Lankem Ceylon PLC CEYLON PLC 2010-11.pdfLankem Ceylon PLC | Annual Report 2010/2011 3 our business areas OUR BUSINESS AREAS ARE AGROCHEMICALS, PAINTS, BITUMINOUS PRODUCTS, CHEMICALS,

Annual Report 2010/2011

www.lankem.lk

Lankem C

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diverse strategic

solidfocuseddynamic

Corporate Information

Board of Directors ChairmanA. Rajaratnam, FCA

Deputy ChairmanS.D.R. Arudpragasam, FCMA (UK)

Managing DirectorAnushman Rajaratnam, B.Sc. (Hons.), CPA, MBA (Alternate, Mr. S. Rajaratnam)

Chief Operating OfficerD.L. Vitharana, MNI (Lond.), MBA, M.Sc. (UK)

DirectorsR.N. Bopearatchy, B.Sc (Cey), Dip. BM, MBA (Univ. of Col.) N.H.B.S. Perera, B.Sc. (Cey.)K.P. David, FCMA (UK), FCMA, FIPFMA.R. Peiris, B.Sc.(Cey.), FCMA (UK)R.T. Weerasinghe, BBA (USA)A. Hettiarachchy, C.Eng, MIEE, MIProdEA.C.S Jayaranjan FCA, FCMA (UK)J.D Gomes, FCMA (UK) FCCA (UK), FCPA (AUS)

SecretariesCorporate Managers & Secretaries (Private) Limited

BankersSampath Bank PLCNational Development Bank PLC Commercial Bank of Ceylon PLC Hatton National Bank PLCBank of CeylonPABC Bank PLCSeylan Bank PLCIndian Bank

LawyersMessrs Julius & Creasy Attorneys-at-Law

AuditorsMessrs KPMG Ford, Rhodes, Thornton & Company Chartered Accountants

Name of the Company Lankem Ceylon PLC

Legal FormA limited liability company incorporated and domiciled in Sri Lanka

Date of Incorporation 15th September 1964

Company NumberPQ 128

Stock Exchange ListingThe ordinary shares of the Company are listed with the Colombo Stock Exchange of Sri Lanka

Registered OfficeNo. 98, Sri Sangaraja Mawatha, Colombo 10

Principal Activities of the CompanyManufacturing of Chemicals, Paints and Consumer Products

Subsidiary Companies and their Principal Activities Lankem Paints Ltd.Distribution of Paints

Lankem Consumer Products Ltd. Distribution of Consumer Products

Lankem Chemicals Ltd. Distribution of Industrial Chemicals

Lankem Agrochemicals Ltd. Distribution of Agrochemicals

SunAgro LifeScience Ltd.Import, Marketing and Distribution of Agrochemicals

Lankem Research Ltd. Research and Development

Lankem Developments PLCProvision of Waterproofing and Construction of Roads and Industrial Flooring

C.W. Mackie PLCManufacturer, Exporter, Importer and Distributor of Consumer, Hardware and Rubber Products

Lankem Plantation Holdings Ltd. Investment in Plantation Companies

Lankem Tea & Rubber Plantations (Pvt) Ltd. Management of Plantations and Investment in Plantations

Kotagala Plantations PLCCultivation and Processing of Tea and Rubber

Agarapatana Plantations Ltd. Cultivation and Processing of Tea

Lankem Plantation Services Ltd. Non-Operational

Sigiriya Village Hotels PLCOwning and Operation of Resort Hotel

Marawila Resorts PLCOwning and Operation of Resort Hotel

Colombo Fort Hotels Ltd. Investment in Hotel Companies

Beruwala Resorts Ltd.Owning and Operation of Resort Hotel

York Hotels (Kandy) Ltd. Owning of Resort Hotel

B.O.T. Hotel Services (Pvt.) Ltd. Owning and Operation of Resort Hotel

SunAgro Farms Ltd.Growers of Vegetables, Fruits and Foliage for Export and Sale

Associated Farms (Pvt.) Ltd. Farming and Dairying

Lankem Technology Services Ltd.Provision of Information Technology and Allied Services

Nature’s Link Ltd.Manufacturing of herbal/natural based products

Lankem Exports (Pvt) Ltd. Non-Operational

SunAgro Foods LimitedGrowers, importers, exporters, processors and marketers of food items

Lankem Ceylon PLC | Annual Report 2010/2011 1

DIVERSED. STRATEGIC. SOLID. FOCUSED. DYNAMIC. THIS IS WHAT WE REPRESENT AND THIS IS WHO WEARE. THESE WORDS DEFINE OUR VALUES, OUR STRENGTHS AND THE SPIRIT THAT DRIVES US TOGREATER HEIGHTS EVERY DAY.

AS ONE OF THE NATION’S FASTEST GROWING DIVERSIFIED CONGLOMERATES, WE HAVE BEENBUILDING SUCCESS UPON SUCCESS IN EVERYSECTOR WE OPERATE, THUS GROWING VALUE FOR EVERY STAKEHOLDER WE PARTNER.

AGROCHEMICALS . PAINTS . BITUMEN . CHEMICALS . CONSUMER . LEISURE . PLANTATIONS . CONSTRUCTION . AGRICULTURE CROPS & LIVESTOCK PRODUCTION

2 Annual Report 2010/2011 | Lankem Ceylon PLC

ContentsFinancial Highlights ........................................... 4

Chairman’s Message ......................................... 5

Board of Directors ............................................. 8

Management Reports ...................................... 10

Financial Review .............................................. 30

Corporate Social Responsibility ....................... 35

Annual Report of the Board of Directors .......... 37

Corporate Governance ................................... 41

Risk Management Review ............................... 44

Audit Committee Report .................................. 46

Independent Auditors’ Report .......................... 50

Income Statement ........................................... 52

Balance Sheet ................................................. 53

Statement of Changes in Equity ....................... 54

Cash Flow Statement ...................................... 55

Notes to the Financial Statements ................... 57

Statement of Value Added ............................. 110

Share Information .......................................... 111

Ten Year Summary ......................................... 113

Notice of Meeting .......................................... 114

Form of Proxy ................................................ 115

Corporate Information - Inner Back Cover


our business areasOUR BUSINESS AREAS ARE AGROCHEMICALS, PAINTS, BITUMINOUS PRODUCTS,

CHEMICALS, CONSUMER PRODUCTS. PLANTATIONS, LEISURE, CONSTRUCTION,

AGRICULTURE CROPS & LIVESTOCK PRODUCTION.

visionTo be the front runner in the chemical industry in Sri Lanka.

missionOur mission as a manufacturer and formulator of chemical products is to expand our business

through value addition and quality assurance with a commitment to society to continuously

improve management and performance in the areas of health, safety and the environment.

favourable rating outlookLong-and Short-term Corporate Credit Ratings of A- and P2 respectively assigned by RAM

Ratings (Lanka) Limited in August 2010.


Financial Highlights

Revenue

Rs. 23,030 Mn.

Shareholders’ Funds

Rs. 3,260 Mn.

Profit Before Tax

Rs. 2,109 Mn.

Net Assets per Share

Rs. 135.84

0

2,000

4,000

6,000

8,000

10,000

Property, Plant & Equipment (Rs. Mn)

2005/06

Company

2006/07 2007/08 2008/09 2009/10 2010/11

Group

240

295

315

329

481

551

4,24

5 4,93

4

5,26

3 5,81

2 6,88

5

8,27

4

0

500

1,000

1,500

2,000

2,500

Profit Before Tax (Rs. Mn)

2005/06

Company

2006/07 2007/08 2008/09 2009/10 2010/11

Group

199

136

180 28

6

317

530

376 50

3

918

257

804

2,10

9

0

3,000

6,000

9,000

12,000

15,000

Current Assets & Liabilities (Rs. Mn.)

2005/06

Group Current Liabilities

2006/07 2007/08 2008/09 2009/10 2010/11

Group Current AssetsCompany Current Liabilities Company Current Assets

1,95

82,

5241,56

51,

634

1,75

91,

776

3,29

1

3,10

62,

067

2,55

9

1,08

7

1,41

41,

268 5,

631

7,71

5

2,20

91,

878

3,64

63,

187

4,98

95,

036

3,59

53,

332

958

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Shareholder Funds (Rs. Mn)

2005/06

Company

2006/07 2007/08 2008/09 2009/10 2010/11

Group

854

916

1,05

9

1,15

4 1,36

3

2,12

2

251 71

6 1,07

2

1,17

7

1,81

3

3,26

0

0

30

60

90

120

150

Net Assets per Share (Rs.)

2005/06

Company

2006/07 2007/08 2008/09 2009/10 2010/11

Group

47.4

3

50.8

8

50.4

4

54.9

5

64.9

3

88.4

3

13.9

3

39.7

5 51.0

5

56.0

4

86.3

3

135.

84

0

5,000

10,000

15,000

20,000

25,000

Revenue (Rs. Mn)

2005/06

Company

2006/07 2007/08 2008/09 2009/10 2010/11

Group

2,60

2

3,02

7

3,25

2

3,93

8

3,58

9

4,90

46,78

5

7,93

7 9,45

2

9,75

2

11,0

46

23,0

30


It gives me great pleasure to present on behalf of the Board of

Directors the Annual Report and the audited financial statements

of Lankem Ceylon PLC and its subsidiaries for the year ended

31st March 2011.

Free from the burden of an ethnic conflict that has dogged the

country for the last thirty years the Sri Lankan economy has

improved markedly over that of the past financial year. Low levels

of inflation and interest rates have helped the economy post an

economic growth rate of 8%. The Government has also placed

a heavy emphasis on improving the infrastructure available for

businesses in the country. This investment in infrastructure has

had the effect of spurring economic growth. The fiscal policies

adopted by Parliament during the financial year will bring down

the levels of taxation that had been a burden to corporate

entities.

In this buoyant economic environment, the performance of the

Company and its subsidiaries has been exceptional. Turnover

at Group level rose to Rs. 23 Billion and the profitability of the

Group rose to Rs. 2.1 Billion before tax. At Company level,

turnover was Rs.4.9 Billion and profitability was Rs. 575.2 Million

after taxation. These financial performances were all time highs

and reflects the progress and the hard work of all the employees

across the Group.

ReviewAll the operating divisions of the Company have shown strong

growth for the year under review. The Financial year 2010/2011

was a landmark year for the crop protection unit as it moved to

it’s new operating hub at Pannala in the Kurunegala district. This

new operating location will not only serve as its factory for the

formulation and packing of crop protection chemicals but will

also serve as a processing site for the seeds division. Extremely

favorable Agro climatic conditions helped the crop protection

division record its highest levels of sales ever. The Division remains

the market leader in this segment of business. The Company,

continues its commitment to being the provider of choice for

crop protection chemicals by investing heavily in research and

Chairman’s Message

product development activities with the collaboration of our

foreign partners. It is heartening to note that there are many

new chemicals in the pipeline that the Company plans to obtain

regulatory approval during the course of the next financial year.

The seeds division continues to grow at a very robust pace. We

now play an active role not only in the seed paddy market but

also in the sale of hybrid vegetable seeds. In order to further

expand our presence in the seed paddy market, the division

plans to open two new seed paddy collecting and distributing

points in the North Central and Uva provinces. Our collaboration

with Monsanto Corporation of the United States have helped

us to penetrate in to the market for maize seeds. Following the

successful launch of the Company’s range of foliar fertilizers and

micro-nutrients in the previous financial year, the Company has

begun to market a range of NPK fertilizer mixes to the paddy

cultivation sector. The Company will move very cautiously in the

fertilizer market on account of the risks involved in collecting

subsidies on time from the State institutions. Our presence in

this sector is essential to offer the full range of agrochemical

inputs needed by the farmer.

A major upturn in the construction industry has helped the Paints

sector perform admirably during the year. Aided by a growth in

institutional sales, especially to the hospitality segment of the

market, volume sales have grown by nearly 20% year on year.

During the year, the Company has partnered with ALCEA of

Italy to offer a range of water based wood care products to

the Sri Lankan market. The Company strives to offer the most

environmentally friendly coating solutions to the local market.

The Company is now actively seeking opportunities to expand

its operations regionally.

With a heavy emphasis being placed by the Government on

infrastructure development, the prospects for the bitumen

division are bright. Lankem remains the only public company

actively involved in this sector. The Company remains the

preferred supplier for many of the new road construction projects

taking place across the country. Over the next few years, the


Company plans to introduce polymer modified bitumen to the

local market. The new product will improve the durability and

ease of laying new road surfaces.

The increased levels of economic activity have helped ensure

that the industrial chemicals division maintains a steady growth

in the year under review. With the Government encouraging

industrialization and with the new chemicals from their foreign

principals in line to be introduced locally, I am confident that the

prospects for the division are excellent.

I am pleased to report that the hitherto loss sustained by the

consumer division has been reduced compared to the last

financial year. The Division has taken steps to rationalize the

range of products that it manufactures and distributes. By

narrowing the focus to a few products, the Company is able to

target its marketing efforts more effectively in order to ensure a

renewed demand for its products.

The strength of the Group’s performance was not limited only to

the core operations of the Company but also to the many other

entities within the Group. The financial results of C.W. Mackie

PLC was consolidated for the first time and is for a period of 15

months on account of the need to bring its financial year in line

with that of Lankem Ceylon PLC. The profitability of C. W. Mackie

PLC for the period under review grew to Rs. 223.4 Million after

taxation. C.W. Mackie PLC, with its mix of operations in FMCG,

Industrial products, Sugar Trading and Rubber exports provides

the Group with many opportunities for growth.

During the course of the financial year, the Group acquired a

controlling interest of the company B.O.T Hotels Services

(Private) Limited, which owns the Weligama Bay Beach Hotel,

a sixty roomed property located on the Southern coast of Sri

Lanka. The Group intends to renovate and refurbish this property

comprehensively. The Group’s three properties in the leisure

industry have all returned to profitability. Sigiriya Village Hotels

PLC and Marawilla Resorts PLC have both raised additional

equity funding in order to upgrade the facilities of the respective

hotels. These refurbishments will be completed on time for the

coming winter season. The prospects for the tourism industry

are bright and the Group will actively look to increase the number

of rooms to its inventory.

Our Plantation sector had an excellent year made possible by

the record Tea crops and significantly increased prices for both

Tea and Rubber. Rubber production was less than what was

produced in the previous year due to the unusual wet weather

which reduced the number of tapping days. However, record

prices offered for both crepe and RSS rubber improved the

profits earned over that achieved in the previous year. The

island’s tea crop for 2010 was an all time record high in spite of

the adverse weather conditions.

The new Collective Agreement covering workers remuneration

which was negotiated in June this year will dampen profits and

have an unfavourable impact on the future of the tea industry,

unless there is a corresponding effort by Trade Unions to co-

operate and improve worker productivity in the plantation

industry.

We continue to invest heavily on capital expenditure and provide

all the agricultural inputs necessary for improving yields. It is

noteworthy that Kotagala Plantations PLC had the distinction

of once again surpassing the highest yield to establish a new

benchmark of 2,182 Kilograms per hectare. In a move to further

diversify its crops, Kotagala Plantations PLC has undertaken to

plant 1000 hectares of oil palm on previously low yielding rubber

lands. It is hoped that with this diversification the Company will

enhance its profitability in the years ahead.

This year has seen an excellent financial performance from

Lankem Ceylon PLC and its subsidiaries. The Company

endeavours to meet the aspirations of all our consumers. We

will continue to strengthen the Company in the markets that

we are present now and place heavy emphasis on achieving a

Chairman’s Message


regional presence in order to continue improving the corporate

profitability.

During the year, the Company paid an interim dividend of Rs.

1.00 per share and the Directors have recommended a final

dividend of Rs. 1.50 per share to all its shareholders.

ConclusionI would like to take this opportunity to thank our many

stakeholders for their continued support and also for their faith

in our Group. It is this unwavering support that allows LANKEM

to remain a premium brand in Sri Lanka. I thank my colleagues

on the board for their valuable support and counsel at all times.

A.Rajaratnam

Chairman

23rd August 2011


A. Rajaratnam [FCA]

ChairmanMr.A. Rajaratnam joined the Board in 1990 and was appointed

Chairman in the year 2003. He also serves as Chairman on the

Boards of several subsidiaries of the Lankem Group and holds

other Directorships within The Colombo Fort Land & Building

Group.

S.D.R. Arudpragasam [FCMA - UK]

Deputy ChairmanMr.S.D.R. Arudpragasam is a Chartered Management

Accountant. He was appointed to the Board in 1989 and was

appointed as Deputy Chairman in 1990. He also holds the

position of Managing Director of E.B. Creasy & Company PLC

in addition to serving on the Boards of other Companies in The

Colombo Fort Land and Building Group.

Anushman Rajaratnam [B.Sc (Hons.), CPA, MBA] Managing DirectorMr.Anushman Rajaratnam was appointed to the Board as

Deputy Managing Director in the year 2005 and was appointed

Managing Director in April 2009. He has spent several years

working overseas as a Consultant for a leading Accountancy

Firm. He also serves on the Boards of several subsidiaries of the

Lankem Group.

D.L Vitharana [MNI (Lond), MBA, M.Sc. (UK)]

Chief Operating OfficerMr.D.L. Vitharana was appointed to the Board in 2005. He joined

Lankem Ceylon PLC in 1997 and has headed the Lankem Agro

Cluster since 1999. He is currently the Chief Operating Officer of

Lankem Ceylon PLC and also serves on the Boards of several

subsidiaries of the Lankem Group.

R.N. Bopearatchy [B.Sc. (Cey), Dip. BM., MBA (Univ. of Col)]

DirectorMr.R.N. Bopearatchy was appointed to the Board in 1996. He has

considerable expertise in product development, manufacturing

and marketing of pesticides, pharmaceuticals and consumer

products. Soon after graduation he was employed in Research

in the Plant Pathology Division of the Tea Research Institute and

subsequently joined Chemical Industries Colombo Ltd, and

Board of Directors

was appointed to its Board. He also served on the Boards of

Crop Management Services (Pvt) Ltd., the managing agents

for Mathurata Plantations Ltd., CIC Fertilizers Ltd and Cisco

Speciality Packaging (Pvt) Ltd. He has been a former Chairman

of the Pesticide Association of Sri Lanka and the Toxicological

Society of Sri Lanka and is now the Chairman of the International

Mosquito Spiral Manufacturers Association (IMSMA). Mr.R.N.

Bopearatchy currently holds several other Directorships within

The Colombo Fort Land & Building Group.

N.H.B.S. Perera [B.Sc. (Cey)]

DirectorMr.N.H.B.S. Perera joined the Board in 1999. He is a former

Chairman of Harrisons (Colombo) Ltd, and the Pesticides

Association of Sri Lanka. He has held office as Deputy Chairman

of the Planters Association of Sri Lanka and has functioned as

Group Director of The Maharaja Organization Ltd. Mr.Perera

has also served as Director on the Board of Harrison Lister

(Colombo) Ltd, and several plantation company Boards such

as Aislaby Estates Ltd, Attampettia Estates Ltd., Newburgh

Estates Ltd, Kinross Estates Ltd, and Lunuwa Plantations Ltd,

prior to nationalisation. He presently serves on the Boards of

The Colombo Fort Land & Building Company PLC and Lankem

Tea & Rubber Plantations (Pvt) Ltd. Mr.Perera has considerable

expertise in the field of developing and marketing Agri Chemicals,

managing of plantation companies, manufacture and distribution,

shipping and warehousing.

K.P. David [FCMA-UK, FCMA, FIPFM]

DirectorMr.K.P. David was appointed to the Board in 2007. Having

commenced his career in the Banking sector, he joined the Parent

Company E.B.Creasy & Company PLC as Group Accountant in

1993. He also serves on the Boards of several subsidiaries of

the Lankem Group.

A.R. Peiris [B.Sc. (Cey), FCMA-UK]

DirectorMr.A.R. Peiris was appointed to the Board in the year 2007.

He has served the Petroleum Corporation for 10 years in

Technical, Planning & Finance Divisions and at the time he

left the Corporation in 1979, he was the Head of the Refinery

Finance Division. Thereafter, he joined National Development


Bank PLC where he held several senior positions for 24 years.

He has held Directorships in several reputed public listed and

unlisted companies. Mr.Peiris also holds Directorships in several

companies within the Lankem Group.

R.T. Weerasinghe [BBA - USA]

DirectorMr.R.T. Weerasinghe was appointed to the Board in April 2009.

He joined Darley Butler & Company Ltd, in the year 1994 as a

Trainee Product Manager and was seconded to Lankem Ceylon

PLC as the Marketing Manager of the Consumer Division in

1998. He was promoted as General Manager of the Consumer

Division in 2005 and was also appointed as General Manager of

the Paints Division. In addition he was appointed as the Head

of the Industrial Chemicals Division in 2009. Mr.Weerasinghe

possess expertise in the fields of Marketing and Management.

Mr.Weerasinghe also serves on the Boards of certain subsidiaries

of Lankem Ceylon PLC.

A. Hettiarachchy [C.Eng, MIEE, MIProdE]

DirectorMr.A. Hettiarachchy was appointed to the Board as an

Independent Non-Executive Director in April 2010. He is a

Chartered Engineer and a Member of the Institution of Engineering

and Technology. He serves on the Boards of National Science

Foundation and as Chairman on the Boards of ISB Services

Limited, ISB Environmental Services Limited, and ISB Technical

Services Limited. He has served on the Board of Hayleys PLC

and functioned as Managing Director on the Boards of Haycarb

PLC, Recogen Limited and Puritas Limited and also served on

several other subsidiaries of Haycarb PLC and Hayleys PLC both

in Sri Lanka and Overseas. He was also a Board Member of The

Sri Lanka Institute of Nanotechnology. Member of the National

Nano Committee and a member of several advisory Boards of the

NSF. Mr.Hettiarachchy possess expertise in the fields of Process

Design, Construction and Commissioning; Instrumentation and

Control-Design, Installation and Commissioning; Mechanical

Engineering, Thermal and Electrical Energy- Generation and

Storage and Nano Technology.

A.C.S. Jayaranjan [FCA, FCMA-UK]

DirectorMr.A.C.S. Jayaranjan was appointed to the Board as an

Independent Non-Executive Director in June 2010. He started

his career as a professional at KPMG Ford Rhodes Thornton &

Company. Thereafter he has been working for thirty five years in

the commercial and industrial sectors at senior managerial level.

He was the Chief Accountant at James Finlay & Company PLC

and Deputy Chief Executive Officer/Executive Director Shaw

Wallace & Hedges PLC. Mr. Jayaranjan then joined as the Group

Finance Director of Pership Group and later joined John KeeIls

Holdings PLC, as Senior Vice President, Head of Learning &

Development. His experience covers diverse areas in commerce

and industry.

Mr. Jayaranjan is a Fellow Member of the Institute of Chartered

Accountants of Sri Lanka, and a Fellow Member of the Chartered

Institute of Management Accountants UK. He is an external

examiner/lecturer at the Faculty of Graduate Studies, University

of Colombo.

J.D. Gomes [FCMA (UK), FCCA (UK,) FCPA (AUS)]

DirectorMr. Dian Gomes was appointed to the Board as an Independent

Non-Executive Director in June 2010. Mr. Gomes is a Group

Director of MAS Holdings and the Managing Director of MAS

Intimates (Private) Limited. In addition to his role as Managing

Director for the Intimates Cluster, Mr. Gomes is also the head of

Human Resources, Corporate Communications, Branding and

CSR for the MAS Holdings Group.

He is a Fellow member of the Chartered Institute of Management

Accountants (UK), the Association of Chartered Certified

Accountants (UK) and Certified Practicing Accountants

(Australia). A Past President of the CIMA — Sri Lanka Division

(2001/2002) and the Sri Lanka Amateur Boxing Association

(2004 to 2009), Mr. Gomes is presently the Vice President of the

National Olympic Committee of Sri Lanka.



management report

growth

As one of the nation’s strongest

and most diversified conglomerates we

see our ability to innovate as the most

powerful tool in overcoming industry

challenges.



agri inputsThe division formulates

and distributes crop protection solutions across the country.

We continue to partner with many leading global agrochemical

companies to develop new crop protection solutions.

The seed business has shown a rapid growth in market share

in both seed paddy and vegetable seeds. The seed division has

introduced 42 seed varieties and Lankem has tied up with giants

such as Monsanto (USA), Kaneko seeds (Japan), Singenta,

Chiathai (Thailand), Hollar seeds (USA) and Vickima seeds

(Denmark), to market their hybrid ranges of seeds.

Last year the Company ventured into the fertilizer sector and

operates in the market segments of foliar fertilizer, fertilizer

mixtures, straight fertilizer and micro-nutrients.

Agrochemicals has predominantly been the core business of Lankem, and this sector has been in operation for more than four decades. Today the Company is the undisputed market leader.

We have lived up to the slogan of “Farmer’s Friend” and it remains the retailer of choice for a majority of the cuntry’s farmers.

Lankem has been accredited with the ISO 9001:2008 for Quality

Management Systems, ISO 14001:2004 for Environmental

Management Systems and OSHAS 18001:2007 Certification for

Occupational Health and Safety at the Company’s production

facility.

The quality control process at Lankem’s Agro Chemical Factory in Pannala.

growth



paints

Lankem Paints has also partnered with Akzo Nobel, Netherlands

- the largest auto refinish company in the world, to distribute its

products in Sri Lanka.

The Paint division operates in a very competitive market. The

division has shown remarkable resilience and we have maintained

our market share even in this challenging environment.

Lankem Paints division continuously improves and monitors its

pricing strategies, distribution channels and promotional mix, in

order to improve and expand its market share. We also continue

to improve product quality in order to ensure that our products

meet global standards.

The Paint sector also includes the C. W. Mackie PLC operations

of import and sale of ‘Hempel’ Marine Paints & Protective

Coatings.

Lankem Paints Limited is one of the pioneer coating manufacturers in Sri Lanka. The division commenced operations in 1984. The Company offers a range of quality products under the international brand name ‘Robbialac’ and we are the first and only paint company in Sri Lanka to be accredited with ISO 9001: 2008 Quality Management Systems, ISO 14001: 2004 Environmental Management Systems and SLS Product Quality.

Our operations include Decorative Coating, Auto Refinish,

Wood Coating, Epoxy Coating, NC-based Coating and Epoxy

Adhesives. We also operate six Colour Studios and over 150

“Pata” Shops across the island.

The Company’s second brand ‘Rolac’ was introduced in 2010,

to cater to a more price concious market segment. We have

also partnered with ALCEA Italy, to offer water-based Wood Care

Solutions to the Sri Lankan market.

Lankem Paints Limited is one of the pioneer

coating manufacturers in Sri Lanka.

Lankem Paints Ltd. manufactures “Robbialac” Paints at our factory in Kanuwana, Ja-ela.

growth


chemicals


chemicals Lankem Chemicals Division comprises of three sections -

Industrial Chemicals, Thinners, Food and

Feed Ingredients.

Lankem’s Chemicals Division comprises of three sectors: Industrial Chemicals, Thinners, Food and Feed Ingredients. The Industrial section imports and trades solvents, rubber chemicals, detergent raw materials and pigments while the Thinner section manufactures thinners and related products. The Food and Feed Ingredient section launched during the year, imports and trades food and feed ingredients.

The division imports materials from Singapore, Europe, India, China, Korea, USA, Middle East, Vietnam and Taiwan.

Our key emphasis is to provide consistently high quality products

to our clientele. The Company has recently invested in a semi

automated manufacturing plant conforming to the international

standards, which will come into operation by the end of 2011.

The division has recently embarked on a strategy of product

diversification, intended to supply a greater variety of products

to our target customer segment.

Lankem Chemicals deals in a wide variety of chemicals and in food and feed ingredients.

growth



bitumenThe Bitumen Division

remains the largest supplier of Emulsion and Road Surfacing

Bitumen in the country.

The Bitumen Division remains the largest supplier of emulsion and road surfacing bitumen in the country. Sri Lanka has over 110,000 km of paved road, which are maintained by the Government. In view of the Government’s current emphasis on the rehabilitation and reconstruction of the existing road network, it can be expected that this industry will record robust growth in the future.

The Bitumen Division strives to introduce innovative products

into its portfolio and continues to maintain very high quality of

manufactured products.

Lankem is the only public Company actively involve in this

sector. Lankem remains the preferred supplier for many of the

road construction projects across the country.

Bituminous products supplied by Lankem Bitumen Division are used in road and highway construction across the island.

growth



consumerLankem Consumer

Division produces and distributes detergent

powder, detergent liquid, laundry

soap, household cleansing products,

dry cell batteries, pharmaceutical

products and personal care products.

Lankem’s Consumer Division produces and distributes detergent powder, detergent liquid, laundry soap, household cleaning products, dry cell batteries, pharmaceutical products and personal care products. Our key target consumer segments are households from both urban and rural areas.

The Consumer sector also includes the consumer and domestic

trading operations of C.W.Mackie PLC , which has local and

global flagship brands such as Sunquick, Ovaltine, Star Brand

Essence and Coloring, Ocean Fresh Tuna and the Scan products

range.

The Sunquick bottling plant of C.W. Mackie PLC, at Munagama, Horana

growth



Comprises of three business units. Core operations in Road Construction,

Water Proofing, Industrial Flooring, Sports Courts Flooring, Epoxy Flooring, Termite

& General Pest Control.

Pest ManagementThe Pest Management division is engaged in termite and general pest control. Lankem Ceylon is a pioneer in the termite control industry in Sri Lanka, holding a market leader’s position in the industry for over two decades.

This division’s main product “Biflex” is an established termiticide

control solution.

Despite the challenges in the local construction industry, the Pest

Management division continued to successfully market its highly

effective pest control solutions to Corporate and Institutional

customers.

construction & pest

management

ConstructionThe Construction division engages in Road Construction, Waterproofing, Industrial Flooring, Sports Courts Flooring, Epoxy Flooring and undertakes Painting.

Lankem’s Construction division is poised to perform better with variety of products and services.

growth



plantationsLankem Ceylon PLC owns and manages

two regional plantation companies - Kotagala

Plantations PLC and Agarapatana

Plantations Ltd.

Kotagala Plantations PLC cultivates a mixture of high grown tea,

low grown tea and rubber.

Agarapatana Plantations Ltd cultivates high grown tea in

Agarapatana and Uva tea growing districts.

Our plantation sector had an excellent year, made possible by

the record Tea crops and significantly increased prices for Tea

and Rubber.

Lankem Ceylon PLC manages two plantation companies engaged in tea and rubber.

growth



The Palms Hotel - Moragalla, Beruwala

leisureThe Company has

made investments in four resort hotels on

the west coast and cultural triangle - Club Palm Bay, The Palms, Bay Beach & Sigiriya

Village.

The Leisure sector portfolio includes The Club Palm Bay operated by Marawila Resorts PLC, Sigiriya Village operated by Sigiriya Village Hotels PLC and The Palms Hotel operated by Beruwala Resorts Ltd.

Latest addition to our portfolio was Bay Beach Hotel in Weligama,

which is owned by B.O.T. Hotel Services (Pvt) Ltd. This is a sixty

roomed property located on the Sourthern coast of Sri Lanka.

