CTC Annual Report 2020

The
Next
Step
CE YLON TOBACCO COM PA NY PLC
ANNUAL R E POR T 2 0 2 0
Contents
Overview Our ESG Performance Financial Statements
2 CTC at a Glance 54 Environment 100 Finance Director’s Review
3 The Year in Numbers 59 Social 102 Financial Reporting Calendar
4 About the Report 64 Governance 103 Independent Auditor's Report
6 Our New Corporate Logo 105 Statement of Profit or Loss and other
7 Our Response to COVID-19
Our Leadership Comprehensive Income
68 Board of Directors
8 Performance Highlights 106 Statement of Financial Position
72 Executive Committee
107 Statement of Changes in Equity
Executive Review and 108 Statement of Cash Flows
Strategic Positioning Governance and Risk
76 Board Governance 109 Notes to the Financial Statements
10 Chairman’s Review
77 Driving Strategy and Performance 143 Statement of Value Added
14 Managing Director & CEO’s Review
18 Value Creation Model 80 Compliance Overview
Supplementary Information
20 Value Creation and Trade-offs 82 Corporate Governance
144 Share Information
22 Strategy for Accelerated Growth 85 Risk Management
148 Notes
24 Industry Overview 88 Assessment of Going Concern
151 Notice of Meeting
25 Our Sustainability Agenda 89 Statement of Internal Controls
152 AGM 2021 Instructions to Shareholders
26 Stakeholder Value 90 Report of the Board of Directors
153 Form of Proxy
28 Material Matters 93 Statement of Directors’ Responsibilities
155 Appendices
for Financial Statements
IBC Corporate Information
Performance and Value Creation 94 Report of the Audit Committee
30 Delivering our Strategy 96 Report of the Related Party Transactions
30 Illicit Trade and Beedi Review Committee
32 Product Responsibility 97 Report of the Board Compensation and
34 Optimising the Manufacturing Footprint Remuneration Committee
36 Leveraging Our Brands 98 Report of the Nominations Committee
38 Our Product SKUs
40 Sustainable Supply Chain
43 Strength in Distribution
45 Managing People
50 Ensuring a Safe Working Environment
Online references:
http://www.ceylontobaccocompany.com
Scan the QR Code with your smart device to view this report online.
The
Next
Step
Sustainability at front and centre.
As Ceylon Tobacco Company PLC marks over 115 years of sustainable

operations in Sri Lanka, we know that our journey is far from complete. Even as
we re-engineer our sustainability agenda, we’re setting our sights on the next
century; re-aligning ourselves to meet the needs of the future, and renewing
our pledge towards championing sustainable change across the board.
As we step into the next stage of our journey, this Report details our plans for
the years ahead; encompassing areas of climate action, sustainable livelihoods
and excellence in corporate governance. We’re striving to reduce the impact of
our operations, while building a diverse and engaging culture for all.
The next step of our sustainability journey begins here.

The Next Step OVERVIEW
CTC at a
Glance
Ceylon Tobacco Company PLC (CTC/Company) is Sri Lanka’s only licensed manufacturer of cigarettes and one of the Country’s most valuable corporate entities. Given its
position as the largest individual tax contributor to government tax revenue and significant value injector to the rural economy, the Company’s socio-economic impacts
are indisputable, and over the last century, CTC has played an important role in supporting the Country’s economic progress. As a subsidiary of British American Tobacco
plc (BAT), the Company adopts global best practices, thereby developing Sri Lanka’s talent pool and propagating best-in-class practices in the Sri Lankan corporate and
manufacturing sector.
OUR PEOPLE SUSTAINABILITY

Continued investments in developing our people We adopted a strategic and focused approach
and efforts to build an increasingly diverse and towards sustainability. Excellence across our ESG
inclusive workplace through global best practices priorities has helped us to consistently generate
in people management have made CTC one of shared value for our stakeholders.
Sri Lanka’s most preferred employers.
262 PERMANENT
EMPLOYEES
STRENGTH IN DISTRIBUTION
An extensive network of island-wide distributors
and traders ensure that our products are marketed
responsibly and made accessible to adult
consumers across the Country.
13 DISTRIBUTORS 33,329 TRADERS

PRODUCT PORTFOLIO
Deep insights into adult consumer behaviour and
access to world-class research has armed us with the
ability to satisfy changing and diverse needs through
a focused portfolio of products.
17 STOCK KEEPING UNITS 07 BRANDS

(SKUs)
2 Ceylon Tobacco Company PLC - Annual Report 2020

OVERVIEW The Next Step
The year in
Numbers
FINANCIAL PERFORMANCE STAKEHOLDER VALUE CREATION
TURNOVER REVENUE VALUE TO GOVERNMENT VALUE TO SHAREHOLDERS
Rs. 132,149 MILLION Rs. 32,073 MILLION Rs. 110,132 MILLION Rs. 15,578 MILLION
(2019 : 141,342) (2019 : 35,524)
PROFIT BEFORE TAX PROFIT AFTER TAX VALUE TO EMPLOYEES VALUE INFUSED TO GDP
Rs. 25,434 MILLION Rs. 15,578 MILLION Rs. 1,365 MILLION Rs. 33,000 MILLION
(2019 : 28,691) (2019 : 17,259)
INVESTOR RATIOS SOCIAL PERFORMANCE
EARNINGS PER SHARE DIVIDEND PER SHARE PERMANENT EMPLOYEES PAYMENTS TO CONTRACTED FARMERS
Rs. 83.16 Rs. 82.85

(INTERIM &
PROPOSED FINAL
262 Rs. 1,658 MILLION
(2019 : 92.13) (2019 : 92.13) DIVIDEND) TRAINING HOURS LIVELIHOODS SUPPORTED
MARKET VALUE PER SHARE RETURN ON INVESTED CAPITAL 11,532 286,900+

Rs. 1,028.9 123% FEMALE PARTICIPATION RATE ACCIDENTS
(2019 : 1,100.3) (2019 : 111%) 29% (MANAGEMENT ROLES) Zero
Our comprehensive sustainability GOVERNANCE ENVIRONMENTAL PERFORMANCE
agenda centres on our material ESG
INSTANCES OF NON-COMPLIANCE TO LAWS AND REDUCTION REDUCTION
initiatives, which reflect the Company’s REGULATIONS IN CARBON IN WATER
focus areas and the priorities of our
Zero
FOOTPRINT WITHDRAWAL
stakeholders. The ESG framework clearly 13% 9%

EMPLOYEES TRAINED ON ANTI-BRIBERY AND CORRUPTION
sets out our long-term aspirations
in achieving carbon neutrality, 100% RENEWABLE
ENERGY FOR
WASTE
RECYCLED
TOBACCO CURING
creating sustainable livelihoods, and NUMBER OF INCIDENTS RELATING TO ANTI-BRIBERY AND
championing excellence in corporate CORRUPTION 100% 89%
governance in Sri Lanka. Zero INVESTMENT IN EHS INITIATIVES : Rs. 86.3 MILLION
Ceylon Tobacco Company PLC - Annual Report 2020 3

About the In 2019, the BAT Group endorsed an ambitious plan to accelerate the
Report transformation of its business through an evolved corporate strategy.

BAT’s sustainability agenda is at the heart of this strategic plan, clearly
setting out the targets and action plans to build a long-term sustainable
business. In aligning our corporate reporting with this integrated approach
towards strategy formulation, this year, CTC has embraced the principles of
integrated reporting and this Annual Report has been prepared in line with
the Integrated Reporting <IR> Framework published by the International
Integrated Reporting Council. The Report provides a balanced overview of
our strategy, performance, operating landscape, and outlook in relation to
material financial and ESG issues.
NAVIGATION ICONS
CAPITAL RESOURCES
Financial Capital Human Capital Natural Capital
Manufactured Intellectual Social and

Capital Capital Relationship Capital
STAKEHOLDERS
S E D
Shareholders and Employees Distributors and
Capital Providers Traders
C G F
Consumers Government and Farmers
(Adult) Regulators (Tobacco)
Co
Communities

BASIS OF REPORTING COMBINED ASSURANCE DIRECTORS' RESPONSIBILITY

This Report covers the operations of CTC for the period We adopt a combined assurance model to ensure the CTC’s Board of Directors is ultimately responsible for
from 1 January to 31 December 2020; It also includes integrity of the information provided in this Annual ensuring the integrity of the Company’s Annual Report. The
any material development until the signoff date (20 Report. Management identifies the material issues Board hereby confirms that CTC’s Integrated Annual Report
April 2021). The Company adopts an annual reporting faced by CTC and implements suitable internal controls of 2020 addresses all material issues and fairly reflects the
cycle, and this Report builds on the Company’s previous to address these risks, in line with the Board-approved Company’s integrated performance and value creation. The
Report for the year ending 31 December 2019. The Report policies and procedures. The Internal Audit team monitors Board also confirms that this Report has been prepared in
complies with the following reporting standards and and assesses this process, while External Audit teams accordance with the <IR> Framework. The Board approves
frameworks: evaluate the integrity of financial reporting and internal this Report and its publication on 20 April 2021.
controls. Assurance on the Company’s financial statements
Integrated Reporting <IR> Framework of the
have been provided by Messrs. KPMG. The Company has
International Integrated Reporting Council.
not obtained assurance for its sustainability reporting this
Sri Lanka Financial Reporting Standards. year. Signed by Audit Committee Chairman, on behalf of the Board.
Companies Act No. 7 of 2007.
Listing Rules of the Colombo Stock Exchange. Inside this Report,
Global Reporting Initiatives (GRI)- In accordance with
the core criteria of the GRI Standards.
United Nations Sustainable Development Goals (SDG). A Step Towards Growth
Guidance on ESG Reporting issued by Colombo Stock Page 9 - 28
Exchange.
Code of Best Practice on Corporate Governance issued
by CA Sri Lanka (2017). A Step Towards Hope
Page 29 - 52
There are no material restatements of information given
in last year’s Report nor any significant changes to the
Company’s organisational structure, operations and/or
supply chain during the year. A Step Towards Sustenance
Page 53 - 65
REPORTING IMPROVEMENTS
This year’s Annual Report features the following reporting
A Step Towards Leadership
Page 67 - 73
enhancements:
Content has been structured to reflect the Company’s
key strategic priorities and the progress made in each
strategic pillar. A Step Towards Trust
Page 75 - 98
Use of navigation icons and signposting to show
connectivity across the Report.
Implications of COVID-19 on the Company’s operations
have been disclosed and discussed within relevant
A Step Towards Results
Page 99 - 160
sections.

Our new
Corporate Logo
BAT, along with its subsidiaries unveiled the new corporate logo and brand identity in 2020, reflecting changes
in the world around us and the evolution of our business. CTC unveiled its new corporate logo in March 2020
aligned to BAT's new brand identity. The new logo and brand identity reflect our business today – with an
evolved purpose that aims to reduce the health impact of the business.
For decades, our previous leaf logo served us well as a strong symbol of an entity that is a member of a world-
leading tobacco company. However, our purpose has evolved, and our dynamic new logo reflects the Company
as it is today as well as our journey ahead.

Our response to
COVID-19
The outbreak of the pandemic presented unparalleled challenges for CTC, necessitating prompt and decisive action to ensure the safety of our people and those of our business partners
while sustaining our financial performance. CTC’s Crisis Management Team was immediately called into action and the Team continuously monitored emerging dynamics including
impacts of restrictions, health & safety risks, demand conditions, and responded effectively.
Our actions included the following:
Facilitated remote working arrangements for office employees & maintained close co-ordination with local health
officials to ensure recommended health & safety standards were followed.
Proactive determination of work arrangements and changes in shift patterns for the Manufacturing Operation with
SAFETY OF OUR EMPLOYEES
effective internal engagements.
Stringent health & safety practices including disinfection chambers, random PCRs, provision of advanced PPE, transport &
accommodation, along with continuous trainings.
OPERATIONS AND Ensured product availability through existing network and new contact points.
DISTRIBUTION CHANNELS Supported commercial viability of distribution partners.
SUPPLY CHAIN Continued value injection through rapid resumption of procurement and logistics activities.
Sensitivity analysis to assess impacts on cash flows.

FINANCE AND LIQUIDITY
Increased focus on productivity, efficiency and cost rationalisation.
Weekly sessions on health, safety, and hygiene to distributor staff through digital channels.
SAFETY OF OUR BUSINESS Provision of essential food items to distributor staff.

PARTNERS Distribution of PPE to tobacco farmers and distributors/traders.
Launch of a health insurance scheme for traders.

Performance
Highlights
Units 2020 2019
Turnover Rs. Million 132,149 141,342
Government levies Rs. Million 100,076 105,818
Revenue Rs. Million 32,073 35,524
Profit before tax Rs. Million 25,434 28,691
Profit after tax Rs. Million 15,578 17,259
Net assets Rs. Million 4,602 4,623
FINANCIAL HIGHLIGHTS
Interim dividends Rs. Million 13,394 14,986

Proposed final dividend Rs. Million 2,126 2,272
Total value added Rs. Million 127,215 136,282
Capital investment Rs. Million 952 884
Market capitalisation Rs. Million 192,737 206,112
Value added per employee Rs. Million 485 505
Dividend pay-out % 99.63 99.99
Earnings per share Rs. 83.16 92.13
Dividend per share (interim and proposed final dividend) Rs. 82.85 92.13
Market value per share (closing) Rs. 1,028.9 1,100.3
Net assets per share Rs. 24.57 24.68
Permanent employees Number 262 270
Training hours Hours 11,532 13,373
HIGHLIGHTS
SOCIAL
Female participation in management roles % 29 23

Total livelihoods supported Number 286,900+ 176,000+
Payments to contracted tobacco farmers Rs. Million 1,658 1,419
SADP beneficiaries Number 79,000+ 76,000+
Energy consumption GJ 31,891 39,476
Energy efficiency GJ/MCE 5.97 7.18
ENVIRONMENTAL
Water consumption CU.M 33,053 36,465

HIGHLIGHTS
Water efficiency CU.M/MCE 6.19 7.32

GHG emissions tCO2e 4,043 4,665
Emission intensity tCO2e/MCE 0.76 0.94
Waste recycled % 89 87
Investment in EHS activities Rs. Million 86.30 60
tCO2e - Tonnes of Carbon Dioxide Equivalent GJ - Giga Joules MCE - Million Cigarette Equivalent CU.M - Cubic Metres

The Next Step
EXECUTIVE REVIEW AND STRATEGIC POSITIONING
A Step Towards Growth

10 | Chairman’s R e vie w
14 | Managing D irector & CEO ’s R e vie w
18 | Value Creation Model
20 | Value Creation and Trade - offs
22 | Strategy for Accelerated Growth
24 | Industr y O ver vie w
25 | O ur Sustainabilit y Agenda
26 | Stakeholder Value
28 | Material Matters

The Next Step EXECUTIVE REVIEW
Chairman’s
Review
“The year’s performance

attests to the relevance of
the Company’s strategy - a
win-win-win approach to
value creation. It is also
a testament to the spirit
of my colleagues in the
business.”
SURESH KUMAR SHAH

Chairman

EXECUTIVE REVIEW The Next Step
Dear Shareholder, significant risks to CTC’s ability to generate shared value

In a year rife with extraordinary challenges, I am pleased to stakeholders. Since taxes do not add to their costs,
Rs. 110 BILLION

to report that Ceylon Tobacco Company PLC (CTC) smuggled cigarettes provide a cheaper alternative to
demonstrated strength, resilience, and agility to deliver a price pressured consumers. This leads to severe losses in
profit after tax of Rs. 15.58 billion, whilst driving continued revenue to the Government. More importantly, as the illicit
segment operates outside the law, smugglers circumvent
CONTRIBUTED TO THE
value creation to its stakeholders. The year’s performance
attests to the relevance of the Company’s strategy - a win- the stringent regulatory framework that governs the GOVERNMENT AS TAXES
win-win approach to value creation. It is also a testament tobacco industry in Sri Lanka. They avoid compliance
to the spirit of my colleagues in the business; they quickly with laws such as the display of health warnings and
adapted to the new norms of working and relentlessly often target the youth. Therefore, allowing the illicit
pursued the Company’s triple bottom line objectives, trade to continue unchecked will not only threaten the
8%
despite the numerous operational challenges that prevailed. Government’s ability to generate sustainable revenue, but
also hamper the delivery of its public health commitments.
With the outbreak of the COVID-19 pandemic in March Whilst commending the Government for strengthening OF THE COUNTRY'S TOTAL
its efforts to combat the influx of illicit products during
2020, CTC’s primary focus was to ensure the safety of
the year, CTC continues to stress the necessity for a more
TAX REVENUE
its employees and value chain partners. The Company
implemented extremely stringent health & safety stringent policy and regulatory framework to fight this
mechanisms and embraced new ways of working. Further, disturbing phenomenon. Since an illegal trade has a far-
significant resources were invested in ensuring the safety of reaching impact on the Country, greater public awareness
distributors, retail partners and suppliers. on the issue, effective enforcement and increased
Rs. 83.16
penalties are needed to curb its spread. It is CTC’s firm
Overall, Sri Lanka’s management of the pandemic has belief that restricting illicit trade is essential for the
sustainable growth of state revenues and for protecting
been commendable. However, due to the lockdowns, EARNINGS PER SHARE
an economic toll was inevitable. The impact on CTC is the rights of the legitimate industry.
reflected in the moderation of its profitability. Nonetheless,
the Company continued to deliver on its shareholder Notwithstanding the challenges in 2020, the Company
commitments, recording a Return On Invested Capital of pursued its win-win-win proposition during the year. This
over 120% during the year. Earnings Per Share amounted centres on multi-stakeholder value creation; contributing
to Rs. 83.16 whilst the Net Asset Value Per Share amounted to government revenue, developing the Sri Lankan
to Rs. 24.57. CTC maintained its position as one of the
most valuable listed companies in Sri Lanka, with a market
workforce, empowering communities across CTC’s value
chains and generating sustainable shareholder returns. 99.63%
capitalisation of Rs. 192.7 billion by 31 December 2020. This DIVIDEND PAYOUT RATIO
amounted to 7% of the total market capitalisation of the In terms of revenue to Government, CTC contributed over
Colombo Stock Exchange (CSE) as at that date. With the final Rs. 110 billion as taxes during the year. This amounted to
dividend of Rs. 11.35 per share, the total distribution for the 8% of the Country’s total tax revenue during 2020. Once
year amounted to Rs. 82.85 per share. CTC’s 2020 pay-out again, CTC remains the largest individual tax contributor to
ratio of 99.63% remains one of the highest amongst the the Government, a position it has held for many years now.
corporates Listed on the CSE, as does its dividend yield of
8% during the year.
CTC is one of Sri Lanka’s most preferred employers. The
Company offers a strong development proposition and
Rs. 192.7 BILLION
MARKET CAPITALISATION
international opportunities. This has enabled the Company
The trade in smuggled cigarettes added to the challenges
to develop global business leaders, thereby enriching
AS AT 31 DECEMBER 2020
faced by the Company during 2020. The growth in
Sri Lanka’s illicit cigarette market continues to pose Sri Lanka’s human capital.

Chairman’s
Review
“In 2020, the

As a corporate citizen, CTC has been at the forefront Whistleblowing process) and the implementation of the
of driving national socio-economic progress since its 3rd party Supply Chain Compliance Procedure. Moreover,
inception, 115 years ago. A report released by ‘Oxford monitoring and disclosures pertaining to compliance
Company re-affirmed Economics’ in 2020 found that the Company generated
over 71,000 jobs across its value chain. This translates to
were enhanced through increased digitisation. During the
year there were no departures from internal BAT policies
its commitment to empowering over 286,900 livelihoods. The report further

noted that the GDP contribution of such initiatives by CTC
including the SoBC. More information on the Company’s
compliance and governance mechanisms can be found in
sustainability by stood at Rs. 33 billion. Coupled together with the excise

and tax payments to the State, CTC’s total economic
the Compliance Overview section of this Report.
launching its revamped contribution is estimated to be over Rs.140 billion,

attesting to its role as a catalyst for development.
In 2020, CTC became a part of ‘MESA’, BAT’s Middle East
and South Asia Area, marking a key milestone in its
Environment – As a subsidiary of a global sustainability champion – British

growth journey. In addition to strengthening governance
and compliance frameworks, this transition offers wider
Social – Governance American Tobacco plc (BAT), environmental, social and

governance consciousness has always been an integral
opportunities for Sri Lankan employees to obtain overseas
exposure through access to 17 markets that constitute this
Framework aligned to part of CTC’s DNA. In 2020, the Company re-affirmed its
commitment to sustainability by launching its revamped
new ‘Area’.
BAT’s strategy.”
Environment – Social – Governance (ESG) Framework With businesses taking a proactive approach to dealing
aligned to BAT’s strategy. CTC’s ESG framework sets out with the challenges of the pandemic, the gradual roll-out
its ambitions of achieving carbon neutrality, empowering of the COVID vaccine(s) and the opening of the airport
livelihoods and championing corporate governance for international arrivals, CTC remains optimistic about
excellence in Sri Lanka. The Board will consistently monitor Sri Lanka’s economic revival by the 2nd half of 2021.
progress in meeting these objectives whilst ensuring Meanwhile, high debt levels and a challenging external
that sustainability factors are given due consideration in environment will continue to weigh on the Country’s
decision making. A key element of CTC’s ESG strategy is economic outlook. However, the Government’s thrust
continuing to enhance its contributions to community towards strengthening exports, reconfiguring its debt,
investments. Its flagship community investment initiative, and supporting businesses through numerous relief
the Sustainable Agriculture Development Programme measures are expected to augur well for the Country
(SADP), has directly contributed towards poverty over the medium-to-long term. As an integral part of
alleviation and food security, empowering over 80,000 its socio-economic responsibilities CTC will continue to
beneficiaries in 20,000 vulnerable rural families through contribute to the growth and development of Sri Lanka by
agricultural knowledge transfer, resource assistance and injecting value to the local economy via its contribution to
skills development. Government coffers and by creating opportunities across
its value chain.
The Company benefits from the world-class corporate
governance standards of its parent entity. In 2020, CTC
further enhanced its governance framework with the
launch of the new Standard of Business Conduct (SoBC)
Assurance Procedure (which further strengthened the

ACKNOWLEDGEMENTS
I join the Board in expressing my appreciation to my
predecessor, Mr. William Pegel for his astute leadership
and valuable counsel. Our appreciation also goes out to
Ms. Amun Mustafiz, who served as the Company’s Finance
Director and a key member of the Leadership Team.
Meanwhile, a warm welcome to our new Directors, Mr.
Umair Luqman, Ms. Rumana Rahman and Mr. Stuart Kidd,
all of whom have joined the Board since the last AGM. We
look forward to their wise counsel in the future. Let me
also take this opportunity to thank all my colleagues on
the Board for their contributions and insights during the
year.
The Company’s performance in this challenging year

reflects the ability, agility and resilience of its leadership
and its people. Thus, on behalf of my colleagues on the
Board and myself, I place on record our appreciation to
the Company’s Managing Director & CEO, Mr. Nedal Salem
and the entire team at CTC for their commitment and
dedication during these unprecedented times. Finally,
let me take this opportunity to thank all our valuable
stakeholders for their continued support and confidence
in the Company over the years.
SURESH KUMAR SHAH

Chairman

Managing Director &

CEO’s Review
“CTC strives to drive

consistent growth in
government revenue,
while developing and
empowering its people
and delivering sustainable
shareholder value – a
win-win-win approach
that ensures long-term
sustainability.”
NEDAL SALEM
Managing Director & CEO

Dear Shareholder, strategic emphasis on maintaining open and ongoing

2020 was a year in which the effectiveness of our strategy, engagement with all our employees, the Company
the grit of our people and the resilience of our operating continued to stay connected through virtual town
model was put to the ultimate test. Against this backdrop,
Ceylon Tobacco Company PLC’s (CTC) rearticulated
halls, multi-level staff meetings and other virtual events
designed to bring people together. Rs. 15.58 BILLION
purpose of creating A Better Tomorrow TM together with PROFIT AFTER TAX
its new ethos and the win-win-win approach to value CTC continued to invest in strengthening its
creation served it well, positioning it to prevail over these manufacturing footprint, whilst proactively exploring
extraordinary challenges. means of driving efficiency improvements and minimising
waste. Capital expenditure of around Rs. 700 million was
CREATING VALUE THROUGH A RESILIENT invested towards enhancing infrastructure to manufacture
71,000
STRATEGY new products and formats, including the commissioning
of new machinery to produce 67 mm length sticks - a new
In a year fraught with challenges, the Company continued
SKU for CTC. I am pleased to note that the Company made
its trajectory to deliver stakeholder value. CTC strives to
significant progress on its Integrated Work Systems (IWS) JOBS
drive consistent growth in government revenue, while
journey during the year, driving further improvements in
developing and empowering its people and delivering
efficiency and product quality.
sustainable shareholder value – a win-win-win approach
that ensures long-term sustainability. In 2020, the
The disruption to the Company’s distribution channel was
Company continued to consistently enhance its employee
a key challenge in 2020, particularly during the extended
286,900
value proposition, nurture mutually beneficial relationships
lockdown following the first COVID-19 wave. In addressing
across the supply chain & distribution network, give
this challenge, the CTC team was compelled to rethink
back to communities and deliver consistent financial
its distribution strategy to ensure continued product LIVELIHOODS SUPPORTED
performance, which fulfilled the revenue objectives of
availability to adult consumers.
both the Government and its valued shareholders.
As an organisation with deep-rooted relationships across

The Company remained steadfast in its commitment
Sri Lanka’s tobacco supply chain, CTC is cognisant of its
to develop a global talent pool by enhancing the
responsibility in driving socio-economic empowerment
Rs. 33 BILLION
competencies and capabilities of the Sri Lankan team. A
across farming communities. During the year, agricultural
definitive decision was made to retain all employees at full
supply chains faced increased pressure from the sharp
remuneration during the year and despite the prevailing
conditions, CTC expanded its team with the addition of
slowdown in demand and liquidity crisis that followed the INFUSED INTO THE
outbreak of COVID-19. The Company ensured continued
24 new recruits. During the year, the Company rolled out COUNTRY'S GDP
value injection to its contracted tobacco farmers through
e-learning solutions through digital platforms, offering
uninterrupted demand and minimal disruptions. I am
opportunities for leadership, functional and technical
pleased to report that in 2020, 100% of the tobacco leaf
skills development that are vital for talent and career
requirement was sourced from contracted local farmers,
growth. CTC also continued to offer opportunities for
Rs. 1.66 BILLION

thereby injecting Rs. 1.66 billion into the rural economy.
cross border exposure and 7 employees were seconded
The Company also continued to work with its contracted
to BAT’s regional and global markets. Staying true to its
farmers in driving higher productivity, improved yields, and
commitment to build talent pipelines and groom the
better quality of output, which in turn boosted farmers’ INJECTED INTO THE
next generation of leaders, 37 employees were given
income generation capacity. RURAL ECONOMY
opportunities for career progression. Having placed

Managing Director &

CEO'S Review
“Despite the challenges

Despite the challenges brought on by the external and taxes. In fact, a report launched by the Research
environment, the Company remained steadfast in its Intelligence Unit (RIU) in 2020 estimated that the tax loss
commitment to support more than 286,900 livelihoods experienced by the Sri Lankan Government due to the
brought on by the across its value chain, generating more than 71,000 jobs
across the Country. As a result, CTC has infused Rs. 33
Country’s growing illicit market stood at Rs. 38 billion. I
commend the Government’s recent efforts in combatting
external environment, billion into to the Country’s GDP, over and above the Rs.
110 billion paid as excise duties and taxes to government
the influx of illicit products, and CTC will continue to
extend its fullest cooperation in supporting these efforts.
the Company remains revenue. At the same time, we urge the Government to implement
reforms - from strengthening the regulatory framework to
steadfast in its CTC continued to incentivise its distributors, guaranteeing

continued employment and financial security of their
increasing penalties and driving public awareness, which
are urgently required to curb illicit cigarettes.
commitment to support employees. The Company marked a key milestone during

the year with the launch of the 'Abhisheka Insurance PERFORMANCE OVERVIEW
more than 286,900 Scheme' to support trade partners and their family
members, thereby enabling over 2,400 individuals to
The Company’s performance during the year attests
to the relevance and resilience of its strategy and the
livelihoods across its access high-quality healthcare. effectiveness of its implementation. Despite the downturn
in consumer demand and numerous challenges to market
value chain, generating

During the year, CTC reaffirmed its commitment to access, the Company was able to curtail the drop in
Sustainability by launching a revamped Environmental volumes to just 13%, which in turn led to a 7% decline in
more than 71,000 jobs

– Social – Governance (ESG) strategy aligned to BAT's Gross Revenue. Meanwhile, relentless focus on operating
rearticulated agenda. CTC has a long and proud history of efficiencies and productivity improvements, enabled
across the Country.”

ESG achievements and in 2020, the Company made a step the Company to record a 20% decline in operating
change in its commitment by placing sustainability front expenses, which in turn allowed a marginal widening
and centre in all that it does. Accordingly, the Company of the operating profit margin. Overall, the Company
set 3 stretched targets: achieve carbon neutrality by 2022; generated a profit after tax of Rs. 15.58 billion, a decline of
maximise sustainable livelihoods supported across our 10% compared to the previous year and a commendable
value chain; and champion corporate governance across achievement given market conditions and operating
Sri Lanka. CTC’s Corporate Social Investment Programmes challenges that existed. Meanwhile, CTC’s financial position
(CSI) form a key element in our ESG agenda, specifically remains strong, reflected by its’ healthy balance sheet, zero
contributing to how the Company supports sustainable exposure to borrowings and good liquidity buffer.
livelihoods across our value chain. In 2020, CTC invested
over Rs. 100 million in ESG related projects and activities. WAY FORWARD
Furthermore, the Company supported over 100,000
While cognisant of the short-term challenges that are likely
people in rural communities across Sri Lanka via its various
to prevail given the Country’s macro-economic pressures,
CSI initiatives.
the Company remains optimistic regarding the medium to
long-term growth prospects. The roll out of the COVID-19
As a key pillar of our win-win-win strategy, CTC is
vaccination, opening of borders for international tourists
committed to support sustainable growth in government
and policy impetus towards stimulating businesses is
revenue. However, the consistent rise in Sri Lanka’s illicit
expected to drive economic activity, positioning Sri Lanka
cigarette market continues to be a deeply concerning
on a strong platform to capture emerging opportunities.
issue, having an impact on the Company’s ability to
As one of Sri Lanka’s most valuable Listed companies and
contribute to the State’s revenue through excise duties
an integral part of the Country’s socio-economic fabric,

CTC is aptly positioned to support the Government in

its development agenda and will continue to invest in
developing its people and emulating global best practices
in governance, sustainability, and corporate citizenship.
ACKNOWLEDGEMENTS
I am confident that the worst of the crisis is behind us, and
as we look to 2021 with optimism and hope, I would like to
take this opportunity to extend my gratitude to the former
Chairman, Mr. William Pegel and the Board of Directors for
their valuable counsel and guidance. I welcome the new
Chairman, Mr. Suresh Kumar Shah, and the new Board
members, and look forward to working with you in the
future.
Team CTC inspires me every day and I am fortunate to

lead such a committed, dynamic, and professional team.
I would also like to thank all our distributors, traders and
value chain partners for their continued support and look
forward to working with them in the coming year.
NEDAL SALEM

The Next Step STRATEGIC POSITIONING
Value creation
Model
Utilising our manufacturing facilities, machinery, skills, and relationships, we convert tobacco leaf into a range of differentiated, high-quality products. Through this process, we transform
our stock of capitals to drive our strategy, deliver stakeholder outcomes and contribute towards several of the UN Sustainable Development Goals.
INPUTS CAPITAL TRANSFORMATION
HUMAN CAPITAL MISSION PURPOSE

Skills, attitudes and competencies Stimulating the senses of adult generations Create A Better Tomorrow TM for all our stakeholders
of our 262-strong, diverse team.
OUR HOW-TO-WIN STRATEGY

FINANCIAL CAPITAL
Equity funds of Rs. 4.60 billion and
funds generated from our operations. Inspirational Remarkable Powerful People and
Connected
foresights innovation brands Partnerships
MANUFACTURED CAPITAL
Manufacturing facilities, machinery
and equipment amounting to KEY PROCESSES
Rs. 4.68 billion.
INTELLECTUAL CAPITAL MANUFACTURE

Access to world-class product PRODUCTS
formulations, R&D and market insights.
SOCIAL AND
RELATIONSHIP CAPITAL SOURCE
DISTRIBUTION
Mutually beneficial relationships with TOBACCO LEAF
stakeholders.
NATURAL CAPITAL
Tobacco leaf, energy, water and other
resources, which are used in our
operations.
IMPACTED BY Changing consumer preferences Macro-economic environment

STRATEGIC POSITIONING The Next Step
OUTPUTS OUTCOMES
PRODUCTS
ADULT CONSUMERS
By responsibly offering enjoyable and stimulating choices for every mood and every
moment, today and tomorrow.
STICKS OF CIGARETTES
2,300 MILLION GOVERNMENT

Compliance to all relevant regulations and tax contributions.
RENEWABLE ENERGY SOCIETY

By reducing the health impact of our business by offering a range of alternative products,
as well as by reducing our environmental and social impacts.
SOLAR ENERGY
1,000 KWH
EMPLOYEES
By creating a dynamic, inspiring and purposeful place to work.
EMISSIONS
GHG EMISSIONS
4,043 tCO2e SHAREHOLDERS

By delivering sustainable and superior returns.
Government policy and regulations Growth in the illicit and beedi market

Value creation and

Trade-offs
INPUTS CAPITAL TRANSFORMATION
PERMANENT EMPLOYEES CONTRACT EMPLOYEES Invested in people development and Ensured employee safety.
262 48 accelerated e-learning. Improved diversity and inclusion.

Facilitated digital adoption and work-from- Drove behavioural and attitudinal changes
SKILLED BOARD STRONG LEADERSHIP TEAM home arrangements.
HUMAN CAPITAL aligned to High Performing Organisations.
6 26 Actioned feedback received from Your Voice
(as at 31 December 2020) survey.
EQUITY CASH GENERATED FROM Effectively managed working capital cycle and investment portfolio.
OPERATIONS
Implemented cost rationalisation and process optimisation measures.
Rs. 4.6 BILLION Rs. 9.9 BILLION Paid interim and final dividends.
FINANCIAL CAPITAL MARKET CAPITALISATION
Rs. 192.7 BILLION
PROPERTY, PLANT, MANUFACTURING Implemented stringent EHS guidelines.

AND EQUIPMENT FACILITIES
Progressed on IWS Phase 1 journey.
Rs. 4.7 BILLION 2 Invested on new products and features.
MANUFACTURED
CAPITAL ADVANCED MANUFACTURING TECHNOLOGY
Ensured health & safety of distributor staff Extended financial support for distributors.
ENGAGEMENT WITH PARTNERSHIPS WITH
through providing PPE, sanitisers, and Invested in community development.
INVESTORS AND CONTRACTED TOBACCO
SHAREHOLDERS FARMERS, OTHER conducting awareness sessions.
Engaged in consumer research through 3rd
SUPPLIERS, DISTRIBUTORS Launched an insurance scheme for traders parties.
SOCIAL & RELATIONSHIP STRENGTH OF THE CTC AND TRADERS and families.
CAPITAL BRAND
SKILLS AND EXPERIENCE ACCESS TO WORLD-CLASS Sent 07 employees on global transfers. Reviewed and updated policies.
OF OUR TEAM RESEARCH, GOVERNANCE Carried out coaching and mentoring initiatives Cascaded the SoBC policy across the
AND MANAGEMENT
for employees. Company.
INSIGHTS INTO MARKET & PRACTICES OF BAT
INTELLECTUAL CUSTOMER BEHAVIOUR Deployed technology to work-from-home.
CAPITAL
DIGITAL INFRASTRUCTURE
TOBACCO PRODUCTION WATER CONSUMPTION Launched the ESG Framework with clear Upgraded the effluent treatment plant.
priorities, goals, and action plans for achieving
5,343 MCE 33,052 CU.M carbon neutral status by 2022.
Converted traditional barns to Loose Leaf
Barns, which are fuelled by paddy husk.
ENERGY Used of energy efficient cooling and lighting Stringently monitored of energy and water
NATURAL CAPITAL
31,891 GJ solutions. consumption.

