LUCKY LANKA - cdn.cse.lk · Project of enhancement of Fresh milk ... Most of this product are Probiotic products and company ... Company is going to introduce lucky ice cream to the

LUCKY LANKAMILK PROCESSING PLCANNUAL REPORT & ACCOUNTSBIBULEWELA, KARAGODA UYANGODA, SRI LANKA

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Contents

Lucky lanka at a glance ....................... 01

Chairman’s Message ....................... 03

Managing Director’s Message ........ 05

2014 New initiatives ....................... 07

Introduction of new products ......... 11

Board of Directors ....................... 13

Senior Management ....................... 15

Corporate Governance ....................... 16

Affairs of the Company ....................... 17

Independent Auditors’ Report ........ 21

Statement of Comprehensive Income 23

Statement of Financial Position ........ 25

Statement of Changes in Equity ........ 26

Cash Flow Statement ...................... 27

Notes to the Financial Statements ....... 28

Notice of Meeting ...................... 60

Form of Proxy .................................... 61

Lucky Lanka at a glance

Lucky processThe company is engaged in the process of collection of locally produced fresh milk from rural village farmers and process yoghurt and other milk products and distribute island wide under the brand name ‘LUCKY’. Lucky has invested in the best available technology, giving our products a clear advantage. The product range comprises of Vanilla, Strawberry, Chocolate, Treacle, Fruit Jelly and Fresh Fruit Yoghurts, Curd, Pasteurized Milk, Sterilized Milk, UHT Milk, Flavoured Milk, Fruit Drink Bottles and Drinking Yoghurt. Lucky recently introduced Lucky Milk Toffee also to the market. Our dedicated and loyal staffs, together with caring and timely farmers, ensure the best of 20,000 litres of fresh milk every day, for

our nation.

Lucky boasts the island’s strongest cold distribution network, with a mammoth 120 delivery vehicles, covering the whole of Sri Lanka. Lucky is also a home away from home to several hundred highly qualified and extremely motivated employees, who work with the single

minded mission of creating a better and healthier Sri Lanka.

Our journey, spanning over two decades, has given us the opportunity to pursue and achieve our goals, receiving many worthy accolades along the way.

01

LUCKY LANKA MILK PROCESSING PLCANNUAL REPORT & ACCOUNTS

Starting from a Milk drop

The founder Mr. Lal Keerthi Gunaward-hana, who is the present Chairman of the Company is someone, who humbly set up a small business, just a mere two decades ago, in 1991, with a single cow, and aiding and abetting him in this venture were his four sisters. At the commencement, production process was done by hand with a production capacity of 300 cups per day and the

delivery was done by a bicycle.

I am proved to introduce the Annual report of Lucky Lanka milk processing PLC for the financial year ended 31st March 2014. In last two decades we strive to estab-lish a strong Sri Lankan dairy manufacturing company with sustainable organic growth and in last two years, we are able to achieve several mill-stones and transform the company in to purpose driven business Model. Although the economic environment remains challenging, Lucky Lanka financial highlights illustrate significant improve-

ments in all aspects.


03

Chairman’s MessageAligning with the Government Vision to put up the nation in to self sufficient in dairy ,lucky Lanka has commenced stupendous projects to encourage the people of our mother land to consume fresh milk in preference to milk power .As Fresh milk has been a fundamental pillar of life throughout our existence ,we believe that it is our responsibility to make the people aware on the nutrition value of fresh milk and create

availability of fresh milk in accessible expanse.

Moreover, the organization is planning to expand its distribution channel to enhance the availability of our products throughout the island as we have ample room to develop. After becoming public quoted company, our principle focus on profit was strengthen and the Boards have paid particular attention to sharpening our focus on key risk areas. In addition Involvement of Non-Exec-utive Directors opens up new avenues to polish up our

business progression.

As always it is our pleasure to express gratitude to all our people on behalf of the Board and our Sharehold-ers. In spite of the many Challengers, our lucky mem-bers continued to dedicate their energies and expertise to ensure high level of performance. Our shareholders have the opportunity to share their voluble comments on our performances at the first Annual General Meet-

ings which will be held on November 2014.

Mr. Lal Keerthi Gunawardhana


05

We are very please to convey that Lucky Lanka has get ahead of another year of top line growth. 7% Sales growth shows our outstanding performances throughout the year. We have established a comprehen-sive framework for driving long term success and our main focus to grow our market share and gain more turnovers

through product diversification.

Managing director’s MessageMoreover, significant investments have been made on long-term drivers of growth, includ-ing research and development, brand building and human resource development. Strength-ening brand portfolio enhances the market share and we paid our much sharper attention

on island wide distribution.

Project of enhancement of Fresh milk consumption is extremely successful and we were able to establish our retail outlet chain with enormous consumer attraction. Sustainable Process development projects enhance the energy conservation and environmental friendly

production systems which also provide better gross margin from our products.

2015 will be as challenging as 2014, with turbulence external environment. But we are very confident on our strategies and we believe that our team has plenty of experience and expertise in dairy business which will provide enormous contribution to the high level

performances of the organization

I convey my sincere gratitude to all our employees, share holders for the remarkable contri-bution they made in 2014 towards our goal.

Ms. Namalee Gunawardhana


2014 New initiativesGedarata Kiri

“Gedarata Kiri” Is one of the major projects initiated in year 2014 which focuses to boost the local fresh milk consumption in urban areas. Twenty “Gedarata Kiri” milk selling centers were started in the middle of 2013 in Matara district and forty five milk selling centers locat-ed in Colombo District. This project has established with the objective of promoting the

habit of drinking fresh milk among all Sri Lankans.

This is the second phase of the ‘Gedarata Kiri’ initiative. It was relatively easy to launch this program in the Colombo city because the metropolis is densely populated.

Selling fresh liquid milk is not a business everybody can do. There are many commitments they need to fulfill. Hygiene is top our priority. The cleansing of milk storage tanks is not an

easy task. It is something which demands special care and attention.

Selling liquid milk also means that the retailer has to bear an enhanced tariff for power consumption. The outlets should be able to absorb this.

07


08

These outlets will operate under the direct supervision of Lucky Lanka. The Organization will be supplying the required stocks of liquid milk to them. A name board will also be provided for each outlet. More importantly, we look forward to training the staff manning these outlets. This is primarily to ensure proper storage of fresh milk and cleaning of stor-

age tanks.

Lucky milk Bars One of the sucsees full projects inisated in 2014 is Lucky milk bars. Lucky Milk bar(Modern Retail Outlet chain) will have all Lucky brand products available all customers, provide hot milk to drink, fresh fruit juices mixed with yoghurt available to drink and many more

services offered to customers are now open at both entrances of Southern Highway.


Strategic business UnitsThree strategic business units are formulated and company has focused to strengthen the

sales of different products by dividing these products in to three categories as follows

• Chill Products • Frozen products • Dry products

These three product categories are very unique and after consideration of method of distri-bution company is going to establish different distribution points all around the country and

which will enhance the number of distribution vehicles up to 150.

Chill ProductsChill Product range is consists of all set, stirred and drinking yoghurt range along with curd

and pasteurized products.

Most of this product are Probiotic products and company is going to introduced different flavored drinking product rang with high quality packaging

Frozen ProductsCompany is going to introduce lucky ice cream to the market from year 2015 and exiting ice lolly range will be modified. This will boost existing sales as it will cater different market

segment in the society.

Dry ProductsDry range is the most effective and high potential product range and company has initialed to establish new distributors all round the country. Key products of this range will be, RTS

Bottles, Sterilized Milk, Kiri toffee, Fruit drink bottles.

10


11

Introduction of new productsKeerasa drinking yoghurt

Keerasa is the very first yoghurt drink brand introduced in Sri Lanka. Keerasa is low fat yoghurt drink made with pure milk and live cultures, providing refreshingly smooth taste that can enjoy through each sip and keeps consumers energized. Keerasa is the market leader in yogurt drink category. It is loved by consumers for its refreshing taste. The target market for Keerasa is executives whom are busy with their lifestyles and need nutritious

refreshment.


12

ChogurtChogurt was launched in 2013 as the first chocolate yogurt in the world. Lucky Lanka use luxurious chocolate, even more decadent than it needs to be for Chogurt also adding richest and creamiest milk. Chogurt’s target group is lovers who enjoy both chocolate and yogurt. Chogurt sales is increasing exceptionally well with substantial volume and value, strength-

ening its market position as a unique brand with unique taste.

