Report Annual - Browns · PDF filemechanic from London who arrived in Ceylon in ... it is my pleasure to present to you the annual report and ... its unblemished reputation and brand

AnnualReport 2012/2013

Financial Highlights .....2

What we do .....4

History .....6

Chairman’s Review .....8

Group Managing Director/Chief Executive

Officer’s Review .....10

Board of Directors .....16

Corporate Senior Management .....20

Our Brands .....22

Sector Reviews .....26

Information and Communications Technology .....555

Sustainability Report .....557

Human Resources .....66

Corporate Governance .....68

Risk Management .....766

Audit Committee Report .....7788

Business Operations Committee Report .....80

Remuneration Committee Report .....81

Directors’ Report .....84

Statement of Directors’ Responsibility .....88

Independent Auditor’s Report .....8899

Statement of Comprehensive Income .....90

Statement of Other Comprehensive Income .....91

Statement of Financial Position .....9992

Statement of Changes in Equity .....993

Statement of Cash Flows .....9955

Significant Accounting Policies .....97

Notes to the Financial Statements .....1337

Economic Value Statement .....21166

Ten Year Summary .....218

Share Information .....219

Subsidiaries & Associates .....221

Glossary .....224

Notice of the Annual General Meeting .....2277

Notes .....228

Form of Proxy .....2331

Corporate Information .....Inner bacba k cooover

Annual Report 2012/2013 | 1

Bold. Adventurous. Willing to step onto the road less travelled and lead the way

into uncharted territory. At Brown & Company PLC we are very proud of the bold

attitude that has brought us so far.

From the earliest days we have been a pioneering company - one that has

embraced change, economic, technological and social, to become who we are

now - a strongly established corporate with a very progressive attitude.

Browns is now geared to expand into sunshine industries and we are confident

that we will bring greater value to thousands of stakeholders we serve today.

We know we can do anything we choose. Because we dare.

2 | Brown & Company PLC

GROUP COMPANY

31st March 2013 2012 2011 2013 2012 2011

Results for the Year

Revenue (Gross) Rs.Mn 14,184 14,387 12,095 9,847 10,542 7,810

EBIT Rs.Mn 1,525 3,881 3,895 430 1,056 1,069

Profit / (Loss) before Taxation Rs.Mn 455 3,462 3,604 (556) 609 771

Profit / (Loss) after Taxation Rs.Mn 412 3,077 3,282 (465) 399 507

Group Profit / (Loss) Attributable to Equity holders Rs.Mn 360 1,171 2,188 (465) 399 507

Position at the Year end

Shareholders’ Funds Rs.Mn 15,096 13,881 14,914 13,789 13,860 15,468

Total Assets Rs.Mn 34,542 32,831 27,282 23,222 21,226 20,254

Market Capitalization Rs.Mn 8,356 10,993 20,540 8,356 10,993 20,540

Retained Earnings Rs.Mn 9,103 8,409 7,507 7,384 7,894 7,602

Financial Ratios

Gross Profit (%) % 20.50% 23.50% 26.39% 19.48% 23.34% 23.20%

Interest Cover Times 1.42 9.26 13.36 0.44 2.36 3.58

Current Ratio Times 1.32 1.80 3.07 1.00 1.24 1.12

Price earnings (year-end) (times) Times 23.21 9.39 9.39 -17.98 27.57 40.53

Debt to Equity % 50% 41% 24% 68% 53% 30.0

Return on Equity % 1.80% 13.67% 14.90% -3.40% 2.70% 4.60%

Per Share

Earnings (basic) (Rs.) Rs. 5.08 16.52 30.87 (6.56) 5.63 7.15

Market Value (year-end) (Rs.) Rs. 117.90 155.10 289.80 117.90 155.10 289.80

Net assets (year-end) (Rs.) Rs. 212.99 195.85 210.43 194.56 195.55 218.24

Value Generated

Economic Value Generated

Gross Economic Value Generated Rs.Mn 14,533 17,689 14,674 10,268 10,837 8,605

Cost of Goods and service Provided Rs.Mn (10,896) (12,433) (9,654) (9,220) (9,348) (7,390)

Net Economic Value Addition Rs.Mn 3,638 5,256 5,020 1,047 1,489 1,215

Economic Value Distributed

Employees Rs.Mn 1,554 1,236 1,057 326 290 229

Government Rs.Mn 122 245 231 229 205 60

Providers of Funds Rs.Mn 1,302 560 378 987 447 298

Economic Value Retained Rs.Mn 660 3,215 3,354 (495) 547 628

Group Employment (No. of persons) Number 760 724 653 534 535 466


The year under review was primarily one of consolidation following a few years of expansion and restructuring. Given the challenging conditions, the company adopted an approach of assessing the situation, filling in gaps, making corrections and consolidating operations. Existing businesses were aligned more closely with the overall goals of the Group, while new business opportunities were also pursued. In order to stay innovative and competitive,organisations need to find and take advantage of new opportunities that would propel the company forward.

VisionTo be a leading Sri Lankan conglomerate excelling through sunshine industries with a global presence and cutting edge technology.

12/1311/1210/1109/10

Rs. (Mn)Revenue

14,1

84

8,95

3

12,0

95

14,3

87

Rs. (Mn)Total Assets

12/1311/1210/1109/10

34,5

42

18,5

91

27,2

82

32,8

31

Rs. (Mn)Equity

12/1311/1210/1109/10

23,0

14

13,4

58

21,8

41

23,1

53


Browns Investments PLCFLC Holdings PLCLOLC Leisure Ltd.Sierra Holdings (Pvt) Ltd.Agstar Fertilizers PLCGal-Oya Holdings (Pvt) LtdRoyal Fernwood Porcelain Ltd.Other Investments

Investments

Agriculture DivisionSifang Lanka (Pvt) Ltd.Plantation Support Services

Agriculture& Plantations

BatteryKlevenberg (Pvt) Ltd.Power SystemsGeneral Trading

Power Generation Marine& ManufacturingBrowns Group Industries (Pvt) Ltd.Browns Thermal Engineering (Pvt) Ltd.Browns Industrial Park Ltd.


Browns Tours (Pvt) Ltd.BG Air Services (Pvt) Ltd.

Travel & Leisure

Veterinary Pharmaceuticals

Vet PharmaHome & OfficeSolutions

Healthcare

Integrated Business SolutionsRetailConsumerCommodity Trading

6 | Brown & Company PLCMr. James Brown, Founder of the Browns Group


The Browns Group is one of the most diversified entities in Sri Lanka with 20 plus subsidiaries and associates focused on trading and strategic investments. The Group traces its history back to James Brown, a young engineer and mechanic from London who arrived in Ceylon in 1872, seeking the adventure and fortunes of the orient. Starting off with a bicycle repair shop near Gleneagle in Hatton, he launched Brown & Company Limited in 1875 to manufacture and repair tea machinery. Over the next decade Browns grew in size and scope and was incorporated as a rupee company. In 1947 the company bought over the total equity capital of the Hatton Bank Limited and the Hatton Transport & Agency Co. Ltd. to become the Browns Group. The Group has since forged ahead, seeking opportunities in sunshine industries and establishing for itself a reputation of solidity and resilience.


As we expand into new geographical areas we are hopeful that we will complement the Government’s policies so as to enable a mutual partnership in the rebuilding and development of the country.


Dear Shareholder,

On behalf of the Board of Directors of Brown and Company PLC, it is my pleasure to present to you the annual report and Financial Statements for the year ended 31st March 2013, and to briefly review the performance of the Company during this period.

My sincere appreciation goes to our outgoing chairperson Mrs. Rohini Nanayakkara who joined Browns in July 2006. Mrs. Nanayakkara, a veteran leader in the financial sector, facilitated the growth strategy of Browns to become a leading conglomerate in the country. Having taken the leadership role at Browns as Executive Chairman a month from the end of the financial year, I wish to take this conglomerate with a rich history of over 137 years to greater heights.

The Company that was formed in 1875 to manufacture, repair and import agricultural and farming machinery, to this date holds the leading position in this sector. The Group’s resilience has been time tested - from colonial times to independent Sri Lanka, through open economy to post civil war.

Today Browns is a conglomerate that operates in growth industries of agriculture, plantations, marine engineering, manufacturing, home and office solutions, power generation, travel and leisure, veterinary pharmaceuticals, construction and healthcare with market leader positions in many of the sectors in which it operates.

Through Browns Investments PLC (BI), the Company’s investment vehicle, Browns has invested in several key areas including leisure & entertainment, construction, plantation & agriculture as well as manufacturing. To capitalize on the benefits of the tourism boom expected in the next few years, BI has invested in and is constructing hotels in the south coast as well as Dambulla, whilst holding a 30% share in LOLC Leisure Ltd which holds a substantial number of hotel properties in the East & South coasts.

The company’s investment in plantation sector compromises 40 tea and rubber estates covering 19,000 acres of tea & 13,000 acres under rubber. Investments in the construction sector of BI include holdings in major construction Companies such as Sierra Constructions (Pvt) Ltd and Ajax Engineers (Pvt) Ltd. The Group also has a significant stake in Agstar Fertilizers PLC which supplies planting material, fertilizer and crop care products.

Healthcare has been identified by the Group to be a remarkably resilient and rapidly growing sector. In line with this, the Group ventured in to the sector during the year under review via the acquisition of a 25-bed hospital that will be expanded into a 60-bed, fully equipped, secondary care General Hospital in Ragama.

Other important areas of expansion include real estate and entertainment. Browns, holding commercial properties in strategic locations, has plans to further develop their portfolio of real estate assets, some as conference and entertainment centres, in line with the government’s plan to develop Colombo city into a commercial and tourist hub.

The opening of the North and the East along with the removal of restrictions on fishing off the shores of Sri Lanka have given the Group immense opportunity to penetrate these areas and further develop the Group’s businesses. With the government focusing on agriculture, rural development, regional development and fisheries, Browns is well positioned to take advantage of these new opportunities, supported by its unblemished reputation and brand recognition in almost all regions of the country.

The year under review was a challenging one for Browns, primarily because the agriculture sector was adversely affected by drought followed by floods, as well as the high interest rate regimes that prevailed throughout most of the year. The trading businesses of Browns were especially impacted by the high interest rates, the curtailing of credit in the first half of the year as well as the price fluctuations on imports due to Rupee depreciation. The Group recorded a turnover of Rs 14.2Bn in the year under review, while net profit was Rs 412Mn. A more detailed review of financial performance is available later in this report.

The Group, while exploring opportunities for expansion and growth in business areas, has also understood the need to increase productivity and efficiency in its operations. During the year under review, the Browns Industrial Park (Pvt) Ltd in Pannala, which is a fully owned subsidiary of Browns, was upgraded to serve all manufacturing, logistics and warehousing needs of the Group. This enables greater synergies between all divisions and subsidiaries that were previously housed in many different locations.

The Group also implemented a much needed Enterprise Resource Planning (ERP) solution and also introduced a shared services concept to its finance function. The ERP will seamlessly integrate the business functions of the Group from assembly and production to core finance functions, and will be further expanded to include a Business Intelligence (BI) package and a Customer Relationships Management (CRM) system in the coming year, true to Browns’ tradition of being a responsive Company in meeting customer needs and developing closer relationships.

The Group, which is recognised as a one-stop-shop for many products and services, will continue to study and ascertain areas where Group synergies between current business lines and new investments can be further enhanced. With the recent consolidation of shareholding, there will be greater synergies achieved between LOLC and Browns, which the Group companies have already begun to leverage on. For instance, in terms of facilitating micro-financing opportunities for farmer communities and dealer networks.

We will always ensure that Browns remains an innovative conglomerate and a household name across Sri Lanka. As we expand into new geographical areas we are hopeful that we will complement the Government’s policies so as to enable a mutual partnership in the rebuilding and development of the country. In this regard, Browns will take on the challenge of aligning its business model, and most importantly, foster the work force to embrace the change of growth economies alongside their personal growth.

In conclusion, I wish to record my sincere appreciation towards all our employees for their dedication and hard work that has resulted in the Group’s recognition as one of the most trusted conglomerates in the country today. I wish to thank the Board of Directors for their support and guidance. I would also like to thank our principals and partners for their unblemished relationship with the Company and the Group. I look forward to another year of continued success and wish to thank the shareholders of the company for the trust and confidence they have placed in me and the management in taking the Company and Group forward.

Ishara Nanayakkara Executive Chairman


The current year saw robust performance with regard to the continued market leadership position in key segments and continued investments in strategic sectors.


Dear Stakeholder,

It is with pleasure that I present to you the audited Financial

Statements of Brown and Company PLC and review its performance

for the financial year ending 31st March 2013.

The year under review was a challenging one on many fronts

both globally and locally, which had a resultant impact on the

operations of the Group. Stagnant or declining economic conditions

in Europe including the sovereign debt crisis, as well as continued

unemployment in the West, dampened the world economy to a

great extent. However, Asia in general and developing countries in

particular did perform generally well. As Browns is largely dependent

on markets in Asia, the impact on the Group was reduced, although

certain global pricing actions did trickle down to the final consumer.

Sri Lanka’s GDP growth was below forecast and we also witnessed

a marginal contraction in the agriculture sector mainly due to

unfavourable weather, which adversely impacted the economy in

those geographical areas as well as the operations of the Group.

There were prolonged droughts in parts of the country followed by

flooding, which together resulted in a low harvesting season and

made it one of the worst years for this sector. In addition, there were

interest rate and foreign exchange rate fluctuations during the year, as

well as changes in broad money supply that resulted in the curtailing

of credit through banks. However, this correction meant a better

foothold on inflation which for the most part remained stable during

the year.

All of these factors had an impact on Browns, which is predominantly

a trading concern dependent on imports, with significant interests

in agriculture. The rupee devaluation, higher interest regime and

restricted cash flows due to credit curtailment caused trading

volumes to contract. Increased import prices, especially at the

beginning of the year when large trading stocks are carried in order

to cater to the upcoming high agricultural season and the New Year,

also affected business. The company held large inventory unsold

due to higher rates without any recourse to price increases as lower

disposable incomes and consumer credit restricted margins. At

retail level, restricted cash flows affected dealers and end consumers

who faced difficulties in obtaining and making timely repayments

on banking facilities. In essence the business was feeling a ‘double

blow’ effect with both the interest rate and foreign exchange rates

contributing negatively to the cost of doing business. The company

absorbed part of the loss in order to hold its market share and

customer base, while maintaining a healthy balance sheet. The

adoption of a more medium-term results management strategy paid

off, with Browns maintaining the high market shares it enjoys across

industries and retaining its customer base.

Financial PerformanceThe year under review was primarily one of consolidation following

a few years of expansion and restructuring. Given the challenging

conditions described above, the company adopted an approach

of assessing the situation, filling in gaps, making corrections and

consolidating operations. Existing businesses were aligned more

closely with the overall goals of the Group, while new business

opportunities were also pursued. In order to stay innovative and

competitive,organisations need to find and take advantage of

new opportunities that would propel the company forward. The

healthcare business was one such new business opportunity for the

Browns Group, with the focus for the year being on entering and

establishing itself in this sector.

Group revenue remained static against the prior year, recording

Rs.14.2 Bn as compared to Rs.14.4 Bn in the previous year. This

achievement is noteworthy considering the challenges that the

business faced. Overall sales at Group level remained unchanged

during the year when compared to the previous year, which is also an

achievement in a difficult year and is a reflection of the success of the

strategy adopted by the organisation to tide over a difficult period.

Diversification of business activities also mitigated the unfavourable

results from particular sectors.

Gross profit for the Group declined 14% to Rs. 2.91 Bn when

compared to the previous year’s earnings of Rs.3.39 Bn. This significant

decline came about due to the changes in foreign exchange rates

and pricing actions by principals as explained elsewhere in this

review. However, commencing this financial year, all stocks have been

cleared and pricing adjustments have been initiated for a healthy

result in the coming year. The Group recorded Rs. 455 Mn in Profit

before tax (PBT), while other income also declined significantly due

to one-off income recorded during the previous year and a 155%

increase in finance costs. When adjusted for the one-off income

recorded in 2011/12, the decline in PBT is 44%. The increase in finance

costs is the result of increases in interest rates, which impacted the

debt financing undertaken during the previous year to expand

Brown’s strategic investments, as well as having to carry a larger than

envisaged working capital during the current year. However, the

Group has already taken corrective measures by divesting several

non-core and underutilised assets and by bringing working capital

to acceptable levels. Distribution expenses too were above average

due to certain last minute provisioning requirements. At Group level,

“Thee yyearr unnder rrevieeww waaas prrrimarrily one oof coonsoolidattion ffoollowwwinggg a feew yearrss of expaansioon anndd resstruuccturiing.””

“... thhe coompaany aadopptteed aaan aappproach of asssesssingg the situaaattionn, filllling in gaapps, mmakking ccorreecctioonns aannd conssoolidatinng operatiioons.. Exiisstingg busiinnessses wwere alignnneed mmmorree closselyy withh the oveerall ggoalss oof tthhe GGGroupp, whillee neww buusineess ooppporrttunniities weree alsoo puursueed. Inn oorddeer ttoo stayy iinnoovattive aand ccoomppeetittivve, orgaannisaationns neeed tooo findd anndd takke advaanntagge off neww opppoortuuunitties thhat wouuldd prropeel thee commppanyyy forrwardd.”


declines in PBT were also due to the ongoing losses at the Galoya

sugar factory and the leisure sector which are still in early stages of

operation and are expected to generate positive results from 2015/16

onwards. Profit After Tax (PAT) declined to Rs. 411 Mn over the Rs. 3 Bn

recorded the previous year, primarily due to declines in gross profits,

increased interest payments and substantial decline in other income

offset by positive changes in fair value of investment properties.

At company level, revenue declined by 7% when compared to the

previous year. This was primarily due to declines in trading concerns

especially in the agriculture sector as reflected in the segmental

analysis later in this report.

General market sentiment affected trading at the Colombo Stock

Exchange, which affected most companies including Browns. While

the share price as at end March 2013 stood at Rs.117.90 as against Rs.

155.10 in March 2012, net assets per share stood at Rs. 212.99 when

compared to Rs 195.85 the previous year. This indicates that the share

still has significant value left based on fundamentals. We believe

that as the market shifts from being speculative to one based on

fundamentals, the share would have significant value.

Performance of Divisions and SubsidiariesSome business divisions and subsidiaries such as Veterinary

Pharmaceuticals, Batteries and Power Systems did exceptionally well

during the year. While overall profits were lower, the current year

saw robust performance with regard to continued market leadership

position in key segments and continued investments in strategic

sectors. In addition, a three-pronged approach is in place for the

Group to manage its businesses in the short to medium term.

The first of these is consolidation and restructuring of back-office

functions to further rationalise costs and seamlessly integrate all

Strategic Business Units (SBUs) and subsidiaries, which has been

a priority. The Shared Service Center, ERP solution, centralised

warehousing and logistics and the planned ‘Star Hub’ to have a

state of the art after-sales service for all sectors falls within this plan

of action. This is expected to deliver faster and accurate customer

responses while ensuring cost efficiencies. Therefore, investments

were made to upgrade service infrastructure and related facilities.

In this regard, the Shared Service Centre and the ERP project were the

two most significant changes that came in to effect during the year

under review. The Shared Services Centre is expected to free front-line

business units from performing administrative functions and be more

proactive in channel building and marketing activities.

Another major change was that the entire organisation was

converted to a full-time online Microsoft ERP platform. The overall

business information model has improved tremendously and further

improvements will be added in the areas of after-sales and front-

end services. This will further enhance the quality of information

processes. Along with this, new standard operating procedures and

ERP functional user manuals are being developed in order to set

the ground rules for continued good administration. This ERP is also

expected to help the organization in its business expansion programs

by providing flexibility in decision making with both speed and the

volume of data availability.

The second approach is the consolidation of the businesses that were

initiated or acquired recently for optimum performance. The Galoya

sugar factory, leisure sector businesses under Browns Investments

and the Porcelain business fall within this strategy. New businesses

that are still in the implementation and growth stages are being

closely monitored to ensure that the final results are within the

expectations of the Group’s overall strategies and goals. Expansion

of existing businesses and filling gaps in the current trading portfolio

also falls within this strategic direction.

Galoya Plantations (Pvt) Ltd progressed well during the year under

review with the plant producing sugar for the first time after an

absence of almost 15 years. This is a significant achievement not only

from a Group point of view but also from a community point of view,

as the livelihood of over 4,000 farmer families was revived and the

factory introduced much-needed economic activity to the Hingurana

area in the Ampara district. With over 2200 hectares already

cultivated, plans are to grow a further 1300 hectares in the coming

year. The leisure sector which is handled through subsidiary Browns

Investments PLC continued to expand during the year. The controlling

stake of Green Paradise Agro Eco Hotel in Dambulla was acquired,

which filled a need to have a presence in the central province – a key

tourist destination. Construction of the 172-room resort in Kosgoda

continued during the year and is expected to be operational in 2014.

Browns Tours (Pvt) Ltd and travels, made significant progress during

“Gall-Oyaa Plaantationss pprogggressssed welll dduriing tthe yyear uuunndeerr reevview withh the plannt prroduccciing ssuggaar for the fiirst timme aftter annn absssencce of almoosst 155 years. TThis iiss a ssignniificaant achiieevemmentt, nott onlyyy froomm aa Grouupp pooint of viiew bbuut aallso ffrom a coommmuunityy poinnt off vviewww, asss the livellihhoood off overr 4,00000 faaarmmeer fammillies...”

“Anoottherr maajor cchanggee wwaas tthhat the entirre orrganiisatiooonn wwaas convveerteed too a fuull-timmme oonnlinne Micrroosofft ERRP pllatfoorrmm. TTThe ooveraall busiinnesss infformaationn mmodddel hhhas improovedd treemenndousslly aannd ffuurthher improovemmennts wiill bee aadddeed iinn thee areaass of afteer-saales aannd ffrronntt-endd servvices.. Thiis willl furrttherr enhhhancee the qqualiity oof infformaattionnn prroocessses.””

Group Maanaaging Direector / Chhief Executivve Officer’ss ReReview Coonntd.


the year, particularly in the in-bound tourist segment, securing several

large arrivals including cruise ships. The sector recorded profits of over

100% against the prior year.

Future expansion into new areas of business is the third approach.

The foray into the healthcare sector was a milestone for the Browns

Group. The initial acquisition of the St. Peters hospital in Ragama

was concluded and complete refurbishment and upgrading of the

property, including the addition of a new wing, got underway during

the year. Related activities such as nursing and channeling were also

initiated during the year.

During the year under review, the Group continued to make strategic

investments to introduce operational efficiencies to its divisions and

subsidiaries. Further investments were made to the facility at Pannala

under the Browns Industrial Park, which is a fully owned subsidiary

of Browns. This facility was upgraded to serve all manufacturing and

logistics functions of the group and to facilitate warehousing and

logistics services for internal as well as external organisations. During

the years ahead. In addition, establishing after - sales services along

with training facilities to enhance the knowledge of dealers and

customers have been a priority in many sectors.

Marketing and BrandingThe overall marketing strategy of the group for the Strategic Business

Units was to maintain market share and re-align processes to bring

about cost efficiencies and improvements in service delivery.

Details of marketing and branding activities for each SBU is available

elsewhere in this report.

The launch of the BG brand was a significant milestone for Browns

during the year under review. Building on the brand image and

recognition established over 138 years as well as superior sourcing

and industry experience we are able to source from the best

manufacturers around the globe. The concept behind BG is to

combine the best sourcing options throughout the globe and

package it with Browns heritage of quality and trust, thus delivering

an above-average value proposition to local consumers in terms of

price and quality. The brand, which currently caters to the consumer

electronics and durables sector, is doing significantly well with urban

consumers. Sales of some products such as high end 55” LED TV’s –

one of the highest selling in this category - is evidence that customers

place significant faith in the brand, which is competing in the high-

price ranges, on par with reputed international brands. The BG brand

also has a highly diversified portfolio of small appliances such as

kitchen equipment that holds significant market share.

Two of Browns’ well known brands, Exide and TAFE, continued to

enjoy premier market leadership positions with shares in excess of

50%. Investments in these brands continued with greater emphasis

on advertising activities to engage the end consumer. TAFE continues

to enhance its after-sales services to ensure that it remains the best

in the industry. The sale of mobile trucks under the brand name

’Tracktec Mobile’ as well as several other infrastructure improvements

are being pursued to enable end-users to have unparallel levels of

service that have hitherto not been seen in this industry.

Lucas, a brand handled by subsidiary Klevenberg (Pvt) Ltd, continued

to make in-roads into the battery market and now enjoys number

two market position behind Exide in this sector. It is recognised

as a brand that is highly trusted by the upper end of the segment.

The positioning of Lucas as a lifestyle brand is a first in this business

segment in Sri Lanka.

“Thee launnch of thhe BGG bbraannd wwwas aa signnifficaant mmilesstonee ffor BBroowwns duriinng thhe yyear uunderr revviieww, building on tthe bbrandd iimaaage aaand recooggnition estabblishheed oovver 1138 yearrss,”

the year, the company also launched its Consumer division, which

has initially embarked on the import and marketing of canned fish.

Gradual expansion into other areas such as soya, rice and sugar are

currently being explored. New brands that have been created for

these commodities have been accepted well by the consumers.

The Integrated Business Solution SBU, apart from its traditional office

automation related products, signed up with ‘Bianca Renee’, an

internationally reputed brand of furniture that caters specifically to

the leisure sector. A tie-up with ’Enigin’, UK - an innovative technology

based company specialising in energy saving options-is expected to

give greater results in the years ahead as many organisations explore

energy conservation measures as a best practice. The ‘Eukanuba’ dog

food range and the veterinary pharmaceutical sector continued to

grow very aggressively with new products and improved services. As

in previous years, the home delivery concepts, free technical advice

to farm owners, and introduction of innovative products such as live

vaccines gave this sector an edge over others. Extended, company-

owned and franchised service facilities were introduced by subsidiary

Browns Thermal Engineering Pvt Ltd. Being the largest radiator

manufacturer in Sri Lanka, the Company caters to both the auto and

non-auto sector and has the capacity to turn out any type of radiator.

Sifang Lanka (Pvt) Ltd, another fully owned subsidiary added the six-

seater three wheeler under the brand ’BG-Pace’ to its range. This is yet

another first in the Sri Lankan market. The diesel vehicle is catching up

fast in areas outside of Colombo and the service will be expanded in

“Braanndinng haas reemainnneed aaan immmporrtantt areaa of ffocuss for the oorrgaannisaaation. Posiittioniing sstrattegieess havvve bbeeen larggely bbasedd on conssuumeerr neeeds and wwe hhave conttinueedd too dessiign our mmarkketinng sttrateeggies iin ssuuch aa mannnner tthatt we sstay rreelevvvantt to thhe segmmmentts thhat wee opeeerratee in..””


Makita/Mactec power tools and Tailin grinding wheels enjoyed

number one positions in their respective brand segments. The re-

launch of Eclipse hacksaw blades helped increase sales of this product

by over 50% as against the prior year.

During the year under review, FG Wilson generators and the smaller

Kva generator sets under the brand Firman did extremely well. FG

Wilson now enjoys leading position in terms of value in the larger

generator segment - an achievement that has been made possible as

Browns provides the best after-sales care in the industry supported by

dedicated sales and service teams. Currently, Firman enjoys a number

two position in the market with a share in excess of 16%.

Branding has remained an important area of focus for the

organisation. Positioning strategies have been largely based on

consumer needs and we have continued to design our marketing

strategies in such a manner that we stay relevant to the segments

that we operate in.

SustainabilityThe Group is conscious of its commitment to the communities it

serves and operates in, and this is an ethos that is built into all our

business operations. The battmobiles which are operated throughout

the island provide services free of charge for anyone who needs

them, regardless of the brand of battery used. The Group also holds

free seminars and training sessions to educate farmers and end-users

on the best practices in that market segment, such as the proper

use and maintenance of equipment, veterinary services and many

other aspects. The millions of rupees spent on these service programs

is testament to the company policy of doing business with the

community at heart.

The revival of the Galoya sugar factory as detailed elsewhere in this

report is also evidence of how an entire village has benefited from the

operations: the livelihood for over 4000 farmer families have improved

with subsidies and financing assistance provided by Browns; the

local economy in general was revived through provision of jobs for

people in an area that has been neglected over the past 15 years; it

has contributed to conservation of the environment with the factory

producing electricity for its own use, as well as providing a health

benefit to approximately 1000 households by distributing purified

water through the company-run water purification plant.

As a major Corporate Social Responsibility project the company

embarked on an IT literacy program, providing computers and

computer labs to some of the most deserving rural schools. The

program was well received by the community and was implemented

in coordination with the educational office in the Matale district.

Future OutlookMacroeconomic fundamentals will continue to affect our business,

especially in trading segments. The continued depressed trading

conditions due to various economic and other factors are expected

to continue throughout the coming year and will pose a challenge for

Browns. However, given its market leadership positions, and as history

has proven time and again, Browns is expected to do better than its

competition even during challenging times. The move by authorities

to stabilise interest rates to more acceptable levels should also

improve the investment climate and increase consumption of goods

and services by end users.

There have been several improvements made internally at Browns,

which should bring about positive results in the coming year. As

mentioned earlier, non-performing, non-core and idle assets are

either being divested or restructured for better use, and significant

reductions in working capital have been achieved through better

stock and debtor management. The steps taken by the company

should increase cash inflows and reduce finance costs significantly.

Supplier prices and credit terms have been re-negotiated in key

sectors, which have already resulted in increased margins since the

fourth quarter of the current year. The improved and enhanced

centralised warehousing and logistics process, cost rationalisation in

administrative areas through shared service centers and centralised

ERP is expected to bring about better cost management in the year

ahead.

The Group will continue to invest in brands and brand building to

stay relevant to the end consumers while taking advantage of market

leader positions in key brands. This will also entail a special channel-

based focus to ensure that push strategies are aligned to the overall

goals and targets of the Group. In addition, new products and models

will be introduced to fill voids in our product portfolios.

The GGrouup wwill coontinnuue ttoo innvvest in branndds aand bbrandd buiillddinngg too stayy releevaant to tthe ennd cooonnsuummerrss whhile takiinng addvanntagee of mmmarkkeet leeaderr posiittionss in key bbrannddss.

The GGrouup iss consciouuuss off its commmmitmmentt to tthe coommmmuuniitties iit servvees annd ooperaates iinn, annnd thhhis iss an eethoss thaat is bbuiltt iintoo all oour busiinnesss opeeratioons.

Group Maanaaging Direector / Chhief Executivve Officer’ss ReReview Coonntd.


The Star Hub program is a special program created to reach every

corner of the country to provide after-sales services. Continuous

improvements will also be made to innovative solutions such as

battmobiles, 24-hour services on generators and home delivery

concepts, among others.

In conclusion, I thank all our customers, financial institutions,

suppliers, shareholders, and other business partners for their

continued loyalty and support. I would also like to thank the senior

management and staff for their dedication and hard work towards

achieving the goals and values of Brown and Company PLC. I also

thank the Chairman and the Board of Directors for their guidance and

for placing their trust in me for the past 7 years. Browns is well poised

to achieve greater success in the coming years and we look forward

to the support of our stakeholders.

Murali Prakash

Group Managing Director / CEO



Left to Right

Mr. S. VV. SSomasundeeram / Non - Executive Director

Mr. N. M. Prakaash / Group Managing Director/ CEO

Mr. W. D.. K. Jayyawarddena / Non - Executive Director

Mr. I. CC. NNanayyakkaraa / Executive Chairman

Mr. A. L. Devassurenddra / Deputy Chairman / Non - Executive

Director (Resigned w.e.f. 15/7/2013)

Mrs. K.. UU. Amaarasingghe / Non - Executive Director

Mr. H. P. J. de SSilva / Independent Non - Executive Director


Mr. I. C. NanayakkaraThe Executive Chairman / Executive DirectorMr. Ishara Nanayakkara is an astute businessman who holds Directorial positions in many corporates and conglomerates in Sri Lanka.

He ventured into the arena of financial services with the strategic investment in LOLC PLC and was appointed to the Board in 2002. He has an exposure to an array of financial services through his stewardship in two flagship finance companies in the group – Lanka ORIX Finance PLC and Commercial Leasing and Finance PLC (CLC) where he is involved as an Executive Director and Chairman respectively.

He is also involved in both life and general insurance through LOLC Insurance Company and in stock brokering through LOLC Securities Company, factoring through LOLC Factors and deeply involved in micro finance and Islamic finance. He is recently appointed as the Deputy Chairman of Seylan Bank, reinstating his expertise in the banking sector.

His interest in Micro Finance is evident through his recurrent contribution to PRASAC, the largest microfinance Company in Cambodia and in his own initiative, LOLC Micro Credit Ltd, one of the largest private sector microfinance institutions in Sri Lanka, where he currently serves as the Chairman. This commitment is further extended through his newest venture in LOLC Myanmar Micro Finance Company Ltd, where he is the founding chairman. He was instrumental in the recent joint venture of BRAC and LOLC.

His passion for Renewable energy is reflected through the energy portfolio of the LOLC Group - comprising of hydro power, agri waste and bio- mass – a promising source of alternate energy. The sustainable investments of the LOLC Group companies are poised to offer their share to the environment.

Mr. Nanayakkara is also conversant in sustainable Forestry and Plantation through group companies – Maturata Plantations Ltd, Pussellawa Plantations Ltd and Gal-Oya Plantations (Pvt) Ltd. The Agstar Fertilizers PLC, a leading agri input provider in the country, has further enhanced the Group’s contribution to the agriculture & plantation sectors.

The participation in Sierra Constructions (Pvt) Ltd, one of the largest construction companies in the country is timely, considering the contribution of the construction sector to the post war development.

Mr Nanayakkara is focused on the immense opportunities presented by the leisure sector. With the acquisitions of some of the leading hotels in the Southern coast alongside key properties in the North and East, development plans are underway for the leisure subsidiaries of LOLC Group and Browns Group – Eden Hotel Lanka PLC, Palm Garden Hotels PLC, Tropical Villas (Pvt) Ltd, Riverina Resorts (Pvt) Ltd, Dickwella Resorts (Pvt) Ltd, Samudra Beach Resorts (Pvt) Ltd in Kosgoda and Green Paradise Agro Eco Hotel in Dambulla.

Mr Nanayakkara is the Chairman of Browns Investments PLC, the investing arm of the Browns Group.

Mr Nanayakkara’s involvement in multifaceted business fields is conclusive proof of his perpetual interest on the growth sectors of the Sri Lankan economy.

He holds a diploma in Business Accounting from Australia.

Mr. A. L. Devasurendra Deputy Chairman / Non - Executive Director (Resigned w.e.f. 15/7/2013)Mr. Ajith Devasurendra is a veteran in the financial services industry in Sri Lanka and counts more than 29 years work experience both in Sri Lanka and overseas. As one of the pioneers in the money brokering and Government Securities markets he was able to bring new dimensions to the local money market industry. Mr. Devasurendra was a past president of the Sri Lanka Money Brokers Association and also the first president of the Sri Lanka Primary Dealers Association. He acted as a consultant to Price Water House Coopers, Bombay, India on a USAID project.

At present he is the Deputy Chairman of Taprobane Holdings PLC and Director of Environmental Resources Investments PLC. He is also in many committees that focus on the development of the financial markets in Sri Lanka.

Mr. N. M. PrakashGroup Managing Director/ CEOMr. Prakash holds a MBA from University of Southern Queensland and is also a Certified Professional Marketer (Asia Pacific) and a Certified Management Accountant (Aust.). He also holds an Executive Diploma in Business Administration from the University of Colombo and is an Alumni of the National University of Singapore and Asian Institute of Management, Manila. He is a Fellow of the Chartered Management Institute (London) and Certified Professional Managers Sri Lanka. He served as the Sales Director for Singer (Sri Lanka) PLC, a multinational company involved in retailing of durables. Mr. Prakash has also served as the Deputy Credit Director and Credit Manager for many years, handling the marketing and management of hire purchase and related credit portfolios at Singer. He also served on the Boards of Singer (Sri Lanka) Ltd, Singer Finance Lanka Ltd and Singer Industries (Ceylon) Ltd.

At present, he is the Group Managing Director / Chief Executive Officer of Browns Group of Companies, a public quoted conglomerate involved in trading, manufacturing, finance, travel and tours, plantations and investments.

Mr. H. P. J. De SilvaIndependent Non - Executive DirectorMr. Janaka de Silva holds a B.Sc., (Ceylon) and a M.B.A. (Sri Jayawardenapura). He is a Fellow of the Institute of Chartered Accountants of Sri Lanka, Chartered Institute of Management Accountants and Institute of Bankers of Sri Lanka.

Mr. De Silva served as a Consultant to National Development Bank during the period of August 2003 to December 2007 and advised the Bank on the integration of financial and accounting systems on the merger of NDB Bank with NDB.

He joined Union Bank of Colombo Ltd at the pre-operational stage of the Bank as General Manager/Chief Operations Officer and was responsible for the design and implementation of all operational


policies, procedures and systems. He designed and implemented the information systems topology, pioneered web presence and internet banking amongst indigenous banks. Under his direction the Bank obtained ISO 9002 Quality Certification covering all divisions and became the first bank in Sri Lanka to connect ATMs to a major international network. Mr. De Silva was appointed Managing Director/CEO in May 2002.

During April 1992 to April 1995, Mr. De Silva served as the Director - Operations of American Express Bank, Colombo and was responsible for all operational activities and functioned as the Quality Co-ordinator of the Colombo Office.

In February 1987, Mr. De Silva joined Sampath Bank and was the founder General Manager/CEO. He made the bank the most technologically advanced financial institution with all branches connected online for the first time in Sri Lanka. He was the first to introduce credit cards with a major international franchise and a multipoint ATM network. He pioneered many new innovations such as extended banking hours, interest on daily balance on Savings Accounts, and the use of UV lights for signature verification.

In September 1976, Mr. De Silva joined Bank of Ceylon as Assistant General Manager/Controller and was elevated to the position of Corporate Advisor in 1979. He set up the IT function in 1978 and by end of 1985, this it was the largest IT facility in the country. He introduced computerised banking with central processing and multipoint access to Sri Lanka. He was the head of the Audit function conducting internal audits of over 200 branch offices throughout the country. Further, he introduced new techniques such as statistical sampling. He was also a member of the Steering Committee to set up the Automated Clearing House of Sri Lanka.

Mr. De Silva also served as a Lecturer/ Accountant at Indeco Ltd, Lusaka, Zambia, from 1973 -1976, the Finance Manager at Building Material Corporation and, during the period 1970 to 1972, was Senior Accountant of the State Engineering Corporation.

Mr. S. V. SomasunderamNon - Executive DirectorMr. Somasunderam is a Chartered Management Accountant and a fellow member of CIMA (U.K.)

He joined Walker & Greig in 1985 for a period of one year as a management trainee and thereafter joined his family business.

In 1994, Mr. Somasunderam established a company in U.K. together with his British partners for the purpose of acquiring a wireless local loop licence to provide telecommunication services in Sri Lanka and to seek funding for the same. In 1994, he founded Lanka Bell Ltd and was successful in obtaining the licence. Mr. Somasunderam was an Executive Director; and thereafter, Deputy Chairman of Lanka Bell Ltd until he divested his shares in 2005 together with his foreign partners.

Mr. Somasunderam acquired controlling interest of the Browns Group of Companies together with his partners in year 2005 and was appointed to the Board of Browns Group of Companies as Deputy Chairman, and thereafter Group Director from 1st July 2006.

Mr. Somasunderam is also Managing Director and Chairman of Lexus Developers Ltd. It was established in 2005 for the purpose of constructing apartments.

Mr. Somasunderam is also an investor in the Sri Lankan stock market with investments in several blue chip companies.

Mr. W.D.K. JayawardenaNon - Executive DirectorMr. Kapila Jayawardena holds a MBA in Financial Management, is an Associate of the Institute of Cost and Executive Accountants and was awarded Fellowship of the Institute of Bankers (IBSL) in 2006.

He has varied experience in the fields of Banking, Audit, Relationship Management, Corporate Finance, Corporate Banking , Investment Banking and Treasury Management.

Mr. Jayawardena was appointed as the Chairman of the Sri Lanka Bankers Association (SLBA) in 2003/2004 and served as President of the American Chamber of Commerce in Sri Lanka in 2006/2007.

He served as a Director of Lanka Clear, National Institute of Business Management (NIBM) and the Institute of Bankers (IBSL).

Mr. Jayawardene was appointed to the Financial Sector Reforms Committee (FSRC) and was a member of the Finance sector and Capital Market cluster of the National Council of Economic Development (NCED). He was a key member of the inaugural sovereign rating team and sovereign debt of Sri Lanka appointed by the Governor of the Central Bank.

He was presented with the prestigious Combined Support Group Award by the US Navy for services rendered after the Tsunami in 2005. The Government of Sri Lanka appointed him to the Board of Sri Lanka Fulbright Commission in 2010.

Mr. Jayawardena was appointed to the Council of the National Chamber of Commerce of Sri Lanka on 27th January 2011.

Mr. Jayawardena has over 27 years experience in all areas of banking out of which 9 years was in the capacity of CEO/Country Head Citibank Sri Lanka and Maldives. He was the first Sri Lankan to be appointed as a Senior Creditor Officer (SCO) by Citibank in Sri Lanka. During his leadership, Citibank in Sri Lanka was rated AAA by Fitch Ratings in Sri Lanka. Citi Bank Sri Lanka was the first foreign bank to obtain an AAA rating.

Mr. Jayawardena is also the Chairman of Lanka Orix Finance PLC, LOLC Insurance Ltd, LOLC General Insurance Ltd, LOLC Life Insurance Ltd, LOLC Securities Ltd, Speed Italia (Pvt) Ltd, United Dendro Energy Solutions (Pvt) Ltd, Palm Garden Hotels PLC, Riverina Resorts (Pvt) Ltd and Eden Hotel Lanka PLC.

He is the Group Managing Director/CEO of Lanka ORIX Leasing Company PLC and serves on the Boards of LOLC Micro Credit Ltd, and Commercial Leasing & Finance PLC. Mr. Jayawardena is also a Director of Browns Investments PLC.

Mrs. K. U. AmarasingheNon - Executive DirectorMrs. Amarasinghe holds an Honours Degree in Economics. She serves on the Boards of Lanka ORIX Leasing Company PLC, LOLC Insurance Ltd, LOLC General Insurance Ltd, LOLC Life Insurance Ltd, LOLC Leisure Ltd , LOLC Motors Ltd , LOLC Securities Ltd , Speed Italia (Pvt) Ltd , United Dendro Energy Solutions (Pvt) Ltd, Palm Garden Hotels PLC, Riverina Resorts (Pvt) Ltd and Eden Hotel Lanka PLC. She also serves as a Director on the Board of Commercial Leasing & Finance PLC.


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1. Mr. Rimoe Saldin Group Chief Operating Officer,

Managing Director /CEO - Browns Investments PLC

2. Mr. Panduka WeerasingheSenior Vice President - Agriculture, Battery, Porcelain & New

Business, Director / CEO - Browns Tours (Pvt) Ltd / B.G.Air

Services (Pvt) Ltd, Browns Real Estates (Pvt) Ltd, Director -

Associated Battery Manufacturers (Ceylon ) Ltd

3. Mr. Chaminda Ediriwickrama Senior Vice President - Vetpharma, Director / CEO- Sifang Lanka

(Pvt) Ltd & Sifang Lanka Trading (Pvt) Ltd

4. Mr. Suresh Tissaaratchy Senior Vice President - Brands, Marketing & Corporate Affairs

Browns Group of Companies

5. Mr. Kennedy Joseph Senior Vice President - General Trading, Power Systems &

Environmental Engineering

6. Mr. Canisius Fernando Senior Vice President / Director / CEO - Browns Industrial Park Ltd,

Browns Thermal Engineering (Pvt) Ltd & Browns Group Industries

(Pvt) Ltd

7. Mr. Panduka Goonawardena Group Chief Financial Officer

8. Mrs. Nayantha Delpechitra

General Manager - Group Legal/ Group Secretary

9. Mr. Rajitha Seneviratne General Manager - B.G. Air Services (Pvt) Ltd,

Director - Browns Tours (Pvt) Ltd

10. Mr. Manjula Wijemanne General Manager - Integrated Business Solutions / Consumer / Retail

Director / General Manager - Klevenberg (Pvt) Ltd

11. Mr. C. N. Rathakrishnan General Manager - Enterprise Resource Planning Process

12. Mr. Jeremy Rajiah General Manager - Plantation Support Services

13. Mr. Dinesh Samarathunga Group Chief Information Officer

14. Mr. Vishwa Lokugamage General Manager - Browns Group Industries (Pvt) Ltd and

Browns Thermal Engineering (Pvt) Ltd

15. Dr. Sajeeva Narangoda Director/GM - Browns Health Care (Pvt) Ltd and

Browns Health Care North Colombo (Pvt) Ltd

16. Mr. Nalin Jayawardena General Manager - Consumer

17. Mr. Vishwa Kumarasinghe General Manager - Sifang Lanka (Pvt) Ltd

18. Mr. Gihan De Silva General Manager - Agriculture

19. Mr. Ushan Wijewardena General Manager - Battery

Left to Right

17 18 19


Browns is all about Brands The Browns Group with over 138 years of expertise in marketing has

introduced a number of products which have won the hearts of our

customers. Trust, quality and Reliability have been the hallmarks of all

brands marketed by Browns.

Having been the pioneers in agricultural mechanisation through the

introduction of the first Massey Ferguson tractors and being leaders

in the vehicle battery market, the Browns Group has continued to

innovate and make strides in managing several local and international

brands in the many segments that it operates in.

Driven by a philosophy of keeping the ‘customer’ as its central focus,

the Group has been able to maintain leadership in many segments

that it operates in by closely identifying the needs and wants of its

diverse customer segments.

The augmented function of service has played a significant role in this

success with Browns having one of the widest service networks in the

country. Be it a tractor, or a vehicle battery, or a generator or an AC,

Browns has pioneered a number of unique service offerings. From the

Exide Battmobile helping you when your vehicle battery gives way to

door-to-door delivery of Eukanuba dog food, to 24 hour installation of

ACs to online monitoring of generators to 24 hour service back up for

photocopiers are a few of the services we provide to our customers

to ensure their tasks and responsibilities are carried out efficiently .

The further expansion of the Service Star Hub concept would further

strengthen this area in the future.

In the marine division a special service facility was established at

the fishing harbour at Kudawella where day-to-day maintenance

and overhaul of marine engines take place. In addition, a spare parts

counter and battery charging unit has been established, which is a

great value addition to the fishing community.

A specialised workshop for radiators was established at Galle where

owners of any vehicle could get their radiators serviced or repaired.

The Browns Group acts as a true brand custodian for its brands,

strategically managing all its brands and seeking new channels

and touch-points to make its product available across the country.

This fact is further justified when one looks at the long-standing

relationships Browns has had with most of its international brands.

Headed by the Group Managing Director himself and driven by

Corporate and Divisional brand teams, the company is always looking

at building the value of the brands we manage and that has been

proven through most brands holding number 1 position or being

within the first three positions in most industries we operate in. As

brand custodian, our philosophy is to nurture and grow the brands

through all channels available, whilst adding value to all our brands

through customer-centric value additions.

The Group’s own Brand ‘BG’ continued to show good growth and

has been accepted as a true value-for-money offering to customers.

Launched during the last year ,the BG product continued to make in-

roads into the consumer electronics segment as a true quality value

proposition. The 55 inch LED 3D TV, water pumps, audio & AC range

have performed well during the year. Sourced from the best factories

in the world, BG will continue to provide products and services with

true quality and value.

The year also saw the launch of the ‘BG’ three-wheeler which is

assembled in our Pannala factory premises. This product which was

being piloted has shown good acceptance and will be rolled out to

the market within the new financial year.

“Drivveen byy a phhilosoophy ofof keeeepinngg the ‘custtoomerr’ as iits ceentrall fof cuuss, thhee Group has bbeeen aable to maaintaain n leaadersship inn manny segmmentts thaat it oopperaattes iinn by closeellyy ideentiffying tthe nneeeeds aandd wwantts of its ddivversee cusstomeer seggmem nttts.”


Exide launched its range of specially designed batteries, for two and

four stroke three-wheelers.

Browns launched one of the hospitality world’s most sought after

brands, ‘Bianca Renee’, that specialises in designing, furnishing and

equipping of hotels, bars, restaurants, banquet halls, convention

centres, offices and conference facilities for multinationals, embassies

and diplomatic residences, public buildings, hospitals, clinics and

patient-care centres, shopping complexes, guest houses, clubs and

even educational facilities.

On the international brand front, Sharp continued to drive its

innovative category of Plasmacluster air purifiers which ensures clean

air through its patent technology. This product, which is about living

healthy, ensures clean air is circulated while bacteria and mould is

broken down through the release of positive and negative ions. This

together with the ‘Healsio’ oven, which reduces fat and oil content in

the cooking process, are some of the products.

The revolutionary mirror-less Olympus OM-D, was voted the best

Camera for 2012 by the Digital Photography Review (DPR). The OM-D

competed against a host of world leading camera brands and shone

through as voted by the DPR readers. The Olympus OM-D is a ground-

breaking, new, digital, interchangeable-lens camera, perfect for

people who want to ‘take part’, ‘create’ and ‘share’. This revolutionary

mirror- less camera has an exceptionally light and compact body.

Pitney Bowes launched its innovative security solutions where

data on soft or hard format could be made completely secure with

tamper-proof technology .This would be an ideal product for those

who seek verification.

Browns also launched two canned fish products to the market under

the brand names Samudra and Sealine which are now available in

15,000 outlets Island wide.

In the poultry sector the Group launched a protein supplement

named ‘Proteina’ which is an extract from fish and is imported from

reputed manufacturers. Another introduction has been the SG 9R

vaccine which is a permanent solution to the salmonella disease

commonly associated with poultry farming.

In the future the Group would continue to address changing

customer needs and cater to them through the introduction of

innovative products and services through multiple touch-points.

Over 60Brands


Investments

Marine & Manufacturing

Agriculture & Plantations

Power Generation

Trusted for Generations, Worldwide

Our Brandds CContd.


Home & Office Solutions

Vet Pharma

Travel & Leisure


Investments

Browns Investments PLC

FLC Holdings PLC

LOLC Leisure Ltd.

Sierra Holdings (Pvt) Ltd.

Agstar Fertilizers PLC

Gal-Oya Holdings (Pvt) Ltd

Royal Fernwood Porcelain Ltd.

Other Investments


Browns Investments PLC (BI) is a subsidiary of Brown and Company

PLC and is also the strategic investment arm for the Group. BI

ensures that its investment strategy is in line with the company’s

vision of having a presence in emerging or sunshine industries that

are expected to lead national growth. Whilst the company has

active management interest in most investments, it also has a few

passive investments where there is only a Board representation. The

company is currently engaged in the diversified industries of agri-

business and plantations, leisure and entertainment, construction and

Exports, and Manufacturing

The current year for BI has been one of consolidation. With Net Assets

in excess of Rs. 7 Bn, the company’s investment strategies are to

invest in the medium to long-term, or invest to hold and divest at an

appropriate time.

Agri-Business and PlantationsPlantationsBI has interests in the Plantations sector through FLC Holdings PLC

(FLCHPLC), a joint Venture formed with Perpetual Holdings (Pvt)

Ltd. FLCH is the holding company of Pussellawa Plantations Ltd and

Maturata Plantations Ltd which together manage 33 tea estates and

13 rubber estates. In addition to managing a total of 18,736 acres of

tea and 14,465 acres of rubber that produce 11.6 Mn kg of tea and

3.3 Mn kg rubber respectively, the plantations also have interests in

coconut (519 acres) and other crops including timber (4,618 acres).

Pussellawa Plantations Ltd. also manage two green tea factories - that

are amongst few available in Sri Lanka.

Plantations and agri-business of BI reaps many benefits of group

synergies through the parent company Browns, especially with the

supply of world renowned machinery, technical support and services

to customers. It also has the added advantage of having Agstar

Fertilizer PLC - supplier of fertilizer and crop care products -within the

Group.

FLCH posted favourable financial results during the year driven by

marginal increases in tea prices and productivity improvements due

to better practices.

The hydro power plants developed in the plantations have

successfully supplied 3.2 MW of electricity to the national grid. The

company is in the process of making further enhancements in order

to increase the supply in the next few years.

Agri BusinessBI together with LOLC PLC and the Sierra Group hold an over 80%

stake in Agstar Fertilizer PLC – a company that supplies straight and

blended fertiliser, crop-care products and seeds to the agriculture

sector. Agstar already has a reputation amongst the farming

community as a provider of total solutions to farmers, which should

bode well for the future.

The financial year for Agstar has been a positive one especially when

compared to the competition. Despite the bad weather experienced

in the country, volume and profits have marginally increased when

compared to the previous year. However, the company is faced with

the challenge of delayed fertiliser subsidies, which is a common trend

in the industry.

BI ensures that its investment strategy is in line with the company’s vision of having a presence in emerging or sunshine industries that are expected to lead national growth.

Rs. 2,625MnTurnover


Leisure and Entertainment LeisureThe leisure industry overall has seen growth over the past three years

with tourist arrivals to the country increasing 17.5% in 2012 from

the 855,975 to 1,005,605 visitors in 2011. The number is expected to

rise in the coming years with a target of 2.5Mn visitors expected in

2016. The country is rapidly developing the infrastructure including

the expansion in the number of hotel rooms, and Browns is set to

capitalise on this with the investments made in hotels in key parts of

the Island.

BI holds a 30% stake in LOLC Leisure Ltd, the managing company

for Palm Gardens, Riverina, Tropical Villas and Eden. Palm Gardens,

Riverina and Tropical Villas were demolished during the year to

commence the building of a 400 room 5-star hotel in the combined

property that will be managed by an international brand once in

operation. Stage 2 of the development plan is to commence the

building of residential condominiums on the same property.

The other hotel properties of the Group will be refurbished in time

to meet the high demand of tourism expected in the coming years.

Eden Resort & Spa, with no interruptions to its operations, is currently

undergoing a refurbishment plan which started towards the end of

the financial year. Dickwella Resort & Spa which was acquired two

years ago has been in operation throughout the financial year but is

expected to undergo a major refurbishment in the next two years.

The building of the hotel in Kosgoda is progressing according to plan.

However, the company is awaiting approval to expand the proposed

150 rooms to 172 rooms in this newest 5-star hotel. The company is

also currently negotiating with an international brand to manage the

operations after the planned soft opening next year.

A 67-room property in Dambulla was acquired post balance sheet by

BI. The brand new hotel Green Paradise Agro Eco Hotel, which was

commissioned about a year ago, consists of villas and is situated in

close proximity to the cultural triangle. The company is also awaiting

approval for the two proposed boutique hotels in the Maturata

Plantations Ltd and Pussellawa Plantations Ltd. In addition, BI is

aggressively pursuing opportunities on the East Coast of the country.

EntertainmentBrowns ventured into the entertainment arena during the last

financial year with the acquisition of Excel World, located in the heart

of Colombo. During the financial year the conference and meeting

facilities were given a facelift. In the long term the Company plans to

convert the six-acre land into a mixed development consisting of a

hypermarket, restaurants, conference centre and an entertainment

centre. The company hopes to capitalise on the expansion of

Colombo City into a tourist hub.

ConstructionBI and LOLC PLC together hold a significant shareholding in Sierra

Construction (Pvt) Ltd and Sierra Holdings (Pvt) Ltd. The Sierra Group

is a dominant member in the engineering and construction sector

in Sri Lanka, with operations in India, Maldives, Qatar, Saudi Arabia

and Australia. Though the investment in Sierra has been passive in

nature, there are synergies that can be achieved with the construction

projects of Browns Group. Sierra has had a few successful competitive

bids in obtaining contracts for some of the Browns property projects.

The recently acquired Ajax Engineers (Pvt) Ltd is the market leader in

manufacturing glass and aluminium doors and windows. With the

boom in the construction industry, performance of Ajax Engineers

(Pvt) Ltd is expected to contribute positively to the Browns Group.

The construction of the commercial building complex in Borella, a

commercial suburb of Colombo, is progressing according to plan and

is expected to be completed by 2014.

Exports and Manufacturing Royal Fernwood Porcelain Ltd (RFPL), a subsidiary of BI with a 77%

stake, is a manufacturer of high quality tableware for the local and

export markets. The manufacturing facility in Kosgama handles a

capacity of 600,000 pieces a month and includes prestigious brands

such as ‘House of Frazer, Lenox, Pottery Barn, Debenhams, John Lewis,

Crate & Barrel and Country Road’.

Locally, RFPL is the only manufacturer to have a SLS certification by

the Sri Lanka Standards Board. Currently, RFPL products are exported

to key clients in niche markets and are also supplied to the local

market through the Browns dealer network which was also expanded

during the year.

The company hopes to expand its operations by introducing new

designs to the local and exports markets. The company will also

increase factory efficiencies such as re-aligning logistics and better

sourcing of raw materials, etc in order to compete on better price

points. The company will also look for new markets and establish

its brand value by participating in trade exhibitions and creating

high quality and novel products backed by relevant communication

mechanisms.

Other InvestmentsBI holds an investment portfolio of Rs. 2.4 Bn of which approximately

Rs 1Bn is a trading portfolio that has been affected by the

performance of the Colombo Stock Exchange (CSE). The portfolio

includes investments in financial services, diversified holdings,

agriculture and plantation sectors.

Investments

“For the first time in Sri Lanka, a sugarcane harvesting machine was imported to mechanise the harvesting process of the cane fields. The machine harvests 100 – 160 metric tons of sugarcane per day in comparison to the 1 metric ton per day per 1 manual labour day.”


The Company also has a land portfolio in excess of Rs. 500Mn – which

is either used within the Group or held for future development.

Gal-Oya Holdings (Pvt) Ltd / Gal-Oya Plantations (Pvt) LtdGal-Oya Holdings (Pvt) Ltd, (GOHL) is a consortium formed by

Brown & Company PLC, Lanka Orix Leasing Company PLC and the

Government of Sri Lanka as a Public-Private Partnership (PPP). The

new company was formed in 2009 as a joint venture between the

Government of Sri Lanka and the consortium, where 51% of the

ownership is retained with the Government of Sri Lanka and 49% of

the ownership is with the consortium. The consortium was appointed

as the exclusive management agent, to revitalise the former

Hingurana Sugar Industries Limited that has been closed since 1997.

Cultivation:The plantation consists of 7,659 hectares (ha) of land with

approximately 5,200 ha of irrigated land allotted amongst 4,400

families. The project area is divided in to 5 major zones, namely:

Varipathanchena, Galmaduwa, Deegawapi, Hingurana and Neetha. A

nucleus estate with an extent of 166 ha of land with a water scheme

will be supporting the 5200 ha of cultivatable land for sugar cane.

Location Cultivatable

Extent (ha)

Number of

Allottees

Varipathanchena 1,067 947

Galmaduwa 1,233 926

Deegawapi 1,034 870

Hingurana 764 697

Neetha 1,104 1,001

Total 5,202 4,441

Sugarcane NurseryAgronomy Division of GOPL has been producing seed cane and

conducting research on various aspects of sugar cane agriculture

since its inception in 2010. The Division maintains over 134 SRI

sugarcane clones as a source of future planting material, and

Trail programs. In 2012 and 2013, the agronomy area consisted of

approximately 159.25 ha, out of which 28 ha is for the maintenance of

primary seeds and 200 ha is for the secondary nursery. In addition to

the nursery, a few select farmers too provide seeds in order to meet

the supply-demand gap.

Achievements in 2012/13Key Statistics

As at 31st March 2013

Sugar Cane cultivation - Plantations 1980.5 ha

Sugar Cane cultivation - Agronomy 159.25 ha

Total farmers 1,879

Target and Achievement during 2012/13

Target Achievement

New Planting (ha) 1,300 1,380.30

Total Harvesting (MT) 46,800 69,936.54

Seed Cane (MT) 10,400 16,130.54

Commercial Cane (MT) 46,800 53,806

Yield (MT/ha) – Plant Crop 80 100

New technology for harvesting to overcome labour scarcity:For the first time in Sri Lanka a sugarcane harvesting machine was

imported to mechanise the harvesting process of the cane fields.

The machine harvests 100 – 160 metric tons of sugar cane per day in

comparison to the one metric ton per day per one manual labour day.

Production:Sugar production in the refurbished factory commenced on 16th July

2012 after a lapse of 15 years. The detail of cane crushing and sugar

production during the production period is given below.

Cane Crushed 53,806.51 MT

Total Marketable Sugar Production 3,315.70 MT

Rendement 6.203

Total Molasses Production 2,679.95 MT

Royal Fernwood Porcelain Ltd (RFPL)A subsidiary of BI with a 77% stake and is a manufacturer of high

quality tableware for the local and export markets. The manufacturing

facility in Kosgama handles a capacity of 600,000 pieces a month

and includes the prestigious brands such as ‘House of Frazer, Lenox,

Pottery Barn, Debenhams,John Lewis, Crate & Barrel, Country Road’.

The industry experienced a steep increase in energy costs, and

globally this was a challenge as the company is competing in

international markets with products that are manufactured in

countries that have a high usage of alternate energy sources.

Therefore, the RFPL factory underwent a refurbishment to include

heat generators using the same duct system in order to keep the

energy costs low.

The company is also taking measures to decrease the CO2 emissions

to meet international standards as required by most buyers in the

developed markets. Locally RFPL is the only manufacturer to have

a SLS certification by the Sri Lanka Standards Board. Currently, RFPL

products are exported to key clients in niche markets and are also

supplied to the local market through the Browns dealer network

which was also expanded during the year.

The company hopes to expand its operations by introducing new

designs to the local and exports markets. The company will also

increase factory efficiencies such as re-aligning logistics and better

sourcing raw materials etc in order to compete on better price points.

The company will look for new markets and establish its brand values

by participation at trade exhibitions and creating high quality and

novel products backed by relevant communication mechanisms.


Agriculture & Plantations

Agriculture Division

Sifang Lanka (Pvt) Ltd.

Plantation Support Services


Browns hopes to introduce futuristic models of farming equipment with better features while increasing the aspirational value of the brand.

AgricultureBrown and Company PLC was instrumental in introducing agriculture

mechanisation to Sri Lanka, and has been serving this sector for over

100 years. The Agriculture Strategic Business Unit (SBU) of Browns is

the sole distributor for Massey Ferguson and TAFE four wheel tractors.

It also markets Howard Rotovators, BG Trailers, BG Sprayers and other

BG branded implements.

Financial and Operating PerformanceThe year under review was a challenging one for the agriculture

sector with the first half of the year affecting cultivation due to

droughts and the second half of the year having heavy rains and

floods. The SBU was also affected by the appreciation of the US Dollar

since the agricultural equipment business is import based. Though

the sector was affected negatively, Browns remained at number one

in the four-wheel tractor market during the year under review.

Paddy farming where four wheel tractors are commonly used had

negative growth during the period under review due to adverse

weather conditions. This resulted in tractor industry sales dropping

by 41%. However, the Browns Agriculture SBU crossed the Rs. 3.2 Bn

mark in revenue.

Browns’ success has been a result of the motivated and competitive

team behind its sales and operations. The team has been providing

unparalleled services to customers through technical training and

after sales services, building a rapport with the farmers and dealers

which is essential during challenging times. Browns has a strong

dealer network for distribution of agricultural material consisting of an

exclusive dealer network and a non-exclusive dealer network. During

the financial year Browns continued to offer free registration of four-

wheel tractors and provided full insurance for the first year at no cost

by partnering with Sri Lanka Insurance Corporation and Lanka Orix

Leasing Company PLC.

In an effort to increase sales, dealers were given targets for the two

seasons - Yala and Maha - with winners receiving fully sponsored

tours to South Africa and Australia. The 38 member contingent

to Australia is the largest ever dealer tour group to have received

a fully sponsored tour to that country. Browns also felicitated and

recognised the top performing dealers at a dealer convention where

the principals from TAFE India too were present. Also, Browns was the

only input supplier in the four-wheel tractor category to win a gold

award in 2012 from the National Agri Council that is affiliated to the

Chamber of Commerce.

Future OutlookBrowns hopes to introduce futuristic models of farming equipment

with better features while increasing the aspirational value of

the brand. The distribution network for spare parts too will be

strengthened in the coming year.

Browns will offer training and seminars to dealers and farmers on

mechanisation and increasing their yield using farming equipment.

Furthermore, the company will continue to assist the farmers with

micro-financing opportunities through the parent company LOLC PLC

and other reputed financial institutes.

Rs. 3,856MnTurnover


Agriculture & PlantationsSifang Lanka (Pvt) LimitedSifang Lanka (Pvt) Ltd is a fully owned subsidiary of Brown and

Company PLC, marketing light agriculture machinery such as Sifang

and Yamasha brand two-wheel tractors and the Sifang brand of

mini-combine harvesters. During the year under review, the company

launched a diesel three-wheeler under the BG Pace brand.

Financial and Operating PerformanceThe year under review was a challenging one for the company due

to the adverse weather conditions that prevailed throughout the

year. After experiencing three consecutive periods of drought, the

agriculture sector was hit hard with floods which contributed to

lower than expected demand for two wheel tractors. However, the

company maintained a 37% market share during the year with the

help of the newly introduced Sifang mini-combine harvester for

paddy farming, along with other products. The agriculture sector

has also been going through a stage of price volatility and the small

harvesters have been a popular product as the pricing fits right into

the budgets of many farmers.

The company has also been expanding into light transportation

products, and the newly launched three-wheeler is the only one in

the country that is approved to transport six passengers. The three-

wheelers which are manufactured in collaboration with Indian based

Pace Argo, are modified with parts manufactured in Sri Lanka to meet

local consumer preferences. The six-passenger three-wheelers have

the second largest market share in the diesel category.

Amidst the challenges faced, the company, through the introduction

of new products and strengthened franchised service agents, did

remarkably well to reach a revenue of Rs. 600 Mn during the year

under review. The company has 58 franchise service agents, covering

all business areas island-wide and supported by a team of company

technicians who promise a service delivery within 24 hours.

Future OutlookThe company will focus on providing farmers with the necessary

knowledge on handling equipment and have special promotions to

help the low-end farmers. The company will also work with parent

company LOLC PLC to provide the lowest possible rates to farmers in

order to ease their burden on associated financing costs.

The company will also continue its product diversification to reduce

seasonal dependence on sales. It will also promote the

three-wheelers as a family vehicle to farmers by leveraging on the

“Browns” brand already established among the farming communities.

Plantations Support ServicesPlantations Support Services Division of Brown and Company PLC

supplies tea and rubber processing machinery as well as allied

products to the manufacturers of tea and rubber in Sri Lanka.

Division’s clients include plantation companies, private tea factory

owners and the state owned plantations.

Browns represents some of the well known brands in machinery

including Parucco from India for heating and drying solutions,

Marshall - Fowler, a Kenyan company based in India for a wide range

of tea machinery, Aarkay Group from India for tea driers, Benson

Corporation from Taiwan for green tea machinery and Kelachandra

Iron and Steel works from Kerala, India for rubber machinery.

The company also provides total engineering solutions in terms

of both electrical and mechanical functions, and advisory services

on energy saving management solutions. In addition, the division

also acts as a one-stop shop for the Group’s other products such as

tractors, batteries, generators etc. by linking them to the plantation

companies.

