Sustainable Growth - Seylan Developments · Seylan Towers, No. 90, Galle Road, Colombo 3. BUSINESS ADDRESS Level 15, Seylan Towers, No. 90, Galle Road, Colombo 3. Phone: 011-2452697-8

SustainableGrowthAnnual Report 2012

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Sustainable GrowthSEYLAN DEVELOPMENTS PLC

Means a growth which could be achieved realistically, and meets the needs of the present, without compromising the ability of future…..

A Built Environment in harmonizing with nature is what Seylan Developments offers…preserving the contextual stability moving with the pace of time and with technological advancements and values of the society….

In managing the Change for a better future with spatial comforts, improved facilities and optimum customer satisfaction and being the best among the rest of the property management entities…..is what we want to achieve…..

CORPORATE INFORMATION

MR. R. NADARAJAHChairman

MR. S. PALIHAWADANADeputy Chairman

MR. K. RATHNAYAKADirector / Acting General Manager(Resigned with e�ect from 30th November 2012)

MR. H. L. GUNASEKARADirector(Resigned with e�ect from 17th February 2012)

MR. P. SARAVANAPAVANDirector

DR. P. MERVYN GUNASEKARADirector

MR. M. K. MUTHUKUMARDirector (Appointed with e�ect from 17th February 2012)

MR. KAPILA ARIYARATNEDirector(Appointed with e�ect from 30th November 2012)

BOARD OF DIRECTORS

NAME OF THE COPMPANY

Seylan Developments PLC

SECRETARIES & REGISTRARS

SSP COPRPORATE SERVICES (PVT) LTD,No. 101, Inner Flower Road,Colombo 03.

LAWYERS

MR. H. L. VIPULA SILVAAttorney at - law & Natary Public

REGISTERED OFFICE

Seylan Towers,No. 90, Galle Road, Colombo 3.

BUSINESS ADDRESS

Level 15,Seylan Towers,No. 90, Galle Road,Colombo 3.Phone: 011-2452697-8Fax: 011-2423249E-mail: [email protected]: www.seylandevelopments.com

December 31st

ACCOUNTING YEAR

BANKERS

People's BankSeylan Bank PLCHatton National Bank PLC

EXTERNAL AUDITORS

M/s KPMG - Chartered Accountants

INTERNAL AUDITORS

M/s Ponnamperuma & CompanyChartered Accountants

TAX IDENTIFICATION NUMBER

134003650

TAX CUNSULTANT

M/s Amarasekara & Co.Chartered Accountants

PRINCIPAL ACTIVITIES AND NATUREOF POERATIONS

The principal activities of the Company was the developments of the property located at No. 90, Galle Road, Colombo 03 & activities relating property Management.

PARENT ENTERPRISE

The Company's parent undertaking is Seylan Bank PLC.

LEGAL STATUS

Incorporated under the Companies Act No. 17of 1982.

Date of Incorporation – 3rd September 1992.

A Public Limited Liability Company listed on the Colombo Stock Exchange with BOI status.

The Company was re-registered under the Companies Act No. 7 of 2007 on 22nd May 2008 and the Company Registration No. is PQ 151.

Financial Highlights 2Our Achievements 4Chairman’s Review 6Head of Operation’s Review 8Board of Directors 10Directors’ Profile 12Management Discussion and Financial Review 14

Risk Management Report 18Corporate Governance Report 23Audit Committee Report 34Remuneration Committee Report 36Sustainability Report 37Financial Calendar 47

ContentsAnnual Report of the Board on the state of affairs of the Company 48

Statement of Directors’ Responsibility 52Independent Auditors’ Report 56Statement of Comprehensive Income 57Statement of Financial Position 58Statement of Changes in Equity 59Cash Flow Statement 60Notes to the Financial Statement 62Segment Report 90Shareholders’ and Directors’ holding Information 91

Ten Years Summary 94Notice of Meeting 95Form of Proxy 97

ANNUAL REPORT 2012 SEYLAN DEVELOPMENTS PLC 1

Our missionstructure that fits their goals, budgets and needs.

We immaculately upkeep our properties to the highest quality standards by deploying our team of highly trained professionals”.

“We are dedicated to controlling costs while maintaining the highest levels of satisfaction and comfort to our tenants by responding to their unique requirements and special requests. We listen to them, and then develop a plan and

* Figures are based on new Sri Lanka Accounting Standards (SLFRSs)

** Figures are based on previous Sri Lanka Accounting Standards (SLASs)

130,000

135,000

140,000

145,000

150,000

155,000

160,000

31 Dec2008**

31 Dec2009**

31 Dec2010**

31 Dec2011 *

31 Dec2012 *

Rs'000 Rs.

Rs.

(6.00)

(5.00)

(4.00)

(3.00)

(2.00)

(1.00)

-

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2.00

31 Dec2008**

31 Dec2009**

31 Dec2010**

31 Dec2011 *

31 Dec2012 *

(500,000)

(400,000)

(300,000)

(200,000)

(100,000)

-

100,000

200,000

31 Dec2008**

31 Dec2009**

31 Dec2010**

31 Dec2011 *

31 Dec2012 *

Rs'000

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30.00

40.00

50.00

60.00

31 Dec2008**

31 Dec2009**

31 Dec2010 *

31 Dec2011 *

31 Dec2012 *

Rental Income Earnings / (Loss) Per Share

Profit Before Tax Net Asset per Share

UnderstandingClient NeedsEnsuring compliance “To be recognized as the premier

property management Company in Sri Lanka which provides an excellent service to its tenants”.

Our vision

Financial Highlights

For the period ended31 Dec. 2012

Rs.31 Dec. 2011

Rs.Statement of Comprehensive Income

Rental Income 156,975,913 148,451,419 Results from Operating Activities 95,976,798 36,561,072Net Finance Income / (Expenses) 16,121,378 (13,525,064)Profit / (Loss) Before Tax 112,098,176 23,036,008 Provision for Taxation (67,424,971) (8,525,047)Profit / (Loss) After Tax 44,673,205 14,510,961

Statement of Financial Position (As at 31st December)Shareholders Fund 4,249,249,160 4,219,372,441 Total Assets 4,947,803,295 4,803,953,790

Shareholders' EquityStated Capital 1,644,391,650 1,644,391,650 Net Asset Value 4,249,249,160 4,219,372,441 Earning / (Loss) per share (Rs.) 0.30 0.12

Financial RatiosProfit After Tax from Rental Income 28.46% 9.77%Return on Equity 1.05% 0.34%Return on Total Assets 0.90% 0.30%

Share PricesHighest during the year 12.80 20.60 Lowest during the year 6.30 10.20 Last Traded Price 9.10 12.30

ANNUAL REPORT 2012 SEYLAN DEVELOPMENTS PLC 32 SEYLAN DEVELOPMENTS PLC ANNUAL REPORT 2012

From a Sliver Award to a Gold AwardCommitted to Achieving our Corporate goals, from a Sliver Award to a Gold Award in the

Land and Property Companies Sector

It was for the first time in 2011 that we took part in an Annual Report competition and to our surprise we won our very first Silver Annual Report Award in the Land and Property Company

Sector presented by the Institute of Chartered Accountants of Sri Lanka.

As the famous saying goes ‘Nothing will stop us now’ nothing did stop us and only encouraged us to strive to achieve even greater heights and in 2012 all effort paid off when

we won our prestige Gold Award in the same category.

Golden Award AchievementEnsuring compliance

Above Mr. Somadasa Palihawadana, Deputy Chairman receiving the Gold Award from Mr.Tishan Subasinghe, Secretary to the Ministry of Corporative and Internal Trade Mr. G.K.D. Amarawardena and President CA Sri Lanka, Sujeewa Rajapakse.


R. NAdARAjAhChairman

21st February 2013.

SUCCESS STORY On behalf of the board of directors of Seylan Developments Plc, a leading property develop-ment company of Sri Lanka, I welcome you all to the 21st annual general meeting on this date of 28th March 2013. I take this great opportunity to present you with the 21st annual general meet-ing report together with the audited financial statements for the year ended 31st December 2012.

As you all know while the year 2011 was the year of recovery for us the year 2012 is the year of sus-tainability, planning for future growth. The dras-tic changes encountered recently in the field of property development sector due to the peace-ful environment in the country had been a mas-sive support in our road map for achieving this position.

STANdING TALLAs you all know throughout the past two de-cades we were in this business, and the experi-ence we have gathered had been supportive to earn the trust of our loyal customers and to bind them with us in the years to come. We are much obliged towards our share holders who are with us for the changes we have planned and applied the remarkable recovery we achieved together since the year 2009. Our most valuable asset is standing tall in the heart of Colombo and is the main income base for Seylan Develop-ments PLC, which is known as THE SEYLAN TOW-ERS. With more and more investors entering in to this market segment, we see more skyscrapers invading the Colombo sky line. Therefore to be competitive, the latest technological supports in the improvements of processes and systems were acquired while developing the infrastruc-ture facilities of our building which comprises of upgrading the air conditioning system etc.

Also to mention here with the many improve-ments proposed and carried out in the tower facing West with sixteen luxurious apartments are appreciated very much by our most distin-guished tenants.

ThE PERFECT LEAGUE (MANAGEMENT)Seylan Developments is moving up on a positive trend with the proactive approach and collec-tive decisions taken by its Board of Management which comprises of leading persons representing different fields of knowledge. The company took several important initiatives in further strengthen-ing this theme of sustainable growth as a futuris-tic approach. In this year we saw the moving out of Kapila Rathnayake, Director/ Acting General Manager who was instrumental in his timely ap-proaches in up grading all system applications. M/S Kapila Ariyaratne, GM/CEO and Ramesh Jayasekara CFO of Seylan Bank PLC have been appointed as new directors. The board with these appointments will have seven directors of whom two are independent will take up the bur-den and drive the company through to attain our goal to be the best in the field of real estate market segment.

In addition Kusala Edirisinghe who was a former DGM of a reputed organization was appointed as the Head of Operations in order to lead and guide the company towards greater heights on the retirement of Kapila Rathnayaka.

FROM SILVER TO GOLd (COMPLIANCE)Compared to the past few years, the year ended on 31st December 2012 had been the most suc-cessful year for the company recording a net profit of Rs: 44.67 mn compared to Rs. 14.94 mn in the year previous. The rent income has been increased from Rs.148.45 mn to Rs.156.98 mn refer-

ence to percentage increase in rentals and action taken in recovering of long standing arrears. The net asset value per share is standing at Rs. 28.72 at the end of the year 2012.

With this strong financial evaluation during the year under review, the company will use every single op-portunity to gain competitive advantage over its competitors in improving its market share.

Also with great pride I mention that the company was able to turn the Silver award it won in the year 2011 at the Annual report award organized by the Institute of Chartered Accountants of Sri Lanka to a grand Gold, the maximum under the category of “Land and Property” based on the year 2012 an-nual report.

ChALLENGES (FUTURE PLANS)We see a clear future, and we are optimistic about it. With this rapid growth of economy at the macro level amidst chaos and international pressure with inflation still remaining in the single digit we shall look forward for better income generations. Our parent company Seylan Bank PLC; who is also the corporate tenant as usual provided us with invest-ment and management advice throughout the year. As a medium strategy with tourism again trigger at the third position of GNP, we have also initiated in developing holiday destinations for the bank as well as to the general public to generate additional income to the company.

We have been static in the field of developments in the past two years and are looking forward to enhance and maintain the same by the involve-ment in several future projects. The property at Union Place and the Condominium rights at Ja Ela will be assessed with a view to generate additional revenue.

ACKNOWLEdGEMENTWe are satisfied with what we have achieved with the contributions of all stake holders. We are look-ing forward towards to a renewed future within the ambition of making our presence felt significantly in the property market.

At this point I would like to express sincere appre-ciation on the strong support and guidance given by our board of directors through out the year. I also wish to place my note of appreciation to out-going Director/ Actg .GM of the company for his excellent service rendered. Also I thank the Man-agement and the Staff of Seylan Developments PLC for their unconditional support and the spirit of Team Work shown. Also I am thankful to our Audi-tors KPMG - Chartered Accountants and Printers Print Care Packaging (Pvt) Ltd for the assistance given on the preparation of this report. In addition I wish to thank our distinguished tenants for their business relationships and would like to end this note by acknowledging the role of our share hold-ers for the confidence and trust placed in us in the continuation of this success story.

WE ARE WINNERS

Chairman’s Review


Million compared to Rs. 14.51 Million in the year previous. The rental income was increased to Rs. 156.98 Million in the effects of rent increments and enhanced recoveries. The morale of staff was high where their hard work was rewarded with introduction of performance base appraisals. A culture of ownership, responsibility and accountability was introduced with cross functional purviews. The company’s presence in the real estate market was also felt during the later stages of the year.

APPRECIATIONSThe company has a clear vision in achieving sustainable growth. We have achieved more and there is a lot to be accomplished. I am much

grateful to the Chairman and Board of directors of Seylan Developments for the encouragement and guidance given in achieving these commendable objectives. I am also thankful to our tenants who bear with us whilst building improvements and modifications were carried out. The staff always was a tower of strength, and should be commended for their dedication and commitment in journeying with us in good times as well as in bad times. Finally I want to extend my appreciations to all our distinguished share holders for their loyalty and confidence kept on us since the time of Rights issue up to now without your faith in us none of these would have been possible.

K. S. EdIRISINGhE Head of Operations

21st February 2013.

TOWARdS A BETTER FUTURE On behalf of the Chairman, Board of director’s and my fellow Staff members, I warmly welcome all our distinguished share holders to the 21st annual general meeting of Seylan Developments Plc. Having taken the office as the Head of Operations from the previous Director/ Acting General Manager on October 2012, I am confident that we have done the needful in continuing the good work in carrying this company on a strategic path towards a sustainable growth. I wish to place on record the encouragement and guidance given by our Chairman and the board of directors, Cooperate Tenants, customers, staff and most importantly you, the share holders in writing this chapter towards a better future.

OPERATIONAL EXCELLENCESeylan Developments has crossed significant miles stones in forgoing

closer operations since the year 2009. The correct management decisions taken has revoked belief and hope on all the stake holders in working as a team in achieving back the most needed financial stability of the company. During the year under the review, our main prosperity The Seylan Towers was given a total upliftment on its service entities, systems and processes as well as on its looks in matching the changes of Metropolitan sky line. A comprehensive budget allocation is reserved for these value additions and restructuring processes which have already been commenced. With energy conservation becoming a frequently discussed topic, measures have been taken to maximize efficiencies while minimizing wastages. Whilst applying methodologies of energy audits, sub metering and system improvements proper awareness was also carried out among employees, tenants and customers on the importance of this topic. Comparatively the company recorded a profit after tax of Rs 44.67

hEAd OF OPERATION’S REVIEW


BOARd OF dIRECTORS

01. Mr. R NADARAJAH Chairman

06. Mr. KAPILA ARIYARATNE Director

02. Mr. S PALIHAWADANA Deputy Chairman

07. Mr. RAMESH JAYASEKARA Director

03. Mr. P SARAVANAPAVAN Director

04. Dr. P MERVYN GUNASEKERA Director

05. Mr. M K MUTHUKUMAR Director

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Engineer in Sri Lanka could be accorded. He was the General Secretary of the National Academy of the Sciences, Sri Lanka and served as a volunteer officer attached to the Air Fields Construction Regiment of the Sri Lanka Air Force.

He served as a visiting lecturer in the Universities of Peradeniya, Moratuwa, Sri Jayawardenepura and Kelaniya and other major academic Institutions such as The Institution of Engineers Sri Lanka, Sir John Kotelawala Defence Academy, The Postgraduate Institute of Management and the Institute for Construction Training and Development.

MR. M. K. MUThUKUMARDirector

Attorney at Law

Appointed as a Director of Seylan Developments PLC on 17th February 2012. He is an Attorney at Law with 36 years experience. Of that 21 years in Banking Sector. He was the Chief Legal Officer of the Bank of Ceylon and Chief Examiner in Law Subjects at the exams conducted by the Institute of Bankers.

He was a Lecturer at the Training Institute of the Central Bank and Lecturer at the Institute of Advanced Legal Studies, Sri Lanka Law College.

MR. KAPILA ARIYARATNEDirector

B.Sc (Hons)

Appointed as a Director of Seylan Developments PLC on 30th November 2012. Mr. Kapila Prasanna Ariyaratne is the General

Manager / CEO of Seylan Bank PLC. He commenced his banking career in 1984 and counts over 27 years of banking experience. He has held responsible positions at several international banks both locally and overseas as well as with local state and private sector banks. He is also a Director of Lanka Financial Services Bureau Ltd.

Mr. Kapila Ariyaratne holds a first class honours degree from the University of Colombo.

MR. RAMESh jAYASEKARADirector

BCOM (HONS), ACA, ACIM, ACMA

Appointed as a Director of Seylan Developments PLC on 30th November 2012. Ramesh Jayasekara is currently the Chief Financial Officer of Seylan Bank Plc. Prior to him taking over as CFO, he was the Deputy Regional Financial Controller for BNP Paribas, Middle East Region (Bahrain, Saudi Arabia, Kuwait, Qatar, Dubai, Abu Dhabi & Cyprus) based in Bahrain. He has over 15 years of Banking, Financial Management & Audit experience. Prior to this Ramesh worked at HSBC Sri Lanka as Resident Manager - PFS Finance & Planning and at KPMG Sri Lanka as an Audit Manager.

Ramesh holds a first class honours degree in Commerce from the University of Colombo. He is an Associate Member of the Institute of Chartered Accountants of Sri Lanka, an Associate Member of the Chartered Institute of Marketing United Kingdom and an Associate Member of the Institute of Certified Management Accountants of Sri Lanka.

MR. R. NAdARAjAhChairman

BSc (Hons), MBA, FCIB (London)

Appointed as Director of Seylan Developments PLC on 11th September, 2009. Mr. Ramanathan Nadarajah brings with him 43 years of banking experience in both state and private sector banks. He is currently an Executive Director, Seylan Bank PLC. He served as Managing Director/General Manager/CEO of Pan Asia Bank for six years and previously served at Bank of Ceylon in various capacities ending as Deputy General Manager. He was the inaugural President of the Primary Dealers Association of Sri Lanka and has been a Past President of the Association of Professional Bankers of Sri Lanka. He is also Director of the Finance Co. PLC.

MR. S. PALIhAWAdANADeputy Chairman

BSc (Colombo), AIB (Part 1)

Appointed as a Director of Seylan Developments PLC on 11th September 2009. Mr. Palihawadana joined Seylan Bank PLC in 1999 as Chief Manager/Chief Dealer. He is the overall in-charge of Treasury Dealing activities of Seylan Bank PLC. He has held positions as Assistant General Manager/Chief Dealer. At present he holds the positions as Deputy General Manager/ Chief Dealer, Heads of Primary Dealer Unit and Gold Investment Unit. He counts over 39 years experience in the banking industry out of which 29 years experience in Treasury dealing activities including service at Bank of Ceylon, Colombo and London branches. He is the President of Association of Primary Dealers.


B.Sc. FCA.

Appointed as a Director of Seylan Developments PLC, from 3rd February 2011. Mr. Saravanapavan brings in more than 31 years experience in the financial and banking sectors. He served as an Accountant at LB Finance for almost five years. He served at Bank of Ceylon in various capacities for seventeen years including Financial

Accountant. He served in an overseas Bank in Cayman Islands as Manager Administration & Finance for five years. On his return to the island, he served at Seylan Bank PLC, as Chief Manager Finance for six years before retiring in 2006. He is a senior lecturer at the Institute of Bankers Sri Lanka, coaching students for the Diploma course in Banking and the Diploma course in Credit Administration.

Mr. Saravanapavan is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka and holds a Bachelor of Science degree from University of Ceylon.

dR. P. MERVYN GUNASEKERADirector

B. Sc(Eng)., MSc. (Const. Mgt)., PhD., CEng., FIE (SL)., FICE(UK)., FNAS(SL)., MASCE., CCE., Int, PE(SL).

Dr. Mervyn Gunasekera is the Managing Director of LAN Management Development Service. He also serves as the Chairperson of Union Chemicals Lanka PLC.

Starting as a Civil Engineering graduate of the University of Ceylon, he later obtained his Masters degree in Construction Management from Loughborough University of Technology, UK and thereafter he obtained a Ph.D in Business Administration from the Postgraduate Institute of Management of University of Sri Jayewardenepura.

A Fellow of the Institution of Engineers Sri Lanka, a Fellow of the Institution of Civil Engineers UK, a Fellow of the National Academy of Sciences Sri Lanka and a Certified Cost Consultant of the American Association of the Cost Engineers and he served as the President of the Institution of Engineer, Sri Lanka in 2000/2001.

He is currently the President of The Institute of Project Managers, Sri Lanka and was the President of the Sri Lanka branch of the Institution of Fire Engineers, (UK), the Association of Consulting Engineers Sri Lanka and the Federation of Engineering Institutions of South and Central Asia, as its President from 2000 to 2003 - he was the first and only Sri Lankan to be elected to that post. Dr. Mervyn Gunasekera was recognized with award of Eminence in Engineering by the Institution of Engineers Sri Lanka, the highest award an

Directors’Profile


the occupancy at the yearend was 100%. The occupancy of East Tower comprises of local tenants where as the West Tower comprises of all non-resident tenants.

COMPOSITION OF RENTAL INCOME

RENTAL INCOME - 2011

RENTAL INCOME - 2012

Seylan Bank PLC

Apartments

Ceylinco Hotels

Chaimway ( Pvt ) Ltd

Dialog Axiata PLC

Mobitel (Pvt) Ltd

Seylan Bank PLC

Apartments

Ceylinco Hotels

Chaimway ( Pvt ) Ltd

Dialog Axiata PLC

Mobitel (Pvt) Ltd

PROFITABILITYThe profitability of the company during the year under review was phenomenal, recording a monumental increase over the previous year. The company was able to record a profit before tax of over Rs.100 Mn (Rs.112.1 Mn), which marked an over 387% increase over 2011 (2011 - Rs.23 Mn).

Company’s Profit before tax (excluding fair value gain on investment property) of Rs. 102.8 Mn was 137% higher than respective figure of Rs. 43 Mn in the previous year. This improvement was mainly due to high provisions for Corporate Guarantee and impairment loss provision made against investment in projects in year 2011.

