05

FINANCIAL
STATEMENTS

Our remarkable spirit of determination, agility and adaptability has inspired us to grow continuously with the people of our nation.

Independent Auditor’s Report

TO THE SHAREHOLDERS OF PRIME LANDS RESIDENCIES PLC
Report on the Audit of the Financial Statements
Opinion

We have audited the financial statements of Prime Lands Residencies PLC (the “Company”), which comprise the statement of financial position as at 31st March 2021, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies as set out on pages 95 to 132.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 31st March 2021, and of its financial performance and its cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Basis for Opinion
We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics) and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of the most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matters
Measurement of Inventory Properties

As disclosed in Note: 15 to the Financial Statements, the Company’s Inventory Properties including work in progress and completed apartments for sale amounted to Rs. 11,086,722,148/- as at 31st March 2021. Inventory Properties account for 85% of the Company’s total assets and are measured at the lower of cost and Net Realisable Value (NRV).

Measurement of Inventory Properties was considered as a Key Audit Matter due to the following factors;
 
  • Inventory properties are significant and determining cost of sales relating to revenue recognized and carrying value involves complex calculations.
  • Estimates and assumptions are applied in determining the carrying amount and Net Realisable Value which is impacted by volatile market and economic conditions.
 

The disclosures associated with measurement of Inventory Properties are set out in the financial statements in the following notes:

  • Note 3.8 – Significant accounting policies: Inventory Properties
  • Note 15 – Inventory Properties
Measurement of Inventory Properties

In establishing whether the Inventory Properties – work in progress and completed apartments for sale were stated at the lower of cost and NRV, our procedures included the following:

  • We evaluated and tested the management’s process in estimating the future costs to completion of the Inventory Properties – work in progress, on a sample basis, by comparing them to the actual development cost of similar completed properties of the Company;
  • We test-checked the appropriateness of the NRV of the Inventory Properties – work in progress and completed apartments for sale, by comparing the NRV to market prices achieved in the same projects or comparable properties and our knowledge of the Company’s business; and We assessed the appropriateness of amount recognised in cost of sales relevant to revenue, performing re- computation tests on cost of sales transfers.
  • We also assessed the adequacy of the related financial statement disclosures.
Other information

Management is responsible for the other information. The other information comprises the information included in the Annual Report. The Annual Report is expected to be made available to us after the date of this auditor’s report.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise whether it appears to be materially misstated.

When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as management determines, is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

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

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

  • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
  • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
  • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures, are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
  • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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

We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

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

CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditor’s report is 3890.
CHARTERED ACCOUNTANTS
Colombo
22nd July 2021
BDO Partners, a Sri Lankan Partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of Independent member firms.
Partners   :

Sujeewa Rajapakse FCA, FCMA, MBA. Ashane J.W. Jayasekara FCA, FCMA (UK), MBA. H. Sasanka Rathnaweera FCA, ACMA. R. Vasanthakumar Bsc (Acc), ACA. F. Sarah Z.Afker ACA, ACMA(UK), CGMA, MCSI (UK). M.N. Mohamed Nabeel ACA. D. Jerad N. Dias ACA. Madhura V. De Silva FCA, MSc.

Statement of Comprehensive Income

 

Note
For the year ended
31.03.2021

Rs.
For the year ended
31.03.2021
Restated
Rs.
Revenue47,732,398,1345,716,288,413
Cost of sales(5,838,879,143)(4,643,344,148)
Gross profit1,893,518,9911,072,944,265
Other income526,091,43115,222,371
Gain on fair valuation of investment property126,835,8634,578,424
Distribution expenses(31,165,383)(29,779,794)
Administrative expenses(310,241,352)(268,716,390)
Operating profit1,585,039,550794,248,876
Finance income6.1104,741,23127,302,208
Finance expenses6.2(412,363,514)(639,767,576)
Profit before taxation71,277,417,267181,783,508
Tax expenses8(288,161,691)(50,987,616)
Profit for the year989,255,576130,795,892
Other comprehensive income
Items that will not be re-classified to profit or loss
Actuarial gain on retirement benefit obligation1,288,798982,633
Tax on other comprehensive income(309,312)(196,527)
Other comprehensive income for the year, net of tax979,486786,106
Total comprehensive income for the year990,235,062131,581,998
Earnings per share91.320.17

Figures in brackets indicate deductions.

The accounting policies and notes on pages 95 to 132 form an integral part of these financial statements.

Colombo
22nd July 2021

Statement of Financial Position

 


Note
As at
31.03.2021

Rs.
As at
31.03.2020
Restated
Rs.
As at
01.04.2019
Restated
Rs.
ASSETS
Non-current assets
Property, plant and equipment109,815,31614,639,07012,300,542
Right-of-use assets1179,151,95597,290,81163,788,271
Investment properties12660,000,000653,000,000689,000,000
Intangible assets13474,231166,027161,665
Financial assets at amortized cost14352,939,048270,194,898269,724,650
Total non-current assets1,102,380,5501,035,290,8061,034,975,128
Current assets
Inventory properties - Apartments1511,086,722,1488,505,835,57510,268,673,606
Financial assets - Fair value through profit or loss16195,000180,000208,500
Advance paid for contractors17357,326,9473,807,469,4382,274,705,470
Advances, deposits and other receivables1876,492,37361,442,85494,275,000
Income tax recoverable194,478,359
Cash and cash equivalents20376,799,448172,541,712213,128,971
Total current assets11,897,535,91612,547,469,57912,855,469,906
Total assets12,999,916,46613,582,760,38513,890,445,034
EQUITY AND LIABILITIES
Equity
Stated capital211,500,000,0001,500,000,0001,500,000,000
Retained earnings1,932,952,648942,717,5861,217,456,619
Total equity3,432,952,6482,442,717,5862,717,456,619
Non-current liabilities
Retirement benefit obligations2215,463,84113,186,38211,677,172
Interest bearing borrowings232,333,941,3731,589,086,1912,551,769,163
Lease liabilities2442,750,00748,270,50026,870,169
Deferred tax liabilities2520,745,38421,435,95014,543,272
Total non-current liabilities2,412,900,6051,671,979,0232,604,859,776
Current liabilities
Trade and other payables261,128,951,405497,324,507504,895,748
Amount due to related party274,995,9815,966,0064,681,229
Amount due to directors28-391,000,000-
Interest bearing borrowings - Current portion231,859,837,9941,593,957,546869,115,286
Lease liabilities - Current portion2411,442,2459,383,5604,031,557
Customer advance collection292,537,768,5623,915,371,0984,859,171,238
Income tax payable19461,009,242118,745,977-
Bank overdraft 201,150,057,7842,936,315,0822,326,233,581
Total current liabilities7,154,063,2139,468,063,7768,568,128,639
Total liabilities9,566,963,81811,140,042,79911,172,988,415
Total equity and liabilities12,999,916,46613,582,760,38513,890,445,034

Figures in brackets indicate deductions.

The accounting policies and notes on pages 95 to 132 form an integral part of these financial statements.

Colombo
22nd July 2021

Certification.

We certify that the above Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007.
Mr. Pathirage Anura W. Perera
General Manager - Finance
Ms. H.K. Sandamini R. Perera
Co-Chairperson/Directress
The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Approved and signed for and on behalf of the Board.
Mr. Premalal Brahmanage
Co-Chairman/Director
Mr. Sanjaya Bandara
Director
Colombo
22nd July 2021

Statement of Changes in Equity

 
Note
Stated capital
Rs.
Retained earnings
Rs.
Total
Rs.
Balance as at 01st April 20191,500,000,0001,227,055,6392,727,055,639
Impact on adoption of SLFRS/LKAS3.23.1-4,944,2524,944,252
Prior year adjustment37.2-(14,543,272)(14,543,272)
Restated balance as at 01st April 2019
1,500,000,0001,217,456,6192,717,456,619
Impact on adoption of IFRIC 23-(406,321,031)(406,321,031)
Adjusted balance as at 01st April 20191,500,000,000811,135,5882,311,135,588
Profit for the year-130,795,892130,795,892
Other comprehensive income for the year, net of tax-786,106786,106
Total comprehensive income for the year-131,581,998131,581,998
Balance as at 31st March 20201,500,000,000942,717,5862,442,717,586
Profit for the year-989,255,576989,255,576
Other comprehensive income for the year, net of tax-979,486979,486
Total comprehensive income for the year-990,235,062990,235,062
Balance as at 31st March 20211,500,000,0001,932,952,6483,432,952,648

Figures in brackets indicate deductions.

The accounting policies and notes on pages 95 to 132 form an integral part of these financial statements.

Colombo
22nd July 2021

Statement of Cash Flows

 For the year ended
31.03.2021

Rs.
For the year ended
31.03.2020

Rs.
Cash flows from operating activities
Profit before taxation1,277,417,267181,783,508
Adjustment for
Depreciation37,424,32129,456,977
Amortization34,01520,638
Provision on retirement benefit obligation4,101,4574,054,918
Interest expenses103,975,413214,664,259
Lease interest10,644,8568,785,384
Loan interest295,981,235401,305,871
Interest on debentures(18,236,546)(14,698,485)
Fair value (gain)/ loss on share investment(15,000)28,500
Exchange (gain)/loss on investment in debenture(64,507,604)14,228,237
Fair value gain on investment property(6,835,863)(4,578,424)
362,566,284653,267,875
Operating cash flows before change in working capital1,639,983,551835,051,383
Changes in working capital
(Increase)/decrease in inventory properties(2,580,886,573)1,762,838,031
Decrease/(increase)in contractor advances3,450,142,491(1,532,763,968)
(Increase)/decrease in advances, deposits and other receivables(15,049,519)32,832,146
Increase/(decrease) in trade and other payables631,626,898(7,571,241)
(Decrease)/increase in amounts due to related parties(970,025)1,284,777
(Decrease)/increase in amounts due to directors(391,000,000)391,000,000
(Decrease)/increase in customer advance collection(1,377,602,536)(943,800,140)
Cash generated from operations1,356,244,287538,870,988
Income tax paid(110,862,296)(327,388,160)
Income tax refund163,963,992-
Interest paid(103,975,413)(214,664,259)
Gratuity paid(535,200)(1,563,075)
Net cash generated from/(used in) operating activities1,304,835,370(4,744,506)
Cash flows from investing activities
Acquisition of intangible assets(342,219)(25,000)
Disposal of investment property-48,000,000
Acquisition of investment property(164,137)(7,421,576)
Acquisition of property, plant and equipment(14,461,711)(65,298,045)
Net cash used in investing activities(14,968,067)(24,744,621)
Cash flows from financing activities
Lease installments paid(20,106,664)(14,208,050)
Proceeds from lease creditor6,000,00032,175,000
Proceeds from interest bearing borrowings2,504,093,000894,436,000
Repayment of interest bearing borrowings(1,493,357,370)(1,132,276,712)
Loan interest paid(295,981,235)(401,305,871)
Net cash generated from/(used in) financing activities700,647,731(621,179,633)
Net increase/(decrease) in cash and cash equivalents during the year1,990,515,034(650,668,760)
Cash and cash equivalents at the beginning of the year (Note A)(2,763,773,370)(2,113,104,610)
Cash and cash equivalents at the end of the year (Note B)(773,258,336)(2,763,773,370)
Note A
Cash and cash equivalents at the beginning of the year
Short-term deposit27,283,134-
Cash in hand1,669,11743,420,620
Cash at bank143,589,461169,708,351
Bank overdraft (2,936,315,082)(2,326,233,581)
(2,763,773,370)(2,113,104,610)
Note B
Cash and cash equivalents at the end of the year
Short-term deposit182,540,34127,283,134
Cash in hand89,472,6241,669,117
Cash at bank104,786,483143,589,461
Bank overdrafts(1,150,057,784)(2,936,315,082)
(773,258,336)(2,763,773,370)

Figures in brackets indicate deductions.

The accounting policies and notes on pages 95 to 132 form an integral part of these financial statements.

Colombo
22nd July 2021

Significant Accounting Policies
to the Financial Statements

1      CORPORATE INFORMATION
  1.1  General information

Prime Lands Residencies PLC (“the Company”) is a public limited liability company, incorporated on 15th September 2008 in Sri Lanka under the Companies Act No. 07 of 2007 (“the Act”) as a private limited liability company, and was converted to a public limited liability company with effect from 12th February 2021 in accordance with the provisions of the Act. Ordinary shares of the Company have been listed on the Colombo Stock Exchange with effect from 08th June 2021. The Company changed its name from “Prime Lands Residencies Limited” to “Prime Lands Residencies PLC” with effect from 17th July 2021. The registered office and principal place of business is situated at No. 75, D.S. Senanayake Mawatha, Colombo 08.

