Orient Garments Limited - Introduction

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Orient Garments Limited

Introductory Document

for listingof 54,916,656 Ordinary Voting Shares of the Company

on Diri Savi Board

of the Colombo Stock Exchange

The delivery of this Introductory Document shall not under any circumstance constitute a

representation or create any implication or suggestion, that there has been no material

change in the affairs of the Company since the date of this Introductory Document.

If you are in any doubt regarding the contents of this document you should consult yourstockbroker, bank manager, lawyer or any other professional advisor.

This Introductory Document is dated 6th

June 2011.

For further inquiries, please contact the Managers to the Introduction.

MANAGERS TO THE INTRODUCTION

NAVARA CAPITAL PVT LIMITED





Responsibility for the Content of the Introductory Document

This Introductory Document has been prepared from information provided by Orient

Garments Limited and other publicly available information. The Directors of the

Company, collectively and individually, having made all reasonable inquiries, confirmthat to the best of their knowledge and belief, the information contained herein is true

and correct in all material respects and that there are no other material facts, the

omission of which, would make any statement herein misleading.

No person is authorized to give any information or to make any representations not

contained in this Introductory Document and if given or made, any such information or

representation must not be relied upon as having been authorized by the Company.

Copies of the Introductory Document may be obtained from the Manager or any

member firm and trading member firm of the Colombo Stock Exchange as specified in

section 2.4 on page 3 titMember Firms and Trading Member Firms of the Colombo

Stock Exchange

The Colombo Stock Exchange (CSE) has taken reasonable care to ensure full and fair

disclosure of information in this Introductory Document. However, the CSE assumes

no responsibility for the accuracy of the statements made, opinions expressed or

reports included in this Introductory Document.



Abbreviations

Bn Billion

BOI Board of Investment of Sri Lanka

CSE Colombo Stock Exchange

EGM Extra Ordinary General Meeting

EU European Union

GSP Generalized System of Preferences

GSP + Generalized System of Preferences Plus

GYT Garments, yarn & other textile items

ICTAD Institute of Construction, Training and DevelopmentJAAF The Joint Apparel Association Forum Sri Lanka

Mn Million

N/A Not applicable

OGL Orient Garments Limited

OGL Group Orient Garments Limited and its subsidiaries, Stafford Orient

(Pvt) Limited and Priority Garments (Pvt) Limited

PGL Priority Garments (Pvt) Limited

Rs. Sri Lankan Rupees

SOL Stafford Orient (Pvt) Limited

Glossary of Terms

Board/ Board of Directors The Board of Directors of Orient Garments Limited

Company/ The Company Orient Garments Limited

Finco Group Finco Holdings (Pvt) Limited, Finco Investments (Pvt) Limited andsubsidiaries of Finco Investments (Pvt) Limited and Finco

Holdings (Pvt) Limited

Ordinary Share(s) Ordinary Voting Share(s) of the Company





Table of Contents

1. Corporate Information .................................................................................................. 1

2. Information Relevant to the Introduction ...................................................................... 3

2.1. Introduction of Ordinary Voting Shares for Listing ................................................................ 3

2.2. Copies of the Introductory Document ................................................................................... 3

2.3. Managers to the Introduction ................................................................................................ 3

2.4. Member Firms and Trading Member Firms of the Colombo Stock Exchange ....................... 3

3. Overview of the Apparel Industry .................................................................................. 6

3.1. Introduction ............................................................................................................................ 6

3.2. History of the Sri Lankan Textile and Garment Industry ........................................................ 6 3.3. Multi Fibre Agreement ........................................................................................................... 8

3.4. Impact of the Global Recession .............................................................................................. 8

3.5. Generalized System of Preferences ..................................................................................... 10

3.6. Future Outlook of the Sri Lankan Garment Manufacturing Industry ................................... 11

4. Company Profile .......................................................................................................... 13

4.1. Introduction .......................................................................................................................... 13

4.2. Corporate Vision and Mission .............................................................................................. 15

4.3. History .................................................................................................................................. 16

4.4. Product Range and Clientele ................................................................................................ 17

4.5. Production Facilities ............................................................................................................. 17

4.6. Marketing Philosophy .......................................................................................................... 19

4.7. Financial Highlights ............................................................................................................... 20

4.8. Key Financial Ratios .............................................................................................................. 23

4.9. Loans, Overdrafts and Other Borrowings ............................................................................. 23

4.10. IT Infrastructure.................................................................................................................... 24

4.11. Accreditation and Certifications ........................................................................................... 25

5. Future Strategies and Risk Analysis .............................................................................. 26

5.1. Future Strategies .................................................................................................................. 26

5.2. Underlying Assumptions on which future strategies are based on ..................................... 27

5.3. Analysis of Associated Risks pertaining to the future strategies ......................................... 27



6. Human Resources ........................................................................................................ 29

6.1. Staff Strength........................................................................................................................ 29

6.2. Corporate Management Team ............................................................................................. 29

6.3. Collective Agreements and Labour Unions .......................................................................... 30

6.4. Statement Managing Director/ Chief Executive Officer .................................................... 31

7. Corporate Structure .................................................................................................... 32

7.1. Share Capital Structure ........................................................................................................ 32

7.2. Other Information as to the Share Capital ........................................................................... 32

7.3. Shareholding Structure ........................................................................................................ 34

7.4. Group Structure of Orient Garments Limited ...................................................................... 36

7.5. Board of Directors ................................................................................................................ 40 7.6. Statement Board of Directors ........................................................................................... 43

7.7. ......................................................................................................... 43

8. Other Information Relating to the Company ................................................................ 44

9. Corporate Governance Practices .................................................................................. 45

10. Statutory Declaration .................................................................................................. 47

11. Statutory and Other General Information .................................................................... 48

Annexure I - Interim Financial Statements for the 11 months ended February 28, 2011 ......... 50

Annexure II - Auditors Report and Financial Statements as at March 31, 2010 ....................... 60

Annexure III - Auditors Report and Financial Statements as at March 31, 2009 ...................... 79

Annexure IV - Auditors Report and Financial Statements as at March 31, 2008 ....................... 92



Introductory Document Orient Garments Limited 1

1. Corporate Information

Company Name


Legal Form

The Company was incorporated in Sri Lanka on March 4th

, 1982 as a private limited

liability company under the Companies Ordinance No 51 of 1938 of Sri Lanka, re-

registered under the Companies Act No. 07 of 2007 on November 14th

, 2008 and

subsequently converted to a public limited liability company on November 10th

2010.

Company Registration Number

PV 9346 PB

Main Line of BusinessManufacturing and exporting of garments

Registered Office

49/16, Iceland Building

Galle Road

Colombo 03

Sri Lanka.

Business Office

78 B, Polgasovita Road

Mattegoda

Sri Lanka.

Tel: +94 11 5387222 Fax: +94 11 5553412

Board of Directors

Mr. Sarath Chandra Weerasooria Non-Executive Chairman

Mr. Rajinda Priyanjith Weerasooria Managing Director

Mr. Harsha Mahendra de Saram Executive Director

Mr. Sunil Karunanayaka Non-Executive Independent Director

Mr. Dinesh de Zoysa Non-Executive Independent Director

Company Secretary

P W Corporate Secretarial (Pvt) Limited

3/17, Kynsey Road

Colombo 08

Sri Lanka.

Tel: +94 11 4640360 3, Fax: +94 11 4740588



2 Introductory Document Orient Garments Limited

Company Auditors

Amerasekera & Co.

Chartered Accountants

12, Rotunda Gardens

Colombo 03

Sri Lanka.

Bankers to the Company

Bank of Ceylon

Off shore Banking Division

No. 4, Bank of Ceylon Mw

Colombo 01

Sri Lanka.

Hatton National Bank PLC

Corporate Branch

Level 17, HNB Towers

479, T B Jayah Mawatha

Colombo 10

Sri Lanka.

Commercial Bank of Ceylon PLC

Foreign Branch

No 21, Bristol Street

Colombo 01Sri Lanka.

Company Lawyers

Mrs. Avanthika Rukshani Senarathne

49/16, Iceland Building

Galle Road

Colombo 03

Sri Lanka.




2. Information Relevant to the Introduction

2.1. Introduction of Ordinary Voting Shares for Listing

This Introductory Document dated 6th

June 2011 is published for the purpose of

obtaining a listing on the Diri Savi Board of the Colombo Stock Exchange for the Ordinary

Voting Shares of Orient Garments Limited.

2.2. Copies of the Introductory Document

Copies of the Introductory Document will be obtained from the Managers to the

Introduction or members and trading members of the Colombo Stock Exchange.

2.3. Managers to the Introduction

Navara Capital (Pvt) Limited

No

Colombo 07

Sri Lanka.

Tel: +94 11 4378387, Fax: +94 11 2698524

E-mail: [email protected]

2.4. Member Firms and Trading Member Firms of the Colombo Stock Exchange

Acuity Stockbrokers (Pvt) Limited

Level 6, Acuity House

53, Dharmapala Mawatha

Colombo 03.

Tel: 2206206

Fax: 2206298/9


Asia Securities (Pvt) Limited

Level 21, West Tower

World Trade Center

Echelon Square

Colombo 01.

Tel: 2423905, 5320000

Fax: 2336018


Bartleet Mallory Stockbrokers (Pvt) Limited

Level "G", Bartleet House

65, Braybrooke Place

Colombo 02.

Tel: 5220200

Fax: 2434985


Capital Trust Securities (Pvt) Limited

42, Mohamed Macan Marker Mawatha

Colombo 03.

Tel: 5335225

Fax: 5365725





CT Smith Stockbrokers (Pvt) Limited

4-14, Majestic City

10, Station Road

Colombo 04.

Tel: 2552290-4

Fax: 2552289


D N H Financial (Pvt) Limited

Level 16, West Tower

World Trade Center

Colombo 01.

Tel: 5732222

Fax: 5736264


Ceylinco Stockbrokers (Pvt) Limited

Level 9 - Ceylinco House

69, Janadhipathi Mawatha

Colombo 01.

Tel: 4714300, 4714388, 4714389

Fax: 2387228


J B Securities (Pvt) Limited

150, St. Joseph Street

Colombo 14.

Tel: 2490900, 0772490900

Fax: 2430070, 2446085, 2447875


John Keells Stockbrokers (Pvt) Limited

130, Glennie Street

Colombo 02.

Tel: 2306250, 2342066-7, 2446694-5

Fax: 2326863, 2342068


Lanka Securities (Pvt) Limited

228/2, Galle Road

Colombo 04.

Tel: 4706757, 2554942

Fax: 4706767


NDB Stockbrokers (Pvt) Limited

5th Floor, NDB Building

40, Navam MawathaColombo 02.

Tel : 2314170-8

Fax: 2314180


SC Securities (Pvt) Limited

2nd

Floor

55, D.R. Wijewardena MawathaColombo 10.

Tel : 4711000, Fax: 2394405


Somerville Stockbrokers (Pvt) Limited

137, Vauxhall Street

Colombo 02.

Tel: 2329201-5, 2332827, 2338292-3

Fax: 2338921


Capital Alliance Securities (Pvt) Limited

Level 5, "Millennium House"

46/58 Navam Mawatha

Colombo 02

Tel: 2317777, Fax: 2317788


Heraymila Securities Limited

Level 8, South Wing

Millennium House

46/58 Nawam Mawatha

Colombo 02

Tel: 2359100, Fax: 2305522


First Guardian Equities (Pvt) Limited

32nd Floor, East Tower,

World Trade Centre, Echelon Square

Colombo 01

Tel: 5884400

Fax: 5884401





SKM Lanka Holdings (Pvt) Limited

377/3, Galle Road

Colombo 03

Tel: 2372413-5

Fax: 2372416


SMB Securities (Pvt) Limited

47, Dharmapala Mawatha

Colombo 03

Tel: 5539593

Fax: 5510750


IIFL Securities Ceylon (Pvt) Limited

27th Floor, East Tower


Colombo 01.

Tel. 011 2333000, Fax: 011 2333383

E-Mail: [email protected]

TKS Securities (Pvt) Limited

19-01, East Tower


Colombo 1.

Tel: 7857799, Fax: 7857857


Richard Pieris Securities (Pvt) Limited69, Hyde Park Corner

Colombo 02.

Tel: 7448900, Fax: 2675064


Claridge Stockbrokers (Pvt) LimitedNo.10, Gnanartha Pradeepa Mawatha

Colombo 08

Tel: 2697974, Fax: 2677576


New World Securities (Pvt) Limited

2nd Floor, 45/2, Braybrooke Street

Colombo 2.

Tel: 2358700/20, Fax: 2358701


Arrenga Capital (Pvt) Limited

Level 23, East Tower

World Trade Centre, Colombo 1.

Tel: 7277000 to 98, Fax: 7277099


Asha Phillip Securities Limited

Level 4, "Millennium House"

46/58, Navam Mawatha, Colombo 2.

Tel. 2429100

Fax: 2429199


Assetline Securities (Pvt) Ltd

No. 282, Kaduwela Road

Battaramulla.

Tel. 4700111, 2307366

Fax: 4700112, 2307365

E-mail:[email protected]

Taprobane Securities (Pvt) Ltd.

2nd

Floor, No. 10, Gothami Road

Colombo 08.

Tel: 5328200

Fax: 5328277





3. Overview of the Apparel Industry

3.1. Introduction

After passing through many transitional chapters the garment manufacturing sector has

reached the forefront of the Sri Lankan economy becoming the chief exporter of the

country. In 2009, Sri Lanka derived an income of nearly Rs. 376 Bn solely from exporting

garments, yarn and other textile items, which accounted for circa 46% of export

earnings.

The garment manufacturing industry of Sri Lanka contributes to many world renowned

fashion apparel brands which include, among others, To,

Burberry, Van Heusen, NEXT, Nike, Triumph, Gap, Polo Ralph Lauren, Abercrombie &

Fitch, Marks & Spencer, Liz Claiborne, and Jones New York. Garments and textile related

products manufactured in Sri Lanka encompasses shirts, blouses, dresses, pants,sweaters, jackets, briefs and lingerie, stockings, hats, terry towels, etc.

In the global apparel sphere, Sri Lanka is recognized as a sourcing country with the

strengths associated such as ownership of a prestigious international customer base,

reputation as a quality manufacturer, high compliance with international labour

regulations, competitive pricing, reputation of -

and trainable workforce.

3.2. History of the Sri Lankan Textile and Garment Industry

The history of the Sri Lankan textile and garment industry spans back to the 1950s when

the government established a few large scale textile mills to produce yarn, raw fabrics

and finished fabrics with the primary objective of curtailing textile imports. The

ownership of such mills was gradually acquired by semi-government organizations while

the industry was being upheld by emerging privately owned power-loom and hand-loom

centers which catered to the domestic market.

Resultant to the open economic policies introduced in 1977, the Sri Lankan economy

was reshaped to embrace an export oriented economic culture. The new trend

prompted the government to establish free trade zones and export processing zonesoffering a series of concessions to investors. In parallel, the government established the

Board of Investment of Sri Lanka (BOI), formerly known as the Greater Colombo

Economic Commission, to lure foreign direct investments by granting an array of tax

concessions and other government support for the establishment of business ventures

in Sri Lanka.




Sri Lanka was able to entice a considerable amount of foreign direct investments in the

garment manufacturing sector owing to the advent of tax incentives via BOI and the

concessions made available by the Multi Fibre Agreement. Later on, many Sri Lankan

entrepreneurs and corporates also forayed into this booming sector by shifting their

investments to the garment manufacturing industry from other conventional business

sectors. In this endeavour Sri Lankan entrepreneurs successfully absorbed market

intelligence and the technology brought in by foreign investors to explore opportunities

in the prosperous global fashion industry.

In the wake of new economic developments the garment and textile industry became Sri

had been

reckoned as the main foreign revenue earner for decades. In 1977, export earnings from

garments and textiles accounted for as low as 2% of total exports which increased to

28% in 1986 attaining the prominence over tea in the Sri Lankan export sector. Since

then the apparel manufacturing industry progressively penetrated into the Sri Lankaneconomy and in 2000 Sri Lanka earned 54% of its export revenue from garments, yarn &

other textile items (GYT).

The comparison of export revenue from GYT against total export revenue is indicated

below (Figure 3.1).

Figure 3.1: Annual Export Revenue from GYT

Source: Central Bank of Sri Lanka

49% 51% 53%54%

53% 52% 50% 49%46% 45%

44% 43% 46%42%

0%

10%

20%

30%

40%

50%60%

0

200

400

600

800

1,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Rs. Bn

Total exports GYT Exports GYT exports as % to total exports




3.3. Multi Fibre Agreement

In the global apparel manufacturing context, the apparel exports from developing

countries were constrained by various informal bilateral voluntary quota systems as

measures of safeguarding domestic manufacturers in developed countries. Such

restrictions were initially formalized in 1961 when the Short Term Agreement on

International Trade in Cotton Textiles was signed, followed in 1962 by the Long Term

Agreement (LTA) on International Trade in Cotton Textiles allowing developed countries

to adjust imports from the developing countries.

LTA was successively renewed and finally replaced by the Multi Fibre Agreement (MFA)

on January 1, 1974 encompassing exports of man-made (synthetic) fiber, silk blend,

vegetable fiber textiles, and apparel products in addition to cotton textiles.

The MFA regime brought a multitude of benefits to developing countries in Asia, Africa,and South America. With guaranteed sales through quotas, the garment manufacturing

industry boosted up in developing countries which had no significant garment

manufacturing industry before. After an existence of nearly twenty years, the MFA

regime was substituted by the Agreement on Textile and Clothing (ATC), which sought to

phase out quota restrictions in four phases during a time span of 10 years. The complete

abolition of quota restrictions on December 31, 2004 intensified competition and

exerted a downward pressure on prices.

As a consequence Sri Lankan apparel manufacturers encountered the challenge of

etching their presence in the competitive global garment industry which was

consolidated around a relatively small number of winners with strong capabilities.

The Sri Lankan garment manufacturing sector weathered this setback exceptionally well

and is witnessed by burgeoning export earnings from GYT which recorded nearly 40%

growth during the 6-year duration from the abolition of the MFA.

3.4. Impact of the Global Recession

Historically garment exports of Sri Lanka were heavily concentrated on USA and UK

markets. Approximately 83% of garment exports have been made to these two countriesin 2002. Over the years the reliance on UK and USA gradually transferred towards other

countries such as Italy, Germany, Belgium, Netherland and France. This resulted in

garment exports revenue from USA and UK declining to 68% of total garment exports

revenue in 2009.




The shift in the main market composition for Sri Lanka garment exports during the

period between 2002 and 2010 is illustrated in Figure 3.2.

Figure 3.2 : Garments Exported to top 5 Countries

Resultant to the global economic crisis, the world demand for garments drastically fell

imposing an immense pressure on prices. This negatively affected developing economies

such as Sri Lanka which relied on garment exports as the main source of foreign

exchange earnings. The situation was further aggravated for Sri Lankan manufacturers

when some of the international apparel buyers shifted its sourcing towards low cost

countries such as Bangladesh, Vietnam and Cambodia while other buyers demanded for

price cuts.

The influence of the global economic turmoil on Sri Lanka is illustrated in the Figure 3.3

and Figure 3.4. Accordingly, garment exports to USA in 2007, which stood at Rs. 174 Bn

in terms of revenue, had dropped by 15% to Rs. 148 Bn in 2009. Nevertheless the drop

was mitigated by the surge in the exports of garments to EU Countries which multiplied

by nearly 1.5 times to Rs. 187 Bn in 2009 accounting for 52% of the revenue generated

by Sri Lanka from garment exports.

Figure 3.3: Export Earnings from Garments Figure 3.4: Garment Export Earnings Trends

Source: Central Bank of Sri Lanka

2002 2003 2004 2005 2006 2007 2008 2009 2010

Other 10% 10% 9% 8% 9% 10% 11% 13% 15%

Belgium 2% 2% 2% 2% 2% 2% 2% 2% 3%

Germany 3% 3% 3% 3% 4% 4% 5% 6% 5%

Italy 2% 3% 4% 5% 6% 9% 10% 11% 11%

U.K. 20% 20% 23% 22% 23% 25% 26% 27% 25%

U.S.A. 63% 61% 58% 59% 56% 50% 45% 41% 41%

0%

20%

40%

60%

80%

100%

-

50

100

150

200

2002 2003 2004 2005 2006 2007 2008 2009 2010

USA EU Other countries

31% 32%37% 36%

40%45%

49% 52% 51%

63% 61% 58% 59% 56%50%

45%41%

41%

2002 2003 2004 2005 2006 2007 2008 2009 2010

10%

20%

30%

40%

50%

60%70%

Garment exports to EU as % to total garment exports

Garment exports to USA as % to total garment exports




3.5. Generalized System of Preferences

The EUeferences (GSP) is a trade arrangement through which

the EU provides preferential access to the EU market to beneficiary countries and

territories. Under this scheme the following three regimes have been successfully

implemented with the objective of bringing a multitude of trading advantages to

beneficiary economies.

Standard GSP allows 176 developing countries and territories to access the EU

market in the form of reduced tariffs covering 6,350 products.

