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Ministry of State Resources and Enterprise Development

MISSION

“To Fulfill the National Requirement

of Phosphate Fertilizer by being Self-Sufficient in Phosphorus

Through an Environment friendly and State of the art process”

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CONTENTS Mission 01

Contents 02

Board of Directors 03

Corporate Information 04

Financial Highlights 05

Chairman’s Statement 06-07

Corporate Management 08

Report of the Directors 09-11

Audit & Management Committee Report 12

Report of the Auditors 13 Income Statement 14 Balance Sheet 15-16 Statement of Changes in Equity 17 Cash flow Statement 18-19 Significant Accounting Policies 20-22 Notes to the Financial Statements 23-27

Review of Operations 28-32

Notice of Meeting 33

Form of Proxy 34

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BOARD OF DIRECTORS

K.W.Bandula A.G.D.D Gunasekara Chairman Executive Director

M.M.C.P.Motottigedara P.Dinuka J. Jayawardana Director Director

Amarapala Gamage W.M.C.Bandara Director Ministry Observer

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CORPORATE INFORMATION Company Name

Lanka Phosphate Ltd

Domicile and Legal Form Lanka Phosphate Ltd was incorporated on July 10, 1992 as a Limited Liability Company under the Companies Act No. 17 of 1982 in terms of the conversion of Public Corporations or Government Owned Business undertakings in to Public Companies Act No. 23 of 1987 to take over the Eppawala Phosphate project of the State Mining and Mineral Development Corporation. However, subsequently the Company has re-register under the Companies Act No. 07 of 2007 Principal Activities and Nature of Operations The principal activities of the company are excavating, processing and selling of Rock Phosphate, which is used as a fertilizer for perennial agricultural crops.

Ultimate Parent Company

The company’s issued shares are fully owned by the

Secretary to the Treasury on behalf of the

Government of Sri Lanka

Line Ministry

Ministry of State Resources & Enterprise

Development

No 561/3, Elvitigala Mawatha

Colombo 05

Registered Office

73 1/1, New Kelani Bridge Rd Colombo 14

Tel: 94112459906/7

Fax:94112459908

Registration No

PB 308

Board of Directors

Mr. K.W Bandula (Chairman)

Mr. A.G.D.D.Gunasekara (Executive Director)

Mr, C. Mohottigedara

Mr. Dinuka Jayawardana

Mr. Amarapala Gamage

Mr. H.H.A.D.Indika Anuradha

Mr. W.M.C.Bandara (Ministry Observer)

Company Secretary

Financial Services and Commercial Agencies (Pvt)

Ltd, Attorney – at – Law

28, Rosmead Place, Colombo 07

Auditors

SJMS Associates

Chartered Accountants

No 02, Castle Lane

Colombo 04

Tax Consultants

Amerasekara & Co.

Chartered Accountants

12, Rotunda Gardens

Colombo 03

Bankers

Bank of Ceylon

Peoples Bank

Hatton National Bank PLC

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FINANCIAL HIGHLIGHTS SUMMARY OF RESULTS FOR THE YEAR (Rs. ‘000)

2010/11 2009/10 2008/09 Revenue 393,068 351,301 239,090 Net Profit before Income Tax 126,000 106,474 24,151 Income Tax Expenses 43,033 43,154 11,066 Net Profit after Taxation 82,968 63,320 13,085 SUMMARY AT THE YEAR END (Rs. ‘000)

2010/11 2009/10 2008/09

Share holder’s Funds 411,942 338,974 288,003 Working Capital 395,228 325,583 251,880 Total Assets 498,864 435,357 355,779 Staff Cost 145,638 141,082 122,339 No of Employees (No) 307 294 295 PER SHARE (Rs.)

2010/11 2009/10 2008/09 Earnings 11.44 8.73 1.80 Net Assets 56.81 46.47 39.72 RATIOS

2010/11 2009/10 2008/09 Current Ratio (Times) 12.28 7.8 9.0 Return on Shareholders Funds (%) 20.1 18.7 4.5

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CHAIRMAN’S STATEMENT

Lanka Phosphate Ltd (LPL) was incorporated on 10th July, 1992 in terms of the conversion of public corporations or government owned business undertaking into Public Companies Act, No 23 of 1987 to take over the Eppawala Phosphate Project of the State Mining & Mineral Development Corporation. It is fully owned by the Secretary to the Treasury on behalf of the Government of Sri Lanka. LPL becomes a fully independent organization with the separation from Bogala Graphite Ltd in November 1998. Company has exclusive exploration rights over 450 hectares of land at Eppawala in Anuradhapura district on which a large Rock Phosphate deposit is located. The ore is currently estimated at 60 million tones containing 33-40% of P2O5 and is considered to be one of the richest and unique phosphate deposit in the world. Currently LPL produces two types of rock phosphate fertilizers namely Eppawala Rock Phosphate (ERP) and High-Grade Eppawala Rock

Phosphate (HERP) which are used as fertilizer for perennial crops in Sri Lanka. However, there is a big potential to expand our activities to give the maximum benefit to the nation from this valuable deposit. At present we are producing about 50,000 mt Eppawala Rock Phosphate annually and marketing the same for plantation crop sector. Our fertilizers are used for perenial crops such as Tea, Rubber, Coconut, export cash crops and fruit crops. Tea plantations dominate 60 percent of the use of Eppawala phosphate, whereas rubber and coconut sectors share 30 percent of the use. The export cash crops and the fruit crops mainly share the balance. Because of the use of our own Phosphate fertilizer there is a saving of substantial foreign exchange over Rs. 500 million annually. Financial year 2010/2011 ended achieving a gross turnover of Rs.393.1 Million. I wish to place on record that Lanka Phosphate Ltd achieved a sales level of 44,832.70 mt and 4778.75 mt of Eppawala Rock Phosphate (ERP) and High-grade Eppawala Rock Phosphate (HERP) respectively. It is with concern to note that an increase of company profit before taxation to Rs. 126.0 Million as compared to the previous year of Rs.106.5 Million. There is more to be done in the years ahead both in planning and organizing to enhance the Company profitability to a further higher level.

