Lankem

LANKEM CEYLON PLC Annual Report 2011/2012

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

An understated yet fast growing player in the diversified conglomerate sector, the Lankem Group has been building value and creating wealth for over forty five years. Today we own over twenty five subsidiary companies working in nine major industry sectors, all of which have performed beyond expectation, in the year under review.

This year sees us broadening our horizons as we acquire several new industry portfolios to the group holding. Simultaneously, our network of factories will see massive refurbishment, in order to drive up capacities and bring each one to a state of the art level. Today we are pleased to see that we rank highly in several very profitable industries and services; strengthening our position as a company that will continue to explore new avenues, seek out new opportunities and broaden our horizons each year.

2 | LANKEM CEYLON PLC | ANNUAL REPORT 2011/2012

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 reaffirmed by RAM ratings (Lanka) Limited in December 2011.

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Financial Highlights .................................................. 4Chairman’s Message ................................................. 5Board of Directors ..................................................... 8Management Reports ...............................................10Financial Review ...................................................... 28Corporate Social Responsibility ............................. 32Annual Report of the Board of Directors ............... 34Corporate Governance ........................................... 37Risk Management Review ....................................... 40Audit Committee Report ......................................... 42Independent Auditors’ Report ................................ 46Income Statement ................................................... 48Balance Sheet .......................................................... 49Statement of Changes in Equity .............................50Cash Flow Statement ...............................................51Notes to the Financial Statements ........................53Statement of Value Added ...................................... 116Share Information ................................................... 117Ten Year Summary ................................................. 119Corporate Information - Inner Back Cover

Contents

Agri Inputs

Paints

Chemicals

Bitumen

Consumer

Construction & Pest Management

Plantations

Leisure

Agriculture, Crop and Livestock Production

Pages 10 - 11

Pages 12 - 13

Pages 14 - 15

Pages 16 - 17

Pages 18 - 19

Pages 20 - 21

Pages 22 - 23

Pages 24 - 25

Pages 26 - 27


Financial Highlights

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Rs. 24,118 Mn.Shareholders’ Funds

Rs. 3,902 Mn.Profit Before Tax

Rs. 1,531 Mn.Net Assets Per Share

Rs. 162.60

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Chairman’s Review

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 2012.

The recently concluded financial year has seen a high degree of volatility in the economic environment. A deteriorating balance of payments situation has precipitated a steep devaluation of the Sri Lankan Rupee. This decline in the value in the Rupee has in turn led to an increase in the annual rate of inflation. The Government has used a policy of rising interest rates to control credit growth in the local economy and to try and improve the balance of payments situation. The increase in interest rates have seen the borrowing costs of the Group increase by nearly 400 basis points. The nearly 15% devaluation of the Rupee has increased the costs of all inputs across the Company and has placed a great deal of pressure on the Company’s margins. The Rupee is yet to settle at a stable trading range and this makes medium term costing and investment decisions difficult to make. The Government also seems to have moved away from its pro-growth stance of low taxation with the taxes associated with the importation of motor and other luxury goods also increasing.

Under these challenging circumstances it will be difficult for the Sri Lankan economy to post a GDP growth rate above 8% as forecasted. In order to return to a path of rapid economic growth, the Government must pursue a policy of smaller budget deficits while encouraging foreign direct investment into the Sri Lankan economy. It must work to reduce the red tape involved for businesses setting up new operations in Sri Lanka and work to reduce interest rates so that local firms can borrow the necessary capital to further grow their businesses.

Company Performance ReviewIn spite of the difficult trading conditions that were present over the course of the last financial year, Lankem Ceylon PLC at Group level recorded a turnover of Rs. 24.1 Billion and a profit after tax of Rs. 1,232.3 Million. At company level turnover improved to Rs. 5.8 Billion and profit after tax increased to Rs. 730.3 Million.

The Company’s Agriculture cluster has had a very challenging year. Unpredictable and adverse weather patterns have reduced the area under cultivation in both the Yala and Maha agricultural seasons. The crop protection business has been further hampered by the misleading information spread about the safety of crop protection solutions marketed by all players in the industry. As a result of this, we as well as our competitors were unable to bring in the necessary chemicals for several months. In addition the shortage of these compounds, cost the Company sales in the second and third quarters. I would like to re-iterate that Lankem has always been at the forefront of retailing safe crop protection solutions.

I would like to thank our many foreign partners for the hard work in providing the necessary toxicological data to prove that their products, which Lankem distributes, are amongst the safest in the world. All crop protection solutions in Sri Lanka go through one of the most vigorous testing and registration exercise in the world before these products can be retailed to Sri Lankan farmers. We stand by the safety of all our products.

Not withstanding the problems that the cluster has faced due to circumstances beyond its control, we continued to make great strides in the other areas that we are present in. The fledgling fertiliser division recorded its first profit after two years in operation. The market for fertiliser is huge but we tread carefully as the fertiliser business can have a large drain on the cash flows of the Company. Our other crop protection subsidiary SunAgro Life Sciences achieved a Revenue of Rs. 500 million for the first time. Another of our subsidiaries, SunAgro Foods has nearly completed its new cereal processing plant in Trincomalee. This plant that was built with the assistance of USAID will serve as a further link between the Company and our ultimate customers – the farming community in Sri Lanka.

The Government’s emphasis on improved infrastructure has helped the Bitumen division record its best ever results. In the year under review the division has increased its fleet of bitumen bowsers to meet the increase in demand for its products. In line with the division’s focus on high quality products for the road construction sector, the division was able to obtain ISO 9001: 2008 certifications for Quality Management Systems. While the future for the division is bright, it must continue to manage its customers as these customers are susceptible to delays in payments from Government institutions which in turn impact their payments to Lankem.

The construction chemicals business has had a very successful year. The industry as a whole grew by approximately 12% while we were successful in increasing volumes by nearly 15%. As a result of the price increases in many of the raw materials used for production of our construction chemicals, the division was forced to increase the prices of all our products. This prudent decision has helped the Company maintain its margins and improve profitability. Our products are manufactured using the very best raw materials provided by world-renowned suppliers. We thank our customers for the trust that they have retained in our products in spite of the premium pricing that many of our products have in comparison to our competitor’s products. We believe this trust is borne by the higher quality of Lankem products.

We have also placed a heavy emphasis on improving our distribution network across the island. In the past financial year we were able to increase the number of dealers by nearly 500 with nearly 130 of these dealers exclusively handling only our products. Over the course of the year we also expanded our factory, increasing production capacity by nearly 21%.


Our operations at the current location will reach its maximum capacity over the next few years and the Company is actively looking for a new location in order to further expand its operations. The Group has also tied with WIP Coatings of the Alchea Group in Italy to bring to the market technologically advanced solutions for the wood coatings market. We in collaboration with Candice SRL of Italy, are about to launch a series of special effect coating solutions, which we believe will soon become the product of choice in this segment.

The profitability of the industrial chemicals division has been hit by the volatility of international commodity prices and the steep decline in the value of the Sri Lankan Rupee. While overall turnover was higher, the turnover attributable to solvents was lower due to a drop in industrial activity.

The division achieved a significant milestone when it opened its new production facility at Sapugaskanda. The state of the art blending and drumming plant was designed and constructed to the highest international safety standards with the drum yard having a capacity of nearly 6000 drums. The Company has further strengthened its relationship with Dupont of the United States for the distribution of its refrigerant gases under the brand name Suva. In the past year, the division also made its initial foray into food chemicals when Dupont appointed it as a distributor for its range of Isolated Soya Proteins.

The only division within the Company that did not perform up to expectations was the consumer division. Higher distribution costs and the non-availability of some of our products from our foreign suppliers have lead to a widening of the operating loss of the division. The Company has also had to deal with a decline in demand for its most popular product -“D” size batteries caused by the emergence of L.E.D torches, which reduces the consumption of batteries. In order to return to profitability, the Company is investing in a new plant to expand the manufacture of its cleaning chemical solutions. This new facility will be launched during the course of the next financial year and help the division turn around its performance.

Group Performance ReviewSome of the subsidiaries of the Group have performed admirably in the year under review. Boosted by a weakening Sri Lankan Rupee that has assisted the growth of exports of natural rubber and value added rubber products, C.W Mackie PLC and its subsidiaries Ceymac Rubber Company Ltd and Ceytra Ltd recorded consolidated revenue of Rs. 9.7 Billion and a profit after tax of Rs. 385.3 Million Rupees. This represents a growth in revenue of 30% and a growth in profit after tax of 88%. The performance of the Company’s domestic FMCG business that distributes household names such as Sunquick fruit concentrate and the SCAN brand of peanuts and water also continued to grow rapidly. The Company will look to further develop its domestic trading business when

it launches its own brand of tea for the local market in the first quarter of 2012. This exceptional performance reiterates the Group’s decision to acquire the Company in January of 2010. The Group will continue to support C.W Mackie as it looks to expand its rubber export business in the future.

The number of tourists arriving into the country continues to grow at a rapid pace. In the year 2011, Sri Lanka saw nearly 800,000 tourists arrive into the country, a growth of nearly 30% over the last year. The Group now has investments in five hotel properties across the country. The decision to upgrade the three existing established properties at Marawilla, Sigiriya and Beruwala has now paid dividends. Profits across all three properties have risen significantly. The profits at Sigiriya Village Hotels PLC rose to Rs. 40.5 Million and the profits at Beruwala Resorts Ltd rose to Rs. 31.2 Million, while the profits at Marawilla Resorts PLC were Rs. 15.0 Million during the course of the year. During the year the Group acquired control of the Galle Fort Hotel Ltd. This Company owns and manages a luxury hotel within the UNESCO world heritage site-Galle Fort. Our investment in this property is a sign of the confidence in the future of the tourism industry in Sri Lanka. During the course of the next financial year, the group will finalize its plans for the upgrading of its property in Weligama and the development of new properties in Kandy and the East coast.

The Group’s two plantation Companies Kotagala Plantations PLC and Agarapatana Plantations Ltd faced challenging times with a decrease in profits to Rs. 438.6 Million in the case of Kotagala Plantations PLC and a loss of Rs. 555.3 Million in the case of Agarapatana Plantations Ltd. The wage hike that was granted to workers in the early part of the financial year was a major strain on the profitability of both Companies. In order to secure the future viability of the Plantation sector in Sri Lanka, any future wage increases must be linked to increased levels of productivity. The Companies continue to rationalise our workforces in both Companies to ensure that profit levels can be maintained in the future. The profitability of both Companies was also impacted by the volatility of commodity prices seen during the year. The performance of Agarapatana Plantations Ltd was severely impacted by the low tea prices fetched at the auctions.

In order to mitigate some of the risks involved in the Plantation sector, the management has made a conscious decision to diversify the crops planted on the estates of both Companies. With this strategy in mind Kotagala Plantations PLC is replanting nearly 1000 Ha of low yielding Rubber with Oil Palm and Agarapatana Plantations Ltd is replanting some low yielding Tea areas with Rubber and Cinnamon. During the course of the past financial year Kotagala Plantations PLC was also successful in obtaining the approval from relevant Government regulators to plant 20,000 Ha of Rubber in Cambodia. Once the entire extent of land is planted, this will represent a five-fold increase in the acreage of rubber under cultivation for the Company. With significantly lower wage costs, and higher yielding lands, the profit per acre from the Cambodian estates will be much higher than the equivalent estates in Sri Lanka.

Chairman’s Review

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In spite of the challenging environment that Lankem Ceylon PLC and its subsidiaries have faced in the last financial year, we continue to make the necessary investments that will enhance stakeholder returns in the future years. The Group continues to make heavy investments in its products, production environments and support systems so that every Company in the Group remains as benchmarks to their peers in their respective industries. Our primary challenge remains to promote our products into new regional markets while maintaining and improving our market shares in which we are already present. With the difficult trading conditions that are likely to be seen in the next financial year, it is prudent that the Company only declare a final dividend of Rs. 2.50 per share for the Financial Year 2011/2012. This is in line with the dividend that was declared for the last financial year as well.

ConclusionI would like to thank my colleagues on the board for their continued support and counsel over the course of the last financial year. My thanks also to the many employees of Lankem Ceylon PLC and its subsidiaries for all the hard work that allows our Company to remain a dominant player in the many industries that we represent.

A. RajaratnamChairman30th May 2012


Board of Directors

A. Rajaratnam [FCA] ChairmanMr. A. Rajaratnam joined the Board in 1990 and was appointed Chairman in the year 2003. He serves as Chairman of The Colombo Fort Land & Building Company PLC (CFLB) and several listed and unlisted companies within the CFLB Group in addition to holding other Directorships within the Group.

S. D. R. Arudpragasam [FCMA (UK)] Deputy ChairmanMr. S. D. R. Arudpragasam joined the Board in 1989, and was appointed Deputy Chairman in 1990. He holds the position of Deputy Chairman of The Colombo Fort Land & Building Company PLC and functions as the Managing Director of E. B. Creasy & Company PLC in addition to serving on the Boards of other Companies within the CFLB Group.

Anushman Rajaratnam [B.Sc (Hons.), CPA, MBA]Managing DirectorMr. Anushman Rajaratnam was appointed to the Board asDeputy Managing Director in the year 2005 and was appointed Managing Director in April 2009. He has spent several yearsworking 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)]Director Mr. 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 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 ofThe Colombo Fort Land & Building Company PLC, Lankem Developments 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, CGMA]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), CGMA]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 severalcompanies within the Lankem Group. He is also a member of the Board of Tess Agro PLC and functions as the Chairman of its Audit Committee.

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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 and is the Head of Process and Engineering Systems-Sri Lanka Institute of Nanotechnology. 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), CGMA]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. 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), CGMA]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 MASIntimates (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 ManagementAccountants (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.


The lifeblood and substance of Lankem Ceylon PLC. With a market presence of over four decades, it is the undisputed market leader in this particular sector. It’s commitment to diversification and dependability has gained it the trusted slogan ‘Farmer’s Friend’. Continuous partnerships with global agrochemical giants help foster development in crop protection solutions.

The modernisation of the existing seeds facilities and the prospect of a new facility in Siripura further strengthen the company’s presence in this domain. A range of eco-friendly products currently in the pipeline is an endorsement to the company’s commitment to expansion.

‘The lifeblood and substance of Lankem Ceylon PLC. With a market presence of over four decades, it is the undisputed market leader in this particular sector.’

Agri-inputs

Having broken new ground and ventured into the fertilizer sector during the last fiscal year the Company went through expansion in this area during the current year, with custom blends for plantation sector.

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IncreaseThe modernisation of the existing seeds facilities and the prospect of a new facility in Siripura further strengthen the company’s presence in this domain.

It has gained the trusted slogan ‘Farmer’s Friend’.

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Lankem Paints is one of the pioneer coatings manufacturers in Sri Lanka, with a culmination of two decade process of evolution and growth. Identified under the international brand name ‘Robbialac’, they are the first paint company in Sri Lanka to be awarded ISO 9001:2000 Quality Management Systems, ISO 14001:2004 Environment Management and SLS Product Quality. Making our presence felt in the Decorative Coatings, Auto Refinish, Wood Coatings, Epoxy Coatings, NC-based Coatings and Epoxy Adhesives segments. Today we have become the most sought after colour provider and operate nine ‘Colour Studios’ and over 150 ‘Pata Shops’ throughout the country.

Operating in a very competitive market the division was able to increase its market share during the financial year and is further looking into the possibilities of expanding its operations into the South Asian region. Our partnership with ALCEA Italy to offer

‘Lankem Paints continuously strives to improve product and service quality in order to ensure that our products and services meet global standards.’

Paints

water-based wood care solutions too was further strengthened during the year.

Lankem Paints continuously strives to improve product and service quality in order to ensure that our products and services meet international standards. Plans are underway to increase its production capacity by way of investing in new machinery and infrastructure facilities during the next financial year which will enable them to meet customer demand and enhance its product quality.

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ExpressOperating in a very competitive market the division was able to increase its market share during the financial year.

Today we have become the most sought after colour

provider.

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Lankem’s Chemicals Division comprises of three sections namely, Industrial Chemicals, Thinners, Food and Feed Ingredients. The Industrial section imports and trades in solvents, rubber chemicals, detergent raw materials and pigments while the Thinner section manufactures thinners and related products. The Food and Feed Ingredient section which is currently at its early stages imports and trades in food plus feed ingredients. The suppliers for the division span the Europe, India, China and USA to name a few.

The successful completion of a semi-automated factory conforming to international standards during the current financial year will enable us to consistently provide high quality products to our clientele.

‘The successful completion of a semi-automated factory conforming to international standards during the current financial year will enable us to consistently provide high quality products to our clientele.’

Chemicals

The division has embarked on product diversification strategies in order to supply a variety of products to its target customer segments, the introduction of Dupont Refrigerant gas has been key in these expansion efforts.

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AccelerateThe division has embarked on product diversification strategies in order to supply a variety of products to its target customer segment.

The introduction of Dupont Refrigerant gas has been

key in these expansion efforts.

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The Bitumen Division remains the most reputed supplier of emulsion and road surfacing bitumen in the country. Sri Lanka has approximately 110,000 km. of paved road which is maintained by the Government. With the current emphasis on the rehabilitation and reconstruction this industry has shown significant development which is expected to continue in the future. Lankem is the only public company actively involved in this sector and remains the preferred choice of many. Research is currently been carried out to bring in new and innovative products into its portfolio. With a newly upgraded factory we foresee significant growth in the coming years.

‘Lankem is the only public company actively involved in this sector and remains the preferred choice of many.’

Bitumen

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ProgressWe remain the most reputed supplier of emulsion and road surfacing bitumen in the country.

With a newly upgraded factory we foresee

significant growth in the coming years.

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Lankem’s Consumer Division produces and distributes detergent powder and liquid, laundry soap, household cleansing products, dry cell batteries, pharmaceutical and personal care products, in both urban and rural areas. Investments were made for new machineries for the detergent powder manufacturing and teepol liquid bottling during the year under review. The division has recently invested in a laundry soap manufacturing plant, which will come into operation by the end of year 2012.

This sector 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 essences and colouring, Ocean Fresh Tuna and the Scan products range under its umbrella.

‘This sector now includes the consumer and domestic trading operations of C. W. Mackie PLC, which has local and global flagship brands.’

Consumer

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DiverseThe division has recently invested in a laundry soap manufacturing plant, which will come into operation by the end of year 2012.

This division has consumer segments from both urban

and rural areas.

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The Construction Division engages in Road Construction, Waterproofing, Industrial Flooring, Sport Court Flooring, Epoxy Flooring plus they undertake Painting. The Pest Management Division has been a formidable player in the industry for over two decades, engaging in termite and general pest control.

Despite the challenges in the local construction industry, the Pest Management division continues to retain its position in the market with its highly effective pest control solution to corporate and institutional customers.

‘Pest Management division continues to retain its position in the market with its highly effective pest control solution.’

Construction & Pest Control

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ExpandThe Construction Division engages in Road Construction, Waterproofing, Industrial Flooring, Sport Court Flooring, Epoxy Flooring plus they undertake Painting.

Pest Management division continues to retain its position in the market.

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Lankem Ceylon PLC owns and manages two regional plantation companies-Agarapatana Plantations Ltd. and Kotagala Plantations PLC.

Kotagala Plantations PLC with its cultivation of high and low grown tea and rubber performed well in the current fiscal year with natural rubber yielding a high price in the market. Treading foreign soil, Kotagala Plantations has ventured into Cambodia, with operations to commence shortly.

Agarapatana Plantations Ltd. with its cultivation of high grown tea in the Agarapatana and Uva tea growing districts had their operations challenged this year, due to high cost of production.

‘Treading foreign soil, Kotagala Plantations has ventured into Cambodia, with operations to commence shortly.’

Plantations

However, due to the currency devaluation the tea market has strengthned and improved prices are foreseen.

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BoostKotagala Plantations PLC with its cultivation of high and low grown tea and rubber performed well in the current fiscal year.

We foresee this sector as been resilient in the next

financial year.

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This sector has been the turnaround division in the year under review. With a profile including Club Palm Bay operated by Marawila Resorts PLC, Sigiriya Village owned and operated by Sigiriya Village Hotels PLC, The Palms Beruwala operated by Beruwala Resorts Ltd, Bay Beach Hotel Weligama owned by B. O. T Hotel Services (Pvt) Ltd. and our newest acquisition Galle Fort Hotel.

Club Palm Bay and Sigirya Village got a makeover during the current year and this enables it to cater better to the ever expanding tourist/local market. The Palms in Beruwela was refurbished and is operating at full potential while Bay Beach Hotel has plans for refurbishment to upgrade the service levels.

‘Our newest acquisition Galle Fort Hotel was adjudged ‘Sri Lanka’s Leading Boutique Hotel’ at the 2010 World Travel Awards.’

Leisure

Galle Fort Hotel is the recent addition in the leisure sector. Situated in the fortified city of Galle, renowned as a UNESCO World Heritage Site, Galle Fort Hotel was adjudged ‘Sri Lanka’s Leading Boutique Hotel’ at the 2010 World Travel Awards. The group is looking into further expansion in this niche market.

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BroadenThis sector has been the turnaround division in the year under review.

Galle Fort Hotel is the recent addition in the leisure

sector.

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Accelerate

Progress

Diverse

Expand

Boost

Broaden

Growth


The company has diversified into the areas of agriculture, crops and livestock production through its subsidiaries – SunAgro Farms Ltd. and Associated Farms (Pvt.) Ltd.

SunAgro pioneered the cultivation of Asparagus in Sri Lanka which has now developed to commercial cultivation in Puttalam. Other varieties of fruit and vegetation are been trialed as pilot projects which once deemed successful may expand into commercial scale.

‘Other varieties of fruit and vegetation are been trialed as pilot projects which once deemed successful may expand into commercial scale’

Agriculture, Crop And Livestock Production

| 27

GrowthThe company has diversified into the areas of agriculture, crops and livestock production.

SunAgro pioneered the cultivation of Asparagus in

Sri Lanka.

Increase

Express

Accelerate

Progress

Diverse

Expand

Boost

Broaden

Growth


Financial Review

OverviewThe year 2011/12 was a challenging year for Lankem Ceylon PLC Group due to the volatile economic environment. In spite of difficult trading conditions the Company managed to record a growth in both revenue and profitability during the financial year. The Group recorded a revenue growth while the profitability dipped during the year under review.

Revenue AnalysisLankem Ceylon PLC Group reported a Consolidated Revenue of Rs. 24.12 Billion. for the year under review compared to a Revenue of Rs. 23.03 Billion. during the previous year. This resulted in a growth of Group Revenue by 4.72% year-on-year and an average growth rate of 24.89% over the last five years.

The Revenue attributable to the Company was Rs. 5.78 Billion. compared to Rs. 4.90 Billion. achieved during the previous year. The Company Revenue grew on a year-on-year basis by 17.83% and recorded an average growth rate of 13.80% over the last five years.

The main contributors to the Group Revenue are the Hardware sector followed by Plantation, Consumer, and Chemical sectors.

Following the consolidation of C. W. Mackie PLC and its subsidiaries, the Lankem Ceylon Group recorded a commendable performance in the Hardware and Consumer segments.

Consequently the Hardware sector Revenue grew by 19.65% which accounts for 27% in the Group Revenue representing a Revenue of Rs. 7.19 Billion. as compared to Rs. 6.01 Billion. during the previous year. The Revenue performance of this sector was attributable to increased volumes, thus leading to an increase in market share. The depreciation of Sri Lankan Rupee against US Dollar also boosted the export business.

Due to the volatility in the commodity prices, the Plantation sector reported a Revenue of Rs. 6.76 Billion. for the year under review compared to Rs. 9.88 Billion. the previous year. This sector Revenue accounts for 25% to the Group Revenue this year as opposed to 39% for the previous financial year.

07/08 08/09 09/10 10/11 11/12

Group Revenue

Rs. Bn.

0

5

10

15

20

25

30

07/08 08/09 09/10 10/11 11/12

Company Revenue

Rs. Bn.

0.0

2.5

5.0

7.5

10.0

Q1 Q2 Q3 Q4

Group Revenue (Quarterly Wise)

Rs. Bn.

0

2

4

6

8

10

07/08 08/09 09/10

10/11 11/12

Segmental Contributionto Group Revenue 2011/12

25%

27%25%

3%

20%

ConsumerHardware

PlantationsChemicals

Hotel

| 29

Consumer sector recorded a robust growth of 57.79% which accounts for 25% of the Group Revenue. Consumer sector Revenue grew to Rs. 6.56 Billion. which was mainly due to the excellent performance of C.W Mackie PLC’s domestic FMCG business.

The Chemical sector also witnessed a growth of 19.74%, recording a Turnover of Rs. 5.16 Billion. compared to previous year Revenue of Rs. 4.31 Billion. Some of the business activities falling under this segment showed impressive growth, whilst the agro cluster had a very challenging year. This was due to erratic weather conditions coupled with the misleading information spread among the farmer community and general public about the safety of crop protection solutions marketed by the industry players.

ProfitabilityThe Group achieved a post-tax profit of Rs. 1,232.26 Million for the financial year under review. The profitability of the Hotel sector and C. W. Mackie Group increased while the Plantation sector, showed a dip during the year under review.

The post-tax profit of the Company increased to Rs. 730.26 Million during the year compared to Rs. 575.20 Million in the previous year. This represents a growth of 26.96% year-on-year.

Finance CostsThe fall in operating profits along with the increase in interest rates nearly by 400 basis points during the year under review, the Group witnessed the interest cover plunging to 4.53 times from 5.66 times.

Financial and Liquidity PositionNon-Current Assets PositionThe total non-current assets increased by 21.67% from Rs. 9.68 Billion. to Rs. 11.77 Billion. during the year under review due to the capital expenditure incurred by the Group. Property Plant & Equipment for the Group which is the major component of the non-current assets amounted to Rs. 9.69 Billion. as at 31st March 2012.

Plantation Hardware Chemicals Consumer Hotel

Segmental Revenue Performance

Rs. Mn

0

2

4

6

8

10

2010/11 2011/12

07/08 08/09 09/10 10/11 11/12

Group & Company Profit After Tax

Rs. Mn.

0

400

800

1,200

1,600

2,000

Group Company

07/08 08/09 09/10 10/11 11/12

Finance Cost and Interest Cover Ratio

Rs. Mn Times

0

100

200

300

400

500

0

1

2

3

4

5

6

Finance Cost Interest Cover

07/08 08/09 09/10 10/11 11/12

Property Plant and Equipment

Rs. Mn

0

2,000

4,000

6,000

8,000

10,000


Working CapitalThe Group’s working capital investment decreased during the financial year to Rs. 1,090.92 Million. from previous year’s Rs. 2,084.73 Million. Hence the current ratio declined from 1.37 to 1.13, whilst quick asset ratio dipped from 0.94 to 0.83.

Capital StructureThe Group’s Debt as a percentage of the total Capital is 52% whilst the Equity component accounted to 48% during the year under review as opposed to previous year’s debt and equity percentages of 46% and 54% respectively.

