Dipped Products PLC (DPL) continues to be committed to conducting the Company's business ethically and in accordance with high standards of good corporate governance.
The Board believes that a comprehensive corporate governance framework enables DPL to achieve ethical and stewardship obligations while supporting the creation of long term sustainable stakeholder value.
The Company is a subsidiary of Hayleys PLC. The principal business of the Company are shown on the inner back cover.
DPL Governance Guidelines provide Directors and management with a road map of their respective responsibilities. These guidelines, which will be updated periodically, detail clearly those matters requiring Board and Committee approval, advice or review. The DPL governance framework is depicted in the below diagram.
The Company adopts the Code of Best Practice on Corporate Governance issued jointly by The Securities and Exchange Commission of Sri Lanka and The Institute of Chartered Accountants of Sri Lanka (Code), which are applicable to listed companies via the Colombo Stock Exchange Listing Rules. While we are adhering to the legal framework for corporate governance provided by listing rules, the Code is used as a guideline for operational structures and processes for discharging corporate governance.
The Board of Directors is responsible for setting up the governance framework within the Company.
As at the end of the year under review, the Board consisted of twelve Directors; six Non-Executive Directors and six Executive Directors. These Directors are named below and their profiles are available on pages 142 to 143 of this Report. Details of Directors shareholding in DPL and directorates in subsidiary companies are given on pages 44, 140 and 141 respectively.
The Board meets quarterly as a matter of routine. Ad hoc meetings are held as and when necessary. During the year under review, the Board met on four occasions. The attendance at these meetings were:
|Name of Director||Attendance|
|A M Pandithage - Chairman||4/4|
|Dr. K I M Ranasoma - Managing Director||4/4|
|J A G Anandarajah*||4/4|
|G K Seneviratne*||4/4|
|N Y Fernando||4/4|
|K A L S Fernando||4/4|
|L G S Gunawardena||3/4|
|S C Ganegoda*||3/4|
|K D D Perera*||0/4|
** Independent Non-Executive
| Reference to
CA Sri Lanka & SEC Code
|Requirement||Compliance||Details of Compliance|
|Section 1: The Company|
|Principle: A.1. The Board|
As at the end of the year under review, the Board consisted of twelve Directors, six Non-Executive Directors and six Executive Directors including the Chairman.
The Board considered that the present composition and expertise is sufficient to meet the needs of the Group. The Non-Executive Directors contribute with their knowledge and experience collectively gained from experience in serving a variety of public and private organisations. The profiles of the Directors are found on pages 142 to 143 of this Annual Report. Details of Directors' shareholdings in DPL and the directorates they hold in subsidiary companies are given on pages 44, 140 and 141.
|A.1.1||Board meetings||Complied||The Board meets quarterly. Ad hoc meetings are held as and when required. During the year under review, the Board met on four occasions. The attendance at these meetings was depicted in the table given in this section.|
|A.1.2||Responsibilities of the Board||Complied|| The Board of Directors is responsible for setting up the governance framework within the company.
The Board is responsible to:
|A.1.3||Compliance with the laws of the country and agreed to obtain independent professional advice||Complied||The Board collectively, and Directors individually act in accordance with the laws and regulations of the country, and to the Group policies. At any time, all the members of the Board are allowed to obtain independent professional advice where necessary, at the Company's expense.|
|A.1.4||Access to the advice and services of the Company Secretary||Complied||The services and advice of the Company Secretary are available to all the Directors as necessary. The Company Secretary is kept informed and is the responsible person to the Board in ensuring that Board procedures are followed and that applicable rules and regulations are complied with.|
|A.1.5||Independent judgment of the Directors||Complied||Non-Executive Directors are independent of the management and free from any business and other relations. None of other Directors are related to each other. This enables all members of the Board to bring independent judgment to bear on issues of strategy, performance, resources and standards of business conduct.|
|A.1.6||Dedication of adequate time and effort of the Directors||Complied|| The Board of Directors allocate adequate time and effort before a meeting to review Board papers and call for additional information and clarification, and to follow up on issues consequent to the meeting.
