Intelligent Investment - Browns Investments PLC · subsidiary Samudra Beach Resorts (Pvt) Ltd has commenced construction of a 150 roomed hotel in Kosgoda. ... and Sierra Holdings

Browns Investments PLCAnnual Report 2011/2012

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Corporate Information

BROWNS INVESTMENTS PLC

LEGAL FORMA Public Limited Liability Company quoted on the Colombo Stock Exchange on 26th July 2011 and incorporated in Sri Lanka on 10th November 2008

COMPANY REG. NO. PV 66136 PB/PQ

DIRECTORS (Mrs.) R.L. Nanayakkara – Non-Executive ChairpersonP.R. Saldin – Executive Director/ Chief Executive OfficerN.M. Prakash – Executive DirectorD.S.K. Amarasekera – Non-Executive DirectorR.P. Sugathadasa – Non-Executive Director S. Furkhan – Non-Executive DirectorS.V. Somasunderam – Non-Executive Director (Appointed w.e.f. 28/06/2012)N. Fernando – Independent Non-Executive DirectorA.G. Weerasinghe – Independent Non-Executive Director

SECRETARIES Standard Finance (Pvt) Ltd481, T.B. Jayah Mawatha,Colombo 10.

ContentsAbout us 01 Financial Highlights 02Chairperson’s Message 06 Director/ Chief Executive Officer’s Review 10

Group Governance Board of Directors 14 Corporate Senior Management 19Investment Portfolio 20Management Discussion and Analysis 22

Governance ReportsCorporate Governance 30Audit Committee Report 34Remuneration Committee Report 35

Financial Information Directors’ Report 38 Statement of Directors’ Responsibilities 41Share Information 42 Independent Auditors’ Report 43Income Statement 44Balance Sheet 45 Statement of Changes in Equity 46Cash Flow Statement 47Significant Accounting Policies 48Notes to the Financial Statement 63

Supplimentary InformationFour Year Summary 120Subsidiaries, Associates & Joint Ventures 121 Glossary 122 Notice of the Annual General Meeting 124Form of Proxy 125

REGISTERED OFFICE 481, T.B. Jayah Mawatha, (Darley Road),P O Box 200,Colombo 10.Fax No. 2698489Tel. 2697111, 2663000 & 2698411Website: www.brownsinvestments.com

BUSINESS OFFICE No.34,Sir Mohamed Macan Markar Mawatha, Colombo 3.Fax No. 2698489Tel. 2697111, 2663000 & 2698411Website: www.brownsinvestments.com

AUDITORS Messrs BDO PartnersChartered Accountants65/2, Sir Chittampalam A. Gardiner Mawatha, Colombo 2.

BANKERS Hatton National Bank PLC- Head Office BranchSeylan Bank PLC- Millennium BranchSampath Bank PLC- Head Office Branch

Designed & Produced byPhotography by Taprobane StreetDigital plates and printing by Aitken Spence Printing & Packaging (Pvt) Ltd.

1Annual Report 2011/2012

During the short period Browns Investments PLC has been in operation, we have built our portfolio to a value in excess of Rs. 7 Billion, spread over several fast-growing industry sectors including leisure, plantations, construction, manufacture, export and entertainment.

Along with our growing portfolio, the outstanding financial results achieved over the past years has helped establish our reputation as one of the most intelligent investment opportunities in an increasingly competitive industry landscape.

Browns Investments PLC. It’s intelligent investment.

Browns Investments PLC2

GROUP 2011/12 2010/11 Change % 2009/10

Earnings Highlights and Ratios

Turnover Rs.000 2,021,727 3,016,177 (33) 2,451,530

Profit Before Interest and Tax (EBIT) Rs.000 2,858,328 2,265,431 26 259,245

Profit Before Tax Rs.000 2,667,996 2,134,956 25 174,021

Profit After Tax Rs.000 2,588,388 2,103,425 23 155,130

Profit Attributable to Equityholders Rs.000 2,525,048 1,894,445 33 43,568

Balance Sheet Highlights and Ratios

Total Assets Rs.000 16,053,159 11,852,181 35 7,269,224

Total Debt Rs.000 1,945,188 1,115,772 74 808,499

Total Shareholders’ Funds Rs.000 10,880,750 8,097,252 34 2,447,442

Number of Shares Issued No. 000 1,860,000 1,810,000 3 98,000

Market/ Share Information

Earnings Per Share (Rs.)* Rs. 1.37 3.14 (56) 0.04

Net Assets Per Share (Rs.)** Rs. 5.85 4.47 31 24.97

Market Price of Share as at 31st March Rs. 3.30 - 100 -

Market Capitalisation Rs. 000 6,138,000 - 100 -

Price Earning Ratio ( Year end) Times 2.40 - 100 -

Financial Ratios

Gross Profit (%) % 21.51 53.60 (60) 7.07

Debt to Equity (%) % 15.24 11.62 31 15.94

Return on Capital Employed (%) % 19.44 21.13 (8) 4.41

Interest Cover (times) Times 15.02 17.36 (14) 3.04

Current Ratio (times) Times 2.13 8.53 (75) 0.55

Return on Total Assets (%) % 17.81 19.11 (7) 3.57

Return on Equity (%) % 23 29 (19) 3.00* Earnings per share has been adjusted for weighted average number of shares outstanding during the year (has been adjusted for previous years).

** Net Assets per share has been computed for the total number of shares issued as at 31st March 2012.

Financial Highlights


155

09/10

Group Profit For the Year

10/11 11/12

2,1

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2,58

8

Rs.2,588 Mn0

500

1,000

1,500

2,000

2,500

Year

Rs. Mn

Rs.2,588mnGroup Profit for the year

Rs.10.88bnGroup Net Assets

2,44

7

09/10

Group Net Assets

10/11 11/12

8,09

7

10,8

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Rs.10.88 Bn0

2,000

4,000

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8,000

10,000

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Year

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The smart

option.Management Reports


Dear Shareholders,

On behalf of the Board of Directors of Browns Investments

PLC, it is my pleasure to present you the Annual Report and

Financial Statements for the year ended 31st March 2012 and

to review the performance of the company during the year.

With the end of the war in 2009, the Sri Lankan economy

saw continued growth. Economic growth in 2011 was 8.3%.

A further increase from the high growth figure of 8% in 2010.

The growth was led by agriculture and service sectors.

However, certain factors in the economy specifically in the

third and fourth quarters resulted in a challenging environment.

Interest rates which had been relatively low in the past few

years began to rise significantly during the second and third

quarters of the financial year. The Rupee which has been

relatively stable at around Rs. 109 to the USD depreciated

sharply in the fourth quarter to around Rs. 130 to the USD.

The situation was further aggravated by restricted lending by

the banking sector based on Central Bank regulations.

Your company, Browns Investments PLC, a subsidiary of

Brown & Company PLC was formed in 2008/2009 as a joint

venture of Brown and Company PLC and Taprobane Holdings

PLC. Browns Investments PLC was listed on the Diri Savi

Board of Colombo Stock Exchange on 26th July 2011. The

company follows a policy of investing in growing sectors

of the economy and while earning profits and dividends

from those investments it would also dispose of the same,

realising a gain when opportunities arise.

“The company invested in a number of key areas this year individually and with its strategic partners. The investments in growing sectors of the economy has the company well placed for future growth as well as to capitalise on opportunities and to maximise profits on disposals of investments.”

Chairperson’s Message


Mrs. R. L. Nanayakkara Chairperson


In this backdrop our company faced a challenging year but

recorded a Group profit before tax of Rs.2,668mn. This figure

is after a sum of Rs.356mn being the decline in market value

of short term equity investments held by the Group and

negative goodwill arising out of acquisition of Excel Global

Holdings (Pvt) Ltd amounting to Rs.2,607mn. Group profit

after tax for the year was Rs.2,588mn.

The company’s investments during the year included the

acquisition of Excel Global Holdings (Pvt) Ltd for a sum of

Rs.888mn. Excel Global Holdings (Pvt) Ltd’s subsidiary

Millennium Development (Pvt) Ltd has leasehold rights to

the property named Excel World. There are plans to develop

this property into a mega, mixed development project over

the next few years in accordance with this leasehold rights

and development plan. This will include entertainment,

supermarkets, shops, conferencing facilities, food courts and

restaurants. In the shorter term, the entertainment park has

been developed and refurbished.

During the year, the company increased its holdings in Agstar

Fertilizers PLC. Agstar Fertilizers PLC , a leading player in the

agri business sector, imports and distributes blended fertilizer

as well as seeds and crop care products. Its business areas

synergise with the business of Brown and Company PLC

which has a significant presence in the agriculture sector

through its distribution of tractors and agricultural equipment.

In the leisure sector, Browns Investments PLC which holds

30% of LOLC Leisure Ltd, invested an additional sum of

Rs.337mn in that company. LOLC Leisure Ltd which has

in its portfolio, the former Riverina, Palm Garden, Tropical

Villas and Eden, acquired Dickwella Resort and Spa during

the year. In addition, Browns Investments PLC through its

subsidiary Samudra Beach Resorts (Pvt) Ltd has commenced

construction of a 150 roomed hotel in Kosgoda. This hotel

with requisite approvals will be increased to a 172 roomed

star class hotel and negotiations are being carried out to have

an international brand name to manage the hotel. While the

company acquired a holding in Sierra Constructions (Pvt) Ltd

and Sierra Holdings (Pvt) Ltd last year, Browns Investments

PLC further increased its presence in the construction sector

by acquiring a 51% stake in AJAX Engineers (Pvt) Ltd a

company which is a market leader in fabrication and installing

aluminium curtain walls and toughened glass facia as well as

installing aluminium cladding.

The company’s joint venture with Perpetual Holdings (Pvt)

Ltd in Free Lanka Capital Holdings PLC had a difficult year.

While rubber prices continued to be somewhat upbeat, low

tea prices, drought and significant increases in wage cost

resulting from the new collective agreement impacted the

performance and results. Free Lanka Capital Holdings PLC

declared a profit after tax of only Rs.363mn in 2011/2012

compared with the profit of Rs.1,243mn in the previous year.

Browns Investments PLC acquired additional stake in

Taprobane Capital (Pvt) Ltd during the year. Taprobane Capital

(Pvt) Ltd is the holding company of Royal Fernwood Porcelain

Ltd, a porcelain manufacturer. After careful strategic review,

it was decided to refocus the company on the local market

and Browns using its island wide reach has taken over the

marketing and distribution of the porcelainware locally.

“The company follows a policy of investing in growing sectors of the economy and while earning profits and dividends from those investments it would also dispose of the same, realising a gain when opportunities arise. “

Chairperson’s Message contd.


The company invested in a number of key areas this year

individually and with its strategic partners. The investments in

growing sectors of the economy has the company well placed

for future growth as well as to capitalise on opportunities and

to maximise profits on disposals of investments.

I would like to place on record my deep appreciation to all

our employees for their commitment and hard work which

was instrumental for the development of the company and

investment which took place during the year. I also thank our

joint venture partners for their continued confidence and look

forward to working with them in the future. I also thank the

Board of Directors for the support, guidance and cooperation

extended and also senior management and all staff without

which our success would not have been achieved. While I

wish to place on record my appreciation for the support

given by Mr. Ishara Nanayakkara and Mr. Ajith Devasurendra

who resigned from the Board of Directors during the year,

I would also take this opportunity to welcome Mr. Shanker

Somasunderam who joined the Board as a Non-Executive

Director on 28th June 2012.

Mrs. R. L. Nanayakkara

Chairperson

06th August 2012


It is with great pleasure that I review the performance of

Browns Investments PLC for the year ended 31st March

2012. Browns Investments PLC was set up as a joint venture

between Brown and Company PLC and Taprobane Holdings

PLC. The company was listed on the Diri Savi Board of the

Colombo Stock Exchange on 26th July 2011. The company’s

investment strategy is to invest in growing sectors of the

economy on its own or with its investment partners.

Economic growth of 8.3% in 2011 was a further increase on

growth of 8% in 2010. The Country continued to develop

and grow led by a stable political environment and peace. The

development of infrastructure, opening up of new areas in the

North and East and improved economic activity set the tone

for continued investment by the company during the year.

The company focused on growth areas such as construction,

entertainment and leisure, agriculture, plantations and

manufacture.

Your company successfully consolidated on its previous

investments as well as expanded aggressively, investing

into growing areas of the economy. Additional investments

with LOLC Leisure Ltd further strengthened your company’s

foot print in the leisure sector along with the acquisition of

Excel Global Holdings (Pvt) Ltd. The company also increased

its investments in the agriculture sector with additional

investment in Agstar Fertilizers PLC and significantly

strengthened its foot print in the construction sector with

the acquisition of AJAX Engineers (Pvt) Ltd. The company’s

subsidiary Samudra Beach Resorts (Pvt) Ltd has obtained the

requisite approvals to commence construction of a star class

hotel in Kosgoda.

“Browns Investments PLC continued its policy of “intelligent investment.” With major investments in the construction, leisure, entertainment and manufacturing sectors. Investments were also targeted to capitalise on group synergies.”

Director/ Chief Executive Officer’s Review


Mr. P. R. Saldin Director/Chief Executive Officer


During the financial year under review the Group recorded

turnover of Rs.2022mn and profit before tax of Rs.2668mn.

Profit after tax was Rs.2588mn. This was in comparison with

a turnover during the previous year of Rs.3016mn, a profit

before tax of Rs.2135mn and a profit after tax of Rs.2103mn.

While the decline in turnover this year, was due to drop in

turnover from plantation sector as well as no disposal of

investments, the company’s profits for the year increased

due to the negative goodwill on acquisition of shares on

arising out of the acquisition of Excel Global Holdings (Pvt)

Ltd. This gain amounts to Rs.2607mn. The profit for the year

was after a charge of Rs.356mn on account of the declining

market value of the company’s portfolio of listed company

shares.

While the economy continued to expand, the company

was affected by certain factors during the third and fourth

quarters of the year. Interest rates continued to rise with the

benchmark PLR which was 9.3% in mid 2011 rising to 12.4%

in March 2012. The Rupee which has been relatively steady

at around Rs110.36 Per USD depreciated significantly to

around Rs129.57 Per USD. Government policy of controlling

increased lending by banks made credit tighter. The impact

of wage hike to the plantations sector and low tea prices also

added to the impact.

In this scenario, Browns Investments PLC continued its

policy of “intelligent investment”. With major investments in

the construction, leisure, entertainment and manufacturing

sectors. Investments were also targeted to capitalise on

group synergies.

Some of the key developments in the various business

sectors in which we operate are found below.

Browns Investments PLC invested a sum of Rs.337mn during

the year thereby increasing its stake in LOLC Leisure Ltd to

Rs.1,186mn. LOLC Leisure Ltd is a joint venture between

Lanka Orix Leasing Company PLC and Browns Investments

PLC where Browns Investments PLC holds 30%. The

properties in LOLC Leisure Ltd encompass, the former

Riverina, Palm Garden and Tropical Villas hotels as well as

the Eden hotel. LOLC Leisure Ltd further acquired Dickwella

Resorts and Spa during the year for a sum of Rs.1,014mn.

This property which has a unique location will be upgraded

and developed over the next few years. Plans are underway

to rebuild a hotel with over 400 rooms in the former Riverina,

Palm Garden, Tropical Villas properties, utilising this prime

block of land with beach frontage.

Browns Investments PLC’s 100% subsidiary Samudra Beach

Resorts (Pvt) Ltd commenced construction of a 150 roomed

hotel in Kosgoda.

The site is unique as it has the sea on the West and two

other water bodies on the North and South. It is adjacent to

a turtle hatchery and the guests will have the opportunity of

holidaying in this environment. With requisite approvals, it is

planned to increase room capacity to 172 rooms at a cost of

Rs. 1.7 bn. Negotiations are underway to have the property

managed by an international hotel chain and plans are to

commence operation of the hotel in winter 2014.

Your company acquired an additional stake in Agstar Fertilizers

PLC during the year for a sum of Rs.219mn. With this

additional investment, Browns Investments PLC has invested

a total sum of Rs.273mn and holds 12%. The company along

with related parties, Lanka Orix Leasing Company PLC, Sierra

Constructions (Pvt) Ltd and Sierra Holdings (Pvt) Ltd hold

75% of capital of Agstar Fertilizers PLC. Agstar Fertilizers

PLC, a significant player in the agri business sector supplies

straight and blended fertilizer, crop care products and planting

material to the agricultural community. This activity along with

the business of Browns and LOLC synchronizes perfectly

whereby a complete package of agricultural equipment and

tractors, fertilizer and planting material along with micro credit

can be offered to the agricultural sector.

Agstar Fertilizer PLC raised Rs.1bn through a Private

Placement on 24th July 2011. The company was listed by

way of introduction in the Colombo Stock Exchange on

16th February 2012. The company plans to expand into rice

milling and increase its blending and storage facilities in the

near future. The company’s profit before tax increased from

Rs.288mn the year before to Rs.314mn for the year ended

31st March 2012.

While Agstar is poised for significant growth and profitability,

the issue of delayed payments of subsidies is a concern.

However, it is understood that steps are being taken to

arrange for more prompt payment of subsidies in the future.

Director/ Chief Executive Officer’s Review contd.


Browns Investments PLC acquired additional stake in

Taprobane Capital (Pvt) Ltd during the year. Taprobane Capital

(Pvt) Ltd is the holding company of Royal Fernwood Porcelain

Ltd, a porcelain manufacturer. After careful strategic review,

it was decided to refocus the company on the local market

and Browns using its islandwide reach has taken over the

marketing and distribution of the porcelainware locally.

The company’s joint venture with Perpetual Holdings (Pvt)

Ltd in Free Lanka Capital Holdings PLC had a difficult year.

While rubber prices continued to be somewhat upbeat, low

tea prices, drought and significant increases in wage cost

resulting from the new collective agreement impacted the

performance and results. Free Lanka Capital Holdings PLC

declared a profit after tax of only Rs.363mn in 2011/2012

compared with the profit of Rs.1,243mn in the previous year.

Browns Investments PLC acquired Excel Global Holdings (Pvt)

Ltd for Rs.888mn. Its subsidiary Millennium Development

(Pvt) Ltd has leasehold rights to the property termed Excel

World which is six Acre block in a prime location. This lease

operates for a further 31 years with the option for extending

for a further 40 years under certain conditions. The property

which can be accessed through Darley Road also has lake

front access and is strategically placed close to other premium

properties owned by Brown and Company PLC. Plans

are underway to develop this property into a mixed mega

development including conferencing facilities, entertainment,

shops, supermarkets, food courts and restaurants in the next

few years. Conceptual designs have already been drawn up.

In the short term additional investment has been made into the

entertainment park upgrading its’ entertainment, restaurants

and conferencing facilities and revenue and profits of the park

have increased from the period of acquisition.

Browns Investment PLC also acquired 51% of AJAX

Engineers (Pvt) Ltd for Rs.100mn during the year. AJAX

Engineers (Pvt) Ltd is the market leaders in aluminium

curtain walls and toughened glass facias as well as installing

aluminium cladding. This investment sits well with the

company’s other investments in the construction sector such

as Sierra Constructions (Pvt) Ltd and Sierra Holdings (Pvt) Ltd.

Browns Investments PLC also holds a trading portfolio in

excess of Rs.1bn and properties in excess of Rs.500mn. The

equity portfolio which includes investments in diversified

holdings, plantations, agriculture and financial services

suffered a significant decline in value during the year in line

with the drop in indices in the Colombo Stock Exchange. This

resulted a charge for the year of Rs.356mn for the company’s

profit & loss account. The properties are mostly based in

Colombo and suburbs. There is also a block of land in Nilaweli,

Trincomalee. The properties are held for future development.

In conclusion, I thank our joint venture partners, our

shareholders, and financial institutions for their support as

well as our employees for their commitment and dedication.

I also would like to thank the staff of Brown & Company PLC

who provide much of our support services. I also would

like to place on record my thanks and appreciation to the

Chairperson and the Board of Directors for their unfailing

support.

Mr. P.R. Saldin

Director/ Chief Executive Officer

06th August 2012


Seated - R.P. Sugathadasa, S.V. Somasunderam, P.R. Saldin, Mrs. R.L. Nanayakkara.

Standing - D.S.K. Amarasekera, S. Furkhan, A.G. Weerasinghe, N. Fernando, N.M. Prakash

Left to right

Board of Directors



Mrs. R.L. NanayakkaraChairperson

In July 2006, Mrs. Nanayakkara assumed duties as Chairper-son of Browns Group of Companies.

Mrs. Rohini Nanayakkara obtained her BA Second Class Honours Degree from the University of Peradeniya, Sri Lanka and a Diploma in French from the Chamber of Commerce, Brussels. She is a Fellow of the Institute of Management & the Institute of Bankers, Sri Lanka.

She was the first woman executive to join a commercial bank with the rare distinction of not only being the first woman General Manager / CEO of a bank in Sri Lanka but the entire Asian Region.

Mrs. Nanayakkara was also Chairperson / Director of several financial institutions such as the National Development Bank, DFCC Bank, Merchant Bank of Sri Lanka and the First Capital Group of Companies. She is presently the Chairperson of NDB Venture Investments (Pvt) Ltd, Ayojana Fund Management (Pvt) Ltd and the Taprobane Investment Group of Companies. She is also a Director of Trans Asia Hotels Ltd and the largest property development companies such as Mireka Capital Lanka Ltd and Overseas Realty PLC as a nominee of the main Singaporean investor.

After her retirement from Bank of Ceylon, she re-joined the banking and financial sector to share her experience with one of the largest private sector banks - Seylan Bank, as Director -General Manager / CEO. During her tenure of office there she successfully improved the performance of the bank which achieved acceptable credit ratings and ISO standards and was recognised as a major player in the market. During the later part of her tenure at the Bank, Seylan Bank received (in 2003) its first credit rating of A(-) from Fitch Ratings Lanka Ltd.

In August 2004 she accepted the invitation extended to her by the shareholders of Lanka ORIX Leasing Co. PLC (LOLC) to be the Chairperson of the LOLC Group of Companies.

In January 2005, her Excellency the President of Sri Lanka appointed her as a member of the Task Force to Rebuild the Nation (TAFREN). This Task Force was converted to a special authority by an Act of Parliament to undertake the rebuilding exercise over the next 5 year period.

Mrs. Nanayakkara has also been the President of Sri Lanka Bankers Association, Association of Professional Bankers and Institute of Management Sri Lanka and was a member of the Council of University of Colombo. She is presently the president of the United Nations Association of Sri Lanka.

Mr. P.R. SaldinExecutive Director/CEO

Mr. Rimoe Saldin is a Fellow of the Institute of Chartered Accountants of Sri Lanka. He is also a Fellow of the Chartered Institute of Management Accountants in the United Kingdom and a Certified Management Accountant, Australia. He is an Alumni of the Asian Institute of Management.

He has over 15 years of experience at top management level in the areas of Finance, Human Resource Development, General Management and Operations.

Presently Mr. Saldin serves as the Group Chief Operating Officer of the Browns Group of Companies and Director/Chief Executive Officer of Browns Investments PLC. He also serves on the Boards of a number of companies in the group.

He was previously the Country Controller for Royal Dutch Shell in Sri Lanka and Finance Director of Shell Gas Lanka Ltd and Shell Terminal Lanka Ltd. Mr. Saldin also served as Group Finance Director and Commercial Director of CIC Holdings PLC. He also functioned as Managing Director of the Cisco Security Packaging (Pvt) Ltd and served on the Board of Directors of a number of listed and unlisted companies in CIC Group.

Mr. N.M. PrakashExecutive Director

Mr. Prakash holds a MBA from University of Southern Queensland and is also a Certified Professional Marketer (Asia Pacific) and a Certified Management Accountant (Aust.). He also holds an Executive Diploma in Business Administration from the University of Colombo and is an Alumni of National University of Singapore & Asian Institute of Management, Manila. He is a Fellow of Chartered Management Institute (London) and Certified Professional Managers Sri Lanka.

He served as the Sales Director for Singer (Sri Lanka) PLC, a

Board of Directors contd.


multinational company involved in retailing of durables. Mr. Prakash has also served as the Deputy Credit Director and Credit Manager for many years handling the marketing and management of hire purchase and related credit portfolios at Singer. He also served in the Boards of Singer (Sri Lanka) Ltd, Singer Finance Lanka Ltd and Singer Industries (Ceylon) Ltd.

At present, he is the Group Managing Director / Chief Executive Officer of Browns Group of Companies, a public quoted conglomerate involved in trading, manufacturing, finance, travel & tours, plantations and investments.

Mr. S. Furkhan Non Executive Director

Mr. Stefan Furkhan joined the hospitality industry in 1984 having had his initial training in Germany and Australia and possesses over 25 years of experience in the tourism and hospitality industry in Australia and Sri Lanka.

He is a Graduate Diploma Holder and Fellow Member of the Chartered Institute of Marketing, UK (CIM), the premier professional marketing body in the world, and a Member of the Institute of Hospitality, UK. Mr. Furkhan was a former Vice President of the Tourist Hotels Association of Sri Lanka (THASL), and the Chairman of its Marketing Sub-Committee. He also served on the Pacific Asia Travel Association (PATA) Sri Lanka Chapter Board.

Mr. Furkhan has had extensive experience in setting up Project Management and Launching of new Green Field Hotel Projects in Sri Lanka, Bangladesh and Australia. He also functioned as the Managing Director of the Confifi Group Hotels until recently.

During his career he has been instrumental in identifying and introducing several new concepts to the Tourism Industry in Sri Lanka. He was awarded the Winner of the Chartered Institute of Marketing, Marketer Award 2001, in recognition of his marketing efforts in the Hospitality Industry.

Mr. Furkhan is currently Chairman of Confifi Capital (Pvt) Ltd., Travelanka (Pvt) Ltd., and related companies and Director of Eden Hotel Lanka PLC and a Consultant & Advisor to the Board of LOLC Leisure Limited.

Mr. S.V. SomasunderamNon Executive Director

Mr. Shanker Somasunderam is a Chartered Management Accountant and a Fellow Member of CIMA (U.K.)

He joined Walker & Greig in 1985 for a period of one year as Management Trainee and thereafter joined his family business.

In 1994 Mr. Somasunderam established a company in U.K. together with his British Partners for the purpose of acquiring a wireless local loop licence to provide telecommunication services in Sri Lanka and to seek funding for same. In 1994 he founded Lanka Bell Ltd and was successful in obtaining the licence. Shanker was Executive Director thereafter Deputy Chairman of Lanka Bell Ltd until he divested his shares in 2005 together with his foreign partners.

He has been holding a position of Director of Browns Group of Companies from 1st July 2006.

Mr. Somasunderam is also Managing Director and Chairman of Lexus Developers Ltd. It was established in 2005 for the purpose of constructing apartments.

Mr. Somasunderam is also an investor in the Sri Lankan stock market with the blue chip companies.

Mr. R.P. SugathadasaNon Executive Director

Mr. Ruwan Sugathadasa possess over 16 years experience in government and corporate debt market including over 10 years in a senior management capacity at First Capital Treasuries, a Central Bank appointed primary dealer. He was also involved in money brokering, corporate debt placement and asset management. Currently he serves as General Manager at Taprobane Holdings PLC managing over Rs.5 bn worth of assets. Mr. Sugathadasa holds a MBA from the University of Preston in USA. Mr. Sugathadasa also serves as a Director at Free Lanka Capital Holdings PLC, Samudra Beach Resorts (Pvt) Ltd and Ajax Engineers (Pvt) Ltd.


Mr. N. FernandoIndependent Non Executive Director

Mr. Nishan Fernando is a Fellow member of the Institute of Chartered Accountants of Sri Lanka (ICASL). He is a member of the Council of the ICASL and is the immediate Past President. He is the Vice President of AAT (SL). He is also a Fellow member of ICMA (SL), AAT (SL) and an Associate member of CIMA (UK). He also holds a MBA from the University of Sri Jayewardenepura, Sri Lanka. He was a member of the International Accounting Education Standards Board of International Federation of Accountants (IFAC) during 2007-2009. Mr. Fernando was a Board Member of the South Asian Federation of Accountants (SAFA) and was the Chairman of SAFA Centre of Excellence on Standards and Quality and SAFA Accounting and Auditing Standards Committee. Currently he is representing ICASL as Technical Advisor at SAFA Board.

Mr. Fernando is the current Chairman of the Accounting Standards Committee. He serves in the Cabinet appointed Expert Panel on Finance Companies in Sri Lanka, Advisory Committee to the Export Development Board on Professional Services and on the Board of “Api Venuven Api” welfare fund of the Ministry of Defence. He has served as a member of the Securities and Exchange Commission of Sri Lanka, Governing Councils of the Postgraduate Institute of Management and National Institute of Business Management, Sri Lanka Accounting and Auditing Standards Monitoring Board, Inter-Regulatory Institutions Council, and of the Quality Assurance and Accreditation Council of University Grants Commission of Sri Lanka. He had been the Chairman of the ICASL’s Urgent Issues Task Force and continues to be a member.

Mr. Fernando counts over 20 years of senior management experience.

Mr. D.S.K. AmarasekeraNon Executive Director

Mr. Kamantha Amarasekera is a member of the Institute of Chartered Accountants of Sri Lanka and is an Attorney-at-law of the Supreme Court of Sri Lanka. He also holds a degree in Business Administration from the University of Sri Jayawardenapura and began his career in the year 1998.

Mr. Amarasekera is an eminent Tax Consultant and the Senior Tax and Legal Partner of Amerasekera & Company, a leading tax consultancy firm in the country.

Mr. A.G. WeerasingheIndependent Non Executive Director

Mr. Aratchige Gunaratne Weerasinghe is a Fellow member of the Institute of Bankers, Sri Lanka and also holds a B.A. in Economics from University of Ceylon, Peradeniya. He is an experienced Senior Banker who served the Board of Pan Asia Banking Corporation PLC as a Director and subsequently was appointed as the Chairman. Mr. Weerasinghe served as an Assistant Lecturer in Economics, University of Ceylon, Peradeniya.

He was the former Deputy General Manager, Corporate Banking at Bank of Ceylon. He has served as Country Manager, Bank of Ceylon, London and Deputy General Manager, International at Seylan Bank. He was also a former President of Sri Lanka FOREX Association.

Board of Directors contd.


T.S. Selviah

Chief Operating Officer Leisure Sector

P.S. Goonawardena

Group Chief Financial OfficerN. Delpechitra

General Manager Group Legal/ Group Secretary

Senior Management


Plantations

Agri-Business

Leisure

Construction

Free Lanka Capital Holdings PLC

Maturata PlantationsPussellawa Plantations

LOLC Leisure Ltd

Eden

Riverina

Palm Garden

Tropical Villas

Dickwella Resort & Spa

Sierra Holdings (Pvt) Ltd

Sierra Constructions (Pvt) Ltd

Ajax Engineers (Pvt) Ltd

Free Lanka Capital Properties (Pvt) Ltd

Agstar Fertilizers PLC

Samudra Beach Resorts (Pvt) Ltd

Investment Portfolio


Entertainment

Manufacturing

Other InvestmentsExcel Global Holdings (Pvt) Ltd

Excel World

Royal Fernwood Porcelain Ltd

Stock Market

Financial Instruments


Browns Investments PLC is a subsidiary and the strategic investment vehicle of Brown and Company PLC. Taprobane Holdings PLC is also a major shareholder. The strategic investments the company makes are in line with the vision of the company to have a presence in emerging or sunshine industries that are expected to lead national growth. Some of the investments the company has made are passive, while it takes an active management interest in others. As at the end of March 2012, Browns Investments PLC have a presence in plantations, agri-business, leisure, construction, entertainment, and manufacturing. It also manages an equity portfolio valued at over Rs.1 billion.

In the year under review, the company consolidated its investments with emphasis on development of its active holdings, while making strategic acquisitions that expanded the Group’s footprint in key areas. Group profit after tax for the year was Rs.2,588 million compared to the profit after tax of Rs.2,103 million for the previous year. This is explained further in Notes to the Accounts on page 44. The tempered growth of the company compared to previous years is also due to the emphasis on consolidation of investments made, with several projects currently under development and due to become operational in the next few years.

During the year, Browns Investments PLC issued 50 million shares at Rs. 5/- a share in an Initial Public Offer, raising Rs. 250 million.

Plantations Browns Investments PLC has interests in the plantation sector through Free Lanka Capital Holdings PLC (FLCH).

Free Lanka Capital Holdings PLC

FLCH is the holding company for Pussellawa and Maturata

Plantations – a joint venture between Browns Investments PLC and Perpetual Holdings (Pvt) Limited. The two plantation companies manage thirty one tea estates and nine rubber estates – a total of 18,841 acres under tea, producing 13.5 million kilos, 13,620 acres under rubber, producing 3.6 million kilos, 635 acres under coconut, and 7,776 acres under other crops, including timber. Pussellawa Plantations also manages two green tea factories. There are synergies between management of these estates and the Plantation Support Services division of Browns, which supplies the plantation sector with related machinery, technical support and services as well as supply of fertilizer and crop care products from group company Agstar Fertilizers PLC.

The year under review was a challenging one for the plantation sector, following a 27% increase in plantation sector wages, which in turn affected costs of production on the estates. Average tea prices in 2011 also dipped slightly to US$ 3.17 a kilogram, from over US$ 3.31 per kilogram the previous year, while output also dipped marginally from 326 million kilos to 325 million kilos of black tea for the same period. There was also a loss of traditional markets in the Middle East due to the turmoil of the Arab Spring during the year that affected sales. Rubber however, continued to perform well, with production increasing by 3.2% to 157.9 million kilos in 2011, while the

Despite adverse weather conditions and increased cost of production led by higher wage rates, Free Lanka Capital Holdings succeeded in earning a Profit Before Tax of Rs.458mn. for the year.

Management Discussion & Analysis


average price of rubber sheets in 2011 was Rs. 517 per kilo of RSS1, driven by favourable weather conditions.