Board of Directors

13


01. Chairman - Mr. Lal Keerthi Gunawardhana

23 years of entrepreneurial carrier as founder Chairman of Lucky Lanka Milk Processing Co. Ltd, which began as a household business, transformed to be a national level enterprise today. His exposure extend from business management, financial management, analyzing & controlling, marketing, supply chain management, operational management, production management, milk procurement and dairy management including cattle management ,automobile engineering, electrical and mechanical engineering, dairy machinery up to many other areas relevant to the management of a business. He won the National Platinum

Award as the Best Entrepreneur of the year 2011 from FCCISL.

Mr. Gunawardhana obtained his bachelor's degree in Leadership & Management and Mas-ter's Degree in Business Administration from Manipal University of India specialized in Marketing and Human Resources Management streams and the dissertation on the 'Study

on positive attitudes of Sri Lankan Community'.

Currently Mr. Gunawardhana is reading for London LLB.

02. Managing Director - Ms. NamaliAmarasiriGunawardana

She possesses a Higher Diploma in Business Administration from NIBM. She has a thor-ough knowledge on manufacturing practices of milk foods. She has under gone several training programs about food safety and GMP. Her experience in this industry is more than

22 years.

01 02 03

04 05 06


1403. Independent Non ExecutiveDirector - Mr. D. B. S. Chamara Bandara

Mr. Bandara is a fellow member and a prominent personality of the institute of Chartered Accountants of Sri Lanka. He was the founder president of the governing council of Young Chartered Accountants’ Forum of Sri Lanka and currently servicing as a council member of

AAT Sri Lanka.

Mr Bandara holds a MBA from the University of Southern Queensland, Australia and is currently reading for his PhD in the world’s fifth largest private academia, Management and Science University, Malaysia. He is also a fellow member of the Institute of Certified Man-

agement Accountants’ of Sri Lanka.

04. Independent Non ExecutiveDirector - Dr. Anura P. Jayasooriya

Dr. Jayasooriya Holds B.V.Sc (Hons) in Veterinary Science, University of Peradeniya and M.Agri in Biochemistry & Nutrition (research), Miyazaki University,Japan

Mr Jayasoorya holds Ph. D in Nutritional Biochemistry & Physiology (research), Royal Mel-bourne Institute of Technology, Melbourne and Howard Florey Institute of Experimental Physiology & Medicine, University of Melbourne, Australia. Presently he served as Senior Lecturer, Department of Basic Veterinary Sciences, Faculty of Veterinary Medicine, Univer-sity of Peradeniya and as Member of Teaching Panel, Veterinary Post Graduate Unit, Faculty

of Veterinary Science

05. Director - Ms. Daisy AmarasiriGunawardana

She has more than 24 years’ experience in manufacturing milk food.

06. Director - Ms.BhadraAmarasiriGunawardana

She has more than 20 years’ experience in milk food processing industry. She possesses a Higher Diploma in Business Administration from NIBM.


Senior Management

15

Director Engineering - Mr. Achala Godawita

He is a Chemical & Process Engineering from university of Moratuwa. He holds a Master degree in Business Administration. He has pursued Master degree in Sustainable process development from University of Moratuwa.More than 10 years’ experience in milk food

processing industry.

Director Administration - Ms. J. P. Wasana Kumari

She is an honours degree holder in agriculture. She holds a Master degree In Business studies from university of Colombo. More than Ten years’ experience in milk food process-

ing industry.

Director Quality Assurance - Mr. Janaka Dhanasekara

He is an honours degree holder in agriculture & food Science. He holds a master degree in Business Administration from university of Sri Jayawardhanapura .More than 10 years’

experience in milk food processing industry.

Director Production - Ms. Nali Sanjeewika

She has more than 16 years’ experience in milk food processing industry


01 02 03

04


16

Corporate Governance The practices of good governance had been the hallmark of success of Lucky Yogurtis its existence and it had been an integral part of its management and corporate culture. The Company recognizes, in a rapidly changing business environment the need to be profes-sionally advised on how it should be directed and controlled and in total compliance with statutory requirements especially with the regulatory standards laid down by the Colombo

Stock Exchange and the Securities and Exchange Commission of Sri Lanka.

The procedure and methodology adopted by the Company to ensure good governance, involves all levels of management and they contribute through proper and extensive exam-ination and review of information, practices and ideas encompassing the entire gamut of the business operations of the Company. The foregoing description in brief gives an account of

the most important best practices adopted by the company.

Board of Directors The Board consists of well-experienced and most respected business personalities and professionals from multi-faceted functional backgrounds. The Board is responsible for broad policy formation and implementation and for the development of overall business

strategy.

The Board is responsible for the review and approval of the corporate plans and annual bud-gets prepared in line with the business strategy of the Company. The Board ensures reliability and integrity of the information, internal control systems and compliance with

laws, regulations and ethical standards

Remuneration committeeThe remuneration committee comprises of Dr AnuraJayasooriya, Mr D B S ChamaraBanda-raand Mr L K A Gunawardena as at date. This committee recommends the remuneration payable to Executive Directors and sets guidelines for the remuneration of the Senior Man-agement of the Company. The Board makes the final determination having considered the recommendations of this committee and the performance of the Senior ManagementMr D

B S ChamaraBandarais the Chairman of the committee.

The main objective of the remuneration policy of the Company is to retain, attracted the required human resources in order to sustain its operations, and to rewards their perfor-

mance.

Audit CommitteeAudit Committee comprises of 03 members as follows;

Mr. D. B. S. ChamaraBandara – Chairman

Mr. L. K. A. Gunawardena

17


Annual Report of the Board of Director on the Affairs of the Company

The Directors are pleased to submit their report together with the Audited Accounts of the Com-pany, for the year ended 31st March 2014, to be presented at the Annual General Meeting of the Company.

Review of the YearChairman’s review on page No. 03 describes the Company’s affairs and mentions important events that occurred during the year, and up to the date of this report. This reports together with the audited financial statements reflect the state of the affairs of the Company.

Principal Activities / Core BusinessThe principle activity of the Company is to carry on the business of milk processing to produce, distribute, import and export of all kinds of milk related products..

Listing in the Colombo Stock ExchangeThe Initial Public Offer (IPO) of the Company opened on 07 July 2014 and was fully subscribed within a few days. Through the IOP 38,000,000 Ordinary Voting shares and 24,000,000 Ordinary Non-Voting Shares were issued which increased our shareholder base from 05 to 2,543 with the listing of the Company in the Colombo Stock Exchange, the name of the Company needs to be changed to “PLC” for this purpose it is proposed to pass a Special Resolution at the AGM.

Financial StatementsThe financial statements prepared in compli-ance with the requirements of Section 151 of the Companies Act No 7 of 2007 are given on page No. 23 in this annual report.

Independent Auditor’s ReportThe Auditor’s Report on the financial statements is given on page No.21 in this report.

Accounting PoliciesThe Accounting Policies adopted in preparation of the financial statements is given on page No. 28. There were no changes in Accounting Policies adopted by the Company during the year under review.

Financial Results / Profit and AppropriationsProperty, Plant & EquipmentDuring the year under review the Company invested a sum of Rs. 42,820,754/- (2013 – Rs. 46,598,649/-) in property, plant & equipment of which Rs. 19,968,345/- is in machinery & equip-ment, Rs. 6,618,198/- is in Computer and other equipment and Rs. 1,943,971/- is in Furniture and fixtures.

Information relating to movement in Property, Plant & Equipment during the year is disclosed under Note 10 to the financial statement.

Market Value of Freehold LandThe freehold land classified as Investment Prop-erties of the Company, is revalued on a routine basis by an independent qualified valuer. The most recent revaluation was carried out as at 31/03/2013 .

Directors’ ResponsibilitiesThe Statement of the Directors’ Responsibilities is given on page No. 13 of this report.

Corporate GovernanceThe Company has compiled with the corporate governance rules laid down under the listing rules of the Colombo Stock Exchange, and is given on page No. 16

ReservesThe Reserves and Accumulated Profits as at 31st March 2014 amount to Rs. 40,111,477/- vs Rs.


1833,024,741/- as at 31st March 2013. The breakup and the movement are shown in the Statement of Changes in Equity in the financial statements.

Stated CapitalAs per the terms of the Companies Act No. 7 of 2007, the stated capital of the Company was Rs. 296,056,820/- as at 31st March 2014 and was unchanged during the year.

Interests RegisterDetails of the transactions with Director-related entities are disclosed in Note 22 to the financial statements on page No. 28, and have been declared at the Board meeting, pursuant to Section 192 (2) of the Companies Act No. 7 of 2007.

Share Information and Substantial ShareholdingsThe earnings per share is given in Financial Statement on page No. 23 of this Annual Report.

