SERENDIB ENGINEERING GROUP PLC

PQ 230
ANNUAL REPORT 2016/2017

Serendib Engineering Group PLC I Annual Report i

 ANNUAL REPORT

2016/2017

SERENDIB ENGINEERING GROUP PLC

ii Serendib Engineering Group PLC I Annual Report 2016/2017

 TABLE OF CONTENTS

1. ABOUT US 1 7.SHARE INFORMATION 75

7.1 Stated Capital 75
2. PERFORMANCE HIGHLIGHTS OF THE YEAR 2 7.2 Twenty Largest Shareholders of the
Company 75
3. CHAIRMAN’S MESSAGE 3
7.3 Distribution of Shareholders 76
4. MANAGEMENT DISCUSSION AND ANALYSIS 4 7.4 Composition of Shareholders 76
4.1 The Macroeconomic Review 4 7.5 Market information on Ordinary Shares
4.2 Financial Review 5 of the Company 77
4.3 Operational Review of the Group 5 7.6 Directors and CEO's Shareholding 77
4.4 Integrated Risk Management 6 7.7 Public Shareholdings 77
4.5 Future Outlook 9
8. SUPPLEMENTARY INFORMATION 78
5.GOVERNANCE 10 8.1 Group Structure 78
5.1 Board of Directors 10 8.2 Performance Summary 79
5.2 Corporate Management Team 12
9. CORPORATE INFORMATION 81
5.3 Corporate Governance Report 14
5.4 Audit Committee Report 18 10. GLOSSARY OF FINANCIAL TERMS 82
5.5 Remuneration Committee Report 19
5.6 Related Party Transactions Review 11. ABBREVIATIONS 83
Committee Report 20
5.7 Directors’ statement on Internal Controls 21 12. NOTICE OF MEETING 86
5.8 Compliance Report 23
13. FORM OF PROXY 87
6.FINANCIAL STATEMENTS OF THE COMPANY 30
6.1 Annual Report of the Board of Directors 30 14. INSTRUCTIONS FOR THE COMPLETION OF
PROXY 88
6.2 The Statement of Directors' Responsibility 33
6.3 Independent Auditor’s Report 34
6.4 Statement of Profit or Loss & Other
Comprehensive Income 35
6.5 Statement of Financial Position 36
6.6 Statement of Changes in Equity 38
6.7 Statement of Cash Flows 40
6.8 Notes to the Financial Statements 42

Serendib Engineering Group PLC I Annual Report 2016/2017 iii

 01. ABOUT US

Serendib Engineering Group PLC (SEG) is a multifaceted companies in Sri Lanka and holds the highest ICTAD
engineering company listed on the Colombo Stock grading of EM1 (extra low voltage installation for telecom
Exchange with a vision to be the premier multi- sector). In the power & energy infrastructure sector the
disciplinary engineering organization in Sri Lanka. The company has undertaken projects involving underground
Company was incorporated as a Public Limited Liability and areal electrical solutions. SEG holds the highest level
Company on 07th September 1992 and re-registered under of ICTAD grading of EM1 for both medium voltage &
the Companies Act No 07 of 2007 and obtained a listing low voltage electrical installations and is a contractor for
on the Colombo Stock Exchange in 2002 under Land LECO/Lanka Electricity Company (Pvt) Limited.
and Property sector which trade as “IDL. N0000”. The
Company formerly operated as “Infrastructure Developers
SEG diversified its business by building capacity in the Civil
PLC” and Navara Capital Limited acquired the controlling
engineering sector and has strategically positioned the
interest of Infrastructure Developers PLC in October 2011.
company to take advantage of the expanding construction
The Company renamed as Serendib Engineering Group
industry of the country. The company has undertaken
PLC with effect from February 2013.
civil engineering projects in diversified sectors such as
construction of water supply and drainage projects, power
SEG serves as the holding company of Serendib generation projects, culverts, construction of commercial
Engineering & Agencies (Pvt) Limited, CCC Plantation buildings, retaining walls & landscaping. It has developed
Engineering Limited and Serendib Investment Holdings an impressive portfolio of civil construction capabilities
Limited while mainly focuses on telecom infrastructure and holds ICTAD C5 grading. For the coming Financial
engineering. Moreover, SEG has expanded its solutions to Year company has been awarded Rs. 100 Mn. - Rs. 120
diversified engineering portfolio including railway, marine, Mn. worth civil projects.
public infrastructure, plantation, power generation, water
supply, civil engineering, as well as pre-cast concrete
SEG also holds the Sri Lankan agencies for some prestigious
poles through their subsidiaries. In order to succeed in
global principles such as Rolls-Royse Marine, MAN diesel
all these aforementioned areas we are strengthened with
and Turbo, R & M India (Pvt) Ltd , Seamaster paints of
professionals who have complementary skills, a depth
Singapore, Brush Traction, ROMIC-ACE (Alsthom) and
of expertise and a commitment to excellence covering
Lincoln Diesel.
diverse disciplines which allows SEG to meet its corporate
objectives. This has been the foundation for our success
over the years and remains the foundation for our future Navara Capital Limited is the parent of the Company which
growth. is an Investment Holding Company consists of subsidiaries
to represent key sectors of the economy; namely Navara
Capital Partners Limited for Financial Services sector,
In the telecom infrastructure engineering sector SEG
Serendib Engineering Group PLC for Construction and
provides a range of telecom solutions for Sri Lanka
Engineering sector, Mandarin Capital Limited and Alerics
Telecom and Dialog Broadband Networks (Pvt) Ltd. The
Dairy Products Limited for Food and Beverages sector.
Company has started Dialog projects during the latter part
of the current financial year and it has contributed to total
revenue increase in the year under review. The company
is a Tier 1 contractor for both these leading Telecom

VISION CORPORATE OBJECTIVES

·· Achieving diverse requirements of our stakeholders
“To be the premier multi-disciplinary engineering
organization in Sri Lanka” ·· Quality and customer satisfaction
·· Ethics, integrity and accountability in our conduct
MISSION
·· Innovation and best industry practices

“To be the most sought after engineering organization ·· Attracting and developing a dynamic and motivated
dedicated to innovation, quality and customer satisfaction team of professionals
manned by a dynamic and motivated team of professionals ·· Health and safety in the work place
leading to sustainable shareholder returns”
·· Sustainable shareholder returns.

Serendib Engineering Group PLC I Annual Report 2016/2017 1

02. PERFORMANCE HIGHLIGHTS OF THE YEAR

TOTAL REVENUE PROFITABILITY & EARNINGS PER SHARE

Rs. Mn.

62.71
47.77

21.67
16.24

11.1
9.01
4.2 0.31 0.26
-0.41 -0.99
Year

-13.89
-18.93

-33.57
Year

-41.64
STATED CAPITAL & NET ASSET PER SHARE TOTAL ASSET BASE

Rs. Mn.

Year Year

ASSET COMPOSITION ROE & ROA

Rs. Mn.

Year

Year

2 Serendib Engineering Group PLC I Annual Report 2016/2017

 03. CHAIRMAN’S MESSAGE

The year under review marked a significant operational

engagement where the group made a concerted effort to
tighten and improve internal processes, internal controls
and reporting systems in order to enhance the operational
efficiencies. During the year, we continued to invest and
improve the process by which we attract and develop
talent in order to sustain the human capital for long- term
prospects of the company. We believe these measures as
well as our inherent strength will enable us to successfully
overcome the challenges we will encounter in the future.

As we look to the year ahead and beyond, we remain

confident that the strategies that we are pursuing will result
in sustainable returns to our stakeholders in the medium to
long run. We believe that, our continuous strategy review
process will strengthen the value creation while being agile
and adopting to the changing dynamics of the external
environment will help us reach our goal of becoming a
premier multi-disciplinary engineering organisation in Sri
Lanka.

I am pleased to present to you the Audited Financials and In conclusion, on behalf of the Board of Directors and
the Annual Report of your company, Serendib Engineering all employees of Serendib engineering Group PLC, I
Group PLC for the financial year ended 31st March 2017. thank all our stakeholders for the support extended to the
group during the financial year ended 31st March 2017.
Further, I thank my colleagues on the Board, the Groups
The consolidated revenue of the group increased by 51%
Management team and the staff for their guidance, support
to Rs.317Mn for the financial year ended 31st March
and commitment.
2017 compared to Rs.210Mn recorded in the previous
year. The profit attributable to equity shareholders of the
group was Rs.8.5Mn compared to the loss of Rs.32Mn Finally, I thank you, our loyal shareholders for your support
recorded in the previous year. During the financial year, and the confidence you have placed in us.
the group recorded a consolidated gross profit of Rs.97Mn
recording 31% gross profit margin compared to 20%
gross profit margin recorded in the previous year. These
positive results were generated through volume increase
with existing service providers as well as due to resource
optimization.

………………….........................
The Telecom Infrastructure business continued to be the
major revenue contributor accounting for 96% compared Harsha N. De Silva
with 88% during the previous year. Civil construction
and Power and Electricity infrastructure engineering Chairman
contributed 3% and 1% respectively. While the group
continuous to be committed to a strategy of building a 25th August 2017
diversified engineering business, Telecom infrastructure Colombo.
engineering is expected to dominate in the near future.

Serendib Engineering Group PLC I Annual Report 2016/2017 3

 04. MANAGEMENT DISCUSSION AND ANALYSIS

4.1 THE MACROECONOMIC REVIEW inflation, particularly during the early part of 2016. Credit
to the private sector by the banking sector grew at higher
During the year 2016, Sri Lankan economy recorded rates during 2015 and 2016, despite some deceleration
a growth of 4.4% which is marginally below the GDP during the second half of 2016, in response to monetary
growth of 4.8% recorded in the year 2015. Although a tightening by the Central Bank. Meanwhile, wages in the
steady acceleration in quarterly growth was observed economy also increased at higher rates, particularly in
from the second quarter of the year amidst tightened fiscal the public sector during 2015 and the early part of 2016,
and monetary policies. Increased investment expenditure, leading to a rise in real income levels.
especially in the construction sector, drove economic
growth during the year, while consumption expenditure
slowed in response to the policy environment in place.

GDP Growth

Rate
In 2016, the Sri Lankan economy grew by 4.4% in real
terms, amidst numerous global and domestic challenges.
Unfavorable weather conditions that prevailed during the
year adversely impacted economic activity, primarily in
the Agriculture sector.

Year
Services related activities, which constitute 56.5% of real
GDP, grew by 4.2% in 2016. Similarly Industry related
activities, which account for 26.8% of real GDP, recorded
a notable growth of 6.7% year-on-year. As shown below Interest Rates
Agriculture related activities contracted by 4.2% resulting
in a reduction in their share in real GDP to 7.1%.
During the year 2016, market interest rates adjusted
upwards reflecting tight monetary conditions in the
Major economic activities of GDP and there contribution economy. Accordingly, the Average Weighted Deposit
is shown as below; Rate (AWDR) increased by 197 basis points to 8.17%
by end 2016 from 6.20% at end 2015 while the Average
Weighted Lending Rate (AWLR) increased by 220 basis
points to 13.20% by end 2016 from 11% at end 2015.
Annual Growth Rate

Similarly, in order to mitigate the inflationary pressures

and to support the BOP, the Central Bank increased the
SDFR and the SLFR by an additional 100 basis point to
7% and 8.50%, respectively. These interest rate moments
2013 2014 2015 2016 are compared and reflected in the graph depicted below;
Year
Rate

Inflation Year

CCPI based, year on year core inflation recorded as 3.6%

compared with 2.8% in 2015.

Demand side developments have resulted in some degree

of price pressure as reflected by the increase in core

4 Serendib Engineering Group PLC I Annual Report 2016/2017

4.2 FINANCIAL REVIEW - Serendib Engineering & Agencies (Private) Limited

During the year under review, the group recorded revenue Serendib Engineering & Agencies (Pvt) Ltd is a multi-faceted
of Rs.317Mn and which is far higher than the Rs.210Mn engineering company involved in Telecom Infrastructure
revenue achieved in the previous year. This is a 51% Engineering, Power & Energy Infrastructure Development,
growth in total revenue when compared with previous Civil Engineering, Water supply and Filtration, Marine &
year. The recorded gross profit for the financial year is Railway Engineering, Agency Management etc.. Serendib
Rs.97.0Mn. The gross profit margin increased from 20% Engineering & Agencies (Pvt) Ltd was established in 1991.
to 31% compared with the year before. This is mainly due
to the increase in total revenue by 51% when compared
In the telecom infrastructure engineering sector SEG
with the previous year. Out of total revenue, Telecom arm
provides a range of telecom solutions for Sri Lanka
of the company has contributed more and Dialog arm
Telecom PLC and Dialog Broadband Networks (Pvt) Ltd.
has contributed Rs.18Mn revenue which was not in the
The company is a Tier 1 contractor for both these leading
year 2015/2016. The company has started to restructure
Telecom companies in Sri Lanka and holds the highest
its operational overhead to maintain the overhead at
ICTAD grading of EM1 (extra low voltage installation for
minimum level in order to achieve profitability.
telecom sector). In the power and energy infrastructure
sector the company has undertaken projects involving
Expenses underground and areal electrical solutions. Company
holds the highest level of ICTAD grading of EM1 for both
The administration expenses of the group have decreased medium voltage & low voltage electrical installations
by Rs.12 Mn compared to previous year mainly due to and is a contractor for LECO (Lanka Electricity Company
restructuring of the expenses and decrease in salaries, (Private) Limited).
wages and consultancy fees.
During the financial year 2016/2017, 90% of the revenue
Profit / (Loss) after Tax is generated from SLT Telecom Infrastructure Engineering,
6% from Dialog business and 3% from Civil projects &
During the year under review, the profit attributable to 1% from power and energy projects respectively. Serendib
equity shareholders of the group was Rs. 8.5Mn. Engineering Group PLC holds an effective control of
94.23% as at 31st March 2017 in Serendib Engineering &
Agencies Private Limited.
Earnings / (Deficit) per Share

Telecom Infrastructure Engineering

During the year, earnings per share was Rs.0.26.

The main revenue stream of the group is from telecom

Investments Asset Utilization
infrastructure engineering and the company serves
to both market leaders (SLT and Dialog Broadband
The net asset value per share attributable to ordinary Networks (Pvt) Ltd). Telecom infrastructure engineering
shareholder has been increased by 0.88% up to Rs.5.72 includes network development including Outside Plant
at the end of the financial year compared to previous year Engineering (OSP) that involves expansions in optical fiber
(2015/2016 - Rs. 5.67). cable network, optical fiber backbone/ junction network
development (optical fiber metro network development
4.3 OPERATIONAL REVIEW OF THE GROUP and optical fiber secondary expansions), copper cable
network development, new subscriber connections, fault
Serendib Engineering Group PLC is the holding company clearance, removals, installation of PEO TV connections,
of the group. It carries out its business operations mainly site acquisition, FTTH (Fiber-to-the-Home) projects and
via its primary operating subsidiary; Serendib Engineering tower erection.
& Agencies Private Limited.
The company has increased the operating areas under Sri
- Serendib Engineering Group PLC Lanka Telecom and Dialog Broadband Networks (Pvt) Ltd.
Dialog Broadband Networks (Pvt) Ltd has awarded number
The Company serves as the holding company to Serendib of jobs to the company to implement for the first time and
Engineering & Agencies (Pvt) Ltd, CCC Plantation company believes this expansion will yield positive results
Engineering Ltd and Serendib Investments Holding Limited. during this year.
The company also provides centralized management
support to the Group. Civil Engineering

The company is focusing on the manufacture of precast During the period under review the company was able to
concrete poles for the telecom industry and power execute several Civil Engineering projects such as power
distribution in which the Company believes the exposure generation projects, water supply and drainage projects as
to this sector will yield positive results in the future. well as the construction of commercial buildings. It has

Serendib Engineering Group PLC I Annual Report 2016/2017 5

developed an impressive portfolio of civil construction Subsequent to the developments in rules and regulations,
capabilities and holds ICTAD C5 grading. The Company employee-related lawsuits risk management became a
believes the exposure to this sector will yield positive serious management criterion. Today risk management has
results in coming years. become an integral part of proper management practices,
placing equal importance as financials or facilities.
Agency
4.4.2 Framework and Procedures
SEG also holds the Sri Lankan agencies for some global
principles such as R & M India (pvt) Ltd (fiber optic Serendib Engineering Group PLC has given due
accessories), Seamaster paints of Singapore (specialty consideration to its risk management process. The group
paints and chemicals), Brush Traction (locomotives), seeks a proactive and holistic approach to manage and
ROMIC-ACE (Alsthom) and Lincoln Diesel (locomotives). mitigate the risk to improve returns. Engineering as an
industry is known to be of very high risk, internal as well
- CCC Plantation Engineering Limited as external.

CCC Plantation Engineering Ltd, a fully owned subsidiary Serendib Engineering Group PLC focuses on long term
of Serendib Engineering Group PLC, which was the oldest sustainable value to all our stakeholders by identifying the
tea machinery manufacturer in the country. However, risks, both existing and potential and analyses all risks to
the Company curtailed down its operations as it was not determine their most probable impact, as well as to take
performing well and company is planning to start a new precautions as far as reasonably practicable by taking
venture in the near future. prompt actions to mitigate them.

- Serendib Investments Holding Limited Several key risks are identified as exiting risks, to which
the company is exposed, in its day to day business
As at 31st March 2017, Serendib Engineering Group PLC activities and categorize them as Internal and external, for
holds 60% ownership of Serendib Investment Holdings assessment and to facilitate taking adequate precautionary
Limited and Serendib Investment Holding Limited owns measures. Risk assessment can include both qualitative
14.44% of the stated capital of Serendib Engineering & and quantitative assessments of the likelihood of the
Agencies Private Limited. various risks occurring and the impact of these in terms of
cost, schedule and/or performance.
4.4 INTEGRATED RISK MANAGEMENT
The assessment of such risks and the related responses are
4.4.1 Introduction set out below:

Almost all business decisions contain an element of risk. ·· Operational Risk Management
Therefore analysing and managing risk is an integral part of ·· Information Technological Risk Management
any organization to formulate its strategies to accomplish
the desired objectives. Risk management consists of ·· Market Risk Management
identifying, analysing and managing all the existing and ·· Financial Risk management
potential internal and external risks that could adversely
affect the achievement of expected goals of the Company.
Generally, this involves reviewing operations of the
organization, identifying potential risks and the likelihood
of their occurrence, and taking appropriate actions to
address them, in order to prevent most likely threats.

The Group's risk management framework has remained

resilient throughout 2016/17, amongst a challenging
macroeconomic environment. The Group manages risks
under an overall strategy formulated by the Board of
Directors, supported by the senior Management team
which continuously reviews and enhances the effectiveness
of the Group's risk management plans, systems, processes
and procedures.

Over the past year, the Group has taken a number of

initiatives to strengthen its risk management capabilities.
Some of these initiatives include adopting faster and more
efficient system-driven processes, internal controls, and
fine-tuning of key risk indicators for operational risk.

6 Serendib Engineering Group PLC I Annual Report 2016/2017

4.4.2.1 Operational Risk Management

Operational risk is an inherent risk in all business activities, which may result in potential financial loss and/or business
instability arising due to human errors and failures in internal controls, operational processes or the systems that support
them. Although the complete elimination of the operational risk is not entirely possible and that the cost of minimizing
it may outweigh the potential benefits. However, the Group has designed and implemented comprehensive and sound
internal controls and other safety measures which are reviewed regularly to overcome the operational risk.

Risk and Uncertainties Groups Response

Failure to address these risks promptly and prudently will During the year under review steps were taken to carry
subsequently create a negative impact to its operations out detailed project planning. In addition meetings were
and the principle of “going concern”. scheduled regularly in order to review the progress of
operations.

The project implementation activities are carried out

under direct supervision of qualified and well experienced
engineers and technically qualified supervisors to ensure
strict enforcement of quality standards. Also measures
were taken to ensure regular check on the accuracy
of functionality of tools, equipment and machinery,
delegation of authority, permit to work systems,
guidelines and a regular reporting framework, creating
awareness and consciousness and accountability in the
operational activities.

In addition, where applicable, the risk mitigation actions

are supported by risk transfer mechanisms such as
insurance. Measures were taken for the establishment
of Safety & Health of all engaged in the yard and sites
including our visitors and we address this thoroughly,
with the continuous education, compliance and audits,
carried out by our own Health, Environment & Safety
Advisory Committee.

4.4.2.2 Information Technological Risk Management

An integrated and updated Management Information System which generates accurate and timely information for prudent
decision making is the key to company’s sustainability.

Risk and Uncertainties Groups Response

Any disruption or failures of such system, infrastructure The company always maintains an updated information
and applications, may have a negative impact to the system to avoid obsolescence. It has further strengthen
Company operations and could possibly result in through the establishment of regular backups procedures,
financial losses. standby file servers, regularized maintenance etc.

Serendib Engineering Group PLC I Annual Report 2016/2017 7

4.4.2.3 Market Risk Management

Although the company has a high reputation, it operates in a very competitive market comprising of hostile players. As
groups businesses are generated from the domestic market, our competition faced is largely through the domestic market.
Several key players in the industry can impact on the upper levels of the pricing. In view of these market pressures, it is
essential that the group focuses on providing competitive products and service.

Risk and Uncertainties Groups Response

The pressure from price competition and increasing Although the expertise gained over two decades
customer demands/expectations are expected to has strengthened our capabilities enabling us to add
have a serious impact in the long run as well as the more values to our customers, the increasing level of
competition within the industry grows as is expected to competition and the saturation levels in the existing
affect the business volumes and prices in selected areas markets has create limitations. To overcome these
of business. challenges the Company has adopted strategies to
diversify its product portfolio and position itself in a
larger market, based on the competitive advantage.
Further Serendib Engineering Group PLC has put
continuous effort in image building and has focusing on
credible business relationship management.

During the year under review the company negotiated

with leading institutions in the country to enter in to
power supply projects and civil engineering projects to
attract available opportunities as much as possible.

4.4.2.4 Financial Risk Management

Financial risks relates to companys ability to meet financial obligations and mitigate credit risks, liquidity risk, interest rate
risk and foreign exchange risk.

To manage these risks, the group's policies and financial authority levels are continuously reviewed. The group's activities
expose to a variety of financial risks including changes in interest rates, foreign exchange rates and liquidity as well as
credit risk.

a. Interest Rate Risk

The group's objective is to maintain an efficient optimal interest cost structure to minimize the adverse effects of interest
volatility.

Risk and Uncertainties Groups Response

The risk would impact the companys interest earnings, The group employs various financial instruments
costs, cash flows and profitability. to manage its exposure to interest rates risk arising
from operational, financial and investing activities.
We continuously negotiate with banks to obtain the
best possible interest rate for group's borrowings and
investments.
b. Foreign Exchange Risk

Risk arising due to foreign currency fluctuations when dealing with foreign clients such as entering in to agency agreements,
sales, purchases mainly via Sterling Pound and US Dollars

Risk and Uncertainties Groups Response

Exchange rate fluctuations are known to create an The group expects to minimize the risks in future by
impact on the cost structure and the bottom line of the using techniques such as hedging the currency: either by
company. forward foreign exchange contracts in respect of actual
or forecasted currency exposures or hedged naturally
by a matching sales or purchase of a matching assets or
liability of the same currency and amount as volumes
increase in future.

8 Serendib Engineering Group PLC I Annual Report 2016/2017

(c) Liquidity Risk

The Group manages its working capital requirements with the view to minimize the cost and maintain a healthy level
of liquidity appropriate to the operations of the Group. Working capital requirements are maintained within the credit
facilities established and are adequate and available to the Group to meet its obligations.

Risk and Uncertainties Groups Response

Inability or difficulty to meet financial obligations as The regular preparation of cash flows and close
they become due would lead to greater financing costs. monitoring will ensure the smooth matching of
collections and borrowings against the expenses. The
close monitoring of trade debtors will also smooth the
cash flows.