The challenging market conditions were reflected in earnings during the year. Free Lanka Capital Holdings PLC posted a turnover of Rs. 5.5 billion in the current financial year as against Rs. 6.5 billion the previous year, while profitability also saw a change from Rs.1.2 billion in 2010/11 to Rs. 363 million in the year under review. Looking ahead, FLCH will undertake further planting in rubber and cinnamon. Rubber prices have remained strong as compared to tea, and companies that have sufficiently diversified into rubber have shown marginal profitability in a difficult year. The company also achieved Ethical Tea Partnership Certification for its Hellbodde and Rothschild Estates during the year.

The company also leveraged on the assets available on the estates and developed a hydropower plant to supply electricity to the national grid. Currently, 3.2 MW or 5,368,415 KWh of electricity is being generated, and this is to be increased to 16 MW over the next four years.

Agri-BusinessBrowns Investments PLC together with LOLC PLC and the Sierra Group, hold over 80% of Agstar Fertilizers PLC, a mid-sized company in the local agri-business industry. Agstar Fertilizers PLC supply straight and blended fertilizers, crop care products and planting material to the agriculture community. With this acquisition, the Browns group is uniquely positioned to offer a complete range of agricultural products and services to customers, from seeds, crop-care and fertilizers, to tractors and agri-machinery, to micro-finance through LOLC PLC.

In the year under review, the company expanded its product

range to include fertilizers for chilli and maize varieties, with plans for different blends of fertilizer based on soil and crop type. Agstar Fertilizers PLC also had a Private Placement of Rs. 1 billion in the financial year under review.

Some of the challenges facing the business in the year ahead are delays in the release of fertilizer subsidies for the sector, as well as a need to improve agricultural practices and distribution of agricultural produce from farm-gate to cities. However, the agriculture sector offers tremendous opportunity for growth, with the clearing up of new agricultural lands in the North and East of Sri Lanka following the end of the war. Browns, with its wide range of agricultural products and services is well positioned to meet this demand. During the year under review, Agstar Fertilizers PLC was listed on the Colombo Stock Exchange.

The investment in Agstar Fertilizers by Browns Investments synchronizes perfectly with Brown & Company’s Agriculture business resulting in the farmer having access to a full package, of Tractors & Equipment, Fertilizers, Crop care & Planting Material. Lanka Orix Leasing Company is on hand to provide the required financing.


The company which was incorporated in 2003 with an asset base of Rs. 38 million now boasts of a net asset position of Rs. 1.9 billion. The company earned a profit before tax of Rs. 314 million for the year.

Leisure The company has made significant investments in the leisure sector with the acquisition of select new properties, as the country’s tourism industry grows rapidly. Sri Lanka recorded the highest number of tourist arrivals in 2011 of 855,975 tourists, a 30.8% increase over the previous year. Earnings from tourism were also up by 44.2% to US$830 million in 2011, with targets of 2.5 million tourists by 2016. Infrastructure development has also been fast-tracked in key tourist destinations across the island, including the development of the road and highway network. The industry has benefitted from the positive political climate in Sri Lanka following the end of the war, as well as growing recognition of the island as an attractive holiday destination. In the medium to long term, Browns is poised to meet the growing demand for top quality hotels.

Browns Investments PLC currently holds a 30% stake in LOLC Leisure Ltd the managing company for leading resorts Palm Garden, Riverina, Tropical Villas and Eden while the company acquired Dickwella Resort and Spa during the year.

This unique property, which is surrounded by the sea on three sides, will be developed and upgraded over the next few years. These properties together, account for the highest number of rooms on the Southern coast. Eden is currently operational, while an extensive renovation is underway to combine the other three adjacent properties into a single 500 room hotel. This also includes long-term plans for residential condominiums. Browns has invested Rs. 1.18 billion in this venture with LOLC Leisure Ltd.

Browns Investments PLC has commenced construction of a star class hotel in Kosgoda. The location for the hotel is considered advantageous as it is surrounded by water bodies on two sides, and is also situated close to a turtle hatchery that is a tourist draw card. The company has obtained approval for a 150 room hotel on four or five star basis, and are negotiating with an international hotel chain to manage the property. Construction of the hotel which began in April 2012 is to be completed in 18 months, in time for the winter tourist season in 2014.

Browns Investments’s investment in LOLC Leisure along with its construction of a Hotel in Kosgoda gives it a significant presence in the Leisure Sector in Sri Lanka.

Investments

CoconutHydro Power

TeaRubber

LeisurePorcelain

Construction

Others0.13%

52.83%

10.51%9.42%3.53%

0.75%

21.23%

1.15%

0.46%

Segment Revenue - Group

Management Discussion & Analysis contd.


Browns Investments PLC is also in the process of obtaining the necessary approvals for two boutique hotels on estates in Maturata and Pussellawa Plantations, managed by Free Lanka Capital Holdings PLC.

ConstructionBrowns Investments PLC and LOLC PLC hold a 10% stake each in Sierra Constructions (Pvt) Ltd respectively, as well as a 10% stake each in Sierra Holdings (Pvt) Ltd, with the balance held by individuals. The Sierra group has become well known in Sri Lanka for its high quality engineering and construction work, its expertise and reliability. The group also has businesses in India, Maldives, Qatar, Saudi Arabia and Australia. The investment in the Sierra group has been a passive one for Browns, although it did assist the company with management support during the year under review. There are also synergies that can be achieved between the two companies, with Sierra Constructions (Pvt) Ltd successfully bidding for and obtaining the contracts for construction of some of Browns property projects.

During the year under review, Browns Investments PLC picked up a 51% stake in Ajax Engineers (Pvt) Ltd at a cost of Rs. 100 million. Ajax Engineers (Pvt) Ltd manufactures glass and aluminium doors and windows. Browns will restructure the company and strengthen its manufacturing capacity in the near term.

A new project that is being developed is the construction of a commercial building complex by Free Lanka Capital Properties (Pvt) Ltd at a cost of over Rs. 625 million, in addition to purchase of the land in Colombo 08. Free Lanka Capital

Browns Investments holding in Sierra Constructions and Ajax Engineers gives it a large presence in the booming construction sector.


Holdings PLC will invest Rs. 600 million in Ordinary Shares of Free Lanka Capital Properties (Pvt) Ltd, with the balance funded through bank borrowings or pre-sales. Construction on this property is due to be completed by July 2013.

EntertainmentWith the acquisition of 100% of Excel Global Holdings (Pvt) Ltd in the year under review, Browns has expanded into the entertainment industry. Through its subsidiary Millennium Development (Pvt) Ltd, the company manages the theme park Excel World. Browns Investments PLC acquired six acres of prime property in Colombo on a 32 year lease, at a cost of Rs. 888 million. The company has the option of extending its lease arrangement to 40 years under certain conditions. In the short term Browns has upgraded some facilities for corporate events and conferences, as well as

some restaurants and entertainment areas. Plans are to have a mixed development property in collaboration with a developer, with a hypermarket, conferencing, entertainment, restaurant facilities and more. The property will be developed over the next few years, at an estimated cost of Rs. 1,000 million. Preliminary discussions with a potential joint investor have begun.

Browns Investments has been in operation for less than five years, but has shown tremendous growth. Our asset base has increased significantly, Return on Investment and profitability have grown, and we have maintained a balanced portfolio in the sectors we operate in.

The company’s acquisition of Excel Global Holdings has created the opportunity to provide a one of a kind mixed mega development in the city.

Management Discussion & Analysis contd.


Manufacturing The manufacturing arm of Browns Investments PLC consists of Royal Fernwood Porcelain Ltd (RFPL), which manufactures high quality tableware. The company has a manufacturing facility in Kosgama with a monthly capacity of 550,000 pieces a month. RFPL is majority owned by Browns Investments PLC, which holds a 77% stake in the company. Royal Fernwood Porcelain Ltd had posted heavy financial losses for several years prior to acquisition by Browns Investments PLC in 2010/12.

The year under review saw a shift away from Royal Fernwood’s traditional dependence on export markets following the economic downturn in Europe and a resulting decline in sales. This change in strategy was supported by an expansion in RFPL’s product range and distribution network. A new flagship store called the ‘Loft’ was also opened in Colombo to market RFPL’s products to a Sri Lankan clientele, and has proven quite popular. It has also been decided that local distribution will be carried out by Brown and Company PLC, utilising its islandwide reach, marketing and distribution expertise.

Plans are to improve factory efficiencies by 10-15% through better sourcing of raw materials and restructuring of factory operations in the year ahead. Several new designs will also be introduced and quality enhanced further.

Other Investments Browns Investments PLC also holds a trading portfolio in excess of Rs. 1 billion. The portfolio includes investments in financial services, diversified holdings, agriculture and plantation sectors. This significant decline in the indices of the Colombo Stock Exchange led to a decline in value of the portfolio of Rs. 356 million which resulted in a charge of Rs. 356 million to the Profit and Loss account in line with the company’s policy to mark to market its’ trading portfolio.

The company also has a land portfolio in excess of Rs. 500 million. These properties, which are based in Colombo and suburbs as well as Trincomalee, are being held for future development.

Browns Investments has a trading portfolio of listed shares as well as a property portfolio exceeding Rs. 1.5 Bn.



Sustainable

stewardship.Governance Reports


We firmly believe in good corporate governance, a system by which companies are directed and controlled. It ensures regulatory, compliance and accountability. The Company holds itself accountable to the highest standards of corporate governance and provides public accessibility to the information of the Company. Corporate Governance lays the basis for responsible performance–oriented management and control which is geared towards sustainable value creation. Corporate Governance has been institutionalised at all levels in the Company through a strong set of corporate values which have been adhered to by the Senior Management and Board of Directors in the performance of their official duties and in other situations which could affect the Company image. The Company is committed to the highest standards of integrity, ethical values and professionalism in all its activities.

Formal publication of the Code of Best Practice on Corporate Governance Rules issued jointly by the Securities and Exchange Commission of Sri Lanka (SEC) and The Institute of Chartered Accountants of Sri Lanka is considered as a strong gesture to strengthen transparency, accountability, and disclosure of its business practices.

The Company is committed towards its corporate values and adheres to the Code of Best Practice on Corporate Governance.

This report sets out the Company’s Corporate Governance processes with reference to the extent of compliance with same.

Board of DirectorsThe Board of Directors are the ultimate governing body of the Company and is abundant in experience, professionalism and has a wide range of expertise in diverse fields as set out on pages 16 to 18. The Board is responsible for the ultimate supervision of the Company. In all actions taken by the Board, the Directors are expected to exercise their business judgment considering the best interest of the Company. The Directors participate in defining goals, visions, strategies and business targets. All Directors are able to and willingly add value and independent opinion on the decision making process, which is of immense benefit for the effective functioning of the Board.

Composition of the Board and Directors’ IndependenceThe Board consists of nine members comprising of-

Five Non-Executive Directors

Two Independent Non-Executive Directors

Two Executive Directors

Name of Director Capacity

Mrs. R.L. Nanayakkara Non-Executive Director/ Chairperson

Mr. A.L. Devasurendra(Resigned w.e.f. 19th December 2011)

Executive Director

Mr. N.M. Prakash Executive Director

Mr. I.C. Nanayakkara(Resigned w.e.f. 30th December 2011)

Executive Director

Mr. P.R. Saldin Executive Director / Chief Executive Officer

Mr. D.S.K. Amarasekera Non-Executive Director

Mr. S. Furkhan Non-Executive Director

Mr. R.P. Sugathadasa Non-Executive Director

Mr. S.V. Somasunderam(Appointed w.e.f. 28th June 2012)

Non-Executive Director

Mr. A.G. Weerasinghe Independent Non-Executive Director

Mr. N. Fernando Independent Non-Executive Director

Board Responsibilities and Decision RightsThe business of the Company is conducted by its managers, officers and employees under the direction of the Executive Directors and the oversight of the Board to enhance the long term value of the Company for its shareholders. The Board aims at fulfilling its responsibilities by creating value for all stakeholders that is sustainable and beneficial. The Board of Directors are well equipped to realise the Company’s corporate business. The Board gives full consideration to the following:-

Review strategic and operational issues

Approve financial statements and annual budgets

Review profit and working capital forecasts and

monthly management accounts

Sanction major investments

The Board is ultimately responsible for the Company’s financial performance.

The Company Secretaries are responsible for ensuring that Board procedures are followed and all Directors have access to the Company Secretaries, Standard Finance (Pvt) Ltd, the

Corporate Governance


Secretaries provide support to the Board on all Corporate Governance matters & compliance with applicable rules & regulations.

All Directors receive appropriate training relevant to their experience and position within the Company.

Board BalanceThe balance of Executive, Non-Executive and Independent Non-Executive Directors on the Board ensures a right balance between executive expediency and independent judgment as no individual Director or small group of Directors dominate the Board discussion and decision-making. The Independent Directors shall be able to ensure equal benefits for all shareholders with independent views and opinions.

Directors are provided with reports of performance and minutes of the Board Meetings and are given the specific documentation necessary, in advance of such meetings.

The Chairperson ensures all Directors are adequately briefed on issues arising at meetings.

Board Meetings and AttendanceFor the financial year ending 31st March 2012 there has been a total number of seven Board Meetings and Directors attendance for same is shown below.

Name of Director Number of Board meetings

attended

Mrs. R.L. Nanayakkara 07

Mr. A.L. Devasurendra(Resigned w.e.f. 19th December 2011)

04

Mr. N.M. Prakash 06

Mr. I.C. Nanayakkara (Resigned w.e.f. 30th December 2011)

03

Mr. P.R. Saldin 07

Mr. D.S.K. Amarasekera 05

Mr. S. Furkhan 05

Mr. R.P. Sugathadasa 07

Mr. A.G. Weerasinghe 05

Mr. N. Fernando 03

Mr. S.V. Somasunderam(Appointed w.e.f. 28th June 2012)

Nil

Procedure for Directors to Obtain Professional AdviceThe Directors obtain independent and professional advice with regard to decision making in their duties.

Financial AcumenThe Board consists of five Senior Accountants, who possess the necessary knowledge to offer the Board guidance on matters of finance.

Re-Election of Directors The Company’s Articles of Association call for one third of the Directors in office to retire at each Annual General Meeting. The Directors who retire are those longest in office since their appointment/ re-appointment. Retiring Directors are generally eligible for re-election by the shareholders.

Board CommitteesThe Board has delegated some of its functions to board committees while retaining final decision rights pertaining to matters under the purview of these committees. The compositions of the Committees are as follows:

Board

Audit Committee Remuneration Committee

2 Independent Non-Executive Directors

2 Independent Non-Executive

Directors

1 Non-Executive Director

1 Non-Executive Director


Audit CommitteeThe Audit Committee is established to approve the half yearly and Annual Financial Statements and to recommend same to the Board prior to its issuance. The Committee comprises of :

Mr. N. Fernando – Independent Non-Executive Director

Mr. A.G. Weerasinghe – Independent Non-Executive Director

Mr. D.S.K. Amarasekera – Non-Executive Director

For the financial year ending 31st March 2012 there have been a total number of three (3) Audit Committee Meetings and the attendance of the members are shown below:

Name of member Number of meetings

held

Attendance

Mr. N. Fernando 3 2

Mr. A.G. Weerasinghe 3 2

Mr. D.S.K. Amarasekera 3 2

The Chief Executive Officer, Group Chief Financial Officer and the External Auditors’ representative join the meetings of the committee by invitation of its members.

The Audit Committee meets with the External Auditors M/s. BDO Partners to review the Audits and determine the objectivity and independence of the Auditors.

The Audit Committee report is given on page 34.

Remuneration Committee The Remuneration Committee comprises of two Independent Non-Executive Directors and one Non-Executive Director.

The Remuneration Committee is responsible for-

assisting the Board of Directors in establishing remuneration policies and practices in the Company;

evaluating the performance of the Executives of the Group; and

in reviewing and recommending to the Board appropriate remuneration packages based on industry level and contributions made to the organisation

The detailed Remuneration Committee Report is given on page 35 of the Annual Report.

Shareholder ValueThe Board constantly strives to enhance shareholders’ values of who they consider are the pillars of success of the Company.

Shareholder RelationsThe Board considers the Annual General Meeting as a prime opportunity to communicate with shareholders. The Shareholders are given the opportunity of exercising their rights at the Annual General Meeting. Each resolution brought before the shareholders at the Annual General Meeting will be voted on separately by the shareholders. The notice of the Annual General Meeting and the relevant documents required will be published and sent to the shareholders within the statutory period. The Company circulates the agenda for the meeting and shareholders vote on each issue separately. All shareholders are invited and encouraged to participate in the Annual General Meeting. The Annual General Meeting provides an opportunity for shareholders to seek and obtain clarifications and information on the performance of the Company and to informally meet the Directors. The external auditors are also present at the Annual General Meeting to render any professional assistance that may be required. Shareholders who are not in a position to attend the Annual General Meeting in person are entitled to have their voting rights exercised by a proxy of their choice.

Going ConcernThe Board of Directors, after reviewing the financial position and the cash flow of the Company are of the belief that the Company has adequate resources to continue operation well into the foreseeable future. Therefore the Board adopts the going concern basis in preparing financial statements.

AccountabilityThe Board places greater emphasis on complete disclosure of financial information within the bounds of commercial reality and has taken necessary steps to ensure the integrity of the Company’s accounting and financial reporting systems and internal control systems and also their review and monitoring on a periodic basis.

Corporate Governance contd.


Ethical StandardsThe Board is committed to maintain high ethical standards in conducting its business and to communicate its values to its employees and agents and ensure their conduct is based on such values.

Compliance with Legal RequirementsThe Board is conscious of its responsibility to the shareholders, the government and the society in which it operates and is committed to upholding the highest standards of ethical behaviour in conducting its business. The Board, through the Legal Division, the Finance Division and its other operating structures, strives to ensure that the Company comply with the laws and regulations of the country.

The Company has complied with the requirement of the Companies Act No. 07 of 2007.

Corporate Social ResponsibilityRights and claims of Stakeholder Groups such as employees, consumers, clients, suppliers, creditors and the government are also considered important apart from the shareholders. Corporate decisions are made with due consideration.

The Company acknowledges the issues facing the environment and adopts a responsible attitude whilst meeting all of its business objectives. The Company’s policy is, wherever economically practical, to recycle waste material and conserve water and energy.

Risk assessments carried out across the Company’s operations take account of environmental, social and ethical matters.

Self Governance Practices by the CompanyThe Solvency Statements prepared by the Group Chief Financial Officer is tabled at the Board Meetings in order to view whether the Company is solvent.

As provided by the Companies Act No.7 of 2007, the Company has obtained insurance covers for Directors and key officials of the Company.


CompositionThe Audit Committee, appointed by and responsible to the Board of Directors, comprises of two Independent Non-Executive Directors and one Non-Executive Director, with the Company Secretary acting as Secretary. One of the above Directors act as the Chairman and is also a Fellow of the Institute of Chartered Accountants of Sri Lanka. All Non-Executive Directors satisfy the criteria for independence as specified in the Standards on Corporate Governance for listed Companies issued by the Securities & Exchange Commission of Sri Lanka.

The members of the Audit Committee are:-


Mr. A.G. Weerasinghe – Independent Non-Executive Director

Mr. D.S.K. Amarasekera – Non Executive Director

The Chief Executive Officer and Group Chief Financial Officer attend all meetings of the Committee by invitation.

Financial ReportingThe Committee is established to oversee the Company’s financial reporting on behalf of the Board of Directors as part of its responsibility and review the half yearly and Annual Financial Statements and recommend same to the Board for its deliberations prior to its issuance.

The Committee is also engaged in reviewing the Financial Statements to ensure consistency of the accounting policies and their compliance with the Sri Lanka Accounting Standards.

The Committee regularly discusses the operations of the Company and its future prospects with the management and ensures that all relevant matters are taken into account in the preparation of the Financial Statements.

Controls & RisksThe Committee reviews the effectiveness of the Company’s system of Internal Control. The Committee also assesses the major business and control risks and the control environment prevalent in the Company and advises the Board on actions to be taken where weaknesses are observed.

External AuditorsThe Audit Committee evaluates the independence of the External Auditors and the effectiveness of the audit process.

The Committee meets with the External Auditors in relation to the scope of the audit and also to discuss the Management Letter at the conclusion of the audit.

The Committee reviews the audited financial statements with the External Auditors who are responsible for expressing an opinion on its conformity with the Sri Lanka Accounting Standards.

The Audit Committee evaluates the independence of the External Auditors and recommends to the Board of Directors that M/s. BDO Partners be appointed as Auditors for the financial year ending 31st March 2013, subject to the approval of the shareholders at the Annual General Meeting.

ConclusionThe reports submitted by the External Auditors of the Company and the certification provided by the Senior Management is considered by the Committee in identifying that the financial position of the Company has been adequately monitored.

Nishan Fernando

Chairman, Audit committee

Date : 06th August 2012

Audit Committee Report


The Remuneration Committee re-constituted under the new Corporate Governance rules of the Colombo Stock Exchange is responsible to the Board of Directors and comprises of two Independent Non-Executive Directors and one Non-Executive Director with the Company Secretary functioning as its Secretary. The members of the Remuneration Committee are:

Mr. A. G. Weerasinghe – Independent Non-Executive Director


Mr. D.S.K. Amarasekera – Non Executive Director

The Chief Executive Officer attends meetings on invitation by the members.

The main responsibilities of the Remuneration Committee are:

To recommend the remuneration of the Directors, Chief Executive Officer and members of the senior management.

To recommend the policy governing annual increments to staff.

To recommend the policy governing annual ex-gratia payments to staff.

Accordingly, the Committee will review and re-draft the remuneration policy and based on the recommendations of the Committee, the Board shall approve the adoption of the policy.

The policy will cover the remuneration to Executive and Non-Executive Directors, including the Non-Executive Chairperson and the Chief Executive Officer. Under the terms of this policy, remuneration will be related to performance and contribution.

A.G. Weerasinghe

Chairman, Remuneration Committee

Date : 06th August 2012

Remuneration Committee Report



Intelligent

investment.Financial Reports


The Directors of Browns Investments PLC have pleasure in presenting to its members their Report and the Audited Consolidated Financial Statements for the year ended 3lst March 2012.

Principal ActivitiesThe principal activities of the Company are investments in listed and non-listed companies and investments in subsidiaries and jointly controlled entities which are mainly engaged in the plantation management, agriculture, hydro power, leisure, construction and porcelain sectors. Principal activities are described in detail in the “Management discussion and Analysis “report on pages 22 to 27 of this report.

The principal activities of Browns Investments PLC are described in the Chief Executive Officer’s Review on page 10 of this report.

The review of the progress and performance during the year with comment on the financial results and prospects is contained in the Chairperson’s Review.

Review of Business and Future DevelopmentsA review of the Group’s business and its’ performance during the year, with comments on financial results and future strategic developments, is contained in the Chairperson’s message (pages 06 to 09) , Director/Chief Executive Officer’s review (pages 10 to 13) and Management Discussion & Analysis (pages 22 to 27) sections of this Annual Report. These reports together with the Financial Statements reflect the state of affairs of the Company and the Group.

TurnoverThe Turnover of the Company was Rs.2,021mn as compared with Rs.3,016mn in the previous year. A detailed analysis of the Company’s Turnover is given in Note 5 of the Financial Statements.

Gross ProfitThe Group’s Gross Profit for the year was Rs.435mn compared with the Gross Profit of Rs.1,617mn for the previous year. A detailed analysis of the Company’s Gross Profit is given in Note 7 of the Financial Statements.

Company’s InvestmentsThe Company has invested Rs.1,596mn in subsidiaries and associates and Rs.319mn in Lands. A detailed analysis of the Company’s Investments are given in Notes 17,19 and 21 of the Financial Statements.

Property, Plant and EquipmentInformation relating to the movement in Property, Plant and Equipment is given in Note 17 of this Financial Statement

Stated Capital The Stated Capital of the Company as at the date of this Report is Rs.5,380,000,000/- which consists 1,860,000,000 ordinary shares.

ReservesThe total Reserves at 31st March 2012 amounts to Rs.5,500mn as compared with Rs.2,967mn in the previous year.

TaxationA provision has been made for income tax in Browns Investments PLC amounting to Rs.49mn for the current year. A provision for taxation for the Group is Rs.80mn as compared to Rs.32mn in the previous year.

Share Holdings/Share InformationThe market value of an ordinary share of the Company as at 31st March 2012 was Rs. 3.30. The number of shareholders as at 31st March 2012 was 12,020.

An analysis of shareholders based on shares held, the distribution of ownership is provided on page 42.

The information in respect of earnings, net assets per share is given on page 02.

ShareholdersIt is a Group policy to treat its shareholders equitably and maximise shareholder wealth. Half yearly returns of financial results with any developments or changes would be circulated to the shareholders on a timely basis.

Events Occurring after the Balance Sheet DateThere have been no material events occurred between Balance Sheet date and the date on which the financial statements are authorised for issue that require adjustments to or disclosures in the Financial Statements.

Employment PoliciesThe Group employment policies respects the individuals and offers equal career opportunities, regardless of sex, race or religion and consider the relationship with the employees to be good. The number of persons employed in the Company as at 31st March 2012 was 03.

The Group promotes a culture of teamwork, integrity and dedication and remuneration is linked to performance by annual appraisals of both qualitative and quantitative performance of all employees.

Statutory Payments Directors, to the best of their knowledge and belief are satisfied that all statutory payments in relation to employees and the Government have been made up to date in line with the Group Policy.

Environmental ProtectionIt is the Group ’s policy to keep adverse effect on the environment to a minimum and to promote co-operation and compliance with the relevant authorities and regulations.

Corporate Governance & Internal Control The information called for by this item with respect to the practice followed by the Company is set out in the Corporate Governance statement on page 30.

Going ConcernAs in the statement of Directors’ Responsibilities given on page 41 the Directors have adopted the going concern basis in preparing the Financial Statements.

Directors’ Report


Profit and Appropriations GroupFor the year ended 31st March 2012 2011 (Rs’000) (Rs’000)Profit for the year 2,525,048 1,894,445Retained profit brought forward from previous year 2,921,072 1,153,228 5,446,120 3,047,673

Realized Revaluation on Disposals 199,155Decreased in the share of Minority interests - 202,258Effect on disposal of joint venture share holdings - (527,722)Adjustment due to De-consolidation of Subsidiary (2,811) - Preference share dividend (833) - Dividend Paid (186,000) (292)Retained Profit carried forward 5,256,476 2,921,072

CompanyFor the year ended 31st March 2012 2011 (Rs’000) (Rs’000)Profit/ (Loss) for the year (261,638) 1,268,610Retained profit brought forward from previous year 1,469,605 1,840 1,207,967 1,270,450Realized Revaluation on Disposals - 199,155Dividend Paid (186,000) - Retained Profit carried forward 1,021,967 1,469,605

DirectorateThe Directors of the Company during the year under review are as follows:

(Mrs.) R.L. Nanayakkara - Non-Executive Director / Chairperson

Mr. P. R. Saldin - Executive Director / CEO

Mr. N.M. Prakash - Executive Director

Mr. A.G. Weerasinghe - Independent


Mr. N. Fernando - Independent


Mr. D.S.K. Amarasekera - Non Executive Director

Mr. R.P. Sugathadasa - Non-Executive Director

Mr. S. Furkhan - Non-Executive Director

Mr. S.V. Somasunderam - Non –Executive Director (Appointed w.e.f. 28th June 2012)

Mr. A.L. Devasurendra - Executive Director (Resigned w.e.f. 19th December 2011) Mr. I.C. Nanayakkara - Executive Director (Resigned w.e.f. 30th December 2011)

Directors’ MeetingsThe Directors conduct Board Meetings at least on a quarterly basis. Board decisions are resolved at meetings, and by resolution passed by circulation which are approved and signed by all the Directors and tabled at the Board Meetings. The Minutes of the Board Meetings, the Agenda for the next meeting are circulated to all the Directors in advance to the meetings.

Appointment and Resignation of DirectorsMr. A.L. Devasurendra, Executive Director resigned from the Board of Directors with effect from 19th December 2011.

Mr. I.C. Nanayakkara, Executive Director resigned from the Board of Directors with effect from 30th December 2011.

Mr. S.V. Somasunderam, Non-Executive Director was appointed to the Board of Directors with effect from 28th June 2012.

Re-Election of DirectorsIn accordance with Article 23(2) of the Articles of Association of the Company, Mr. S.V. Somasunderam Non-Executive Director retires and being eligible offers himself for re-election.

In accordance with Article 23(6) of the Articles of Association of the Company, Mr. D.S.K. Amarasekera Non-Executive Director retires by rotation and being eligible offers himself for re-election.

In accordance with Article 23(6) of the Articles of Association of the Company, Mr. N. Fernando Independent Non-Executive Director retires by rotation and being eligible offers himself for re-election.

In accordance with Article 23(6) of the Articles of Association of the Company, Mr. S. Furkhan Non-Executive Director retires by rotation and being eligible offers himself for re-election.

In accordance with Section 210 of the Companies Act No. 7 of 2007 (Mrs.) Rohini Nanayakkara, Non Executive Director retires and offers herself for re-election. Special notice has been received pursuant to Sections 145 and 211 of the Companies Act No. 7 of 2007 of the intention to propose an ordinary resolution for such re-election notwithstanding the age limit of 70 years stipulated by Section 210 of the said Companies Act.

In accordance with Section 210 of the Companies Act No. 7 of 2007 Mr. A.G. Weerasinghe, Independent Non Executive Director retires and offers himself for re-election. Special notice has been received pursuant to Sections 145 and 211 of the Companies Act No. 7 of 2007 of the intention to propose an ordinary resolution for such re-election notwithstanding the age limit of 70 years stipulated by Section 210 of the said Companies Act.


List of Major ShareholdersThe list of 20 major shareholders and the percentage held by each as at 3lst March 2012 and as at 31st March 2011 is given on page 42 of the Financial Statements.

Subsidiary/ Associate Companies and its DirectorsThe Directors of the Subsidiaries and Associate Companies as at date are given on page 121.

Accounting PoliciesThe accounting policies adopted in the preparation of the financial statements are given on pages 48 to 62. There were no changes in the accounting policies adopted in the previous year.

Annual ReportThe Board of Directors approved the financial statements on 06th August 2012. The appropriate number of copies of this report will be submitted to Colombo Stock Exchange and to the Sri Lanka Accounting and Auditing Standards Monitory Board on or before 30th August 2012.

Annual General MeetingThe Annual General Meeting will be held at Park Premier, Excel World, No. 338, T.B. Jayah Mawatha, Colombo 10 on 27th September 2012 at 10.30 a.m. The Notice of the Annual General Meeting is given on page No. 124.

AuditorsIn accordance with Section 154 (1) of the Companies Act No. 7 of 2007 a resolution proposing the reappointment of Messrs. BDO Partners, Chartered Accountants as Auditors of the Company for the ensuing year will be proposed at the Annual General Meeting.

In terms of Section 155 (a) of the Companies Act No. 7 of 2007 a resolution authorizing the Directors to fix the remuneration of the Auditors Messrs. BDO Partners, Chartered Accountants for the ensuing year will be proposed at the Annual General Meeting.

The fees paid to auditors are disclosed in Note 11 to the financial statements.

For and on behalf of the Board

Mrs. R.L. NanayakkaraChairperson

Mr. P.R. Saldin Director/ Chief Executive Officer

STANDARD FINANCE (PVT) LIMITEDSECRETARIES

Colombo, 06th August 2012

Board Committees The Board has established the following Committees on 8th March 2011 for better monitoring and guidance of different aspects of operations and control.

Audit Committee Mr. N. Fernando – Chairman of the Committee

Mr. A.G. Weerasinghe

Mr. D.S.K. Amarasekera The report of the Audit Committee is given on page 34.

Remuneration CommitteeMr. A.G. Weerasinghe – Chairman of the Committee

Mr. N. Fernando

Mr. D.S.K. AmarasekeraThe report of the Remuneration committee is given on page 35.

Interest Register The Directors have made the declarations required by the Companies Act No. 7 of 2007. These have been entered into the Interest Register which is maintained by the Company.

The Company carried out transactions in the ordinary course of business with entities in which a Director of the Company is a Director. The transactions with entities where a Director of the Company either has control or exercises significant influence have been classified as related party transactions and disclosed in Note 45.1 to the Financial Statements

The Directors have no direct or indirect interest in any other contract or proposed contract with the Company.

Directors’ ShareholdingsThe Directors interests in shares as at 31st March 2012 were as follows :- As at As at 31.03.2012 31.03.2011Mrs. R.L. Nanayakkara Nil Nil Mr. N.M. Prakash 5,000,000 5,000,000Mr. P. R. Saldin 554,000 554,000 Mr. A.G. Weerasinghe Nil 200,000Mr. N. Fernando Nil NilMr. D.S.K. Amarasekera Nil NilMr. R.P. Sugathadasa-Margin Trading 2,000,000 2,000,000Mr. S. Furkhan Nil NilMr. S.V. Somasunderam 50,000,000 50,000,000(Appointed w.e.f. 28th June 2012)Mr. A.L. Devasurendra Nil Nil (Resigned w.e.f. 19th December 2011) Mr. I.C. Nanayakkara 20,000,000 20,000,000

(Resigned w.e.f. 30th December 2011)

Remuneration of DirectorsThe remuneration of the Directors are disclosed in Note 11.

Directors’ Report contd.


The responsibilities of the Directors in relation to the Financial Statements for the year ended 31st March 2012 which have been prepared and presented in conformity with the requirements of the Sri Lanka Accounting Standards, the Listing Rules of the Colombo Stock Exchange and the Companies Act No.7 of 2007, is set out in the following statement .

The responsibility of the Auditors in relation to the Financial Statements is set out in the Report of the Auditors on page 43 of the Report. As per the provisions of the Companies Act No. 7 of 2007, the Directors are required to prepare financial statements, for each financial year and place before a general meeting which comprise:

1 An Income Statement, which presents a true and fair view of the profit and loss of the Company and its subsidiaries for the financial year; and

2 A Balance Sheet, which presents a true and fair view of the state of affairs of the Company and its subsidiaries as at the end of the financial year.

and which comply with the requirements of the Act.