Generalized System of Preferences plus (GSP+) scheme facilitates 16 beneficiary

countries to receive additional preferences encompassing 6,450 products on the

condition that such countries must ratify and effectively implement 27 specified

international conventions in the fields of human rights, core labour standards,sustainable development and good governance.

countries that are privileged to access the EU market with duty free and quota free

incentives.

Implication of GSP+ Regime on Sri Lankan Garment Manufacturing Industry

Until 2005, garment export revenue generated from EU countries remained in the range

of Rs. 50 Bn to Rs. 100 Bn accounting for 30% to 36% of the total garment export

revenue. With the introduction of GSP+ trade concessions to Sri Lanka, a clear change in

the composition of the garment export market was witnessed as in 2009, over half of

export revenue from garments was reported under EU Countries. Garment export

earnings from EU Countries in 2009 grew by nearly twofold to Rs. 187 Bn compared to

Rs. 100 Bn in 2005.






Moreover, farsighted local garment manufacturers are now in pursuit of high level of

productivity to move up in the value chain to sustain its market share profitably while

attempting to secure new markets in the global apparel environ.

It has been evident that some of the world leading apparel buyers have shifted their

sourcing towards low cost countries such as Bangladesh, Vietnam and Cambodia from

Sri Lanka in the light of the global economic turmoil. However due to the reason that

particular low cost destinations have failed to accomplish service levels with required

standards such buyers are gradually returning to Sri Lanka.

Challenged with currency appreciation, subsidy withdrawals and escalating labour costs

China is rapidly turning into an unprofitable garment manufacturing destination. This

trend in China presents an opening for Sri Lanka to reinforce its position as a cost

effective sourcing country in the global fashion industry.

The Sri Lankan garment manufacturing sector has been consistently successful in

deriving the maximum dividends from growth opportunities in the global apparel

market. In this endeavor, Sri Lanka has been successful in overcoming the hurdles which

surfaced from time to time such as the abolishment of the MFA, the global economic

crisis, the emergence of low cost destinations and the withdrawal of GSP+ concessions.

With unassailable economic growth, political stability and proactive measures taken by

the JAAF such as the initiative, the garment manufacturing

sector in Sri Lanka is now poised to capture future opportunities.




4. Company Profile

4.1. Introduction

Orient Garments Limited is the garment manufacturing arm of Finco Group, a diversified

conglomerate, with a history which spans back to 1963. The Group has spread its wings

across an array of significant business clusters creating a strong brand presence in each

respective arena.

Construction and Property Development Cluster

Finco Group maintains a strong presence in the construction sector through

International Construction Consortium (Pvt) Limited (ICC), Nivasie Developers (Pvt)

Limited, ICC Housing (Pvt) Limited and Durra Building Systems (Pvt) Limited.

Finco Group has forayed into the construction sector through ICC, which is a M1contractor as per the classification of ICTAD. ICC is mainly involved in the construction of

high rise commercial buildings, roads, bridges, and power stations and its construction

capacity is further assisted by its own support services such as ready mixed concrete

plant, precast concrete yard and asphalt concrete production unit. In this aspect,

landmark architectural projects built by ICC such as Hemas Hospital Wattala, Access

Towers Union Place and Sri Lanka Institute of Information Technology Malabe are

considered as the evidence of its sophisticated construction excellence.

Nivasie Developers (Pvt) Limited, with its fortitude inherited from the parent company

different scales. Nivasipura Ekala, a product in the C

houses, is considered as one of the large township development projects in Sri Lanka.

The Company has already initiated many housing projects in a bid to benefit from the

impending revival of the real estate sector including a project to construct 350-house

project in Digana, Kandy.

ICC Housing (Pvt) Limited has been formed to address the residential needs of the cream

of the market by offering exclusive residential space in prime locations of Colombo. The

Company is solely accountable for the success story of Iceland Residencies, a land mark

architectural project in the heart of Colombo.

The construction cluster of Finco Group has not restricted itself to the construction and

property development but has further broadened its portfolio with the inclusion of

manufacturing construction materials. In this context, Durra Building Systems (Pvt)

Limited, a BOI approved company, formed in collaboration with an Australian Company,

produces easy-to-install construction panel boards using densely compressed rice straw

as raw materials.




Services Cluster

scope has been

extended to include provision of services using specialized construction materials as

diverse as concrete admixtures, water proofing material, polythene flooring and geo

textiles via Engineering Sales Directorate of Finco (Pvt) Limited. It is the sole agent for

several such reputed brands as BITUMAT water proofing system, XYPEX water proofing

system, TENCATE Geosynthetics and COOLARO weather protection system.

Travel and Leisure Cluster

The diversified business portfolio of Finco Group has not been limited to construction

and services but has ventured into travel, tour and leisure sector endorsing its

multifaceted business strategy.

Alpha Tours (Pvt) Limited, the travel arm of Finco Group, is a member of Federation of Airline General Sales Agents and certified as a General Sales Service Agency by IATA (The

Air Transport Association). While it represents Korean Air as the General Sales Agent for

cargo and passengers in Sri Lanka, it has explored opportunities as a destination

manager in the fields of inbound tours, conventions and exhibitions.

Signifying Gro Ulagalla Walawwa Resort (Pvt) Limited

operates an exclusive eco-friendly five-star chalet resort named Ulagalla Resorts in

Anuradhapura. Ulagalla Resorts comprises of 20 chalets scattered throughout its 58-acre

property nestled in a natural woodland and offers a range of luxurious amenities.

Information Technology and Communication Cluster

Genesiis Software (Pvt) Ltd and Finco Technologies (Pvt) Limited, provides software and

hardware solutions to local and international clients.

, a famous interactive website among private

sector employers and job seekers, developed by Genesiis Software (Pvt) Ltd symbolizes

the e sector.

Manufacturing Cluster

cluster which comprises of Alpha Industries (Pvt) Limited and Orient Garments Limited.

Alpha Industries (Pvt) Limited is a leading manufacturer of office furniture and

consists of a variety of office furniture and equipment such as office security equipment,

light metal furniture, wooden furniture and hospital furniture, in addition to undertaking

interior fit-out and furnishing projects.





At present, Orient Garments Limited (OGL), shares of which are mainly held by Finco

Investments (Pvt) Limited, Finco Holdings (Pvt) Limited and Finco (Pvt) Limited, remains

as the holding company of the garment manufacturing sector of Finco Group. The Group

enjoys the ownership of a series of modern self contained factory units, established

under OGL and its subsidiaries namely Stafford Orient (Pvt) Limited and Priority

Garments (Pvt) Limited.

The business focus of OGL Group is predominantly aimed at designing, manufacturing

and selling a wide range of garments catering to the needs of leading international

fashion brands and retailers such as NEXT, Tesco, Tommy Hilfiger, Polo Ralph Lauren and

Burberry. The infrastructure of the Group consists of five garment manufacturing plants

accounting for a total of near 1,500 direct sewing machines, 2 embroidery units with 105

embroidery sewing heads, and an employment base of nearly 3,500 personnel.

Please refer Section 7.4 for details with respect to the group structure of Orient

Garments Limited.

4.2. Corporate Vision and Mission

OGL as follows;

Vision

To nurture the values of a world-class manufacturing organization, who would be the

preferred partner to our customers, embed professionalism and honesty in our efforts,

while always aspiring for greater achievement in our industry, consistently exceed ourown expectations, delivering the best value to our shareholders and employees, while

always being responsible to our community and the environment.

Mission

Integrity, ethics and honesty are words that are often overstated and underused. At

Orient we overlook the fancy words and follow a simple philosophy - inspired by

standards set during our early days. These have now evolved into strong pillars of

corporate ideals which continue to give us an edge over the competition.

We believe that the wellbeing of our staff depends on how well we achieve our own

corporate objectives - because when we profit, the cycle continues to benefit those who

work for us and with us. This is good enough reason for us to maintain the strictest

standards of value and integrity in the smallest detail of our operation.

Our responsibility however goes further than just ensuring profits. We watch over our

own carefully, always aware about their wellbeing and their own communities and their

families.




4.3. History

1982

The Finco Group ventured into the apparel manufacturing industry with the

establishment of its first factory in Kotte under Orient Garments Limited.

1992

OGL kicked off its second garment manufacturing plant in Weligama in 1992 under the

auspices of the Board of Investments of Sri Lanka. The factory was established under the

employment opportunities in deprived areas of the South.

1998

Finco Group partnered with Stafford Textiles Limited (Canada), a company which had

strong ties with leading apparel brands in USA such as NIKE, and incorporated StaffordOrient (Pvt) Limited (SOL) to establish a garment manufacturing plant at Pitabeddara in

Deniyaya Electorate. The

BOI, created over 700 employment opportunities in

the locality.

2000

The operations of its first factory in Kotte were shifted to a newly established state of

the art factory in Mattegoda with an expanded direct sewing machine capacity.

2001

Processing Zone with a capacity of 90 direct sewing machines. The factory capacity has

been now expanded to house 270 direct sewing machines creating over 500

employment opportunities in the locality.

2008

Finco Group added its fifth garment manufacturing plant, situated in Kahapola in the

electorate of Piliyandala, to its portfolio by forming Priority Garments (Pvt) Limited (PGL)

in collaboration with Fascination Exports (Pvt) Limited.

2010

apparel manufacturing sector was reshaped with the intention of

converging G

were converted into the subsidiaries of OGL.




4.4. Product Range and Clientele

OGL designs, manufactures and exports a wide range of garments for men, women and

children spanning outerwear, bottoms and casual wear catering to the needs of several

leading international fashion brands and retailers. At present in excess of 95% of

garments manufactured at OGL factories dock into the EU and USA.

In response to changes in the macro environment, OGL has steered away from its

previous marketing approach under which it concentrated on broadening its client base.

The Company has now built strong strategic relations with a few world renowned

retailers and brands including NEXT, Tesco, Tommy Hilfiger, Polo Ralph Lauren and

Burberry.

The following table (Table 4.1) and the graphs (Figure 4.1 and Figure 4.2) set forth the

number of garments manufactured and exported by OGL Group in the financial years2007/08, 2008/09 and 2009/10 under different product categories and countries.

Table 4.1 : Garments Exported by OGL

Financial year 2007/08 2008/09 2009/10

Garment exports (In pieces) 3,294,123 3,227,946 3,213,517

Value of the garment exports (In US $) 22,248,944 25,710,945 23,924,542

Figure 4.1

Garments Exported by OGL

Product wise

Figure 4.2

Garments Exported by OGL

Region wise

4.5. Production Facilities

During a near three decade time span, OGL has succeeded in expanding its reach to a

total capacity in excess of 1,500 direct sewing machines by means of five fully fledged

garment manufacturing plants spreading from Colombo to Weligama creating

approximately 3,500 employment opportunities mainly in the areas with less economic

development activities.

90%99%

90%

10%16%

16%

0% 0% 1%

2007/8 2008/9 2009/10

Woven Bottoms Woven Outerwear Knits

80% 92% 86%

15% 17% 16%

5% 6% 5%

2007/8 2008/9 2009/10

Europe USA Other




The encapsulated in the following table.

Table 4.2 : Particulars of OGLManufacturing Base

Factory Details

FactoryMattegoda

Factory

Weligama

Factory

Koggala

Factory

Deniyaya

Factory

Kahapola

Factory

Holding Company Orient

Garments

Limited

Orient

Garments

Limited

Orient

Garments

Limited

Stafford

Orient (Pvt)

Limited

Priority

Garments

(Pvt) Limited

Address

78B,

Polgasowita

Road,

Mattegoda

Leonard

State,

Midigama,

Weligama

EPZ, Koggala Hulandawa

State,

Kaduruwana

State,

Pitabaddara

Deniyaya

Regidal

Estate,

Kahapola,

Madapatha

Land Extent3 Acres &

9.6 Perches

2 Acres 3 Acres 4 Acres &

3 Perches

148.46

Perches

Building Extent (Sq.ft.) 77,000 41,600 22,500 53,000 32,000

Ownership Free Hold Free Hold 50 Year LeaseHold

(Commencing

from April

27, 2000)

25 Year LeaseHold

(Commencing

from January

1, 2003)

Free hold

Employees as at April 30, 2011

FactoryMattegoda

Factory

Weligama

Factory

Koggala

Factory

Deniyaya

Factory

Kahapola

FactoryTotal

Labour Cadre 651 804 502 673 380 3,010

Non Executives 127 73 40 58 13 311

Executives 95 23 07 18 16 159Total 873 900 549 749 409 3,480

Capacity overview

FactoryMattegoda

Factory

Weligama

Factory

Koggala

Factory

Deniyaya

Factory

Kahapola

FactoryTotal

Direct Sewing Machines 330 360 270 330 180 1,470

No of garments produced

in 2009/10688,110 708,131 735,618 682,830 322,703 3,137,392




4.6. Marketing Philosophy

In order to face the obstacles which occurred in the global garment manufacturing

landscape due to the demise of the MFA and the global economic crisis, OGL took the

path of moving up the value chain by serving a niche client base.

In this attempt, OGL shifted away from the previous marketing strategy that had been

designed to broaden the client base. Under the new marketing philosophy, OGL scaled

down its client base with the intention of retaining a profitable niche segment. This

niche client base is catered to with a customized service delivering high standards. In

line with the new strategy the service ants were

revamped to offer an end to end solution, from product design and development to

fabric and trim sourcing.

Simultaneously, the measures were taken to adopt steady productivity improvementinitiatives on the production floor which enables OGL to consistently provide an

unparalleled service to its valuable client base at a competitive price level.

Against this backdrop in focus, OGL has now reinforced its position in its niche market

capitalizing on its competitive strengths such as design capabilities, skilled work force

and a level of service characterized by shorter lead-time, quality, reliability, transparency

and flexibility.




4.7. Financial Highlights

The financial year 2009/10 witnessed several changes in the corporate structure of OGL

Group as OGL turned into a Group of Companies with two subsidiaries. Therefore SOL

and PGL financials are being consolidated with OGL commencing from 2009/10.

Salient extracts from the Income Statement and the Balance Sheet highlighting the

historical performance of the Company during the three year period ended March 31,

2010 and the eleven month period ended February 28, 2011 together with comparative

figures are given below.

Table 4.3 : Financial Performance during the three year period ended March 31, 2010

All Figures In Rs. Mn Company Group

For the year ended March 31 2008 2009 2010 2010Turnover 2,492.9 2,854.0 2,782.9 2,801.7

Cost of Sales 2,207.0 2,514.3 2,426.3 2,428.6

Gross Profit 285.9 339.7 356.6 373.1

Other Operating Income 0.2 1.1 10.1 46.5*

Administration Expenses 110.0 158.5 144.0 154.4

Selling and Distribution Expenses 42.1 50.4 47.9 47.9

Finance Expenses 79.2 83.4 71.5 78.1

Profit Before Tax 54.8 48.5 103.4 139.2

Tax - 3.0 17.5 18.6

Profit for the Year 54.8 45.5 86.0 120.6

Attributable to

Equity Holders of the Company 125.7

Non Controlling Interest (5.1)

Profit for the Year 120.6

* The other operating income of SOL, which is indicated in the consolidated accounts of

OGL, includes a reversal of the long term loan amounting to Rs. 33,958,647.00. This

loan has been advanced at the inception to meet the capital commitments and

working capital requirements of SOL by related parties. Since OGL acquired 100%

ownership of SOL during 2009/10, such related parties relinquished their rights of

those advances.




Table 4.4 : Financial Performance during the eleven month period ended February 28,

2011 together with the Comparative Figures (Unaudited)


For the Eleven Months ended February 28, 2010 2011 2011Turnover 2,567.9 3,312.8 3,326.0

Cost of Sales (2,233.3) (2,967.0) (2,967.6)

Gross Profit 334.6 345.8 358.4

Other Operating Income 10.0 34.4 35.1

Administration Expenses (129.6) (132.5) (148.2)

Selling and Distribution Expenses (44.8) (64.4) (64.4)

Finance Expenses (66.1) (72.6) (74.6)

Profit Before Tax 104.0 110.7 106.3

Tax (15.9) (14.0) (14.9)

Profit for the Year 88.2 96.7 91.4

Attributable to

Equity Holders of the Company 98.2

Non Controlling Interest (6.7)

Profit for the Year 91.4

Table 4.5 : Financial Position as at the end of the Financial Year

All Figures in Rs. Mn Company Group

As At March 31 2008 2009 2010 2010Property, Plant & Equipment 368.3 365.6 438.4 575.2

Investments in Non Listed Companies/

Subsidiaries24.6 20.5

Other Investments 139.7 87.5 86.3 1.3

Goodwill on Acquisitions 55.1

Total Non Current Assets 508.0 477.7 545.2 631.6

Current Assets 741.4 862.0 782.8 774.3

Total Assets 1,249.4 1,339.7 1,328.0 1,405.9

Non - Current Liabilities 58.6 152.4 149.3 170.8

Current Liabilities 825.3 839.9 672.2 722.8Total Liabilities 883.9 992.3 821.5 893.6

Net Assets 365.5 347.4 506.5 512.3

Stated Capital 90.5 90.5 90.5 90.5

Revaluation Reserve 178.4 158.5 231.6 199.2

Revenue Reserves 96.6 98.4 184.4 222.6

Stated Capital and Reserves 365.5 347.4 506.5 512.3




Table 4.6 : Financial Position as at the end of February 2011 together with

Comparative Figures (Unaudited)


As at end of March2010

February2011

March2010

February2011

Property, Plant & Equipment 438.4 425.3 575.2 548.5

Investments in Non Listed Companies/ Subsidiaries 20.5 20.5

Other Investments 86.4 66.3 1.3

Goodwill on Acquisition 55.1 55.1

Total Non-Current Assets 545.2 512.1 631.6 603.6

Current Assets 782.8 1,291.5 774.3 1,299.8

Total Assets 1,328.0 1,803.6 1,405.9 1,903.4

Non - Current Liabilities 149.4 153.7 170.8 174.7

Current Liabilities 672.2 1,046.7 722.8 1,125.0Total Liabilities 821.6 1,200.4 893.6 1,299.6

Net Assets 506.5 603.1 512.3 603.7

Stated Capital 90.5 90.5 90.5 90.5

Revaluation Reserve 231.6 231.6 199.2 199.2

Revenue Reserves 184.4 281.0 222.6 314.0

Stated Capital and Reserves 506.5 603.1 512.3 603.7




4.8. Key Financial Ratios

Table 4.7 : Key Financial Ratios

Company Group

For the year endedEleven

Months

ended

For theyear

ended

ElevenMonths

ended

March

2008

31st

March

2009

31st

March

2010

28th

Feb

2011

31st

March

2010

28th

Feb

2011

Gross Profit Ratio 11.5% 11.9% 12.8% 10.4% 13.3% 10.8%

EBITDA/ Turnover 6.5% 5.5% 7.2% 5.7% 9.0% 5.9%

Net Profit Ratio 2.2% 1.6% 3.1% 2.9% 4.5% 3.0%

Return on Average Equity 15.8% 12.8% 20.1% 17.4% N/A N/A

Return on Average Total Assets 4.5% 3.5% 6.4% 6.2% N/A N/A

Debt to Equity Ratio (Times) 1.96 2.29 1.07 1.60 1.11 1.66Current Ratio (Times) 0.90 1.03 1.16 1.23 1.07 1.16

Equity to Asset Ratio (Times) 0.29 0.26 0.38 0.33 0.36 0.32

Earnings per Share (Rs.) * 1.00 0.83 1.57 1.76 2.29 1.79

Net Book Value per Share (Rs.) * 6.66 6.33 9.22 10.98 9.02 10.87

* Estimated based on number of shares as at April 30, 2011 (post split)

4.9. Loans, Overdrafts and Other BorrowingsThe details of the loans, overdrafts and other borrowings of OGL Group as at April 30,

2011 are depicted below.

Table 4.8 : Borrowings of OGL as at April 30, 2011

Lender Type of borrowing Currency

Outstanding

balance as at

April 30 2011

Payable

within one

year

Payable

after one

year

Bank of Ceylon Overdraft USD 411,241 411,241 -

Bank of Ceylon Import Loans

(Revolving Facility)

USD4,188,743 4,188,743 -

Hatton National Bank Import Loans USD 2,170,756 2,170,756 -

(Revolving Facility)

Commercial Bank Term Loan USD 658,477 207,936 450,541

Hatton National Bank Term Loan USD 22,692 22,692 -

Board of Investment Non- Interest Bearing Loan Rs. 7,809,600 1,301,600 6,508,000




Table 4.9 : Borrowings of SOL as at as at April 30, 2011

Lender Type of borrowing Currency

Outstanding

balance as at

April 30 2011

Payable

within one

year

Payable

after one

year

Commercial Bank Term Loan USD 60,000 22,500 37,500

4.10. IT Infrastructure

The consistent focus on exploiting information technology to enhance efficiency

and productivity continues to be a critical element of its success. The function

descriptions below provide an outline of the systems and procedures which have been

improved strategy.

Product design process ensuring rapid turnaround times Raw material consumption control enabling strong cost management

Optimal working capital management ensuring timely inventory management,

debtor collections and creditor payments

Financial reporting system enabling the delivery of accurate and relevant

information to management

Direct connectivity with the customers and suppliers through Electronic Data

Interchange (EDI) systems

Human resources management




4.11. Accreditation and Certifications

Constant pursuit of excellence in business practices and provision of high quality service

have enabled OGL to earn the recognition from its clientele and as well the global

garment manufacturing industry. The following are some of the certificates achieved by

OGL.

