. or failing him/her*

Dr. Sivakumar Selliah of Colombo or failing himMr. Aelian Winston Gunawardene of Thalawathugoda or failing him Ms. Joyce Gunawardene of Thalawathugoda or failing herMr. Jehan Prasanna Amaratunga of Colombo or failing himMr. Senaka Kakiriwaragodage of Colombo or failing himMr. Hussain Akbarally of Colombo or failing himMr. Nandana Wickramage of Thalawathugoda

as my/our* proxy, to represent me/us* to vote on my/our* behalf at the Annual General Meeting of the Company to be held on 29 June 2018 at No 351, Pannipitiya Road, Thalawathugoda at 3.00 p.m. and at any adjournment thereof, and at every poll which may be taken in consequence thereof.

Signed this ………………..........................................day of ..………...................................................2018

............................................Signature and Date

*Please delete the inappropriate words.

FORM OF PROXY


INSTRUCTIONS AS TO COMPLETION OF FORM OF PROXYi) The full name and the address of the proxy and of the shareholder appointing the proxy should be

entered legibly in the form of proxy.ii) In the case of a Corporation/Company this proxy shall be under its Common Seal duly signed.iii) The complete form of proxy should be deposited at the Registered Office of the Company No:

351, Pannipitiya Road, thalawathugoda, not less than 24 hours before the time appointed for holding the Meeting.

FORM OF PROXY


NOTES

JAT HOLDINGS (PVT) LTD | ANNUAL REPORT 2017/18

REGISTERED OFFICEJAT Holdings (Pvt) Ltd, No: 351, Pannipitiya Road, Thalawathugoda.Phone: +94 11 – 4407700Fax: +94 11 – 2773793Email: [email protected] Web Site:www.jatholdings.com

DATE OF INCORPORATION1st July 1993

BOARD OF DIRECTORSDr. S. Selliah – ChairmanMr. Aelian Gunawardene – Managing Director Mr. Jehan Amaratunga Mrs. Joyce GunawardeneMr. Senaka KakiriwaragodageMr. Hussain AkbarallyMr. Nandana Wickramage

AUDIT COMMITTEEMr. Jehan Amaratunga – Chairman Dr. S. SelliahMr. Senaka Kakiriwaragodage

REMUNERATION COMMITTEEDr. S. Selliah – Chairman Mr. Jehan Amaratunga

CORPORATE INFORMATION

RELATED PARTY TRANSACTION COMMITTEEMr. Jehan Amaratunga – Chairman Dr. S. Selliah BANKERSCommercial Bank PLCThe Hongkong and Shanghai Banking Corporation Ltd Hatton National Bank PLCNational Development Bank PLC Nations Trust Bank PLC Standard Chartered BankSeylan Bank PLCPeoples’ BankNational Savings Bank

AUDITORSErnst & Young Chartered Accountants 201, De Saram Place, Colombo 10.

SECRETARIESS S P Corporate Services (Pvt) Ltd 101, Inner Flower Road,Colombo.

JAT HOLDINGS (PVT) LTD