Financial and Operating PerformancePlantations Support Services division recorded revenue of Rs. 136.2

Mn, a growth of 16% over the previous year. During the year under

review, the Division continued to support the technical aspects

related to the Hingurana Sugar Factory in Gal-Oya which the Browns

Group is operating as a public private partnership with the Sri Lanka

Government in an effort to revive the local sugar industry. The

Division also continues to support the tea estates of the Finlays Group

by offering a 24/7 on call service for maintenance and repairs to their

plant and equipment. The division held a market share of 70% for

wood fired heaters in 2012/13.

“...the company maintained a 37% market share during the year with the help of the newly introduced Sifang mini-combine harvester for paddy farming, along with other products.

It has also has been expanding into light transportation products, and the newly launched three-wheeler is the only one in the country that is approved to transport six passengers.”


Browns is conducting a pilot project with drip irrigation for tea

plantations in Sri Lanka. Two hectares in Bogawantalawa are being

used for the pilot and is being monitored by the Tea Research

Institute to ascertain the success of the programme. Also new to

Browns and new to the Country is the introduction of a green leaf

weighing system for electronic monitoring of green leaf weighment,

attendance, etc., to eliminate waste and increase productivity.

Talawakalle, Bogawantalawa and Horana Plantations are trying out

the new equipment on a trial basis.

Future OutlookBrowns will continue the two pilot projects introduced during the

financial year in the hope that they will be successful in the Sri

Lankan landscape. In addition, the Division hopes to introduce new

products especially in the areas of energy reduction/conservation to

its product portfolio.

The company also provides total engineering solutions in terms of both electrical and mechanical functions and advisory services on energy saving management solutions.


Power Generation

Battery

Klevenberg (Pvt) Ltd.

Power Systems

General Trading


A customer centric service initiative was a key value addition in this sector.

BatteryBrowns Battery strategic business unit (SBU) is the sole distributor

for the Exide brand of batteries – Exide Power Plus, Exide Ultra, Exide

Biker, Exide 3WD, Exide Din type, and Exide Marine as well as BG

deionised water, BG jumper cables and BG charging equipment. With

over 500 dealer outlets, key partners and suppliers, Exide is the market

leader in providing batteries to the automotive battery market.

Exide has built a reputation over the years as a premium battery

that is reliable and long lasting. A total of 95% of the batteries are

manufactured in Sri Lanka while 5% are imported from India. Exide

has faced fierce competition over the years due to operating in a

market with minimum entry and exit barriers. However, the product

quality combined with superior service has enabled Exide to sustain

its number one position.

BG deionised water is the only battery water that has SLS status from

the Sri Lanka Standards Institution, and BG jumper cable supplied by

Kelani Cables is the only cable that caters to both petrol and diesel

vehicles.

Financial and Operating PerformanceThe SBU crossed Rs. 2.4 Bn in revenue during the year which is a

marked achievement compared to the Rs. 680 Mn recorded five years

ago. The unparalleled service levels delivered by a motivated team

have propelled the growth of the SBU during the year.

During the year under review, the SBU introduced a new battery

targeting 3-wheel vehicles under the brand name of Exide 3WD

which had an exceptional performance during the year.

The Battmobile service too expanded its services to 65 locations

throughout the country. Battmobile which provides a free service to

stalled motorists regardless of the brand of battery used, also helped

the SBU secure additional customers to Browns with the exceptional

service provided. In addition, Browns Power Mart, a one-stop-shop

that provides total solutions for all battery needs, continued to

perform well. The three centres in Colombo, Galle and Kurunegala

as well as the mini power marts in regional centres in Jaffna, Ampara

and Vavuniya continued to service customers whilst taking the time

to advise them on better battery care and reasons for battery failure.

2012/13 saw the Exide brand sponsor some of the best motor racing

events in the country including Foxhill, Gunners Super Cross and

Cavalry with Brown’s own Exide racing team taking part in some

races and winning awards for the company. The Exide motor rally

in Colombo attracted all brands of vehicles using Exide batteries.

Exide was placed 19th in the unlisted brands category in the Brands

Finance Survey, surpassing some of the other well known brands.

Exide also continued to motivate its dealers with technical seminars

and service campaigns and recognised key high performing dealers

with fully paid travel packages to overseas locations.

Future OutlookThe future of the Exide battery looks promising with the surge of new

vehicles that were imported to the country in the last 2-3 years. With

the relaxation of duty on import vehicles, the number of new cars

and motorcycles increased in the past few years and will be due for a

battery change in the 2014/15 year and beyond.

The company also hopes to increase product quality with new

machinery and technology.

Rs. 4,420MnTurnover


The company will capitalise on the brand equity built by the Browns

Group over the years when introducing new products/brands to

the market. The company will continue to strengthen the dealer

network and build customer-centric value additions, thus increasing

the aspirational value of the brand as a long term strategy.

Klevenberg (Pvt) LimitedKlevenberg is a subsidiary of Brown and Company PLC and is the sole

distributor of Lucas automotive products from the UK. The company

markets a complete range of premium automotive batteries for all

categories of vehicles including cost of European as well as motor

cycles and three-wheel vehicles. The company promotes Lucas

Premium MF, a top-of-the-range maintenance-free battery with

a two year comprehensive warranty targeting premium vehicle

owners, Lucas Powerride for motor cycle owners and Lucas Buddy

battery for three-wheeler owners. The company also operates two

Lucas premium service centres that are open to all who need battery

servicing and a check on the electrical systems regardless of the

brand of battery used.

Financial and Operating PerformanceDuring the year under review, the company consolidated its sales and

operations functions and streamlined the dealer channel. Klevenberg

increased its market share from 16% to 19% during the year, in

keeping with the goal of sustaining a market share of approximately

20%. Net profit for the company grew by 157% when compared to

the previous year.

During the year, Klevenberg concentrated its efforts on reaching out

to the three-wheeler market. Three-wheelers is one of the fastest

growing automobile segments in the country. Klevenberg, which has

understood the needs of the three-wheeler market, introduced the

Power Generation

“During the year under review, the SBU introduced a new battery targeting 3-wheel vehicles under the brand name of Exide 3WD which had an exceptional performance during the year.

The company also made a substantial investment during the year on improving its auto rescue facility that provides a 24 hour mobile service for auto repairs for all automobile users.”

Lucas Buddy battery during the year under review and launched an

Owners Club giving lifestyle benefits to the owners of three-wheelers

lifestyle benefits. The Owners Club members receive discounts to

fashion malls and other lifestyle discounts including programs that

benefit the entire family.

The company also made a substantial investment during the year

on improving its auto-rescue facility that provides a 24-hour mobile

service for auto repairs for all automobile users. Services such as

on-site replacement of batteries, door step assistance in the event of

auto-electrical failure etc., are provided by the auto rescue facility with

services performed free for Lucas users.

Klevenberg is a pioneer in providing unmatched after sales and

post sales services to customers as well as providing auto services

to those who need it. The company has built partnerships with

leading organisations to provide auto services to their customers.

The partnership with the Automobile Association (AA) of Sri Lanka

continued with Lucas investing in the AA Call boxes. Services ranging

from replacing flat tyres, towing, jump starting, etc are provided to

all auto users through the Nuwara Eliya and Colombo AA centers

while similar services are offered to the auto users in Jaffna through

the Browns Centre. The company also partnered with Sri Lanka

Insurance Corporation (SLIC) to provide auto solutions such as mobile

and towing services free of charge to the SLIC premium customers

as well as providing discounted pricing on battery purchases to their

premium customers.

Future OutlookThe company could see a surge in battery sales in all market

segments as a result of the new vehicles that entered the market

in the last three years during the times of relaxed import taxes. The

typical life of a new battery is 2-3 years and Lucas hopes to capitalise

on the replacement battery market in due time. The infrastructure

development in the North and the East, once completed, is expected

to further increase the number of automobiles in the future, which

will increase the need for batteries even further.

The three-wheeler owners club introduced during the financial year

too is expected to increase the sales of batteries through word-of-

mouth amongst the clientele. A discount and incentive program is

available to existing Owner’s Club members for referrals and repeat

purchases.

Branding activities and change in product packaging highlighting

the benefits of the battery will bring in positive results in the

future, with Lucas investing heavily on event sponsorships such as

participating in fun motor rallies and classic car rallies to build brand

image. Marketing strategies through advertising, social media and

the introduction of a CRM system in order to capture details of loyal

customers should bode well for the future of the Lucas brand.

Power SystemsThe Power Systems Strategic Business Unit (SBU) of Brown and

Company PLC imports and markets the F. G. Wilson brand of generators

from the UK. The SBU has its own after sales division which carries out

services, repairs and maintenance 24 hours a day, 365 days a year and is

a provider of complete electrical energy solutions.


“... contributing to the positive results for the year is the direction it took in becoming a complete electrical energy solutions provider over being a mere seller of generators.”

Financial and Operating PerformanceAs a high-tech, high quality product, HG Wilson is one of the leading

generator brands in the market. The division was challenged during

the year with the depreciation of the Rupee and the contraction of

disposable income.

Cash liquidity of the customer is a concern for this product as it is

not sold on credit. Unlike the competitors, that follow a multi brand

strategy, the Power System SBU follows a single brand – single

product strategy and hence is unable to compete on price or cater to

the price conscious segment. However, the SBU partnered with LOLC

to enable small-scale clients to receive financing and thus was able to

retain market share as it did in the past.

The SBU also changed its strategy of competing only in the

conventional market to include more project based sales in order to

stay competitive. This change in strategy has already resulted in the

SBU generating additional sales.

Also contributing to the positive results for the year is the direction

it took in becoming a complete electrical energy solutions provider

over being a mere seller of generators. The service component

comprises of provision of equipment, installation, 24-hour assistance

across the country through Browns regional centres in Dambulla,

Kurunegala, Badulla, Ampara, Jaffna and in the South. The service

promise of Browns to its customers is that down-time will be limited

to three to six hours. The trust in the quality of service provided by

Browns has resulted in achieving over 1000 service contracts thus

far. The SBU also introduced a remote monitoring system to provide

enhanced service delivery to the customer. The system allows instant

notification of any breakdown or malfunction via SMS, enabling the

service staff to attend to the needs with improved response time. The

monitoring which is currently done as a pilot project is showing signs

of success.

The division entered rental operations during the year and it has been

successful thus far. The rentals are offered to customers for a nominal

fee as a temporary replacement during a breakdown or as a rental

in place of a permanent solution. The division is studying the rental

market closely to evaluate if operations should be expanded in the

coming year.

Future OutlookSustaining market share with a single brand – single product has

been a challenge in a tough market consisting of competitors

offering high, medium and small capacity generators with varying

price points. The division hopes to introduce related products and

increase the product portfolio to overcome this situation. In addition,

with the increase in electricity tariffs, commercial customers have

been faced with unexpectedly higher utility bills and the SBU has

recognised the need for power saving equipment. The SBU hopes to

add power saving equipment to its product portfolio in the

coming year.

With B2B sales being an important aspect in this business, the SBU

will continue to participate in corporate exhibitions such as the

Techno exhibition and the Constructors exhibition to increase its

visibility and build relationships with potential customers.

General TradingThe General Trading Division of Browns consists of machinery,

hardware, and electrical products. The machinery and hardware area

carries power tools, cutting and grinding wheels, engineering tools,

hacksaw blades and hand tools from world renowned suppliers such

as Makita, Maktec, Tailin, Eclipse and Tekiro. The electrical products

consist of Firman generators, Usha Euro CFL bulbs and BG Fans.

Financial and Operating PerformanceThe Division sustained its market leadership position in power tools

with 37% market share and in hacksaw blades with 45% market

share. On average, each product grew by 3%-4% during the year with

fireman generators growing by 5% to reach a market share of 16%,

keeping in line with the 17% targeted for the year.

The dealer distributor model in this operation has worked well for

the division with the current distribution channel exceeding over

450 dealers islandwide. However, the business was marginally

affected due to the cash liquidity issues of dealers that affected their

credit limits. Due to the efficient sales and support team at hand,

the downward trend was curtailed early in the year and the division

achieved good growth. The profitability of the division was also

challenged during the first two quarters with the appreciation of

the rupee which appears to have stabilised towards the end of the

financial year.

The after sales support centres have added a new dimension to the

sales support function and have helped fuel an increase in the service

contracts signed. Browns regional centres in Dambulla, Kurunegala,

Badulla, Ampara, Jaffna and in the South along with seven franchise

service points across the island have improved the after sales

experience of the customer. In addition, the main centre in Colombo

performs warranty repairs with a one-day service for power tools.

Browns has taken the initiative to train staff and end users on the

products offered and have conducted many seminars over the years.

During the year under review the division won the ‘best display of

engineering services’ presented by Techno Exhibition Committee and

the ‘best display of power tools’ in the Constructors award sector.

Future OutlookBrowns hopes to expand the product portfolio in the coming year in

order to gain an edge over the competition, bring in additional revenue

and strengthen the division’s business. In addition, the relationships and

confidence built between Browns and the dealers has been a definite

advantage in the growth of the business. Therefore the dealer network

too will be expanded to 650 in the coming year.


Marine & Manufacture

Browns Group Industries (Pvt) Ltd.

Browns Thermal Engineering (Pvt) Ltd.

Browns Industrial Park Limited


Browns Industrial Park Limited Browns Industrial Park Limited serves as the logistics and

manufacturing hub for the Browns Group of Companies. Browns

Industrial Park is situated on 25 acres of land and consists of 300,000

sq ft of warehousing facility, making it one of the largest in the

country. During the year under review, all manufacturing operations

of Browns Group Industries (Pvt) Limited (BGIL) and Browns Thermal

Engineering (Pvt) Limited (BTEL), the manufacturing and assembly

plants of Tafe and Sifang tractors as well as the central warehouse and

stores of the Browns Group, moved to the new location.

The consolidated warehouse of Browns contains over 17,000 SKUs

worth approximately Rs 2 Bn. The warehouse contains state-of-the- art

technology with inventory controlled through an ERP system which

has introduced increased efficiency, accuracy and accountability to the

operations. Browns Industrial Park Ltd will improve synergies between

various divisions and companies of Browns Group that were previously

housed in a number of different locations.

The facility that is built on 50% of the land contains a waste disposal

system, waste water treatment facility and a chemical treatment plant

and possesses of all necessary environmental certifications. 70% of the

current warehousing facility is rented to other entities. The industrial park

which also contains lodging, food and training facilities can be expanded

further on the remaining land and rented as investment property.

Browns Group Industries (Pvt) Limited Browns Group Industries (Pvt) Limited (BGIL) is a subsidiary of Brown

and Company PLC that provides complete solutions to the boat

building industry. BGIL markets a range of high quality inboard and

outboard marine engines under the brands Yanmar, Ashok Leyland,

Hyundai Deo Dong, Parson, Powertech, and other related accessories.

The company also manufactures plastic containers and other plastic

components for batteries manufactured by the Associated Battery

Manufacturers (Ceylon) Ltd, in addition to managing a boiler division

for the Group.

Financial and Operating PerformanceThe company had a successful year with growth in revenue and

market share. The success can be attributed to the introduction of

new products, strengthening of the service and maintenance teams,

brand recognition and the newly introduced boiler division.

The inboard engine segment saw the newly introduced Deodong

brand of engines from Korea do well during the year. In a market

where second hand engines dominate, the Deodong brand with its

cost efficient and affordable pricing competed well to increase its

sales when compared to the previous year.

The inboard engine section also opened a new workshop in

Kudawella fisheries harbour in the Matara district to repair parts

and sell spare parts. In addition, the workshop in Negombo was

expanded to attract the craft owners from the North and the East

that require repair services. With the growth in the fisheries industry

especially with the opening of the seas in the North and the East, the

demand for repairs and maintenance has seen a growth. Therefore,

the expansion of the Negombo workshop should bode well for the

future as it is the closest city to the North that has expertise in marine

repairs.

The consolidated warehouse of Browns contains over 17,000 SKUs. The warehouse contains state-of-the-art technology with inventory controlled through an ERP system, which has introduced increased efficiency, accuracy and accountability to the operations.

Rs. 507MnTurnover


The outboard engine segment introduced two new brands during

the year under review - Parsun and Powertech engines - both from

China. The products backed by the Browns service promise picked

up in sales towards the later part of the year. The company also

participated in boat shows in Colombo and Korea and provided

sponsorships for races in Negombo and Bolgoda to strengthen its

brand image with customers.

BGIL, as a manufacturer of plastic injections for sister companies,

saw its sales increase by 50% during the year. In addition, the newly

acquired boiler division which acts as the agents for the world famous

Cochran brand from UK and the Daelim Royal brand from Korea,

performed well during the year. The multi product - multi brand

strategy targeting various price points has worked well for BGIL to

keep its market share steady in this area. The division also introduced

an alternative to diesel and furnace oil boilers by introducing the cost

effective solid fuel burners from India. Steam Jen solid fuel burners

use coconut husk, fire wood and paddy husk to fuel the burners.

Future OutlookThe Company is carefully observing the government’s policies for the

fisheries industry in the coming years, especially for the North and the

Marine & Manufacture

The warehouse contains state-of- the-art technology with inventory controlled through an ERP system giving increased efficiency with accuracy and accountability to the operations.

The outboard engine segment introduced two new brands during the year under review - Parsun and Powertech engines - both from China.

The introduction of the RADCO radiator coolant during the year showed slow but steady progress in a very competitive environment.

East. Further expansion of the fishing industry in the North and East

will fuel the growth of the marine business in the new year.

Browns plans to expand the market share of the outboard engine

segment in the coming year. With the planned marketing activities

and participation in trade shows, Browns will also strengthen its brand

value and image. In addition, the company will conduct various

workshops in fisheries harbours to educate the users on equipment

and after-care.

Browns Thermal Engineering (Pvt) Ltd. Browns Thermal Engineering (Pvt) Ltd is a fully owned subsidiary of

Brown and Company PLC that manufactures heat exchangers for

the auto and non-auto segments including automotive radiators,

locomotive radiators, non-auto radiators, oil and air coolers, and

driers. The company is also the market leader for the RADCO brand of

radiators with a 42% market share.

Financial and Operating PerformanceThe influx of imported second hand and refurbished radiators to the

Sri Lankan market has challenged the genuine local brands due to

a low price strategy adopted by importers. The government of Sri

Lanka which has been monitoring the market situation introduced a

10% duty for these imports. However, the results of this measure are

yet to have an impact on local manufacturers.

The Company’s Gross Profit margin was affected during the year

primarily due to the high cost of copper and brass, two imported

raw materials used in the manufacture of radiators. The Company’s

diversification into aluminum core radiators to overcome the

uncertainty and volatility of the copper market is expected to give

the division good returns in the future. Also adding to the challenge

is the import duty that was imposed on customers who assemble

cars as the volumes are now expected to drop with higher costs.

However, the company’s strategy to diversify into the non-auto

segment by providing heat exchange systems to tea estates has seen

positive results. The new initiative introduced during the year has

already brought in additional sales. In addition, the introduction of

the RADCO radiator coolant during the year showed slow but steady

progress in a very competitive environment.

Future OutlookThe diversification into the non-auto segment is expected to grow

during the year, especially given that radiator and boiler requirements

of tea estates are now handled as a fully integrated solution package.

The convenience to the customer who has to work with just one

partner for both products as well as after-sales care is a significant

advantage to Browns.


The company will continue to educate the auto body shop owners on

the products and services under its ‘Karmika Navodaya’ programme.

The Technical Upliftment programme has so far been successful in

many parts of the country and will be expanded to other areas during

the year. In addition, the company will conduct workshops directly

for the end customer in order to enhance the Browns brand and

create awareness amongst customers.


Home & Office Solutions

Integrated Business Solutions

Retail

Consumer

Commodity Trading


The sector continued to introduce new brands and services to meet evolving customer expectations.

Home and OfficeBrowns Home and Office sector consists of the Integrated Business

Solutions division, Retail division and the Consumer division. These

divisions provide a range of consumer electronic products and office

automation products whilst establishing relevant customer touch

points to market the Group’s products.

Integrated Business SolutionsThe Integrated Business Solutions (IBS) division broadened its

horizons and aligned itself to move into growth areas such as leisure

and energy management products whilst marketing its core products

in the office automation and IT category. The Division markets world

renowned brands such as Sharp, OCE, Pitney Bowes, Vivitek, Scan Coin

and Bianca Renee amongst a host of others.

Financial and Operating PerformanceThe year under review was a challenging one given the contraction

in the economy, high competition and availability of low priced

refurbished products in the market.

However, the division continued to maintain its market share in

photocopiers the core office automation product distributed by

Browns. Though the total market for photocopiers declined during

the year, Browns remained the second largest player in the segment

with a market share of 24%. Browns continued to be one of the key

players in the high-end category of printers, through the OCE range

of printers which caters to cut sheet and wide format printing.

The ‘Doculine’ rental solution showed positive growth during the

year and is currently the third largest player in the rental market. The

division provides flexible and customised solutions with a 24-hour

service available to clients with critical operations.

The office automation segment provides services across the country

through a network of service franchises and Browns own staff.

Browns service offerings include a 24-hour service for mission critical

operations, stationing of back up machines, job tracking mechanisms

and others. Customers have easy access to service centres that

provide a 24-hour service to get any of their issues resolved. Job

tracking mechanisms with immediate feedback to customers

through the use of SMS technology or e-mail, online monitoring

of breakdowns and repairs, etc., are some of the initiatives taken to

strengthen the service experience of customers. One hour response

time is guaranteed for key customers with critical operations. A

customer satisfaction survey is also carried out on a periodic basis

to ascertain our service levels and areas for improvement, and

the introduction of the new ERP system will further enhance the

customer servicing function.

Browns also launched the hospitality world’s most sought after brand

‘Bianca Renee’, a brand that specialises in designing, furnishing of

equipment for hotels, bars, restaurants, banquet halls, convention

centers, offices, and conference facilities for multinationals, embassies

and diplomatic residences.

During the year under review, the division introduced ‘Enigin’

products and services from UK that provide total energy solutions to

clients. Browns offers consultation and follow-up audits as a package

with the Enigin real time energy management system. The division

reached a revenue of Rs 550.9 Mn during the year.

Rs. 2,379MnTurnover


Home & Office SolutionsFuture OutlookWith the success in printing solutions, the Division will take active

measures to expand the product portfolio in this area. IBS will also

continue to introduce innovative products, especially IT software

solutions to the market. In order to compete with the sub-standard,

low-priced products that have entered the market, the Division will

continue to enhance the service aspect of the business to provide

customers with the necessary after sales care. Browns also expects

good growth to come from some of the new lines that have been

established to cater to the leisure and energy sectors. The activation

of the island wide e-service hub will also further enhance our value

proposition to our customer base.

Retail Division The Retail division manages the retail showrooms at Brown and

Company PLC which includes 14 Browns centres, regional centres,

the Discovery Store and outlets in the modern trade channel. All the

above channels have been set up after carefully studying the varying

customer segments we serve and analysing their requirements. The

Retail division markets the entire range of products of the Group.

Financial and Operating PerformanceThe failure of three consecutive agro seasons due to adverse weather

conditions had a negative impact on this Division which primarily

markets agricultural equipment across the country.

The modern trade channel continues to perform well with the

expansion of supermarket chains and shows good potential for future

growth. The Arpico and Keells chains now carry a range of products

such as Belkin, BG, Olympus, Sharp, 3M and many others.

The introduction of the Discovery Store - a concept store born out of

customer feedback, showed positive signs of growth during the year.

The concept store which specialises in IT, consumer electronics and

white goods enables customers to experience the product prior to

purchasing. This feature offers customers the satisfaction they look for

when purchasing large ticket items such as the 55” LED 3D television.

The division also promotes healthy lifestyles by offering products

such as Healsio microwave oven that encourages healthy cooking. In

an effort to expand the reach of the Browns retail product portfolio,

during the year, Browns partnered with Singer Sri Lanka which is the

largest retailer in the country, to carry some of the Browns products in

over 400 Singer outlets.

Future OutlookTaking forward the concept of the Discovery store, Browns will open

its first flagship store in Colombo during the next financial year. The

concept of a customer experience zone is fast becoming popular and

bodes well for the future of retailing in Sri Lanka.

The company will also expand its presence in the modern trade

channel whilst exploring opportunities to bring innovative products

to the Sri Lankan market.

Consumer DivisionThe Consumer division of Browns is entrusted with the marketing

and dealings of consumer electronics and related products to

consumers through dealers. The Division markets Sharp electronic

products, Olympus brand of digital cameras, binoculars and voice

recorders, Mitashi gaming and entertainment products and Belkin

surge protectors to name a few. In addition, the Division also markets

consumer electronics, small appliances and water pumps under

Brown’s own BG brand.

Financial and Operating PerformanceThe Browns consumer division recorded a 44% increase in revenue

during the year with LED and LCD televisions contributing to the

majority of the growth. This growth was also driven by the expansion

of the dealer network by 100 dealers to bring the total to 420 as at the

end of the financial year.

The ‘Doculine’ rental solution showed positive growth during the year and is currently the third largest player in the rental market.

The modern trade channel continues to perform well with the expansion of supermarket chains and shows good potential for future growth.

The Division also introduced 37 new SKUs during the year which included the BG brand of air conditioners for domestic and industrial use, 3D LED televisions, home coolers, subwoofers and fans.


Currently, Browns holds the number three position in the dealer

market with a market share of 12%. The reasons for this achievement

has been the trust, quality products and services provided to our loyal

dealer base.

The Division’s mission is to provide a range of products and services

which continuously enhance the value proposition for the dealer

network in Sri Lanka through innovative and customer centric

solutions. True to its mission, the Consumer division carries an

extensive product portfolio covering many international brands as

well as Brown’s BG brand. The BG brand which was introduced to

the market four years ago contributed to 40% of revenue, surpassing

other reputed brands.

The Division also introduced 37 new SKUs during the year which

included the BG brand air conditioners for domestic and industrial

use, 3D LED televisions, home coolers, subwoofers and fans.

The Company’s ‘no frills’ warehouse outlets Direct2U proved to be a

success by capturing the market with high quality products offered

at competitive prices. The outlet situated in Bloemendhal in close

proximity to the electronic bazaar contributed to 15% of the growth.

All three ‘Direct2U’ outlets, as they are named, offer the entire product

range to the customer.

Future Outlook The Division hopes to expand the product range in the coming year

with audio-visual products, water solution equipment, other white

goods among others, and is envisioning a 15% growth in revenue

with an expected dealer network expansion to 540 by the end of the

next financial year.

Commodity Trading DivisionThe division launched its own range of canned fish products during

the year under review and has successfully captured 10% of the

market by packaging it under three price levels for the consumer

market, and one large packaging for the industrial segment.

The products, under brands ‘Samudra’ and ‘Sealine’, are currently

available through modern trade channels, stand-alone shops and

supermarkets, totaling over 15,000 outlets.

Future OutlookThe division will enter the soya product market in the coming year

and will expand the product range to include basmati rice imported

from Pakistan in the near future. The division will also increase the

number of outlets and its products will be sold in an additional 30,000

outlets.

Browns FarmsBrowns entered the farming arena during the year under review

to produce export oriented food products. A pilot project with

pineapple was commenced on 25 acres of Brown’s own property

which will be ready for harvesting in the coming year.

Future OutlookBrowns Farms is currently in the process of acquiring 1000 acres for

cultivation and export of tropical fruits. Browns will partner with

suitable foreign partners with technical expertise in agriculture

manufacturing to form a joint venture. Currently, the division is

exploring the feasibility of growing mango, banana, pomegranate,

pineapple and sesame for the export market.


Vet Pharma

Veterinary Pharmaceuticals


Growth at Browns has been sustainable due to the reputation built with high quality products offered by leading global brands.

Veterinary PharmaceuticalsThe Veterinary Pharmaceuticals division of Browns markets a portfolio

of leading global brands for poultry, companion animals and dairy

sectors. Browns is a market leader in the supply of nutrition, drugs,

vaccines, vitamins, minerals and antibiotics primarily for the poultry

and companion animal sector, with a few products being supplied to

the dairy sector.

Financial and Operating PerformanceThe Division performed well during the year under review. Browns

poultry segment grew by over 20% when compared to the previous

year when the industry itself grew only by 10%. The Division has seen

a growth over the past five years, and in particular the year under

review saw a 20% increase in profitability.

Growth at Browns has been sustainable due to the reputation built

with high quality products offered from leading global brands.

Intervet Schering Plough biologicals from Netherlands, Zagro supply

feed additives and supplements from Singapore, Eukanuba dog food

from Proctor and Gamble USA and the poultry supplement Stallon

which is a joint venture between an Italian promoter and an Indian

manufacturer, are some of the leading brands offered by Browns.

Browns has built a strong brand loyalty with its small, medium and

large farmers and farmer societies that has resulted in the Division

maintaining market leadership position in biological supplies and

minerals and vitamins whilst maintaining second position in pet

foods. The pet foods market has seen a growth of 10% as a result

of premium pricing associated with the branded products which

has not been favourable to the consumers due to the economic

condition in the country.

The pilot project of supplying large scale protein supplements to

the poultry segment, introduced during the last financial year, was a

success and has been added to the product portfolio of the Division.

The brand ‘Proteina’ is a feed additive product extracted from fish and

is imported from Malaysia and Pakistan.

Browns has also been in the forefront of finding a permanent solution

to the salmonella disease commonly associated with poultry farming.

During the year under review, a live vaccine – SG9R- was introduced

successfully to eliminate Salmonella, and Browns hopes to continue

supplying the vaccine in the coming year.

The success of the Division has been due to the dedicated team

of sales staff, and the best performing pharmaceuticals sales staff

member was duly recognised at the SLIM NASCO Awards.

Future OutlookThe future strategy of the division is to have a mix of distributors and

direct customers to strengthen the network, and provide technical

assistance and training through Browns own veterinary surgeons.

Browns will strengthen the product portfolio to include disinfectants

that will assist in farmer management, and will also continue sales of

the newly introduced ‘Proteina’ brand.

The division will also strengthen the marketing plan by recognising

customers and rewarding them with annual incentives such as

foreign trips. Browns will also further build its brand image by

participating in dog shows, and charity events such as Rabies

prevention activities.

Rs. 401MnTurnover


Healthcare


Browns vision is to deliver quality and innovative healthcare to every Sri Lankan through comprehensive integrated clinical practice, state of the art facilities and personalised care.

Browns Health Care (Pvt) LtdThe Browns Group entered the healthcare sector during the year

acquiring assets of St. Peter’s hospital in Ragama in the Gampaha

District.

Browns vision is to deliver quality and innovative healthcare to every

Sri Lankan through comprehensive integrated clinical practice, state-

of the art facilities and personalised care and aiming to continuously

enhance the value proposition to its stakeholders through innovative

and patient centric solutions.

HospitalsSt. Peters hospital, now under Browns Group - was a family owned,

25- bed hospital that had been in operation for over 30 years and had

established a name for itself in the Gampaha District. The hospital

is located strategically across from the Teaching Hospital in Ragama

where over 100 consultants are available for services. The hospital

currently caters to approximately 150 outdoor patients per day with

over 35 consultants visiting the facility.

The hospital is undergoing a refurbishment and will be upgraded to

a 60-bed, fully fledged, secondary care General Hospital. This modern,

purpose-built facility will be designed to offer quality care while

assuring safety to all patients, and will be renamed suitably to clearly

indicate that it is a subsidiary of Browns. Staff and management of

this hospital will aim to provide quality services to the consumer

and will work with the patients and their families’ to achieve the best

possible clinical outcomes. Browns hospitals will always encourage

medical, nursing and other allied health staff to adhere to the highest

standards of ethics and practice evidence based medicine.

There is a widening gap in private sector healthcare facilities with

the change in demographic, epidemiological, socio – economic and

health-seeking behavioural factors.

Considering the disease burden and the investment options available,

Browns feels that it is more feasible to set up a hospital that caters to

a majority of the disease conditions as well as other services that are

required of a hospital. Furthermore, it is also important to consider the

availability of fast evolving non-invasive medical technology that can

be offered instead of the capital intensive invasive services. Therefore,

General Hospitals with multi – speciality facilities will be the choice for

Brown’s healthcare sector expansion plans.

Private sector hospitals in Sri Lanka are concentrated mainly in the

western province and as such has given rise to a large number of

patients seeking treatment in Colombo. Furthermore, community

migration towards the suburbs of Colombo as a choice of residence

has been evident with the construction of many housing projects

during the last few decades. This has resulted in the growth of middle

income groups in areas such as Battaramulla, Piliyandala, Kadawatha,

Ragama and Maharagama. Other major cities in the country such

as Kandy, Kurunegala and Negombo have already seen a growth in

demand for better private sector healthcare.

The above analysis confirms that placing hospitals in these areas

will not only improve the accessibility to healthcare in general but

will also fill the vacuum that exists in private healthcare in these

areas. In the many studies done, it has also been highlighted that a

patient centric hospital, as opposed to the current practice of doctor


centric hospitals will have a greater potential in today’s context.

Attractive infrastructure, faster patient processes, new technology, a

comfortable environment and patient oriented pricing models are

critical factors that are demanded by patients.

Therefore, building 35-75 bed, secondary care general hospitals would

be very much central to the main strategy of Browns Health Care.

Therefore, Browns is already exploring opportunities to build a

specialised care hospital in Kandy, which is one of the largest cities

outside of Colombo. Being centrally located in the country, Kandy is

expected to attract patients from cities further away for specialised

medical attention. It will be positioned as a dedicated cancer hospital

along with aged care to assist the aging population of the country

and as a facility that will attract tourists for medical purposes. Browns

is awaiting environmental approvals to commence the construction.

Diagnostic Centres Browns Health Care plans to establish three Diagnostic centres in

and around the city of Colombo during the next financial year. This

diagnostic centre model has been proven to be successful in India

and several other countries including Singapore. These centers will

Browns is already exploring opportunities to build a specialised care hospital in Kandy, which is one of the largest cities outside of Colombo along with three diagnostic centres in other areas.

The first fully-fledged medical laboratory was inaugurated at the new hospital in Ragama in June 2013. These centres will carry out a full range of laboratory investigations such as Heamatology, Microbiology and Biochemistry while collecting samples such as blood, urine and stools from the patients.

Healthcare be focusing mainly on Diagnostic Imaging and Medical Laboratory

services. This model will also accommodate approximately 7-10

consultation chambers for medical consultants to practice in the

areas of obstetrics and gynaecology, general medicine, paediatrics

and general surgery. A fully fledged pharmacy, an outpatient facility

and a medical practitioner will be available to provide services

throughout the day.

Medical LaboratoryThe first fully-fledged medical laboratory was inaugurated at the new

hospital in Ragama in June 2013. These centres will carry out a full

range of laboratory investigations such as Heamatology, Microbiology

and Biochemistry while collecting samples such as blood, urine and

stools from the patients. Having Brown’s own medical laboratories

has its advantages such as comparatively low investment and low

operational costs. It will also be conveniently fed by a network of

collection centers and operate as a standalone centre with very low

clinical risks.

Nursing SchoolWith Browns entering the healthcare sector, it has also being realised

that there is a shortage of qualified healthcare employees in the

country. Therefore, with the acquisition of the hospital in Ragama,

Browns has invested in training 60 nursing students through the

International Institute of Health Sciences (IIHS) that have many foreign

accreditations and affiliations with many international universities.

With the expansion of the healthcare sector, Browns hopes to start its

own nursing school in the near future.


Future OutlookGiven the entry of the LOLC group into the leisure sector, there are

synergies that can be achieved with the healthcare sector in the area

of Medical Tourism. To this end, Browns Health Care will apply for

international hospital accreditation through a reputed International

Hospital Accreditation Agency so that it will have the necessary

recognition and stature internationally.

Browns future plans for the hospital sector will be surrounding the

objective of providing the best possible healthcare at affordable

prices using the most up-to-dated and appropriate technology while

enabling high touch patient care and standardised procedures to

minimise hospital stays. Browns will also concentrate on introducing

high quality diagnostic centres with deep geographical penetration

to support early diagnosis of various non-communicable as well

as communicable diseases, thereby providing easy access to major

healthcare for the citizens that are in remote parts of the country.


Travel & Leisure

Browns Tours (Pvt) Ltd.

BG Air Services (Pvt) Ltd.


The travel wing is evolving into a fully integrated leisure provider.

Browns Tours (Pvt) Limited and BG Air Services (Pvt) LimitedThe Travel and Leisure sector at Browns consists of BG Air Services

(Pvt) Ltd which is the General Sales Agent (GSA) for two European

based airlines - Austrian Airlines and Scandinavian Airlines, and

Browns Tours (Pvt) Ltd which handles inbound and outbound tours.

Browns Tours has been a pioneer in the Sri Lankan travel industry with

over 47 years of experience. Browns travel division has expanded

its inbound tourism team to include specialised services in aviation,

cruises and event management, and provides a one-stop shop to all

tourists – local and foreign.

Financial and Operating PerformanceAs a destination management company, Browns Tours had a

successful year. Revenue for the year was Rs. 4.6 Mn, a growth

of 254% from the Rs. 1.3 Mn achieved in 2011/12. Company

performance was driven primarily by the growth in corporate sales for

inbound tourism.

During the year under review, ‘Browns Tours Events’ specialising in

the MICE (Meetings, Incentives, Conferences and Events) market

organised many inbound events for tour groups. Browns Tours

Events were responsible for the organisation of the events from

the blue-print of the concept to the grand finale with theme logo

development, design and print management of all material, hotel

and event location, coordination/management, coordination of

activities etc. The total solution offering in organising events enabled

Browns Tours to organize a six day event for 250 delegates of a major

company, a few destination wedding packages for overseas clients

and many other events for local clientele.

‘Browns Tours Cruises’, a recently developed concept in order to

capture the cruise ship market that arrives in Sri Lanka, had its first

experience with 276 guests from the Carnival cruise ship that docked

at the Colombo port. Browns Tours Cruises offers its customers

a variety of services including pickup/transfers from the port,

organisation of on-shore excursions for group tours, hotel transfers

and experiential tours, multilingual tour guides, and customised tour

packages.

‘Browns Tours Aviation’ offers assistance to any airline – scheduled

or ad hoc – to operate flights by assisting with obtaining permission

from the Civil Aviation Authority in Sri Lanka to operate flights in and

out of Colombo, SLOT clearance from Sri Lankan Airlines, landing and

parking clearance to park crafts overnight, aircraft catering services

and menus, customs and immigrations formalities for crews, etc.,

amongst a host of other services. Browns Tours Aviation hopes to use

the expertise built over the last 20 years and is strongly positioned to

capitalise on the increase in charter flights that will touch down in Sri

Lanka.

Browns Tours was also named a top ten agent by Qatar Airways and

won the top agent award from KLM, Air France and Northwest Airlines

during the year, confirming that Browns Tours is amongst the top

agents in Sri Lanka that provides superior packages in ‘world holidays’.

Though the inbound segment had success during the year, the

outbound segment had a less than favourable year primarily due

to the depreciation of the rupee against the US dollar. The volatile

Rs. 38MnTurnover


Travel & Leisure

political climate in the Middle-East too was a contributing factor

towards the less than favourable results. Browns outbound tours

which offers unique tour packages to all five continents partnered

with new destinations such as Morocco, Turkey, Greece and Bhutan

in order to mitigate the risk associated with the Middle Eastern

destinations. The year under review saw a total of approximately

1,400 passengers using the services offered by Browns outbound

segment.

Future OutlookWith the expected increase in tourist arrivals in the country and

some of Brown’s own hotels in operation during the next financial

year, Browns Tours inbound division is expected to have a better

performance.

Browns Tours (Pvt) Ltd has also introduced a dedicated after-sales

services representative to handle all after-sales care in order to

minimise negative experiences of clients, especially after a long

journey. Browns Tours (Pvt) Ltd also plans on further strengthening

the service component with a 24 by 7 dedicated hotline for all

travellers.

The Company hopes to expand the Browns brand and image

internationally to strengthen the inbound and outbound travel

divisions. The Company’s main priorities for next year are to obtain

the Sri Lanka Association of Inbound Tour Operators (SLAITO)

membership which will enable it to stay competitive with the major

players.


The Information and Communications Technology (ICT) department

at Browns is responsible for information technology infrastructure and

security, business solutions and communications. The ICT department

supports 14 divisions and 8 subsidiaries of Brown and Company PLC.

A comprehensive ICT road map that was developed for the Browns

Group in 2010/11 outlined the tasks to be achieved by 2012/13. The

Department has successfully been implementing all the required

tasks that were identified and are now well placed to provide efficient

and effective service to all divisions and subsidiaries of the Browns

Group.

Information Technology Infrastructure and SecurityIT infrastructure and security includes the management of Local Area

Networks (LAN), Wide Area Networks (WAN), remote connectivity,

desktop connectivity, hardware, firewall, wireless networking, CCTV

solutions, routers, switches etc. The infrastructure backbone of Browns

is run through the Microsoft Enterprise Agreement (EA) 2008 – R2

where it enables systems centre operations management where the

servers can be monitored centrally and configuration management

where solutions can be deployed across the Group from a central

location. The Department also manages over 450 e-mail users in the

Group.

In addition, the Department was also responsible for building the

infrastructure for Healthcare sector using in-house expertise. The

Department will build the clinical management solutions system

next and also plans to build the electronic medical records including

linkage of laboratories.

The Group is also in the process of migrating to O365 cloud

computing by the end of the next financial year. The project-which is

currently underway-once completed will make Browns one of the few

companies in the country to be using this latest technology.

The Department has also undertaken to develop comprehensive

disaster recovery and business continuity plans in order to be

prepared in case of an emergency. The Department also carries out

periodical security audits on the existing systems to ensure that all

ports are secure and any vulnerability is detected and solved

Business SolutionsUnder the business solutions area of operations, the Microsoft

Dynamics AX 2009 ERP solution went live during the current year

though it was introduced to Browns last year.

During the year under review, ERP the went live for all 14 divisions

at Browns with all except the service and fixed asset modules being

completed.

When evaluating the uses of ERP, Browns Group identified 86 areas

that ERP could be of benefit, of which some of the main modules

introduced during the year were the Letter of Credit (LC), inter-

division transactions, GP share automation, Delayed Payment

Document acceptance (DPDA) and statutory charges calculations.

The LC and DPDA modules are important to Browns as the company

is over 80% dependent on imports. With multiple suppliers spread

The IICCT deeparrtmennt supppop rtsss 14 dddivisioons and 8 subsidiaaries oof Browown aaand CCompany PLC.

Three Year IT Roadmap

2010/11 2011/12 2012/13

Infrastructure Introduction to Post implementation Review

Overhaul Enterprise Resource (PIR) of ERP

Planning (ERP) Standard Operating

Procedures (SOP)

Business Intelligence (BI)

Cloud Computing


across the globe, the new ERP system helps Browns to have an

efficient import handling process.

Overall the ERP process at Browns has increased efficiencies and the

acceptance of the new system has been positive. Users have adapted

to the new processes and requirements with ease primarily due to

the effective training sessions had for all of the 150 users, with each

one getting 8 to 10 hours of initial training. ICT department also

provides continuous on-going training sessions for all users,

A post implementation review of ERP by a third party was initiated

during the year to ascertain the standards of internal controls and

feedback on issues.

Communications Browns Group is connected through a centralized PABX system

for voice communication. There are over 100,000 extensions used

throughout the Group and the ICT department has re-negotiated

rates and adopted cost reduction methodologies such as least cost

routing method by strategically subscribing to multiple service

providers. The Department also undertook measures to remove idle

extensions and phone lines, thereby bringing about cost savings to

the company.

Future OutlookThe ERP system is also the base for introducing other administrative

improvements within the Group such as the use of standard

operating procedure (SOP) and the ERP user manual. SOP is currently

being developed and will be available to the Group during the next

financial year and will provide guidelines to divisions and subsidiaries

on uniform practices and processes that are acceptable to the Group

while also detailing the ‘do’s and ‘dont’s’ to the end user. The ERP

manual once completed will complement the on-going training

efforts of the ICT division in bringing all users up to speed in using the

system.

During the next financial year the service module of ERP will be

launched, which will be beneficial to almost all of Browns divisions

and subsidiaries that provide equipment and machinery services.

This will bring about further efficiencies to a process that is currently

handled manually. In addition, a Customer Resource Management

(CRM) system will be introduced during the next financial year to

facilitate better after sales care and solutions.

Also in the pipeline is to introduce a Bill of Quantities (BOQ), ABC

analysis, physical volumes and weight analysis for cubic capacity for

delivery and storage requirements.

The ICT division will also introduce a Business Intelligence system to

facilitate better Management Information System reporting. The MIS

reporting system, which will be accessible by senior management

when introduced will enable them to evaluate business driven Key

Performance Indicators (KPIs) via dashboards, and KPI driven balance

score cards.

The ICT division will work towards achieving ISO 90001 on 2008

standards that will govern the ITIL procedures and policies for Browns

ICT. The division hopes to expand its expertise to provide systems

solutions to other entities and become a revenue generating division

within the Group by 2014.

Informatiion and Commmunications Technoology Contd.


Sustainability Report

This is the first sustainability report for Brown & Company PLC, and

is issued as part of the Annual Report and Audited Accounts for

the year ending March 31st, 2013. This report details and reviews

activities and data related to Browns Group of Companies’ operations

in Sri Lanka and wherever applicable to any overseas concerns

pertaining to the financial year 2012/13 ending 31st March. It

reports on the practices and processes involved in our sustainability

endeavours across the triple bottom line vis-a-vis economic, social

and environmental performance. We believe the GRI framework is a

core tool for sustainability reporting and as such, we have attempted

to report along the guidelines and recommendations set forth in the

GRI guidelines. We hope to improve our reporting to present a more

comprehensive, technically fine-tuned sustainability report in future.

At Browns, the strategy guiding our sustainability initiatives is three-

pronged: to contribute to national economic development through

operational excellence and strategic initiatives that are aligned with

national priorities; build enduring relationships with our stakeholders

which includes our employees, customers and the community

we live in; contribute to protection of the environment through

the sustainable use of resources such that we meet present needs

without compromising the ability of future generations to meet their

own needs.

The following is a report of the sustainability initiatives of Brown and

Company PLC for the year ending March 31st 2013. The performance

of the company is measured across the three main areas mentioned

above: economic, social and environmental performance.

Economic Sustainability In the area of economic sustainability Browns focused on two main

areas: operational excellence across all its business divisions and

subsidiaries, and contribution to national economic development.

Operational excellence can be demonstrated through Browns

maintaining leading market share in most of the sectors it operates

in, the superior quality of its products and services marketed to its

customers, and its linkages with local and foreign suppliers. The

following are some of the market shares that Browns enjoys: Lucas

- 19%, Exide - 52%, Dagenite - 1%, Tafe (four wheel tractors) - 58%,

Sifang (two wheel tractors) - 65%, branded power tool segment

(Maktec and Makita) - 36%, branded marine engine market (Yanmar,

Ashok Leyland) - 30%, Radiators (Radco) - 42% , Vetpharma - poultry

- 31% and pet animal - 27% and high end generators - 27%. Browns

has clearly demonstrated its strength as an organisation in the strong

financial performance it has recorded year after year and as reported

elsewhere in this annual report. It has also established itself as a

household name across Sri Lanka and has inspired loyalty among

its customer base that has helped it withstand external challenges

and economic shocks. Browns maintains an extensive network of

recognised local and foreign dealers, which has been instrumental

in maintaining a diversified product base across different economic

segments, contributing to the growth in sales volumes and earnings.


Browns has also undertaken strategic investments and initiatives that

are closely aligned with national priorities, which in turn contributes

to national development. The Group invested in reviving the national

sugar estate and factory – Hingurana Sugar Industries. Not only does

the output contribute towards meeting a gap in local production

of sugar, it also provides employment to an out-grower network of

farmers. For further details, please see the case study.

In another strategic initiative, Brown and Company PLC has expanded

into the field of private healthcare, helping to bridge a gap in the

overall healthcare service provision in Sri Lanka. There is currently a

national shortage of beds and a need for more specialised diagnostic

services. Construction is to begin shortly on a 60-bed secondary

care general hospital in Ragama, which will provide the following

facilities: Outdoor care, Inward Care, Specialist Care, Diagnostics, and

Ambulatory Care at an affordable price. Brown and Company PLC will

also launch a chain of laboratories in the Gampaha district, providing

the following tests: bio-chemistry, haematology, microbiology and

clinical pathology, serology and histology. The launch of the new

hospital is expected to provide jobs to 400 people.

In the area of marine engineering, Brown and Company PLC has

invested to improve service facilities at the fisheries harbours of Sri

Lanka, which will be of immense benefit to development of the

industry as a whole. Initially, the service improvement has been

introduced at Kudawella, with plans to extend this to Negombo and

Trincomalee.

Social Responsibility For Browns, the philosophy behind its social responsibility initiatives

is to build enduring relationships with the people it impacts. This

includes its employees, its customers and the wider community in

which it operates. For its employees this involves creating a healthy

work environment in which they can grow and thrive, with numerous

opportunities for personal and professional growth. It also extends to

include benefits for employees and their families and consideration of

a healthy work-life balance. For customers, there are several benefits

such as free services and workshops for farmers and fisherman

for instance, that are of far-reaching importance. A decision was

made in the past year that one of the main platforms on which its

sustainability initiatives for the external community would be based is

improving IT literacy in schools and supporting youth education. (See

Case Study). Each division also undertakes smaller welfare projects for

disadvantaged groups of individuals.

Employee WelfareEmployee welfare is a priority at Browns. The organisation has 760

permanent staff and 174 staff on an out-sourced basis. In 2012/13,

91 new positions were created. There are several best practices that

Browns follows with respect to labour standards and human rights

in relation to employees. Workers are unionised and union meetings

are held quarterly with three members from each union and annually

with the Chairman, GMD and ten members of each union. A health

and safety policy has been finalised in the draft HR policy manual. A

Browns Emergency Response Team to manage staff in case of any

emergency incidents was formed and 32 Members were selected

as Emergency Response Team members. Each member was given

training on first aid and fire safety by St. John’s Ambulance Services &

Colombo Municipal Fire and Rescue Training Centre respectively. An

annual evacuation mock drill was conducted on 21st of June 2012 for

the main head office building. A comprehensive Occupational Safety

and Health Audit was Conducted for the Head Office building by

National Institute of Occupational Safety and Health on

24th May 2012.

Several training programs were held for staff following a

comprehensive needs assessment. A total of 57 training programs

were conducted (38 internal programs and 19 external programs) in

which a total of 666 employees participated. The training programs

were conducted on the following topics: Communication and

presentation skills, team work, ICT to optimise work processes and

expedite decision making, customer service, talent acquisition and

attracting the best employees for superior business performance,

health and safety awareness, finance/ marketing and HR knowledge

for non-specialist staff of respective areas to create cross functional

awareness and appreciation, a comprehensive induction and

“Several training programs were held for staff following a comprehensive needs assessment. A total of 57 training programs were conducted (38 internal programs and 19 external programs) in which a total of 666 employees participated.”

Training Programme

Sustainability Report Contd.


corporate awareness program for new employees as a compulsory

requirement, a systematic decision making workshop for all

top executives of the Group. In addition, there were specialised

training needs identified under sales and marketing areas – a core

competency of the Browns Group. These included: marketing

planning and branding, credit management, motivation for sales

performance.

High performers from Browns Strategic Business Units participated

in the NASCO 2012 competition organised by SLIM and Sriyan de

Seram of Vet Pharma managed to achieve a Bronze award under the

pharmaceutical sales category. A Browns sales conference was held

for all the staff members of the Group who are directly or indirectly

involved with the sales function to communicate new sales strategies

and to motivate them for better performance. The event took place

on the 10th of November 2012 at the conference facility of Excel

world. This was an initiative directly overseen by the GMD/CEO’s office

and MD Mr. Murali Prakash himself was personally involved with the

organising of the conference and the key presentations.

Customers, Community and the Public The social responsibility initiatives of Brown and Company for

customers, the public and the broader community have been

reported below by business division.

Power Generation This Division launched the highly successful Battmobile - a mobile

battery service that is available free of charge for any motorist

who needs urgent roadside assistance. Free technical seminars

on automotive battery use and maintenance as well as service

campaigns are also provided for the public. All Power Mart employees

voluntarily donated a day’s salary to provide medicine’s to the cancer

hospital in Maharagama; the division donated several required

items to schools, and also sponsored the illumination of the Dalada

Maligawa during the Kandy Perahera and a Wesak Dansal. The

division has also supported motor sports in Sri Lanka through several

sponsorships over the years.

AgricultureBrowns has established a Farmer Mechanisation Training Centre

(FMTC) in Anuradhapura and signed a MOU to train farmers free

of charge under the Govi Nana Pahana programme. The three day

program is conducted every month and is fully sponsored by Browns.

The training consists of theory and practical components related to

farm mechanisation such as how to increase yield with less labour,

use of equipment for optimum productivity etc. Farmers are also

provided with awareness sessions on hygienic practices by medical

staff from the Browns hospital. Browns also joined hands with Sri

Lanka Agriculture School’s Past Pupils General Association to conduct

training programs for students of the school under the ‘Sisu Nana

Pahana’ programme. Browns Agriculture division has also hired a

leading trainer to provide training sessions to dealers on how to run

an effective dealer business.

SifangThis Division provided farmers with education programmes such

as demonstrations on handling agricultural equipment Sifang also

negotiated with leasing companies to provide farmers with the best

possible rates for agricultural equipment.

Vet Pharma This Division has in-house veterinary surgeons that provide education

to farmers on best practices. They also provide surgery facilities

and other veterinary services free of charge including prescribing

medicines. Veterinary surgeons are flown down to Sri Lanka from

various countries - Netherlands, Thailand, Philippines, India and the

US – to provide training for farmers as well Browns’ own veterinary

surgeons. Training programs include: best farm management

practices such as cleanliness and hygiene, preventative care, diseases,

“Browns has established a Farmer Mechanisation Training Centre (FMTC) in Anuradhapura and signed a MOU to train farmers free of charge under the Govi Nana Pahana programme.”

Revitalising the Rural Economy Brown and Company PLC and the LOLC Group inked a deal with

the Government of Sri Lanka to revive ‘Gal-Oya Plantations’, a non

-operational state sugar firm that was formerly known as Hingurana

Sugar Industries.

Hingurana Sugar Industries previously experienced huge losses prior

to 2007 under Gal-Oya Plantation Ltd (GOPL) which resulted in the

factory closing its doors for 15 years. At a time where Sri Lanka’s sugar

producing sector was reduced to a crisis-ridden industry, Browns

Investments ventured into reviving the plantation which consists of

7659 hectares (ha) of land with approximately 5200 ha of cultivatable

extent allotted amongst 4,400 families. According to national policy

on the development of Sri Lanka’s sugar industry, local manufacturers

have the potential to produce at least 50% of the domestic

requirement of sugar and other value-added sugarcane products in

the future.

The project area is divided into five major zones namely

Varipathanchena, Galmaduwa, Deegawapi, Hingurana and Neetha. A

nucleus estate with an extent of 166 ha of land with a water scheme

will be supporting the 5200 ha of cultivatable land for sugarcane.

Sugar production in the refurbished factory commenced on 16th

July 2012. Approximately 10,000 hectares of land which was earlier

used to grow sugarcane was used by farmers to grow other crops

including paddy. Since taking over the factory from the Government,

the consortium has also managed to grow 250 hectares of sugarcane

which was required for their operations through a farmer outgrower

system.

The Agronomy Division of GOPL has been producing seed cane and

conducting research on various aspects of sugar cane agriculture

since its inception in 2010. The Division maintains over 134 SRI

sugarcane clones as a source of future planting material and Trail

programs. In 2012 and 2013, the agronomy area consisted of

approximately 159.25 ha, of which 28ha is for the maintenance of

primary seeds and 200 ha is for the secondary nursery. In addition to

the nursery, a few select farmers also provide seeds in order to meet

the supply-demand gap.


As at 31st March 2013

Sugar Cane cultivation - Plantations 1980.5 ha

Sugar Cane cultivation - Agronomy 159.25 ha

Total farmers 1,879

Cane crushed 53,806.51 MT

Total marketable sugar production 3,315.70 MT

Total Sugar Sales 3,302.5 MT

Total Revenue from Sugar sales Rs. 326,332,625

The consortium invested almost Rs 2 billion to date to turn around

the factory to operating status. Apart from sugar production, the

multi-purpose Gal-Oya Sugar factory complex operated by the

consortium also generates electricity and supplies purified water to

the national grid. The third project of the company is the impeccable

water purification plant which also supplies water to the National

Water Supply and Drainage Board. The investment for this project

is Rs. 15 million. With the revitalisation of the Gal-Oya sugar factory

and related operations, the Gal-Oya water purification plant too was

activated in order to provide a much needed service to approximately

1000 households in the area. At a time when there are many water

borne diseases and other tertiary health concerns such as kidney

failures etc due to contaminated water ways, the Gal-Oya water

purification plant provides 100,000 litres of clean water per day to the

local Water Board. The plant receives the water that flows through

the RP17 Canal which is an off-shoot of the D.S. Senanayaka tank in

Inginiyagala. The plant then sends the water through a sand filtration

process before it is pumped into tanks for chemical treatment.

A chemical test and monitoring is done by the Gal-Oya staff on a

daily basis with daily visits by the experts at the Water Board for their

own independent check on the quality of water. The sand filters are

washed using high pressure water pumps before the next cycle of

filtration takes place.


The Gal-Oya venture has provided 789 direct employment

opportunities and created over 7,500 indirect job opportunities for

the local community.

Type of Employment As at 31.03.2013

Executive 37

Non Executive 138

Contacted 309

Casual 305

Total 789

Farmer Assistance - FinancialSugarcane cultivation is currently done on an out-grower basis where

the farmers are given financial assistance for extension services, land

preparation for cultivation, fertiliser, chemicals and transportation of

harvested cane to the factory. The farmers are given a cash advance

totaling Rs 30,000 per year which is recovered by setting it off against

the crop at the end of the year and the balance is paid back within

three years on a pre-agreed schedule.

Farmers are paid Rs 4,000 per ton for their yield which has been

increased to Rs. 4100 per ton in the new year. Since a farmer produces

approximately 100,000 tons of sugarcane per harvesting season, the

cultivation of sugarcane could enables the farmer to have earnings

of upto Rs. 400,000 per year with a net profit of approximately

Rs. 250,000 per year. This is a significant increase in income when

compared to earnings from other crops.

Farmer Assistance – Agri InsuranceGal-Oya also provides an insurance scheme to farmers with a 50%

subsidy on cost to protect them against total or partial crop loss as a

result of due to flood, drought, excess water, pests, diseases, damage

including from wild animal and other natural perils including fire.

Farmer Assistance – inter-crop for year round incomeWhile the farmers were engaged in paddy cultivation, they used to

make an income twice a year and are not accustomed to the concept

of ‘saving for a rainy day’. The downfall of cultivating a crop that is

harvested just once a year is that the farmer needs to survive on

this income throughout the year. Therefore, while encouraging the

farmers to use the banking system for their financial needs, Gal-Oya is

also experimenting with a smaller farmer community to harvest inter-

crops during off season periods for an additional source of income

during the season.

Higher ReturnsThough the Gal-Oya factory operation is in its early stages,

farmers who have already harvested their first crop are looking

forward to the growth of the industry in the future.

When interviewed, Mr. G. L. D. Somarathna and Mr. K.L.M.

Ismail - both sugarcane farmers - as well as Mr. W.M. Somapala

– a seed cane farmer, all envisioned a better future with the

revitalisation of the Gal-Oya sugar factory.

All three had been sugarcane farmers prior to 1997 when the

factory was involved in sugar production. Since the closing of

factory operations, they had resorted to paddy farming which

is much more labour intensive and is cultivated twice year with

little or no financial assistance. The farmers had no access to

machinery, training on latest cultivation methodologies, high

yielding seeds etc. On average their annual profits were Rs.

30,000 which was the only source of income to maintain a

household with an average of four members.

Fifteen years later, their annual profit on average in the first

year of cultivation is Rs. 250,000. The farmers are given financial

assistance, a subsidised insurance scheme, high yielding seed

cane, access to a knowledge-base on best farming practices.

In addition, Gal-Oya has also further developed the existing

irrigation system by building more canals as needed and

cleaning up roadways for better access.

All three farmers have immediate relatives and extended

relatives that have also re-started sugarcane cultivation. Some

of them had family members working in the factory itself

bringing in a stable monthly income. In general, people from

the area were of the view that “everyone in the village now has

a source of income – directly or indirectly created by the revival

of the Gal-Oya plantation”.




possible threats etc. The average cost of training is approximately Rs.

140,000 per month, totaling approximately Rs. 1.7mn a year. About

75-100 farmers attend per session and on average two sessions are

held every month. The division has partnered with Embark (Dog

adoption program) to provide rabies vaccines, other medicines and

dog food for the program. It has also partnered with the Colombo

Municipal Council in their rabies prevention program

Plantation services This Division facilitates/sponsors planters to go to India to observe

new trends and better agricultural practices.

HealthcareTwo health-camps were carried out with the collaboration of the

Ragama business community and Wattala UC. Further, medical

officers were sent to various social activities conducted by temples,

churches and various other organisations. The purpose of these

health-camps was to provide medical consultations along with

medicines to low income earners of the area. This will enhance the

image of the up and coming hospital as well as the brand.

This Division also provided free training programs for nurses with

international qualifications including allowances, food and lodging

while on training.

Power systemsThis Division donated a generator set to Nallur Temple in Jaffna and

also assisted religious and non-profit organisations by providing

discounted prices on products.

Travel This division created several jobs through the expansion of its

inbound tourism segment such as for chauffeurs and tour guides,

while also developing the local economy. This division also supported

local craftsmen by commissioning their services to provide event/

meeting memorabilia when organizing MICE events. The division

with support from Pitney Bowes (Asia Pacific) Pte Ltd carried out the

refurbishment of the primary section of Kudapaduwa Sinhala Mix

School, Negombo.

General Trading Browns sponsored the 2012 Mannar District Soccer tournament on

the 18th & 19th of May 2012. The tournament was organised by the

leading football club in the area, Green Field Sports Club. General

Trading and Power Systems Divisions along with Sifang Lanka Pvt Ltd

and Vet Pharma supported the event with valuable gifts and sports

kits for the participants.

Marine Engineering The BTEL division conducted workshops to enhance the knowledge

of dealers, retailers, garage owners and end-users like fleet owners

and general vehicle owners. The Radco Radiator ‘Karmika Navodaya’

program was launched in 2012 to rejuvenate radiator technology in

Sri Lanka. The event was successfully conducted in the two regions

of Anuradhapura & Negombo with effective training and knowledge

sharing sessions by Director/General Manager Mr. Anoj Munidasa &

Deputy General Manager (Operations) Mr. Sudarshan Karunarathne.

In addition, a training session was conducted with the collaboration

of Lucas Battery Division on radiator maintenance for the technicians

of the Automobile Association by the Director/General Manager

Mr. Anoj Munidasa and on effective customer service conducted by

Mr. Dhanesh Jayathillake. Nearly 50 technicians participated in the

training.

Browns Investments The following social responsibility activities were conducted on

Maturata Plantations:

“Two health-camps were carried out with the collaboration of the Ragama business community and Wattala UC. Further, medical officers were sent to various social activities conducted by temples, churches and various other organisations.”

Empowering Young People to Face the Future’The Browns Group has identified the need to support the broader

community we live and work in and to build sustainable businesses

that reflects the value it lives by as the foundation for its corporate

social responsibility (CSR) programme.

Browns’ first fully-fledged CSR project was to develop IT education

especially in high poverty districts where facilities are limited to

support such programmes. The vision of the Browns IT education

project is to enable all students including those in the villages to

have access to advanced technologies so that each child will be

empowered to face the future challenges of a global village.

During the year under review, Browns took this CSR concept to the

Matale District by providing IT centres to two schools in collaboration

with the Zonal Education Office of the Central Province. Browns

helped equip the two IT Centers of Kalalpitiya Vidyalaya and

Mahanama Vidyalaya with computers, printers, desks, chairs and

other accessories. Each centre is be equipped with five computers

with an average student to computer ratio of 17:1. The centre will be

operated under the guidance of a trained teacher. Mahanama College

– Kirimatiyawa restarted operations in 2006 with just eight students

and two teachers while today it has 221 students ranging from year

one to eight. The school has a faculty of 17 teaching staff. Kalalpitiya

Vidyalaya, Ukuwela commenced operations in 1962, with the most

basic of structures and is now a 140 student strong establishment

with a teacher to student ratio of 1:11. This mixed gender school

provides education to students ranging from year one up to the

Ordinary Level Examinations.

Browns also donated computers to Dankada TV, Maussagala TV,

Wevalmada TV in Rattota, Yatawataa TV in Yatawatta and Matale West

TV in Ukuwela in the Matale district.

Browns is committed to investing in under-developed and under-

served areas around the country, not only through CSR but also

by expanding its operations into rural areas through their regional

centers and wide network of dealers. Currently the company has

regional centers in Ampara, Dambulla, Kurunegala, Batticoloa and

Jaffna. Browns also has over 1500 dealers island-wide. This rapid

expansion has contributed to creating employment and growing the

rural economy.

Browns has already identified a few schools for the next phase of the

CSR programme with the hope that it will enable the next generation

to develop a set of skills that will be key to the upliftment of society in

general.

Brighter Futures“This is a long standing dream come true, as most of our

children have very little chance if at all to have computer

facilities.. It is with great gratitude that I accept this IT center

provided to us by Brown and Company and on behalf of the

students, teachers and parents of this school I would like to

thank you and the Zonal Education office for making this a

reality.” - Mrs. W. G. Ramyawathi Principal of the Kalalpitiya

Vidyalaya,

“It was our ambition to ensure that every school in our

District be equipped with at least one computer to ensure

that every student received not only a sound education in IT

but also practical computer knowledge. I am very happy to

state that today with the help of Brown & Company PLC that

ambition has been fulfilled. I take this opportunity to thank

the Management of Browns for their immense contribution

towards making our endeavour a success.” -Mr. Y.M.M.S.

Yapa, Director of the Zonal Education Office of the Central

Province.

“Browns is committed to investing in under-developed and under-served areas around the country, not only through CSR but also by expanding its operations into rural areas through their regional centers and wide network of dealers.”



(1) Establishment of Welfare Societies on all estates managed by

Maturata Plantations Limited with the participation of estate staff

and work-force where the sole benefits go to the estate work-

force.

(2) Organised awareness programmes and seminars on prevention

of drug addiction, child abuse, teenage pregnancy, spread of

Dengue, importance of breast feeding, diet of pregnant mothers

and lactating mothers.

(3) Organised medical camps with the participation of specialists

with regard to Blood Pressure, Diabetes, Oral Cancers, inclusive of

Eye clinics.

(4) Mobile service was conducted on the issue of Birth Certificates

and National Identity Cards for estate residents, which is an

important concern for them.

(5) Job opportunities were provided through the Estate Worker

Housing Co-operative society by way of opening up of sewing

centres, bakeries, barber salons, franchise shops which will

provide services to the estate work-force. A well organized EWHCS

could provide loan facilities, maintenance of savings accounts

for their future commitments and infrastructure such as assisting

them with regard to construction of toilets for each worker

family, bathing places etc. Also household cash management by

the Ladies Committee is in operation. Many other loan facilities

were provided through the VANISA Bank for Wedding, Funerals

and other ceremonial functions, even for the purchase of school

books.