During the financial year the Company raised additional funds by way of an issue of Rated Unsecured Unlisted Redeemable Debentures of Rs. 200 Million. at the rate of AWPLR+1%. 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. 1.45 Billion, whilst settling amounts worth of Rs. 1.19 Billion. interest bearing term loans, finance leases and redemption of debentures.

Cash FlowThe Group’s net cashflows from operating activities increased to Rs. 1,127.31 Million from the previous year’s amount of Rs. 593.06 Million, representing an increase of 90.1% year-on-year. This was partly attributable to the decrease of inventory from the Plantation sector.

Share PerformanceThe All Share Price Index (ASPI) of the Colombo Stock Exchange (CSE) for the financial year ended 31st March 2012 had decreased by 27% to 5,420 points. The closing share price of Lankem Ceylon PLC (LCEY) was Rs. 180 at the end of the financial year ended 31st March 2012 representing a drop of 56% over the previous year. The total market capitalization of Lankem Ceylon PLC as at 31st March 2012 stood at Rs. 4.32 Billion.

Capital Structure 2011/12

48%

52%

Equity Debt

0

500

1,000

1,500

2,000

07/08 08/09 09/10 10/11 11/12

Cash Flow & Profit After Tax

Rs. Mn

Net Cash Flow- Operating ActivitiesProfit after Tax

Lankem Share Price & Volume Movement

Rs.

Share Price Volume

In’000

0

100

200

300

400

500

600

0

50

100

150

200

250

300

350

400

1-A

pr-1

112

-Apr

-11

27-A

pr-1

19-

May

-11

20-M

ay-1

131

-May

-11

9-Ju

n-11

21-J

un-1

130

-Jun

-11

11-J

ul-1

121

-Jul

-11

1-Au

g-11

10-A

ug-1

119

-Aug

-11

30-A

ug-1

19-

Sep-

1121

-Sep

-11

30-S

ep-1

113

-Oct

-11

24-O

ct-1

14-

Nov

-11

21-N

ov-1

130

-Nov

-11

12-D

ec-1

121

-Dec

-11

2-Ja

n-12

12-J

an-1

224

-Jan

-12

2-Fe

b-12

15-F

eb-1

227

-Feb

-12

9-M

ar-1

220

-Mar

-12

30-M

ar-1

2

Financial Review

| 31

The Earnings Per Share (EPS) of Lankem Ceylon PLC Group decreased from Rs. 47.16 to Rs. 23.01 due to the drop in the Group profitability. The Net Asset Value Per Share of the Group improved to Rs. 162.60 from Rs. 135.84.

DividendsDirectors of Lankem Ceylon PLC have recommended a first and final dividend of Rs. 2.50 per share for the year ended 31st March 2012. This represents a dividend payout of 10.86% and a dividend yield of 1.39%.

Relative Performance of ASPI and LCEY

%

0

20

40

60

80

100

120

140

160

ASPI - Based on 1/4/2011 Index ValueLCEY- Based on 1/4/2011 Prices

1-Ap

r-11

22-A

pr-1

113

-May

-11

3-Ju

n-11

24-J

un-1

115

-Jul

-11

5-Au

g-11

26-A

ug-1

116

-Sep

-11

7-O

ct-1

128

-Oct

-11

18-N

ov-1

19-

Dec

-11

30-D

ec-1

120

-Jan

-12

10-F

eb-1

22-

Mar

-12

23-M

ar-1

2

07/08 08/09 09/10 10/11 11/12

Dividend Per Share & Dividend Yield

Rs. %

0.0

0.5

1.0

1.5

2.0

2.5

0

1

2

3

4

5

6

7

8

Dividend Per Share Dividend Yield

07/08 08/09 09/10 10/11 11/12

Earnings Per Share & Net Assets Per Share

Rs.

0

50

100

150

200

EPS NAV


Corporate Social Responsibility

Lankem continued its endeavors in uplifting the community and the environment as a whole through its profound CSR vision. Being a mature corporate citizen we believe it is more than a corporate philanthropy. Improving the quality of life in our community, enhancing the living standards of our human resources and ensuring environmental safety, whilst incorporating the best social values and ethical practices in every aspect and at every level of business within the Group.

Community In our journey as a caring community partner, we associated with various stakeholders comprising of multi-ethnicities, demographies and social clusters. Our integrated sustainability policy is a proactive strategy which addresses the long term value of our shareholders.

During the financial year we donated equipment to the Retinal Clinic of the National Eye Hospital in order to attend to their immediate and vital needs. These equipments included three slit-lamps and an auto-refractor. In addition we also undertook the refurbishment of the clinic and the retinal ward by adding a fresh new coat of paint, replacement of new air conditioner units, fans and ceiling lights.

We continued our patronage with ‘Ability Foundation’ a not for profit organization, engaged in empowering and enabling people with intellectual disabilities. Special resource personnel were brought in to carry out various training and awareness building sessions along with follow up visits in the Ampara district. Individuals with Autism Spectrum Disorder (ASD), Attention Deficit Hyperactivity (ADHD), Cerebral Palsy, Down syndrome, and other mental health problems were assessed and recommendations were made to facilitate improvement. In addition to the work conducted at the locations, our team visited the homes of patients who could not attend the health programmes due to varied reasons, one of such been transportational hazards. Lankem Ceylon collaborated with Lend-A-Hand Fund Foundation in donating and distributing of school books, bags and other school supplies to more than 800 rural children islandwide.

We were priviledged in participating in the maintenance and upkeep of our religious and traditional heritage, by continuing our commitment to paint 100 religious places of worship, those of which included the Sri Dalada Maligawa, Madu Church, Bellanvilla Temple and Vishnu Devalaya.

We futher extended our support and commitment to colour wash and upgrade the recreational facilities for few schools, such as Samudradevi Vidyalaya Nugegoda and Kingswood College Kandy. Furthermore initiatives were taken in the painting of the Cancer Hospital, Lady Ridgeway Hospital and public places such as Railway and Police Stations.

In view of upgrading the health conditions of the local community we continued our social responsibility by providing disposable garbage barrels to schools, military camps and NGO’s to encourage effective disposal of waste in urban and suburban areas in order to keep the environment safe and clean.

EnvironmentSince the Company is involved in working with hazardous chemicals, we continued to conduct regular awareness programmes for school children and farmers on the use of pesticides and other harmful chemicals to minimize environmental damage.

Ascertaining our footprint as a corporate citizen with a sound environmental philosophy, we were successful in receiving ISO 9001:2008 for Quality Management Systems, ISO 14001:2004 for Environmental Management Systems, OHSAS 18001:2007 Certification for Occupational Health and Safety for our production facility and SLSI Product Quality Certification for our products.

At Kotagala Plantations, most of its tea factories have implemented and met the requirements of the new national standards of ISO 22000:2005 which is obtained for food safety management system. The Drayton Estate was awarded with ISO 9001:2008 and ISO 22000:2005 certifications for the manufacture of black tea. Further Kotagala Plantations PLC was awarded the Forest Stewardship Council (FSC) certification for the period 1st July 2011- 30 June 2016, subject to annual surveillance audits. We are among the very few plantation companies to successfully establish, and manage our rubber properties and the forest areas in tea estates on par with the international standards specified by FSC.

EmployeesThe Company believes that its strength is in its people and their contribution is the key factor to its growth. The company’s commitment towards the wider society is recognized and accepted by its employees at all levels.

As an equal opportunity employer we ensure that employees are not discriminated based on gender, cast or creed. Due to the high level of involvement in hazardous chemicals, extensive training is provided to all employees at 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. Routine Cholinesterase tests are carried out to identify possible chemical contaminations of 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.

| 33

These programmes focus on soft skills, such as leadership and management training, as well as technical capabilities. Looking into the physical and social wellbeing of the employees the Company has further provided opportunities for the workforce to participate in workshops on leadership and sporting events, some of which are organised by the Sports and Social Activities Committee. At Kotagala Plantations, welfare activities pertaining to welfare such as health, child care, skill development, sports, recreational activities were conducted during the year. Workshops were also organized by the Department of Labour on ‘Protection of Labour Rights’ and ‘Protection of Child rights’ at their Endurugala Estate. A Dengue Prevention Programme was held to create awareness among the workers, and subsequently followed by a shramadana which was conducted to destroy the breeding grounds of the dengue mosquitoes.

In addition Kotagala Plantations, with the assistance of the Ministry of Livestock & Rural Community Development and the Plantation Human Development Trust (PHDT) took initiatives towards the provision of better facilities on improving the living standards of the estate workers.


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 2012.

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 48 to 115.

Auditors’ ReportThe Auditors’ Report on the Financial Statements is given on pages 46 and 47.

Accounting PoliciesThe Accounting Policies adopted in the preparation of the Financial Statements are given on pages 53 to 59. 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 96 to 109.

Directors’ RemunerationThe Directors’ remuneration in respect of the Group for the financial year 2011/12 is Rs. 96.90 Million (2010/11 - Rs. 75.86 Million) and in respect of the Company for the financial year 2011/12 is Rs. 90.12 Million (2010/11 - Rs. 71.12 Million).

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 31.03.2012 31.03.2011

Mr. A. Rajaratnam 12,298 12,198

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

Mr. Anushman Rajaratnam 39,204 5,403

Mr. D. L. Vitharana - -

Mr. R.N. Bopearatchy - -

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

Mr. K. P. David 12,150 8,150

Mr. A. R. Peiris 2,935 5,435

Mr. R. T. Weerasinghe 7,000 3,500

Mr. A. Hettiarachchy - - Mr. A. C. S. Jayaranjan - -

Mr. J. D. Gomes - -

Corporate DonationsDonations made by the Group amounted to Rs. 438,000/- during the year under review. (2010/11- Rs. 99,000/-)

DirectorateThe names of the Directors who held office during the financial year are given below. Brief profiles of these Directors appear on pages 8 and 9.

Mr. A. Rajaratnam ChairmanMr. S. D. R. Arudpragasam Deputy ChairmanMr. Anushman Rajaratnam Managing DirectorMr. D. L. Vitharana Director/Chief Operating OfficerMr. R. N. Bopearatchy DirectorMr. N. H. B. S. Perera DirectorMr. K. P. David DirectorMr. A. R. Peiris DirectorMr. R. T. Weerasinghe Director Mr. A. Hettiarachchy Director Mr. A. C. S. Jayaranjan DirectorMr. J. D. Gomes Director

Mr. S. Rajaratnam was appointed Alternate Director to Mr. A. Rajaratnam with effect from 29th March 2012.

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

| 35

of the Special Notice received from a shareholder of the Company which is referred to in the Notice of Meeting.

Mr. R. N. Bopearatchy, 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. A. Rajaratnam, who is 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.

AuditorsThe Financial Statements of the Company for the year have been audited by Messrs KPMG Chartered Accountants. 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 authorise the Directors to determine their remuneration will be proposed at the Annual Genaral Meeting.

The Auditors, Messrs KPMG Chartered Accountants were paid Rs. 8.84 Million during the year under review (2010/11- Rs. 7.18 Million) as audit fees and fees for audit related services by the Group. In addition, they were paid Rs. 0.19 Million (2010/11- Rs. 0.47 Million) 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. 4.36 Million during the year under review (2010/11- Rs. 4.69 Million). Further, the fees for non-audit related services by these audit firms during the year 2011/12 was Rs. 2.33 Million.(2010/11-Rs. 0.04 Million)

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. 24,118 Million (2010/11-Rs. 23,031 Million).

ResultsThe Group made a profit before tax of Rs. 1,531 Million against a profit of Rs. 2,109 Million in the previous year. The detailed results are given in the Income Statements on page 48.

DividendsThe Board of Directors have recommended the payment of a first & final Dividend of Rs. 2.50/- per share on the ordinary shares of the Company for the year ended 31st March 2012 for approval by the shareholders at the Annual General Meeting to be held on 28th June 2012. 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 76 to 80.

Property, Plant & EquipmentDuring 2011/12 the Group invested Rs. 1,548.95 Million in Property, Plant & Equipment (2010/11 - Rs. 1,305.70 Million). 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 2012.

Stated CapitalThe stated capital of the Company as at 31st March 2012 was Rs. 536,218,000/- and is represented by 24,000,000 issued and fully paid Ordinary Shares.

ReservesThe total Group Reserves as at 31st March 2012 comprised Revaluation Reserves of Rs. 439.82 Million, Capital Redemption Reserve Rs. 8.33 Million, Other Capital Reserves Rs. 22.50 Million, General Reserves of Rs. 305.95 Million and Retained Earnings Rs. 2,589.52 Million whereas the total Group Reserves as at 31st March 2011 comprised Revaluation Reserves of Rs. 462.09 Million, Capital Redemption Reserve Fund of Rs. 8.33 Million, Other Capital Reserves of Rs. 22.50 Million, General Reserves of Rs. 305.95 Million and Retained Earnings of Rs. 1,924.97 Million.

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 60 and 62 to 64.

Share InformationInformation relating to earnings, dividend, net assets, market value per share and share trading is given on pages 65, 117 and 118.

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 114.


Capital Commitments and Contingent LiabilitiesCapital commitments and contingent liabilities as at the Balance Sheet date are disclosed in Notes 30 and 31 on pages 110 to 111.

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 realise 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

R. N. Bopearatchy K. P. DavidDirector Director

By Order of the Board

Corporate Managers & Secretaries (Private) Limited Secretaries

Colombo30th May 2012

Annual Report of the Board of Directors

| 37

Corporate Governance

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 properlyformulated governance practices and procedures.

Lankem Ceylon PLC is in compliance with a 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.

1. 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 DirectorMr. A. Rajaratnam(Chairman) Non-ExecutiveMr. S. D. R. Arudpragasam(Deputy Chairman) Non-ExecutiveMr. Anushman Rajaratnam(Managing Director) ExecutiveMr. D. L. Vitharana(Chief Operating Officer) ExecutiveMr. R. N. Bopearatchy ExecutiveMr. N. H. B. S. Perera Independent Non-ExecutiveMr. K. P. David ExecutiveMr. A. R. Peiris ExecutiveMr. R. T. Weerasinghe ExecutiveMr. A. Hettiarachchy Independent Non-ExecutiveMr. A. C. S. Jayaranjan Independent Non-ExecutiveMr. J. D. Gomes Independent Non-Executive

The Board meets regularly and has met nine 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 9

Name of Director Directorship Board Meetings Status Attended

Mr. A. Rajaratnam Chairman 4/9 Non-Executive

Mr. S. D. R. Arudpragasam Deputy Chairman 9/9 Non-Executive

Mr. Anushman Rajaratam Managing Director 6/9 Executive

Mr. D. L. Vitharana Chief Operating 8/9 Officer/Executive

Mr. R. N. Bopearatchy Executive 8/9

Mr. N. H. B. S. Perera Independent 8/9 Non-Executive

Mr. K. P. David Executive 9/9

Mr. A. R. Peiris Executive 9/9

Mr. R. T. Weerasinghe Executive 9/9

Mr. A. Hettiarachchy Independent 6/9 Non-Executive

Mr. A. C. S. Jayaranjan Independent 9/9 Non-Executive

Mr. J. D. Gomes Independent 3/9 Non-Executive

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 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 Board 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 & 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 Judgement The 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 OfficerThe 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 RoleThe 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 AcumenThe Board includes seven finance professionals who possess the knowledge to offer the Board the necessary guidance on matters relating to finance.

1.5 Board BalanceThe 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. 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 also serves on the Boards of certain subsidiary companies. 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 InformationLankem 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 BoardThe 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 DirectorsIn 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 CommitteeThe 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 RemunerationAggregate remuneration paid to Directors is disclosed in Note 29 to the Financial Statements on page 109.

3. Relationship with Shareholders3.1 Constructive Use of AGM/General MeetingsLankem Ceylon PLC always welcomes the active participation of shareholders at General Meetings in order to promote and continue an effective dialogue between the two parties. Opportunities are available to shareholders to raise questions

Corporate Governance

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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 TransactionsLankem 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 ReportingLankem 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 34 to 36 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 Auditors’ Report on Financial Statements is given on pages 46 and 47 containing the Auditors’ reporting responsibility. Non-financial information of business segments is given on pages 10 to 27.

4.2 Internal ControlsThe 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 CommitteeThe Audit Committee was reconstituted on 23rd August 2011.

The Audit Committee report is set out on pages 42 to 43 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 such risks.

A disciplined approach to risk management is important in order to ensure successful execution of strategic objectives and to express our acceptance towards risk management for which we have adequately compensated for.

The Lankem Board of Directors has overall responsibility for risk oversight with a focus on the most significant risks facing the Company. We consider risk management as a vital component in our 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 stakeholders.

1. Strategic RiskStrategic 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, competitor 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 strengthening its controlling and monitoring processes while providing more prominence to the Compliance Department to ensure smooth functioning in all operations.

3. Financial RiskFinancial risk covers the broad area of risk and mainly incorporates credit risk and market risk stemming from business operations.

3.1. Credit Risk ManagementCredit risks arise due to the non-payment by debtors which can lead to working capital issues. Due to the nature of operations and economic conditions that prevailed in 2011/12, The Company has provided its customers with fair credit periods to facilitate a smooth flow in operations. The Company 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 ManagementMarket risk refers to the risk arising from the volatilities in market forces. The Company faces market risk in the financial sphere in terms of the local rates of interest, inflation and exchange rate. In the current 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 has a hand in does not allow any increases to be passed on to the end consumer.

3.2.1. Foreign Exchange RiskThe Company 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 fluctuations in foreign exchange rates. This results in the transaction risk for the Company. The Company 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 was able to minimise any adverse impact.

3.2.2. Interest Rate RiskThe funding of a large proportion of the operations of Lankem Ceylon PLC is via debt. The Company continuously restructure its debt portfolio in a manner to minimize the downside risk of rising interest rates. Going forward, the Company is committed to reduce its level of debt in order to ensure that finance costs remain under control.

3.2.3. Inflation Rate RiskThe Company serves both individuals and institutional clients. Upward movements in inflation will mainly deteriorate the purchasing power of both sets of customers. This will reduce 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 minimal increase in price to customers.

3.2.4. Liquidity RiskDue 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 the obligations to its creditors are met on time.

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3.2.5. Investment RiskThis risk incorporates threat of investments not yielding the expected results. Lankem has in the recent past focused on organic growth. The Company conducts detailed feasibility studies on new projects and only once the Company ascertains that the rate of return is above a 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 reoccurrences of adverse variances. 4. Business RiskNew entrants into the markets that Lankem is already present and the intensification of competition from existing players in these 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. Counterparty RiskThe Group may be exposed to the risk of losses on cash and other financial instruments held or managed on its behalf by financial institutions, in the instance that its counterparties’ defaults on their obligations. The Group policy is to limit its exposure by dealing solely with leading counterparties and monitoring their credit ratings.

6. Industrial and Environmental RisksThe Group may be exposed to capital costs and environmental liabilities as a result of its past, present or future operations. The main industrial and environmental risks result from the storage of chemicals at certain sites and the waste generated from production process.

These risks are predominantly managed by obtaining certifications and new methods through research and development subject to specific legislation and close supervision by the relevant authorities.

7. Legal and Compliance The Company addresses this area with great concern in order to protect its corporate image. 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.

Composition The Audit Committee of Lankem Ceylon PLC (LCPLC) until August 2011, comprised 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 (LCPLC). 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 Audit Committee was reconstituted on 23rd August 2011, and comprise of two Independent Non – Executive Directors of Lankem Ceylon PLC (LCPLC) an Independent Non – Executive Director of E.B. Creasy & Company PLC (EBC) (Parent Company) and an Independent Non – Executive Director of The Colombo Fort Land & Building Company PLC (CFLB) (Ultimate Parent Company) .

The Names of the members are given below :

Mr. A. C. S. Jayaranjan - Chairman(Independent, Non – Executive Director (LCPLC) Mr . A. Hettiarachchi (Independent, Non – Executive Director (LCPLC) Mr. A. R. Rasiah(Independent, Non – Executive Director (EBC) Mr. A. M. de S. Jayaratne(Independent, Non – Executive Director CFLB)

The Committee has a blend of experience in the commercial sector, financial expertise with high standing of integrity and business acumen in order to carry out their role effectively and efficiently.

The Company’s Secretaries, Corporate Managers & Secretaries (Private) Limited function as the Secretaries to the Audit Committee.

Meetings and AttendanceThe Audit Committee has met on six occasions during the financial year ended 31st March 2012.

The attendance of the former Audit Committee was as follows:

Mr. R. Seevaratnam – Chairman 2/2Mr. A. M. de S. Jayaratne 2/2Mr. R. Senathirajah 1/2Mr. A. C. S. Jayaranjan 2/2

Since being reconstituted in August 2011, the attendance of the present Audit Committee was as follows:

Mr. A. C. S. Jayaranjan – Chairman 4/4Mr. A. Hettiarachchy 4/4Mr. A. R. Rasiah 4/4Mr. A. M. de S. Jayaratne 4/4

Other members of the Board and the Management Committee, as well as the External Auditors were present at discussions where 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 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

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with the Sri Lanka Accounting Standards and also in compliance with the Companies Act and the regulatory requirements. The Committee has assessed the adequacy of existing control 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, Chartered Accountants, as its External Auditors for the financial year ended 31st March, 2012 and the services provided by them are segregated between audit/assurance services and other advisory services. The Committee has reviewed the progress and the conduct of the statutory audit function and discussed the audit-related issues with the Auditors. KPMG Chartered Accountants 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 KPMG, Chartered Accountants, for the financial year ending 31st March, 2013 subject to the approval of the Shareholders at the Annual General Meeting of the Company.

A. C. S. JayaranjanChairmanAudit Committee

30th May 2012


Audit Committee Report 42Independent Auditors’ Report 46Income Statement 48Balance Sheet 49Statement of Changes in Equity 50Cash Flow Statement 51Notes to the Financial Statements 53Statement of Value Added 116Share Information 117Ten Year Summary 119

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Strengthening our positionFINANCIAL INFORMATION


Independent Auditors’ Report

TO THE SHAREHOLDERS OF LANKEM CEYLON PLC

Report on the Financial Statements

We have audited the accompanying Financial Statements of Lankem Ceylon PLC the “Company”, the consolidated financial statements of the Company and its subsidiaries as at 31st March 2012 which comprise the balance sheet as at 31st March 2012, and the Income Statement, Statement of Changes in Equity and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 48 to 115 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.

OpinionCompany(a) The Company has not provided for impairment of the carrying amount of the investments in Lankem Development PLC and SunAgro Farms Limited as at the reporting date as explained in Note 17.3 to these Financial Statements.

(b) The Company has not provided for impairment of the amounts due from Colombo Fort Hotels Limited, Associated Farms Limited, SunAgro Farms Limited, Lankem Consumer Products Limited and Lankem Development PLC as at the reporting date as explained in Note 29.3 to these Financial Statements.

In our opinion, so far as appears from our examination, except for the effects on the Financial Statements of the matters referred to the aforesaid paragraphs (a) and (b); the Company maintained proper accounting records for the year ended 31st March 2012 and the Financial Statements give a true and fair view of the Company’s state of affairs as at 31st March 2012 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

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GroupIn our opinion, the consolidated Financial Statements give a true and fair view of the state of affairs as at 31st March 2012 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 Matters Without 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.

CHARTERED ACCOUNTANTS

30th May 2012Colombo


Income Statement

Group Company

For the year ended 31st March 2012 2011 2012 2011 Note Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Revenue 6 24,117,751 23,030,604 5,778,255 4,903,869

Cost of Sales (20,317,557) (18,806,358) (4,838,809) (3,912,463)

Gross Profit 3,800,194 4,224,246 939,446 991,406

Other Income 7 788,385 460,802 534,264 101,072Distribution Cost (1,008,754) (826,738) (338,881) (338,997)Administrative Expenses (1,554,432) (1,288,336) (174,549) (109,226)Other Expenses (60,734) (8,479) (57,945) -Net Finance Cost 8 (433,589) (452,931) (191,978) (114,007)Profit before Tax 9 1,531,070 2,108,564 710,357 530,248

Income Tax Expense 10 (298,810) (236,815) 19,906 44,952

Profit for the Year 1,232,260 1,871,749 730,263 575,200

Attributable to:Equity Holders of the Parent 552,210 1,131,106 730,263 575,200Minority Interest 680,050 740,643 - -

1,232,260 1,871,749 730,263 575,200

Earnings per Share (Rs.) 11 23.01 47.16 30.43 23.98

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

The Notes from pages 53 to 115 form an integral part of these Financial Statements.Figures in brackets indicate deductions.

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Balance Sheet

Group CompanyAs at 31st March 2012 2011 2012 2011

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

ASSETSNon-Current AssetsProperty,Plant & Equipment 13 9,690,947 8,273,781 673,470 551,026Leasehold Properties 14 801,857 847,591 - -Investment Property 15 46,729 50,753 - -Intangible Assets 16 711,845 357,078 - -Investments in Subsidiaries 17 - - 2,792,818 1,527,791Other Long Term Investments 18 29,241 39,008 181,758 186,758Loans Due from Related Parties 29.2 380,000 - - -Retirement Benefit Assets 27 112,283 107,701 67,346 63,687Total Non-Current Assets 11,772,902 9,675,912 3,715,392 2,329,262

Current AssetsInventories 19 2,526,036 2,436,334 854,342 608,595Trade & Other Receivables 20 4,246,729 3,687,134 1,057,006 712,861Amounts due from Related Parties - Trade Receivables 29.1 - - 446,196 344,163Amounts due from Related Parties 29.1 283,011 140,063 488,301 673,798Loans due from Related Parties 29.2 20,000 - 154,000 -Income Tax Recoverable 154,098 83,622 138,550 72,640Short Term Investments 18 365,067 47,008 347,678 47,008Bank & Cash Balances 21 1,755,172 1,321,341 109,737 64,988Total Current Assets 9,350,113 7,715,502 3,595,810 2,524,053Total Assets 21,123,015 17,391,414 7,311,202 4,853,315

EQUITY AND LIABILITIESEquity Attributable to Equity Holders of the ParentStated Capital 22 536,218 536,218 536,218 536,218Capital Reserves 23 470,649 492,918 95,710 95,710Revenue Reserves 2,895,467 2,230,919 2,184,755 1,490,492 3,902,334 3,260,055 2,816,683 2,122,420

Minority Interest 3,262,557 3,266,125 - -Total Equity 7,164,891 6,526,180 2,816,683 2,122,420

Non-Current LiabilitiesInterest bearing Borrowings 24 2,674,038 2,788,762 642,855 329,901Loans Payable to Related Parties 24 390,000 - 770,000 300,000Deferred Income 25 553,093 560,883 - 1,275Deferred Tax Liabilities 26 368,916 270,588 8,922 18,963Retirement Benefit Obligations 27 1,712,890 1,614,228 158,855 123,065Total Non-Current Liabilities 5,698,937 5,234,461 1,580,632 773,204

Current LiabilitiesInterest bearing Borrowings 24 2,465,963 1,895,562 817,058 488,905Loans Payable to Related Parties 24 30,000 26,000 30,000 26,000Trade and Other Payables 28 3,273,773 2,609,854 1,092,092 707,159Amounts due to Related Parties - Trade Payables 29.4 - - 51,396 131,844Amounts due to Related Parties 29.4 196,694 129,083 215,635 271,776Income Tax Payable 146,000 145,796 - -Bank Overdraft 21 2,146,757 824,478 707,706 332,007Total Current Liabilities 8,259,187 5,630,773 2,913,887 1,957,691Total Liabilities 13,958,124 10,865,234 4,494,519 2,730,895Total Equity and Liabilities 21,123,015 17,391,414 7,311,202 4,853,315

Net Assets per Share (Rs.) 162.60 135.84 117.36 88.43

The Notes from pages 53 to 115 form an integral part of these Financial Statements. Figures in brackets indicate deductions.