They are therefore able to familiarise with the business changes, operations, risks and controls which ultimately help to satisfactorily discharge the duties and responsibilities owed to the Company.
|A.1.7||Training for new and existing Directors||Complied||Every new Director and current Directors are given a training if necessary. This training curriculum encompasses both general aspects of directorship and matters specific to the industry. The Board is of the view that continuous training and development of skills are vital when effectively performing duties.|
|Principle: A.2. Chairman and Chief Executive Officer (CEO)|
|Chairman and the Chief Executive Officer of the Company are two different positions which clearly distinguishes the power and authority when conducting the business of the Board and facilitating executive responsibility for the management. The Managing Director acts as the Chief Executive Officer of the Company, Ensuring that no person has unfettered from decision-making powers.|
|A.2.1||Division of responsibilities of Chairman and CEO||Complied||The Chairman and the Chief Executive Officer of the Company are two different personnel where it clearly distinguishes the power and authority. The Chairman of the Company is also the Chairman of Hayleys PLC. Chief Executive Authority is vested in the Managing Director of the Company. The separation between the position of the Chairman and officers with executive powers in the Company ensures a balance of power and authority.|
|Principle: A.3. Chairman's Role|
|The Chairman is the most responsible person for guiding the Board in formulating the appropriate business strategies and gives direction to the Company. He preserves good corporate governance in the Company.|
|A.3.1||Chairman's role||Complied|| The Chairman is responsible for the efficient conduct of Board meetings and ensures, inter alia, that:
|Principle: A.4. Financial Acumen|
|A.4.1||Financial acumen||Complied||The Board includes two senior Chartered Accountants, who possess the necessary knowledge and competence to offer the Board guidance on matters of finance. One of them serves as Chairman of the Audit Committee and the other as a Director of Hayleys PLC. Other members of the Board are having ample experience in handling matters of finance by serving in different organisations. Hence the Board is with sufficient financial acumen and knowledge to offer guidance on matters of finance.|
|Principle: A.5. Board Balance|
|A.5.1||Non-Executive Directors||Complied||Six out of twelve Directors on the Board are Non-Executive Directors. The composition of the Executive and Non-Executive Directors (the latter are over one-third of the total number of Directors) satisfies the requirements laid down in the Listing Rules of the Colombo Stock Exchange. The Chairman and the Managing Director is not the same person.|
|A.5.2||Independence of Non-Executive Directors||Complied||Two of six Non-Executive Directors are independent. The Board has determined that two Non-Executive Directors satisfy the criteria for 'independence' set out in the Listing Rules.|
|A.5.3||Independence of Non-Executive Directors||Complied||Non-Executive Directors' profiles reflect their calibre and the weight their views carry in Board deliberations. Each is independent of management and free from any relationship that can interfere with independent judgment. The balance of Executive, Non-Executive and Independent Non-Executive Directors on the Board ensures that no individual Director or a small group of Directors dominates Board discussion and decision-making.|
|A.5.4||Annual declaration of Independence Non-Executive Directors||Complied|| Each Non-Executive Director has submitted a declaration stating the Independence
or Non-Independence in a prescribed format. This information is made available to
|A.5.5||Board determination of Independence of Non-Executive Directors and disclosure in Annual Report||Complied||The Board considered the declaration of independence submitted by each Non-Executive Director with the basis for determination given in the Code of Best Practices as a fair representation and will continue to evaluate their independence on this basis annually. Brief résumé of all Directors is available on pages 142 and 143.|
|A.5.6, A.5.7||Requirement to appoint Senior Independent Director||Not Applicable||This is not applicable as the Chairman and the Managing Director is not the same person.|
|A.5.8||Chairman's meetings with Non-Executive Directors||Complied||The Chairman holds meetings with the Non-Executive Directors, without Executive Directors, at least once in each year and at any other time where necessary.|
|A.5.9||Record in the Board minutes of concerns not unanimously resolved||Complied||All matters of the Company which cannot be unanimously resolved are recorded in the Board minutes, if applicable.|
|Principle: A.6. Supply of Information|
|A.6.1||Timely information to the Board||Complied||Directors are provided with quarterly reports on performance and such other reports and documents as necessary. The Chairman ensures all Directors are adequately briefed on issues arising at meetings.|
|A.6.2||Information provided in advance to the Board meetings||Complied||The Board meetings are arranged in advance and all Directors are informed. The Directors are provided with minutes, the agenda and the Board papers in advance to prepare and clearly comprehend with the matters discussed or consent.|
|Principle: A.7. Appointments to the Board|
|A.7.1, A.7.2||Appointment to the Board||Complied|| The Nominations Committee makes recommendations to the Board on all new Board appointments.