4.5 FUTURE OUTLOOK

As we look to the year ahead and beyond, we will continue bottom line. We are happy to say that, we have recorded
to review our strategies in keeping with the changing around Rs.9 Mn net profit during the current financial year
dynamics of the external environment. It is pictured that the after 2 years. When compared with last year it is a very big
growth in the infrastructure, construction and engineering achievement. With the improvement of revenue from SLT
sectors looks set to continue in Sri Lanka, at least for the telecom, Dialog and civil projects, we can assure that we
short to medium term. The primary concern of the group can record a much higher net profit in coming financial
is to be the most sought after engineering organization years.
dedicated to innovation and quality. Reflecting our triple
bottom line focus, the Group will make attempts to be the
Future outlook for the Group is very promising and it will
premier multi-disciplinary engineering organization in Sri
leverage on and continue to strengthen relationships with
Lanka and continue to build long term sustainability.
all its stakeholders which include shareholders, customers,
partners, principals, investors, regulators, employees and
During the year ahead contribution from Civil society at large.
Construction and Power and Energy is expected to
increase while the construction of Telecom infrastructure
and its maintenance will remain our main field of activity.
The company expects a substantial increase in the topline
with it's ongoing restructuring plan resulting healthy

Serendib Engineering Group PLC I Annual Report 2016/2017 9

 05. GOVERNANCE

The Board of Directors guides and supervises the business and operations of the Company to accomplish their operational
goals and objectives in order to maximize shareholder wealth. Further, the board believes that highest standards in
governance are indispensable to create long term value to its stakeholders and to grow in a sustainable manner. The board
comprises of five (05) directors.

5.1 BOARD OF DIRECTORS

Mr. Harsha N. De Silva Ms. D. L. De Silva Mr. H. G. S. Kariyawasam

Prof. R. W. T. M. R. Bandara Dr. A. G. P. A. Gunawansa

10 Serendib Engineering Group PLC I Annual Report 2016/2017

Mr. H. N. De Silva trainer and master facilitator who has a broad experience
Chairman in leadership, strategic management and coaching and
mentoring. He was Member of the National Economic
Mr. Harsha N De Silva is the Chairman and Group Council of Sri Lanka and the Financial System Stability
Managing Director of the Navara Group of Companies, Consultative and the Rating Committees of the Central
which has interest in Financial Services, Engineering, Food Bank of Sri Lanka. Prof. Bandara was also the Chairman of
Industry and Leisure Industry. Sri Lanka Foundation and Senior Economic Adviser of the
Strategic Enterprise Management Agency at the President's
He is a Financial Markets specialist and counts over 23 Office. He has also served as a Senior Director on the
years management experience in the corporate sphere Board of Directors - Merchant Bank of Sri Lanka PLC,
locally and internationally. His Corporate Management Director Merchant Insurance Company Limited, Merchant
experience covers a range of industries including Banking Credit Financial Services Limited, MBSL Savings Bank
and Investment Banking, Housing and Real Estate, FMCG, Limited, National Livestock Development Board, Lanka
Logistics and Apparel. Libya Agricultural And Livestock Development Co. Ltd, Sri
Jayawardenepura General Hospital Board. Prof. Bandara
He is an Associate member of the Chartered Institute of serves as a Director on the Board of Serendib Engineering
Management Accountants (UK) and the Chartered Institute Group PLC, Director / Business Development at Melwire
of Bankers (UK). He is a fellow of the Institute of Certified Group of Sri Lanka, Chairman, Spell Solutions (Pvt) Limited
Management Accountants (SL) and holds a MBA from and Chairman and Managing Partner, Colombo School of
the PIM, University of Sri Jayewardenepura. Mr. De Silva Business Management.
continues to hold Executive and Non- Executive Director
positions in many Listed and unlisted companies. Prof. Bandara earned his B.A Honours degree in
Economics from the University of Peradeniya in 1990 and
Ms. D. L. De Silva subsequently completed two Masters Degrees, M.A in
Non-executive Director Economics from the University of Colombo in 1992 and
MSc in Management of Natural Resources and Sustainable
Ms. Dimanthi L De Silva is a Group Director of Navara Agriculture from the Agricultural University of Norway in
Group of Companies and is the Managing Director of 1995. He earned his PhD in Economics from the University
Alerics Dairy Products Limited. She counts over 23 years of of Queensland, Australia in 2003. Prof. Bandara has
management experience in Consultancy, Finance, Project contributed to a number of National and International
Management and Logistics. Ms. De Silva is a Member of Journals and is the author of a few books written under
the Association of Business Executives (UK) and holds an various themes in Economics and related subjects and
MBA from Edith Cowan University of Western Australia. has also served as the Editor of the Sri Lanka Economic
Journal. He is also currently the Editor of the Management
Mr. H. G. S. Kariyawasam Digest, a premier Management Journal in Sri Lanka.
Non-executive Director
Dr. A. G. P. A. Gunawansa
Having called to the BAR in 1993 Mr. Sagara Kariyawasam Independent Non-executive Director
commenced his career as a State Counsel in 1994 and
possesses more than 23 years of experience as an Attorney Dr. Gunawansa holds a Ph.D in Law from the National
at Law. Mr. Kariyawasam is also a Director of Navara University of Singapore and an LLM in International
Capital Limited and the present Chairman of the Board of Economic Law from University of Warwick England. He is
Navara Securities (Pvt) Limited. an Attorney-at-Law of the Supreme Court of Sri Lanka and
has over 24 years of experience as a Legal Counsel.
He has held the position of Chairman of Lanka Electricity He is also a Member of the Law Reform Sub-Committee for
Company Private Limited (LECO) during 2013/ 2015, Building and Construction Law in Singapore and a member
Chairman of the Education Employees Corporative and of the board of studies, Council of Legal Education on Sri
Thrift Society Limited during 2011/2012 and the Chairman Lanka. In addition to his legal practice, Dr Gunawansa is
of Corporative Wholesale Establishment (CWE) during currently attached to the Lee Kuan Yew School of Public
2009/2010. Policy of the National University of Singapore (NUS) as a
Senior International Research Associate. He is also attached
Mr. Kariyawasam has pursued further studies in to the Centre for Project Management and Construction
Commercial Law and International Trade Law in the Law of the School of Design and Environment of NUS as
National University of Singapore and University of Turin an Adjunct Professor. He is also an Associate Member
Italy. Presently, apart from his professional work Mr. of the Executive Committee of the Asia Pacific Centre of
Kariyawasam serves as a visiting lecturer of Sri Lanka Law Environmental Law.
College.

Prof. R. W. T. M. R. Bandara
Independent Non-executive Director

Prof. Ranjith Bandara is a Professor in Economics attached

to the academic staff of the Department of Economics,
University of Colombo. Prof. Bandara is also a professional

Serendib Engineering Group PLC I Annual Report 2016/2017 11

5.2 CORPORATE MANAGEMENT TEAM

Mr. Naleen De Silva Mr. Harshan Fernando Mr. D. M. G. Dissanayake

Mr. Sanjeewa De Silva Mr. S. B. Wasala Mr. A. C. J. Gunasinghe

Ms. Janaki Rupasinghe

12 Serendib Engineering Group PLC I Annual Report 2016/2017

Mr. A. N. D. De Silva a Bachelor of Information Technology degree from
Group Chief Executive Officer University of Colombo and earned Post graduate Diploma
in Business Administration from University of Wales
Mr. Naleen De Silva is the Group Chief Executive Officer (PGDBA-Wales).
of the Serendib Engineering Group PLC. He counts
for over 25 years of experience in various industries Mr. S. B. Wasala
including Housing & Property Development, Engineering, Project Manager
Manufacturing, Financial Services and Media. He also
specializes in management consultancy, restructuring Mr. S B Wasala counts over 20 years of experience in
and auditing. He is a Fellow Member of the Institute of Telecom Engineering in Local as well as in International
Chartered Accountants of Sri Lanka and the Institute of Organizations. Mr. S B Wasala commenced his Telecom
Certified Management Accountants of Sri Lanka. Mr. career in 1997 and he is currently working as a Project
De Silva holds a MBA from the PIM, University of Sri Manager at Serendib Engineering. He has completed
Jayewardenepura. He is also a member of the Governing his certificate in Civil Engineering and also gained
Council of AAT Sri Lanka. Telecommunication Engineering training at Sri Lanka
Mr. De Silva is presently a Director of Serendib Engineering Telecom.
& Agencies (Pvt) Limited, CCC Plantation Engineering
Limited, Navara Capital Partners Limited, Navara Securities Mr. A. C. J. Gunasinghe
(Pvt) Limited and Alerics Dairy Products Limited. Deputy Finance Manager

Mr. Harshan Fernando Mr. Chinthana Gunasinghe is an associate member of the

Deputy General Manager Institute of Chartered Accountants of Sri Lanka. At present
he is working as the Deputy Finance Manager at Serendib
Mr. Harshan Fernando counts for over 14 years Engineering & Agencies Pvt Ltd,Serendib Engineering
of experience in the corporate sector at different Group PLC and CCC Plantation Engineering Limited. He
capacities. Prior to joining Serendib Engineering Group is also a graduate holding Bachelor of Commerce (special)
he has held various positions in Software Engineering, degree with a Second upper division class from the
Telecommunication Engineering, and International University of Colombo. He completed his articles at the
Business & Product Marketing in mobile communication Ernst & Young having gained wider exposure to different
sector. He holds a Bachelor of Science Engineering degree industry sectors. Meanwhile he counts over 10 years of
from University of Peradeniya and holds his MBA from working experience in the Auditing & Finance fields.
Post Graduate Institute of Management (PIM) University
of Sri Jayawardenepura. At present he is working as the Ms. Janaki Rupasinghe
Deputy General Manager at Serendib Engineering & Assistant Finance Manager
Agencies (Pvt) Ltd.
Ms. Janaki Rupasinghe is an Associate Member of the
Mr. D. M. G. Dissanayake Institute of Chartered Accountants of Sri Lanka & holding a
Assistant General Manager Bachelor of Business Management (Accountancy) Special
Degree from University of Kelaniya. Prior to joining
Mr. Gamini Dissanayake holds a degree of B.Sc. Engineering Serendib Engineering Group, She worked as an Accountant
from the University of Peradeniya. He started his career at St. Anthony's Hydro Power Ltd. (business: developing
as an Assistant Engineer and he counts over 24 years of hydro power projects) and as a Finance Executive at Super
experience in the telecommunication field. Besides he has Serv (Pvt) Ltd (business: industrial catering) and as Audit
served as a consultant for telecom engineering companies Trainee and Audit Senior at Wijeyeratne & Company
and conducted industrial training programs in Road Chartered Accountants. At present she is working as the
Development Authority, Road Construction Development Assistant Finance Manager at Serendib Engineering &
Company & State Engineering Corporation. Attending Agencies (Pvt) Ltd. She counts over 9 years of working
many work shop programs & Project Meetings of several experience in Auditing and Finance field.
types of projects with top management staff of Sri Lanka
Telecom. At present he is working as an Assistant General
Manager at Serendib Engineering & Agencies (Pvt) Ltd.

Mr. Sanjeewa de Silva

Manager Projects Coordination

Mr. De Silva counts over 22 years of management

experience in Telecom/ITC Engineering in Local &
International Organizations. Mr. I. S. De Silva commenced
his Telecom/ITC career in 1995 and also served as Progress
Engineer. He is currently working as the Manager, Projects
Coordination at Serendib Engineering. He was awarded

Serendib Engineering Group PLC I Annual Report 2016/2017 13

5.3 CORPORATE GOVERNANCE REPORT

Serendib Engineering Group PLC is one of the leading Construction and Engineering Companies in the country, listed on
the Colombo Stock Exchange.

This report outlines the Company's Corporate Governance processes and activities for the financial year under review with
reference to the Code of Best Practice of the Institute of Chartered Accountants Sri Lanka, the requirements of the Securities
and Exchange Commission of Sri Lanka and the Colombo Stock Exchange.

The Board has been continuously committed towards improving the internal control systems with the view to provide
transparency and accountability to ensure best practices of Corporate Governance principles. The internal governance
structure of the Company encompasses, the Board of Directors, Board Sub-committees such as Audit Committee,
Remuneration Committee and Related Party Transaction Review Committee. As depicted below the corporate governance
framework shows how effectively managed the above internal governance components through strengthened internal
policies, process and procedures.

5.3.1 Role and Responsibilities of the Board of Group's overall performance objectives, accurate and
Directors efficient financials plans and annual budgets, major
investments, divestment and evaluation and assessment
The core responsibility of the Directors is to exercise their of funding proposals, risk management and ensuring
judgment to act in what they reasonably believe to be the corporate governance practices are adhered to.
best interest of the Company and for the creation of long-
term value and return for shareholders. Further, the Board To ensure the efficiency and effectiveness of the delegation
seeks independent professional advice when deemed of responsibilities and to provide an independent oversight
necessary. of Management, the Board has established a number of
Board Sub Committees, including the Audit Committee,
The Board is responsible for the achievement of the Remuneration Committee and Related Party Transactions

14 Serendib Engineering Group PLC I Annual Report 2016/2017

Review Committee. These committees are primarily 5.3.5 Board Meetings
consists of Non-Executive Directors. The respective roles
and responsibilities of each Board Sub-Committees are During the financial year under review, there were 04
included in this report. Board Meetings. Also, the Board of Directors was provided
with the necessary information well in advance by sending
5.3.2 Board Composition them the Board papers, proposals and discussion topics
in order to ensure the informed deliberation and effective
As at 31st March 2017, the Board comprised of 05 Directors decision making at the time of the Board Meeting.
with 04 of them being Non-Executive Directors and out of
which 02 directors are Independent Non-Executive. 5.3.6 Board Evaluation

Mr. H.N. De Silva served as the Chairman of the Board The Board conducted its annual performance evaluation of
and ensured that all Board Proceddings were conducted the Board and individual director's by end of the financial
in a proper manner. year 2016/17 on a self-appraisal basis. This performance
evaluation carried out on the basis of contribution and
commitment towards achieving corporate goals and
The group policy is to maintain a healthy balance between objectives. Also, the CEO‘s performance appraisal is
the Executive, Non-Executive and Independent Directors carried out by annually against the set strategic targets.
with vast range of expreince and experitse in the industry
including fields of Management, Business, Adminstration,
5.3.7 Independence
Contruction, Law, Banking, Finance and Accounting,
Economics, Marketing, Human Resource Management
and People Mamangement , Project Management and Independence of the Directors has been determined in
Logisctics etc.. The Board as a whole annually assess accordance with the CSE Listing Rules and Independent
the Board composition to ascertain whether the overall Non-Executive Directors have submitted declarations of
experitise expected from the Board matches with the their independence up on appointments and during the
corpoarte strategic requirements in order to achieve year as required.
stipulated corporate objectives and collectively and
indivudually act in accordance with the laws of the The Independence of all its Non-executive directors was
country. reviewed on the basis of criteria given by the CSE Listing
Rules 7.10.4 as follows;
5.3.3 Board Appointments
Non-executive director shall not be considered
There were no new appointments to the Board during the independent if he/she,
financial year 2017. The group practices a formal and
transparent procedure for the new appointments to the a. has been employed by the Listed Entity during the
Board by assessing their Non-executive and Independence period of two years immediately preceding appointment
at the time of appointment. When directors are newly as director;
appointed to the Board, they will get an induction about b. currently has/had during the period of two (2) years
the Group direction, values, culture, policies, governing immediately preceding appointment as a director, a
framework, procedures and operating environment etc… Material Business Relationship with the Listed Entity,
whether directly or indirectly;
Details of the new appointments including a brief resume, c. has a Close Family Member who is a director, Chief
the nature of his expertise in relevant functional areas, Executive Officer (and/or an equivalent position) in the
other directorships and “independent” will be disclosed Listed Entity;
to the company's shareholders and regulatory authorities d. has a 10% Shareholding in the Listed Entity;
at the time of their appointment as per the CSE Continues
e. has served on the board of the Listed Entity continuously
Listing Rules and Code of Best Practice on Corporate
for a period exceeding nine (9) years from the date of
Governance.
the first appointment; provided however, if such director
is re-appointed after a period of two (2) years from the
5.3.4 Retirement of Directors and Re-election date of completion of the preceding nine (9) year period,
f. is employed in another company or business,
In accordance with Article 118 of the Articles of
Association of the Company, Dr A.G.P.A.Gunawansa (i) in which a majority of the other directors of the Listed
retires by rotation and is eligible for re-election. Entity are employed or are directors; or

All Directors including Chairman of the Board is subject to (ii) in which a majority of the other directors of the Listed
re-election at intervals of no more than 03 years. Entity have a 10% Shareholding or Material Business
Relationship; or

Serendib Engineering Group PLC I Annual Report 2016/2017 15

 (iii) that has a Significant Shareholding in the Listed and quality financial reporting within the Group.
Entity or with which the Listed Entity has a Business
Connection;
The Committee ensures the independence of the
g. is a director of another company, external auditors and confirms the compliance with
the requirements under the Companies Act No 07. of
(i) in which a majority of the other directors of the Listed 2007 in relation to appointments, re-appointments and
Entity are employed or are directors; or removal of the External Auditors. The Committee makes
recommendation to the Board as appropriate. The External
Auditors are duly appointed by the shareholders at the
(ii) that has a Business Connection in the Listed Entity or Annual General Meeting of each year.
a Significant Shareholding;

h. has a Material Business Relationship (income or non- The Committee confirms to the best of their knowledge that
cash benefits equivalent to 20% of the director's income) the functions of the Audit Committee are in accordance
or a Significant Shareholding in another company or with the requirements under the Listing Rules of the
business, Colombo Stock Exchange.

(i) in which a majority of the other directors of the Listed

The Audit Committee met four (04) times for the year ended
Entity are employed or are directors; and/or
31st March 2017 and the detailed Audit Committee report
is presented on pages 18 and 19 of this Annual Report.
(ii) which has a Business Connection (transaction value
equivalent to 10% of the turnover) with the Listed 5.3.9 (b) Remuneration Committee
Entity or 10% Shareholding in the same.
Main responsibility of the Remuneration Committee
5.3.8 Board Secretary includes, formulation, establishment of remuneration
policies, reviewing, approving and recommending to the
The Company Secretary functions as the Secretary to board, as well as remunerations of Directors including
the Board. In addition to maintaining board minutes the key position of the Company and employees of the
and records the Board Secretary has provided support Company.
in ensuring that the Board receives timely and accurate
information, advices related to corporate governance 5.3.9 (c) Related Party Transactions Review
matters, Board procedures and regulatory requirements Committee
during the year under reviewed.
The key objective of the Related Party Transactions Review
5.3.9 Board Sub-committees Committee is to ensure that the interests of shareholders
as a whole are taken into account by the company when
The Board has delegated some of its functions to Board entering into Related Party Transactions.
Sub-committees, while retaining the final decision rights.
There are three Board Sub-committees as follows;
Further, the Committee provides an independent review,
approval and oversight of all the proposed related party
5.3.9 (a) Audit Committee transactions to maintain the key principles of the company
“accountability and the transparency”.
The Audit Committee comprises of one (01) Independent
Non-Executive Director and one (01) Non-Executive
The detailed Related Party Transactions Review Committee
Director.
report is presented on page 20 of this Annual Report.
·· Prof. R. W. T. M. R. Bandara
Chairman of the Committee 5.3.10 Accountability and Financial Reporting

·· Mr. H. G. S. Karaiyawasam The Board of Directors are directly responsible for overall
Non-Executive Director company's activities to shareholders of the Company.
In order to compliance with the CSE continuous listing
rule 7.10.6 (a), the company is planning to appoint new Therefore, the Board of Directors and the Management
Independent Non-executive director who possess the pay their utmost priority to provide complete disclosure
membership of recognized professional accounting body of financial and non-financial information in accordance
in Sri Lanka to strengthen the Audit Committee. with commercial practices.

Principally, the Audit Committee monitor and supervise The Board of Directors pay broad attention to the adoption
management's financial reporting process to ensure that , of sound and accurate reporting practices to ensure that an
the accuracy and timely disclosure , transparency, integrity honest and balanced assessment is presented at all times.

16 Serendib Engineering Group PLC I Annual Report 2016/2017

5.3.11 Internal Control Committee where applicable, is responsible in ensuring
the accuracy and timeliness of published information. The
The Board of Directors ensures to maintain strong internal quarterly financial statements along with the explanatory
control system to safeguard shareholders wealth. The notes are disclosed and published to all company's
Board periodically reviews and assesses the internal stakeholders by the Company in accordance with the
control system with a view to increase the efficiency and SLAS, Listing Rules of the Colombo Stock Exchange and
productivity of the Company's wealth. The Board ensures Securities and Exchange Commission of Sri Lanka.
the timely reporting to shareholders and compliance
with the statutory requirements and provisions. Further Furthermore, any other material and financial and non-
the Board confirms that there is an ongoing process to financial information which are price sensitive information
identifying, evaluating and managing the significant risk about the Company is promptly communicated to the CSE
faced by the organization. and such information is also released to all stakeholders
including employees, shareholders and regulatory
The framework is designed to provide reasonable care of, authorities and the press.

·· Efficiency and effectiveness of operations 5.3.14 Investor Relations

·· Reliability of financial and other management
information The Company continuously focuses on maintaining an
active dialogue with shareholders, potential investors,
·· The prevention of fraud.
investment banks, stock brokers and other interested
·· Compliance with relevant national laws and Company parties in ensuring effective investor communications. The
regulations. Primary mode of communication between the Company
and the shareholders are through the Annual Report,
The board has delegated the process of reviewing Interim Reports and Annual General Meeting.
the effectiveness of the internal controls to the Audit
Committee. In order to achieve this objective, there is an Investor
Relations team focuses on the followings;
5.3.12 Code of Business Conduct and Ethics
·· Maintaining and building a healthy relationships
Although there is no written code of conduct of the ·· Keep investors informed about group's performance and
Directors, they are conscious of the duties required of them. obtain constructive feedback
The transactions and activities which were associated
·· Responding to queries and clarifying on concerns of
with the Company are disclosed under the related party
investors
transaction, which is revealed on pages 66-69 under Note
23 of the Financial Statements. ·· Coordinating media relations and investor
communications
The Company complies with the Code of Best Practices on
Corporate Governance jointly issued by the Securities and Further, individual shareholders are encouraged to carry
Exchange Commission of Sri Lanka (SEC) and Institute of out adequate analysis or seek independent advice on their
Chartered Accountants of Sri Lanka (ICASL) as disclosed investing, holding or divesting decisions at all times.
under the Compliance Report on page No 23.
5.3.15 Compliance with the Colombo Stock Exchange
5.3.13 Disclosures to the Public, SEC and CSE Rules on Corporate Governance

The Board of Directors, in conjunction with the Audit Levels of Compliance with the CSE Listing Rules and Code
of Best Practices on Corporate Governance are given in
the Compliance Report under section 5.8 in this report.

Serendib Engineering Group PLC I Annual Report 2016/2017 17

5.4 AUDIT COMMITTEE REPORT

I am pleased to present the report of the Audit Committee External Auditors will be invited on a need basis.
for the financial year ended 31st March 2017. During
the year under review, the committee has successfully
The results of the review have been communicated to the
reviewed and reported to the Board on its functions in order
Board of Director verbally in quarter basis.
to ensure accurate and timely disclosure and transparency,
integrity and quality of financial reporting. Further, the
Audit Committee also assesses the effectiveness of the Financial Reporting
risk review process and systems of internal control on a ·· The Committee has reviewed and deliberated the Interim
regular basis and this report describes its key functions and and Annual Financial Statements of the Company prior
performance during the year ended 31st March 2017. to publication and has recommended same to the Board
for approval and publication.
Composition of the Committee
·· Review of the preparation of the Annual report to
ensure the reliability of the process, consistency of the
The Audit Committee comprises of one (01) Independent accounting policies and methods and compliance with
Non-Executive Director and one (01) Non-Executive Sri Lanka Accounting Standards.
Director at the year ended 31st March 2017 as follows;
Internal Control System
·· Prof. R. W. T. M. R. Bandara - Independent Non-
Executive Director ·· The Committee is satisfied that the control environment
prevailing in the Company provides reasonable but not
·· Mr. H. G. S. Karaiyawasam - Non-Executive Director
absolute assurance that the financial position of the
Company is adequately monitored and that the systems
Prof R. W. T .M. R. Bandara is appointed as the Chairman are in place to minimize the impact of identifiable risks.
of the Committee by the Board and the company is
planning to appoint new Independent Non-executive ·· The Committee also monitors the timely payments of all
director who possess the membership of recognized statutory obligations.
professional accounting body in Sri Lanka to strengthen ·· The Committee also monitors the effectiveness of the
the Audit Committee. internal and financial control procedures on the basis
of the reports and findings submitted by the Internal and
Role of the Committee External Auditors of the Company.