I certify that these Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007.

T. HettiarachchiFinance Manager

The Directors are responsible for the preparation and presentation of these Financial Statements.Approved and signed for and on behalf of the Board of Directors of Lankem Ceylon PLC.

R. N. Bopearatchy K. P. DavidDirector DirectorColombo 30th May 2012


Statement of Changes in 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

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

GroupBalance as at 1st April 2010 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 Effect of Acquisitions, Disposals and changes 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 Effect of Acquisitions, Disposals and changes in Percentage Holding in Subsidiaries - - - - - 115,132 115,132 (144,863) (29,731)Net of Acquisition / (Disposal) of Subsidiaries - - - - - - - (116,824) (116,824)Adjustment due to Debit balance in Minority Interest - - - - - 84,379 84,379 (84,379) - Direct Cost of Right Issue - - - - - (14,412) (14,412) (10,554) (24,966)Repurchases of Ordinary Shares - - - - - - - (9,929) (9,929)Loss on Redemption Shares - - - - - (43,885) (43,885) (32,971) (76,856)Transfer from Revaluation Reserve to Retained Earnings - (7,124) - - - 7,124 - - - Derecognition of Revaluation Reserve on Disposal - (15,145) - - - - (15,145) - (15,145)Profit for the year - - - - - 552,210 552,210 680,050 1,232,260 Dividend Paid - - - - - (36,000) (36,000) - (36,000)Dividend Paid by Subsidiaries to Minority Interest - - - - - - - (284,098) (284,098)Balance as at 31st March 2012 536,218 439,819 8,333 22,497 305,952 2,589,515 3,902,334 3,262,557 7,164,891

Stated Revaluation Capital General Retained Total Capital Reserve Redemption Reserve Profit/(Loss) Reserve Fund

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

CompanyBalance as at 1st April 2010 281,218 87,377 8,333 300,000 686,542 1,363,470 Issue of Shares 255,000 - - - - 255,000 Dividend Paid - - - - (71,250) (71,250)Profit for the year - - - - 575,200 575,200 Balance as at 31st March 2011 536,218 87,377 8,333 300,000 1,190,492 2,122,420 Dividend Paid - - - - (36,000) (36,000)Profit for the year - - - - 730,263 730,263 Balance as at 31st March 2012 536,218 87,377 8,333 300,000 1,884,755 2,816,683


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Cash Flow Statement

Group Company


Cash Flows From Operating ActivitiesProfit before Taxation 1,531,070 2,108,564 710,357 530,248Adjustment for;Depreciation/Amortisation on Property, Plant & Equipment 468,625 429,427 74,653 55,568Dividend Income (116,656) (569) (77,026) (44,929)Interest Expense 649,656 513,089 270,368 139,322(Gain)/Loss on Disposal of Property, Plant & Equipment (34,783) (25,456) (1,698) (1,821)(Gain)/Loss on Translation of Foreign Currency (46,433) 13,393 - -Interest Income (86,716) (17,413) (78,390) (18,530)Negative Goodwill (9,367) (68,038) - -Defined Benefit Plan Cost - Retiring Gratuity 341,151 320,139 38,271 15,370(Gain)/Loss on Disposal of Investments (366,175) (73,074) (399,840) (16,052)Provision for fall in Value of Investments-Short Term 42,004 (11,357) 41,814 -Provision/(Reversal of Provision) for Doubtful Debts Trade & Other Receivables 28,899 (32,487) 1,692 6,355Provision/(Reversal of Provision) for Doubtful Debts Related Parties (50,689) (68,731) - -Provision for Obsolete Inventories (586) 8,388 3,698 4,067Provision/(Reversal of Provision) for Impairment of Capital work in progress - (4,701) - -Provision for Value Added Tax Recoverable - 5,266 - -Creditors no longer Payable Written Back (40,914) (60,579) (13,577) (35,472)Amortisation of Deferred Income (19,001) (16,171) (1,275) (2,183)Operating Profit before Working Capital Changes 2,290,085 3,019,690 569,047 631,943

(Increase)/Decrease in Inventories (89,116) (762,724) (249,444) (120,997)(Increase)/Decrease in Trade & Other Receivables (588,494) (892,983) (345,837) (57,242)(Increase)/Decrease in Amounts due from Related Parties (92,259) 66,660 (765,606) (386,087)Increase/(Decrease) in Trade & Other Payables 704,633 (23,980) 398,510 (210,164)Increase/(Decrease) in Amounts due to Related Parties 67,711 (79,655) (136,590) 154,516Cash Generated from Operations 2,292,560 1,327,008 (529,920) 11,969

Income Tax Paid (283,358) (216,259) (56,044) (76,437)Interest Paid (639,578) (400,726) (268,555) (132,770)Retiring Gratuity Paid (235,410) (113,113) (6,140) -Payment made to Gratuity Fund (6,903) (3,850) - -Net Cash Flow Generated from/(Used in) Operating Activities 1,127,311 593,060 (860,659) (197,238)

Cash Flows from Investing ActivitiesPurchase & Construction of Property, Plant & Equipment (1,618,206) (1,160,564) (199,063) (125,600)Investment in Subsidiaries (779,060) (37,324) (108,214) (150,596)Interest Received 86,716 17,413 - 18,530Dividend Received 116,656 569 77,026 44,929Investments in Long Term Investments (3,308) (8,000) - -Net Investments in Short Term Investments (381,408) (47,008) (341,005) (64,375)Proceeds on Disposal of Property, Plant & Equipment 245,635 180,190 3,667 1,821Net Proceeds on Disposal of Investments 387,595 106,664 20,004 39,584Net Cash Flow Generated from/(Used in) Investing Activities (1,945,380) (948,060) (547,585) (235,707)


Cash Flow Statement

Group Company


Continued from previous PageCash Flows from Financing ActivitiesProceeds from Rights Issue of Shares - 255,000 - 255,000Capital Grants Received 11,211 69,144 - -Long Term Loans obtained from Related Companies 414,000 - 494,000 300,000Long Term Loans granted to Related Companies (400,000) - - -Lease Rentals Paid (164,852) (89,612) (10,929) (33,951)Proceeds from Long Term Loans 625,763 1,746,079 250,000 100,000Repayment of Long Term Loans (583,469) (624,721) (40,645) (232,878)Settlement of Loans Payable to Related Companies (20,000) (58,000) (20,000) (59,000)Issue of Debentures 200,000 150,000 200,000 150,000Redemption of Debentures - (112,500) - -Payment to Lessor on Leasehold Rights (22,170) (94,963) - -Dividend Paid (36,000) (71,250) (36,000) (71,250)Net Transactions with Minority (284,098) 191,704 - -Net Movement in Short Term Borrowings 214,201 (360,224) 240,868 (19,088) Direct cost on Rights Issue (24,965) - - -Net Cash Flow Generated from /(Used in) Financing Activities (70,379) 1,000,657 1,077,294 388,833

Net Increase/(Decrease) in Cash & Cash Equivalents during the year (888,448) 645,657 (330,950) (44,112)Cash & Cash Equivalents at the beginning of the year 21 496,863 (148,794) (267,019) (222,907)Cash & Cash Equivalents at the end of the year 21 (391,585) 496,863 (597,969) (267,019)

Analysis of Cash & Cash Equivalents at the end of the yearCash in Hand & at Bank 1,755,172 1,321,341 109,737 64,988Bank Overdraft (2,146,757) (824,478) (707,706) (332,007) (391,585) 496,863 (597,969) (267,019)


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1. REPORTING ENTITYLankem Ceylon PLC is a public limited liability company incorporated and domiciled in Sri Lanka and listed on the Colombo Stock Exchange.

The Consolidated financial statements of Lankem Ceylon PLC, as at the year ended 31st March 2012 comprises of 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 PREPARATION2.1. Statement of ComplianceThe Financial Statements of the Company and those consolidated with such comprise the Balance Sheet, Statements of Income, Statement of Changes in equity and Cash Flow statement together with the Accounting Policies and Notes to the Financial Statements. These Statements are prepared in accordance with the Sri Lanka Accounting Standards (SLAS) promulgated by the Institute of Chartered Accountants of Sri Lanka (ICASL) and with the requirement of Companies Act No 7 of 2007.

The Financial Statements were authorised for issue by the Board of Directors on 30th May 2012.

2.2. Basis of MeasurementThe Financial Statements have been prepared on the historical cost basis except for certain items of Property, Plant & Equipment, Short-Term Investments which are measured at fair value and Retirement Benefit Obligations which are measured at the present value of the defined benefit plans as explained in the respective Notes to the Financial Statements.

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

2.4. Use of Estimates and JudgmentsThe preparation of Financial Statements in conformity with Sri Lanka Accounting Standards (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.

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 included in the following notes:

3. SIGNIFICANT ACCOUNTING POLICIESThe accounting policies set out below have been consistently applied to all periods presented in these Financial Statements and have been applied consistently by the Group.

Comparative information where necessary has 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 3.1.1. SubsidiariesSubsidiaries 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’. A list of the Group’s subsidiaries is set out on the inner back cover of this report.

3.1.2. Acquisitions of entities under common controlThe purchase method of accounting is used to account for the acquisition of a subsidiary by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non controlling interest. The excess of the Group’s share of the identifiable net assets acquired is recorded as Goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the Income Statement.

3.1.3. Transactions eliminated on consolidationInter group balances and transactions and any unrealised income and expenses arising from inter group transactions are eliminated in preparing the consolidated Financial Statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

3.1.4. Transactions and Non-controlling InterestThe Group applies a policy of treating transactions with non-controlling interests as transactions with parties external to the

Notes to the Financial Statements


Group. Disposals to non-controlling interest results in gains and losses for the Group that are recorded in the Income Statement. Purchases of non controlling interest results in Goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of subsidiary.

3.2. Foreign Currency3.2.1. Foreign Currency TransactionsIn preparing the Financial Statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated at the rates prevailing on the Balance Sheet date. Non-monetary items carried at fair value or historical cost is translated at the rates prevailing on, the date when the fair value was determined or the date of transaction. Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in profit or loss for the period.

3.3. Assets and bases of their valuationAssets 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 of the Company’s business, or within one year from balance sheet date, whichever is shorter. Assets other than current assets are those which the Company intends to hold beyond a period of one year from the Balance Sheet date.

3.3.1. Property, Plant & Equipment3.3.1.1. Recognition and measurementItems of Property, Plant & Equipment are measured at cost (or at valuation in the case of certain items) less accumulated depreciation and accumulated impairment losses.

3.3.1.2. Owned AssetsThe cost of an item of property, plant and equipment comprise its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. The cost of self-constructed assets includes the cost of materials, direct labour, and any other costs directly attributable to bringing the asset to the working condition for its intended use. This also includes cost of dismantling and removing the items and restoring in the site on which they are located. 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 decrease is recognised in profit and loss.

3.3.1.3. Leased AssetsLeases 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.

The corresponding principal amount payable to the lessor is shown as a liability. The interest element of the rental obligation applicable to each financial year is charged to the Income Statement over the period of lease so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

3.3.1.4. Subsequent CostsThe cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within that part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognized 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.

3.3.1.5. DerecognitionThe carrying amount of an item of Property, Plant & Equipment is derecognised on disposal, or when no future economic benefits are expected from its use. Gains and losses on derecognition are recognized in the income statement and gains are not classified as revenue.

3.3.1.6. DepreciationDepreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost less its residual value.

Depreciation is recognized in the income statement 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. Land is not depreciated.

The estimated useful lives are as follows:

Freehold Building 20-40 YearsRoads 25 YearsPlant, Machinery & Equipment 8-13 YearsMotor Vehicles 5-10 YearsFurniture, Fixtures & Fittings 7-10 YearsElectrical Equipment & Fittings 10 YearsLinen, Cutlery & Crockery On Replacement Basis Depreciation of an asset begins when it is available for use where as depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised.


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The appropriateness of useful lives of the asset and the depreciation rates are assessed annually.

3.3.2. Intangible Assets3.3.2.1. GoodwillGoodwill 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 recognized immediately in the income statement.

3.3.3. Investments3.3.3.1. ClassificationInvestments in subsidiaries of the Company are treated as long term investments and stated at cost. Other investments which are held for yield or capital appreciation are also classified as long term investments that are intended to be held for trading purposes are classified as short-term investments.

3.3.3.2. ValuationQuoted and unquoted investments in shares held on long term basis are measured initially at cost. In the parent Company’s Financial Statements, investments in subsidiaries are carried at cost less impairment losses.

Provision for impairment is made when in the opinion of the Directors there has been a decline which is other than temporary in the value of the investment.

Short term investments are measured at the lower of cost and market value on an aggregate portfolio basis, with any resultant gain or loss recognized in the income statement.

3.3.3.3. CostCost of investments is the cost of acquisition including brokerage, commission and other fees.

3.3.3.4. Diminution in Carrying ValueDiminution in carrying value of investments are deemed to be permanent where the Investee Company and/or Auditors have qualified their opinion on the going concern status, and/or operations have resulted in net losses and these are expected to continue, and/or where the core business has become non-viable due to environmental and/or other concerns, and/or where the industry/sector has an uncertain outlook due to environmental and/or other concerns.

3.3.4. Investment PropertyInvestment property is property held to either earn rental income or for 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 initially measured at its cost including related transaction cost and

is therefore carried at its cost less any accumulated depreciation and any accumulated impairment losses.

3.3.5. InventoriesRaw materials, finished goods and work in progress of Lankem Ceylon PLC and its subsidiaries are valued at the lower of cost, on 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.

At the invoice value of the goods that has been dispatched to the Company.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses.

3.3.6. Trade and Other ReceivablesTrade and other receivables are stated at the values estimated to be realised after providing for bad and doubtful debts.

The Company identifies the specific receivables, which are not realizable, and make a specific provision for them.

3.3.7. Cash & Cash EquivalentsCash & cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s Cash Management are included as a component of cash & cash equivalents for the purpose of the Statement of Cash Flows.

3.3.8. Impairment of AssetsThe 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.


Reversal of impairment losses is recognised 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.

3.4. Liabilities & ProvisionsLiabilities classified as current liabilities on the Balance Sheet are those obligation payable on demand or within one (1) year from the Balance Sheet date. Items classified as non-current liabilities are those obligations which expire beyond a period of one (1) year from the Balance Sheet date.

All known liabilities have been accounted for in preparing the Financial Statements. Provisions and liabilities are recognized when the Group has a legal or constructive obligation as a result of past events and it is probable that an outflow of economic benefits will be required to settle the obligation and reliable estimate can be made of the amount of the obligation.

3.4.1. Retirement Benefit Obligation3.4.1.1. Defined Contribution PlansA 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 in the periods during which services are rendered by employees.

3.4.1.2. Defined Benefit PlansA defined benefit plan is a post-employment benefit plan other than a defined contribution plan. 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 has obtained an insurance policy as described in Note 27 to the Financial Statements to meet the retiring gratuity payments to its employees. However, the provision in relation to other companies in the Group is not funded externally.

3.4.1.3. Defined Contribution Plans – Employees’ Provident Fund and Employee Trust FundAll employees who are eligible for Employees’ Provident Fund contributions and Employees’ Trust Fund contributions are covered by relevant contributions funds in line with the relevant statutes. Employer’s contributions to the defined contribution plans are recognized as an expense in the Income Statement when incurred.

3.4.2. ProvisionsA 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.

3.4.3. Trade and Other PayablesTrade and other payables are stated at their cost.

3.4.4. Stated CapitalAs per the Companies Act No. 07 of 2007, section 58 (1), stated capital in relation to a Company means the total of all amounts received by the Company or due and payable to the Company in respect of the issue of shares and in respect of call in arrears.

3.4.5. Capital Commitment and Contingent LiabilitiesCapital commitments and contingencies which exist as at the Balance Sheet date are disclosed in the respective notes to the Financial Statements.

3.5. Income Statement3.5.1. Revenue The Group’s revenue represents sales to customers outside the Group and excludes Value Added Tax, Turnover Tax and Intra-Group Sales.

3.5.1.1. Revenue recognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue and the associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and sales taxes, and after eliminating sales within the Group. The following specific criteria are used for the purpose of recognition of revenue.

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 reporting 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.

3.5.1.2. Interest IncomeInterest from bank deposits are recognized on a time proportion basis from the date of deposit to the Balance Sheet date.

3.5.1.3. Other IncomeOther income is recognized on an accrual basis. Net Gains and losses of revenue nature on the disposal of Property Plant and Equipment and other non current assets including investment have been accounted for in the income statement, having deducted from proceeds on disposal, the carrying amount of the assets and related expenses.


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Gains and losses arising from incidental activities to main revenue generating activities and those arising from a group of similar transactions which are not material, are aggregated, reported and presented on a net basis.

3.5.2. Expenditure Recognition3.5.2.1. Operating LeasesLeases 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.

3.5.2.2. Operating ExpensesAll expenses incurred in day to day operations of the business and in maintaining the Property, Plant and Equipment in a state of efficiency has been charged to the Income Statement in arriving at the profit for the year. Provision has also been made for bad and doubtful debts, all known liabilities and depreciation on property, plant and equipment.

3.5.2.3. Borrowing costsBorrowing costs are recognized 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.

3.5.2.4. Finance CostsInterest expenses are recognized on an accrual basis.

3.5.3. Taxation3.5.3.1. Current TaxesCurrent Income tax liabilities for the current and prior periods are measured at the amounts expected to be recovered from or paid to the Commissioner General of Inland Revenue. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively enacted by the Balance Sheet date.

The provision for income tax on Sri Lankan operation is based on the elements of income and expenditures reported in the Financial Statements and computed with in accordance with the provisions of the Inland Revenue Act.

Income tax has been provided on overseas operations in accordance with the relevant statutes in force in the countries in which operations are carried out. The relevant details are disclosed in the respective notes to the Financial Statements.

3.5.3.2. Deferred Taxation Deferred taxation is provided, based on the liability method, on temporary differences at the balance sheet date between the carrying amounts of assets and liabilities for financial reporting

purposes and the amounts used for tax purposes. The balance in the deferred taxation account represents income tax applicable to the difference between the written down values for tax purposes of the assets on which tax depreciation has been claimed and the net book values of such assets, offset by the provision for retirement benefit which is deductible for income tax purposes only on payment. Deferred tax assets are recognized for all deductible temporary differences and carry forward of unused tax losses, to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences and carry forward of unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each Balance Sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax assets to be utilized.

3.6. Policies specific to Plantation CompaniesThe 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 by the plantation companies are in accordance with Sri Lanka Accounting Standards (SLAS) 32- ‘Plantations’.

Those accounting policies of plantation companies that significantly vary from the rest of the Group are given below.

3.6.1. Immature & Mature PlantationsThe cost of replanting and new planting is classified as mature 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 areas coming into bearing is transferred to mature plantations and depreciated over their estimated useful lives. No depreciation has been charged in the year of transfer.

3.6.2. Infilling CostWhere infilling results in an increase in the economic life of relevant fields beyond its previously assessed standard of performance, the costs are capitalized in accordance with Sri Lanka Accounting Standard 32 - Plantations and are depreciated over its useful life at rates applicable to mature plantations.

Infilling costs that are not capitalized are charged to the Income Statement as an expense in the year in which they are incurred.


3.6.3 DepreciationDepreciation is recognized in the income statement 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 yearsPlant & Machinery 13 1/3 yearsFurniture & Fittings 10 yearsMotor Vehicles 5 yearsSanitation, Water & Electricity Supply 20 yearsEquipment 8 yearsMature Plantations - Tea 13 – 33 years - Rubber 20 -25 yearsRoads 25 years

Leased AssetsLeasehold rights are amortised/depreciated in equal annual amounts over the following periods:

Type of Assets No. of Years

Bare Land 53 YearsImprovement to Land 30 YearsMature Plantations - Tea & Rubber 30 Years - Others 25 YearsRoads & Bridges 40 YearsBuildings 25 YearsFences & Securities 20 YearsMachinery 15 YearsWater Supply 20 YearsPower Augmentation 20 YearsVested Tea 30 YearsLand Development Cost 30 YearsWater Supply Scheme 30 Years

3.6.4. Permanent Land Development CostsPermanent 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 remaining lease periods.

Permanent impairments to land development costs are recognised in the profit and loss in full or reduced to the net carrying amounts of such asset in the year of occurrence after ascertaining the loss.

3.6.5. 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.

3.6.6. InventoriesInventories 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 realization and/or cost of conversion from their existing state to saleable condition.

Input MaterialAt average cost.

Growing Crop – NurseriesAt the cost of direct materials, direct labour and an appropriate proportion of directly attributable overheads less provision for overgrown plants.

Harvested CropValued at estimated selling prices or realisable prices.

Produce StockValued at estimated selling prices or realisable prices.

Spares and Consumables At actual cost

3.6.7. Retirement Benefit ObligationsThe Retirement Benefit Plan adopted is as required under the Payment of Gratuity Act No. 12 of 1983 and the Indian Repatriate Act No 34 of 1978 to eligible employees. This item is grouped under Retirement Benefit Obligations in the Balance Sheet.

All Workers and StaffProvision of gratuity for all workers and staff is on an actuarial basis, using the Projected Unit Credit (PUC) method as recommended by Sri Lanka Accounting Standard No.16 (Revised 2006) “Employee Benefits”.The actuarial valuation was carried out by a professionally qualified actuary firm Messrs Actuarial & Management Consultants (Pvt) Ltd.

The Company expects to carry out a comprehensive actuarial valuation once in every two years, unless there’s a revision of wage rates.


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3.6.8. Grants & Subsidies3.6.8.1. Capital Nature Grants and Subsidies Grants and subsidies are credited to the income statement over the periods necessary to match them with related costs which they are intended to be compensated on a systematic basis. Grants related to assets, including non monetary grants at fair value is deferred in the balance sheet and credited to the income statement over useful life of the related assets. Grants related to income are recognized in the profit and loss in the period in which it is receivable.

3.6.8.2. Revenue Nature Grants and Subsidies Grants and subsidies that compensate the Group for expenses incurred are recognized as revenue in the income statement on a systematic basis in the period in which the expenses are recognized. Grants that compensate the Group for the cost of an asset are recognized in the income statement over the useful life of the related assets.

3.6.9. Revenue RecognitionProfit or loss on perennial crops is recognized in the financial period of harvesting. Revenue from sale of produced stock is accounted on the basis of invoiced value less export duty, brokerage, cess, trade discounts and any other taxes on turnover.

3.6.10. Borrowing CostBorrowing costs are recognized as expense in the period in which they are incurred expect to the extent where borrowing costs that are directly attributable to the acquisition, construction, or production of a qualifying asset that takes a substantial period of time to get ready for its intended use or sale is capitalized as part of the cost of that asset.

3.7. Related Party TransactionsDisclosure has been made in respect of the transactions in which one party has the ability to control or exercise significant influence over the financial and operating policies/decisions of the other, irrespective of whether a price is being charged or not.

3.8. Segmental ReportingA segment is a distinguishable component of the Group that is engaged either in providing products or services (Business/Industry segment) or in providing products or services within a particular economic environment (Geographical segment).segmental information is presented in respect of the group’s business or Geographical segments. The primary format business segments are based on the Groups management and internal reporting structure. Segmental results assets and liabilities includes items directly attributable to segment as well as those that can be allocated on a reasonable basis.

3.9. Cash Flow StatementInterest received and dividends received are classified as investing cash flows, while dividend paid and interest paid, is classified as financing cash flows for the purpose of presentation of Cash Flow Statement which has been prepared using the ‘Indirect Method’.

3.10. General3.10.1. Earnings Per ShareBasic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of shares outstanding during the period.

3.10.2. Events Occurring After the Balance Sheet DateThe materiality of the events occurring after the Balance Sheet date is considered and appropriate adjustments to or disclosures are made in the Financial Statements, where necessary.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSThe 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 these estimates. Estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results which form the basis of making the judgments about the carrying amount of assets and liabilities that are not readily apparent from other sources.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about assumptions and estimates uncertainties that have a significant risk of resulting in a material adjustment in the financial statements are included in the table below:

Critical accounting estimate/judgement

Disclosure referenceNote Page

Property Plant and Equipment 13 66Intangible Assets 16 75Deferred Tax Assets / Liabilities 26 92Employee Benefits 27 93

5. NEW ACCOUNTING STANDARDS ISSUED BUT NOT

EFFECTIVE AS AT BALANCE SHEET DATEThe Institute of Chartered Accountants of Sri Lanka has issued a new volume of Sri Lankan Accounting Standards which will become applicable for the financial period beginning on or after 1st January 2012. Accordingly, these standards have not been applied in preparing these Financial Statements as they were not effective for the year ended 31st March 2012.

These Sri Lankan Accounting Standards comprise accounting standards prefixed both SLFRS (corresponding to IFRS) and LKAS (corresponding to IAS). Application of Sri Lanka Accounting Standards prefixed SLFRS and LKAS for the first time shall be deemed to be an adoption of SLFRS. The Company is currently in the process of evaluations the potential effects of these Standards on its Financial Statements and the impact on the adoption of these Standards have not been quantified as at Balance Sheet date.