OUTPUTS AND OUTCOMES TRADE-OFFS

Total employee payments: Rs. 1.19 billion Employee productivity: 7% decrease in net Employees adapting to new ways of working, built Intellectual Capital.
Promotions: 37 profit per employee Significant investments in providing PPE and implementing other safety
Accidents and lost-time hours: Zero measures affected Financial Capital but ensured protection of Human
Capital.
Profit before tax: Rs. 25.4 billion Return On Equity: 300%+ Extension of financial support to distributor partners enhanced Social
Dividends Paid Per Share: Rs. 83.63 Net gearing ratio: Zero and Relationship Capital.
Earnings Per Share: Rs. 83.16 Investments on CSI initiatives further supported Social and Relationship
Capital.
Cigarettes manufactured: 2,300 million Lowest level of tobacco waste: 6.18% Investments in strengthening manufacturing capabilities negatively
sticks Conformance to quality specifications: impacted Financial Capital, but strengthened Social and Relationship
Overall equipment efficiency ratio: 69.13% 99.6% Capital over the long-term.
Initiatives to improved IWS supported Intellectual Capital.
Payments to contracted tobacco farmers: Generated over 71,000 jobs across Investments in supporting distributors, traders and communities
Rs. 1.66 billion the value chain, which translates to adversely impacted on Financial Capital but support Social and
Taxes: Rs. 110 billion empowering over 286,900 livelihoods. Relationship Capital over the long-term.
Investment to ensure people safety across Contribution to GDP: Rs. 33 billion Engagement of farmers and communities in environmental
Value Chain: Rs. 86.30 million Local procurement of tobacco leaf: 100% preservation efforts supported Natural Capital.
Launched 7 new SKUs and 2 new brands during the year. Introduction of new products and brands is expected to support
Launched the Company’s revamped ESG Framework. Financial Capital in the medium-to-long term.
Formulation of the Company’s ESG Framework would lead to long-term
nurturing of Natural and Social and Relationship Capital.
GHG emissions: 4,043 tCO2e Emission intensity (production): 0.76 GJ/ Investments in renewable energy negatively impacted Finance
Energy consumption: 31,891GJ MCE Capital over the short-term but supported Natural Capital through the
Waste recycling: 89% reduction of emissions.
Water consumption: 33,053 CU.M
Employee awareness on the ESG goals and action plans strengthened
Intellectual Capital.

Strategy for
Accelerated Growth
Our evolved strategy was launched in 2019 and provides a clear blueprint for driving transformation of the business by reducing the health impacts of our products and creating
A Better Tomorrow TM for all stakeholders. The strategy is centred on generating an increasingly greater proportion of revenue from products other than cigarettes, by responsibly offering
innovative and less harmful products that stimulate the senses of adult consumers.
OUR MISSION MUST WINS
Stimulating the senses of adult generations: Today, we see opportunities HIGH GROWTH SEGMENTS PRIORITY MARKETS
to capture consumer moments, which have, over time, become limited by Driven by our unique and data-driven consumer insight By relying on a rigorous Market Prioritisation System (MAPS), we will
societal and regulatory shifts, and to satisfy evolving consumer needs and platform (PRISM), we will focus on product categories and focus the strengths of our unparalleled retail and marketing reach, as
preferences. Our mission is to anticipate and satisfy this ever-evolving consumer segments across our global business that have well as our regulatory and scientific expertise, on those markets and
consumer: provide pleasure, reduce risk, increase choice, and stimulate the best potential for long-term sustainable growth. marketplaces with the greatest opportunities for growth.
the senses of adult consumers worldwide.
HOW TO WIN
INSPIRATIONAL REMARKABLE POWERFUL BRANDS CONNECTED PEOPLE AND US FOCUS

FORESIGHTS INNOVATION For over a century, we have Few companies can claim over 150 PARTNERSHIPS The United States comprises
As one of the most long-standing As consumer preferences built trusted and powerful million daily consumer interactions, Our highly motivated people nearly half of our global
and established consumer and technology evolve brands that satisfy our over 11 million retail points of sale and are being empowered business. It is also the single
goods businesses in the world, rapidly, we rely on our consumers and serve as a global network of expert employees through a new ethos that is largest economy in the world,
we have a unique view of the growing global network a promise for quality and around the world. Cultivating an responsive to constant change, the largest single centre for
consumer across all of our of digital hubs, innovation enjoyment. We will build ecosystem that directly connects us embodies a learning culture technology and the key driver
product categories, which is super centres, world- the brands of the future by with consumers and stakeholders, and is dedicated to continuous of global consumer trends,
increasingly driven by powerful class R&D laboratories, focusing on fewer, stronger, especially through the power of digital improvement. But we cannot and is where we have the deep
data and analytics. These insights external partnerships and and global brands across technology, ensures we can build the succeed on our own, and our consumer understanding and
ensure that the development our corporate venturing all our product categories, brands of the future, deliver access to partnerships with farmers, financial strength to support
and responsible marketing of our initiative to stay ahead of delivered through our markets and foster innovations that suppliers and customers the delivery of our mission to
products is fit to satisfy consumer the curve. deep understanding and offer sensorial enjoyment and satisfy are also key for ensuring stimulate consumer senses
needs. segmenting of our consumers. consumer needs. sustainable future growth. around the rest of the world.

KEY STAKEHOLDER OUTCOMES We will create A Better Tomorrow TM for:
By responsibly offering By reducing the health impact of By creating a dynamic, By delivering sustainable
enjoyable and stimulating our business by offering a range inspiring and purposeful and superior returns.
choices for every mood and of alternative products, as well as place to work; and
CONSUMERS every moment, today and SOCIETY by reducing our environmental EMPLOYEES SHAREHOLDERS
tomorrow; and social impacts;
We are We are We are We are We are

BOLD FAST EMPOWERED DIVERSE RESPONSIBLE
Dream big - with innovative Speed matters. Set clear Set the context for our teams Value different perspectives. Take action to reduce the
ideas. direction and move fast. and trust their expertise. health impact of our business.
Build on each other’s ideas,
Make tough decisions quickly Keep it simple. Focus on Challenge each other. Once knowledge and experiences. Ensure the best quality
and proudly stand accountable outcomes. in agreement, we commit products for our consumers,
for them. Challenge ourselves to be
collectively. the best place to work for our
Learn quickly and share open-minded recognising
people and the best results for
Resilient & fearless to learnings. Collaborate and hold each unconscious bias.
our shareholders.
compete. other accountable to deliver.
Act with integrity, never
compromising our standards
and ethics.
The Sustainability Agenda now forms an integral part of our corporate strategy and
centres on harm reduction and greater emphasis on addressing climate change, driving
positive social impacts, and ensuring robust governance practices.
CTC’s long-term strategic aspirations are aligned to that of the BAT's, as well as local dynamics
impacting the business. These areas are further supported by the Company’s ESG priorities,
which clearly set out environmental, social and governance aspirations, and the roadmap for
long-term, sustainable value creation.

Industry
Overview
MARKET CONDITION REGULATION MACRO-ECONOMIC DEVELOPMENTS

In Sri Lanka, the consumption of legal cigarettes Tobacco is amongst the most heavily regulated and taxed Sri Lanka’s macro-economic woes have been exacerbated
(manufactured only by CTC) has declined significantly. industries in the Country, with the National Authority on by the pandemic, with economic activity being severely
On the other hand, the illicit market as well as the under- Tobacco and Alcohol Act (NATA) setting out regulations affected in the 2nd quarter of the year. Extended
regulated and under-taxed beedi industry have recorded on product marketing & distribution, product labelling, lockdowns, closure of borders for tourists and weak global
accelerated growth. including graphical health warnings, advertising, and demand have had significant and wide-ranging impacts
sponsorships. across all key economic sectors, with GDP contracting by
The decline in the legal cigarette market has been driven 16.3%. A gradual pick-up was recorded in the ensuing
by the widening price disparity between legal and illegal months following the resumption of economic activities
products, as frequent excise-led price increases have in the 3rd quarter, resulting in a GDP growth of 1.5%.
resulted in price hikes of legal products. While directly However, the emergence of the 2nd wave in October 2020
impacting our market share, this has defeated the and the rapid spread of infection had a significant impact
Government’s public health as well as revenue objectives. on 4th quarter growth.
Meanwhile the beedi market has also expanded at an
accelerated pace and currently accounts for 67% of the
total combustible market. However, its contribution to
the Government’s tobacco tax revenue remains relatively
insignificant, reflecting the unfair tax burden on legal
cigarettes.

Our sustainability
Agenda
In 2020, we revamped our ESG Framework, marking a step-change in our aspirations, placing sustainability at the front and centre of decision making and operations. While being aligned
to BAT’s sustainability agenda, our Framework has been designed to address specific stakeholder concerns and prioritise the achievement of 12 Sustainable Development Goals (SDGs)
through ambitious environmental, social and governance targets. As summarised below, the ESG Framework prioritises the achievement of 4 key objectives and clearly sets out the KPIs,
management approach and action plans to achieve these goals by 2025.
CLIMATE ACTION SUSTAINABLE LIVELIHOODS ETHICS & CONDUCT ESG CENTRE OF EXCELLENCE
GOAL GOAL GOAL GOAL

Carbon Neutral by 2022 Maximise Sustainable Champion Corporate Governance ESG Center of Excellence in BAT
Livelihoods Supported by 2025 Excellence in Sri Lanka
CTC will adopt a three-pronged approach to The Company aspires to empower both its CTC is committed to maintaining the highest The Company aspires to position itself as a
achieving carbon neutrality by 2022. We will contracted tobacco farmers and communities, degree of integrity, transparency, and centre of ESG excellence in BAT; this will be
seek to; thereby creating prosperous livelihoods, accountability in all its operations. As part of achieved by implementing a robust ESG agenda
(1) Reduce emissions through increasing while protecting human rights across our a Group, which is globally recognised for its and reporting mechanism, driving impactful
energy efficiency; supply chain. We also understand the robust governance, the Company has access ESG campaigns, and sharing best practices.
critical importance of nurturing a dynamic to international best practices which we are
(2) Increase reliance on renewable energy,
and engaged team to drive our strategic keen to share with our Sri Lankan counterparts,
thereby reducing dependence on fossil
aspirations, while offering all our employees a thereby driving governance excellence in the
fuel-based energy sources; and
safe and injury-free working environment. Country’s corporate sector.
(3) Continuously focus on offsetting emissions
through projects such as afforestation.

Policies: Policies: Policies:
Environment Policy Sustainable Tobacco Programme Standards of Business Conduct
Biodiversity Policy Supplier Code of Conduct International Marketing Principles
Supplier Code of Conduct Human Resource policies Board policies and Terms of Reference

KPI: KPI: KPI:
GHG emissions, energy consumption and Livelihoods supported, employee satisfaction and Employee training on SoBC, SoBC compliance,
intensity, reliance on renewable energy retention rate Board diversity
Relevant SDGs: Relevant SDGs: Relevant SDG: Relevant SDG:

Stakeholder
Value
Given the interdependencies with a broad range of stakeholders, it is imperative that we understand and respond to their concerns in a holistic and systematic manner. As a prerequisite
of formulating our ESG Framework, we conducted comprehensive stakeholder engagement exercises during the year, enabling the identification of material ESG topics. We engaged the
stakeholders who could potentially have a material impact on our ability to create value and sought to build trust and responsiveness through open dialogue.
CONSUMERS
Methods of engagement Topics and concerns Our response

07 C 17 The Company does not directly engage Value for money. Ensured availability of products.
Brands SKUs with the end-consumer of its products Product availability. New product launches focusing on
except as provided for under the NATA innovation.
Product development.
VALUE GENERATED Law.
Innovation and Company initiatives
NEW BRANDS LAUNCHED NEW SKUs LAUNCHED for harm reduction.
02 07
SHAREHOLDERS

3,909 16%
Shareholders S Retail shareholders
Annual General Meeting and
publication of Annual Report.
Sustainable growth in financial
performance.
Open, transparent, and timely reporting
to shareholders.
Regular performance updates Financial implications of the Providing access to public information.
VALUE GENERATED (quarterly). pandemic. Continued dividend payments.
Announcements to the Colombo Stock Excellence in environmental Implementation of ESG Framework.
EARNING PER SHARE DIVIDEND PER SHARE
Exchange (periodic). performance.
Rs. 83.16 Rs. 82.85 Corporate website. Positive social impact.
Business ethics and corporate
NET ASSET VALUE PER SHARE RETURN ON EQUITY governance.
Rs. 24.57 338% Transparency and credibility of

disclosures.
Corporate reputation.
EMPLOYEES

262 E 15% Your Voice employee survey Performance & reward Actioning feedback received from the
Employees Females (biennial). management. Your Voice survey.
Performance appraisals (annual). Multiple level staff meetings. Ensuring safe working conditions through
VALUE GENERATED Negotiations with trade unions. Digital engagement. providing advanced PPE and facilitating
(ongoing). remote working arrangements.
WAGES AND BENEFITS INVESTMENT IN TRAINING Safe working environment.
Multiple level staff meetings Provide ongoing opportunities for
Rs. 1,365 MILLION Rs. 13 MILLION (ongoing). training and development including 7
overseas assignments.
Women of Worth forum.
PROMOTIONS CREATED A SAFE WORKING Proactive and continued negotiations
ENVIRONMENT WITH ZERO Town hall meetings.
37 WORKPLACE INJURIES Digital engagement (ongoing).
with trade unions.

CONTRACTED TOBACCO FARMERS AND OTHER SUPPLIERS

20,000+ 600+ Sustainable Tobacco Programme Fair pricing and buy-back guarantees 100% leaf requirement sourced
Persons involved
in tobacco
T Non-leaf
suppliers
(STP) Reviews.
Disseminating knowledge and best
for crop.
Sustainable livelihoods.
locally.
Raising awareness on safety and
farming practices. Preserving human rights. hygiene among farmers.
Farmer appreciation programme. Financial assistance. Guidance on implementing
Field support to contracted tobacco sustainable agricultural practices.
VALUE GENERATED Best practices to improve efficiency.
farmers through Leaf Field Officers. and productivity.
PAYMENTS TO CONTRACTED TOBACCO FARMERS Farmer meetings.
Rs. 1.66 BILLION Support through CSI initiatives.
DISTRIBUTORS AND TRADERS

13 33,329
Distributors D Traders Customer Voice survey for selected
distributors and traders (periodic).
Availability of products. Financial support to ensure
Affordability. commercial sustainability during the
Trade loyalty programme (ongoing). Credit/payment terms. pandemic.
VALUE GENERATED Engagement through the Trade Significant investments in ensuring
Service quality.
Marketing team (ongoing). safety across the distribution network.
INVESTMENTS ENSURED PRODUCT AVAILABILITY. Value added services.
Introduced insurance cover for traders
Rs. 37.8 MILLION and their families.
LOCAL COMMUNITIES

100,000+
Beneficiaries Co Island wide reach Field support through field officers
(ongoing).
Opportunities for harmonious and
mutually beneficial relationships.
Continued engagement and
community value creation with
focus on,
VALUE GENERATED • Organic home gardening.
• Water purification.
SADP FAMILIES CLEAN DRINKING WATER
• Irrigation for farming.
20,000+ 50,000+ LITERS

Material
Matters
The annual assessment of our material topics enable the Company to identify and understand the issues that could positively or negatively impact our ability to create value in the short,
medium and long-term. These issues consist of factors that could directly impact our financial performance, as well as ESG priorities and risks, which in turn could impact our triple bottom
line over time. The material issues presented below were identified following a mapping of stakeholder concerns to factors identified as most important to our business based on strategic
plans, risk registers, governance procedures and policies. Emerging issues are monitored continuously and reported on accordingly.
The material matters for 2020 are presented below. Please refer to Appendix A to see how these selected material topics correspond to the topics prescribed by GRI.
HIGH PRIORITY HIGHEST PRIORITY

Circular economy Our brands
People and culture Stakeholder engagement
Importance to stakeholders
Distribution network Health & Safety

Manufacturing operations Sustainable livelihoods
Corporate behaviour Preserving human rights
Tax transparency Value infusion to economy
Compliance Product responsibility
Climate change
Water and waste
Sustainable agriculture
Risk management
Ethics and business conduct
Importance to BAT
Financial Environmental Social Governance

The Next Step
PERFORMANCE AND VALUE CREATION
A Step Towards Hope

30 | D elivering our Strategy
30 | Illicit Trade and Beedi
32 | Product R esponsibilit y
34 | O ptimising the Manufacturing Footprint
36 | Le veraging O ur Brands
38 | O ur Product SKUs
40 | Sustainable Supply Chain
43 | Strength in D istribution
45 | Managing People
50 | Ensuring a S afe Work ing Environment

The Next Step PERFORMANCE AND VALUE CREATION
Delivering our
Strategy
CTC’s strategy is actioned through focus on several key areas, which are central pillars of its business and stakeholder value creation process. The subsequent sections of this Report provide
an overview of the progress made in each of these focus areas.
ILLICIT TRADE AND BEEDI

“Despite being the only legal manufacturer of cigarettes in Sri Lanka, CTC has
INSPIRATIONAL experienced a consistent decline in market share due to the substantial and
FORESIGHTS
continued growth in the illicit market. In addition to eroding our market share, the
RELEVANT CAPITALS
growth in illicit trade has deprived the Government of legitimate tobacco taxes and
led to an increase in tobacco consumption. “
Erosion of market share due
to illicit products directly
impacts our Financial Capital.
FINANCIAL CAPITAL
Supporting the Government and

relevant authorities in tackling
illicit trade.
SOCIAL & RELATIONSHIP

CAPITAL
Leveraging on our industry

experience and expertise to
generate shared value.
INTELLECTUAL
CAPITAL
ILLICIT TRADE IN SRI LANKA

Sri Lanka’s illicit cigarette trade has increased by a CAGR of around 87% from 2016-2020, driven by increasing price
differentials between legal and illicit products and broader macro-economic pressures. Successive governments have
considered the legal cigarette industry as a reliable source of tax revenue. In line with our win-win-win approach to
value creation, we have remained committed to contributing to national development through consistent growth in
tax contributions. However, regular hikes in excise duties have led to consistent and significant price increases in our
products. For instance, the price of a legal cigarette has increased by almost 100% between 2015 and 2019, making the
price of cigarettes in Sri Lanka the most expensive in the world, based on purchasing power parity as per the World Health
Organisation (WHO). The widening price disparity between legal and illicit products have provided impetus for significant
growth in the latter, which is now estimated to accounted for nearly 24% of the Country’s total cigarette consumption.

PERFORMANCE AND VALUE CREATION The Next Step
In addition to its direct impact on our market share, the continued growth in the illicit market has led to several undesirable THE BEEDI MARKET
consequences, including the year-on-year decrease in government revenue. In 2020, this loss was estimated to be Rs. 38 Sri Lanka’s beedi market has also recorded a steady
billion. As legal volumes decline, it also threatens over 286,900 livelihoods dependent on the legal value chain. Further, as growth, accounting for 67% of total tobacco consumption
witnessed in other markets, widening price differentials between legal and illicit products leads to an increase in tobacco in 2020. Despite an increase in taxes applicable for the
consumption, thereby undermining the Government’s public health objectives. For instance, while CTC’s volumes have import of tendu wrappers in 2019, beedi continues to be
gradually declined, the Country’s total tobacco consumption has increased over time. relatively under taxed and underregulated. Contribution
from beedi amounted to just 3% of total tax revenue
FAST FACTS collected from the tobacco sector in 2020. This reflects the
unfair tax burden on legal cigarettes. In recent years, there
SMUGGLED
SMUGGLED CIGARETTES
CIGARETTES TAX REVENUE DEPRIVED TO GOVERNMENT has also been a notable increase in smuggled tendu leaves
Million sticks Potential annual loss in tobacco tax revenue to the into the Country, further depriving the Government of
Government due to the decline in volumes of legally legitimate tax revenue.
manufactured cigarettes and growth in the illicit
2020 730 WAY FORWARD
market.
We will continue to place strategic emphasis on
Rs. 38 BILLION supporting relevant authorities in tackling illicit trade
2019 740 and preventing sub-standard products from entering
the market. We remain deeply concerned that the
600 640 680 720 760 rapid growth in the illicit market could undermine the
socio-economic contribution that could accrue from
our win-win-win approach to value creation. This multi-
TAX CONTRIBUTION TAX FROM TOBACCO CTC MARKET SHARE stakeholder approach focuses on driving sustainable
growth in government revenue, developing capabilities
CTC accounted for a The legal industry’s share in Sri Lanka’s tobacco
of our employees & value chain partners, empowering
significant portion of 3% market has recorded consistent decline due to the
communities and driving sustainable shareholder value.
total tax from tobacco continued growth in illicit and beedi market shares.
Given the expertise and experience of our parent entity
contributions while its
market share stood at
CTC 97% 25% in over 180 markets, we have much to offer governments
Beedi (2019: 31%) and regulators when it comes to developing policies
only 25%.
around tobacco and are keen to contribute towards
shaping an industry, which ensures the creation of shared
stakeholder value.
Unlike legal cigarettes, which are required to comply with the NATA Act, traders of illegal cigarettes do not comply with
any such rules and regulations. Furthermore, the illicit cigarette trade has been linked to transnational criminal activities
including funding of narcotics, weapons and terrorism.
Curbing the growth in illicit trade requires strong cooperation between the Government, law enforcement agencies
and the legal industry. We have continued to support the Government in its efforts to fight smuggling, through raising
public awareness and sharing world class practices and procedures driven by BAT globally. The Supply Chain Compliance
Procedure (SCCP) makes specific reference to ensuring that tobacco products are not diverted to illicit channels through
Know-Your-Customer (KYC) and Know-Your-Supplier (KYS) evaluation and approval procedures.

Delivering our
Strategy
PRODUCT RESPONSIBILITY
“We adhere to extremely stringent standards on manufacturing and marketing,
REMARKABLE as set out by a suite of globally consistent policies. This approach ensures that our
INNOVATIONS
adult consumers benefit from world-class research capabilities and industry-leading
RELEVANT CAPITALS
product standards of our parent entity. “
Enhancing value creation to

adult consumers through
international product standards,
which ensure quality.
FINANCIAL CAPITAL
Partnering with distributors and

traders to ensure responsible
marketing practices across our
distribution network.
CAPITAL
Benefiting from the tacit

knowledge and innovative
capabilities of our parent entity.
INTELLECTUAL
CAPITAL
RESPONSIBLE MARKETING
The Company’s marketing operations are governed by BAT's International Marketing Principles (IMP) which clearly set out
our commitment towards marketing our products responsibly. The IMP are centred on the premise that our products are
intended strictly at adults and are not designed to engage or appeal to youth. The IMP covers all aspects of marketing and
is complemented by ongoing internal training on marketing-related aspects.
The NATA Act and its regulations also set out clear guidelines on product marketing and labelling, which includes tri-lingual
text health warnings, TAR and Nicotine content disclosures and Graphical Health Warning covering the top 80% of the
surface area of the front and back of the pack. During the year, there were no instances of non-compliance concerning
these aspects.

YOUTH ACCESS PREVENTION PRODUCT STANDARDS

In addition to the IMPs, CTC also adheres to BAT’s global CTC benefits from access to world-class research and product standards of its parent. All products are formulated following
Youth Access Prevention (YAP) guidelines. These ensure extremely stringent criteria including multi-disciplinary risk assessments, scrutiny of ingredients and extensive testing.
that individuals under the legal age (21 in Sri Lanka) do Manufacturing also follows industry leading practices, with continued emphasis on quality, traceability and product
not have access to our products and include mandatory integrity maintained throughout the process.
requirements to provide traders with point-of-sale
materials with YAP messaging. The Company also works Innovation at BAT is underpinned by:
directly with traders to uphold minimum age laws and
GLOBAL RESEARCH CAPABILITIES
provide training and awareness on preventing access to
youth. Stringent governance mechanisms are in place to
monitor compliance to these guidelines.
HARM REDUCTION
Harm reduction is a key component of BAT's evolved
1500+ 600+ 200+ 150+
corporate strategy as it aspires to reduce the health
impacts of the business through offering a greater
choice of less risky products to adult consumers. Since R&D SCIENTISTS AND EXTERNAL PHD
the launch of its first vapour product in 2013, BAT has SPECIALISTS ENGINEERS PARTNERS HOLDERS
made significant progress in developing a range of non-
combustible products such as vaping, tobacco heating
and modern oral products, thereby offering a wider choice
WAY FORWARD
of enjoyable nicotine alternatives to adult consumers. New
product development is backed by world-class research We are keen to leverage the research and innovation capabilities of our parent entity to offer Sri Lankan adult consumers
capabilities, multi-disciplinary risk assessments and deep a wider choice of products. Accordingly, we continue to explore consumer attitudes and preferences towards harm
insights into adult consumer preferences and behaviour. reduction and new category alternatives, which can pave way to reducing the overall health impacts of our business in the
New category products are available across 48 markets medium to long-term.
and BAT is keen to expand its reach of this product range
in the short-to-medium term.

Delivering our
Strategy
OPTIMISING THE MANUFACTURING FOOTPRINT
“Transforming our manufacturing capabilities to be more agile and efficient, while
REMARKABLE minimising the environmental impacts of our operations is a key priority, which will
INNOVATION
support product, commercial and environmental aspirations. “
RELEVANT CAPITALS
Adoption of stringent EHS

measures to ensure the safety of
all employees.
HUMAN CAPITAL
Progression on the IWS

journey through leveraging
organisational knowledge and
insights.
INTELLECTUAL
CAPITAL
Ongoing focus on reducing the

environmental impacts of our
operations.
NATURAL CAPITAL
INVESTMENTS IN MANUFACTURED CAPITAL

The Company’s drive to increase efficiency and reduce waste through optimising its manufacturing infrastructure
continued throughout the year. We successfully commissioned new machinery required to manufacture the 67mm
length sticks - a new SKU for CTC. A key achievement was our team’s ability to step up to the challenge of installing and
converting the machinery; a complex task, which would have typically been carried out by the foreign original equipment
manufacturer. We also invested around Rs. 700 million on infrastructure to manufacture new products and formats, which
would fulfil emerging market demands.
THE IWS JOURNEY

We also made significant progress on the IWS journey, recording broad-based improvements across several key indicators.
Overall Equipment Efficiency (OEE), Mean Time Between Failures (MTBF), product quality indicators, and waste generation
recorded improvements during the year. The long-term objective of IWS is to transform our manufacturing capabilities
through process improvement, progressive maintenance, education, training & quality, and we hope to successfully
achieve Phase 1 by Q2 2021.

ENSURING EMPLOYEE SAFETY WAY FORWARD

Stringent COVID-19 related health & safety measures were adopted to ensure the safety of all employees including We will continue to place strategic emphasis on
changing shift operating patterns to minimise cross infection of individuals, random PCR testing and provision of advanced driving efficiency and productivity improvements, and
PPE to all employees. We also marked an improvement in general health & safety, with zero lost time injuries and zero successfully obtain Phase 1 compliance status of IWS,
serious injuries. Meanwhile, the Leaf operations achieved fully compliant status of BAT’s EHS Global Health Check Review. marking a key milestone in our journey. We also hope to
(Refer to Health & Safety on page 50 for further information) upgrade our manufacturing capabilities and technology
in 2021, which will provide improved agility and
MITIGATING ENVIRONMENTAL IMPACTS OF MANUFACTURING efficiencies while enabling the addition of new features.
We continued to drive proactive efforts towards reducing the environmental footprint of our manufacturing operation in Strategic emphasis will be placed on increasing reliance
line with the long-term aspirations set out in the ESG Framework. We focused on driving reductions in our carbon footprint on renewable energy in line with our ambitious goal of
through energy efficiency and reducing dependence on fossil fuels. We proactively monitored our water consumption to achieving carbon neutrality by 2022.
identify means for sustained improvements in efficiency and recorded reductions in solid waste (Please refer to our EHS
Performance on page 57 for further information) during the year.
MEASURING SUCCESS
MANUFACTURING EFFICIENCY PRODUCT QUALITY

We have made considerable progress in improving efficiency Improvements in product quality are assessed through Quality to
and productivity in line with the implementation of IWS. Specification (Q2S) levels and consumer complaints.
OEE MTBF Q2S REDUCTION IN CONSUMER COMPLAINTS

69.13% 9.34 MINUTES 99.6% 15%
(2019: 61.4%) (2019: 6.74)
SAFETY ENVIRONMENTAL FOOTPRINT GHG EMISSIONS

tCO2e
Stringent measures were adopted We continued to progress towards our
to ensure the health & safety of all long-term environmental aspirations,
employees. recording improvements in water and 2020 4,043
energy consumption, waste generation
and GHG emissions.
2019 4,376
REPORTABLE REDUCTION IN CARBON
INCIDENTS FOOTPRINT
3,600 3,800 4,000 4,200 4,400 4,600
ZERO 13%

Delivering our
Strategy
LEVERAGING OUR BRANDS
“We offer a multi-category portfolio of brands, which has allowed us to effectively
POWERFUL cater to diverse adult consumer needs across market segments. This approach serves
BRANDS
us well, as we leverage the brand equity of our products to drive continued growth.“
RELEVANT CAPITALS
Increasing consumer value

by further enhancing our
portfolio.
HUMAN CAPITAL
Strengthening capabilities to
manufacture new products
and brands.
MANUFACTURED
CAPITAL
Preserving Financial Capital in a

difficult year by leveraging the
equity of our brands.
FINANCIAL CAPITAL BRAND PERFORMANCE IN 2020

It was a year of unprecedented challenges, marked by extended lockdowns, disruptions to distribution and pressure on
consumer affordability. Despite these challenges, the Company performed commendably during the year to curtail the
decline in volumes to 13%. Our key brands demonstrated strong resilience supported by a sound distribution strategy,
which ensured availability of products despite the operational constraints that prevailed during the year (Refer Strength in
Distribution on page 43 for further information)

PRODUCT INNOVATION
We maintained focus on our market segmentation strategy, while building brand equity across our key brands of John
Player and Dunhill. Despite the numerous operational challenges that prevailed in 2020, we continued to enhance our
consumer proposition delivering value continuously.
MEASURING SUCCESS
MARKET SHARE SALES VOLUME

Our key brands John Player and Dunhill performed commendably, with the former The Company demonstrated strong resilience to
retaining its market share. stem the decline in volumes to 13%.
STICKS
TURNOVER
2.3 BILLION
The turnover recorded a decline of 7% to Rs. 132.15 billion during the year. (2019: 2.6)
GROSS REVENUE
Rs. Billion PRODUCT PORTFOLIO
We continued to enhance our value offering to
2020 1,340
adult consumers through the launch of new
brands, and SKUs.
2019 1,419
BRANDS SKUs
0 200 400 600 800 1,000 1,200 1,400 1,600
07 17
WAY FORWARD
Democratising innovation will be a key priority over the short-to-medium term as we seek to enhance our offering in the
value-for-money segment. Focus will also be placed on enhancing our premium segment further with additions to the
Dunhill range, while we continue to consolidate and build brand equity of John Player.

Delivering our
Strategy
OUR PRODUCT SKUs


Delivering our
Strategy
SUSTAINABLE SUPPLY CHAIN
“We are committed to creating prosperous livelihoods for our contracted farmers and
PEOPLE & continue to work with them in increasing yields and productivity, which ultimately
PARTNERSHIPS
drives better incomes, while securing the tobacco leaf supply chain.“
RELEVANT CAPITALS
Ensuring continued value

injection to tobacco farmers
through uninterrupted demand.
HUMAN CAPITAL
Significant reduction in
energy consumption and
carbon footprint through LLB
conversion.
NATURAL CAPITAL
Optimising process
infrastructure through
ongoing initiatives.
MANUFACTURED
CAPITAL
SUPPORTING FARMER LIVELIHOODS
The Company supports 20,000+ people involved in the tobacco cultivation value chain through a multi-faceted value
Significant investments in proposition, which includes guaranteed buyback at pre-agreed prices, guidance on improving efficiency and productivity,
ensuring the health & safety sustainable agriculture, and community support. Despite the numerous challenges that prevailed, we ensured continued
of contracted tobacco farmers.
value injection to our contracted farmers through uninterrupted demand and minimal disruptions to the supply chain
FINANCIAL CAPITAL - one of the very few agriculture-based companies to do so. We sourced 100% of our tobacco requirement from local
farmers, thereby injecting Rs.1.66 billion to the rural economy.
PRODUCTIVITY DRIVE
We made significant progress in our efforts to drive greater yields, higher productivity, and better quality, which in turn
boost contracted farmer incomes. In 2020, 80% of tobacco leaf sourced was from hybrid varieties, resulting in 7% and 8%
improvements in Yield Per Hectare (YPH) in the Maha and Yala seasons, respectively. Processing efficiency also recorded
improvements, with throughput and OEE of the Green Leaf Threshing Plant (GLTP) increasing during the year. Key initiatives
included the following:

Conversion of traditional barns to LLBs During the year, the Company also successfully completed the Global Leaf Buying Audit, a comprehensive end-to-end
fuelled by paddy husk assessment on our purchasing processes conducted by BAT. Sri Lanka emerged as the only Country to be certified as
compliant across all aspects of the audit. BAT’s Global EHS Audit was also completed successfully during the year.
Tobacco curing has been carried out in traditional
barn systems that are fuelled by paddy husk, a
ENSURING THE SAFETY OF FARMERS
renewable biomass energy source. In 2020, the
Company made significant investments in converting Following the outbreak of COVID-19 in March, we commenced ongoing awareness sessions for our contracted farmers,
these traditional barns into Loose Leaf Barns (LLBs). sharing best practices on minimising the risk of infection. We conducted 60 such sessions at depot and buying centre level
CTC became the world’s first to convert LLBs to while also providing required PPE for farmers, field officers and employees at the GLTP.
operate on paddy husk, which is estimated to further
improve efficiencies and decrease emissions. The SUSTAINABLE TOBACCO PROGRAMME (STP)
technology is also expected to drive reductions in All our leaf operations adhere to the requirements of STP, which is an industry-wide standard, covering a range of areas
labour usage, curing costs and minimise health & including human rights, environmental preservation, safety of people. It is aligned to international standards including
safety risks. Two units were successfully converted as a the International Labour Organisation (ILO) and the UN Guiding Principles on Business and Human Rights. Compliance is
pilot project during the year and we hope to convert monitored through a Farmer Sustainability Monitoring App, used by the extension officers to track a range of indicators
100% of our traditional barns to this model over the allowing access to all relevant information on a real-time basis.
next 5 years.
COMPONENTS OF STP
USE OF RENEWABLE ENERGY
100% Seed testing and certification Prevention of child labour
Soil analysis and fertilizer management CROP Safe working environment
REDUCTION IN CURING COST MANAGEMENT PEOPLE
Crop hygiene Fair treatment
29% Crop management best practices Terms of employment
REDUCTION IN LABOUR REQUIREMENTS

30% Sustainable management of
water, soil and forests
Hygiene
ENVIRONMENT FACILITIES Health
Pollution control Safety and protection
Fuel and energy reduction Medical facilities
Efficiency improvements in GLTP
Continued focus on driving processing efficiencies,
optimising energy consumption and improving
productivity led to broad-based improvements in NON-LEAF SUPPLIERS
yields, throughput, and OEE.
The Company engages with over 600 non-leaf suppliers for the procurement of packing materials, machinery & equipment,
office supplies, consumables, and indirect services. Despite disruptions to operations during the year, we continued
Automated purchasing
to support these partners through timely settlements and uninterrupted demand, which in turn contributed to their
Digitalising the purchase process in 3 depots and commercial sustainability.
6 buying centres, facilitated the availability of
comprehensive real-time information which enabled
better monitoring and robust controls.

Delivering our
Strategy
MEASURING SUCCESS
VALUE INJECTION TO THE RURAL ECONOMY LIVELIHOODS SUPPORTED

Ensured uninterrupted procurement of tobacco leaf, which We offer a multi-faceted value proposition to our contracted farmers,
ensured continued value injection to contracted tobacco farmers. empowering them to lift themselves out of poverty.
PAYMENTS TO CONTRACTED TOBACCO FARMERS CONTRACTED FARMERS CONTRACTED FARMERS

Rs. Million ASSURED PURCHASE AT PRE- PLACED ABOVE THE GLOBAL
AGREED PRICES POVERTY LINE
2020 1,658 100% 100%
ENVIRONMENTAL FOOTPRINT
2019 1,419
Conversion of traditional barns to LLBs and improved energy
efficiencies at the GLTP have contributed towards the reduction in
0 500 1,000 1,500 2,000
energy consumption and GHG emissions.
EFFICIENCY INDICATORS DECLINE IN DIRECT ENERGY DECREASE IN

CONSUMPTION EMISSIONS
Broad-based improvements in leaf yields and GLTP efficiency
during the year. 4% 5%
MATERIAL CONSUMPTION IN 2020

RENEWABLE MATERIALS NON-RENEWABLE MATERIALS
GREEN LEAF GLTP OTHER PRODUCTION MATERIALS WRAPPING MATERIALS
2,779 MT 794 MT 2,634 MT
*MT - Metric Tons
WAY FORWARD
Unit manufacturing costs are likely to increase in the short-term, given persistent economic woes, which will result in
stagnant volume growth in 2021. In mitigating this challenge, we will seek to progress further on our productivity and
efficiency drive. Reducing the environmental footprint of our operations will also be a priority as we seek to increase
reliance on renewable energy and drive down our carbon footprint.
We also intend to implement the BAT's global procurement system for non-leaf suppliers in 2021, which is expected to
accrue considerable benefits in efficiencies.