  1.2   Principal activities and nature of operations
The principal activities of the Company are purchasing lands and constructing residential apartment complexes.
  1.3   Parent enterprise and ultimate parent enterprise
The Company’s immediate and ultimate parent undertaking as at 31st March 2021 is Prime Lands (Pvt) Ltd. which has been incorporated in Sri Lanka.
  1.4   Subsidiaries and associates
The Company has no subsidiaries or associates.
2      BASIS OF PREPARATION
  2.1   Statement of compliance

The statement of financial position, statement of comprehensive income, changes in equity and statement of cash flows, together with accounting policies and notes (“Financial Statements”) of Prime Lands Residencies PLC as at 31st March 2021 and for the year then ended, comply with the Sri Lanka Accounting Standards (hereinafter referred to as SLFRS/LKAS) effective from 01st April 2019 issued by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and in compliance with the requirements of the Companies Act No. 07 of 2007 and Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995.

For all period up to and including the year ended 31st March 2020, the Company prepared its financial statements in accordance with Sri Lanka Accounting Standard for Small and Medium-sized Entities (SLFRS for SMEs) effective up to 31st March 2020.

These financial statements for the year ended 31st March 2021 are the first set of financial statements prepared by the Company in accordance with SLFRS/LKAS (effective for the year beginning on or after 01st April 2019).

The Company has consistently applied the accounting policies used in the preparation of its opening SLFRS statements of financial position at 01st April 2019 through all periods presented, as if these policies had always been in effect.
 

Note 3.23 discloses the impact of the transition to SLFRS/LKAS on the Company’s reported financial position including the nature and effect of significant change in accounting policies from those used in Company’s financial statements for the year ended 31st March 2020, prepared under SLFRS for SMEs.

  2.2   Responsibility for financial statements
The Board of Directors is responsible for the preparation and presentation of these Financial Statements as per the provision of the Companies Act No. 07 of 2007 and Sri Lanka Accounting Standards (SLFRS/LKAS).
  2.3   Date of authorization for issue

The Financial Statements of Prime Lands Residencies PLC for the year ended 31st March 2021 were authorized for issue on 22nd July 2021 in accordance with a resolution of the Board of Directors.

  2.4   Basis of measurement
The financial statements of the Company have been prepared on the historical cost basis, except for the following material items in the statement of financial position.
ItemBasis of measurementNote number
Investment propertyMeasured at cost at the time of acquisition and subsequently at revalued amounts which are the fair values at the date of valuation3.7
Financial assets classified as fair value through profit or lossMeasured at fair value3.2.3
  2.5   Functional and presentation currency

Items included in these financial statements are measured using the currency of the primary economic environment in which the Company operates (the functional currency), which is the Sri Lanka Rupee.

These financial statements are presented in Sri Lanka Rupees (Rs.). All financial information presented have been rounded to the nearest rupee except where it is otherwise indicated as permitted by the Sri Lanka Accounting Standard – LKAS 01 on “Presentation of Financial Statements”.
  2.6   Materiality and aggregation
Each material class of similar item is presented separately in the financial statements. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by the Sri Lanka Accounting Standard – LKAS 01 on ‘Presentation of Financial Statements’ and amendments to the LKAS 1 on ‘Disclosure Initiative’ which was effective from January 01, 2016 Notes to the financial statements are presented in a systematic manner which ensures the understandability and comparability of financial statements of the Company. Understandability of the financial statements is not compromised by obscuring material information with immaterial information or by aggregating material items that have different nature or function.
  2.7   Off-setting

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position, only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or to realize the assets and settle the liabilities simultaneously. Income and expenses are not offset in the income statement, unless required or permitted by Sri Lanka Accounting Standard and as specially disclosed in the Significant Accounting Policies of the Company.

  2.8   Significant accounting judgments, estimates and assumptions

The preparation of the Financial Statements of the Company in conformity with SLFRS/LKAS requires the management to make judgments, estimates and assumptions, which may affect the amounts of income, expenditure, assets, liabilities and the disclosure of contingent liabilities, at the end of the reporting period. In the process of applying the Company’s accounting policies, key assumptions were made relating to the future and the sources of estimation at the reporting date together with the related judgments that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Actual results may differ from these estimates.

Accounting judgments, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future periods affected.

Information about critical judgments, estimates and assumptions in applying the accounting policies that have the most significant effect on the amounts recognized in the financial statements are included in the following notes to these financial statements.

Critical accounting estimate / judgementDisclosure note
Going concern2.9
Fair value of financial instruments3.2.10
Useful life of property, plant and equipment3.3.3
Useful life of intangible assets3.5.1
Retirement benefit obligations3.11.2
Impairment losses on financial assets3.2.6
Provision for liabilities, commitment and contingencies3.18
Net realizable value of inventory3.8

Impact of COVID-19 pandemic

The evolving COVID – 19 pandemic and its implications have increased the uncertainty of estimates made in preparation of the Financial Statements. The estimation uncertainty is associated with:

  • the extent and duration of the disruption to businesses arising from the on-going pandemic and the related actions of stakeholders such as government, businesses, and customers.
  • the extent and duration of the expected economic downturn due to impact on GDP, capital markets, credit risk of customers, impact of unemployment and possible decline in consumer discretionary spending.
  • the effectiveness of Government and Central Bank measures that have been put in place to support the businesses through this disruption and economic downturn.
 

The significant accounting estimates impacted by these forecasts and associated uncertainties are related to expected credit losses and recoverable amount assessments of non-financial assets, recoverable value of property, plant and equipment and net realizable value of inventory.

The impact of COVID-19 pandemic on accounting estimates is discussed under the relevant notes to these Financial Statements.

  2.9   Going concern

The Board of Directors of the Company evaluated the appropriateness of using the going concern assumption in preparing the Financial Statements for the year ended 31st March 2021 based on the available information. In this exercise, the Board evaluated a number of scenarios prepared by the management under different assumptions which took into account the existing and anticipated effects of COVID-19 on the Company.

When preparing the Financial Statements based on the available information, the management has assessed the impact of COVID 19 and the appropriateness of the use of the going concern basis. The Board of Prime Lands Residencies PLC is satisfied that the Company has adequate resources to continue operations without any disruption for the foreseeable future, and therefore preparing and presenting these Financial Statements on a going concern basis.

3      SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies that have been used in the preparation of these financial statements are summarized below.
  3.1   Foreign currency transactions and balances

Transactions in foreign currencies are translated to the respective functional currency, the Sri Lanka Rupee (Rs.), at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are re-translated to the functional currency at the spot rate of exchange at that date. The foreign currency gain or loss on monetary items is the difference between the amortized cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are re-translated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction.

Foreign currency differences arising on re- translation are recognized in the Statement of Comprehensive Income.

  3.2   Financial instruments
  3.2.1   Initial recognition, classification and subsequent measurement
Date of recognition
All financial assets and liabilities are initially recognised on the trade date, i.e., the date that the Company becomes a party to the contractual provisions of the instrument. This includes “regular way trades”: purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place.
Initial measurement of financial instruments
The classification of financial instruments at initial recognition depends on the purpose and the management’s intention for which the financial instruments were acquired and their characteristics. All financial instruments are measured initially at their fair value plus transaction costs, except in the case of financial assets and financial liabilities recorded at fair value through profit or loss.
  3.2.2   Classification and subsequent measurement of financial instruments

On initial recognition, a financial asset is classified as measured at: amortised cost, fair value through other comprehensive income (FVTOCI) or fair value through profit or loss (FVTPL).

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

  • The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
  • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (“SPPI”).
 

A debt instrument is measured at FVTOCI only if it meets both of the following conditions and is not designated as at FVTPL:

  • The asset is held within a business model whose objective is achieved by both collecting the contractual cash flows and selling the financial assets.
  • Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
 

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in fair value in OCI. This election is made on an investment by investment basis. All other financial assets are classified as measured at FVTPL.

In addition, on initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Business model assessment
The Company makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to Management.
The information considered includes:
  • The stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether Management’s strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets or realizing cash flows through the sale of the assets;
  • How the performance of the portfolio is evaluated and reported to the Company’s Management;
  • The risks that affect the performance of the business model (and the financial assets held within that business model) and its strategy for how those risks are managed;
  • How managers of the business are compensated (e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected); and
  • The frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Company’s stated objective for managing the financial assets is achieved and how cash flows are realized.
 

Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at FVTPL because they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets.

Financial assets - assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows as such that it would not meet this condition. In making this assessment, the Company considers:

  • Contingent events that would change the amount or timing of cash flows;
  • Terms that may adjust the contractual coupon rate, including variable-rate features;
  • Prepayment and extension features; and
  • Terms that limit the Company’s claim to cash flows from specified assets (e.g. non-recourse features).
 

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual paramount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.
Financial assets at amortized cost
These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on de-recognition is recognised in profit or loss.
Debt investments at FVTOCI
These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On de- recognition, gains and losses accumulated in OCI are re-classified to profit or loss.

Equity investments at FVTOCI

These assets are subsequently measured at fair value. Dividend is recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never re-classified to profit or loss.
  3.2.3   Financial assets

Financial assets are classified appropriately as financial assets recognised through profit or loss, financial assets measured at fair value through other comprehensive income and financial assets at amortised cost.

All the financial assets are recognised at fair value at its initial recognition.

Financial assets measured at - fair value through profit or loss
A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated at fair value through profit or loss if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company’s documented risk management or investment strategy. Upon initial recognition, transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and subsequent therein are recognised in Profit or Loss. Following assets represent financial assets at fair value though profit or loss,
  • Investment in quoted shares
Amortised cost

A financial asset shall be measured at amortised cost if both of the following conditions are met:

  1. The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and
  2. The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
 

Financial assets at amortised cost of the Company comprise the followings,

  • Investment in debentures
  • Other receivables
  • Cash and Cash equivalents
Financial assets measured at fair value through other comprehensive income

Financial assets measured at fair value through other comprehensive income (FVTOCI) are non-derivative financial assets that are designated FVTOCI and that are not classified in any of the previous categories of financial assets. FVTOCI are recognised initially at fair value plus any directly attributable transaction costs.

Subsequent to initial recognition, these are measured at fair value and changes therein, other than impairment losses are recognised in other comprehensive income and presented within equity in the fair value reserve. When an investment in debt instrument is de-recognised, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.
Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and cash at banks and other highly liquid financial assets which are held for the purpose of meeting short-term cash commitments with original maturities of less than three months which are subject to insignificant risk of changes in their fair value.

Bank overdrafts that are repayable on demand and form an integral part of the Company cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

  3.2.4   Financial liabilities

The Company initially recognises debt securities and borrowings on the date that they are originated. All other financial liabilities are recognised initially on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instruments.

The Company de-recognizes a financial liability when its contractual obligations are discharged, cancelled or expired.

The Company classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value plus
any directly attributable transaction cost. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using effective interest rate method.

Financial liabilities comprise;

  • Interest bearing borrowings
  • Lease liabilities
  • Other payables
  • Amount due to related party
  • Amount due to directors
  • Bank overdraft
Recognition and measurement of financial liabilities

The Company classifies financial liabilities, other than financial guarantees and loan commitments, into one of the following categories:

  • Financial liabilities at amortised cost; and
  • Financial liabilities at fair value through profit or loss,
 

A financial liability is measured initially at fair value plus, transaction costs that are directly attributable to its acquisition or issue. Subsequent measurement of financial liability is at fair value or amortised cost. The amortised cost of a financial liability is the amount at which the financial liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount and the maturity amount.

Classification and subsequent measurement of financial liabilities

The subsequent measurement of financial liabilities depends on their classification.

Financial liabilities at amortised cost

Financial liabilities issued by the Company that are not designated at fair value through profit or loss are recognised initially at fair value plus any directly attributable transaction costs, by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.

The effective interest rate amortisation is included in “Interest Expense” in the statement of profit or loss. Gains and losses too are recognised in the income statement when the liabilities are de- recognised as well as through the effective interest rate amortization process.

Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include derivative liabilities held for risk management purposes.
  3.2.5   Re-classification of financial assets and liabilities
Financial assets are not re-classified subsequent to their initial recognition, except and only in those rare circumstances when the Company changes its objective of the business model for managing such financial assets. Financial liabilities are not re-classified as such re-classifications are not permitted by SLFRS 9.
  3.2.6   Impairment of financial assets

The Company recognizes a loss allowance for Expected Credit Losses (ECLs) on financial assets measured at amortized cost or at fair value through other comprehensive income. The Company, at each reporting date measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since the initial recognition.

For trade and other receivables, the Company applies a simplified approach in calculating ECLs. Therefore, the Company does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date.