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PROFIT BEFORE TAX (EXCL FAIR VALUE GAINS/(LOSSES))

* Figures are based on new Sri Lanka Accounting Standards (SLFRSs). ** Figures are based on previous Sri Lanka Accounting Standards (SLASs)

Even though the Company recorded Rs. 112 Mn Profit before tax during the year, Profit after tax decreased to Rs. 44.67 Mn due to the high deferred tax expense recorded on revaluation gain of Seylan Towers.

NET FINANCE INCOME / (EXPENSES)The Company has recorded Net Finance income of Rs. 16.1 Mn in the year 2012 compared to Net Finance Expenses of Rs. 13.5 million recorded in previous year. It shows a significant improvement during the year under review. This is due to settlements of interest bearing loans and borrowings during the previous year through a successful right issue. Presently the Company runs as a debt free Company.

ROA & ROEThe return on assets increased to 0.90% in 2012, from 0.30% in the previous year and the return on equity for the Company was 1.05% for the year compared to 0.34% in the previous year. This is primarily driven by the increase in income during the year with the improvement of finance cost compared to last year due to settlement of interest bearing loans & borrowings and high provisions recorded in last year.

The Board of Directors have recommended a first and final dividend of Rs.0.25 per share amounting to Rs. 36,991,215/- out of the profit arising from the financial year 2012 ( 2011 - Rs. 14,796,486), which is to be approved by the shareholders at the Annual General Meeting to be held on 28th March 2013.

EPSDuring the financial year the Company has generated Rs. 0.30 earning for each unit of shares. (Total Ordinary shares: 147,964,860). It is an increase of 156% compared to the previous year.

FINANCIAL REPORTINGThe Company is committed to adopt best practices for financial reporting and to maintain a close watch on new developments in the financial reporting environment. Seylan Developments PLC prides itself on its comprehensive financial reporting and

1. MANAGEMENT ChANGESYear 2012 was the year of renaissance for Seylan Developments Plc. following the difficulties and setbacks in the years preceding. Certain revisions were also noticed in the Management structure where we saw resignations of eminent figure Mr. Kapila Rathnayaka from his duties as the Director/Actg. General Manager of the company and also Mr. H. L. Gunasekara from his duties as a Director. Mr. Rathnayaka as the AGM of the Premises and Maintenance Department of Seylan Bank was required to engage himself full time on Bank activities. Seylan Developments’ Board of Management was further strengthened by the arrival of two prominent bankers, none other than GM/ CEO of Seylan Bank PLC Mr. Kapila Ariyaratne and CFO Mr. Ramesh Jayasekara being a Chartered Accountant himself; in addition to that Mr. M K Muthukumr a legal expert representing Seylan Bank also joined as a Director on 17th February 2012. The new Directors added the total tally to seven. Both the resignation of Mr. Rathnayaka and new appointments were made on 30th November 2012, while Mr. H. L. Gunasekara resigned on 17th February 2012.

Also the organizational structure of SDP was realigned with business needs and technicalities in and the Property Development sector. Mr. K. S. Edirisinghe being appointed as the Head of Operations, in streamlining the activities of SDP incorporating his efficiencies in Architecture & Engineering.

2. REAL ESTATE MARKET ANALYSISThe residential and commercial property market in the Island consisting of land and ready to occupy properties which experienced a signifying decline in the year 2007 as an outcome of world recession, saw a major turnaround in the year 2010/2011. This was mainly due to the success achieved in ending a 30 year ethnic conflict and restored peace, efforts made by government policy makers to attract investors which had a huge impact in the tourism sector and transformed the leisure property sector to positively move forward over the past two years.

However, with all efforts in place to uplift the market demand, the increased levels of interest rates and higher construction costs have adversely affected the purchasing power of the local property buyers. The weakening of the rupee has increased the cost of raw material as especially the imported varieties. The higher rates of cost of living observed in Sri Lanka has caused Locals to put on hold property purchases and sustaining other hierarchical needs. There are also concerns that the market boom will create an over flow in the real estate market that will cause negative impact on the price.

Sri Lankan Economy is moving on up. The stable political environment coupled by easing of Central bank controls and fiscal policies over inward and outward remittances attracts foreign investments on the property development sector. The comprehensive development objective that year marked Sri Lanka as one of the worlds best tourist destinations is coming to light with increasing demand for luxury hotels, condominiums and hotel apartments. This has been influenced by setting up of new local and foreign business and hosting of many international events like IIFA, T20 World cup has created a demand for expatriates on visit visa and working visa to look for residential living on a short/medium term basis strengthening the renting market. As a result the once experienced over flow which resulted in renting prices been slashed has taken a turn for the better and property developers are able to achieve a better return on investment.

Therefore the conditions are such that the real estate market will thrive once again despite the setbacks experienced from rising construction cost, increased interest rates, high living cost and other economic and global factors.

3. FINANCE REVIEW2012 marked another significant year, in which the company retaliates challenges that came its way. The Company surpassed the Rs. 150 Mn rental income, recording Rs. 156.975 million, signifying a growth of 6% compared to previous year. The Company’s revenue is derived from leasing space at the Seylan Towers and

Management Discussion & Financial Review


it was recognized through awarding Gold medal in the category of “Land & Property” at the competition organized by the Institute of Chartered Accountant of Sri Lanka in year 2012.

EARNING/ (LOSS) PER SHARE

RENTAL INCOME

020406080

100120140160180

Rs: 'Mn

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* Figures are based on new Sri Lanka Accounting Standards (SLFRSs).


4. FUTURE PLANSYear 2012/2013 is the year of sustainable and growth for Seylan Developments PLC. As previously explained, the company with its parent holder Seylan Bank PLC worked hard in restoring its brand image in the eyes of our stake holders. The changes desired and the improvements needed supported by cooperate customers as their share holders with a restructured management and motivated work force would take this organization miles ahead than its competitors. Also the current boom in the real estate market has prompted us to analysis the market demand and to cater

to such demand by selecting the most viable project / development ranging from small scale housing to mega scale and land sale projects.

We will also focus on improvements to processes, systems and maintenance aspects of Seylan Towers. The market competition will enhances on provisioning of best support services and maximum customer satisfaction. The company is expecting to invest on services improvements including modifications to external envelope where stage 1 is already commenced in colour washing the external envelope improving its cooperate identity. Also as a subsidiary of Seylan Bank PLC there was a long felt need for being the agent or the property provider to the Bank by sourcing of property / buildings / bungalows is also has been positively approached. Selecting the best deal for the Union Place property is also in our agenda.

Last but not least the Human Recourses Management factor is understood as a priority and as an area of focus. In this year a substantial budget is allocated to training and development of staff members in the areas identified. The management of Seylan Developments PLC understands the effect of the work life balance could do on the overall productivity and the bottom line of the company.

This beautiful island has a serious potential for future growth. The real estate culture is no more a business; it is a passion with rising opportunities. The best will survive while others will become history. Seylan Developments has focused its attention in par with the Government policy of decentralizing the development as explained in Mahinda Chinthana, is building strong middle class customer base giving rise to existing opportunities. The Team Seylan Developments is ready to accept this challenge with renewed hope, courage and commitment.

Management Discussion & Financial Review Cont...

16 SEYLAN DEVELOPMENTS PLC ANNUAL REPORT 2012

4.0 MAjOR RISKS FACEd BY ThE COMPANY

4.1 Operational RiskOperational risk is the risk associated with inadequate or failed internal processes, technology, people and systems, or from external events including legal and regulatory risks. Therefore operational risks directly affect company’s overall business functions. Seylan Developments has implemented various cross functional risk management policies and procedures in minimizing any risks associated with errors, omissions, inefficiency, system failure etc. These varies from identification of vulnerable areas, formulating risk management plans, promoting best practices, implementing internal controls etc. in a cost effective manner.

4.2 Market RiskMarket risks are directly affiliated to movements in the market such as interest rates, equity, recession, commodity prices, supply and demand, and credit movement etc. It signifies the possibility for an investor to experience losses due to factors that affect the overall performance of the financial markets due to various reasons. In the property development sector market booms and recessions are common to the extent that having a variance will reduce the

risk to an extent. Seylan Developments has identified this which is inherent to all business it conducts from renting, real estate to property development.

4.3 Business RiskBusiness risk is the probability that the companies either will incur a lower profit margin than anticipated, or will incur a loss rather than a profit. This is influenced by various factors, including sales volume, per-unit price, input costs, competition, and overall economic climate and government regulations.

Having its core business as renting out apartments, Seylan Developments has taken precautionary measures in mitigating threats which could occur as business risk. Tenants buying power, depressing property values, new entrants to the market, unsafe property laws, taxation and multiple demands of key customers could be attributed as probable risks.

The company is extremely cautious in selecting tenants especially for apartments with conflicted residential and commercial interests. Having two corporate extendable tenancy agreements with a Banking institute and a diplomatic mission however minimizes any loss of long time profits but requires maintaining the highest standards as the service provider.

Risk description Risk Rating Mitigating Actions

1.0 Operational Risk

1.1 Fraud Risk The risk which could occur of weak internal controls leading to corruptions and employee abusing of entrusted power for private gains leading to misappropriation of assets or fraudulent financial reports, will have negative impacts on the company.

Low The company follows good governance practices by having Administrative, Financial and Disciplinary controls over actions of its employees having various authorization levels and cross functions like prior approvals, budget limits and legal compliances like Shop and office act etc.

In addition to that duties and responsibilities are structurally disseminated in accordance with the co - functions of the company.

1.0 INTROdUCTION TO RISK MANAGEMENTA risk is anything that has the potential in negatively affecting a business or an organization. Risk management is a pro-active process in identifying, assessing, and prioritizing risks of different kinds. Accordingly the Risk manager will formulate plans to minimize or eliminate the impacts of all negative events. With the effects of Globalization, effective risk management has become a fundamental requirement for the survival of any organization over its profitability and growth.

2.0 OUR VISION TO RISK MANAGEMENTVision of Seylan Developments PLC, as a public quoted company is focused on optimizing stake holder interests through a strategic and an integrated approach. In achieving thus, the risk management functions of the company where directors are responsible to its shareholders has never been significant so and challenging than ever as if for today. Lessons learnt from past, where Seylan Developments PLC succeeded in overcoming a financial crisis over an organizational collapse coupled with global recession attributing to its sensible approach to risk management. As a subsidiary of banking institute (Seylan Bank PLC) Seylan Developments PLC follows an integrated approach to risk management as the repercussion have spread to lower credit markets, reduced consumer demand towards extremely volatile commodity, currency and stock markets.

In this year the company has initiated a number of changes to its risk management policy. The risk as a whole is diversified from the top management through heads of departments to lower ranks and is continuously monitored over strategic business changes and related regulatory guide lines. A culture of risk-adjusted decision making is promoted right through the organization when and where is necessary.

3.0 RISK MANAGEMENT PROCESS The risk management committee with Head of Operations is entrusted in outlining the frame work and formulation of policies for the ratification of board of directors. This in turn will flow directly to the strategic review, budget review and audit committee review respectively.

Identify

Report

Monitor

Treat Reassess

ConsiderControls

Assess

As the first step the committee identifies the strengths, weaknesses, opportunities and threats associated with its strategic approach and assess the risk associated with each factor. The next step of the risk management process is addressing each risk, reassessing and remapping the exposure in light of controls in place. Treating the risk, monitoring the risk and reporting of movement will be done as the last phase. Seylan Developments follows an upward approach in implementing the Risk Management process where responsibilities are distributed among the staff members. They are well trained and motivated in application of risk management techniques; elevate decisions and assess and develop risk reduction alternatives, to a higher level when it is required. The board is the final decision making authority in determining the overall risk management framework and also is responsible in overseeing the effective application.

Risk ManagementReport



1.5 Health and Safety Risk

The company has obtained all required insurance covers reference to industrial safety in looking after its employees, tenants and general public.

This year it has recorded zero percentage of accidents due to work conditions, occupational diseases or negligence.

2.0 Market Risk

2.1 Liquidity Risk It is the possibility of the company suffering a loss due to insufficient financial resources at its disposal, to meet its obligations, as and when they fall due.

Low The finance position of the company is regularly monitored by the management and precautionary measures are taken in accordance with,

» Cash Flow » Budgeting » Funding Arrangements

2.2 Credit Risk Credit risk arises from borrower’s or customer’s inability to meet its demands. For Seylan Developments the credit risk is attributed to the rent receive from its tenants. The inflation rate and foreign currency fluctuations could also be affect to the recoverability

Moderate Company does not have obligations from long standing debtors. Pro active measures are taken in collecting three months rent with one month security deposit in minimizing any credit risks.

2.3 Interest Rate Risk

It is the risk arising from fluctuation of interest rates over Net income. This could lead to high cost of borrowings or lower interest income resulting impacts over its profitability.

Low Company maintains adequate liquidity by optimizing the working capital.

2.4 Foreign Exchange Risk

Forex risk is the risk that a company may suffer due to losses over adverse exchange rate movements.

Moderate Preventive measures are taken in minimizing Forex risk by taking rent advances mainly from US$ from corporate clients.


1.1 Fraud Risk The Company also has appointed an independent internal auditor further strengthening the transparency of all its operations.

1.2 Human Resources Risk

Risk arising from inability to attract and retain qualified and experienced staff, drop in productivity and quality and increase in human errors.

Moderate Company has the potential for attracting the best with its brand image. Also has paved way for carrier development leading up to succession planning in retaining its employees in maintaining low percentage of labour turn over.

In maintaining good cooperate culture with an open door policy enhancing better employee relationship.

1.3 Legal and Regulatory compliance Risk

Risk of unfavourable Law suits against the company may lead to penalties and legal fees, loss of reputation and loss of stake holder’s confidence.

Moderate Statutory obligations are periodically reviewed by the management with the advice of the appointed legal and tax consultants. Also the secretarial functions are given a professional contribution

1.4 Climate and Weather Risk

Loss or damage caused by unfair climatic conditions, including drought, heat, flood, cold, storm, winds and natural disasters etc.

Moderate The company’s main asset the Seylan Towers is directly facing Indian Ocean exposing to periodic weather changes. The company is adhering to all safety measures laid down with acquiring of all comprehensive insurance covers.

1.5 Health and Safety Risk

Risk occurring from threats to personal, staff, tenants and general public.

Low The company performs proper training programs and workplace safety practices. Also as a high riser fire evacuation and other safety precautions are strictly maintained by conducting fire drills etc.

Risk ManagementReport Cont...


1.0 Introduction to Corporate GovernanceSeylan Developments PLC, is one of the oldest Property Development Company in Sri Lanka, and is listed in the Colombo Stock Exchange since 1992 and is approve d by the Board of Investment of Sri Lanka and also is the only subsidiary company of Seylan Bank PLC.

The Board Directors of the company, headed by the Chairman,has given the highest priority to develop an effective framework of Corporate Governance practices. The Board is committed to improve the internal control systems with a view to provide transparency and accountability to ensure best practices of Corporate Governance principles The Seylan Developments PLC adopts Code of Best Practices in Corporate Governance issued jointly by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka.

2.0 Role of Board of directorsThe Board of the Directors is responsible for the shareholders for creating and delivering sustainable shareholder value through management of business activities. The Board of Directors holds the final decision making authority and directs the operational management team to uphold highest level of integrity,

function in compliance within the applicable rules and regulations and delegate the necessary authority to fulfil their job responsibilities. Each Director has unrestricted access to information and services of Senior Management and the Company Secretary. Advance notices are given to the Directors regarding the meetings and Board papers are circulated and all directors actively and deliberatly contribute to Board proceedings.

2.1 Board of directors/ Composition and attendance of meetingsAs at 31st December 2012, the board of directors of the company consisted of 7 members representing varied fields of Engineering, Banking, Finance, and Law. The composition being five Non- Executive Directors representing the majority shareholder, Seylan Bank PLC, and two Independent Non- Executive Directors. The names and the profiles of Directors are given in page No. 12 to 13.

During the year under the review the three new directors were appointed to the Board whilst two resigned from their responsibilities. In keeping with the best practices, the Board meets at least once a month to discuss and review company performance and future activities. During the year under review Board met on thirteen occasions and details of attendance at meetings are as follows.

Corporate Governance Report 2012

Attendance of the directors of the Board Meeting during the Year 2012

Name Of the directors Category Eligible to attend

Board Meeting

attendanceMr R Nadarajah/Chairman Non - Executive 13 13 Mr H L Gunasekara Non - Executive 2 -(Resigned from February 2012)Mr S Palihawadana/Deputy Chairman Non - Executive 13 11 Mr P Saravanapavan Independent Non - Executive 13 13Mr R M K K B Rathnayaka (Resigned from November 30, 2012) Executive 12 12Dr P M Gunasekara Independent Non - Executive 13 10 Mr M K Muthukumar(Appointed on February 17 ,2012) Non - Executive 12 10

Mr K P Ariyaratne(Appointed on November 30 ,2012) Non - Executive 1 -

Mr R J Jayasekara (Appointed on November 30 ,2012) Non - Executive 1 1


3.0 Business Risk

3.1 Risk of depending on key customers

Risk occurring from loss of key customers may have material impact to the Company’s performance

High Company has rented the East tower to its holding Company and major portion of apartments to a diplomatic mission. Even though the relationships are long standing threats from new entrants to the property market is ever increasing.

The location factor, parking and cordial service are few high scores over its competitors.

3.2 Risk of depending on key suppliers

As a service organization managing a key property the risk occurs on breakdown of any essential services on its Plants and Equipments needs to be maintained and upkeep to highest expected levels.

Moderate Company has employed in house maintenance crew with necessary technical guidance given by experts. Maintenance agreements are updated annually and correct procumbent guide lines are followed.

3.3 Project Management Risk

Risk occurs due to not implementing proper project management principles or standards and lagging behind schedules or exceeding of set budgets.

Low This year the Company has restructured its organization net work with incorporation of a Head of all Operation functions in streamlining of its activities.

Risk ManagementReport Cont...


Committee MembersMr. S. Palihawadana - Chairman (Non - Executive)Mr. P. Saravanapavan (Independent Non - Executive)Mr. R. Nadarajah (Non - Executive)

In case of a vacancy or vacancies in the Board, the Nomination Committee selects qualified nominees, with a view of maintaining the balance & independence, and recommend them to the Board for appointment.

Re-ElectionIn tern of the provisions of the Articles of Association, one fourth of the Directors, excluding the Chairman and Deputy Chairman retires and submit them for re appoint at every Annual General Meeting. The retirement of each Director is determined according to those who have served the longest period of time in office, since their appointment or reappointment, as the case may be.

As per provision of article company can fill a casual vacancy or additional Directors until the Annual General Meeting of the Company and following such an appointment, after which they must seek re election.

The re-election of a Director safeguards the right of the shareholders by providing a regular reassessment of the composition of the board. The names of the Directors submitted for re-election are provided to the share holders along with notice of the Annual General Meeting, enabling them to make informed decisions on such appointments.

disclosure of Information in Respect of directors

Refer the Directors Profile on Page No. 12 to 13

2.4.3 Remuneration CommitteeResponsibility of the Remuneration Committee lies on the formulating and establishment of remuneration policies including reviewing, approving and recommendation to the Board on the remuneration of Board members, Chief Executive officer and other staff members who hold the key position in the senior management in the Company. The remuneration policy ensures that the level of remuneration are adequate to attract, retain and reward the senior management and other key positions so that the highest quality of work is maintained.

The Remuneration committee comprises 3 non Executive Directors as at 31st December 2012.

Committee members are » Dr P Mervyn Gunasekera - Chairman

(Independent Non - Executive)

» Mr S Palihawadana (Non - Executive)

» Mr P Saravanapavan - (Independent Non- Executive)

The Report of the Remuneration Committee appears on Page No. 36

disclosure of director’s Remuneration Under review of financial year 2012, all Directors of the Company are non executive directors they receive a fee for participating at board meetings and other committee meetings and do not receive any other perquisites or benefit other than what is discussed at Note 9 in the financial statements.

2.5 Corporate disclosure and Shareholder Relationship All material information regarding the company events promptly communicated to Colombo Stock Exchange which is to be released to the share holders. The Board firmly think that the shareholders must provided their opinions and clarify their concerns.

Further the Board of Directors gives appropriate notice to all its shareholders, as per provision of Company Act No 7 of 2007 of its Annual General Meeting and percents them with an Annual report at the time of such notice. Active participation of shareholders is appropriately welcome by the Board of Directors.

The holding company, Seylan Bank PLC also publishes consolidated financial statements on quarterly basis.

2.6 Accountability and internal Control2.6.1 Financial Reporting

The Board of Directors are directly responsible for overall company’s activities to share holders of the company. Therefore the Board of management pays their upmost priority to complete disclosure of financial and non financial information is made in accordance with real commercial practices. The Board of Directors pays broad attention to the adoption of sound and accurate reporting practices to ensuring that an honest and balanced assessment is presented at all times.

2.2 Financial AcumenThere are two Chartered Accountants, a Civil Engineer, an Attorney at Law, as Board members and also other members having long and distinguished service in the banking and financial sectors. They confer the essential guidance to the Board when and where is necessary on all financial and engineering matters. The Board directs complete disclosure of financial and non financial information, adoption and reporting in accordance with Sri Lanka Accounting Standards, BOI regulation and the Company Act No. 07 of 2007. The profile of the Directors as set out on page No. 12 to 13.

2.3 Board Balance and IndependenceAs at 31st December 2012, all Directors are Non-Executive Directors including two Independent Non-Executive Directors. The Directors act free of any business or other relationship with the Company that could materially interfere with their ability to exercise unfettered and independent judgment other than being on the Seylan Bank board or key management personnel of Seylan Bank PLC. Each Director has a continuing responsibility to determine whether he or she has a potential or actual conflict arising from any external involvements or interests, other than being the Directors or key Managerial personnel of Seylan Bank PLC.

2.4 Board CommitteesCertain Board responsibilities have been delegated to the following sub-committees. All sub-committees are represented by the Board members.

1. Audit Committee2. Nomination Committee3. Remuneration Committee

2.4.1 Audit CommitteeThe audit Committee consists of two non executive directors headed by a qualified Chartered Accountant having extensive experience in the field of finance. During the year under review the audit committee held four extensive meetings and the relevant report appears on Page No. 34 to 35.