Compliance Certificates in Code of Conduct by Tommy Hilfiger Europe B.V., NEXT

Sourcing Limited, Tesco Plc and Polo Ralph Lauren confirming that the systems and

procedures of factories of OGL Group of Companies are in line with the international

standards.

Organic Exchange (OE 100) Certification and Organic Exchange (OE Blend)

Certification from the Organic Exchange enabling the company to supply its

products to clients who are members of Organic Exchange.

Garments without Guilt Certification from Joint Apparel Association Forum

confirming that OGL has adhered to the Garments without Guilt code of conduct,

which says no to child labour, forced labour and discrimination of any kind.

Fair Trade Certificate from FLO-CERT, which is the inspection and certification body

for Fair-trade Labeling Organizations International (FLO), confirming that the cutting,

making and trimming process of OGL

Fair-trade Standards set by FLO.




5. Future Strategies and Risk Analysis

5.1. Future Strategies

OGL seeks to achieve the growth momentum by penetrating into the already established

clientele by increasing the production capacity and the value added services in addition

to pursuing new geographical markets. In this context, OGL has formulated the following

strategies.

Capacity Expansion

In order to facilitate the continuous growth in the business activities of its selected client

base in their own territories, the Company seeks to widen its capacity in two phases. The

initial expansion program will include increasing machine capacity in existing facilities.

Secondly, it is intended to acquire or lease a new manufacturing plant with a capacity of

approximately 200 direct sewing machines. It is planned to invest approximately Rs. 50Mn in the event of an acquisition.

Design & Product Development Services

Going forward, development of new products and designs will remain as the priority of

the Company in creating a value proposition to its clients. The Company will offer a wide

range of own designs to its clients and in addition will undertake direct developments by

offering concepts developed using fabrics sourced by our own development teams in

keeping with OGLoal to help the customers to make the design process efficient in

terms of cost and speed.

Market Penetration through Improved Lead Times

The Company plans to seize the demand in European countries for apparel orders

shipped within a short lead time which is currently catered by Turkey and other Eastern

European countries at a premium price. In this regard, OGL will allocate 20% of its

existing capacity to process export orders which require quick response time. Under the

new scheme, the Company will deliver goods within nearly 70/80 days from the order

acceptance instead of 100/120 days. This will enable the Company to increase the

market share by capturing new market segments while increasing its profitability by way

of adding a premium to its price.

New Markets

In order to mitigate the risk of overdependence on USA and Europe, to which over 95 %

of OGL broaden its horizon to the

Asia Pacific region covering countries such as Japan, Hong Kong, Taiwan and South Korea

via the existing clientele that have market access and representation in such countries.

Continuous Efforts in Improving the Efficiency and Productivity

The Company will continue to enhance its efficiency and the productivity on the

production floor by improving internal processes and investing in new machinery.




5.2. Underlying Assumptions on which future strategies are based on

It is envisaged that the business horizon of OGL selected client base will continue to

grow at or above the historical average in the near future in parallel to the growth in the

global fashion and apparel industry.

In addition the Company expects that the demand and expectations of its selected

clients will not vary to an unprecedented degree during the next 5 years and the

Company will prolong its partnership with its existing clientele to retain the current

business opportunities and to achieve new prospects.

5.3. Analysis of Associated Risks pertaining to the future strategies

Loss of major clientsThough OGL has ensured strong and long-term ties with its clients, any adversity in

their own territory due to any unpredictable internal and

external factors relating to their business may hinder the growth opportunities of OGL in

terms of capacity expansion and market penetration through improved lead time. In

addition, this may cause a decrease in the volume of apparels sourced from OGL and

exert pressure on prices which will eventually affect the revenue and profitability of the

Company.

Foreign currency risk

Since OGL is primarily an export oriented apparel manufacturer revenue is generated in

foreign currency. Moreover clients compare the garment exported from Sri Lanka with

that of the competitors in denomination of US Dollars. The appreciation of Sri Lankan

Rupee against US Dollars tends to push the revenue and profitability of the Company to

the downward direction including the viability of its future strategies.

People risk

The experienced key management team together with the skilled workforce has played

a vital role success of the Company. In an environ where it has been

a challenge to attract and retain right people with the right talent, significant change in

the management structure or trained factory workforce could cause delays to the

production floor and to service standards. This may deprive OGL specifically in theimplementation of its strategy to capture the demand in European countries for apparel

orders shipped within a short lead time.

Risk of changes in the fashion trends

The partnership with OGL innovative

and creative designing capabilities. Therefore it is critical to identify and recognize

international fashion on a timely manner. Any shortcomings in this factor will weaken

the relationship of OGL with its clientele and

design & product development arm of the Company.




Risk of reliance on external fabric suppliers

OGL relies on external suppliers for raw materials which constitute a substantial

component of the production cost and the lead time. Any delays or non conformance to

quality requirements caused by our suppliers may results in setbacks in operations,

unexpected cost escalations and customer dissatisfaction which will have an impact on

immediate and long term profitability.

Risk of emergence of competition from other manufacturing countries with better

trade concessions

Emergence of trade concession schemes equivalent to GSP+ targeting developing

countries excluding Sri Lanka may cause serious pricing pressures on Sri Lankan

manufacturers including OGL and the growth plans of OGL.

Global economic risks

Any downturn in the global economy will directly have an adverse impact on the globalfashion apparel industry. Such factors will not only deteriorate profitability

but hinder his plans to explore new business opportunities.




6. Human Resources

6.1. Staff Strength

As at 30th

April 2011, OGL Group consisted of 3,480 employees. The composition of the

staff base of OGL is detailed in the Table 6.1

Table 6.1 : Staff composition of OGL Group

Company Group

Corporate Managers 3 3

Senior Managers 11 13

Middle Managers 23 37

Executives 88 106

Clerical Staff 240 311

Workers 1,957 3,010

Total No of Employees 2,322 3,480

6.2. Corporate Management Team

Mr. Rajinda Priyanjith Weerasooria Managing Director/ Chief Executive Officer

Mr. Weerasooria graduated from the Bentley College U.S.A. with a Bachelor of Science

in Marketing and he counts over 17 years of experience within OGL and other Finco

Group of Companies specializing in the areas of production, marketing, merchandising,

finance, shipping and human resources.

He joined OGL in 1993 as the Commercial Manager and in 1996 he was promoted to the

post of Managing Director/ Chief Executive Officer of OGL. He functions as the Managing

Director of Alpha Industries (Pvt) Limited and holds directorates in number of companies

in Finco Group in addition to his role in OGL.

In his capacity as the Managing Director/ Chief Executive Officer, Mr. Weerasooria has

product range from a specialty

outerwear manufacturer to one with a diverse range of casual apparel and functions to offer value added design and product development services to its

customers.

He was also instrumental in increasing the operations of the Company to five

manufacturing plants securing long term relationships with the loyal client base and

OGL Group of Companies through timely strategic

initiatives implemented under his leadership.




Mr. Ramli Ghaffoor Chief Operating Officer

Mr. Ghaffoor functions as the Chief Operations Officer of OGL and has an experience of

over ten years in ensuring the smooth operations of OGL

Mr. Ghaffoor is entrusted with responsibilities of heading the key functions such asmarketing, merchandising, sourcing and procurement, production planning and

monitoring, outsourcing, export documentation and shipping, finance and general

administration.

Commencing his career in the field of financial accounting at KMPG Ford Rhodes

Thornton & Company in 1989, he counts over 20 years of experience in the fields of

accounting, merchandising and marketing.

Prior to joining OGL in 1999 as the General Manager Marketing and Merchandising, he

has gained an extensive exposure to merchandising field during his five year stay at

Brandix Apparel.

Mr. Deshantha Silva Chief Financial Officer

Mr. Silva counts over 14 years of experience in the fields of financial and general

management out of which approximately 10 years in Finco Group including OGL.

He joined OGL as the Group Financial Controller in 2001 and subsequently promoted to

the post of General Manager Finance & Planning. In 2007, he was appointed as the

Chief Financial Officer Manufacturing Cluster of Finco Group of Companies including

OGL where he is responsible for overlooking the functions of financial, import & exports,human resources, production planning and IT. In addition to his duties in OGL, he plays a

vital role as the Chief Operating Officer of Alpha Industries (Pvt) Limited.

He is an Associate Member of the Chartered Institute of Management Accountants UK,

an Associate Member of the Chartered Institute of Marketing UK, an Associate of the

Institution of Engineering & Technology UK and a Fellow Member of the Institute of

Certified Management Accountants Sri Lanka. In addition, he is holding a Master of

Business Administration from University of Colombo and B.Sc. (Engineering) from the

University of Moratuwa.

6.3. Collective Agreements and Labour Unions

unionised.




6.4. Statement Managing Director/ Chief Executive Officer

The Managing Director/ Chief Executive Officer of the Company has not been involved in

any of the following:

A petition under any bankruptcy laws filed against such person or any partnership in

which he was a partner or any corporation of which he was an executive officer;

Conviction for fraud, misappropriation or breach of trust or any other similar offence

which the CSE considers a disqualification.




7. Corporate Structure

7.1. Share Capital Structure

As at the date of this Introductory Document, the stated capital of OGL is Rs. 90,483,320

comprising 54,916,656 issued and fully paid ordinary voting shares. Other than these

ordinary voting shares, the Company has no other classes of shares.

There are no restrictions on the purchase of shares of the Company by non-residents.

7.2. Other Information as to the Share Capital

New Share IssuesOGL has not issued any shares during the last two years preceding the date of this

introductory Document.

Outstanding Convertible Debt Securities

OGL has no outstanding Convertible Debt Securities.

Free Transferability of Securities

There are no statutory restrictions on the free transferability of the issued shares.

Shares Repurchased/ Redeemed March 20, 2009

The Company has not been engaged in any share re-purchase, redemption or stated

capital reduction exercises in the two years preceding the date of this introductory

Document except the share repurchase which was effected on March 20, 2009 wherein

OGL repurchased 2,183,750 number of its own shares at a repurchase price of Rs. 20.00

under section 63 (1) (b) and section 31 (2) (c) of the Companies Act No. 07 of 2007

utilizing the revenue reserves.

The effect of the share repurchase on the capital structure of OGL is as follows;

Table 7.1 : The Effect of the Share Repurchase on the Capital Structure of OGL

Number of issued and fully

paid sharesStated Capital (Rs.)

Before the share repurchase 9,048,332 90,483,320

Share repurchase (2,183,750) -

After the share repurchase 6,864,582 90,483,320




Subdivision of Shares September 28, 2010

Pursuant to the Articles of Association of OGL, each of the 6,864,582 issued ordinary

shares representing the stated capital of Rs. 90,483,320.00, was subdivided into 8

ordinary shares thereby increasing the issued ordinary shares to 54,916,656 whichordinary shares shall rank pari-passu in respect of voting and other rights attached to the

ordinary shares that are being subdivided with effect from September 28th

2010.

The effect of the subdivision of shares on the capital structure of OGL is as follows;

Table 7.2 : The Effect of the Subdivision of Shares on the Capital Structure of OGL

Number of Issued

and Fully Paid Shares

Stated Capital

(Rs.)

Before the sub division of shares 6,864,582 90,483,320

After the subdivision of shares on the basis of 1 to 8

54,916,656 90,483,320

Transfer of Shares December 31, 2010

On December 31, 2010, 5,562,175 ordinary shares of OGL, which were held by Finco

Holdings (Pvt) Limited, were transferred to the following shareholders at a price of Rs. 23.00

per share.

Table 7.3 : Transfer of Shares

Number of

shares held

before thetransfer

Number of

shares

transferred

Number of

shares held

after thetransfer

Finco Holdings (Pvt) Ltd 14,280,000 (5,562,175) 8,717,825

Mr. Harsha N De Silva - 2,225,000 2,225,000

Mr. Mushtaq Mohamed Fuad - 1,000,000 1,000,000

Mr. Nalin Dharshake Samarawickrema - 652,175 652,175

Mr. Mohamed Sabri Ismail Marikar - 300,000 300,000

Mr. Rukshan Medard Peter Dias - 220,000 220,000

Almar Trading Company (Private) Limited - 220,000 220,000

Mr. Warnakulasuriya Sebastian Loyela Coonge - 220,000 220,000

Mr. Hiran Arjuna Suren Madanayake - 200,000 200,000

Mr. Mark Raaymakers - 100,000 100,000Adam Apparels (Private) Limited - 100,000 100,000

Mr. Charitha Prasanna De Silva - 100,000 100,000

The Regent Group (Private) Limited - 100,000 100,000

Mr. Don Ananda Panapitiya - 50,000 50,000

Mr. Shermal Hemaka Jayasuriya - 50,000 50,000

Ms. Mildred De Silva - 15,000 15,000

Ms. Omathage Amalee Prashanthi Perera - 10,000 10,000

Other than the share transfer which took place on 31st

December 2010, no other shares

of the Company have been transferred or sold by the major shareholders within theimmediate period of one year from the date of this Introductory Document.




7.3. Shareholding Structure

Ten Major Shareholders

Tabulated below is the list of ten major shareholders of OGL as at April 30, 2011.

Table 7.4 : Ten Major Shareholders of OGL as at April 30, 2011

Name of the Share HolderNo. of Shares

held

Percentage of

Shareholding

1 Finco Investments (Pvt) Limited 35,758,000 65.11%

2 Finco Holdings (Pvt) Limited 8,717,825 15.87%

3 Finco (Pvt) Limited 3,168,000 5.77%

4 Mr. Harsha N De Silva 2,225,000 4.05%

5 Mr. Mushtaq Mohamed Fuad 1,000,000 1.82%

6 Mr. Nalin Dharshake Samarawickrema 652,175 1.19%

7 Ms. Swarupuranee Weerasooria 551,048 1.00%

8 Mr. Nishan Eshendra Weerasooria 551,040 1.00%

9 Nikan (Pvt) Limited 343,600 0.63%

10 Mr. Mohamed Sabri Ismail Marikar 300,000 0.55%

Total 53,266,688 96.99%

Public holding of OGL shares as at April 30, 2011 is 10.13%.

as at April 30, 2011 are tabulated below.

Table 7.5 : Shares held by the Directors

Name of the Director No. of shares held

1 Mr. Sarath Chandra Weerasooria 234,008

2 Mr. Harsha Mahendra de Saram 400

3 Mr. Rajinda Priyanjith Weerasooria 240




Distribution of Shareholding

Distribution of shareholding of OGL as at April 30, 2011 is depicted in the Table 7.6.

Table 7.6 : Distribution of shareholding

HoldingNo of

ShareholdersNo of Shares

Shareholding

Percentage

Less than 10,000 3 10,640 0.02%

Between 10,001 to 50,000 5 142,520 0.26%

Between 50,001 to 100,000 4 400,000 0.73%

Between 100,001 to 1,000,000 11 4,494,671 8.18%

Between 1,000,001 to 5,000,000 2 5,393,000 9.82%

Over 5,000,000 2 44,475,825 80.99%

Grand Total 27 54,916,656 100.00%

Analysis of Shareholding

Analysis of shareholding based on the type of the shareholder as at April 30, 2011 is as

follows.

Table 7.7 : Analysis of shareholding

Type of ShareholderNo of

ShareholdersNo of Shares

Shareholding

Percentage

Individual 20 6,506,431 11.85%

Institutions 7 48,410,225 88.15%

Grand total 27 54,916,656 100.00%




7.4. Group Structure of Orient Garments Limited

wing. With the increase of the shareholding of OGL in Stafford Orient (Pvt) Limited upto

100%, the Company became a subsidiary of OGL during the financial year 2009/10.

Moreover, OGL acquired 43.75% of the shares of Priority Garments (Pvt) Limited along

with the management control of the Company. With this step, Priority Garments (Pvt)

Limited also became a subsidiary of OGL in the same financial year.

The structure of OGL Group is depicted in Figure 7.1 below.

Figure 7.1 : Group Structure of Orient Garments Limited

Finco

Investments

(Pvt) Limited

Finco

Holdings

(Pvt) Limited

Finco (Pvt)

LimitedOthers

65.11% 15.87% 5.77% 13.25%

Orient Garments

Limited

100% 43.75% Stafford

Orient (Pvt)

Limited

Priority

Garments

(Pvt) Limited

Finco Holdings (Pvt) Limited

Finco Holdings (Pvt) Limited, which has been incorporated on October 9, 1995 is one of

the holding companies that directly and indirectly owns investments in companies whichform the Finco Group. (See Table 7.8 which highlights the shareholding structure of

Finco Group of Companies). The C

investment holdings. The board of directors of the Company is represented by the

following personnel.

Mr. Sarath Chandra Weerasooria

Mr. Harsha Mahendra de Saram

Mr. Nishan Eshendra Weerasooria

Mr. Rajinda Priyanjith Weerasooria




Finco Investments (Pvt) Limited

Finco Investments (Pvt) Limited is the other holding company that holds direct and

indirect investments in the companies which form the Finco Group as specified in the

Table 7.8 on page 38. Having established in January 5, 2010, Finco Investments (Pvt)

Limited is engaged in investment holdings. The board of directors of the Company

consists of the following.


Mr. Harsha Mahendra de Saram



Finco (Pvt) Limited

The Company is primarily involved in the real estate and property development and

supply of waterproofing materials, other engineering materials and chemicals for the

construction industry. The date of incorporation of the company was January 23, 1967

and the following personnel currently serve the board of Finco (Pvt) Limited.




Mr. Rohan Sarath Delgoda

Mr. Nihal Abeysekera

Dr. Sumitha Anura Bandara Ekanayeke

Stafford Orient (Pvt) Limited (SOL)

SOL, which has been established as a BOI company under the BOI agreement dated July

16, 1998, is engaged in manufacturing of garments for export purpose. SOL operates a

manufacturing plant in Pitabeddara, Deniyaya. SOL became a fully owned subsidiary of

OGL in March 2010, when OGL increased its interest in SOL to 100% to hold 4,400,000

shares of SOL.

Priority Garments (Pvt) Limited (PGL)

PGL, a BOI approved company under the BOI agreement dated June 9, 2008, is engagedin the similar line of business as OGL and SOL. In March 2010, 43.75% of the share

capital of PGL was acquired by OGL with the management control. At present OGL holds

700,000 shares of PGL while Fascination Exports (Pvt) Limited, Unifashion (Pvt) Limited

and Ian Burke Limited hold 400,000, 400,000 and 100,000 shares of PGL respectively.




Table 7.8 : Finco Group Structure

Company ShareholdersNumber of Shares

held

Percentage of

Shareholding

Finco (Pvt) Ltd Finco Holdings (Pvt) Ltd 29,100 38.80%

Finco Investments (Pvt) Ltd 15,000 20.00%

Alpha Industries (Pvt) Ltd 8,450 11.27%

Others 22,450 29.93%

Total 75,000 100.00%

International Construction

Consortium (Pvt) Limited (ICC)

Finco Holdings (Pvt) Ltd 2,342,480 39.04%

Finco Investments (Pvt) Ltd 1,817,380 30.29%

Others 1,840,140 30.67%

Total 6,000,000 100.00%

Durra Building Systems (Pvt) Ltd ICC 10,000,000 100.0%

Others 2 0.0%

Total 10,000,002 100.0%

ICC Housing (Pvt) Ltd ICC 655,198 62.40%

Finco Holdings (Pvt) Ltd 275,000 26.19%

Others 119,802 11.41%

Total 1,050,000 100.00%

Nivasie Developers (Pvt) Ltd ICC 4,000,000 100.0%

Others 2 0.0%Total 4,000,002 100.0%

Ulagalla Walawwa Resort (Pvt)

Limited

Finco Leisure (Pvt) Ltd 88,002,000 100.00%

Others 2 0.0%

Total 88,002,002 100.00%

Genesiis Software (Pvt) Ltd Alpha Tours (Pvt) Ltd 100,000 28.57%

Finco (Pvt) Ltd 12,480 3.57%

ICC 50,000 14.29%

Others 187,520 53.58%

Total 350,000 100.00%




Company ShareholdersNumber of shares

held

Percentage of

shareholding

Finco Technologies (Pvt) Ltd Finco (Pvt) Ltd 1,359,998 73.12%

Others 500,002 26.88%Total 1,860,000 100.00%

Alpha Industries (Pvt) Ltd Finco Investments (Pvt) Ltd 400,000 48.8%

Finco Holdings (Pvt) Ltd 311,000 37.9%

Others 109,000 13.3%

Total 820,000 100.0%

Alpha Tours (Pvt) Ltd Finco Holdings (Pvt) Ltd 26,816 42.91%

Finco Investments (Pvt) Ltd 30,000 48.00%

Alpha Industries (Pvt) Ltd 4,862 7.78%

Others 822 1.32%

Total 62,500 100.00%

Finco Leisure (Pvt) Ltd ICC 70,000,000 72.65%

ICC Housing (Pvt) Ltd 16,950,000 17.59%

Finco Holdings (Pvt) Ltd 5,200,000 5.40%

ICC Investments (Pvt) Ltd 3,368,675 3.50%

Finco (Pvt) Ltd 840,000 0.87%

Others 2 0.00%

Total 96,358,677 100.00%




7.5. Board of Directors

Name Residential Address Other Directorships

Mr. Sarath

Chandra

Weerasooria

226/4

Thalawathugoda Road

Kotte

Alpha Industries (Pvt) Limited

Finco (Pvt) Limited

Alpha Tours (Pvt) Limited



Nivasie Developers (Pvt) Limited

Stafford Orient (Pvt) Limited

Ulagalla Walawwa Resort (Pvt) Limited

Autodrome Plc.,

ICC Housing (Pvt) Limited

Durra Building Systems (Pvt) Limited

Finco Leisure (Pvt) Limited

Mr. Rajinda

Priyanjith

Weerasooria

28/8

De Fonseka Road

Colombo 5

International Construction Consortium (Pvt) Limited


Finco (Pvt) Limited




Priority Garments (Pvt) Limited

Stafford Orient (Pvt) Limited

Union Commodities (Pvt) Limited


Mr. HarshaMahendra

de Saram

49/4, 29AIceland Residencies

Galle Road

Colombo 3

International Construction Consortium (Pvt) Limited



Durra Building Systems (Pvt) Limited



ICC Housing (Pvt) Limited

Ulagalla Walawwa Resort (Pvt) Limited


Mr. Sunil

Karunanayaka

116 A

Koswatta Road

Nawala

Ceylon Grain Elevators PLC

Three Acre Farms PLC

Mr. Dinesh de

Zoysa

No. 9

Bois Place

Colombo 5

ADZ Insurance Brokers (Pvt) Limited

AEC Limited

Corporate Druids (Pvt) Limited

Capital Alliance Holdings Limited

Capital Alliance Limited

Ceylon Tea Brokers PLC

Commercial Agencies Ceylon Limited




Mr. Sarath C. Weerasooria Chairman (Non-Executive)

Mr. Sarath C. Weerasooria is a Fellow Member of the Institute of Chartered Accountants

- Sri Lanka, a Fellow Member of the Institute of Certified Management Accountants of

Sri Lanka and a Member of Industrial Association of Sri Lanka.

