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Annual Report 2012/13 LANKEM CEYLON PLC The lives we touch
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Page 1: LANKEM CEYLON PLC we touch · 2013. 10. 31. · 2 Lankem Ceylon PLC | Annual Report 2012/13 Financial Highlights 24,668 Mn. 24,668 million rupees Revenue 838 Mn. 838 million rupees

A n n u a l R e p o r t 2 0 1 2 / 1 3

L A N K E M C E Y L O N P L C

The lives we touch

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Page 2: LANKEM CEYLON PLC we touch · 2013. 10. 31. · 2 Lankem Ceylon PLC | Annual Report 2012/13 Financial Highlights 24,668 Mn. 24,668 million rupees Revenue 838 Mn. 838 million rupees

Lankem Ceylon PLC was incorporated under the Companies’ Ordinance No. 51 of 1938 (CAP 145) on 15th September 1964 as a Private Limited Liability Company. It was converted into a Public Company on the 14th of November 1968 and commenced commercial operations on the 16th of March 1970.

Even though the Company’s original emphasis was on chemicals, today Lankem has a diversified business portfolio including paints, chemicals, bituminous products, consumer products, plantations, leisure, construction and agriculture crops & processing.

Our Business AreasOUR BUSINESS AREAS ARE AGRI-INPUTS, PAINTS, BITUMINOUS PRODUCTS,

CHEMICALS, CONSUMER PRODUCTS, PLANTATIONS, LEISURE, CONSTRUCTION,

AGRICULTURE CROPS & PROCESSING.

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 February 2013.

Corporate Information

Board of Directors ChairmanA. Rajaratnam, FCA

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

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

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

DirectorsR. N. Bopearatchy, B.Sc (Cey), Dip. BM, MBA (Univ. of Col.)N. H. B. S. Perera, B.Sc. (Cey.)K. P. David, FCMA (UK), FCMA, 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 Number PQ 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 Paints

Lankem Consumer Products Ltd. Distribution of Consumer Products

Lankem Chemicals Ltd. Distribution of Industrial Chemicals

Lankem Agrochemicals Ltd. Distribution of Agrochemicals

SunAgro LifeScience Ltd.Import, Marketing and Distribution of Agrochemicals

Lankem Research Ltd. Research and Development

Lankem Developments PLCInvestment HoldingC.W. Mackie PLCManufacturer, Exporter, Importer and Distributor of Consumer, Hardware and Rubber Products

Lankem Plantation Holdings Ltd.Investment in Plantation Companies

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

Kotagala Plantations PLCCultivation and Processing of Tea and Rubber

Agarapatana Plantations Ltd. Cultivation and Processing of Tea

Lankem Plantation Services Ltd. Non-Operational

Sigiriya Village Hotels PLCOwning and Operation of Resort Hotel

Marawila Resorts PLCOwning and Operation of Resort Hotel

Colombo Fort Hotels Ltd. Investment in Hotel Companies

Beruwala Resorts PLCOwning and Operation of Resort Hotel

York Hotels (Kandy) Ltd. Owning of Resort Hotel

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

Galle Fort Hotel (Pvt) Ltd.Owning and Operation of a Boutique HotelSunAgro Farms Ltd.Growers of Vegetables, Fruits and Foliage for Export and Sale

Associated Farms (Pvt.) Ltd. Farming and Dairying

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

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

Lankem Exports (Pvt) Ltd. Non-Operational

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

Waverly Power (Pvt) Ltd.Generation of power energy/electricity using hydro resources

Union Commodities (Private) LimitedExporters of traditional and non-traditional produce

Union Commodities Exports (Pvt) Ltd.Exporters of traditional and non-traditional produceTeacom (Pvt) Ltd.Importers, exporters and manufacturers of traditional and non-traditional produce

Unicom Clearing & Forwarding (Pvt) Ltd.Clearing, forwarding and warehousing agents

Union Commodities Teas (Pvt) Ltd.

Manufacturers, blenders, processors and exporters of traditional and non-traditional produce

Unicom Holdings (Pvt) Ltd.Investment Holding

Designed and produced by emagewise

Page 3: LANKEM CEYLON PLC we touch · 2013. 10. 31. · 2 Lankem Ceylon PLC | Annual Report 2012/13 Financial Highlights 24,668 Mn. 24,668 million rupees Revenue 838 Mn. 838 million rupees

AGRI-INPUTS, PAINTS, CHEMICALS, BITUMEN, CONSUMER, LEISURE, PLANTATIONS,

CONSTRUCTION, AGRICULTURE CROPS & PROCESSING

The lives we touch

ContentsFinancial Highlights 2Chairman’s Review 3Board of Directors 5Management Reports 7Financial Review 26Sustainability Report 30Annual Report of the Board of Directors 34Corporate Governance 37Risk Management 40Remuneration Committee Report 42Audit Committee Report 43

Financial InformationIndependent Auditors’ Report 45Statement of Comprehensive Income 46Statement of Financial Position 47Statement of Changes in Equity 48Cash Flow Statement 49Notes to the Financial Statements 51

Ten Year Summary 126Share Information 127Notice of Meeting 129Notes 130Form of Proxy 131Corporate Information Inner Back Cover

The Lankem Group has been working in a wide range of industry sectors in Sri Lanka for over forty years. From agri-inputs to leisure, chemicals, bitumen, plantations, consumer and paints, our portfolio has been steadily growing and with it, the excellence and value creation we offer to every customer, business partner, supplier and shareholder we partner.

Today we’re growing even bigger, seeking new opportunities to add value to trade and industry in Sri Lanka and through such value additions, to improve the lives of thousands of Sri Lankans, whom we directly or indirectly touch.

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Lankem Ceylon PLC | Annual Report 2012/132

Financial Highlights

24,668 Mn.24,668 million rupees Revenue

838 Mn.838 million rupees Profit Before Tax

3,698 Mn.3,698 million rupees Shareholders’ Fund

154.10154.10 rupees Net Assets per Share

Net Assets per Share - GroupIn rupees

0

50

100

150

200

12/1311/1210/1109/1008/09

Profit Before Tax - GroupIn millions

0

500

1,000

1,500

2,000

2,500

12/1311/1210/1109/1008/09

Revenue - Group

12/1311/1210/1109/1008/09

In millions

0

5,000

10,000

15,000

20,000

25,000

Total Assets

In millions

0

6,000

12,000

18,000

24,000

30,000

12/1311/1210/1109/1008/09

Price Earnings Ratio (No.of Times) Times

0

5

10

15

20

25

30

12/1311/1210/1109/1008/09

Total Equity

In millions

0

2,000

4,000

6,000

8,000

12/1311/1210/1109/1008/09

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3Annual Report 2012/13 | Lankem Ceylon PLC

Chairman’s Review

On behalf of the Board of Directors I am pleased to welcome you to the Annual General Meeting of the company and to present the Annual Report and the Audited Financial Statements of your company for the financial year ended 31st March 2013. This year’s financial statements have been, for the first time, prepared according to the Sri Lanka Accounting Standards (SLFRS/LKAS), which have converged with International Financial Reporting Standards (IFRS).

The unfavorable weather patterns witnessed over the course of the last financial year have had a disastrous impact on many of the subsidiaries of the company. Heavy rains during the latter part of the third quarter followed the extreme drought experienced during the first part of the year. Most impacted, were Group companies involved in the plantations sector, as well as those involved in crop protection, and in the provision of agricultural inputs for farming.

The successive seasonal failures of the monsoons has had a debilitating effect on the crop protection businesses of your company. Also affected were the allied businesses of fertilizers and seeds. In the year under review these three divisions witnessed a nearly thirty percent decline in turnover.

A serious threat and constraint to the future of the crop protection industry in the country are the adhoc restrictions that are being proposed in an attempt to address certain health concerns in the North Central Province. Lankem Ceylon PLC has always produced, marketed and distributed crop protection solutions from reputed International Organizations. These solutions conform to the highest International Standards and are widely used in the most advanced countries. We are committed to extensive testing of our products before they are introduced into the market. We believe that the attempts if any to link the crop protection industry to the entry of heavy metals into the food chain may have little or no scientific basis. Your company and the many others in the industry play a crucial role in ensuring a profitable harvest for Sri Lanka’s farmers and food security for all Sri Lankans. We believe that if the current legislative changes continue, the impact of these changes will be diminished income for the nation’s farmers and the loss of our hard earned self-sufficiency in rice production.

Operations in the bituminous products division continued to grow moderately. While the government continues to emphasize the importance of infrastructure development, we have been compelled to be very cautious in extending credit to companies in the construction industry because of the difficulty associated with collecting dues from these companies. We are looking at the possibility of introducing a new Polymer modified Bitumen into our range. This technology is gaining wide acceptance in developing countries and will certainly improve the durability and quality of the country’s road surface standards. The weak Sri Lankan rupee, high interest rates, and reduced consumer incomes has had a negative effect on the discretionary income available to Sri Lankan consumers. This

had an adverse impact on the company’s surface coating product business. In a very difficult year, we have seen static revenues. The bright light has been increased sales to the institutional sector. With reducing interest rates and stability in the domestic economy, the potential remains for this sector to do well in the future. The company is also actively looking to enter into regional markets with its products and I am hopeful that we can announce some success in this area in the year ahead.

The consolidated turnover for the Group rose marginally to approximately Rs. 24.7 Billion while at company level turnover declined to approximately Rs. 6.0 Billion. At Group level, Net income was approximately Rs. 639.2 Million while at company level the corresponding figure was a loss of approximately Rs. 338.1 Million.

The weakness seen in the coatings industry has also had a similar impact on our industrial chemicals division. Many of the products retailed by the division are used as intermediates in several manufacturing processes. The expected pick up of industrial activity during the course of the next financial year will have a beneficial impact on this division.

Adverse weather conditions during the year under review had a negative impact on the tea crops of Agarapatana Plantations and the Kotagala Plantations’ rubber crop. Due to the reduced crop harvested, unit costs of production were high. Nevertheless with strict cost control measures being exercised, Agarapatana Plantations was able to minimize these losses, whilst Kotagala Plantations had a reasonable year. For the year under review, Agarapatana Plantations recorded a made tea volume of 8.1 Million Kg against 9.8 Million Kg in the previous year. Crop levels at Kotagala Plantations fell to 6.6 Million Kg for tea and 2.8 Million Kg for rubber.

Agarapatana Plantations recorded a loss of Rs. 2.5 Million for the year under review while Kotagala Plantations recorded a profit of Rs. 474.7 Million for the year under review. Unfortunately, the weather during the new season has been extremely poor and the Plantation Industry is faced with a difficult year ahead. However, the recent wage increase granted to workers on both plantations is going to have a major impact on the profitability of both companies in the year ahead. In the years to come, mono-crop companies such as Agarapatana Plantations will find it extremely difficult to meet future wage demands, particularly during times when the tea market weakens. Kotagala has significant extents of both tea and rubber and is in a better position to spread the risks. The Company is also in the process of planting up to a 1,000 ha of rubber lands into oil palm. Due to its lower labour requirement, oil palm is more profitable per hectare than either tea or rubber.

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Lankem Ceylon PLC | Annual Report 2012/134

Chairman’s Review Contd.

Kotagala Plantations is also in the process of setting up a nearly 15,000 ha rubber plantation in Cambodia. Planting in Cambodia should begin at the latter part of the next financial year with crops expected approximately six to seven years after. The area that finally will be cultivated in Cambodia is nearly four times as large as the company’s cultivations in Sri Lanka and will be key to securing the company’s future financial success.

During the course of the year, the group acquired control of Union Commodities (Pvt) Ltd. Union Commodities is one of Sri Lanka’s largest tea exporters and with this acquisition we expect to derive many synergies with our plantations.

Profitability at the C.W. Mackie Group dropped from Rs. 385.8 Million to Rs.163.5 Million for the current year. Two principle reasons can be identified for this decline. The impact of the weather has meant that the company had been unable to export the volumes of rubber products and desiccated coconut that it usually does. The second reason is a breakdown in the company’s TSR plant, which forced it to curtail production and sales to several key customers. The problems at the TSR plant have now been rectified and the supply to these customers has resumed. The FMCG part of the business continues to grow strongly and the company is looking at enhancing its portfolio of goods distributed. With the improving weather and better availability of its products, the expectations are that the financial performance of C.W. Mackie will rebound strongly in the coming financial year.

The Group’s profit during the year has been sustained by strong performances by companies operating in the hospitality sector. With Sri Lanka seeing an increase in tourist arrivals into the country, I am very positive of the future prospects of our businesses in this sector. Increased rates and improved occupancy has allowed three of the group’s leisure businesses to increase profitability. Profit at the Galle Fort Hotels (Pvt) Limited increased to Rs. 41.8 Million, at Marawila Resorts PLC the company that owns and operates Club Palm Bay profit was Rs. 22.7 Million; at Sigiriya Village Hotels PLC the profit was Rs. 61.0 Million, however at Beruwala Resorts PLC recorded a loss of Rs. 8.2 Million. I am confident that all four hotels will be able to increase their profitability in the next year. In addition the Group will look at developing other properties around the country in order to further enhance profitability.

The Group has performed relatively well given the challenging business environment both locally and overseas. I firmly believe that with growth returning to the United States, the global economy should do better this year. The weaknesses of many of the European economies are also a worry, although many expect the economy of some of its members to return to growth. Locally, the economy is expected to continue its post war growth. One critical factor for most industries in Sri Lanka is the rapidly increasing cost of labour. All stakeholders must work together to ensure greater productivity in the

economy and moderation of wage increases so that Sri Lanka remains competitive in the global environment. The Group is well diversified and has a stake in many of the strategic business sectors of Sri Lanka.

I thank the stakeholders who collectively ensure the success of the Lankem Group. It is only with the confidence that they place in our company that we are able to sustain the financial performance year on year. I am grateful to my colleagues on the Board for their continued counsel and guidance as we go forward.

A. RajaratnamChairman

3rd June 2013

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5Annual Report 2012/13 | Lankem Ceylon PLC

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 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 serves as Chairman of several subsidiaries of The Colombo Fort Land & Building PLC. He also holds the position of Deputy Chairman of The Colombo Fort Land & Building 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 as Deputy Managing Director in the year 2005 and was appointed Managing Director in April 2009. He has spent several years working overseas as a Consultant for a leading Accountancy Firm. He also serves on the Board of The Colombo Fort Land & Building PLC in addition to serving on the Boards of several subsidiaries of the Lankem Group.

D. L. Vitharana [MNI (Lond), MBA, M.Sc. (UK)]Chief Operating OfficerMr. D. L. Vitharana was appointed to the Board in 2005. He joined Lankem Ceylon PLC in 1997 and has headed the Lankem Agro Cluster since 1999. He is currently the Chief Operating Officer of Lankem Ceylon PLC and also serves on the Boards of several subsidiaries of the Lankem Group.

R. N. Bopearatchy [B.Sc. (Cey), Dip. BM., MBA (Univ. of Col)]DirectorMr. R. N. Bopearatchy was appointed to the Board in 1996. He has considerable expertise in product development, manufacturing and marketing of pesticides, pharmaceuticals and consumer products. Soon after graduation he was employed in research in the Plant Pathology Division of the Tea Research Institute and subsequently joined Chemical Industries Colombo Ltd., and 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 held office as the Chairman of the Pesticide Association of Sri Lanka, the Toxicological Society of Sri Lanka and the International Mosquito Spiral Manufacturers Association (IMSMA). Mr. R. N. Bopearatchy currently holds several other directorships within The Colombo Fort Land & Building Group.

N. H. B. S. Perera [B.Sc. (Cey)]DirectorMr. N. H. B. S. Perera joined the Board in 1999. He is a former Chairman of Harrisons (Colombo) Ltd, and the Pesticides Association of Sri Lanka. He has held office as Deputy Chairman of the Planters Association of Sri Lanka and has functioned as Group Director of the Maharaja Organization Ltd. Mr. Perera has also served as Director on the Board of Harrison Lister(Colombo) Ltd, and several plantation company Boards such as Aislaby Estates Ltd, Attampettia Estates Ltd, Newburgh Estates Ltd, Kinross Estates Ltd, and Lunuwa Plantations Ltd, prior to nationalisation. He presently serves on the Boards of The Colombo Fort Land & Building 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 several companies 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.

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.

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Lankem Ceylon PLC | Annual Report 2012/136

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, Member of the Institution of Chemical Engineers and is the Head of Process and Engineering Systems-Sri Lanka Institute of Nanotechnology. He serves on the Boards of National Science Foundation, Richard Pieris Arpico Finance Ltd 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 MAS Intimates (Private) Limited. He is a Fellow Member of the Chartered Institute of Management Accountants (UK), the Association of Chartered Certified Accountants (UK) and Certified Practicing Accountants (Australia). A Past President of the CIMA — Sri Lanka Division (2001/2002) and the Sri Lanka Amateur Boxing Association (2004 to 2009), Mr. Gomes is presently the Vice President of the National Olympic Committee of Sri Lanka. He is also a Member of the Commonwealth Advisory Body on Sport.

Board of Directors Contd.

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Management ReportsAGRI-INPUTS, PAINTS, CHEMICALS, BITUMEN, CONSUMER, LEISURE, PLANTATIONS,

CONSTRUCTION, AGRICULTURE CROPS AND PROCESSING

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Lankem Ceylon PLC | Annual Report 2012/138

Bite into the fresher side of life

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9Annual Report 2012/13 | Lankem Ceylon PLC

Agri-InputsLankem broke new ground through its tie-up with the world’s number one research based crop protection company ‘Bayer Crop Science- Germany’.

Keeping abreast with rapid changes in global trends, the Sri Lankan agriculture industry too is at a transitional stage with farmers shifting from more conventional agriculture to commercial agriculture. In the year under review Lankem broke new ground through its tie-up with the world’s number one research based crop protection company ‘Bayer Crop Science - Germany’ to offer a range of crop protection solutions to farmers, further strengthening its slogan as the ‘Farmers Friend’. The launch of Coragen, an innovative eco-friendly crop protection solution further strengthened our portfolio of chemicals with low toxicity.

Being awarded the prestigious ‘National Cleaner Production Award’ for our state-of-the-art factory in the Pannala industrial zone, affirms our commitment to environmental best practices.

The recently established fertilizer arm which took initiatives to further enhance its distribution network, witnessed a successful year showing tremendous potential for growth in years to come. A modern seed processing facility in Pannala came into operation with the pledge of offering the best to the local farmer which manifests our position in this domain.

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Lankem Ceylon PLC | Annual Report 2012/1310

Adding fashion to your walls

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11Annual Report 2012/13 | Lankem Ceylon PLC

PaintsLankem remains resilient in this sector whilst being pioneer in the coating manufacturing industry.

During the fiscal year under review, Lankem Paints has spread its wings in the realm of decorative paints by partnering with Italian paint giant Candis, offering the Sri Lankan consumer a world class fashion experience for their walls combined with Italian sophistication. Their product portfolio was further strengthened with the introduction of a new range of decorative and protective wood care products and the introduction of a PU wood coating brought down in collaboration with Verinlegno of Italy.

Strengthening the Auto refinish sector, Lankem joined hands with 3M Lanka, as their sole distributor for collision repair products.

All in all Lankem remains resilient in this sector whilst being the pioneer in the coating manufacturing industry in Sri Lanka. Our market share has increased with new and innovative products into the portfolio of Decorative Coatings, Auto Refinish, Wood Coatings, Epoxy Coatings, NC-based Coatings and the Epoxy Adhesives segments.

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Lankem Ceylon PLC | Annual Report 2012/1312

For life’s essential Chemistry

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13Annual Report 2012/13 | Lankem Ceylon PLC

ChemicalsLankem Chemicals sustained market dominance in the Thinner and Solvent trading markets.

Lankem Chemicals comprises of three sectors namely Industrial Chemical, Thinner and Food & Feed ingredients. Lankem Chemicals sustained market dominance in the Thinner and Solvent trading markets whilst maintaining a considerable stake in the market. Despite market growth of each of these sectors being well below expectations during the year, Industrial Chemical and Thinner divisions maintained a sustainable growth. The Food and Feed ingredients division recorded an impressive increase in turnover from the previous year resulting in higher profitability.

Lankem Chemicals partnered with ‘Ms. Solae Co Ltd’ a fully owned subsidiary of ‘DuPont Inc.’, as its authorised distributor in Sri Lanka and with Asia’s largest pigment manufacturer, ‘Shenghua Group Deqing Huayuan Pigment Co Ltd,’ manufacturer of Hyrox Brand pigments as their authorised dealer in Sri Lanka. Lankem Chemicals has indeed set its standards in the industry for all three divisions it represents.

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Lankem Ceylon PLC | Annual Report 2012/1314

Life is a journey we make it smoother

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15Annual Report 2012/13 | Lankem Ceylon PLC

BitumenLankem is the pioneer in the supply of Emulsion and Road surfacing Bitumen in Sri Lanka, and is the only Public Company engaged in this sector.

Lankem is the pioneer in the supply of Emulsion and Road surfacing Bitumen in Sri Lanka, and is the only Public Company engaged in this sector. With the Government’s current emphasis on infrastructure development, the rehabilitation and reconstruction of the existing road network and the construction of new roads, this industry is likely to show a rapid growth in the near future.

In addition to the supply of road construction material, the company is also involved in waterproofing through its three types of hardware products which are Shieldkote, DPC Tar and Roofing Tar.

The company has obtained ISO 9001:2000 quality management systems for its manufacturing process in collaboration with the Sri Lanka Standards Institute.

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Lankem Ceylon PLC | Annual Report 2012/1316

Our business is your well-being

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17Annual Report 2012/13 | Lankem Ceylon PLC

ConsumerC.W. Mackie PLC has been presented with the prestigious ‘International brand of the year’, a global award for brand excellence.

Sunquick, a flagship brand of C.W.Mackie PLC clinched the title of “International Brand of the Year” gold award at the SLIM brand excellence awards 2012 and was presented with prestigious International Brand of the Year award at the World Brand Congress 2012 held in Mumbai. The company’s continuous commitment to stringent world class standards was instrumental in enabling it achieve such a remarkable feat.

An investment of Rs. 70 million was made by Lankem Consumer division in the commissioning of a state-of-the-art laundry soap plant in Sapugaskanda. The launch of a new laundry soap into the market saw a noteworthy growth in sales during the year.

The division has focused on the detergent industry given the tremendous potential and growth prospects. Investments in Nano technology are to be made to further strengthen our brand offerings.

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Lankem Ceylon PLC | Annual Report 2012/1318

Building a better environment

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19Annual Report 2012/13 | Lankem Ceylon PLC

Construction & Pest ControlThe Pest Control division recorded its first venture into Maldivian soil with their termite treatment methods.

The construction division has its main focuses on epoxy flooring, waterproofing, industrial flooring and sports court flooring. During the next fiscal year the focus is to be mainly on developing the water proofing industry and venturing into heat insulation.

The Pest Control division recorded its first venture into Maldivian soil with their termite treatment methods. This led to the training of the Maldivian defense team on termite protection, and plans are underway to expand both the termite control and general pest control businesses.

Another notable feat was the awarding of the termite control project of Shangri-La hotel in Hambantota.

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Lankem Ceylon PLC | Annual Report 2012/1320

Prospering tomorrow’s nation

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21Annual Report 2012/13 | Lankem Ceylon PLC

PlantationsDuring the year under review the company made strategic investments in rubber plantation projects in Cambodia.

With tea estates in the two main elevation categories of Western High Grown and Low Grown, Kotagala Plantations has the advantage of not being over dependent on the demand of any particular type of tea. In spite of adverse climatic conditions the company was able to harvest the budgeted crop. The rubber plantations too had similar effects due to climatic conditions effecting crops.

During the year under review the company made strategic investments in rubber plantation projects in Cambodia. It also acquired Union Commodities (Pvt) Ltd., a long established tea export trading house with significant synergies in terms of operations. The year initiated the planting of Oil Palm in the low country due to the uneconomic nature of rubber lands with plans underway for future investments in this domain.

Rain Forest Alliance certification which is a mandatory requirement, was obtained for the Dambetenne factory and associated fields. Additionally Food Factory Standard ISO 22000 certification was obtained for three factories.

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Lankem Ceylon PLC | Annual Report 2012/1322

Making your break memorable

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23Annual Report 2012/13 | Lankem Ceylon PLC

LeisureThe hotels within the group reflected the upsurge in the industry.

The Government’s efforts to promote Sri Lanka as one of the most sought after tourist destination was successful and resulted in increased tourist arrivals during the year. It also helped to improve the lucrativeness of the leisure sector and reiterated the group’s decision to make further investments in hotels across the country.

The hotels within the group reflected the upsurge in the industry. While The Palms - Beruwela undertook refurbishment during the year, Club Palm Bay - Marawila housed an expansion project to cater to the increase in numbers of guests while the Bay Beach Hotel - Weligama will embark on a full-scale upgrade shortly.

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Lankem Ceylon PLC | Annual Report 2012/1324

Here to make life bloom

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25Annual Report 2012/13 | Lankem Ceylon PLC

Agriculture Crops and ProcessingLankem is committed in achieving sustainable agricultural productivity and growth through its partnership with the farming community.

SunAgro Farms operates in the agriculture and crop production industry. Making its mark with the introduction of Asparagus cultivation to Sri Lanka, this is now into commercial operations, supplying to some of the leading hotels and institutions.

A number of strategic projects are in the pipeline which will enable the company to sustain a higher engagement in the Agri Processing industry while establishing partnerships for growth with the farming community, especially through out-grower progammes. These programmes will provide essential farming inputs such as seeds, fertilizers, agrochemicals and technical know-how, thus generating dividends for both the company and the farmers.

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Lankem Ceylon PLC | Annual Report 2012/1326

Financial Review

OverviewLankem Ceylon PLC together with its subsidiaries posted mixed yet satisfactory results for the financial year 2012/13 amidst a challenging environment as its core businesses faced difficult trading conditions due to government restrictions on key product segments, unpredictable and adverse weather conditions, competitor pressure and adverse exchange rate fluctuations. Despite these challenges the group concluded the year with a positive result while the Company recorded a loss as a result of provisions being made for long term investments in listed subsidiaries using market values.

Revenue AnalysisThe Consolidated Revenue of Rs. 24.67 Bn. which resulted in a growth of 2.11% year-on-year and an average growth rate of 21.15% over the last five years has proved yet again the ability to establish itself as a successful and competitive business conglomerate in diversified areas. The main contributors to the Group Revenue are the Plantations segment followed by Industrial Products, Plantation Trading and Consumer Products segments.

The Company managed to record a revenue of Rs. 5.98 Bn. during the year under review compared to Rs. 6.09 Bn. achieved during the previous year. The reduction in the Company Turnover was predominantly due to the inadequate contribution generated by Agricultural inputs and Industrial products segments.

In December 2012 Kotagala Plantations PLC, a subsidiary of Lankem Ceylon PLC, acquired a 100% stake of Union Commodities (Private) Limited, the fourth largest tea exporter in Sri Lanka which resulted in strengthening the group’s synergies in the Plantations and Plantation Trading segments.

The Plantations segment revenue grew by 5.31% representing a value of Rs. 7.03 Bn. as compared to Rs. 6.68 Bn. reported in the previous year. The remunerative tea prices that prevailed in the year under review coupled with higher production volumes contributed to the higher turnover. The Plantation Trading segment reported a revenue of Rs. 5.3 Bn. for the year under review.

The revenue growth of 8.60% which resulted in a year end turnover figure of Rs. 4.5 Bn. reflected in the Consumer Products segment was mainly due to the exceptional performance in sales and distribution activities of the FMCG segment in C.W. Mackie PLC.

The Industrial Products segment witnessed a marginal decline recording a revenue of Rs. 6.77 Bn. compared to previous year’s revenue of Rs. 6.84 Bn. while the Agricultural Inputs segment experienced a very challenging year. This was mainly due to severe weather conditions which prevailed during the Yala season coupled with government restrictions on importation of certain products during the year.

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Segmental Contribution to Group Revenue 2012/13

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Agricultural InputsConsumer ProductsIndustrial ProductsLeisure

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27Annual Report 2012/13 | Lankem Ceylon PLC

ProfitabilityThe Group achieved a post-tax profit of Rs. 594.52 Mn. for the financial year under review. The profitability of the Leisure and Plantation sectors increased while all the other sectors showed a decrease during the year under review.

The post-tax loss of the Company was Rs. 351.95 Mn. during the year compared to a profit of Rs. 730.02 Mn. during the previous year. The Company had to make provisions for the falling value of its short term and long term investments and further impairments on amounts due from Related Parties resulted in a loss for the financial year.

Finance CostsThe fall in operating profits along with the increase in borrowings resulted in an increase in finance costs during the year under review, has led to Group’s interest cover dropping to 1.90 times from 3.42 times reported in the previous year.

Financial and Liquidity PositionNon-Current Assets PositionThe total Non-Current Assets increased to Rs. 14.77 Bn. from Rs. 11.96 Bn. during the year under review. This was mainly due to the investments in Property, Plant & Equipment that has increased to Rs. 8.38 Bn. during the year from Rs. 6.23 Bn. in the previous year.

Working CapitalThe Group’s working capital investment decreased during the financial year to Rs. 508.70 Mn. from the previous year’s figure of Rs. 712.21 Mn. Hence the current ratio declined from 1.08 to 1.05, whilst the quick asset ratio dipped from 0.80 to 0.76.

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Lankem Ceylon PLC | Annual Report 2012/1328

Capital StructureThe Group’s Debt as a percentage of the Total Capital is 58% whilst the Equity component accounted to 42% during the year under review as opposed to previous year’s debt and equity percentages of 52% and 48% respectively.

During the financial year the Group obtained additional interest bearing long term and short term borrowings by way of term loans amounting to Rs. 3.29 Bn. while settling amounts worth of Rs. 1.40 Bn. Further, the Company’s working capital tied up due to increase in stocks and debtors which were in certain seasonal related businesses are expected to self-liquidate during the coming financial year.

Cash FlowThe Group’s net cash flows from operating activities amounted to Rs. 144.50 Mn. compared to Rs. 1,160.12 Mn. previous year representing a decrease of 87.54% year-on-year. This was mainly attributable to the increase in cash outflows due to investment in subsidiaries, property, plant and equipment coupled with increase in amounts due from related parties.

Financial Review Contd.

Share PerformanceThe All Share Price Index (ASPI) of the Colombo Stock Exchange (CSE) for the financial year ended 31st March 2013 has increased by 6% to 5,736 points. The closing share price of Lankem Ceylon PLC (LCEY) was Rs. 144.50 representing a drop of 20% over the previous year. The total market capitalisation of the company stood at Rs. 3.47 Bn. as at 31st March 2013.

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The Earnings Per Share (EPS) of the Group decreased from Rs. 19.85 to Rs. 5.29 as a result of an increase in Group finance cost. The Net Asset Value Per Share (NAV) of the Group has marginally improved to Rs. 154.10 as at 31st March 2013.

Lankem Share Price & Volume Movement

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LCEY- Based on 1/4/2012 Prices ASPI - Based on 1/4/2012 Index Value

Equity

Capital Structure 2012/13

42%

58%

Debt

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29Annual Report 2012/13 | Lankem Ceylon PLC

DividendsThe Directors of Lankem Ceylon PLC have recommended a first and final dividend of Rs. 1.50 per share for the year ended 31st March 2013. This represents a dividend payout of 28.36% and a dividend yield of 1.04%.

Earnings Per Share & Net Assets Per Share

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Lankem Ceylon PLC | Annual Report 2012/1330

Sustainability Report

Our company’s foundation is built on our values, which distinguish us and guide our actions. We conduct our business in a socially responsible and ethical manner. Our practice of returning to society and protecting the environment evokes trust among consumers, employees, shareholders and the community.

Our Sustainability ethos has been built on the foundation stones of; Commitment to quality Value addition through innovation Cultural values Conscious outlook Growth through diversification and evolution Green initiative Nurturing employee talent

We ensure that our sustainable ethos is applied to all business segments from chemicals to hotels to plantations covering the entire spectrum of our group. Our sustainability strategy revolves around the community, customer, environment and workforce.

COMMUNITY - As one of the largest conglomerates in the country we believe that our sphere of responsibility is extensive. Therefore, it is of utmost importance that our operations take place under the stringent measures, preventing any adverse impact to the community around us. This has been engrained in the values of the organisation through the adoption of voluntary and statutory codes and processes.

CUSTOMERS - All businesses need customer information, but to stay ahead of the competition requires proactive research. We evaluate ourselves from our clients’ perspective. This approach enables the organisation to find the existing gaps as well as receive an unbiased status whether we need to measure awareness of our brand, explore service requirements or simply check that customers are satisfied.

ENVIRONMENT - The Lankem Group is committed to promoting sound environmental practices within our key businesses, through the establishment of policies and

practices that enable us to conduct our operations in a sustainable and environmentally sound manner. We strive to continuously identify all potential impacts on the environment and manage such impacts whilst using our resources in a sustainable and efficient manner.

EMPLOYEES - We believe that employees are the foundation on which the organisation is built, thus making each individual play a vital role in the Groups’ functionality. We strive to create a working environment where employees are informed and involved in company activities with a work culture that is focused on learning and development followed by recognition and reward.

Environmental ImpactOur focus has been on energy and biodiversity during the reporting period. Sustainable energy usage is strongly encouraged throughout the Group, with companies being involved in numerous energy saving initiatives. Our energy management processes minimise impact of energy related environmental damage. We have and will continue to use all energy resources responsibly and efficiently with a view to optimising energy consumption by constantly developing our energy management processes and exploring emerging technologies and best practices.

LANKEM CEYLON PLC

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Commitment To Quality

Growth ThroughDiversification

Value Addition ThroughInnovation

Conscious Outlook

Eco-Friendly

Nurturing Internal Growth

Cultural Values

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31Annual Report 2012/13 | Lankem Ceylon PLC

Some of the improvements carried out by certain sectors as a part of the energy saving initiative during the year under review is as follows;

The hotels sector carried out an initiative to convert from central air conditioning units to split units.

The use of energy efficient CFL bulbs was promoted throughout many sectors.

More than just a Work PlaceThe Lankem Group has established many policies and practices that contribute to build employee engagement. These initiatives enable the creation of an organisation of citizenship and commitment that in return ensures the success of employee relations.

Whilst we strive to attract and retain the best employees through our robust employee value proposition, we also identify and assist employees to reach their true potential through continuous learning and development opportunities. The group is committed to maintain workplaces that are free from physical or verbal harassment or discrimination of any form.

Our ContributionThe Lankem Group firmly believes that education is the foundation stone of an enlightened and civilized society. As such education related initiatives take high priority on its agenda of corporate responsibility.

Believing in the simple line of ‘a healthy society is a productive society’ – several health camps were carried out by our plantations sector on a number of group estates. Further a workshop was held at the Carlton Pre-School to educate the children on the ‘Prevention against the deadly mosquito’ and the importance of having a clean environment.

Product StewardshipAt Lankem we are aligned with our customers’ expectations, offering products and services in line with the highest standards. We provide an extensive portfolio of products and services to address the varied and complex requirements of our customers and are able to do so due to the strategic diversification of our group. This credo is applicable to our customers in both the local and foreign arenas. All products and services will continue to be transparent in terms of their scope, ingredients, service deliverables and standards and the environmental impact where applicable. Product and service excellence is an essential component of our strategy involving investment in certification by recognised authorities. Our labeling includes such certification where applicable.

Our objective in sourcing the highest quality and most sustainable product is two pronged, while offering these products to the customer we educate them and make them aware of new and more ethical products available in the market. One such product which was introduced to the Sri Lankan market is ‘Coragen Insect Control’ by DuPont – designed to destroy specific crop harming insects and with minimum heavy metal components, this product has taken the market by storm, its added advantage being its very low levels of bee toxicity as per EU recommendations.

“We ensure that our sustainable ethos is applied to all business segments from chemicals to hotels to plantations covering the entire spectrum of our group.”

Project Overall Objective Project Location

‘Help a child’ in collaboration with The Lend a Hand Foundation

The provision of stationery and other educational material to orphaned kids.

Vavuniya and Batticaloa

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Lankem Ceylon PLC | Annual Report 2012/1332

Sustainability Report Contd.

“Our values of integrity and ethical behavior go beyond how we conduct ourselves in business – they extend to our cities and towns, our neighbourhoods...”

CSR Report For over four decades Lankem has been committed to supporting the vitality and health of their communities; helping them stay accountable and identify areas of improvement related to their people, communities and environment that are important to both internal and external stakeholders.

Commitment to Our PeopleAs a conglomerate we understand that people are our most important asset – they’re the engines that drive our success, which is one of the reasons we invest so much time and resources in creating a vibrant work environment that encourages a variety of perspectives, values every voice and respects a balanced life.

We work hard to ensure our people have first-class benefits, dynamic challenges and opportunities to learn and grow. Once part of our team, our staff members benefits from continual learning and development. After all, career development is woven into our business culture.

ProjectsCaring for our ownWelfare of our worker is given top priority. New life housing, sanitation and upgrading of living standards was one that took priority amongst our Plantations group. Further health and educational camps and educational and dental clinics were organized thoughtout the year under review.