All hotels recorded improved performance during the year under

review.

growth


agriculture, crop and livestock

production


agriculture, crop and livestock

production

growth

The Company has diversified into

agriculture, crop and livestock production.

The company has diversified into agricultural crops and livestock production through its subsidiary companies: SunAgro Farms Ltd and Associated Farms (Pvt) Ltd.

SunAgro Farms Ltd. pioneered asparagus cultivation in Sri Lanka

and plans are underway to commence commercial cultivation.

The asparagus farm is located in Madurankuliya, Puttalam.

Associated Farms (Pvt) Ltd. is primarily involved in livestock

production.

This sector is in it’s early stages of operation.

The Asparagus Nursery section at our Madurankuliya Farm.


0

5

10

15

20

25

Group & Company Revenue (Rs. Bn)

2005/06

Group

2006/07 2007/08 2008/09 2009/10 2010/11

Company

OverviewThe year 2010/11 was a milestone for Lankem Ceylon PLC

Group which recorded the highest ever Revenue and Profits in

the long history of Lankem Ceylon PLC Group. In the backdrop

of improved macro-economic environment of the country, all the

business sectors of Lankem Ceylon PLC Group have shown

commendable results during the financial year 2010/11.

However it should be noted that the above financial performance

includes 15 months results of C.W. Mackie PLC which is

consolidated for the first time.

Revenue AnalysisLankem Ceylon PLC Group reported a Consolidated Revenue of

Rs. 23.03 Bn. for the year under review compared to a Revenue

of Rs.11.05 Bn. during the previous year. This resulted in the

growth of Group Revenue by 108.50% year-on-year and an

average growth rate of 27.69% over the last five years.

Financial Review

0

2

4

6

8

10

Group Revenue (Quarterly) (Rs. Bn)

Q1 Q2 Q3 Q4

2010/112007/08 2008/09 2009/10

Segmental Contribution to Group Revenue 2010/11

Consumer

Hardware

Hotel

Plantations

Chemicals

17%

24%

39%

2%

17%

The main contributors to the Group Revenue are, the Plantation

sector followed by Hardware, Chemical and Consumer sectors.

The Revenue attributable to the Company was Rs. 4.90 Bn.

compared to Rs. 3.59 Bn. achieved during the previous year. This

represents Company Revenue growth of year-on-year basis by

36.63% and average growth of 13.5 % over the last five years.

The Tea and Rubber commodities experienced high prices

during the year which resulted in the plantation companies

recording a strong Group Revenue. However the plantation

crops were hampered by adverse weather conditions which

prevailed throughout the country during the year. Consequently

the plantation sector Revenue grew by 53.61% from Rs. 6.43 Bn

to Rs. 9.88 Bn, which accounts for 39% of the Group Revenue.


0

2

4

6

8

10

Segmental Revenue Performance (Rs. Bn)

Plantations

2010

Hardware Chemicals Consumer Hotel

2011

9,75

2

The Hardware sector accounts for 24% of the Group Revenue

as opposed to 18% contribution made in the previous financial

year. The improvement in the contribution from this sector was

mainly due to strong demand for construction and hardware

related products with the boom in construction activities in

the Island. The Hardware sector also showed a remarkable

performance with its strong market presence in the Northern

and Eastern regions.

The Chemical sector also witnessed a growth of 37.68%,

recording a Revenue of Rs. 4.34 Bn. compared to the previous

year Revenue of Rs. 3.15 Bn. The improved contribution from

this sector was mainly due to strong demand for crop protection

and solution products and chemical products. The Agri-inputs

cluster experienced favourable climatic conditions and aslo was

able to penetrate and gain market position in the Northern and

Eastern regions by extending the distribution network.

ProfitabilityThe Group has made an outstanding performance in terms of

Profit before tax and Profit after tax. The Profit before tax of

Rs. 2,108.56 Mn. during the year under review compared to the

previous year’s Profit before tax of Rs. 803.58 Mn. represents an

increase of 162.40% year-on-year. The average growth rate of

Profit before tax was 41.19% over the last five years.

The Profit after tax for the financial year grew by 241.20%

on a year-on-year basis to Rs. 1,871.75 Mn. as opposed to

Rs. 548.58 Mn. during the previous year. The Profit after tax for

the Group grew by 42.80% on average over the last five years.

The Profit before tax of the Company for the year under review

rose to Rs. 530.25 Mn. from Rs. 317.36 Mn. in the previous year

representing a growth of 67.08% year-on-year and an average

growth rate of 21.65% over the last five years.

The Profit after tax of the Company grew by 174.87% to

Rs. 575.20 Mn. compared to Rs. 209.26 Mn. during the previous

year.

The biggest contributors to the Group’s profitability are the

Plantations and Chemicals segments with contributions of 52%

and 32% respectively.

0

500

1000

1500

2000

2500

Group & Company Profit Before Tax (Rs. Mn)

2005/06

Group

2006/07 2007/08 2008/09 2009/10 2010/11

Company

The Consumer segment recorded strong growth during the

financial year with excellent performance of domestic trading

activities. The Sri Lankan Economy grew by 8% which boosted

consumer confidence and disposable income which contributed

to the consumer segment performance during the financial year.

The Consumer segment having renowned international and local

brands under C.W.Mackie PLC posted a Group Revenue of

Rs. 4.16 Bn. during the financial year.


Financial Review

Finance CostsDuring the financial year under review the Group saw remarkable

improvement in its interest cover as the ratio improved from 3.73

times to 5.66 times. This was mainly due to improved Operating

profits of the Group with the associated fall in market interest

rates as a result of an improved macro environment.

0

100

200

300

400

500

Finance Cost and Interest Cover Ratio

2006/07

Finance Cost

2007/08 2008/09 2009/10 2010/11

Interest Cover

1.00

2.00

3.00

4.00

5.00

6.00

7.00Rs. Mn. Times

Financial and Liquidity PositionNon-Current Assets PositionThe total non-current assets grew by 15.90% from Rs. 8.35

Bn. to Rs. 9.68 Bn. during the year under review due to the

capital expenditure incurred by the Group. The Property, Plant &

Working CapitalThe working capital investment of the Group significantly

improved during the year under review due to aggressive

working capital management, which resulted in an improvement

in the cash and the trade receivable balances of the Group. The

Group working capital investment increased to Rs. 2,084.73

Mn. from previous year’s Rs. 47.41 Mn. Hence the current ratio

improved from 1.01 to 1.37, whilst quick asset ratio improved

from 0.67 to 0.94.

0

2,000

4,000

6,000

8,000

10,000

Non-Current Assets (Rs. Mn)

2005/06

PPE

2006/07 2007/08 2008/09 2009/10 2010/11

Others

0

500

1000

1500

2000

Group & Company Profit After Tax (Rs. Mn)

2005/06

Group

2006/07 2007/08 2008/09 2009/10 2010/11

Company

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Working Capital and Liquidity Position

2006/072005/06

Current Assets

2007/08 2008/09 2009/10 2010/11

Current Ratio

Current Liabilities Quick Asset Ratio

Rs. Mn. Times

Equipment for the Group which is the major component of non-

current assets amounted to Rs.8.27 Bn. as at 31st March 2011.


Capital Structure 2010/11

Debt

Equity

54% 46%

Capital StructureThe Group’s Debt as a percentage of Total Capital is 46% whilst

the Equity component amounted to 54% during the year under

review which was a significant improvement compared to the

previous years restated debt and equity percentages of 55%

and 45% respectively.

During the financial year the Company raised additional funds by

way of a rights issue of 3 million ordinary shares at a price of Rs.85

per share for a total consideration of Rs. 255 Mn. The purpose of

this issue was to meet the working capital requirements.

During the financial year the Group obtained additional interest

bearing long term and short term borrowings by way of term

loans, finance leases and debentures amounting to Rs.1.90 Bn.,

whilst it settled Rs.1.34 Bn. in the form of interest bearing term

loans, finance leases and redemption of debentures.

Cash FlowThe Group’s net cash flows from operating activities decreased

to Rs. 593.06 Mn from the previous year’s amount of

Rs. 601.35 Mn, representing a slight drop of 1% year-on-year.

Share PerformanceThe All Share Price index (ASPI) of the Colombo Stock Exchange

(CSE) for the financial year ended 31st March 2011 had

increased by 93% to 7,226 points. The closing share price of

Lankem Ceylon PLC (LCEY) was Rs. 401.50 at the end of the

financial year representing a growth of 518% over the previous

year. The total market capitalisation of Lankem Ceylon PLC as at

31st March 2011 stood at Rs. 9.64 Bn.

0

400

800

1,200

1,600

2,000

Cash Flow & Profit After Tax (Rs. Mn.)

2006/072005/06

Net Cash Flow- Operating Activities

2007/08 2008/09 2009/10 2010/11

Profit after Tax

Lankem Share Price & Volume Movement

Share price Volume

In ’000

50

-

100

150

200

250

300

350

400

65

115

165

215

265

315

365

415

465

515

1-A

pr-

10

22-A

pr-

10

7-M

ay-1

0 21

-May

-10

8-Ju

n-10

23

-Jun

-10

8-Ju

l-10

22-J

ul-1

0 5-

Aug

-10

19-A

ug-1

0 3-

Sep

-10

20-S

ep-1

0 5-

Oct

-10

19-O

ct-1

0 3-

Nov

-10

22-N

ov-1

0 6-

Dec

-10

21-D

ec-1

0

4-Ja

n-11

2-Fe

b-1

1 18

-Jan

-11

21-F

eb-1

1 8-

Mar

-11

22-M

ar-1

1

Rs.

LCEY shares have continuously outperformed the market indices

ASPI and MPI. During this period LCEY prices appreciated by

593% as opposed to a 193% appreciation observed in the ASPI

performance.


LCEY- Based on 1/4/2010 Prices ASPI - Based on 1/4/2010 Index Value

All equated to 100 as at 1/4/2010

Relative Performance of ASPI and LCEY

100%

200%

300%

400%

500%

600%

700%

1-A

pr-

10

15-A

pr-

10

29-A

pr-

10

13-M

ay-1

0 27

-May

-10

10-J

un-1

0 24

-Jun

-10

8-Ju

l-10

22-J

ul-1

0 5-

Aug

-10

19-A

ug-1

0 2-

Sep

-10

16-S

ep-1

0 30

-Sep

-10

14-O

ct-1

0 28

-Oct

-10

11-N

ov-1

0 25

-Nov

-10

9-D

ec-1

0 23

-Dec

-10

6-Ja

n-11

20

-Jan

-11

3-Fe

b-1

1 17

-Feb

-11

3-M

ar-1

1 17

-Mar

-11

31-M

ar-1

1

0.0

0.50

1.00

1.50

2.00

2.50

3.00

Dividend Per Share & Dividend Yield

2006/072005/06

Dividend per Share

2007/08 2008/09 2009/10 2010/11

Dividend Yield

0

1%

2%

3%

4%

5%

6%

7%

8%Rs.

The Earnings Per Share (EPS) of Lankem Ceylon PLC Group

increased from Rs.15.72 to Rs.47.16 due to the significant

increase in Group profitability. The Net Asset Value Per Share

(NAV) of the Group has also increased to Rs.135.84 from

Rs.86.33.

DividendsDuring the year the Company declared an interim dividend of

Rs.1.00 per share and the Directors have recommended a final

dividend of Rs. 1.50 per share for the year ended 31st March

2011. This represents a dividend payout of 10%. Due to an

increase in the share price during the year, the dividend yield has

reduced to 1% from previous year’s dividend yield of 3%.

Financial Review

0

30

60

90

120

150

Earnings Per Share & Net Assets Per Share (Rs.)

2005/06

EPS

2006/07 2007/08 2008/09 2009/10 2010/11

NAV


Corporate Social Responsibility

As a diversified business entity, Lankem continued to support

the community and the environment through its comprehensive

CSR vision. Being a mature corporate citizen, we strongly believe

in improving the quality of life of our community, enhancing the

potential and standards of living of our human resource, and

ensuring environmental safety while incorporating the best social

values and ethics in every aspect of our business at every level

within the group.

CommunityOn our journey as a caring community partner, we have

partenered with a multitude of stakeholders, covering a wide

spectrum in terms of social cluster, ethnicity and demography.

We have extended our support to uplift their quality of life and

social well-being.

During the year, we joined hands with “Ability Foundation”, a not

for profit organization, engaged in empowering and enabling

people with intellectual disabilities. Under the theme of “Creating

a Future for All” to create awareness, a programme was launched

on the opportunities and support available for children and

young adults with intellectual disabilities across Sri Lanka, with

a view to bridging the social gaps that affect such individuals.

Special resource personnel were brought in to carry out various

training and awareness building sessions in the Ampara District.

In addition, the web site of Ability Foundation was upgraded and

formally handed over as a gesture of good faith.

Leptospirosis, a disease commonly known in Sri Lanka as

“Mee-Una” reached epidemic proportions during the year and

it was found that farmers were among the most affected. As

the “Farmer Friendly” Agro Chemicals pioneer, we launched an

awareness building campaign carrying television snippets on

channel ITN. The snippets carried information to help control

the spread of the disease and also to create awareness on

preventive techniques.

In our efforts to extend support to preserve traditional values

in the community, we were privileged to continue with our

commitments to colour wash Dalada Maligawa - Kandy,

Poorwaramaya – Dehiattakandiya, Sri Sudarmaramaya -

Meepawala, Bellanwila Rajamaha Vihara, St. Mary’s Church-

Mukkuthuduwawa, and many childrens’ homes, elderly homes

and schools. Free Pest control services were provided to Giriulla

Medapola Maha Vidyalaya – Kirimetiyawa and school stationary

was provided to support children of Isuru Sevana Children

Orphanage, Kuruwita.

We donated water bottles to the National Blood Bank for the

consumption of blood donors, thereby extending a helping hand

to make island wide blood donation campaigns a success.

In view of upgrading the health conditions of the local community,

large garbage bins were provided to encourage the safe and

effective disposal of waste in urban and suburban areas.

EnvironmentAs a company working with hazardous chemicals, we continued

to conduct regular awareness programmes for school children

and farmers on the safe use of pesticides, with particular attention

on the usage of correct dosage to minimise environmental

damage.

Demarcating our footprint as a corporate citizen with a sound

Environmental Philosophy, we were successful in obtaining ISO

9001:2008 for Quality Management Systems, ISO 14001:2004

for Environmental Management Systems, OSHAS 18001;2007

Certification for Occupational Health and Safety for our

production facility and SLSI Product Quality Certification for our

products.

It has been identified that the Rubber Processing Industry is the

main cause of pollution of the natural waterways in Sri Lanka. As

a company that has a significant involvement in rubber cultivation

and manufacturing, Kotagala Plantation PLC has ensured that

all plants are provided with modern effluent treatment plants

that conform to the COD (Chemical Oxygen Demand) and BOD

(Biochemical Oxygen Demand) levels stipulated by the Central

Environmental Authority, thereby minimising the environmental

damage. Furthermore, our factories are equipped with energy

efficient fans and lighting.We have also taken steps to use

Biomass to operate tea driers thereby minimizing the usage

of fuel and oil. This has resulted in a cost saving as well as a

reduction in air pollution due to reduced level of carbon and

sulphur emissions.


EmployeesThroughout the Group, employees are considered the life blood

of the organisation.

We are an equal opportunity employer and ensure that our

employees are not discriminated against and that they are

compensated above industry average levels.

The company follows an extensive and effective Health and

Safety Policy to avoid operational hazards. Compliance is

strongly monitored and reported on a routine basis.

Due to the high level of involvement in hazardous chemicals,

extensive training is provided to all employees at the factory level,

on health and safety measures together with knowledge on the

composition of the chemicals. Fully equipped medical centers

are maintained at factories with full time professional nurses.

Cholinesterase tests are carried out as a routine to identify

possible chemical contaminations by the production floor staff.

We believe that long term investment in training will not only

benefit the company through the creation of a more competitive

and skilled workforce, but will also enable our employees to

pursue better careers and lifestyles in the future.

During the year, initiatives taken by the company to conduct

welfare and social events, sports and recreation programmes

which made employees happier and more productive. Lankem

Sports Club created opportunities for the employees to benefit

from the use of gymnasium facilities and other indoor and

outdoor sports for entertainment, physical and mental wellbeing.

In addition, company has hosted a variety of social events to add

colour to their work life.

During the latter part of the financial year the “Lankem Ladies

Corner” was launched with the objectives of empowering the

female employees with knowledge, awareness, leadership skills

and attitudinal changes to help them balance work and personal

life and provide them with a forum to discuss issues in their work

lives. The programmes will commence in the coming year.

At Kotagala Plantations, workshops were conducted to teach

crafting work, sewing etc. to female workers, who make up about

about 60% of the total workforce, thus creating opportunities for

entrepreneurship.

Labour welfare was also given highest priority, through initiatives

such as building new worker housing, re-roofing, new factory

and field rest rooms and modernised creche units for estate

workers’ children.

We also carried out immunization programmes to keep in line

in building a healthy national. Therefore periodical medical

camps were held for workers together with regular nutrition and

health checks, dengue awareness programme, and sanitation

pragammes.

In addition a “New Life Housing Scheme” was initiated to build

25 houses for the workers on Gikiyanakanda estate.

Corporate Social Responsibility


Annual Report of the Board of Directors

The Board of Directors of Lankem Ceylon PLC present their

Report on the affairs of the Company together with the Audited

Financial Statements for the year ended 31st March 2011.

The details set out herein provide the pertinent information

required by the Companies Act No. 07 of 2007, and the Colombo

Stock Exchange Listing Rules and are guided by recommended

best practices.

GeneralThe Company was re-registered on 18th March 2008 as required

under the Companies Act No. 07 of 2007.

Principal Activities, Business and Future ProspectsThe principal activities of the Company together with those of

its subsidiary companies have been described along with the

Corporate Information in this Annual Report. A review of the

Company’s business and its performance during the year with

comments on financial results and future prospects is contained in

the Chairman’s Message, Business Review and Financial Review

sections of this Annual Report. These reports together with the

Financial Statements reflect the state of affairs of the Company.

The Directors to the best of their knowledge and belief confirm

that the Company has not engaged in any activities that

contravene laws and regulations.

Financial StatementsThe Financial Statements of the Group are given on pages 52

to 109.

Auditors’ ReportThe Auditors’ Report on the Financial Statements is given on

pages 50 and 51.

Accounting PoliciesThe Accounting Policies adopted in the preparation of the

Financial Statements are given on pages 57 to 63. There were

no changes in the Accounting Policies adopted.

Interest RegisterDirectors’ Interest in TransactionsThe Directors have made general disclosures as provided for in

Section 192 (2) of the Companies Act No. 07 of 2007. Arising

from this, details of contracts in which they have an interest are

disclosed in Note 29 to the Financial Statements on pages 97

to 102.

Directors’ RemunerationThe Directors’ remuneration in respect of the Group for the

financial year 2010/11 is Rs. 75.86 Mn. (2009/10 - Rs. 64.60

Mn) and in respect of the Company for the financial year 2010/11

is Rs. 71.12 Mn. (2009/10 - Rs. 60.40 Mn.).

Directors’ Interest in SharesThe Directors of the Company who have an interest in the shares

of the Company have disclosed their shareholdings and any

acquisitions/disposals to the Board in compliance with Section

200 of the Companies Act No. 07 of 2007.

Details pertaining to Directors’ direct and indirect Shareholdings

are given below:

No. of Shares

As at As at

31.03.2011 31.03.2010

Mr.A. Rajaratnam 12,198 7,000

Mr.S.D.R. Arudpragasam 5,132 4,459

Mr.Anushman Rajaratnam 5,403 4,728

Mr.D.L. Vitharana - -

Mr.R.N. Bopearatchy - -

Mr.N.H.B.S. Perera - -

Mr.K.P. David 8,150 7,083

Mr.A.R. Peiris 5,435 4,723

Mr.R.T. Weerasinghe 3,500 -

Mr.A. Hettiarachchy - -

(Appointed w.e.f. 01.04.2010)

Mr.A.C.S. Jayaranjan - -


Mr.J.D. Gomes - -


Corporate DonationsDonations made by the Group amounted to Rs. 99,000/- during

the year under review. (2009/10- Rs. 30,000/-)



DirectorateThe names of the Directors who held office during the financial

year and are given below. Brief profiles of these Directors appear

on pages 8 and 9.

Mr.A. Rajaratnam Chairman

Mr.S.D.R. Arudpragasam Deputy Chairman

Mr.Anushman Rajaratnam Managing Director

Mr.D.L. Vitharana Director/Chief Operating Officer

Mr.R.N. Bopearatchy Director

Mr.N.H.B.S. Perera Director

Mr.K.P. David Director

Mr. A.R. Peiris Director

Mr. R.T. Weerasinghe Director

Mr. A. Hettiarachchy Director

(Appointed w.e.f. 01. 04.2010)

Mr. A.C.S. Jayaranjan Director


Mr.J.D. Gomes Director


Mr. A. Hettiarachchy was appointed as an Independent Non-

Executive Director with effect from 1st April 2010. Mr.A.C.S.

Jayaranjan and Mr.J.D. Gomes were appointed as Independent

Non- Executive Directors with effect from 1st June 2010.

In terms of Articles 85 and 86 of the Articles of Association, Mr.

J.D. Gomes retires by rotation and being eligible offers himself

for re-election.

Mr.N.H.B.S. Perera, Director, being over seventy years of age

retires and offers himself for reappointment under and by virtue of

the Special Notice received from a shareholder of the Company

which is referred to in the Notice of Meeting.

Mr. R.N. Bopearatchy who has attained the age of seventy years

offers himself for reappointment under and by virtue of a Special

Notice received from a shareholder of the Company which is

referred to in the Notice of Meeting.

Mr. A. Rajaratnam who has attained the age of seventy years

offers himself for reappointment under and by virtue of a Special

Notice received from a shareholder of the Company which is

referred to in the Notice of Meeting.

AuditorsThe Financial Statements of the Company for the year have

been audited by Messrs KPMG Ford, Rhodes, Thornton & Co.

the retiring auditors who have expressed their willingness to

continue as Auditors of the Company and are recommended for

reappointment. A resolution to reappoint them and to authorize

the Directors to determine their remuneration will be proposed at

the Annual Genaral Meeting

The Auditors, Messrs KPMG Ford, Rhodes, Thornton & Co.

were paid Rs. 7.18 Mn. during the year under review (2009/10-

Rs. 6.75 Mn.) as audit fees and fees for audit related services by

the Group. In addition, they were paid Rs. 0.47 Mn. (2009/10-

Rs. 0.56 Mn.) by the Group for non-audit related work, which

consisted mainly of tax related work. In addition to the above,

Group companies are engaged with other audit firms. Audit fees

in respect of these firms amounted to Rs. 4.69 Mn. during the

year under review (2009/10- Rs. 3.75 Mn.). Further, the fees for

non-audit related services by these audit firms during the year

2010/11 was Rs. 0.04 Mn.

As far as the Directors are aware, the Auditors do not have any

relationship (other than that of an Auditor) with the Company.

The Auditors do not have any interest in the Company.

RevenueThe revenue of the Group for the year was Rs. 23,031 Mn.

(2009/10-Rs. 11,046 Mn.).

ResultsThe Group made a profit before tax of Rs. 2,109 Mn. against a

profit of Rs. 804 Mn. in the previous year. The detailed results are

given in the Income Statements on page 52.

DividendsThe Board of Directors approved the payment of an Interim

Dividend of Rs.1/- per share which was paid on 9th February

2011 and have recommended the payment of a Final Dividend of

Rs. 1.50 per share on the ordinary shares of the Company for the

year ended 31st March 2011 for approval by the shareholders at

the Annual General Meeting to be held on 30th September 2011.

The Directors have confirmed that the Company satisfies the

solvency test requirement under Section 56 of the Companies

Act No. 07 of 2007 for the dividend proposed. A solvency

certificate has been sought from the Auditors in respect of the

aforementioned dividend.


InvestmentsInvestments made by the Group are given in Notes 17 and 18 to

the Financial Statements on pages 78 to 82.

Property, Plant & EquipmentDuring 2010/11 the Group invested Rs. 1,305.70 Mn. in Property,

Plant & Equipment (2009/10 - Rs. 1,320.36 Mn.). Further, your

Directors are of the opinion that the net amounts at which Land

and other Property, Plant & Equipment appear in the Balance

Sheets are not greater than their market value as at 31st March

2011.

Stated CapitalThe stated capital of the Company as at 31st March 2011 was

Rs. 536,218,000/- and is represented by 24,000,000 issued and

fully paid Ordinary Shares.

During the year the Company made a Rights Issue of shares to

its ordinary shareholders the details of which are disclosed under

Note 22 to the Financial Statements on page 83.

ReservesThe total Group Reserves as at 31st March 2011 comprised

Revaluation Reserves of Rs. 462.09 Mn., Capital Redemption

Reserve Rs. 8.33 Mn., Other Capital Reserves Rs. 22.50 Mn.,

General Reserves of Rs. 305.95 Mn. and Retained Earnings

Rs. 1,924.96 Mn. whereas the total Group Reserves as at 31st

March 2010 comprised Revaluation Reserves of Rs. 412.25

Mn., Capital Redemption Reserve Fund of Rs. 8.33 Mn.,

Other Capital Reserves of Rs. 22.50 Mn., General Reserves of

Rs. 305.95 Mn. and Retained Earnings of Rs. 782.67 Mn.

The movements are shown in the Statement of Changes in

Equity in the Financial Statements.

TaxationThe Group’s liability to taxation has been computed in

accordance with the provisions of the Inland Revenue Act No.

10 of 2006, and subsequent amendments thereto.

Income tax and other taxes paid and liable by the Group are

disclosed in Notes 6 and 10 to the financial statements on pages

64, and 66 to 68.

Share InformationInformation relating to earnings, dividend, net assets, market

value per share and share trading is given on pages 68, 111

and 112.

Events Occurring after the Balance Sheet DateEvents occurring after the Balance Sheet date that would require

adjustments to or disclosures are disclosed in Note 34 on

page 105 to 106.

Capital Commitments and Contingent LiabilitiesCapital commitments and contingent liabilities as at the

Balance Sheet date are disclosed in Notes 30 and 31 on pages

102 to 104.

Employment PolicyThe Company’s recruitment and employment policy is

non¬discriminatory. The occupational health and safety

standards receive substantial attention. Appraisals of individual

employees are carried out in order to evaluate their performance

and realize their potential. This process benefits the Company

and the employees.

ShareholdersIt is the Company’s policy to endeavour to ensure equitable

treatment to its shareholders.

Statutory PaymentsThe Directors, to the best of their knowledge and belief, are

satisfied that all statutory payments of the Company due in

relation to employees and the Government have been made

promptly and are up to date.

Environmental ProtectionThe Company’s business activities can have direct and indirect

effects on the environment. It is the Company’s policy to minimize

any adverse effect its activities have on the environment and

to promote co-operation and compliance with the relevant

authorities and regulations. The Directors confirm that the

Company has not undertaken any activities which have caused

or are likely to cause detriment to the environment.

Internal ControlThe Directors acknowledged their responsibility for the

Company’s system of internal control. The system is designed

to give assurance regarding the safeguarding of assets, the


maintenance of proper accounting records and the reliability

of financial information generated. However, any system can

ensure only reasonable and not absolute assurance that errors

and irregularities are either prevented or detected within a

reasonable period of time.

The Board is satisfied with the effectiveness of the system of

internal control for the period up to the date of signing these

Financial Statements.

Going ConcernThe Directors, after making necessary inquiries and reviews

including reviews of the Company’s budget for the subsequent

year, capital expenditure requirements, future prospects and

risks, cash flows and borrowing facilities, have a reasonable

expectation that the Company has adequate resources to

continue in operational existence for the foreseeable future.

Therefore, the going concern basis has been adopted in the

preparation of the Financial Statements.

For and on behalf of the Board

Anushman Rajaratnam K. P. David

Director Director

By Order of the Board

Corporate Managers & Secretaries (Private) Limited

Secretaries

Colombo

23rd August 2011



Corporate Governance is a way of structuring the organisation in

order to safeguard the interests of a wide variety of stakeholders.

It needs to balance the Corporate Governance with everyday

business management in today’s dynamic corporate world.

We at Lankem firmly promise our stakeholders better business

performance which is nurtured and backed through properly

formulated governance practices and procedures.

Lankem Ceylon PLC is in compliance with the majority of the

good corporate governance practices listed in the code of Best

Practice on Corporate Governance issued by The Institute of

Chartered Accountants in Sri Lanka and the rules on Corporate

Governance set out in the Colombo Stock Exchange Listing

Rules.

We present below the Corporate Governance practices adopted

and practiced by Lankem Ceylon PLC.

The Board of Directors1.1 The Board, Composition and MeetingsThe Board of Directors of Lankem Ceylon PLC is responsible

for the governance practices adopted in all the companies

within the Group. The Board comprises the Chairman, Deputy

Chairman, Managing Director, Chief Operating Officer and eight

other Directors. All the Directors are professionals who have

acquired a wealth of experience and knowledge in the fields of

Management, Marketing and Finance.

Name of Director

Mr. A. Rajaratnam

(Chairman) Non-Executive

Mr. S. D. R. Arudpragasam

(Deputy Chairman) Non-Executive

Mr. Anushman Rajaratnam

(Managing Director) Executive

Mr. D. L. Vitharana

(Chief Operating Officer) Executive

Mr. R. N. Bopearatchy Executive

Mr. N. H. B. S. Perera Independent Non-Executive

Mr. K. P. David Executive

Mr. A. R. Peiris Executive

Mr. R. T. Weerasinghe Executive

Mr. A. Hettiarachchy Independent Non-Executive


Mr. A. C. S. Jayaranjan Independent Non-Executive


Mr. J. D. Gomes Independent Non-Executive


Corporate Governance

The Board meets regularly and has met seven times during the

year under review. In addition to Board Meetings, matters are

referred to the Board and decided by resolutions in writing.

The number of meetings of the Board and the individual

attendance by members is shown below :

Total number of Meetings held 7

Name of Director Directorship Board Meetings

Status Attended

Mr. A. Rajaratnam Chairman 5/7

Non-Executive

Mr. S.D.R. Arudpragasam Deputy Chairman 6/7

Non-Executive

Mr. Anushman Rajaratam Managing Director 7/7

Executive

Mr. D.L. Vitharana Chief Operating 6/7

Officer/Executive

Mr. R.N. Bopearatchy Executive 5/7

Mr. N.H.B.S. Perera Independent 7/7

Non-Executive

Mr. K.P. David Executive 7/7

Mr. A.R. Peiris Executive 7/7

Mr. R.T. Weerasinghe Executive 6/7

Mr. A. Hettiarachchy Independent 5/7

(Appointed w.e.f. 1.4.2010) Non-Executive

*Mr. A.C.S. Jayaranjan Independent 6/6


*Mr. J.D. Gomes Independent 1/6


* Six Board Meetings were held after the appointment of

Mr. A.C.S. Jayaranjan and Mr. J.D. Gomes on 1st June 2010.

Availability of Formal Schedule of Matters

The code of Best Practice on Corporate Governance of The

Institute of Chartered Accountants of Sri Lanka suggests that

the Board should have a formal schedule


Corporate Governance

of matters specially reserved for its decision making. Sufficient time was dedicated at meetings in order to ensure the following.