(6) Increased productivity – Best Awards were provided to recognise

top performance and motivate workers in the categories of Staff

and Workers on a divisional basis on each plantation, with the

participation of Head Office Staff.

(7) Organised drama competitions on education and welfare

programmes on the estates and also organized a field trip for

estate workers. Seminars were also organized on gender issues

and alcoholism.

(8) A ‘Shramadana’ campaign was organised to get support of the

estate for the maintenance of roads and footpaths.

(9) Employment was offered to staff and worker children who were

suitably qualified for the position.

(10 ) Scholarships were awarded to children of staff and workers who

gained University admission.

The following social responsibility activities were conducted on

Pussellawa Plantations:

(1) Infrastructure development activities included the construction

of 25 new houses, re-roofing of existing houses, building latrines,

upgrading staff quarters, building footpaths, water schemes, field

rest rooms.

(2) Awareness programs were held to promote gender equality and

empower women

(3) Awareness programs were held with the Ministry of Health on

improvement of maternal health, combating HIV and other

diseases, and improving the nutritional status of workers

(4) The plantation obtained Rainforest Alliance certification for all its

estates, contributing towards environmental sustainability.

(5) Awareness programs on household money management was

held for estate workers

(6) Health camps were held to check eyesight of workers, on oral

cancer and dengue prevention.


Environmental Sustainability There have been several activities undertaken across the organisation

to conserve energy and introduce environmentally friendly operating

practices as well as ‘green’ products. Given below are the main

initiatives undertaken during the year under each business unit/

division.

Power Generation The total energy used by the Power Generation division was 4410961

KWH. Several initiatives have been taken to reduce energy use such

as purchase of energy efficient rated electrical equipment like motors

and pumps; re-designing of processes by which the total ampere

input is reduced. For example, the charging system of MF batteries;

a new capacitor bank has been added to increase the power factor

of electricity by up to 99%. Brown’s expects to achieve ISO: 50001

certification for which a new Energy Manager has been appointed

to monitor and control all energy consumption. A total of 32,854000

litres of water is sent annually to the waste-water treatment plant and

treated water is being reused. Gaseous emissions and ambient air

quality is monitored to comply with Central Environmental Authority


standards. Products are also recycled wherever possible as part of

Brown’s ‘Go Green’ initiative. For instance, LED and scrap batteries

recycling takes place at the Browns factory as well as rigi foam

packing material which is used to package batteries. All products are

manufactured according to the ISO: 14001 Environment Management

System.

General TradingThe General Trading Division of Brown and Company introduced

energy efficient and eco- friendly lighting solutions to the Sri Lankan

market under ‘Think Green and be different.’ This was held during the

Techno 2012 exhibition. Cold Cathode Fluorescent Lamps (CCFL)

Lamps were introduced mainly to fill a gap in the market for better

energy-saving and eco-friendly products for energy conservation in

the country. CCFL has a very low mercury content and very low heat

generation. Browns GTD division collaborated with 1AB COMMS (Pvt)

Ltd in Singapore to display energy efficient and eco-friendly lighting

solutions at this exhibition. 1AB COMMS displayed a comprehensive

range of energy saving solutions targeted at both commercial and

industrial applications. The stall displayed CCFL and induction lamps

with higher energy efficiency that is manufactured using Japanese

technology. The commercial launch of the CCFL lamp took place

along with the inaugural opening of the Techno Exhibition by Hon.

Minister Basil Rajapakse and Hon. Minister Wimal Weerawansa. Further

strengthening the importance of the energy conservation message,

product presentation was taken place under ‘Think green and be

Different’ concept at the Engineering Pavilion on the first day of the

exhibition.

Healthcare With development of the new hospital, several environmentally

friendly measures have been put in place. These include:

Recycling water – a waste water treatment plant will be installed to

treat the waste water before dumping it into a land-fill. The same will

also be used for gardening and flushing purposes;

Reducing waste - measures are being explored to reduce the amount

of waste generated – the expected quantity of medical waste (clinical

waste) generation including sharps (but excluding human anatomical

wastes) will be 252 kg per week and 201.6 kg per week during 100%

bed occupancy and 80% bed occupancy, which is expected from the

second year of operation.

Recycling products - the hospital intends to collect sharp waste

in cardboard containers which will be provided by Finlay Rentokil

Ceylon (Pvt) Limited (a CEA licensed infectious/clinical waste

management firm). All other bio-medical waste will be segregated

from municipal wastes, for which preliminary arrangements have

been made with the Kandy Four Gravets and Gangawata Korale

Pradeshiya Saba to remove them on a daily basis. Finlay Rentokil

Ceylon (Pvt) Limited have been already entrusted to collect the

sharp and infectious waste to be taken away on a daily basis for

hydroclaving and incineration, respectively. It is intended to remove

the bins (avoiding meal times and visiting hours) using trolleys, hence

to avoid possible spills. A separate biomedical waste storage area

will be made available, which has been designed to avoid foul odour

generation and spill runoffs. Furthermore, it is planned to make use

of rigid-walled HDPE containers (lined with yellow bags provided by

Finlays) to collect the different types of infectious wastes and they

will be carried using trolleys to avoid spills. All personnel engaged in

biomedical waste management will be required to wear appropriate

personnel protective equipment.

Home and Office Solutions The Sharp brand offers a range of environmentally conscious

products and devices, which are among the main product offering

of the home and office division of Browns. Sharp is well known for

developing environmentally conscious products and devices as well

as maintaining stringent certification standards for the same. These

standards are revised each year, thereby constantly improving the

environmental performance of its products and devices.

Sharp calls its environmentally conscious products Green Products

(GP). Among its Green Products, Sharp has been certifying those

that offer a particularly high level of environmental performance as

Advanced Green Products (AGP), and further, among these AGPs,

certifying those with the highest possible levels of environmental

performance as Super Green Products (SGP). SGP and AGP

certifications apply to products worldwide, but Sharp incorporates

certification criteria set by region based on the needs of customers

and on official systems introduced in each region to not only deliver

high environmental performance, but also to create SGPs and AGPs

tailored to specific regions.

PorcelainThe porcelain arm of Browns has taken steps to reduce the company’s

carbon footprint, reduce waste generation and recycle waste as per

Central Environmental Authority requirements. Total energy used

at the porcelain factory is 1566 metric tons of LP gas. There have

been efforts made to use renewable energy sources and increase

energy efficiency. For instance, the heat generated from kilns is

used to power the dryers, which saves on gas consumption. Also,

treated water from the waste water treatment plant is re-used at the

washing stage of the manufacturing process. Other initiatives include

monitoring of carbon dioxide emissions to maintain air quality, as

well as recycling of factory product rejects to make other porcelain

products.

Farming Farming is a relatively new venture for Brown and Company and

guidelines are in place to use the optimal amount of farm inputs to

ensure sustainability. The amount of artificial fertilisers used is also

minimised and sustainable farming practices are implemented such

as the use of organic sprays.

Several initiatives have been taken to reduce energy use such as purchase of energy efficient rated electrical equipment like motors and pumps; re-designing of processes by which the total ampere input is reduced.


The Human Resources (HR) division of Brown and Company PLC

has gone through a transformation process over the past two years

to enhance the HR function and processes, thereby giving the

employees of Browns an environment where they can develop to

their full potential. During the year, the Division undertook a study of

the job description (JD) for all executives in order to better align the

functions with industry standards. The HR division works diligently to

align its functions to meet the vision of the Division which is to align

the employees of the Group to the vision, mission and objectives of

the Group, engage employees in the business to ensure optimum

motivation levels and to develop all employees to build commitment

and drive business performance.

Performance EvaluationIn this light, the performance management process at Browns was

further enhanced to include a 360 evaluation and feedback process

for executive as well as manual staff members. This process was

introduced during the 2012/13 year as an additional feature to the

existing performance evaluation process that is carried out twice a

year to evaluate staff against pre-set key performance indicators that

are aligned with company goals. The first appraisal identifies the

training and development needs of staff members and the second

appraisal decides on promotions and increments. During the year

under review, the results of the skill assessment of manual and clerical

staff that were conducted last year were made available for their

superiors to make informed decisions on their performance.

Training and DevelopmentDuring the year, the company focused on creating a training culture

within the Group. The HR staff believes in living by example and

therefore the training initiative included a specialised training

program for HR staff to develop their skills. ‘HR Circle’ - as the program

is named, is conducted to enhance the presentation skills of staff

members where they are encouraged to conduct a presentation to

the ‘circle’ on any given subject.

In addition, Group staff are encouraged to attend skill development

and technical training programs where training is provided four

times a month for interested staff members. During the year, 846 staff

members attended training sessions comprising of 5,200 hours of

total training.

A Memorandum of understanding (MOU) was entered in to with

NAITA to train of healthcare sector staff for the coming year.


Employee Benefits and WelfareAll employees at Browns are offered medical coverage including

hospitalisation, a spectacle allowance and access to an in-house

doctor and pharmacy services. During the year under review,

hospitalisation and OPD coverage was increased.

During the year, employees were offered subsidised rates to purchase

Browns retail goods. With this scheme, employees now can afford

to purchase international brands known for quality and reliability for

their own use. Browns believe that happy employees are an asset

to the company. In this regard, a grievance and counseling process

too was introduced at Browns during the year. The counseling

and grievance processes are handled in parallel by trained HR staff.

However, outside counseling specialists are brought in if needed and

are paid for by the company.

were provided with training on first aid and fire fighting. In addition,

building evacuation training was held and drills were conducted for

the benefit of all employees so that everyone is aware of their roles

and responsibilities in case of an emergency. A building evaluation

was conducted by the health and safety institute and a report was

issued with no adverse findings.

“Broowwns bbelievve thaat haappppy eemmpllooyeess are an assset tto thee commpanyy. In tthhis rregardd, a grievvaancee andd counnselinngg proocesss too wwas introodduceed at Browwns duururingg thee yyear.””

Browns also know the importance of helping children of employees

complete their education and therefore have supported a scholarship

programme for children who are successful in the grade 5 scholarship

exam and at the university entrance level.

Employee Communication The employee communication process at Browns was enhanced over

the past few years with the introduction of the quarterly newsletter

and other modes such as online tools. The newsletter was enhanced

during the year with a 50% increase in content including corporate

news, employee news, employee creative articles as well as articles

and painting published by the children of employees where awards

were given to the best creative child.

In order to encourage employee interaction and team building,

a Christmas tree decorating contest was introduced where

all departments including the subsidiaries took part. An inter-

departmental cricket tournament too was organized by the Browns

sports club with the participation of teams covering most subsidiaries.

Health and SafetyEmployee health and safety comes first at Browns! An Emergency

response team was created during the year with a team member

available on each floor and in each subsidiary. All team members

Browns and its subsidiaries are also aware of accidents that could

occur in the work place and therefore have provided personal

protective equipment at factories. A training programme on the use

of these equipment such as visors, industrial gloves, masks etc have

been carried out for all users and their supervisors. All supervisors

have also been trained on handling emergency situations.

Future OutlookThe HR division understands the importance of team work and

building a rapport amongst each other. In this regards, the division

will conduct more programmes for all Browns employees to

participate in, get to know each other and enjoy the time spent with

colleagues and superiors.

The HR division is working on strengthening the HR manual and Code

of Ethics. This ongoing project has been piloted with all incoming

new staff members. The roll out to the entire group is expected to

take place in the coming year.


Corppooratee Govvernannce iss cconnccernneed withh mmainntainning thhe baallaanceee bettwweenn econnoomic and sociaal goaallss anndd beettweenn indivvidduall andd communaaal l goaaals. TThhe Goveerrnannce frrame--workk eexistts too encoouuragee thee efficcient ususe ooff ressoourcees and ttoo reqquiree accoountaabbiilityy for tthe stewwaardshhip oof thosse ressoourccees. TTThe aiim iss to alliggn ass closely aas posssis blee thee interrest of innddividuuals,, corpporatiioonns aannd ssoocietyty

We firmly believe in good corporate governance, a system by

which companies are directed and controlled. It ensures regulatory,

compliance and accountability. The Company holds itself accountable

to the highest standards of corporate governance and provides

public accessibility to the information of the Company. Corporate

Governance lays the basis for responsible performance–oriented

management and control which is geared towards sustainable value

creation. Corporate Governance has been institutionalised at all levels

in the Group through a strong set of corporate values which have

been adhered to by the senior management and Board of Directors in

the performance of their official duties and in other situations which

could affect the Group image. The Company is committed to the

highest standards of integrity, ethical values and professionalism in all

its activities.

Formal publication of the Code of Best Practice on Corporate

Governance Rules issued jointly by Securities and Exchange

Commission of Sri Lanka (SEC) and The Institute of Chartered

Accountants of Sri Lanka is considered as a strong gesture to

strengthen transparency, accountability, and disclosure of its business

practices.

Corporate Governance Framework

INTERNAL GOVERNANCE

STRUCTURE

ASSURANCE OF

COMPLIANCE

REGULATORY

FRAMEWORK

CHAIRMAN & BOARD

OF DIRECTORS

MANAGING

DIRECTOR/CEO

SHAREHOLDERS

INTERNAL CONTROL

COMPANY’S CODE OF CONDUCT

EXTERNAL AUDIT

INTERNAL AUDIT

SE

NIO

R V

ICE

PR

ES

IDE

NT

S

GR

OU

P-L

EG

AL

&

CO

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BOARD COMMITTEES

AU

DIT

RE

MU

NE

RA

TIO

N

BU

SIN

ES

S

OP

ER

AT

ION

S

MANDATORY

COMPLIANCE

Companies Act No 7

of 2007

Listing Rules of the

CSE

VOLUNTARY

COMPLIANCE

The Code of Best

Practice on Corporate

Governance

published by

The Securities

and Exchange

Commission and The

Institute of Chartered

Accountants of SL.GR

OU

P C

HIE

F F

INA

NC

IAL

OF

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The Company is committed towards its corporate values and adheres

to the Code of Best Practice on Corporate Governance.

The consistent adherence to the principles and practices of good

Corporate Governance has resulted in the company acquiring a

matchless reputation in Sri Lanka for fidelity and dependability

amongst all its stakeholders.

The Corporate Governance framework has been incorporated within

the Group with adherence to the following:

Complying with laws , rules and regulations within the territory

Allegiance to the Group Values

Ensuring that no individual has unfettered decision making

powers

Exercising professionalism and integrity in all business

transactions

Timely and efficient decision making and resource allocation

within a framework which is compliant with the laws of the

territory and standards of governance

The key components of the Corporate Governance framework of the

Company comprising of Internal Governance Structure, Assurance of

Compliance and Regulatory Framework which guides the Company

towards the progress by way of developing and implementing

appropriate corporate strategies are discussed in detail in this report.

Internal Governance StructureThe Role of the ChairmanThe Chairman’s primary role is to ensure that the Board is effective

in its tasks of setting and implementing the Company’s directions

and strategy. Also the Chairman is expected to act as the Company’s

leading representative which will involve the presentation of the

Company’s aims and policies to the outside world. While providing

leadership to the Board, the Chairman should ensure that the

participation and contribution of the Executive, Non Executive and

Non/ Independent Directors are encouraged and their views on the

matters under consideration are determined.

The Board considers that none of Chairman’s other commitments

interfere with the discharge of his responsibilities to the Group. The

Board is satisfied that the Chairman makes sufficient time to serve the

Company effectively.

The ppoositiions of thee Chaairirmaann anndd thee Mannaagingg Direector havee bbeennn seppaarateed inn ordeer to mmainttain aa balaancn e ooof poowwer aand authhoority.y.

Adhering to the Code of Best Practice on Corporate Governance

issued by the Securities and Exchange Commission of Sri Lanka and

the Chartered Accountants of Sri Lanka, the Company has made

a clear division of responsibilities between the Chairman and the

Managing Director to ensure a balance of power and authority, in

such a way that no individual has unfettered powers of decision-

making.

Board of DirectorsThe Board of Directors are the ultimate governing body of the

Company and is abundant in experience, professionalism and has a

wide range of expertise in diverse fields as set out on pages 18 to 19.

The Board is responsible for the ultimate supervision of the Group.

In all actions taken by the Board, the Directors are expected to

exercise their business judgment considering the best interest of

the Company. The Directors participate in defining goals, visions,

strategies and business targets. All Directors are able to and willingly

add value and independent opinion on the decision making process,

which is of immense benefit for the effective functioning of the Board.

The questions raised by Shareholders at General Meetings are readily

answered by the Board members and they maintain an appropriate

dialogue with the Shareholders.

The Board gives leadership in setting the strategic direction and

establishing a sound control framework for the successful functioning

of the Company. The Board’s composition reflects a sound balance of

independence and anchors.

Key Responsibilities of the Chairman

Provide leadership to the Company and ensure the

Board of Directors works effectively and discharges its

responsibilities.

Ensuring that the directors receive accurate, timely

and clear information, including on the Company’s

current performance, to enable the Board to take sound

decisions, monitor effectively and provide advice to

promote the success of the Company

Ensure the continual improvement in quality and calibre

of the Executives

Promote a culture of openness and debate by facilitating

the effective contribution of Non-Executive Directors in

particular and encouraging active engagement by all

members of the Board.

Ensuring effective communication with shareholders

Ensure an appropriate balance is maintained between

the interests of shareholders and other stakeholders

(employees, customers, suppliers and the community).

Ensure the long term sustainability of the business.

Uphold the highest standards of integrity and probity


Composition of the Board and Directors’ IndependenceAs at 31st March 2013, the Board consists of 7 members comprising

of-

4 Non-Executive Directors

1 Independent Non-Executive Director

2 Executive Directors

Subsequently Mr. R. M. Nanayakkara was appointed as a Non-

Executive Director to fill the casual vacancy created consequent to

the resignation of Mr. A. L. Devasurendra on 15th July 2013.

Independence of the Directors have been determined in accordance

with the Colombo Stock Exchange Rules and the Independent

Non- Executive Director has submitted signed confirmations of his

independence.

Transactions which have a material bearing on the Company is

disclosed by way of circulars to shareholders and by announcements

to the Colombo Stock Exchange.

The Non-Executive Directors are required to notify the Chairman

of their outside Board appointments and the Chairman reviews

such appointments in consultation with the other Directors where

necessary to ascertain any possible conflicts of interest.

Name of Director Executive / Non ExecutiveIndependent/ Non

Independent

Involvement/interest in Share

holding

*I. C. Nanayakkara Executive Non Independent Yes

** Mrs. R. L. Nanayakkara Non-Executive Non Independent No

***A. L. Devasurendra Non-Executive Non Independent Yes

N. M. Prakash Executive Non Independent Yes

S. V. Somasunderam Non-Executive Non Independent Yes

H. P. J. de Silva Non-Executive Independent No

W. D. K. Jayawardena Non-Executive Non Independent No

Mrs. K. U. Amarasinghe Non-Executive Non Independent No

****R. M. Nanayakkara Non-Executive Non Independent No

* Mr. I.C. Nanayakkara was appointed as the Executive Chairman with effect from 01st March 2013.

**Mrs. R.L. Nanayakkara resigned with effect from 28th February 2013

***Mr. A.L. Devasurendra resigned with effect from 15th July 2013

****Mr. R.M. Nanayakkara was appointed as a Non-Executive Director with effect from 15th July 2013

Board Responsibilities and Decision RightsThe business of the Company is conducted by its managers, officers

and employees under the direction of the Executive Directors

and the oversight of the Board to enhance the long term value

of the Company for its shareholders. The Board aims at fulfilling

its responsibilities by creating value for all stakeholders that is

sustainable and beneficial. The Board of Directors are well equipped

to realise the Company’s corporate business. The Board meets

monthly and gives full consideration to the following:-

Review strategic and operational issues

Approve interim and annual budgets.

Review Profit and working capital forecasts and monthly

management accounts

Provide advice and guidelines to Senior Managers through the

Group Managing Director/ Chief Executive Officer.

Provide and circulate timely and periodic reports to shareholders.

Sanction major investments.

Approve interim and annual reports.

The Board is responsible ultimately for the Group financial

performance.

The Booardd reccognisses thhee rigghhts ooof all stakkehholdders wwhichh encoououraggges aacctive co-operraationn betwween the CCoompaany aand thhe stakkehholdders.

Corporatee Goovernancce Contd.


The Company Secretaries are responsible for ensuring that Board

procedures are followed and all Directors have access to the

Company Secretaries, S.F.L. Services (Pvt) Ltd (formerly known as

Standard Finance (Pvt) Ltd), the Secretaries provide support to the

Board on all Corporate Governance matters & compliance with

applicable rules & regulations.

All Directors receive appropriate training relevant to their experience

and position within the Company.

Board BalanceThe balance of Executive, Non-Executive and Independent Non-

Executive Directors on the Board who are professionals/ academics/

business leaders holding senior positions in their respective fields

ensures a right balance between executive expediency and

independent judgment as no individual Director or small groups of

Stakeholders’ Rights Framework

ShareholdersThe Company is committed to

enhance long term shareholder

value and facilitate the existing

shareholder rights

EmployeesThe Company is committed

to build a convenient work

environment

Customers/CommunityThe Company is committed to

maintain and enhance its public

reputation and to meet its CSR

RegulatorsThe Company is committed

to ensure the fulfillment of all

regulatory frameworks fulfilling

the legal and good governance

practices adopted by the

Company

Directors dominate the Board discussion and decision-making. The

Independent Directors shall be able to ensure equal benefits for all

shareholders with independent views and opinions.

Directors are provided with monthly reports of performance

and minutes of the Board Meetings and are given the specific

documentation necessary, in advance of such meetings.

The Chairman ensures all Directors are adequately briefed on issues

arising at meetings.

No ssinngle indiividuaal hass uunffeetterred decissiion mmakiing poowerrss


Corpporate Govvernance Contd.

Board Meetings and AttendanceFor the financial year ending 31st March 2013 there has been a total

number of 11 Board Meetings and Directors attendance for the same

is shown below.

Any instances of non-attendance at Board Meetings were generally

related to prior business, personal commitments or illness.

Name of Director

Date of Meeting

Total

number of

meetings

attended

I. C. Nanayakkara √ √ √ √ √ √ √ - - √ √ 09

*Mrs. R. L. Nanayakkara √ √ √ √ √ √ √ - - √ - 10

**A. L. Devasurendra √ √ √ √ √ √ √ √ - - √ 09

N. M. Prakash √ √ √ √ √ √ √ √ √ √ √ 11

S. V. Somasunderam √ √ √ √ √ √ √ √ √ √ √ 11

H. P. J. de Silva √ √ √ √ √ √ √ √ √ √ √ 11

W. D. K. Jayawardena √ √ √ √ √ √ √ √ √ √ - 10

Mrs. K. U. Amarasinghe √ √ √ √ √ √ √ √ √ √ - 10

***R. M. Nanayakkara - - - - - - - - - - - 0

*Mrs. R.L. Nanayakkara resigned w.e.f. 28th February 2013

**Mr. A.L. Devasurendra resigned w.e.f. 15th July 2013

***Mr. R.M. Nanayakkara appointed w.e.f. 15th July 2013

22

/05

/12

26

/06

/12

24

/07

/12

16

/08

/12

25

/09

/12

23

/10

/12

20

/11

/12

19

/12

/12

15

/01

/13

26

/02

/13

27

/03

/13

Procedure for Directors to Obtain Professional AdviceThe Directors obtain independent and professional advice with

regard to decision making in their duties.

Financial AcumenFinancial acumen has been a key attribute of successful careers of the

Board of Directors who have held senior management positions in

other institutions.

The Board consists of four senior accountants, who possess the

necessary knowledge to offer the Board guidance on matters of

finance.

Appointment and Re-election of Directors The Company’s Articles of Association call for one of the Directors

in office to retire at each Annual General Meeting. The Directors

who retire are those longest in office since their appointment/ re-

appointment. Retiring Directors are generally eligible for re-election

by the shareholders.

The Managing Director shall not, while he continues to hold that

office, be subject to retirement by rotation, and he shall not be taken

into account in determining the rotation of retirement of Directors.

All new appointments are communicated to the shareholders via the

Colombo Stock Exchange.

Mr.I.C Nanayakkara 82%

Mrs. R.L Nanayakkara 91%

Mr.N.M Prakash 100%

Mr.S.V Somasunderam 100%

Mr.A.L Devasurendra 82%

Mrs.K.U.Amerasinghe 91%

Mr.W.D.K.Jayawardena 91%

Mr.H.P.J De Silva 100%

Mr.R.M. Nanayakkara -

Board Meetings and Attendance


The Board is actively engaged in succession planning to ensure that

the Board composition is periodically renewed and that the Board

retains its effectiveness at all times.

Assurance of Compliance This element is the supervisory module of the group Corporate

Governance framework, where a range of assurance mechanisms

such as monitoring, effectiveness tests are carried out and corrective

actions are proposed and implemented.

Board CommitteesThe Board has delegated some of its functions to Board Committees

while retaining final decision rights pertaining to matters under the

purview of these committees. The compositions of the Committees

are given in the chart 1 below:

Audit CommitteeThe Audit Committee meets on a quarterly basis to approve the

Quarterly and Annual Financial Statements and to recommend the

same to the Board prior to its issuance. The Committee comprises of :

Mr. H.P.J. de Silva - Acting Chairman /Independent Non-Executive

Director

Mrs. R.L. Nanayakkara - Non Executive Director (resigned w.e.f.

28/02/13)

Mrs. K.U. Amarasinghe - Non-Executive Director (appointed on

26/02/2013)

Mr. W.D.K. Jayawardena - Non-Executive Director (appointed on

26/02/2013)

The Group Managing Director/CEO, the Group Chief Operating

Officer, the Group Chief Financial Officer, the representatives of the

Internal Auditors join the meetings of the committee by invitation of

its members.

For the financial year ending 31st March 2013 there have been a total

number of four (04) Audit Committee Meetings and the attendance

of the members are shown in the chart 2 below:

BOARD OF DIRECTORS

BOARD COMMITTEES

EXTERNAL & INTERNAL AUDIT

Board Committees

Audit Committee Remuneration Committee Business Operations

Committee

Group Management

Committee

1 Independent Non-Executive

Director

2 Non-Executive Directors

1 Independent Non-Executive

Director

1 Executive Director

Group Managing Director /

CEO

1 Executive Director

2 Non Executive Directors

Executive Chairman

Group Managing Director /

CEO

Divisional and Departmental

heads

Name of member

Date of Audit Committee Meetings

Attendance23rd October 2012

13th November

201212th February 2013 04th March 2013

Mr. H.P.J. de Silva √ √ √ √ 4/4

Mrs. R.L. Nanayakkara √ √ √ √ 4/4

Mrs. K.U. Amarasinghe - - - - 0/1

Mr. W.D.K. Jayawardena - - - - 0/1

Chart 1

Chart 2


Corporatee Goovernancce Contd.

The Committee recommends the appointment and fees of the

Internal Auditors M/s. Ernst and Young Advisory Services (Pvt) Ltd,

having given due consideration to their independence.

The Internal Auditors carry out financial audits and systems audits on

a pre-planned basis to ensure effectiveness of the various functions,

reviews the internal controls, checks compliance with the accounting

standards and reports non-compliance, serious errors to the Executive

Chairman, Group Managing Director/CEO and concerned Managers

for rectification or corrective action.

The Audit Committee also meets with the External Auditors M/s.

KPMG to review the Audits and the objectivity and independence of

the Auditors. Audit Committee report is given on pages 78 to 79.

Remuneration Committee The Remuneration Committee, which met on regular occasions

during the period under review, comprises of one Independent

Non-Executive Director and one Executive Director (the Chairman).

The Remuneration Committee is responsible for-

assisting the Board of Directors in establishing remuneration

policies and practices in the Group;

evaluating the performance of the Executives of the Group; and

in reviewing and recommending to the Board appropriate

remuneration packages based on industry level and contributions

made to the organization

The detailed Remuneration Committee Report is given on page 81 of

the Annual Report.

Business Operations CommitteeThe Business Operations Committee met on regular intervals

depending on the need and urgency. The Committee comprises

of the Group Managing Director/CEO, N.M. Prakash and three

Directors namely, A.L. Devasurendra (resigned on 15th July 2013), I.C.

Nanayakkara and S.V. Somasunderam.

The Business Operations Committee Report is given on page 80 of

the Annual Report.

Group Management CommitteeThe day-to-day affairs of the Group are carried out by the Group

Management Committee chaired by the Executive Chairman, the

Group Managing Director/CEO, and consisting of Divisional and

Departmental Heads. The Group Management Committee meets

every month to review Corporate, Divisional and Departmental

performances against predetermined Annual Business Plans and

Budgets.

The Group Management Committee formulates strategy, seeks

Board approval for these strategies, and implements it within the

policy framework, which demands best practice in dealing with

stakeholders.

The introduction of peer adjusted organisational ratings in

determining pay for performance has resulted in the search

by business units, sectors and industry group of productivity

enhancements, process improvements and cost efficiencies within a

framework of better teamwork.

Browns Group - ERP and SSCThe Microsoft Dynamics AX-2009, is a tier one global Enterprise

Recourses Planning (ERP) which is owned and marketed by Microsoft

corporation, USA which was implemented by the Company in the

year 2012.

As a direct benefit of the ERP where common business processes

were identified, Browns Group Shared Services Centre (SSC) which is

a single entity that will consolidate the entire back office operations

of Financial and Accounting (F & A) of the entire group to improve

processes and efficiency was also set up.

With the implementation of ERP, the major change was that the entire

organization was converted to a full time Microsoft EPR platform. The

overall business information model has improved tremendously and

further improvements will be added in the areas of after sales and

front- end services. This will further enhance the quality of information

process along with this new standard operating procedure and ERP

functional user manuals are being developed in order to set the

ground rules for continued good administration.

This ERP is also expected to help the organization in its business

expansion programme by providing flexibility in decision making

with both speed and volume of data availability.

Shareholder ValueThe Board constantly strives to enhance shareholders’ values who

have built this winning organization.

Shareholder RelationsThe Board considers the Annual General Meeting as a prime

opportunity to communicate with shareholders. The Shareholders are

given the opportunity of exercising their rights at the Annual General

Meeting. The notice of the Annual General Meeting and the relevant

documents required are published and sent to the shareholders

within the statutory period. The Company circulates the agenda

for the meeting and shareholders vote on each issue separately.

All shareholders are invited and encouraged to participate at the

Annual General Meeting. The Annual General Meeting provides an

opportunity for shareholders to seek and obtain clarifications and

information on the performance of the Company and to informally

meet the Directors. The external auditors are also present at the

Annual General Meeting to render any professional assistance that

may be required. Shareholders who are not in a position to attend the

Annual General Meeting in person are entitled to have their voting

rights exercised by a proxy of their choice.


The Company published and circulated quarterly accounts in a timely

manner as its principal communications with shareholders and

others. This enables the stakeholders to make a rational judgment of

the Company.

Going ConcernThe Board of Directors, after reviewing the financial position and the

cash flow of the Company are of the belief that the Company has

adequate resources to continue operations well into the foreseeable

future. Therefore the Board adopts the going concern basis in

preparing Financial Statements.

AccountabilityThe Board places greater emphasis on complete disclosure of Group

financial information within the bounds of commercial reality and

has taken necessary steps to ensure the integrity of the Group’s

accounting and financial reporting systems and internal control

systems and also their review and monitoring on a periodic basis.

The Board is responsible for formulating internal control and

implementing adequate & appropriate internal control system.

Ethical StandardsThe Board is committed to maintaining high ethical standards

in conducting its business and to communicate its values to its

employees and agents and ensure their conduct is based on such

values.

Corporate Social ResponsibilityRights and claims of stakeholder groups such as employees,

consumers, clients, suppliers, creditors and the government are

also considered important apart from the shareholders. Corporate

decisions are made with due consideration.

The Group acknowledges the issues facing the environment and

adopts a responsible attitude whilst meeting all of its business

objectives. The Group’s policy is, wherever economically practical, to

recycle waste material and conserve water and energy.

Risk assessments carried out across the Group’s operations take

account of environmental, social and ethical matters.

Self Governance Practices by the CompanyThe Solvency Statements prepared by the Group Chief Financial

Officer is tabled every quarter at the Board Meeting in order to view

whether the Company is solvent.

As provided by the Companies Act No.7 of 2007, the Company

has obtained insurance cover for Directors and key officials of the

Company.

The New rules of Corporate Governance and disclosure requirements

for listed companies, as mandated by the Securities Exchange

Commission of Sri Lanka and also in the requirements of the listing

rules of the Colombo Stock Exchange are complied with importance

as it helps to build an ethical environment in the Company.

Internal Audit FunctionTo strengthen internal controls and to obtain independent assurance

M/s. Ernst & Young Advisory Services (Pvt) Ltd had been appointed

as internal auditors to monitor and report on the adequacy of the

financial and operational systems of the Divisions.

Regulatory FrameworkThis refers to the regulatory structure within which the Group

operates towards conforming to established governance related laws,

regulations and best practice.

Compliance with Legal RequirementsThe Board is conscious of its responsibility to the shareholders, the

government and the society in which it operates and is committed to

upholding the highest standards of ethical behaviour in conducting

its business. The Board, through the Group Legal Division, the Group

Finance Division and its other operating structures, strives to ensure

that the Company and all of its subsidiaries and associates comply

with the laws and regulations of the countries they operate in.

The Group has complied with the requirement of the Companies Act

No. 07 of 2007.

The Vehicle used by the Group in developing and implementing

the Group’s involvement in the Community had ensured that the

social programmes of the Group are consistent with the principles of

sustainable development.


Risk Management is an integral function in any organisation be

it a corporate, a not for profit or a government entity. Browns has

understood the importance of risk management especially in

the current context of doing business in a dynamic and volatile

environment. Browns is also aware that success in a business lies

in its ability to respond to key risks by adequately preparing for

unforeseen challenges and therefore, has initiated the initial stage of a

comprehensive risk management program.

The initial stage of the risk management process of identifying major

risks associated with Financial, Regulatory and Legal, Operational and

Reputational risk areas and identifying the mitigating circumstances

especially in a conglomerate setting, are reflected below.

Risk Category Identified Risks Mitigating Circumstances

Financial

Foreign Exchange Risk Carefully study the future forecast of currency movement in order to manage

any forex losses

Interest Rate risk Periodical analysis of the current investments and debt to take timely action

to minimize any adverse impact

Liquidity Risk Regular financial planning and monitoring especially working capital

planning and cash flow management

Credit Risk Comprehensive systems and procedures in place to monitor and evaluate

debtors and recoveries.

Investment Risk Proper valuation and feasibility studies of future investments

Regulatory and Legal

New and Existing

Regulations

Monitoring proposed laws and regulations that effect the sectors the Group

operates in

Attending forums and meetings such as meetings and seminars organized by

the Chamber of commerce to keep abreast of latest rules and regulations

Litigation Well experienced in-house legal team who handles all litigation/

investigations.

Expert legal advice and counsel is sought with on-going litigation when

necessary

Operational Risk

Information Technology Staff is encouraged and mandated to undergo training on a regular basis

The standard Operating Procedures (SOP) and ERP user manual to guide staff

on do’s and don’t in the use of IT and other processes.

Human Resources Structured performance evaluation and feedback program to enhance career

development and support career goals of staff members

Programs to enhance work life balance and increase the retention rates of

employees

HR policies and procedures manual including a code of conduct and ethics to

guide staff

Marketing CRM system to be introduced in 2013/14 to enable MIS reports that are key to

understanding customer concerns, requirements etc

Business continuity Browns is in the process of introducing a

Disaster Recovery Systems and

Business Continuity planning

Suppliers Senior management is encouraged to build a rapport with suppliers

especially international partners

Regular monitoring of contracts to ensure that requirements laid out by the

principals are met and are up to standard


Risk Category Identified Risks Mitigating Circumstances

Reputational

Service Delays Regular training for service staff, dealers and distributors to provide prompt

service and minimize service delays

Service Interruptions Adequate systems in place including notifications via SMS and 24 x 7

monitoring by staff

FutureBrowns’ focus on Risk management for the foreseeable future is going

to be strong, with the need to expand the program to include the

identification of risks tolerance limits, risk registers, critical risks that

need immediate attention, adequate training of staff members and

identifying risk escalation processes etc. The Group envisions forming

a new division in order to give Risk management its highest priority in

the coming year.


Role of the CommitteeThe role of the Audit committee which reports its findings to the

Board, is to ensure the integrity of the financial reporting of the

Company, internal and external audit processes of the Company and

the maintenance of sound internal control and risk management

systems of the Company and it’s compliance with legal and

regulatory requirements.

CompositionThe Audit Committee, appointed by and responsible to the Board

of Directors, comprises of one Independent Non-Executive Director

and two Non Executive Directors, with the Company Secretary

acting as Secretary. Independent Non-Executive Director acts as the

Acting Chairman and is also a Fellow of the Institute of Chartered

Accountants of Sri Lanka and the Chartered Institute of Management

Accountants of Sri Lanka. The Independent Non-Executive Director

satisfies the criteria for independence as specified in the Standards on

Corporate Governance for listed Companies issued by the Securities &

Exchange Commission of Sri Lanka.

The members of the Audit Committee are:-

Mr. H. P. J. de Silva

Acting Chairman / Independent Non-Executive Director

Mrs. R. L. Nanayakkara

Non Executive Director (resigned w.e.f 28th February 2013)

Mrs. K. U. Amarasinghe

Non-Executive Director (appointed w.e.f 26th February 2013)

Mr. W. D. Kapila Jayawardena

Non-Executive Director (appointed w.e.f 26th February 2013)

Consequent to the resignation of Mrs. R.L. Nanayakkara, a Non

Executive Director of the Audit Committee, Mrs. K. U. Amarasinghe

and Mr. W. D. K. Jayawardena were appointed.

The Group Managing Director/ Chief Executive Officer together with

the Group Chief Operating Officer and Group Chief Financial Officer

attends all meetings of the Committee by invitation. The other Senior

Managers, Internal and External Auditors are requested to be present

when required.

MeetingsThe Audit Committee had four (04) meetings during the year under

review. The minutes of the Audit Committee are circulated among the

Board and are signed by the Chairman of the Board.

Financial ReportingThe Committee oversees the Company’s financial reporting on

behalf of the Board of Directors as part of its responsibility and

have reviewed the Quarterly and Annual Financial Statements and

recommended them to the Board for its deliberations prior to their

issuance.

The Committee reviewed the Financial Statements to ensure

consistency of the accounting policies and their compliance with the

Sri Lanka Accounting Standards.

The Committee has also regularly discussed the operations of the

Company and its future prospects with the management and is

satisfied that all relevant matters have been taken into account in the

preparation of the Financial Statements.

Internal AuditIn addition to the Company’s Internal Audit Section, an independent

organization, M/s. Ernst & Young Advisory Services (Pvt) Ltd., were

engaged during the year, to enhance the Internal Audit. The main

focus of the Internal Audit was to provide independent assurance on

the overall system of internal controls and governance by evaluating

the adequacy of internal controls, and compliance with laws and

regulations and established policies and procedures of the Company.

The reports submitted by Ernst & Young Advisory Services (Pvt)

Ltd have been reviewed by the Committee in the presence of

the Senior Managers of the Company, and compliance with the

recommendations of the Internal Auditors have been followed

through at subsequent reviews.

Controls & RisksDuring the year, the Committee reviewed the effectiveness of the

Company’s system of Internal Control. The Committee also assessed

the major business and control risks and the control environment

prevalent in the Company and advised the Board on action to be

taken where weaknesses were observed.

External AuditorsThe Audit Committee evaluated the independence of the External

Auditors and the effectiveness of the audit process.

The Committee met with the External Auditors in relation to the

scope of the audit and also to discuss the Management Letter at the

conclusion of the audit.


The Committee reviewed the audited Financial Statements with the

External Auditors who are responsible for expressing an opinion on

its conformity with the Sri Lanka Accounting Standards. And also the

External Auditors kept the Audit Committee advised on an on-going

basis regarding any unresolved matters of significance.

The Audit Committee evaluated the independence of the External

Auditors and recommended to the Board of Directors that M/s. KPMG

be appointed as Auditors for the financial year ending 31st March

2014, subject to the approval of the shareholders at the Annual

General Meeting.

ConclusionConsidering the reports submitted by the External Auditors and the

Internal Auditors of the Company and the certification provided

by the Senior Management, the Committee is of the view that the

financial position of the Company has been adequately monitored.

H. P. J. de Silva

Acting Chairman

30th July 2013


The Committee comprises of the Group Managing Director/CEO

(Mr. N.M. Prakash) and three Directors namely Mr. A.L. Devasurendra

(resigned on 15th July 2013), Mr. I.C. Nanayakkara and Mr. S.V.

Somasunderam.

The primary responsibility of this committee is to look at strategic

directives and investments for the group prior to being ratified by

the Board so as to have a better representation in this process and to

expedite decisions.

The Committee meets at regular intervals depending on the need

and urgency.

Browns Group is in the process of expanding which includes not only

investments into the existing manufacturing and trading operations

but also in areas that are strategic and would complement the core

growth strategies of the organisation. The Committee also evaluates

the pros and cons of such substantial investments and the related

opportunity costs of funds, to have a better balance between the

growth strategies and stakeholder requirements. In such evaluations

the Committee endeavours to strike a balance between the short,

medium and long-term investments in order to post continuous and

harmonious growth without interruptions.

N. M. Prakash

Group Managing Director/CEO

30th July 2013


The Remuneration Committee re-constituted under the new

Corporate Governance rules of the Colombo Stock Exchange

is responsible to the Board of Directors and comprises of one

Independent Non-Executive Director and one Executive Director with

the Company Secretary functioning as its Secretary. The members of

the Remuneration Committee are:

Mr. I.C. Nanayakkara – The Chairman /Executive Director

Mr. H.P.J. De Silva – Independent Non-Executive Director

Mrs. R.L. Nanayakkara– Non Executive Director (resigned w.e.f.

28/02/2013)

The Chief Executive Officer attends meetings on invitation by the

members.

The Remuneration Committee met half yearly. The Committee

interacted with Board member when the necessity arose. The Board

was also kept informed of the work of the Committee.

The main responsibilities of the Remuneration Committee would be:

To recommend the remuneration of the Directors, GMD/CEO and

members of the senior management.

To recommend the policy governing annual increments to staff.

To recommend the policy governing annual ex-gratia payments

to staff.

Accordingly, the Committee will review and re-draft the remuneration

policy and based on the recommendations of the Committee, the

Board shall approve the adoption of the policy.

The policy will cover the remuneration to Executive and Non-

Executive Director, including the Executive Chairman and the

Executive Group Managing Director/CEO. Under the terms of this

policy, remuneration will be related to performance and contribution.

I. C. Nanayakkara

Chairman, Remuneration Committee

30th July 2013


Interim Financial Statements and Annual Report in terms of Rules 7.4 and 7.5 of the Colombo Stock Exchange For the three months ended 30th June 2012 (Unaudited ) in August

2012

For the six months ended September 2012 (Unaudited ) in November

2012

For the nine months ended December 2012 (Unaudited ) in February

2013

For the year ended 31st March 2013 (Unaudited ) in May 2013

Annual Report & Accounts for the year ended 31st March 2013

(Audited) in August 2013

One Hundred and Twenty First Annual General Meeting to be held in

September 2013

Proposed Financial Calendar 2013/2014

Interim Financial Statements and Annual Report in terms of Rules 7.4 and 7.5 of the Colombo Stock Exchange For the three months ended June 2013 (Unaudited ) in August 2013

For the six months ended September 2013 (Unaudited ) in November

2013

For the nine months ended December 2013 (Unaudited ) in February

2014

For the year ended 31st March 2014 (Unaudited ) in May 2014

Annual Report & Accounts for the year ended 31st March 2014

(Audited) in August 2014

One Hundred and Twenty Second Annual General Meeting to be held

in September 2014

Financial Calendar 2012/2013


Financial ContentDirectors’ Report .....84

Statement of Directors’ Responsibility .....88

Independent Auditor’s Report .....89

Statement of Comprehensive Income .....90

Statement of Other Comprehensive Income .....91

Statement of Financial Position .....92

Statement of Changes in Equity .....93

Statement of Cash Flows .....95

Significant Accounting Policies .....97

Notes to the Financial Statements .....137

Economic Value Statement .....216

Ten Year Summary .....218


Directors’ Report

The Directors of Brown and Company PLC have pleasure in presenting

to members their Report and the Audited Consolidated Financial

Statements for the year ended 3lst March 2013.

Principal Activities

Browns Group consists of a portfolio of diversed business operations

in the commercial market today by continuously expanding in all

business segments in line with the core strategy of creating wealth for

all stakeholders.

The principal activities of Brown and Company PLC are described in

the Group Managing Director/CEO’s Review on pages 11 to 15 of this

report, while that of the Subsidiaries and Associate Companies are

given on pages nos 27 to 54 of this report.

The review of the Group progress and performance during the year

with comment on the financial results and prospects is contained in

the Chairman’s Review on page no 9.

Review of Business and Future Developments

The Group is looking out for opportunities to venture in sunshine

industries and differentiate to create new paradigms and hybrid

markets and be the first in it, whilst it is also actively looking at

possibilities of obtaining more foreign agencies for its trading

activities.

Group Turnover

The Turnover of the Group was Rs. 14.18 Bn as compared with

Rs. 14.38 Bn in the previous year. A detailed analysis of the Group

Turnover is given in Note No. 1 of the Financial Statements.

Gross Profit

The Group Gross Profit for the year was Rs. 2.91Bn, compared with the

Group Gross Profit of Rs. 3.38 Bn for the previous year.

Group Investments

Investments of the Company and the Group in Subsidiaries,

Associates, Joint Ventures and other long term external equity

investments amounted to Rs.13,639 Mn (2012-Rs.12,482 Mn) and

Rs. 9,545 Mn (2012-Rs. 10,188 Mn), respectively. Detailed description

of the Subsidiaries, Associates, Joint Ventures and other long term

external equity investments held at the balance sheet date, are given

in Note No. 16 to 19 in the Financial Statements .

Property, Plant and Equipment

Information relating to the movement in Property, Plant and

Equipment is given in Note No. 9 of these Financial Statements.

Market Value of Properties

The market values of the Land and Buildings owned by the Company

and Group are included on the basis of valuation carried out by a

professionally qualified valuer. Detailed description is given in Note

No. 9.4 to the Financial Statements .

Stated Capital

The Stated Capital of the Company as at the date of this Report is

Rs.2,005,601,000 which consists of 70,875,000 ordinary shares (2012 –

Rs.2,005,601,000).

Reserves

The total Group Reserves at 31st March 2013 amounts to Rs. 13.09 Bn

as compared with Rs. 11.87 Bn in the previous year.

Segment Reporting

Segment wise contribution to group revenue, results, asset and

liabilities is provided in pages 212 to 215 in the Financial Statements.

Taxation

A reversal provision has been reflected for income tax due to deferred

tax in Brown and Company PLC amounting to Rs. 91.77 Mn for the

current year, as compared to Rs. 210 Mn provision for tax in the

previous year. The provision for taxation for the Group is Rs. 43 Mn as

compared with Rs. 384 Mn in the previous year. Taxation has been

provided at the appropriate rates indicated in Note No. 6.2 of the

Financial Statements

Share Holdings/Share Information

The market value of an ordinary share of the Company as at 31st

March 2013 was Rs. 117.90 (31st March 2012 – Rs. 155.10). The

number of shareholders as at 31st March 2013 was 2470 (31st March

2012 – 2422) . An analysis of shareholders based on shares held, the

distribution of ownership and market values for the last five years are

provided on page 219.

The information in respect of earnings, dividends, net assets per share

is given on pages 140 and 187.

Shareholders

It is a Group policy to treat its shareholders equitably and maximize

shareholder wealth. Quarterly returns of financial results with any

developments or changes would be circulated to the shareholders on

a timely basis.

Events Occurring After the Balance Sheet Date

There have been no events subsequent to the balance sheet date

which would have any material effect on the Company or the Group.

Employment Policies

The Group employment policies respect the individuals and offer

equal career opportunities, regardless of sex, race or religion, and

consider the relationship with the employees to be good. The

number of persons employed in the Company and its subsidiaries as

at 31st March 2013 was 760 (724 as at 31st March 2012)


The Company promotes a culture of teamwork, integrity and

dedication, and remuneration is linked to performance by annual

appraisals of both qualitative and quantitative performance of all

employees.

Customers

The Group firmly believes in investing time and effort in discovering

exactly what the customer wants and then giving it to them at the

best price and building relationship and loyalty by supplying the

demand in the best manner possible every single time. In other

words, we believe in selling customer excellence. In addition the

Company also carries out customer awareness programmes and

customer service campaigns. The Company deals with both corporate

and retail customers.

Supplier Policy

The Group places great emphasis on the importance of suppliers

to the Group, building loyalty and ensuring payments are made

promptly. Further, a clear communication terms of payment as part of

commercial agreements is being maintained.

Statutory Payments

Directors, to the best of their knowledge and belief, are satisfied that

all statutory payments in relation to employees and the Government

have been made up to date.

Environmental Protection

It is the Group policy to keep adverse effects on the environment to

a minimum and to promote co-operation and compliance with the

relevant authorities and regulations.

Corporate Governance & Internal Control

The information called for by this item with respect to the practice

followed by the Group is set out in the Corporate Governance

statement on Pages 68 to 75.

Going Concern

As in the statement of Directors’ Responsibilities given on page 88,

the Directors have adopted the Going Concern basis in preparing the

Financial Statements.

Directorate

The Directors of the Company during the year under review are as

follows:

Mr. I. C. Nanayakkara

Executive Chairman/Executive Director (Appointed as the Executive

Chairman on 1st March 2013)

Mrs. R. L. Nanayakkara

Non-Executive Chairperson (Resigned on 28th February 2013)

Mr. A. L. Devasurendra

Non-Executive Deputy Chairman (Resigned on 15th July 2013)

Mr. N. M. Prakash

Executive - Group Managing Director/ CEO

Mr. S. V. Somasunderam

Non-Executive Director


Non-Executive Independent Director

Mr. W. D. K. Jayawardena


Mrs. K. U. Amarasinghe


Mr. R. M. Nanayakkara

Non-Executive Director (Appointed on 15th July 2013)

Profit and Appropriations

GROUP

For the year ended 31st March 2013 2012

Rs 000 Rs 000

Profit for the period 359,963 1,170,876

Retained Profit brought forward

from previous year 8,356,111 7,453,933

Dividend Paid Associates - (942)

Issue of Ordinary shares/Cost of share issue (1,399) (115,793)

Change in effective holding (743) (6,578)

On Acquisition of Subsidiary 274,122 2,380

Revaluation of Property, Plant and Equipment 116,807 (58,065)

Net Change in Fair value of Available For

Sale Financial Assets, Net of Tax - 18,383

Defined Benefit Plan Actuarial

Gains / (Losses), Net of Tax (19,113) (13,696)

Preference dividend paid (832) (832)

Dividend Paid (35,438) (93,555)

Retained Profit carried forward 9,049,478 8,356,111

COMPANY

For the year ended 31st March 2013 2012

Rs 000 Rs 000

Profit/ (Loss) for the year (464,708) 398,788

Retained Profit brought forward

from previous year 1,980,602 1,689,146

Defined Benefit Plan Actuarial

Gains / (Losses), Net of Tax (9,191) (13,777)

Dividend Paid (35,438) (93,555)

Retained Profit carried forward 1,471,265 1,980,602


Directors’ Meetings

The Directors conduct Board Meetings on a monthly basis. Board

decisions are resolved by resolutions at meetings, by circulation and

also through circular Board papers which are approved and signed by

all the Directors and tabled at the Board Meetings. The Minutes of the

Board Meetings, the Agenda for the next meeting and the monthly

Management Reports are circulated to all the Directors in advance to

the meetings.

Resignations of Non-Executive Directors

Mrs. R.L. Nanayakkara, Non-Executive Chairperson resigned from the

Board of Directors with effect from 28th February 2013.

Mr. A.L. Devasurendra, Deputy Chairman/Non Executive Director

resigned from the Board of Directors with effect from 15th July 2013.

Appointment of the Executive Chairman /Executive Director

Mr. I. C. Nanayakkara, who was a Non Executive Director since 28th

September 2005 was appointed as the Executive Chairman/Executive

Director with effect from 1st March 2013, consequent to the

resignation of Mrs. R. L. Nanayakkara, Non-Executive Chairperson.

Appointment of Non-Executive Director

Mr. R.M. Nanayakkara a Non Executive Director was appointed to

the Board of Directors with effect from 15th July 2013 to fill the

casual vacancy created consequent to the resignation of Mr. A.L

Devasurendra.

Re-Election of Directors

In accordance with Articles 24(6) of the Articles of Association of the

Company, Mr. H.P. J. de Silva an Independent Non- Executive Director

retires by rotation, and being eligible, offers himself for re-election.

In accordance with Section 210 of the Companies Act No. 7 of 2007,

Mr. R. M. Nanayakkara a Non-Executive Director retires and offers

himself for re-election. Special notice has been received pursuant

to Sections 145 and 211 of the Companies Act No. 7 of 2007 of

the intention to propose ordinary resolution for such re-election

notwithstanding the age limit of 70 years stipulated by Section 210 of

the said Companies Act.

Board Committees

The Board has established Committees for better monitoring and

guidance of different aspects of operations and control.

Audit Committee Mr. H.P.J. de Silva (appointed as the Acting Chairman)

Mrs. R.L Nanayakkara (resigned on 28/02/2013)

Mrs. K.U. Amarasinghe (appointed on 26/02/2013)

Mr. W.D.K. Jayawardena (appointed on 26/02/2013)

The Audit Committee reviewed the type and quantum of non-audit

services provided by the External Auditors to the Group to ensure that

their independence as Auditors has not been impaired.

The report of the Audit Committee is given on pages 78 and 79.

Remuneration CommitteeMrs. R. L. Nanayakkara- Chairperson (resigned on 28/02/2013)

Mr. I. C. Nanayakkara (appointed chairman on 01st March 2013)


The report of the Remuneration committee is given on page 81.

Business Operations Committee Mr. N.M. Prakash - Group Managing Director/CEO

Mr. A.L. Devasurendra - Deputy Chairman (Resigned on 15/07/2013)

Mr. I.C. Nanayakkara - Director

Mr. S.V. Somasunderam - Director

The report of the Business Operations committee is given on

page 80.

Interest Register

The Directors have made the declarations required by the Companies

Act No. 7 of 2007. These have been entered into the Interest Register

which is maintained by the Company.

The Company carried out transactions in the ordinary course of

business with entities in which a Director of the Company is a

Director. The transactions with entities where a Director of the

Company either has control or exercises significant influence have

been classified as related party transactions and disclosed in

Note No. 44 in the Financial Statements

The Directors have no direct or indirect interest in any other contract

or proposed contract with the Company.

Directors’ Report


Directors’ Shareholdings

The Directors interests in shares as at 31st March 2013 were as follows :-

As at As at

31st March 31st March

2013 2012

Mr. I C Nanayakkara 99,900 99,900

Mr. A.L.Devasurendra

(Resigned on 15/07/2013) 1,098,900 1,098,900

Mr. N M Prakash

Margin Trading 35,100 35,100

Mr. S.V.Somasunderam

Individual 3,027,400 2,877,400

Margin Trading Nil 150,000

Mr. H P J. de Silva Nil Nil

Mr. W.D.K.Jayawardena Nil Nil

Mrs. K U Amarasinghe Nil Nil

Mr. R.M. Nanayakkara

(Appointed on 15/07/2013) Nil Nil

Remuneration of Directors

The remuneration of the Directors are disclosed in Note No. 5.

List of Largest Shareholders of the Company

The list of 20 largest shareholders and the percentage held by each at

3lst March 2013 is given on page 220 of the Financial Statements.

Subsidiary and Associate Companies and its Directors

The Directors of subsidiary and associate companies as at date are

given on pages 221 to 223 of the Financial Statements.

Accounting Policies

The accounting policies adopted in the preparation of the Financial

Statements are given on pages 97 to 119. There were changes in the

accounting policies adopted in the year under review

Annual Report

The Board of Directors approved the Consolidated Financial

Statements on 30th July 2013. The appropriate number of copies of

this report will be submitted to Colombo Stock Exchange and to the

Sri Lanka Accounting and Auditing Standards Monitory Board on or

before 31st August 2013.

Annual General Meeting

The Annual General Meeting will be held at Park Premier, Excel World,

No 338, T. B. Jayah Mawatha, Colombo 10 on Twenty Fourth day of

September 2013 at 10.30 a. m. The Notice of the Annual General

Meeting is given on page 227.

Auditors

In accordance with Section 154 (1) of the Companies Act No. 7 of

2007, a resolution proposing the reappointment of Messrs. KPMG,

Chartered Accountants as Auditors of the Company for the ensuing

year will be proposed at the Annual General Meeting.

In terms of Section 155 (a) of the Companies Act No. 7 of 2007 a

resolution authorizing the Directors to fix the remuneration of the

Auditors Messrs. KPMG, Chartered Accountants for the ensuing year

will be proposed at the Annual General Meeting.

The fees paid to Auditors are disclosed in Note No. 5 to the Financial

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

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

any of its subsidiaries other than those disclosed above. The Auditors

also do not have any interest in the Company or any of its group

Companies.

For and on behalf of the Board

I. C . Nanayakkara

Executive Chairman

N. M. Prakash


S.F.L. SERVICES (PVT) LTD

(Formerly known as STANDARD FINANCE (PVT) LIMITED)

SECRETARIES

Colombo 30th July 2013


The responsibility of the Directors in relation to the Financial

Statements for the year ended 31st March 2013 which have been

prepared and presented in conformity with the requirements of the

Sri Lanka Accounting Standards, the Listing Rules of the Colombo

Stock Exchange and the Companies Act No.7 of 2007, is set out in the

following statement .

The responsibility of the Auditors in relation to the Financial

Statements is set out in the Report of the Auditors on pages 89 of

the Report. As per the provisions of the Companies Act No. 7 of 2007,

the Directors are required to prepare Financial Statements, for each

financial year and place before a General Meeting which comprise:

1. An Income Statement, which presents a true and fair view of

the profit and loss of the Company and its subsidiaries for the

financial year;

2. A Statement of changes in Equity which presents a true and

fair view of the changes in the Company’s and its Subsidiaries

retained earnings for the financial year;

3. A Statement of Cash Flow which presents a true and fair view

of the flow of cash in and out of the business for the financial

year; and

4. A Balance Sheet, which presents a true and fair view of the

state of affairs of the Company and its subsidiaries as at the

end of the financial year.

and which comply with the requirements of the Act.

The Directors are of the view that, in preparing these Financial

Statements :

1. The appropriate accounting policies have been selected and

applied in a consistent manner. Material deviations, if any have

been disclosed and explained;

2. All applicable Accounting Standards, as relevant, have been

followed.

3. Judgments and estimates have been made which are

reasonable and prudent.

The Directors are also of the view that the Company has adequate

resources to continue in operation and have applied the going

concern basis in preparing these Financial Statements.

Further, the Directors have a responsibility to ensure that the

Company maintains sufficient accounting records to disclose, with

reasonable accuracy of the financial position of the Company and

of the Group, also to reflect the transparency of transactions and

to ensure that the Financial Statements presented comply with the

requirements of the Companies Act.

Statement of Directors’ Responsibility

The Directors are also responsible for taking reasonable steps to

safeguard the Assets of the Company and that of the Group and

in this regard to give proper consideration to the establishment of

appropriate internal control systems with a view to preventing and

detecting fraud and other irregularities.

The Directors are required to prepare the Financial Statements and

to provide the Auditors with every opportunity to take whatever

steps and undertake whatever inspections they may consider to be

appropriate to enable them to give their Audit Opinion.

The Directors are of the view that they have discharged their

responsibilities as set out in this statement.

Compliance Report

The Directors confirm that to the best of their knowledge, all taxes,

duties and levies payable by the Company and its subsidiaries, all

contributions levies and taxes payable on behalf of and in respect

of the employees of the Company and its subsidiaries, and all other

known statutory dues as were due and payable by the Company and

its subsidiaries as at the Balance Sheet date have been paid or, where

relevant provided for.

The Board of Directors confirms that the Company, based on the

information available, satisfies the Solvency test as and when required

according to the Section 56(2) of the Companies Act No. 07 of 2007.

By order of the Board

N. M. Prakash


30th July 2013


Independent Auditor’s Report

INDEPENDENT AUDITOR’S REPORT

TO THE SHAREHOLDERS OF BROWN & COMPANY PLCReport on the Financial StatementsWe have audited the accompanying financial statements of Brown

& Company PLC (“the Company”) and the consolidated financial

statements of the Company and its subsidiaries (“the Group”), which

comprise the statements of financial position as at 31 March 2013, the

statements of comprehensive income, changes in equity and cash

flows for the year then ended, and notes, comprising a summary of

significant accounting policies and other explanatory information set

out on pages 90 to 215 of the annual report.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation

of these financial statements in accordance with Sri Lanka

Accounting Standards. This responsibility includes: designing,

implementing and maintaining internal control relevant to the

preparation and fair presentation of financial statements that are

free from material misstatement, whether due to fraud or error;

selecting and applying appropriate accounting policies; and making

accounting estimates that are reasonable in the circumstances.

Scope of Audit and Basis of OpinionOur responsibility is to express an opinion on these financial

statements based on our audit. We conducted our audit in

accordance with Sri Lanka Auditing Standards. Those standards

require that we plan and perform the audit to obtain reasonable

assurance whether the financial statements are free from material

misstatement.

An audit includes examining, on a test basis, evidence supporting

the amounts and disclosures in the financial statements. An audit

also includes assessing the accounting policies used and significant

estimates made by management, as well as evaluating the overall

financial statement presentation.

We have obtained all the information and explanations which to the

best of our knowledge and belief were necessary for the purposes of

our audit. We therefore believe that our audit provides a reasonable

basis for our opinion.

Opinion- CompanyIn our opinion, so far as appears from our examination, the Company

maintained proper accounting records for the year ended 31 March

2013 and the financial statements give a true and fair view of the

financial position of the Company as at 31 March 2013, and of its

financial performance and its cash flow for the year then ended in

accordance with Sri Lanka Accounting Standards.

Opinion- GroupIn our opinion, the consolidated financial statements give a true

and fair view of the financial position of the Company and its

subsidiaries dealt with thereby as at 31 March 2013, and of its

financial performance and its cash flows for the year then ended in

accordance with Sri Lanka Accounting Standards.

Report on Other Legal and Regulatory RequirementsThese financial statements also comply with the requirements of

Sections 153(2) to 153(7) of the Companies Act No. 07 of 2007.

CHARTERED ACCOUNTANTS

Colombo, 30 July 2013.


Statement of Comprehensive Income

Group Company

For the year ended 31st March 2013 2012 2013 2012

Notes Rs.000 Rs.000 Rs.000 Rs.000

Revenue 1 14,183,801 14,387,354 9,847,137 10,542,321

Cost of Sales (11,273,283) (11,005,943) (7,929,268) (8,082,182)

Gross Profit 2,910,518 3,381,411 1,917,869 2,460,139

Other Income 2 361,676 2,838,749 91,504 35,514

Distribution Expenses (1,128,312) (665,159) (882,176) (469,386)

Administrative Expenses (1,661,540) (1,455,456) (1,020,711) (888,020)

Other Expenses (19,815) (675,488) (5,123) (341,742)

Finance Income 3 494,581 331,932 327,072 258,304

Finance Costs 4 (1,070,375) (418,956) (986,737) (447,446)

Change in Fair Value of Investment Properties 10 869,721 219,887 1,820 1,224

Share of Loss of Equity Accounted Investees (Net of Tax) 18 (301,790) (94,931) - -

Profit / (Loss) before Taxation 5 454,664 3,461,989 (556,482) 608,587

Tax (Expense) / Reversal 6 (43,063) (384,638) 91,774 (209,799)

Profit / (Loss) for the Year 411,601 3,077,351 (464,708) 398,788

Profit / (Loss) Attributable to:

Equity holders of the Company 359,963 1,170,876 (464,708) 398,788

Non-Controlling Interest 51,638 1,906,475 - -

411,601 3,077,351 (464,708) 398,788

Earnings per Share

Basic Earnings / (Loss) per Share (Rs.) 7 5.08 16.52 (6.56) 5.63

Diluted Earnings / (Loss) per Share (Rs.) 7 5.08 16.52 (6.56) 5.63

Dividend per Share (Rs.) 8 0.50 1.32 0.50 1.32

The Significant Accounting Policies and Notes as set out in pages 97 to 215 form an integral part of these Financial Statements.


Statement of Other Comprehensive Income

Group Company


Rs.000 Rs.000 Rs.000 Rs.000

Profit / (Loss) for the Year 411,601 3,077,351 (464,708) 398,788

Other Comprehensive Income

Revaluation of Property, Plant and Equipment 348,840 267,235 126,237 153,189

Deferred Tax impact on Revaluation 4,446 5,070 2,014 5,658

Net Change in Fair Value of Available-for-Sale Financial Assets 173,823 (2,066,540) 310,606 (2,058,292)

Defined Benefit Plan Actuarial Gains/(Losses) for the year (20,460) (13,703) (9,191) (13,777)

Realised Revaluation on Disposal (3,476) - - -

Other Comprehensive Income/ (Expense) for the year, Net of Tax 503,173 (1,807,938) 429,666 (1,913,222)

Total Comprehensive Income/ (Expense) for the year, Net of Tax 914,774 1,269,413 (35,042) (1,514,436)

Attributable to:

Equity holders of the Company 979,307 (844,563) (35,042) (1,514,436)

Non-Controlling Interest (64,533) 2,113,976 - -

914,774 1,269,413 (35,042) (1,514,436)

The Significant Accounting Policies and Notes to the Financial Statements from Pages 97 to 215 form an integral part of these Financial

Statements.