Our Wage StructureThe economic well-being of our employees is a core pursuit of the Company. We strive at all times to remain an employer of choice and therefore offering the most lucrative wage structures we can is an imperative.

A Skilled WorkforceAt Lankem we believe that our most invaluable assets are its highly trained workforce. With a planned training regime which leads to the self-development, motivation and career advancement. During the year under review due emphasis was given to this area throughout the group.

Investing in Our CommunitiesOur values of integrity and ethical behavior go beyond how we conduct ourselves in business – they extend to our cities and towns, our neighbourhoods, our schools and our environment. We encourage employees to give back to the communities that have supported our success and have given us clients, new recruits and welcoming places to put down roots.

Over the years, individuals across the firm have dedicated countless hours to volunteering for and serving various causes they support. In addition, our offices regularly lead charitable donation drives and outreach efforts throughout our communities.

ProjectsMaw Piya PranamaAt Lankem we have our roots deeply into Sri Lankan cultures and values, focusing on these values a special program was engineered rewarding parents/elders. Maw Piya Pranama is the first such program to be introduced in Sri Lanka and gives children the opportunity to convey their gratitude to their parents for all the sacrifices, hard work they have made by gifting them with a pilgrim tour to various religious sites.

Help a childSeveral projects were carried out in collaboration with Lend-A-Hand Fund; providing books and stationery to children in Vavuniya and Batticaloa. Many of these kids have been resettled from IDP camps and those in Batticaloa are victims of the Tsunami, they were in dire need of books/stationery and other items to continue their schooling. Celebrating ‘Deaf Day’This project was carried out for the Sri Lanka Central Federation of the Deaf in commemorating the International Day of the Deaf. Providing them with specially printed T’shirts for all members participating in the march, making this day colorful and memorable to them.

Introduction of Weed Management TechnologyThe above mentioned workshop was conducted in collaboration with the Department of Agriculture, Agrarian Services Department and divisional farmer organisations. Conducted in Kanthale and Allai, a total participation of 500 farmers was recorded for the 10 sessions.

The main objective of this program was to educate the farmers on Weed ecology Integrated weed management practices Education on herbicide resistance and To improve relationships between the organisations

who took part in this program

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33Annual Report 2012/13 | Lankem Ceylon PLC

Educating our Future GenerationA workshop was held at the Carlton Pre-School to educate the young ones on the ‘Prevention against the deadly mosquito’. The importance of having a clean environment was the emphasis of the workshop.

Paying PatronageWe at Lankem paid tribute to the noble soldiers who were maimed during the war by offering them financial assistance at their retreat - Mihindu Seth Madura.

‘Varna Pooja’ Holding sacred the religious and cultural beliefs, Lankem engaged in the tradition ‘Varna Pooja’ – painting of the Dalada Maligawa Complex prior to the Kandy Esela Perehera for the eighth consecutive time this year.

Further the painting of the sacred Madhu Church in preparation of the annual feast and the numerous renovations and upgrades to places of worship under the ‘Siyak Pudabim Varna Pooja’ was indeed a success story yet again this year around. Being a totally home grown company our belief is that we do owe a debt of gratitude to the people of Sri Lanka and this is but one way of repaying this debt.

Environmental SustainabilityAs a firm, we’re committed to minimising our environmental impact – from how we source our office supplies to the business choices we make every single day. To do this, we’ve developed specific goals related to the percentage of recycled materials and the total amount of supplies we use in our offices, the amount of water withdrawn, and the direct and indirect energy we use.

Office Materials PurchasedIn our goal to reduce the consumption of purchased office material, we begun by instituting firm-wide initiatives to reduce the use of paper materials, including:

Encouraging the use of double-sided printing. Transitioning from printed to electronic materials for

training events and conferences.

Recycled MaterialYear-end complimentary items such as diaries and organizers broke ground with recycled materials being the key component used in these items.

ProjectsPesticide Container Recycling ProgramThe above mentioned project was conducted in collaboration with the Registrar of Pesticides- Department of Agriculture, Ministry of Environment and Crop Life Sri Lanka. Launched in Weearaketiya, Beralihela, Ambalantota, Ranna, Agunukolapelessa and Sooriyawewa in the Hambantota district, the focus of the program was the collection and recycling of empty glass pesticide bottles.

This program was implemented taking to account the increased number of accidents brought about due to empty glass containers lying around (resulting in cuts and bruises) and the reduction of pollution as many of these bottles once used were dumped into natural water resources resulting in contamination of the water and the pollution and clutter of the environment.

Waste Management ProgramThe aim of this project was to implement proper waste management systems in a number of public organisations - Sri Lanka Army, Schools, Municipal Councils, Sri Lanka Coconut Research Institute and Cricket stadiums. A total number of 850 plastic barrels were donated to these institutions to be used as garbage bins and for the making of liquid fertilizer.

This progam helped in reducing the spread of dengue in the areas which it was conducted and further educated the people in the manufacturing and uses of ‘compost’ fertilizer.

Efficient use of WaterPrudent usage and conservation of water is becoming more of an imperative each year. Across the constitute companies of the Group several measures were made to conserve and reuse water. Some of the hotels within our group have now obtained their own recycling processes.

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Lankem Ceylon PLC | Annual Report 2012/1334

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 2013.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 46 to 125.

Auditors’ ReportThe Auditors’ Report on the Financial Statements is given on page 45.

Accounting PoliciesThe Accounting Policies adopted in the preparation of the Financial Statements are given on pages 51 to 60.

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 93 to 106.

Directors’ RemunerationThe Directors’ remuneration in respect of the Group for the financial year 2012/13 is Rs. 188.04 Million (2011/12 - Rs. 164.74 Million) and in respect of the Company for the financial year 2012/13 is Rs. 74.16 Million (2011/12 - Rs. 65.46 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 in the next column:

No. of Shares

As at As at 31.03.2013 31.03.2012

Mr. A. Rajaratnam 12,198 12,298 Mr. S. D. R. Arudpragasam 5,132 5,132Mr. Anushman Rajaratnam 46,054 39,204Mr. D. L. Vitharana - -Mr. R.N. Bopearatchy - -Mr. N. H. B. S. Perera - -Mr. K. P. David 12,150 12,150Mr. A. R. Peiris 2,935 2,935Mr. R. T. Weerasinghe 7,000 7,000Mr. A. Hettiarachchy - -Mr. A. C. S. Jayaranjan - -Mr. J. D. Gomes - -

Corporate DonationsDonations made by the Group amounted to Rs. 69,000/- during the year under review. (2011/12- Rs. 438,000/-)

DirectorateThe names of the Directors who held office during the financial year are given below. Brief profiles of these Directors appear on pages 5 and 6.

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 DirectorMr. A. Hettiarachchy DirectorMr. A. C. S. Jayaranjan DirectorMr. J. D. Gomes Director

In terms of Articles 85 and 86 of the Articles of Association, Mr. A.C.S. Jayaranjan retires by rotation and being eligible offers himself for re-election.

Mr. N. H. B. S. Perera, Director, being over seventy years of age retires and offers himself for reappointment under and by virtue of the Special Notice received from a shareholder of the Company which is referred to in the Notice of Meeting.

Mr. R. N. Bopearatchy, 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 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.

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35Annual Report 2012/13 | Lankem Ceylon PLC

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 General Meeting.

The Auditors, Messrs KPMG Chartered Accountants were paid Rs. 11.16 Million during the year under review (2011/12- Rs. 8.84 Million) as audit fees and fees for audit related services by the Group. In addition, they were paid Rs. 1.76 Million (2011/12- Rs. 2.48 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. 6.02 Million during the year under review (2011/12- Rs. 4.36 Million). Further, the fees for non-audit related services by these audit firms during the year 2012/13 was nil. (2011/12-Rs. 0.03 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. 24,668 Million (2011/12 - Rs. 24,159 Million).

ResultsThe Group made a profit before Tax of Rs. 838 Million against a profit of Rs. 1,025 Million in the previous year. The detailed results are given in the Statement of Comprehensive Income on page 46.

InvestmentsInvestments made by the Group are given in Note 18 to the Financial Statements on pages 75 to 78.

Property, Plant & EquipmentDuring 2012/13 the Group invested Rs. 1,058.56 Million in Property, Plant & Equipment (2011/12 - Rs. 750.16 Million). Further, your Directors are of the opinion that the net amounts at which Land and other Property, Plant & Equipment appear in the Statement of Financial Position are not greater than their market value as at 31st March 2013.

Stated CapitalThe stated capital of the Company as at 31st March 2013 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 2013 comprised Other Capital Reserves of Rs. 3.93 Million, General Reserves of Rs. 305.95 Million and Retained Earnings of Rs. 2,844.39 Million whereas the total Group Reserves as at 31st March 2012

comprised Other Capital Reserves of Rs. 3.93 Million, General Reserves of Rs. 305.95 Million and Retained Earnings of Rs. 2,840.98 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 Note 10 to the financial statements on pages 63 to 65.

Share InformationInformation relating to earnings, dividend, net assets, market value per share and share trading is given on pages 65, 127 and 128.

Events Occurring after the Reporting PeriodEvents Occurring after the Reporting Period that would require adjustments to or disclosures are disclosed in Note 34 on page 112.

Capital Commitments and Contingent LiabilitiesCapital commitments and contingent liabilities as at the date of the Statement of Financial Position are disclosed in Notes 31 and 32 on pages 109 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 minimise 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.

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Lankem Ceylon PLC | Annual Report 2012/1336

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) LimitedSecretaries

Colombo03rd June 2013

Annual Report of the Board of Directors Contd.

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37Annual Report 2012/13 | Lankem Ceylon PLC

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 properly formulated 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 of Sri Lanka and the rules on Corporate Governance set out in the Colombo Stock Exchange Listing Rules.

We present below the Corporate Governance practices adopted and practiced by Lankem Ceylon PLC.

The Board of Directors1.1 The Board, Composition and MeetingsThe Board of Directors of Lankem Ceylon PLC is responsible for the governance practices adopted in all the companies within the Group. The Board comprises the Chairman, Deputy Chairman, Managing Director, Chief Operating Officer and eight other Directors. All the Directors are professionals who have acquired a wealth of experience and knowledge in the fields of Management, Marketing and Finance.

Name of DirectorMr. A. Rajaratnam Non-Executive (Chairman)

Mr. S. D. R. Arudpragasam Non-Executive(Deputy Chairman)

Mr. Anushman Rajaratnam Executive(Managing Director)

Mr. D. L. Vitharana Executive(Chief Operating Officer)

Mr. R. N. Bopearatchy Executive

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

Mr. K. P. David Executive

Mr. A. R. Peiris Executive

Mr. R. T. Weerasinghe Executive

Mr. A. Hettiarachchy Independent Non-Executive

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

Mr. J. D. Gomes Independent Non-Executive

The Board meets regularly and has met eight 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: 8

Name of Director Directorship Board Meetings Status Attended

Mr. A. Rajaratnam Chairman 6/8 Non-Executive

Mr. S. D. R. Arudpragasam Deputy Chairman 8/8 Non-Executive

Mr. Anushman Rajaratam Managing Director 8/8 Executive

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

Mr. R. N. Bopearatchy Executive 5/8

Mr. N. H. B. S. Perera Independent 6/8 Non-Executive

Mr. K. P. David` Executive 8/8

Mr. A. R. Peiris Executive 7/8 Mr. R. T. Weerasinghe Executive 7/8

Mr. A. Hettiarachchy Independent 6/8 Non-Executive

Mr. A. C. S. Jayaranjan Independent 5/8 Non-Executive

Mr. J. D. Gomes Independent - Non-Executive (excused)

Availability of Formal Schedule of MattersThe 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.

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Lankem Ceylon PLC | Annual Report 2012/1338

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

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

1.2 Segregation of the Role of Chairman and Chief Executive Officer

The role of Chairman and Chief Executive Officer is clearly segregated. The Managing Director functions in the capacity of Chief Executive Officer who is responsible for the operational matters of the Company. Functional Directors are responsible for the respective division of strategic business units.

1.3 Chairman’s 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.

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. Directors Remuneration2.1 Remuneration CommitteeThe Remuneration Committee of the Ultimate Parent Company, The Colombo Fort Land & Building PLC (CFLB) functioned as the Company’s Remuneration Committee until such time the Company formed its own Remuneration Committee in December 2012.

The Remuneration Committee report is set out on page 42 of this report.

2.2 Disclosure of RemunerationAggregate remuneration paid to Directors is disclosed in Note 29 to the Financial Statements on page 106.

Corporate Governance Contd.

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39Annual Report 2012/13 | Lankem Ceylon PLC

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 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 (SLFRS / LKAS).

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 page 45 containing the Auditors’ reporting responsibility. Non-financial information of business segments is given on pages 7 to 25.

4.2 Internal ControlsThe Board of Directors take 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 report is set out on page 43 of this report.

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Lankem Ceylon PLC | Annual Report 2012/1340

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 been adequately compensated.

The risk management process of the Group focuses 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 and safety, environmental compliance, financial reporting and controls and information technology and security.

The Company has established comprehensive 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, demand for our products and services, competitor threats, technology and product innovation, mergers and acquisitions and public policy.

2. Operational RiskOperational risk relates to the risk arising from the 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 continuously focusing on improving its controlling and monitoring processes 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 customers, which can lead to financial losses. Due to the nature of operations and economic conditions, the Company has provided its customers with fair credit periods to facilitate a smooth flow in operations. The Company implements proper credit control policies, which evaluate customers periodically, structured approval levels, recovery procedures and debt collection policies to ensure that the Company selects and maintains 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. In order to mitigate these risks the Company monitors and evaluates market forces and implements adequate controls.

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 rate fluctuations. 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 by minimising any adverse impact. 3.2.2. Interest Rate RiskThe Company has faced increasing finance costs due to prevailing high interest rate regimes. The Company continuously restructures its debt portfolio to minimise 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 rates have deteriorated the purchasing power of customers. This will reduce the potential demand for 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 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 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.

3.2.5. Investment RiskThis risk incorporates threat of investments not yielding the expected results. The Company has in the recent past focused on organic growth. The Company conducts detailed feasibility studies and selects projects only exceeding the expected rate of return. 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 feedforward controls are established to deter the reoccurrences of adverse variances. In addition, investments in capital and money markets are also closely monitored to avoid and mitigate risk of investment returns due to the market conditions.

Risk Management

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41Annual Report 2012/13 | Lankem Ceylon PLC

4. Business RiskNew entrants into the markets that the Company 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 and effects of the weather conditions for certain seasonal businesses are also a potential 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’ default 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 because 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 ComplianceThe 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, 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.

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Lankem Ceylon PLC | Annual Report 2012/1342

Remuneration Committee Report

The Remuneration Committee consists of the following members:

Mr. A. Hettiarachchy Chairman - Independent/Non-Executive Director

Mr. N.H.B.S.Perera Member - Independent/Non-Executive Director

Mr. S.D.R. Arudpragasam Member - Non-Executive Director

Mr. Anushman Rajaratnam Member - Managing Director/Executive

The main function of the Remuneration Committee is to assist the Board in developing and administering an equitable and transparent method for setting policy on the overall human resources strategy of the Group, the remuneration of Directors and senior management of the Group, and for determining their remuneration packages, on the basis of their merit, qualifications, and competence, and having regard to the Company’s operating results, individual performance, and comparable market statistics.

The Executive Director on the committee contributes to the deliberations.

The key objective of the committee is to attract, motivate and retain qualified and experienced personnel and to ensure that the remuneration of executives at each level of management is competitive and are rewarded in a fair manner based on their performance.

Mr. A. HettiarachchyChairmanRemuneration Committee

03rd June 2013

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43Annual Report 2012/13 | Lankem Ceylon PLC

Audit Committee Report

The Audit Committee has the responsibility of assisting the Board in fulfilling its overall responsibility to the shareholders in relation to the integrity of the Company’s financial reporting process in accordance with the Companies Act and other legislative reporting requirements including the adequacy of disclosures in the financial statements in accordance with the Sri Lanka Accounting Standards. The Audit Committee also has responsibility to ensure that the internal controls of the Company are in accordance with legal and regulatory requirements. The Committee evaluates the performance and the independence of the Company’s external audit functions.

CompositionThe Company’s Audit Committee comprises 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 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. Hettiarachchy(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 Committee comprises of three finance professionals.

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 seven occasions during the financial year ended 31st March 2013 and the attendance was as follows.

Mr. A. C. S. Jayaranjan – Chairman 7/7Mr. A. Hettiarachchy 5/7Mr. A. R. Rasiah 7/7Mr. A. M. de S. Jayaratne 6/7

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 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 controls and risk management procedures and recommends to the Board, additional controls and risk mitigating strategies that could be implemented to strengthen the existing internal control system. Further, the Committee has reviewed the routine operations of the Company and assessed the future prospects of its business operations and accordingly makes sure that the going concern assumption used in the preparation of the financial statements, is appropriate.

External AuditThe Company has appointed KPMG, Chartered Accountants, as its External Auditors for the financial year ended 31st March 2013 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 2014 subject to the approval of the Shareholders at the Annual General Meeting of the Company.

A. C. S. JayaranjanChairman Audit Committee

03rd June 2013

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Lankem Ceylon PLC | Annual Report 2012/1344

Financial InformationIndependent Auditors’ Report 45Statement of Comprehensive Income 46Statement of Financial Position 47Statement of Changes in Equity 48Cash Flow Statement 49Notes to the Financial Statements 51

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45Annual Report 2012/13 | Lankem Ceylon PLC

Independent Auditors’ Report

TO THE SHAREHOLDERS OF LANKEM CEYLON PLCReport on the Financial StatementsWe have audited the accompanying financial statements of Lankem Ceylon PLC (the “Company”), the consolidated financial statements of the Company and its subsidiaries (the “Group”) as at 31st March 2013 which comprise the statement of financial position as at 31st March 2013, the statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information set out on pages 46 to 125 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.

Opinion - CompanyIn our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31st March 2013 and the financial statements give a true and fair view of the financial position of the Company as at 31st March 2013 and of its financial performance and its cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Opinion - ConsolidatedIn our opinion, the consolidated financial statements give a true and fair view of the financial position of the Company and its subsidiaries dealt with thereby as at 31st March 2013, and of its financial performance and its cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Emphasis of MatterWithout 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

03rd June 2013Colombo

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Lankem Ceylon PLC | Annual Report 2012/1346

Consolidated Company

For the Year Ended 31st March 2013 2012 2013 2012 Notes Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Revenue 5 24,667,729 24,158,766 5,981,757 6,091,243

Cost of Sales (20,298,486) (20,284,594) (5,178,066) (5,151,797)

Gross Profit 4,369,243 3,874,172 803,691 939,446

Other Income 6 428,345 319,058 123,574 544,386Gain / (Loss) on changes in Fair Value of Biological Assets 103,472 (48,529) - -Distribution Costs (1,064,793) (1,012,394) (333,556) (338,881)Administration Expenses (1,880,404) (1,601,656) (102,976) (166,927)Other Expenses 7 (185,915) (78,125) (501,512) (71,670)Net Finance Costs 8 (932,201) (427,422) (308,347) (196,239)Profit / (Loss) before Income Tax 9 837,747 1,025,104 (319,126) 710,115

Income Tax Expense 10 (243,229) (299,950) (32,828) 19,906

Profit / (Loss) for the Year 594,518 725,154 (351,954) 730,021

Other Comprehensive IncomeNet Gain / (Loss) on Financial Assets Available for Sale 1,007 (11,226) 903 (1,636)Actuarial Gain / (Loss) on Defined Benefit Obligations 43,719 (33,816) 12,961 (8,988)Other Comprehensive Income for the year, net of Tax 44,726 (45,042) 13,864 (10,624)Total Comprehensive Income 639,244 680,112 (338,090) 719,397

Profit Attributable toOwners of the Company 126,908 476,353 (351,954) 730,021Non-controlling Interests 467,610 248,801 - - 594,518 725,154 (351,954) 730,021

Total Comprehensive Income Attributable toOwners of the Company 151,265 456,749 (338,090) 719,397Non-controlling Interests 487,979 223,363 - - 639,244 680,112 (338,090) 719,397

Earnings / (Loss) per Share (Rs.) 11 5.29 19.85 (14.66) 30.42

Dividend per Share (Rs.) 12 1.50 2.50 1.50 2.50

The Notes from Pages 51 to 125 form an integral part of these Financial Statements.Figures in brackets indicate deductions.

Statement of Comprehensive Income

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47Annual Report 2012/13 | Lankem Ceylon PLC

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Notes Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

ASSETSProperty, Plant & Equipment 13 8,376,158 6,229,960 5,314,312 857,682 700,028 588,721Biological Assets 14 4,768,363 4,111,418 3,588,156 - - -Leasehold Properties 15 665,068 702,061 739,300 - - -Investment Property 16 52,856 56,843 61,580 - - -Intangible Assets 17 686,276 711,845 357,078 - - -Investment in Subsidiaries 18.1. - - - 2,410,869 2,830,818 1,532,791Investments Classified as Available for Sale 18.2/18.3 45,822 13,726 16,601 8,582 8,284 9,920Investments Classified as Held to Maturity 18.4. 52,979 25,726 22,418 - - -Loan due from Related Parties 18.7 - - - 180,000 180,000 180,000Retirement Benefit Assets 27.1 118,788 112,283 107,702 75,626 67,346 63,687Deferred Tax Assets 26 - - - 3,147 - -Total Non - Current Assets 14,766,310 11,963,862 10,207,147 3,535,906 3,786,476 2,375,119

Inventories 19 3,173,285 2,456,399 2,420,383 979,728 885,949 735,623Trade & Other Receivables 20 5,257,187 3,958,739 3,358,296 1,544,879 1,057,006 712,861Amounts Due from Related Parties - Trade 29.1 - - - 612,180 446,196 344,163Amounts Due from Related Parties - Non Trade 29.1 1,131,203 208,998 98,514 538,727 360,681 575,259Loans Due from Related Parties 29.2 352,700 400,000 - 289,500 154,000 -Income Tax Recoverable 40,123 156,151 200,673 24,456 138,550 72,640Investments Classified as Fair Value through Profit or Loss 18.5/18.6 320,519 365,292 48,733 307,956 347,678 48,733Bank & Cash Balances 21 1,387,960 1,837,853 1,321,341 104,537 109,737 64,988Total Current Assets 11,662,977 9,383,432 7,447,940 4,401,963 3,499,797 2,554,267Total Assets 26,429,287 21,347,294 17,655,087 7,937,869 7,286,273 4,929,386

EQUITYStated Capital 22 536,218 536,218 536,218 536,218 536,218 536,218Other Capital Reserves 23.1 3,930 3,930 3,930 - - -Available for Sale Reserves 23.2 7,927 6,977 12,389 7,429 6,526 8,162Revenue Reserves 3,150,341 3,146,935 2,597,468 1,783,745 2,182,738 1,497,705Equity attributable to Owners of the Company 3,698,416 3,694,060 3,150,005 2,327,392 2,725,482 2,042,085

Non-controlling Interests 4,160,598 3,564,895 3,484,748 - - -Total Equity 7,859,014 7,258,955 6,634,753 2,327,392 2,725,482 2,042,085

LIABILITIESInterest bearing Borrowings 24 4,596,166 2,719,316 2,808,185 553,214 654,529 349,311Deferred Income 25 570,154 580,590 560,883 - - 1,275Deferred Tax Liabilities 26 403,035 377,324 288,721 - 12,926 22,967Retirement Benefit Obligations 27 1,846,645 1,739,885 1,643,762 171,843 158,855 123,065Total Non - Current Liabilities 7,416,000 5,417,115 5,301,551 725,057 826,310 496,618

Interest bearing Borrowings 24 2,828,407 2,439,148 1,900,930 1,386,734 824,793 494,869Loans Payable to Related Parties 24 485,000 420,000 26,000 762,100 800,000 326,000Trade and Other Payables 28 4,892,267 3,322,856 2,692,495 1,604,988 1,123,701 834,187Amounts Due to Related Parties - Trade 29.3 - - - 17,393 51,396 131,844Amounts Due to Related Parties Non - Trade 29.3 308,061 192,463 129,083 406,867 226,885 271,776Income Tax Payable 90,283 146,184 145,793 - - -Bank Overdraft 21 2,550,255 2,150,573 824,482 707,338 707,706 332,007Total Current Liabilities 11,154,273 8,671,224 5,718,783 4,885,420 3,734,481 2,390,683Total Liabilities 18,570,273 14,088,339 11,020,334 5,610,477 4,560,791 2,887,301Total Equity and Liabilities 26,429,287 21,347,294 17,655,087 7,937,869 7,286,273 4,929,386

Net Assets per Share (Rs.) 154.10 153.92 131.25 96.97 113.56 85.08

The Notes from pages 51 to 125 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.

K.P. DavidChief Financial Officer

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 D. L. Vitharana Director DirectorColombo03rd June 2013

Statement of Financial Position

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Lankem Ceylon PLC | Annual Report 2012/1348

Statement of Changes in Equity

Attributable to Owners of the Company Stated Other Available General Retained Total Non - Total Capital Capital for Sale Reserves Profit / controlling Reserves Reserves (Loss) Interest Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

ConsolidatedBalance as at 01st April 2011 536,218 3,930 12,389 305,952 2,291,516 3,150,005 3,484,748 6,634,753Effect of Acquisitions, Disposals and changes in Percentage Holding in Subsidiaries - - - - 118,859 118,859 112,445 231,304 Direct Cost on Right Issue - - - - 4,447 4,447 28,437 32,884 Profit for the year - - - - 476,353 476,353 248,801 725,154Other Comprehensive Income for the year - - (5,412) - (14,192) (19,604) (25,438) (45,042)Dividend Paid - - - - (36,000) (36,000) (284,098) (320,098)Balance as at 31st March 2012 536,218 3,930 6,977 305,952 2,840,983 3,694,060 3,564,895 7,258,955 Effect of Acquisitions, Disposals and changes in Percentage Holding in Subsidiaries - - - - (86,080) (86,080) 144,597 58,517Direct Cost on Right Issue - - - - (830) (830) (382) (1,212)Profit for the year - - - - 126,908 126,908 467,610 594,518Other Comprehensive Income for the year - - 950 - 23,408 24,358 20,368 44,726 Dividend Paid - - - - (60,000) (60,000) (36,490) (96,490)Balance as at 31st March 2013 536,218 3,930 7,927 305,952 2,844,389 3,698,416 4,160,598 7,859,014

Stated Available General Retained Total Capital for sale Reserves Profit / Reserves (Loss) Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

CompanyBalance as at 1st April 2011 536,218 8,162 300,000 1,197,705 2,042,085 Profit for the Year - - - 730,021 730,021 Other Comprehensive Income for the year - (1,636) - (8,988) (10,624)Dividend Paid - - - (36,000) (36,000)Balance as at 31st March 2012 536,218 6,526 300,000 1,882,738 2,725,482 Profit for the Year - - - (351,954) (351,954)Other Comprehensive Income for the year - 903 - 12,961 13,864 Dividend Paid - - - (60,000) (60,000)Balance as at 31st March 2013 536,218 7,429 300,000 1,483,745 2,327,392

Revenue Reserves include General Reserves and Retained Profit / (Loss).

The Notes from pages 51 to 125 form an integral part of these Financial Statements.Figures in brackets indicate deductions.

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49Annual Report 2012/13 | Lankem Ceylon PLC

Cash Flow Statement

Consolidated Company

For the Year Ended 31st March 2013 2012 2013 2012 Notes Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Cash flows from Operating ActivitiesProfit before Taxation 837,747 1,025,104 (319,126) 710,115Adjustment for;Depreciation /Amortisation on Property, Plant & Equipment 577,051 475,347 94,445 85,790Write - off of Immature Plantation 4,740 - - -Dividend Income (3,228) (1,924) (94,771) (77,025)Interest Expense 1,226,633 702,640 507,227 285,424(Gain) / Loss on Disposal of Property, Plant & Equipment (35,587) (34,783) (3,763) (1,701)(Gain)/Loss on Translation of Foreign Currency (123,213) (137,728) (116,563) -Interest Income (136,557) (122,884) (82,317) (89,185)Negative Goodwill (71,615) (9,367) - -Defined Benefit Plan Cost - Retiring Gratuity 314,600 298,070 27,509 28,046(Gain)/Loss on Disposal of Investments (519) (34,209) - (399,840)Provision for fall in Value of Investments - Long Term - - 221,413 12,000Impairment of Goodwill 25,569 - - -Provision/ (Reversal of Provision) for Doubtful Debts - Trade & Other Receivable (7,187) (26,804) 13,410 1,691Provision /(Reversal of Provision) for Doubtful Debts - Related Parties 35,198 (50,689) 127,730 (10,123)Provision for Obsolete Inventories (1,828) 10,477 1,212 3,698(Gain) / Loss on Short Term Investments 141,938 43,540 141,938 43,540Creditors no longer payable written back (23,344) (40,915) (3,167) (13,577)Amortisation of Deffered Income (17,636) (19,001) - (1,275)Gain / (Loss) on change in Fair Value of Biological Assets (103,472) 48,529 - -(Gain) / Loss on Disposal of Short - Term Investments 10,431 - 10,431 -Operating Profit before Working Capital Changes 2,649,721 2,125,403 525,608 577,578

(Increase)/Decrease in Inventories (90,598) (38,397) (94,990) (249,445)(Increase)/Decrease in Trade & other Receivables (812,100) (361,357) (406,004) (345,837)(Increase)/Decrease in Amounts due from Related Parties (886,788) (60,015) (364,443) (760,040)Increase/(Decrease) in Trade & Other Payables 666,094 624,984 481,287 409,760Increase/(Decrease) in Amounts due to Related Parties 115,598 63,380 145,980 (140,917)Cash Generated from Operations 1,641,927 2,353,998 287,438 (508,901)

Income Tax Paid (166,886) (283,358) (15,189) (56,044)Interest Paid (1,151,847) (639,578) (503,845) (279,805)Retiring Gratuity Paid (155,067) (252,457) (9,840) (6,140)Payment made to Gratuity Fund (23,628) (18,482) - -Net Cash Flow from Operating Activities 144,499 1,160,123 (241,436) (850,890)

Cash Flow from Investing ActivitiesPurchase & Construction of Property, Plant & Equipment (1,609,720) (1,583,233) (255,479) (199,063)Investment in Subsidiaries (1,608,475) (779,060) (20,068) (108,214)Interest Received 55,207 86,716 - -Dividends Received 3,228 1,924 94,771 77,026Net Investments in Short Term Investments (95,237) (381,408) (102,216) (341,005)Proceeds on Disposal of Property, Plant & Equipment 61,310 245,635 7,144 3,668Net Proceeds on Disposal of Investments - 323,813 218,604 20,004Net Cash Flow generated from / (Used in) Investing Activities (3,193,687) (2,085,613) (57,244) (547,584)

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Lankem Ceylon PLC | Annual Report 2012/1350

Consolidated Company

For the Year Ended 31st March 2013 2012 2013 2012 Notes Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Cash Flow from Financing ActivitiesProceeds from Rights Issue of SharesCapital Grants Received 7,201 38,708 - -Long Term Loans obtained from Related Parties 80,000 414,000 20,000 494,000Long Term Loans Receipts/(granted) to Related Parties 47,300 (400,000) (160,500) -Net Lease Movement During the Year (128,649) (20,310) (15,668) (20,699)Proceeds from Long Term Loans 3,292,747 625,763 150,000 250,000Repayment of Long Term Loans (1,403,218) (583,469) (144,025) (40,645)Settlement of Loans Payable to Related Parties (15,000) (20,000) (57,900) (20,000)Issue of Debentures (50,000) 200,000 - 200,000Dividend Paid (60,000) (36,000) (60,000) (36,000)Net Transactions with minority (36,490) (284,098) - -Direct cost on Right Issue (1,212) (32,884) - -Net Movement in Short Term Borrowings 466,934 214,201 561,941 240,868Net Cash Flow from / (Used in) Financing Activities 2,199,613 115,911 293,848 1,067,524

Net Increase/(Decrease) in Cash & Cash Equivalents during the year (849,575) (809,579) (4,832) (330,950)Cash & Cash Equivalents at the beginning of the year 21 (312,720) 496,859 (597,969) (267,019)Cash & Cash Equivalents at the end of the year 21 (1,162,295) (312,720) (602,801) (597,969)

Analysis of Cash & Cash Equivalents at the end of the yearCash in Hand & Bank 1,387,960 1,837,853 104,537 109,737Bank & Other Borrowings (2,550,255) (2,150,573) (707,338) (707,706) (1,162,295) (312,720) (602,801) (597,969)

The Notes from pages 51 to 125 form an integral part of these Financial Statements.Figures in brackets indicate deductions.

Cash Flow Statement Contd.

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51Annual Report 2012/13 | Lankem Ceylon PLC

Notes to the Financial Statements

1. REPORTING ENTITYLankem Ceylon PLC (the “Company”) is a public limited company incorporated and domiciled in Sri Lanka and listed on the Colombo Stock Exchange.

The Consolidated Financial Statements of the Company as at and for the year ended 31st March 2013 comprise the Company and its subsidiaries.

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 PLC respectively.

2. BASIS OF PREPARATION2.1 Statement of ComplianceThe Financial Statements of the Company and those consolidated with such comprise of the Statement of Financial Position, Statement of Comprehensive Income, Statement of Changes in Equity and statement of Cash Flows, together with Notes to the Financial Statements. These Financial Statements comply with the Sri Lanka Accounting Standards hereafter referred as (SLFRS) as laid down by the Institute of Chartered Accountants of Sri Lanka and the requirement of the Companies Act No. 07 of 2007.

These Financial Statements for the year ended 31st March 2013, are the first financial statements prepared and presented in accordance with Sri Lanka Accounting Standards immediately effective from 01st January 2012. Financial Statements were prepared in accordance with Sri Lanka Accounting Standards (SLAS) effective up to 31st March 2012 reconciled on convergence from SLAS compliant Financial Statements to SLFRS/LKAS compliant Financial Statements as given in Note 38 to the Financial Statements.

The Consolidated Financial Statements for the year ended 31 March, 2013 were authorised for issue by Board of Directors on 3rd June 2013.

2.2 Basis of MeasurementThe Consolidated Financial Statements have been prepared on the historical cost basis and applied consistently with an adjustment being made for inflationary factors affecting the Financial Statements except for the following .

Derivative financial instruments are measured at fair value Non-derivative financial instruments at fair value through profit

or loss are measured at fair value Available for sale financial assets are measured at fair value Defined benefit asset is recognised as plan assets, plus

unrecognised past service cost, less the present value of the defined benefit obligation

2.3 Use of Estimates, Judgments and AssumptionsThe preparation of the Consolidated Financial Statements in conformity with Sri Lanka Accounting Standards 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 reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments, estimates and assumptions in applying accounting policies that could have a significant effect on the Financial Statements are mentioned below:

Policy No. Measurement of Fair Value of Financial Instruments 3.3 Measurement of Intangible Assets 3.8 Impairment 3.11 Valuation of Employee Benefit Liabilities 3.12 Provisions, Contingent Assets & Liabilities 3.13 Deferred Tax Assets & Liabilities 3.17.2 Valuation of Biological Assets 3.19.2

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

Monetary assets and liabilities denominated in foreign currencies have been translated into local currency at the rate of exchange ruling at the date of the Statement of Financial Position while all non-monetary items are reported at the rate prevailing at the time transactions were affected.

2.5 Events Occurring after the Reporting PeriodAll material events after the date of Statement of Financial Position have been considered and appropriate adjustments or disclosures are made in the respective Notes to the Financial Statements.

3. SIGNIFICANT ACCOUNTING POLICIESThe accounting policies set out below have been consistently applied to all periods presented in these Consolidated Financial Statements and in preparing the opening SLFRSs / LKASs Statement of Financial Position as at 1st April 2011 for the purposes of the transition to SLFRSs / LKASs, unless otherwise indicated.

The accounting policies have been consistently applied by the Group entities. Certain comparative amounts in the Statement of Comprehensive Income and Financial Position have been reclassified or rearranged, wherever necessary, to conform with the current year’s presentation.

3.1 Basis of ConsolidationThe Consolidated Financial Statements (referred to as the ‘Group’) comprise the Financial Statements of the Company and its Subsidiaries.

Losses within a subsidiary are attributed to the non-controlling interest even if this results in a deficit balance. A change in the ownership interest of a subsidiary without a loss of control is accounted for as an equity transaction. If the Group loses control over a subsidiary, the group derecognised assets and liabilities of the subsidiary, any non-controlling interest and the other components of entity related to the subsidiary. Any surplus or deficit arising on the loss of controls is recognised in profit or loss. If the Group retain any interest in the previous subsidiary , then such interest is measured at fair value at the date that control was lost. Subsequently it is accounted as an Equity Accounted Investee or as AFS Financial Assets depending on the level of influence retained.

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Lankem Ceylon PLC | Annual Report 2012/1352

Notes to the Financial Statements Contd.

