Distilleries Company of Sri Lanka PLC / Annual …

1 Distilleries Company of Sri Lanka PLC / Annual Report 2015 / 16 Distilleries Company of Sri Lanka PLC / Annual Report 2015 / 16 The operations of the Distilleries Group are wide-ranging and complex, now grown to include diverse sectors. Over the years, we have honed our business model to one that is vibrant and dynamic, constantly evolving to meet changing consumer and stakeholder re building on our fine heritage to evolve your Company into the future. We re looking to the years ahead with confidence and anticipation, because we know we have the right people, the right positions and the right strategies to keep us firmly on the right right track2 Distilleries Company of Sri Lanka PLCA nnual Report 2015/16 ContentsScan the QR code with your smart device to view this report Overview3 Highlights of the Year4 Financial Highlights8 Our Businesses12 Historical Perspective14 The Story of Arrack22 Chairman s Statement26 Board of Directors 30 Group Management 32 DCSL Management Management Information34 Management Discussion and Analysis 44 Sustainability Report Governance Reports55 Corporate Governance 68 Enterprise Risk Management 72 Board Audit Committee Report 74 Remuneration Committee Report 75 Board Related Party Transactions Review Committee 76 Annual Report of the Board of DirectorsFinancial Reports 80 Statement of

2 Directors Responsibility 81 Independent Auditors Report 82 Statement of Profit or Loss and Other Comprehensive Income 83 Statement of Financial Position84 Statement of Changes in Equity 87 Statement of Cash Flows 88 Notes to the Financial Statements 163 Statement of Value Added 164 Details of Real Estate 165 Shareholder Information 167 Ten Year SummarySuplimentary Information168 DCSL Management Team and Unit Management Team 175 Notice of Meeting 176 Notes 179 Form of Proxy 181 Attendance Slip3 Highlights of the YearJuly 2015 Continental Insurance Lanka was reaffirmed Continental Insurance Lanka A-(lka) / Stable by Fitch. Continental Insurance is the Sri Lanka s only A-(lka) Fitch Rated insurance 2015 DCSL was ranked No. 05 in the Business Today Top Twenty Five.

3 This was the 17th consecutive year DCSL was listed among corporate heavy weights in the 2016 Introduction of award winning single malts Speyburn and Old Pulteney from the stable of International Beverage Holdings Scotland, and Stolichnaya VodkaDecember2015 DCSL PLC Annual report was awarded certificate of compliance in the Annual report competition organised by the Institute of Chartered Accountants of Sri Regal Finance was reaffirmed A+ (lka) / Stable by Fitch. Thus signifying a very high credit rating for a finance Rating reaffirmed DCSL a national long term Rating of AAA (lka) / stable outlook - The best & highest entity credit rating for a corporate in Sri Company of Sri Lanka PLCA nnual Report 2015/16 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary InformationFinancial Highlights2016201520162015 GroupGroupCompanyCompanySUMMARY OF RESULTSG ross TurnoverRs Mn 88,865 66,759 72,11451,800 Excise DutyRs Mn 55,025 37,846 50,57334,884 Net TurnoverRs Mn 33,840 28,913 21,54116,916 Profit After TaxRs Mn 5,670 6,474 5,30210,285 Shareholders FundsRs Mn 63,204 61,004 53,05650,283 Working CapitalRs Mn(1,577) 214 (3,271)(6,255)

4 Total AssetsRs Mn 99,306 92,689 69,41665,028 Staff CostRs Mn 4,364 4,017 1,2981,125No. of Employees 12,692 11,897 1,1361,197 PER SHAREB asic EarningsRs. * Net AssetsRs. DividendsRs. Market Price HighRs. LowRs. Year EndRs. RATIOSP rice Earnings times 10 11 12 16* Return on Shareholders Funds % * Current Cover * Stock Turnover (Finished Goods)days16151312 Debt to Equity% to Total Assets%1515710 Dividend Payout % * Dividend Yield% * Previous year Company s profit has been adjusted for intra-group capital gain on share transfer5Rs. 60,460 Mn. Rs. 88,865 Mn. Rs. 5,670 Mn. Taxes Paid - Group Gross Turnover - GroupProfit After Tax - GroupTaxes Paid - Group(Rs. Mn.)2012 2013 2014 2015 2016010,00020,00030,00040,00050,00060,00 070,00060,460 Total Assets - Group(Rs.)