The Audit Committee has written terms of reference and is External Audit
empowered to examine any matters relating to the financial
affairs of the Company and its internal and external audits. The Committee has reviewed the services provided by
Its duties include reviews of financial statements, internal the External Auditors to the Company to ensure their
control procedures and risk management, accounting independence as Auditors has not been compromised. As
policies and compliance with Sri Lanka Accounting far as the Directors are aware, the Auditors doesn't not
Standards. It also reviews the adequacy of systems for have any relationship (other than that of an Auditor) with
compliance with the Companies Act No. 07 of 2007, other the Company other than disclosed above. The Auditors
relevant legal, regulatory and ethical requirements and also do not have any interest in the Company. For the said
company policies. The Committee endeavors to assist the reasons the Committee determined that the Auditors are
Directors to discharge their duties and responsibilities in Independent.
respect of regulatory compliance and risk management as
well as performance of the Company's External Auditors.
The performance of the External Auditors has been
evaluated and the Audit Committee has recommended
Meeting Attendance to the Board of Directors that V.S.& Associates, Chartered
Accountants be re-appointed as Auditors for the financial
The attendance of the Directors at the Audit Committee year ending 31st March 2018 at remuneration to be
meeting during the year is tabulated below; determined by the Board, subject to the approval of the
Shareholders at the Annual General Meeting.
Eligible to
Name of the Director Attended
attend
Prof. R. W. T. M. R. Bandara 4 4
…………………………………………………..
Mr. H. G. S. Kariyawasam 4 4 Prof. R. W. T. M. R. Bandara
Chairman of the Audit Committee
The Group Chief Executive Officer and Deputy Finance
Manager attend meetings by invitation. Representatives of 25th August 2017
Colombo.

18 Serendib Engineering Group PLC I Annual Report 2016/2017

5.5 REMUNERATION COMMITTEE REPORT

I am pleased to present the report of the Remuneration The Group Chief Executive Officer, Group Human
Committee which describes its key functions and Resource Manager and the Deputy Finance Manager
performance during the year ended 31st March 2017. attended meetings by invitation.

The Composition of the Committee Remuneration Policy

The Remuneration Committee comprises of two (02) The Remuneration Committee strongly believes that the
Independent Non-Executive Directors and one (01) Non- remuneration policy should be in par with the industry
Executive Director. standards in order to motivate, attract and retain the best
professional and managerial talent and expertise. The
·· Prof. R. W. T. M. R. Bandara recommendations of the Committee are implemented with
Independent Non-Executive Director the approval of the Board of Directors.

·· Mrs. D. L. De Silva
Procedure
Non-Executive Director

·· Dr. A. G. P. A. Gunawansa The Committee is fulfilling the above tasks by reviewing

Independent Non-Executive Director the information relating to retirement and remuneration
of employees. Extension of services not exceeding one
Prof. R. W. T. M. R. Bandara served as the Chairman of the year is considered on a case by case basis over the
Remuneration Committee while Group Chief Executive retirement age of 55 years. The Remuneration packages
Officer functioned as the Secretary to the Remuneration are decided in par with market rates and practices and
Committee except when own evaluation and remuneration similar to other establishments. The Committee determines
was under discussion. Deputy Finance Manager assisted the revision/increments based on performance and makes
the Committee by providing the relevant information for recommendation to the Board of Directors and upon
their decision within the terms of reference approved by consideration of such recommendations the Board makes
the Board. the final determination.

Role of the Committee

The Remuneration Committee is responsible for

recommending remuneration payable to Executive
Directors, Non-executive Directors and Key managerial
personnel including the Group Chief Executive Officer …………………………………………………..
based on performance parameters. Also, the Committee
is responsible for the remuneration structure of the Prof. R. W. T. M. R. Bandara
employees of the Company. Chairman of the Remuneration Committee

25th August 2017

Responsibilities of the Committee include a review of and Colombo.
recommendation to the Board on;

·· Remuneration policy and framework

·· Senior executive's remuneration and incentives
schemes.

Meeting Attendance

The attendance of the Committee members of the

Remuneration Committee during the year under reviewed
is tabulated below;

Eligible to
Name of the Director Attended
attend
Prof. R. W. T. M. R. Bandara 2 2
Mrs. D. L. De Silva 2 2
Dr. A. G. P. A. Gunawansa 2 2

Serendib Engineering Group PLC I Annual Report 2016/2017 19

5.6 RELATED PARTY TRANSACTIONS REVIEW COMMITTEE REPORT

I am pleased to present the report of the Related Party being entered into or, if the transaction is expressed to be
Transactions Review Committee for the financial year conditional on such review, prior to the completion of the
ended 31st March 2017. During the year, the Committee transaction.
has continued to review and report to the Board on
company's as well as Group's Related Party Transactions
As at 01st January 2014, LKAS 24 – ‘Related Party
in order to maintain the best interest of our shareholders.
Disclosures defines the ‘related party transactions' as
The Related Party Transactions Review Committee was
follows;
established in terms of the Code of Best Practice on
Related Party Transactions issued by the Securities and
Exchange Commission of Sri Lanka and the Section 9 of the “A related party transaction is a transfer of resources,
Continues Listing Rules of the Colombo Stock Exchange. services or obligations between related parties, regardless
of whether a price is charged”.
The Composition
Such transactions are also disclosed to stakeholders
The Related Party Transactions Review Committee through the Company's Financial Statements.
comprises of two (02) Independent Non-Executive
Directors during the year under review and the committee Duties of the Committee
comprised the following members;
·· Reviewing in advance all proposed related party
·· Prof. R. W. T. M. R. Bandara transactions of the Company except those explicitly
Independent Non-Executive Director exempted by the terms of Rule 9.5 of the Listing Rules of
the Colombo Stock Exchange.
·· Dr. A. G. P. A. Gunawansa
Independent Non-Executive Director ·· Reviewing if there are any proposed material changes of
previously reviewed related party transaction before the
Prof. R. W. T. M. R. Bandara served as the Chairman of the completion of the transaction.
Related Party Transactions Review Committee. ·· To determine whether related party transactions
require the approval of the Board or shareholders of the
Role of the Committee Company.
·· Review and revise policies and procedures on related
The role of the Related Party Transactions Review party transactions as and when require.
Committee is to ensure that the interests of shareholders
as a whole are taken in to account by a listed entity when ·· Establishing guidelines for the Senior Management to
entering into related party transactions. follow regarding dealings with recurrent related party
transactions
Meeting Attendance ·· To ensure that immediate market disclosures and
disclosures in the Annual Report are made as required
The attendance of the Committee members of the Related by the applicable rules and regulations in a timely
Party Transactions Review Committee during the year manner.
under reviewed is tabulated below;
Declaration

Eligible to The Board of Directors have also declared in the Annual

Name of the Director Attended
attend Report that there were no Recurrent and Non-Recurrent
Prof. R. W. T. M. R. Bandara 4 4 related party transactions which exceeded the respective
thresholds mentioned in Section 9 of the CSE Listing Rules
Dr. A. G. P. A. Gunawansa 4 4 and that the Company has complied with the requirements
of the Listing Rules on Related Party Transactions.

The Group Chief Executive Officer and the Deputy

Finance Manager are permanent invitees for all Committee
meetings.
…………………………………………………..

Policies and Procedures Prof. R. W. T. M. R. Bandara

Chairman of the Related Party Transactions Review
All related party transactions must be reported to the Committee
Related Party Transactions Committee and referred for
approval by the Committee either prior to the transaction 25th August 2017
Colombo

20 Serendib Engineering Group PLC I Annual Report 2016/2017

5.7 DIRECTORS’ STATEMENT ON INTERNAL CONTROLS

Responsibility accordance with the annual audit plan which approved

by the Board of Audit Committee. The internal audit
In line with Section D.1.3 of Code of Best Practice on plan that covers internal audit coverage and scope of
Corporate Governance jointly issued by the Securities and work is presented for Audit Committee and the Board.
Exchange Commission of Sri Lanka and the Institute of Further, the annual audit plan is reviewed and approved
Chartered Accountants of Sri Lanka, the Board of Directors by the Board of Audit Committee.
presents this report on Internal Control. ·· Internal audit reports are submitted to the Audit Committee
during its quarterly meetings which encompasses the
The Board of Directors are responsible for the adequacy audit findings together with recommendations thereon.
and effectiveness of the Serendib Engineering Group The senior and functional line management are tasked
PLC systems of Internal Controls. However, the Board to ensure management action plans are carried out
recognizes that such systems are designed to manage the effectively and regular follow up audits are performed to
Company's key areas of risk within an acceptable risk monitor the continued compliance.
profile, rather than to eliminate the risk of failure to achieve ·· In addition to this internal control mechanism, the
the strategies and corporate objectives of the Company. Company also received extensive and detailed reports,
Accordingly, the systems implemented can provide only management letters from its external Auditors that
reasonable but not absolute assurance against material primarily focuses on financial controls. The management
misstatement of management and financial information letters were also presented to the Audit Committee
and records or against financial losses of fraud. for deliberations. In the event of non-compliance,
appropriate corrective actions have been taken in
Whilst the board has overall responsibility for the addition to amendments to the relevant procedures, if
company's system of internal controls, it has delegated required.
the implementation of these internal control systems to ·· The Board and employees of the Company are
the management. The board has established an ongoing committed to adhere to the best practice in corporate
process for identifying, evaluating and managing the risks governance and observing the highest standards of
faced by the Company as stated in the section of Integrated integrity and behavior in all activities conducted by the
Risk Management in this annual report. Moreover, the Company, including relationships with its customers,
monitoring process includes enhancing the systems of suppliers, shareholders, employees, business partners
internal controls as and when there are changes to business and within the community and environment in which
environment or regulatory guidelines. The Management company operates.
assists the Board in the implementation of the Board's
policies and procedures to mitigate and control risks. ·· Risk Management is vital for continued profitability
Further to implement the recommendation, the internal and enhancement of shareholder value; hence Risk
control systems are subject to the board's regular review Management is practiced within the Group on an
with a view towards appraising the effectiveness of these interactive basis. The Board regards risk management as
systems within the Company. an integral part of its business operation where oversee
the implementation of the risk management framework,
periodically review the risk management processes and
Key Features of the process adopted in applying and ensure that on-going measures taken were adequate
reviewing the design and effectiveness of the Internal to manage, address or mitigate the identified risks.
Control System on Financial Reporting All new and major investments have to observe a
process of approval that includes an evaluation of
the associated risks. A Corporate risk Management
The key processes that have been established in reviewing
Framework was developed and documented via a
the adequacy and integrity of the system of internal controls
Corporate Risk Management Manual which sets out in
with respect to financial reporting include the following;
a comprehensive manner the process adopted by the
·· The Board Committees established by the Board of the Company towards risk identification, evaluation and
Company assists the Board in ensuring the effectiveness control and monitoring. Further detailed information
of the Groups' daily operations and that the Group on the Company's risk management activities are
operations are in accordance with the corporate highlighted in the Integrated Risk Management Report
objectives, strategies and the annual budget as well on pages 6 To 9 of this Annual Report.
as the policies and business directions that have been
approved. Confirmation

·· The internal Auditor of the Group checks for compliance

with policies and procedures and the effectiveness of Based on the above processes, the Board of Directors
the internal control systems on an ongoing basis using confirm that the financial reporting system of the Group has
samples and rotational basis and highlights significant been designed to provide reasonable assurance regarding
findings in respect of any non-compliance. Audits are the reliability of financial reporting and the preparation of
carried out on all subsidiaries and within the Group in Financial Statements for external purposes has been done

Serendib Engineering Group PLC I Annual Report 2016/2017 21

in accordance with the Sri Lanka Accounting Standards
(SLFRS/LKAS) and other regulatory requirements.

Review by External Auditors

The External Auditors have reviewed the Internal Control

System of the Group and reported to the Board of Directors
that nothing has come to their attention that causes them
to believe that the statement is inconsistent with their
understanding of the process adopted by the Board in
the review of the design and effectiveness of the internal
control system over financial reporting of the Company.

By order of the Board of Directors of Serendb Engineering

Group PLC,

...................................... ......................................

H. N. De Silva H. G. S. Kariyawasam
Chairman Director

......................................

Prof. R. W. T. R. Bandara
Chairman – Audit Committee

25th August 2017

Colombo.

22 Serendib Engineering Group PLC I Annual Report 2016/2017

5.8 COMPLIANCE REPORT

5.8.1 Statement of Compliance under Section 7.10 of the Rules of the Colombo Stock Exchange (CSE) on
Corporate Governance.

Relevant CSE Rule Degree of SEG Action

Section Compliance
7.10 Compliance
a./b./c. Compliance with Corporate Governance Complied The Group is in compliance with the
Rules with Corporate Governance Rules and deviations
are explained where applicable.
7.10.1 Non-Executive Directors
a./b./c. At least two members or 1/3 of the Board, Complied 4 out of 5 Board Members are Non-Executive
which is higher should be Non-Executive with Directors. SEG concerns to maintain an
Directors appropriate mix of skills and experience in
the Board.
7.10.2 Independent Directors
a. 2 or 1/3 of Non-executive directors, which is Complied 2 out of 4 Non-Executive Directors are
higher shall be “Independent” with Independent
b. Each Non-Executive Director to submit Complied Independence of the Directors has been
a signed and dated declaration of his/her with determined in accordance with CSE Listing
independence or non-independence in the Rules (Appendix 7A) and 2 independent
prescribed format Non-Executive Directors have submitted
signed confirmation of their independence.
7.10.3 Disclosures Relating to Directors
a./b. The Board shall annually make a Complied All Independent Non-Executive Directors
determination as to the independence of with have submitted declarations as to their
the Non-executive Directors and names of Independence up on appointments and
Independent Directors should be disclosed subsequently review the independence of
in the Annual Report each non-executive as required.
c. A brief resume of each Directors should be Complied Refer Board of Directors section of the
included in the Annual Report including the with Annual Report.
Director's experience
d. Forthwith provide a brief resume of new Complied A brief resume of new directors and the
Directors appointed to the Board with details with appointments were submitted to the CSE
specified in 7.10.3 a, b and c to the CSE when such appointments were made.
7.10.4 Criteria for Defining Independence
a. - h. Requirements for meeting the criteria to be Complied 2 directors are qualified as “Independent” as
an Independent Director with per the criteria given under Listing Rules
7.10.5. Remuneration Committee
a.1 Remuneration Committee shall comprise Complied Remuneration Committee is comprises of 2
of Non-Executive Directors, a majority of with Independent Non-Executive Directors and 1
whom will be independent Non-executive Director
a.2 One Non-Executive Director shall be Complied Refer Remuneration Committee report of the
appointed as Chairman of the Committee by with Annual Report
the Board of Directors
b. Remuneration Committee shall recommend Complied Refer Remuneration Committee report of the
the remuneration of the Chief Executive with Annual Report
Officer and the Executive Directors
c.1 Names of Remuneration Committee Complied Refer Remuneration Committee report of the
members with Annual Report
c.2 Statement of Remuneration policy Complied Refer Remuneration Committee report of the
with Annual Report
c.3 Aggregate remuneration paid to Executive Complied Refer Director's Remuneration sub section
Directors and Non-Executive Directors with under Annual report of the Board on the State
of Affairs of the Annual Report
7.10.6 Audit Committee

Serendib Engineering Group PLC I Annual Report 2016/2017 23

 a.1 Audit Committee shall comprise of Non- Complied Audit Committee is comprises of 1
Executive Directors, a majority of whom with Independent Non-Executive Director and 1
should be independent Non-executive Director as stated in the Audit
Committee Report of the Annual Report
a.2 A Non-Executive Director shall be the Complied Chairman of the Audit Committee is an
Chairman of the committee with Independent Non-Executive Director
a.3 Chief Executive Officer and Chief Financial Complied The Chairman, Chief Executive Officer and
Officer should attend Audit Committee with Group Chief Financial Officer attended
meetings most of the Audit Committee meetings by
invitation
a.4 The Chairman of the Audit Committee or Not Refer Report of the Audit Committee in the
one member should be a member of a Complied Annual Report
professional accounting body
b. Functions of the Audit Committee Complied Refer Report of the Audit Committee in the
with Annual Report
b.1 Overseeing of the preparation, presentation Complied The Audit Committee assists the Board in
and adequacy of disclosures in the financial with fulfilling its oversight responsibilities for the
statements in accordance with SLFRS/LKAS integrity of the financial statements of the
Company and the Group
b.2 Overseeing the compliance with financial Complied The Audit Committee has the overall
reporting requirements, information with responsibility for overseeing the preparation
requirements as per laws and regulations of financial statements in accordance with
the laws and regulations of the country and
also recommending to the Board, on the
adoption of best accounting policies
b.3 Ensuring the internal and risk management Complied The Audit Committee assesses the role and
controls are adequate to meet the with the effectiveness of the Group Business
requirements of the SLFRS/LKAS Process Review division which is largely
responsible for internal control and risk
management
b.4 Assessment of the independence and Complied The Audit Committee assesses the external
performance of the entity's External Auditors with auditor's performance, qualifications and
independence
b.5 Make recommendations to the Board Complied The Committee is responsible for
pertaining to External Auditors with appointment, reappointment, removal of
External Auditors and also the approval of the
remuneration and terms of Engagement
c.1 Names of the Audit Committee members Complied Refer Board Sub Committees section of the
shall be disclosed with Annual Report
c.2 Audit Committee shall make a determination Complied Refer Report of the Audit Committee in the
of the independence of the external auditors with Annual Report
c.3 Report on the manner in which Audit Complied Refer Report of the Audit Committee in the
Committee carried out its functions with Annual Report

24 Serendib Engineering Group PLC I Annual Report 2016/2017

5.8.2 Compliance with the Code of Best practice of Corporate Governance Issued jointly by the Securities and
Exchange Commission of Sri Lanka (SEC) and the Institute of Chartered Accountants of Sri Lanka (ICASL).

A. Directors

Relevant CSE Rule Degree of SEG Action

Section Compliance
A.1 The Board - Effective Board , which should direct, lead and control the Company
A.1.1 Regular Board meetings and supply of Complied Refer page no 15 section 5.3.5
information with
A.1.2 The Board should be responsible for matters Complied Refer page no 14 section 5.3.1
including , formulation and implementation with
of a sound business strategy, Skills and
succession of the Management team,
effective systems to secure integrity of
information, internal controls, business
continuity and risk management,
compliance with laws, regulations and
ethical standards, stakeholder interests,
recognize sustainable business development
in corporate strategy, adopting appropriate
accounting policies and fostering
compliance with financial regulations and
fulfilling other Board functions
A.1.3 Collectively and individually act in Complied Refer page no 14 section 5.3.1
accordance with the laws of the country and with
obtain professional advice as and where
necessary
A.1.4 Access to advice and services of the Complied Refer page no 16 section 5.3.8
Company Secretary with
A.1.5 Bring independent judgment on various Complied All directors possess the skills and expertise
business issues and standards of business with in diverse fields and contributed by giving
conduct their independent judgments and ideas when
required.
A.1.7 Board induction and training Complied Refer page no 15 section 5.3.3
with
A.2 Chairman and Chief Executive Officer (CEO)
A.2.1 Justification for combining the roles of the N/A N/A
Chairman and the CEO
A.3 Chairman's Role
A.3.1 The Chairman should ensure Board Complied Refer page no 15 section 5.3.2
proceedings are conducted in a proper with
manner
A.4 Financial Acumen
A.4 The Board should ensure the availability Complied Refer page no 15 section 5.3.2
within it of those with sufficient financial with
acumen and knowledge to offer guidance on
matters of finance
A.5 Board Balance
A.5.1 In the event the Chairman and CEO is the N/A The positions of the Chairman and the CEO
same person, Non-Executive Directors have been separated as outlined on pages 10
should comprise a majority of the Board to 13
A.5.2 Where the constitution of the Board of N/A N/A
Directors includes only two Non-Executive
Directors, both such Non-Executive
Directors should be “Independent”
A.5.3 Definition of Independent Directors Complied Refer page no 15 section 5.3.7
with
A.5.4 Declaration of Independent Directors Complied Refer page no 15 section 5.3.7
with

Serendib Engineering Group PLC I Annual Report 2016/2017 25

 A.5.5 Board determinations on independence Complied Refer page no 15 section 5.3.7
or non-independence of Non-Executive with
Directors
If an Alternate Director is appointed by a N/A N/A
NED such Alternate Director should not be
an Executive of the company
In the event the Chairman and CEO is the N/A N/A
same person, the Board should appoint one
of the Independent Non-Executive Directors
to be the “Senior Independent Director”
The Senior Independent Director should N/A N/A
make himself available for confidential
discussions with other Directors who may
have concerns
The Chairman should hold meetings with Complied Chairman meets Non-Executive Directors
the Non-Executive Directors only, without with when it is required
the presence of Executive Directors
A.6 Supply of Information
A.6.1 Board should be provided with timely Complied Refer page no 15 section 5.3.5
information to enable it to discharge its with
duties
A.6.2 Timely submission of the minutes, agenda Complied Refer page no 15 section 5.3.5
and papers required for the Board Meeting with
A.7 Appointments to the Board
A.7.1 Nomination Committee to make N/A The Company doesn't not have a Nomination
recommendations on new Board Committee as we believe given the structure
appointments of the Company it would not be required
A.7.2 Assessment of the capability of Board to Complied Refer page no 15 section 5.3.6
meet strategic demands of the Company with
A.7.3 Disclosure of new Board member profile Complied Refer page no 15 section 5.3.3
and Interests with
A.8 Re-election
A.8.1/ Re-election at regular intervals and should Complied Refer page no 15 section 5.3.4
A.8.2 be subject to election and re-election by with
shareholders
A.9 Appraisal of Board Performance
A.9.1 The Board should annually appraise itself on Complied Refer page no 15 section 5.3.6
its performance in the discharge of its key with
responsibilities
A.9.2 The Board should also undertake an annual Complied Refer page no 15 section 5.3.6
self-evaluation of its own performance and with
that of its Committees
A.9.3 The Board should state how such Complied Refer page no 15 section 5.3.6
performance evaluations have been with
conducted
A.10 Disclosure of Information in respect of Directors
A.10.1 Profiles of the Board of Directors and Board Complied Refer page no 15 section 5.3.5
meeting attendance with
A.11 Appraisal of Chief Executive Officer (CEO)
A.11.1/ Appraisal of the CEO against the set strategic Complied Refer page no 15 section 5.3.6
A.11.2 targets with

B. Director's Remuneration

Relevant Degree of
Rule SEG
Section Compliance
B.1 Remuneration Procedure
The Board of Directors should set up a Complied
B.1.1 Refer page no 19 section 5.5
Remuneration Committee with

26 Serendib Engineering Group PLC I Annual Report 2016/2017

 Remuneration Committees should consist Complied
B.1.2 Refer page no 20 section 5.5
exclusively of Non-Executive Directors with
The Chairman and members of the
Complied
B.1.3 Remuneration Committee should be listed in Refer page no 20 section 5.5
with
the Annual Report each year
Determination of the remuneration of Non- Complied
B.1.4 Refer page no 20 section 5.5
Executive Directors with
The Remuneration Committee should consult
the Chairman and/or CEO about its proposals Complied
B.1.5 Refer page no 20 section 5.5
relating to the remuneration of other with
Executive Directors
B.2 The level and make up of remuneration
B.2.1 to Performance related elements in pay Complied
Refer page no 19 section 5.5
B.2.4 structure and alignment to industry practices with
Executive share options should not be offered
B.2.5 N/A N/A
at a discount
Designing schemes of performance-related Complied
B.2.6 Refer page no 19 section 5.5
remuneration with
B.3 Disclosure of Remuneration
Refer page no 53 note no 06 of the financial
Disclosure of remuneration policy and Complied
B.3.1 statements for the year ended 31st March
aggregate remuneration with
2017

C. Relations with Shareholders

Relevant Rule Degree of SEG

Section Compliance
C.1 Constructive use of the AGM and conduct of General Meetings
C.1.1 Counting of proxy votes Complied Proxy votes, those for and against and
with withheld are counted
C.1.2 Separate resolution to be proposed for each Complied Separate resolutions are proposed for each
item with item
C.1.3 Heads of Board Sub-Committees to be Complied All the Executive and Non-Executive
available to answer queries with Directors are available to answer queries or
concerns
C.1.4 Notice of Annual General Meeting to be Complied Notice of AGM and related documents
sent to shareholders with other papers as per with are sent to the shareholders along with the
statute Annual Report within the specified time
C.2 Communication with shareholders
C.2.1 Channel to reach all shareholders to Complied Refer page no 17 section 7.3.14 of this
disseminate timely information with Annual Report
C.2.2 Policy and methodology of communication Complied Refer page no 17 section 7.3.14 of this
with shareholders and implementation with Annual Report
C.3 Major and material Transactions including related party transactions
C.3.1 Disclosure of all material facts involving all Complied Refer page no 66 , note no 23 of the
material transactions including related party with financial statement for the year ended 31st
transactions March 2017