  3.2.7   De-recognition of financial assets and financial liabilities
Financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is de-recognized when:

  • The rights to receive cash flows from the asset have expired
  • The Company has transferred its rights to receive cash flows from the asset
    or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass–through’ arrangement; and either:
  • The Company has transferred substantially all the risks and rewards of the asset, or
  • The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset
 

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass– through arrangement and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Company’s continuing involvement in the asset. In that case, the Company also recognises an associated liability.

The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.

Financial liabilities

A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as de-recognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in profit or loss.

  3.2.8   Off-setting financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.
  3.2.9   Amortised cost measurement
The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.
  3.2.10   Fair value measurement

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. For financial instruments not traded in an active market, the fair value is determined using the appropriate valuation techniques. Such techniques may include using the recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same, a discounted cash flow analysis or other valuation models. An analysis of fair values of financial instruments and further details as to how they are measured are provided in the notes.

  3.3   Property, plant and equipment
Property, plant and equipment are tangible items that are held for use in the production or supply of goods or services or for administrative purposes and are expected to be used during more than one period.
  3.3.1   Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.

Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.

If significant parts of an item of property or equipment have different useful lives, then they are accounted for as separate items (major components) of property and equipment.

Any gain or loss on disposal of an item of property and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised within other income in profit or loss.

  3.3.2   Subsequent cost
Subsequent expenditure is capitalized only when it is probable that the future economic benefits of the expenditure will flow to the Company. Ongoing repairs and maintenance are expensed as incurred.
  3.3.3   Depreciation

Depreciation is calculated to write off the cost of items of property and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognised in profit or loss. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. Land is not depreciated.

The estimated useful lives of significant items of property, plant and equipment are as follows:

Type of assetsYear
Computer and equipment05 years
Motor vehicle04 years
Office equipment04 years
Plant and machinery04 years
Furniture and fittings04 years
The assets’ useful lives and depreciation methods are reviewed if there is an indication of a significant change since the last annual reporting date.
  3.3.4   De-recognition

The carrying amount of an item of property, plant and equipment is de- recognized on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from de-recognition of an item of property, plant and equipment is included in profit or loss when the item is de-recognised.

When replacement costs are recognised in the carrying amount of an item of property, plant and equipment, the remaining carrying amount of the replaced part is de-recognised.

  3.4   Right-of-use assets

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Company by the end of the lease term or the cost of the right-of-use asset reflects that the Company will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

Policy applicable from 01st April 2019
At the inception of a contract, the Company assess to ascertain whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for an year of time in exchange for a consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company uses the definition of a lease in SLFRS 16.
As a lessee

At the commencement or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

The Company determines its incremental borrowing rate by obtaining interest rates from debt financing arrangements at the inception of the lease period.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate.

Short-term leases and leases of low value assets
The Company elected not to recognize right-of-use assets and lease liabilities for lease of low value assets and short-term leases. The Company recognizes the lease payments associated with these leases as an expense on the straight-line basis.
As a lessor

At inception or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative standalone prices.

When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

The Company recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of “other income”.

Generally, the accounting policies applicable to the Company as a lessor in the comparative year are not different from SLFRS 16.

Policy applicable before 01st April 2019

For contracts entered into prior to 01st April 2019, the Company determined whether the arrangement was or contained a lease based on the assessment of whether;

  • Fulfilment of the arrangement was dependent on the use of a specific asset or assets and;
  • The arrangement had conveyed a right to use the asset
  3.5   Intangible assets
  3.5.1   Software

Software acquired by the Company is measured at cost less accumulated amortization and any accumulated impairment losses.

Subsequent expenditure on software assets is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

Software is amortised on a straight-line basis in profit or loss over its estimated useful life, from the date on which it is available for use. The estimated useful life of software is 10 years.

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
  3.6   Impairment of non-financial assets

The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired.

If any indication exists, or when the annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less cost of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or a group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. In determining the fair value less costs to sell, an appropriate valuation model is used. These calculations are collaborated by valuation multiples or other available fair value indicators.

Impairment losses of continuing operations are recognized in the Statement of Profit or Loss in those expense categories consistent with the function of the impaired asset, except for property previously revalued where the revaluation was taken to equity. In this case the impairment is also recognized in equity up to the amount of any previous revaluation.

For assets, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company makes an estimate of the recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the Statement of Profit or Loss unless the asset is carried at revalued amount, in which case, the reversal is treated as a revaluation increase.

  3.7   Investment property
  3.7.1   Basis of recognition

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, used in the production or supply of goods or services or for administrative purposes.

  3.7.2   Basis of measurement
Fair value model
Investment properties are initially recognized at cost. Subsequent to initial recognition, the investment properties are stated using the fair value model.
  3.7.3   De-Recognition
Investment properties are de-recognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognized in the statement of comprehensive income in the year of retirement or disposal.
  3.7.4   Subsequent transfers to / from investment property

Transfers are made to investment property when, and only when, there is a change in use, evidenced by the end of owner occupation, commencement of an operating lease to another party or completion of construction or development.

Transfers are made from investment property when, and only when, there is a change in use, evidenced by the commencement of owner occupation or commencement of development with a view to sale.

For a transfer from investment property to owner occupied property or inventories, the deemed cost of property for subsequent accounting is its fair value. If the property occupied by the Company as an owner-occupied property becomes an investment property, the Company, accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use.

  3.8   Inventory property – Apartments

Property acquired or being constructed for sale in the ordinary course of business, rather than to be held for rental or capital appreciation, and completed properties are shown as inventories and measured at the lower of cost and net realizable value.

Cost includes:

  • Freehold and leasehold rights for land
  • Amounts paid to contractors for construction
  • Planning and design costs, costs of site preparation, property transfer taxes, construction overheads and other related costs
 

Non-refundable commissions paid to sales or marketing agents on the sale of real estate units are expensed when paid.

Net realizable value is the estimated selling price in the ordinary course of the business, based on market prices at the reporting date and discounted for the time value of money if material, less costs to completion and the estimated costs of sale. The cost of inventory recognized in profit or loss on disposal is determined with reference to the costs incurred on the property sold and an allocation of costs based on the gross floor area of the property developed.
  3.9   Provisions
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
  3.10   Other liabilities
Other liabilities are recorded at amounts expected to be payable at the reporting date.
  3.11   Employee benefits
  3.11.1   Defined contribution plan
A defined contribution plan is a post- employment plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay a further amount. Obligations for contributions to defined contribution plans are recognised as expense in the profit or loss as and when they are due.
Employees’ provident fund
The Company and employee contribute 12% and 8% respectively on the salary of each employee to an approved Provident Fund.
Employees’ trust fund
The Company contributes 3% of the salary of each employee to the Employees’ Trust Fund maintained by the Employees Trust Fund Board.
  3.11.2   Defined Benefit Plans
A defined benefit plan is a post- employment benefit plan other than a defined contribution plan.
Gratuity

Gratuity is a Defined Benefit Plan. The liability recognized in the statement of financial position in respect of defined benefit plan is the present value of the defined benefit obligation at the statement of financial position date. The defined benefit obligation is calculated annually by independent actuaries, using projected unit credit method, as recommended by LKAS 19 employee benefit. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates that apply to the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related liability. The assumptions based on which the results of the actuarial valuation were determined are included in the note 22 to the financial statements. This liability is not externally funded and the item is grouped under non-current liabilities in the statement of financial position.

The Company recognizes all actuarial gains and losses arising from defined benefit plans in other comprehensive income and expenses related to defined benefit plans in staff expenses in the statement of profit or loss.

According to the payment of the Gratuity Act No.12 of 1983, the liability for gratuity payment to an employee arises only after the completion of 5 years of continued service.

  3.11.3   Short-term Employee Benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

STATEMENT OF COMPREHENSIVE INCOME
  3.12   Revenue and income
  3.12.1   SLFRS 15 – Revenue from contracts with customers

The Company is in the business of real estate and providing related services. Revenue from contracts with customers is recognized when the control of the goods or services is transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Timing of transferring the goods and services to the customer is determined based on judgments taking into consideration of the nature of the goods and services that offers to the customers.

The following specific criteria are used for the purpose of recognition of revenue:

Sale of property
The Company enters into contracts with customers to sell properties that are either completed or under development.
Revenue recognized at a point in time

The sale of completed property is generally expected to be the single performance obligation and the Company has determined that it will be satisfied at the point in time when the control is transferred. For unconditional exchange of contracts, this is generally expected to be when legal title is transferred to the customer. For conditional exchanges, this is expected to be when all significant conditions are satisfied. The determination of transfer of control for both unconditional and conditional exchanges are not expected to change upon the adoption of SLFRS 15.

Revenue recognized over time

For contracts relating to the sale of properties under development, the Company is responsible for the overall management of the project and identifies various goods and services to be provided, including design work, procurement of materials, site preparation and foundation pouring, framing and plastering, mechanical and electrical work, installation of fixtures and finishing work. In such contracts, the Company has determined that the goods and services are not distinct and will generally account for them as a single performance obligation. Depending on the terms of each contract, the Company will determine whether control is transferred at a point in time or over time:

For each performance obligation satisfied over time, the Company recognizes the revenue over time by measuring the progress towards a complete satisfaction of that performance obligation. For sale of properties under development, the Company expects to continue recognizing revenue over time because it expects that control will be transferred over time. Generally, its performance does not create an asset with alternative use to the Company and the Company has concluded that it has an enforceable right to payment for performance completed to date. As a result, no material adjustment is expected on transition to SLFRS 15 for those contracts currently recognized over time.

  3.12.1   SLFRS 15 – Revenue from contracts with customers
  • Legal fee income represents the fee that the Company charges from its clients when they agree to transfer the deeds by taking the legal services provided by Prime Lands Residencies PLC instead of obtaining legal services to transfer deeds from the outside professionals. All income is recognized on a straight-line basis over the year.
  • Interest income is recognized as it accrues. Interest income is included under finance income in the statement of comprehensive income.
  3.13   Expenses recognition

Expenses are recognised in the statement of comprehensive income on the basis of a direct association between the cost incurred and the earning of specific items of income. All expenditure incurred in the running of the business and in maintaining the property, plant and equipment in a state of efficiency have been charged to income in arriving at the profit for the year.

For the presentation of the statement of comprehensive income, the directors are of the opinion that the nature of the expenses method present fairly the element of the Company’s performance, and hence, such presentation method is adopted.

  3.14   Borrowing Costs

Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs and borrowing costs incurred after the completion of the underlying construction are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

  3.15   Tax expenses

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to items recognized directly in equity or in OCI.

Income tax provisions for the year ended 31st March 2021 have been made as per the provision of the Inland Revenue Act No. 24 of 2017 and the amendments thereto.

  3.15.1   Current tax expense

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Current tax assets and liabilities are offset only if certain criteria are met.

Current tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

  3.15.2   Uncertainty over income tax treatments
The Company has accounted for the uncertainty over tax treatments under IFRIC 23. An ‘Uncertain Tax Treatment’ is a tax treatment for which there is uncertainty over whether the relevant taxation authority will accept the tax treatment under tax law. If it is not probable that the taxation authority will accept an uncertain tax treatment, effect of uncertainty shall be reflected in determining the related taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates. The effect of uncertainty for each uncertain tax treatment shall be reflected by using either of the most likely amount or the expected value methods, depending on which method the Company expects to better predict the resolution of the uncertainty.
  3.15.3   Deferred tax

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is not recognized for:

  • Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
  • Temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and
  • Taxable temporary differences arising on the initial recognition of goodwill.
 

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset the current tax liabilities and assets, and they relate to income taxes levied
by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle the current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred tax assets and liabilities are not discounted.

The net increase in the carrying amount of deferred tax liability net of deferred tax asset is recognized as deferred tax expense and conversely any net decrease is recognized as reversal to deferred tax expense, in the statement of comprehensive income.

  3.16   Stated capital

Stated capital consists solely of ordinary share capital. Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares other than on a business combination, are shown as a deduction, net of tax, in equity from the proceeds.

Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Company’s shareholders.

  3.17   Earnings per share (EPS)
The Company presents Basic Earnings per Share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year.
  3.18   Contingent liabilities and commitments

Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present obligations where the transfer of economic benefit is not probable or cannot be readily measured as defined in the Sri Lanka Accounting Standard- LKAS 37 on ‘Provisions, Contingent Liabilities and Contingent Assets’. Contingent Liabilities are not recognized in the statement of financial position but are disclosed unless its occurrence is remote.

Details of the commitments and contingencies are given in note 30 to the financial statements.

  3.19   Statement of cash flows
The Statement of Cash Flows has been prepared using the “Indirect Method” of preparing Cash Flows in accordance with the Sri Lanka Accounting Standard – (LKAS 7) “Statement of Cash Flows”. Cash and cash equivalents comprise short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.
  3.20   Events after reporting period

Events after the reporting period are those events, favorable and unfavorable, that occur between the reporting date and the date the Financial Statements are authorised for issue.