DirectorsThe Directors of the Company as at 31st March 2014 and their brief profiles are given on page No. 13 in this report.

Directors’ ShareholdingThe interest of the Directors in the shares of the Company as at 31st March were as follows;

No. of Ordinary Shares As at 31.03.2014

Mr. L K A Gunawardhana 93,119,850

Ms. B A Gunawardhana 13,302,910

Ms. D A Gunawardhana 13,302,825

Ms. N A Gunawardhana 13,302,825

Independence of DirectorsIn accordance with Rule 7.10.2 of Colombo Stock Exchange Rules on Corporate Governance (‘CSECG Rules’) Mr. D. B. Sunil Chamara Banda-ra and Mr. L. J. P. Anura Prasanna Jayasooriya

who are Non-Executive Directors of the Compa-ny, have have been appointed at the end of March 2014.

AuditorsThe resolutions to appoint the present Auditors, Messrs. Ernst & Young Chartered Accountant, who have expressed their willingness to contin-ue in office, will be proposed at the Annual General Meeting.

As far as the Directors are aware, the Auditors do not have any relationship on interest in the Company.

The Audit committee reviews the appointment of the Auditor, its effectiveness and its relationship with the Company including the level of audit and non-audit fees paid to the Auditor. Details on the work on the Audit Committee are set out in the Audit Committee Report.

Notice of MeetingThe Annual General Meeting will be held at Hemali Hotel, Walgama, Matara on 30th Decem-ber 2014 at 10.00 am.

The Notice of the Annual General Meeting appears on page No. 60

For and on behalf of the Board.

(Sgd.) Director

(Sgd.) Director

(Sgd.) Managers & Secretaries (Pvt) Ltd) Secretaries

Lucky Lanka Milk Procesing Co. Limited. 08th December 2014 Bibulewela Karagoda Uyangoda

Financial Statement

21

23


LUCKY LANKA MILK PROCESSING COMPANY LIMITEDSTATEMENT OF COMPREHENSIVE INCOME

For the year ended Note 2014 2013 (Restated)Rs. Rs.

Revenue 4 893,123,960 837,580,595 Cost of sales (527,833,669) (505,977,494) Gross profit 365,290,291 331,603,101

Other operating income 5 657,664 3,824,535 Administrative expenses (71,570,106) (53,726,694) Selling and distribution expenses (215,769,480) (212,052,105) Results from operating activities 78,608,368 69,648,837

Finance costs 6 (65,669,287) (51,671,356) Finance income 7 210,073 1,715 Net finance cost (65,459,214) (51,669,640)

Profit before taxation 13,149,154 17,979,197

Tax expense 7a (6,111,878) (4,945,913)

Profit for the year 7,037,276 13,033,283

Earnings per share 9 0.16 8.69

The accounting policies and notes as set out in pages 07 to 38 form an integral part of these financial statements.


24LUCKY LANKA MILK PROCESSING COMPANY LIMITEDSTATEMENT OF OTHER COMPREHENSIVE INCOME

For the year ended Note 2014 2013 (Restated)Rs. Rs.

Profit for the Year 7,037,276 13,033,283

Other comprehensive income / (Expenses) Revaluation of property, plant & equipment - 93,500,648 Actuarial gain /(loss) on defined benefit plans 49,460 2,343,127 Income tax on other comprehensive income - - Other comprehensive income for the year, net of tax 49,460 95,843,775

Total comprehensive income for the year, net of tax 7,086,736 108,877,058


25


LUCKY LANKA MILK PROCESSING COMPANY LIMITEDSTATEMENT OF FINANCIAL POSITION

As at 1 April

(Restated) (Restated)As at 31 March Note 2014 2013 2012

Rs. Rs. Rs.ASSETSNon-Current assetsProperty, Plant and equipment 10 526,539,854 536,179,318 463,594,349 Total current non assets 526,539,854 536,179,318 463,594,349

Current assetsInventories 12 45,823,270 45,424,263 39,207,583 Trade and other receivables 13 131,487,736 52,755,347 26,475,963 Income tax refund 23 - 1,033,067 5,507,598 Amounts due from related parties 22 36,685,988 33,168,259 34,638,106 Other current assets 14 7,235,563 13,855,421 4,271,466 Cash & cash equivalents 15 15,328,786 33,804,396 13,824,401 Total current assets 236,561,344 180,040,754 123,925,116

Total assets 763,101,198 716,220,072 587,519,465

EQUITY AND LIABILITIESEquity attributable to equity holders Stated capital 16 296,056,820 15,000,020 15,000,020 Reserve 17 - 251,056,802 157,556,154 Retained earnings 18 40,111,477 33,024,741 26,172,536 Total equity 336,168,297 299,081,563 198,728,710

Non-current liabilitiesInterest bearing borrowings 19 111,790,024 237,201,039 207,738,887 Retirement benefit obligation 20 5,579,671 4,827,628 8,101,109 Deferred tax liability 11 11,895,961 8,524,205 - Total Non-current liabilities 129,265,656 250,552,872 215,839,996

Current liabilitiesInterest bearing borrowings 19 188,899,190 63,662,873 69,472,934 Trade and other payables 21 70,691,868 76,925,702 88,744,027 Amounts due to related parties 22 1,478,465 1,549,126 - Income tax liabilities 23 1,695,868 - - Other current liabilities 24 34,901,853 24,447,936 14,733,798 Total current liabilities 297,667,245 166,585,637 172,950,759

Total equity and liabilities 763,101,198 716,220,072 587,519,465

………………………………………………………..Chief Financial Officer

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

…………………………………….. ………………………………….Managing Director Director

The accounting policies and notes as set out in pages 07 to 38 form an integral part of these financial statements.28 November 2014Matara

These financial statements have been prepared in compliance with the requirements of the Companies Act No.07 of 2007.


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27


LUCKY LANKA MILK PROCESSING COMPANY LIMITEDCASH FLOW STATEMENT

Year ended 31 March Note 2014 2013Rs. Rs.

CASH FLOWS FROM OPERATING ACTIVITIESNet Profit Before Income Tax 13,149,154 17,979,197

Adjustments for:Finance expenses (65,669,287) (51,671,356) Depreciation of property, plant and equipment 38,395,440 67,514,327 Profit on disposal property, plant and equipment 248,780 - Provision/(Reversal) for defined benefit plan 1,052,888 (760,378)

(12,823,025) 33,061,790

(Increase) / Decrease in inventories (399,007) (6,216,680) (Increase) / Decrease in trade and other receivables (78,732,389) (26,279,384) (Increase) / Decrease in dues from related parties (3,517,729) 1,469,847 (Increase) / Decrease in other current assets 6,608,672 (10,055,338) Increase / (Decrease) in trade and other payables (6,233,834) (11,818,325) Increase / (Decrease) in dues to related parties (70,661) 1,549,126 Increase / (Decrease) in other current liabilities 10,453,917 9,714,138 Cash generated from operations (84,714,056) (8,574,827)

Finance expenses paid 65,669,287 51,671,356 Payment of retirement benefit cost (251,385) (169,976) Net cash flow from operating activities (19,296,155) 42,926,552

CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIESAccusation of property, plant and equipment (19,883,393) (27,512,728) Proceeds from sales of property, plant and equipment 13,815,997 - Net cash flow from/(used in) investing activities (6,067,396) (27,512,728)

CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIESProceeds from Share Issue 30,000,000 - Proceeds from long term borrowings 109,068,014 77,107,780 Repayment of long term borrowings (80,093,923) (32,624,064) Repayment short term borrowings (31,972,741) - Principle payment under finance lease liability (42,171,740) (39,978,542) Net cash flow from /(used in) financing activities (15,170,390) 4,505,174

Net Increase/(Decrease) In Cash and Cash Equivalents (40,533,941) 19,918,998

Cash and Cash Equivalents at the Beginning (15,943,328) (35,862,323)

Cash and cash equivalants at the end of the year (56,477,269) (15,943,327)

ANALYSIS OF CASH AND CASH EQUIVALENTSFavorable balancesCash in hand and at bank 15 15,328,786 33,804,396 Unfavorable balancesBank overdrafts 19 (71,806,053) (49,747,721) Total cash and cash equivalents (56,477,269) (15,943,328)



28LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014 1.1. CORPORATE INFORMATION 1.1.1 General Lucky Lanka Milk Processing Company Limited is a limited liability Company incorporated and domiciled in Sri Lanka.The registered office of the Company and the principal place of business is located at Bibulawela, Karagoda – Uyangada, Kamburupitiya. 1.1.2. Principal Activities and Nature of Operations The Principal activity of the company, which is engaged in the process of collection of locally produced fresh milk from rural village farmers and process yoghurt and other milk products and distribute island wide under the brand name ‘LUCKY’, remained unchanged.