The Audit Committee members areMr S Saravanapavan - Chairman - (Independent Non - Executive)Mr S Palihawadana - (Non - Executive)

Some of the responsibilities of Audit Committee as described in the Audit Charter are listed below:

» Review and monitor the integrity of the financial statements, financial reporting, information databases and audit process.

» Review and monitor IT Governance activities.

» Review and monitor the performance of the internal audit and information system audit functions of the company.

» Review and monitor the system of internal control.

» Review and monitor the effectiveness and efficiency of IT /IS controls pertaining to IT operations, technologies, systems, structures and processes.

» Review and monitor IT assets are safeguarded in terms of integrity, confidentiality and availability and effective IT risk management measures are in place.

» Review and monitor IT investment, projects proposals for their efficiency and effectiveness & security and controls systems inbuilt into project System Development Life Cycle (SDLC) process.

» Review and monitor the system for approval and monitoring of expenditure including capital expenditure.

» Review and monitor the statutory and regulatory compliance process.

» Review and monitor the implementation of Board decisions by the Management.

» Approve the annual internal audit and information system audit plans.

2.4.2 Nomination CommitteeThe Nomination Committee consists of three non executive directors as at 31st December 2012.

Corporate Governance Report 2012 Cont...


Rule No Subject Applicable Requirement

Compliance Status Reference

7.10.3 (a) Disclosure relating to Directors

The Board shall annually make a determination as to the independence of the Non-Executive Directors and names of independent Directors should be disclosed in the Annual Report.

Complied. Refer on page No. 23

7.10.3 (b) Disclosure relating to Directors

The basis for the Board to determine a Director is independent, if criteria specified for independence is not met


7.10.3 ( c) Disclosure relating to Directors

A brief resume of each Director should be included in the Annual Report and should include the Director’s areas of expertise

Complied. Refer Directors' Profile on page 12 to 13

7.10.3 (d) Disclosure relating to Directors

Forthwith provide a brief resume of new Directors appointed to the Board with details specified in 7.10.3(a), (b) and (c) to the rules of the Colombo Stock Exchange.

Complied A brief resume of new directors and the appointments were submitted to the Colombo Stock Exchange when such appointments were made.

7.10.5 Remuneration Committee

A listed Company shall have a Remuneration Committee.


7.10.5 (a) Composition of Remuneration Committee

Shall comprise Non-Executive Directors, at which a majority of whom shall be independent.


7.10.5 (b) Function of Remuneration Committee.

The Remuneration Committee shall recommend the remuneration of the Chief Executive Officer and Executive Directors.

Complied. Remuneration Committee report on page No. 36 of this Report which set out the functions of the Committee.

7.10.5 (c)

Disclosure in the Annual Report relating to Remuneration Committee.

The Annual Report should set out;

a. Names of Directors comprising the Remuneration Committee.


b. Statement of remuneration policy.


c. Aggregate remuneration paid to Executive & Non Executive Directors.

Complied. Refer Directors’ emoluments on page No. 71

2.6.2 Internal ControlThe Board of Directors initiates and maintains the firm set of internal controls to safeguard the company’s responsibilities on shareholders investment. The board has established the tone from the top and ensures that importance of internal controls is understood and correct resource allocations are made. The internal audits conduct regular basis in strengthening the internal control process and in identifying the risk of the system and report to the Audit committee to ensure that appropriate action are taken.

The framework is designed to provide reasonable care of, » Efficiency and effectiveness of

operations.

» Reliability of financial and other management information.

» The prevention of fraud.

» Compliance with relevant national laws and company regulations

The board has delegated the process of reviewing the effectiveness of the internal controls to the Audit and Management Committee. The audit committee whose

functions are described in the corporate governance statements met 4 times during the year under the review.

2.6.3 Code of business Conduct and EthicsAlthough there is no written code of conduct of the Directors, they are conscious of the duties required of them. The transaction and activities which were associated with the company are disclosed under the related party transaction, which is appearing at note No. 27 of the financial report.

The Company is compliant with the Code of Best Practice on Corporate Governance jointly issued by the SEC and ICASL.

2.6.4 Corporate Governance disclosureThe quarterly financial statements published by the company with the explanatory notes as per required rules of the Colombo Stock exchange and the Securities exchange Commission of Sri Lanka is disclosed to all stakeholders. Furthermore any other financial and non financial information which are price sensitive or warrants the shareholders attention and consideration is promptly disclosed to the public.


Compliance with the Colombo Stock Exchange Rules on Corporate GovernanceLevels of Compliance with the CSE’s Listing Rules Section 07 - Rules on Corporate Governance are given in the following table



7.10.1(a) Non-Executive Directors

At least one-third of the total number of Directors should be Non-Executive Directors.

Complied. Refer on page No. 23.

7.10.2 (a) Independent Directors

Two or one-third of Non-Executive Directors, whichever is higher should be independent

Not Complied.

Refer on page No. 23.Two of seven Directors are independent. Will be regularized ishortly

7.10.2 (b) Independent Directors

Each Non-Executive Director should submit a declaration of independence / non-independence in the prescribed format

Complied. Refer Annual Report of the Board on the state of Affairs of the Company on page No. 48.




7.10.6 (b)Audit Committee Functions

b. Overseeing of the compliance with financial requirements, i n f o r m a t i o n requirements of the Companies Act and other relevant financial reporting related regulations and requirements.

Complied Refer on pages 34 to 35 for the functions of Audit Committee.

c. Overseeing the process to ensure that the internal controls and risk management processes are adequate to meet the requirements of the Sri Lanka Auditing Standards.

Complied. Refer on pages 34 to 35 for the functions of Audit Committee.

d. Assessment of the independence and performance of the external Auditors.


e. Make recommendations to the Board pertaining to appointment, re appointment and removal of external Auditors, and approve the fees and terms of engagement of the external Auditors.


7.10.6 (c)

Disclosure in the Annual Report relating to Audit Committee.

a. Names of Directors comprising the Audit Committee.


b. The Audit Committee shall make a determination of the independence of the Auditors and disclose the basis for such determinations.


c. The Annual Report shall contain a Report of the Audit Committee setting out the manner of compliance with their functions.




7.10.6 Audit Committee.

The Company shall have an Audit Committee.

Complied. Names of the members of the Audit Committee are stated on page No. 34.

7.10.6 (a) Composition of Audit Committee.

Shall comprise of Non-Executive Directors, a majority of who shall be independent.

Audit Committee consists of 2 non-executive Directors one Director is independent.

Chairman of the Audit Committee is an Independent Non-Executive Director.

A Non Executive Director shall be appointed as the Chairman of the Committee Meetings.

Complied.

Chief Executive Officer and Chief Financial Officer should attend Audit Committee Meetings.

Complied.

The Chairman of the Audit Committee or one member should be a member of a professional accounting body.

Complied. Chairman of the Audit Committee is a qualified Chartered Accountant.

7.10.6 (b)Audit Committee Functions

Functions shall include;

a. Overseeing of the preparation, presentation and adequacy of disclosures in the Financial Statements in accordance with Sri Lanka Accounting Standards.


a. Overseeing of the preparation, presentation and adequacy of disclosures in the Financial Statements in accordance with Sri Lanka Accounting Standards.




Subject & Ref. Corporate governance Principle Level of Compliance

Board Related Disclosures A.10.1

» Immediate family and/or material business relationship with other Directors of the Company;

» Names of other listed Companies in Sri Lanka in which the Director concerned serves as a Director;

» Names of Companies in which the Director concerned serves as a Director and/or the fact that he/she holds other Directorships in group Companies;

» Number/percentage of Board meetings of the Company attended during the year;

» Names of the Committees in which the Director serves as the Chairman or a member; and

» Number/percentage of committee meetings attended during the year.

Details of directorships/other positions held, Directors’ interests in contracts and related party transactions are disclosed in Notes 27 of the Financial Statements given on page No. 84.

Details of Board meetings and Board subcommittees, their composition, attendance by Directors of meetings held during the year are given on pages 23, 34 & 36.

Disclosure of Remuneration B.3

» A Statement of Remuneration Policy and details of Remuneration of the Board as a whole.

Complied Refer Remuneration Committee Report on page No. 36 and also Note 9 of the Audited Financial Statements.

Major transactionsC.2

» All major transactions entered into by the Company should be disclosed.

Complied

Audit CommitteeD.3.4

» Names of the members of the Audit Committee should be disclosed.

» Basis for determining the independence of Auditors.

Complied

Refer the Audit Committee Report on pages 34 to 35.

Code of Business Conduct and Ethics D.4.1 & D.4.2

» Should disclose whether the Company has a Code of Business Conduct & Ethics for Directors and members of the Senior Management team.

Will be complied shortly

Compliance with the code of best practice on corporate governance issued jointly by the Securities & Exchange Commission of Sri Lanka (SEC) and the Institute of Chartered Accountants of Sri Lanka (ICASL)


A. Annual Report

Chairman & CEO A.2.1 & A.5.6

If Chairman and CEO is one and the same person, the name of the Chairman/CEO and Senior Independent Director appointed and justification of the decision to combine the positions.

As outlined earlier, the positions of the Chairman and the HOP have been separated on pages 6 to 9.

Board Balance A.5.5Should identify the independent Non-Executive Directors.

Refer Page No. 24

Nominations Committee A.7.1

The Chairman and members of the Nomination Committee should be identified.

Complied Refer Page No. 25

Appointment of New Directors A.7.3

When new Directors are appointed, the following details should be disclosed.

» a brief résumé of each Director;

» the nature of his expertise in the relevant functional areas;

» the names of Companies in which the Director holds Directorships or memberships in Board committees; and

» Whether such Director can be considered independent.

CompliedDisclosure of details as required of new appointments to the Board was informed to the Colombo Stock Exchange and also in the Annual Report. Profiles of Directors are given on pages 12 to 13

Board Related Disclosures A.10.1

The following details pertaining to each Director should be disclosed

» Name, qualification and brief profile;

» The nature of his/her expertise in relevant functional areas;

Complied

Directors’ profiles with their qualifications, areas of expertise etc. are given on pages 12 to 13.



Directors’ Report D.1.2

» They have conducted a review of internal controls covering financial, operational and compliance controls and risk management and have obtained reasonable assurance of their effectiveness and successful adherence herewith.

Refer on page No. 52

d Financial Statements

Financial Statements D.1.3

» The Board of Directors should include a Statement of Responsibility for the preparation and presentation of Financial Statements.

Complied


» Auditors should also have a statement about their reporting responsibility.


E. Management Report

Management ReportD.1.4

» Should include a Management Discussion and Analysis Report discussing at least the following issues:

» Industry structure and developments;

» Opportunities and threats;

» Risks and concerns;

» Internal control systems and their adequacy;

» Social and environmental protection activities carried out by the Company;

» Financial performance;

» Material developments in human resources and industrial relations; and

» Prospects for the future

Complied.

Refer Chairman’s Review on pages 6 to 7.

Refer Head of Operation’s review on page No. 8

Refer Management Discussion and Financial Review on pages 14 to 16.

F. Corporate governance Report

Corporate governance Report D.5.1

Should disclose the manner and extent to which the Company has complied with the principles and provisions of the Code.

CompliedRefer on pages 23 to 33.

G. Audit Committee Report

Audit Committee Report D.3.3

Should set out the work carried out by the Committee.

CompliedRefer on pages 34 to 35.


Code of Business Conduct and Ethics D.4.1 & D.4.2

» Should also disclose an affirmative declaration that they have abided by such Code.

» The Chairman must certify that he/she is not aware of any violation of any of the provisions of this Code.

Refer Page No. 26

Going ConcernD.1.5

» Should report that the Company is a going concern, with supporting assumptions and qualifications as necessary

CompliedRefer Annual Report of the Board on the state ofAffairs of the Company. On pages 48 to 51

Members of Remuneration Committee B.1.3

» The names of the members of Remuneration Committee should be disclosed in the Remuneration Committee Report.

Complied

Refer the Remuneration Committee Report on page No. 36

C. directors’ Report

Directors’ Report D.1.2

Should contain the following declarations made by the Directors,

» The Company has not engaged in any activities, which contravenes laws and regulations;

» The Directors have declared all material interests in contracts involving the Company and refrained from voting on matters in which they were materially interested;

» The Company has made all endeavours to ensure the equitable treatment of shareholders;

» The business is a going concern with supporting assumptions or qualifications as necessary; and

Complied



that no limitations are placed in the conduct of the Audit.

The Audit Committee has recommended to the Board of Directors the Messrs KPMG be re-appointed as Auditors of the company for the financial year 31st December 2013, subject to the approval of the shareholders at the Annual General Meeting.

Conclusion:The Audit Committee is satisfied that the accounting policies, operational controls and the risk management process of the company provides reasonable assurance that the affairs of the company are managed satisfactorily in financial reporting, statutory & regulatory compliance and safeguarding the assets .

P. SaravanapavanChairman - Audit Committee21st February 2013.

Composition:Mr. P. Saravanapavan, an Independent, Non-Executive Director continued as Chairman of the Audit Committee during the financial year. He is a Fellow member of the Institute of Chartered Accountants of Sri Lanka, and carries over 28 years experience in the banking sector locally and overseas. The other Non-Executive members of the committee were Mr. S Palihawardana. The Executive Director/Acting General Manager Mr. Kapila Ratnayake, the External Auditors Ms KPMG and the Internal Auditors Ms Ponnamperuma & Company attended the Audit Committee meetings by invitation.

Meetings:During the year under review the Committee met four times. The attendance of the other members at these meetings is as follows.

P.Saravanapavan (Chairman) 4/4S. Palihawardana 4/4Kapila Rathnayaka 2/4External Auditors (Partner/ Representative) 4/4Internal Auditors (Partner) 4/4

The minutes of the meetings were made available to the Board of Directors for information and necessary action.

Terms of Reference:The Audit Committee charter approved by the Board in January 2011 was adopted sets out the terms of reference governing the Audit Committee. It ensures the composition and activities of the Audit Committee are in line with International Best Practices, Listing Rule 7.10.6 of the Colombo Stock Exchange and the Code of Best Practice on Corporate Governance jointly issued by the Securities & Exchange Commission of Sri Lanka (SEC) and The Institute of Chartered Accountants of Sri Lanka (ICASL).

Activities and Responsibilities in Financial Reporting:

The Committee reviewed and discussed the financial reporting systems adopted by the

company in the preparation of quarterly and annual financial statements with the Management & External Auditors to ensure reliability and consistency of the Accounting policies adopted and its compliance with the Sri Lanka Accounting Standards and the provisions of the Companies Act No.7 of 2007.

The Committee reviewed the un-audited quarterly interim financial statements for the four quarters before Directors Approval and submission to the Colombo Stock Exchange. The Committee also reviewed the year end financial statements before certification by External Auditors together with supporting information including significant assumptions and judgements made in the preparation of the financial statements.

The committee reviewed the Management Letter issued by the External Auditors and took measures to implement their recommendations.The committee also took steps to implement the recommendations of the Internal Auditors

Regulatory Compliance:Procedures were in place to ensure compliance with statutory regulations. The Committee reviewed the quarterly compliance reports submitted by relevant officers to ensure that the company has complied with all statutory requirements.

Internal Audit & Inspection:The Board of Directors decided to engage the services of Ms. Ponnamperuma & Company, a professional audit firm to carryout Internal Audit function with effect from 1st February 2012.

External Audit:The Committee met with the Senior Lead Partner of Ms KPMG during the Audit Committee meetings and on the occasions by appointment to discuss matters indicated in the Management Letter and matters relating to valuations and impairment of investment projects. The Committee also discussed on the scope and approach of their work to ensure

AuditCommittee Report


“SUSTAINABILITY IS ThE KEY IN AN ORGANIzATION ThAT ENSURES LONG TERMS SUCCESS”1. Our Approach to Sustainability

At Seylan Developments we believe that a sustainable organization is one that creates value for its shareholders whilst concurrently protecting the environment and improving the lives of those whom we interact. Our primary business objective is to be among the best in the property & real estate market, achieving maximum customer satisfaction with optimum value added services.

Sustainability, as its name implies is looking to the future through today’s eye. Therefore it compels us to examine and monitor the impact of our systems, process and practices have on our stakeholders; customers, tenants, employees, business partners, society and also the environment

and to adapt necessary changes that will enable us to withstand the test of time and ensure long term success.

Sustainability is not a totally new concept for us. We have faced the consequences of the past successfully mitigating both external and internal challenges. In looking to the future we strive to be committed in maintaining transparency, accountability and sincerity that will defines Seylan Developments PLC as a responsible and a learning organization.

2. description of key impacts, risks and opportunitiesThe chart below summarizes Sustainability in organizations by analyzing the challenges, opportunities and risk that need continues evaluation in the context of the triple bottom line - Economic, Environmental and Social aspects.

Triple Bottom

LineChallenges Opportunities Risks Our Strategies

Econ

omic

» Increased Inflation

» Decrease in Global spending Power

» Intense Competition

» Improved business opportunities.

» Govt. stance in infrastructure improvements

» cost Inflations could have an impact on power of spending as well as on power of investment

» Competition could affect loss of key customers

» Be flexible for market conditions

» Enhance customer reach & service

» Maintain effective investments

Envi

ronm

enta

l

» Increasing cost on Energy supplies and basic services.

» Energy and waste management.

» Govt. Policy changes on sustainable use of recourses.

» Positive views on management on system improvements.

» Work efficiency and capabilities of support staff on Building Management systems (BMS)

» Stake holder awareness on energy conservation.

» Risk in higher tariff costs.

» Threats of environmental pollution due to waste emissions.

» Preventive measurements taken on minimizing energy wastage.

» Energy auditing & system upgrading

» Conducting of stakeholder awareness programs.

SustainabilityReport

The Composition of Remuneration Committee ReportThe Remuneration Committee appointed by the Board, comprises 3 Non Executive Directors as at 31st December 2012. Two of the members are Independent Directors. The members of the Committee are as follows:

Dr. P Mervyn Gunasekera - Chairman

Mr. S. Palihawadana

Mr. P. Saravanapavan

Mr. R. Nadarajah (By Invitation)

The attendance of the Directors at the Remuneration Committee meeting during the year is tubulised

Name of the Director Eligible to attend Attended

Dr. P. Mervyn Gunasekara 1 1

Mr. S. Palihawardana 1 1Mr. P. Saravanapavan 1 1Mr. R. Nadarajah (by invitation) 1 1

The Accountant assisted the Committee by providing the relevant information for their decision within the terms of reference approved by the Board.

REMUNERATION POLICY ANd FUNCTIONS:

The Remuneration Committee is responsible for recommending remuneration payable to key managerial personnel based on performance parameters. The Committee is also responsible for establishing guidelines and parameters for the remuneration structure of the employees for approval of the Board and ensure implementation of the approved policies.

The Committee in fulfilling the above tasks reviews the information relating to remuneration of employees in other similar establishments to bring payments to be in par with market rates and practices. In this regard the Committee determines the basis of revision based on performance and makes recommendation to the Board of directors and upon consideration of such recommendations the Board shall make the final determination.

dr. P. Mervyn Gunasekara

ChairmanRemuneration Committee.21st February 2013.

RemunerationCommittee Report


information on the performance during the year. The previous sustainability report covered the financial year of 2011.

5. Commitments and Engagements 4.1 Our Stakeholders & their

ExpectationsA business organization is composed of a network of relationships including interest groups and individuals. We, at Seylan Developments PLC define our key stakeholder audience to ensure materiality in engagement and reporting. Company defines its key stakeholders as customers, employees, investors, suppliers, government, legal & regulatory bodies and society. We have clearly identified the different stake holder expectations and have formulized our responses accordingly. This varies from effective management that delivers sustainable wealth, product innovation, performance linked remuneration, transparent procumbent policies, effective and efficient use of resources etc.

4.2 Sustainability Content and the ScopeThis Report presents the Company’s performance in the wider context of sustainability, providing an insight into the Company’s contribution towards the enhancement of economic, environmental and social conditions within which it operates.

In addition this sustainability report has been developed with in the context of the Company’s overall business strategy.

4.3 defining the Report QualityThis Report signifies an unbiased script of Company’s performance by reflecting on both positive and negative aspects on the economic, environmental and social contexts. It is derived in presenting a format which is understandable and accessible to the reader.

4.4 Stakeholder EngagementAt Seylan Developments we consider our stake holders as our followers and our believers. We intend in applying a conceptual approach in analyzing social, environmental, and economic factors and thereby enhancing our capabilities through incremental improvements. We intend to track our progress by putting in place a structured process of stakeholder engagement and through the measurement of our impacts earlier mentioned.

This concept of sustainable development flows freely from within and beyond the Company towards the external environment. It has helped us in understanding the strengths and weaknesses within ourselves and the threats and opportunities in the global environment.

Stakeholder categorization and current engagement at Seylan developments PLC

Stak

ehol

der Why they are

our keystakeholders

and theimportance of

engagingwith them

Current level of engagement Key Issues how we respond to

these issues

Cus

tom

ers

(Ind

ivid

ual,

corp

orat

e)

Customers are our key stake holders and they are the reason we exist. Having good customer relationship and obtaining customer feedback will improve our products and services in maximizing service excellence.

» Personal meetings

» Discussion forums

» Field visits Progress reviews

» Business development activities.

» Product quality

» Service standards

» Affordable

» Price

» Facilities

» Sustainable practices

» Product innovation

» Provisioning of most modern and comfort rented spaces with highest standards at competitive prices.

» Availability of round the clock maintenance and customer service at the door step with minimum down time.

3. Organization ProfileSeylan Developments PLC; a subsidiary of Seylan Bank PLC, is a limited liability company reregistered under the companies act of year 2007, is also listed and Colombo Stock Exchange (CSE). Our core business is management of properties in maintaining and renting the office space and luxury apartments at No 90, Galle Road, Colombo 03. We are also diverted on to the avenues of property development such as real estate developments, condominium housing projects and also shopping & office complexes.