STRENGTH IN DISTRIBUTION
“Our route-to-market approach is critical in executing our strategy and ensuring the
PEOPLE & availability of our products. We have always taken the view that joint value creation
PARTNERSHIPS
with our distributor and retail partners is an imperative in driving profitable growth
RELEVANT CAPITALS
and have made considerable investments in ensuring the sustainability of our
distribution partners.“
Strengthening relationships
with distribution partners by
supporting their commercial
sustainability.
HUMAN CAPITAL
Adapting to the new normal

by providing new insights on
distribution efficiencies.
INTELLECTUAL
CAPITAL
Supporting our distributors

impacted Financial Capital,
but strengthened Social and
Relationship Capital.
FINANCIAL CAPITAL
DISTRIBUTION STRATEGY IN 2020

Agility and adaptability were key to navigating the complexities presented by the operating landscape in 2020. As
traditional distribution networks were impacted by the restrictions imposed, we were compelled to rethink our strategy to
ensure continued product availability to adult consumers. Efficient route planning enabled us to optimise deliveries in spite
of restrictions in mobility and access. Meanwhile, we increased product availability across our network.

Delivering our
Strategy
SUPPORTING OUR BUSINESS PARTNERS DISTRIBUTION OF VENDOR CARTS
Our distributor and trade partners faced numerous challenges, reflecting the inevitable toll of the pandemic. Despite the The vendor cart project was launched in 2019, with
sharp drop in volumes, we continued to incentivise our distributors, which in turn guaranteed the financial security of their the objective of combining our social objectives with
employees. Additional value creation included the following: our business aspirations by providing vendor carts to
socially and economically vulnerable individuals in rural
Distributing 900+ packs of essential food items for distributor staff at a total cost of Rs. 6.1 million.
communities. During the year we distributed 800 carts
Ensuring safety across the network by providing PPE, masks, and hand sanitizers to all distributor employees. facilitating job creation and economic empowerment.
Weekly sessions on health, safety, and hygiene to distributor staff through digital channels.
WAY FORWARD
VALUE CREATION TO TRADING PARTNERS Adapting to the new realities of the pandemic have armed
us with fresh insights on more efficient and effective
We continued to invest in 'Abhisheka' - our trade loyalty programme through which we offered opportunities for capacity
route to market and delivery channels. Strengthening our
building, and ensured health & safety across the network. A key achievement during the year was the launch of 'Abhisheka
presence in e-commerce platforms will be a key priority
Insurance Scheme' for our traders and their families. Through this unique initiative, over 2,200 traders obtained access to a
and we hope to embrace the learnings obtained during
medical insurance and hospitalisation cover of up to Rs.1.5 million, the annual premium of which was paid by CTC. Given
this period to further enhance distribution efficiencies.
the prevalent health & safety risks following the outbreak of COVID-19, this timely initiative has provided our traders and
We will also continue to strengthen our relationships with
their families with access to high-quality medical care.
distributor and trade partners, ensuring their commercial
MEASURING SUCCESS sustainability and supporting them.
DISTRIBUTION CAPABILITIES STRENGTH OF RELATIONSHIPS

In responding to the crisis, we pursued growth through new We have nurtured long-term, mutually beneficial relationships
channels while consolidating our presence across traditional with our distributors through a multi-faceted value proposition.
distribution channels.
LENGTH OF DISTRIBUTOR RELATIONSHIPS
DISTRIBUTORS TRADERS
13 33,329 1
3
HEALTH INSURANCE FOR TRADERS
9
The 'Abhisheka' scheme offers medical and hospitalisation
insurance of up to Rs.1.5 million
TRADERS INVESTMENT
2,200+ RS. 14.7 MILLION 50 years or more 25-50 years Less than 25 years
DISTRIBUTOR SUPPORT
We ensured the health & safety of our distributors and their
employees.
INVESTMENT PPE PROVIDED
Rs. 17 MILLION 900 Distributor staff

MANAGING PEOPLE
“Our competitive edge is underpinned by the attitudes and competencies of our
PEOPLE & team and we place strategic emphasis on creating a rewarding, fulfilling and
PARTNERSHIPS
dynamic work environment in which they can thrive.“
RELEVANT CAPITALS
Nurturing tacit knowledge

through adapting to new ways
of working.
INTELLECTUAL
CAPITAL
Considerable investments
in ensuring the safety of our
employees.
FINANCIAL CAPITAL
Proactive employee
engagement in driving the
new ESG Framework.
NATURAL CAPITAL
A WINNING ORGANISATION
Our people strategy revolves around building a dynamic and inclusive organisational culture, which attracts, engages, and
retains talent. HR ways of working are governed by comprehensive policy frameworks which are aligned to that of BAT and
revised to ensure compliance to local regulations and market practices. The policy framework is designed to ensure:
Equal opportunity to each employee.

Fairness at work and an environment of openness.
Accountability for performance.
Fair, clear and competitive remuneration and benefits.

Delivering our
Strategy
Our Team TRAINING & DEVELOPMENT
CTC’s high-performing, agile team consists of 262 permanent employees. The enhanced value proposition we offer to Achievement of our strategic aspirations necessitated the
employees has enabled us to emerge as an employer of choice, with the ability to recruit and retain the right talent. development of critical capabilities across the Company.
We continued to offer opportunities for cross border
EMPLOYEES BY GENDER EMPLOYEES BY CATEGORY AND GENDER exposure, with 7 CTC employees given International
Assignment (IA) opportunities, either on short/long-term
Senior management 12 4 engagements or global transfers. During the year we
Female 40
Junior and Middle accelerated e-learning offered through digital platforms,
37 13
Management offering an array of development opportunities in
262 Executive 84 22 functional, leadership and technical skills. In alignment
Male 222 Permanent with BAT’s global talent development agenda, training
Non-executive 89 1
employees programmes were formulated at regional level and
0 50 100 150 200 250 0 20 40 60 80 100 120 customised to suit local needs.
Male Female
During the year, 37 employees were promoted, reflecting
PPE and continued engagement on health and hygiene our commitment to build talent pipelines and nurture the
PROFILE OF NEW RECRUITS standards (refer to Ensuring a Safe Working Environment next generation of leaders.
NEW RECRUITS BY GENDER from pages 50 to 52).
LEARNING & DEVELOPMENT PHILOSOPHY

83% 17% EMPLOYEE ENGAGEMENT
20 4 The Company has established a range of engagement
Male Female channels, which enables it to identify and respond to
employee needs. The ‘Your Voice’ survey is conducted 70% 20% 10%
NEW RECRUITS BY AGE every 2 years and is an effective way of gauging employee
pulse on rewards, training, work environment and health
87% 13% & safety. In 2020, focus was placed on actioning the
21 3 feedback received the previous year. Other ongoing On the job Mentoring and Formal
21-30 years 30-55 years training coaching training
forms of engagement included town hall sessions, digital
engagement, and recreational activities.
NEW WAYS OF WORKING We respect our employees’ right to be represented ONGOING TRAINING INITIATIVES
The Company swiftly adapted to the new realities of the by recognised trade unions and enter into collective
Digital Learning
year, facilitating remote working for employees through agreements. Approximately 35% of our employees are
the provision of required IT and network infrastructure. represented by trade unions and covered by a collective Leadership Development: Leading Self and Leading Teams
As far as practically possible, all employee engagements agreement, which forms the foundation for harmonious
IWS Capability Development for Manufacturing Employees
including meetings, town halls, business updates and industrial relations between these employees and the
Company. The operating challenges that prevailed Global Graduate Academy
training initiatives were shifted to digital platforms. We
also ensured the safety of all factory and other employees during the year necessitated a high level of engagement
who were required to come into our facilities to perform with trade unions and we ensured their concerns and
their roles. The health & safety of our marketing and leaf suggestions were taken fully into consideration when
employees were also ensured through the distribution of determining work arrangements during the pandemic.

PERFORMANCE MANAGEMENT AND

RECOGNITION WOMEN OF WORTH (WOW)
The Company’s rewards structure is designed to motivate The WOW initiative aims to provide a platform for women to
and retain high-performing employees, whilst nurturing connect, engage and share experiences. Driven by a cross-
a performance-driven culture. During the year, we functional team of women, the platform has provided an
focused on nurturing behaviours and attitudes identified opportunity to improve visibility on female talent, build talent
in High Performing Organisations (HPO); aligned to the pipelines and collectively address issues facing the female
workforce, both in their professional careers and personal lives.
Organisational pillar of IWS, the HPO principles centre
During the year, curated programmes were carried out for different
on flexibility, resilience, learning and personal growth.
segments of our female workforce, including mothers, married and
Employees displaying these behaviours are recognised
single ladies, and a survey was conducted to identify the varying
through the performance management system and given
needs of women in these categories. Key initiatives carried out:
increased visibility through a recognition board, which
serves to showcase their achievements. Total remuneration Quarterly mental health programmes for all 3 categories.
to employees was 1.19 billion in 2020, reflecting salary Movie date night.
increases across several employee categories as we took a
Virtual games night for all single ladies.
long-term view to value creation and retention.
Creating opportunities to highlight CTC female talent in the
DIVERSITY AND INCLUSION external space.
Diversity and Inclusion is a key global priority for BAT, with Momsplaining- a social media engagement platform for
regions, end markets and business functions adopting mothers.
action plans to implement the global agenda. CTC’s
Mother’s Day celebration.
approach centres on ensuring balanced access at entry
level, coaching and mentoring programmes to support Quarterly Mother’s roundtable discussion on topics of
women’s development, and providing opportunities for interest.
engagement and networking. Men’s Day, virtual town hall session to celebrate diversity
within the organisation.
RETENTION
The Company’s overall retention levels remained relatively healthy at around 95%, attesting to our holistic employee value
proposition and strength of the employer brand.
TURNOVER BY GENDER TURNOVER BY AGE
79% 21% 84% 16%

15 4 16 3
Male Female 21-30 years 30-55 years

Delivering our
Strategy
MEASURING SUCCESS
VALUE CREATION TRAINING AND DEVELOPMENT

Remuneration paid to employees decreased by 7% during The Company invested approximately Rs. 13 million in developing
the year. talent during the year.
PAYMENTS TO EMPLOYEES AVERAGE TRAINING HOURS (BY GENDER)
Rs. Million Hours
2020 1,192 Female 37.6
2019 1,299 Male 41.5
0 300 600 900 1,200 1,500 0 10 20 30 40 50
DIVERSITY PRODUCTIVITY
Increasing female representation at leadership level is a key Productivity is measured through 'value-added-per employee',
component of our diversity agenda. which decreased by 4% during the year.
FEMALE REPRESENTATION VALUE ADDED PER EMPLOYEE
Rs. Million
Board Management team Overall
2020 485
12.5% 29% 15%
2019 505
0 100 200 300 400 500 600

87.5% 71% 85%
(2019 : 23%)
Male Female
WAY FORWARD
We will continue to offer flexible and remote working arrangements, thereby ensuring the safety and well-being of our
employees. Key areas of focus for 2021 will be driving the Diversity and Inclusivity agenda, talent development focusing on
digital platforms and strengthening leadership capabilities.

UNION COMMITTEE - COLOMBO
UNION COMMITTEE - KANDY

Delivering our
Strategy
ENSURING A SAFE WORKING ENVIRONMENT
“Health & safety aspects gained centre stage in 2020 and we adopted stringent
PEOPLE & measures to minimise the risk of COVID-19 infections in our operations and across
PARTNERSHIPS
our distribution network. “
RELEVANT CAPITALS
Implementing proactive
measures to ensure the health &
safety of all our employees.
HUMAN CAPITAL
Adopting stringent safety

measures including awareness &
training and distribution of PPE
to our business partners.
CAPITAL
Considerable investments
in distributing PPE and
implementing safety measures.
FINANCIAL CAPITAL
COMMITMENT TO HEALTH & SAFETY

Our commitment to provide a safe and injury-free work environment extends to all employees, distribution partners,
tobacco farmers and other contractors. Health & safety aspects are governed by BAT’s integrated EHS guidelines. A
cross functional EHS Steering Committee, supported by departmental committees ensure that; these guidelines are
implemented across the Company, monitor performance and identify areas for continuous improvement. Our approach
is based on risk assessment and management; awareness and training; and implementing specific initiatives to mitigate
high-risk areas of the business. Health & safety aspects including the use of PPE, availability of first-aid, medical care and
health insurance are also covered under the collective agreements.

RESPONSE TO COVID-19
At the onset of the pandemic, the Company invoked its Business Continuity Plans (BCPs) and its Crisis Management Team
took leadership in driving COVID-19 response efforts. This Team met regularly to review the ongoing situation and identify
emerging risks. We introduced a range of health & safety measures to ensure the safety of our employees. This commitment
was also extended to our business partners as we provided ongoing training and distributed PPE to all distributor staff and
contracted tobacco farmers.
CONTRACTED DISTRIBUTION
EMPLOYEES
TOBACCO FARMERS PARTNERS
Provision of PPEs Changed shift schedules Distribution of PPE and Provision of PPE and
including full body suits. for factory employees to sanitisers free of charge. sanitizers free of charge.
minimise interaction.
Distancing measures on Training and awareness Weekly sessions on
the factory floor. Facilitated remote sessions to share best health, safety, and
working arrangements practices. hygiene through digital
Manual and automatic
for office employees. channels.
disinfection chambers.
Ongoing training and
Random PCR tests.
awareness sessions.
NURTURING A CULTURE OF SAFETY

We have introduced several unique initiatives across the Company with the aim of nurturing a culture of safety through
sharing best practices and recognising positive behaviour.
NEAR MISS: Employees and 3rd party logistics partners are encouraged to report potential safety risks and hazards
through a mobile app, with the aim of instilling a safety culture within the organisation and raising awareness on
hazards. Follow-up on all reports are actioned by the EHS Manager. Operational level employees have also been given
quarterly targets for incident reporting.
PULSAR: Involves the mutual observation of employees’ safety behaviour and providing reinforcement on positive
aspects, which is expected to condition employees to continuously adopt these behaviours.
COMPLIANCE AND AUDIT

A key achievement during the year was the successful conclusion of a global EHS audit at our Kandy facility. The audit
covered 4 key pillars including health & safety policies and procedures, infrastructure investments, training & development,
as well as safety of contractors. Following this audit, measures were taken to revamp certain key processes, improve
infrastructure as well as enhance training of contractors.

Delivering our
Strategy
MEASURING SUCCESS
HEALTH & SAFETY RECORD INVESTMENTS IN HEALTH & SAFETY

Our Colombo premises and trade operation marked 20 years During the year, we invested Rs. 86.30 million in health & safety
remaining injury-free, with zero lost time while our leaf initiatives supporting employees, contractors, contracted farmers
operation marked 1 year, attesting to the effectiveness of our and distribution partners.
health & safety strategy.
HEALTH & SAFETY INVESTMENT
Rs. Million
LOST DAY RATE INJURY RATE
ZERO ZERO 2020 125.26
OCCUPATIONAL WORK-RELATED
DISEASE RATE FATALITIES 2019 68.82
ZERO ZERO
0 30 60 90 120 150
COVID-19 SUPPORT
Measures were taken to minimise the risk of infection not only at our premises but also across our supply chain and distribution network.
PPE DISTRIBUTED AWARENESS SESSIONS CONDUCTED
1,800 900 60
A Step Towards Suﬆenance

Farmers Distributor employees Farmers
WAY FORWARD
As risks related to COVID-19 are expected to prevail over the short-to-medium term, we will maintain relentless focus
on ensuring that the risk of infections is minimised at our operating locations as well as across our supply chain and
distribution network.

OUR ESG PERFORMANCE
A Step Towards Suﬆenance

54 | Environment
59 | S ocial
64 | G overnance
The Next Step OUR ESG PERFORMANCE
Environment
“We recognise that good environmental management is not only the right thing to do, but also makes sound business sense
given how much we depend on natural resources for our operations. Securing access to these resources as well as being prepared
for future changes and the impacts of climate change, is key to ensuring the sustainability of our business.”
KEY PRIORITY: CLIMATE ACTION WATER AND WASTE

We are driving proactive efforts to achieve sustainable reductions in our water footprint, while ensuring the responsible disposal of our waste.
Climate action is our key environmental
priority, and we have set an ambitious
SUSTAINABLE AGRICULTURE
goal of achieving carbon neutrality by We work with our contracted farmers to propagate sustainable agricultural methods, which help preserve eco-systems and reduce the
2022 through a three-pronged approach environmental impacts of their operations.
aimed at reducing emissions, increasing

reliance on renewable energy, and CIRCULAR ECONOMY
There is growing global consensus on the need for eliminating plastic waste, which over the long-term can degrade natural habitats and eco-
carrying out afforestation programmes. systems. We are keen to imbue BAT’s aspirations to eliminate single-use plastic, not just in our operations, but across our supply chain.

OUR ESG PERFORMANCE The Next Step
CLIMATE ACTION MANAGEMENT APPROACH Afforestation

We are governed by BAT’s Environmental Policy, which Biodiversity site in Maragamuwa, Matale: The
outlines the commitment to minimising environmental Company maintains a 123-acre Government-
“As the impacts of climate change impacts and preserving the environment in line with owned land in Matale, in partnership with the
intensify, countries, organisations globally accepted principles of sustainable development.

A comprehensive EHS system ensures the implementation
University of Peradeniya, which is currently
exploring ways to convert the eucalyptus forest
and communities are being called of the Environmental Policy, which is driven by an EHS into an indigenous forest. CTC provides required
upon to accelerate their efforts to Steering Committee. In line with our 2025 climate related
targets, annual goals have been set for carbon reduction,
funds for the maintenance of the land.
drive down emissions and build and performance against these targets are monitored
Reforestation project in Sigiriya: We have joined
efforts with the Forest Department to plant 3,500
in carbon consciousness to their consistently.
species of indigenous trees in a Government
decision making. “ Driving reductions in emissions

owned 12-acre land in Sigiriya, which is a part of
the Murungahitikanda Forest Reserve. CTC will
Most of our emissions arise from our manufacturing provide required funds to convert the land into a
OUR GOALS facility, Green Leaf Threshing Plant and distribution fleet. forest over the next 5 years.
We have installed over 75 energy monitoring points at our
manufacturing facilities, which allows us to clearly identify Distribution of saplings: During the year, 1,000
consumption, intensity levels and areas for improvement. mango saplings were distributed to tobacco and
ACHIEVE CARBON LED solutions account for nearly 80% of our lighting non-tobacco farmers and we hope to widen the
NEUTRALITY BY requirements, while a state-of-the-art magnetic bearing scope of this initiative in 2021.
2022 chiller plant ensures energy efficient cooling. Most of our
100% air conditioning and other machinery & equipment also
CONVERSION run on inverter technology. Our trade marketing vehicle
30% RELIANCE
TO PADDY HUSK fleet has also been converted to hybrid vehicles.
ON RENEWABLE
FUELLED LOOSE ENERGY BY 2023
LEAF BARNS Renewable energy
Reducing dependence on fossil fuels through renewable
energy generation is a key short-to-medium term priority,
as the Company gears up to fulfil 30% of its energy
consumption through renewable sources by 2025. We are
GLIDE PATH gearing up to install a 2MW solar panel at the Colombo
facility and a 400KW panel at our Kandy premises in 2021
with plans to convert 4 leaf depots to renewable energy
Sustained reduction in emissions over the next 3 years. The 100% conversion of traditional
barns to paddy husk fuelled Loose Leaf Barns over the
next 5 years is expected to further reduce emissions in the
Increase reliance on renewable energy tobacco curing process.
Afforestation

Environment
Progress and Results in 2020 sets out guidelines on the measurement, management
In 2020, we recorded a 13% decline in our GHG emissions to 4,043 tCO2e; meanwhile emission intensity also recorded an and effective reduction of water consumption, the
improvement to 0.76, reflecting ongoing efforts in energy efficiency and process innovation. Our energy and emission implementation of which is supported by the Company’s
results are set out below: EHS system and driven by the EHS Steering Committee.
PILLAR RELEVANT SDG AND TARGETS KPI INCREASE

REDUCE
WATER WATER
Target 13.1 : Strengthen resilience GHG EMISSIONS EMISSION INTENSITY
and adaptive capacity to climate-
WITHDRAWAL RECYCLING TO
related hazards and natural disasters 4,034 tCO2e 0.76 tCO2e/MCE BY 30% BY 15% BY
in all countries (2019: 4,665) (2019: 0.94) 2025 2025
EMISSIONS
Target 13.2 : Integrate climate
change measures into national Implementation of IWS has helped optimise water
policies, strategies, and planning consumption in our factory through a range of initiatives
including eliminating leakages and increasing recycling.
Over 30 monitoring points ensure the timely and reliable
Target 7.2 : By 2030, increase ENERGY GENERATION OF tracking of water consumption. We have also upgraded
substantially the share of renewable CONSUMPTION RENEWABLE ENERGY
energy in the global energy mix water tracking by bringing nearly 70% of underground
31,891 GJ 12 Mw monitoring points above ground, thereby ensuring
ENERGY Target 7.3 : By 2030, double the (2019: 39,476) increased visibility and accessibility. We also launched
global rate of improvement in a Building Management System during the year, which
energy efficiency provides access to real time information on water
consumption.
Target 15.2: By 2020, promote TOTAL TREES PLANTED TREES MAINTAINED
47,500+
the implementation of sustainable Supply chain impacts: We work with our contracted
management of all types of forests, 3,500 tobacco farmers in propagating sustainable water use
halt deforestation, restore degraded through irrigation methods. These practices are governed
AFFORESTATION forests and substantially increase SAPLINGS DISTRIBUTED
AND afforestation and reforestation by the STP and Supplier Code of Conduct, which set out
BIODIVERSITY globally 1,000 the minimum standards we expect from all our suppliers
in minimising environmental impact (refer to Sustainable
Agriculture on page 58 for further information)
*GHG emissions are computed based on the GHG Protocol published by the World Resource Institute and World Business Council
for Sustainable Development Effluents & waste
We are committed to recycling the water discharged from
WATER AND WASTE our operations and are currently upgrading the Effluent
Treatment Plant (ETP) to increase recyclable capacity
MANAGEMENT APPROACH
to around 8.7%. Recycled water is used for non-critical
Water activities such as gardening and cleaning of roadways.
We consume water primarily for cleaning and hygiene purposes. The use of water in our manufacturing operation is far less
as they are not water intensive processes. Our waste comprises of tobacco waste, waste from green
leaf threshing as well as polythene, cardboard and food
Although our manufacturing processes are not highly-water intensive, given the increasing risks of global and local water waste. Nearly 90% of our waste is recycled at present with
scarcity, we are committed to do our part to achieve sustained reductions in our water footprint. BAT's Environmental Policy plans to improve this rate to 98% by 2025. We are currently

also exploring avenues to eliminate single-use plastics in

Type of waste Method of disposal % recycled
our direct operations and along our supply chain.
SOLID WASTE
Tobacco waste Sent to Holcim Lanka Ltd for alternative fuel generation 100%
The Company’s hazardous waste consists primarily of its
electronic waste (including printer toners and LED bulbs) Waste wrapping and packaging material Third party recyclers 95%
and oil waste. We have also initiated a comprehensive Food waste from canteen Sent for recycling 95%
waste management agenda to ensure the proper disposal
Used CFL and Fluorescent light bulbs Sent to a recycling facility operated by Orel Corporation 100%
of waste as given in the table across.
Progress and results in 2020

PILLAR RELEVANT SDG AND TARGETS KPI
Target 6.3: By 2030, improve water quality by reducing pollution, eliminating WATER WITHDRAWAL BY SOURCE REDUCTION IN WATER
dumping, and minimising release of hazardous chemicals and materials, halving CONSUMPTION
the proportion of untreated wastewater, and substantially increasing recycling and
safe reuse globally 5% 9%
EMISSIONS
Target 6.4: By 2030, substantially increase water-use efficiency across all sectors WATER RECYCLED
and ensure sustainable withdrawals and supply of freshwater to address water
scarcity and substantially reduce the number of people suffering from water 3.17 MILLION LITRES
scarcity 95% (9% of water withdrawn)
Ground water Municipality line
Target 12.5: By 2030, substantially reduce waste generation through prevention, Water discharge destination WATER DISCHARGED
reduction, recycling, and reuse
Destination Litres 13.78 MILLION LITRES
Target 15.3: Encourage companies, especially large and transnational companies, (1% increase compared to
EFFLUENTS to adopt sustainable practices and to integrate sustainability information into their Sewerage lines 13,762,210 the previous year)
reporting cycle Recycled through ETP 3,167
Ground through soak pits 9,954
Target 12.5: By 2030, substantially reduce waste generation through prevention, Waste by type and disposable method
reduction, recycling, and reuse
Disposable method Hazardous (MT) Non-hazardous (MT)
Target 15.3: Encourage companies, especially large and transnational companies,
SOLID WASTE to adopt sustainable practices and to integrate sustainability information into their Recycling 74.21
reporting cycle Incineration 266.23
Landfill 43.0
Other 12.0

Environment
SUSTAINABLE AGRICULTURE CIRCULAR ECONOMY

MANAGEMENT APPROACH MANAGEMENT APPROACH
As an organisation which relies on agricultural input, Given the increasing scarcity of natural resources and environmental degradation caused by waste, circular economy is
we are cognisant of the role we can play in propagating gaining global traction. BAT considers the principles of circular economy as an opportunity to deliver better products,
sustainable agricultural practices, which preserves the create efficiencies and drive innovation across our operations. Accordingly, a circular economy strategy is currently being
environment while increasing the resilience of farmers. developed to identify and capitalise on such opportunities.
The Sustainable Tobacco Programme sets out criteria for
a range of areas relating to environmental protection, At CTC, we have identified several areas, which can contribute towards a circular economy, as illustrated below. In the
including waste management, recycling, and crop short-to-medium term, we will prioritise the complete elimination of single-use plastics and introduce eco-friendly
management (refer Chapter on Sustainable Supply Chain alternatives, particularly in the kitchen and canteen areas. Over the longer-term, we are committed to extending this across
page 40 for further information). our supply chain, through which we will seek to eliminate single-use plastics from the sourcing of our raw materials to the
distribution of finished products.
Our leaf field team of 38 employees engage closely
with contracted farmers, providing technical assistance
and training on sustainable farming practices and RENEWABLE MATERIALS WASTE MANAGEMENT
technologies. Performance is monitored through a Farmer
Sustainability Monitoring App, which allows farmers Increase reliance on renewable energy Commitment to eliminate single-use plastics
to input relevant assessment information and provide Conversion of traditional barns to paddy 89% waste recycling
verification using biometrics. husk fuelled LLBs
Meanwhile, the Company’s organic home gardening

initiative, SADP has contributed towards uplifting rural
communities and developing a platform for sustainable
agriculture through knowledge transfer, resource
assistance and empowerment. CTC continued to support
4,100 tobacco farmers to grow alternative food crops as
part of SADPUltra (refer Social chapter on page 59 for
further information).

Social
“As a responsible corporate, we have an important role to play in delivering a positive societal impact for our employees and
people across our supply chain. Enhancing farmer livelihoods, respecting human rights and looking after our people adds value
to society and is a pragmatic and commercial approach that secures the long-term sustainability of our business.”
KEY PRIORITY: SUSTAINABLE LIVELIHOODS HUMAN RIGHTS
We are committed to driving socio-economic empowerment in rural communities by As an organisation with an extensive supply chain
providing agricultural knowledge, access to infrastructure, and capacity building. This will and distribution network, we are cognisant of the
role we can play in ensuring fair labour practices
be achieved through both, our network of contracted tobacco farmers and our strategic CSI
and preserving the dignity of labour across our
initiatives, targeting underprivileged communities.
value chain.

Social
HUMAN RIGHTS
OUR GOALS
“As an organisation relying on agricultural input materials, we are exposed to
the risk of human rights issues along the tobacco supply chain. CTC adheres to
MAXIMISE
SUSTAINABLE BAT’s stringent policies on human rights, which demonstrates our commitment to
LIVELIHOODS conducting operations in a way that respects the rights of our employees, business
SUPPORTED BY
ADDRESS RURAL 2025
partners, and the communities in which we operate. “
INEQUALITIES ENSURE HUMAN
THROUGH RIGHTS ACROSS
OUR VALUE CHAIN MANAGEMENT APPROACH
TARGETED
PROJECTS SoBC includes the Workplace and Human Rights Policy, which is aligned to the UN Guiding Principles on Business and
Human Rights and the ILO’s Declaration on Fundamental Principles and Rights at Work. Meanwhile, the Supplier Code
of Conduct and Sustainable Tobacco Programme Policy sets out the minimum standards we expect from our suppliers,
including human rights criteria, which are typically incorporated into our contractual agreements. These frameworks
GLIDE PATH (2025) ensure the prevention of child labour, respecting freedom of association and preventing discrimination and harassment at
the workplace.
+286,900 livelihoods across value chain
Sets minimum standards

+100,000 livelihoods via CSI expected from our operations POLICIES
and suppliers SoBC, Supplier Code of
Policies implemented through Conduct Risk assessments to identify
Zero child labour in tobacco cultivation business procedures and human rights risks of our
DUE DILIGENCE
practices operations and suppliers
Identify, prevent
and mitigate Monitoring and review
human rights through audits and
Proactive and open
REMEDY issues engagement through leaf
stakeholder engagement
field team
‘Speak up; channel to report Remedial action against
grievances and issues of non- any identified human
compliance rights issues
ASSESSING OUR SUPPLY CHAIN

Our leaf team maintains close engagement with our contracted tobacco farmers. The Farmer Sustainability Monitoring
app covers 100% of our contracted farmers and includes a self-assessment for child and forced labour, working conditions,
health & safety and fair treatment. Red flags for risks relating to child labour and forced labour allow immediate reporting
and prompt action is taken to remedy any situation. Other suppliers adhere to the requirements set out in the Supplier
Code of Conduct, which includes assessment criteria on child and forced labour.

SUSTAINABLE LIVELIHOODS The programme is structured in a manner that provides individuals living below the poverty line in selected villages with
agricultural and other inputs to achieve self-sufficiency through home gardening and animal husbandry. The project is
“We seek to drive sustainable and implemented in 4 stages over a period of 30 months as illustrated below.
meaningful change in the lives of

STAGE 1 Preparing compost pits
our contracted farmers and wider (0-6 months)
Registration
and gliricidia fencing
Issuing plants and seeds Field support
rural communities, by multi-faceted

STAGE 2 Issuing plants, seeds
community engagement initiatives, (7-15 months)
Forming clusters Forming societies
and poultry
Field support
which include providing access to basic STAGE 3 Issuing plants and

infrastructure and agricultural skill (16-24 months)
Animal husbandry
seeds
Field support
development. “ STAGE 4 Preparation for Graduation after 30

Field support
(25-30 months) graduation months
MANAGEMENT APPROACH
Our approach is governed by BAT’s Strategic Framework
for Corporate Social Investment, which articulates how SADP aims to enhance the nutrition levels of beneficiary families by increasing the daily calorie intake in line with WHO
companies are expected to develop, deliver and monitor recommendations and provides an additional source of income through the cultivation of alternative crops such as
community investment programmes. All CSI activities are vegetables and maize.
managed at a local level to effectively cater to community
specific challenges and drive needs-based development. Over the years, several variants of the programme were launched based on the specific needs of the respective target
communities. These include:
A dedicated Board sub-committee is in place to ensure
SADPPlus: Provision of agricultural inputs enabling families to cultivate a range of cash and other crops for their
that CTC’s CSI projects are aligned to BAT's Framework
consumption.
and that projects are managed in accordance with the
Statement of Business Principles. SADPLite: Agriculture related vocational training to support ex-LTTE combatants that were undergoing rehabilitation.
SADPMega: Establishment of a 12 acre model farm in Sooriyawewa to serve as a knowledge hub to local farmers.
SUSTAINABLE AGRICULTURE
DEVELOPMENT PROGRAMME (SADP) SADPUltra: Provision of agricultural inputs to cultivate cash crops such as maize among tobacco farmers.
The SADP is the Company’s flagship CSI initiative; it SADP Argo-wells: construction of 100 agro-wells in drought-stricken areas of Welioya to provide water for drinking and
was launched over a decade ago with the objective irrigation.
of contributing towards uplifting communities and
developing a platform for sustainable agriculture Since its launch, SADP and its variants have generated wide-ranging benefits to vulnerable communities, driving socio-
through knowledge transfer, resource assistance and economic empowerment and uplifting livelihoods.
empowerment. To date, the programme has directly
benefited over 80,000 economically underprivileged
individuals in more than 20,000 families across 16
districts. Activities related to SADP are carried out through
Outreach Projects (Guarantee) Limited, an independent
and dedicated organisation set up for the execution
and management of ESG related activities including CSI
projects.

Social
Number of SADP Families By Project SADP Families by District
SADP - 11,761 SADP

SADP Plus - 2,700
Anuradhapura ............................................... 800
SADP Lite - 1,449 Polonnaruwa ................................................. 648
SADP Ultra - 4,100 Kurunegala .................................................... 623
Matale............................................................ 499
Badulla .......................................................... 608
Kandy ......................................................... 2,076
Kegalla........................................................... 643
Nuwara Eliya ................................................. 300
Monaragala.................................................... 558
Hambantota................................................ 1,547
Matara ....................................................... 2,204
Galle ........................................................... 1,255
SADP Plus
Trincomalee ................................................ 1,700

Kilinochchi ................................................. 1,000
SADP Lite
Kandakadu ................................................. 1,449
SADP Ultra
Matale ........................................................ 1,240

Polonnaruwa............................................... 1,168
Badulla.......................................................... 146
Ampara ......................................................... 346
Anuradhapura ............................................... 600
Kurunegala.................................................... 300
Kandy............................................................. 300
1,547

CSI INITIATIVES CARRIED OUT
HOME GARDENING FOR SADP FAMILIES FAMILIES GRADUATED FAMILIES ADDED WATER FOR IRRIGATION
The Company introduced organic home gardening to 600 new families 1,800 600 The Company continues to support rural farmer organisations to rebuild and
across 3 districts in Sri Lanka. The families were given training and provided repair irrigation channels, sluice gates and other infrastructure, which will
with resources such as seeds and saplings to develop their home gardens. support agricultural activities and ensure the continued supply of water.
RURAL FARMERS
PROVISION OF CLEAN DRINKING WATER FAMILIES POTABLE WATER
This initiative supports rural farming communities in which Chronic Kidney 3,750 (PER DAY) 2,650
Disease is highly prevalent, through the installation of Reverse Osmosis 50,000 LITRES
(RO) plants. During the year we installed and commissioned 5 plants, with EMPLOYEE VOLUNTEERISM
BENEFICIARIES
5 more in the pipeline. The Company has commissioned 7 RO plants since
15,000
Our employees contributed one day’s salary, which was matched by
2019, benefiting more than 21,000 people and will continue to support
the Company to support frontline healthcare workers with PPE and
vulnerable communities to access clean drinking water.
packs of dry rations. During the year, the Company also began work on
SMALL SCALE INFRASTRUCTURE DEVELOPMENT SMALL SCALE RATION PACKS the construction of a bus stand in Kotahena.
PROJECTS DISTRIBUTED PACKS OF ESSENTIAL ITEMS AND PPE
We partnered with grassroot level local authorities and other stakeholders
to improve public services and infrastructure. During the year, the Company 130+ 15,000+ 550
also supported communities affected by lockdown through the distribution
of rations and essential items.
PILLAR RELEVANT SDG AND TARGETS KPI
FEMALE REPRESENTATION TOTAL EMPLOYEE PAYMENTS INVESTMENT IN TRAINING

15% Rs. 1.19 BILLION Rs. 13 MILLION
GREAT PLACE TO WORK
BUY-BACK GUARANTEE FROM CONTRACTED PAYMENTS TO CONTRACTED

TOBACCO FARMERS FARMERS
SUSTAINABLE FARMER
100% Rs. 1.66 BILLION
LIVELIHOODS
SADP BENEFICIARIES
Provision of 70,000 litres of clean
80,000 Provided food security
drinking water a day to 21,000+ 35+ irrigation projects
to over 80,000
CORPORATE SOCIAL people via 7 RO plants situated in high providing access to
individuals in more
INVESTMENTS chronic kidney disease prone areas water for irrigation
than 20,000 families
(from 2019-2020)

Governance
“Good corporate governance is key to our sustainable, long-term growth. We are committed to achieving our business objectives
in a transparent and accountable way, and sustaining a culture of integrity in everything we do. Our actions and behaviour
impact all areas of our business, which is why corporate governance is such an important focus for us.”
100% DELIVERY WITH INTEGRITY 100% REGULATORY COMPLIANCE KNOWLEDGE SHARING
Achieve 100% compliance to SoBC, IMP, Ensure full compliance to all relevant Propagate best practices in corporate
Youth Access Prevention guidelines and regulations and legislation including the governance among Sri Lankan companies
comply with all relevant statutory and NATA Act, Labour laws, Environmental laws, by sharing knowledge and expertise.
voluntary guidelines on Board governance. Consumer protection laws, Tax legislations
and related regulations.