The Directors are of the view that, in preparing these Financial Statements :

1 The appropriate accounting policies have been selected and applied in a consistent manner. Material deviations, if any have been disclosed and explained;

2 All applicable Accounting Standards, as relevant, have been followed.

3 Judgments and estimates have been made which are reasonable and prudent.

The Directors are also of the view that the Company has adequate resources to continue in operation and have applied the going concern basis in preparing these Financial Statements.

Further, the Directors have a responsibility to ensure that the Company maintains sufficient accounting records to disclose, with reasonable accuracy the financial position of the Company, and to ensure that the financial statements presented comply with the requirements of the Companies Act.

The Directors are also responsible for taking reasonable steps to safeguard the Assets of the Company and in this regard to give proper consideration to the establishment of appropriate

internal control systems with a view to preventing and detecting fraud and other irregularities.

The Directors are required to prepare the Financial Statements and to provide the Auditors with every opportunity to take whatever steps and undertake whatever inspections they may consider to be appropriate to enable them to give their Audit Opinion.

The Directors are of the view that they have discharged their responsibilities as set out in this statement.

Compliance ReportThe Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its subsidiaries, all contributions levies and taxes payable on behalf of and in respect of the employees of the Company and its subsidiaries, and all other known statutory dues as were due and payable by the Company and its subsidiaries as at the Balance Sheet date have been paid or, where relevant provided for.

By order of the Board

P.R. Saldin

Director/CEO

06th August 2012

Statement of Directors’ Responsibilities


Share Analysis as at 31st March 2012RESIDENT NON RESIDENT TOTAL

No. of shareholders

No. of shares

(%) No of shareholders

No. of shares

(%) No. of shareholders

No. of shares

(%)

1 to 1000 shares 4,619 4,187,206 0.23 1 1,000 0.00 4,620 4,188,206 0.23

1001 to 10,000 shares 6,388 17,097,301 0.92 12 56,700 0.00 6,400 17,154,001 0.92

10,001 to 100,000 shares 746 23,513,294 1.26 8 391,200 0.02 754 23,904,494 1.28

100,001 to 1000,000 shares 177 59,059,767 3.18 10 2,933,600 0.16 187 61,993,367 3.34

over 1,000,000 shares 53 1,733,325,199 93.19 6 19,434,733 1.04 59 1,752,759,932 94.23

TOTAL 11,983 1,837,182,767 98.77 37 22,817,233 1.23 12,020 1,860,000,000 100

Categories of Shareholders

No of shares No of shareholders

IndividualInstitutionalTotal

279,253,8341,580,746,166 1,860,000,000

11,838182

12,020

Directors’ Shareholdings

Directors’ Shareholdings As at 31st March 2012 As at 31st March 2011

Mrs. R.L. NanayakkaraMr. N.M. Prakash Mr. P. R. Saldin Mr. A.G. Weerasinghe Mr. N. FernandoMr. D.S.K. AmarasekeraMr. R.P. Sugathadasa - Margin TradingMr. S. FurkhanMr. S.V. Somasunderam (Appointed w.e.f. 28th June 2012)Mr. A.L. Devasurendra (Resigned w.e.f. 19th December 2011) Mr. I.C. Nanayakkara (Resigned w.e.f. 30th December 2011)

Nil5,000,000

554,000NilNilNil

2,000,000Nil

50,000,000Nil

20,000,000

Nil 5,000,000

554,000200,000

NilNil

2,000,000Nil

50,000,000Nil

20,000,000

List of 20 Major Shareholders

NAME OF THE SHAREHOLDER 31.03.2012 (%)

01 BROWN & COMPANY PLC A/C NO. 1 492,927,600 26.50 02 TAPROBANE HOLDINGS PLC 485,318,800 26.09 03 LOLC INVESTMENTS LTD. 244,927,500 13.17 04 NATIONAL SAVINGS BANK 93,606,200 5.03 05 SEYLAN BANK PLC/ARRC CAPITAL (PVT) LTD 87,436,000 4.70 06 MR. SHANKER VARADANANDA SOMASUNDERAM 50,000,000 2.69 07 NATIONAL DEVELOPMENT BANK PLC/TAPROBANE HOLDINGS PLC 30,000,000 1.61 08 SEYLAN BANK LIMITED/BROWN & COMPANY PLC 24,688,800 1.33 09 LEXINTON HOLDINGS (PVT) LTD 22,492,300 1.21 10 MR. ISHARA CHINTHAKA NANAYAKKARA 20,000,000 1.08 11 CEYLINCO INSURANCE PLC A/C NO 2 (GENERAL FUND) 20,000,000 1.08 12 DR. WARUNI UDESHIKA NIHILUWA GAMAGE 17,244,400 0.93 13 FINCO HOLDINGS (PVT) LTD 16,000,000 0.86 14 LANKA ORIX LEASING COMPANY PLC 14,344,100 0.77 15 MR. SHANTHA RANJITH SENADHEERA 11,787,199 0.63 16 PRIME LANDS (PVT) LTD 10,000,000 0.54 17 MR. BHAGWAN WASSIAMAL KUNDANMAL 8,708,100 0.47 18 MR. HAMISH WINSTON MCDONALD WOODWARD 8,000,000 0.43 19 MRS. PUBUDHU SARANGA WIJAYAKUMARI RUPASINGHE 6,261,000 0.34 20 MR. NITHIABALA BALASINGAM 5,194,900 0.28 TOTAL 1,668,936,899 87.36

NAME OF THE SHAREHOLDER 31.03.2011 (%)

01 BROWN & COMPANY PLC A/C NO. 1 490,000,000 27.07 02 TAPROBANE HOLDINGS LTD 490,000,000 27.07 03 LOLC INVESTMENTS LTD. 240,000,000 13.26 04 NATIONAL SAVINGS BANK 100,000,000 5.52 05 RUREV CAPITAL (PVT) LTD 84,900,000 4.69 06 MR. SHANKER VARADANANDA SOMASUNDERAM 50,000,000 2.76 07 ASSOCIATED ELECTRICAL CORPORATION LTD 20,000,000 1.10 08 CEYLINCO INSURANCE PLC 20,000,000 1.10 09 FINCO HOLDINGS (PVT) LTD 20,000,000 1.10 10 MR. ISHARA CHINTHAKA NANAYAKKARA 20,000,000 1.10 11 PRIME LANDS (PVT) LTD 20,000,000 1.10

12 LEXINTON HOLDINGS (PVT) LTD 19,000,000 1.05 13 W D N H PERERA 11,000,000 0.6014 ARRUMADURA SAMANTHA RAYYNOR SILVA 10,000,000 0.55

15 MR. BHAGWAN WASSIAMAL KUNDANMAL 10,000,000 0.5516 DUNAMIS CAPITAL PLC 10,000,000 0.55 17 MERCHANT BANK OF SRI LANKA PLC 10,000,000 0.55 18 SWISS LIOYD LTD 10,000,000 0.55 19 Y S H I K SILVA 10,000,000 0.55 20 PUBUDI SARANGA WIJEKUMARI RUPASINGHE 6,061,000 0.33 TOTAL 1,650,961,000 91.55

No. of shares held by Public 582,278,200

Percentage of shares held by Public 31.30%

Share Information


Report on the Financial StatementsWe have audited the accompanying financial statements of Browns Investments PLC, and consolidated financial statements of the company and its subsidiaries as at 31st March, 2012, which comprise the balance sheet as at 31st March, 2012, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 48 to 119.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Scope of Audit and Basis of OpinionOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.

Opinion - CompanyIn our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year 31st March, 2012 and the financial statements give a true and fair view of the Company’s state of affairs as at 31st March, 2012 and its loss and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Opinion - GroupIn our opinion, the consolidated financial statements give a true and fair view of the state of affairs as at 31st March, 2012 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards, of the company and its subsidiaries dealt with thereby so far as concerns the shareholders of the company.

Report on Other Legal and Regulatory RequirementsThese financial statements also comply with the requirements of Sections 151(2) and Sections 153(2) to 153(7) of the Companies Act No. 07 of 2007.

CHARTERED ACCOUNTANTS

06th August, 2012

Colombo

SM/cc

Independent Auditors’ Report


Group Company For the year ended 31st March 2012 2011 2012 2011 Notes (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Revenue 5 2,021,727 3,016,077 212,386 1,243,001 Cost of Sales 6 (1,586,802) (1,399,291) - - Gross Profit 7 434,925 1,616,786 212,386 1,243,001

Other Income 8 317,127 531,547 179,084 146,201 Gain/(Loss) on Change in Fair Value of Timber Stocks 18 (14,952) 128,745 - - Share of Profit/(Loss) of Equity Accounted Investees (Net of Tax) 21 (103,401) 131,063 - - Negative Goodwill on Acquisition of Shares 9 2,671,483 - - - Gain in Fair Value of Investment Properties 16 250,000 - - - 3,555,182 2,408,141 391,470 1,389,202

Administrative Expenses (225,454) (142,710) (48,169) (40,913) Other Expenses (471,401) - (471,401) - Finance Costs 10 (190,331) (130,475) (84,730) (78,034) (887,186) (273,185) (604,300) (118,947)

Profit Before Taxation 11 2,667,996 2,134,956 (212,830) 1,270,255 Income Tax Expense 12 (79,608) (31,531) (48,808) (1,645) Profit/(Loss) for the Year 2,588,388 2,103,425 (261,638) 1,268,610

Attributable to:

Equity Holders of the Company 2,525,048 1,894,445 (261,638) 1,268,610 Non Controlling Interests 63,340 208,980 - - 2,588,388 2,103,425 (261,638) 1,268,610

Basic Earnings per Ordinary Share (Rs.) 13 1.37 3.14 (0.14) 2.10 Diluted Earnings Per Ordinary Share (Rs.) 13 1.37 3.14 (0.14) 2.10

Dividend per Ordinary Share (Rs.) 14 0.10 - 0.10 -

The Significant Accounting Policies and Notes on pages 48 to 119 form an integral part of these Financial Statements.

Colombo 06th August, 2012

Income Statement


Group Company As at 31st March 2012 2011 2012 2011 Notes (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) ASSETSNon-Current Assets Leasehold Property 15 138,903 143,087 - - Investment Property 16 3,799,597 49,597 - - Property, Plant and Equipment 17 3,310,578 1,981,629 677,585 358,497 Timber Stocks 18 2,062,608 1,714,342 - - Investments in Subsidiaries 19 - - 1,251,687 - Investments in Joint Ventures 20 - - 50,000 50,000 Investments in Equity Accounted Investees 21 1,233,436 1,029,538 1,190,088 897,174 Other Long Term Investments 22 1,208,082 1,056,785 1,207,082 1,056,785 11,753,204 5,974,978 4,376,442 2,362,456 Goodwill 23 48,444 2,863 - - Current Assets Inventories 24 346,983 215,415 - - Trade and Other Receivables 25 367,605 221,102 81,753 96,311 Loans To Related Parties 26 592,125 617,791 674,356 617,791 Amounts Due from Related Parties Due with in One Year 27 239,267 194,497 438,454 380,727 Short Term Investments 28 2,312,302 4,088,451 2,011,990 4,000,539 Cash and Cash Equivalents 29 393,229 537,084 38,360 3,734 4,251,511 5,874,340 3,244,913 5,099,102 TOTAL ASSETS 16,053,159 11,852,181 7,621,355 7,461,558 EQUITY AND LIABILITIES Stated Capital and Reserves

Stated Capital 30 5,380,000 5,130,000 5,380,000 5,130,000 Capital Reserves 31 244,274 46,180 - - Revenue Reserves 5,256,476 2,921,072 1,021,967 1,469,605 Total Equity attributable to Equity Holders of the Company 10,880,750 8,097,252 6,401,967 6,599,605 Non-Controlling Interests 1,878,916 1,506,283 - - Total Equity 12,759,666 9,603,535 6,401,967 6,599,605 Non-Current Liabilities Interest Bearing Borrowings 32 611,248 164,500 128,000 - Finance Lease Obligation 33 85,059 88,724 - - Retirement Benefit Obligations 34 402,696 377,781 - - Deferred Tax Liabilities 35 16,246 33,284 - - Deferred Income 36 178,883 157,727 - - Loans from Related Parties 37 - 738,299 - 709,634 1,294,132 1,560,315 128,000 709,634 Current Liabilities Trade and Other Payables 38 467,090 301,274 40,168 44,857 Loans From Related Parties 37 541,401 32,760 541,401 - Finance Lease Obligation 33 4,988 5,844 - - Amounts Due To Related Parties 39 216,506 246,894 77,011 105,817 Income Tax Payable 40 66,884 15,914 48,808 1,645 Short Term Borrowings 125,603 16,379 - - Rescheduled Debentures 41 - 410 - - Current Portion of Interest Bearing Borrowings 32 494,916 44,302 384,000 - Bank Overdrafts 29 81,973 24,554 - - 1,999,361 688,331 1,091,388 152,319 TOTAL LIABILITIES 3,293,493 2,248,646 1,219,388 861,953 TOTAL EQUITY AND LIABILITIES 16,053,159 11,852,181 7,621,355 7,461,558Net Assets per Ordinary Share (Rs.) 42 5.85 4.47 3.44 3.65Contingencies and Commitments 43 & 44

The Significant Accounting Policies and Notes on pages 48 to 119 form an integral part of these Financial Statements. These Financial Statements are prepared and presented in compliance with the requirements of the Companies Act No.7 of 2007.

……………………………………….. P.S.Goonawardena Group Chief Financial Officer The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Signed for and on behalf of the Board

……………………………………….. ……………………………………….. P.R. Saldin N.M. Prakash Director/CEO Director Colombo06th August, 2012 SM/cc

Balance Sheet


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Colo

mbo

06th

Aug

ust,

2012

Statement of Changes in Equity


Group Company For the year ended 31st March 2012 2011 2012 2011 Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Cash Flows From Operating Activities

Profit/(Loss) before Taxation 2,667,996 2,134,956 (212,830) 1,270,255 Adjustments for : Gain in Fair Value of Investment Properties (250,000) - - - Profit on Disposal of Short Term Investments (52,217) (736,595) (52,217) (736,595) Provision for Retirement Benefit Obligations - Gratuity 39,075 84,300 - - Profit on Disposal of Shares in Joint Venture - (744,826) - (417,562) Depreciation/Amortization 94,641 70,193 - - Gain/ Loss on Change in Fair Value of Timber Stocks 14,952 (128,745) - - Share of Profit/(Loss) of Equity Accounted Investees (Net of Tax) 103,401 (131,063) - - Capital Grants Amortized (5,350) (5,602) - - Interest Expense 190,331 130,475 84,730 78,034 Interest Income (180,434) (106,324) (128,577) (98,088) Market Value Adjustment for Carrying Value of Long Term Investments 79,038 - 79,038 - Market Value Adjustment for Carrying Value of Short Term Investments 283,993 (127,217) 276,571 (127,217) Negative Goodwill on Acquisition of Shares (2,671,483) - - CER Price adjustment 5,945 - - - Amount Written Off from Timber Stocks - 4 - - Dividend Income (29,365) (8,837) (29,365) (8,837) Gain/(Loss) on Disposal of Property, Plant and Equipment 1,150 (7,314) - - Operating Profit Before Working Capital Changes 291,672 423,406 17,350 (40,010)

Working Capital Changes (Increase)/Decrease in Inventories (131,568) 16,600 - - (Increase)/Decrease in Trade and Other Receivables (146,503) (36,112) 14,558 (96,311) (Increase)/Decrease in Loans To Related Parties 25,666 (617,791) (56,565) (617,791) (Increase)/Decrease in Amounts Due From Related Parties (44,770) (189,962) (57,727) (6,327) Increase/(Decrease) in Trade and Other Payables 165,815 (68,745) (4,689) 24,572 Increase/(Decrease) in Loans From Related Parties (229,658) 704,857 (168,233) 709,634 Increase/(Decrease) in Amounts Due To Related Parties (30,388) 107,541 (28,806) (27,501) Cash Generated From/(Used In) Operations (99,733) 339,793 (284,112) (53,734) Income Tax/ESC/SRL Paid (39,056) (25,747) (1,645) - Retiring Gratuity Paid (41,214) (28,492) - - Interest Paid (190,331) (130,475) (84,730) (78,034) Net Cash Generated From/(Used In) Operating Activities (370,334) 155,078 (370,487) (131,768) Cash Flows From Investing Activities Acquisition of Subsidiaries (1,147,376) - (1,203,287) - Acquisition of Investment Property - (49,597) - - Investments in Joint Ventures - - - (50,000) Investments in Equity Accounted Investees (341,314) (897,174) (341,314) (897,174) Net Proceed from Disposal of Shares in Joint Venture - 533,784 - 533,784 Acquisition and Construction of Property, Plant and Equipment (620,371) (472,008) (319,088) (313,497) Capital Grants Received 8,209 13,853 - - Interest Income Received 180,434 41,538 128,577 33,302 Proceeds from Sale of Property, Plant and Equipment 2,378 44,973 - - Investments in Short Term Investments (1,585,132) (4,377,119) (1,430,496) (4,289,207) Receipts from Withdrawal of Short Term Investments 3,027,446 565,849 2,950,872 565,849 Investments/(Dinvestments) in Repurchase Agreements ( Net) 93,838 (85,179) 93,838 (85,179) Acquisition of Long Term Investments (308,115) (1,056,785) (308,115) (1,056,785) Proceeds from Disposal of Short Term Investments 228,761 1,530,859 228,761 1,530,859 Dividend Received 30,164 11,233 29,365 8,837 Net Cash Generated/(Used) in Investment Activities (431,077) (4,195,774) (170,887) (4,019,211) Cash Flows From Financing Activities

Repayment of Finance Lease Liabilities (11,192) (25,280) - - Receipt from Issue of Ordinary Shares 284,850 4,659,172 250,000 4,150,000 Advance Received Against Share Capital 9,000 - - - Term and Other Loans Repaid (73,881) (44,622) - - Term and Other Loans Received 716,186 31,395 512,000 - Payment of Short Term Loans - Net of Receipts (87,090) (11,120) - - Settlement of Rescheduled Debentures (410) - - - Dividends Paid (237,327) (19,770) (186,000) - Net Cash Flows Generated From/(Used In) Financing Activities 600,137 4,589,775 576,000 4,150,000 Net Increase/(Decrease) in Cash and Cash Equivalents (201,274) 549,079 34,626 (979) Cash and Cash Equivalents at Beginning of the Year 512,530 (36,549) 3,734 4,713 Cash and Cash Equivalents at End of the Year A 311,256 512,530 38,360 3,734

Note A : Cash and Cash Equivalents at End of the Year Cash in Hand and at Banks 393,229 537,084 38,360 3,734 Bank Overdrafts (81,973) (24,554) - - 311,256 512,530 38,360 3,734

The Significant Accounting Policies and Notes on pages 48 to 119 form an integral part of these Financial Statements.

Colombo 06th August, 2012

Cash Flow Statement


1 CORPORATE INFORMATION 1.1 Reporting Entity

Browns Investment PLC (“the Company”) is a public quoted company incorporated on 10th November’2008 under the Companies Act No.07 of 2007 and domiciled in Sri Lanka.

The Registered Office of the Company is located at 481, T.B.Jayah Mawatha, Colombo 10.

The Business Office of the Company is located at 34, Sir Mohamed Macan Marker Mawatha, Colombo 03.

The Consolidated Financial statements of the company for the year ended 31st March, 2012 comprises of the company and its subsidiaries, (together referred to as the “Group”) and the Group’s Interest in associates and jointly controlled entities.

1.2 Principal Activities and Nature of Operations

The principal activities of the Company are investments in listed and non-listed companies and investments in subsidiaries and jointly controlled entities which are mainly engaged in the Plantation Management, agriculture, Hydro power, Leisure, Construction and Porcelain sectors. Principal activities are described in detail in the “Management discussion and Analysis “report on page no 22 to 27 of this report.

1.3 Date of Authorization for IssueThe Consolidated Financial Statements of Browns Investments PLC., for the year ended 31st March 2012 were authorized for issue in accordance with the resolution of the board of directors on 6th August 2012.

1.4 Directors’ Responsibility StatementThe Board of Directors takes the responsibility for the preparation of these Consolidated Financial Statements.

1.5 Name of Immediate and Ultimate Parent Enterprise

In the opinion of the Directors, the Company’s immediate parent undertaking is Brown & Company PLC and ultimate parent company is Lanka Orix Leasing Company PLC.

2 BASIS OF PREPARATION2.1 Statement of Compliance

The Consolidated Financial Statements have been prepared in accordance with Sri Lanka Accounting

Standards (SLAS), adopted by the Institute of Chartered Accountants of Sri Lanka and in compliance with the requirements of the companies Act. No. 07 of 2007.

The principal accounting policies adopted in the preparation of these financial statements are set out bellow. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.2 Basis of MeasurementThe Consolidated Financial Statements have been prepared on a historical cost basis, except for the following material items in the Balance Sheet:

Investment properties and land and buildings that have been measured at fair value.

Long Term & Short Term Investments measured at fair value.

Defined Benefit Obligation measured at present value of the defined benefit obligation.

2.3 Functional and Presentation CurrencyThe Consolidated Financial Statements are presented in Sri Lankan Rupees, which is the Group’s functional currency. All financial information presented in Sri Lankan Rupees has been rounded to the nearest thousand, unless stated otherwise.

2.4 Use of Estimates and JudgmentsPreparation of the Consolidated Financial Statements in conformity with SLASs’ requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future period affected.

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in the Consolidated Financial Statements is included in the following notes:

Note 16 – Classification of Investment Property.

Significant Accounting Policies


Note 24- Inventory Valuation- Unsold Produce Stock as at the balance sheet has been valued date at their actual or estimated realizable values, net of direct selling expenses based on most recent selling prices available subsequent to the year end.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes:

Note 17 - Useful Lives and Residual Values appropriate for Property, Plant and Equipment.

The Company tests annually whether, the useful life and residual value estimates were appropriate and in accordance with its accounting policy. Useful lives and residual values of property, plant and equipment have been determined by Professional Valuers.

Note 25- Impairment Loss on Trade Receivables.

The company reviews its debtors to assess impairment on a regular basis. In determining whether an impairment loss should be recorded in the income statement, the company makes judgments as to whether there is any observable data indicating that there is a measurable decrease in estimated cash flows from a portfolio of debtors.

Management uses estimates based on historical loss experience of assets. The assumptions used for estimating the amount and timing of cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

Note 23- Impairment of Goodwill

Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash generating unit is less than the carrying amount, an impairment loss is recognized. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets pro-rata to the carrying amount of each asset in the unit.

Note 34 – Measurement of defined retirement benefit obligations

The cost of defined benefit plan is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases.

Due to the long term nature of these plans, such estimates are subject to significant uncertainty. Further details are disclosed in Note 34 to the Financial Statements.

The assumptions and methodology used by the company are consistent with SLAS 16. The pension costs and balance sheet items are dependent on the assumptions made for future experience. SLAS 16 sets out how these assumptions should be set. These assumptions are shown in Note 3.6.3.1 to the financial statements.

Note 43 & 44 – commitments and contingencies

2.5 Going ConcernThe Directors have made an assessment of the Company’s ability to continue as a going concern and they certified that the company has adequate resources to continue its operations in the foreseeable future. Therefore, these Consolidated Financial Statements are prepared on going concern basis.

2.6 Materiality and Aggregation Each material class of similar items is presented separately in the Financial Statements. Items of dissimilar nature or function are presented separately unless they are immaterial.

3 SIGNIFICANT ACCOUNTING POLICIES3.1 Changes in Accounting Policies

The accounting policies set out below have been applied consistently to all periods presented in these Consolidated Financial Statements. The accounting policies of the Company have been consistently applied by Group entities where applicable and deviations if any, have been disclosed accordingly.

Certain comparative information has been reclassified to conform with the current year’s presentation.


3.2 Effect of New Sri Lanka Accounting Standards Issued but not yet Effective.3.2.1 Effect of Sri Lanka Financial Reporting Standards (SLFRS)

Following the convergence of Sri Lanka Accounting Standards (SLAS) with the International Financial Reporting Standards (IFRS), the Council of the Institute of Chartered Accountants of Sri Lanka has adopted a new set of Sri Lanka Financial Reporting Standards (SLFRS) that would become effective for financial periods beginning on or after 1st January 2012.

Accordingly, the application of these new Sri Lanka Financial Reporting Standards (SLFRS) will be substantially different to the prevailing Sri Lanka Accounting Standard (SLAS) the Company apply now.

These standards have not been applied in preparing and presenting the Consolidated Financial Statements as they were not effective for the financial year ended 31st March 2012.

However the Company and the Group is in the process of evaluating the impact of adopting the new standards (SLFRS) (LKAS) currently and the impact of the same is not estimable as at the date of the publication of these financial statements. Please refer page 60 note 4 for the significant accounting policies to the Financial Statements for detail disclosure.

3.3 Basis of ConsolidationThe Consolidated Financial Statements (referred to as the “Group”) comprises the Financial Statements of the Company and its subsidiaries and its joint ventures and the Group’s interest in Equity Accounted investees. The Consolidated Financial Statements of the Company and the Group have been prepared in compliance with the Group’s accounting policies.

Subsidiaries, Joint ventures and Equity Accounted Investees are disclosed in Note 19, 20 and 21 to the Financial Statements.

3.3.1 Acquisitions and DivestmentsAcquisitions of subsidiaries are accounted for using the purchase method of accounting. The results of subsidiaries, joint ventures and equity accounted investees acquired or incorporated during the year have been included from the date of acquisition, or incorporation while results of subsidiaries, joint ventures and equity accounted investees disposed have been included up to the date of disposal.

3.3.2 SubsidiariesSubsidiaries are those entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases. A list of Subsidiaries within the group is provided in page 80.

The interest of outside shareholders in the Group Companies is disclosed separately under the heading of ‘ Non-Controlling Interest’.

The profit or loss and net assets of a company attributable to equity interest that are not owned by the parent, directly or indirectly through subsidiaries is disclosed separately under Non-Controlling Interest in the consolidated Income Statement and the Consolidated Balance Sheet within the equity, separately from the equity attributable to the equity holders of the group.

3.3.3 Jointly Controlled Entities A Joint Venture is a contractual agreement, whereby the group and other party undertake an economic activity that is subject to joint control. The group recognizes its interest in the joint venture using the proportionate consolidation method. The group’s share of each of the assets, liabilities, income and expenses of the joint venture are combined with the similar items, line by line, in the Consolidated Financial Statements. A list of joint ventures within the group is provided in Note 20 to these Financial Statements.

Jointly controlled entities has been recognized using the proportionate consolidation method of accounting from the date that joint control commences until the date joint control ceases.

3.3.4 Equity Accounted Investees - AssociatesAssociates are those investments over which the group has significant influence and holds 20% to 50% of the equity and which are neither subsidiaries nor joint ventures of the group.

A list of associate companies of the group which have been accounted for under the equity method of accounting are disclosed under Note 21 to these Financial Statements.

Significant Accounting Policies contd.


The investments in associates are carried in the balance sheet at cost plus post acquisition changes in the group’s share of net assets of the associates.

Goodwill relating to an associate is included in the carrying amount of the investment.

After application of the equity method, the group determines whether it is necessary to recognize any additional impairment loss with respect to the group’s net investment in the associate.

The income statement reflects the share of the results of operations of the associate. Where there has been a change recognized directly in the equity of the associate, the group recognizes its share of any changes in the statement of changes in equity.

When the group’s share of losses in an associate equals or exceeds the interest in the undertaking, the group does not recognize future losses unless it has incurred obligations or made payments on behalf of the entity. The group ceases to use the equity method of accounting on the date from which it no longer has significant influence in the associates. The accounting policies of associate companies conform to those used for similar transactions of the group.

3.3.5 Goodwill acquired in a Business Combination

All business combinations have been accounted for by applying the purchase method in accordance with the Sri Lanka Accounting Standard 25 (Revised 2004) - ‘Business Combinations’. Applying this method involves the entity that obtains control of the other entity to recognize the fair value of assets acquired and liabilities and contingent liabilities assumed, including those not previously recognised.

Goodwill represents the excess of the cost of any acquisition of a subsidiary or an associate over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. When the excess is negative goodwill it is recognized immediately in the Income Statements.

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the group’s interest in the net fair value of the identifiable assets, liabilities and

contingent liabilities. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to groups of cash-generating units that are expected to benefit from the synergies of the combination.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation.

3.3.6 Transactions Eliminated on ConsolidationIntra-group balances and transactions and any unrealized gains arising from intra-group transactions, are eliminated in preparing the Consolidated Financial Statements.

Unrealized gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the enterprise, against the investment in the associate. Unrealized losses are eliminated in the same way as unrealized gains.

3.4 Foreign Currency TransactionsTransactions in foreign currencies are translated into Sri Lanka Rupees (“Rupees”) at the foreign exchange rate ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies at the Balance Sheet date are translated to rupees at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translations are recognized in the Income Statement.

3.5 Assets and Bases of their Valuation3.5.1 Current Assets

Assets classified as current assets on the balance sheet are cash and bank balances and those which are expected to be realized in cash during the normal operating cycle or within one year from the balance sheet date, whichever is shorter.


3.5.2 Freehold Property, Plant and Equipment3.5.2.1 Cost

Items of Property, Plant and Equipment are stated at cost or fair value less accumulated depreciation and any accumulated impairment in value.

The cost of Property, Plant and Equipment is the cost of acquisition or construction together with any expenses incurred in bringing the asset to its working condition for its intended use.

Where an item of Property, Plant and Equipment comprises major components having different useful lives, they are accounted for as separate items of Property, Plant and Equipment.

3.5.2.2 RevaluationA revaluation of Property, Plant and Equipment is done after a review once a year when there is a substantial distinction between the fair value (market value) and the book value of the asset and is undertaken by professionally qualified valuers.

Where items of property, plant and equipment are subsequently revalued, the entire class of such assets is revalued.

When an asset is revalued, any increase in the carrying amount is transferred to a revaluation reserve, unless it reverses a previous revaluation. Decrease relating to the same asset, which was recognized in the Income Statement. Any balance remaining in the revaluation surplus in respect of an asset is transferred directly to accumulated profit or loss on retirement or disposal of the asset.

3.5.2.3 Subsequent Expenditure Expenditure incurred to replace a component of an item of Property, Plant and Equipment that is accounted for separately, including major inspection and overhaul expenditure, is capitalised.

Other subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the item of Property, Plant and Equipment.

All other expenditure is recognized in the Income Statement as an expense as incurred.

3.5.2.4 Derecognition An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is calculated as the difference between the net disposal proceeds and the carrying amount. Gains or losses on derecognition are recognized in profit or loss and gains are not classified as revenue.

3.5.2.5 DepreciationDepreciation is charged to the Income Statement on a straight line basis over the estimated useful lives of Property, Plant and Equipment and major components that are accounted separately based on the cost or valuation other than freehold land. Assets are depreciated over the shorter of the lease term and their useful lives.

Class of Asset No. of Years Rate

Buildings 20 - 40 years 2.5%-5%

Water Sanitation 20 years 5%

Plant and Machinery 13 1/3 years 7.5%

Office Equipment 05 - 08 years 12.5%- 20%

Furniture and Fittings 05 - 10 years 10%-20%

Motor Vehicles 04 - 05 years 20% - 25%

Roads Bridges 50 years 2%

Computers 02 years 50%

Electro Machinery and Equipment

20 years 5%

Tools 02 years 50%

Penstock Pipes 20 years 5%

3.5.2.6 Grants and SubsidiesGrants related to property, Plant and Equipment are initially deferred and allocated to income statement on a systematic basis over the useful life of the related Property, Plant and Equipment as follows. Assets are amortized over the shorter of the lease term and their useful lives.




Buildings 20 - 40 years 2.5 - 5%

Plant and Machinery

13 1/3 years 7.5%

Equipment 05-08 years 12.5 - 20%

Road 50 years 2%

Vehicles 04-05 years 20%-25%

Grants related to assets, including non-monetary grants at fair value, are deferred in the balance sheet and credited to the income statement over the useful life of the related asset.

3.5.3 Leasehold Property, Plant and Equipment3.5.3.1 Finance Leases

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Assets acquired by way of a finance lease are stated at an amount equal to the lower of their fair value and the present value of minimum lease payments at the inception less accumulated depreciation.

3.5.3.2 Leasehold Property, Leasehold PropertyProperty, plant and equipment obtained under the finance lease, which effectively transfer to the Company substantially the entire risk and rewards incidental to ownership of the leased assets, are treated as if they have been purchased outright and are capitalized at their cash price.

Assets held under finance lease are amortized over the shorter of the lease period or the useful lives of equivalent owned assets, unless ownership is not transferred at the end of the lease period.

The corresponding principal/capital elements payable to the lessor are shown as a liability/obligation. The lease rentals are treated as consisting of capital and interest elements. The capital element in the rental that is applied to reduce the outstanding obligation and interest element is charged against profit, in proportion to the reducing capital element outstanding.

The finance charges allocated to future periods are separately disclosed in the notes.

The cost of improvements to or on leased property is capitalized, disclosed as improvements to leasehold property and depreciated over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is shorter.

3.5.3.3 Leasehold Rights to Bare Land of JEDB/ SLSPC Estate Assets and Immovable (JEDB/SLSPC) Estate Assets on Finance Lease

Leasehold Rights to Bare Land of JEDB/SLSPC Estate Assets and Immovable (JEDB/SLSPC) Estate Assets on Finance Lease obtained on a long term basis, are stated at the recorded carrying values as at the effective date of Sri Lanka Accounting Standard No.19 – Leases, in line with Ruling of the Urgent Issues Task Force of the Institute of Chartered Accountants of Sri Lanka. Such carrying amounts are amortized over the remaining Lease term or useful life of such asset whichever is shorter.

Prepaid lease rentals paid to acquire land use rights are amortized over the lease term in accordance with the pattern of benefits provided.