Over the years Seylan Developments PLC has consistently adopted a strategic approach to sustainability where economic, environmental and social strategies are intrinsically aligned. The Company ensures that sustainable development is featured at all strategic levels, supported by leadership, envisioning and also by commitment and worker efficiency. We at Seylan Developments continue to pivot on the end achievement of national priorities in supporting housing people, providing employment opportunities, improving technical advancement, empowering people on CSR activities, and also creating a sustainable environment in optimizing energy efficiency. The Company strives to contribute towards the national agenda and meet national objectives through the effective implementation of its own business strategy.

ORGANIzATIONAL STRUCTURE OF SEYLAN dEVELOPMENTS

Organization Structure of Seylan Developments PLC is narrow banded to the extent where it fully appreciates to achieve the greatest long-term benefit and Therefore the Company must consistently devised its own unique approach and business case towards Sustainability & Growth.

4. Scale of OperationsAs at 31st December 2012, the total asset of the Company was Rs: 4,948 Mn and the total equity of the Company is Rs: 4,249 Mn. During the year under review the Company recorded a turnover and profit after tax of Rs: 172.6 Mn and Rs: 44.7 Mn respectively.

Any questions or comments about this Sustainability Report should be directed to the Head of Operations of Seylan Developments PLC, on Telephone No. 011 2452697.

5. Report ParametersReport Framework and frequency

As in the previous year, the Company’s Sustainability Report has been developed based on the Sustainability Reporting Framework proposed by Global Reporting Initiative (GRI).

This Report covers the activities of Seylan Developments PLC for the period from 1st January 2012 to 31st December 2012. We analyze the business and financial activities of the institution and provide detailed

SustainabilityReport Cont...

Soci

al

» Recruitment, Selection and Rewarding the best employees.

» Training and Development with moving on to succession planning.

» Better employee relationships confirmation with labour legislations.

» The best trained work force on successful fields.

» Rejuvenated work force in accepting challenges on change.

» Possibilities for higher employee retention with the competitive labour market.

» Technologies taking over HR aspects.

» Introduction of performance based appraisals linking to KPI’s.

» Clear cut policies and procedures.


Gov

ernm

ent,

Lega

l & R

egul

ator

y Bo

dies

» to have system controls

» all Statutory payments in order

» BOI, Labour issues,

» Taxes and tariff controls

» Representation through associations,

» Acts and circulars,

» Penalties,

» Loss of reputation

» Loss of shareholder confidence.

» Implementations of regulatory monitors

» Conduct compliance reviews at various levels.

» Good Code of ethics.

Soci

ety

/ Pr

essu

re g

roup

s /

Med

ia

» External Environment (PESTEL) factors

» Sustainable developments

» Green concepts in reducing the carbon foot print

» Correspondence, Discussions, Media coverage.

» Waste disposal

» Energy efficiency.

» Potential for future growth

» Reducing environmental impacts

» SDP promotes initiatives such as internal paper recycling, energy saving lighting (LED),

» Effective maintenance of AC system, Generators, water supply etc.

» Ex. This year SDP launched energy management program in consultation with Access energy management systems.

6. Management Approach and Performance IndicatorsWe, at Seylan Developments PLC are committed to achieve our corporate goals based on a strategic approach through responsible social, environmental, and economic practices of our company. Our co business in providing superficial rented spaces to our customers with a value added support service empower and generate long term financial benefits to our stake holders. Therefore, the key performance indicators of the company will be improved living conditions, energy efficiency, employee satisfaction, economic growth, increased market share, environmental consciousness etc.

6.1 Economic Performances6.1.1 Economic Sustainability Initiatives

Our economic sustainability initiatives are superior long term financial returns, sustainable developments, comply with

regulatory requirements and recognition and acceptance in the trade.

This goes hand in hand with both environmental and social parameters in the global context in understanding current and changing needs of its stake holders.

6.1.2 Economic Performance Indicators Economic impacts of our activities across key stakeholder segments are as follows;

Value Addition

The value statement depicts the generation of wealth and its distribution among the stakeholders by acting responsibly in all of our businesses/ social activities throughout the organization.

This part of the Report looks at Seylan Developments PLC’s impact on investors, customers and employees

Cus

tom

ers

(Ind

ivid

ual,

corp

orat

e) c

ont..

. » Ex. This year we saw the commencement of total uplifting of the building including services and external appearance in highlighting Seylan Towers as a Land mark.

Supp

liers

» A dependent supplier base provides opportunities in attending to service needs on time.

» Supplier Registration

» Price fluctuations

» Delays in delivery.

» Proper procumbent policies.

» Better negotiations

» Proper inventory management systems

Empl

oyee

s

» The internal customers; They are the pillars of the organization success depends on.

» *Direct reporting

» *Open door policy at all management levels.

» Employee Development

» Health & Safety req.

» Organizational ethics

» work force diversity

» Merit based recruitment & selection.

» Employee Welfare

y Insurance

y Staff Loans

y Medical Allowances

» Performance link rewards

» Succession planning

» Need based training ( on the job/off the job)

Inve

stor

s /

Shar

ehol

ders » Corporate

responsibility

» Increasing Shareholder wealth

» Ethical business practices

» AGM.

» Internal& External Audit procedures

» Web updating/CSE reports

» ROI

» Good governance Practices

» Risk management controls

» Transparency

» The Company recorded an EPS of Rs. 0.30 per ordinary share, which is an increase of 150% over the previous year’s EPS of Rs. 0.12.



2. Waste ManagementRecycling has been a day to day topic for years but sadly little has been done. We have acted at our strength by collecting and segregating all the waste differently as paper, glass, scrapped iron,

and polythene and organic and hired a contracted recycling company in disposing for recycling. Every necessary step has been taken in contributing to minimize the carbon foot print in the global context.

Value AdditionThe value statement depicts the generation of wealth and its distribution among the stakeholders by acting responsibly in all of our businesses/ social activities throughout the organization.

2012 2011Rs.’000 Rs.’000

Value Added StatementIncome Earned by Seylan Developments 163,097 154,392PLC for providing services

Cost of Services (47,723) (56,331)

Value Added Services provided by SDP 115,374 98,060Non-Seylan Developments PLC Income 25,895 65,894Provision for Bad Debts (1,304) (111,378)

139,965 52,577

2012 2011Rs.’000 Rs.’000 Rs’000 Rs.’000

Value Allocated to EmployeesSalaries, Wages and Other Benefits 25,288 26,618

To Providers of CapitalDividends to Shareholders

To GovernmentIncome Tax 5,878 1,552Deferred Tax 61,547 6,973 Stamp Duty 8 58VAT 1,283 439Debit Tax - 68,716 162 9,184

To Expansion and Growth Surplus / (Deficit) 44,673 14,511Depreciation 1,288 45,961 2,264 16,775

139,965 52,577

This part of the Report looks at Seylan Developments PLC’s impact on investors, customers and employees

6.1.3 Contributory Benefit PlanThe company provides a retirement plan for its workforce by using general resources to pay the obligations to retired employees. According to the terms of Employees’ Provident Fund (EPF) Act No. 15 of 1958 and its subsequent amendments and Employees’ Trust Fund (ETF) Act No. 46 of 1980 and its subsequent amendments, employees are eligible for EPF and ETF contributions. The companies contribute the relevant percentages of the eligible gross emoluments of employees to the

respective provident funds and to the Trust Fund respectively.

In relation to the rules of the provident fund, to which such contributions are made, the company contributes 12 per cent as the employers’ contribution and the employees contribute 8 per cent to their respective provident funds managed by the Central Bank of Sri Lanka. Further, the company also contributes 3 per cent to the Employees’ Trust Fund managed by the Department of Labour.

6.1.4 Retirement Gratuity PlanEmployees are entitled to gratuity payable under the Payment of Gratuity Act No. 12 of 1983. The Company has duly carried out an actuarial valuation on retirement benefit obligations as at the year end and the actuary has used the projected unit credit method as prescribed in Sri Lanka Accounting Standards.

6.2 Environmental Performance6.2.1 Environmental Sustainability

Initiatives We are extremely aware of the importance of conserving our immediate environment from the consequences of our day to day practices. As an organization, we take every necessary step to promote and practice conservation methods from the very basics of internal paper recycling, employing energy saving, minimizing unnecessary power draw offs in respect of the operation of its air conditioning, computers and lighting up to the extremes of energy auditing.

The sections below examine as to how our policies and processes help

preserve the environment and ensure its sustainability. We strive to succeed in achieving our goal of seeing all our employees been dedicated and committed towards this noble cause.

6.2.2 Environmental Performance Indicators 1. Energy ConservationEnergy conservation today is discussed at the highest forum as a subject with world wide concern. We at Seylan Developments have taken every necessary step to maximize energy efficiency in order to have a significant effect leading up to the national grid.

Even the very little measures taken by switching off unwanted illumination and maximizing day light effects, optimizing the usage of air conditioning whilst keeping the occupants at comfort work levels.

Also the new measures taken up by the management to upgrade our Building Management Systems (BMS) will enable us to have more control on mechanical & electrical equipments and further contribute to the process of reducing energy consumption.

2012 2011Rs’000 Rs.’000

Employer contribution to the trust fund 401,979 370,298Employer contribution to the provident fund 1,646,923 1,481,194



Breakdown of Employees according to No of years service

Age No of Employees< 5 75 - 9 410 - 19 1920 - 29 1>30 -

- Total number and rate of employee turnover by age group and gender

Breakdown of Employees resignation according to age

Age No of Employees< 20 -20 - 29 -30 - 39 140 - 49 -> 50 -

Breakdown of Employees resignation according to gender

Gender No of ResignationsMale 1Female -

c Child LabourOur employment practices are governed by the laws and regulations of the country, we maintain zero-tolerance of discrimination and do not condone forced or child labour.

d health & SafetyHealth and Safety is the work place is essential for the well being of our employees.

At Seylan Developments PLC all employees are covered by Hospitalization and Insurance Scheme through Sri Lanka Insurance Corporation. In addition the Company pays a fixed allowance for every employee as medical allowance.

In order to minimize risk and repetition of health and safety related issues all health and safety related issues are monitored on an individual basis and necessary corrective action is taken where necessary.

There we no accidents on any of our properties during the year under review.

e Employee CommunicationWe believe in maintaining cordial relations with our employees based on strong foundation of mutual understanding and continues interaction and dialogue.

We work towards maintaining our ‘Open Door Policy’ which enable and

encourages employees to express themselves openly and to discuss their work related problems face to face with their immediate superiors.

f Employee WelfareThe Staff Welfare Society is committed and acts swiftly in helping employees in distress.

Benefits given to Seylan Developments PLC staff are:

Benefits(Permanent)

Full-time Employees

Insurance YesStaff Loans YesOutdoor Medical Allowances Yes

6.3.2 Social Performance Indicators CSR Activities (Corporate Social Responsibility) : Whilst continuing to assist our staff we have reached beyond the boundaries towards the society, and in the year under review contributed to the renovation of the Saloon and Beauty Culture Training Centre at The School for the Deaf in Rathmalana.

This heart warming event in deed was a Nobel cause and we were proud to par take and be of assistance and look forwarded to spreading our wings further in helping the less fortunate.

6.3 Social Performance6.3.1 Empowering the Team Seylan

development Employees are our key customers, the pillars of strength of the organization who stood straight in good times as well as in bad times delivering the very best improving the productivity.

In the year under review the company took a further step forward by recognizing its valuable customers through employee engagement in providing opportunities for professional and personnel development.

More than just a workplace - An equal opportunity employer We strive to maintain equality of opportunity for all employees irrespective of ethnic origin, religion, gender, age or marital status. We also maintain a safe and healthy working environment for all our valued employees.

In this section below we look at how the Company’s activities have had an impact on society and on our employees.

Total workforce by employment type, employment contract, gender, ethnicity and ageCategory of Employment

Category No of Employees Percentage (%)Permanent 28 90.32%Contract 3 9.68%Total 31 100%

Breakdown of Employees per Category according to Gender

GenderSupervisory/ Clerical &

Executive TotalTechnical Allied

Male 17 3 4 24Female 1 2 4 7

Breakdown of Employees per Category according to Ethnic Group

Ethnic GroupSupervisory/ Clerical &

Executive TotalTechnical Allied

Sinhala 17 5 7 29Tamil 1 - - 1Muslim - - - -Burger - - 1 1Others - - - -

Breakdown of Employees according to Age

Age No of Employees< 20 -20 - 29 -30 - 39 1140 - 49 12>50 8



Annual Report and Accounts for 2012 signed on 21st February 2013.

20th Annual General Meeting held on 29th March, 2012.

Submission of the Interim Financial Statements in terms of Rule 7.4 of the Colombo Stock Exchange - 2012 » For the three months ended March 31, 2012

(un-audited) on 10th May, 2012

» For the six months ended June 30, 2012 (un-audited) on 2nd August, 2012

» For the nine months ended September 30, 2012 (un-audited) on 1st November, 2012

» For the twelve months ended December 31, 2012 (un-audited) before 28th February 2013.

Proposed Financial Calendar - 201321st Annual General Meeting to be held on 28th March 2013

Submission of Interim Financial Statements in terms of Rule 7.4 of the Colombo Stock Exchange - 2013 » For the three months ended March 31, 2012

(un-audited) on or before May 15, 2013

» For the six months ended June 30, 2012 (un-audited) on or before August 15, 2013

» For the nine months ended September 30, 2012 (un-audited) on or before November 15, 2013

» For the twelve months ended December 31, 2012 (un-audited) on or before February 28, 2014

FinancialCalendar 2013


directorateList of Directors

The following were the Directors of the Company during the year:

» Mr. R. Nadarajah (Chairman) » Mr. S. Palihawadana (Deputy Chairman) » Mr. K. Rathnayaka (Director/Acting General

Manager)(Resigned 30th November 2012)

» Mr. H. L. Gunasekara (Resigned 17th February 2012)

» Mr. P. Saravanapawan » Dr. P. M. Gunasekera » Mr. M. K. Muthukumar

(Appointed on 17th February 2012)

» Mr. K.P Ariyaratne (Appointed on 30th November 2012)

» Mr. R. Jayasekara (Appointed on 30th November 2012)

directors’ Responsibility for Financial ReportingThe Directors are responsible for the preparation of Financial Statements of the Company which should reflect a true and fair view of the state of its affairs. The Directors are of the view that the Statement of Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Cash Flow Statement, Accounting Policies and Notes thereto appearing on pages 57 to 89 have been prepared in conformity with the requirements of the Sri Lanka Accounting Standards, Companies Act No. 7 of 2007, Sri Lanka Accounting and Auditing Standards Act. No. 15 of 1995 and the Listing rules of the Colombo Stock Exchange.

The statement of Directors’ Responsibilities for the financial statements is given on page No. 52 of this Annual Report.

directors’ Interests in SharesThe Directors share holding information of the Company is as follows:

Mr. R. Nadarajah 15,000 SharesMr. S. Palihawadana 6,600 SharesMr. P. Saravanapawan NilDr. P. M. Gunasekera NilMr. M.K. Muthukumar NilMr. K. P. Ariyaratne NilMr. R. Jayasekara Nil

directors’ Interests in ContractsDirectors’ interests in contracts with the Company, both direct and indirect are disclosed on page No. 84.

These interests have been declared at Directors’ Meetings. Directors have no direct or indirect interests in any other contract or proposed contracts with the Company.

Corporate GovernanceSystems and procedures are in place to ensure that Corporate Governance is adequately and practically dealt with. The Board of Directors has focused on the necessary resources and processes required to ensure that the Company complies with the Codes of Best Practice on Corporate Governance issued by regulators as detailed in the Section on ‘Corporate Governance’ on pages 23 to 33.

AuditorsThe Audit Committee reviews the appointment of the Auditors, their effectiveness, independence and relationship with the Company. In accordance with Section 158 of the Companies Act No. 7 of 2007, the Auditors of the Company Messrs. KPMG - Chartered Accountant are deemed reappointed as Auditors of the Company.

The Auditors, Messrs. KPMG - Chartered Accountants were paid Rs. 700,000/- as audit fees for the year 2012 (2011 - Rs. 625,000/-). In addition, Auditors were paid Rs. 263,296/- as Non-Audit fee during the year 2012 (2011 - Nil).

System of Internal ControlsThe Board of Directors has taken steps to oversee the implementation of an effective and comprehensive system of Internal Controls covering financial operations and compliance controls required to carry on the business of the Company in an orderly manner, safeguard its assets and secure accuracy and reliability of the records. Controls over financial reporting were also reviewed during the year to ensure that they are robust and operationally sound.

TurnoverThe Company recorded a turnover of Rs. 157 Mn (2011 - Rs. 148 Mn).

ANNUAL REPORT OF ThE BOARd ON ThE STATE OF AFFAIRS OF ThE COMPANYThe details set out herein provide the pertinent information required by the Companies Act No. 07 of 2007, listing rules of the Colombo Stock Exchange and are guided by recommended best accounting practices.

GeneralThe Board of Directors have pleasure in presenting their report to the members, together with the audited Financial Statements for the year ended 31st December 2012 of Seylan Developments PLC, a Public Limited Liability Company incorporated in Sri Lanka on 3rd September 1992 quoted in the Colombo Stock Exchange on the same day and re-registered under the Companies Act, No. 07 of 2007 on 22 May 2008.

Principal Activities, Business Review, Future developmentsThe nature of principal activities of the Company which are property development/management and providing services to the tenants of East Tower and the apartment tenants at the West Tower was not significantly changed during the year.

A review of financial and operational performance of the Company during the year and the future developments of the Company is contained in the Chairman’s Statement on pages 6 to 7 of this Annual Report. The audited Financial Statements are given on pages 57 to 89 of the Annual Report. These reports together reflect the state of affairs of the Company during the period under review.

Financial StatementsThe financial statement of the Company was approved by the Board of Directors on 21st February 2013 and is stated on page nos. 57 to 89 in the Annual Report.

Auditor’s ReportThe auditor’s report on the financial statements is stated on page No. 56 in the Annual Report.

Accounting PoliciesThe accounting policies adopted by the Company in the preparation of financial statements are stated on pages 62 to 69. Those accounting policies have been applied consistently to all periods presented in these financial statements.

These are the Company’s first Financial Statements prepared in accordance with Sri Lanka Accounting Standards (SLFRSs) and SLFRS - 1 First-time Adoption of Sri Lanka Accounting Standards has been applied.

dividendThe Directors recommended the payment of a first and final dividend of Rs. 0.10 per share for the year ended 31 December 2011 which was approved by the shareholders at the Annual General Meeting of the Company held on 29 March 2012.

donationsThe Donations made during the year amounted to Rs. 149,843/- (2011 - Nil). The Company does not exceed the amount approved by the share holders at the last Annual General Meeting.

Interests RegisterThe Interests Register is maintained by the Company, as required by the Companies Act No. 7 of 2007. All Directors have made declarations as provided for in Section 192 (2) of the aforesaid Companies Act. Entries were made in the Interests Register on Directors’ interests in contracts and remuneration paid to them etc. The Interests Register is available for inspection as required by the Companies Act.

directors’ RemunerationsDirectors’ remuneration, in respect of the Company for the financial year ended December 31, 2012 is given in Note 9 of the Financial Statements on page 71.

Annual Report of the Board on the State ofAffairs of the Company


and belief, confirm that the Company has not engaged in any activities that contravene laws and regulations.

Statutory PaymentsThe Directors, to the best of their knowledge and belief confirm and are satisfied that all statutory payments to the Government regulatory institutions have been settled.

Outstanding LitigationThere were no litigation pending against the Company as at December 31, 2012, other than the cases disclosed in Note 28 on page 85.

Events after the Reporting PeriodThere have not been any material events that occurred subsequent to the reporting period that require adjustments to the Financial

Statements.

Going ConcernThe Directors having considered the financial position, operating conditions, regulatory requirements, and matters required to be addressed in the corporate governance code are satisfied that the Company has adequate resources to continue its operations in the foreseeable future. The Financial Statement of the company has been prepared accordingly on a Going Concern Basis.

Notice of MeetingThe Annual General Meeting will be held at ”Raja Bojun” at Seylan Towers, on day 28th March 2013 at 3.00 pm. Notice of Meeting relating to the Twenty First Annual General Meeting is given on page 95.

For and on behalf of the Board of Directors

………………….............. ………………….............. …………………..................................

R. Nadarajah S. Palihawadana SSP Corporate Services (Pvt) LtdChairman Deputy Chairman Company Secretary

21st February 2013

Operating ResultsDetails of profit relating to the Company are given below:

For the year ended december 31 2012Rs.

2011Rs.

Profit / (Loss) from operations for the year 95,976,798 36,561,072Less : Net Finance Income / (Expense) 16,121,378 (13,525,064)Profit / (Loss) before taxation 112,098,176 23,036,008Less : Provision for taxation (67,424,971) (8,525,047)Net Profit / (Loss) after taxation 44,673,205 14,510,961

(500)

(400)

(300)

(200)

(100)

-

100

200

2008** 2009Restated**

2010** 2011* 2012*

Rs. MnProfit After Tax

* Figures are based on new Sri Lanka Accounting Standards (SLFRSs)


Income Tax ExpensesIncome tax expense has been computed at the rates mentioned in Note 11 of the Financial Statements on pages 71 to 72.

Property, Plant and EquipmentDetails on Capital expenditure on Property, Plant and Equipment are given in Note 14 of the Financial Statements on page 73 of this Annual Report.

Investment PropertyThe land & the buildings held to earn rental income and capital appreciation are classified as an Investment Property. The value of Seylan Towers is stated at ‘Fair Value’ based on a valuation carried out by a Professional valuer in 2012 and the difference between the carrying value and the revalued amount has been taken to the Statement of Comprehensive Income. Details of Investment Properties are

given in Note 14 of the Financial Statements on page No. 74.

InvestmentsThe details of investments held by the Company are disclosed in Notes 15 on pages 75 to 77 of the Financial Statements.

Stated Capital and ReservesThe stated capital of the Company as at 31 December 2012 is Rs. 1,644,391,650/- comprising of 147,964,860 ordinary shares. There were no changes in the stated capital during the year from previous financial year.

The capital and reserves of the Company as at 31 December 2012 amounts to Rs 4,249,249,160/- (2011 - Rs. 4,219,372,441/-)

Share InformationInformation on shareholding is given on page No. 91.

ShareholdingsThere were 8,307 registered shareholders (9,053 in 2011) holding Ordinary Voting Shares as at December 31, 2012. The distribution of shareholding is given on page No. 91.