ESG GOVERNANCE Speak-Up Channel: The Speak-Up channel allows

employees and third parties working with us to raise
The Company’s ESG agenda is underpinned by a robust framework of policies, procedures, principles and standards, which
concerns or grievances regarding non-compliance
are aligned with international best-practices and customised to suit domestic requirements. The Leadership Team holds
to SoBC. The channel is independently managed and
apex responsibility for the delivery of the Company’s ESG agenda while implementation is driven by a cross-functional
accessible via a designated hotline, an online portal, or one
working group, which works with all relevant functions in achieving specific targets. Progress against ESG targets is
can simply speak to a designated officer, Line Manager,
reviewed quarterly at the Leadership Team - Governance meeting.
or HR. No employee speaking up about any alleged
wrongdoing is victimised in any manner.
INTEGRITY AND COMPLIANCE
Our organisational culture, relations with internal and external stakeholders and overall corporate behaviour is founded Compliance: Compliance to all external and internal
on several key internal instruments set out by BAT. Compliance to these policies, procedures and standards are mandatory regulations, voluntary standards and guidelines are
for all our employees, and regular training and awareness sessions are conducted to ensure that the policies are clearly ensured through a dedicated Compliance Manager, who
understood and actioned. is responsible for implementing BAT’s global compliance
strategy (refer to page 80 for further information). During
Standards of Business Conduct Core policy that clearly sets out the high standards of integrity that is the year under review, the Company was fully compliant
expected from all our employees and covers topics such as anti-bribery to all relevant socio-economic, environmental, and other
and corruption, gifts and entertainment, political contributions, tax evasion, regulations.
human rights and the SoBC assurance procedure among others. All
employees formally confirm every year that they have complied with the KNOWLEDGE SHARING PLATFORM
SoBC through an annual sign-off. We are keen to share our best-in-class governance
practices with other Listed Sri Lankan corporates and are
Statement of Business Principles Our core beliefs and values.
currently exploring ways in which we can partner the CSE
Supplier Code of Conduct Complements the SoBC by defining the minimum standards we expect our in sharing our insights through a structured programme.
suppliers to adhere to.
Anti-Bribery and Corruption Policy Ensures that all third parties and non-company personnel engaged by CTC
comply with stringent anti-bribery and corruption standards while carrying
out work on behalf of the Company.
International Marketing Principles Offers detailed guidance on numerous aspects of tobacco product
marketing, from use of print & electronic media, packaging, sponsorship and
promotional events to Youth Access Prevention.

OUR LEADERSHIP
A Step Towards Leadership

68 | Board of D irectors
72 | Executive Committee
The Next Step OUR LEADERSHIP
Board of
Directors
SURESH KUMAR SHAH ANIL TITTAWELLA YUDHISHTRAN KANAGASABAI

Chairman (W.E.F. 16 February 2021) Independent Non-Executive Independent Non-Executive Director
Independent Non-Executive Director Director
(W.E.F. 1 February 2021)
NEDAL SALEM UMAIR LUQMAN

Managing Director & CEO Finance Director
(W.E.F. 1 November 2020)

OUR LEADERSHIP The Next Step
USMAN ZAHUR RUMANA RAHMAN STUART KIDD

Non-Executive Director Non-Executive Director Non-Executive Director
(W.E.F. 1 February 2021) (W.E.F. 1 February 2021)
WILLIAM PEGEL AMUN MUSTAFIZ

Chairman /Non-Executive Director Finance Director
(resigned W.E.F. 16 February 2021) (resigned W.E.F. 1 November 2020)

Board of
Directors
SURESH KUMAR SHAH Current appointments Cargills Ceylon PLC. He is also a Non-Executive Director
Chairman and Independent Non-Executive Director He holds Directorships in Orient Finance Lanka PLC, and a member of the Board Audit Committee of Cargills
Hyundai Lanka Limited and Shipping & Cargo Logistics Food Company Limited and Cargills Bank Limited. Mr.
Current appointments
Limited (Aitken Spence Group). Kanagasabai is a Non-Executive, Independent Director
Mr. Suresh Shah serves as the Chief Executive Officer and and Chairman of the Audit Committee of Millennium IT
a Board Member of Ceylon Beverage Holdings PLC and (Pvt) Limited, Non-Executive, Independent Director and
Past appointments
Lion Brewery (Ceylon) PLC. He also serves as a Director of member of the Board Audit Committee of Hunters Limited
Carson Cumberbatch PLC, Bukit Darah PLC, and several Mr. Anil Tittawella was a member of the Committee on
PLC, Non-Executive Director and member of the Board
companies within the Carson Cumberbatch Group. Company Law Reform of the Bar Association of Sri Lanka
Audit Committee of Lanka Canneries Limited, and a Non-
(1995-1996), a member of Sri Lanka Swedish Joint Legal
Executive, Independent Director and Chairman of the Board
Past appointments Team to formulate the Arbitration Act of Sri Lanka (1994-
Audit Committee of Eswaran Brothers Exports (Pvt) Limited.
1997) and also a Legal Consultant to the Airport and Civil
Prior to joining the Carson’s Group, Mr. Shah served as the
Aviation Authority of Sri Lanka (1994-1997). Further, Mr.
CFO of Lankem Ceylon PLC and United Motors PLC. He Past appointments
Tittawella was the Founding Member of the Institute of
has also served as the Chairman of the Ceylon Chamber Mr. Kanagasabai was a Senior Partner/Chief Executive
Commercial Law and Practice in Sri Lanka (1995). He was a
of Commerce and the Employers Federation of Ceylon. Officer of PricewaterhouseCoopers in 2006. He was also
Member of the Ceylon Chamber of Commerce Committee
Mr. Shah has served as a Commissioner of the Securities a Non-Executive Director and Chairman of the Board
on Company Reforms (1993), a Commission Member of
and Exchange Commission of Sri Lanka and served as a Audit Committee of Union Bank PLC (A Texas Pacific
the Securities and Exchange Commission of Sri Lanka
member of the Monetary Policy Consultative Committee Group Subsidiary) and the Commissioner of the Insurance
(2000-2002) and a Member of the Insurance Board of Sri
of the Central Bank of Sri Lanka. Regulatory Commission of Sri Lanka.
Lanka (2001-2002).
Skills and experience Skills and experience

Skills and experience
Mr. Shah is a Fellow Member of the Institute of Chartered Mr. Kanagasabai served PricewaterhouseCoopers since its
A renowned lawyer in Sri Lanka and a President’s Counsel,
Accountants of Sri Lanka and brings a wealth of business inception in 1981 and has held progressively responsible
Mr. Tittawella holds a Masters’ in Law (Hons) from the
acumen, serving as Director on the Board of the reputed positions before being appointed as Senior Partner/
University of Waikato, New Zealand. He has extensive
blue chip, Carson Cumberbatch & Co. PLC, since 2002, Chief Executive Officer in 2006, a position he retired from
experience in litigation and alternate dispute resolution
and Director/CEO of Ceylon Beverage Holdings PLC since in 2017. He elevated the profile of both the Sri Lankan
focusing on civil and commercial law with a diverse
1991, and Lion Brewery Ceylon PLC since its inception in and the Maldives practices of the Firm to consistently
clientele from Sri Lanka, Pakistan, South Korea, Hong Kong,
1996. Through his numerous leadership roles in business provide quality solutions to clients within appropriate
Sweden, UAE, Thailand, Singapore, England, USA, India,
chambers, industry forums and associations, Mr. Shah has standards and applicable best practices. Mr. Kanagasabai
Mauritius, New Zealand, and Switzerland.
contributed towards developing policies in creating a has extensive knowledge of current economic, social, and
more conducive business environment in the Country. regulatory issues. He is a Fellow of the Institute of Chartered
YUDHISHTRAN KANAGASABAI
Independent Non-Executive Director Accountants of Sri Lanka.
ANIL TITTAWELLA
Independent Non-Executive Director Independent Non- Executive Director, Chairman of the NEDAL SALEM
Audit Committee, Related Party Transactions Review Managing Director & CEO
Independent Non-Executive Director, Chairman of Board
Committee and member of Board Compensation and
Compensation and Remuneration Committee, Corporate Managing Director & CEO, Chairman of the Nominations
Remuneration Committee, Corporate Social Investment
Social Investment Steering Committee and member Committee, and member of the Corporate Social
Steering Committee and Nominations Committee.
of Related Party Transactions Review Committee, Audit Investment Steering Committee.
Committee and Nominations Committee.
He was appointed as an Independent Non-Executive
Director and member of the Board Audit Committee of Serves on the Board of American Chamber of Commerce
Sri Lanka (AMCHAM).

Past appointments shaped key business strategies while developing and Past appointments
Mr. Nedal Salem joined BAT in 1998 as the Country nurturing high-performing teams. He holds a degree in Ms. Rumana Rahman previously served as the Head of HR
Manager of Jordan. Prior to his appointment as Managing BSc. (Hons) Accounting & Finance and an MBA in General at BAT Bangladesh Company Ltd.
Director & CEO of CTC, he was the Head of Brand Management from the Lahore University of Management
Marketing at BAT Indonesia from 2017 to 2019. Sciences, Pakistan. He is also an Associate Member of the Skills and experience
Chartered Institute of Management Accountants (CIMA)
Ms. Rahman has extensive experience in human resource
Skills and experience of UK.
management leading HR in 33 countries of the Group
Over the last 20 years, Mr. Salem has built high performing in APME. Her capabilities include talent, developing
USMAN ZAHUR
teams through his inspiring and inclusive leadership styles. employer brands, organisational development, HR
Non-Executive Director
He has contributed towards the growth of BAT’s global transformation and change management. She was the first
drive brands and delivered a strong financial performance Non-Executive Director, and member of Audit Committee, South Asian female and first Bangladeshi to be appointed
in various BAT companies. He holds a Bachelor of Arts (BA) Related Party Transactions Review Committee and Board to the Regional Leadership Team and is the First South
in International Business from The George Washington Compensation and Remuneration Committee. Asian female leader of top 120 leaders of Group. She was
University. recognised as the 'Most Inspiring Woman Leader' by Brand
Current appointments Forum in 2016.
UMAIR LUQMAN He was appointed as Area Director - Asia Pacific Area on 1
Finance Director March 2021. STUART KIDD
Member of the Corporate Social Investment Steering
Committee since 16 February 2021.
Past appointments Current appointments
Mr. Usman Zahur has served as the Managing Director Regional Head of Finance, APME - BAT.
Current appointments & CEO of Pakistan Tobacco Company Limited since
N/A January 2020. In 2012, Mr. Usman Zahur was appointed Past appointments
as the Head of Marketing in BAT Bangladesh Company
Mr. Stuart Kidd has held several senior finance roles
Past appointments Ltd. In 2015, he moved to BAT HQ and was instrumental
across markets, including New Zealand, Vietnam, United
in developing the “KENT” brand. Mr. Zahur was later
Mr. Umair Luqman has acted in the capacity of Corporate Kingdom, Hong Kong, Switzerland and Japan.
appointed as the Area Marketing Director for South Asia
Finance Controller and Senior Commercial Finance
Cluster and Deputy Managing Director in 2017.
Manager – Operations & Marketing at Pakistan Tobacco Skills and experience
Company Ltd. He has also held the role of Head of Internal He has over 19 years of experience across diverse BAT
Skills and experience
Audit at BAT (South Asia). Mr. Luqman has held various markets, including several successful stints as Finance
senior positions in the areas of Statutory, Treasury, Tax, Mr. Zahur joined Pakistan Tobacco Company Limited 21
Director, most recently in Japan where he successfully
Planning and Reporting at Pakistan Tobacco Company Ltd. years ago and since then he held various senior marketing
contributed to BAT's New Category growth and business
positions in the areas of brands, trade and strategic
transformation agenda. He has also been involved in
Skills and experience planning and insights across different markets. He played
mergers and acquisitions across the Region.
a key role in building and deploying the KENT Next
Mr. Luqman joined Pakistan Tobacco Company Ltd in Mr. Kidd holds a Bachelor of Commerce from the
Generation Product Agenda in Romania and Japan.
2009 and has multi-faceted experience in driving high- University of Auckland and is a Certified Chartered
performing, cross cultural teams to achieve strategic Accountant of the Australia and New Zealand Institute of
RUMANA RAHMAN
aspirations. He has worked proactively in building Chartered Accountants.
robust control environments and has driven initiatives
in strengthening corporate governance practices. Mr. Current appointments
Luqman also has experience in the areas of revenue Regional Head of Talent, Culture & Inclusion, APME - BAT.
planning, and pricing & excise management and has

Executive
Committee
NEDAL SALEM SUDESH PETER KAVINDA NANAYAKKARA

Managing Director & CEO Head of Legal & External Affairs Head of Marketing
and Company Secretary

ALEXANDER UGARTE UMAIR LUQMAN ARUNI ABEYSEKERA

Head of Operations Finance Director Head of Human Resources

GOVERNANCE AND RISK
A Step Towards Truﬆ

76 | Board G overnance
77 | D riving Strategy and Per formance
80 | Compliance O ver vie w
82 | Corporate G overnance
85 | R isk Management
88 | A ssessment of G oing Concern
89 | Statement of Internal Controls
90 | R epor t of the Board of D irectors
93 | Statement of D irectors’ R esponsibilities for Financial Statements
94 | R epor t of the Audit Committee
96 | R epor t of the R elated Par t y Transactions R e vie w Committee
97 | R epor t of the Board Compensation and R emuneration Co mmittee
98 | R epor t of the Nominations Committee
The Next Step GOVERNANCE AND RISK
Board
Governance
“Strong corporate governance practices are key in driving sustainable and Non-Executive Directors undergo a 3-day induction programme,
with comprehensive coverage on all operational aspects. These
shared growth. At CTC, good corporate governance begins with our Board of sessions include:
Directors and extends to every employee, thereby ensuring that transparency One-to-one session with the Chairman.
and integrity are vital in all our actions and behaviours.” Sessions with department heads, including presentations
covering all functions, which include Marketing, Supply Chain,
Finance, Human Resources, and Legal & External Affairs.
EFFECTIVE LEADERSHIP
Site-visit to factory and a tobacco cultivation area providing
As the apex governing body, the Board of Directors serves as the custodian of the Company’s Corporate Governance
Directors with an opportunity to meet contracted tobacco
and is collectively responsible to the shareholders of the Company for its long-term success and the Company’s
farmers and barn owners.
strategic direction, values and governance. The Board comprises of 8 Directors including the Chairman, of whom 2
are Executive and 6 are Non-Executives of whom 3 are independent. The BAT Group is represented by 5 Directors, In addition, Directors receive regular briefings.
3 of whom hold no executive functions. The Board combines diverse skills and perspectives, bringing together
professional and academic expertise both locally and internationally; this serves to enrich discussions leading to CONFLICTS OF INTEREST
more effective decision making. Please refer to page 70 for detailed profiles of Directors. The Directors are cognisant of their duties in dealing with
situations in which conflicts of interest could arise and there are
The Board was refreshed recently and key changes made as follows: multiple channels available for Directors to disclose potential
conflicts. Annual declarations of independence or non-
Resignation of Ms. Amun Mustafiz as Finance Director in November 2020
independence are obtained from all Non-Executive Directors in
Appointment of Mr. Umair Luqman as Finance Director in November 2020 accordance with the stipulations of the Listing Rules of the CSE
Appointment of 2 Non-Executive Directors (Ms. Rumana Rahman and Mr. Stuart Kidd) and 1 Independent Non- and the guidelines of the Code of Best Practice on Corporate
Executive Director (Mr. Suresh Shah) in February 2021 Governance. The Board also has formal procedures for managing
Appointment of Independent Non-Executive Director (Mr. Suresh Shah) as the Chairman in February 2021 conflicts of interest and Directors are required to provide advance
following Mr. William Pegel's resignation from the Board. notice of the same to the Company Secretary. From the present
Board, 3 Directors are deemed independent of management and
free of any business or other relationship that could materially
BOARD COMPOSITION BOARD EXPERTISE
affect the exercise of their independent judgement.
Tobacco industry 5
Marketing 3 BOARD CONTRIBUTION TO VALUE CREATION
Executive Directors
2 Finance and Accounting 4
3 DRIVING STRATEGY AND PERFORMANCE
Non-Executive Directors Legal 1 Ensuring that the Company’s strategy is aligned to its business purpose and
Independent Human Resources 1 monitoring the effective implementation of the strategy.
3 Non-Executive Directors FMCG 1
0 1 2 3 4 5 6 RISK AND CONTROL
Exercising oversight on risk management practices and internal controls.
INDUCTION AND TRAINING
SHAPING ORGANISATIONAL CULTURE
Directors undergo a comprehensive induction upon joining the Board, including their duties & responsibilities, and
Setting the right tone and nurturing a culture of integrity and transparency.
information encompassing matters pertaining to the Company and the industry. An induction pack, consisting of
the Company’s Articles of Association, the NATA Act, Board Charters and Annual Reports, is provided to all newly
SUSTAINABILITY AND STAKEHOLDER ACCOUNTABILITY
appointed Directors. On an ongoing basis, Directors also receive briefings designed to update their skills and
Driving the sustainable creation of shared value across our stakeholder
knowledge, for example, in relation to the business and on legal & regulatory requirements. Directors also participate
universe.
in relevant external training sessions, such as those organised by the Sri Lanka Institute of Directors.

GOVERNANCE AND RISK The Next Step
Driving
Strategy and Performance
Despite the unprecedented challenges that prevailed during the year, the Company’s strategy served it well, attesting to its resilience and relevance in difficult times. During the year, the
Board's focus was directed primarily towards implementing measures to ensure the safety of employees and business partners, while driving business continuity.
Ensuring relevance and implementation of the Company’s win-win-

Monitoring the achievement of ESG goals and target.
win strategy.
Reviewing progress of CSI initiatives. SUSTAINABILITY GROWTH
AND CSI Monitoring performance against short-term and long-term strategic
priorities.
STRATEGIC
PILLAR
Providing guidance on implementing comprehensive measures WINNING PRODUCTIVITY Evaluating progress of IWS and other lean management initiatives.
to ensure the safety of all employees. ORGANISATION Providing guidance for further utilisation of Company assets to
Ensuring people development, diversity, and inclusion. increase shareholder value.
BOARD MEETINGS Other members of the Executive Committee and Senior the meetings, providing adequate time for preparation,
The Board meets on a quarterly basis with special Management are invited to meetings from time to time, thereby ensuring informed decision making. Given the
meetings convened if and when the need arises. The in particular, when the Company’s business strategy and conditions that prevailed during the year, the quarterly
Board agenda is set by the Chairman in consultation with annual budgets are under discussion. Board papers are meetings were held virtually.
the Managing Director & CEO and the Company Secretary. circulated electronically, at least 5 working days prior to
Director Board Audit Board Compensation and Nominations CSI Steering Related Party Transactions
Committee Remuneration Committee Committee Committee Committee
Mr. William Pegel (Resigned W.E.F. 16 February 2021) 4/4

Mr. Nedal Salem 4/4 *4/4 1/1 2/2
Mr. Usman Zahur 4/4 4/4 0/1 4/4
Mr. Yudhishtran Kanagasabai 4/4 4/4 1/1 1/1 2/2 4/4
Mr. Anil Tittawella 4/4 4/4 1/1 1/1 2/2 4/4
Ms. Amun Mustafiz (Resigned W.E.F. 1 November 2020) 2/2 *2/2 2/2 *2/2
Mr. Umair Luqman (Appointed W.E.F. 1 November 2020) 2/2 *2/2 1/2 *2/2
Mr. Suresh Kumar Shah (Appointment W.E.F. 1 February 2021) 1/1
Mr. Stuart Kidd (Appointment W.E.F. 1 February 2021) 1/1
Ms. Rumana Rahman (Appointment W.E.F. 1 February 2021) 1/1
*Invitee

Driving
Strategy and Performance
BOARD REMUNERATION 05 Directors who serve on Board Sub-Committees Executive Director, who is a member of a recognised
enabling engagement with management personnel professional accounting body with extensive experience
The Board Compensation and Remuneration Committee
on specific matters. in relevant areas. The Chairman works closely with
is responsible for determining the framework and policy
the Company’s Finance Director in discharging his
in terms of engagement (including remuneration) of the Approval of the Company’s strategic agenda.
responsibilities. (Refer to the Report of the Audit
Chairman, Executive Directors, Non-Executive Directors
Regular monitoring of performance reports. Committee on page 94 of this Report). The Terms of
and Senior Management. The Terms of Reference of the
Reference of the Audit Committee complies with the
Committee comply with the guidelines prescribed by
PERFORMANCE AND EVALUATION recommendations of the Code of Best Practice on
the Code of Best Practice on Corporate Governance,
As prescribed by the Code of Best Practice on Corporate Corporate Governance and Listing Rules stipulated by
CSE Listing Rules and SEC Guidelines. The Company’s
Governance, the Board evaluates its own performance the CSE.
Remuneration Policy is designed to provide a structured
and balanced remuneration package, with the objective through an annual self-assessment undertaken by each
Director. The assessment covers several topics relating The Audit Committee is responsible for reviewing and
of attracting and retaining top talent. The Remuneration
to the contribution of each Director and the collective monitoring;
Policy covers performance based variable rewards (cash
and share incentives, annual bonus plans and long-term efficiency, effectiveness, and quality of Board activities. The integrity of the Company’s financial statements
incentive plans); the core fixed elements (base salary The results of the overall evaluation are discussed with and any formal announcement relating to the
and benefits); pension; terms of service contracts and the Chairman and presented to the Board and each of the Company’s performance, considering any significant
compensation payments. Committees in respect of its own performance. issues and judgements reflected in them before their
submission to the Board;
Further details on the activities of the Board Compensation RISK AND CONTROL
The consistency of the Company’s accounting
and Remuneration Committee are provided on page 97 of The Board holds ultimate responsibility for ensuring that
policies;
this Report. The aggregate remuneration paid to Executive the Company’s risks are managed effectively through a
Directors and Non-Executive Directors is disclosed in the robust framework of policies, procedures and internal The effectiveness of the Company’s accounting, risk,
Notes to the Financial Statements on page 122 of this control systems. To this end, the Board determines the risk and internal control systems;
Report. appetite that the Company is willing to take to achieve its
The effectiveness of the Company’s internal audit
strategic objectives. A discussion on the Company’s key
function; and
ACCESS TO INFORMATION risk exposures and mitigation mechanisms are given in
The Company Secretary, under the direction of the the Risk Management Report on page 85 of this Report. The performance, independence and objectivity
Chairman, is responsible for ensuring that the Board A risk register based on a standardised methodology is of the Company’s External Auditors, making
and its sub-committees receive high quality, up-to-date used to identify, assess, manage and monitor financial and recommendations as to their reappointment, while
information for review, in sufficient time ahead of each non-financial risks. Risk performance is monitored against approving their terms of engagement and the level
meeting. The Company Secretary also ensures efficient defined parameters and reviewed by the Board, through of audit fees.
information flow within the Board and its sub-committees the Audit Committee. This quarterly exercise enables the
and between the Non-Executive Directors and Senior review of the effectiveness of the Company’s risk and CTC’s financial statements are prepared in accordance with
Management, while advising the Board on all corporate internal control systems. (Refer page 89 of this Report for the Sri Lanka Financial Reporting Standards, laid down
governance matters. All Directors have access to the Director’s statement on Internal Controls) by the Institute of Chartered Accountants of Sri Lanka.
advice and services of the Company Secretary. The Report also contains a declaration of the Board of
ACCOUNTABILITY AND AUDIT Directors on the affairs of the Company (refer page 90), the
ENGAGING WITH THE BUSINESS The Audit Committee is entrusted with the responsibility Statement of Directors' Responsibilities (refer page 93), and
in ensuring the integrity of the Company’s financial Directors’ Statement on Internal Controls (refer page 89).
Directors maintain ongoing engagement with the
business, which enable a deeper understanding of its statements, as well as internal controls and compliance.
operations, risks, and performance. The Committee is chaired by an Independent Non-

External Auditors and Auditor Independence

ETHOS
Policy:
The Company’s External Auditors are Messrs. KPMG, and
they have not engaged in any services which are in the
restricted category as stipulated by the CSE for external
auditors. There is a formalised policy in place aimed EMPOWERED BOLD FAST DIVERSE RESPONSIBLE
at safeguarding and supporting the independence
and objectivity of the Company’s External Auditors.
As prescribed in this policy, external auditors may be SUSTAINABILITY AND STAKEHOLDER ACCOUNTABILITY
engaged to provide services only in cases where those In 2020, the Company launched a comprehensive ESG Framework, marking a step change in its sustainability aspirations
services do not impair their independence and objectivity. and placing sustainability at the centre of its decision making. A dedicated CSI Steering Committee supports the Board in
The audit fees paid by the Company to its Auditors are discharging its sustainability and CSI related duties and is responsible for ensuring;
separately classified on page 123 of the Notes to the
Financial Statements. The Company’s management of CSI and the conduct of business in accordance with the SoBC and making
appropriate recommendations to the Board on CSI matters,
SHAPING ORGANISATIONAL
The effectiveness of the Company’s strategy in managing significant social, environmental, and governance issues,
CULTURE
The Company is committed to upholding the highest The Company’s sustainability plans and activities; and
standards of integrity, business ethics and transparency The effectiveness of CSI governance.
in all aspects of its operations, and the Board plays an
important role in shaping an organisational culture Please refer to page 25 for further information on the progress of the Company’s Sustainability Agenda.
which values these behaviour. BAT’s new ‘Ethos’- which
evolved from our guiding principles is key in leading our SHAREHOLDER COMMUNICATION
organisational culture and behaviours. It is the thread
The Company strives to engage with its shareholders in a continuous and open manner. The Annual General Meeting
that runs through everything we do and how we do it.
(AGM) is the main forum for engagement and is generally well attended. Notice of the AGM and relevant documents are
It is aimed at creating an organisation that is responsive
sent to shareholders at least 15 working days prior to the AGM. A summary of procedures governing voting at the AGM is
to change and which embodies a culture of continuous
provided in the proxy form and circulated to shareholders prior to the meeting. Directors, including the Chairman of the
learning.
Audit Committee attend the AGM to respond to questions raised by shareholders.
Meanwhile, the SoBC clearly outlines the standards we

Communication with shareholders is also facilitated through the Company’s website and announcements to the CSE.
expect from our employees and suppliers relating to
Quarterly performance updates are released to the CSE and published on the Company website. Meanwhile, the Assistant
preventing bribery and corruption, money laundering
Company Secretary acts as the point of contact for clarifications, suggestions or complaints raised by shareholders.
and political contributions. In creating an open culture,
the ‘Speak Up’ channels encourage employees and/or The Company’s engagement with other stakeholder groups are listed on pages 26 to 27 of this Report.
our business partners to raise any concerns or grievances
confidentially and anonymously. This includes the 'Speak
up' hotline and 'Speak up' portal, which are managed
independently and available 24 hours. Allegations that
are raised through the external 'Speak up' channels
(www.bat.com/speakup or the 'Speak up' hotline), will be
automatically entered into the SoBC portal, 'Conversant',
which access is only provided to internal employees.

Compliance
Overview
CTC benefits from the globally recognised, best-in-class governance practices of its parent entity BAT, which includes robust STANDARDS OF BUSINESS CONDUCT
policies, principles and standards that are aligned with international standards. The Company’s corporate governance (SoBC)
framework is broadly aligned to that of BAT, but has been further refined to comply with domestic requirements under the The SoBC represent the core global policies that
Companies Act No. 7 of 2007, the Listing Rules of the CSE and other relevant local laws and regulations. The Company has articulate the high standards expected from our Directors,
also adopted the revised Code of Best Practice on Corporate Governance. employees and 3rd parties working on behalf of the
Company. It requires all staff to act in an ethical and
Standards of Business Conduct (SoBC) transparent manner with the highest standards of business
Core Group policies such as: integrity, comply with all applicable laws and regulations
Anti-Bribery and Corruption, and ensure that our standards are never compromised
Anti-illicit trade Intelligence Compliance Procedure for results. Critical areas of focus include bribery and
Sanctions Compliance Procedure corruption, political & charitable contributions, and
money laundering. The Audit Committee is responsible
POLICIES The SoBC is complemented by for monitoring compliance with the SoBC. Awareness
Supplier Code of Principles of Assurance Health & Safety Environmental and understanding is promoted through regular policy
Conduct Engagement Procedure Policy Policy road-shows, trainings, and communications. During the
year, we also launched the SoBC app, allowing easy access
BOARD OF DIRECTORS and understanding in applying the policy and relevant
disclosures.
Audit Board Nominations CSI Steering Related Party
Committee Compensation Committee Committee Transactions
ANNUAL SoBC SIGN-OFF
and Review
Remuneration Committee COMPLIANCE
OVERSIGHT
Committee
100%
All employees are required to formally confirm their compliance
to the SoBC every year. During this sign-off they undergo
Annual SoBC training and assessment and reaffirm their commitment to the
Key Audit Controls Policy Cascade Speak-up Channels
Sign-off SoBC by disclosing if they have any conflicts of interest with the
CONTROLS business.

POLICY FRAMEWORK Highlights of 2020 include,
The Company’s policy framework is aligned to that of its parent Revamped the Whistleblowing policy through the launch of a new SoBC Assurance Procedure;
entity. In 2020, CTC came under the purview of BAT’s MESA Area,
Annual review of all policies and procedures;
thereby necessitating the adoption of several Area policies such
as Gifts & Entertainment and Assurance Procedure. CTC has also Organisation-wide policy cascades and workshops to raise awareness;
established several local policies such as records management and
Roll-out of 3rd party Supply Chain Compliance Procedure; and
data privacy and updated other policies including Statement of
Delegated Authorities. Digitalisation of the SoBC through the launch of a mobile app.

SUPPLY CHAIN COMPLIANCE PROCEDURE (SCCP)

The SCCP sets out the responsibilities and commitment expected from our suppliers and contractors in minimising the risk
of illicit trade and tax evasion. The Procedure aims to maintain robust supply chain controls where there are risks that our
tobacco leaf and/or products may be smuggled and/or that taxes may be evaded. The Procedure sets out supply chain
controls that should be maintained including ‘Know Your Customer’ and ‘Know Your Supplier’ evaluation and approval
procedures, tracking and tracing supplies and training for supply chain entities.
EXTERNAL AND INTERNAL COMPLIANCE

External compliance: A strong compliance and control environment has been nurtured through comprehensive policies
& procedures, structured governance mechanisms and ongoing sessions to raise employee awareness. Compliance to
external laws and regulations are ensured through a comprehensive process, which involves the clear identification of
regulatory and statutory obligations and continuous monitoring of a checklist of regulatory payments, including excise
& sales tax, EPF and ETF contributions. This is reviewed by the Audit Committee while the Company Secretary and the
Legal & External Affairs department keeps the Board abreast of any changes in the regulatory and statutory environment,
particularly pertaining to the NATA Act, and related regulations.
Internal compliance: BAT’s global compliance programme, ‘Delivery with Integrity’, focuses on strengthening and driving
a globally consistent approach to compliance across the BAT Group. With CTC coming under the purview of the MESA Area,
internal compliance has been strengthened, thereby ensuring the effective implementation of BAT’s global compliance
strategy.
A dedicated Compliance Manager reports directly to the MESA Area on compliance to the SoBC and adherence to all
internal policies and procedures, thereby improving the overall control environment. Meanwhile, Heads of key functions
are required to annually sign-off on the key controls that they are expected to have in place as part of a self-assessment
mechanism for internal controls. Any material areas of concern and the action plan to address them are also reported
together with compliance of SoBC.

Corporate
Governance
Listing Board Applicable Requirement Compliance Applicable section in the Annual Report
Rule No. Status
7.10.1(a) Non-Executive Directors At least 1/3 of the total number of Directors should be Non- Compliant Board Governance on page 76.
Executive Directors
7.10.2(a) Independent Directors Two or 1/3 of Non-Executive Directors, whichever is higher, should Compliant Board Governance on page 76.
be independent
7.10.2(b) Independent Directors Each Non-Executive Director should submit a declaration of Compliant Board Governance on page 76.
independence/non-independence
7.10.3(a) Disclosures relating to a. The Board shall make a determination annually as to the Compliant Report of the Board of Directors on page 90.
Directors independence or non independence of each Non-Executive
Director
b. Names of independent Directors should be disclosed in the Board of Directors on pages 68 to 71.
Annual Report
7.10.3(c) Disclosure relating to A brief resume of each Director should be included in the Annual Compliant Section of Board of Directors on pages 70 to 71.
Directors Report including the areas of expertise
7.10.3(d) Disclosure relating to Upon appointment of a new Director to the Board, a brief resume Compliant Report of the Board of Directors on page 90.
Directors of each Director should be provided to the CSE.
7.10.4 Criteria for defining As per defined criteria of the CSE Listing Rules Compliant Report of the Board of Directors on page 90.
independence
7.10.5 Remuneration Committee A Listed Company shall have a Remuneration Committee Compliant Report of the Board Compensation and Remuneration
Committee on page 97.
7.10.5(a) Composition of the The Committee shall comprise of Non-Executive Directors, a Compliant Report of the Board Compensation and Remuneration
Remuneration Committee majority of whom shall be independent Committee on page 97.
7.10.5(b) Report of the The Remuneration Committee shall recommend the remuneration Compliant Report of the Board Compensation and Remuneration
Remuneration Committee of the Chief Executive Officer and Executive Directors Committee on page 97.
7.10.5(c) Disclosure in the Annual The Annual Report should set out; Compliant Report of the Board Compensation and Remuneration
Report relating to a. Names of Directors comprising the Remuneration Committee Committee on page 97.
Remuneration Committee
b. Statement of remuneration policy Compliant Report of the Board Compensation and Remuneration
Committee on page 97.
c. Aggregate remuneration paid to Executive & Non-Executive Compliant Note 5 to Financial Statements on page 122.
Directors
7.10.6 Audit Committee The Company shall have an Audit Committee Compliant Report of the Audit Committee on pages 94 to 95.

Rule No. Status
7.10.6(a) The composition of the a. The Committee shall comprise Non-Executive Directors, a Compliant Report of the Audit Committee on pages 94 to 95.
Audit Committee majority of whom shall be independent
b. The Chief Executive Officer and the Chief Financial Officer Compliant Report of the Audit Committee on pages 94 to 95.
should attend Audit Committee Meetings
c. The Chairman of the Audit Committee or one member should Compliant Report of the Audit Committee on pages 94 to 95.
be a member of a professional accounting body
7.10.6(b) Audit Committee Overseeing of the, Compliant Report of the Audit Committee on pages 94 to 95.
Functions (i) Preparation, presentation and adequacy of disclosures in
the Financial Statements, in accordance with the Sri Lanka
Accounting Standards.
(ii) Compliance with financial reporting requirements, information Compliant Report of the Audit Committee on pages 94 to 95.
requirements of the Companies Act and other relevant financial
reporting related regulations and requirements.
(iii) Processes to ensure that the internal controls and risk Compliant Report of the Audit Committee on pages 94 to 95.
management are adequate to meet the requirements of the Sri
Lanka Auditing Standards.
(iv) Assessment of the independence and performance of the Compliant Report of the Audit Committee on pages 94 to 95.
External Auditors.
(v) Make recommendations to the Board pertaining to Compliant Report of the Audit Committee on pages 94 to 95.
appointment, re-appointment and removal of External Auditors
and to approve the remuneration and terms of engagement of
the External Auditors.
7.10.6(c) Disclosure in the Annual a. Names of Directors comprising the Audit Committee Compliant Report of the Audit Committee on pages 94 to 95.
Report relating to Audit
b. The Audit Committee shall make a determination of the Compliant Report of the Audit Committee on pages 94 to 95.
Committee
independence of the Auditors and disclose the basis for such
determination
c. The Annual Report shall contain a Report of the Audit Compliant Report of the Audit Committee on pages 94 to 95.
Committee setting out the manner of compliance of the
functions
9.2.1 Related Party Transactions The Company shall have a Related Party Transactions Review Compliant Report of the Related Party Transactions Review
Review Committee Committee (RPTRC) Committee on page 96.