Nominations Committee consists of two Independent Non-Executive Directors.
The Senior Independent Director, Mr. R Seevaratnam is the Chairman and Mr. F Mohideen is a member of the Committee.
The Board annually assesses the Board composition to ascertain whether the combined knowledge and experience of the Board matches the strategic demands facing the Company.
|A.7.3||Disclosure of new appointments||Complied||A brief resume of the Director, nature of his experience and names of the companies he holds the directorship and the independency is informed to the Colombo Stock Exchange and disclosed in the Annual Report.|
|Principle: A.8. Re-election|
|A.8.1, A.8.2||Re-election of Directors||Complied|| The provisions of the Company's Articles require a new Director appointed by the Board to hold office until the next Annual General Meeting, and seek re-election by the shareholders at that meeting.
The articles call for one-third of the Directors in office to retire at each Annual General Meeting. The Directors who retire are those who have served the longest period after their appointment/reappointment. Retiring Directors are generally eligible for re-election.
The Managing Director does not retire by rotation.
|Principle: A.9. Appraisal of Board Performance|
|A.9.1, A.9.2, A.9.3||Appraisal of Board performance||Complied||The performance of the Board and Subcommittees is evaluated annually on self-assessment basis.|
|Principle: A.10. Disclosure of Information in Respect of Directors|
|A.10.1||Disclosures about Directors||Complied|| Name, qualification, brief profile and nature of expertise are given on pages 142 and 143 of this Annual Report.
Directors' interest in contracts is given on page 124 of this Report.
The number of Board meetings attended by the Directors is available on page 47 of this Report.
|Principle: A.11. Appraisal of Chief Executive Officer|
|A.11.1, A.11.2||Evaluation the performance of the CEO||Complied||The short, medium and long term objectives including financial and non-financial targets that should be met by the CEO are set and evaluated at the commencement of each fiscal year. The performances were evaluated in each quarter to ascertain whether the targets were achieved or achievement is reasonable in the circumstances.|
|B. Directors' Remuneration|
|Principle: B.1. Remuneration Procedure|
|B.1.1, B.1.2, B.1.3, B.1.4, B.1.5||Establishment of Remuneration Committee.||Complied|| The Remuneration Committee consists of two Non-Executive Directors and the Chairman of this committee is appointed by the Board. The Senior Independent Director, Mr. R Seevaratnam is the Chairman and Mr. F Mohideen is a member of the Committee.
The Remuneration Committee recommends the remuneration payable to the Managing Director and Executive Director(s) and sets guidelines for the remuneration of management staff within the Company. The Board makes the final determination after considering such recommendations.
Payment of remuneration to Directors is disclosed on page 44 of this Report.
No Directors are involved in deciding his/her own remuneration.
|Principle: B.2. The Level and Make-Up of Remuneration|
|B.2.1, B.2.2, B.2.3, B.2.4||Levels of remuneration||Complied||The Remuneration Committee structures the remuneration package to attract, retain and motivate the Directors needed to run the Company successfully but avoid paying more than is necessary for this purpose. The remuneration levels relative to other companies and performance of the Directors are taken into account when considering the remuneration levels of the Directors.|
|Principle: B.3. Disclosure of the Remuneration|
|B.3.1||Disclosure of remuneration||Complied||The total of Directors' remuneration is reported in Note 7 to the Financial Statements.|
|C. Relations with Shareholders|
|Principle: C.1. Constructive use of the AGM and Conduct of General Meetings|
|C.1.1||Use of proxy||Complied||The Company ensures that all proxy votes are counted and the level of proxies are lodged for each resolution and are conveyed to the Chairman.|
|C.1.2||Separate resolution for substantially separate issues||Complied|| A separate resolution is proposed at an Annual General Meeting on each substantially separate issue.