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We have great challenges ahead of us. Company Board is committed to work out solutions to develop the existing as well as new business opportunities for the optimal utilization of Eppawala Phosphate Deposit. We have recognized the importance and national need of a more soluble type of phosphate fertilizer in the form of Triple Super Phosphate (TSP) or Single Super Phosphate (SSP) fertilizer for short-term crops to cater to the total requirement of the country. New venture of the Company for the manufacture of TSP/SSP fertilizer with the setting-up of a local plant will be a boon to Sri Lanka agriculture field thus preventing the large annual out flow of foreign exchange on the import of Triple Supper Phosphate (TSP). I have no doubt that LPL as a responsible State organization we will support to enrich soil fertility of the Motherland while enhancing agricultural productivity to dedicate the national economy. I wish the company to achieve its bench marks while providing much needed service to the people of the country.

I consider the development of human resources, information technology and infrastructure of the company are necessary for better productivity, competitiveness, profitability and stability. We have given priority to staff training programs to develop the necessary skills at all levels to be conversant with the new developments in their respective fields. In concussion, I greatly appreciate the guidance, encouragement and support extend by the Minister of State Resources & Enterprises Development Hon. Dayasritha Tissera, Deputy Minister Hon. Sarath kumara Gunarathna, Secretary to the Ministry Dr. Willie Gamage and the staff in this regard. Chairman Lanka Phosphate Ltd

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CORPORATE MANAGEMENT

A.Sumanarathna H.R.U.D Bandara

General Manager Dy. General Manager

U.S.P.G Sooriyarachchi D.G.U Chamara D.A.M Munasinghe Maintenance Manager Finance Manager Manager(Per/Adm)

G.A.Chandradasa S.D Rupasinghe K.A Ovitigedara M.M.D.Thilakerathna

Production Manager Dy. Finance Manager Production Engineer Internal Auditor

S.A Abeysiri W.R.Illangasinghe D.R.K.Thilakerathn S.M.A.R.K.Manchanayake Supplies Officer Sn.Transport Officer Finance Officer Personal Officer

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REPORT OF THE DIRECTORS

The Directors of Lanka Phosphate Ltd, (the Company) present herewith the Audited Accounts for the year ended 31st March 2011 and the Annual Report for the year ended 31st March 2011. 1.0 Financial Statement Directors are satisfied that the financial statement attached hereto gives a true and fair view of the state of affairs of the Company as at the Balance Sheet date. The Directors consider that in preparing these Financial Statements, suitable accounting policies have been used, which are applied consistently and supported by reasonable and prudent judgment and estimates. They are of the opinion that there been no significant change in the accounting policies which warrant disclosure in this report. The Directors have taken such steps as are responsibly open to them to safeguard the assets of the Company and to prevent and detect fraud or other irregularities.

2.0 Financial Statements and

Accounting Policies The Directors consider that in preparing these Financial Statements, suitable Accounting Policies have been selected which are applied consistently while reasonable and prudent judgments and estimates have been made so that the form and substance of transaction are properly reflected. There was no change in accounting policies made during the accounting period.

3.0 Property, Plant & Equipment, their Valuation and Depreciation

Capital Expenditure during the year on property plant and equipment by the company amounted Rs. 11,446,539/-. Details of the status and movements of Property plant and Equipment, their Valuation and deprecation are given in Note 9.0 of Note to the Financial Statements. 4.0 Taxation The company was taxable at 35% on the taxable income for the year under review. 5.0 Dividends No interim dividends were declared for the year under review. 6.0 Stated Capital The Stated Capital of the Company altogether Rs. 72,510,000/- consisting of 7,251,000 ordinary shares. There was no change in the Stated Capital for the year under review. 7.0 Shareholding Interms of Section 2(3) of the Conversion of Public Corporations or Government Owned Business Undertakings into Public Companies Act No. 23 of 1987 the sole

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shareholder is the Company is Secretary to the Treasury (in his official capacity) for on behalf of the state.

As at 31st March 2011, the shareholding details of the company are as follows; Secretary to the Treasury (in his official capacity) 7,251,000 ordinary shares Lanka Phosphate Limited is a Shareholder of GSMB Technical Services (Private) Limited and holding 100,000 of ordinary shares (Rs. 10/- each).

The Percentage of said shareholding is 16.66%. 8.0 Changes in Shareholdings There have been no changes to the Shareholding of the Company as at 31.03.2011. 9.0 Donations The Company has contributed Rs. 1,342,427 for charitable purposes & CSR during the year under review. 10.0 Employees The total cost of personnel during the year was Rs. 145,638,084/-

The number of persons employed by the Company at the end of the year was 307. 11.0 Directors The following Directors held office during the year under review.