Leasehold properties are tested for impairment annually and are written down where applicable. The impairment loss, if any, is recognized in the income statement

3.5.3.4 AmortizationThe leasehold rights of assets taken over from JEDP/SLSPC are amortized in equal amounts over the lower of lease period and economic useful life.

Depreciation rates used for the purpose are as follows.


Bare Land 34.5-53 years 1.89%-2.89%

Mature Plantations 30 years 3.33%

Buildings 25 years 4%

Machinery 15 years 6.67%

Water and Sanitation

20 years 5%

Other Vested Assets

30 years 3.33%


3.5.3.5 Operating Leases Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the leased term are classified as operating leases.

Lease payments (excluding cost of service such as insurance and maintenance) paid under operating leases are recognized as an expense in the income statement.

3.5.4 Timber Stocks The accounting policy adopted for Timber Stocks on plantations is stated at fair value less estimated point-of-sale-costs. Point-of-sales-costs include all the costs that would be necessary to sell the assets, including costs necessary to get the assets to market.

The company has engaged an Independent Chartered Valuation Surveyor Mr.K.T.D. Tissera in determining the fair value of Timber Stocks. The valuer has valued the Timber Stocks on a per tree valuation basis by using available log and tree prices in city centers less point-of-sale-costs. Timber Stocks are measured at fair value less estimated-point-of-sale-costs as at each balance sheet date.

3.5.5 Permanent Land Development Costs Permanent land development costs are those costs incurred making major infrastructure development and building new access roads on leasehold lands.

These costs have been capitalized and amortized over the remaining lease period.

3.5.6 Immature and Mature Plantations The total cost of land preparation, rehabilitation, new planting, replanting, crop diversification, inter-planting and fertilizing etc., incurred between the time of planting and harvesting (When the planted area attains maturity) are classified as immature plantations. These immature plantations are shown at direct costs plus attributable overheads, including interest attributable to long-term loans used for financing immature plantations.

Attributable overheads incurred on the plantation are apportioned based on the labour days spent on respective replanting and new planting and capitalized on the immature areas. The remaining non attributable overhead is expensed in the accounting period in which it is incurred.

The expenditure incurred on perennial crop (Tea/Rubber/Coconut) fields, which come into bearing during the year, has been transferred to mature plantations and depreciated over their useful life period.

3.5.6.1 Depreciation of Mature Plantations (Re-planting and New Planting)


Tea 33 1/3 years 3%

Rubber 20 years 5%

Coconut 50 years 2% Depreciation of an asset begins when it is available

for use and ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised.

Depreciation methods, useful lives and residual values are assessed at the reporting date. Mature plantations are depreciated over their useful lives or unexpired lease period, whichever is less.No depreciation is provided for immature plantations.

3.5.7 Infilling CostsThe land development costs incurred in the form of infilling have been capitalized to the relevant mature field where infilling results in an increase in the economic life of the relevant field beyond its previously assessed standard of performance, in accordance with Sri Lanka Accounting Standard No. 32 and depreciated over the useful life at rates applicable to mature plantation.

Infilling cost that are not capitalized have been charged to the income statement in the year in which they are incurred.

3.5.8 Investment PropertyProperties held to earn rental income, and properties held for capital appreciation have been classified as investment property. Investment properties are initially recognized at cost.

Subsequent to initial recognition, the investment properties are stated at fair values, which reflect market conditions at the balance sheet date. Gains or losses arising from changes in fair value are included in the income statement in the year in which they arise.



Investment properties are derecognised when disposed, or permanently withdrawn from use because no future economic benefits are expected. Any gains or losses on retirement or disposal are recognized in the income statement in the year of retirement or disposal.

Transfers are made to investment property, when there is a change in use, evidenced by ending of owner occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment property, when there is a change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sale.

Where group companies occupy a significant portion of the investment property of a subsidiary, such investment properties are treated as Property, Plant and Equipment in the Consolidated Financial statements, and accounted for as per Sri Lanka Accounting Standard 18 - Property, Plant and Equipment.

3.5.9 Capital Work-In-ProgressThe cost of Capital Work-In-Progress is the cost of purchase or construction together with any related Expenses thereon.

Expenditure Incurred on Capital Work-In-Progress for permanent nature or for the purpose of increasing the earning capacity of the business has been treated as capital expenditure.

Capital Work-In-Progress is transferred to the respective asset accounts at the time of the first utilization or at the time the asset is commissioned.

3.5.10 Impairment of AssetsThe group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Impairment losses are recognized in the income statement except for impairment losses in respect of Property, Plant and Equipment which are recognized against the revaluation reserve to the extent that it reverses a previous revaluation surplus.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. Previously recognized impairment losses other than in respect of goodwill, are reversed only if there has been an increase in the recoverable amount of the asset. Such increase is recognized to the extent of the carrying amount had no impairment losses been recognized previously.

3.5.11 Intangible AssetsAn intangible asset is initially recognized at cost, if it is probable that future economic benefit will flow to the enterprise, and the cost of the asset can be measured reliably. Following the initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year-end.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level.

However, at present the company does not record any intangible assets as at the balance sheet date.


3.5.12 Investments3.5.12.1 Long Term Investments

In the parent company’s financial statements, the investments in subsidiaries, joint ventures and equity accounted investees have been accounted for at cost, net of any impairment losses which are charged to the income statement. Income from these investments is recognized only to the extent of dividends received. Provision for diminution in value is made when in the opinion of the Directors that there has been a decline other than temporary in the value of the investment.

Investments held to yield or capital appreciation are classified as long-term investments and investments that are intended to be held for trading purposes are classified as short term investments.

The Long Term marketable securities of the Group are stated at the market value as at the Balance Sheet date. The surplus on revaluation is credited to Revaluation surplus of investments in the statement of changes in equity, unless it reverses a previous revaluation decrease relating to the same marketable securities, which was recognized in the Income Statement. The carrying amounts of Long Term marketable securities are reduced to recognize a decline which is considered other than temporary, in the value of investments, determined on an individual investment basis is charged to the Income Statement.

All other Long Term investments have been accounted for at cost, net of any impairment losses which are charged to the income statement. Income from these investments is recognized only to the extent of dividends received. Provision for diminution in value is made when in the opinion of the Directors that there has been a decline other than temporary in the value of the investment.

3.5.12.2 Short Term Investments The Short Term marketable securities of the Group are stated at the market value as at the Balance Sheet date. The excess or deficit on revaluation is included in the income statement, determined on an individual investment basis.

Government securities held for resale in the near future to benefit from short-term market movements are accounted for at cost plus the relevant proportion of the discounts or premiums.

Debt securities held for resale in the near future to are accounted for at cost.

Other short term Investments such as Time and Term Deposits, Investments in REPOs and Investments in Commercial Papers are carried at cost or at consideration paid and interest accrued thereon is capitalized.

3.5.13 Inventories Inventories other than produce stocks are valued at the lower of cost and estimated net realizable value, after making due allowances for obsolete and slow moving items. Net realizable value is the price at which inventories can be sold in the ordinary course of business after allowing for cost of realization and/or cost of conversion from their existing state to saleable condition.

The cost incurred is bringing inventories to its present location and condition is accounted using the following cost formula.

Type of Inventory

Method of Valuation

Input Materials

At Average Cost using Weighted Average Cost Formula

Growing Crop Nurseries

At the cost of direct materials, direct labour and appropriate proportion of directly attributable overheads less provision for over grown plants.

Harvested Crop

Produce Stocks manufactured Up to the Balance Sheet date and sold since then , until the time of preparation the Financial Statements are valued at since realized price. The balance Produce Stocks are valued at estimated selling prices. The prices are net of all attributable expenses relating to the public auction.

Certified certified Emission Reduction

Carbon Credit Units as at the Balance Sheet date have been valued at their estimated net realizable Value as Inventories and disclosed in the financial statements as Certified Emission Reduction.

Spares and Spares and Consumables

At the Actual Cost



3.5.14 Trade & Other ReceivablesTrade and other receivables are stated at the amounts they are estimated to be realised, net of provisions for bad and doubtful receivables.

A provision for doubtful debts is made when the collection of the full amount is no longer probable. Bad debts are written off when identified.

Other receivables and dues from related parties are recognized at cost less provision for bad and doubtful receivables.

3.5.15 Cash and Cash EquivalentsCash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

3.6 Liabilities and ProvisionsLiabilities classified as current liabilities on the balance sheet are those, which fall due for payment on demand or within one year from the balance sheet date.

Non - current liabilities are those balances that fall due for payment after one year from the balance sheet date.

All known liabilities have been accounted for in preparing the financial statements.

3.6.1 Debenture This represents the funds borrowed for the long terms funding requirements, these are recorded in the Balance Sheet at the amounts expected to be payable at Balance Sheet date.

Details of Debentures are disclosed in Note 41 to the Consolidated Financial Statements.

3.6.2 Borrowings Borrowings Includes borrowings from the financial Institutions and are shown at the gross value of the outstanding balance. They are stated in the Balance Sheet to the extent of amount payable. Interest paid/payable on these borrowings are changed to the Income Statement.

Details of borrowings are disclosed in Note 32 to the Consolidated Financial Statements.

3.6.3 Employee Benefits3.6.3.1 Defined Benefit Plans – Retirement Benefit Obligation

A defined benefit plan is a post employment benefit plan other than a defined contribution plan. The liability recognized in the balance sheet in respect of defined benefit plan is the present value of the defined benefit obligation at the balance sheet date. Benefits falling due more than 12 months after the balance sheet date are discounted to present value. The defined benefit obligation is calculated annually by independent actuaries using Projected Unit Credit Method (PUC) as recommended by SLAS – 16 (Revised 2006), “Employees benefits”. The assumptions based on which the results of the actuarial valuation was determined, are disclosed in Note 34 to the financial statements.

The Retirement Benefit Obligations is based on the actuarial valuation carried out.

The actuarial gains and losses are charged or credited to income statement in the period in which they arise.

However, according to the Payment of Gratuities Act No.12 of 1983, the liability for the gratuity payment to an employee arises only on the completion of 5 years of continued service with the Company.

The liability is not externally funded.

3.6.3.2 Defined Contribution Plans – EPF, ETF and ESPS

Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions in line with respective statutes and regulations. The company contributes 12% and 3% of consolidated salary of such employees to the relevant Provident Fund and to the Employees’ Trust Fund respectively.

Contributions to defined contribution plans, Employees Provident Fund and Employees Trust Fund are recognized as an expense in the income statement as incurred.


3.6.4 Provisions, Contingent Assets and Contingent Liabilities

Provisions are made for all obligations existing as at the balance sheet date when it is probable that such an obligation will result in an outflow of resources and a reliable estimate can be made of the quantum of the outflow. All contingent liabilities are disclosed as a note to the financial statements unless the outflow of resources is remote. Contingent assets are disclosed, where inflow of economic benefit is probable. All probable contingent assets and liabilities are disclosed in note 43 to the Consolidated Financial Statements.

3.6.5 Trade and Other Payables Trade and other payables are stated at their cost.

3.7 Income Statement 3.7.1 Revenue

The net Group turnover excludes turnover taxes, and trade discounts. The gross turnover represents the invoiced value of goods and services to customers outside the Group.

Revenue RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to the group, and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and value added taxes, net of sales within the Group.

The following specific criteria have been used to recognize revenue.

a) Revenue from Sale of GoodsRevenue from the sale of goods is recognized in the income statement when the significant risks and rewards of ownership have been transferred to the buyer.

b) Revenue from Services RenderedRevenue from services rendered is recognized in the income statement in proportion to the stage of completion of the transaction at the Balance Sheet date. The stage of completion is assessed by reference to surveys of work performed.

c) Dividend IncomeDividend income is recognized in the income statement, when the Group’s right to receive payment is established.

d) Certified Emission Reduction IncomeIncome from Carbon Credit Units is recognized on accrual basis.

e) Sale of Electrical Energy Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and the revenue and associated costs incurred can be reliably measured.

Revenue is measured at the fair value of the consideration received or receivable net of trade discounts and sales taxes.

f) Interest IncomeInterest income is recognized in the income statement as it accrues.

g) Gains/(Losses) on Change in Fair Valuation of Timber Stocks Gains/(Losses) arising on the change in the fair valuation of Timber Stocks are dealt with in the Income Statement in the year in which they occur.

h) Gains or Losses on the disposal of Property, Plant and Equipment Gains or Losses of revenue nature on the disposal of Property, Plant and Equipment and other Non-current assets, including investments held by the Group have been accounted for in the Income Statement, after deducting from the net sales proceeds on disposal, the carrying amount of such Assets and related Property, Plant and Equipment amount remaining in the Revaluation Reserve relating to that asset is directly transferred to Retained Earnings.

i) Other Income Other income is recognized on accrual basis.

3.7.2 Expenditure RecognitionExpenses are recognized in the income statement on the basis of a direct association between the cost incurred and the earning of specific items of income.

All the expenditure incurred in the running of the business and in maintaining the property, plant and equipment in a state of efficiency have been charged to income is arriving at the profit for the period.

For the purpose of presentation of the income statement the directors are of the opinion that function of expenses method presents fairly the elements of the company’s performance and hence such presentation method is adopted.



a) Preliminary and pre-operational expenditurePreliminary and pre-operational expenditure are recognised in the Income Statement.

b) Borrowing Borrowing costs that are directly attributable to acquisition, construction or production of a qualifying asset, which takes a substantial period of time to get ready for its intended use or sale, are capitalized as a part of the asset.

Borrowing costs that are not capitalized are recognized as expense in the period in which they are incurred and charged to the Income Statement.

The amounts of borrowing costs which are eligible for capitalization are determined in accordance with the Allowed Alternative Treatment in Sri Lanka Accounting Standard 20 - “Borrowing Costs”.

Borrowing cost incurred in respect of specific loans that are utilized for field development activities have been capitalized as a part of the cost of the relevant immature plantation. The capitalization will cease when the crops are ready for commercial harvest.

c) Financing CostsFinancing costs comprise interest payable on borrowings, net foreign exchange gains and losses, The interest expense component of finance lease payments is recognized in the Income Statement using the effective interest rate method.

d) Repair and renewal CostsRepair and renewal cost are charged to the Income Statement in the year in which the expenditure is incurred.

3.8 Taxation3.8.1 Income Tax Expense

Income tax on profit or loss for the year comprises current and deferred tax and is recognized in the Income Statement.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the Balance Sheet date and any adjustments to tax payable in respect of previous years.

3.8.2 Deferred TaxDeferred taxation is the tax attributable to the temporary differences that arise when taxation authorities recognize and measure assets and liabilities with rules that differ from those of the consolidated financial statements.

Deferred tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax assets are recognized for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilized.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the year when the asset is realized or liability is settled, based on the tax rates and tax laws that have been enacted or substantively enacted as at the balance sheet date.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxable entity and the same taxation authority.

Deferred tax relating to items recognized directly in equity is recognized in equity.

3.9 Earnings Per Share (EPS)The Group presents basic earnings per share and diluted earnings per share for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS are determined by the dividing the profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding adjusted for the effects of all dilutive potential ordinary shares. The details of earnings per share are given in Note 13 to the Consolidated Financial Statements.


3.10 Related Party Transactions For the purpose of these Consolidated Financial Statements, parties are considered to be related to the Company, if the Company has the ability directly or indirectly, to control the party or exercise significant influence over the party or vice versa. The relevant disclosure notes are provided in the Note 45 to the Consolidated Financial Statements.

3.11 Segment ReportingA segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment) which is subject to risk and rewards that are different from those of other segments.

3.11.1 Reporting SegmentsThe group’s internal organization and management is structured based on individual products and services which are similar in nature and process and where the risk and return are similar.

3.11.2 Segment InformationSegment information has been prepared in conformity with the accounting policies adopted for preparing and presenting the consolidated financial statements of the group.

3.12 Discontinuing OperationsA discontinuing operation is a clearly distinguishable component of the Group’s business that is abandoned or terminated pursuant to a single plan, and which represents a separate major line of industry or geographical area of operations.

3.13 Cash Flow Statement The Cash Flow Statement has been prepared using the “indirect method”.

Interest paid is classified as operating cash flows.

Government grants received, which are related to purchase and construction of Property, Plant and Equipment are classified as investing cash flows. Dividend and interest income are classified as cash flows from investing activities.

Dividends paid are classified as financing cash flows.

3.14 Off Balance Sheet and Income Statement Items 3.14.1 Events after the Balance Sheet Date

All material post Balance Sheet events have been considered where appropriate; either adjustments have been made or adequately disclosed in the Financial Statements.

3.14.2 Capital Contingencies and Unrecognized Contractual Commitments

Contingencies are possible assets or obligations that arise from past events and would be confirmed only by the occurrence or non-occurrence of uncertain future events, which are beyond the company’s control.

Contingencies and capital commitments of the group/company have been disclosed in Notes 43 and 44 to the Financial Statements respectively.

3.15 Comparative Information The comparative information is re-classified wherever necessary to conform with the current year’s presentation in order to provide a better presentation.

Comparative information has been given for the last period, wherever applicable.

4 Sri Lanka Accounting Standards effective from 01 January 2012

The Institute of Chartered Accountants of Sri Lanka has issued a new volume of Lanka Accounting Standards which became applicable for financial periods commencing on or after 1st January 2012. Accordingly, these Standards have not been applied in preparing these financial statements as they were not effective for the year ended 31st March 2012.

These Sri Lanka Accounting Standards comprise Accounting Standards prefixed both SLFRS (corresponding to IFRS) and LKAS (corresponding to IAS). Application of Sri Lanka Accounting Standards prefixed SLFRS and LKAS for the first time shall be deemed to be an adoption of SLFRSs.

The Group has commenced reviewing its accounting policies and financial reporting in readiness for the transition. Set out below are the key areas where accounting policies will change and may have an impact on the financial statements of the Group. The Group is in the process of quantifying the impact on the financial statements arising from such changes in accounting policies.



SLFRS1 - First Time Adoption of Sri Lanka Accounting Standards requires the Group to prepare and present opening new SLFRS financial statements at the date of transition to new SLFRS. The Group shall use the same accounting policies in its opening new SLFRS financial statements and throughout all comparable periods presented in its first new SLFRS financial statements.

LKAS1 - Presentation of Financial Statements requires an entity to present, in a statement of changes in equity, all owner changes in equity. All non owner changes in equity are required to be presented in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). Components of comprehensive income are not permitted to be presented in the statement of changes in equity. This standard also requires the Group to disclose information that enables users of its financial statements to evaluate the entity’s objectives, policies and processes for managing capital.

LKAS16 – Property Plant and Equipment requires a company to initially measure an item of property plant and equipment at cost, using the cash price equivalent at the recognition date. If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and the total payment is recognized as interest over the period, unless such interest is capitalized in accordance with LKAS23 Borrowing Costs.

All site restoration costs including other environmental restoration and similar costs must be estimated and capitalised at initial recognition, in order that such costs can be depreciated over the useful life of the asset.

This standard requires depreciation of assets over their useful lives, where the residual value of assets is deducted to arrive at the depreciable value. It also requires that significant components of an asset be evaluated separately for depreciation.

LKAS32 – Financial Instruments: Presentation, LKAS39 – Financial Instruments: Recognition and Measurement and SLFRS7 – Disclosures will result in changes to the current method of recognizing financial assets, financial liabilities and equity instruments. These standards will require measurement of financial assets and financial liabilities at fair value at initial measurement. The subsequent measurement of financial assets classified as fair value through profit and loss and available for sale will be at fair value, with

the gains and losses routed through the statements of comprehensive income and other comprehensive income respectively.

Financial assets classified as held to maturity and loans and receivables will be measured subsequently at amortized cost. These assets will need to be assessed for any objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) coupled with a reliable estimate of the loss event (or events) impact on the estimated future cash flows of the financial asset or group of financial assets . As such the current method of assessing for impairment will have to be changed to meet the requirements of these new standards.

Financial liabilities will be either classified as fair value through profit or loss or at amortized cost. At present, the company/group does not identify, categorize and measure financial assets and liabilities as per the requirements of the standard and also does not recognize certain derivative instruments on the balance sheet.

SLFRS3 – Business combinations will require the company to apply this standard to transactions and other events that meet the new definition of a business i.e. an integrated set of assets (inputs) and activities( processes) which are capable of being conducted and managed to provide a return, as opposed to a mere asset acquisition. Under the new acquisition method of accounting, in addition to recognizing and measuring in its financial statements the identifiable assets acquired and liabilities assumed the standard also requires recognition and measurement of any non-controlling interest in the acquiree and re-measuring to fair value any previously held interests which could have an impact on the recognition of goodwill. Subsequent to the acquisition of control any acquisitions or disposals of non-controlling interest without loss of control will be accounted for as equity transactions and cannot be recognized as profit/loss on disposal of investments in the statement of financial performance.

LKAS12 – Income Tax requires deferred tax to be provided in respect of temporary differences which will arise as a result of adjustments made to comply with the new SLAS.


LKAS18 – Revenue requires the company to measure revenue at fair value of the consideration received or receivable. It also specifies recognition criteria for revenue, and the company/Group needs to apply such recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance of the transaction.

The Institute of Chartered Accountants of Sri Lanka has resolved an amendment to Sri Lanka Accounting Standard 10, whereby the provision contained in paragraphs 30 and 31 of SLAS10 – Accounting Policies, Changes in Accounting Estimates and Errors, would not be applicable for financial statements prepared in respect of financial periods commencing before 1 January 2012 and hence the impact of this transition is not required to be disclosed in these financial statements.



5 Revenue Group Company For the year ended 31st March 2012 2011 2012 2011 Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Total Revenue 2,089,842 3,032,381 212,386 1,243,001 Less : Inter Group Revenue (68,115) (16,304) - - 5.1 2,021,727 3,016,077 212,386 1,243,001 5.1 Industry Segment ( Revenue )

Investments 212,386 1,243,001 212,386 1,243,001 Tea 1,068,153 1,253,108 - - Rubber 429,273 467,416 - - Coconut 2,595 2,828 - - Hydro Power 15,093 36,907 - - Leisure 71,272 - - - Porcelain 190,396 - - - Construction 23,209 - - - Others 9,350 12,817 - - 2,021,727 3,016,077 212,386 1,243,001 5.2 Geographical Dispersion of Turnover The Group does not distinguish its turnover into significant geographical segments.

6 Cost of Sales 6.1 Industry Segment ( Cost of Sales )

Investments - - - - Tea 1,130,174 1,186,409 - - Rubber 215,487 197,384 - - Coconut 2,294 1,662 - - Hydro Power 16,914 10,175 - - Leisure 28,512 - - - Porcelain 167,224 - - - Construction 21,534 - - - Others 4,663 3,661 - - 1,586,802 1,399,291 - -

7 Gross Profit 7.1 Industry Segment ( Gross Profit )

Investments 212,386 1,243,001 212,386 1,243,001 Tea (62,020) 66,699 - - Rubber 213,786 270,032 - - Coconut 301 1,167 - - Hydro Power (1,821) 26,732 - - Leisure 42,760 - - - Porcelain 23,172 - - - Construction 1,674 - - - Others 4,687 9,155 - - 434,925 1,616,786 212,386 1,243,001

Notes to the Financial Statements


8 Other Income Group Company For the year ended 31st March 2012 2011 2012 2011 Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Amortization of Capital Grants 5,350 5,602 - - Profit on Sale of Property, Plant and Equipment 1,255 7,314 - - Sale of Trees 8.1 40,992 29,655 - - Interest Income on Short Term Loans 128,577 18,081 128,577 18,081 Interest Income 51,857 8,235 - - Market Value Adjustments for Carrying Value of Short Term Investments - 127,217 - 127,217 Gain on Deemed Disposal of Interest in Joint Venture 8.2 - 327,264 - - Other Income 89,096 8,179 50,507 903 317,127 531,547 179,084 146,201

8.1 Sale of Trees Income from sale of Trees has been recognized as per Urgent Issue Task Force (UITF) ruling No. 14 - Accounting for Sale

of Proceeds of Perennial Plantation Trees, dated 31st December 2001.

8.2 Gain on Deemed Disposal of Interest in Joint Venture During the previous year, Company’s joint venture Free Lanka Capital Holdings PLC issued share capital to public through initial public issue. Accordingly, share capital of Free Lanka Capital Holdings PLC has been increased. Due to the additional share issue, the effective holding of Browns Investments PLC in Free Lanka Capital Holdings PLC, has been reduced by 22.7% resulting in a gain of Rs.327,264,000/- from the deemed disposal of the reduced holding.

9 Negative Goodwill on Acquisition of Shares Group Company For the year ended 31st March 2012 2011 2012 2011 Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Free Lanka Capital Holdings PLC 15,480 - - - Excel Global Holdings (Pvt) Ltd 16.3 2,607,597 - - - Taprobane Capital (Pvt) Ltd 48,406 - - - 2,671,483 - - -

10 Finance Costs Interest on Bank Overdrafts 63,594 5,627 5 71 Lease Interest to JEDB/SLSPC 10,430 17,184 - - Lease Interest to Others 3,055 4,412 - - Interest on Debentures 37 129 - - Interest on Short Term Loans 89,096 78,946 84,725 77,963 Interest on Other Loans 39,418 41,247 - - 205,630 147,545 84,730 78,034 Less : Finance Costs capitalized during the Year (15,299) (17,070) - - 190,331 130,475 84,730 78,034

Notes to the Financial Statements contd.


11 Profit Before Taxation Group Company For the year ended 31st March 2012 2011 2012 2011 Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Profit before tax is stated after charging all expenses including the following: Directors’ Emoluments 10,614 5,541 2,400 1,200 Auditors’ Remuneration - Audit Service 2,555 1,629 248 207 Depreciation/Amortization 94,641 70,193 - - Amount Write Off from Timber Stocks - 4 - - Staff Costs - - - - - Salaries & Wages 784,026 689,312 1,453 - - Defined Contribution Plan Costs - EPF, ETF, CPPS and ESPS 108,673 95,343 218 - - Defined Benefit Plan Costs - Gratuity 39,075 84,302 - - Management Fees 5,600 5,600 5,600 5,600 Mark to Market Loss 355,608 - 355,608 - IPO / Private Placement Expenses 115,792 - 115,792

12 Income Tax Expense 12.1 Current Income Tax Expense Income Tax Expense 12.2 71,296 32,214 48,808 1,645 10% Withholding Tax on Dividend from Associate/Subsidiary Companies - 384 - - Income Tax Over/Under Provision 10,865 - - - Deferred Tax Expense/(Reversal) 12.1.1 (2,553) (1,067) - - 79,608 31,531 48,808 1,645

12.1.1 Deferred Tax Expense/(Reversal) a) Income Statement Deferred Tax Expense/(Income) (2,553) (1,067) - - Deferred Tax Charge/(Reversal) (2,553) (1,067) - - b) Statement of Changes In Equity

Deferred Tax Expense arising on Revaluation of Property, plant and Equipment to Fair Value 21,515 27,369 - - Deferred Tax Charge/(Reversal) 21,515 27,369 - -

c) Total Deferred Tax Charge/(Reversal) 18,962 26,302 - -

Deferred Tax has been computed at 28% standard rate for all companies.


12.2 Numerical Reconciliation between the Tax Expense(Income) and the Product of Accounting Profit/(Loss). Numerical reconciliation between the Tax Expense/(Income) and the product of Accounting Profit/(Loss) multiplied by the applicable tax rate disclosing also the basis on which the applicable tax rate is computed are given below.

Group Company For the year ended 31st March 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Accounting Profit/(Loss) before Taxation 2,667,996 2,134,956 (212,830) 1,270,255 Less : Exempt Income (536) - - - Gain on Change in Fair Value of Timber Stocks 14,952 (128,745) - - CER Income - - - - Other Exempt Income (86,084) - (86,084) - Accounting Profit before Taxation 2,596,328 2,006,211 (298,914) 1,270,255 Aggregate Disallowable Expenses 652,383 142,040 473,228 27,113 Aggregate Allowable Expenses (525,535) (213,888) - - Aggregate Non-business Income (32,064) 4,651 - - Aggregate Interest Income - 3,437 - - Aggregate Interest Income considered separately - (3,418) - - Aggregate Loss from the business - - - - Aggregate Exempt Income (2,450,987) (1,397,317) - (1,290,244) Aggregate Deductions under Section 32 (22,977) (23,565) - (2,493) Taxable Income 217,148 518,151 174,314 4,631 Taxable Income at Special Rate @ 10%/ 15% 7,606 135,470 - - Taxable Income at Special Rate @ 12% 16,071 - - - Taxable Income at Normal Rate @ 28%/35% 193,471 382,681 174,314 4,631 Taxable Income 217,148 518,151 174,314 4,631 Income Tax Expense 69,674 30,622 48,808 1,621 Dividend Tax on Dividend received from Subsidiaries 1,622 383 - - Deemed Dividend Tax - 745 - - Social Responsibility Levy at 1.5% Thereon - 464 - 24 Income Tax Expense/(Income) 71,296 32,214 48,808 1,645

12.2.1 The Group tax expense is based on the Taxable Profits of the individual companies within the Group. At present, tax laws of Sri Lanka do not provide for Group Taxation.

12.3 Deferred Taxation 12.3.1 Deferred Tax Asset Deferred tax has been computed taking into consideration the revised tax rates effective from 1st April 2011 which is

28% for all standard rate companies. The deferred tax effect on undistributed reserves of subsidiaries has not been recognized since the parent can control the timing of the reversal of these temporary differences.

The Management recognizes deferred tax assets only when it is probable that taxable profit will be available against which the deductible temporary differences can be utilized in accordance with SLAS 14 (Revised 2005) - “Income taxes”.

The deferred tax asset arising on the temporary difference of the companies in the Group has not been recognized in the Financial Statements as a matter of prudence and the resultant tax effect is disclosed below. The effect is computed using 28% rate applicable for future periods.



Group Company For the year ended 31st March 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Accelerated Depreciation for Tax Purposes 11,907 (77,496) - - Revaluation of Property, Plant and Equipment to Fair Value - - - - Revaluation of Investment Property to Fair Value - - - - Employee Benefit Liability (37,519) (180,108) - - Unused Tax Losses available for offset against future taxable Income (70,891) (313,151) - - Unused Tax Credits available for offset against future taxable Income (5,923) (69,039) - - (102,426) (639,794) - -

The deferred Tax Liability arisen on the accelerated depreciation in Free Lanka Capital Holdings PLC on Computer Equipment amounting to Rs.2.075mn has not been recognized considering the materiality of the amount.

12.4 Aggregate Current and Deferred Tax relating to items that are charged to equity

Aggregate Deferred Tax relating to the revaluation of Property, Plant and Equipment that is directly charged to equity is Rs.21,514,857/=. (Previous year - Rs.27,369,615 )

12.5 Tax Losses Carried Forward Group Company 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Tax Losses Brought Forward 481,248 871,218 - - Less : Adjustments on Finalization of Tax Liability 1,138 - - - Adjustment on Disposal of Joint Venture - (395,533) - Utilization of Tax Losses (22,575) (141) - - 459,811 475,544 - - Add : Tax Losses for the Year 88,776 5,704 - - 548,587 481,248 - -

12.6 Applicable Rates of Income Tax The tax liability of Resident Companies of the Group have been computed at the standard rates except for the following companies which enjoy full of partial tax exemptions and concessions.

Free Lanka Capital Properties (Pvt) Ltd Hydro Power Free Lanka 2 (Pvt) Ltd Hydro Power Free Lanka 3 (Pvt) Ltd The corporate tax rate applicable to other income is liable at normal rates.


13 Earnings per Ordinary Share 13.1 Basic Earnings per Ordinary Share Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary shareholders by

the weighted average number of ordinary shares outstanding during the year. Number of ordinary shares for the year 2010/2011 has been adjusted to reflect the increase in number of shares consequent to the Private Placement on 3rd February 2011. Accordingly Earnings per share has been adjusted retrospectively as per SLAS 34 Earnings per Share (Revised 2005).

The following reflects the income and share data used in the basic earnings per share computations.

Group Company For the year ended 31st March 2012 2011 2012 2011 Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Amounts used as the Numerator Net Profit Attributable to Ordinary Shareholders 2,525,048 1,894,445 (261,638) 1,268,610 Amount used as the Denominator Weighted Average Number of Ordinary Shares in Issue (Nos.) 13.1.1 1,847,500 603,833 1,847,500 603,833 Basic Earnings/(Loss) per Ordinary Share (Rs.) 1.37 3.14 (0.14) 2.10

13.1.1 As the number of ordinary shares outstanding have been increased as a result of the share split exercised at the end of November 2010, the calculation of basic and diluted earnings per share for all periods presented have been adjusted retrospectively.

13.2 Diluted Earnings Per Ordinary Share The calculation of Diluted Earnings per Ordinary Share is based on Net Profit attributable to ordinary shareholders and weighted average number of ordinary shares outstanding after adjustment for the effect of all dilutive potential ordinary shares. There were no potentially dilutive shares outstanding at any time during year/previous year.

14 Dividend per Ordinary Share The dividend per share based on the dividend paid for the period covered by the Financial Statements.

Group Company For the year ended 31st March 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Dividend Paid

Interim 186,000 - 186,000 - Final - proposed - - - - 186,000 - 186,000 - Number of Ordinary Shares in Issue (Nos.) 1,860,000 1,810,000 1,860,000 1,810,000 Dividend per Ordinary Share (Rs.) 0.10 - 0.10 -



15 Leasehold Property Lease agreements of all JEDB/SLSPC estates handed over to the Company’s Joint Venture’s Sub-subsidiaries have been executed to date. All of these lease are retroactive to 15th June 1992, the date of formation of the Company’s Joint Venture’s Sub-subsidiaries. The leasehold rights to the bare land on all of these estates have been taken into the books of the Company’s Joint Venture’s Sub-subsidiaries on 15th June 1992, immediately after formation of the Company’s Joint Venture’s Sub-subsidiaries, in terms of the ruling obtained from the Urgent Issue Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka. For this purpose, Board of the Company’s Joint Venture’s Sub-subsidiaries decided at its meetings that lease bare land would be revalued at the value established for this land by Valuation Specialist Dr.Wickramasinghe just prior to the formation of the Company’s Joint Venture’s Sub-subsidiaries. The value as at 15th June 1992 was taken in to the books of Company’s Joint Venture’s Sub-subsidiaries namely Maturata Plantations Limited and Pussellawa Plantations Limited, and the amortisation of the leasehold rights up to 31st March 2012 are as follows.