He has acted as the Senior Vice Chairman of Finco Group of Companies for a period of 25

years until he assumed duties as the Executive Chairman of the same in 1994. His

contribution was instrumental in escalating Finco Group of Companies to the current

position, which is today a large scale diversified conglomerate with over 15 associate

companies representing a varied business portfolio.

As Chairman of the Finco Group of Companies, including OGL, he is responsible for

formulation of overall policy and provision of leadership to the senior management of

the companies within the Group in the implementation of corporate strategies and

achieving corporate goals.

Mr. Weerasooria is currently holding the Chairmanship of the Nordic Business Council in

Sri Lanka and is also a member of the Industrial Association of Sri Lanka both affiliated to

the Ceylon Chamber of Commerce.

Mr. Rajinda P. Weerasooria Managing Director

Mr. Weerasooria graduated from the Bentley College U.S.A. with a Bachelor of Science

in Marketing and he counts over 17 years of experience within the Finco Group. He

joined OGL in 1993 as the Commercial Manager and in 1996 he was promoted to thepost of Managing Director/ Chief Executive Officer of OGL. He functions as the Managing

Director of Alpha Industries (Pvt) Limited and holds directorates in number of companies

in Finco Group in addition to his role in OGL.

In his capacity as the Managing Director/ Chief Executive Officer, Mr. Weerasooria has

product range from a specialty

outerwear manufacturer to one with a diverse range of casual apparel and

functions to offer value added design and product development services to its

customers.

He was also instrumental in increasing the operations of the Company to fivemanufacturing plants securing long term relationships with the loyal client base and

OGL Group of Companies through timely strategic

initiatives implemented under his leadership.




Mr. Harsha M. de Saram Executive Director

Mr. de Saram is a member of the Chartered Management Institute UK by profession.

Mr. de Saram was instrumental in establishing International Construction Consortium

(Pvt) Limited (ICC) which has today grown into one of the leading construction industries

with multi disciplinary capabilities. ICC has undertaken several landmark projects in Sri

Lanka and is also engaged in overseas construction projects. Mr. de Saram is the

Managing Director of ICC

Mr. Sunil Karunanayaka Non-Executive Independent Director

Mr. Karunanayaka 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. In addition he holds a Masters Degree in Business Administration from the

Postgraduate Institute of Management, University of Sri Jayawardenapura, Sri Lanka.

Mr. Karunanayaka counts over 20 years of experience in the corporate financial

management, treasury management, planning and budgetary control. He is currently

serving as the Chief Financial Consultant of The Associated Newspapers of Ceylon

Limited. In addition he is holding directorships in the boards of Ceylon Grain Elevators

PLC and Three Acre Farms PLC.

He holds memberships in the Best Corporate Reports Committee of the Institute of

Chartered Accountants of Sri Lanka, the Management Board of The Mercantile Service

and the National Hospital Committee of Sri Lanka.

He joined the board of OGL in September 2010.




Mr. Dinesh de Zoysa Non-Executive Independent Director

Mr. de Zoysa graduated from the University of Technology in Sydney, with a Bachelor of

Business (Finance and IT) and possesses over 17 years of experience in the fields of

Manufacturing, IT, Finance, HR Consulting, Risk Management and Insurance services.

Having joined Associated Electrical Corporation Limited in 1991 as the General Manager,

Mr. de Zoysa is now holding the position of Managing Director of Associated Electrical

Corporation Limited. He could be singularly credited in developing the refrigerator brand

SISIL, a landmark brand of Associated Electrical Corporation Limited which was

subsequently sold to SINGER. The transaction was marked in the corporate history of Sri

Lanka as the first ever sale of a BRAND.

In addition to his responsibilities at Associated Electrical Corporation Limited, he has also

functioned as the Director - IT and Systems of Associated Motorways Limited and has

served the Audit and Risk management Committee of Associated Motorways Limited.

He is currently on the boards of Capital Alliance Holdings Limited, Ceylon Tea Brokers

Limited and Corporate Druids (Pvt) Limited and serving ADZ Insurance Brokers (Pvt)

Limited (Representative of Marsh McLennan Companies (USA) for Sri Lanka and the

Maldives) in the capacity of the Managing Director.

He was appointed to the board of OGL in September 2010.

7.6. Statement Board of Directors

No director or a person nominated to become a director of the Company has been

involved in any of the following:

A petition under any bankruptcy laws filed against such person or any partnership in

which he was a partner or any corporation of which he was an executive officer;

Conviction for fraud, misappropriation or breach of trust or any other similar offence

which the CSE considers a disqualification;

7.7.

/10 amounted to Rs. 2,579,000.00. It is

estimated that for the financial year 2010/

approximately Rs. 4.7 Mn.




8. Other Information Relating to the Company

Degree of Dependence on Key Suppliers

OGL sources its raw materials from a large number of suppliers based locally as well asoverseas and the Company does not depend on any key suppliers, as no single supplier

accounts for more than 10% of raw materials and outsourced services.

Degree of Dependence on Key Customers

The Company depends on a niche client base which consists of five to six international

fashion brands which accounts for nearly 90% to 95% of its revenue.

The selected clientele of OGL account for a strong presence in the global fashion

industry stemming from USA and Europe and now spreading its reach to the Asianmarket in response to the imminent affluent Asian economy. The clientele have

recognized Sri Lanka as a reliable sourcing destination for garments and envisages

continuing its partnership with OGL in catering to its thriving global demand for fashion

apparel.

Litigation, Disputes and Contingent Liabilities

As at the date of this Introductory Document, there are no material legal, arbitration or

mediation proceedings which may have or have had in the recent past affected the

financial position or profitability of the Company.

As at the date of this Introductory Document, there are no contingent liabilities that

would affect current and future profits of the Company.

As at the date of this Introductory Document, there are no penalties imposed by any

regulatory or state authority against the Company.




9. Corporate Governance Practices

The board of directors of OGL has given the due emphasis to the importance of highest

standard corporate governance practices in promoting business integrity, accountabilityand transparency.

The following framework forms the part and parcel of corporate governance code of the

Company.

Constitution of the Board

The Company has one Non-Executive Director, two Non-Executive Independent

Directors and two Executive Directors on the Board with the expertise mainly in the area

of financial management, general management and operations of garment

manufacturing plants.

Non-Executive Directors

The Board of OGL consists of the following Non-Executive Directors.

Mr. Sarath C. Weerasooria Chairman

Mr. Sunil Karunanayaka

Mr. Dinesh de Zoysa

Non-Executive Independent Directors

The following directors of OGL have fulfilled the requirements to be Non-Executive

Independent Directors of OGL.


Mr. Dinesh de Zoysa

Remuneration Committee

The remuneration committee consists of the following one Non-Executive Director and

two Independent Non-Executive Directors.

Mr. Sarath C. Weerasooria, Chairman of the Committee


Mr. Dinesh De Zoysa

The remuneration committee is responsible for making recommendations to the Boardon the remuneration of Executive Directors and Non-Executive Directors. The committee

is also responsible for setting up the remuneration policy, which provides guidelines to

the Board on the overall remuneration framework to ensure that remuneration levels

are at a satisfactory level to attract and retain the requisite professionals to support the

success of the Company.




Audit Committee

The audit committee comprises of the following one Non-Executive Director and two

Independent Non-Executive Directors;

Mr. Sarath C. Weerasooria, Chairman of the Committee


Mr. Dinesh De Zoysa

The Chief Financial Officer attends meetings of the audit committee by invitation.

The audit committee is responsible for reviewing the functions and processes of internal

controls in the Company and ensuring the effectiveness of such controls. The Committee

monitors all audit activities and operations and ensures their compliance with overall

policies and procedures as well as adherence to statutory and regulatory requirements

and industry best practices.




10. Statutory Declaration

Declaration by the Board of Directors

Date: June 6, 2011

We the undersigned, who are named in the Introductory Document as Directors of

Orient Garments Limited, hereby declare and confirm that we have read the provisions

of the CSE listing rules and of the Companies Act No. 07 of 2007 and any amendments to

it relating to the issue of this Introductory Document and those provisions have been

complied with.

This Introductory Document has been seen and approved by us and we collectively and

individually accept full responsibility for the accuracy of the information given andconfirm that after making all reasonable enquires and to the best of our knowledge and

belief, there are no other facts the omission of which would make any statement herein

misleading or inaccurate.

Where representations regarding the future performance of Orient Garments Limited

have been given in the Introductory Document, such representations have been made

after due and careful enquiry of the information available to Orient Garments Limited

and making assumptions that are considered to be reasonable at the present point in

time in our best judgment.

Name Designation Signature

Mr. Sarath Chandra Weerasooria Chairman (Signed)

Mr. Rajinda Priyanjith Weerasooria Managing Director (Signed)

Mr. Harsha Mahendra de Saram Director (Signed)

Mr. Sunil Karunanayaka Director (Signed)

Mr. Dinesh De Zoysa Director (Signed)




11. Statutory and Other General Information

Inspection of Documents

The Introductory Document and The Articles of Association of Orient Garments Limited

will be available on the website of the CSE (www.cse.lk) and on the Company website

(http://www.orientgarments.lk) for a period of not less than fourteen 14 days.

Reports by Experts

Apart from the Independent Auditors Report, this Introductory Document does not

include any other reports or statements made by experts.




Interim Financial Statements



ORIENT GARMENTS LIMITEDINCOME STATEMENT FOR THE 11 MONTHS ENDED FEBRUARY 28, 2011

Group

Unaudited Unaudited Unaudited Note 28th Feb. 2011 28th Feb. 2011 28th Feb. 2010

Turnover 1 3,325,953,519 3,312,790,583 2,567,880,536

Cost of Sales (2,967,599,527) (2,967,023,323) (2,233,251,393)

Gross Profit 358,353,993 345,767,261 334,629,143

Other Income 2 35,143,263 34,414,586 10,000,000

Administrative Expenses (148,236,242) (132,467,729) (129,616,409)

Marketing and Logistic Expenses (64,408,236) (64,408,236) (44,833,228)

Profit from Operations 3 180,852,778 183,305,881 170,179,506

Finance Expenses 4 (74,583,788) (72,637,669) (66,139,328)

Profit Before Taxation 106,268,990 110,668,212 104,040,178

Provision for Income Tax (14,856,714) (13,987,074) (15,868,583)

Profit for the Period 91,412,276 96,681,138 88,171,595

Attributable to :

Equity Holders of the Company 98,154,854 96,681,138 88,171,595

Non Controlling Interest (6,742,578)

Earnings Per Share before Split (Rs.) 5 14.30 14.08 12.84

Earnings Per Share after Split (Rs.) 5 1.79 1.76 1.61

(Expressed in Sri Lankan Rupees)

Company

50 Introductory Document-Orient Garments Limited



51



ORIENT GARMENTS LIMITED

STATEMENT OF CHANGES IN EQUITY


For the period ended February 28, 2011

Stated Revaluation General Retained Total

Capital Reserves Reserves Earnings

Balance as at March 31, 2010 90,483,320 231,626,097 170,162,500 14,191,240 506,463,157

Profit for the Period - - - 96,681,138 96,681,138

Balance as at February 28, 2011 90,483,320 231,626,097 170,162,500 110,872,378 603,144,295

For the period ended February 28, 2010

Balance as at 31st March 2009 90,483,320 158,487,659 95,162,500 3,226,750 347,360,229

Profit for the Period - - - 88,171,595 88,171,595

Balance as at February 28, 2010 - 158,487,659 95,162,500 91,398,345 435,531,824




ORIENT GARMENTS (PRIVATE) LIMITED

CASH FLOW STATEMENT FOR THE 11 MONTHS ENDED FEBRUARY 28, 2011

Unaudited

Feb. 28, 2011

March 31, 2010Unaudited

Feb. 28, 2011

Unaudited

Feb. 28, 2010Operating Activities

Profit Before Taxation 106,268,990 139,246,345 110,668,212 104,040,178

Adjustments for:

Depreciation 46,519,378 34,733,313 32,174,062 24,546,724

Provision for Gratuity 13,175,292 14,373,047 10,088,926 10,088,926

Gain on Disposal of Property, Plant and Equipment (5,545,474) (2,083,333) (4,816,796) -

Money Received under Export Development Rebate Scheme (2,500,000) (10,000,000) (2,500,000) (10,000,000)

Interest Cost 72,788,827 77,018,588 72,487,539 66,139,328

Amortisation of Prepaid Lease - Lease Hold Land 50,360 54,938 50,360 50,360

Amortisation of Finance Lease Interest 150,130 984,217 150,130 902,198

Write Back of Long Term Loans (26,500,000) (33,958,647) (26,500,000) -

Interest Income (597,789) (435,319) (597,789) -

Operating Profit Before Working Capital Changes 203,809,714 219,933,149 191,204,643 195,767,714

Working Capital Changes

Inventories (225,262,331) (40,192,746) (225,262,331) 1,788,033

Trade and Other Receivables (260,083,434) 112,208,484 (245,729,248) (38,368,219)

Trade Creditors (16,195,990) 45,956,245 (18,026,372) 60,003,684

Cash Generated from Operations (297,732,041) 337,905,132 (297,813,307) 219,191,212

Gratuity Paid (5,487,498) (5,342,910) (4,885,403) (4,475,790)

Income Tax / ESC Paid (11,810,000) (7,644,109) (10,892,525) (7,200,143)

Net Cash Flow from Operating Activities (315,029,539) 324,918,113 (313,591,236) 207,515,279

Investing Activities

Purchase of Property, Plant and Equipment (19,822,072) (14,255,004) (19,140,430) (14,025,200)Proceeds from Sale of Property, Plant and Equipment 5,545,474 2,083,333 4,816,796 -

Decrease in Investments 1,333,334 - 20,061,534 (524,176)

Interest Received 597,789 435,319 597,789 -

Net Cash used in Investing Activities (12,345,477) (11,736,352) 6,335,690 (14,549,376)

Financing Activities

Proceeds from Loans 19,285,969 10,260,000 19,285,969 -

Re-payment of Loans (27,221,450) (34,484,588) (24,870,200) (30,283,608)

Repayment of Short Term Borrowing on Trade Finance 393,713,876 (175,434,804) 393,713,876 (97,131,513)

Interest Paid (72,788,827) (77,018,588) (72,487,539) (66,139,328)

Money Received under Export Development Rebate Scheme 2,500,000 10,000,000 2,500,000 10,000,000

Net Cash Flow from / (used in) Financing Activities 315,489,569 (266,677,980) 318,142,105 (183,554,449)

Net Change in Cash and Cash Equivalents for the Period (11,885,446) 46,503,781 10,886,560 10,459,806

Cash and Cash Equivalents at the Beginning of the Year 4,653,593 (41,850,189) 6,187,848 (33,638,455)

Cash and Cash Equivalents at the End of the Period (7,231,853) 4,653,592 17,074,408 (23,178,649)

Cash and Cash Equivalents at the End of the Year Represented by:Unaudited

Feb. 28, 2011 March 31, 2010

Unaudited

Feb. 28, 2011

Unaudited

Feb. 28, 2010

Cash at Bank and In Hand 80,199,708 30,428,578 75,682,550 14,413,862

Bank Overdrafts (87,431,561) (25,774,986) (58,608,141) (37,592,511)

(7,231,853) 4,653,592 17,074,408 (23,178,649)


CompanyGroup

Introductory Document-Orient Garments Limited 53




NOTES TO THE FINANCIAL STATEMENTS FOR THE 11 MONTHS ENDED FEBRUARY 28, 2011


Group

Unaudited

Feb 28, 2011

Unaudited

Feb 28, 2011

Unaudited

Feb 28, 20101 Turnover

Imcome from Exports 3,325,953,519 3,312,790,583 2,567,880,536

2 Other Income

Interest Income 597,789 597,789 -

Gain on Disposal of Property, Plant and Equipment 5,545,474 4,816,796 -

Writte Back of Long Term Loan 26,500,000 26,500,000 -

Grant Received from Export Development Rebate Scheme 2,500,000 2,500,000 10,000,000

35,143,263 34,414,586 10,000,000

3 Profit Before Taxation

Directors Remuneration 2,364,389 2,364,389 1,436,722

Auditors Remuneration 175,000 100,000 70,000

Depreciation 46,519,378 32,174,062 24,597,084

Defined Contribution Plan cost - EPF/ETF 60,513,927 43,899,999 39,536,159

Defined Benefit Plan cost - Retiring Gratuity 0 0

Other Staff Cost 141,414,039 117,738,414 112,854,382

Legal Fees 250,875 250,875 48,510

4 Finance Expenses

Interest on Long Term Loans and Borrowings 3,782,872 3,482,608 4,059,859

Interest on Short Term Loans and Borrowings 70,650,786 69,004,931 53,724,812

Interest on Finance Leases 150,130 150,130 424,78674,583,788 72,637,669 58,209,457

5 Basic Earnings Per Share

Amount used as the Numerator

Profit Attributable to the Equity Shareholders (Rs.) 98,154,854 96,681,138 88,171,595

Amount used as the Denominator

Number of Shares - before Split 6,864,582 6,864,582 6,864,582

Number of Shares - after Split 54,916,656 54,916,656 54,916,656

Earnings Per Share before Split (Rs.) 14.30 14.08 12.84

Earnings Per Share after Split (Rs.) 1.79 1.76 1.61

Company

Operating Profit/(Loss) after charging all expenses including

Pursuant to the approval by the Shareholders at an extra ordinary general meeting, the Shares of the Company were split on 28th

September 2010 on the basis of 1 Ordinary Share in to 8 Ordinary Shares. Consequent to the Share split, the number of ordinary

Shares of the Company increased from 6,864,582/- to 54,916,656/- without any change to the Stated Capital.