D. Accountability and Audit

Relevant Rule Degree of SEG

Section Compliance
D.1 Financial Reporting
D.1.1 Disclosure of interim and other price- Complied Refer page no 17 section 5.3.13
sensitive and statutorily mandated reports to with
Regulators

Serendib Engineering Group PLC I Annual Report 2016/2017 27

 D.1.2 Declaration by the Directors that the Complied Refer Annual Report of the Board of
company has not engaged in any activities, with Directors on page 30
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
D.1.3 Statement of Directors' responsibility Complied Refer Annual Report 2016/17 – Statement on
with Director's Responsibility on page no 33
D.1.4 Management Discussion and Analysis Complied Refer Annual Report 2016/17 – Management
with Discussion and Analysis on page no 4
D.1.5 The Directors should report that the Complied Refer Annual Report 2016/17 – Statement on
business is a going concern, with supporting with Director's Responsibility on page no 33
assumptions or qualifications as necessary
D.1.7 Disclosure of Related Party Transactions Complied Refer page no 66 , note no 23 of the
with financial statement for the year ended 31st
March 2017
D.2 Internal Control
D.2.1 Annual review of effectiveness of system of Complied Refer Directors Statement on Internal
Internal Control and report to shareholders as with Controls on page no 20 Section 5.6 of this
required Annual Report
D.2.2 Internal Audit function Complied Refer Directors Statement on Internal
with Controls on page no 20 Section 5.6
D.2.3/ Maintaining a sound system of internal Complied Refer Directors Statement on Internal
D.2.4 control with Controls on page no 20 Section 5.6 of this
Annual Report
D.3 Audit Committee
D.3.1 The Audit Committee should be comprised of Complied Refer Audit Committee Report on page no
a minimum of two with 18 Section 5.4 of this Annual Report
D.3.2 Terms of reference, duties and responsibilities Complied Refer Audit Committee Report on page no
with 18 Section 5.4 of this Annual Report
D.3.3 The Audit Committee to have written Terms Complied Refer Audit Committee Report on page no
of Reference covering the salient aspects with 18 Section 5.4 of this Annual Report
D.3.4 Disclosure of Audit Committee membership Complied Refer Audit Committee Report on page no
with 18 Section 5.4 of this Annual Report
D.4 Code of Business Conduct and Ethics
D.4.1 Availability of a Code of Business Conduct Complied There is no written Code of Business
and Ethics and an affirmative declaration that with Conduct. (page no 17 section 5.3.12)
the Board of Directors abide by such Code
D.4.2 The Chairman must certify that he/she is Complied Refer Corporate Governance Report on
not aware of any violation of any of the with page no 14 to 17 Section 5.3 of this Annual
provisions of this Code Report
D.5 Corporate Governance Disclosures
D.5.1 The Directors should include in the Complied Refer Corporate Governance Report on
company's Annual Report a Corporate with page no 14 to 17 Section 5.3 of this Annual
Governance Report Report

E. Institutional Investors

Relevant Rule Degree of SEG

Section Compliance
E.1 Shareholder Voting
E.1.1 Conducting regular and structured dialogue Complied There is an Investor Relations team
with shareholders based on a mutual with to conduct regular discussions with
understanding of objectives shareholders as and when applicable
E.2 Evaluation of Corporate Disclosures

28 Serendib Engineering Group PLC I Annual Report 2016/2017

 E.2 When evaluating companies' governance Complied Refer page no 17 Section 5.3.12 of this
arrangements, particularly those relating with Annual Report
to Board structure and composition,
institutional investors should be encouraged
to give due weight to all relevant factors
drawn to their attention

F. Other Investors

Relevant CSE Rule Degree of SEG Action

Section Compliance

F.1 Investing Divesting Decision

F.1 Individual shareholders, investing directly in Complied Refer page no 17 section 5.3.14 of this
shares of companies should be encouraged with Annual Report
to carry out adequate analysis or seek
independent advice in investing or divesting
decisions
F.2 Shareholder Voting
F.2 Individual shareholders should be Complied Complied at AGM
encouraged to participate in with

Serendib Engineering Group PLC I Annual Report 2016/2017 29

 06. FINANCIAL STATEMENTS OF THE COMPANY

6.1 ANNUAL REPORT OF THE BOARD OF Retirement Of Directors And Their Re-Election
DIRECTORS
In accordance with Article 118 of the Articles of
The Directors of Serendib Engineering Group PLC, present Association of the Company, Dr A. G. P. A. Gunawansa,
their report together with the Audited Financial Statements retires by rotation and is eligible for re-election.
for the year ended 31st March 2017.
Directors And CEO's Shareholdings
The Report contains pertinent information and disclosures
required under the Companies Act No.07 of 2007, 2016/ 2017 2015/2016
the Listing Rules of the Colombo Stock Exchange, Name of the Director No of
recommended Best Practices of Corporate Governance No of Shares
Shares
and the requirements of the Sri Lanka Accounting
Mr. H. N. De Silva Nil Nil
Standards.
Mrs. D. L. De Silva Nil Nil
Mr. H. G. S. Kariyawasam Nil Nil
Principal Activities
Prof. R. W. T. M. R. Bandara Nil Nil
Dr. A. G. P. A. Gunawansa Nil Nil
The Company is engaged in diverse engineering activities.
Mr. A. N. D. De Silva Nil Nil
Total Nil Nil
Results And Appropriations

Director's Remuneration
The Financial Statements of the Company are given on
pages 35-74 of this Annual Report.
The remuneration paid to the Executive and Non-Executive
Directors during the financial year under review is given
Review Of Operations & Performance in Note 06 to the Financial Statements. The Remuneration
Policy adopted by the Company is given in Note 19 to the
The Chairman's Review provides an overall assessment Accounts.
of the Company's operations and performance during the
financial year under review on Pages 1 to 3. Dividends

Statement Of Director’s Responsibilities The Board of Directors do not recommend the payment of
dividend for the Financial year under review.
The Directors Responsibilities in compliance with the
requirements in preparation of financial statements are set Turnover
out on Page 33.

The Net income of the Company after deducting Turnover

Directorate Tax and Defense levy was Rs. 317 Mn.

The Members of the Board during the financial year under Taxation
review were as follows;

The Tax position of the Company is given in Note 07 to the

Mr. H. N. De Silva - Chairman Financial Statements

Ms. D. L. De Silva - Non Executive Director

Major Shareholdings
Mr. H. G. S. Kariyawasam - Non Executive Director
The 20 major shareholders of the Company as at 31st March
Prof. R. W. T. M. R. Bandara - Non Executive/ 2016 and 2017 are listed on Page 75 in the “Shareholder
Independent Director Information”.

Dr. A. G. P. A. Gunawansa - Non Executive/ Shareholding

Independent Director
As at 31/03/2017 there were 624 Registered Shareholders.
The Profile of the Board of Directors of the Company are The distribution, categories and location of shareholders
given on Pages 10 to 11. are indicated on Pages 75, 76, 77 under “Shareholder
Information”.

30 Serendib Engineering Group PLC I Annual Report 2016/2017

Stock Market Information Audit Committee

Information relating to earnings, dividends, net assets per The Audit Committee comprises of Mr. H. G. S.
share, share trading and Public Holding are given on Page Kariyawasam and Prof. R. W. T. M. R. Bandara of whom
77. Prof. Bandara functions as the Chairman of the Committee.
The report of the Audit Committee is given on Page 18.
Stated Capital
Remuneration Committee
The Stated Capital of the Company as at 31st March
2017, was Rupees One Hundred & Seventy Eight Million The Remuneration Committee comprises of Prof. W. T.
One Hundred & Seven Thousand Nine Hundred & Ten M. R. Bandara, Mrs D. L. De Silva and Dr A. G. P. A.
(Rs.178,107,910/-) representing 32,383,250 Ordinary Gunawansa of whom Professor Bandara functions as the
Shares. The structure of the Stated Capital is given in Note Chairman of the Committee.
17 to the Accounts.
Related Party Transactions Review Committee
Property, Plant And Equipment
The Related Party Transaction Review Committee comprise
An analysis of the property, plant and equipment of the of Non-Executive, Independent Directors namely Prof. R.
Company, additions and disposals made during the year W. T. M. R. Bandara and Dr. A. G. P. A. Gunawansa. Prof.
and depreciation charged during the year are set out in Bandara functions as the Chairman of the Committee.
Note 09 of the Financial Statements.
Statutory Payments
Going Concern
The Directors, to the best of their knowledge and belief are
The Board of Directors of the Company are satisfied satisfied that all statutory payments have been made up to
that the Company has adequate resources to continue date or provided for same.
its operations in the foreseeable future. Therefore the
Company continues to adopt a going concern concept in Environmental Protection
preparing the accounts of the Company.
The Board of Directors has taken adequate precautions
Internal Control Systems when diversifying the business activities to ensure that the
Company does not engage in any activities which could
The Board has overall responsibility for the Company's be detrimental to the environment.
Systems of Internal Control. The Company's internal
control and check systems have been designed to provide Risk Management
the Directors with reasonable assurance that the Assets are
protected, safeguarded and transactions are authorized
The Board of Directors has structured proper systems
thereby ensuring that errors and irregularities are either
and controls to identify probable risk. These systems are
prevented or detected within a timely period, whilst
periodically evaluated and reviewed by the Board to
ensuring that Corporate Governance is properly practiced
ensure smooth functioning. Remedial measures also have
and adhered to.
been implemented to mitigate risk.

Interests Register
Contributions To Charities

An Interests Register is maintained, in compliance with the

The Company has not contributed to charities during the
Companies Act No.07 of 2007.
financial year under review.

The particulars of the entries made in connection with Accounting Policies

the General Disclosure in terms of Section 192(2) of the
Companies Act No.07 of 2007 are given in Note 23 under
There has been no change in the Accounting Policies
Related Party transactions.
adopted by the Company in preparation of Financial
Statements during the Financial Year under review.

Events After The Reporting Period

Subsequent to the date of the Balance sheet no

circumstance has arisen which require adjustments to the
accounts.

Serendib Engineering Group PLC I Annual Report 2016/2017 31

Material Issues Pertaining To Employees And
Industrial Relations

There were no material issues relating to the Employees

and Industrial Relations during the year ended 31st March
2017.

Equitable Treatment To Shareholders

The Company has at all times ensured that all Shareholders

are treated equitably.

Auditor's Report

The Auditor's Report on the Financial Statements is given

on Page 34.

Auditor

The accounts for the year have been audited by V. S. &

Associates, Chartered Accountants, who retire and are
eligible for re-appointment. The Directors recommend
their re-appointment.

The Auditors were paid a sum of Rs. 100,000.00 as

Audit Fees and Rs. 126,750.00 as Non Audit Fees by the
Company for the financial year under review. As far as the
Board is aware the Auditors do not have any relationship
with the Company other than carrying out the External
Audit.

This Annual Report is signed for and on behalf of the

Board of Directors

By order of the Board of

Serendib Engineering Group PLC

................................... ...................................

H. N. De Silva H. G. S. Kariyawasam
Director Director

...................................

Corporate Arcade Limited

Company Secretaries

25th August 2017

Colombo

32 Serendib Engineering Group PLC I Annual Report 2016/2017

6.2 THE STATEMENT OF DIRECTORS’ RESPONSIBILITY

The responsibility of the Directors in relation to the Further, the Board Directors are responsible for ensuring
Financial Statements of the Company and the Consolidated that the Company keeps sufficient accounting records to
Financial Statements of the Company and its Subsidiaries disclose with reasonable accuracy of the financial position
are set out in the following statement. These differ from of the Company and of the Group for ensuring that the
the responsibilities of the Auditors, which are set out in the financial statements comply with the Companies Act No.
Report of the Auditors given on page 18. 07 of 2007.

In accordance with the provisions of the Companies Act The Directors are also responsible for taking reasonable
No.07 of 2007, the financial statements comprise of measures to safeguard the assets of the Company and of
the Group, and in that context to have proper regarded to
·· A statement of Profit or Loss and Other Comprehensive the establishment of appropriate systems of internal control
Income of the Company and its Subsidiaries in which to preventing and detecting frauds and other irregularities.
present a true and fair view of the profit and loss
generated by the Company and its Subsidiaries for the
financial year 2016/17. The Directors of the Company are of the view that they
have discharged their responsibilities as set out in this
·· A statement of Financial Position of the Company and its statement.
Subsidiaries in which present a true and fair view of the
state of affairs as at the end of the financial year.
By Order of the Board
Accordingly, the Board of Directors also wishes to confirm
that in preparing the financial statements ;

·· Appropriate accounting policies have been selected and

applied in a consistent manner .....................................................

·· Reasonable and prudent judgments and estimates have Corporate Arcade Limited
been made and applicable accounting standards have Company Secretaries
been followed
25th August 2017
·· Presented in accordance with the Sri Lanka Accounting
Colombo.
Standards (SLFRS/LKAS)

Serendib Engineering Group PLC I Annual Report 2016/2017 33

6.3 INDEPENDENT AUDITOR’S REPORT

20/62, Fairfield Gardens,

Colombo 08,
Sri Lanka.
Tel : (94-11) 2699606, 2699917, 2691281
Partners
Fax:(94-11) 2699918.
Mrs. L. R. SHAH F.C.A.
email: [email protected]
L.J. SELVANAYAGAM F.C.A

TO THE SHAREHOLDERS OF We believe that the audit evidence we have obtained is

SERENDIB ENGINEERING GROUP PLC sufficient and appropriate to provide a basis for our audit
opinion.
Report on the Financial Statements
Opinion
We have audited the accompanying financial statements
of Serendib Engineering Group PLC (“the Company”), In our opinion, the consolidated financial statements give
and the consolidated financial statements of the a true and fair view of the financial position of the Group
Company and its subsidiaries (“the Group”), which as at 31st March 2017, and of its financial performance
comprise the Statement of Financial Position as at 31st and cash flows for the year then ended in accordance
March 2017, and the Statement of Profit or Loss and with Sri Lanka Accounting Standards.
Other Comprehensive Income, Statement of Changes
in Equity and Statement of Cash Flows for the year then Report on Other Legal and Regulatory Requirements
ended, and notes, comprising a summary of significant
accounting policies and other explanatory information As required by section 163 (2) of the Companies Act No.
set out on pages 35 to 74. 07 of 2007, we state the following:

Board’s Responsibility for the Financial Statements a) The basis of opinion and scope and limitations of
the audit are as stated above.
The Board of Directors (“Board”) is responsible for
the preparation of these financial statements that give b) In our opinion:
a true and fair view in accordance with Sri Lanka
Accounting Standards and for such internal control as - We have obtained all the information
Board determines is necessary to enable the preparation and explanations that were required for
of financial statements that are free from material the audit and, as far as appears from our
misstatement, whether due to fraud or error. examination, proper accounting records
have been kept by the Company,
Auditors’ Responsibility
- The financial statements of the Company
Our responsibility is to express an opinion on these give a true and fair view of its financial
financial statements based on our audit. We conducted position as at 31st March 2017, and of its
our audit in accordance with Sri Lanka Auditing financial performance and cash flows for
Standards. Those standards require that we comply with the year then ended in accordance with Sri
ethical requirements and plan and perform the audit to Lanka Accounting Standards.
obtain reasonable assurance about whether the financial
statements are free from material misstatement. - The financial statements of the Company and
the Group comply with the requirements of
An audit involves performing procedures to obtain audit sections 151 and 153 of the Companies Act
evidence about the amounts and disclosures in the No. 07 of 2007.
financial statements. The procedures selected depend
on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal
control relevant to the entity's preparation of the financial
statements that give a true and fair view in order to design V.S. & ASSOCIATES
audit procedures that are appropriate in the circumstances, CHARTERED ACCOUNTANTS
but not for the purpose of expressing an opinion on the Colombo
effectiveness of the entity's internal control. An audit also 25th August 2017
includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting
estimates made by Board, as well as evaluating the
overall presentation of the financial statements.

34 Serendib Engineering Group PLC I Annual Report 2016/2017

 6.4 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes Group Company

For the Year ended 31st March 2017 2016 2017 2016
Rs. Rs. Rs. Rs.
Revenue 2 316,761,579 210,168,173 16,206,500 9,019,482
Cost of Sales (219,425,076) (168,867,486) (14,141,434) (8,684,601)
Gross Profit 97,336,503 41,300,687 2,065,066 334,881

Other Income 3 892,414 12,436,295 - -

98,228,917 53,736,982 2,065,066 334,881

Administrative Expenses (69,747,564) (81,902,153) (1,411,056) (2,069,761)

Distribution Expenses (4,020,788) (4,434,266) - -
Other Expenses 3 - (99,870) - (3,000,000)
Results from Operating Activities 24,460,565 (32,699,307) 654,010 (4,734,880)

Finance Income 4 218,573 339,219 115,193 115,885

Finance Costs 5 (13,528,355) (9,289,200) (3,117) (691,080)
Net Finance Income / (Costs) (13,309,782) (8,949,981) 112,076 (575,195)

Profit / (Loss) before Tax 6 11,150,783 (41,649,288) 766,086 (5,310,075)

Income Tax Expense 7 (2,135,156) 8,070,605 (84,978) 64,663
Profit / (Loss) for the year 9,015,627 (33,578,683) 681,108 (5,245,412)

Other Comprehensive Income - - - -

Total Other Comprehensive Income for the - - - -
year

Total Comprehensive Income / (Expense) 9,015,627 (33,578,683) 681,108 (5,245,412)

for the year

Attributable to:
Equity Holders of the Parent 8,556,691 (31,965,613) 681,108 (5,245,412)
Non-Controlling Interest 458,936 (1,613,070) - -

Total Comprehensive Income / (Expense) 9,015,627 (33,578,683) 681,108 (5,245,412)

for the year

Earnings / (Deficit) per Share 8 0.26 (0.99)

Figures in brackets indicate deductions.

The Financial Statements are to be read in conjunction with t he related notes, which f orm an integral part o f the
Financial Statements set out on pages 42 to 74.

Serendib Engineering Group PLC I Annual Report 2016/2017 35

 6.5 STATEMENT OF FINANCIAL POSITION

Notes Group Company

As at 31st March 2017 2016 2017 2016
Rs. Rs. Rs. Rs.
ASSETS
Non - Current Assets
Plant & Equipment 9 17,761,447 18,814,542 353,696 596,426
Intangible Assets 10 21,669,723 21,669,723 - -
Investments in Subsidiaries 11 - - 146,737,890 146,737,890
Other Financial Assets 12 35,000,000 35,000,000 - -
Deferred Tax Asset 13 7,262,997 15,658,764 - -
Total Non - Current Assets 81,694,167 91,143,029 147,091,586 147,334,316

Current Assets
Inventories 14 31,965,167 30,547,037 3,681,953 2,682,226
Trade and Other Receivables 15 250,635,360 195,052,221 111,276 249,319
Amounts due from Related Parties 23 1,427,899 3,876,103 3,597,727 4,863,527
Other Financial Assets 12 6,962,454 3,962,273 1,530,300 1,395,100
Cash and Cash Equivalents 16 5,121,660 2,125,754 1,308,844 58,417
Total Current Assets 296,112,540 235,563,388 10,230,100 9,248,589

Total Assets 377,806,707 326,706,417 157,321,686 156,582,905

EQUITY AND LIABILITIES

Equity
Stated Capital 17 178,107,910 178,107,910 178,107,910 178,107,910
Revenue Reserves 7,105,431 5,439,002 (58,213,418) (58,894,526)
Total Equity attributable to Equity 185,213,341 183,546,912 119,894,492 119,213,384
Holders of the Parent
Non-Controlling Interest 2,763,850 2,726,827 - -
Total Equity 187,977,191 186,273,739 119,894,492 119,213,384

Figures in brackets indicate deductions.

36 Serendib Engineering Group PLC I Annual Report 2016/2017

Figures in brackets indicate deductions.

I certify that these financial statements are in compliance with the requirements of the Companies Act No. 07 of 2007.

........................................ ........................................
A. C. J. Gunasinghe A. N. D. De Silva
Deputy Finance Manager Group Chief Executive Officer

The Board of Directors is responsible for the preparation and presentation of these financial statements.

The Financial Statements on pages 35 to 74 were approved by the Board of Directors on 25th August 2017 in
Colombo and were signed on behalf of the Board by:

………………………… …………………………
H. N. De Silva H. G. S. Kariyawasam
Director Director
 6.6 STATEMENT OF CHANGES IN EQUITY

Group Attributable to Equity Holders Non- Total

of the Parent Controlling Equity
Interest
Stated Revenue Total
Capital Reserve
Rs. Rs. Rs. Rs. Rs.
Balance as at 31st March 2015 178,107,910 37,404,615 215,512,525 4,339,897 219,852,422

Loss for the year - (31,965,613) (31,965,613) (1,613,070) (33,578,683)

Other Comprehensive Income - - - - -
Total Comprehensive Income / - (31,965,613) (31,965,613) (1,613,070) (33,578,683)
(Expense) for the year

Total transaction with owners - - - - -

of the Company
Balance as at 31st March 2016 178,107,910 5,439,002 183,546,912 2,726,827 186,273,739

Effect of Deferred Tax due to change - (6,890,262) (6,890,262) (421,913) (7,312,175)

in applied Tax rate (Note 13.1)

Profit for the year - 8,556,691 8,556,691 458,936 9,015,627

Other Comprehensive Income - - - - -
Total Comprehensive Income for the - 8,556,691 8,556,691 458,936 9,015,627
year

Total transaction with owners of the - - - - -

Company

Balance as at 31st March 2017 178,107,910 7,105,431 185,213,341 2,763,850 187,977,191

Figures in brackets indicate deductions.

Revenue Reserve comprises of Retained Earnings and Revenue Reserve represents the amounts set aside by the Directors
for General Application.

38 Serendib Engineering Group PLC I Annual Report 2016/2017

 6.6 STATEMENT OF CHANGES IN EQUITY (CONTD)

Company Stated Capital Revenue Total

Reserve
Rs. Rs. Rs.
Balance as at 31 March 2015
st
178,107,910 (53,649,114) 124,458,796
Loss for the year - (5,245,412) (5,245,412)
Other Comprehensive Income - - -
Total Comprehensive Income / (Expense) for the year - (5,245,412) (5,245,412)

Total transaction with owners of the Company - - -

Balance as at 31 March 2016
st
178,107,910 (58,894,526) 119,213,384

Profit for the year - 681,108 681,108

Other Comprehensive Income - - -
Total Comprehensive Income for the year - 681,108 681,108

Total transaction with owners of the Company - - -

Balance as at 31st March 2017 178,107,910 (58,213,418) 119,894,492

Figures in brackets indicate deductions.

Revenue Reserve comprises of Retained Earnings and Revenue Reserve represents the amounts set aside by the Directors
for General Application.

The Financial Statements are to be r ead in conjunction with t he related notes, which f orm an integral part o f the
Financial Statements set out on pages 42 to 74.