The Group measures goodwill at the acquisition date as the fair value of the consideration transferred including the recognised amount of any non-controlling interests in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

In a business combination achieved in stages, the Group-remeasures its previously held equity interest in the acquiree at its acquisition date at fair value and recognises the resulting gain or loss, if any, in profit or loss.

3.1.1 Non-controlling interestsFor each business combination, the Group elects to measure any non-controlling interests in the acquiree either: at fair value; or at their proportionate share of the acquiree’s identifiable net

assets, which are generally at fair value.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss.

3.1.2 SubsidiariesSubsidiaries are those enterprises controlled by the Company. Control exists when the Company (the Parent) holds more than 50% of the voting rights and/or has the power, directly or indirectly, to govern the financial and operational policies of an enterprise to obtain benefits from its activities.

The following companies in which the Group’s effective holding is less than 50%, have been consolidated as subsidiaries based on the power to govern the financial and operating policies of those entities.

Company Name Holding %

C.W. Mackie PLC 46Marawila Resorts PLC 41Kotagala Plantations PLC 33Lankem Tea & Rubber Plantations (Pvt) Limited 48Lankem Plantation Holdings Limited 48 Agarapatana Plantations Limited 24 Waverly Power (Pvt) Limited 28 York Hotels (Kandy) Limited 47Lankem Developments PLC 31

The Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the date the control effectively commences until the date that control effectively ceases.

3.1.3 Loss of controlOn the loss of control, the Group de-recognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost.Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

3.1.4 Transactions eliminated on consolidationIntra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

3.2 Foreign CurrencyForeign currency transactionsTransactions in foreign currencies are translated to the respective functional currencies of the Group entities at the prevailing exchange rates at the transaction date. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities that are measured at fair value in a foreign currency are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Foreign currency differences arising on translation are recognised in profits or loss.

3.3 Financial Instruments3.3.1 Non-derivative financial assetsThe Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

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The Group classifies non-derivative financial assets into the following categories: Financial assets at fair value through profit or loss, held to maturity financial assets, loans and receivables and available-for-sale financial assets.

3.3.1.1 Financial assets as fair value through profit or lossA financial asset is classified as fair value through profit or loss if it is classified as held-for-trading or is designated as such on initial recognition. Financial assets are designated as at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group’s documented risk management or investment strategy. Attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein, which takes into account any dividend income, are recognised in profit or loss.

3.3.1.2 Held-to-maturity financial assetsIf the Company has the positive intent and ability to hold debt securities to maturity, then such financial assets are classified as held to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses.

3.3.1.3 Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the categories of financial assets. Available-for-sale financial assets are recognised initially at fair value plus any directly attributable transaction costs.

Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses are recognised in other comprehensive income and presented in the fair value reserve in equity. When an investment is derecognised, the gain or loss accumulated in equity is reclassified to profit or loss.

3.3.1.4 Loans and receivablesLoans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprises by other receivables.

3.3.1.5 Cash and cash equivalentsCash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments.

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

3.3.2 Non-derivative financial liabilitiesThe Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit

or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group has the following non-derivative financial liabilities: bank overdrafts, and trade and other payables.

Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.

3.3.2.1 Corporate guaranteesCorporate guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Corporate guarantee liabilities are recognised initially at their fair value, and the initial fair value is amortised over the life of the corporate guarantee. The corporate guarantee liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment when a payment under the guarantee has become probable.

3.4 Stated CapitalOrdinary sharesOrdinary shares are classified as equity. As 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.

Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

3.5 Property, Plant and Equipment3.5.1 Recognition and measurementItems of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost of certain property and plant and equipment was determined by reference to a previous SLASs revaluation. The Group elected to apply the optional exemption to use this previous revaluation as deemed cost at 1st April 2011, the date of transition in accordance with SLFRS 1 “1st time Adoption of SLFRS”.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the following: the cost of materials and direct labour; any other costs directly attributable to bringing the assets to a

working condition for their intended use; when the entity has an obligation to remove the asset or

restore the site an estimate of the costs of dismantling and removing the items and restoring the site on which they are located; and

capitalised borrowing costs

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When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

3.5.2 Subsequent costsThe cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

3.5.3 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 recognised net within other income in profit or loss.

3.5.4 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 recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.

Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

Assets Years

Freehold Buildings 10 - 40 Plant, Machinery & Equipment 04 - 13Motor Vehicles 04 - 05 Office Equipment 08 - 10Furniture & Fittings 08 - 10Computer Equipment 04 - 05 Mature Plantations – Tea 3 1/3 Mature Plantations – Rubber 20CTC Machinery 20Roads 25Freehold Buildings on Over the lease period or Leasehold Lands estimated useful life whichever is shorter Linen, Cutlery & Crockery On Replacement Basis \ 4 Years The useful life and residual value of assets are reviewed, and adjusted if required, at the end of each financial year.

3.5.5 Finance LeasesProperty, plant & equipment on finance leases, which effectively transfer to the Group substantially all the risk and benefits incidental to ownership of the leased items, are classified as leasehold assets

under the property, plant and equipment and stated at an amount equal to the lower of their fair value and the present value of minimum lease payments at the inception of the lease, less the accumulated depreciation. Depreciation is made over the period the Group is expected to benefit from the use of the leased assets.

3.5.6 Operating LeasesLeases, where the lessor effectively retains substantially all of the risks and benefits of ownership over the term of the lease, are classified as operating leases. Lease payments are recognised as an expense in the Statement of Comprehensive Income over the term of the lease and not recognised in the statement of Financial Position.

3.6 Investment PropertyInvestment property is property held either to earn rental income or for capital appreciation or for both, but not held for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes.

The Group has chosen the cost model to measure Investment property and consequently Investment property is measured at deemed cost less accumulated depreciation and any impairment losses. Depreciation is recognised on a straight line basis over the estimated useful life of the investment property.

The estimated useful life and the Fair Value of investment properties in the Group are as follows:

C.W. Mackie Building - 40 years Investment properties are derecognised when disposed of, or permanently withdrawn from use because no future economic benefits are expected. Any gains or losses on retirement or disposal are recognised in the year of retirement of disposal. Transfers are made to and from investment property only when there is a change in use in accordance with the criteria listed in LKAS 40 Investment Property.

Where group companies occupy a significant portion of the investment property of a subsidiary, such investment properties are treated as property, plant and equipment in the Consolidated Financial Statements, and accounted for in accordance with LKAS 16 Property, Plant and Equipment.

3.7 Borrowing CostsBorrowing costs are recognised as an expense in the period in which they are incurred except those 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, where it is capitalised as a part of the cost of that asset.

3.8 Intangible AssetsAn intangible asset is initially recognised at cost, if it is probable that future economic benefit will flow to the enterprise, and the cost of the asset can be measured reliably.

Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least once at each financial year end.

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

3.9 InventoriesRaw material, finished goods and work in progress of Lankem Ceylon PLC and its subsidiaries are valued at the lower of cost, on a weighted average basis and net realisable value. Provision is made for obsolete, slow moving and defective inventories where necessary.

The cost includes expenditure incurred in acquiring the inventories and bringing them to their existing condition. In the case of manufactured inventories cost includes raw material cost and packing material cost.

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

3.10 Derecognition of Financial AssetsA financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is de-recognised when the right to receive cash flows from the asset has expired .The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement and either (a) the Group has transferred substantially all the risks and

rewards of the asset, or

(b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of it, the asset is recognised to the extent of the Group’s continuing involvement in it. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

3.11 Impairment3.11.1 Non-derivative financial assetsA financial asset not classified as at fair value through profit or loss, including an interest in an equity-accounted investee, is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse

changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

3.11.2 Financial assets measured at amortised costThe Company considers evidence of impairment for financial assets measured at amortise cost (loans and receivables and held to-maturity financial assets) at both a specific asset and collective level. All individually significant assets are assessed for specific impairment. Those found not to be specifically impaired are, then collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually significant are, collectively assessed for impairment by grouping together assets with similar risk characteristics.

In assessing collective impairment, the Company uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in the profit or loss and reflected in an allowance account against loans and receivables or held-to-maturity investment securities. Interest on the impaired asset continues to be recognised. When an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

3.11.3 Available-for-sale financial assetsImpairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss recognised previously in profit or loss. Changes in cumulative impairment losses attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

An impairment loss in respect of an equity-accounted investee is measured by comparing the recoverable amount of the investment with its carrying amount. An impairment loss is recognised in profit or loss. An impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount.

3.11.4 Non-financial assetsThe carrying amounts of the Group’s non-financial assets, investment property and inventories, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such

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indication exists, then the asset’s recoverable amount is estimated. Goodwill & indefinite life intangible assets are tested annually to impairment. An impairment loss is recognised if the carrying amount of an asset or cash generating unit (CGU) exceeds its recoverable amount. An impairment Loss in respect of Goodwill is not reversed.

3.12 Employee Benefits3.12.1 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 when incurred.

3.12.2 Defined Benefit PlansA defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The liability recognised in the Statement of Financial Position in respect of defined benefit plan is the present value of the defined benefit obligation as at the reporting date.

Provision for gratuity of the employees of the company and Group are based on actuarial valuation.

An actuarial valuation was carried out by a professionally qualified firm of actuaries, as at 31st March 2013 for the recognition of the Company’s Retirement Benefit Obligation. The Valuation method used by the actuary is ‘Projected Unit Method’. Any gains and losses arising from actuarial valuation that arise in calculating the obligation in respect of employee benefits are recognised in Other Comprehensive Income.

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.

However under payment of Gratuity Act No. 12 of 1983, the liability to an employee arise only on completion on 5 years of continuous service.

Lankem Ceylon PLC and C.W. Mackie PLC have obtained insurance policies to meet the retiring gratuity payments to its employees.

3.12.3 Short-term benefitsShort-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

3.13 Provisions, Contingent Assets and Contingent Liabilities

Provisions are made for all obligations existing as at the Date of the Statement of Financial Position when it is probable that such an obligation will result in an outflow of resources and a reliable estimate can be made of the quantum of the outflow.

All contingent liabilities are disclosed as a note to the financial statements unless the outflow of resources is remote.

Contingent assets are disclosed in the notes, where inflow of economic benefit is probable.

3.14 Revenue3.14.1 Revenue RecognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group, and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and value added taxes, after eliminating sales within the Group.

Revenue is generally accounted for on an accrual basis and following specific criteria are used for recognition of revenue:

(a) Sale of Goods Revenue from the sale of goods is recognised when the significant risk and rewards of ownership of the goods have passed to the buyer with the group retaining neither a continuing managerial involvement to the degree usually associated with ownership, nor an effective control over the goods sold.

(b) Rendering of ServicesRevenue from rendering of services is recognised in the accounting period in which the services are rendered or performed.

(c ) Revenue from Construction ContractsRevenue from construction contracts are calculated on the basis of the percentage completion method. Revenue is accounted proportionately and accrued accordingly on the jobs which are substantially completed as at the Date of the Statement of Financial Position. The stage of completion is assessed by reference to the surveys of work performed.

(d) Revenue from Hotel ServicesApartment revenue is recognised on the rooms occupied on a daily basis and food and beverage and other hotel related sales are recognised at the point of sale.

(e) Dividend IncomeDividend income is recognised when the shareholders’ right to receive such dividend is established.

(f) Finance Income Finance income comprises interest income on funds invested (including available-for-sale financial assets), gains on the disposal of available-for-sale financial assets and fair value gains on financial assets at fair value through profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

3.15 Government Grants3.15.1 Capital nature grants and subsidiesGrants and subsidies are credited to the Statement of Comprehensive Income 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 Statement of Financial Position and credited to the Statement of Comprehensive Income over useful life of the related assets. Grants related to income are recognised in the profit and loss in the period in which it is receivable.

3.15.2 Revenue nature grants and subsidiesGrants and subsidies that compensate the Group for expenses incurred are recognised as revenue in the Statement of Comprehensive Income on a systematic basis in the period in which the expenses are recognised. Grants that compensate the Group for the cost of

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an asset are recognised in the Statement of Comprehensive Income over the useful life of the related assets.

3.16 Expenses3.16.1 Operating lease paymentsWhere the Company has the use of assets under operating leases, payments made under the leases are recognised in the Statement of Comprehensive Income on a straight line basis over the term of the lease. Lease incentives received are recognised in the Statement of Comprehensive Income as an integral part of the total lease expense over the term of the lease. Contingent rentals are charged to the Statement of Comprehensive Income in the accounting period in which they are incurred.

3.16.2 Finance costsFinance costs comprise interest expense on borrowings, unwinding of the discount on provisions and losses on disposal of available for sale financial assets, fair value losses on financial assets at fair value through profit or loss and impairment losses recognised on financial assets (other than trade receivables).

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position.

3.17 Taxation Income tax expense comprises current and deferred tax. Income tax is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

3.17.1 Current taxCurrent tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the Date of the Statement of Financial Position, and any adjustment to tax payable in respect of previous years.

3.17.2 Deferred taxDeferred tax is recognised using the Statement of Financial Position liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, nor differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.

The principal temporary differences arise from depreciation on property, plant and equipment; tax losses carried forward, impairment of trade and other receivables, bialogical assets and provisions for defined benefit obligations. Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at date of the Statement of Financial Position and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.

3.18 Earnings per ShareThe Group presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

3.19 Accounting Policies which are specific to the Business of Plantation Companies

The plantation companies in the Group adopt certain accounting policies which differ from that of the Group since the nature of the operation of the plantation companies is significantly different from that of the Group. The accounting policies adopted by those companies are in accordance with Sri Lanka Accounting Standard (LKAS) 41- “Agriculture”.

3.19.1 Property, Plant & Equipment3.19.1.1 Recognition and MeasurementItems of Property, Plant & Equipment are measured at cost, less accumulated depreciation and accumulated impairment losses, if any.

3.19.1.2 Owned AssetsThe cost of Property, Plant & Equipment includes expenditures that are directly attributable to the acquisition of the asset. Such costs includes the cost of replacing part of the property, plant and equipment and borrowing costs for long terms construction projects if the recognition criteria are met. The cost of self-constructed assets includes the cost of materials and direct labour, any other cost directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.

When significant parts of property, plant and equipment are required to be replaced at intervals, the entity recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the Statement of Comprehensive Income as incurred. The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.

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Revaluation of timber is done with sufficient frequency to ensure that the fair value does not defer materially from the carrying amount and is undertaken by professionally qualified valuers. Increases in the carrying amount on revaluation are credited to the revaluation reserve in shareholders’ equity. Decreases that offset previous increases of the same individual asset are charged against revaluation reserve directly in equity and all other decreases are expensed in the Statement of Comprehensive Income.

An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset, upon disposal, any revaluation reserve retaining to the particular asset being sold is transferred to retained earnings.

Capital work-in-progress is transferred to the respective asset accounts at the time of first utilisation or at the time the asset is commissioned.

3.19.1.3 Leased AssetsProperty, plant and equipment on finance leases, (which effectively transfer to the company substantially all of the risks and benefits incidental to ownership of the leased item) are capitalised at their cash price, and depreciated/amortised over the period the company is expected to benefit from the use of the leased assets.

The corresponding principal amount payable to the lessor is shown as a liability.

The finance charges allocated to future periods are separately disclosed under Note 24.

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

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

3.19.1.4 Subsequent CostThe cost of replacing part of an item of Property, Plant & Equipment is recognised in the carrying amount of the item, if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of those parts that are replaced is derecognised in accordance with the derecognition policy given below. The costs of the day-to-day servicing of Property, Plant & Equipment are recognised in profit or loss as incurred.

3.19.1.5 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 or disposal. Gains or losses on derecognition are recognised in profit or loss and gains are not classified as revenue.

3.19.1.6 Land Development CostPermanent land development costs are those costs incurred in making major infrastructure development and building new access roads on leasehold lands.

These costs have been capitalised and amortised over the remaining lease period.

Permanent impairments to land development costs are charged to the Statement of Comprehensive Income in full or reduced to the net carrying amounts of such assets in the year of occurrence after ascertaining the loss.

3.19.1.7 Biological Assets3.19.1.7.1 Immature and Mature PlantationsThe cost of Replanting and New Planting are classified as immature plantations upto the time of harvesting the crop.

Further, the general charges incurred on the plantation are apportioned based 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 expensed in the accounting period in which it is incurred.

The cost of areas coming into bearing are transferred to mature plantations and depreciated over their useful life period.

3.19.1.7.2 Infilling Cost on Bearer Biological AssetsWhere infilling results in an increase in the economic life of the relevant field beyond its previously assessed standard of performance, the costs are capitalised in accordance with Sri Lanka Accounting Standard No. 16 and depreciated over the useful life at rates applicable to mature plantation.

Infilling costs that are not capitalised have been charged to the Statement of Comprehensive Income in the year in which they are incurred.

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

Borrowing costs that are not capitalised are recognised as expenses in the period in which they are incurred and charged to the Statement of Comprehensive Income.

The amounts of the borrowing costs which are eligible for capitalisation are determined in accordance with LKAS 23 – “Borrowing Costs”.

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

3.19.1.9 Depreciation and Amortisation(a) DepreciationDepreciation is recognised in Statement of Comprehensive Income on a straight-line basis over the estimated useful economic lives of each part of an item of Property, Plant & Equipment. Assets held under finance leases are depreciated over the shorter of the lease term and the useful lives of equivalent owned assets unless it is reasonably certain that the Company will have ownership by the end of the lease term. The lease period for land acquired from JEDB/SLSPC will expired in the year 2045. The estimated useful lives for the current and comparative periods are as follows:

Notes to the Financial Statements Contd.

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No. of Years Rate (%)

Buildings 40 2.50Roads 25 4.00Plant & Machinery 13 1/3 7.50Motor Vehicles 5 20.00Equipment 8 12.50Furniture & Fittings 10 10.00Sanitation, Water & Electricity Supply 20 5.00

Mature Plantations (Replanting and New Planting)

No. of Years Rate (%)

Mature Plantations - Tea 33 1/3 3.00

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date on which the asset is classified as held for sale or is derecognised. Depreciation methods, useful lives and residual values are reassessed at the reporting date and adjusted prospectively, if appropriate. Mature plantations are depreciated over their useful lives or unexpired lease period, whichever is less.

No depreciation is provided for immature plantations.

(b) AmortisationThe leasehold rights of assets taken over from JEDB/SLSPC are amortised in equal amounts over the shorter of the remaining lease periods and the useful lives as follows:

No. of Years Rate (%)

Bare land 53 1.89Improvements to land 30 3.33Mature Plantations - Tea 30 3.33Roads & Bridges 40 2.50Buildings 25 4.00Fences & Securities 20 5.00Machinery 15 6.67Water supply 20 5.00Power Augmentation 20 5.00Vested Tea 30 3.33

The asset’s residual values useful lives and method of depreciation are reviewed and adjusted if appropriate at each financial year end.

3.19.2 Biological Assets Biological assets are classified as mature biological assets and immature biological assets. Mature biological assets are those that have attained harvestable specifications or are able to sustain regular harvests. Immature biological assets are those that have not yet attained harvestable specifications. Tea, rubber, other plantations and nurseries are classified as biological assets.

Biological assets are further classified as bearer biological assets and consumable biological assets. Bearer biological asset includes tea trees, those that are not intended to be sold or harvested, however used to grow for harvesting agricultural produce from such biological assets. Consumable biological assets includes managed timber those that are to be harvested as agricultural produce or sold as biological assets.

The entity recognise the biological assets when, and only when, the entity controls the assets as a result of past event, it is probable that future economic benefits associated with the assets will flow to the entity and the fair value or cost of the assets can be measured reliably.

The bearer biological assets are measured at cost less accumulated depreciation and accumulated impairment losses, if any, in terms of LKAS 16 – Property Plant & Equipment as per the ruling issued by CASL.

The managed timber is measured on initial recognition and at the end of each reporting period at its fair value less cost to sell in terms of LKAS 41. The cost is treated as approximation to fair value of young plants as the impact on biological transformation of such plants to price during this period is immaterial. The fair value of timber trees are measured using DCF method taking in to consideration the current market prices of timber, applied to expected timber content of a tree at the maturity by an independent professional valuer. All other assumptions and sensitivity analysis are given in Notes.

The main variables in DCF model concerns

Variable Comment

Currency valuation Estimate based on physical verification Timber content of girth, height and considering the growth of the each species in different geographical regions. Factor all the prevailing statutory regulations enforced against harvesting of timber coupled with forestry plan of the Company

Economic useful life Estimated based on the normal life span of each species by factoring the forestry plan of the Company

Selling price Estimated based on prevailing Sri Lankan market prices. Factor all the conditions to be fulfilled in bringing the trees in to saleable condition

Nursery cost includes the cost of direct materials, direct labour and an appropriate proportion of directly attributable overheads.

The gain or loss arising on initial recognition of biological assets at fair value less cost to sell and from a change in fair value less cost to sell of biological assets are included in profit or loss for the period in which it arises.

3.19.3 Grants and SubsidiesGrants are recognised where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, it is set up as deferred income. Where the Company receives non-monetary grants, the asset and that grant are recorded at nominal amounts and is released to the Statement of Comprehensive Income over the expected useful life of the relevant asset by equal annual installments.

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3.20 Cash Flow StatementThe Cash Flow Statement has been prepared using ‘indirect method’. Interests paid are classified as operating cash flows while dividends paid are classified as financing cash flows. Interests and dividends received are classified as investing cash flows for the purpose of presentation of Cash Flow Statement.

For the purpose of Cash Flow Statement, cash & cash equivalents consist of cash at bank and in hand and short term deposits net of outstanding bank overdrafts.

3.21 Segmental ReportingA segment is a distinguishable component of an enterprise that is engaged in either providing products or services (Business Segments) or in providing products or services within a particular economic environment (Geographic Segment) which is subject to risks and rewards that are different from those of other segments.

Segment information is presented in respect of the Group’s business activities. The business segment has been identified as the primary segment of the Group as there are no distinguishable components to be identified as geographical segments for the Group.

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components, whose operating results are reviewed regularly by the Board of Directors (being the chief operating decision maker) to make decisions about resources allocated to each segment and assess its performance, and for which discrete financial information is available.

3.22 Related Party TransactionsDisclosures have been made in respect of the transactions between parties who are defined as related parties as per Sri Lanka Accounting Standards No. 24 – Related Party Disclosures.

3.23 Financial Risk Management Policies The Group’s principal financial liabilities comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Group’s operations and to provide guarantees to support its operations. The Group has loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. The Group also holds available-for-sale investments and enters into derivative transactions.

The Group is exposed to market risk, credit risk and liquidity risk. The Group’s senior management monitors these risks. The Group’s senior management is supported by a audit committee that advises on financial risks and the appropriate financial risk governance framework for the Group. The Audit committee provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with group policies and group risk appetite.

4 STANDARDS ISSUED BUT NOT YET EFFECTIVEStandards issued but not yet effective up to the date of issuance of the Group’s financial statements are listed below.

This listing of standards and interpretations issued are those that the Group reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date.

The Group intends to adopt these standards when they become effective. SLFRS 10-Consolidated Financial Statements SLFRS 11-Joint Arrangements SLFRS 12-Disclosure of Interests in other entities SLFRS 13-Fair Value Measurement

Notes to the Financial Statements Contd.

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5. REVENUE

Consolidated Company

For the Year Ended 31st March 2013 2012 2013 2012 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

5.1 SummaryNet Revenue 24,667,729 24,158,766 5,981,757 6,091,243 24,667,729 24,158,766 5,981,757 6,091,243

5.2 SegmentsSegmentation has been determined based on the operating 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.

Agricultural Inputs - Manufacturing, Selling & Distribution Activities relating to AgricultureConsumer Products - Manufacturing, Selling and Distribution of Consumer ProductsIndustrial Products - Manufacturing, Selling and Distribution of Industrial ProductsLeisure - Owning and Operation of Resort HotelsPlantation - Cultivation and Processing of Tea and RubberPlantation Trading - Trading of Tea, Rubber and Coconut based ProductsOthers - Construction, Pest Control, Special Projects, Power Generation and Management Services

Consolidated Company

For the Year Ended 31st March 2013 2012 2013 2012 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

5.3 Segment RevenueAgricultural Inputs 2,581,994 2,500,882 2,054,049 2,058,134 Consumer Products 4,496,719 4,140,637 204,462 161,490 Industrial Products 6,766,776 6,835,443 3,615,589 3,808,137 Leisure 925,128 821,173 - - Plantation 7,032,290 6,677,467 - - Plantation Trading 5,301,703 5,648,674 - - Others 125,624 244,570 107,657 63,482 27,230,234 26,868,846 5,981,757 6,091,243 Less: Inter-Segment Revenue (2,562,505) (2,710,080) - - 24,667,729 24,158,766 5,981,757 6,091,243

Profit before Tax Non Cash Expenses

For the Year Ended 31st March 2013 2012 2013 2012 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

5.4 Segment Profit - ConsolidatedAgricultural Inputs (3,799) 151,367 45,792 35,791 Consumer Products 59,699 178,623 59,943 38,704 Industrial Products 48,861 304,304 85,919 68,880 Leisure 131,186 53,908 85,204 68,443 Plantation 248,107 (103,393) 459,679 588,371 Plantation Trading 249,491 290,429 163,610 53,872 Others 104,202 149,866 3,340 2,329 837,747 1,025,104 903,487 856,390

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Notes to the Financial Statements Contd.

6. OTHER INCOME

Consolidated Company

For the Year Ended 31st March 2013 2012 2013 2012 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Profit on Disposal of Property, Plant & Equipment 35,587 34,783 3,763 1,701Dividend Income - Quoted Companies 3,223 1,924 19,553 33,824 - Unquoted 5 - 75,218 43,201Creditors no longer payable written back 23,344 40,915 3,167 13,577Amortisation of Grants and Subsidies 17,636 19,001 - 1,275Profit on Disposal of Investments 519 34,209 - 399,840Negative Goodwill on Acquisition 71,615 9,367 - -Reversal of Provision for Amounts due from Related Parties 35,198 46,441 - 10,123Sale of Timber 3,220 3,214 - -Sale of Refuse Tea 14,893 10,836 - -Sale of Rubber Trees/Green Chillies 131,242 44,444 - -Reversal of Impairment of Capital Work in Progress 930 337 - -Rent Income 76,789 - - -Sundry Income 14,144 73,587 21,873 40,845 428,345 319,058 123,574 544,386

7. OTHER EXPENSESLoss on changes in Fair Value of Financial Assets 141,938 43,540 141,938 43,540Loss on Disposal of Investments 10,431 - 10,431 -Immature Plantation Written-off 4,740 - - -Impairment of Goodwill 25,569 - - -Impairment of Investment in Subsidiaries - - 221,413 12,554Impairment on Amounts due from Related Parties - - 127,730 -Unsettled Advances Written-off - 15,576 - 15,576Loss on Disposal of Property 15,283 - -Sundry Expenses 3,237 3,726 - - 185,915 78,125 501,512 71,670

8. NET FINANCE COST(A) Finance IncomeInterest Income (98,979) (118,910)Interest from Related Companies - Debenture Interest Income - - (16,200) (16,200) - Others (27,646) 6,821 (56,185) (62,190)Interest on Corporate Guarantee (9,932) (10,795) (9,932) (10,795)Gain on Translation of Foreign Currency (123,213) (137,728) (116,563) -Total Finance Income (259,770) (260,612) (198,880) (89,185)

(B) Finance CostInterest on Term Loans 466,213 165,529 155,747 49,499Interest on Overdraft and Trust Receipt Loans 397,335 147,222 187,252 78,689Interest on Finance Lease Obligations 103,899 31,529 3,382 5,619Debenture Interest 82,275 40,124 51,106 37,377Other Interest 206,024 271,648 109,740 72,622Loss on Translation of Foreign Currency 17,686 94,381 - 41,618Interest on JEDB/SLSPC Estate Lease 57,100 46,588 - - 1,330,532 797,021 507,227 285,424Amount Capitalised (138,561) (108,987) - -Total Finance Cost 1,191,971 688,034 507,227 285,424Net Finance Cost 932,201 427,422 308,347 196,239

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9. PROFIT BEFORE TAXis stated after charging all expenses including the following:

Consolidated Company

For the Year Ended 31st March 2013 2012 2013 2012 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Depreciation/AmortisationProperty, Plant & Equipment 449,807 364,162 94,445 85,790Biological Assets 85,500 69,209 - -Leasehold Properties 36,993 37,239 - -Investment Property 4,751 4,737 - -

Auditor’s RemunerationKPMG 11,164 8,835 2,100 1,580Other Auditors 6,024 4,361 - -

Non Audit ServicesKPMG 1,756 2,484 - -Other Auditors - 30 - -

Salaries & Wages 4,143,508 4,629,470 320,240 250,645Defined Benefit Plan Cost - Retiring Gratuity 314,600 298,070 27,509 28,046Defined Contribution Plan Cost - EPF/ETF 438,043 288,050 25,800 22,005Managing Agent Fees 184,180 31,520 - -Provision / (Reversal Provision) for Bad & Doubtful Debts (7,187) 26,804 13,410 1,691Provision for Obsolete Inventories (1,828) 10,477 1,212 3,698Donations 69 438 11 422

10. INCOME TAX EXPENSE

Consolidated Company

For the Year Ended 31st March 2013 2012 2013 2012 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Current Tax Expense (Note 10.1)Taxation on Profit for the Year 182,854 230,476 - 1,664Deemed Dividend Tax - 38 - -Under / (Over) Provision on Taxation in respect of previous year 47,551 (16,783) 48,901 (11,529) 230,405 213,731 48,901 (9,865)

Deferred Tax ExpenseOrigination / (Reversal) of Temporary Differences 12,824 86,219 (16,073) (10,041) 12,824 86,219 (16,073) (10,041) 243,229 299,950 32,828 (19,906)

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Lankem Ceylon PLC | Annual Report 2012/1364

Notes to the Financial Statements Contd.

10. INCOME TAX EXPENSE CONTD.10.1 Current Income Tax ExpenseReconciliation of Accounting Profit to Income Tax Expense

Consolidated Company

For the Year Ended 31st March 2013 2012 2013 2012 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Accounting Profit/(Loss) before Taxation 837,747 1,025,104 (319,126) 710,115Intra- Group Adjustments (107,159) 1,179,964 - - 730,588 2,205,068 (319,126) 710,115Aggregate Disallowable Expenses 1,259,041 1,670,449 587,860 109,502Aggregate Allowable Expenses (675,201) (2,081,032) (127,524) (84,952)Tax Exempt Income (262,206) (253,551) (183,796) (253,551)Income not part of Assessable Income (128,532) (575,099) (120,986) (488,704)Statutory Profit / (Loss) from Business 923,690 965,835 (163,572) (7,590)Other Source of Income 179,411 215,284 18,854 9,142Tax Losses utilised during the year (222,591) (120,529) (6,599) (3,200)Qualifying Payments utilised during the year (12,255) - (12,255) -Taxable Income / (Loss) 868,255 1,060,590 - 5,942

Income Tax @ 28% 147,016 189,929 - 1,664Income Tax @ 15% 879 1,045 - -Income Tax @ 12% 7,351 19,371 - -Income Tax @ 10% 27,608 18,874 - -Income Tax @ 5% - 1,257 - -Taxation on Profit for the Year 182,854 230,476 - 1,664

10.2 Corporate income taxes of the companies in the Group are computed in accordance with the Inland Revenue Act No. 10 of 2006 and subsequent amendments thereto.

Lankem Ceylon PLC and other companies within the Group, excluding those which are enjoying a tax holiday or concessionary rate of taxation as referred to below, are liable to income tax at 28%.

10.3 In accordance with the section 21 of the Inland Revenue Act No.10 of 2006, the profits & income from relocated activities (Lankem Ceylon PLC has relocated its Agro Chemicals & Agro Seeds operations to Pannala) is exempt from income tax for a period of five years commencing from the Year of Assessment 2009/2010 under GAMATA KARMANTHA PROJECT.

10.4 Lankem Exports (Pvt) Ltd., Lankem Technology Services Limited, Associated Farms (Pvt) Ltd., and Lankem Agrochemicals Limited were non-operative during the year.

10.5 Sigiriya Village Hotels PLC, Galle Fort Hotel (Pvt) Ltd. and Beruwala Resorts PLC are liable for taxation at 12% 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 (BOI) 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 was 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 12% on profits from business and 28% on other income.

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65Annual Report 2012/13 | Lankem Ceylon PLC

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 10% on its taxable income 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 is liable for taxation at the rate of 12% on its taxable profits in accordance with the provisions of Inland Revenue Act No. 10 of 2006 and subsequent amendments 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 Limited 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 amendments there to.

10.12 Profits from any agricultural undertakings falling within section 16 of the Inland Revenue Act No. 10 of 2006 was exempt from income tax for a period of 5 years from 2006/2007. The said tax exemption was expired on 31st March 2011 and such profits are liable for income tax at the rate of 10% from the year of assessment 2011/12 onwards.

The corporate rate of tax applicable on other income of Kotagala Plantations PLC, Agarapatana Plantations Limited and Lankem Tea and Rubber Plantations (Pvt) Limited including the income not covered under Section 16 (Profits from manufacturing) are taxed at 28%.

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

the standard rate for the assessment year 2012/13. The subsidiaries which are liable for income tax at reduced rates (below the standard rate) for the assessment year 2012/13 have computed the deferred tax at the tax rate of 12%.

ii Kotagala Plantations PLC has used 15.88% (2011/12 - 17.15%) as the average tax rate to calculate the deferred tax Asset/Liability as at 31st March 2013.

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

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

As at 31.03.2013 31.03. 2012 01.04.2011 Million Million Million

Colombo Fort Hotels Ltd. 605.0 17.3 13.7SunAgro Farms Ltd. 3.6 3.6 -Agarapatana Plantations Ltd. 188.4 64.0 191.9Lankem Developments PLC. 13.5 13.2 12.3

11. EARNINGS PER SHAREEarnings / (Loss) per share is based on the profit for the year attributable to owners of the Company divided by weighted average number of ordinary shares in issue during the year.

Consolidated Company

For the Year Ended 31st March 2013 2012 2013 2012

Profit attributable to Owners of the Company (Rs.’000) 126,908 476,353 (351,954) 730,021Weighted average number of Ordinary Shares (No. ‘000) 24,000 24,000 24,000 24,000Earnings / (Loss) per Share (Rs.) 5.29 19.85 (14.66) 30.42

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Lankem Ceylon PLC | Annual Report 2012/1366

Notes to the Financial Statements Contd.

12. DIVIDEND PER SHARE

Consolidated Company

For the Year Ended 31st March 2013 2012 2013 2012

Dividends for Ordinary Shareholders (Rs. ‘000) 36,000 60,000 36,000 60,000No. of Ordinary Shares in issue (No. ‘000) 24,000 24,000 24,000 24,000Dividend per Ordinary Share 1.50 2.50 1.50 2.50

Directors of the Company have recommended the payment of a first and final dividend of Rs. 1.50/- per ordinary share for the year ended 31st March 2013, which will be declared at the Annual General Meeting to be held on 24th September 2013.