Substantial ShareholdingsThe list of the top twenty shareholders is given on page No. 91 of the Annual Report.

Equitable Treatment to ShareholdersAll shareholders have been treated equally in accordance with the original terms of issue.

Compliance with Laws and RegulationsThe Directors, to the best of their knowledge

Annual Report of the Board on the State ofAffairs of the Company Cont...


In terms of Sections 150 (1) and 151 (1) of the Companies Act No. 07 of 2007, the Directors are responsible for ensuring that the Company keep proper books of account of all transactions and events and prepares Financial Statements reflecting a true and fair view of the state of affairs of the Company at the reporting date and the profit or loss for the year ending on the reporting date.

The Directors have taken appropriate steps to ensure that the Company maintains proper books of account and review the financial reporting system at their meetings through the Audit Committee. The Report of the Audit Committee is given on page 34 to 35. The Board of Directors also approves Interim Financial Statements prior to their release following a review and recommendation by the Audit Committee.

The Financial Statements for the year 2012, prepared and presented in this Annual Report is consistent with the underlying books of account and is in conformity with the requirements of the Sri Lanka Accounting Standards, Companies Act No. 07 of 2007, Sri Lanka Accounting & Auditing Standards Act No. 15 of 1995 and Section 7 on Continuing Listing Requirements of the Listing Rules of the Colombo Stock Exchange.

The Directors have taken reasonable measures to safeguard the assets of the Company, by establishing of an appropriate system of

internal controls with the view to prevent and detect fraud and other irregularities. The Directors are responsible for the formulation of overall business policies and for guiding Management on the conduct of the activities of the Company. Accordingly, the day to day Management of the Company is delegated to a competent management team. The Directors have also made the necessary assessment that the Company ability to continue as a going concern and the Company has adequate resources to continue in its operations. The Company continues to adopt the Going concern basis in preparing the Financial Statements.

The Board of Directors also wish to confirm that as required under Sections 166 (1) and 167 (1) of the Companies Act, they have prepared the Annual Report and ensured that a copy thereof is sent to every shareholder of Company, within the stipulated period of time.

The Company’s External Auditors, Messrs KPMG - Chartered Accountants, appointed during the year, was provided with every opportunity to undertake the inspections they considered appropriate.

The Directors confirm that to the best of their knowledge, all statutory payments relating to employees and Government and other statutory bodies that were due in respect of the Company have been paid where relevant or provided for.

…………….......……… ……………......………… ………….............................………….

R. Nadarajah S. Palihawadana SSP Corporate Services (Pvt) Ltd Chairman Deputy Chairman Company Secretary

Statement of Directors’Responsibility

52 SEYLAN DEVELOPMENTS PLC ANNUAL REPORT 2012

Strengthen the process

FinancialStatement

Amounts in Sri Lankan Rupees

Note 2012 2011

Rental income 5 156,975,913 148,451,419

Other income 6 15,661,773 62,461,656

172,637,686 210,913,075

Personnel cost 7 (25,288,297) (26,617,533)

Premises, equipment, establishments (30,325,969) (30,793,343)

Administrative expenses (19,613,418) (5,289,558)

Marketing expenses (129,608) (273,950)

97,280,394 147,938,691

Provision for doubtful receivables (1,303,596) (826,619)

Provision / impairment for investments 8 - (110,551,000)

Results from operating activities 9 95,976,798 36,561,072

Net finance income / (expense) 10 16,121,378 (13,525,064)

Profit before income taxation 112,098,176 23,036,008

Income tax expenses 11 (67,424,971) (8,525,047)

Net profit for the year 44,673,205 14,510,961

Other comprehensive income

Revaluation of property, plant and equipment - 603,119

Deferred tax liability on revaluation of property plant & equipment - (168,873)

Other comprehensive income for the period, net of income tax - 434,246

Total comprehensive income for the period 44,673,205 14,945,207

Earnings per share 12 0.30 0.12

The notes on pages 70 to 89, form an integral part of these financial statements.

STATEMENT OF COMPREHENSIVE INCOMEFor The Year Ended 31St December

STAT

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T O

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INC

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T A

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We have audited the accompanying financial statements of Seylan Developments PLC (“the Company”), which comprise the statement of financial position as at December 31, 2012, the statements of comprehensive income, changes in equity and cash flow for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information set out on pages 57 to 89 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.

OpinionIn our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended December 31, 2012 and the financial statements give a true and fair view of the financial position of the Company as at December 31, 2012, and of its financial performance and its cash flow 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 Section 151(2) of the Companies Act No. 07 of 2007.

INDEPENDENT AUDITORS’ REPORT


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Note 2012 2011 1 Jan 2011

AssetsNon Current Assets

Property, plant & equipment 13 3,276,586 3,227,055 5,494,921 Investment property 14 4,647,399,250 4,638,504,146 4,802,584,153 Other investments 15 7,878,662 878,364 2,383,319 Total Non Current Assets 4,658,554,498 4,642,609,565 4,810,462,393

Current AssetsInventories 16 3,554,428 1,156,165 1,075,177 Trade and other receivables 17 55,131,457 52,718,858 44,665,375 Other assets 18 16,209,131 16,560,123 8,851,901 Other investments 15 187,371,671 75,100,000 100,000 Income tax receivable 20 1,257,701 6,116,401 2,989,217 Cash and cash equivalents 21 25,724,409 9,692,678 5,059,483 Total Current Assets 289,248,797 161,344,225 62,741,153 Total Assets 4,947,803,295 4,803,953,790 4,873,203,546

Equity and LiabilitiesEquity

Stated capital 22 1,644,391,650 1,644,391,650 1,356,078,570 Reserves 525,927,896 525,927,896 - Retained earnings 2,078,929,614 2,049,052,895 2,034,541,934

4,249,249,160 4,219,372,441 3,390,620,504

Non Current LiabilitiesInterest bearing loans and borrowings 23 - - 1,077,315 Deferred tax liability 24 531,384,164 469,836,848 462,695,016

531,384,164 469,836,848 463,772,331

Current LiabilitiesBank overdrafts 21 503,047 2,478,840 4,606,529 Interest bearing loans and borrowings 23 - - 800,032,882 Other liabilities 25 166,666,924 112,265,661 214,171,300

167,169,971 114,744,501 1,018,810,711

Total Equity and Liabilities 4,947,803,295 4,803,953,790 4,873,203,546

The notes on pages 70 to 89, form an integral part of these financial statements. The financial statements have been prepared in compliance with the requirement of Companies Act no 7 of 2007 …………………………. N. P. Arangalage Accountant The Board of Directors is responsible for the preparation and presentation of these financial statements. Approved and signed on behalf of the Board of Directors;

…………………….. ……………..R Nadarajah S. PalihawadanaChairman Deputy Chairman Colombo 21st February 2013

STATEMENT OF FINANCIAL POSITIONFor The Year Ended 31St December


Reconciliation of Operating Profit

2012 2011

Cash flows from operating activities

Net Profit before taxation 112,098,176 23,036,008

Adjustment for:

Gratuity (303,185) 4,089,591

Miscellaneous Income - (68,140,210)

Profit on Sale of Fixed Assets - (3,636,047)

Profit on Sale of Investments Securities - (470,435)

Depreciation 1,287,513 2,264,340

Changes in Fair value of Investment properties (9,297,021) 20,314,303

Allowance for impairment in Investments Securities / Projects - 70,351,000

Bad & Doubtful Debtors 1,303,596 826,619

Interest income (19,005,305) (8,527,953)

Over Provision reversals - (5,928,735)

Provision for Corporate Guarantee - 40,200,000

Net change in fair value of financial assets at fair value through profit or loss 2,999,702 (621,324)

Amortisation of prepaid staff expenses 89,317 -

Changes in interest income of staff loan and staff cost on SLFRS Adjustments (91,357) -

Operating Profit before Working Capital Changes 89,081,436 73,757,157

CASH FLOW STATEMENTFor The Year Ended 31St December

CA

SH F

LOW

STA

TEM

ENT


For the period 2012 2011Cash Flows from Operating Activities

Receipt from other Operating Activities 163,697,835 159,204,093

Cash payments to Employees, Suppliers and Tax Authorities (74,383,928) (70,971,272)

Interest Payments (232,471) (14,475,664)

Operating profit before changes in operating assets 89,081,436 73,757,157

(Increase)/Decrease in operating assets:

Stock & Receivables 896,555 (16,827,239)

Increase/(Decrease) in operating liabilities:

Deposits & Trade payables 50,130,226 (171,784,802)

Cash Generated from Operations 140,108,217 (114,854,884)

Income Taxes paid - (713,399)

Gratuity paid (102,713) -

Net cash from Operating Activities 140,005,504 (115,568,283)

Cash Flows from Investing Activities

Interest Received 19,005,305 8,527,953

Purchase of Dealing Securities (122,271,671) (75,028,440)

Disposal of Dealing Securities - 2,624,085

Investments in Projects - (47,937)

Proceeds from Sale of Property, Plant & Equipment - 5,300,500

Purchase of Property, Plant and Equipment (1,337,045) (126,014)

Capital repayment from projects - 17,064,872

Purchase of Investment Property (2,598,083) (2,427,919)

Net cash from Investing Activities (107,201,494) (44,112,900)

Cash Flows from Financing Activities

Net increase/ (decrease) in Other Borrowings - (647,364,663)

Cash proceeds from right issue - 813,806,730

Dividends paid (14,796,486) -

Net Cash from Financing Activities (14,796,486) 166,442,067

Net increase in cash and cash equivalents 18,007,524 6,760,884

Cash and Cash equivalents at beginning of period 7,213,838 452,954

Cash and Cash Equivalents at end of period 25,221,362 7,213,838

Reconciliation of Cash and Cash Equivalents

Cash & Cash Equivalents 25,724,409 9,692,678

Bank Overdraft (503,047) (2,478,840)

Net Cash & Short Term Funds (Cash & Cash Equivalents) 25,221,362 7,213,838

CASH FLOW STATEMENTFor The Year Ended 31St December

CA

SH F

LOW

STA

TEM

ENT



and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes. The following specific recognition criteria must also be met before revenue is recognised:

Rental incomeRental income from Investment Property leased out under operating lease 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.

DividendsDividend income is recognized when the shareholders’ right to receive the payment is established.

OthersOther income is recognized on an accrual basis. Net Gains and losses of a revenue nature on the disposal of Property Plant and Equipment and other non-current assets including investments have been accounted for in profit or loss, having deducted from proceeds on disposal, the carrying amount of the assets and related selling expenses

3.3 ExpensesExpenses are recognized in profit or loss as they are incurred, in the period to which they relate.

3.4 Lease paymentsPayments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised 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.

Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

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

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions and changes in the fair value of financial assets at fair value through profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

3.6 TaxesCurrent income taxThe 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 thereon.

Deferred taxationDeferred 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 measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

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 benefit will be realized.

Economic Service Charge (ESC)ESC is payable on the liable turnover at specified rates. As per the provision of the Economic Service Charge Act No. 13 of 2006 and subsequent amendments thereto, ESC is deductible from the income tax liability. Any unclaimed payment can be carried forward and set off against the income tax payable as per the relevant provision in the Act.

3.7 Earnings per share (EPS)The Company presents basic EPS data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

3.8 Property Plant and EquipmentProperty, plant and equipment are tangible items that are held for use in the production or supply of goods or services, for rental to others or for administrative purposes and are expected to be used during more than one period.

NO

TES

TO T

HE

FIN

AN

CIA

L ST

ATEM

ENTS

NOTES TO THE FINANCIAL STATEMENTS

1. REPORTING ENTITy

Seylan Developments PLC (the “Company”) is a “Public Quoted Company” and a Limited Liability Company Incorporated and domiciled in Sri Lanka and listed on the Colombo Stock Exchange.

• The Company’s registered office is situated at No. 90, Galle Road, Colombo 03.

• The Company is in the business of development of property, administration & maintenance.

• The Company is a subsidiary of Seylan Bank PLC.

• The staff strength of the Company as at 31st December 2012 is 31 (2011- 31).

2. BASIS OF PREPARATION

2.1 Statement of complianceThe financial statements of the Company have been prepared in accordance with Sri Lanka Accounting Standards (SLFRS) as issued by the Institute of Chartered Accountants of Sri Lanka.

For all periods up to and including the year ended 31 December 2011, the Company prepared its financial statements in accordance with Sri Lanka Accounting Standards (SLASs). These are the Company’s first Financial Statements prepared in accordance with Sri Lanka Accounting Standards (SLFRSs) and SLFRS - 1 First-time Adoption of Sri Lanka Accounting Standards has been applied.

An explanation of how the transition to SLFRSs has affected the reported financial position, financial performance and cash flows of the Company is provided in note 34.

The Company’s financial statements were authorized for issue by the Board of Directors on 21st February 2013.

2.2 Basis of measurementThe Financial Statements have been prepared on the historical cost basis 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

• Investment Property is measured at fair value

• Liability for defined benefit obligation is recognized as the present value of the defined benefit obligation less the net total of the plan assets and unrecognized past service cost.

2.3 Functional and presentation currencyThese financial statements are presented in Sri Lankan Rupees, which is the Company’s functional currency.

2.4 Use of estimates and judgmentsThe preparation of the financial statements in conformity with SLFRSs requires Management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

In particular, Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the Financial Statements are described in the following notes:

Note 14 - Investment Property

Note 24 - Deferred Taxation

Note 25.1 - Measurement of Defined Benefit Obligations

Note 26 - Fair value of financial instruments

3. SUmmARy OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these financial statements and in preparing the opening SLFRSs statement of financial position at 1 January 2011 for the purposes of the transition to SLFRSs, unless otherwise indicated.

3.1 Foreign currency transactionsTransactions in foreign currencies are translated to the functional currency of Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss.

3.2 Revenue recognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Company

NO

TES

TO T

HE F

INA

NC

IAL

STAT

EMEN

TS

NOTES TO THE FINANCIAL STATEMENTS


Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

3.9 Intangible Assets - SoftwareSoftware acquired is stated at cost less accumulated amortization and accumulated impairment losses. Subsequent expenditure on software assets is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expense as incurred. Amortization is recognized in profit or loss on a straight line basis over the estimated useful life of the software, from the date that is available for use since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful life of software is as follows;

Amortization Useful LifeAccounting Software 20% 05

3.10 Leased assetsLeases in terms of which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Other leases are operating leases and, except for Investment Property, the leased assets are not recognized in the Statement of Financial Position. Investment Property held under an operating lease is recognized in the Statement of Financial Position at its fair value.

3.11 Investment PropertyInvestment Properties are those which are held either to earn rental income or for capital appreciation or for both. Investment Properties are stated at fair value. An external, independent valuation Company, having an appropriate recognized professional qualification and recent experience in the location and category of property being valued, values the 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 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, prudently and without compulsion.

Any gain or loss arising from a change in fair value is recognized in profit or loss. Rental income from

investment property is accounted for as described in accounting policy.

When an item of Property, Plant and Equipment is transferred to Investment Property following a change in its use, any differences arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value is recognized directly in Equity if it is a gain. Upon disposal of the item the gain is transferred to Retained Earnings. Any loss arising in this manner is recognized in profit or loss immediately.

If an Investment Property becomes owner-occupied, it is reclassified as Property, Plant and Equipment and its fair value at the date of reclassification becomes its deemed cost for subsequent accounting.

When the Company begins to redevelop an existing Investment Property for continued future use as

Investment property, the property remains an Investment Property, which is measured based on fair value model, and is not reclassified as property, plant and equipment during the redevelopment.

A property interest under an operating lease is classified and accounted for as an Investment Property on a property-by-property basis when the Company holds it to earn rentals or for capital appreciation or both any such property interest under an operating lease classified as an Investment Property is carried at fair value. Lease payments are accounted for as described in accounting policy.

Investment properties are derecognised 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. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the Statement of Comprehensive Income in the period of derecognition.

3.12 Financial Instruments - Initial recognition and subsequent measurement(i) Non-derivative financial assetsThe Company initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the

NO

TES

TO T

HE

FIN

AN

CIA

L ST

ATEM

ENTS

Basis of Recognition Property, plant and equipment are recognised if it is probable that future economic benefits associated with the assets will flow to the Company and cost of the asset can be reliably measured.

Measurement An item of property, plant and equipment that qualifies for recognition as an asset is initially measured at its cost. Cost includes expenditure that is directly attributable to the acquisition of the asset and cost incurred subsequently to add to, replace part of, or service it. The cost of self constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of computer equipment.

RevaluationProperty Plant and Equipments of the Company are revalued every five years on a roll over basis to ensure the carrying amounts do not differ materially from the fair values at the reporting Date. On revaluation of an asset, any increase in the carrying amount is recognized in Other Comprehensive Income and accumulated in equity, under revaluation reserve or used to reverse a previous revaluation decrease relating to the same asset, which was charged to the Statement of Comprehensive Income. Any decrease in the carrying amount is recognized as an expense in the Statement of Comprehensive Income or debited in the Other Comprehensive Income to the extent of any credit balance existing in the capital reserve in respect of that asset. The decrease recognised in Other Comprehensive Income reduces the amount accumulated in equity under revaluation reserves. Any balance remaining in the revaluation reserve in respect of an asset is transferred directly to Retained Earnings on retirement or disposal of the asset.

Reclassification to Investment PropertyWhen the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified as an Investment Property. Any gain arising on remeasurement is recognized in profit or loss to the extent the gain reverses a previous impairment loss on the specific property, with any remaining gain recognized in other comprehensive income and presented in revaluation reserve in equity. Any loss is recognized in the Statement of Changes in Equity and presented in the Revaluation Reserve in Equity to the extent that an amount had previously been included in the Revaluation Reserve relating to the specific property, with any remaining loss recognised immediately in profit or loss.

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

DerecognitionThe carrying amount of an item of Property, Plant and Equipment is derecognized on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of an item of Property, Plant and Equipment is included in profit or loss when the item is derecognized. When replacement costs are recognized in the carrying amount of an item of Property, Plant and Equipment, the remaining carrying amount of the replaced part is derecognized. Major inspection costs are capitalized. At each such capitalization, the remaining carrying amount of the previous cost of inspections is derecognized.

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

Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of Property, Plant and Equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. Land is not depreciated.

The estimated useful lives and rates of depreciation for the current and comparative periods are as follows:

Depreciation Useful LifeFurniture & Fittings 10% 10

Equipment 20% 05

Motor Cars 20% 05

Motorcycles 25% 04

Tools 33.33% 03

Leasehold Equipment 20% 05

Other Equipment 20% 05

Apartment Assets 20% 05

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.

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NOTES TO THE FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS


3.13 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.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs to sell.

3.14 Cash and short-term depositsCash and Cash Equivalents comprise cash in hand and short term deposits. Company overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as components of Cash and Cash Equivalents for the purpose of presenting the Cash flow statement.

Cash Flow Statement is prepared under the “Direct” method as per LKAS 7 – Statement of Cash Flows.

3.15 Stated Capital3.15.1 Ordinary Shares

Company’s Stated Capital comprises of ordinary shares, which are classified as Equity.

3.16 ProvisionsProvisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

3.17 Impairment(i) Financial assets (including receivables)

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a

significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

The Company considers evidence of impairment for receivables and held-to-maturity investment securities at both a specific asset and collective level. All individually significant receivables and held-to-maturity investment securities are assessed for specific impairment. All individually significant receivables and held-to-maturity investment securities found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables and held-to-maturity investment securities that are not individually significant are collectively assessed for impairment by grouping together receivables and held-to-maturity investment securities with similar risk characteristics.

In assessing collective impairment the Company uses historical trends of the default and the amount of loss incurred, adjusted for management’s judgement 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 trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised 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 recognised by transferring the cumulative loss that has been recognised in other comprehensive income, and presented in the fair value reserve in equity, to profit or loss. The cumulative loss that is removed from other comprehensive income and recognised in profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised 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 related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment loss is reversed,

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contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.

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

The Company has the following non-derivative financial assets;

Financial assets at fair value through profit or loss

Held-to-maturity financial assets

Loans and receivables

Available-for-sale financial assets.

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 Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company’s documented risk management or investment strategy. Upon initial recognition attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognised in Statement of Comprehensive Income.

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

Loans and receivablesLoans and receivables are financial assets with fixed or determinable payments that are not quoted in an

active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

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 Company’s unquoted investments in equity securities and certain debt securities are classified as available-for-sale financial assets.

Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (see note 15.2) are recognised in other comprehensive income and presented within equity in the fair value reserve. When an investment is derecognised, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.

(ii) Non-derivative financial liabilitiesThe Company initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

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

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

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

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

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Risk management frameworkThe Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.

The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Company Audit Committee oversees how management monitors compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

Credit RiskCredit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities.

Trade and other receivablesThe Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Approximately 54 percent (2011: 54 percent) of the Company’s revenue is attributable to sales transactions with a single customer who is the Parent Company of Seylan Developments PLC. The Company collects rent deposits from the tenants initially, which can be used to recover any unpaid rents.

The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments, where appropriate.

InvestmentsThe Company limits its exposure to credit risk by investing only in liquid securities. Management actively monitors credit ratings and given that the Company only has invested in securities with high credit ratings.

LIQUIDITY RISKLiquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash

or another financial asset. The 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, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation

MARKET RISKMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

OPEARIONAL RISKOperational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Company’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Company’s operations.

The Company’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Company’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management. This responsibility is supported by the development of overall Company standards for the management of operational risk in the following areas:

• Requirements for appropriate segregation of duties, including the independent authorization of transactions

• Requirements for the reconciliation and monitoring of transactions

• Compliance with regulatory and other legal requirements

• Documentation of controls and procedures

• Development of contingency plans

• Training and professional development

• Risk mitigation, including insurance when this is effective.

Compliance with Company standards is supported by a programme of periodic reviews undertaken by Internal Audit. The results of Internal Audit reviews are discussed with the management of the business

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with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

3.18 Non Current Asset held for saleNon-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held for sale, the assets, or components of a disposal group, are remeasured in accordance with the Company’s accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less cost to sell. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

3.19 Employee benefits3.19.1 Defined benefit plan

The Company operates an approved Gratuity Fund to facilitate the payments for permanent staff of the Company.