6 Property, Plant and Equipment

Group

Freehold Assets

Land and Land Development Cost 55,802,397 - - 55,802,397

Buildings 380,117,274 - - - 380,117,274

Plant and Machinery 310,416,213 6,104,186 - - 316,520,399Factory Equipment and Office Equipment 38,748,087 6,150,029 - - 44,898,116

Furniture and Fittings 29,505,761 - - 29,505,761

Motor Vehicles 14,727,759 - (6,012,884) 12,799,500 8,714,875

Leasehold Assets

Land Development Cost 27,828,291 - - - 27,828,291

Motor Vehicles 15,514,500 7,567,857 - (12,799,500) 23,082,357

872,660,282 19,822,072 (6,012,884) - 886,469,470

Freehold Assets

Buildings 1,705,885 20,599,945 - - 22,305,830

Plant and Machinery 207,394,362 20,668,762 - - 228,063,123Factory Equipment and Office Equipment 29,181,170 1,060,023 - - 30,241,192

Furniture and Fittings 28,494,543 694,760 - - 29,189,303

Motor Vehicles 13,331,150 1,396,608 (6,012,884) 12,799,500 21,514,374

- Leasehold Assets -

Land Development Cost 6,119,056 590,889 - - 6,709,945

Motor Vehicles 13,414,046 1,508,392 - (12,799,500) 2,122,937

299,640,212 46,519,378 (6,012,884) - 340,146,705

Carrying Value 573,020,071 546,322,765

Property, Plant and Equipment

Company

Freehold Assets

Land and Land Development Cost 47,225,000 - 47,225,000

Buildings 297,047,203 - - 297,047,203

Plant and Machinery 266,975,723 6,053,586 - 273,029,309

Factory Equipment and Office Equipment 27,304,426 5,518,986 32,823,413

Furniture and Fittings 17,276,242 - 17,276,242

Motor Vehicles 10,848,962 (3,756,587) 12,799,500 19,891,875

Leasehold Assets

Land Development Cost 20,910,821 - - 20,910,821

Motor Vehicles 15,514,500 7,567,857 - (12,799,500) 10,282,857

703,102,877 19,140,430 (3,756,587) - 718,486,720

Freehold Assets

Buildings - 13,878,747 - 13,878,747


Factory Equipment and Office Equipment 18,605,447 891,322 19,496,769

Furniture and Fittings 16,798,063 488,045 17,286,108

Motor Vehicles 9,452,353 1,396,608 (3,756,587) 12,799,500 19,891,874

Leasehold Assets

Land Development Cost 4,182,164 383,365 - 4,565,529

Motor Vehicles 13,414,046 1,508,392 - (12,799,500) 2,122,937

266,882,378 32,174,062 (3,756,587) - 295,299,853

Carrying Value 436,220,499 423,186,867

Balance as at

Feb. 28, 2011

Depreciation

Cost/Valuation


Disposals

Additions Disposals

Transfer

Balance as at

Feb. 28, 2011Depreciation

Balance as at

April 1, 2010

Transfer

TransferCharge for the

PeriodDisposals

Cost/Valuation AdditionsBalance as atApril 1, 2010

Balance as at

April 1, 2010

Balance as atFeb. 28, 2011

Balance as at

Feb. 28, 2011Disposals

Charge for for

the Period

Balance as at

April 1, 2010Transfer

55



ORIENT GARMENTS LIMITEDNOTES TO THE FINANCIAL STATEMENTS

Unaudited

28th Feb. 2011

31st March

2010

Unaudited

28th Feb. 201131st March 2010

7 Prepaid Lease - Leasehold Land

Balance at the Beginning of the Period 2,197,499 2,252,437 2,197,499 2,252,437

Charge for the Period (50,360) (54,938) (50,360) (54,938)

Net Balance as at February 28, 2011 2,147,139 2,197,499 2,147,139 2,197,499

8 Intangible Assets

Goodwill on Acquisition 55,098,462 55,098,462 55,098,462 55,098,462

55,098,462 55,098,462 55,098,462 55,098,462

Company

9 Investment in Subsidiaries 28th Feb. 2011 28th Feb. 2011 31st March 2010

Subsidiaries Principle Activity Holdings Cost Cost Cost

Stafford Orient (Pvt) Limited Manufacture of Garments 100% - - 20,473,788Priority Garments (Pvt) Limited Manufacture of Garments 43.75% - - 7,000,000

Provision for Impairment of Investments - - (7,000,000)

- - 20,473,788

Unaudited

28th Feb. 2011

31st March

2010

Unaudited


10 Other Investments

Long Term Receivables

Priority Garments (Private) Limited - - - 12,500,000

Stafford Orient (Private) Limited - - 66,291,327 72,519,527

- - 66,291,327 85,019,527

11 Inventories

Raw Materials 395,495,094 183,916,334 395,495,094 183,916,334

Work-In-Progress 144,651,011 112,802,085 144,651,011 112,802,085

Finished Goods 79,777,291 79,240,921 79,777,291 79,240,921

Goods-In-Transit 17,981,913 36,683,638 17,981,913 36,683,638637,905,309 412,642,978 637,905,309 412,642,978

12 Trade and Other Receivables

Trade Debtors 531,385,153 296,916,913 527,293,044 292,696,083

Other Receivables/Prepayments 31,588,193 12,814,607 30,863,702 11,732,525

Amount due from Related Companies / Subsidiaries 1,492,402 - 4,274,597 17,770,612

VAT Recoverable 17,243,759 21,466,959 15,460,204 19,340,978

581,709,509 331,198,479 577,891,547 341,540,198

13 Cash and Cash Equivalents

Short Term Investments - FCBU Deposits/Fixed Deposits 57,891,838 14,380,803 54,191,838 14,380,803Cash at Bank and In Hand 22,307,870 16,047,775 21,490,712 14,205,558

80,199,708 30,428,578 75,682,550 28,586,361

14 Non Current Assets - Held for Sale

Investments held for sale - Orient Design (Pvt) Ltd - (Note 14.1) - 1,333,334 - 1,333,334

- 1,333,334 - 1,333,334

14.1

15 Stated Capital

Issued and Fully Paid

54,916,656 Ordinary Shares 90,483,320 90,483,320 90,483,320 90,483,320


Company

Group Company

Group

Group

The Company divested it's Investments in Orient Design (Private) Limited on 15th February 2011 for a total consideration of Rs.

1,333,334/-. There was no material gain or loss resulting from the transfer in to the Company/Group. The Investment was sold at cost for sum

of Rs. 1,333,334/-






Unaudited

28th Feb. 2011

31st March

2010

Unaudited


16 Borrowings

Non-Current Portion of the Interest Bearing Borrowings

Term Loans 16.1 80,485,090 88,896,874 75,690,340 81,843,124

Finance Lease Obligations 16.2 6,033,439 1,408,047 6,033,439 1,408,047

86,518,529 90,304,921 81,723,779 83,251,171

Current Portion of the Interest Bearing Borrowings:

Term Loans 16.1 25,146,475 29,749,922 22,673,725 27,184,922

Finance Lease Obligations 16.2 2,129,772 1,525,284 2,129,772 1,525,284

27,276,247 31,275,206 24,803,497 28,710,206

16.1 Term Loans

Non-Current

At the Beginning of the Year 118,646,797 139,618,982 109,028,047 139,618,982

Loans Obtained During the Year 11,718,106 10,260,000 11,718,106 -

130,364,903 149,878,982 120,746,153 139,618,982

Repayments During the Year (24,733,338) (31,232,185) (22,382,088) (30,590,935)

At the End of the Year 105,631,565 118,646,796 98,364,065 109,028,046

Transferred to Current Liabilities (Repayable Within One Year) 25,146,475 29,749,922 22,673,725 27,184,922

Transferred to Non-Current Liabilities (Repayable After One Year) 80,485,090 88,896,874 75,690,340 81,843,124

16.2 Finance Lease Obligations

Gross Liability at the Beginning of the Year 3,065,929 6,318,332 3,065,929 6,318,332

Lease Faclility Obtained During the Period 9,340,037 9,340,037

12,405,966 6,318,332 12,405,966 6,318,332

Repayments During the Year (2,488,112) (3,252,403) (2,488,112) (3,252,403)

Lease Obligation at the End of the Year 9,917,854 3,065,929 9,917,854 3,065,929

Finance Charges Amortized (1,754,643) (132,598) (1,754,643) (132,598)

Net Liability at the End of the Year 8,163,211 2,933,331 8,163,211 2,933,331

Transferred to Current Liabilities (Repayable Within One Year) 2,129,772 1,525,284 2,129,772 1,525,284

Transferred to Non-Current Liabilities (Repayable After One Year) 6,033,439 1,408,047 6,033,439 1,408,047

17 Trade and Other Creditors

Trade Creditors 119,118,311 139,547,102 110,299,325 135,235,258

Accrued Expenses 62,508,601 56,163,459 42,596,068 35,207,935

Amount due to Related Parties 290,383 244,906 290,383 244,906

Other Payables 24,128,588 52,716,406 6,580,991 33,605,042

206,045,883 248,671,873 159,766,767 204,293,140

18 Short Term Borrowing on Trade Finance

Hypothecation/Packing Credit Loans 801,130,052 407,416,176 801,130,052 407,416,176

801,130,052 407,416,176 801,130,052 407,416,176

19

20

21

22

23


There are no material post Balance Sheet events that require adjustments to or disclosure in Financial Statement.

The Financial Statements of the Company and those Consolidated with such for the Interim Period have been prepared on the same

basis as the most recent Audited Financial Statement and are in compliance with Sri Lanka Accounting Standards 35 - Interim Financial

Reporting.

There were no material commitments, financial or other contracted or consented by the Board of Directors as at the Balance Sheet date.

There were no material contingent liabilities as at the Balance Sheet date which require adjustments to or disclosure in the Financial

Statements.

Company

The accounting policies have been consistently applied by the Group and are consistent with those used in previous year. The

Group

presentation and to be comparable with year ending reporting.

presentation and classification of the Financial Statement of the previous period have been adjusted where relevant, for better








Audited Financial Statements





Page 2


INCOME STATEMENT

Group

2010 2010 2009

For the Year Ended 31 March Restated

Note

Turnover 3 2,801,673,323 2,782,889,411 2,853,980,805

Cost of Sales (2,428,591,232) (2,426,246,456) (2,514,298,098)

Gross Profit 373,082,091 356,642,955 339,682,707

Other Income 4 46,477,299 10,092,735 1,083,000

Administrative Expenses (154,390,613) (143,949,710) (158,553,205)

Marketing and Logistic Expenses (47,864,689) (47,864,689) (50,384,517)

Finance Expenses 5 (78,057,743) (71,500,526) (83,350,606)

Profit Before Taxation 6 139,246,345 103,420,765 48,477,378

Income Tax Expenses 7 (18,648,087) (17,456,275) (2,988,741)

Profit for the Year 120,598,258 85,964,490 45,488,637

Attributable to ;

Equity Holders of the Company 125,747,787 85,964,490 45,488,637

Non - Controlling Interest (5,149,529) - -

Profit for the Year 120,598,258 85,964,490 45,488,637

Basic Earnings Per Share Before Split (Rs.) 8 18.32 12.52 6.63

Basic Earnings Per Share after Split (Rs.) 8 2.29 1.57 0.83

Audit Report on Page 1

Figures in brackets indicate deductions

Accounting Policies and Notes to the Financial Statements on pages 6 to 19 form an integral part of these Financial Statements


Company

IntroductoryDocumentOrientGarmentsLimited 61



62



Page 4


STATEMENT OF CHANGES IN EQUITY


Group

Stated Revaluation General Retained Non - Controlling Total

Capital Reserves Reserves Earnings Interest

Balance as at March 31, 2009 as Previously Reported 90,483,320 178,448,693 95,162,500 6,660,096 - 370,754,609

Effect of difference in amortization of Land Development cost as per

SLAS 18 (Note 28 (a))(1,547,428) - (1,547,428)

Recognition of Defer red Tax Liability as per SLAS 10 (Note 28 (b)) (19,961,034) (1,885,918) - (21,846,952)

Balance as at March 31, 2009 (Restated) 90,483,320 158,487,659 95,162,500 3,226,750 - 347,360,229

Non Controlling Interest as at April 01, 2009 - - - - 3,614,730 3,614,730

Profit for the Year - - - 125,747,787 (5,149,529) 120,598,258

Revaluation Surplus - 47,948,612 - - - 47,948,612

Share of Loss of Non Controlling Interest Borne by the Equity Holding

of the Parent.(1,534,799) 1,534,799 -

Deferred Tax Arising on Revaluation - (7,192,293) - - - (7,192,293)

Transferred to General Reserves - - 75,000,000 (75,000,000) - -

Balance as at March 31, 2010 90,483,320 199,243,978 170,162,500 52,439,738 - 512,329,536

Company


Capital Reserves Reserves Earnings

Balance as at April 01, 2008 90,483,320 178,448,693 90,098,101 6,477,512 365,507,626

- - (43,675,000) - (43,675,000)

Profit for the Year - - - 48,921,983 48,921,983

Transferred to General Reserves - - 48,739,399 (48,739,399) -

Balance as at March 31, 2009 as Previously Reported 90,483,320 178,448,693 95,162,500 6,660,096 370,754,609

Effect of difference in amortization of Land Development cost as per

SLAS 18 (Note 28 (a))(1,547,428) (1,547,428)

Recognition of Deferred Taxation as per SLAS 10 (Note 28 (b)) (19,961,034) (1,885,918) (21,846,952)

Balance as at March 31, 2009 (Restated) 90,483,320 158,487,659 95,162,500 3,226,750 347,360,230


Revaluation Surplus - 86,045,222 - - 86,045,222

Deferred Tax Arising on Revaluation - (12,906,784) - - (12,906,784)

Transferred to General Reserves - - 75,000,000 (75,000,000) -





Net Gain / (Loss) recognized directly in Equity on Repurchase of Shares

Attributable to Equity Holders of the Parent

IntroductoryDocumentOrientGarmentsLimited 63



Page 5


CASH FLOW STATEMENT

Group

2010 2010 2009

As at 31 March Restated

Operating Activities

Profit Before Taxation 139,246,345 103,420,765 48,477,378

Adjustments for:

Depreciation 34,733,313 26,751,385 25,715,133

Provision for Gratuity 14,373,047 11,006,102 5,923,552

Prior Year Adjustments - - 1,547,428

Gain on Disposal of Property, Plant and Equipment (2,083,333) - (1,083,000)

Money Received under Export Development Rebate Scheme (10,000,000) (10,000,000) -

Provision for Impairment of Investment in Subsidiaries - 7,000,000 -

Amortization of Pre Paid Lease - Lease Hold Land 54,938 54,938 -

Amortization of Finance Leasing Interest in Suspense 984,217 984,217 -

Interest Cost 77,018,588 70,461,371 -Long Term Loans Written Back (33,958,647) - -

Interest Income (435,319) (92,735) -

Operating Profit Before Working Capital Changes 219,933,149 209,586,043 80,580,491


Inventories (40,192,746) (43,877,100) 15,095,983

Trade and Other Receivables 112,208,484 119,234,514 (73,240,190)

Trade Creditors 45,956,245 52,987,219 (32,072,765)

Cash Generated from Operations 337,905,132 337,930,677 59,301,315

Gratuity Paid (5,342,910) (4,784,885) (4,471,435)

Income Tax / ESC Paid (7,644,109) (7,200,143) (1,102,823)

Net Cash Flow from Operating Activities 324,918,113 325,945,649 53,727,057

Investing ActivitiesPurchase of Property, Plant and Equipment (14,255,004) (13,598,778) (24,507,535)

Proceeds from Sale of Property, Plant and Equipment 2,083,333 - 1,083,000

Increase in Investments - (2,873,788) (19,438,199)

Interest Received 435,319 92,735 -

Net Cash Flow from / (used in) Investing Activities (11,736,352) (16,379,831) (42,862,733)


Proceeds from Loans 10,260,000 - 118,780,595

Interest Paid (77,018,588) (70,461,371) -

Repayment of Loans / Leases (34,484,588) (33,843,338) (41,751,532)

Repayment of Short Term Borrowings on Trade Finance (175,434,805) (175,434,805) 68,937,796

Money Received under Export Development Rebate Scheme 10,000,000 10,000,000 -

Net Cash Flow from / (used in) Financing Activities (266,677,980) (269,739,513) 77,029,063

Net Change in Cash and Cash Equivalents During the Year 46,503,781 39,826,304 87,893,386

Cash and Cash Equivalents at Beginning of the Year (41,850,189) (33,638,456) (121,531,842)

Cash and Cash Equivalents at End of the Year 4,653,592 6,187,848 (33,638,456)

Cash and Cash Equivalents at End of the Year Represented by: March 31,2010 March 31,2010 March 31,2009

Cash at Bank and in Hand 30,428,578 28,586,362 33,610,130

Bank Overdrafts (25,774,986) (22,398,514) (67,248,586)

4,653,592 6,187,848 (33,638,456)





Company

64 IntroductoryDocumentOrientGarmentsLimited



65Introductory Document-Orient Garments Limited

Page 6


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010

1. CORPORATE INFORMATION

1.1 General

Orient Garments (Private) Limited is a Limited Liability Company incorporated and domiciled in Sri Lanka. Theregistered office of the company is located at 49/16, Iceland Building, Galle Road, Colombo 03, while its principal

place of business is Located at 78B, Polgasowita Road, Mattegoda.

The Company is a BOI Venture for the manufacturing and exporting of Outerwear, Casual-wear apparels. OrientGroup has five fully equipped modern factory complexes located at Mattegoda, Weligama, Koggala (EPZ),Deniyaya and Piliyandala.

1.2 Principle Activities and Nature of OperationsDuring the year, the principal activities of the Company were manufacturing and exporting of apparels.

1.3 Parent EnterpriseThe parent undertaking is Orient Garments (Private) Limited and the ultimate parent of the Group is also the same.

1.4 Date of Authorization for Issue and Revision of the Financial StatementsThe Financial Statements were authorized for issue by the Directors on 01, September 2010, however the FinancialStatements of the Company for the year ended 31 March 2010 were re-cast based on the recommendation given bythe Colombo Stock Exchange (CSE) by their letter dated 25, March 2011, and the amended Financial Statementswere authorized on 07 April 2011. Further, on the recommendation given by the CSE by their letter dated 21 April2011, the Financial Statements once again were re-cast and the amended Financial Statements were approved by theBoard of Directors on 06 May 2011.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 GENERAL ACCOUNTING POLICIES

2.1.1 Basis of PreparationThese Financial Statements presented in Sri Lankan Rupees have been prepared under the historical cost or revaluation in accordance with Generally Accepted Accounting Principles and the Accounting Standards laid down

by the Institute of Chartered Accountants of Sri Lanka.

2.1.2 Statement of ComplianceThe Balance Sheet, Statements of Income, Changes in Equity and Cash Flow together with Accounting Policies and

Notes (Financial Statements) of the Company and the Group as at 31, March 2010 and for the year then ended have been prepared in compliance with the Sri Lanka Accounting Standards (SLAS) issued by the Institute of CharteredAccountants of Sri Lanka and the requirements of the Companies Act No 7 of 2007.

2.1.3 Significant Accounting Judgments, Estimates and AssumptionsThe preparation of groups consolidated and Company Financial Statements in conformity with SLASs, requires

management to make judgments, estimates, and assumptions that affects the application of accounting policies andreported amounts of assets, liabilities, income and expenses and disclosure of contingent liabilities, at the reportingdate. However, uncertainty about these assumptions and estimates could result in outcome that require materialadjustments to the carrying amounts of assets or liabilities effected in future periods.

The judgments, estimates and underlying assumptions are based on historical experience and various other factorsthat are believed to be reasonable under the circumstances, the results of which form the basis of making the

judgments, estimates and assumptions about the carrying amount of assets, liabilities and contingent liabilities thatare not readily identified from other sources.

The judgments, estimates and underlying assumptions are reviewed on and ongoing basis. Revisions to accountingestimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the

period of the revision and future periods if the revision affects both current and future periods.Judgments, estimates and assumptions made by the management in application of SLASs that could have asignificant effect on the Financial Statements are mentioned below.

Notes to the Financial Statements continued on Page 7



Introductory Document-Orient Garments Limited66

Page 7



Policy

Valuation of Property, Plant & Equipment 2.3.1

Deferred Taxation 2.1.9

Valuation of Employee Benefits 2.4.22.1.4 Comparative Information

The accounting policies have been consistently applied by the Company and are consistent with those of the previous year. The previous year figures and phrases have been re-arranged wherever necessary to conform to the

2.1.5 Discontinuing Operations

n abandoned or terminated pursuant to a single plan and which represents a separate major line of industry or geographical area of operations.As at the balance sheet date, the Company does not have any discontinuing operations.

2.1.6 InvestmentsAll investments, which are held as Long term, are valued at cost, and test for impairment.

2.1.7 Foreign Currency TransactionsAll foreign exchange transactions are converted to Sri Lankan Rupees, which is the reporting currency at the rates of exchange prevailing at the time the transactions were effected.Monetary assets and liabilities denominated in foreign currencies are translated to Sri Lankan Rupee equivalentsusing the year end foreign exchange rates, the resulting gains or losses are accounted in the Income Statement.

2.1.8 TaxationThe Group recognizes liability for anticipated tax based on estimates of taxable income where the final tax outcomeof these matters is different from the amount that were initially recorded, such differences will impact the currentand deferred income tax assets and liabilities in the period in which such determination is made.

2.1.9 Deferred Tax

Deferred tax is recognized using the Liability Method, providing for temporary differences between carryingamounts of assets and liabilities for financial reporting purposes and the amount used for taxation purpose. Deferredtax is not recognized further following temporary differences for which the initial recognition of assets or liabilitiesin a transaction that is not a business combination and that affects neither accounting nor taxable profit, anddifferences relating to investment in subsidiaries to the extent that they probably will not reverse in the foreseeablefuture. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognitionof goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differenceswhen they reverse, based on the laws that have been enacted or substantively enacted by reporting date. Deferred taxassets and liabilities are offset if there is a legal enforceable right to set off current tax liabilities and assets and theyrelate to income taxes levied by the same tax authorities on the same taxable entity.

A deferred tax asset is recognized only to the extent that it is probable that future profits will be available againstwhich the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are

reduce to the extent that is no longer probable that the related tax benefits will be realized.

2.2 CONSOLIDATION

a) SubsidiariesSubsidiaries are all entities over which the Group has the power directly or indirectly to govern the financial andoperating policies of an entity so as to obtain benefits from its activities, which is evident when the company controlsthe composition of the board of Directors of the entity or holds more than 50% of the voting right of the entity or entitled to receive more than half of every dividend from each shares carrying unlimited right to participate indistribution of profits or capital. Accounting policies of subsidiaries have been changed where necessary to ensureconsistency with the policies adopted by the Parent.