13. PROPERTY, PLANT & EQUIPMENT13.1 Consolidated

Balance Transfers / Acquisition Additions Disposals Balance Transfers / Acquisition Additions Disposals Balance As at Adjustments of during the during the As at Adjustments of during the during the As at 01.04.2011 Subsidiary Year Year 31.03.2012 Subsidiary Year Year 31.03.2013 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Cost / Deemed CostFreeholdLand 1,839,634 - 219,800 27,112 (28,950) 2,057,596 - - 104,369 (11,959) 2,150,006Buildings 2,455,017 (4,635) 65,861 237,838 (20,664) 2,733,417 12,334 1,130,211 511,710 (16,407) 4,371,265Land Development Cost 10,002 - - - (598) 9,404 - - - - 9,404Plant & Machinery 1,178,315 107,175 16,316 157,935 (22,521) 1,437,220 47 250,070 177,432 (8,038) 1,856,731Motor Vehicles 382,557 66,141 1,081 36,855 (19,121) 467,513 - 38,524 32,182 (15,487) 522,732Furniture, Fittings & Office Equipment 597,539 (1,244) 15,481 105,513 (46,386) 670,903 7,667 52,803 145,262 (14,202) 862,433Linen & Soft Furnishings 43,707 (395) 3,486 33,566 - 80,364 - - 14,974 - 95,338 6,506,771 167,042 322,025 598,819 (138,240) 7,456,417 20,048 1,471,608 985,929 (66,093) 9,867,909

LeaseholdPlant & Machinery 204,372 (107,468) - 1,605 - 98,509 - - - - 98,509Motor Vehicles 482,511 (66,141) - 149,741 (54,554) 511,557 (7,667) - 72,636 (40,475) 536,051Furniture, Fittings & Office Equipment 2,202 - - - (1) 2,201 - - - - 2,201 689,085 (173,609) - 151,346 (54,555) 612,267 (7,667) - 72,636 (40,475) 636,761Total Cost / Deemed Cost 7,195,856 (6,567) 322,025 750,165 (192,795) 8,068,684 12,381 1,471,608 1,058,565 (106,568) 10,504,670

Balance Transfers / Acquisition Charge Disposals Balance Transfers / Acquisition Charge Disposals Balance As at Adjustments of for the during the As at Adjustments of for the during the As at 01.04.2011 Subsidiary Year Year 31.03.2012 Subsidiary Year Year 31.03.2013 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Accumulated DepreciationFreeholdBuilding 441,867 (932) 13,852 82,192 (17,250) 519,729 - - 101,422 (14,368) 606,783Plant & Machinery 604,427 51,256 14,243 97,750 (22,124) 745,552 - 2,872 132,592 (7,202) 873,814Motor Vehicles 322,576 58,148 301 28,900 (12,721) 397,204 7,667 - 22,452 (12,075) 415,248Furniture, Fittings & Office Equipment 357,855 (138) 16,171 60,480 (46,678) 387,690 - 30,138 79,405 (14,126) 483,107Linen & Soft Furnishings 31,420 - - 4,094 - 35,514 - - 6,050 - 41,564 1,758,145 108,334 44,567 273,416 (98,773) 2,085,689 7,667 33,010 341,921 (47,771) 2,420,516

LeaseholdPlant & Machinery 79,045 (51,319) - 10,426 - 38,152 - - 10,918 - 49,070Motor Vehicles 225,883 (58,148) - 80,030 (41,349) 206,416 (7,667) - 96,630 (33,074) 262,305Furniture, Fittings & Office Equipment 465 - - 290 - 755 - - 338 - 1,093 305,393 (109,467) - 90,746 (41,349) 245,323 (7,667) - 107,886 (33,074) 312,468 2,063,538 (1,133) 44,567 364,162 (140,122) 2,331,012 - 33,010 449,807 (80,845) 2,732,984

Carrying Amount 5,132,318 5,737,672 7,771,686Capital Work in Progress 181,994 - 8,969 439,854 (138,529) 492,288 (12,381) - 633,796 (509,231) 604,472Total Carrying Amount of Property, Plant & Equipment 5,314,312 6,229,960 8,376,158

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67Annual Report 2012/13 | Lankem Ceylon PLC

13. PROPERTY, PLANT & EQUIPMENT13.2 Company

Balance Transfers / Additions Disposals Balance Transfers / Additions Disposals Balance

As at Adjustments during the during the As at Adjustments during the during the As at

01.04.2011 Year Year 31.03.2012 Year Year 31.03.2013

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

Cost / Deemed Cost

Freehold

Land 111,148 - - - 111,148 - - - 111,148

Land Development Cost 9,404 - - - 9,404 - - - 9,404

Buildings 223,531 - 30,129 - 253,660 12,334 35,588 - 301,582

Plant & Machinery 113,714 107,468 57,629 (22,031) 256,780 47 72,461 (189) 329,099

Motor Vehicles 16,755 66,141 23,567 (4,623) 101,840 - 16,289 (6,094) 112,035

Furniture, Fittings & Office Equipment 207,626 - 39,598 (46,124) 201,100 - 41,013 (5,178) 236,935

682,178 173,609 150,923 (72,778) 933,932 12,381 165,351 (11,461) 1,100,203

Leasehold

Plant & Machinery 111,783 (107,468) - - 4,315 - - - 4,315

Motor Vehicles 110,728 (66,141) 2,188 (187) 46,588 - - - 46,588

222,511 (173,609) 2,188 (187) 50,903 - - - 50,903

Total Cost / Deemed Cost 904,689 - 153,111 (72,965) 984,835 12,381 165,351 (11,461) 1,151,106

Balance Transfers / Charge Disposals Balance Transfers / Charge Disposals Balance

As at Adjustments for the during the As at Adjustments for the during the As at

01.04.2011 Year Year 31.03.2012 Year Year 31.03.2013

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

Accumulated Depreciation

Freehold

Buildings 40,456 - 15,914 - 56,370 - 13,539 - 69,909

Plant & Machinery 50,469 51,319 21,597 (22,032) 101,353 - 28,682 (142) 129,893

Motor Vehicles 7,341 58,148 9,461 (2,656) 72,294 - 7,085 (2,852) 76,527

Furniture, Fittings & Office Equipment 118,781 - 30,346 (46,124) 103,003 - 36,449 (5,087) 134,365

217,047 109,467 77,318 (70,812) 333,020 - 85,755 (8,081) 410,694

Leasehold

Plant & Machinery 51,891 (51,319) 431 - 1,003 - 431 - 1,434

Motor Vehicles 69,498 (58,148) 8,041 (187) 19,204 - 8,259 - 27,463

121,389 (109,467) 8,472 (187) 20,207 - 8,690 - 28,897

338,436 - 85,790 (70,999) 353,227 - 94,445 (8,081) 439,591

Carrying Amount 566,253 631,608 711,515

Capital Work in Progress 22,468 - 45,952 - 68,420 (12,381) 90,128 - 146,167

Total Carrying Amount of

Property, Plant &

Equipment 588,721 700,028 857,682

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Lankem Ceylon PLC | Annual Report 2012/1368

Notes to the Financial Statements Contd.

13.3 ConsolidatedAs at 31st March 2013The portfolio of land and buildings in the Group consist of the following;

Carrying

Company Name Location Extent in Number of Effective Amount

Perches Buildings Date of the As at

Latest 31.03.2013

Valuation Rs.’000

i Lankem Ceylon PLC Land St Anthoneys Rd, 480 11 31.03.2010 33,600

Ekala, Kurunduwatta

Land Maithree Mawatha, 240 4 31.03.2010 27,000

Ekala

Land Maguruwala Rd, 881 8 31.03.2010 43,198

Gonawala

Land Kandathoduwawa, 4,055 2 31.03.2010 7,350

Putlam

ii Lankem Developments PLCLand Maguruwila Road, 89 - 31.03.2010 6,950

Gonawala

iii Marawila Resorts PLC Land Thalawila, 4,508 36 31.03.2010 876,776 Kuppayawela, Naththandiya

iv Sigiriya Village Hotels PLC Land Mankanai, 1,922 - 31.03.2010 151,599 Trincomalee

v York Hotels (Kandy) Ltd Land Hallolouwa, 978 2 31.03.2010 147,106

Katugastota

vi B.O.T. Hotels Services (Pvt) Ltd.Land Kapparatota Rd, 525 1 02.04.2010 356,360

Weligama

vii C.W. Mackie PLCLand Scan Bottling Plant 604 13 31.03.2011 Munagama, Horana

Land Industrial Estate 800 11 31.03.2011 Aramanagolla, 280,000 Horana

Land Thebuwana, Narthupana 850 8 31.03.2011

viii Galle Fort Hotel (Private)Limited

Land Galle Fort, Galle 37 8 30.09.2011 219,800

ix Beruwela Resorts PLC

Land Moragolla, Beruwela 2 - - 267

2,150,006

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69Annual Report 2012/13 | Lankem Ceylon PLC

14. BIOLOGICAL ASSETS

As at 31.03.2013 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000

Bearer Biological Assets (14.1)Kotagala Plantations PLC 2,618,800 2,282,642 1,960,268Agarapatana Plantations Ltd. 1,425,194 1,216,435 989,431SunAgro Farms Limited 20,552 23,688 16,315 4,064,546 3,522,765 2,966,014

Consumable Biological Assets (14.2)Kotagala Plantations PLC 423,037 330,306 386,531Agarapatana Plantations Ltd. 280,780 258,347 235,611 703,817 588,653 622,142 4,768,363 4,111,418 3,588,156

14.1 Bearer Biological Assetsi) Kotagala Plantations PLC (KPPLC)

Mature Plantations Immature Plantations Total Total TotalAs at Tea Rubber Tea Rubber Others 31.03.2013 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

CostAt the beginning of the year 610,080 765,907 321,469 796,164 197,897 2,691,517 2,312,192 1,989,553Additions/Transfers during the year 73,596 188,451 97,727 173,338 133,322 666,434 537,110 459,860Disposals/Transfers - - (73,596) (188,451) - (262,047) (157,785) (137,221)At the end of the year 683,676 954,358 345,600 781,051 331,219 3,095,904 2,691,517 2,312,192

DepreciationAt the beginning of the year 149,222 259,653 - - - 408,875 351,924 301,918Charge for the year 20,510 47,719 - - - 68,229 56,951 50,006At the end of the year 169,732 307,372 - - - 477,104 408,875 351,924Carrying amount 513,944 646,986 345,600 781,051 331,219 2,618,800 2,282,642 1,960,268

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 Note 15. Further investment in Immature Plantations taken over by way of leases are shown in this note. When such plantations become mature, the additional investments since taken over to bring them to maturity are transferred from immature to mature under this note. A corresponding movement, from Immature to Mature, in respect of the investment undertaken by JEDB/SLSPC on the same plantation prior to the leases are shown under Note 15.

b) Borrowing costs amounting Rs. 18.7 Million (2011/2012 - Rs. 22.9 Million) on Tea, and Rs. 38.4 Million (2011/2012- Rs 54.3 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 9.4% (2011/12 -11.4%) The capitalisation will cease when crops are ready for harvest.

c) Other immature plantations includes oil palm etc. which have been cultivated and managed in separate fields and other crops such as cinnamon and coconut. They are carried at cost less impairment.

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Lankem Ceylon PLC | Annual Report 2012/1370

Notes to the Financial Statements Contd.

14. BIOLOGICAL ASSETS CONTD.14.1 Bearer Biological Assetsii) Agarapatana Plantations Limited (APL)

Mature Tea Immature Plantations Total Total TotalAs at Plantations Tea Others 31.03.2013 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

CostAt the beginning of the year 558,919 636,295 89,632 1,284,847 1,046,087 845,268Additions/Transfers during the year 67,034 208,193 17,333 292,560 238,759 200,819Disposals/Transfers - (67,034) - (67,034) - -At the end of the year 625,953 777,454 106,965 1,510,373 1,284,846 1,046,087

DepreciationAt the beginning of the year 68,411 - - 68,411 56,656 46,052Charge for the year 16,767 - - 16,768 11,755 10,604At the end of the year 85,178 - - 85,179 68,411 56,656Carrying amount 540,775 777,454 106,965 1,425,194 1,216,435 989,431

a) These are investments in immature/ mature plantations since the formation of the company. The assets (including plantation assets) taken over by way of estate leases are set out in notes 15. 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.

b) Borrowing costs amounting to Rs. 81,461,476/= (previous year Rs. 31,786,509/=) incurred on long term loans obtained to meet expenses relating to immature plantations have been capitalised as part of the cost of the immature plantations. Capitalisation will cease when crops are ready for harvest.

iii) SunAgro Farms Limited

Mature Immature Total Total Total As at Plantations Plantations 31.03.2013 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

CostAt the beginning of the year 3,021 22,680 25,701 17,825 7,675Additions/Transfers during the year - 2,107 2,107 7,876 10,150Written off during the year (4,740) (4,740) - -At the end of the year 3,021 20,047 23,068 25,701 17,825

DepreciationAt the beginning of the year 2,013 - 2,013 1,510 1,007Charge for the year 503 - 503 503 503At the end of the year 2,516 - 2,516 2,013 1,510Carrying amount 505 20,047 20,552 23,688 16,315

The requirement of recognition of bearer biological assets at its fair value less cost to sell under LKAS 41 was superseded by the ruling issued on 2nd March 2012, by The Institute of Chartered Accountants of Sri Lanka. Accordingly, the Group has elected to measure the bearer biological assets at cost using LKAS 16 - Property Plant and Equipment.

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71Annual Report 2012/13 | Lankem Ceylon PLC

14.2 Consumable Biological Assets

As at 31.03.2013 31.03.2012 Rs.’000 Rs.’000

Kotagala Plantations PLC (KPPLC)At the beginning of the year 330,303 386,531Additions / Transfers during the year 3,195 3,923Gain/(Loss) arising from Changes in Fair Value 89,539 (60,148) 423,037 330,306

Agarapatana Plantations Limited (APL)At the beginning of the year 258,347 235,611Additions / Transfers during the year 8,500 11,117Gain/(Loss) arising from Changes in Fair Value 13,933 11,619 280,780 258,347

Managed trees include commercial timber plantations cultivated on estates. The cost of immature trees is treated as approximate fair value particularly on the ground of little biological transformation has taken place and impact of the biological transformation on price is not material. When such Plantations become mature, the additional investments since taken over to bring them to maturity are transferred from Immature to Mature.

The fair value of managed trees was ascertained since the LKAS 41 is only applicable for managed agricultural activities in terms of the ruling issued by The Institute of Chartered Accountants of Sri Lanka. The valuation was carried out by Messers B.J.B.Kariyawasam, chartered valuers, using Discounted Cash Flow (DCF) methods. In ascertaining the fair value of timber, physical verification was carried out covering all the estates.

Key assumptions used in valuation are as follows,

1. The harvesting is approved by the Project Management and Monitoring Department and Forest Department based on the forestry development plan

2. The price adopted is net of expenditure

3. Discount rate is 15.3%

4. Though replanting is a condition precedent for harvesting, yet the cost are not taken in to consideration.

15. LEASEHOLD PROPERTIES

As at Balance as at Additions Balance Additions Balance 01.04.2011 During the as at During the as at Year 31.03.2012 Year 31.03.2013 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Cost / ValuationLeasehold Right to Bare Land of JEDB / SLSPC Estates - (15.1)Kotagala Plantations PLC 342,287 - 342,287 - 342,287Agarapatana Plantations Ltd. 341,588 - 341,588 - 341,588 683,875 - 683,875 - 683,875

Immovable Leased Assets of JEDB / SLSPC Estates (other than Bare Land)- (15.2)Kotagala Plantations PLC 458,222 - 458,222 - 458,222Agarapatana Plantations Ltd. 269,883 - 269,883 - 269,883 728,105 - 728,105 - 728,105

Leasehold Right to Bare Land - (15.3)SunAgro Farms Limited 2,555 - 2,555 - 2,555 2,555 - 2,555 - 2,555Total Cost Valuation 1,414,535 - 1,414,535 - 1,414,535

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Lankem Ceylon PLC | Annual Report 2012/1372

Notes to the Financial Statements Contd.

15. LEASEHOLD PROPERTIES CONTD.

As at Balance Charge Balance Charge Balance As at for the As at for the As at 01.04.2011 Year 31.03.2012 Year 31.03.2013 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Accumulated Amortisation / DepreciationLeasehold Right to Bare Land of JEDB / SLSPC Estates - (15.1)Kotagala Plantations PLC 121,278 6,459 127,737 6,458 134,195Agarapatana Plantations Ltd. 120,968 6,441 127,409 6,441 133,850 242,246 12,900 255,146 12,899 268,045

Immovable Leased Assets of JEDB / SLSPC Estates (other than Bare Land) - (15.2)Kotagala Plantations PLC 269,966 15,189 285,155 15,209 300,364Agarapatana Plantations Ltd. 162,957 9,062 172,019 8,797 180,816 432,923 24,251 457,174 24,006 481,180

Leasehold Right to Bare Land - (15.3)SunAgro Farms Limited 66 88 154 88 242 66 88 154 88 242Total Amortisation / Depreciation 675,235 37,239 712,474 36,993 749,467

Carrying Amount 739,300 - 702,061 - 665,068

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

The leases of plantation estates in relation to the subsidiaries of the Group, Kotagala Plantations PLC and Agarapatana Plantations Limited have been executed and are retroactive from 22nd June,1992. The leasehold rights to these estates have been taken into the books as at 22nd June 1992 immediately after the formation of these two companies, in terms of the ruling obtained from the Urgent Issues Task force (UITF) of The Institute of Chartered Accountants of Sri Lanka.

For this purpose, the Board of Directors of Kotagala Plantations PLC and Agarapatana Plantations Limited decided at the meeting held on 8th March,1995 that these bare lands would be revalued, at the 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 Statement of Financial Position and the amortisation of leasehold rights up to 31st March 2013 are as follows:

Revaluation Balance Accumulated Amortisation Accumulated Carrying Carrying Carrying As at As at Depreciation during the Depreciation Amount Amount Amount 22.06.1992 01.04.2012 01.04.2012 Year 31.03.2013 31.03 2013 31.03 2012 01.04. 2011 Rs. ‘000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

a) Kotagala Plantations PLC 358,928 342,287 127,737 6,458 134,195 208,092 214,550 221,009

b) Agarapatana Plantations Limited 341,588 341,588 127,409 6,441 133,850 207,738 214,179 220,620

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73Annual Report 2012/13 | Lankem Ceylon PLC

15.2 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 in to the books of the two plantation companies, Kotagala Plantations PLC and Agarapatana Plantations Limited retroactive to 22nd June, 1992.

For this purpose, the Board of Directors of these two companies decided at the meeting held on 08th March, 1995 that these assets be restated at their book values as they appear in the books of the JEDB/SLSPC on the day immediately preceding the date of the Companies. These assets taken into the Statement of Financial Position as at 22nd June, 1992 and depreciation as follows:

Revaluation Transfer/ Balance Accumulated Depreciation Carrying Carrying Carrying

As at Immature As at Depreciation for the Amount Amount Amount

22.06.1992 to Mature 01.04 2012 01.04.2012 Year 31.03 2013 31.03 2012 01.04. 2011

(Adjustments)

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

a) Kotagala Plantations PLCLand Development Cost 6,712 - 6,701 4,415 223 2,063 2,286 2,507Building other than worker housing 26,519 - 25,902 20,490 1,036 4,376 5,412 6,446Plant & Machinery 8,757 - 8,757 8,755 - 2 2 -Water Projects and Sanitations 8,688 - 8,688 5,727 290 2,671 2,961 3,249Mature Plantations 130,905 - 408,174 245,768 13,660 148,746 162,406 176,054Immature Plantations 293,998 - - - - - - - 475,579 - 458,222 285,155 15,209 157,858 173,067 188,256

Revaluation Transfer/ Balance Accumulated Depreciation Carrying Carrying Carrying

As at Immature As at Depreciation for the Amount Amount Amount

22.06.1992 to Mature 01.04 2012 01.04.2012 Year 31.03 2013 31.03 2012 01.04. 2011

(Adjustments)

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

b) Agarapatana Plantations LimitedImprovement to Land 5,407 - 5,407 3,556 181 1,670 1,851 2,032Unimproved Land 998 - 998 - - 998 998 998Roads and Bridges 677 - 677 335 17 325 342 360Buildings 62,634 - 62,634 49,503 2,501 10,630 13,131 15,632Fences & Securities 49 - 49 49 - - - (1)Machinery 8,823 (621) 8,202 8,201 - 1 1 -Water Supply 6,158 - 6,158 6,082 76 - 76 384Power Augmentation 972 - 972 959 12 1 13 61Coffee, Pepper, Cardamom 305 - 305 - - 305 305 305Mature Plantations 37,457 141,636 179,093 102,506 5,968 70,619 76,587 82,555Vested Tea 1,223 - 1,223 798 40 385 425 465Immature Plantations 141,636 (141,636) - - - - - -Immature Timber 4,136 - 4,136 - - 4,136 4,136 4,136Other Vested Assets 30 - 30 30 - - - - 270,505 (621) 269,883 172,019 8,795 89,070 97,865 106,927

15.3 SunAgro Farms LimitedThe agricultural land of SunAgro Farms Limited which was acquired on a 29 year lease from the Department of Buddhist Affairs and leasehold rights in relation to above land is amortised over the period of lease.

As at 31.03.2013 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000

Acquisition CostBalance at the beginning of the year 2,555 2,555 -Additions - - 2,555 2,555 2,555 2,555Accumulated AmortisationBalance at the beginning of the year 154 66 -Amortisation Charge for the year 88 88 66Balance at the end of the year 242 154 66Carrying Amount 2,313 2,401 2,489

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Lankem Ceylon PLC | Annual Report 2012/1374

Notes to the Financial Statements Contd.

16. INVESTMENT PROPERTY

Consolidated

As at 31.03.2013 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000

CostBalance at the beginning of the year 61,580 61,580 61,580Additions during the period 764 - -Balance at the end of the year 62,344 61,580 61,580

Accumulated DepreciationBalance at the beginning of the year 4,737 - -Charge for the Year 4,751 4,737 -Balance at the end of the year 9,488 4,737 -Carrying Amount 52,856 56,843 61,580

Group - C. W. Mackie PLCThe 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 LKAS 40 – Investment Property. The above investment property is situated at No. 36, D. R. Wijewardena Mawatha, Colombo 10 and the extent of the building is 52,923 square feet. The carrying amount of investment property as at 31st March 2013, amounted to Rs. 52.9 Million (As at 31st March 2012 - Rs. 56.9 Million).

Rental Income earned from Investment Property by the company amounted to Rs. 63.7 Million for the year ended 31st March 2013 (Rs. 57.9 Million for the period ended 31st March 2012) and direct operating expenses incurred for the same period amounted to Rs. 27.7 Million (Rs. 33.6 Million for the period ended 31st March 2012).

17. INTANGIBLE ASSETS

Consolidated

As at 31.03.2013 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000

GoodwillBalance at the beginning of the year 711,845 357,078 357,078Goodwill on Acquisition of Subsidiary - 354,767 -Impairment of Goodwill (25,569) - -Balance at the end of the year 686,276 711,845 357,078

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:

Consolidated

As at 31.03.2013 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000

Agarapatana Plantations Ltd. 150,120 150,120 150,120Lankem Tea & Rubber Plantations (Pvt) Ltd. 10,329 10,329 10,329Lankem Plantation Holdings Limited 30,820 30,820 30,820C.W. Mackie PLC 165,935 165,935 140,240Galle Fort Hotel (Private) Ltd. 329,072 329,072 -Kotagala Plantations PLC - 6,369 6,369Lankem Developments PLC - 4,361 4,361Marawila Resorts PLC - 14,839 14,839 686,276 711,845 357,078

Carrying amount of the goodwill as at the reporting date was tested for impairment and an impairment loss of Rs. 25.6 Million has been recognised for the year ended 31st March 2013.

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75Annual Report 2012/13 | Lankem Ceylon PLC

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 planInflation - Based on the current inflation and the total cost subjected to the inflationDiscount Rate - Average market borrowing rate adjusted for risk premiumMargin - Based on current margin and business plan

18. INVESTMENT18.1 Investment in Subsidiaries18.1.1 Company

As at Group Company Group Company No of Market Cost No of Market Cost No of Market Cost

Holding Holing Holding Holing Shares Value Shares Value Shares Value

2013 2013 2012 2012 31.03.2013 31.03.2013 31.03.2013 31.03.2012 31.03.2012 31.03.2012 01.04.2011 01.04.2011 01.04.2011

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

Quoted Investments

C.W.Mackie PLC 46.05 39.03 45.92 39.44 14,046,811 941,136 541,413 14,193,453 1,060,251 549,494 13,537,453 1,179,112 483,589

Lankem Developments PLC 31.75 1.51 35.47 5.45 903,680 5,061 10,276 3,270,597 34,014 37,192 3,459,241 250,103 39,337

Sigiriya Village Hotels PLC 53.05 23.15 61.25 53.71 2,083,760 143,779 41,851 4,833,760 357,698 225,245 4,831,560 483,639 225,031

Marawila Resorts PLC 41.24 13.63 40.70 13.05 16,700,919 100,206 99,756 15,991,271 111,939 94,542 38,043,668 418,480 209,126

Kotagala Plantations PLC 33.22 0.80 32.60 0.18 257,377 13,898 19,505 57,100 3,997 5,301 5,000 840 122

Beruwala Resorts PLC 55.91 0.01 57.10 0.01 83,965 168 194 30,000 - 30 118,381,000 - 118,381

Total Quoted Investments 712,995 911,804 1,075,586

Unquoted Investments

Colombo Fort Hotels Ltd. 72.41 69.61 72.40 69.68 2,329,326,024 - 1,595,115 2,329,326,024 - 1,595,116 65,753,012 - 170,753

Lankem Plantation Holdings Ltd. 47.56 47.56 47.56 47.56 19,500,001 - 220,500 19,500,001 - 220,500 195,000,001 - 220,500

Lankem Tea & Rubber Plantation (Pvt) Ltd. 48.07 1.00 48.07 1.00 8,342 - 1,998 8,342 - 1,998 8,342 - 1,998

Lankem Plantation Services Ltd. 60.00 60.00 60.00 60.00 179,993 - 1,800 179,993 - 1,800 179,993 - 1,800

Lankem Exports (Pvt) Ltd. 100.00 100.00 100.00 100.00 10,000 - 100 10,000 - 100 10,000 - 100

Lankem Paints Ltd. 100.00 100.00 100.00 100.00 2,000,000 - 20,000 2,000,000 - 20,000 2,000,000 - 20,000

Lankem Consumer Products Ltd. 100.00 100.00 100.00 100.00 2,000,000 - 20,000 2,000,000 - 20,000 2,000,000 - 20,000

Lankem Chemicals Ltd. 100.00 100.00 100.00 100.00 2,000,000 - 20,000 2,000,000 - 20,000 2,000,000 - 20,000

Lankem Research Ltd. 100.00 100.00 100.00 100.00 250,007 - 2,500 250,007 - 2,500 250,007 - 2,500

SunAgro Life Science Ltd. 100.00 100.00 100.00 100.00 200,000 - 2,000 200,000 - 2,000 200,000 - 2,000

SunAgro Farms Ltd. 100.00 100.00 100.00 100.00 1,200,000 - 12,000 1,200,000 - 12,000 1,200,000 - 12,000

SunAgro Foods Ltd. 100.00 100.00 100.00 100.00 4,999,994 - 50,274 4,999,994 - 50,000 - - -

Lankem Technology Services Ltd. 100.00 100.00 100.00 100.00 4,999,995 - 5,000 4,999,995 - 5,000 4,999,995 - 5,000

Associated Farms (Pvt) Ltd. 100.00 100.00 100.00 100.00 55,398 - 554 55,398 - 554 55,398 - 554

Total Unquoted Investments 1,951,841 1,951,568 477,205

Total Investments 2,664,836 2,863,372 1,552,791

Less: Provision for Impairment

in Value of Investments (18.1.2.) (253,967) (32,554) (20,000)

Total Unquoted Investments 2,410,869 2,830,818 1,532,791

18.1.2 Provision for Impairment in Value of Investments

Company

As at 31.03.2013 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000

Lankem Consumer Products Ltd. 20,000 20,000 20,000SunAgro Farms Ltd. 12,000 12,000 -Associated Farms (Pvt) Ltd. 554 554 -Kotagala Plantations PLC 5,607 - -Lankem Developments PLC 5,216 - -Colombo Fort Hotels Ltd. 210,590 - - 253,967 32,554 20,000

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Notes to the Financial Statements Contd.

18. INVESTMENT CONTD.18.2 Investments Classified as Available for Sale

Consolidated Company

As at 31st March Notes 2013 2012 01.04.2011 Notes 2013 2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Quoted Investments 18.2.1. 33,733 2,562 2,141 18.3.1. - 605 256Unquoted Investments 18.2.2. - 250 325 18.3.2. - - -Unit Trusts 18.2.3. 12,089 10,914 14,135 18.3.3. 8,582 7,679 9,664 45,822 13,726 16,601 8,582 8,284 9,920

18.2 Consolidated18.2.1 Quoted Investments

Consolidated

No of Market No of Market No of Market Shares Cost Value Shares Cost Value Shares Cost Value As at 31.03.2013 31.03.2013 31.03.2013 31.03.2012 31.03.2012 31.03.2012 01.04.2011 01.04.2011 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Bank, Finance & InsuranceDFCC Bank PLC 5,536 51 726 10,906 102 1,221 4,260 102 731Central Finance Company PLC 46,500 8,200 8,370 - - - - - -Housing Development Finance Company PLC 200,000 7,800 8,000 - - - - - -Total 16,051 17,096 102 1,221 102 731

Construction & EngineeringColombo Dockyard PLC 269 2 58 257 2 59 257 2 66Total 2 58 2 59 2 66

Hotels & TravelHunas Falls Hotels PLC 400 7 21 400 7 24 400 7 34Hotel Sigiriya PLC 14,000 65 1,106 14,000 65 1,002 14,000 65 869Pegasus Resorts PLC 960 9 35 960 9 36 960 9 68Renuka City Hotels PLC 600 115 144 525 30 115 525 30 175Royal Palms Beach Hotels PLC 775 30 12 375 11 21 375 11 26Trans Asia Hotels PLC 400 2 28 200 1 13 200 1 39John Keells Hotel PLC 250,000 3,200 3,300 - - - - - -Total 3,428 4,646 123 1,211 123 1,211

ManufacturingPelwatte Sugar Industries PLC 1,000 9 - 1,000 9 23 1,000 9 32Singer Sri Lanka PLC 30 3 3 - - - - -Total 12 3 9 23 9 32

PlantationsBalangoda Plantations PLC 100 2 3 100 2 2 100 2 6Hapugastenna Plantations PLC 100 1 4 100 1 4 100 1 7Horana Plantations PLC 100 1 3 100 1 3 100 1 7Kahawatte Plantations PLC 100 1 3 100 1 3 100 1 4Kegalle Plantations PLC 100 1 11 100 1 10 100 1 21Kelani Valley Plantations PLC 100 1 9 100 1 10 100 1 18Madulsima Plantations PLC 100 2 1 100 2 1 100 2 3Malwatte Valley Plantations PLC 100 1 - 100 1 1 100 1 11Maskeliya Plantations PLC 100 3 1 100 3 2 100 3 3Namunukula Plantations PLC 100 1 8 100 1 6 100 1 11Talawakelle Tea Estates PLC 100 2 3 100 2 2 100 2 5Udapussellawa Plantations PLC 100 1 3 100 1 3 100 1 5Watawala Plantations PLC 100 1 1 100 1 1 100 1 -Total 18 50 18 48 18 101

DiversifiedHemas Holdings PLC 440,000 20,689 11,880 - - - - - -Total Quoted Investments 40,200 33,733 254 2,562 254 2,141

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18.2.2 Unquoted Investments

Consolidated

No of Market No of Market No of Market Shares Cost Value Shares Cost Value Shares Cost Value As at 31.03.2013 31.03.2013 31.03.2013 31.03.2012 31.03.2012 31.03.2012 01.04.2011 01.04.2011 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Ceylon Ocean Lines Container Services Limited - - - - 250 250 - 250 250Ceylone Ocean Lines Container Repair Ltd - - - - - - - 75 75Total - - 250 250 325 325

18.2.3 Unit Trusts

No of Market No of Market No of Market Shares Cost Value Shares Cost Value Shares Cost Value As at 31.03.2013 31.03.2013 31.03.2013 31.03.2012 31.03.2012 31.03.2012 01.04.2011 01.04.2011 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Comtrust Equity Fund 94,856 784 1,733 94,856 784 1,609 94,856 784 2,391National Equity Fund 339,624 1,709 8,582 326,923 1,709 7,679 313,772 1,709 9,664Pyrmid Unit Trust - - - 58,597 518 1,626 55,290 518 2,080Eagle Growth Equity Fund 60,666 650 1,774 - - - -Total 3,143 12,089 3,011 10,914 3,011 14,135

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

18.3 Company18.3.1 Quoted Investments

Company

No of Market No of Market No of Market Shares Cost Value Shares Cost Value Shares Cost Value As at 31.03.2013 31.03.2013 31.03.2013 31.03.2012 31.03.2012 31.03.2012 01.04.2011 01.04.2011 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Banks, Finance & InsuranceDFCC Bank PLC - - - 5,370 49 605 1,492 49 256Total - - 49 605 49 256

18.3.2 Unquoted InvestmentsLankem Technology Services Limited - - - - - - 5,000 5,000 -Total - - - - 5,000 -

18.3.3 Unit TrustsNational Equity Fund 339,624 1,709 8,582 326,923 1,709 7,679 313,772 1,709 9,664Total 1,709 8,582 1,709 7,679 1,709 9,664

18.4 Investment Classified as Held to Maturity

Consolidated

As at 31.03.2013 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000

Debentures 25,400 25,226 21,918Long Term Fixed Deposits 27,579 500 500 52,979 25,726 22,418

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Notes to the Financial Statements Contd.

18. INVESTMENT CONTD.18.5 Investments Classified as Fair Value through Profit or Loss

Consolidated

No of Market No of Market No of Market Shares Cost Value Shares Cost Value Shares Cost Value As at 31.03.2013 31.03.2013 31.03.2013 31.03.2012 31.03.2012 31.03.2012 01.04.2011 01.04.2011 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Dialog Axiata PLC 1,000 9 9 1,000 8 7 1,500,000 15,307 15,750Nations Trust Bank PLC 44,600 2,020 2,721 44,600 2,020 2,538 60,300 2,732 4,601Raigam Wayamba Saltens PLC - - - - - - 100,000 426 450Janashakthi Insurance Company PLC 153,900 2,323 1,893 153,900 2,323 1,785 339,400 5,123 5,600Colonial Motors PLC 382,301 107,416 31,731 224,600 101,425 71,827 - - -PC House PLC 1,249,775 18,581 3,749 810,400 15,168 6,645 - - -PC House Holdings PLC 3,981,629 50,313 23,492 - - - - - -Colombo Fort Investments PLC 7,250 715 674 - - - - - -Citizens Development Bank PLC (Voting) - - - 16 1 1 - - -Citizens Development Bank PLC ( Non Voting) - - - 71 3 4 - - -Capital Alliance Finance PLC 3,657,443 126,808 52,302 4,175,048 157,320 157,817 - - -Infrastructure Developers PLC 766,397 108,997 156,498 421,900 48,332 61,007 - - -Renuka Agri Foods PLC - - - 289,600 2,034 1,738 - - -Renuka Holdings PLC 347,589 19,368 13,876 124,937 6,384 4,810 - - -Nanda Investment & Finance PLC - - - 30,000 263 258 - - -Orient Garments PLC 1,452,020 26,386 11,471 550,575 10,902 10,296 - - -HVA Foods PLC 959,500 20,375 10,746 959,500 20,375 14,392 - - -J.L. Morison Sons & Jones (Ceylon) PLC 8,402 2,010 1,470 6,603 1,622 1,400 - - -Richard Pieris and Company PLC - - - - - - 36,500 524 496Tokyo Cement Company PLC (Voting) 285,900 17,497 6,719 285,900 17,497 10,578 285,900 18,321 17,383Tokyo Cement Company PLC (Non Voting) 93,900 3,789 1,643 93,900 3,789 2,535 100,000 4,550 4,400Kotmale Holdings PLC - - - 1,000 26 40 1,000 25 53Piramal Glass Ceylon PLC 250,000 2,049 1,525 250,000 2,049 1,525 - - -John Keells Holdings PLC - - - 78,100 15,530 16,089 - - - 508,656 320,519 407,071 365,292 47,008 48,733

18.6 Investments Classified as Fair Value through Profit or Loss

Company

No of Market No of Market No of Market Shares Cost Value Shares Cost Value Shares Cost Value As at 31.03.2013 31.03.2013 31.03.2013 31.03.2012 31.03.2012 31.03.2012 01.04.2011 01.04.2011 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Dialog Axiata PLC 1,000 9 9 1,000 8 7 1,500,000 15,307 15,750Nations Trust Bank PLC 44,600 2,020 2,721 44,600 2,020 2,538 60,300 2,732 4,601Raigam Wayamba Saltens PLC - - - - - - 100,000 426 450Janashakthi Insurance Company PLC 153,900 2,323 1,893 153,900 2,323 1,785 339,400 5,123 5,600Richard Pieris and Company PLC - - - - - - 36,500 524 496Tokyo Cement Company PLC (Voting) 285,900 17,497 6,719 285,900 17,497 10,578 285,900 18,321 17,383Tokyo Cement Company PLC (Non Voting) 93,900 3,789 1,643 93,900 3,789 2,535 100,000 4,550 4,400Colonial Motors PLC 382,301 107,416 31,731 224,600 101,425 71,827 - - -PC House PLC 1,249,775 18,581 3,749 810,400 15,168 6,645 - - -PC House Holdings PLC 3,981,629 50,313 23,492 - - - - - -Colombo Fort Investments PLC 7,250 715 674 - - - - - -Citizens Development Bank PLC (Voting) - - - 16 1 1 - - -Citizens Development Bank PLC (Non-Voting) - - - 71 3 4 - - -Capital Alliance Finance PLC 3,609,969 125,466 51,623 4,175,048 157,320 157,817 - - -Infrastructure Developers PLC 766,397 108,997 156,498 421,900 48,332 61,007 - - -Renuka Agri Foods PLC - - - 289,600 2,034 1,738 - - -Renuka Holdings PLC 13,437 5,852 3,517 124,937 6,384 4,810 - - -Nanda Investment and Finance PLC - - - 30,000 263 258 - - -Orient Garments PLC 1,452,020 26,386 11,471 550,575 10,902 10,296 - - -HVA Foods PLC 959,500 20,375 10,746 959,500 20,375 14,392 - - -J.L. Morison Sons and Jones (Ceylon) PLC 8,402 2,010 1,470 6,603 1,622 1,400 - - -Kotmale Holdings PLC - - - 1,000 26 40 1,000 25 53 491,749 307,956 389,492 347,678 47,008 48,733

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18.7 Loan Due from Related Parties

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Lankem Tea & Rubber Plantations (Pvt) Ltd - - 180,000 180,000 180,000Total - - 180,000 180,000 180,000

19. INVENTORIES

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Finished Goods 1,924,089 31,607 987,625 419,564 479,449 331,248Raw Materials 649,353 652,864 706,935 402,863 411,506 301,866Produce Stock-Tea & Rubber 304,534 507,583 592,843 - - -Growing Crop - Nurseries 70,161 72,851 37,714 - - -Packing & Other Materials 56,173 76,303 - - - -Work-in-Progress 64,278 9,006 8,672 41,345 - 8,396Goods in Transit 153,780 1,157,096 127,028 153,780 31,607 127,028 3,222,368 2,507,310 2,460,817 1,017,552 922,562 768,538Provision for Obsolete Inventories (49,083) (50,911) (40,434) (37,824) (36,613) (32,915) 3,173,285 2,456,399 2,420,383 979,728 885,949 735,623

20. TRADE & OTHER RECEIVABLES

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Trade Receivables 3,574,854 3,017,492 2,624,976 867,305 763,330 457,920Provision for Bad and Doubtful Debts (97,683) (104,870) (78,066) (28,038) (14,628) (12,936) 3,477,171 2,912,622 2,546,910 839,267 748,702 444,984

Other Receivables 639,108 207,735 216,933 527,280 50,890 106,773Deposits, Advances and Prepayments 701,863 396,917 363,943 - 11,725 10,046Staff Loan 76,672 75,698 80,301 348 479 849Tax Recoverable ( Note 20.1) 362,373 365,767 150,209 177,984 245,210 150,209 1,780,016 1,046,117 811,386 705,612 308,304 267,877 5,257,187 3,958,739 3,358,296 1,544,879 1,057,006 712,861

20.1 Taxes RecoverableValue Added Tax Recoverable 205,828 275,919 142,124 87,608 175,766 142,124Economic Service Charge Recoverable 135,584 78,265 6,094 80,510 65,321 6,094Withholding Tax Recoverable 7,884 7,003 1,060 - - 1,060Advanced Company Tax Recoverable 457 457 - - - -Nation Building Tax 12,620 4,123 - 9,866 4,123 -Social Responsibility Levy Recoverable - - 931 - - 931 362,373 365,767 150,209 177,984 245,210 150,209

21. CASH & CASH EQUIVALENTS

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Favourable BalanceFixed Deposits 94,190 141,826 211,721 64,934 48,363 -Call Deposits - 82,500 - - - -Cash at Bank 1,191,593 1,578,088 1,104,353 17,444 38,192 64,988Cash in Hand 102,177 35,439 5,267 22,159 23,182 - 1,387,960 1,837,853 1,321,341 104,537 109,737 64,988

Unfavourable BalanceBank Overdraft (2,550,255) (2,150,573) (824,482) (707,338) (707,706) (332,007) (1,162,295) (312,720) 496,859 (602,801) (597,969) (267,019)

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Lankem Ceylon PLC | Annual Report 2012/1380

Notes to the Financial Statements Contd.