Statement of Financial Position

Group Company

31st March 31st March 1st April 31st March 31st March 1st April 2013 2012 2011 2013 2012 2011 Notes Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

ASSETSNon-Current AssetsProperty, Plant and Equipment 9 6,829,098 6,509,437 4,727,690 4,056,265 3,942,441 3,558,251Investment Properties 10 5,857,212 4,685,617 826,344 111,691 111,971 110,747Prepaid Lease Rentals 11 189,044 196,472 189,337 45,046 45,649 46,250Intangible Assets 12 233,456 168,095 65,849 68,513 14,745 21,824Capital Work in Progress 13 650,350 135,450 21,999 2,135 56,396 -Bearer Biological Assets 14 1,975,422 1,842,608 1,600,287 - - -Consumable Biological Assets 15 1,567,671 1,514,295 1,630,001 - - -Investment in Subsidiaries 16 - - - 7,985,978 7,110,798 6,858,816Investment in Joint Venture 17 - - - 13,000 10,000 10,000Investments in Equity Accounted Investees 18 1,430,458 1,707,308 1,448,957 248,998 248,998 248,998Other Investments - Long term 19 4,718,776 4,349,537 5,950,949 3,705,083 3,394,477 5,017,987Deferred Tax Assets 20 281,489 189,703 274,812 200,110 80,426 153,167Loans to Related Parties - Due after one year 21 3,169 3,928 22,623 - - -Total Non-Current Assets 23,736,145 21,302,450 16,758,848 16,436,819 15,015,901 16,026,040

Current AssetsInventories 22 2,209,731 2,737,001 1,261,602 1,448,109 1,968,998 690,002Trade and Other Receivables 23 2,692,582 1,982,823 1,299,576 2,034,220 1,393,760 999,513Deposits and Prepayments 24 417,021 203,617 322,565 64,700 113,701 178,662Loans to Related Parties - Due within one year 25 1,107,099 1,412,727 431,334 778,187 532,515 405,036Amounts due from Related Parties 26 289,317 303,523 297,088 451,298 282,791 144,486Tax Recoverable 27 59,647 4,298 202 42,019 - -Other Investments - Short term 28 3,395,654 4,130,902 5,545,776 1,685,770 1,717,809 1,072,560Cash at Bank and in Hand 29 634,720 753,575 1,364,914 280,705 200,833 737,228Total Current Assets 10,805,771 11,528,466 10,523,057 6,785,008 6,210,407 4,227,487TOTAL ASSETS 34,541,916 32,830,916 27,281,905 23,221,827 21,226,308 20,253,527

EQUITY AND LIABILITIESStated Capital 30 2,005,601 2,005,601 2,005,601 2,005,601 2,005,601 2,005,601Capital Reserves 31 3,987,572 3,465,922 5,401,247 4,399,483 3,960,626 5,860,071Revenue Reserves 31 9,102,591 8,409,224 7,507,046 7,384,362 7,893,699 7,602,243Equity Attributable to Equity holders of the Company 15,095,764 13,880,747 14,913,894 13,789,446 13,859,926 15,467,915Non-Controlling Interest 7,918,315 9,272,244 6,927,084 - - -Total Equity 23,014,079 23,152,991 21,840,978 13,789,446 13,859,926 15,467,915

Non Current LiabilitiesInterest Bearing Borrowings - Due after one year 32 2,287,576 2,255,059 1,050,937 1,018,273 1,538,771 746,439Rescheduled Debentures 33 - - 410 - - -Finance Lease Obligations - Due after one year 34 89,084 85,058 88,724 6,145 - -Retirement Benefit Obligations 35 517,695 483,500 433,620 83,113 64,833 44,592Deferred Tax Liabilities 36 295,098 282,037 258,890 - - -Deferred Income 37 175,470 173,014 152,753 23,349 22,285 19,061Loans from Related Parties - Due after one year 38 - - 28,665 1,232,917 738,580 199,484Total Non Current Liabilities 3,364,923 3,278,668 2,013,999 2,363,797 2,364,469 1,009,576

Current LiabilitiesAccounts Payable & Accrued Expenses 39 2,296,310 2,924,259 1,892,840 1,589,560 2,018,888 1,184,431Interest Bearing Borrowings- Due within one year 32 799,493 1,169,465 405,257 520,493 593,292 319,457Finance Lease Obligations - Due within one year 34 5,811 6,058 6,300 2,543 - 328Loans from Related Parties - Due within one year 40 - - 33,119 711,221 322,991 1,291,518Amounts due to Related Parties 41 345,099 285,361 314,663 120,405 282,470 309,460Income Tax Payable 42 92,098 147,647 158,438 - 59,563 103,316Dividend Payable 75,396 41,280 20,483 45,461 27,160 16,083Short Term Interest Bearing Borrowings 3,264,259 1,544,012 516,389 3,044,960 1,508,057 500,000Bank Overdraft 1,284,448 281,175 79,449 1,033,941 189,492 51,443Total Current Liabilities 8,162,914 6,399,257 3,426,928 7,068,584 5,001,913 3,776,036TOTAL EQUITY AND LIABILITIES 34,541,916 32,830,916 27,281,905 23,221,827 21,226,308 20,253,527

Net Assets per Share (Rs.) 43 212.99 195.85 210.43 194.56 195.55 218.24

The Significant Accounting Policies and Notes to the Financial Statements from Pages 97 to 215 form an integral part of these Financial Statements.

It is certified that these Financial Statements have been prepared and presented in compliance with the requirements of the Companies Act No.7 of 2007.

P. S. GoonawardenaGroup Chief Financial Officer

The Board of Directors is responsible for the Preparation and Presentation of these Financial Statements.Signed for and on behalf of the Board by,

I.C. Nanayakkara N. M. PrakashChairman Group Managing Director/CEO

Colombo, 30th July 2013


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Statement of Cash Flows

Group Company


Rs.000 Rs.000 Rs.000 Rs.000

Cash Flows from Operating Activities

Profit/ (Loss) before Taxation 454,664 3,461,989 (556,482) 608,587

Adjustment for:

Share of Loss of Equity Accounted Investees 301,790 94,931 - -

(Gain)/ Loss on Disposal of Investments 318 (52,217) - -

Depreciation on Property, Plant and Equipment 261,244 212,940 63,374 59,484

Amortization of Prepaid Lease Rentals 4,788 8,015 604 601

Amortization of Capital Grants (4,683) (5,350) - -

Amortization of Intangible Assets 27,646 8,015 24,929 7,839

Provision for Retiring Gratuity 93,767 73,054 24,719 11,312

Provision for Bad & Doubtful Debts 85,765 78,213 78,123 5,383

Amortization of Deferred Income (5,364) (5,203) (514) 3,224

Provision for Intercompany Receivables - - 4,405 (12,214)

Provision for Slow Moving Stocks 142,895 24,434 143,145 4,247

Dividend Income (184,028) (105,865) (219,544) (212,993)

Negative Goodwill - (2,656,003) - -

Interest Income (310,553) (226,066) (107,529) (107,528)

Change in Fair Value of Investment Properties (869,721) (219,887) (1,820) (1,224)

(Gain)/Loss on Changes in Fair Value of Short term Investments (151,879) 2,224 1,760 235,903

(Gain)/ Loss on Disposal of Investment Properties (7,019) - 402 -

Gain on Changes in Fair Value of Biological Assets (83,948) (37,394) - -

Gain on Disposal of Property, Plant and Equipment (3,801) (9,172) (2,303) (2,420)

Interest Expense 1,070,375 418,956 986,737 447,446

Operating Profit before Working Capital Changes 822,256 1,065,614 440,006 1,047,647

Working Capital Changes

(Increase)/Decrease in Inventories 384,377 (1,499,834) 377,743 (1,206,140)

Increase in Trade and Other Receivable (1,008,928) (642,506) (669,582) (427,041)

(Increase)/Decrease in Amounts due from Related Companies 330,164 230,882 (183,200) (126,092)

Increase/(Decrease) in Trade and Other Payables (612,132) 1,045,536 (416,383) 844,380

Increase/(Decrease) in Amounts due to Related Companies 59,738 (91,087) (162,065) (26,990)

Cash Generated from/ (Used in) Operations (24,525) 108,605 (613,480) 105,764

Interest Paid (1,070,375) (418,956) (986,737) (447,446)

Income Tax Paid (197,905) (236,752) (127,477) (178,077)

Retiring Gratuity Paid (62,382) (41,173) (6,438) (1,834)

Net Cash Flows used in Operating Activities (1,355,187) (588,276) (1,734,133) (521,593)


Group Company


Rs.000 Rs.000 Rs.000 Rs.000

Cash Flows from Investing Activities

Purchase of Property, Plant and Equipment (1,064,612) (946,776) (75,041) (347,061)

Acquisition of Bearer Biological Assets- Net of Immature Grants (112,069) (111,900) - -

Purchase of Investment Properties (104,058) - - -

Proceeds from Sale of Investment Properties 9,119 - 1,698 -

Purchase of Intangible Assets (93,007) (110,301) - (759)

Investment in Equity Accounted Investees - (341,314) - -

Investment in Subsidiaries (934,988) (1,197,376) (875,180) (246,737)

Capital Grants Received 399 - - -

Proceeds from Sale of Timber Stocks - 19,233 -

Short term Investments made (43,430) (3,076,003) 30,281 (1,322,734)

Investment in joint venture - - (3,000) -

Proceeds from Sale of Property, Plant and Equipment 12,039 - 2,303 2,599

Proceeds from Sale of Investments 717,681 3,356,045 - -

Dividend Received 184,028 105,865 219,544 212,993

Interest Received 310,553 226,066 107,529 107,528

Net Cash Flows used in Investing Activities (1,118,345) (2,076,461) (591,866) (1,594,171)

Cash Flows from Financing Activities

Loans Received 2,713,723 3,288,328 2,923,202 2,458,058

Repayment of Loans (1,330,932) (1,514,784) (1,342,702) (940,731)

Expenses on issue of shares - (115,293) - -

Redemption of Rescheduled Debentures - (410) - -

Proceeds from issue of Shares to Non - Controlling Interest - 288,850 - -

Lease Rentals Paid (14,252) (12,536) (1,942) (327)

Dividend Paid (17,137) (82,480) (17,136) (82,480)

Net Cash Flows Generated from Financing Activities 1,351,402 1,851,675 1,561,422 1,434,520

Net Decrease in Cash and Cash Equivalents during the Year (1,122,130) (813,063) (764,576) (681,244)

Cash and Cash Equivalents at the beginning of the Year 472,402 1,285,465 11,341 692,585

Cash and Cash Equivalents at the end of the Year (649,728) 472,402 (753,235) 11,341

Analysis of Cash and Cash Equivalents at the end of the Year

Cash at Bank and in Hand 634,720 753,577 280,705 200,833

Bank Overdraft (1,284,448) (281,175) (1,033,940) (189,492)

(649,728) 472,402 (753,235) 11,341

The Significant Accounting Policies and Notes to the Financial Statements from Pages 97 to 215 form an integral part of these Financial

Statements.

Statement of Cash Flows


Significant Accounting Policies

1 CORPORATE INFORMATION

1.1 Reporting entity Brown & Company PLC (‘the Company’) is a public quoted company

incorporated on 17th August 1892 with limited liability and domiciled

in Sri Lanka. The registered office of the Company is located at No.

481, T.B. Jayah Mawatha, Colombo 10, Sri Lanka and the business

office is located at No. 34, Sir Mohamed Macan Marker Mawatha,

Colombo 3, Sri Lanka.

The Consolidated Financial Statements of the Company as at and

for the year ended 31st March 2013 comprise the Company and its

subsidiaries (together referred to as the “Group” and individually as

“Group entities”) and the Group’s interest in associates and jointly

controlled entities.

The Group is primarily involved in trading business for a wide variety

of customer segments and also engaged in diversified activities such

as Investments, leisure, plantations, healthcare and construction, etc.

Ordinary shares of the company are listed on the main board of the

Colombo Stock Exchange (CSE).

1.2 Principal Activities and Nature of Operations There were no significant changes in the nature of the principal

activities of the Company and the Group during the financial year

under review. Principal activities of the company are described in

detail in the “Management Discussion and Analysis” to the annual

report.

1.3 Parent Entity and Ultimate Parent EntityIn the opinion of the Directors, the Company’s ultimate parent

undertaking is Lanka Orix Leasing Company PLC.

1.4 Date of Authorization for IssueThe Consolidated Financial Statements of Brown & Company PLC

for the year ended 31 March 2013 were authorized for issue in

accordance with the resolution of the board of directors on

30th July 2013.

2 BASIS OF PREPARATION

2.1 Statement of ComplianceThe Consolidated Financial Statements of the group and the separate

Financial Statements of the company, have been prepared and

presented in accordance with the Sri Lanka Accounting Standards

(SLFRS/LKAS) laid down by The Institute of Chartered Accountants

of Sri Lanka (ICASL) and in compliance with the requirements of the

Companies Act No. 07 of 2007, provides appropriate disclosures as

required by the listing rules of the Colombo Stock Exchange.

These are the Company’s and the Group’s first Financial Statements

prepared in accordance with SLFRSs/ LKAS’s (referred to as ‘SLFRS’ in

these Financial Statements) and SLFRS 1 First-time Adoption of Sri

Lanka Accounting Standard has been applied.

An explanation of how the transition to SLFRS/LKAS has affected on

the reported financial position, financial performance and cash flows

of the Group is provided in Note No. 7.

2.2 Basis of MeasurementThese Financial Statements have been prepared on the historical

cost basis with no adjustments being made for inflationary factors

affecting the Financial Statements, except for the following material

items in the statement of financial position,

Financial instruments at Fair Value through Profit or Loss are

measured at fair value

Available-for-sale financial assets are measured at fair value

The liability for defined benefit obligations are measured at the

present value

Lands and buildings are measured at fair value

Investment properties are measured at fair value

Consumable Biological assets (timber stocks) are measured at

fair value less cost to sell

2.3 Functional and presentation currencyThe functional currency is the currency of the primary economic

environment in which the entities of the group operate.

The Consolidated Financial Statements are presented in Sri Lankan

Rupee (SLR), which is the functional currency of the Company and the

Group’s presentation currency. All financial information presented in

Sri Lankan Rupees has been rounded to the nearest thousands unless

stated otherwise.

2.4 Use of estimates and judgmentsThe preparation of the Consolidated Financial Statements in

conformity with SLFRSs/LKAS’s requires Management to make

judgments, estimates and assumptions that affect the application of

accounting policies and the reported amounts of assets, liabilities,

income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are based on historical

experience and various other factors that are believed to be

reasonable under the circumstances, the results which form the basis

of making the judgments about the carrying amount of assets and

liabilities that are not readily apparent from other sources.

Estimates and underlying assumptions are reviewed on an ongoing

basis. Revisions to accounting estimates are recognized in the period

in which the estimates are revised and in any future periods affected.

Information about critical judgments in applying accounting policies

that have the most significant effect on the amounts recognized in

the Consolidated Financial Statements is included in the following

notes to these Financial Statements.



Critical accounting estimate/judgment Disclosure reference

Note Page

Bearer Biological Assets –Rubber &

Coconut14 153 - 156

Consumer Biological Assets - Timber 15 156 -158

Determination in fair value of Investment

properties10 147 - 148

Revaluation of lands & buildings 9 145

Goodwill on acquisition 12 151 - 152

Retirement benefit obligation 35 181 - 182

Deferred Taxation

20 & 36

166 - 167

&

182 - 183

Useful lives of property, plant and

equipment3.3.1.5 106 - 107

Useful lives of intangible assets 3.3.7.5 109

2.5 Going ConcernThe Board of Directors has made an assessment of Group’s ability to

continue as going concern and is satisfied that it has the resources

to continue in business for the foreseeable future. Furthermore, the

Board of Directors’ is not aware of any material uncertainties that

may cast significant doubt upon the Group’s ability to continue as

going concern. Therefore these Financial Statements continue to be

prepared on a going concern basis.

2.6 Materiality and AggregationEach material class of similar items is presented separately in the

Consolidated Financial Statements. Items of dissimilar nature or

function are presented separately unless they are immaterial as

permitted by the Sri Lanka Accounting Standards LKAS - 01 on

Presentation of Financial Statements.

2.7 OffsettingAssets and liabilities, and income and expenses, are not offset unless

required or permitted by SLFRSs.

2.8 Comparative InformationPrevious period figures and Notes have been restated and reclassified

wherever necessary to conform to the current year’s presentation.

2.9 Directors’ Responsibility for the Financial Statements

The Board of Directors is responsible for the preparation and

fair presentation of these Consolidated Financial Statements in

accordance with Sri Lanka Accounting Standards and as per the

provisions of the Companies Act No. 07 of 2007. This responsibility

includes: designing, implementing and maintaining internal controls

relevant to the preparation and fair presentation of Financial

Statements that are free from material misstatement, whether due

to fraud or error; selecting and applying appropriate accounting

policies; and making accounting estimates that are reasonable in the

circumstances.

2.10 New Accounting Standards issued but not Effective at Balance sheet Date

Standards issued but not yet effective up to the date of issuance of

the group’s Financial Statements with their effective dates are listed

below. None of these is expected to have a significant effect on the

Financial Statements of the Group. Therefore, extent of the impact has

not been determined.

Accounting

Standard

Name of the Standard Effective Date

SLFRS 9 Financial Instruments

Classification and Measurement

1st January 2015

SLFRS 10 Consolidated Financial

Statements

1st January 2014

SLFRS 11 Joint Arrangements 1st January 2014

SLFRS 12 Disclosure of Interest in other

entities

1st January 2014

SLFRS 13 Fair value Measurement 1st January 2015

2.10.1 SLFRS 9 - Financial InstrumentsSLFRS 9 - Financial Instruments, which will replaces the provisions

of LKAS 39 Financial Instruments: Recognition and Measurement on

classification and measurement of financial assets and requirements

with respect to the classification and measurement of financial

liabilities, the de-recognition of financial assets and financial liabilities

and how to measure fair value were added to SLFRS 9. Most of

these requirements have been carried forward without substantive

amendment from LKAS 39. However, to address the issue of own

credit risk some changes was made to the fair value option for

financial liabilities.

The standard is applied retrospectively in accordance with LKAS 8

Accounting Policies, Changes in Accounting Estimates and Errors with

certain exemptions.

2.10.2 SLFRS 10 - Consolidated Financial StatementsSLFRS 10 Consolidated Financial Statements, which replaces LKAS

27 Consolidated and Separate Financial Statements and SIC-12

Consolidation-Special Purpose Entities. Additionally, the ICASL

published SLFRS - 12 Disclosure of Interests in Other Entities and LKAS

27 Separate Financial Statements.

The main changes from LKAS 27 and SIC-12 are a single control model

is applied to determine whether an investee should be consolidated,

Control assessment includes consideration of substantive potential

voting rights as opposed to currently exercisable potential voting


rights, Guidance is provided for assessing whether the investor is a

principal or an agent in respect of its relationship with the investee. A

principal could consolidate an investee whereas an agent would not

because the linkage between power and returns is not present.

2.10.3 SLFRS 11 - Joint ArrangementsSLFRS 11 Joint Arrangements, which replaces LKAS 31 Interests

in Joint Ventures and SIC-13 Jointly Controlled Entities - Non-

Monetary Contributions by Ventures. SLFRS 11 also amends LKAS 28

Investments in Associates.

The following are the main changes from LKAS 31;

The structure of the joint arrangement, although still an important

consideration, is no longer the main factor in determining the type

of joint arrangement and therefore the subsequent accounting and

If a joint arrangement is determined to be a joint venture, then the

joint venture accounts for its investment using the equity method

in accordance with LKAS 28 Investments in Associates and Joint

Ventures; the free choice between using either the equity method or

proportionate consolidation has been eliminated.

2.10.4 SLFRS 12 - Disclosure of Interests in Other EntitiesSLFRS 12 Disclosure of Interests in Other Entities is a consolidated

disclosure standard requiring a wide range of disclosures about an

entity’s interests in subsidiaries, joint arrangements, associates and

unconsolidated ‘structured entities’.

The objective of SLFRS 12 is to require the disclosure of information

that enables users of Financial Statements to evaluate the nature of,

and risks associated with, its interests in other entities, the effects of

those interests on its financial position, financial performance and

cash flows.

2.10.5 SLFRS 13 - Fair Value MeasurementSLFRS 13 Fair Value Measurement applies to SLFRSs that require or

permit fair value measurements or disclosures and provides a single

SLFRS framework for measuring fair value and requires disclosures

about fair value measurement. The Standard defines fair value on the

basis of an ‘exit price’ notion and uses a ‘fair value hierarchy’, which

results in a market-based, rather than entity-specific, measurement.

SLFRS 13, defines fair value, sets out in a single SLFRS a framework

for measuring fair value and requires disclosures about fair value

measurements.

2.10.6 Withdrawal of UITF RulingsThe Urgent Issue Task Force (UITF) rulings issued prior to 1 January

2012 have been superseded by the Sri Lanka Accounting Framework

with effect from 1 January 2012. Consequently it is now required to

treat transactions which any of UITF rulings applied, in accordance

with Sri Lanka Accounting Framework effective from 1 January 2012.

Since the SORP issued by the ICASL has not been finalized as of the

date of auditor’s report, Company’s Joint Venture’s Sub-subsidiaries

have not been complied with the SORP issued by the Institute of

Chartered Accountants of Sri Lanka.

3 SIGNIFICANT ACCOUNTING POLICIES

3.1 GeneralThe accounting policies set out below have been applied consistently

to all periods presented in these Consolidated Financial Statements

and in preparing the opening SLFRS statement of financial position

at 1 April 2011 for the purposes of the transition to SLFRSs, unless

otherwise indicated.

These accounting policies have been applied consistently by entities

within the Group where applicable and deviations if any, have been

disclosed accordingly.

3.2 Basis of ConsolidationThe Consolidated Financial Statements (referred to as the ‘group’)

comprise the Financial Statements of the company and its

subsidiaries, associates and jointly controlled entities. The Financial

Statements of the subsidiaries, associates and jointly controlled

entities are prepared for the same reporting period as the parent

company, using consistent accounting policies in compliance with

the Group accounting policies unless otherwise stated.

All intra-Group balances, income and expenses, unrealised gains

and losses resulting from intra-Group transactions and dividends are

eliminated in full.

Losses within a subsidiary are attributed to the non-controlling

interest even if that results in a deficit balance. A change in the

ownership interest of a subsidiary, without a loss of control, is

accounted for as an equity transaction. If the group losses control

over a subsidiary, it:

Derecognises the assets (including goodwill) and liabilities of

the subsidiary

Derecognises the carrying amount of any non-controlling

interest

Derecognises the cumulative transaction differences, recorded

in equity

Recognises the fair value of consideration received

Recognises the fair value of any investment retained

Recognises any surplus or deficit in profit or loss

Reclassify the parent’s share of components previously

recognised in other comprehensive income to profit or loss or

retained earnings, as appropriate

The Consolidated Financial Statements of Browns & Company PLC.,

as at and for the year ended 31 March 2013 comprise the company,

its subsidiaries, associates and jointly controlled entities. (Together

referred to as the ‘Group’).


3.2.1 Business CombinationsBusiness combinations are accounted for using the acquisition

method in accordance with the SLFRS 3. - Business Combinations.

The cost of an acquisition is measured as the aggregate of the

consideration transferred, measured at acquisition date fair value

and the amount of any non-controlling interest in the acquiree. For

each business combination, the group elects whether it measures

the non-controlling interest in the acquiree either at fair value or

at the proportionate share of the acquiree’s identifiable net assets.

Other cost related to acquisition are expensed and included in

administrative expenses.

When the Group acquires a business, it assesses the financial assets

and liabilities assumed for appropriate classification and designation

in accordance with the contractual terms, economic circumstances

and pertinent conditions as at the acquisition date. This includes the

separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition

date fair value of the acquirer’s previously held equity interest in the

acquiree is remeasured to fair value at the acquisition date through

profit or loss.

After the control of an entity is obtained, changes in ownership

interest that do not result in a loss of control are accounted as equity

transactions and gain or loss from these changes are not recognized

in Income Statement.

Any contingent consideration to be transferred by the acquirer will be

recognized at fair value at the acquisition date. Subsequent changes

in the fair value of the contingent consideration which is deemed to

be an asset or liability, will be recognized in accordance with LKAS 39

either in profit or loss or as a change to other comprehensive income.

3.2.1.1 Acquisitions on or after 1st April 2011The Group measures goodwill as the fair value of the consideration

transferred including the recognized amount of any non-controlling

interest in the acquiree, less the net recognised amount (generally

fair value) of the identifiable assets acquired and liabilities assumed,

all measured as of the acquisition date. When the excess is negative, a

bargain purchase gain is recognized immediately in profit or loss.

3.2.1.2 Acquisitions prior to 1st April 2011As part of its transition to SLFRSs, the Group elected not to restate

those business combinations that occurred prior to 1st April 2011.

In respect of acquisitions prior to 1st April 2011, goodwill represents

the amount recognized under the previous Sri Lanka Accounting

Standards.

3.2.2 SubsidiariesSubsidiaries are entities controlled by the Group. Control exists when

the Company has the power, directly or indirectly, to govern the

financial and operational policies of an entity so as to obtain benefits

from its activities. In assessing control, potential voting rights that

presently are exercisable or convertible are taken into account.

The Financial Statements of subsidiaries are included in the

Consolidated Financial Statements from the date that control

commences until the date that control ceases. Acquisition of

subsidiaries is accounted for using the acquisition method of

accounting.

The accounting policies of subsidiaries have been changed when

necessary to align them with the policies adopted by the Group.

If a member of the group uses accounting policies other than

those adopted in the Consolidated Financial Statements for similar

transactions and events in similar circumstances, appropriate

adjustments are made to its Financial Statements in preparing the

Consolidated Financial Statements.

3.2.3 Non-controlling interestsThe interest of outside shareholders in the Group Companies

is disclosed separately in the net assets not owned, directly or

indirectly, by the group in the consolidated Statements of Financial

Position within equity, separately from the equity attributable to

equity holders of the group under the heading of Non-Controlling

interest. Non-Controlling interest in the comprehensive income

statement of the Group are presented separately in the consolidated

comprehensive income Statement.

3.2.4 Acquisition of Non-controlling interestsSubsequent to the acquisition of control, any further acquisition

of net assets from non-controlling interests is accounted for as

transactions with owners in their capacity as owners. Therefore no

goodwill is recognized as a result of such transactions.

Any difference between the amount by which the Non - Controlling

Interest is adjusted and the fair value of the consideration paid or

received shall be recognized directly in equity and attributed to the

owners of the parent.

3.2.5 Loss of controlThe parent can loose control of a subsidiary with or without a change

in absolute or relative ownership levels. Upon the loss of control, the

Group derecognizes the assets and liabilities of the subsidiary, any

minority interests and the other components of equity related to

the subsidiary. Any surplus or deficit arising on the loss of control is

recognized in Profit or Loss.

If the Group retains any interest in the previous subsidiary, then

such interest is measured at fair value at the date that control is lost.

Subsequently it is accounted for as an equity-accounted investee or

as other financial asset depending on the level of influence retained.

3.2.6 Deemed DisposalsChanges in a parent’s ownership interest in a subsidiary that do not

result in a loss of control are accounted for as an equity transaction.



3.2.7 Financial Reporting DateThe Consolidated Financial Statements incorporating all subsidiaries,

joint ventures and investments in equity accounted investees

(associates) , in the group are prepared to a common financial year

ending March 31. In the case where the reporting dates are different

from the group reporting dates, adjustments are made for any

significant transactions or events up to 31 March.

3.2.8 Jointly-Controlled EntitiesJoint ventures are those entities over whose activities the Group has

joint control, established by contractual agreement and requiring

unanimous consent for strategic financial and operating decisions.

Jointly-controlled entities are accounted for using proportionate

consolidation method, from the date that joint control commences

until the date that joint control ceases. The group combines its share

of the joint ventures’ individual income and expenses, assets and

liabilities and cash flows on a line-by-line basis with similar items in

the group’s Financial Statements.

3.2.9 Equity Accounted Investees (Associates)Equity Accounted Investees (Associates) are those entities in which

the Group has significant influence, but not control, over the financial

and operating activities. Significant influence is presumed to exist

when the Group holds 20% to 50% of the equity and voting power of

another entity which are neither subsidiaries or joint ventures of the

Group.

The investments in Equity Accounted Investees (Associates) are

carried in the Statements of Financial Position at cost plus post

acquisition changes in the group’s share of net assets of the associates

using the equity method. Goodwill relating to an associate is included

in the carrying amount of the investment.

After application of the equity method, the group determines

whether it is necessary to recognize any additional impairment loss

with respect to the group’s net investment in Equity Accounted

Investees (Associates).

The Consolidated Statement of Comprehensive Income reflects the

share of the results of operations of an Equity Accounted Investees

(Associates). Where there has been a change recognized directly

in the equity of an Equity Accounted Investees (Associates), the

group recognizes its share of any changes in the statement of

changes in equity. When the group’s share of losses in an Equity

Accounted Investees (Associates) equals or exceeds the interest in the

undertaking, the group does not recognize further losses unless it has

incurred obligations or made payments on behalf of the entity. The

group ceases to use the equity method of accounting on the date

from which it no longer has significant influence in the associate. The

accounting policies of associate companies conform to those used for

similar transactions of the group.

3.2.10 Goodwill acquired in a Business CombinationsGoodwill acquired in a business combination is initially measured at

cost being the excess of the cost of the business combination over

the group’s interest in the net fair value of the identifiable assets,

liabilities and contingent liabilities. Following initial recognition,

goodwill is measured at cost less any accumulated impairment losses.

Goodwill is reviewed for impairment, annually or more frequently if

events or changes in circumstances indicate that the carrying value

may be impaired. For the purpose of impairment testing, goodwill

acquired in a business combination is, from the acquisition date,

allocated to groups of cash-generating units that are expected

to benefit from the synergies of the combination. Impairment is

determined by assessing the recoverable amount of the cash-

generating unit to which the goodwill relates. Where the recoverable

amount of the cash generating unit is less than the carrying amount,

an impairment loss is recognized. The impairment loss is allocated first

to reduce the carrying amount of any goodwill allocated to the unit

and then to the other assets pro-rata to the carrying amount of each

asset in the unit.

Where goodwill forms part of a cash-generating unit and part of the

operation within that unit is disposed of, the goodwill associated

with the operation disposed of is included in the carrying amount of

the operation when determining the gain or loss on disposal of the

operation.

Carrying amount of the goodwill arising on acquisition of subsidiaries

and joint ventures is presented as an intangible and the goodwill on

an acquisition of an equity accounted investment is included in the

carrying value of the investment.

3.2.11 Gain on Bargain Purchase (negative goodwill)If the Group’s interest in the net fair value of the identifiable assets,

liabilities and contingent liabilities exceeds the cost of the acquisition

of the entity, the Group will reassess the measurement of the

acquiree’s identifiable assets and liabilities and the measurement

of the cost and recognize the difference immediately in the

Consolidated Statement of Comprehensive Income.

3.2.12 Balances and transactions eliminated on ConsolidationIntra-group balances and transactions and any unrealised gains

arising from intra-group transactions, are eliminated in preparing

the Consolidated Financial Statements. Unrealised gains arising

from transactions with associates are eliminated to the extent of

the Group’s interest in the enterprise, against the investment in

the associate. Unrealised losses are eliminated in the same way as

unrealised gains.


3.3 Assets and Bases of their Valuation 3.3.1 Property, Plant and Equipment3.3.1.1 Basis of Recognition and MeasurementItems of Property, plant and equipment are recognized if it is

probable that future economic benefits associated with the asset

will flow to the Group and cost of the asset can be reliably measured.

Property, plant and equipment are measured at cost/revaluation less

accumulated depreciation/ impairment losses.

3.3.1.2 Freehold (Own) AssetsThe cost of Property, plant and equipment includes expenditure

that is directly attributable to the acquisition of the asset. The cost

of self-constructed assets includes the cost of materials and direct

labour, any other costs directly attributable to bringing the assets to a

working condition for their intended use, the costs of dismantling and

removing the items and restoring the site at which they are located

and capitalized borrowing costs.

Purchased software that is integral to the functionality of the related

equipment is capitalized as part of that equipment.

When parts of an item of property, plant and equipment have

different useful lives, they are accounted for as separate items of

property, plant and equipment.

3.3.1.2 (a) Cost ModelThe Group applies the cost model to all property, plant and

equipment except freehold land and buildings; which are recorded at

cost of purchase together with any incidental expenses thereon less

any accumulated depreciation and accumulated impairment losses.

3.3.1.2 (b) Revaluation ModelThe Group revalues its land and buildings which are measured at its

fair value at the date of revaluation less any subsequent accumulated

depreciation and accumulated impairment losses. Revaluations are

made with sufficient regularity to ensure that the carrying amount

does not differ materially from that which would be determined using

fair value at the balance sheet date.

On revaluation of lands and buildings, any increase in the revaluation

amount is credited to the revaluation reserve in shareholder’s equity

unless it off sets a previous decrease in value of the same asset that

was recognized in the Statement of Comprehensive Income. A

decrease in value is recognized in the Statement of Comprehensive

Income where it exceeds the increase previously recognized in the

revaluation reserve. Upon disposal, any related revaluation reserve is

transferred from the revaluation reserve to retained earnings and is

not taken into account in arriving at the gain or loss on disposal.

3.3.1.3 Subsequent CostsThe cost of replacing part of an item of property, plant and

equipment is recognized in the carrying amount of the item if it is

probable that the future economic benefits embodied within the

part will flow to the Group and its cost can be measured reliably. The

carrying amount of the replaced part is de-recognized. The costs

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

recognized in Profit or Loss as incurred.

3.3.1.4 De-recognitionAn item of property, plant and equipment is de-recognized upon

disposal or when no future economic benefits are expected from its

use or disposal.

The gain or loss on disposal of an item of property, plant and

equipment is determined by comparing the proceeds from disposal

with the carrying amount of the property, plant and equipment,

and is recognized net within other income/other expenses in the

Statement of Comprehensive Income. When revalued assets are

sold, the amounts included in the revaluation surplus reserve are

transferred to retained earnings.

3.3.1.5 DepreciationDepreciation is based on the cost of an asset less its residual value.

Significant components of individual assets are assessed and if a

component has a useful life that is different from the remainder of

that asset, that component is depreciated separately.

Depreciation is recognized in Statement of Comprehensive Income

on a straight-line basis over the estimated useful life of each

component of an item of property, plant and equipment. Leased

assets are depreciated over the shorter of the lease term and their

useful lives unless it is reasonably certain that the Group will obtain

ownership by the end of the lease term. Lands are not depreciated.

Depreciation of an asset begins when it is available for use and ceases

at the earlier of the date that the asset is classified as held for sale and

the date that the asset is de-recognized.

Depreciation methods, useful life values are assessed at the reporting

date. The estimated useful lives for the current year are as follows:



The estimated useful lives for the current and comparative year are as

follows:

Property, Plant & Equipment No. of Years

Range

Rate Range

Buildings 20 to 50 years 2 % to 5 %

Plant & Machinery 5 to 30 years 3.33% to 20%

Motor Vehicles 1 to 15 years 6.66% to 100%

Tools & Equipment 8 to 40 years 2.5% to 12.50%

Computers 4 to 8 years 12.50% to 25%

Furniture & Fittings 5 to 20 years 5% to 20%

Ergonomic Equipment 25 years 4%

Water, Sanitations & Others 20 years 5%

Roads & Bridges 50 years 2%

Penstock Pipeline 20 years 5%

Security Fences 3 years 33.33%

Power/Electricity Supply 131/3 years 7.5%

Air Conditioners 5 years 20%

Generator 8 years 12.5%

Cutlery, Crockery & Glassware 5 years 20%

Linen 3 years 33.33%

Sewage System 20 years 5%

Improvement to lease hold Over the Lease period

Buildings Over the Lease period

Improvements to leasehold buildings and buildings constructed on

leasehold land are amortized over the lower of their economic useful

life or unexpired period of lease.

Depreciation of an asset begins when it is available for use and ceases

at the earlier of the date that the asset is classified as held for sale and

the date that the asset is derecognized.

The useful life, depreciating methods and residual values are assessed

annually or in an earlier date where any circumstance indicates such

assessment is required.

3.3.2 Capital Work-in-ProgressCapital work-in-progress is stated at cost. These are expenses of a

capital nature directly incurred in the construction of an asset. Capital

work in progress is transferred to the respective asset accounts at the

time of the first utilization or at the time the asset is commissioned.

3.3.3 Leasehold Property, Plant & Equipment (Assets Acquired on Finance Leases)

3.3.3.1 Finance LeasesProperty, Plant and Equipment on finance leases, which effectively

transfer to the company substantially the entire risk and rewards

incidental to ownership of the leased items, are disclosed as finance

leases at their cash price and depreciated over the period the

company is expected to benefit from the use of the leased assets.

The corresponding principal amount payable to the lessor is shown

as a liability.

The interest element of the rental obligation applicable to each

financial year is charged to the statement of comprehensive income

over the period of the lease so as to produce a constant periodic rate

of interest on the remaining balance of the liability for each period.

The cost of improvements to or on leased property is capitalized, and

depreciated over the unexpired period of the lease or the estimated

useful lives of the improvements, whichever is shorter.

3.3.3.2 Operating Leases Leases where the lessor effectively retains substantially all the risks

and benefits of ownership over the leased term are classified as

operating leases.

Lease payments paid under operating leases are recognized as an

expense in the statement of comprehensive income.

3.3.4 Prepaid Lease RentalsPrepaid lease rentals paid to acquire land use rights are amortized

over the lease term in accordance with the pattern of benefits

provided. Leasehold properties are tested for impairment annually

and are written down where applicable. The impairment loss, if any, is

recognized in the Statement of Comprehensive Income.

3.3.5 Investment Property3.3.5.1 Basis of RecognitionInvestment property is property held either to earn rental income or

for capital appreciation or for both, but not for sale in the ordinary

course of business, use in the production or supply of goods or

services or for administrative purposes.

3.3.5.2 Basis of Measurement3.3.5.2.1 Fair value ModelInvestment properties are initially recognized at cost. Subsequent to

initial recognition the investment properties are stated at fair values,

which reflect market conditions at the Balance Sheet date. Gains or

losses arising from changes in fair value are included in the Statement

of Comprehensive Income in the year in which they arise.

Where Group companies occupy a significant portion of the

investment property of a subsidiary, such investment properties

are treated as property, plant and equipment in the Consolidated

Financial Statements, and accounted for as per LKAS 16- Property,

Plant and Equipment.


3.3.5.2.2 De-recognition Investment properties are de-recognized when either they have

been disposed of or when the investment property is permanently

withdrawn from use and no future economic benefit is expected

from its disposal. Any gains or losses on the retirement or disposal

of an investment property are recognized in the Statement of

Comprehensive Income in the year of retirement or disposal.

3.3.5.2.3 Subsequent Transfers to/from Investment PropertyTransfers are made to investment property when, and only when,

there is a change in use, evidenced by the end of owner occupation,

commencement of an operating lease to another party or

completion of construction or development.

Transfers are made from investment property when, and only when,

there is a change in use, evidenced by commencement of owner

occupation or commencement of development with a view to sale.

For a transfer from investment property to owner occupied, the

deemed cost of property for subsequent accounting is its fair value at

the date of change in use. If the property occupied by the Company

as an owner occupied property becomes an investment property, the

Company, accounts for such property in accordance with the policy

stated under property, plant and equipment up to the date of change

in use.

For a transfer from owner occupied to investment property, any

difference between the fair value of the property at that date

and its previous carrying amount is recognized in the Statement

of Comprehensive Income. When the Company completes the

construction or development of a self-constructed investment

property, any difference between the fair value of the property at that

date and its previous carrying amount is recognized in the Statement

of Comprehensive Income.

3.3.5.2.4 Determining Fair Value External and independent valuers, having appropriate recognized

professional qualifications and recent experience in the location and

category of property being valued, values the investment property

portfolio every year.

The fair values are based on market values, being the estimated

amount for which a property could be exchanged on the date of

the valuation between a willing buyer and a willing seller in an arm’s

length transaction after proper marketing wherein the parties had

each acted knowledgeably.

3.3.6 Impairment of AssetsThe group assesses at each reporting date whether there is an

indication that an asset may be impaired. If any such indication exists,

or when annual impairment testing for an asset is required, the group

makes an estimate of the asset’s recoverable amount. An asset’s

recoverable amount is the higher of an asset’s or cash generating

unit’s (CGU’s) fair value less costs to sell and its value in use and is

determined for an individual asset, unless the asset does not generate

cash inflows that are largely independent of those from other assets

or groups of assets.

Where the carrying amount of an asset exceeds its recoverable

amount, the asset is considered impaired and is written down to its

recoverable amount. 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 assessments of the time

value of money and the risks specific to the asset. Impairment

losses are recognized in the Statement of Comprehensive Income

statement except for impairment losses in respect of Property, Plant

and Equipment which are recognized against the revaluation reserve

to the extent that it reverses a previous revaluation surplus.

An assessment is made at each reporting date as to whether there

is any indication that previously recognized impairment losses

may no longer exist or may have decreased. Previously recognized

impairment losses other than in respect of goodwill, are reversed only

if there has been an increase in the recoverable amount of the asset.

Such increase is recognized to the extent of the carrying amount had

no impairment losses been recognized previously.

3.3.7 Intangible Assets3.3.7.1 Basis of RecognitionAn Intangible Asset is recognized if it is probable that future

economic benefits that are attributable to the assets will flow to the

entity and the cost of the assets can be measured reliably.

3.3.7.2 Basis of MeasurementIntangible assets acquired separately are measured as initial

recognition at cost. Following initial recognition intangible assets

are carried at cost less any accumulated amortization and any

accumulated impairment losses. The useful life of intangible assets is

assessed to be either finite or indefinite. Intangible assets with finite

useful life are amortized over the useful economic life and assessed

for impairment whenever there is an indication that the intangible

asset may be impaired. The amortization period and the method

for an intangible asset with a finite useful life is reviewed at least at

each financial year end. Intangible assets with indefinite useful lives

are tested for impairment annually either individually or at the cash

generating unit level.

3.3.7.3 Subsequent ExpenditureSubsequent expenditure on intangible assets is capitalized only when

it increases the future economic benefits embodied these assets. All

other expenditure is expensed when incurred.

3.3.7.4 De-recognitionIntangible assets are de-recognized on disposal or when no future

economic benefits are expected from its use. The gain or loss

arising from de-recognition of intangible assets are measured as

the difference between the net disposal proceeds and the carrying

amount of the asset.



3.3.7.5 AmortizationAmortization is recognized in the Statement of Comprehensive

income on a straight-line basis over the estimated useful life of

intangible assets, other than goodwill, from the date that they are

available for use.

The estimated useful life of each intangible asset is as follows;

Computer Software 4-5 years

Amortization methods, useful lives and residual values are reviewed at

each reporting date and adjusted if appropriate.

3.3.8 Non-Current Assets Held for Sale and Discontinued Operations

Non-current assets and disposal groups classified as held for sale are

measured at the lower of their carrying amount and fair value less

costs to sell. Non-current assets and disposal groups are classified as

held for sale only when the sale is highly probable and the asset or

disposal group is available for immediate sale in its present condition.

In the consolidated statement of comprehensive income of the

reporting period, and of the comparable period of the previous year,

income and expenses from discontinued operations are reported

separately from income and expenses from continuing operations.

Property, plant and equipment and intangible assets once classified

as held for sale are not depreciated or amortized.

3.4 Financial Instruments3.4.1 Non derivative Financial Instruments3.4.1.1 Initial RecognitionThe Group initially recognizes loans and advances, deposits, debt

securities issued and subordinated liabilities on the date at which

they are originated. All the financial assets and liabilities other than

regular way purchases and sales are recognized on the trade date at

which the Group becomes a party to the contractual provisions of the

instruments.

3.4.1.2 De-recognitionThe Group derecognizes a financial asset when the contractual rights

to the cash flows from the financial asset expire, or when it transfers

the financial asset in a transaction in which substantially all the risks

and rewards of ownership of the financial asset are transferred or

in which the Group neither transfers nor retains substantially all

the risks and rewards of ownership and it does not retain control of

the financial asset. Any interest in transferred financial assets that

qualify for de-recognition that is created or retained by the Group is

recognized as a separate asset or liability in the statement of financial

position. On de-recognition of a financial asset, the difference

between the carrying amount of the asset (or the carrying amount

allocated to the portion of the asset transferred), and the sum of (i)

the consideration received (including any new asset obtained less any

new liability assumed) and (ii) any cumulative gain or loss that had

been recognized in other comprehensive income is recognized in

Profit or Loss.

The Group enters into transactions whereby it transfers assets

recognized on its statement of financial position, but retains either all

or substantially all of the risks and rewards of the transferred assets

or a portion of them. If all or substantially all risks and rewards are

retained, then the transferred assets are not derecognized.

In transactions in which the Group neither retains nor transfers

substantially all the risks and rewards of ownership of a financial asset

and it retains control over the asset, the Group continues to recognize

the asset to the extent of its continuing involvement, determined

by the extent to which it is exposed to changes in the value of the

transferred asset.

The Group/Company derecognizes a financial liability when its

contractual obligations are discharged or cancelled or expire.

3.4.1.3 OffsettingFinancial assets and liabilities are offset and the net amount presented

in the statement of financial position when, and only when, the

Group has a legal right to offset the amounts and intends either

to settle on a net basis or to realize the asset and settle the liability

simultaneously.

3.4.1.4 Amortized cost measurementThe amortized cost of a financial asset or liability is the amount at

which the financial asset or liability is measured at initial recognition,

minus principal repayments, plus or minus the cumulative

amortization using the effective interest method of any difference

between the initial amount recognized and the maturity amount,

minus any reduction for impairment.

3.4.1.5 Fair value measurement Fair value is the amount for which an asset could be exchanged, or a

liability settled, between knowledgeable, willing parties in an arm’s

length transaction on the measurement date.

When available, the Group measures the fair value of an instrument

using quoted prices in an active market for that instrument. A market

is regarded as active if quoted prices are readily and regularly available

and represent actual and regularly occurring market transactions on

an arm’s length basis.

If a market for a financial instrument is not active, the Group

establishes fair value using a valuation technique. Valuation

techniques include using recent arm’s length transactions between

knowledgeable, willing parties (if available), reference to the current

fair value of other instruments that are substantially the same,

discounted cash flow analyses and other equity pricing models.

The chosen valuation technique makes maximum use of market

inputs, relies as little as possible on estimates specific to the Group,

incorporates all factors that market participants would consider

in setting a price, and is consistent with accepted economic

methodologies for pricing financial instruments.


The best evidence of the fair value of a financial instrument at

initial recognition is the transaction price, i.e. the fair value of

the consideration given or received, unless the fair value of that

instrument is evidenced by comparison with other observable

current market transactions in the same instrument or based on

a valuation technique whose variables include only data from

observable markets. When transaction price provides the best

evidence of fair value at initial recognition, the financial instrument is

initially measured at the transaction price and any difference between

this price and the value initially obtained from a valuation model is

subsequently recognized in Profit or Loss.

Valuation of Financial InstrumentsThe Group measures the fair values using the following fair value

hierarchy that reflects the significance of the inputs used in making

the measurements.

Level 1 – Quoted market price (unadjusted) in an active market of an

identical instrument.

Level 2 – Valuation techniques based on observable inputs, either

directly (i.e., as prices) or indirectly (i.e., derived from prices), this

category included instruments valued using: quoted market prices

in active markets similar instruments; quoted prices for identical or

similar instruments in markets are considered less than active: or

other valuation techniques where all significant inputs are directly

observable from market data.

Level 3 – Valuation techniques use significant unobservable inputs.

This category includes all instruments where the valuation technique

includes inputs not based on observable data and the unobservable

inputs have a significant effect on the instrument’s valuation.

This category includes instruments that are valued based on quoted

prices for similar instruments where significant unobservable

adjustments or assumptions are required to reflect differences

between the instruments.

Fair values of financial assets and financial liabilities that are traded

in active markets are based on quoted market prices or dealer price

quotations. For all other financial instruments the Group determines

fair values using valuation techniques

Valuation techniques include net present value and discounted

cash flow models, comparison to similar instruments for which

market observable prices exist, other equity pricing models and

other valuation models. Assumptions and inputs used in valuation

technique include risk free and bench mark interest rates, credit

spreads and other premium used in estimating discount rates, bond

and other equity prices, foreign currency exchange rates, equity and

equity index prices and expected price volatilities and correlations.

The objective of valuation techniques is to arrive at a fair value

determination that reflects the price of the financial instruments

at the reporting date that would have been determined by market

participants acting at arm’s length.

The Group widely recognized valuation models for determining

the fair value of common and more simple financial instruments.

Observable prices and model inputs are usually available in the

market for listed debt and equity securities. Availability of observable

market inputs reduces the need of management judgment and

estimation and also reduces the uncertainty associated with

determination of fair values. Availability of observable market prices

and inputs varies depending on the products and markets are is

prone to changes based on specific events and general conditions in

the financial markets.

The table below shows the different basis used in assessing the fair

value of financial instruments,

Instrument Category Fair value basis and assumptions Fair value hierarchy

Financial Assets

Fair value through profit or loss

- Trading equity shares Valued using market prices Level 1

Loans and receivables

Loans & Advances Stated at amortized cost Level 3

Staff loans Stated at amortized cost

Loan given to employees at below market rate will be identified at market rate by

discounting the loan at market rate. The group companies used 19%-25% rate for

this purpose.

Level 3

- Repo investments Stated at amortized cost Level 2

- Commercial papers Stated at amortized cost Level 2



3.4.1.6 Identification and measurement of impairmentAt each reporting date the Group assesses whether there is objective

evidence that financial assets not carried at fair value through Profit

or Loss are impaired. A financial asset or a group of financial assets

is (are) impaired when objective evidence demonstrates that a loss

event has occurred after the initial recognition of the asset(s), and that

the loss event has an impact on the future cash flows of the asset(s)

that can be estimated reliably.

Objective evidence that financial assets (including equity securities)

are impaired can include significant financial difficulty of the borrower

or issuer, default or delinquency by a borrower, restructuring of a

loan or advance by the Group on terms that the Group would not

otherwise consider, indications that a borrower or issuer will enter

bankruptcy, the disappearance of an active market for a security, or

other observable data relating to a group of assets such as adverse

changes in the payment status of borrowers or issuers in the group

of economic conditions that correlate with defaults in the group.

In addition, for an investment in an equity security, a significant or

prolonged decline in its fair value below its cost is objective evidence

of impairment.

The Group considers evidence of impairment for loans and advances

at both a specific and collective basis. All individually significant loans

and advances are assessed for specific impairment. All individually

significant loans and advances found not to be specifically impaired

are then collectively assessed for any impairment that has been

incurred but not yet identified.

Loans and advances that are not individually significant are

collectively assessed for impairment by grouping them together with

similar risk characteristics based on product types.

In assessing collective impairment the Group uses statistical modeling

of historical trends of the probability of default, timing of recoveries

and the amount of loss incurred, adjusted for management’s

judgment as to whether current economic and credit conditions

are such that the actual losses are likely to be greater or less than

suggested by historical modeling, Default rates, loss rates and the

expected timing of future recoveries are regularly taken into account

to ensure that they remain appropriate.

Impairment losses on assets carried at amortized cost are measured

as the difference between the carrying amount of the financial asset

and the present value of estimated future cash flows discounted

at the asset’s original effective interest rate. Impairment losses are

recognized in Profit or Loss and reflected in an allowance account

against loans and advances. Interest on impaired assets continues

to be recognized through the unwinding of the discount. When a

subsequent event causes the amount of impairment loss to decrease,

the decrease in impairment loss is reversed through Profit or Loss.

Impairment losses on available-for-sale investment securities

are recognized by transferring the cumulative loss that has been

recognized in other comprehensive income to Profit or Loss as a

reclassification adjustment. The cumulative loss that is reclassified

from other comprehensive income to Profit or Loss is the difference

between the acquisition cost, net of any principal repayment and

amortization, and the current fair value, less any impairment loss

previously recognized in Profit or Loss. Changes in impairment

provisions attributable to time value are reflected as a component of

interest income.

If, in a subsequent period, the fair value of an impaired available-

for-sale debt security increases and the increase can be objectively

related to an event occurring after the impairment loss was

recognized in Profit or Loss, the impairment loss is reversed, with the

amount of the reversal recognized in Profit or Loss. However, any

subsequent recovery in the fair value of an impaired available-for-sale

equity security is recognized in Other Comprehensive Income.

Instrument Category Fair value basis and assumptions Fair value hierarchy

- Corporate debentures No investment has been made

Held to Maturity No investment has been classified at held to maturity

Available for sale instruments

- Treasury Bonds Valued using market yields

In valuing the Bonds at market rates the bid quotes available in the market.

Level 1

- Treasury Bills Valued using market yields

In valuing the Bills at market rates the bid quotes available in the market.

Level 1

Financial Liabilities

Other Financial Liabilities Stated at amortized cost Level 3


3.4.2 Financial Assets Financial assets are within the scope of LKAS 39 are classified

appropriately as Fair value through Profit or Loss (FVTPL), loans and

receivables (L&R), held to maturity investments (HTM), available-for-

sale financial assets (AFS) as appropriate. The Group determines the

classification of its financial assets at initial recognition.

All the financial assets are recognized initially at fair value plus

transaction costs, except in the case of financial assets recorded at fair

value through profit or loss.

3.4.2.1 Financial assets at fair value through Profit or LossA financial asset is classified at fair value through Profit or Loss if it

is classified as held for trading or is designated as such upon initial

recognition. Financial assets are designated at fair value through Profit

or Loss if the Group manages such investments and makes purchase

and sale decisions based on their fair value in accordance with the

Group’s documented risk management or investment strategy. Upon

initial recognition, transaction costs are recognized in Profit or Loss as

incurred.

Financial assets at fair value through Profit or Loss are measured at fair

value, and subsequent therein are recognized in Profit or Loss.

3.4.2.2 Loans and ReceivablesLoans and receivables are non-derivative financial assets with fixed

or determinable payments that are not quoted in an active market.

Such assets are recognized initially at fair value plus any directly

attributable transaction costs. Subsequent to initial recognition, loans

and receivables are measured at amortized cost using the effective

interest method, less any impairment losses.

Loans and receivables of the Group comprise of the following,

(a) Advances and Loans Advances and loans to related parties, employees and customers

comprised of loans, loans with fixed instalments and advances.

Loans of such nature with fixed instalments are stated in the Balance

Sheet net of possible loan losses and net of interest, which is not

accrued to revenue.

(b) Trade ReceivablesTrade and other receivables are stated at the amounts that are

estimated to realize, net of provisions for bad and doubtful

receivables. A provision for doubtful debts is made where as there

is objective evidence that the Company will not be able to recover

all amounts due according to the original terms of receivables. Bad

debts are written-off when identified.

3.4.2.3 Held-to-maturity financial assetsIf the Group has the positive intent and ability to hold debt or

investment securities to maturity, then such financial assets are

classified as held-to-maturity. Held-to-maturity financial assets

are recognized initially at fair value plus any directly attributable

transaction costs. Subsequent to initial recognition held to- maturity

financial assets are measured at amortized cost using the effective

interest method, less any impairment losses.

Any sale or reclassification of a more than insignificant amount of

held-to-maturity investments not close to their maturity would result

in the reclassification of all held-to-maturity investments as available-

for-sale, and prevent the Group from classifying investment securities

as held-to-maturity for the current and the following two financial

years.

3.4.2.4 Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivative financial assets

that are designated as available for- sale and that are not classified

in any of the previous categories. The Group’s investments in equity

securities and certain debt securities are classified as available-for-sale

financial assets.

Subsequent to initial recognition, these are measured at fair value

and changes therein, other than impairment losses are recognized in

other comprehensive income and presented within equity in the fair

value reserve. When an investment is derecognized, the cumulative

gain or loss in other comprehensive income is transferred to Profit or

Loss.

3.4.2.5 Other Current assetsAssets classified as current assets in the Statement of Financial

Position are those expected to realize during the normal operating

cycle of business or within one year from the Statement of Financial

Position date, whichever is longer and cash balances. Assets other

than current assets are those which the Group/Company intends to

hold beyond the one year period from the Statement of Financial

Position date

a) Other Receivables and Prepayments Other receivable balances and prepayments are stated at estimated

amounts receivable after providing for doubtful receivables.

b) Short Term Investments Short term investments are measured at fair value since their carrying

values are almost equal to its fair value.

c) Cash and Cash EquivalentsCash and cash equivalents comprise of cash in hand and cash at

banks and other highly liquid financial assets which are held for the

purpose of meeting short-term cash commitments with original

maturities of less than three months which are subject to insignificant

risk of changes in their fair value.

Bank overdrafts that are repayable on demand and form an integral

part of the Group cash management are included as a component of

cash and cash equivalents for the purpose of the statement of cash

flows



3.4.2.6 InventoriesInventories are measured at the lower of cost and net realizable value.

The cost of inventories is based on the first-in first-out principle,

and includes expenditure incurred in acquiring the inventories,

production or conversion costs and other costs incurred in bringing

them to their existing location and condition.

In the case of manufactured inventories and work in progress, cost

includes an appropriate share of production overheads based on

normal operating capacity. Net realizable value is the estimated

selling price in the ordinary course of business, less the estimated

costs of completion and selling expenses.

For the manufacturing stocks, provision for slow moving inventories is

made when the holding period exceeds 365 days, and the sale of the

inventories is no longer probable.

The cost incurred in bringing inventories to its present location and

condition is accounted using the following cost formula:

Type of Inventory Method of Valuation

Input Materials Weighted Average Cost Formula

Growing Crop - Nurseries At the cost of direct materials,

direct labour and appropriate

proportion of directly

attributable overheads less

provision for overgrown plants

Harvested Crop Agricultural produce harvested

from an entity’s biological

assets shall be measured at

its fair value less costs to sell

at the point of harvest. Such

measurement is deemed to

be the cost at the time of

transferring the harvested crop

to inventories.

Spares and Consumables Weighted average Cost basis

Finished goods and work-in-

progress

First in First out (FIFO) basis

3.4.3 FINANCIAL LIABILITIES AND PROVISIONS3.4.3.1 Financial Liabilities The Group initially recognizes debt securities and Loans & Borrowings

on the date that they are originated. All other financial liabilities

are recognized at initially on the trade date, which is the date that

the Company becomes party to the contractual provisions of the

instruments.

The Group derecognizes a financial liability when its contractual

obligations are discharged, cancelled or expired.

The Group classifies non-derivative financial liabilities into the other

financial liabilities category. Such financial liabilities are recognized

initially at fair value plus any directly attributable transaction cost.

Subsequent to initial recognition, these financial liabilities are

measured at amortized cost using effective interest rate method.

Other financial liabilities comprise of Loans & Borrowings, bank

overdraft and debentures issued.

3.4.3.2 Accounts Payables and Accrued ExpensesTrade and other payables are stated at cost.

3.4.3.3 ProvisionsProvisions are made for all obligations existing as at the date of

Statement of Financial Position when it is probable that such an

obligation will result in an outflow of resources and a reliable estimate

can be made of the quantum of the outflow. All contingent liabilities

are disclosed as a note to the Financial Statements unless the outflow

of resources is remote. Contingent assets are disclosed, where inflow

of economic benefit is probable.

3.4.4.1 Other Liabilities and Provisions 3.4.4.1.1 General

Liabilities classified as current liabilities on the statement of financial

position are those which fall due for payment on demand or within

one year from the Statement of Financial Position date. Non-current

liabilities are those balances that fall due for payment after one year

from the Statement of Financial Position date. All known liabilities

have been accounted for in preparing these Financial Statements.

Provisions and liabilities are recognized when the company has a

legal or constructive obligation as a result of past events and it is

probable that an outflow of economic benefits will be required to

settle the obligation.

3.4.4.2 Employee benefits3.4.4.2.1 Defined Benefit Plan –Retirement Benefit

Obligations

A defined benefit plan is a post -employment benefit plan other

than a defined contribution plan. The liability recognized in the

balance sheet in respect of defined benefit plan is the present value

of the defined benefit obligation at the balance sheet date. Benefits

falling due more than 12 months after the balance sheet date

are discounted to present value. The defined benefit obligation is

calculated annually by independent actuaries using Projected Unit

Credit Method (PUC) as recommended by LKAS – 19 “Employees

benefits”. The assumptions based on which the results of the actuarial

valuation was determined, are disclosed in Note No. 35 to the

Financial Statements.

The Retirement Benefit Obligation is based on the actuarial valuation

carried out by the M/s. Actuarial & Management Consultants (Pvt) Ltd.


Provision has been made for retirement gratuities from the first year

of service of all employees, in conformity with LKAS 19 on Employee

Benefit. However under the Payment of Gratuity Act No.12 of 1983,

the liability to an employee arises only on completion of five years of

continued service.

The liability is not externally funded.

3.4.4.2.2 Defined Contribution Plans

A Defined Contribution Plan is a post-employment benefit plan under

which an entity pays fixed contributions into a separate entity and

will have no legal or constructive obligation to pay further amounts.

Obligations for contributions to Defined Contribution Plans are

recognized as an employee benefit expense in the Statement of

Comprehensive Income in the periods during which services are

rendered by employees.

The Group Contributes 12% and 3% of gross emoluments to

employees as Employees Provident Fund (EPF) & Employees Trust

Fund (ETF) contribution respectively.

3.4.4.2.3 Employees’ Provident Fund (EPF)

The Company and employees contribute 12% and 8% respectively

on the gross emoluments of each employee to the above mentioned

funds.

3.4.4.2.4 Employees’ Trust Fund (ETF)

The Company contributes 3% of the gross emoluments of each

employee to the Employees’ Trust Fund.

3.4.4.3 Short-term employee benefitsShort-term employee benefit obligations are measured on an

undiscounted basis and are expensed as the related service is

provided. A liability is recognized for the amount expected to be paid

under short-term cash bonus if the company has a present legal or

constructive obligation to pay this amount as a result of past services

provided by the employee, and the obligation can be estimated

reliably.

3.4.5 Finance LeasesProperty and Equipment on finance leases, which effectively transfer

to the Group substantially the entire risk and rewards incidental to

ownership of the leased items, are disclosed as finance leases at their

cash price and depreciated over the period the Group is expected to

benefit from the use of the leased assets.

The corresponding principal amount payable to the lessor is shown

as a liability. Lease payments are apportioned between the finance

charges and reduction of the lease liability so as to achieve a constant

rate of interest on the outstanding balance of the liability. The interest

payable over the period of the lease is transferred to an interest in

suspense account. The interest element of the rental obligations

pertaining to each financial year is charged to the Statement of

Comprehensive Income over the period of lease.

3.4.5.1 Lease Payments

Payments made under operating leases are recognized in Profit

or Loss on a straight-line basis over the term of the lease. Lease

incentives received are recognized as an integral part of the total

lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned

between the finance expense and the reduction of the outstanding

liability. The finance expense is allocated to each period during the

lease term so as to produce a constant periodic rate of interest on the

remaining balance of the liability.

3.4.6 Provisions, Contingent Assets and Contingent Liabilities

Provisions are made for all obligations existing as at the Balance

Sheet date when it is probable that such an obligation will result in

an outflow of resources and a reliable estimate can be made of the

quantum of the outflow. All contingent liabilities are disclosed as a

note to the Financial Statements unless the outflow of resources is

remote. Contingent assets are disclosed, where inflow of economic

benefit is probable.

STATEMENT OF COMPREHENSIVE INCOME

3.5 RevenueIncome comprises of revenue, income and other income other than

those relating to contributions from equity participants.

The following are the main components of the revenue;

Trading & Related Services Sale of consumer, agricultural,

motor vehicles and industrial

items and providing related

services.

Leisure Accommodation sales, Service

Charges, Food & Beverages

income and outlet sales.

Plantation Sale of perennial crops

Power Generation Sale of electrical energy, sale of

solar system.

Revenue is income that arises in the course of ordinary activities

of group companies. Other Income such as interest on treasury

bills, gain on disposal of property, plant and equipment, rental

income, dividend income, foreign exchange gain, gain on disposal

of investments securities, gain on marked to market valuation of

investments is also included in Other income.

3.5.1 Revenue RecognitionRevenue is recognized to the extent that it is probable that the

economic benefits will flow to the Group, and the revenue and

associated costs incurred or to be incurred can be reliably measured.

Revenue is measured at the fair value of the consideration received or



receivable, net of trade discounts and value added taxes, net of sales

within the Group.

3.5.1.1 Goods soldRevenue from the sale of goods in the course of ordinary activities is

measured at the fair value of the consideration received or receivable,

net of returns, trade discounts and volume rebates. Revenue is

recognized when persuasive evidence exists, usually in the form of

an executed sales agreement, that the significant risks and rewards

of ownership have been transferred to the customer, recovery of the

consideration is probable, the associated costs and possible return of

goods can be estimated reliably, there is no continuing management

involvement with the goods, and the amount of revenue can be

measured reliably.

If it is probable that discounts will be granted and the amount can be

measured reliably, then the discount is recognized as a reduction of

revenue as the sales are recognized. The timing of the transfer of risks

and rewards varies depending on the individual terms of the sales

agreement.

3.5.1.2 Rendering of ServicesRevenue from services rendered is recognized in Profit or Loss in

proportion to the stage of completion of the transaction at the

reporting date. The stage of completion is assessed by reference to

surveys of work performed.

3.5.1.3 Fees and Other IncomeFees and commission income and expense that are integral to the

effective interest rate on a financial asset or liability are included in the

measurement of the effective interest rate.

Other fees and commission income, including servicing fees,

investment management fees, sales commission are recognized as

the related services are performed.

Other fees and commission expense relate mainly to transaction and

service fees, which are expensed as the services are received.

3.5.1.4 Net Trading IncomeNet trading income comprise of gains less losses related to trading

assets and liabilities, and includes all realized and unrealised fair value

changes, interest, dividends and foreign exchange differences.

3.5.1.5 Net income from other financial instruments at fair value through Profit or LossNet income from other financial instruments at fair value through

Profit or Loss relates to non-trading derivatives held for risk

management purposes that do not form part of qualifying hedge

relationships and financial assets and liabilities designated at fair value

through Profit or Loss, and include all realized and unrealised fair

value changes, interest, dividends and foreign exchange differences.

3.5.1.6 Rental IncomeRental income from investment property is recognized in profit or loss

on a straight-line basis over the term of the lease. Lease incentives

granted are recognized as an integral part of the total rental income,

over the term of the lease. Rental income from subleased property is

recognized as other income.

Rental income is recognized in the income statement as it accrues.

3.5.1.7 Dividend IncomeDividend income is recognized in the income statement, when the

right to receive payment is established.

3.5.1.8 Interest IncomeInterest income and expense are recognized in Profit or Loss using the

effective interest method. The effective interest rate is the rate that

exactly discounts the estimated future cash payments and receipts

through the expected life of the financial asset or liability (or, where

appropriate, a shorter period) to the carrying amount of the financial

asset or liability. When calculating the effective interest rate, the

Group estimates future cash flows considering all contractual terms of

the financial instrument, but not future credit losses.

The calculation of the effective interest rate includes all fees paid are

an integral part of the effective interest rate. Transaction costs include

incremental costs that are directly attributable to the acquisition or

issue of a financial asset or liability.

Interest income and expense presented in the Statement of

Comprehensive Income include:

interest on financial assets and financial liabilities measured at

amortized cost calculated on an effective interest basis

interest on available for sale investment securities calculated

on an effective interest basis

Interest income and expense on all trading assets and liabilities are

considered to be incidental to the Group’s trading operations and are

presented together with all other changes in the fair value of trading

assets and liabilities in net trading income.

Fair value changes on other financial assets and liabilities carried at

fair value through Profit or Loss, are presented in net income from

other financial instruments at fair value through profit or loss in the

Statement of Comprehensive Income.

3.5.1.9 Gains and LossesGains or Losses on the disposal of Property, Plant and Equipment and

other Non-Current assets, including investments held by the Group

have been accounted for in the Statement of Comprehensive Income,

after deducting from the net sales proceeds on disposal the carrying

amount of such Assets.


3.5.2 Government Grants3.5.2.1 Amortization of Government Grants ReceivedAn unconditional government grant is recognized in the Statement of

Income as other income when the grant becomes receivable.

Other government grants are recognized initially as deferred income

at fair value when there is reasonable assurance that they will be

received and the Group will comply with the conditions associated

with the grant and are then recognized in the Statement of Income as

other income on a systematic basis over the useful life of the asset.

Grants that compensate the Group for expenses incurred are

recognized in the Statement of Income as other income on a

systematic basis in the same periods in which the expenses are

recognized.