6. REVENUE Group Company

For the year ended 31st March 2012 2011 2012 2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

6.1 Summary Gross Revenue 24,135,736 23,052,207 5,778,255 4,907,625Less: Turnover Tax/Nation Building Tax (17,985) (21,603) - (3,756)Net Revenue 24,117,751 23,030,604 5,778,255 4,903,869

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 DairyingPower Plant - Generation of Electricity through Hydro Power IT - Services - Provision of Information Technology (IT) Services

Group Company


6.3 Segmental Revenue Chemicals 5,161,758 4,310,970 3,995,569 3,380,967Consumer 6,561,054 4,158,189 161,490 194,947Hardware 7,186,078 6,005,802 1,599,686 1,331,711Construction 22,977 96,922 21,510 -Hotels 835,110 608,000 - -Plantations 6,763,257 9,882,876 - -Agriculture 2,594 29,330 - - 26,532,828 25,092,089 5,778,255 4,907,625Turnover Tax/Nation Building Tax (17,985) (21,603) - (3,756) 26,514,843 25,070,486 5,778,255 4,903,869Less: Inter-Segment Revenue (2,397,092) (2,039,882) - -Net Revenue 24,117,751 23,030,604 5,778,255 4,903,869


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6. REVENUE (CONTD.) Profit Before Tax Non Cash Expenses


6.4 Segmental Profit -Group Chemicals 477,562 696,261 141,849 49,919Consumer 550,037 238,376 109,790 110,376Hardware 120,325 101,450 20,744 25,057Construction 6,373 (27,092) - 671Hotels 153,019 55,076 86,507 55,512Plantations 1,659,581 1,133,823 560,980 512,429Agriculture (3,915) (4,276) 1,005 1,211Power Plant (6,228) - - - IT - Services (12) - - - 2,956,742 2,193,618 920,875 755,175Un-Allocated (1,425,672) (85,054) - 24,052 1,531,070 2,108,564 920,875 779,227

7. OTHER INCOME Group Company


Profit on Disposal of Property Plant and Equipment 34,783 25,456 1,701 1,821Dividend Income - Quoted 62,912 206 33,825 12,213 - Unquoted 53,744 363 43,201 32,716Amortisation of Grants and Subsidies 19,001 16,171 1,275 2,183Profit on Disposal of Investments 366,175 73,074 399,840 16,052Creditors no longer payable written back 40,914 60,579 13,577 35,472Rent Income 28,285 26,678 - -Negative Goodwill on Acquisition 9,367 68,038 - -Reversal of Provision for Amounts due from Related Parties 49,484 68,731 - -Sale of Timber 3,215 2,358 - -Sale of Refuse Tea 10,836 13,407 - -Sale of Rubber Trees 44,444 68,696 - -Reversal of Provision for Impairment in Value of Investments 1,715 11,357 - -Reversal of Impairment of Capital Work in Progress 337 4,701 - - Sundry Income 63,173 20,987 40,845 615 788,385 460,802 534,264 101,072

8. NET FINANCE COST (A) Finance Income Interest Income (86,716) (17,413) - -Interest from Related Companies - Debenture Interest Income - - (16,200) (16,200) - Others - - (62,190) (2,330)Gain on Translation of Foreign Currency (129,351) (43,345) - (6,785)Total Finance Income (216,067) (60,758) (78,390) (25,315)


8. NET FINANCE COST CONTD. Group Company


(B) Finance Cost Interest on Term Loans 254,013 287,650 49,499 53,561Interest on Overdraft and Trust Receipt Loans 147,222 99,303 78,689 66,559Interest on Finance Lease Obligations 43,726 22,971 1,813 6,708Debenture Interest 40,124 20,164 37,377 3,857Other Interest 157,571 111,106 61,372 8,637Loss on Translation of Foreign Currency 69,431 600 41,618 - Interest on JEDB/SLSPC Estate Lease 46,556 89,392 - - 758,643 631,186 270,368 139,322Amount Capitalised (108,987) (117,497) - -Total Finance Cost 649,656 513,689 270,368 139,322

Net Finance Cost 433,589 452,931 191,978 114,007

9. PROFIT BEFORE TAX Is stated after charging all expenses including the following: Depreciation/Amortisation Property ,Plant & Equipment 418,868 376,542 74,653 55,567Leasehold Properties 45,734 47,855 - -Investment Property 4,024 5,030 - -

Auditors’ RemunerationKPMG 8,835 7,183 1,580 1,375Other Auditors 4,361 4,693 - -

Non Audit ServicesKPMG 186 469 - 205Other Auditors 2,328 45 - -

Salaries & Wages 4,629,470 3,637,771 250,645 176,140Defined Benefit Plan Cost - Retiring Gratuity 341,151 320,139 38,271 15,370Defined Contribution Plan Cost - EPF & ETF 288,050 528,312 22,005 13,102Managing Agent Fees 31,520 17,492 - -Provision / (Reversal of Provision) for Bad & Doubtful Debts 28,899 (32,487) 1,692 6,355Provision for Obsolete Inventories (586) 8,388 3,698 4,067Donations 438 99 422 70

10. INCOME TAX EXPENSE Current Income Tax Expense (Note 10.1) Taxation on Profit for the Year 230,282 229,535 1,664 28,545Deemed Dividend Tax 38 - - -Under / (Over) Provision on Taxation in respect of previous years (27,454) (50,382) (11,529) (70,750) 202,866 179,153 (9,865) (42,205)

Deferred Tax Expense Origination/(Reversal) of Temporary Differences 95,944 57,662 (10,041) (2,747) 95,944 57,662 (10,041) (2,747) 298,810 236,815 (19,906) (44,952)


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Group Company


10.1 Current Income Tax Expense Reconciliation of Accounting Profit to Income Tax Expense Accounting Profit before Taxation 1,531,070 2,108,564 710,357 530,248Intra- Group Adjustments 1,179,964 98,994 - - 2,711,034 2,207,558 710,357 530,248Aggregate Disallowable Expenses 1,075,814 928,472 104,805 127,367Aggregate Allowable Expenses (2,002,736) (848,794) (84,952) (76,822)Tax Exempt Income (253,551) (1,114,198) (253,551) (441,200)Income not part of Assessable Income (492,648) - (488,704) -Statutory Profit / (Loss) from Business 1,037,913 1,173,038 (12,045) 139,593Other Source of Income 142,093 (41,849) 9,142 (59,243)Tax Losses utilised during the year (120,176) (406,110) (3,200) -Taxable Income / (Loss) 1,059,830 725,079 5,942 80,350

Income Tax @ 28% (@ 35% for year 2010/11) 189,746 194,381 1,664 28,123Income Tax @ 12% (@ 15% for year 2010/11) 20,416 32,469 - -Income Tax @ 10% 18,863 - - -Income Tax @ 5% 1,257 - - - 230,282 226,850 1,664 28,123Social Responsibility Levy Liability - 2,660 - 422Income Tax at other rates - 25 - -Taxation on Profit for the Year 230,282 229,535 1,664 28,545

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 concessionery rate of taxation as referred to below, are liable to income tax at 28%.

10.3 In accordance with the section 20 of the Inland Revenue Act No.10 of 2006, the profit & 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) Ltd., Lankem Technology Services Ltd, Associated Farms Ltd. and Lankem Agrochemicals Ltd. were non- operating during the year.

10.5 Sigiriya Village Hotels PLC, Galle Fort Hotel (Pvt) Ltd and Beruwala Resorts Ltd. are liable for taxation at 10% on the profits and income from activities relating to operating of hotels and Sigiriya Village Hotels PLC is liable for taxation at 28% on other income in accordance with the provision of Inland Revenue Act.


10.6 In accordance with the agreement entered into with the Board of Investments of Sri Lanka under Section 17 of the G.C.E.C. Law No.4 of 1978, profits of York Hotels (Kandy) Ltd 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, which ever 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 years tax holiday. Other income is liable to income tax at 28%.

However, Board of Investment 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.

10.7 In accordance with the powers conferred on the Board of Investments 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 Assessment 2001/02. Accordingly, the Company’s tax holiday has been over as of 31.03.2011 and currently the Company is liable for income tax at the rate of 10% on profits from business as per the section 59B of the Inland Revenue Act No. 22 of 2011 and 28% on other income.

10.8 In accordance with Section 22 (1) and 22 (2) of the Inland Revenue Act No 10 of 2006, the profits and income of Lankem Research Ltd is exempt from income tax for a period of 5 years commencing from the Year of Assessment 2006/07. The said tax exemption provision was expired and the Company is liable for income tax at 5% on its taxable income for the year of Assessment 2011/12, 10% for the year of Assessment 2012/13 and thereafter 12% as per the section 48 of Inland Revenue Act No. 10 of 2006.

10.9 Lankem Developments PLC being a construction company for the year of assessment 2011/12, it is liable for taxation at the rate of 12% on it’s taxable profits in accordance with the provisions of Inland Revenue Act No. 10 of 2006 and subsequent ammendments thereto. Other income is liable to income tax at 28%.

10.10 In accordance with the agreement entered into with the Board of Investments of Sri Lanka under Section 17 of the G.C.E.C. Law No 04 of 1978, profits of SunAgro Farms Ltd are exempted from income tax for a period of 10 years with effect from 31st May 2008.

10.11 C. W. Mackie PLC and its subsidiaries are liable for income tax at 12% on taxable profits on non traditional exports and 28% on other profits in accordance with the provisions of Inland Revenue Act No. 10 of 2006 and subsequent ammendments there to.

10.12 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 2006/2007 onwards. After the exemption period, applicable tax rate would be 10%. The corporate rate of tax applicable on other income of Kotagala Plantations PLC and Agarapatana Plantations Ltd including the income not covered under Section 16 (Profits from manufacture of tea) would be taxed at 28%.

10.13 Deferred Taxation i Deferred tax has been computed by using the tax rate of 28% for the Comapny and subsidiaries which are liable for income tax at the

standard rate for the assessment year 2011/12. The subsidiaries which are liable for income tax at reduced rates (below the standard rate) for the assessment year 2011/12 have computed the defferred tax at the tax rate of 12%.

ii No provision has been made for deferred tax in the financial statements of Lankem Consumer Products Ltd, Lankem Chemicals Ltd, Lankem Paints Ltd, Lankem Research Ltd. and York Hotel (Kandy) Ltd. as no material temporary differences have arisen during the year which are expected to reverse in the future.

iii No deferred tax assets have been recognized in the financial statements of subsidiaries, namely Lankem Developments PLC, SunAgro Farms Ltd, Colombo Fort Hotels Ltd, and Agarapatana Plantations Ltd., in respect of tax losses carried forward because it is not probable that future taxable profit will be available against which these companies can utilise the benefit.

As at 31st March 2012 2011 Million Million

Colombo Fort Hotels Ltd. 17.3 13.7 SunAgro Farms Ltd. 3.6 1.3 Agarapatana Plantations Ltd. 64 191.9 Lankem Developments PLC 13.2 12.3


| 65

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

As at 31st March 2012 2011 2012 2011

Profit attributable to Equity Holders of the Company (Rs.’000) 552,210 1,131,106 730,263 575,200Weighted average number of Ordinary Shares (No. ‘000) 24,000 23,984 24,000 23,984Earnings per Share (Rs.) 23.01 47.16 30.43 23.98

Weighted average number of Ordinary Shares Issued Ordinary Shares at the beginning of the year (No. ‘000) 24,000 21,000 24,000 21,000Effect of shares issued during the year (No. ‘000) - 2,984 - 2,984Weighted average number of Ordinary Shares as at 31st March 24,000 23,984 24,000 23,984

12. DIVIDEND PER SHARE Dividends for Ordinary Shareholders (Rs. ‘000) 60,000 60,000 60,000 60,000No. of Ordinary Shares in issue (No. ‘000) 24,000 24,000 24,000 24,000Dividend per Ordinary Share (Rs.) 2.50 2.50 2.50 2.50

Directors of the Company have recommended the payment of a first and final dividend of Rs. 2.50/- per ordinary share for the year ended 31st March 2012, which will be declared at the Annual General Meeting to be held on 28th June 2012.


13. PROPERTY,PLANT & EQUIPMENT Balance Transfers/ Acquisition of Additions Disposals Balance As at Adjustments Subsidiaries during the during the As at As at 31st March 01.04.2011 Year Year 31.03.2012

Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

13.1 Group Cost/Valuation Freehold Land 1,839,634 - 219,800 27,112 (28,950) 2,057,596Buildings 2,391,923 (4,635) 50,450 237,838 (5,253) 2,670,323Land Development Cost 10,002 - - - (598) 9,404Mature/Immature Plantations 3,455,388 - - 798,780 (157,785) 4,096,383Plant & Machinery 1,176,885 107,102 17,059 157,192 (22,520) 1,435,718Motor Vehicles 382,549 66,141 628 36,865 (19,121) 467,062Furniture, Fittings & Office Equipment 682,515 (1,244) 18,420 115,541 (46,781) 768,451Linen & Soft Furnishings 43,707 - - 23,322 - 67,029 9,982,603 167,364 306,357 1,396,650 (281,008) 11,571,966

Leasehold Plant & Machinery 204,372 (107,468) - 1,605 - 98,509Motor Vehicles 450,561 (66,141) - 149,739 (54,554) 479,605Furniture, Fittings & Office Equipment 2,202 - - - (1) 2,201 657,135 (173,609) - 151,344 (54,555) 580,315Total Cost / Valuation 10,639,738 (6,245) 306,357 1,547,994 (335,563) 12,152,281

Balance Transfers / Acquisition of Charge for Disposals Balance As at Adjustments Subsidiaries the Year during the As at As at 31st March 01.04.2011 Year 31.03.2012

Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Accumulated Depreciation Freehold Buildings 440,307 (932) 561 76,986 (1,839) 515,083Mature/Immature Plantations 410,090 - - 69,209 - 479,299Plant & Machinery 605,412 51,256 15,050 97,090 (22,124) 746,684Motor Vehicles 322,577 58,148 334 28,802 (12,721) 397,140Furniture, Fittings & Office Equipment 442,019 (138) 16,938 63,510 (46,678) 475,651Linen & Soft Furnishings 31,449 - - 1,541 - 32,990 2,251,854 108,334 32,883 337,138 (83,362) 2,646,847

Leasehold Plant & Machinery 79,045 (51,319) - 7,472 - 35,198Motor Vehicles 216,585 (58,148) - 73,968 (41,349) 191,056Furniture, Fittings & Office Equipment 465 - - 290 - 755 296,095 (109,467) - 81,730 (41,349) 227,009Total Accumulated Depreciation 2,547,949 (1,133) 32,883 418,868 (124,711) 2,873,856

Carrying Amount 8,091,789 9,278,425Capital Work in Progress 181,995 (218,296) 8,969 439,854 - 412,522Total Carrying Amount of Property, Plant & Equipment 8,273,784 9,690,947


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13. PROPERTY,PLANT & EQUIPMENT (CONTD.) Balance Transfers / Additions Disposals Balance As at Adjustments during the during the As at As at 31st March 01.04.2011 Year Year 31.03.2012

Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

13.2 Company Cost Freehold Land 111,148 - - - 111,148Land Development Cost 9,404 - - - 9,404Buildings 208,889 - 30,129 - 239,018Plant & Machinery 113,539 107,468 57,629 (22,031) 256,605Motor Vehicles 16,755 66,141 23,567 (4,623) 101,840Furniture, Fittings & Office Equipment 207,401 - 39,598 (46,124) 200,875 667,136 173,609 150,923 (72,778) 918,890

Leasehold Plant & Machinery 111,783 (107,468) - - 4,315Motor Vehicles 78,778 (66,141) 2,188 (187) 14,638 190,561 (173,609) 2,188 (187) 18,953Total Cost 857,697 - 153,111 (72,965) 937,843

Balance Transfers / Charge Disposals Balance As at Adjustments for the during the As at As at 31st March 01.04.2011 Year Year 31.03.2012

Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Accumulated Depreciation FreeholdBuildings 40,456 - 10,892 - 51,348Plant & Machinery 50,469 51,319 21,579 (22,032) 101,335Motor Vehicles 7,341 58,148 9,461 (2,656) 72,294Furniture, Fittings & Office Equipment 118,781 - 30,312 (46,124) 102,969 217,047 109,467 72,244 (70,812) 327,946

Leasehold Plant & Machinery 51,891 (51,319) 431 - 1,003Motor Vehicles 60,201 (58,148) 1,978 (187) 3,844 112,092 (109,467) 2,409 (187) 4,847 329,139 - 74,653 (70,999) 332,793Carrying Amount 528,558 605,050Capital Work in Progress 22,468 68,420Total Carrying Amount of Property, Plant & Equipment 551,026 673,470


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13. PROPERTY,PLANT & EQUIPMENT (CONTD.) Mature Immature Total as at Total as at As at 31st March Plantations Plantations 31.03.2012 31.03.2011

Rs.’000 Rs.’000 Rs.’000 Rs.’000

13.4 Mature/Immature Plantations i) SunAgro Farms Ltd. Cost At the beginning of the year 3,021 14,804 17,825 7,675Additions/Transfers during the year - 7,876 7,876 10,150At the end of the year 3,021 22,680 25,701 17,825

Depreciation At the beginning of the year 1,510 - 1,510 1,007Charge for the year 503 - 503 503At the end of the year 2,013 - 2,013 1,510Carrying amount at the end of the year 1,008 22,680 23,688 16,315

ii) Agarapatana Plantations Ltd. (APL) Cost At the beginning of the year 391,846 694,582 1,086,428 885,608Additions/Transfers during the year - 249,876 249,876 200,820Disposals/Transfers 167,074 (167,074) - -At the end of the year 558,920 777,384 1,336,304 1,086,428

Depreciation At the beginning of the year 56,656 - 56,656 46,052Charge for the year 11,755 - 11,755 10,604At the end of the year 68,411 - 68,411 56,656Carrying amount at the end of the year 490,509 777,384 1,267,893 1,029,772

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. 31,786,509/- (2010/11 Rs. 51,096,720/-) 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 to harvest.


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13. PROPERTY,PLANT & EQUIPMENT (CONTD.) Mature Plantations Immature Plantations Total TotalAs at 31st March Tea Rubber Tea Rubber Others 31.03.2012 31.03.2011

Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

13.4 Mature/Immature Plantations (Contd.)iii) Kotagala Plantations PLC (KPPLC) Cost At the beginning of the year 542,320 675,882 284,327 697,865 150,741 2,351,135 2,028,498Additions/Transfer in 67,760 90,025 104,902 188,324 90,017 541,028 459,858Transfer out - - (67,760) (90,025) - (157,785) (137,221)At the end of the year 610,080 765,907 321,469 796,164 240,758 2,734,378 2,351,135

Depreciation At the beginning of the year 130,298 221,626 - - - 351,924 301,918Charge for the year 18,924 38,027 - - - 56,951 50,006At the end of the year 149,222 259,653 - - - 408,875 351,924Carrying amount as at 31.03.2012 460,858 506,254 321,469 796,164 240,758 2,325,503 1,999,211

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

b) Borrowing costs amounting to Rs. 22.9 Million (2010/2011 - Rs. 18.6 Million) on Tea, and Rs. 54.3 Million (2010/2011 Rs. 47.8 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 11.4% (2010/2011 - 11.0%). 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. are carried at cost less impairment.


14. LEASEHOLD PROPERTIES Balance as at Additions Balance as at As at 31st March 01.04.2011 During the Year 31.03.2012

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 Agarapatana Plantations Ltd. 341,588 - 341,588

Leasehold Right to Bare Land SunAgro Farms Ltd. - (14.4) 2,555 - 2,555 686,430 - 686,430

Immovable Leased Assets of JEDB / SLSPC Estates (Other than Bare Land)- (14.2) Kotagala Plantations PLC 458,222 - 458,222 Agarapatana Plantations Ltd. 269,882 - 269,882

C.W.Mackie PLC - (14.3) 165,009 - 165,009 893,113 - 893,113Total Cost/Valuation 1,579,543 - 1,579,543

Balance as at Charge for Balance as at As at 31st March 01.04.2011 the Year 31.03.2012

Rs.’000 Rs.’000 Rs.’000

Accumulated Amortization / Depreciation Leasehold Right to Bare Land of JEDB / SLSPC Estates- (14.1) Kotagala Plantations PLC 121,278 6,459 127,737 Agarapatana Plantations Ltd. 120,968 6,441 127,409

Leasehold Right to Bare Land SunAgro Farms Ltd. - (14.4) 66 88 154 242,312 12,988 255,300

Immovable Leased Assets of JEDB / SLSPC Estates (Other than Bare Land)- (14.2) Kotagala Plantations PLC 269,966 15,189 285,155 Agarapatana Plantations Ltd. 162,955 9,063 172,018

C.W.Mackie PLC - (14.3) 56,719 8,494 65,213 489,640 32,746 522,386Total Amortisation / Depreciation 731,952 45,734 777,686Carrying amount 847,591 801,857


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14. LEASEHOLD PROPERTIES (CONTD.)14.1 Leasehold Right to Bare Land of Janatha Estate Development Board (JEDB) / SriLanka State Plantation Corporation (SLSPC) Estates The leases of plantation estates in relation to the subsidiaries of the Group, Kotagala Plantations PLC and Agarapatana Plantations Ltd. 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 Ltd. 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 2012 are as follows:

Revaluation Balance Accumulated Amortisation Accumulated Carrying Carrying As at As at Amortisation during the Amortisation Amount Amount As at 31st March 22.06.1992 01.04.2011 01.04.2011 year 31.03.2012 31.03.2012 31.03.2011

Rs. ‘000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

a) Kotagala Plantations PLC 358,928 342,287 121,278 6,459 127,737 214,550 221,009

b) Agarapatana Plantations Ltd. 341,588 341,588 120,968 6,441 127,409 214,179 220,620

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 Ltd. 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 the Companies. These assets are taken into the Balance Sheet as at 22nd June 1992 and depreciation as follows:

Revaluation Transfer/ Balance Accumulated Depreciation Accumulated Carrying Carrying As at Immature As at Depreciation for the Depreciation Amount Amount As at 31st March 22.06.1992 to Mature 01.04 2011 01.04.2011 year 31.03.2012 31.03 2012 31.03 2011 (Adjustments)

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

a) Kotagala Plantations PLC Land Development Cost 6,712 - 6,701 4,194 221 4,415 2,286 2,507Building other than worker housing 26,519 - 25,902 19,456 1,034 20,490 5,412 6,446Plant & Machinery 8,757 - 8,757 8,757 (2) 8,755 2 -Water Projects and Sanitations 8,688 - 8,688 5,439 288 5,727 2,961 3,249Mature Plantations 130,905 - 408,174 232,120 13,648 245,768 162,406 176,054Immature Plantations 293,998 - - - - - - - 475,579 - 458,222 269,966 15,189 285,155 173,067 188,256


14. LEASEHOLD PROPERTIES (CONTD.) Revaluation Transfer/ Balance Accumulated Depreciation Accumulated Carrying Carrying As at Immature As at Depreciation for the Depreciation Amount Amount As at 31st March 22.06.1992 to Mature 01.04 2011 01.04.2011 year 31.03.2012 31.03 2012 31.03 2011 (Adjustments)

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

14.2 Immovable Leased Assets of JEDB / SLSPC Estates (Other than Bare Land)Contd. b) Agarapatana Plantations Ltd. Improvement to Land 5,407 - 5,406 3,375 181 3,556 1,851 2,032Unimproved Land 998 - 998 - - - 998 998Roads and Bridges 677 - 677 318 17 335 342 360Buildings 62,634 - 62,634 47,002 2,501 49,503 13,131 15,632Fences & Securities 49 - 49 50 (1) 49 - (1)Machinery 8,823 (621) 8,201 8,201 - 8,201 1 -Water Supply 6,158 - 6,158 5,774 308 6,082 76 384Power Augmentation 972 - 972 911 48 959 13 61Coffee, Pepper, Cardamom 305 - 305 - - - 305 305Mature Plantations 37,457 141,636 179,093 96,537 5,968 102,506 76,587 82,555Vested Tea 1,223 - 1,223 757 40 798 425 465Immature Plantations 141,636 (141,636) - - - - - -Immature Timber 4,136 - 4,136 - - - 4,136 4,136Other Vested Assets 30 - 30 30 - 30 - - 270,505 (621) 269,882 162,955 9,063 172,018 97,864 106,928

14.3 C.W. Mackie PLC C. W. Mackie PLC has taken certain land & Buildings on leases. In terms of the grant to the Company dated 22nd September 1964 under Crown Lands Ordiance, premises No. 34 and 36, D. R. Wijewardana Mawatha, Colombo 10 has been leased for a period of 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 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 Ltd. The agricultural land of SunAgro Farms Ltd. 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 31st March 2012 Rs. ‘000

Acquisition Cost Balance at the beginning of the year 2,555 2,555Accumulated AmortisationBalance at the beginning of the year (66)Amortisation charge for the year (88)Balance at the end of the year (154)Carrying amount 2,401

15. INVESTMENT PROPERTY Group

As at 31st March 2012 2011 Rs.’000 Rs.’000

Cost Balance at the beginning of the year 68,408 68,408Balance at the end of the year 68,408 68,408


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15. INVESTMENT PROPERTY (CONTD.) Group

As at 31st March, 2012 2011 Rs.’000 Rs.’000

Accumulated Depreciation Balance at the beginning of the year 17,655 12,625Charge for the year 4,024 5,030Balance at the end of the year 21,679 17,655Carrying Amount as at 31st March 46,729 50,753

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 invesment property is situated at No. 36, D. R. Wijewardena Mawatha, Colombo 10 and the extent of the building is 52,923 squarefeet. The carrying amount of investment property as at 31st March 2012, amounted to Rs. 46.7 Million (As at 31st March 2011 - Rs. 50.7 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. 65 Million for the year ended 31st March 2012 (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. 46.5 Million (Rs. 43.3 Million for the period of 15 months ended 31st March 2011).

16. INTANGIBLE ASSETS Group


Goodwill Balance at the beginning of the year 357,078 357,078Goodwill on Acquisition of Subsidiary 354,767 -Balance at the end of the year 711,845 357,078

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:

Group


Agarapatana Plantations Ltd. 150,120 150,120Lankem Tea & Rubber Plantations (Pvt) Ltd. 10,329 10,329Kotagala Plantations PLC 6,369 6,369Lankem Plantation Holdings Ltd. 30,820 30,820Lankem Developments PLC 4,361 4,361Marawila Resorts PLC 14,839 14,839C.W.Mackie PLC 165,935 140,240Galle Fort Hotel (Pvt) Ltd. 329,072 - 711,845 357,078

Carrying amount of the goodwill as at the reporting date was 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 and 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 total cost subjected to the inflation Discount Rate - Average market borrowing rate adjusted for risk premium Margin - Based on current margin and business plan


17.3 Company(i) The Company has an investment in the shares of Lankem Developments PLC (LDPLC) and the carrying amount of the investment at

cost amounted to Rs. 34 Million as at the reporting date. The net assets attributable to the said investment as at the reporting date amounted to Rs. 57 Million based on historical cost. However, LDPLC has incurred continuous losses in previous years and as at the reporting date the current liabilities exceeded the current assets by Rs. 86 Million. No provision has been made in the financial statements to the carrying amount of the investment in LDPLC due to the anticipated profits from its subsidiaries which will result in an improved performance of the Company in the near future.

(ii) The Company has an investment in the shares of SunAgro Farms Ltd (SAFL) and the carrying amount of the investment at cost

amounted to Rs. 12 Million as at the reporting date. The net assets attributable to the said investment as at the reporting date amounted to Rs. 0.2 Million based on historical cost. SAFL has incurred continuous losses in previous years and as at the reporting date the current liabilities exceeded the current assets by Rs. 28.7 Million. No provision has been made in the financial statements to the carrying amount of the investment in SAFL due to the anticipated profits from investments in Asparagus and Pineapple plantations.