22. STATED CAPITAL

As at 31.03.2013 31.03.2012 01.04.2011

Number of Value of Number of Value of Number of Value of Shares Shares Shares Shares Shares Shares Rs. ‘000 Rs. ‘000 Rs. ‘000

Fully paid ordinary shares at beginning of the year 24,000,000 536,218 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 24,000,000 536,218

The holders of ordinary shares are entitled to receive dividend as declared from time to time and are entitled to one vote per individualpresent at meetings of the shareholders or one vote per share in the case of a poll.

23. CAPITAL RESERVES

Other Available Total Capital for sale Reserves Reserves Rs.’000 Rs.’000 Rs.’000

Consolidated Balance as at 01st April 2012 3,930 6,977 10,907 Net Gain / (Loss) on Financial Assets Available for Sale - 950 950 Balance as at 31st March 2013 3,930 7,927 11,857 Company Balance as at 01st April 2012 - 6,526 6,526 Net Gain / (Loss) on Financial Assets Available for Sale - 903 903 Balance as at 31st March 2013 - 7,429 7,429

23.1 Other Capital ReservesThe amount set aside out of the retained profits by C. W. Mackie PLC as Export Development Grant Reserve.

23.2 Available for Sale Reserves The amount set aside out of retained profits for the changes in the fair value of investments classified as available for sale.

24. INTEREST BEARING BORROWINGS

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Repayable after one yearFinance Lease Obligations- JEDB/SLSPC (Note 24.1) 391,657 397,923 403,951 - - -Finance Lease Obligations- Others (Note 24.2) 189,740 234,198 203,951 3,454 19,216 29,378Long Term Loans - Others (Note 24.4) 3,551,269 1,573,695 1,886,783 199,760 285,313 169,933Debentures (Note 24.6) 463,500 513,500 313,500 350,000 350,000 150,000 4,596,166 2,719,316 2,808,185 553,214 654,529 349,311

Repayable within one yearFinance Lease Obligations- JEDB/SLSPC (Note 24.1) 6,265 6,024 5,793 - - -Finance Lease Obligations- Others (Note 24.2) 107,960 102,231 87,395 15,803 12,325 17,244Long Term Loans - Others (Note 24.4) 1,520,271 1,618,916 1,309,966 227,020 135,491 41,516Short Term Loans (Note 24.5) 1,143,911 676,977 462,776 1,143,911 676,977 436,109Debentures (Note 24.6) 50,000 35,000 35,000 - - - 2,828,407 2,439,148 1,900,930 1,386,734 824,793 494,869

Loans Payable to Related Parties (Note 24.3) 485,000 420,000 26,000 762,100 800,000 326,000Total 3,313,407 2,859,148 1,926,930 2,148,834 1,624,793 820,869Total Interest bearing Borrowings 7,909,573 5,578,464 4,735,115 2,702,048 2,279,322 1,170,180

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81Annual Report 2012/13 | Lankem Ceylon PLC

24.1 Finance Lease Obligations -JEDB/SLSPC

Consolidated

As at 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000

Gross Lease Obligation 737,035 759,205 781,375Payments made during the year (22,170) (22,170) (22,170)Less: Finance Charges allocated for future periods (316,943) (333,088) (349,461) 397,922 403,947 409,744

Analysis of Lease Obligations - (JEDB/SLSPC) by year of RepaymentPayable within one yearGross Lease Obligations 22,170 22,170 22,170Less: Finance Charges allocated for future periods (15,905) (16,146) (16,377)Net Lease Obligations 6,265 6,024 5,793

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

Payable after five yearsGross Lease Obligations 603,584 625,907 648,081Less: Finance Charges allocated for future periods (238,532) (254,589) (269,712)Net Lease obligations 365,052 371,318 378,369Repayable after one year 391,657 397,923 403,951

Kotagala Plantations PLCIn terms of the leases, Rs.22.2 Million 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) deflator 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 thePlantation Development Project, the aforesaid lease rental will be frozen for a period of six years commencing from fiscal year 2002/03.Accordingly 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) 37.4All inclusive lease Rental per year 59.6

The Charge to the Statement of Comprehensive Income for the current financial year on account of interest is Rs. 57.1 million (2011/2012 - Rs. 46.5 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 at the discount rate of 4% per annum and projected inflation of 4% per annum.

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Notes to the Financial Statements Contd.

24. INTEREST BEARING BORROWINGS CONTD.24.2 Finance Lease Obligations - others

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Balance at the beginning 419,416 370,968 241,448 36,091 56,790 59,284 419,416 370,968 241,448 36,091 56,790 59,284Leases acquired during the year 37,542 223,152 239,142 - - -Adjustments made during the year - - 31,457 - - 31,457Payments made during the year (86,921) (174,704) (141,079) (15,668) (20,699) (33,951)Less: Interest in Suspense (72,337) (82,987) (79,621) (1,166) (4,550) (10,168)Balance at the end of the year 297,700 336,429 291,347 19,257 31,541 46,622

Analysis of Finance Lease Obligations by year of RepaymentPayable within one yearGross Lease Obligations 139,575 139,655 123,098 16,713 15,707 23,442Less: Finance Charges Unamortised (31,615) (37,424) (35,703) (910) (3,382) (6,198)Net Lease Obligations 107,960 102,231 87,395 15,803 12,325 17,244

Payable within one to five yearsGross Lease Obligations 225,453 273,365 243,064 3,710 20,382 33,348Less: Finance Charges Unamortised (35,713) (39,167) (39,113) (256) (1,166) (3,970)Net Lease Obligations 189,740 234,198 203,951 3,454 19,216 29,378

24.3 Loans Payable to Related PartiesBalance at the beginning 420,000 26,000 84,000 800,000 326,000 85,000Loans transferred / obtained during the year 80,000 414,000 - 20,000 494,000 300,000Payments made during the year (15,000) (20,000) (58,000) (57,900) (20,000) (59,000)Balance at the end 485,000 420,000 26,000 762,100 800,000 326,000Payable within one year (485,000) (420,000) (26,000) (762,100) (800,000) (326,000)Payable after one year - - - - - -

Loans payable to related parties are as followsThe Colombo Fort Land & Building PLC 405,000 420,000 26,000 405,000 420,000 26,000Kotagala Plantations PLC - - - 257,100 300,000 300,000Sigiriya Village Hotels PLC - - - 80,000 80,000 -Colombo Fort Investments PLC 20,000 - - 20,000 - -Darley Butler & Company Ltd. 60,000 - - - - - 485,000 420,000 26,000 762,100 800,000 326,000

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

Amount Interest Rs.’000 Rate

The Colombo Fort Land & Building PLCLoan 1 300,000 15%Loan 2 90,000 9%Loan 3 15,000 12.5% 405,000

Kotagala Plantations PLC 300,000 9%Sigiriya Village Hotels PLC 80,000 9%Colombo Fort Investments PLC 20,000 18%Darley Butler & Company Ltd. 60,000 9%

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83Annual Report 2012/13 | Lankem Ceylon PLC

24.4 Long Term Loans - Others

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Balance at the beginning 3,192,611 3,196,749 2,084,149 420,804 211,449 344,327Acquisition of Subsidiary - - 4,635 - - - 3,192,611 3,196,749 2,088,784 420,804 211,449 344,327Loans obtained during the year 3,292,747 625,763 1,746,079 150,000 250,000 100,000Exchange fluctuations (10,600) (46,432) (13,393) - - -Payments made during the year (1,403,218) (583,469) (624,721) (144,024) (40,645) (232,878)Balance at the end 5,071,540 3,192,611 3,196,749 426,780 420,804 211,449Payable within one year (1,520,271) (1,618,916) (1,309,966) (227,020) (135,491) (41,516)Payable after one year 3,551,269 1,573,695 1,886,783 199,760 285,313 169,933

24.5 Short Term Loans

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Term Loans 399,996 91,006 101,667 399,996 91,006 75,000Trust Receipt Loans 743,915 585,971 361,109 743,915 585,971 361,109 1,143,911 676,977 462,776 1,143,911 676,977 436,109

24.6 Debentures

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Unsecured Redeemable Debentures 448,500 448,500 248,500 350,000 350,000 150,000Guaranteed Redeemable Debentures 65,000 100,000 100,000 - - - 513,500 548,500 348,500 350,000 350,000 150,000

Payable within one year (50,000) (35,000) (35,000) - - -Payable after one year 463,500 513,500 313,500 350,000 350,000 150,000

Companyi The Company has issued Rs.150 Million Rated Unsecured Unlisted Redeemable Debentures of the value of Rs. 1,000/- each on 30th

December 2010 to DFCC Bank at the rate of AWPLR+1%. These debentures are redeemable after 5 years from the date of issue. The purpose of the issue was to fund long term working capital requirement.

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.

Groupi Kotagala Plantations PLC has issued Rs. 35 Million and Rs. 65 Million Guaranteed Redeemable Debentures (Unquoted) on 23rd April 2009

and 17th July 2009 respectively to Plantations Trust Fund at the Interest rate of 15.86%. Part of these debentures were redeemable on 31st December 2012 (Rs. 35 Million) and rest are redeemable in 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.

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Lankem Ceylon PLC | Annual Report 2012/1384

Notes to the Financial Statements Contd.

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

Company Lender Balance Balance Balance Terms of Security Pledged

as at as at as at Repayment

31.03.2013 31.03.2012 31.03.2011

(Rs.) Mn (Rs.) Mn (Rs.) Mn

Lankem Ceylon PLC PABC Bank PLC - 8.6 24.5 In 47 monthly installments of a) Primary Mortgage for Rs. 87.0 Mn. Rs.1,230,000/- each and a final installment installments over land & agrochemical of Rs.1,190,000/- together with interest factory building at Ekala, Ja-ela payable monthly on reducing balance of capital b) Overdraft Agreement

Sampath Bank PLC 75.0 100.0 100.0 In 4 years in 16 equal quarterly installments Primary Mortgage for Rs. 300 Mn. over of Rs.18,750,000/-. Land & Building situated in Fort owned by The Colombo Fort Land & Building Co. PLC

Lanka Puthra Development Bank Ltd. a) Mortgage over Primary bond of Rs. 5.7 Mn. Loan 1 - - 1.3 60 equal monthly installments which pledges some machinery of the company. Loan 11 - - 0.2 60 equal monthly installments

Commercial Bank of Ceylon PLC Loan 1 37.0 62.2 85.3 In 47 monthly installments of a) Primary Mortgage for Rs. 145 Mn. Rs. 2,100,000/- each and a final installment installments over land at Ja-ela & Gonawala of Rs.13,100,000/- together with interest payable monthly on reducing balance of capital

Loan 2 141.6 - - In 35 monthly installments of b) Primary Mortgage for Rs. 200 Mn. Rs. 4,200,000/- each and a final installment installments over land at Ja-ela & Gonawala of Rs. 3,000,000/- together with interest payable monthly on reducing balance of capital

Indian Bank 133.2 200.0 - In 3 Years in 12 equal quarterly installments of Rs.16,666,666/-.

Hatton National Bank PLC 40.0 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 426.8 420.8 211.3

Beruwala Resorts Sampath Bank PLC - PLC Term Loan 86.1 30.0 30.0 Primary mortgage of Rs. 100 Mn over land and building of BOT Hotel Services Ltd. situated at Weligama. 86.1 30.0 30.0

Sigiriya Village Commercial Bank of Hotels PLC Ceylon PLC - - 7.2 Equal monthly installments of Rs.166,666/- Corporate Guarantee for Rs.10Mn by Lankem Ceylon PLC. - - 7.2

Kotagala National Development Bank - - 4.3 Repayable over 10 years from 30.11.2001 Primary Mortgage over leasehold rights ofPlantations PLC PLC - Term Loan in equal monthly installments of Stonycliff,Vogan,Gikiyanakanda and Delkeith Approved facility-Rs.103 Mn Rs. 410,287/-,Rs.148,433/- and Estates and all immovable properties of Rs. 57,497/- respectively these Estates.

Approved facility-Rs.124 Mn 1.7 12.6 23.5 Repayable over 10 years from Secondary Mortgage over leasehold rights of 30.05.2003,30.06.2003 and 30.08.2003 in Stonycliff,Vogan,Gikiyanakanda and Delkeith equal monthly installments of Rs. 618,745/-, Estates and all immovable properties of these Rs. 41,250/- and Rs. 248,333/- respectively Estates.

Approved facility-Rs.215 Mn 193.5 215.0 215.0 Repayable over 5 years from 31.12.2012, Secondary Mortgage over leasehold rights of in equal monthly installments of Stonycliff,Vogan,Gikiyanakanda and Delkeith Rs. 3,300,000/- and Rs. 283,400/- Estates and all immovable properties of these respectively. Estates. (After the re-finance is received interest rate would be 15.58%)

Approved facility-Rs.150 Mn 26.0 88.0 133.0 Repayable over 45 months starting from Securitisation of Kotagala Tea receivable over a 29.09.2010 in 32 installments ending in period of 45 months. 29.07.2013

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85Annual Report 2012/13 | Lankem Ceylon PLC

Company Lender Balance Balance Balance Terms of Security Pledged

as at as at as at Repayment

31.03.2013 31.03.2012 31.03.2011

(Rs.) Mn (Rs.) Mn (Rs.) Mn Kotagala Approved facility 116.6 180.2 243.8 Repayable over 4 years in first monthly Primary Mortgage over 12 Mn. Ordinary Shares Plantations PLC - Rs.250 Mn. installments of Rs. 900,000/- and 47 monthly of C.W. Mackie PLC. Further mortgage over installments of Rs. 3,300,000/- leasehold rights of Buildings, Plant & Machinery in Stonycliff,Vogan,Gikiyanakanda and Delkeith Estates and all immovable properties of these Estates.

Approved facility 163.5 256.2 300.0 Repayable over 38 installments starting from Securitisation of Kotagala Tea receivable. - Rs.300 Mn. 24.10.2011 Approved facility - Rs.500 Mn. 443.0 - - Repayable over 46 installments starting from Securitised Tea sales of Kotagala 20.08.2012 Approved facility 204.5 - - Repayable over 89 installments of Primary mortgage over lease hold rights of - Rs.204 Mn. (USD 41,110) and one installment of building and machinery of Millewa Estate. USD 41,210 from 7th month after the Secondary mortgage leased hold rights of disbursements. Stonycliff, Vogan, Gikiyanakanda and Dalkeith Estates and all immovable properties of these estates. Secondary mortgage over 8.57 Mn. shares of C.W. Mackie PLC

DFCC Bank PLC - Term Loan 6.4 19.2 32.0 Repayable over 10 years from 15.09.200 Primary Mortgage over leasehold rights of Approved facility 3 in equal monthly installments of Drayton,Raigam and Padukka Estates. - Rs.211 Mn. Rs. 1,067,614/- each.

Approved facility 12.9 17.90 22.9 Repayable over 10 years from 23.06.2005 a) Primary Mortgage over leasehold - Rs.50 Mn. in equal monthly installments of rights to the land & buildings of Craigie Rs. 416,667/- each. Lea and Bogahawatte Estates.

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

Approved facility - Rs.7.5 Mn. 0.02 1.0 2.0 Repayable over 8 years from 25.06.2005 a) Primary Mortgage over leasehold rights to in equal monthly installments of the land & buildings of Craigie Lea and Rs. 77,781/- each. Bogahawatte Estates. b) A Corporate Guarantee of Rs. 7.46 Mn. from Lankem Tea & Rubber Plantations (Pvt) Ltd.

Approved facility - Rs.50 Mn. 30.6 40.6 49.7 Repayable over 5 years in equal 60 Secured under the mortgage bond existing monthly installments. Grace period is no.1068 dated 8th September 1998 attested 18 Months. by R.S.Wijesekara NP over the leasehold rights of Drayton,Padukka and Raygam estates. AWPLR or Average Treasury Bill rate

Lanka Orix Leasing Company PLC Approved facility 17.1 22.4 28.1 Repayable over 7 years from 30.03.2009 An on demand Promissory Note for - Rs.40 Mn. in 84 equal monthly installments of Rs. 40 Mn. with interest at 18% p.a until the Rs. 476,191/- each. (the interest will be receipt of re-finance of the subsidiary loan recovered on a monthly basis during the from DFCC bank and thereafter at the grace period also. 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 attested by D.C Peiris, NP and the amendments thereto bearing indenture no.1522 dated 4th July,1995 attested by M.H.D. Amaratunga,NP. Corporate Guarantees of M/s. Lankem Plantation Holdings Limited and M/s. Lankem Tea & Rubber Plantations (Pvt) Ltd.

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Lankem Ceylon PLC | Annual Report 2012/1386

Notes to the Financial Statements Contd.

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

Company Lender Balance Balance Balance Terms of Security Pledged

as at as at as at Repayment

31.03.2013 31.03.2012 31.03.2011

(Rs.) Mn (Rs.) Mn (Rs.) Mn

Kotagala Sampath Bank PLC 34.6 40.6 46.9 In 95 equal monthly installments of Loan Agreement for Rs.50 Mn. PrimaryPlantations PLC Approved Facility Rs. 521,000/- and a final installment of Mortgage Bond for Rs.50 Mn. over leasehold - Rs. 50 Mn. Rs. 505,000/- (Capital) together with the rights of Arapolakande Rubber Estate at interest after a grace period of 48 months Kalutara together with factory buildings commencing from the date of 1st therein. disbursement. The interest will be recovered on a monthly basis during the grace period also.

People’s Leasing Company PLC Term Loan - 3.6 7.1 Interest monthly at the rate of 24% from Primary Mortgage over two colour separators. - Rs.13 Mn. the time of disbursement of funds till the Corporate Guarantee of Lankem Tea & time the re-finance is received from DFCC. Rubber Plantations (Pvt) Ltd. Promissory Thereafter, Rs. 147,070/- within the capital Notes. grace period of 12 months and Rs. 350,826/-(Capital+Interest) to be paid within 48 months.

Term Loan - Rs. 27.7 Mn. 19.6 24.5 27.7 Interest monthly at the rate of 21% from Primary Mortgage over two colour separators. the time of disbursement of funds till the Corporate Guarantee of Lankem Tea & time the re-finance is received from DFCC. Rubber Plantations (Pvt) Ltd.Promissory Thereafter payable within 60 months with Notes. a capital grace period of 12 months.

E-Friends Term Loan 1 - Rs.1.8 Mn. 0.8 1.1 1.5 Interest monthly at the rate of 25% from Loan Agreement, acceptance and receipt. the time of disbursement of funds till the Corporate Guarantee of Lankem Tea & time the re-finance is received from PMU. Rubber Plantations (Pvt) Ltd. Thereafter Rs. 9,760/- within the capital grace period of 12 months and Rs. 41,924/- (Capital +Interest) to be paid within 60 months.

Term Loan 2 0.7 1.0 1.3 Interest monthly at the rate of 25% from Loan Agreement, acceptance and receipt. - Rs.1.5 Mn. the time of disbursement of funds till the Corporate Guarantee of Lankem Tea & time the re-finance is received from PMU. Rubber Plantations (Pvt) Ltd. 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 5.2 7.3 9.7 Interest monthly at the rate of 25% from Loan Agreement, acceptance and receipt. - Rs.10.2 Mn. the time of disbursement of funds till the Corporate Guarantee of Lankem Tea & Rubber time the re-finance is received from PMU. Plantations (Pvt) Ltd. There is a capital grace period of 12 months and the loan period is 60 months.

Term Loan 4 4.9 6.9 9.0 Interest monthly at the rate of 25% from Loan Agreement, acceptance and receipt. - Rs. 9.6 Mn. the time of disbursement of funds till the Corporate Guarantee of Lankem Tea & time the re-finance is received from PMU. Rubber Plantations (Pvt) Ltd. There is a capital grace period of 12 months and the loan period is 60 months.

Term Loan 5 4.9 6.9 9.0 Interest monthly at the rate of 25% from Loan Agreement, acceptance and receipt. - Rs. 9.6 Mn. the time of disbursement of funds till the Corporate Guarantee of Lankem Tea & time the re-finance is received from PMU. Rubber Plantations (Pvt) Ltd. There is a capital grace period of 12 months and the loan period is 60 months.

Term Loan 6 - - 3.8 Interest monthly at the rate of 25% from the Loan Agreement, acceptance and receipt. - Rs. 3.8 Mn. time of disbursement of funds till the time Corporate Guarantee of Lankem Tea & the re-finance is received from PMU.There Rubber Plantations (Pvt) Ltd. is a capital grace period of 12 months and the loan period is 60 months.

Term Loan 7 - - 2.0 Interest monthly at the rate of 25% from the Loan Agreement, acceptance and receipt. - Rs. 2.0 Mn. time of disbursement of funds till the time Corporate Guarantee of Lankem Tea & the re-finance is received from PMU.There Rubber Plantations (Pvt) Ltd. is a capital grace period of 12 months and the loan period is 60 months.

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87Annual Report 2012/13 | Lankem Ceylon PLC

Company Lender Balance Balance Balance Terms of Security Pledged

as at as at as at Repayment

31.03.2013 31.03.2012 31.03.2011

(Rs.) Mn (Rs.) Mn (Rs.) Mn

People’s Bank Term Loan Rs.100 Mn. - 29.2 79.2 Repayable within 24 installments of Securitized tea sales of Mayfield estate. Rs. 4,166,666/- each.

Rs. 300 Mn. 285 - - Repayable within 60 installments of Immovable properties and leasehold right Rs.5,000,000/- each. of Mount Vernon and Mayfield Estate.

Hatton National Bank PLC Term Loan Approved facility 889.0 - - Payable in 20 equal quarterly installments Mortgage of immovable property situated - Rs. 889 Mn. of USD 0.35 Mn. each. at Talwatte village belonging to Union Commodities (Private) Limited

Standard Chartered Bank Term Loan Approved facility - Rs. 250 Mn. 250.0 Short term loan payable in full within a month. 2,710.5 974.2 1,251.5

Agarapatana DFCC Bank - 5.5 13.8 1st installment of Rs. 691,884/- and 119 Primary Mortgage over leasehold rights Plantations Ltd ADB monthly installments of Rs. 691,429/- to bare Land and Buildings of Balmoral, Loan Term Loan payable commencing from 01.11.2002 Hauteville and Nayabedde Estates.

Term Loan - 2.3 7.0 1st installment of Rs. 390,917/- and 119 Further Mortgage over leasehold rights to monthly installments of Rs. 344,538/- Land and Buildings of Balmoral,Hauteville payable commencing from 01.12.2003 and Nayabedde Estates.

Term Loan 6.4 9.1 11.7 1st installment of Rs. 217,545/- and 119 Further Mortgage over leasehold rights to monthly installments of Rs. 217,432/- Land and Buildings of Balmoral,Hauteville and payable commencing from 01.10.2005 Nayabedde Estates.

Term Loan - 0.9 1.9 1st installment of Rs. 77,805/- and 95 A Guarantee from Lankem Tea & Rubber monthly installments of Rs. 77,781/- Plantations (Pvt) Ltd payable commencing from 01.06.2005 Term Loan 0.7 1.7 2.7 1st installment of Rs. 86,373/- and 119 Further Mortgage over leasehold right to monthly installments of Rs. 83,333/- Land and Buildings of Balmoral, Havterville, payable commencing from 01.12.2003 Nayabedda.

Hatton National Bank PLC Term Loan 9.6 - 0.9 47 monthly installments of Rs. 210,000/- A Corporate Guarantee of Lankem Plantation and final installment of Rs. 130,000/- Holdings Ltd for Rs. 45 Mn. Primary Mortgage over leasehold rights to bare land and buildings of Pitaratmale and Kahagalle Estates.

Lanka Orix Leasing Company PLC Term Loan 0.4 1.1 1.9 60 monthly installments commencing Loan agreement and Corporate Guarantee from from 30.10.2008 Lankem Tea & Rubber Plantations (Pvt) Ltd. People’s Leasing Company PLC Term Loan 4.2 6.6 8.9 60 monthly installments commencing Loan agreement and Corporate Guarantee from from 12.11.2010 Lankem Tea & Rubber Plantations (Pvt) Ltd. Term Loan 3.8 6.0 8.1 60 monthly installments commencing Loan agreement acceptance from Lankem Tea from 12.11.2010 & Rubber Plantations (Pvt) Ltd.

Term Loan 4.2 6.6 8.9 60 monthly installments commencing Loan agreement and Corporate Guarantee from from 12.11.2010 Lankem Tea & Rubber Plantations (Pvt) Ltd.

Term Loan 3.2 6.5 9.6 60 monthly installments commencing Loan agreement acceptance and receipts from from 13.03.2010 Lankem Tea & Rubber Plantations (Pvt) Ltd.

Term Loan 11.0 14.1 - 48 monthly installments commencing Loan agreement acceptance and receipts from from 01.12.2011 Lankem Tea & Rubber Plantations (Pvt) Ltd.

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Lankem Ceylon PLC | Annual Report 2012/1388

Notes to the Financial Statements Contd.

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

Company Lender Balance Balance Balance Terms of Security Pledged

as at as at as at Repayment

31.03.2013 31.03.2012 31.03.2011

(Rs.) Mn (Rs.) Mn (Rs.) Mn

Agarapatana Plantations Ltd Bank of Ceylon Term Loan - - 25.7 24 monthly installments commencing Mortgage over leasehold rights of Glenanore from 17.07.2009 and Haputale Estates including machinery fixed at each of these estates. Treasury Guarantee and Loan Agreement.

National Development Bank PLC Term Loan - 60.0 - 12 monthly installments commencing Loan agreement acceptance and Broker from 15.11.2011 certificate from Forbes & Walkers Tea Brokers (Pvt) Ltd.

Term Loan 24.0 100.0 - 14 monthly installments commencing Loan agreement acceptance and Broker from 15.05.2012 certificate from Forbes & Walkers Tea Brokers (Pvt) Ltd.

Term Loan 121.5 177.5 200.0 14 monthly installments commencing Loan agreement acceptance and from 15.07.2011 Broker certificate from Forbes & Walkers Tea Brokers (Pvt) Ltd.

Term Loan - 24.0 50.0 38 monthly installments commencing Loan agreement acceptance and Broker from 24.10.2011 certificate from John Keells PLC.

Term Loan 95.0 - - 36 monthly installments commencing Loan agreement acceptance and Broker from 23.09.2013 certificate from Forbes & Walkers Tea Brokers (Pvt) Ltd.

Term Loan 100.0 - - 36 monthly installments commencing Loan agreement acceptance and Broker from 08.05.2013 certificate from John Keells PLC. 384.0 421.9 351.1

Marawila Resorts PLC Hatton National Bank PLC Loan I, II, & III 310.0 383.0 376.2 In terms of new arrangement made with Existing secondary floating mortgage Hatton National Bank PLC on 30th July bonds totalling to US $ 5.1 Mn over 2012 and on 24th September Marawila the hotel premises at Marawila. Resort PLC has to settle US $ 1 Mn in financial year 2013/14 and balance by 2014/15

Loan IV 75.1 - - Capital payment of US$ 23,960 in the year Primary concurrent mortgage over the 2013/14, US$ 47,920 in the year 2014/15, existing Land and secondary mortgage to US$ 239,600 in the year 2015/16,2016/17 & be enhanced by US $ 0.27 Mn. Additional US$ 47,920 in the year 2017/18. security to be executed over the new property where the new rooms are constructed and Plant & Machinery installed there.

Loan V 237.5 - - Capital payment of US$ 76,040 in the year Primary concurrent mortgage over the 2013/14 , US$ 152,080 in the year 2014/15, existing Land and secondary mortgage to be US$ 760,400 in the year 2015/16,2016/17 & enhanced by US $ 0.27 Mn. Additional security US$ 152,080 in the year 2017/18. to be executed over the new property where the new rooms are constructed and Plant & Machinery installed there. 622.6 383.0 376.2

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89Annual Report 2012/13 | Lankem Ceylon PLC

Company Lender Balance Balance Balance Terms of Security Pledged

as at as at as at Repayment

31.03.2013 31.03.2012 31.03.2011

(Rs.) Mn (Rs.) Mn (Rs.) Mn

Lankem Plantation NDB Bank 73.0 - - 84 monthly installments commencing 3,025,000 Shares held by the company in Holdings Limited from 1st April 2014. Kotagala Plantations PLC have been pledged.

Lankem Tea & Rubber NDB Bank 108.0 - - 84 monthly installments commencing 4,600,525 shares held by the company in Plantation (Pvt) Limited from 1st April 2014. Kotagala Plantation PLC & 3,025,000 shares held by Lankem Plantation Holding Ltd. in Kotagala Plantation PLC have been pledged to NDB Bank.

Waverly Power DFCC Bank PLC 69.6 - - 60 monthly installments commencing Own share capital holding by Agarapathana (Pvt) Ltd from 15.06.2013 Plantations Ltd and Lankem Developments PLC. Loan agreement and Corporate Guarantee from Lankem Ceylon PLC.

Hatton National Bank PLC 69.6 - - 60 monthly installments commencing Own share capital holding by Agarapatana from 15.06.2013 Plantations Ltd and Lankem Developments PLC. Loan agreement and Corporate Guarantee from Lankem Ceylon PLC. 139.2 - -

25. DEFERRED INCOME

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

At the beginning of the year 721,880 683,172 614,028 5,641 5,641 5,641Grants received during the year 7,201 38,708 69,144 - - -At the end of the year 729,081 721,880 683,172 5,641 5,641 5,641

AmortisationAt the beginning of the year 141,291 122,289 106,118 5,641 4,366 2,183Amortisation for the year 17,636 19,001 16,171 - 1,275 2,183At the end of the year 158,927 141,290 122,289 5,641 5,641 4,366 570,154 580,590 560,883 - - 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

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Balance as at the beginning of the year 377,324 288,721 212,925 12,926 22,967 21,710Acquisition of Subsidiaries 12,887 2,384 - - - - 390,211 291,105 212,925 12,926 22,967 21,710Charged / (Reversal) in the Statement of Comprehensive Income 12,824 86,219 75,796 (16,073) (10,041) 1,257Balance as at the end of the year 403,035 377,324 288,721 (3,147) 12,926 22,967

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26. DEFERRED TAX LIABILITIES CONTD.26.1 Deferred Tax Composition

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Deferred Tax AssetsDefined Benefit Obligations 135,491 134,200 105,387 26,941 25,623 16,627Tax Losses carried forward 128,655 99,525 76,493 45,204 2,477 - 264,146 233,725 181,880 72,145 28,100 16,627Deferred Tax LiabilitiesProperty, Plant & Equipment 652,854 611,109 470,601 68,998 41,026 39,594Provision for Doubtful Receivables 14,327 (60) 667,181 611,049 470,601 68,998 41,026 39,594Net Deferred Tax Assets / (Liabilities) (403,035) (377,324) (288,721) 3,147 (12,926) (22,967)

27. RETIREMENT BENEFIT OBLIGATIONS

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Fair Value of Retirement Benefit Assets 118,788 112,283 107,702 75,626 67,346 63,687

Present Value of the Funded Obligations 252,444 238,957 199,349 171,843 158,855 123,065Present Value of the Unfunded Obligations 1,594,201 1,500,928 1,444,413 - - - 1,846,645 1,739,885 1,643,762 171,843 158,855 123,065

CompanyAn Actuarial valuation has been carried out as at 31st March 2013 by Messrs. Actuarial and Management Consultants (Private) Ltd. as required by the Sri Lanka Accounting Standard 19 ‘Employee Benefits’.

Plan Assets of the Company are held by an approved external gratuity fund where it invests in insurance scheme amounting to Rs. 75.6 Million as at the date of Statement of Financial Position.

The valuation method used by the actuary is the ‘Project Unit Credit Method’, the method recommended by Sri Lanka Accounting Standard 19 -’Employee Benefits’.

27.1 Fair Value of Retirement Benefit Assets

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Movements in Fair Value of Plan AssetsFair Value of Plan assets at the beginning of the year 112,283 107,702 104,101 67,346 63,687 66,083Contribution paid to the Plan Assets 7,581 6,902 7,029 - - -Expected Return on Plan Assets 12,591 5,187 7,559 8,844 1,237 -Benefits paid by the Plan Assets / the Company (13,788) (13,579) (12,762) - (5,252) (8,284)Actuarial Gains/(Losses) 121 6,071 1,775 (564) 7,674 5,888Fair Value of Retirement Benefit Assets 118,788 112,283 107,702 75,626 67,346 63,687

Notes to the Financial Statements Contd.

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27.2 Present Value of the Funded Obligations

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Movement in Present Value of Funded ObligationsBalance at the beginning of the year 238,957 199,349 155,442 158,855 123,065 110,091Provision for the year 50,449 42,706 35,618 36,353 29,283 23,558 289,406 242,055 191,060 195,208 152,348 133,649Benefits paid by the Plan Assets / the Company (23,628) (18,482) (12,762) (9,840) (10,155) (8,284)Actuarial (Gains) / Losses (13,334) 15,384 21,051 (13,525) 16,662 (2,300)Present Value of Defined Benefit Obligations 252,444 238,957 199,349 171,843 158,855 123,065

Expenses Recognised in the Statement of Comprehensive IncomeCurrent Service Cost 24,412 20,634 14,957 18,879 15,745 11,447Interest on Obligation 26,037 22,071 20,661 17,474 13,538 12,111Provision for the year 50,449 42,705 35,618 36,353 29,283 23,558Expected Return on Plan Assets (12,591) (10,671) (7,559) (8,844) (1,237) - 37,858 32,034 28,059 27,509 28,046 23,558

Net Actuarial (Gains) / Losses (13,455) 9,313 22,829 (12,961) 8,988 8,188 (13,455) 9,313 22,829 (12,961) 8,988 8,188

27.3 Present Value of Net Obligations

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Fair Value of Plan Assets 118,788 112,283 107,702 75,626 67,346 63,687

Present Value of Funded Obligations (252,444) (238,957) (199,349) (171,843) (158,855) (123,065)Unrecognised Actuarial (Gains)/Losses - - - - - -Arrears Payable to Non Contributory Gratuity Fund - - - - - -Net Present Value of Funded Obligations (252,444) (238,957) (199,349) (171,843) (158,855) (123,065)Present Value of Net Obligations (133,656) (126,674) (91,647) (96,217) (91,509) (59,378)

27.4 Present Value of the Unfunded Obligations

Consolidated

As at 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000

Movement in Present Value of Unfunded ObligationsBalance at the beginning of the year 1,500,928 1,444,413 1,246,191Acquisition of Subsidiaries 15,650 1,386 2,100Provision for the year 276,742 266,036 225,266 1,793,320 1,711,835 1,473,557Gratuity Paid (168,855) (235,410) (113,113)Actuarial (Gains) /Losses (30,264) 24,503 83,969Present Value of Defined Benefit Obligations 1,594,201 1,500,928 1,444,413

Expenses Recognised in the Statement of Comprehensive IncomeCurrent Service Cost 114,161 101,825 83,244Interest on Obligations 162,581 164,211 142,022Provision for the year 276,742 266,036 225,266Net Actuarial (Gains) /Losses (30,264) 24,503 83,969 246,478 290,539 309,235

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27. RETIREMENT BENEFIT OBLIGATIONS CONTD.27.4 Present Value of the Unfunded Obligations Contd.