3.6 Expenses RecognitionExpenses are recognized in the Statement of Income on the basis

of a direct association between the cost incurred and the earning of

specific items of income. All expenditure incurred in the running of

the business and in maintaining the property, plant & equipment in a

state of efficiency has been charged to income in arriving at the profit

for the year.

For the presentation of the Statement of Comprehensive Income the

Directors are of the opinion that the nature of the expenses method

present fairly the element of the Company’s performance, and hence

such presentation method is adopted.

Preliminary and pre-operational expenditure is recognized in the

Statement of Income.

Repairs and renewals are charged to the Profit or Loss in the year in

which the expenditure is incurred.

3.6.1 Operating LeasesPayments made under operating leases are recognized in Profit

or Loss on a straight-line basis over the term of the lease. Lease

incentives received are recognized as an integral part of the total

lease expense, over the term of the lease.

3.6.2 Finance costsFinance costs comprise interest expense on borrowings and

impairment losses recognized on financial assets (other than trade

receivables), are recognized in the Statement of Comprehensive

Income.

3.6.3 Borrowing costsBorrowing costs that are directly attributable to the acquisition,

construction or production of qualifying assets that take a substantial

period of time to get ready for its intended use or sale, are capitalized

as part of the assets.

Borrowing costs that are not directly attributable to the acquisition,

construction or production of a qualifying asset are recognized in

profit or loss using the effective interest method.

3.6.4 TaxationTax expense comprises of current, deferred tax and other

statutory taxes. Income tax expense is recognized in Statement of

Comprehensive income except to the extent that it relates to items

recognized directly in the statement changes in equity.

3.6.4.1 Income Tax ExpenseCurrent tax is the expected tax payable or recoverable on the taxable

income or loss for the year, using tax rates enacted or substantively

enacted at the reporting date, and any adjustment to tax payable in

respect of previous years. Current tax payable also includes any tax

liability arising from the tax on dividend income.

The provision for income tax is based on the elements of income and

expenditure as reported in the Financial Statements and computed

in accordance with the provisions of the Inland Revenue Act. No 10 of

2006 and subsequent amendments thereto.

Current tax assets and liabilities for the current and prior periods are

measured at the amount expected to be recovered from or paid to

the Commissioner General of Inland Revenue.

3.6.4.2 Deferred Tax Deferred tax is recognized in respect of temporary differences

between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for taxation purposes.

Deferred tax is not recognized for:

Temporary differences on the initial recognition of assets or

liabilities in a transaction that is not a business combination

and that affects neither accounting nor taxable Profit or Loss;

Temporary differences related to investments in subsidiaries

and jointly controlled entities to the extent that it is probable

that they will not reverse in the foreseeable future; and

Taxable temporary differences arising on the initial recognition

of goodwill.

Taxable temporary differences arising on subsidiaries,

associates or joint ventures who have not distributed their

entire profits to the parent or investor.

Deferred tax is measured at the tax rates that are expected to be

applied to temporary differences when they reverse, based on

the laws that have been enacted or substantively enacted by the

reporting date.

Deferred tax assets and liabilities are offset if there is a legally

enforceable right to offset current tax liabilities and assets, and they

relate to income taxes levied by the same tax authority on the same

taxable entity, or on different tax entities, but they intend to settle

current tax liabilities and assets on a net basis or their tax assets and

liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits

and deductible temporary differences, to the extent that it is probable

that future taxable profits will be available against which they can be



utilized. Deferred tax assets are reviewed at each reporting date and

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

tax benefits will be realized.

Deferred tax assets and liabilities are not discounted.

The net increase in the carrying amount of deferred tax liability

net of deferred tax asset is recognized as deferred tax asset is

recognized as deferred tax expense and conversely any net decrease

is recognized as reversal to deferred tax expense, in the Statement of

Comprehensive Income.

3.6.4.3 Companies enjoying tax holidaysGroup companies enjoying a tax exemption period shall only

recognize deferred tax in their Financial Statements for temporary

differences, where reversals of such differences extend beyond the

tax exemption period.

Deferred Tax shall not be considered nor provided for assets/

liabilities for which tax impacts and reversals take place within the tax

exemption period. There will be no tax implications that take place

after the expiration of the tax exemption period for such assets.

Where a Company is entitled to claim the total value or any part of

expenditure made during the tax holiday period, as deductions for

tax purposes after the tax holiday period, such an entity will treat such

amount of expenditure as part of the tax base throughout the tax

holiday period in the purpose of recognizing deferred tax.

3.6.4.4 Withholding Tax on DividendsDividend distributed out of taxable profit of the local companies

attracts a 10% deduction at source and is not available for set off

against the tax liability of the Company. Withholding tax that arises

from the distribution of dividends by the Company is recognized

at the same time as the liability to pay the related dividend is

recognized.

3.6.4.5 Economic Service Charge (ESC)As per the provisions of Economic Service Charge Act No. 13 of 2006

and subsequent amendments thereto, ESC is payable on the liable

turnover at specified rates. ESC is deductible from the income tax

liability. Any unclaimed amount can be carried forward and set off

against the income tax payable in the five subsequent years as per

the relevant provision in the Act.

3.6.4.6 Nation Building Tax (NBT)As per the provisions of the Nation Building Tax Act, No. 9 of 2009 and

the subsequent amendments thereto, Nation Building Tax should be

payable at the rate of 2% with effect from 1 January 2011 on the liable

turnover as per the relevant provisions of the Act.

3.6.4.7 Value Added Tax on Financial Services (VAT on FS)VAT on Financial Services is calculated in accordance with the

amended VAT Act No. 7 of 2003 and subsequent amendments

thereto. The base for the computation of VAT on Financial Services is

the accounting profit before income tax adjusted for the economic

depreciation and emoluments of employees. VAT on financial services

is computed on the prescribed rate of 12%.

3.6.4.8 Sales Taxes (Value Added Tax and Turnover Tax)Revenues, expenses and assets are recognized net of the amount of

sales tax except for the following;

Sales tax incurred on a purchase of a assets or services is not

recoverable from the taxation authority, in which case the

sales tax is recognized as part of the cost of acquisition of the

asset or as part of the expense item as applicable; and

Receivables and payables that are stated with the amount of

sales tax included.

The net amount of sales tax recoverable from, or payable to, the

taxation authority is included as part of other receivables or other

payables in the balance sheet.

3.7 Earnings per ShareThe Group presents basic earnings per share and diluted earnings per

share for its ordinary shares. Basic EPS is calculated by dividing the

profit or loss attributable to ordinary shareholders of the company by

the weighted average number of ordinary shares outstanding during

the period. Diluted EPS is determined by the dividing the profit or

loss attributable to ordinary shareholders of the company by the

weighted average number of ordinary shares outstanding adjusted

for the effects of all dilutive potential ordinary shares. The details of

earnings per share are given in Note 7 to the Consolidated Financial

Statements.

3.8 Cash Flow StatementThe Cash Flow Statement has been prepared using the ‘Indirect

Method’ of preparing Cash Flows in accordance with the Sri Lanka

Accounting Standard -LKAS 7 ‘Statement of Cash Flows.’ Cash and

cash equivalents comprise short term, highly liquid investments that

are readily convertible to known amounts of cash and are subject to

an insignificant risk of changes in value.

Cash and cash equivalents comprise of cash in hand and cash at

banks and other highly liquid financial assets which are held for the

purpose of meeting short-term cash commitments with original

maturities of less than three months which are subject to insignificant

risk of changes in their fair value.

3.9. Related Party Disclosures3.9.1 Transactions with Related PartiesThe Company carries out transactions in the ordinary course of

its business with parties who are defined as related parties in Sri

Lanka Accounting Standard –LKAS 24. The Pricing applicable to

such transactions is based on the assessment of the risk and pricing

model of the Company and is comparable with what is applied to

transactions between the Company and its unrelated Customers.


3.9.2 Transactions with Key Management PersonnelAccording to Sri Lanka Accounting Standard -LKAS 24 “Related Party

Disclosures”, Key management personnel, are those having authority

and responsibility for planning, directing and controlling the activities

of the entity. Accordingly, the Board of Directors (including executive

and non-executive Directors), personnel that hold designation of

Deputy General Manager and above positions and their immediate

family member have been classified as Key Management Personnel of

the Company.

The immediate family member is defined as spouse or dependent.

Dependent is defined as anyone who depends on the respective Key

Management Personnel for more than 50% of his/her financial needs.

3.10 Discontinuing OperationsA discontinuing operation is a clearly distinguishable component of

the Group’s business that is abandoned or terminated pursuant to a

single plan, and which represents a separate major line of industry or

geographical area of operations.

3.11 Segment reportingAn operating segment is a component of the Group that engages

in business activities from which it may earn revenues and incur

expenses, including revenues and expenses that relate to transactions

with any of the Group’s other components. All operating segments

operating results are reviewed regularly by Group Board of Directors

to make decisions about resources to be allocated to the segment

and to assess its performance, and for which discrete financial

information is available.

3.11.1 Reporting segments The group’s internal organization and management is structured

based on individual products and services which are similar in nature

and process and where the risk and return are similar. Accordingly

Group’s reportable segments comprise of Trading, Manufacturing,

Finance, Plantation and Investments.

3.11.2 Segment informationSegment information has been prepared in conformity with the

accounting policies adopted for preparing and presenting the

Consolidated Financial Statements of the group. Segment results,

assets and liabilities include items directly attributable to a segment

as well as those that can be allocated on a reasonable basis. Segment

capital expenditure is the total cost incurred during the period to

acquire segment assets that are expected to be used for more than

one period.

Expenses that cannot be directly identified to a particular segment

are allocated on bases decided by the management and applied

consistently throughout the year.

3.12 Events after the Balance Sheet Date All material post Balance Sheet events have been considered and

where appropriate adjustments or disclosures have been made in the

respective Notes to the Financial Statements

3.13 Commitments and Contingencies

All discernible risks are accounted for in determining the amount of

all known liabilities. Contingent Liabilities are possible obligations

whose existence will be confirmed only by uncertain future events

or present obligations where the transfer of economic benefit is not

probable or cannot be reliably measured. Contingent Liabilities are

not recognized in the Balance Sheet but are disclosed unless they are

remote.

4 ACCOUNTING POLICIES SPECIFIC TO THE “ BUSINESSES OF THE JOINT VENTURES & SUBSIDIARIES”

4.1 Plantation Sector4.1.1 Agricultural ActivitiesThe Group considers all the activities that are managed in biological

transformation and harvest of biological assets for sale or for

conversion into agricultural produce or into additional biological

asset.

4.1.2 Bearer Biological Assets Biological assets are classified as mature biological assets and

immature biological assets. Mature biological assets are those that

have attained harvestable specifications or are able to sustain regular

harvests. Immature biological assets are those that have not yet

attained harvestable specifications. Tea, rubber, coconut, timber, other

plantations and nurseries are classified as biological assets.

The biological assets are further classified as bearer biological assets

and consumables biological assets. Bearer biological assets includes

tea, rubber and coconut trees, those that are not intended to be

sold or harvested, however, used to grow for harvesting agricultural

produce from such biological assets. Consumable biological

assets includes managed timber own by the company (Eucalyptus

Torariyana, Albezzia, Graveelia, Eucalyptus Grandis, Astonia, Pinus,

Toona, Mahogany, Teak, Jak, Rubber, Nadun, Mango, Pellen, Hora,

Domba, Lunumidella, Wal Del and Mara on the plantations have been

taken into consideration in this valuation of timber trees) those that

are to be harvested as agricultural produce or sold as biological assets.

The entity recognizes the biological assets when, and only when, the

entity controls the assets as a result of past event, it is probable that

future economic benefits associated with the assets will flow to the

entity and the fair value or cost of the assets can be measured reliably.

Nursery cost includes the cost of direct materials, direct labour and

an appropriate proportion of directly attributable overheads, less

provision for overgrown plants.



4.1.2.1 Bearer Biological Assets – At CostThe Group recognizes Tea and Other Crops except for Rubber and

Coconut, at cost in accordance with the new ruling issued by the

Institute of Chartered accountants of Sri Lanka dated 2nd March 2012,

due to the impracticability of carrying out a proper fair valuation. New

ruling provides the option to measure bearer biological assets using

LKAS16 – Property, Plant and Equipment. The Group measures Tea

and Other Crops at their cost less any accumulated depreciation and

any accumulated impairment losses at the end of the financial period.

Limited Life Land Development Cost on Bearer Biological Assets at Cost (New/ Re-Planting)

The total cost of land preparation, rehabilitation, new planting,

replanting, crop diversification, inter-planting and fertilizing etc,

incurred between the time of planting and harvesting (When

the planted area attains maturity) are classified as immature

plantations. These immature plantations are shown at direct

costs plus attributable overheads, including interest (borrowing

cost) attributable to long-term loans used for financing immature

plantations.

Attributable overheads incurred on the plantation are apportioned

based on the labour days spent on respective replanting and new

planting and capitalized on the immature areas. The remaining non-

attributable overhead is expensed in the accounting period in which

it is incurred.

The expenditure incurred on bearer biological assets (tea) fields,

which come into bearing during the year, has been transferred to

mature bearer biological assets and depreciated over their useful life

in accordance with the LKAS16 – Property, Plant and Equipment.

Infilling CostsThe land development costs incurred in the form of infilling have

been capitalized to the relevant mature field where infilling results

in an increase in the economic life of the relevant field beyond its

pre-infilling standard of performance. Infilling costs so capitalized

are depreciated over the newly assessed remaining useful life of the

relevant mature plantation or the unexpired lease period, whichever

is lower.

Infilling cost that are not capitalized have been charged to the

statement of comprehensive income in the year in which they are

incurred.

Growing Crop NurseriesNursery cost includes the cost of direct materials, direct labour and an

appropriate proportion of directly attributable overheads.

4.1.2.2 Bearer Biological Assets – At Fair ValueThe Group recognizes the Rubber and Coconut plantations at fair

value less estimated point-of-sale-of-costs, in accordance with LKAS

41- Agriculture. Point-of-sales-costs include all the costs that would

be necessary to sell the assets, including costs necessary to get the

assets to market. In respect of Rubber and Coconut Plants having

below six years of age as at the date of financial position, have been

taken at cost. The fair value of rubber and coconut are measured

using DCF Method based on forecasted future cash flows.

The Group has engaged an Independent Chartered Valuation

Surveyor Mr. K.T.D. Tissera in determining the fair value of Rubber

and Coconut Bearer Biological Assets. The valuer has valued the latex

component of Rubber, and also Coconut using the forecasted crop,

prices and cost of production based on past statistics. The scrap

value, being the timber component of trees is valued by using the

available log prices in city centers less point-of-sale-costs. All other

assumptions are given in Note No. 14. The Group measured the

Rubber and Coconut plantations at fair value less estimated-point-of-

sale-costs as at each date of Statement of Financial Position and the

gain or loss on changes in fair value is recognized in the Statement of

comprehensive income.

The estimated useful lives for the current and comparative years are

as follows;

No of Years Rate

Tea 30-33 1/3 years 3% to 3.33%

Rubber 20 years 5%

Coconut 50 years 2%

Cardamom / Cinnamon 15 years 6.67%

4.1.3 Consumable Biological assetsTrees namely teak, mahogany, Nadun, mango, Albezzia, Wal del,

rubber and etc are considered as consumable biological assets

and measured in accordance with LKAS 41- Agriculture. The initial

costs incurred in planting such trees are capitalized until the

market determined prices or values are not available and for which

alternative estimates of fair value are to be clearly unreliable. Once the

fair value of such a biological asset becomes reliably measurable, the

group measures it at its fair value less costs to sell. The change in fair

values will be directly identified in income statement.

The company has engaged an Independent Chartered Valuation

Surveyor Mr. K.T.D. Tissera in determining the fair value of managed

Timber Plantation. The valuer has valued the Timber Plantation per

tree valuation basis by using available log prices in city centers less

point-of-sale-costs. The timber plants having less than three years

old have not been taken in to the valuation and hence, the cost of

such plants has been added to the valuation. All other assumptions

are given in Note No. 15. The Group measures the Timber Plantation

at fair value less estimated-point-of-sale-costs as at each date of

Statement of Financial Position. The gain or loss on changes in

fair value of Timber Plantation is recognized in the Statement of

comprehensive income.


The Main Variables in DCF Model Concerns

Variable Comments

Currency Valuation Rs.

Timber Content Estimate based on physical verification of

girth, height and considering the growth

of each species in different geographical

regions.

Economic Useful Life

(Harvesting Period)

Estimate based on the normal life span of

each species.

Selling Price Estimate based on prevailing Sri Lankan

market price. Factor all the conditions

to be fulfilled in bringing the trees into

saleable condition.

Discount Rate Future cash flows are discounted at 12 %

(Not adjusted for inflation)

Growing Crop NurseriesNursery cost includes the cost of direct materials, direct labour and an

appropriate proportion of directly attributable overheads.

4.1.4 Permanent Land Development CostsPermanent land development costs are those costs incurred making

major infrastructure development and building new access roads on

leasehold lands.

These costs have been capitalized and amortized over the remaining

lease period.

4.1.5 Leasehold Rights to Bare Land of JEDB/SLSPC Estate Assets and Immovable (JEDB/SLSPC) Estates Assets on Finance Lease

Leasehold Rights to bare land of JEDB/SLSPC estate assets and

immovable (JEDB/SLSPC) estates assets have been classified as

finance lease in terms of the statement of recommended practice

(SoRP) issued on right-to-use of land on lease. Accordingly, The value

of the lease obtained on a long-term basis, have been stated at the

recorded carrying values as at the effective date of SoRP on right-to-

use of land on lease. Prepaid lease rentals paid to acquire rights are

included in the right-to- use the land.

4.1.6 AmortizationThe Right-to-use of land on lease is amortized over the remaining

lease term of such asset or over the useful life of the underlying asset

if shorter. Leasehold rights are tested for impairment annually and

are written down where applicable. The impairment loss, if any, is

recognized in the Income Statement.

Amortization rates used for the purpose are as follows:

No. of Years Rate %

Bare Land 53 1.89

Improvement to Lands 30 3.33

Mature Plantations 30 3.33

Buildings 25 4.00

Machinery 15 6.67

Crop Diversification 30 3.33

Water and Sanitation 20 5.00

Other Vested Assets 30 3.33

Permanent Land Development 53 1.89

4.1.7 InventoriesInventories are measured at the lower of cost and net realizable value.

The cost of inventories is based on the first-in first-out principle,

and includes expenditure incurred in acquiring the inventories,

production or conversion costs and other costs incurred in bringing

them to their existing location and condition.

In the case of manufactured inventories and work in progress, cost

includes an appropriate share of production overheads based on

normal operating capacity. Net realizable value is the estimated

selling price in the ordinary course of business, less the estimated

costs of completion and selling expenses.

For the manufacturing stocks, provision for slow moving inventories is

made when the holding period exceeds 365 days, and the sale of the

inventories is no longer probable.

The cost incurred in bringing inventories to its present location and

condition is accounted using the following cost formula:

Agricultural Produce harvested from Biological Assets

Agricultural produce harvested from an entity’s Biological Assets is

measured at its fair value less cost to sell at the point of harvest. Such

measurement is deemed to be the cost at the time of transferring the

harvested crop to inventories.

Finished/Semi finished Agricultural Produce of Biological Assets

Finished and Semi Finished Agricultural Produce are valued adding

the cost of conversion depending on the existing state of conversion

as at the date of financial position and thereafter vale at the lower of

cost or net realizable value.

Net realizable value is the estimated selling price at which stocks

can be sold in the ordinary course of business after allowing for cost

of realization and/or cost of conversion from their existing state to

saleable condition.



Input material, Spares and ConsumablesAt actual cost on weighted average basis.

Certified Emission Reduction (CER)Carbon credit units as at the balance sheet date have been valued at

their estimated net realizable value as inventories and disclosed in the

Financial Statements as Certified Emission Reduction.

CER represents units of greenhouse gas reduction that has been

generated certified by the United Nations under the Cleaned

Development Mechanism (CDM) provision of the Kyoto Protocol.

These CERs can be traded and sold and used by industrialized

countries to meet part of their emission reduction targets.

According to the ruling issued by Sri Lanka Accounting and

Auditing Standards Monitoring Board (SLAASMB), CER units have

been recognized as an asset and disclosed under inventories. These

inventories have been measured at Net Realizable Value (NRV) and

any changes in value as at Balance Sheet date is recognized in the

Income Statement.

4.1.8 Grants and SubsidiesGovernment grants are recognized where there is reasonable

assurance that the grant will be received and all attached conditions

will be compiled with. When the grant relates to an expense item, it is

recognized as income over the period necessary to match the grant

on a systematic basis to the costs that it is intended to compensate.

Where the grant relates to an asset, it is recognised as deferred

income and released to income in equal amounts over the expected

useful life of the related asset.

Where the Group receives non-monitory grants, the asset and the

grant are recorded gross at nominal amounts and released to the

statement of comprehensive income over the expected useful life

and pattern of consumption of the benefit of the underlying asset

by equal annual instalments. Where loans or similar assistance are

provided by governments or related institutions with an interest rate

below the current applicable market rate, the effect of this favourable

interest is regarded as additional government grant.

Grants related to property, plant and equipment other than grants

received for biological assets are initially deferred and allocated to the

statement of comprehensive income on a systematic basis over the

useful life of the related property, plant and equipment.

Government grant related to the Biological Assets which are

measured at fair value less point sale cost is directly charged to the

carrying value of such assets in accordance with the applicable

financial framework.

4.1.9 Borrowing CostBorrowing costs incurred in respect of specific loans that are utilized

for field development activities have been capitalized as a part of the

cost of the relevant immature plantation. The capitalization will cease

when the crops are ready for commercial harvest.

The amount so capitalized and the capitalization rates are disclosed in

the Notes to the Financial Statements.

Borrowing costs that are not directly attributable to the acquisition,

construction or production of a qualifying asset are recognized in

profit or loss using the effective interest method.

4.1.10 Liability to make lease rentalsThe liability to make the rentals to the lessor is recognized on

amortized cost using effective interest rate method. The finance cost

is recognized in the income statement under finance cost using

effective interest rate method.

4.1.11 Revenue Recognition4.1.11.1 Gains Arising from Changes in Fair Value of Biological Assets Gains or losses arising on initial recognition of biological assets at

fair value less estimated point of sale costs are recognized in the

statement of comprehensive income. Gains or losses arising on change

in fair value due to subsequent measurements are recognized in the

statement of comprehensive income in the period in which they arise.

4.1.11.2 Sale of Electrical Energy Revenue is recognized to the extent that it is probable that the

economic benefits will flow to the company and the revenue and

associated costs 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.

4.1.11.3 Certified Emission Reduction (CER)Certified Emission Reduction income is recognized on accrual basis.

5 Financial Risk Management5.1 OverviewThe Group has exposure to the following risks from its use of financial

instruments:

Credit risk

Liquidity risk

Market risk

Operational risk

This note presents information about the Group’s exposure to each

of the above risks, the Group’s objectives, policies and processes

for measuring and managing risk, and the Group’s management of

capital.

Further quantitative disclosures are included throughout these

Consolidated Financial Statements

5.2 Risk management frameworkThe Board of Directors has overall responsibility for the establishment

and oversight of the Company’s risk management framework. Risk

management policies and systems are reviewed regularly to reflect

changes in market conditions and the Company’s activities.


5.2.1 Credit RiskCredit risk is the risk of financial loss to the Group/Company if a

customer or counterparty to financial instruments fails to meet its

contractual obligations. Credit risk is mainly arising from Group/

Company’s receivable from customers.

5.2.2 Liquidity RiskLiquidity risk is the risk that the Group will encounter difficulty in

meeting the obligations associated with its financial liabilities that

are settled by delivering cash or another financial asset. The Group

uses the maturity analysis all the financial instruments to manage the

liquidity risk.

5.2.3 Exposure to Liquidity RiskThe Group relies on deposits from customers and issued debt

securities such as debentures as its primary sources of funding.

Deposits which consist most of short term maturity in nature

increases the liquidity risk for the financial service sector and hence

the Group actively manages this risk through maintaining competitive

pricing and constant monitoring of market trends.

5.2.3.1 Management of Liquidity RiskThe Group/Company’s approach to managing liquidity is to ensure,

as far as possible, that it will always have sufficient liquidity to meet

its liabilities when due without incurring unacceptable losses or

risking financial position of the Group/Company while maintaining

regulatory requirements and debt covenants agreed with the fund

providers. The Group/Company treasury manages the liquidity

position as per the treasury policies and procedures.

5.2.4 Market risk The Group exposes to the market risk due to changes in market risk

such as Foreign exchange rates, Interest rate, and equity prices.

Group expose to foreign currency is mainly due to the loans and

borrowings obtained. The Group manages its exposure to the foreign

exchange rates by entering in to forward rate contracts with the

banks. In this way the Group eliminates substantial exposure on

foreign currency risk.

The Group ensures the mix of variable and fixed rate borrowings

to manage the any exposure due to interest rate movement in the

market. These are monitored by the Group treasury division.

The Group investment in quoted equity shares are always subjected

to change in equity prices. The Group manages this risk mainly by

diversifying its investment portfolio.

5.2.5 Capital Management The Board of Directors monitors the return on capital investment on

a month basis. This review is mainly carried out through Return on

investment analysis prepared on a quarterly basis. The plan forecasts

are also reviewed on a monthly basis to ensure that targets are met in

order to manage the capital invested on the group companies.

The Board of Directors also decides and monitors the level of

dividends to ordinary shareholders.

The company does not subject to any externally impose capital

requirements. However companies within the group have such

requirement based on the industry in which such company

established. The group companies which require externally imposed

capital will monitor such requirement on a regular basis and report

to respective legal authority in order to ensure compliance with such

regulatory requirement.

6 First Time Adoption of SLFRS and LKASThese Financial Statements for the year ended 31st March, 2013, are

the first set of Financial Statements that the company has prepared in

accordance with SLFRS and LKAS. For the period upto and including

the year ended 31st March, 2012, the company prepared its Financial

Statements in accordance with local generally accepted accounting

practice (SLAS).

Accordingly, the company has prepared these Financial Statements

which comply with SLFRS/LKAS applicable for periods ending on or

after 31st March, 2013, together with the comparative period data

as at and for the year ended 31st March, 2012 as described in the

accounting policies. In preparing these Financial Statements, the

company’s opening statement of financial position was prepared

as at 01st April, 2011, which is the company’s date of transition to

SLFRS/LKAS. This note explains the principal adjustments made by the

company in terms of the new financial reporting framework.

6.1 Exemptions AppliedSLFRS 1 –First time Adoption of Sri Lanka Accounting Standard

allows first time adopters certain exemptions from the retrospective

application of certain SLFRS/LKAS.

There was no requirement to make use of any such exemptions.

6.1.1 Optional exemptions the Group has opted to apply:

a) SLFRS 3 - Business CombinationsThis has not been applied to acquisitions of subsidiaries, which are

considered businesses for SLFRS/LKAS, or of interests in associates

and joint ventures that occurred before 1 April 2011. The Group has

not applied LKAS 21 retrospectively to fair value adjustments and

goodwill from business combinations that occurred before the date

of transition to SLFRS/LKAS. Such fair value adjustments and goodwill

are treated as assets and liabilities of the parent rather than as assets

and liabilities of the acquiree. Therefore, those assets and liabilities

are already expressed in the functional currency of the parent or

are nonmonetary foreign currency items and no further translation

differences occur.

Use of this exemption means that the SLAS carrying amounts of

assets and liabilities, which are required to be recognised under

SLFRS/LKAS, are stated at their deemed cost at the date of the

acquisition. After the date of the acquisition, measurement is in

accordance with SLFRS/LKAS. Assets and liabilities that do not qualify

for recognition under SLFRS/LKAS are excluded from the opening

SLFRS/LKAS statement of financial position.



SLFRS 1 also requires that the SLAS carrying amount of goodwill must

be used in the opening SLFRS/LKAS statement of financial position

(apart from adjustments for goodwill impairment and recognition or

derecognition of intangible assets). In accordance with SLFRS 1, the

Group has tested goodwill for impairment at the date of transition to

SLFRS/LKAS.

b) Fair value of revaluation as deemed costInvestments were carried in the statement of financial position

prepared in accordance with SLAS on the basis of valuations

performed prior to 31 March 2012. The Group has elected to regard

those values as deemed cost at the date of the revaluation since they

were broadly comparable to fair value.

c) Investment in subsidiaries, jointly controlled entities and associates

The Group has measured its investments in certain subsidiaries,

joint ventures and associates at deemed cost, which is the carrying

amount as per SLAS at the date of transition 1 April 2011.

d) Designation of previously recognized financial instruments - Unquoted equity instruments

The Group has designated unquoted equity instruments held as at 1

April 2011 as available-for-sale investments.

6.1.2 Optional exemptions which the Group has opted not to apply:

e) Borrowing CostsIn the Group the treatment of borrowing costs were already aligned

as per SLFRS/LKAS.

f) Employee benefits (LKAS 19)SLAS’s and the SLFRS/LKAS were already aligned as regards to these

transactions.

6.1.3 Optional exemptions not applicable to the Group:

g) Assets and liabilities of subsidiary, associates and joint ventures

The subsidiary, associate and joint ventures in the Group have

transited from SLAS to SLFRS/ LKAS simultaneously with the parent

Company.

h) Transfers of assets from customers as per IFRIC 18

The Group does not have these types of arrangements as at the date

of transition.

i) Compounded Financial instrumentsThe Group does not have these types of financial instruments as at

the date of transition.

j) Decommissioning liabilities included in the cost of property, plant and equipment

The Group does not have any decommissioning liabilities relating to

property, plant and equipment.

k) Financial assets or intangible assets accounted for under IFRIC 12

The Group has not entered into agreements within the scope of IFRIC

12.

l) Extinguishing Financial liabilities with equity instruments

The Group has not used equity instruments to extinguish financial

liabilities and the provisions in IFRIC 19 extinguishing financial

liabilities are not applicable to the Group.

m) Severe hyperinflationThe Group does not operate in a hyperinflationary economy.

6.1.4 Mandatory exception applicable to the Group:a) Significant accounting judgments, estimates and

assumptionsSignificant accounting judgments, estimates and assumptions at 1

April 2011 and at 31 March 2012 are consistent with those made for

the same dates in accordance with SLAS effective up to 31 March

2012 (after adjustments to reflect any differences in accounting

policies). The estimates used by the Group to present these amounts

in accordance with SLFRS/LKAS effective from 1 April 2012 reflect

conditions at 1 April 2011, the date of transition to SLFRS/LKAS and as

of 31 March 2012.

b) Non-controlling interestsThe requirement of SLFRS 3 is that total comprehensive income is

attributed to the owners of the parent and to the non-controlling

interests even if this results in the non-controlling interests having a

deficit balance. The Group applies above requirement prospectively

from the date of transition to SLFRS/LKAS.

6.1.5 Mandatory exceptions not applicable to the Group:

c) De-recognizing of financial assets and financial liabilities

De-recognition requirements in SLFRS 9 requires prospective

application for transactions occurring on or after the date of

transition.

d) Hedge accountingThe Group has not entered into any hedging relationships. The

standard states that hedging relationships of a type that does not

qualify for hedge accounting in accordance with LKAS 39 should

not be reflected in the opening SLFRS/ LKAS statement of financial

position.

6.1.6 Explanations for transition to SLFRS/LKASsIn preparing SLFRS/LKAS statement of financial position for previously

reported financial periods, required adjustments have been made

in accordance with the respective SLFRS/LKASs. The effect of the

transition from SLASs to SLFRS/LKASs has been presented in the

reconciliation statements and accompanying notes to the material

reconciliation items in Note No. 7 in these Financial Statements.


7 E

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,35

1

40

6,5

13

(7

,72

5)

39

8,7

88

Oth

er

com

pre

he

nsi

ve

inco

me

Re

va

lua

tio

n s

urp

lus

of

pro

pe

rty,

p

lan

t a

nd

eq

uip

me

nt

Re

valu

atio

n s

urp

lus

10

-

26

7,2

35

2

67

,23

5

- 1

53

,18

9

15

3,1

89

De

ferr

ed

tax

imp

act

on

Re

valu

atio

n

-

- -

- 5

,65

8

5,6

58

Av

ail

ab

le f

or

sale

fin

an

cia

l in

stru

me

nts

Ne

t ch

ang

e in

fai

r va

lue

of

avai

lab

le-

fo

r-sa

le fi

nan

cial

ass

ets

1

1

- (2

,06

6,5

40

) (2

,06

6,5

40

)

(2,0

58

,29

3)

(2,0

58

,29

3)

Ne

t ch

ang

e in

fai

r va

lue

of

avai

lab

le-f

or-

sale

-

fin

anci

al a

sse

ts t

ran

sfe

rre

d t

o in

com

e s

tate

me

nt

-

- -

- -

-

Imp

airm

en

t o

n a

vaila

ble

for

sale

fi

nan

cial

inst

rum

en

ts

-

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- -

-

reco

gn

ise

d in

inco

me

sta

tem

en

t

- -

- -

- -

De

fin

ed

be

ne

fit

pla

n a

ctu

ari

al g

ain

s (l

oss

es)

De

fin

ed

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ne

fit

pla

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ctu

aria

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ns

(lo

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s) fo

r th

e y

ear

- (1

3,7

03

) (1

3,7

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) -

(10

,76

3)

(10

,76

3)

De

ferr

ed

tax

on

act

uar

ial g

ain

s (lo

sse

s) fo

r th

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ear

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(3,0

14

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Inco

me

tax

re

cog

nis

ed

in o

the

r co

mp

reh

en

sive

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me

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5,0

70

5

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0

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Oth

er

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pre

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com

e/

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en

se)

fo

r th

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ear

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t o

f ta

x

- -

- -

- -

Tota

l co

mp

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en

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me

/ (e

xpe

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r th

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3,0

59

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7

(1,7

90

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4)

(1,2

69

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3)

40

6,5

13

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0,9

48

) (1

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4,4

35

)

Att

rib

uta

ble

to

:

Equ

ity

ho

lde

rs o

f th

e C

om

pan

y

1,1

77

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2

(69

4,2

04

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82

,98

8

40

6,5

13

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,92

0,9

48

) (1

,51

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35

)

No

n-c

on

tro

llin

g In

tere

st

1

,88

2,4

35

(1

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) 7

86

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5

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-

Tota

l co

mp

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en

sive

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me

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r th

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ear

3,0

59

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7

(1,7

90

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4)

1,2

69

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3

40

6,5

13

(1

,92

0,9

48

) (1

,51

4,4

35

)


7 E

XP

LAN

ATIO

N T

O T

HE

TR

AN

SIT

ION

OF

SLFR

S/LK

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Rec

onci

liat

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of

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emen

t of

Fin

anci

al P

osit

ion

31S

t M

arch

20

12

G

rou

p

Co

mp

an

y

E

ffe

cts

of

Eff

ect

s o

f

Tr

an

siti

on

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Tr

an

siti

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to

SL

AS

S

LF

RS

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AS

S

LF

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AS

S

LA

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FR

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KA

S

SL

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S/L

KA

S

N

ote

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th

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As

at

Re

cla

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As

at

As

at

Re

cla

ssifi

cati

on

&

As

at

Fo

r th

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ea

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nd

ed

R

eco

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lia

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st M

arc

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Re

-me

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en

t 3

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3

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Ma

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20

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R

e-m

ea

sure

me

nt

31

st M

arc

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01

2

AS

SE

TS

No

n-C

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ts

Pro

pe

rty,

Pla

nt

and

Eq

uip

me

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12

8

,38

3,0

03

(1

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3,5

66

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9,4

37

3

,95

1,3

63

(8

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2)

3,9

42

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1

Inve

stm

en

t P

rop

ert

ies

13

3

,91

1,5

68

7

74

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9

4,6

85

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7

11

1,9

71

-

11

1,9

71

Pre

pai

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eas

e R

en

tals

18

4,5

52

1

1,9

20

1

96

,47

2

45

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9

- 4

5,6

49

Inta

ng

ible

Ass

ets

16

8,3

91

(2

96

) 1

68

,09

5

14

,74

5

- 1

4,7

45

Cap

ital

wo

rk in

Pro

gre

ss

14

1

28

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9

7,0

61

1

35

,45

0

56

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6

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6,3

96

Be

are

r B

iolo

gic

al A

sse

ts

15

-

1,8

42

,60

8

1,8

42

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8

- -

-

Co

nsu

me

r B

iolo

gic

al A

sse

ts

16

-

1,5

14

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5

1,5

14

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5

- -

-

Tim

be

r St

ock

1

7

2,0

62

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9

(2,0

62

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9)

- -

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Inve

stm

en

ts in

Su

bsi

dia

rie

s 1

8

- -

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7,2

01

5

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3,5

97

7

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0,7

98

Inve

stm

en

ts in

Jo

int

Ve

ntu

re

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- -

10

,00

0

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0,0

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Inve

stm

en

ts in

Eq

uit

y A

cco

un

ted

Inve

ste

es

19

1

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9,1

45

9

8,1

63

1

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7,3

08

2

48

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8

- 2

48

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8

Oth

er

Inve

stm

en

ts L

on

g T

erm

2

0

4,6

11

,03

7

(26

1,5

00

) 4

,34

9,5

37

3

,39

4,4

77

-

3,3

94

,47

7

De

ferr

ed

Tax

Ass

et

21

1

83

,61

1

6,0

92

1

89

,70

3

76

,74

7

3,6

80

8

0,4

27

Loan

s to

Re

late

d P

arti

es

22

3

82

,76

7

(37

8,8

39

) 3

,92

8

50

5,7

01

(5

05

,70

1)

-

21

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5,0

72

(3

22

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2)

21

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2,4

50

9

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3,2

48

5

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2,6

54

1

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2

Cu

rre

nt

Ass

ets

Inve

nto

rie

s 2

3

2,6

93

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4

43

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7

2,7

37

,00

1

1,9

16

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3

52

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5

1,9

68

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8

Trad

e a

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Oth

er

Re

ceiv

able

s 2

4

2,1

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5

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1,7

62

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2,8

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1

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48

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0,1

88

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De

po

sits

an

d P

rep

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en

ts

2

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1)

20

3,6

17

1

13

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1

- 1

13

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1

Loan

s to

Re

late

d P

arti

es

22

1

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5,5

94

3

77

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3

1,4

12

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5

50

5,7

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5

32

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5

Am

ou

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du

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rom

Re

late

d P

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es

2

87

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6

15

,53

7

30

3,5

23

2

82

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2

(1)

28

2,7

91

Tax

Re

cove

rab

le

25

1

24

4

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4

4,2

98

-

- -

Oth

er

Inve

stm

en

ts S

ho

rt T

erm

2

6

4,3

89

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5

(25

8,1

93

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0,9

02

1

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7,8

09

-

1,7

17

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Cas

h a

t B

ank

and

in H

and

2

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49

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75

3,5

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2

00

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3

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3

11

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3,1

67

2

05

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0

11

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8,4

66

5

,73

2,3

01

4

78

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6

6,2

10

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7

Tota

l Ass

ets

32

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8,2

38

(1

17

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2)

32

,83

0,9

16

1

5,3

55

,54

9

5,8

70

,76

0

21

,22

6,3

09



G

rou

p

Co

mp

an

y

E

ffe

cts

of

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ect

s o

f

Tr

an

siti

on

to

Tr

an

siti

on

to

SL

AS

S

LF

RS

/LK

AS

S

LF

RS

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AS

S

LA

S

SL

FR

S/L

KA

S

SL

FR

S/L

KA

S

N

ote

s to

th

e

As

at

Re

cla

ssifi

cati

on

&

As

at

As

at

Re

cla

ssifi

cati

on

&

As

at

Fo

r th

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ea

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nd

ed

R

eco

nci

lia

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n

31

st M

arc

h 2

01

2

Re

-me

asu

rem

en

t 3

1st

Ma

rch

20

12

3

1st

Ma

rch

20

12

R

e-m

ea

sure

me

nt

31

st M

arc

h 2

01

2

EQ

UIT

Y A

ND

LIA

BIL

ITIE

S

Ca

pit

al a

nd

Re

serv

es

Stat

ed

Cap

ital

2,0

05

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1

- 2

,00

5,6

01

2

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5,6

01

-

2,0

05

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1

Cap

ital

Re

serv

es

28

4

,15

9,3

35

(6

93

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3)

3,4

65

,92

2

3,9

60

,62

6

- 3

,96

0,6

26

Re

ven

ue

Re

serv

es

29

8

,18

0,6

63

2

28

,56

1

8,4

09

,22

4

2,0

63

,73

0

5,8

29

,96

8

7,8

93

,69

9

Eq

uit

y A

ttri

bu

tab

le t

o E

qu

ity

ho

lde

rs o

f P

are

nt

1

4,3

45

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9

(46

4,8

52

) 1

3,8

80

,47

4

8,0

29

,95

7

5,8

29

,96

8

13

,85

9,9

26

Min

ori

ty In

tere

st

9

,14

1,5

76

(1

30

,66

8)

9,2

72

,24

4

-

-

Tota

l Eq

uit

y

2

3,4

87

,17

5

(33

4,1

83

) 2

3,1

52

,99

1

8,0

29

,95

7

5,8

29

,96

8

13

,85

9,9

26

No

n-C

urr

en

t L

iab

ilit

ies

Inte

rest

Be

arin

g B

orr

ow

ing

s

2,2

62

,01

7

(6,9

58

) 2

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5,0

59

1

,53

8,7

71

-

1,5

38

,77

1

Re

sch

ed

ule

d D

eb

en

ture

s

- -

- -

-

Fin

ance

Le

ase

Ob

ligat

ion

s

85

,05

8

- 8

5,0

58

-

-

Re

tire

me

nt

Be

ne

fit

Ob

ligat

ion

s

48

2,2

61

1

,23

9

48

3,5

00

6

4,8

33

-

64

,83

3

De

ferr

ed

Tax

Lia

bili

ty

30

1

6,5

67

2

65

,47

0

28

2,0

37

-

-

De

ferr

ed

Inco

me

3

1

17

8,8

83

(5

,86

9)

17

3,0

14

-

22

,28

5

22

,28

5

Loan

s fr

om

Re

late

d P

arti

es

-

- -

73

8,5

80

-

73

8,5

80

3,0

24

,78

6

25

3,8

82

3

,27

8,6

68

2

,34

2,1

84

2

2,2

85

2

,36

4,4

69

Cu

rre

nt

Lia

bil

itie

s

Acc

ou

nts

Pay

able

an

d A

ccru

ed

Exp

en

ses

32

2

,93

4,1

95

(9

,93

6)

2,9

24

,25

9

2,0

00

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1

18

,50

7

2,0

18

,88

8

Inte

rest

Be

arin

g B

orr

ow

ing

s d

ue

wit

hin

on

e y

ear

3

3

1,1

16

,20

8

53

,25

7

1,1

69

,46

5

59

3,2

92

-

59

3,2

92

Fin

ance

Le

ase

Ob

ligat

ion

s d

ue

wit

hin

on

e y

ear

5,9

88

7

0

6,0

58

- -

Loan

s fr

om

Re

late

d P

arti

es

- -

- -

32

2,9

91

-

32

2,9

91

Am

ou

nts

du

e t

o R

ela

ted

Par

tie

s

29

7,8

42

(1

2,4

81

) 2

85

,36

1

28

2,4

70

-

28

2,4

70

Inco

me

Tax

Pay

able

3

4

13

5,9

64

1

1,6

83

1

47

,64

7

59

,56

3

- 5

9,5

63

Div

ide

nd

Pay

able

27

,16

2

14

,11

8

41

,27

9

27

,16

1

(1)

27

,16

0

Sho

rt T

erm

Inte

rest

Be

arin

g B

orr

ow

ing

s 3

3

1,6

40

,31

1

(96

,29

9)

1,5

44

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1

1,5

08

,05

7

- 1

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8,0

57

Ban

k O

verd

raft

27

8,6

09

2

,56

6

28

1,1

75

1

89

,49

1

- 1

89

,49

2

6,4

36

,27

9

(37

,02

2)

6,3

99

,25

7

4,9

83

,40

6

18

,50

8

5,0

01

,91

3

32

,94

8,2

39

(1

17

,32

4)

32

,83

0,9

16

1

5,3

55

,54

7

5,8

70

,76

0

21

,22

6,3

08

Ne

t A

sse

ts p

er

Sh

are

(R

s.)

2

02

.41

19

5.8

5

11

3.3

0

1

95

.55


7 E

XP

LAN

ATIO

N T

O T

HE

TR

AN

SIT

ION

OF

SLFR

S/LK

AS

7.4

Rec

onci

liat

ion

of

the

Stat

emen

t of

Fin

anci

al P

osit

ion

as

at 1

ST A

PR

IL 2

011

G

rou

p

Co

mp

an

y

E

ffe

cts

of

Eff

ect

s o

f

Tr

an

siti

on

to

Tr

an

siti

on

to

SL

AS

S

LF

RS

/LK

AS

S

LF

RS

/LK

AS

S

LA

S

SL

FR

S/L

KA

S

SL

FR

S/L

KA

S

N

ote

s to

th

e

As

at

Re

cla

ssifi

cati

on

&

As

at

As

at

Re

cla

ssifi

cati

on

&

As

at

Fo

r th

e y

ea

r e

nd

ed

R

eco

nci

lia

tio

n

31

st M

arc

h 2

01

1

Re

-me

asu

rem

en

t 3

1st

Ma

rch

20

11

3

1st

Ma

rch

20

11

R

e-m

ea

sure

me

nt

31

st M

arc

h 2

01

1

AS

SE

TS

No

n-C

urr

en

t A

sse

ts

Pro

pe

rty,

Pla

nt

and

Eq

uip

me

nt

12

6

,64

5,1

28

(1

,91

7,4

38

) 4

,72

7,6

90

3

,56

2,4

67

(4

,21

6)

3,5

58

,25

1

Inve

stm

en

t P

rop

ert

ies

13

1

60

,34

4

66

6,0

00

8

26

,34

4

11

0,7

47

-

11

0,7

47

Pre

pai

d L

eas

e R

en

tals

18

9,3

36

1

1

89

,33

7

46

,25

0

- 4

6,2

50

Inta

ng

ible

Ass

ets

66

,24

0

(39

1)

65

,84

9

21

,82

5

(1)

21

,82

4

Cap

ital

wo

rk in

Pro

gre

ss

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7 EXPLANATION TO THE TRANSITION OF SLFRS/LKAS 7.5 Note on Explanation to the Transition of SLFRS/LKAS Reconciliation of Total Comprehensive Income for the Year Ended 31st March 2012

Note 1 Revenue - Group/Company Profit & loss of the perennial crop has been recognised in the financial period of harvesting in terms of SLAS 32. Thus the unsold stocks were

treated as a part of revenue. The scope of revenue recognition was changed to LKAS 18. Accordingly, the revenue is recognised based on the date

of auction where the recognition criteria’s are met and therefore the quantity which is sold at auction is treated as the sales.

Interest income is recognized using the EIR method in accordance with LKAS 39 and the difference has been reversed from Revenue and

recorded as a gain to the previous financial year (Retained Earnings).

The revenue will be recognised when the criteria for sale of goods is met under the relevant agreement. Accordingly an adjustment is made in

order to comply with the requirement under SLFRS in order to recognise such revenue.

Services income and early settlement discounts offered has been accounted on the basis of its realisations and occurences due to timing

differences as per LKAS 18 on revenue recognition.

Year ended

31st March 2012

Group Company

Rs. ‘000 Rs. ‘000

Net impact on remeasurement of revenue-unsold stock of perennial Crop 10,079 -

Interest income is recognized using the EIR method in accordance with LKAS 39 (2,100) -

Revenue recognition as per LKAS 18- Upon sale of goods due to timing differences (11,469) (9,225)

Annual Maintenance Income not realised due to timing differences (5,907) (5,907)

Early settlement discounts offered to customers not netted of with gross sales (16,250) -

2 Cost of Sales - Group/Company Matching the Cost of Sales Against Revenue Recognition of the cost of sales has been changed in relation to the changes identified in revenue recognition. Thus, cost of sales consists the

costs that are directly attributable to goods sold.

Net difference of cost of opening stocks and the closing perennial stocks were adjusted to the cost of production in arriving this. Further, the

measurement of unsold tea and rubber stocks have been adjusted, in terms of LKAS 2 and LKAS 41.

Decrease in depreciation/ amortization due to fair valuation of bearer biological assets, rubber and coconut. Depreciation and amortization charged under SLAS on Rubber and Coconut was reversed in adopting fair value of bearer biological assets,

rubber and coconut under LKAS 41.

Reclassification of costs which are not directly attributable to cost sales Exchange losses which is not directly attributable to cost of sales now are reclassified to other expenses

Expenses directly attributable to cost of sales included in Administration costs now reclassified to cost of sales

Year ended

31st March 2012

Group Company

Rs. ‘000 Rs. ‘000

Net difference on opening and closing unsold produce stock at lower of deemed cost or NRV (8,641) -

Revenue recognition as per LKAS 18- upon sale of goods due to timing differences (19,089) 5,832

Reclassification of exchange loss not directly attributable to cost of sale to other expenses 46,474 46,474

Direct working expenses recovery now reclassified to cost of sales 12,892 12,892

Provision for Free Services (8,936) -

Reversal of Depreciation and Amortization Charges during the year ended 31st March 2012 for Rubber and

Coconut due to Fair Value 14,582 -



3 Other Income/Finance Income - Group/Company Sale of trees Proceeds from sale of trees recognized under other income transferred to respective Consumer Biological Assets measured at fair value under

LKAS 41.

Gain on Money Market Investments The impact in fair valuation of investments as per LKAS 39 is recognized under other income.

Gain/(Loss) on Changes in Fair Value of Biological Assets Rubber, Coconut and timber plantations are recognized at fair valuation in accordance with LKAS 41. The gain/(loss) on changes in fair value

during the year is recognized accordingly.

Reclassification Reclassification of income as per the SLFRS/LKAS illustrative Financial Statements mainly derived from Interest income and dividend income

Year ended

31st March 2012

Group Company

Rs. ‘000 Rs. ‘000

Reversal of Proceeds from Sale of Trees (42,780) -

Gain on Money Market Investments 2,224 -

Gain/(Loss) on Fair Valuation of Bearer Biological Assets 146,674 -

Gain/(Loss) on Fair Valuation of Consumable Biological Assets (94,329) -

Reclassification of Interest and Dividend income as finance income (331,932) (257,750)

4 Distribution Expenses- Group/Company Sales related costs Costs directly attributable to sales now accounted due to its contractual obligations

Reclassification of costs which are not directly attributable to cost sales Distribution costs which is not directly attributable to cost of sales now reclassified

Year ended

31st March 2012

Group Company

Rs. ‘000 Rs. ‘000

Early settlement discounts 10,230

Warranty Provision after sales (8,061) (8,061)

Expenses on distribution due to sales timing differences (1,701) (1,701)

Reclassification of costs from administration costs due to its nature (26,850) (19,395)

5 Administration Expenses - Group/Company In accordance to SLFRS 1 (Para 30), A sub-subsidiary of the Group (MDPL), use fair value as deemed cost as at transition date. Fair value of the

above plant and equipment has been ascertained by Independent valuation carried by Incorporated valuer and consultant using open market

value method of valuation as at 1st April 2011. As a result of fair valuation, previously recognized depreciation has been reduced by Rs. 9Mn.

Year ended

31st March 2012

Group Company

Rs. ‘000 Rs. ‘000

Acturial loss on defined benefit plan now charged to Other Comprehensive income 10,552 10,763

Depreciation on deemed costs on Property,plan and Equipment 4,146 (4,706)

Reclassification of distribution costs from administration costs previously classified (25,500) 26,850

Depreciation impact on Re-valuation 8,852

Derecognition of loss on fair value of Money Market Securities 7,422


7 EXPLANATION TO THE TRANSITION OF SLFRS/LKAS

7.5 Note on Explanation to the Transition of SLFRS/LKAS 6 Other Expenses - Group/Company Transaction cost of Equity transaction In accordance with LKAS 32-” Financial Instrument presentation “Transaction costs of equity has been recognised to the equity statement.

However, these costs were recorded under Other expenses as per previous financial frame work.

Gain/(Loss ) on Fair valuation of Asset Available for sale assets In Accordance with LKAS 39, Gain or loss from Assets available for sale has been recognised in the other Comprehensive income. However, in

accordance with previous financial from work gain from fair valuation of respective assets recorded under other expenses.

Year ended

31st March 2012

Group Company

Rs. ‘000 Rs. ‘000

Cost incurred on equity transaction has been reversed directly to equity 115,793 -

Reclassification of exchange loss not directly attributable to cost of sale to other expenses (59,367) (59,367)

7 Finance Costs-Group/Company

Year ended

31st March 2012

Group Company

Rs. ‘000 Rs. ‘000

Capitalization of borrowing costs 15,299 -

8 Change in Fair value of Investment Properties-Group/Company The Group has reclassified certain property under LKAS 40 as Investment Property since these land were used for the purpose of capital

appreciation and to earn rental income.

Year ended

31st March 2012

Group Company

Rs. ‘000 Rs. ‘000

Change in Fair value of Investment Properties due to reclassification from PPE net of additions during the year (31,337) -

9 Taxation The effect of transition on Income Taxes is due to SLFRS convergence adjustments.

Year ended

31st March 2012

Group Company

Rs. ‘000 Rs. ‘000

Tax Effect arising from the transition to SLFRS adoption - 5,512

Remeasurement of unrecognised deferred tax expenses (63,526) -



10 Revaluation Surplus of Property, Plant and Equipment With the adoption of SLFRS/LKAS, revaluation surplus of Property, Plant and Equipment during the financial year ended 31 march 2012 has been

reclassified through Other Comprehensive Income Statement

As at

31st March 2012

Group Company

Rs. ‘000 Rs. ‘000

Reclassification of Revaluation Surplus of Property, Plant and Equipment 267,235 153,189

11 Net change in fair value of available-for-sale financial assets With the adoption of SLFRS/LKAS, difference arising from fair valuation of the available for sales financial assets classified as long term during the

financial year ended 31 march 2013 has been reclassified through Other Comprehensive Income Statement

As at

31st March 2012

Group Company

Rs. ‘000 Rs. ‘000

Net change in fair value of available-for-sale financial assets (2,066,540) (2,058,293)

12 Property, Plant and Equipment The Group elected to apply the optional exemption to use the deemed cost for certain assets under property plant & equipment under First time

adoption of SLFRS 1.

Transfer to Bearer Biological Assets previously recognized in Property, Plant and Equipment under SLAS.

Re-classify Land Development Cost under Property, Plant and Equipment.

The Group has reclassified certain property under SLFRS/LKAS as Investment property since these lands were used for the purpose of capital

appreciation and to earn a rental income.

Group Company

31st March 31st March 31st March 31st March

2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Property,plant and equipment impairment upon deemed

costs on first time adoption - - (8,922) (4,216)

Immature/Mature Plantations reclassified under Bearer Biological

Assets (724,888) (807,662) - -

Transfer to Consumer Biological Assets (244,714) - -

Reclassification of Property,plant & equipment as Investment

properties as per LKAS 40 (838,000) (666,000) - -

Immovable(JEDB/SLSPC)Assets on Finance Lease(Other

than Bare Land) (64,954) (70,422) - -



7.5 Note on Explanation to the Transition of SLFRS/LKAS 13 Investment Properties The Group has reclassified certain property under SLFRS/LKAS as Investment property since these lands were used for the purpose of capital

appreciation and to earn a rental income.

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Reclassification of Property, Plant & Equipment as Investment

properties as per LKAS 40 774,050 666,000 - -

14 Capital Work in Progress As per LKAS 23 capitalisation of borrowing costs previously not capitalised now adjusted with Capitalisation of Borrowing costs directly relating to

construction of as asset.

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

7,061 1,662 - -

15 Bearer Biological Assets Tea, Rubber, Coconut and Other Crops are categorized under Bearer Biological Assets.

Tea and Other Crops are recorded at cost due to practical difficulties to adopt fair value model. Rubber and Coconut Crops are recorded at fair

value as per LKAS 41.

The components of Bearer Biological Assets previously recognized under Property, Plant and Equipment and Timber Stocks are transferred to

Bearer Biological Assets.

Nurseries of Tea, Rubber and Other Crops were previously classified as inventory under SLAS which has to be re-classified under Bearer/

Consumable Biological Assets as per LKAS 41.

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Transfer of value of timber component from Consumable to Bearer

Biological Assets - Rubber 457,105 436,460 - -

Transfer of value of timber component from Consumer to Bearer

Biological Assets - Coconut 8,361 - - -

Land Development Cost (15,200) (15,011) - -

Immovable (JEDB/SLSPC) Mature/Immature Plantations reclassified

under Bearer Biological Assets 65,733 69,431 - -

Mature/Immature Plantations reclassified under Bearer

Biological Assets 934,987 807,662 - -

Growing Crop Nurseries’ reclassified under Biological Assets 8,166 5,640 - -

Impact on Fair Valuation of Bearer Biological Assets 400,247 305,623 - -

Reversal of Depreciation/ Amortization charged on Mature

Plantations - Rubber and Coconut 11,544 11,544 - -

Reversal of Grant Received on Rubber Replanting (28,335) (21,062) - -



16 Consumable Biological Assets Timber component of rubber trees were initially recorded under consumable biological assets after fair valuation in terms of LKAS 41. Due to fair

valuation of letex and timber of Rubber trees, the timber component of rubber trees was reclassified under bearer biological assets ( rubber) in

terms of LKAS 41.

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Transfer of value of timber component from

Consumer to Bearer Biological Assets (548,313) (435,929) - -

Transfer from Property, Plant and Equipment - 351,587 - -

Transfer from previously classified as Timber stock 2,062,608 1,714,343 - -

17 Timber Stock Timber stocks are now reclassified as consumer biological assets in term of LKAS 41.

Accordingly timber stock previously classified now reclassified as Consumer Biological Assets

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Timber stock previously classified now reclassified as Consumer

Biological Assets 2,062,609 1,714,343 - -

18 Investment in Subsidiaries Certain investments in subsidiaries were revalued as at the SLFRS transition date of 1st April 2011 as allowed by SLFRS 1-First time adoption of Sri

Lanka Accounting standards. The fair value of those investments shall be the deemed cost thereafter. Accordingly the fair value gains pertaining

to investment in Browns Investments PLC, S.F.L Services (Pvt) Ltd (Formerly Standard Finance Pvt Ltd) and investment in Browns Group Industries

(Pvt) Ltd were taken into retained earnings as at the transition date.

The valuation was based on the following methods and assumptions:

Valuation technique: P/E based market valuation (Level 2 inputs)

Data input: Comparable market data available at Colombo Stock Exchange

Risk allowance: 50% on the valuation

Discounted Cash flow method (DCF) where P/E based market multiple method is not available

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Valuation of investment in subsidiaries at deemed cost - - 5,898,252 5,898,252

Fair Value of the Guarantees given - - 5,345 5,345



7.5 Note on Explanation to the Transition of SLFRS/LKAS 19 Investments in Equity Accounted Investees Investment in equity accounted investees were fair valued as of transition to SLFRS date (1/4/2011) as allowed by SLFRS 1-First time adoption of

Sri Lanka Accounting standards. The fair value of those investments as at 1/4/2011 shall be considered deemed cost thereafter of that investment.

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Revaluation of Property plant and equipment owned by Investments

in Equity Accounted Investees 91,001 5,659 - -

Deferred tax on Revaluation 3,548 - - -

20 Other Investments - Long TermUnder previous SLAS, the Group and Company accounted for the other investments - long term measured at cost. Under SLFRS/LKAS,the Group

and Company have designated such investments as available for sale Investments. LKAS 39 requires available for sale investments measured at

Fair Value. The difference between the fair value under SLFRS/LKAS and carrying value under previous SLAS has been recognised as separate

component of Equity.

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Fair Value change on assets available for sale assets (272,694) (144,953) - -

Share advance reclassified under Long term Investments. 15,151 9,009 - -

21 Deferred Tax Asset The effect of transition on Income taxes is due to the temporary difference arised due to the SLFRS convergence is recognized.

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Due to Property, plant and equipment Revaluation 1,324 15,594 1,597 -

Due to Acturial valuation loss on Retirement Benefit plan - Gratuity 2,082 1,183 2,082 1,183

Deferred tax due to timing differences on SLFRS/LKAS adjustments 2,685 12,517 - -

22 Loans to Related Parties- Due after one year Loans given to related parties have been reclassified based on the terms and condition of the loan agreements in accordance to LKAS 39.

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Net adjustment to Loans to Related Parties- Due with in one year (378,839) (280,574) (505,701) (404,938)

- - - -

(378,839) (280,574) (505,700) (404,938)



23 Inventories The produce stock of biological assets ie. tea and rubber were valued at their estimated realizable values, net of direct selling expenses as per

SLAS 32. With the adoption of SLFRS, the agricultural products that are harvested from biological assets ie. green leaf and latex are required

to measure at its fair value less cost to sell at the point of harvest. Therefore, it is scoped under LKAS 2 and its fair value is the cost at the date

of applying this standard. The cost of semi-finished and finished products are estimated through attributing the direct manufacturing cost

into the fair value of biological product’s cost of conversion, depending on the existing state of conversion as at the date of financial position.

Subsequently, the measurement of inventory is carried at the lower of cost and estimated net realizable value in accordance with LKAS 2.

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Removal of produce stock valuation as per SLAS (134,472) (168,600) - -

Inclusion of produce stock valuation as per SLFRS 120,401 149,258 - -

Growing Crop Nurseries’ reclassified under Biological Assets (Refer L.4) (8,723) (6,172) - -

Inventory restatement due to revenue recognition upon timing differences 66,115 46,466 52,595 46,763

24 Trade and Other Receivables The revenue will be recognised when the criteria for sale of goods is met under the relevant agreement and with the condition of all risks and

rewards passed to the customer . Accordingly an adjustment is made in order to comply with the requirement under SLFRS in order to recognise

such revenue as per LKAS 18. Due to the effect of such impact on trade receivables not adjusted.

Impairment assessment for financial asset has been carried out as per LKAS 39 and effect of such has been now recognised.

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Trade Receivables restatement due to revenue recognition (84,198) (72,729) (72,094) (62,869)

Revenue recognition on installations and Annual Maintenance 2,124 6,048 2,124 6,048

Impairment of Trade Receivables (16,538) (15,363) (10,216) (10,047)

Share advance reclassified under Long term Investments. (15,151) (9,009) - -

Early settlement discounts (5,936) - - -

Reclassification of staff loan as receivables (4,492) - - -

25 Tax Recoverable

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Tax Effect arising from transition from SLFRS adoption 3,699 78 - -



7.5 Note on Explanation to the Transition of SLFRS/LKAS 26 Other Investments -Short term Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Call deposits previously recognised under short term investments now

reclassified under Cash and Bank (258,193) (2,289) - -

27 Cash at Bank and in Hand Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Call deposits previously recognised under short term investments

now reclassified under Cash and Bank 261,764 424 - -

28 Capital Reserves Capital reserves include revaluation reserves and other capital reserves under previous gap. However revaluation reserve has been reclassified as

other component of equity under SLFRS/LKAS.

Other component of equity includes revaluation reserve and available for sale reserve.

Further Group has reclassified certain property under LKAS 40 as Investment property since these lands were used for the purpose of capital

appreciation and to earn rental income. Upon the transition to SLFRS 1 first time adoption on transition date 1st April 2011 revaluation gain

pertaining to certain properties now classified to revenue reserves.

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Impact on capital reserves due to SLFRS Conversions (693,413) (633,666) - -

29 Revenue Reserves Due to the application of SLFRS/LKAS first time adoption , measurement and presentation of Financial Statements have changed. The Group has

assessed the useful life of the property, plant & equipment and accounted under deem cost and which has accounted through retained earnings.

Further the Group has recomputed the deferred tax, financial assets, inventory and financial liability and has recorded under fair value and

adjusted through retained earnings. Also the Group has reclassified certain property under SLFRS/LKAS 40 as Investment property since these

lands were used for the purpose of capital appreciation and to earn a rental income. Upon the reclassification with SLFRS 1 first time adoption,

revaluation gain pertaining to certain properties now classified to revenue reserves.

At Company level certain investments in subsidiaries were revalued as at the SLFRS transition date of 1/4/2011 as allowed by SLFRS 1-First time

adoption of Sri Lanka Accounting standards. The fair value of those investments shall be the deemed cost thereafter of those investments.

Accordingly the fair value gains pertaining to investment in Browns Investments PLC, S.F.L Services (Pvt) Ltd ( Formerly Standard Finance Pvt Ltd)

and investment in Browns Group Industries (Pvt) Ltd were taken into retained earnings as at the transition date.



30 Deferred Tax Liability The deferred tax effect arises due to the increase of the taxable temporary difference mainly as a result of fair valuation of biological assets. The

liability as at 1 April 2011 and 31 March 2012 has been increased as analysed below.

This measurement effects on the net assets in the Statement of Financial Position as at 1 April 2011, 31 March 2012 and Comprehensive Income

for the year ended 31 March 2012 as follows.

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Unutilized Tax Losses (80,261) (69,365) - -

Employee benefits (54,803) (54,843) - -

Property, Plant & Equipment 99,396 58,403 - -

Bearer Biological Assets 149,031 128,178 - -

Consumer Biological Assets 151,429 163,000 - -

31 Deferred Income The impact of amortizing grants over the useful life relating to biological assets in accordance to LKS/SLFRS were considered under differed

income. under LKAS 20 grant related to immature plantations are deducted from the carrying value of the immature plantations since immature

plantations are carried at cost.

Adjustments have also been made in accordance to LKAS 18 “Revenue Recognition”

Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Reversal grant received on timber plantations (2,973) (2,972) - -

Reversal grant received on Immature Rubber plantations (25,156) (21,061) - -

Annual Maintenance income now recognised 22,285 19,061 22,285 19,061

32 Accounts Payable and Accrued Expenses Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Early settlement discounts provision (293) 1,869 2,143 1,869

Warranty on sales provision (7,925) 10,132 17,818 9,590

Effect of unwinding liability (1,703) (1,703) (1,703) (1,703)



7.5 Note on Explanation to the Transition of SLFRS/LKAS 33 Interest Bearing Borrowings due within one year and Short Term Interest Bearing Borrowings Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Reclassification 53,257 7,390 - -

34 Income Tax Payable Group Company


2012 2011 2012 2011

Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Tax Effect on income tax based on the transition to SLFRS has been adjusted 11,683 290 - (1)

35 Other The effect of Transition, other than above, relate to reclassification of balances to be in compliance with SLFRS/LKAS.

36 Statement of Cash Flows The transition from SLAS to SLFRS/ LKAS has not had a material impact on the statement of cash flows.