Mr. Koggala Wellala Bandula - Chairman Mr. A.G.D.D.Gunasekara – Executive Director Mr. M.M.C.P.Mohottigedara - Director Mr. A. Gamage – Director Mr. P.D.J Jayawardana - Director Mr. H.H.A.D.I.Anuradha – Director 12.0 Resignation and Appointment

of Directors Mr. H. M. S. Warnakulasooriya (10.05.2010), Mr. Prasad Imbulegoda (10.05.2010), Mr. Yasapala Koralage (30.04.2010), Mr. U. A. Dissanayaka (10.05.2010), Mr. D. M. D. O. K. Dissanayaka (10.05.2010), Mr. P. Ariyasena (12.05.2010) were resigned during the year of 2010/11. 13.0 Director’s remuneration Rs. 302,333.00 was paid as Directors Remuneration & Expenses in the year under review.

14.0 Statutory Payments The Directors, to their best of their knowledge and the belief are satisfied that all statutory payments due to the Government and to Employment Provident Fund and Employees Trust Fund have been paid accurately and on time. 15.0 Compliance The company has not engaged in activities that contravene the laws or regulations that are applicable in Sri Lanka or elsewhere.

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16.0 Going Concern The Directors are satisfied that the company has adequate resources to continue their operations in the foreseeable future and accordingly all finance statements of the company is prepared on the going concern basis. 17.0 Corporate Governance The Board of Directors ensures good corporate Governance. It is the duty of the Board of Directors to ensure that the performance is in line with the company objectives as a public enterprise as well as the objectives and expectations of the stakeholders. 18.0 Risk Management The Company consciously fulfills its statutory and legal requirement to ensure that its exposure to legal risk is eliminated or minimized. 19.0 Auditors Messrs SJMS Associates, Chartered Accountant are the present Auditors of the Company. As the present Auditors of Lanka Phosphate Limited, M/s. SJMS Associates, Chartered Accountants have completed their 1st year of service and retire at the Annual General Meeting Scheduled to be held on 23rd September 2011. Therefore the Directors of Lanka Phosphate Limited have decided to

recommend to the Shareholders of the Company to re-appoint the retiring Auditors M/s. SJMS Associates subject to the procedure imposed by the Companies Act No. 07 of 2007 at the Annual General Meeting scheduled to be held on 23rd September 2011 at 4.00pm at Head Office, Lanka Phosphate Ltd, No 73 1/1, New Kelani Bridge Rd, Colombo 14. A resolution proposing that the Directors be authorized to determine the remuneration of new Auditors will be tabled at the Annual General Meeting. Total audit fees paid by the company to Messrs SJMS Associates Amount to Rs. 337,008/- for the year under review. Fees paid for tax consultation services to Messers. Ameresekara & Company for the year is Rs. 172,755/-.

As far as the Directors are aware, the Auditors did not have any relationship with the Company or its subsidiaries that would have an impact on their independence. FOR AND BEHALF OF THE BOARD OF DIRECTORS

Director

Director

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AUDIT & MANAGEMENT COMMITTEE REPORT COMPOSITION The Audit & Management Committee is appointed by the Board of Directors and it is responsible to the Board. The Chairman of the Committee was the Director who represents the Secretary to the Treasury on behalf of the Government of Sri Lanka and also the General Manager, Deputy General Manager, Finance Manager, Human Resources Manager and Internal Auditor represents the committee as members who represent the Management of the company. MEETINGS The Audit & Management Committee was able to meet only one occasion during the year to discuss the issues and evaluate the existing controls because there had been regular changes in the Management and the Board of Directors of the company. ACTIVITIES & RESPONSIBILITIES Financial Reporting The committee reviewed and discussed the financial reporting system adopted by the company in the preparation of its quarterly and annual financial statements with the Management & the External Auditors to ensure reliability of the processes and the consistency of the accounting policies adopted and its compliance with the Sri Lanka Accounting Standards and the provision of the Companies Act No 07 of 2007. Internal Audit The company formed an Internal Audit Division during the year with the aiming of strengthening & enhancing the overall controls and performances of the company. COMPLIANCE WITH LAWS AND REGULATIONS The Committee reviewed the monthly/quarterly compliance reports submitted by the relevant officers to ensure that the company has complied with all statutory requirements. CONCLUSION The Audit & Management Committee is satisfied that the Company’s accounting policies, operational controls and risk management processes provided reasonable assurance that the affairs of the Company are managed in accordance with Company policies and that the Company assets are properly accounted for and adequately safeguarded. Chairman Audit & Management Committee

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REPORT OF THE AUDITORS INDEPENDENTS AUDITOR’S REPORT TO THE SHAREHOLDERS OF LANKA PHOSPHATE LTD Report on the Financial Statements We have audited the accompanying financial statements of Lanka Phosphate Limited which comprise the Balance Sheet as at 31st March 2011 and the Income Statement, the Statement of Changes in Equity and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory notes . The financial statement of the company as of 31st March 2010 were audited by another auditor whose report dated 20th August 2010 expressed an unqualified opinion on these statements. Management’s Responsibility for the Financial Statements. Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. The responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are responsible in the circumstances. Scope of Audit and Basis of Opinion Our responsibility is to express an opinion on these financial statements based on our audit. Except as discussed in the following paragraph, we conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. We therefore believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended March 31, 2011 and the financial statements give a true and fair view of the Company’s state of affairs as at March 31, 2011 and of its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards. Report on Other Legal and Regulatory Requirements In our opinion these financial statements also comply with the requirements of section 151 (2) of the Companies Act No 07 of 2007.