The Company’s obligation in respect of defined benefit gratuity plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods and discounting that benefit to determine its present value, then deducting the fair value of any plan assets. The discount rate is the yield at the reporting date on Government bonds that have maturity dates approximating to the terms of the Company’s obligations. The Company carries out an actuarial valuation of the Gratuity Fund in December each year to ascertain the full liability of the Fund. The calculation is performed by a qualified actuary using the Projected Unit Credit Method which is the method recommended by LKAS 19 “Employee Benefits”.

The Company recognises all actuarial gains and losses arising from defined benefit plans in profit or loss in the Statement of Comprehensive income

However, under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of five years of continual service.

3.19.2 Defined contribution plan.A defined contribution plan is a post employment plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay a further amount.

Obligations for contributions to defined contribution plans are recognized as expense in profit or loss as and when they are due.

3.19.2 (a) Employees’ Provident FundThe Company and employees contribute 12% and 8% respectively on the salary of each employee to the Employees’ Provident Fund. (Note - 07)

3.20.2 (b) Employees’ Trust FundThe Company contributes 3% of the salary of each employee to the Employees’ Trust Fund. The total amount recognized as an expense to the Company for contribution to ETF is disclosed in the Notes to Financial Statements. (Note - 07)

3.20 Commitments and ContingenciesCommitments and contingencies as at the balance sheet date, is disclosed in Note 30 to the Financial Statements.

3.21 Events after the Reporting PeriodAll material and important events which occur after the Reporting Period have been considered and disclosed in Note 29 or adjusted as applicable.

3.22 Comparative InformationThe comparative information is re-classified wherever necessary to conform with the current year’s presentation in order to provide a better presentation. The detail of restatement is disclosed in Note 32 to the Financial Statements.

3.23 Directors’ Responsibility StatementThe Board of Directors of the Company is responsible for the preparation and presentation of these Financial Statements. Please refer to page 52 for the statement of the Directors’ Responsibility for financial reporting.

4 FINANCIAL RISk mANAGEmENT

OverviewThe Company 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 Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these financial statements.

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2012 2011

8 ProvisionsProvision for Impairment of Investment Properties (Note 14.1) - 70,351,000

Provision for Corporate Guarantee (Note 31) - 40,200,000

- 110,551,000

9 Results from Operating ActivitiesResults from operating activities are stated after deducting all operating expenses

including the following,Directors' Emoluments 1,295,000 940,000

Audit Fees 812,705 625,000

Non Audit Fees 96,934 -

Audit Fees - Internal 260,590

Depreciation (Note 13) 1,287,513 2,264,341

Legal Fees 484,200 89,000

Professional Fees 983,721 636,315

10 Financing Income & Expenses10.1 Finance Income

Interest income on loans and receivables 348,246 223,409

Interest income on bank deposits 19,005,305 8,527,953

Net change in fair value of financial assets at fair value through profit or loss (2,999,702) 621,324

16,353,849 9,372,686

10.2 Finance Expenses Interest on Overdraft 16 106,087

Interest on Bank Loan - 13,419,030

Bank Charges 232,355 75,455

Debits Tax - 161,583

Overdue Interest 100 333,082

Interest on Leasing - 1,833,370

Trustee Fees - 432,600

Rights Issue Expenses - 6,536,543

232,471 22,897,750

Net Finance Expenses / (Income) (16,121,378) 13,525,064

Recognised in Other Comprehensive IncomeRevaluation of property, plant and equipment - 603,119

Deferred Tax Liability on revaluation of Property Plant & Equipment - (168,873)

Finance Income recognised in Other Comprehensive Income, net of tax - 434,246

11 Income Tax ExpensesCurrent Tax 5,877,655 1,552,088

Under Provision for Taxation - -

5,877,655 1,552,088

Deferred Income TaxDeferred Taxation Charge/ (Reversal) (Note 24) 61,547,316 6,972,959

61,547,316 6,972,959

Income Tax expense reported in the Statement of Comprehensive Income 67,424,971 8,525,047

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NOTES TO THE FINANCIAL STATEMENTSAmounts in Sri Lankan Rupees

unit to which they relate, with summaries submitted to the Audit Committee and senior management of the Company.

Capital ManagementThe Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market con-

fidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Company defines as result from operating activities divided by total shareholders’ eq-uity. The Board of Directors also monitors the level of dividends to ordinary shareholders.

The Company’s debt to adjusted capital ratio at the end of the reporting period was as follows;

2012 2011Rs. ‘000 Rs. ‘000

Total liabilities 698,554 584,581

Less: cash and cash equivalents 25,724 9,693

Net debt 672,830 574,888

Total equity 4,249,249 4,219,372

Debt to adjusted capital ratio at 31 December 0.16 0.14

2012 2011Rs. Rs.

5 Turnover

Rental Income 156,975,913 148,451,419

156,975,913 148,451,419

6 Other Income

Management Fees 4,854,010 4,877,020

Profit on disposal Property Plant & Equipment - 3,636,047

Dividend Income 843 657

Work Order Income 1,266,921 1,063,278

Profit / (loss) from disposal of Investment Property - -

Miscellaneous Income 242,978 73,198,957

Change in Fair Value of Investment Properties (Note 6.1) 9,297,021 (20,314,303)

15,661,773 62,461,656

6.1 Change in Fair Value of Investment Properties

Investment property - Seylan Towers 9,297,021 -

Investment property - Moratuwa - (20,314,303)

9,297,021 (20,314,303)

7 Personnel Cost

Salary and wages (Including Directors' emoluments) 14,694,305 12,621,689

Statutory EPF 1,646,923 1,481,194

Statutory ETF 401,979 370,298

Staff allowances 1,788,250 2,152,950

(Reversal) / Provision for retirement benefits (Note 25.1.f ) (3,375,290) 4,089,591

Amortisation of prepaid staff expenses 89,317 -

Other staff expenses 10,042,813 5,901,811

25,288,297 26,617,533

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13Pr

oper

ty, P

lant

& E

quip

men

t

Offi

ce, m

achi

ne &

Equi

pmen

tsFu

rnitu

re &

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ings

mot

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hicl

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aseh

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Equi

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ts

Free

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Eq

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Apa

rtm

ent

Ass

ets

Tota

l

Cost

/ Re

valu

atio

n (R

s.)

Bal

ance

as a

t 01s

t Jan

uary

201

1 1

0,67

8,90

7 9

,872

,920

2

,428

,125

4

,263

,640

-

3

,859

,190

-

3

1,10

2,78

2

Add

ition

s 1

26,0

14

-

-

-

-

-

126

,014

Rev

alua

tion

Surp

lus/

(Defi

cit)

(9,5

89,7

31)

(7,8

40,7

02)

-

-

-

-

-

(17,

430,

433)

Tra

nsfe

rs to

/ (fro

m) F

reeh

old/

leas

ehol

d As

sets

-

-

-

(4

,263

,640

) 4

,263

,640

-

-

-

Disp

osal

s -

-

(2

,428

,125

) -

-

(3

,326

,921

) -

(5

,755

,046

)

Bal

ance

as

at 3

1st D

ecem

ber 2

011

1,2

15,1

90

2,0

32,2

18

-

-

4,2

63,6

40

532

,269

-

8

,043

,317

Bal

ance

as a

t 01s

t Jan

uary

201

2 1

,215

,190

2

,032

,218

-

-

4

,263

,640

5

32,2

69

-

8,0

43,3

17

Add

ition

s 2

00,1

90

26,

505

-

-

-

-

1,1

10,3

49

1,3

37,0

44

Bal

ance

as

at 3

1st D

ecem

ber 2

012

1,4

15,3

80

2,0

58,7

23

-

-

4,2

63,6

40

532

,269

1

,110

,349

9

,380

,361

Acc

umul

ated

Dep

reci

atio

n (R

s.)

Bal

ance

as a

t 01s

t Jan

uary

201

1 1

0,07

6,10

8 7

,795

,858

2

,349

,627

2

,558

,183

-

2

,828

,085

-

2

5,60

7,86

1

Cha

rge

for t

he y

ear

417

,105

6

17,5

63

38,

029

852

,728

-

3

38,9

15

-

2,2

64,3

40

Rev

alua

tion

Adju

stm

ent

(9,7

00,9

78)

(8,3

32,5

74)

-

-

-

-

-

(18,

033,

552)

Tra

nsfe

r to/

(fro

m) F

reeh

old/

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sets

-

-

-

(3

,410

,911

) 3

,410

,911

-

-

-

Disp

osal

s -

-

(2

,387

,656

) -

-

(2

,634

,731

) -

(5

,022

,387

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Bal

ance

as

at 3

1st D

ecem

ber 2

011

792

,235

8

0,84

7 -

-

3

,410

,911

5

32,2

69

-

4,8

16,2

62

Bal

ance

as a

t 01s

t Jan

uary

201

2 7

92,2

35

80,

847

-

-

3,4

10,9

11

532

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-

4

,816

,262

Cha

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for t

he y

ear

108

,934

2

03,6

64

-

-

852

,729

-

1

22,1

86

1,2

87,5

13

Bal

ance

as

at 3

1st D

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012

901

,169

2

84,5

11

-

-

4,2

63,6

40

532

,269

1

22,1

86

6,1

03,7

75

Net

boo

k va

lue

as a

t 31s

t Dec

embe

r 201

2 5

14,2

11

1,7

74,2

12

-

-

-

-

988

,163

3

,276

,586

Net

boo

k va

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as a

t 31s

t Dec

embe

r 201

1 4

22,9

55

1,9

51,3

71

-

-

852

,729

-

-

3

,227

,055

Net

boo

k va

lue

as a

t 01s

t Jan

uary

201

1 6

02,7

99

2,0

77,0

62

78,

498

1,7

05,4

57

-

1,0

31,1

05

-

5,4

94,9

21

NOTE

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Amou

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n Sr

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11.1 Reconciliation of Income Tax

Profit/ (Loss) as per the Statement of Comprehensive Income 112,098,176 23,036,008

(-) Income from other sources

Interest Income 19,005,305 8,527,953

Dividend Income 843 657

SLFRS Adjustment in the staff loan interest income 91,357 -

Faire value adjustment in Financial Assets - 621,324

Profit on Disposal of Property, Plant & Equipment - 3,636,047

Changes in Fair value of Investment Property 9,297,021 -

Project Contribution write back - 68,140,211

Vehicle Disposal - 2,850,000

Profit on Share Disposal - 470,435

Reversal of over provision of Interest on Bank Loans - 54,655,354

Reversal of over provision 3,375,290 4,761,599

80,328,360 (120,627,572)

Disallowable Expenses 9,344,130 144,311,210

89,672,490 23,683,638

Allowable Expenses (76,382,985) (76,522,840)

Adjusted Tax Profit / (Loss) 13,289,505 (52,839,202)

Total Statutory Income

Adjusted Tax Profit / (Loss) 13,289,505 -

Interest Income 19,005,305 8,527,953

32,294,810 8,527,953

Less : Tax Losses set off (11,303,184) (2,984,784)

Taxable Income 20,991,626 5,543,169

Tax liability

Taxable Income at 28% 5,877,655 1,552,088

12 Earnings/ (Loss) Per Share

The computation of basic earnings / (loss) per share is based on the net profit / (loss) attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue during the period.

Profit attributable to ordinary shareholders 44,673,205 14,510,961

Weighted average number of ordinary shares 147,964,860 123,212,163

Basic earnings / (loss) per ordinary share (Rs) 0.30 0.12

On 9th March 2011 the Company announced the right issue of 73,982,430 new ordinary shares by way of rights to qualifying shareholders at Rs. 11/- per share. The issue was on basis of 1 share for every 1 share held as of the said date. As required by LKAS 33 "Earnings Per Share" the impact of the bonus element included within the price of right issue has been adjusted in arriving at the number of ordinary shares used as the denominator for the year ended 31st December 2011.

2012 2011

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14.2 The carrying amount of Investment Property is the fair value of the property as determined by a registered independent appraiser having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued. Fair values were determined having regard to recent market transactions for similar properties in the same location as the Company’s Investment Property."

Investment Property Extent Date of Valuation market Value

Address

No, 90, Galle Road, Colombo 03. 0A - 3R - 24.55 P 31st December 2012 4,356,000,000

No. 257, Union Place, Colombo 02. 0A - 1R - 12.27 P 28th December 2008 250,255,500

Moratuwa Lake villas, St. Peters Road, Moratuwa 0A - 3R - 23.75 P 31st December 2012 50,143,750

4,656,399,250

14.3 A valuation was carried out for the Union Place Property on 5th December 2012 and the property valued at Rs: 320 mn. The property is presently occupied by Ceylinco Packaging (Pvt) Limited and Seylan Developments PLC has limited access to the property. The Company has initiated legal actions for the eviction.

As the valuation was based on the assumption that the property is unencumbered without restrictions, valuation gain was not recognized in the profit or loss for the year ended 31st December 2012.

15 Other Investments

2012 2011 1 January 2011Non Current Investments

Financial Assets designated at fair value through profit or loss (Note 15.2.1) 7,878,662 878,364 2,382,250

Available-for-sale financial assets (Note 15.2.2) - - 1,069

7,878,662 878,364 2,383,319

The financial assets designated as fair value through profit or loss and available for sale are equity securities.

Current InvestmentsHeld to maturity investments 193,414,272 81,142,601 6,142,601

193,414,272 81,142,601 6,142,601

Provision for Impairment (6,042,601) (6,042,601) (6,042,601)

187,371,671 75,100,000 100,000

Held to maturity investments under current investments includes Fixed Deposits with short term maturities.

The impairment provision for the above was done due to the uncertainty of the realisiability of the assets. The provision includes Fixed Deposit investment in Standard Credit Lanka Limited. (Formerly known as Ceylinco Investment & Reality Ltd) and Debenture investments in Ceylinco Fashion Trend Ltd.

The Company's exposure to credit and interest rate risk related to other investments is disclosed in Note 26.


14 Investment Property

Property at Colombo 3Property at

Union PlaceProperty at

moratuwaProperty at

Ja-Ela TotalLeaseholdLand

Building, Plant &

machinery

Balance as at 1st January 2011 1,542,733,585 2,798,943,392 250,255,500 140,300,676 70,351,000 4,802,584,153

Additions during the year - 2,427,919 - 47,937 - 2,475,856

Transfers / Set off (75,890,560) - (75,890,560)

Provision for Impairments (Note 14.1) - - - - (70,351,000) (70,351,000)

Changes in fair value - - - (20,314,303) - (20,314,303)

Net Balance as at 31st December 2011 1,542,733,585 2,801,371,311 250,255,500 44,143,750 - 4,638,504,146

Balance as at 1st January 2012 1,542,733,585 2,801,371,311 250,255,500 44,143,750 70,351,000 4,708,855,146

Additions during the year - 2,598,083 - - - 2,598,083

Disposals during the year - - - (3,000,000) - (3,000,000)

Provision for Impairments (Note 14.1) - - - - (70,351,000) (70,351,000)

Changes in fair value (123,986,999) 133,284,020 - - - 9,297,021

Net Balance as at 31st December 2012 1,418,746,586 2,937,253,414 250,255,500 41,143,750 - 4,647,399,250

Investment Property comprises properties at Colombo 3 and Union Place that are leased to third parties and to Seylan Bank PLC, the Parent.

Property at Colombo 3 contains an initial non-cancellable period of 99 years. In accordance with LKAS 40, a property interest under an operating lease is classified and accounted for as an Investment Property on a property-by-property basis when the Company holds it to earn rentals or for capital appreciation or both. Any such property interest under an operating lease classified as an Investment Property is carried at fair value.

Property at Moratuwa and Ja-Ela classified as Investment Property at the date of transition to SLFRS.

14.1 Provision for impairment

2012 2011 1 January 2011Ja - Ela Commercial Complex

Balance as at 1st January 70,351,000 70,351,000 70,351,000

Provision for Impairments (70,351,000) (70,351,000) -

Balance as at 31st December - - 70,351,000

The Ja-Ela Commercial Complex was a joint venture project and a Directors of joint venture party agreed to allocate marked portion of the complex in settlement of the contribution by Seylan Developments PLC towards the project. The Company accounted for the investment of Ja-Ela Commercial Complex based on the valuation of said marked portion. As the final settlement was not forthcoming as anticipated, and there was no income derived from the investment for a considerable period, full provision was made as impairment loss during the year 2011.

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15.

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2012 2011 1 January 2011 Number Rs. Number Rs. Number Rs.

22 Stated Capital

Issued and Fully Paid Ordinary Shares

On issue as at 1 January 147,964,860 1,644,391,650 73,982,430 830,584,920 73,982,430 830,584,920

Right Issue - - 73,982,430 813,806,730 - -

Capital Redemption Reserve Fund - - - - - 525,493,650

On issue as at 31 December 147,964,860 1,644,391,650 147,964,860 1,644,391,650 73,982,430 1,356,078,570

The holders of ordinary shares are entitled to one vote per individual present at meetings of the share holders and one vote per share in case of a poll and are also entitled to receive dividends as declared from time to time.

2012 2011 1 January 2011

Dividends

The following dividends were declared and paid by the Company;

For the year ended 31 December

Rs. 0.10 per Qualifying Ordinary Share (2011: Nil) 14,796,486 - -

14,796,486 - -

23 Interest Bearing Loans and Borrowings

Non current interest bearing loans and borrowings

Finance lease liabilities - - 1,077,315

- - 1,077,315

Current interest bearing loans and borrowings

Secured Bank Loans - - 269,418,780

Unsecured Bank Loans - - 154,140,211

Loans from Related Party - - 375,235,247

Finance Lease Liabilities - - 1,238,644

- - 800,032,882

24 Deferred Tax LiabilityDeferred Tax Assets, Liabilities and Income Tax relates to the following

Statement of Financial Position Statement of Comprehensive Income

Statement of Other Comprehensive Income

2012 2011 2010 2012 2011 2012 2011

Deferred Tax Liability

Property Plant and Equipment - 603,119 -

Investment Property 2,714,178,715 2,505,066,936 2,430,309,092

Total taxable temporary difference 2,714,178,715 2,505,670,055 2,430,309,092

759,970,040 701,587,615 680,486,546 58,382,425 20,932,196 - 168,873

Deferred Tax Assets

Effect from carried forward tax losses (816,378,128) (827,681,312) (777,826,893)

Total taxable temporary difference (816,378,128) (827,681,312) (777,826,893)

(228,585,876) (231,750,767) (217,791,530) 3,164,891 (13,959,237) - -

Deferred Tax (Income)/Expense 61,547,316 6,972,959 - 168,873

Net Deferred Tax Liability 531,384,164 469,836,848 462,695,016

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2012Rs

2011Rs

1 January 2011Rs

16 InventoriesMaintenance Material 3,554,428 1,156,165 1,075,177

3,554,428 1,156,165 1,075,177

17 Trade & Other ReceivablesTrade Receivables 58,924,399 62,762,460 64,131,665 Other Receivables 68,025,230 66,235,168 64,650,736 Value Added Tax 6,733,474 7,190,059 6,577,652 Trade and Other Receivables from Related Companies 20,694,659 15,312,043 7,623,411 Project receivable Naiwala 16,863,063 16,863,063 16,863,063 Loans and Receivables 171,240,825 168,362,793 159,846,527 Provision for Doubtful Receivables (116,109,368) (115,643,935) (115,181,152)

55,131,457 52,718,858 44,665,375

The property at Naiwala was a joint venture project with Ceylinco Investment & Reality Ltd. The investment of Rs. 16,863,063/- has been fully provided in 2010 due to the uncertainty of the realisability of the investment.

18 Other AssetsDeposits 2,566,022 2,566,022 2,766,022 Prepayments 1,147,614 2,437,065 1,415,492 Advances 22,018,953 25,108,886 14,935,945 Prepaid Staff Expenses 552,822 - - Planned Assets (Note 27.1) 3,599,980 224,690 4,314,281

29,885,391 30,336,663 23,431,740 Provision for Doubtful Receivables (13,676,260) (13,776,540) (14,579,839)

16,209,131 16,560,123 8,851,901

19 Provision for Doubtful ReceivablesBalance as at 1st January 129,420,637 129,761,153 75,902,873 Over Provision Reversal (100,280) (1,167,135) - Provision during the year 1,303,597 826,619 53,858,280 Amounts written off during the year as uncollectible (838,164) - - Balance as at 31st December 129,785,790 129,420,637 129,761,153

20 Income tax ReceivablesAs at the beginning of the year 6,116,401 2,989,217 (8,716,577)Income tax for the period (5,877,655) (1,552,088) (55,525)Less: Tax paid - 38,187 6,272,854

Notional tax 151,887 762,115 - With Holding Taxes 867,068 2,939,045 5,119,654 Economic Service Charge - 939,925 368,811

As at the end of the year 1,257,701 6,116,401 2,989,217

21 Cash and cash equivalentsFavourable Cash & Cash EquivalentsCash and Bank Balances 25,724,409 4,065,824 5,059,483 REPO investments - 5,626,854 -

25,724,409 9,692,678 5,059,483 Unfavourable Cash & Cash EquivalentsBank Overdraft (503,047) (2,478,840) (4,606,529)

(503,047) (2,478,840) (4,606,529)

Total Cash and Cash Equivalents for the Purpose of Cash Flow Statement 25,221,362 7,213,838 452,954




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2012 2011

25.1.d Unrecognized Actuarial (Gain) or Loss Balance as at 1st January

Actuarial (Gain) / Loss for year - Obligation (4,126,586) 2,279,477 Actuarial (Gain) / Loss for year - Plan Assets 291,287 1,163,898 Actuarial Gain /( Loss) Immediately Recognised 3,835,299 (3,443,375)Balance as at 31st December - -

25.1.e Unrecognised Past Service Cost Non Vested Benefits Balance as at 1st January - -

Recognised during the period - -

Balance as at 31st December - -

25.1.f Amount Recognized in the Statement of Comprehensive Income Current Service Cost 637,912 960,520 Interest Cost 1,010,178 748,086 Expected return on Plan Assets (1,188,081) (1,062,390)Actuarial (Gain) / Loss Immediately Recognised (3,835,299) 3,443,375

(3,375,290) 4,089,591 25.1.g Actuarial Assumptions

Normal retirement age 55 years 55 years Rate of discount 10% 10%

Salary increase

Long term salary escalation rate of 2.5%. Nextincrement due on 01st January 2013

Long term salary escalation rate of 10%. Nextincrement due on 01st April 2012.