Page 8



b) Non-Controlling InterestThe Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the date thatcontrol commences until the date control ceases. The interest of outside shareholders in Group Companies is

Non-Controlling

c) Transactions Eliminated on ConsolidationInter-company transactions, balances and unrealized gains on transactions between Group Companies are eliminated.Unrealized gains arising from transactions with Group Companies are eliminated against the investment to the extentof the groupUnrealized losses are also eliminated in the same way as unrealized gains, butonly to the extent there is no evidence of impairment.

d) Reporting DateAll the subsidiaries and the parent have a common financial year ending 31 March.

2.3 ASSETS AND BASES OF THEIR VALUATIONAssets classified as current assets on the Balance Sheet are Cash and Bank balances and those which are expected to

be realized in cash during the normal operating cycle or within one year from the Balance Sheet date, whichever isshorter.

2.3.1 Property, Plant and Equipment

Permanent Land Development CostPermanent land and development costs are those costs on building new access roads on leased land as part of a major infrastructural development. The cost has been capitalized and amortized over the shorter of useful life or remaininglease period.

The Property, plant and equipment are stated at cost or valuation less accumulated depreciation and impairmentlosses if any.

The cost of property, plant and equipment is the cost of acquisition or construction together with any expensesincurred 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 earning capacity of the business has been treated as capital expenditure.

RevaluationA revaluation of property, plant and equipment is done when there is a substantial distinction between the fair value(market value) and the carrying amount of the asset and is normally undertaken by a professionally qualified valuer.When an asset is revalued, any increase in the carrying amount is credited directly to a revaluation surplus unless itreverses a previous revaluation decrease relating to the same asset, which was previously recognized as an expense.In these circumstances the increase is recognized as income to the extent of the previous write down. When ancreased as a result of a revaluation, the decrease is recognized as an expense unless it

reverses a previous increment relating to that asset, in which case it is charged against any related revaluationsurplus, to the extent that the decrease does not exceed the amount held in the revaluation surplus in respect of thatsame asset. Any balance remaining in the revaluation surplus in respect of an asset, is transferred directly toaccumulated profits on retirement or disposal of the asset.

2.3.2 DepreciationProvision for depreciation is calculated by using straight line on the cost or valuation of all property plant andequipment other than freehold land, in order to write off such amounts over the estimated useful lives of such assets.Which are given below. Depreciation Method and useful lives and residual values are reassessed at every BalanceSheet Date.





Page 9



Asset Category Depreciation Rate Useful Life

Amortization of Lease hold Land Development Cost - Koggala Factory 2% 50 YearsAmortization of Lease hold Land Development Cost - Deniyaya Factory 4% 25 YearsBuildings 5% 20 Years

Plant, Machinery 20% 05 YearsFactory Equipment and Office Equipment 10% 10 YearsFurniture & Fittings 10% 10 YearsMotor Vehicles 25% 04 Years

Depreciation of assets begins when it is available for use and ceases of the earlier of the dates on which the asset is

classified as held for sale and or is de-recognized.

2.3.3 ImpairmentThe carrying a non-financial assets, other than inventories and deferred tax assets arereviewed at each balance sheet date to determine whether there is any indication of impairment. If any suchindication exists, the assets recoverable amounts are estimated.For goodwill, recoverable amount is estimated at each balance sheet date or as and when an indication of impairment

is identified.

2.3.3.1 Impairment / Reversal of impairmentAn impairment loss is recognized if the carrying amount of an asset or its cash generating unit exceeds itsrecoverable amount. Impairment losses are recognized in profit and loss. A cash generating unit is the smallestidentifiable asset group that generates cash flows that are largely independent from other assets and Groups.

Impairment loss recognized in respect of subsidiaries acquired are allocated first to reduce the carrying amount of any goodwill allocated to the entity and then to reduce the carrying amount of the other assets in the entity on a pro-rata basis.

The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value lesscosts to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a

pre tax discount rate that reflects current market assessment of the time value of money and risks specific to the assetor cash generating unit.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at reporting date for any indications that the loss has decreased or no longer exists. Animpairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Animpairment loss is reversed only to the extent that the assets carrying amount do not exceed the carrying amountsthat would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

2.3.4 Finance LeasesProperty, plant and equipment on finance leases which effectively transfer to the company substantially all the risksand benefits incidental to ownership of the leased items are capitalized at the inception of the lease at the fair valueof the leased property or, if lower, at the present value of the minimum lease payment at inception less accumulated

depreciation.

The total interest payable is accounted as interest in suspense. The corresponding credit is recorded on lease as anamount payable to the lessor. The installments paid are used to reduce the liability. The Interest charge of the year istransferred from the interest suspense account to the income statement.

2.3.5 Operating LeasesLeases, where the lessor effectively retains substantially all the risks and rewards of ownership over the lease termare classified as operating lease. Payments made under operating lease are recognized in Income Statement onstraight-line basis over the period of lease.





Page 10



2.3.6 GoodwillGoodwill represents identifiable assets and liabilities of the acquired subsidiary at the date of acquisition.

Negative goodwill arising on acquisition represents the excess of the Group interest in the fair value of the assets andliabilities acquired over the cost of acquisition. Negative goodwill is recognized immediately in the incomestatement. Goodwill is not amortized; instead Goodwill is reviewed for impairment annually or more frequently inthe events or changes in circumstances indicates that the carrying value may be impaired.

2.3.7 Inventories

Inventories are measured at the lower of cost or net realizable value, after making due allowances for obsolete andslow moving items. Net realizable value is priced at which inventories can be sold in the ordinary course of businessless the estimated cost of completion and estimated cost necessary to make the sale.

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

Raw Material - At cost determined on first-in-first-out basis

Finished Goods - At the cost of direct materials, direct labour and appropriate proportion of fixed productionoverheads at normal operating capacity.

Work-in-progress - At the cost of direct materials, direct labour and appropriate proportion of fixed Productionoverheads.

Packing Material - At cost determined on first-in first-out basis

Goods in Transit - At actual cost

Raw materials are valued at the lower of cost or net realizable value. Finished goods and work-in-progress are

valued at average cost and includes labour and appropriate overheads absorbed under normal level of activity.

2.3.8 Trade Debtors and ReceivablesTrade receivables are carried out at anticipated realizable value. A provision for impairment of trade receivables isestablished when there is reasonable evidence that the company will not be able to collect all amounts due accordingto the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor willenter bankruptcy or financial re-organization and default payments are considered as indicators that a tradereceivable is impaired. When the carrying amount of the asset is reduced, the loss is recognized in the Incomestatement. When a trade receivable is uncollectible, it is written off against the provision for trade receivable.Subsequent recoveries of amounts previously written off are credited against other operating expenses in theIncome Statement.

2.3.9 Cash and Cash Equivalents

Comprise of cash in hand, demand deposits and bank balance. For the purpose of the Cash Flow Statement, cash andcash equivalents comprise cash in hand, deposits held with banks, other short term highly liquid investments withoriginal maturity of three months or less, and bank overdrafts.

2.4 LIABILITIES AND PROVISIONS

2.4.1 LiabilitiesAll known liabilities have been accounted for in preparing the Financial Statements and adequate provisions have

been made for liabilities which are known to exist.





Page 11



2.4.2 Retiring Benefit Costs

(a) Defined Benefit Plan Retirement Gratuity ProvisionA defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The liability

recognized in the Financial Statements in respect of defined benefit plan is the present value of the definedobligation at the reporting date. The defined benefit obligation is calculated using the projected unit credit method asst The present value of the defined benefit obligation is determined bydiscounting the estimated future cash outflows using interest rates that are determined in currency in which the

benefits will be paid and that have terms to maturity approximating to the terms of the related liability.

Provision has been made for retirement gratuities from the first year of service for all employees, in conformity withSLAS 16 (Revised 2006) on retirement benefit costs. However, under the payment of gratuity Act No. 12 of 1983,the liability to an employee arises only on completion of 5 years of continued service.

The liability is not externally funded.The key assumption used includes the followings,

01. Rate of Interest at 9.50%02. Rate of annual Salary increment at 10%03. Retirement age of all employees at 55 Years

(b) Defined Contribution Plans Employees Provident Fund & Employees Trust FundAll employees who are eligible for Employees Provident Fund contribution and Employees Trust Fund contributionare covered by relevant contribution funds in line with respective statutes and regulations. Employers contributionsto these defined contribution plans are recognized as an expense in the Income Statement as incurred.

2.5 INCOME STATEMENTFor the purpose of presentation of the Income Statement, the function of expenses method is adopted, as it representsfairly the elements of Company performance.

2.5.1 Revenue RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and therevenue 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 sales taxes.

2.5.2 Sale of GoodsRevenue from the sales of goods is recognized in the Income Statement when the significant risks and rewards of ownership have been passed to the buyer with the Group retaining neither continuing marginal involvement to thedegree usually associated with ownership, nor an effective control over the goods sold.

2.5.3 Interest IncomeInterest income is recognized as the interest accrued on the time basis (taking into account the effective yield on theasset) unless collectability is in doubt.

2.5.4 Government GrantsGrants related to property, plant & equipment are initially deferred and allocated to income on a systematic basisover the useful life of the related PPE. Grants related to income are recognized in the Income Statement in the year in which it is received.

2.5.5 TurnoverThe turnover represents the invoice value of exports.

2.5.6 ExpensesAll expenditure incurred in the running of the business has been charged to income in arriving the profit for the year on an annual basis.

2.6 CASH FLOWThe Cash Flow Statement has been prepared on the indirect method.





Page 12



2.7 EFFECT OF ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVEThe following standards have been issued by the institute of chartered accountants of Sri Lanka and are effective for the period specified below.

2.7.1 Sri Lanka Accounting Standard No. 44 Financial Instruments; Presentation Sri Lanka AccountingStandard No. 45 - Financial Instruments; Recognition and Measurement.

Sri Lanka Accounting Standards No 44 and No 45 becomes effective for financial years beginning on or after 1 st

January, 2012. Accordingly, Sri Lanka Accounting Standards 44 and 45 will be adopted in preparing and presentingthe Group Financial Statements for the financial years commencing 1 April, 2012

These two standards together provide comprehensive guidance on identification, classification, measurement and presentation of financial instruments (including derivatives) into financial assets, financial liabilities and equityinstruments.

Accordingly, when financial assets or liabilities are recognized initially, the Group is required to measure suchfinancial assets or liabilities at its fair value plus transaction costs that are directly attributable to the acquisition or

issue of the financial assets, financial liability and subsequently measure either at fair value or amortized costdepending on the categorization of the financial assets and financial liabilities.

In order to comply with the requirements of these accounting standards, the Group is in the process of assessing theimpact, the aforesaid two Accounting Standard will have on the Financial Statements.

Due to the complex nature of the effect of these Accounting Standards, the impact of adoption is not estimable as atthe date of publication of these Financial Statements.

2.7.2 Sri Lanka Accounting Standard No. 44 -

Sri Lanka Accounting Standard No.39 becomes effective for financial years beginning on or after 1 January, 2012.Accordingly, Sri Lanka Accounting Standards No.39 will be adopted in preparing and presenting the Group

Financial Statements for the financial years commencing 1 April, 2012.

Sri Lanka Accounting Standards No.39 requires an expense to be recognized where the Group buys good or servicesin exchange for share or right over shares (equity-settled transactions), or in exchange for other assets equivalent invalue to a given number of shares or rights over shares (cash-settled transactions). For equity settled share based

payments transactions, the Group is required to apply Sri Lanka Accounting Standards No.39 in issuing shares, shareoption or other equity instruments that are to be issued after 1 January, 2012.

The Group is currently in the process of evaluating the impact of this Accounting Standard that will have onFinancial Statements, and the impact if the same is not currently estimate as at the date of publication of theFinancial Statements.




Page 13


NOTES TO THE FINANCIAL STATEMENTS


GroupFor the Year Ended 31 March 2010 2010 2009

3 Turnover

Income from Exports 2,801,673,323 2,782,889,411 2,853,980,805

4 Other Income

FCBU Income / Exchange Gain 435,319 92,735 -

Gain on Disposal of Property, Plant and Equipment 2,083,333 - 1,083,000

Written Back Long Term Loans 33,958,647 - -

Grant Received from Export Development Rebate Scheme 10,000,000 10,000,000 -

46,477,299 10,092,735 1,083,000

5 Finance Expenses

Interest on Long Term Loans and Borrowings 4,336,053 4,275,298 76,688,915

Interest on Short Term Loans and Borrowings 72,737,472 66,241,010 5,542,616

Interest on Finance Leases 984,218 984,218 1,119,07578,057,743 71,500,526 83,350,606


Group

2010 2010 2009

Restated

Directors' Remuneration 2,579,000 2,579,000 2,667,973

Auditors' Remuneration 208,000 100,000 100,000

Depreciation 34,733,313 26,751,385 25,715,133

Defined Contribution Plan Cost - EPF / ETF 59,717,196 17,268,886 19,124,880

Defined Benefit Plan Cost - Retiring Gratuity 19,113,889 14,250,737 5,923,552

Other Staff Cost 144,902,780 123,113,872 138,787,696

Legal Fees 48,510 48,510 70,325

7 Income Tax Expenses

Accounting Profit Before Taxation 139,246,345 103,420,765 48,477,378

Aggregate of Disallowable Expenses 59,372,962 47,937,137 26,951,412

Aggregate of Allowable Expenses (72,480,614) (32,378,190) (60,941,792)

Total Statutory Income 126,138,694 118,979,713 14,486,998

Tax Losses Brought Forward and Utilised (2,505,643) - -

Income from Exempted Sources (10,092,735) (10,092,735) (7,243,499)

Assessable Income/Taxable Income 113,540,316 108,886,978 7,243,499

Income Tax 15% 17,031,047 16,333,047 1,086,525

SRL 1.5% 255,466 244,996 16,298

Total Tax Expense 17,286,513 16,578,042 1,102,823

Deferred Tax 1,361,574 878,233 1,885,918

Tax Expense Charged to the Income Statement 18,648,087 17,456,275 2,988,741

8 Basic Earnings Per Share

Amount used as the Numerator

Profit Attributable to the Equity Shareholders of the Year (Rs.) 125,747,787 85,964,490 45,488,637

Amount used as the Denominator

Number of Shares - before Split 6,864,582 6,864,582 6,864,582

Number of Shares - after Split Note 27.1 54,916,656 54,916,656 54,916,656

Basic Earnings Per Share before Split (Rs.) 18.32 12.52 6.63

Basic Earnings Per Share after Split (Rs.) 2.29 1.57 0.83


Notes to the Financial Statements Continued on Page 14

Company

The calculation of basic earnings per share has been done based on profit after tax attributable to the equity shareholders of the parent for

the year divided by the weighted average number of ordinary shares outstanding during the year.

Company Profit Before Taxation is arrived at after charging all expenses

including the following.




Page 14




9.1 Group

Balance as at

March 31, 2010

Freehold Assets

Land and Land Development 53,623,977 - - 2,178,420 55,802,397

Buildings 444,647,486 4,085,506 - (68,615,718) 380,117,274

Plant and Machinery 336,894,300 7,803,789 - (34,281,876) 310,416,213

Factory Equipment and Office Equipment 36,799,647 1,948,440 - - 38,748,087


Motor Vehicles 16,415,667 - (1,687,908) - 14,727,759

917,469,569 14,255,004 (1,687,908) (100,719,174) 829,317,491

Leasehold Assets


Motor Vehicles 15,514,500 - - - 15,514,500

43,342,791 - - - 43,342,791

960,812,360 14,255,004 (1,687,908) (100,719,174) 872,660,282

Freehold Assets

Buildings 74,449,023 11,761,423 - (84,504,560) 1,705,885

Plant and Machinery 257,481,670 14,075,918 - (64,163,226) 207,394,362


Furniture and Fittings 27,134,538 1,444,676 - - 28,579,215

Motor Vehicles 13,987,308 1,031,750 (1,687,908) - 13,331,150

400,024,523 30,438,281 (1,687,908) (148,667,786) 280,107,110

Leasehold Assets


Motor Vehicles 9,868,867 3,545,179 - - 13,414,046

15,238,070 4,295,032 - - 19,533,102

415,262,593 34,733,313 (1,687,908) (148,667,786) 299,640,211

Carrying Value 545,549,767 573,020,071

Class of Asset Cost Cumulative Net Carrying Net Carrying

Depreciation Amount Amount

if assets were 2010 2009

carried at cost

Land and Land Development 1,849,872 - 1,849,872 1,849,872

Buildings 200,111,204 124,899,534 75,211,670 78,752,048

Plant and Machinery 64,463,226 64,463,226 - -

The Gross carrying amounts of fully depreciated assets still in use as at the Balance Sheet date are as follows

Class of Assets Group Company

Plant and Machinery 142,604,969 142,604,969

Factory Equipment 25,464,208 15,162,218

Furniture Fittings/Office Equipmen 25,906,039 14,472,495

Motor Vehicles 3,878,797 8,055,745Total 197,854,013 180,295,427




Depreciation/AmortisationBalance as at

April 1, 2009

Freehold Land of the Company, Buildings of the Group and Plant & Machinery of the Subsidiary (Stafford Orient (Pvt) Limited) were revalued in 31

March 2010 by Mr. A.G. Gunarathna, an independent incorporated valuer. The said assets were valued based on an open market value on existing use

basis. The results of such valuation net of deferred tax was recognised in the Financial Statements as at 31st March 2010 by transferring the surplus

arising thereon to the revaluation Reserve.

DisposalsBalance as at

March 31, 2010

Balance as at

April 1, 2009

RevaluationCharge for

the Year

During the financial year, the Group acquired Property, Plant & Equipment to the aggregate value of Rs.14,255,004/-. Payments amounting to Rs.

14,255,004/- were made during the year for purchase of Property, Plant & Equipment.

DisposalsAdditions Revaluation

The carrying amounts of revalued assets that would have been included in the financial statements had the assets been carried at cost less

depreciation is as follows:

Cost / Valuation

Introductory Document-Orient Garments Limite 73



Page 15



9 Property, Plant and Equipment Contd.,

9.2 Company

Balance as at Balance as at

April 1, 2009 March 31, 2010

Restated

Freehold Assets

Land and Land Development 45,046,580 - - 2,178,420 47,225,000

Buildings 283,684,155 4,085,506 - 9,277,542 297,047,203

Plant and Machinery 259,171,934 7,803,789 - - 266,975,723



Motor Vehicles 10,848,962 - - - 10,848,962

641,622,816 13,598,778 - 11,455,962 666,677,556

Leasehold Assets


Motor Vehicles 15,514,500 - - - 15,514,500

36,425,321 - - - 36,425,321

678,048,137 13,598,778 - 11,455,962 703,102,877

Restated

Freehold Assets

Buildings 68,561,973 6,027,287 - (74,589,260) -

Plant and Machinery 192,049,280 12,381,025 - - 204,430,305


Furniture and Fittings 15,557,852 1,240,212 - - 16,798,063

Motor Vehicles 8,420,603 1,031,750 - - 9,452,353

301,142,376 22,733,052 - (74,589,260) 249,286,168

Leasehold Assets


Motor Vehicles 9,868,867 3,545,179 - - 13,414,046

13,577,877 4,018,333 - - 17,596,210

314,720,253 26,751,385 - (74,589,260) 266,882,378

Carrying Value 363,327,885 436,220,499

Class of Asset Cost Cumulative Net Carrying Net Carrying

Depreciation Amount Amount

if assets were 2010 2009

carried at cost

Land and Land Development 1,849,872 - 1,849,872 1,849,872

Building 135,947,978 60,736,308 75,211,670 78,752,048

Group

10 Prepaid Lease - Leasehold Land 2010 2010 2009

Restated

Balance at Beginning of the Year 2,252,437 2,252,437 2,307,375

Amortization for the Period (54,938) (54,938) (54,938)

Balance at End of the Year 2,197,499 2,197,499 2,252,437

10.1



Land & buildingswitha carryingamount of Rs. 344,272,203/- (2009 Rs. 260,168,762/-) are subject to a primary mortgageto secure the overdraft and

import trade facilities obtained from Hatton National Bank PLC and Bank of Ceylon.

Freehold Land and Buildings of the Company were revalued in 31 March 2010 by Mr. A.G. Gunarathna, an independent incorporated valuer. The said

assets were valuedbased on an open market value on existinguse basis. The results of such valuation net of deferred tax was recognisedin the Financial

Statements as at 31st March 2010 by transferring the surplus arising thereon to the revaluation Reserve.

The carrying amounts of revalued assets that would have been included in the financial statements had the assets been carried at cost less

depreciation is as follows:

During the financial year, the Company acquired Property, Plant & Equipment to the aggregate value of Rs.13,598,778.00 (2009 Rs. 26,070,067/-).

Payments amounting to Rs. 13,598,778/- (2009 Rs.26,070,067/-) were made during the year for purchase of Property, Plant & Equipment.

Charge for

the Year

Balance as at

April 1, 2009

The Company entered into an Agreement (No. 31 dated 27/04/2000) with Board of Investment of Sri Lanka to manufacture and export of garments at

Koggala Export Processing Zone. The land was allocated to the Company for a period of 50 years commencing from 27th April 2000 to 26th April 2050.