Group Company As at 31st March 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

15.1 Capitalized Value ( 15th June 1992 ) 175,500 175,500 - - a) Leasehold Rights Acquired/Revalued 208,240 378,074 - - Less : Adjustment on Disposal of Joint Venture - (171,646) - - Transfer from Property, Plant and Equipment - 1,812 - - Balance as at 31st March 208,240 208,240 - - b) Accumulated Amortization

Accumulated Amortization at the beginning of the Year 65,153 111,215 - - Add : Amount amortized during the Year 4,184 4,185 - - Transfer from Property, Plant and Equipment - 245

Less : Adjustment on Disposal of Joint Venture - (50,492) - - Accumulated Amortization at the end of the Year 69,337 65,153 - - c) Total Net Carrying Value 138,903 143,087 - -

The Leasehold Right to Bare Land of JEDB/SLSPC Estates is being amortized by equal amounts over a 53 year period

and the unexpired period of the lease as at the Balance Sheet date is 33.5 years.

15.2 Maturata Plantations Limited

Since the fair value of revalued assets differs materially from its carrying amount, the Board of Directors of Maturata Plantations Limited, a Company’s Joint Venture’s Sub-subsidiary, on 20th December 2005 has decided a further revaluation to be carried out as at 31st December 2005. The net amounts have been restated to the new valuation carried out by an independent and qualified Valuer, Mr.K.Arther Perera. The values of Bare land which was not subjected to a land survey has been based on the current freehold bare land values which varies from District to District and estate to estate depending on demand. The free hold values have been converted into leasehold value depending on the balance period of the lease. The revised UITF ruling does not permit further revaluation of Leasehold lands.


15.2.1 Carrying Value of Revalued Leasehold Property of Maturata Plantations Limited (MPL) at Cost Model - Group The carrying value of Leasehold Right to bare land of JEDB/SLSPC Estates of MPL that would have been included in the Financial Statements as at 31st March 2012 had the asset been carried at initial valuation less accumulated amortization is as follows.

Leasehold Right to Bare Land of JEDB/SLSPC Estates Group Company As at 31st March 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

a) Revaluation as at 22nd June 1992 89,896 89,896 - - 89,896 89,896 - - b) Accumulated Amortization as at 01st April 31,847 30,151 - - Add : Amortization for the Year 1,696 1,696 - - Accumulated Amortization as at 31st March 33,543 31,847 - - c) Written Down Value as at 31st March 56,353 58,049 - -

15.3 Land Maturata Plantations Ltd The Government through the Ministries had recoursed to compulsory acquisition procedures in terms of Land Acquisition

Act for 1,136.24 Hectares from various estates belonging to Maturata Plantations Ltd. Most of the acquisitions were made for the “Village Expansions” and “Public Purposes”. However, Section 2 Notice was issued under Land Acquisition Act for 726 Hectares of three estates in the Low Grown Region for the preservation of Sinharaja World Heritage Forest which is included in the total of 1,136.24 Hectares. In addition, some Gazette Notifications have been issued divesting 800.48 Hectares (Total extent of 1936.72 Hectares of land has been acquired/proposed to acquired as at the balance sheet dates) with the previous owner, Land Reform Commission (LRC) in Low Grown Region. No adjustments have been made to the written down book value in respect of the acquisitions referred above as the compensation is receivable by the company on the Land acquired as per the Lease Agreement.

Pussellawa Plantations Ltd The Government has acquired 50.3285 Hectares of Pitipana Estate, Homagama under the Section 2 of the Urban Development Authority Act through Section 38(a) for town development by Extra Ordinary Gazette Notification No. 1539/9 dated 03rd March 2008. Pussellawa Plantations Ltd filed a fundamental rights case against the Minister of Lands and Land Development at Supreme Courts stating that the Gazette is illegal, nul and void which is pending as at the Balance Sheet date. No adjustments have been made to the written down book value in respect of the acquisitions referred above as the compensation is receivable by the company on the Land acquired as per the Lease Agreement.

16 Investment Property Group Company As at 31st March 2012 2011 2012 2011 Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)16.1 Land and Building

Fair Value as at 01st April 16.2 49,597 - - - Add : Additions - 49,597 - - On acquisition of Subsidiary 16.3 3,500,000 Less : Disposals - - - - Change in Fair Value during the Year 250,000 - - - Fair Value as at 31st March 3,799,597 49,597 - -

16.2 This represents the property having a land extent of 49.50 perches bearing new amended Assessment No. 19, Dudley Senanayake Mawatha, Colombo 08 purchased in December 2010 by Free Lanka Capital Properties (Pvt) Ltd, (FLCPL) a 100% owned subsidiary of the company. The Group has adopted Fair Value Model for Investment Property as per the Sri Lanka Accounting Standard SLAS 40 (Revised 2005). The group has engaged an Independent Chartered Valuations Surveyor Mr.W.M.Chandrasena, in determining the fair value as at 31st March 2011 of the said Investment Property which amounted to Rs.181,674,000/-. The Directors are of the view that there would not be any substantial difference in the valuation of the property as at 31st March 2012.



16 Investment Property (Contd.) 16.3 Browns Investments PLC (the group) acquired 100% shares of Excel Global Holdings (Pvt) Ltd on 22nd July 2011. Upon

this acquisition, the group gained controlling interest of Millennium Development (Pvt) Ltd (MDL) which is a wholly owned subsidiary of Excel Global Holdings (Pvt) Ltd. The cost of the acquisition was Rs.888mn. MDL has leasehold rights to a block of land at T.B. Jayah Mawatha 897 Perches in extent, presently known as “Excel World”. The unexpired portion of the lease is 32 years with provision to extend for another 40 years, subject to certain conditions. Business activities being carried out at Excel World as per the sixth schedule of the lease agreement.

According to SLAS 25 (14), all business combinations should apply the purchase method of accounting and SLAS 25 (16) ( c ) requires to allocate (at the acquisition date), the cost of the business combination to the assets acquired and liabilities and contingent liabilities assumed.

Further, SLAS 25 (36), requires the acquirer to allocate the cost of the business combination by recognizing the acquirer’s identifiable assets, liabilities and contingent liabilities that satisfy recognition criteria provided in SLAS 25 (37) at their fair value, at the acquisition. All identifiable intangible assets acquired in a business combination should be recognized separately from goodwill and measured initially at fair values.

The fair value of this intangible asset has been incorporated in the accounts for the period. The negative goodwill of Rs.2,608mn computed on acquisition is reflected in the group income statement for the period ended 31st March 2012. For the purpose of ascertaining the fair value of leasehold interest, a valuation has been obtained from two Chartered Valuation Surveyors, U.K (RICS) namely Mr.P.W.Senaratne, who has valued the leasehold interest at Rs.5,102mn for a period of 72 years and at Rs.4,320mn for a period of 32 years and Mr.K.T.D.Tissera, who valued the same asset on comparable basis at Rs.4,500mn for 72 years and at Rs.3,500mn for 32 years. Of the two values, it has been decided to incorporate the lower valuation submitted by Mr.Tissera as a matter of prudence.

MDL intends to develop this property as a mixed development over the next few years. It is planned that the development should be in line with the terms of the lease agreement between MDL and the Lessor namely, the Incorporate Trustees of the Church of England in Ceylon. The proposed development has to be in line with the sixth schedule of the lease agreement and the approved development plan.

On 1st October 2011, Taprobane Plantations Limited, an associate company of the group, took over business activities carried on Excel World formerly operated by MDL. As a result of this, the property was categorized as an investment property as provided for in the Sri Lanka Accounting Standards. Consequently, the intangible assets was classified as an investment property, in terms of SLAS 40(35), the investment property was revalued as at 31st March 2012 using the fair value model resulting in a gain of Rs.250mn which was credited to the Income Statement.

The Value is apportioned for accounting purposes as follows, (Rs.’000) Land 3,175,000 Buildings 325,000 Total 3,500,000

17 Property Plant and Equipment Group Company As at 31st March 2012 2011 2012 2011 Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Immovable ( JEDB/SLSPC ) Assets on Finance Lease (Other than Bare Land) 17 (a) 72,738 79,689 - - Property, Plant and Equipment (Other than Immature/Mature Plantations) 17 (b) 2,250,299 829,225 677,585 358,497 Immature/Mature Plantations 17 (c) 923,834 1,052,379 - - Capital Work-In-Progress 17 (d) 63,707 20,337 - - 3,310,578 1,981,629 677,585 358,497


17 (

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Not

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Adju

stm

ents

on

Disp

osal

of J

oint

Ven

ture

-

-

-

-

-

-

-

-

-

-

-

-

-

O

n Ac

quisi

tion

of s

ubsid

iary

3,7

61

-

12,

948

-

3

14

-

-

-

-

-

-

-

17,

023

Addi

tions

-

-

-

-

-

-

-

-

-

-

-

-

Tran

sfer

red

In/(O

ut)

-

(6,9

70)

(4,0

47)

-

-

-

-

-

-

-

-

-

(11,

017)

Disp

osal

-

- (7

60)

- -

- -

- -

- -

- (7

60)

As a

t 31s

t Mar

ch 2

012

3,7

61

7,3

51

15,

535

-

3

14

-

-

-

-

-

-

-

26,

961

Tota

l Gro

ss C

arry

ing

Amou

nt a

s at 3

1st M

arch

201

2 1,

456,

186

1

,335

,973

1

46,3

60

327

,229

9

,684

6

5,75

3

2,3

65

12,

322

4

4

38,

484

4

1,85

5

847

3

,437

,102

Ac

cum

ulat

ed D

epre

ciat

ion

As a

t 1st

Apr

il 2

6,93

9

107

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7

6,64

0

28,

755

1

,457

5

,236

1

,329

5

,907

4

4

1,7

50

2,0

75

733

2

58,1

29

On

Acqu

isitio

n of

sub

sidiar

y 6

8,54

5

621

,650

1

1,35

9

132

,811

1

,628

3

6,15

6

-

-

-

-

-

-

872

,149

O

n Di

spos

als

-

- (1

,800

) (3

) -

-

-

-

-

-

-

-

(1

,803

)Tr

ansf

erre

d In

/(Out

) -

2

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-

-

-

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-

-

-

-

-

-

2

,843

De

prec

iatio

n on

Tran

sfer

s -

(6

,774

) (1

1,15

4)

(1,2

82)

(1,6

54)

(215

) -

-

-

-

-

-

(2

1,07

9)Ch

arge

for t

he Y

ear

10,

583

1

5,87

8

14,

607

1

1,68

9

308

3

,180

3

84

805

-

8

36

2,0

81

26

6

0,37

7 As

at 3

1st M

arch

201

2 1

06,0

67

740

,860

8

9,65

2

171

,970

1

,739

4

4,35

7

1,7

13

6,7

12

44

2

,586

4

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7

59

1,1

70,6

16

Accu

mul

ated

Dep

reci

atio

n

As

sets

on

Fina

nce

Leas

es

As a

t 1st

Apr

il -

3

,811

2

,060

-

-

-

-

-

-

-

-

-

5

,871

O

n Ac

quisi

tion

of s

ubsid

iary

-

-

8,4

80

-

52

-

-

-

-

-

-

-

8

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O

n Di

spos

als

3,7

62

-

(431

) -

-

-

-

-

-

-

-

-

3

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Tr

ansf

erre

d In

/(Out

) -

(2

,843

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(2,8

43)

Char

ge fo

r the

Yea

r -

7

86

494

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1

5

-

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-

-

-

-

1,2

95

As a

t 31s

t Mar

ch 2

012

3,7

62

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10,

603

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6

7

-

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-

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16,

186

Tota

l Dep

reci

atio

n 1

09,8

29

742

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00,2

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2

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Writ

ten

Dow

n Va

lue

as a

t 31s

t Mar

ch 2

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1,3

46,3

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593

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4

6,10

5

155

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7

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2

1,39

6

652

5,

610

-

3

5,89

8

37,

699

8

8

2,2

50,2

99

Writ

ten

Dow

n Va

lue

as a

t 31s

t Mar

ch 2

011

549

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9

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5

28,

600

7

3,37

1

491

2

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9

91

6,2

52

-

35,

810

3

9,42

2

22

8

29,2

25


17(b)1.1 These Immovable/Movable assets vested in the Company’s Joint Venture’s Sub-subsidiaries by Gazette Notification on

the date of formation of the Company’s Joint Venture’s Sub-Subsidiaries and all the investments made in the tangible

assets by the Company’s Joint Venture’s Sub-subsidiaries since their formation have been classified as above. The assets

taken over by way of finance leases by the Company’s Joint Venture’s Subsidiaries are set out in Notes 15 and 16.

17(b)1.2 Revaluation of Property, Plant and Equipment

Freehold Building, Electrical Equipment and Penstock Pipe Lines owned by Hydro Power Free Lanka PLC., a Sub-subsidiary

of the company’s Joint Venture, were revalued by an independent Valuer, Mr.K.T.Tissra, Chartered Valuation Surveyor.

Freehold Building, Electrical Equipment and Plant & Machinery owned by Ajax Engineers (Pvt) Ltd., a Subsidiary of the

company, were revalued by an independent Valuer, Mr.L.D.Abeywickrama, Chartered Valuation Surveyor.

Freehold Building, Electrical Equipment and Plant & Machinery owned by Taprobane Capital (Pvt) Ltd., a Subsidiary of the

company, were revalued by an independent Valuer, Mr.A.Y.Daniel and sons, Chartered Valuation Surveyor.

The current market value of the revalued assets as at 31st March 2012 was arrived at by depreciating the estimated

current cost of similar items. In the absence of similar items in the market, the original cost have been adjusted taking

into account the escalation of prices and depreciation of rupee.

There is no income tax effect on the above revaluation.

The Revaluation Surplus recorded by the Subsidiaries and Sub-subsidiaries of the Company as at 31st March 2012 was as

follows.

Taprobane Free Lanka

Ajax Engineers Capital (Pvt) Capital Holdings Total

(Pvt) Ltd Ltd PLC

(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Freehold Building - (35,813) 3,436 (32,377)

Freehold Motor Vehicles 18,195 - - 18,195

Furniture & Fittings 1,477 347 - 1,824

Plant & Machinery 14,158 249,013 - 263,171

Electrical and Office Equipment 5,931 3,159 28,576 37,666

Computers 2,321 - - 2,321

Penstock Pipe Line - - 28,592 28,592

Balance as at 31st March 2012 42,082 216,706 60,604 319,392

Less : Transfer of Deferred Tax Liability in respect of

Revaluation of Property, Plant and Equipment - - (14,424) (14,424)

Balance as at 31st March 2012 42,082 216,706 46,180 304,968



17(b)1.3 Carrying Value of Revalued Property, Plant and Equipment at Cost Model - Group The carrying value of revalued Property, Plant and Equipment that would have been included in the financial statements, had the assets been carried at under the Cost Model is as follows.

Class of Asset Cost Accumulated Depreciation Net Book Value

As at 31st March 2012 2011 2012 2011 2012 2011

(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Free Hold Land and Buildings 1,491,999 576,828 96,615 17,487 1,395,384 559,341

Penstock Pipe Line 12,950 12,592 6,096 4,015 6,854 8,577

Motor Vehicles 24,954 41 13,043 31 11,911 10

Tools & Equipment 217,261 1,248 144,463 1,248 72,798 -

Computers & Accessories 5,570 155 437 155 5,132 -

Furniture & Fittings 56,070 49 39,165 44 16,905 5

Plant & Machinery 926,588 56,565 650,791 17,095 275,797 39,370

Sub Total 2,735,391 647,478 950,609 40,075 1,784,782 607,303


17

Pro

per

ty, P

lan

t an

d E

qu

ipm

ent

17

(b)2

Co

mp

any

Land

Fu

rnitu

re

W

ater

Pen

stoc

k

an

d P

lant

and

M

otor

a

nd

Ergo

nom

ic

Sani

tatio

ns B

iolo

gica

l Ro

ads

and

Pipe

Se

curit

y

Co

st

Build

ings

M

achi

nery

Ve

hicl

es E

quip

men

t Co

mpu

ters

Fi

ttin

gs

Equi

pmen

t an

d O

ther

s As

sets

Br

idge

s Li

ne

Fenc

es

Tota

l

(R

s.’0

00)

(Rs.

’000

) (R

s.’0

00)

(Rs.

’000

) (R

s.’0

00)

(Rs.

’000

) (R

s.’0

00)

(Rs.

’000

) (R

s.’0

00)

(Rs.

’000

) (R

s.’0

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(Rs.

’000

) (R

s.’0

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As

at 1

st A

pril

358

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-

-

-

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35

8,49

7

Addi

tions

3

19,0

88

-

-

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-

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319,

088

As

at 3

1st M

arch

201

2 6

77,5

85

-

-

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-

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-

-

-

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677,

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Ac

cum

ulat

ed D

epre

ciat

ion

As

at 1

st A

pril

-

-

-

-

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-

-

-

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O

n Di

spos

als

-

-

-

-

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-

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Ch

arge

for t

he Y

ear

-

-

-

-

-

-

-

-

-

-

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-

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As

at 3

1st M

arch

201

2 -

-

-

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Writ

ten D

own V

alue a

s at 3

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arch 2

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677

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-

-

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-

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-

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67

7,58

5

W

ritte

n Dow

n Valu

e as a

t 31s

t Marc

h 201

1 3

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-

-

-

-

-

-

-

-

-

-

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358,

497



17 (

c)

Imm

atu

re/M

atu

re P

lan

tati

on

s -

Gro

up

La

nd

M

atur

e Pl

anta

tions

Im

mat

ure

Plan

tatio

ns

De

velo

pmen

t

Mix

ed

Mix

ed

Co

sts

Tea

Rubb

er

Coco

nut

Crop

To

tal

Tea

Rubb

er

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nut

Crop

To

tal

Tota

l

(R

s.’0

00)

(Rs.

’000

) (R

s.’0

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(Rs.

’000

) (R

s.’0

00)

(Rs.

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) (R

s.’0

00)

(Rs.

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) (R

s.’0

00)

(Rs.

’000

) (R

s.’0

00)

(Rs.

’000

)

Co

st

As a

t 1st

Apr

il 16

,014

2

74,6

30

470

,635

5

,533

8

21

751

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1

07,2

01

312

,409

1

,864

1

,593

42

3,06

7 1

,190

,700

Effe

ct o

f Rec

lassifi

catio

n -

-

(2

44,7

16)

-

-

(244

,716

) -

-

-

-

-

(2

44,7

16)

Ad

ditio

ns

498

3

2,91

7

1,6

25

196

1

35

34,

873

3

6,84

1

98,

244

1

13

2,3

07

137,

505

1

72,8

76

Tr

ansf

er fr

om T

imbe

r Sto

cks

-

-

-

-

-

-

-

-

-

-

-

-

Tr

ansf

ers

In/(O

ut)

-

19,8

47

34,

258

-

-

5

4,10

5

(52,

763)

(3

5,88

3)

(196

) (1

35)

(88,

977)

(3

4,87

2)

As a

t 31s

t Mar

ch 2

012

16,5

12

327

,394

2

61,8

02

5,7

29

956

5

95,8

81

91,

280

3

74,7

70

1,7

81

3,7

66

471,

596

1,0

83,9

88

Accu

mul

ated

Dep

reci

atio

n

As

at 1

st A

pril

1,00

4

64,

438

7

1,73

7

973

1

69

137

,317

-

-

-

-

-

1

38,3

21

Ch

arge

for t

he Y

ear

307

9

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1

2,13

7

334

2

6

21,

526

-

-

-

-

-

2

1,83

3

As a

t 31s

t Mar

ch 2

012

1,3

11

73,

467

8

3,87

4

1,3

07

195

1

58,8

43

-

-

-

-

-

160

,154

W

ritte

n Do

wn

Valu

e as

at 3

1st M

arch

201

2 1

5,20

2

253

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1

77,9

28

4,4

23

761

4

37,0

38

91,

280

3

74,7

70

1,7

81

3,7

66

471,

596

9

23,8

34

Writ

ten

Dow

n Va

lue

as a

t 31s

t Mar

ch 2

011

15,

010

21

0,19

2

398

,898

4

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6

52

614

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1

07,2

01

312

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1

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1

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42

3,06

7 1

,052

,379

Th

ese

are

inve

stm

ents

in im

mat

ure/

mat

ure

plan

tatio

ns s

ince

the

for

mat

ion

of t

he C

ompa

ny’s

Joi

nt V

entu

re’s

Sub

-sub

sidi

arie

s. T

he a

sset

s (in

clud

ing

plan

tatio

ns

asse

ts) t

aken

ove

r by

way

of

esta

te a

re s

et o

ut in

Not

es 1

5 an

d 17

. Fur

ther

inve

stm

ent

in im

mat

ure

plan

tatio

ns t

aken

ove

r by

way

of

thes

e le

ases

are

sho

wn

in

the

abov

e N

ote.

Whe

n su

ch p

lant

atio

ns b

ecom

e m

atur

e, t

he a

dditi

onal

inve

stm

ents

sin

ce t

ake

over

to

brin

g th

em t

o m

atur

ity w

ill b

e m

oved

fro

m im

mat

ure

to

mat

ure

unde

r th

is N

ote.

A c

orre

spon

ding

mov

emen

t fr

om im

mat

ure

to m

atur

e of

the

inve

stm

ent

unde

rtak

en b

y J

ED

B/S

LSP

C o

n th

e sa

me

plan

tatio

n pr

ior

to

the

leas

e w

ill b

e ca

rrie

d ou

t un

der

Not

e 17

.


17 (d) Capital Work-In-Progress Group

As at 31st March 2012 2011 (Rs’000) (Rs’000)

Balance as at 1st April 20,337 47,378 Less : Adjustment on Disposal of Joint Venture - (21,510) 20,337 25,868 Add : Transfer from Tangible Assets other than Immature/Mature Plantations - 32 Amount Incurred during the Year 63,050 16,916 83,386 42,816 Amount Capitalized during the Year (19,680) (22,479) Balance as at 31st March 63,707 20,337 17 d) 1 Class of Asset-wise Break-up

Buildings 18,847 4,942 Plant and Machinery 201 4,760 Water Sanitation 106 106 Roads and Bridges 4,417 4,170 Hydro Power 39,260 6,254 Others 876 105 Balance as at 31st March 63,707 20,337

18 Timber Stocks Opening balance as at 1st April 1,714,342 2,884,583

Less : Adjustment on Disposal of Joint Venture - (1,309,600) 1,714,342 1,574,983 Add : Effect on Reclassification of Mature/ Immature Plantation 244,716 - Effect on adjustment due to share of Non-controlling interest of Joint venture’s Sub-subsidiary 106,872 - I ncrease due to New Planting 11,630 12,210 Marginal Increase/Decrease of Timber Contents (14,952) 128,745 2,062,608 1,715,938

Less : Amount Written Off from Timber Stocks - (4) Amount Transferred to Immature Plantations - (1,592) Balance as at 31st March 2,062,608 1,714,342

18.1 The timber stocks as at 31st March 2012 of the group was valued by Mr.K.T.D.Tissera, an independent Chartered Valuation Surveyor as per the Valuation Report dated 15th April 2012 prepared on the physically verified timber statistics provided by the company on a tree by tree basis. As the timber trees were valued as at 31st December 2010 by the same Chartered valuation Surveyor on a field by field basis as per the timber statistics provided by the company, an additional valuation of timber trees as 31st March 2011 had not been carried out as there was no major change in the valuation of timber stock as at 31st March 2011. However, a difference was noted in number of trees as at 31st March 2011 compared to that of 31st March 2012 which has resulted in a loss on fair value of Timber Stocks for the current year. The group has valued the Timber Stocks at fair value less estimated point-of-sale-costs. The direct cost attributable to new/re-planting pertaining to trees having three years or less have been added to the timber stocks. Timber Trees namely Eucalyptus Torariyana, Albezzia, Graveelia, Eucalyptus Grandis, Astonia, Pinus, Toona, Mahogany, Teak, Jack, Turpentine, Rubber, Nadun, Mango, Pellen, Hora, Domba, Lunumidella, Wal Del, Mara etc. available on the plantations have been taken into consideration in this valuation of Timber Trees.



18 Timber Stocks (contd.)In valuing the timber plantations, under-mentioned factors have been taken into consideration.

1 The present age of trees 2 Maturity age of the tree- Maturity of the tree is based on the variety of the species of the tree 3 Annual marginal increase in timber content 4 Number of years to harvest 5 Timber content of harvestable trees on maturity 6 Timber Plants having below three years of age have not been taken into the valuation 7 The timber content of immature trees at an estimated future harvestable year 8 The current price of species of timber per cubic foot at the relevant year Trees have been valued as per the current timber prices in the domestic market based on the price list of the State Timber Corporation and prices of timber trees sold by estates and prices of logs and sawn timber in the popular timber traders in Sri Lanka.

The fair value is determined on the basis of net present value of expected future cash flows using a discount rate of 12% per annum. The significant assumptions used in the valuation of Timber Stocks are as follows:

a) Future cash flows are determined by references to current timber prices without considering the inflationary effect.

b) The on going cost of growing trees which are deducted in determining the net cash flows are constant in real terms.

c) Timber Trees that have not come up to a harvestable size are valued working out the period that would take for those trees to grow up to a harvestable size.

d) The Present Value of the Trees is worked out based on the projected size and the estimated number of years it would take to reach that size. This is worked out on the basis of an annual marginal increase of Timber content which normally ranges from 0.50 to 1.50 cm per year for trees of diameter girth over 10 cm.

e) The value of each matured species of timber is worked out on the price of a cubic of timber in the market of the species and the available cubic content of timber in the tree.

f) Due consideration has been given for cost of felling, transport, sawing, cost to sell including obtaining of approval for felling.


19 Investments in Subsidiaries- Company19.1 Subsidiary Carrying Carrying No. of Shares Group Holding Company Holding Value Value As at 31st March 2012 2011 2012 2011 2012 2011 2012 2011

Note Nos. Nos. % % % % (Rs.’000) (Rs.’000) Excel Global Holdings (Pvt) Ltd (EGHPL) 53,448,329 - 100 - 100 - 888,387 - Samudra Beach Resorts (Pvt) Ltd (SBRPL) 1,000,000 - 100 - 100 - 10,000 - Taprobane Capital (Pvt) Ltd., (TCPL) 19.1 18,200,002 - 100 - 100 - 182,000 - AJAX Engineers (Pvt) Ltd (AEPL) 239,694 - 100 - 51 - 100,000 - Royal Fernwood Porcelain Ltd (RFPL) 68,557,692 - 77 - 17 - 71,300 - 1,251,687 -

19(a) On 22nd July 2011, company has acquired 100% holding of Excel Global Holdings (Pvt) Ltd with a purchase consideration of Rs.888,386,921/-. Main business activity of the entity is Operating a recreational park.

19(b) On 4th April 2011, company has invested 100% holding of Samudra Beach Resorts (Pvt) Ltd with a capital infusion of Rs.10,000,000/-. Main business activity of the entity is to operate beach resort at Kosgoda. This resort is still under construction.

19(c) On 30th January 2012, company has acquired 51% holding of Ajax Engineers (Pvt) Ltd with a purchase consideration of Rs.100,000,000/-. Main business activity of the entity is Construction.

19(d) On 31st March 2012, Company has converted Rs.71.3mn short term loan given to RFPL to the ordinary shares (Rs.1.04 X 68,557,692 shares = Rs.71,300,000). As a result of that company has acquired 17% holding of the RFPL. Company has a 59% (No. of shares 242,169,778) indirect holding through Taprobane Capital (Pvt) Ltd. Main business activity of the RFPL is Manufacturing, Exporting and retail porcelain related products.

19.1 Associates Transfer to Subsidiaries during the year On 27th December 2011 the company has acquired balance 60.33% holding of Taprobane Capital (Pvt) Ltd(TCPL). Prior to

this acquisition, this company was Associate Company to the Group and, as a result, TCPL is now treated as Subsidiary.

Further investment made by the group during the year in TCPL has resulted gaining control over those equity accounted investees. Consequently these are treated as subsidiaries of the Group from the date of establishing control over the respective of the company.

No fair value adjustments were made on pre-acquisition carrying amounts on the acquisition date and the recognized values on acquisition, are as follows. A detailed disclosure as required by SLAS 9 - Cash Flow Statements, is given below for the acquisitions made during the year.



19.2 The acquisition had the following effect on the Group’s assets and liabilities on the acquisition date.

Group TCPL SBRPL EGHPL AEPL Total

(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Property, Plant and Equipment 728,295 - 65,979 5,288 799,562 Investment Property - - 3,500,000 - 3,500,000 Deferred Expenditure 43,222 - - - 43,222 Investments - - - 20,090 20,090 Inventories 138,180 - - 63,996 202,176 Trade and Other Receivables 87,947 - 8,944 58,734 155,625 Amounts due from Related Parties - 10,000 - - 10,000 Short Term Investments - - 14,520 75,873 90,393 Deposits and Advances 38,239 - - 2,356 40,595 Cash and Cash Equivalents 6,232 - 3,193 268 9,693 Interest Bearing Borrowings (227,872) - (27,185) - (255,057) Finance Lease Obligation (2,298) - - (204) (2,502) Retirement Benefit Obligations (18,994) - (1,603) (6,457) (27,054) Amounts due to Related Parties (67,483) - - (6,964) (74,447) Deferred Tax (7,685) - - - (7,685) Long Term Loan Liabilities (196,314) - - - (196,314) Accounts Payable and Accrued Expenses (179,063) - (22,735) (52,523) (254,321) Deposits and Advances - - (25,483) - (25,483) Income Tax Payable - - - (8,259) (8,259) Bank Overdraft (23,990) - (19,646) (5,250) (48,886) Net Identifiable Assets and Liabilities 318,416 10,000 3,495,984 146,948 3,971,348 Minority Interest (85,814) - - (72,005) (157,819) Share of Net Assets recognized in the previous years (74,400) - - - (74,400) Goodwill (Negative Goodwill) on Acquisition (48,406) - (2,607,597) 25,057 (2,630,947) Cash paid on acquisition 109,796 10,000 888,387 100,000 1,108,183

Analysis of Cash on Acquisition of the Subsidiaries Cash paid on Acquisition (109,796) (10,000) (888,387) (100,000) (1,108,183)

Cash at bank Acquired (17,758) - (16,453) (4,982) (39,193) Net Cash Outflow (127,554) (10,000) (904,840) (104,982) (1,147,376) 20 Investments in Joint Ventures Company At Cost At Cost As at 31st March 2012 2011 (Rs.’000) (Rs.’000) Free Lanka Capital (Pvt) Ltd., (FLCPL) Note 20.1 50,000 50,000 50,000 50,000

20.1 Free Lanka Capital Holdings PLC., (FLCHL) Company has invested Rs.50,000,000/- representing 50% of the Stated Capital of FLCPL during the previous year. Consequently, the effective holding percentage in Free Lanka Capital Holdings PLC (FLCHL) became to 27.3%. The investment in FLCHL has been recognized in the financial statements on the basis of Proportionate Consolidation.


20 Investments in Joint Ventures (contd.) Summarized last audited financial statements of FLCPL as at 31st March 2012 is as follows.

Investor’s Total Interest (Rs.’000) (Rs.’000) Revenue - - Cost of Sales - - Gross Profit - - Administrative Expenses (1,482) (741) (1,482) (741)

Profit/ (Loss) before Taxation (1,482) (741) Loss for the Period (1,482) (741) As at 31st March 2012

Non-current Assets 748,600 374,300 Total Assets 748,600 374,300 Current Liabilities 664,716 332,358 Total Liabilities 664,716 332,358

21 Investments in Equity Accounted Investees 21.1 Group

No. of Shares Group Holding Carrying value As at 31st March 2012 2011 2012 2011 2012 2011 Carrying value Nos. Nos. % % (Rs.’000) (Rs.’000) Melfort Green Teas (Pvt) Ltd (MGTPL) 650,000 650,000 12.68 12.68 4,207 3,908 LOLC Leisure Ltd (LOLCLL) 115,642,800 48,184,500 30.00 30.00 1,205,020 894,828 Taprobane Capital (Pvt) Ltd (TCPL) - 4,840,000 - 39.67 - 130,802 Taprobane Plantations Ltd (TPL) 22,500 - 45.00 - 4,969 - Rain Forest Eco Lodge (Pvt) Ltd (RFELL) 6,399,375 - 5.46 - 15,240 - Virginia International Investments Ltd (VIIL) 800,000 - 40.00 - 4,000 - Total Carrying value of the Group 1,233,436 1,029,538

No. of Shares Group Holding Cost As at 31st March 2012 2011 2012 2011 2012 2011 Cost Nos. Nos. % % (Rs.’000) (Rs.’000) Melfort Green Teas (Pvt) Ltd (MGTPL) 650,000 650,000 12.68 12.68 5,631 5,631 LOLC Leisure Ltd (LOLCLL) 115,642,800 48,184,500 30.00 30.00 1,186,065 848,779 Taprobane Capital (Pvt) Ltd (TCPL) - 4,840,000 - 39.67 - 48,400 Taprobane Plantations Ltd (TPL) 22,500 - 45.00 - 23 - Rain Forest Eco Lodge (Pvt) Ltd (RFELL) 6,399,375 - 5.46 - 17,470 - Virginia International Investments Ltd (VIIL) 800,000 - 40.00 - 4,000 - Total Cost of the Group 1,213,189 902,810



21.2 Group Share of Net Assets of Investment in Equity Accounted Investees

Equity Value of Investment in Associates - Group MGTPL LOLCLL TCPL* TPL RFELL VIIL Total (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Equity Value of Investment as at 31st March 2010 3,074 - - - - - 3,074 Investment made during the year - 848,774 48,400 - - - 897,174 Share of Profit/(Loss) of Associate Company after Tax 2,609 46,054 82,402 - - - 131,065 Dividend Received (1,775) - - - - - (1,775) Equity Value of Investment as at 31st March 2011 3,908 894,828 130,802 - - - 1,029,538

Investment made during the year - 337,291 23,802 23 17,470 4,000 382,586 Share of Profit/(Loss) of Associate Company after Tax 1,186 (27,099) (80,204) 4,946 (2,230) - (103,401) Recognised as subsidiary (74,400) - - - (74,400) Dividend Received (887) - - - - - (887) Equity Value of Investment as at 31st March 2012 4,207 1,205,020 - 4,969 15,240 4,000 1,233,436

* TCPL became a subsidiary of the Browns Investments PLC during the year.