Group Company


Rs.000 Rs.000 Rs.000 Rs.000

1 REVENUE

Gross Revenue (Note 1.1) 14,183,801 14,387,354 9,847,137 10,542,321

1.1 Revenue - Industry SegmentsTrading 10,704,673 11,100,167 9,847,137 10,542,321

Manufacturing 744,346 1,166,168 - -

Travel & Tours 31,790 20,335 - -

Finance 78,172 44,135 - -

Plantation 2,553,652 1,844,163 - -

Investments 71,168 212,386 - -

Total Segment Revenue - Gross 14,183,801 14,387,354 9,847,137 10,542,321

2 OTHER INCOME

Rent - 15,810 1,162 507

Management Fees - 1,200 29,000 29,000

Gain on Disposal of Property, Plant and Equipment 3,801 9,172 2,303 2,420

Gain on Foreign Currency Translation 49,379 - 49,326 -

Secretarial Fees 300 335 - -

Loss on Disposal of Investments (318) 37,394 - -

Gain on Changes in Fair Value of Short term Investments 153,640 2,224 - -

Others (Note 2.1) 154,874 2,772,614 9,713 3,587

361,676 2,838,749 91,504 35,514

2.1 OthersMiscellaneous Income 143,171 65,327 9,713 3,587

Gain on Disposal of Investment Properties 7,019 - - -

Negative Goodwill - 2,656,003 - -

Amortization of Capital Grants 4,684 5,350 - -

Sale of Trees - 45,934 - -

154,874 2,772,614 9,713 3,587

3 FINANCE INCOME

Dividend Income 184,028 105,865 219,544 212,993

Interest Income 310,553 226,067 107,528 45,311

494,581 331,932 327,072 258,304

4 FINANCE COSTS

Interest on Loans 949,138 399,490 880,091 442,977

Interest on Finance Lease 14,057 14,513 1,121 10

Interest on Benefit Liability 433 4,837 6,483 4,459

Interest on Overdraft 106,747 116 99,042 -

1,070,375 418,956 986,737 447,446

Notes to the Financial Statements


Group Company


Rs.000 Rs.000 Rs.000 Rs.000

5 PROFIT / (LOSS) BEFORE TAXATION

Profit / (Loss) before Taxation is stated after charging all expenses

including the following:

Directors’ Emoluments 33,498 23,760 13,429 12,660

Auditors’ Remuneration

Audit fees and expenses- Parent Auditors 3,390 2,665 1,300 1,200

Audit fee and expenses - Other Auditors 4,035 3,653 - -

Secretarial Fees 478 605 300 300

Depreciation 261,244 212,940 63,375 59,484

Amortization of Finite Life Intangible Assets 27,646 8,015 24,929 7,839

Provision for Bad & Doubtful Debts and Write offs 42,088 9,544 70,547 5,383

Provision for Slow Moving Stocks 120,209 24,434 140,774 4,246

Wages & Salaries 1,331,863 1,099,777 271,407 234,755

Defined Contribution Plan Cost- EPF and ETF 160,291 150,828 38,811 33,509

Defined Benefit Plan Cost- Retiring Gratuity 61,439 59,446 24,719 22,075

Provision for fall in value of Investments 1,760 591,511 1,760 235,903

6 TAXATION

The Company and its Subsidiaries are liable to taxation at the rate of 28% (2011/2012- 28%), 10% and 15% in accordance with the provisions of

Inland Revenue Act No. 10 of 2006 and subsequent amendments there to.

Group Company


Rs.000 Rs.000 Rs.000 Rs.000

6.1 Income Tax (Expense) / ReversalIncome Tax on current year profits (Note 6.2) 87,731 250,571 19,596 131,414

Deferred Tax Originating during the year (Note 6.4) (79,144) 120,651 (117,670) 80,897

Under/(Over) Provision during prior years 34,476 13,416 6,300 (2,512)

43,063 384,638 (91,774) 209,799



Group Company


Rs.000 Rs.000 Rs.000 Rs.000

6.2 Reconciliation of Accounting Profit / (Loss) to Income Tax

Accounting Profit / (Loss) before Taxation 454,664 3,461,989 (556,482) 608,587

Adjustment on Disallowable Expenses 1,946,865 1,341,482 455,417 434,307

Adjustment on Allowable Expenses (225,918) (436,020) (8,504) (2,082)

Tax Exempt Income (374,110) (2,711,110) (219,544) (213,618)

Adjustment on Capital Allowances (122,733) (93,706) (122,733) (95,140)

Tax Losses Utilized (Note - 6.3) (122,097) (312,348) (37,684) (262,719)

Loss incurred for the year (Note - 6.3) (558,987) 35,687 (559,513) -

Taxable Income 997,684 1,285,974 (1,049,043) 469,335

Income Tax @ 28% (last year 28%) 32,615 154,349 19,596 131,414

Income Tax @ 10% 16,167 18,345 - -

Income Tax @ 15% 38,949 77,877 - -

Income Tax on Current year Profits 87,731 250,571 19,596 131,414

6.3 Tax Losses UtilizedTax Loss Brought Forward 733,424 1,010,085 271,096 533,815

Tax Losses Utilized during the year (122,097) (312,348) (37,684) (262,719)

Loss incurred during the year (558,987) 35,687 559,513 -

Tax Losses carried forward 52,340 733,424 792,925 271,096

6.4 Deferred Tax ExpenseProvision/(Reversal) from Deferred Taxation (79,144) 120,651 (117,670) 80,897

(79,144) 120,651 (117,670) 80,897


7 EARNINGS / (LOSS) PER SHARE

Basic Earnings / (Loss) per ShareThe calculation of basic earnings / (loss) per share is based on the Profit/(Loss) attributable to ordinary shareholders and the weighted average

number of ordinary shares outstanding during the year.

Basic earnings / (Loss) per share are calculated as follows:

Group Company

2013 2012 2013 2012

Profit / (Loss) Attributable to Equity holders of the Company (Rs.000) 359,963 1,170,876 (464,708) 398,788

Weighted Average Number of Ordinary Shares in Issue (‘000) 70,875 70,875 70,875 70,875

Basic Earnings / (Loss) per Share (Rs.) 5.08 16.52 (6.56) 5.63

Diluted Earnings per ShareThere were no potentially dilutive ordinary shares outstanding at any time during the year/ previous year.

8 DIVIDEND PER SHARE

The dividend per share is based on the dividend paid for the period covered by the Financial Statements.

Group Company

2013 2012 2013 2012

Dividends Paid (Rs’000) 35,438 93,555 35,438 93,555

Weighted average number of Ordinary Shares in issue (‘000) 70,875 70,875 70,875 70,875

Dividend per Share (Rs.) 0.50 1.32 0.50 1.32

8.1 The interim dividend was paid on 12th October 2012.

8.1.1 The interim dividend of Rs 0.50 per share, represented redistribution of dividends received by the Company and was therefore not

subjected to 10% tax deduction.



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13

2

01

2

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

Co

st/

Va

lua

tio

n

Bal

ance

at

the

be

gin

nin

g o

f th

e y

ear

0

1st

Ap

ril 2

01

2

3,4

36

,79

2

14

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2

73

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9

35

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21

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13

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Ad

dit

ion

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- 7

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1

0,1

20

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6

50

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7

29

0,6

65

Re

valu

atio

n

13

3,7

84

(1

0,8

69

) -

- -

- -

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12

2,9

15

1

49

,00

5

Dis

po

sals

-

- -

- -

- (1

,39

5)

- -

(1,3

95

) (1

,51

3)

Ba

lan

ce a

t th

e e

nd

of

the

ye

ar

3

1st

Ma

rch

20

13

3

,57

0,5

76

1

36

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28

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3

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1

56

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49

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0

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81

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7

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09

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0

Acc

um

ula

ted

De

pre

cia

tio

n

Bal

ance

at

the

be

gin

nin

g o

f th

e

ye

ar 0

1st

Ap

ril 2

01

2

- -

68

,71

0

3,5

68

1

,06

8

61

,30

2

26

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9

- 5

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16

7,0

79

1

13

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2

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arg

e fo

r th

e y

ear

-

3,3

23

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2,7

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On

Dis

po

sals

-

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,39

5)

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(1,3

95

) (1

,33

4)

On

Re

valu

atio

n

- (3

,32

3)

- -

- -

- -

- (3

,67

7)

(4,1

82

)

Ba

lan

ce a

t th

e e

nd

of

the

ye

ar

3

1st

Ma

rch

20

13

-

- 9

1,4

47

4

,46

0

2,8

47

8

4,3

12

2

9,5

64

1

,57

2

11

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0

22

5,3

82

1

67

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9

Ne

t B

oo

k V

alu

e

As

at

31

st M

arc

h 2

01

3

3,5

70

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6

13

6,2

15

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90

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8

31

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8

20

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7

71

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3

19

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7

8,5

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4,0

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5

As

at 3

1st

Mar

ch 2

01

2

3,4

36

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14

7,0

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05

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9

32

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0

20

,35

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70

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20

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7

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5

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at 3

1st

Mar

ch 2

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3

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8,2

51



9.3

Pro

pert

y, P

lan

t an

d E

quip

men

t -

Gro

up

9.3.

1 A

sset

s on

Fin

ance

Lea

se -

Gro

up

As

exp

lain

ed

mo

re f

ully

in N

ote

11

.1, a

ll JE

DB

/SLS

PC

est

ate

leas

e d

ee

ds

hav

e b

ee

n e

xecu

ted

to

dat

e. In

te

rms

of

the

ru

ling

of

the

UIT

F o

f th

e In

stit

ute

of

Ch

arte

red

Acc

ou

nta

nts

of

Sri

Lan

ka, a

ll im

mo

vab

le a

sse

ts in

th

e J

EDP

/SLS

PC

est

ate

s u

nd

er

fin

ance

leas

es

hav

e b

ee

n t

ake

n in

to t

he

bo

oks

of

the

Co

mp

any’

s su

b-

sub

sid

iari

es

(nam

ely

, Mat

ura

ta P

lan

tati

on

s Lt

d. a

nd

Pu

sse

llaw

a P

lan

tati

on

s Lt

d.)

retr

osp

ect

ive

to

15

th J

un

e’1

99

2. F

or

this

pu

rpo

se, t

he

Bo

ard

of

the

afo

resa

id c

om

pan

ies

de

cid

ed

at

the

ir m

ee

tin

gs

that

th

ese

ass

ets

be

re

valu

ed

at

the

ir

bo

ok

valu

es

as t

he

y ap

pe

ar in

th

e b

oo

ks o

f th

e J

EDP

/SLS

PC

, on

th

e d

ay im

me

dia

tely

pre

ced

ing

th

e d

ate

of

form

atio

n o

f th

e a

bo

ve c

om

pan

ies.

Th

ese

ass

ets

hav

e b

ee

n t

ake

n in

to t

he

Co

mp

any’

s su

b-

sub

sid

iari

es

(nam

ely

, Mat

ura

ta P

lan

tati

on

s Lt

d. a

nd

Pu

sse

llaw

a P

lan

tati

on

s Lt

d.)

as a

t 1

5th

Ju

ne’

19

92

an

d d

ep

reci

ate

d a

s fo

llow

s;

As

at

31

st M

arc

h

Ve

ste

d

P

erm

an

en

t

Oth

er

U

nim

pro

ve

d

Imp

rov

em

en

ts

Ve

ste

d

Mo

tor

W

ate

r L

an

d

Ro

ad

s V

est

ed

To

tal

Tota

l

L

an

d

To L

an

d

Pla

nta

tio

ns

Ve

hic

les

Co

mp

ute

rs

Bu

ild

ing

s M

ach

ine

ry

Sa

nit

ati

on

D

ev

elo

pm

en

t a

nd

Bri

dg

es

Ass

ets

2

01

3

20

12

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

R

s.0

00

Co

st/

Va

lua

tio

n

Bal

ance

as

at 0

1st

Ap

ril 2

01

2

24

3

1,8

68

8

55

1

5,5

34

3

14

3

2,5

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1

4,9

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Ad

dit

ion

s -

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6

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2,0

96

9

59

Acq

uis

itio

n o

f Su

bsi

dia

ry

- -

- -

- -

- -

- -

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9,9

02

Tran

sfe

r O

ut

- -

- (1

,43

4)

(31

4)

- (3

,42

7)

- -

- -

(5,1

75

) (6

,96

9)

On

Dis

po

sals

-

- -

- -

- -

- -

- -

- (7

60

)

Bal

ance

at

the

en

d o

f th

e y

ear

3

1st

Mar

ch 2

01

3

24

3

1,8

68

8

55

1

4,1

00

-

32

,59

5

13

,63

0

4,4

73

1

37

3

48

3

61

6

8,6

10

7

1,6

89

Am

ort

iza

tio

n

Bal

ance

as

at 0

1st

Ap

ril 2

01

2

15

1

1,2

25

5

62

1

0,6

03

6

8

24

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2

9,3

00

4

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2

27

3

61

5

1,4

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4

3,4

45

Acq

uis

itio

n o

f Su

bsi

dia

ry

- -

- -

- -

- -

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7,4

32

Ch

arg

e fo

r th

e y

ear

8

6

2

28

2

,05

8

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35

3

(9)

3

12

-

4,3

02

3

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9

Tran

sfe

r O

ut

- -

- (9

36

) (6

8)

- (1

,11

7)

- -

- -

(2,1

21

) (2

,90

6)

On

Dis

po

sals

-

- -

- -

- -

- -

- -

- (4

30

)

Ba

lan

ce a

s a

t 3

1st

Ma

rch

20

13

1

59

1

,28

7

59

0

11

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5

- 2

6,2

19

8

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5

3

23

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36

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53

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51

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0

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t B

oo

k V

alu

e

As

at

31

st M

arc

h 2

01

3

84

5

81

2

65

2

,37

5

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6

5,0

94

4

1

84

1

09

-

15

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9

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at 3

1st

Mar

ch 2

01

2

92

6

43

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93

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,93

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24

6

8,1

63

5

,66

1

32

8

7

12

1

- 2

0,2

69

As

at 3

1st

Mar

ch 2

01

1

10

0

70

5

32

1

5,3

34

-

7,7

55

1

0,5

10

1

65

8

9

13

1

- 2

5,1

10

Inve

stm

en

t in

pla

nta

tio

n a

sse

ts w

hic

h w

ere

imm

atu

re a

t th

e t

ime

of

han

din

g o

ver

to t

he

Co

mp

any’

s su

b-

sub

sid

iari

es

(nam

ely

Mat

ura

ta P

lan

tati

on

s Lt

d. a

nd

Pu

sse

llaw

a P

lan

tati

on

s

Ltd

.) b

y w

ay o

f e

stat

e le

ase

s ar

e s

ho

wn

un

de

r Im

mat

ure

Pla

nta

tio

ns

( re

valu

ed

as

at 2

2n

d J

un

e’1

99

2 )

, all

of

wh

ich

hav

e b

ee

n t

ran

sfe

rre

d t

o M

atu

re P

lan

tati

on

s as

at

Bal

ance

Sh

ee

t d

ate.


9 PROPERTY, PLANT AND EQUIPMENT CONTD.

9.3 Property, Plant and Equipment - Group9.3.2 Other Tangible Assets - Group

Land Water Penstock

and Sanitations Roads and Pipe Security Total Total

Buildings and Others Bridges Line Fences Others 2013 2012

Cost/ Valuation Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Balance as at 1st April 2012 16,512 12,322 38,484 41,854 845 73,009 183,026 156,381

Additions 89 433 1,010 - - 24,858 26,391 26,892

Transferred Out - - - - - (247) (247) (247)

Balance as at 31st March 2013 16,601 12,755 39,494 41,854 845 97,620 209,170 183,026

Accumulated Depreciation

Balance as at 1st April 2012 1,312 6,712 2,587 4,156 759 420 15,945 7,314

Transferred Out - - - - - (13) (13) (13)

Charge for the year 314 541 755 2,093 - 31,065 34,768 8,643

Balance as at 31st March 2013 1,625 7,253 3,342 6,248 759 31,473 50,700 15,945

Net Book Value

As at 31st March 2013 14,976 5,502 36,152 35,606 87 66,147 158,470

As at 31st March 2012 15,201 5,607 35,893 37,700 86 72,594 167,081

As at 31st March 2011 15,010 6,252 35,805 39,427 20 - 96,514

These Immovable/Movable Assets vested in the subsidiaries of FLC Holdings PLC ( Formerly known as Free Lanka Capital Holdings PLC).(namely

Maturata Plantations Ltd and Pussellawa Plantations Ltd.)



9 P

RO

PE

RT

Y, P

LAN

T A

ND

EQ

UIP

ME

NT

CO

NT

D.

9.4

Pro

pert

y, P

lan

t an

d E

quip

men

t -

Com

pan

y9.

4.1

Rev

alu

atio

n o

f La

nd

and

Bu

ildi

ngs

Lan

d a

nd

Bu

ildin

gs

ow

ned

by

the

Co

mp

any

hav

e b

een

re

-val

ued

by

an In

corp

ora

ted

Val

uer

, Mr.H

alee

m G

ho

use

on

th

e b

asis

of m

arke

t va

lue

and

Co

ntr

acto

r (c

ost

) as

ind

icat

ed b

elo

w, a

nd

the

surp

lus

on

rev

alu

atio

n a

s at

31s

t M

arch

201

3 am

ou

nti

ng

to

Rs.

126

.2 M

n (2

011/

2012

- R

s. 1

53 M

n) h

as b

een

cre

dit

ed t

o t

he

Rev

alu

atio

n R

eser

ve A

cco

un

t o

f th

e C

om

pan

y d

uri

ng

th

e ye

ar.

De

tails

of

Co

mp

any’

s la

nd

s an

d b

uild

ing

s st

ate

d a

t va

luat

ion

are

ind

icat

ed

be

low

;

Av

era

ge

Tota

l M

ain

V

alu

e

B

asi

s o

f E

ffe

ctiv

e D

ate

P

rop

ert

y

Ex

ten

t B

uil

din

g

pe

r S

q.F

t.

La

nd

B

uil

din

g

Pro

pe

rty

V

alu

ati

on

o

f V

alu

ati

on

V

alu

er

La

nd

S

q.F

t.

Rs.

R

s. ‘0

00

R

s. ‘0

00

Lan

d &

Bu

ildin

g

Op

en

Mar

ket

Val

ue

Bas

is

31

st M

arch

20

13

A

.Y. D

ania

l & S

on

- M

r.Hal

ee

m G

ho

use

A

1-R

2-P

12

.44

6

9,2

15

7

22

1

,57

0,1

05

5

0,0

00

At

TB J

ayah

Maw

ath

a,

-In

corp

ora

ted

Val

uat

ion

Co

nsu

ltan

ts

Co

lom

bo

-10

Lan

d &

Bu

ildin

g

Co

ntr

acto

r (C

ost

/Su

mm

atio

n)

Bas

is

31

st M

arch

20

13

A

.Y. D

ania

l & S

on

- M

r.Hal

ee

m G

ho

use

A

2-R

0-P

34

.80

5

,00

0

6,0

00

1

,20

6,3

20

3

0,0

00

At

De

van

amp

iyat

issa

Maw

ath

a,

-In

corp

ora

ted

Val

uat

ion

Co

nsu

ltan

ts

Co

lom

bo

-10

Lan

d &

Bu

ildin

g

Co

ntr

acto

r (C

ost

) B

asis

3

1st

Mar

ch 2

01

3

A.Y

. Dan

ial &

So

n-

Mr.H

ale

em

Gh

ou

se

A2

5-R

1-P

15

1

,00

0

4,2

00

3

51

,37

8

4,2

00

At

De

man

han

diy

a, N

eg

om

bo

. -I

nco

rpo

rate

d V

alu

atio

n C

on

sult

ants

Lan

d &

Bu

ildin

g

Co

ntr

acto

r (C

ost

) B

asis

3

1st

Mar

ch 2

01

3

A.Y

. Dan

ial &

So

n-

Mr.H

ale

em

Gh

ou

se

A2

-R0

-P2

8.6

8

48

,00

0

51

9

21

7,9

25

2

4,8

99

No

3, U

day

a M

awat

ha

Rat

mal

ana.

-I

nco

rpo

rate

d V

alu

atio

n C

on

sult

ants

(No

w O

ff G

ang

adar

a M

awat

ha,

Rat

mal

ana)

Lan

d &

Bu

ildin

g

Co

ntr

acto

r (C

ost

) B

asis

3

1st

Mar

ch 2

01

3

A.Y

. Dan

ial &

So

n-

Mr.H

ale

em

Gh

ou

se

A0

-R3

-P1

0

9,3

62

2

,40

3

11

8,0

00

2

2,5

00

At

Co

lom

bo

-Dam

bu

lla H

igh

way

-I

nco

rpo

rate

d V

alu

atio

n C

on

sult

ants

Lan

d &

Bu

ildin

g

Co

ntr

acto

r (C

ost

) B

asis

3

1st

Mar

ch 2

01

3

A.Y

. Dan

ial &

So

n-

Mr.H

ale

em

Gh

ou

se

A0

-R2

-P2

8.7

5

8,3

42

5

53

6

7,9

69

4

,61

6

At

Gan

gad

ara

Maw

ath

a,

-In

corp

ora

ted

Val

uat

ion

Co

nsu

ltan

ts

Rat

mal

ana

Lan

d

Co

ntr

acto

r (C

ost

) B

asis

3

1st

Mar

ch 2

01

3

A.Y

. Dan

ial &

So

n-

Mr.H

ale

em

Gh

ou

se

A0

-R1

-P2

4.8

-

- 3

8,8

80

-

Mai

n S

tre

et,

Am

bal

anto

ta.

-In

corp

ora

ted

Val

uat

ion

Co

nsu

ltan

ts

3

,57

0,5

77

1

36

,21

5


9 PROPERTY, PLANT AND EQUIPMENT CONTD.

As at As at

As at 31st March 1st April

31st March 2013 2012 2011

Land Buildings Total Total Total

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

9.4.2 Surplus on Revaluation during the year No 481,T.B Jayah Mawatha, Colombo 10. 9,974 144 10,118 5,761 63,135

Devanampiyatissa Mawatha, Colombo 10. 70,960 (2,459) 68,501 107,793 42,604

Demanhandiya , Negombo. 29,049 1,586 30,635 15,424 18,666

Gangadara Mawatha, Ratmalana. 8,717 (9,270) (553) 12,636 17,576

Habarana Road, Dambulla 9,125 4,224 13,349 3,968 13,417

No 3, Udaya Mawatha Ratmalana. (Now Off Gangadara

Mawatha, Ratmalana) 2,719 (1,875) 843 3,467 8,795

Main Street, Ambalantota. 3,240 104 3,344 4,140 -

Total Revaluation Surplus 133,784 (7,546) 126,237 153,189 164,193

As at As at As at

31st March 31st March 1st April

2013 2012 2011

Rs.000 Rs.000 Rs.000

9.4.3 Revaluation Reserve as atDemanhandiya, Negombo. 354,640 324,005 308,581

No 3, Udaya Mawatha Ratmalana. (Now Off Gangadara Mawatha, Ratmalana) 72,766 71,921 68,455

Devanampiyatissa Mawatha, Colombo 10. 1,038,556 970,055 862,262

No 481,T.B Jayah Mawatha, Colombo 10. 1,588,387 1,578,269 1,572,508

Gangadara Mawatha, Ratmalana. 149,273 149,826 137,190

167/92, Avissawella Road, Orugodawatta. 5,359 5,359 5,359

Habarana Road, Dambulla 41,934 28,584 24,617

Main Street, Ambalantota. 7,483 4,142 -

Total on Land & Buildings 3,258,398 3,132,161 2,978,972

Plant & Machinery 5,567 5,567 5,567

Total Revaluation surplus 3,263,965 3,137,728 2,984,539

Appropriated for bonus issue (1997/1998) (14,000) (14,000) (14,000)

Deferred Tax impact on Building Revaluation (2007/2008) (4,831) (4,831) (4,831)

Deferred Tax impact on Building Revaluation (2008/2009) 12,881 12,881 12,881

Appropriated for bonus issue (2008/2009) (1,984,500) (1,984,500) (1,984,500)



Deferred Tax impact on Building Revaluation (2011/2012) 5,658 5,658 -

Deferred Tax impact on Building Revaluation (2012/2013) 2,016 - -

Revaluation Reserve as at 31st March 2013 1,267,416 1,139,165 980,318



Group Company

As at As at As at As at As at As at

31st March 31st March 1st April 31st March 31st March 1st April

2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

10 INVESTMENT PROPERTIES

Balance at the beginning of the year 4,685,617 826,344 117,480 111,971 110,747 117,480

On Acquisition of Subsidiary - 3,500,000 - - - -

Additions (10.2) 104,059 - 49,597 - - -

Disposals (2,100) - (8,448) (2,100) - (8,448)

Transfers from / (to) PPE 199,915 139,386 666,000 - - -

Change in Fair Value during the year 869,721 219,887 1,715 1,820 1,224 1,715

Balance at the end of the year 5,857,212 4,685,617 826,344 111,691 111,971 110,747

Hatton Property

Land Buildings Total

Rs.000 Rs.000 Rs.000

10.1 Summary of Investment Properties - CompanyBalance as at 1st April 2010 99,002 18,478 117,480

Disposals (5,047) (3,401) (8,448)

Change in fair value during the year 1,435 280 1,715

Balance as at 31st March 2011 95,390 15,357 110,747

Change in fair value during the year 5,054 (3,830) 1,224


Disposals (1,255) (845) (2,100)

Change in fair value during the year 3,320 (1,500) 1,820


Investment properties include properties situated in Hatton containing in extent 200 perches bearing Assessment Nos 97 and 99, Dunbar Road,

Dumburugiriya, Hatton.These properties were valued by Mr.Haleem Ghouse, an Incorporated Valuer having recent experience in the location and

category of the investment properties being valued. As at 31st March 2013 and 31st March, 2012, the Investment properties were revalued for

Rs.111.7 Mn and Rs. 111.9 Mn, respectively, and the resulting gains and losses were recognised in the Profit or Loss. Rental income earned from

investment properties by the Company during the year amounted to Rs 1.8 Mn (2011/2012 - Rs. 1.2 Mn). Hatton Property represents the Land

and Building situated in Hatton.

10.2 Investment Properties of the Group Include Following:10.2.1 Leasehold land at Excel WorldThe Company’s Sub-subsidiary, Millennium Developments ( Pvt) Ltd ( MDPL, A subsidiary of Excel Global Holdings ( Pvt) Ltd) has Leasehold rights

to its property bearing Plan No. 784A, No 338, T.B Jayah Mawatha, Colombo 10, Containing in extent 897 perches. The property was valued by

Independent Valuer Mr. K.T.D. Tissera, a member of the Institute of Valuers of Sri Lanka in determining the fair value as at 1st April 2012 and 31st

March 2013 to be Rs. 3,750 Mn and 3,718 Mn respectively. The resulting loss for the year Rs.35Mn has been recognized in the Profit and Loss.

Rental Income of Rs.82.3 Mn has been earned from this investment Property by MDPL during the year ended 31st March 2013.


10 INVESTMENT PROPERTIES CONTD.

10.2.2 Property owned by F L C Properties (Pvt) Limited (Formerly Free Lanka Capital Properties (Pvt) Ltd.)F L C Properties (Pvt) Ltd a fully owned subsidiary of the company has a land extent of 49.50 perches bearing Assessment No. 19, Dudley

Senanayake Mawatha, Colombo 08. The Company has adopted Fair Value Model for Investment Property as per the Sri Lanka Accounting

Standard- LKAS 40. The Company has engaged an Independent Valuers Mr.W. M .Chandrasena, a member of the Institute of Valuer of Sri Lanka in

determine the fair value as at 31st March’ 2013 of the said Investment Property which amounted to Rs. 272Mn.

10.2.3 Property owned by Brown Investments PLC (BIPLC)Browns Investments PLC has a land containing in extent 28.07 perches bearing Assessment No. 30, Havelock Road, Colombo 05. The Group

has adopted Fair Value Model for Investment Property as per the Sri Lanka Accounting Standard - LKAS 40. The Company has engaged an

Independent Valuer Mr.W. M .Chandrasena, a member of the Institute of Valuers of Sri Lanka in determine the fair value as at 31st March’ 2013 of

the said Investment Property which amounted to Rs. 126Mn. Rental Income of Rs.0.7Mn has been earned from this investment Property by BIPLC

during the year ended 31st March 2013.

10.2.4 Property owned by S.F.L. Services Pvt Limted (Formerly Standard Finance Pvt Limited)The Company’s Subsidiary S.F.L. Services Pvt Limted ( Formerly Standard Finance Pvt Limited) owned 2 land plots containing in extent of 131

perches bearing Plan No. 8798, No. 88, Glennie Street, Slave Island , Colombo 2 (perches 30.5) and bearing Plan No. 1006, No.432, Malabe

Road, Pittugala, Malabe ( perches 100.5) respectively. The Company has adopted Fair Value Model for Investment Property as per the Sri Lanka

Accounting Standard - LKAS 40. The Company has engaged an Independent Valuer Mr. Haleem Ghouse, a member of the Institute of Valuers

of Sri Lanka in determine the fair value as at 31st March’ 2013 of the said Investment Properties which amounted to Rs.114 Mn and Rs.68Mn

respectively. The resulting gain for the year Rs.10.7 Mn has been recognized in the Profit and Loss.

10.2.5 Property owned by Browns Industrial Park Limited (BIPL)The Company’s Subsidiary, Browns Industrial Park Limited has Leasehold rights to property bearing plan no 289 dated 16th March 1992 ,Gonawila

, Markandura. Accordingly BIPL has reclassified this property under SLFRS/LKAS as investment property as at 1st April 2011 since this property

were used for the purpose of capital appreciation and to earn rental income. Upon this reclassification, the Company has adopted Fair Value

Model for Investment Property as per the Sri Lanka Accounting Standard - LKAS 40.This Property consists of land and buildings with a land

extent over 25.5 acres. The Company has engaged an Independent Valuer Mr.W. M .Chandrasena, a member of the Institute of Valuer of Sri Lanka

in determine the fair value as at 1st April 2011 and 31st March 2012 to be Rs.603Mn and Rs.602 Mn respectively. The property was valued by

Independent Valuer Mr.P.W.Senarathna, a Chartered valuation Surveyor of Sri Lanka who determined the fair value as at 31st March 2013 to be Rs.

1,572Mn. The resulting gain for the year Rs.868 Mn net of capital improvements has been recognized in the Profit and Loss. Rental Income of Rs.45

Mn has been earned from this investment Property by BIPL during the year ended 31st March 2013.

Group

As at As at As at


2013 2012 2011

Rs.000 Rs.000 Rs.000

10.3 Summary of Investment Properties - GroupLand 4,015,311 3,682,701 277,987

Buildings 1,841,901 1,002,916 548,357

5,857,212 4,685,617 826,344



Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

11 PREPAID LEASE RENTALS

Gross Value

Balance at the beginning of the year 247,519 256,894 426,728 48,653 48,653 48,653

Additions during the Period (2,640) (9,375) - - - -

On Disposal of Joint Venture - - (169,834) - - -

Balance at the end of the year 244,879 247,519 256,894 48,653 48,653 48,653

Amortization


Amortization during the Period 4,788 (16,510) 601 604 601 601



Carrying Value 189,044 196,472 189,337 45,046 45,649 46,250

The Leasehold Right to Bare Land of JEDB/SLSPC Estates is being amortized by equal amounts over a 53 year period and the unexpired period of

the lease as at the Balance Sheet date is 32 years.

11.1 Prepaid Lease Rentals- GroupLease agreements of all JEDB/SLSPC estates handed over to the Company’s Joint Venture’s Sub-subsidiaries have been executed to date. All

of these lease are retroactive to 15th June’ 1992, the date of formation of the Company’s Joint Venture’s Sub-subsidiaries. The leasehold rights

to the bare land on all of these estates have been taken into the books of the Company’s Joint Venture’s Sub-subsidiaries on 15th June’1992,

immediately after formation of the Company’s Joint Venture’s Sub-subsidiaries, in terms of the ruling obtained from the Urgent Issue Task Force

(UITF) of the Institute of Chartered Accountants of Sri Lanka. For this purpose, Board of the Company’s Joint Venture’s Sub-subsidiaries decided

at its meetings that lease bare land would be revalued at the value established for this land by Valuation Specialist Dr.Wickramasinghe just prior

to the formation of the Company’s Joint Venture’s Sub-subsidiaries . The value as at 15th June’1992 was taken in to the books of Company’s Joint

Venture’s Sub-subsidiaries namely Maturata Plantation Limited and Pussellawa Plantations Limited, and the amortization of the leasehold rights

up to 31st March 2013 are as follows.

Leasehold Rights to Bare Land of JEDB/SLSPC Estate Assets and Immovable (JEDB/SLSPC) Estates Assets on Finance Lease obtained on a long

term basis by the Company’s Joint Venture’s Sub-subsidiaries, are stated at the recorded carrying values as at the effective date of Sri Lanka

Accounting Standard No.19 – Leases, in line with Ruling of the Urgent Issues Task Force of the Institute of Chartered Accountants of Sri Lanka.

Such carrying amounts are amortized over the remaining Lease term or useful life of such asset whichever is shorter.

“The Institute of Chartered Accounts of Sri Lanka has issued a Statement of Recommended Practice (SORP) (with effect from 01st January 2012)

for Right-to-use of Land on Lease on 19th December, 2012. Since the SORP issued by the ICASL has not been finalized as of the date of auditor’s

report, Company’s Joint Venture’s Sub-subsidiaries have not been complied with the SORP issued by the Institute of Chartered Accountants of Sri

Lanka.

Therefore, respective Leasehold Right to bear lands are accounted as the existing practice of “Urgent Issue Task Force (UITF) rulings” issued prior

to 01st January, 2012 which has been superseded by the Sri Lanka Accounting Framework with effect from 01st January, 2012 Company’s Joint

Venture’s Sub-subsidiaries.


11 PREPAID LEASE RENTALS CONTD.11.2 Maturata Plantations LtdSince the fair value of revalued assets differs materially from its carrying amount, the Board of Directors of Maturata Plantations Limited, a

Company’s Joint Venture’s Sub-subsidiaries, on 20th December 2005 has decided a further revaluation to be carried out as at 31st December

2005. The net amounts have been restated to the new valuation carried out by an independent and qualified valuer, Mr.K.Auther Perera. The

values of Bare land which was not subjected to a land survey has been based on the current freehold bare land values which varies from District

to District and estate to estate depending on demand. The freehold values have been converted into leasehold value depending on the balance

period of the lease. The revised UITF ruling does not permit further revaluation of Leasehold lands.

11.2.1 Carrying Value of Revalued Leasehold Property of Maturata Plantations Limited (MPL) at Cost Model - Group.

The carrying value of Leasehold Right to bare land of JEDB/SLSPC Estates of the MPL that would have been included in the Financial Statements

as at 31st March, 2013 had the asset been carried at initial valuation less accumulated amortization is as follows:

Leasehold Right to Bare Land of JEDB/SLSPC Estates Group

As at As at As at


2013 2012 2011

Rs.000 Rs.000 Rs.000

Revaluation as at 22nd June 1992 89,896 89,896 89,896

89,896 89,896 89,896

Accumulated Amortization as at 01st April 33,543 31,847 30,151

Amortization for the Year 1,696 1,696 1,696

Accumulated Amortization as at 31st March 35,239 33,543 31,847

Written Down Value as at 31st March 54,657 56,353 58,049

11.2.2 Land Acquired/ in the Process of being Acquired by the Government & Divested as at 31st March 2013.

Maturata Plantations LimitedThe Government of Sri Lanka has acquired a total land extent of 223.1445 hectares and also in the process of being acquired a further total land

extent of 877.3567 hectares.

The Land divested at the year end totaling to 822.00 hectares.

Pussellawa Plantations LtdThe Government of Sri Lanka has acquired a total land extent of 82.50 hectares and also in the process of being acquired a further total land

extent of 7.02 hectares.

The Land divested at the year end totaling to 89.52 hectares.

No adjustments have been made to the records in respect of the lands acquired as the compensations receivable on the major acquisition are

not known and the transactions pertaining to those acquisitions have been incomplete as at 31st March, 2013.

Government has acquired 50.3285 Hect of Pitipana Estate, Homagama under the Section 2 of the Urban Development Authority [Special Projects]

act through section 38[a] for town development by Extra Ordinary Gazette notification no.1539/9 dated 03rd March 2008.

Pussellawa Plantations Ltd filed a fundamental rights case against the Minister of Lands and Land Development at Supreme Courts stating that

the Gazette notification is illegal, Null and void which is pending as at the date of statement of financial position. No adjustments have been

made to the written down book value in respect of the acquisitions referred above as the compensation is receivable by the company on the

land acquired as per the Lease Agreement.

11.3 Prepaid Lease Rentals- CompanyLease rentals paid to acquire right to use the lands have been classified as pre paid lease rentals, and are amortised over the lease term (80 years).



Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

12 INTANGIBLE ASSETSGross Value


Additions during the year 93,007 110,301 42,180 78,697 759 27,288

Transfers - (47) - - - -

On Disposal of Joint Venture - - - - - -


Amortization


Amortization during the year 27,646 8,015 18,072 24,929 7,839 7,932

Transfers - (7) - - - -


Carrying Value 233,456 168,095 65,849 68,513 14,745 21,824

31st March 2013 31st March 2012

Goodwill Software Total Goodwill Software Total

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

12.1 Summary of Intangible Assets- Group Gross value


Additions during the year - 93,007 93,007 109,450 851 110,301

Transfers - - - - (46) (46)


Amortization


Amortization during the year - 27,646 27,646 - 8,015 8,015

Transfers - - - - (7) (7)


Carrying Value 153,165 80,291 233,456 153,165 14,930 168,095

31st March 2011

Goodwill Software Total

Rs.000 Rs.000 Rs.000

Gross value

Balance at the beginning of the year 53,877 6,543 60,420

Additions during the year 14,656 27,247 41,903

Transfers - (117) (117)

Balance at the end of the year 68,533 33,673 102,206

Amortization

Balance at the beginning of the year 14,818 3,468 18,286

Amortization during the year 10,000 8,072 18,072

Transfers - - -

Balance at the end of the year 24,818 11,540 36,358

Carrying Value 43,715 22,133 65,848


12 INTANGIBLE ASSETS CONTD. Goodwill on Provision for Carrying Value

Acquisition Impairment 31st March 31st March 1st April

2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

12.2 Summary of Goodwill - GroupKlevenberg (Pvt) Ltd. 56,623 (4,818) 51,805 51,805 -

Galoya Holdings (Pvt) Ltd. 5,026 - 5,026 5,026 5,026

Sifang Lanka (Pvt) Ltd. 7,698 - 7,698 7,698 7,698

Walker & Greig (Pvt) Ltd. 36,085 (20,000) 16,085 16,085 16,085

Browns Motors (Pvt) Ltd. 250 - 250 250 250

IG Browns Rubber Industries (Pvt) Ltd. 14,293 - 14,293 14,293 11,793

Browns Investments PLC 9,564 - 9,564 9,564 -

FLC Hydro Power PLC 2,863 - 2,863 2,863 -

Ajax Engineers (Pvt) Ltd., 25,057 - 25,057 25,057 -

Excel Restaurants (Pvt) Ltd 20,524 - 20,524 20,524 -

177,983 (24,818) 153,165 153,165 40,852

12.3 Software with a finite life is amortized over the period of the expected economic useful life time . As per the Group policy software

intangible asset is amortise over 4 years. Goodwill as at the Balance Sheet date has been tested for impairment and no additional

impairment losses were identified. Recoverable value of Goodwill has been estimated based on the expected future cash flows.

12.4 Negative Goodwill on Acquisition of shares

2011/2012

Rs.000

Free Lanka Capital Holding PLC 15,480

Excel Global Holdings (Pvt) Ltd. 2,607,597

Taprobane Capital (Pvt) Ltd. 48,406

2,671,483

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

13 CAPITAL WORK IN PROGRESSBalance at the beginning of the year 135,450 21,999 47,378 56,396 - -

Additions during the year 581,291 113,451 18,609 66,708 56,396 -

Amount Capitalized during the year (66,391) - (22,479) 120,969 - -

On Disposal of Joint Venture - - - (56,396) - -

Transfer to Intangible Assets - - (21,509) - - -

Balance at the end of the year 650,350 135,450 21,999 2,135 56,396 -

13.1 Capital Work in ProgressCapital Work in Progress comprises of the following items:

Buildings 549,873 89,664 6,604 2,135 - -

Intangible Assets - - - - 56,396 -

Plant and Machinery - 1,430 4,760 - - -

Water Sanitation 96,354 106 105 - - -

Roads and Bridges 3,842 4,619 4,170 - - -

Hydro Power - 39,260 6,254 - - -

Others 281 371 106 - - -

650,350 135,450 21,999 2,135 56,396 -



As At 31.03.2013 As At 31.03.2012

Tea Others Total Tea Others Total

Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000

14 BEARER BIOLOGICAL ASSETS

- GROUP

14.1.1 At Cost14.1.1.1 On Finance LeaseRevaluation as at 22nd June 1992 101,538 - 101,538 101,538 - 101,538

Balance as at 31st March 101,538 - 101,538 101,538 - 101,538

Amortization

Balance as at 01st April 61,872 - 61,873 58,516 - 58,516

Amortization for the year 3,344 - 3,343 3,357 - 3,357


Written Down Value as at 31st March 36,322 - 36,322 39,665 - 39,665

14.1.1.2 Investments after Formation of the Company

Immature Plantations

Balance as at 01st April 91,278 3,765 95,043 107,200 1,593 108,793

Additions 30,330 12,446 42,776 36,841 2,306 39,147

Transfer Out (19,299) - (19,299) (52,763) (134) (52,897)

Written off - (406) (406) - - -

Balance as at 31st March 102,309 15,805 118,114 91,278 3,765 95,043

Mature Plantations

Balance as at 01st April 327,393 956 328,349 274,629 821 275,450

Transfer In 19,299 - 19,299 52,763 134 52,899

Balance as at 31st March 346,692 956 347,648 327,392 955 328,349

Depreciation

Balance as at 01st April 73,467 194 73,661 64,438 170 64,608

Charge for the year 10,204 229 10,433 9,029 25 9,053

Balance as at 31st March 83,671 423 84,094 73,467 195 73,661

Written Down Value as at 31st March 365,330 16,338 381,668 345,203 4,525 349,728

14.1.1.3 Growing Crop NurseriesBalance as at 01st April 3,995 2,024 6,019 2,567 745 3,313

Charge for the year (128) (1,690) (1,818) 1,428 1,278 2,706

Balance as at 31st March 3,867 334 4,201 3,995 2,023 6,019


14 BEARER BIOLOGICAL ASSETS - GROUP CONTD.

As At 31.03.2013 As At 31.03.2012

Rubber Coconut Total Rubber Coconut Total

Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000

14.1.2 At Fair Value14.1.2.1 On Finance LeaseBalance as at 1st April 431,496 7,099 438,595 379,026 6,863 385,889

Decrease due to sale (25,808) - (25,808) (24,700) - (24,700)

Decrease due to harvesting Reversal of depreciation - - - - - -

Gain/( Loss )on Fair Valuation (12,955) 334 (12,621) 77,170 238 77,406

Fair value as at 31st March 392,733 7,433 400,166 431,496 7,101 438,595

14.1.2.2 Investments after formation of the company

Balance as at 1st April 998,619 7,832 1,006,451 838,529 7,573 846,102

Additions 106,330 44 106,374 98,243 113 98,356

Grant Received on Immature Rubber (2,900) - (2,900) (7,272) - (7,272)

Gain/(Loss) on Fair valuation 40,982 (217) 40,765 69,119 148 69,269

Carrying value as at 31st March 1,143,031 7,659 1,150,690 998,619 7,834 1,006,451

14.1.2.3 Growing Crop NurseriesBalance as at 01st April 2,146 - 2,146 2,326 - 2,326

Increase/Decrease 229 - 229 (179) - (179)


Carrying Value of Rubber & Coconut as at 31st March 1,538,139 15,092 1,553,231 1,432,262 14,935 1,447,197

Total Carrying value as at 31st March 1,943,658 31,764 1,975,422 1,821,125 21,483 1,842,608

Total Carrying value as at 01st April 2011 1,582,863 17,424 1,600,287

14.1.2.4 Gain / Loss on Fair Value of Biological Assets 28,027 117 28,144 146,289 386 146,675

14.1.2.5 The carrying value of Rubber and Coconut as at year / period end has been computed as follows.

As At 31.03.2013 As At 31.03.2012

Rubber Coconut Total Rubber Coconut Total

Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000

Carrying Value of Rubber/Coconut as per the

Valuation Report as at 31st March 1,058,847 15,092 1,073,939 1,055,344 13,806 1,069,150

Add: Cost of Immature Rubber and Coconut

Plants below harvesting stage as at 31st March,

2013 not considered for Valuation 476,915 - 476,915 374,770 1,129 375,899

Growing Crop Nurseries 2,377 - 2,377 2,146 - 2,148

Carrying Value of Rubber/Coconut

Assets as at 31st March 1,538,139 15,092 1,553,231 1,432,260 14,935 1,447,197

Maturata Plantations Ltd/Pussellawa Plantations Ltd

14.2 Borrowing Costs amounting to Rs 17,936/= (Previous Year - Rs 15,299/=) incurred on borrowings obtained to meet expenses relating to

bearer biological Assets have been capitalized.



14.3 Capitalization of borrowing costs will cease when the bearer biological Assets are ready for bearing.

14.4 Bearer biological assets, namely Rubber and Coconut plantations are recognized at its fair value less cost to sell under LKAS 41 -

Agriculture. However the Company’s Subsidiary measures Tea and Other Bearer Biological Assets at cost using LKAS 16 - Property Plant &

Equipment in accordance with the new ruling issued by the Institute of Chartered accountants of Sri Lanka dated 2nd March 2012, due to

the impracticability of carrying out proper fair valuation.

14.5 Rubber and Coconut plantations as at 31st March 2013 of the company’s Subsidiary was valued by Mr K.T.D. Tissera, an independent

Chartered Valuation Surveyor as per the Valuation Report dated 15th April 2013 having separately valued latex/crop and timber

components based on the physically verified statistics on a field by field basis. Rubber and Coconut plantations were retrospectively

valued as at 31st March 2012 and 31st March 2011 by the same Chartered valuation Surveyor on a field by field basis.

14.6 The valuation has been prepared in respect of each estate separately for the latex/nuts and the timber component of the Rubber/Coconut

plantation.

14.7 Bearer Biological Assets - Group

14.8 The Rubber and Coconut plants having below six years of age as at the date of financial position have been taken at cost.

14.9 The valuer has valued the latex/nuts component of Rubber, and Coconut using the forecasted crop, prices and cost of production based

on past statistics on the basis of net present value of expected future cash flows using a discount rate of 20% per annum (i.e. 8% Risk Free

Rate plus 4% Risk Premium plus 8% Inflation). The scrap value, being the timber component of trees is valued by using the available log

prices in city centres less point-of-sale-costs on the basis of net present value of expected future cash flows using a discount rate of 12%

per annum.

14.10 In valuing the Rubber and Coconut plantations, under-mentioned factors have been taken into consideration.

1 The present age of trees and yields of each separate field.

2 Maturity age of the trees.

3 Number of years remaining to harvest.

4 Rubber/Coconut Plants having below six years of age have not been taken into the valuation.

5 Past prices of latex and Coconut for forecasting future price trend and the current market price of timber as per the available log

prices in city centres less point-of-sale-costs to determine the value of timber component.

6 Field level cost to determine the cost of production of latex and Coconut.

7 Annual yield level is estimated and derived based on last year yield.

14.11 The significant assumptions used in the valuation of Rubber and Coconut plantations are as follows:

a) Future cash flows of timber component of Rubber and Coconut are determined by references to current timber prices without

considering the inflationary effect.

b) The on-going cost of growing trees which are deducted in determining the net cash flows are constant in real terms.

c) Rubber/Coconut Plants have been valued working out the period that would take for those trees to be harvested.

d) Due consideration has been given for cost of felling and transport.


14 BEARER BIOLOGICAL ASSETS - GROUP CONTD.

14.12 Sensitivity Analysis - GroupSensitivity Variation on Sales PriceValues as appearing in the Statement of Financial Position are very sensitive to price changes with regard to the average sales prices applied.

Simulations made for rubber show that a rise or decrease by 10% of the estimated future selling price has the following effect on the net present

value of biological assets:

Variance Variance

As at 31st March 2013 Rs. Rs.

-10% +10%

Rubber (105,884,817) 105,884,817

Sensitivity Variation on Discount RateValues as appearing in the Statement of Financial Position are very sensitive to changes of the discount rate applied. Simulations made for rubber

show that a rise or decrease by 1% of the estimated future discount rate has the following effect on the net present value of biological assets:

Variance Variance


-1% +1%

Rubber 50,796,440 (46,408,963)

Group Company

As At As At As At As At

31.03.2013 31.12.2012 31.03.2013 31.12.2012

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

15 CONSUMABLE BIOLOGICAL ASSETS (TIMBER)

Balance as at 1st April 1,514,295 1,630,001 - -

Increase due to New Planting 10,572 11,631 - -

Sale of Trees (12,960) (18,080) - -

Increase/Decrease in Growing Crop Nursery (40) 24 - -

1,511,867 1,623,576 - -

Gain/(Loss) on Fair Valuation 55,804 (109,281) - -

1,567,671 1,514,295 - -

The carrying value of Consumable Biological Assets as at year end

has been computed as follows.

Carrying Value as per the Valuation Report as at 31st March 1,550,854 1,481,676 - -

Add: Cost of Timber Plants below three years of age as at

31.03.2013 not considered for Valuation 16,301 32,063 - -

Growing Crop Nurseries 516 556 - -

Carrying Value of Timber Stocks as at 31st March 1,567,671 1,514,295 - -

Total Carrying value as at 01st April 2011 1,630,001



15.1 GROUPMaturata Plantations Ltd/Pussellawa Plantations LtdThe Consumable Biological Assets as at 31st March 2013 of the entity was valued by Mr K.T D Tissera, an independent Chartered Valuation

Surveyor as per the Valuation Report dated 24th April 2013 prepared on the physically verified timber statistics provided by the company on a

tree by tree basis. The timber trees were valued as at 31st March 2012 by the same Chartered valuation Surveyor on a tree by tree basis as per the

timber statistics provided by the company. The value of trees transferred after three years, from cost to fair value have been valued on field /block

basis by discounting the value of expected timber content of trees at the time of harvest. It is expected that only 60% of the presently available

trees will remain on the field at the time of final harvest.

The entity has valued the Consumable Biological Assets consist of trees over 3 years of age, which have been properly establish in the field at fair

value less estimated point-of-sale-costs. The direct cost attributable to new/re-planting pertaining to trees having three years or less have been

added to the Consumable Biological Assets.

Timber Trees namely Eucalyptus Torariyana, Albezzia, Graveelia, Eucalyptus Grandis, Astonia, Pinus, Toona, Mahogany, Teak, Jack, Turpentine,

Nadun, Mango, Pellen, Hora, Lunumidella, Mara etc. available on the plantations have been taken into consideration in this valuation of Timber

Trees.

In valuing the Consumable Biological Assets, under-mentioned factors have been taken into consideration.

1 The present age of trees.

2 Maturity age of the tree.

Maturity of the tree is based on the variety of the species of the tree.

3 Annual marginal increase in timber content.

4 Number of years to harvest

5 Timber content of harvestable trees on maturity.

6 Timber Plants having below three years of age have not been taken into the valuation.

7 The timber content of immature trees at an estimated future harvestable year

8 The current price of species of timber per cubic foot at the relevant year.

Trees have been valued as per the current timber prices in the domestic market based on the price list of the State Timber Corporation and prices

of timber trees sold by estates and prices of logs and sawn timber in the popular timber traders in Sri Lanka.

The fair value is determined on the basis of net present value of expected future cash flows using a discount rate of 12% per annum. The

significant assumptions used in the valuation of Consumable Biological Assets are as follows:

a) Future cash flows are determined by references to current timber prices without considering the inflationary effect.

b) The on-going cost of growing trees which are deducted in determining the net cash flows are constant in real terms.

c) Timber Trees that have not come up to a harvestable size are valued working out the period that would take for those trees to grow up to

a harvestable size.

d) The Present Value of the Trees is worked out based on the projected size and the estimated number of years it would take to reach that

size. This is worked out on the basis of an annual marginal increase of Timber content which normally ranges from 0.50 to 1.50 cm per year

for trees of diameter girth over 10 cm.

e) The value of each matured species of timber is worked out on the price of a cubic foot of timber in the market of the species and the

available cubic content of timber in the tree.

f ) Due consideration has been given for cost of felling, transport, sawing, cost to sell including obtaining of approval for felling.


15 CONSUMABLE BIOLOGICAL ASSETS (TIMBER) CONTD.15.2 Consumable Biological Assets (Timber) - Group15.2.1 Gain / (Loss) Arising from Changes in Fair Value Less Cost to SellManaged trees include commercial timber plantations cultivated in estates. The cost of immature trees is treated at approximate fair value

particularly on the ground of little biological transformation has taken place and impact of the biological transformation on price is not material.

When such Plantations become mature, the additional investments since taken over to bring them to maturity are transferred from Immature to

Mature.

The fair value of managed trees was ascertained since the LKAS 41 is only applicable for managed agricultural activity in terms of the ruling issued

by The Institute of Chartered Accountants of Sri Lanka. The valuation was carried by using Discounted Cash Flow (DCF) methods. In ascertaining

the fair value of timber a physical verification was carried out covering all the estates.

The valuations, as presented in the external valuation models based on net present values, take into account the long-term exploitation of the

timber plantation. Because of the inherent uncertainty associated with the valuation at fair value of the biological assets due to the volatility

of the variables, their carrying value may differ from their realizable value. The Board of Directors retains their view that commodity markets

are inherently volatile and that long-term price projections are highly unpredictable. Hence, the sensitivity analysis regarding selling price and

discount rate variations as included in this note allows every investor to reasonably challenge the financial impact of the assumptions used in the

LKAS 41 against his own assumptions.

The biological assets of company is cultivated in leased lands. When measuring the fair value of the biological assets it was assumed that these

concessions can and will be renewed at normal circumstances. Timber content expects to be realized in future and is included in the calculation

of the fair value that takes into account the age of the timber plants and not the expiration date of the lease.

15.3 Sensitivity Analysis-GroupSensitivity Variation on Sales PriceValues as appearing in the Statement of Financial Position are very sensitive to price changes with regard to the average sales prices applied.

Simulations made for timber show that a rise or decrease by 10% of the estimated future selling price has the following effect on the net present

value of biological assets:

Variance Variance


-10% +10%

Managed Timber (155,085,357) 155,085,357

Sensitivity Variation on Discount Rate

Values as appearing in the Statement of Financial Position are very sensitive to changes of the discount rate applied. Simulations made for timber

show that a rise or decrease by 1% of the estimated future discount rate has the following effect on the net present value of biological assets:

Variance Variance


-1% +1%

Managed Timber 91,212,356 (76,843,732)

The Group is exposed to a number of risks related to its timber plantations;

Regulatory and environmental risksThe Group is subject to laws and regulations imposed by the environmental authorities of Sri Lanka. The Group has established environmental

policies and procedures aimed at compliance with local environmental and other laws. Management performs regular reviews to identify

environmental risks and to ensure that the systems in place are adequate to manage those risks.

Supply and demand riskThe Group is exposed to risks arising from fluctuations in the price and sales volume of timber. When possible the Group manages this risk by

aligning its harvest volume to market supply and demand. Management performs regular industry trend analyses to ensure that the Group’s

pricing structure is in line with the market and to ensure that projected harvest volumes are consistent with the expected demand.

Climate and other risksThe Group’s timber plantations are exposed to the risk of damage from climatic changes, diseases, forest fires and other natural forces. The Group

has extensive processes in place aimed at monitoring and mitigating those risks, including regular forest health inspections and industry pest and

disease surveys.



16

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16 INVESTMENTS IN SUBSIDIARIES16.3 Acquisitions of SubsidiariesOn 22nd July 2011 Browns Investments PLC (BIPLC), a subsidiary has acquired 100% holding of Excel Global Holdings (Pvt) Ltd with a purchase

consideration of Rs. 888,386,921/- and the main business activity of the entity is Investments.

On 4th April 2011 BIPLC has acquired 100% holding of Samudra Beach Resorts (Pvt) Ltd with a purchase consideration of Rs 10,000,00/- and the

main business activity of the entity is operating beach resort at Kosgoda. This hotel is still under construction.

On 30th January 2012 BIPLC has acquired 51% holding of Ajax Engineers (Pvt) Ltd with a purchase consideration of Rs 100,000,00/- and the main

business activity of the entity is Construction.

On 31st March 2012 Royal Fernwood Porcelain Ltd has converted Rs. 71.3Mn value of loan to the ordinary shares.(Rs.1.04 X 68,557,692 shares =

Rs.71,300,000) As a result of that BIPLC has acquired 18% holding of the said company. And the company has a 59%(No of shares 242,169,778)

indirect holding through Taprobane Capital (Pvt) Ltd. Main business activity of the entity is Manufacturing, Exporting and retail porcelain related

products.

On 27th December, 2011 the BIPLC has acquired balance 60.33% holding of Taprobane Capital (Pvt) Ltd. Prior to this acquisition, this company

was Associate Company to the Group and, as a result, this Company is now treated as Subsidiary.

16.3.1 The acquisition had the following effect on the Group’s assets and liabilities on the acquisition date.

BRSPL TCPL SBRL EGHL AJAX Total

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Property, Plant and Equipment - 728,295 - 65,979 5,288 799,562

Investment Property - - - 3,500,000 - 3,500,000

Deferred Expenditure - 43,222 - - - 43,222

Other Investments - Long term - - - - 20,090 20,090

Inventories - 138,180 - - 63,996 202,176

Trade and Other Receivables - 87,947 60,699 8,944 58,734 216,324

Amounts due from Related Parties 50,000 - 10,000 - - 60,000

Other Investments - Short term - - - 14,520 75,873 90,393

Deposits and Advances - 38,239 - - 2,356 40,595

Cash and Cash Equivalents - 6,232 - 3,193 268 9,693

Interest Bearing Borrowings - (227,872) - (27,185) - (255,057)

Finance Lease Obligation - (2,298) - - (204) (2,502)

Retirement Benefit Obligations - (18,994) - (1,603) (6,457) (27,054)

Amounts due to Related Parties - (67,483) (60,699) - (6,964) (135,146)

Deferred Tax - (7,685) - - - (7,685)

Long Term Loan Liabilities - (196,314) - - - (196,314)

Trade and Other Payables - (179,063) - (22,735) (52,523) (254,321)

Deposits and Advances - - - (25,483) - (25,483)

Income Tax Payable - - - - (8,259) (8,259)

Bank Overdraft - (23,990) - (19,646) (5,250) (48,886)

Net Identifiable Assets and Liabilities 50,000 318,416 10,000 3,495,984 146,948 4,021,348

Non-Controlling interests - (85,814) - - (72,005) (157,819)

Share of Net Assets recognized in the previous years - (74,400) - - - (74,400)

Goodwill (Negative Goodwill) on Acquisition - (48,406) - (2,607,597) 25,057 (2,630,947)

Cash paid on acquisition 50,000 109,796 10,000 888,387 100,000 1,158,183

Analysis of Cash on Acquisition of the Subsidiaries

Cash paid on Acquisition (50,000) (109,796) (10,000) (888,387) (100,000) (1,158,183)

Cash at bank Acquired - (17,758) - (16,453) (4,982) (39,193)

Net Cash Outflow (50,000) (127,554) (10,000) (904,840) (104,982) (1,197,376)



Company

As at As at As at


2013 2012 2011

Rs.000 Rs.000 Rs.000

17 INVESTMENT IN JOINT VENTURE

Galoya Holdings (Pvt) Ltd. 13,000 10,000 10,000

13,000 10,000 10,000

The investment in the Galoya Holdings (Pvt) Ltd. has been recognised in the Financial Statements on the basis of proportionate consolidation

method. Galoya Holdings (Pvt) Ltd. is the Management Company of Galoya Plantations (Pvt) Ltd. Further details have been disclosed in the

Note 17.1.

17.1 The summarized Financial Statements of Galoya Holdings (Pvt) Ltd. is as follows:

As at As at As at


2013 2012 2011

Rs.000 Rs.000 Rs.000

Non Current Assets 5,829 4,594 11,678

Current Assets 6,167 163 146

Non Current Liabilities (1,784) - -

Current Liabilities (20,403) (18,056) (16,578)

Net Liabilities (10,190) (13,299) (4,754)

Statement of Comprehensive Income For the For the

year ended year ended

31st March 31st March

2013 2012

Rs.000 Rs.000

Other Income 787 -

Expenses (3,679) (8,545)

Loss before Taxation (2,892) (8,545)

Taxation - -

Loss after Taxation (2,892) (8,545)


18

INV

EST

ME

NT

S IN

EQ

UIT

Y A

CC

OU

NT

ED

IN

VE

STE

ES

18.1

In

vest

men

ts in

Equ

ity

Acc

oun

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Inve

stee

s -

Gro

up

G

rou

p H

old

ing

%

No

. of

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up

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s a

t A

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3

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rch

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l 3

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l

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01

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qu

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me

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oci

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fact

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rs (

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y) L

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M)

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. (M

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me

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.(GP

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. (LO

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18

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ME

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S IN

EQ

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Y A

CC

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IN

VE

STE

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stee

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nd

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18.2

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19 OTHER INVESTMENTS - LONG TERM -LONG TERM CONTD.

19.3 Quoted Investments-Related Company

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Sierra Cables PLC 70,864 106,667 201,494 - - -

Agstar Fertilizer PLC - - 153,118 - - -

Taprobane Holdings PLC 73,757 100,600 - - - -

Commercial Leasing & Finance PLC 200,000 200,000 - - - -

344,621 407,267 354,612 - - -

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

19.4 Unquoted InvestmentsHotel Hanthana Ltd. 190 190 190 - - -

Motor Marvels (Pvt) Ltd. 4,800 4,800 4,800 4,800 4,800 4,800

Sierra Constructions (Pvt) Ltd. 335,605 299,938 346,386 - - -

Sierra Holdings (Pvt) Ltd. 308,430 228,183 219,843 - - -

Others 15,074 11,357 164 - - -

664,099 544,468 571,383 4,800 4,800 4,800

Provision for fall in value of Investments (5,309) (5,309) (5,309) (4,800) (4,800) (4,800)

658,790 539,159 566,074 - - -

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

20 DEFERRED TAX ASSETS


On Acquisition of Subsidiary 6,987 33,126 3,940 - -

Transferred from Deferred Tax Liability - - (8) - -

Deferred Tax impact on Building Revaluation 5,654 2,367 (10,455) 2,014 8,156 (10,426)

Recognized/ (Reversal) during the year 79,144 (120,651) (58,134) 117,670 (80,897) (133,891)



20 DEFERRED TAX ASSETS CONTD.

20.1 The Closing Deferred Tax Asset balance relates to the following; Group

31st March 2013 31st March 2012 1st April 2011

Temporary Tax Temporary Tax Temporary Tax

Difference Effect Difference Effect Difference Effect

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

20.1.1 GroupProperty, Plant & Equipment (195,261) (54,869) (126,215) (35,029) (70,746) (24,761)

Employee Benefit Liabilities 97,334 26,797 87,304 24,445 49,444 17,305

Losses available for offset against future Taxable Income 1,020,235 285,665 616,703 172,677 782,074 273,726

Deferred Tax impact on Revaluation of Investment Properties (1,820) (510) (1,224) (343) (280) (98)

Deferred Tax recognized on General Provisions 66,967 18,750 77,845 21,797 20,258 7,089

987,456 275,835 654,414 183,548 780,749 273,261

Deferred Tax impact on Building Revaluation 20,193 5,654 21,986 6,156 4,431 1,551

1,007,648 281,489 676,399 189,704 785,180 274,812

Company




Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

20.1.2 CompanyProperty, Plant & Equipment (164,629) (46,096) (106,341) (29,775) (70,883) (19,847)

Employee Benefit Liabilities 83,113 23,272 77,971 21,832 44,592 12,486

Losses available for offset against future Taxable Income 790,818 221,431 281,096 78,707 568,504 159,181

Deferred Tax impact on Revaluation of Investment Properties (1,820) (510) (1,224) (343) (280) (78)

Deferred Tax recognized on General Provisions - - 15,527 4,348 659 185

707,482 198,097 267,029 74,769 542,592 151,927

Deferred Tax impact on Building Revaluation 7,193 2,013 20,207 5,657 4,431 1,240

714,675 200,110 287,236 80,426 547,023 153,167

20.2 Deferred Tax liability charged credited to Equity - GroupAccording to Sri Lanka Accounting Standard LKAS 14 (Revised 2005) “Income Taxes”, deferred tax shall be charged or credited directly to equity if

the tax relates to items that are credited or charged, in the same or in a different period, directly to equity. Accordingly, the deferred tax liability

arising on revaluation of property, plant and equipment of Rs. 5.2 Mn was charged /credited directly to revaluation reserve in the Statement of

Changes in Equity in the year 2012/13 (Rs. 5 Mn -2011/12).


Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

21 LOANS TO RELATED PARTIES - DUE AFTER ONE YEAR

Browns Holdings Ltd 1,569 2,328 2,623 - - -

Director of Klevenberg (Pvt) Ltd. 1,600 1,600 20,000 - - -

3,169 3,928 22,623 - - -

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

22 INVENTORIES

Raw Material 185,897 325,288 263,848 194 - -

Work-in-Progress 56,172 113,001 19,733 11,967 7,895 7,373

Finished Goods 1,979,741 2,154,497 869,082 1,605,315 1,996,977 726,397

Input Material 15,392 22,791 16,520 - - -

Growing Crop Nurseries - 3,870 5,022 - - -

- Tea 139,281 106,247 122,791 - - -

- Rubber 12,299 14,145 26,189 - - -

- Coconut 100 115 555 - - -

Consumables and Spares 15,542 71,355 7,798 - - -

Goods in Transit 61,078 55,667 30,505 48,521 41,240 29,100

Certified Emission Reduction 529 6,116 11,216 - - -

2,466,030 2,873,092 1,373,259 1,665,997 2,046,112 762,870

Less: Provision for Slow Moving Stocks (256,300) (136,091) (111,657) (217,888) (77,114) (72,868)

2,209,730 2,737,001 1,261,602 1,448,109 1,968,998 690,002

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

23 TRADE AND OTHER RECEIVABLES

Trade Receivables 2,624,792 1,952,317 1,409,689 2,062,256 1,465,197 1,075,172

Other Receivables (Note 23.1) 397,580 318,208 168,045 221,528 107,580 97,975

3,022,372 2,270,525 1,577,734 2,283,784 1,572,777 1,173,147

Less: Provision for Bad and Doubtful Debts (329,790) (287,702) (278,158) (249,564) (179,017) (173,634)

2,692,582 1,982,823 1,299,576 2,034,220 1,393,760 999,513



Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

23.1 Other ReceivablesVAT Recoverable 49,243 29,039 8,092 23,871 5,175 -

Staff Loan 24,683 19,434 5,531 - - 325

WHT Recoverable 14,889 22,739 5,899 113 2,140 342

Dividend Receivable 167,870 6,216 3,063 161,671 - -

Others 140,895 240,780 145,460 35,873 100,265 97,308

397,580 318,208 168,045 221,528 107,580 97,975

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

24 DEPOSITS AND PREPAYMENTSDeposits 28,914 15,215 21,134 15,193 8,784 14,900

Prepayments 388,107 188,402 301,431 49,507 104,917 163,762

417,021 203,617 322,565 64,700 113,701 178,662

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

25 LOANS TO RELATED PARTIES - DUE WITHIN ONE YEAR

Royal Fernwood Porcelain Ltd. - 82,800 10,243 56,304 26,800 -

Lexinton Holdings (Pvt) Ltd. 510,214 812,303 100,329 - - -

Engineering Services (Pvt) Ltd. 33,091 32,304 40,793 26,000 26,000 -

Browns Investments PLC - - - - - 98

Taprobane Holdings (Pvt) Ltd - 133,095 - - - -

Masons Mixture Ltd. 64,977 57,377 64,077 64,977 57,377 64,077

Galoya Plantations (Pvt) Ltd. 498,817 288,962 167,875 498,817 288,962 167,875

Browns Industrial Park Ltd. - - - 73,007 73,007 73,007

Sifang Lanka (Pvt) Ltd. - - - 22,577 15 -

BG Air Services (Pvt) Ltd. - - - 36,505 20,000 20,000

Browns Investments PLC - - - - 40,354 79,979

Director of Klevenberg (Pvt) Ltd. - 5,886 48,017 - - -

1,107,099 1,412,727 431,334 778,187 532,515 405,036


Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

26 AMOUNTS DUE FROM RELATED PARTIES

Associated Battery Manufacturers (Cey) Ltd. 25,828 34,494 931 11 8 8

Agstar Fertilizer PLC 2 - - 2 - -

BG Air Services (Pvt) Ltd - - - 614 3,112 823

Browns Capital (Pvt) Ltd. - - - - - 250

Browns Group Industries (Pvt) Ltd. - - - 58,089 45,120 31,001

Browns Health Care (Pvt) Ltd. - - - - - 1,660

Browns Industrial Park Ltd. - - - 185,866 39,308 -

Browns Investments PLC - - - 24,249 16,511 5,691

Browns Real Estates (Pvt) Ltd. - - - - 299 -

Browns Thermal Engineering (Pvt) Ltd. - - - 29,756 21,707 12,652

Browns Tours (Pvt) Ltd. - - - 9,179 7,715 7,810

C.F.T. Engineering (Pvt) Ltd. - - - 317 106 56

Ceylon Estate Teas (Pvt) Ltd - 2,668 1,601 - - -

Ceylon Ayurvedic Teas (Pvt) Ltd 222 - - - - -

Diesel & Motor Engineering PLC 50 50 1,113 - - -

Engineering Services (Pvt) Ltd. 9,411 8,916 8,910 8,092 7,656 7,356

ESL Trading(Pvt)Ltd - - - 41 - -

FLMC Sudima Timber Products (Pvt) Ltd. 142 69 - - - -

FLC Joint Venture (Pvt) Ltd. 183,527 190,896 194,006 - - -

FLC Estate Bungolws (Pvt) Ltd. 23 4 - - - -

Free Lanka Trading Company (Pvt) Ltd. 7 - 42 - - -

Free Lanka Trading Liquor (Pvt) Ltd - 2 - - - -

Galoya Holdings (Pvt) Ltd. 36 36 - 72 72 -

Galoya Plantations (Pvt) Ltd. 3,293 - - 3,293 - -

Hatton Transport & Agency Co. (Pvt) Ltd. - - - - - 1,193

IG Browns Rubber Industries (Pvt) Ltd. - - - 1,186 148 24

Klevenberg (Pvt) Ltd. - - - 1,348 10,896 -

LOLC Leisure Ltd. 41,126 45,934 - - - -

Masons Mixture Ltd. 25,548 19,310 38,169 21,533 17,105 34,284

Melfort Green Teas (Pvt) Ltd. 17 178 2,154 - - -

Perpetual Holdings Ltd - - 162 - - -

Royal Fernwood Porcelain Ltd. - - 50,000 15,017 91 -

Rain Forest Eco lodge 65 - - - -

Samudra Beach Resorts (Pvt) Ltd. - - - 5 5 -

Sierra Constructions (Pvt) Ltd. - 52 - - - -

Sifang Lanka (Pvt) Ltd. - - - 61,578 51,655 33,807

Sifang Lanka Trading (Pvt) Ltd. - - - 3,000 - -

Snowcem Products Lanka (Pvt) Ltd. - - - 24,554 20,048 17,325

S.F.L Services (Pvt) Ltd. - - - 34,652 67,902 14,496

Taprobane Securities (Pvt) Ltd. - - - 16 - -

Taprobane Capital (Pvt) Ltd. - - - 3 - -

Taprobane Planations Ltd - 914 - - - -

Taprobane Holdings PLC 3 - - - - -

Browns Holdings Ltd. 16 - - - - -

Walker & Greig (Pvt) Ltd. - - - 3 - 14,937

289,317 303,523 297,088 482,476 309,464 183,373

Less: Provision for Intercompany Receivables (Note 26.1) - - - (31,178) (26,673) (38,887)

289,317 303,523 297,088 451,298 282,791 144,486



Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

26.1 Provision for Inter Company Receivables

Snowcem Products Lanka (Pvt) Ltd. - - - 24,554 20,049 17,326

Walker & Greig (Pvt) Ltd. - - - - - 14,937

Masons Mixture Ltd. - - - 6,624 6,624 6,624

- - - 31,178 26,673 38,887

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

27 TAX RECOVERABLE

Balance at the beginning of the year 4,298 202 3,513 (59,563) - -

On Acquisition of Subsidiary - - (818) - - -

Provision for the Year (18,949) (9,842) - (25,896) - -

Payment made/(Recovered) during the year 74,298 13,938 (2,493) 127,478 - -

Balance at the end of the year 59,647 4,298 202 42,019 - -

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

28 OTHER INVESTMENTS - SHORT TERM

Fixed and Call Deposits 314,310 246,413 2,304,440 - 6,800 6,800

Treasury Bills 11,024 12,499 1,795 - - -

Treasury Bonds 32,602 100,835 21,903 - 23,481 -

Commercial Papers - 688,703 940,847 - - -

REPO 12,943 55,578 278,136 - - 21,903

Investment in Quoted Shares (Note 28.1, 28.2) 3,024,775 3,026,874 1,998,655 1,685,770 1,687,528 1,043,857

3,395,654 4,130,902 5,545,776 1,685,770 1,717,809 1,072,560


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7


Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

29 CASH AT BANK AND IN HAND

Cash at Bank 625,833 745,858 1,357,886 280,705 200,833 737,228

Cash in Hand 6,981 5,83 3,196 - - -

Cash in Transit 1,906 2,334 3,832 - - -

634,720 753,575 1,364,914 280,705 200,833 737,228

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

30 STATED CAPITAL

70,875,000 Ordinary Shares 2,005,601 2,005,601 2,005,601 2,005,601 2,005,601 2,005,601

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

31 RESERVES

31.1 Capital ReservesRevaluation of Property, Plant and Equipment 1,209,771 861,756 696,037 1,267,416 1,139,165 980,318

Available for Sales Reserve 2,575,585 2,401,950 4,502,994 2,932,067 2,621,461 4,679,753

Capital Reserves 202,216 202,216 202,216 200,000 200,000 200,000

3,987,572 3,465,922 5,401,247 4,399,483 3,960,626 5,860,071

31.2 Revenue ReservesGeneral Reserve 53,113 53,113 53,113 5,913,097 5,913,097 5,913,097

Retained Earnings 9,049,478 8,356,111 7,453,933 1,471,265 1,980,602 1,689,146

9,102,591 8,409,224 7,507,046 7,384,362 7,893,699 7,602,243

31.3 Revaluation ReserveThe revaluation reserve relates to the revaluation surplus of property, plant and equipment and the long-term investments. Once the respective

revalued items have been disposed, the relevant portion of revaluation surplus is transferred to retained earnings.

31.4 Fair Value Reserve on AFSThe fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the assets are derecognized

or impaired.



Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

32 INTEREST BEARING BORROWINGS

Balance at the beginning of the year 3,424,524 1,456,194 1,599,808 2,132,063 1,065,896 639,580

On Acquisition of Subsidiary - 255,058 - - - -

Obtained during the year 682,230 2,166,186 806,395 - 1,450,000 775,000

Repayments (1,019,685) (452,913) (644,141) (593,295) (383,833) (348,684)

Transfers - - (121,250) - - -


Balance at the end of the year 3,087,069 3,424,524 1,456,194 1,538,766 2,132,063 1,065,896

Payable after one Year 2,287,576 2,255,059 1,050,937 1,018,273 1,538,771 746,439

Payable within one Year 799,493 1,169,465 405,257 520,493 593,292 319,457

3,087,069 3,424,524 1,456,194 1,538,766 2,132,063 1,065,896

32.1 Analysis of Non-Current portion of Interest Bearing Borrowings - Company

Payable Payable after One year

Name of the Lending Institution Within Payable Payable More than 31st March 31st March 1st April

One year 1-2 years 2-5 Years 5Years 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Hatton National Bank PLC - - - - - 42,215 98,795

Hatton National Bank PLC 6,110 - - - 6,110 28,970 51,830

Hatton National Bank PLC - - - - - 12,518 37,514

Hatton National Bank PLC 70,000 70,000 122,500 - 262,500 332,500 -

Commercial Bank of Ceylon PLC 14,513 - - - 14,513 30,347 46,180

Commercial Bank of Ceylon PLC 7,500 7,500 1,250 - 16,250 23,750 31,250



Commercial Bank of Ceylon PLC 125,004 83,320 - - 208,324 333,328 458,333

Commercial Bank of Ceylon PLC 112,500 112,500 65,625 - 290,625 403,125 -

DFCC Bank 118,182 118,182 295,454 - 531,818 650,000 -

Total 520,493 458,186 560,087 - 1,538,766 2,132,063 1,065,896


32

INT

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Term

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PLC

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32

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me

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Na

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Term

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ank

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n

Term

Lo

an

12

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on

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old

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3,1

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Lo

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on

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Leas

eh

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la, M

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atio

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pm

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Lo

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7

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k P

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Term

Lo

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g P

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Term

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on

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eh

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9

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Term

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12

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on

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Term

Lo

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on

thly

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ts

7

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Sa

mp

ath

Ban

k P

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Term

Lo

an

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mo

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ly in

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lme

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P

rim

ary

mo

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age

ove

r le

ase

ho

ld r

igh

ts

22

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5

28

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to

ge

the

r w

ith

fac

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g t

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of

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stat

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om

me

rcia

l Ban

k Te

rm L

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4

7 m

on

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ts

Pri

mar

y m

ort

gag

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old

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45

of

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n P

LC

Term

Lo

an

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mo

nth

ly in

stal

lme

nts

to

ge

the

r w

ith

fac

tory

bu

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g t

he

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of

1

0,7

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1

1,9

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1

1,9

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Term

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an

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mo

nth

ly in

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lme

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oth

sch

ild E

stat

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nd

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94


Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

33 RESCHEDULED DEBENTURES

Balance at the beginning of the year - 410 2,250 - - -

Settlement of Debentures - (410) (818) - - -


Balance at the end of the year - - 410 - - -

Interest Rate ApplicableInterest rate applicable to Rescheduled Debentures is one year weighted average Treasury Bill gross rate ( before 10% withholding tax ) which

prevails immediately prior to 11th November every year.

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

34 FINANCE LEASE OBLIGATIONS

Balance at the beginning of the year 161,154 169,867 339,423 - 338 3,689

On Acquisition of Subsidiary - 2,500 1,773 - -

Obtained during the year 18,391 1,323 2,882 14,162 - -

Paid during the Year (14,252) (12,536) (19,816) (1,942) (338) (3,351)


Balance at the end of the year 165,293 161,154 169,867 12,220 - 338

Interest in Suspense (70,398) (70,038) (74,843) (3,532) - (10)

Capital outstanding at the end of the year 94,895 91,116 95,024 8,688 - 328

34.1 Lease Payable due after one yearAmounts due after one Year 153,749 150,827 158,663 8,644 - -

Less: Interest in Suspense (64,665) (65,769) (69,938) (2,499) - -

89,084 85,058 88,724 6,145 - -

34.2 Lease Payable due within one yearAmounts due within one Year 10,457 10,515 11,205 3,577 - 338

Less: Interest in Suspense (4,646) (4,457) (4,905) (1,034) - (10)

5,811 6,058 6,300 2,543 - 328



Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

35 RETIREMENT BENEFIT OBLIGATIONS

Change in the Retirement Benefit Obligations are as follows.

Defined Benefit Obligation at the beginning of the year 483,500 433,620 661,931 64,833 44,592 62,785

On Acquisition of Subsidiary - 7,090 3,331 - - -

Interest on Benefit Liability 880 5,072 7,801 9,189 4,459 6,906

Current Service Cost 116,157 92,593 102,350 9,046 6,853 4,776

Actuarial Gain / (Loss) (20,460) (13,703) 1,243 6,483 10,763 6,808

Benefit paid (62,382) (41,172) (75,315) (6,438) (1,834) (36,683)


Defined Benefit Obligation at the end of the year 517,695 483,500 433,620 83,113 64,833 44,592

This Liability is not externally funded.

35.1 The total amount charged to Profit and Loss in respect of Retirement Benefit Obligation is made up as follows:

Group Company

As At As At As At As At


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

Gratuity charge for the year - - - -

Interest charge for the year 880 5,072 9,189 4,459

Current service cost 116,157 92,593 9,046 6,853

117,037 97,665 18,235 11,312

35.2 Brown & Company PLC measures its retirement benefit obligation together with following subsidiaries and Joint Ventures using an

actuarial valuation carried out by Messer Actuarial and Management Consultants (Pvt) Ltd.

Sifang Lanka Trading (Pvt) Ltd.

BG Air Services (Pvt) Ltd.

Brown Tours (Pvt) Ltd.

Browns Group Industries (Pvt) Ltd.

Browns Thermal Engineering (Pvt) Ltd.

Free Lanka Plantations Company (Pvt) Ltd.

Free Lanka Management Company (Pvt) Ltd.

FLC Holdings PLC


35 RETIREMENT BENEFIT OBLIGATIONS

35.3 The principal assumptions used in the actuarial valuation are as follows:

Company

As at As at As at


2013 2012 2011

Rs.000 Rs.000 Rs.000

35.3.1 Financial Assumptionsa) Discount rate (the rate of interest used to discount the future 10% 10% 10%

cash flows in order to determine the present value

b) Future salary increase

Executive 10% 10% 10%

Non- Executive 9% 9% 9%

c) Retirement age 60 yrs 60 yrs 60 yrs

35.3.2 Demographic AssumptionsIn addition to the above, demographic assumptions such as mortality, withdrawal and disability, and retirement age were considered for the

actuarial valuation. “A 67/07 mortality table” issued by the Institute of Actuaries, London was used to estimate the gratuity liability of the Company.

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

36 DEFERRED TAX LIABILITIES

Balance at the beginning of the year 282,037 258,890 225,373 - - -

Transfers - (10,812) (8) - - -

Charged/(Reversal) during the year 13,061 33,959 6,155 - - -

Liability in respect of Revaluation of Property,

Plant and Equipment - - 27,370 - - -

Balance at the end of the year 295,098 282,037 258,890 - - -



36.1 The Closing Deferred Tax Liability balance relates to the following;

Group




Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Property, Plant & Equipment 260,383 72,847 240,597 67,285 601,273 168,323

Bearer Biological Assets 765,071 214,220 708,218 198,301 186,225 52,143

Consumer Biological Assets 559,882 156,767 541,018 151,485 582,143 163,000

Employee Benefit Liabilities (205,677) (57,549) (195,696) (54,776) (197,212) (55,211)

Losses available offset against future Taxable Income (325,668) (91,187) (286,643) (80,260) (247,736) (69,366)

1,053,991 295,098 1,007,494 282,037 924,693 258,890

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

37 DEFERRED INCOME

37.1 Capital Grants Gross value


Additions during the year 399 19,233 (10,181) - - -



Amortization


Amortization during the year 5,364 5,203 5,456 - - -



Balance at the end of the year- Net 140,654 145,619 131,589 - - -


37 DEFERRED INCOME

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

37.2 PHDT Lease RentalsBalance at the beginning of the year 1,956 2,103 4,121 - - -

Amortization during the Year (147) (147) (147) - - -



37.3 Income Received in AdvanceBalance at the beginning of the Period 25,439 19,061 - 22,285 19,061 -

Additions during the Period 19,063 24,563 19,061 5,058 21,389 19,061

Amortization during the Period (11,495) (18,185) - (3,995) (18,165) -

Balance at the end of the Period 33,007 25,439 19,061 23,349 22,285 19,061

Total Deferred Income 175,470 173,014 152,753 23,349 22,285 19,061

37.1.1 The above Capital Grants represents the following:- i The funds received from the Plantation Housing and Social Welfare Trust (PHSWT), MTIP and PHDT are for the development of

Workers Welfare Facilities and improvement to Institutional Facilities.

ii The funds received from the Tea Board is for the construction of the CTC Tea Factory at Delta Estates.

iii The funds received from the Plantation Reform Project is for the Development of Forestry Plantations.

iv Subsidy received from the Rubber Controller Department is for Rubber Replanting.

The amount spent is capitalized under the relevant classification of Property, Plant and Equipment, the corresponding grant component is

reflected under Deferred Income and is being amortized over the useful life span of the related assets.

37.1.2 Premises at St. Andrew’s Drive in Nuwara Eliya has been leased out to Plantation Human Development Trust for a period of 20 years

commencing from August 2005 at a total lease rental of Rs.10 Mn. Lease Rentals received are deferred and amortized over the lease period

commencing from August 2005.



Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

38 LOANS FROM RELATED PARTIES DUE AFTER ONE YEAR

S.F.L Services (Pvt) Ltd. - - - 1,232,917 738,580 199,484

Ishara Traders (Pvt) Ltd. - - 28,665 - - -

- - 28,665 1,232,917 738,580 199,484

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

39 ACCOUNTS PAYABLES & ACCRUED EXPENSES

Accounts Payable 1,483,885 2,340,122 1,386,744 1,161,544 1,829,746 987,045

Accrued Expenses 262,475 206,711 213,956 186,470 150,512 168,641

VAT Payable 22,810 27,612 20,663 5,363 - 3,550

Turnover Tax Payable 1,075 1,105 1,105 1,075 1,105 1,105

WHT Payable 6,447 2,431 34,737 - 165 1,728

Other Payables 519,618 346,278 235,635 235,108 37,360 22,362

2,296,310 2,924,259 1,892,840 1,589,560 2,018,888 1,184,431

Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

40 LOANS FROM RELATED PARTIES DUE WITHIN ONE YEAR

Ishara Traders (Pvt) Ltd. - - 32,760 - - -

Lanka Orix Leasing Company PLC - - 359 - - -

Browns Tours (Pvt) Ltd. - - - - - 5,000

Browns Group Motels Ltd. - - - 4,126 3,497 3,497

S. F. L.Services (Pvt)Ltd. - - - 375,698 213,673 765,802

Browns Health Care (Pvt) Ltd - - - 74,280 - -

Browns Group Industries (Pvt) Ltd. - - - 11,338 20,000 10,000

Browns Investments PLC - - - 245,779 85,821 507,219

- - 33,119 711,221 322,991 1,291,518


Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

41 AMOUNTS DUE TO RELATED PARTIES

Free Lanka Trading Company Ltd. 25,332 629 545 - - -

FLC Holdings PLC 83 25,975 905 - - -

FLC Joint Venture Company Ltd. - - 25,000 - - -

FLC Estate Bungalows (Pvt) Ltd. 464 500 - - - -

Cricket Club Café 2 2 2 - - -

Commercial Leasing and Company PLC (CLC) 11,794 - - - - -

Engineering Services (Pvt) Ltd. - - 3,527 - - -

Galoya Plantations (Pvt) Ltd. 9,818 8,950 7,898 - - -

Perpetual Holdings Ltd. 161,900 165,363 161,742 - - -

Associated Battery Manufacturers (Cey) Ltd. 116,385 72,492 109,533 - - -

Masons Mixture Ltd. 764 764 764 - - -

Royal Fernwood Porcelain Ltd - 2,794 - - - -

Taprobane Securities (Pvt) Ltd. - - 2 - - -

Taprobane Holdings PLC - - 4,500 - - -

Browns Holdings Ltd. - - 245 - - 245

Taprobane Plantations Ltd. 17,917 7,197 - - - -

Sierra Civil Engineering (Pvt) Ltd. 273 328 - - - -

Ishara Traders (Pvt) Ltd. 17 17 - - - -

Taprobane Plantations Ltd. - - - - - -

Arrc Capital ( Pvt) Ltd. 350 350 - - - -

Hatton Transport & Agency Co. (Pvt) Ltd. - - - 16,646 16,697 17,941

Klevenberg (Pvt) Ltd. - - - - - 55,804

Browns Group Motels Ltd. - - - 5,164 5,721 5,682

Browns Battery (Pvt) Ltd. - - - - - 66

Browns Motors (Pvt) Ltd. - - - 4,683 4,696 4,722

Browns Capital (Pvt) Ltd. - - - 49,689 49,742 50,000

Browns Health Care (Pvt) Ltd. - - - - 155,614 175,000

Browns Real Estates (Pvt) Ltd. - - - 44,223 50,000 -

345,099 285,361 314,663 120,405 282,470 309,460



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

42 INCOME TAX PAYABLEBalance at the beginning of the year 147,647 158,438 30,754 59,563 103,316 129

Provision for the year 95,858 230,094 238,297 - 134,324 129,385

ESC Recoverable (9,188) (10,880) (42,699) - - (18,955)

WHT Recoverable (17,791) (5,013) (7,915) - - (2,064)

Under/ (Over) Provision during prior year (821) (2,178) - - - -

Transfers - - - (59,563) - -

Payments made during the year (123,607) (222,814) (59,999) - (178,077) (5,179)

Balance at the end of the year 92,098 147,647 158,438 - 59,563 103,316



Group Company



2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

43 NET ASSETS PER SHARE

Equity Attributable to Equity holders

of the Company (Rs.000) 15,095,764 13,880,747 14,913,894 13,789,443 13,859,926 15,467,915

Weighted Average Number of Ordinary

Shares in Issue (‘000) 70,875 70,875 70,875 70,875 70,875 70,875

Net Assets per Share (Rs.) 212.99 195.85 210.43 194.56 195.55 218.24

44 RELATED PARTY DISCLOSURES

44.1 The Directors of Brown & Company PLC are also the Directors of the following related companies.

Name of the Director

BC

PLC

LOLC

PLC

BG

IPL

BT

PL

SF

LS

PL

HTA

CP

L

SP

LP

L

BG

ML

CF

TE

L

BG

AS

PL

KP

L

SL

PL

SLT

PL

BM

PL

WG

PL

BIP

LC

BIP

L

BH

CP

L

BC

PL

AB

M(C

)L

IGB

RIP

L

BT

EP

L

GH

PL

GP

PL

MM

L

ES

PL

Se

yP

LC

TS

PL

TH

PLC

RF

PL

BH

L

Mr.I.C Nanayakkara√ √++ + + + + + + + + + + + + + *√ - - - - - - - - +++ +++ √ - - - -

Mrs. R.L Nanayakkara - √ √ √ √ √ - √ √ √ - √ √ - √ - √ √ - - √ √ - - √ √ - - √ - -

Mr.N.M Prakash √ - √ √ √ √ √ √ √ √ √ √ √ - √ √ √ √ - √ √ √ √ - √ √ - - - √ -

Mr.S.V Somasunderam √ - √ √ √ √ √ √ √ √ √ √ √ - √ √ √ √ - √ - √ - - √ √ - - - - √

Mr.A.L Devasurendra **√ - - - - - - - - - - - - - - - - - - - - - - - - - - - √ - **√

Mrs.K.U.Amerasinghe √ √ - - - - - - - - - - - - - √ - - - - - - - - - - - - - - -

Mr.W.D.K.Jayawardena √ √ - - - - - - - - - - - - - √ - - - - - - - - - - - - - - -

Mr.H.P.J De Silva √ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Mr.R.M. Nanayakkara ***√ - - - - - - - - - - - - √ - - - - - - - - - - - - - - - - -

+ Alternate to Mrs. R.N.A. Nanayakkara *Appointed on 01/ 03/ 2013 **Resigned on 15/ 07/ 2013

++ Alternate to Mr. R.M. Nanayakkara ***Appointed w.e.f 15/07/2013

+++ Alternate to Mr. R.M. Nanayakkara / Mrs. R.N.A. Nanayakkara


44 RELATED PARTY DISCLOSURES CONTD.

44.1 The Directors of Brown & Company PLC are also the Directors of the following related companies contd.

Name of the Company Nature of the Relationship

Lanka Orix Leasing Company PLC (LOLCPLC) Ultimate ParentBrowns Group Industries (Pvt) Ltd. (BGIPL) SubsidiaryBrowns Tours (Pvt) Ltd. (BTPL) SubsidiaryS.F.L Services (Pvt) Ltd. (SFLSPL) SubsidiaryThe Hatton Transport & Agency Co. (Pvt) Ltd. (HTACPL) SubsidiarySnowcem Products Lanka (Pvt) Ltd. (SPLPL) SubsidiaryBrowns Group Motels Ltd. (BGML) SubsidiaryC.F.T Engineering Ltd. (CFTEL) SubsidiaryB.G Air Services (Pvt) Ltd. (BGASPL) SubsidiaryKlevenberg (Pvt) Ltd. (KPL) SubsidiarySifang Lanka (Pvt) Ltd. (SLPL) SubsidiarySifang Lanka Trading (Pvt) Ltd. (SLTPL) SubsidiaryBrowns Battery (Pvt) Ltd. (BBPL) SubsidiaryBrowns Motors (Pvt) Ltd. (BMPL) SubsidiaryWalker & Greig (Pvt) Ltd. (WGPL) SubsidiaryBrowns Investments PLC (BIPLC) SubsidiaryBrowns Industrial Park Ltd (BIPL) SubsidiaryBrowns Health Care (Pvt) Ltd (BHCPL) SubsidiaryBrowns Capital (Pvt) Ltd (BCPL) SubsidiaryBrowns Real Estates (Pvt)Ltd (BREPL) SubsidiaryI.G. Browns Rubber Industries (Pvt) Ltd. (IGBRIPL) SubsidiaryBrowns Thermal Engineering (Pvt) Ltd. (BTEPL) SubsidiaryAjax Engineers (Pvt)Ltd (AJEX) SubsidiaryAssociate Battery Manufacturers (Cey) Ltd. (ABM(C)L) AssociateGaloya Plantations (Pvt) Ltd. (GPPL) AssociateMelfort Green Teas (Pvt) Ltd. (MGTPL) AssociateLOLC Leisure Ltd. (LOLCLPL) AssociateVirginia International Investments Ltd. (VIIL) AssociateTaprobane Plantations Ltd. (TPPL) AssociateRain Forest Eco Lodge (Pvt) Ltd. (RFELPL) AssociateGaloya Holdings (Pvt) Ltd. (GHPL) Joint VentureF L C Joint Venture (Pvt) Ltd (Formerly Known as Free Lanka Capital (Pvt) Ltd) (FLCJVL) Joint VentureRoyal Fernwood Porcelain Ltd. (RFPL) Sub-SubsidiaryExcel Global Holdings (Pvt) Ltd. (EGHPL) Sub-SubsidiarySamudhra Beach Resorts (Pvt)Ltd (SBRPL) Sub-SubsidiaryTaprobane Capital (Pvt) Ltd. (TCPL) Sub-SubsidiaryF L C Holdings PLC (Formerly Known as Free Lanka Capital Holdings PLC) (FLCHL ) Sub-SubsidiaryMasons Mixture Ltd. (MML) Other AffiliateEngineering Services (Pvt) Ltd. (ESPL) Other AffiliateFree Lanka Trading Company (Pvt) Ltd. (FLTCPL) Other AffiliateCricket Club Café (CCC) Other AffiliateFree Lanka Teas (Pvt) Ltd. (FLTPL) Other AffiliateSeylan Bank PLC (SeyBPLC) Other AffiliateTaprobane Securities (Pvt) Ltd. (TSPL ) Other AffiliateBrowns Holdings Limited (Formerly Known as Taprobane Fund Management Ltd.) (TFML) Other AffiliateTaprobane Holdings PLC (THPL) Other AffiliateF L C Power Holdings (Pvt) Ltd (Formerly Known as Free Lanka Power Holdings (Pvt) Ltd) (FLCPHL) Joint Venture’s-Sub-SubsidiaryEnselwatte Power (Pvt) Ltd (Formerly Known as Free Lanka Power 3 (Pvt) Ltd) (EPL) Joint Venture’s-Sub-SubsidiaryDolekanda Power (Pvt) Ltd (Formerly Known as Free Lanka Power 2 (Pvt) Ltd) (DPL) Joint Venture’s-Sub-SubsidiaryF L C Properties (Pvt) Ltd (Formerly Known as Free Lanka Capital Properties (Pvt) Ltd) (FLCPL ) Joint Venture’s-Sub-SubsidiaryF L C Hydro Power PLC (Formerly Known as Hydro Power Free Lanka PLC) (FLCHPPLC) Joint Venture’s-Sub-SubsidiaryHalgranoya Hydro Power (Pvt) Ltd (Formerly Known as Free Lanka Power 1 (Pvt) Ltd ) (HHPL) Joint Venture’s-Sub-SubsidiaryThebuwena Hydro Power (Pvt) Ltd (Formerly Known as Hydro Power Free Lanka 2 (Pvt) Ltd) (THPL) Joint Venture’s-Sub-SubsidiaryStellenberg Hydro Power (Pvt) Ltd (Formerly Known as Hydro Power Free Lanka 3 (Pvt) Ltd) (SHPL) Joint Venture’s-Sub-SubsidiaryF L C Estate Bungalows (Pvt) Ltd (Formerly Known as Free Lanka Estate Bungalows (Pvt) Ltd) (FLCEBL) Joint Venture’s-Sub-Subsidiary



44.2 Related Party TransactionsThe Company carries out transactions in the ordinary course of its business with parties who are defined as related parties in Sri Lanka Accounting

Standard-LKAS 24 “Related Party Disclosures”, the details of which are reported below. The pricing applicable to such transactions is based on the

assessment of the risk and pricing model of the Company, and is comparable with what is applied to transactions between the Company and its

unrelated customers.

44.3 Transactions of Brown & Company PLC with Related Companies Providing the Services44.3.1 Share of Group OverheadsThe Company has incurred Group Expenses on behalf of the Related companies during the year on reimbursement basis as follows;

31.3.2013 31.3.2012

Group Group

Name of the Company Overheads Overheads

Rs.’000 Rs.’000

Browns Group Industries (Pvt) Ltd. 8,443 10,494

Sifang Lanka (Pvt) Ltd. 20,193 11,787

Browns Health Care (Pvt) Ltd 11,216 32,913

Masons Mixture Ltd. 928 608

Browns Thermal Engineering (Pvt) Ltd. 6,039 5,265

Klevenberg (Pvt) Ltd. 16,861 7,412

Engineering Services (Pvt) Ltd. 1,851 595

S. F. L.Services (Pvt)Ltd. 3,879 453

BG Air Services (Pvt) Ltd. 674 521

Browns Group Motels Ltd. 69 171

Browns Tours (Pvt) Ltd. 5,569 129

Browns Investments PLC 2,753 1,777

Snowcem Products Lanka (Pvt) Ltd. 4,505 2,723

Browns Motors (Pvt) Ltd. - 25

C.F.T. Engineering (Pvt) Ltd. 210 51

Browns Industrial Park Ltd 9,144 93

Royal Fernwood Porcelain Ltd. 20 91

Hatton Transport Agency Company (Pvt) Ltd 1,244 51

Browns Properties (Pvt) Ltd 295

Browns Capital (Pvt) Ltd 718 8

Galoya Holdings (Pvt) Ltd. - 72

Browns Real Estates (Pvt) Ltd 5,587 5

Sumudra Beach Resorts (Pvt)Ltd - 5

I.G. Browns Rubber Industries (Pvt) Ltd. 1,055 -

42.3.2 Loans granted to Related CompaniesThe Company has granted and recovered the following Loan balances during the year.

Interest Loan

Loan Charged/ Recovered/

Granted Capitalized Transferred

Name of the Company Rs.’000 Rs.’000 Rs.’000

Masons Mixtures Ltd. 7,700 - -

Galoya Plantations (Pvt) Ltd. 117,500 93,356 -

BG Air Services (Pvt) Ltd. - 3,572 10,000

Sifang Lanka (Pvt) Ltd. 64,100 2,977 44,587

Royal Fernwood Porcelain Ltd. 23,200 6,305 -



44.3.3 Loans obtained from Related Companies Loan Interest Loan Interest

Obtained Charged Repaid Paid

Name of the Company Rs.’000 Rs.’000 Rs.’000 Rs.’000

S. F. L.Services (Pvt)Ltd. 857,688 139,183 168,072 32,729

Browns Group Industries (Pvt) Ltd. - 1,515 10,000 -

Browns Investments PLC 637,926 11,488 441,341 7,760

Browns Health Care (Pvt) Ltd. 74,280 6,067 - -

44.3.4 Trading TransactionsThe Company has engaged in the following trading transactions with Related Companies under the normal commercial terms and conditions.

2012/2013 2011/2012 2010/2011

Name of the Company Sales Purchases Sales Purchases Sales Purchases

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

Associated Battery Manufacturers (Cey) Ltd. 78 1,385,247 153 1,538,385 17,737 1,639,867

Browns Thermal Engineering (Pvt) Ltd. 180 5,601 38 1,619 430 13,189

Engineering Services (Pvt) Ltd. 834 782 - - 2,378 7,310

Browns Group Industries (Pvt) Ltd. 1,293 4,996 1,407 3 649 137

Browns Tours (Pvt) Ltd. - 65 - - 95 -

B.G Air Services (Pvt) Ltd. 28 5,537 4,006 - 245 -

Walker & Greig (Pvt) Ltd. - - - 14,631 - 1,297

S. F. L.Services (Pvt)Ltd. 8 - 190 - - -

Browns Industrial Park Ltd. 4,267 - 185 - - -

Klevenberg (Pvt) Ltd. 1,155 5,316 3,995 310 - -

Sifang Lanka (Pvt) Ltd. 181 27,431 15,743 53,401 - -

Browns Investments PLC 115 - - - - -

Browns Health Care (Pvt) Ltd 638 - - - - -

Royal Fernwood Porcelain Ltd. 167 121,359 - - - -

44.3.5 Management FeeThe Company has provided Management Consultation to its Related Companies and has charged Management Fees as follows.

2012/2013 2011/2012 2010/2011

Name of the Company Rs.’000 Rs.’000 Rs.’000

Browns Group Industries (Pvt) Ltd. 7,000 7,000 7,000

Sifang Lanka (Pvt) Ltd. 3,000 7,000 7,000

S. F. L.Services (Pvt)Ltd. 5,000 5,000 5,000

Browns Thermal Engineering (Pvt) Ltd. 5,000 5,000 5,000

Browns Investments PLC 5,000 5,000 5,000

Klevenberg (Pvt) Ltd 4,000 - -



44.3.6 The Company has paid an interim dividend of Rs.0.50 per share to its shareholders during the year including the following related

companies.

2012/2013 2011/2012 2010/2011

Rs.’000 Rs.’000 Rs.’000

Engineering Services (Pvt) Ltd. 8,294 21,897 21,897

Masons Mixtures Ltd. 6,866 18,127 18,127

Lanka Orix Leasing Company PLC 1,691 4,160 4,160

Mutugala Estates Ltd. 1,493 3,941 3,941

Pathregalla Estates Ltd. 981 2,589 2,589

Taprobane Holdings PLC - 531 531

44.3.7 The Company recognised dividends from the following related companies during the year.

2012/2013 2011/2012 2010/2011

Rs.’000 Rs.’000 Rs.’000

S. F. L.Services (Pvt)Ltd. 21,600 47,683 464,116

Browns Group Industries (Pvt) Ltd. 585 5,031 4,072

Klevenberg (Pvt) Ltd. 2,881 - -

Seylan Bank PLC. 21,807 - 11,175

B.G Air Services (Pvt) Ltd. 176 29 -

44.3.8 The Company has made the following new investments during the year.

2012/2013 2011/2012

No of No of

Shares % Rs’000 Shares % Rs’000

Klevenberg (Pvt) Ltd. - - - 2,736,000 16% 62,700

Browns Investments PLC 199,409,313 10.73% 875,180 27,616,400 0.76% 698,698

Browns Real Estates (Pvt) Ltd. - - - 5,000,000 100% 50,000

44.4 Transactions Between Related Companies44.4.1 S. F. L. Services (Pvt)Ltd.(SFL)* SFL has earned following income from group companies during the year

Secretarial Fees Dividend Income

Rs.’000 Rs.’000

Browns Group Industries (Pvt) Ltd 65 45

Browns Tours (Pvt) Ltd 60 -

Browns Thermal Engineering (Pvt) Ltd 75 -

Engineering Services (Pvt) Ltd 60 -

Masion Mixtures (Pvt) Ltd 65 -

Browns Group Motels (Pvt) Ltd 5 -

IG Browns Rubber Industries (Pvt) Ltd 60 -

Hatton Transport Agency (Pvt) Ltd 30 -

Snowcem Products (Pvt) Ltd 10 -

Associated Battery Manufacturers (Cey) Ltd. 150 -

Brown & Company PLC 275 -


44 RELATED PARTY DISCLOSURES CONTD.44.4 Transactions Between Related Companies Contd.44.4.1 S. F. L. Services (Pvt)Ltd.(SFL) Contd. SFL has charged interest and granted the following Loan amounts during the year.

Loan Interest

Granted Charged

Rs.’000 Rs.’000

Browns Investment PLC - 62,800

Engineering Services (Pvt) Ltd. - 786

C.F.T. Engineering Ltd. - 6,246

Browns Holdings Ltd. - 278

Royal Fernwood Porcelain Ltd. - 6,564

Lexinton Holdings Ltd. - 64,698

Browns & Company PLC - 139,217

Sifang Lanka (Pvt) Ltd. - 11,814

44.4.2 Browns Group Industries (Pvt) Ltd. (BGIL)BGIL has earned income from following group companies during the year.

Rent Management Dividend Overheads Others

Fees

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

Browns Thermal Engineering (Pvt) Ltd 514 1,200 1,834 - 390

BG Air Services (Pvt) Ltd - - 191 - -

BGIL has made the following new investment during the year

No.of Shares % Rs 000

Browns Thermal Engineering (Pvt) Ltd 675,000 45% 59,808

44.4.3 Browns Thermal Engineering (Pvt) Ltd. (BTEPL)BTEPL has earned income from following group company during the year.

Others

Rs.’000

Browns Group Industries (Pvt) Ltd 1,455

44.4.4. Browns Tours (Pvt) Ltd. (BTL)BTL has earned income from following group company during the year

Rent Dividend

Rs.’000 Rs.’000

BG Air Services (Pvt) Ltd 978 180

44.4.5 Browns Industrial Park (Pvt) Ltd. (BIPL)BIPL has earned rent income from following group companies during the year

Rent

Rs.’000

Brown & Company PLC 4,495

Browns Group Industries (Pvt) Ltd. 1,177

Browns Thermal Engineering (Pvt) Ltd. 2,949

Sifang Lanka (Pvt) Ltd. 1,931



44.4.6 Browns Investment PLC

Name of Related Company Relationship Description of Transaction

F L C Holdings PLC ( formerly known as Joint Venture’s Subsidiary The Company has received Rs.2,182,212/= dividend income

Free Lanka Capital Holdings Ltd., (FLCHPLC) during the year. (previous year Rs.600,000/=)

F L C Joint Venture Co., Pvt Ltd ( formerly known Joint Venture The Company has received Rs.10,000,000/= dividend income

as Free Lanka Capital Holdings Ltd., (FLCJVL) during the year.

S.F.L.Services (Pvt) Ltd., Other Affiliate The company has fully settled loan obtained from S.F.L.Services

( formerly known as Standard (Pvt) Ltd during the previous year. (previous year Rs.67,735,822/=)

Finance Pvt Ltd) (SFL)

The Company has incurred an interest expense of Rs.62,800,126/=

(Previous Year - Rs.61,159,251/=) on loans obtained from S.F.L.

Services ( Pvt) Ltd.

Company has received advances amounting to Rs.275,000,000/=

from SFL and it has been settled in full during the year.

The Company has granted Rs.55,666,409/- during the Financial

year.

During the year Company has earned Rs.1,716,051/= an interest

income on loans given to SFL Services ( Pvt) Ltd.

Royal Fernwood Porcelain Ltd., (RFPL) Subsidiary The Company has given a loan of Rs.57,000,000/= to RFPL.

(Previous year 56,200,000/=) and RFPL has fully settled loan during

the Financial year.

During the year company has earned an interest income of

Rs.8,502,498/= (Previous year Rs.4,871,800/=) on loans granted

to RFPL.

The Company has purchased Rs.61,826,050/- valued land and

buildings from RFPL.

Lanka Orix Finance Ltd., (LOFL) Other Affiliate No Transitions

Lexinton Holdings Ltd.,(LHL) Other Affiliate The Company has recovered Rs. 464,882,815/= during the year.

(Previous year - Rs.818,946,115)

The Company has earned an interest income of Rs.129,848,896/=

on loans granted to LHL. (Previous year - Rs.107,923,245/= )

Excel Global Holdings (Pvt) Ltd.,(EGHL) Subsidiary No Transitions

Millennium Development (Pvt) Ltd., (MDPL) Sub-subsidiary The Company has recovered the outstanding loan balance

amounting of Rs. 15,830,000 during the year. ( Previous year-

Rs. 5,963,766/-)

The Company has earned an interest income of 2,097,951/= on

loans granted to MDPL. (Previous year - Rs.963,766/= )



44.4 Transactions Between Related Companies Contd.44.4.6 Browns Investment PLC


Taprobane Capital (Pvt) Ltd., (TCPL) Subsidiary The Company has earned an interest income of 11,843,339/= on

loans granted to TCPL. (Previous year - Rs.1.678,632/= )

Samudra Beach Resorts (Pvt) Ltd.(SBRPL) Subsidiary The Company has paid Rs.250,000,000/- Mobilization advance on

behalf of Samudra Beach Resorts ( Pvt) Ltd.

The Company has paid Rs.434,150,973/- Construction payments

on behalf of Samudra Beach Resorts ( Pvt) Ltd

The Company has incurred expenses of Rs.19,348,845/-on behalf

of SBRPL during the year. ( Previous year- Rs. 34,642/-)

The Company has sold Rs.321,000,000/- valued lands to SBRPL.

Agstar Fertilizers PLC Other Affiliate The Company has received Rs.1,950,000/= dividend income

during the year.

44.4.6.1 Obtaining and Providing Servicesa) FLC Holdings PLC (formerly known as Free Lanka Capital Holding Limited (FLCHPLC) with Other Related Parties


Maturata Plantations Ltd., (MPL) Joint Ventures Subsidiary FLCHPLC has granted Rs.150,000,000/= to Maturata Plantations

Ltd,during the year(Previous Year Rs.115,000,000 /-)and received

Rs.20,876,800/= (Previous Year Rs.31,573,200/-)from MPL in part

settlement of loan. The Company has earned Rs.30,981,600/= as

loan interest.(Previous Year Rs.9,791,809/-)

FLCHPLC has granted a Corporate Guarantee on behalf of

Maturata Plantations Ltd to Lanka Orix Leasing Co. PLC for

Rs. 275.0 Mn. In return, a Counter Guarantee was received from

Maturata Plantations Ltd for the same amount and on the same

terms and conditions.

FLCHPLC received Rs.2,757,504/- as a guarantee fee from MPL

Free Lanka Management Co. (Pvt) Ltd., (FLMCL ) Joint Venture FLCHPLC has earned Rs.86,729,781/=(Previous Year

Rs. 63,205,674/=) from FLMC as Dividend for Investment made by

the Company.




FLC Properties (Pvt) Ltd. (FLCPL) Joint Venture Current Year Nil.F L C Properties (Pvt) Ltd had issued 35,000,000

(Formerly known as Free Lanka nos. Ordinary Shares to F L C Holdings PLC (FLCHPLC) at Rs. 10/- per

Capital Properties (Pvt) Ltd.) share in the Previous year against the advances.

During the year the Company has granted an advance of

Rs.290,000,000/- to F L C Properties (Pvt) Ltd (Previous year -

Rs.290,000,000/-).

F L C Holdings PLC has settled Rs.2,583,607 for operational

expenses and financial charges on behalf of the F L C Properties

(Pvt) Ltd (Previous year - Rs. 10,396,845/-).

Ceylon Estate Teas (Pvt) Ltd (CETL) Joint Venture’s FLMCL loan granted to CETL Rs.21,500,000/-(Previous Year

Rs.4,000,000/-)

Sub-subsidiary FLMCL received loan interest Rs.602,603/-(Previous Year Nil.

FLMCL has invested in shares for Rs.45,500,000/-(Previous Year Nil.)

Dolekanda Power (Pvt) Ltd. (DPL) Joint Venture’s FLCHL has paid Rs.450,729 (Previous Year Rs.Nil) to DPL as

(Formerly known as Free Lanka Sub-subsidiary operational expenses.

Power 2 Co.(Pvt) Ltd.)

Enselwatte Power (Pvt) Ltd. (EPL) Joint Venture’s FLCHLPLC has paid Rs.10,895,778 (Previous Year Rs.Nil) to EPL as

(Formerly known as Free Lanka operational expenses.

Power 3 Co.(Pvt) Ltd.) Sub-subsidiary FLCHLPLC has settled during the year a Promissory Note worth of

Rs.10,000,000/= issued in favour of Free Lanka Power 3 (Pvt) Ltd.

FLC Estate Bungalows (Pvt) Ltd. (FLEL) Joint Venture’s FLCHLPLC has Paid Rs.83,518 (Previous Year Rs.16,398) to (FLEL) as

(Formerly known as Free Lanka Sub-subsidiary Administrative expenses.

Estate Bungalows (Pvt) Ltd.) (FLEBL)

Lanka Orix Finance Co. PLC (LOFC) Other Affiliate FLCHLPLC has earned Rs. 35,791,740/-/- as Gross Interest Income for

the Short Term Deposits made in LOFCL during the

year. 9 (Previouse Year Rs.25,845,387/-) The Short Term Deposit as

at 31st March 2013 amounted to Rs. 175,000,000/- (Previous Year -

Rs.250,000,000/-)

The Company has obtained a revised Speed Draft Facility

Rs.80,000,000/-(Originally 115,000,000/- ) and repaid Rs.

20,876,800/- during the year (Previous year - Rs.31,573,200). The

interest paid for the loan during the Year was Rs. 14,288,564/-

(Previous year - 6,071,404).

Commercial Leasing & Finance PLC (CLFPLC) Other Affiliate FLCHLPLC has earned Rs. 42,717,187/- as Gross Interest Income for

the Short Term Deposits made in CLCL during the year.(Previous

Year Rs.11,200,235/-) The Short Term Deposit as at 31st March 2013

amounted to Rs. 110,000,000/- (Previous Year - 154,868,525/-)

Lanka Orix Leasing Co PLC (LOLC) Ultimate Parent FLCHLPLC has earned Rs. 37,646,233/- as Gross Interest Income

for the Short Term Deposits made in LOLC during the year.

(Previous Year Rs.14,687,52/-)The Short Term Deposit as at 31st

March 2013 amounted to Rs. 250,000,000/- (Previous Year -

Rs.250,000,000/-)

LOLC Factors Ltd (LOLCFL) Other Affiliate FLCHLPLC has earned Rs. 25,202,877/- as Gross Interest Income for

the Short Term Deposits made in LOLCFL during the year.(Previous

Year Rs.10,430,340/-) The Short Term Deposit as at 31st March

2013 amounted to Rs. 100,000,000/- (Previous Year -

Rs.300,000,000/-)



44.4 Transactions Between Related Companies Contd.44.4.6.1 Obtaining and Providing Services Contd.b) Maturata Plantations Ltd., (MPL )


Pussellawa Plantations Ltd., (PPL) Joint Venture’s MPL has paid Rs. 152,779/-, Rs. 1,264,164/-, Rs. 175,000/-, &

Rs. 581,396 for generator fuel,office rent,rubber consultation, and

Sub-subsidiary other administration charges respectively

MPL has Incurred Rs.51,000/- for purchase of Rubber Plants.

MPL has been received Rs.215,146/- as reimbursement of

administration expenses met by the company on behalf of PPL.

Lanka Orix Leasing Co. PLC.(LOLC) Ultimate parent MPL has obtained a revolving fund facility of Rs. 275,000,000/-

during the year and of which Rs. 262,605,732/- is utilized at the

end of the date of statement of financial position

MPL has paid off Rs. 12,405,888/- (Previous Year - Rs.18,528,342/-)

in settlement of Commercial Loans & loans obtained under ADB

Plantation development Project through LOLC.

MPL has paid off Rs. 1,965,828/- (excluding Input VAT) (Previous

Year - Rs.1,040,312/-) in settlement of loans obtained under

finance leasing arrangements from LOLC.

MPL’S Loan amount payable was increased by Rs.4,180,296/-

(Previous Year Rs.22,266,890/-)

MPL has incurred an interest expense of Rs. 75,343,752/- (Previous

Year - Rs.18,678,793/-) for loans obtained from LOLC.

Free Lanka Trading (Pvt) Ltd., (PLTCL) Other Affiliate MPL has incurred a vehicle rent expense of Rs. 1,200,000/-

(Previous year - Rs.900,000/-) for obtaining vehicles on rent.

FLC Power Holdings (Pvt) Ltd. Joint Venture’s MPL has incurred expenditure of Rs. 58,272/- pertaining to its

(Formerly known as Free Lanka Sub Subsidiary Hydro Power Projects

Power Holdings PLC)

Ishara Traders (Pvt) Ltd. Other Affiliate MPL has repaid Rs. 225,000,000/- and incurred an interest expense

of Rs. 37,402,740/- (Previous year - Rs. 36,846,576/-) during the year

Brown & Company PLC Immediate parent Company MPL has paid Rs. 158,000/-, Rs. 30,400/-, Rs. 121,050/-,

Rs. 1,053,842/-, Rs. 196,000/-, Rs.2,900,000/- & Rs. 164,970/- for

purchase of batteries, C.F.L. bulbs, buying toners & servicing

photocopy machines, generator repair & servicing, purchasing

drier trays, purchase of energy efficient fans and other items

respectively



c) Free Lanka Management Company (Pvt) Ltd., ( FLMCL )


Pussellawa Plantations Ltd., (PPL) Joint Venture’s FLMCL has received Rs. 208,930,806/- (Previous year

Sub Subsidiary Rs.208,657,052/-) as Management fees

FLMCL has invested Rs. 32,800/- (Previous year Rs.1,140/-) as Share

Advance

FLMCL has received Rs. 39,435,109/- (Previous year

Rs.50,566,151/-) as Dividend.

Ceylon Estate Teas (Pvt) Ltd Other Affiliate FLMCL loan granted to CETL Rs.21,500,000/-(Previous Year

Rs.4,000,000/-)

FLMCL received loan interest Rs.602,603/-(Previous Year Nil.)

FLMCL has invested in shares for Rs.45,500,000/-(Previous Year Nil.)

Melfort Green Teas (Pvt) Ltd ) (MGTL) Associate FLMCL has received Rs. 5,850,000/- (Previous year Rs 2,925,000/-.)

as Dividend

FLMC Sudima Timber Products (Pvt) Ltd Other Affiliate FMLCL has incurred Rs. 269,525/-,(Previous year Rs.253,181/-) as

Preliminary Expenses

Agstar Fertilizer PLC Other Affiliate FLMCL has received Rs. 157,500/- (Previous year Rs.Nil.) as

Dividend

d) Pussellawa Plantations Ltd., (PPL) with other related parties


Melfort Green Teas (Pvt) Ltd (MGTPL) Associate Current Year Rs.Nil. Previous Year PPL had earned Rs.7,391,641/- for

the Supply of Green Tea Leaf to MGTPL

PPL has earned Rs.8,324,335/- (Previous year Rs. 8,731,366/-) for

lent Labour and others to MGTPL

PPL has earned Rs.84,836/- (Previous year Rs. 27,763/-) for supply

of Teas to MGTPL

PPL has given Short Term Loans amounting to Rs nil (Previous year

Rs. 28,500,000/-) to MGTPL

PPL has obtained an Interest on short term loan amounting to Rs.

Nil (previous Year Rs.859,830/-) from MGTPL

PPL has incurred Rs. 2,064,590/-,(Previous year Rs.3,371,335/-) for

tea purchased from MGTPL

PPL has received from MGTPL of Rs. 2,799,573/- (Previous Year

Rs.643,430/-) as reimbursement of Other Expense


44 RELATED PARTY DISCLOSURES CONTD.44.4 Transactions Between Related Companies Contd.44.4.6.1 Obtaining and Providing Services Contd.d) Pussellawa Plantations Ltd., (PPL ) Contd.


Melfort Green Teas (Pvt) Ltd (MGTPL) PPL has received Rs. 200,000/- (Previous year Rs.Nil/-) as reimbursement of Office refurnishing cost from MGTPL.

PPL has received Rs. 2,423,200/- (Previous year Rs.Nil/-) as reimbursement of Office and Factory rent from MGTPL

PPL has received Rs. 260,375/- (Previous year Rs.124,644/-) as reimbursement of Communication and other Expenses from MGTPL

PPL has paid Rs. 179,266/- on behalf of MGTPL (Previous year Rs.2,563,576/-) as Communication and other Expenses.

PPL has paid Rs.1,500,000 (Previous Year Rs. Nil) for Tea purchases. PPL has received Rs. 8,280,410/- (Previous year Rs.7,027,687/-) as reimbursement of Rent labour and other charges from MGTPL PPL Has earned Rs. 8,324,335/- (Previous year Rs. 8,731,366/-) for lent labour and other to MGTPL PPL has earned Rs. 84,836/- (Previous year Rs. 27,763/-) for supply of Teas to MGTPL PPL has Given Short Term Loans amounting to Rs nil (Previous year Rs. 28,500,000/-) to MGTPL PPL has obtained an Interest on short term loan amounting to Rs. nil (Previous year Rs. 859,830/-) from MGTPL

Maturata Plantations Ltd (MPL) Joint Venture’s PPL has paid Rs. 3,359,664/- on behalf of MPL (Previous year Sub Subsidiary Rs.2,563,576/-) as Office Rent, Refurnishing cost and Other services

PPL has paid Rs. 149,773/- to MPL (Previous year Rs.97,742/-) as Vehicle Maintenance & Hiring Charges PPL has received Rs. 149,431/- (Previous year Rs.109,638/-) as reimbursement of Vehicle Maintenance & Hiring Charges from MPL PPL has received Rs. 2,159,664/- (Previous year Rs. Nil/-) as Office Rent from MPL PPL has received Rs. 706,603/- (Previous year Rs.956,768/-) as reimbursement of Other Services from MPL

PPL has paid Rs.754,344/- to MPL (Previous Year Rs.713,952/-) as Communication and Other Expenses. PPLPPL has obtained office rent Rs.2,159,664/-(Previous Year Rs.Nil) has paid Rs.754,344/- to MPL (Previous Year Rs.713,952/-) as Communication and Other Expenses.

The Tea Leaf Resort Holdings (Pvt) Ltd Joint Venture’s Subsidiary PPL has received Rs. 996,040/- (Previous Year Rs. Nil) as (TLRHL) reimbursement of Valuation fee for Geragama, Ayr Bungalow & Hotel Project




Ceylon Estate Teas (Pvt) Ltd (CETL) Other Affiliate Current Year Rs.Nil. Previous Year PPL had received Rs. 5,000,000/-

as settlement of Short Term Loan from CETL.


of Teas to CETL

PPL has paid Rs. 239,013/- (Previous year Rs.1,293,908/-) as

Communication and Other Expense

PPL has received Rs. 591,180/- (Previous year Rs.220,610/-) as

reimbursement of Communication and Other Expenses from

CETL

PPL has received Rs. 208,583/- (Previous year Rs 35,450.) as

reimbursement of Tea sales from CETL

PPL has received Rs. 928,000/- (Previous year Rs.Nil.) as

reimbursement of Office rent from CETL.

PPL has received Rs. 117,160/- (Previous year Rs Nil.) as

reimbursement of Survey and labour charges from CETL

F L C Hydro Power PLC Joint Venture’s PPL has paid Rs. 768,779/- (Previous year Rs.1,198,788/-)as Office

(Formerly Known as Hydro Power Sub Subsidiary refurnishing cost, Communication and other services

Free Lanka PLC)(HPFPLC)

PPL has received Rs nil (Previous year Rs. 46,530,806/-) as

settlement of Short Term Loan by HPF PLC

PPL has received Rs 354,255/- (Previous year Rs. 290,501/-) as

reimbursement of cost of labour and transport charges from

HPFPLC

PPL has received Rs 769,066/- (Previous year Rs. 801,888/-) as

reimbursement of Communication and other services from

HPFPLC

Thebuwana Hydro Power (Pvt) Ltd (THPL) Joint Venture’s Current Year Rs.Nil .(Previous Year PPL had received Rs 2,868,511/-

(Formerly known as Hydro Free Sub Subsidiary as reimbursement of Expenses paid on Thebuwana Projects).

Lanka 2 Pvt Ltd)(HPF2L)

Stellinberg Hydro Power (Pvt) Ltd (SHPL) Joint Venture’s Current Year Rs.Nil Previous Year PPL had received Rs 2,181,872/-

(Formerly known as Hydro Free Lanka Sub Subsidiary as reimbursement of Expenses paid on Stellenberg Project.

3 Pvt Ltd)(HPF3L)



44.4 Transactions Between Related Companies Contd.44.4.6.1 Obtaining and Providing Services Contd.d) Pussellawa Plantations Ltd., (PPL ) Contd.


Free Lanka Trading Company (Pvt) Ltd Other Affiliate PPL has paid Rs 157,658/-(Previous year Rs 164,977/-) as

Communication and Travelling Expenses

PPL has received Rs 228,977/- (Previous year Rs 247,974/-) as

reimbursement of Communication and Traveling Expenses

PPL has paid Rs 2,700,000/-(Previous year Rs .900,000/-) as Vehicle

hiring Charges

PPL has settled vehicle hiring charges Rs.3,600,000/-

(Previous Year Rs.Nil)


of Teas to FLTC

Lanka Orix Leasing Co, PLC Ultimate parent PPL has repaid loan capital of Rs.9,642,444/-(Previous year

Rs.9,038,871/-) to LOLC

PPL has incurred an Interest expenses of Rs. 4,370,982/-(previous

year Rs.5,729,619/-) on loan obtained from LOLC.

Commercial Leasing PLC Other Affiliate No transactions

Brown & Company PLC Immediate parent PPL has incurred an expenses of Rs. 876,063/-(Previous year Rs

905,186/-) for the Consumables

company

Agstar Fertilizers PLC Other Affiliate PPL has incurred an expenses of Rs.36,757,662/-(Previous year

Rs 38,250,261) for the fertilizer purchased during the year

e) F L C Hydro Power PLC (Formerly known as Hydro Power Free Lanka PLC) (FLCHPPLC) with Other Related Parties


Thebuwana Hydro Power (Pvt) Ltd. (THPL) Joint Venture’s FLCHPPLC has incurred total expense

(Formely Known as Hydro Power Free Sub Subsidiary amounting to Rs.87,528,125/- (Previous Year - Rs.3,384,487/-) for

Lanka2 (Pvt) Ltd) (HPFL2L) operational expenses and finance charges on behalf of the

company.

FLCHPPLC has settled Promissory note worth of

Rs. 10,000,000/- to the Company during the Year




Stellenberg Hydro Power (Pvt) (SHPL) Joint Venture’s FLCHPPLC has incurred total expense

(Formely Known as Hydro Power Sub Subsidiary (Pvt) Ltd., (HPFL3L) amounting to Rs.83,296,248/- (Previous Year -

Free Lanka 3) (HPF3L) Rs. 7,369,674/-) for operational expenses and finance charges on

behalf of the company

FLCHPPLC has settled Promissory Note worth of

Rs.10,000,000 to the company during the year.

Halgaranoya Hydro Power (Pvt) Ltd. (HHPL) Joint Venture’s FLCHPPLC has incurred total expense

(Formerly Known as Free Lanka Sub Subsidiary amounting to Rs.1,580,307/- (Previous Year - Rs.645,685/-) for

Power 1 (Pvt) Ltd.,(FLP1L) operational expenses and finance charges on behalf of the

company.

FLCHPPLC has settled the due of Maturata

Plantations Ltd. amounting to Rs.1,827,882 directly on behalf of

the company.

Dolekanda Power (Pvt) Ltd. (DPL) Joint Venture’s FLCHPPLC has incurred total expense

(Formerly Known as Free Lanka Sub Subsidiary amounting to Rs.193,412 (Previous Year - Rs.72,827) for operational

Power 2 (Pvt) Ltd., (FLP 2L) expenses and finance charges on behalf of the company.


Plantations Ltd. amounting to Rs.136,859 directly on behalf of the

company.

Enselwatta Power (Pvt) Ltd. (EPL) Joint Venture’s FLCHPPLC has incurred total expense

(Formerly Known as Free Lanka Power Sub Subsidiary amounting to Rs.4,831,093 (Previous Year - Rs.5,147,647 ) for

3 (Pvt) Ltd., (FLP 3L) operational expenses and finance charges on behalf of the

company.


Plantations Ltd. amounting to Rs.908,910 directly on behalf of the

company.

FLC Power Holding (Pvt) Ltd. (FLCPHL) Joint Venture’s FLCHPPLC has incurred total expense

(Formerly Known as Free Lanka Power Sub Subsidiary amounting to Rs.159,947 (Previous Year - Rs.304,182 ) for

Holding (Pvt) Ltd., (FLPHL) operational expenses and finance charges on behalf of the

company.

FLCHPPLC has settled the due of Pussellawa

Plantation Ltd. amounting to Rs.25,440 directly on behalf of the

company.

FLCHPPLC has fully settled the due amount of

Hydro Power Free Lanka PLC amounting to Rs.489,569 during the

year.

Pussellawa Plantations Limited (PPL) Joint Venture’s Pussellawa Plantations has incurred total expenses amounting to

Sub Subsidiary Rs.1,168,459 On behalf of the Hydro Power Free Lanka PLC .

FLCHPPLC has settled Rs.1,128,958 during

the year.



44.4 Transactions Between Related Companies Contd.44.4.6.1 Obtaining and Providing Services Contd.f) FLC Properties (Pvt) Ltd., (FLCPL) (Formerly Known as Free Lanka Capital Properties (Pvt) Ltd.


The Tea Leaf Resort Holdings (Pvt) Ltd (TLRHL) Joint Venture’s Tea Leaf Resort Holding (Pvt) Ltd has settled Professional Fees of

Sub Subsidiary Rs.57,120 in the previous year. TLRHL has incurred Rs.19,096 in the

current year which has been subsequently settled.

Pussellawa Plantations Ltd., (PPL) Joint Venture’s PPL has charged Rs.1,335,616 (Previous Year Rs.5,607,692) at 15%

Sub Subsidiary per annum on the loan granted to the FLCPL

Sierra Civil Engineering (Pvt) Ltd Other Affiliate Sierra Civil Engineering (Pvt) Ltd has billed for the value worked

done amounting to Rs. 244,140,272/-during the year (Previous

year - 48,911,744/-)

Melfort Green Teas (Pvt) Ltd., (MGTPL) Associate FLMCL has received Rs.2,925,000 (Previous Year Rs.8,775,000 ) as

Dividend

Rain Forest Eco Lodge (Pvt) Ltd (RFELL) Other Affiliate RFELL has been issued 6,399,375 nos. of Ordinary Shares

equivalent to 20% of issued Ordinary Share Capital of Rs. 10/- each

of Rain Forest Eco Lodge (Pvt) Ltd.

MPL has incurred Rs. 6,352,363/- (Previous Year - Rs.4,516,218/-) for

the green leaf bought from RFELL.

MPL has earned Rs. 6,270,363/- (Previous Year - Rs.6,432,679/-) as

reimbursement of expenses met by the company on behalf of

RFELL.

g) F L C Hydro Power PLC (HPFPLC) (Formerly Known as Hydro Power Free Lanka PLC)


Halgranoya Hydro Power (Pvt) Ltd Joint Venture’s F L C Hydro Power PLC has incurred total expense amounting to

(Formerly Known as Free Lanka Sub Subsidiary Rs.5,988,355/- (Previous Year - Rs.1,580,307/-) for capital expenses

Power 1 (Pvt) Ltd. and finance charges on behalf of the company.

F L C Hydro Power PLC has settled Promissory Note worth of

Rs.10,000,000/- to the company during the year

F L C Hydro Power PLC has settled the due of Matuarata

Plantations Ltd; amounting to Rs. 33,697/- for operational

expenses. ( Previous year Rs.1,827,882/-) directly on behalf of the

company.

Dolekanda Power (Pvt) Ltd Joint Venture’s F L C Hydro Power PLC has incurred total expense amounting to

(Formely Known as Free Lanka Sub Subsidiary Rs.132,111/-(Previous Year-Rs.193,412/-)for capital expenses and

Power 2 (Pvt) Ltd. finance charges on behalf of the company.




Enselwatte Power (Pvt) Ltd Joint Venture’s F L C Hydro Power PLC has incurred total expense amounting to

(Formerly Known as Free Lanka Sub Subsidiary Rs.202,061/- (Previous Year - Rs.4,831,093/-) for capital expenses

Power 3 (Pvt) Ltd. and finance charges on behalf of the company.

F L C Power Holdings (Pvt)Ltd Joint Venture’s Company has fully settled the due amount of Hydro Power Free

(Formerly Known as Free Lanka Sub Subsidiary Lanka PLC amounting to Rs. 99,389 (Previous Year Rs.489,569/-)

Power Holdings (Pvt) Ltd. during the year.

Pussellawa Plantations Limited Joint Venture’s Pussellawa Plantations Limited has incurred total expenses

Sub Subsidiary amounting to Rs. 3,355,348/-( Previous Year Rs.1,168,459/-) on

behalf of the Company.

F L C Hydro Power PLC has settled Rs. 3,326,087/- (Previous Year

Rs.1,128,958 /-) during the year.

h) Excel Global Holdings (Pvt) Ltd., (EGHPL) with other related parties


Millennium Developments (Pvt) Ltd Subsidiary No Transitions during the year

Taprobane Plantations Ltd Associate No Transitions during the year

i) Excel Restaurants (Pvt) Ltd., (ERPL) with other related parties


Millennium Development (Pvt) Ltd. Subsidiary MDPL has received Rs.4,800,000 during the financial year.

j) Millennium Development (Pvt) Ltd., (MDPL) with other related parties


Taprobane Plantation Ltd Associate MDPL has earned Rs.31,751,424 as rent income.



44.5 There are no any other Related Party transactions to be Disclosed in accordance with the continuing listing requirements of

Colombo Stock Exchange

44.6 Compensation to Key Management PersonnelAccording to Sri Lanka Accounting Standard- LKAS 24 “Related Party Disclosures”, Key management personnel are those having authority and

responsibility for planning, directing and controlling activities of the entity. Accordingly, the Board of Directors (including executive and Non-

executive Directors) has been classified as Key Management Personnel of the Company. Emoluments paid to Key Management Personnel have

been disclosed in Note 5.

This note should be read in conjunction with Note No. 21, 25 - Loan to Related Companies, Note No. 26 - Amounts due from Related Companies,

Note No. 38, 40 - Loan from Related Companies and Note No. 41 - Amounts due to Related Companies.

45 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group has loans and other receivables, trade and other receivables, and cash and short-term deposits that arise directly from its operations.