17. INVESTMENTS IN SUBSIDIARIES Group Company No.of Cost Market No.of Cost Market Holding Holding Shares Value Shares Value 2012 2012 2012 2012 2012 2011 2011 2011

% % Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

17.1 CompanyQuoted Investments C.W.Mackie PLC 45.92 39.44 14,193,453 549,494 1,060,251 13,537,453 483,589 1,179,112 Lankem Developments PLC 35.47 5.45 3,270,597 37,192 34,014 3,459,241 39,337 250,103 Sigiriya Village Hotels PLC 61.25 53.71 4,833,760 225,245 357,698 4,831,560 225,031 483,639 Marawila Resorts PLC 40.70 13.05 15,991,271 94,542 111,939 38,043,668 209,126 418,480 Kotagala Plantations PLC 32.60 0.18 57,100 5,301 3,997 5,000 122 840Total Quoted Investments 911,774 1,567,899 957,205 2,332,174 Unquoted Investments Colombo Fort Hotels Ltd. 72.40 69.68 2,329,326,024 1,595,116 - 65,753,012 170,753 - Lankem Plantation Holdings Ltd. 47.56 47.56 19,500,001 220,500 - 19,500,001 220,500 - Lankem Tea & Rubber Plantations (Pvt) Ltd. 48.07 1.00 8,342 1,998 - 8,342 1,998 - Lankem Plantation Services Ltd. 60.00 60.00 179,993 1,800 - 179,993 1,800 - Beruwala Resorts Ltd. 57.10 0.01 30,000 30 - 118,381,000 118,381 - Lankem Exports (Pvt) Ltd. 100.00 100.00 10,000 100 - 10,000 100 - Lankem Paints Ltd. 100.00 100.00 2,000,000 20,000 - 2,000,000 20,000 - Lankem Consumer Products Ltd. 100.00 100.00 2,000,000 20,000 - 2,000,000 20,000 - Lankem Chemicals Ltd. 100.00 100.00 2,000,000 20,000 - 2,000,000 20,000 - Lankem Research Ltd. 100.00 100.00 250,007 2,500 - 250,007 2,500 - SunAgro Life Science Ltd. 100.00 100.00 200,000 2,000 - 200,000 2,000 - SunAgro Farms Ltd. 100.00 100.00 1,200,000 12,000 - 1,200,000 12,000 - Associated Farms (Pvt) Ltd. 100.00 100.00 55,398 554 - 55,398 554 - Lankem Technology Services Ltd. 100.00 100.00 4,999,995 5,000 - - - - Total Unquoted Investments 1,901,598 - 590,586 - Total Investments 2,813,372 1,547,791 Less: Provision for Impairment in Value of Investments (Note 17.2) (20,554) (20,000)

2,792,818 1,527,791

Company


17.2 Provision for Impairment in Value of InvestmentsLankem Consumer Products Ltd. 20,000 20,000Associated Farms (Pvt) Ltd. 554 - 20,554 20,000


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18 OTHER LONG-TERM INVESTMENTS Group Company

As at 31st March Note 2012 2011 Note 2012 2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Quoted Investments 18.1.1 254 254 18.2.1 49 49 Unquoted Investments 18.1.2 250 13,325 18.2.2 - 5,000 Debentures 18.1.3 25,226 21,918 18.2.3 180,000 180,000 Unit Trusts 18.1.4 3,011 3,011 18.2.4 1,709 1,709 Fixed Deposits 18.1.5 500 500 - - 29,241 39,008 181,758 186,758

Group

No of Cost Market No of Cost Market As at 31st March Shares Value Shares Value 2012 2012 2012 2011 2011 2011

Rs.’000 Rs.’000 Rs.’000 Rs.’000

18.1 Group 18.1.1 Quoted Investments Bank, Finance & Insurance DFCC Bank PLC 10,906 102 1,228 4,260 102 731Total 102 1,228 102 731

Construction & Engineering Colombo Dockyard PLC 257 2 59 257 2 66Total 2 59 2 66

Hotels & Travel Hunas Falls Hotels PLC 400 7 24 400 7 34Hotel Sigiriya PLC 14,000 65 1,002 14,000 65 1,065Pegasus Resorts PLC 960 9 36 960 9 68Renuka City Hotels PLC 525 30 115 525 30 175Royal Palms Beach Hotels PLC 375 11 21 375 11 26Trans Asia Hotels PLC 200 1 13 200 1 39Total 123 1,211 123 1,407

Manufacturing Pelawatte Sugar Industries PLC 1,000 9 23 1,000 9 32Total 9 23 9 32


18 OTHER LONG-TERM INVESTMENTS (CONTD.) Group

No of Cost Market No of Cost Market Shares Value Shares Value As at 31st March 2012 2012 2012 2011 2011 2011

Rs.’000 Rs.’000 Rs.’000 Rs.’000

18.1.1 Quoted Investments Contd.Plantations Balangoda Plantations PLC 100 2 2 100 2 6Hapugastenna Plantations PLC 100 1 4 100 1 7Horana Plantations PLC 100 1 3 100 1 7Kahawatte Plantations PLC 100 1 3 100 1 4Kegalle Plantations PLC 100 1 10 100 1 21Kelani Valley Plantations PLC 100 1 10 100 1 18Madulsima Plantations PLC 100 2 1 100 2 3Malwatte Valley Plantations PLC 100 1 1 100 1 11Maskeliya Plantations PLC 100 3 2 100 3 3Namunukula Plantations PLC 100 1 6 100 1 11Talawakelle Tea Estates PLC 100 2 2 100 2 5Udapussellawa Plantations PLC 100 1 3 100 1 5Watawala Plantations PLC 100 1 1 100 1 3Total 18 48 18 104

Total Quoted Investments 254 2,569 254 2,340

18.1.2 Unquoted Investments Waverly Power (Pvt) Ltd. - - 800,000 8,000 Ceylon Ocean Lines Container Services Ltd. - 250 - 250 Ceylon Ocean Lines Container Repairs Ltd. - - - 75 Lankem Technology Services Ltd. - - 4,999,995 5,000 Total 250 13,325

18.1.3 Debentures Bank of Ceylon 200 25,226 200 21,918 25,226 21,918

18.1.4 Unit Trusts Comtrust Equity Fund 94,856 784 1,609 94,856 784 2,391National Equity Fund 326,923 1,709 7,679 313,772 1,709 9,664Pyramid Unit Trust 58,597 518 1,627 55,290 518 2,080 3,011 10,915 3,011 14,135

As at 31st March 2012 2011 Rs.’000 Rs.’000 18.1.5 Fixed Deposits 500 500Total 500 500

Sector classification and market value per shares of quoted investments are based on the official valuation list published by the Colombo Stock Exchange.


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18 OTHER LONG-TERM INVESTMENTS (CONTD.) Company

No of Cost Market No of Cost Market Shares Value Shares ValueAs at 31st March 2012 2012 2012 2011 2011 2011

Rs.’000 Rs.’000 Rs.’000 Rs.’000

18.2 Company 18.2.1 Quoted Investments Banks,Finance & Insurance DFCC Bank PLC 5,370 49 605 1,492 49 256Total 49 605 49 256

18.2.2 Unquoted Investments Lankem Technology Services Ltd. - - - 4,999,995 5,000 -Total - - 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 326,923 1,709 7,679 313,772 1,709 9,664Total 1,709 7,679 1,709 9,664

Group No of Cost Market No of Cost Market Shares Value Shares ValueAs at 31st March 2012 2012 2012 2011 2011 2011

Rs.’000 Rs.’000 Rs.’000 Rs.’000

18.3 Short-Term Investments Dialog Axiata PLC 1,000 8 7 1,500,000 15,307 15,750Nations Trust Bank PLC 44,600 2,020 2,538 60,300 2,732 4,601Janashakthi Insurance Company PLC 153,900 2,323 1,785 339,400 5,123 5,600Tokyo Cement Company PLC (Non Voting) 93,900 3,789 2,535 100,000 4,550 4,400Tokyo Cement Company PLC (Voting) 285,900 17,497 10,578 285,900 18,321 17,383Kotmale Holdings PLC 1,000 26 40 1,000 25 53Colonial Motors PLC 224,600 101,425 71,827 - - -PC House PLC 810,400 15,168 6,645 - - -Citizens Development Bank PLC (Voting) 16 1 1 - - -Citizens Development Bank PLC ( Non Voting) 71 3 4 - - -Capital Alliance Finance PLC 4,175,048 157,320 157,817 - - -Infrastructure Developers PLC 421,900 48,332 61,007 - - -Renuka Agri Foods PLC 289,600 2,034 1,738 - - -Renuka Holdings PLC 124,937 6,384 4,810 - - -Nanda Investment & Finance PLC 30,000 263 258 - - -Orient Garments PLC 550,575 10,902 10,296 - - -HVA Foods PLC 959,500 20,375 14,392 - - -J.L Morrison Sons & Jones (Ceylon) PLC 6,603 1,622 1,400 - - -Piramal Glass Ceylon PLC 250,000 2,049 1,300 - - -John Keells Holdings PLC 78,100 15,530 16,089 - - - Raigam Wayamba Saltens PLC - - - 100,000 426 450Richard Pieris and Company PLC - - - 36,500 524 496 407,071 365,067 47,008 48,733Less: Provision for Impairment in Value of Investment s (42,004) - - - 365,067 365,067 47,008 48,733


18 OTHER LONG-TERM INVESTMENTS (CONTD.) Company

No of Cost Market No of Cost Market As at 31st March Shares Value Shares Value 2012 2012 2012 2011 2011 2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

18.4 Short-Term InvestmentsDialog Axiata PLC 1,000 8 7 1,500,000 15,307 15,750Nations Trust Bank PLC 44,600 2,020 2,538 60,300 2,732 4,601Janashakthi Insurance Company PLC 153,900 2,323 1,785 339,400 5,123 5,600Tokyo Cement Company PLC (Non Voting) 93,900 3,789 2,535 100,000 4,550 4,400Tokyo Cement Company PLC (Voting) 285,900 17,497 10,578 285,900 18,321 17,383Kotmale Holdings PLC 1,000 26 40 1,000 25 53Colonial Motors PLC 224,600 101,425 71,827 - - -PC House PLC 810,400 15,168 6,645 - - -Citizens Development Bank PLC (Voting) 16 1 1 - - -Citizens Development Bank PLC (Non Voting) 71 3 4 - - -Capital Alliance Finance PLC 4,175,048 157,320 157,817 - - -Infrastructure Developers PLC 421,900 48,332 61,007 - - -Renuka Agri Foods PLC 289,600 2,034 1,738 - - -Renuka Holdings PLC 124,937 6,384 4,810 - - -Nanda Investment and Finance PLC 30,000 263 258 - - -Orient Garments PLC 550,575 10,902 10,296 - - -HVA Foods PLC 959,500 20,375 14,392 - - -J.L Morision Sons and Jones (Ceylon) PLC 6,603 1,622 1,400 Raigam Wayamba Saltens PLC - - - 100,000 426 450 Richard Pieris and Company PLC - - - 36,500 524 496 389,492 347,678 47,008 48,733Less: Provision for Impairment in Value of Investment s (41,814) - - - 347,678 347,678 47,008 48,733

19. INVENTORIES Group Company

As at 31st March 2012 2011 2012 2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Finished Goods 1,145,778 987,625 479,448 331,248Raw Materials 652,435 706,935 411,506 301,866Produce Stock-Tea & Rubber 609,509 735,822 - -Growing Crop - Nurseries 72,850 37,714 - -Packing & Other Materials 76,303 - - -Work-in-Progress 9,006 8,672 - 8,396 2,565,881 2,476,768 890,954 641,510Less: Provision for Obsolete Inventories (39,845) (40,434) (36,612) (32,915) 2,526,036 2,436,334 854,342 608,595


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20. TRADE & OTHER RECEIVABLES Group Company


Trade Receivables 3,315,139 2,840,744 763,330 457,920Provision for Bad and Doubtful Debts (110,901) (82,002) (14,628) (12,936) 3,204,238 2,758,742 748,702 444,984

Other Receivables 391,763 388,459 116,212 106,773Deposits, Advances and Prepayments 205,914 184,191 11,725 10,046Staff Loan 72,824 87,048 478 849Taxes Recoverable ( Note 20.1) 371,990 268,694 179,889 150,209 1,042,491 928,392 308,304 267,877Total Trade and Other Receivables 4,246,729 3,687,134 1,057,006 712,861

20.1 Taxes Recoverable Value Added Tax 280,789 191,555 175,766 142,124Withholding Tax 8,067 13,808 - 1,060Advanced Company Tax 457 457 - -Economic Service Charge 78,554 61,943 - 6,094Nation Building Tax 4,123 - 4,123 -Social Responsibility Levy - 931 - 931 371,990 268,694 179,889 150,209

21. CASH & CASH EQUIVALENTS Favourable Balance Cash at Bank 1,578,088 1,104,353 38,192 64,988Fixed Deposits 141,826 211,721 48,363 -Cash in Hand 35,258 5,267 23,182 - 1,755,172 1,321,341 109,737 64,988

Unfavourable Balance Bank Overdraft (2,146,757) (824,478) (707,706) (332,007) (391,585) 496,863 (597,969) (267,019)


22. STATED CAPITAL As at 31st March 2012 2011

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 24,000,000 536,218 21,000,000 281,218Issued during the year - - 3,000,000 255,000At the end of the year 24,000,000 536,218 24,000,000 536,218

The holders of ordinary shares are entitled to receive dividend as declared from tim e 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 Reserve Fund

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Group Balance as at 01.04.2011 462,088 8,333 22,497 492,918Derecognition of Revaluation Reserve on Disposal (15,145) - - (15,145)Transfer from Revaluation Reserve to Retained Earnings (7,124) - - (7,124)Balance as at 31.03.2012 439,819 8,333 22,497 470,649

Company Balance as at 01.04.2011 87,377 8,333 - 95,710Balance as at 31.03.2012 87,377 8,333 - 95,710

23.1 Revaluation Reserve The revaluvation reserve relates to revaluation of freehold lands & buildings and represents the increase in the fair value of these

lands and buildings.

23.2 Capital Redemption Reserve Fund The amount set aside out of retained earnings for redemption of preference shares.


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24. INTEREST BEARING BORROWINGS Group Company


Repayable after one year Finance Lease Obligations- JEDB/SLSPC 24.1 397,923 403,951 - -Finance Lease Obligations- Others 24.2 221,030 184,528 7,542 9,968Long Term Loans - Others 24.4 1,541,585 1,886,783 285,313 169,933Debentures 24.6 513,500 313,500 350,000 150,000 2,674,038 2,788,762 642,855 329,901

Loans Payable to Related Parties 24.3 390,000 - 770,000 300,000Total 3,064,038 2,788,762 1,412,855 629,901

Repayable within one year Finance Lease Obligations- JEDB/SLSPC 24.1 6,024 5,793 - -Finance Lease Obligations- Others 24.2 96,932 82,027 4,590 11,280Long Term Loans - Others 24.4 1,651,030 1,309,966 135,491 41,516Short Term Loans 24.5 676,977 462,776 676,977 436,109Debentures 24.6 35,000 35,000 - - 2,465,963 1,895,562 817,058 488,905

Loans Payable to Related Parties 24.3 30,000 26,000 30,000 26,000Total 2,495,963 1,921,562 847,058 514,905Total Interest bearing Borrowings 5,560,001 4,710,324 2,259,913 1,144,806

24.1 Finance Lease Obligations -JEDB/SLSPC Gross Lease Obligations 759,205 781,375 - -Payments made during the year (22,170) (22,170) - -Less: Finance Charges allocated to future periods (333,088) (349,461) - - 403,947 409,744 - -

Analysis of Lease Obligations - (JEDB/SLSPC) by year of Repayment Payable within one year Gross Lease Obligations 22,170 22,170 - -Less: Finance Charges allocated to future periods (16,146) (16,377) - -Net Lease Obligations 6,024 5,793 - -

Payable within two to five years Gross Lease Obligations 88,680 88,680 - -Less: Finance Charges allocated to future periods (62,075) (63,098) - -Net Lease Obligations 26,605 25,582 - -


24. INTEREST BEARING BORROWINGS (CONTD.) Group Company


Payable after five years Gross Lease Obligations 625,907 648,081 - -Less: Finance Charges allocated to future periods (254,589) (269,712) - -Net Lease obligations 371,318 378,369 - -Repayable after one year 397,923 403,951 - -

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 Privatised Regional Plantation Companies relating to the Plantation Development Project, the aforesaid lease rental will be frozen for a period of six years commencing from fiscal year 2002/03. Accordingly the all inclusive lease rental payable by the company for a fiscal year is Rs. 59.6 Million as stated below.

Million

Gross Lease obligation per year 22.2Contingent Interest (Frozen for 6 Years) 37.4 59.6

The Charge to the Income Statement for the current financial year on account of interest is Rs. 46.5 Million (2010/2011 - Rs. 89.4 Million).

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.

Group Company


24.2 Finance Lease Obligations - Others Balance at the beginning 339,517 241,448 25,333 59,284 339,517 241,448 25,333 59,284Leases acquired during the year 223,152 187,681 - -Payments made during the year (164,940) (89,612) (10,929) (33,951)Less: Interest in suspense (79,767) (72,962) (2,272) (4,085)Balance at the end of the year 317,962 266,555 12,132 21,248

Analysis of Finance Lease Obligations by year of RepaymentPayable within one year Gross Lease Obligations 131,639 109,438 5,937 13,672Less: Finance Charges Unamortized (34,707) (27,411) (1,347) (2,392)Net Lease Obligations 96,932 82,027 4,590 11,280

Payable within one to five years Gross Lease Obligations 259,695 225,268 8,466 11,662Less: Finance Charges Unamortized (38,665) (40,740) (924) (1,694)Net Lease Obligations 221,030 184,528 7,542 9,968


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24. INTEREST BEARING BORROWINGS (CONTD.) Group Company


24.3 Loans Payable to Related Parties Balance at the beginning 26,000 84,000 326,000 85,000Loans transferred/obtained during the year 414,000 - 494,000 300,000Payments made during the year (20,000) (58,000) (20,000) (59,000)Balance at the end 420,000 26,000 800,000 326,000Payable within one year (30,000) (26,000) (30,000) (26,000)Payable after one year 390,000 - 770,000 300,000

Loans Payable to Related Parties are as followsThe Colombo Fort Land & Building Co.PLC 420,000 26,000 420,000 26,000Kotagala Plantations PLC - - 300,000 300,000Sigiriya Village Hotels PLC - - 80,000 - 420,000 26,000 800,000 326,000

The Company has obtained loans from related parties and interest on the outstanding balances is charged at the rates as specified below ;

Amount Interest Rate Rs. ‘000 The Colombo Fort Land & Building Co. PLC Loan 1 300,000 15% Loan 2 90,000 9% Loan 3 30,000 12.5% 420,000

Kotagala Plantations PLC 300,000 9%Sigiriya Village Hotels PLC 80,000 9%

Group Company


24.4 Long Term Loans - Others Balance at the beginning 3,196,749 2,084,149 211,449 344,327Acquisition of Subsidiary - 4,635 - - 3,196,749 2,088,784 211,449 344,327Loans obtained during the year 625,767 1,746,079 250,000 100,000Exchange Fluctuations (46,432) (13,393) - -Payments made during the year (583,469) (624,721) (40,645) (232,878)Balance at the end 3,192,615 3,196,749 420,804 211,449Payable within one year (1,651,030) (1,309,966) (135,491) (41,516)Payable after one year 1,541,585 1,886,783 285,313 169,933

24.5 Short Term Loans Term Loans 91,006 101,667 91,006 75,000Trust Receipt Loans 585,971 361,109 585,971 361,109 676,977 462,776 676,977 436,109

24.6 Debentures Unsecured Redeemable Debentures 448,500 248,500 350,000 150,000Guaranteed Redeemable Debentures 100,000 100,000 - - 548,500 348,500 350,000 150,000Payable within one year (35,000) (35,000) - -Payable after one year 513,500 313,500 350,000 150,000


24. INTEREST BEARING BORROWINGS (CONTD.) Company i) 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 Average Weighted Prime Lending Rate (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.

ii) The Company has issued Rs. 200 Million Rated Unsecured Unlisted Redeemable Debentures of the value of Rs. 1,000/- each on 5th April 2011 to Sri Lanka Insurance Corporation Limited 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 17 th 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).

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.

iii) Waverly Power (Pvt) Ltd. has pledged its own share certificates issued to its shareholders (Lankem Developments PLC and Agarapatana Plantations Ltd.) for the loans obtained from DFCC and HNB amounting to Rs. 54 Million each.

24.7 Assets pledged as Security Against Interest bearing Borrowings

Company Lender

Balance as at

31.03.2012

Balance as at 31.03.2011 Terms of Repayment Security Pledged

(Rs.) Million (Rs.) Million

Lankem Ceylon PLC PABC PLC 8.6 24.5 In 47 monthly installments of Rs.1,230,000/- each and a final installment of Rs.1,190,000/- together with interest payable monthly on reducing balance of capital.

a) Primary Mortgage for Rs. 87 Mn. installments over land & agrochemical factory building at Ekala, Ja-ela.

b) Overdraft Agreement.

Sampath Bank PLC 100.0 100.0 In 4 Years in 16 equal quarterly installments of Rs.18,750,000/-.

Primary Mortgage for Rs. 300 Mn. over land & Building situated in Fort owned by The Colombo Fort Land & Building Co.PLC.

LankaputhraDevelopment BankLoan 1

- 1.3 60 equal monthly installments a) Mortgage over Primary bond of Rs. 5.7 Mn. which pledges some machinery of the Company.

Loan 11 - 0.2 60 equal monthly installments

Commercial Bank of Ceylon PLC

62.2 85.3 In 47 monthly installments of Rs.2,100,000/- each and a final installment of Rs.1,300,000/- together with interest payable monthly on reducing balance of capital.

a) Primary Mortgage for Rs. 145 Mn. over land at Ja-ela & Gonawala.

Indian Bank 200.0 - In 3 Years in 12 equal quarterly installments of Rs.16,666,666/-.

Hatton National Bank PLC

50.0 - In 59 monthly installments of Rs.835,000/- each and a final installment of Rs.735,000/- together with interest payable monthly on reducing balance of capital.

420.8 211.3


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Company Lender

Balance as at

31.03.2012



Beruwala Resorts Ltd.

Sampath Bank PLC - Term Loan

30.0 30.0 48 Equal monthly installments of Rs.778,480/-.

Mortgage shares of B.O.T. Hotel Services (Pvt) Ltd for Rs.30 Mn for Sampath Bank PLC Term Loan

30.0 30.0

Sigiriya Village Hotels PLC

Commercial Bank of Ceylon PLC

- 7.2 Equal monthly installments of Rs.166,666/-

Corporate Guarantee for Rs.10Mn by Lankem Ceylon PLC.

- 7.2

Kotagala Plantations PLC

National Development Bank PLC - Term Loan

Approved facility - Rs.103Mn.11.78%

- 4.3 Repayable over 10 years from 30.11.2001 in equal monthly installments of Rs. 410,287/- Rs. 148,433/- and Rs. 57,497/- respectively.

Primary Mortgage over leasehold rights of Stonycliff, Vogan, Gikiyanakanda and Delkeith Estates and all immovable properties of these Estates.

Approved facility -Rs.124Mn11.51%

12.5 23.5 Repayable over 10 years from 30.05.2003, 30.06.2003 and 30.08.2003 in equal monthly installments of Rs. 618,745/-, Rs. 41,250/- and Rs. 248,333/- respectively.

Secondary Mortgage over leasehold rights of Stonycliff, Vogan, Gikiyanakanda and Delkeith Estates and all immovable properties of these Estates.

Approved facility -Rs.215Mn.15.58%

215.0 215.0 Repayable over 5 years from 21.12.2012, in equal monthly installments of Rs. 3,300,000/- and Rs. 283,400/- respectively. (After the re-finance is received interest rate would be 15.58%).

Secondary Mortgage over leasehold rights of Stonycliff, Vogan, Gikiyanakanda and Delkeith Estates and all immovable properties of these Estates.

Approved facility -Rs.150Mn.AWPLR+2.25%

88.0 133.0 Repayable over 45 months starting from 29.09.2010 in 32 installments ending in 29.07.2013.

Securitisation of Kotagala Tea receivable over a period of 45 months.

Approved facility -Rs.250Mn.AWPLR+4.8%

180.2 243.8 Repayable over 4 years in first monthly installments of Rs. 900,000/- and 47 monthly installments of Rs. 3,300,000/-.

Primary Mortgage over 12 Mn. Ordinary Shares of C. W. Mackie PLC. Further mortgage over leasehold rights of Buildings,Plant & Machinery in Stonycliff, Vogan, Gikiyanakanda and Delkeith Estates and all immovable properties of these Estates.

Approved facility -Rs.300Mn - AWPLR+1.5%

256.2 300.0 Repayable over 38 installments starting from 24.10.2011.

Securitisation of Kotagala Tea receivable.

DFCC Bank PLC - Term Loan

Approved facility -Rs. 211Mn.11.55%

19.2 32.0 Repayable over 10 years from 15.09.2003 in equal monthly installments of Rs. 1,067,614/- each.

Primary Mortgage over leasehold rights of Drayton, Raigam and Padukka Estates.

Approved facility -Rs.50Mn.12.75%

17.9 22.9 Repayable over 10 years from 23.06.2005 in equal monthly installments of Rs. 416,667/- each.

a) Primary Mortgage over leasehold rights to the land & buildings of Craigie Lea and Bogahawatte Estates.

b) A Corporate Guarantee of Rs. 50Mn. from Lankem Tea & Rubber Plantations (Pvt) Ltd.

24. INTEREST BEARING BORROWINGS (CONTD.)24.7 Assets pledged as Security Against Interest Bearing Borrowings (Contd.)


Company Lender

Balance as at

31.03.2012




Approved facility - Rs.7.5Mn.12%

1.0 2.0 Repayable over 8 years from 25.06.2005 in equal monthly installments of Rs. 77,781/- each.

a) Primary Mortgage over leasehold rights to the land & buildings of Craigie Lea and Bogahawatte Estates.

b) A Corporate Guarantee of Rs. 7.46Mn from Lankem Tea & Rubber Plantations (Pvt) Ltd.

Approved facility - Rs.50Mn.AWPLR or Average Treasury Bill Rate

40.6 49.7 Repayable over 5 years in equal 60 monthly installments. Grace period is 18 Months.

Secured under the mortgage bond existing No. 1068 dated 8th September 1998 over the leasehold rights of Drayton, Padukka and Rayigam estates.

Lanka Orix Leasing Company PLC

Approved facility - Rs.40Mn.18%

22.4 28.1 Repayable over 7 years from 30.03.2009 in 84 equal monthly installments of Rs. 476,191/- each.

On demand Promissory Note for Rs. 40 Mn. with interest at 18% p.a until the receipt of re-finance of the subsidiary loan 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 March,1995 and the amendments thereto bearing indenture No.1522 dated 4th July,1995. Corporate Guarantees of M/s. Lankem Plantation Holdings Ltd. and M/s. Lankem Tea & Rubber Plantations (Pvt) Ltd.

Sampath Bank PLC

Approved Facility -Rs. 50 Mn.15%

40.6 46.9 In 95 equal monthly installments of Rs.521,000/- and a final installment of Rs. 505,000/- (Capital) together with the interest after a grace period of 48 months commencing from the date of 1st disbursement.