1.1.3. Date of Authorisation Issue

The Financial statements for the year ended 31 March 2014were authorized for issue by the directors on 28 November 2014.

29


LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014 1.2. BASIS OF PREPARATION

1.2.1. Basis of Preparation and Adoption of SLAS (SLAS and LKAS) Effective for the Financial Period Beginning on or after 1st January, 2012

The Financial Statements of the Company have been prepared in accordance with Sri Lanka Accounting Standards comprising SLFRS and LKAS (hereafter SLFRS’), as issued by The Institute of Chartered Accountants of Sri Lanka.

For all periods up to and including the year ended 31 March 2013, the Company prepared its Financial Statements in accordance with Previous SLAS.

These financial statements for the year ended 31 March 2014 are the first, the Company has prepared in accordance with SLFRS effective for the periods beginning on or after 1 April 2013.

Subject to certain transition elections and exceptions disclosed in Note 2.4 the Company has consistently applied the accounting policies used in preparation of its opening SLFRS Statement of Financial Position at 1 April 2012 through all periods presented, as if these policies had always been in effect.

Note 2.3 discloses the impact of the transaction to SLFRS on the Company’s reported financial position, performance and cash flows, including the nature and effect of significant changes in accounting policies from those used in the Company’s Financial Statements for the year ended 31 March 2013 prepared under SLAS.

The Financial Statements have been prepared on a historical cost basis except for Freehold Land and Buildings. The preparation and presentation of these Financial Statements is in compliance with the Companies Act No. 07 of 2007.

1.2.2. Basis for measurement The financial statements have been prepared on an accrual basis and under the historical cost basis except for Property Plant and equipment at valuation and defined benefit obligations are measured at its present value, based on an actuarial valuation. The Directors have made an assessments of the company’s ability to continue as going concern in the foreseeable future and they do not foresee a need for liquidation or cessation of trading. 1.2.3. Presentation and Functional Currency The financial statements are presented in Sri Lankan Rupees, the Company's functional and presentation currency, which is the primary economic environment in which the Company operates. 1.2.4. Comparative information The presentation and classification of the financial statements of the previous years have been amended, where relevant for better presentation and to be comparable with those of the current year.


30LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014 1.3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the financial statements of the Company require 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, the key assumptions 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 are discussed below. 1.3.1. Taxes Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. The actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. Accordingly, based on reasonable estimates the Company establishes the provisions to be made during the financial year. Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. 1.3.2. Impairment of non-financial assets Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use (VIU). The fair value less costs to sell calculation is based on available data from an active market, in an arm’s length transaction, of similar assets or observable market prices less incremental costs for disposing of the asset. The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses are recognised in the income statement, except that, impairment losses in respect of property, plant and equipment previously revalued are recognised against the

who are Non-Executive Directors of the Compa-ny, have have been appointed at the end of March 2014.

AuditorsThe resolutions to appoint the present Auditors, Messrs. Ernst & Young Chartered Accountant, who have expressed their willingness to contin-ue in office, will be proposed at the Annual General Meeting.

As far as the Directors are aware, the Auditors do not have any relationship on interest in the Company.

The Audit committee reviews the appointment of the Auditor, its effectiveness and its relationship with the Company including the level of audit and non-audit fees paid to the Auditor. Details on the work on the Audit Committee are set out in the Audit Committee Report.

Notice of MeetingThe Annual General Meeting will be held at Hemali Hotel, Walgama, Matara on 30th Decem-ber 2014 at 10.00 am.

The Notice of the Annual General Meeting appears on page No. 60

For and on behalf of the Board.

(Sgd.) Director

(Sgd.) Director

(Sgd.) Managers & Secretaries (Pvt) Ltd) Secretaries

Lucky Lanka Milk Procesing Co. Limited. 08th December 2014 Bibulewela Karagoda Uyangoda


31LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014 revaluation reserve through the statement of other comprehensive income to the extent that it reverses a previous revaluation surplus. 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 recoverable amount is estimated. A previously recognised 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 recognised. 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 recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. 1.3.3. Valuation of property, plant and equipment The Company measures Property Plant and Eqipment at revalued amounts with changes in fair value being recognized in other comprehensive income. The Company last engaged independent valuation specialists to determine fair value of land and buildings as at 31 March 2013. The valuer has used valuation techniques such as Comparison Method of Valuation and Depreciated Replacement Cost Basis is used to ascertain Fair Value of the property where there was lack of comparable market data available based on the nature of the property. 1.3.4. Useful Life- time of the property, Plant and Equipment

The Company reviews the residual values, useful lives and method of depreciation of assets at each reporting date. Management estimate these values, rates, Methods and hence they are subject to uncertainty. 1.3.5. Employee Benefit Liability The employee benefit liability of the Company is based on the actuarial valuation carried out by Independent actuarial specialist. The actuarial valuations involve making assumptions about discount rates and future salary increases. Considering the complexity of the valuation, the underlying assumptions and its long term nature, the defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Details of the key assumptions used in the estimates are contained in Note 20


32LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014 1.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.4.1. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company, and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and Nation Building Taxes. The following specific criteria are used for recognition of revenue: Sale of goods Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Gains and losses Net gains and losses of a revenue nature arising from the disposal of property, plant and equipment and other non-current assets, including investments, are accounted for in the income statement, after deducting from the proceeds on disposal, the carrying amount of such assets and the related selling expenses. Gains and losses arising from activities incidental to the main revenue generating activities and those arising from a group of similar transactions, which are not material are aggregated, reported and presented on a net basis. Other income Other income is recognised on an accrual basis. 1.4.2. Expenditure recognition Expenses are recognised in the income statement 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 has been charged to the income statement. For the purpose of presentation of the income statement, the “function of expenses” method has been adopted, on the basis that it presents fairly the elements of the company’s performance.

33


LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014 1.4.3 Taxation Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement. 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. Deferred tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets are recognized for all deductible temporary differences, and unused tax credits and tax losses carried forward, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the unused tax credits and tax losses carried forward can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the year when the asset is realized or liability is settled, based on the tax rates and tax laws that have been enacted or substantively enacted as at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxable entity and the same taxation authority.


34LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014 Sales tax Revenues, expenses and assets are recognised net of the amount of sales tax except:

• Where the sales tax incurred on a purchase of a assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• Receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. 1.4.4. Property, plant and equipment Basis of recognition Property, plant and equipment are recognized if it is probable that future economic benefits associated with the asset will flow to the company and the cost of the asset can be reliably measured. Basis of measurement Property Plant and Equipment are measured at fair value less accumulated depreciation and impairment charged subsequent to the date of the revaluation. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Where property, plant and equipment are subsequently revalued, the entire class of such assets is revalued at fair value on the date of revaluation. Any revaluation surplus is recognized in other comprehensive income and accumulated in equity in the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the income statement, in which case the increase is recognized in the income statement. A revaluation deficit is recognized in the income statement, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve. Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. De-recognition An item of property, plant and equipment are derecognised upon replacement, disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset is included in the income statement in the year the asset is derecognised.

35


LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014 Depreciation Depreciation is calculated by using a straight-line method on the valuation of all property, plant and equipmentin order to write off such amounts over the estimated useful economic life of such assets. The estimated useful life of assets is as follows: Assets Years % Buildings 20-10 5-10 Plant and Machinery 20-05 5-20 Equipment 25-03 4-33 1/3 Furniture and Fittings 10-03 10-33 1/3 Computer Equipment 04-02 25-50 Motor Vehicles 12-05 8 1/3-20 Refrigerators 10-05 10-20 The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year end. 1.4.5. Financial instruments — initial recognition and subsequent measurement i) Financial assets

Initial recognition and measurement Financial assets within the scope of LKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial assets at initial recognition. All financial assets are recognised initially at fair value plus, in the case of assets not at fair value through profit or loss, directly attributable transaction costs. The Company’s financial assets include cash and short-term deposits, trade and other receivables, loans and other receivables. Subsequent measurement The subsequent measurement of financial assets of the Company depends on their classification as follows: Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on


36LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014 acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the income statement. The losses arising from impairment are recognised in the income statement in finance costs. Derecognition A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised 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 (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) 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 of the risks and rewards of theasset nor transferred control of it, the asset is recognised to the extent of the Company’s continuing involvement in it. 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.

ii) Impairment of financial assets The Company assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

37


LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014 Financial assets carried at amortised cost For financial assets carried at amortised cost, the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Company. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the income statement

iii) Financial liabilities

Initial recognition and measurement Financial liabilities within the scope of LKAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, carried at amortised cost. This includes directly attributable transaction costs. The Company’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings. Subsequent measurement The subsequent measurement of financial liabilities of the Company depends on their classification as follows:


38LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014 Loans and borrowings After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective interest rate method (EIR) amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income statement. Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When 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 a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

iv) Offsetting of 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 assets and settle the liabilities simultaneously.