Corporate
Governance
Rule No. Status
9.2.2 The composition of RPTRC The Committee should comprise of a combination of Non- Compliant Report of the Related Party Transactions Review
Executive Directors and Independent Non- Executive Directors Committee on page 96.
One Independent Non-Executive Director should be appointed as Compliant Report of the Related Party Transactions Review
Chairman of the Committee Committee on page 96.
9.3.2.(c) Disclosure in the Annual Names of the Directors comprising the Committee; Compliant Report of the Related Party Transactions Review
Report relating to RPTRC Committee on page 96.
A statement to the effect that the Committee has reviewed the Compliant Report of the Related Party Transactions Review
Related Party Transactions during the financial year and has Committee on page 96.
communicated the comments/ observations to the Board of
Directors.
The policies and procedures adopted by the Committee for Compliant Report of the Related Party Transactions Review
reviewing the Related Party Transactions. Committee on page 96.
The number of times the Committee has met during the Financial Compliant Report of the Related Party Transactions Review
Year Committee on page 96.
9.3.2.(d) Declaration by Board of A declaration by the Board of Directors in the Annual Report as Compliant Report of the Board of Directors on page 90.
Directors an affirmative statement of the compliance with these Rules
pertaining to Related Party Transactions

Risk
Management
The year under review presented extraordinary challenges given the outbreak of COVID-19 and the resultant economic, human, and social consequences of
the pandemic. Against this backdrop, the Company further strengthened its risk management mechanisms, proactively monitoring emerging developments to
effectively identify emerging risks that could affect its performance, stability, business model or its supply chain. Given the conditions that prevailed, the Company’s
risk landscape underwent several changes, reflecting the disruptions to the business and it’s value chain. Other major risk factors remained broadly unchanged
compared to 2019.
RISK GOVERNANCE MANAGEMENT APPROACH Risk Identification- Every year, a risk assessment is carried out to identify
The Board of Directors holds ultimate responsibility for the principal uncertainties facing CTC, including those that would
ensuring that the Company’s risks are identified and threaten its business model, future performance, solvency and liquidity.
mitigated effectively. The Board is supported by the RISK Financial and non-financial risks are identified at a functional level, with
IDENTIFICATION inputs from relevant employees. This is done through team discussions
Audit Committee and a dedicated Risk Management
Committee (RMC) at executive level in discharging its and brainstorming sessions, which facilitate value addition. The identified
risk management responsibilities. The Audit Committee risks are reviewed for completeness by the RMC on a regular basis and
ASSESSMENT
reviews the effectiveness of the Company’s risk AND reported to the Audit Committee.
MONITORING
management and internal control systems at least bi- EVALUATION
Assessment and Evaluation- Risk registers, which are standardised
annually. The RMC, headed by the Company’s Finance
RISK across BAT, are used to assess and evaluate risks. All identified risks
Director and consisting of Senior Managers representing
MANAGEMENT are assessed at three levels (high/medium/low) with reference to the
key functions, reports to the Executive Committee on
likelihood of occurrence and the potential impact. Tolerance levels and
the risk performance of each function on a regular basis.
trigger points are also defined for each identified risk. The risk registers are
The Company’s risk profile is also monitored through the
validated by the RMC and reviewed regularly by the Executive Committee,
internal reporting mechanisms of the BAT Group.
and at least bi-annually by the Board and the Audit Committee.
Regional Audit Board of

3 6 9
Committee Directors
High
(3)
Board of Directors
IMPACT
Medium
Audit Executive 2 4 6
(2)
Internal Audit
Committee Committee Review
Low (1)
1 2 3
Risk Audit Committee
Low (1) Medium (2) High (3)
Management LIKELIHOOD
Committee
IMPACT: LIKELIHOOD: RISK STATUS NEW AND
Increased Increased Under DELETED RISKS
The Company’s risk management framework is In Place On Track
Decreased Decreased Development
Risk Management Committee Same
characterised by defined mandates, comprehensive The current Some current Current activities
New Risk
Analysis activities activities to manage to manage the risk
policy frameworks and clear governance structures. As a
in place to the risk are in are insufficient and
subsidiary of a Global group, CTC also benefits from the manage place, but further inappropriate OR For deletion
international harmonisation of global best practices in the risk are activities have been plans to implement
sufficient and agreed and plans to further activities are
risk management and has been successful in nurturing appropriate implement them are behind schedule
a risk culture which aptly balances risk and growth on track
considerations.

Risk
Management
Risk Management- Based on the risk scores derived from the risk register, the respective functions formulate strategies PRINCIPAL RISKS IN 2020
to curtail and mitigate risk exposures. Responsibility for managing each identified risk is allocated to the Head of each The risks detailed below are the ones that had and could
Function (risk owners), who report regularly to the RMC on the performance of defined risk parameters. Additionally, the potentially have the most significant impact on the
potential impact of global trends and risks are also captured through input by the Regional Audit Committee, which also Company’s ability to create value. Some of these major
recommends improvements in internal controls in line with global best practices. risks are outside the control of CTC, and other factors
besides those listed below, may affect the Company’s
Monitoring- Risks are monitored at multiple levels in the organisation, including at functional level, by the RMC, Executive
performance. Some risks may be unknown at present;
Committee and Board level via the Audit Committee. Identified risks, the risk registers, mitigation plans and performance of
others which are currently immaterial, could emerge
each identified risk are evaluated at these levels throughout the year.
as material risks in the future. The Company’s key risk
exposures for 2020 are given below.
Summary of key risks of 2020

Principal risks Risk assessment compared to last year Timeline of risk Risk management
Impact Likelihood mechanisms in place
Disruptions to business stemming from COVID-19 New risk factor New risk factor Short to Mid term 
Competition from illicit trade Mid to Long term 
Competition from beedi Mid to Long term 
Unfavourable and unplanned excise and taxes Mid to long term 
Impact of price increases on consumer affordability Short to Mid term 
Difficulties in recruiting/retaining talent Long term 
Impact / Likelihood

Increased Decreased Remained the same

Disruptions to business stemming from Unfavourable and unplanned excise and

COVID-19 taxes
The outbreak of the pandemic, particularly during the Excise duties and taxes on tobacco products are a key
lockdown which followed the first wave of infections, source of government revenue leading successive
had a considerable impact on multiple aspects of the governments to view the industry as a potential source
Company’s operations. Challenges stemmed primarily of additional revenue during periods of fiscal difficulties.
from disruptions to distribution channels and supply During the period from 2015 to 2019 the price of a legal
chains and the downturn in consumer demand given the cigarette increased by more than 100%, driven by excise
moderation in disposable incomes. The health & safety and taxes, which in turn has had significantly impacted the
of employees also emerged as a key risk during the year, Company’s volumes.
particularly given that the Company’s Head Office and
manufacturing plant are in an area which was considered Impact of price increases on consumer
high-risk for COVID-19 infections. affordability
The Company’s ability to adjust retail prices to reflect
Competition from illicit trade rising manufacturing costs is limited, particularly given the
The illicit market comprises of smuggled products excise-driven steep escalation in prices and the adverse
(counterfeit cigarettes and duty-not-paid genuine impacts on consumer affordability. The moderating
products), on which applicable taxes are evaded. The economic conditions and impacts on consumer
increasing price disparity between legal and smuggled disposable incomes in both 2019 and 2020, have further
cigarettes have fuelled the growth of the illicit market, compounded this challenge, which has directly impacted
which is estimated to have expanded by a CAGR of 87% our volumes.
from 2016-2020. It's now accounting for 24% of the
Country’s total cigarette consumption. In addition to the Difficulties in recruiting/retaining talent
direct impact on CTC’s market share and volumes, the The Company could potentially be exposed to difficulties
growth of the illicit market leads to a decline in tobacco in attracting and retaining the right people who have
tax revenue to the Government and defeats its public the ability and personal leadership skills to drive its
health objectives as consumers tend to smoke more illicits. strategic objectives, particularly given social perceptions
surrounding the tobacco industry.
Competition from beedi
Beedi has continued to gain market share, accounting
for 67% in 2020 compared to just 20% in 2007. The beedi
market continues to be under-regulated and under
taxed, with just imported tendu leaves being taxed. In
recent years, there has also been a spike in smuggled
tendu leaves, which further deprives the Government of
legitimate taxes.

Assessment of
Going Concern
The financial statements of CTC for the year ended 31 Low likelihood that legal cases filed against the
December 2020, have been prepared on the basis that the Company will have significant adverse effect on its
Company is a going concern. operations.
Robust risk management process and migratory

In assessing the going concern assumption, the Company
action plans.
has taken in to account all available information for the
foreseeable future, which should be at least, but not Robust actions to continue business operations
limited to, 12 months from the reporting date. during COVID-19 pandemic, strictly in conformity
with Government guidelines and directives issued
Further, the following indicators have been considered to from time to time.
conclude that the going concern assumption is valid.
Based on the above, Directors of the Company are
FINANCIAL INDICATORS confident that CTC is a going concern and is able to pay
Healthy net assets and net current assets position. debts as they fall due.
History of profitable operations and ready access to

financial resources.
Strong cash position and available borrowing

facilities.
OPERATING INDICATORS
Low turnover of key management and availability of
key succession plans.
Good track record on Environment and Health &

Safety standards.
OTHER INDICATORS
Management pro-activeness and compliance with
legal and statutory requirements.

Statement of
Internal Controls
The Board of Directors has overall responsibility for the responsibility for establishing and operating detailed monthly Sales and Operations Planning (SOP) process
Company’s system of internal controls and for reviewing control procedures within their functions. A detailed to integrate and optimise key operations such as leaf,
its effectiveness. The Board has established that achieving checklist of controls, called the “Control Navigator” is procurement of direct materials, manufacturing and
a sound internal control environment is a key priority, with available for each Function. Management does a thorough marketing on a rolling basis over a 2 year horizon;
understanding at all levels, and an appropriate allocation self- assessment against the standard controls set out in
a detailed and up to date Statement of Delegated
of resource is made to maintain the right standard. the Control Navigator and prepares action plans to bridge
Authorities (SoDA) that enables the Board to exercise
the gaps, if any. This is thereafter presented to the Audit
appropriate control over the business through the
CTC has created a strong control environment through Committee and followed up by the Executive Committee.
Executive Committee.
application of the business principles, responsible
product stewardship and good corporate governance, The internal control system is monitored by the Executive The Board has delegated the process of reviewing
which defines the way the business operates. These are Committee, Compliance and BAT Internal Audit. The the effectiveness of the internal controls to the Audit
further supported by our Ethos; Bold, Fast, Empowered, Internal Control Committee (ICC) is in place with the Committee. The scope of the Audit Committee is
Responsible & Diverse, that collectively shape the objective of supporting the Executive Committee in described in the Corporate Governance Statement and
culture and framework in maintaining the right control maintaining a sound control environment. Each function in the Report of the Board Audit Committee. To ensure
environment that currently exists within the Company. is represented in the ICC by a senior manager from the complete independence, both external and internal
Function and the Committee is chaired by an Executive auditors have full and free access to the members of the
To be effective, internal controls must: Committee member on rotation. Scope of the ICC Audit Committee to discuss any matters of substance.
encompasses: The External Auditors also attend the Audit Committee
be embedded within the Organisation;
meetings on invitation.
enable responsiveness to change; review and validation of the 'Control Navigator', self-
assessment by functions;
be able to identify major weaknesses, if any. Findings of internal audits and compliance reviews are
review of functional controls to identify any issues or presented at Audit Committee meetings.
Control activities include a comprehensive list of policies weaknesses;
and procedures, which ensures that the management These best practices were complied with during the year
review and recommendation of required changes to
directives are carried out and the necessary controls are in 2020.
policies and procedures;
place to minimise the risk of not meeting objectives. The
enhance organisation wide control awareness and The Company Secretary ensures that the Company is in
policies and procedures are established throughout the
education; compliance with the relevant Rules and requirements of
Organisation, and periodically reviewed for adequacy and
improvement. The policies and procedures are designed to follow up on Audit and Control Navigator action SEC and the CSE.
provide reasonable assurance of: points.
effectiveness and efficiency of operations; The other key elements of the Company’s system of
internal controls are as follows:
protection of Company assets against unauthorised NEDAL SALEM
use or disposition; regular review of key risks facing the business and Managing Director & CEO
corresponding action plans by the Risk Management
reliability of financial and other management
Committee, as well as the Executive Committee and
information;
Audit Committee;
prevention of fraud;
a business plan for the year with detailed budgets by
compliance with relevant National laws and other Functions. In the business plan, targets are set for key
applicable regulations. performance indicators that are critical to achieve the UMAIR LUQMAN
plan. Performance is monitored against the targets on Finance Director
Within this framework, each Head of Function has the
a regular basis; 20 April 2021

Report of the
Board of Directors
GENERAL Following changes were taken place to the Board of Directors since the last Annual Report.
The Board of Directors take pleasure in presenting the
Name Change Date
Annual Report of the Company, that includes and covers
the Audited Financial Statements, Chairman’s Review,
Ms. Amun Mustafiz (Finance Director) Resigned November 2020
Corporate Governance commentary, and all other relevant
Mr. Umair Luqman (Finance Director) Appointed November 2020
information for the year ended 31 December 2020.
Mr. Suresh Kumar Shah (Independent Non-Executive Director) Appointed February 2021
The information table on the level of compliance to the Ms. Rumana Rahman (Non-Executive Director) Appointed February 2021
Listing Rules provided by CSE appearing on pages 82 to 84 Mr. Stuart Kidd (Non-Executive Director) Appointed February 2021
and Share Information section on pages 144 to 147 forms Mr. William Pegel (Chairman) Resigned February 2021
part of this Report of the Board of Directors.
Mr. Suresh Kumar Shah (Independent Non-Executive Director and Chairman) Appointed February 2021
STRUCTURE AND PRINCIPLE BUSINESS Upon appointment of a new Director to the Board, a brief resume of each Director has been provided to the CSE as per
ACTIVITIES Listing Rule 7.10.3(d).
A brief description of the ultimate parent and nature of the
principal business activities of the Company and is given in INDEPENDENCE OF NON-EXECUTIVE DIRECTORS
Note 1 to the Financial Statements on page 109. In accordance with the Listing Rules No.7.10.4 of CSE the Directors determined Mr. Yudhishtran Kanagasabai, Mr. Anil
Tittawella and Mr. Suresh Kumar Shah, as Independent Directors based on declarations made by them according to
REVIEW OF PERFORMANCE Appendix 7A of the Listing Rules of CSE.
A review of performance and future outlook of the
Company is available in the Chairman’s Review (pages 10 RE-ELECTION OF DIRECTORS
to 13), Managing Director & CEO's Review (pages 14 to 17), In accordance with the Articles of Association of the Company, it was resolved that, Mr. Anil Tittawella, Mr. Yudhishtran
Finance Director's Review (pages 100 to 101) and in the Kanagasabai and Mr. Usman Zahur retire from the Board of Directors by rotation at the Annual General Meeting and being
section of Value Creation appearing from pages 18 to 21. eligible, be proposed for re-election.
DISCLOSURES Mr. Umair Luqman, Mr. Suresh Kumar Shah, Ms. Rumana Rahman and Mr. Stuart Kidd, who were appointed since the last
The Annual Report of the Company fulfils the disclosure Annual General Meeting will come up for re-election under the Company’s Articles of Association.
requirements of the Sri Lanka Accounting Standards
(SLFRs/LKASs), Companies Act No. 07 of 2007 and the DIRECTORS’ INTEREST IN CONTRACTS AND RELATED PARTY TRANSACTIONS
Listing Rules of the Colombo Stock Exchange. Directors’ interests in contracts have been declared at the meetings of the Directors and have no direct or indirect interests
in any other contract or proposed contract with the Company.
THE BOARD OF DIRECTORS
The Board of Directors of the Company consisted of 6 Related Party Transaction
members as at 31 December 2020. Post balance sheet The Company identifies related parties as defined by LKAS 24. The members of the Board of Directors and the Executive
date new appointments were affected to the Board of Committee have been identified as Key Management Personnel (KMP) and the Company retrieves data on related party
Directors of the Company increasing the members to 8. transactions based on declarations obtained from each KMP.
Profiles of the Directors are disclosed in pages 70 to 71 of
the Annual Report. The Company’s transactions with Related Parties, given in Note 25 to the Financial Statements, have complied with Listing
Rule 9.3.2 of CSE and the Code of Best Practices on Corporate Governance.
The Board of Directors affirms that the related party transactions have occurred on an arms length basis.

DIRECTOR’S SHAREHOLDING
No Director disclosed above has any shareholding in the Company.
RESULTS FOR THE YEAR AND APPROPRIATION
Units 2020 2019 Growth
Turnover Rs. million 132,149 141,342 -7%

Profit for the year Rs. million 15,578 17,259 -10%
No. of shares Number 187,323,751 187,323,751 -
Earnings per share Rs. 83.16 92.13 -10%
Net assets per share Rs. 24.57 24.68 -0.4%
Market price per share Rs. 1,028.90 1,100.30 -6%
Price earnings ratio 12.37 11.94 4%
Dividends per share Rs. 83.63 95.77 -13%
FUTURE DEVELOPMENTS DIVIDENDS

Future Company developments are covered in the reviews Interim dividends of Rs. 13,394 million have been paid and a final dividend of Rs. 2,126 million proposed from the current
of the Chairman, the Managing Director & CEO and the year’s profit of Rs. 15,578 million yielding a dividend per share of Rs. 82.85 with a pay-out ratio of 99.63% for the year ended
Finance Director. 31 December 2020.
SHARE INFORMATION MOVEMENT OF RETAINED EARNINGS

Information relating to shareholding, market value of
Rs.000’s
shares, public shareholding and top twenty shareholders
are available on pages 144 to 147 under ‘Share Information’.
Retained profit as at 1 January 2020 2,749,626
STATED CAPITAL Current year’s profit after charging all expenses and providing for all known liabilities 15,578,094
The stated capital of the Company as at 31 December Dividends of Rs. 83.63 per share on the Issued Share Capital of 187,323,751 shares (15,665,884)
2020 amounted to Rs. 1,873 million (2019- Rs. 1,873 2019 Final dividend - Rs. 12.13 per share paid on 08/07/2020
million), details of which are available in Note 17 to the First Interim dividend - Rs. 19.00 per share paid on 04/06/2020
Financial Statements. There were no shares issued during Second Interim dividend - Rs. 15.00 per share paid on 04/09/2020
the financial year.
Third Interim dividend - Rs. 19.00 per share paid on 09/12/2020
Fourth Interim dividend - Rs. 18.50 per share paid on 22/01/2021
RESERVES
Write back of unclaimed dividends 65,777
Total reserves as at 31 December 2020, comprise
Re-measurement of defined benefit obligations 1,538
of revenue reserves amounting to Rs. 2,729 million.
Movements are shown in the Statement of Changes in Balance carried forward to 2021 2,729,151
Equity in the Financial Statements.

Report of the
Board of Directors
PROPERTY, PLANT AND EQUIPMENT GOING CONCERN ANNUAL GENERAL MEETING
The movements in property, plant and equipment for the The Financial Statements are prepared on the basis of In order to comply with the measures imposed by the Sri
year are shown in Note 11 to the Financial Statements. The going concern. Lankan Government on account of the ongoing COVID-19
Company capitalised a sum of Rs. 952 million in property, pandemic and to ensure the health & safety of our
plant and equipment in its modernisation programme. EMPLOYMENT shareholders, employees and management, the Directors
Specific information on extent, locations, valuations and Pages 46 to 47 covers in detail the Company’s practices have decided that the Company’s AGM for 2021 will be
number of buildings on the Company’s land holdings are and policies relating to employee engagement, training & convened as a virtual meeting using a digital platform in
given in Note 11.3. development, performance management and recognition. line with the directions given by the CSE.
DONATIONS There were no material issues pertaining to employees or

Total donations made by the Company during the year industrial relations during the year.
ended 31 December 2020 amounted to Rs. 129 million as
shown in Note 7 to the Financial Statements. COMPLIANCE WITH LAWS AND NEDAL SALEM UMAIR LUQMAN
REGULATIONS Managing Director & CEO Finance Director
CONTINGENT LIABILITIES AND To the best of knowledge and belief of the Directors,
COMMITMENTS 20 April 2021
the Company has not engaged in any activity, which
Contingent Liabilities and Commitments as at the year- contravenes laws and regulations of the Country.
end are disclosed in Notes 22 and 23 to the Financial
Statements. ENVIRONMENTAL PROTECTION
Policies and endeavours made on environmental
EMPLOYEE SHARE OWNERSHIP PLANS preservation by the Company are covered on pages
The Company has no share ownership plan as at 31 157 to 159.
December 2020. However, the Group through an
International Executive Incentive Scheme (IEIS) offers EVENTS OCCURRING AFTER THE
value of phantom shares in BAT, in cash, to selected REPORTING PERIOD
members of the Executive Committee of CTC, subject to There were no material events that occurred after the
the achievement of performance targets over the previous reporting date that require adjustment to or disclosure
financial year. The cash equivalent of the share award is in the Financial Statements, other than those disclosed in
paid after a period of 3 years from the date of grant based Note 26 to the Financial Statements on page 142.
on the share price preceding the date of payment.
INDEPENDENT AUDITORS
STATUTORY PAYMENTS The Financial Statements for the year have been audited
The Directors, to the best of their knowledge and belief, by Messrs. KPMG, Chartered Accountants, who offer
are satisfied that all statutory payments in relation to themselves for re-appointment. A resolution proposing
employees and the Government have been made to date. their re-appointment and giving authority to the Directors
to determine their remuneration will be submitted at the
forthcoming Annual General Meeting (AGM).

Statement of
Directors’ Responsibilities for
Financial Statements
This Statement sets out the responsibility of the Board iii. Judgments and estimates have been made which are The Board of Directors accepts responsibility for the
of Directors in relation to the Financial Statements of the reasonable and prudent. integrity and objectivity of the Financial Statements
Company. The responsibility of the Auditors in relation to presented.
iv. Provides the information required by and otherwise
the Financial Statements is set out in the Independent
comply with the Companies Act No 7 of 2007 and the
Auditor’s Report on pages from 103 to 104. The Directors confirm that to the best of their knowledge,
Listing Rules.
all taxes, duties and levies payable by the Company, all
The Companies Act No. 7 of 2007 requires the Directors contributions, levies and taxes payable on behalf of and
The Directors are also required to ensure that the
to prepare and present Financial Statements for each in respect of the employees of the Company, and all
Company has adequate resources to continue in operation
financial year, giving a true and fair view of the state of other known statutory dues as were due and payable by
to justify applying the going concern basis in preparing
affairs of the Company as at the end of the financial year, the Company as at the reporting date have been paid or,
these Financial Statements.
and the profit or loss of the Company for the financial year where relevant, provided for, except as specified in Note 22
and place them before a general meeting of shareholders. to the Financial Statements covering contingent liability.
Further, the Directors have a responsibility to ensure that
The Financial Statements comprise of the Statement of
the Company maintains sufficient accounting records to
Financial Position as at 31 December 2020, the Statements
disclose with reasonable accuracy, the financial position
of Profit or Loss and Other Comprehensive Income,
of the Company, and that Financial Statements presented
Changes in Equity and Cash Flows for the year then ended,
comply with the requirements of the Companies Act No 7
and Accounting Policies and Notes thereto.
of 2007.
Accordingly, the Board of Directors confirms that the SURESH SHAH

The Directors are also responsible for taking reasonable
Financial Statements of the Company give a true and fair Chairman
steps to safeguard the assets of the Company and in this
view of the;
regard to give proper consideration to the establishment
Financial position of the Company as at 31 December of appropriate internal control systems, with a view to
2020; and preventing and detecting fraud and other irregularities.
NEDAL SALEM
Financial performance of the Company for the The Directors are required to prepare the Financial Managing Director & CEO
financial year ended 31 December 2020. Statements and to provide the Auditors with every
opportunity to take whatever steps, and undertake 20 April 2021
The Directors are required to ensure that, in preparing whatever inspections they may consider to be appropriate,
these Financial Statements: to enable them to form their audit opinion in accordance
with Sri Lanka Auditing Standards (SLAuS).
i. The appropriate accounting policies have been
selected and applied in a consistent manner and
The Financial Statements were audited by Messrs. KPMG,
material departures, if any have been disclosed and
Chartered Accountants, the independent External
explained;
Auditors. To ensure complete independence, the
ii. Financial Statements are presented in accordance independent External Auditors have full and free access
with Sri Lanka Accounting Standards (SLFRSs/LKASs) to the members of the Audit Committee to discuss any
and all applicable Standards as relevant, have been matter of substance.
followed;

Report of the
Audit Committee
COMPOSITION TERMS OF REFERENCE The scope of the review included ascertaining compliance
The Board Audit Committee (“the Committee”) appointed The Charter of the Committee, which is approved and with relevant disclosures with the Sri Lanka Accounting
by and responsible to the Board of Directors continued adopted by the Board of Directors, clearly defines the Standards, including new Accounting Standards which
to review and report to the Board on the Company’s terms of reference governing the Committee. The 'Rules came into effect during the year, the appropriateness
financial reporting, internal control and risk management on Corporate Governance under Listing Rules' and ‘Code of accounting policies, material judgement matters,
processes, and the performance, independence and of Best Practice on Corporate Governance’, issued jointly alternative accounting treatments, material audit
effectiveness of External Auditors. There were no changes by The Institute of Chartered Accountants of Sri Lanka adjustments, going concern assumption, financial
to the composition of the Committee during the year. The and the Securities and Exchange Commission of Sri Lanka, reporting controls and compliance with applicable laws
Committee consisted of 2 Independent Non-Executive further regulate the composition, roles and functions of and regulations that could impact the integrity of the
Directors and a Director of an overseas BAT Subsidiary, the Committee. Company’s financial statements, its annual report and its
who is independent of executive functions of CTC. quarterly financial statements prepared for publication.
It also assists the Board of Directors in its general oversight
The members of the Board Audit Committee are: of financial reporting, internal controls and functions Internal Control:
relating to internal and external audit. The Directors are responsible for maintaining and
Mr. Yudhishtran Kanagasabai – Chairman
reviewing the effectiveness of risk management and
Mr. Anil Tittawella THE ROLE OF THE AUDIT COMMITTEE internal control systems, and for determining the nature
Mr. Usman Zahur The role of the Audit Committee, which has specific terms and extent of the principal risks it is willing to take in
of reference, is described in the CTC corporate governance achieving its strategic objectives. The Committee reviewed
The Chairman of the Committee is a Fellow of the Institute report on pages from 82 to 84. the Control Navigator, which is a self-assessment of the
of Chartered Accountants of Sri Lanka and a former Control Environment and the Internal Control Statement,
Territory Senior Partner of PricewaterhouseCoopers, The Committee’s role is to review on behalf of the Board, prepared by the Management for submission to BAT
Sri Lanka and the Maldives. The Board is satisfied that the Company’s internal financial controls. It is also Global Office.
the Committee has an adequate blend of accounting, responsible for oversight and advice to the Board on
auditing, legal and commercial experience to carry out financial reporting related matters and internal controls The Committee has noted the findings from the
their duties. Brief profiles of the Committee members are over financial reporting, and has overseen the work compliance reviews, their root causes and management
given in pages 70 to 71 of this Report. undertaken by the Group’s Internal Audit and External responses, and status of implementing remediation,
Auditors. including Control Navigator actions. This process assesses
The Company Secretary serves as the Secretary to the the adequacy and effectiveness of the internal controls
Committee. KEY RESPONSIBILITIES OF THE BOARD and the processes for controlling business risks to ensure
AUDIT COMMITTEE compliance with laws and regulations.
MEETINGS
Financial Reporting:
The Committee met 4 times during the year under review, Internal Audit:
The primary role of the Committee in relation to financial
where all of the meetings were held as virtual meetings The establishment and maintenance of appropriate
reporting is to monitor the integrity of the Company’s
due to the prevailing COVID-19 pandemic. The Managing systems of risk management and internal control is
financial statements and formal announcements, if any,
Director and Chief Executive Officer, the Finance Director, primarily the responsibility of the Management. The
relating to the Company financial performance. The
other members of the Executive Committee and External Group Internal Audit function provides independent and
Committee reviewed and discussed the Company’s
Auditors attended the meetings by invitation. objective assurance in respect of the adequacy of the
quarterly and annual financial statements prior to
design and operating effectiveness of the framework of
publication. The Committee also reviewed matters
The attendance of the members at these meetings are risk management, control and governance processes
communicated to the Committee by the External Auditors
given in page 77 of this Report. across the Group, focusing on the areas of greatest risk to
in their reports to the Audit Committee on the audit for
CTC using a risk - based approach.
the year.

Executive Management is responsible for ensuring that Company’s risk management activities and the global
recommendations made by the Groups' Internal Audit spread of COVID-19. The Committee reviewed the risk
function are implemented within an appropriate and management actions and going concern assessment
agreed timetable. The Committee noted the internal carried out by the Management, after considering the
audit plan, which is based on risk assessments by the existing and potential financial impact of COVID-19 and is
BAT Internal audit function. Gaps, if any, reported by BAT satisfied that the Company is able to continue as a going
internal audit are addressed and followed up to confirm concern and adequate disclosures have been made in
rectification. these Financial Statements.
External Audit: CONCLUSION

The External Auditor’s Letter of Engagement, including The Committee is satisfied that the Company’s internal
the scope of the audit, was reviewed and discussed by the controls, risk management processes and, accounting
Committee with the External Auditors and Management policies provide reasonable assurance, that the affairs of
prior to commencement of the audit. The Auditors the Company are managed in accordance with Company
were also provided with the opportunities to discuss policies, and that Company assets are properly accounted
and express their opinions on any matter, and for the for and adequately safeguarded. The Committee believes
Committee to have the assurance that the Management that the Company’s accounting policies are appropriate,
has fully - provided all information and explanations and have been applied consistently.
requested by the Auditors. The Committee reviewed
opportunities for improvement, which were observed
during the audit and the Letter of Representation issued
to the External Auditor to ensure that the representations
made were consistent with the understanding of the
YUDHISHTRAN KANAGASABAI
Committee, as to the Company’s operations and plans.
Chairman
The Committee is satisfied that the independence of

Audit Committee
the External Auditors has not been impaired by any
event or service that gives rise to a conflict of interest.
20 April 2021
The Committee has recommended to the Board of
Directors that Messrs. KPMG, Chartered Accountants, be
reappointed for the financial year ending 31 December
2021, subject to the approval of shareholders at the next
Annual General Meeting.
POTENTIAL FINANCIAL IMPLICATION

ARISING FROM COVID-19 PANDEMIC
The Committee regularly monitored the Company’s
known and emerging exposures in relation to the changes
in the external regulatory and political environment,
including the possible impact on the

Report of the
Related Party Transactions
Review Committee
The Related Party Transactions Review Committee (the OBJECTIVE ACTIVITIES
Committee) of CTC was established effective from 1 The objective of the Committee is to exercise and ensure During the year, the Committee reviewed the related party
January 2016 in compliance with the Code of Best Practice on behalf of the Board, that all Related Party Transactions transactions of CTC and their compliance according to
on Corporate Governance and Section 09 of the Listing (RPTs) of Ceylon Tobacco Company PLC are compliant with SEC, the Listing Rules and Code of Best Practises. There
Rules. the mandates of the SEC, Listing Rules and Code of Best were 4 non - recurrent new RPTs which required pre-
Practices. approval from the Committee, and the recurrent RPTs were
COMPOSITION reviewed at quarterly intervals for noting. Furthermore,
The Committee comprised of the following members as TERMS OF REFERENCE there were no RPTs which met the disclosure thresholds
at the year end with 3 Non-Executive Directors of whom, The Committee, in discharging its functions ensures that: as per the SEC Listing Rules and Code of Best Practices on
2 are Independent Non-Executive Directors and is Chaired Corporate Governance. The Committee communicated
by an Independent Non-Executive Director. There is compliance with the SEC and Listing Rules the same to the Board of Directors, quarterly, through
and Code of Best Practises; verbal briefings and by tabling the minutes of the
Mr. Yudhishtran Kanagasabai – Chairman
Committee’s meetings.
Shareholder interests are protected; and
Mr. Anil Tittawella
Fairness and transparency are maintained. The Committee in its review process, recognised the
Mr. Usman Zahur
adequacy of the content and quality of the information
The approved guidelines for conducting Related Party forwarded to its members by the Management during the
Brief profiles of the Committee members are given in Transactions sets out, the following: year.
pages 70 to 71 of this report.
The principles that guide RPTs, including pre-approval
MEETINGS and other reporting requirements;
The Committee held 4 meetings in to the year 2020, where
Process to identify transactions that require
all of the meetings were held as virtual meetings, due to
immediate market disclosures and shareholder YUDHISHTRAN KANAGASABAI
the prevailing COVID-19 pandemic. The Managing Director
approval; Chairman
& CEO and other members of the Executive Committee
or any other Manager (where relevant) of the Company Steps to be followed by the Management in
attend meetings on the request of the Committee. reporting RPTs to the Committee, including Related Party Transactions Review Committee
documentation templates; and
The Finance Director or his/her nominee subject to 20 April 2021
The Executive and Non-Executive Directors of the
approval of the Committee acts as the Secretary of the
Board and Executive Committee Members of CTC
Committee. The attendance at the meetings held is given
would form a part of the Key Management Personnel
in the table on page 77 of this Report.
(KMP).

Report of the
Board Compensation and
Remuneration Committee
Board Compensation and Remuneration Committee Ensure that the remuneration package is at all times
of Ceylon Tobacco Company PLC is established to take fully in compliance with local taxation and legal
independent, objective and defensible decisions on all requirements
matters associated with the total reward package and
Establish and maintain an effective system of job
other terms of service of the managers and executives,
evaluation
so that remuneration policy at all times remains both
competitive and sustainable in terms of attracting and
Also, the committee review and approve Remuneration
retaining talent.
policy for below:
COMPOSITION Basic salaries

The Committee comprised of the following members as Perquisites and benefits
at the end of the year with 3 Non-Executive Directors of
whom, 2 are Independent Non-Executive Directors and is Performance bonus
Chaired by an Independent Non-Executive Director. Pension entitlements
Mr. Anil Tittawella – Chairman Long Term Incentive Plan
Mr. Yudhishtran Kanagasabai

MEETINGS & ACTIVITIES
Mr. Usman Zahur The Board Compensation and Remuneration Committee
met only once during the year. During the meeting,
Brief profiles of the Committee members are given in Committee reviewed and granted approval for the below
pages 70 to 71 of this report. topics:
TERMS OF REFERENCE Employee Compensation and Benefit Proposals as

per BAT guidelines
The Terms of Reference of the Committee includes the
following: Pay Range Review
Ensure that arrangements are made for regular Salary Review

surveys of remuneration and benefits, with a
sufficient sample of comparator companies to obtain
a reliable measure of the market.
Ensure that remuneration systems offer the

ANIL TITTAWELLA
opportunity of excellent reward for excellent
Chairman
performance
Examine reward packages as a whole, seeking Board Compensation and Remuneration Committee
overall competitiveness rather than item-by-item
comparability 20 April 2021

Report of the
Nominations Committee
CTC’s Nominations Committee (the Committee) performs an assessment
on Board composition as and when the need for the appointment of new
Independent Non- Executive Board members arises.
COMPOSITION
The Committee comprised of the following members as at the end of the year.
Mr. Nedal Salem – Chairman
Mr. Yudhishtran Kanagasabai
Mr. Anil Tittawella
Brief profiles of the Committee members are given in pages 70 to 71 of this

report.
TERMS OF REFERENCE
The Terms of Reference of the Committee includes the following:
Propose a suitable Charter for the appointment and the re-appointment

of Independent Non-Executive Directors to the Board.
Provide advice and recommendation to the Board or the Chairman on

appointing Independent Non-executive Directors.
Select and appoint Independent Non-Executive Directors as required.
Regularly review the structure, size, and composition (including the skills,
knowledge and experience) of the Board, and make recommendations to
the Board with regard to any suitable changes.
MEETINGS & ACTIVITIES

Committee meets only when there is a necessity. During 2020, the Committee
did not meet, as there were no Independent Non-Executive Director
appointments. However, the Committee met during the first quarter of 2021
to recommend the new Board appointments.
NEDAL SALEM
Chairman
Nominations Committee
20 April 2021

The Next Step
FINANCIAL STATEMENTS
A Step Towards Results

100 | Finance D irector ’s R e vie w
102 | Financial R epor ting Calendar
103 | Independent Auditor's R epor t
105 | Statement of Profit or Loss and other
Comprehensive Income
106 | Statement of Financial Position
107 | Statement of Changes in Equit y
108 | Statement of Cash Flows
109 | Notes to the Financial Statements
143 | Statement of Value Added
144 | Supplementar y Information
144 | Share Information
148 | Notes
151 | Notice of Meeting
152 | AGM 2021 Instructions to Shareholders
153 | Form of Prox y
155 | A ppendices
The Next Step FINANCIAL STATEMENTS
Finance Director’s
Review
“The Company pursued
concerted efforts to preserve
operating margins through
driving cost rationalisation,
optimising the product mix
and increasing distribution
UMAIR LUQMAN
Finance Director
efficiency.”
OVERVIEW

DOMESTIC VOLUMES REVENUE PROFIT CASH GENERATED FROM EPS
2.3 BILLION
-13%
RS.32.1 BILLION
-10%
RS. 15.6 BILLION
-10%
OPERATIONS
RS. 83.16
-10%
STICKS RS. 20.7 BILLION
Despite the unprecedented challenges stemming from During this period, CTC operated in strict compliance in contributing to the economy was further challenged
the outbreak of the COVID-19 pandemic, CTC delivered a with Government guidelines and directives to ensure the by moderating economic conditions and impacts on
commendable performance, while maintaining a healthy health & safety of employees, as well as the workforce of consumer affordability.
financial position. all extended value chain partners. The Company swiftly
and seamlessly facilitated work-from-home solutions for In spite of these challenges, CTC remained steadfast in its
Economic activity as well as consumer and business its office-based employees by leveraging its Information commitment to deliver consistent shareholder returns,
sentiments were on an improving trajectory at the & Digital Technology (IDT) infrastructure, while all other and ensured continued support to the Government of Sri
beginning of 2020, with the Country showing gradual employees carried out limited critical responsibilities, Lanka, through much needed tax revenue. Accordingly,
signs of recovery, following the 2019 Easter Sunday terror subject to all necessary health & safety precautions. the Company sought to optimise its product portfolio,
attacks. However, these gains were completely reversed enhance the efficiency of its distribution network, and
by the outbreak of the pandemic in March 2020, which In 2020, the operating environment for the legitimate relentlessly pursued cost efficiencies and productivity
led to a sharp downturn in demand, which continued to tobacco industry remained challenging. Illicit cigarettes improvements, to ensure sustainable value to
be affected by the extended lockdown. The situation was smuggled into the Country, as well as under-regulated shareholders. This was evident from strong results in the
further worsened by the fall in disposable income and and low taxed beedi, provided cheaper alternatives to second half of the year.
weaker consumer sentiments. Disruptions to distribution price pressured consumers. The growth in illicit products
channels led to considerable difficulties in market access, and beedi continued to pose a significant threat to the
which in turn impacted the Company’s sales volumes in revenue growth of the Government, and CTC’s viability
the first half of the year.