21.2.1 Summarised Financial Information of Equity Accounted Investees

For the year ended 31 st March 2011 2011 2011 2011 MGTPL LOLCLL TCPL Total (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Revenue 179,836 1,175,668 530,016 1,885,520 Cost of Sales (135,662) (277,295) (538,908) (951,865) 44,174 898,373 (8,892) 933,655 Other Income 1,001 97,325 299,085 397,411 45,175 995,698 290,193 1,331,066 Expenses (20,073) (751,501) (158,732) (930,306) Profit/(Loss) before Taxation 25,102 244,197 131,461 400,760 Income Tax Expenses (4,532) 8,310 (3,149) 629 Profit/(Loss) after Taxation 20,570 252,507 128,312 401,389

For the year ended 31 st March 2012 2012 2012 2012 2012 2012 MGTPL LOLCLL TPL RFEL VIIL* Total (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Revenue 116,967 799,709 78,894 781 - 996,351 Cost of Sales (92,451) (141,365) (43,406) (540) - (277,762) 24,516 658,344 35,488 241 - 718,589 Negative Goodwill - 353,420 - - - 353,420 Other Income 3,313 247,919 72 3,726 - 255,030 27,829 1,259,683 35,560 3,967 - 1,327,039 Expenses (17,065) (1,564,196) (22,093) (33,673) - (1,637,027) Profit/(Loss) before Taxation 10,764 (304,513) 13,467 (29,706) - (309,988) Income Tax Expenses (1,400) 18,306 (2,477) (462) - 13,967 Profit/(Loss) after Taxation 9,364 (286,207) 10,990 (30,168) - (296,021)

* Virginia International Investments Ltd (VIIL) has not yet commenced on commercial operations.


For the year ended 31 st March 2011 MGTPL LOLCLL TCPL Total (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Current Assets 41,834 1,812,258 786,616 2,640,708 Non-current Assets 15,895 4,717,566 272,172 5,005,633 Total Assets 57,729 6,529,824 1,058,788 7,646,341 Current Liabilities 25,969 248,244 254,906 529,119 Non-current Liabilities 961 1,505,735 340,981 1,847,677 Total liabilities 26,930 1,753,979 595,887 2,376,796

For the year ended 31 st March 2012 MGTPL LOLCLL TPL RFEL VIIL Total (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Current Assets 33,427 1,763,772 20,559 45,132 - 1,862,890 Non-current Assets 10,042 6,065,682 303 341,053 10,000 6,427,080 Total Assets 43,469 7,829,454 20,862 386,185 10,000 8,289,970 Current Liabilities 9,394 1,646,335 10,034 25,344 - 1,691,107 Non-current Liabilities 911 251,407 - 81,715 - 334,033 Total liabilities 10,305 1,897,742 10,034 107,059 - 2,025,140

21.3 Company No. of Shares Company Holding At Cost As at 31st March 2012 2011 2012 2011 2012 2011 Nos. Nos. % % (Rs.’000) (Rs.’000) LOLC Leisure Ltd (LOLCLL) 115,642,800 48,184,500 30.00 30.00 1,186,065 848,774 Taprobane Capital (Pvt) Ltd (TCPL) - 4,840,000 - 39.67 - 48,400 Virginia International Investments Ltd (VIIL) 800,000 - 40.00 - 4,000 - Taprobane Plantations Ltd (TPL) 22,500 - 45.00 - 23 - 1,190,088 897,174

22 Other Long Term Investments Group Company As at 31st March 2012 2011 2012 2011 Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Quoted Investments 22.1 106,667 - 106,667 - Unquoted Investments 22.2 & 22.3 1,101,415 1,056,785 1,100,415 1,056,785 1,208,082 1,056,785 1,207,082 1,056,785 22.1 Quoted Investments Number of shares Cost Market value As at 31st March 2012 2011 2012 2011 2012 2011 Nos. Nos. (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Sierra Cables PLC 32,202,953 - 106,667 - 106,667 - 106,667 - 106,667 -



22.2 Unquoted Investments-Group Number of shares Value

As at 31st March 2012 2011 2012 2011 Nos. Nos. (Rs.’000) (Rs.’000) Sierra Constructions (Pvt) Ltd 12,490,253 12,490,253 600,904 600,904 Sierra Holdings (Pvt) Ltd 4,519,892 4,519,892 199,911 199,911 Agstar Fertilizers Ltd - 1,825,000 - 54,476 Sierra Cables Ltd - 29,816,800 - 201,494 Commercial Leasing & Finance Ltd 40,000,000 - 200,000 - Taprobane Holdings (Pvt) Ltd 16,766,667 - 100,600 - Balance as at 31st March 1,101,415 1,056,785

Number of shares Value 22.3 Unquoted Investments-Company 2012 2011 2012 2011 Nos. Nos. (Rs.’000) (Rs.’000) Sierra Constructions (Pvt) Ltd 12,490,253 12,490,253 600,904 600,904 Sierra Holdings (Pvt) Ltd 4,519,892 4,519,892 199,911 199,911 Agstar Fertilizers Ltd - 1,825,000 - 54,476 Sierra Cables Ltd - 29,816,800 - 201,494 Commercial Leasing & Finance Ltd 40,000,000 - 200,000 - Taprobane Holdings (Pvt) Ltd 16,600,000 - 99,600 - Balance as at 31st March 1,100,415 1,056,785

Group Company 23 Goodwill on Acquisition 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Opening balance as at 1st April 2,863 258 - - Less : Adjustments on Disposal of Joint Venture - (117) - - 2,863 141 - - Add : Additional payment on Acquisition of Hydro Power Free Lanka (Pvt) Ltd - 2,722 - - Acquisition of Ajax Engineers (Pvt) Ltd 25,057 - - - Acquisition of Excel Restaurants (Pvt) Ltd 20,524 - - - Balance as at 31st March 48,444 2,863 - -

Opening balance the group share of the excess of net assets of Hydro Power Free Lanka (Pvt) Ltd., acquired by the Group in year 2010/11 period, over the consideration paid and the additional payment made on acquisition.

Goodwill on acquisition during the year represents the group share of the excess of net assets of Ajax Engineers (Pvt) Ltd and Excel Restaurants (Pvt) Ltd., acquired by the Group in year 2011/12 period, over the consideration paid and the additional payment made on acquisition.

Goodwill as at the Balance sheet date has been tested for impairment and no impairment losses were identified at the Group level. Recoverable value of the Goodwill has been estimated based on the expected future cash flows.


23.1 Goodwill on Acquisition - Group

Goodwill on Carrying Value Acquisition

As at 31st March 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) Free Lanka Capital Holdings PLC 2,863 2,863 2,863 Ajax Engineers (Pvt) Ltd 25,057 25,057 - Excel Restaurants (Pvt) Ltd 20,524 20,524 48,444 48,444 2,863

24 Inventories

Group Company As at 31st March 2012 2011 2012 2011 Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Input Materials 94,913 16,520 - - Work-In-Progress 22,517 - - - Finished Goods 22,791 - Growing Crop Nurseries 8,722 6,172 - - - Tea 120,541 148,253 - - - Rubber 13,923 25,090 - - - Coconut 115 555 - - Certified Emission Reduction 6,116 11,217 - - Consumables and Spares 75,035 7,608 - - 364,673 215,415 - -

Less : Provision for Obsolete Items (17,690) - - - 346,983 215,415 - -

25 Trade and Other Receivables

Total trade debtors 153,944 58,489 - - Provision for doubtful debts (5,381) - - - 148,563 58,489 - - Other receivables 25.1 219,042 162,613 81,753 96,311 367,605 221,102 81,753 96,311

25.1 Other Receivables

Withholding Tax Recoverable 12,992 1,706 10,989 1,223 Economic Service Charge Recoverable 6,285 6,199 - - Other Debtors 38,141 29,493 1,274 231 Interest Receivable 4,094 - - - Dividend Receivable 8,825 - 8,825 - Advance and Prepayments 146,313 125,215 60,665 94,857 Refundable Deposits 2,392 - - - 219,042 162,613 81,753 96,311



26 Loans To Related Parties

Group Company As at 31st March 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Brown & Company PLC 45,467 507,219 45,467 507,219 Royal Fernwood Porcelain Ltd - 10,243 - 10,243 Lexinton Holdings (Pvt) Ltd 545,566 100,329 545,566 100,329 Taprobane Capital (Pvt) Ltd - - 67,493 - Millennium Development (Pvt) Ltd - - 15,830 - Ceylon Estate Teas (Pvt) Ltd 1,092 - - - 592,125 617,791 674,356 617,791

27 Amounts Due from Related Parties

Amounts Due From Subsidiaries Samudra Beach Resorts (Pvt) Ltd (SBRPL) - - 35 -

Amounts Due From Other Related Companies Ceylon Estate Teas (Pvt) Ltd 1,576 1,601 - -

Free Lanka Trading (Pvt) Ltd - 42 - - Melfort Green Teas (Pvt) Ltd 178 2,154 - - Free Lanka Trading Liqour (Pvt) Ltd 2 - - - FLMC Sudima Timber Products 69 - - - Sierra Constructions (Pvt) Ltd 52 - - - Free Lanka Capital (Pvt) Ltd 190,542 190,542 380,726 380,727 Perpetual Holdings (Pvt) Ltd - 158 - - Taprobane Plantations Ltd 914 - - - Millennium Development (Pvt) Ltd - - 2,112 - Excel Global Holdings (Pvt) Ltd - - 147 - LOLC Leisure Ltd 45,934 - 45,934 - Royal Fernwood Porcelain Ltd - - 9,500 - 239,267 194,497 438,454 380,727

28 Short Term Investments Group Company As at 31st March 2012 2011 2012 2011 Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Investments in Equity Securities 28.1 (a )&(b) 1,346,418 968,696 1,322,257 954,798 Fixed Deposits 45,262 1,000,000 - 1,000,000 Savings Deposits 145,142 1,070,389 - 1,010,025 Investments in REPOs 14,680 13,650 1,030 - Other Investments 28.2 760,800 1,035,716 688,703 1,035,716 2,312,302 4,088,451 2,011,990 4,000,539


28 Short Term Investments (contd.)28.1 Investments in Equity Securities

Market Value Market Value No. of Cost of of Investment No. of Cost of of Investment As at 31st March Shares Investment 2012 Shares Investment 2011 Nos. (Rs’000) (Rs’000) Nos. (Rs’000) (Rs’000) a) Quoted Investments-Group

Agstar Fertilizer PLC 40,250,000 285,884 418,350 - - - Ceylinco Insurance PLC 1,000 554 845 1,000 554 730 Commercial Bank Of Ceylon PLC 160,450 16,225 16,045 151,000 38,478 40,015 CT Land Development PLC 19,500 195 472 Dialog Axiata PLC 44,991,400 521,864 319,438 44,990,600 521,864 476,900 Distilleries Company of Sri Lanka PLC 16,013 2,029 2,322 65,600 12,017 11,808 Free Lanka Capital Holdings PLC 43,978,213 43,978 83,559 43,978,213 43,978 219,890 Hayleys PLC 293,300 119,984 105,624 Hemas Holding PLC 843,100 36,283 22,174 692,200 32,343 31,841 Hydro Power Free Lanka PLC 1,027,934 15,283 7,347 3,389,100 13,898 13,898 Janashakthi Insurance PLC - - - 627,600 10,078 10,356 Lanka Orix Finance PLC 28,300 123 127 Nations Trust Bank PLC 116,100 10,273 6,618 116,100 10,273 8,905 Richard Peiris PLC 1,600,400 23,864 12,003 1,943,200 28,280 26,233 Seylan Bank PLC - Non Voting 10,363,800 357,244 300,515 1,757,200 66,627 68,531 Textured Jersy Lanka PLC 1,744,700 26,301 12,387 - - - The Finance Company PLC 1,250,000 50,000 37,500 1,250,000 50,000 46,500 The Lanka Hospital Corporation PLC - - - 300 15 14 Vallibel One PLC - - - 523,000 13,075 13,075 Parquet (Ceylon) PLC 72,800 2,367 1,092 - - - 1,512,451 1,346,418 841,480 968,696

Market Value Market Value No. of Cost of of Investment No. of Cost of of Investment Shares Investment 2012 Shares Investment 2011 Nos. (Rs’000) Nos. Nos. (Rs’000) (Rs’000) b) Quoted Investments-Company

Agstar Fertilizers PLC 39,000,000 273,134 405,600 - - - Ceylinco Insurance PLC 1,000 554 845 1,000 554 730 Commercial Bank Of Ceylon PLC 160,450 16,225 16,045 151,000 38,478 40,015 Dialog Axiata PLC 44,991,400 521,864 319,438 44,990,600 521,864 476,900 Distilleries Company of Sri Lanka PLC 16,013 2,029 2,322 65,600 12,017 11,808 Free Lanka Capital Holdings PLC 43,978,213 43,978 83,559 43,978,213 43,978 219,890 Hayleys PLC 293,300 119,984 105,624 - - - Hemas Holding PLC 843,100 36,283 22,174 692,200 32,343 31,841 Hydro Power PLC 38,200 567 275 - - - Janashakthi Insurance PLC - - - 627,600 10,078 10,356 Lanka Orix Finance PLC 28,300 123 127 - - - Nations Trust Bank PLC 116,100 10,273 6,618 116,100 10,273 8,905 Richard Peiris PLC 1,600,400 23,864 12,003 1,943,200 28,280 26,233 Seylan Bank PLC - Non Voting 10,230,467 352,391 296,648 1,757,200 66,627 68,531 Textured Jersey Lanka PLC 1,744,700 26,301 12,387 - - - The Finance Company PLC 1,250,000 50,000 37,500 1,250,000 50,000 46,500 The Lanka Hospital Corporation PLC - - - 300 15 14 Vallibel One PLC - 523,000 13,075 13,075 Parquet (Ceylon) PLC 72,800 2,367 1,092 - - - 1,479,937 1,322,257 827,582 954,798



28 Short Term Investments (contd.)28.2 Other Investments Group Company As at 31st March 2012 2011 2012 2011 Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Investment in Commercial Papers 28.2.1 688,703 940,847 688,703 940,847 Investment in Treasury Bills 3,847 - - - Investment in Unit Trust 68,250 - - - Investments in Repurchase Agreements - 94,869 - 94,869 760,800 1,035,716 688,703 1,035,716

28.2.1 Investment in Commercial Papers Taprobane Holdings PLC 493,683 484,587 493,683 484,587

Lexinton Holdings (Pvt) Ltd - 456,260 - 456,260 Sierra Constructions ( Pvt) Ltd 79,013 - 79,013 - Lanka Orix Finance Company Ltd 116,007 116,007 688,703 940,847 688,703 940,847 29 Cash and Cash Equivalents

Cash in Hand 18,015 1,870 - - Cash in Transit 41,489 1,120 188 - Call Deposits 254,692 423 - - Cash at Banks 79,033 533,671 38,172 3,734 393,229 537,084 38,360 3,734

Bank Overdrafts 81,973 24,554 - - 81,973 24,554 - -

30 Stated Capital Group Company As at 31st March 2012 2011 2012 2011 (‘000) (‘000) (‘000) (‘000) No. No. No. No. Movement in Number of Ordinary Shares

Opening balance as at 1st April 1,810,000 98,000 1,810,000 98,000 Increase in Number of Shares due to Share Split - 882,000 - 882,000 Issue of Shares during the Year 50,000 830,000 50,000 830,000 Closing balance as at 31st March 1,860,000 1,810,000 1,860,000 1,810,000

(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Value of Shares Opening balance as at 1st April 5,130,000 980,000 5,130,000 980,000

Issue of Shares during the Year 250,000 4,150,000 250,000 4,150,000 Closing balance as at 31st March 5,380,000 5,130,000 5,380,000 5,130,000

The issued shares of the Company as of 1st April 2010 have been sub-divided on the basis of 10 shares per 01 existing shares in November 2010.

During the previous year, the Company has issued Rs.4,150,000,000/- worth of ordinary shares through a private placement and during the year the Company has issued Rs.250,000,000/- worth of ordinary shares through a Initial Public Offer (IPO).

The shares of Browns Investments PLC are quoted in the Colombo Stock Exchange under Divi Savi Board.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.


31 Capital Reserves Group Company As at 31st March 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Revaluation of Property, Plant and Equipment

Opening balance as at 1st April 46,180 115,039 - - Add : Surplus on Revaluation of Property, Plant And Equipment 188,410 - - - 234,590 115,039 - - Less : Transfers of Deferred Tax Liability in respect of Revaluation of Property, Plant and Equipment 9,684 (14,424) - - Adjustment on Disposal of Joint Venture - (54,435) - - Closing balance as at 31st March 244,274 46,180 - -

This represents the group share of the surplus on revaluation of Freehold Building, Electrical Equipment and Penstock Pipe Lines owned by Hydro Power Free Lanka (Pvt) Ltd., a Sub-subsidiary of the Joint Venture of the Company and the fully owned subsidiaries of Ajax Engineers (Pvt) Ltd and Taprobane Capital (Pvt) Ltd.

32 Interest Bearing Borrowings Group Company As at 31st March 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Amount Payable after One Year 611,248 164,500 128,000 - Amount Payable within One Year 494,916 44,302 384,000 - 1,106,164 208,802 512,000 -

32.1 Opening balance as at 1st April 208,802 527,897 - - On Acquisition of Subsidiary 255,057 - - - New Loans Obtained during the Year 716,186 31,395 512,000 - Amount Reclassified as Loan From Related Parties - (66,203) - - Disposal of Joint venture - (239,665) - - Repayments during the Year (73,881) (44,622) - - Closing balance as at 31st March 1,106,164 208,802 512,000 -

32.2 Lender-wise Summary Bank of Ceylon 18,298 25,002 - -

National Development Bank PLC 5,254 8,419 - - Lanka Orix Leasing Co. PLC 106,658 51,467 - - Sampath Bank PLC 540,372 34,408 512,000 - Seylan Bank PLC 66,077 48,556 - - Lanka Orix Finance Co. Ltd 22,775 - - - Commercial Bank PLC 40,950 40,950 - - DFCC Bank LTD 19,259 - - - People Leasing Finance Ltd 1,786 - - - Hatton National Bank PLC 284,735 - - - 1,106,164 208,802 512,000 -



33 Finance Lease Obligation As at 31st March 2012 2011 2012 2011 Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Net Liability to Lessor of JEDB/SLSPC Estate 33.3 83,205 84,400 - - Other Finance Leases 6,842 10,168 - - 90,047 94,568 - -

33.1 Amount Payable after One Year 148,489 158,661 - - Interest In Suspense (63,430) (69,937) 85,059 88,724

Amount Payable within One Year 9,232 10,735 - - Interest In Suspense (4,244) (4,891) 4,988 5,844 - -

33.2 Opening balance as at 1st April 167,059 328,730 - - New Leases Obtained during the Year 1,323 2,881 - - On Acquisition of Subsidiary 531 - - - Disposal of Joint venture - (151,581) - - Repayments during the Year (11,192) (12,971) - - Closing balance as at 31st March 157,721 167,059 - - Interest in Suspense (67,674) (72,491) - - 90,047 94,568 - -

33.3 Net Liability to Lessor of JEDB/SLSPC Estate The lease agreement of estates was amended with effect from 15th June 1996 to a substantially higher amount than

the previous nominal lease rental of Rs. 500/- per estate per annum. In terms of the agreement entered into with the Ministry of Plantation Industries, the contingent lease rental was suspended for a five year period commencing from the year 2002/2003 and expired on 21st June 2008. As per the letter received from the Secretary, Ministry of Plantations industries dated 12th May 2010,the application of the contingent lease rental was made effective and accordingly the Annual Lease Rental revised with retrospective effect from 2008/2009. The Escalated Lease Rentals for the years 2008/2009,2009/2010 and 2010/2011 were computed applying the GDP Deflators as 2007-14%, 2008-16.31%, 2009-5.70% and 2010 - 7.30% respectively. The contingent lease rental charged by the Group in the Income Statement for the year amounted to (Rs.’000) 22,839/-. The future liability on annual lease payments of the Group would continue till year 2045. The net present value of this liability discounted at 4% would result in a total group liability of (Rs.’000) 304,780/-.

34 Retirement Benefit Obligations Group Company As at 31st March 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) 34 (a) Gratuity Balance as at 1st April 377,781 589,694 - - On acquisition of Subsidiary 27,054 - - - Add : Transfer Out/Net impact of Actuarial Valuations - - - - Provision made during the Year 39,075 84,300 - - 443,910 673,994 - -

Less : Payments Made during the Year (41,214) (28,492) - - Adjustment on Disposal of Joint Venture - (267,721) - - Balance as at 31st March 402,696 377,781 - -

This Liability is not externally funded.


34 (b) As required by the Sri Lanka Accounting Standard 16 (Revised 2006), “Employee Benefits” which became effective from 01st July 2007, Free Lanka Capital Holdings PLC measures its benefit obligation together with following subsidiaries using an actuarial valuation carried out by Messers Actuarial & Management Consultants (Pvt) Ltd.

Free Lanka Plantations Co. (Pvt) Limited Free Lanka Management Co. (Pvt) Limited

If the Group had provided for gratuity on the basis of fourteen days wages and half month salary for each completed year

of service in line with the Payment of Gratuities Act No. 12 of 1983, the liability would have been as follows.

Group Company 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Free Lanka Plantations Co. (Pvt) Ltd 289,606 239,632 - - Free Lanka Management Co. (Pvt) Ltd 192,115 167,574 - - 481,721 407,206 - - Hence, there is a contingent liability of Rs.106mn (Previous Year - Rs.28mn) which would crystallize only if the Group

ceases to be a going concern.

34.(b).1 The principal assumptions used The principal assumptions used in determining the cost of employee benefits using Actuarial Valuation are disclosed in

Note 3.6.3.1 to the financial statements.

34.(c) The Gratuity Liability for employees of Hydro Power Free Lanka PLC The Gratuity Provision of Rs.1.995mn provided in the Group Financial Statements for Employees of Hydro Power Free Lanka PLC has been based on the Gratuity Formula in Appendix E of SLAS 16 - Employee Benefits.

The key assumptions used for the calculation are as follows. I. Rate of Interest 10.50%

II. Rate of Salary Increment 12.00% III. Retirement Age 55 IV. Staff Turnover Factor 5.00% V. The Company will continue as a going concern. The gratuity liability is not externally funded.



35 Deferred Tax Liabilities Group Company As at 31st March 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Balance as at 1st April 33,284 - - - On Acquisition of Subsidiary 7,029 - - - Liability recognized during the Year - 6,982 - - Charge for the Year/(Release to Income Statement) (2,552) (1,068) - - Liability in respect of Revaluation of Property, Plant and Equipment (21,515) 27,370 - - Balance as at 31st March 16,246 33,284 - -

35.1 The closing Deferred Tax Liability relates to the followings.

Accelerated Depreciation for Tax Purposes 2,241 (11,661) - - Revaluation of Property, Plant and Equipment to Fair Value 14,067 45,084 - - Revaluation of Investment Property to Fair Value - - - - Employee Benefit Liability (62) (139) - - 16,246 33,284 - -

35.2 Deferred Tax liability charged directly to Equity According to Sri Lanka Accounting Standard 14 (Revised 2005) “Income Taxes”, deferred tax shall be charged or credited

directly to equity if the tax relates to items that are credited or charged, in the same or in a different period, directly to equity. Accordingly, the deferred tax liability arising on revaluation of property, plant and equipment of Rs.21,515mn was charged directly to revaluation reserve in the Statement of Changes in Equity in the year 2011/2012. (Rs.9.6mn - Revaluation Surplus and Non controlling Interest Rs.11.8mn).

35.3 Impact Due to Corporate Income Tax Rate Change The corporate income tax rate has been reduced from 35% to 28% with effect from the year of assessment 2011/12.

Accordingly, the deferred taxation has been computed on the basis of 28%; which is considered as the substantively enacted tax rate for deferred tax purpose for the current financial year.


36 Deferred Income Group Company As at 31st March 2012 2011 2012 2011 Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Capital Grants 36.1 160,047 155,624 - - PHDT Lease Rentals 36.2 1,956 2,103 - - Rain Forest Eco Lodge (Pvt) Ltd 36.2.3 16,880 - 178,883 157,727 - -

36.1 Capital Grants

Total Capital Grants Received

Balance as at 1st April 195,223 332,180 - - Less : Adjustment on Disposal of Joint Venture - (150,810) - - 195,223 181,370 - - Add : On acquisition of Subsidiary 827 Total Grants Received during the Year 8,209 13,853 - - Balance as at 31st March 204,259 195,223 - - Total Amortization

Balance as at 1st April 39,599 62,535 - - Less : Adjustment on Disposal of Joint Venture - (28,391) - - 39,599 34,144 - - Add : Amount Amortized during the Year 4,613 5,455 - - Balance as at 31st March 44,212 39,599 - - Total Unamortized Capital Grants as at 31st March 160,047 155,624 - -

The above capital grants represent the following:

i Funds received from the Plantation Housing and Human Development Trust (PHDT), MTIP, MPI for the development of workers welfare facilities and improvements to institutional facilities. ii Funds received from the Tea Board for the construction of the CTC Tea Factory at Delta Estate. iii Funds received from the Plantation Reform Project for the development of Forestry Plantations. iv Subsidy received from the Rubber Controller Department for Rubber Replanting.

The amounts spent is capitalized under the relevant classification of Property, Plant and Equipment. The corresponding grant component is reflected under Deferred Income and is being amortized over the useful life span of the related asset.

36.2 PHDT Lease Rentals Group Company 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Balance as at 1st April 2,103 4,121 - - Less : Adjustment on Disposal of Joint Venture - (1,871) - - Amount Amortized during the Year (147) (147) - - Balance as at 31st March 1,956 2,103 - -

36.2.1 Premises at St.Andrew’s Drive in Nuwara Eliya has been leased out to Plantation Human Development Trust for a period of 20 years commencing from August 2005 at a total lease rental of Rs.10,734,696/-.

Lease Rentals received are deferred and amortized over the lease period commencing from August 2005.



36.2.2 Rain Forest Eco Lodge (Pvt) Ltd (RFELL) Group Company As at 31st March 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Balance as at 01st April - - - - Add : Value of Ordinary Shares Received 17,470 - - Less : Amount Amortized during the Year (590) - - - Balance as at 31st March 16,880 - - - This represents the value of 6,399,375 nos. of Ordinary Shares received by Maturata Plantations Ltd equivalent to 20% of

the issued Ordinary Shares of RFELL at Rs.10/- each in lieu of releasing the leasehold rights of 488 Hectares in Ensalwatte Estate, Deniyaya for Eco Tourism Project. The value of Ordinary Shares are deferred and amortized over the unexpired balance lease period.

36.2.3 Maturity Analysis Group Company 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) PHDT Lease Rentals Not later than one Year 147 147 - - Later than one year and not later than five years 586 586 - - Later than five years 1,223 1,370 - - 1,956 2,103 - -

Rain Forest Eco Lodge (Pvt) Ltd Not later than one Year 508 - - - Later than one year and not later than five years 2,032 - - - Later than five years 14,340 - - - 16,880 - - -

Group Company 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)37 Loans From Related Parties Ishara Traders (Pvt) Ltd - 61,425 - - Standard Finance (Pvt) Ltd 541,401 629,655 541,401 629,655 Brown & Company PLC - 79,979 - 79,979 541,401 771,059 541,401 709,634

37.1 Maturity Analysis Amount Payable within One Year 541,401 32,760 541,401 - Amount Payable after one Year - 738,299 - 709,634 541,401 771,059 541,401 709,634


38 Trade and Other Payables Group Company As at 31st March 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Trade Payables 209,332 121,572 - - VAT Payable 11,471 3,182 - - Accrued Charges 30,317 38,600 - 24,857 Employees’ Profit Share 16,638 16,268 - - Payable on Share Acquisition 20,531 3,180 17,351 - Other payables 165,288 90,462 22,664 20,000 Dividend Payable 13,359 - - - Excess Funds Received in respect of Initial Public Offer (IPO) Refundable to Subscribers 153 28,010 153 - 467,090 301,274 40,168 44,857

39 Amounts Due To Related Parties Amounts Due To Holding Company Brown & Company PLC 16,511 5,692 16,511 5,691 Amounts Due To Other Related Companies Free Lanka Trading Company Ltd 630 545 - - Cricket Club Café 2 2 - - Perpetual Holdings (Pvt) Ltd 165,363 165,363 - - Samudra Beach Resorts (Pvt) Ltd - - 10,000 - Free Lanka Capital Holdings PLC - 743 - 577 Free Lanka Capital (Pvt) Ltd 25,625 25,000 50,000 50,000 Standard Finance (Pvt) Ltd 500 45,046 500 45,046 Taprobane Securities (Pvt) Ltd - 3 - 3 Taprobane Holdings PLC - 4,500 - 4,500 Sierra Civil Engineering (Pvt) Ltd 327 - - - ARRC Capital Ltd 350 - - - Taprobane Plantations Ltd 7,198 - - - 216,506 246,894 77,011 105,817

40 Income Tax Payable Balance as at 1st April 15,914 17,302 1,645 - Add : Current Income Tax Expense 79,608 32,214 48,808 1,645 On Acquisition on Subsidiary 10,666 - - - Reversal of Income Tax over provision (1,781) - - - 104,407 49,516 50,453 1,645 Less : Adjustment on Disposal of Joint Venture - (7,855) - - - Self Assessment Tax Paid (29,639) (7,656) (1,645) - - ESC Set Off (3,140) (9,645) - - - Withholding Tax Set Off (4,742) (8,446) - - - Balance Tax Payment (2) - - - Balance as at 31st March 66,884 15,914 48,808 1,645



41 Rescheduled Debentures Group Company As at 31st March 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Employees’ Trust Fund Board Balance as at 1st April 410 2,250 - - Less : Adjustment on Disposal of Joint Venture - (1,021) - - Settlement of Debentures (410) (819) - - Balance as at 31st March - 410 - -

41.1 Maturity Analysis Amount Payable after five Years - - - - Amount Payable within One Year - 410 - - - 410 - -

Interest rate applicable to Rescheduled Debentures is one year weighted average Treasury Bill gross rate ( before 10% withholding tax ) which prevails immediately prior to 11th November every year.

42 Net Assets per Ordinary Share Computation of the Net Assets per Ordinary Share has been done based on the total equity attributable to Equity

Holders of the Company divided by the number of ordinary shares in issue as at the Balance Sheet date and calculated as follows.

Group Company As at 31st March 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Amounts used as the Numerator Total equity attributable to Equity Holders of the Company 10,880,750 8,097,252 6,401,967 6,599,605

Amount used as the Denominator Number of Ordinary Shares in issue as at the Balance Sheet date 1,860,000 1,810,000 1,860,000 1,810,000

Net Assets per Ordinary Share (Rs.) 5.85 4.47 3.44 3.65


43 Contingent Liabilities and Assets 43.1 Company

The company does not anticipate any contingent liabilities to arise out of any contingent event as at the balance sheet date. There is no contingent asset as at the Balance Sheet date.

43.2 Group 43.2.1 Contingent Liabilities 43.2.1.1 Maturata Plantations Ltd.

a) Debenture Issued

Debenture issued on 19th June 1997 to the value of Rs.150mn have been converted to ordinary shares on 22nd June 2002 as stipulated in the agreement. The basis and or ratio of conversion has been contested by the golden share holder in year 2008.

The number of shares resulting from the above conversion would be reduced from nos.15,000,000 to 3,278,688 Ordinary Shares. (i.e. incremental shareholding to the Group would be reduced from 72% to 57.90%).

b) Cumulative Preference Dividend The 8% cumulative preference dividends computed for the minority interest up to 31st March 2012 amounted to Rs.15,409,660/-. However, this amount has not been accrued as payable in the Financial Statements.

c) Cases in the Labour Tribunals The contingencies in respect of pending litigations before Labour Tribunals are not expected to crystalise in a material liability to the Company and no other contingent liability exists as at the Balance Sheet date other than those disclosed above.

43.2.1.2 Free Lanka Plantations Co. (Pvt) Ltd. Cumulative Preference Dividend

The 8% cumulative preference dividends computed for the minority interest up to 31st March 2012 amounted to Rs.3,971,014/=. However, this amount has not been accrued as payable in the Financial Statements.

43.2.1.3 Pussellawa Plantations Ltd.

a) Harvesting of Pinus Trees Forest Department has imposed Rs.50.8mn as the stumpage payable to the Government by Pussellawa Plantations Ltd., (PPL) a sub-subsidiary of the Company for harvesting of Forest Department’s Pinus Trees at Delta Estate by the Timber Lake Company. However, the company has requested Forest Department to reconsider the stumpage calculation, as the said fee is more than the market value of the Timber and is not keeping in line with the Supreme Court judgement. Therefore, the amount of liability and the date of liability are uncertain as at the balance sheet date and will depend on the response of the Forest Department.

b) Cases in the Labour Tribunals The contingencies in respect of pending litigations before Labour Tribunals are not expected to crystalise in a material liability to the Company and no other contingent liability exists as at the Balance Sheet date other than those disclosed above.

43.2.1.4 Free Lanka Capital Properties (Pvt) Ltd The construction of Multi Storied Office Complex was initially planned to commence the commercial operations in April 2012. However, due to extra time taken to obtain approvals from various Governmental Authorities which were necessary prior to the commencement of the construction, the project is now expected to complete its constructions by the end of second quarter of 2013. The Company does not anticipate any contingent liabilities arising due to the delay in the construction.