26 Financial Instruments

Credit Risk

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;

Carrying amount

Note 2012 2011 1 Jan 2011

Available-for-sale financial assets 15 - - 1,069

Held-to-maturity investments 15 193,414,272 81,142,601 6,142,601

Financial assets designated at fair value through profit or loss 15 7,878,662 878,364 2,382,250

Financial assets classified as held-for-trading 15 - - -

Loans and receivables 17 171,240,825 168,362,793 159,846,527

Cash and cash equivalents 21 25,724,409 9,692,678 5,059,483

398,258,168 260,076,436 173,431,930

2012 2011 1 January 2011

25 Trade & Other LiabilitiesTrade Payables 18,604,148 18,274,184 19,596,308

Other Payables 25,496,364 20,355,824 88,527,412

Accrued Expenses 431,326 431,327 72,186

Rent in Advance and Security Deposits 66,756,105 17,825,345 27,975,394

Defined Benefit Obligations (25.1) - -

Rent, Security Deposits & other Payables 55,378,981 55,378,981 78,000,000

166,666,924 112,265,661 214,171,300

25.1 Plan Assets The amount recognized in the Statement of Financial

PositionPresent Value of Defined Benefit Obligations - ( Note 25.1.b ) 7,457,469 10,101,783 9,351,076

Fair Value of Plan Assets - ( Note 25.1.c ) (11,057,449) (10,326,473) (13,665,357)

Unrecognized Actuarial Gain / ( Loss) - ( Note 25.1.d) - - -

Unrecognized Past Service Gain Non Vested - ( Note 25.1.e) - - -

Provision for Defined Benefit Obligations (Note 18) (3,599,980) (224,690) (4,314,281)

25.1.a Plan Assets consist the following Repo and Fixed Deposits 10,984,686 10,236,916 13,428,763

Cash 72,763 89,557 236,594

Provision for Defined Benefit Obligations 11,057,449 10,326,473 13,665,357

25.1.b movement in the Present Value of Defined Benefit Obligations Liability for Defined Benefit Obligations as at 1 January 10,101,783 9,351,076 28,864,472

Current Service Cost 637,912 960,520 951,298

Interest Cost 1,010,178 748,086 3,175,092

Unrecognised Actuarial (Gains) / Losses (4,126,586) 2,279,477 (15,622,167)

Payments made (including benefits paid by the Plan) (165,818) (3,237,376) (8,017,619)

Liability for Defined Benefit Obligations as at 31st December 7,457,469 10,101,783 9,351,076

2012 2011

25.1.c movement in plan Assets Fair value of Plan Assets at 1 January 10,326,473 13,665,357

Expected Return 1,188,081 1,062,390

Contribution Paid - -

Benefits Paid (165,818) (3,237,376)

Unrecognised Actuarial Gains / (Loss) (291,287) (1,163,898)

Fair Value of Plan Assets at 31 December 11,057,449 10,326,473

NO

TES

TO T

HE F

INA

NC

IAL

STAT

EMEN

TS




NO

TES

TO T

HE

FIN

AN

CIA

L ST

ATEM

ENTS

Interest rate risk

Profile

At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was:

Carrying amount

2012 2011

Fixed rate instruments

Financial assets 193,414,272 81,142,601

Financial liabilities - -

193,414,272 81,142,601

Variable rate instruments

Financial assets - 5,626,854

Financial liabilities (503,047) (2,478,840)

(503,047) 3,148,014

Fair value sensitivity analysis for fixed rate instruments

The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and therefore a change in interest rates at the reporting date would not affect profit or loss.

Fair values

Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position, are as follows:

31st December 2012 31st December 2011Carrying Amount Fair Value Carrying

Amount Fair Value

Assets carried at fair valueFinancial Assets designated at fair value through

profit or loss 15 7,878,662 7,878,662 878,364 878,364

7,878,662 7,878,662 878,364 878,364

Assets carried at amortised cost

Held to maturity investments 15 193,414,272 193,414,272 81,142,601 81,142,601

Loans and receivables 17 171,240,825 171,240,825 168,362,793 168,362,793

Cash and cash equivalents 21 25,724,409 25,724,409 9,692,678 9,692,678

390,379,506 390,379,506 259,198,072 259,198,072

Liabilities carried at amortised cost

Trade and other payables 25 (166,666,924) (166,666,924) (112,265,662) (112,265,662)

Bank overdraft 21 (503,047) (503,047) (2,478,840) (2,478,840)

(167,169,971) (167,169,971) (114,744,502) (114,744,502)

NO

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TO T

HE F

INA

NC

IAL

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EMEN

TS

The maximum exposure to credit risk for Trade receivables at the reporting date by type of counterparty was:

Carrying amount

2012 2011 1 January 2011

Corporate Customers 55,472,882 57,678,076 58,569,756

Residential Customers 3,451,516 5,084,383 5,561,909

58,924,398 62,762,459 64,131,665

Impairment losses

The aging of loans and receivables at the reporting date was:

2012 2011 1 January 2011Gross Impairment Gross Impairment Gross Impairment

Not past Due 13,758,288 - 3,021,214 - 6,041,954 -

Past due 0-90 days 17,802,221 - 20,221,215 - 18,022,303 -

Past due 91-365 days 733,909 - 1,261,923 - 810,445 -

More than one year 138,946,407 116,109,368 143,858,441 115,643,935 134,971,825 115,181,152

171,240,825 116,109,368 168,362,793 115,643,935 159,846,527 115,181,152

The movement in the allowance for impairment in respect of loans and receivables during the year was as follows:

2012 2011

Balance as at 1st January 115,643,935 115,181,152

Impairment loss recognised 1,303,596 826,619

Impairment reversed / written off (838,163) (363,836)

Balance as at 31st December 116,109,368 115,643,935

The impairment loss as at 31 December 2012 relates to several customers that have indicated that they are not expecting to be able to pay their outstanding balances, mainly due to economic circumstances. The Company believes that the unimpaired amounts that are past due by more than 30 days are still collectible, based on their historic payment behaviour.

Based on historic default rates, the Company believes that, apart from the above, no impairment allowance is necessary in respect of trade receivables not past due or past due by up to 30 days, relates to customers that have a good payment record with the Com-pany.

The movement in the allowance for impairment in respect of held-to-maturity investments during the year was as follows:

2012 2011

Balance as at 1st January 6,042,601 6,042,601

Impairment loss recognised - -

Impairment reversed / written off - -

Balance as at 31st December 6,042,601 6,042,601

The allowance accounts in respect of loans and receivables and held-to-maturity investments are used to record impairment losses unless the Company is satisfied that no recovery of the amount owing is possible; at that point the amounts are considered irrecoverable and are written off against the financial asset directly.




28 Litigation and claims

There are no litigations and claims against the Company, other than the followings;

(a) Income tax for the year of assessment 2005/06 (Rs 9,287,489/-) and 2006/07 (Rs 14,028,233/-) determined by commissioner General of Inland Revenue ( assessment no: 8740923, 8240889) have been referred to the Tax Appeals Commission. Company is of the view that the above assessment would not have any material impact on the Financial Statements.

(b) Income tax for the year of assessment 2008/09 (Rs 8,581,317/-Assessment no: 6416959) have been referred to the Tax Appeal Commission. The Company is of the view that the above assessment would not have any material impact on the Financial Statements.

29 Events after the Reporting Period

There have been no material events after the reporting period that would require adjustments to /or disclosure in the Financial Statements.

30 Commitments and contingencies

Capital Expenditure approved by the Board of Directors for which provisions has not been made in these accounts amounted to approximately.

2012 2011

Approved and contracted for - 11,219,806

Approved but not contracted for 2,617,370 -

31 Capital commitments

There were no material capital commitments outstanding as at the reporting date except for the following.

The following Corporate Guarantees are given for following companies.

Company Facility Amount Financial Institution

Ceylinco Industries (pvt) Ltd 29,000,000 Peoples Bank

Ceylinco Packaging Co. Ltd 38,000,000 Peoples Bank

Company provided Rs: 40,200,000/- during the year 2011 for the Corporate Guarantees given to Ceylinco Industries (Pvt) Ltd., and Ceylinco Packaging Co. Ltd. as they were Non Performing as at 31st December 2011.

32 Comparative Information

The comparative information is re-classified wherever necessary to conform with the current year’s classification in order to provide a better presentation. The details of such re-classifications have been provided in Note 34 on pages 86 to 89

33 Operating Leases

33.1 Leases as lessee

The Company had entered in to a 99 year operating lease with the UDA (Urban Development Authority ) with the view of set up/conduct and operate a business for the construction of a office and apartment complex on the Year of 1992. The Company pays a nominal rent to UDA for occupying the land.

33.2 Leases as lessor

The Company leases out its investment property held under operating leases (see note 14). The future minimum lease payments are as follows:

2012 2011

Less than one year 145,171,065 156,975,913

More than one year 10,917,000 145,171,065

The future minimum lease payments are presented above based on lease agreements which Company has presently entered into with it’s respective tenants. Maximum period is two years. N

OTE

S TO

TH

E FI

NA

NC

IAL

STAT

EMEN

TS

27 Related Party Transactions

Parent and the ultimate controlling party

The Company is a subsidiary of Seylan Bank PLC, which owns 51.83% of controlling interest of the Company.

Transactions with the key management personnel

"According to LKAS 24 - Related Party Disclosure, Key Management Personnel are those having authority for planning, directing and controlling the activities of the entity. Accordingly, Seylan Developments PLC considers its Board of Directors, and Key Employees and their immediate family members have been classified as Key Management Personnel of the Company."

Immediate family member is defined as spouse or dependent. Dependent is defined as anyone who depends on the respective Director for more than 50% of his / her financial needs.

Mr. R. Nadarajah is the Chairman of this Company and is also Director of Seylan Bank PLC.

Key management personnel have transacted with the Company during the period as follows:

a. Key Management Personnel compensation for the period comprised:

2012 2011

Short term employee benefits 1,787,700 940,000

Post employment benefits - 1,362,720

Directors receive a fee for participating at Board Meetings and other committee meetings and do not receive any other perquisite or benefit other than what is discussed in Note 9 in the financial statements. The Executive Director received an allowance for his contribution to the Company until his resignation as mentioned in Note 9 . The newly appointed Head of Operations of the Company receives an salary and allowances for his contribution to the Company and included in Note 7.

b. Key Management Personnel and Director transactions

Number of key management personnel and their related parties hold positions in other entities that result them having control or significant influence over financial or operating policies of these entities.

A number of these entities transacted with the Company during the year.

The aggregate value of transactions and outstanding balances related to Related Parties are as follows.

Parties accommodated

"Director / key management Personnel (Relationship)" Transaction

Transaction value for the year ended

31 December 2012

Balance outstanding as at

31 December 2012

Seylan Bank PLC" Mr. R. Nadarajah (Chairman)"Loans and advances from Seylan Bank"

(45,000,000) (60,715,925)

Mr. S. Palihawadana (Deputy Chairman) Interest Income 18,978,948 - Mr. K. Rathnayaka (Acting General Manager / Director - Resingned on 30th November 2012)"

Investments 106,644,817 187,271,671

Mr. M K Muthukumar (Director) Bank Charges 229,321 - Mr. Kapila Ariyaratne (Director) Administrative Services 101,811,797 -

Mr. Ramesh Jayasekara (Director)Receivables - Water, Electricity, Management Fee

- 10,247,814

Sri Lanka Insurance Corporation Limited

Mr. M. De AlwisInsurance 2,427,100 2,439,580

Mr. P. Kudabalage

All outstanding balances with these related parties are priced on an arm’s length basis.

c. Seylan Developments Employees’ Gratuity Trust Fund

Following Directors/ Key Employees of the Company are also Trustees of the Seylan Developments Employees’ Gratuity Trust Fund.

- Mr. S. Palihawadana - Mr. K. Rathnayaka (Resigned on 30th November 2012) - Mr. P. Saravanapavan - Dr. P M. Gunasekara

The above trust fund has invested in REPO’s at Seylan Bank amounting Rs. 4,646,901/-

NO

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NO

TES

TO T

HE

FIN

AN

CIA

L ST

ATEM

ENTSN

ote

Prev

ious

SLA

SEff

ect o

f tra

nsiti

on to

SL

FRSs

/ Lk

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SLFR

S / L

kAS

Prev

ious

SLA

SEff

ect o

f tra

nsiti

on to

SL

FRSs

/ Lk

ASs

SLFR

S / L

kAS

1st

Janu

ary

2011

3

1st D

ec. 2

011

Equi

ty a

nd L

iabi

litie

s

Equi

ty

Stat

ed C

apita

l 1

,356

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,570

-

1

,356

,078

,570

1

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-

1

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Rese

rves

2,0

73,2

32,1

26

(2,0

73,2

32,1

26)

-

525

,927

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-

5

25,9

27,8

96

Reta

ined

Ear

ning

s(b

) 8

9,85

9,94

8 1

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2

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(2

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52,8

95

3,5

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(128

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) 3

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4

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(2

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41

Non

Cur

rent

Lia

bilit

ies

Inte

rest

Bea

ring

Loan

s and

Bor

row

ings

1,0

77,3

15

-

1,0

77,3

15

-

-

-

Rent

, Sec

urity

Dep

osits

& O

ther

Pay

able

s 7

8,00

0,00

0 (7

8,00

0,00

0) -

5

5,20

0,00

0 (5

5,20

0,00

0) -

Def

erre

d Ta

x Li

abili

ty 3

34,1

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128

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4

62,6

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16

267

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2

02,3

43,6

71

469

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413

,232

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5

0,53

9,63

6 4

63,7

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31

322

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1

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469

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Curr

ent L

iabi

litie

s

Bank

Ove

rdra

fts 4

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-

4

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,529

2

,478

,840

-

2

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Inte

rest

Bea

ring

Loan

s and

Bor

row

ings

800

,032

,882

7

8,00

0,00

0 8

78,0

32,8

82

-

55,

200,

000

55,

200,

000

Oth

er L

iabi

litie

s 1

36,1

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00

-

136

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5

7,06

5,66

1 -

5

7,06

5,66

1

940

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7

8,00

0,00

0 1

,018

,810

,711

5

9,54

4,50

1 5

5,20

0,00

0 1

14,7

44,5

01

Tota

l Equ

ity

and

Liab

ilitie

s 4

,873

,214

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(1

0,50

4) 4

,873

,203

,546

4

,801

,912

,220

2

,041

,570

4

,803

,953

,790

NOTE

S TO T

HE FI

NANC

IAL ST

ATEM

ENTS

Amou

nts i

n Sr

i Lan

kan

Rupe

es

34Ex

plan

atio

n of

tran

sitio

n to

SLF

RSs

/ LkA

Ss

As st

ated

in n

ote

2(a)

, the

se a

re th

e Co

mpa

ny’s

first

fina

ncia

l sta

tem

ents

pre

pare

d in

acc

orda

nce

with

SLF

RSs /

LKA

Ss.

The

acco

untin

g po

licie

s set

out

in n

ote

3 ha

ve b

een

appl

ied

in p

repa

ring

the

finan

cial

stat

emen

ts fo

r the

yea

r end

ed 3

1 D

ecem

ber 2

012,

the

com

para

tive

info

rmat

ion

pres

ente

d in

thes

e fin

anci

al st

atem

ents

fo

r the

yea

r end

ed 3

1 D

ecem

ber 2

011

and

in th

e pr

epar

atio

n of

an

open

ing

SLFR

S / L

KAS

stat

emen

t of fi

nanc

ial p

ositi

on a

t 1 Ja

nuar

y 20

11 (t

he C

ompa

ny’s

date

of t

rans

ition

).

In p

repa

ring

its o

peni

ng S

LFRS

/ L

KAS

stat

emen

t of fi

nanc

ial p

ositi

on, t

he C

ompa

ny h

as a

djus

ted

amou

nts

repo

rted

pre

viou

sly in

fina

ncia

l sta

tem

ents

pre

pare

d in

acc

orda

nce

with

Sri

Lank

a Ac

coun

ting

Stan

dard

s (SL

ASs)

. An

expl

anat

ion

of h

ow th

e tr

ansit

ion

from

pre

viou

s SLA

Ss to

SLF

RSs /

LKA

Ss h

as a

ffect

ed th

e Co

mpa

ny’s

finan

cial

pos

ition

, fina

ncia

l per

form

ance

and

cas

h flo

ws i

s set

out

in th

e fo

llow

ing

tabl

es a

nd th

e no

tes t

hat a

ccom

pany

the

tabl

es.

Reco

ncili

atio

n of

Equ

ity

Not

ePr

evio

us S

LAS

Effec

t of t

rans

ition

to

SLFR

Ss /

LkA

SsSL

FRS

/ LkA

SPr

evio

us S

LAS

Effec

t of t

rans

ition

to

SLFR

Ss /

LkA

SsSL

FRS

/ LkA

S

1st

Janu

ary

2011

3

1st D

ec. 2

011

Ass

ets

Non

Cur

rent

Ass

ets

Inve

stm

ent P

rope

rty

5,4

94,9

21

-

5,4

94,9

21

3,2

27,0

55

-

3,2

27,0

55

Prop

erty

, Pla

nt &

Equ

ipm

ent

4,5

91,9

32,4

77

210

,651

,676

4

,802

,584

,153

4

,594

,360

,396

4

4,14

3,75

0 4

,638

,504

,146

Inve

stm

ent i

n Pr

oper

ty D

evel

opm

ent P

roje

cts

210

,651

,676

(2

10,6

51,6

76)

-

-

-

-

Inve

stm

ent S

ecur

ities

(a)

2,3

93,8

23

(10,

504)

2,3

83,3

19

267

,544

6

10,8

20

878

,364

Tota

l Non

Cur

rent

Ass

ets

4,8

10,4

72,8

97

(10,

504)

4,8

10,4

62,3

93

4,5

97,8

54,9

95

44,

754,

570

4,6

42,6

09,5

65

Curr

ent A

sset

s

Inve

ntor

ies

1,0

75,1

77

-

1,0

75,1

77

43,

869,

165

(42,

713,

000)

1,1

56,1

65

Trad

e an

d O

ther

Rec

eiva

bles

44,

665,

375

-

44,

665,

375

52,

718,

858

-

52,

718,

858

Oth

er A

sset

s 8

,851

,901

-

8

,851

,901

1

6,56

0,12

3 -

1

6,56

0,12

3

Shor

t Ter

m In

vest

men

ts

100

,000

-

1

00,0

00

75,

100,

000

-

75,

100,

000

Inco

me

Tax

Rece

ivab

le 2

,989

,217

-

2

,989

,217

6

,116

,401

-

6

,116

,401

Cash

and

Cas

h Eq

uiva

lent

s 5

,059

,483

-

5

,059

,483

9

,692

,678

-

9

,692

,678

Tota

l Cur

rent

Ass

ets

62,

741,

153

-

62,

741,

153

204

,057

,225

(4

2,71

3,00

0) 1

61,3

44,2

25

Tota

l Ass

ets

4,8

73,2

14,0

50

(10,

504)

4,8

73,2

03,5

46

4,8

01,9

12,2

20

2,0

41,5

70

4,8

03,9

53,7

90

NO

TES

TO T

HE F

INA

NC

IAL

STAT

EMEN

TS

NOTE

S TO T

HE FI

NANC

IAL ST

ATEM

ENTS

Amou

nts i

n Sr

i Lan

kan

Rupe

es


34 Explanation of transition to SLFRSs / LkASs cont..

(a) In accordance with SLFRSs / LKASs, investments in quoted shares have been recognised at fair value. These assets were previously carried at cost.

At the date of transition, the fair value of the financial assets designated as “fair value through profit or loss” is Rs: 2,382,250/- and their carrying amount under previous SLAS was Rs: 2,392,754/-.

The impact arising from the change is summarised as follows: 1st January 2011 31st Dec. 2011

Statement of comprehensive income

Adjustment before income tax - (621,324)

Statement of financial position

Other investments, including derivatives:

Non-current assets (10,504) 610,820

Related tax effect 2,941 (171,030)

Adjustment to retained earnings (7,563) 439,790

(b) The above changes decreased (increased) retained earnings as follows:

Note 1st January 2011 31st Dec. 2011

Financial Assets a (10,504) 610,820

(10,504) 610,820

NO

TES

TO T

HE

FIN

AN

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ATEM

ENTS

34 Explanation of transition to SLFRSs / LkASs cont..

Reconciliation of Comprehensive Income

Note Previous SLAS

Effect of transition to

SL FRSs / LkASs31st Dec. 2011

SLFRS / LkAS

Rental Income 148,451,419 - 148,451,419 Other Income 82,775,959 (20,314,303) 62,461,656

231,227,378 (20,314,303) 210,913,075

Personnel Cost (24,949,633) (1,667,900) (26,617,533)Premises, Equipment, Establishments (30,793,343) - (30,793,343)Administrative Expenses (6,957,458) 1,667,900 (5,289,358)Marketing Expenses (273,950) - (273,950)

168,252,994 (20,314,303) 147,938,691 Provision for Doubtful Receivables and Advance Payments (826,619) - (826,619)Provision / Impairment for Investments (132,296,053) 21,745,053 (110,551,000)Results from Operating Activities 35,130,322 1,430,750 36,561,072 Net Finance Income / (Expense) (a) (14,146,388) 621,324 (13,525,064)Profit / (Loss) Before Income Taxation 20,983,934 2,052,074 23,036,008 Income Tax Expenses (8,525,047) - (8,525,047)Net Profit / (Loss) for the year 12,458,887 2,052,074 14,510,961

Other comprehensive income Revaluation of property, plant and equipment - - -Deferred Tax Liability on revaluation of Property Plant &

Equipment - - -

Income tax on other comprehensive income - - -Other comprehensive income for the period, net of

income tax - - -

Total comprehensive income for the period 12,458,887 2,052,074 14,510,961

material adjustments to the statement of cash flows for 2011

There are no any material differences between the statement of cash flows presented under SLFRSs / LKASs and the statement of cash flows presented under SLASs.