Serendib Engineering Group PLC I Annual Report 2016/2017 39

 6.7 STATEMENT OF CASH FLOWS

Group Company
For the Year ended 31 March
st
2017 2016 2017 2016
Rs. Rs. Rs. Rs.
CASH FLOWS FROM OPERATING ACTIVITIES
Profit / (Loss) before Interest & Tax 24,360,267 (33,668,989) 766,521 (5,147,289)
Adjustment for;
Depreciation 6,510,650 6,969,286 485,140 547,548
Profit on Disposal of Plant & Equipment (565,217) (2,645,202) - -
Gratuity Provision / (Reversal) (45,973) 358,199 - -
Write back of Gratuity Over provision (278,265) - - -
Dividend Income (24,430) (12,750) (12,500) -
Profit on Disposal of Financial Assets (37,462) (311,254) (16,983) (113,394)
Fair Value Changes on Financial Assets 140,674 1,193,855 (85,450) 508,300
Provision for diminution in value of investment - - - 3,000,000
Impairment of Intangible Assets - 99,870 - -
Profit / (Loss) before Working Capital Changes 30,060,244 (28,016,985) 1,136,728 (1,204,835)

Changes in Working Capital

(Increase) / Decrease in Inventories (1,418,130) 4,576,612 (999,727) 292,922
(Increase) / Decrease in Trade and Other Receivables (55,583,139) 769,432 138,043 (76,447)
(Increase) / Decrease in Amounts due from Related 2,483,393 (9,104,537) (815,614) (1,638,618)
Parties
Increase / (Decrease) in Trade and Other Payables 15,239,011 (9,633,000) 2,054,339 504,574

Cash Generated from / (used in) Operating (9,218,621) (41,408,478) 1,513,769 (2,122,404)
Activities
Tax Paid (966,780) (2,629) (230) (392)
Interest Paid (13,280,715) (7,995,514) (695) (165,277)
Gratuity Paid (111,000) (747,000) - -

Net Cash Flows from / (used in) Operating Activities (23,577,116) (50,153,621) 1,512,844 (2,288,073)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of Plant & Equipment (3,958,555) (1,397,877) (242,410) (139,300)
Proceeds from Disposal of Plant & Equipment 565,217 3,961,869 - -
Acquisition of Financial Assets (8,333,843) (28,816,665) (5,179,002) (5,376,241)
Proceeds from Disposal of Financial Assets 5,230,450 7,801,835 5,146,235 5,146,235
Interest Received 71,231 15,215 260 2,491
Dividend Income Received 24,430 12,750 12,500 -
Finance Lease Repayment (3,237,896) (4,187,969) - -
Net Cash Flows from / (used in) Investing Activities (9,638,966) (22,610,842) (262,417) (366,815)

40 Serendib Engineering Group PLC I Annual Report 2016/2017

 6.7 STATEMENT OF CASH FLOWS (CONTD)

Group Company
For the Year ended 31st March 2017 2016 2017 2016
Rs. Rs. Rs. Rs.
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds form Interest Bearing Borrowings 44,766,203 25,000,000 - -
Repayment of Interest Bearing Borrowings (18,706,595) (600,000) - -
Net Cash Flows from / (used in) Financing Activities 26,059,608 24,400,000 - -

Net Increase / (Decrease) in Cash and Cash (7,156,474) (48,364,463) 1,250,427 (2,654,888)
Equivalents
Cash and Cash Equivalents at the beginning of the year (5,255,441) 43,109,022 58,417 2,713,305
Cash and Cash Equivalents at the end of the year (12,411,915) (5,255,441) 1,308,844 58,417

ANALYSIS OF CASH AND CASH EQUIVALENTS

Favourable balances
Savings Accounts 419,950 408,906 8,128 7,894
Cash in Hand & at Bank 4,701,710 1,716,848 1,300,716 50,523
Unfavourable balances
Bank Overdrafts (17,533,575) (7,381,195) - -

(12,411,915) (5,255,441) 1,308,844 58,417

Figures in brackets indicate deductions.

The Financial Statements are t o be r ead in conjunction with t he related notes, which f orm an integral part o f the
Financial Statements set out on pages 42 to 74.

Serendib Engineering Group PLC I Annual Report 2016/2017 41

6.8 NOTES TO THE FINANCIAL STATEMENTS

1. CORPORATE INFORMATION and in compliance with the Companies Act, No.

07 of 2007 and Sri Lanka Accounting and Auditing
1.1. Reporting Entity Standards Act, No. 15 of 1995.

1.1.1. General The financial statements of the Company and those

consolidated with such comprise the Statement of
Serendib Engineering Group PLC (“Company”) is Profit or Loss and Other Comprehensive Income,
a Public Quoted Company with Limited Liability Statement of Financial Position, Statement of Changes
incorporated and domiciled in Sri Lanka. The in Equity and Statement of Cash Flows together with
registered office of the Company is located at No.12B, the Accounting Policies and Notes to the financial
Gregory's Road, Colombo 07 and principal place of statements.
business is located at No. 20/7 A, Averihena Road,
Colombo 05. 1.2.2. Basis of Measurement

The Ordinary Shares of the Company are listed on the The consolidated financial statements have been
Colombo Stock Exchange. prepared on the historical cost basis, except for the
measurement of the following material items in the
1.1.2. Consolidated Financial Statements Statement of Financial Position.

The Consolidated Financial Statements, “the a) Financial instruments reflected as fair value
Company” refers to Serendib Engineering Group PLC through profit or loss financial assets are measured
as the Parent Company and “the Group” refers to the at fair value.
companies whose accounts have been consolidated
therein.
b) Defined benefit plans which are measured at the
present value of the Employee Benefits.
Serendib Engineering Group PLC's Parent Entity is
Navara Capital Ltd.
Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly
1.1.3. Principal Activities and Nature of Operations transaction between market participants at the
measurement date.
The principal activities of the Company were
manufacturing of precast Concrete Poles used in When measuring fair value of an asset or liability, the
Telecommunication and Electricity Industries and Group uses observable market data as far as possible.
acting as a Holding Company for Subsidiaries Fair Values are categorised into different levels in a
engaged in a range of Engineering Services. fair value hierarchy based on the inputs used in the
valuation techniques.
The principal activities of the Subsidiaries are
disclosed in Note 11 to the Financial Statements. Level 1: inputs are unadjusted quoted prices in active
markets for identical assets or liabilities
There were no significant changes in the nature of
the principal activities of the Company and the Group
Level 2: inputs are inputs other than quoted prices
during the financial year under review.
included within Level 1 that are observable for the
asset or liability either directly (i.e. as prices) or
1.1.4. Date of Authorisation for issue indirectly (i.e. derived from prices)

The Consolidated Financial Statements of the Group Level 3: inputs are inputs that are not based on
for the year ended 31st March 2017 were authorised observable market data (unobservable inputs)
for issue, in accordance with a resolution of the Board
of Directors on 25th August 2017. If inputs used to measure the fair value of an asset
or liability fall into different levels of the fair value
1.2. BASIS OF PREPARATION hierarchy, then the fair value measurement is
categorised in its entirety in the same level of the
1.2.1. Statement of Compliance fair value hierarchy as the lowest level input that is
significant to the entire measurement.
The Consolidated Financial Statements have been
prepared in accordance with Sri Lanka Accounting
Standards (SLFRS / LKASs) adopted by The Institute
of Chartered Accountants of Sri Lanka (CA Sri Lanka)

42 Serendib Engineering Group PLC I Annual Report 2016/2017

6.8 NOTES TO THE FINANCIAL TESTAMENTS (CONTD.)

1.2.3. Functional and Presentation Currency acquisition method as at the acquisition date which is
the date on which control is transferred to the Group.
The financial statements are presented in Sri Lankan Control is the power to govern the financial and
Rupees, which is the Group's functional currency. operating policies of an entity so as to obtain benefits
from its activities. In assessing control, the Group
1.2.4. Use of Estimates, Judgements and Assumptions takes into consideration potential voting rights that
are currently exercisable.
The presentation of the financial statements of the
Group and the Company in conformity with Sri Goodwill acquired in a business combination is
Lanka Accounting Standards (SLFRS / LKAS) requires initially measured at cost being the excess of the
the management to make judgements, estimates and cost of the business combination over the Group's
assumptions that affect the application of accounting interest in the net fair value of the identifiable assets,
policies and the reported amounts of assets, liabilities, liabilities and contingent liabilities. Following
income and expenses. Actual results may differ from initial recognition, goodwill is measured at cost less
those estimates. any accumulated impairment losses. Goodwill is
reviewed for impairment, annually or more frequently
Estimates and underlying assumptions are reviewed if events or changes in circumstances indicate that the
on an ongoing basis. Revisions to accounting carrying value may be impaired. For the purpose of
estimates are recognised in the period in which the impairment testing, goodwill acquired in a business
estimates are revised and any future periods affected. combination is, from the acquisition date, allocated
to groups of cash-generating units that are expected
to benefit from the synergies of the combination.
Information about significant areas of estimation
uncertainty and critical judgements in applying
accounting policies that have the most significant Impairment is determined by assessing the
effect on the amounts recognised in the financial recoverable amount of the cash-generating unit to
statements is included in the Note 19 - measurement which the goodwill relates. Where the recoverable
of Employee Benefits. amount of the cash generating unit is less than the
carrying amount, an impairment loss is recognised.
The impairment loss is allocated first to reduce the
1.2.5. Materiality and Aggregation
carrying amount of any goodwill allocated to the unit
and then to the other assets pro-rata to the carrying
Each material class of similar items is presented amount of each asset in the unit.
separately in the Consolidated Financial Statements.
Items of a dissimilar nature or function are presented
1.3.1.2. Subsidiaries
separately unless they are immaterial.

Subsidiaries are entities controlled by the Group. The

1.2.6. Going Concern
Group ‘controls' an entity when it is exposed to, or
has rights to, variable returns from its involvement
The Directors have made an assessment of the with the entity and has the ability to affect those
Group's ability to continue as a going concern in the returns through its power over the entity. The
foreseeable future, and they do not intend either to Financial Statements of Subsidiaries are included in
liquidate or cease trading. the Consolidated Financial Statements from the date
on which control commences until the date when
1.3. SIGNIFICANT ACCOUNTING POLICIES control ceases.

The accounting policies set out below have been 1.3.1.3. Transactions with Non-controlling Interests
applied consistently to all periods presented in these
consolidated financial statements.
The profit or loss and net assets of a subsidiary
attributable to equity interests that are not owned by
1.3.1. Basis of Consolidation the Parent, directly or indirectly through subsidiaries,
is disclosed separately under the heading “Non-
The consolidated financial statements (referred to as Controlling Interest”.
the Group), comprise of the financial statement of
the Company and its Subsidiaries. Subsidiaries are The Group applies a policy of treating transactions
disclosed in Note 11 to the Financial Statements. with non-controlling interests as transactions
with parties external to the Group. Losses within
1.3.1.1. Business Combination and Goodwill a subsidiary are attributed to the non-controlling
interest even if that results in a deficit balance.
Business combinations are accounted for using the

Serendib Engineering Group PLC I Annual Report 2016/2017 43

6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

The acquisition of an additional ownership interest 1.3.1.8. Financial Period

or a disposal of ownership interest in a subsidiary
without a change of control is accounted for as All Subsidiaries of the Group have a common
an equity transaction. Any excess or deficit of financial year as the Parent Company.
consideration paid over the carrying amount of the
non-controlling interests is recognised in equity of the 1.3.2. Foreign Currency Transactions
parent. No adjustment is made to goodwill as a result
of such transactions. All foreign exchange transactions are converted
to functional currency, at the rates of exchange
1.3.1.4. Loss of Control prevailing at the time the transactions are effected.
Monetary assets and liabilities denominated in foreign
On the loss of control, the Group derecognises currency are retranslated to functional currency
the assets including goodwill and liabilities of the equivalents at the spot exchange rate prevailing at the
subsidiary, any non-controlling interests and other reporting date.
components of equity related to the subsidiary. Any
surplus or deficit arising on the loss of control is Non-monetary items that are measured in terms of
recognised in the Statement of Profit or Loss. historical cost in a foreign currency are translated
using the exchange rates as at the dates of the initial
If the Group retains any interest in the previous transactions. Non monetary assets and liabilities are
subsidiary, then such interest is measured at fair translated using exchange rates that existed when the
value at the date that control is lost. Subsequently it is values were determined.
accounted for as an equity-accounted investee or as
an available-for-sale financial asset depending on the Foreign exchange differences arising on translation
level of influence retained. are recognised in the Statement of Profit or Loss.

A change in the ownership interest of a subsidiary, 1.3.3. Plant & Equipment

without a loss of control, is accounted for as an equity
transaction.
1.3.3.1. Recognition and Measurement

1.3.1.5. Profits and Losses Items of Plant & Equipment are measured at cost
less accumulated depreciation and accumulated
The total profits or losses of the Company and impairment losses.
its subsidiaries for the period are included in the
consolidation. The proportion of the profit or loss When parts of an item of plant & equipment have
after taxation attributable to Non Controlling Interest different useful lives, they are accounted for as
shareholders of the subsidiaries is shown as a separate items (major components) of plant &
component of profit for the period in the Consolidated equipment.
Statement of Profit or Loss.
1.3.3.2. Owned Assets
1.3.1.6. Assets and Liabilities
The cost of plant & equipment include expenditure
All assets and liabilities of the Company and its that is directly attributable to the acquisition of the
subsidiaries are included in the Consolidated asset. The cost of self-constructed assets includes the
Statement of Financial Position. Non controlling cost of materials and direct labour, and any other
interest which represents the proportion of interest costs directly attributable to bringing the asset to a
attributable to non controlling interest of subsidiaries working condition for its intended use and the cost of
in the net assets employed by the Group is disclosed dismantling and removing the items and restoring the
as a component of equity in the Consolidated site on which they are located.
Statement of Financial Position, separately from the
Parent shareholders' equity.
Expenditure incurred for the purpose of acquiring,
extending or improving assets of a permanent nature
1.3.1.7. Transactions Eliminated on Consolidation by means of which to carry on the business or to
increase the earning capacity of the business is treated
All intra group balances and transactions, income and as capital expenditure.
expenses, profits and losses resulting from intra group
transactions that are recognised in assets, liabilities,
income and expenses are eliminated in preparing the
consolidated financial statements.

44 Serendib Engineering Group PLC I Annual Report 2016/2017

6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

1.3.3.3. Subsequent Costs use of the leased assets.

The cost of replacing component of an item of plant The corresponding principal amount payable to
& equipment is recognised in the carrying amount the lessor is shown as a liability, lease payments
of the item if it is probable that the future economic are apportioned between the finance charges and
benefits embodied within that part will flow to the reduction of the lease liability so as to achieve a
Group and its cost can be measured reliably. The constant rate of interest on the remaining balance
carrying amount of the replaced part is derecognised of the liability. The interest payable over the period
in accordance with the derecognition policy given of the lease is transferred to an interest in suspense
below. account. The interest element of the rental obligations
applicable to each financial year is charged to the
The costs of the day-to-day servicing of plant & statement of profit or loss over the period of the lease.
equipment are recognised in statement of profit or
loss as incurred. 1.3.4. Intangible Assets

1.3.3.4. Derecognition An intangible asset is initially recognised at cost, if

it is probable that future economic benefit will flow
The carrying amount of an item of plant & equipment to the enterprise, and the cost of the asset can be
is derecognised upon disposal off or when no future measured reliably.
economic benefits are expected from its use. Gains
and losses arising on derecognition of the assets Intangible assets with indefinite useful lives are tested
determined by comparing the proceeds from disposal for impairment annually either individually or at the
with the carrying amount of plant & equipment and cash-generating unit level.
are recognised net within ‘Other Income' in profit or
loss. 1.3.4.1. Intangible Assets recognised by the Group

1.3.3.5. Depreciation a) Goodwill

Depreciation is recognised in profit or loss on a Goodwill arising on an acquisition represents the

straight-line basis over the estimated useful lives of excess of the cost of acquisition over the fair value of
each part of an item of plant & equipment, since net assets acquired. Goodwill is measured at cost less
this most closely reflected the expected pattern accumulated impairment losses.
of consumption of the future economic benefits
embodied in the asset. Gain from bargain purchase arising on an acquisition
represents the excess of the fair value of the net assets
The estimated useful lives for the current and acquired over the cost of acquisition. Gain from
comparative periods are as follows. bargain purchase is recognised immediately in the
Statement of Profit or Loss.
Furniture & Fittings Over 5 -10 Years
Office Equipment Over 5 -10 Years 1.3.5. Financial Instruments
Computers Over 2 Years
Motor Vehicles Over 5 Years 1.3.5.1. Non-Derivative Financial Assets
Tools & Equipment Over 2 - 5 Years
Plant & Machinery Over 10 Years The Group recognises financial assets in its statement
of financial position when the Group becomes a party
Depreciation of an asset begins when it is available to the contractual provisions of the instrument.
for use and ceases at the earlier of the date that the
asset is classified as held for sale and the date that the Financial assets are initially measured at fair value.
asset is derecognised. Transaction costs that are directly attributable to the
acquisition or issue of a financial asset or a liability
1.3.3.6. Finance Leases (other than financial assets at fair value through profit
or loss) are added or deducted from the fair value of the
Plant & equipment on finance leases, which financial asset, as appropriate, on initial recognition.
effectively transfers to the Group substantially all Transaction costs that are directly attributable to the
the risk and benefits incidental to ownership of the acquisition of financial assets at fair value through
leased item, are capitalised at their cash price and profit or loss are recognised immediately in the
disclosed as plant & equipment and depreciated over statement of profit or loss.
the period the Group is expected to benefit from the

Serendib Engineering Group PLC I Annual Report 2016/2017 45

6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

The Group derecognises financial assets when

the contractual rights to the cash flows from the c) Held-to-maturity Financial Assets
asset expire, or it transfers the rights to receive the
contractual cash flows on the financial assets in a Held-to-maturity investments are non-derivative financial
transaction in which substantially all the risks and
assets with fixed or determinable payments and fixed
rewards of ownership of the financial assets are
maturities when the Group has the positive intention and
transferred. Any interest in transferred financial assets
that is created or retained by the Group is recognised ability to hold it to maturity. After initial measurement,
as a separate asset or liability. held-to-maturity investments are measured at amortised
cost using the effective interest method (EIR), less
Financial assets and liabilities are offset and the impairment. Amortised cost is calculated by taking
net amount presented in the statement of financial into account any discount or premium on acquisition
position when, and only when, the Group has a legal and fees or costs that are an integral part of the EIR.
right to offset the amounts and intends either to settle The EIR amortisation is included in finance income
on a net basis or to realise the asset and settle the
in the statement of profit or loss. The losses arising
liability simultaneously.
from impairment are recognised as finance cost in the
The Group classifies non-derivative financial assets statement of profit or loss.
into the following categories; financial assets at fair
value through profit or loss, loans and receivables, d) Available-for-sale Financial Assets
held-to-maturity financial assets and available-for-
sale financial assets. Available-for-sale financial assets are non-derivative
financial assets that are designated as available-
a) Financial Assets at fair value through profit or loss for-sale or are not classified in any of the above
categories of financial assets. The Group's un-
Financial assets at fair value through profit or loss quoted investments are classified as available-for-
include financial assets held-for-trading and financial sale financial assets under the category of Other Non
assets designated upon initial recognition at fair value Current Financial Assets.
through profit or loss. Financial assets are classified as
held-for-trading if they are acquired for the purpose After initial measurement, available-for-sale financial
of selling or repurchasing in the near term. Financial assets are subsequently measured at fair value with
assets at fair value through profit or loss are carried in unrealised gains or losses recognised in Available-for-
the Statement of Financial Position at fair value with sale Reserve through Other Comprehensive Income
changes in fair value recognised in the Statement of until the investment is derecognised, at which time the
Profit or Loss. cumulative gain or loss is recognised in the statement
of profit or loss, or determined to be impaired, at
b) Loans and Receivables which time the cumulative loss is reclassified to the
statement of profit or loss and removed from the
Loans and Receivables are non-derivative financial available-for-sale reserve.
assets with fixed or determinable payments that
are not quoted in an active market. After initial
If there is an indication of impairment in the unquoted
measurement, such financial assets are subsequently
investments, it is recognised in the statement of profit
measured at amortised cost using the effective interest
or loss.
rate method (EIR), less impairment losses.

A provision for impairment of trade receivable is 1.3.5.2. Non-Derivative Financial Liabilities

established when there is objective evidence that the
Group will not be able to collect all amounts due The Group initially recognises debt securities issued
according to the receivables. and subordinated liabilities on the date that they are
originated. All other financial liabilities are recognised
Loans and receivables comprise of amounts due from initially on the trade date, which is the date which the
related parties, cash and cash equivalents and trade Group becomes a party to the contractual provisions
and other receivables. of the instrument.

Cash and Cash Equivalents The Group classifies non-derivative financial

liabilities into the other financial liabilities category.
Cash and Cash equivalents are defined as cash in Such financial liabilities are recognised initially at fair
hand, demand deposits and short term highly liquid value, plus any directly attributable transaction costs.
investments, readily convertible to known amounts Subsequent to initial recognition, these financial
of cash and subject to insignificant risk of changes liabilities are measured at amortised cost using the
in value. effective interest method.

46 Serendib Engineering Group PLC I Annual Report 2016/2017

6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

The Group derecognises a financial liability when its The Group assesses at each reporting date, whether
contractual obligations are discharged, cancelled or there is any objective evidence that a financial asset
expired. or a group of financial assets are impaired. A financial
asset or a group of financial assets are deemed to be
Financial assets and liabilities are offset and the impaired if, and only if, there is objective evidence
net amount presented in the statement of financial of impairment as a result of one or more events that
position when, and only when, the Company has a have occurred after the initial recognition of the assets
legal right to offset the amounts and intends either to and that loss event has an impact on the estimated
settle on a net basis or to realise the asset and settle future cash flows of the financial asset or the group of
the liability simultaneously. financial assets that can be reliably estimated.

The Group's other financial liabilities comprise loans a) Impairment Losses on Financial Assets Carried at
and borrowings, bank overdrafts, amounts due to Amortised Cost
related parties and trade and other payables. Bank
overdrafts that are repayable on demand and form Impairment losses on assets carried at amortised cost
an integral part of the Group's cash management are are measured as the difference between the carrying
included as a component of cash and cash equivalents amount of the financial asset and the present value of
for the statement of cash flows. estimated future cash flows discounted at the asset's
original effective interest rate.
a) Loans and Borrowings
When the Group considers that there are no realistic
After initial recognition, interest bearing loans and prospects of recovery of the asset, the relevant amounts
borrowings are subsequently measured at amortised are written off. Impairment losses are recognised in
cost using the effective interest rate (EIR) method. profit or loss and reflected in an allowance account
Gains and losses are recognised in profit or loss when against loans and receivables. When a subsequent
the liabilities are derecognised as well as through event causes the amount of impairment loss to
the effective interest rate method (EIR) amortisation decrease, the decrease in impairment loss is reversed
process. through profit or loss.

Amortised cost is calculated by taking into account b) Impairment Losses on Available-for-Sale Financial
any discount or premium on acquisition and fees Assets
or costs that are an integral part of the EIR. The
EIR amortisation is included in finance costs in the Impairment losses on available-for-sale financial
statement of profit or loss. assets are recognised by reclassifying the losses
accumulated in the fair value reserve to profit or loss.
1.3.6. Stated Capital The amount reclassified is the difference between
the acquisition cost (net of any principal repayment
Ordinary shares are classified as equity. Incremental and amortisation) and the current fair value, less any
costs directly attributable to the issue of ordinary impairment loss previously recognised in profit or loss.
shares are recognised as a deduction from equity, net If the fair value of an impaired available-for-sale debt
of any tax effects. security subsequently increases and the increase can
be related objectively to an event occurring after the
As per the Companies Act No. 07 of 2007, Section impairment loss was recognised, then the impairment
58(1), Stated Capital in relation to a Company means loss is reversed through profit or loss; otherwise, it is
the total of all amounts received by the Company or reversed through other comprehensive income.
due and payable to the Company in respect of the
issue of shares and in respect of calls in arrears. 1.3.7.2. Impairment of Non Financial Assets

1.3.7. Impairment The carrying amounts of the Group's non-financial

assets other than inventories and deferred tax assets
1.3.7.1. Impairment of Non-Derivative Financial Assets are reviewed at each reporting date to determine
whether there is an indication of impairment. If any
Financial assets, other than those measured at fair such indication exists, or when annual impairment
value are assessed for indicators of impairment at testing for an asset is required, then the asset's
the end of each reporting period. Financial assets are recoverable amount is estimated.
considered to be impaired when there is objective
evidence that as a result of one or more events that
occurred after the initial recognition of the financial
assets, the estimated future cash from the asset have
been affected.