Indemnity The company has issued an Indemnity in favour of the Colombo Municipal Council against any claims or demands for any damages to the adjacent structures and movable and immovable properties due to the construction and also relating to boundary disputes and/or ownership disputes including access roads and service lines and issues relating to the height or number of floors issues at the property at No 19, Dudley Senanayake Mawatha, Colombo 08.

43.2.1.5 The Group does not anticipate any contingent liabilities to arise out of any contingent event as at the balance sheet date, other than those disclosed in Notes 43.2.1 to the financial statements.

43.2.2 Contingent Assets There is no contingent assets as at the balance sheet date.

44 Unrecognized Contractual Commitments 44.1 Company

There have been no capital commitments contracted but not provided for, or authorized by the board but not contracted for, outstanding as at the balance sheet date.

44.2 Group a) Free Lanka Capital Holdings PLC (FLCH)

Free Lanka Capital Holdings PLC is required to invest Rs.600mn in Ordinary Shares of Free Lanka Capital Properties (Pvt) Ltd a fully owned subsidiary, out of IPO Proceeds to finance the Office Building Complex at No. 19, Dudley Senanayake Mawatha, Colombo 08.

b) Free Lanka Capital Properties (Pvt) Ltd., (FLCPL) FLCPL has entered into an agreement for a lump sum contract with Sierra Civil Engineering (Pvt) Ltd as Designing and Building Contractor to construct a multi storied office complex at new assessment No. 19, Dudley Senanayake Mawatha, Colombo 08.

The total cost of this project excluding the cost of land which is already acquired for Rs.181.674mn and taxes is estimated to be Rs.625mn.

For the purpose of the aforementioned Project FLCPL has entered into an agreement with Board of Investment on 08th March 2012 to obtain financial benefits/concessions under the agreement. Accordingly, FLCPL is required to invest in Fixed Deposits not less than USD 7,000,000 or its equivalent in Sri Lankan Rupees.

c) The Tea Leaf Resort Holdings (Pvt) Ltd., (TTLRHL) TLRHL, a joint venture of the Group has entered into an agreement with Sierra Construction (Pvt) Ltd for Rs.850mn for the construction of two boutique style hotels as detailed below;

Amount (Rs.mn)

Tea Leaf, Giragama Estate 494 Tea Leaf, Ayr Estate 356

d) Hydro Power Free Lanka 2 (Pvt) Ltd

The Company has entered into various contracts to construct Mini Hydro Power Projects at Thebuwana, Keragala Estate and Kuruwita the total of which as at the Balance Sheet date are as follows;

Amount (Rs.mn)

Commitments on Civil Constructions 57.07 Commitments on Purchase and Installation of Electro Mechanical Equipment 8.59

e) Samudra Beach Resorts ( Pvt) Ltd .,

Samudra Beach Resorts has entered into an agreement for a contract with Sierra Civil Engineering (Pvt) Ltd as Designing and Building Contractor to construct a 4 star Hotel at Kosgoda. The total cost is estimated to be Rs.1,720mn.

Other than as disclosed above, there have been no capital commitments contracted but not provided for, or authorized by the board but not contracted for, outstanding as at the balance sheet date.


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Name of the Company Abbreviations Nature of the Relationship

Lanka Orix Leasing Co. PLC LOLCPLC Ultimate Parent CompanyBrown & Company PLC BCPLC Immediate Parent CompanyExcel Global Holdings (Pvt) Ltd EGHPL SubsidiaryAjax Engineers (Pvt) Ltd AEPL SubsidiaryTaprobane Capital (Pvt) Ltd TCPL SubsidiarySamudra Beach Resorts (Pvt) Ltd SBRPL SubsidiaryFree Lanka Capital (Pvt) Ltd FLCPL Joint VentureMillennium Development (Pvt) Ltd MDPL Sub-subsidiaryExcel Restaurants (Pvt) Ltd ERL Sub-subsidiaryRoyal Fernwood Porcelain Ltd RFPL Sub-subsidiaryFree Lanka Capital Holdings PLC FLCH Joint Venture’s Sub-subsidiaryFree Lanka Plantations Co. (Pvt) Ltd FLPCL Joint Venture’s Sub-subsidiaryFree Lanka Management Co. (Pvt) Ltd FLMCL Joint Venture’s Sub-subsidiaryMaturata Plantations Ltd MPL Joint Venture’s Sub-subsidiaryPussellawa Plantations Ltd PPL Joint Venture’s Sub-subsidiaryFree Lanka Power Holdings (Pvt) Ltd FLPHL Joint Venture’s Sub-subsidiaryFree Lanka Power 2 (Pvt) Ltd FLP2L Joint Venture’s Sub-subsidiaryFree Lanka Power 3 (Pvt) Ltd FLP3L Joint Venture’s Sub-subsidiaryFree Lanka Capital Properties (Pvt) Ltd FLCPL Joint Venture’s Sub-subsidiaryHydro Power Free Lanka PLC HPFPLC Joint Venture’s Sub-subsidiaryFree Lanka Power 1 (Pvt) Ltd FLP1L Joint Venture’s Sub-subsidiaryHydro Power Free Lanka 2 (Pvt) Ltd HPF2L Joint Venture’s Sub-subsidiaryHydro Power Free Lanka 3 (Pvt) Ltd HPF3L Joint Venture’s Sub-subsidiaryThe Tea Leaf Resort Holdings (Pvt) Ltd TTLRHL Joint Venture’s Sub-subsidiaryLOLC Leisure Ltd LOLCLL AssociateMelfort Green Teas (Pvt) Ltd MGTL AssociateTaprobane Plantations Ltd TPL AssociatePerpetual Holdings (Pvt) Ltd PHLPL Other AffiliateFree Lanka Trading Co Ltd FLTC Other AffiliateCeylon Estate Teas (Pvt) Ltd CETL Other AffiliateAgstar Fertilizers PLC AFL Other AffiliateRain Forest Eco Lodge (Pvt) Ltd RFELL Other AffiliateIshara Traders (Pvt) Ltd ITPL Other AffiliateSifang Lanka (Pvt) Ltd SLPL Other Affiliate

45.2 Substantial Shareholding and Immediate and Ultimate Parent Company The company’s parent company is Brown & Company PLC which holds 27.83% of the issued Ordinary Shares of the company as at the Balance Sheet date and ultimate parent company is Lanka Orix Leasing Company PLC.

45.3 Key Management Personnel Information According to Sri Lanka Accounting Standard 30 (Revised 2005) “Related Party Disclosures”, Key management personnel are those having authority and responsibility for planning, directing and controlling activities of the entity. Accordingly, the Board of Directors (including executive and Non-executive Directors) has been classified as Key Management Personnel of the Company.

45.4 Related Party Transactions The Company carries out transactions in the ordinary course of its business with parties who are defined as related

parties in Sri Lanka Accounting Standard 30 (Revised 2005), “Related Party Disclosures”, the details of which are reported below.

The pricing applicable to related party transactions is based on the assessment of risk and pricing model of the company and is comparable with that is applicable to transactions between the company and its unrelated customers. Loans and borrowings between related parties have been at prevailing commercial rates and were made on terms equivalent to those that prevail in arm’s length transactions.


45.4.1 Transactions with Companies in which Directors of the Company hold Other Directorships The Company has carried out transactions with entities where the Chairman/Chairperson or a Director of the Company is the Chairman/Chairperson or a Director of such entities as detailed below.

45.4.1.1 Transactions with Immediate Parent Company Name of Immediate Parent Relationship Description of Transaction Brown & Company PLC (BCPLC) Parent Company During the year Company has obtained and repaid in full Loans

amounting of Rs.775,000,000/- from BCPLC.(Previous Year - Rs.75,000,000/-) .

Company has incurred an interest expense of Rs.2,611,694/-

(Previous Year - Rs.5,292,432/-) on the loans obtained from BCPLC.

During the year Company has given Rs.520,000,000/- a loan to BCPLC. (Previous Year - Rs.500,000,000/-)

During the year Company has earned Rs.11,500,544/- an interest

income (Previous Year - Rs.7,219,178/-) on loans given to BCPLC.

Company has incurred Rs.5,600,000/- (Previous Year - Rs.5,600,000/-) as Management Fee to BCPLC.

Cost of Assets Transfer during the year is Rs.13,470,663/-

BCPLC made payment for purchases shares Rs.30,623,355 and

subsequently company has settled this amount. BCPLC has charged Rs.5,904,207/- for provision of services.

The company incurred capital expenditure of Rs.10,362,884/- during

the year subsequently BCPLC has settled outstanding amount.

45.4.1.2 Transactions with Ultimate Parent Company The Company did not have any transactions with its ultimate Parent Company Lanka Orix Leasing Company PLC.



45.4.1.3 Transactions with Other Related Companies a) Company a).1 Receiving and Providing of Services Name of Related Company Relationship Description of Transaction Free Lanka Capital Holdings PLC., (FLCH) Joint Venture’s Company Received Rs.600,000/- dividend during the year. (previous

Subsidiary year Rs.600,000/-) An amount of Rs.577,304/- as share sell down expenses which

was due previous year was fully settled during the year.

Standard Finance (Pvt) Other Affiliate The company has repaid Rs.64,735,822/- from the loan which was Ltd., (SFL) outstanding Rs.850,000,000/- obtained during the previous year.

(previous year Rs.475,000,000/-) Company has incurred an interest expense of Rs.61,159,251/-

(Previous Year - Rs.50,966,347/-) on loans obtained from SFL.

The company has repaid Rs.45,046,253/- to SFL which was outstanding during the previous year.

Royal Fernwood Porcelain Subsidiary Company has given a loan of Rs.56,200,000/- to RFPL.

Ltd., (RFPL) (Previous year Rs.10,000,000/-) During the year company has earned an interest income of

Rs.4,871,800/- (Previous year Rs.242,603/-) on loans granted to RFPL.

Lanka Orix Finance Other Affiliate The Company has divested the Savings Deposits a sum of

Ltd., (LOFL) Rs.1,000,000,000/- in LOFL during the year. Lexinton Holdings (Pvt) Other Affiliate The Company has given a loan Rs.1,156,260,273/- and recovered

Ltd.,(LHPL) Rs.818,946,115/- during the year. (Previous year - Rs.100,000,000/-)

The Company has earned an interest income of Rs.107,923,245/- on loans granted to LHPL. (Previous year - Rs.328,762/- )

Excel Global Holdings Subsidiary During the year Company has incurred expenses on behalf of EGHL (Pvt) Ltd.,(EGHPL) Rs.147,325/-.

Millennium Development Sub-subsidiary During the year Company has incurred expenses on behalf of MDPL

(Pvt) Ltd., (MDPL) Rs.2,111,940/-. The company has given a loan of Rs.20,830,000/- during the year.

Further, the company charged interest amounting to Rs.963,766/- on above loan. MDPL has repaid Rs.5,963,766/- during the year.

Taprobane capital Subsidiary The company has given a loan amount of Rs.65,813,922/- during the (Pvt) Ltd., (TCPL) year. Interest charge on the same is Rs.1,678,632/-.

Browns Investments PLC has purchased 10,830,602 , 74,600 and 746,000 shares of Taprobane Capital (Pvt) Ltd from ARRC Capital (Pvt) Ltd, Mr.R.T.Devasurendra and Ms.R.Devasurendra for a total consideration of Rs.109,798,020/-.

Samudra Beach Resorts Subsidiary During the year Company has incurred expenses amounting to

(Pvt) Ltd.(SBRPL) Rs.34,642/- on behalf of SBRPL.


b) Group b).1 Transactions between Group Companies b).1.1 Free Lanka Capital Holding PLC (FLCH) with Other Related Parties b).1.1.1Obtaining and Providing Services Name of Group Company Relationship Description of Transaction Maturata Plantations Ltd., Joint Venture’s Joint Venture’s Sub-subsidiary FLCHL has granted

(MPL) Sub-subsidiary Rs.115,000,000/- to Maturata Plantations Ltd,during the year and received Rs.31,573,200/- from MPL in part settlement of loan. The Company has earned Rs.9,791,809/- as loan interest.

FLCHL has granted a Corporate Guarantee on behalf of Maturata Plantations Ltd to Lanka Orix Leasing Co. PLC for Rs.275mn. In return, a Counter Guarantee was received from Maturata Plantations Ltd for the same amount and on the same terms and conditions.

Free Lanka Management Co. Joint Venture’s FLCHL has earned Rs.63,205,674/- (Previous Year - (Pvt) Ltd., (FLMC) Sub-subsidiary Rs.59,721,750/-) from FLMC as Dividend for Investment made by the Company in the Stated Capital of FLMC.

Free Lanka Capital Properties Joint Venture’s FLCHL has granted an advance of Rs.290,000,000/- (Previous Year - (Pvt) Ltd., (FLCPL) Sub-subsidiary Rs.56,674,000/-) to PLCPL.

FLCPL has issued 35,000,000 nos. Ordinary Shares to FLCHL at Rs. 10/- per share in the current year against the advances. (Previous year, 10,000 nos. of Ordinary Shares at Rs.10/- each).

Free Lanka Capital Holdings PLC has settled Rs.10,396,845/32 for operational expenses and financial charges on behalf of the Free Lanka Capital Properties (Pvt) Ltd (Previous year - Rs.26,000/-).

Free Lanka Capital Joint Venture’s FLCHL has paid Rs.600,000/- (Previous Year - Rs.600,000/-) to BIL Holdings PLC Sub-subsidiary as Dividend for Investments made by BIL in the Stated Capital of the Company.

FLCHL has incurred Rs.17,110/- (Previous Year - Rs.17,110/-) to BIL as Stamp Duty on Shares Transfers.

Pussellawa Plantations Joint Venture’s FLCHL has settled Short Term Loan amounting Rs.125,000,000/- Ltd., (PPL) Sub-subsidiary (Previous Year Nil) to the PPL on behalf of Free Lanka Capital Properties (Pvt) Ltd.

Free Lanka Power 2 Co.(Pvt) Joint Venture’s FLCHL has paid Rs.450,729/- (Previous Year Rs.Nil) to FLP2 as Ltd (FLP2) Sub-subsidiary operational expenses.

Free Lanka Power 3 Co.(Pvt) Joint Venture’s FLCHL has paid Rs.10,895,778/- (Previous Year Ltd (FLP2) Sub-subsidiary Rs.Nil) to FLP3 as operational expenses.

The Tea Leaf Resort Joint Venture’s FLCHL has granted an advance of Rs.2,500,000/- (Previous Year Holdings (Pvt) Ltd Sub-subsidiary Rs.Nil) to the TTLRHL

Perpetual Holdings (Pvt) Ltd Other Affiliate The Company has received Rs.577,304/- (Previous Year Nil) from Perpetual Investments Ltd



45.4.1.3 Transactions with Other Related Companies (Contd.) b) Group b).1 Transactions between Group Companies b).1.1 Free Lanka Capital Holding PLC (FLCH) with Other Related Parties b).1.1.1 Obtaining and Providing Services

Name of Group Company Relationship Description of Transaction

Free Lanka Estate Joint Venture’s FLCH has Paid Rs.16,398/- (Previous Year Rs.Nil) to FLEB Bungalows (Pvt) Ltd Sub-subsidiary as Administrative expenses.

Pussellawa Plantations Joint Venture’s FLCHL has settled Short Term Loan amounting Rs.125,000,000/- Ltd., (PPL) Subsidiary (Previous Year Nil) to the PPL on behalf of Free Lanka Capital Properties (Pvt) Ltd.

Lanka Orix Finance Co. PLC Other Affiliate FLCHL has earned Rs.25,845,387/- as Gross Interest Income for (LOFC) the Short Term Deposits made in LOFC during the year. The Short Term Deposit as at 31st March 2012 amounted to Rs.250,000,000/- (Previous Year - Rs.Nil)

Commercial Leasing & Other Affiliate FLCHL has earned Rs.11,200,235/- as Gross Interest Income for Finance Ltd (CLFL) the Short Term Deposits made in CLFL during the year. The Short Term Deposit as at 31st March 2012 amounted to Rs.154,868,525/- (Previous Year - Rs.Nil)

Lanka Orix Leasing Co PLC Other Affiliate FLCHL has earned Rs.14,687,524/- as Gross Interest Income for (LOLC) the Short Term Deposits made in CLFL during the year. The Short Term Deposit as at 31st March 2012 amounted to Rs.250,000,000/- (Previous Year - Rs.Nil)

LOLC Factors Ltd (LOLCFL) Other Affiliate FLCHL has earned Rs.10,430,340/- as Gross Interest Income for the Short Term Deposits made in CLFL during the year. The Short Term Deposit as at 31st March 2012 amounted to Rs.300,000,000/- (Previous Year - Rs.Nil)


b).1.2 Maturata Plantations Ltd., (MPL) with Other Related Parties Name of Group Company Relationship Description of Transaction The Tea Leaf Resorts Holding Other Affiliate TTLRHL has incurred expenses of Rs.57,120/- (Previous Year -

(Pvt) Ltd., (TTLRHL) Rs.57,120/- ) on behalf of the FLCPL.

Pussellawa Plantations Joint Venture’s MPL has paid Rs.52,165/-, Rs.300,000/-, Rs.350,877/-, Rs. Ltd., (PPL) Sub-subsidiary 65,500/-, Rs.1,290,615/- & Rs.257,736/- for Electricity charges, rubber consultation, security charges, hampers, interior designing and other administration charges respectively.

MPL has paid Rs.549,860/- for purchase of fixed assets.

MPL has earned Rs.90,285/- as reimbursement of administration expenses met by the company on behalf of PPL.

Lanka Orix Leasing Co. PLC. Ultimate parent MPL has obtained a evolving fund facility of Rs.275,000,000/- (LOLC) company during the year and of which Rs.262,605,732/- is utilized at the end of the balance sheet date.

MPL has paid off Rs.18,528,342/- (Previous Year - Rs.18,098,126/-) in settlement of Commercial Loans & loans obtained under ADB Plantation development Project through LOLC.

MPL has incurred an interest expense of Rs.18,678,793/- (Previous Year - Rs.11,223,465/-) for loans obtained from LOLC.

MPL has paid off Rs.1,040,312/- (excluding Input VAT) (Previous Year - Rs.9,573,086/-) in settlement of loans obtained under finance leasing arrangements from LOLC.

Free Lanka Trading Co Ltd., MPL has incurred a vehicle rent expense of Rs.900,000/- (Previous (PLTCL) year - Rs.900,000/-) for obtaining vehicles on rent.

Free Lanka Power Other Affiliate MPL has incurred expenditure of Rs.58,272/- pertaining to its Hydro Holdings PLC Power Projects.

Ishara Traders (Pvt) Ltd Other Affiliate MPL has repaid Rs.225,000,000/- and incurred an interest expense of Rs.37,402,740/- (Previous year - Rs.36,846,576/-) during the year.

Browns & Company PLC Immediate parent MPL has paid Rs.158,000/-, Rs.30,400/-, Company Rs.121,050/-, Rs.1,053,842/-, Rs.196,000/-, Rs.2,900,000/- & Rs.164,970/- for purchase of batteries, C.F.L. bulbs, buying toners & servicing photocopy machines, generator repair & servicing, purchasing drier trays, purchase of energy efficient fans and other items respectively.



b).1.12 Free Lanka Management Company (Pvt) Ltd., ( FLMCL ) with Other Related Parties

Name of Related Company Relationship Description of Transaction Pussellawa Plantations Ltd., Joint Venture’s PPL has incurred Rs.208,657,052/- (Previous year Rs.276,286,758/-)

(PPL) Subsidiary as Management Fees for obtaining management services from FLMC.

FLMC has received Rs.50,566,151/- (Previous year Rs.12,641,538/-) as Dividend.

FLMC has invested Rs.1,140/- (Previous year Rs.59,300/-) as

Share Advance. Hydro Power Free Lanka PLC Joint Venture’s FLMC has invested in shares Rs.3,405,799/- (Previous year

(HPFL) Subsidiary Rs.50,909,768/-) FLMC has sold shares for Rs.1,221,163/- (Previous year Rs.NIL)

FLMC has received Rs.1,598,895/- (Previous year Rs.NIL ) as

Dividend. Ceylon Estate Teas (Pvt) Ltd Joint Venture’s FLMC has paid an advance for Investment in Shares Rs.

Subsidiary 41,000,000/-. (Previous year Rs.33,000,000/-) Agstar Fertilizers PLC Other Affiliate FLMC has invested in shares for Rs.25,200,000/-. (Previous year

Rs.NIL) FLMC Sudima Timber Other Affiliate FLMC has incurred Rs.253,181/-, (Previous year Rs.Nil) as

Products (Pvt) Ltd Preliminary Expenses

b).1.13 Pussellawa Plantations Ltd., (PPL ) with Other Related Parties Name of Related Company Relationship Description of Transaction Maturata Plantations Ltd., Joint Venture’s PPL has paid Rs.2,563,576/- (Previous year Rs.5,976,767/-) as

(MPL) Subsidiary Office Rent, Refurnishing cost and Other services.

PPL has paid Rs.97,742/- (Previous year Rs.480,000/-) as Vehicle Maintenance & Hiring Charges.

PPL has received Rs.109,638/- (Previous year Rs.120,000/-) as reimbursement of Vehicle Maintenance & Hiring Charges from MPL.

PPL has received Rs. Nil- (Previous year Rs.5,040,000/-) as Office Rent from MPL.

PPL has received Rs.956,768/- (Previous year Rs.356,203/-) as reimbursement of Other Services from MPL.


b).1.13 Pussellawa Plantations Ltd., (PPL ) with Other Related Parties (Contd.)

Name of Related Company Relationship Description of Transaction Melfort Green Teas (Pvt) Ltd., Joint Venture’s PPL has earned Rs.7,391,641/- (Previous Year Rs.12,624,361/-) for

(MGTPL) Subsidiary the Supply of Green Tea Leaf to MGTPL. PPL has earned Rs.8,731,366/- (Previous year Rs.9,392,459/-) for

lent Labour And others to MGTPL. PPL has earned Rs.27,763/- (Previous year Rs.361,000/-) for supply

of Teas to MGTPL. PPL has given Short Term Loans amounting to Rs nil (Previous year

Rs.28,500,000/-) to MGTPL. PPL has obtained an Interest on short term loan amounting to Rs.

Nil (previous Year Rs.859,830/-) from MGTPL. PPLhas incurred Rs.3,371,335/-,(Previous year Rs.336,000/-) for tea

purchased from MGTPL. PPL has received from MGTPL of Rs.2,799,573/- (Previous Year

Rs.643,430/-) as reimbursement of Other Expenses. The Tea Leaf Resort Joint Venture’s PPL has paid Rs.1,095,540/- (Previous Year Rs. Nil) as

Holding (Pvt) Ltd Subsidiary Valuation fee for Geragama, Ayr Bungalow & Hotel Project.

Ceylon Estate Teas (Pvt) Ltd Joint Venture’s PPL has received Rs.5,000,000/- (Previous year Rs. Nil) as

Subsidiary settlement of Short Term Loan from CETPL. PPL has earned Rs.859,426/- (Previous year Rs.253,096/-) for

supply of Teas to CETPL. PPL has paid Rs.1,189,973/-(Previous year Rs.1,576,203/-) as Office

refurnishing cost. PPL has paid Rs.1,293,908/- (Previous year Rs.54,831/-) as

Communication and Other Expenses. PPL has incurred Rs.1,060,326/-,(Previous year Rs.Nil) for tea

purchased from CETPL. PPL has received Rs.220,610/- (Previous year Rs.29,216/-) as

reimbursement of Communication and Other Expenses from CETPL.

Hydro Power Free Lanka Joint Venture’s PPL has paid Rs.1,198,788/- (Previous year Rs.1,669,161/-)as

PLC Subsidiary Office refurnishing cost, Communication and other services.

PPL has received Rs.801,888/- (Previous year Rs.2,597,275/-) as reimbursement of Communication and other services.

PPL has received Rs.357,400/- (Previous year Rs.Nil) as

reimbursement of Office refurnishing cost.



b).1.12 Pussellawa Plantations Ltd with Other Related Parties (Contd.....) Name of Related Company Relationship Description of Transaction Hydro Power Free Lanka 2 (Pvt) Joint Venture’s PPL has received Rs.2,868,511/- (Previous year Rs.Nil) as

Ltd Subsidiary reimbursement of Expenses paid on Thebuwana project.

Hydro Power Free Lanka 3 (Pvt) Joint Venture’s PPL has received Rs.2,181,872/- (Previous year Rs.Nil)

Ltd Subsidiary as reimbursement of Expenses paid on Stellenberg Project.

Free Lanka Trading Company Joint Venture’s PPL has paid Rs.164,977/-(Previous year Rs.684,612/-) as Ltd Subsidiary Communication and Travelling Expenses.

PPL has received Rs.247,974/- (Previous year Rs.18,243/-) as

reimbursement of Communication and Traveling Expenses.

PPL has paid Rs.900,000/-(Previous year Rs.Nil) as Vehicle hiring Charges.

PPL has earned Rs.55,375/- (Previous year Rs.Nil) for supply of Teas

to FLTC. Lanka Orix Leasing Co,PLC Ultimate parent PPL has repaid loan capital of Rs.9,038,871/-(Previous year

company Rs.6,896,124/-) to LOLC PLC. PPL has incurred an Interest expenses of Rs. 5,729,619/-(previous

year Rs.6,572,671/-) on loan obtained from LOLC PLC. PPL has invested Rs.200,000,000/- (Previous year Rs.Nil) on

Commercial Paper. Commercial Leasing Company Other Affiliate PPL has invested Rs.200,000,000/- (Previous year Rs.Nil) on

Ltd Commercial Paper. PPL has earned an Interest income of Rs.6,190,069/-(Previous year

Rs.Nil) on Commercial paper. PPL has withdrawn the investment of Rs.200,000,000/- on

commercial paper. Browns & Company PLC Immediate parent PPL has purchased Rs.4,800,000/- (Previous year Rs Nil) worth of

company new Tractors. PPL has incurred an expenses of Rs. 905,186/- (Previous year Rs.

1,212,137/-) for the Consumables. Agstar Fertilizers PLC Other Affiliate PPL has incurred an expenses of Rs.38,250,261/- (Previous year

Rs.Nil) for the fertilizer purchased during the year.


b).1.13 Hydro Power Free Lanka PLC (HPFLPC) with Other Related Parties Name of Related Company Relationship Description of Transaction Hydro Power Free Lanka 2 (Pvt) Joint Venture’s Hydro Power Free Lanka PLC has incurred total expense

Ltd (HPFL2L) Subsidiary amounting to Rs.87,528,125/- (Previous Year - Rs.3,384,487/-) for operational expenses and finance charges on behalf of

the company. Hydro Power Free Lanka PLC has settled Promissory note worth of

Rs.10,000,000/- to the Company during the Year. Hydro Power Free Lanka 3 (Pvt) Joint Venture’s Hydro Power Free Lanka PLC has incurred total expense

Ltd., (HPFL3L) Subsidiary amounting to Rs.83,296,248/- (Previous Year - Rs.7,369,674/-) for operational expenses and finance charges on behalf

of the company. Hydro Power Free Lanka PLC has settled Promissory Note worth of

Rs.10,000,000/- to the company during the year. Free Lanka Power 1 (Pvt) Joint Venture’s Hydro Power Free Lanka PLC has incurred total expense

Ltd.,(FLP1L) Subsidiary amounting to Rs.1,580,307/- (Previous Year - Rs.645,685/-) for operational expenses and finance charges on behalf

of the company. Hydro Power Free Lanka PLC has settled the due of Maturata

Plantations Ltd. Amounting to Rs.1,827,882/- directly on behalf of the company.

Free Lanka Power 2 (Pvt) Joint Venture’s Hydro Power Free Lanka PLC has incurred total expense

Ltd., (FLP 2L) Subsidiary amounting to Rs.193,412/- (Previous Year - Rs.72,827/-) for operational expenses and finance charges on behalf


Plantations Ltd. amounting to Rs.136,859/- directly on behalf of the company.

Free Lanka Power 3 (Pvt) Joint Venture’s Hydro Power Free Lanka PLC has incurred total expense

Ltd., (FLP 3L) Subsidiary amounting to Rs.4,831,093/- (Previous Year - Rs.5,147,647/-) for operational expenses and finance charges on behalf


Plantations Ltd. amounting to Rs.908,910/- directly on behalf of the company. Free Lanka Power Holding Joint Venture’s Hydro Power Free Lanka PLC has incurred total expense

(Pvt) Ltd., (FLPHL) Subsidiary amounting to Rs.159,947/- (Previous Year - Rs.304,182/-) for operational expenses and finance charges on behalf

of the company. Hydro Power Free Lanka PLC has settled the due of Pussellawa

Plantation Ltd. Amounting to Rs.25,440/- directly on behalf of the company.

Company has fully settled the due amount of Hydro Power Free

Lanka PLC amounting to Rs.489,569/- during the year. Pussellawa Plantations Joint Venture’s Pussellawa Plantations has incurred total expenses

Limited (PPL) Subsidiary amounting to Rs.1,168,459/- On behalf of the Company.

Hydro Power Free Lanka PLC has settled Rs.1,128,958/- during the year.



b).1.14 Free Lanka Capital Properties (Pvt) Ltd., (FLCPL) with Other Related Parties

Name of Related Company Relationship Description of Transaction The Tea Leaf Resort Holdings Joint Venture’s The Tea Leaf Resort Holding (Pvt) Ltd has settled Professional

(Pvt) Ltd (TTLRHL) Subsidiary Fees of Rs.57,120/- in the previous year. TLRHL has incurred Rs. 19,096/- in the current year which has been subsequently settled.

Pussellawa Plantations Ltd., Ultimate parent PPL has charged Rs.1,335,616/- (Previous Year

(PPL) company Rs.5,607,692/-) at 15% per annum on the loan granted to the FLCPL.

Sierra Civil Engineering (Pvt) Other Affiliate FLCPL has paid Rs.165,000,000/- as mobilization advance and

Ltd against the construction bill (Previous year - Nil). Sierra Civil Engineering (Pvt) Ltd has billed for the value worked

done amounting to Rs.48,911,744/44 during the year. (Previous year - Nil)

Melfort Green Teas (Pvt) Ltd., Associate FLMC has received Rs.2,925,000/- (Previous Year Rs.8,775,000/-)

(MGTPL) as Dividend. Rain Forest Eco Lodge (Pvt) Associate The Company has been issued 6,399,375 nos. of Ordinary Shares

Ltd (RFELL) equivalent to 20% of issued Ordinary Share Capital of Rs. 10/- each of Rain Forest Eco Lodge (Pvt) Ltd.

MPL has incurred Rs.4,516,218/- (Previous Year - Rs.6,004,582/-)

for the green leaf bought from RFELL. MPL has earned Rs.6,432,679/- (Previous Year - Rs.6,016,851/-) as

reimbursement of expenses met by the company on behalf of RFELL.

b).1.14 Excel Global Holdings (Pvt) Ltd., (EGHPL ) with Other Related Parties Name of Related Company Relationship Description of Transaction Millennium Development Subsidiary MDPL has incurred an expense of Rs.147,325/- on

(Pvt) Ltd. behalf of EGHPL. Taprobane Plantations Ltd Associate TPL has transferred a sum of Rs.3,230,000/- to EGHPL. b).1.15 Excel Restaurants (Pvt) Ltd., (ERPL ) with Other Related Parties Name of Related Company Relationship Description of Transaction Expense Millennium Development Subsidiary MDPL has incurred Rs.914,026/- on behalf of

(Pvt) Ltd. ERPL.

b).1.16 Millennium Development (Pvt) Ltd., (MDPL ) with Other Related Parties Name of Related Company Relationship Description of Transaction Taprobane Plantations Ltd Associate MDPL has earned Rs.16,193,000/- as rent income. 45.5 Transactions with Key Management Personnel (KMP) of the Company or Parent Key management personnel are those persons having authority and responsibility for planning, directing and controlling

the activities of the company as well as its related parties, directly or indirectly, including any director (whether executive or otherwise) of the company.


45.5.1 Loans to Directors a) Group/Company No loans have been given to directors of the company and its parent company.

b) Compensations to Key Management Personnel of the Company and its Parent Company b).1 Company Emoluments to the directors of the Company are disclosed in Note 11 to the Financial Statements.

b).2 Group Emoluments to the directors of the Group are disclosed in Note 11 to the Financial Statements.

Other than those disclosed above, there are no material transactions with the key management personnel of the

company and its parent company. 45.6 Amounts receivable from and payable to related parties are set out in Notes 27 and 39 to the Financial Statements.

These receivables and payables are unsecured and have no fixed repayment terms.

46 Assets Pledged as Collaterals 46.1 Assets Pledged as Collaterals by the Company Name of Financial Nature of the Balance Balance Institution Facility 2012 2011 Securities Pledged (Rs.’000) (Rs.’000) Sampath Bank Term Loan 512,000 Nil Pledged short term quoted investments. 46.2 Assets Pledged as Collaterals by the Group Companies The following assets of the Group have been pledged as collaterals for overdraft facilities and Loans obtained by the

Group to the respective financial institution concerned.



46.2.1 Assets Pledged by Maturata Plantations Limited As at 31st March Balance Name of Financial Nature of the Facility Outstanding Institution Facility Granted 2012 Securities Pledged (Rs.’000) (Rs.’000)

a) Seylan Bank PLC Term Loan 100,000 60,404 Mortgage over leasehold rights of Bramley Estate for Rs.13mn.

Term Loan 13,000 8,667 Primary Mortgage for Rs.36mn Secondary (Tea Relief II) Mortgage bond for Rs.50mn over leasehold rights of Gonapitiya Estate.

Term Loan 150,000 140,000 Bank Overdraft 125,000 135,594 Mortgage over leasehold rights of Alma Estate for

Rs.26mn. b) Asian Development Term Loan (PSRP I) 33,088 12,134 Mortgage over leasehold rights of estate land,

Bank., through buildings, fixed and floating assets of Ragalla Estate Seylan Bank PLC for Rs.74.75mn, Rs.20.25mn & Rs.25mn.