5 Mn.)2012 2013 2014 2015 2016020,00040,00060,00080,000100,00099,3 06 Gross Turnover - Group(Rs. Mn.)2012 2013 2014 2015 2016020,00040,00060,00080,000100,00088,8 65 Profit After Tax - Group(Rs. Mn.)2012 2013 2014 2015 201601,0002,0003,0004,0005,0006,0007,000 5,670Rs. 99,306 Assets - Group6 Distilleries Company of Sri Lanka PLCA nnual Report 2015/16 Latest addition to our range78 Distilleries Company of Sri Lanka PLCA nnual Report 2015/16 Our BusinessesBeveragesDistillation, Manufacture and Distribution of Liquor ProductsPlantationsCultivation & Processingof Tea & RubberTelecommunicationVoice, Data, Broadband,Hardware, Software and Networking SolutionsGroup Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information9 FinancialServicesVariety of innovative Financial Solutions under one roofPowerGenerationHydro Power GenerationBogo PowerInsuranceGeneral Insurance Services10 Distilleries Company of Sri Lanka PLCA nnual Report 2015/16 Our BusinessesDyeing and Printing FabricTextilesMediaMedia Buying & CreativeServicesLogisticsAutomobile Servicing andLogisticsGroup Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information11 Oracle ERP CloudOracle HCM Cloud Oracle Tech Information Technology BPO ServicesBPO.

6 KPO & Call CentreServicesLeisureHotels & Hospitality12 Distilleries Company of Sri Lanka PLCA nnual Report 2015/16 Excise Department of Ceylon, which was initially created as the enforcement authority to distribute and sell liquor products in Sri Lanka , branched out into the distillation and manufacture of liquor products. In 1974, the State Distilleries Corporation was incorporated by statute, to take over this venture, while the Excise Department realigned its operations as a monitoring body. Thus, DCSL has the distinction of being the pioneer distiller in Sri Lanka . In 1989, under a government policy decision, the State Distilleries Corporation was converted into a limited liability Company . This transfer of ownership took place at the Colombo Stock Exchange (CSE) in 1992, making it the largest transaction in the history of the CSE at that new private management, the Company entered an era of modernisation that witnessed upgrading of machinery and equipment, the introduction of modern management Today, we are present in all parts of the country, operating under the principle of providing the highest standard of products and servicesTouching lives for over a in Sri Lanka for over a century, The Distilleries Company of Sri Lanka PLC (DCSL), is one of the most profitable and well respected corporate entities in the country.

7 Its proud tradition, rich heritage and proven credentials have made the Company a beacon of inspiration for others. Over the past 100 years, our corporate DNA has been strengthened with our values of tradition, quality, innovation, resilience and the determination to succeed. DCSL s roots can be traced back to 1913, when the Historical PerspectiveGroup Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information13systems & processes and the continuous upgrading of the quality of our products. Plant and machinery were upgraded to modern international standards and new technology developed by world renowned experts was introduced. Large investments have also been made in Research and Development (R&D) and in upgrading laboratories. The best experts in the spirit industry were tasked with ensuring that all the spirits marketed by us were up to international quality improvements have equipped the Company with top of the line facilities enabling it to produce beverages which are world class.

8 Furthermore, storage facilities and product distribution systems have been upgraded to modern standards with fully computerised systems. A fleet of modern vehicles ensures that customers in even the remotest areas are able to enjoy the best DCSL products delivered island wide. These improvements contributed towards higher production efficiencies across the supply chain. Our people are regularly trained in the best international practices in locations famed for high quality alcohol, such as France, Scotland and the years, we have not only grown to become Sri Lanka s largest distiller, but have been recognised as a leading corporate with the highest quality standards. Despite these achievements and our strong position of business leadership, we continue to look for ways to improve and grow.

9 Since 1992, the Company has not only expanded production, but has also diversified into other non-alcohol related , we are present in all parts of the country, operating under the principle of providing the highest standard of products and services for the people of Sri Lanka , imbued with a vision of uplifting the quality of life of our people. We aim to expand our presence into international markets to render our brand an internationally recognised one. The newly installed ultra modern state-of-the-art fully automated plant will ensure that only products of the highest quality reach the Company of Sri Lanka PLCA nnual Report 2015/16 The Story of ArrackThe Sri Lankan flavour that lingers pristine ambrosia-like qualities of Sri Lanka s unique coconut arrack can be traced back thousands of centuries earlier, finding mention in early literature.

10 Liquor drawn from the coconut flower . This delectable beverage is steeped in legend and tradition, making it one of the most prised offerings from Sri Lanka to the Sri Lankan coconut arrack is believed to be one of the purest, naturally derived alcoholic beverages in the world distilled through a natural fermentation process. Sri Lanka has perfected the technique of making coconut arrack through the years. Today, it has acquired the perfect balance for the discerning palate and coconut arrack reigns as the alcoholic beverage of choice in the initial step in the process of making coconut arrack is toddy tapping, an age-old vocation which is lovingly passed down from father to son. Toddy Tapping is as much an intricate art as it is a science. Toddy tappers manually extract the toddy from coconut trees which are coupled and girdled by deftly rappelling from tree to tree.