• Offer guidance on overall direction and related strategies, financial and non-financial objectives of Lankem Ceylon PLC.

• Formulation, implementation and monitoring of business strategy of the Company.

• Overseeing the effectiveness of the internal control systems and proactive risk management system.

• Ensuring compliance with legal requirements and ethical standards.

• Approval of budgets, corporate plans, major investments and divestments.

• Approval of interim and annual Financial Statements for publication.

• Approval and review of the succession planning of the Boards and top management.

• Approval of any issue of equity and debt securities of the Company.

• Any other matter which is important to ensure that the Company conducts its business in the best interest of all stakeholders.

Company Secretary and Independent Professional AdviceLankem Ceylon PLC and all the Directors seek advice from Corporate Managers and Secretaries (Private) Ltd, who are qualified to act as Secretaries as per the provisions of the Companies Act No. 07 of 2007. In addition, the Board seeks professional advice as and when, and where necessary from independent external professionals.

Independent JudgementThe Board of Directors as a whole and individually are committed to exhibit high standards of integrity and independence of judgement on various issues from strategy to performance.

Training for DirectorsThe Directors are provided with adequate and relevant training opportunities for their continuous development.

1.2 Segregation of the Role of Chairman and Chief Executive Officer

The role of Chairman and Chief Executive Officer is clearly segregated. The Managing Director functions in the capacity of Chief Executive Officer who is responsible for the operational matters of the Company. Functional

Directors are responsible for the respective division of strategic business units.

1.3 Chairman’s Role The Chairman oversees good governance of the

Company’s affairs and monitors the satisfactory performance of duties and responsibilities allocated to the Board Members.

The Chairman leads the Board Meetings ensuring effective participation of all Directors. The Chairman ensures that the Board is in complete control of the Company’s affairs.

1.4 Financial Acumen The Board includes seven finance professionals who

possess the knowledge to offer the Board the necessary guidance on matters relating to finance.

1.5 Board Balance The Board comprises of six Non-Executive Directors of

whom four are Independent and six Executive Directors. The Non-Executive Directors have submitted their declarations of their Independence or Non- Independence to the Board.

Mr.A. Hettiarachchy was appointed as an Independent Non Executive Director on 1st April 2010 and Mr.A.C.S Jayaranjan and Mr. J.D.Gomes were appointed Independent Non-Executive Directors with effect from 1st June 2010.

Mr.N.H.B.S Perera was determined to be an Independent Non Executive Director with effect from 11th June 2010. Mr.N.H.B.S Perera has served on the Board for more than nine years and is a Director on the Board of the Ultimate Parent Company and on the Board of a Subsidiary Company. However, the Board after taking into consideration all other circumstances listed in the Rules pertaining to the Criteria for Defining Independence is of the opinion that Mr.N.H.B.S Perera is nevertheless Independent.

1.6 Supply of Information Lankem Ceylon PLC has set up procedures to receive

timely information including a clear agenda prior to the meetings. Minutes of all the meetings are properly recorded and circulated among Directors.

Apart from regular Board Meetings, Executive Directors and Senior Managers meet bi-weekly or more frequently in order to discuss specific matters. Decisions and


important information from these meetings are conveyed to all Board Members at the Board Meetings.

Monthly Accounts and key financial parameters and performance of each division are discussed and necessary action is taken.

1.7 Appointments to the Board The Board as a whole decides on the appointments of

Directors in accordance with the Articles of Association of Lankem Ceylon PLC and in compliance with rules on Governance. All appointments are approved by the ultimate Parent Company, The Colombo Fort Land & Building Company PLC.

The details of new appointments to the Board are made available to shareholders by making announcements to the Colombo Stock Exchange.

1.8 Re- election of Directors In terms of the Articles of Association of the Company,

a director appointed to the Board holds office until the next Annual General Meeting and seeks re-election by the shareholders at that meeting. The Articles require one - third or a number nearest to one-third of Directors in office (excluding Executive Directors) to retire at each Annual General Meeting. The Directors to retire are those who have been longest in office since their last election. Retiring Directors are eligible for re-election by the shareholders.

2. Director’s Remuneration2.1 Remuneration Committee The Remuneration Committee of the Ultimate Parent

Company The Colombo Fort Land & Building Company PLC functions as the Company’s Remuneration Committee.

2.2 Disclosure of Remuneration Aggregate remuneration paid to Directors is disclosed in

Note 29 to the Financial Statements on page 102.

3 Relationship with Shareholders3.1 Constructive Use of AGM/General Meetings Lankem Ceylon PLC always welcomes the active

participation of shareholders at General Meetings in order to promote and continue an effective dialog between the two parties. Opportunities are available to shareholders to raise questions from the Chairman and other Directors at the AGM/General Meetings. The required number of days notice has been given in accordance with the Articles of

Association of the Company and the Companies Act No. 07 of 2007.

3.2 Major Transactions Lankem Ceylon PLC publishes its Annual Report together

with quarterly, half yearly, nine months and twelve months ended interim reports in order to communicate information to the shareholders in a timely manner. All material and price sensitive information are included in these reports together with major transactions if any during the particular period of reporting.

4 Accountability and Audit4.1 Financial Reporting Lankem Ceylon PLC and its Board of Directors consider

timely publication of its Annual and Quarterly Financial Statements as a high priority. These publications include all material, financial and non financial information in order to facilitate the requirements of existing and potential shareholders. Financial Statements were prepared based on the Sri Lanka Accounting Standards (SLAS).

The Annual Report of the Board of Directors on the affairs of the Company is given on pages 37 to 40 of this Annual Report. The Directors are of the belief that the Company is capable of operating in the foreseeable future after the adequate assessment of the Company’s financial position and resources. Therefore, the going concern principle has been adopted in the preparation of these Financial Statements. The Auditor’s Report on Financial Statements is given on pages 50 and 51 containing the Auditors’ reporting responsibility. Non-financial information of business segments is given on pages 10 to 29.

4.2 Internal Controls The Board of Directors takes overall responsibility for

the Company’s internal control system. A separate Audit and Compliance Section has been established to review the effectiveness of the Company’s internal controls in order to ensure reasonable assurance that assets are safeguarded and all transactions are properly authorised and recorded.

4.3 Audit Committee An Audit Committee was appointed for the Company

with effect from 21st July 2010.

The Audit Committee report is set out on page 46 to 47 of this report.


Risk Management Review

Risk Management involves identifying potential risk exposure

faced by the company and implementing proper risk management

techniques to mitigate risks. A disciplined approach to risk is

important in a diversified organisation such as ours in order to

ensure that we execute according to our strategic objectives

and that we only accept risks for which we are adequately

compensated.

The Lankem Board of Directors (Board) has overall responsibility

to risk oversight with a focus on the most significant risks

facing the company. We consider risk management as a vital

component in the Company’s operations and build upon

management’s risk assessment and mitigation processes,

which include standardised reviews of long-term strategic and

operational planning; executive development and evaluation;

regulatory and litigation compliance; health, safety and

environmental compliance; financial reporting and controls; and

information technology and security.

The company has established appropriate internal control

systems and other risk mitigation techniques to ensure the

delivery of shareholder wealth and to meet its obligations to

other shareholders.

1. Strategic Risk Strategic Risk relates to the Company’s future business

plans and strategies, including the risks associated

with the markets and industries in which we operate,

demand for our products and services, competitive

threats, technology and product innovation, mergers and

acquisitions and public policy.

2. Operational Risk Operational risk relates to the risk arising from execution

of business operations. The Company has established

sound internal control systems in all its operations and

continuously reviews and monitors those procedures to

ensure accountability and transparency in all its operations.

The Company is in the process of continuously improving

its controlling and monitoring processes while providing

more prominence to the compliance department to

ensure adherence system and control procedures in all

business activities.

3. Financial Risk Financial risk covers the board area of risk and mainly

incorporates credit risk and market risk stemming from

business operations.

3.1 Credit Risk Management Credit risks arise due to the non-payment by debtors

which can lead working capital issues. Due to the nature

of operations and adverse economic conditions that

prevailed in 2009/10, Lankem has provided its customers

with fair credit periods to facilitate a smooth flow in

operations. Lankem implements proper credit controls

and debt collection policies to ensure that the company

selects only reliable distributors who are able to honor

their debts.

3.2 Market Risk Management Market risk refers to the risk arising from the volatilities in

market forces. Lankem faces market risk in the financial

sphere in terms of the local rates of interest, inflation and

exchange rate. Given the business environment, the

company is able to manage its interest rate risk. The other

market risk that the company faces is the risk associated

with raw material pricing. The Company does not actively

hedge raw material purchases as many of the industries

that the company participated in allow any increases to

be passed on the end consumer.

3.2.1. Foreign Exchange Risk

Lankem operates in a business model where most

of the raw material items are imported. As a result the

Company is highly exposed to foreign exchange risk

due to the movements in foreign exchange rates. This

results in transaction risk for the company. Lankem

uses forward exchange rates for accounting purposes

on the assumption that future spot rates will fall below

the forward rate. By this means the company effectively

provides for its foreign exchange exposure and has able

to minimise any adverse impact.

3.2.2 Interest Rate Risk

The funding of a large proportion of the operations of

the Company is via debt. The Company review and

restructure its debt portfolio in a manner to minimise the


downside risk of rising interest rates. Going forward, the

Company is committed to reduce its level in order to

ensure that finance costs remain under control.

3.2.3. Inflation Rate Risk

The Company serves both individuals and institutional

clients. Upward movements in inflation will mainly

deteriorate the purchasing power of both sets of

customers. This will deteriorate the potential demand for

Company products and increase the Company’s cost

base. The company closely monitors fluctuations in price

levels and focuses on the efficient management of its

cost base so as to ensure the minimal increase in price to

customers.

3.2.4. Liquidity Risk

Due to the nature of the businesses that the Company

operates in, we need to ensure that working capital cycles

are properly maintained so as to ensure that operations

are not compromised due to the lack of adequate working

capital. The Company implements effective credit control

policies to ensure collection from debtors and obligations

to its creditors are met on time.

3.2.5. Investment Risk

The risk incorporates threat investments not yielding the

expected results. The company has in the recent past

focused on organic growth. The Company conducts

detailed feasibility studies on new projects and only once

the Company is certain threshold will any investments

take place. Further regular controlling and monitoring

of the performance of newly implemented projects are

carried out. Moreover suitable feedback controls are

implemented to rectify any issues that may arise as well

as feed forward controls are established to deter the

reassurances of adverse variances.

4. Business Risk New entrants into markets that the Company is already

present in as well as intensification of competition from

existing players in existing markets are the significant

business risk that the Company faces. Variation in

consumer spending patterns is also a potential business

risk.

The very nature of the industries that the Company and its

subsidiaries operate in is also considered to be a source

of business risk.

5. Legal and Compliance Legal and compliance risk relates to changes in the

government and regulatory environment, compliance

requirements with policies and procedures, including

those relating to financial reporting, environmental health

and safety, and intellectual property risks. Government

and regulatory risk is the risk that the government or

regulatory actions will cause us to have to change our

business models or practices.


Audit Committee Report

The Audit Committee has the responsibility of assisting the

Board in fulfilling its overall responsibility to the shareholders

in relation to the integrity of the Company’s financial reporting

process in accordance with the Companies Act and other

legislative reporting requirements including the adequacy of

disclosures in the Financial Statements in accordance with the

Sri Lanka Accounting Standards. The Audit Committee also has

responsibility to ensure that the internal controls of the Company

are in accordance with legal and regulatory requirements. The

Committee evaluates the performance and the independence of

the Company’s external audit functions.

CompositionThe Audit Committee of Lankem Ceylon PLC (LCPLC) consists

of members of the Audit Committee of The Colombo Fort Land

& Building Company PLC (CFLB) (Ultimate Parent Company)

and an Independent Non-Executive Director of Lankem Ceylon

PLC. The names of the members are set out below:

Mr. R. Seevaratnam - Chairman (Independent, Non-Executive

Director- CFLB)

Mr. A.M. de S. Jayaratne - Member (Independent, Non-Executive

Director- CFLB)

Mr. R. Senathirajah - Member (Non-Executive Director - CFLB)

Mr. A. C. S. Jayaranjan - Member (Independent, Non-Executive

Director - LCPLC)

The Committee has a blend of experience in the commercial

sector, financial risk and audit exposure and corporate law with

high standing of integrity and business acumen in order to carry

out their role efficiently and effectively.

The members of the Committee were appointed by the Board

of Directors. The Company’s Secretaries, Corporate Managers

and Secretaries (Private) Limited function as the Secretaries to

the Audit Committee.

Meetings and AttendanceThe Audit Committee was appointed in July 2010 and since then

has met twice during the financial year ended 31st March, 2011.

The attendance of the members at these meetings is stated

below:

Mr. R. Seevaratnam - Chairman (2)

Mr. A.M. de S. Jayaratne - (1)

Mr. R. Senathirajah – (1)

Mr. A. C. S. Jayaranjan - (2)

Other members of the Board and the Management Committee,

as well as the External Auditors were present at discussions

where this was appropriate. The proceedings of the Audit

Committee are regularly reported to the Board of Directors.

Terms of ReferenceThe Committee is governed by the specific terms of the reference

set out in the Audit Committee Charter. The Committee focuses

on the following objectives in discharging its responsibilities

taking into consideration the terms of reference together with

the requirements of the Listing Rules of the Colombo Stock

Exchange:

(a) Risk Management

(b) Efficiency of the system of internal controls

(c) Independence and objectivity of the external (statutory)

Auditors

(d) Appropriateness of the principal accounting policies used

(e) Financial Statement integrity

ComplianceDuring the year under review, the Committee has assisted the

Board in ensuring compliance with the statutory provisions prior

to publication of Interim Financial Statements and the Annual

Report. The Committee has taken necessary measures to

ensure that Interim Financial Statements and the Annual Report

are timely published and they are prepared and presented in

accordance with Sri Lanka Accounting Standards and also

in compliance with the Companies Act and other regulatory

requirements. The Committee has assessed the adequacy of

existing internal controls and risk management procedures and

recommends to the Board, additional controls and risk mitigating

strategies that could be implemented to strengthen the existing

internal control system.

Further, the Committee has reviewed the routine operations of

the Company and assessed the future prospects of its business

operations and accordingly makes sure that the going concern

assumption used in the preparation of the Financial Statements,

is appropriate.

External AuditThe Company has appointed KPMG Ford, Rhodes, Thornton

& Co. as its External Auditors for the financial year ended 31st

March, 2011 and the services provided by them are segregated

between audit/assurance services and other advisory services.

The Committee has reviewed the progress and conduct of the


statutory audit function and discussed the audit-related issues

with the Auditors.

Messrs KPMG Ford, Rhodes, Thornton & Co. has also issued a

declaration as required by the Companies Act No. 07 of 2007,

that they do not have any relationship or interest in any of the

companies in the Group, which may have a bearing on the

independence of their role as Auditors.

The Committee after evaluating the independence and

performance of the External Auditors, has recommended to

the Board the reappointment of Messrs KPMG Ford, Rhodes,

Thornton & Co. for the financial year ending 31st March, 2012

subject to the approval of the Shareholders at the Annual General

Meeting of the Company.

R. Seevaratnam

Chairman

Audit Committee

23rd August 2011



financial information

growth

“long term value that keeps growing”


TO THE SHAREHOLDERS OF LANKEM CEYLON PLCReport on the Financial StatementsWe have audited the accompanying financial statements of Lankem Ceylon PLC, the consolidated financial statements of the

Company and its subsidiaries as at that date which comprise the balance sheet as at March 31, 2011, 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 52 to 109 of the Annual Report.

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 policies 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.

CompanyOpinion

1. The Company has not provided for impairment of the carrying amount of the investments in subsidiary companies Beruwala

Resorts Limited and Colombo Fort Hotels Limited as at the reporting date as explained in Note 17.3 to these financial

statements.

2. The Company has not provided for impairment of the amount receivable from subsidiary companies Beruwala Resorts Limited,

Colombo Fort Hotels Limited, Lankem Consumer Products Limited and Associated Farms (Pvt) Limited as at the reporting date

as explained in Note 29.1.2 to these financial statements.

In our opinion, so far as appears from our examination, except for the effect on the financial statements of the matters referred to in

the aforesaid paragraphs (1) and (2); the Company maintained proper accounting records for the year ended March 31, 2011 and the

financial statements give a true and fair view of the Company’s state of affairs as at March 31, 2011 and its profit and cash flows for

the year then ended in accordance with Sri Lanka Accounting Standards.

Independent Auditors’ Report


ConsolidatedOpinion

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs as at March 31, 2011 and the 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.

Emphasis of Matter – ConsolidatedWithout qualifying our opinion we draw attention to Note 33 to these financial statements regarding matters that may cast significant

doubt that the respective Group Companies will be able to continue as a going concern.

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

KPMG Ford, Rhodes, Thornton & Co.

Chartered Accountants

Colombo

23rd August 2011


Group Company

For the year ended 31st March 2011 2010 2011 2010

Note Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Restated Restated

Revenue 6 23,030,604 11,046,103 4,903,869 3,589,034

Cost of Sales (18,806,358) (8,786,326) (3,912,463) (2,927,664)

Gross Profit 4,224,246 2,259,777 991,406 661,370

Other Income 7 460,802 285,813 101,072 105,788

Distribution Costs (826,738) (502,563) (338,997) (291,044)

Administrative Expenses (1,288,336) (905,520) (109,226) (92,912)

Other Expenses (8,479) (39,673) - (9,880)

Net Finance Cost 8 (452,931) (294,252) (114,007) (55,957)

Profit Before Tax 9 2,108,564 803,582 530,248 317,365

Income Tax Expense 10 (236,815) (255,000) 44,952 (108,106)

Profit for the year 1,871,749 548,582 575,200 209,259

Attrributable to:

Equity Holders of the Parent 1,131,106 357,308 575,200 209,259

Minority Interest 740,643 191,274 - -

Profit for the Year 1,871,749 548,582 575,200 209,259

Earnings per Share (Rs.) 11 47.16 15.72 23.98 9.20

Dividend per Share (Rs.) 12 2.50 2.25 2.50 2.25

The Notes from pages 57 to 109 form an integral part of these Financial Statements.

Figures in brackets indicate deductions.

Income Statement


Group Company

As at 31st March 2011 2010 2011 2010 Note Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Restated Restated ASSETSNon-Current AssetsProperty, Plant and Equipment 13 8,273,781 6,885,254 551,026 480,994 Leasehold Properties 14 847,591 892,891 - -Investment Property 15 50,753 55,783 - - Intangible Assets 16 357,078 357,078 - - Investments in Subsidiaries 17 - - 1,527,791 1,370,959 Other Long Term Investments 18 39,008 53,240 186,758 186,758 Retirement Benefit Assets 27 107,701 104,101 63,687 66,083 Total Non-Current Assets 9,675,912 8,348,347 2,329,262 2,104,794

Current AssetsInventories 19 2,436,334 1,681,997 608,595 491,665 Trade & Other Receivables 20 3,687,134 2,688,472 712,861 653,889 Amounts due from Related Parties -Trade Receivables 29.1 - - 344,163 326,830 Amounts due from Related Parties 29.1 140,063 137,992 673,798 305,044 Income Tax Recoverable 83,622 19,029 72,640 - Short Term Investments 18 47,008 12,401 47,008 12,401 Bank & Cash Balances 21 1,321,341 496,178 64,988 87,748 Total Current Assets 7,715,502 5,036,069 2,524,053 1,877,577 Total Assets 17,391,414 13,384,416 4,853,315 3,982,371

EQUITY AND LIABILITIESEquity Attributable to Equity Holders of the ParentStated Capital 22 536,218 281,218 536,218 281,218 Capital Reserve 23 492,918 443,080 95,710 95,710 Revenue Reserve 2,230,919 1,088,624 1,490,492 986,542 3,260,055 1,812,922 2,122,420 1,363,470 Minority Interest 3,266,125 1,898,619 - - Total Equity 6,526,180 3,711,541 2,122,420 1,363,470

Non-Current LiabilitiesInterest bearing Borrowings 24 2,788,762 2,558,030 329,901 274,767 Loans Payable to Related Parties 24 - - 300,000 - Deferred Income 25 560,883 507,910 1,275 3,458 Deferred Tax Liabilities 26 270,588 212,925 18,963 21,710 Retirement Benefit Obligations 27 1,614,228 1,405,348 123,065 110,091 Total Non-Current Liabilities 5,234,461 4,684,213 773,204 410,026

Current LiabilitiesTrade & Other Payables 28 2,609,854 2,678,093 707,159 950,696 Loans Payable to Related Parties 24 26,000 84,000 26,000 85,000 Amounts due to Related Parties - Trade Payables 29.2 - - 131,844 170,071 Amounts due to Related Parties 29.2 129,083 197,636 271,776 79,033 Interest bearing Borrowings 24 1,895,562 1,265,651 488,905 573,404 Income Tax Payable 145,796 118,309 - 40,016 Bank Overdraft 21 824,478 644,972 332,007 310,655 Total Current Liabilities 5,630,773 4,988,661 1,957,691 2,208,875 Total Liabilities 10,865,234 9,672,874 2,730,895 2,618,901 Total Equity and Liabilities 17,391,414 13,384,416 4,853,315 3,982,371

Net Assets per Share (Rs.) 135.84 86.33 88.43 64.93

It is certified that the Financial Statements have been prepared in compliance with the requirements of Companies Act No. 07 of 2007.

Kishoni MoneyAssistant General Manager - Finance

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.Approved and signed for and on behalf of the Board

Anushman Rajaratnam K.P. DavidDirector DirectorColombo23rd August , 2011

The Notes on pages 57 to 109 form an integral part of these Financial Statements.Figures in brackets indicate deductions.

Balance Sheet


Statement of Changes in Equity

Equity Attributable to Equity Holders of the Parent

Stated Revaluation Capital Other General Retained Total Minority Total Capital Reserve Redemption Capital Reserve Profit / (Loss) Interest Reserve Reserve Fund For the year ended 31st March, 2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

GROUP

Balance as at 31st March 2009 281,218 228,568 8,333 35,919 318,321 304,403 1,176,762 1,077,484 2,254,246

Prior Period Adjustment (Note 38) - - - - - (16,114) (16,114) (22,669) (38,783)

Balance as at 1st April 2009 - Restated 281,218 228,568 8,333 35,919 318,321 288,289 1,160,648 1,054,815 2,215,463

Revaluation Surplus - 120,155 - - - - 120,155 229,926 350,081

Issue of Shares by Subsidiaries - - - - - - - 129,111 129,111

Adjustments on Acquisition - - - - - (11,045) (11,045) 274,457 263,412

Adjustments on Disposals - - - (1,963) (1,071) 1,496 (1,538) (14,938) (16,476)

Movements due to Changes in Equity Holding - (3,148) - (11,459) (11,298) 188,383 162,478 2,620 165,098

Transfer of Revaluation Reserve - (241) - - - 241 - - -

Profit for the year - Restated - - - - - 357,308 357,308 191,274 548,582

Dividend Paid - - - - - (42,000) (42,000) - (42,000)

Dividend Paid by Subsidiaries to Minority Interest - - - - - - - (7,834) (7,834)

Balance as at 31st March 2010 - Restated 281,218 345,334 8,333 22,497 305,952 782,672 1,746,006 1,859,431 3,605,437

Prior Period Adjustment (Note 38) - 66,916 - - - - 66,916 39,188 106,104

Balance as at 31st March 2010 - Restated 281,218 412,250 8,333 22,497 305,952 782,672 1,812,922 1,898,619 3,711,541

Revaluation Surplus - 49,838 - - - - 49,838 60,913 110,751

Effects of Acquisitions, Disposals and Change in

Percentage Holding in Subsidiaries - - - - - 82,439 82,439 373,394 455,833

Issue of Shares by the Company 255,000 - - - - - 255,000 - 255,000

Issue of Shares by Subsidiaries - - - - - - - 298,073 298,073

Profit for the year - - - - - 1,131,106 1,131,106 740,643 1,871,749

Dividend Paid - - - - - (71,250) (71,250) - (71,250)

Dividend Paid by Subsidiaries to Minority Interest - - - - - - - (105,517) (105,517)

Balance as at 31st March 2011 536,218 462,088 8,333 22,497 305,952 1,924,967 3,260,055 3,266,125 6,526,180

Stated Revaluation Capital General Retained Total Capital Reserve Redemption Reserve Profit / (Loss) Reserve For the year ended 31st March,2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

COMPANY

Balance as at 1st April 2009 281,218 45,145 8,333 300,000 519,283 1,153,979

Surplus on valuation during the year - 42,232 - - - 42,232

Profit for the year - Restated - - - - 209,259 209,259

Dividends Paid - - - - (42,000) (42,000)

Restated Balance as at 31st March 2010 281,218 87,377 8,333 300,000 686,542 1,363,470

Issue of Shares 255,000 - - - - 255,000

Profit for the year - - - - 575,200 575,200

Dividend Paid -2009/10 - - - - (71,250) (71,250)

Balance as at 31st March 2011 536,218 87,377 8,333 300,000 1,190,492 2,122,420

The Notes from pages 57 to 109 form an integral part of these Financial Statements.



Cash Flow Statement

GROUP COMPANY

For the year ended 31st March 2011 2010 2011 2010 Notes Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Cash Flows from Operating ActivitiesProfit before Tax 2,108,564 803,582 530,248 317,365

Adjustments for:Depreciation/Amortisation on Property, Plant & Equipment 429,427 284,419 55,568 43,026Write-off of Property, Plant & Equipment - 167 - -Gain on Deemed Disposal of Investment - (37,996) - -Dividend Income (569) (318) (44,929) (13,491)Interest Expense 513,089 325,593 139,322 123,009(Gain)/Loss on Disposal of Property, Plant & Equipment (25,456) (5,033) (1,821) -(Gain) / Loss on Translation of Foreign Currency 13,393 945 - -Interest Income (17,413) (11,320) (18,530) (46,532)Negative Goodwill (68,038) - - -Defined Benefit Plan Cost - Retiring Gratuity 320,139 406,954 15,370 22,988(Gain) / Loss on Disposal of Investments (73,074) (70,804) (16,052) (68,559)Provision for fall in Value of Investments - Long Term (11,357) (2,737) - (8,400)Change in Fair Value of Short Term Investments - (1,112) - (1,154)Provision / (Reversal of Provision) for Bad & Doubtful Debts - Trade & Other Receivables (32,487) (4,526) 6,355 (5,841)Provision / (Reversal of Provision) for Bad & Doubtful Debts - Related Parties (68,731) (25) - 9,880Provision for Obsolete Inventories 8,388 16,087 4,067 13,345Provision / (Reversal of Provision) for Impairement of Capital Work-In-Progress (4,701) (12,940) - -Provision for Value Added Tax (VAT) Recoverable 5,266 - - -Creditors no longer payable written back (60,579) (15,179) (35,472) -Loss on Deemed Disposal of Investment - 25,131 - -Amortisation of Deferred Income (16,171) (17,487) (2,183) (2,183)Operating Profit before Working Capital Changes 3,019,690 1,683,401 631,943 383,453

(Increase) / Decrease in Inventories (762,724) (211,741) (120,997) 31,005(Increase) / Decrease in Trade & Other Receivables (892,983) (304,966) (57,242) (51,820)(Increase) / Decrease in Amounts due from Related Parties 66,660 1,228 (386,087) (80,838)Increase / (Decrease) in Trade & Other Payables (23,980) 192,497 (210,164) 12,790Increase / (Decrease) in Amounts due to Related Parties (79,655) 12,977 154,516 18,067Cash Generated from Operations 1,327,008 1,373,396 11,969 312,657

Income Tax Paid (216,259) (389,690) (76,437) (131,136)Interest Paid (400,726) (299,478) (132,770) (109,143)Retiring Gratuity Paid (113,113) (82,881) - -Payment made to Gratuity Fund (3,850) - - (7,000)Net Cash Generated from / (used in) Operating Activities 593,060 601,347 (197,238) 65,378

Cash Flows from Investing ActivitiesPurchase and Construction of Property, Plant & Equipment (1,160,564) (1,229,893) (125,600) (124,716)Investment in Subsidiaries (37,324) (954,998) (150,596) (612,760)Interest Received 17,413 11,320 18,530 46,532Dividend Received 569 318 44,929 13,491Investments in Long Term Investments (8,000) (113,320) - (112,392)Investments in Short Term Investments (47,008) 57,301 (64,375) 57,423Proceeds from Disposal of Property, Plant & Equipment 180,190 371,471 1,821 -Proceeds from Disposal of Investments 106,664 192,479 39,584 180,742Net Cash Generated from / (used in) Investing Activities (948,060) (1,665,322) (235,707) (551,680)


Cash Flow Statement

GROUP COMPANY

For the year ended 31st March, 2011 2010 2011 2010 Notes Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Continued from Previous PageCash Flows from Financing ActivitiesProceeds from Rights Issue of Shares 255,000 - 255,000 -Capital Grants Received 69,144 101,209 - -Long Term Loans obtained from Related Companies - 27,000 300,000 28,000Lease Rentals Paid (89,612) (109,121) (33,951) (43,358)Proceeds from Long-Term Loans 1,746,079 1,008,851 100,000 300,000Repayment of Long-Term Loans (624,721) (343,396) (232,878) (56,828)Settlement of Loans Payable to Related Companies (58,000) - (59,000) -Issue of Debenture 150,000 100,000 150,000 -Redemption of Debentures (112,500) (9,000) - -Payment to Lessor on Leasehold Rights (94,963) (29,232) - -Dividend Paid (71,250) (42,000) (71,250) (42,000)Net transactions with minority 191,704 121,277 - -Net Movement in Short -Term Borrowings (360,224) 593,880 (19,088) 282,744Net Cash Generated from / (used in) Financing Activities 1,000,657 1,419,468 388,833 468,558

Net Increase / (Decrease) in Cash & Cash Equivalents 645,657 355,493 (44,112) (17,744)Cash & Cash Equivalents at the beginning of the year 21 (148,794) (504,287) (222,907) (205,163)Cash & Cash Equivalents at the end of the year 21 496,863 (148,794) (267,019) (222,907)

Analysis of Cash & Cash Equivalents at the end of the yearCash in Hand and at Bank 1,321,341 496,178 64,988 87,748Bank Overdraft (824,478) (644,972) (332,007) (310,655) 496,863 (148,794) (267,019) (222,907))

The Notes from pages 57 to 109 form an integral part of these Financial Statements



Notes to the Financial Statements

1. REPORTING ENTITY Lankem Ceylon PLC and its subsidiaries are limited liability

companies incorporated and domiciled in Sri Lanka.

The consolidated financial statements of Lankem Ceylon

PLC, as at the year ended 31st March 2011comprises

the company and its subsidiaries (together referred to as

the ‘Group’).

The registered office of the Company and the principal

line of business are given on the inner back cover of this

report.

The immediate and ultimate holding companies of

Lankem Ceylon PLC are E.B. Creasy & Company PLC

and The Colombo Fort Land & Building Company PLC

respectively.