All material and important events that occurred after the reporting date have been considered and appropriate disclosures are made in Note 35 to the Financial Statements.

  3.21   Comparative information

Comparative information including quantitative, narrative and descriptive information is disclosed in respect of the previous year in the Financial Statements in order to enhance the understanding of the current year’s Financial Statements and to enhance the inter period comparability. The presentation and classification of the Financial Statements of the previous year are amended where relevant, for better presentation and to be comparable with those of the current year.

The Company remeasured and adjusted certain financial statement line items as disclosed in Note 3.23, on adoption of SLFRS/LKAS for the first time during the year.

  3.22   New accounting standards, amendments and interpretations issued but not yet effective

The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below.

The Company intends to adopt this amended standard and interpretation, if applicable, when it becomes effective.

Amendments to SLFRS 16 - COVID – 19 Related Rent Concessions

As a result of the COVID19 pandemic, rent concessions have been granted to lessees. Such concessions might take a variety of forms, including payment holidays and deferral of lease payments. According to the amendment to SLFRS 16 Leases, the lessees are provided with an option to treat qualifying rent concessions in the same way as they would if they were not lease modifications. In many cases, this will result in accounting for the concessions as variable lease payments in the period in which they are granted. Entities applying the practical expedients must disclose this fact, whether the expedient has been applied to all qualifying rent concessions or, if not, information about the nature of the contracts to which it has been applied, as well as the amount recognized in profit or loss arising from the rent concessions.

The amendment applies to annual reporting periods beginning on or after 01 June 2020.

  3.23   First-time adoption of SLFRS/ LKAS

These financial statements, for the year ended 31st March 2021, are the first set of financial statements, the Company has prepared in accordance with SLFRS/ LKAS. For year up to and including the year ended 31st March, 2020, the Company prepared its financial statements in accordance with SLFRS for SMEs.

Accordingly, the Company has prepared financial statements which comply with SLFRS/LKAS applicable for the year ended on 31st March 2021, together with the comparative year data as at and for the year ended 31st March 2020, as described in the accounting policies. In preparing these financial statements, the Company’s opening statement of financial position was prepared as at 01st April 2019, the Company’s date of transition to SLFRS/ LKAS. This note explains the principal adjustments made by the Company in restating its SLFRS for SMEs statement of financial position as at 01st April 2019 and its previously published SLFRS for SMEs financial statements as at and for the year ended 31st March 2020.

  3.23.1   Reconciliation of Equity as at 01st April 2019 (Date of transition to SLFRS/LKAS) and 31st March 2020
  As at 31st March 2020As at 31st March 2019

Statement of
financial position


Note
SLFRS for
SMEs
Rs.
Remeasurements /
Re-classifications
Rs.
SLFRS/
LKAS
Rs.
SLFRS for
SMEs
Rs.
Remeasurements /
Re-classifications
Rs.
SLFRS/
LKAS
Rs.
ASSETS
Non-current assets
Property, plant and equipmentA111,929,881(97,290,811)14,639,07076,088,813(63,788,271)12,300,542
Right-of-use assets-97,290,81197,290,811-63,788,27163,788,271
Investment property653,000,000-653,000,000689,000,000-689,000,000
Intangible assets166,027-166,027161,665-161,665
Financial assets at amortized cost270,194,898-270,194,898269,724,650-269,724,650
Total non-current assets1,035,290,806-1,035,290,8061,034,975,128-1,034,975,128
Current assets
Inventory properties8,505,835,575-8,505,835,57510,268,673,606-10,268,673,606
Financial assets - FVTPL180,000-180,000208,500-208,500
Advance paid for contractors3,807,469,438-3,807,469,4382,274,705,470-2,274,705,470
Advances, deposits and other receivables61,442,854-61,442,85494,275,000-94,275,000
Income tax recoverable---4,478,359-4,478,359
Cash and cash equivalentsC172,541,712-172,541,712213,128,971-213,128,971
Total current assets12,547,469,579-12,547,469,57912,855,469,906-12,855,469,906
Total assets13,582,760,385-13,582,760,38513,890,445,034-13,890,445,034
EQUITY AND LIABILITIES
Equity
Stated capital1,500,000,000-1,500,000,0001,500,000,000-1,500,000,000
Retained earningsB / D937,121,0425,596,544942,717,5861,212,512,3674,944,2521,217,456,619
Total equity2,437,121,0425,596,5442,442,717,5862,712,512,3674,944,2522,717,456,619
Non-current liabilities
Employee benefitB18,979,453(5,793,071)13,186,38216,621,424(4,944,252)11,677,172
Interest - bearing loans and borrowings1,589,086,191-1,589,086,1912,551,769,163-2,551,769,163
Lease liabilities48,270,500-48,270,50026,870,169-26,870,169
Deferred tax liabilitiesB / D21,239,423196,52721,435,95014,543,272-14,543,272
Total non-current liabilities1,677,575,567(5,596,544)1,671,979,0232,609,804,028(4,944,252)2,604,859,776
Current liabilities
Trade and other payables497,324,507-497,324,507504,895,748-504,895,748
Amount due to related party5,966,006-5,966,0064,681,229-4,681,229
Amount due to directors391,000,000-391,000,000---
Interest - bearing loans and borrowings1,593,957,546-1,593,957,546869,115,286-869,115,286
Lease liabilities9,383,560-9,383,5604,031,557-4,031,557
Customer advance collection3,915,371,098-3,915,371,0984,859,171,238-4,859,171,238
Income tax payable118,745,977-118,745,977---
Bank overdraft2,936,315,082-2,936,315,0822,326,233,581-2,326,233,581
Total current liabilities9,468,063,776-9,468,063,7768,568,128,639-8,568,128,639
Total liabilities11,145,639,343(5,596,544)11,140,042,79911,177,932,667(4,944,252)11,172,988,415
Total equity and liabilities13,582,760,385-13,582,760,38513,890,445,034-13,890,445,034
  3.23.2   Reconciliation of statement of comprehensive income for the year ended 31st March 2020 and 31st March 2019
  For the year ended 31st March 2020For the year ended 31st March 2019

Statement of
Comprehensive Income


Note
SLFRS for
SMEs
Rs.
Remeasurements /
Re-classifications
Rs.
SLFRS/
LKAS
Rs.
SLFRS for
SMEs
Rs.
Remeasurements /
Re-classifications
Rs.
SLFRS/
LKAS
Rs.
Revenue5,716,288,413-5,716,288,4133,595,043,841-3,595,043,841
Cost of sales(4,643,344,148)-(4,643,344,148)(2,712,702,942)-(2,712,702,942)
Gross profit1,072,944,265-1,072,944,265882,340,899-882,340,899
Other incomeC15,222,371-15,222,37122,183,548-22,183,548
Gain on fair value of investment property4,578,424-4,578,424197,819,765-197,819,765
Distribution expenses(29,779,794)-(29,779,794)(22,292,447)-(22,292,447)
Administrative expensesB / C(268,582,576)(133,814)(268,716,390)(237,509,554)4,944,252(232,565,302)
Operating profit794,382,690(133,814)794,248,876842,542,2114,944,252847,486,463
Finance incomeC27,302,20827,302,20852,798,162-52,798,162
Finance expensesC(639,767,576)-(639,767,576)(621,667,701)-(621,667,701)
Profit before taxation181,917,322(133,814)181,783,508273,672,6724,944,252278,616,924
Tax expensesD(50,987,616)-(50,987,616)(15,611,147)-(15,611,147)
Profit for the year130,929,706(133,814)130,795,892258,061,5254,944,252263,005,777
Other comprehensive income
Items that will not be re-classified to profit or loss
Actuarial gain on retirement benefit obligationB-982,633982,633---
Tax on other comprehensive incomeB-(196,527)(196,527)---
Total other comprehensive income-786,106786,106---
Total comprehensive income for the year130,929,706652,292131,581,998258,061,5254,944,252263,005,777
  3.23.3   Notes to the reconciliation of Equity and Statement of Comprehensive Income
  1. The Company’s leasehold assets classified under property, plant and equipment have been re-classified separately as Right of Use assets as per SLFRS 16.
  2. The Company remeasured its Retirement Benefit Obligations based on Actuarial Valuation on adoptions of SLFRS / LKAS, as disclosed in Note 22. These adjustments are related to remeasurement of Retirement Benefit Obligations.
  3. The Company re-classified these items as given in Note 37.1 for better presentation. These are not resulting from adopting SLFRS / LKAS for the first time.
  4. The Company re-stated deferred tax liabilities as given in Note 37.2. These balances are re-stated as per the adjustments reflected in the note and not resulting from adopting SLFRS / LKAS for the first time.

Notes to the
Financial Statements

4.REVENUE
For the
year ended
31.03.2021

Rs.
For the
year ended
31.03.2020
Restated
Rs.
Revenue7,742,210,7705,725,161,095
Less: Rebates(9,812,636)(8,872,682)
7,732,398,1345,716,288,413
5.OTHER INCOME
For the
year ended
31.03.2021

Rs.
For the
year ended
31.03.2020
Restated
Rs.
Rent income12,000,000120,000
Fair value gain on investments in quoted shares15,000-
Legal fee income14,076,43115,102,371
26,091,43115,222,371
6.FINANCE INCOME AND EXPENSES
For the
year ended
31.03.2021

Rs.
For the
year ended
31.03.2020
Restated
Rs.
6.1.Finance income
Interest income27,783,13823,215,477
Foreign exchange gain73,605,9844,086,731
Late payment fee3,352,109-
104,741,23127,302,208
6.2.Finance expenses
Bank loan charges1,762,010783,825
Loan interest295,981,235401,305,871
Lease interest10,644,8568,785,384
Overdraft interest103,975,413214,664,259
Exchange loss on investments in debenture-14,228,237
412,363,514639,767,576
7.PROFIT BEFORE TAXATION IS STATED AFTER CHARGING ALL EXPENSES INCLUDING THE FOLLOWING:
For the
year ended
31.03.2021

Rs.
For the
year ended
31.03.2020
Restated
Rs.
Directors' remuneration72,000,00024,000,000
Staff salaries, bonus, allowances and incentives96,309,035114,679,519
Defined contribution plan costs - EPF and ETF11,926,29314,819,806
Depreciation and amortization37,458,33629,477,615
Fair value loss on investment in quoted shares-28,500
Auditors' remuneration1,284,900907,500
Advertising and business promotion16,157,46920,943,902
Provision for retirement benefit obligation4,101,4574,054,918
8.TAXATION



Note
For the
year ended
31.03.2021

Rs.
For the
year ended
31.03.2020
Restated
Rs.
Income tax8.1289,161,56944,291,465
Deferred tax (reversal)/provision25(999,878)6,696,151
288,161,69150,987,616
8.1Reconciliation between the current tax expense and product of accounting profit
Profit before taxation1,277,417,267181,783,508
Income considered separately(123,592,094)(40,536,125)
Disallowable items51,325,51067,765,242
Allowable items(25,209,513)(25,993,148)
Business income1,179,941,170183,019,477
Investment income21,546,59223,335,477
Other income3,352,10915,102,371
Taxable income1,204,839,871221,457,325
Effective tax rate24%20%
Income tax expense for the year289,161,56944,291,465
9.EARNINGS PER SHARE
The basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.
31.03.2021


Rs.
31.03.2020

Restated
Rs.
Amounts used as numerator
Profit attributable to ordinary shareholders989,255,576130,795,892
Number of ordinary shares used as the denominator
Weighted average number of ordinary shares in issue750,000,000750,000,000
1.320.17
The Company has computed income tax at the enacted rates as at the reporting date as per the Inland Revenue Act no 24 of 2017 and the amendments thereto.
10.PROPERTY, PLANT AND EQUIPMENT     
DescriptionOffice
equipment
Rs.
Plant and
machinery
Rs.
Computers and
accessories
Rs.
Furniture and
fittings
Rs.
Motor
vehicles
Rs.
Electrical
items
Rs.
Total