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LANKA PHOSPHATE LIMITED INCOME STATEMENT

FOR THE YEAR ENDED 31ST MARCH 2011

2010/2011 2009/2010 Note Rs. Rs.

(Restated) Revenue 3 393,067,883.46 351,301,370

Cost of sales (171,421,962.84) (150,893,463) Gross profit 221,645,920.62 200,407,907

Other income 4 33,295,084.70 30,838,454 254,941,005.32 231,246,361

Distribution costs (2,700,015.75) (4,658,925) Administrative expenses (125,067,750.11) (119,173,600) Profit from operation 5 127,173,239.46 107,413,836

Finance costs 6 (1,172,459.20) (939,997) Profit before taxation 126,000,780.26 106,473,839

Tax expense 7 (43,032,618.63) (43,153,618)

Net profit for the year 82,968,161.63 63,320,220

Earnings per share 8 11.44 8.73

The accounting policies and notes from 1 to 22 to the financial statements form an integral part of these financial statements.

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LANKA PHOSPHATE LIMITED BALANCE SHEET AS AT 31ST MARCH 2011

31.03.2011 31.03.2010

Note Rs. Rs. Assets (Restated) Non-Current Assets Property, plant and equipment 9 46,043,415.27 40,591,328 Investment in equity 10 1,000,000.00 1,000,000 Investment in treasury bonds 887,207.89 - Long term loan 11 3,931,257.53 6,559,498 Goodwill 12 6,192,052.00 7,430,224 Deferred taxation 10,542,400.49 7,124,790

68,596,333.18 62,705,840 Current Assets Inventories 13 40,653,986.05 55,454,388 Trade receivables 31,198,224.86 33,917,886 Deposits, prepayments and other receivables 14 65,318,940.72 59,144,416 Long term loan receivable within one year 11 2,628,240.00 2,628,240 Short term deposits 240,190,026.67 200,176,830 Cash and cash equivalent 15 50,278,309.54 21,329,705

430,267,727.84 372,651,465 Total Assets 498,864,061.02 435,357,305

Equity and Liabilities Capital and Reserves Stated capital 16 72,510,000.00 72,510,000 Retained profit 339,432,103.53 266,463,942 Total Equity 411,942,103.53 338,973,942

Non-Current Liabilities Retirement benefit obligations 17 51,882,087.32 49,314,545 Current Liabilities Trade payable 3,928,609.00 2,888,453 Commissioner general of inland revenue 13,783,745.58 33,991,718 Other payables and accrued expenses 18 11,218,847.71 8,348,643 Bank overdrafts 6,108,667.88 1,840,004

35,039,870.17 47,068,818 Total Equity and Liabilities 498,864,061.02 435,357,305

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I certify that the financial statements also comply with the requirements of the Companies Act No 07 of 2007.

Finance Manager

The Board of Directors is responsible for the preparation and presentation of these financial statements.

Approved and signed for and on behalf of the Board

Director Director Date: 28th July 2011


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LANKA PHOSPHATE LIMITED STATEMENT OF CHANGES IN EQUITY


Stated Capital Retained Profit Total Equity

Rs. Rs. Rs. Balance as at 01.04.2009 72,510,000.00 215,493,310.00 288,003,310.00

Net profit for the year - Restated - 63,320,220.26 63,320,220.26

Effect in changes of assumptions-gratuity - (10,349,588.36) (10,349,588.36)

Dividend paid - (2,000,000.00) (2,000,000.00)

Balance as at 31.03.2010-Restated 72,510,000.00 266,463,941.90 338,973,941.90

Net profit for the year - 82,968,161.63 82,968,161.63

Dividend paid - (10,000,000.00) (10,000,000.00)

Balance as at 31.03.2011 72,510,000.00 339,432,103.53 411,942,103.53 Restatement: During the financial year 2009/2010 company has over depreciated its building and amounted to Rs. 1,970,305.88 which has been corrected during the year.


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LANKA PHOSPHATE LIMITED CASH FLOW STATEMENT


31.03.2011 31.03.2010

Note Rs. Rs. Restated

Cash Flow from Operating Activities Profit before taxation 126,000,780.26 106,473,839

Adjustments for ; Depreciation 5,994,451.28 7,835,522 Retiring Benefit Obligations 7,884,149.85 7,424,214 Amortization of goodwill 1,238,172.00 1,238,172 Recognized actuarial loss 3,509,604.06 - Interest income (31,812,781.89) (30,119,025) Dividend income (450,000.00) (500,000) Operating profit before working capital changes 112,364,375.56 92,352,722

Working Capital Changes (Increase)/decrease inventories 14,800,401.95 16,235,892 (Increase)/decrease in trade receivables 2,719,661.14 284,640 (Increase)/decrease in deposits, prepayments and other receivables (10,792,825.53) (13,237,842) Increase/(decrease) in trade payables 1,040,156.00 (2,062,589) Increase/(decrease) in other payables and accrued expenses 2,870,204.97 190,238 Cash generated from operations 123,001,974.09 93,763,061

Income tax/ESC/WHT paid (66,658,201.23) (11,147,256) Payment of retirement benefit obligation (8,826,212.00) (4,974,127) Net cash flow from operating activities 47,517,560.86 77,641,678