Therefore, the initial cost (Rs. 2,746,875/-) of the land is amortized over the lease period of 50 years at the rate of 2% per annum.

Company

Disposals Revaluation

Revaluation

Additions

DisposalsBalance as at

March 31, 2010Depreciation/Amortisation

Cost / Valuation





Page 16



As at 31 March 2010 2009

11 Intangible Assets - Goodwill

Balance As at April 01, 2009 - -

Recognized During the Year 55,098,462 -

Balance As at March 31, 2010 55,098,462 -

11.1

The composite value of Goodwill recognized as a result of acquisition of the above two companies are as follows.

Total Consideration Transferred 27,473,788 -

3,614,730 -

Fair Value of identifiable net assets Note 11.2 24,009,944 -

Goodwill 55,098,462 -

11.2 Fair Value of identifiable net assets SOPL PGPL Total Non-Current Assets 141,995,448 40,226,436 182,221,884

Current Assets 6,009,755 7,354,989 13,364,744

Non-Current Liabilities (123,300,778) - (123,300,778)

Current Liabilities (55,140,555) (41,155,239) (96,295,794)

(30,436,130) 6,426,186 (24,009,944)

As at 31 March 2010 2009

12 Investments in Subsidiaries

Name of the Company Principal Activity % of Holding Cost Cost

Stafford Orient (Private) Limited 100% 20,473,788 17,600,000

Priority Garments (Private) Limited 43.75% 7,000,000 7,000,000

Provision for Impairment (7,000,000) -

20,473,788 24,600,000 Group

As at 31 March 2010 2010 2009

13 Other Investments

Priority Garments (Private) Limited - 12,500,000 12,500,000

Orient Design (Private) Limited - - 2,497,820

Stafford Orient (Private) Limited - 72,519,527 72,519,527 - 85,019,527 87,517,347

14 Inventories

Raw Materials 183,916,334 183,916,334 160,205,483

Work-in-Progress 112,802,085 112,802,085 99,618,628

Finished Goods 79,240,921 79,240,921 93,725,814

Goods-in-Transit 36,683,638 36,683,638 15,215,954

412,642,978 412,642,978 368,765,878


Trade Debtors 296,916,913 292,696,083 388,104,395

Other Receivables 12,814,607 11,732,525 22,384,832

Amounts Due from Subsidiaries - 17,770,612 26,889,824

VAT Recoverable 21,466,959 19,340,978 22,231,178

331,198,479 341,540,198 459,610,228



Manufacture of

Apparels

Manufacture of

Apparels

Goodwill represents the difference between the purchase consideration and the fair value of assets acquired as a result of the acquisition

of 100% shares in Stafford Orient (Private) Limited (SOPL) and the acquisition of 43.75% shares in Priority Garments (Private)

Limited (PGPL) effective from April 01, 2009. Goodwill has not been amortized following the requirements of SLAS-25 as there is no

impairment as at March 31, 2010.

Non-controlling interests, based on their proportionate interest in the recognized amounts of the

assets and the liabilities of the acquiree


Group

Company

Company




Page 17




Short Term Investments - in FCBU 14,380,803 14,380,803 9,000,000 Cash at Bank and in Hand 16,047,775 14,205,559 24,610,130

30,428,578 28,586,362 33,610,130

17 Non Current Assets - Held for Sale

Investments Held for Sale - Orient Design (Pvt) Ltd (Note 17.1) 1,333,334 1,333,334 - 1,333,334 1,333,334 -

17.1 The Company has disposed the investment in Orient Design (Pvt) Limited on 15 February 2011.

18 Stated Capital


6,864,582 Ordinary Shares (Note 27.1) 90,483,320 90,483,320 90,483,320

Group

As at 31 March Note 2010 2010 2009

19 Borrowings

Term Loans 19.1 88,896,874 81,843,124 105,497,145

Finance Lease Obligations 19.2 1,408,047 1,408,047 845,717

90,304,921 83,251,171 106,342,862

Term Loans 19.1 29,749,923 27,184,923 34,121,837

Finance Lease Obligations 19.2 1,525,284 1,525,284 4,355,79931,275,206 28,710,206 38,477,636

19.1 Term Loans

139,618,982 139,618,982 59,537,517

10,260,000 - 118,780,595

149,878,982 139,618,982 178,318,112

(31,232,185) (30,590,935) (38,699,130)

At the End of the Year 118,646,797 109,028,047 139,618,982

88,896,874 81,843,124 105,497,145

29,749,923 27,184,923 34,121,837118,646,797 109,028,047 139,618,982

19.2

6,318,332 6,318,332 9,370,734

(3,252,403) (3,252,403) (3,052,402)

3,065,929 3,065,929 6,318,332

(132,598) (132,598) (1,116,816)

2,933,331 2,933,331 5,201,516

1,408,047 1,408,047 845,717

1,525,284 1,525,284 4,355,7992,933,331 2,933,331 5,201,516

Lending Institution Type of Loan Facility

Purpose of the

Loan

Actual Interest

Rate Securities

Commercial Bank of Ceylon PLC Term Loan (on USD)

Conversion of

OverdraftFacility in to a

Term Loan

3.76% p.a

Fixed Deposits of

ResourcesDevelopment

Consultants (Pvt)

Ltd.

Hatton National Bank PLC Term Loan (on USD)To purchase

Machinery5.5% p.a

Primary

Mortgage over

Machinery

purchased



Non-Current Portion of the Interest Bearing Borrowings

Finance Lease Obligations

Transferred to Non - Current Liabilities (Repayable after One Year)

Transferred to Non - Current Liabilities (Repayable After One Year)


Finance Charges

Net Liability at End of the Year

Repayments During the Year

Transferred to Current Liabilities (Repayable Within One Year)

Company

Transferred to Current Liabilities (Repayable Within One Year)

At the Beginning of the Year

Loans Obtained During the Year

Current Portion of the Interest Bearing Borrowings

Repayments During the Year

Obligation at End of the Year

Gross Liability at Beginning of the Year




Page 18



Group

2010 2010 2009

20 Retirement Benefits Obligations

Balance at Beginning of the Year 30,853,593 24,250,737 22,798,620

Interest Cost 2,931,091 2,303,820 -

(7,671,932) (5,548,455) -

Provision for the Year 19,113,889 14,250,737 5,923,552

Payments Made During the Year (5,342,910) (4,784,885) (4,471,435)

Balance at the End of the Year 39,883,731 30,471,954 24,250,737

21 Deferred Tax Liability

Group

2010 2010 2009

Restated

At Beginning of the Year 32,066,700 21,846,952 -

Charge for the Year 8,553,866 13,785,017 21,846,952

At end of the Year 40,620,566 35,631,969 21,846,952

Deferred Tax Provision as at End of the Year is Made up as Follows:

Temporary Differences Arising from Revaluation 47,463,127 32,867,818 19,961,034

Temporary Differences Arising from Accelerating Depreciation 5,287,267 7,334,944 5,523,528

Temporary Differences Arising from Provision for Gratuity (4,819,348) (4,570,793) (3,637,610)

Temporary Differences Arising from Brought Forward Tax Losses (7,310,480) - -

40,620,566 35,631,969 21,846,952

22 Trade and Other Payables

Trade Creditors 139,547,102 135,235,258 72,132,631 Accrued Expenses 56,163,459 35,207,935 35,811,434

Amounts Due to Related Parties 244,906 244,906 529,125

Other Payables 52,716,406 33,605,042 42,832,732

248,671,873 204,293,140 151,305,922

23 Borrowings on Trade Finance

Hypothecation / Packing Credit Loan 407,416,176 407,416,176 582,850,980

407,416,176 407,416,176 582,850,980

24 Related Party Transactions

Related Party Disclosures are as follows;

24.1 Transactions with Key Management Personnel

Group

2010 2010 2009

a) Key Management Personnel CompensationShort-term Employee Benefits - Directors' Remunerations 2,579,000 2,579,000 2,667,973



(Gain) / Loss arising from Changes in the Assumptions or due to (Over) / Under

Provision in the Previous Years

Company

Deferred Tax is provided using the liability method, providing for temporary differences between the carrying amounts of assets and

liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences associated with the

Company for which a Deferred Tax liability arises has been recognized. Deferred Tax has been computed taking into consideration the

effective tax rate of 15% for the Company. The Deferred Tax provision as at year end made up as follows.

Company


The key management personnel of the Company are the members of its Board of Directors and that of its related entities.

Company




Page 19



24.2 Transactions with Other Related Entities / Parties

Name of the Company Name of the Directors RelationshipNature of

transaction

Balance as at

March 31, 2010

24.2.1Finco (Pvt) Limited Mr. S.C. Weerasooria 343,974

Mr. R.P. Weerasooria

24.2.2Alpha Industries (Pvt) Limited Mr. S.C. Weerasooria (99,068)

Mr. Harsha De Saram


24.2.3Stafford Orient (Pvt) Limited Mr. S.C. Weerasooria Subsidiary 72,519,527

Mr. Harsha De Saram

Mr. R.P. Weerasooria Working Capital 13,256,752 Note 1

24.2.4Priority Garments (Private) Limited Mr. R.P. Weerasooria Subsidiary 12,500,000

Working Capital 4,513,860

Note 2

24.2.5Orient Design (Pvt) Ltd Mr. R.P. Weerasooria Note 3 Nil

Note 1

The Company has purchased goods worth of Rs. 142,407,257/- which was the total sales of the above subsidiary.

Note 2

The Company has purchased goods worth of Rs. 58,503,689/- from the above subsidiary.

Note 3The Company has purchased goods worth of Rs. 28,852,875/- .

25 Commitments

26 Contingent Liabilities

27 Post Balance Sheet Events

27.1

27.2

28 Prior Year Adjustments

(a)

(b)



Related

Company with

Common

Directors

Long Term

Receivable

Related

Company with

Common

Directors

The Company carried out transactions on ordinary course of it's business on an arms length basis with its related Companies.

The company has not recognized the deferred tax liability in the financial statements of 2008/2009. In the current reporting period, the

provision was made retrospectively and the previous year figures were restated to incorporate the deferred tax liability in accordance

with the accounting policy disclosed under the Note No.2.1.9 to the financial statements. Accordingly,Rs. 21,846,952/- was adjusted to

the opening balance of the equity statement.

Amortization of Prepaid Lease on Leasehold Land

Orient Garments (Private) Limited re registered on 10th of November 2010 as a public Company and has submitted an application to list

it's Shares on Diri Savi Board of Colombo Stock Exchange on 31 December 2010.

Long Term

Receivable

There were no material commitments, financial or other contracted or consented by the Board of Directors as at the Balance Sheet date.

Related

Company with

Common

Directors

Pursuant to the approval by the Shareholders at an extra ordinary general meeting, the Shares of the Company were split on 28th

September 2010 on the basis of 1 Ordinary Shares in to 8 Ordinary Shares. Consequent to the Share split, the number of ordinary Shares

of the Company increased from 6,864,582/- to 54,916,656/- without any change to the Stated Capital.

Subsequent to the date of Balance Sheet no circumstances have arisen which could require adjustments to, or disclosure in these

Financial Statements, except following.

There were no material contingent liabilities as at the Balance Sheet date which require adjustments to or disclosure in the Financial

Statements.

Working Capital

Working Capital

There had been overstatement of the carrying value of Prepaid Lease - Lease Hold Land during the past years due to an error in

computing amortization. In the current reporting period, this error was rectified and the previous year figures were restated to

incorporate the true carrying value of the Prepaid Lease balance. Accordingly,Rs. 1,547,428/- was adjusted against the opening retained

earnings.






Page 2


STATEMENT OF INCOME FOR THE YEAR ENDED MARCH 31, 2009

Note

Turnover 3 2,853,980,805 2,492,911,057

Cost of Sales (2,512,750,670) (2,207,019,331)

Gross Profit 341,230,135 285,891,726

Other Income 4 1,083,000 244,939

Administrative Expenses (158,553,205) (110,025,341)

Selling and Distribution Expenses (50,384,517) (42,070,039)

Finance Cost (83,350,606) (79,258,570)

Profit Before Taxation 5 50,024,806 54,782,715

Income Tax Expense (1,102,823) -

Profit for the Year 48,921,983 54,782,715

Earnings Per Share (Rs.) 6 7.13 6.05


Figures in brackets indicate deductions.Notes to the Financial Statements on pages 6 to 13 form an integral part of these Financial Statements.


March 31,2008




81



Page 4

ORIENT GARMENTS (PRIVATE) LIMITEDSTATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED MARCH 31, 2009 - (Amended)



Capital Reserves Reserves Earning

Balance as at April 01, 2007 90,483,320 178,448,693 57,543,101 1,694,797 328,169,912

Net Loss recognised directly in Equity - - (17,445,000) - (17,445,000)


Transfers - - 50,000,000 (50,000,000) -


Repurchase of Shares - - (43,675,000) - (43,675,000)


Transfers - - 48,739,399 (48,739,399) -



Figures in brackets indicate deductions.

Notes to the Financial Statements on pages 6 to 13 form an integral part of these Financial Statements.

Net Gain / (Loss) recognised directly in Equity




Page 5


CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2009


Profit Before Taxation 50,024,806 54,782,715

Adjustments for:

Depreciation 25,715,133 28,156,492

Gratuity 5,923,552 4,467,000

Profit on Sale of Motor Vehicles (1,083,000) -

Interest Income - (244,939)

Operating Profit Before Working Capital Changes 80,580,491 87,161,268


Inventories 15,095,984 (39,642,222)

Trade and Other Receivables (73,240,190) (57,374,824)

Trade and Other Creditors (32,072,766) 68,555,809Import / Export Loan 68,937,796 11,802,075

Cash Generated from Operations 59,301,315 70,502,106

Gratuity Paid (4,471,435) (4,642,447)

Income Tax / ESC Paid (1,102,823) (2,514,988)

Net Cash Flow from Operating Activities 53,727,057 63,344,671


Purchase of Property, Plant and Equipment (24,507,535) (5,538,173)

Proceeds from Sale of Property, Plant and Equipment 1,083,000 -

Increase in Investment (19,438,199) (1,987,467)

Interest Received - 244,939Net Cash Flow used in Investing Activities (42,862,733) (7,280,701)


Proceeds From Loans 118,780,595 45,425,199

Re-payment of Loans (41,751,532) (64,683,101)

Net Cash Flow from / (used in) Financing Activities 77,029,063 (19,257,903)

Net Change in Cash and Cash Equivalents During the Year 87,893,386 36,806,068

Cash and Cash Equivalents at Beginning of the Year (121,531,842) (158,337,910)

Cash and Cash Equivalents at End of the Year (33,638,456) (121,531,842)

Cash and Cash Equivalents at End of the Year Represented by:

Cash at Bank and in Hand 33,610,130 12,619,098

Bank Overdrafts (67,248,586) (134,150,940)

(33,638,456) (121,531,842)


Figures in brackets indicate deductions.

Notes to the Financial Statements on pages 6 to 13 form an integral part of these Financial Statements.


March 31,2008

March 31,2008





Page 6




1.1 GeneralOrient Garments (Private) Limited is a Limited Liability Company incorporated and domicile in Sri Lanka. Theregistered office of the company is located at 49/16 Iceland Building, Galle face Courts, Colombo 03 while its

principal place of business at 78B, Polgasowita Road, Mattegoda.

The Company is a BOI Venture for the manufacture and export of Outerwear, Work-wear, Sport-wear andRainwear Garments. It has four fully equipped modern factory complexes located at Mattegoda, Kotte,Weligama, and Koggala (EPZ).

The company employed 2,720 persons as at 31st March 2009

Company has repurchased Rs.21,837,500.00 Ordinary Shares and cancelled as at 31st March 2009 in accordancewith the provisions of the section 63 of the Companies act no 07 of 2007.


2.1 GENERAL POLICIES

2.1.1 Accounting Conventions

The financial statements of the Company have been prepared in accordance with the Generally AcceptedAccounting Principles and the Accounting Standards as laid down by the Institute of Chartered Accountants of Sri Lanka (ICASL) and Sri Lanka Accounting and Auditing Standards Act No.15 of 1995 using historic costconvention.These principles and standards have been applied consistently with that of the previous years.

No adjustments have been made for inflationary factors affecting the Financial Statements.

2.1.2 InvestmentsAll investments, which are held as Long term are valued at cost.

2.1.3 Foreign Currency transaction

All transactions involving foreign exchange are converted in to Sri Lanka Rupees at the rate of exchange prevailing at the time such transactions were affected.

Profit and Loss items are translated in to rupees at average exchange rates and assets and liabilities are translatedat the rate ruling at the Balance sheet date.

2.1.4 Taxation

The company has signed the third agreement (No. 31) with Board of Investment of Sri Lanka on 27 th April2000. In accordance with section (2) of the said agreement for a further additional tax exemption period of eight

(8) years shall be reckoned from the last date on which the additional tax exemption period of three (3) yearsgranted under the principal agreement for manufacture and export of garment.

However, the charge for taxation is based on the results of the year after adjustments for the disallowable items,and is determined in conformity with the Inland Revenue act No. 10 of 2006 and amendments thereafter.

2.1.5 Deferred TaxationDeferred tax provisions are made to provide for the tax incidences arising from Income tax applicable to theexcess of the net book value of assets on which depreciation allowances have been claimed over their writtendown value.

However, no provision is made for deferred taxation, as there is reasonable evidence that these timingdifferences will not realize in the foreseeable future due to the tax losses and tax concessions available.

Notes to the Financial Statements Continued to Page 7




Page 7



2.2 ASSETS AND BASES OF THEIR VALUATION

Assets classified as current assets on the balance sheet are cash and bank balances and those which are expected

to be realized in cash during the normal operating cycle or within one year from the balance sheet date,whichever is shorter.

2.2.1 Property, Plant and Equipment

The property, plant and equipment are stated at cost or valuation less accumulated depreciation. A revaluation of property, plant and equipment is done when there is a substantial distinction between the fair value (marketvalue) and the book value of the asset and is normally undertaken by professionally qualified valuers.


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

capital expenditure.

2.2.2 Depreciation

Free hold Land is not depreciated. Depreciation is charged on Property Plant and Equipment on Straight Line basis to write off the Cost/Valuation over the estimated useful life as follows.

Depreciation Rate Useful Life

Amortization of Lease hold Land 2% 50 YearsBuildings 5% 20 YearsPlant, Machinery and Electrical Equipment 20% 05 YearsFactory Equipment and Office Equipment 10% 10 YearsFurniture & Fittings 10% 10 YearsMotor Vehicles 25% 04 Years

Depreciation is not charged in the year of acquisition/construction and useful life and residual value arereassessed at the Balance Sheet date.

2.2.3 Inventories

Raw materials are valued at the lower of cost and net realisable value. Finished goods and work in progress arevalued at average cost and includes labour and appropriate overheads absorbed under normal level of activity.

2.2.4 Trade Debtors and Receivables

Debtors and other receivables are stated at their estimated realisable value.

2.2.5 Cash and Cash Equivalents

Comprises of cash in hand, demand deposits and bank borrowings.


2.3.1 Liabilities

All known liabilities have been accounted for in preparing the financial statements and adequate provisions have been made for liabilities which are known to exist.

The current portion of the Long term borrowings is included under other payables.





Page 8



2.3.2 Retiring benefit Costs

(a) Defined Benefit Plan Retirement Gratuity Provision

Full provision has been made on account of retiring gratuity for the first year of service of the employee, infor each year of service.

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

The liability is not externally funded nor actuarially valued.

(b) Defined Contribution Plans Em

contribution are covered by relevant contribution funds in line with respective statutes and regulations.

2.4 INCOME STATEMENT


2.4.2 Revenue and Expenses

Revenue is principally recognized on accrual basis in terms of Sri Lanka Accounting Standards No. 29

2.5 CASH FLOW

The cash flow statement has been prepared on the indirect basis.

2.6 COMPARATIVE FIGURES

Comparative figures have been reclassified and restructured to effect current classification.




Page 9




3 Turnover

Sales - Export 2,853,980,805 2,492,911,057

4 Other Income

FCBU Interest - 244,939

Disposal Profit 1,083,000 -

1,083,000 244,939


Operating Profit / (Loss) after charging all expenses including followings.

Directors' Remuneration 2,667,973 2,165,100

Auditors Remuneration 100,000 72,000

Depreciation 25,715,133 28,156,492Staff Expenses 138,787,696 116,322,706

Employees' Provident Fund 15,299,909 12,451,441

Employees' Trust Fund 3,824,971 3,162,857

Defined Benefit Plan Cost - Gratuity 5,923,552 4,467,000

Legal Fees 70,325 328,856

Interest Expenses 57,412,610 61,847,492

6 Earnings Per Share

Net Profit Attributable to the Shareholders (Rs.) 48,921,983 54,782,715

Weighted Average Number of Shares (Nos.) 6,864,582 9,048,332

Earnings Per Share (Rs.) 7.13 6.05



The total foreign exchange earnings from exports were US $ 26,120,467.49

Earnings Per Share is calculated by dividing the Net Profit attributable to the Shareholders by the weighted average

number of Shares in issue during the year.