1.4.6 Inventories Inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price less estimated costs of completion and the estimated costs necessary to make the sale. The costs incurred in bringing inventories to its present location and condition, are accounted for as follows: Finished goods - Directly attributable manufacturing cost WIP - Actual cost on a weighted average basis Raw material - Actual cost on a weighted average basis Packing Material - Actual cost on a weighted average basis

39


LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014 1.4.7 Cash and cash equivalents

Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less. For the purpose of the cash flow statement, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts. 1.4.8 Defined benefit plan - gratuity The employee benefit liability of the Company is based on the actuarial valuation carried out by Independent actuarial specialist in the current financial year. The actuarial valuations involve making assumptions about discount rates and future salary increases. Considering the complexity of the valuation, the underlying assumptions and its long term nature, the defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Details of the key assumptions used in the estimates are contained in Note 20.The company did not use the actuarial valuation method in past financial years. 1.4.9 Defined contribution plan - Employees' Provident Fund and Employees' Trust Fund Employees are eligible for Employees’ Provident Fund contributions and Employees’ Trust Fund contributions in line with respective statutes and regulations. The companies contribute the defined percentages of gross emoluments of employees to an approved Employees’ Provident Fund and to the Employees’ Trust Fund respectively, which are externally funded. 1.4.10 Provisions, contingent assets and contingent liabilities Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the sCompany expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. All contingent liabilities are disclosed as a note to the financial statements unless the outflow of resources is remote. Contingent assets are disclosed, where inflow of economic benefit is probable.


40LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014 1.5 SRI LANKA ACCOUNTING STANDARDS (SLFRS/LKAS) ISSUED BUT NOT YET EFFECTIVE Standards issued but not yet effective up to the date of issuance of the Company’s financial statements are listed below. This listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt those standards when they become effective. a) SLFRS 9-Financial Instruments: Classification and Measurement

IFRS 9 as issued reflects the first phase of the IASB’s work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2014. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. The adoption of thefirst phase of IFRS 9 will have an effect on the classification and measurement of the Company’s financial assets, but will potentially have no impact on classification and measurements of financial liabilities. The Company will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture.

b) SLFRS 13-Fair Value Measurement

SLFRS 13 establishes a single source of guidance under SLFRS for all fair value measurements. SLFRS 13 does not state when an entity is required to use fair value, but rather provides guidance on how to measure fair value under SLFRS when fair value is required or permitted. This standard becomes effective for annual periods beginning on or after 1 January 2014. The Institute of Chartered Accountants of Sri Lanka has resolved an amendment to Sri Lanka Accounting Standard 10, whereby the provision contained in paragraphs 30 and 31 of SLAS 10 – Accounting Policies, Changes in Accounting Estimates and Errors, would not be applicable for financial statements prepared in respect of financial periods commencing before 1 January 2012 and hence the impact of this transition is not required to be disclosed in these financial statements.

2. FIRST-TIME ADOPTION OF SLFRS/LKAS

These financial statements, for the year ended 31 March 2014, are the first the Company has prepared in accordance with SLFRS. For periods up to and including the year ended 31 March 2013, the Company prepared its financial statements in accordance with Sri Lanka Accounting Standards (SLAS).

Accordingly, the Company has prepared financial statements which comply with SLFRS applicable for periods ending on or after 31 March 2014, together with the comparative period data as at and for the year ended 31 March 2013, as described in the accounting policies. In preparing these financial statements, the Company’s opening statement of financial position was prepared as at 1 April 2012, the Company’s date of transition to SLFRS. This note explains the principal adjustments made by the Company in restating its SLAS statement of financial position as at 1 April 2012 and its previously published SLAS financial statements as at and for the year ended 31 March 2013.

41


LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014 2.1. Exemptions Applied

SLFRS 1 First-Time Adoption of Sri Lanka Financial Reporting Standards allows first-time adopters certain exemptions and exceptions from the retrospective application of certain SLFRS. Set out below are the applicable exemptions and exceptions under SLFRS 1 applied by the Company in preparing the first consolidated financial statements for the year ended 31 March 2014 under SLFRS.

2.2. Optional Exemptions which the Company has Opted to Apply

Business Combinations

SLFRS 3 Business Combinations has not been applied to acquisitions of subsidiaries, which are considered businesses for SLFRS, or of interests in associates and joint ventures that occurred before 1 April 2011.

Use of this exemption means that the local SLAS carrying amounts of assets and liabilities, which are required to be recognised under SLFRS, is their deemed cost at the date of the acquisition. After the date of the acquisition, measurement is in accordance with SLFRS. Assets and liabilities that do not qualify for recognition under SLFRS are excluded from the opening SLFRS statement of financial position. The Company did not recognize or exclude any previously recognised amounts as a result of SLFRS recognition requirements.

SLFRS 1 also requires that the local SLAS carrying amount of goodwill must be used in the opening SLFRS statement of financial position (apart from adjustments for goodwill impairment and recognition or derecognition of intangible assets). In accordance with SLFRS 1, the Company has tested goodwill for impairment at the date of transition to SLFRS. No goodwill impairment was deemed necessary at 1 April 2012.

The Compny has not applied LKAS 21 retrospectively to fair value adjustments and goodwill from business combinations that occurred before the date of transition to SLFRS.

Investments in Subsidiaries and Associates

The basis of measurement of an investment in a subsidiary or associate is at its deemed cost in the separate SLFRS financial statements of the subsidiary, jointly controlled entity or associate. The Company has applied the previous carrying value under SLAS on 1 April 2011 as the deemed cost of such investments.


42LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014

Exceptions the Company has not applied retrospectively

Estimates

The estimates at 1 April 2012 and at 31 March 2013 are consistent with those made for the same dates in accordance with SLAS (after adjustments to reflect any differences in accounting policies)

De - recognition of Financial Assets and Financial Liabilities

The Company has applied the derecognition requirements in LKAS 39 prospectively to transactions occurring after 1 April 2012. Therefore the non-derivative financial assets or non-derivative financial liabilities which were previously de-recognised under SLAS as a result of a transaction that occurred before the transition date 1 April 2012 has not been re-recognised in the SLFRS financial statsements.


43

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46

LUCKY LANKA MILK PROCESSING COMPANY LIMITEDFIRST TIME ADOPTION OF SLFRS/LKAS

NOTES TO THE RECONCILIATIONS

A & C Revenue /Selling and distribution expense

B Cost of sale

D Finance income

E,F & G Trade and other receivables

H & I Revenue reserve

J Employee benefit liabilities

K,L & M Trade and other payable

Statement of cash flows The transition from SLAS to SLFRS/LKAS has not had a material impact on the statement of cash flows.

During the financial year 2013 company has removed the market return amount Rs 4,179,212 from revenue and reclassified under and distribution expense for better understanding of the users.In addition to that following restatements were made. Administration expense 2013 restated 2013 Traveling and transport 472,006 - Foreign travelling 966,140 - Directors remuneration 12,240,000 15,497,006 Selling and distribution cost Travelling and transport 1,136,640 2,574,786 Selling and distribution cost Salary & wages 25,917,978 9,403,005 Allowances 33,783,456 12,363,414 sales commission - 18,163,036

As per previous SLAS gratuity has been classified amounting Rs 169,635 under factory overhead. Under SLFRS/LKAS gratuity has been classified under administration expenses.

Due to the application of LKAS 32 & 39, non financial assets (Prepayments and Tax refunds) in trade & other receivables Rs 30,148,287 have been reclassified under other current assets Rs 19,834,402 and amount due from related party Rs10,539,230.

Due to the application of LKAS 32 & 39, non financial liabilities (Tax payables, Advances & Deposits received) in trade & other payables have been reclassified under other current liabilities.

Revenue reserve as at 01 April 2012 amounting 93,500,648 has been remeasuermed as Revaluation reserve under SLFRS's.

Employee benefit liabilities have been remeasuermed according to the requirements of SLFRS's.

As per previous SLAS interest income has been classified amounting to Rs 1,715 under other operating income. Under SLFRS/LKAS interest income has been classified in finance income. In adddion to that reversal of gratuity LKR 760,378 has been classified under finance income.