Cash Flow from Investing Activities Purchase of property, plant and equipment (9,357,106.95) (1,720,805) Additions in capital work-in-progress (2,089,431.98) (1,399,130) Additions in investment (862,080.00) - Additions in short term deposits (40,013,196.64) (73,019,130) Interest received 36,405,955.37 30,119,025 Dividend received 450,000.00 500,000

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Loan capital recovered 2,628,240.00 2,628,240 Net cash flow from investing activities (12,837,620.20) (42,891,800)

Cash Flow from Financing Activities Dividend paid (10,000,000.00) (2,000,000) Net cash used in financing activities (10,000,000.00) (2,000,000)

Net changes in cash and cash equivalents 24,679,940.66 32,749,878

Cash and cash equivalents at beginning of the year 19.1 19,489,701.00 (13,260,177)

Cash and cash equivalents at the end of the year 19.2 44,169,641.66 19,489,701

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LANKA PHOSPHATE LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2011 1 CORPORATE INFORMATION 1.1 Domicile and Legal Form

Lanka Phosphate Ltd was incorporated on July 10, 1992 as a Limited Liability Company under the Companies Act No. 17 of 1982 in terms of the conversion of Public Corporations or Government Owned Business undertakings in to Public Companies Act No. 23 of 1987 to take over the Eppawala Phosphate project of the State Mining and Mineral Development Corporation. However, subsequently the Company has re-register under the Companies Act No. 07 of 2007

The registered office of the company is located at No. 73 1/1 New Kelani Bridge Road, Colombo-14 and Rock Phosphate (Apatite) deposit is located at Eppawala.

1.2 Principal Activities and Nature of Operations

The principal activities of the company are excavating, processing and selling of Rock Phosphate, which is used as a fertilizer for perennial agricultural crops.

1.3 Parent and Ultimate Parent Company The company’s issued shares are fully owned by the Secretary to the Treasury on behalf of the Government of Sri Lanka.

1.4 Number of Employees The number of employees at the end of the year was 307 (2010-294)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 ACCOUNTING CONVENTION

The Financial Statements of the Company are prepared in accordance with Generally Accepted Accounting Principles and the applicable Sri Lanka Accounting Standards lay down by the Institute of Chartered Accountants of Sri Lanka. The Accounting Policies have been applied by the company consistent with that of the previous year, and previous year figures and phrases have been rearranged where necessary to confirm to the current year’s presentation.

These Financial Statements presented in Sri Lanka Rupees have been prepared on the historical cost basis.

2.2 ASSETS AND BASES OF THEIR VALUATION 2.2.1 Property Plant, and Equipment

Items of Property, Plant and Equipment are stated at cost or valuation less accumulated depreciation, which is provided on a Straight-Line Basis.

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

Expenditure incurred for the purpose of acquiring, extending or improving assets of a permanent nature by means of which to carry on the business or to increase the earning capacity of the business has been treated as capital expenditure.

Depreciation The principal annual rates used for Depreciation are as follows;

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Building 04% Plant and Machinery 10% Laboratory Equipment 10% Electrical Equipment 10% Miscellaneous Assets 10% Motor Vehicle 20% Office Equipment 20% Furniture and Fittings 20%

Computer Hardware and Software 20%

As per the revised SLAS 18, Depreciation is provided on a pro-rata basis on the assets purchased / disposed of during the year.

2.2.2 Operating Lease

The Operating lease is for a period of 30 Years. The rentals paid are charged to Income Statement.

2.2.3 Inventories Stocks of Phosphate are valued on a weighted average basis, based on the cost of production. It has been the practice to apportion 40% of the costs of the Mine to “Crushed” production (Unprocessed) and to apportion the balance 60% to “Ground” production (Processed) when valuing the Phosphate stocks.

General stocks are stated at the lower of cost and net realizable value. In general, cost is determined on a FIFO basis. Net realizable value is the price at which stock can be sold in the ordinary course of business after allowing for the cost of realization. Provision is made where necessary for obsolete, slow- moving and defective stocks.

2.2.4 Short Term Investments Short-Term Investments are stated at lower of cost and market value. 2.2.5 Trade and Other Receivables

Trade and Other Receivables are stated at the value estimated to be realized after providing for Bad and doubtful debts.

2.2.6 Cash and Cash Equivalents

Cash and Cash Equivalents comprise cash balances, stamp float and demand deposits. 2.3 LIABILITIES AND PROVISIONS 2.3.1 Provision for Taxation Income Tax

Income Tax on the profit or loss for the Year comprises current and Deferred Tax. Income Tax is recognized in the Income Statement.

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

Deferred Tax

Deferred Tax is provided using the Balance Sheet liability, providing for timing differences between the carrying amount of assets and liabilities for financial reporting purpose and the amounts used for Taxation purposes.

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2.3.2 Retiring Gratuity The liability recognized in the balance sheet is the present value of the defined benefit obligation at the balance sheet date using the projected unit credit method. However, according to the payment of Gratuity Act, No. 12 of 1983, the liability arises only on the completion of 5 years of continued service. The gratuity liability is not externally funded.

2.3.3 Payables and Provisions

Trade and Other Payables are stated at their cost.

A Provision is recognized in the Balance sheet when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefit will be required to settle the obligation.

2.4 INCOME STATEMENT 2.4.1 Turnover

The company’s turnover comprises of sale of Eppawela Rock Phosphate (ERP) and, High grade Eppawala Rock Phosphate (HERP)

2.4.2 Revenue and Expenses Revenue from the sale of Phosphate is recognized in the Income Statement when the significant risks rewards of ownership have been transferred to the buyer.