2. BASIS OF PREPARATION Statement of Compliance The Group and separate financial statements have been

prepared in accordance with Sri Lanka Accounting

Standards (SLAS) issued by the Institute of Chartered

Accountants of Sri Lanka and with the requirements of

the Companies Act No. 07 of 2007.

Basis of Measurement The financial statements have been prepared on the

historical cost basis except for certain items of Property,

Plant & Equipment and Short-Term Investments which

are measured at fair value as explained in the respective

Notes to the financial statements.

Functional and Presentation Currency The financial statements are presented in Sri Lankan

Rupees which is the functional currency of the Company

and its subsidiaries.

Use of Estimates and Judgments The preparation of financial statements in conformity

with SLAS requires management to make judgments,

estimates and assumptions that affect the application of

accounting policies and the reported amounts of assets,

liabilities, income and expenses. Actual results may differ

from those estimates and judgmental decisions.

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 if

the revision affects only that period or in the period of the

revision and future periods if revision affects both current

and future periods.

Information about significant areas of estimation

uncertainty and critical judgments in applying accounting

policies that have the most significant effect on the

amounts recognized in the financial statements is

disclosed in Notes to the financial statements.

3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been

consistently applied to all periods presented in these

financial statements.

Certain comparative amounts have been reclassified to

conform to the current year’s presentation.

The Directors have made an assessment of the Group’s

ability to continue as a going concern in the foreseeable

future, and they do not foresee a need for liquidation or

cessation of trading.

3.1 Basis of Consolidation Subsidiaries

Subsidiaries are entities controlled by the Group. Control

exists when the Group has the power to govern the

financial and operating policies of an entity so as to obtain

benefits from its activities. In assessing control, potential

voting rights that are currently excisable are also 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.

The interest of the outside shareholders of the Group

is disclosed separately under the heading of ‘minority

interest’

Transactions Eliminated on consolidation

Intra-group balances and transactions and any

unrealised income and expenses arising from intra-group

transactions are eliminated in preparing the consolidated

financial statements.

Foreign Currency

Transactions in foreign currencies are translated in to

Sri Lankan rupees at exchange rates at the dates of the

transactions. Monetary assets and liabilities denominated

in foreign currencies at the reporting date are retranslated

to the functional currency at exchange rate ruling at that

date. Foreign currency differences arising on translation

are recognised in profit and loss.


3.2 Assets and bases of their valuation Assets classified as current assets in the Balance Sheet

are cash and bank balances and those which are expected

to be realised in cash during the normal operating cycle

or within one year from the reporting date, whichever is

shorter.

Property, Plant & Equipment

Recognition and measurement

Items of Property, Plant & Equipment are measured at

cost (or at valuation in the case of certain items) less

accumulated depreciation and accumulated impairment

losses.

Owned Assets

The cost of Property, Plant & Equipment include

expenditure that is directly attributable to the acquisition

of the asset. The cost of self-constructed assets includes

the cost of materials and direct labour, and any other

costs directly attributable to bringing the asset to a

working condition for its intended use and the cost of

dismantling and removing the items and restoring the

site on which they are located and capitalised borrowing

costs. Purchased software that is integral to the

functionality of the related equipment is capitalised as

part of the equipment.

A revaluation of Property, Plant & Equipment is done

when there is a substantial difference between the

carrying amount and the fair value of the assets and is

undertaken by professionally qualified valuers.

Increases in the carrying amount on revaluation are credited

to the revaluation surplus reserve in shareholders’ equity.

Decreases that offset previous increases of the same

asset are charged against revaluation surplus reserve

directly in equity. All other decreases are recognised in

profit and loss.

Leased Assets

Leases in terms of which the Group assumes substantially

all the risks and rewards of ownership are classified as

finance leases. Upon initial recognition the leased asset

is measured at an amount equal to the lower of its fair

value and the present value of minimum lease payments.

Subsequent to initial recognition, the asset is accounted

for in accordance with the accounting policy applicable to

that asset.

Subsequent Expenditure

The cost of replacing part of an item of property, plant

and equipment is recognised in the carrying amount of

the item if it is probable that the future economic benefits

embodied within that part will flow to the Group and its

cost can be measured reliably. The carrying amount of

the replaced part is derecognised in accordance with

the derecognition policy given below. The costs of the

day-to-day servicing of property, plant and equipment are

recognised in profit and loss as incurred.

Derecognition

The carrying amount of an item of Property, Plant &

Equipment is derecognised on disposal, or when no future

economic benefits are expected from its use or disposal.

Gains and losses on derecognition are recognised in

profit and loss and gains are not classified as revenue.

Depreciation

Depreciation is recognised in profit and loss on a straight

line basis over the estimated useful lives of each part of

an item of Property, Plant & Equipment. Leased assets

are depreciated over the shorter of the lease term and

their useful lives unless that it is reasonably certain that

the Group will obtain ownership by the end of the lease

term. Freehold land is not depreciated.

The estimated useful lives for the current and comparative

periods are as follows:

Freehold Building 20-40 Years

Roads 25 Years

Plant, Machinery & Equipment 8-13 Years

Motor Vehicles 5-10 Years

Furniture, Fixtures & Fittings 7-10 Years

Kitchen & Other Equipment 10 Years

Linen & Soft Furnishing 4 Years

Cutlery & Crockery 4 Years

Electrical Equipment & Fittings 10 Years

Depreciation of an asset begins when it is available for

use and ceases at the earlier of the date the asset is

derecognised and classified as held for sale. Depreciation

methods, useful lives and residual values are reassessed

at the reporting dates.

Intangible Assets Goodwill

Goodwill arising on an acquisition represents the excess

of the cost of acquisition over the fair value of net assets

acquired. Goodwill is measured at cost less accumulated

impairment losses.

Negative goodwill arising on an acquisition represents the

excess of the fair value of the net assets acquired over

the cost of acquisition. Negative goodwill is recognised

immediately in profit and loss.



Investments Quoted and unquoted investments in shares held on

long-term basis are measured at cost, as they are held

for long term capital appreciation.

In the parent company’s financial statements, investments

in subsidiaries are carried at cost.

Provision for diminution in value is made when in the

opinion of the Directors there has been a decline which

is other than temporary in the carrying amount of the

investment.

Investment Property Investment property is property held either to earn rental

income or capital appreciation or both, but not for sale

in the ordinary course of business, use in the production

or supply of goods or services or for administrative

purposes. Investment Property is measured at cost on

initial recognition and subsequently carried at its cost

less any accumulated depreciation and any accumulated

impairment losses.

Inventories Raw material, finished goods and work in progress of

Lankem Ceylon PLC and its subsidiaries are measured

at the lower of cost, on a weighted average basis and

net realisable value. Provision is made for obsolete, slow

moving and defective inventories where necessary.

The cost includes expenditure incurred in acquiring the

inventories and bringing them to their existing condition.

In the case of manufactured inventories cost includes raw

material cost and packing material cost.

Net realisable value is the estimated selling price in the

ordinary course of business less the estimated costs of

completion and selling expenses.

Trade and Other Receivables Trade and other receivables are stated at the values

estimated to be realised after providing for bad and

doubtful debts.

Cash and Cash Equivalents Cash and cash equivalents comprise of cash at bank

and in hand and short-term highly liquid deposits that are

readily convertible to known amounts of cash and subject

to insignificant risk of changes in value.

Impairment The carrying amounts of the Group’s assets are reviewed

at each reporting date to determine whether there is any

indication of impairment. If any such indication exists then

the asset’s recoverable amount is estimated.

An impairment loss is recognised if the carrying amount

of an asset or cash-generating unit (CGU) exceeds its

recoverable amount. A CGU is the smallest identifiable

asset group that generates cash flows that are largely

independent from other asset groups.

Impairment losses are recognised in profit and loss.

Impairment losses recognised in respect of CGUs are

allocated first to reduce the carrying amount of any

goodwill allocated to the CGU and then to reduce the

carrying amount of other assets in the unit on a pro rata

basis.

The recoverable amount of an asset or CGU is the greater

of its value in use and its fair value less cost to sell. In

assessing value in use, the estimated future cash flows

are discounted to present value using a pre-tax discount

rate that reflects current market assessments of the time

value of money and the risks specific to that asset.

An impairment loss in respect of goodwill is not reversed.

In respect of other assets, impairment losses recognized

in prior periods are assessed at each reporting date for

any indications that the loss has decreased or no longer

exists. An impairment loss is reversed only to the extent

that the asset’s carrying amount does not exceed the

carrying amount that would have been determined, net

of depreciation or amortisation, if no impairment loss had

been recognised.

3.3 Liabilities & Provisions Liabilities classified as current liabilities in the Balance

Sheet are those which fall due for payment on demand or

within one year from the reporting date. Items classified

as long-term liabilities are those that fall due for payment

one year after the reporting date.

Employee Benefits

Defined Contribution Plans

A defined contribution plan is a post-employment benefit

plan under which an entity pays fixed contributions into

a separate entity and will have no legal or constructive

obligation to pay further amounts. Obligations for

contributions to provident and trust funds covering all

employees are recognised as an expense in profit and

loss when incurred.

Defined Benefit Plans

A defined benefit plan is a post-employment benefit

plan other than a defined contribution plan. The liability


recognised in the Balance Sheet in respect of defined

benefit plan is the present value of the defined benefit

obligation as at the reporting date.

Provision for gratuity of the employees of the company and

Group are based on actuarial valuation as recommended

by SLAS – 16 ‘Employee Benefits’ (Revised 2006).

An actuarial valuation was carried out by a professionally

qualified firm of actuaries, as at 31st March 2010 for

the recognition of the Company’s Retirement Benefit

Obligation. The Valuation method used by the actuary

is ‘Projected Unit Method’. Any gains and losses arising

from actuarial valuation that arise in calculating the

obligation in respect of employee benefits are recognized

in profit and loss immediately.

Provision has been made in the financial statements for

retiring gratuities payable under the Payment of Gratuity

Act No. 12 of 1983 to all employees including those

who have less than 5 years of continued service with the

Company.

Lankem Ceylon PLC and C.W. Mackie PLC have obtained

insurance policies to meet the retiring gratuity payments

to its employees.

Short-term benefits

Short-term employee benefit obligations are measured on

an undiscounted basis and are expensed as the related

service is provided.

Provisions

A provision is recognised if, as a result of a past event,

the Group has a present legal or constructive obligation

that can be measured reliably, and it is probable that an

outflow of economic benefits will be required to settle the

obligation.

Trade and Other Payables

Trade and other payables are stated at their cost.

3.4 Income statement For the purpose of the presentation of the Income

Statement, the “function of expenses” method is

adopted, as it represents fairly the elements of Company

performance.

Revenue

The Group’s revenue represents sales to customers

outside the Group and excludes Value Added Tax,

Turnover Tax and Intra-Group Sales.

Revenue recognition

Revenue is generally accounted on an accrual basis and

is recognised as follows:

On sale of goods, when all significant risks and rewards

of ownership have been transferred to the buyer, recovery

of the consideration is probable, the associated costs of

the transaction can be estimated reliably, and there is no

continuing management involvement with the goods.

On construction contracts, on the basis of the percentage

completion method. However, for jobs substantially

completed at the Balance Sheet date, revenue is

accounted proportionately and accrued accordingly. The

stage of completion is assessed by reference to surveys

of work performed.

For hotels, apartment revenue is recognised on rooms

occupied on a daily basis whilst food and beverage sales

are accounted for at the time of sale.

Interest from bank deposits is recognised on a time

proportionate basis from the date of deposit to the

reporting date.

Dividend income is recognised when the right to receive

dividend is established.

The Group’s Profit/ (Loss) is arrived after –

(a) Providing for bad and doubtful debts and

depreciation of Property, Plant & Equipment.

(b) Charging all expenses incurred in running of the

business and in maintaining the Property, Plant &

Equipment in a state of efficiency.

Operating Leases

Leases where the Lessor effectively retains substantially

all the risks and rewards of ownership over the lease term

are classified as operating leases. Payments made under

operating leases are recognised in profit and loss on a

straight-line basis over the term of the lease.

Borrowing costs

Borrowing costs are recognised as an expense in profit

and loss in the period in which they are incurred, except

to the extent that they are attributable to the acquisition,

construction or production of a qualifying asset, in which

case they are capitalised as part of the cost of that

asset. The amount of borrowing costs to be capitalised

is determined in accordance with the allowed alternative

treatment in SLAS 20 - Borrowing Costs.



Finance Income and Costs

Finance income comprises interest income on funds

invested and gains on translation of foreign currency.

Interest income is recognised in profit and loss as it

accrues.

Finance costs comprise interest payable on borrowings

and loss on translation of foreign currency.

Income Tax

Income tax expense comprises of current and deferred

tax. Income tax expense is recognised in profit and loss

except to the extent that it relates to items recognised

directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable

income for the year, using tax rates enacted at the

reporting date and any adjustments to tax payable in

respect of previous years.

Deferred tax is recognised using the liability method,

providing for temporary differences between the carrying

amounts of assets and liabilities for financial reporting

purposes and the amounts used for taxation purposes.

Deferred tax is measured at the tax rates that are

expected to be applied to the temporary differences

when they reverse, based on the laws that have been

enacted or substantively enacted by the reporting date.

Deferred tax assets are recognised for unused tax losses

and deductible temporary differences to the extent that

it is probable that future taxable profits will be available

against which the temporary difference can be utilised.

Deferred tax assets are reviewed at each reporting date

and are reduced to the extent that it is no longer probable

that the related tax benefit will be realised.

3.5 Plantations The plantation companies in the Group adopt certain

accounting policies, which differ from that of the Group

since the nature of operation of the plantation companies

is significantly different from that of the rest of the Group.

The accounting policies adopted are in accordance with

SLAS 32 on Plantations.

Those accounting policies of plantation companies that

significantly vary from the rest of the Group are given

below.

Immature & Mature Plantations

The cost of replanting and new planting is classified as

immature plantations up to the point of harvesting the

crop.

Further, the general charges incurred on the plantations

are apportioned based on the labour days spent on

replanting and new planting and capitalised on the

immature areas. The remaining proportion of general

charges is expensed in the accounting period in which it

is incurred.

The cost of perennial crop fields which come into bearing

is transferred to mature plantations.

Infilling Cost

Where infilling results in an increase in the economic life

of relevant fields beyond its previously assessed standard

of performance, the costs are capitalised in accordance

with SLAS 32 – Plantations.

Infilling costs that are not capitalised are recognised in

profit and loss as an expense in the year in which they are

incurred.

Depreciation

Depreciation is recognised in profit and loss on a straight-

line basis over the useful lives of each item of Property,

Plant & Equipment other than freehold land as follows:

Freehold Assets Useful life

Buildings 40 years

Plant & Machinery 13 1/3 years

Furniture & Fittings 10 years

Motor Vehicles 5 years

Sanitation, Water & Electricity Supply 20 years

Equipment 8 years

Mature Plantations - Tea 13 – 33 years

- Rubber 20 – 25 years

Roads 25 years

Leasehold Properties

Leasehold properties comprise of leasehold rights of

assets (bare lands and immovable lease assets) taken

over from Janatha Estate Development Board (JEDB)

/ Sri Lanka State Plantation Corporation (SLSPC) on a

long term basis which are accounted at recorded carrying

values as at the effective date of Sri Lanka Accounting

Standard – 19 “Leases” in line with the ruling of the

Urgent Issues Task Force of the Institute of Chartered

Accountants of Sri Lanka. Leasehold rights are amortised

in equal amounts over the remaining lease term or

estimated useful life of the leased property whichever is

shorter are as follows:


Type of Assets No. of Years

Bare Land 53 Years

Improvement to land 30 Years

Mature Plantations - Tea & Rubber 30 Years

- Others 25 Years

Roads & Bridges 40 Years

Buildings 25 Years

Fences & Securities 20 Years

Machinery 15 Years

Water Supply 20 Years

Power Augmentation 20 Years

Vested Tea 30 Years

Land Development Cost 30 Years

Water Supply Scheme 30 Years

Permanent Land Development Costs

Permanent land development costs are those costs

incurred to make major changes to land contours to

build new access roads and other major infrastructure

development. Such expenditure on leasehold land has

been capitalised and amortised over the shorter of useful

lives or remaining lease periods.

Permanent impairments to land development costs are

recognised in profit and loss in full or reduced to the net

carrying amounts of such asset in the year of occurrence

after ascertaining the loss.

Limited Life Land Development Costs (Immature &

Mature Plantations)

The cost of new planting, replanting, inter-planting and

crop diversification incurred between the time of field

development and being ready for commercial harvesting

is classified as immature plantations. Further, the general

charges incurred on the plantation are apportioned on

the labour days spent on respective replanting and new

planting and capitalised on the immature areas. The

remaining portion of the general charges is recognised in

profit and loss in the year in which it is incurred.

No depreciation is provided for immature plantation.

The total expenditure incurred on perennial crops (Tea)

which come into bearing during the year have been

transferred to mature plantations and depreciated over

its useful life time.

No depreciation has been charged on mature plantations

in the year of transfer.

Permanent impairments to land development costs are

recognised in profit and loss in full or reduced to the net

carrying amounts of such asset in the year of occurrence

after ascertaining the loss.

Inventories

Inventories other than produce stocks are valued at the

lower of cost and estimated realisable value, after making

due allowances for obsolete and slow moving items. Net

realisable value is the price at which the stocks can be

sold in the normal course of business after allowing for

cost of realisation and/or cost of conversion from their

existing state to saleable condition.

Input Material

Actual cost of FIFO basis.

Growing Crop – Nurseries

Cost of direct materials, direct labour and an appropriate

proportion of directly attributable overheads less provision

for overgrown plants.

Harvested Crop

Valued at estimated selling prices or realisable prices

Produce Stock

Valued at estimated selling prices or realisable prices

Other Stocks

At actual cost

Grants & Subsidies

A grant is recognised initially as deferred income when

there is reasonable assurance that they will be received

and the Group will comply with the conditions associated

with the grant. Grants & subsidies that compensate the

Group for expenses incurred are recognised as revenue

in profit and loss on a systematic basis in the periods in

which the expense is recognised.

Grants that compensate the Group for the cost of an

asset are recognized in profit and loss over the useful life

of the related asset.

Revenue Recognition

Profit and loss on perennial crops is recognised on the

financial period of harvesting.

Revenue from sale of produce stock is accounted on the

basis of invoiced value less export duty, brokerage, cess,

trade discount and any other taxes on turnover.

3.6 Related party transactions Disclosures have been made in respect of the transactions

between parties who are defined as related parties as



per Sri Lanka Accounting Standard 30 – “Related Party

Disclosures”.

3.7 Segmental Reporting A segment is a distinguishable component of the

enterprise that is engaged in either in providing products

or services (business segments) or in providing products

or services within a particular economic environment

(geographical segment) which is subject to risks and

rewards that are different from those of other segments.

Segmental information is presented in respect of the

Group’s business activities. The business segment has

been identified as the primary segment of the Group as

there are no distinguishable components to be identified

as geographical segments for the Group. The business

segments are reported based on the the Group’s

management and internal reporting structure.

3.8 Cash flow statement The cash flow statement is prepared under the Indirect

Method. Interest paid is classified as operating cash flows

while dividend paid is classified as financing cash flow.

Interest and dividend received are classified as investing

cash flows for the purpose of presentation of Cash Flow

Statement.

For the purpose of Cash Flow Statement, Cash and cash

equivalents consists of cash at bank and in hand and

short-term deposits net of outstanding bank overdrafts.

3.9 Events after Balance Sheet date All material events after Balance Sheet date have been

considered and where appropriate adjustments or

disclosures have been made in the respective Notes to

the financial statements.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Information about significant areas of estimation,

uncertainty and critical judgments in applying accounting

policies that have most significant effect on the amount

recognised in the financial statement is included in the

following notes.

Measurement of Recoverable amount of Cash-Generating

Units Containing Goodwill

The Group tests annually whether goodwill has suffered

any impairment, in accordance with the accounting policy

for impairment. The basis of determining the recoverable

amounts of cash generating units & key assumptions

used are given in Note 16.

Income Taxes The Group is subject to income taxes in numerous

jurisdictions. The Group recognizes liabilities for

anticipated tax based on estimates of taxable income.

Where the final tax outcome of this matter is different

will impact the current & deferred income tax assets &

liabilities in the period in which such determination is

made

Measurement of Defined Benefit Obligations The present value of the defined benefit obligation

depends on a number of factors that are determined

on an actual basis using a number of assumptions. Key

assumptions used in determining the defined retirement

benefit obligation are given in Note 27.Any changes in

these assumptions will impact the carrying amount of

defined benefit obligation.

Impairment of Property, Plant & Equipment and Intangible Assets other than Goodwill

The impairment analysis is principally based upon

discounted estimated cash flows from the use & eventual

disposal of assets. Factors like lower than anticipated &

resulting decreases of net cash flows and changes in the

discount rates could lead to impairment.

5. EFFECTS OF ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE

The institute of chartered Accountants of Sri Lanka has

issued a new volume of Sri Lanka Accounting Standards

which will become applicable for financial periods

beginning on or after 1st January 2012. Accordingly,

these standards have not been applied in preparing

these financial statements as the effective dates of these

standards are after the Balance Sheet date.

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 first time shall be deemed

to be an adoption of SLFRSs.

The Company is currently in the process of evaluating

the potential effect of these standards on its financial

statements and the impacts of the adoption of these

standards have not been quantified as at the Balance

Sheet date.


GROUP COMPANY

For the year ended 31 March 2011 2010 2011 2010 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

6 REVENUE6.1 Summary

Gross Revenue 23,052,207 11,070,768 4,907,625 3,593,551 Less: Turnover Taxes (21,603) (24,665) (3,756) (4,517) Net Revenue 23,030,604 11,046,103 4,903,869 3,589,034

6.2 Segments Segmentation has determined based on the activities of the companies or the sector, where multiple activities fall within one company or sector has been based on the core activities of that particular sector. Chemicals - Manufacturing, Distribution and Service Activities Relating to Chemicals Consumer - Manufacturing, Selling and Distribution of Consumer Products Hardware - Manufacturing, Selling and Distribution of Hardware Products Construction - Road Construction, Waterproofing and Industrial Flooring Hotel - Owning and Operation of Resort Hotels Plantations - Cultivation and Processing of Tea and Rubber Agriculture - Farming and Dairying

GROUP COMPANY


6.3 Segmental RevenueChemicals 4,310,970 3,135,737 3,380,967 2,426,165 Consumer 4,158,189 435,224 194,947 167,875 Hardware 6,005,802 2,299,165 1,331,711 999,511 Construction 96,922 95,560 - - Hotels 608,000 406,066 - - Plantations 9,882,876 6,433,654 - - Agriculture 29,330 16,902 - - 25,092,089 12,822,308 4,907,625 3,593,551 Turnover Tax (21,603) (24,665) (3,756) (4,517) 25,070,486 12,797,643 4,903,869 3,589,034 Less: Inter - Segment Revenue (2,039,882) (1,751,540) - - Net Revenue 23,030,604 11,046,103 4,903,869 3,589,034

6.4 Segmental Profit - Group

Profit Before Tax Non Cash Expenses

For the year ended 31st March 2011 2010 2011 2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Chemicals 696,261 410,946 49,919 23,690Consumer 238,376 (71,988) 110,376 13,703Hardware 101,450 22,888 25,057 19,576Construction (27,092) 2,344 671 1,039Hotel 55,076 (29,174) 55,512 48,624Plantations 1,133,823 454,850 512,429 545,063Agriculture (4,276) (14,066) 1,211 527

2,193,618 775,800 755,175 652,222Un-Allocated (85,054) 27,782 24,052 32,636

2,108,564 803,582 779,227 684,858



GROUP COMPANY

For the year ended 31 March 2011 2010 2011 2010

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

7 OTHER INCOMEProfit on Disposal of Property, Plant and Equipment 25,456 5,033 1,821 -

Dividend Income - Quoted 206 318 12,213 261

- Unquoted 363 - 32,716 13,230

Sale of Rubber Trees 68,696 57,980 - -

Amortisation of Grants and Subsidies 16,171 17,487 2,183 2,183

Gain on Deemed Disposal of Investments - 37,996 - -

Profit on Disposal of Investments 73,074 70,804 16,052 68,559

Commission Income - 6,059 - 6,059

Rent Income 26,678 7,346 - -

Negative Goodwill on Acquisition 68,038 - - -

Reversal of Provision for amount due from Related Parties 68,731 - - -

Sale of Timber 2,358 13,808 - -

Sale of Refuse Tea 13,407 7,195 - -

Creditors no longer payable written back 60,579 15,179 35,742 -

Reversal of Provision for Fall in value of

Long/Short - Term Investments 11,357 2,737 - 8,400

Change in Fair Value of Short Term Investments - 1,112 - 1,154

Sundry Income 20,987 29,819 615 5,942

Reversal of Impairment of Capital Work in Progress 4,701 12,940 - -

460,802 285,813 101,072 105,788

8 NET FINANCE COST (A) Finance Income

Interest Income (17,413) (11,320) - -

Interest from Related Companies

- Debenture interest income - - (16,200) (16,200)

- Others - - (2,330) (30,332)

Gain on Translation of Foreign Currency (43,345) (24,899) (6,785) (20,521)

Total Finance Income (60,758) (36,219) (25,315) (67,053)

(B) Finance CostsInterest on Term Loans 287,650 146,744 53,561 27,140

Interest on Overdraft and TR Loans 99,303 114,722 66,559 64,906

Interest on Finance Lease obligations 22,971 26,115 6,708 13,988

Interest on JEDB/SLSPC Estate lease 89,392 23,874 - -

Debenture Interest 20,164 32,263 3,857 -

Other Interest 111,106 102,012 8,637 16,976

Loss on Translation of Foreign Currency 600 4,878 - -

631,186 450,608 139,322 123,010

Amount Capitalised (117,497) (120,137) - -

Total Finance Cost 513,689 330,471 139,322 123,010

Net Finance Cost 452,931 294,252 114,007 55,957


GROUP COMPANY


9 PROFIT BEFORE TAXATION Is stated after charging all expenses including the following;

DepreciationPropety, Plant & Equipment 376,542 271,518 55,567 43,026 Leasehold Properties 47,855 12,901 - - Investment Properties 5,030 - - -

Auditors Remuneration

KPMG Ford, Rhodes, Thornton & Co. 7,183 6,750 1,375 1,250 Other Auditors 4,693 3,751 - -

Non-Audit ServicesKPMG Ford, Rhodes, Thornton & Co. 469 565 205 40 Other Auditors 45 - - -

Salaries and Wages 3,637,771 3,532,470 176,140 155,072 Defined Benefit Plan Cost - Retiring Gratuity 320,139 406,954 15,370 22,988 Defined Contribution Plan Cost - EPF & ETF 528,312 511,208 13,102 12,620 Managing Agents Fee 17,492 6,778 - - Provision / (Reversal of Provision) for Bad and Doubtful Debts (32,487) (4,526) 6,355 (5,841) Provision for Obsolete Inventories 8,388 16,087 4,067 13,345 Donations 99 30 70 2

10 INCOME TAX EXPENSE Current Tax Expense (Note 10.1)

Taxation on Profit for the Year 229,535 171,167 28,545 106,480 Under / (Over) Provision on Taxation in respect of previous years (50,382) 29,406 (70,750) (2,934) 179,153 200,573 (42,205) 103,546

Deferred Tax ExpenseOrigination/(Reversal) of Temporary Differences 57,662 66,189 (2,747) 19,963 Effect on prior year adjustment - (15,403) - (15,403) 57,662 50,786 (2,747) 4,560

Tax on Dividend Income - 3,641 - - 236,815 255,000 (44,952) 108,106

10.1 Current Income Tax Expense Reconciliation of Accounting Profit to Income Tax Expense

Accounting Profit / (Loss) before Taxation 2,108,564 803,582 530,248 317,365 Intra-Group Adjustments 98,994 152,663 - - 2,207,558 956,245 530,248 317,365 Aggregate Disallowed Expenses 928,472 812,875 127,367 155,521 Aggregate Allowable Items (848,794) (951,383) (76,822) (79,320) Tax Exempt Income (1,114,198) (124,240) (441,200) - Other Source of Income (41,849) (80,766) (59,243) (93,997) Tax Losses utilised during the year (406,110) (31,884) - - Taxable Income / (Loss) 725,079 580,847 80,350 299,569 Income Tax @ 35% 194,381 141,363 28,123 104,849 Income Tax @ 15% 32,469 26,543 - - SRL @ 1.5% 2,660 2,606 422 1,631 Income Tax at Other Rates 25 655 - - Taxation on Profit for the year 229,535 171,167 28,545 106,480



10.2 Corporate income taxes of the companies in the Group are computed in accordance with the Inland Revenue Act No.10 of

2006 and subsequent amendments thereto.

Lankem Ceylon PLC and other companies within the Group, excluding those which are enjoying a tax holiday or concessionary

rate of taxation as referred to below, are liable to income tax at 35%.

10.3 In accordance with the section 20 of the Inland Revenue Act No. 10 of 2006, the profits & income from relocated activities

(Lankem Ceylon PLC has relocated its Agro Chemicals & Agro Seeds operations to Pannala) is exempt from income tax for a

period of five years commencing from the year of Assessment 2009/2010 under GAMATA KARMANTHA PROJECT.

10.4 Lankem Exports (Private) Limited and Lankem Agrochemicals Limited were non-operative during the year.

10.5 Sigiriya Village Hotels PLC and Beruwala Resorts Limited are liable for taxation at 15% on the profits and income from activities

relating to operating of hotels and Sigiriya Village Hotels PLC is liable for taxation at 35% on other income in accordance with

the provision of Inland Revenue Act.

10.6 Profits from any agricultural undertakings falls within Section 16 of the Inland Revenue Act No. 10 of 2006 would be exempt

from income tax for a period of 5 years from 2006/07 onwards. The corporate rate of tax applicable on other income of

Kotagala Plantations PLC and Agarapatana Plantations Limited including the income not covered under Section 16 (Profits

from manufacture of tea) would be taxed at 35%.

10.7 In accordance with the agreement entered into with the Board of Investment (BOI) of Sri Lanka under Section 17 of the

G.C.E.C Law No. 4 of 1978, profits of York Hotels (Kandy) Limited are exempted from income tax for a period of ten

years from the year in which the Company commences to make profits or within five years from the year the Company

commenced commercial operations, whichever is earlier. The Company is also entitled to a concessionary rate of tax at 2%

of its turnover for 15 years immediately after the expiry of the said 10 year tax holiday. Other income is liable to income tax

at 35%.

However, BOI has given a notice of cancellation and termination of all rights, privileges and benefits conferred on the enterprise

under the conduct and operation of the project with effect from 23rd November 2002.

No tax has been provided since the Company has not made any taxable profit during the year of assesment due to no

commencement of its commercial operations.

10.8 In accordance with the powers conferred on the Board of Investments (BOI) of Sri Lanka under Section 17(2) of the BOI

Law No. 04 of 1978 and in terms of the Agreement Registration No. 368-29-6-92 between BOI and Marawila Resorts PLC

the Company is not liable for tax on profits from business for a period of 10 years commencing from the Year of Assesment

2001/02. Accordingly, the Comapny is not liable for income tax on profits from business for the year.