Rs.
10.1Gross carrying amounts
Balance as at 01.04.201923,2003,794,3678,272,9933,162,92721,300,132686,03037,239,649
Add : Additions during the year--1,456,074-8,600,00028,95010,085,024
Balance as at 31.03.202023,2003,794,3679,729,0673,162,92729,900,132714,98047,324,673
Add : Additions during the year--1,107,296--1,354,4152,461,711
Balance as at 31.03.202123,2003,794,36710,836,3633,162,92729,900,1322,069,39549,786,384
10.2Accumulated depreciation
Balance as at 01.04.201923,2002,227,7955,075,9762,247,97014,817,330546,83624,939,107
Add : Depreciation for the year-951,1611,632,540577,6484,503,77381,3747,746,496
Balance as at 31.03.202023,2003,178,9566,708,5162,825,61819,321,103628,21032,685,603
Add : Depreciation for the year-555,3271,398,704230,7364,963,287137,4117,285,465
Balance as at 31.03.202123,2003,734,2838,107,2203,056,35424,284,390765,62139,971,068
10.3Carrying amount
Balance as at 01.04.2019-1,566,5723,197,017914,9576,482,802139,19412,300,542
Balance as at 31.03.2020-615,4113,020,551337,30910,579,02986,77014,639,070
Balance as at 31.03.2021-60,0842,729,143106,5735,615,7421,303,7749,815,316
10.4During the year, the Company acquired property, plant and equipment to the aggregate value of Rs.2,461,711/- (2020 - Rs.10,085,024/-). Cash payments amounting to Rs.2,461,711/- (2020 - Rs.10,085,024/-) were made during the year for the acquisition of property, plant and equipment.
10.5Temporarily idling property, plant and equipment
There were no property, plant or equipment idling as at 31st March 2021 and 31st March 2020.
10.6Title restriction on property, plant and equipment
There was no restriction on the title of property, plant and equipment as at 31st March 2021 and 31st March 2020.
10.7Property, plant and equipment pledged as security for liabilities
There were no items of property, plant and equipment pledged as securities for liabilities as at 31st March 2021 and 31st March 2020.
10.8Property, plant and equipment of the Company includes fully depreciated assets having a gross carrying value of Rs.13,050,805 ( 2020 Rs.9,500,453)
During the year ended 31st March 2021, the Company has subdivided its 150,000,000 fully paid Ordinary Shares, by splitting each One (01) Ordinary Share into Five (05) Shares totaling to 750,000,000 fully paid Ordinary Shares without any change to the Stated Capital of the Company.
11.RIGHT-OF-USE-ASSETS   
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
11.1Motor vehicle
Cost
Balance at the beginning of the year119,438,02164,225,000-
Add : Additions during the year12,000,00055,213,02164,225,000
Balance at the end of the year131,438,021119,438,02164,225,000
Accumulated amortization
Balance at the beginning of the year22,147,210436,729-
Add : Amortization for the year30,138,85621,710,481436,729
Balance at the end of the year52,286,06622,147,210436,729
Carrying amount at the end of the year79,151,95597,290,81163,788,271
12.INVESTMENT PROPERTIES
Land
Rs.
Building
Rs.
Total
Rs.
Balance as at the 01.04.2019524,000,000165,000,000689,000,000
Add : Additions during the year-7,421,5767,421,576
Less : Transfers during the year(48,000,000)-(48,000,000)
Add : Fair value gain/(loss) during the year5,000,000(421,576)4,578,424
Balance as at 31.03.2020481,000,000172,000,000653,000,000
Add : Additions during the year-164,137164,137
Add : Fair value gain during the year6,835,863-6,835,863
Balance as at 31.03.2021487,835,863172,164,137660,000,000
Fair value of the investment property for the purpose of disclosure in note 34.2 was ascertained by valuations carried out by independent valuers as required by LKAS 40.
12.1The amount recognized to comprehensive income on investment property is as follows:
For the year
ended
31.03.2021
Rs.
For the year
ended
31.03.2020
Rs.
Fair value gain during the year6,835,8634,578,424
6,835,8634,578,424
12.2Fair value of the investment property    
Location of the investment propertyValuer’s name and report dateFair Value
Total extentAs at 31.03.2021As at 31.03.2020
Bare Land
No 123, Castle Street, Colombo 08
R.M.N. Priyadarshani
[Incorporated Valuer]
- Report date : 31/01/2021 ( valid for 6 months from the date of valuation)
P 33.50300,000,000296,000,000
Land & Commercial Building No. 61, D S Senanayaka Mw, Colombo 08R.M.N. Priyadarshani
[Incorporated Valuer]
- Report date : 31/01/2021 ( valid for 6 months from the date of valuation)
P 12.20360,000,000357,000,000
12.3The Company uses unobservable market input in determining the fair value of investment property (Level-3 of fair value hierarchy)
12.4Valuation details of investment property
Total Perches/
Square feet
Rs.
Cost per perch

Rs.
Total value

Rs.
(a) Bare Land-No 123, Castle Street, Colombo 08P33.59,000,000301,500,000
Fair value of the subject property for the Financial Reporting purpose300,000,000
(b) Lot A in Plan No 4751/9000 situated at Colombo 08
LandP12.2016,000,000195,200,000
Commercial Building No. 61, D S Senanayaka Mw,Colombo 0813,427 sq.ft14,000187,978,000
Less: 12.5% for Depreciation
(23,497,250)
359,680,750
Fair value of the subject property for the Financial Reporting purpose360,000,000
Further details of the valuation techniques and significant unobservable input are given in note 34.2.
12.5Impact on COVID-19
The Company has assessed the impact from COVID-19 on its assets base by way of an evaluation of the assumptions used for the valuation of investment property and identified that there is no significant impact resulting from the evaluation of market indicators.
12.6Income and expenditure on investment property
For the year ended
31.03.2021
Rs.
For the year ended
31.03.2020 Rs.
Rental income earned
Operating expenditure12,000,000120,000
8,151,981212,520
12.7The details of investment properties pledged as security against borrowings are disclosed in Note 31.
13INTANGIBLE ASSETS
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
13.1Software
Cost
Balance at the beginning of the year230,219205,219180,219
Add : Additions during the year342,21925,00025,000
Balance at the end of the year572,438230,219205,219
Amortization
Balance at the beginning of the year64,19243,55425,532
Add : Amortization for the year34,01520,63818,022
Balance at the end of the year98,20764,19243,554
Written-down value at the end of the year474,231166,027161,665
14FINANCIAL ASSETS AT AMORTISED COST
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
14.1Investment in unquoted debentures
Balance at the beginning of the year270,194,898269,724,65077,207,391
Add : Investments made during the year--173,338,240
Add : Exchange gain/(loss) for the year64,507,604(14,228,237)9,893,714
Add : Interest receivable during the year18,236,54614,698,4859,285,305
Balance at the end of the year352,939,048270,194,898269,724,650
As at 31.03.2021As at 31.03.2020
Number of
debentures.
Rs.
Carrying
amount
Rs.
Number of
debentures.
Rs.
Carrying
amount
Rs.
Debt securities - unquoted debenture2,034352,939,0482,034270,194,898
2,034352,939,0482,034270,194,898

The Company has invested in non-convertible redeemable debentures denominated in Australian Dollar (AUD) amounting to AUD 2,034,000 for a tenor of five years at an interest rate of 6% per annum as funding for operation of Prime Lands Australia (Pty) Limited.

Assets pledged as security against borrowings and the facility details are disclosed in Note 31.

15INVENTORY PROPERTIES- APARTMENTS
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
Balance at the beginning of the year8,505,835,57510,268,673,6067,831,346,082
Add : Cost incurred during the year8,386,917,2532,804,791,0074,995,352,106
16,892,752,82813,073,464,61312,826,698,188
Less : Disposals during the year (Recognized in cost of sales)(5,806,030,680)(4,567,629,038)(2,558,024,582)
Balance at the end of the year11,086,722,1488,505,835,57510,268,673,606

The Company assessed the impact of COVID-19 on inventory properties and evaluated whether it was required to adjust the carrying value of the inventory prior to reflecting them at the lower of cost or net realizable value and concluded no significant impact had resulted from it and therefore, no adjustments were made in the carrying value of the inventory related to this.

The details of inventory properties pledged as security against borrowings are disclosed in Note 31.

16FINANCIAL ASSETS-FAIR VALUE THROUGH PROFIT OR LOSS


Note
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
Quoted equity securities16.1195,000180,000208,500
195,000180,000208,500
16.1Quoted equity securities
As at 31.03.2021As at 31.03.2020
Number of
shares
Rs.
Fair value

Rs.
Number of
shares
Rs.
Fair value

Rs.
Mahaweli Reach Hotels PLC15,000195,00015,000180,000
15,000195,00015,000180,000
17ADVANCE PAID FOR CONTRACTORS
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
Balance at the beginning of the year3,807,469,4382,274,705,470458,033,887
Add : Advance paid for contractors during the year107,550,4201,641,366,5122,328,300,098
Less : Transferred to inventory properties during the year(3,557,692,911)(108,602,544)(511,628,515)
Balance at the end of the year357,326,9473,807,469,4382,274,705,470
18ADVANCES, DEPOSITS AND OTHER RECEIVABLES    
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
Receivables from management corporation47,018,68335,957,90531,543,184
ESC--40,233,861
WHT receivable--1,521,579
Security deposit44,80044,80044,800
Staff advance1,624,6781,535,428916,803
Other utility advance7,976,0757,576,0756,902,657
Project advance16,823,13615,542,64612,326,116
Refundable deposits3,005,001786,000786,000
76,492,37361,442,85494,275,000
19INCOME TAX PAYABLE/(RECOVERABLE)


Note
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
Balance at the beginning of the year118,745,977(4,478,359)-
Impact on adoption of IFRIC 2319.1-406,321,031-
Adjusted balance at the beginning of the year118,745,977401,842,672-
Less : WHT credit-(566,438)(2,114,287)
ESC claim-(89,882,471)(17,975,219)
During the year payment(110,862,296)(236,939,251)-
7,883,68174,454,512(20,089,506)
Add : Income tax refund163,963,992--
During the year income tax expense289,161,56944,291,46515,611,147
Balance at the end of the year461,009,242118,745,977(4,478,359)
19.1The Company had assessed the impact of initial adoption of IFRIC 23 - Uncertainty over income tax treatment on the tax exemption provisions under Section 17 (A) of the Inland Revenue (Amended) Act No. 08 of 2012 for years of assessment 2015/16, 2016/17 and 2017/18 and accordingly, had determined the final tax liability of Rs. 406,321,031 for the Company as of 01st April 2019.
20CASH AND CASH EQUIVALENTS   
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
20.1Short-term deposit
Fixed deposits182,540,34127,283,134-
182,540,34127,283,134-
20.2Favorable balances
Cash in hand15,682,1081,570,1176,035,263
Petty cash85,96499,00099,700
Cheques in hand73,704,552-37,285,657
Cash at banks104,786,483143,589,461169,708,351
194,259,107145,258,578213,128,971
Total short-term deposits and favorable balance376,799,448172,541,712213,128,971
20.3Unfavorable balances
Bank overdraft 1,150,057,7842,936,315,0822,326,233,581
1,150,057,7842,936,315,0822,326,233,581
Cash and cash equivalents for the purpose of statement of cash flows(773,258,336)(2,763,773,370)(2,113,104,610)
Fixed deposits pledged as security against borrowings are disclosed in Note 31
21STATED CAPITAL
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
21.1Ordinary shares
Number of shares - Ordinary shares750,000,000150,000,000150,000,000
Value - Ordinary shares (Rs.)1,500,000,0001,500,000,0001,500,000,000
21.2Rights of shareholders
The holders of ordinary shares confer their rights to receive dividends as declared from time to time and are entitled to one vote per share at the meetings of shareholders.

All shares rank equally and pari pasu with regard to the Company’s residual assets.
21.3During the year ended 31st March 2021, the Company has subdivided its 150,000,000 fully paid Ordinary Shares, by splitting each One (01) Ordinary Share into Five (05) Shares totaling to 750,000,000 fully paid Ordinary Shares without any change to the Stated Capital of the Company.
22RETIREMENT BENEFIT OBLIGATION  
As at
31.03.2021

Rs.
As at
31.03.2020
Restated
Rs.
22.1Retirement benefit obligations- Gratuity
Balance at the beginning of the year13,186,38211,677,172
Amount charged/(reversed) for the year2,812,6593,072,285
Payments made during the year(535,200)(1,563,075)
Balance at the end of the year15,463,84113,186,382
For the year ended
31.03.2021


Rs.
For the year ended
31.03.2020
Restated

Rs.
22.2Amount recognised in the statement of comprehensive income
Current service cost for the year2,650,9552,770,429
Interest cost for the year1,450,5021,284,489
4,101,4574,054,918
22.3Amount recognised in other comprehensive income
Actuarial gain for the year(1,288,798)(982,633)
(1,288,798)(982,633)
22.4Messrs. Actuarial and Management Consultants (Pvt) Ltd, Actuaries, carried out an actuarial valuation of the retirement benefit obligation for Prime Lands Residencies PLC as at 31st March 2021. The valuation method used by the Actuary to value the liability is the ‘Projected Unit Credit Actuarial Cost Method’ recommended by LKAS 19. Appropriate and compatible assumptions were used in determining the cost of retirement benefits. The principal assumptions used are as follows:
Actuarial assumptions 31.03.202131.03.2020
Discount rate8%11%
Salary increment rate6%10%
Staff turnover10%10%
Retirement age55 years60 years
MortalityA 1967/70 Mortality Table (Institute of Actuaries, London)
22.5Sensitivity analysis    
The following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed with all other variables held constant in the employment benefit liability measurement.