Consolidatedi) Agarapatana Plantations LimitedThe gratuity liability of the Company as at 31st March 2013 is based on the actuarial valuation carried out by a professionally qualified actuary firm Messrs.’ Actuarial and Management Consultants (Private) Ltd. As per the actuarial valuation the liability as at 31st March 2013 was Rs. 950,175,131/-. 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 2013, the liability would have been of Rs. 1,206,931,909/- (2012 - Rs. 1,267,611,504/-) .Hence there is a contingent liability of Rs. 256,756,778/- (2012-Rs. 368,852,429/-) which would crystalize only if the Company ceases to be a going concern.

ii) Kotagala Plantations PLCThe retirement benefit obligations as at 31st March 2013 is based on the actuarial valuation carried out by Messrs.’ Actuarial & Management Consultants (Private) Ltd. as per which liability as at 31st March, 2013 was Rs. 609,126,000/-. If the Company had provided for gratuity on the basis of payment of Gratuity Act No. 12 of 1983 the liability would have been Rs. 758,757,170/-. Hence there is a contingent liability of Rs. 165,623,170/- which would crystalise only if the Company ceases to be a going concern.

iii) Marawila Resorts PLCThe retirement benefit obligations as at 31st March 2013 is based on actuarial valuation carried out by Messrs.’ Piyal S. Goonethilleke and Associates as per which liability as at 31st March 2013 was Rs. 6,038,069/-.

iv) C.W. Mackie PLCThe retirement benefit obligations as at 31st March 2013 is based on actuarial valuation carried out by Messrs.’ Piyal S. Goonethilleke and Associates as per which liability as at 31st March 2013 was Rs. 80.60 Million.

v) LKAS 19 - ‘Employee benefit’ requires to apply formula method 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. These key assumptions were made in arriving at the retirement benefit obligation as at 31st March 2013 in respect of following companies are stated below:

Company Name Expected Salary Discount Liability Increment Rate Rate as at 31.03.2013

Lankem Ceylon PLC 10% 11% 171.84Marawila Resorts PLC 10% 11% 6.04C.W. Mackie PLC 12% 10% 80.60Kotagala Plantations PLC Workers - 16% every two years and for other categories of staff - 10% p.a. 11% 609.12 Agarapatana Plantations Ltd. Workers - 16% every two years and for other categories of staff - 10% p.a. 11% 950.17Beruwala Resorts PLC 10% 11% 2.15Lankem Consumer Products Ltd. 10% 11% 0.58SunAgro LifeScience Ltd. 10% 11% 0.78Lankem Paints Ltd. 10% 11% 3.03

Notes to the Financial Statements Contd.

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28 TRADE AND OTHER PAYABLES

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Trade Payables 1,875,535 1,546,402 1,095,956 1,230,203 889,358 636,293Other Payables 2,078,487 1,029,208 718,465 219,272 182,207 145,352Accrued Expenses 325,623 154,642 533,031 133,690 30,753 40,800ESC Payable 4,452 14,557 11,272 4,452 14,251 10,209WHT Payable 1,308 1,046 569 1,308 1,046 569Unclaimed Dividend 30,194 19,873 14,915 16,063 6,086 -NBT Payable 2,906 1,377 2,671 - - 964EPF/ETF Payable 261,670 152,078 74,657 - - -Payable to Employees 248,490 239,838 225,744 - - -VAT/GST Payable 20,481 39,299 11,565 - - -Penalties Payable 34,744 34,744 77 - - -Provision for Breakages 4,557 85,445 2,703 - - -PAYE Tax Payable 3,820 - 34 - - -Other Levies Payable - 4,347 836 - - - 4,892,267 3,322,856 2,692,495 1,604,988 1,123,701 834,187

29 RELATED PARTY TRANSACTIONS29.1 Amounts Due from Related Parties

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

(a) Amounts Due from Related Parties - Trade

SubsidiariesLankem Paints Ltd. - - - 419,500 383,192 262,397Lankem Consumer Products Ltd. - - - 46,112 22,857 40,676Lankem Chemicals Ltd. - - - 120,360 36,843 41,090Agarapatana Plantations Ltd. - - - 26,208 333 -Kotagala Plantations PLC - - - - 2,967 -C.W. Mackie PLC - - - - 4 - - - - 612,180 446,196 344,163

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29 RELATED PARTY TRANSACTIONS CONTD.29.1 Amounts Due from Related Parties Contd.(b) Amounts Due from Related Parties - Non Trade

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

SubsidiariesAgarapatana Plantations Ltd. - - - 4,658 3,157 2,077Associated Farms (Pvt) Ltd. - - - 22,674 22,673 31,853Beruwala Resorts PLC - - - 5,038 5,050 226,288Lankem Consumer Products Ltd. - - - 121,763 63,015 60,917Lankem Developments PLC - - - 11,903 2,579 29,456Lankem Paints Ltd. - - - 138,103 113,717 122,410SunAgro Farms Ltd. - - - 42,773 29,482 32,523SunAgro LifeScience Ltd. - - - 80,888 125,117 34,519SunAgro Foods Ltd. - - - 30,276 - -Colombo Fort Hotels Ltd. - - - 243,959 60,888 55,636B.O.T. Hotel Services (Pvt) Ltd. - - - 18,787 3,777 13,818Lankem Tea & Rubber Plantations (Pvt) Ltd. - - - 8,613 20,924 60,987Lankem Chemicals Ltd. - - - - 3,899 -Marawila Resorts PLC - - - 67 - 22,862Sigiriya Village Hotels PLC - - - 540 420Waverly Power (Pvt) Ltd. - - - 4,200 2,100 -Kotagala Plantations PLC - - - 13,114 - 5,047 - - - 747,356 456,798 698,393Less : Provision for Bad & Doubtful Debts - Related Parties (29.1.1) - - - (217,900) (115,170) (125,293) - - - 529,456 341,628 573,100

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

AffiliatesE.B. Creasy & Company PLC 1,242 1,382 2,498 739 995 2,159Carplan Ltd. - 145 145 - - -The Colombo Fort Land & Buildings PLC 186,421 181,940 124,749 - 13,708 -Darley Butler & Co Ltd. 8,988 4,571 3,454 8,532 4,350 -Dutch Dairy Foods Ltd. - 31,945 31,945 - - -Sherwood Holidays Ltd. 17,577 15,824 5,308 - - -Voyages Ceylon (Pvt) Ltd. - 3,155 3,155 - - -York Hotel Management Services Ltd. - 4,735 12,897 - - -Ceylon Tea Brokers PLC - 684 - - - -Creasy Plantation Management Ltd. - - 250 - - -Consolidated Rubber Plantation Private Ltd. 916,975Others - 35 - 1,131,203 244,416 184,401 9,271 19,053 2,159Less: Provision for Bad & Doubtful Debts - Related Parties (Note 29.1.1) - (35,418) (85,887) - - - 1,131,203 208,998 98,514 9,271 19,053 2,159Key Management Personnel - - - - - -Total amounts due from Related Parties 1,131,203 208,998 98,514 538,727 360,681 575,259

Notes to the Financial Statements Contd.

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29.1.1 Provision for Bad & Doubtful Debts - Related Parties

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

SubsidiariesLankem Consumer Products Ltd. - - - 121,763 63,015 60,917Associated Farms (Pvt) Ltd. - - - 22,674 22,673 31,853SunAgro Farms Ltd. - - - 42,773 29,482 32,523Lankem Developments PLC - - - 11,903 - -B.O.T. Hotel Services (Pvt) Ltd. - - - 18,787 - - - - - 217,900 115,170 125,293

AffiliatesCarplan Ltd. - 98 98 - - -Dutch Dairy Foods Ltd. - 31,945 31,945 - - -The Colombo Fort Land & Building PLC - - 50,000 - - -Voyages Ceylon (Pvt) Ltd. - 3,155 3,155 - - -Others - - 689 - - - - 35,198 85,887 - - - - 35,198 85,887 217,900 115,170 125,293

29.2 Loans due from Related Parties

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Colombo Fort Hotels Ltd. 352,700 400,000 - 55,000 55,000 -SunAgro LifeScience Ltd. - - - 124,500SunAgro Foods Ltd. - - - 60,000B.O.T. Hotel Services (Pvt) Ltd. - - - - 14,000 -Lankem Developments PLC - - - 25,000 25,000 -Lankem Tea & Rubber Plantations (Pvt) Ltd. - - - 50,000 60,000 -Receivable after one year 352,700 400,000 - 314,500 154,000 -Provisions for Doubtful Loans - Lankem Developments PLC - - - (25,000) - - 352,700 400,000 - 289,500 154,000 -

29.3 Amounts Due To Related Parties(a) Amounts due to Related Parties - Trade

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

SubsidiariesLankem Research Ltd. - - - 17,393 46,785 131,844Lankem Tea & Rubber Plantations (Pvt) Ltd. - - - - 14 -Sigiriya Village Hotels PLC - - - - 3,876 -Marawila Resorts PLC - - - - 721 - - - - 17,393 51,396 131,844

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29 RELATED PARTY TRANSACTIONS CONTD.29.3 Amounts Due To Related Parties Contd.(b) Amounts due to Related Parties - Non Trade

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

SubsidiariesLankem Research Ltd. - - - 120,974 105,105 14,782Sigiriya Village Hotels PLC - - - 31,714 25,123 137,007Lankem Exports (Pvt) Ltd. - - - 5 22 22C.W. Mackie PLC - - - 24,925 - -Kotagala Plantations PLC - - - - 6,732 -Lankem Technology Services Ltd. - - - 4,881 4,925 -Lankem Chemicals Ltd. - - - 90,910 - 9,342 - - - 273,409 141,907 161,153

AffiliatesIsland Consumer Supplies (Pvt) Ltd. 40,500 40,500 40,500 40,500 40,500 40,500Darley Butler & Co Ltd. 18,613 76,519 65,131 - 24 24York Hotel Management Services Ltd. 16,137 17,459 14,479 5,132 5,132 5,132E.B. Creasy & Company PLC 24,017 13,863 1,901 22,500 12,346 -Carplan Ltd. 1,032 43 257 322 - -Colonial Motors PLC 6,260 2,177 2,165 4,096 - -Creasy Plantation Management Ltd. 4,462 4,428 4,291 - - -Laxapana Batteries PLC - - 25 - - -Harrison Malayalam Ltd. - 140 140 - - -Sherwood Holidays Ltd. - 194 194 - - -The Colombo Fort Land & Building PLC 75,543 32,908 - 56,420 24,887 59,967E.B. Creasy Logistic (Pvt) Ltd. 2,693 2,089 - 2,693 2,089 -Ceylon Trading Co Ltd. - 2,043 - - - -Ceylon Tea Brokers PLC 12,931 - - - - -KIA Motors (Lanka) Ltd. 90,849 - - - - -Colombo Fort Investments PLC 1,795 - - 1,795 - -Others 13,229 100 - - - 5,000 308,061 192,463 129,083 133,458 84,978 110,623

Key Management Personnel - - - - - - - - - - - -

Total Amounts Due to Related Parties 308,061 192,463 129,083 406,867 226,885 271,776

Notes to the Financial Statements Contd.

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29.4 Related Party TransactionsThe Company carries out transactions in the ordinary course of its business with parties who are defined as related parties in Sri Lanka Accounting Standard 24 - Related Party Disclosure, the details of which are reported below.

Name of Related Party Name of Directors Nature of the Transaction Amount Receivable / Receivable / (Payable) (Payable) Balance Balance as at as at 31.03.2013 31.03.2012 Rs’000 Rs’000 Rs’000

E.B. Creasy & Co. PLC Mr. A. Rajaratnam Interest Expenses (11,250) Mr. S.D.R. Arudpragasam Recovery of Expenses 3,688 Mr. R.N. Bopearatchy Sale of Goods 540 Office Rent (32) Purchase of Goods - Settlements (3,355) Current Account (21,761) (11,352)

Darley Butler & Co. Ltd. Mr. A. Rajaratnam Interest Income 4,350 Mr. S.D.R. Arudpragasam Purchase of Goods (209) Mr. R.N. Bopearatchy Settlements 41 8,532 4,350

The Colombo Fort Land & Mr. A. Rajaratnam Fund Transfer -Building PLC Mr. S.D.R. Arudpragasam Settlement of Current Account 30,000 Mr. N.H.B.S.Perera Reimbursement of Expenses (8,592) Mr. Anushman Rajaratnam Interest Expense (55,216) Interest Settlement 2,275 Settlement of Loan (15,000) Current Account (56,420) (24,887) Loans Obtained - 405,000 420,000

Lankem Paints Ltd. Mr. S.D.R. Arudpragasam Sale of Goods 1,427,167 Mr. Anushman Rajaratnam Recovery of Expenses 398,300 Mr. R.N. Bopearatchy Fund Transfer (1,764,772) Mr. D.L. Vitharana Current Account - Trade Related 419,500 383,192 Mr. K.P. David Current Account - Others 138,103 113,716 Mr. A.R. Peiris

Lankem Chemicals Ltd. Mr. S.D.R. Arudpragasam Sale of Goods 605,970 Mr. Anushman Rajaratnam Recovery of Expenses 118,512 Mr. R.N. Bopearatchy Fund Transfer (735,774) Mr. D.L. Vitharana Current Account - Trade Related 120,360 110,146 Mr. K.P. David Current Account - Others (90,910) (69,404) Mr. A.R. Peiris

Lankem Consumer Products Ltd. Mr. S.D.R. Arudpragasam Sale of Goods 220,193 Mr. Anushman Rajaratnam Salaries & Wages Recovered - Mr. R.N. Bopearatchy Recovery of Expenses 81,653 Mr. D.L. Vitharana Fund Transfer (219,843) Mr. K.P. David Current Account - Trade Related 46,112 22,857 Mr. A.R. Peiris Current Account - Others 121,763 63,015

Lankem Research Ltd. Mr. S.D.R. Arudpragasam Research Expenses (17,393) Mr. Anushman Rajaratnam Fund Transfer 30,776 Mr. R.N. Bopearatchy Salaries & Wages Recovered 10,194 Mr. D.L. Vitharana Expenses Recovered 7,526 Mr. K.P. David Inter Company Transfers (17,580) Mr. A.R. Peiris Current Account (138,367) (151,890)

Associated Farms (Pvt) Ltd. Mr. S.D.R. Arudpragasam Expenses Recovered 1 22,674 22,673 Mr. A.R. Peiris Mr. K.P. David

SunAgro Farms Ltd. Mr. S.D.R. Arudpragasam Fund Transfer 2,800 Mr. Anushman Rajaratnam (Resigned w.e.f. 19.04.2012) Mr. R.N. Bopearatchy Salaries & Wages Recovered 2,916 Mr. K.P. David Recovery of Expenses 7,574 Mr. A.R. Peiris Current Account 42,773 29,482

Lankem Developments PLC Mr. A. Rajaratnam Salaries & Wages Recovered (27) Mr. S.D.R. Arudpragasam Administrative Expenses Recovered 185 Mr. Anushman Rajaratnam Interest Income 2,250 (Resigned w.e.f. 06.11.2012) Mr. R.N. Bopearatchy Corporate Guarantee Interest 1,863 Mr. D.L. Vitharana Inter Company Settlements (47) Mr. K.P. David Fund Transfer 5,100 Mr. A.R. Peiris (Resigned w.e.f. 06.11.2012) Current Account 11,903 2,579 Mr. R.T. Weerasinghe Loan Given - 25,000 25,000 (Resigned w.e.f. 06.11.2012) Mr. N.H.B.S.Perera

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29 RELATED PARTY TRANSACTIONS CONTD.29.4 Related Party Transactions Contd

Name of Related Party Name of Directors Nature of the Transaction Amount Receivable / Receivable / (Payable) (Payable) Balance Balance as at as at 31.03.2013 31.03.2012 Rs’000 Rs’000 Rs’000

SunAgro LifeScience Ltd. Mr. S.D.R. Arudpragasam Recovery of Expenses 26,245 Mr. Anushman Rajaratnam Overhead Expenses Recovered 40,420 Mr. R.N. Bopearatchy Fund Transfer (119,232) Mr. D.L. Vitharana Inter Company Interest 8,339 Mr. K.P. David Current Account - 80,888 125,117 (Appointed w.e.f. 20.07.2012) Mr. A.R. Peiris (Appointed w.e.f. 20.07.2012) Mr. R.T. Weerasinghe (Appointed w.e.f. 20.07.2012)

Lankem Tea & Rubber Mr. A. Rajaratnam Interest Paid (15,000)Plantations (Pvt) Ltd. Mr. S.D.R. Arudpragasam Provision for Inter Company 16,200 Mr. Anushman Rajaratnam Dividend Income 188 Mr. N.H.B.S.Perera Loan Interest Received 6,300 Transferred to Loans (20,000) Settlement of Loan (10,000) Current Account 8,613 20,925 Loan Given - 50,000 60,000

Kotagala Plantations PLC Mr. A. Rajaratnam Sale of Goods 6,323 Mr. S.D.R. Arudpragasam Interest Expense (26,001) Inter Company Settlements 45,000 Settlements (8,443) Settlement of Loan 42,900 13,114 (3,765) Loan Obtained (257,100) (300,000)

Agarapatana Plantations Ltd. Mr. A. Rajaratnam Mr. S.D.R. Arudpragasam Corporate Guarantee Interest 1,500 4,658 3,158

Sigiriya Village Hotels PLC Mr. A. Rajaratnam Purchase of Goods 5,248 Mr. S.D.R. Arudpragasam Interest Expense (7,185) Mr. A.R. Peiris Transferred to Current Account (778) Corporate Guarantee Interest 120 Current Account (31,174) (28,579) Loan Obtained - 80,000 80,000

Marawila Resorts PLC Mr. A. Rajaratnam Sale of Goods 67 Mr. S.D.R. Arudpragasam Mr. A.R. Peiris Current Account 67 -

Colombo Fort Hotels Ltd. Mr. A. Rajaratnam Purchase of Shares 183,121 Mr. S.D.R. Arudpragasam Recovery of Expenses 5,000 Mr. Anushman Rajaratnam Interest Income 4,950 Settlements (10,000) Current Account 243,959 60,888 Loan given - 55,000 55,000

B.O.T Hotel Services (Pvt) Ltd. Mr. S.D.R. Arudpragasam Recovery of Expenses 1,010 Mr. K.P. David Transferred From Loan 14,000 Transferred to Current Account (14,000) Current Account 18,787 3,777 Loan Issued - (14,000)

Lankem Technology Services Ltd. Mr. S.D.R. Arudpragasam Recovery of Expenses 44 (4,881) (4,925) Mr. Anushman Rajaratnam (Resigned - w.e.f. 19.04.2012) Mr. R.N. Bopearatchy Mr. K.P. David

SunAgro Foods Ltd. Mr. S.D.R. Arudpragasam Recovery of Expenses 4,979 Mr. Anushman Rajaratnam Salaries & Wages 9,167 Mr. R.N. Bopearatchy Fund Transfer 48,916 Mr. D.L. Vitharana Purchase of Goods 1,763 Mr. K.P. David Interest Expense on Loans 5,363 Fixed Asset transfers 6,380 Transferred to Current Account 60,000 Loans Obtained (60,000) Current Account 30,276 13,708 Loan Given 60,000 -

Notes to the Financial Statements Contd.

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99Annual Report 2012/13 | Lankem Ceylon PLC

Name of Related Party Name of Directors Nature of the Transaction Amount Receivable / Receivable / (Payable) (Payable) Balance Balance as at as at 31.03.2013 31.03.2012 Rs’000 Rs’000 Rs’000

C.W. Mackie PLC Mr. S.D.R. Arudpragasam Sale of Goods 343 Mr. Anushman Rajaratnam Settlements (272) Mr. A. Rajaratnam Advance Obtained (25,000) (24,925) 4

Lankem Exports (Pvt) Ltd. Mr. S.D.R. Arudpragasam Recovery of Expenses 17 (5) (22) Mr. D.L. Vitharana

Carplan Ltd. Mr. A. Rajaratnam Settlements (4,071) Mr. S.D.R. Arudpragasam Inter Company Settlements 896 Mr. A. R. Peiris Sale of Goods 2,853 (322) - Mr. A. C. S. Jayaranjan (Resinged w.e.f. 11.09.2012)

Colonial Motors PLC Mr. A. Rajaratnam Settlements (4,096) (4,096) - Mr. S.D.R. Arudpragasam

Colombo Fort Investments PLC Mr. A. Rajaratnam Loan Granted (20,000) (20,000) - Mr. S.D.R. Arudpragasam Interest on Loan (1,795) (1,795) -

Waverly Power (Pvt) Ltd. Mr. A. Rajaratnam Interest Income 2,100 4,200 2,100 Mr. Anushman Rajaratnam (Appointed w.e.f. 05.03.2013) Mr. S.D.R. Arudpragasam Mr. N.H.B.S.Perera

Beruwala Resorts PLC. Mr. A. Rajaratnam Fund Transfer (12) 5,038 5,050 Mr. S.D.R. Arudpragasam Mr. A.R. Peiris

29.5 Transactions With Related Parties - Consolidated

Name of the Related Party Name of the Director Nature of the Transaction Amount Amount Amount 2013 2012 2011 Rs. ‘000 Rs. ‘000 Rs. ‘000

01 Lankem Paints Ltd.Lankem Consumer Products Ltd. Mr. S.D.R. Arudpragasam Fund Transfer 1,864 402 125 Mr. Anushman Rajaratnam Mr. R.N. Bopearatchy Mr. D.L. Vitharana Mr. K.P. David Mr. A.R. Peiris

Lankem Chemicals Ltd. Mr. S.D.R. Arudpragasam Fund Transfer 298 (31) (590) Mr. Anushman Rajaratnam Mr. R.N. Bopearatchy Mr. D.L. Vitharana Mr. K.P. David Mr. A.R. Peiris

Beruwala Resorts PLC Mr. S.D.R. Arudpragasam 1,933 - - Mr. A.R. Peiris

Marawila Resorts PLC Mr. S.D.R. Arudpragasam Sale of Goods 904 1,398 - Mr. A.R. Peiris (1,077) - -

Sigiriya Village Hotels PLC Mr. S.D.R. Arudpragasam Sale of Goods 1,576 114 - Mr. A.R. Peiris Fund Transfer (1,372) - -

SunAgro Foods Ltd. Mr. S.D.R. Arudpragasam Sale of Goods 1,617 360 - Mr. Anushman Rajaratnam Cheque in Transit (115) - - Mr. R.N. Bopearatchy Mr. D.L. Vitharana Mr. K.P. David

B.O.T. Hotel Services (Pvt) Ltd. Mr. S.D.R. Arudpragasam Settlements of Trade Payables (159) - - Mr. K.P. David

Darley Butler & Co. Ltd. Mr. S.D.R. Arudpragasam Fund Transfer (96) - - Mr. R.N. Bopearatchy Sale of Goods 129 - -

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Lankem Ceylon PLC | Annual Report 2012/13100

29 RELATED PARTY TRANSACTIONS CONTD.29.5 Transactions With Related Parties - Consolidated Contd.

Name of the Related Party Name of the Director Nature of the Transaction Amount Amount Amount 2013 2012 2011 Rs. ‘000 Rs. ‘000 Rs. ‘000

02 Lankem Chemicals Ltd. Lankem Consumer Products Ltd. Mr. S.D.R. Arudpragasam Fund Transfer - 100 (23) Mr. Anushman Rajaratnam Mr. R.N. Bopearatchy Mr. D.L. Vitharana Mr. K.P. David Mr. A.R. Peiris

SunAgro Foods Ltd. Mr. S.D.R. Arudpragasam Sale of Goods 11 - - Mr. Anushman Rajaratnam Mr. R.N. Bopearatchy Mr. D.L. Vitharana Mr. K.P. David

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 (702) 7 71 Mr. R.N. Bopearatchy Purchase of Goods 700 - -

Darley Butler & Co. Ltd. Mr. S.D.R. Arudpragasam Fund Transfer (350) 29 - Mr. R.N. Bopearatchy Purchase of Goods 392 - -

04 Lankem Research Ltd. SunAgro Farms Ltd. Mr. S.D.R. Arudpragasam Advances Received - 13,000 - Mr. Anushman Rajaratnam Reimbursement of Expenses (1,472) 388 - Mr. R.N. Bopearatchy Balance to Lankem Ceylon PLC (13,388) - Mr. K.P. David Mr. A.R. Peiris

05 Associated Farms (Pvt) Ltd. SunAgro Farms Ltd. Mr. S.D.R. Arudpragasam Reimbursement of Expenses - 15 866 Mr. K.P. David Fund Advance - (1,886) - Mr. A.R. Peiris Transfer of Salary Expenses - 1,005 -

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 201 (263) (263) Mr. R.N. Bopearatchy Mr. Anushman Rajaratnam Mr. K.P. David (Appointed w.e.f. 20.07.2012) Mr. A.R. Peiris (Appointed w.e.f. 20.07.2012)

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 (Resigned from Lankem Developments PLC w.e.f. 06.11.2012)

Colombo Fort Hotels Ltd. Mr. A. Rajaratnam Interest Receivable 11,923 - - Mr. S.D.R. Arudpragasam Loan Recovered (10,000) Mr. S. Rajaratnam (Resigned from Lankem Developments PLC w.e.f. 06.11.2012) Mr. Anushman Rajaratnam (Resigned from Lankem Developments PLC w.e.f. 06.11.2012)

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

Agarapatana Plantations Ltd. Mr. A. Rajaratnam Fund Transfer 5,000 - - Mr. S.D.R. Arudpragasam Intercompany Settlement 1,383 - -

Notes to the Financial Statements Contd.

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101Annual Report 2012/13 | Lankem Ceylon PLC

Name of the Related Party Name of the Director Nature of the Transaction Amount Amount Amount 2013 2012 2011 Rs. ‘000 Rs. ‘000 Rs. ‘000

07 Lankem Developments PLC Lankem Tea & Rubber Mr. A. Rajaratnam Inter-Company Settlements (170,159) - - Plantations Pvt Ltd. Mr. S.D.R. Arudpragasam Mr. Anushman Rajaratnam (Resigned from Lankem Developments PLC w.e.f. 06.11.2012) Mr. N.H.B.S.Perera Mr. C.P.R. Perera

08 SunAgro LifeScience 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 PLC Sigiriya Village Hotels PLC Mr. A. Rajaratnam Reimbursement of Expenses (1,410) - - Mr. S.D.R. Arudpragasam Mr. A.R. Peiris Mr. C.P.R. Perera Mr. T. Theyagamurti Mr. A.R. Peiris Mr. E.P.A. Cooray Mr. S. Rajaratnam Mr. Amrit Rajaratnam Mr. A.R. Rasiah (Appointed w.e.f. 16.04.2013)

Marawila Resorts PLC Mr. A. Rajaratnam Reimbursement of Expenses (222) 222 322 Mr. S.D.R. Arudpragasam Mr. A.R. Peiris Mr. S. Rajaratnam Mr. T. Theyagamurti Mr. E.P.A. Cooray Mr. C.R.R. Perera Mr. Amrit Rajaratnam Mr. A.R. Rasiah (Appointed w.e.f. 16.04.2013)

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

Carplan Ltd. Mr. A. Rajaratnam Vehicle Repair (27) - - Mr. S.D.R. Arudpragasam Mr. A.R. Peiris

The Colombo Fort Land Mr. A. Rajaratnam Settlement of Loan (589) (589) & Building PLC Mr. S.D.R. Arudpragasam Interest Charged 26 - - Mr. C.P.R. Perera (Appointed w.e.f. 14.05.2013)

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 Services Ltd. Mr. T. Theyagamurti Management Fees 2,813 4,911 4,512 Mr. S. Rajaratnam Management Fees (8,768) (9,672) Mr. Amrit Rajaratnam Mr. S.D.R. Arudpragasam (Appointed w.e.f. 14.05.2013)

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

B.O.T. Hotel Services (Pvt) Ltd. Mr. S.D.R. Arudpragasam Reimbursement of Expenses - 462 - Mr. T. Theyagamurti Loan Given 2,500 - - Mr. S. Rajaratnam Mr. Amrit Rajaratnam

York Hotels (Kandy) Ltd. Mr. A. Rajaratnam Reimbursement of Expenses 2 - - Mr. S.D.R. Arudpragasam Mr. A.R. Peiris Mr. S. Rajaratnam Mr. Amrit Rajaratnam Mr. T. Theyagamurti

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Lankem Ceylon PLC | Annual Report 2012/13102

29 RELATED PARTY TRANSACTIONS CONTD.29.5 Transactions With Related Parties - Consolidated Contd.

Name of the Related Party Name of the Director Nature of the Transaction Amount Amount Amount 2013 2012 2011 Rs. ‘000 Rs. ‘000 Rs. ‘000

09 Beruwala Resorts PLC Colombo Fort Hotels Ltd. Mr. A. Rajaratnam Settlement of Loans (6,000) 226,288 - Mr. S.D.R. Arudpragasam Temporary Deposits - (82,500) - Mr. T. Theyagamurti Interest Receivable 8,230 (3,498) - Mr. S. Rajaratnam Interest Charges (9,574) - - Loan Given 164,500 - - Loan Obtained (80,000) - -

10. Lankem Tea & Rubber Plantations (Pvt) Ltd. Kotagala Plantations PLC Mr. A. Rajaratnam Managing Agents Fee 114,613 87,490 138,388 Mr. S.D.R. Arudpragasam Dividend Receipt - (86,419) (25,926) Mr. C. P. R. Perera Expenses (1,031) 91,755 114 Mr. R. C. Peiris Receipt of Management Fee (75,000) (84,561) (54,534) Mr. D. A. Ratwatte Dividend Income 17,284 86,419 25,926 Mr. G. D. V. Perera Fund Transfer (43,051) (20,000) - Mr. M.S. Madugalla Tea Purchase (55,612) - - (Appointed w.e.f. 01.01.2013)

Agarapatana Plantations Ltd. Mr. A. Rajaratnam Managing Agents Fee 57,312 62,393 74,487 Mr. S.D.R. Arudpragasam Receipt of Management Fee (20,000) (2,570) (13,668) Mr. C. P. R. Perera Expenses 2,321 57 126 Mr. R. C. Peiris Tea Purchase (28,645) - - Mr. D. A. Ratwatte Fund Transfer (145,665) - - Mr. G. D. V. Perera Mr. K.G.Punchihewa (Appointed w.e.f. 01.04.2012) Mr. H. D.Caldera (Appointed w.e.f. 01.04.2012) Ms. K. M. Ramesh (Appointed w.e.f. 01.04.2012)

Lankem Plantation Holdings Ltd. Mr. A. Rajaratnam Dividend Receipt (18,587) (44,609) (35,687) Mr. S.D.R. Arudpragasam Current Account Settlement 27,300 (293,000) (20,000) Ms. K.M. Ramesh Purchase of Shares - - 60,000 Mr. N.H.B.S. Perera Expenses 1,359 300 194 (Appointed w.e.f. 21.11.2012) Mr. C. P. R. Perera (Appointed w.e.f. 21.11.2012)

The Colombo Fort Land & Mr. A. Rajaratnam Advance against Current Account - - 85,000 Building PLC Mr. S.D.R. Arudpragasam Administration Expenses (10,313) (8,088) (7,298) Mr. N.H.B.S. Perera Settlement of Expenses - 2,628 6,138 Mr. Anushman Rajaratnam Loan to Related Companies - 380,000 - Mr. C. P. R. Perera Loan Interest Income 22,527 15,200 - (Appointed w.e.f. 14.05.2013) Related Party Loan Settlement 27,300 - -

Darley Butler & Co. Ltd. Mr. A. Rajaratnam Debenture Interest Payable (8,889) (8,890) (12,139) Mr. S.D.R. Arudpragasam Debenture Interest Paid 5,332 9,503 21,069 Mr. S. Rajaratnam Tea Sales 5,584 7,473 9,972 Receipt for Tea Sales (4,772) (7,474) (8,515) Management Salaries (7,902) (12,000) - Management Salary Paid 9,902 - - Current Account Settlement (12,001) - -

11. Agarapatana Plantations Ltd Sigiriya Village Hotels PLC Mr. A. Rajaratnam Rental Expenses (250) 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 100,000 (441) (33,831) Mr. S. D. R. Arudpragasam Paid for Short Term Advance (100,000) 8,396 18,011 Mr. C. P. R. Perera Reimbursable Expenses 27,591 53,774 (11,684) Mr. D.A. Ratwatte Right Issue - (200,000) - Mr. G.D.V. Perera Mr. R.C. Peries

The Colombo Fort Land & Mr. A. Rajaratnam Rent on Building & Other Expenses 13,635 13,650 19,680 Building PLC Mr. S.D.R. Arudpragasam Rent & Other Expenses Paid (2,005) (7,642) (4,310) Mr. C. P. R. Perera (Appointed w.e.f. 14.05.2013)

Notes to the Financial Statements Contd.