10.9 In accordance with Section 22 of the Inland Revenue Act No. 10 of 2006, the profits and income of Lankem Research Limited is

exempt from income tax for a period of 5 years commencing from the Year of Assessment 2006/07. Accordingly, the Company

is not liable for income tax on profits from business for the year.

10.10 Lankem Developments PLC being a construction Company is liable for taxation at the rate of 15% on it’s taxable profits in

accordance with the Section 46 of Inland Revenue Act No. 10 of 2006.

10.11 In accordance with the agreement entered into with the Board of Investments (BOI) of Sri Lanka under Section 17 of the

G.C.E.C. Law No. 04 of 1978, profits of SunAgro Farms Limited, are exempt from income tax for a period of 10 years from the

year in which the Company commences to make a profit or any year of assessment not later than two years, from the date of

commencement of commercial operations which ever is earlier.


10.12 Deferred Taxation i Deferred tax has been computed by using the future tax rate of 28% for subsidiaries which were liable for income tax

at the standard rate of 35% for the assesment year of 2010/11 . The subsidiaries which were liable for income tax at

reduced rates (below the standard rate) for the assement year of 2010/11, have computed the deferred tax at the future

reduced tax rate of 12%.

ii Agarapatana Plantations Limited has not recognised a deferred tax assets of Rs. 109.4 million (As at 31 March,

2010 - Rs. 104.2 million) as the management is of the opinion that the reversal of the taxable asset will not be crystallised

in the foreseeable future.

iii No provision has been made for deferred tax in the Financial Statements of Lankem Consumer Products Limited,

Lankem Chemicals Limited, SunAgro LifeScience Limited, Lankem Paints Limited, Lankem Research Limited and York

Hotel (Kandy) Limited as no material temporary differences have arisen during the year which are expected to reverse in

the future.

iv No Deferred tax assets has been recognized in the Financial Statements of subsidiaries, namely Lankem Developments

PLC, Colombo Fort Hotels Limited, Lankem Plantation Holdings Limited and Associated Farms (Pvt) Limited, in respect

of tax losses carried forward because it is not probable that future taxable profit will be available against which these

companies can utilize the benefit.

11 EARNINGS PER SHARE Earnings per share is based on the profit for the year attributable to equity holders of the company divided by weighted average

number of ordinary shares in issue during the year.

GROUP COMPANY

2011 2010 2011 2010

Profit attributable to Equity Holders of the

Company (Rs. ‘000) 1,131,106 357,308 575,200 209,259

Weighted Average Number of Ordinary Shares (No. ‘000) 23,984 22,734 23,984 22,734

Earnings Per Share (Rs.) 47.16 15.72 23.98 9.20

Weighted average number of ordinary sharesIssued ordinary shares at the beginning of the year (No. ‘000) 21,000 21,000 21,000 21,000

Effect of shares issued during the year (No. ‘000) 2,984 1,734 2,984 1,734

Weighted average number of ordinary shares as at

31st March 23,984 22,734 23,984 22,734

12 DIVIDEND PER SHAREDividends for Ordinary Shareholders (Rs. ‘000) 60,000 47,250 60,000 47,250

No. of Ordinary shares in issue (No. ‘000) 24,000 21,000 24,000 21,000

Dividend per Ordinary Share 2.50 2.25 2.50 2.25

The Company paid an interim dividend of Rs. 1/- per Ordinary share for the year ended 31st March 2011 on 9th February 2011.

The Directors recommend the payment of a final dividend of Rs. 1.50/- per Ordinary share for the year ended 31st March 2011

which will be declared at the Annual General Meeting to be held on 30th September 2011.



13 PROPERTY, PLANT & EQUIPMENT13.1 Group

Prior Year Restated Balance Adjustments/ Balance Transfers/ Acquisition Revaluation Additions Disposals Balance As at Transfers As at Adjustmets of during during during As at 01.04.2010 01.04.2010 Subsidiaries the year the year the year 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Cost / ValuationFreeholdLand 1,235,179 126,036 1,361,215 - 356,360 110,750 11,294 - 1,839,619Building 1,994,350 - 1,994,350 155,849 111,970 - 154,772 (159) 2,416,782Land Development Cost 9,404 - 9,404 559 - - 39 - 10,002Mature / Immature Plantations (Note 13.4) 2,921,294 - 2,921,294 487 - - 670,828 (137,221) 3,455,388Plant & Machinery 1,058,257 - 1,058,257 (39,886) - - 159,166 (652) 1,176,885Motor Vehicles 348,400 - 348,400 966 - - 51,273 (18,271) 382,368Furniture, Fittings & Office Equipment 576,054 - 576,054 14,950 3,000 - 97,588 (348) 691,244Linen & Soft Furnishings 53,500 - 53,500 (14,697) 452 - 4,768 (316) 43,707 8,196,438 126,036 8,322,474 118,228 471,782 110,750 1,149,728 (156,967) 10,015,995

LeaseholdLand & Buildings 802,250 (683,875) 118,375 (118,228) - - - (147) -Immovable Leased Assets 905,726 (893,113) 12,613 - - - - (12,613) -Plant & Machinery 182,936 - 182,936 1,004 - - 20,432 - 204,372Motor Vehicles 325,630 - 325,630 (117) - - 151,544 (27,417) 449,640Furniture, Fittings & Office Equipment 17,614 - 17,614 (887) - - 183 - 16,910 2,234,156 (1,576,988) 657,168 (118,228) - - 172,159 (40,177) 670,922Total Cost / Valuation 10,430,594 8,979,642 - 487,971 110,750 1,305,698 (197,144) 10,686,917

Restated Balance Prior Year Balance Transfers/ Acquisition Depreciation Charge Disposals Balance As at Adjustments/ As at Adjustments of on for during As at 01.04.2010 Transfer 01.04.2010 Subsidiaries Revaluation the Year the year 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Accumulated DepreciationFreeholdLand - - - - - - - - -Building 386,944 - 386,944 9,676 1,365 - 67,167 - 465,152Mature / Immature Plantations (Note 13.4) 348,473 - 348,473 504 - - 61,113 - 410,090Plant & Machinery 537,968 - 537,968 (5,813) - - 73,638 (496) 605,297Motor Vehicles 291,614 - 291,614 1,770 - - 44,289 (12,281) 325,392Furniture, Fittings & Office Equipment 392,630 - 392,630 (1,648) 74 - 42,065 (96) 433,025Linen & Soft Furnishings 28,243 - 28,243 - 170 - 3,251 (215) 31,449 1,985,872 1,985,872 4,489 1,609 - 291,523 (13,088) 2,270,405

LeaseholdLand & Buildings 233,835 (229,347) 4,488 (4,488) - - - - -Immovable Leased Assets 445,433 (445,433) - - - - - - -Plant & Machinery 62,493 (9,317) 53,176 2,078 - - 23,905 - 79,159Motor Vehicles 185,437 - 185,437 (1,085) - - 57,445 (29,130) 212,667Furniture, Fittings & Office Equipment 9,405 - 9,405 (994) - - 2,212 (191) 10,432 936,603 (684,097) 252,506 (4,489) - - 83,562 (29,321) 302,258Total Depreciation 2,922,475 2,238,378 - 1,609 - 376,542 (42,409) 2,572,663

Carrying Amount 7,508,119 - 6,741,264 470,173 8,114,254Capital Work in Progress 163,922 (19,932) 143,990 159,527Total Carrying amount of Property, Plant & Equipment 7,672,041 6,885,254 470,173 8,273,781


13.2 Company

Balance Transfers Additions Balance

As at during during As at

01.04.2010 the year the year 31.03.2011

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Cost

Freehold

Land 111,133 - - 111,133

Land Development Cost 9,404 - - 9,404

Buildings 107,195 86,847 14,863 208,905

Plant & Machinery 80,261 - 33,278 113,539

Motor Vehicles 9,687 - 6,886 16,573

Furniture, Fittings & Office Equipment 145,557 - 70,573 216,130

463,237 86,847 125,600 675,684

Leasehold

Land & Buildings 86,847 (86,847) - -

Plant & Machinery 111,783 - - 111,783

Motor Vehicles 77,857 - - 77,857

Furniture, Fittings & Office Equipment 14,708 - - 14,708

291,195 (86,847) - 204,348

Total Cost 754,432 - 125,600 880,032

Balance Transfers Charge Balance

As at during for As at

01.04.2010 the year the Year 31.03.2011

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Accumulated Depreciation

Freehold

Buildings 30,775 - 9,681 40,456

Plant & Machinery 42,944 - 7,410 50,354

Motor Vehicles 8,205 - 1,951 10,156


177,101 - 33,652 210,753

Leasehold

Plant & Machinery 40,865 - 11,140 52,005

Motor Vehicles 47,458 - 8,823 56,281


96,337 - 21,916 118,253

273,438 - 55,568 329,006

Total carrying amount of Property, Plant & Equipment 480,994 - - 551,026



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13.4 Mature/Immature Plantations

Mature Immature Total as at Total as at

As at 31st March Plantations Plantations 31.03.2011 31.03.2010

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

i) SunAgro Farms Limited

Cost

At the beginning of the year 3,021 4,654 7,675 6,622

Additions/Transfers during the year - 10,150 10,150 1,053

At the end of the year 3,021 14,804 17,825 7,675

Depreciation

At the beginning of the year 1,007 - 1,007 504

Charge for the year 503 - 503 503

At the end of the year 1,510 - 1,510 1,007

Carrying Amount at the end of the year 1,511 14,804 16,315 6,668

ii) Agarapatana Plantations Limited (APL)

Cost


Additions/Transfers during the year - 200,819 200,819 143,773

Disposals/Transfers 38,377 (38,377) - -

At the end of the year 391,846 694,581 1,086,427 885,608

Depreciation

At the beginning of the year 46,052 - 46,052 37,823

Charge for the year 10,604 - 10,604 8,229

At the end of the year 56,656 - 56,656 46,052

Carrying Amount at the end of the year 335,190 694,581 1,029,771 839,556

a) These are investments in mature/immature plantations since the formation of the Company. The assets (including plantation

assets) taken over by way of estate leases are set out in notes 13.4 and 14.1 (b). Further, investment in immature plantations

taken over by way of these leases are shown in the above notes. When such plantations become mature, the additional

investments since taken over to bring them to maturity are transferred from immature to mature under this note. A corresponding

movement from immature to mature in respect of the investment undertaken by JEDB/SLSPC on the same plantation prior to

the leases will be carried out under note 14.2 (b).

b) Borrowing costs amounting to Rs. 51,096,720/- (2009/10 Rs. 58,937,034/-) incurred on long-term loans obtained to meet

expenses relating to immature plantations have been capitalised as part of the cost of the immature plantations. Capitalisation

will cease when crops are ready for harvest.



13.4 Mature/Immature Plantations Contd.

Mature Plantations Immature Plantations Total Total

As at 31st March Tea Rubber Tea Rubber Other 31.03.2011 31.03.2010

Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

iii) Kotagala Plantations PLC (KPPLC)

Cost

At the beginning of the year 490,703 590,275 218,949 602,384 126,181 2,028,498 1,748,722

Additions/Transfer in 51,615 85,605 102,822 181,084 38,728 459,854 365,174

Transfer out - - (37,446) (85,605) (14,170) (137,221) (85,400)

At the end of the year 542,318 675,880 284,325 697,863 150,739 2,351,131 2,028,496

Depreciation

At the beginning of the year 113,729 188,189 - - - 301,918 257,965

Charge for the year 16,569 33,437 - - - 50,006 43,953

At the end of the year 130,298 221,626 - - - 351,924 301,918

Carrying Amount

as at 3l.03.2011 412,020 454,254 284,325 697,863 150,739 1,999,207 -

Carrying Amount

as at 31.03.2010 376,974 402,086 218,949 602,384 126,181 - 1,726,578

a) These are investments in mature/immature plantations since the formation of the Company. Further, investment in Immature

Plantations taken over by way of leases are shown in this Note and Note 14.1 (a). When such plantations become mature, the

additional investments since taken over to bring them to maturity are transferred from Immature to Mature under this Note. A

corresponding movement, from Immature to Mature, in respect of the investment undertaken by JEDB/SLSPC on the same

plantation prior to the leases are shown under Note 14.2 (a).

b) Borrowing costs amounting to Rs.18.6million (2009/2010 - Rs. 16.8 million) on Tea, and Rs.47.8 million (2009/2010 Rs. 44.4

million) on Rubber incurred on term loans and overdrafts utilised to finance replanting expenditure of tea and rubber have been

capitalised.The average rate of interest for capitalisation was 11% (2009/2010 - 13.7%). The capitalisation will cease when

crops are ready for harvest.

c) Other immature plantations include Eucalyptus, other timber, etc. which have been cultivated and managed in separate fields

and other crops such as Cinnamon, Coconut, etc. and carried at cost less impairment.


14 LEASEHOLD PROPERTIES

Balance Transfer Balance Additions Balance as at from as at During the as at As at 31st March 31.03.2010 PPE* 01.04.2010 Year 31.03.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Cost / Valuation

Leasehold Right to Bare Land

of JEDB / SLSPC Estates - (14.1)

Kotagala Plantations PLC - 342,287 342,287 - 342,287

Agarapatana Plantations Ltd - 341,588 341,588 - 341,588


SunAgro Farms Limited - (14.4) - - - 2,555 2,555

- 683,875 683,875 2,555 686,430

Immovable Leased Assets of JEDB /

SLSPC Estates (Other than Bare Land)-(14.2)

Kotagala Plantations PLC - 458,222 458,222 - 458,222

Agarapatana Plantations Ltd - 269,882 269,882 - 269,882

C. W. Mackie PLC - (14.3) - 165,009 165,009 - 165,009

- 893,113 893,113 - 893,113

Total Cost Valuation - 1,576,988 1,576,988 2,555 1,579,543

Balance Transfer Balance Charge Balance as at from as at for the as at As at 31st March 31.03.2010 PPE* 01.04.2010 Year 31.03.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Accumulated Amortisation / Depreciation


of JEDB / SLSPC Estates

Kotagala Plantations PLC - 114,820 114,820 6,458 121,278

Agarapatana Plantations Ltd - 114,527 114,527 6,441 120,968


SunAgro Farms Limited - (14.4) - - - 66 66

- 229,347 229,347 12,965 242,312

Immovable Leased Assets of JEDB /

SLSPC Estates (Other than Bare Land)

Kotagala Plantations PLC - 254,757 254,757 15,209 269,966

Agarapatana Plantations Ltd - 153,890 153,890 9,065 162,955

C. W. Mackie PLC - 46,103 46,103 10,616 56,719

- 454,750 454,750 34,890 489,640

Total Amortisation / Depreciation - 684,097 684,097 47,855 731,952

Carrying Amount - - 892,891 - 847,591

*Property, Plant & Equipment



14.1 Leasehold Right to Bare Land of Janatha Estate Development Board (JEDB) / Sri Lanka State Plantation Corporation (SLSPC)

Estates

The leases of plantation estates in relation to the subsidiaries of the Group, Kotagala Plantations PLC and Agarapatana

Plantations Limited have been executed and are retroactive from 22nd June, 1992. The leasehold rights to these estates have

been taken into the books as at 22nd June, 1992 immediately after the formation of these two companies, in terms of the ruling

obtained from the Urgent Issues Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka.

For this purpose, the Board of Directors of Kotagala Plantations PLC and Agarapatana Plantations Limited decided at the

meeting held on 8th March, 1995 that these bare lands would be revalued, at the value established for these lands, by the

valuation Specialist Mr.D.R.Wickramasinghe, just prior to the formation.The value taken into the 22nd June, 1992 Balance

Sheet and the amortisation of leasehold rights up to 31st March 2011 are as follows:

Description Revaluation Balance Accumulated Amortisation Accumulated Carrying Carrying

As at As at Amortisation during the Amortisation Amount Amount

22.06.1992 01.04.2010 01.04.2010 Year 31.03.2011 31.03.2011 31.03.2010

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

a) Kotagala Plantations PLC 358,928 342,287 114,820 6,458 121,278 221,009 227,467

b) Agarapatana Plantations Limited 341,588 341,588 114,527 6,441 120,968 220,620 227,061

14.2 Immovable Leased Assets of JEDB / SLSPC Estates (Other than Bare Land) In terms of the ruling of the UITF of the Institute of Chartered Accountants of Sri Lanka, all immovable assets in the JEDB/

SLSPC estates under finance leases have been taken into the books of the two plantation companies, Kotagala Plantations

PLC and Agarapatana Plantations Limited retroactive to 22nd, June 1992.

For this purpose, the Board of Directors of these two companies decided at the meeting held on 08th March, 1995 that these

assets be restated at their book values as they appear in the books of the JEDB/SLSPC, on the day immediately preceding the

date of formation of the Companies. These assets are taken into the Balance Sheet as at 22nd June 1992 and depreciated as

follows:

a) Kotagala Plantations PLC

Description Revaluation Transfers/ Balance Accumulated Depreciation Accumulated Carrying Carrying As at Immature to As at Depreciation for the Depreciation Amount Amount 22.06.1992 Mature 01.04.2010 01.04.2010 year 31.03.2011 31.03.2011 31.03.2010 (Adjustments) Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Land Development Cost 6,712 (11) 6,701 3,971 223 4,194 2,507 2,730Buildings other than worker housing 26,519 (617) 25,902 18,420 1,036 19,456 6,446 7,482Plant & Machinery 8,757 - 8,757 8,757 - 8,757 - -Water Projects and Sanitations 8,688 - 8,688 5,149 290 5,439 3,249 3,539Mature Plantations 130,905 277,269 408,174 218,460 13,660 232,120 176,055 189,714Immature Plantations 293,998 (293,998) - - - - - - 475,579 (17,357) 458,222 254,757 15,209 269,966 188,257 203,465


14.2 Immovable Leased Assets of JEDB / SLSPC Estates (Other than Bare Land) Contd.b) Agarapatana Plantations Limited

Description Revaluation Transfers/ Balance Accumulated Depreciation Accumulated Carrying Carrying As at Immature to As at Depreciation for the Depreciation Amount Amount 22.06.1992 Mature 01.04.2010 01.04.2010 year 31.03.2011 31.03.2011 31.03.2010 (Adjustments) Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Improvement to Land 5,406 - 5,406 3,194 181 3,375 2,032 2,213Unimproved Land 998 - 998 - - - 998 998Roads and Bridges 677 - 677 301 17 318 360 376Buildings 62,634 - 62,634 44,500 2,501 47,002 15,632 18,134Fences and Securities 49 - 49 47 3 50 (1) 2Machinery 8,823 (621) 8,201 8,201 - 8,201 - -Water Supply 6,158 - 6,158 5,467 307 5,774 384 691Power Augmentation 972 - 972 862 48 911 61 109Coffee, Pepper, Cardamom 305 - 305 - - - 305 305Mature Plantations 37,457 141,636 179,093 90,570 5,968 96,538 82,555 88,523Vested Tea 1,223 - 1,223 718 40 758 465 505Immature Plantations 141,636 (141,636) - - - - - -Immature Timber 4,136 - 4,136 - - - 4,136 4,136Other Vested Assets 30 - 30 30 - 30 - - 270,504 (621) 269,882 153,890 9,065 162,957 106,927 115,992

14.3 C. W. Mackie PLC C. W. Mackie PLC has taken certain land & buildings on lease. In terms of the Grant to the Company dated 22nd September

1964 under the Crown Lands Ordinance, premises No. 34 and 36, D. R. Wijewardena Mawatha, Colombo 10 has been leased

for a period 60 years, 8 months and 10 days (being the residue of the unexpired term under Indenture of Lease by the Crown

dated 10th June 1925 granting the Company a 99 year lease of the premises from the said date). At the time of handing

over the possession of the premises, the Company is not entitled to any compensation in respect of the land, buildings or

improvements thereon.

14.4 SunAgro Farms Limited The agricultural land of SunAgro Farms Limited which was acquired on a 29 year lease from the Department of Buddhist Affairs

and leasehold rights in relation to the above land is ammortised over the period of lease.

As at 31 March 2011

Rs.’000

Acquisition Cost

Balance at the beginning of the year -

Additions 2,555

2,555

Ammortisation Charged for the year (66)

Carrying Amount 2,489



15 INVESTMENT PROPERTY

GROUP

As at 31st March 2011 2010

Rs. ‘000 Rs. ‘000

Cost

Balance at the beginning of the year 68,408 -

Acquisition of Subsidiaries - 68,408

Balance at the end of the year 68,408 68,408

Accumulated Depreciation

Balance as at the beginning of the year 12,625 -

Acquisition of Subsidiaries - 12,625

Charge for the year 5,030 -

Balance as at end of the year 17,655 12,625

Carrying Amount as at 31st March 50,753 55,783

GROUP - C.W. Mackie PLC

The Company has rented out a part of C.W. Mackie building complex and value of land and buildings of that portion has been

classified as investment Property and accounted on “Cost model” as required by SLAS 40 - Investment Property. The above

investment property is situated at No 36, D. R. Wijewardena Mawatha, Colombo 10 and the extent of the building is 52,923 sqft.

The carrying amount of Investment Property as at 31st March 2011, amounts to Rs. 50.7 million (As at 31 December, 2009 -

Rs. 55.8 million). The fair value of the investment property on valuation carried out on 31st March 2011 is Rs. 61.5 million.

Rental Income earned from Investment Property by the Company amounted to Rs. 60 million for the period of 15 months

ended 31st March 2011 and Direct Operating Expenses incurred for the same period amounted to Rs.13.8million.

16 INTANGIBLE ASSETS

GROUP

As at 31st March 2011 2010

Rs. ‘000 Rs. ‘000

Goodwill

Balance at the beginning of the year 357,078 147,254

Goodwill on Acquisition of Subsidiary - 140,240

Increase due to Changes in Equity Holdings - 69,584

Impairment of Goodwill - -

Balance as at the end of the year 357,078 357,078

This represents the excess of the cost of acquisition over the attributable net assets of the following Companies. The aggregate

carrying amount of Goodwill allocated to each Company is as follows:


16 INTANGIBLE ASSETS CONTD.

2011 2010

Rs. ‘000 Rs. ‘000

Agarapatana Plantations Limited 150,120 150,120

Lankem Tea & Rubber Plantations (Private) Limited 10,329 10,329

Kotagala Plantations PLC 6,369 6,369

Lankem Plantations Holdings Limited 30,820 30,820

Lankem Developments PLC 4,361 4,361

Marawila Resorts PLC 14,839 14,839

C.W.Mackie PLC 140,240 140,240

357,078 357,078

Carrying amount of the goodwill as at the reporting date has been tested for impairment and no impairment losses were

identified as at the balance sheet date.

The recoverable value of Kotagala Plantations PLC, Lankem Developments PLC, Marawila Resorts PLC, C.W. Mackie PLC

was based on fair value less cost to sell and the others were based on value in use. Value in use was determined by discounting

the future cash flows generated from the investment. Key Assumptions used are given below.

Business growth - Based on historical growth rate and business plan

Inflation - Based on the current inflation and the percentage of the total cost subjected to the inflation

Discount Rate - Average market borrowing rate adjusted for risk premium

Margin - Based on current margin and business plan

17 INVESTMENTS IN SUBSIDIARIES17.1 Company

Group Company No. of Cost Market No. of Cost Market Holding Holding Shares Value Shares Value As at 31st March 2011 2011 2011 2011 2011 2010 2010 2010 % % Rs.’000 Rs.’000 Rs.’000 Rs.’000 Quoted InvestmentsC. W. Mackie PLC 44 38 13,537,453 483,589 1,179,112 13,205,802 477,353 515,026 Lankem Developments PLC 50 50 3,459,241 39,337 250,103 3,459,241 39,337 42,376 Sigiriya Village Hotels PLC 61 54 4,831,560 225,031 483,639 3,706,737 120,298 159,390 Marawila Resorts PLC 42 31 38,043,668 209,126 418,480 36,695,156 184,016 266,040 Kotagala Plantations PLC 32 - 5,000 122 840 5,000 122 224 957,205 2,332,174 821,126 983,056 Unquoted InvestmentsColombo Fort Hotels Limited 69 42 65,753,012 170,753 - 45,000,000 150,000 - Lankem Plantation Holdings Limited 48 48 19,500,001 220,500 - 19,500,001 220,500 - Lankem Tea & Rubber Plantation (Pvt) Ltd. 48 1 8,342 1,998 - 8,342 1,998 -Lankem Plantation Services Ltd. 60 60 179,993 1,800 - 179,993 1,800 -Beruwala Resorts Limited 42 20 118,381,000 118,381 - 118,381,000 118,381 -Lankem Exports (Pvt) Ltd. 100 100 10,000 100 - 10,000 100 -Lankem Paints Ltd. 100 100 2,000,000 20,000 - 2,000,000 20,000 - Lankem Consumer Products Ltd. 100 100 2,000,000 20,000 - 2,000,000 20,000 - Lankem Chemicals Ltd. 100 100 2,000,000 20,000 - 2,000,000 20,000 - Lankem Research Ltd 100 100 250,007 2,500 - 250,007 2,500 - SunAgro Life Science Ltd. 100 100 200,000 2,000 - 200,000 2,000 - SunAgro Farms Ltd. 100 100 1,200,000 12,000 - 1,200,000 12,000 - Associated Farms (Pvt) Ltd. 100 100 55,398 554 - 55,398 554 - 590,586 - 569,833 - 1,547,791 1,390,959 Less: Provision for impairment in Value of Investments (Note 17.2) (20,000) (20,000) 1,527,791 1,370,959

Lankem Ceylon PLC also holds 100% in Lankem Agro Chemicals Ltd, the investment being Rs. 70/-



17.2 Provision for Impairment in Value of Investments

COMPANY

2011 2010

Rs.’000 Rs.’000

Unquoted Investments

Lankem Consumer Products Ltd. 20,000 20,000

20,000 20,000

17.3 Company i) The Company has an investment in the shares of Beruwala Resorts Limited (BRL) and the carrying amount of the investment

at cost amounted to Rs. 118.38 million as at the reporting date. The net assets attributable to the said investment as at the

reporting date amounted to Rs.68.44 million based on historical cost. BRL has incurred continuous losses in previous years

and as at the reporting date the current liabilities exceeded the current assets by Rs. 81.59 million. No provision has been made

in the financial statements to the carrying amount of the investment in BRL due to the anticipated boom in the tourist industry

which will result in an improved performance of the Company in the near future.

ii) The Company has an investment in the shares of Colombo Fort Hotels Limited (CFHL) and the carrying amount of the

investment at cost amounts to Rs. 170.75 million as at the reporting date. The net assets attributable to the said investment

as at the reporting date amounted to Rs. 98.38 million based on historical cost. Further CFHL has investments in York Hotels

(Kandy) Limited and Beruwala Resorts Limited amounting to Rs. 105.26 million and Rs. 220.59 million respectively.

No provision has been made in the financial statements to the carrying amount of the investment in CFHL due to anticipated

boom in the tourisim industry which will result in an improved performance of the companies in which CFHL had invested in

and in turn would result in an improved net asset position.

18 OTHER LONG-TERM INVESTMENTS

GROUP COMPANY

Notes Cost Cost Notes Cost Cost

2011 2010 2011 2010

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Quoted Investments 18.1.1 254 33,102 18.2.1 49 49

Unquoted Investments 18.1.2 13,325 5,325 18.2.2 5,000 5,000

Debentures 18.1.3 21,918 22,660 18.2.3 180,000 180,000

Unit Trusts 18.1.4 3,011 3,010 18.2.4 1,709 1,709

Fixed Deposits 18.1.5 500 500 - -

39,008 64,597 186,758 186,758

Less : Provision for fall in value of Investment - (11,357) - -

39,008 53,240 186,758 186,758


18.1 Group18.1.1 Quoted Investments

Group

No. of Cost Market No. of Cost Market

Shares Value Shares Value

As at 31st March 2011 2011 2011 2010 2010 2010

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Banks, Finance & Insurance

DFCC Bank PLC 4,260 102 731 4,260 102 769

Total 102 731 102 769

Construction & Engineering

Colombo Dockyard PLC 257 2 66 257 2 63

Total 2 66 2 63

Hotel & Travel

Hunas Falls Hotels PLC 400 7 34 400 7 21

Hotel Sigiriya PLC 14,000 65 1,065 14,000 65 294

Pegasus Resorts PLC 960 9 68 960 9 41

Renuka City Hotels PLC 525 30 175 525 30 126

Royal Palms Beach Hotels PLC 375 11 26 375 11 24

Trans Asia Hotels PLC 200 1 39 200 1 35

Total 123 1,407 123 541

Manufacturing

Pelwatte Sugar Industries PLC 1,000 9 32 1,000 9 31

Total 9 32 9 31



As at 31st March 2011 2011 2011 2010 2010 2010

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Plantations

Balangoda Plantations PLC 100 2 6 100 2 3

Hapugastenna Plantations PLC 100 1 7 100 1 4

Horana Plantations PLC 100 1 7 100 1 3

Kahawatte Plantations PLC 100 1 4 100 1 3

Kegalle Plantations PLC 100 1 21 100 1 5

Kelani Valley Plantations PLC 100 1 18 100 1 5

Madulsima Plantations PLC 100 2 3 100 2 1

Malwatte Valley Plantations PLC 100 1 11 100 1 4

Maskeliya Plantations PLC 100 3 3 100 3 3

Namunukula Plantations PLC 100 1 11 100 1 3

Talawakelle Tea Estates PLC 100 2 5 100 2 3

Udapussellawa Plantations PLC 100 1 5 100 1 3

Watawala Plantations PLC 100 1 3 100 1 17

Total 18 104 18 57

Chemicals and Pharmaceuticals

Muller & Phillips (Ceylon) PLC - - - 32,848,620 32,848 32,848

Total - - 32,848 32,848

Total Quoted Investments 254 2,340 33,102 34,309



GROUP



As at 31st March 2011 2011 2011 2010 2010 2010

Rs.’000 Rs.’000 Rs.’000 Rs.’000

18.1.2 Unquoted InvestmentsWaverly Power (Pvt) Ltd 800,000 8,000 - - - -

Ceylon Ocean Lines Container Services Limited - 250 - - 250 -

Ceylon Ocean Lines Container Repairs Limited - 75 - - 75 -

Lankem Technology Services Limited 5,000 5,000 - 5,000 5,000 -

Total 13,325 - - 5,325 -

18.1.3 Debentures Bank of Ceylon 200 21,918 - 200 22,660 -

Total 21,918 22,660 -

18.1.4 Unit Trusts Comtrust Equity Fund 94,856 784 2,391 94,856 784 1,596

National Equity Fund 150,000 1,709 4,711 150,000 1,709 3,162

Pyramid Unit Trust 55,290 518 2,080 55,290 517 1,118

Total 3,011 9,182 3,010 5,876

2011 2010

Rs.’000 Rs.’000

18.1.5 Fixed Deposits

Total 500 500

Sector classification and market value per share of Quoted investments are based on the official valuation list published by the Colombo Stock Exchange.