Loan Agreement for Rs.50Mn Primary Mortgage Bond for Rs.50Mn over leasehold rights of Arapolakande Rubber Estate at Kalutara together with factory buildings.

People’s Leasing Company PLC

Term Loan -Rs.13 Mn.13.32%

3.6 7.1 Interest monthly at the rate of 24% from the time of disbursement of funds till the time the re-finance is received from DFCC.Thereafter ,Rs. 147,070/- within the capital grace period of 12 months and Rs. 350,826/- (Capital+Interest) to be paid within 48 months.

Primary Mortgage over two colour separators. Corporate Guarantee of Lankem Tea & Rubber Plantations (Pvt) Ltd. promissory notes.



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Company Lender

Balance as at

31.03.2012




Term LoanRs.27.7 Mn.

25.0 27.7 Interest monthly at the rate of 21% from the time of disbursement of funds till the time the re-finance is received from DFCC. Thereafter payable within 60 months with a capital grace period of 12 months.

Primary Mortgage over two colour separators. Corporate Guarantee of Lankem Tea & Rubber Plantations (Pvt) Ltd. promissory notes.

E-Friends Term Loan 1 - Rs.1.8Mn.

1.1 1.5 Interest monthly at the rate of 25% from the time of disbursement of funds till the time the re-finance is received from PMU. Thereafter Rs. 9,760/- within the capital grace period of 12 months and Rs. 41,924/- (Capital +Interest) to be paid within 60 months.

Loan Agreement, acceptance and receipt. Corporate Guarantee of Lankem Tea & Rubber Plantations (Pvt) Ltd.

Term Loan 2 -Rs.1.5 Mn.

1.0 1.3 Interest monthly at the rate of 25% from the time of disbursement of funds till the time the re-finance is received from PMU. Thereafter Rs. 8,281/- within the capital grace period of 12 months and Rs.35,573/- (Capital +Interest) to be paid within 60 months.


Term Loan 3 - Rs.10.2Mn.

7.3 9.7 Interest monthly at the rate of 25% from the time of disbursement of funds till the time the re-finance is received from PMU.There is a capital grace period of 12 months and the loan period is 60 months.


Term Loan 4 - Rs.9.6Mn.



Term Loan 5 -Rs.9.6 Mn.



Term Loan 6 -Rs. 3.8Mn.

- 3.8 Interest monthly at the rate of 25% from the time of disbursement of funds till the time the re-finance is received from PMU.There is a capital grace period of 12 months and the loan period is 60 months.


Term Loan 7 - Rs.2.0 Mn

- 2.0 Interest monthly at the rate of 25% from the time of disbursement of funds till the time the re-finance is received from PMU.There is a capital grace period of 12 months and the loan period is 60 months.




Company Lender

Balance as at

31.03.2012




People’s BankTerm LoanRs.100 Mn

29.1 79.2 Repayable within 24 installments of Rs. 4,166,666/- each.

Securitized tea sales of Mayfield Estate.

974.5 1,251.5

Agarapatana Plantations Ltd

DFCC Bank - ADB Long Term Loan13.7%

5.5 13.8 1st installment of Rs. 691,884/- and 119 monthly installments of Rs. 691,429/- payable commencing from 01.11.2002.

Primary Mortgage over leasehold rights to bare land and buildings of Balmoral, Hauteville and Nayabedde Estates.

Term Loan11.75%

2.3 7.0 1st installment of Rs. 390,917/- and 119 monthly installments of Rs. 344,538/- payable commencing from 01.12.2003.

Further Mortgage over leasehold rights to land and buildings of Balmoral, Hauteville and Nayabedde Estates.

Term Loan13.27%

9.0 11.7 1st installment of Rs.217,545/- and 119 monthly installments of Rs. 217,432/- payable commencing from 01.10.2005.

Further Mortgage over leasehold rights to land and buildings of Balmoral, Hauteville and Nayabedde Estates.

Term Loan17.75%

1.0 1.8 1st installment of Rs. 77,805/- and 95 monthly installments of Rs. 7 7,781/- payable commencing from 01.06.2005.

A Guarantee from Lankem Tea & Rubber Plantations (Pvt) Ltd.

Term Loan11.75%

1.6 2.6 1st Installment of Rs. 86,373 and 119 monthly installments commencing from 01.12.2003

Further Mortgage over leasehold rights to land and buildings of Balmoral, Itanterdle and Noyebadde Estates.


Term Loan(AWPLR + 1.5%)

- 1.0 48 monthly installments commencing from 01.07.2007.

A Corporate Guarantee of Lankem Plantation Holdings Ltd for Rs.45Mn.Primary Mortgage over leasehold rights to bare land and buildings of Pitaratmale and Kahagalle Estates.

Lanka Orix Leasing Company PLC

Term Loan6.5%

1.1 1.9 60 monthly installments commencing from 30.10.2008.

Loan agreement and Corporate Guarantee from Lankem Tea & Rubber Plantations (Pvt) Ltd.

People’s Leasing Company PLC

Term Loan6.5%



Term Loan6.5%


Loan agreement acceptance from Lankem Tea & Rubber Plantations (Pvt) Ltd.

Term Loan6.5%



Term Loan6.5%


Loan agreement and receipts from Lankem Tea & Rubber Plantations (Pvt) Ltd.

Term Loan 14 -



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Company Lender

Balance as at

31.03.2012



Agarapatana Plantations Ltd

Bank of Ceylon

Term Loan14%

- 25.6 24 monthly installments commencing from 17.07.2009

Mortgage over leasehold rights of Glenanore and Haputale Estates including machinery fixed each of these estates.Treasury Guarantee and Loan Agreement.

National Development Bank PLC

Term Loan - AWPLR + 2%

60.0 - 12 monthly installments commencing 15.11.2011

Loan Agreement acceptance & Broker Certificate from Forbes & Walkers Tea Brokers (Pvt) Ltd.

Term Loan - AWPLR + 1.15%

100.0 - 14 monthly installments commencing 15.05.2012


Term Loan - AWPLR + 2%

177.5 200.0 14 monthly installments commencing from 15.07.2011


Term Loan 24.0 50.0 38 monthly installments commencing from 24.10.2011


422.4 350.9

Marawila Resorts PLC


Loan I 62.0 68.2 Outstanding balance to be repaid in quarterly installments of US$ 15,000 in June & September and US$ 35,000 in December and March.

Existing secondary, Floating Mortgage Bond, totalling US$ 5.1 Mn over the hotel premises at Marawila

Loan II 182.0 172.8 Outstanding balance to be repaid in quarterly installments of US$ 15,000 in June & September and US$ 35,000 in December and March.


Loan III-Interest Free 139.0 135.2 Outstanding balance to be repaid in quarterly installments of US$ 15,000 in June & September and US$ 35,000 in December and March (interest free). Bulk payment of US$ 100,000 to be made at the year end in order to complete on aggregate repayment of US$ 400,000 per annum.


383.0 376.2



24. INTEREST BEARING LOANS & BORROWINGS (CONTD.)24.8 Group24.8.1 C.W. Mackie PLCC.W. Mackie PLC has obtained a restructured subordinated loan from the Industrialization Fund for Developing Countries Denmark which is outstanding and is denominated and payable in Danish Kroner and is converted into Sri Lankan Rupees at the exchange rate prevailing as at 31st March 2012 was Rs. 32.1 Million (as at 31st March 2011 Rs. 56.9 Mn.).

A primary concurrent mortgage bond for the mortgage of the Company’s leasehold interests in the premises at No. 34 and 36, D. R. Wijewardana Mawatha, Colombo 10 in favour of the lenders consortium composed of NDB Bank PLC (Rs. 64.0 million), Hatton National Bank PLC (Rs. 54.0 million) and Commercial Bank of Ceylon PLC ( Rs. 47.0 million) to provide security for the Company’s borrowings from the said banks was duly executed in July 2003.

As per the Company’s request, the lenders consortium has released and discharged the primary concurrent mortgage of the Company’s leasehold interest in the premises and increased their respective share of the primary concurrent mortgage over stock and book debts covering their exposure in their favour.

25. DEFERRED INCOME Group Company


At the beginning of the year 683,172 614,028 5,641 5,641Grants received during the year 11,211 69,144 - -At the end of the year 694,383 683,172 5,641 5,641

Amortisation At the beginning of the year 122,289 106,118 4,366 2,183Amortisation for the year 19,001 16,171 1,275 2,183At the end of the year 141,290 122,289 5,641 4,366 553,093 560,883 - 1,275

The funds have been received by Kotagala Plantations PLC and Agarapatana Plantations Ltd. from the Plantation Housing and Social Welfare Trust, Asian Development Bank, Plantation Development Support Program, Plantation Human Development Trust, Plantation Reform Project and Ministry of Livestock Development and 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 and 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 2012 2011 2012 2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Balance at the beginning of the year 270,588 212,925 18,963 21,710Acquisition of Subsidiaries 2,384 - - - 272,972 212,925 18,963 21,710Charged / (Reversal) to the Income Statement 95,944 57,663 (10,041) (2,747)Balance at the end of the year 368,916 270,588 8,922 18,963

26.1 Deferred Tax Composition Deferred Tax Assets Defined Benefit Obligations 128,004 98,460 25,623 16,627Tax Losses carried forward 99,585 76,493 2,477 - 227,589 174,953 28,100 16,627

Defered Tax Liabilities Property, Plant & Equipment 596,505 445,541 37,022 35,590 596,505 445,541 37,022 35,590Net Deferred Tax Assets / (Liabilities) (368,916) (270,588) (8,922) (18,963)


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27. RETIREMENT BENEFIT OBLIGATIONS Group Company


Fair Value of Retirement Benefit Assets 112,283 107,701 67,346 63,687

Present Value of the Funded Obligations 215,192 178,967 158,855 123,065Present Value of the Unfunded Obligations 1,497,698 1,435,261 - - 1,712,890 1,614,228 158,855 123,065

Company An Acturial valuation has been carried out as at 31st March 2012 by Messrs. Acturial and Management Consultants (Pvt) Ltd as required by the Sri Lanka Accounting Standard 16 ‘Employee Benefits’.

Plan assets of the Company are held by an approved external gratuity fund where it invests in insurance scheme amounting to Rs. 67.3 Million as at the Balance Sheet date.

The valuation method used by the actuary is the ‘Project Unit Credit Method’, the method recommended by Sri Lanka Accounting Standard 16 -’Employee Benefits’.

Group Company


27.1 Fair Value of Retirement Benefit Assets Movements in Fair Value of Plan Assets Fair Value of Plan Assets at the beginning of the year 107,701 104,101 63,687 66,083Contribution paid to the Plan Assets 6,903 7,029 - -Expected Return on Plan Assets 5,187 7,559 1,237 -Benefits paid by the Plan Assets/the Company (13,579) (12,763) (5,252) (8,284)Actuarial Gains/(Losses) 6,071 1,775 7,674 5,888Fair Value of Retirement Benefit Assets 112,283 107,701 67,346 63,687

27.2 Present Value of the Funded Obligations Movement in Present Value of Funded Obligations Balance at the beginning of the year 199,351 155,444 123,065 110,091Provision for the year 42,706 35,618 29,283 23,558 242,057 191,062 152,348 133,649Benefits paid by the Plan Assets/the Company (18,484) (12,762) (10,155) (8,284)Actuarial (Gains) / Losses 15,384 21,051 16,662 (2,300)Present value of Defined Benefit Obligations 238,957 199,351 158,855 123,065

Expenses Recognised in the Income Statement Current Service Cost 20,634 14,957 15,746 11,447Interest on Obligation 22,072 20,661 13,537 12,111Provision for the year 42,706 35,618 29,283 23,558Expected Return on Plan Assets (5,187) (7,559) (1,237) -Net Actuarial (Gains) / Losses 12,708 8,003 10,225 (8,188) 50,227 36,062 38,271 15,370


27. RETIREMENT BENEFIT OBLIGATIONS (CONTD.) Group Company


27.3 Present Value of Net Obligations

Fair Value of Plan Assets 112,283 107,701 67,346 63,687

Present Value of Funded Obligations (238,957) (199,351) (158,855) (123,065)Unrecognised Actuarial (Gains)/Losses 27,380 29,536 - -Arrears Payable to Non Contributory Gratuity Fund (3,615) (9,152) - -Net Present Value of Funded Obligations (215,192) (178,967) (158,855) (123,065)Present Value of Net Obligations (102,909) (71,266) (91,509) (59,378)

Group

As at 31st March 2012 2011 Rs. ‘000 Rs. ‘000

27.4 Present Value of the Unfunded Obligations Movement in Present Value of Unfunded Obligations Balance at the beginning of the year 1,435,261 1,246,191Acquisition of Subsidiaries 953 2,100Provision for the year 272,749 215,046 1,708,963 1,463,337Gratuity Paid (235,410) (113,113)Actuarial (Gains) /Losses 24,145 85,037Present Value of Defined Benefit Obligations 1,497,698 1,435,261

Expenses Recognised in the Income Statement Current Service Cost 108,538 88,835Interest on Obligations 164,211 126,211Provision for the year 272,749 215,046Net Actuarial (Gains) /Losses 24,145 85,037 296,894 300,083

Group i) Agarapatana Plantations Ltd.

The gratuity liability of the Company as at 31st March 2012 is based on the acturial valuation carried out by a professionally qualified actuary firm Messrs Acturial and Management Consultants (Private) Ltd. As per the acturial valuation the liability as at 31st March 2012 is Rs. 898,759,075/-. 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 2012, the liability would have been of Rs. 1,267,611,504/- (2011 - Rs. 1,107,793,138/-) .Hence there is a contingent liability of Rs. 368,852,429/- (2011-Rs. 249,598,506/-) which would crystalise only if the Company ceases to be a going concern.

ii) Kotagala Plantations PLC The retirement benefit obligation as at 31st March 2012 is based on the actuarial valuation carried out by Messrs Actuarial & Management Consultants (Private) Ltd. as per which liability as at 31st March, 2012 was Rs. 568,879,000/-. If the Company had provided for gratuity on the basis of payment of Gratuity Act No. 12 of 1983 the lialibilty would have been Rs. 753,639,101/-. Hence there is a contingent liability of Rs. 184,742,101/- which would crystalise only if the Compnay ceases to be a going concern.

iii) Marawila Resorts PLC The retirement benefit obligation as at 31st March 2012 is based on acturial valuation carried out by Messrs Piyal S. Goonethilleke and Associates as per which liability as at 31st March 2012 was Rs. 4,855,072/-.


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27. RETIREMENT BENEFIT OBLIGATIONS (CONTD.)27.4 Present Value of the Unfunded Obligations - Group (Contd.)

iv) C. W. Mackie PLC The retirement benefit obligations as at 31st March 2012 is based on acturial valuation carried out by Messrs Piyal S. Goonethilleke and Associates as per which liability as at 31st March 2012 was Rs. 41.3 Million (2011 – Rs. 43.4 Million) v) 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 2012 in respect of the companies are stated below:

Company Name Expected Salary Discount Rate Liability as at Increment Rate 31.03.2012 Rs. Million Lankem Ceylon PLC 10% 11% 158.85 Lankem Developments PLC 10% 11% 0.15 Marawila Resorts PLC 10% 11% 4.86 C.W.Mackie PLC 12% 10% 53.32 Kotagala Plantations PLC Workers - 16% every two years and for other categories of staff - 10% p.a 11% 568.88 Agarapatana Plantations Ltd. Workers - 16% increase once in two years and staff - 10% p.a 11% 898.76 Beruwala Resorts Ltd. 11% 10% 1.48Lankem Consumer Products Ltd. 10% 11% 0.48SunAgro LifeScience Ltd. 10% 11% 0.37Lankem Paints Ltd. 10% 11% 2.06

28 TRADE AND OTHER PAYABLES Group Company


Trade Payables 1,496,550 1,012,659 857,751 509,265Other Payables 1,035,640 718,460 182,206 145,352Accrued Expenses 235,773 533,029 30,752 40,800ESC Payable 14,706 11,272 14,251 10,209WHT Payable 1,046 569 1,046 569Unclaimed Dividend 19,873 15,398 6,086 -NBT Payable 2,048 2,671 - 964EPF/ETF Payable 152,557 74,657 - -Payable to Employees 239,838 225,924 - -VAT/GST Payable 36,566 11,565 - -PAYE Tax Payable 109 34 - -Penalties Payable 34,744 77 - -Provision for Breakages 4,323 2,703 - -Other Levies Payable - 836 - - 3,273,773 2,609,854 1,092,092 707,159

28.1 Accrued expenses & other payables for the Group include Rs. 13.3 Million on penalty and pradeshiya sabha tax payables of Marawila Resort PLC as more fully described in note No 31.2 to these financial statements.


29 RELATED PARTY TRANSACTIONS Group Company


29.1 Amounts due from Related Parties (a) Amounts due from Related Parties - Trade Receivables

Subsidiaries Lankem Paints Ltd. - - 383,192 262,397Lankem Consumer Products Ltd. - - 22,857 40,676Lankem Chemicals Ltd. - - 36,843 41,090Agarapatana Plantations Ltd. - - 333 -Kotagala Plantations PLC - - 2,967 -C. W. Mackie PLC - - 4 - - - 446,196 344,163

(b) Amounts due from Related Parties Subsidiaries Agarapatana Plantations Ltd. - - 1,657 2,077Associated Farms (Pvt) Ltd. - - 22,673 31,853Beruwala Resorts Ltd. - - 5,050 226,288Lankem Consumer Products Ltd. - - 63,015 60,917Lankem Developments PLC - - 717 29,456Lankem Paints Ltd. - - 113,154 122,410SunAgro Farms Ltd. - - 29,482 32,523SunAgro Lifescience Ltd. - - 125,116 34,519Colombo Fort Hotels Ltd. - - 60,888 55,636BOT Hotel Services (Pvt) Ltd. - - 3,777 13,818Lankem Tea & Rubber Plantations (Pvt) Ltd. - - 20,925 60,987Lankem Chemicals Ltd. - - 3,899 -Marawila Resorts PLC - - - 22,862Kotagala Plantations PLC - - - 5,047 - - 450,353 698,393Less : Provision for Bad & Doubtful Debts - Related Parties (29.1.1) - - (26,754) (26,754) - - 423,599 671,639


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29 RELATED PARTY TRANSACTIONS (CONTD.) Group Company


29.1 Amounts due from Related Parties (Contd.) Affiliates E.B. Creasy & Company PLC 1,382 2,420 994 2,159Carplan Ltd. 145 145 - -The Colombo Fort Land & Buildings Co.PLC 181,940 164,907 - -Darley Butler & Co. Ltd. 221 4,425 - -Dutch Dairy Foods Ltd. 31,945 31,945 - -Sherwood Holidays Ltd. 15,824 5,308 - -Tropical Beach Resorts Ltd. 30 25 - -Voyages Ceylon (Pvt) Ltd. 3,155 3,155 - -York Hotel Management Services Ltd. 4,735 12,897 - -SunAgro Foods Ltd. 77,068 - 63,708 -Sunrise Resorts Ltd. 1,045 - - -Ceylon Tea Brokers PLC 684 - - -Creasey Plantation Management Ltd. - 250 - -Others 35 473 - - 318,209 225,950 64,702 2,159Less: Provision for Bad & Doubtful Debts - Related Parties (Note 29.1.1) (35,198) (85,887) - - 283,011 140,063 64,702 2,159Key Management Personnel - - - -Total Amounts due from Related Parties 283,011 140,063 488,301 673,798

29.1.1 Provision for Bad & Doubtful Debts - Related Parties Subsidiaries Lankem Consumer Products Ltd. - - 26,754 26,754 - - 26,754 26,754

Affiliates Carplan Ltd. 98 98 - -Dutch Dairy Foods Ltd. 31,945 31,945 - -The Colombo Fort Land & Building Co. PLC - 50,689 - -Voyages Ceylon (Pvt) Ltd. 3,155 3,155 - - 35,198 85,887 - - 35,198 85,887 26,754 26,754

29.2 Loans due from Related Parties The Colombo Fort Land & Building Co. PLC 400,000 - - -Colombo Fort Hotels Ltd. - - 55,000 -BOT Hotel Services (Pvt) Ltd. - - 14,000 -Lankem Developments PLC - - 25,000 -Lankem Tea & Rubber Plantations (Pvt) Ltd. - - 60,000 -Balance at the end of the year 400,000 - 154,000 -Receivable within one year (20,000) - (154,000) -Receivable after one year 380,000 - - -

29.3 The Company has not made any provision in the financial statements in respect of amount due from Colombo Fort Hotels Ltd, Associated Farms Ltd, SunAgro Farms Ltd and Lankem Developments PLC as at the reporting date. Further the Company has not made a full provision in the financial statements in respect of amounts due from Lankem Consumer Products Ltd. other than for the provision of Rs. 26.75 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.


29 RELATED PARTY TRANSACTIONS (CONTD.) Group Company


29.4 Amounts due to Related Parties (a) Amounts due to Related Parties - Trade Payables Subsidiaries Lankem Research Ltd. - - 46,785 131,844Lankem Tea & Rubber Plantations (Pvt) Ltd. - - 14 -Sigiriya Village Hotels PLC - - 3,876 -Marawila Resorts PLC - - 721 - - - 51,396 131,844

(b) Amounts due to Related Parties Subsidiaries Lankem Research Ltd. - - 105,105 14,782Sigiriya Village Hotels PLC - - 25,123 137,007Lankem Exports (Pvt) Ltd. - - 22 22Kotagala Plantations PLC - - 6,732 -Lankem Technology Services Ltd. - - 4,925 -Lankem Chemicals Ltd. - - - 9,342 - - 141,907 161,153

Affiliates Island Consumer Supplies (Pvt) Ltd. 40,500 40,500 40,500 40,500Darley Butler & Co. Ltd. 76,518 65,131 24 24York Hotel Management services Ltd. 17,459 14,479 5,132 5,132E.B. Creasy & Company PLC 2,613 1,901 1,096 -Carplan Ltd. 43 257 - -Colonial Motors PLC 2,177 2,165 - -Creasy Plantation Management Ltd. 4,428 4,291 - -Harrison Malayalam Ltd. 140 140 - -Sherwood Holidays Ltd. 194 194 - -The Colombo Fort Land & Building Co. PLC 48,490 - 24,887 59,967E.B. Creasy Logistic (Pvt) Ltd. 2,089 - 2,089 -Ceylon Trading Co. Ltd. 2,043 - - -Others - 25 - 5,000 196,694 129,083 73,728 110,623

Key Management Personnel - - - - - - - -Total Amounts due to Related Parties 196,694 129,083 215,635 271,776


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29 RELATED PARTY TRANSACTIONS CONTD29.5 Transaction With Related Parties - Company 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 the Related Party Name of the Director Nature of the transaction Amount Receivable/ Receivable/ (Payable) (Payable) balance balance as at as at 31.03.2012 31.03.2011 Rs’000 Rs’000 Rs’000

E.B. Creasy & Co. PLC Mr. A. Rajaratnam Fund Transfer (2,793) Mr. S. D. R. Arudpragasam Recovery of Expenses 2,193 Mr. R. N. Bopearatchy Sale of Goods 1,008 Office Rent (1,573) Current Account 994 2,159

Darley Butler & Co. Ltd. Mr. A. Rajaratnam Current Account - (24) (24) Mr. S. D. R. Arudpragasam Mr. R. N. Bopearatchy

The Colombo Fort Land & Mr. A. Rajaratnam Fund Transfers (298,279) Building Co. PLC Mr. S. D. R. Arudpragasam Settlement of Group Service fee (5,492) Mr. N. H. B. S. Perera Reimbursement of expenses 1,220 Mr. Anushman Rajaratnam Interest Expense (26,369) (Appointed w.e.f. 28.11.2011) Transferred to Loan 364,000 Current Account (24,887) (59,967) Loans Obtained 394,000 420,000 (26,000)

Lankem Paints Ltd. Mr. A. Rajaratnam Sale of goods 1,508,947 (Retired on 29.07.2011) Interest Income 32,752 Mr. S. D. R. Arudpragasam Recovery of Expenses 461,598 Mr. Anushman Rajaratnam Fund Transfers (1,891,758) Mr. R. N. Bopearatchy Current Account- Trade Related 383,192 262,397 Mr. D. L.Vitharana Current Account- Others 113,154 122,410 Mr. K. P.David Mr. A. R. Peiris

Lankem Chemicals Ltd. Mr. A. Rajaratnam Sale of goods 519,318 (Retired on 29.07.2011) Recovery of Expenses 96,210 Mr. S. D. R. Arudpragasam Fund Transfer (606,534) Mr. Anushman Rajaratnam Current Account- Trade Related 36,843 41,090 Mr. R. N. Bopearatchy Current Account- Others 3,899 (9,342) Mr. D. L. Vitharana Mr. K. P. David Mr. A. R. Peiris

Lankem Consumer Products Ltd. Mr. A. Rajaratnam Sale of goods 184,308 (Retired on 29.07.2011) Salaries & Wages Recovered 24,253 Mr. S. D. R. Arudpragasam Recovery of Expenses (175,905) Mr. Anushman Rajaratnam Fund Transfer (48,377) Mr. R. N. Bopearatchy Current Account- Trade Related 22,857 40,676 Mr. D. L.Vitharana Current Account- Others 63,015 60,917 Mr. K. P.David Mr. A. R. Peiris



29 RELATED PARTY TRANSACTIONS (CONTD.)29.5 Transaction With Related Parties - Company (Contd.)


Lankem Research Ltd. Mr. A. Rajaratnam Research Expenses (46,785) (Retired on 29.07.2011) Fund Transfer 19,623 Mr. S. D. R. Arudpragasam Salaries & Wages Recovered 10,559 Mr. Anushman Rajaratnam Expenses Recovered 11,339 Mr. R. N. Bopearatchy (151,890) (146,626) Mr. D. L.Vitharana Mr. K. P. David Mr. A. R. Peiris

Associated Farms (Pvt) Ltd. Mr. A. Rajaratnam Fund Transfer (1,256) (Retired on 29.07.2011) Salaries & Wages Recovered (8,434) Mr. S. D. R. Arudpragasam Expenses Recovered 510 Mr. Anushman Rajaratnam 22,673 31,853 (Resigned on 19.04.2012) Mr. A. R. Peiris Mr. K. P. David

SunAgro Farms Ltd. Mr. A. Rajaratnam Fund Transfer (8,324) (Retired on 29.07.2011) Salaries & Wages Recovered 1,983 Mr. S. D. R. Arudpragasam Recovery of Expenses 3,300 Mr. Anushman Rajaratnam 29,482 32,523 Mr. R. N. Bopearatchy Mr. K. P. David Mr. A. R. Peiris