NO

TES

TO T

HE F

INA

NC

IAL

STAT

EMEN

TS




As At 31st December 2012

ShARE INFORMATION

Range Of Share Holding No Of Share Holders Total Number Of Shares

% As At

31.12.2012 31.12.2011

1 - 1,000 4,480 1,368,103 0.92 1.03 1,001 - 10,000 3,030 10,154,039 6.86 8.10

10,001 - 100,000 700 20,263,323 13.69 15.40 100,001 - 1,000,000 88 21,134,008 14.28 15.46

Over 1,000,000 9 95,045,387 64.24 60.00

TOTAL 8,307 147,964,860 100 100

Public Share Holding 48.16% No. of Share Holders as at 31st December 2012 - 8,307

TWENTY MAjOR ShAREhOLdERS

NAmE OF SHAREHOLDER NO OF SHARES 31.12.2012 % NO OF SHARES

31.12.2011 %

1 Seylan Bank PLC 76,688,880 51.83 76,688,880 51.83 2 Mr Perera K D D 8,546,640 5.78 7,400,000 5.00 3 Amina Investments Ltd 2,500,000 1.69 2,000,000 1.35 4 Mr Imtiaz T L M 2,455,136 1.66 416,800 0.28 5 J B Cocoshell (Pvt) Ltd 1,426,928 0.96 - - 6 Mrs M M Udeshi (DESC) 1,287,900 0.87 1,287,958 0.87 7 Singalanka Standard Chemicals PLC 1,100,000 0.74 1,000,000 0.68 8 Dr. Senthilverl Thirugnanasambandar 1,039,903 0.70 381,800 0.26 9 Mr Sithampalam A 769,128 0.52 769,128 0.52

10 First Capital Markets Ltd/Mr. S W.U Arunashantha 748,744 0.51 1,407,400 0.95 11 Bank of Ceylon A/C Ceybank Unit Trust 737,210 0.50 565,900 0.38 12 Mr Fuad Mushtaq Mohamed 614,965 0.42 - -13 Asian Guild Financial Services (Pvt) Ltd 609,121 0.41 609,121 0.41 14 Commercial Bank of Ceylon PLC / Sinali Capital (Pvt) Ltd 600,000 0.41 525,000 0.35 15 Zagra Investment Consultants (Pvt) Ltd 594,000 0.40 594,200 0.40 16 Mr. Tay Biak Chye 505,948 0.34 505,948 0.34 17 Seylan Bank PLC / Jayantha Dewage 469,184 0.32 400,000 0.27 18 Dee Investments (Pvt) Ltd 440,000 0.30 440,000 0.30 19 Mr Alnaqib L M S H 435,000 0.29 - - 20 Mr Poongunaseelan P 368,000 0.25 - -

dIRECTORS’ ShAREhOLdINGS

Name Of The Director No. Of Shares 31.12.2012

No. Of Shares 31.12.2011

Mr R Nadarajah 15,000 15,000Mr S Palihawadana 6,600 6,600Mr. P Saravanapavan - -Dr. H A D P Mervyn Gunasekara - -Mr. M. K. Muthukumar - N/AMr. K. Ariyaratne - N/AMr. R. Jayasekara - N/AMr R M K K B Rathnayaka N/A -Mr H L Gunasekera N/A 1,000

Shareholders’ and Directors’ HoldingInformation

segment reportAmounts in Sri Lankan Rupees

2012 2011

Revenue

Finance Income 16,353,849 9,372,686

Rental Income 156,975,913 148,451,419

Other Inocme 15,661,773 62,461,656

Total Revenue 188,991,535 220,285,761

Segment Depreciation 1,287,513 2,264,340

SEGmENT RESULT

Profit / (Loss) before Tax 112,098,176 23,036,008

Income tax expense (67,424,971) (8,525,047)

Net Profit / (Loss) for the year 44,673,205 14,510,961

OTHER INFORmATION

Segment Assets 4,953,907,070 4,808,770,052

Segment Amortisation (6,103,775) (4,816,262)

Total Assets 4,947,803,295 4,803,953,790

Segment Liabilities 698,554,135 584,581,349

Shareholders Funds 4,249,249,160 4,219,372,441

Total Liabilities 4,947,803,295 4,803,953,790

Cash Flows from Oparating activities 140,005,504 (115,568,283)

Cash Flows from Investing activities (107,201,494) (44,112,900)

Cash Flows from Financing activities (14,796,486) 166,442,067

Capital Expenditure (3,935,127) (2,601,871)

SHA

REHO

LDER

S’ A

ND

DIR

ECTO

RS’ H

OLD

ING

INFO

RMAT

ION

SEG

MEN

T RE

PORT


Des

crip

tion

2012

*20

11*

2010

**20

09

Rest

ated

**20

08

Rest

ated

**20

07**

2006

**20

05**

2004

** 2

003*

*

Tota

l Inc

ome

163

,340

,665

2

31,2

27,3

78

153

,993

,181

1

49,0

00,6

20

186

,770

,518

2

09,4

13,4

32

217

,968

,858

1

70,7

45,8

93

711

,251

,217

1

54,3

91,5

95

Rent

Inco

me

156

,975

,913

1

48,4

51,4

19

143

,156

,566

1

39,7

51,0

49

148

,881

,839

1

42,4

45,9

34

141

,283

,563

1

17,9

62,1

08

140

,015

,274

1

32,3

03,1

03

Oth

er In

com

e15

,661

,773

62,4

61,6

56 1

0,83

6,61

5 9

,249

,571

3

7,88

8,67

9 6

6,96

7,49

8 7

6,68

5,29

5 5

2,78

3,78

5 5

71,2

35,9

43

22,

088,

492

172,

637,

686

210,

913,

075

153

,993

,181

1

49,0

00,6

20

186

,770

,518

2

09,4

13,4

32

217

,968

,858

1

70,7

45,8

93

711

,251

,217

1

54,3

91,5

95

Ope

ratin

g Ex

pens

es (7

5,35

7,29

2) (6

2,97

4,38

4) (6

0,88

5,11

0) (1

52,7

63,1

79)

(182

,679

,882

) (1

48,1

64,9

09)

(124

,650

,360

) (1

04,6

09,8

59)

(93,

652,

335)

(78,

578,

108)

Ope

ratin

g Pr

ofit

97,2

80,3

9414

7,93

8,69

1 9

3,10

8,07

1 (3

,762

,559

) 4

,090

,636

6

1,24

8,52

3 9

3,31

8,49

8 6

6,13

6,03

4 6

17,5

98,8

82

75,

813,

487

Chan

ges I

n Fa

ir Va

lues

--

- 3

50,5

67,1

45

(285

,392

,925

) 2

03,7

75,7

66

-

-

-

- Fi

nanc

e In

com

e / (

Expe

nses

) & P

rovi

sions

1

4,81

7,78

2 (1

24,9

02,6

83)

(120

,792

,162

) (2

51,3

77,6

32)

(104

,103

,440

) (2

6,57

1,68

1) (2

7,35

8,47

3) (2

1,38

2,83

0) (3

6,58

2,82

1) (4

6,18

5,53

7)Pr

ofit

Befo

re T

ax 1

12,0

98,1

76

23,

036,

008

(27,

684,

091)

95,

426,

954

(385

,405

,729

) 2

38,4

52,6

08

65,

960,

025

44,

753,

204

581

,016

,061

2

9,62

7,95

0 Ta

x (6

7,42

4,97

1) (8

,525

,047

) (5

5,52

5) (6

62,5

89)

(7,0

61,6

22)

(14,

145,

386)

(16,

757,

186)

(4,2

30,1

95)

-

Prof

it/(L

oss)

Afte

r Tax

44,

673,

205

14,

510,

961

(27,

739,

616)

94,

764,

365

(392

,467

,351

) 2

24,3

07,2

22

49,

202,

839

40,

523,

009

581

,016

,061

2

9,62

7,95

0 Tr

ansf

er T

o Ca

pita

l Red

empt

ion

Rese

rve

Fund

-

-

-

-

-

-

-

-

(540

,000

,000

) -

Prof

it /(

Loss

) for

the

year

44,

673,

205

14,

510,

960

(27,

739,

616)

94,

764,

365

(392

,467

,351

) 2

24,3

07,2

22

49,

202,

839

40,

523,

009

41,

016,

061

29,

627,

950

Stat

emen

t of F

inan

cial

Poi

sson

Ass

ets

2012

*20

11*

2010

*20

09

Rest

ated

**20

08

Rest

ated

**20

07**

2006

**20

05**

2004

** 2

003*

* Pr

oper

ty ,

Plan

t & E

quip

men

ts 3

,276

,586

3

,227

,055

5

,494

,921

1

3,93

2,50

9 1

,402

,102

,935

1

,433

,335

,254

1

,446

,381

,065

1

,461

,744

,687

1

,486

,641

,890

1

,262

,189

,990

In

vest

men

t Pro

pert

y 4

,647

,399

,250

4

,638

,504

,146

4,

802,

584,

153

4,5

91,4

72,4

87

1,1

51,4

93,9

32

1,2

26,5

44,4

12

1,2

26,9

57,4

24

1,0

22,7

68,6

46

1,0

22,7

91,7

03

858

,671

,812

O

ther

Inve

stm

ent -

Non

Cur

rent

7,8

78,6

62

878

,364

2,

383.

319

253

,606

,884

4

98,3

31,6

09

605

,761

,760

4

57,2

26,8

58

405

,118

,623

1

1,12

2,82

3 1

1,12

2,82

3 Cu

rrent

Ass

et 2

89,2

48,7

97

161

,344

,225

6

2,74

1,15

3 1

19,0

04,2

10

463

,530

,345

4

53,1

73,1

22

173

,093

,056

2

30,1

98,6

77

256

,106

,460

1

21,9

70,0

76

Tota

l Ass

ets

4,9

47,8

03,2

95

4,8

03,9

53,7

90

4,8

73,2

03,5

46

4,9

78,0

16,0

90

3,5

15,4

58,8

21

3,7

18,8

14,5

48

3,3

03,6

58,4

03

3,1

19,8

30,6

33

2,7

76,6

62,8

76

2,2

53,9

54,7

01

Curre

nt L

iabi

litie

s16

6,16

9,97

111

4,74

4,50

11,

018,

810,

711

821

,301

,761

6

49,4

58,8

90

424

,589

,772

3

36,5

19,4

15

186

,136

,730

9

0,12

5,49

4 1

59,3

78,6

09

Non

Cur

rent

Lia

bilit

ies

531,

384,

164

469,

836,

848

463,

772,

331

609

,804

,069

5

76,0

65,9

82

574

,832

,260

4

27,4

56,4

01

413

,621

,183

1

92,4

81,3

13

294

,938

,133

To

tal L

iabi

litie

s 6

98,5

54,1

35

584

,581

,349

1

,482

,583

,042

1

,431

,105

,830

1

,225

,524

,872

9

99,4

22,0

32

763

,975

,816

5

99,7

57,9

13

282

,606

,807

4

54,3

16,7

42

Net

Ass

ets

4,2

49,2

49,1

60

4,2

19,3

72,4

41

3,3

90,6

20,5

04

3,5

46,9

10,2

60

2,2

89,9

33,9

49

2,7

19,3

92,5

16

2,5

39,6

82,5

87

2,5

20,0

72,7

20

2,4

94,0

56,0

69

1,7

99,6

37,9

59

Capi

tal &

Res

erve

sSt

ated

Cap

ital

1,6

44,3

91,6

50

1,6

44,3

91,6

50

1,3

56,0

78,5

70

1,3

56,0

78,5

70

1,3

56,0

78,5

70

1,3

56,0

78,5

70

1,3

56,0

78,5

70

1,3

56,0

78,5

70

1,3

56,0

78,5

70

1,3

56,0

78,5

70

Rese

rves

525

,927

,896

5

25,9

27,8

96

- 2

,073

,232

,126

9

26,3

39,3

75

926

,339

,375

9

26,3

39,3

74

1,0

90,3

16,2

91

1,0

90,3

16,2

91

436

,914

,243

Re

tain

ed E

arni

ng 2

,078

,929

,614

2

,049

,052

,895

2

,034

,541

,934

1

17,5

99,5

64

7,5

16,0

04

436

,974

,571

2

57,2

64,6

43

73,

677,

859

47,

661,

208

6,6

45,1

46

Shar

ehol

der's

Fun

d 4

,249

,249

,160

4

,219

,372

,440

3

,390

,620

,504

3

,546

,910

,260

2

,289

,933

,949

2

,719

,392

,516

2

,539

,682

,587

2

,520

,072

,720

2

,494

,056

,069

1

,799

,637

,959

W

eigh

ted

Aver

age

Num

ber o

f Sha

res

147

,964

,860

1

23,2

12,1

63

73,

982,

430

73,

982,

430

73,

982,

430

73,

982,

430

73,

982,

430

73,

982,

430

72,

531,

795

72,

531,

795

Earn

ing/

(Los

s) P

er S

hare

0.30

0.

12

(0.3

7) 1

.28

(5.3

0) 3

.03

0.6

7 0

.55

0.5

7 0

.41

Net

Ass

et P

er S

hare

28.

72

28.

52

45.

83

47.

94

30.

95

36.

76

34.

33

34.

06

34.

39

24.

81

Div

iden

d Pe

r Sha

re -

0.1

0 -

-

-

-

0.5

0 0

.40

-

- M

arke

t Val

ue P

er S

hare

Yea

r End

9.1

0 1

2.30

1

7.00

9

.50

4.5

0 9

.00

8.2

5 5

.75

3.0

0 3

.00

Staf

f mem

bers

3131

3545

4852

5247

4738

* Fi

gure

s are

bas

ed o

n ne

w S

ri La

nka

Acc

ount

ing

Stan

dar

ds (

SLFR

Ss)

** F

igur

es a

re b

ased

on

prev

ious

Sri

Lank

a A

ccou

ntin

g St

and

ard

s (SL

ASs

)

Finan

cial

Info

rmat

ion

Ten

Yea

r Sum

ma

ryNOTICE IS HEREBY GIVEN THAT THE TWENTY FIRST ANNUAL GENERAL MEETING OF SEYLAN DEVELOPMENTS PLC WILL BE HELD ON 28TH MARCH 2013 AT 3.00 P.M. AT THE “RAJA BOJUN” RESTAURANT, SEYLAN TOWERS, NO.90, GALLE ROAD, COLOMBO 03 FOR THE FOLLOWING PURPOSES.

AGENdA1. To receive and consider the Annual Report

of the Directors and the Statement of Audited Accounts for the year ended 31st December 2012 and to receive the Report of the Auditors thereon.

2. To re-elect Mr. P. Saravanapavan who retires in terms of Article 93(a) of the Company’s Articles of Association as a Director of the Company.

3. To re-elect Mr. K. P. Ariyaratne who retires in terms of Article 85(a) of the Company’s

Articles of Association as a Director of the Company.

4. To re - elect Mr. R. J. Jayasekara who retires in terms of Article 85(a) of the Company’s Articles of Association as a Director of the Company.

5. To re-appoint the retiring auditors, M/s KPMG Chartered Accountants and to authorize the Directors to determine their remuneration.

6. To declare a first & final dividend of Rs. 0.25 per ordinary share as recommended by the Directors.

7. To authorize the Directors to determine contributions to charities and other donations for the year 2013/2014.

8. To transact any other business of which due notice has been given.

BY ORdER OF ThE BOARd OF dIRECTORS OFSEYLAN dEVELOPMENTS PLCS S P CORPORATE SERVICES (PRIVATE) LIMITEd

SECRETARIES26th February 2013

notice of meeting

FIN

AN

CIA

L IN

FORM

ATIO

N T

EN Y

EAR

SUM

MA

RYANNUAL REPORT 2012 SEYLAN DEVELOPMENTS PLC 9594 SEYLAN DEVELOPMENTS PLC ANNUAL REPORT 2012

form of proxy

I/We,……………………………………………………………(NIC No….…………………) of……………………

………………………………………………………………………….. being a member/members of Seylan

Developments PLC hereby appoint Mr/Mrs/Ms ………………………..……………......…….………………

(NIC No.………………………) of……………………………………………………………………………………

………….. failing him / her,

Mr. Ramanathan Nadarajah of Colombo 07 failing him Mr. Somadasa Palihawadana of Kotte failing him Mr. Ponniah Saravanapavan of Dehiwela failing him Dr. P. Mervyn Gunasekera of Malabe failing him Mr. M.K.Muthukumar of Colombo 04 failing him Mr. K.P.Ariyaratne of Colombo 08 failing him Mr. R.J.Jayasekara of Colombo 04

as my /our proxy to represent me/us and vote and speak for me/us on my/our behalf at the Twenty First Annual General Meeting of the Company to be held on 28th March 2013 at 3.00 pm “Raja Bojun” Restaurant, Seylan Towers, No.90, Galle Road, Colombo 03 and at any adjournment thereof and to vote at every poll which may be taken in consequence thereof.

Please indicate your preference by placing a “X” against the Resolution Number.

FOR AGAINST

1. To receive and consider the Report of the Board of Directors and the audited financial statements for the year ended 31st December 2012 and to receive the Report of the Auditors thereon.

2. To re-elect Mr. P.Saravanapavan who retires by rotation in terms of Article 93 (a) of the Company’s Articles of Association.

3. To re-elect Mr. K.P.Ariyaratne who retires in terms of Articles 85 (a) being a director appointed by the board during the Year.

4. To re-appoint Mr. R.J.Jayasekara who retires in terms of Articles 85(a) being director appointed by the board during the Year.

5. To re-appoint the Auditors M/s KPMG Chartered Accountants until the conclusion of the next Annual General Meeting and to authorise the Directors to determine their remuneration.

6. To declare a first & final dividend of Rs.0.25 per ordinary share as recommended by the Directors.

7. To authorize the Directors to determine contributions to charities and other donations for the year 2013/2014.

As witness my/our hand/s this ………………….…….. day of ………………………. 2013

………………………….. …………………………….

NIC Number/ Reg. No (Signatures)

1. Please complete the Form of Proxy after filling in legibly your full name, NIC Number and address and by signing in the space provided.

2. The completed Form of Proxy should be deposited at the office of the S S P CORPORATE SERVICES (PRIVATE) LIMITED at No. 101, Inner Flower Road, Colombo 03, 48 hours before the time appointed for the holding of the meeting.

3. Please indicate clearly how your proxy is to vote on the resolution. If no indication is given, the proxy in his discretion may vote as he thinks fit.

4. If the shareholder is a Company or body corporate, a form of Corporate Representation executed under its Common Seal in Accordance with its Articles of Association or Constitution should be submitted.

5. Where the Form of Proxy is signed under a Power of Attorney (POA) which has not been registered with the company, the original POA together with a photocopy of same or a copy certified by a Notary Public must be lodged with the company along with the Form of Proxy.

6. Any Shareholder / Proxy attending the Annual General Meeting is kindly requested to bring with him/her the National Identity Card or any other form of valid identification, and produce same at the time of registration.

Notes

Notes CORPORATE INFORMATION

MR. R. NADARAJAHChairman

MR. S. PALIHAWADANADeputy Chairman

MR. K. RATHNAYAKADirector / Acting General Manager(Resigned with e�ect from 30th November 2012)

MR. H. L. GUNASEKARADirector(Resigned with e�ect from 17th February 2012)


DR. P. MERVYN GUNASEKARADirector

MR. M. K. MUTHUKUMARDirector (Appointed with e�ect from 17th February 2012)

MR. KAPILA ARIYARATNEDirector(Appointed with e�ect from 30th November 2012)

BOARD OF DIRECTORS

NAME OF THE COPMPANY

Seylan Developments PLC

SECRETARIES & REGISTRARS

SSP COPRPORATE SERVICES (PVT) LTD,No. 101, Inner Flower Road,Colombo 03.

LAWYERS

MR. H. L. VIPULA SILVAAttorney at - law & Natary Public

REGISTERED OFFICE

Seylan Towers,No. 90, Galle Road, Colombo 3.

BUSINESS ADDRESS

Level 15,Seylan Towers,No. 90, Galle Road,Colombo 3.Phone: 011-2452697-8Fax: 011-2423249E-mail: [email protected]: www.seylandevelopments.com

December 31st

ACCOUNTING YEAR

BANKERS

People's BankSeylan Bank PLCHatton National Bank PLC

EXTERNAL AUDITORS

M/s KPMG - Chartered Accountants

INTERNAL AUDITORS

M/s Ponnamperuma & CompanyChartered Accountants

TAX IDENTIFICATION NUMBER

134003650

TAX CUNSULTANT

M/s Amarasekara & Co.Chartered Accountants

PRINCIPAL ACTIVITIES AND NATUREOF POERATIONS

The principal activities of the Company was the developments of the property located at No. 90, Galle Road, Colombo 03 & activities relating property Management.

PARENT ENTERPRISE

The Company's parent undertaking is Seylan Bank PLC.

LEGAL STATUS

Incorporated under the Companies Act No. 17of 1982.

Date of Incorporation – 3rd September 1992.

A Public Limited Liability Company listed on the Colombo Stock Exchange with BOI status.

The Company was re-registered under the Companies Act No. 7 of 2007 on 22nd May 2008 and the Company Registration No. is PQ 151.

Financial Highlights 2Our Achievements 4Chairman’s Review 6Head of Operation’s Review 8Board of Directors 10Directors’ Profile 12Management Discussion and Financial Review 14

Risk Management Report 18Corporate Governance Report 23Audit Committee Report 34Remuneration Committee Report 36Sustainability Report 37Financial Calendar 47

ContentsAnnual Report of the Board on the state of affairs of the Company 48

Statement of Directors’ Responsibility 52Independent Auditors’ Report 56Statement of Comprehensive Income 57Statement of Financial Position 58Statement of Changes in Equity 59Cash Flow Statement 60Notes to the Financial Statement 62Segment Report 90Shareholders’ and Directors’ holding Information 91

Ten Years Summary 94Notice of Meeting 95Form of Proxy 97

SustainableGrowthAnnual Report 2012

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Documents

Sustainable Growth - Seylan Developments · Seylan Towers, No. 90, Galle Road, Colombo 3. BUSINESS ADDRESS Level 15, Seylan Towers, No. 90, Galle Road, Colombo 3. Phone: 011-2452697-8