FINANCIAL STATEMENTS The Next Step
REVENUE AND PROFIT FROM OPERATIONS REVENUE AND PROFIT GROWTH Rs. 20.7 billion. The cash flows were closely monitored,
Rs. Million and investment position was regularly reviewed, to
Prior to the outbreak of the pandemic, the Company was
positioned for strong growth in the early months of 2020, optimise the interest income while managing all liquidity
160,000
recording good volume and profit growth. However, requirements. Overall, the Company’s cash and cash
performance was inevitably impacted by the market equivalents declined by 42% in the year, although liquidity
120,000 levels remained strong with a Cash and Cash Equivalent
disruption that followed the outbreak, with considerable
impacts on profitability, cash flow and our operational (CCE) balance of Rs. 9.8 billion as at 31 December 2020.
capability. Resultantly, the Company’s sales volumes 80,000 CTC remained committed to adopting efficient capital
declined by 13%, reflecting the interruptions to the management and resource allocation policies, and did
28,691
25,904
not incur any bad debts arising from trade debtors, which
24,671
23,066
distribution channels and economic conditions. This in
20,369
40,000
remained fully covered through bank guarantees and a
121,525
138,539
145,298
141,342
132,149
turn, resulted in the Company’s turnover declining by 6.5%,
to Rs. 132.1 billion. Contributions to government revenue distributor financing scheme.
0
also recorded a parallel decrease of 5.4%, to Rs. 100.1 billion. 2016 2017 2018 2019 2020
Meanwhile, the Company’s revenue recorded a decline of
CREATING VALUE FOR SHAREHOLDERS
Revenue (Rs.Million) Operating profit
9.7%, to Rs. 32.1 billion. Profit before tax decreased by 11%, to Rs. 25.4 billion
and reduction in effective tax charge steadied the profit
In offsetting the decline in revenue, the Company pursued INVESTMENT FOR GROWTH for the year at Rs. 15.6 billion, with 10% reduction in
concerted efforts to preserve operating margins through comparison to the previous year. During the year, the
Despite the decline in volume, the Company continued
driving cost rationalisation, optimising the product mix Company continued to generate sustainable value to its
to invest in its brands to ensure sustainable long-term
and increasing distribution efficiency. As a result, operating shareholders delivering Rs. 83.16 in Earnings per share.
returns, establishing a portfolio that addresses changing
expenses declined by 20%, a commendable achievement, CTC also maintained its track record as a strong dividend
and dynamic consumer needs. New variants of the
given the costs that were incurred to ensure stringent distributor, with 4 interim dividends amounting to Rs.
83mm category were introduced, to deliver value to adult
health & safety standards. Accordingly, the Company’s 71.50 per share, and a proposed final dividend of Rs. 11.35
consumers through better product propositions. During
operating profit margin improved marginally during the per share, translating to a dividend pay-out ratio of 99.6%.
the year, the Company also invested in enhancing its
year. Meanwhile, CTC’s net finance income declined by
manufacturing capability to reintroduce the 67mm length
53%, to Rs. 0.76 billion, reflecting the sustained decline Additionally, when measured on a 5 year annualised
category to the market, as an illicit price fighter.
in market interest rates, which in turn impacted the basis, both Dividend per share and Earnings per Share
Company’s investment income. ranked among the highest when compared to the Top 20
CASH FLOW AND LIQUIDITY
Listed Companies in the Country. Meanwhile, CTC’s share
CTC’s profit before tax for the year declined by 11%, to Understandably, the prevalent conditions impacted the price closed the year at Rs. 1,028.9 from Rs. 1,100.3 of the
Rs. 25.4 billion, while profit after tax amounted to Rs. 15.6 Company’s operating cash flow. The decline in revenue previous year.
billion, a decrease of 10%. This was commendable, given and increased working capital requirements resulted in
the market and operating conditions that prevailed in the a 15% reduction in cash generated from operations, to
Country.
Units 2020 2019 2018 2017 2016

UMAIR LUQMAN
Finance Director
Earnings per share Rs. 83.16 92.13 90.78 77.87 67.05
Dividend per share* Rs. 82.85 92.13 90.77 77.80 66.80
20 April 2021
Net Assets per share Rs. 24.57 24.68 28.61 24.39 18.60
Share Price (31st December) Rs. 1,028.90 1,100.30 1,415.00 1,004.50 806.50
Dividend pay-out % 99.6 99.9 99.9 99.9 99.6
*includes Interim & proposed

Financial Reporting
Calendar
First Quarter Results 2020 14 May-20
Second Quarter Results 2020 14 Aug-20
Third Quarter Results 2020 10 Nov-20
Fourth Quarter Results 2020 16 Feb-21
Annual Report 2020 20 Apr-21
90th Annual General Meeting to be held on 25 May-21

Independent
Auditor's Report
TO THE SHAREHOLDERS OF CEYLON TOBACCO Key Audit Matters Performing a fraud risk assessment through inquiry of
COMPANY PLC Key audit matters are those matters that, in our professional management regarding any actual or suspected override
Report on the Audit of the Financial Statements judgment, were of most significance in our audit of the of controls in relation to revenue recognition.
Opinion financial statements of the current period. These matters Reviewing report on General IT Controls tested centrally
were addressed in the context of our audit of the financial at group level and Application Controls tested by our IT
We have audited the accompanying financial statements
statements as a whole, and in forming our opinion thereon, specialist and consider impact at the end market level.
of Ceylon Tobacco Company PLC, (“the Company”), which
and we do not provide a separate opinion on these matters.
comprise the statement of financial position as at 31 Testing design and implementation and operating
December 2020, the statements of profit or loss and other effectiveness of controls over journal entries and post-
1. Revenue Recognition
comprehensive income, changes in equity and cash flows closing adjustments.
for the year then ended, and notes, comprising significant As described in Note 2.8.15 (accounting policies) and Note 4
accounting policies set out on pages 105 to 142 of this annual (Revenue), the Company recorded revenue of Rs. 32.07 Bn for Through inquiry and observation assessing the
report. year ended 31 December 2020 (2019: Rs. 35.52 Bn). accounting for significant transactions that are outside of
the normal course of business, or are otherwise unusual.
In our opinion, the accompanying financial statements give Key audit matter
Testing that amounts have been recognised in the
a true and fair view of the financial position of the Company Under Auditing Standards we are required to consider that the correct period for cut-off and evaluate whether there are
as at 31 December 2020, and of its financial performance and fraud risk from revenue recognition is a significant risk. any significant amount of returns after the year end.
its cash flows for the year then ended in accordance with Sri
Lanka Accounting Standards (SLFRS/LKAS). Whilst revenue recognition and measurement is not complex Other Information
for Ceylon Tobacco Company PLC, the Company operates in Management is responsible for the other information. The
Basis for Opinion a market where volumes are in decline and/or contracting. other information comprises the information included in the
We conducted our audit in accordance with Sri Lanka This, together with the focus on volumes and revenue as key annual report, but does not include the financial statements
Auditing Standards (SLAuS). Our responsibilities under those performance measures resulted in revenue being selected as and our auditor’s report thereon.
standards are further described in the Auditor’s Responsibilities a key audit matter.
for the Audit of the Financial Statements section of our report. Our opinion on the financial statements does not cover
We are independent of the Company in accordance with We focused on whether transactions have been recorded in the other information and we will not express any form of
Code of Ethics issued by CA Sri Lanka (Code of Ethics), and we the period in which the Company becomes entitled to record assurance conclusion thereon.
have fulfilled our other ethical responsibilities in accordance revenue in accordance with SLFRS 15.
with these requirements. We believe that the audit evidence In connection with our audit of the financial statements,
we have obtained is sufficient and appropriate to provide a Our audit procedures included, our responsibility is to read the other information identified
basis for our opinion. Identifying and evaluating the design and above when it becomes available and, in doing so, consider
implementation and operating effectiveness of key whether the other information is materially inconsistent with
controls relating to revenue recognition. the financial statements or our knowledge obtained in the

Independent
Auditor's Report
audit, or otherwise appears to be materially misstated. If based or error, design and perform audit procedures are responsible for the direction, supervision and
on the work we have performed, we conclude that there is responsive to those risks, and obtain audit evidence performance of the Company audit. We remain solely
a material misstatement of this other information, we are that is sufficient and appropriate to provide a responsible for our audit opinion.
required to report that fact. We have nothing to report in this basis for our opinion. The risk of not detecting a
regard. We communicate with those charged with governance
material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may regarding, among other matters, the planned scope and
Responsibilities of Management and Those Charged with timing of the audit and significant audit findings, including
involve collusion, forgery, intentional omissions,
Governance for the Financial Statements any significant deficiencies in internal control that we identify
misrepresentations, or the override of internal control.
Management is responsible for the preparation and fair during our audit.
presentation of the financial statements in accordance with Obtain an understanding of internal control relevant
SLFRS/LKAS and for such internal control as management to the audit in order to design audit procedures We also provide those charged with governance with a
determines is necessary to enable the preparation of financial that are appropriate in the circumstances, but not statement that we have complied with relevant ethical
statements that are free from material misstatement, whether for the purpose of expressing an opinion on the requirements regarding independence and communicate with
due to fraud or error. effectiveness of the Company’s internal control. them all relationships and other matters that may reasonably
be thought to bear on our independence, and where
In preparing the financial statements, management is Evaluate the appropriateness of accounting policies applicable, related safeguards.
responsible for assessing the Company’s ability to continue used and the reasonableness of accounting estimates
as a going concern, disclosing, as applicable, matters related and related disclosures made by management. From the matters communicated with those charged with
to going concern and using the going concern basis of governance, we determine those matters that were of most
accounting unless management either intends to liquidate Conclude on the appropriateness of management’s significance in the audit of the financial statements of the
the Company or to cease operations, or has no realistic use of the going concern basis of accounting and, current period and are therefore the key audit matters. We
alternative but to do so. based on the audit evidence obtained, whether describe these matters in our auditor’s report unless law or
a material uncertainty exists related to events or regulation precludes public disclosure about the matter or
Those charged with governance are responsible for conditions that may cast significant doubt on the when, in extremely rare circumstances, we determine that a
overseeing the Company’s financial reporting process. Company’s ability to continue as a going concern. If matter should not be communicated in our report because
we conclude that a material uncertainty exists, we the adverse consequences of doing so would reasonably be
Auditor’s Responsibilities for the Audit of the Financial are required to draw attention in our auditor’s report expected to outweigh the public interest benefits of such
Statements communication.
to the related disclosures in the financial statements
Our objectives are to obtain reasonable assurance about or, if such disclosures are inadequate, to modify our
whether the financial statements as a whole are free from Report on Other Legal and Regulatory Requirements
opinion. Our conclusions are based on the audit
material misstatement, whether due to fraud or error, As required by section 163 (2) of the Companies Act No. 07 of
evidence obtained up to the date of our auditor’s
and to issue an auditor’s report that includes our opinion. 2007, we have obtained all the information and explanations
report. However, future events or conditions may
Reasonable assurance is a high level of assurance, but is not a that were required for the audit and, as far as appears from our
cause the Company to cease to continue as a going examination, proper accounting records have been kept by the
guarantee that an audit conducted in accordance with SLAuSs
will always detect a material misstatement when it exists. concern. Company.
Misstatements can arise from fraud or error and are considered Evaluate the overall presentation, structure and
material if, individually or in the aggregate, they could CA Sri Lanka membership number of the engagement partner
content of the financial statements, including the
reasonably be expected to influence the economic decisions responsible for signing this independent auditor’s report is
disclosures, and whether the financial statements
of users taken on the basis of these financial statements. 1798.
represent the underlying transactions and events in a
manner that achieves fair presentation.
As part of an audit in accordance with SLAuSs, we exercise
professional judgment and maintain professional skepticism Obtain sufficient appropriate audit evidence
throughout the audit. We also: regarding the financial information of the entities Chartered Accountants
or business activities within the Company to Colombo, Sri Lanka
Identify and assess the risks of material misstatement express an opinion on the financial statements. We
of the financial statements, whether due to fraud 20 April 2021

Statement of
Profit or Loss and Other
Comprehensive Income
Year ended 31 December
(all amounts in Sri Lanka Rupees thousands) 2020 2019
Note Rs. ‘000 Rs. ‘000
Turnover 4 132,148,810 141,341,887

Government levies 4 (100,076,289) (105,818,189)
Revenue 32,072,521 35,523,698
Raw materials used (2,168,630) (2,212,800)

Employee benefit expenses 5 (1,365,458) (1,477,244)
Depreciation expenses 11 (338,747) (295,716)
Amortisation expenses 12 (1,150) (479)
Other operating expenses (3,628,576) (4,550,084)
Other operating income 6 100,615 70,093
Operating profit 24,670,575 27,057,468
Finance income 8 787,262 1,665,633

Finance cost 8 (24,274) (32,257)
Profit before income tax 25,433,563 28,690,844
Income tax expenses 9 (9,855,469) (11,431,899)

Profit for the year 15,578,094 17,258,945
Other comprehensive income:

Items that will not be reclassified to Profit or Loss
Remeasurement of defined benefit obligations 13(b) 1,538 (85,266)
Total other comprehensive income for the year 1,538 (85,266)
Total comprehensive income 15,579,632 17,173,679
Earnings per share

- Basic (Rs.) 10 83.16 92.13
- Diluted (Rs.) 10 83.16 92.13
The Notes on pages 109 to 142 form an integral part of these financial statements.

Statement of
Financial Position
As at 31 December I certify that these financial statements have been
prepared in compliance with the requirements of the
(all amounts in Sri Lanka Rupees thousands) 2020 2019 Companies Act No. 07 of 2007.
Note Rs. ‘000 Rs. ‘000

ASSETS
Non-current assets
Property, plant and equipment 11 4,682,376 3,978,265
Intangible assets 12 1,820 2,970 Umair Luqman
Employee benefit plan asset 13 (b) 180,904 196,817 Finance Director

Other receivables 15 111,820 116,152
The Board of Directors is responsible for the
4,976,920 4,294,204
preparation and presentation of these financial
Current assets
statements. These financial statements were
Inventories 14 3,732,192 2,729,449
authorised for issue by Board of Directors on 20 April
Trade and other receivables 15 3,229,974 2,798,976
2021.
Assets held for sale 11.4 - 279
Cash and cash equivalents 16 9,782,347 16,845,231
16,744,513 22,373,935
Total assets 21,721,433 26,668,139
Nedal Salem
EQUITY AND LIABILITIES Managing Director & CEO
Equity
Stated capital 17 1,873,238 1,873,238
Retained earnings 2,729,151 2,749,626
4,602,389 4,622,864
Non-current liabilities Umair Luqman
Unfunded retirement benefit obligation 13 (a) 163 163 Finance Director
Deferred tax liabilities 18 396,350 596,836
Lease liabilities 21 83,772 119,410 20 April 2021
480,285 716,409
Current liabilities
Trade and other payables 19 7,827,053 10,680,833
Lease liabilities 21 104,918 99,811
Income tax liabilities 4,966,761 6,474,856
Dividend payable 20 (a) 3,465,489 3,746,475
Unclaimed dividends 20 (b) 274,538 326,891
16,638,759 21,328,866
Total liabilities 17,119,044 22,045,275
Total equity and liabilities 21,721,433 26,668,139

Statement of
Changes in Equity
(all amounts in Sri Lanka Rupees thousands) Stated Retained Total
capital earnings
Note Rs. ‘000 Rs. ‘000 Rs. ‘000
Balance at 1 January 2019 1,873,238 3,486,172 5,359,410
Profit for the year - 17,258,945 17,258,945

Other comprehensive income - (85,266) (85,266)
Total comprehensive income for the year - 17,173,679 17,173,679
Transactions with owners of the Company, recognised directly in equity

Write back of unclaimed dividends 20 (b) - 29,771 29,771
Dividends 20 (c) - (17,939,996) (17,939,996)
Total transactions with shareholders - (17,910,225) (17,910,225)
Balance at 31 December 2019 1,873,238 2,749,626 4,622,864
Balance at 1 January 2020 1,873,238 2,749,626 4,622,864
Profit for the year - 15,578,094 15,578,094

Other comprehensive income - 1,538 1,538
Total comprehensive income for the year - 15,579,632 15,579,632
Transactions with owners of the Company, recognised directly in equity

Write back of unclaimed dividends 20 (b) - 65,777 65,777
Dividends 20 (c) - (15,665,884) (15,665,884)
Total transactions with shareholders - (15,600,107) (15,600,107)
Balance at 31 December 2020 1,873,238 2,729,151 4,602,389

Statement of
Cash Flows
(all amounts in Sri Lanka Rupees thousands) 2020 2019
Note Rs. ‘000 Rs. ‘000
Cash flows from operating activities

Cash generated from operations 24 20,745,028 24,450,124
Interest received 8 787,262 1,665,633
Interest paid 8 (24,274) (32,257)
Gratuity Paid - Unfunded Scheme - (37)
Taxes paid (11,564,049) (10,472,323)
Net cash generated from operating activities 9,943,967 15,611,140
Cash flows from investing activities

Purchases of property, plant and equipment 11 (952,014) (884,498)
Purchase of intangible assets 12 - (3,449)
Net cash used in investing activities (952,014) (887,947)
Cash flows from financing activities

Dividends paid 20 (a) (15,903,852) (17,932,140)
Unclaimed dividends paid 20 (b) (29,594) (3,690)
Payment of lease liabilities (121,391) (94,695)
Net cash used in financing activities (16,054,837) (18,030,525)
Decrease in cash and cash equivalents (7,062,884) (3,307,332)
Movement in cash and cash equivalents

At beginning of year 16,845,231 20,152,563
Decrease in cash and cash equivalents (7,062,884) (3,307,332)
At end of year 16 9,782,347 16,845,231

Notes to the
(all amounts in Sri Lanka Rupees thousands)
1 GENERAL INFORMATION material uncertainties that may cast significant adjustment to the carrying amounts of assets and
Ceylon Tobacco Company PLC ('the Company') doubt upon the Company’s ability to continue liabilities in the next financial year is included in
is a public limited company incorporated and as a going concern. Therefore, the financial the following notes:
domiciled in Sri Lanka. The principal operations statements continue to be prepared on the
going concern basis. The impact from COVID-19 Note 13 – measurement of defined benefit
of the Company is a manufacturing, marketing
pandemic has been disclosed in Note 26. obligations: key actuarial assumptions;
and selling cigarettes. The Company's registered
and
office is located at No. 178, Srimath Ramanathan
Mawatha, Colombo 15.
2.4 Significant accounting judgements,
Note 18 – recognition of deferred tax assets
estimates and assumptions
British American Tobacco plc (BAT) is the ultimate In preparing these financial statements, 2.5 Comparative information
parent company of Ceylon Tobacco Company PLC management has made judgements and
The comparative information has been reclassified
through British American Tobacco International estimates that effect the application of the
where necessary to confirm to the current
Holdings BV. The ordinary shares of the Company Company's accounting policies and the reported
year's classification in order to provide a better
are listed on the Colombo Stock Exchange. amounts of assets, liabilities, income and
presentation.
expenses. Actual results may differ from these
2 BASIS OF PREPARATION AND OTHER estimates.
2.6 Changes in significant accounting
SIGNIFICANT ACCOUNTING POLICIES policies
2.1 Basis of preparation Estimates and underlying assumptions are
A number of new standards are effective from
reviewed on an ongoing basis. Revisions to
These financial statements have been prepared in 1 January 2020, but they do not have a material
estimates are recognised prospectively.
accordance with Sri Lanka Accounting Standards effect on the Company's financial statements.
('SLFRS/LKAS') as laid down by the Institute of
Judgements
Chartered Accountants of Sri Lanka (CA Sri Lanka) 2.7 Segmental reporting
and the requirements of the Companies Act No. Information about judgements made in applying
The Company operates in two geographical
07 of 2007. accounting policies that have the most significant
segments - domestic and export sales.
effects on the amounts recognised in the Financial
These financial statements were authorised for Statements is included in the following notes:
Operating segments are reported in a manner
issue by the Company’s Board of Directors on 20 consistent with the internal reporting provided
April 2021. Note 4 - Revenue Recognition: whether
revenue from made-to-order products is to the chief operating decision-makers. The chief
recognised over time or at a point in time; operating decision-makers, who are responsible
2.2 Functional and presentation currency for making strategic decisions, allocating
These financial statements are presented in Sri Note 21 - Lease Term: whether the Company resources and assessing performance of the
Lankan Rupees (LKR), which is the Company’s is reasonably certain to exercise extension operating segments, have been identified as the
functional currency. All amounts have been options; and Chief Executive Officer (CEO) and the Board of
rounded to the nearest thousand, unless Directors.
Note 18 - Deferred Tax Liabilities:
otherwise indicated.
Determination of whether lands should be
considered as a capital asset or an investment However, operating segments are not presented
2.3 Going concern as exports make up less than 1% of sales turnover.
asset.
The Company’s management has made an
assessment of its ability to continue as a going Assumption 2.8 Summary of significant accounting
concern and is satisfied that it has the resources policies
Information about assumptions and estimation
to continue in business for a foreseeable future. The Company has consistently applied the
uncertainties at 31 December 2020 that have
Furthermore, management is not aware of any accounting policies to all periods presented in
a significant risk of resulting in a material

Notes to the
these financial statements, except if mentioned acquired or as a consequence of having used the An asset's carrying amount is written down
otherwise in Note 2.6. item during a particular period for purposes other immediately to its recoverable amount if the
than to produce inventories during that period. asset's carrying amount is greater than its
2.8.1 Foreign currency transactions, estimated recoverable amount.
translation and balances Subsequent costs are included in the asset's
Transactions in foreign currencies are translated carrying amount or recognised as a separate asset, Gains and losses on disposal of property, plant
into the functional currency of the Company as appropriate only when it is probable that future and equipment are determined by reference to
at the exchange rates at the dates of the economic benefit associated with the item will their carrying amount and are taken into account
transactions. flow to the Company and the cost of the item can in determining operating profit
be measured reliably. The carrying amount of the
Monetary assets and liabilities denominated replaced part is derecognised. All other repairs Capital work-in-progress
in foreign currencies are translated into the and maintenance costs are charged to profit or Capital work-in-progress is stated at cost. These
functional currency at the exchange rate at loss during the financial period in which they are are expenses of a capital nature directly incurred
the reporting date. Non-monetary assets and incurred. in the construction of buildings and major plant
liabilities that are measured at fair value in a and machinery, awaiting capitalisation.
foreign currency are translated into the functional Depreciation and derecognition
currency at the exchange rate when the fair value Land is not depreciated. Depreciation on other 2.8.3 Intangible assets
was determined. Non-monetary items that are assets is calculated using the straight-line method Basis of recognition and measurement
measured based on historical cost in a foreign to allocate their cost to their residual values over
Intangible assets wholly consist of cost of
currency are translated at the exchange rate at their estimated useful lives, as follows:
computer software acquired by the Company
the date of the transaction. Foreign currency
Freehold buildings 40 years and have finite useful life is measured at cost less
differences are generally recognised in profit or
Leasehold buildings Over the lease period accumulated amortisation and impairment losses,
loss.
Building improvements 10 years if any.
2.8.2 Property, plant and equipment / upgrades

Plant and machinery 20 years
Subsequent measurement
Basis of recognition
Furniture, fittings and 5 years Subsequent expenditure is capitalised only
Property, plant and equipment are recognised when it increases the future economic benefits
office equipment
if it is probable that future economic benefits embodied in the specific asset to which it relates.
IT equipment and 3 years
associated with the asset will flow to the All other expenditure is recognised in profit or loss
household equipment
Company and the cost of the asset can be reliably as incurred.
Vehicles and accessories 4 years
measured.
Lab equipment and 10 years
Amortisation
canteen equipment
Basis of measurement
IT infrastructure 5 years Amortisation is calculated to write off the cost
All property, plant and equipment are initially of intangible assets less their estimated residual
recorded at cost and stated at historical cost values using the straight-line method over their
Depreciation of an asset begins when it is
less depreciation and impairment losses, if any. estimated useful lives, and is generally recognised
available for use and ceases at the earlier of the
Historical cost includes expenditure that is directly in profit or loss for the period.
date that the asset is classified as held for sale and
attributable to the acquisition of the items and
the date that the asset is derecognised.
also includes the initial estimate of the costs of Estimated useful life for current and comparative
dismantling and removing the item and restoring period are as follows:
The asset's residual values and useful lives are
the site on which it is located, the obligation for
reviewed, and adjusted if appropriate, at the end
which an entity incurs either when the item is Computer software 3 years
of each reporting period.

Amortisation methods, useful lives and residual It is held within a business model whose Financial assets – Business model
values are reviewed at each reporting date and objective is to hold assets to collect assessment
adjusted if appropriate. contractual cash flows; and The Company makes an assessment of the
Its contractual terms give rise on specified objective of the business model in which a
2.8.4 Financial Instruments financial asset is held at a portfolio level because
dates to cash flows that are solely payments
Recognition and initial measurement of principal and interest on the principal this best reflects the way the business is managed
Trade receivable and debt securities issues are amount outstanding. and information is provided to management. The
initially recognised when they are originated. All information considered includes:
other financial assets and financial liabilities are The Company's financial assets classified
The stated policies and objectives for
initially recognised when the Company becomes under amortised cost include trade and other
the portfolio and the operation of those
a party to the contractual provisions of the receivables and cash and cash equivalents.
policies in practice. These include whether
instrument.
management’s strategy focuses on earning
A debt investment is measured at FVOCI if it
contractual interest income, maintaining a
A financial asset (unless it is a trade receivable meets both of the following conditions and it is
particular interest rate profile, matching the
without a significant financing component) or not designated as at FVTPL.
duration of the financial assets to the duration
financial liability is initially measured at fair value
It is held within a business model whose of any related liabilities or expected cash
plus, for an item not at FVTPL, transaction costs
objective is achieved by both collecting outflows or realising cash flows through the
that are directly attributable to its acquisition or
contractual cash flows and selling financial sale of the assets;
issue. A trade receivable without a significant
financing components is initially measured at the assets; and
How the performance of the portfolio is
transaction price. Its contractual terms give rise on specified evaluated and reported to the Company’s
dates to cash flows that are solely payments management;
Classification and subsequent of principal and interest on the principal
The risks that affect the performance of the
measurement amount outstanding.
business model (and the financial assets held
Financial assets
within that business model) and how those
On initial recognition, a financial asset is classified On initial recognition of an equity investment
risks are managed;
as measured at: amortised cost; FVOCI – debt that is not held for trading, the Company may
irrevocably elect to present subsequent changes How managers of the business are
investment; FVOCI – equity investment; or FVTPL.
in the investment’s fair value in OCI. This election is compensated – e.g. whether compensation is
Financial assets are not reclassified subsequent made on an investment-by-investment basis. based on the fair value of the assets managed
to their initial recognition unless the Company or the contractual cash flows collected; and
changes its business model for managing All financial assets not classified as measured at
The frequency, volume and timing of sales of
financial assets, in which case all affected financial amortised cost or FVOCI as described above are
financial assets in prior periods, the reasons for
assets are reclassified on the first day of the first measured at FVTPL. This includes all derivative
such sales and expectation about future sales
reporting period following the change in the financial assets. On initial recognition, the
activity.
business model. Company may irrevocably designate a financial
asset that otherwise meets the requirements to
Transfers of financial assets to third parties in
A financial asset is measured at amortised cost if it be measured at amortised cost or at FVOCI as
transactions that do not qualify for derecognition
meets both of the following conditions and is not at FVTPL if doing so eliminates or significantly
are not considered sales for this purpose,
designated as at FVTPL: reduces an accounting mismatch that would
consistent with the Company’s continuing
otherwise arise.
recognition of the assets.

Notes to the
Financial assets that are held for trading or are for the credit risk associated with the principal such that it would not meet this condition. In
managed and whose performance is evaluated on amount outstanding during a particular period of marking this assessment, the Company considers:
a fair value basis are measured at FVTPL. time and for other basic lending risks and costs.
(e.g. liquidity risk and administrative costs), as well Contingent events that would change the
Financial Assets – Assessment whether as a profit margin. amount or timing of cash flows;
contractual cash flows are solely payments
Terms that may adjust the contractual coupon
of principal and interest In assessing whether the contractual cash flows
rate, including variable-rate features; and
For the purpose of this assessment, ‘principal’ are solely payments of principal and interest, the
is defined as the fair value of the financial asset Company considers the contractual terms of the Terms that limit the Company’s claim to cash
on initial recognition. ‘Interest’ is defined as instrument. This includes assessing whether the flows from specified assets (e.g. non-recourse
consideration for the time value for money and financial asset contains a contractual cash flows features).
Financial assets – subsequent measurement and gains and losses
These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit
Financial assets at FVTPL
or loss.
These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment
Financial assets at
losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is
amortised cost
recognised in profit or loss.
These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains
Debt investments at FVOCI and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On derecognition, gains and
losses accumulated in OCI are reclassified to profit or loss.
These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly
Equity investments at FVOCI represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit
or loss.
Financial liabilities – Classification, expense and foreign exchange gains and losses receive the contractual cash flows in a transaction
subsequent measurement and gains and are recognised in profit or loss. Any gain or loss on in which substantially all of the risks and rewards
losses derecognition is also recognised in profit or loss. of ownership of the financial asset are transferred
Financial liabilities are classified as measured at in which the Company neither transfers nor
amortised cost or FVTPL. A financial liability is Financial liabilities measured at amortised cost retains substantially all of the risks and rewards of
classified as at FVTPL if it is classified as held- include trade and other payables and lease ownership and it does not retain control of the
for-trading, it is a derivative or it is designated liability. financial asset.
as such on initial recognition. Financial liabilities
Derecognition The Company enters into transactions whereby
at FVTPL are measured at fair value and net
gains and losses, including any interest expense, Financial assets it transfers assets recognised in its statement
are recognised in profit or loss. Other financial of financial position, but retains either all or
The Company derecognises a financial asset when
liabilities are subsequently measured at amortised substantially all of the risks and rewards of the
the contractual rights to the cash flows from the
cost using the effective interest method. Interest transferred assets. In these cases, the transferred
financial asset expire, or it transfers the rights to
assets are not derecognised.

Financial liabilities Credit-impaired financial assets 2.8.7 Inventories

The Company derecognises a financial liability At each reporting date, the Company assesses Inventories are stated at the lower of cost or
when its contractual obligation are discharged whether financial assets carried at amortised cost net realisable value after making due allowance
or cancelled, or expire. The Company also are credit-impaired. A financial asset is 'credit for slow moving and obsolete items, on a basis
derecognises a financial liability when its terms impaired' when one or more events that have a consistently applied from year to year. Net
are modified and the cash flows of the modified detrimental impact on the estimated future cash realisable value is the estimate of the selling
liability are substantially different, in which case a flows of the financial asset have occurred. price in the ordinary course of business, less
new financial liability based on the modified terms the estimated costs of completion and selling
is recognised at fair value. Evidence that a financial asset is credit-impaired expenses. Cost is determined on a weighted
includes the following observable data: average basis. The value of raw materials includes
On derecognition of a financial liability, the the cost of leaf processed by the Company’s
difference between the carrying amount Significant financial difficulty of the borrower leaf operations and wrapping material cost. The
extinguished and the consideration paid or issuer; values of the work-in-progress and finished goods
(including any non-cash assets transferred or consist of the raw materials, direct labour, other
A breach of contract such as a default or
liabilities assumed) is recognised in profit or loss. direct costs and related production overheads. All
being more than 90 days past due;
other stocks are included under the category of
Offsetting The restructuring of a loan or advance by the consumables which are valued at cost.
Financial assets and financial liabilities are offset Company on terms that the Company would
and the net amount presented in the statement not consider otherwise; 2.8.8 Trade receivables
of financial position when, and only when, the It is probable that the borrower will enter Trade receivables are amounts due from
Company currently has a legally enforceable right bankruptcy or other financial reorganisation. customers for merchandise sold or services
to set off the amounts and it intends either to performed in the ordinary course of business. If
settle them on a net basis or to realise the asset 2.8.6 Impairment of non-financial assets collection is expected in one year or less (or in the
and settle the liability simultaneously. normal operating cycle of the business if longer),
Assets which are subject to amortisation are
reviewed for impairment whenever events or they are classified as current assets. If not, they are
2.8.5 Impairment of financial assets presented as non-current assets.
changes in circumstances indicate that the
The Company uses simplified approach to carrying amount may not be recoverable. An
measuring expected credit losses which uses a impairment loss is recognised for the amount by Trade receivables are recognised initially at fair
lifetime expected loss allowance for all trade and which the asset’s carrying amount exceeds its value and subsequently measured at amortised
other receivables. recoverable amount. The recoverable amount cost using the effective interest method, less
is the higher of an asset’s fair value less costs provision for impairment.
When determining whether the credit risk of a of disposal and value in use. For the purposes
financial asset has increased significantly since Impairment testing of trade receivables is
of assessing impairment, assets are grouped at
initial recognition and when estimating ECLs, the described in Note 2.8.5.
the lowest levels for which there are separately
Company considers reasonable and supportable identifiable cash inflows (cash-generating units).
information that is relevant and available Prior impairments of non-financial assets (other
2.8.9 Cash and cash equivalents
without undue cost or effort. This includes both than goodwill) are reviewed for possible reversal In the statement of cash flows of the Company,
quantitative and qualitative information and of each reporting date. cash and cash equivalents includes cash in hand,
analysis, based on the Company’s historical deposits held at call with banks, other short-term
experience and informed credit assessment and highly liquid investments with original maturities
including forward-looking information. of three months or less and bank overdrafts.