Serendib Engineering Group PLC I Annual Report 2016/2017 47

6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

For impairment testing, assets are grouped into the 1.3.9. Provisions
smallest group of assets that generates cash inflows
from continuing use that are largely independent of A provision is recognised in the Statement of
the cash flows of other assets or other cash-generating Financial Position when the Company has a legal or
unit (CGU). Goodwill arising from business constructive obligation as a result of a past event and it
combination is allocated to CGUs or groups of CGUs is probable that an outflow of economic benefits will
that are expected to benefit from the synergies of be required to settle the obligation and the amount of
combination. the provision can be measured reliably in accordance
with LKAS 37 – ‘Provisions, Contingent Liabilities and
The recoverable amount of an asset or cash- Contingent Assets'. The amount recognised is the best
generating unit is the greater of its value in use and estimate of the consideration required to settle the
its fair value less costs to sell. In assessing value in present obligation at the Reporting date, taking into
use, the estimated future cash flows are discounted account the risks and uncertainties surrounding the
to their present value using a pre-tax discount rate obligation at the date. Where a provision is measured
that reflects current market assessments of the time using the cash flows estimated to settle the present
value of money and the risks specific to the asset. In obligation, its carrying amount is determined based
determining fair value, less costs to sell, an appropriate on the present value of those cash flows.
valuation model is used.
1.3.9.1. Commitments and Contingencies
An impairment loss is recognised if the carrying
amount of an asset or cash-generating unit exceeds Capital commitments and contingent liabilities of
its estimated recoverable amount. Impairment losses the Company are disclosed in respective notes to the
are recognised in profit or loss. An impairment loss is Financial Statements.
reversed if there has been a change in the estimates
used to determine the recoverable amount. An 1.3.10. Employee Benefits
impairment loss is reversed only to the extent that the
asset's carrying amount does not exceed the carrying
1.3.10.1. Defined Benefit Plan – Retirement Gratuity
amount that would have been determined, net of
depreciation or amortisation, if no impairment loss
had been recognised. A defined benefit plan is a post-employment benefit
plan other than a defined contribution plan. The
liability recognised in the statement of financial
1.3.8. Inventories
position in respect of defined benefit plan is the
present value of the defined benefit obligation as at
Inventories are measured at the lower of cost and the reporting date. The defined benefit obligation
net realisable value. The cost of inventories includes is calculated by the Group using the projected unit
expenditure incurred in acquiring the inventories credit method based on the formula prescribed in
and other costs incurred in bringing them to their “LKAS 19 - Employee Benefits”.
existing location and condition. Net realisable value
is the estimated selling price less estimated costs of
The provision has been made for retirement gratuities
completion and estimated costs necessary to make
for the first year of service for all employees, in
the sale. Accordingly, the costs of inventories are
conformity with “LKAS 19 - Employee Benefits”.
accounted for as follows.
However, under the Payment of Gratuity Act No.
12 of 1983, the liability to an employee arises only
- Raw Materials on completion of 5 years of continued service. The
At actual cost on first-in-first-out and weighted liability is not externally funded.
average cost.
The key assumptions used in the computation are
- Work-in-Progress
At the cost of direct materials, direct labour and an stated in the note 19 to the financial statements.
appropriate proportion of production overheads
based on normal operating capacity. 1.3.10.2. Defined Contribution Plans - Employees
Provident Fund & Employees Trust Fund
- Finished Good
At purchase cost and/or cost of direct materials, direct A defined contribution plan is a post-employment
labour and an appropriate proportion of production benefit plan under which an entity pays fixed
overheads based on normal operating capacity. contributions into a separate entity and will have
no legal or constructive obligation to pay further
amounts.

48 Serendib Engineering Group PLC I Annual Report 2016/2017

6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

All employees who are eligible for Employees Losses on disposal of Financial Assets are accounted
Provident Fund Contributions and Employees for in the statement of profit or loss on the basis of
Trust Fund Contributions are covered by relevant realised net profit or loss.
contribution funds in line with respective statutes
and regulations. Contribution plans are recognised as Finance costs comprises of interest expense on
an expense in the statement of profit or loss when borrowings, loss on the disposal of financial assets at
incurred. fair value through profit or loss and the changes in the
fair value of financial assets.
1.3.11. Statement of Profit or Loss and Other
Comprehensive Income All borrowing costs are recognised as an expense
in the period in which they are incurred. Interest
1.3.11.1. Revenue Recognition expenses are recognised using the effective interest
method.
Revenue is recognised to the extent that it is probable
that the economic benefits will flow to the Group e) Others
and the revenue and associated costs incurred or
to be incurred can be reliably measured. Revenue Other income is recognised on an accrual basis.
is measured at the fair value of the consideration
received or receivable, net of trade discounts and Net gains and losses of a revenue nature on disposal
value added taxes, after eliminating sales within the of an item of plant & equipment and other non-current
Group. assets including investments have been accounted for
in profit or loss, having deducted from proceeds from
Revenue is generally accounted for on an accrual disposal, the carrying amount of the assets and related
basis and following specific criteria are used for selling expenses.
recognition of revenue.
1.3.11.2. Segmental Reporting
a) Sale of Goods
A segment is a distinguishable component of an enterprise
Revenue is recognised on sale of goods when all that is engaged in either providing products or services
significant risks and rewards of ownership have been (Business Segments) or in providing products or services
transferred to the buyer which normally occurs on within a particular economic environment (Geographic
delivery of goods. Segment) which is subject to risks and rewards that are
different from those of other segments.
b) Construction Contract
Segment information is presented in respect of the
When the outcome of the contract can be measured Group's business activities. The business segment has
reliably, contract revenue is recognised by reference been identified as the primary segment of the Group as
to the stage of completion of the contract activity as there are no distinguishable components to be identified
at the reporting date. Further, the Group recognise as geographical segments for the Group. The business
construction revenue only after receiving the segments are reported based on the Group's management
work done certification from the engineer. Any and internal reporting structure.
expected losses on specific contracts are recognised
immediately by a corresponding reduction in their Segment information of the Group is stated in
revenue. Note No. 2.2.

c) Rendering of Services 1.3.11.3. Expenditure Recognition

Revenue from rendering of services is recognised All expenditure incurred in the running of the business
in the accounting period in which the services are and in maintaining the plant & equipment in a state of
rendered or performed. efficiency has been charged to statement of profit or loss
in arriving at the profit for the year.
d) Finance Income and Finance Costs
Expenditure incurred for the purpose of acquiring and
Finance income comprises interest income on funds extending or improving assets of a permanent nature
invested, dividend income and gains on the disposal by means of which to carry on the business or for the
of financial assets at fair value through profit or loss. purpose of increasing the earning capacity of the business
has been treated as capital expenditure.
Interest Income is recognised on an accrual basis.
Dividend Income is recognised when the Shareholders
right to receive such dividend is established. Profit or

Serendib Engineering Group PLC I Annual Report 2016/2017 49

6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

a) Borrowing Costs that it is probable that future taxable profits will be

available against which the asset can be utilised.
Borrowing costs directly attributable to the Deferred tax assets are reviewed at each reporting
acquisition, construction or production of an asset date and are reduced to the extent that it is no longer
that necessarily takes a substantial period of time to probable that the related tax benefit will be realised.
get ready for its intended use or sale are capitalised as
part of the cost of the asset. All other borrowing costs - Withholding Tax on Dividend
are expensed in the period they occur.
Withholding Tax (WHT) on dividend arises from the
b) Income Tax Expense distribution of dividend by the Company is recognised
at the time, the liability to pay the related dividend is
Current tax is the expected tax payable on the taxable recognised.
income for the year, using tax rates enacted at the
reporting date. Tax withheld in dividend income from subsidiaries
is recognised as an expense in the consolidated
Income tax expense comprises of current and deferred Statement of Profit or Loss and Other Comprehensive
tax. Income tax expense is recognised in Statement Income at the same time as the liability to pay the
of Profit or Loss and Other Comprehensive Income related dividend is recognised.
except to the extent that it relates to items recognised
directly in Other Comprehensive Income or Changes 1.4. STATEMENT OF CASH FLOWS
in Equity, in which case it is recognised directly in the
respective statement. The Statement of Cash Flows has been prepared
using ‘indirect method'. Interests paid are classified
- Current Tax as operating cash flows while dividends paid are
classified as financing cash flows. Interests and
The provision for Income Tax is based on the elements dividends received are classified as investing cash
of Income & Expenditure as reported in the financial flows for the purpose of presentation of Statement of
statements and computed in accordance with the Cash Flows.
provisions of the Inland Revenue Act No. 10 of 2006
and the amendments thereto. For the purpose of Statement of Cash Flows, cash
& cash equivalents consist of savings accounts,
- Deferred Tax cash in hand, cash at banks net of outstanding bank
overdrafts.
Deferred Tax is provided in full, using the liability
method on temporary differences arising between 1.5. EARNINGS PER SHARE
the tax base of assets and liabilities and their carrying
amounts in the Financial Statements. Deferred tax is The Group presents Earnings per Share (EPS) data for
determined using tax rates that have been enacted or its ordinary shares. EPS is calculated by dividing the
substantively enacted by the reporting date and are profit or loss attributable to ordinary shareholders of
expected to apply when the related deferred income the Company by the weighted average number of
tax asset is realised or the deferred income tax liability ordinary shares outstanding during the period.
settled.
1.6. RELATED PARTY TRANSACTIONS
Deferred tax is not recognised for the following
temporary differences: the initial recognition of Disclosures has been made in respect of the
goodwill, the initial recognition of assets or liabilities transactions in which one party has the ability to
in a transaction that is not a business combination control or exercise significant influence over the
and that affects either accounting nor taxable profit, financial and operating policies / decisions of the
and difference relating to investments in subsidiaries other, irrespective of whether a price is charged.
to the extent that they probably will not reverse in the
foreseeable future. Related Party Receivables and Payables are treated
as Current Assets and Current Liabilities as they are
Deferred tax is measured at the tax rates that are deemed to be of a temporary nature.
expected to be applied to the temporary differences
when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting
date.

A deferred tax asset is recognised only to the extent

50 Serendib Engineering Group PLC I Annual Report 2016/2017

6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

1.7. FINANCIAL RISK MANAGEMENT POLICIES SLFRS 9 - Financial Instruments

The Group's principal financial liabilities comprise of SLFRS 9 as issued reflects the replacement of LKAS
loans and borrowings and trade and other payables. 39 and applies to the classification and measurement
The main purpose of these financial liabilities is to of financial assets and financial liabilities as defined
finance the Group's operations. The Group has loan in LKAS 39. This standard becomes effective for
and other receivables, trade and other receivables, annual periods beginning on or after January 01,
and cash and short-term deposits that arrive directly 2018. The adoption of SLFRS 9 will have an impact
from its operations. on classification and measurement of the Company's
financial assets.
The Group is exposed to market risk, credit risk
and liquidity risk. The Group's senior management SLFRS 15 - Revenue from Contracts with Customers
monitors these risks. The Group's senior management
is supported by an Audit Committee that advises SLFRS 15 establishes a comprehensive framework
on financial risks and the appropriate financial risk for determining whether, how much and when
governance framework for the Group. The Audit revenue is recognised. It replace the existing revenue
Committee provides assurance to the Group's senior recognition guidance, including LKAS 18 - Revenue,
management that the Group's financial risk-taking LKAS 11 - “Construction Contracts” and IFRIC 13 -
activities are governed by appropriate policies and “Customer Loyalty Programmes”.
procedures and that financial risks are identified,
measured and managed in accordance with group SLFRS 15 is effective for annual periods beginning
policies and group risk appetite. on or after 01st January 2018, with early adoption
permitted.
The Group's objectives, policies and processes
for measuring and managing risk from financial
instruments and the management of capital are
reported separately in Note 30 in conformity with Sri
Lanka Financial Reporting Standards.

1.8. NEW ACCOUNTING STANDARDS ISSUED

BUT NOT EFFECTIVE AS AT THE REPORTING DATE

The Institute of Chartered Accountants of Sri Lanka

has issued the following standards which become
effective for annual periods beginning after the current
financial year. Accordingly these standards have not
been applied in preparing these financial statements.
The Group expects that these standards when
applied will have substantial impact on the financial
performance, financial position and disclosures. The
Group will be adopting these standards when they
become effective.

Serendib Engineering Group PLC I Annual Report 2016/2017 51

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

Group Company
2017 2016 2017 2016
Rs. Rs. Rs. Rs.
2 REVENUE
2.1 Income
Income on Concrete Poles - 231,982 16,206,500 9,019,482
Projects Income 316,711,579 205,813,936 - -
Income from Manufacturing of Machinery 50,000 - - -
Trading Income - 1,255,351 - -
Repair & Service Income - 2,866,904 - -
316,761,579 210,168,173 16,206,500 9,019,482
2.2 Business Segment Analysis
Concrete Poles - 231,982 16,206,500 9,019,482
Projects Income 316,711,579 205,813,936 - -
Manufacturing 50,000 - - -
Trading - 1,255,351 - -
Others - 2,866,904 - -
316,761,579 210,168,173 16,206,500 9,019,482

3 OTHER INCOME / (EXPENSE)

3.1 Other Income
Profit on Disposal of Plant & Equipment 565,217 2,645,202 - -
Sale of Scraps 2,518 426,925 - -
Payable Balances Written Back - 9,303,931 - -
Write back of Gratuity Over-provision 278,265 - - -
Reversal of Gratuity Provision 45,973 - - -
Sundry Income 441 60,237 - -
892,414 12,436,295 - -
3.2 Other Expenses
Provision for diminution in value of investment - - - 3,000,000
Impairment of Intangible Assets - 99,870 - -
- 99,870 - 3,000,000
4 FINANCE INCOME
Interest on Bank Deposits 71,231 15,215 260 2,491
Dividend Income 24,430 12,750 12,500 -
Profit on Disposal of Financial Assets 37,462 311,254 16,983 113,394
Fair Value Changes on Financial Assets 85,450 - 85,450 -
218,573 339,219 115,193 115,885

5 FINANCE COSTS
Interest on Bank Overdrafts 5,015,880 3,563,144 695 165,277
Interest on Finance Lease Obligations 705,386 1,066,053 - -
Interest on Borrowings 7,559,449 3,366,317 - -
Transaction Cost 21,516 99,831 2,422 17,503
Fair Value Changes on Financial Assets 226,124 1,193,855 - 508,300
13,528,355 9,289,200 3,117 691,080

52 Serendib Engineering Group PLC I Annual Report 2016/2017

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

Group Company
2017 2016 2017 2016
Rs. Rs. Rs. Rs.
6 PROFIT / (LOSS) BEFORE TAX
Profit / (Loss) before Tax is stated after charging
all expenses including the following:
Remuneration to Directors 3,840,000 4,800,000 - -
Auditors Remuneration 657,438 381,506 100,000 95,000
Personnel Costs
- Staff Costs 30,376,410 37,589,326 - -
- Defined Benefit Plan Costs - 358,199 - -
- Defined Contribution Plan Costs 4,251,770 4,899,508 - -
Depreciation 6,510,650 6,969,286 485,140 547,548
Donation 3,000 - - -

7 INCOME TAX EXPENSE

Current Income Tax Expense
Tax Expense on Ordinary Activities (7.1) 1,148,629 2,768 182,043 453
Deferred Tax Expense
Origination / (Reversal) of
Temporary Differences (13) 986,527 (8,073,373) (97,065) (65,116)
2,135,156 (8,070,605) 84,978 (64,663)

7.1 Reconciliation of Accounting Profit / (Loss)

Taxable Income
Accounting Profit / (Loss) before Tax 11,150,783 (41,649,288) 766,086 (5,310,075)
Intra Group Adjustments - (2,900,130) - -
11,150,783 (44,549,418) 766,086 (5,310,075)

Aggregate Disallowed Expenses 8,248,636 16,118,796 487,561 4,575,852

Aggregate Allowable Expenses (6,287,250) (8,301,867) (253,670) (430,876)
Statutory Loss from Business (207,941) (36,732,489) - (1,165,099)
Statutory Profit from Business 13,320,110 - 999,977 -

Other Sources of Income 71,672 15,215 260 2,491

Tax Losses utilised during the year (4,687,124) (5,325) (350,083) (872)
Taxable Income 8,704,658 9,890 650,154 1,619

The utilisation of tax losses brought forward is restricted to 35% of current year's statutory income.
Unabsorbed tax losses can be carried forward indefinitely.

Income Tax Expenses for the period is made up

Statutory Tax Rate
- Income Tax @ 12% 966,506 - - -
- Income Tax @ 28% 182,123 2,768 182,043 453
Current Income Tax Expense 1,148,629 2,768 182,043 453

Serendib Engineering Group PLC I Annual Report 2016/2017 53

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

Group Company
2017 2016 2017 2016
Rs. Rs. Rs. Rs.
7.2 Reconciliation of Tax Losses
The tax losses carried forward by the Group entities as at 31st March 2017 amounts to Rs. 60,323,870
(2016 - Rs. 64,803,053) and the details are given below.

Tax Losses at the beginning of the year 64,803,053 30,004,408 6,113,429 4,949,202
Adjustment to opening balance - (1,928,519) - -
Tax Losses for the year 207,941 36,732,489 - 1,165,099
Tax losses set off during the year
(35% of statutory income) (4,687,124) (5,325) (350,083) (872)
Tax losses at the end of the year 60,323,870 64,803,053 5,763,346 6,113,429

7.3 Applicable rates of Income Tax

Corporate income taxes of companies in the Group are computed in accordance with the Inland Revenue
Act, No. 10 of 2006 and subsequent amendments thereto.

Serendib Engineering Group PLC and Serendib Investment Holdings Ltd are liable to income tax at 28%
(2016 - 28%).

Serendib Engineering & Agencies (Pvt) Ltd is liable for taxation at 12% (2016 - 12%) on the profits from
construction income and other income is liable for taxation at 28% (2016 - 28%) in accordance with pro-
vision of Inland Revenue Act, No. 10 of 2006.

No tax has been provided in the financial statements of C C C Plantation Engineering Limited, since the
Company has not made any taxable profit during the year.

7.4 Deferred Taxation

Deferred tax has been computed by using the future tax rate of 28% for subsidiaries which are liable for
income tax at the standard rate for the Year of Assessment 2016/2017 (in 2015/2016 - 28%).

Serendib Engineering & Agencies (Pvt) Limited being a construction company deferred tax has been com-
puted at the tax rate of 12% (2016 - 12%).

There was no temporary differences for Serendib Investment Holdings Ltd and as such no provision has
been made for
deferred taxation.

No provision has been made for deferred tax in the financial statements of C C C Plantation Engineering
Ltd during the year.

No Deferred tax assets have been recognised in the financial statements of Serendib Engineering Group
PLC in respect of tax losses carried forward because it is not probable that future taxable profit will be
available against which the subsidiary can utilise the benefit there from.

The tax losses carried forward are given below.

Group
2017 2016
Rs. Rs.
Serendib Engineering Group PLC 5,763,346 6,113,429
C C C Plantation Engineering Ltd. 14,424,688 14,306,884
Serendib Engineering & Agencies (Pvt) Ltd. 38,629,191 42,966,078
Serendib Investment Holdings Ltd. 1,506,645 1,416,662
60,323,870 64,803,053

54 Serendib Engineering Group PLC I Annual Report 2016/2017

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

8 EARNINGS / (DEFICIT) PER SHARE

The calculation of basic earnings / (deficit) per share is based on the profit / (loss) for the year attributable
to equity holders of the company divided by weighted average number of ordinary shares in issue
during the year.

Group
2017 2016
Rs. Rs.
Profit / (Loss) attributable to Equity Holders of the Company (Rs.) 8,556,691 (31,965,613)
Weighted average number of Ordinary Shares 32,383,250 32,383,250
Basic earnings / (deficit) per share (Rs.) 0.26 (0.99)

There were no potentially dilutive ordinary shares outstanding at any time during the year.

Balance as at Additions Disposals Balance as at

01.04.2016 31.03.2017
Rs. Rs. Rs. Rs.
9 PLANT & EQUIPMENT
9.1 GROUP
Cost
Furniture & Fittings 2,885,441 34,820 - 2,920,261
Office Equipment 10,113,376 330,500 - 10,443,876
Computers 47,700 - - 47,700
Motor Vehicles 18,124,451 1,113,800 (640,000) 18,598,251
Tools & Equipment 10,781,723 2,479,435 - 13,261,158
41,952,691 3,958,555 (640,000) 45,271,246

Leased Assets
Plant & Machinery 3,600,000 - - 3,600,000
Motor Vehicles 16,989,285 1,499,000 - 18,488,285
62,541,976 5,457,555 (640,000) 67,359,531

Accumulated Depreciation
Furniture & Fittings 2,088,637 140,887 - 2,229,524
Office Equipment 6,229,212 636,387 - 6,865,599
Computers 29,813 17,887 - 47,700
Motor Vehicles 17,864,545 157,577 (640,000) 17,382,122
Tools & Equipment 9,174,028 1,750,088 - 10,924,116
35,386,235 2,702,826 (640,000) 37,449,061

Serendib Engineering Group PLC I Annual Report 2016/2017 55

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

Balance as at Additions Disposals Balance as at

01.04.2016 31.03.2017
Rs. Rs. Rs. Rs.
9 PLANT & EQUIPMENT (CONTD.)
9.1 GROUP
Leased Assets
Plant & Machinery 810,000 360,000 - 1,170,000
Motor Vehicles 7,531,199 3,447,824 - 10,979,023
43,727,434 6,510,650 (640,000) 49,598,084

Carrying Value 18,814,542 17,761,447

9.1.1 During the financial year, the Group acquired Plant & Equipment to the aggregate value of Rs. 3,958,555
(2016 - Rs. 1,397,876) on cash basis.

9.1.2 The gross carrying amount of fully depreciated Plant & Equipment still in use as at 31st March 2017 is Rs.
27,181,352 (2016 - Rs. 26,747,416).

9.1.3 During the year under review, the Group has not capitalised any borrowing costs.

9.1.4 There were no items of Plant & Equipment of the Group pledged as securities for liabilities.

Balance as at Additions Disposals Balance as at

01.04.2016 31.03.2017
Rs. Rs. Rs. Rs.
9 PLANT & EQUIPMENT
9.2 COMPANY
Cost
Furniture & Fittings 3,200 - - 3,200
Office Equipment 7,300 - - 7,300
Tools & Equipment 2,206,952 242,410 - 2,449,362
2,217,452 242,410 - 2,459,862

Accumulated Depreciation
Furniture & Fittings 1,653 640 - 2,293
Office Equipment 608 1,460 - 2,068
Tools & Equipment 1,618,765 483,040 - 2,101,805
1,621,026 485,140 - 2,106,166

Carrying Value 596,426 353,696

56 Serendib Engineering Group PLC I Annual Report 2016/2017

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

9 PLANT & EQUIPMENT (CONTD.)

9.2.1 During the financial year, the Company acquired Plant & Equipment to the aggregate value of
Rs. 242,410 (2016 - Rs. 139,300 ) on cash basis.

9.2.2 There were no fully deprecated Plant & Equipment still in use as at 31st March 2017.

9.2.3 During the year under review, the Company has not capitalised any borrowing costs.

9.2.4 There were no items of Plant & Equipment of the Company pledged as securities for liabilities.

9.3 The Board of Directors has assessed the potential impairment loss of Plant & Equipment as at 31st March
2017. Based on the assessment, no impairment provision is required to be made in the Financial statements
as at the reporting date in respect of Plant & Equipment.

10 INTANGIBLE ASSETS Group

2017 2016
Rs. Rs.
10.1 Goodwill
At the beginning of the year 21,669,723 21,769,593
Impairment for the year (Note 10.1.1) - (99,870)
At the end of the year 21,669,723 21,669,723

This represents the excess of the cost of acquisition of the net Assets of the following companies.
The aggregate carrying amount of Goodwill allocated to each Company is as follows.

Serendib Engineering & Agencies (Pvt) Ltd. 21,002,412 21,002,412

Serendib Investment Holdings Ltd. 667,311 667,311
21,669,723 21,669,723

Goodwill is not amortised, but is reviewed for impairment annually and whether there is an indication that
goodwill may be impaired.

The management is of the view that a provision for impairment of goodwill is not required as at the end of
the reporting period

10.1.1 Impairment of Goodwill

Based on the impairment assessment, the following goodwill were impaired during the financial year 2016.

C C C Plantation Engineering Ltd. Rs. 99,870

Serendib Engineering Group PLC I Annual Report 2016/2017 57

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

11 INVESTMENTS IN SUBSIDIARIES
Holding % No. of Shares Cost

2017 2016 2017 2016 2017 2016

Rs. Rs.
Unquoted Investments

C C C Plantation Engineering Ltd. 100% 100% 3,000,000 3,000,000 3,000,000 3,000,000

Serendib Engineering 85.56% 85.56% 2,823,576 2,823,576 61,537,890 61,537,890
& Agencies (Pvt) Ltd.
Serendib Investment Holdings Ltd. 60% 60% 85,200,000 85,200,000 85,200,000 85,200,000
149,737,890 149,737,890
Provision for diminution in value of investments (Note 11.3) (3,000,000) (3,000,000)
146,737,890 146,737,890

Name of the Subsidiary Principal Activity

C C C Plantation Engineering Ltd. Manufacturing of machinery equipment for Plantation Sector,
servicing and repairing of machines used in Plantation Sector.
Serendib Engineering & Agencies (Pvt) Ltd. A multifaceted Engineering Company involved in
Telecommunications, Plantation Engineering, Water Supply and
Filtration, Marine and Railway Engineering.
Serendib Investment Holdings Ltd. Investing in shares.

11.1 Inter-Company Shareholding Holding % No. of Shares

Investor Investee 2017 2016 2017 2016

Serendib Investment Serendib Engineering & 14.44% 14.44% 476,424 476,424
Holdings Ltd. Agencies (Pvt) Ltd.

11.2 Investments in subsidiaries are recorded at cost less impairment in the financial statements of the Compa-
ny. The net assets of each subsidiary are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the recoverable amount of the investment is
estimated and the impairment loss is recognised to the extent of its net assets loss.