March 31,2008




Page 10




Balance as at

April 1, 2008

Land and Land Development 45,046,580 - - 45,046,580

Buildings 280,490,033 3,194,122 - 283,684,155


Factory Equipment and Office Equipment 23,403,317 2,450,395 (90,000) 25,763,712

Furniture and Fittings 16,395,361 757,112 (45,000) 17,107,473

Motor Vehicles 12,698,962 - (1,850,000) 10,848,962

Capital WIP Water Teatment Plant 1,562,532 - - - Lease Hold Assets

Land 23,657,696 - - 23,657,696

Motor Vehicles 15,514,500 - - 15,514,500658,272,477 26,070,067 (1,985,000) 680,795,012

Balance as at Charge for

April 1, 2008 the Year

Buildings 61,818,633 6,743,340 - 68,561,973


Factory Equipment and Office Equipment 14,516,956 2,125,713 (90,000) 16,552,669

Furniture and Fittings 14,364,377 1,238,475 (45,000) 15,557,852

Motor Vehicles 12,081,783 2,087,497 (1,850,000) 12,319,280 Lease Hold Assets

Land 2,182,866 473,154 - 2,656,020

Motor Vehicles 4,179,061 1,791,128 - 5,970,190289,937,130 25,715,133 (1,985,000) 313,667,263

Written Down Value 368,335,347 367,127,750

Note : The Capital Work in Progress (Water Treatment Plant) was transferred to Plant and Machinery and re-restated.

8 Investments

Investment in Non Listed Companies (Note 8.1) 17,600,000 17,600,000

Long Term Receivable (Note 8.2) 97,852,901 122,089,702115,452,901 139,689,702

8.1 Investment in Non Listed Companies

Stafford Orient (Pvt) Ltd 17,600,000 17,600,000

8.2 Long Term Receivable

Finco (Pvt) Ltd - 20,000,000

Alpha Industries (Pvt) Ltd - 8,000,000

ICC (Pvt) Ltd - 3,675,000

RDC (Pvt) Ltd - 9,000,000Alpha Tours (Pvt) Ltd - 3,000,000

Priority Garments (Pvt) Limited 22,835,554 -

Orient Design (Private) Limited 2,497,820 5,895,175

Stafford Orient (Private) Ltd 72,519,527 72,519,52797,852,901 122,089,702

9 Inventories

Raw Materials 160,205,483 129,232,082

Work-In-Progress 99,618,628 115,521,428

Finished Goods 93,725,814 95,398,079

Goods-in-Transit 15,215,954 43,710,273368,765,878 383,861,862



March 31, 2009Depreciation

Additions (Disposals)

(Disposals)


Balance as at

March 31, 2009

Balance as at

Cost




Page 11

ORIENT GARMENTS (PRIVATE) LIMITEDNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2009 - (Amended)

March 31,2008


Trade Bills 388,104,395 276,852,706

Related Company Balances (Note 10.1) (14,546,882) 31,472,119

Other Receivables 22,384,832 23,432,792

Commissioner General of Inland Revenue (VAT) 22,231,178 13,175,717418,173,522 344,933,333

10.1 Related Company Balances

Finco (Pvt) Ltd 294,354 261,567

Alpha Industries (Pvt) Ltd (716,757) (1,057,793)

RDC (Pvt) Ltd (38,572,027) (3,179,788)

Alpha Tours (Pvt) Ltd (106,722) (106,722)


(14,546,882) 31,472,119


Short Term Investments - FCBU Deposits 9,000,000 2,599,452

Cash at Bank & in Hand 24,610,130 10,019,64633,610,130 12,619,098

12 Stated Capital


6,864,582 Ordinary Shares 90,483,320 90,483,320

13 Long Term Borrowings

Seylan Bank Term Loans - 9,666,955

BOI Koggala project Loan 9,094,671 10,396,271

Commercial Bank Term Loan 86,064,225 -

HNB Term Loan 1,731,080 9,488,139

HNB Machinery Loan 8,607,169 -

Sampath Bank Vehicle Leasing 1,277,322 7,080,390 Less : Interest in Suspense (431,605) (779,210)

106,342,862 35,852,545

14 Provision for Gratuity

Balance as at April 01, 2008 22,798,620 22,974,067

Provision for the Year 5,923,552 4,467,000

Payment made During the Year (4,471,435) (4,642,447)Balance as at March 31, 2009 24,250,737 22,798,620

15 Trade and Other Creditors

Trade Creditors 73,132,631 106,857,408

Accrued Expenses 35,811,434 33,496,957

Other Payables 4,260,705 4,923,170113,204,770 145,277,535

16 Import / Export Loans

Hypothecation Loan 582,850,980 513,913,184582,850,980 513,913,184







Page 12



March 31,2008

17 Current Portion of Long Term Borrowings

Seylan Bank Term Loans 9,253,027 12,839,674


Commercial Bank Term Loan 9,315,810 -

HNB Term Loan 8,844,000 8,622,096

HNB Machinery Loan 5,082,000 4,594,682 Less : Interest in Suspense - (100,361)

Sampath Bank Vehicle Leasing 5,041,009 5,041,009 Less : Interest in Suspense (685,210) (685,210)

38,477,636 31,938,890

18 Commitments

19 Contingencies


21 Related Party Transactions

Details of significant related party disclosures are as follows;



Subsequent to the date of Balance Sheet no circumstances have arisen which could require adjustments to, or disclosure

in these Financial Statements.


There were no material commitments, financial or other contracted or consented by the Board of Directors as at the

Balance Sheet date.

There were no material contingent liabilities as at the Balance Sheet date which require adjustments to or disclosure in

the Financial Statements.




Page 13



21.1 Transactions with Other Related Entities / Parties

The Company carried out transactions on ordinery course course of it's business on an arms lenth basis with

the related Companies stated in notes 8 (2) and 10 (1)

Name of the Company Name of the Director RelationshipNature of

transaction

Balance as at

March 31,

2009 (Rs)

Finco (Pvt) Limited Mr. S.C. Weerasooria 294,354


Alpha Industries (Pvt) Limited Mr. S.C. Weerasooria

Mr. Harsha De Saram (716,757)


Alpha Tours (Pvt) Limited Mr. S.C. Weerasooria



Stafford Orient (Pvt) Limited Mr. S.C. Weerasooria 72,519,527

Mr. Harsha De Saram



Mr. Harsha De Saram


Orient Design (Pvt) Limited Mr. R.P. Weerasooria 2,497,820


Working

Capital

Working

Capital

Working

capital

Long term

Receivable

Working

capital

Working

capital


Related Company with

common directors'


common directors'


common directors'


common directors'


common directors'


common directors'






Page 2


STATEMENT OF INCOME FOR THE YEAR ENDED MARCH 31, 2008

Note

Turnover 3 2,492,911,057 2,375,028,050

Cost of Sales (2,207,019,331) (2,140,539,615)

Gross Profit 285,891,726 234,488,435

Other Operating Income 4 244,939 268,296

Administration Expenses (110,025,341) (95,159,166)

Selling & Distribution Expenses (42,070,039) (58,131,484)

Finance Cost (79,258,570) (71,087,497)

Profit Before Taxation 5 54,782,715 10,378,583

Income Tax Expense - 165,709

Profit for the Year 54,782,715 10,544,293

Earnings/ (Loss) Per Share (Rs.) 6 6.05 1.17

Audit Report on Page 1Figures in brackets indicate deductions

Notes to the Financial Statements on pages 6 to 13 form an integral part of these Financial Statements


March 31,2007




94



Page 4


STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED MARCH 31, 2008



Capital Reserves Reserves Earning

Balance as at April 01, 2006 90,483,320 - 161,899,380 (8,849,495) 243,533,205

Revaluation of Land and Factory Buildings - 178,448,693 (104,356,279) - 74,092,415

Loss for the Year - - - 10,544,293 10,544,293

Balance as at March 31,2007 90,483,320 178,448,693 57,543,101 1,694,797 328,169,912

Net Loss recognised directly in Equity - - (17,445,000) - (17,445,000)


Transfers - - 50,000,000 (50,000,000) -








Page 5


CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2008


Profit Before Taxation 54,782,715 10,378,583

Adjustments for:

Depreciation 28,156,492 30,975,017

Gratuity 4,467,000 3,500,000

Interest Income (244,939) (268,296)

Operating Profit Before working Capital Changes 87,161,268 44,585,304


Inventories (39,642,222) (20,934,960)

Trade & Other Receivables (57,374,824) (38,882,732)

Trade & Other Creditors 68,555,809 (50,162,235)

Import / Export Loan 11,802,075 98,620,289

Cash Generated from Operations 70,502,106 33,225,666

Gratuity Paid (4,642,447) (2,491,785)

Income Tax / Economic Service Charges Paid (2,514,988) (5,942,052)

Net Cash flow from Operating Activities 63,344,671 24,791,829


Purchase of Property, Plant & Equipment (5,538,173) (28,144,404)

Increase in Investment (1,987,467) (4,851,198)

Interest Received 244,939 268,296

Net Cash Flow used in Investing Activities (7,280,701) (32,727,306)

Financing ActivitiesProceeds From Loans 45,425,199 36,581,425

Re-payment of Loans (64,683,101) (34,243,217)

Net Cash Flow from / (used in) Financing Activities (19,257,903) 2,338,207

Net Change in Cash & Cash Equivalents During the Year 36,806,068 (5,597,270)

Cash & Cash Equivalents at Beginning of the Year (158,337,910) (152,740,640)

Cash & Cash Equivalents at the End of the Year (121,531,842) (158,337,910)

Cash & Cash Equivalents at End of the Year Represented by ; March 31,2007

Cash & Cash Equivalents 12,619,098 7,807,065

Bank Overdrafts (134,150,940) (166,144,975)

(121,531,842) (158,337,910)





March 31,2007





Page 6




1.1 General

Orient Garments Limited is a Limited Liability Company incorporated and domicile in Sri Lanka. Theregistered office of the company is located at 49/16 Iceland Building, Galle face Courts, Colombo 03 while its

principal place of business at 78B, Polgasowita Road, Mattegoda.

The Company is a BOI Venture for the manufacture and export of Outerwear, Work-wear, Sport-wear andRainwear Garments. It has four fully equipped modern factory complexes located at Mattegoda, Kotte,Weligama, and Koggala(EPZ).

The company employed 2,326 persons as at 31st March 2008


2.1 GENERAL POLICIES

2.1.1 Accounting ConventionsThe financial statements of the Company have been prepared in accordance with the Generally AcceptedAccounting Principles and the Accounting Standards as laid down by the Institute of Chartered Accountants of Sri Lanka (ICASL) and Sri Lanka Accounting and Auditing Standards Act No.15 of 1995 using historic costconvention.

These principles and standards have been applied consistently with that of the previous years.

No adjustments have been made for inflationary factors affecting the accounts.

2.1.2 InvestmentsAll investments, which are held as Long term are valued at cost.

2.1.3 Foreign Currency transactionAll transactions involving foreign exchange are converted in to Sri Lanka Rupees at the rate of exchange

prevailing at the time such transactions were affected.

Profit and Loss items are translated in to rupees at average exchange rates and assets and liabilities aretranslated at the rate ruling at the Balance sheet date.

2.1.4 TaxationThe company has signed the third agreement (No. 31) with Board of Investment of Sri Lanka on 27 th April2000. In accordance with section (2) of the said agreement for a further additional tax exemption period of eight (8) years shall be reckoned from the last date on which the additional tax exemption period of three (3)years granted under the principal agreement for manufacture and export of garment.

However, the charge for taxation is based on the results of the year after adjustments for the disallowable items,and is determined in conformity with the Inland Revenue act No. 10 of 2006 and amendments thereafter.

2.1.5 Deferred TaxationDeferred tax provisions are made to provide for the tax incidences arising from Income tax applicable to theexcess of the net book value of assets on which depreciation allowances have been claimed over their writtendown value.

However, no provision is made for deferred taxation, as there is reasonable evidence that these timingdifferences will not realize in the foreseeable future due to the tax losses and tax concessions available.





Page 7



2.2 ASSETS AND BASES OF THEIR VALUATION

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

2.2.1 Property, Plant and EquipmentThe property, plant and equipment are stated at cost or valuation less accumulated depreciation. A revaluationof property, plant and equipment is done when there is a substantial distinction between the fair value (marketvalue) and the book value of the asset and is normally undertaken by professionally qualified valuers.


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

2.2.2 Depreciation

Depreciation Rate Useful Life

Amortization of Lease hold Land 2% 50 YearsBuildings 5% 20 YearsPlant, Machinery and Electrical Equipment 20% 05 YearsFactory Equipment and Office Equipment 10% 10 YearsFurniture & Fittings 10% 10 YearsMotor Vehicles 25% 04 Years

Depreciation Method, useful life and residual values are reassessed at the Balance Sheet Date.

2.2.3 InventoriesRaw materials are valued at the lower of cost and net realisable value. Finished goods and work in progress arevalued at average cost and includes labour and appropriate overheads absorbed under normal level of activity.

2.2.4 Trade Debtors and ReceivablesDebtors and other receivables are stated at their estimated realisable value.

2.2.5 Cash and Cash EquivalentsComprises of cash in hand, demand deposits and bank borrowings.


2.3.1 LiabilitiesAll known liabilities have been accounted for in preparing the financial statements and adequate provisionshave been made for liabilities which are known to exist.

The current portion of the Long term borrowings is included under other payables.





Page 8



2.3.2 Retiring benefit Costs

(a) Defined Benefit Plan Retirement Gratuity Provision

Full provision has been made on account of retiring gratuity for the first year of service of the employee, in salary for each year of service.

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

The liability is not externally funded nor actuarially valued.

(b) Defined Contribution Plans

contribution are covered by relevant contribution funds in line with respective statutes and regulations.

2.4 INCOME STATEMENT


2.4.2 Revenue and ExpensesRevenue is principally recognized on accrual basis in terms of Sri Lanka Accounting Standards No. 29

2.5 CASH FLOWThe cash flow statement has been prepared on the indirect basis.

2.6 COMPARATIVE FIGURESComparative figures have been reclassified and restructured to effect current classification.




Page 9




3 Sales -Export

2,492,911,057 2,375,028,050

4 Other Income

Foreign Currency Banking Unit (FCBU) Interest 244,939 268,296

244,939 268,296


Operating Profit / (Loss) after charging all expenses including followings.

Directors Remuneration 2,165,100 2,062,000

Auditors Remuneration 72,000 72,000

Depreciation 28,156,492 30,538,903

Staff Expenses 116,322,706 104,573,057

Employees' Provident Fund 12,451,441 11,840,743

Employees' Trust Fund 3,162,857 2,960,185

Defined Benefit plan Cost -Gratuity 4,467,000 3,500,000

Legal Fees 328,856 275,700

Interest 61,847,492 53,093,408

6 Earnings / (Loss) per Share

Profit Attributable to the Shareholders (Rs.) 54,782,715 10,544,293

Weighted Average Number of Shares (Nos.) 9,048,332 9,048,332

Earnings / (Loss) per Share (Rs.) 6.05 1.17



The total foreign Exchange earnings from exports were US $ 23,189,870.29

Earnings per Share is calculated by dividing the net Profit attributable to the Shareholders by the weighted average

number of Shares in issue during the year.

March 31,2007




Page 10



7 Property, Plant & Equipment

Balance as at AdditionsApril 1, 2007

Land & Land Development 45,046,580 - 45,046,580

Buildings 279,666,999 580,908 280,247,907

Plant & Machinery 239,465,785 560,066 240,025,851

Factory Equipment & Office Equipment 21,981,680 991,125 22,972,805

Furniture & Fittings 16,356,322 189,323 16,545,645

Motor Vehicles 9,905,745 2,793,217 12,698,962

Capital WIP - Water Treatment Plant 1,138,998 423,534 1,562,532

Lease Hold Assets

Land 23,657,696 - 23,657,696

Motor Vehicles 15,514,500 - 15,514,500Total 652,734,305 5,538,173 658,272,477

Balance as at Charge for

April 1, 2007 the Year

Buildings 55,008,717 6,809,917 61,818,633

Plant & Machinery 168,533,903 12,259,551 180,793,454

Factory Equipment/Office Equipment 12,790,446 1,726,510 14,516,956

Furniture Fittings 10,923,147 3,441,230 14,364,377

Motor Vehicles 9,905,745 2,176,038 12,081,783

Lease Hold AssetsLand 1,709,712 473,154 2,182,866

Motor Vehicles 2,908,969 1,270,092 4,179,061261,780,638 28,156,492 289,937,130

Written Down Value 390,953,667 368,335,347




Cost

Depreciation

Balance as atMarch 31, 2008

Balance as at

March 31, 2008




Page 11



March 31,2007

8 Investments

Investment in non Listed Companies (Note 8 A) 17,600,000 17,600,000

Long Term Receivable (Note 8 B) 122,089,702 137,547,235

139,689,702 155,147,235

(8 A) Investment in Non Listed Companies


(8 B) Long Term Receivable

Finco Ltd 20,000,000 20,000,000

Alpha Industries Ltd 8,000,000 8,000,000

ICC Ltd 3,675,000 3,675,000

RDC Ltd 9,000,000 9,000,000

Alpha Tours Ltd 3,000,000 3,000,000

Orient Design (Private) Limited 5,895,175 4,851,198Stafford Orient (Private) Ltd 72,519,527 89,021,037

122,089,702 137,547,235

9 Inventories

Raw Materials 129,232,082 99,197,571

Work-In-Progress 115,521,428 155,675,844

Finished Goods 95,398,079 48,736,478

Goods- in -Transit 43,710,273 40,218,951

Stationary Stocks - 140,819

Furnace Oil Stocks - 249,977

383,861,862 344,219,640

10 Trade & Other Receivables

Trade Bills 276,852,706 232,270,479Related Company Balances (Note 10 A) 31,472,119 10,968,761

Other Receivables 13,747,188 10,607,892

Refundable Deposits & Advances 9,685,604 9,502,327

Commissioner General of Inland Revenue (VAT) 13,175,717 21,694,062

344,933,333 285,043,521

(10 A) Related Company Balances

Finco Ltd 261,567 466,059

Alpha Industries Ltd (1,057,793) (1,571,174)

R.D.C. Ltd (3,179,788) (2,236,288)

Alpha Tours Ltd (106,722) (106,722)


31,472,119 10,968,761

11 Cash & Cash Equivalents

Short Term Investments - FCBU Deposits 2,599,452 6,670,026

Cash at Bank & in Hand 10,019,646 1,137,039

12,619,098 7,807,065

12 Stated Capital

Issued & Fully Paid

9,048,332 Ordinary Shares 90,483,320 90,483,320







Page 12



March 31,2007

13 Long Term Borrowings

NTB Term Loan - 8,821,976



HNB Term Loan 9,488,139 -

HNB Machinery Leasing - 4,723,960

Less : Interest in Suspense - (100,182)

Sampath Bank Vehicle Leasing 7,080,390 9,563,661

Less : Interest in Suspense (779,210) (639,169)

35,852,545 41,844,005

14 Provision for Gratuity

As at Beginning of the Year 22,974,067 21,965,852Provision for the Year 4,467,000 3,500,000

Payment made During the Year (4,642,447) (2,491,785)

As at End of the Year 22,798,620 22,974,067

15 Trade& Other Creditors

Trade Creditors 106,857,408 40,896,837

Accrued Expenses 33,496,957 32,111,186

Other Payables 4,923,170 3,713,702

145,277,535 76,721,726

16 Import/ Export Loans

Hypothecation Loan 513,913,184 502,111,110513,913,184 502,111,110

17 Loan Payable Within One Year

NTB Term Loan - 10,272,220

DFCC Vardhana Loan - 11,983,157



HNB Machinery Loan 8,622,096 3,891,505

HNB Machinery Leasing 4,594,682 8,270,555


Sampath Bank Vehicle Leasing 5,041,009 5,517,497


31,938,890 45,205,333


19 Commitments

20 Contingencies

There are no contingent events as at the Balance Sheet date.




Subsequent to the date of balance sheet no circumstances have arisen which could require adjustments to, or disclosure

in these Financial Statements.

There is no material capital or financial commitments approved by the Board of Directors or contracted by the company

as at March 31, 2008




Page 13



21 Related Party Disclosure

Related Party Disclosure is as follows

Name of the Company Name of the Director RelationshipNature of

transaction

Balance as at

March 31,

2008

Finco Limited Mr. S.C. Weerasooria 20,000,000


Finco Limited Mr. S.C. Weerasooria 261,567


Alpha Industries Limited Mr. S.C. Weerasooria

Mr. Harsha De Saram 8,000,000


Alpha Industries Limited Mr. S.C. Weerasooria

Mr. Harsha De Saram (1,057,793)


ICC Ltd Mr. Harsha De Saram 9,000,000

Alpha Tours Limited Mr. S.C. Weerasooria

Mr. Harsha De Saram 3,000,000


Alpha Tours Limited Mr. S.C. Weerasooria




Mr. Harsha De Saram



Mr. Harsha De Saram


Orient Design (Pvt) Limited Mr. R.P. Weerasooria 5,895,175


Working

Capital

Working

Capital

Working

capital

Long term

Receivable

Long term

Receivable

Long term

Receivable

Working

capital

Long term

Receivable

Working

capital



common directors


common directors

Long term

Receivable


common directors


common director


common directors


common directors


common directors


common directors


common directors


common directors




Notes