Gain and Losses of revenue nature on the disposal of property, plant and equipment have been accounted for in the Income Statement. Rentals on operating leases are recognized in the Income Statement in the Year to which they relate. All expenditures incurred in running of the business and maintaining the capital assets in a state of efficiency has been charged to revenue in arriving the profit for the year.

2.4.3 Net Financing Income

Net Financing Income comprises of interest income from Fixed Deposits, Treasury Bills, Treasury Bonds, Loan given to Bogala Graphite Lanka Limited and Staff Loans. Interest income is recognized in the Income Statement as it accrues, taking in to account the effective yield on the asset.

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

2.5 CASH FLOW

The Cash Flow Statement has been prepared using the “Indirect Method”. Interest paid are classified as operating cash flow, interest and dividend received are classified as investing cash flows while dividends paid are classified as Financing cash flows for the purpose of presenting of cash flow statement.

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9. Property, Plant and Equipment

Buildings

Plant & Machinery

Motor Vehicles

Office Equipment

Electrical Equipment

Furniture & Fittings

Laboratory Equipment

Computer Hardware

& Software Miscellaneous WIP Total Cost Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Balance at the beginning of the year 32,838,447.65

32,268,999.00

25,803,221.00

1,889,607.00

2,094,235.00

3,196,103.75 407,463.00

8,098,300.40 8,328,951.81

4,500,220.10

119,425,548.71

Additions -

142,420.00

8,050,000.00

106,400.00

135,920.00

292,406.95

309,800.00 320,160.00

2,089,431.98

11,446,538.93

Balance at the end of the year 32,838,447.65

32,411,419.00

33,853,221.00

1,996,007.00

2,230,155.00

3,488,510.70 407,463.00

8,408,100.40 8,649,111.81

6,589,652.08

130,872,087.64

Accumulated Depreciation Balance at the beginning of the

year-Restated 14,793,133.12

22,294,964.18

24,758,638.17

1,464,687.34

1,433,713.02

2,842,526.16 372,393.14

5,990,052.31 4,884,113.65

-

78,834,221.09

Charge for the year 1,313,537.90

1,887,778.00

862,499.96

103,696.34

116,603.85

165,335.95 17,589.96

920,754.90 606,654.42

-

5,994,451.28


24,182,742.18

25,621,138.13

1,568,383.68

1,550,316.87

3,007,862.11 389,983.10

6,910,807.21 5,490,768.07

-

84,828,672.37

Written Down Value


8,228,676.82

8,232,082.87

427,623.32

679,838.13

480,648.59 17,479.90

1,497,293.19 3,158,343.74

6,589,652.08

46,043,415.27

Balance at the beginning of the year (Restated)

18,045,315

9,974,035

1,044,583

424,920

660,522

353,578 35,070

2,108,248 3,444,838

4,500,220

40,591,328

23

2010/2011 2009/2010 Rs. Rs.

Restated 3. Revenue

ERP -Eppawala Rock Phosphate 340,940,268.46 306,209,705 HERP - High Grade Eppawala Rock Phosphate 52,127,615.00 45,091,665

393,067,883.46 351,301,370 4. Other Income

Interest income 31,812,781.89 30,119,025 Dividend income 450,000.00 500,000 Miscellaneous income 1,032,302.81 219,429

33,295,084.70 30,838,454

5. Profit from operation is stated after charging the following:

Staff costs 145,638,083.78 141,082,063 Directors fees 84,000.00 191,500 Directors expenses 218,333.00 240,000 Depreciation 5,994,451.28 7,835,521 Audit fee 337,348.40 288,660

6. Finance Costs Debit tax 1,172,459.20 801,636 Overdraft interest - 138,361

1,172,459.20 939,997

7. Income Tax Income tax on profit for the year (Note-10.1) 46,450,229.12 42,471,119 Transferred from deferred tax (3,417,610.49) 682,499

43,032,618.63 43,153,618 7.1 Reconciliation of Income Tax

Profit before taxation 126,000,780.26 106,473,839 Non business income (32,262,781.89) (25,211,019) Aggregate disallowable items 38,079,823.02 36,277,638 Aggregate allowable expenses (32,289,773.40) (25,257,547) Interest income/profit on disposal of fixed assets 32,047,771.00 27,269,853 Taxable profit 131,575,818.99 119,552,764

Income tax at 35% 46,051,536.65 41,843,467 Social responsibility levy 1.5% 690,773.05 627,652 Notional tax credit (234,988.78) - Over provision in the prior year (57,091.80) -

46,450,229.12 42,471,119

24

8.0 Earnings per share The calculation of the basic earnings per share is based on the profit attributable to ordinary shareholders of the company and the weighted average number of ordinary shares outstanding during the year as follows:

2010/2011 2009/2010 Rs. Rs. Restated Profit attributable to ordinary shareholders 82,968,161.63 63,320,220 Weighted average number of ordinary shares outstanding during the year

7,251,000 7,251,000

Basic earnings per share 11.44 8.73

31.03.2011 31.03.2010 Rs. Rs.