58 Serendib Engineering Group PLC I Annual Report 2016/2017

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

11 INVESTMENTS IN SUBSIDIARIES (CONTD.)

11.3 Provision for diminution in value of investments

The Company has 100% holding in C C C Plantation Engineering Limited, as at the reporting date. C C C Plantation En-
gineering Limited has reported a net loss of Rs. 151,905 for the year ended 31st March 2017 and the Accumulated losses
were Rs. 10,696,052. The Company has made a full provision of Rs. 3,000,000 on the investment made in C C C Plantation
Engineering Limited as at 31st March 2016.

11.4 Material Partly-Owned Subsidiaries

As per the SLFRS 12, Financial Information of subsidiaries that have material Non-Controlling Interest need
to be disclosed separately. However, the Group concluded that there were no subsidiaries with material
Non-Controlling Interest that require separate disclosure.

Group Company

2017 2016 2017 2016

Rs. Rs. Rs. Rs.

12 OTHER FINANCIAL ASSETS

12.1 Other Non Current Financial Assets
Available-for-Sale Financial Assets 35,000,000 35,000,000 - -
12.2 Other Current Financial Assets
Financial Assets at Fair Value Through
Profit or Loss 5,512,454 3,962,273 1,530,300 1,395,100
Held to Maturity Financial Assets
- Treasury Bills 1,450,000 - - -
6,962,454 3,962,273 1,530,300 1,395,100

Total Other Financial Assets 41,962,454 38,962,273 1,530,300 1,395,100

Group
2017 2016
12.1 OTHER NON CURRENT FINANCIAL ASSETS No. of Cost No. of Cost
Shares Rs. Shares Rs.
Available-For-Sale Financial Assets
Un-quoted
Navara Capital Partners Ltd. 31,000,000 35,000,000 31,000,000 35,000,000
35,000,000 35,000,000

The unquoted investments do not have a quoted market price in active market and the fair value is carried at cost.

Serendib Engineering Group PLC I Annual Report 2016/2017 59

60
Group Group COMPANY COMPANY
6.8

2017 2016 2017 2016

No. of Cost Fair No. of Cost Fair No. of Cost Fair No. of Cost Fair
Shares Value Shares Value Shares Value Shares Value
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
OTHER CURRENT FINANCIAL
ASSETS
Financial Assets at Fair Value
Through Profit or Loss
Banks, Finance and Insurance
Multi Finance PLC 88,000 1,310,414 1,214,400 - - 12,500 218,672 172,500 - -
Pan Asia Banking Corporation PLC 20,500 531,027 315,700 20,500 531,027 471,500 - - - -
Construction & Engineering
Lankem Development PLC 138,700 518,938 360,620 - - - - - -
MTD Walkers PLC 60,000 3,961,024 2,100,000 66,914 4,442,976 2,228,236 20,000 1,446,534 700,000 25,000 1,808,167 832,500
Diversified Holdings
Browns Capital PLC 250,000 556,160 375,000 250,000 556,160 300,000 250,000 556,160 375,000 250,000 556,160 300,000
Browns Investments PLC 402,000 691,054 562,800 402,000 691,054 522,600 202,000 347,246 282,800 202,000 347,246 262,600
Softlogic Holdings PLC 10,000 164,826 119,000 10,000 164,826 133,000 - - - -
NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

Land and Property

Huejay International Investments 741 44,183 21,934 741 44,183 31,937 - - - -
PLC
Manufacturing
Laxapana Batteries PLC 10,000 113,254 115,000 - - - - - -
Swisstek (Ceylon) PLC 5,000 305,888 328,000 5,000 305,888 275,000 - - - -
8,196,769 5,512,454 6,736,115 3,962,273 2,568,612 1,530,300 2,711,573 1,395,100

Sector classification and market value per share are based on the official valuation list published by the Colombo Stock Exchange.

Serendib Engineering Group PLC I Annual Report 2016/2017

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

12.2 OTHER CURRENT FINANCIAL ASSETS (CONTD.)

12.2.1 Fair Value Hierarchy

The Company measures the fair value using the following fair value hierarchy, which reflects the signifi-
cance of the inputs used in making the measurement.

Level 1 : Inputs are unadjusted quoted market prices in an active market for identical instruments.
Level 2 : Inputs other than quoted prices included within level 1 that are observable either directly
(i.e. as prices) or indirectly (i.e. derived from prices)
Level 3 : Inputs that are not based on observable market data.

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

Level 1 Level 2 Level 3

2017 2016 2017 2016 2017 2016

Rs. Rs. Rs. Rs. Rs. Rs.
GROUP
Financial Assets at Fair Value Through 5,512,454 3,962,273 - - - -
Profit or Loss

COMPANY
Financial Assets at Fair Value 1,530,300 1,395,100 - - - -
Through Profit or Loss

Serendib Engineering Group PLC I Annual Report 2016/2017 61

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

Group Company

2017 2016 2017 2016

Rs. Rs. Rs. Rs.

13 DEFERRED TAX
Deferred Tax Asset 1,083,592 (8,008,257) - -
Deferred Tax Liability (97,065) (65,116) (97,065) (65,116)
Origination / (Reversal) of temporary differences
Recognised in Statement of Profit or Loss 986,527 (8,073,373) (97,065) (65,116)

13.1 Deferred Tax Asset

Balance as at beginning of the year 15,658,764 7,650,507 - -
Effect of change in applied Tax rate (7,312,175) - - -
Accelerated Depreciation for Tax purposes (516,452) (102,560) - -
Employee Benefit Liability (46,713) (108,864) - -
Losses available for offset against
future taxable income (520,427) 8,219,681 - -
Balance as at end of the year 7,262,997 15,658,764 - -

13.2 Deferred Tax Liability

Balance as at beginning of the year 137,670 202,786 137,670 202,786
Accelerated Depreciation for Tax purposes (97,065) (65,116) (97,065) (65,116)
Balance as at end of the year 40,605 137,670 40,605 137,670

14 INVENTORIES
Raw Materials 25,707,106 21,319,576 605,515 667,538
Work in Progress 2,943,004 7,262,943 87,802 50,170
Finished Goods 2,988,636 1,964,518 2,988,636 1,964,518
Good in Transit 326,421 - - -
31,965,167 30,547,037 3,681,953 2,682,226

14.1 Inventories carried at the lower of cost or net realisable value.

15 TRADE AND OTHER RECEIVABLES

Debtors & Retentions 231,064,774 176,485,771 - 157,500
Other Receivables 200,000 315,000 - -
Tax Receivables 13,915,637 13,208,624 - -
Deposits, Advances & Prepayments 5,454,949 5,042,826 111,276 91,819
250,635,360 195,052,221 111,276 249,319

62 Serendib Engineering Group PLC I Annual Report 2016/2017

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

Group Company

2017 2016 2017 2016

Rs. Rs. Rs. Rs.

16 CASH AND CASH EQUIVALENTS

Favourable Balances
Savings Accounts 419,950 408,906 8,128 7,894
Cash at Bank 2,734,976 298,882 1,285,716 35,523
Cash in Hand 1,966,734 1,417,966 15,000 15,000
5,121,660 2,125,754 1,308,844 58,417

Bank Overdrafts 17,533,575 7,381,195 - -

Cash and Cash Equivalents as per the Statement of

Cash Flows (12,411,915) (5,255,441) 1,308,844 58,417

16.1 Security Details Over Bank Overdraft Facilities

GROUP
Serendib Engineering & Agencies (Pvt) Ltd.
The bank overdraft facility obtained from Pan Asia Banking Corporation PLC (facility amount Rs. 25.0 Mn) is
secured by;
- Corporate Guarantee of Serendib Engineering Group PLC for Rs. 50.0 Mn.

2017 2016
17 STATED CAPITAL

Number of Value of Shares Number of Value of Shares

Shares Rs. Shares
Fully paid ordinary shares
At the beginning of the year 32,383,250 178,107,910 32,383,250 178,107,910

At the end of the year 32,383,250 178,107,910 32,383,250 178,107,910

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

Serendib Engineering Group PLC I Annual Report 2016/2017 63

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

Group Company

2017 2016 2017 2016

Rs. Rs. Rs. Rs.

18 FINANCE LEASE OBLIGATIONS

Analysis of finance lease obligations by year of
repayment

18.1 Lease Obligations Repayable within

two to five years
Gross Lease Liability 3,677,119 6,376,629 - -
Finance Charges Unamortised (220,325) (479,583) - -
Net Lease Obligations 3,456,794 5,897,046 - -

18.2 Lease Obligations Repayable within

one year from year end
Gross Lease Liability 4,294,740 3,747,804 - -
Finance Charges Unamortised (535,757) (690,177) - -
Net Lease Obligations 3,758,983 3,057,627 - -

19 EMPLOYEE BENEFITS
Balance at the beginning of the year 5,008,988 5,397,789 - -
Add:
Current service cost 576,299 748,765 - -
Interest cost 571,644 433,819 - -
(Gain) / Loss arising from changes in assumptions (1,426,208) (824,385) - -
4,730,723 5,755,988 - -
Less:
Payment made during the year (111,000) (747,000) - -
Reversal of Gratuity Provision (45,973) - - -
Balance as at the end of the year 4,573,750 5,008,988 - -

19.1 Serendib Engineering & Agencies (Pvt) Ltd had adopted the LKAS 19 - “Employee Benefits” and applied the
formula method to make a reliable estimate of the Company's employee benefits using the “Projected Unit
Credit Method” in order to determine the present value of the employee benefits.

The following key assumptions were made in arriving at the retirement benefit obligation.
Group

As at 31 March
st
2017 2016
Retirement Age 55 Years 55 Years
Salary Increment Rate 5% 5%
Discount Rate 12.89% 10.38%
Employee Turnover Ratio 5% 5%

64 Serendib Engineering Group PLC I Annual Report 2016/2017

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

19 EMPLOYEE BENEFITS (CONTD.)

19.2 Employee benefits of C C C Plantation Engineering Limited had been made on half months salary based
on the last month of the financial year of all employees multiplied by the completed years of service, com-
mencing from the first year of service. During the year the provision was reversed since there were no em-
ployees as at the end of the year. All staff related services are provided by Serendib Engineering & Agencies
(Pvt) Ltd.
19.3 No provision has been made for Retiring Gratuity in the financial statements of Serendib Engineering Group
PLC and Serendib Investment Holdings Ltd as these companies do not employ any staff. All staff related
services are provided by Serendib Engineering & Agencies (Pvt) Ltd.

Group Company

2017 2016 2017 2016

Rs. Rs. Rs. Rs.

20 TRADE AND OTHER PAYABLES

Trade Creditors
- Related Parties 3,733,445 2,093,726 - -
- Others 32,563,013 28,508,877 - -
Project Advances 11,113,752 1,743,538 - -
Accrued Expenses 32,383,814 30,706,078 3,107,942 1,324,195
Other Tax Payables
- Value Added Tax 21,826,020 14,707,704 - -
- Nation Building Tax 215,217 215,217 - -
NDB Bill Discounting Facility - 11,639,112 - -
Other Payables 4,708,658 1,690,656 1,262,925 992,333
Dividend Payable 184,100 184,100 - -
106,728,019 91,489,008 4,370,867 2,316,528

21 INTEREST BEARING BORROWINGS

Term Loan 18,461,192 25,000,000 - -
Short Term Loan 32,598,416 - - -
51,059,608 25,000,000 - -

21.1 Assets Pledged as Security against Interest Bearing

Borrowings

GROUP
Serendib Engineering & Agencies (Pvt) Ltd.

Lender Approved Interest Terms of Security Pledged

Facility Rate Repayment
Pan Asia Banking Corporation PLC Rs. 25.0 Mn 13.5% 24 equated Corporate Guarantee of
monthly Serendib Engineering
installements of Group PLC for
Rs. 1,194,425.36 Rs. 50.0 Mn
Details of assets pledged as security against interest bearing borrowings other than above are disclosed in note 29.

Serendib Engineering Group PLC I Annual Report 2016/2017 65

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

Group Company

2017 2016 2017 2016

Rs. Rs. Rs. Rs.

22 INCOME TAX LIABILITY

Income Tax in respect of prior periods 133,960 133,927 - -
Income Tax on current year profit 182,097 281 182,017 204
316,057 134,208 182,017 204

23 RELATED PARTY TRANSACTIONS

23.1 Amounts due from Related Parties
23.1.1 Non Interest Bearing Receivables
Parent
Navara Capital Ltd. - 2,448,204 - 1,265,800
Subsidiaries
C C C Plantation Engineering Ltd. - - 3,542,347 3,542,347
Serendib Investment Holdings Ltd. - - 55,380 55,380
Affiliates
Alerics Dairy Products Ltd. 424,695 424,695 - -
Navara Forex and Money Brokers Ltd. 1,003,204 1,003,204 - -
1,427,899 3,876,103 3,597,727 4,863,527

23.2 Amounts due to Related Parties

23.2.1 Non Interest Bearing Payables
Subsidiaries
Serendib Engineering & Agencies (Pvt) Ltd. - - 30,904,955 33,021,557
Affiliates
Navara Securities (Pvt) Ltd. 1,928,751 1,893,562 1,928,750 1,893,562
23.2.2 Key Management Personnel
Mr. H.N De Silva 433,374 433,374 - -
2,362,125 2,326,936 32,833,705 34,915,119

23.3 Related Party Disclosures

23.3.1 Parent and Ultimate Controlling Party

The Company's parent undertaking and controlling party is Navara Capital Ltd which is incorporated in Sri
Lanka, while the ultimate parent undertaking is Navara Holdings (Pvt) Ltd which is incorporated in Sri Lanka.

66 Serendib Engineering Group PLC I Annual Report 2016/2017

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

23 RELATED PARTY DISCLOSURES (CONTD.)

23.3.2 Identity of the Related Parties

The Group carried out transactions in the ordinary course of the business with parties who are defined as
Related Parties as per the Sri Lanka Accounting Standard (LKAS 24) - “Related Party Disclosures”, the details
of which are reported below.

During the year Company has not carried out any transaction with the ultimate parent.

a) Transactions with Related Parties

The Company had following transactions with related entities during the year under review.

2017 2016

Rs. Rs.

i) Transactions with Parent Company

Navara Capital Ltd.
Fund Transfers - 1,269,220
Recovery / (Settlement) of Expenses - (3,420)
(Recovery) / Settlement of Outstanding Balance (1,265,800) -
Non Interest Bearing Receivable - 1,265,800

ii) Transactions with Subsidiaries

C C C Plantation Engineering Ltd.
Fund Transfers - 1,000,000
Recovery / (Settlement) of Expenses - (130,826)
Non Interest Bearing Receivable 3,542,347 3,542,347

Serendib Investment Holdings Ltd.

Non Interest Bearing Receivable 55,380 55,380

Serendib Engineering & Agencies (Pvt) Ltd.

Sale of Concrete Poles 16,206,500 8,787,500
Fund Transfers 157,500 (4,521,443)
Recovery / (Settlement) of Expenses (16,324,088) (5,481,530)
Non Interest Bearing Payable (30,904,955) (33,021,558)

All operational services are provided by Serendib Engineering & Agencies (Pvt) Ltd.

The Company and its subsidiary Serendib Engineering & Agencies (Pvt) Ltd have pledged as security the assets
mentioned in Note No. 29 for facilities obtained and utilised jointly from the National Development Bank
PLC.

iii) Transactions with Affiliates

2017 2016

Rs. Rs.

Navara Securities (Pvt) Ltd.

Non Interest Bearing Payable (1,928,751) (1,893,562)

The Company's Investment portfolio is managed by Navara Securities (Pvt) Ltd.

Serendib Engineering Group PLC I Annual Report 2016/2017 67

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

b) Terms and Conditions of Transactions with Related Parties

Transactions with related parties are carried out in the ordinary course of the business at commercial rates.
Outstanding related parties balances at the year end are unsecured.

No Interest have been received or paid on the above Related Party balances since they are deemed to be
of a temporary nature.

c) Non-recurrent Related Party Transactions

There were no any Non-recurrent Related Party Transactions which aggregate value exceeds 10% of the
equity or 5% of the total assets whichever is lower of the Group audited financial statements, which required
additional disclosures in the Annual Report under Colombo Stock Exchange Listing Rule 9.3.2 and Code of
Best Practices on Related Party Transactions under the Security Exchange Commission Directive issued under
Section 13(c) of the Security Exchange Commission Act.

d) Recurrent Related Party Transactions

There were no any Recurrent Related Party Transactions which in aggregate value exceeds 10% of the
consolidated revenue of the Group as per the audited financial statements, which required additional
disclosures in the Annual Report under Colombo Stock Exchange Listing Rule 9.3.2 and Code of Best Practices
on Related Party Transactions under the Security Exchange Commission Directive issued under Section 13(c)
of the Security Exchange Commission Act.

23.3.3 Transaction with Key Management Personnel (KMP)

According to Sri Lanka Accounting Standard (LKAS 24) - “Related Party Disclosures”, Key Management
Personnel (KMP) are those persons having authority and responsibility for planning, directing and
controlling the activities of the entity. Accordingly, Key Management Personnel include the members of
the Board of Directors (including Executive and Non-Executive Directors) of the Company and its subsidiary
companies.

Outstanding balances at the year end relating to Key Management Personnel (KMP) are disclosed in Note
23.2.2 to the Financial Statements.

a) Loans from Key Management Personnel

No loans have been received from Key Management Personnel and their close family members during the
year other than those disclosed in Note 23.2.2 to the financial statements.

b) Key Management Personnel Compensation

Details of Compensation are given in Note 6 to the Financial Statements.

68 Serendib Engineering Group PLC I Annual Report 2016/2017

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

c) The Directors of the Company are also Directors of the following Companies

Mr. H.N. De Mrs. D.L. De Mr. H. G. Prof. R.W.T.

Silva Silva Sagara M.R. Bandara
Kariyawasam

Ultimate Parent √ √

Navara Holdings (Pvt) Ltd. √ √ - -

Parent
Navara Capital Ltd. √ √ √ -

Subsidiaries
C C C Plantation Engineering Ltd. √ √ √ -
Serendib Engineering & Agencies (Pvt) Ltd. √ √ - -
Serendib Investment Holdings Ltd. √ √ √ -

Affiliates
Alerics Dairy Products Ltd. √ √ √ √
Navara Forex and Money Brokers Ltd. √ √ - -
Navara Securities (Pvt) Ltd. - - √ -

There were no other related party transactions other than the above and those disclosed in Note 23 to the
Financial Statements.

24 CAPITAL EXPENDITURE COMMITMENTS

24.1 COMPANY
The Company had no material capital or financial commitments as at the date of the Statement of Financial
Position.

24.2 GROUP
The Group had no material capital or financial commitments as at the date of the Statement of Financial Position.

25 CONTINGENT LIABILITIES

25.1 COMPANY
Serendib Engineering Group PLC has issued Corporate Guarantees of Rs. 50.0 Mn for Pan Asia Banking Corpora-
tion PLC on behalf of Serendib Engineering & Agencies (Pvt) Ltd for borrowings obtained by the subsidiary.

25.2 GROUP

25.2.1 Serendib Engineering & Agencies (Pvt) Ltd.

Contingent Liabilities exists in respect of Bank Guarantees issued in favour of third parties through the
following Financial Institutions.

2017 2016

Rs. Rs.

Hatton National Bank PLC 3,453,068 7,379,455

National Development Bank PLC 25,639,328 15,375,782

Serendib Engineering Group PLC I Annual Report 2016/2017 69

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

26 RESTATEMENT OF COMPARATIVE FIGURES

Comparative information including quantitative, narrative and descriptive information is disclosed in
respect of the previous period for all amounts reported in the Financial Statements in order to enhance
the understanding of the current period's Financial Statements and to enhance the inter period comparability.

27 EVENTS AFTER THE REPORTING PERIOD

Subsequent to the date of the Financial Position, no circumstances have arisen which would require
adjustments to or disclosure in the financial statements.

28 DIRECTORS' RESPONSIBILITY
The Directors acknowledge the responsibility for the preparation and presentation of these Financial Statements.

29 ASSETS PLEDGED
The details of assets pledged as securities against bank borrowings are disclosed in Notes 16.1 and 21.1.
Except for above the following assets have been pledged as security for liabilities as at the reporting date.

Name of the Financial Nature of Facility

Nature of Assets
Institution Facility Amount

a) Hatton National Bank PLC Letter of Guarantee Rs. 10.0 Mn Letter of Indemnity

(i) Primary Mortgage Bond No. 1309 dated

National Development
b) Letter of Guarantee Rs. 30.0 Mn 22.08.2013 over stocks and book debts for
Bank PLC
Rs. 85.0 Mn.
Receivable (ii) Cross Corporate Guarantee of Serendib
Finance Engineering & Agencies (Pvt) Ltd. (PV 9944)
Rs. 20.0 Mn
(Bill Discounting) and Serendib Engineering Group PLC (PQ
230) for Rs. 85.0 Mn each.
Short Term (iii) Receivable Finance Agreement between the
Rs. 35.0 Mn
Loans Borrowers and the Bank.
(iv) Lien over cash deposit/s, to be built up
through the deposit of two per centum (2%)
of value of each payment / invoice routed
through NDB, in the name of the Borrowers
held by the bank.

The facilities obtained from the Hatton National Bank PLC has been utilised by Serendib Engineering &
Agencies (Pvt) Ltd.

The facilities obtained from the National Development Bank PLC has been utilised jointly by the Company
and its subsidiary Serendib Engineering & Agencies (Pvt) Ltd.

30 FINANCIAL INSTRUMENTS
Overview
The Group has exposure to the following risks from its use of financial instruments.
- Credit risk
- Liquidity risk
- Market risk
- Operational risk

70 Serendib Engineering Group PLC I Annual Report 2016/2017

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

This note presents qualitative and quantitative information about the Group's exposure to each of the above
risks, the Group's objectives, policies and processes for measuring and managing risks.

Risk Management Framework

The Board of Directors have overall responsibility for the establishment and oversight of the risk management
framework, including policies and procedures. The Group's system of internal controls covers all policies and
procedures and facilitates the timely identification and effective management of significant areas of strategic
and operational risks that may arise.

30.1 Credit Risk

Credit Risk is the risk that one party to a financial instrument will cause a financial loss for the other party by
failing to discharge an obligation. The Group is exposed to credit risk from its operating activities and from its
financing activities.

30.1.1 Exposure to Credit Risk

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

Group Company

2017 2016 2017 2016

Rs. Rs. Rs. Rs.

Trade and Other Receivables 250,635,360 195,052,221 111,276 249,319

Amounts due from Related Parties 1,427,899 3,876,103 3,597,727 4,863,527
Other Financial Assets 6,962,454 3,962,273 1,530,300 1,395,100
Cash and Cash Equivalents 5,121,660 2,125,754 1,308,844 58,417
264,147,373 205,016,351 6,548,147 6,566,363

The aging of Trade Debtors and Amounts due from Related Parties at the reporting date was:

2017 2016

Gross Impairment Gross Impairment

Rs. Rs. Rs. Rs.

GROUP
Past due 0-365 days 161,753,735 - 124,332,841 -
More than one year 55,761,676 - 59,670,581 -
217,515,411 - 184,003,422 -

COMPANY
Past due 0-365 days - - 2,432,327 -
More than one year 3,597,727 - 2,588,701 -
3,597,727 - 5,021,028 -

Based on historical default rates, the Group believes that, no impairment allowance is necessary in respect of
Trade and Other Receivables and Amounts due from Related Parties for past dues or past due by up to 365
days.

Serendib Engineering Group PLC I Annual Report 2016/2017 71

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

30.2 Liquidity Risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with
its financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to
managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, without incurring unacceptable losses or risking damage to the Group's reputation.

The following are the contractual maturities of financial liabilities.

GROUP COMPANY

Carrying 1-12 More than Carrying 1-12 More than

As at 31st March 2017
Amount Months one year Amount Months one year
Rs. Rs. Rs. Rs. Rs. Rs.
Trade and Other Payables 106,728,019 105,694,553 1,033,466 4,370,867 4,203,088 167,779
Amounts due to Related Parties 2,362,125 468,563 1,893,562 32,833,705 18,304,639 14,529,067
Finance Lease Obligations 7,215,777 3,758,983 3,456,794 - - -
Interest Bearing Borrowings 51,059,608 51,059,608 - - - -
Income Tax Liability 316,057 182,097 133,960 182,017 182,017 -
Bank Overdrafts 17,533,575 17,533,575 - - - -
185,215,161 178,697,379 6,517,782 37,386,589 22,689,744 14,696,845

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at
significantly different amounts.

30.3 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.

The Group was not exposed to currency risk and commodity risk at the reporting period.