Lankem Developments PLC Mr. A. Rajaratnam Sale of Goods 838 Mr. S. D. R. Arudpragasam Salaries & Wages Recovered 29 Mr. Anushman Rajaratnam Administrative Expenses Recovered 26 Mr. R. N. Bopearatchy Interest Income 2,370 Mr. D. L. Vitharana Inter Company Settlements (7,002) Mr. K. P. David Transferred to Loan (25,000) Mr. A. R. Peiris Current Account 717 29,456 Mr. R. T. Weerasinghe Loan given 25,000 25,000 - Mr. N. H. B. S. Perera SunAgro LifeScience Ltd. Mr. A. Rajaratnam Recovery of Expenses 68,925 (Retired on 29.07.2011) Overhead Expenses Recovered 8,589 Mr. S. D. R. Arudpragasam Fund Transfers 13,083 Mr. Anushman Rajaratnam 125,116 34,519 Mr. R. N. Bopearatchy Mr. D. L. Vitharana Beruwala Resorts Ltd. Mr. A. Rajaratnam Fund Transfer (5,000) Mr. S. D. R. Arudpragasam Purchase of Shares (226,288) Mr. A. R. Peiris Loan Capital & Interest 10,050 Current Account 5,050 226,288

Lankem Tea & Rubber Mr. A. Rajaratnam Purchases (14) Plantations (Pvt) Ltd. Mr. S. D. R. Arudpragasam Debenture Interest Income 16,200 Mr. Anushman Rajaratnam Debenture Interest Received (2,112) Mr. N. H. B. S. Perera Dividend 450 Loan Interest Received 5,400 Transferred to Loan (60,000) Current Account 20,911 60,987 Loans given 60,000 60,000 -

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Kotagala Plantations PLC Mr. A. Rajaratnam Sale of Goods 2,967 Mr. S. D. R. Arudpragasam Interest Expense (27,370) Fund Transfer 15,591 (3,765) 5,047 Loan Obtained 300,000 300,000

Agarapatana Plantations Ltd. Mr. A. Rajaratnam Sale of Goods 333 Mr. S. D. R. Arudpragasam Fund Transfer (420) 1,990 2,077

Sigiriya Village Hotels PLC Mr. A. Rajaratnam Purchase of Goods (89) Mr. S. D. R. Arudpragasam Fund Transfer 11,970 Mr. A. R. Peiris Interest Paid (6,820) Reimbursement of Expenses 109 Dividend Income 2,838 Transferred to Loans 100,000 Current Account (28,999) (137,007) Loan Obtained 100,000 Loan Settlement (20,000) 80,000 -

Marawila Resorts PLC Mr. A. Rajaratnam Purchases (356) Mr. S. D. R. Arudpragasam Interest Received 1,850 Mr. A. R. Peiris Reimbursement of Expenses 10,536 Purchase of Shares (35,613) Current Account (721) 22,862

Colombo Fort Hotels Ltd. Mr. A. Rajaratnam Purchase of Shares (547,170) Mr. S. D. R. Arudpragasam Recovery of Expenses 4,389 Mr. Anushman Rajaratnam Interest Income 4,950 (Appointed w.e.f. 16.11.2011) Fund Transfer 598,083 Transferred to Loans (55,000) Current Account 60,888 55,636 Loan given 55,000 55,000 -

B.O.T Hotel Services (Pvt) Ltd. Mr. S. D. R. Arudpragasam Recovery of Expenses 3,859 Mr. Anushman Rajaratnam Fund Transfer 100 (Resigned w.e.f. 19.04.2012) Transferred to Loan (14,000) 3,777 13,818 Mr. K. P. David Loan given 14,000 14,000 -

Lankem Technology Services Ltd. Mr. A . Rajaratnam Fund Transfer 50 (4,925) (4,975) (Retired on 31.07.2011) Mr. S. D. R. Arudpragasam Mr. Anushman Rajaratnam (Resigned w.e.f. 19.04.2012) Mr. R. N. Bopearatchy Mr. K. P. David

SunAgro Foods Ltd. Mr. A . Rajaratnam Recovery of Expenses (27,338) (Retired on 31.07.2011) Salaries & Wages 3,237 Mr. S. D. R. Arudpragasam Fund Transfer 87,809 63,708 - Mr. Anushman Rajaratnam Mr. R. N. Bopearatchy Mr. D. L. Vitharana (Appointed w.e.f. 16.05.2011) Mr. K. P. David (Appointed w.e.f. 16.05.2011)





C. W. Mackie PLC Mr. S. D. R. Arudpragasam Sale of Goods 4 4 - Mr. Anushman Rajaratnam

Laxapana Batteries PLC Mr. A. Rajaratnam Fund Transfer 25 - (25) (Retired on 27.09.2011) Mr. S. D. R. Arudpragasam Mr. R. N. Bopearatchy

29.6 Transaction With Related Parties - Group Name of the Related Party Name of the Director Nature of the transaction Amount Amount 2012 2011 Rs. ‘000 Rs.’000 01. Lankem Paints Ltd. Lankem Consumer Mr. A. Rajaratnam Fund Transfer 402 125 Products Ltd. (Retired on 29.07.2011) Mr. S. D. R. Arudpragasam Mr. Anushman Rajaratnam Mr. R. N. Bopearatchy Mr. D. L. Vitharana Mr. K. P.David Mr. A. R. Peiris Lankem Chemicals Ltd. Mr. A. Rajaratnam Fund Transfer (31) (590) (Retired on 29.07.2011) Mr. S. D. R. Arudpragasam Mr. Anushman Rajaratnam Mr. R. N. Bopearatchy Mr. D. L. Vitharana Mr. K. P.David Mr. A. R. Peiris Marawila Resorts PLC Mr. A. Rajaratnam Sale of Goods 1,398 - Mr. S. D. R. Arudpragasam Mr. A. R. Peiris Sigiriya Village Hotels PLC Mr. A. Rajaratnam Sale of Goods 114 - Mr. S. D. R. Arudpragasam Mr. A. R. Peiris SunAgro Foods Ltd. Mr. A. Rajaratnam Sale of Goods 360 - (Retired on 31.07.2011) Mr. S. D. R. Arudpragasam Mr. R. N. Bopearatchy Mr. Anushman Rajaratnam Mr. D. L. Vitharana Mr. K. P. David

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29 RELATED PARTY TRANSACTIONS (CONTD.)29.6 Transaction With Related Parties - Group (Contd.) Name of the Related Party Name of the Director Nature of the transaction Amount Amount 2012 2011 Rs. ‘000 Rs.’000 02. Lankem Chemicals Ltd. Lankem Consumer Mr. A. Rajaratnam Fund Transfer 100 (23) Products Ltd. (Retired on 29.07.2011) Mr. S. D. R. Arudpragasam Mr. Anushman Rajaratnam Mr. R. N. Bopearatchy Mr. D. L. Vitharana Mr. K. P. David Mr. A. R. Peiris

03. Lankem Consumer Products Ltd Creasy Foods Ltd. Mr. S. D. R. Arudpragasam Fund Transfer (42) 42 Mr. R. N. Bopearatchy Marawila Resorts PLC Mr. S. D. R. Arudpragasam Fund Transfer (63) 63 Mr. A. R. Peiris E.B. Creasy & Co. PLC Mr. S. D. R. Arudpragasam Fund Transfer 7 71 Mr. R. N. Bopearatchy Darley Butler & Co. Ltd. Mr. S. D. R. Arudpragasam Fund Transfer 29 - Mr. R. N. Bopearatchy 04. Lankem Research Ltd. SunAgro Farms Ltd. Mr. A. Rajaratnam Advances Received 13,000 - (Retired on 29.07.2011) Reimbursement of Expenses 388 - Mr. S. D. R. Arudpragasam Transfer the current account Mr. Anushman Rajaratnam balance to Lankem Ceylon PLC (13,388) - Mr. R. N. Bopearatchy Mr. K. P. David Mr. A. R. Peiris 05. Associated Farms (Pvt) Ltd. SunAgro Farms Ltd. Mr. A. Rajaratnam Reimbursement of Expenses 15 866 (Retired on 29.07.2011) Fund Advance (1,886) - Mr. S. D. R. Arudpragasam Transfer of Salary Expense 1,005 - Mr. K. P. David Mr. A. R. Peiris Sigiriya Village Hotels PLC Mr. S. D. R.Arudpragasam Reimbursement of Expenses 378 - Mr. A. R. Peiris Fund Advance (2,016) - Mr. T. Theyagamurti

06. SunAgro Farms Ltd. SunAgro Life Science Ltd. Mr. S. D. R. Arudpragasam Fund Transfer (263) 263 Mr. R. N. Bopearatchy Mr. Anushman Rajaratnam

07. Lankem Developments PLC E.B. Creasy & Co. PLC Mr. A. Rajaratnam Rent Charges (116) (1,401) Mr. S. D. R. Arudpragasam Mr. R. N. Bopearatchy Mr. S. Rajaratnam



29 RELATED PARTY TRANSACTIONS (CONTD.)29.6 Transaction With Related Parties - Group (Contd.)Name of the Related Party Name of the Director Nature of the transaction Amount Amount 2012 2011 Rs. ‘000 Rs.’000

07. Lankem Developments PLC (Contd.)Colombo Fort Hotels Ltd. Mr. A. Rajaratnam Advance Given 80,000 - Mr. S. D. R. Arudpragasam Mr. S. Rajaratnam Mr. Anushman Rajaratnam (Appointed w.e.f. 16.11.2011)

Sigiriya Village Hotels PLC Mr. A. Rajaratnam Settlement of Trade Receivables (996) 996 Mr. S. D. R Arudpragasam Mr. A. R. Peiris Mr. S. Rajaratnam Mr. C. P. R. Perera

08. SunAgro Life Science Ltd. SunAgro Foods Ltd. Mr. S. D. R. Arudpragasam Fund Transfer 13,000 - Mr. Anushman Rajaratnam Mr. R. N. Bopearatchy Mr. D. L. Vitharana Mr. K. P. David

09. Beruwala Resorts Ltd. Marawila Resorts PLC Mr. A. Rajaratnam Reimbursement of Expenses 221 322 Mr. S. D. R. Arudpragasam Mr. A. R. Peiris Mr. S. Rajaratnam Mr. T. Theyagamurti Mr. E. P. A. Cooray Mr. C. P. R.Perera Mr. Amrit Rajaratnam (Appointed w.e.f. 05.03.2012)

Colonial Motors PLC Mr. A. Rajaratnam Interest charged (12) (148) Mr. S. D. R. Arudpragasam Mr. S. Rajaratnam

The Colombo Fort Land & Mr. A. Rajaratnam Settlement of Loan (589) (589) Building Co.PLC Mr. S. D. R. Arudpragasam

E.B. Creasy & Co. PLC Mr. A. Rajaratnam Reimbursement of Expenses (500) (500) Mr. S. D. R. Arudpragasam Mr. S. Rajaratnam

York Hotel Management Mr. A. Rajaratnam Reimbursement of Expenses 4,911 4,512Services Ltd. Mr. T. Theyagamurti Management Fees (9,672) Mr. S. Rajaratnam Mr. Amrit Rajaratnam

Agarapatana Plantations Ltd. Mr. A. Rajaratnam Tea Purchase - (96) Mr. S. D. R. Arudpragasam

B.O.T. Hotel Services (Pvt) Ltd. Mr. S. D. R. Arudpragasam Reimbursement of Expenses 462 - Mr. T. Theyagamurti Mr. S. Rajaratnam Mr. Amrit Rajaratnam

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09. Beruwala Resorts Ltd. (Contd.) York Hotels (Kandy) Ltd. Mr. A. Rajaratnam Reimbursement of Expenses 2 - Mr. S. D. R. Arudpragasam Mr. T. Theyagamurti Mr. A.R. Peiris Mr. S. Rajaratnam (Appointed w.e.f. 06.10.2011) Mr. Amrit Rajaratnam (Appointed w.e.f. 05.03.2012) Colombo Fort Hotels Ltd. Mr. A. Rajaratnam Settlement of Loans 226,288 - Mr. S. D. R. Arudpragasam Temporary Deposit (82,500) Mr. T. Theyagamurti Interest Receivable (3,498) Mr. S. Rajaratnam

10. Lankem Tea & Rubber Plantations (Pvt) Ltd. Kotagala Plantations PLC Mr. A. Rajaratnam Managing Agents Fee 87,490 138,388 Mr. S. D. R. Arudpragasam Dividend Receipt (86,419) (25,926) Mr. C. P. R. Perera Expenses 91,755 114 Mr. R. C. Peiris Receipt of Management Fee (84,561) (54,534) Mr. D. A. Ratwatte Dividend Income 86,419 25,926 Mr. G. D. V. Perera Fund Transfer (20,000)

Agarapatana Plantations Ltd. Mr. A. Rajaratnam Managing Agents Fee 62,393 74,487 Mr. S. D. R. Arudpragasam Receipt of Management Fee (2,570) (13,668) Mr. C. P. R. Perera Expenses 57 126 Mr. R. C. Peiris Mr. D. A. Ratwatte Mr. G. D. V. Perera

Lankem Plantation Holdings Ltd. Mr. A. Rajaratnam Dividend Receipt (44,609) (35,687) Mr. S. D. R. Arudpragasam Current Account Settlement (293,000) (20,000) Ms. K. M. Ramesh Purchase of shares - 60,000 Expenses 300 194

The Colombo Fort Land & Mr. A. Rajaratnam Advance against Current Account - 85,000 Building Co.PLC Mr. S. D. R. Arudpragasam Administration Expenses (8,088) (7,298) Mr. N. H. B. S. Perera Settlement of Expenses 2,628 6,138 Loan to Related Companies 380,000 - Loan Interest Income 15,200 -

Darley Butler & Co. Ltd. Mr. A. Rajaratnam Debenture Interest Payable (8,890) (12,139) Mr. S. D. R. Arudpragasam Debenture Interest Paid 9,503 21,069 Mr. S. Rajaratnam Tea Sales 7,473 9,972 Receipt for Tea Sales (7,474) (8,515) Management Salaries (12,000) -

11. Agarapatana Plantations Ltd Sigiriya Village Hotels PLC Mr. A. Rajaratnam Rental Expenses 103 1,149 Mr. S. D. R. Arudpragasam Reimbursable Expenses 2 110 Mr. C. P. R. Perera Kotagala Plantations PLC Mr. A. Rajaratnam Receipt on Short Term Advance (441) (33,831) Mr. S. D. R. Arudpragasam Paid for Short Term Advance 8,396 18,011 Mr. C. P. R. Perera Reimbursable Expenses 53,774 (11,684) Mr. R. C. Peiris Right Issue (200,000) - Mr. D. A. Ratwatte Mr. G. D. V. Perera




11. Agarapatana Plantations Ltd (Contd.)The Colombo Fort Land & Mr. A. Rajaratnam Rent on Building & Other Expenses 13,650 19,680 Building Co.PLC Mr. S. D. R. Arudpragasam Rent & Other Expenses Paid (7,642) (4,310)

Creasy Plantation Mr. A. Rajaratnam Interest Expenses 480 480 Management Ltd. Mr. S. D. R. Arudpragasam

Sherwood Holidays Ltd. Mr. A. Rajaratnam Rent & Bungalow upkeep Expenses 1,196 804 Mr. S. D. R. Arudpragasam Mr. D. A. Ratwatte Mr. G. D. V. Perera

Marawila Resorts PLC Mr. A. Rajaratnam Investment in Ordinary Shares (25) 695 Mr. S. D. R. Arudpragasam Mr. C. P. R. Perera Ceylon Tea Brokers PLC Mr. C. P. R. Perera Broker Advance Received (101,000) (98,591) Broker Advance Paid 90,523 98,591 Sale Proceeds Receivable (134,254) (154,334) Sale Proceeds Received 131,833 155,249

Waverly Power (Pvt) Ltd. Mr. A. Rajaratnam Investment in Ordinary Shares 26,000 - Mr. S. D. R. Arudpragasam Rental Expenses (397) - Mr. G. D. V. Perera

12. Sigiriya Village Hotels PLC York Hotel Management Mr. A. Rajaratnam Reimbursement of Expenses 2,970 4,735 Services Ltd. Mr. T. Theyagamurti Management Fees (11,132) - Mr. S. Rajaratnam Mr. Amrit Rajaratnam

Marawila Resorts PLC Mr. A. Rajaratnam Salaries & Wages 480 - Mr. S. D. R. Arudpragasam Reimbursement of Expenses (615) - Mr. T. Theyagamurti Cheques in Transit 3,194 - Mr. A. R. Peiris Mr. C. P. R. Perera Mr. S. Rajaratnam Mr. E. P. A. Cooray Mr. Amrit Rajaratnam (Appointed w.e.f. 05.03.2012)

Tropical Beach Resorts Ltd. Mr. A. Rajaratnam Reimbursement of Expenses 5 - Mr. T. Theyagamurti (Appointed w.e.f. 09.09.2011)

York Hotels (Kandy) Ltd. Mr. A. Rajaratnam Salaries & Wages 333 8,237 Mr. S. D. R Arudpragasam Reimbursement of Expenses 21,331 - Mr. T. Theyagamurti Mr. A. R. Peiris Mr. S. Rajaratnam Mr. Amrit Rajaratnam

Sigiriya Resorts Ltd Mr. A. Rajaratnam Reimbursement of Expenses 534 - Mr. T. Theyagamurti Mr. S. Rajaratnam (Appointed w.e.f. 09.09.2011)

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29 RELATED PARTY TRANSACTIONS (CONTD.)29.6 Transaction With Related Parties - Group (Contd.)Name of the Related Party Name of the Director Nature of the transaction Amount Amount 2012 2011 Rs. ‘000 Rs.’000 12. Sigiriya Village Hotels PLC (Contd.)Colombo Fort Hotels Ltd. Mr. A. Rajaratnam Reimbursement of Expenses 414 - Mr. S. D. R. Arudpragasam Temporary Loan 1,500 - Mr. T. Theyagamurti Mr. S. Rajaratnam

13. Marawila Resorts PLC York Hotel Management Mr. A. Rajaratnam Management Fee (12,838) -Services Ltd. Mr. T. Theyagamurti Reimbursement of Expenses 6,072 4,177 Mr. S. Rajaratnam Mr. Amrit Rajaratnam

Kotagala Plantations PLC Mr. A. Rajaratnam Settlements 25 - Mr. S. D. R. Arudpragasam Mr. C. P. R. Perera

Colombo Fort Hotels Ltd. Mr. A. Rajaratnam Short Term Loan Given (15,000) - Mr. S. D. R. Arudpragasam 9% Interest on Loan 507 - Mr. T. Theyagamurti Recovery of Loan Given 10,000 - Mr. S. Rajaratnam

Colombo Investment Trust PLC Mr. A. Rajaratnam Recoverable of Loan Given 10,000 - Mr. S. D. R. Arudpragasam Short Term Loan Given (10,000) - (Appointed w.e.f. 12.08.2011) Mr. S. Rajaratnam 9% Interest on Loan 390 -

Colombo Fort Investments PLC Mr. A. Rajaratnam Recoverable of Loan Given 10,000 - Mr. S. D. R. Arudpragasam Short Term Loan Given (10,000) - (Appointed w.e.f. 12.08.2011) Mr. S. Rajaratnam 9% Interest on Loan 390 - The Colombo Fort Land & Mr. A. Rajaratnam Recoverable of Loan Given 20,000 - Building Co.PLC Mr. S. D. R. Arudpragasam Short Term Loan Given (20,000) - 9% Interest on Loan 138 -

Lankem Plantation Holdings Ltd. Mr. A. Rajaratnam Sales 99 - Mr. S. D. R. Arudpragasam

14. Colombo Fort Hotels Ltd The Colombo Fort Land & Mr. A. Rajaratnam Funds Advanced 35 (35)Building Co.PLC Mr. S. D. R. Arudpragasam Stamp Duty 15,547 - Mr. Anushman Rajaratnam (Appointed w.e.f. 28.11.2011)

BOT Hotel Services (Pvt) Ltd. Mr. S. D. R. Arudpragasam Loan Granted 100,000 - Mr. T. Theyagamurti Mr. S. Rajaratnam Interest Income 1,721 -

15. C.W.Mackie PLC Ceymac Rubber Company Ltd. Mr. W. T. Ellawala Interest on Current Account Balance 35,401 18,096 Mr. H. M. D. Kulatunga Recovery of Overheads 8,422 3,457 Mr. E. A. A. K. Edirisinghe




15. C.W.Mackie PLC (Contd)Scan Tours & Travels (Pvt) Ltd. Mr. W. T. Ellawala Interest on Current Mr. C. R. Ranasinghe Account Balance 341 1,246 Mr. E. A. A. K. Edirisinghe Vehicle Hire Charges (28,159) (32,650) Mr. K. T. A. N. Perera Recovery of Overheads 2,591 2,160 Ceytra (Pvt) Ltd. Mr. W.T. Ellawala Interest on Current 3,096 939 Mr. E. A. A. K. Edirisinghe Account Balance Mr. H. M. D. Kulatunga Recovery of Overheads 3,869 3,734 Mr. A. I. Piyadigama Inter Company Purchases 4,222 10,366 Ceylon Trading Company Ltd. Mr. W. T. Ellawala Rent Income 2,400 2,730 Ms. C. R. Ranasinghe Secretarial & Legal Fees (3,030) (6,375) Mr. G. C. B. Wijeysinghe Management Fee Overheads (2,140) (6,308)

Maersk Lanka (Pvt) Ltd. Mr. W. T. Ellawala Rent Income - Office 13,674 16,529 Recovery of Overheads 7,239 1,773

16. Lankem Plantation Services Ltd. Kotagala Plantations PLC Mr. A. Rajaratnam Interest Income 480 4,383 Mr. S. D. R. Arudpragasam Reimbursement of Expenses 357

The Colombo Fort Land & Mr. A. Rajaratnam Interest Income 200 3,533Building Co. PLC Mr.S. D. R. Arudpragasam

17. York Hotels (Kandy) Ltd. The Colombo Fort Land & Mr. A. Rajaratnam Loan Given - 90,000 Building Co. PLC Mr. S. D. R. Arudpragasam Interest Income 5,400 -

18. Lankem Plantation Holdings Ltd. Darley Butler & Co. Ltd Mr. A. Rajaratnam Debenture Interest Payable (8,889) (12,139) Mr. S. D. R. Arudpragasam Debenture Interest Paid 9,503 21,069 Tea Sales 7,473 9,972 Receipt of Tea Sales (7,474) (8,515) Management Salaries (12,000) -

The Colombo Fort Land & Mr. A. Rajaratnam Advance against Current Account - 85,000 Building Co. PLC Mr. S. D. R Arudpragasam Expenses (8,088) (7,298) Settlement of Expenses 2,628 6,138 Loan Given (380,000) - Interest Receivable 15,200 - Rent & Other Expenses Payable 13,650 19,680 Rent Paid (7,643) (4,310)

Sherwood Holidays Ltd. Mr. A. Rajaratnam Rent & Bungalow Upkeep Expenses 2,064 1,661 Mr. S. D.R. Arudpragasam

E.B. Creasy & Co. PLC Mr. A. Rajaratnam Land Rent - 208 Mr. S. D. R. Arudpragasam

Creasy Plantation Mr. A. Rajaratnam Interest Expenses 478 480Management Ltd. Mr. S. D. R. Arudpragasam Ms. K. M. Ramesh

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18. Lankem Plantation Holdings Ltd. (Contd.)Lankem Plantation Services Ltd. Mr. A. Rajaratnam Interest Expenses (480) (480) Mr. S. D. R. Arudpragasam Interest Paid 329 329 Ms. K. M. Ramesh Ceylon Tea Brokers PLC Mr. C. P. R. Perera Broker Advances Received (101) (99) Broker Advances Paid 90,523 98,591 Sale Proceeds Receivable (235,618) (253,702) Sale Proceeds Received 234,237 258,480 Darley Butler & Co. Ltd. Mr. A. Rajaratnam Sale of Shares - (60,000) Mr. S. D. R. Arudpragasam Dividend Receipts - (32,670) Expenses (1) (9) Dividend Income - 32,670 Agarapatana Plantations Ltd. Mr. A. Rajaratnam Expenses (24) (24) Mr. S. D. R. Arudpragasam

29. 7 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. Interest on outstanding balances has been charged at the prevailing market rate (unless otherwise stated) when the interest is charged.

29.8 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


Short-term Employee Benefits 164,745 147,983 65,459 71,119

(c) Key Management Personnel Shareholding of the Company The shareholdings of the Directors are disclosed on page 34 of this Annual Report.

(d) Transactions with close family members There were no transactions with close family members during the year.

30 CAPITAL EXPENDITURE COMMITMENT 30.1 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.



30 CAPITAL EXPENDITURE COMMITMENT (CONTD.)30.2.1 Capital Commitments (Contd.)i Agarapatana Plantations Ltd. Followings are the capital commitments approved as at the balance sheet date

2012 2011 Rs. Million Rs. Million a) Field Development 178 226 b) Machinery & Factory Development 79 137 ii Sigiriya Village Hotels PLC The Company has contracted a capital expenditure of Rs. 15 Million as at the balance sheet date on Property Plant & Equipment. iii Beruwala Resorts Ltd.

a) The Company is in the process of constructing new quarters for their executive staff and the budgeted cost for this projects is Rs. 34.8 Million. The Cost incurred for the construction of executive staff quarters project was Rs. 22.9 Million during the year.

b) The Company is also in the process of constructing a new Sewage Treatment Plant with a budgeted cost of Rs. 15.4 Million.

c) The Company had made an application for listing of the securities on the ‘Diri Savi Board’ of the Colombo Stock Exchange. The Applicaion is pending approval.

iv Lankem Research Ltd. The Company has made an advance payment of Rs. 2 Million in view of purchasing a land situated in Marawila. v York Hotels (Kandy) Ltd. The capital expenditure commitment to Sierra Constructions (Pvt) Ltd amounting to Rs. 3.4 Million. vi Waverly Power (Pvt) Ltd. The Company intends to invest an amount of Rs. 15 Million to construct their site at Agarapatana and futher Rs. 15 Million is expected to be incurred for fixing the inter connection and metering equipment at the site.

vii SunAgro Farms Ltd. The Company has entered into a lease agreement with the Department of Buddhist Afffairs for the lease of the agriculture land for cultivation for a period of 29 years, on 21st June 2010. Further, non cancellable operating lease rentals are payable in first five years of lease period amounting to Rs. 113,000/- per year. However lease payable after the first five years will be determined based on the market price of the land in the respective area.

viii Kotagala Plantations PLC Budgeted capital development programme for the next financial year amounts to approximately Rs. 654.5 Million (2010/11 - Rs. 510.3 Million).

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 borrowings obtained by the related companies indicated below as at 31st March 2012.