47


LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS

Year ended 31 March 2014 2013Rs. Rs.

4 Revenue

Sales of yogurt & other products 658,523,370 594,193,936 National building tax (13,170,468) (11,944,011) Fresh milk sale 246,330,267 255,330,670 Other sales 1,440,790 - Total Revenue 893,123,960 837,580,595

2014 2013Rs. Rs.

5 Other operating income

- 1,527,167 Sundry income 657,664 1,536,990 Reversal of gratuity - 760,378 Total operating Income 657,664 3,824,535

2014 2013Rs. Rs.

6 Finance costs

OD interest 6,147,210 4,846,867 Loan interest 21,040,491 17,028,503 Stamp duty 93,861 44,240 Bank charges 917,708 728,695 Lease interest & charges 13,849,231 15,360,002 Other financial charges 49,664 350,568 Factoring charges 10,391,329 2,146,317 Interest on personal loans 13,179,792 11,166,162 Total finance cost 65,669,287 51,671,356

2014 2013Rs. Rs.

7 Finance income

Other interest income 210,073 1,715 Total finance income 210,073 1,715

7a PROFIT BEFORE TAX

Profit before tax is stated after charging all expenses including the following;Remuneration to executive directors 12,240,000 12,240,000 Auditors’ remuneration 255,000 174,170 Costs of defined employee benefits Defined benefit plan cost 1,052,888 (760,378) Staff expenses 132,299,431 87,980,476 Depreciation of property, plant and equipment 38,395,440 67,514,328

Profit on sale of property, plant and equipment


48LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTSYear ended 31 March

2014 20138 Tax expense Rs. Rs.

Current income taxCurrent tax charge 1,666,482 4,945,913 Under provision of tax 2011/2012 1,073,640 - Deferred income taxRelating to origination and reversal of temporary differences 3,371,756 -

6,111,878 4,945,913

8.1 Reconciliation between income tax charge and tax on current year profit is given below;

Profit before taxation 13,149,154 17,979,197 Aggregate exempt income - (2,343,127) Aggregate disallowed expense 60,990,426 85,946,474.01 Aggregate allowable expense (57,474,763) (52,123,411.02) Adjusted profit (a) 16,664,817 49,459,133

Taxable income from other sources - - Statutory income (b) 16,664,817 49,459,133

Tax rate 10% 10%

Income tax expense 1,666,482 4,945,913

Lucky Lanka Milk Processing Company Limited;is subject to a concessinory tax rate of 10% uder the Inalnd Revenue Act No.10 of 2006 and subseqeunet amendments hereto.

9 Earnings per share

9.1 Basic earnings per share

Profit attributable to ordinary share holders (Rs) 7,037,276 13,033,283

Weighted average number of ordinary shares 44,951,808 1,500,002

Basic earnings per share (Rs) 0.16 8.69

Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary share holders of Lucky Lanka Milk Processing Company Limited by weighted average number of ordinary shares in issue.

49


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50LUCKY LANKA MILK PROCESSING COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS

2014 2013 201210.3 Net Book Value Rs. Rs. Rs.

Under free hold assetsLand 64,845,500 64,845,500 23,991,000 Buildings 81,184,905 85,457,795 57,771,729 Plant and machinery 208,387,502 197,679,550 235,648,725 Office Equipment 3,055,108 1,328,600 2,079,596 Computer Equipment 9,168,312 10,002,500 1,239,796 Furniture and fittings 2,713,976 2,005,150 2,802,022 Refrigerators 1,217,728 957,500 151,321 Motor vehicles 47,086,833 52,550,000 27,874,878 Motor tricycle 12,288,333 14,475,000 21,840,000 Water treatment Plant 3,325,000 3,500,000 3,489,549

433,273,197 432,801,595 376,888,616

Under lease hold assetsPlant Machinery and Equipment 30,767,684 49,950,000 17,551,265 Motor Vehicles 38,261,488 39,850,000 53,663,522 Refrigerators 12,219,951 13,577,723 15,490,946

81,249,123 103,377,723 86,705,733 Under work in progressBuildings 70,000 - - Plant & Machinery 11,947,534 - -

12,017,534 - -

526,539,854 536,179,318 463,594,349

10.4 Revaluation of land and building

Property Method of Effective date Propertyvaluation of valuation valuer

LandBuildings 31 March 2013 D. Prathapasinghe Plant & Machinery Chartered Valuation SurveyorsOffice Equipment IT EquipmentFurniture and Fittings Motor VehiclesRefrigerators

10.5 As at 31 March 2014 lands worth Rs 62,345,500 out of the total land value of Rs 64,845,500 were owned by the company’s Directors However ,all such ownership have been transfered to to he company on 21 October 2014 by the Directors.Accordingly legal ownershipof all lands worth Rs 64,845,500 have been transferred to the copmany by 21 October 2014.During the year fixed asset addition was LKR 42,820,754,disposal Rs 15,365,000 and transferred was LKR 38,200,000.

The Company uses the revaluation model of measurement of property plant equipment. The Company engaged D. Prathapasinghe – Chartered Valuation Surveyors, an accredited independent valuer, to determine the fair value of its buildings on leasehold land. Fair value is determined using Comparison Method of Valuation and Depreciated Replacement Cost Basis is used to ascertain Fair Value of the property . The date of the most recent revaluation was 31 March 2013. The previous revaluation was on 31 March 2008.

Comparison Method of Valuation and Depreciated Replacement Cost Basis is used to ascertain Fair Value of the property

51



As at 1 AprilYear ended 31 March 2014 2013 2012

Rs. Rs. Rs.

11 Deferred tax liabilityOpening balance 8,524,205 - - Net Book Value 368,427,697 367,956,095 - Less - Revaluation surplus without Land (62,279,440) (62,279,440) - Tax Written Down Value (181,608,976) (215,606,977) -

124,539,282 90,069,678 - Deferred tax liability 12,453,928 9,006,968 - Gratuity 5,579,671 4,827,628 - Deferred tax asset 557,967 482,763 - Net Deferred Tax (Asset)/Liability 11,895,961 8,524,205 -

As at 1 April2014 2013 2012

Rs. Rs. Rs.

12 Inventories

Raw materials 29,448,793 24,458,724 21,786,090 Work in progress 160,617 2,286,044 5,601,205 Finished goods 12,819,264 16,351,179 10,551,176 Consumables and Spares 3,394,595 2,328,316 1,269,112 Total inventories 45,823,270 45,424,263 39,207,583

As at 1 April2014 2013 2012

Rs. Rs. Rs.

13 Trade and other receivables

Trade debtors 123,138,360 31,488,494 6,826,297 Less: Provision for bad & doubtful debts (1,680,242) - - Other Trade receivables 10,029,619 21,260,508 19,641,670 Staff loan - 6,346 7,996 Total trade and other receivables 131,487,736 52,755,347 26,475,963

As at 1 April2014 2013 2012

Rs. Rs. Rs.

14 Other current assets

Prepayments, advances and non cash receivables 6,528,108 11,291,140 3,917,705 Other 707,455 2,564,281 353,761 Total other current assets 7,235,563 13,855,421 4,271,466

As at 1 April2014 2013 2012

Rs. Rs. Rs.

15 Cash & cash equivalents

Favorable BalancesCash & bank balances 15,328,786 33,804,396 13,824,401

Total cash & cash equivalents 15,328,786 33,804,396 13,824,401


52LU

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53



19 Interest bearing borrowingsAs at 1 April

As at 31st March 2013 2012Current Non Current Total Total Total

Rs. Rs. Rs. Rs. Rs.

21,302,664 28,416,566 49,719,230 68,953,609 89,846,230

81,502,452 83,373,458 164,875,910 135,901,819 119,743,866

Advances from third parties 14,288,022 - 14,288,022 46,260,763 17,935,000 Bank overdraft 71,806,053 - 71,806,053 49,747,721 49,686,725

188,899,190 111,790,024 300,689,214 300,863,912 277,211,821

19.1 Finance leases & hire purchasesBalance Addition Repayment Balance

as at during the during the as atName of the Financial Institute 01.04.2013 Year Year 31.03.2014

Rs. Rs. Rs. Rs.