Adoption of the Annual Report of the Board of Directors on the affairs of the Company, Statement of Compliance and the Financial Statements with the Independent Auditors' Report are considered in a separate resolution.
|C.1.3||Answer questions at the AGM||Complied|| The active participation of shareholders at the Annual General Meeting is encouraged. The Board believes that the AGM is a means of continuing an effective dialogue with shareholders.
The Board offers clarifications and responds to concerns shareholders have over the content of the Annual Report as well as other matters which are important to them. The AGM is also used to adopt the Financial Statements for the year.
|C.1.4, C.1.5||Notice of Annual General Meeting and General Meetings||Complied|| The Notice of Meeting is included in the Annual Report. The Notice contains the Agenda for the AGM as well as instructions on voting for shareholders, including the appointment of proxies. A Form of Proxy is enclosed with the Annual Report. The period of notice prescribed by the Companies Act No. 07 of 2007 has been met.
The Notice and the Agenda of the Annual General Meeting together with the Annual Report with all other relevant documents are sent to shareholders 15 working days prior to the meeting.
|Principle: C.2. Major Transactions|
|C.2.1||Disclosure of major transactions to shareholders||Complied||There have been no transactions during the year under review which fall within the definition of 'Major Transactions' as set out in the Companies Act No. 07 of 2007.|
|D. Accountability and Audit|
|Principle: D.1. Financial Reporting|
|D.1.1||Balance and understandable information to shareholders||Complied|| The Board places great emphasis on complete disclosure of financial and non-financial information within the bounds of commercial reality, and on the adoption of sound reporting practices. Financial information is disclosed in accordance with the new Sri Lanka Accounting Standards. Revisions to existing accounting standards and adoption of new standards are carefully monitored.
The Annual Report includes descriptive, non-financial content through which an attempt is made to provide stakeholders with information to assist them in making more informed decisions.
|Communication with shareholders|| The Quarterly Financial Statements are posted to the CSE website for public dissemination.
Shareholders are provided with the Annual Report, which the Company considers as its principal communication with them and other stakeholders. The Company has duly complied with all requirements prescribed by the regulatory authorities including the Colombo Stock Exchange and the Registrar of Companies. These reports are also provided to the Colombo Stock Exchange.
Shareholders may bring up concerns they may have, with the Chairman, the Managing Director or the Secretaries, as appropriate.
|Price sensitive information||Due care is exercised with respect to share price sensitive information.|
|Shareholder value and return||The Board strives to enhance shareholder value and provide a total return in excess of the market. It has been the policy of the Board to distribute a reasonable dividend to the shareholders whilst retaining sufficient resources for capital needs.|
|D.1.2||Statement of Directors' Responsibility||Complied||The Statement of Directors' Responsibilities for the Financial Statements is given on page 65 of this Report.|
|D.1.3||Auditors' Report||Complied||The Auditors' Report for the year ended March 31, 2013 is available on page 67 of this Report.|
|D.1.4||Management Discussion & Analysis||Complied|| Management structure
DPL Group comprises Dipped Products PLC and subsidiary companies. The Group is effectively divided into two divisions to achieve the strategic objectives. The Hand Protection Division includes the production operation of Dipped Products PLC and eight subsidiary companies and the Italian marketing company ICOGUANTI S.p.A. The division is managed by Managing Director and four functional units supervised by Executive Directors. The Plantation Division is managed by Managing Director of Kelani Valley Plantations PLC and Talawakelle Tea Estates PLC who is also a Director of DPL Plantations (Pvt) Ltd. (Plantations Holding Company).
The authority is exercised within the ethical framework and business practices established by the Board which demands compliance with existing laws and regulation as well as best practices in dealing with employees, customers, suppliers and the community at large. These are further described elsewhere in this Report.
The Group structure and the Management Team are given in this Annual Report.
The Executive Directors, General Managers and Key Managers of both divisions meet separately on a monthly basis to review progress and discuss strategic issues and other important developments that require consideration. Minutes are kept of decisions made and of major issues discussed.
The Managing Director of Dipped Products PLC and Managing Director of Kelani Valley Plantations PLC and Talawakelle Tea Estates PLC attend the monthly meetings of the Group Management Committee of Hayleys PLC and report on progress and important issues.
| Management Report
The Joint Letter from the Chairman and the Managing Director in this Report provides an analysis of the Group's performance during the financial year.