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103Annual Report 2012/13 | Lankem Ceylon PLC

Name of the Related Party Name of the Director Nature of the Transaction Amount Amount Amount 2013 2012 2011 Rs. ‘000 Rs. ‘000 Rs. ‘000

Creasy Plantation Mr. A. Rajaratnam Interest Expenses 480 480 480 Management Ltd. Mr. S.D.R. Arudpragasam Ms. K.M. Ramesh Mr. R.C. Peries (Appointed w.e.f. 20.03.2013)

Sherwood Holidays Ltd. Mr. A. Rajaratnam Rent & Bungalow upkeep Expenses 1,129 1,196 804 Mr. S.D.R. Arudpragasam Mr. D.A. Ratwatte Mr. G.D.V. Perera Ms. K.M. Ramesh

Marawila Resorts PLC Mr. A. Rajaratnam Investment in Ordinary Shares - - 695 Mr. S.D.R. Arudpragasam Advance Paid - 25 - Mr. C. P. R. Perera

Ceylon Tea Brokers PLC Mr. C. P. R. Perera Broker Advance Received (120,300) (101,000) (98,591) Broker Advance Paid 110,778 90,523 98,591 Sale Proceeds Receivable (157,838) (134,254) (154,334) Sale Proceeds Received 151,813 131,853 155,249

Waverly Power (Pvt) Ltd. Mr. A. Rajaratnam Investment in Ordinary Shares 8,000 26,000 - Mr. S.D.R. Arudpragasam Rental Expenses (417) (397) - Mr. G.D.V. Perera Reimbursement of Expenses 5,224 Ms. K. M. Ramesh

12 Sigiriya Village Hotels PLC York Hotel Management Mr. A. Rajaratnam Reimbursement of Expenses 8,827 2,970 4,735 Services Ltd. Mr. T. Theyagamurti Management Fees (10,492) (11,132) - Mr. S. Rajaratnam Mr. Amrit Rajaratnam Mr. S.D.R. Arudpragasam (Appointed w.e.f. 14.05.2013)

Sherwood Holidays Ltd. Mr. A. Rajaratnam Reimbursement of Expenses 623 - - Mr. S.D.R. Arudpragasam Mr. T. Theyagamurti Mr. S. Rajaratnam Mr. Amrit Rajaratnam

Car Plan Ltd. Mr. A. Rajaratnam Reimbursement of Expenses 639 - - Mr. S.D.R. Arudpragasam Mr. A.R.Peiris

Tropical Beach Resorts Ltd. Mr. A. Rajaratnam Reimbursement of Expenses - 5 - Mr. T. Theyagamurti

York Hotels (Kandy) Ltd. Mr. A. Rajaratnam Salaries & Wages 348 333 8,237 Mr. S.D.R. Arudpragasam Reimbursement of Expenses 1,951 21,331 - Mr. T. Theyagamurti Fund Transfer (1,518) - - 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

Colombo Fort Hotels Ltd. Mr. A. Rajaratnam Reimbursement of Expenses - 414 - Mr. S.D.R. Arudpragasam Temporary Loan - 1,500 - Mr. T. Theyagamurti Loan Interest (3,911) - - Mr. S. Rajaratnam Loan Interest Income 1,347 - - Loan Settlement - - 300

13. Marawila Resorts PLC York Hotel Management Mr. A. Rajaratnam Management Fees (13,726) (12,838) - Services Ltd. Mr. T. Theyagamurti Reimbursement of Expenses 8,649 6,072 4,177 Mr. S. Rajaratnam Mr. Amrit Rajaratnam Mr. S.D.R. Arudpragasam (Appointed w.e.f. 14.05.2013)

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Lankem Ceylon PLC | Annual Report 2012/13104

29 RELATED PARTY TRANSACTIONS CONTD.29.5 Transactions With Related Parties - Consolidated Contd.

Name of the Related Party Name of the Director Nature of the Transaction Amount Amount Amount 2013 2012 2011 Rs. ‘000 Rs. ‘000 Rs. ‘000

13. Marawila Resorts PLC Sigiriya Village Hotels PLC Mr. A. Rajaratnam Reimbursement of Expenses (2,193) - - Mr. S.D.R. Arudpragasam Mr. A.R. Peiris Mr. T. Theyagamurti Mr. E.P.A. Cooray Mr. S. Rajaratnam Mr. C.P.R. Perera Mr. Amrit Rajaratnam Mr. A.R. Rasiah (Appointed w.e.f. 16.04.2013)

Colombo Fort Hotels Ltd. Mr. A. Rajaratnam Recovery of Loan Given 225 10,000 - Mr. S.D.R. Arudpragasam Short Term Loan Given - (10,000) - Mr. S. Rajaratnam 9% Interest on Loan 1,347 390 - Mr. T. Theyagamurti Short Term Loan Received (41,000) - - Interest on Loan Received (5,846) - -

The Colombo Fort Land & Mr. A. Rajaratnam Recoverable of Loan Given 30,000 20,000 - Building PLC Mr. S.D.R. Arudpragasam Short Term Loan Given (30,000) (20,000) - Mr. C. P. R. Perera 9% Interest on Loan 666 138 - (Appointed w.e.f. 14.05.2013)

Lankem Plantation Holdings Ltd. Mr. A. Rajaratnam Sales 40 99 - Mr. S.D.R. Arudpragasam Settlement (99) - - Mr. C. P. R. Perera (Appointed w.e.f. 21.11.2012)

Lankem Tea & Rubber Mr. A. Rajaratnam Purchases (310) - - Plantations (Pvt) Ltd. Mr. S.D.R. Arudpragasam Advance to Purchase Land (38,220) - - Mr. C. P. R. Perera Mr. S. Rajaratnam Mr. Amrit Rajaratnam

Lankem Agro Chemicals Ltd. Mr. S.D.R. Arudpragasam Settlement (35) - - Mr. A.R. Peiris

Darley Butler & Co. Ltd. Mr. A. Rajaratnam Sales 223 - - Mr. S.D.R. Arudpragasam Settlement (63) - - Mr. S. Rajaratnam

Carplan Ltd. Mr. A. Rajaratnam Setting off with B/F Provision (98) - - Mr. S.D.R. Arudpragasam Mr. A.R. Peiris

Voyages Ceylon (Pvt) Ltd. Mr. T. Theyagamurti Setting off with B/F Provision (3,155) - -

York Hotels (Kandy) Ltd. Mr. A. Rajaratnam Reimbursement of Expenses 246 - - Mr. S.D.R. Arudpragasam Mr. T. Theyagamurti Mr. A.R. Peiris Mr. S. Rajaratnam Mr. Amrit Rajaratnam

E.B. Creasy & Co. PLC Mr. A. Rajaratnam Sales 60 - - Mr. S.D.R. Arudpragasam Mr. S. Rajaratnam

14 C.W. Mackie PLC Ceymac Rubber Company Ltd. Mr. W.T. Ellawala Interest on Current Account Balance 15,706 35,401 18,096 Mr. H.M.D. Kulatunaga Recovery of Overheads 6,560 8,422 3,457 Mr. E. A. A. K. Edirisinghe Dividend Income 8,501 - -

Scan Tours & Travels (Pvt) Ltd. Mr. W.T. Ellawala Account Balance 1,295 341 1,246 Mr. C. R. Ranasinghe Vehicle Hire Charges 45,482 (28,159) (32,650) Mr. E. A. A. K. Edirisinghe Recovery of Overheads - 2,591 2,160 Mr. K. T. A. N. Perera

Ceytra (Pvt) Ltd. Mr. W.T. Ellawala Interest on Current Account Balance 3,393 3,096 939 Mr. E. A. A. K. Edirisinghe Recovery of Overheads 2,700 3,869 3,734 Mr. H.M.D. Kulatunaga Inter Company Purchases 11,849 4,222 10,366 Mr. A. I. Piyadigama

Notes to the Financial Statements Contd.

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105Annual Report 2012/13 | Lankem Ceylon PLC

Name of the Related Party Name of the Director Nature of the Transaction Amount Amount Amount 2013 2012 2011 Rs. ‘000 Rs. ‘000 Rs. ‘000

14 C.W. Mackie PLC Ceylon Trading Company Ltd. Mr. W.T. Ellawala Rent Income 2,400 2,400 2,730 Mr. C. R. Ranasinghe Secretarial & Legal Fees (7,464) (4,650) (6,375) Mr. G. C. B. Wijeysinghe Management Fee Overheads (12,286) (10,140) (6,308)

Maersk Lanka (Pvt) Ltd. Mr. W.T. Ellawala Rent Income - Office 16,821 13,674 16,529 Recovery of Overheads 12,410 7,239 1,773

Janashakthi Insurance PLC Mr. W.T. Ellawala Insurance Premium Paid 6,605 - -

Kotagala Plantations PLC Mr. S.D.R. Arudpragasam Purchase of Rubber through Commodity - 219,315 - Mr. A. Rajaratnam Mr. R.C. Peiris

Lankem Tea & Rubber Mr. A. Rajaratnam Short Term Fund Transfers (25,000) - - Plantations Pvt Ltd. Mr. S.D.R. Arudpragasam Mr. Anushman Rajaratnam Mr. R.C. Peiris

E.B. Creasy & Co. PLC Mr. A. Rajaratnam Sales of Sugar and Scan Branded Products 115 - - Mr. S.D.R. Arudpragasam

15 York Hotels (Kandy) Ltd. The Colombo Fort Land & Mr. A. Rajaratnam Loan Given - 90,000 Building PLC Mr. S.D.R. Arudpragasam Interest Income 5,100 5,400 - Loan Recovered (5,000) - -

16 Lankem Plantation Holdings Ltd. The Colombo Fort Land & Mr. A. Rajaratnam Loan Interest Expenses 1,000 800 - Building PLC Mr. S.D.R. Arudpragasam Mr. N.H.B.S. Perera Mr. C. P. R. Perera (Appointed w.e.f. 14.05.2013)

Kotagala Plantations PLC Mr. A. Rajaratnam Dividend Receipt 21,780 - (32,670) Mr. S. D. R. Arudpragasam Expenses - - 9 Mr. C. P. R. Perera Dividend Income - - 32,670 Current Account Settlement (42,900) - -

Darley Butler & Co. Ltd. Mr. A. Rajaratnam Sale of Shares - - (60,000) Mr. S.D.R. Arudpragasam Related Party Loan Interest Expenses 1,350 - -

Agarapatana Plantations Ltd. Mr. A. Rajaratnam Expenses (13) (24) (24) Mr. S.D.R. Arudpragasam Mr. C. P. R. Perera

17 Waverly Power (Pvt) Ltd Agarapatana Plantations Ltd. Mr. A. Rajaratnam Expenses incurred on behalf 20,247 - - Mr. S.D.R. Arudpragasam of the Company Mr. G.D.V. Perera Ms. K.M. Ramesh

18 Colombo Fort Hotels Ltd. The Colombo Fort Land & Mr. A. Rajaratnam Funds Advanced 3,515 35 (35) Building PLC Mr. S.D.R. Arudpragasam Stamp Duty (1,214) 15,547 - Mr. Anushman Rajaratnam

B.O.T. Hotel Services (Pvt) Ltd. Mr. S. D. R. Arudpragasam Loan Granted 100,000 - Mr. T. Theyagamurti Interest Income 9,000 1,721 - Mr. S. Rajaratnam

KIA Motors (Lanka) Ltd. Mr. A. Rajaratnam Interest Expense 10,849 - - Mr. S.D.R. Arudpragasam Fund Received 80,000 - -

Lankem Tea & Rubber Mr. A. Rajaratnam Fund Transfer Received 50,000 - - Plantations (Pvt) Ltd. Mr. S.D.R. Arudpragasam Mr. Anushman Rajaratnam Mr. S. Rajaratnam

Galle Fort Hotel (Pvt) Ltd. Mr. S.D.R. Arudpragasam Fund Transfer Received 20,000 - - Mr. Anushman Rajaratnam Interest Expense 2,025 - - Mr. S. Rajaratnam Financial Trust Ltd. Mr. S. Rajaratnam Fund Transfer 80,000 - - Mr. Anushman Rajaratnam

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29 RELATED PARTY TRANSACTIONS CONTD.29.5 Transactions With Related Parties - Consolidated Contd.

Name of the Related Party Name of the Director Nature of the Transaction Amount Amount Amount 2013 2012 2011 Rs. ‘000 Rs. ‘000 Rs. ‘000

19 Kotagala Plantations PLC The Colombo Fort Land & Mr. A. Rajaratnam Rent 14,394 11,309 - Building PLC Mr. S.D.R. Arudpragasam Rent Paid (3,000) (11,309) - Mr. C. P. R. Perera Expenses Charged (938) (1,189) - (Appointed w.e.f. 14.05.2013) Expenses Paid 938 1,189 -

Lankem Plantation Mr. A. Rajaratnam Interest on Short Term Loan (480) (480) Services Ltd. Mr. S.D.R. Arudpragasam Reimbursement of Expenses 151 357 Mr. R.C.Peries (Appointed w.e.f. 20.03.2013)

Sherwood Holidays Ltd. Mr. A. Rajaratnam VAT Paid - 868 - Mr. S.D.R. Arudpragasam Ms. K.M. Ramesh Mr. G.D.V. Perera Mr. D.A. Ratwatte

Ceylon Tea Brokers PLC Mr. C. P. R. Perera Sale of Tea (209,742) (101,364) - Cash Received 208,459 102,404

Consolidated Rubber Plantations (Pvt) Ltd. Mr. R. C.Peries Advances and Project Expenses 916,929 -

29.6 Terms and Conditions of Transactions with Related PartiesTransactions 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).

29.7 Transactions with Key Management PersonnelAccording to Sri Lanka Accounting Standard 24 - 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 PersonnelNo loans have been given to Key Management Personnel during the year.

(b) Key Management Personnel CompensationDetails of compensation for Executive and Non-Executive Directors are disclosed below.

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Short-term Employee Benefits 188,044 164,745 147,983 74,157 65,459 71,119

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

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

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30 FINANCIAL INSTRUMENT30.1 Financial Instruments - Statement of Financial Position The Financial Instruments recognised in the Statement of Financial Position are as follows;

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Financial Assets Investments Classified as Available for Sale 18.2/18.3 45,822 13,726 16,601 8,584 8,284 9,920Investments Classified as Held to Maturity 18.4 52,979 25,726 22,418 - - - 98,801 39,452 39,019 8,584 8,284 9,920

Current Assets Trade & Other Receivables 20 5,257,187 3,958,739 3,358,296 1,544,879 1,057,006 712,861 Amounts Due from Related Parties - Trade 29.1 - - - 612,180 446,196 344,163 Amounts Due from Related Parties - Non - Trade 29.1 1,131,203 208,998 98,514 538,727 360,681 575,259 Loans Due from Related Parties 29.2 352,700 400,000 - 289,500 154,000 - Income Tax Recoverable 40,123 156,151 200,673 24,456 138,550 72,640 Short Term Investments 18.5/18.6 320,519 365,292 48,733 307,956 347,678 48,733 7,101,732 5,089,180 3,706,216 3,317,698 2,504,111 1,753,656 Bank and Cash Balances 21 1,387,960 1,837,853 1,321,341 104,537 109,737 64,988 Total Financial Assets 8,588,493 6,966,485 5,066,576 3,430,819 2,622,132 1,828,564 Financial Liabilities Non-Current Liabilities Interest Bearing Borrowings 24 4,596,166 2,719,316 2,808,185 553,218 654,529 349,311 4,596,166 2,719,316 2,808,185 553,218 654,529 349,311

Current Liabilities Interest Bearing Borrowings 24 2,828,407 2,439,148 1,900,930 1,386,734 824,793 494,869 Loans Payable to Related Parties 24 485,000 420,000 26,000 762,100 800,000 326,000 Trade and Other Payables 28 4,892,267 3,322,856 2,692,495 1,604,988 1,123,700 834,187 Amounts Due to Related Parties - Trade 29.4 - - - 17,393 51,396 131,844 Amounts Due to Related Parties - Non - Trade 29.4 308,061 192,463 129,083 406,867 226,885 271,776 Income Tax Payable 90,283 146,184 145,793 - - - 8,604,018 6,520,651 4,894,301 4,178,082 3,026,774 2,058,676 Bank Overdraft 21 2,550,255 2,150,573 824,482 707,338 707,706 332,007 Total Financial Liabilities 15,750,439 11,390,540 8,526,968 5,438,638 4,389,009 2,739,994

30.2 Financial Risk Management The Group has exposure to the following risks from its use of Financial instruments: Credit Risk Liquidity Risk Market Risk (including currency risk and interest rate risk)

This note represents qualitative and quantitative information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and procedures for measuring and managing risk.

Risk Management Framework The Board of Directors have overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risk faced by the Group, to set appropriate risk limits and controls, and to monitor risk and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.

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30 FINANCIAL INSTRUMENT CONTD.30.2.1 Credit Risk Credit risk is the risk of Financial loss to the Group if a customer or counter party to a Financial instrument fails to meet its contractual obligation, and arises principally from the Group’s receivables from customers, investment and forward contracts. The Group’s credit exposure is closely monitored. Credit given is reviewed with the predetermined approval procedures and contractual agreement made for every high value transaction.

Consolidated Company

As at 31.03.2013 31.03.2012 01.04.2011 31.03.2013 31.03.2012 01.04.2011 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Trade & Other Receivables 20 5,257,187 3,958,739 3,358,296 1,544,879 1,057,006 712,861 Amounts Due from Related Parties - Trade 29.1 - - - 612,181 446,196 344,163 Amounts Due from Related Parties - Non - Trade 29.1 1,131,203 208,998 98,514 538,727 360,681 575,259 Loans Due from Related Parties 29.2 352,700 400,000 - 289,500 154,000 - Income Tax Recoverable 40,123 156,151 200,673 24,456 138,550 72,640 Short Term Investments 18.5/18.6 320,519 365,292 48,733 307,956 347,678 48,733 7,101,732 5,089,180 3,706,216 3,317,699 2,504,111 1,753,656 The aging of Trade & Other Receivables, Amounts due from Related Parties (Trade & Non-Trade) and Loans due from Related Parties at the reporting date was:

Consolidated Company

As at 31.03.2013 31.03.2012 31.03.2013 31.03.2012 Gross Impairment Gross Impairment Gross Impairment Gross Impairment Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Past due 0-365 days 5,354,870 97,683 4,063,609 104,870 2,185,097 28,038 1,517,830 14,628More than one year 1,483,903 - 644,416 35,418 1,071,127 242,900 629,851 115,170 6,838,773 97,683 4,708,025 140,288 3,256,224 270,938 2,147,681 129,798

Based on historic default rate the Group believes that, apart from the above, no impairment allowance is necessary in respect of Trade & Other Receivables, Amounts due from Related Parties (Trade & Non-Trade) and Loans due from Related Parties for past dues or past due by up to 365 days. 30.2.2 Liquidity Risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligation associated with its financial liabilities that are settled by delivering cash or any other Financial asset. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding netting agreements. The Group applied the exemption in SLFRS 1 that allows an entity not to provide comparative information for periods ending 31st March, 2013 in respect of the liquidity disclosures below: Consolidated Company

As at 31st March 2013 Carrying Contractual Less than More than Carrying Contractual Less than More than

Amount Cash Flows One Year One year Amount Cash Flows One year One year

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

Non-Derivative Financial Liabilities Term Loans / Finance Obligations / Debentures 7,424,573 7,604,573 2,828,407 4,776,166 1,939,952 1,939,952 1,386,734 553,218 Loans, Trade & Non-Trade Amounts due to Related Companies 793,061 793,061 793,061 - 1,186,360 1,186,360 1,186,360 - Other Financial Liabilities, Trade & Other Payables 4,982,552 4,982,552 4,982,552 - 1,604,988 1,604,988 1,604,988 - Bank Overdrafts 2,550,255 2,550,255 2,550,255 - 707,338 707,338 707,338 - 15,750,441 15,930,441 11,154,275 4,776,166 5,438,638 5,438,638 4,885,420 553,218 30.2.3 Market Risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates etc. will affect the Group’s income or the value of its holdings of Financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the returns.

30.2.3.1 Currency Risk The Group is exposed to currency risk on purchases and borrowings that are denominated in a currency other than the functional currency which is Sri Lankan Rupees.

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30.2.3.2 Interest Rate Risk Interest rate risk is the risk that the fair value of future cash flows of a Financial instrument fluctuate because of changes in market interest rates. The exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligation and investments with floating interest rates. However, the Group does not have material long-term floating rate borrowings or deposits as at the reporting date which results in a material interest rate risk. The Group utilises various Financial instruments to manage exposures to interest rate risks arising due to Financial instruments.

31 CAPITAL EXPENDITURE COMMITMENT31.1 CompanyThe Company had no material capital or financial commitments as at the date of the Statement of Financial Position.

31.2 ConsolidatedThe Group had no significant capital or financial commitments as at the date of the Statement of Financial Position other than those disclosed below.

31.2.1 Capital CommitmentsThere are no material capital commitments other than the following as at the date of the Statement of Financial Position.

i Agarapatana Plantations Ltd.Following are the capital commitments approved as at the date of the Statement of Financial Position.

As at 31.03.2013 31.03.2012 01.04.2011 Rs. Million Rs. Million Rs. Million

a) Field Development 186 178 226b) Machinery & Factory Development 86 79 137

ii Beruwala Resorts PLCa) The company is in the process of constructing a new water treatment plant and the budgeted cost for this project is Rs. 9.1 Million for which

60 % advance payment has been made as at 31st March, 2013.

b) The company has the following Financial Lease Commitments to the Lending Institutions.

Institution Facility For Amount Rs. Million

Mercantile Investment Ltd Motor Vehicle Lease 13Sampath Bank PLC To settle outstanding balance of Rs.30 Mn and to reimburse the purchase cost of 45% shares of B.O.T. Hotel Services (Pvt) Ltd. 86

iii York Hotels (Kandy) LimitedThe capital expenditure commitment to Sierra Constructions (Pvt) Ltd amounting to Rs.3.4 Million.

iv SunAgro Farms LimitedThe company has entered into a lease agreement with the Department of Buddhist Affairs 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 the 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.

v Kotagala Plantations PLCBudgeted capital development programme for the next financial year amounts to approximately Rs. 561.1 Million (2011/12 - Rs. 654.5 Million).

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32 CONTINGENT LIABILITIES32.1 CompanyThere are no material contingent liabilities outstanding as at the date of the Statement of Financial Position 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 2013.

Name of the Company Amount Rs.’000

Agarapatana Plantations Ltd. 50,000Darley Butler & Co. Ltd. 145,000Sigiriya Village Hotels PLC 4,000Waverly Power (Pvt) Ltd. 70,000Lankem Developments PLC 62,080

32.2 Consolidated(i) Lankem Tea & Rubber Plantations (Pvt) LimitedContingent liabilities exist in relation to the following;

a) Corporate Guarantee to DFCC Bank on behalf of Agarapatana Plantations Limited 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 Statement of Financial Position 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 People’s 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 People’s Leasing Company PLC on behalf of Agarapatana Plantations Limited to secure term loans of Rs. 9.7 Million, Rs. 8.9 Million, Rs. 9.7 Million, Rs. 9.7 Million and Rs. 12 Million.

(ii) Lankem Plantation Holdings LimitedContingent liabilities exist in relation to the following;

a) Corporate Guarantee to Hatton National Bank on behalf of Agarapatana Plantations Limited, to secure term loan of Rs. 15 Million.

b) Corporate Guarantee of Rs. 40 Million to Indian Bank on behalf of Agarapatana Plantations Limited, 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 date of the Statement of Financial Position 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 the future.

(iii) Marawila Resort PLCThe company has contingent liabilities in respect of legal claims arising in the ordinary course of business. It is anticipated that any material liabilities that will arise from such legal cases and additional payment will have to be met accordingly, the company has provided Rs. 13,299,965/- in the financial statement as at 31st March 2013 as penalty and pradesiya saba tax payable since the company has undergone a legal case against pradeshiya saba.

(iv) Lankem Developments PLCThe contingent liability as at 31.03.2012 on balance given by the company to third parties amounted to Rs. 22.08 Million.

Notes to the Financial Statements Contd.

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32.2 Consolidated contd.(v) C. W. Mackie PLCThe company has issued Corporate Guarantees for the borrowings obtained by the related companies as at 31.03.2013 which are indicated below.

Name of the Company Amount Rs.’000

Ceymac Rubber Company Ltd. 75,000Ceytra (Private) Ltd. 8,000 83,000

33 APPROPRIATENESS OF GOING CONCERN ASSUMPTION33.1 ConsolidatedThe consolidated financial statements of Lankem Ceylon PLC does not include any adjustments in relation to the recoverability and the classification of recorded asset 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 Limited recorded a loss of Rs. 36,657,710/-(2011/12 - Rs. 11,974,682/-) during the year ended 31st March 2013 and as at that date accumulated loss was Rs. 114,540,843/- (2011/12- Rs. 77,917,404/-). Further total liabilities exceeds the total assets by Rs. 94,540,843/- (2011/12 - Rs. 57,917,404) and the current liabilities exceeds the current assets by Rs. 93,956,141/-(2011/12 - Rs. 57,439,154). These conditions indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as 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 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. 12,313,884/- (2011/12- Rs. 18,243,892/-) during the year ended 31st March 2013 and as at the date accumulated loss was Rs. 24,018,703/- (2011/12- Rs.11,704,819/-). Current Liabilities exceeded the Current Assets by Rs. 40,756,340/- (2011/12 - Rs. 28,733,675/-) and its total liabilities exceed its total assets by Rs.12,018,703/-. Further, company’s net assets are less than half of the stated capital and face a serious loss of capital situation. These factors have effects on company’s ability to continue as going concern. However the management has set an action plan which is monitored by the Board to prevent further such losses or to recoup the losses incurred. Accordingly the Directors of the company are of the view that the company is able to continue as a going concern.

(iv) Agarapatana Plantations Limited, a subsidiary has recorded a net loss of Rs. 2,473,032/- during the year ended 31st March 2013 compared to the net Loss of Rs. 482,676,810 - made in year 2011/12, and as at 31st March 2013 the Current Liabilities of the company exceeded its Current Assets by Rs. 1,012,233,841/- (2011 - Rs. 894,674,708/-). The company‘s net assets are less than half of stated capital which is a serious loss of capital as defined in section 220 (1) of the companies Act No 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) Lankem Developments PLC, a subsidiary has incurred a loss of Rs. 362,744,000/- during the year ended 31st March 2013 (2011/112 - Rs. 271,179,000/- ), as at that date accumulated loss was Rs. 716,653,000/- (2011/12 - Rs. 353,914,000/-) and the company’s current liabilities exceeded its current assets by Rs. 105,290,000/- (2011/12 Rs. 87,932,000/-). These factors raise significant doubt of the company’s ability to continue as going concern. However the management is of 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.

(vi) Associated Farms (Pvt) Limited, a subsidiary has ceased its operation due to environmental issues and will be looking for suitable place to continue the business. However, there is no any long term liability or fixed assets belonging to the company. The directors have made an assessment of company’s ability to continue as a going concern and they do not intend to liquidate the company.

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34 EVENTS OCCURRING AFTER THE REPORTING PERIOD34.1 Company(i) The Directors of Lankem Ceylon PLC have recommended the payment of a first and final dividend of Rs. 1.50 per Ordinary Share which

will be declared at the Annual General Meeting to be held on 24th September, 2013.

34.2 Consolidated(I). The Directors of C. W. Mackie PLC have recommended the payment of a first and final dividend of Rs. 3/- per ordinary share amounting

to Rs. 107,965,668/- for the year ended 31st March, 2013 for approval by the shareholders at the Annual General Meeting to be held on 27th June, 2013.

(II). Kotagala Plantations PLC made a Rights Issue of 8,000,000 ordinary shares at a price of Rs. 45/- per share to the holders of the issued ordinary shares of the company in the proportion of one (1) new ordinary shares for every four (4) ordinary shares held by them in the capital of the Company. The issue was fully subscribed and concluded on 27th March, 2013. The final allotment was made on 5th April, 2013 and the Stated Capital of Kotagala Plantations PLC has subsequently increased to Rs. 680,000,010/-.

(III). The Board of Directors of Kotagala Plantations PLC have recommended a first and final dividend of Rs. 2.50 per ordinary share for the year ended 31st March, 2013 for approval by the shareholders at the Annual General Meeting.

(IV). The Employer’s Federation of Ceylon signed a Plantation Workers Wage Collective Agreement with Trade Unions increasing the daily wage rate and attendance incentive to Rs. 450 and Rs. 140 respectively with effect from 1st April, 2013.

(V). The Board of Directors of Lankem Developments PLC have resolved to convene an Extraordinary General Meeting (EGM) in compliance

with Section 220 of the Companies Act No.7 of 2007. The said meeting will be held on 5th July, 2013, immediately following the Annual General Meeting.

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

35 ACQUISITION OF UNION COMMODITIES (PRIVATE) LIMITEDKotagala Plantations PLC has acquired 100% of the Stated Capital of the Union Commodities (Private) Limited and its subsidiaries on the 12th December 2012 for a consideration of Rs. 1,575,001,000/-.

Rs`000

Property, Plant and Equipment 1,438,598Investments Classified as Available for Sale 33,018Inventories 624,460Trade & Other Receivables 659,815Retirement Benefit Obligations (15,650)Deferred Taxation (12,887)Trade & Other Payables (903,318)Cash & Cash Equivalents (33,474)Net Identifiable Assets and Liabilities 1,790,562

Net Assets Acquired 594,868Negative Goodwill on Acquisition (71,615)Investment made by Equity Holders of the Parent 523,253Investment allocated to Minority Interest 1,051,748Cash Consideration paid on Acquisition of Subsidiary 1,575,001Cash & Cash Equivalents Acquired 33,474Net Cash outflow on Acquisition of Subsidiary 1,608,475

Notes to the Financial Statements Contd.

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36 SUBSIDIARY COMPANIES OF THE GROUPDetails of subsidiaries in which Lankem Ceylon PLC held an indirect interest are set out below:

Indirect Subsidiary Effective Holding (%)

Agarapatana Plantations Ltd. 24York Hotels (Kandy) Ltd. 47B.O.T Hotel Services (Pvt) Ltd. 56Ceymac Rubber Company Ltd. 46Scan Tours & Travels (Pvt) Ltd. 46Ceytra (Pvt) Ltd. 29Galle Fort Hotel (Pvt) Ltd. 72Waverly Power (Pvt) Ltd. 28

37. COMPARATIVE INFORMATION To facilitate comparison and where relevant, balance pertaining to the previous year have been reclassified & restated, as follows. Consolidated Company For the Year Ended 31.03.2012 31.03.2012

Note Reclassified / As per Change Reclassified / As per Change Restated Audited Restated Audited Accounts Accounts Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Revenue a 24,115,951 24,117,751 (1,800) 6,091,243 5,778,255 312,988 Cost of Sales a (20,317,557) (20,317,557) - (5,151,797) (4,838,809) (312,988)Other Income b 396,533 788,385 (391,852) 534,264 534,264 - Distribution Costs c (1,012,399) (1,008,754) (3,645) (338,881) (338,881) - Administration Expense c (1,599,237) (1,554,432) (44,805) (174,549) (174,549) - Other Expense (60,734) (60,734) - (57,945) (57,945) - Net Finance Costs (431,789) (433,589) 1,800 (191,978) (191,978) - Income Tax Expenses (298,810) (298,810) - 19,906 19,906 - Profit attributable to Non - Controlling Interest b (248,801) (680,050) 431,249 - - -

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Notes to the Financial Statements Contd.

37. COMPARATIVE INFORMATION CONTD.

Consolidated

As at 31.03.2012 01.04.2011

Reclassified / As per Change Reclassified / As per Change

Note Restated Audited Restated Audited

Accounts Accounts

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

ASSETS

Non - Current Assets

Property, Plant & Equipment c 9,768,056 9,690,947 77,109 8,273,781 8,273,781 -

Leasehold Properties 801,857 801,857 - 847,591 847,591 -

Investment Property 46,729 46,729 - 50,793 50,753 40

Intangible Assets 711,845 711,845 - 357,038 357,078 (40)

Financial Assets Available for Sale - Long Term c 29,241 29,241 - 34,008 39,008 (5,000)

Loans due from Related Parties 380,000 380,000 - - -

Retirement Benefit Assets 112,283 112,283 - 107,701 107,701 -

Total Non - Current Assets 11,850,011 11,772,902 77,109 9,670,912 9,675,912 (5,000)

Current Assets

Inventories c 2,535,982 2,526,036 9,946 2,436,334 2,436,334 -

Trade & Other Receivables c,g,i,j,k 3,955,630 4,246,729 (291,099) 3,346,196 3,687,134 (340,938)

Amount Due from Related Parties - Non Trade c 208,997 283,011 (74,014) 140,063 140,063 -

Loans due from related Parties 20,000 20,000 - - - -

Income Tax Recoverable g 156,151 154,098 2,053 200,673 83,622 117,050

Short - Term Investments 365,067 365,067 - 47,008 47,008 -

Bank & Cash Balances c,k 1,837,852 1,755,172 82,680 1,321,341 1,321,341 -

Total Current Assets 9,079,679 9,350,113 (270,434) 7,491,614 7,715,502 (223,888)

Total Assets 20,929,690 21,123,015 (193,325) 17,162,526 17,391,414 (228,888)

EQUITY AND LIABILITIES

Equity

Stated Capital 536,218 536,218 - 536,218 536,218 -

Other Capital Reserves d 462,316 470,649 (8,333) 484,585 492,918 (8,333)

Revenue Reserves c,d,e,h,j 2,636,137 2,895,467 (259,330) 2,044,530 2,230,919 (186,389)

Equity Attributable to Equity Holders of the Parent 3,634,671 3,902,334 (267,663) 3,065,333 3,260,055 (194,722)

Non-Controlling interest e 3,292,335 3,262,557 29,778 3,266,125 3,266,125 -

Total Equity 6,927,006 7,164,891 (237,885) 6,331,458 6,526,180 (194,722)

Non - Current Liabilities

Interest Bearing Borrowings f 2,707,647 2,674,038 33,609 2,788,762 2,788,762 -

Loans Payable to Related parties f - 390,000 (390,000) - -

Deferred Income c 580,589 553,093 27,496 560,883 560,883 -

Deferred Tax Liability h 368,916 368,916 - 280,808 270,588 10,220

Retirement Benefit Obligations 1,712,890 1,712,890 - 1,614,228 1,614,228 -

Total Non - Current Liabilities 5,370,042 5,698,937 (328,895) 5,244,681 5,234,461 10,220

Current Liabilities

Interest Bearing Borrowings f 2,432,357 2,465,963 (33,606) 1,895,563 1,895,562 1

Loans Payable to Related Parties f 420,000 30,000 390,000 26,000 26,000 -

Trade & Other Payables c,i 3,291,248 3,273,773 17,475 2,565,467 2,609,854 (44,387)

Amount Due to Related Parties - Non Trade i 192,463 196,694 (4,231) 129,083 129,083 -

Income Tax Payable 146,000 146,000 - 145,796 145,796 -

Bank Overdraft c 2,150,574 2,146,757 3,817 824,478 824,478 -

Total Current Liabilities 8,632,642 8,259,187 373,455 5,586,387 5,630,773 (44,386)

Total Liabilities 14,002,684 13,958,124 44,560 10,831,068 10,865,234 (34,166)

Total Equity and Liabilities 20,929,690 21,123,015 (193,325) 17,162,526 17,391,414 (228,888)

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115Annual Report 2012/13 | Lankem Ceylon PLC

Company

As at 31.03.2012 01.04.2011

Reclassified / As per Change Reclassified / As per Change

Note Restated Audited Restated Audited

Accounts Accounts

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

ASSETS

Non - Current Assets

Property, Plant & Equipment 673,470 673,470 - 551,026 551,026 -

Investments in Subsidiaries c 2,842,818 2,792,818 50,000 1,532,791 1,527,791 5,000

Financial Assets Available for Sale - Long Term c 181,758 181,758 - 181,758 186,758 (5,000)

Retirement Benefit Assets 67,346 67,346 - 63,687 63,687 -

Total Non - Current Assets 3,765,392 3,715,392 50,000 2,329,262 2,329,262 -

Current Assets

Inventories 854,342 854,342 - 608,595 608,595 -

Trade & Other Receivables 1,057,006 1,057,006 - 712,861 712,861 -

Amount Due from Related Parties

- Trade 446,196 446,196 - 344,163 344,163 -

Amount Due from Related Parties - Non Trade c 438,301 488,301 (50,000) 673,798 673,798 -

Loans due from related Parties 154,000 154,000 - - - -

Income Tax Recoverable 138,550 138,550 - 72,640 72,640 -

Short - Term Investments 347,678 347,678 - 47,008 47,008 -

Bank & Cash Balances 109,737 109,737 - 64,988 64,988 -

Total Current Assets 3,545,810 3,595,810 (50,000) 2,524,053 2,524,053 -

Total Assets 7,311,202 7,311,202 - 4,853,315 4,853,315 -

EQUITY AND LIABILITIES

Equity

Stated Capital 536,218 536,218 - 536,218 536,218 -

Capital Reserves d 87,377 95,710 (8,333) 87,377 95,710 (8,333)

Accumulated Profit/(Accumulated Loss) d 2,193,088 2,184,755 8,333 1,498,825 1,490,492 8,333

Total Equity 2,816,683 2,816,683 - 2,122,420 2,122,420 -

Non - Current Liabilities

Interest Bearing Borrowings 642,855 642,855 - 329,901 329,901 -

Loans Payable to Related parties 770,000 770,000 - 300,000 300,000 -

Deferred Income - - - 1,275 1,275 -

Deferred Tax Liability 8,922 8,922 - 18,963 18,963 -

Retirement Benefit Obligations 158,855 158,855 - 123,065 123,065 -

Total Non - Current Liabilities 1,580,632 1,580,632 - 773,204 773,204 -

Current Liabilities

Interest Bearing Borrowings 817,058 817,058 - 488,905 488,905 -

Loans Payable to Related Parties 30,000 30,000 - 26,000 26,000 -

Trade & Other Payables 1,092,092 1,092,092 - 707,159 707,159 -

Amount Due to Related Parties - Trade 51,396 51,396 - 131,844 131,844 -

Amount Due to Related Parties - Non Trade 215,635 215,635 - 271,776 271,776 -

Bank Overdraft 707,706 707,706 - 332,007 332,007 -

Total Current Liabilities 2,913,887 2,913,887 - 1,957,691 1,957,691 -

Total Liabilities 4,494,519 4,494,519 - 2,730,895 2,730,895 -

Total Equity and Liabilities 7,311,202 7,311,202 - 4,853,315 4,853,315 -

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Lankem Ceylon PLC | Annual Report 2012/13116

37. COMPARATIVE INFORMATION CONTD.

a. Goods transferred by the Company to SunAgro LifeScience Ltd. has been restated as sales and pertaining cost of sales have been recognised accordingly.

b. Profit attributable to the non-controlling interest which was recognised and adjusted in the profit or loss has been reclassified and adjusted

through the statement of changes in equity. c. SunAgro Foods Limited which was incorporated on 09th June 2011, have not been consolidated with the Company for the year ended

31 March, 2012 due to non availability of audited financial statements. Company has invested Rs. 50 Mn. The Consolidated Financial Statements for the year ended 31 March, 2012 have been restated for the above effect.

Effect on Statement of Comprehensive Income

Rs. ‘000

Distribution Expense (3,645)Administrative Expense (5,408) (9,053) Effect on Statement of Financial Position

Rs. ‘000

Property, Plant & Equipment 77,109 Inventories 9,946 Trade & Other Receivables 15,411 Cash & Cash Equivalent 181 Deferred Income (27,496)Trade & Other Payables (3,679)Bank Overdraft (3,817)

Lankem Technologies Limited which was incorporated on 26th March 2009, has not been consolidated with the Company for the year ended 31st March, 2011 & 2012 due to non availability of audited financial statements. The Company has invested Rs. 5Mn. The Consolidated Financial Statements for the year ended 31st March, 2011 have been restated for the above effect. d Capital Redemption Reserve fund of the company has been reclassified to retained earnings.

e The understatement of non - controlling interest amounting to Rs. 29.8 Mn. relating to the previous year has now been corrected.

f Following non current liabilities have been reclassified as current liabilities as follows

Group

2012 2011 Rs.’ 000 Rs.’ 000

Interest Bearing Loans and Borrowings 33,609 -Loans Payable to Related parties 390,000 -

g Income tax recoverables (Group) previously recorded under Trade & Other Receivables have been reclassified as Income Tax Recoverables.

h The under statement of Deferred Tax Liability (Group) amounting to Rs.10.2 Mn as at 31st March 2011has now been corrected.

i Group has recorded Trade Receivables under Trade Payables & Amount Due to Related Companies. Error has now been corrected in these financial statements.

j The over statement of Trade & Other Receivables (Group) amounting to Rs.179.5 Mn as at 31st March 2011 and Rs.191.1 Mn as at 31st March 2012 has now been corrected.

k Group has recorded Deposits under Trade and Other Receivables. Error has now been corrected in these financial statements.