18.2 Company

COMPANY



As at 31st March 2011 2011 2011 2010 2010 2010

Rs.’000 Rs.’000 Rs.’000 Rs.’000

18.2.1 Quoted Investments Banks, Finance & Insurance

DFCC Bank PLC 1,492 49 256 1,492 49 269

Total 49 256 49 269

18.2.2 Unquoted Investments Lankem Technology Services Limited 5,000 5,000 - 5,000 5,000

Total 5,000 - 5,000

18.2.3 Debentures Lankem Tea & Rubber Plantations (Pvt.) Ltd. 1,800,000 180,000 - 1,800,000 180,000

Total 180,000 - 180,000

18.2.4 Unit Trusts National Equity Fund 150,000 1,709 4,711 150,000 1,709 3,162

Total 1,709 4,711 1,709 3,162


18.3 Short - Term Investments

GROUP



As at 31st March 2011 2011 2011 2010 2010 2010

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Dialog Axiata PLC 1,500,000 15,307 15,750 - - -

Nations Trust Bank PLC 60,300 2,732 4,601 - - -

Raigam Wayamba Saltens PLC 100,000 426 450 - - -

Janashakthi Insurance Company PLC 339,400 5,123 5,600 - - -

Richard Pieris and Company PLC 36,500 524 496 - - -

Tokyo Cement Company PLC (Non Voting) 100,000 4,550 4,400 - - -

Tokyo Cement Company PLC (Voting) 285,900 18,321 17,383 - - -

Kotmale Holdings PLC 1,000 25 53 - - -

C. W. Mackie PLC - - - 363,000 12,401 14,157

Total 47,008 48,733 12,401 14,157

18.4 Short - Term Investments

COMPANY



As at 31st March 2011 2011 2011 2010 2010 2010

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Dialog Axiata PLC 1,500,000 15,307 15,750 - - -

Nations Trust Bank PLC 60,300 2,732 4,601 - - -

Raigam Wayamba Saltens PLC 100,000 426 450 - - -

Janashakthi Insurance Company PLC 339,400 5,123 5,600 - - -

Richard Pieris and Company PLC 36,500 524 496 - - -

Tokyo Cement Company PLC (Non Voting) 100,000 4,550 4,400 - - -

Tokyo Cement Company PLC (Voting) 285,900 18,321 17,383 - - -

Kotmale Holdings PLC 1,000 25 53 - - -

C. W. Mackie PLC - - - 363,000 12,401 14,157

Total 47,008 48,733 12,401 14,157

19 INVENTORIES

GROUP COMPANY

As at 31st March 2011 2010 2011 2010

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Raw Materials 706,935 545,542 301,866 195,352Produce Stock-Tea & Rubber 735,822 517,876 - -Growing Crop-Nurseries 37,714 44,378 - -Work - in - Progress 8,672 3,881 8,396 -Finished Goods 987,625 484,735 331,248 207,530Goods-in-Transit - 117,631 - 117,631 2,476,768 1,714,043 641,510 520,513Less: Provision for Obsolete Inventories (40,434) (32,046) (32,915) (28,848) 2,436,334 1,681,997 608,595 491,665



20 TRADE AND OTHER RECEIVABLES

GROUP COMPANY

As at 31st March 2011 2010 2011 2010 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Trade Receivables 2,840,744 1,965,470 457,920 358,559Less: Provision for Doubtful Debts (82,002) (114,489) (12,936) (6,581) 2,758,742 1,850,981 444,984 351,978

Other Receivables 388,459 336,015 106,773 158,642Deposits & Prepayments 184,191 219,278 10,046 20,979Staff Loan 87,048 3,666 849 2,012Taxes Recoverable (Note - 20.1) 268,694 278,532 150,209 120,278 928,392 837,491 267,877 301,911 3,687,134 2,688,472 712,861 653,889

20.1 Taxes Recoverable Withholding Tax Recoverable 13,808 4,781 1,060 -Advanced Company Tax Recoverable 457 22,262 - -Social Responsibility Levy Recoverable 931 - 931 -Value Added Tax Recoverable 191,555 206,467 142,124 120,278Economic Service Charge Recoverable 61,943 45,022 6,094 - 268,694 278,532 150,209 120,278

21 CASH AND CASH EQUIVALENTS Favourable Balance

Fixed Deposits 211,721 3,204 - -Cash at Bank 1,104,353 482,942 64,988 87,748Cash in Hand 5,267 10,032 - - 1,321,341 496,178 64,988 87,748 Unfavourable Balance Bank Overdraft (824,478) (644,972) (332,007) (310,655) 496,863 (148,794) (267,019) (222,907)

22 STATED CAPITAL

2011 2010

Number of Value of Number of Value of Shares Shares Shares Shares Rs’ 000 Rs’ 000

Fully paid ordinary shares At the beginning of the year 21,000,000 281,218 21,000,000 281,218

Issued during the Year 3,000,000 255,000 - -At the end of the year 24,000,000 536,218 21,000,000 281,218

The Company made a Rights Issue of 3,000,000 Ordinary Shares at a price of Rs.85/- per share to the holders of the issued ordinary shares of the Company as at end of trading on 24th September 2010 in the proportion of One (1) new ordinary share for every Seven (7) ordinary shares held as at that date. The issue closed on 15th October 2010 and was fully subscribed. The total consideration received was Rs.255 million. The purpose of the issue was to fund Working Capital requirements. Out of the proceeds received 68% was utilized to settle part of the short term borrowings and the balance 32% was used for the purpose of settling trade creditors.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per individual present at meetings of the shareholders or one vote per share in the case of a poll.


23 CAPITAL RESERVES

Revaluation Capital Other Total

Reserve Redemption Capital

Reserve Fund Reserve

Rs.’000 Rs.’000 Rs.’000 Rs.’000

GROUP

Balance as at 01.04.2010 - Restated 412,250 8,333 22,497 443,080

Surplus on Revaluation 49,838 - - 49,838Balance as at 31.03.2011 462,088 8,333 22,497 492,918 COMPANY Balance as at 01.04.2010 87,377 8,333 - 95,710Movement during the year - - - -Balance as at 31.03.2011 87,377 8,333 - 95,710

23.1 Revaluation Reserve The revaluation reserve relates to revaluation of freehold lands & buildings and represents the increase in the fair value of these

lands & buildings.

23.2 Capital Redemption Reserve Fund The amount set aside out of retained earnings for redemption of preference shares.

24 INTEREST BEARING BORROWINGS

GROUP COMPANY

As at 31st March 2011 2010 2011 2010

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Payable after one year Finance Lease Obligations - JEDB/SLSPC (Note 24.1) 403,951 409,741 - - Finance Lease Obligations - Others (Note 24.2) 184,528 113,852 9,968 21,264 Long Term Loans - Others (Note 24.4) 1,886,783 1,723,437 169,933 253,503 Debentures (Note 24.6) 313,500 311,000 150,000 - 2,788,762 2,558,030 329,901 274,767

Loans Payable to Related Parties (Note 24.3) - - 300,000 - Total 2,788,762 2,558,030 629,901 274,767 Payable within one year Finance Lease Obligations - JEDB/SLSPC (Note 24.1) 5,793 5,574 - - Finance Lease Obligations - Others (Note 24.2) 82,027 76,365 11,280 27,383 Long Term Loans - Others (Note 24.4) 1,309,966 360,712 41,516 90,824 Short Term Loans (Note 24.5) 462,776 823,000 436,109 455,197 Debentures (Note 24.6) 35,000 - - -

1,895,562 1,265,651 488,905 573,404

Loans Payable to Related Parties (Note 24.3) 26,000 84,000 26,000 85,000 Total 1,921,562 1,349,651 514,905 658,404

Total Interest Bearing Borrowings 4,710,324 3,907,681 1,144,806 933,171



24.1 Finance Lease Obligations-JEDB/SLSPC

GROUP COMPANY

As at 31st March 2011 2010 2011 2010

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Balance at the beginning 781,375 803,571 - -Payments made during the year (22,170) (22,196) - -Less: Interest in suspense (349,461) (366,060) - -Balance at the end 409,744 415,315 - -

GROUP

2011 2010

Rs. ‘000 Rs. ‘000

Analysis of Lease Obligations - (JEDB/SLSPC) by year of Repayment

Payable within one year (Transferred to Current Liabilities)

Gross Lease Obligations 22,170 22,182Less: Finance Charges allocated to Future periods (16,377) (16,608)Net Lease Obligations 5,793 5,574

Payable within two to five years

Gross Lease Obligations 88,680 88,718Less: Finance Charges allocated to Future periods (63,098) (64,106)Net Lease Obligations 25,582 24,612

Payable after five years

Gross Lease Obligations 648,081 670,345Less: Finance Charges allocated to Future periods (269,712) (285,216)Net Lease Obligations 378,369 385,129Repayable after one year 403,951 409,741

Kotagala Plantations PLC

In terms of the leases, Rs. 22.2 Mn. is payable each year as lease rental, commencing from 22.06.1996 till the end of the lease on 21.06.2045. This amount is to be inflated annually by the Gross Domestic Product (GDP) deflated in form of contingent rent.

Consequent to the agreement signed on 4th August 2003 by the Company with the Ministry of Plantations Industries, JEDB and SLSPC, for the capping of management fees and freezing of lease rental in respect of the Privatized Regional Plantation Companies relating to the Plantation Development Project, the aforesaid lease rental will be frozen until 17th June 2008. Thereafter the rental will be inflated by GDB deflator. Accordingly the all inclusive lease rental payable by the Company for a fiscal year is Rs. 55.6 million. The Charge to the Income Statement for the current financial year on account of interest and interest arrears is Rs. 89.4 million. ( 2009/10 Rs. 23.9 million.)

The charge to the Income Statement for the current financial year

Rs. Mn.

Gross Lease Obligation per year 22.20Contingent interest (Frozen for 6 years) 33.40All inclusive Lease rental per year 55.60

Agarapatana Plantations Ltd.

Net Liability to lessor is the Net Present Value of annual lease rental over the life of the leases at a nominal discount rate of

8.16% per annum, consisting of real discount rate 4% per annum and projected inflation of 4% per annum.


24.2 Finance Lease Obligations-Others

GROUP COMPANY

As at 31st March 2011 2010 2011 2010

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Balance at the beginning 241,448 156,922 59,284 78,480

Acquisition of Subsidiary - 78,371 - -

241,448 235,293 59,284 78,480

Leases acquired during the year 187,681 115,276 - 24,162

Payments made during the year (89,612) (109,121) (33,951) (43,358)

Less: Interest in suspense (72,962) (51,231) (4,085) (10,637)

Balance at the end 266,555 190,217 21,248 48,647

Analysis of Finance Lease Obligations by year of Repayment

Payable within one year

Gross Lease Obligations 109,438 93,906 13,672 33,934

Less: Finance Charges Unamortized (27,411) (17,541) (2,392) (6,551)

Net Lease Obligations 82,027 76,365 11,280 27,383

Payable within one to five years

Gross Lease Obligations 225,268 126,522 11,662 25,349

Less: Finance Charges Unamortized (40,740) (12,670) (1,694) (4,085)

Net Lease Obligations 184,528 113,852 9,968 21,264

24.3 Loans Payable to Related Parties

GROUP COMPANY


Balance at the beginning 84,000 57,000 85,000 57,000Loans transferred/obtained during the year - 27,000 300,000 28,000Payments made during the year (58,000) - (59,000) -Balance at the end 26,000 84,000 326,000 85,000Payable within one year (26,000) (84,000) (26,000) (85,000)Payable after one year - - 300,000 -

Loans payable to related parties are as follows The Colombo Fort Land & Building Co.PLC 26,000 84,000 26,000 84,000Kotagala Plantations PLC - - 300,000 -Sigiriya Village Hotels PLC - - - 1,000 26,000 84,000 326,000 85,000

The Company has received a loan of Rs. 300 million from Kotagala Plantations PLC on 28th March 2011 at an interest rate of

9% per annum payable quarterly.

Further the Company did not incur interest on the loan obtained from The Colombo Fort Land & Building Co. PLC. This loan is unsecured and the terms of repayment has not been agreed at the reporting date.



GROUP COMPANY


24.4 Long Term Loans - Others Balance at the beginning 2,084,149 1,323,551 344,327 101,154Acquisition of Subsidiary 4,635 96,089 - - 2,088,784 1,419,640 344,327 101,154Loans obtained during the year 1,746,079 1,008,851 100,000 300,000Exchange Fluctuations (13,393) (945) - -Payments made during the year (624,721) (343,397) (232,878) (56,827)Balance at the end 3,196,749 2,084,149 211,449 344,327Payable within one year (1,309,966) (360,712) (41,516) (90,824)Payable after one year 1,886,783 1,723,437 169,933 253,503

24.5 Short Term Loans Term Loans 101,667 497,803 75,000 130,000Trust Receipt Loans 361,109 325,197 361,109 325,197 462,776 823,000 436,109 455,197

24.6 Debentures Unsecured Redeemable Debentures 248,500 211,000 150,000 -Guaranteed Redeemable Debentures 100,000 100,000 - - 348,500 311,000 150,000 -Payable within one year (35,000) - - -Payable after one year 313,500 311,000 150,000 -

Company The Company has issued Rs. 150 million Rated Unsecured Unlisted Redeemable Debentures of the value of Rs. 1,000/- each

on 30th December 2010 to DFCC Bank at the rate of AWPLR+1%. These debentures are redeemable after 5 years from the date of issue. The purpose of the issue was to fund long term working capital requirement.

Group i) Kotagala Plantations PLC has issued Rs. 35 million and Rs. 65 million Guaranteed Redeemable Debentures (unquoted) on

23rd April 2009 and 17th July 2009 respectively to the Plantations Trust Fund at the Interest rate of 15.86%. These Debentures are redeemable in 2012 (Rs. 35 million), 2013 (Rs. 50 million) and 2014 (Rs. 15 million) respectively.

ii) Lankem Tea and Rubber Plantations (Pvt) Ltd. has issued Rs. 220 million Unsecured Redeemable Debentures on 31.03.2005. The Debentures are redeemed at Rs 45 million per year commencing on the expiry of the fifth year from the date of allotment and ending on the expiry of the fourteenth year from the date of allotment. However on obtaining the approval of the debenture holders the company shall commence the redemption of the debentures on the expiry of the second year from the date of allotment.

The value of the debenture redeemed during the year was Rs.112.5 million (Rs. 9.0 million - 2009/10).


24.7 Assets Pledged as Security Against Interest Bearing Borrowings Company/ Lender Balance Balance Terms of Repayment Security Pledged

as at as at

31.03.2011 31.03.2010

Rs. million Rs. million

Lankem Ceylon PLC Sampath Bank PLC 100.0 300.0 In 4 Years in 16 equal quarterly a) Primary Mortgage for

installments of Rs.18,750,000/-. Rs.300Mn over land & Building

situated in Fort owned by The

Colombo Fort Land &

Building Co.PLC.

Commercial Bank of 85.3 - In 47 monthly installements a) Primary mortgage of

Ceylon PLC of Rs. 2,100,000/- each and a Rs. 145 Mn installments over land

final installment of at Ja-ela & Gonawala.

Rs. 1,3100,000/- together with

interest payable monthly on

reducing balance of capital.

PABC Bank PLC 24.5 39.0 In 47 equal monthly instalments a) Primary Mortgage Bond for

of Rs. 1,230,000/- each and a Rs. 87 Mn over land &

final instalment of agrochemical factory building

Rs. 1,190,000/- together with at Ekala, Ja-ela.

interest payable monthly on b) Overdraft Agreement.

reducing balance of capital.

Lanka Puthra Development

Bank Limited

Loan I 1.3 3.9 60 Equal monthly instalments a) Mortgage over Primary Bond

of Rs. 5.7 Mn which pledges

some machinery of the Company.

Loan II 0.2 1.3 60 Equal monthly instalments b) Corporate Guarantee of

Rs. 19 Mn has been pledged

by E. B. Creasy & Company PLC.

211.4 344.3

Beruwala Resorts Sampath Bank PLC 30.0 - Mortgage shares of B.O.T. Hotel

Limited Term Loan Service (Pvt) Ltd. For Rs. 30 Mn for

Sampath Bank PLC term Loan

Merchant Credit of Sri Lanka - 4.3 48 Equal monthly instalments Corporate Guarantee of Lankem

of Rs.778,480/- Ceylon PLC for Rs. 19 Mn.

30.0 4.3

Sigiriya Village Commercial Bank of 7.2 7.7 Equal monthly instalments of Corporate Guarantee for

Hotels PLC Ceylon PLC Rs.166,666/- Rs. 10 Mn by Lankem

Ceylon PLC.

7.2 7.7

Kotagala National Development 4.3 11.7 Repayable over 10 years Primary Mortgage over

Plantations PLC Bank PLC from 30.11.2001 in equal leasehold rights of Stonycliff,

Approved facility - monthly instalments of Vogan, Gikiyanakanda and

Rs. 103 million Rs. 410,287/-, Rs. 148,433/- Dalkeith Estates and all

11.78% and Rs. 57,497/- respectively immovable properties of

these Estates.

Approved facility - 23.5 34.4 Repayable over 10 years Secondary Mortgage over

Rs. 124 million from 30.05.2003, 30.06.2003 leasehold rights of Stonycliff,

11.51% and 30.08.2003 in equal Vogan, Gikiyanakanda and

monthly instalments of Dalkeith Estates and all

Rs. 618,745/-, Rs. 41,250/- immovable properties of

and Rs. 248,333/- these Estates.

respectively

Approved facility - 215.0 215.0 Repayable over 5 years from Secondary Mortgage over

Rs. 215 million 21.12.2012, in equal monthly leasehold rights of Stonycliff,

15.58% instalments of Rs. 3,300,000/- Vogan, Gikiyanakanda and

and Rs.283,400/- respectively. Dalkeith Estates and all

(After the re-finance is received immovable properties of

interest rate would be 15.58%) these Estates.



Company/ Lender Balance Balance Terms of Repayment Security Pledged

as at as at

31.03.2011 31.03.2010


Kotagala Approved facility - 133.0 150.0 Repayable over 45 months Securitisation of Kotagala

Plantations PLC Rs. 150 million starting from 29.09.2010 in Tea receiveble over a period

AWPLR +2.25% 32 instalments ending in of 45 months.

29.07.2013.

Approved facility - 121.9 125.0 Repayable over 4 years in first Primary Mortgage over 12 million

Rs. 250 million monthly instalment of Ordinary Shares of C.W. Mackie

AWPLR +4.8% 121.9 125.0 Rs. 900,00/- and 47 monthly PLC. Further mortgage over.

instalments of Rs. 3,300,000 leasehold rights of Buildings,

Plant & Machiney in Stonycliff,

Vogan, Gikiyanakanda &

Dalkeith Estates.

Approved facility - 300.0 - Repayable over 38 Securitisation of Kotagala

Rs. 300 million instalments starting from tea receivable.

24/10/2011

DFCC Bank PLC 32.0 44.8 Repayable over 10 years from Primary Mortgage over leasehold

Approved facility - 15.09.2003 in equal monthly rights of Drayton, Raigam and

Rs. 211 million instalments of Rs. 1,067,614/- Padukka Estates.

11.55% each.

Approved facility - 22.9 27.9 Repayable over 10 years from a) Primary Mortgage over

Rs. 50 million 23.06.2005 in equal monthly leasehold rights to the land

12.75% instalments of Rs. 416,667/- and buildings of Craigie Lea and

each. Bogahawatte Estates.

b) A Corporate Guarantee

of Rs. 50 Mn from Lankem

Tea & Rubber Plantations (Private)

Limited.

Approved facility - 2.0 3.0 Repayable over 8 years from a) Primary Mortgage over

Rs. 7.5 million 25.06.2005 in equal monthly leasehold rights to the land

12% instalments of and buildings of Craigie Lea and

Rs. 77,781/- each. Bogahawatte Estates.

b) A Corporate Guarantee of Rs.

7.46 Mn from Lankem Tea &

Rubber Plantations (Private) Limited.

Approved facility - 49.7 49.7 Repayable over 5 years Secured under the mortgage bond

Rs.50 million in equal 60 monthly existing no. 1068 dated 8th

AWPLR or Avarage Treasury Bill instalments. Grace period September 1998 attested by

Rate is 18 months. R.S. Wijesekara NP over the lease

hold rights of Drayton, Padukka

and Rayigam estates.

Lanka Orix Leasing 28.1 33.8 Repayable over 7 years from An On demand Promissory Note

Company Limited 30.03.2009 in 84 equal for Rs. 40 million with interest at

Approved facility - monthly instalments of 18% p.a. until the receipt of

Rs. 40 million Rs. 476,191/- each. re-finance of the subsidiary loan

10.56% from the DFCC bank, and

thereafter at the rate of 10.56%

p.a. and the interest shall be paid

together with any taxes which

may be imposed by the

Government from time to time.

Primary Mortgage Bond over the

unexpired leasehold rights created

by the indenture of lease bearing

no. 293 dated 2nd Marc h, 1995

attested by D. C. Peiris, NP and

the amendments thereto bearing

indenture no. 1522 dated 4th July,

1995 attested by

M. H. D. Amaratunga,NP.


24.7 Assets Pledged as Security Against Interest Bearing Borrowings Contd.


as at as at

31.03.2011 31.03.2010


Kotagala Lanka Orix Leasing Corporate Guarantees of M/s.

Plantations PLC Company Limited Lankem Plantation Holdings

Approved facility - Limited and M/s. Lankem Tea &

Rs. 40 million Rubber Plantations (Pvt) Ltd.

Sampath Bank PLC 46.9 50.0 In 95 equal monthly instalments Loan Agreement for

Approved facility - of Rs. 521,000/- and a final Rs. 50 Mn Primary

Rs. 50 million instalment of Rs. 505,000/- Mortgage Bond for

15% (Capital) together with interest Rs. 50 Mn over leasehold

after a grace period of 48 rights of Arapolakande Rubber

months commencing from the Estate at Kalutara together with

date of 1st disbursement. factory buildings therein.

People’s Leasing 7.1 9.9 Interest monthly at the rate of Primary Mortgage over two

Company PLC 24% from the time of colour separators

Term Loan disbursement of funds till the Corporate Guarantee of

Rs. 13 million time the re-finance is received Lankem Tea & Rubber

13.32% from DFCC. Thereafter, Plantations (Pvt) Ltd.

Rs. 147,070/- within the capital

grace period of 12 months and Promissory Notes.

Rs. 350,826/- (Capital + Interest)

to be paid with in 48 months.

Term Loan 27.7 - Interest monthly at the rate of Primary Mortgage over two

Rs. 27.7 million 21% from the time of colour separators.

disbursement of funds till the

time the re-finance is received Corporate Guarantee of Lankem

from DFCC. Thereafter payable Tea & Rubber Plantations

within 60 months with a capital (Pvt) Ltd.

grace period of 12 months.

Promissory Notes.

People’s Leasing 1.5 1.8 Interest monthly at the rate of Loan Agreement, acceptance

Company PLC 25% from the time of and receipt.

E-Friends Term disbursement of funds till

Loan 1 Rs. 1.8 million the time the re-finance is Corporate Guarantee from

received from PMU. Thereafter, Lankem Tea & Rubber

Rs. 9,760/- within the capital Plantations (Pvt) Ltd.

grace period of 12 months and


to be paid within 60 months.

Term Loan 2 1.3 1.5 Interest monthly at the rate of Loan Agreement, acceptance

Rs. 1.5 million 25% from the time of and receipt.

disbursement of funds till the

time the re-finance is received Corporate Guarantee from

from PMU. Thereafter, Lankem Tea & Rubber

Rs. 8,281/- within the capital Plantations (Pvt) Ltd.

grace period of 12 months and


to be paid within 60 months.

Term Loan 3 9.7 10.2 Interest rate of 25% from the Loan Agreement, acceptance

Rs. 10.2 million time of disbursement of funds and receipt.

till the time the re-finance is

received from PMU. There is a Corporate Guarantee from

capital grace period of 12 Lankem Tea & Rubber

months and the loan period is Plantation (Pvt) Ltd.

60 months.




as at as at

31.03.2011 31.03.2010






capital grace period of 12 Lankem Tea & Rubber Plantations

months and loan period is (Pvt) Ltd.

60 months.






months and loan period is 60 Plantations (Pvt) Ltd.

months.






months and the loan period is Plantations (Pvt) Ltd.

60 months.






months and loan period is Plantations (Pvt) Ltd.

60 months.

People’s Bank 79.2 - Repayable within 24 Securitized tea sales of

Term Loan instalments of Rs. 4,166,666/- Mayfield estate.

Rs. 100 million each.

1,251.5 918.7

Agarapatana DFCC Bank - ADB 13.8 22.1 1st Instalment of Rs. 691,884/- Primary Mortgage over

Plantations Limited Loan Term Loan and 119 monthly instalments of leasehold rights to bare land

Rs. 691,429/- payable and buildings of Balmoral,

commencing from 01.11.2002 Hauteville and Nayabedde Estates.

Term Loan 7.0 11.7 1 st Instalment of Rs. 390,917/- Further Mortgage over

and 119 monthly instalments of leasehold rights to the land


commencing from 01.12.2003 Hauteville and Nayabedde Estates.

Term Loan 2.7 3.7 1 st Instalment of Rs. 86,373/- Further Mortgage over leasehold

and 119 monthly instalments of rights to the land and buildings

Rs. 83,333/- payable of Balmoral, Hauteville and

commencing from 01.12.2003 Nayabedde Estates.

Term Loan 11.7 14.3 1 st Instalment of Rs. 217,545/- Further Mortgage over

and 119 monthly instalments of leasehold rights to bare land


commencing from 01.10.2005 Hauteville,Nayabedde and

Glasgow Estates.

Term Loan 1.8 2.8 1 st Instalment of Rs. 77,805/- A Guarantee from Lankem

and 95 monthly instalments of Tea & Rubber Plantations (Pvt) Ltd.

Rs. 77,781/- payable

commencing from 01.06.2005

Hatton National 1.0 4.7 48 monthly installments A Corporate Guarantee of

Bank PLC commencing from Lankem Plantation Holdings Ltd

Term Loan 01.07.2007 for Rs. 45 million. Primary

Mortgage over leasehold rights

to bare land and buildings of

Pitaratmale and Kahagalle Estates.


24.7 Assets Pledged as Security Against Interest Bearing Borrowings Contd.


as at as at

31.03.2011 31.03.2010


Lanka Orix Leasing 1.9 2.6 60 monthly installments Loan agreement and Corporate

Company PLC commencing from Guarantee from Lankem Tea &

Term Loan 30.10.2008 Rubber Plantations (Pvt) Ltd.

People’s Leasing 8.9 9.8 60 monthly installments Loan agreement and Corporate

Company PLC commencing from Guarantee from Lankem Tea &


People’s Leasing 8.1 8.9 60 monthly installments Loan agreement acceptance from

Company PLC commencing from Lankem Tea & Rubber Plantations

Term Loan 12.11.2010 (Pvt) Ltd.

People’s Leasing 8.9 9.8 60 monthly installments Loan agreement acceptance and

Company PLC commencing from receipts Corporate Guarantee

Term Loan 12.11.2010 from Lankem Tea & Rubber

Plantations (Pvt) Ltd.

People’s Leasing 9.6 12.5 60 monthly installments Loan agreement acceptance and

Company PLC commencing from receipts from Lankem Tea &


Bank of Ceylon 25.6 102.6 24 monthly installments Mortgage over leasehold rights of

Term Loan commencing from Glenanore and Haputale Estates

17.07.2009 including machinery fixed each of

these estates. Treasury Guarantee

and Loan Agreement.

National Development - 62.0 21 monthly installments Loan agreement acceptance and

Bank PLC commencing from Broker certificate from Forbes &

Term Loan 29.04.2009 Walkers Tea Brokers (Pvt) Ltd.

National Development 200.0 - 38 monthly installments Loan agreement acceptance &

Bank PLC commencing from Broker certificate from John Keells

Term Loan 24.10.2011 PLC - Produced Broker.

National Development 50.0 - 14 monthly installments Loan agreement acceptance and

Bank PLC commencing from Broker certificate from Forbes &

Term Loan 15.07.2011 Walkers Tea Brokers (Pvt) Ltd.

351.0 267.5

Marawila Resorts PLC Hatton National 68.2 78.8 Capital payment of Land and other movable and

Bank PLC US$ 293,839 for the period immovable properties of Marawila

Loan I ending 30 th November, 2004. Resorts PLC.

The balance to be paid in 5

equal annual instalments of

US$ 176,710.93 plus interest

on or before 30 th November

each year.

Loan II 172.8 187.7 To be repaid in 5 equal annual Land and other movable and

instalments of US$ 386,240.83 immovable properties of Marawila

on or before 30 th November Resorts PLC.

each year.

Loan III - 135.2 149.0 To be repaid in 5 equal annual Land and other movable and

Interest free instalments of US$ 312,842 on immovable properties of Marawila

or before 30 th November Resorts PLC.

each year.

376.2 415.5

Lankem Commercial Bank - 30.0 Repayable over a period of 6

Developments PLC of Ceylon PLC months in equal installments of

Rs.5 Mn.



24.8 Groupi) Marawila Resorts PLC (MRPLC) has obtained loans denominated in foreign currency from Hatton National Bank PLC to fund

the construction of the hotel at the rate of 5% per annum except for the 3rd loan which is an interest free one. This loan is

secured by the land and other movable and immovable properties of MRPLC. In terms of the rescheduling arrangement made

with Hatton National Bank PLC in July, 2008, the Company has to settle the outstanding facilities as below:

Reschedulement of Term Loan Facility Outstanding of US$ 622,722.27

Outstanding balance to be repaid in quaterly installments of US$ 7,500 and the interest to be payable on a monthly basis.

Reschedulement of Term Loan Facility Outstanding of US$ 1,576,338

Outstanding balance to be repaid in quaterly installments of US$ 7,500 and the interest to be payable on a monthly basis.

Reschedulement of Term Loan Facility Outstanding of US$ 1,234,020

Outstanding balance to be repaid in quaterly installments of US$ 7,500. This is an interest free loan.

ii) C.W. Mackie PLC has obtained a restructured subordinated loan from the Industrialization Fund for Developing Countries (IFU),

Denmark which is outstanding and is denominated and payable in Danish Kroner and is converted into Sri Lanka Rupees at

the exchange rate prevailing as at 31st March 2011 was Rs. 56.9 million (31st December 2009 Rs. 88.5 million).

25 DEFERRED INCOME

GROUP COMPANY

As at 31st March 2011 2010 2011 2010

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000


Grants received during the year 69,144 101,209 - -


Amortisation

At the beginning of the year 106,118 88,631 2,183 -

Amortisation for the year 16,171 17,487 2,183 2,183


560,883 507,910 1,275 3,458

Group The funds have been received by Kotagala Plantations PLC and Agarapatana Plantations Limited from the Plantation Housing

and Social Welfare Trust, Asian Development Bank, Planation Development Support Program, Planation Human Development

Trust , Plantation Reform Project and Ministry of Livestock Development & Estate Infrastructure for the development of worker

welfare facilities such as re-roofing of line rooms, latrines, water supply and sanitation etc. The amounts spent are included

under the relevant classification of Property, Plant & Equipment and the grant component is reflected under Deferred Income

and Capital Grants.