Name of the Company Amount Rs.’000

Agarapatana Plantations Ltd. 50,000Darley Butler & Co. Ltd. 105,000Lankem Paints Ltd. 125,000Sigiriya Village Hotels PLC 7,200SunAgro LifeScience Ltd. 55,000Waverly Power (Pvt) Ltd. 70,000 412,200

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31. CONTINGENT LIABILITIES (CONTD.)31.2 Group(i) Lankem Tea & Rubber Plantations (Pvt) Ltd. Contingent liabilities exist in relation to the followings; a) Corporate Guarantee to DFCC Bank on behalf of Agarapatana Plantations Ltd to secure a loan of Rs. 7.47 Million under ADB

credit line.

b) Corporate Guarantee to DFCC Bank on behalf of Kotagala Plantations PLC to secure a loan of Rs. 50 Million & Rs. 7.47 Million under ADB credit line.

c) A contingent liability of Rs. 50 Million exists as at the balance sheet in relation to the various regulatory and legal matters. In addition to which penalties may be imposed on certain statutory payments. However company is confident that these liabilities may not materialise in the future.

d) Corporate Guarantee to Peoples Leasing Company PLC on behalf of Kotagala Plantations PLC, to secure term loans of Rs. 13 Million, Rs. 27.7 Million and E- Friends Loans of Rs. 1.8 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.

e) Corporate Guarantee to Lanka Orix Leasing Company PLC on behalf of Kotagala Plantations PLC to secure a term loan of Rs. 40 Million.

f) Corporate Guarantee to Peoples Leasing Company PLC on behalf of Agarapatana Plantations Ltd to secure term loans of Rs. 9.7 Million, Rs. 8.9 Million, Rs. 9.7 Million, Rs. 9.7 Million and Rs. 12.8 Million.

(ii) Lankem Plantation Holdings Ltd. Contingent liabilities exist in relation to the followings;

a) Corporate Guarantee to Hatton National Bank on behalf of Agarapatana Plantations Ltd, to secure Term Loan of Rs. 15 Million.

b) Corporate Guarantee of Rs. 40 Million to Indian Bank on behalf of Agarapatana Plantations Ltd, to secure Term Loan of Rs. 20 Million.

c) Corporate Guarantee to Orix Leasing Company Ltd. on behalf of Kotagala Plantations PLC, to secure Term Loan of Rs. 40 Million.

d) A Contingent liability of Rs. 50 Million exists as at the Balance Sheet in relation to the 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.

(iii) Marawila Resorts PLC

The Company has contingent liabilities in respect of legal claims arising in the ordinary course of business. It is anticipated that anymaterial liabilities that will arise from such legal cases and additional payment will have to be met accordingly, company has provided Rs. 13,299,965/- in the financial statement as at 31st March 2012 as penalty and pradesiya saba tax payable since company has undergone a legal case against pradeshiya saba.

(iv) Lankem Developments PLC The contingent liablity as at 31.03.2012 on balance given by the Company to third parties amounted to Rs. 22.08 Million.

(v) C. W. Mackie PLC The company has issued Corporate Guarantees for the borrowings obtained by the related companies as at 31.03.2012 are indicated below. Name of the Company Amount Rs.’000 Ceymac Rubber Company Ltd. 75,000Ceytra (Private) Ltd. 8,000 83,000



32. COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform to the current year’s classification and presentation. Group Company

As per As per Audited Audited Reclassified Accounts Change Reclassified Accounts Change Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

32.1 Property, Plant and Equipment Cost Freehold Land 1,839,634 1,839,619 15 111,148 111,133 15 Land Development Cost 10,002 10,002 - 9,404 9,404 -Buildings 2,391,923 2,416,782 (24,859) 208,889 208,905 (16)Mature /Immature Plantations 3,455,388 3,455,388 - - - -Plant & Machinery 1,176,885 1,176,885 - 113,539 113,539 - Motor Vehicles 382,549 382,368 181 16,755 16,573 182 Furniture,Fittings & Office Equipment 682,515 691,244 (8,729) 207,401 216,130 (8,729)Linen & Soft Furnishings 43,707 43,707 - - - - Asset Under Construction 181,995 159,527 22,468 22,468 - 22,468 10,164,598 10,175,522 (10,924) 689,604 675,684 13,920 Leasehold Plant & Machinery 204,372 204,372 - 111,783 111,783 - Motor Vehicles 450,561 449,640 921 78,778 77,857 921 Furniture,Fittings & Office Equipment 2,202 16,910 (14,708) - 14,708 (14,708) 657,135 670,922 (13,787) 190,561 204,348 (13,787) Total Cost 10,821,733 10,846,444 (24,711) 880,165 880,032 133 Accumulated Depreciation Freehold Buildings 440,307 465,152 (24,845) 40,456 40,456 -Mature /Immature Plantations 410,090 410,090 - - - -Plant & Machinery 605,412 605,297 115 50,469 50,354 115 Motor Vehicles 322,577 325,392 (2,815) 7,341 10,156 (2,815)Furniture,Fittings & Office Equipment 442,019 433,025 8,994 118,781 109,787 8,994 Linen & Soft Furnishings 31,449 31,449 - - - - 2,251,854 2,270,405 (18,551) 217,047 210,753 6,294 Leasehold Plant & Machinery 79,045 79,159 (114) 51,891 52,005 (114)Motor Vehicles 216,585 212,667 3,918 60,201 56,281 3,920 Furniture,Fittings & Office Equipment 465 10,432 (9,967) - 9,967 (9,967) 296,095 302,258 (6,163) 112,092 118,253 (6,161)Total Accumulated Depreciation 2,547,949 2,572,663 (24,714) 329,139 329,006 133 Carrying Value 8,273,784 8,273,781 3 551,026 551,026 - 32.2 Amounts due from related partiesMarawila Resorts PLC 23,011 22,862 149 23,011 22,862 149 Amounts due to related parties -Trade Payables Marawila Resorts PLC 149 - 149 149 - 149E.B. Creasy Logistics (Pvt) Ltd. 3,036 - 3,036 3,036 - 3,036 Trade and Other Payables Trade Creditors 506,229 509,265 (3,036) 506,229 509,265 (3,036)

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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) Lankem Consumer Products Ltd recorded a loss of Rs. 11,976,798/- during the year ended 31st March 2012 and as at that date accumulated loss was Rs. 77,917,404/-. Further the total liability exceeds the total assets by Rs. 57,917,404/-and current liabilities exceeds current assets by Rs. 57,439,154/-. 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. Hence Company’s ability to continue as a going concern depends on the financial support of the parent Company, Lankem Ceylon PLC. However, the Financial Statements are prepared on a going concern assumption.

(ii) York Hotels (Kandy) Ltd., a subsidiary has not commenced its operations. Further, it has not continued the construction work since 1996. But the Board of Directors of the Company are confident that the construction work will be recommenced in the next financial year.

(iii) SunAgro Farms Ltd., a subsidiary has incurred a loss of Rs. 3,099,332/- during the year ended 31 March 2012 and as at that date accumulated loss was Rs. 11,704,819/- and the Company’s current liabilities exceeded its current assets by Rs. 28,733,675/-. Further, the Company’s net assets are less than half of the stated capital and face a serious loss of capital situation as defined in section 220 (1) of Companies Act No 07 of 2007 and it is in the process of complying with the requirement of the same act. These factors have effects on company’s ability to continue as going concern. However the Management has set an action plan which will be monitored by the Board to prevent further such losses or to recoup the losses incurred. Accordingly the Directors of the Company are in the view that the Company is able to continue as a going concern.

(iv) Agarapatana Plantations Ltd., a subsidiary has recorded a net loss of Rs. 555,330,075/- during the year ended 31st March 2012

compared to the net profit of Rs.19,427,297/- made in year 2010/11, and as at 31st March 2012 the Current Liabilities of the Company exceeded its Current Assets by Rs.868,817,029/- (2011 - Rs. 386,344,413/-) and the Company is dependant on creditors and borrowings for the continuation of its operations. The Company ‘s net assets is Rs. 10.15 Mn as at the balance sheet date and has a serious loss of capital as defined in section 220 (1) of the Companies Act N o 07 of 2007 and it is in the process of complying with the requirement of the Companies Act. The directors of the Company are confident that the financial position of the Company will significantly improve in the near future in view of the finance facilities available from the banks and related companies. The financial statements of the Company have been prepared on the assumption that the Company is a going concern.

(v) Management of Associated Farms Ltd., has decided to transfer the net assets of Sigiriya Farm amounting to Rs. 9,985,683/- as per the Financial Statements as at 31 st March, 2011 to Sigirya Village Hotel PLC on 15th July, 2011. The Company has ceased its operations due to the environmental issues and will be looking for a suitable place to continue the business.

(vi) Lankem Developments PLC, a subsidiary has incurred a loss of Rs. 266,980,889/- during the year ended 31st March 2012 (2010/11 - Rs. 27,012,210/- ), as at that date accumulated loss was Rs.360,790,627/- (2010/11 - Rs. 86,123,513/-) and the Company’s current liabilities exceeded its current assets by Rs. 86,072,866/- (2010/11 Rs. 17,408,259/-). These factors raise significant doubt of the Company’s ability to continue as going concern. However the management is the view that investments in Plantation sector and Hydro Power Plants will generate profits in the future. Accordingly the Directors of the Company are of the view that the Company is able to continue as a going concern and financial statements of the Company have been prepared on the assumption that the Company is a going concern.

(vii) Lankem Technology Services Ltd., a subsidiary has not commenced its operations from the date of incorporation and incurred a loss of Rs. 11,200/- during the year ended 31st March 2012 and as at that date accumulated loss was Rs. 32,400/-. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern.



34. EVENTS AFTER THE BALANCE SHEET DATE34.1 Company(i) The Company has transferred on 5th April 2012, 2,750,000 Ordinary Shares of its investment in Sigiriya Village Hotels PLC

representing an equity stake of 30.56% to Colombo Fort Hotels Ltd. for a consideration of Rs. 184,250,000/-.

(ii) The Directors of Lankem Ceylon PLC have recommended the payment of a first and final dividend of Rs. 2.50/- per Ordinary Share which will be declared at the Annual General Meeting to be held on 28th June, 2012. In accordance with 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 31 March 2012.

34.2 Group(i) The Directors of Lankem Tea & Rubber Plantations (Pvt) Ltd, have proposed a dividend amounting to Rs.20,865,000/- (Rs.25/- per

Share).

(ii) York Hotels (Kandy) Ltd. has subsequently completed the river bank revetment Protection Project.

(iii) The Diretors of C. W. Mackie PLC have recommended the payment of a final dividend of Rs.1/- per Ordinary Share which will be declared at the Annual General Meeting to be held on 27th June 2012. (iv) The Board of Directors of Ceymac Rubber Company Ltd. has proposed a first and final dividend of Rs. 3/- per share, amounting to

Rs. 9,568,125 /- for the year ended 31st March 2012, subject to the approval of the shareholders.

(v) The Board of Directors of Kotagala Plantations PLC have recommended a first and final dividend of Rs. 2/- per Ordinary Share for the year ended 31st March 2012 for approval by the shareholders at the Annual General Meeting.

(vi) The Board of Directors of Sigiriya Village Hotels PLC have recommended a first and final dividend of Rs. 2/- per Ordinary Share for the year ended 31st March 2012 for approval by the shareholders at the Annual General Meeting.

Subsequent to the balance sheet date, no circumstances have arisen that would require adjustments to/or disclosure in the financial statements other than those disclosed above.

35. ACQUISITION OF GALLE FORT HOTEL (PRIVATE) LIMITEDColombo Fort Hotel Ltd., subsidiary of the Company acquired 100 % of the issued capital of Galle Fort Hotel (Pvt) Ltd. on 21st November 2011 for a total consideration of Rs. 781,559,000/-.

The acquisition had the following effect on the Group Assets and Liabilities.

Rs.’000

Property, Plant & Equipment 282,443Inventories 8,096Trade and Other Receivables 50,292Bank & Cash Balances 2,499Deferred Tax Liability (2,384)Retirement Benefit Obligations (953)Trade and Other Payables (5,377)Income tax Payables (2,249)Net Identifiable Assets and Liabilities 332,367

Net Assets Acquired 236,769Goodwill on Acquisition 329,072Investment made by Equity Holders of the Parent 565,841Investment allocated to Minority Interest 215,718Cash Consideration paid on Acquisition of Subsidiary 781,559

Cash & Cash Equivalents Acquired (2,499)Net Cash outflow on Acquisition of Subsidiary 779,060

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37. SEGMENT INFORMATION Information based on primary segments (Business Segments).

Total Assets Total Liabilities 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

37.1 Assets and Liabilities Chemicals 2,652,765 1,831,242 3,107,886 840,715 Consumer 2,311,443 1,491,675 1,181,041 899,591 Hardware 3,239,700 1,689,315 1,864,021 1,351,873 Construction 148,442 41,476 16,732 13,093 Hotels 4,027,159 3,005,844 1,544,718 884,554 Plantations 9,660,630 8,525,338 7,705,688 6,477,427 Agriculture 33,499 69,050 52,772 1,975 Power Plant 164,451 - 110,678 - Technology 4,998 - 30 - 22,243,087 16,653,940 15,583,566 10,469,228 Un-allocated (1,831,917) 380,396 (1,625,442) 396,006 Goodwill on Consolidation 711,845 357,078 - - 21,123,015 17,391,414 13,958,124 10,865,234

Additions to Property, Depreciation and Plant and Equipment Amortisation 2012 2011 2012 2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

37.2 Assets and Liabilities Chemicals 108,270 61,920 52,626 25,548 Consumer 101,964 63,185 41,026 63,534 Hardware 98,602 10,781 45,627 42,026 Construction 562 34 278 122 Hotels 317,250 1,074,162 61,445 181,719 Plantations 912,141 15,063 216,969 50,671 Agriculture 9,205 10,914 897 1,097 Power Plant - - - - Technology - - - - 1,547,994 1,236,059 418,868 364,717 Un-allocated - 69,639 - 11,825 1,547,994 1,305,698 418,868 376,542

36. 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 Ltd. 26York Hotels (Kandy) Ltd. 51B.O.T Hotel Services (Pvt) Ltd. 57Ceymac Rubber Company Ltd. 45Scan Tours & Travels (Pvt) Ltd. 46Ceytra (Pvt) Ltd. 29Galle Fort Hotel (Pvt) Ltd. 72Waverly Power (Pvt) Ltd. 31


Group Company

2012 2011 2012 2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Revenue 24,117,751 23,030,604 5,778,255 4,903,869 Other Income 788,385 460,802 534,264 101,072 24,906,136 23,491,406 6,312,519 5,004,941 Less: Cost of Material and Services Purchased (18,307,791) (17,642,291) (5,016,642) (4,114,792)Total Value Added 6,598,345 5,849,115 1,295,877 890,149 Distributed as follows To Employees as Remuneration 4,629,470 3,637,771 250,645 176,140 To Government as Tax Expenses/ (Release) 316,795 258,418 (19,906) (41,196)To Providers of Capital as - Interest 459,017 400,726 268,555 132,770 - Dividend 36,000 71,250 36,000 71,250 Retained in the Business as - Depreciation 468,625 429,427 74,653 55,568 - Reserves 507,877 1,051,523 685,930 495,617 976,502 1,480,950 760,583 551,185 Distribution of Value Added 6,598,345 5,849,115 1,295,877 890,149 To Employees as Remuneration 70.16% 62.19% 19.34% 19.79%To Government as Taxes 4.80% 4.42% -1.54% -4.63%To Providers of Capital 10.24% 8.07% 23.50% 22.92%Retained in the Business 14.80% 25.32% 58.70% 61.92% 100.00% 100.00% 100.00% 100.00%

Statement of Value Added

Note:

The over provisions on Company taxes made for 2010/11 have been reversed due

to the exepmtions for relocation of Agro Chemical and Agro Seeds operations.

Distribution of Value Added - Group - 2011/12

70.16%

4.80%

14.80%

10.24%To Employees as RemunerationTo Government as TaxesTo Providers of Capital Retained in the Business

Distribution of Value Added - Group - 2010/11

62.19%4.42%

25.32%

8.07%

To Employees as RemunerationTo Government as TaxesTo Providers of Capital Retained in the Business

Distribution of Value Added-Company - 2011/12

19.34%

23.50%58.70%

To Employees as RemunerationTo Providers of CapitalRetained in the Business

Distribution of Value Added-Company - 2010/11

19.79%

22.92%

61.92%

To Employees as RemunerationTo Providers of CapitalRetained in the Business

| 117

Share Information

Twenty Major Shareholders

31st March 2012 31st March 2011 No of No of Ordinary Ordinary Shares % Shares %

1 E.B. Creasy & Company PLC 9,536,108 39.73 10,974,635 45.732 The Colombo Fort Land & Building Company PLC 4,961,100 20.67 4,941,900 20.593 Seylan Bank PLC/The Colombo Fort Land & Building Company PLC 2,500,000 10.42 2,500,000 10.424 Pan Asia Banking Corporation PLC/E.B.Creasy & Company PLC 1,438,527 5.99 - -5 Sri Lanka Insurance Corporation Ltd-General Fund 516,500 2.15 - -6 Colombo Fort Investments PLC 422,957 1.76 419,857 1.757 Associated Electrical Corporation Ltd 407,500 1.70 186,700 0.788 Darley Butler & Company Ltd 366,616 1.53 366,616 1.539 Colombo Investment Trust PLC 170,719 0.71 170,219 0.7110 Pan Asia Banking Corporation PLC/Darley Butler & Company Ltd 169,998 0.71 169,998 0.7111 Waldock Mackenzie Ltd/Hi-Line Trading (Pvt) Ltd 107,885 0.45 87,485 0.3612 Colonial Motors PLC 100,457 0.42 100,457 0.4213 Swiss Lloyd Limited 78,100 0.33 - -14 Employees Trust Fund Board 76,300 0.32 10,000 0.0415 Mr. Mariapillai Radhakrishnan 68,800 0.29 68,800 0.2916 Mr.David Kotthoff 64,000 0.27 2,000 0.0117 Mr. Anthony Isidore De Silva & Mr. Francis Xavier Ranjith Pereira 55,047 0.23 55,047 0.2318 Mr. Duraisamy Ganeshamoorthy & Mr. Periyasami Pillai Anandarajah 55,000 0.23 50,000 0.2119 Bank of Ceylon No. 1 Account 51,900 0.22 - -20 Pan Asia Banking Corporation PLC/Mr. H.N. De Silva 51,000 0.21 51,000 0.21 21,198,514 88.34 20,154,714 83.99

Market ValueThe market value of the Company’s Ordinary Shares on 31st March 2012 was Rs. 180.00 (Highest during the year - Rs. 590.00 and lowestduring the year - Rs.151.00)

Net Assets per ShareConsolidatedThe Net Assets per Share as at 31st March 2012 Rs. 162.60The Net Assets per Share as at 31st March 2011 Rs. 135.84

CompanyThe Net Assets per Share as at 31st March 2012 Rs. 117.36 The Net Assets per Share as at 31st March 2011 Rs. 88.43

Public HoldingThe percentage of shares held by the public as at 31st March 2012 was 17.25% (31st March 2011 - 17.85%).


As at 31st March 2012 As at 31st March 2011

No. of Total % of Total No. of Total % of Total

No. of Shares Held Shareholders Holdings Holdings Shareholders Holdings Holdings

1 - 1,000 1882 480,791 2.00 1,887 526,009 2.19

1,001 - 10,000 452 1,311,887 5.47 555 1,660,144 6.92

10,001 - 100,000 60 1,508,955 6.28 67 1,601,860 6.67

100,001 - 1,000,000 8 2,262,632 9.43 9 1,795,452 7.48

Over 1,000,000 4 18,435,735 76.82 3 18,416,535 76.74

2406 24,000,000 100.00 2,521 24,000,000 100.00

Distribution of Shares

Analysis of Ordinary Shareholders

As at 31st March 2012 No of % Total Market % of Total

Shareholders Holdings Value (Rs.) Holding

Individuals 2,214 92.02 2,386,204 429,516,720 9.94

Institutions 192 7.98 21,613,796 3,890,483,280 90.06

2,406 100.00 24,000,000 4,320,000,000 100.00

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

Share Information

| 119

Ten Year Summary

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000

Trading Results Turnover 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 24,117,751 Profit/(Loss) before Tax (293,067) 222,824 301,029 375,746 502,636 918,464 256,696 803,582 2,108,564 1,531,070 Taxation (35,921) (57,454) (48,467) (60,564) (98,745) (180,376) (194,293) (255,000) (236,815) (298,810)Profit/(Loss) after Tax (328,988) 165,370 252,562 315,182 403,891 738,088 62,403 548,582 1,871,749 1,232,260 Assets Employed Property, Plant & Equipment 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 9,690,947 Investments (Other Long Term Investment) 212,613 13,152 4,016 3,478 3,338 57,481 54,168 53,240 39,008 29,241 Working Capital (1,517,207) (1,254,495) (1,080,257) (1,039,775) (732,162) (262,984) (459,127) 47,408 2,084,729 1,090,926 Shareholders’ Funds Stated Capital 242,137 242,137 242,137 267,137 222,885 289,552 281,218 281,218 536,218 536,218 Reserves (670,693) (400,172) (248,260) (16,324) 492,673 782,471 895,544 1,531,704 2,723,837 3,366,116 Goodwill on Consolidation 198,472 193,870 135,589 163,276 160,067 84,366 147,254 357,078 357,078 711,845 Non-Current Liabilities 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 5,698,937 Ratio Analysis Profitability Ratios Profit before Interest & Tax Margin (PBIT) (%) 1.65 11.10 10.44 10.19 9.81 12.27 5.55 9.94 11.12 8.15Pre Tax Return on Capital Employed - 1.93 0.71 0.49 0.33 0.39 0.11 0.22 0.32 0.21After Tax Return on Capital Employed - 1.43 0.60 0.41 0.26 0.31 0.03 0.15 0.29 0.17 Liquidity Ratios Current Ratio 0.45 0.55 0.64 0.67 0.78 0.93 0.87 1.01 1.37 1.13Quick Ratio 0.26 0.37 0.37 0.40 0.45 0.53 0.56 0.67 0.94 0.83 Gearing Ratios Debt Equity Ratio 1.06 0.96 0.85 0.75 0.61 0.47 0.54 0.55 0.46 0.52Interest Coverage (0.16) 1.73 1.97 2.19 2.82 4.81 1.90 3.73 5.66 4.53 Investor Ratios Market Price per Share (Rs.) 8.50 14.25 70.00 54.00 36.75 46.50 28.75 65.00 401.50 180.00 Earnings per Share (Rs.) (18.64) 9.15 8.39 11.51 9.95 15.07 8.30 15.72 47.16 23.01 Net Assets per Share (Rs.) (35.71) (8.78) (0.34) 13.93 39.75 51.05 56.04 86.33 135.84 162.60 Dividend Per Share (Rs) 1.00 1.50 1.50 1.50 1.50 1.80 2.00 2.25 2.50 2.50 Price Earnings Ratio (PE) 0.46 1.56 8.34 4.69 3.69 3.09 3.45 4.14 8.51 7.82 Earnings Yield (2.19) 0.64 0.12 0.21 0.27 0.32 0.29 0.24 0.12 0.13 Dividends Yield 0.12 0.11 0.02 0.03 0.04 0.04 0.07 0.03 0.01 0.01 Dividend Payout Ratio (0.05) 0.16 0.18 0.13 0.15 0.12 0.24 0.14 0.05 0.11 Market Capitalization 102,000 171,000 1,260,000 972,000 661,500 976,500 603,750 1,365,000 9,636,000 4,320,000


Notes

Notice of Meeting

Notice is hereby given that the Forty Seventh Annual General Meeting of Lankem Ceylon PLC will be held at the Grand Oriental Hotel, No. 2, York Street, Colombo 01, on 28th June 2012 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 2012, with the Report of the Auditors thereon.

• To declare a first and final dividend as recommended by the Directors.

• To re-elect as a Director, Mr. A. Hettiarachchy 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 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.5).

• To reappoint Mr. A. Rajaratnam who is 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. 6).

• To authorise the Directors to determine contributions to charities.

• To reappoint as Auditors, Messrs KPMG Chartered Accountants and to authorise the Directors to determine their remuneration.

By Order of the BoardCorporate Managers & Secretaries (Private) LimitedSecretaries

Colombo30th May 2012

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 eighty one 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.”

5. 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. R. N. Bopearatchy who is seventy one 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. R. N. Bopearatchy”.

6. 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. A. Rajaratnam who is seventy 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. 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 28th June 2012 and at any adjournment thereof and at every poll which may be taken in consequence of the aforesaid meeting.

For AgainstTo receive the Annual Report of the Board of Directors and the Statementof Accounts for the year ended 31st March 2012 with the Report of theAuditors thereon.

To declare a first and final dividend as recommended by the Directors.

To re-elect Mr. A. Hettiarachchy 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 authorise the Directors to determine contributions to charities.

To reappoint as Auditors, Messrs KPMG, Chartered Accountants, and to authorise the Directors to determine their remuneration.

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 Twelve.

...................................................................... 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;

Instructions as to Completion1. 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.

Board of Directors ChairmanA. Rajaratnam, FCA(Alternate, Mr. S. Rajaratnam)

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, FIPFM, CGMAA.R. Peiris, B.Sc.(Cey.), FCMA (UK), CGMAR.T. Weerasinghe, BBA (USA)A. Hettiarachchy, C.Eng, MIEE, MIProdEA.C.S Jayaranjan FCA, FCMA (UK), CGMAJ.D Gomes, FCMA (UK) FCCA (UK), FCPA (AUS), CGMA

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, 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 ActivitiesLankem Paints Ltd.Distribution of PaintsLankem Consumer Products Ltd. Distribution of Consumer ProductsLankem Chemicals Ltd. Distribution of Industrial ChemicalsLankem Agrochemicals Ltd. Distribution of AgrochemicalsSunAgro LifeScience Ltd.Import, Marketing and Distribution of AgrochemicalsLankem Research Ltd. Research and DevelopmentLankem Developments PLCInvestment Holding. (Formerly - Provision of Waterproofing and Construction of Roads and Industrial Flooring).C.W. Mackie PLCManufacturer, Exporter, Importer and Distributor of Consumer, Hardware and Rubber ProductsLankem Plantation Holdings Ltd.Investment in Plantation CompaniesLankem Tea & Rubber Plantations (Pvt) Ltd. Management of Plantations and Investment in PlantationsKotagala Plantations PLCCultivation and Processing of Tea and RubberAgarapatana Plantations Ltd. Cultivation and Processing of TeaLankem Plantation Services Ltd. Non-OperationalSigiriya Village Hotels PLCOwning and Operation of Resort HotelMarawila Resorts PLCOwning and Operation of Resort HotelColombo Fort Hotels Ltd. Investment in Hotel CompaniesBeruwala Resorts Ltd.Owning and Operation of Resort HotelYork Hotels (Kandy) Ltd. Owning of Resort HotelB.O.T. Hotel Services (Pvt.) Ltd. Owning and Operation of Resort HotelGalle Fort Hotel (Private) Ltd. Owning and Operation of Boutique HotelSunAgro Farms Ltd.Growers of Vegetables, Fruits and Foliage for Export and SaleAssociated Farms (Pvt.) Ltd. Farming and DairyingLankem Technology Services Ltd.Provision of Information Technology and Allied ServicesNature's Link Ltd.Manufacturing of herbal/natural based productsLankem Exports (Pvt) Ltd. Non-OperationalSunAgro Foods LimitedGrowers, importers, exporters, processors and marketers of food items Waverly Power (Pvt) Ltd.Generation of power energy /electricity using hydro resources

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