The Group also holds available-for-sale investments and may enter into derivative transactions. The Group’s principal financial liabilities comprise

of loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance

the Group’s operations and to provide guarantees to support its operations. The Group is exposed to market risk, credit risk and liquidity risk.

45.1 Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.

The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits

with banks and financial institutions, foreign exchange transactions and other financial instruments.

The Group manages its operations to avoid any excessive concentration of counterparty risk and the Group takes all reasonable steps to ensure

the counterparties fulfill their obligations.

Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was

as follows.

Carrying Amount

2013 2013

Rs. 000 Rs. 000

Group Company

Trade and Other Receivable 3,109,603 2,098,921

Loans to Related Companies 1,107,099 778,187

Amounts due from Related Companies 289,318 451,298

Cash at Bank and in Hand 634,720 280,704

5,140,739 3,609,110



Trade and Other Receivable The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers

the default risk of the industry in which customers operate, as this factor may have an influence on credit risk.

Each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are

offered. The Group’s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for

each customer, which represents the maximum open amount without requiring approval from the management. These limits are reviewed

periodically. Customers that fail to meet the Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis. In

addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables.

The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss

component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss

allowance is determined based on historical data of payment statistics for similar financial assets.

Loans Given to Related Parties The Group’s amounts due from related parties consist of the balances from affiliate companies.

Cash at Bank and in HandThe Group held cash and cash equivalents of Rs. 635 Mn as at the reporting date, which represents its maximum credit exposure on these assets.

The cash and cash equivalents are held with bank and financial institution counterparties, with good credit ratings.

45.2 Liquidity Risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled

by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have

sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking

damage to the Group’s reputation.

The Group’s policy is to hold cash and undrawn committed facilities at a level sufficient to ensure that the Group has available funds to meet

its short and medium term capital and funding obligations, including organic growth and acquisition activities, and to meet any unforeseen

obligations and opportunities. The Group holds cash and undrawn committed facilities to enable the Group to manage its liquidity risk.

The Group monitors its risk to a shortage of funds using a daily cash management process. This process considers the maturity of both the

Group’s financial investments and financial assets (e.g. accounts receivable, other financial assets) and projected cash flows from operations.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of multiple sources of funding

including debentures, bank loans, overdrafts and finance leases over a broad spread of maturities.

45.2.1 Net debt / (cash)

Group Company

As at 31 st March 2013 Rs. ‘000 Rs. ‘000

Short term investments 3,395,655 1,685,770

Cash in hand and at bank 634,720 280,704

Total liquid assets 4,030,374 1,966,474

Non current portion of borrowings 2,287,576 1,018,273

Short term borrowings 3,264,259 3,044,960

Current portion of borrowings 799,493 520,493

Bank overdrafts 1,284,448 1,033,940

Total liabilities 7,635,776 5,617,667

Net debt / (cash) (3,605,401) (3,651,194)


45 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTD.

45.2.2 Liquidity risk management The mixed approach combines elements of the cash flow matching approach and the liquid assets approach. The business units attempt to

match cash outflows in each time bucket against a combination of contractual cash inflows plus other inflows that can be generated through the

sale of assets, repurchase agreements or other secured borrowings. The Group and Company net cash positions excluding long term borrowings

amounting to Rs. 1.32 Mn and Rs. 2.63 Mn respectively.

45.3 Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices.

Market risk comprise of the following types of risk:

Interest rate risk

Currency risk

Commodity price risk

Equity price risk

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the

return.

The analysis excludes the impact of movements in market variables on the carrying values of other post-retirement obligations, provisions, and

the non-financial assets and liabilities.

45.3.1 Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest

rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating

interest rates.

Most lenders grant loans under floating interest rates. The management periodically analyse the interest rate movements to manage this risk by

taking mitigating actions.

45.3.2 Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign

exchange rates. The Group has exposure to foreign currency risk due to foreign currency transactions which are affected by foreign exchange

movements. Group treasury analyses the market condition of foreign exchange and provides market updates to the board, with the use of

external consultants’ advice. Based on the suggestions made by Group treasury, the board takes decisions on whether to hold, sell, or make

forward bookings of foreign currency.

Capital management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future

development of the business. Capital consists of ordinary shares, retained earnings and non-controlling interests of the Group. The Board of

Directors monitors the return on capital as well as the level of dividends to ordinary shareholders.

The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages

and security afforded by a sound capital position.

45.4.1 FINANCIAL INSTRUMENTS - GROUPa) The fair value of a financial instrument is the amount at which the instrument could be exchanged or settled between knowledgeable and

willing parties in an arm’s length transaction, other than in a forced liquidation or sale.

(i) Classes of financial instruments that are not carried at fair value and of which carrying amounts are a reasonable approximation of fair

value are Current trade and other receivables, cash and cash equivalents, trade and other payables and loans and borrowings.



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rch

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st A

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l 3

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rch

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rch

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Fin

an

cia

l in

stru

me

nts

in n

on

cu

rre

nt

ass

ets

Oth

er

no

n c

urr

en

t fi

nan

cial

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ets

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Fin

an

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l in

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me

nts

in c

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t a

sse

ts

Trad

e a

nd

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er

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s to

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late

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Cas

h in

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d a

nd

at

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k 6

34

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l 5

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00

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,01

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For

fin

anci

al a

sse

ts b

oth

at

avai

lab

le-f

or-

sale

fin

anci

al a

sse

ts, t

he

car

ryin

g a

mo

un

t an

d f

air

valu

e a

re e

qu

al.

The

fai

r va

lue

of

loan

s an

d r

ece

ivab

les

do

es

no

t si

gn

ifica

ntl

y va

ry f

rom

th

e v

alu

e b

ase

d o

n t

he

am

ort

ise

d c

ost

me

tho

do

log

y.

Fin

anci

al li

abil

itie

s by

cat

egor

ies

F

ina

nci

al

lia

bil

itie

s m

ea

sure

d

a

t a

mo

rtis

ed

co

st

A

s a

t

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at

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at

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rch

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me

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Fin

an

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l in

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me

nts

in c

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t li

ab

ilit

ies

Trad

e a

nd

oth

er

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able

s 2

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Am

ou

nts

du

e t

o r

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ted

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tie

s 3

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,09

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Loan

fro

m R

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cial

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iliti

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16

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k o

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79

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l 8

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The

fai

r va

lue

of

fin

anci

al li

abili

tie

s d

oe

s n

ot

sig

nifi

can

tly

vary

fro

m t

he

val

ue

bas

ed

on

th

e a

mo

rtis

ed

co

st m

eth

od

olo

gy.


45

FIN

AN

CIA

L R

ISK

MA

NA

GE

ME

NT

OB

JEC

TIV

ES

AN

D P

OLI

CIE

S C

ON

TD

.45

.4.2

FI

NA

NC

IAL

INST

RU

ME

NT

S -

CO

MPA

NY

Fin

anci

al A

sset

s an

d Li

abil

itie

s by

Cat

egor

ies

Fin

anci

al a

sse

ts a

nd

liab

iliti

es

in t

he

tab

les

be

low

are

sp

lit in

to c

ate

go

rie

s in

acc

ord

ance

wit

h L

KA

S 3

9.

Fin

an

cia

l A

sse

ts b

y c

ate

go

rie

s L

oa

ns

an

d R

ece

iva

ble

s (L

&R

) F

ina

nci

al

Ass

ets

at

Fa

ir V

alu

e t

hro

ug

h

Av

ail

ab

le-F

or-

Sa

le F

ina

nci

al

Ass

ets

P

rofi

t o

r L

oss

(F

VT

PL

) (A

FS

)

A

s a

t

As

at

As

at

As

at

A

s a

t A

s a

t A

s a

t

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at

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at

3

1st

Ma

rch

3

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rch

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pri

l 3

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rch

3

1st

Ma

rch

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st A

pri

l 3

1st

Ma

rch

3

1st

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rch

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st A

pri

l In

Rs.

‘00

0

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13

2

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Fin

an

cia

l in

stru

me

nts

in n

on

cu

rre

nt

ass

ets

Oth

er

no

n c

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en

t fi

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cial

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ets

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- -

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Fin

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l in

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nts

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en

t a

sse

tsTr

ade

an

d o

the

r re

ceiv

able

s 2

,09

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1

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- -

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ans

to R

ela

ted

Par

tie

s 7

78

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53

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4

05

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- -

- -

- -

Am

ou

nts

du

e f

rom

re

late

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arti

es

45

1,2

98

2

82

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ort

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rm in

vest

me

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Bo

th c

arry

ing

am

ou

nt

and

fai

r va

lue

of

avai

lab

le-f

or-

sale

fin

anci

al a

sse

ts a

re e

qu

al.

The

fai

r va

lue

of

loan

s an

d r

ece

ivab

les

do

es

no

t si

gn

ifica

ntl

y va

ry f

rom

th

e v

alu

e b

ase

d o

n t

he

am

ort

ise

d c

ost

me

tho

do

log

y fo

r th

e C

om

pan

y.

Fin

anci

al li

abil

itie

s by

cat

egor

ies

F

ina

nci

al

lia

bil

itie

s m

ea

sure

d

a

t a

mo

rtis

ed

co

st

A

s a

t

As

at

As

at

3

1st

Ma

rch

3

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rch

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st A

pri

l In

Rs.

‘00

0

20

13

2

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2

20

11

Fin

an

cia

l in

stru

me

nts

in n

on

cu

rre

nt

lia

bil

itie

sB

orr

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ing

s 1

,02

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1

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71

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Fin

an

cia

l in

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me

nts

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en

t li

ab

ilit

ies

Trad

e a

nd

oth

er

pay

able

s 1

,58

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60

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,18

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31

Am

ou

nts

du

e t

o r

ela

ted

par

tie

s 1

20

,40

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28

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3

09

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an f

rom

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late

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es

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22

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91

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ort

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rm b

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ing

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5

00

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urr

en

t p

ort

ion

of

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rro

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gs

52

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36

5

93

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31

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85

Oth

er

curr

en

t fi

nan

cial

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iliti

es

45

,46

3

86

,72

5

11

9,4

01

Ban

k o

verd

raft

s 1

,03

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40

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89

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51

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tal

7,0

68

,58

5

5,0

01

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4

3,7

76

,03

7

The

Co

mp

any

has

no

t d

esi

gn

ate

d a

ny

fin

anci

al a

sse

ts o

r lia

bili

tie

s u

po

n in

itia

l re

cog

nit

ion

, as

fair

val

ue

th

rou

gh

pro

fit

or

loss

.

The

fai

r va

lue

of

fin

anci

al li

abili

tie

s d

oe

s n

ot

sig

nifi

can

tly

vary

fro

m t

he

val

ue

bas

ed

on

th

e a

mo

rtis

ed

co

st m

eth

od

olo

gy.



45.4

.3

Fin

anci

al A

sset

s an

d Li

abil

itie

s by

Fai

r Va

lue

Hie

rarc

hy

- G

rou

pTh

e G

rou

p u

ses

the

follo

win

g h

iera

rch

y fo

r d

ete

rmin

ing

an

d d

iscl

osi

ng

th

e f

air

valu

e o

f fi

nan

cial

inst

rum

en

ts b

y va

luat

ion

te

chn

iqu

e:

Leve

l 1: q

uo

ted

(u

nad

just

ed

) p

rice

s in

act

ive

mar

kets

for

ide

nti

cal a

sse

ts o

r lia

bili

tie

s;

Leve

l 2: o

the

r te

chn

iqu

es

for

wh

ich

all

inp

uts

wit

h s

ign

ifica

nt

eff

ect

on

th

e r

eco

rde

d f

air

valu

es

are

ob

serv

able

, eit

he

r d

ire

ctly

or

ind

ire

ctly

;

Leve

l 3: t

ech

niq

ue

s th

at u

se in

pu

ts t

hat

hav

e a

sig

nifi

can

t e

ffe

ct o

n t

he

re

cord

ed

fai

r va

lue

th

at a

re n

ot

bas

ed

on

ob

serv

able

mar

ket

dat

a

Met

hod

s an

d as

sum

ptio

ns

use

d to

det

erm

ine

fair

val

ues

The

me

tho

ds

and

ass

um

pti

on

s u

sed

by

the

man

age

me

nt

to d

ete

rmin

e t

he

fai

r va

lue

s o

f fi

nan

cial

inst

rum

en

ts o

the

r th

an t

ho

se c

arry

ing

am

ou

nts

re

aso

nab

ly a

pp

roxi

mat

e t

he

ir f

air

valu

es

as m

en

tio

ne

d in

No

te a

re a

s fo

llow

s;

Inst

rum

en

t C

ate

go

ry

Fair

Va

lue

Ba

sis

Fair

Va

lue

Hie

rarc

hy

Inve

stm

en

t in

Lis

ted

Sh

are

s P

ub

lish

ed

Vo

lum

e W

eig

hte

d A

vera

ge

(V

WA

) p

rice

s Le

vel 1

Fair

val

ue

of

fin

anci

al in

stru

me

nts

by

clas

ses

that

are

no

t ca

rrie

d a

t fa

ir v

alu

e a

nd

of

wh

ich

car

ryin

g a

mo

un

ts a

re r

eas

on

able

ap

pro

xim

atio

n o

f fa

ir v

alu

e a

re c

urr

en

t tr

ade

an

d o

the

r

fin

anci

al r

ece

ivab

les

and

pay

able

s, c

urr

en

t an

d n

on

-cu

rre

nt

loan

s an

d b

orr

ow

ing

s at

flo

atin

g r

ate,

oth

er

ban

k d

ep

osi

ts a

nd

cas

h a

nd

ban

k b

alan

ces.

The

car

ryin

g a

mo

un

ts o

f th

ese

fin

anci

al a

sse

ts a

nd

liab

iliti

es

are

a r

eas

on

able

ap

pro

xim

atio

n o

f fa

ir v

alu

e, e

ith

er

du

e t

o t

he

ir s

ho

rt-t

erm

nat

ure

or

that

th

ey

are

flo

atin

g r

ate

inst

rum

en

ts

that

are

re

-pri

ced

to

mar

ket

inte

rest

rat

es

on

or

ne

ar t

he

Bal

ance

Sh

ee

t d

ate.

The

Gro

up

he

ld t

he

follo

win

g fi

nan

cial

inst

rum

en

ts c

arri

ed

at

fair

val

ue

in t

he

sta

tem

en

t o

f fi

nan

cial

po

siti

on

:

L

ev

el

1

Le

ve

l 2

L

ev

el

3

A

s a

t

As

at

As

at

As

at

A

s a

t A

s a

t A

s a

t

As

at

As

at

3

1st

Ma

rch

3

1st

Ma

rch

1

st A

pri

l 3

1st

Ma

rch

3

1st

Ma

rch

1

st A

pri

l 3

1st

Ma

rch

3

1st

Ma

rch

1

st A

pri

l In

Rs.

‘00

0

20

13

2

01

2

20

11

2

01

3

20

12

2

01

1

20

13

2

01

2

20

11

Fin

an

cia

l Ass

ets

Fair

val

ue

th

rou

gh

pro

fit

or

loss

3

,39

2,5

05

3

,44

1,6

52

2

,36

3,9

17

6

44

,05

4

53

9,1

59

5

66

,07

4

- -

-

Fin

anci

al a

sse

ts h

eld

for

trad

ing

-

- -

- -

- -

- -

De

sig

nat

ed

at

fair

val

ue

th

rou

gh

pro

fit

or

loss

-

- -

- -

- -

- -

Fore

ign

exc

han

ge

forw

ard

co

ntr

acts

-

- -

- -

- -

- -

Ava

ilab

le fo

r sa

le

3,7

06

,98

8

3,3

95

,60

0

5,0

19

,61

3

- -

- -

- -

Tota

l 7

,09

9,4

93

6

,83

7,2

52

7

,38

3,5

30

6

44

,05

4

53

9,1

59

5

66

,07

4

- -

-

Fin

an

cia

l Lia

bil

itie

s

Fair

val

ue

th

rou

gh

pro

fit

or

loss

-

- -

- -

- -

- -

Fore

ign

exc

han

ge

forw

ard

co

ntr

acts

-

- -

- -

- -

- -

Tota

l -

- -

- -

- -

- -


45

FIN

AN

CIA

L R

ISK

MA

NA

GE

ME

NT

OB

JEC

TIV

ES

AN

D P

OLI

CIE

S C

ON

TD

.

45.4

.4

Fin

anci

al A

sset

s an

d Li

abil

itie

s by

Fai

r Va

lue

Hie

rarc

hy

- C

ompa

ny

The

Co

mp

any

use

s th

e fo

llow

ing

hie

rarc

hy

for

de

term

inin

g a

nd

dis

clo

sin

g t

he

fai

r va

lue

of

fin

anci

al in

stru

me

nts

by

valu

atio

n t

ech

niq

ue

:

Leve

l 1: q

uo

ted

(u

nad

just

ed

) p

rice

s in

act

ive

mar

kets

for

ide

nti

cal a

sse

ts o

r lia

bili

tie

s;

Leve

l 2: o

the

r te

chn

iqu

es

for

wh

ich

all

inp

uts

wit

h s

ign

ifica

nt

eff

ect

on

th

e r

eco

rde

d f

air

valu

es

are

ob

serv

able

, eit

he

r d

ire

ctly

or

ind

ire

ctly

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d. A corporate guarantee has been issued to Lanka Orix Leasing Company PLC for cheque discounting facilities obtained by Engineering

Services (Pvt) Ltd.

e. Debenture issued by Maturata Plantations Ltd on 19th June 1997 to the value of Rs. 150 Mn has been converted to ordinary shares on

22nd June 2002 as stipulated in the agreement. The basis and/or ratio of conversion has been contested by the Golden Shareholder in

year 2008.

f. Forest Department has imposed Rs. 50.8 Mn as the stumpage payable to the Government by Pussellawa Plantations Ltd for harvesting of

Forest Department’s Pinus Trees at Delta Estate by the Timber Lake Company. However, the Company has requested Forest Department

to re-consider the sumpage calculation, as the said fee is more than the market value of the Timber and is not keeping in line with the

Supreme Court judgement. Therefore, the amount of liability and the date of liability are uncertain and will depend on the response of the

Forest Department.

g. A corporate guarantee has been issued to Commercial Leasing & Finance PLC for cheque discounting facilities obtained by Browns Health

Care (Pvt) Ltd.

46.3 Litigation and ClaimsThere are no material litigations or claims that could have a material impact on the financial position of the Company, or which would lead to a

disclosure in the Financial Statements for the year ended 31st March 2013.

47 COMPARATIVE INFORMATION

Comparative information has been reclassified to conform to the current year’s classification and presentation where necessary.

48 NUMBER OF EMPLOYEES

The number of employees of the Group as at end of the year was 760 (2012 - 724 ). The number of employees of the Company at end of the year

was 534 (2012 - 535).

49 SUBSEQUENT EVENTS

Subsequent to the Balance Sheet date, no circumstances have arisen which would require adjustments to or disclosure in the Financial

Statements other than the following.

49 .1 Brown Investments PLC has acquired 51% of the shareholding of Green Paradise Resorts (Pvt) Ltd which operates hotel in Dambulla on 5th

April 2013 for a consideration of Rs.500 Mn.

49.2 The name of the following Companies have been changed during the year.

Previous Name New Name

Standard Finance (Pvt) Ltd S F L Services (Pvt) Ltd

Free Lanka Power Holdings (Pvt) Ltd F L C Power Holdings (Pvt) Ltd

Free Lanka Power3 (Pvt) Ltd Enselwatte Power (Pvt) Ltd

Free Lanka Power2 (Pvt) Ltd Dolekanda Power (Pvt) Ltd

Free Lanka Capital Properties (Pvt) Ltd F L C Properties (Pvt) Ltd

Free Lanka Capital HoldingsPLC F L C Holdings PLC

Hydro Power Free Lanka PLC F L C Hydro Power PLC

Free Lanka Power 1 (Pvt) Ltd Halgranoya Hydro Power (Pvt) Ltd

Hydro Power Free Lanka 2 (Pvt) Ltd Thebuwana Hydro Power (Pvt) Ltd

Hydro Power Free Lanka 3 (Pvt) Ltd Stellenberg Hydro Power (Pvt) Ltd

Free Lanka Capital (Pvt) Ltd F L C Joint Venture (Pvt) Ltd

Free Lanka Estate Bungalows (Pvt) Ltd F L C Estate Bungalows (Pvt) Ltd


50 SEGMENT INFORMATION - BUSINESS SEGMENTS

Trading Manufacturing Travel & Tours

As at 31st March 2013 2012 2011 2013 2012 2011 2013 2012

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Property, Plant and Equipment 4,449,669 4,027,406 3,711,935 35,534 112,475 110,329 4,610 5,245

Investment Properties 1,683,991 713,971 713,747 63,269 - - - -

Prepaid Lease Rentals 54,326 57,569 46,250 - - - - -

Other Long Term Investments 3,707,008 3,395,619 5,019,631 180 152 222 6,192 5,256

Intangible Assets 72,871 14,745 21,825 5,169 0 (0) 81 183

Capital Work in Progress 25,130 66,960 1,660 - - - - -

Consumer Bilogical Assets - - - - - - - -

Beare Bilogical Assets - - - - - - - -

Inter Company Lending - - - - - - - -

Segment Non-Current Assets 9,992,994 8,276,270 9,515,049 104,152 112,627 110,552 10,883 10,683

Investments in Equity Accounted Investees - - - 214,270 198,442 191,117 - -

Investments in Joint Venture - - - - - - - -

Deferred Tax Asset - - - - - - - -

Goodwill - - - - - - - -

Eliminations/ Adjustments - - - - - - - -

Total Non-Current Assets - - - 214,270 198,442 191,117 - -

Inventories 1,483,169 1,987,120 741,436 271,596 425,693 330,265 - -

Trade and other Receivable 2,214,165 1,415,519 1,038,911 197,238 228,024 144,831 57,415 31,544

Inter Company Lending 948,391 544,373 74,930 45,478 43,981 6,356 10,954 9,339

Deposits and Prepayments 74,809 121,738 187,675 13,948 7,733 7,117 1,609 1,911

Short Term Investments 1,687,908 1,719,724 1,079,354 12,222 15,077 21,858 52,202 37,913

Cash at Bank and in Hand 305,920 227,811 749,651 52,321 70,503 66,152 1,097 4,032

Segment Current Assets 6,714,362 6,016,285 3,871,957 592,804 791,011 576,580 123,276 84,739

Tax recoverable - - - - - - - -


Total Current Assets - - - - - - - -

Total Assets - - - - - - - -

Interest Bearing Borrowings 1,108,417 1,643,811 886,436 - - - - -

Retirement Benefit Obligations 88,855 70,766 49,856 8,627 5,968 - 2,758 2,820

Deferred Income 33,006 25,439 19,061 - - - - -

Inter Company Borrowing 1,767,413 770,580 614,705 90,000 - - - -

Segment Non-Current liabilities 2,997,692 2,510,596 1,570,058 98,627 5,968 - 2,758 2,820

Deferred Tax liability - - - - - - - -


Total Non-Current Liabilities - - - - - - - -

Accounts Payable and Accrued Expenses 1,639,495 2,054,367 1,211,164 139,273 412,135 303,241 25,126 26,187

Interest Bearing Borrowings due within one year 548,493 634,900 360,956 - - - - -

Other Payables 1,081,702 1,114,807 1,778,346 302,904 156,574 110,861 58,382 40,824

Short Term Interest Bearing Borrowings 3,148,949 1,508,058 500,000 - - - - -

Bank Overdraft 1,131,625 196,631 54,893 - 5 1 14,630 -

Segment Current Liabilities 7,550,264 5,508,763 3,905,359 442,177 568,714 414,103 98,138 67,011

Income Tax Payable 11,112 63,946 108,500 1,640 8,194 14,163 915 310


Total Current Liabilities - - - - - - - -

Total Liabilities - - - - - - - -

Total Segment Assets 15,758,965 13,748,182 13,312,075 651,478 859,657 680,776 123,205 86,083

Total Segment Liabilities 8,656,556 7,163,719 4,771,580 450,803 574,683 414,103 100,895 69,831



Finance Plantation Investments Group Total

2011 2013 2012 2011 2013 2012 2011 2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

5,371 80,028 116,506 40,720 1,653,441 1,570,221 500,838 605,817 677,585 358,497 6,829,098 6,509,437 4,727,690

- 182,698 172,050 63,000 3,792,256 3,799,597 49,597 135,000 - - 5,857,212 4,685,617 826,344

- - - - 133,529 138,903 143,087 1,189 - - 189,044 196,472 189,337

7,631 2,042 1,922 2,617 15,417 12,199 9,014 987,939 934,388 911,832 4,718,776 4,349,537 5,950,949

305 725 - - 49,888 48,446 2,865 - - - 128,735 63,374 24,995

- - - - 625,221 68,490 20,339 - - - 650,350 135,450 21,999

- - - - 1,567,671 1,514,295 1,630,001 - - - 1,567,671 1,514,295 1,630,000

- - - - 1,975,422 1,842,608 1,600,287 - - - 1,975,422 1,842,608 1,600,287

- - 751,708 429,294 - - - - - - - 751,708 429,294

13,308 265,493 1,042,187 535,631 9,812,843 8,994,759 3,956,028 1,729,945 1,611,973 1,270,329 21,916,310 20,048,498 15,400,896

- - - - 69,608 186,651 206,730 1,146,580 1,322,215 1,051,110 1,430,458 1,707,308 1,448,957

- - - - - - - - - - 13,000 10,000 10,000

- - - - - - - - - - 281,490 189,703 274,812

- - - - - - - - - - 104,721 104,721 40,853

- - - - - - - - - - 3,357,874 1,202,118 980,697

- - - - 69,608 186,651 226,730 1,146,580 1,322,215 1,051,110 23,736,145 21,302,448 16,758,844

- - - - 454,966 324,190 189,900 - - - 2,209,731 2,737,002 1,261,602

14,626 29,178 28,140 5,320 171,158 197,842 (423) 23,428 81,753 96,310 2,692,582 1,982,823 1,299,576

11,656 355,625 577,597 325,185 (979,270) (281,059) (182,762) 163,672 237,436 13,207 1,524,120 1,412,727 431,334

2,068 14,615 2,615 9,500 312,039 69,620 116,206 - - - 417,020 203,617 322,566

39,444 4,121 48,436 328,465 272,943 297,760 74,014 1,366,259 2,011,990 4,002,641 3,395,655 4,130,900 5,545,776

3,989 3,849 53,355 7,964 268,637 359,516 533,424 2,896 38,360 3,734 634,720 753,577 1,364,914

71,783 407,388 710,144 676,433 500,471 967,869 730,359 1,556,255 2,369,539 4,115,892 10,873,828 11,220,646 10,225,767

- - - - - - - - - - 59,646 4,298 202

- - - - - - - - - - (1,954,531) (1,905,626) (2,786,084)

- - - - - - - - - - 10,805,771 11,528,468 10,523,062

- - - - - - - - - - 34,541,916 32,830,916 27,281,905

- - - - 497,243 568,308 253,634 771,000 128,000 - 2,376,660 2,340,119 1,140,070

2,358 25 11 76 417,431 403,935 377,783 - - - 517,695 483,500 430,072

- - - - 142,465 147,576 133,692 - - - 175,471 173,015 152,753

- - - - 50,000 - 738,298 - - - 1,907,413 770,580 1,353,003

2,358 25 11 76 1,107,138 1,119,819 1,503,407 771,000 128,000 - 4,977,239 3,767,214 3,075,899

- - - - - - - - - 295,098 282,037 258,890

- - - - - - - - - 89,085 85,058 92,680

- - - - - - - - - 3,364,925 3,278,669 2,013,998

15,544 17,354 9,564 61,582 508,114 381,836 256,449 1,852 40,168 44,859 2,331,213 2,924,257 1,892,839

- - - - 76,000 150,565 44,302 175,000 384,000 - 799,493 1,169,465 405,258

35,795 105,138 106,102 27,682 284,859 255,024 (525,155) 74,772 618,411 815,451 1,907,756 2,291,743 2,242,980

- - - - 115,310 35,955 16,380 - - - 3,264,259 1,544,013 516,380

- - 2,509 - 111,523 82,030 24,554 26,669 - - 1,284,448 281,176 79,449

51,339 122,492 118,176 89,264 1,095,806 905,411 (183,470) 278,293 1,042,579 860,310 9,587,170 8,210,654 5,136,906

787 31,124 8,332 19,077 22,128 18,058 14,267 - 48,809 1,645 66,919 147,647 158,438

- - - - - - - - - - (1,491,176) (1,959,047) (1,864,868)

- - - - - - - - - - 8,172,639 6,399,258 3,426,927

- - - - - - - - - - 11,527,837 9,677,925 5,440,927

73,435 317,256 1,174,733 886,880 11,292,585 10,243,687 4,869,149 3,122,528 3,744,076 5,373,014 27,740,033 28,100,407 23,670,938

53,697 122,517 118,186 118,005 2,152,944 2,025,230 581,638 1,049,293 1,170,579 860,310 14,564,409 11,977,867 8,212,804



As at 31st March 2013 2012 2011 2013 2012 2011 2013 2012

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Revenue 10,708,439 11,136,906 8,473,176 909,050 1,225,239 1,245,560 37,764 24,592

Inter Segment Revenue (3,766) (36,739) (4,907) (164,704) (59,071) (17,211) (5,974) (4,257)

Segment Revenue 10,704,673 11,100,167 8,468,269 744,346 1,166,168 1,228,349 31,790 20,335

Segment Results 120,173 1,051,155 992,134 (28,540) 104,872 67,326 7,421 (127)

Eliminations/ Unallocated 20,042 (102,577) 141,141 (26) (43,908) (23,174) 174,263 (157)

Finance Cost (740,773) (221,402) (152,767) (50,313) (5,068) (7,147) (3,596) (2,108)

Change in Fair Value of Investment Properties 859,743 (30,113) 1,715 - - - - -

Share of Profit of Equity Accounted Investees (58,607) 6,134 18,488 - - - - -

Negative Goodwill - - - - - - - -

Profit before Taxation 210,613 669,634 1,000,710 (78,880) 55,895 37,005 178,088 (2,392)

Taxation 76,743 (206,580) (268,357) (3,554) (23,070) (46,882) (1,888) (404)

Profit for the Year 287,355 463,454 732,353 (82,433) 32,825 (9,876) 176,200 (2,796)

Attributable to:

Equity holders of the Company 273,789 353,969 758,570 (74,628) 14,853 (16,965) 176,175 (2,796)

Non - Controlling Interests 13,566 109,485 (26,216) (7,805) 17,972 7,089 25 -

287,355 463,454 732,353 (82,433) 32,825 (9,876) 176,200 (2,796)

Depreciation for the Year 87,140 62,240 70,842 6,190 6,983 11,555 1,078 937

Purchase of Property, Plant and Equipment 382,827 328,628 82,953 7,677 6,642 4,584 443 811

50 SEGMENT INFORMATION - BUSINESS SEGMENTS CONTD.



Finance Plantation Investments Group Total

2011 2013 2012 2011 2013 2012 2011 2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

20,960 298,250 238,030 152,649 2,553,652 1,844,163 1,773,076 71,168 212,386 1,243,001 14,578,322 14,681,316 12,908,422

(2,332) (220,078) (193,895) (135,522) - - - - (653,350) (394,521) (293,962) (813,321)

18,629 78,172 44,135 17,127 2,553,652 1,844,163 1,773,076 71,168 212,386 589,652 14,183,801 14,387,354 12,095,101

4,410 193,495 203,283 1,222,544 575,420 2,910,108 782,702 (128,100) (2,799,583) 1,348,289 739,868 1,469,708 4,417,405

(2,332) (182) (193,895) (135,522) - - - 13,107 (11,501) (653,350) 207,204 (352,039) (673,236)

(904) - - - (190,962) (105,648) (52,753) (84,730) (84,730) (78,034) (1,070,375) (418,956) (291,605)

- 10,773 - - (795) 250,000 - - - - 869,721 219,887 1,715

- - - - (243,182) (101,065) 131,059 - - - (301,790) (94,931) 149,548

- - - - - - - - 2,671,483 - - 2,671,483 -

1,174 204,085 9,388 1,087,023 140,481 2,953,395 861,009 (199,723) (224,330) 616,905 454,664 3,461,989 3,603,827

(1,609) (68,868) (31,989) 26,141 3,311 (73,788) (29,886) (48,808) (48,808) (1,645) (43,063) (384,638) (322,238)

(435) 135,218 (22,601) 1,113,163 143,792 2,879,607 831,122 (248,531) (273,138) 615,260 411,601 3,077,351 3,281,588

(435) 135,218 (22,601) 1,113,163 (54,459) 2,828,597 166,536 (96,132) (2,001,146) 167,351 359,963 1,170,876 2,188,219

- - - - 198,251 51,010 664,587 (152,399) 1,728,007 447,910 51,638 1,906,475 1,093,369

(435) 135,218 (22,601) 1,113,163 143,792 2,879,607 831,122 (248,531) (273,138) 615,260 411,601 3,077,351 3,281,588

909 36,603 28,563 1,995 2,049 7,084 73,023 124,233 117,650 - 257,292 223,457 158,324

586 - 200,797 41,430 3,283 277,108 174,863 90,588 319,088 313,497 484,818 1,133,074 617,913


Economic Value Statement


As at 31st March 2013 2012 2011 2013 2012 2011 2013 2012 2011 2013

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Direct Economic Value Generated

Revenue 10,708,439 11,136,906 8,473,176 909,050 1,225,239 1,245,560 37,763 24,592 20,960 298,250

Interest Income 109,075 46,344 62,244 4,318 2,817 4,148 5,041 4,200 3,019 -

Dividend Income 219,719 216,207 566,873 2,010 954 - 180 29 - 14,527

Share of Results of Associates (58,607) 6,134 18,488 - - - - - - -

Profit on Sale of Assets Other Income 2,303 43,559 210,008 856.33 22,452 20,661 - 771 3,066 -

Valuation gain on IP - (30,113) 1,715 - - - - - - -

10,980,928 11,419,036 9,332,504 916,234 1,251,462 1,270,369 42,984 29,592 27,045 312,777

Economic Value Distributed

Operating Costs 9,011,466 10,112,846 8,175,994 841,281 1,089,151 1,144,368 24,370 16,946 13,283 95,374

Employee Wages and Benefits 319,300 282,439 212,426 129,735 48,954 50,188 9,849 10,824 8,564 476

Payments to Providers of Funds 993,102 554,841 397,852 17,251 5,617 6,668 3,596 2,108 681 -

Payments to Governments 33,968 135,474 128,236 3,525 23,592 44,248 2,054 1,168 1,614 44,733

10,357,835 11,085,600 8,914,508 991,792 1,167,688 1,245,472 39,868 31,170 24,142 137,709

Economic Value Retained

Depreciation 87,140 62,240 70,842 6,190 6,983 11,555 1,078 937 909 36,603

Amortization 26,076 7,839 7,932 659 57 43 102 123 97 191

Profit After Dividend 509,877 263,357 339,221 (82,407) 76,733 13,298 1,937 (2,639) 1,897 135,400

623,093 333,436 417,995 (75,558) 83,774 24,896 3,116 (1,578) 2,903 172,194

Distribution of Value Added - Group 2012

To EmployeesTo Government

To Providers of fundsTo Expansion and growth

560 3,215

1,235

244



122

1,302

660

1,553

Distribution of Value Added - Group 2013


Finance Plantation Investments Eliminations Group Total

2012 2011 2013 2012 2011 2013 2012 2011 2013 2012 2011 2013 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

238,030 152,649 2,553,652 1,844,163 1,773,076 71,168 212,386 1,243,001 (394,521) (293,962) (813,321) 14,183,801 14,387,354 12,095,101

- - 52,618 51,857 8,236 167,812 134,616 18,081 (28,312) (13,974) (22,915) 310,553 225,860 72,813

44,949 23,174 226 - - - - - (52,634) (156,274) (528,086) 184,028 105,865 61,961

- - (243,182) (101,065) 131,059 - - - - - - (301,790) (94,931) 149,547

1,006 1,103,748 (166,875) 2,757,669 505,857 167,517 50,507 128,120 - (31,405) 321,485 3,801 2,844,559 2,292,945

- - (3,521) 250,000 - 156,561 - - - - - 153,040 219,887 1,715

283,985 1,279,571 2,192,919 4,802,624 2,418,228 563,058 397,509 1,389,202 (475,467) (495,615) (1,042,837) 14,533,434 17,688,593 14,674,082

70,863 3,368 1,327,491 933,713 622,702 (108,571) 353,791 63,933 (475,467) (143,576) (369,602) 10,895,338 12,433,234 9,654,046

451 745 1,090,909 891,028 784,655 2,515 1,671 - - - - 1,552,784 1,235,367 1,056,578

- - 118,557 127,714 52,824 169,870 77,963 77,963 - (207,869) (158,437) 1,302,375 560,374 377,551

12,817 24,777 38,175 22,488 32,598 - 48,808 - - - - 122,454 244,347 231,473

84,131 28,890 2,575,132 1,974,943 1,492,779 63,814 481,233 141,896 (475,467) (351,445) (528,039) 13,872,952 14,473,322 11,319,648

28,563 1,995 2,049 7,084 73,023 124,233 117,650 - - - - 257,292 223,457 158,324

- - - - - - - - - - - 27,028 8,019 8,072

171,290 1,248,685 (563,655) 2,820,597 852,426 375,011 (201,374) 1,247,306 - (144,170) (514,799) 376,162 2,983,795 3,188,034

199,853 1,250,680 (561,607) 2,827,681 925,449 499,244 (83,724) 1,247,306 - (144,170) (514,799) 660,482 3,215,271 3,354,430

Distribution of Value Added - Company 2012



290

204

447

547

Distribution of Value Added - Company 2013



(494)

987

326

229


Ten Year Summary

2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000

Group revenue 14,183,801 14,387,354 12,095,101 8,952,613 6,815,976 5,796,748 5,085,390 4,513,164 3,791,168 3,344,808

EBIT 1,525,039 3,880,945 3,895,431 1,741,717 882,064 693,118 589,397 495,590 445,337 560,090

Finance expenses (1,070,375) (418,956) (291,605) (473,551) (418,116) (429,157) (185,160) (151,905) (163,919) (207,064)

Share of results of Associates (301,790) (94,931) 149,548 44,274 24,006 19,782 21,381 (11,217) 148,851 352,344

Profit before tax 454,664 3,461,989 3,603,827 1,268,166 463,948 263,961 404,237 343,685 281,418 353,026

Tax expense (43,063) (384,638) (322,238) (120,203) (50,710) 146,189 119,542 (44,205) (50,485) (27,993)

Profit for the year 411,601 3,077,351 3,281,588 1,147,963 413,238 410,150 523,779 299,480 230,933 325,033

Attributable to:

Equity holders of the parent 359,963 1,170,876 2,188,219 1,013,665 425,597 419,237 526,258 297,592 230,197 324,388

Non-Controling Interest 51,638 1,906,475 1,093,369 134,298 (12,359) (9,087) (2,479) 1,888 736 645

411,601 3,077,351 3,281,588 1,147,963 413,238 410,150 523,779 299,480 230,933 325,033

CAPITAL EMPLOYED

Stated capital 2,005,601 2,005,601 2,005,601 2,005,601 2,005,601 21,101 21,101 21,000 21,000 21,000

Capital reserves 3,987,572 3,465,922 5,401,247 4,495,526 2,715,232 907,023 4,733,031 2,590,534 1,322,519 1,179,448

Revenue reserves 9,102,591 8,409,224 7,507,046 3,103,269 1,329,875 6,154,142 528,023 (153,424) 211,908 256,135

Share holders fund 15,095,764 13,880,747 14,913,894 9,604,396 6,050,708 7,082,266 5,282,155 2,458,110 1,555,427 1,456,583

Non-Controling Interest 7,918,315 9,272,244 6,927,084 3,853,502 3,280,220 5,611 16,265 12,807 9,733 5,784

Total equity 23,014,079 23,152,990 21,840,978 13,457,898 9,330,928 7,087,877 5,298,420 2,470,917 1,565,160 1,462,367

Total debt 7,730,670 5,340,827 4,009,995 2,372,992 3,473,014 2,245,283 1,936,774 1,344,877 1,382,588 1,623,828

30,744,749 28,493,817 25,850,976 15,830,890 12,803,942 9,333,160 7,235,194 3,815,794 2,947,748 3,086,195

ASSETS EMPLOYED

Property, plant and

equipment (PP&E) 6,829,098 6,509,437 4,727,690 7,041,027 5,982,663 3,247,298 2,476,543 1,634,157 950,261 867,274

Non-current assets other

than PP&E 16,907,047 14,793,014 12,031,158 8,347,073 6,366,473 4,425,766 3,311,798 1,424,220 1,369,475 1,495,172

Current assets 10,805,770 11,528,466 10,523,057 3,203,089 3,357,331 3,093,472 2,743,307 1,444,521 1,104,205 1,232,084

Liabilities net of debt (3,797,167) (4,337,098) (1,430,932) (2,760,298) (2,902,525) (1,433,376) (1,296,454) (687,104) (476,193) (508,335)

30,744,749 28,493,817 25,850,976 15,830,890 12,803,942 9,333,160 7,235,194 3,815,794 2,947,748 3,086,195

CASH FLOW

Net cash flows from

operating activities (1,355,187) (588,276) 1,092,449 (297,565) 734,453 (251,184) (519,410) 90,161 166,128 149,980

Net cash flows from / (used in)

investing activities (1,118,345) (2,076,461) (2,075,835) 841,490 (541,611) (46,017) 64,005 (92,232) 91,261 213,652

Net cashflows from / (used in)

financing activities 1,351,402 1,851,675 4,539,135 (48,303) (376,572) 275,722 353,637 (9,617) (114,376) (68,912)

Net increase / (decrease) in

cash and cash equivalents (1,122,130) (813,063) 3,555,749 495,623 (183,730) (21,479) (101,768) (11,688) 143,013 294,720

KEY INDICATORS

Earnings per Share (Rs.)* 5.08 16.52 30.87 14.30 6.00 5.92 7.43 4.20 3.25 4.58

Net Assets per Share (Rs.)** 212.99 195.85 210.43 135.51 85.37 99.93 74.53 34.68 21.95 20.55

Market Price per Share (Rs.) 117.90 155.10 289.80 87.75 18.00 925.50 630.00 530.00 251.00 150.00

Market Capitalization 8,356,163 10,992,713 20,539,575 6,219,281 1,275,750 2,429,438 1,653,750 1,391,250 658,875 393,750

Return on Shareholders’ funds (%) 2.38 8.44 14.67 10.55 7.03 5.92 9.96 12.11 14.80 22.27

Return on Capital Employed (%) 4.96 13.62 15.07 11.00 6.89 7.43 8.15 12.99 15.11 18.15

Price Earnings Ratio (times) 23.82 9.39 9.39 6.14 3.00 156.46 84.85 126.23 77.28 32.77

Interest Cover (times covered) 1.42 9.26 13.36 3.68 2.11 1.62 3.18 3.26 2.72 2.70

Current Ratio (times) 1.32 1.80 3.07 1.12 0.79 1.13 1.08 1.01 0.91 0.89

Debt to Equity Ratio (%) 33.59 34.66 18.36 17.63 37.22 31.68 36.55 54.43 88.34 111.04

Dividend per Share 0.50 1.32 1.32 - - 17.20 1.60 1.60 0.80 -

Number of Employees 760 724 653 824 888 881 877 813 955 988

Number of Shares 70,875 70,875 70,875 70,875 70,875 2,625 2,625 2,625 2,625 2,625

* Earnings per share has been adjusted for weighted average number of shares outstanding during the year (has been adjusted for previous years).

** Net Assets per share has been computed for the total number of shares issued as at 31st March 2013.


Share Information

Share Price information on ordinary shares of the Company

2012/2013 2011/2012 2010/2011 2009/2010 2008/2009

Share information

High 195.90 404.90 308.00 103.00 1,200.00*

Low 103.00 149.00 86.00 17.00 17.50

Close 117.90 155.10 289.80 87.75 18.00

* During the year 2008/2009, the Company has subdivided ordinary shares in the ratio of nine for one and has also, capitalized reserves in the

ratio of two for one.

Distribution of Shareholders

Number of 31.03.2013 (%)

shareholders Number of

No of shares

1 to 1,000 shares 1,488 466,973 0.66

1,001 to 10,000 shares 610 2,427,488 3.42

10,001 to 100,000 shares 343 9,538,850 13.46

100,001 to 1000,000 shares 19 6,130,271 8.65

Over 1,000,001 shares 10 52,311,418 73.81

TOTAL 2,470 70,875,000 100

Categories of Shareholders

No of shareholders No of shares held %

Individual 2,321 17,609,970 24.85

Institutional 149 53,265,030 75.15

Total 2,470 70,875,000 100

Resident 2,221 64,193,777 90.57

Non-Resident 249 6,681,223 9.43

Total 2,470 70,875,000 100

Directors’ shareholdings

31st March 2013 31st March 2012

No. of shares No. of shares

Mrs. R. L. Nanayakkara (Resigned on 28/02/2013) Nil Nil

Mr. I. C. Nanayakkara 99,900 99,900

Mr. A. L. Devasurendra (Resigned on 15/07/2013) 1,098,900 1,098,900

Mr. N. M. Prakash - Margin Trading 35,100 35,100

Mr. S. V. Somasunderam - Individual 3,027,400 2,877,400

- Margin Trading Nil 150,000

Mr. H. P. J. de Silva Nil Nil

Mr. W. D. K.Jayawardena Nil Nil

Mrs. K. U. Amarasinghe Nil Nil


Twenty Largest Shareholders of the Company

31.03.2013 31.03.2012

NAME & ADDRESS No. of shares % NAME & ADDRESS No. of shares %

1 ENGINEERING SERVICES (PVT) LTD 16,588,962 23.41 1 ENGINEERING SERVICES (PVT) LTD 16,588,962 23.41

2 MASONS MIXTURE LIMITED 13,732,632 19.38 2 MASONS MIXTURE LIMITED 13,732,632 19.38

3 EMPLOYEES PROVIDENT FUND 6,621,645 9.34 3 EMPLOYEES PROVIDENT FUND 6,427,435 9.07

4 LANKA ORIX LEASING COMPANY PLC 3,382,800 4.77 4 LANKA ORIX LEASING COMPANY PLC 3,382,800 4.77

5 MR. SHANKER VARADANANDA 5 MUTUGALA ESTATES (PVT) LIMITED 2,986,524 4.21

SOMASUNDERAM 3,027,400 4.27

6 MUTUGALA ESTATES (PVT) LIMITED 2,986,524 4.21 6 MR. SHANKER VARADANANDA

SOMASUNDERAM 2,877,400 4.06

7 PATHREGALLA ESTATES (PVT) LIMITED 1,961,658 2.77 7 PATHREGALLA ESTATES (PVT) LIMITED 1,961,658 2.77

8 ACE BONUS INVESTMENTS LIMITED 1,755,000 2.48 8 ACE BONUS INVESTMENTS LIMITED 1,755,000 2.48

9 VYJAYANTHI & COMPANY LTD. 1,155,897 1.63 9 VYJAYANTHI & COMPANY LTD. 1,155,897 1.63

10 MR. AJITH LASANTHA DEVASURENDRA 1,098,900 1.55 10 MR. AJITH LASANTHA DEVASURENDRA 1,098,900 1.55

11 NATIONAL SAVINGS BANK 1,000,000 1.41 11 SRI LANKA INSURANCE CORPORATION

LTD- LIFE FUND 1,069,600 1.51

12 SRI LANKA INSURANCE CORPORATION

LTD- LIFE FUND 906,990 1.28 12 NATIONAL SAVINGS BANK 1,000,000 1.41

13 PAN ASIA BANKING CORPORATION PLC. / 781,646 1.10 13 PAN ASIA BANKING CORPORATION PLC./ 781,646 1.10

MR. SHABBIR ABBAS GULAMHUSEIN MR. SHABBIR ABBAS GULAMHUSEIN

14 EST. OF LATE MR. MARIAPILLAI 14 MR. MARIAPILLAI RADHAKRISHNAN 575,640 0.81

RADHAKRISHNAN(DECD) 575,640 0.81

15 MRS. PAMELA CHRISTINE COORAY 506,408 0.71 15 MRS. PAMELA CHRISTINE COORAY 506,408 0.71

16 EMPLOYEES TRUST FUND BOARD 478,500 0.68 16 EMPLOYEES TRUST FUND BOARD 478,500 0.68

17 BANK OF CEYLON NO. 1 ACCOUNT 289,700 0.41 17 BANK OF CEYLON NO. 1 ACCOUNT 189,700 0.27

18 DR. IAM DAVID GILCHRIST DONALDSON 160,380 0.23 18 FIRST CAPITAL LIMITED 161,600 0.23

19 MR. PAUL CARTER 160,380 0.23 19 DR. IAM DAVID GILCHRIST DONALDSON 160,380 0.23

20 MR. BRUCE DAVID DONALDSON 160,380 0.23 20 MR. PAUL CARTER 160,380 0.23

Total 57,331,442 80.89 Total 57,051,062 80.5

No. of shares held by public 36,292,106

Percentage of shares held by public 51.20%

Distribution of Shareholders

1-1000To 1001-10000

100001-1000000Over 1,000,001

10001-100000

6,130,271

9,538,850

52,311,418

466,973 2,427,488

12/1311/1210/1109/10

Share Price InformationRs. (Mn)

High Low Close

Share Information


Subsidiaries & Associates

Subsidiaries & Associates Directors

Browns Group Industries (Pvt) Ltd Mrs. R. L. Nanayakkara Reg No. PV 1917 N. M. Prakash S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R.N.A. Nanayakkara) W. M. N. Canisius Fernando Browns Tours (Pvt) Ltd Mrs. R. L. Nanayakkara Reg No. PV 1242 N. M. Prakash S. V. Somasunderam R. B. Seneviratne Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara) P. Weerasinghe

S.F.L. Services (Pvt) Ltd Mrs. R. L. Nanayakkara(Formerly known as Standard Finance (Pvt) Ltd) N. M. PrakashReg No. PV 1463 S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara) The Hatton Transport & Agency Mrs. R. L. Nanayakkara Company (Pvt) Ltd N. M. Prakash Reg No. PV 2833 S. V. Somasunderam(is not operational) Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara) Snowcem Products Lanka (Pvt) Ltd S. V. SomasunderamReg. No. PV 5900 N. M. Prakash Mrs. R. N. A. Nanayakkara Mr. I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara)

Browns Group Motels Ltd Mrs. R. L. Nanayakkara Reg No. PB 167 N. M. Prakash (is not operational) S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara) *C.F.T. Engineering Ltd Mrs. R. L. NanayakkaraReg No. PB 318 N. M. Prakash S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara)

BG. Air Services (Pvt) Ltd Mrs. R. L. Nanayakkara Reg No. PV 1807 N. M. Prakash S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara) P. Weerasinghe

*Klevenberg (Pvt) Ltd M. BalasubramaniamReg. No. PV 5697 P. Balasubramaniam N. M. Prakash S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara) M. Wijemanne



* Associated Battery P. K. Kataky (Resigned on 11th June 2013)Manufacturers (Ceylon) Ltd W. Wong, Reg No. PB 240 A. K. Mukherjee K. Ganesan Saha Arnab N. M. Prakash S. V. Somasunderam P. Weerasinghe G. Chatterjee I.G. Browns Rubber (Pvt) Industries Ltd Mrs. R. Nanayakkara Reg. No. PV 11481 N. M. Prakash Browns Thermal Engineering (Pvt) Ltd Mrs. R. L. NanayakkaraReg No. PV 5001 N. M. Prakash K. D. P. Fernando A. K. D. Munidasa, S. V. Somasunderam W. M. N. Canisius Fernando

Browns Motors (Pvt) Ltd R. M. NanayakkaraReg. No. PV 65726 Mrs. Indra Nanayakkara Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara)

*Browns Investments PLC I. C. Nanayakkara Reg No.PV66136PB/PQ P. R. Saldin N. M. Prakash A. G. Weerasinghe D. S. K. Amarasekera Stefan Furkhan R. P. Sugathadasa S. V. Somasunderam W. D. K. Jayawardena Mrs. K. U. Amarasinghe *Sifang Lanka (Pvt) Ltd Zhou HaifengReg No. PV 7481 Huang Yilin Mrs. R. L. Nanayakkara N. M. Prakash S. V. Somasunderam Mrs. R. N. A. Nanayakkara Mr. I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara) C. Ediriwickrema

*Sifang Lanka Trading (Pvt) Ltd Mrs. R. L. NanayakkaraReg No. PV 7363 N. M. Prakash S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara) C. Ediriwickrema

*Browns Industrial Park Ltd Mrs. R. L. NanayakkaraReg. No. PB 1100 N. M. Prakash W. M. N. Canisius Fernando S. V. Somasunderam

Subsidiaries & Associates



*Walker & Greig (Pvt) Ltd Mrs. R. L. Nanayakkara Reg. No. PV 66042 N. M. Prakash S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara)

*Gal-Oya Holdings(Pvt) Ltd N. M. PrakashReg. No. PV 7182 W. G. L. Dharmakeerthi N. T. K. A. Adikarama P. R. Saldin R. M. G. K. B. Ratnayake Ms. M. Anoma Nandani

*Gal-Oya Plantations (Pvt) Ltd Dr. W. GamageReg. No. PV 7601 P. R. Saldin W. G. L. Dharmakeerthi N. T. K. A. Adikarama K. A. K. P. Gunawardena S. G. Senarathna R. A. S. Kolitha De Alwis T. P. G. Neil De Alwis Ms. M. Anoma Nandani

Browns Health Care (Pvt) Ltd Mr. R. L. NanayakkaraReg No. PV 77421 N. M. Prakash S. V. Somasunderam Dr. K. S. Narangoda

Browns Real Estates (Pvt) Ltd Mrs. R. L. NanayakkaraReg. No. PV 79609 N. M. Prakash S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara) P. Weerasinghe

Browns Health Care North Colombo (Pvt) Ltd Mrs. R. L. NanayakkaraReg. No. PV 89856 N. M. Prakash Dr. K. S. Narangoda S. V. Somasunderam

Samudra Beach Resorts (Pvt) Ltd Mrs. R. L. NanayakkaraReg. No. PV 78179 N. M. Prakash D. S. K. Amarasekera P. R. Saldin R. P. Sugathadasa S. V. Somasunderam

Browns Global Farm (Pvt) Ltd Mrs. R. L. NanayakkaraReg. No. PV 92172 N. M. PrakashIncorporated on 22/04/2013 S. V. Somasunderam C. D. Ediriwickrema

*Indicate the Companies whose accounts are audited by a Auditors other than KPMG who are the Auditors of Brown & Company PLC


Glossary

ACCRUAL BASIS

Recognizing the effects of transactions and other events when

they occur without waiting for receipt or payment of cash or cash

equivalent.

CASH EQUIVALENTS

Cash equivalents are short-term, highly liquid investments that are

readily convertible to known amounts of cash and which are subject

to an insignificant risk of changes in value.

CONTINGENT LIABILITIES

Conditions or situations at the balance sheet date, the financial effect

of which are to be determined by the future events which may or

may not occur.

FOREIGN CURRENCY TRANSACTION

The realized gain recorded when assets or liabilities denominated

in foreign currencies are translated into Sri Lankan Rupees on the

balance sheet date at prevailing rates which differ from those rates in

force at inception or on the previous balance sheet date.

IMPAIRMENT

This occurs when recoverable amount of an asset is less than its

carrying amount.

GROUP

A group is a parent and all its subsidiaries.

PARENT

A parent is an entity that has one or more subsidiaries.

SUBSIDIARY

A subsidiary is an entity, including an unincorporated entity such

as a partnership, that is controlled by another entity (known as the

parent).

JOINT CONTROL

Joint control is the contractually agreed sharing of the control over

an economic activity, and exists only when the strategic financial and

operating decisions relating to the activity require the unanimous

consent of the parties sharing control.

JOINT VENTURE

A joint venture is a contractual arrangement whereby two or more

parties undertake an economic activity that is subject to joint control.

ASSOCIATE

An associate is an entity, including an unincorporated entity such as a

partnership, over which the investor has significant influence and that

is neither a subsidiary nor an interest in a joint venture.

COST METHOD

Cost method is a method of accounting for an investment whereby

the investment is recognised at cost. The investor recognizes income

from the investment only to the extent that the investor receives

distributions from accumulated profits of the investee arising after

the date of acquisition. Distributions received in excess of such profits

are regarded as a recovery of investment and are recognised as a

reduction of the cost of the investment.

EQUITY METHOD

The equity method is a method of accounting whereby the

investment is initially recognised at cost and adjusted thereafter for

the post-acquisition changes in the investor’s share of net assets of

the investee. The profit or loss of the investor includes the investor’s

share of the profit or loss of the investee.

SIGNIFICANT ACCOUNTING POLICIES

The specific principles, bases, conventions, rules and practices

adopted by an enterprise in preparing and presenting Financial

Statements.

MARKET CAPITALISATION

Number of ordinary shares in issue multiplied by the market value of

each share at the year end.

NET ASSETS

Total assets minus current liabilities minus long term liabilities minus

minority interest.

NET ASSET VALUE PER SHARE

Shareholders’ Funds divided by the number of ordinary shares in issue.

CAPITAL EMPLOYED

Shareholders’ funds plus minority interest and debt.

MARKET VALUE ADDED

Market capitalization minus shareholder’s funds.

NET PROFIT MARGIN

Profit after tax divided by turnover inclusive of share of associate

company turnover.


SHAREHOLDERS’ FUND

Total of issued and fully paid share capital, capital reserves and

revenue reserves.

TOTAL DEBT

Long term loans plus short term loans and overdrafts.

EBITDA

Abbreviation for Earnings before Interest, Tax, Depreciation and

Amortization.

RETURN ON AVERAGE EQUITY (ROE)

Net income, less preferred share dividends if any, expressed as a

percentage of average ordinary shareholders’ equity.

RETURN ON AVERAGE ASSETS (ROA)

Net income expressed as a percentage of average total assets, used

along with ROE, as a measure of profitability and as a basis of intra-

industry performance comparison.

EARNINGS PER SHARE (EPS)

Profits attributable to ordinary shareholders divided by the weighted

average number of ordinary shares in issue during the period.

PRICE EARNINGS RATIO (P/E RATIO)

Market price of an ordinary share divided by earnings per share (EPS).

TOTAL EQUITY

Shareholders’ funds plus minority interest.

CAPITAL RESERVES

Reserves identified for specific purposes and considered not available

for distribution.

REVENUE RESERVES

Reserves considered as being available for distributions and

investments.

WORKING CAPITAL

Capital required financing day to day operations computed as the

excess of current assets over current liabilities.

INTEREST COVER

Profit before tax plus net finance cost divided by net finance cost.

Measure of an entity’s debt service ability.

DEFERRED TAX

Sum set aside in the Financial Statements for taxation that may

become payable/ receivable in a financial year other than the current

financial year.

EFFECTIVE TAX RATE

Provision for taxation excluding deferred taxation divided by the

profit before tax.

INTANGIBLE ASSET

An identifiable non-monetary asset without physical substance held

for use in the production / supply of goods / services or for rental to

others or for administrative purposes.

AMORTIZATION

The systematic allocation of the depreciable amount of an intangible

asset over its useful life.

FAIR VALUE

Fair Value is the amount for which an asset could be exchanged

between a knowledgeable, willing buyer and a knowledgeable,

willing seller in an arm’s length transaction.

GENERAL PROVISIONS

General provisions are established for Trading transactions and others

for anticipated losses.

PROVISION FOR BAD AND DOUBTFUL DEBTS

Provisions are established to reduce the book value of specific assets

(primarily debtors) to estimated realizable values.

KEY MANAGEMENT PERSONNEL

Key Management Personnel are those persons having authority and

responsibility for planning, directing and controlling the activities of

the entity, directly or indirectly.

RELATED PARTIES

Parties who could control or significantly influence the financial and

operating policies of the business.

VALUE ADDITION

The quantum of wealth generated by the activities of the Group

measured as the difference between turnover and the cost of

materials and services bought in.


RETIREMENT BENEFITS

Present value of a defined benefit obligation

Is the present value of expected future payments required to settle

the obligation resulting from employee service in the current and

prior periods.

Current Service Cost Is the increase in the present value of the defined benefit obligation

resulting from employee service in the current period.

Interest Cost Is the increase during a period in the present value of a defined

benefit obligation which arises because of the benefits are one period

closer to settlement.

Actuarial gains and losses Is the effects of difference between the previous actuarial

assumptions and what has actually occurred and the effects of

changes in actuarial assumptions.

MARKET RISK

This refers to the possibility of loss arising from changes in the value

of a financial instrument as a result of changes in market variables

such as interest rates, exchange rates, credit spreads and other asset

prices.

SEGMENT REPORTING

Segment reporting indicates the contribution to the revenue derived

from business segments such as Trading, Manufacturing, Travel &

Tours, Finance and Plantation.

CONTINGENT LIABILITY

A possible obligation that arises from past events whose existence

will be confirmed only by the occurrence or non-occurrence of one

or more uncertain future events not wholly within the control of the

enterprise.

Glossary


Brown and Company PLC - Reg. No. PQ 25

Notice of the Annual General Meeting

NOTICE IS HEREBY GIVEN that the One Hundred and Twenty First

ANNUAL GENERAL MEETING of the Company will be held at Park

Premier, Excel World, No 338, T. B. Jayah Mawatha, Colombo 10 on

Twenty Fourth day of September 2013 at 10.30 a. m.

The business to be brought before the meeting will be:

To receive and consider the Report of the Directors and

Statement of Accounts and the Balance Sheet of the Company

for the Financial Year ended 31st March 2013 with the Auditors’

Report thereon.

To re-elect Mr. H. P. J. De Silva as an Independent Non-

Executive Director, who retires by rotation in accordance with

Article 24(6) of the Articles of Association of the Company.

To re-elect Mr. R. M. Nanayakkara as a Non-Executive Director

in terms of Section 210 of the Companies Act No. 7 of 2007.

Special notice has been received from a shareholder, pursuant

to Sections 145 and 211 of the Companies Act No. 7 of 2007

of the intention to propose the following resolution as an

ordinary resolution.

RESOLUTION

“That Mr. R. M. Nanayakkara who reached the age of 73 years

on 26th February 2013 be and is hereby re-elected as a Non-

Executive Director of the Company and it is hereby declared

that the age limit of 70 years referred to in Section 210 of

the Companies Act No. 7 of 2007 shall not apply to the said

Director.”

To re-appoint M/s. KPMG, Chartered Accountants, as Auditors

of the Company for the ensuing year.

To authorize the Directors to fix the remuneration of the

Auditors.

BY ORDER OF THE BOARD

S. F. L. SERVICES (PVT) LTD

(FORMERLY KNOWN AS STANDARD FINANCE (PVT) LIMITED

SECRETARIES

Colombo, 30th July 2013

Notes: 1 A member entitled to attend and vote at the Meeting may

appoint a proxy to attend and vote in his stead

2 A proxy need not be a member of the Company. A Form of

Proxy is found at the end of this Annual Report.

3 The instrument appointing such a proxy must be deposited at

the Business office of the Company before 10.30 a. m. on 22nd

September 2013.


Notes



Notes


Form of Proxy

I / We ........................................................................................................................................................................................................................................................................................................................ of

...................................................................................................................................................................................................... being a member/members of the above named Company

hereby appoint

Ishara Chinthaka Nanayakkara or failing him

Nadarajah Murali Prakash or failing him,

Shanker Varadananda Somasunderam or failing him,

Herbert Poshitha Janaka de Silva or failing him

Waduthanthri Darshan Kapila Jayawardena or failing him

Mrs. Kalsha Upekha Amarasinghe or failing her

Rajah Mahinda Nanayakkara of failing him

Mr/ Mrs/Miss ....................................................................................................................................................................................................................................................................................................... of

.............................................................................................................................................. as my/our proxy to represent me/us and to vote for me/us and on my/our behalf

at the One Hundred and Twenty First Annual General Meeting of the Company to be held on the Twenty Fourth day of September 2013 and at

any adjournment thereof and at every poll which may be taken in consequence thereof.

Signed this .................................................... day of ..................................... 2013

...........................................................

Signature/s

Please provide the following details:

Shareholder’s NIC No. : ........................................................................................

No. of shares held : ........................................................................................

Proxy holder’s NIC No. : ........................................................................................

(if not a Director of this Company)

Brown and Company PLC - Reg. No. PQ 25


Notes:

1 The full name and the registered address of the shareholder

appointing the proxy should be legibly entered in the form of proxy.

2 If the Form of Proxy is signed by an Attorney, the relative Power of

Attorney should accompany the Form of Proxy for registration, if such

Power of Attorney has not been registered with the company.

3 In the case of a company/corporation, the proxy must be under its

common seal which should be affixed and attested in the manner

prescribed by its Articles of Association.

4 In the case of joint-holders, the senior should sign this form. Seniority

shall be determined by the order in which names stand in the

Register of Members in respect of the joint holding.

5 Every alteration or addition to the form of proxy must be duly

authenticated by the full signature of the person signing on the form

of proxy.

6 To be valid the completed Form of Proxy should be deposited with

the Secretaries at No.34, Sir Mohamed Macan Markar Mawatha,

Colombo 3, not less than 48 hours before the time appointed for the

holding of the meeting.

Form of Proxy

Corporate Information

Brown & Company PLC

Legal Form

A Public Limited Liability Company quoted on the Colombo Stock

Exchange on 25th April 1991 and incorporated in Sri Lanka on 17th

August 1892

Company No.

PQ 25

Directors

I. C. NanayakkaraExecutive Chairman/Executive Director (Appointed as the Executive

Chairman on 1/3/2013)

Mrs. R. L. NanayakkaraNon-Executive Chairperson (Resigned on 28/2/2013)

A. L. DevasurendraDeputy Chairman / Non-Executive Director (Resigned on 15/07/2013)

N. M. PrakashExecutive Group Managing Director/CEO

S. V. SomasunderamNon-Executive Director

H. P. J. de SilvaIndependent Non-Executive Director

W. D. K. JayawardenaNon-Executive Director

Mrs. K. U. AmarasingheNon-Executive Director

R. M. NanayakkaraNon-Executive Director (Appointed on 15/07/2013)

Secretaries

S. F. L. Services (Pvt) Ltd

(Formerly known as Standard Finance (Pvt) Limited)

No. 481, T B Jayah Mawatha,

Colombo 10.

Registered Office

No. 481, T B Jayah Mawatha, (Darley Road),

P O Box 200, Colombo 10.

Fax No. 2307380

Tel. 2663000

Website: www.brownsgroup.com

Business Office

No. 34, Sir Mohamed Macan Markar Mawatha,

Colombo 3.

Fax No. 2307380

Tel. 2663000

Website: www.brownsgroup.com

Auditors

Messrs KPMG Chartered Accountants

No. 32A, Sir Mohamed Macan Markar Mawatha

Colombo 3.

Bankers

Hatton National Bank PLC

Commercial Bank of Ceylon PLC

Sampath Bank PLC

Hongkong & Shanghai Banking Corporation Ltd.

Peoples Bank

ICICI Bank Ltd.

National Development Bank PLC

DFCC Varadhana Bank PLC

DFCC Bank

Seylan Bank PLC

Standard Chartered Bank Ltd.

Documents

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