The Board confirms that there is an ongoing process for identifying, evaluating and managing significant risks. This process has been in place through the year under review. The potential risks, both internal as well as external, faced by the Company and actions instituted for mitigating the same are reported in the Joint Letter from the Chairman's and the Managing Director.
|D.1.5||Declaration of going concern||Complied||The Directors, after making necessary inquiries and reviews including reviews of budgets for the ensuing year, capital expenditure requirements, future prospects and risks, cash flows and borrowing facilities, have a reasonable expectation that the Company has resources to continue in operational existence for the foreseeable future. Therefore, the going concern basis has been adopted in the preparation of the Financial Statements.|
|D.1.6||Summon an EGM to notify serious loss of capital||Complied||In the event the net assets of the Company falls below 50% of the value of the Company's shareholders' funds, the Directors will forthwith summon an Extraordinary General Meeting to notify shareholders of the remedial action being taken. However, such an event has not taken place since the adoption of the New Companies Act No. 07 of 2007.|
|Principle: D.2. Internal Control|
|D.2.1, D.2.2||Requirement of sound system of internal control||Complied|| The Board is responsible for the Group's internal control and its effectiveness. Internal control is established with emphasis on safeguarding assets, making available accurate and timely information and imposing greater discipline on decision-making. It covers all controls required, including financial, operational and compliance controls, and risk management.
The important procedures in place to discharge this responsibility are as follows:
|Principle: D.3. Audit Committee|
|D.3.1, D.3.2||Composition of Audit Committee||Complied|| An Audit Committee was established in 2007. The Committee consists of three Non-Executive Directors, of which two are Independent Non-Executive Directors.
The Chairman of the Audit Committee is an Independent Non-Executive Director, a Fellow Member of The Institute of Chartered Accountants of Sri Lanka.
The Company Secretary serves as Committee Secretary.
The Chairman, Managing Director and the Group CFO of Hayleys PLC are invited to attend the meetings, and other Directors and Senior Managers attend meetings as required. The input of the External Auditors is obtained where necessary.
The Audit Committee helps the Group achieve a balance between conformance and performance.
|D.3.3||Committees' purpose, duties and responsibilities||Complied|| The Committee is empowered to examine any matters relating to the financial reporting systems of DPL, and its external and internal audits. Its duties include the detailed review of Financial Statements, internal control procedures and risk management framework, accounting policies and compliance with applicable accounting standards and other rules and regulations.
It reviews the adequacy of systems in place for compliance with relevant legal, regulatory and ethical requirements and Company policies.
The Audit Committee makes recommendations to the Board pertaining to appointment, reappointment of External Auditors after assessing the independence and performance, and approves the remuneration and terms of engagement of the External Auditors.
|D.3.4||Disclosures of names of the members of Audit Committee||Complied||During the year under review, the Committee met on four occasions, the attendance at these meetings are reported in 'Audit Committee Report' of this Report.|
|Principle: D.4. Code of Business Conduct and Ethics|
|D.4.1||Disclosure on presence of Code of Business Conduct and Ethics||Complied||The Directors and members of the Senior Management team are bound with a Code of Business Conduct and Ethics which is developed by the Hayleys Group. The Code consists of important topics like conflict of interest, corporate opportunities, confidentiality, fair dealing, protection and proper use of Company assets, compliance of laws, rules and regulations etc. The Board ensures compliance with the Code and non-compliance may become reasons to go for disciplinary actions.|
|D.4.2||Affirmation of Code in the Annual Report by the Chairman||Complied||The Chairman affirms that he is not aware of any violation of provisions of the Code of Business Conduct and Ethics in the Annual Report. Please refer the Joint Letter from the Chairman and the Managing Director in this Report.|
|Principle: D.5. Corporate Governance Disclosures|
|D.5.1||Disclosure of adherence to corporate governance||Complied|| The extent to which the Company adheres to established principles and practices of good corporate governance is disclosed in this Report.
The Company continues to give attention to bringing DPL's IT systems in line with its strategies and objectives. Dedicated staff is deployed to support this.
DPL's investment in IT covers resources operated and managed centrally and resources deployed on the various manufacturing locations and estates. The former includes an ERP system and internet and email services catering to most parts of the business.