Term Loan (PSRP II) 15,404 7,491 Term Loan (PSRP III) 1,806 698 Mortgage over leasehold rights of estate land,

buildings, fixed and floating assets of Mahan Uva Estate for Rs.19.50mn.

Term Loan (PSRP IV) 9,000 5,200 Mortgage over leasehold rights of estate land,

buildings, fixed and floating assets of Enselwatte Estate for Rs.102.25mn, Rs.30mn & Rs.28mn.

Term Loan (PSRP V) 11,870 7,448 Primary mortgage over stock in trade for Rs.200mn. c) Lanka Orix Leasing PLC PDP Loan under ADB 4,427 2,296 Primary Continuing mortgage bond for Rs.42.93mn over

Plantation Development the unexpired leasehold rights over the land called Project Anningkanda and Panilkanda Estates in Deniyaya and Free hill Bungalow in Nuwara Eliya.

- do - 38,506 17,677 Primary continuing mortgage bond on all that

unexpired leasehold rights over Land, Estate and Premises called “Hayes Group” in Deniyaya/ Rathnapura.

- do - 59,206 44,404 Revolving Loan 22,250 22,267 On Demand promissory notes of Rs.17,759. Revolving Credit 275,000 262,606 Corporate Guarantee of Ms. Free Lanka Capital

Facility Holdings PLC for Rs.275mn. On demand Promissory Note for Rs.275mn in

favor of Lanka Orix Leasing Co. PLC by Maturata Plantations Ltd

A Counter Guarantee was given by MPL for Rs. 275mn in favor of Free Lanka Capital Holdings PLC on the same terms and conditions with 1% guarantee fee per annum.


46.2.1 Assets Pledged by Maturata Plantations Limited (Contd.) As at 31st March Balance Name of Financial Nature of the Facility Outstanding Institution Facility Granted 2012 Securities Pledged (Rs.’000) (Rs.’000)

d) Free Lanka Capital Loan 115,000 83,427 On a Promissory Note of Rs.115mn Holdings PLC e) Lalan Rubbers (Pvt) Temporary Loan 10,000 2,000 On a Promissory Note of Rs.10mn Ltd f) Asia Siyaka Temporary Loan 75,000 75,000 Commodities (Pvt) Ltd g) S M B Leasing PLC., Finance Lease 3,650 432 Absolute ownership of the asset on finance lease. h) Peoples Leasing Finance Lease 2,785 1,348 - do - Finance PLC i) Merchant Bank of Finance Lease 23,132 13,664 - do - Sri Lanka PLC j) Lanka Orix Leasing Finance Lease 5,989 5,242 - do - Company PLC k) Orient Financial Finance Lease 8,906 542 - do - Services Corporation PLC Balance Outstanding’s of Finance Leases are Gross Liabilities.

46.2.2 Assets Pledged by Pussellawa Plantations Ltd., As at 31st March Balance Name of Financial Nature of the Facility Outstanding Institution Facility Granted 2012 Securities Pledged (Rs.’000) (Rs.’000)

a) Bank of Ceylon Overdraft 70,000 6,121 Leasehold rights of Stellenburg Estate.b) Sampath Bank - do - 70,000 4,040 Leasehold rights of Beaumont Estate.c) People’s Bank - do - 70,000 4,645 Leasehold rights of Hemingford & Keragala Estates. d) Bank of Ceylon Term Loan 41,473 8,662 Leasehold rights of Helbodde & Stellenburg Estates.

(Field Development) - do - 48,576 10,930 Leasehold rights of Pussella Estate. - do - 74,714 19,114 Leasehold rights of Melfort & Mooloya Estates. - do - 82,425 28,319 Leasehold rights of Kaloogalla, Mooloya & Giragama

Estates. e) National Development Term Loan (Vehicles) 48,222 7,627 Bank PLC Term Loan (Field 20,126 3,614 Leasehold rights of Delta, Ayr, Siriniwasa,

Development) Pambegama and Elston Estates. Term Loan 49,596 8,004 (Processing) f) Lanka Orix Leasing PLC Term Loan 50,542 26,952 Leasehold rights of Somagama Estate. (Field Development) - do - 16,900 14,486 g) Sampath Bank PLC Term Loan 103,925 103,925 Primary mortgage over leasehold rights together with

(Field Development) factory building therein of Halpe Estate. Term Loan 9,638 - (Processing)

h) Commercial Bank PLC Term Loan 65,000 65,000 Primary mortgage over leasehold rights together with (Field Development) factory building therein of Rothschild Estate and Sanquhar Estate.

- do - 43,774 43,774 - do - 41,227 41,227 906,138 396,440



46.2.3 Assets Pledged by Millennium Development (Pvt) Ltd., Balance Balance Name of Financial Nature of the Outstanding Outstanding Institution Facility Terms of Repayment 2012 2011 Securities Pledged (Rs.’000) (Rs.’000) a) DFCC Bank Term Loan 60 monthly installment on 20,741 28,148 PPE amount upto Rs.40mn. demand b) Commercial Bank Bank Over Draft 12,342 1,737 Fixed Deposit amount of

Rs.12mn. 33,083 29,885 47 Events after the Balance Sheet Date 47.1 Company There have been no material events occurred between Balance Sheet date and the date on which the financial statements

are authorized for issue that require adjustments to or disclosures in the Financial Statements.


48 Segmental Information 48.1 Primary Segments ( Business Segments ) 48.1.1 Group

Plantation a) Segment Results Investments Tea Rubber Hydro Power Real Estate Leisure Porcelain Construction Unallocated Total

As at 31st March 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Revenue 212,386 1,243,001 1,068,153 1,253,108 429,273 467,416 15,401 36,907 - - 71,272 - 190,396 - 23,209 - 11,637 15,645 2,021,727 3,016,077 Revenue Expenditure - - (1,130,174) (1,186,409) (215,487) (197,384) (10,970) (10,175) - - (28,512) - (174,010) - (21,534) - (6,116) (5,324) (1,586,802) (1,399,291) Gross Profit/(Loss) 212,386 1,243,001 (62,020) 66,699 213,786 270,032 4,431 26,732 - - 42,760 - 16,386 - 1,675 - 5,521 10,321 434,925 1,616,785 Add : Other Income 179,084 146,201 - - - - - - - - 19,414 - 6,113 - 2,654 - 109,862 385,346 317,127 531,547

Gain in Fair Value of Timber Stocks - - - - - - - - - - - - - - - - (14,952) 128,745 (14,952) 128,745

Share of Profit from Equity Accounted Investees - - - - - - - - - - - - - - - - (103,401) 131,063 (103,401) 131,063

Gain in Fair Value of Investment Properties - - - - - - - - - - 250,000 - - - - - - - 250,000 -

Negative goodwill 2,656,003 - - - - - - - - - - - - - - - 15,480 - 2,671,483 - Less : Expenses (604,300) (118,947) - - - - - - - - (34,793) - (88,437) - (5,372) - (154,284) (154,238) (887,186) (273,185) Profit/(Loss) before Taxation 2,443,173 1,270,255 (62,020) 66,699 213,786 270,032 4,431 26,732 - - 277,381 - (65,938) - (1,043) - (141,774) 501,237 2,667,997 2,134,955 Less : Taxation (48,808) (1,645) - - - - - (8,958) - - (1,928) - (4,838) - (2,753) - (21,281) (20,928) (79,608) (31,531) Net Profit / (Loss) for the Year 2,394,365 1,268,610 (62,020) 66,699 213,786 270,032 4,431 17,774 - - 275,453 - (70,776) - (3,796) - (163,055) 480,310 2,588,389 2,103,424

b) Segment Assets Non-current Assets 3,074,755 2,362,456 743,843 909,752 764,187 466,591 164,350 139,992 62,950 50,005 3,836,305 990,599 51,377 2,113,282 2,049,044 11,801,648 5,977,841 Current Assets 2,949,434 5,099,102 231,307 395,951 41,868 25,090 67,034 109,297 31,706 713 41,268 210,815 157,222 520,857 244,187 4,251,511 5,874,340 6,024,189 7,461,558 975,149 1,305,703 806,055 491,681 231,384 249,289 94,656 50,718 3,877,573 - 1,201,414 - 208,599 - 2,634,139 2,293,231 16,053,159 11,852,181

c) Segment Liabilities

Non-current Liabilities 128,000 709,634 478,396 743,136 43,485 43,547 10,933 35,334 - - 9,451 - 310,940 - 7,369 - 305,558 28,664 1,294,132 1,560,315 Current Liabilities 1,091,388 152,319 301,114 499,208 21,332 18,807 4,307 5,290 44 14 96,687 - 399,534 - 35,736 - 49,219 12,534 1,999,361 688,171 1,219,388 861,953 779,511 1,242,344 64,816 62,354 15,240 40,624 44 14 106,138 - 710,474 - 43,105 - 354,777 41,198 3,293,492 2,248,486

d) Segment Capital Expenses

d).1 Capital Expenditure 319,088 313,497 57,512 72,798 108,004 50,169 33,572 10,028 - 34,597 - 14,792 7,550 532,967 488,640 d).2 Depreciation/ Amortization - - 41,685 47,795 23,572 12,712 7,696 7,066 - - 19,269 1,362 4,872 539 2,621 89,251 70,193



48 Segmental Information 48.1 Primary Segments ( Business Segments ) 48.1.1 Group

Plantation a) Segment Results Investments Tea Rubber Hydro Power Real Estate Leisure Porcelain Construction Unallocated Total

As at 31st March 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Revenue 212,386 1,243,001 1,068,153 1,253,108 429,273 467,416 15,401 36,907 - - 71,272 - 190,396 - 23,209 - 11,637 15,645 2,021,727 3,016,077 Revenue Expenditure - - (1,130,174) (1,186,409) (215,487) (197,384) (10,970) (10,175) - - (28,512) - (174,010) - (21,534) - (6,116) (5,324) (1,586,802) (1,399,291) Gross Profit/(Loss) 212,386 1,243,001 (62,020) 66,699 213,786 270,032 4,431 26,732 - - 42,760 - 16,386 - 1,675 - 5,521 10,321 434,925 1,616,785 Add : Other Income 179,084 146,201 - - - - - - - - 19,414 - 6,113 - 2,654 - 109,862 385,346 317,127 531,547

Gain in Fair Value of Timber Stocks - - - - - - - - - - - - - - - - (14,952) 128,745 (14,952) 128,745

Share of Profit from Equity Accounted Investees - - - - - - - - - - - - - - - - (103,401) 131,063 (103,401) 131,063

Gain in Fair Value of Investment Properties - - - - - - - - - - 250,000 - - - - - - - 250,000 -

Negative goodwill 2,656,003 - - - - - - - - - - - - - - - 15,480 - 2,671,483 - Less : Expenses (604,300) (118,947) - - - - - - - - (34,793) - (88,437) - (5,372) - (154,284) (154,238) (887,186) (273,185) Profit/(Loss) before Taxation 2,443,173 1,270,255 (62,020) 66,699 213,786 270,032 4,431 26,732 - - 277,381 - (65,938) - (1,043) - (141,774) 501,237 2,667,997 2,134,955 Less : Taxation (48,808) (1,645) - - - - - (8,958) - - (1,928) - (4,838) - (2,753) - (21,281) (20,928) (79,608) (31,531) Net Profit / (Loss) for the Year 2,394,365 1,268,610 (62,020) 66,699 213,786 270,032 4,431 17,774 - - 275,453 - (70,776) - (3,796) - (163,055) 480,310 2,588,389 2,103,424

b) Segment Assets Non-current Assets 3,074,755 2,362,456 743,843 909,752 764,187 466,591 164,350 139,992 62,950 50,005 3,836,305 990,599 51,377 2,113,282 2,049,044 11,801,648 5,977,841 Current Assets 2,949,434 5,099,102 231,307 395,951 41,868 25,090 67,034 109,297 31,706 713 41,268 210,815 157,222 520,857 244,187 4,251,511 5,874,340 6,024,189 7,461,558 975,149 1,305,703 806,055 491,681 231,384 249,289 94,656 50,718 3,877,573 - 1,201,414 - 208,599 - 2,634,139 2,293,231 16,053,159 11,852,181


Non-current Liabilities 128,000 709,634 478,396 743,136 43,485 43,547 10,933 35,334 - - 9,451 - 310,940 - 7,369 - 305,558 28,664 1,294,132 1,560,315 Current Liabilities 1,091,388 152,319 301,114 499,208 21,332 18,807 4,307 5,290 44 14 96,687 - 399,534 - 35,736 - 49,219 12,534 1,999,361 688,171 1,219,388 861,953 779,511 1,242,344 64,816 62,354 15,240 40,624 44 14 106,138 - 710,474 - 43,105 - 354,777 41,198 3,293,492 2,248,486


d).1 Capital Expenditure 319,088 313,497 57,512 72,798 108,004 50,169 33,572 10,028 - 34,597 - 14,792 7,550 532,967 488,640 d).2 Depreciation/ Amortization - - 41,685 47,795 23,572 12,712 7,696 7,066 - - 19,269 1,362 4,872 539 2,621 89,251 70,193


48 Segment Information (Contd.) 48.2 Primary Segments ( Business Segments ) 48.2.1 Company

a) Segment Results Plantation Investments Tea Rubber Hydro Power Real Estate Leisure Porcelain Construction

As at 31st march 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Revenue 212,386 1,243,001 - - - - - - - - - - - - 212,386 1,243,001 Revenue Expenditure - - - - - - - - - - - - - - - - Gross Profit/(Loss) 212,386 1,243,001 - - - - - - - - - - - - 212,386 1,243,001 Add : Other Income 179,084 146,201 - - - - - - - - - - - - 179,084 146,201 Less : Expenses (604,300) (118,947) - - - - - - - - - - - - (604,300) (118,947) Profit/(Loss) before Taxation (212,830) 1,270,255 - - - - - - - - - - - - (212,830) 1,270,255 Less : Taxation (48,808) (1,645) - - - - - - - - - - - - (48,808) (1,645) Net Profit/(Loss) for the Year (261,638) 1,268,610 - - - - - - - - - - - - (261,638) 1,268,610 b) Segment Assets

Non-current Assets 4,376,442 2,362,456 - - - - - - - - - - - - 4,376,442 2,362,456 Current Assets 3,244,913 5,099,102 - - - - - - - - - - - - 3,244,913 5,099,102 7,621,355 7,461,558 - - - - - - - - - - - - 7,621,355 7,461,558


Non-current Liabilities 128,000 709,634 - - - - - - - - - - - - 128,000 709,634 Current Liabilities 1,091,388 152,319 - - - - - - - - - - - - 1,091,388 152,319 1,219,388 861,953 - - - - - - - - - - - - 1,219,388 861,953


d).1 Capital Expenditure 319,088 313,497 - - - - - - - - - - - - 319,088 313,497 d).2 Depreciation/Amortization - - - - - - - - - - - - - - - -



48 Segment Information (Contd.) 48.2 Primary Segments ( Business Segments ) 48.2.1 Company

a) Segment Results Plantation Investments Tea Rubber Hydro Power Real Estate Leisure Porcelain Construction

As at 31st march 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Revenue 212,386 1,243,001 - - - - - - - - - - - - 212,386 1,243,001 Revenue Expenditure - - - - - - - - - - - - - - - - Gross Profit/(Loss) 212,386 1,243,001 - - - - - - - - - - - - 212,386 1,243,001 Add : Other Income 179,084 146,201 - - - - - - - - - - - - 179,084 146,201 Less : Expenses (604,300) (118,947) - - - - - - - - - - - - (604,300) (118,947) Profit/(Loss) before Taxation (212,830) 1,270,255 - - - - - - - - - - - - (212,830) 1,270,255 Less : Taxation (48,808) (1,645) - - - - - - - - - - - - (48,808) (1,645) Net Profit/(Loss) for the Year (261,638) 1,268,610 - - - - - - - - - - - - (261,638) 1,268,610 b) Segment Assets

Non-current Assets 4,376,442 2,362,456 - - - - - - - - - - - - 4,376,442 2,362,456 Current Assets 3,244,913 5,099,102 - - - - - - - - - - - - 3,244,913 5,099,102 7,621,355 7,461,558 - - - - - - - - - - - - 7,621,355 7,461,558


Non-current Liabilities 128,000 709,634 - - - - - - - - - - - - 128,000 709,634 Current Liabilities 1,091,388 152,319 - - - - - - - - - - - - 1,091,388 152,319 1,219,388 861,953 - - - - - - - - - - - - 1,219,388 861,953


d).1 Capital Expenditure 319,088 313,497 - - - - - - - - - - - - 319,088 313,497 d).2 Depreciation/Amortization - - - - - - - - - - - - - - - -


2012 2011 2010 2009 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)OPERATING RESULTS Group revenue 2,021,727 3,016,077 2,451,530 - Profit before interest & tax (EBIT) 2,858,327 2,265,431 259,245 1,109,960 Finance expenses (190,331) (130,475) (85,224) - Profit before tax 2,667,996 2,134,956 174,021 1,109,960 Tax expense (79,608) (31,531) (18,891) - Profit for the year 2,588,388 2,103,425 155,130 1,109,960 Attributable to: Equity holders of the parent 2,525,048 1,894,445 43,568 1,109,960 Minority interest 63,340 208,980 111,562 - 2,588,388 2,103,425 155,130 1,109,960 CAPITAL EMPLOYED Stated capital 5,380,000 5,130,000 980,000 450,000 Capital reserves 244,274 46,180 314,194 - Revenue reserves 5,256,476 2,921,072 1,153,228 1,109,960 Share holders fund 10,880,750 8,097,252 2,447,422 1,559,960 Minority interest 1,878,916 1,506,283 2,623,271 2,493,788 Total equity 12,759,666 9,603,535 5,070,693 4,053,748 Total debt 1,945,188 1,115,772 808,499 771,523 14,704,854 10,719,307 5,879,192 4,825,271 ASSETS EMPLOYED Property, plant and equipment (PP&E) 2,250,300 829,225 945,282 274,501 Non-current assets other than PP&E 9,551,348 5,148,616 5,869,711 5,156,184 Current assets 4,251,511 5,874,340 454,231 309,678 Liabilities net of debt (1,348,305) (1,132,874) (1,390,032) (915,092) 14,704,854 10,719,307 5,879,192 4,825,271 CASH FLOW Net cash flows from/(Used in) operating activities (370,334) 155,078 412,437 - Net cash flows from / (used in) investing activities (431,077) (4,195,774) (979,393) (507,301)Net cash flows from / (used in)financing activities 600,137 4,589,775 587,708 450,000 Net increase / (decrease) in cash and cash equivalents (201,274) 549,079 20,752 (57,301) KEY INDICATORS Earnings per Share (Rs.)* 1.37 3.14 0.04 24.67Net Assets per Share (Rs.)** 5.85 4.47 24.97 35.00Market Capitalization ( Rs’000’) 6,138,000 - - - Market price per Share (Rs.) 3.30 - - - Price Earning Ratio ( times) 2.40 - - - Dividend per Share (Rs.) 0.10 - - - Return on Shareholders’ funds (%) 23.21 23.40 1.78 71.15Return on Capital Employed (%) 19.44 21.13 4.41 23.00Interest Cover (times covered) 15.02 17.36 3.04 - Current Ratio (times) 2.13 8.53 0.55 0.49 Debt to Equity Ratio (%) 15.24 11.62 15.94 19.03Number of Shares (‘000) 1,860,000 1,810,000 98,000 45,000

* Earnings per share has been adjusted for weighted average number of shares outstanding during the year (has been adjusted for previous years).

** Net Assets per share has been computed for the total number of shares issued as at 31st March 2012.

Four Year Summary


Company Name Relationship Directors Reg. No.

Samudra Beach Resort (Pvt) Ltd Subsidiary Mrs. R.L. Nanayakkara PV 78179

Mr. P.R. Saldin

Mr. N.M. Prakash

Mr. D.S.K. Amarasekera

Mr. R.P. Sugathadasa

Excel Global Holdings (Pvt) Ltd Subsidiary Mr. P.R. Saldin PV 1625

Mr. N.M. Prakash


AJAX Engineers (Pvt) Ltd Subsidiary Mr. P.R. Saldin PV 1556

Mr. N.M. Prakash


Mr. S. Karunaratne

Mr. J. Sheriff

Mr. A.P. Weerasekera

Mr. R.P. Sugathadasa

Taprobane Capital (Pvt) Ltd Subsidiary Mr. P.R. Saldin PV 73040

Mr. N.M. Prakash


LOLC Leisure Ltd Associate Mr. W.D.K. JayawardenaMrs. K.U. Amarasinghe

PB 3805

Free Lanka Capital (Pvt) Ltd Joint Venture Mr. K.AloysiusMr. G.A. AloysiusMr. J.M.S. De MelMr. G.J. AloysiusMr. P.R. SaldinMr. N.M. PrakashMr. D.S.K. AmarasekeraMr. R.P. Sugathadasa

PV 74078

Free Lanka Capital Holdings PLC Joint Venture’s Subsidiary

Mr. K.AloysiusMr. G.A. AloysiusMr. J.M.S. De MelMr. G.J. AloysiusMr. P.R. SaldinMr. N.M. PrakashMr. D.S.K. AmarasekeraMr. I.C. NanayakkaraMr. D.C. WimalasenaMr. A.I. Fernando

PV 64165 PB/PQ

Subsidiaries, Associates & Joint Ventures


ACCRUAL BASISRecording revenue and expenses in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period.

AMORTIZATIONThe systematic allocation of the depreciable amount of an intangible asset over its useful life.

ASSOCIATEAn associate is an entity, including an unincorporated entity such as a partnership, over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture.

CAPITAL EMPLOYEDShareholders’ funds plus minority interest and debt.

CAPITAL RESERVESReserves identified for specific purposes and considered not available for distribution.

CASH EQUIVALENTSCash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

CONTINGENT LIABILITYA condition or situation existing at the balance sheet date due to past events, where the financial effect is not recognized because:

1. The obligation is crystallized by the occurrence or non occurrence of one or more future events or,

2. A probable outflow of economic resources is not expected or,

3. Is unable to be measured with sufficient reliability.

COST METHODCost method is a method of accounting for an investment whereby the investment is recognized at cost. The investor recognizes income from the investment only to the extent that the investor receives distributions from accumulated profits of the investee arising after the date of acquisition. Distributions received in excess of such profits are regarded as a recovery of investment and are recognized as a reduction of the cost of the investment.

CURRENT RATIOCurrent assets divided by current liabilities.

DEBT/ EQUITY RATIODebt as a percentage of shareholder’s funds and minority interest.

DEFERRED TAXSum set aside in the financial statements for taxation that may become payable/ receivable in a financial year other than the current financial year.

EARNINGS PER SHARE (EPS)Profits attributable to Equity holders of the parent divided by the weighted average number of ordinary shares in issue during the period.

EBITDAAbbreviation for Earnings before Interest, Tax, Depreciation and Amortization.

EFFECTIVE TAX RATEProvision for taxation excluding deferred taxation divided by the profit before tax.

EQUITY METHODThe equity method is a method of accounting whereby the investment is initially recognized at cost and adjusted thereafter for the post-acquisition changes in the investor’s share of net assets of the investee. The profit or loss of the investor includes the investor’s share of the profit or loss of the investee.

FAIR VALUEFair Value is the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction.

FOREIGN CURRENCY TRANSACTIONThe realized gain recorded when assets or liabilities denominated in foreign currencies are translated into Sri Lankan Rupees on the balance sheet date at prevailing rates which differ from those rates in force at inception or on the previous balance sheet date.

GENERAL PROVISIONSGeneral provisions are established for Trading transactions and others for anticipated losses.

GROUPA group is a parent and all its subsidiaries.

IMPAIRMENTThis occurs when recoverable amount of an asset is less than its carrying amount.

INTANGIBLE ASSETAn identifiable non-monetary asset without physical substance held for use in the production / supply of goods / services or for rental to others or for administrative purposes.

Glossary


INTEREST COVERConsolidated profit before interest and tax over finance expenses.

JOINT CONTROLJoint control is the contractually agreed sharing of the control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control.

JOINT VENTUREA joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.

KEY MANAGEMENT PERSONNELKey Management Personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly.

MARKET RISKThis refers to the possibility of loss arising from changes in the value of a financial instrument as a result of changes in market variables such as interest rates, exchange rates, credit spreads and other asset prices.

NET ASSETSTotal assets minus current liabilities minus long term liabilities minus minority interest.

NET ASSET VALUE PER SHAREShareholders’ Funds divided by the number of ordinary shares in issue.

NET PROFIT MARGINProfit after tax divided by turnover.

PARENTA parent is an entity that has one or more subsidiaries.

PROVISION FOR BAD AND DOUBTFUL DEBTSProvisions are established to reduce the book value of specific assets (primarily debtors) to estimated realizable values.

RELATED PARTIESParties who could control or significantly influence the financial and operating policies of the business.

RETIREMENT BENEFITSPresent value of a defined benefit obligationIs the present value of expected future payments required to settle the obligation resulting from employee service in the current and prior periods.

Current Service CostIs the increase in the present value of the defined benefit obligation resulting from employee service in the current period.

Interest CostIs the increase during a period in the present value of a defined benefit obligation which arises because of the benefits are one period closer to settlement.

Actuarial gains and lossesIs the effects of difference between the previous actuarial assumptions and what has actually occurred and the effects of changes in actuarial assumptions.

RETURN ON EQUITY (ROE)Net income, less preferred share dividends if any, expressed as a percentage of average ordinary shareholders’ equity.

REVENUE RESERVESReserves considered as being available for distributions and investments.

SEGMENT REPORTINGSegment reporting indicates the contribution to the revenue derived from business segments such as Investments, Manufacturing, Constructions, Plantation, Leisure and Hydro Power.

SHAREHOLDERS’ FUNDTotal of issued and fully paid stated capital, capital reserves and revenue reserves.

SIGNIFICANT ACCOUNTING POLICIESThe specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting Financial Statements.

SUBSIDIARYA subsidiary is an entity, including an unincorporated entity such as a partnership that is controlled by another entity (known as the parent).

TOTAL DEBTLong term loans plus short term loans plus inter company loans and overdrafts.

TOTAL EQUITYShareholders’ funds plus minority interest.

WORKING CAPITALCapital required financing day to day operations computed as the excess of current assets over current liabilities.


BROWNS INVESTMENTS PLC NOTICE OF THE ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the FOURTH ANNUAL GENERAL MEETING of the Company will be held at Park Premier,Excel World, No. 338, T.B. Jayah Mawatha, Colombo 10 on 27th September 2012 at 10.30 a.m.

The business to be brought before the meeting will be :

To receive and consider the Report of the Directors and Statement of Accounts and the Balance Sheet of the Company for the Financial Year ended 31st March 2012 with the Auditors’ Report thereon.

To re-elect Mr. S.V. Somasunderam as a Non-Executive Director in terms of Article 23(2) of the Articles of Association of the Company.

To re-elect Mr. D.S.K. Amarasekera as a Non-Executive Director who retires by rotation in terms of Article 23(6) of the Articles of Association of the Company.

To re-elect Mr. N. Fernando as an Independent Non-Executive Director who retires by rotation in terms of Article 23(6) of the Articles of Association of the Company.

To re-elect Mr. S. Furkhan as a Non-Executive Director who retires by rotation in terms of Article 23(6) of the Articles of Association of the Company.

To re-elect (Mrs.) Rohini Nanayakkara as a Non-Executive Director in terms of Section 210 of the Companies Act No. 7 of 2007. Special notice has been received from a shareholder, pursuant to Sections 145 and 211 of the Companies Act No. 7 of 2007 , of the intention to propose the following resolution as an ordinary resolution.

Resolution “That (Mrs.) Rohini Nanayakkara who reached the age of 76 years on 12th April 2012 be and is hereby re-elected as a

Non-Executive Director of the Company and it is hereby declared that the age limit of 70 years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Director”

To re-elect Mr. A.G. Weerasinghe as an Independent Non-Executive Director in terms of Section 210 of the Companies Act No 7 of 2007. Special notice has been received from a shareholder, pursuant to Sections 145 and 211 ,of the Companies Act No. 7 of 2007 , of the intention to propose the following resolution as an ordinary resolution

Resolution “That Mr. A.G. Weerasinghe who reached the age of 70 years on 20th May 2012 be and is hereby re-elected as an

Independent Non-Executive Director of the Company and it is hereby declared that the age limit of 70 years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Director”

To re-appoint M/s. BDO Partners, Chartered Accountants, as Auditors of the Company for the ensuing year.

To authorize the Directors to fix the remuneration of the Auditors.

BY ORDER OF THE BOARD

STANDARD FINANCE (PVT) LTD

SECRETARIES Colombo,

06th August 2012

Notes: 1 A member entitled to attend and vote at the Meeting may appoint a proxy to attend and vote in his stead.

2 A proxy need not be a member of the Company. A Form of Proxy is found at the end of this Booklet.

3 The instrument appointing such a proxy must be deposited at No. 34, Sir Mohammed Macan Markar Mawatha, Colombo 3 on or before 25th September 2012 at 10.30 a.m.

Notice of the Annual General Meeting


Browns Investments PLC - Reg. No. PV 66136 PB/PQ

I/We …………………………………………………………………………………...…..................................................................…

of ……………………………………………………………………………………………… being a member/members of the above

named Company hereby appoint

Mrs. Rohini Lettitia Nanayakkara or failing her,

Prawira Rimoe Saldin or failing him,

Nadarajah Murali Prakash or failing him,

Ruwan Prasanna Sugathadasa or failing him,

Don Soshan Kamantha Amarasekera or failing him,

Stefan Furkhan or failing him,

Arachchige Gunaratne Weerasinghe or failing him,

Nishan Fernando or failing him,

Shanker Varadananda Somasunderam or failing him,

Mr/ Mrs/Miss. …………………………………………………………………….................................................................………… of

………………………………………………………………………………………….. as my/our proxy to represent me/us and to vote

for me/us and on my/our behalf at the 4th Annual General Meeting of the Company to be held on the 27th day of September

2012 and at any adjournment thereof and at every poll which may be taken in consequence thereof.

Signed this…………………………………… day of ……………………. 2012

…………………………………..

Signature/s

Please provide the following details :

Shareholder’s NIC No. ……...........................……………………………..

No. of shares held ……...........................……………………………..

Proxy holder’s NIC No. ……...........................……………………………..(if not a Director of this Company)

Form of Proxy


Notes:

1 The full name and the registered address of the shareholder appointing the proxy should be legibly entered in the form of proxy.

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

3 In the case of a company/corporation, the proxy must be under its Common Seal which should be affixed and attested in the manner prescribed by its Articles of Association.

4 In the case of joint-holders, the senior should sign this form. Seniority shall be determined by the order in which names stand in the Register of Members in respect of the joint holding.

5 Every alteration or addition to the form of proxy must be duly authenticated by the full signature of the person signing on the form of proxy.

6 To be valid the completed Form of Proxy should be deposited with the Secretaries at No. 34, Sir Mohammed Macan Markar Mawatha, Colombo 3 not less than 48 hours before the time appointed for the holding of the meeting.

Corporate Information

BROWNS INVESTMENTS PLC

LEGAL FORMA Public Limited Liability Company quoted on the Colombo Stock Exchange on 26th July 2011 and incorporated in Sri Lanka on 10th November 2008

COMPANY REG. NO. PV 66136 PB/PQ

DIRECTORS (Mrs.) R.L. Nanayakkara – Non-Executive ChairpersonP.R. Saldin – Executive Director/ Chief Executive OfficerN.M. Prakash – Executive DirectorD.S.K. Amarasekera – Non-Executive DirectorR.P. Sugathadasa – Non-Executive Director S. Furkhan – Non-Executive DirectorS.V. Somasunderam – Non-Executive Director (Appointed w.e.f. 28/06/2012)N. Fernando – Independent Non-Executive DirectorA.G. Weerasinghe – Independent Non-Executive Director

SECRETARIES Standard Finance (Pvt) Ltd481, T.B. Jayah Mawatha,Colombo 10.

ContentsAbout us 01 Financial Highlights 02Chairperson’s Message 06 Director/ Chief Executive Officer’s Review 10

Group Governance Board of Directors 14 Corporate Senior Management 19Investment Portfolio 20Management Discussion and Analysis 22

Governance ReportsCorporate Governance 30Audit Committee Report 34Remuneration Committee Report 35

Financial Information Directors’ Report 38 Statement of Directors’ Responsibilities 41Share Information 42 Independent Auditors’ Report 43Income Statement 44Balance Sheet 45 Statement of Changes in Equity 46Cash Flow Statement 47Significant Accounting Policies 48Notes to the Financial Statement 63

Supplimentary InformationFour Year Summary 120Subsidiaries, Associates & Joint Ventures 121 Glossary 122 Notice of the Annual General Meeting 124Form of Proxy 125

REGISTERED OFFICE 481, T.B. Jayah Mawatha, (Darley Road),P O Box 200,Colombo 10.Fax No. 2698489Tel. 2697111, 2663000 & 2698411Website: www.brownsinvestments.com

BUSINESS OFFICE No.34,Sir Mohamed Macan Markar Mawatha, Colombo 3.Fax No. 2698489Tel. 2697111, 2663000 & 2698411Website: www.brownsinvestments.com

AUDITORS Messrs BDO PartnersChartered Accountants65/2, Sir Chittampalam A. Gardiner Mawatha, Colombo 2.

BANKERS Hatton National Bank PLC- Head Office BranchSeylan Bank PLC- Millennium BranchSampath Bank PLC- Head Office Branch

Designed & Produced byPhotography by Taprobane StreetDigital plates and printing by Aitken Spence Printing & Packaging (Pvt) Ltd.

Browns Investments PLCAnnual Report 2011/2012

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Intelligent Investment - Browns Investments PLC · subsidiary Samudra Beach Resorts (Pvt) Ltd has commenced construction of a 150 roomed hotel in Kosgoda. ... and Sierra Holdings

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