10. Investment in GSMB Technical Services (Pvt) Ltd 100,000 Ordinary shares, Rs.10 each 1,000,000.00 1,000,000

11. Long Term Loan -Bogala Graphite Lanka Limited Balance at the beginning of the year 10,074,851.00 12,703,091 Installments received during the year (2,628,240.00) (2,628,240)

7,446,611.00 10,074,851 Installments received in advance (887,113.47) (887,113)

6,559,497.53 9,187,738 Amount receivable within one year (2,628,240.00) (2,628,240) Balance at the end of the year 3,931,257.53 6,559,498

12. Goodwill The excess of issued share capital of the Company over the net identifiable assets of the business converted to a company at the date of conversion is the balance sheet as goodwill, arising on conversion. The goodwill so recognized, is amortized over a period of 20 years on a straight line basis, commencing from the year ended 31.03.1997.

Balance at the beginning of the year

7,430,224.00

8,668,396

Amortization for the year (1,238,172.00) (1,238,172) Balance at the end of the year 6,192,052.00 7,430,224

25

13. Inventories Trade stocks 5,576,908.39 20,511,996 General stocks 35,664,915.18 35,530,230

41,241,823.57 56,042,226 Provision for obsolete general stocks (587,837.52) (587,838)

40,653,986.05 55,454,388

14. Deposits, Prepayments and Other Receivables Staff loans and advances 51,958,276.64 42,976,444 Deposit and prepayments 3,364,632.25 1,485,048 Interest receivables 9,996,031.83 14,614,333 Pre-operation expenses-SSP - 68,591

65,318,940.72 59,144,416 15. Cash and Cash Equivalent

Repo -Bank of Ceylon 44,600,000.00 - Stamp float 23,702.00 24,062 Cash at bank 5,569,607.54 21,220,643 Cash in hand 85,000.00 85,000

50,278,309.54 21,329,705

16. Stated Capital Issued and fully paid 7,251,000 Ordinary shares 72,510,000.00 72,510,000

17. Retirement Benefit Obligations Balance at the beginning of the year 49,314,545.41 36,514,870 Charged for the year 3,199,268.04 2,677,281 Interest cost 4,684,881.81 4,746,933

57,198,695.26 43,939,084 Gratuity payments during the year (8,826,212.00) (4,974,127) Effect in changes of assumptions 3,509,604.06 10,349,588 Balance at the end of the year 51,882,087.32 49,314,545

The following assumptions have been taken in the computation of gratuity as per SLAS No.16.

Expected annual average salary increment 10% 10% Discount Rate 9.50% 13%

26

18. Other Payables and Accrued Expenses WHT payables

201,133.00 6,500

Accrued expenses 10,162,670.87 7,778,727 Other Payables 855,043.84 563,416 11,218,847.71 8,348,643 19. Note to the Cash Flow Statement 19.1 Cash & Cash Equivalent at the beginning of the year Stamp float 24,062.00 20,417 Cash at bank 21,220,643.00 1,245,485 Bank overdraft (1,840,004.00) (14,596,079) Cash in hand 85,000.00 70,000 19,489,701.00 (13,260,177) 19.2 Cash & Cash Equivalent at the End of the year Repo – Bank of Ceylon 44,600,000.00 -

Stamp float 24,062.00 20,417 Cash at bank 21,220,643.00 1,245,485 Bank overdraft (1,840,004.00) (14,596,079) Cash in hand 85,000.00 70,000 19,489,701.00 (13,260,177) 20. Contingent liabilities/Contingent Assets

The company has no material contingent liabilities/assets except the outcome on following pending cases as at the balance sheet date.

21. Event after the balance sheet date

No circumstances have arisen since the balance sheet date which requires adjustments to or disclosure in the financial statements.

22. Related Party Transactions 22.1 Transaction with Key Management Personnel

Related party includes key management personnel defined as those persons having authority & responsibility for planning, directing & controlling the activities of the company. Key management personnel include the directors of the Company. Compensation to key management personnel for the year was as follows.

2010/2011 2009/2010 Rs. Rs.

Short term benefits 302,333.00 431,500.00 22.2 Transaction with other related parties

During the financial year, no parties and transaction were identified as related parties defined under the Sri lanka Accounting Standards No 30.

27

REVIEW OF OPERATIONS A brief review of operations and operational results for the year 2010/11 and the future plans of the company are presented as follows. 01. PROFITABILITY

Profit before taxation for the year 2010/11 is Rs. 126.00 millions. It is an over 18.3% increase when compare to the previous year of Rs. 106.5 million. The profit after tax too for the year has gone up by 19.65 million which is a sustainable growth of over 30%.

02. NET ASSETS

The company is being able to maintain a healthy Net Assets position continuously. The value of net assets at the end of the last year of Rs.339 million had been increased up to Rs. 412 million by the end of current year.

28

03. REVENUE Company achieved gross revenue of Rs. 393.1 million which includes the sale of 44832.7 mt of ERP and 4778.75 mt of HERP for the year. It is over 6% achievement against the targets for the year. It is to inform that the company has been able to achieve the above without doing any price revisions during the year.

29

CAPITAL EXPENDITURE

The capital expenditures incurred during the last five years are as follows;

Acquisition & Capital Work-In-Progress 2006/07- Rs. 3,158,965/= 2007/08- Rs. 12,651,515/= 2008/09- Rs. 1,078,048/= 2009/10- Rs. 1,720,805/= 2010/11- Rs. 11,446,539/= The Company has planned to increase the capital expenditure in the coming years by way of enhancing the existing storage facilities, production capacities , replacement of old vehicles etc.