The sensitivity of the statement of financial position is the effect of the assumed changes in discount rate and salary increment rate on the profit or loss and employment benefit obligation for the year.
2020/2021
Rs.
2019/2020
Rs.
Discount rate
Effect on retirement benefit obligation due to 1% increase14,594,49712,278,707
Effect on retirement benefit obligation due to 1% increase16,431,91114,218,048
Salary increment rate
Effect on retirement benefit obligation due to 1% increase16,393,92814,179,535
Effect on retirement benefit obligation due to 1% increase14,613,866
12,296,666
22.5INTEREST BEARING BORROWINGS
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
Balance at the beginning of the year3,183,043,7373,420,884,4492,990,446,236
Loans obtained during the year2,504,093,000894,436,0001,143,998,753
5,687,136,7374,315,320,4494,134,444,989
Repayments during the year(1,493,357,370)(1,132,276,712)(713,560,540)
Balance at the end of the year4,193,779,3673,183,043,7373,420,884,449
Repayable within one year1,859,837,9941,593,957,546869,115,286
Repayable between one & five years2,333,941,3731,589,086,1912,551,769,163
Assets pledged as security against borrowings and the facility details are disclosed in Note 31.
24LEASE LIABILITIES    
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
Balance at the beginning of the year86,676,16249,013,684-
Lease obtained during the year8,754,54051,146,58049,278,780
95,430,702100,160,26449,278,780
Repayments during the year(20,106,664)(13,484,102)(265,096)
Balance at the end of the year75,324,03886,676,16249,013,684
Interest in suspense
Balance at the beginning of the year29,022,10218,111,958-
Interest in suspense on lease obtained during the year2,754,54018,971,58018,278,624
Charged to the statement of comprehensive income(10,644,856)(8,061,436)(166,666)
Balance at the end of the year21,131,78629,022,10218,111,958
Net lease creditor at the end of the year54,192,25257,654,06030,901,726
Repayable within one year11,442,2459,383,5604,031,557
Repayable between one and five years42,750,00748,270,50026,870,169
25DEFERRED TAX LIABILITIES
As at
31.03.2021

Rs.
As at
31.03.2020
Restated
Rs.
The movement of deferred tax
Balance at the beginning of the year21,435,95014,543,272
Recognized in statement of comprehensive income(999,878)6,696,151
Recognized in other comprehensive income309,312196,527
Balance at the end of the year20,745,38421,435,950
Deferred tax (provision) / reversal for the year
Deferred tax assets/(liabilities) are attributable to the following:
As at 31.03.2021As at 31.03.2020
Temporary
difference
Rs.
Tax

Rs.
Temporary
difference
Rs.
Tax

Rs.
Deferred tax assets
Employee benefits15,463,8413,711,32213,186,3822,637,276
15,463,8413,711,32213,186,3822,637,276
Deferred tax liabilities
Property, plant and equipment(47,453,734)(11,388,896)(58,445,012)(11,689,002)
Investment properties - Land(130,678,103)(13,067,810)(123,842,240)(12,384,224)
(178,131,837)(24,456,706)(182,287,252)(24,073,226)
Net deferred tax liability(162,667,996)(20,745,384)(169,100,870)(21,435,950)
 Movement in deferred tax balance during the year
Balance as at
31.03.2020
Rs.
Recognised in
profit or loss
Rs.
Recognised in
OCI
Rs
Balance as at
31.03.2021
Rs.
Employee benefits2,637,2761,383,358(309,312)3,711,322
Property, plant and equipment(11,689,002)300,106-(11,388,896)
Investment properties - Land(12,384,224)(683,586)-(13,067,810)
Net deferred tax asset/ (liability)(21,435,950)999,878(309,312)(20,745,384)
Deferred tax has been determined based on the effective tax rate of 24%.
26TRADE AND OTHER PAYABLES


Note
As at
31.03.2021
Rs.
As at
31.03.2020
Rs
As at
01.04.2019
Rs.
Accrued expenses26.1134,798,371112,203,20688,889,804
Retention payable963,262,350363,966,501388,879,385
Payables to contractors30,890,68421,154,80021,347,359
Land creditors--5,779,200
1,128,951,405497,324,507504,895,748
26.1Accrued Expenses
Auditor's remuneration1,247,400907,5001,135,141
Welfare society93,000284,250279,000
Staff payable - others17,093,4921,986,2571,599,036
EPF1,660,7371,536,4271,772,281
ETF249,113230,466265,842
Statutory and other payables114,454,629107,258,30683,838,504
134,798,371112,203,20688,889,804
27AMOUNT DUE TO RELATED PARTY
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
Prime Lands (Pvt) Ltd4,995,9815,966,0064,681,229
4,995,9815,966,0064,681,229
28.AMOUNT DUE TO DIRECTORS    
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
Mr. Premalal Brahmanage-245,500,000-
Mrs. H.K.S.R Perera-145,500,000-
-391,000,000
-
29.CUSTOMER ADVANCE COLLECTION
NoteAs at
31.03.2021
Rs.
As at
31.03.2020
Rs.
As at
01.04.2019
Rs.
Project advance29.12,330,439,1393,733,443,9734,707,121,826
Customer payables33,196,20833,196,20833,206,208
Direct customer deposits174,133,215148,730,917118,843,204
2,537,768,5623,915,371,0984,859,171,238
29.1Project advance
Balance at the beginning of the year3,733,443,9734,707,121,8263,324,908,565
Add: During the year advance received amount6,339,205,9364,751,483,2424,988,865,095
10,072,649,9099,458,605,0688,313,773,660
Less : Transferred to statement of comprehensive income(7,742,210,770)(5,725,161,095)(3,606,651,834)
Balance at the end of the year2,330,439,1393,733,443,9734,707,121,826
30.COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company makes various commitments and incurs contingent liabilities. No material losses are anticipated as a result of these transactions.
30.1Commitments
The Company has entered into agreements with contractors to pay Rs. 7,024,809,232 in order to complete the projects included in inventory properties as at the reporting date. The commitment of the Company depends on the successful completion of the project as agreed in the contractors’ agreement.
30.2Contingent liabilities
The Company does not have significant contingencies as at the reporting date.
31.ASSETS PLEDGED    
The following assets have been pledged as security for credit facilities and loans obtained by the Company from respective financial institutions concerned.
Nature of assetsNature of liabilities Facility
amount
Rs
As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
Lien over Fixed deposit amounting Rs. 568 Mn of Prime Lands (Pvt) LtdDFCC Bank - Revolving loan200,000,000200,000,000-
Primary mortgage for Rs. 200 Mn over Investment property at No.61, D.S Senanayake Mawatha, Colombo 08.DFCC Bank - Term loan200,000,000107,370,065127,083,322
Lien over Fixed deposit amounting Rs. 568 Mn of Prime Lands (Pvt) LtdDFCC Bank - Overdra 280,000,000114,913,607277,113,744
A primary mortgage for Rs.225 Mn over the Inventory property at No. 43, Kassapa Road , Colombo 05. (Kassapa 02 project)Seylan Bank - Overdra 225,000,000102,939,327220,861,282
Corporate Guarantee for Rs. 2,000 Mn from Prime Lands (Pvt) LtdSeylan Bank - Term loan850,000,0002,037,499,000662,499,400
Lien over 400,000,000 Nos of HNB Finance PLC shares owned by Prime Lands (Pvt) Ltd.Seylan Bank - Term loan1,500,000,000
Lien over Fixed deposit amounting Rs. 300 Mn of Prime Lands (Pvt) Ltd.Seylan Bank - Overdraft 1,000,000,000538,534,982999,539,370
Lien over 74,926,029 Nos of Prime Finance PLC shares owned by Prime Lands (Pvt) Ltd.Seylan Bank PLC - Revolving import loan900,000,000707,619,751500,803,000
A primary mortgage for Rs. 2,200 Mn over the inventory property at No. 62 & 64, Ward Place, Colombo 07.Sampath Bank -Term loan2,200,000,0001,312,462,4001,749,950,000
Lien over USD A/C amounting to USD 750,000 of Prime Lands Residencies PLCSampath Bank - Overdra 222,000,000124,703,313142,450,497
Lien over Fixed Deposit amounting
Rs. 26.4 Mn of Prime Lands Residencies PLC
Corporate guarantee of Rs.100 Mn from Prime Lands (Pvt) Ltd
Corporate guarantee of Rs.164 Mn from Prime Lands (Pvt) LtdHatton National Bank- Overdraft164,000,000264,421,302577,867,220
Corporate guarantee of Rs.125 Mn from Prime Lands (Pvt) Ltd125,000,000
Corporate guarantee from Prime Lands (Pvt) Ltd for Rs. 50 Mn.Union Bank- Overdraft 50,000,000225,53725,457,753
Primary mortgage bond for Rs.175 Mn over the Investment property at No 123, Castle Street, Colombo 08.Na ons Trust Bank Overdraft 175,000,0003,527,840172,476,042
Personal Guarantee from Director of Mr. H.M.N.U Kumara of Prime Lands Residencies PLCPrime Finance PLC - Term loan
25,000,000
17,822,45021,765,994
Prime Finance PLC - Term loan25,000,00017,822,45021,765,994
32.RELATED PARTY DISCLOSURES
32.1Parent and ultimate controlling party
The immediate and ultimate parent of the Company as at 31st March 2021 is Prime Lands (Pvt) Ltd.
32.2Transactions with key management personnel
Key management personnel include all the members of the Board of Directors of the Company having authority and responsibilities for planning , directing and controlling the activities of the Company.
(a) Loans to Directors
No Loans were advanced to the Directors of the Company.
(b) Key Management Personnel Compensation
The remuneration of directors and other members of the key management during the year under review is as follows:
Key management personnelNature of the transactionFor the
year ended
31.03.2021
Rs.
For the
year ended
31.03.2020
Rs.
DirectorsShort-term benefit72,000,00024,000,000
(c) Transactions with key Management Personal
Director's current account settlements
- Mr. Premalal Brahmanage(581,913,119)-
- Mrs. H.K.S.R Perera(373,500,000)-
Director's current account receipts
- Mr. Premalal Brahmanage336,413,119245,500,000
- Mrs. H.K.S.R Perera228,000,000145,500,000
32.3Related party transactions
Related companiesRelationshipNature of the transactionFor the
year ended
31.03.2021
Rs.
For the
year ended
31.03.2020
Rs.
Prime Lands (Pvt) LtdParent CompanyCustomer deposits collected by Prime Lands (Pvt) Ltd on behalf of Prime Lands Residencies PLC86,264,50064,861,840
Payments made by Prime Lands Residencies PLC on behalf of Prime Lands (Pvt) Ltd-402,268,570
Land transferred to Prime Lands (Pvt) Ltd-48,000,000
Net amount of Fund transferred to Prime Lands (Pvt) Ltd14,000,15029,451,513
Payments made by Prime Lands (Pvt) Ltd on behalf of Prime Lands Residencies PLC68,765,625506,970,132
Customer deposits accepted by Prime Lands Residencies PLC on behalf of Prime Lands (Pvt) Ltd30,529,00038,896,569
Shared service fee from Prime Lands Residencies PLC to Prime Lands (Pvt) Ltd30,000,000-
Rent expenses from Prime Lands Residencies PLC to Prime Lands (Pvt) Ltd6,000,000-
Prime Finance PLCRelated CompanyRent income to Prime Lands Residencies PLC from Prime Finance PLC12,000,000-
32.4Related party balances
The following related party balances are shown in the respective notes as stated below.

1. Investment in non-convertible redeemable debentures issued by Prime Lands Australia (Pty) Limited as given in Note 14.