Further, Kotagala Plantations PLC received funds from Sri Lanka Tea Board and they have been utilised for the construction of

the CTC Tea Factory at Mount Vernon Estate.


26 DEFERRED TAX LIABILITIES

GROUP COMPANY

As at 31st March 2011 2010 2011 2010 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Restated Restated

Balance at the beginning of the year 212,925 107,977 21,710 17,150 Prior Period Adjustment - 23,380 - (15,403)Balance at the beginning of the year (Restated) 212,925 131,357 21,710 1,747 Acqusition of Subsidiaries - 15,385 - - 212,925 146,742 21,710 1,747 Charged / (Reversal) to the Income Statements 57,663 66,183 (2,747) 19,963 Balance at the end of the year 270,588 212,925 18,963 21,710

26.1 Deferred Tax Composition Deferred Tax Assets

Defined Benefit Obligations 98,460 115,633 16,627 15,403Tax Losses carried forward 76,493 157,204 - -

174,953 272,837 16,627 15,403 Deferred Tax Liabilities

Property Plant & Equipment 445,541 485,762 35,590 37,113 445,541 485,762 35,590 37,113 Net Deferred Tax Assets / (Liabilities) (270,588) (212,925) (18,963) (21,710)

27 RETIREMENT BENEFIT OBLIGATIONS

GROUP COMPANY

2011 2010 2011 2010 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Fair Value of Retirement Benefit Assets (Note 27.1) 107,701 104,101 63,687 66,083

Present Value of the Funded Obligations (Note 27.3) 178,967 159,157 123,065 110,091Present Value of the Unfunded Obligations (Note 27.4) 1,435,261 1,246,191 - -Total Present Value of Retirement Benefit Obligations 1,614,228 1,405,348 123,065 110,091

Company An acturial valuation has been carried out as at 31st March 2010 by Messrs. Acturial and Management Consultants (Pvt) Ltd.

The Qualified Actuary provided an estimate of the provision and disclosures as at 31st March 2011 as required by the Sri Lankan Accounting Standard 16 “Employee Benefits”.

The valuation method used by the actuary is the “Project Unit Credit Method”, the method recommended by Sri Lanka Accounting Standard 16 - “Employee Benefits” (SLAS 16).



GROUP COMPANY

2011 2010 2011 2010 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

27.1. Fair Value Retirement Benefit AssetsMovements in Fair Value of Plan AssetsFair Value of Plan Assets at the beginning of the Year 104,101 59,525 66,083 59,525Acquisition of Subsidiaries - 38,018 - -Contribution paid to the Plan Assets 7,029 7,000 - 7,000Expected Return on Plan Assets 7,559 - - -Benefits paid by the Plan (12,763) (9,253) (8,284) (9,253)Actuarial Gains /(Losses) 1,775 8,811 5,888 8,811Fair Value of Retirement Benefit Assets 107,701 104,101 63,687 66,083

27.2. Present Value of the Funded ObligationsMovement in Present Vaule of Funded ObligationsBalance at the beginning of the Year 155,444 87,546 110,091 87,545Acquisition of Subsidiaries - 45,352 - -Provision for the year 35,618 20,388 23,558 20,388 191,062 153,286 133,649 107,933Benefits paid by the Plan (12,762) (9,253) (8,284) (9,253)Actuarial (Gains) /Losses 21,051 11,411 (2,300) 11,411Present value of Defined Benefit Obligations 199,351 155,444 123,065 110,091

Expenses Recognised in the Income StatementCurrent Service Cost 14,957 9,883 11,447 9,883Interest on Obligation 20,661 10,505 12,111 10,505Provision for the year 35,618 20,388 23,558 20,388Expected Return on Plan Assets (7,559) - - -Net Actuarial (Gains) /Losses 8,003 2,600 (8,188) 2,600 20,056 22,988 15,370 22,988

27.3. Present Value of Net Obligations

Fair Value of Plan Assets 107,701 104,101 63,687 66,083

Present Value of Funded Obligations (199,351) (155,444) (123,065) (110,091)Unrecognised Actuarial (Gains) /Losses 29,536 2,260Arrears Payable to Non Contributory Gratuity Fund (9,152) (5,973)Net Present Value of Funded Obligations (178,967) (159,157) (123,065) (110,091)

Present Value of Net Obligations (71,266) (55,056) (59,378) (44,008)


27.4. Present Value of the Unfunded Obligations

GROUP

2011 2010

Rs. ‘000 Rs. ‘000

Movement in Present Vaule of Unfunded Obligations

Balance at the beginning of the year 1,246,191 948,008

Acquisition of Subsidiaries 2,100 -

Provision for the year 215,046 307,587

1,463,337 1,255,595

Gratuity Paid (113,113) (89,070)

Actuarial (Gains) /Losses 85,037 79,666

Present value of Defined Benefit Obligations 1,435,261 1,246,191

Expenses Recognised in the Income Statement

Current Service Cost 88,835 33,098

Interest on Obligations 126,211 274,489

Provision for the year 215,046 307,587

Net Actuarial (Gains) /Losses 85,037 79,666

300,083 387,253

Groupi) Agarapatana Plantations Limited The gratuity liability of the Company as at 31st March 2011 is based on the acturial valuation carried out by a professionally

qualified actuary firm Messrs Acturial and Management Consultants (Pvt) Ltd. As per the acturial valuation the liability as at 31st March 2011 is Rs. 858,194,632/-. If the Company had provided for gratuity for all employees on the basis of 14 days wages for workers and a half month salary for staff for each completed year of service for the year ended 31st March 2011, the liability would have been Rs. 1,107,793,138/- (2010 Rs. 1,101,210,015/-). Hence there is a contingent liability of Rs. 249,598,506/- (2010 Rs. 375,104,331/-) which would crystalise only if the Company ceases to be a going concern. The deferred acturial loss as at 31st March 2011 amounts to Rs. 76,891,702/- (2010 Rs. 125,111,489/-).

ii) Kotagala Plantations PLC The retirement benefit obligation as at 31st March, 2011 is based on the actuarial valuation carried out by

Messrs Actuarial & Management Consultants (Private) Limited as per which liability as at 31st March, 2011 was Rs. 550,225,611/-. If the Company had provided for gratuity on the basis of payment of Gratuity Act No. 12 of 1983, the liability would have been Rs. 613,170,491/-. Hence there is a contingent liability of Rs. 62,944,880/- which would crystalise only if the Company ceases to be a going concern.

iii) SLAS 16 (Revised 2006) requires the use of actuarial techniques to make a reliable estimate of the retirement benefit using the Projected Unit Credit method in order to determine the present value of the retirement benefit obligation. The key assumptions were made in arriving at the retirement benefit obligation as at 31st March, 2011 in respect of the Companies which is stated below:

Company Name Expected Salary Increment Rate Discount Rate Interest Rate Liability as at 31.03.2011 Rs. Million Lankem Ceylon PLC 10% 11% - 123.06Lankem Developments PLC 10% 11% - 0.11Marawila Resorts PLC 10% 11% - 4.08C. W. Mackie PLC 12% - 14% 49.00Kotagala Plantations PLC Workers -16% every two years and for other catogories of staff - 10% p.a. - 11% 550.22Agarapatana Plantations Limited Workers -12% increase once in two years and staff-10% p.a. - 11% 858.19Beruwala Resorts Limited 11% 10% - 3.30



28 TRADE & OTHER PAYABLES

GROUP COMPANY

As at 31st March 2011 2010 2011 2010

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Trade Payables 1,012,659 1,401,317 509,265 808,478

Other Payables 718,460 489,912 145,352 61,692

Accrued Expenses 533,029 449,914 40,800 67,697

Payable to Employees 225,924 168,653 - -

VAT/GST Payable 11,565 17,385 - -

ESC Payable 11,272 9,337 10,209 8,679

WHT Payable 569 17 569 -

EPF/ETF Payable 74,657 111,132 - -

NBT Payable 2,671 2,023 964 -

PAYE Tax Payable 34 135 - -

Penalties Payable 77 7,788 - -

Other Levies Payable 836 14,720 - -

Provision for Breakages 2,703 1,610 - -

Unclaimed Dividend 15,398 4,150 - 4,150

2,609,854 2,678,093 707,159 950,696

29 RELATED PARTY TRANSACTIONS29.1 Amounts Due from Related Parties

GROUP COMPANY


(a) Amounts due from Related Parties-Trade ReceivablesSubsidiariesLankem Paints Ltd. - - 262,397 224,370Lankem Consumer Products Ltd. - - 40,676 46,335Lankem Chemicals Ltd. - - 41,090 56,125 - - 344,163 326,830

(b) Amounts due from Related PartiesSubsidiariesAgarapatana Plantations Limited - - 2,077 1,656Associated Farms (Pvt.) Ltd. - - 31,853 32,005Beruwala Resorts Limited - - 226,288 112,306Lankem Chemicals Ltd. - - - 4,007Lankem Consumer Products Ltd. - - 60,917 43,275Lankem Developments PLC - - 29,456 1,626Lankem Paints Ltd. - - 122,410 80,087Lankem Tea & Rubber Plantations (Pvt) Limited - - 60,987 12,760Marawila Resorts PLC - - 22,862 10,598Sigiriya Village Hotels PLC - - - 330SunAgro Farms Ltd. - - 32,523 18,868SunAgro LifeScience Ltd. - - 34,519 8,742Kotagala Plantations PLC - - 5,047 -Colombo Fort Hotels Limited - - 55,636 -B. O. T. Hotel Services (Pvt) Limited - - 13,818 - - - 698,393 326,260


29.1 Amounts Due from Related Parties Contd.

GROUP COMPANY

As at 31st March, 2011 2010 2011 2010 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Less:Provision for Bad & Doubtful Debts - Related Parties (Note 29.1.1) - - (26,754) (26,754) - - 671,639 299,506 AffiliatesCarplan Ltd. 145 103 - -The Colombo Fort Land & Building Co. PLC 164,907 109,728 - 4,010Ceylon Tea Brokers PLC - 5,584 - -Creasey Plantation Management Ltd. 250 2 - -Darley Butler & Co. Ltd. 4,425 1,869 - -Dutch Dairy Foods Ltd. 31,945 31,945 - -E.B. Creasy & Company PLC 2,420 1,702 2,159 1,520Great Eastern Resorts Ltd. - 389 - -Muller & Phipps (Ceylon) PLC - 119,415Sherwood Holidays Limited 5,308 10,627 - -Tropical Beach Resorts Ltd. 25 22Voyages Ceylan (Pvt.) Ltd. 3,155 3,155 - -York Hotel Management Services Ltd. 12,897 8040Others 473 29 - 8 225,950 292,610 2,159 5,538Less: Provision for Bad & Doubtful Debts - Related Parties (Note 29.1.1) (85,887) (154,618) - - 140,063 137,992 2,159 5,538Key Management Personnel - - - -Total Amounts Due From Related Parties 140,063 137,992 673,798 305,044

29.1.1 Provision for Bad & Doubtful Debts - Related Parties

GROUP COMPANY

As at 31st March 2011 2010 2011 2010 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 SubsidiariesLankem Consumer Products Ltd. - - 26,754 26,754 - - 26,754 26,754 AffiliatesCarplan Ltd. 98 103 - -Dutch Dairy Foods Limited 31,945 31,945 - -The Colombo Fort Land & Building Co. PLC 50,689 - - -Muller & Phipps (Ceylon) PLC - 119,415 - -Voyages Ceylan (Pvt) Ltd. 3,155 3,155 - - 85,887 154,618 - - 85,887 154,618 26,754 26,754

29.1.2 The Company has not made any provision in the financial statements in respect of amount due from Beruwala Resorts Ltd., Colombo Fort Hotels Limited, and Associated Farms (Pvt) Ltd. as at the reporting date. Further the Company has not made provision in the financial statements in respect of amounts due from Lankem Consumer Products Limited other than for the provision of Rs. 26.754 million reflected in Note 29.1.1 to the financial statements. The Company anticipates that these

balances will be recovered in the ordinary course of business.



GROUP COMPANY

As at 31st March 2011 2010 2011 2010

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

29.2 Amounts Due To Related Parties(a) Amounts due to Related Parties-Trade Payables

Subsidiaries

Lankem Developments PLC - - - 49,073

Lankem Research Limited - - 131,844 120,998

- - 131,844 170,071

(b) Amounts due to Related Parties

Subsidiaries

Lankem Exports (Pvt.) Ltd. - - 22 21

Lankem Research Limited - - 14,782 38,512

Lankem Chemicals Ltd. - - 9,342 -

Sigiriya Village Hotels PLC - - 137,007 -

- - 161,153 38,533

Affiliates

Carplan Ltd. 257 370 - -

Colonial Motors PLC 2,165 2,119 - -

Creasy Plantation Management Ltd. 4,291 4,173 - -

Darley Butler & Co. Ltd. 65,131 134,037 - -

E.B.Creasy & Company PLC 1,901 500 - -

Harrison Malayalam Limited 140 140 - -

Island Consumer Supplies (Pvt) Ltd. 40,500 40,500 40,500 40,500

Sherwood Holidays Limited 194 172 -

York Hotel Management Services Ltd. 14,479 9,799 5,132 -

Ceylon Tea Brokers PLC - 5,826 - -

The Colombo Fort Land & Building Co. PLC - - 59,967 -

Darley Butler & Co. Ltd. - - 24 -

Others 25 - 5,000 -

129,083 197,636 110,623 40,500

129,083 197,636 271,776 79,033

Key Management Personnel - - - -

Total Amounts Due to Related Parties 129,083 197,636 403,620 249,104


29.3 Transaction With Related Parties The Company carries out transactions in the ordinary course of it’s business with parties who are defined as related parties in

Sri Lanka Accounting Standard 30 - ‘Related Party Disclosures (Revised 2005)’, the details of which are reported below.

Name of Related Party Name of Directors Nature of the transaction Amount Receivable/ Receivable/ (Payable) (Payable) balance balance as at as at 31.03.2011 31.03.2010 Rs’000 Rs’000 Rs’000

E.B. Ceasy & Co. PLC Mr. A. Rajaratnam Office Rent (1,175) Mr. S.D.R. Arudpragasam Reimbursement of Expenses 3,007 Mr. R.N. Bopearatchy Fund Transfers (1,157) Management Expenses (36) Current Account 2,159 1,520 Darley Butler & Co. Ltd. Mr. A. Rajaratnam Reimbursement of Expenses (24) Mr. S.D.R. Arudpragasam Current Account (24) - Mr. R.N. Bopearatchy The Colombo Fort Land & Mr. A. Rajaratnam Fund Transfers (35,000)Building Co.PLC Mr. S.D.R. Arudpragasam Settlement of Group Service Fee (27,469) Mr. N.H.B.S.Perera Chairman’s Office Expenses (343) Reimbursement of expenses (1,165) Current Account (59,967) 4,010 Loan Settlement (58,000) (26,000) (84,000) Lankem Paints Limited Mr. A. Rajaratnam Sales of Goods 1,126,594 Mr. S.D.R. Arudpragasam Interest Income 716 Mr. Anushman Rajaratnam Recovery of Expenses 251,540 Mr. R.N. Bopearatchy Fund Transfers (1,298,500) Mr. D.L.Vitharana Current Account- Trade Related 262,397 224,370 Mr. K.P.David Current Account- Others 122,410 80,087 Mr. A.R.Peiris Lankem Chemicals Limited Mr. A. Rajaratnam Sales of Goods 366,115 Mr. S.D.R. Arudpragasam Interest Income - - Mr. Anushman Rajaratnam Recovery of Expenses 91,339 Mr. R.N. Bopearatchy Fund Transfer (485,839) Mr. D.L. Vitharana Current Account- Trade Related - 41,090 56,126 Mr. K.P. David Current Account- Others - (9,342) 4,007 Mr. A.R. Peiris Lankem Consumer Mr. A. Rajaratnam Sales of Goods 195,203 Products Ltd. Mr. S.D.R. Arudpragasam Interest Income - Mr. Anushman Rajaratnam Recovery of Expenses 38,340 Mr. R.N. Bopearatchy Fund Transfer (221,560) Mr. D.L.Vitharana Current Account- Trade Related 40,676 46,335 Mr. K.P.David Current Account- Others 60,917 43,275 Mr. A.R.Peiris Lankem Research Limited Mr. A. Rajaratnam Research Expenses (58,284) (146,626) (159,510) Mr. S.D.R. Arudpragasam Fund Transfer 54,417 Mr. Anushman Rajaratnam Salaries & Wages Recovered 8,700 Mr. R.N. Bopearatchy Expenses Recovered 8,051 Mr. D.L.Vitharana Mr. K.P.David Mr. A.R.Peiris Associated Farms (Pvt) Limited Mr. A. Rajaratnam Fund Transfer (152) 31,853 32,005 Mr. S.D.R. Arudpragasam Mr. Anushman Rajaratnam Mr. K.P. David Mr. A.R. Peiris SunAgro Farms Limited Mr. A. Rajaratnam Fund Transfer 12,136 32,523 18,868 Mr. S.D.R. Arudpragasam Administrave Expenses Recovered 1,519

Mr. Anushman Rajaratnam Mr. R.N. Bopearatchy Mr. K.P. David

Mr. A.R. Peiris



Name of Related Party Name of Directors Nature of the transaction Amount Receivable/ Receivable/ (Payable) (Payable) balance balance as at as at 31.03.2011 31.03.2010 Rs’000 Rs’000 Rs’000 Lankem Developments PLC Mr. A. Rajaratnam Management Fees 1,940 Mr. S.D.R. Arudpragasam Sale of Goods 13,716 Mr. Anushman Rajaratnam Salaries & Wages Recovered 13,741 Mr. R.N. Bopearatchy Administrave Expenses Recovered 3,718 Mr. D.L. Vitharana Overhead Expenses Recovered 9,424 Mr. K.P. David Inter Company Settlements (14,709) Mr. A.R. Peiris Construction Contracts 49,073 Mr. R.T. Weerasinghe Current Account 29,456 1,626 Current Account- Trade Related - (49,073) SunAgro LifeScience Limited Mr. A. Rajaratnam Recovery of Expenses 20,041 34,519 8,742 Mr. S.D.R. Arudpragasam Overhead Expenses Recovered 18,607 Mr. Anushman Rajaratnam Fund Transfers (14,714) Mr. R.N. Bopearatchy Interest Income 1,843 Mr. D.L. Vitharana Beruwala Resorts Ltd. Mr. A. Rajaratnam Fund Transfer (10,128) Mr. S.D.R. Arudpragasam Recovery of Expenses 90,440 Mr. A.R. Peiris Settlement of mechant credit Loan Capital & Interest 33,670 Current Account 226,288 112,306

Lankem Tea & Rubber Mr. A. Rajaratnam Debenture interest Income 16,200Plantations (Pvt) Ltd Mr. S.D.R. Arudpragasam Debenture interest Received (3,333) Mr. Anushman Rajaratnam Dividend 360 Mr. N.H.B.S.Perera Fund Transfer 35,000 Current Account 60,987 12,760 Kotagala Plantations PLC Mr. A. Rajaratnam Recovery of Expenses 5,047 5,047 - Mr. S.D.R. Arudpragasam Loan Obtained 300,000 300,000 - Agarapatana Plantations Ltd. Mr. A. Rajaratnam Recovery of Expenses 421 2,077 1,656 Mr. S.D.R. Arudpragasam Sigiriya Village Hotels PLC Mr. A. Rajaratnam Fund Transfers (125,000) Mr. S.D.R. Arudpragasam Interest Paid (2,655) Mr. A.R. Peiris Reimbursement of Expenses (3,481) Purchase of Shares (6,201) Current Account (137,007) 330 Marawila Resorts PLC Mr. A. Rajaratnam Fund Transfers 35,020 Mr. S.D.R. Arudpragasam Purchase of Shares (9,322) Mr. A.R. Peiris Reimbursement of Expenses (13,434) Current Account 22,862 10,598 Colombo Fort Hotels Ltd. Mr. A. Rajaratnam Fund Advance 55,613 Mr. S.D.R. Arudpragasam Recovery of Expenses 23 Current Account 55,636 - B.O.T Hotel Services (Pvt) Ltd. Mr. A. Rajaratnam Fund Transfers 13,818 13,818 - Mr. Anushman Rajaratnam Mr. K.P. David Mr. S.D.R. Arudpragasam York Hotel Management Mr. A. Rajaratnam Purchase of Shares (5,132) (5,132) - Services Ltd. Laxapana Batteries PLC Mr. A. Rajaratnam Purchase of Goods (25) (25) - Mr. S.D.R. Arudpragasam Mr. R.N. Bopearatchy


29.4 Terms and Conditions of Transactions with Related Parties Transactions with related parties are carried out in the ordinary course of the business at commercial rates. Outstanding

balances at the end of the year are unsecured. Intrest on outstanding balances has been charged at the prevailing market rate when the interest is charged.

29.5 Transactions with Key Management Personnel According to Sri Lanka Accounting Standard 30 - Related Party Disclosures, Key Management Personnel are those persons

having authority and responsibility for planning, directing and controlling the activities of the entity. Accordingly, Key Management Personnel include the members of the Board of Directors of Lankem Ceylon PLC and its subsidiary companies.

(a) Loans to Key Management Personnel No loans have been given to Key Management Personnel during the year.

(b) Key Management Personnel Compensation

Details of compensation for Executive and Non-Executive Directors are disclosed below.

Group Company

2011 2010 2011 2010

Rs.000 Rs.000 Rs.000 Rs.000

Short-term Employee Benefits 75,859 64,604 71,119 60,404

(c) Key Management Personnel Shareholding of the Company

The shareholdings of the Directors are disclosed on page 37 of this Annual Report

(d) Transactions with Close Family Members

There were no transactions with close family members during the year.

30 CAPITAL EXPENDITURE COMMITMENTS30.1 Company The Company had no material capital or financial commitments as at the Balance Sheet Date.

30.2 Group The Group had no significant capital or financial commitments as at the Balance Sheet date other than those disclosed below.

30.2.1 Capital Commitments

There are no material capital commitments other than the following as at the Balance Sheet date.

Agarapatana Plantations Limited

The following are the capital commitments approved as at the Balance Sheet date

2011 2010

Million Million

a) Field Development 226.19 166.34

b) Machinery & Factory Development 137.22 96.64

Kotagala Plantations PLC

The Budgeted Capital Development programme for the next financial year amounts to approximately Rs. 510.3 million.(2009/10

- 516.5 million)



Marawila Resorts PLC

The following commitments for capital expenditure approved by the directors as at 31 March, 2011 have not been provided for in the financial statements.

2011 2010

Rs. ‘000 Rs. ‘000

a) Approximate amount approved but not contracted for 150,157 -b) Approximate amount contracted for but not accounted 37,571 -

Beruwala Resorts Limited The Company is constructing new quarters for their employees & executive staff and budgetted cost for these porjects are Rs.

26.2 million and Rs. 34.2 million respectively. The cost incurred for the construction of employee quarters project was Rs. 11.4 million during the year.

31 CONTINGENT LIABILITIES31.1 Company There are no material contingent liabilities outstanding as at the Balance Sheet date other than those disclosed below

Lankem Ceylon PLC has issued corporate guarantees for the borrowings obtained by the related companies as indicated below as at 31st March 2011.

Name of the Company Amount

Rs. ‘000

Sigiriya Village Hotels PLC 7,200 Darley Butler & Company Limited 105,000 Lankem Paints Limited 50,000 Lankem Paints Limited 75,000 SunAgro LifeScience Limited 25,000 SunAgro LifeScience Limited 30,000 Agarapatana Plantations Limited 50,000 Waverly Power (Pvt.) Limited 70,000 412,200

31.2 Group(i) Contingent Liabilities exist in relation to the following for Lankem Tea & Rubber Plantation (Pvt) Ltd : A Contingent liability of Rs. 50 million exists as at the Balance Sheet date in relation to various regulatory and legal matters.

In addition to which penalties may be imposed on certain statutory payments. However, the Company is confident that these liabilities may not materialise in future.

Corporate Guarantee to DFCC Bank on behalf of Agarapatana Plantations Limited to secure loan of Rs. 7.467 million under ADB credit line.

Corporate Guarantee to DFCC Bank on behalf of Kotagala Plantations PLC to secure loans of Rs. 50 million and Rs. 7.467 million under ADB credit line.

Corporate Guarantee to People’s Leasing Company Limited on behalf of Kotagala Plantations PLC to secure Term Loans of Rs. 13 million and Rs. 27.7 million and E-Friends loans of Rs. 1.768 million, Rs. 1.5 million, Rs. 10.2 million, Rs. 9.6 million, Rs. 9.6 million, Rs. 3.7 million and Rs. 2 million.

Corporate Guarantee to Lanka Orix Leasing Company Lmited on behalf of Kotagala Plantations PLC to secure a term loan of Rs. 40 million.

Corporate Guarantee to People’s Leasing Company Limited on behalf of Agarapatana Plantations Limited to secure term loans of Rs. 9.7 million, Rs. 8.9 mllion, Rs. 9.7 million and Rs. 12.8 million.


31.2 Group Contd.(ii) Lankem Developments PLC has a contingent liability on guarantees given to third parties amounting to Rs. 22,180,000/-

iii) Kotagala Plantations PLC has a contingent liability of Rs. 62.9 million in relation to retirement benefit obligations as fully

discribed in Note 27 to these financial statemetns.

iv) Agarapatana Plantations PLC has a contingent liability of Rs. 249.6 million in relation to retirement benefit obligations as fully

discribed in Note 27 to these financial statemetns.

v) Contingent liabilities exist in relation to the following for C.W.Mackie PLC:

Letters of comfort & guarantees of Rs.83 Million, have been provided to banks against facilities to Ceymac Rubber Company

Limited (Rs. 75 million) and Ceytra (Private) Limited (Rs. 8 million).

32 COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform to the current year’s classification and presentation.

33 GOING CONCERN33.1 Group The consolidated financial statements of Lankem Ceylon PLC do not include any adjustments in relation to the recoverability

and the classification of recorded asset amounts or to amounts and classification of liabilities that may be necessary, if any of

the following companies are unable to continue as going concern.

i) Agarapatana Plantations Ltd recorded a net profit of Rs. 19,427,297/- during the year ended 31st March, 2011 compared

to the net loss of Rs. 92,358,171/- made in 2009/10, and as at 31st March, 2011 the Current Liabilities of the Company

exceeded its Current Assets by Rs. 386,344,418/- (2010 - Rs. 491,441,741/-) and the Company is dependant on creditors

and borrowings for the continuation of its operations. As a result, the Directors have made an assessment of the Company to

continue as a going concern and they do not intend either to liquidate or cease trading.

ii) York Hotels (Kandy) Limited (YHKL), which was incorporated on 11th February, 1993, has not yet commenced its operations.

Further the Company has not continued construction work since 1996. However, the Board of Directors of the Company is

confident that the construction work will recommence in the next financial year.

iii) Lankem Plantation Holdings Limited (LPHL), a subsidiary has recorded a profit of Rs. 68.3 million during the year under review

(2009/10 Rs. 9.9 million). However as at 31st March, 2011 the accumulated losses amounted to Rs. 162.9 million (31st March

2010 Rs. 231.2 million) as of that date, the Company’s current liabilities exceeded the current assets by Rs. 381.7 million (2010

Rs. 450 million). Therefore, the said unfavourable conditions have raised doubts as to the ability of the company to continue

as a going concern, even though there has been an improvement from the financial position reported in the previous year. The

Directors have made an assessment of the Company’s ability to continue as a going concern and they do not intend either to

liquidate or to cease trading.

iv) Lankem Developments PLC has incurred a loss of Rs. 27,012,210/- for the year ended 31st March 2011 and has accumulated

lossses amounting to Rs. 86,123,513/- as at 31st March 2011. The Company’s current liabilities also exceeded its current

assets by Rs. 17,408,259/- at the end of the financial year. However, the Company’s ability to continue in the business as a

going concern is dependant on the significant cash infusion of Rs. 1,327,500,000/- through the rights issue subsequent to the

balance sheet date and the increased profitability derived from the utilization of these funds for future investments in Plantation

companies, Leisure Industry and Hydro Power Plants.

v) Colombo Fort Hotels Limited (CFHL), a subsidiary, has not been generating operating income since its incorporation and its

going concern assumption is dependent largely on the continuous support from its ultimate parent company, The Colombo

Fort Land & Building Company PLC. However, the financial statements do not include any adjustments that may be required to

the recorded assets amounts and classification of assets and liabilities if the company could not continue as a going concern.



vi) Lankem Consumer Products Limited (LCPL), a subsidiary has recorded a profit of Rs. 0.8 million during the year under review.

However, consequent to losses incurred in prior years, the current liabilities exceeded the current assets by Rs. 45.6 million and

the total liabilities exceeded the total assets by Rs. 45.9 million as at the reporting date. These conditions indicate the existence

of a material uncertainity which may cast significant doubt about the Company’s ability to continue as a going concern. The

Directors are confident that the Company would continue as a going concern with the Company having recorded profits in the

last three years. Accordingly, the going concern assumption has been adopted in the preparation of the Financial Statements.

34 EVENTS OCCURRING AFTER THE BALANCE SHEET DATE34.1 Companyi) The Directors of Lankem Ceylon PLC have recommended the payment of a Final dividend of Rs. 1.50/- per ordinary share

which will be declared at the Annual General Meeting to be held on 30th September, 2011. In accordance with the Sri Lanka

Accounting Standard 12 (Revised) - Events Occurring After the Balance Sheet Date, this proposed dividend has not been

recognised as a liability as at 31st March, 2011

ii) Consequent to the Rights Issue Lankem Developments PLC (LDEV), a direct subsidiary of Lankem Ceylon PLC has become

an Indirect Subsidiary of Lankem Ceylon PLC. Lankem Plantation Holdings Ltd a subsidiary of Lankem Ceylon PLC, is now the

parent undertaking of Lankem Developments PLC holding 56.25% of the issued capital of LDEV.

iii) SunAgro Foods Limited was incorporated on 9th June 2011 as a wholly owned Subsidiary of Lankem Ceylon PLC. The objects

of the Company are to grow, import, export, process and market any food item.

34.2 Groupi) Beruwala Resorts Limited by a Special Resolution passed at the Extraordinary General Meeting held on the 20th June 2011

resolved that the Stated Capital be reduced from Rs. 666,607,580/- to Rs. 340,000,000/- without effecting any change to the

number of issued and fully paid shares.

The aforesaid reduction was effected by setting off the brought forward losses of Beruwala Resorts Limited against its Stated

Capital to the extent of Rs. 326,607,580/- and by writing off a similar amount from the carry forward losses as at the financial

year ended 31st March 2010 of Rs. 329,464,868/- which carry forward losses have consequent thereto been reduced to Rs.

2,857,288/-

ii) Lankem Developments PLC

Equity Investments in Agarapatana Plantations Ltd.

In terms of the provisions regulating major transactions in the Companies Act No. 7 of 2007 a Special Resolution was passed

unanimously by the shareholders at the Extraordinary General Meeting of the Company held on 21st April, 2011, for the proposed

acquisition by Lankem Developments PLC of 47,417,276 ordinary shares of Agarapatana Plantations Limited (“APL”) (constituting

a total equity stake of 61.88% in APL) to be purchased from Lankem Plantation Holdings Ltd. and Kotagala Plantations PLC (the

“Sellers”) at a total investment cost of Rs. 1,185,431,900/- (i.e. on the basis of a price of Rs. 25/- per share).