04. PAYMENTS TO GENERAL TRESURY & GOVERNMENT INSTITUTIONS

Being a state company & having 100% ownership of shares, the total dividend declared by LPL is paid to the General Treasury of Sri lanka. Such dividend declared and paid during the year is Rs. 10.0 million. The company is liable to pay income tax on the net taxable income and also several other taxes and levies on different basis to other Government Institutions. The Royalty is paid 4% on sales value of the production to Geological Survey & Mining Bureau quarterly & the payments to current year is Rs. 16.98 millions.

Summary of such payments for last six years are as follows.

30

FUTURE PLANS FOR LANKA PHOSPHATE LTD

1. MANUFACTURE OF SINGLE SUPER PHOSPHATE FERTILIZER

Lanka Phosphate Limited (LPL) having recognized the importance and national need

of the manufacture of more soluble type phosphate fertilizer for annual crops is in the

process of implementing its own project proposal on the manufacture of Single Super

Phosphate (SSP) fertilizer for the total fulfillment of the country’s requirements of

phosphate fertilizer with the setting up SSP Mixing Plant and the dedicated sulfuric

acid production plant. Having firmly established the agronomic efficiency of SSP

fertilizer manufactured out of Eppawala Rock Phosphate with the conclusion of

collaborative long term research conducted by the Rice Research Institute and

followed by simultaneous island wide field experiments commencing far back in 2002

covering 100 experiments plots representing different soil conditions of Sri Lanka

paved the way for finalizing plans on the above project.

We have obtained the necessary approval for the implementation of the above project

after completion of the Environmental Impact Assessment Report (EIAR) from the

Central Environmental Authority of Sri Lanka (CEA) with detailed investigation

carried out into the ecological, hydrological, sociological aspects, noise and vibration

and air quality of the area. However the decision in this project is remained at Cabinet

level.

2. PURCHASE OF A BRAND NEW GRINDING MILL FOR ROCK

PHOSPHATE GRINDING

We are in the process of purchasing a brand new grinding mill to enhance the

production as medium term measure to cater the current demand of phosphate.

Necessary procurement procedures are being followed at present.

31

3. HUMAN RESOURCE DEVELOPMENT AND PRODUCTIVITY

ENHANCEMENT

Company acts on the firm belief that development of human resources and a satisfied

work force is of paramount importance for higher productivity. We have given

priority to staff training programmes to develop the necessary skills for the new

developments in the respective fields.

The officers of supervisory and middle management levels will be given opportunities

to attend training courses both locally and overseas. Active implementation of

productivity enhancement techniques such as continued practice of 5-S, Quality

Circles and IT development will be encouraged company-wide.

4. EXPANSION OF EXISTING STORAGE FACILITIES

At present our storage facilities are not adequate to store finished goods. Therefore,

we are in the process of increasing the storage facilities.

Deputy General Manager Lanka Phosphate Ltd

32

NOTICE OF THE MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Shareholders of Lanka Phosphate Limited will be held on 23rd September 2011 at 4.00pm at the Office of Lanka Phosphate Ltd (State Company) at No. 73 1/1, New Kelani Bridge Road, Colombo 14 for the following purposes:

1. To approve the Minutes of the Annual General Meeting of Lanka Phosphate Ltd held on 29th September 2010.

2. To receive and adopt the Annual Report 2011 sent herewith

3. To receive, consider and adopt the Financial Statement for the year ended 31st March 2011 and the Report of the Auditors thereon.

4. To record the retirement of and implementation of the election/re-election

of Directors as provided for in Article 92 and 93 of the Company taking in to account that the retiring Directors are willing and eligible to be re-elected

5. To appoint Auditors for the Company for year 2011 and authorized the Directors to determine their remuneration.

6. To consider any other business, motion or resolution of which due notice has been given.

By Order of the Board,

FINANCIAL SERVICES AND COMMERCIAL AGENCIES (PRIVATE) LIMITED Secretaries to Lanka Phosphate Limited

Notes: A shareholder who is entitled to attend and vote at a General Meeting is entitled to appoint a proxy to attend and vote instead of him/her and the proxy need not be a member of the company. A form of proxy is attached for this purpose. The instrument appointing a proxy must be deposited at No. 28, Rosemead Place, Colombo 07, together with the resolutions referred in above item 4 (if any) not less than 48 hours before the time fixed for the meeting.

33

FORM OF PROXY

Lanka Phosphate Ltd

P R O X Y I/We ……………………………………………………………………………………

Of ……………………………………………………………………………………….

Being a member of the above named Company hereby appoint …….................. ………………………………………….of …………………………………………………………......or

Failing him …………………………………………………………………………………………….....

Of ………………………………………………………………………………………………………….

As my/our proxy to vote for me/us an on my/our behalf at the Annual General Meeting of the

company to be held on 23rd September 2011 and at any adjournment thereof and at every poll which

may be taken in consequence thereof.

Signed this ………………………………...day of …………………………..two thousand and eleven

Signature ……………………………..

NOTE

A Proxy may vote as he thinks fit on any resolution brought before the Meeting

A Proxy need not to be a Member of the Company

Instructions as to completion are noted on the reverse hereof

34

Documents

iS ]i ,xld fmdiafmag$ iud.u tiuaWf;fggl;l ,yq;if ngh]Ngl; epWtdk … · 2015. 1. 1. · 2010/11 2009/10 2008/09 ... dominate 60 percent of the use of Eppawala phosphate, whereas rubber