IT Value and Alignment
Investments in IT projects and systems are made after consideration of their suitability for the related projects. Further aspects such as cost savings, the provision of timely information and the balance between cost and benefits/needs are also considered when decisions are taken.
IT Risk Management
Risks associated with IT are assessed in the process of risk management. Use of licensed software, close monitoring of internet usage (for compliance with the IT Use Policy) and mail server operations and the use of anti-virus and firewall software, are some practices in place.
|Section 2: Shareholders|
|E. Institutional Investors|
|Principle: E.1. Shareholder Voting, E.2. Evaluation of Governance Disclosures|
|E.1, E.2||Use of the vote of Institutional Investors||Complied||All the investors are welcome to the Annual General Meeting and all the comments, suggestions are opened to them. The Company believes that the institutional investors have more understanding and awareness about the matters including corporate governance, hence conduct structured dialogues with them to raise the matters. The Company appreciates the way of using the votes at AGM on the weight they had regarding all relevant factors noted.|
|F. Other Investors|
|Principle F.1. Investing/Divesting decisions, F.2. Shareholder voting|
|F.1, F.2||Adequate analysis for investment/divestment decisions and using of the voting right||Complied||All shareholders are encouraged to actively participate in the AGM and they have the independence of using their votes as they wish. The Company believes that the rational investors remain with the Company without divesting. There are no restrictions for investing or divesting in the Company shares.|
Levels of compliance with the CSE's Listing Rules - Section 7.10, Rules on Corporate Governance are given in the following table.
|Rule No.||Subject||Applicable Requirement||Compliance
|Applicable Section in
the Annual Report
|7.10.1(a)||Non-Executive Directors||At least one-third of the total number of Directors should be Non-Executive Directors||Compliant||Corporate Governance A.5.1|
|7.10.2(a)||Independent Directors||Two or one-third of Non-Executive Directors, whichever is higher, should be independent||Compliant||Corporate Governance A.5.2|
|7.10.2(b)||Independent Directors||Each Non-Executive Director should submit a declaration of independence/non-independence in the prescribed format||Compliant||Corporate Governance A.5.4|
|7.10.3(a)||Disclosure relating to Directors||Names of Independent Directors should be disclosed in the Annual Report||Compliant||Corporate Governance A.5.5|
|7.10.3(b)||Disclosure relating to Directors||The basis for the Board to determine a Director is independent,
if criteria specified for independence is not met
|Compliant||Corporate Governance A.5.5|
|7.10.3(c)||Disclosure relating to Directors||A brief résumé of each Director should be included in the Annual Report and should include the Director's areas of expertise||Compliant||Corporate Governance A.5.5|
|7.10.3(d)||Disclosure relating to Directors||Forthwith provide a brief résumé of new Directors appointed to the Board with details specified in 7.10.3(a), (b) and (c) to the exchange||Compliant||Corporate Governance A.7.3|
|7.10.5||Remuneration Committee||A listed company shall have a Remuneration Committee||Compliant||Corporate Governance B.1.1, B.1.2, B.1.3, B.1.4, B.1.5|
|7.10.5(a)||Composition of Remuneration Committee||Shall comprise Non-Executive Directors a majority of whom will be independent||Compliant||Corporate Governance B.1.1, B.1.2, B.1.3, B.1.4, B.1.5|
|7.10.5(b)||Functions of Remuneration Committee||The Remuneration Committee shall recommend the remuneration of Chief Executive Officer and Executive Directors||Compliant||Corporate Governance B.1.1, B.1.2, B.1.3, B.1.4, B.1.5|
|7.10.5(c)||Disclosure in the Annual Report relating to Remuneration Committee||The Annual Report should set out:
||Compliant||Corporate Governance B.1.1, B.1.2, B.1.3, B.1.4, B.1.5|
|7.10.6||Audit Committee||The Company shall have an Audit Committee||Compliant||Corporate Governance D.3.1, D.3.2|
|7.10.6(a)||Composition of Audit Committee||
||Compliant||Corporate Governance D.3.1, D.3.2|
|7.10.6(b)||Audit Committee Functions||Functions shall include:
||Compliant||Corporate Governance D.3.3|
|7.10.6(c)||Disclosure in the Annual Report relating to Audit Committee||
||Compliant||Corporate Governance D.3.4|