Consequent to the aforementioned purchase of an equity stake of 61.88% by Lankem Developments PLC (LDEV) in Agarapatana

Plantationa Ltd., at an investment cost of Rs.1,185,431,900/- the said company has become a subsidiary of Lankem Developments

PLC.

Rights Issue of Shares

The Company made a Rights Issue of 103,500,000 Ordinary Shares at a price of Rs.25/- per share to the holders of the issued

Ordinary Shares of the Company as at the end of trading on the 21st of April 2011 in the proportion of Fifteen (15) new Ordinary

Shares for every One (1) Ordinary Share held by them in the Capital of the Company. The issue closed on 16th May 2011 and

53,100,000 shares were subscribed. The total consideration received was Rs. 1,327,500,000/-. The purpose of the issue was

to finance the acquisition of the equity stake in Agarapatana Plantations Limited and for further equity investments in Plantation

Companies, Leisure Industry and Hydro Power Plants, such investments which will be given effect to within a period of two years.


34.2 Group Contd. Of the Rights Issue proceeds received Rs.1,185,431,900/- was utilized to acquire the equity stake of 61.88% in Agarapatana

Plantations Limited. The remainder of the funds will be retained for the purposes mentioned above.

Consequent to the Rights Issue Lankem Developments PLC has become an indirect subsidiary of Lankem Ceylon PLC. The Company’s immediate parent company is now Lankem Plantation Holdings Limited which Company holds 56.25% of the Issued Capital of Lankem Developments PLC.

There were no events occurring after the Balance Sheet date other than those disclosed above that require adjustments to or

disclosures in the Financial Statements.

35 ACQUISITION OF B.O.T HOTEL SERVICES PRIVATE LIMITED Beruwala Resort Limited, subsidiary of the Company acquired 51% and further 4% of the issued ordinary share capital of B.O.T

Hotel Services Private Limited on 26 May, 2010 and 26 July, 2010 respectively for a total consideration of Rs.38.02 million.

The acquisition had the following effect on the Groups Assets and Liabilities.

Rs,000

Property, Plant and Equipment 470,173

Inventories 1

Trade and Other Receivables 182

Bank & Cash Balances 696

Interest-bearing Loans and Borrowings (4,635)

Retirement Benefit Obligations (2,100)

Trade and Other Payables (74,857)

Amount Due to Related Parties (11,102)

Net Identifible Assets and Liabilities 378,358

Net Assets Acquired - 22 % (83,239)

Negative Goodwill on Acquisition 68,038

Investment made by Equity Holders of the Parent (15,201)

Investment allocated to Minority Interest (22,819)

Cash Consideration paid on Acquisition of Subsidiary (38,020)

Cash & Cash Equivalents Acquired 696

Net Cash Outflow on Acqisition of Subsidiary (37,324)

36 OPERATING LEASE COMMITMENTS Lease rental due on Non -Cancelable Opearating Leases of the Group as follows ;

2011 2010

Rs.000 Rs.000

Lease rental payable less than one year 37,436 37,424

Lease rental payable between one to five years 149,743 149,695

Lease rental payable after five years 1,066,329 1,103,477

1,253,507 1,290,595



36.1 Details of Leases under Operating Lease

Company Name The Party with whom Lease Commencemnet Unexpired Lease

the agreement made Period Date of of Lease Period Payment

Agreement the Lease per Year

As at Rs. ‘000

31/03/2011

Agarapatana Plantations Janatha Estate Development Board Limited (JEDB) / Sri Lanka State Plantation Corporation (SLSPC) Estates 53 years 22.06.1992 34 years 12,500 Kotagala Plantations PLC Janatha Estate Development Board (JEDB) / Sri Lanka State Plantation Corporation (SLSPC) Estates 53 years 22.06.1992 34 years 22,183 (Inflated by

the GDP Deflator)

C.W.Mackie PLC Crown Lands Ordinance 99 years 10.06.1925 13 years 26 Beruwala Resorts Limited Sri Lanka Tourism Development Authority 30 years 01.08.2007 26 years 1,200 Sigiriya Village PLC Sri Lanka Tourism Development Authority 30 years 02.09.2009 28 years 1,515 SunAgro Farms Limited Department of Buddhist Affairs 29 years 01.04.2010 28 years 12

37 SUBSIDIARY COMPANIES OF THE GROUP Details of subsidiaries in which Lankem Ceylon PLC held an indirect interest are set out below:

Indirect Subsidiary Effective Holding (%)

Agarapatana Plantations Limited 28

York Hotels (Kandy) Limited 50

B.O.T. Hotel Services (Pvt) Ltd. 22

Ceymac Rubber Company Limited 42

Scan Tours & Travels (Pvt) Ltd. 43

Ceytra (Pvt) Ltd. 27

38 PRIOR PERIOD ADJUSTMENT Companyi) Recognition of Deferred tax

The Company had not recognised deferred tax asset in respect of temporary difference arising from the recognition of retirement

benefit obligations and retirement benefit assets as at 31st March, 2010. The Company effected a Prior period adjustment to

correct the error.

The effect of this application has been accounted for retrospectively in compliance with SLAS 10 Accounting Policies, Change

in Accounting Estimates & Errors(Revised 2005) and the effect of the restatement is summarised below,

2010

Rs

Balance Sheet

Decrease in deferred tax liabilities 15.4 Mn

Income Statement

Decrease in deferred tax expense 15.4 Mn


38 PRIOR PERIOD ADJUSTMENT CONTD. Groupii) Revaluation Reserve of Sigiriya Village Hotels PLC. The land of Sigiriya Village Hotels PLC was revalued as at 31st March, 2010 and the carrying amount written up by Rs.126 Mn

to correspond with the market value. The corresponding entries was not recognised in the Consolidated Financial Statements as at 31st March, 2010. Accordingly, the Consolidated Financial Statements was restated as at 31st March, 2010 to recognise the omission in the revaluation of land of Sigiriya Village Hotels PLC.

The effect of this application has been accounted for retrospectively in compliance with SLAS 10 Accounting Policies, Change

in Accounting Estimates & Errors(Revised 2005) and the effect of the restatement is summarised below,

2010 Rs.

Balance SheetIncrease in Property, Plant & Equipment - Land 126 Mn

Statement of Changes in EquityIncrease in Revaluation Reserve 126 Mn

iii) Capital working progress of York Hotels Kandy (Pvt) Ltd The Capital Work In Progress of York Hotels Kandy (Pvt) Ltd has been erroneously overstated by Rs 19.9 Mn

The effect of this application has been accounted for retrospectively in compliance with SLAS 10 Accounting Policies, Change in Accounting Estimates & Errors(Revised 2005) and the effect of the restatement is summarised below,

2010 Rs.

Balance SheetDecrease in Property, Plant & Equipment - Capital Work In Progress 19.9 Mn

Statement of Changes in EquityDecrease in Revaluation Reserve 19.9 Mn

iv) Deferred tax of Marawila Resorts PLC During the year Company commenced application of deferred taxation as per SLAS 14 Income Taxes (Revised 2005) on

entities enjoying tax holiday periods under the Board of Investment Law, as recommended by the “Deferred Tax council ruling for BOI Companies” issued by The Institute of Chartered Accountants of Sri Lanka. The effect of this application has been accounted for retrospectively in compliance with SLAS 10 Accounting Policies, Changes in Accounting Estimates & Errors (Revised 2005) and the above mentioned ruling.

The effect of the change on the comparative information for 2009/2010 is tabulated below. Opening retained earnings for 2009/2010 is reduced by Rs.38,782,611/-, which is the amount of the adjustment relating to periods prior to 2009/2010.

2010 Periods prior to 31st March 2009 Rs. Rs.

Balance SheetIncrease in Deferred Tax Liabilities 39.5Mn -

Income StatementDeferred Tax Expense 0.7Mn -

Statement of Changes in EquityDecrease in Retained Earnings - 38.8 Mn



39 CHANGE IN FINANCIAL PERIOD END OF SUBSIDIARY – C. W. MACKIE PLC Lankem Ceylon PLC acquired controlling interest of C. W. Mackie PLC in January 2010. C. W. Mackie PLC changed its

financial period year end from 31st December to 31st March to conform to the financial period end of its Parent Company. Consequently, the audited financial statements for the 15 months period from 1st January 2010 to 31st March 2011 of C. W. Mackie PLC are included in the consolidated financial statements of Lankem Ceylon PLC prepared for the year ended 31st March 2011. Thereby, the consolidated income statement of Lankem Ceylon PLC for the year ended 31st March 2011 includes 15 months results of C. W. Mackie PLC from 1st January 2010 to 31st March 2011.

40 SEGMENT INFORMATION Information based on primary segments (Business Segments).

Total Assets Total Liabilities

31.03.2011 31.03.2010 31.03.2011 31.03.2010

Rs.’000 Rs.’000 Rs.’000 Rs.’000

40.1 Assets and LiabilitiesChemicals 1,831,242 1,009,796 840,715 682,895Consumer 1,491,675 1,032,782 899,591 759,977Hardware 1,689,315 649,870 1,351,873 565,607Construction 41,476 96,417 13,093 67,729Hotels 3,005,844 1,296,117 884,554 377,528Plantations 8,525,338 8,532,689 6,477,427 6,550,464

Agriculture 69,050 55,866 1,975 50,801 16,653,940 12,673,537 10,469,228 9,055,001Un-Allocated 380,396 353,801 396,006 617,873

Goodwill on Consolidation 357,078 357,078 - - 17,391,414 13,384,416 10,865,234 9,672,874

Additions to Property Depreciation and Plant and Equipment Amortisation

2011 2010 2011 2010

Rs.’000 Rs.’000 Rs.’000 Rs.’000

40.2 Property, Plant and Equipment Chemicals 61,920 99,931 25,548 18,799Consumer 63,185 512 63,534 2,829Hardware 10,781 11,805 42,026 15,443Construction 34 - 122 127Plantations 1,074,162 1,129,950 181,719 195,513Hotels 15,063 22,598 50,671 44,465

Agriculture 10,914 4,729 1,097 495 1,236,059 1,269,525 364,717 277,671

Un-Allocated 69,639 50,839 11,825 6,748 1,305,698 1,320,364 376,542 284,419


Group Company

2011 2010 2011 2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Gross Sales 23,030,604 11,046,103 4,903,869 3,589,034

Other Income 460,802 285,813 101,072 105,788 23,491,406 11,331,916 5,004,941 3,694,822

Less: Cost of Material and Services Purchased (17,642,291) (6,586,910) (4,106,461) (3,065,699)

Total Value Added 5,849,115 4,745,006 898,480 629,123

Distributed as follows:To Employees as Remuneration 3,637,771 3,532,470 176,140 155,072To Government as Tax Expenses/ (Release) 258,418 279,665 (41,196) 112,623To Providers of Capital as - Interest 400,726 299,478 132,769 109,143 - Dividends 71,250 42,000 71,250 42,000Retained in the Business as - Depreciation 429,427 284,419 55,567 43,026 - Reserves 1,051,523 306,974 503,950 167,259

1,480,950 591,393 559,517 210,285

Distribution of Value Added 5,849,115 4,745,006 898,480 629,123

To Employees as Remuneration 62.19% 74.45% 19.60% 24.65%To Government as Taxes 4.42% 5.89% -4.59% 17.90%To Providers of Capital 8.07% 7.20% 22.71% 24.02%

Retained in the Business 25.32% 12.46% 62.27% 33.43%

100.00% 100.00% 100.00% 100.00%

Statement of Value Added

Distribution of Value Added - Company 2009/10

To Employees as Remuneration

To Government as Taxes

To Providers of Capital

Retained in the Business

24.65%

17.90%

24.02%

33.43%

Distribution of Value Added - Company 2010/11




19.60%

22.71%62.27%

Note:The over provisions on Company taxes made for 2009/10 have been reversed due to the exemptions for relocation of Agrochemical and Agro Seeds operations.

Distribution of Value Added - Group 2009/10





74.45%

12.46%

7.20%

5.89%

Distribution of Value Added - Group 2010/11





62.19%

4.42%

8.07%

25.32%


Share Information

Twenty Major Shareholders

31st March 2011 31st March 2010

No of No of

Ordinary Ordinary

Shares % Shares %

1 E.B. Creasy & Company PLC 10,974,635 45.73 9,536,408 45.41

2 The Colombo Fort Land & Building Company PLC 4,941,900 20.59 3,966,984 18.89

3 Seylan Bank PLC/The Colombo Fort Land & Building Company PLC 2,500,000 10.42 2,500,000 11.90

4 Colombo Fort Investments PLC 419,857 1.75 349,854 1.67

5 Darley Butler & Company Ltd 366,616 1.53 466,316 2.22

6 Associated Electrical Corporation Ltd 186,700 0.78 - -

7 Colombo Investment Trust PLC 170,219 0.71 147,659 0.70

8 Pan Asia Banking Corporation PLC/Darley Butler & Company Ltd 169,998 0.71 - -

9 Mr. Dueleep Fairlie George Dalpethado 159,406 0.66 447,854 2.13

10 Mushtaq Mohamed Fuad 116,900 0.49 - -

11 J.B. Cocoshell (Pvt) Ltd. 105,299 0.44 92,200 0.44

12 Colonial Motors PLC 100,457 0.42 87,900 0.42

13 Waldock Mackenzie Ltd/Hi-Line Trading (Pvt) Ltd 87,485 0.36 54,200 0.26

14 Mr. Mariapillai Radhakrishnan 68,800 0.29 68,800 0.33

15 Mr. Anthony Isidore De Silva & Mr. Francis Xavier Ranjith Pereira 55,047 0.23 55,047 0.26

16 Dr.Thirugnanasambandar Senthilverl 52,014 0.22 125,100 0.60

17 Pan Asia Banking Corporation PLC/Mr. H.N. De Silva 51,000 0.21 - -

18 Mr. Duraisamy Ganeshamoorthy & Mr. Periyasaami Pillai Anandarajah 50,000 0.21 - -

19 First Capital Markets Ltd/Ventura Crystal (Pvt) Ltd 50,000 0.21 - -

20 Pan Asia Banking Corporation PLC/Mr. I.P. Galhenage 48,612 0.20 - -

20,674,945 86.16 17,898,322 85.23

Market ValueThe market value of the Company’s Ordinary Shares on 31st March 2011 was Rs. 401.50 (Highest during the year - Rs. 500.00 and

lowest during the year - Rs.65.00).

Net Assets per ShareConsolidated The Net Assets per Share as at 31st March 2011 Rs. 135.84

The Net Assets per Share as at 31st March 2010 Rs. 86.33

Company The Net Assets per Share as at 31st March 2011 Rs. 88.43

The Net Assets per Share as at 31st March 2010 Rs. 64.93

Public HoldingThe percentage of shares held by the public as at 31st March 2011 was 17.85% (31st March 2010 - 18.52%).


Distribution of Shares

As as 31st March 2011 As at 31st March 2010

No. of Total % of Total No. of Total % of Total

No. of Shares Held Shareholders Holdings Holdings Shareholders Holdings Holdings

1 - 1,000 1,887 526,009 2.19 1,600 472,659 2.25

1,001 - 10,000 555 1,660,144 6.92 488 1,511,653 7.19

10,001 - 100,000 67 1,601,860 6.67 60 1,475,513 7.03

100,001 - 1,000,000 9 1,795,452 7.48 5 1,536,783 7.32

Over 1,000,000 3 18,416,535 76.74 3 16,003,392 76.21

2,521 24,000,000 100.00 2,156 21,000,000 100.00

Analysis of Ordinary Shareholders

As at 31st March 2011 No of % Total Market % of Total

Shareholders Holdings Value (Rs.) Holding

Individuals 2,331 92.46 3,049,843 1,224,511,965 12.71

Institutions 190 7.54 20,950,157 8,411,488,035 87.29

2,521 100.00 24,000,000 9,636,000,000 100.00

As at 31st March 2010 No of % Total Market % of Total

Shareholders Holdings Value (Rs.) Holding

Individuals 2,048 94.99 3,329,612 216,424,715 15.86

Institutions 108 5.01 17,670,388 1,148,575,285 84.14

2,156 100.00 21,000,000 1,365,000,000 100.00

Share Information


Ten Year Summary

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11

Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000

Restated

Trading Results

Turnover 3,760,177 4,330,160 4,751,159 5,829,450 6,784,903 7,937,129 9,451,805 9,752,487 11,046,103 23,030,604

Profit/(Loss) Before Tax (322,694) (293,067) 222,824 301,029 375,746 502,636 918,464 256,696 803,582 2,108,564

Taxation (15,378) (35,921) (57,454) (48,467) (60,564) (98,745) (180,376) (194,293) (255,000) (236,815)

Profit/(Loss) After Tax (338,072) (328,988) 165,370 252,562 315,182 403,891 738,088 62,403 548,582 1,871,749

Assets Employed

Property, Plant &

Equipment 2,994,544 3,529,593 3,610,641 3,961,363 4,244,554 4,934,249 5,262,758 5,812,371 6,885,254 8,273,781

Investments

(Other Long Term Inv) 211,347 212,613 13,152 4,016 3,478 3,338 57,481 54,168 53,240 39,008

Working Capital (677,958) (1,517,207) (1,254,495) (1,080,257) (1,039,775) (732,162) (262,984) (459,127) 47,408 2,084,729

Shareholders’ Funds

Stated Capital 242,137 242,137 242,137 242,137 267,137 222,885 289,552 281,218 281,218 536,218

Reserves (33,016) (670,693) (400,172) (248,260) (16,324) 492,673 782,471 895,544 1,531,704 2,723,837

Goodwill on Consolidation 213,050 198,472 193,870 135,589 163,276 160,067 84,366 147,254 357,078 357,078

Non-Current Liabilities 2,088,187 2,561,502 2,449,706 2,599,217 2,605,856 2,819,691 2,795,150 3,359,950 4,684,213 5,234,461

Ratio Analysis

Profitability Ratios

Profit before Interest &

Tax Margin (PBIT) (%) 1.78 1.65 11.10 10.44 10.19 9.81 12.27 5.55 9.94 11.12

Pre Tax Return on

Capital Employed (3.07) - 1.93 0.71 0.49 0.33 0.39 0.11 0.22 0.32

After Tax Return on

Capital Employed (2.36) - 1.43 0.60 0.41 0.26 0.31 0.03 0.15 0.29

Liquidity Ratios

Current Ratio 0.67 0.45 0.55 0.64 0.67 0.78 0.93 0.87 1.01 1.37

Quick Ratio 0.33 0.26 0.37 0.37 0.40 0.45 0.53 0.56 0.67 0.94

Gearing Ratios

Debt Equity Ratio 0.77 1.06 0.96 0.85 0.75 0.61 0.47 0.54 0.55 0.46

Interest Coverage 0.17 (0.16) 1.73 1.97 2.19 2.82 4.81 1.90 3.73 5.66

Investor Ratios

Market Price per Share (Rs.) 9.50 8.50 14.25 70.00 54.00 36.75 46.50 28.75 65.00 401.50

Earnings per Share (Rs.) (12.39) (18.64) 9.15 8.39 11.51 9.95 15.07 8.30 15.72 47.16

Net Assets per Share (Rs.) (0.90) (35.71) (8.78) (0.34) 13.93 39.75 51.05 56.04 86.33 135.84

Dividend Per Share (Rs) - 1.00 1.50 1.50 1.50 1.50 1.80 2.00 2.25 2.50

Price Earnings Ratio (PE) (0.77) (0.46) 1.56 8.34 4.69 3.69 3.09 3.45 4.14 8.51

Earnings Yield (1.30) (2.19) 0.64 0.12 0.21 0.27 0.32 0.29 0.24 0.12

Dividends Yield - 0.12 0.11 0.02 0.03 0.04 0.04 0.07 0.03 0.01

Dividend Payout Ratio - (0.05) 0.16 0.18 0.13 0.15 0.12 0.24 0.14 0.05

Market Capitalization 114,000 102,000 171,000 1,260,000 972,000 661,500 976,500 603,750 1,365,000 9,636,000


Notice of Meeting

Notice is hereby given that the Forty Sixth Annual General

Meeting of Lankem Ceylon PLC will be held at the Grand Oriental

Hotel, No. 2, York Street, Colombo 01, on 30th September 2011

at 9.30 a.m. for the following purposes namely:

• To receive and consider the Annual Report of the Board

of Directors and the Statement of Accounts for the year

ended 31st March 2011, with the Report of the Auditors

thereon.

• To declare a final dividend as recommended by the

Directors.

• To re-elect as a Director, Mr. J. D. Gomes who retires

in accordance with Articles 85 and 86 of the Articles of

Association.

• To reappoint Mr. N.H.B.S. Perera who is over seventy

years of age as a Director. Special Notice has been

received from a shareholder of the intention to pass

a resolution which is set out below in relation to his

reappointment (see Note No. 4).

• To reappoint Mr. R.N. Bopearatchy who has attained

the age of seventy years as a Director. Special Notice

has been received from a shareholder of the intention to

pass a Resolution which is set out below in relation to his

reappointment (see Note No.5).

• To reappoint Mr. A. Rajaratnam who has attained the

age of seventy years as a Director. Special Notice has

been received from a shareholder of the intention to

pass a Resolution which is set out below in relation to his

reappointment. ( see Note No. 6).

• To authorize the Directors to determine contributions to

charities.

• To reappoint as Auditors, Messrs KPMG Ford, Rhodes

Thornton & Company and to authorize the Directors to

determine their remuneration.

• Special Business To consider and if thought fit to pass a Special Resolution

to amend the Articles of Association of the Company in

the manner following:

Special Resolution Resolved –

“That the existing Article 74 of the Articles of Association

be deleted and the following Article be substituted therefor:

74. The Directors shall not be less than five nor more than

fifteen in number.”

By Order of the Board

Corporate Managers & Secretaries (Private) Limited

Secretaries

Colombo

23rd August 2011

Note:

1. Any member of the Company who is entitled to attend

and vote at this meeting may appoint a proxy to attend

and vote instead of him or her. A proxy need not be a

member of the Company.

2. A Form of Proxy for the Meeting is enclosed with this

Report

3. The instrument appointing a proxy must reach the

Registered Office of the Company’s Secretaries,

Corporate Managers & Secretaries (Private) Limited,

No. 8-5/2, Leyden Bastian Road, York Arcade Building,

Colombo 01, not less than forty-eight (48) hours before

the time appointed for the holding of the meeting.

4. Special Notice has been received by the Company from

a shareholder giving notice of the intention to move the

following Resolution as an Ordinary Resolution at the

Annual General Meeting.

Resolved-

“That Mr.N.H.B.S. Perera who is presently eighty years

of age be and is hereby reappointed a Director of the

Company and it is further specially declared that the age

limit of seventy years referred to in Section 210 of the

Companies Act No.7 of 2007 shall not apply to the said

Director, Mr.N.H.B.S. Perera.”




Annual General Meeting:

Resolved –

“That Mr. R.N. Bopearatchy who has attained the age of

seventy years be and is hereby reappointed a Director of

the Company and it is further specially declared that the

age limit of seventy years referred to in Section 210 of the

Companies Act No.7 of 2007 shall not apply to the said

Director, Mr. R.N. Bopearatchy”.




Annual General Meeting:

Resolved –

“That Mr. A. Rajaratnam who has attained the age of

seventy years be and is hereby reappointed a Director of

the Company and it is further specially declared that the

age limit of seventy years referred to in Section 210 of the

Companies Act No. 7 of 2007 shall not apply to the said

Director, Mr. A. Rajaratnam”.


Form of Proxy

I/We ................................................................................................................................................................................................ of ............................................................................................................................................................................................................ being a member/members of Lankem Ceylon PLC, hereby appoint ................................................................................................ of ...................................................................................................................................................................................... whom failing. 1. Alagarajah Rajaratnam of Colombo or failing him,2. Sri Dhaman Rajendram Arudpragasam of Colombo or failing him,3. Anushman Rajaratnam of Colombo or failing him,4. Damitha Laksiri Vitharana of Colombo or failing him,5. Ranjit Noel Bopearatchy of Colombo or failing him,6. Nelakanni Hettiarachige Bernard Susantha Perera of Colombo or failing him,7. Kamalanesan Ponniah David of Colombo or failing him,8. Amaralal Rajasri Peiris of Colombo or failing him,9. Ruwan Tharka Weerasinghe of Colombo or failing him,10. Ariyawansa Hettiarachchy of Colombo or failing him,11. Anthony Crossette Selvanayagam Jayaranjan of Colombo or failing him,12. Jammagalage Dian Gomes of Colombo

as my/our proxy to represent me/us and to speak and vote on my/our behalf at the Annual General Meeting of the Company to be held

on 30th September 2011 and at any adjournment thereof and at every poll which may be taken in consequence of the aforesaid meeting.

To receive the Annual Report of the Board of Directors and the Statement

of Accounts for the year ended 31st March 2011 with the Report of the

Auditors thereon.

To declare a final dividend as recommended by the Directors.

To re-elect Mr. J.D. Gomes as a Director.

To re-appoint Mr. N.H.B.S. Perera as a Director.

To re-appoint Mr. R.N. Bopearatchy as a Director.

To re-appoint Mr. A. Rajaratnam as a Director.

To authorize the Directors to determine contributions to charities.

To reappoint as Auditors, Messrs KPMG Ford, Rhodes Thornton &

Company and to authorize the Directors to determine their remuneration.

Special Business

To amend the Articles of Association as set out in the Notice of meeting.

Special Resolution

For Against

The proxy may vote as he/she thinks fit on any resolution brought before the meeting.

As witness my hand/our hands this ………..day of………………….Two Thousand and Eleven.

......................................................................

Signature

Note: A proxy need not be a member of the Company. If no words are deleted or there is in the view of the proxy doubt (by reason of the manner in which the instructions contained in the Form of Proxy have been completed) as to the way in which the proxy should vote, the proxy may vote as he/she thinks fit.

Instructions as to completion are noted on the reverse hereof;


Form of Proxy

Instructions as to Completion

1. Perfect the Form of Proxy, after filling in legibly your full

name and address by signing in the space provided and

filling in the date of signature.

2. In the case of Corporate Members the Form of Proxy must

be under the Common Seal of the Company or under the

hand of an Authorized Officer or Attorney.

3. Where the Form of Proxy is signed under a Power of

Attorney (POA) which has not been registered with the

Company’s Secretaries, the original POA together with a

photocopy of the same, or a copy certified by a Notary

Public must be lodged with the Company’s Secretaries,

along with the Form of Proxy.

4. The completed Form of Proxy should be deposited at the

Registered Office of the Company’s Secretaries, Corporate

Managers & Secretaries (Private) Limited., 8-5/2, Leyden

Bastian Road, York Arcade Building, Colombo 01, not less

than forty-eight (48) hours before the time appointed for

the meeting.

diverse strategic

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Corporate Information

Board of Directors ChairmanA. Rajaratnam, FCA

Deputy ChairmanS.D.R. Arudpragasam, FCMA (UK)

Managing DirectorAnushman Rajaratnam, B.Sc. (Hons.), CPA, MBA (Alternate, Mr. S. Rajaratnam)

Chief Operating OfficerD.L. Vitharana, MNI (Lond.), MBA, M.Sc. (UK)

DirectorsR.N. Bopearatchy, B.Sc (Cey), Dip. BM, MBA (Univ. of Col.) N.H.B.S. Perera, B.Sc. (Cey.)K.P. David, FCMA (UK), FCMA, FIPFMA.R. Peiris, B.Sc.(Cey.), FCMA (UK)R.T. Weerasinghe, BBA (USA)A. Hettiarachchy, C.Eng, MIEE, MIProdEA.C.S Jayaranjan FCA, FCMA (UK)J.D Gomes, FCMA (UK) FCCA (UK), FCPA (AUS)

SecretariesCorporate Managers & Secretaries (Private) Limited

BankersSampath Bank PLCNational Development Bank PLC Commercial Bank of Ceylon PLC Hatton National Bank PLCBank of CeylonPABC Bank PLCSeylan Bank PLCIndian Bank

LawyersMessrs Julius & Creasy Attorneys-at-Law

AuditorsMessrs KPMG Ford, Rhodes, Thornton & Company Chartered Accountants

Name of the Company Lankem Ceylon PLC

Legal FormA limited liability company incorporated and domiciled in Sri Lanka

Date of Incorporation 15th September 1964

Company NumberPQ 128

Stock Exchange ListingThe ordinary shares of the Company are listed with the Colombo Stock Exchange of Sri Lanka

Registered OfficeNo. 98, Sri Sangaraja Mawatha, Colombo 10

Principal Activities of the CompanyManufacturing of Chemicals, Paints and Consumer Products

Subsidiary Companies and their Principal Activities Lankem Paints Ltd.Distribution of Paints

Lankem Consumer Products Ltd. Distribution of Consumer Products

Lankem Chemicals Ltd. Distribution of Industrial Chemicals

Lankem Agrochemicals Ltd. Distribution of Agrochemicals

SunAgro LifeScience Ltd.Import, Marketing and Distribution of Agrochemicals

Lankem Research Ltd. Research and Development

Lankem Developments PLCProvision of Waterproofing and Construction of Roads and Industrial Flooring

C.W. Mackie PLCManufacturer, Exporter, Importer and Distributor of Consumer, Hardware and Rubber Products

Lankem Plantation Holdings Ltd. Investment in Plantation Companies

Lankem Tea & Rubber Plantations (Pvt) Ltd. Management of Plantations and Investment in Plantations

Kotagala Plantations PLCCultivation and Processing of Tea and Rubber

Agarapatana Plantations Ltd. Cultivation and Processing of Tea

Lankem Plantation Services Ltd. Non-Operational

Sigiriya Village Hotels PLCOwning and Operation of Resort Hotel

Marawila Resorts PLCOwning and Operation of Resort Hotel

Colombo Fort Hotels Ltd. Investment in Hotel Companies

Beruwala Resorts Ltd.Owning and Operation of Resort Hotel

York Hotels (Kandy) Ltd. Owning of Resort Hotel

B.O.T. Hotel Services (Pvt.) Ltd. Owning and Operation of Resort Hotel

SunAgro Farms Ltd.Growers of Vegetables, Fruits and Foliage for Export and Sale

Associated Farms (Pvt.) Ltd. Farming and Dairying

Lankem Technology Services Ltd.Provision of Information Technology and Allied Services

Nature’s Link Ltd.Manufacturing of herbal/natural based products

Lankem Exports (Pvt) Ltd. Non-Operational

SunAgro Foods LimitedGrowers, importers, exporters, processors and marketers of food items

Annual Report 2010/2011

www.lankem.lk

Lankem C

eylon P

LC | A

nnual Rep

ort 2010/2011

Lankem Ceylon PLC CEYLON PLC 2010-11.pdfLankem Ceylon PLC | Annual Report 2010/2011 3 our business areas OUR BUSINESS AREAS ARE AGROCHEMICALS, PAINTS, BITUMINOUS PRODUCTS, CHEMICALS,

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