Notes to the
2.8.10 Stated capital determined using rates (and laws) that have been The calculation of defined benefit obligations
The ordinary shares of the Company are quoted enacted or substantively enacted by the end of is performed annually by a qualified actuary
in the Colombo Stock Exchange. The ordinary the reporting period and are expected to apply using the projected unit credit method. When
shareholders are entitled to receive dividend as when the related deferred tax asset is realised or the calculation results in a potential asset for the
declared by the Company from time to time. the deferred income tax liability is settled. Company, the recognised asset is limited to the
present value of economic benefits available in
Incremental costs directly attributable to the issue Deferred tax assets are recognised only to the the form of any future refunds from the plan or
of ordinary shares are recognised as a deduction extent that it is probable that future taxable profit reductions in future contributions to the plan.
from equity. will be available against which the temporary
differences can be utilised. The rate used is Remeasurements of the net defined benefit
2.8.11 Trade payables considered as substantively enacted as at the liability, which comprise actuarial gains and losses,
reporting date. the return on plan assets (excluding interest) and
Trade payables are obligations to pay for goods or
the effect of the asset ceiling (if any, excluding
services that have been acquired in the ordinary
2.8.13 Employee benefits interest), are recognised immediately in OCI. The
course of business from suppliers. Accounts
(a) Defined contribution plan Company determines the net interest expense
payable are classified as current liabilities if
(income) on the net defined benefit liability (asset)
payment is due within one year or less (or in the Obligations for contributions to defined
for the period by applying the discount rate used
normal operating cycle of the business if longer). If contribution plans are expensed as the related
to measure the defined benefit obligation at the
not, they are presented as non-current liabilities. service is provided.
beginning of the annual period to the then-
net defined benefit liability (asset), taking into
2.8.12 Income tax CTC Provident Fund
account any changes in the net defined benefit
Income tax expense comprises current and All local employees of the Company are members
liability (asset) during the period as a result of
deferred tax. It is recognised in profit or loss of the CTC Provident Fund to which Company
contributions and benefit payments. Net interest
except to the extent that it relates to items Contributes 15% of such employees' consolidated
expense related to defined benefit plans are
recognised directly in equity or in OCI. wage or salary.
recognised in profit or loss.
Current tax Employees’ Trust Fund

(c) Short term employee benefits
Current tax comprises the expected tax payable The Company contributes 3% of the salary of each
Short-term employee benefits are expensed
or receivable on the taxable income or loss for employee to the Employees’ Trust Fund.
as the related service is provided. A liability is
the year and any adjustment to the tax payable recognised for the amount expected to be paid if
or receivable in respect of previous years. The (b) Defined benefit plan
the Company has a present legal or constructive
amount of current tax payable or receivable is the The Company’s net obligation in respect of obligation to pay this amount as a result of
best estimate of the tax amount expected to be defined benefit plans is calculated separately for past service provided by the employee and the
paid or received that reflects uncertainty related each plan by estimating the amount of future obligation can be estimated reliably.
to income taxes, if any. It is measured using tax benefit that employees have earned in the current
rates enacted or substantively enacted at the and prior periods, discounting that amount and Wages, salaries, paid annual leave and sick leave,
reporting date. deducting the fair value of any plan assets. The bonuses, leave encashment, and non-monetary
Company is liable to pay retirement benefits benefits are accrued in the period in which the
Deferred tax under the Payment of Gratuity Act No. 12 of associated services are rendered by employees of
Deferred tax is recognised on temporary 1983. The liability for the gratuity payment to an the Company.
differences arising between the tax bases of assets employee arises only on the completion of five
and liabilities and their carrying amount in the years of continued service with the Company.
statement of financial position. Deferred tax is

(d) Share based payment are affected by economic factors. The Company’s The right‑of‑use asset is subsequently depreciated
The fair value of the amount payable to contracts with customers are similar in nature and using the straight‑line method from the
employees in respect of Phantom shares in BAT revenue from these contracts are not significantly commencement date to the end of the lease
PLC, which are settled in cash, is recognised affected by economic factors apart from exports term, unless the lease transfers ownership of the
as an expense with a corresponding increase sales. The Company believes objective of this underlying asset to the Company by the end of
in liabilities, over the period during which the requirement will be met by using one type of the lease term or the cost of the right‑of‑use asset
employees are entitled to payment. The liability category - Geographical markets (Refer Note 4). reflects that the Company will exercise a purchase
is remeasured at each reporting date and at option. In that case the right‑of‑use asset will be
settlement date based on the fair value of the 2.8.16 Leases depreciated over the useful life of the underlying
current price of the BAT share. Any changes in the Recognition asset, which is determined on the same basis
liability are recognised in profit or loss. as those of property, plant and equipment. In
At inception of a contract, the Company assesses
addition, the right‑of‑use asset is periodically
whether a contract is, or contains, a lease. A
2.8.14 Provisions reduced by impairment losses, if any, and adjusted
contract is, or contains, a lease if the contract
for certain remeasurements of the lease liability.
Provisions are recognised when the Company conveys the right to control the use of an
has a present legal or constructive obligation as a identified asset for a period of time in exchange
The lease liability is initially measured at the
result of past events, it is probable that an outflow for consideration. To assess whether a contract
present value of the lease payments that are not
of resources embodying economic benefits will conveys the right to control the use of an
paid at the commencement date, discounted
be required to settle the obligation, and a reliable identified asset, the Company uses the definition
using the interest rate implicit in the lease or,
estimate of the amount of the obligation can be of a lease in SLFRS 16.
if that rate cannot be readily determined, the
made. Provisions are not recognised for future
Company’s incremental borrowing rate. Generally,
operating losses. As a lessee
the Company uses its incremental borrowing rate
At commencement or on modification of a as the discount rate.
2.8.15 Revenue recognition contract that contains a lease component, the
Sale of goods Company allocates the consideration in the The Company determines its incremental
Revenue principally comprises sales of cigarettes contract to each lease component on the basis borrowing rate by obtaining interest rates from
and other tobacco products to external of its relative stand-alone prices. However, for various external financing sources and makes
customers. Revenue excludes duty, excise and the leases of property and motor vehicles the certain adjustments to reflect the terms of the
other taxes collected on behalf of third parties, Company has elected not to separate non-lease lease and type of the asset leased.
rebates, discounts and certain marketing expenses components and account for the lease and non-
which are not distinct from sales or fair value of lease components as a single lease component. Lease payments included in the measurement of
the goods or services that cannot be reasonably the lease liability comprise the following:
estimated or excess value of fair value of such The Company recognises a right‑of‑use asset and
product or services. The Company considers sales a lease liability at the lease commencement date. fixed payments, including in‑substance fixed
and delivery of products as one performance The right‑of‑use asset is initially measured at cost, payments;
obligation and recognises revenue when it which comprises the initial amount of the lease
variable lease payments that depend on an
transfers control to a customer. liability adjusted for any lease payments made
index or a rate, initially measured using the
at or before the commencement date, plus any
index or rate as at the commencement date;
Disaggregation of revenue initial direct costs incurred and an estimate of
costs to dismantle and remove the underlying amounts expected to be payable under a
SLFRS 15 requires an entity to disaggregate
asset or to restore the underlying asset or the site residual value guarantee; and
revenue from contracts with customers into
on which it is located, less any lease incentives
categories that depict how the nature, amount,
received.
timing and uncertainty of revenue and cash flows

Notes to the
the exercise price under a purchase option 2.8.17 Dividend distribution

that the Company is reasonably certain Dividend distribution to the Company's
to exercise, lease payments in an optional shareholders is recognised as a liability in the
renewal period if the Company is reasonably Company's financial statements in the period
certain to exercise an extension option, and in which the dividends are approved by the
penalties for early termination of a lease Company's shareholders. Interim dividend
unless the Company is reasonably certain not distributions are recognised in the period in which
to terminate early. the dividends are declared and paid.
The lease liability is measured at amortised 2.8.18 Fair value estimation

cost using the effective interest method. It is
The carrying values of applicable financial
remeasured when there is a change in future
instruments represent their fair values as they
lease payments arising from a change in an index
are mostly short term non-derivative financial
or rate, if there is a change in the Company’s
instruments, considering the discounting impact
estimate of the amount expected to be payable
as immaterial.
under a residual value guarantee, if the Company
changes its assessment of whether it will exercise
2.9 Standards issued but not yet effective
a purchase, extension or termination option
or if there is a revised in‑substance fixed lease A number of new standards are effective for
payment. annual periods beginning after 1 January 2021
and earlier application is permitted; however,
When the lease liability is remeasured in this the Company has not early adopted the new or
way, a corresponding adjustment is made to the amended standards in preparing these financial
carrying amount of the right‑of‑use asset, or is statements.
recorded in profit or loss if the carrying amount of
the right‑of‑use asset has been reduced to zero. The following amended standards and
interpretations are not expected to have a
The Company presents right‑of‑use assets that do significant impact on the Company's financial
not meet the definition of investment property statements;
in 'property, plant and equipment’ and lease
Onerous Contracts - Cost of fulfilling a
liabilities in ‘lease liabilities’ in the statement of
Contract (Amendments to LKAS 37)
financial position.
Property, Plant and Equipment: Proceeds
Short-term leases and leases of low-value before Intended Use (Amendments to LKAS
assets 16).
The Company has elected not to recognise Classification of Liabilities as Current or Non-
right‑of‑use assets and lease liabilities for leases current (Amendments to LKAS 1).
of low‑value assets and short‑term leases.
The Company recognises the lease payments
associated with these leases as an expense on a
straight‑line basis over the lease term.

3 FINANCIAL RISK MANAGEMENT

3.1 Financial risk factors
(a) Market risk
Market risk reflects the changes in market prices, such as foreign exchange rates, interest rates and equity prices that will affect the Company’s income or the value of its holdings of
financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
(i) Foreign exchange risk

The Company is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar (USD), Euro (EUR) and the Great Britain Pound
(GBP). Foreign exchange risk arises from future commercial transactions of recognised assets and liabilities that are denominated in a currency that is not the entity's functional
currency. Management complies with the treasury policy to manage foreign exchange risk against their functional currency.
The following significant exchange rates were applied during the year:
Closing exchange rate 2020 2019
US Dollar (USD) 185.25 181.38

Great Britain Pound (GBP) 253.23 240.28
Euro (EUR) 226.66 203.59

Average exchange rate 2020 2019
US Dollar (USD) 185.45 178.69

Great Britain Pound (GBP) 238.00 228.14
Euro (EUR) 211.70 200.04
The Company considered a further 5% strengthening or weakening of the functional currency against non-functional currencies as a reasonably possible change. The impact is
calculated with reference to the financial asset or liability held as at the year end. A 5% increase or decrease of functional currency against non-functional currencies would result in
Rs. 69.2 million impact on profit before tax.
(ii) Price risk

Price risk represents the risk that the fair value of future cash flows of a financial statement will fluctuate because of a change in market prices (other than those arising from interest
rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments
traded in the market. The Company is not exposed to any price risk.
Equity price risk

The Company is not exposed to equity price risk since there are no investments in equity securities.
Commodity price risk

The Company is not significantly exposed to commodity price risk as material prices are contractually agreed to on a long term basis.

Notes to the
(iii) Cash flow and fair value interest rate risk

As the Company has no long term interest bearing assets or liabilities, the Company's income and operating cash flows are independent of changes in market interest rate. Hence,
there is no impact to the Company.
(b) Credit risk

Credit risk represents the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge a contractual obligation. Credit risk mainly
arises from trade debtors, advances and cash and cash equivalents. Group treasury guidelines are followed for managing cash and cash equivalents while short term investment
decisions are taken after proper review by treasury committee ensuring compliance with group guidelines. The Company sales are on an order to order basis with guarantees
equivalent to a day's sales, being obtained from all distributors. Management does not expect any losses from non performance by these counterparties. The maximum exposure
to credit risk at the reporting date in terms of carrying value of assets are as follows:
As at 31 December
2020 2019
Trade receivables [Note 15] 2,816,979 2,486,169

Receivables from related parties [Note 25 (iii)] 57,714 34,301
Staff loans [Note 15] 265,447 225,955
Advances to farmers [Note 15] 215,766 192,360
3,355,906 2,938,785
Provision [Note 15] (156,835) (113,385)
Cash and cash equivalents, excluding cash in hand 9,782,025 16,845,025
12,981,096 19,670,425
The following tables provide information about the exposure to credit risk on trade receivables;
As at 31 December 2020
Ageing Category Gross Receivable % Provision Total Provision Net Receivable
Not Due 1,803,638 0.10% 1,804 1,801,834

1 - 30 Days 927,704 0.12% 1,113 926,591
31 - 60 Days 80,450 0.14% 113 80,337
61 - 90 Days - 0.14% - -
91 - 120 Days - 0.16% - -
121 - 180 Days - 0.16% - -
181 - 360 Days 5,187 0.18% 9 5,178
>360 Days - 0.20% - -
2,816,979 3,039 2,813,940

Ageing Category Gross Receivable % Provision Total Provision Net Receivable
Not Due 2,314,225 0.05% 1,157 2,313,068

1 - 30 Days 171,129 0.06% 103 171,026
31 - 60 Days - 0.07% - -
61 - 90 Days 440 0.07% - 440
91 - 120 Days 375 0.08% - 375
121 - 180 Days - 0.08% - -
181 - 360 Days - 0.09% - -
>360 Days - 0.10% - -
2,486,169 1,260 2,484,909
Credit quality of financial assets

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about
counterparty default rates:
Cash at bank and short term bank deposits

As at 31 December
Rating 2020 2019
AAA (lka) 5,555,516 1,686,880

AA+ (lka) 193,680 429,787
AA (lka) - 9,979
AA- 3,989,595 14,675,804
BBB 43,234 -
BBB+ - 42,575
Total cash at bank and short term bank deposits 9,782,025 16,845,025
(c) Liquidity risk

Liquidity risk is the risk that the entity will not be able to honour its financial obligations as they fall due.
The Company's management monitors rolling forecasts of the liquidity position, expressed in cash and cash equivalents on the basis of expected cash flow and ensure access to
short term credit as per approved credit limit. However, the Company is able to meet all working capital requirements with its cash at bank and in hand. Excess funds are invested
in term deposits of less than one year. The management considers liquidity risk to be very negligible.

Notes to the
Relevant non-derivative financial liabilities at the reporting date are as follows:
Undiscounted Contractual Cash Flows

At 31 December 2020 Carrying Total Less than 3 Between 3 More than
amount months months 1 year
and 1 year
Trade and other payables, excluding accrued expenses 4,918,661 4,918,661 4,306,350 612,311 -
Lease liabilities 188,690 210,278 38,686 81,152 90,440
Undiscounted Contractual Cash Flows

At 31 December 2019 Carrying Total Less than 3 Between 3 More than
amount months months 1 year
and 1 year
Trade and other payables, excluding accrued expenses 6,914,591 6,914,591 6,463,570 451,021 -
Lease liabilities 219,221 249,275 30,811 88,513 129,951
3.2 Capital management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits
for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell
assets to reduce debt.
During 2020, the Company’s strategy, which was unchanged from 2019, was to be fully equity funded and have no external borrowings.
3.3 Analysis of financial instruments by measurement basis

The fair value of financial assets and liabilities, together with carrying amounts shown in the statement of financial position are as follows:
At 31 December 2020
Financial Financial Assets Financial Assets Total

Assets at measured at measured
amortised fair value at fair value
cost through through other
profit or comprehensive
loss income
Assets as per statement of financial position

Trade and other receivables, excluding pre-payments 3,234,784 - - 3,234,784
Cash and cash equivalents 9,782,347 - - 9,782,347
Total 13,017,131 - - 13,017,131

At 31 December 2020
Financial Financial Total

liabilities liabilities
measured at fair measured at
value through amortised
profit and loss cost
Liabilities as per statement of financial position

Trade and other payables, excluding non financial liabilities - 4,918,661 4,918,661
Lease liabilities - 188,690 188,690
Total - 5,107,351 5,107,351
Financial Assets Financial Assets Financial Assets Total

at amortised measured at measured
cost fair value at fair value
through through other
profit or comprehensive
loss income
Assets as per statement of financial position

Trade and other receivables, excluding pre-payments 2,849,548 - - 2,849,548
Cash and cash equivalents 16,845,231 - - 16,845,231
Total 19,694,779 - - 19,694,779
Financial Financial Total

liabilities liabilities
measured at fair measured at
value through amortised cost
profit and loss
Liabilities as per statement of financial position

Trade and other payables, excluding non financial liabilities - 6,914,591 6,914,591
Lease liabilities - 219,221 219,221
Total - 7,133,812 7,133,812

Notes to the
4 REVENUE
2020 2019
Local turnover 132,074,321 141,292,282

Export turnover 74,489 49,605
Total turnover 132,148,810 141,341,887
Government levies
Excise special provision tax (90,215,609) (87,498,842)
Value added tax (9,843,343) (18,236,548)
Nation building tax - (62,607)
Tobacco tax (17,337) (20,192)
Total government levies (100,076,289) (105,818,189)
Revenue 32,072,521 35,523,698
The Company does not distinguish its products into significant components for different geographical / business segments as they are insignificant. Export proceeds of the
Company are less than 1% of total turnover.
5 EMPLOYEE BENEFIT EXPENSES

2020 2019
Executive Directors' emoluments 112,207 140,231

Non-executive Directors' remuneration 9,000 7,760
Salaries and wages 1,070,555 1,150,777
Defined contribution plans 77,742 77,646
Provision for voluntary separation scheme [(a) below] 78,503 107,325
Defined benefit obligations [Note 13] 17,451 (6,495)
1,365,458 1,477,244
a) Voluntary Separation Scheme (VSS) was available to selected employees.
6 OTHER OPERATING INCOME

2020 2019
Sundry sales / gains 13,418 17,752

Recharge income 29,316 52,341
Gain from disposal of assets held for sale 57,870 -
Derocognition of right of use assets 11 -
100,615 70,093

7 OPERATING PROFIT
The operating profit is stated after charging the following other operating expenses :
2020 2019
Auditors' remuneration
- Audit fees 3,755 4,028
- Audit related services 2,005 1,890
- Non-audit services - -
Legal fees 50,036 118,860
Donations and corporate social activity expenses 129,047 25,793
Technical and advisory fees 570,200 487,351
Fixed assets write-offs 328 6,424
Provision for obsolete inventories (net of write-offs) (900) 30,924
Provision for doubtful debts (net of write-offs) 43,450 55,499
Repairs and maintenance 216,583 355,849
8 NET FINANCE INCOME

2020 2019
Interest income
- Interest income from bank deposits 787,262 1,665,633
Interest expense
- Interest on lease liabilities [Note 21] (24,274) (32,257)
Net Finance income 762,988 1,633,376

Notes to the
9 INCOME TAX EXPENSES

The Company is liable for income tax in accordance with Inland Revenue Act No. 24 of 2017 and income tax has been provided on the taxable income of the Company at 40% and
28% on profits arising from sales and interest income respectively in 2021.
2020 2019
Current tax on profit for the year 10,055,955 11,397,068

Deferred tax [Note 18] (200,486) 34,831
9,855,469 11,431,899

% 2020 % 2019
Profit before tax 25,433,563 28,690,844
Tax calculated at tax rate of 40% 40% 10,173,425 40% 11,476,338

Tax effects of:
Expenses not deductible for tax purposes 4.88% 496,420 3.17% 364,330
Expenses deductible for tax purposes (4.80%) (487,836) (2.12%) (243,724)
Rate differentials (1.24%) (126,055) (1.74%) (199,876)
Deferred taxation (1.97%) (200,486) 0.30% 34,831
Tax charge 36.87% 9,855,469 39.61% 11,431,899
10
EARNINGS PER SHARE
Earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.
2020 2019
Net profit attributable to shareholders (in thousands) 15,578,094 17,258,946

Weighted average number of ordinary shares in issue 187,323,751 187,323,751
Basic earnings per share (Rs.) 83.16 92.13

Diluted earnings per share (Rs.) 83.16 92.13

11
PROPERTY, PLANT AND EQUIPMENT
Freehold Freehold Building Leasehold Plant and Motor Capital work Right of Total
land buildings improvements buildings machinery/ vehicles in progress use assets
/upgrades equipment
Cost
At 1 January 2019 96,837 356,928 189,136 27,423 4,638,227 8,643 1,074,637 - 6,391,831
Recognition of right-of-use assets - - - - - - - 313,916 313,916
on initial application of SLFRS 16
Adjusted balance as at 96,837 356,928 189,136 27,423 4,638,227 8,643 1,074,637 313,916 6,705,747
1 January 2019
Transfers from CWIP - 2,180 36,371 - 717,082 - (755,633) - -
Additions to CWIP - - - - - - 884,498 - 884,498
Write-offs - (49) - (1,481) (7,417) - - - (8,947)
At 31 December 2019 96,837 359,059 225,507 25,942 5,347,892 8,643 1,203,502 313,916 7,581,298
Accumulated depreciation
At 1 January 2019 - 225,938 110,671 27,306 2,938,145 7,780 - - 3,309,840
Depreciation - 5,300 17,208 30 165,877 - - 107,301 295,716
Write-offs - (34) - (1,481) (1,008) - - - (2,523)
At 31 December 2019 - 231,204 127,879 25,855 3,103,014 7,780 - 107,301 3,603,033
Closing net book value 96,837 127,855 97,628 87 2,244,878 863 1,203,502 206,615 3,978,265
Cost
At 1 January 2020 96,837 359,059 225,507 25,942 5,347,892 8,643 1,203,502 313,916 7,581,298
Additions of right-of-use assets - - - - - - - 91,172 91,172
Transfers from CWIP - 1,663 29,624 - 371,155 - (402,442) - -
Additions to CWIP - - - - - - 952,014 - 952,014
Write-offs / Derecognitions - - - - (10,632) - - (903) (11,535)
At 31 December 2020 96,837 360,722 255,131 25,942 5,708,415 8,643 1,753,074 404,185 8,612,949
Accumulated depreciation
At 1 January 2020 - 231,204 127,879 25,855 3,103,014 7,780 - 107,301 3,603,033
Depreciation - 5,327 19,196 30 190,529 - - 123,665 338,747
Write-offs / Derecognitions - - - - (10,605) - - (602) (11,207)
At 31 December 2020 - 236,531 147,075 25,885 3,282,938 7,780 - 230,364 3,930,573
Closing net book value 96,837 124,191 108,056 57 2,425,477 863 1,753,074 173,821 4,682,376

Notes to the
11.1 Property, plant and equipment includes fully depreciated assets which are in use, the cost of which as at the end of the reporting date amounted to Rs. 2,078,216,901 (2019 -
2,000,293,265).
11.2 Capital work in progress, represents the operational and administrative activities related project works in progress, which mainly consists improvements and additions to
machinery/equipment.
11.3 Company Property

The freehold land and buildings were valued by professional valuers W.D.P. Rupananda, FIV, MRICS & Dr. Prathap Kaluthanthri MRICS, AIV. The valuations carried out on 31 December
2020 have been considered to derive the market values of the respective properties as at 31 December 2020.
The Company follows the cost model as stated in its accounting policy to measure property, plant and equipment. The purpose of this valuation is for management information
and to ascertain the current market prices of the freehold land and buildings owned by the Company. The valuation results have not been incorporated in the financial statements.
The valuation of the properties mentioned below amounts to Rs. 7,374,500,000.
Property Extent of Land No of Revalued Amount

Asset Type Location A R P Buildings Rs. ‘000
Land and Buildings Colombo head office factory 7 2 22.15 15 5,999,000

Land and Buildings Kandy industrial premises 3 3 26.05 5 520,750
Land and Buildings Kandy commercial premises 2 1 18.75 2 174,000
Land and Buildings Haliela depot, stores and quarters 1 1 38.50 7 39,450
Land and Buildings Anuradhapura depot, stores and quarters 2 1 33.50 5 56,850
Land and Buildings Nildanhinna depot, stores and quarters 2 1 4.00 9 31,100
Land and Buildings Hanguranketa depot, stores and quarters 2 3 21.00 8 16,150
Land and Buildings Melsiripura depot, stores and quarters 1 3 1.25 5 57,500
Land and Buildings Ambale depot, stores and quarters 2 0 9.66 4 19,500
Land and Buildings Wendaruwa quarters 0 2 0.00 1 3,700
Land and Buildings Galewela depot, stores and quarters 5 3 39.88 8 142,500
Land and Buildings Hunnasgiriya quarters 0 2 0.00 1 2,050
Land and Buildings Nuwara Eliya 0 1 31.30 1 161,750
Land Naula 0 0 21.00 - 10,500
Land Nuwara Eliya Yalta 0 1 23.50 - 139,700
11.4
Assets held for sale
The land and building at Kabitigollawa, land at Walapane and land at Kalagedihena which were classified as held for sale in 2019, were disposed during 2020. The total sales
proceeds received was Rs. 58,149,500.

11.5 The Group changed the expected useful life estimate of Machinery and Equipment w.e.f. 1 January 2018. The Machinery and Equipment which initially had a useful life of 14 years,
are now expected to remain in production for 20 years from the date of purchase. As a result, their expected useful life increased and its estimated residual value decreased. The
effect of these changes on actual and expected depreciation expense, was as follows.
2018 2019 2020 2021 2022 Later
(Decrease) / increase in depreciation expense (Rs. 000’) (86,818) (80,626) (73,413) (61,746) (49,875) 352,478
12
INTANGIBLE ASSETS
Intangible assets comprise computer software development and purchase cost incurred by the Company that is not integral to the functionality of the related equipment as
explained in Note 2.8.3.
As at 31 December
2020 2019
Cost
At 1 January 66,874 63,425
Additions - 3,449
At 31 December 66,874 66,874
Amortisation
At 1 January 63,904 63,425
Amortisation during the year 1,150 479
At 31 December 65,054 63,904
Net book value 1,820 2,970
13 EMPLOYMENT BENEFITS
(a) Unfunded defined benefit plan
The retiring gratuity is a defined benefit plan covering employees of the Company. The Company's pre 1992 gratuity liability amounting to Rs. 0.16 million (2019 - Rs. 0.16 million) is
not funded and has been provided for in the books of the Company.
As at 31 December
2020 2019
Unfunded obligations 163 163

Notes to the
(b) Funded defined benefit plan

Subsequent to 1992, an externally funded policy was purchased from AIA Insurance Lanka PLC, which covered all 310 (2019 - 318) employees attached to the Company. The plan is
fully funded by a policy obtained from AIA Insurance Lanka PLC. This policy meets the criteria mentioned in Sri Lanka Accounting Standard LKAS 19 - Employee Benefits, to classify
it as a qualifying insurance policy.
The amounts recognised in the statement of financial position are determined as follows:
As at 31 December
2020 2019
Defined Benefit Obligation 426,974 403,435

Fair Value of the Plan Asset (607,878) (600,252)
Net Defined Benefit (Asset)/Liability (180,904) (196,817)

The movement in the defined benefit (asset) / liability over the year and the comparative period are as follows:.
Defined Fair value Net defined

benefit of plan asset benefit (asset)
obligation /liability
Included in profit or loss:

At 1 January 2020 403,435 (600,252) (196,817)
Current service cost 37,330 - 37,330

Interest expense / (income) 35,231 (55,110) (19,879)
72,561 (55,110) 17,451
Included in OCI:
Remeasurements:
- Return on plan assets, excluding amounts included in interest expense - (61,741) (61,741)
- Actuarial loss from change in financial assumptions 49,355 - 49,355
- Experience loss 10,848 - 10,848
60,203 (61,741) (1,538)
Other:
Benefits paid (109,225) 109,225 -
At 31 December 2020 426,974 (607,878) (180,904)

Defined Fair value Net defined

benefit of plan asset benefit (asset)
obligation /liability
Included in profit or loss:

At 1 January 2019 395,570 (671,158) (275,588)
Current service cost 25,749 - 25,749

Interest expense / (income) 35,636 (67,880) (32,244)
61,385 (67,880) (6,495)
Included in OCI:
Remeasurements :
- Return on plan assets, excluding amounts included in interest expense - (43,189) (43,189)
- Actuarial gain from change in financial assumptions 54,891 - 54,891
- Experience loss 73,564 - 73,564
128,455 (43,189) 85,266
Other:
Benefits paid (181,975) 181,975 -
At 31 December 2019 403,435 (600,252) (196,817)
The principal assumptions the Company used are as follows:

As at 31 December
2020 2019
Discount rate per annum 7.70% 10.10%

Annual salary increment rate 9.00% 10.25%

Notes to the
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
Impact on defined benefit obligation 2020
Change in Increase in Decrease in
assumption assumption assumption
Discount rate per annum 1.00% (43,367) 50,929

Annual salary increment rate 1.00% 49,790 (43,265)
Impact on defined benefit obligation 2019

Change in Increase in Decrease in
assumption assumption assumption
Discount rate per annum 1.00% (35,805) 41,642

Annual salary increment rate 1.00% 41,194 (36,075)
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of
the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the
defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied when calculating the pension liability recognised
within the statement of financial position.
14 INVENTORIES
As at 31 December
2020 2019
Raw materials 3,219,177 2,197,116

Work-in-progress 51,105 55,864
Finished goods 264,756 271,147
Consumables 309,993 319,061
Provision for obsolete and slow moving inventories (Note 14.1) (112,839) (113,739)
3,732,192 2,729,449
14.1 Provision for obsolete and slow moving inventories

As at 31 December
2020 2019
At 1 January 113,739 82,815

Charge/(reversal) during the year (900) 42,993
Write offs during the year - (12,069)
At 31 December 112,839 113,739
A provision for obsolete and slow moving items is primarily made in relation to slow moving consumables that have not been used in a two years period. Finished goods, wrapping
material are provided for based on their shelf life.

15 TRADE AND OTHER RECEIVABLES

As at 31 December
2020 2019
Current
Trade receivables 2,816,979 2,486,169
Receivables from related parties [Note 25 (iii)] 57,714 34,301
Advances to farmers 215,766 192,360
Staff loans 153,627 109,803
Other receivables 142,723 89,728
Provision for impairment of receivables (156,835) (113,385)
3,229,974 2,798,976
Non-current
Staff loans 111,820 116,152
Total trade and other receivables 3,341,794 2,915,128
(i) Trade receivables wholly consist of amounts receivable from distributors. No specific impairment indicators were noted as all receivables are less than 12 months.
(ii) Provision for doubtful debts has been made on a case by case basis on loans made to farmers and on long outstanding balances included under other receivables.
The fair values of trade and other receivables are as follows :
As at 31 December
2020 2019
Trade receivables 2,816,979 2,486,169

Receivables from related parties 57,714 34,301
Advances to farmers 215,766 192,360
Staff loans 265,447 225,955
Other receivables 142,723 89,728
Provision for impairment of receivables (156,835) (113,385)
3,341,794 2,915,128

Notes to the
Movements on the Company's provision for impairment of receivables are as follows:
As at 31 December
2020 2019
At 1 January 113,385 57,886

Provision for the period 76,717 66,727
Write-offs during the period (13,282) (9,426)
Reversals during the period (19,985) (1,802)
At 31 December 156,835 113,385
16 CASH AND CASH EQUIVALENTS

As at 31 December
2020 2019
Cash at bank and in hand 5,755,514 9,832,759

Short term investments 4,026,833 7,012,472
Cash and cash equivalents in the statement of cash flows 9,782,347 16,845,231
17 STATED CAPITAL
As at 31 December
2020 2019
Share value (Rs. 000) 1,873,238 1,873,238

Number of shares 187,323,751 187,323,751
All issued ordinary shares are fully paid.
18
DEFERRED TAX LIABILITIES
Deferred tax is recognised in respect of all temporary differences under liability method using the effective tax rate.
The movement on the deferred income tax account is as follows:

As at 31 December
2020 2019
At beginning of the year 596,836 562,005

Charge for the year (200,486) 34,831
At end of the year 396,350 596,836

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred taxes relate to
the same fiscal authority. The movement in deferred income tax assets and liabilities during the year is as follows:
Property, plant Unfunded Provisions Total

and equipment defined benefit
obligation
Balance as at 1 January 2019 (562,085) 80 - (562,005)

Recognised in profit or loss (34,816) (15) - (34,831)
At 31 December 2019 (596,901) 65 - (596,836)
Balance as at 1 January 2020 (596,901) 65 - (596,836)

Recognised in profit or loss (75,824) - 276,310 200,486
At 31 December 2020 (672,725) 65 276,310 (396,350)
2020 2019
Temporary Tax Effect Temporary Tax Effect
Differences Differences
Deferred Tax Liability On

Property, Plant and Equipment (1,681,813) (672,725) (1,492,253) (596,901)
(1,681,813) (672,725) (1,492,253) (596,901)
Deferred Tax Assets On

Unfunded defined benefit obligation 163 65 163 65
Provision 690,774 276,310 - -
690,938 276,375 163 65
(990,875) (396,350) (1,492,089) (596,836)
19 TRADE AND OTHER PAYABLES

As at 31 December
2020 2019
Trade payables 701,864 778,742

Payable to related parties [Note 25 (iii)] 715,598 449,247
Accrued expenses 2,908,392 3,766,242
Government levies and other payables 3,501,199 5,686,602
7,827,053 10,680,833

Notes to the
20 DIVIDENDS PAYABLE
(a) The movement of dividend payable over the year is as follows:
As at 31 December
2020 2019
At 1 January 3,746,475 3,813,823

Dividends declared [Note 20 (c)] 15,665,884 17,939,996
Dividends paid (15,903,852) (17,932,140)
Transfers to unclaimed dividend [Note 20 (b)] (43,018) (75,204)
At 31 December 3,465,489 3,746,475
(b) Unclaimed dividends over the year is as follows:

As at 31 December
2020 2019
At 1 January 326,891 285,148

Transfers 43,018 75,204
Payments (29,594) (3,690)
Write back (65,777) (29,771)
At 31 December 274,538 326,891
(c) The dividend declared during the year is as follows:

2020 2019
per share Rs. per share Rs.
Final dividend for prior year 12.13 2,272,237 15.77 2,954,096

First interim dividend 19.00 3,559,151 19.00 3,559,151
Second interim dividend 15.00 2,809,856 20.00 3,746,475
Third interim dividend 19.00 3,559,151 21.00 3,933,799
Fourth interim dividend 18.50 3,465,489 20.00 3,746,475
83.63 15,665,884 95.77 17,939,996

21 LEASES
The Company's material leases include Buildings and Vehicles rented. The useful life of the leases of the company is between 1 - 4 years. Information about leases for which the
Company is a lessee is presented below.
(a) Right-of-use assets

2020 2019
Balance as of 1 January 206,615 -

Additions to right-of-use assets 91,172 313,916
Derecognition of right-of-use assets (301) -
Depreciation charge for the year (123,665) (107,301)
Balance as at 31 December 173,821 206,615
(b) Lease liabilities

2020 2019
Balance as of 1 January 219,221 -

Additions to lease liabilities 91,172 313,916
Derecognition of lease liabilities (312) -
Interest expense 24,274 32,257
Payment of lease liabilities (145,665) (126,952)
Balance as at 31 December 188,690 219,221
Maturity analysis - contractual undiscounted cash flows

Less than one year 119,838 119,324
One to five years 90,440 129,951
More than five years - -
Total undiscounted liabilities as at 31 December 210,278 249,275
Lease liabilities included in the statement of financial position as at 31 December 188,690 219,221
Current 104,918 99,811
Non-current 83,772 119,410
(c) Amounts recognised in profit or loss

2020 2019
Depreciation of right-of-use assets 123,665 107,301

Interest on lease liabilities 24,274 32,257
Expense relating to short term leases 17,854 38,329
(d) Amounts recognised in statement of cash flows

2020 2019
Total cash outflow for leases 145,665 126,952

Notes to the
22 CONTINGENT LIABILITIES
No provision has been made in the financial statements of the Company in respect of the following :
(a) Rs. 500 Mn (2019 - Rs. 500 Mn) Bank Guarantee issued in favour of Commissioner General of Excise to obtain certificate of registration (Manufacturing Licence) in accordance
with the provisions of the Tobacco Tax Act No. 8 of 1999 (as amended).
(b) Shipping and Bank Guarantees have been issued amounting to Rs. 58.9 Mn (2019 - Rs. 36.8 Mn), for goods cleared before the arrival of original bank documents.
(c) Outstanding litigation
Considering the opinion of the Company's lawyers, the Directors have reasonable assurance that any pending litigation will not have a material impact on the financial statements.
23 COMMITMENTS
Capital commitments
There were no capital commitments at the end of the reporting period.
Financial commitments
There were no financial commitments at the end of the reporting period.
24 CASH GENERATED FROM OPERATIONS

Reconciliation of profit before tax to cash generated from operations:
2020 2019
Profit before tax 25,433,563 28,690,844

Adjustments for:
Depreciation of property, plant and equipment [Note 11] 338,747 295,716
Amortisation of intangible assets [Note 12] 1,150 479
Write offs of property, plant and equipment [Note 11] 328 6,424
Interest expense [Note 8] 24,274 32,257
Interest income [Note 8] (787,262) (1,665,633)
Net interest on retirement benefit obligations [Note 13] 17,451 (6,495)
Provision for obsolete inventories and doubtful debts 42,550 86,423
Derocognition of right of use assets (11) -
Changes in working capital :

- Inventories (1,001,843) (426,254)
- Trade and Other Receivables (470,119) (606,373)
- Trade and Other Payables (2,853,800) (1,957,264)
Cash generated from operations 20,745,028 24,450,124

25 RELATED PARTY TRANSACTIONS

Transactions with related parties
The Company has a number of transactions and relationships with related parties, as defined in LKAS 24 - Related Party Disclosures, all of which are undertaken in the normal
course of business and on an arm's length basis.
Non-recurrent related party transactions

Any non-recurrent related party transactions of which the aggregate value exceeds 10% of the equity or 5% of the total assets, whichever is lower of the Company as per 31
December 2019 audited financial statements, requires additional disclosures in the 2020 Annual Report under Colombo Stock Exchange Listing Rule 9.3.2 and Code of Best
Practices. However, Ceylon Tobacco Company PLC has not entered into any transaction with related party that exceeds the specified thresholds.
Recurrent related party transactions

Any recurrent related party transactions of which the aggregate value exceeds 10% of revenue of the Company as per 31 December 2019 audited financial statements requires
additional disclosures in the 2020 Annual Report under Colombo Stock Exchange Listing Rule 9.3.2 and Code of Best Practices. However, Ceylon Tobacco Company PLC has not
entered into any transaction with a related party that exceeds the specified thresholds.
The following transactions were carried out with related parties:
(i) Sale of goods / services

2020 2019
British American Shared Services (GSD) Limited 19,210 44,298

BAT Marketing (Singapore) Private Limited 8,306 -
British American Tobacco Myanmar Limited 379 720
Pakistan Tobacco Co Ltd 13,575 -
VINA-BAT JV HCMC Branch - 728
British American Tobacco (Malaysia) Berhad - 4,134
BAT (Holdings) Limited 485 31,868
BAT AsPac Service Centre Sdn Bhd 4,368 741
BAT Investments LTD 13,584 16,736
British American Tobacco (GLP) Limited. - 1,890
Benson & Hedges (Overseas) Limited - 104
BAT Global Travel Retail Limited 6,040 -
CN Creative Ltd 3,571 -
BAT Jordan 5,738 -
75,256 101,219

Notes to the
25 RELATED PARTY TRANSACTIONS (CONTD.)