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

30.3.1 Interest Rate Risk

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

The Group's exposure to the risk of changes in the market interest rate relates primarily to the Group's long term debt
obligations with floating 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 objective is to maintain an efficient operational interest cost structure to minimise the adverse effects of
fluctuating interest rates.

At the reporting date, the Group's interest-bearing financial instruments were as follows:

Carrying amount
GROUP COMPANY
2017 2016 2017 2016
Rs. Rs. Rs. Rs.
Fixed Rate Instruments
Financial Assets - - - -
Financial Liabilities
Interest Bearing Borrowings (18,461,192) (25,000,000) - -
(18,461,192) (25,000,000) - -

72 Serendib Engineering Group PLC I Annual Report 2016/2017

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

Carrying amount
GROUP COMPANY
2017 2016 2017 2016
Rs. Rs. Rs. Rs.
Variable Rate Instruments
Financial Assets
Treasury Bills 1,450,000 - - -
Savings Accounts 419,950 408,906 8,128 7,894

Financial Liabilities
Interest Bearing Borrowings (32,598,416) - - -
Bank Overdrafts (17,533,575) (7,381,195) - -
(48,262,041) (6,972,289) 8,128 7,894

Sensitivity analysis for variable rate instruments

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all
other variables held constant, of the profit before tax:

Effect on Profit Before Tax Effect on Profit Before Tax

GROUP COMPANY
2017 2016 2017 2016
Rs. Rs. Rs. Rs.
Variable rate instruments
(1% decrease) 482,620 69,723 (81) (79)
(1% increase) (482,620) (69,723) 81 79

30.3.2 Equity Price Risk

The Group's listed equity securities are susceptible to market price risk arising from uncertainties about
future values of the investment securities. Management of the Group reviews and approves all equity invest-
ment decisions.

Sensitivity analysis on the value of the investments is not provided as it is deemed to be not material.

30.4 Capital Management

The Board's policy is to maintain a strong capital base so as to maintain shareholder, creditor and market
confidence and to sustain future development of the business. The Board of Directors monitors the return
on capital and level of dividends paid out to ordinary shareholders.

Bank Overdrafts with variable interest rates are used to manage the working capital requirements of the Group.
Major projects are financed by funds received from long term borrowings as well as reserves of the Group.

The Group's debt to equity ratio at the end of the reporting period was as follows:

Serendib Engineering Group PLC I Annual Report 2016/2017 73

 6.8 NOTES TO THE FINANCIAL STATEMENTS (CONTD.)

GROUP COMPANY
2017 2016 2017 2016
Rs. Rs. Rs. Rs.
Total Liabilities 189,829,516 140,432,678 37,427,194 37,369,521
Less: Cash and Cash Equivalents (5,121,660) (2,125,754) (1,308,844) (58,417)

Net Debt 184,707,856 138,306,924 36,118,350 37,311,104

Total Equity 187,977,191 186,273,739 119,894,492 119,213,384

Net Debt to Equity Ratio 98% 74% 30% 31%

There were no changes in the Group's approach to capital management during the year and the Group is not
subject to externally imposed capital requirements.

30.5 Operational Risk

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

The Group's objective is to manage operational risk so as to balance the avoidance of financial losses and
damage to the Group's reputation with overall cost effectiveness and to avoid control procedures that restrict
initiative and creativity.

74 Serendib Engineering Group PLC I Annual Report 2016/2017

07. SHARE INFORMATION

7.1 STATED CAPITAL

The stated capital of the Company as at 31st March 2017 Rs.178,107,910 represented by 32,383,250 Ordinary
Voting Shares. All shares are issued and fully paid.

7.2 TWENTY LARGEST SHAREHOLDERS OF THE COMPANY

As at 31/03/2017 As at 31/03/2016
Name of the Shareholder Number of Number of
% %
Shares Shares
1 NAVARA CAPITAL LIMITED 24,699,458 76.27 24,699,458 76.27

2 LANKEM CEYLON PLC 2,462,559 7.60 2,462,559 7.60

3 PAN ASIA BANKING CORPORATION PLC / 1,435,300 4.43 1,435,300 4.43

LANKEM CEYLON PLC
4 FLYASIA SDN BHD 1,175,625 3.63 1,175,625 3.63

5 MR. S. C. DE SILVA 637,732 1.97 697,732 2.15

6 MR. K. D. S. R. KULATUNGA 185,770 0.57 185,770 0.57

7 MR P. V. D. C. PEIRIS 165,881 0.51 125,844 0.39

8 FIRST CAPITAL MARKETS LIMITED / 58,450 0.18 53,450 0.17

MR. P. R. B. PERERA
9 MRS H. P. GIN 50,920 0.16 50,920 0.16

10 MR. T. M. N. PEIRIS 48,300 0.15 40,200 0.12

11 MBSL/MR H. L. R. J. NONIS 45,840 0.14 - -

12 MR. H. M. C. M. ABEYWARDANA 35,790 0.11 35,000 0.11

13 MR. S. MUTHUGALA 35,000 0.11 35,000 0.11

14 BANSEI SECURITIES CAPITAL (PVT) LDT/ 33,283 0.10 - -

MR M A U GUNATHILAKA
15 TKS FINANCE LTD/MR. M C D FERNANDO 28,853 0.09 - -

16 MR. M. H. DE PINTO WICKRAMARATHNA 27,199 0.08 27,199 0.08

17 MR. S. LOHESWARAN 26,000 0.08 - -

18 MISS R. H. MALLIKA 23,468 0.07 - -

19 MR. A. P. D. D. S. FONSEKA 22,425 0.07 22,425 0.07

20 MRS. M. M. SAFEENA BEEBI 22,000 0.07 22,000 0.07

31,219,853 96.41 31,068,482 95.93

Others 1,163,397 3.59 1,314,768 4.07

TOTAL 32,383,250 100 32,383,250 100

Serendib Engineering Group PLC I Annual Report 2016/2017 75

 7.3 DISTRIBUTION OF SHAREHOLDERS

As of 31st March 2017

Resident Non – Resident Non – Resident
No of No of % No of No of % No of No of %
Value Band Share Shares Share Shares Share Shares
Holders Holders Holders
1 - 1,000 389 112,645 0.35 1 4 - 390 112,649 0.35
1,001 - 5,000 144 355,357 1.10 2 7,500 0.02 146 362,857 1.12
5,001 - 10,000 41 297,790 0.92 - - - 41 297,790 0.92
10,001 - 50,000 37 716,964 2.21 1 21,295 0.07 38 738,259 2.28
50,001 - 100,000 01 58,450 0.18 1 50,920 0.16 2 109,370 0.34
100,001 - 500,000 02 351,651 1.09 - - - 2 351,651 1.09
500,001 - 1,000,000 01 637,732 1.97 - - - 1 637,732 1.97
1,000,001 - 50,000,000 03 28,597,317 88.31 1 1,175,625 3.63 4 29,772,942 91.94
50,000,001 - 75,000,000 - - - - - - - - -
75,000,001 & Above - - - - - - - - -
TOTAL 618 31,127,906 96.12 6 1,255,344 3.88 624 32,383,250 100

As of 31st March 2016

Resident Non – Resident Non – Resident

Value Band No of No of % No of No of % No of No of %
Share Shares Share Shares Share Shares
Holders Holders Holders
1 - 1,000 393 127,854 0.39 02 1,004 - 395 128,858 0.39
1,001 - 5,000 151 386,599 1.19 02 7,500 0.02 153 394,099 1.21
5,001 - 10,000 44 325,928 1.01 - - - 44 325,928 1.01
10,001 - 50,000 31 626,412 1.93 01 21,295 0.07 32 647,707 2.00
50,001 - 100,000 01 53,450 0.17 01 50,920 0.16 02 104,370 0.33
100,001 - 500,000 02 311,614 0.96 - - - 02 311,614 0.96
500,001 - 1,000,000 01 697,732 2.15 - - - 01 697,732 2.15
1,000,001 - 50,000,000 03 28,597,317 88.31 01 1,175,625 3.63 04 29,772,942 91.94
50,000,001 - 75,000,000 - - - - - - - - -
75,000,001 & Above - - - - - - - - -
TOTAL 626 31,126,906 96.12 07 1,256,344 3.88 633 32,383,250 100

7.4 COMPOSITION OF SHAREHOLDERS

As at 31st March 2017 31st March 2016

No of Shares Holding % No of No of Shares Holding % No of
Categories of Shareholders
shareholders shareholders
Individuals 2,389,460 7.38 583 2,377,711 7.34 590
Institutions 29,993,790 92.62 41 30,005,539 92.66 43
TOTAL 32,383,250 100.00 624 32,383,250 100.00 633

76 Serendib Engineering Group PLC I Annual Report 2016/2017

 7.5 MARKET INFORMATION ON ORDINARY SHARES OF THE COMPANY

As at 31st March 2017 31st March 2016

No of Shares No of Shares
Rs. Rs.
Ordinary Voting Shares
Highest Price Per Share 11.00 15.40
Lowest Price Per Share 5.00 5.20
Closing Price Per Share 5.90 6.80

7.6 DIRECTORS AND CEO’S SHAREHOLDING

31st March
As at 31st March 2017
2016
No of Shares Holding % as of No of No of Shares
Name of the Director total no of Issued shareholders
Shares
Mr. H. N. De Silva Nil 0.00 Nil 0
Mrs. D. L. De Silva Nil 0.00 Nil 0
Mr. H. G. S. Kariyawasam Nil 0.00 Nil 0
Prof. R. W. T. M. R. Bandara Nil 0.00 Nil 0
Dr. A. G. P. A. Gunawansa Nil 0.00 Nil 0
Mr. A. N. D. De Silva (CEO) Nil 0.00 Nil 0
TOTAL Nil 0.00 Nil 0

7.7 PUBLIC SHAREHOLDINGS

The percentage of shares held by the public as at 31st March 2017 was 23.73%.

As at 31st March 2017 31st March 2016

No of Shares Holding % No of No of Shares Holding % No of
Categories of Shareholders
shareholders shareholders
Shares held by Public 7,683,792 23.73 623 7,683,792 23.73 632
Shares held by the others 24,699,458 76.27 01 24,699,458 76.27 01
TOTAL 32,383,250 100.00 624 32,383,250 100.00 633

Serendib Engineering Group PLC I Annual Report 2016/2017 77

 08. SUPPLEMENTARY INFORMATION
08. SUPPLEMENTARY INFORMATION
8.1 GROUP STRUCTURE

8.1 GROUP STRUCTURE

Navara Capital Limited

76.27%

Serendib Engineering
Group PLC

60% 85.56% 100%

Serendib Investments Serendib Engineering & CCC Plantation

Holding Limited Agencies (Pvt) Limited Engineering Limited

14.44%

78 Serendib Engineering Group PLC I Annual Report 2016/2017

Serendib Engineering Group PLC I Annual Report 2015/2016 75

 8.2 PERFORMANCE SUMMARY

8.2.1 Performance of the Group

2017 2016 2015 2014

Group
Rs. Rs. Rs. Rs.
OPERATING RESULTS
Revenue 316,761,579 210,168,173 266,049,940 261,357,719
Net Profit/(Loss) before Tax 11,150,783 (41,649,288) (18,935,815) 21,671,505
Profit/(Loss) for the Year 9,015,627 (33,578,683) 13,894,030 16,240,911
Profit Attributable to Equity Holders of the Parent 8,556,691 (31,965,613) (13,352,159) 9,964,949

ASSETS EMPLOYED
Property, Plant & Equipment 17,761,447 18,814,542 23,002,619 17,678,735
Total Current Assets 296,112,540 235,563,388 278,211,567 273,159,647
Total Assets 377,806,707 326,706,417 345,634,285 329,915,971
Total Current Liabilities 181,758,367 129,388,974 114,686,485 84,167,899

Stated Capital 178,107,910 178,107,910 178,107,910 178,107,910

Shareholders' Funds 185,213,341 183,546,912 215,512,525 203,029,499

Net Cash Flow from /(used in) Operating Activities (23,577,116) (50,153,621) (347,441) 8,045,925
Net Cash Flow from /(used in) Investing Activities (9,638,966) (22,610,842) 21,193,944 3,324,159
Net Cash Flow from /(used in) Financing Activities 26,059,608 24,400,000 (2,702,000) 3,265,080
Cash and Cash Equivalents at the end of the year (12,411,915) (5,255,441) 43,109,022 24,964,519

Earnings Per Share (Rs.) 0.26 (0.99) (0.41) 31.00

Net Asset Value Per Share (Rs.) 5.72 5.67 6.66 6.27
ROA (%) 2% -10% -4% 5%
ROE (%) 5% -17% -6% 5%
Debt/Equity Ratio (%) 98% 75% 57% 41%
Current Ratio (Times) 1.63 1.87 2.40 3.20

Serendib Engineering Group PLC I Annual Report 2016/2017 79

 8.2.2 Performance of the Company

2017 2016 2015 2014 2013 2012 2011

Company
Rs. Rs. Rs. Rs. Rs. Rs. Rs.
OPERATING RESULTS
Revenue 16,206,500 9,019,482 7,36,000 11,975,000 - - -
Net Profit/Loss before Tax 766,086 (5,310,075) (933,413) 560,823 (2,167,464) (558,982) 38,605.342

Profit/Loss for the Year 681,108 (5,245,412) (985,229) 468,208 (558,982) (558,982) 38,507,468

ASSETS EMPLOYED
Property, Plant & Equipment 353,696 596,426 1,004,674 1,481,234 1,168,233 - -

Total Current Assets 10,230,100 9,248,589 10,149,878 9,399,728 20,689,246 2,026,499 -

Total Assets 157,321,686 156,582,905 16,892,442 149,618,852 125,446,369 87,226,499 -

Current Liabilities 37,386,589 37,231,851 36,230,860 24,023,541 380737 88,177,064 391,583

Stated Capital 178,107,910 178,107,910 178,107,910 178,107,910 178,107,910 45,574,870 48,574,870

Shareholders' Funds 119,894,492 119,213,384 124,458,796 125,444,025 124,975,817 (950,565) (391,583)

Net Cash Flow from /(used in)

1,512,844 (2,288,073) 8,956,103 24,022,931 (94,603,862) 87,073,861 (5,652)
Operating Activities

Net Cash Flow from /(used in)

(262,417) (366,815) (7,761,803) (29,856,969) (26,616,444) (86,920,863) -
Investing Activities

Net Cash Flow from /(used in)

Financing Activities
- - - 128,420,350 - - -

Cash and Cash Equivalents

1,308,844 58,417 2,713,305 1,519,004 7,353,042 152,998 -
at the end of the year

Earnings Per Share (Rs.) 0.02 (0.16) (0.03) 0.01 (0.08) (0.02) 1.59

Net Asset Value Per Share (Rs.) 3.70 3.68 3.84 3.87 4.20 (0.04) (0.02)

ROA (%) 0% -3% -1% 0% -2% (1%) 0%

ROE (%) 1% -4% -1% 0% -2% 59% (98.33%)

Debt/Equity Ratio (%) 31% 31% 29% 19% 0% (92.76%) (100%)

Current Ratio (Times) 0.27 0.25 0.30 0.40 54.30 0.02 0

80 Serendib Engineering Group PLC I Annual Report 2016/2017

 09. CORPORATE INFORMATION

NAME OF THE COMPANY SUBSIDIARIES

Serendib Engineering Group PLC Serendib Investment Holdings Limited
Serendib Engineering & Agencies (Pvt) Limited
CCC Plantation Engineering Limited
FORMER NAME OF THE COMPANY
Infrastructure Developers PLC
PARENT COMPANY
Navara Capital Limited
LEGAL STATUS

A Public Quoted Company with Limited Liability REGISTERED OFFICE OF THE COMPANY
incorporated in Sri Lanka on 07th September 1992, and No 12 B, Gregory's Road, Colombo 07
re-registered under the Companies Act No 07. of 2007. Tele: +94 112 814090/91
The Company was listed on the Diri Savi Board of the Fax: +94 112 814093
Colombo Stock Exchange. Email: [email protected]
Web: www. serendib engineering.com

REGISTRATION NUMBER
COMPANY SECRETARY
PQ 230
Corporate Arcade Limited
No 122/37, Kirulapona Avenue, Kirilapona
CSE CODE Tele: +94 112 514420/ 514421
Fax: +94 112513621
IDL.N0000 Email: [email protected]

FINANCIAL YEAR END AUDITORS OF THE COMPANY

31st March 2017 M/s. V. S. & Associates
Chartered Accountants
No.20/62, Fairfield Gardens,
BOARD OF DIRECTORS Colombo 08.
Mr. H. N. De Silva – Chairman
Mrs. D. L. De Silva – Non-Executive Director
Mr. H. G. S. Kariyawasam – Non-Executive Director BANKERS OF THE COMPANY
Prof. R. W. T. M. R. Bandara – Independent Non- Hatton National Bank PLC
Executive Director National Development Bank PLC
Dr. A. G. P. A. Gunawansa – Independent Non- Nations Trust Bank PLC
Executive Director Pan Asia Banking Corporation PLC
Seylan Bank PLC

Serendib Engineering Group PLC I Annual Report 2016/2017 81

 10. GLOSSARY OF FINANCIAL TERMS

GLOSSARY OF TERMS DESCRIPTION

Recording revenues and expenses in the period in which they are earned or
Accrual basis
incurred regardless of whether cash is received or disbursed in that period
Current Ratio Current Assets / Current Liabilities
Debt/Equity Total Debt / Total Equity
Profit attributable to equity holders / Weighted Average number of Shares
EPS
in issue
Net Assets Total assets minus current liabilities minus non-controlling interest
Net Asset Value per Share Profit for the period/ Number of shares as of period end
PAT Profit after tax
Percentage of shares held by the public calculated as per the Colombo
Public Holding
Stock Exchange Listing Rules as at the end of this financial year
ROA Profit after Tax / Average Total Assets
ROE Profit after Tax/ Average Total Equity
Total Debt Long term liabilities plus short term liabilities
Total Equity Shareholders' funds plus non-controlling interest
Non-controlling interest of the parent company is the portion of equity
Non-Controlling Interest
ownership in a subsidiary not attributable to the parent company.

82 Serendib Engineering Group PLC I Annual Report 2016/2017

 11. ABBREVIATIONS

GLOSSARY OF TERMS DESCRIPTION

Article Articles of Association

AWDR Average Weighted Deposit Rate

AWPLR Average Weighted Prime Lending Rate

CBSL Central Bank of Sri Lanka

CCPI Colombo Consumer Price Index

CSE Colombo Stock Exchange

GDP Gross Domestic Product

GP Gross Profit

ICASL Institute of Chartered Accountants of Sri Lanka

IDL Infrastructure Developers PLC

Mn Millions

MBA Master of Business Administration

N/A Not Applicable

(Pvt) Private

PLC Public Limited Company

Rs. Sri Lankan Rupees

SEC Securities and Exchange Commission of Sri Lanka

SEG / the Company Serendib Engineering & Group PLC

SLAS Sri Lanka Accounting Standards

SDFR Standing Deposit Facility Rate

SLFR Standing Lending Facility Rate

UK United Kingdom

Y-o-Y Year on Year

SDF Standing Deposit Facility

Serendib Engineering Group PLC I Annual Report 2016/2017 83

 noteS

84Serendib Engineering Group PLC I Annual Report 2015/2016 Serendib Engineering Group PLC I Annual Report 2016/2017
81
 noteS

Serendib
SerendibEngineering
EngineeringGroup
GroupPLC
PLCIIAnnual
AnnualReport
Report2016/2017
2015/2016 8185
 12. NOTICE OF MEETING

NOTICE IS HEREBY GIVEN THAT THE TWENTY FORTH ANNUAL GENERAL MEETING OF THE SHAREHOLDERS
OF SERENDIB ENGINEERING GROUP PLC WILL BE HELD ON FRIDAY THE 29TH SEPTEMBER 2017, AT
11.00 A.M. AT THE “COMMITTEE ROOM E” (TULIP) OF THE BANDARANAIKE MEMORIAL INTERNATIONAL
CONFERENCE HALL (B.M.I.C.H.), SITUATED AT BAUDDHALOKA MAWATHA, COLOMBO 07, FOR THE
FOLLOWING PURPOSES:

AGENDA

1. To receive and consider the Report of the Board of Directors and the Audited Financial Statements for the year ended
31st March 2017 together with the Report of the Auditors thereon.

2. To re-elect Dr. A. G. P. A. Gunawansa, who retires by rotation in terms of Article 118 of the Articles of Association
of the Company.

3. To re-appoint M/s. V. S. & Associates, Chartered Accountants, Auditors of the Company, for the ensuing financial
year 2017/2018 and to authorise the Board of Directors to determine their remuneration.

4. To transact any other business of which due notice has been given.

BY ORDER OF THE BOARD

Corporate Arcade Ltd

Company Secretaries
31st August 2017

Note:

1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of him
/ her. A proxy need not be a member of the Company. The form of proxy is enclosed for this purpose.

2. To be valid, the instrument appointing a proxy should be deposited with the Company Secretaries, Corporate Arcade
Ltd, No.122/37, Kirulapone Avenue, (Baseline Road), Colombo – 05, not less than 48 hours before the time fixed for
the Annual General Meeting.

3. Shareholders appointing proxies (other than Directors of the Company) to attend the Meeting are requested to
indicate the number of the National Identity Card of the Proxy holder on the form of proxy. Only registered Proxy
holders will be permitted to attend the Annual General Meeting.

4. Shareholders / Proxy holders are requested when attending the Annual General Meeting to bring with them the
National Identity Card or any other form of valid identification.

86 Serendib Engineering Group PLC I Annual Report 2016/2017

 13. FORM OF PROXY

I/We…………………………………….……………………………………………......…of.........………………………..
…………………………………………………….........…… being a Member/ Members of Serendib Engineering Group
PLC hereby appoint ………................…………..................……………………………………………………. holder of NIC
No………………......…………..of ………………...…………………………………………………………. or failing him /her

Harsha Nilantha De Silva of Colombo – 07 whom failing

Dimanthi Lakshini De Silva of Colombo – 07 whom failing
Haputantri Gamage Sagara Kariyawasam of Boralesgamuwa whom failing
Professor Rajapaksha Wasala Tennakoon Mudiyanselage Ranjith Bandara of Battaramulla whom failing
Akurugoda Gamage Pubudu Asanga Gunawansa of Colombo 03 whom failing

as my / * our proxy to represent me / * us on my/ * our behalf as indicated below at the Twenty Forth Annual
General Meeting of the Company to be held on the 29th September 2017 and at any adjournment thereof.

Please indicate your preference by placing a against the Resolution No. … For Against

1) To receive and consider the Report of the Board of Directors and the Audited Financial
Statements for the Year ended 31st March 2017 together with the Report of the Auditors
thereon.
2) To re-elect Dr. A G P A Gunawansa,, who retires by rotation in terms of Article 118 of the
Articles of Association of the Company.
3) To re-appoint M/s. V S & Associates, Chartered Accountants, Auditors of the Company for the
ensuing Financial year 2017/2018, and to authorize the Board of Directors to determine their
remuneration.

As witness my/ our hand/s this ..............…..........................……......................... day of ....……............................... 2017.

............................................... ...............................................
Nic / Reg. No Signature

Serendib Engineering Group PLC I Annual Report 2016/2017 87

 14. INSTRUCTIONS FOR THE COMPLETION OF PROXY

1. Please perfect the form of proxy overleaf, by signing in the space provided and filling in the date of signature, after
filling in legibly your full name and address.

2. Please return the completed Form of Proxy after deleting one or other of the alternative words indicated by asterisks
in the body of the form

3. To be valid, completed form of Proxy should be deposited with the Company Secretaries at Corporate Arcade Ltd,
No.122/37, Kirulapone Avenue, (Baseline Road) Kirulapone., not less than 48 hours before the time appointed for
the holding of the meeting.

4. If the form of Proxy has been signed by an attorney, the relative Power of Attorney should also accompany the
completed form of Proxy for registration, if such Power of Attorney has not already been registered with the Company.

5. If the shareholder is a Company or a corporate body, the Proxy should be executed under its Common Seal in
accordance with its Articles of Association or Constitution.

6. If there is any doubt as to how the vote is to be exercised by reason of the manner in which the Form of Proxy has
been completed, no vote will be recorded.

88 Serendib Engineering Group PLC I Annual Report 2016/2017

 Serendib Engineering Group PLC
No. 12 B, Gregory’s Road , Colombo 07, Sri Lanka
Tel : +94 11 2814090 / 1 | +94 11 4061733 Fax : +94 11 2814093
Email: [email protected], Website: www.serendibengineering.com
Serendib Engineering Group PLC I Annual Report 2016/2017 89