Notes to the Financial Statements Contd.

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117Annual Report 2012/13 | Lankem Ceylon PLC

38. EXPLANATION OF TRANSITION TO SLFRS/LKAS

38.1 Reconciliation of Comprehensive Income For the Year Ended 31st March 2012

Consolidated Company

SLAS Effect of SLFRS SLAS Effect of SLFRS

(Restated) transition (Restated) transition

For the Year Ended 31.03.2012 31.03.2012 31.03.2012 31.03.2012

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

Revenue a 24,115,951 42,815 24,158,766 6,091,243 - 6,091,243

Cost of Sales a,b,c (20,317,557) 32,963 (20,284,594) (5,151,797) - (5,151,797)

Gross Profit 3,798,394 75,778 3,874,172 939,446 - 939,446

Other Income d,e 396,533 (77,475) 319,058 534,264 10,122 544,386

Gain / (Loss) on Change in fair value

of Biological Assets f - (48,529) (48,529) - - -

Distribution Costs b (1,012,399) 5 (1,012,394) (338,881) - (338,881)

Administration Expense b,c,g (1,599,237) (2,419) (1,601,656) (174,549) 7,622 (166,927)

Other Expenses c,d,m (60,734) (17,391) (78,125) (57,945) (13,725) (71,670)

Net Finance Costs g,h,n (431,789) 4,367 (427,422) (191,978) (4,261) (196,239)

Profit before Taxation 1,090,768 (65,664) 1,025,104 710,357 (242) 710,115

Income Tax Expense (298,810) (1,140) (299,950) 19,906 - 19,906

Profit after Taxation 791,958 (66,804) 725,154 730,263 (242) 730,021

Other Comprehensive Income

Net Gain / (Loss) on Financial Assets

Available for Sale - (11,226) (11,226) - (1,636) (1,636)

Actuarial Gain / (Loss) on Defined Benefit Plan - (33,816) (33,816) - (8,988) (8,988)

Other Comprehensive income for the year, net of tax - (45,042) (45,042) - (10,624) (10,624)

Total Comprehensive income for the year 791,958 (111,845) 680,112 730,263 (10,866) 719,397

Profit Attributable to;

Owners of the Company 543,157 (66,804) 476,353 730,263 (10,866) 730,021

Non - Controlling Interest 248,801 - 248,801 - - -

791,958 (66,804) 725,154 730,263 (10,866) 730,021

Total Comprehensive attributable to;

Owners of the Company 543,157 (86,397) 456,749 730,263 (10,866) 719,397

Non - Controlling Interest 248,801 (25,438) 223,363 - - -

791,958 (111,835) 680,112 730,263 (10,866) 719,397

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Lankem Ceylon PLC | Annual Report 2012/13118

38. EXPLANATION OF TRANSITION TO SLFRS/LKAS CONTD.38.2 Reconciliation of Financial Position as at 31.03.2012 & 31.03.2011

Consolidated

SLAS Effect of SLFRS SLAS Effect of SLFRS (Restated) transition (Restated) transition As at 31.03.2012 31.03.2012 01.04.2011 01.04.2011 Note Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

ASSETS Non - Current Assets Property, Plant & Equipment c 9,768,056 (3,538,096) 6,229,960 8,273,781 (2,959,469) 5,314,312 Investment Property i 46,729 10,114 56,843 50,793 10,787 61,580 Leasehold Properties g 801,857 (99,796) 702,061 847,591 (108,291) 739,300 Biological Assets f - 4,111,418 4,111,418 - 3,588,156 3,588,156 Intangible Assets 711,845 - 711,845 357,038 40 357,078 Investments Classified as Available for Sale d 29,241 10,211 39,452 34,008 5,011 39,019 Loans due from Related Parties j 380,000 (380,000) - - - Retirement Benefit Assets 112,283 - 112,283 107,702 - 107,702 Total Non - Current Assets 11,850,011 113,851 11,963,862 9,670,912 536,235 10,207,147 Current Assets Inventories k 2,535,982 (79,583) 2,456,399 2,436,334 (15,951) 2,420,383 Trade & Other Receivables l 3,955,630 3,109 3,958,739 3,346,196 12,100 3,358,296 Amount Due from Related Parties - Trade - - - - - - Amount Due from Related Parties - Non Trade 208,998 - 208,998 140,063 (41,549) 98,514 Loans due from related Parties j 20,000 380,000 400,000 - - - Income Tax Recoverable 156,151 - 156,151 200,673 - 200,673 Investments Classified as Fair Value through Profit or Loss d 365,067 225 365,292 47,008 1,725 48,733 Bank & Cash Balances 1,837,852 - 1,837,853 1,321,341 - 1,321,341 Total Current Assets 9,079,679 303,753 9,383,432 7,491,614 (43,674) 7,447,940 Total Assets 20,929,690 417,604 21,347,294 17,162,526 492,561 17,655,087 EQUITY AND LIABILITIES Equity Stated Capital 536,218 - 536,218 536,218 - 536,218 Other Capital Reserves c 462,316 (458,386) 3,930 484,585 (480,655) 3,930 Available For Sale Reserve - 6,977 6,977 - 12,389 12,389 Revenue Reserves a,b,c,d,e,f,g,h,i,k,l,m,n 2,636,137 510,798 3,146,935 2,044,530 552,938 2,597,468 Equity Attributable to Owners of the Company 3,634,671 59,389 3,694,060 3,065,333 84,672 3,150,005 Non-Controlling interest a,b,c,d,e,f,g,h,i,k,l,m,n 3,292,335 272,560 3,564,895 3,266,125 218,623 3,484,748 Total Equity 6,927,006 331,949 7,258,955 6,331,458 303,295 6,634,753 Non - Current Liabilities Interest Bearing Borrowings g 2,707,647 11,669 2,719,316 2,788,762 19,423 2,808,185 Loans Payable to Related parties - - - - - Deferred Income 580,590 - 580,590 560,883 - 560,883 Deferred Tax Liability b,c 368,916 8,408 377,324 280,808 7,913 288,721 Retirement Benefit Obligations b 1,712,890 26,995 1,739,885 1,614,228 29,534 1,643,762 Total Non - Current Liablilities 5,370,042 47,073 5,417,115 5,244,681 56,870 5,301,551 Current Liabilities Interest Bearing Borrowings g 2,432,357 6,791 2,439,148 1,895,563 5,367 1,900,930 Loans Payable to Related Parties 420,000 - 420,000 26,000 - 26,000 Trade & Other Payables k 3,291,248 31,608 3,322,856 2,565,467 127,028 2,692,495 Amount Due to Related Parties - Non Trade 192,463 - 192,463 129,083 - 129,083 Income Tax Payable 146,000 184 146,184 145,793 - 145,793 Bank Overdraft 2,150,573 - 2,150,573 824,482 - 824,482 Total Current Liabilities 8,632,642 38,582 8,671,224 5,586,387 132,396 5,718,783 Total Liabilities 14,002,684 85,655 14,088,339 10,831,068 189,266 11,020,334 Total Equity and Liabilities 20,929,690 417,604 21,347,294 17,162,526 492,561 17,655,087

Notes to the Financial Statements Contd.

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119Annual Report 2012/13 | Lankem Ceylon PLC

38.3 Reconciliation of Financial Position as at 31.03.2012 & 31.03.2011

Company

SLAS Effect of SLFRS SLAS Effect of SLFRS (Restated) transition (Restated) transition As at 31.03.2012 31.03.2012 01.04.2011 01.04.2011 Note Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

ASSETSNon - Current Assets Property, Plant & Equipment b 673,470 26,558 700,028 551,026 37,695 588,721 Investment in Subsidiaries m 2,842,818 (12,000) 2,830,818 1,532,791 - 1,532,791 Investments Classified as Available for Sale d 181,758 (173,474) 8,284 181,758 (171,838) 9,920 Loan due from Related Parties f - 180,000 180,000 - 180,000 180,000 Retirement Benefit Assets 67,346 - 67,346 63,687 - 63,687 Total Non - Current Assets 3,765,392 21,084 3,786,476 2,329,262 45,857 2,375,119 Current Assets Inventories k 854,342 31,607 885,949 608,595 127,028 735,623 Trade & Other Receivables 1,057,006 - 1,057,006 712,861 - 712,861 Amounts Due from Related Parties - Trade 446,196 - 446,196 344,163 - 344,163 Amounts Due from Related Parties - Non Trade e,n 438,301 (77,620) 360,681 673,798 (98,539) 575,259 Loans Due from Related Parties 154,000 - 154,000 - - - Income Tax Recoverable 138,550 - 138,550 72,640 - 72,640 Investments Classified as Fair Value through Profit or Loss d 347,678 - 347,678 47,008 1,725 48,733 Bank & Cash Balances 109,737 - 109,737 64,988 - 64,988 Total Current Assets 3,545,809 (46,012) 3,499,797 2,524,053 30,214 2,554,267 Total Assets 7,311,202 (24,928) 7,286,273 4,853,315 76,071 4,929,386

EQUITY AND LIABILITIES Equity Stated Capital 536,218 - 536,218 536,218 - 536,218 Capital Reserves c 87,377 (87,377) - 87,377 (87,377) - Available for Sale Reserves d - 6,526 6,526 - 8,162 8,162Revenue Reserves c,d,e,g,m,n 2,193,088 (10,350) 2,182,738 1,498,825 (1,120) 1,497,705Total Equity 2,816,683 (91,201) 2,725,482 2,122,420 (80,335) 2,042,085 Non - Current Liabilities Interest bearing Borrowings g 642,855 11,674 654,529 329,901 19,410 349,311 Loans Payable to Related Parties j 770,000 (770,000) - 300,000 (300,000) - Deferred Income - - - 1,275 - 1,275 Deferred Tax Liabilities c 8,922 4,004 12,926 18,963 4,004 22,967 Retirement Benefit Obligations 158,855 - 158,855 123,065 - 123,065 Total Non - Current Liablilities 1,580,632 (754,322) 826,310 773,204 (276,586) 496,618 Current Liabilities Interest bearing Borrowings g 817,058 7,735 824,793 488,905 5,964 494,869 Trade and Other Payables k 1,092,092 31,609 1,123,701 707,159 127,028 834,187 Loans Payable to Related Parties j 30,000 770,000 800,000 26,000 300,000 326,000 Amount Due to Related Parties - Trade 51,396 - 51,396 131,844 - 131,844 Amount Due to Related Parties - Non Trade n 215,634 11,251 226,885 271,776 - 271,776 Bank Overdraft 707,706 - 707,706 332,007 - 332,007 Total Current Liabilities 2,913,887 820,595 3,734,481 1,957,691 432,992 2,390,683 Total Liabilities 4,494,519 66,273 4,560,791 2,730,895 156,406 2,887,301 Total Equity and Liabilities 7,311,202 (24,928) 7,286,273 4,853,315 76,071 4,929,386

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Lankem Ceylon PLC | Annual Report 2012/13120

38. EXPLANATION OF TRANSITION TO SLFRS/LKAS CONTD.a. Profit & Loss of the perennial crop has been recognised in the financial period of harvesting in terms of SLAS 32. Thus the unsold stocks were

treated as a part of revenue. The scope of revenue recognition was changed to LKAS 18. Accordingly, the revenue is recognised based on the date of auction where the recognition criteria are met and therefore the quantity which is sold at auction is treated as sales.

Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Comprehensive Income Revenue 42,815 - - -Cost of Sales (1,764) - - -Adjustment before Income Tax 41,052 - - - b Retirement Benefit Obligations Under SLFRSs/LKASs the Group’s accounting policy is to recognise all actuarial gains and losses in other comprehensive income. Under

previous SLASs the Group recognised actuarial gains and losses in the profit or loss account under administrative expenses. On transition to SLFRSs/LKASs, the actuarial gains and losses relating to defined benefit plans were reclassified under other comprehensive income.

The impact arising from the change is summarised as follows : Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Comprehensive Income Cost of Sales 35,746 - - -Distribution Cost 5 - - -Administrative Expenses 10,357 - 8,988 -Adjustment before Income Tax 46,108 - 8,988 - Statement of Financial Position Retirement Benefit Obligation 26,695 29,534 - - Effect on Deferred Tax (6,196) (7,498) - - Adjustment to Retained Earnings 20,499 22,036 - - c Property, Plant & Equipment Deemed Cost exemptions granted under ‘SLFRS 1 - First-time Adoption of International Financial Reporting Standards’; the Group has

changed its accounting policy and elected to apply the optional exemption to use the previous revaluation as deemed cost under SLFRSs. Accordingly revaluation reserve pertaining to freehold land and buildings are reclassified to retained earnings.

Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Financial Position Deferred tax 14,606 15,411 4,004 4,004 Adjustment to Retained Earnings 14,606 15,411 4,004 4,004 Statement of Financial Position Reclassification of loss on sale of revalued assets (15,667) - - -Adjustment before Income Tax (15,667) - - - Statement of Financial Position - PPE Revaluation at deemed cost 58,572 63,171 15,042 15,042 Recognition of leased assets 31,950 31,950 31,950 31,950 Recognition of leased assets depreciation (15,360) (9,297) (15,360) (9,297)Transfer to biological assets (3,617,083) (3,045,293) - - Capitalisation of borrowing cost 3,725 - - - Adjustment to depreciation - Cost of sales (1,019) - - - - Administrative expenses 1,119 - (5,074) - Adjustment to Property, Plant & Equipment (3,538,096) (2,959,469) 26,558 37,695

Notes to the Financial Statements Contd.

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121Annual Report 2012/13 | Lankem Ceylon PLC

d Valuation of Investments Under previous SLAS, the Group valued its investments in quoted shares at cost. With the transition to SLFRSs, Group has recognised

those assets as Available for Sale Investments in accordance with LKAS 39 and consequently measured at fair value and the resulting gain or losses in fair value has been recognised in equity.

Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Comprehensive Income Transfer from fair value reserve (73,248) - - - Adjustment before Income Tax (73,248) - - - Statement of Financial Position Adjustment of fair value 10,212 5,011 6,526 8,162 Adjustment to Retained Earnings 10,212 5,011 6,526 8,162 Further, investment in debentures of the Company amounting to Rs.180 Mn has been reclassified as loans due from related companies.

Short term investments are measured at lower of cost and market value on aggregate portfolio basis with any resultant gain/loss recognised in the Statement of Comprehensive Income in accordance with previous SLASs. However with the convergence to SLFRSs/LKASs these short term investments were classified as financial assets at fair value through profit or loss and were carried in the Statement of Financial Position at fair value, with changes in fair value recognised in the Statement of Comprehensive Income.

Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Financial Position As per SLAS 365,067 47,008 347,678 47,008 Change in Market Value - Other Expenses 225 1,725 - 1,725 365,292 48,733 347,678 48,733 e Under SLASs, the provision for trade receivables consists of both specific amount for incurred losses and general amount for expected

future losses. SLFRSs does not permit recognition of provision for expected future losses and this amount has been eliminated against retained earnings at April 1st 2011 (Transition date). The effect on earnings for the year ended 31st March, 2012 is also recognised in profit for the year under SLFRSs.

Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Comprehensive Income Other Income (4,227) - 10,122 - Adjustment before Income Tax (4,227) - 10,122 - Statement of Financial Position Amount due from related parties - (41,549) (88,417) (98,539)Adjustment to Retained Earnings - (41,549) (88,417) (98,539)

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Lankem Ceylon PLC | Annual Report 2012/13122

38. EXPLANATION OF TRANSITION TO SLFRS/LKAS CONTD.

f Biological Assets Under previous GAAP, biological assets are recognised under Property, Plant and Equipment. With the transition to SLFRSs, biological

assets are reclassified from PPE and consumable biological assets are measured at fair value

Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Financial Position Reclassification from Property, Plant and Equipment 3,617,083 3,045,293 - -Gain on Biological assets 494,334 542,863 - - Recognition of Biological Assets 4,111,417 3,588,156 - - g Leases As per previous SLASs motor vehicles purchased under lease terms were classified as operating leases and lease payments were charged

to the Profit & Loss acount under administration expenses.

On convergence to SLFRSs/LKASs these vehicles were classified under finance lease and respective lease creditor was recognised. Accordingly, interest cost of these leases were charged to the Statement of Comprehensive Income under finance cost.

Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Comprehensive Income Reversal of lease rentals charged to the Profit & Loss account 9,770 - 9,770 - Interest on lease recognition (8,092) - (3,806) -Adjustment before Income Tax 1,678 - 5,964 -

Statement of Financial Position Lease creditor recognised – Long Term 11,669 19,423 11,674 19,410Lease creditor recognised – Short Term 6,794 5,368 7,735 5,964Adjustment to Retained Earnings 18,463 24,791 19,409 25,374 As per LKAS 17 - Leases, leasehold land cannot be classified as finance lease since land normally has an indefinite economic life and hence there are significant risks and rewards associated with the land at the end of the lease term, which is not passed to the lessee. According to this definition, Group has derecognised the carrying value of this revalued land.

Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Financial Position Leasehold property (99,796) (108,289) - - Adjustment to Retained Earnings (99,796) (108,289) - - h Under previous SLASs, the Group expensed borrowing costs as incurred. At the date of transition, the Group elected to capitalise

borrowing costs only in respect of qualifying assets for which the commencement date for capitalisation was on or after the date of transition.

The impact arising from the change is summarised as follows : Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Comprehensive Income Capitalisation of borrowing cost 3,725 - - -Adjustment before Income Tax 3,725 - - -

Notes to the Financial Statements Contd.

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123Annual Report 2012/13 | Lankem Ceylon PLC

i In terms of deemed cost exemptions granted under SLFRS 1 - ‘First-time Adoption of International Financial Reporting Standards’, the Group has changed its accounting policy and elected to apply the optional exemption to use the previous revaluation as deemed cost under SLFRSs.

Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Financial Position Recognition of revaluation as deemed cost 10,827 10,827 - - Adjustment to depreciation (713) - - -Adjustment to Retained Earnings 10,114 10,827 - - j Inter Company Loans Loans payable/receivable to/from related companies were treated as “payable on demand” in accordance with SLFRSs/LKASs as these

loans are to be settled/recovered at any time on the request of the lender. Accordingly, they were reclassified under current liabilities/assets.

Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Financial Position Loans due from Related Companies 380,000 - - - Loans Payable to Related Parties - - 770,000 300,000 k Inventories The produce stock of biological assets that is tea was valued at their actual or estimated realisable values, net of direct selling expenses

in terms of SLAS 32. With the conversion to new accounting standards, the agricultural products that are harvested from biological assets that is green leaf is required to be measured at its fair value less cost to sell at the point of harvest. Thereafter it is scoped under LKAS 2 and said fair value is the cost at the date of applying this standard. Finally the measurement of inventory is carried at the lower of cost and estimated net realisable value in accordance with LKAS.

Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Financial Position Valuation of Tea & Rubber stock at lower of cost or Net Realisable Value (111,189) (142,977) - - According to the terms of agreement, Goods in Transit as at the Statement of Financial Position date was recognised as follows.

Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Financial Position

Recognition of Goods in Transit according to the terms of the agreement 31,607 127,028 31,607 127,028 l Trade & Other Receivables Under SLASs, the provision for trade receivables consists of both specific amount for incurred losses and general amount for expected

future losses. SLFRSs does not permit recognition of provision for expected future losses and this amount has been eliminated against retained earnings at 01st April 2011. The effect on earnings for the year ended 31st March 2012 is also recognised in profit for the year under SLFRSs.

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Lankem Ceylon PLC | Annual Report 2012/13124

38. EXPLANATION OF TRANSITION TO SLFRS/LKAS CONTD. Trade Receivables denominated in non functional currency has been translated at the exchange rate that prevailed at the reporting date.

Gains and losses are recognised in the Statement of Comprehensive Income in each period until the date of the settlement.

Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Financial Position Trade & Other Receivables 3,110 12,100 - - m Investment in Subsidiaries Considering the impairment indications existing on the company’s investment in SunAgro Farms Ltd, Company has impaired the

investment on 31st March 2012. Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Financial Position Impairment of Investment in Subsidiary - - (12,000) - Adjustment to Retained Earnings - - (12,000) - Statement of Comprehensive income Other Expenses - - (12,000) - Adjustment to Profit before Tax - - (12,000) - n Corporate Guarantee Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss

it incurs if the specified debtor fails to make a payment by the due date in accordance with the terms of a debt instrument. The benefit of interest rate reduction enjoyed by the related company because of this type of assurance given to the lender is assessed at the rate of 3% per annum on the face value of the corporate guarantee.

Consolidated Company

As at 31.03.2012 01.04.2011 31.03.2012 01.04.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Statement of Financial Position Amount due from related companies - - 10,795 - Amount due to related companies - - 11,250 -Adjustment to Retained Earnings - - 22,045 - Statement of Comprehensive Income Finance Income - - 10,795 - Finance Cost - - (11,250) -Adjustment to Profit before Tax - - (455) -

Notes to the Financial Statements Contd.

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125Annual Report 2012/13 | Lankem Ceylon PLC

39 SEGMENT INFORMATIONInformation based on operating segments of the Group.

39.1 Assets and Liabilities

Total Assets Total Liabilities

As at 31.03.2013 31.03.2012 31.03.2013 31.03.2012 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Agricultural Inputs 1,901,787 1,472,922 1,796,107 1,383,408 Consumer Products 1,943,087 1,512,566 964,205 820,927 Industrial Products 3,723,413 3,142,555 2,952,769 2,577,889 Leisure 3,975,846 3,401,849 1,239,012 756,942 Plantation 9,284,603 9,010,356 7,569,469 6,915,665 Plantation Trading 4,538,296 1,933,612 3,023,734 1,023,285 Others 1,062,255 873,434 1,024,977 610,223 26,429,287 21,347,294 18,570,273 14,088,339

Additions to Property, Plant and Equipment , Depreciation and Amortisation

Additions to Property, Depreciation and Plant and Equipment Amortisation

31.03.2013 31.03.2012 31.03.2013 31.03.2012 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Agricultural Inputs 87,931 117,475 33,071 25,780 Consumer Products 96,606 101,964 47,153 29,946 Industrial Products 159,107 99,164 61,894 49,321 Leisure 1,068,717 317,250 78,490 61,445 Plantation 114,263 114,312 237,415 323,063 Plantation Trading 65,111 - 116,348 42,038 Others 79,063 - 2,677 1,995 1,670,798 750,165 577,048 533,588

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Lankem Ceylon PLC | Annual Report 2012/13126

Ten Year Summary

2012/13 2011/12 2010/11 2009/10 2008/09 2007/08 2006/07 2005/06 2004/05 2003/04 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Income StatementRevenue 24,667,729 24,158,766 23,030,604 11,046,103 9,752,487 9,451,805 7,937,129 6,784,903 5,829,450 4,751,159 Profit/(Loss) Before Income Tax 837,747 1,025,104 2,108,564 803,582 256,696 918,464 502,636 375,746 301,029 222,824 Income Tax Expense (243,229) (299,950) (236,815) (255,000) (194,293) (180,376) (98,745) (60,564) (48,467) (57,454)Profit/(Loss) for the Year 594,518 725,154 1,871,749 548,582 62,403 738,088 403,891 315,182 252,562 165,370 Non-Controlling Interests 467,610 248,801 740,643 191,274 (112,831) 444,142 209,519 93,101 122,668 48,150 Profit Attributable to Owners of the Company 126,908 476,353 1,131,106 357,308 175,234 293,946 194,372 222,081 129,894 117,220

Statement of Financial PositionEquityStated Capital 536,218 536,218 536,218 281,218 281,218 289,552 222,885 267,137 242,137 242,137 Capital Reserves 3,930 3,930 3,930 443,080 272,820 271,108 271,108 65,717 65,717 64,418 Available for Sale Reserve 7,927 6,977 12,389 - - - - - - - Revenue Reserves 3,150,341 3,146,935 2,597,468 1,088,624 622,724 511,363 221,565 (82,041) (313,977) (464,590)Non-Controlling Interests 4,160,598 3,564,895 3,484,748 1,898,619 1,077,484 1,274,726 830,719 514,864 428,637 273,538 Total Equity 7,859,014 7,258,955 6,634,753 3,711,541 2,254,246 2,346,749 1,546,277 765,677 422,514 115,503

AssetsNon-Current Assets 14,766,310 11,963,862 10,207,147 8,348,347 6,073,323 5,404,882 5,098,130 4,411,308 4,101,988 3,819,704 Current Assets 11,662,977 9,383,432 7,447,940 5,036,069 3,186,942 3,332,428 2,558,710 2,066,644 1,879,904 1,533,606 Total Assets 26,429,287 21,347,294 17,655,087 13,384,416 9,260,265 8,737,310 7,656,840 6,477,952 5,981,892 5,353,310

LiabilitiesNon-Current Liabilities 7,416,000 5,417,115 5,301,551 4,684,213 3,359,950 2,795,150 2,819,691 2,605,856 2,599,217 2,449,706 Current Liabilities 11,154,273 8,671,224 5,718,783 4,988,661 3,646,069 3,595,411 3,290,872 3,106,419 2,960,161 2,788,101 Total Liabilities 18,570,273 14,088,339 11,020,334 9,672,874 7,006,019 6,390,561 6,110,563 5,712,275 5,559,378 5,237,807

Cash Flow StatementNet Cash Flow Generated from/ (Used in) Operating Activities 144,499 1,160,123 593,060 601,347 236,932 943,316 499,631 572,157 301,722 254,460 Net Cash Flow Generated from/ (Used in) Investing Activities (3,193,687) (2,085,613) (948,060) (1,665,322) (750,531) (379,350) (304,984) (352,569) (489,094) (17,863)Net Cash Flow Generated from/ (Used in) Financing Activities 2,199,613 115,911 1,000,657 1,419,468 100,630 (346,667) (175,024) (138,410) 24,084 (149,902)Net Increase/(Decrease) in Cash and Cash Equivalents (849,575) (809,579) 645,657 355,493 (412,969) 217,299 19,623 81,178 (163,288) 86,695

Key IndicatorsEarnings per Share (Rs.) 5.29 19.85 47.16 15.72 8.30 15.07 9.95 12.34 8.39 9.15 Dividend Per Share (Rs.) 1.50 2.50 2.50 2.25 2.00 1.80 1.50 1.50 1.50 1.50 Net Assets per Share (Rs.) 154.10 153.92 131.25 86.33 56.04 51.05 39.75 13.93 (0.34) (8.78)Market Capitalisation (Rs.Million) 3,468 4,320 9,636 1,365 604 977 662 972 1,260 171

Current Ratio (No.of Times) 1.05 1.08 1.30 1.01 0.87 0.93 0.78 0.67 0.64 0.55 Interest Cover (No.of times) 1.90 3.40 5.66 3.73 1.90 4.81 2.82 2.19 1.97 1.73 Price Earnings Ratio (No.of Times) 27.33 9.07 8.51 4.14 3.45 3.09 3.69 4.69 8.34 1.56

Pre Tax Return on Capital Employed (%) 10.66 14.12 31.78 21.65 11.00 39.00 32.51 49.07 71.00 193.00 Gearing (%) 57.81 52.18 46.16 54.63 54.00 47.00 61.00 75.19 85.24 96.45 Dividend Payout Ratio (%) 28.37 12.60 5.30 14.32 24.00 12.00 15.00 13.00 18.00 16.00

Notes:1) The Statement of Financial Position for FY 2010/11, FY 2011/12 & FY 2012/13 is restated in line with SLFRSs.2) The Income Statement for FY 2011/12 & FY 2012/13 is restated in line with SLFRSs.

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127Annual Report 2012/13 | Lankem Ceylon PLC

Share Information

Twenty Major Shareholders

31.03.2013 31.03.2012

Posititon Name No of No of Ordinary Ordinary Shares % Shares %

1 E.B. Creasy & Company PLC 10,974,635 45.73 9,536,108 39.732 The Colombo Fort Land & Building PLC 7,486,549 31.19 4,961,100 20.673 Darley Butler & Company Ltd. 536,614 2.24 366,616 1.534 Sri Lanka Insurance Corporation Ltd-General Fund 516,500 2.15 516,500 2.155 Colombo Fort Investments PLC 422,957 1.76 422,957 1.766 Associated Electrical Corporation Ltd. 412,835 1.72 407,500 1.707 Colombo Investment Trust PLC 170,719 0.71 170,719 0.718 Waldock Mackenzie Ltd/Hi-Line Trading (Pvt) Ltd. 107,885 0.45 107,885 0.459 Colonial Motors PLC 100,457 0.42 100,457 0.4210 Employees Trust Fund Board 76,300 0.32 76,300 0.3211 Est. of Late Mariapillai Radhakrishnan (Deceased) 68,800 0.29 68,800 0.2912 Mr. David Kotthoff 62,000 0.26 64,000 0.2713 Mr Anthony Isidore De Silva & Mr. Francis Xavier Ranjith Pereira 55,047 0.23 55,047 0.2314 Mr. Duraisamy Ganeshamoorthy & Mr. Periyasaamipillai Anandarajah 55,000 0.23 55,000 0.2315 Bank Of Ceylon No. 1 Account 51,900 0.22 51,900 0.2216 Pan Asia Banking Corporation PLC/Mr. H. N. De Silva 51,000 0.21 51,000 0.2117 Trust Holdings & Investments (Pvt) Limited 44,633 0.19 44,563 0.1918 Pershing LLC S/A Averbach Grauson & Co. 42,000 0.17 - -19 A E C Properties ( Pvt ) Ltd. 40,000 0.17 40,000 0.1720 Capital Alliance Holdings Ltd. 40,000 0.17 40,000 0.17 21,315,831 88.83 17,136,452 71.42

Market ValueThe market value of the Company’s Ordinary Shares on 31st March 2013 was Rs.144.50 (Highest during the year - Rs.240.00 and lowest during the year - Rs.124.00)

Net Assets per ShareConsolidatedThe Net Assets per Share as at 31st March 2013 - Rs. 154.10The Net Assets per Share as at 31st March 2012 - Rs. 153.92

CompanyThe Net Assets per Share as at 31st March 2013 - Rs. 96.97The Net Assets per Share as at 31st March 2012 - Rs. 113.56

Public HoldingThe percentage of shares held by the public as at 31st March 2013 was 17.44 % (31st March 2012 - 17.25%).

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Lankem Ceylon PLC | Annual Report 2012/13128

Distribution of Shares

As as 31st March 2013 As as 31st March 2012

No. of Total % of Total No. of Total % of Total No. of Shares Held Shareholders Holding Holding Shareholders Holding Holding

1 - 1,000 1,815 449,829 1.87 1,882 480,791 2.00 1,001 - 10,000 457 1,374,348 5.73 452 1,311,887 5.47 10,001 - 100,000 59 1,446,672 6.03 60 1,508,955 6.28 100,001 - 1,000,000 7 2,267,967 9.45 8 2,262,632 9.43 Over 1,000,000 2 18,461,184 76.92 4 18,435,735 76.82 2,340 24,000,000 100.00 2,406 24,000,000 100.00

Analysis of Ordinary Shareholders

As at 31st March 2013 No of % Total Market % of Total Shareholders Holding Value (Rs.) Holding

Individuals 2,167 92.61 2,471,355 357,110,798 10.30Institutions 173 7.39 21,528,645 3,110,889,203 89.70 2,340 100.00 24,000,000 3,468,000,001 100.00

As at 31st March 2012 No of % Total Market % of Total Shareholders Holding Value (Rs.) Holding

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

Share Information Contd.

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129Annual Report 2012/13 | Lankem Ceylon PLC

Notice is hereby given that the Forty Eighth Annual General Meeting of Lankem Ceylon PLC will be held at the Grand Oriental Hotel, No. 2, York Street, Colombo 01, on 24th September 2013 at 10.00 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 2013, 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.C.S. Jayaranjan 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 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.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 Board

Corporate Managers & Secretaries (Private) LimitedSecretaries

Colombo13th August 2013

Notice of Meeting

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 two 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 two 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 two 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”.

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Lankem Ceylon PLC | Annual Report 2012/13130

Notes

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131Annual Report 2012/13 | Lankem Ceylon PLC

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 24th September 2013 and at any adjournment thereof and at every poll which may be taken in consequence of the aforesaid meeting.

For Against

To receive the Annual Report of the Board of Directors and the Statement of Accounts for the year ended 31st March 2013 with the Report of the Auditors thereon.

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

To re-elect Mr. A. C. S. Jayaranjan 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 Thirteen.

...................................................................... Signature

Note:A proxy need not be a member of the Company. If no words are deleted or there is in the view of the proxy doubt (by reason of the manner in which the instructions contained in the Form of Proxy have been completed) as to the way in which the proxy should vote, the proxy may vote as he/she thinks fit.

Instructions as to completion are noted on the reverse hereof;

Form of Proxy

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Lankem Ceylon PLC | Annual Report 2012/13132

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.

Form of Proxy Contd.

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Lankem Ceylon PLC was incorporated under the Companies’ Ordinance No. 51 of 1938 (CAP 145) on 15th September 1964 as a Private Limited Liability Company. It was converted into a Public Company on the 14th of November 1968 and commenced commercial operations on the 16th of March 1970.

Even though the Company’s original emphasis was on chemicals, today Lankem has a diversified business portfolio including paints, chemicals, bituminous products, consumer products, plantations, leisure, construction and agriculture crops & processing.

Our Business AreasOUR BUSINESS AREAS ARE AGRI-INPUTS, PAINTS, BITUMINOUS PRODUCTS,

CHEMICALS, CONSUMER PRODUCTS, PLANTATIONS, LEISURE, CONSTRUCTION,

AGRICULTURE CROPS & PROCESSING.

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 February 2013.

Corporate Information

Board of Directors ChairmanA. Rajaratnam, FCA

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

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

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

DirectorsR. N. Bopearatchy, B.Sc (Cey), Dip. BM, MBA (Univ. of Col.)N. H. B. S. Perera, B.Sc. (Cey.)K. P. David, FCMA (UK), FCMA, 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 Number PQ 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 Paints

Lankem Consumer Products Ltd. Distribution of Consumer Products

Lankem Chemicals Ltd. Distribution of Industrial Chemicals

Lankem Agrochemicals Ltd. Distribution of Agrochemicals

SunAgro LifeScience Ltd.Import, Marketing and Distribution of Agrochemicals

Lankem Research Ltd. Research and Development

Lankem Developments PLCInvestment HoldingC.W. Mackie PLCManufacturer, Exporter, Importer and Distributor of Consumer, Hardware and Rubber Products

Lankem Plantation Holdings Ltd.Investment in Plantation Companies

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

Kotagala Plantations PLCCultivation and Processing of Tea and Rubber

Agarapatana Plantations Ltd. Cultivation and Processing of Tea

Lankem Plantation Services Ltd. Non-Operational

Sigiriya Village Hotels PLCOwning and Operation of Resort Hotel

Marawila Resorts PLCOwning and Operation of Resort Hotel

Colombo Fort Hotels Ltd. Investment in Hotel Companies

Beruwala Resorts PLCOwning and Operation of Resort Hotel

York Hotels (Kandy) Ltd. Owning of Resort Hotel

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

Galle Fort Hotel (Pvt) Ltd.Owning and Operation of a Boutique HotelSunAgro Farms Ltd.Growers of Vegetables, Fruits and Foliage for Export and Sale

Associated Farms (Pvt.) Ltd. Farming and Dairying

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

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

Lankem Exports (Pvt) Ltd. Non-Operational

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

Waverly Power (Pvt) Ltd.Generation of power energy/electricity using hydro resources

Union Commodities (Private) LimitedExporters of traditional and non-traditional produce

Union Commodities Exports (Pvt) Ltd.Exporters of traditional and non-traditional produceTeacom (Pvt) Ltd.Importers, exporters and manufacturers of traditional and non-traditional produce

Unicom Clearing & Forwarding (Pvt) Ltd.Clearing, forwarding and warehousing agents

Union Commodities Teas (Pvt) Ltd.

Manufacturers, blenders, processors and exporters of traditional and non-traditional produce

Unicom Holdings (Pvt) Ltd.Investment Holding

Designed and produced by emagewise

Page 136: LANKEM CEYLON PLC we touch · 2013. 10. 31. · 2 Lankem Ceylon PLC | Annual Report 2012/13 Financial Highlights 24,668 Mn. 24,668 million rupees Revenue 838 Mn. 838 million rupees

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