People's Leasing Company PLC 4,634,941 - (3,596,542) 1,038,399 Nation Trust Bank 3,703,458 5,000,000 (2,973,700) 5,729,757 Lanka orix Leasing Company PLC 11,741,686 - (7,374,939) 4,366,747 Central Finance Company PLC - 5,262,361 (583,384) 4,678,977 Asia Assets Finance PLC 24,914,759 - (12,448,392) 12,466,367 Mercantile Investment PLC 20,232,381 8,675,000 (11,993,673) 16,913,708 Commercial Bank 3,726,383 - (3,107,655) 618,727 DFCC - 4,000,000 (93,453) 3,906,547 Net Lease Liability 68,953,609 22,937,361 (42,171,740) 49,719,230

-

19.2 Balance Loan obtained Adjustments Loan payment Balanceas at during the during the during the as at

01.04.2013 year year year 31.03.2014Rs. Rs. Rs. Rs. Rs.

Union Bank 116,408,925 37,521,531 - (43,360,137) 110,570,320 Commercial Bank 5,038,155 5,500,000 945,766 (2,182,100) 9,301,821 Mercantile Investment PLC 11,099,488 - - (4,115,072) 6,984,416 Asia Assets Finance PLC 3,355,250 - - (817,281) 2,537,970 NDB - 66,046,483 - (30,565,100) 35,481,383

135,901,819 109,068,014 945,766 (81,039,689) 164,875,910

2014

Finance leases & hire purchases (Note 19.1)Interest bearing loans (Note 19.2)

Interest Bearing Loans


Year ended 31 March As at 1 April2014 2013 (Restated) 2012

Rs. Rs. Rs.

20 Retirement benefit obligation

Balance at the beginning of the year 4,827,628 8,101,109 4,569,747 Amount Charged/(Reversed for the year) 1,052,888 (760,378) 3,531,362 Actuarial (Gain)/Loss (49,460) (2,343,127) - Contributions paid (251,385) (169,976) - At the end of the year 5,579,671 4,827,628 8,101,109

Expenses on defined benefit planCurrent Service Cost for the year 521,849 - - Interest cost for the year 531,039 - - Actuarial (Gain)/Loss (49,460) - - (Gain) Loss Due to changes in assumptions - - -

1,003,428 - -

The principal assumptions used in determining the cost of employee benefits were:Discount rate 11%Future salary increases 10%The company did not follow actuarial valuation method in year 2013.

As at 1 April2014 2013 (Restated) 2012

Rs. Rs. Rs.

21 Trade and other payables

Trade payables 43,597,141 55,708,514 62,149,115 Accrued expenses 19,134,510 15,194,796 9,175,479 Advances and deposits 7,960,217 6,022,393 17,419,434

70,691,868 76,925,702 88,744,027


Rs. Rs. Rs.

22 Related party transaction22.1 Amounts due from related parties

The company carried out transactions in the ordinary course of business with the following related entities.

Non TradeAmounts Due from Directors 23,201,796 22,629,029 24,401,186 Lucky Lanka Dairies (Private) Limited 9,396,412 9,313,885 8,773,432 CA Gunawardana Auto Engineering (Private) Limited 4,087,780 1,225,345 970,919 Lucky Lanka Printers Company Limited - - 492,570

36,685,988 33,168,259 34,638,106

22.2 Amounts due to related parties

Lucky Lanka Printers Company Limited 1,478,465 1,549,126 - 1,478,465 1,549,126 -

The employee benefit liability based on the actuarial valuations carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd., actuaries.


54



As at 1 April23 Income tax liabilities 2014 2013 (Restated) 2012

Rs. Rs. Rs.

At the beginning of the year (1,033,067) (5,507,598) (5,507,598) Provision for the year 1,666,482 4,945,913 - (Over)/Under provision for the year 1,073,640 - - Less - Tax Credit

ESC Paid - (471,383) - WHT on Interest (11,186) - - Self Assessment Payment - - -

At the end of the year 1,695,868 (1,033,067) (5,507,598)


Rs. Rs. Rs.

24 Other current liabilities

Other tax Payable 32,043,853 24,117,936 14,681,806 Other Payable 2,858,000 330,000 51,992

34,901,853 24,447,936 14,733,798

25 Commitments and contingencies.

There were no material capital commitments approved by the Board of Directors as at reporting date.

26 Post balance sheet events

>Thirty eight million (38,000,000) Ordinary Voting Shares of the Company at Rs 6 per share and>Twenty four million (24,000,000)Ordinary Non-Voting Shares of the Company at Rs 3 per share

After share issuing share holders structure has been changed as follows.

Category of Share holders Number of sharesNon public (Pre IPO Shares)(Ordinary Voting Shares) 133,028,410 75.57Public (Pre IPO Shares)(Ordinary Voting Shares) 5,000,000 2.84Public (Ordinary Voting Shares) 38,000,000 21.59Total 176,028,410 100Category of Share holders Number of sharesPublic (Ordinary Non-Voting Shares) 24,000,000 100Total 24,000,000 100

As at 31 March 2014 lands worth Rs 62,345,500 out of the total land value of Rs 64,845,500 were owned by the company’s Directors However ,all such ownership have been transfered to to he company on 21 October 2014 by the Directors.Accordingly legal ownershipof all lands worth Rs 64,845,500 have been transferred to the copmany by 21 October 2014.

Subsequent to the Reporting date, except for the above no circumstances have arisen which would require adjustment to or disclosure in the financial statements.

%

%

Company has listed in Colombo Stock Exchange and issued their shares to the public on 30 July , 2014 by Initial Public Offering. Resolution passed on 25 March 2014 by the Board of Directors and the Special Resolution passed on 25 March 2014 by the shareholders of the company and invited applications from the public for the subscription of up to



27 Assets pledged

Commercial Bank PLCBank LoanFacility-1 3,500,000 Cash

S/A No : 71104007942Facility-2 4,200,000 Amount :Rs.1,738,206

Rate of interest :4%Maturity Date : 15/10/2022

Facility-3 4,000,000 Letter of set-off to be signed by two Directors.

Letter of Authority to be signed by two Directors.

Facility-4 1,500,000 Property 1

Bank Overdraft Location: Piniliyadda,Pitakatuwana, KamburupitiyaPermanent overdraft 37,500,000 Plan :348 dated 05/01/2011

Owner :LLMPProperty 2

Temporary Overdraft 7,500,000

Plan :4066 dated 05/01/2011Owner : LLDProperty 3

Owner : LLMPProperty 4

Owner : LLMPProperty 5

Location: No76,Meera road, Issadeen Town, MataraPlan : 5042 dated 01/03/2005

Owner : LKA GunawardhaneProperty 6

Location:Welikandahena, Elawella Road, HittetiyaPlan : 2742 dated 23/07/2005

Owner : LKA Gunawardhane

Nation Development Bank Facility - Letter of Credit

Mortgage of book debts for LKR 41 MNTo facilitate the imports and local purchase

Personal Guarantee of Directors for Rs.10mnFacility - Post Import FinanceMaximum

sublimit of LKR 40,000,000

To retire sight /usance bills drawn under letters of credit/DA/DP.

Facility - Block Lease To purchase vehicles for distribution Cash build up of LKR 200k per month held under lien

Facility - Over Draft Ownership of the vehicles remained to NDB bank till the facility is fully paid. To meet operational expenses.Maximum limit of LKR 1,000,000

Maximum limit of LKR 1,000,000

Plan : 4156B dated 18/01/2002 ,12/152 dated 09/08/2012 and 4156C dated 09/12/2002

SMB for Rs.16,000,000 executed over the following property.

PMB for Rs.12,000,000 executed over the following property.

Maximum limit of LKR 40,000,000

Location: Batakolayamulla,Karagoda - Uyangada, Kamburupitiya

For permanent Working Capital requirements

For extensions of the building proposed for bottled Drinking waterPMB No.9847 dated 05.05.2011 for Rs.3,500,000 executed over the following

property.

For working capital requirements of the business

TMB No 13 dated 12.09.2012 for Rs. 6,800,000 executed over the following property.


PMB No.15120 dated 23.08.2012 for Rs.4,200,000 & SMB No. 15354 dated 15354 dated 04.09.2013 for Rs.1,400,000 executed over the following property.


Plan : 94/2006 dated 10/09/2006 and 4158 dated 15/08/1996

PMB No.11170 dated 04.09.2013 for Rs.2,100,000 executed over the following property.

Purpose for granting the loan for purchase of a commercial Property @ Mirisatta

Lien over following Savings Account in the name of M/S Lucky Lanka Milk Processing Limited.

Purpose for granting the loan for purchase of a commercial Property @Ranrasa caters



Union Bank PLCBank LoanFacility - 1 75,000,000

Facility -2 30,300,000

Facility -3 30,000,000

Facility -4 35,000,000

Facility -5- proposed facility 25,000,000 Against the Existing property leeway

Negative pledge over machinery.Bank Overdraft 5,000,000

Facility - 6 -Overdraft

Overdraft agreement for Rs.5 Mn.