(ii) Purchase of goods / services
2020 2019
BAT AsPac Service Centre Sdn Bhd 153,382 220,105

BAT Investments Limited 570,200 496,904
Benson & Hedges (Overseas) Limited 7,885 7,543
BAT Asia Pacific Region Limited 530 -
BAT (Holdings) Limited 190,171 351,487
BAT SAA Service (Private) Limited - 39,828
BAT Pecsi Dohanygyar KFT - 224
British American Tobacco Kenya Ltd 1 666
British-American Tobacco (Singapore) Pte Ltd 202,964 122,179
PT Bentoel Prima 165,050 2,070
British American Tobacco (Cambodia) Ltd 893 14,128
British American Tobacco Argentina 12 9,616
BAT Nigeria Ltd - 659
Pakistan Tobacco Company Limited 27,460 210
British American Tobacco Tutun - 1,231
BAT Romania Investment - 502
BAT Korea Manufacturing Limited 933 -
BAT Bangladesh Company Limited 2,957 -
British American Tobacco Exports Li 230,838 -
CTBAT International Co. Limited 252 -
British American Tobacco So 2,102 -
BAT ME DMCC 123,526 -
CN Creative Ltd 834 -
BAT Venezuela 1,122 -
2,328,660 1,907,135

(iii) Outstanding balances arising from sale and purchase of goods / services
2020 2019
Receivable from related parties [Note 15]

BAT (Holdings) Limited 326 18,219
BAT Investments LTD 12,383 -
BAT Marketing (Singapore) Private Limited 6,617 6,665
British American Tobacco Asia-Pacific Region Ltd - 1,897
British American Tobacco (GLP) Limited - 1,879
VINA-BAT JV HCMC Branch 1,569 1,549
BAT AsPac Service Centre Sdn Bhd 4,403 747
Pakistan Tobacco Company Limited 13,732 157
British American Tobacco Myanmar Li 132 786
BAT Global Travel Retail Limited 5,994 -
CN Creative Ltd 3,571 -
BAT Jordan 5,738 -
57,714 34,301

Notes to the
25 RELATED PARTY TRANSACTIONS (CONTD.)

2020 2019
Payable to related parties [Note 19]

BAT Investments Limited 11,333 17,831
BAT ASPAC Service Centre Sdn Bhd 2,252 18,527
BAT (Holdings) Limited 54,729 274,240
Benson & Hedges (Overseas) Limited 913 4,064
BAT (Germany) GmbH 1,216 1,092
Pakistan Tobacco Company 6,117 -
BAT Korea Manufacturing Limited 952 -
BAT Switzerland S.A. 90 80
British American Tobacco Mexico S.A. de C.V. 11,630 11,035
BAT Pecsi Dohanygyar KFT 925 831
British American Tobacco Kenya Ltd 776 763
British-American Tobacco Polska S.A. - 264
PT Bentoel Prima 161,587 3,657
BAT SAA Service (Private) Ltd - 13
British American Tobacco Argentina - 9,616
British American Tobacco (Cambodia) Ltd 15,715 14,510
BAT Nigeria Ltd 688 674
BAT Romania Investment 576 517
British American Tobacco Tutun 1,398 1,256
BAT Bangladesh Company Limited 2,959 -
British American Tobacco Exports Li 41,200 -
CTBAT International Co. Limited 82 -
British American Tobacco So 2,090 -
BAT ME DMCC 123,526 -
CN Creative Ltd 834 -
BAT Venezuela 1,122 -
715,598 449,247
Related parties on (i), (ii) and (iii) above, are companies within the same Group (British American Tobacco plc).

(iv) Key management compensation

Key Management Personnel include members of the Board of Ceylon Tobacco Company PLC and the members of the Executive Committee. The compensation paid or payable to
key management
2020 2019
Salaries and other short-term employee benefits 216,299 272,789

Terminal benefit payments - 150,556
Share based payments 2,955 15,899
(v) Contribution to post-employment benefits (Ceylon Tobacco Company PLC Group Providend Fund)
2020 2019
Employer contribution 61,115 74,153
There were no other related parties or related party transactions other than those disclosed above in the financial statements.
The Company has no share ownership plans. However, the BAT Group through an International Executive Incentive Scheme (“IEIS”) offers value of phantom shares in BAT PLC,
in cash to selected members of the Executive Committee of Ceylon Tobacco Company PLC. This is operated as a cash settled share based payment where a liability equal to the
portion of the services received is recognised at its current fair value determined at each reporting date. Fair value is measured by the use of Black-Scholes option pricing model.
As at 31 December 2020, the fair value of the phantom shares granted was Rs. 12.9 million (2019 - Rs. 9.0 million).

Notes to the
26 EVENTS AFTER THE REPORTING PERIOD

No material events have occurred since the end of the reporting date which would require adjustments to, or disclosure in the financial statements except for the following:
(a) Dividends:
The Directors recommend a final dividend of Rs. 11.35 per share for 2020. The final dividend is subject to the approval of the shareholders at the Annual General Meeting to be held
on 25 May 2021.
Once approved by the shareholders, the final dividend will be payable on 17 June 2021.
(b) Impact from COVID-19 pandemic

On 11 March 2020, the World Health Organisation declared the coronavirus outbreak a pandemic, and the Sri Lankan Government declared a state of emergency on 18th March
2020. Responding to the potentially serious threat COVID-19 presents to public health, the Sri Lankan Government authorities have taken measures to contain the outbreak.
During this period the primary focus of the Company has been to ensure the continuation of business activities subject to the health & safety of employees as well as the work
force of all extended value chain partners. As such CTC has implemented Work from Home Policy for all office-based employees utilising IT capabilities to facilitate seamless
remote working conditions. All other employees have on a need-only basis been engaged to carry out limited critical responsibilities subject to taking all necessary health & safety
precautions.
Sales were impacted due to product access restrictions faced by adult consumers and retailers as a result of the island wide curfew intermittently imposed to contain the COVID-19
pandemic. The Company implemented robust marketing plans during the second half of the year and constantly reviewed the cost base in order to increase profitability and
ensure sustainable value to shareholders.
In view of the rapidly evolving dynamic environment created by the COVID-19 pandemic, the Company is cautiously optimistic of the future in anticipation of the gradual revival
of the economy and will continue to closely observe the market developments and take all decisions and measures in order to ensure the Company remains a going concern and
continues to deliver shareholder value.

SUPPLEMENTARY INFORMATION The Next Step
Statement of
Value Added

2020 2019
Turnover 132,148,810 141,341,887

Supplied material and services (5,797,206) (6,762,884)
Net interest income 762,988 1,633,376
Other operating income 100,615 70,093
127,215,207 136,282,472
State 109,931,758 117,250,088

Shareholders 15,665,884 17,939,996
Employees 1,365,458 1,477,244
Depreciation & amortisation 339,897 296,195
Value retained / (distributed) in business through profit earned (87,790) (681,051)
127,215,207 136,282,472
STATEMENT OF VALUE ADDED

0.3% (0.1)%
1.1%
12.3% State
Shareholders
Employees
Depreciation & amortisation
Value retained / (distributed) in business through profit earned
86.4%

The Next Step SUPPLEMENTARY INFORMATION
Share
Information
Stock Exchange Listing
The issued ordinary shares of Ceylon Tobacco Company PLC are listed with the Colombo Stock Exchange of Sri Lanka.
Shareholders
The number of ordinary shareholders as at 31 December 2020 was 3,909 (3,472 as at 31 December 2019).
Ordinary Shareholding
Stated Capital - Rs. million 1,873
Number of shares representing the Entity's stated capital 187,323,751
Number of Shareholders as at 31 December 2020 3,909
Number of Shareholders as at 31 December 2019 3,472
Categorisation of Shareholding
2020 Resident Non Resident Total
No. of No. of % No. of No. of % No. of No. of %
Shareholders Shares Shareholders Shares Shareholders Shares
1-1000 2,494 547,802 0.29 37 11,175 0.01 2,961 558,257 0.30

1001-10,000 788 2,301,439 1.23 43 179,036 0.09 831 2,480,475 1.32
10,001-100,000 75 2,040,233 1.09 24 962,414 0.51 99 3,002,647 1.60
100,001-1,000,000 4 755,946 0.40 9 2,484,557 1.33 13 3,240,503 1.73
Over 1,000,000 - - - 5 178,041,869 95.05 5 178,041,869 95.05
Total 3,361 5,645,420 3.01 118 181,679,051 96.99 3,909 187,323,751 100.00
2019 Resident Non Resident Total

No. of No. of % No. of No. of % No. of No. of %
Shareholders Shares Shareholders Shares Shareholders Shares
1-1000 2,494 500,876 0.27 33 9,906 0.01 2,527 510,782 0.28

1001-10,000 788 2,271,047 1.21 39 162,603 0.09 827 2,433,650 1.30
10,001-100,000 72 1,865,421 0.99 23 837,083 0.45 95 2,702,504 1.44
100,001-1,000,000 3 524,730 0.27 15 4,211,756 2.25 18 4,736,486 2.52
Over 1,000,000 - - - 5 176,940,329 94.46 5 176,940,329 94.46
Total 3,357 5,162,074 2.74 115 182,161,677 97.26 3,472 187,323,751 100.00

2020 2019
No. of No. of % of No. of No. of % of
Shares Shareholders Shares Shares Shareholders Shares
Individuals 5,360,264 3,708 2.86 5,191,683 3,280 2.78

Institutions 181,963,487 201 97.14 182,132,068 192 97.22
187,323,751 3,909 100.00 187,323,751 3,472 100.00
Market Value of Share (Rs.)

2020 2019
Price Movements (Rs.)

Highest 1,160.00 1,499.00
Lowest 900.00 1,045.00
Closing Price 1,028.90 1,100.30
Market Capitalisation (Rs. million) 192,737 206,112
No. of share transactions for the year 5,453 2,122

No. of shares traded 2,735,723 2,302,018
CTC Share performance at Colombo Stock Exchange (CSE) - Reuters’ code CTC,CM
Dividend Payments 2020 2019

Rs. per share Rs. per share
Final dividend for prior year 12.13 15.77

First interim dividend 19.00 19.00
Second interim dividend 15.00 20.00
Third interim dividend 19.00 21.00
Fourth interim dividend 18.50 20.00

Share
Information
Shareholding of Directors
No. of Shares As at 31 December
2020 2019
Directors shareholding (including spouses & children)

Mr. W F Pegel - -
Mr. N L Salem - -
Ms. A Mustafiz - -
Mr. U Luqman - -
Mr. Y Kanagasabai - -
Mr. K M A T Tittawella - -
Mr. U Zahur - -
Mr.S K Shah - -
Mr. S. Kidd - -
Ms.R.Rahman - -
Parent Company 157,590,931 157,590,931

Subsidiaries or Associate Companies of Parent - -
Subsidiaries or Associate Companies - -
10% or more holding - -
Directors shareholding (including spouses & children) - -
Public Holding 29,732,820 29,732,820
187,323,751 187,323,751
Public Shareholding
No. of Shares As at 31 December
2020 2019
Public Holding as a % of Issued Share Capital 15.87% 15.87%

Number of shareholders holding the Public Holding 3,908 3,471
Market Capitalisation of Public Holding (Rs. million) 30,592 32,751
The Company complies with option 1 of the Listing Rule 7.13.1(a) - Float Adjusted Market Capitalisation of Rs. 10.0 Bn which requires no minimum public holding percentage.

20 Largest Shareholders
31 December 2020 31 December 2019
No. of Shares % No. of Shares %
1 British American Tobacco International Holdings BV 157,590,931 84.13 157,590,931 84.13

2 Philip Morris Brand SARL 15,585,910 8.32 15,585,910 8.32
3 CB NY S/A Allan Gray Frontier Markets Equity Fund Limited 2,167,374 1.16 1,931,653 0.57
4 Pershing LLC S/A Averbach Grauson & Co. 1,605,009 0.86 1,605,009 0.86
5 Northen Trust Company S/A - Fundsmith Emerging Equities Trust PLC 1,092,645 0.58 1,092,645 0.58
6 SSBT-AL MEHWAR COMMERCIAL INVESTMENTS L.L.C 698,258 0.38 698,258 0.26
7 RBC Investor Services Bank-COELI SICAV1 - Frontier Markets Fund 398,735 0.21 478,735 0.42
8 J.B.Cocoshell (Pvt) Ltd 354,513 0.19 248,624 0.13
9 Mrs. Jasbinderjit Kaur Piara Singh 306,802 0.16 306,802 0.17
10 BBH-Matthews Emergine Asia Fund 214,321 0.11 245,624 0.19
11 Miss Neesha Harnam 211,030 0.11 211,030 0.12
12 SSBT-Frank Russel Trust Company Comingled Benefit Fund Trust GNA 200,124 0.11 200,124 0.11
13 Deutsche Bank AG Singapore A/C 01 175,600 0.09 175,600 0.09
14 Harnam Holdings SDN BHD 150,000 0.08 150,000 0.08
15 Bank of Ceylon No 1 Account 143,175 0.08 143,175 0.08
16 Deutsche Bank AG AS Trustee For JB vantage Value Equity Fund 134,831 0.07 134,831 0.07
17 BNYM RE- GHI Holdings Mauritius 129,687 0.07 129,687 0.07
18 Malship Ceylon Ltd 123,427 0.07 123,272 0.07
19 Mr. Ratnayake Susantha Chaminda 100,000 0.05 - -
20 Mr. Jayawardena Sanjeeva Praneeth 98,247 0.05 - -
SSBT-BMO Investments 11 (Ireland) Public Limited Company - - 710,489 0.38
HSBC INTL NOM Ltd - SSBT-BMO-LGM Frontier Markets Equity Fund - - 197,692 0.11
BNYM RE- GHI Holdings Mauritius - - 129,687 0.07
Mellon Bank N.A-Eaton Vance Trust Co.Collective Inv. - - 126,600 0.07
Sub Totals 181,480,619 96.88 182,216,378 97.27
Others 5,843,132 3.12 5,107,373 2.73
Total Shares 187,323,751 100.00 187,323,751 100.00

Notes
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Notice of
Meeting
NOTICE IS HEREBY given that the 90th Annual General Meeting of Ceylon Tobacco Company PLC will be held as a virtual meeting using a digital platform from Ceylon Tobacco Company
PLC, No. 178, Srimath Ramanathan Mawatha, Colombo 15, on Tuesday, 25 May 2021 at 10.00 am for the following purposes:
(i) To receive, consider and adopt the Report of the Board of Directors and the Financial Statements for the year ended 31 December 2020 and the Report of the Auditors thereon.
(ii) To declare a Final Dividend for 2020.
(iii) To re-elect the following Directors.
To re-elect as Director, Mr. Anil Tittawella, who retires by rotation in terms of the Articles of Association of the Company.
To re-elect as Director, Mr. Yudhistran Kanagasabai, who retires by rotation in terms of the Articles of Association of the Company.
To re-elect as Director, Mr. Usman Zahur, who retires by rotation in terms of the Articles of Association of the Company.
To re-elect as Director, Mr. Umair Luqman, who was appointed since the last Annual General Meeting and comes up for re-election under the Articles of Associations of the
Company.
To re-elect as Director, Mr. Suresh Kumar Shah, who was appointed since the last Annual General Meeting and comes up for re-election under the Articles of Associations of the
Company.
To re-elect as Director, Ms. Rumana Rahman, who was appointed since the last Annual General Meeting and comes up for re-election under the Articles of Associations of the
Company.
To re-elect as Director, Mr. Stuart Kidd, who was appointed since the last Annual General Meeting and comes up for re-election under the Articles of Associations of the
Company.
(iv) To authorise the Directors to determine and make donations.
(v) To re-appoint Messrs. KPMG as the Company’s Auditors and to authorise the Directors to determine their remuneration.
By Order of the Board
Sudesh Peter
Company Secretary
5 May 2021

AGM 2021
Instructions to Shareholders
In order to comply with the measures imposed by the Sri You can share the above details with the Company in the This is not a public event and therefore any recording or
Lankan Government on account of the ongoing COVID-19 following manner: publishing of this event, in full or in part without the prior
pandemic and to ensure the health & safety of our written consent of the Company, is strictly prohibited, and
shareholders, employees and management, the Directors By emailing [email protected]; or due action will be taken against those who are in violation
have decided that the Company’s Annual General Meeting By post to: The Assistant Company Secretary, Ceylon of these instructions.
(AGM) for 2021 will be convened as a virtual meeting Tobacco Company PLC, 178, Srimath Ramanathan
using a digital platform. This is in line with the directions Mawatha, Colombo 15.
given by the Colombo Stock Exchange and noted by the
Registrar of Companies in accordance with which the last Any incomplete details or details shared past the Deadline
AGM was successfully held. will not be accepted under any circumstances, therefore in
order to attend the AGM, the shareholders are required to
Shareholders may attend the meeting virtually and if strictly comply with the Deadline .
they are unable to so attend, they may exercise their
vote by appointing a proxy in the form of the template Once all required information have been received,
provided in the Annual Report. In order to ensure the reviewed and verified by the Company, the shareholder
smooth functioning of the AGM in this manner via a digital will receive details of the virtual meeting link with all
platform, shareholders are encouraged to authorise an necessary instructions to join the AGM. A computer or
Independent Director as proxy to attend and vote at the smartphone having internet access is required to join
AGM on their behalf. the AGM. Shareholders who are unable to provide an
email address may join the meeting via a mobile number
Shareholder prior registration and verification that is registered in the name of the shareholder. Only
In order for a shareholder or proxy to attend the AGM shareholders and proxies whose details have been verified
virtually, the following must be shared via email or post to will be allowed to attend the AGM via the link provided.
reach the Company no later than 5 pm on Monday 17 May The Company reserves the right to deny access to the
2021 (Deadline): meeting to any person who fails to register and/or be
verified as an active shareholder of the Company.
Shareholder’s Full Name,
Shareholder’s NIC / Passport number, Shareholder participation via questions, comments

and suggestions prior to the AGM
Shareholder’s CDS number, if any,
Shareholders may submit questions, comments or
Shareholder’s phone number (preferably mobile suggestions relating to the business of the AGM, directly
number registered in the name of the shareholder); to the Company, by email to [email protected] by 5
and pm on Monday, 17 May 2021, in order to be addressed at
the AGM. Only those questions, comments or suggestions
Shareholder’s email address,
which have been received on the aforesaid email address
In the case of a Corporate Member, the duly latest by the said date and time will be discussed at
completed Form of Proxy must be submitted. the AGM. Kindly note that no questions, comments or
suggestion will be entertained during the meeting to
ensure the smooth running of the AGM.

Form of
Proxy
(Please read the notes carefully before completing this form)
I / We the undersigned (please print) ……………………………………………………………………………………………………………………………………………………………………… of
………………………………………………………………………………………………………………………………………………………… being a member/members of the Company, hereby
appoint …………………………………………………………………………………………………………. of …………………………………………………………………………. whom failing
Mr. Suresh Kumar Shah whom failing

Mr. Anil Tittawella whom failing
Mr. Yudhishtran Kanagasabai whom failing
Mr. Nedal Salem whom failing
Mr. Umair Luqman whom failing
Mr. Usman Zahur whom failing
Ms. Rumana Rahman whom failing
Mr. Stuart Kidd
as my / our Proxy to represent me / us and * ………………………………… vote for me / us and on my / our behalf at the Annual General Meeting of the Company to be held at 10.00 am on
Tuesday, 25 May 2021 and at any adjournment thereof and at every poll which may be taken in consequence thereof.
I / We, the undersigned, hereby direct my / our Proxy to vote for me / us and on my / our behalf on the specified Resolutions as indicated by an ‘X’ in the appropriate spaces.
Yes No
(i) To receive and adopt the Report of the Board of Directors and the Financial Statements for the year ended 31 December 2020.
(ii) To declare a Final Dividend for 2020.
(iii) To re-elect as Director, Mr. Anil Tittawella, who retires by rotation in terms of the Articles of Association of the Company.
(iv) To re-elect as Director, Mr. Yudhishtran Kanagasabai, who retires by rotation in terms of the Articles of Association of the Company.
(v) To re-elect as Director, Mr. Usman Zahur, who retires by rotation in terms of the Articles of Association of the Company.
(vi) To re-elect as Director, Mr. Umair Luqman, who was appointed since the last Annual General Meeting and comes up for re-election under the Articles of
Associations of the Company.
(vii) To re-elect as Director, Mr. Suresh Kumar Shah, who was appointed since the last Annual General Meeting and comes up for re-election under the Articles
of Associations of the Company.
(viii) To re-elect as Director, Ms. Rumana Rahman, who was appointed since the last Annual General Meeting and comes up for re-election under the Articles of
Associations of the Company
(ix) To re-elect as Director, Mr. Stuart Kidd, who was appointed since the last Annual General Meeting and comes up for re-election under the Articles of
Associations of the Company.
(x) To authorise the Directors to determine and make donations.
(xi) To appoint Messrs. KPMG as the Company’s Auditors and authorise the Directors to determine their remuneration.
………………………
Signature
Signed this ……………………… day of ……………………….. Two Thousand and Twenty One.
Note: Instructions as to completion appear on the reverse of this Form of Proxy

Form of
Proxy
Instructions as to completion :
1. The persons mentioned in the Form of Proxy are Directors of the Company and are willing to represent any Shareholder as Proxy, and vote as directed by the Shareholder. They will
not, however, be willing to speak or move or second any amendment to a resolution, or make any statement in regard thereto on behalf of any Shareholder.
2. If any Proxy is preferred, delete the names printed, add the name of the Proxy preferred and initial the alteration.
3. Please indicate with an ‘X’ in the space provided how your Proxy is to vote on each Resolution. If there is, in the view of the Proxy holder a doubt (by reason of the way in which the
instructions contained in the Proxy have been completed) as to the way in which the Proxy holder should vote, the Proxy holder, will vote as he/she thinks fit.
4. Subject to Note 1 above, if you wish the Proxy to speak at the Meeting you should interpolate the words “to speak and” in the place indicated with an asterisk (*) and initial such
interpolation.
5. In the case of a Corporate Member, the Form of Proxy must be completed under its Common Seal, which should be affixed and attested in the manner prescribed by the Articles of
Association. If the Form of Proxy is signed by an Attorney, the relevant Power-of-Attorney should also accompany the completed Form of Proxy if it has not already been registered
with the Company.
6. To be valid, the completed Form of Proxy should be deposited at the Registered Office of the Company, No.178, Srimath Ramanathan Mawatha, Colombo15, Sri Lanka or email:
[email protected], by 5 pm on Monday, 17 May 2021
7. The full name and address of the Proxy, and the Shareholder appointing the Proxy should be entered legibly in the Form of Proxy.

Appendices
Appendix A: Material topics mapping to GRI disclosures
Material topics and why it matters to us Relevant GRI Standard Topic boundary
Our brands Relates to the Company’s operations

Our portfolio of brands and the value it offers to customers is key to preserving our
competitive edge and ensuring commercial sustainability.
Stakeholder engagement Company’s internal and external stakeholders
Listening to our stakeholders allows us to understand their legitimate concerns and & Retail
respond in a timely and suitable manner.
Health & Safety GRI 403: Occupational health & safety Relates primarily to our employees
Safety risks gained centre stage in 2020 with the outbreak of the COVID-19 pandemic;
that apart, it is a key risk in our manufacturing operations and across our supply chain.
Sustainable livelihoods GRI 201: Indirect economic impacts Boundary extends to tobacco farmers and
Ensuring sustainable livelihoods for our farmers allows us to secure our supply chain GRI 413: Local communities communities in which we operate & Retail
while driving our social sustainability aspirations.
Preserving human rights GRI 408: Child labour Boundary extends across our supply chain and
We are exposed to the risk of human rights issues across our supply chain. GRI 409: Forced or compulsory labour includes tobacco farmers and other suppliers
Value infusion to economy GRI 201: Economic Performance Boundary extends to external stakeholders
Our win-win-win approach to value creation centres on contributing to the Country’s GRI 202: Market presence including tobacco farmers, suppliers, and
economic growth while driving shareholder value. GRI 204: Procurement practices other communities
Product responsibility GRI 417: Marketing and labelling Relates to the Company’s products
In line with BAT’s long-term aspirations, we are committed to reducing the health
impacts of our business by offering a wider choice to consumers.
Climate change GRI 302: Energy Relates to the emissions generated from
Climate related issues present significant risks for our operations and supply chains GRI 305: Emissions our procurement, manufacturing, and other
operations
Water and waste GRI 303: Water Relates to the Company’s operations
We are committed to responsibly managing our environmental footprint, which in turn GRI 306: Effluents and waste
will ensure access to resources while minimising adverse impacts.
Sustainable agriculture GRI 301: Materials Boundary extends to our suppliers
Given that our primarily raw material is an agricultural product, driving sustainable GRI 308: Supplier environmental assessment
agriculture practices is key to ensuring security of supply while fulfilling our
environmental responsibility.
Risk management Internal and external risks
Effectively managing our financial, social, and environmental risks are critical in ensuring
commercial sustainability and maintaining our social license to operate.

Appendices
Material topics and why it matters to us Relevant GRI Standard Topic boundary
Ethics and business conduct Refers to the Company’s operations and

Operating with the highest standards of integrity and transparency is not only the right dealings with third parties
thing to do, but important in managing a range of internal and external risks.
Circular economy Relates to the Company’s operations
We believe adopting the principles of circular economy provides opportunities in
reducing costs, driving innovation, and offering better value to customers.
People and Culture GRI 401: Employment Relates to the Company’s operations
The CTC team is a critical element of our success and offering them a rewarding and GRI 402: Labour management relations
dynamic work environment is a strategic priority. GRI 404: Training and education
GRI 405: Diversity and equal opportunity
Distribution network Relates to the Company’s operations and
Our distribution network represents the vital link between the Company and end- distribution network
consumers of our products.
Manufacturing operations Relates to the Company’s operations
As a manufacturing organisation, optimising our manufacturing footprint, and capacity
and adopting sustainable manufacturing methods are all key to continued business
success.
Corporate behaviour GRI 205: Anti-corruption Relates to the Company’s operations and
As an organisation operating in a controversial industry, maintaining ongoing dealings with third parties
engagement with our stakeholders, and adopting responsible business practices are
critical to our continued success.
Compliance GRI 307: Environmental compliance Relates to the Company’s operations
Maintaining 100% compliance to all relevant regulations is vital in managing our risks GRI 419: Socioeconomic compliance
and preserving our reputation.

ENVIRONMENTAL POLICY STATEMENT
Ceylon Tobacco Company PLC, is committed to meeting its consumer needs in an environmentally responsible and sustainable way in the direct operations it controls and the wider
supply chain it influences. We believe as a responsible organisation that good environmental practice is good business practice and are therefore committed to:
Comply with all applicable national environmental laws and regulations and BAT’s EHS Guidelines
Use our established framework of policy, good practices and procedures to manage our environmental performance and monitor compliance to them through internal auditing
capabilities
Understand our impacts on the environment in which we operate and proactively put in place plans to minimise such impacts
Monitor environmental performance through a set of key matrices, set targets for continuous improvement and where applicable use external assurances to verify our performance
Provide appropriate training as may be required to staff and share good practice across the organisation
Work with suppliers and service providers to reduce the impacts of our products and services across the total lifecycle, share good practices and support them to manage their
business in an environmentally sustainable manner
Collaborate with key stakeholders to understand emerging issues, regulatory and social expectations and technological innovations and work to develop sustainable solutions to
these challenges
Continuously seek to conform to best international environmental standards in line with business objectives
Specific to our business we will focus on the following two priority areas,
Agriculture Operations and Trade

We are committed to: We are committed to:
Work with internal and external suppliers to mitigate environmental impacts of Set absolute targets of reduction in emissions from our manufacturing sites.
producing the tobacco we source. Identify initiatives and projects to deliver these sustainable reductions and review the
Incorporate biodiversity protection and conservation into our recommended practices. business cases for investment in these initiatives against reduction targets.
Align with other stakeholders in areas we operate to assist farmers adopt sustainable Focus on transport & warehouse energy efficiency projects and driving innovations
agriculture practices, with special focus on soil fertility and water. with our logistics partners.
The Executive Committee has overall responsibility for the Environment under our control and owns this policy. All staff regardless of their level in the organisation will take reasonable care
of the environment under our control and co-operate fully with the Company in all environment related matters.
Nedal Salem
Ceylon Tobacco Company PLC
20 April 2021

Appendices
SUSTAINABLE TOBACCO PROGRAMME (STP) POLICY
Ceylon Tobacco Company PLC hereby dedicates to assure focus on the following areas for the Sustainable Tobacco Programme (STP).
Conduct all business activities of the Company according to the Company EHS, Quality, Biodiversity and STP policies.
Minimise our contribution to climate change through focus on soil and water conservation, Integrated Pest Management (IPM), cultivation of productive varieties, minimum
and appropriate use of fuel in tobacco production, elimination of farm NTRM, reduction of carbon emission per Kg of tobacco and integrated Crop Management (ICM) to ensure
sustainable development.
Motivate tobacco farmers through effective and efficient training methods to follow good agriculture practices (GAP). Facilitate them to be transmitted to the wider farming
community by setting examples.
Educate on Green Tobacco Sickness (GTS) to ensure stakeholder health & safety.
Improve productivity to ensure better living standards through socio-economic development.
Educate farmers on children’s rights to education to ensure that the industry does not employ minors in crop production.
Educate and promote Good Labour Practices among relevant stakeholders aligning to local and international guidelines.
Maintain a continuous productive dialogue with stakeholders to capture the opinions and be responsible to respond to them in a timely manner.
Contribute to rural and national development through social responsibility.
Establish BAT standards across the operation and ensure compliance to all legal requirements and commitment to implement all best practices among the relevant stakeholders.
Nedal Salem
20 April 2021

BIODIVERSITY STATEMENT
We recognise that we have both an impact and a dependence on biodiversity, through our business operations and use of ecosystem services, such as forest products, soil and water.
Under the British American Tobacco plc business principle of Good Corporate Conduct, we aim to minimise our impact on biodiversity and the wider environment. Part of this commitment
means avoiding, minimising or mitigating our impacts on biodiversity and linked ecosystem services, or where this is not appropriate or most beneficial, offsetting those impacts at a
regional or national level. In order to meet this commitment:
We will ensure that our business is in compliance with all international and national biodiversity laws as a minimum requirement.
We commit to assessing our impacts, i.e. we will identify areas of high biodiversity value and understand our impacts on ecosystem services. We will also assess our impacts where our
ecological footprint is changing due to an increase or decrease in production or changes to production methods.
We will undertake these assessments, engaging with stakeholders such as farmers, conservation organisations, universities and governments, to understand local issues and take into
account their needs and requirements.
These assessments and stakeholder engagements will lead to action plans, to avoid, minimise, mitigate or offset our impacts, with effective monitoring mechanisms to ensure such
action plans are implemented and progress is reported.
We will also take steps to share information with suppliers, assisting them in understanding and managing their impacts on biodiversity, hence minimising our impact throughout the
supply chain, e.g. in the sourcing of leaf and packaging materials.
This statement will enhance the integration of biodiversity conservation principles into the business. All further guidelines and assessment tools will be integrated into the existing systems
and tools such as:
Environmental, Health & Safety (EHS) Policy and guidelines
Agronomy guidelines
Social Responsibility in Tobacco Production (SRTP) Policy and guidelines
Business Enabler Survey Tool (BEST)
Sustainable Tobacco Programme (STP)
This statement will be reviewed periodically by the EHS department in conjunction with the British American Tobacco Biodiversity Partnership.
Nedal Salem
20 April 2021

Appendices
HEALTH & SAFETY POLICY STATEMENT
Ceylon Tobacco Company PLC, in its seed to smoke supply chain as manufacturer, marketer and distributor, is committed to safeguard the health, safety and welfare of all employees and
non-company personnel on our premises, in the successful conduct of our business. We are therefore committed to:
Comply with all applicable national laws and regulations on health & safety and BAT’s EH&S Guidelines
Prevent injury and ill-health of employees and non-company personnel on our premises by providing and maintaining safe and healthy working conditions, equipment and systems
of work
Provide work instructions, training and supervision for all employees and other associated personnel as may be required to ensure safe and healthy work conditions
Strive for continual improvement in our health & safety management and performance, through setting clear objectives, including the monitoring and measurement of key
performance indicators
Ensure the active participation of each employee and others as appropriate, in promoting, achieving and maintaining the highest standards of health & safety in so far as reasonably
practicable
Effectively control workplace health & safety risks through hazard identification and risk assessment and initiate actions to mitigate significant risks
Continuously seek to conform with best international health & safety standards in line with Business Objectives.
The Executive Committee has overall responsibility of health & safety and owns this policy. All staff regardless of their level in the organisation will take reasonable care of health & safety of
themselves and others while at work and co-operate fully with the Company in all health & safety related matters.
Nedal Salem
20 April 2021

Corporate
Information
NAME OF THE COMPANY
Reg. No. PQ 29
REGISTERED OFFICE
178, Srimath Ramanathan Mawatha,
Colombo 15
LEGAL FORM
A Public Quoted Company with limited liability
incorporated in Sri Lanka in 1932
REGISTRARS
SSP Corporate Services (Private) Limited
LEGAL ADVISORS
Sudath Perera Associates
Attorneys-at-Law
Messrs. Julius & Creasy

Attorneys-at-Law
AUDITOR
Messrs. KPMG Chartered Accountants
BANKERS
Commercial Bank of Ceylon PLC
Citibank NA
Deutsche Bank AG
HSBC
People’s Bank
Standard Chartered Bank
HOLDING COMPANY
British American Tobacco plc through
British American Tobacco International Holdings BV
Designed & produced by
Printed by Printel (Pvt) Ltd

Photography by Wildlight (Pvt) Ltd

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The

As Ceylon Tobacco Company PLC marks over 115 years of sustainable

The next step of our sustainability journey begins here.

OUR PEOPLE SUSTAINABILITY

13 DISTRIBUTORS 33,329 TRADERS

17 STOCK KEEPING UNITS 07 BRANDS

2 Ceylon Tobacco Company PLC - Annual Report 2020

TURNOVER REVENUE VALUE TO GOVERNMENT VALUE TO SHAREHOLDERS

INVESTOR RATIOS SOCIAL PERFORMANCE

Rs. 83.16 Rs. 82.85

MARKET VALUE PER SHARE RETURN ON INVESTED CAPITAL 11,532 286,900+

stakeholders. The ESG framework clearly 13% 9%

Ceylon Tobacco Company PLC - Annual Report 2020 3

Report transformation of its business through an evolved corporate strategy.

Financial Capital Human Capital Natural Capital

Manufactured Intellectual Social and

4 Ceylon Tobacco Company PLC - Annual Report 2020

BASIS OF REPORTING COMBINED ASSURANCE DIRECTORS' RESPONSIBILITY

Ceylon Tobacco Company PLC - Annual Report 2020 5

6 Ceylon Tobacco Company PLC - Annual Report 2020

Our actions included the following:

Sensitivity analysis to assess impacts on cash flows.

SAFETY OF OUR BUSINESS Provision of essential food items to distributor staff.

Launch of a health insurance scheme for traders.

Ceylon Tobacco Company PLC - Annual Report 2020 7

Interim dividends Rs. Million 13,394 14,986

Female participation in management roles % 29 23

Water consumption CU.M 33,053 36,465

Water efficiency CU.M/MCE 6.19 7.32

8 Ceylon Tobacco Company PLC - Annual Report 2020

EXECUTIVE REVIEW AND STRATEGIC POSITIONING

A Step Towards Growth

Ceylon Tobacco Company PLC - Annual Report 2020 9

“The year’s performance

SURESH KUMAR SHAH

10 Ceylon Tobacco Company PLC - Annual Report 2020

Dear Shareholder, significant risks to CTC’s ability to generate shared value

Rs. 110 BILLION

Ceylon Tobacco Company PLC - Annual Report 2020 11

“In 2020, the

its commitment to empowering over 286,900 livelihoods. The report further

sustainability by stood at Rs. 33 billion. Coupled together with the excise

launching its revamped contribution is estimated to be over Rs.140 billion,

Environment – As a subsidiary of a global sustainability champion – British

Social – Governance American Tobacco plc (BAT), environmental, social and

12 Ceylon Tobacco Company PLC - Annual Report 2020

The Company’s performance in this challenging year

SURESH KUMAR SHAH

Ceylon Tobacco Company PLC - Annual Report 2020 13

Managing Director &

“CTC strives to drive

14 Ceylon Tobacco Company PLC - Annual Report 2020

Dear Shareholder, strategic emphasis on maintaining open and ongoing

As an organisation with deep-rooted relationships across

Rs. 1.66 BILLION

Ceylon Tobacco Company PLC - Annual Report 2020 15

Managing Director &

“Despite the challenges

steadfast in its CTC continued to incentivise its distributors, guaranteeing