2. Amount due to Prime Lands (Pvt) Ltd as disclosed in Note 27.
32.5Terms and conditions of transactions with related parties
Transactions with related parties are carried out in the ordinary course of the business. Outstanding current account balances at the year end as disclosed in Note 27 are interest free and settled on demand. Investment in unquoted debentures at the year end as disclosed in Note 14 is at an interest rate of 6% per annum and settlement occurs at maturity of five years.
33.ANALYSIS OF FINANCIAL INSTRUMENTS BY MEASUREMENT BASIS
33.1The fair values of financial assets and liabilities, together with carrying amounts shown in the Statement of Financial Position, are as follows;



Balance as at 31.03.2021
Financial assets at
fair value through
profit or loss
Rs.
Financial assets at
amortized cost

Rs.
Other financial
liabilities at
amortized cost
Rs.
Total


Rs.
Financial assets
Financial investments - unquoted debentures-352,939,048-352,939,048
Financial investments - quoted equity share
195,000--195,000
Cash and cash equivalents-376,799,448-376,799,448
195,000729,738,496-729,933,496
Financial liabilities
Interest bearing borrowings--4,193,779,3674,193,779,367
Lease liabilities--54,192,25254,192,252
Amount due to related party--4,995,9814,995,981
Trade and other payables--1,128,951,4051,128,951,405
Bank overdraft --1,150,057,7841,150,057,784
--6,531,976,7896,531,976,789



Balance as at 31.03.2020
Financial assets at
fair value through
profit or loss
Rs.
Financial assets at
amortized cost

Rs.
Other financial
liabilities at
amortized cost
Rs.
Total


Rs.
Financial assets
Financial investments - unquoted debentures-270,194,898-270,194,898
Financial investments - quoted equity share180,000--180,000
Cash and cash equivalents-172,541,712-172,541,712
180,000442,736,610-442,916,610
Financial liabilities
Interest bearing borrowings--3,183,043,7373,183,043,737
Lease liabilities--57,654,06057,654,060
Amount due to directors391,000,000391,000,000
Amount due to related party--5,966,0065,966,006
Trade and other payables--497,324,507497,324,507
Bank overdraft --2,936,315,0822,936,315,082
--7,071,303,3927,071,303,392
34.FAIR VALUE MEASUREMENT AND RELATED FAIR VALUE DISCLOSURES
34.1Determination of fair value and fair value hierarchy
As at 31st March 2021, the Company held the following assets carried at fair value on the statement of financial position. The Company uses the following hierarchy for determining and disclosing the fair value of these assets by valuation technique:

Level 1:Quoted (unadjusted) prices in active markets for identical assets or liabilities

Level 2: Other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly
or indirectly

Level 3: Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data
Level 1Level 2Level 3Total
As at 31.03.2021
Financial assets - Fair value through profit or loss195,000--195,000
Investment property - Land and building--660,000,000660,000,000
As at 31.03.2020
Financial assets - Fair value through pro t or loss180,000--180,000
Investment property - Land and building--653,000,000653,000,000
34.2Valuation techniques and significant unobservable inputs
The following table shows the valuation techniques used in measuring the fair value of investment property, as well as the significant unobservable inputs used.
DescriptionValuation technique
Significant observable and unobservable inputsInter-relationship between key unobservable inputs and fair value measurement
Investment property
Bare Land
No 123, Castle Street, Colombo 08
Comparison method valuation
Considering the current land values in the area it has been adjusted for time, nature of land, size and location. The land value is determined by adopting rates Rs. 9,000,000 per perch.The estimated fair value would increase/ decrease if expected market rentals get high / low.
Land & Commercial Building No. 61, D S Senanayake Mw, Colombo 08Comparison method of valuation and investment method of valuationValue of land
Considering the current land values in the area it has been adjusted for time, nature of land, size and location. The land value is determined by adopting rates Rs. 16,000,000 per perch.
Value of building
Considering the current cost of construction of similar buildings which were obtained from the cost of construction
of the subject buildings, compared with information available in respect of other buildings. The building value is determined by adopting rates Rs. 14,000 per sq. Ft.
35. EVENTS AFTER THE REPORTING DATE

No circumstances have arisen since the reporting date, which would require adjustments to, or disclosures in the financial statements except below;

On-going COVID-19 pandemic implications
Subsequent to the reporting date, the Company has monitored the operational performance, internal actions as well as other relevant external factors (such as changes in any of the government restrictions). No adjustments to the key estimates and judgements have been identified that would impact the financial position as at 31 March 2021. Where any material changes in key estimates and judgements have been identified, updates have been made to the financial statements as adjusting post-reporting period events or disclosure to these financial statements.

Listing of Shares on the Colombo Stock Exchange
The Company has issued One Hundred Million (100,000,000) New Ordinary Voting Shares and further issued Eighty-Seven Million and Five Hundred Thousand (87,500,000) New Ordinary Voting Shares as a result of oversubscription of the Initial One Hundred Million (100,000,000) Ordinary Voting Shares, at a price of Rs. 10.40 per share to the general public by way of an Offer for Subscription on the Colombo Stock Exchange and the listing of up to Nine Hundred and Thirty-Seven Million Five Hundred Thousand (937,500,000) Ordinary Voting Shares on the Diri Savi Board of the Colombo Stock Exchange on 11th of May 2021. The listing of shares was effective from the 08th of June 2021 and was classified under the Industry Group “Real Estate (6010)”.

Authorization of interim dividend
The Board of Directors of the Company has authorized an interim dividend of forty cents (-/40cts) per ordinary share amounting to Rs. 375,000,000/- on the 30th June 2021.

36. RISK MANAGEMENT

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

  • Credit risk
  • Liquidity risk
  • Market risk

This note represents qualitative and quantitative information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and procedures for measuring and managing risk and the Company’s management of capital. Further, quantitative disclosures are included throughout these financial statements.

Risk management framework
The Board of Directors has the overall responsibilities for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyze the risk faced by the Company, to set appropriate risk limits and controls, and to monitor risk and adherence to limits. Risk management policies and systems are reviewed regularly to reflect the changes in market conditions and the Company’s activities.

36.1 Credit risk

Credit risk is the risk of financial loss to the Company if a customer or a counter party to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables and deposits with banks.

Management of credit risk includes the following components.
The Company does an extensive and continuous evaluation of credit worthiness of its customers / financial institutions by assessing external credit ratings (if available) or historical information about default rates and change the credit limits and payment terms where necessary.

Analysis of credit quality – Maximum exposure to credit risk by class of financial assets
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

  As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
Financial assets at amortized cost352,939,048270,194,898
Financial assets - FVTPL195,000180,000
Cash and cash equivalents376,799,448172,541,712
36.2 Liquidity risk

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

Management of liquidity risk
The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed condition, without incurring unacceptable losses or risking damages to the Company’s reputation.

The following are the contractual maturities of financial liabilities of the Company;

  Carrying
amount
Rs
Contractual
amount
Rs.
Less than
01 year
Rs.
More than
01 year
Rs.
Balance as at 31.03.2021
Non-derivative financial liabilities
Trade and other payables1,128,951,4051,128,951,4051,128,951,405
Bank overdraft 1,150,057,7841,150,057,7841,150,057,784-
Loans and borrowings4,193,779,3674,193,779,3671,859,837,9942,333,941,373
Lease liabilities54,192,25275,324,03821,835,98053,488,058
Amounts due to related parties4,995,9814,995,9814,995,981-
6,531,976,7896,553,108,5754,165,679,1442,387,429,431
Balance as at 31.03.2020
Non-derivative financial liabilities
Trade and other payables497,324,507497,324,507497,324,507-
Bank overdraft 2,936,315,0822,936,315,0822,936,315,082-
Loans and borrowings3,183,043,737
3,183,043,7371,593,957,5461,589,086,191
Lease liabilities57,654,06086,676,16214,107,08948,270,500
Amounts due to related parties5,966,0065,966,0065,966,006-
6,680,303,3926,709,325,4945,047,670,2301,637,356,691
It is not expected that the cash flows included in the maturity analysis amounts.
36.3 Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rate, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control the market risk exposures within acceptable parameters, while optimising the return.
Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flow of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Company is exposed to currency risk on investments in unquoted debentures which are denominated in Australian Dollars (AUD).

The Sri Lankan Rupee witnessed a depreciation against major currencies in the backdrop of economic turmoil in global, regional and local markets resulting from the COVID-19 pandemic. The Company managed this risk with prudent foreign currency risk management practices in dealing with transactions denominated in foreign currencies.
Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The exposure to the risk of changes in market interest rate relates primarily to the Company’s long-term debt obligations and investments with floating interest rates.

The evolving COVID-19 pandemic has resulted in consecutive reductions in policy rates and monetary easing policies by the Central Bank of Sri Lanka to encourage banks and finance companies to reduce lending rates.

At the end of the reporting period, the interest rate profile of the Company’s interest-bearing financial instruments as reported to the management of the Company was as follows;
 As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
Fixed rate instruments
Financial assets
Fixed deposit182,540,34127,283,134
Financial liabilities
Lease creditors54,192,25257,654,060
Variable rate instruments
Financial liabilities
Loans and borrowings4,193,779,3673,183,043,737
Bank overdraft 1,150,057,7842,936,315,082
5,580,569,7446,204,296,013
A change of 100 basis points in interest rates at the end of the reporting period would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant.
 Profit or loss Equity
For the year ended
31.03.2021
Rs.
For the year ended
31.03.2020
Rs.
For the year ended
31.03.2021
Rs.
For the year ended
31.03.2020
Rs.
100 bp increase4,106,0156,247,5554,106,0156,247,555
100 bp decrease(4,106,015)(6,247,555)(4,106,015)(6,247,555)
36.4 Capital Management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of stated capital and reserves of the Company. The Board of Directors monitors the return on capital, which the Company defines as a result from operating activities divided by total shareholders’ equity. The Board of Directors also monitors the level of dividends to ordinary shareholders.

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The Company’s debt to adjusted capital ratio at the end of the reporting period was as follows:

 As at
31.03.2021
Rs.
As at
31.03.2020
Rs.
Total liabilities9,566,963,81811,140,042,799
Less : Cash and cash equivalents(376,799,448)(172,541,712)
Net debt9,190,164,37010,967,501,087
Total equity3,432,952,6482,442,717,586
Debt to adjusted capital ratio2.684.49
37. COMPARATIVE INFORMATION
Comparative figures have been re-classified where necessary in line with the presentation requirements for the current year.
 NoteAs disclosed in the previous year

Rs.
As reclassified in the
current year
Rs.
Adjustment

Rs
Statement of Comprehensive Income
Other incomea19,309,10215,222,371(4,086,731)
Finance income23,215,47727,302,2084,086,731
Administration expenses
b282,624,655268,582,576(14,042,079)
Finance expenses625,725,497639,767,57614,042,079
Statement of Financial Position
Financial investment - Short-term
c27,283,134-(27,283,134)
Cash and cash equivalents145,258,578172,541,71227,283,134
  1. Foreign exchange gain amounting to Rs. 4,086,731, that was classified under other income in the previous re-classified under finance income in the current year.
  2. Foreign exchange loss amounting to Rs. 14,228,237, which was classified under administrative expenses in the previous year, has been re-classified under finance expense in the current year. Further, credit card commission amounting to Rs. 114,858 and stamp duty amounting to Rs. 71,300, that were classified under finance expenses in the previous year, have been re-classified under administrative expenses in the current year.
  3. Short-term fixed deposit investment amounting to Rs. 27,283,134, that was presented as a separate line item on the Statement of Financial Position, has been re-classified under Cash and Cash Equivalents for better presentation.
37.2 Restatement

The Company did not provide for Deferred taxation in prior years due to differences in the application of tax provisions. This was corrected during the period. Accordingly, the Company retrospectively adjusted the deferred tax liability in the Financial statements.

The following is a summary of the impact on the Financial Statements due to the above;

Impact to statement of financial position
 As previously
reported
Rs.
Adjustments

Rs.
Restated

Rs.
As at 31st March 2019
Deferred tax liabilities-14,543,27214,543,272
Retained earnings1,227,055,639(14,543,272)1,212,512,367
As at 31st March 2020
Deferred tax liabilities-21,239,42321,239,423
Retained earnings958,360,465(21,239,423)937,121,042
Impact to statement of comprehensive income
For the year ended 31st March 2020
Income tax expenses44,291,4656,696,15150,987,616
Profit for the year137,625,857(6,696,151)130,929,706

GRI Content Index

GRI Standard/DisclosurePage No.Page Title / Report Commentary
GRI 102: General Disclosures 2016
Organisational profile
102- 1. Name of the organisation137Corporate Information
102 -2. Activities, brands, products and services95Note 1.2
102 -3 Location of headquarters137Corporate Information
102-4. Location of Operations8 to 9Our Properties at a Glance
102-5. Ownership and legal form6
137
About the Company
Corporate Information
102-6. Markets served6About the Company
102-7. Scale of the organisation20Highlights
102-8. Information on employees and other workers59Human Capital - Cadre Numbers
102-9. Supply chain69Social and Relationship Capital - Supply Chain Management
102-10 Significant changes to the organisation and its supply chain69Social and Relationship Capital - Supply Chain Management
102-11. Precautionary principle or approach22Key Risks - Risk Appetite
102-12. External initiatives4