Facility - 7 -Temporary Overdraft 5,000,000

Overdraft agreement for Rs.5 Mn.Import loan facility

5,000,000

5,000,000

5,000,000 Personal Guarantee of Directors for Rs.10mn

Personal Guarantee of Directors for Rs.10mn

To purchase machinery and to complete the Aseptic room construction

To fund the cost over run of the latest expansion Report

Additional Mortgage Bond for Rs.35 mn over the same property already mortgaged to the Bank for existing facility No.1,2 and 4

To reimburse the expenses incurred for the development of the ongoing business.

Additional Mortgage Bond for Rs.30 mn over the same property already mortgaged to the Bank for existing facility No.1 and 2 Joint and Several personal guarantee of Company directors for Rs.35mn

Purpose

Existing Primary Floating Mortgage Bond for Rs.105.3 Mn over property depicted as Lot A in Survey Plan No.5458

Expansion of the business

Do To absorb the credit facilities from DFCC and Commercial Bank

Under Agro Livestock Development Loan Scheme

Institution & the Facility Principal Amount LKR

Security offered

Personal Guarantee of Directors for Rs.5mn To finance working Capital requirements of the business.

Monthly cash build up of Rs. 50,000 to an interest bearing A/C and balance held under lien to the bank.

Existing Primary mortgage bond for Rs.5 Mn over raw materials, working progress & finished goods.

Personal Guarantee of Directors for Rs.5mnTo finance working Capital requirements of the business.

Facility - 8 -Import loan - Sub limit under documentary Credit

Personal Guarantee of Directors for Rs.10mn To retire Import bills received under Facility 11.

Facility - 9 -Short term loan - Sub limit under documentary Credit

Personal Guarantee of Directors for Rs.10mn To purchase sugar and other raw materials for production process

Title of goods to be imported under the Documentary Credit.

Facility - 10 -Acceptance - Sub limit under documentary CreditFacility - 11 -Sight/Usance 60 days Maximum

10% Cash Margin Limit LKR

10% cash margin for each D/C to be booked in a call deposit To import sugar and other raw materials for production process



28 Related party transaction

Details of related party transactions which the company had during the year are as follows,

29 Transactions with key managerial personnel (KMPs)

30 Key management personnel compensation2014 2013 2012

Rs. Rs. Rs.

Directors fees & expenses 12,240,000 12,240,000 6,476,335 12,240,000 12,240,000 6,476,335

31 Credit risk

31.1.1 Credit risk exposure

Notes Cash in hand and at bank

Trade and other receivables

Amounts due from related parties

Total % of allocation

Trade and other receivables 13 - 131,487,736 - 131,487,736 71.65%Amounts due from related parties 22.1 - - 36,685,988 36,685,988 19.99%Cash in hand and at bank 15 15,328,786 - - 15,328,786 8.35%Total credit risk exposure 15,328,786 131,487,736 36,685,988 183,502,511 100.00%

Total equity risk exposure 15,328,786 131,487,736 36,685,988 183,502,511

Cash in hand and at bank

Trade and other receivables

Amounts due from related parties

Total

Trade and other receivables 13 - 52,755,347 - 52,755,347 44.06%Amounts due from related parties 22.1 - - 33,168,259 33,168,259 27.70%Cash in hand and at bank 15 33,804,396 - - 33,804,396 28.23%Total credit risk exposure 33,804,396 52,755,347 33,168,259 119,728,002 100.00%

Total equity risk exposure 33,804,396 52,755,347 33,168,259 119,728,002

2014

2013

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The company is exposed to credit risk from its The company trades only with recognized, creditworthy third parties. It is the company’s policy that all clients who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with

operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions and other financial instruments. With respect to credit risk arising from the other financial assets of the company, such as cash and cash equivalents and short term investments, the company’s exposure to credit risk arises from default of the counterparty. The company manages its operations to avoid any

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

The Company carried out transactions with parties who are defined as Related Parties as per the Sri Lanka Accounting Standard - LKAS 24 ‘Related Party Disclosures'.

Related party includes KMPs defined as those persons having authority and responsibility for planning directing and controlling the activities for the Company. Such KPMs include the board of directors of the Company (inclusive of executive and non executive directors ) and executives who directly report to Board of Directors.

% of allocation

59


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.


60

NOTICE OF MEETINGNotice is hereby given that the Annual General Meeting of Lucky Lanka Milk Processing Company Limited will be held at Hemali Hotel, Walgama, Matara on 30th December 2014 at 10.00 am. for the following purposes.

1. To receive and consider the statement of Accounts for the year ended 31st March 2014 with the Annual Report of the Board of Directors and Auditors thereon.

2. To re-elect Mr. Lal Keerthi Amarasiri Gunawardhana who retires by rotation in terms of Article 81, of the Articles of Association of the Company, and being eligible offers himself for re-election.

3. (a) To appoint Mr. Lokubadu Jayasooriya Patabandige Anura Prasanna as a non executive director of the Company in terms of Article 88 of the Articles of Association of the Company.

(b) To appoint Mr. Dingiri Bandage Sunil Chamara Bandara as a non executive director of the Company in terms of Article 88 of the Articles of Association of the Company.

4. To re-appoint the Auditors Messer. Ernst & Young and authorize the Board of Directors to deter-mine their remuneration

5. To authorise the Board of Directors to determine payments for charitable and other purposes for the year 2014/2015.

6. To pass the following resolution as a Special Resolution.

SPECIAL RESOLUTIONIT IS HEREBY RESOLVED,

“that the name of the Company be changed from Lucky Lanka Milk Processing Company Limited to Lucky Lanka Milk Processing Company PLC with immediate effect.”

By Order of the Board

LUCKY LANKA MILK PROCESSING CO. LIMITED

MANAGERS & SECRETARIES (PRIVATE) LIMITED

Sgd:Mrs.C Salgado

Secretaries

05th December 2014

NOTE:

a. Only persons who are shareholders of the Company and whose names appear on the share Regis-ter as at AGM date will be entitled to attend the above meeting.

b. A Shareholder entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend and vote in his/her place by completing the From of Proxy enclosed herewith.

c. A proxy need not be shareholder of the Company .However the proxy must be above 18 years of age.

d. Shareholders/Proxy holders are kindly advised to bring along with them their National Identity Card or a similar form of acceptable identity when attending the meeting.

e. For more information, please refer Administrative Details enclosed herewith.

f. The Completed form of proxy must be deposited at the registered office Bibulewela, Karagoda,Uy-angoda not less than forty eight hours before the time fixed for the meeting

61


LUCKY LANKA MILK PROCESSING COMPANY LIMITED

FORM OF PROXY

I / we ………………………………………………………………………………………..............................................

of …………………………………………………………………………………………................................................

being a member/members of Lucky Lanka Milk Processing Company Limited hereby appoint ;

…………………………………………………………………………………………….................................................

of …………………………………………………………………………………………................................................

…………………………………………………………………………..........................................……or failing him

Mr. Lal Keerthi Amarasiri Gunawardhana or failing him

Ms. Bhadra Amarasiri Gunawardhana or failing him

Ms. Daisy Amarasiri Gunawardhana or failing him

Ms. Namali Amarasiri Gunawardhana or failing him

Mr. L J Patabandige Anura Prasanna Jayasooriya or failing him

Mr. Dingiri Bandage Sunil Chamara Bandara or failing him

………………………………………………………………………………………………...............................................

as my / our proxy to represent me / us and *vote for me / us on my / our behalf at the Annual General Meeting of the Company to be held on ……………… 2014 and at any adjournment thereof and at every poll which may be taken in consequence thereof

Signed this …………………… day of ……………………. 2014

……………………………..

Signature of Shareholder

Note: Instructions to complete are noted on the following page


62

INSTRUCTIONS AS TO COMPLETIONKindly perfect, the Form of Proxy, by filling in legibly your full name and address, signing in space provided, and filling in the signature.

If the form of proxy is signed by an Attorney, the relative Power of Attorney should also accompany the Form of Proxy for registration, if such Power of Attorney has not already been registered with the company.

In case of a Company / Corporation, the Proxy must be under its common seal which should be affixed and attested in the manner prescribed by its Articles of Association.

The completed Form of Proxy should be deposited at the registered office of the Company Bibulewela,Karagoda, Uyangoda not less than forty eight (48) hours before the time appointed for the holding of the meeting.

Documents

LUCKY LANKA - cdn.cse.lk · Project of enhancement of Fresh milk ... Most of this product are Probiotic products and company ... Company is going to introduce lucky ice cream to the