19
Report Pro le - Repor ng Frameworks

Value Creation Model - Contribution to the SDG’s
102-13 Membership of associations56Intellectual Capital - Memberships and Affiliation
Strategy
102-14. Statement from senior decision-maker33 to 36Joint Statement by Co-Chairman and Co-Chairperson
Ethics and Integrity
102 -15. Values, principles, standards, and norms of behaviour56Intellectual Capital - Ethics and Integrity
Governance
102-18. Governance structure75Corporate Governance Report - Governance Structure
102-19. Delegating authority76Corporate Governance Report
- Delegation of Authority by the Board
102-22. Composition of the highest governance body and its committees75Corporate Governance Report - The Board
102-23. Chair of the highest governance body
79Corporate Governance Report - Chairman’s Role (Principle A.3, A.3.1)
102-24. Nominating and selecting the highest governance body77Corporate Governance Report -Remuneration, Nomination and Human Resources Committee (Duties and Responsibilities)
102-25. Conflicts of interest77Corporate Governance Report - Related Party Transaction Review Committee (Duties and Responsibilities)
GRI Standard/DisclosurePage No.Page Title / Report Commentary
102-35. Remuneration policies. 60Human Capital- Remuneration and Benefits
102-36. Process for determining remuneration77Corporate Governance Report - Remuneration, Nomination and Human Resources Committee (Duties and Responsibilities)
Stakeholder Engagement
102-40. List of stakeholder groups25Stakeholder Interactions
102-41. Collective bargaining agreements62Human Capital - Employee Relations
102-42. Identifying and selecting stakeholders25Stakeholder Interactions
102-43. Approach to stakeholder engagement25Stakeholder Interactions
102-44. Key topics and concerns raised25 to 26Stakeholder Engagement Mechanism
Reporting Practice
102-45. Entities included in the consolidated financial statements4Report Profile- Scope and Boundary
102-46. Defining report content and topic boundaries4
27 to 29
Report Profile- Materiality
Material Topics
102-47. List of material topics27 to 29Material Topics
102-48. Restatement of information4Report Profile - Introduction
102-49. Changes in reporting4Report Profile - Introduction
102-50. Reporting period4Report Profile -Scope and Boundary
102-51. Date of most recent report4Report Profile -Introduction
102-52. Reporting cycle4Report Profile -Scope and Boundary
102-53. Contact point for questions regarding the report5Report Profile - Feedback
102-54. Claims of reporting in accordance with the GRI StandardsThis report has been prepared in accordance with the GRI Standards: Core option
102-55. GRI content index133 to 136
102-54. External assuranceThe Company aims to progress towards securing external assurance in the next reporting cycle
GRI 103: Management Approach 2016
103 - 1. Explanation of the material topic and its boundary27 to 29Material Topics
103 - 2. The management approach and its components27 to 29Material Topics
103 - 3. Evaluation of the management approach27 to 29Material Topics
GRI 200: Economic
GRI 201: Economic performance 2016
GRI 201 - 1. Direct economic value generated and distributed46Financial Capital - Value Creation for Stakeholders
GRI 202 : Market Presence 2016
202 - 1. Ratios of standard entry level wage by gender compared to local minimum wage60Human Capital - Remuneration and Benefits
GRI Standard/DisclosurePage No.Page Title / Report Commentary
GRI 203: Indirect economic impact 2016
203-2. Significant indirect economic impacts69Social and Relationship Capital
- Contribution towards the development of local economies
GRI 204: Procurement Practices 2016
204 -1. Proportion of spending on local suppliers19
69
Value Creation model
Social and Relationship Capital -
Supply Chain Management
GRI 205: Anti -corruption Practices 2016
205-1. Operations assessed for risks related to corruption56Intellectual Capital - Ethics and Integrity
GRI 206: Anti -competitive Behaviour 2016
206-1 Legal actions for anti -competitive behavior, anti trust, and monopoly practices
56Intellectual Capital - Ethics and Integrity
GRI 207: Tax 2019
207-1. Approach to tax48Financial Capital Tax Framework
GRI 300: Environmental
GRI 303: Water and Effluents 2018
303-1. Interactions with water as a shared resource71Natural Capital - Construction Best Practices
GRI 306: Waste 2020
306-2. Management of significant waste-related impacts71Natural Capital - Sustainable Resource Utilisation
GRI 307: Environmental Compliance 2016
307-1 Non-compliance with environmental laws and regulations54

71
Intellectual Capital - Regulatory
Compliance

Natural Capital - Construction
Best Practices
GRI 400: Social
GRI 401: Employment 2016
401-1. New employee hires and employee turnover

401-2. Benefits provided to full- time employees that are not provided to temporary or part- time employees

401-3. Parental leave
60

60

61
Human Capital - New Hires & Employee Turnover

Human Capital - Remuneration and Benefits

Human Capital - Maternity Leave
GRI 402: Labour Management and Relations 2016
402-1. Minimum notice periods regarding operational changes62Human Capital - Employee Relations
GRI 403 : Occupational Health and Safety 2018
403-1. Occupational health and safety management system62Human Capital - Employee Wellbeing
GRI 404: Training and Education 2016
404-1. Average hours of training per year per employee61Human Capital - Training and Development
404-3. Percentage of employees receiving regular performance and career development reviews61Human Capital - Performance Management
GRI Standard/DisclosurePage No.Page Title / Report Commentary
GRI 405: Diversity and Equal Opportunity 2016
405-1. Diversity of governance bodies and employees75

59
Corporate Governance Report- The Board

Human Capital - Cadre Numbers
405-2. Ratio of basic salary and remuneration of women to men60Human Capital - Remuneration and Benefits
GRI 406: Non Discrimina on 2016
406-1. Incidents of discrimination and corrective actions taken61Human Capital - Performance Management
GRI 407: Freedom of Association and Collective Bargaining 2016
407 -1. Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk62Human Capital - Employee Relations
GRI 408: Child Labour 2016
408-1. Operations and suppliers at significant risk for incidents of child labour60Human Capital - Recruitment and Selection
GRI 409: Forced or Compulsory Labour 2016
409-1. Opera ons and suppliers at significant risk for incidents of forced or compulsory labor62Human Capital - Employee Relations
GRI 410: Security Practices 2016
410-1. Security personnel trained in human rights policies or procedures56Intellectual Capital - Ethics and Integrity
GRI 412: Human Rights Assessment 2016
412-1. Opera ons that have been subject to human rights reviews or impact assessments56Intellectual Capital - Ethics and Integrity
GRI 413: Local Communities 2016
413-1. Opera ons with significant actual and potential negative impacts on local communities69Social and Relationship Capital
- Contribution towards the development of local economies
GRI 415: Public Policy 2016
415-1. Political contributions56Intellectual Capital - Ethics and Integrity
GRI 416 : Customer Health and Safety 2016
416-2. Incidents of non-compliance concerning the health and safety impacts of products and services54

64
Intellectual Capital - Regulatory
Compliance

Social and Relationship Capital -
Product Responsibility
GRI 417: Marke ng and Labelling 2016
417-3 Incidents of non-compliance concerning marketing communications68Social and Relationship Capital - Transparency of Marketing Information
GRI 418: Customer Privacy 2016
418-1. Substantiated complaints concerning breaches of customer privacy and losses of customer data68Social and Relationship Capital - Confidentiality and Customer Privacy
GRI 419: Socioeconomic Compliance 2016
419-1. Non-compliance with laws and regulations in the social and economic area54Intellectual Capital - Regulatory Compliance

Corporate Information

Name of the Company
Prime Lands Residencies PLC
Legal Form
Limited Liability Company incorporated in Sri Lanka in May 2005 under the Companies Act No. 17 of 1982 Re-registered in September 2008 under the Companies Act No. 07 of 2007 Converted to a Public Limited Company in February 2021 Ordinary Shares listed on the Colombo Stock Exchange in June 2021
Company Registration No
PQ00234680
Directors

Mr. P Brahmanage
Co-Chairman / Executive Director

Mrs. H K S R Perera
Co-Chairperson / Executive Director

Mr. N M Weerakkody
Managing Director / Executive Director

Mr. H M N U Kumara
Executive Director/ Director – Corporate Affairs

Mrs. S S A P Brahmanage
Executive Director

Mr. D Sooriyaarachchi
Independent Non-Executive Director

Mr. S Bandara
Independent Non-Executive Director

Mr. D Kalapuge
Non-Executive Director

Mr. M Perera
Non-Executive Director

Senior Independent Director
Mr. D Sooriyaarachchi
Board Audit Committee
Mr. S Bandara
(Chairman of the Committee)
Mr. D Sooriyaarachchi
Mr. M Perera
Related Party Transactions Review Committee
Mr. S Bandara
(Chairman of the Committee)
Mr. D Sooriyaarachchi
Mr. M Perera
Remuneration, Nomination & Human Resources Committee
Mr. D Sooriyaarachchi
(Chairman of the Committee)
Mr. S Bandara
Mr. D Kalapuge
Registered Office of the Company
No. 75, D S Senanayake Mawatha,
Colombo 08.
Telephone – +94 11 2699822
Website – www.primeresidencies.lk
Email – investorrelations@primeresidencies.lk
Company Secretary
PELE Consultants (Pvt) Ltd.
Apart. No. 9/6,10, Alfred House Gardens,
Colombo – 03
Registrar of the Company
SSP Corporate Services (Pvt) Ltd
101, Inner Flower Road,
Colombo – 03
Auditors
BDO Partners (Chartered Accountants)
65/2, ‘Charter House’ Sir Chittampalam
A Gardiner Mawatha,
Colombo – 02
Bankers of the Company
Hatton National Bank
Seylan Bank
Sampath Bank
Commercial Bank of Ceylon
Nations Trust Bank
National Development Bank
DFCC Bank
Peoples Bank
Union Bank
Company Secretary
PELE Consultants (Pvt) Ltd.
Apart. No. 9/6,10, Alfred House Gardens,
Colombo – 03

Annual General Meeting

NOTICE IS HEREBY GIVEN THAT the Sixteenth Annual General Meeting of the shareholders of the Prime Lands Residencies PLC will be held via an Online Meeting Platform on this 30th day of September 2021 at 2.30 p.m. to conduct the following business:
Agenda
  1. Notice of meeting
  2. To receive and consider the Report of the Directors and the Statements of Accounts for the year ended 31st March 2021 together with the Report of the Auditors thereon.
  3. To elect Mr. M. Perera, as a Director in terms of Article 29(1)(b) of the Articles of Association of the Company.
  4. To elect Mr. D. H. Kalapuge, as a Director in terms of Article 29(1)(b) of the Articles of Association of the Company.
  5. To elect Mr. S. M. S. S. Bandara, as a Director in terms of Article 29(1)(b) of the Articles of Association of the Company.
  6. To elect Mr. D. Sooriyaarachchi, as a Director in terms of Article 29(1)(b) of the Articles of Association of the Company.
  7. To re-appoint Messrs. BDO Partners, Chartered Accountants as the Auditors of the Company for the ensuing year and authorise the Directors to determine their remuneration.
  8. To authorise the Board of Directors to determine contributions to charities and other donations for the year 2021/2022.
Note: To attend the Meeting via the Online Meeting Platform you are requested to carefully read the enclosed ‘GUIDELINES AND REGISTRATION PROCESS FOR THE ANNUAL GENERAL MEETING (AGM) VIA THE ONLINE MEETING PLATFORM’ and submit the ‘REGISTRATION OF SHAREHOLDER DETAILS – ONLINE PARTICIPATION AT THE AGM 2021’ – Annexure II (REGISTRATION FORM) attached hereto as instructed therein.

By order of the Board of Directors of

By Order of the Board
Prime Lands Residencies PLC



(Signed)
Pele Consulting (Pvt) Ltd.
Company Secretary

Date: 7th September 2021

Note:
  1. A shareholder entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend and vote his/her behalf.
  2. A proxy so appointed need not be a member of the Company.
  3. A form of proxy accompanies this notice.

Form of Proxy

INSTRUCTIONS ON HOW TO COMPLETE THE FORM OF PROXY

  1. Kindly perfect the Form of Proxy by legibly filling your full name and address, signing in the space provided, and filling in the date of signature. Please indicate with a ‘X’ how the Proxy should vote on each Resolution, if no indication is given, the Proxy in his/her discretion will vote as he/she thinks fit.
  2. If the Proxy Form is signed by an Attorney, the relative Power of Attorney should also accompany the Proxy form for registration, if such Power of Attorney has not already been registered with the Company.
  3. In the case of a company or corporation/statutory body, the Proxy must be filled and attested in the legally prescribed manner, either under its common seal or signed by the Attorney or by an Officer(s) on behalf of the company or corporation/statutory body in accordance with its Articles of Association or the Constitution or the Statute (as applicable).
  4. The completed Form of Proxy should be deposited at the Registered Office of the Company at No. 75, D.S. Senanayake Mawatha, Colombo 08, or emailed to agm@ primeresidencies.lk not less than 48 hours before the Meeting.
  5. A shareholder appointing a Proxy (other than a Director of the Company) to attend the meeting should indicate the Proxy holder’s details clearly and, additionally in the enclosed REGISTRATION FORM (Annexure II)
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